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EXHIBIT 10.50
LEASE
Dated as of
March 15, 1984
Between
DC-9T-III, Inc., as Lessor
and
TRANS WORLD AIRLINES, INC., as Lessee
_____________________________
One McDonnell Douglas DC-9-82 Aircraft
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TABLE OF CONTENTS TO LEASE AGREEMENT
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Acceptance Under Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Term for Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Payment to Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Lessor's Representations and Warranties; Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . 9
Lessor's Representations and Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Certain Covenants of Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Condition Prior to Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Maintenance Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Return Delivery Flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Replacement Engine upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Failure to Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7. Registration, Maintenance and Operation; Possession; Insignia . . . . . . . . . . . . . . . . . . . . . . . 14
Registration, Maintenance and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8. Replacement and Pooling of Parts; Alterations, Modifications and Additions . . . . . . . . . . . . . . . . 19
Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Termination During Initial Lease Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Termination for Obsolescence or Surplusage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10. Loss; Destruction; Requisition; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Event of Loss with Respect to the Aircraft or the Airframe During Initial Lease Period . . . . . . . . . . . . 24
Event of Loss with Respect to the Aircraft or the Airframe During Base Lease Period or
any Renewal Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conveyance of Replacement Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Application of Payments from Governmental Authorities for Requisition of Title . . . . . . . . . . . . . . . . 29
Requisition for Use by the Government of the Airframe and the Engines Installed Thereon . . . . . . . . . . . 29
Requisition for Use by the Government of an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Application of Payments During Existence of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Airlines Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Insurance Against Loss or Damage to Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Proceeds of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Reports, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
General Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Failure to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Failure to Carry Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Public Liability Insurance not in Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Failure to Perform Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Incorrect Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Entry of a Decree in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Commencement of a Voluntary Case in Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Undischarged Final Judgment in Excess of $1,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Acceleration of Indebtedness Exceeding $5,000,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Failure to Remain Air Carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Voluntary Suspension of Airline Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Return of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Sale of Airframe or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 16. Federal Bankruptcy Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 17. Further Assurances; Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 18. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 19. No Setoff; Counterclaim; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 20. Purchase Option and Renewal Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Renewal Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Determination of Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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Section 21. Not Applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 22. Lessor's Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 23. Maintenance of Certain Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 24. Investment of Security Funds; Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Stipulated Loss Schedule
EXHIBIT C - Termination Schedule
EXHIBIT D - List of Permitted Air Carriers
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LEASE AGREEMENT
THIS LEASE AGREEMENT dated as of March 15, 1984, between
DC-9T-III, Inc , a Delaware corporation, with a place of business at United
Technologies Building, Hartford, Connecticut and its successors and assigns
("Lessor"), and TRANS WORLD AIRLINES, INC., a Delaware corporation with its
principal place of business at 605 Third Avenue, New York, New York 10158
("Lessee" or "TWA").
WITNESSETH:
Section 1. Definitions
Unless the context otherwise requires, the following terms
shall have the following meanings for all purposes of this Lease Agreement and
shall be equally applicable to both the singular and the plural forms of the
terms herein defined:
"Act" means the Federal Aviation Act of 1958, as
amended from time to time.
"Agreement to Manufacture and Lease" means the
Agreement to Manufacture and Lease dated October 29, 1982
between Lessee and Manufacturer.
"Aircraft" means the Airframe delivered and leased
hereunder (or any Replacement airframe substituted for such
Airframe hereunder) together with the two Engines described
under a Lease Supplement covering such Airframe (or any Engine
substituted for any of such Engines hereunder), whether or not
any of such initial or substituted Engines may from time to
time be installed on such Airframe or may be installed on any
other airframe. The term "Aircraft" shall also include any
Replacement Aircraft.
"Airframe" means (i) the McDonnell Douglas DC-9-82
aircraft (except Engines or engines from time to time
installed thereon) leased hereunder by Lessor to Lessee under
a Lease Supplement; and (ii) any and all Parts so long as the
same shall be incorporated or installed in or attached to such
aircraft, or so long as title thereto shell remain vested in
Lessor in accordance with the terms of Section 8, after
removal from such aircraft. The term "Airframe" shall also
include any Replacement Airframe substituted as contemplated
by Section 10(b). Except as otherwise set forth herein, at
such time as a Replacement Airframe shall be so substituted,
such replaced Airframe shall cease to be the Airframe
hereunder.
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"Base Lease Period" means a period from the day after
the end of the Initial Lease Period for the Aircraft to but
not including the eighteenth anniversary of the Delivery Date
of the Aircraft.
"Base Loss Cost" for the Aircraft means $23,840,000
and for any Engine means 2,000,000.
"Basic Rent" for the Aircraft means the rent payable
for the Aircraft to pursuant to Section 3(b) and, during any
Renewal Period, Renewal Rent.
"Business Day" means any day other than a Saturday,
Sunday or holiday scheduled by law for any commercial banking
institution in New York, New York.
"Delivery Date" for the Aircraft means the date,
which shall be a Business Day other than a day on which the
FAA is authorized or required by law to remain closed, on
which the Aircraft is delivered to and accepted by, Lessor,
and the Aircraft is leased by Lessor to Lessee hereunder,
which shall be the date of the Lease Supplement covering the
Aircraft.
"Engine" means (i) each of the two Pratt & Whitney
Aircraft Model JT8D-217A engines listed by manufacturer's
serial numbers in a Lease Supplement and originally installed
on the Airframe covered by such Lease Supplement whether or
not from time to time thereafter installed on such Airframe or
installed on any other airframe or on any other aircraft; and
(ii) any Replacement Engine which may from time to time be
substituted as contemplated by Sections 5, 7(b), 10(b) or
10(c) for an Engine leased hereunder; together in each case
with any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so
long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from such
Engine. Except as otherwise set forth herein, at such time as
a Replacement Engine shall be so substituted, such replaced
Engine shall cease to be an Engine hereunder. The term
"Engines" means, as of any date of determination, all Engines
then leased hereunder. Each Engine has or at the time it
becomes a Replacement Engine hereunder will have at least 750
rated take-off horsepower or the equivalent of such
horsepower.
"Event of Default" has the meaning specified in
Section 14.
"Event of Loss" with respect to any property means
any of the following events with respect to such property: (i)
loss of such property or the use thereof
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due to theft, disappearance, destruction, damage beyond
repair or rendition of such property permanently unfit for
normal use for any reason whatsoever; (ii) any damage to
such property which results in the receipt of insurance
proceeds with respect to such property on the basis of a
total loss; (iii) the condemnation, confiscation or seizure
of, or requisition of title to or use of, such property,
other than a requisition for use by the United States
Government or any instrumentality or agency thereof (unless
and until such property shall have been modified or adapted
in such manner as would render reconversion of such
property for use in normal commercial passenger service
impractical or uneconomical); (iv) as a result of any
rule, regulation, order or other action by the FAA, the
Civil Aeronautics Board or other governmental body having
jurisdiction, the use of such property in the normal course
of interstate air transportation of persons shall have been
prohibited for a period of six consecutive months, unless
Lessee, prior to the expiration of such six (6) month
period, shall have undertaken and shall be diligently
carrying forward all steps which are necessary or desirable
to permit the normal use of such property by Lessee or, in
any event, if such use shall have been prohibited for a
period of 12 consecutive months; (v) with respect to an
Aircraft or Engine, the operation or location of such
Aircraftor Engine, while under requisition for use by the
United States Government or any instrumentality or agency
thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Aircraft or
Engine required by the terms of Section 11 hereof, if
Lessee shall be unable to obtain indemnity in lieu thereof
from the United States of America; or(vi) with respect to
the Aircraft or any Engine, the opinion required pursuant
to Section 4(q) of the Participation Agreement shall not be
to the effect contemplated by such Section and Lessee shall
fail to take such action as shall enable a new opinion to
the effect so contemplated to be delivered within thirty
(30) days after the date of such first opinion. An Event of
Loss with respect to the Aircraft shall be deemed to have
occurred if an Event of Loss occurs with respect to the
Airframe.
"FAA" means the Federal Aviation Administration or
a successor agency.
"Incentive Rate" means a fluctuating rate equal to
the prime rate quoted from time to time by The Chase
Manhattan Bank, National Association, plus 1-1/2%.
"Independent Appraisal" means an appraisal
mutually agreed to by two nationally recognized
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independent aircraft appraisers, one of which shall be chosen
by Lessor and one by Lessee, or, if such appraisers cannot
agree on the amount of such appraisal, an appraisal arrived at
by a third nationally recognized independent aircraft appraiser
chosen by the mutual consent of such two appraisers, and paid
for by Lessee, provided that, if either party shall fail to
appoint an appraiser within 15 days after a written request to
do so by the other party, or if such two appraisers cannot
agree on the amount of such appraisal and fail to appoint a
third appraiser within thirty (30) days after the date of the
appointment of the second of such appraisers, then either party
may apply to any court having jurisdiction to make such
appointment. An "Independent Appraisal" of the fair market
value or fair market rental value of the Aircraft shall mean an
appraisal which assumes that the Aircraft is unencumbered by
this Lease or any renewal or purchase option hereunder and
which assumes that the Aircraft has been maintained in all
respects in accordance with the terms of this Lease (whether or
not it is in fact in such condition) and which is net of
selling and transportation charges, and which would be obtained
in an arms-length transaction between an informed and willing
lessor or seller, as the case may be, and an informed and
willing lessee or purchaser, as the case may be, both under no
compulsion to lease or sell and purchase, as the case may be.
"Initial Lease Period" means a period of five years
from the Delivery Date for the Aircraft to but excluding the
fifth anniversary of such Delivery Date.
"Lease Agreement", "this Lease Agreement", "this
Lease", "this Agreement", "herein", "hereunder", "hereby" or
other like words mean this Lease Agreement as originally
executed or as modified, amended or supplemented pursuant to
the applicable provisions hereof, including, without
limitation, supplementation hereof by one or more Lease
Supplements entered into pursuant to the applicable provisions
hereof.
"Lease Supplement" means a Lease Supplement,
substantially in the form of Exhibit A hereto, entered into
between Lessor and Lessee for the purpose of leasing an
Aircraft, Airframe or an Engine under and pursuant to the
terms of this Lease Agreement, including, without limitation,
any amendment thereto entered into subsequent to the Delivery
Date of such Aircraft.
"Lessor's Warranty" means, as to any property, a
warranty by Lessor that: (i) Lessor has received, or will
receive, whatever title to such property was
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conveyed, or will be conveyed, to Lessor by the Manufacturer or
by any other predecessor in interest to such property, as the
case may be; and (ii) such property is free of Liens of any
Person claiming by, through, or under Lessor which either (a)
result from action taken by Lessor, other than with respect to
its ownership of the Aircraft, or (b) result from action taken
by Lessor other than action (1) permitted by this Lease or the
Participation Agreement, (2) participated in or consented to by
Lessee, or (3) taken by reason of the occurrence of an Event of
Default hereunder.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or
claim of any nature whatsoever.
"Manufacturer" means McDonnell Douglas Corporation,
a Maryland corporation, and its successors and assigns.
"Material Adverse Change in Financial Condition"
means the existence of an event of default, as such term may
be defined in any then effective agreement, with respect to
any material financial covenant in such agreement binding on
Lessee, which has not been cured within the applicable cure
period.
"Participation Agreement" means that certain
Participation Agreement dated as of the date hereof between
Lessee and Lessor whereby, among other things, the Lessor
agrees, subject to conditions specified therein, to purchase
the Aircraft to be leased hereunder as therein provided.
"Parts" means any and all appliances, parts,
instruments, appurtenances, accessories, furnishings and other
equipment of whatever nature (other than complete Engines or
engines), which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine.
"Permitted Air Carrier" has the meaning set forth in
Section 7(b).
"Person" means any individual, corporation,
partnership, trust, unincorporated organization or government,
or any agency or political subdivision thereof.
"Pratt & Whitney Aircraft" means Pratt & Whitney
Aircraft Group of United Technologies Corporation, a Delaware
Corporation, and its successors and assigns.
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"Renewal Period" means for the Aircraft, a period of
one, two, three or four years commencing the day after the end
of the Base Lease Period aa determined pursuant to Section
20(b) hereof.
"Renewal Rent" means, the rent payable for the
Aircraft pursuant to Section 20(b) hereof.
"Rent" means Basic Rent, Renewal Rent and
Supplemental Rent.
"Replacement Aircraft" means the Aircraft of which a
Replacement Airframe is part.
"Replacement Airframe" means each McDonnell Douglas
DC-9-82 aircraft (except Engines or engines from time to time
installed thereon), the cockpit configuration of which is
substantially the same as the Airframe which is being
replaced, and which shall have been substituted as
contemplated by Section 10(d) hereof, together with all Parts
relating to such aircraft.
"Replacement Engine" means each Pratt & Whitney
Aircraft Model JT8D-217A engine (or engine of the same or, if
Pratt & Whitney Aircraft no longer manufacturers such engines,
another manufacturer of the same or an improved model), that
has a value and utility at least equal to such Pratt & Whitney
Aircraft engine and which may be installed on the Airframe
without materially impairing the value or utility of the
Aircraft, and is certified for use on a McDonnell Douglas
DC-9-80 aircraft, which shall have been leased hereunder as
contemplated by Sections 5(e), 7(b), 10(b) or 10(c) hereof,
together with all Parts relating to such engine.
"Stipulated Loss Schedule" shall mean, in the case of
the Aircraft and each Engine, the Stipulated Loss Schedule
included as Exhibit B to this Lease, to which reference is
made in determining the Stipulated Loss Value for the Aircraft
or such Engine.
"Stipulated Loss Value" for the Aircraft or any
Engine, as of any date of computation, shall mean an amount
equal to Base Loss Cost for the Aircraft or such Engine
multiplied by either (a) if the date of computation falls on a
date on which a Basic Rent payment for the Aircraft becomes
due, or, in the case of an Engine, on the date on which a
Basic Rent payment becomes due for the Aircraft of which such
Engine was a part, the percentage specified in the Stipulated
Loss Schedule opposite the month corresponding to the Basic
Rent payment date for the Aircraft or such Engine, or
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(b) if the date of computation falls on a day other than one on
which a Basic Rent payment for the Aircraft becomes due, or, in
the case of an Engine, on a date other than one on which a
Basic Rent payment becomes due for the Aircraft of which such
Engine was a part, the percentage derived by linear
interpolation (by reference to the actual number of days)
between the percentages specified in the Stipulated Loss
Schedule for the Aircraft or such Engine opposite the month of
the Basic Rent payment immediately preceding and the month of
the Basic Rent payment immediately following the date of
computation, less the amount of Basic Rent multiplied by a
fraction, the denominator of which shall be 30 and the
numerator of which shall be 30 minus the number of days from
and including the date of computation to but excluding the
Basic Rent payment date next succeeding the termination.
"Supplemental Rent" means all amounts, liabilities
and obligations (other than Basic Rent) which Lessee assumes
or agrees to pay hereunder or under the Participation
Agreement to Lessor or others, including, without limitation,
payments of Stipulated Loss Value, any interest payable with
respect to payments pursuant to Section 3(e) hereunder and the
amount of any loss of principal realized as the result of any
investments made pursuant to Section 24 hereunder.
"Term" means the period for which Lessee leases the
Aircraft pursuant to this Lease Agreement.
"Termination Value" means for the Aircraft, as of any
date of computation, an amount equal to Base Loss Cost for the
Aircraft multiplied by either (a) if the date of computation
falls on a date on which a Basic Rent payment for the Aircraft
becomes due, the percentage specified in Exhibit C hereto
opposite the month corresponding to the Basic Rent payment
date for the Aircraft, or (b) if the date of computation falls
on a day other than one or which a Basic Rent payment for the
Aircraft becomes due, the percentage derived by linear
interpolation (by reference to the actual number of days)
between the percentages specified in Exhibit C opposite the
month of the Basic Rent payment immediately preceding and the
month of the Basic Rent payment immediately following the date
of computation less the amount of Basic Rent multiplied by a
fraction, the denominator of which shall be 30 and the
numerator of which shall be 30 minus the number of days from
and including the date of computation to but excluding the
Basic Rent payment date next succeeding the termination date.
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Section 2. Acceptance Under Lease
Lessor hereby agrees (subject to satisfaction or waiver of the
conditions set forth in Section 4 of the Participation Agreement) to purchase
and accept delivery of the Aircraft from Manufacturer and simultaneously to
lease to Lessee hereunder, and Lessee hereby agrees to lease from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessor shall authorize one or
more employees of Lessee, designated by Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft.
Lessee hereby agrees that such acceptance of delivery by such authorized
representative or representatives on behalf of Lessor shall, without further
act, irrevocably constitute acceptance by Lessee of the Aircraft for all
purposes of this Agreement.
Section 3. Term and Rent
(a) Term for Aircraft. The Term for the Aircraft shall
consist of the following period: (i) the Initial Lease Period; (ii) upon
written notice given by Lessee to Lessor on or before October 17, 1987 Lessee
may elect to renew the lease for the Base Lease Period; and (iii) upon written
notice given at least eight (8) months prior to the end of the Base Lease
Period for the Aircraft, Lessee may elect to renew the Lease for a Renewal
Period as specified herein.
(b) Basic Rent. For the Aircraft, Lessee agrees to pay
Basic Rent in installments monthly in advance at the rate specified in Section
4 of the Lease Supplement relating to the Aircraft commencing on the Delivery
Date thereof, and on the date in each succeeding calendar month corresponding
to such Delivery Date or, if any month has no such corresponding date, on the
last day of such month.
(c) Supplemental Rent. Lessee also agrees to pay to
Lessor or to whomsoever shall be entitled thereto, any and all Supplemental
Rent promptly as the same shall become due and owing, and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have
all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Supplemental Rent shall
include, without limitation, all amounts payable by Lessee under Section 3(e)
hereof and under Sections 8 and 11 of the Participation Agreement when and as
the same shall become due.
(d) Payment to Lessor. All Rent shall be paid by Lessee
to Lessor to its General Account No. 38137504 at Citibank, N.A., 399 Park
Avenue, New York, New York, or as Lessor may otherwise direct, in immediately
available funds in U.S. Dollars by 11 A.M. New York time on the date that such
payment is due if
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such day is a Business Day or, if such day is not a Business Day, the next
preceding Business Day.
(e) Late Payments. As to any (i) amount due under this
Lease or the Participation Agreement which is not paid when due as herein
provided; or (ii) advance made by Lessor of any amount required to be paid by
Lessee as herein provided and not so paid by Lessor, Lessee shall pay on demand
to Lessor aa Supplemental Rent, interest thereon from either the due date
thereof or the date demanded by Lessor, as the case may be (as to amounts
referred to in clause (i)) or the date advanced by Lessor (as to amounts
referred to in clause (ii)), as the case may be, to the date paid at the
Incentive Rate.
Section 4. Lessor's Representations and Warranties; Certain
Agreements of Lessee
(a) Lessor's Representations and Warranty. Lessor hereby
makes Lessor's Warranty and represents and warrants that it is a "citizen of
the United States" as defined in Section 101(16) of the Act. EXCEPT FOR THE
FOREGOING WARRANTIES AND THE REPRESENTATIONS AND WARRANTIES OF LESSOR SET FORTH
IN SECTION 12 OF THE PARTICIPATION AGREEMENT, LESSOR NEITHER MAKES NOR SHALL BE
DEEMED TO HAVE MADE OR TO MAKE ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES OF
ANY KIND, AND LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES ANY WARRANTIES,
REPRESENTATIONS OR GUARANTEES, LIABILITIES AND OBLIGATIONS OF ANY KIND, EITHER
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE AIRCRAFT, THE
AIRFRAME, OR ANY ENGINE, PART OR OTHER THING DELIVERED, LEASED, SOLD OR
TRANSFERRED HEREUNDER (AND WHETHER OR NOT ARISING OUT OF THE DELIVERY, USE,
OPERATION, LEASE, SUBLEASE, TRANSFER, POSSESSION, STORAGE, MODIFICATION,
ALTERATION, MAINTENANCE, REPAIR OR OTHER DISPOSITION THEREOF), INCLUDING, BUT
NOT LIMITED TO (i) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION OF OR
THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN, OR TITLE TO, OR ANY DEFECT IN
THE AIRCRAFT, THE AIRFRAME, OR ANY ENGINE, PART OR OTHER THING DELIVERED,
LEASED, SOLD OR TRANSFERRED HEREUNDER; (ii) ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE, AGAINST
INFRINGEMENT OR THE LIKE, OR ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE; (iii) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY IN TORT WITH RESPECT TO THE AIRCRAFT, THE AIRFRAME, OR ANY ENGINE, PART
OR OTHER THING DELIVERED, LEASED, SOLD OR TRANSFERRED HEREUNDER, WHETHER OR NOT
IN STRICT OR ABSOLUTE LIABILITY OR ARISING FROM THE NEGLIGENCE OF LESSOR,
ACTUAL OR IMPUTED; OR (iv) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
FOR LOSS OF, OR DAMAGE TO, THE AIRCRAFT, THE AIRFRAME, OR ANY ENGINE, PART OR
OTHER THING, FOR ANY LOSS OF USE, REVENUE OR PROFIT, OR OTHER DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES. Nothing in this Section 4(a) shall be
deemed to modify or otherwise affect the respective rights and obligations of
the Lessee and of the Manufacturer (as manufacturer) under the Agreement to
Manufacture and Lease.
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(b) Certain Agreements of Lessee. Lessee agrees with
Lessor that it shall perform the agreements, covenants and indemnities of
Lessee set forth in Sections 7, 8, 10, 11 and 14 of the Participation Agreement
as fully and to the same extent and with the same force and effect as if set
forth in full in this Section 4(b).
(c) Certain Covenants of Lessor. (i) Lessor covenants
with Lessee that, so long as no Event of Default or event, which with
the passage of time or the giving of notice, or both, would become an
Event of Default, shall have occurred, Lessee's right to use and
possession of the Aircraft shall not be interrupted by voluntary acts
or omissions of Lessor, or by persons claiming through Lessor
resulting from actions taken by Lessor, in each case other than as
permitted by this Lease or the Participation Agreement or participated
in or consented to by Lessee and not arising from Lessor's ownership
of the Aircraft, it being understood and agreed that, Lessee shall not
thereby be relieved of any obligation, covenant or agreement of Lessee
set forth herein or in the Participation Agreement (including, without
limitation, those of Section 6 hereof and of Section 10 of the
Participation Agreement.
(ii) throughout the Term, Lessor shall (A) not knowingly
create any Lien on the Aircraft (x) which results from or constitutes
a claim against Lessor not relating to or arising directly or
indirectly as a result of its interest in the Aircraft, the Airframe
or any Engine or of the transactions contemplated by this Lease, or
the Participation Agreement or (y) covered by Lessor's Warranty, (B)
as soon as reasonably practical after it becomes aware of any such
Lien (whether such Lien arose with or without the knowledge of Lessor)
on the Aircraft, discharge or remove the same unless, where such Lien
does not affect Lessee's quiet possession and enjoyment of the
Aircraft, Lessor is contesting such Lien in good faith by appropriate
proceedings as long as such proceedings will not adversely affect the
continued quiet possession and enjoyment of the Aircraft by Lessee and
will not result in the sale, forfeiture or loss of the Airframe or any
Engine or interest therein during its continuance, and (C) pay when
due all taxes of Lessor the non-payment of which will result in a Lien
against the Aircraft (unless, where such Lien does not affect Lessee's
quiet possession and enjoyment of the Aircraft, the liability to pay
and/or the amount of such taxes are being disputed or contested by
Lessor in good faith by appropriate proceedings so long aa such
proceedings will not adversely affect the continued quiet possession
and enjoyment of the Aircraft by Lessee and.will not result in the
sale, forfeiture or loss of the Airframe or any Engine or interest
therein during its continuance), other than taxes for which Lessor is
entitled to indemnification under this Lease or the Participation
Agreement.
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Section 5. Return of Aircraft
Following the termination of this Lease in any circumstances
other than as a result of an Event of Loss, within four days after such
termination, or as otherwise agreed, Lessee shall, at its own expense,
redeliver the Aircraft to Lessor at Manufacturer's facility in Long Beach,
California. All costs associated with the return flight shall be for the
account of Lessee.
(a) Condition Prior to Return. Immediately prior to
return of the Aircraft to Lessor, the Aircraft shall have a currently valid
Standard FAA Certificate of Airworthiness. The Aircraft condition shall allow
for normal wear and tear. The Aircraft shall be clean by normal airline
operating standards and shall have installed thereon all Engines, equipment,
accessories or Parts as when delivered to Lessee or replacements therefor and
additions and improvements thereto, as provided in Sections 7 and 8 herein, and
shall be in the same interior configuration as when delivered to Lessee or as
otherwise mutually agreed. All Lessee exterior markings shall have been
painted over in matching exterior colors.
(b) Maintenance Status. The maintenance status of the
Aircraft so returned shall be as follows:
(i) all FAA Airworthiness Directives applicable
to the Aircraft requiring compliance on or before the return date
shall have been complied with;
(ii) at time of return, the Aircraft shall be in
its "as is" maintenance cycle condition within Lessee's then current
FAA approved maintenance program; and
(iii) if requested by Lessor, Lessee shall perform or
cause to be performed a single visit "C" check within thirty (30) days
prior to the return of the Aircraft and such additional overhaul,
repair or maintenance work which Lessor in its Judgment deems necessary
to bring the Aircraft up to a condition not greater than half-time.
Lessor will pay Lessee an amount equal to the cost of such single visit
"C" check and such additional overhaul, repair or maintenance work.
Lessee shall not exchange Engines or time/cycle controlled
components on the Aircraft about to be returned to Lessor for engines or
time/cycle controlled components on other aircraft or in Lessee's possession
which will remain in Lessee's possession after such return in order to reduce
or avoid future maintenance requirements.
(c) Inspections. Upon termination of the Lease, Lessee
shall provide up to three (3) days for a ground functional
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inspection including engine runs at Lessee's main base of operations. Such
inspections shall be conducted during normal working hours, unless otherwise
agreed by both parties. Any equipment noted during such inspections not
complying with normal airline standards for continued usage in passenger
service shall be corrected by Lessee. All costs associated therewith shall be
to the account of Lessee.
(d) Return Delivery Flight. During the return delivery
flights, a pilot of Manufacturer, in conjunction with Lessee's flight crew,
will accomplish a flight functional to demonstrate the airworthiness of the
Aircraft and proper functioning of all systems and components. Any discrepancy
or malfunction detected of an airworthiness or operational nature by normal
airline standards shall be corrected. All costs associated therewith shall be
to the account of Lessee.
(e) Replacement Engine upon Return. In the event that
any engine not owned by Lessor shall be installed on the Airframe returned in
accordance with this Section 5(a) hereof, such engine shall comply with the
definition of a Replacement Engine, suitable for installation and use on the
Airframe and fully compatible with other Engines. At the time of such
replacement such engine shall have performance and durability characteristics
and a value, condition and utility at least equal to the Engine it replaced
hereunder, assuming such Engine was maintained in accordance with the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft of which the Airframe is a part, Lessee
shall duly convey to Lessor good and marketable title to any such replacement
engines, free and clear of all Liens whatsoever; and, upon such conveyance,
Lessee, at its own expense, will (i) furnish Lessor with a full warranty bill of
sale, in form and substance satisfactory to Lessor, with respect to such
replacement engines; (ii) furnish Lessor with such evidence of Lessee's title to
such replacement engines, including an opinion of Lessee's counsel, and of the
condition of such replacement engines may be duly and properly vested in Lessor
to the same extent as the Engine replaced thereby. Upon full compliance by
Lessee with its obligations hereunder, at Lessee's expense, Lessor will transfer
to Lessor, without recourse or warrant, (except for Lessor's Warranty and
subject to the disclaimer set forth in Section 4(a) hereof), all Lessor's right,
title and interest in and to an Engine constituting part of the Aircraft but not
installed on the Airframe at the time of the return of the Airframe.
(f) Failure to Return. If Lessee shall, for any reason
whatsoever, fail to return the Aircraft or any Engine at the time specified
herein, the obligations of Lessee as provided in this Lease shall continue in
effect with respect to the Aircraft or such Engine until the Aircraft or such
Engine is returned to Lessor, provided that this Section 5(f) shall not be
construed as (A) permitting Lessee to fail to meet its obligation
-12-
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to return the Aircraft and Engines in accordance with the requirements of this
Lease or (B) relieving Lessee of any legal responsibility for direct or
consequential damages suffered by Lessor by reason of such failure.
(g) Documentation. Documentation for the Aircraft upon
return shall be as follows:
(i) all documentation shall be made available by
Lessee for review by Lessor seven (7) days prior to the return
of the Aircraft. Applicable Maintenance, Repair, Wiring
Diagram, Weight and Balance, Flight Crew Operating, FAA
approved Flight Manuals, and other documentation as listed in
the Agreement to Manufacture and Lease, will be provided with
the Aircraft at time of return; and
(ii) upon acceptance of the Aircraft by Lessor,
Lessor agrees to execute a receipt for such Aircraft in a
mutually acceptable form.
(iii) upon the return of the Airframe either at the
end of the Term or pursuant to Section 9 hereof, each fuel
tank and oil tank shall contain the same quantity of fuel and
oil as was contained in the fuel and oil tanks when the
original Airframe was delivered to Lessee on the Delivery Date
of the Aircraft, or, in the case of differences in any such
quantities, an appropriate adjustment will be made by payment
at the then current market price of fuel or oil, as the case
may be.
If Lessor requests the single visit "C" check and additional
work as may be required as noted in paragraph (b)(iii) above, Lessor and Lessee
agree that the Term will be extended by the amount of time required by Lessee
to accomplish such "C" check and additional work and Lessor agrees to waive the
payment of Basic Rent for such extension period. All other terms and
conditions of the Lease Agreement shall remain in full force and effect during
such extension.
(h) Insurance. In connection with inspections of the
Aircraft and the return delivery flights, Lessor shall be named as additional
insured under Lessee's Third Party and Passenger Liability insurance and Lessee
shall maintain the following insurance in the minimum amounts noted (and
otherwise as provided in Section 11 hereof):
(i) Hull Insurance (in the amount of Stipulated
Loss Value at the last day of the Term before such return).
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(ii) Third Party and Passenger Liability coverage
(in the amount of Lessee's current coverage but not less than
U.S. $100,000,000).
The hull insurance coverage set forth above shall contain a
waiver of subrogation by Lessee's insurance carrier of any rights it may have
against Lessor.
Prior to the inspections and return delivery flight set forth
herein, Lessee shall supply evidence satisfactory to Lessor of the insurance
coverage set forth above.
Section 6. Liens
Lessee will not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to the Airframe or any Engine,
title thereto or any interest therein or in this Lease or any interest of
Lessor in any Rent except (i) the respective rights of Lessor and Lessee as
herein provided; (ii) the rights of others under agreements or arrangements to
the extent expressly permitted by the terms of Sections 7(b) and 8(b); (iii)
Liens covered by Lessor's Warranty; (iv) Liens for taxes either not yet due or
being contested in good faith (and for the payment of which adequate reserves
have been provided) by appropriate proceedings so long as such proceedings, in
Lessor's opinion, do not involve any unreasonable danger of the sale,
forfeiture or loss of the Airframe or any Engine or interest therein; (v)
materialmen's, mechanics', workmen's, repairmen's, employees' or other like
liens arising in the ordinary course of business for amounts the payment of
which is either not yet delinquent or is being contested in good faith (and for
the payment of which adequate reserves have been provided) by appropriate
proceedings so long as such proceedings do not involve any danger of the sale,
forfeiture or lose of the Airframe or any Engine or interest therein; and (vi)
Liens on Lessee's interest as Lessee under this Lease, arising out of judgments
or awards against Lessee (for the payment of which adequate reserves have been
provided with respect to which at the time an appeal or proceeding for review
is being prosecuted in good faith and with respect to which there shall have
been secured a stay of execution pending such appeal or proceeding after
review. Lessee will promptly, at its own expense, take such action as may be
necessary duly to discharge any such Lien not excepted above if the same shall
arise at any time.
Section 7. Registration, Maintenance and Operation;
Possession; Insignia
(a) Registration, Maintenance and Operation. Lessee, at
its own cost and expense, shall: (i) forthwith upon the delivery thereof
hereunder, cause the Aircraft to be duly registered, and at all times
thereafter to remain duly
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registered, in the name of Lessor with the FAA pursuant to the Act; (ii)
maintain, service, repair, overhaul, alter, modify, add to and test the
Aircraft, the Airframe, and each Engine, and each other engine installed from
time to time on the Airframe in accordance with its FAA approved maintenance
program for McDonnell Douglas Model DC-9 Series 80 aircraft and Pratt & Whitney
Aircraft Model JT8D-217A engines and comply with all service, inspection,
maintenance, repair and overhaul regulations, directives and instructions which
are made mandatory by the FAA upon United States operators of McDonnell Douglas
Model DC-9 Series 80 aircraft and Pratt & Whitney Aircraft Model JT8D-217A
engines so as to keep the Aircraft and Engines in as good operating condition
as when delivered to Lessee hereunder, ordinary wear and tear excepted, and in
such condition as may be necessary to enable the Standard Airworthiness
Certification of the Aircraft to be maintained in good standing at all times
under the Act; (iii) maintain all records, logs and other materials required by
the FAA or any other governmental authority or agency having jurisdiction to be
maintained in respect of the Aircraft, Airframe and each Engine; and (iv)
promptly furnish to Lessor such information as may be required to enable Lessor
to file any reports required to be filed by Lessor with any governmental
authority because of Lessor's ownership of the Aircraft. Lessee shall pay for
and provide all electric power, oil, fuel and lubricant consumed by and
required for the operation of the Aircraft and any Engines, and all repairs,
parts and supplies necessary therefor. Lessee agrees that the Aircraft and
Engines will not be maintained, used or operated in violation of any law or any
rule, regulation or order of any government or governmental authority having
jurisdiction (domestic or foreign), or in violation of any airworthiness
certificate, license or registration relating to the Aircraft or such Engine
issued by any such authority. In the event that any such law, rule, regulation
or order requires alteration of the Aircraft or any Engine, Lessee will conform
thereto or obtain conformance therewith at no expense to Lessor and will
maintain the Aircraft in proper operating condition under such laws, rules,
regulations and orders; provided, however, that Lessee may, in good faith
(after having delivered to Lessor a certificate signed by a responsible officer
of Lessee stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's opinion, materially adversely affect Lessor.
Lessee also agrees not to operate, use or locate the Airframe or any Engine, or
suffer the Airframe or any Engine to be operated, used or located, (i) in any
area excluded from coverage by any insurance required by the terms of Section
11, except in the case of a requisition by the United States of America where
Lessee obtains an indemnity (which need not be evidenced by written agreement)
in lieu of such insurance from the United States of America against the risks
and in the amounts required by Section 11 covering such areas; or (ii) in any
recognized or, in Lessee's reasonable judgment, threatened area of hostilities
unless fully covered to Lessor's satisfaction by war risk and
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allied perils insurance, or unless the Airframe or such Engine is operated or
used under contract with the Government of the United States under which
contract the Government assumes liability for any damage, loss, destruction or
failure to return possession of the Airframe or such Engine at the end of the
term of such contract or for injury to persons or damage to property of others;
provided, however, that the Airframe or an Engine located in an area at the
time it becomes a recognized or threatened area of hostilities may be flown
from and through such area of hostilities to an area outside such area of
hostilities.
(b) Possession. Lessee will not, without the prior
written consent of Lessor, sublease or otherwise in any manner deliver,
transfer or relinquish possession of the Aircraft, Airframe or any Engine or
install any Engine, or permit any Engine to be installed, on any airframe other
than the Airframe; provided that, so long as no Event of Default (or event
which would constitute an Event of Default but for the lapse of time or the
giving of notice or both) shall have occurred and be continuing, and so long as
Lessee shall comply with the provisions of Section 11 hereof, Lessee may,
without the prior written consent of Lessor:
(i) subject any Engine to normal interchange or pooling
agreements or arrangements customary in the airline industry and
entered into by Lessee in the ordinary course of its business with
other United States certificated air carriers or with any "foreign air
carrier" (as such term is defined in the Act) as to which there is in
force a permit issued pursuant to Section 402 of said Act (any such
United States certificated air carrier and any such foreign air
carrier being hereinafter called a "Permitted Air Carrier"); provided
that no transfer of the registration of such Engine shall be effected
in connection therewith and so long as the terms of this Lease shall
be observed and provided further that (A) no such agreement or
arrangement contemplates or requires the transfer of title to such
Engine, and (B) if Lessor's title to any such Engine shall be divested
under any such agreement or arrangement, such divestiture shall be
deemed to be an Event of Loss with respect to such Engine and Lessee
shall comply with Section 10(c) in respect thereof;
(ii) deliver possession of the Aircraft, Airframe or any
Engine to the manufacturer thereof for testing or other similar
purposes or to any organization for service, repair, maintenance or
overhaul work on the Aircraft, Airframe or such Engine or any part
thereof or for alterations or modifications in or additions to the
Aircraft, Airframe or such Engine to the extent required or permitted
by the terms of Sections 7(a) or 8(c);
(iii) enter into a "wet" sublease with respect to the Aircraft
in the ordinary course of Lessee's business
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pursuant to which Lessee retains exclusive control of the Aircraft,
provides all maintenance and conducts all operations of such Aircraft;
(iv) transfer possession of the Aircraft, Airframe or any
Engine to the United States of America or any instrumentality or
agency thereof in accordance with the Civil Reserve Air Fleet Program
administered pursuant to Executive Order No. 10999, as amended, or any
similar or substitute programs;
(v) install an Engine on an airframe owned by Lessee free
and clear of all Liens, except (A) those of the type permitted under
clauses (iv), (v) and (vi) of Section 6, and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) Liens (including the Lien of the Indenture of Mortgage
dated as of January 1, 1977, from Lessee to The Bank of New York as
Trustee) which insofar as they relate to such Engine are subordinate
to the rights of the Lessor hereunder, and (C) the rights of other
Permitted Air Carriers under normal interchange agreements which are
customary in the airline industry and do not contemplate, permit or
require the transfer of title to the airframe or engines installed
thereon;
(vi) install an Engine on an airframe leased to Lessee or
purchased by Lessee subject to a conditional sale or other security
agreement; provided that such airframe is free and clear of all Liens
except the rights of the parties to the lease or conditional sale or
other security agreement covering such airframe which insofar as they
relate to such Engine are subordinate to the rights of the Lessor
hereunder and except Liens of the type permitted by clauses (A) and
(B) of subparagraph (v) of this paragraph (b);
(vii) install an Engine on an airframe owned by Lessee,
leased to Lessee or purchased by Lessee subject to a conditional sale
or other security agreement under circumstances where neither
subparagraph (v) nor subparagraph (vi) of this paragraph (b) is
applicable; provided, however, that prior to such installation, the
Lessee shall convey or cause to be conveyed to the Lessor, as
replacement for the Engine to be so installed, title to a Replacement
Engine in the same manner as is provided in Section 10(c) for Engines
suffering an Event of Loss, and the Lessee shall take all other action
which would be required of it under said Section 10(c) if an Event of
Loss had occurred with respect to such Engine, the Lessor not
intending hereby to waive any right or interest it may have to or in
such Engine under applicable law until compliance by the Lessee with
Section 10(c);
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(viii) during the Base Lease Period but not during the Initial
Lease Period, transfer possession of the Aircraft or the Airframe or
an Engine to the United States of America or any instrumentality or
agency thereof pursuant to a sublease a copy of which shall be
furnished to Lessor; provided that the term of such sublease
(including, without limitation, any option of the sublessee to renew
or extend) shall not continue beyond the end of the Base Lease Period;
(ix) during the Base Lease Period but not during the
Initial Lease Period, sublease the Aircraft, or an Engine or the
Airframe (together, in the case of the Airframe, with engines then
installed on the Airframe) to any United States certificated air
carrier or, if there has been no Material Adverse Change in Financial
Condition, to any foreign air carrier listed in Exhibit D hereto,
which sublessee shall not be the subject of a petition in bankruptcy
filed under the Federal Bankruptcy laws or other insolvency laws now
or hereafter in effect, for a term including, without limitation, any
extension thereof, in the case of a United States certificated air
carrier, not to exceed in the aggregate one-half of the remaining Base
Lease Period or five years, whichever is greater, and, in the case of
a foreign carrier, not to exceed in the aggregate five years; provided
that no such sublease shall extend beyond the end of the Base Lease
Period and Lessee may not sublease during any Renewal Period;
provided, however, that no transfer of the registration of the
Airframe or any Engine or engine shall be effected in connection
therewith, and provided further, that the rights of any transferee who
receives possession by reason of a transfer permitted by this
paragraph (b) (other than the transfer of an Engine which is deemed an
Event of Loss) shall be, and any sublease permitted by this Section
shall be made expressly subject and subordinate to all the terms of
this Lease, including without limitation, the covenants contained in
Section 7(a) hereof and Lessor's rights to repossession pursuant to
Section 15 and to avoid such sublease upon such repossession, and
Lessee shall remain primarily liable hereunder for the performance of
all of the terms of this Lease to the same extent as if such sublease
or transfer had not occurred, and that any such sublease shall include
appropriate provisions for the registration, maintenance, insurance
and return of the Aircraft and each Engine subleased thereby. No
interchange agreement, transfer, sublease or other relinquishment of
possession permitted hereunder shall affect the United States
registration of the Aircraft. In connection with any sublease, all
necessary action shall be taken which is required to continue the
perfection of Lessor's title and interest to the Aircraft, Airframe
and Engines and Lessor's rights under this Lease, such sublease and
all other necessary documents shall be duly filed, registered or
recorded in such public offices as may be required fully to preserve
the title of, and the
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priority of the interest of, Lessor in the Aircraft, Airframe and
Engines and provided, further, that any such instrument of transfer or
sublease shall contain a provision comparable to that set forth in
Section 16. Lessee shall deliver to Lessor promptly after execution
thereof a duly executed copy of any sublease permitted hereunder. No
interchange agreement, sublease or other relinquishment of possession
of the Airframe or any Engine shall in any way discharge or diminish
any of Lessee's obligations to Lessor hereunder or under the
Participation Agreement. In the event Lessor shall have received from
the lessor or secured party of any airframe leased to Lessee or
purchased by Lessee subject to a conditional sale or other security
agreement referred to in Section 7(b)(vi) a written agreement in which
such lessor or secured party expressly agrees that neither it nor its
successors and assigns will acquire or claim any right, title or
interest in any Engine by reason of such Engine's being installed on
such airframe at any time while such Engine is subject to this Lease or
is owned by Lessor, and the lease or conditional sale or other security
agreement covering such airframe also covers an engine or engines owned
by the lessor under such lease or subject to a security interest in
favor of the secured party under such conditional sale or other
security agreement, Lessor hereby agrees for the benefit of such lessor
or secured party that Lessor will not acquire or claim, as against such
lessor or secured party, any right, title or interest in any such
engine as the result of such engine being installed on the Airframe at
any time while such engine is subject to such lease or conditional sale
or other security agreement and owned by such lessor or subject to a
security interest in favor of such secured party.
(c) Insignia. Lessee agrees to affix and maintain in the
cockpit of the Airframe adjacent to the airworthiness certificate therein and
on each Engine a metal nameplate bearing the inscription "Owned by and leased
from DC-9T-III, Inc., AS LESSOR."
Section 8. Replacement and Pooling of Parts, Alterations,
Modifications and Additions
(a) Replacement of Parts. Lessee, at its own cost and
expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or
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permanently rendered unfit for use for any reason whatsoever, except as
otherwise provided in Section 8(c). In addition, Lessee may, at its own cost
and expense, remove in the ordinary course of maintenance, service, repair,
overhaul or testing, any Parts, whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use; provided that Lessee, except as otherwise provided in Section
8(c), will, at its own cost and expense, replace such Parts as promptly as
possible. All replacement Parts shall be free and clear of all Liens (except
for pooling arrangements to the extent permitted by Section 8(b)) 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 Parts replaced
assuming such replaced Parts were in the condition and repair required to be
maintained by the terms hereof. All Parts at any time removed from the
Airframe or any Engine shall remain the property of Lessor, no matter where
located, until such time as such Parts shall be replaced by Parts which have
been incorporated or installed in or attached to the Airframe or such Engine
and which meet the requirements for replacement Parts specified above.
Immediately upon any replacement Parts becoming incorporated or installed in or
attached to the Airframe or any Engine as above provided, without further act,
(i) title to the replaced Part shall thereupon vest in Lessee, free and clear
of all rights of Lessor, and shall no longer be deemed a Part hereunder; (ii)
title to such replacement Part shall thereupon vest in Lessor (subject only to
a pooling arrangement to the extent permitted by Section 8(b)); and (iii) such
replacement Part shall become subject to this Lease and be deemed part of the
Airframe or such Engine for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to the Airframe or such
Engine.
(b) Pooling of Parts. Any Part removed from the Airframe
or any Engine as provided in Section 8(a) may be subjected by Lessee to a
normal pooling arrangement customary in the airline industry entered into in
the ordinary course of Lessee's business with Permitted Air Carriers; provided
that the part replacing such removed Part shall be incorporated or installed in
or attached to the Airframe or such Engine in accordance with Section 8(a) as
promptly as possible after the removal of such removed Part. In addition, any
replacement part when incorporated or installed in or attached to the Airframe
or an Engine in accordance with Section 8(a) may be owned by a Permitted Air
Carrier subject to such a normal pooling arrangement, provided that Lessee, at
its expense, as promptly thereafter as possible, either (i) causes title to
such replacement part to vest in Lessor in accordance with Section 8(a) by
Lessee acquiring title thereto for the benefit of, and transferring such title
to, Lessor free and clear of all Liens; or (ii) replaces such replacement Part
by incorporating or installing in or attaching to the Airframe or such Engine a
further replacement Part owned by Lessee free and clear of all Liens and by
causing title to such further replacement Part to vest in Lessor in accordance
with Section 8(a).
(c) Alterations, Modifications and Additions. Lessee, at
its own expense, will make such alterations and modifications in and additions
to the Airframe or Engines as may be required
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from time to time to meet the standards of the FAA or other governmental
authority having jurisdiction. In addition, Lessee, at its own expense, may
from time to time make such alterations and modifications in and additions to
the Airframe or any Engine as Lessee may deem desirable in the proper conduct
of its business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the Airframe, or
such Engine, provided that no such alteration, modification or addition shall
(i) diminish the value or utility of the Airframe or such Engine, or impair the
condition or airworthiness thereof, below the value, utility, condition and
airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine was then of the value or utility
and in the condition and airworthiness required to be maintained by the terms
of this Lease Agreement; (ii) materially adversely affect the capability of the
Aircraft to be used in commercial, scheduled passenger service in the United
States; (iii) materially adversely affect aerodynamic characteristics,
performance, weight or ground or flight operation characteristics of the
Aircraft; (iv) materially adversely affect the cost of performing Airframe or
Engine maintenance; (v) adversely affect the service life of the Aircraft or
such Engine, the interchangeability of spare parts and ground support equipment
for the Airframe or such Engine or the commonality of (A) the Aircraft with
other McDonnell Douglas DC-9 Series 80 aircraft; or (B) such Engine with other
Pratt & Whitney Aircraft JT89-217A engines; or (vi) materially change the basic
configuration thereof. Title to all Parts incorporated or installed in or
attached or added to the Airframe or such Engine as the result of such
alteration, modification or addition shall, without further act, vest in
Lessor. Notwithstanding the foregoing sentence of this Section 8(c), so long
as no Event of Default (or event which would constitute an Event of Default but
for the lapse of time or the giving of notice or both) shall have occurred and
be continuing, Lessee may, at any time during the Term remove any Part;
provided that (x) such Part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or attached
to the Airframe or such Engine at the time of delivery thereof hereunder or any
Part in replacement of, or substitution for any such Part; (y) such Part is not
required to be incorporated or installed in or attached or added to the
Airframe or such Engine pursuant to the terms of this Section 8, and (z) such
Part can be removed from the Airframe or such Engine without diminishing or
impairing the value, utility, condition or airworthiness required to be
maintained by the terms of this Lease Agreement which the Airframe or such
Engine would have had at such time had such alteration, modification or
addition not occurred. Upon the removal by Lessee of any Part as above
provided, title thereto shall, without further act, vest in Lessee and such
Part shall no longer be deemed part of the Airframe or Engine from which it was
removed. Any Part not removed by Lessee as above provided prior to the return
of the respective Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.
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Section 9. Voluntary Termination
(a) Termination During Initial Lease Period. During the
Initial Lease Period, Lessee shall be entitled to terminate the Lease with
respect to the Aircraft effective on a date when a payment of Basic Rent is
due, if, on or before April 17, 1987, the Manufacturer has officially announced
that it will no longer manufacture DC-9 aircraft or derivatives thereof, in
which case Lessee will have a period of three (3) months following such
announcement to decide whether or not to terminate the Lease, provided that the
Lessee must give Lessor at least nine (9) months prior written notice of
termination. If Lessee does not elect to terminate within said three (3)
months, the Lease shall continue for the remainder of the Initial Lease Period,
it being understood that Lessee retains the right not to renew the Lease for
the Base Lease Period in accordance with Section 3(a) herein.
(b) Termination for Obsolescence or Surplusage.
(i) Right of Termination. So long as no Event of
Default (or event which would constitute an Event of Default but for
the lapse of time or the giving of notice or both) shall have occurred
and be continuing, Lessee shall have the right at its option at any
time after the seventh anniversary of the Delivery Date of the
Aircraft, on at least six (6) months' prior written notice to Lessor
specifying a proposed date of termination, to terminate this Lease
with respect to the Aircraft if, in the good faith opinion of the
Board of Directors of Lessee the Aircraft shall have become obsolete
or shall be surplus to Lessee's requirements, such termination to be
effective on the date of sale, if any, referred to in Section 9(b)(ii)
hereof, provided that, prior to or concurrently with such termination,
Lessee shall have provided to Lessor a copy of the resolutions of the
Board of Directors of Lessee, certified by the Secretary or an
Assistant Secretary of Lessee, by which such Board determined, in good
faith, that the Aircraft shall have become obsolete or surplus to
Lessee's requirements. Lessor shall notify Lessee of its intention to
sell or retain the Aircraft no later than sixty (60) days prior to the
proposed termination date;
(ii) Election by Lessor to Sell. If Lessor elects
to sell the Aircraft, Lessee, as agent for Lessor, shall, from the
date of such election until the proposed date of termination
specified, use its best efforts to obtain bids for the cash purchase
of the Aircraft and Lessor may, after consulting with and giving
notice to Lessee, seek to obtain such bids. In the event Lessee
receives any bid, Lessee shall, promptly, and in any event at least
ten (10) Business Days prior to the proposed date of sale, certify to
Lessor in writing the amount and terms of such bid, the proposed date
of such sale and the name and address of the party (who
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shall not be Lessee or any person, firm or corporation affiliated with
Lessee) submitting such bids. In the event Lessee receives any bid,
Lessor shall, at least five (5) Business Days prior to the proposed
date of sale, certify to Lessor in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the
party or submitting such bid. On the date specified in such notice of
termination or such earlier date as shall be consented to in writing by
Lessor (1) Lessee shall deliver the Airframe and Engines or engines to
the bidder, if any, which shall have submitted the highest bid prior to
such date, in the same manner as if delivery were made to Lessor
pursuant to Section 5 hereof and in full compliance with the terms
thereof, and shall duly transfer to Lessor title to any such engines
not owned by Lessor, all in accordance with the terms of Section 5
hereof; and (2) Lessor shall, without recourse or warranty (except for
Lessor's Warranty and subject to the disclaimer set forth in Section
4(a) hereof), simultaneously therewith sell the Airframe and Engines or
engines to such bidder for cash paid in the manner and in funds of the
type specified in Section 3(d) hereof. The total selling price
realized at such sale shall be paid to and retained by Lessor and, in
addition, on the date of such sale, and as a condition precedent to
such sale and the delivery of the Aircraft and Engines or engines to
such bidder, Lessee shall pay to Lessor, in the manner and in funds of
the type specified in Section 3(d) hereof, the excess, if any, of (A)
the Termination Value for the Aircraft computed as of the date of sale
over (B) the sale price of the Airframe and Engines or engines sold by
Lessor after deducting the expenses incurred by Lessor in connection
with such sale. Upon such payment, Lessor will transfer to Lessee,
without recourse or warranty (except for Lessor's Warranty and subject
to the disclaimer set forth in Section 4(a) hereof), all of Lessor's
right, title and interest in and to any Engines constituting part of
the Aircraft, but which were not then installed on the Airframe and
sold therewith. If no sale shall have occurred on or as of the date
specified in such notice of termination, either because no bids have
been received or because Lessee, at its option, shall have elected that
no bid be accepted, this Lease shall continue in full force and effect
as to the Aircraft. In the event of any such sale and receipt by
Lessor of such sale price as provided herein, and upon compliance by
Lessee with the provisions of this Section 9(b)(ii), the obligation of
Lessee to pay Basic Rent hereunder for the Aircraft shall cease for any
period commencing on or after the Basic Rent payment date occurring on
or after the date as of which Termination Value is computed and the
Term for the Aircraft shall end effective as of the date of such sale.
Lessor shall be under no duty to solicit bids, to inquire into the
efforts of Lessee to obtain bids or otherwise take any action in
connection with any such sale other than to transfer to the purchaser
named
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in the highest bid as referred to above (or to such purchaser and to
Lessee, as the case may be), without recourse or warranty (except for
Lessor's Warranty and subject to the disclaimer set forth in Section
4(a) hereof), all of Lessor's right, title and interest in and to the
Airframe and Engines, against receipt of the payments provided for
herein; and
(iii) Retention of Aircraft by Lessor. In the
event that Lessor elects to retain the Aircraft as provided in Section
9(b)(i) hereof, Lessee, on the proposed termination date, shall
deliver the Aircraft as provided in Section 5, Lessor shall repay to
Lessee that amount of prepaid Basic Rent representing the amount of
Basic Rent prepaid multiplied by a fraction, the denominator of which
shall be 30 and the numerator of which shall be 30 minus the number of
days from and including the date of return to but excluding the Basic
Rent payment date next succeeding the termination date, and no further
payment of Basic Rent or any payment of Termination Value will be owed
to Lessor by Lessee and this Lease shall terminate.
Section 10. Loss; Destruction; Requisition; etc.
(a) Event of Loss with Respect to the Aircraft or the
Airframe During Initial Lease Period. Upon the occurrence of an Event of Loss
with respect to the Aircraft or the Airframe during the Initial Lease Period,
Lessee shall, within sixty (60) days of such occurrence, pay to Lessor (i) all
installments of Basic Rent due with respect to the Aircraft to that date; (ii)
the Stipulated Loss Value in respect of the Aircraft; and (iii) interest at the
Incentive Rate on any amounts of overdue Rent outstanding. Upon the payment of
the Stipulated Loss Value in respect of the Aircraft, Lessee's obligation to
pay future installments of Basic Rent in respect of the Aircraft shall cease.
Lessor will transfer to Lessee, without recourse or warranty (except for
Lessor's Warranty and subject to the disclaimer set forth in Section 4(a)
hereof), all Lessor's right, title and interest, if any, in and to the Airframe
and Engines (if any) with respect to which such Event of Loss occurred, as well
as all Lessor's right, title and interest in and to any Engines constituting
part of the Aircraft with respect to which such Event of Loss occurred but not
installed thereon when such Event of Loss occurred.
(b) Event of Loss with Respect to the Aircraft or the
Airframe During Base Lease Period or any Renewal Period. Upon the occurrence
of an Event of Loss with respect to the Aircraft or Airframe during the Base
Lease Period or any Renewal Period, Lessee shall forthwith (and, in any event,
within fifteen (15) days after such occurrence) give Lessor written notice of
such Event of Loss and of its election, subject to the terms hereof, to perform
one of the following two options (it being agreed that
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if Lessee shall not have given Lessor notice of such election within twenty
(20) calendar days after such occurrence, Lessee shall be deemed to have
elected to perform the option set forth in the following clause (ii)), provided
that Lessee shall not have the right to select the option set forth in clause
(i) if an Event of Default, or an event which would constitute an Event of
Default upon the lapse of time or the giving of notice or both, shall have
occurred and is continuing or, if Lessee shall have suffered a Material Adverse
Change in Financial Condition:
(i) within one year after the date of occurrence
of such Event of Loss, during which time Lessee's obligation
to pay Basic Rent shall continue, Lessee shall convey or cause
to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement of the Airframe, title to a Replacement Airframe
(together with the same number of Replacement Engines as the
Engines, if any, installed on the Airframe at the time such
Event of Loss occurred), such Replacement Airframe and
Replacement Engines to be free and clear of all Liens other
than Liens permitted by Section 6, to have a value, utility
and useful life at least equal to, and to be in as good
operating condition as, the Airframe and the Engines, if any,
so replaced (assuming the Airframe and such Engines were in
the condition and repair required by the terms of this
Agreement), provided that if Lessee shall not perform its
obligation to effect such replacement under this clause (i)
promptly upon receipt of any insurance proceeds paid in
accordance with Section 11 hereof, but in any event no later
than ninety (90) days after the date of the occurrence of such
Event of Loss, Lessee shall deposit with Lessor the amount
that would be required by the terms of clause (ii) below to be
paid with respect to the Aircraft, such amount to be held by
the Lessor until paid over to the Lessee or applied to reduce
the Lessor's investment, and such amount may be invested by
the Lessor as provided in Section 24; provided further that
(A) if the replacement occurs pursuant to Section 10(d)
hereof, during the one (1) year period, Lessor shall pay to
Lessee the amount held at such time (giving effect to any
increase or decrease thereof on account of actions taken
pursuant to Section 24, hereof) which was deposited with
Lessor by Lessee pursuant to this clause (i) and Lessor will
execute and deliver any documents requested by Lessee to
terminate Lessor's interest, if any in such amount, or (B) if
no replacement occurs by the end of the one (1) year period,
the Event of Loss with respect to the Airframe shall be deemed
to have occurred on the last day of such one (1) year period
and Lessee shall comply with the provisions of clause (ii) of
this Section 10(b) except that the amount to be paid to Lessor
by Lessee as the Stipulated Loss Value of the Aircraft shall
be
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paid on the date on which the Event of Loss is deemed to have
occurred and shall be reduced by the amount then held by Lessor
(giving effect to any increase or decrease in such amount on
account of actions taken pursuant to Section 24 hereof) which
was deposited with Lessor by Lessee pursuant to this clause
(i), and Lessor shall retain such amount, or if such amount
held by Lessor exceeds the Stipulated Loss Value of the
Aircraft to be paid to Lessor by Lessee, Lessor shall, upon
compliance by Lessee with the provisions of clause (ii) of this
Section 10(b), pay over to Lessee the amount of such excess,
and the Lease shall terminate. At such time Lessor will execute
and deliver to Lessee any documents requested by Lessee to
terminate the interest, if any, granted by Lessee to Lessor in
such amount; and
(ii) (1) On or before ninety (90) days after the date
of Event of Loss, Lessee shall pay to Lessor, in immediately
available funds the Stipulated Loss Value of the Aircraft,
whereupon the obligation of Lessee to pay Basic Rent hereunder
with respect to the Aircraft for any period commencing on or
after the Basic Rent payment date occurring on or after the
date as of which such Stipulated Loss Value is computed shall
terminate, provided that Lessee shall remain liable for all
payments of Basic Rent for the Aircraft due on or before the
date of such payment of Stipulated Loss Value, (2) the Term
for the Aircraft shall end, and (3) Lessor will transfer to
Lessee, without recourse or warranty (except for Lessor's
Warranty and subject to the disclaimer set forth in Section
4(a) hereof), all Lessor's right, title and interest, if any,
in and to the Airframe and Engines (if any) with respect to
which such Event of Loss occurred, as well as all Lessor's
right, title and interest in and to any Engines constituting
part of the Aircraft with respect to which such Event of Loss
occurred but not installed thereon when such Event of Loss
occurred.
(c) Event of Loss with Respect to an Engine. Upon the
occurrence of an Event of Loss with respect to an Engine only, under
circumstances in which there has been no Event of Loss to the Airframe Lessee
shall give Lessor prompt written notice thereof and shall, within thirty (30)
days after the occurrence of such Event of Loss, convey or cause to be conveyed
to Lessor, as replacement for the Engine with respect to which such Event of
Loss occurred, title to a Replacement Engine free and clear of all Liens not
excepted in Section 6 and having performance and durability characteristics and
a value and utility at least equal to, and being in as good operating condition
as, the Engine with respect to which such Event of Loss occurred assuming such
Engine was of the value or utility and in the condition and repair required by
the terms hereof immediately prior to the occurrence
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of such Event of Loss. Prior to or at the time of any such conveyance, Lessee,
at its own expense, will promptly (i) furnish Lessor with a bill of sale, in
form and substance satisfactory to Lessor, with respect to such Replacement
Engine; (ii) cause a supplement hereto, in form and substance satisfactory to
Lessor, subjecting such Replacement Engine to this Lease, to be duly executed
by Lessee, and recorded pursuant to the Act, as amended; (iii) furnish Lessor
with such evidence of title to such Replacement Engine and of compliance with
the insurance provisions of Section 11 hereof with respect to such Replacement
Engine as Lessor may reasonably request; (iv) furnish Lessor with an opinion of
Lessee's counsel to the effect that title to such Replacement Engine has been
duly conveyed to Lessor free and clear of all Liens (except those permitted
under Section 6 of this Lease) and is duly leased hereunder; (v) furnish to
Lessor a certificate signed by a duly authorized financial officer or executive
of Lessee certifying that the Lessee's representations and warranties contained
in the Participation Agreement are true and accurate on and as of said date as
though made on and as of said date and that upon consummation of such
replacement, no Event of Default (or other event which after lapse of time or
notice or both would become an Event of Default) will exist hereunder; (vi)
furnish to Lessor such documents and evidence with respect to Lessee, as Lessor
or its counsel may reasonably request in order to establish the Lessor's title
to such Engine, free and clear of all liens, except those permitted hereby, the
consummation of the transactions contemplated by this Section 10(c), the taking
of all corporate proceedings in connection therewith and compliance with the
conditione set forth in this Section 10(c), in each case in form and substance
satisfactory to such party; and (vii) furnish to Lessor evidence that all
amounts payable by Lessee on or prior to said date pursuant to the provisions
of this Lease shall have been paid in full. Upon full compliance by Lessee
with the terms of this paragraph (c), Lessor will transfer to Lessee all of the
right, title and interest in the Engine with respect to which the Event of Loss
occurred and which was originally conveyed to Lessor without recourse or
warranty (except for Lessor's Warranty and subject to the disclaimer set forth
in Section 4(a) hereof). 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 same Aircraft as was
the Engine replaced thereby. No Event of Loss covered by this Section 10(c)
shall result in any reduction in Basic Rent.
(d) Conveyance of Replacement Airframe. Prior to or at
the time of any conveyance of a Replacement Airframe pursuant to subsection (b)
above, Lessee, at its own expense, will furnish Lessor with the following
documents which shall have been duly authorized, executed and delivered by the
respective parties as parties thereto and shall be in full force and effect on
said date: (i) a full warranty bill of sale, in the form and substance
satisfactory to Lessor, and an AC Form 8050-2 Bill of Sale (or such other form
of bill of sale as may be approved by the FAA on
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said date), executed by the owner thereof, in favor of Lessor, with respect to
such Replacement Airframe and Engines, if any, and in the case of the latter,
recorded pursuant to the Act; (ii) a supplement hereto, in form and substance
satisfactory to Lessor, covering such Replacement Airframe and Engines, if any,
duly executed by Lessee and recorded pursuant to the Act; (iii) such evidence
of compliance with the insurance provisions of Section 11 with respect to such
Replacement airframe and Engines, if any, as Lessor may reasonably request,
including an independent insurance broker's report with Certificates of
Insurance; (iv) an opinion of Lessee's counsel (and such other evidence of
title as Lessor may reasonably request) to the effect that, upon such
conveyance, Lessor is entitled to the benefits of 11 U.S.C. Section 1110 with
respect to the Replacement Airframe and Engines, if any, and Lessor will
acquire good and marketable title to such Replacement Airframe and Engines, if
any, free and clear of all Liens other than the rights of Lessee hereunder and
such Liens as are permitted by this Lease, and that such Replacement Airframe
and Engines, if any, will be leased hereunder to the same extent as the
Airframe and Engines, if any, replaced thereby; (v) a certificate signed by a
duly authorized financial officer or executive of Lessee certifying that the
representations and warranties made by Lessee contained in the Participation
Agreement are true and accurate on and as of said date as though made on and as
of said date and that, upon consummation of such replacement, no Event of
Default (or other event which after lapse of time or notice or both would
become an Event of Default) will exist hereunder; (vi) such documents and
evidence with respect to Lessee, as Lessor, or its counsel may reasonably
request in order to establish the consummation of the transactions contemplated
by this Section 10(d), the taking of all corporate proceedings in connection
therewith and compliance with the conditions set forth in this Section 10(d),
in each case in form and substance satisfactory to Lessor, including evidence
that the Replacement Aircraft has been duly certificated by the FAA as to type
and airworthiness in accordance with the terms of this Lease and application
for registration of the Replacement Aircraft in the name of Lessor has been
duly made with the FAA and Lessee has temporary or permanent authority to
operate the Replacement Aircraft; and (vii) evidence that all amounts payable
by Lessee on or prior to said date pursuant to the provisions of this Lease
shall have been paid in full. Upon full compliance by Lessee with the terms of
this paragraph (d), Lessor will transfer to Lessee, without recourse or
warranty (except for Lessor's Warranty and is subject to the disclaimer set
forth in Section 4(a) hereof) all of Lessor's right, title and interest, if
any, in and to the Aircraft with respect to which such Event of Loss occurred.
No Event of Loss with respect to the Aircraft under the circumstances
contemplated by the terms of this paragraph (d) shall result in any reduction
in Basic Rent.
For all purposes of this Lease, each such Replacement Aircraft
(together with any Engines constituting part of the Aircraft being replaced
which were not installed on such Aircraft
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when the Event of Loss occurred) shall be deemed part of the property leased
hereunder, and shall be deemed the "Aircraft" as defined herein.
(e) Application of Payments from Governmental Authorities
for Requisition of Title. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other person with
respect to an Event of Loss resulting from the condemnation, confiscation,
theft or seizure of, or requisition of title to or use of the Airframe or any
Engine, other than a requisition for use by the United States Government or any
instrumentality or agency thereof (for purposes of this Section 10 called the
"Government") not constituting an Event of Loss, will be applied as follows:
(i) if such payments are received with respect to
the Airframe or the Airframe and the Engines or engines installed on
the Airframe that has been or is being replaced by Lessee as
contemplated by Sections 10(b) and 10(d), such payments shall be paid
over to, or retained by, Lessor and upon completion of such
replacement be paid over to, or retained by Lessee; and
(ii) if such payments are received with respect to
the Airframe or the Airframe and the Engines or engines installed on
the Airframe that has not been and will not be replaced as
contemplated by Sections 10(b) and 10(d), so much of such payments
remaining after reimbursement of Lessor for costs and expenses as
shall not exceed the Stipulated Loss Value require to be paid by
Lessee pursuant to Section 10(b), shall be paid to or retained by
Lessor and applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value, if not already paid by Lessee, or, if already
paid by Lessee, shall be paid to or retained by Lessee and applied to
reimburse Lessee for its payment of such Stipulated Loss Value, and
the balance, if any, of such payment remaining thereafter shall be
retained by the Lessee; and
(iii) if such payments are received with respect to
an Engine under circumstances contemplated by Section 10(c), so much
of such payments remaining after reimbursement of Lessor for costs and
expenses shall be paid over to, or retained by, Lessee provided that
Lessee shall have fully performed the terms of Section 10(c) with
respect to the Event of Loss for which such payments are made.
(f) Requisition for Use by the Government of the Airframe
and the Engines Installed Thereon. In the event of the requisition for use by
the Government of the Airframe and the Engines or engines installed on the
Airframe during the Term, Lessee shall promptly notify Lessor of such
requisition and all of Lessee's obligations under this Lease Agreement with
respect
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to the Aircraft shall continue to the same extent as if such requisition had
not occurred provided that, if the Airframe and such Engines or engines are not
returned by the Government prior to the end of the Term, Lessee shall be
obligated to return the Airframe and such Engines or engines to Lessor pursuant
to, and in all other respects to comply with the provisions of, Section 5
promptly upon their return by the Government. All payments received by Lessor
or Lessee from the Government for the use of the Airframe and such Engines or
engines during the Term shall be paid over to, or retained by, Lessee; and all
payments received by Lessor or Lessee from the Government for the use of the
Airframe and such Engines or engines after the Term shall be paid over to, or
retained by, Lessor.
(g) Requisition for Use by the Government of an Engine.
In the event of the requisition for use by the Government of any Engine, Lessee
will replace such Engine hereunder by complying with the terms of Section 10(c)
to the same extent as if an Event of Lose had occurred with respect to such
Engine, and any payments received by Lessor or Lessee from the Government with
respect to such requisition shall be paid over to, or retained by, Lessee,
provided that Lessee shall have fully performed the terms of Section 10(c) with
respect to the Engine requisitioned for use for which such payments are made.
(h) Application of Payments During Existence of Event of
Default. Any amount referred to in clause (i), (ii) or (iii) of Section 10(e),
Section 10(f) or Section 10(g) which is payable to Lessee shall not be paid to
Lessee, or if it has been previously paid directly to Lessee, shall not be
retained by Lessee, if at the time of such payment an Event of Default, or any
event which after lapse of time or the giving of notice or both would
constitute an Event of Default, shall have occurred and be continuing, but
shall be paid to and held by Lessor as security for the obligations of Lessee
under this Lease, and at such time as the following shall be true and Lessor
shall receive a certificate of an officer of Lessee stating that there is not
continuing any such Event of Default or event which after lapse of time or the
giving of notice or both would become an Event of Default, all such amounts
paid during such Event of Default in excess of Basic Rent shall be paid to
Lessee.
Section 11. Insurance
(a) Airlines Public Liability and Property Damage
Insurance. Lessee will carry at its own expense airlines public liability
insurance (which shall include contractual liability insurance) including
passenger legal liability and property damage insurance with respect to the
operation of the Aircraft (i) in amounts which are not lest than the public
liability and property damage insurance applicable to similar aircraft and
engines which comprise Lessee's fleet on which Lessee carries insurance; (ii)
of the type usually carried by corporations
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engaged in the same or a similar business, similarly situated with Lessee, and
owning or operating similar aircraft and engines; and (iii) which is maintained
in effect with insurers of recognized responsibility.
Furthermore, any policies of insurance carried in accordance
with this Section 11(a), and any policies taken out in substitution or
replacement for any of such policies (A) shall be amended to name Lessor (in
the case of any manufacturers of the Aircraft or Engines, not in their
capacities as such), its assigns and officers, directors, shareholders, agents,
employees and servants as additional insured(s) (Additional Insureds), (B)
shall provide that in respect of the interests of Lessor in such policies the
insurance shall not be invalidated by any action or inaction of Lessee and
shall insure Lessor regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by Lessee, and (C) shall
provide that if such insurance is cancelled for any reason, or any substantial
change is made in the coverage which affects the interests of Lessor or if such
insurance is allowed to lapse for nonpayment of premium, Lessee will cause to
be sent to Lessor immediate notification of such cancellation, change or lapse
which cancellation, change or lapse shall not be effective as to the Lessor for
thirty (30) days, except seven (7) days or such shorter period as from time to
time may be customarily obtainable in the industry, in the case of war risk or
allied perils coverage, after receipt by the Lessor of written notice from such
insurers of such cancellation change or lapse.
Each liability insurance policy (1) shall be primary without
right of contribution from any other insurance which is carried by any
Additional Insureds with respect to its interest as such in each Aircraft, (2)
shall expressly provide that all of the provisions thereof, except the limits
of liability, shall operate in the same manner as if there were a separate
policy covering each Additional Insureds, and (3) shall contain other
provisions as required by (f) hereof.
(b) Insurance Against Loss or Damage to Aircraft. Subject
to the rights of Lessee to establish and maintain self-insurance with respect
to loss or damage to the Aircraft as hereinafter provided, Lessee shall
maintain in effect with insurers of recognized responsibility, at its own
expense, all-risk aircraft hull insurance covering the Aircraft and ground
property insurance with respect to any Engines or Parts while removed from the
Aircraft. Lessee shall also maintain war risk and allied perils hull insurance
if the Aircraft is operated on routes where the custom in the industry or
Lessee's practice is to carry war risk and allied perils hull insurance. Such
war risk and allied perils hull insurance will be of the type and in
substantially the amount usually carried by airlines similarly situated with
Lessee; provided that such all-risk and war risk and allied perils insurance
(including the permitted self-insurance) shall at all times while the Aircraft
is subject
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to this Lease be for an amount not less than the Stipulated Loss Value for the
Aircraft (as from time to time determined). Provision in the aircraft hull
insurance for deductible amounts per occurrence shall be permitted in addition
to self insurance; provided that such deductible amount shall not exceed the
greater of: (i) the deductible amounts carried by United States airlines
operating similar aircraft, or (ii) the greater of $600,000 or two (2%) percent
of the insured value of the Aircraft (except that in the case of damage to
Engines caused by ingestion, such deductible amounts may not be in excess of
four (4%) percent of the insured value).
Lessee may self-insure the risks required to be insured
against pursuant to this Section 11 to a reasonable level. The self-insurance
with respect to all of the aircraft in the Lessee's fleet may not exceed for
any twelve-month-policy year, the lesser of (i) $12,000,000 (or the largest
replacement value of any single aircraft on which Lessee carries insurance, if
such value is greater than $12,000,000), or (ii) one and one-half (1-1/2%)
percent of the average aggregate insurable value of Lessee's fleet for the
preceding year.
Any policies carried in accordance with this Section 11(b)
covering the Aircraft and any policies taken out in substitution or replacement
for any such policies shall (A) be amended to name Lessor as loss payee as its
interests may appear as Owner and Lessor, (B) provide that in respect of the
interest of Lessor, the insurance shall not be invalidated by any action or
inaction of Lessee and shall insure Lessor's interest, regardless of any breach
or violation by Lessee of any warranties, declarations or conditions contained
in such policies, (C) provide for a waiver of subrogation in respect of Lessor,
(D) provide that if such insurance is cancelled for any reason whatsoever, or
any substantial change is made in the coverage which affects the interest of
the Lessor, or if such insurance is allowed to lapse for nonpayment of premium,
such cancellation, change or lapse shall not be effective as to the Lessor for
30 days (seven days, or such shorter period as may from time to time be
customarily obtainable in the industry, in the case of any war risk and allied
perils coverage) after receipt by the Lessor of written notice from such
insurers of such cancellation, change or lapse, and (E) be primary and without
right of contribution from other insurance which may be available to the
Lessor.
In the case of a lease or contract with the United States of
America or any agency or instrumentality thereof in respect of the Aircraft, a
valid agreement by the United States of America or such agency or
instrumentality to indemnify Lessee against the same risks which Lessee is
required hereunder to insure against in an amount at least equal to the
Stipulated Loss Value of the Aircraft from time to time shall be considered
adequate insurance with respect to the Aircraft while subject to
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such lease or contract, to the extent of the risks and in the amounts that are
the subject of any such agreement to indemnify.
(c) Proceeds of Insurance. As between Lessor and Lessee
it is agreed that all insurance payments received under policies required to be
maintained by Lessee hereunder, exclusive of any payments received in excess of
the Stipulated Loss Value for the Aircraft, as the result of the occurrence of
an Event of Loss with respect to the Airframe or any Engine will be applied as
follows:
(i) if such payments are received with respect to
the Airframe or Airframe and Engines or engines installed on
the Airframe that has been or is being replaced by Lessee,
such payments shall be paid over to, or retained by, Lessor,
and upon completion of such replacement be paid over to, or
retained by Lessee; and
(ii) if such payments are received with respect to
the Airframe or Airframe and Engines or engines installed on
the Airframe that has not been and will not be replaced, so
much of such payments remaining after reimbursement of Lessor
for costs and expenses shall be applied in reduction of
Lessee's obligations pursuant to Section 10(b)(ii) hereof, if
not already paid by Lessee, or, if payment for such
obligations has been already made by Lessee, shall be applied
to reimburse Lessee for such payment, and the balance, if any,
will be paid over to, or retained by, Lessee; and
(iii) if such payments are received with respect to
an Engine replaced pursuant to Section 10(c) hereof, so much
of such payments remaining after reimbursement of Lessor for
costs and expenses shall be paid over to, or retained by,
Lessee, provided that Lessee shall have fully performed the
terms of Section 10(c) with respect to such Engine;
provided, however, if at the time of such payment an Event of Default or an
event which but for the giving of notice or lapse of time would constitute an
Event of Default shall have occurred and be continuing, such insurance payments
shall be paid to the Lessor and either (i) held by the Lessor as security for
the obligations of the Lessee under this Agreement, or (ii) applied by the
Lessor on behalf of the Lessee for repairs or for replacement property in
accordance with the terms of Sections 7 and 10 hereof. At such time as there
shall not be continuing any such Event of Default or event which with the lapse
of time or giving of notice or both would become an Event of Default, the
Lessor will pay to the Lessee any such amount then held by the Lessor.
As between Lessor and Lessee the insurance payments with
respect to any property damage not constituting an Event of
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Loss with respect to the Airframe or an Engine shall be retained by the Lessee,
provided that Lessee repairs or causes to be repaired such damage in accordance
with the provisions hereof.
(d) Reports, etc. In the case of the Aircraft, (i) on or
before the Delivery Date thereof, and upon each renewal or change of insurance,
Lessee will furnish to Lessor certificates of the insurer or insurers (or their
authorized representatives) stating the amounts and types of insurance in force
as to the Aircraft, and (ii) on or before the Delivery Date thereof and
annually on the anniversary date hereof, Lessee will furnish to Lessor a report
signed by a fire of independent aircraft insurance brokers, appointed by Lessee
and not objected to by Lessor, stating the opinion of such firm to the effect
that Lessee's insurance coverage complies with the insurance requirements of
this Section, provided, that all information contained therein shall be held
confidential by Lessor and shall not be furnished to anyone other than as
necessary to any affiliate of Lessor, who shall also hold such information
confidential and shall not furnish or disclose such information to anyone,
except, in each case as may be required by an order of any court or
administrative agency or by any statute, rule, regulation or final order of any
governmental authority. In the event that Lessee shall fail to maintain
insurance as herein provided, Lessor may at its option, provide such insurance
and, in such event, Lessee shall, upon demand, reimburse Lessor, for the cost
thereof.
(e) Insurance for Own Account. Nothing in this Section
shall limit or prohibit the Lessor or the Lessee from obtaining insurance for
its own account; and any proceeds payable thereunder shall be payable as
provided in the insurance policy relating thereto, provided that no such
insurance may be obtained which would limit or otherwise adversely affect the
coverage of any insurance required to be obtained or maintained pursuant to
this Section.
(f) General Requirements. Any policies carried in
accordance with this Section 11 and any policies taken out in substitution or
replacement for any such policies shall (A) be primary and without right of
contribution from other insurance which may be available to Lessor or any
Additional Insured and shall expressly provide that all the provisions thereof,
except limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, (B) waive any right of the insurers to
any setoff, recoupment, counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of the Lessee or the
Additional Insureds, (C) provide that the Additional Insureds shall not be
liable for any insurance premium of the Lessee arising out of or resulting from
this Agreement and (D) specifically refer to this Section 11. The Lessee will
cause such insurers to advise the Lessor in writing promptly of any default in
the payment of any premium and of any other act or omission on the part of the
Lessee of which they
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have knowledge and which might invalidate on render unenforceable, in whole or
in part, any insurance on the Aircraft.
Section 12. Inspection
At all reasonable times Lessor or its authorized
representatives may inspect the Aircraft and the books and records of Lessee
relative thereto. Lessor shall have no duty to make any such inspection and
shall not incur any liability or obligation by reason of not making any such
inspection.
Section 13. Assignment
Except as otherwise provided in Section 7(b) or in the case of
any requisition by the United States of America referred to in Section 10(f),
Lessee will not, without prior written consent of Lessor, assign any of its
rights hereunder. The terms and provisions of this Lease shall be binding upon
and inure to the benefit of Lessor and Lessee and their respective successors
and assigns.
Section 14. Events of Default
The following events shall constitute Events of Default
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any Judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Event of Default shall be
deemed to exist and continue so long as, but only so long as, it shall not have
been remedied:
(a) Failure to Pay Rent. Lessee shall fail to make any
payment of Rent within ten (10) days after the same shall have become due; or
(b) Failure to Carry Insurance. Lessee shall fail to
carry and maintain insurance on or with respect to the Aircraft in accordance
with the provisions of Section 11 provided that, in the case of insurance with
respect to which cancellation, change, or lapse for nonpayment of premium shall
not be effective as to Lessor for thirty (30) days (seven (7) days, or such
shorter period as may from time to time be customarily obtainable in the
industry, in the case of any war risk and allied perils coverage) after receipt
of notice by Lessor of such cancellation, change, or lapse, no such failure to
carry and maintain insurance shall constitute an Event of Default hereunder
until the earlier of (i) the date such failure shall have continued unremedied
for a period of fifteen (15) days (three (3) days or 24 hours less than any
shorter notice period in the case of any war risk and allied perils coverage)
after receipt by Lessor of the notice of
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cancellation, change, or lapse referred to in Section 11(a)(C) or 11(b)(D)
hereof or (ii) such insurance not being in effect as to either of Lessee or
Lessor; or
(c) Public Liability Insurance not in Effect. Lessee
shall operate any Aircraft at a time when public liability insurance required
by Section 11(a) shall not be in effect; or
(d) Failure to Perform Covenants. Lessee shall (i) fail
to comply with its obligations under clause (i) of Section 7(a) hereof; or (ii)
fail to perform or observe any other covenant, condition or agreement to be
performed or observed by it hereunder or under the Participation Agreement, and
such failure shall continue unremedied for a period of thirty (30) days after
written notice thereof to Lessee; or
(e) Incorrect Representation or Warranty. Any
representation or warranty made by Lessee herein or in the Participation
Agreement or in any document or certificate furnished by Lessee in connection
herewith or pursuant hereto shall at any time prove to have been incorrect in
any material respect at the time made or deemed to have been made; or
(f) Entry of a Decree in Bankruptcy. The entry of a
decree or order for relief by a court having Jurisdiction in the premises in
respect of Lessee in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of Lessee or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs and the continuance of
any such decree or order undismissed, unstayed or unvacated for a period of
ninety (90) days after the date of entry thereof; or
(g) Commencement of a Voluntary Case in Bankruptcy. The
commencement by Lessee of a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
it to the entry of an order for relief in an involuntary case under any such
law or to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of
Lessee or of any substantial part of its property, or the making by it of any
general assignment for the benefit of creditors, or the failure of Lessee
generally to pay its debts as such debts become due (within the meaning of 11
U.S.C. Section 303(h)), or the taking of corporate action by Lessee in
furtherance of any of the foregoing; or
(h) Undischarged Final Judgment in Excess of $1,000,000.
Final judgment for the payment of money in excess of $1,000,000 shall be
rendered against Lessee and the same shall remain undischarged for a period of
sixty (60) days during which execution of such judgment shall not be
effectively stayed; or
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(i) Acceleration of Indebtedness Exceeding $5,000,000.
The Lessee shall fail to pay an indebtedness of the Lessee for borrowed money
or the deferred purchase price of property or the rental of any personal
property (excluding the Lessee's obligations hereunder), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such payment and the maturity of such indebtedness, deferred
purchase price or rental shall have been accelerated by the holder or holders
thereof or such payment shall not be made at final maturity and the aggregate
amount over the term of this Lease, whether or not later repaid or pardoned, of
all such indebtedness, deferred purchase price or rental which shall have been
so accelerated or which shall not have been made at final maturity shall equal
or exceed $5,000,000; or
(j) Failure to Remain Air Carrier. The Lessee shall fail
to remain an "air carrier" as that term is used in 11 U.S.C. Section 1110; or
(k) Voluntary Suspension of Airline Operations. The
Lessee shall voluntarily suspend all or substantially all of its commercial
airline operations (except a suspension resulting from a labor action) or the
franchises, concessions, permits, rights or privileges require for the conduct
of the business and operations of the Lessee shall be revoked, cancelled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result thereof the preponderant business
activity of the Lessee shall cease to be that of a commercial airline.
Promptly after Lessee has knowledge thereof, Lessee shall give
Lessor notice of any event that has occurred and is continuing which
constitutes an Event of Default or would constitute an Event of Default but for
the lapse of time or the giving of notice or both.
Section 15. Remedies
Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare this Lease to be in default; and at any time thereafter, so long as
Lessee shall not have remedied all outstanding Events of Default, Lessor may do
one or more of the following with respect to all or any part of the Airframe or
any and all Engines as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory requirements of,
applicable law then in effect:
(a) Return of Airframe and Engines. Cause Lessee, upon
the written demand of Lessor and at Lessee's expense, to return
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promptly, and Lessee shall return promptly, all or such part of the Airframe or
any Engine as Lessor may so demand to Lessor or its order in the manner and
condition required by, and otherwise in accordance with all the provisions of,
Section 5 as if the Airframe or Engine were being returned at the end of the
Term, or Lessor, at its option, may enter upon the premises where all or any
part of the Airframe or any Engine is located and take immediate possession of
and remove the same (together with any engine which is not an Engine but which
is installed on the Airframe), subject to all of the rights of the owner,
lessor, lienor or secured party of such engine; provided that the Airframe with
an engine (which is not an Engine) installed thereon may be flown only to a
location within the continental United States, and such engine shall be held
for the account of any such owner, lessor, lienor or secured party or, if owned
by Lessee, may, at the option of Lessor, be exchanged with Lessee for an Engine
in accordance with the provisions of Section 5(e), by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the restoration of damage to
property caused by such taking or otherwise and Lessee expressly waives any
right it may have under applicable law to a hearing prior to repossession of
the Aircraft, Airframe or any Engine;
(b) Sale of Airframe or Engines. With or without taking
possession thereof, sell all or any part of the Airframe or any Engine at
public or private sale at such times and places and to such Person or Persons,
with or without advertisement, for cash or upon credit, as Lessor may
determine, or otherwise dispose of, hold, use, operate, lease to others or keep
idle all or any part of such Airframe or Engine as Lessor in its sole
discretion, may determine, all free and clear of any rights of Lessee except as
hereinafter set forth in this Section 15 and without any duty to account to
Lessee with respect to such action or inaction or for any proceeds with respect
thereto;
(c) Liquidated Damages. Whether or not Lessor shall have
exercised, or shall thereafter at any time exercise, any of its rights under
paragraph (a) or paragraph (b) above with respect to all or any part of the
Airframe or any Engine, Lessor, by written notice to Lessee specifying a
payment date (which shall also be the date on which Stipulated Loss Value is
determined under (i) or (ii) below) which shall be a date not earlier than ten
(10) days from the date of such notice, may demand Lessee to pay to Lessor, and
Lessee shall pay Lessor, on the payment date specified In such notice, as
liquidated damages for lose of a bargain and not as a penalty (in lieu of Basic
Rent for the Aircraft due on or after the date specified for payment in such
notice), in addition to all Basic Rent due up to such date, the following:
(i) in the event that the Aircraft, Airframe or
such Engine has been sold, Stipulated Loss Value less the net proceeds
of such sale; or
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(ii) in the event the Aircraft, Airframe or such
Engine is being re-leased by Lessor to another lessee, for the whole,
or any portion of the remaining Initial and Base Lease Term,
Stipulated Loss Value less the present value of such rentals under
such lease through the end of the Base Lease Term, and in the event
that there are subsequent re-lease agreements entered into prior to
the end of the Base Lease Term, such subsequent re-lease rentals
through the end of the Base Lease Term shall be paid to Lessee as
received by Lessor. If Lessor sells the Aircraft either before or
after any re-lease period or periods, but before the end of the Base
Lease Period, Lessee shall receive the net sales proceeds of such
sale;
provided, however, that any payments to Lessee or reductions from payments of
Stipulated Loss Value due from Lessee shall not be made until Lessor shall have
been paid in full Stipulated Loss Value and, provided further, however, that
the total of the present value, as of the date of determination of Stipulated
Loss Value, of all credits and payments to Lessee pursuant to (i) and (ii)
above, shall not exceed Stipulated Loss Value. The present value of any
re-lease rentals or sales proceeds shall be determined using a discount rate
equal to the sum of two (2%) percent plus a rate equal to the average of the
latest two weeks of the Ten Year Treasury Constant Maturity Rate as contained
in the most recent Federal Reserve Statistical Release H.15 published by the
Board of Governors of the Federal Reserve System (or any successor publication
thereto) prior to the Delivery Date for the Aircraft.
(d) Other Remedies. Lessor may terminate this Lease
Agreement as to the Airframe or any and all Engines or may exercise any other
right or remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
the breach hereof. In addition, Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before, after or
during the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses incurred by reason of the occurrence of any Event of
Default or the exercise of Lessor's remedies with respect thereto, including
all costs and expenses incurred in connection with the return of the Airframe
or any Engine in accordance with the terms of Section 5 or in placing the
Airframe or such Engine in the condition and airworthiness. required by such
Section. At any sale of the Airframe or an Engine or part thereof pursuant to
this Section 15, Lessor may bid for and purchase such property. Except as
otherwise expressly provided above, no remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity, and the exercise or beginning of exercise of any one or more of such
remedies shall not preclude the simultaneous or later exercise by Lessor of any
or all of such other remedies. No express or implied waiver by
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Lessor of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default. To the extent permitted by
applicable law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise which may require Lessor to sell, lease or otherwise use
the Airframe or any Engine or part thereof in mitigation of Lessor's damages as
set forth in this Section or which may otherwise limit or modify any of
Lessor's rights or remedies under this Section 15.
Section 16. Federal Bankruptcy Act.
Pursuant to the provisions of 11 U.S.C. Section 1110, or any
analogous section of the Federal bankruptcy laws, as amended from time to time,
it is hereby expressly agreed and provided that, notwithstanding any other
provisions of the Federal bankruptcy laws, as amended from time to time, the
title of Lessor to the Aircraft, Airframe and each Engine and any right of
Lessor to take possession of the Aircraft, Airframe and each Engine in
compliance with the provisions of this Lease shall not be affected by the
provisions of the Federal bankruptcy laws, as amended from time to time.
Section 17. Further Assurances; Financial Information
Forthwith upon the execution and delivery of each Lease
Supplement, Lessee will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) to be duly filed and recorded in
accordance with the Act. In addition, Lessee will promptly and duly execute and
deliver to Lessor such further documents and assurances and take such further
action as Lessor may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor hereunder, including, without limitation, if requested by Lessor, at the
expense of Lessee, the execution and delivery of supplements or amendments
hereto, in recordable form, subjecting to this Lease any Replacement Airframe
or Replacement Engine and the recording or filing of counterparts hereof, in
accordance with the laws of such Jurisdictions as Lessor may from time to time
deem advisable, provided that this sentence is not intended to impose upon
Lessee any additional liabilities not otherwise contemplated by this Lease.
Lessee also agrees to furnish Lessor (i) within sixty (60) days after the end
of each of the first three quarterly fiscal periods in each fiscal year of
Lessee, a consolidated balance sheet of Lessee and its consolidated
subsidiaries prepared by it as of the close of such period, together with the
related consolidated statements of income and of surplus and statements of
changes in financial position for such period; (ii) within 120 days after the
close of each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries as of the close of such fiscal year, together
with
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the related consolidated statements of income and of surplus and statements of
changes in financial position for such fiscal year, as certified by independent
public accountants, including their certificate and accompanying comments;
(iii) within 120 days after the close of each fiscal year of Lessee, a
certificate of Lessee, signed by a duly authorized financial officer of Lessee
to the effect that the signer has reviewed the relevant terms of this Lease and
has made, or caused to be made under his supervision, a review of the
transactions and condition of Lessee during the accounting period covered by
the financial statements referred to in clause (ii) above, and that such review
has not disclosed the existence during such accounting period, nor does the
signer have knowledge of the existence as at the date of such certificate, of
any condition or event which constitutes an Event of Default or which, after
notice or lapse of time or both, would constitute an Event of Default, or, if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what action Lessee has taken or is taking or proposes
to take with respect thereto, together with a certificate of Lessee as to the
condition of the Aircraft; and (iv) from time to time such other information as
Lessee sends to its lenders (except periodic reports that may be sent more
frequently than quarterly).
Section 18. Notices
All notices required under the terms and provisions hereof
shall be in writing by telex, teletype, telecommunication or other customary
means of business communication; if by writing, any such notice shall become
effective when received, addressed (i) if to Lessee, at 605 Third Avenue, New
York, New York 10158, Attention: Vice President and Treasurer, or at such other
address as Lessee shall from time to time designate in writing to Lessor; and
(ii) if to Lessor, c/o UT Credit Corporation, United Technologies Building,
Hartford, Connecticut, 06101, Attention: Treasurer, or at such other address as
Lessor shall from time to time designate in writing to Lessee.
Section 19. No Setoff; Counterclaim; etc.
Lessee's obligation to pay all Rent payable hereunder shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (i) any setoff, counterclaim, recoupment,
defense or other right which Lessee may have against Lessor, the Manufacturer,
Pratt & Whitney Aircraft or anyone else for any reason whatsoever (including
any thereof based upon or relating to Lessor's representations or warranties in
Section 4 hereof or elsewhere); (ii) any defect in the title, airworthiness,
condition, design, operation, or fitness for use of, or any damage to or loss
or destruction of, the Aircraft, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever; (iii) any insolvency,
-41-
46
bankruptcy, reorganization or similar proceedings by or against Lessee; or (iv)
any other circumstance, happening or event whatsoever, whether or not similar
to any of the foregoing. If for any reason whatsoever this Lease shall be
terminated in whole or in part by operation of law or otherwise, except as
specifically provided herein, Lessee nonetheless agrees to pay to Lessor an
amount equal to each Basic Rent payment at the time such payment would have
become due and payable in accordance with the terms hereof had this Lease not
been terminated in whole or in part. Lessee hereby waives, to the extent
permitted by applicable law, any and all rights which it may now have or which
at any time hereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease except in accordance with the
express terms hereof. Each payment of Rent made by Lessee shall be final as to
Lessor and Lessee. Lessee will not seek to recover all or any part of any such
payment of Rent from Lessor for any reason whatsoever.
Section 20. Purchase Option and Renewal Option
(a) Purchase Option. In the case of the Aircraft, upon
not less than eight (8) months' prior written notice from Lessee to Lessor,
Lessee may, on the last Business Day of the Base Lease Period if no Event of
Default (or other event or condition which after lapse of time or notice or
both would become an Event of Default) hereunder shall have occurred and be
continuing on such day and the last payment of Rent required to be paid
hereunder on or before such day shall have been made, elect to purchase the
Aircraft at a purchase price equal to the fair market value for the Aircraft
determined by mutual consent of Lessor and Lessee or, if they shall be unable
to agree, by Independent Appraisal. Such election to purchase shall be
revocable by Lessee (by written notice from Lessee to Lessor) until a date
which shall be no later than six (6) months before the end of the Base Lease
Period at which time such election to purchase shall become irrevocable. Upon
receipt of the purchase price (in the type of funds and in the manner specified
in Section 3(d) hereof) for the Aircraft, Lessor will transfer to Lessee,
without recourse or warranty (except for Lessor's Warranty and subject to the
disclaimer set forth in Section 4(a) hereof), all of Lessor's right, title and
interest in and to the Aircraft.
(b) Renewal Option. Lessee shall have the right, subject
to the provisions set forth herein, to elect to extend this Lease in respect of
the Aircraft for one period of one, two, three, or four years, such period
commencing on the date immediately following the final day of the Base Lease
Period (such period being hereinafter referred to as the "Renewal Period").
Such election to renew shall be exercised upon written notice (such notice to
specify whether the term of such Renewal Period shall be one, two, three, or
four years) from Lessee to Lessor given not less than eight (8) months prior to
the final day of the Base Lease Period which election to renew shall be
revocable (by written notice from Lessee to Lessor) until a date
-42-
47
which shall be six (6) months before the end of the Base Lease Period, at which
time such election to renew shall become irrevocable and, if, on the last day
of the Base Lease Period, no Event of Default shall have occurred and be
continuing and no payment ia due and owing under the Participation Agreement,
then this Lease shall be extended for the Renewal Period specified in Lessee's
notice, on the same conditione provided for herein, at a rental rate equal to
the fair market rental value for such Aircraft determined by mutual consent of
Lessor and Lessee or, if they shall be unable to agree, as determined by an
Independent Appraisal.
(c) Determination of Fair Value. If Lessee elects either
to purchase the Aircraft or to renew this Lease with respect to the Aircraft
pursuant to this Section 20 and the parties do not determine a fair market
purchase price or fair market rental value, as the case may be, with respect to
the Aircraft by mutual consent by the date which is three months prior to the
expiration of the Base Lease Term then such purchase price or rental value
shall be determined by an Independent Appraisal and each party shall have 15
days from such date to appoint an appraiser, instructing such appraiser that
such Independent Appraisal must be completed not less than 15 days prior to the
end of the Base Lease Term.
Section 21. Not Applicable.
Section 22. Lessor's Right to Perform for Lessee
If Lessee fails to make any payment of Rent required to be
made by it hereunder or fails to perform or comply with any of its agreements
contained herein, Lessor may itself make such payment or perform or comply with
such agreement, and the amount of such payment and the amount of the reasonable
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 Incentive Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand provided, however, that no such payment,
performance or compliance by Lessor shall (i) be deemed to have satisfied the
obligation of Lessee to make such payment or to perform or comply with such
agreement, as the case may be, unless and until Lessee shall have paid all such
Supplemental Rent as may be payable pursuant to this Section 22 by reason of
such failure; or (ii) be deemed waiver of Lessor's rights and remedies against
Lessee hereunder.
Section 23. Maintenance of Certain Engines
Notwithstanding anything to the contrary contained herein, an
aircraft engine which is not an Engine, but which is installed on the Airframe,
shall be maintained in accordance with Sections 7(a) and 8 hereof.
-43-
48
Section 24. Investment of Security Funds; Miscellaneous
Any monies required to be paid to or retained by Lessor which
are not required to be paid to Lessee pursuant to Section 1O(e) or 11(c) hereof
solely because an Event of Default hereunder (or other event which after notice
or lapse of time or both would constitute such an Event of Default) shall have
occurred, or which are required to be paid to Lessee pursuant to Section 1O(e)
or 11(c) hereof after completion of a replacement to be made pursuant to
Section 1O(b) hereof shall, until paid to Lessee as provided in Section 10 or
11 hereof or applied as provided herein, be invested by Lessor from time to
time as directed in writing by Lessee and at the expense of Lessee (i) in
obligations of the United States Government maturing within ninety (90) days,
(ii) in repurchase agreements fully collateralized by such obligations, (iii)
in certificates of deposit maturing within ninety (90) days issued by
commercial banks organized under the laws of the United States or of any
political subdivision thereof and having commercial paper rated P1 by Moody's
Investors Service, Inc. or A1 by Standard & Poor's Corp. (provided, however,
that the aggregate amount at any one time so invested in certificates of
deposit issued by any one bank shall not be in excess of the lesser of
$10,000,000 or 5% of such bank's capital and surplus) or (iv) in commercial
paper rated P1 by Moody's Investors Service, Inc., or A1 by Standard & Poor's
Corp. at the time of purchase thereof. There shall be promptly remitted to
Lessee any gain (including interest received) realized as the result of any
such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) unless an Event of Default (or
other event which after lapse of time or notice or both would become an Event
of Default shall have occurred and be continuing and Lessee will promptly pay
to Lessor, on demand, the amount of any loss of principal realized as the
result of any such investment together with and fees, commissions and other
expenses, if any, incurred in connection with such investment).
Any provision of this Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law Lessee hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect. No term or
provision of this Lease may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
the enforcement of the change, waiver, discharge or termination is sought. This
Lease shall constitute an agreement of lease, and nothing herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as lessee only. The section and paragraph headings in this Lease and the
table of
-44-
49
contents are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereto and all references herein
to numbered sections, unless otherwise indicated, are to sections of this
Lease. This Lease has been delivered in the State of New York and shall in all
respects be governed by, and construed in accordance with, the laws of the
State of New York, including all matters of construction, validity and
performance.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Agreement to be duly executed as of the day and year first above written.
LESSOR
DC-9T-III, INC.
By: /s/ Scott W. Cleveland
---------------------------------
Title: Vice President
LESSEE
TRANS WORLD AIRLINES, INC.
By: /s/ [signature]
---------------------------------
Title: Vice President and Treasurer
-45-
50
EXHIBIT A
LEASE SUPPLEMENT NO. 1
LEASE SUPPLEMENT NO. 1 dated ____________, 1984 between
DC-9T-III, Inc., a Delaware Corporation ("Lessor"), and Trans World Airlines,
Inc., a Delaware corporation ("Lessee").
Lessor and Lessee have heretofore entered into that certain
Lease Agreement dated as of March 15, 1984 (herein called the "Lease Agreement"
and the defined terms therein being hereinafter used with the same meaning).
The Lease Agreement provides for execution and delivery from time to time of
Lease Supplements each substantially in the form hereof for the purpose of
leasing each Aircraft under the Lease Agreement as and when delivered by Lessor
to Lessee in accordance with the terms thereof.
The Lease Agreement relates to the aircraft and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation on the date hereof with the Federal
Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premise. and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the
Lease Agreement and Lessee hereby accepts and leases from Lessor under the
Lease Agreement, the following described McDonnell Douglas Model DC-9-82
Aircraft ("Delivered Aircraft") which Delivered Aircraft as of the date hereof
consists of the following components:
(i) airframe U.S. Identification Number ___________;
manufacturer's serial No. ______________;
(ii) two (2) Pratt & Whitney Aircraft Model JT8D-217A engines
bearing, respectively; manufacturer's serial Nos. ____________ and ____________
(each of which engines has 750 or more rated takeoff horsepower or the
equivalent of such horsepower).
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement as set forth in the opening paragraph hereof.
3. The Initial Lease Period for the Delivered Aircraft shall
commence on the Delivery Date and shall end on ____________, 1989.
51
-2-
4. Lessee hereby agrees to pay Lessor Basic Rent for the
Delivered Aircraft during the Initial Lease Period in 60 payments, monthly in
advance, of $ ________ each and thereafter, the Base Lease Period, in 156
payments, monthly in advance, of $ ____________ each.
5. Lessee hereby confirms to Lessor that the Delivered
Aircraft and each delivered Engine have been duly marked in accordance with the
terms of Section 7(c) of the Lease Agreement and that Lessee has accepted the
Delivered Aircraft for all purposes hereof and of the Lease Agreement, as being
airworthy, in accordance with specifications, in good working order and repair
and without defect or inherent vice in title, condition, design, operation or
fitness for use, whether or not discoverable by Lessee as of the date hereof,
and free and clear of all Liens except such Liens as are covered by Lessor's
Warranty.
6. All of the terms and provisions of the Lease Agreement are
hereby incorporated by reference in the Lease Supplement to the same extent as
if fully set forth herein.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written and
to be delivered in the State of New York.
LESSOR
DC-9T-III, INC.
By: ______________________________
Title:
LESSEE
TRANS WORLD AIRLINES, INC.
By: ______________________________
Title: Vice President and Treasurer
52
EXHIBIT B
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
1 101.5
2 102.1
3 102.7
4 103.2
5 103.7
6 104.2
7 104.8
8 105.2
9 105.7
10 106.2
11 106.6
12 107.1
13 107.5
14 104.5
15 104.8
16 105.1
17 105.5
18 105.8
19 106.1
20 106.4
21 106.7
22 107.0
23 107.3
24 107.6
25 107.9
26 106.2
27 106.5
28 106.8
29 107.0
30 107.3
31 107.6
32 107.9
33 108.2
34 108.4
35 108.7
53
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
36 109.0
37 109.2
38 107.5
39 107.7
40 108.0
41 108.3
42 108.5
43 108.8
44 109.0
45 109.2
46 109.5
47 109.7
48 109.9
49 110.2
50 108.4
51 108.6
52 108.9
53 109.1
54 109.3
55 109.5
56 109.8
57 110.0
58 110.4
59 110.7
60 111.0
61 111.8
62 109.4
63 109.5
64 109.4
65 109.2
66 109.1
67 109.0
68 108.8
69 108.6
70 108.4
71 108.1
72 107.8
2
54
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
73 107.5
74 107.2
75 106.9
76 106.6
77 106.2
78 105.9
79 105.5
80 105.1
81 104.7
82 104.3
83 103.9
84 103.5
85 103.1
86 102.6
87 102.2
88 101.8
89 101.4
90 100.9
91 100.5
92 100.0
93 99.6
94 99.2
95 98.7
96 98.3
97 97.8
98 97.4
99 96.9
100 96.5
101 96.0
102 95.5
103 95.1
104 94.6
105 94.1
106 93.7
107 93.2
108 92.7
109 92.2
3
55
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
110 91.7
111 91.3
112 90.8
113 90.3
114 89.8
115 89.3
116 88.8
117 88.3
118 87.8
119 87.3
120 86.7
121 86.2
122 85.7
123 85.2
124 84.7
125 84.1
126 83.6
127 83.1
128 82.5
129 82.0
130 81.4
131 80.9
132 80.3
133 79.8
134 79.2
135 78.7
136 78.1
137 77.6
138 77.0
139 76.4
140 75.8
141 75.3
142 74.7
143 74.1
144 73.5
145 72.9
146 72.3
4
56
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
147 71.7
148 71.1
149 70.5
150 69.9
151 69.3
152 68.7
153 68.1
154 67.4
155 66.8
156 66.2
157 65.6
158 64.9
159 64.3
160 63.6
161 63.0
162 62.3
163 61.7
164 61.0
165 60.4
166 59.7
167 59.0
168 58.4
169 57.7
170 57.0
171 56.3
172 55.6
173 54.9
174 54.2
175 53.5
176 52.8
177 52.1
178 51.4
179 50.7
180 50.0
181 49.3
182 48.5
183 47.8
5
57
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
184 47.1
185 46.3
186 45.6
187 44.8
188 44.1
189 43.3
190 42.6
191 41.8
192 41.0
193 40.2
194 39.5
195 38.7
196 37.9
197 37.1
198 36.3
199 35.5
200 34.7
201 33.9
202 33.1
203 32.3
204 31.4
205 30.6
206 29.8
207 28.9
208 28.1
209 27.3
210 26.4
211 25.5
212 24.7
213 23.8
214 23.0
215 22.1
216 21.2
End of Term
and Thereafter: 20.0
6
58
EXHIBIT C
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
1 101.5
2 102.0
3 102.6
4 103.1
5 103.5
6 104.0
7 104.4
8 104.8
9 105.3
10 105.7
11 106.0
12 106.4
13 106.8
14 103.9
15 104.2
16 104.4
17 104.7
18 105.0
19 105.3
20 105.5
21 105.8
22 106.0
23 106.2
24 106.5
25 106.7
26 105.0
27 105.2
28 105.4
29 105.6
30 105.9
31 106.1
32 106.3
33 106.5
34 106.7
35 106.9
59
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
36 107.1
37 107.3
38 105.5
39 105.7
40 105.9
41 106.1
42 106.2
43 106.4
44 106.6
45 106.8
46 106.9
47 107.1
48 107.2
49 107.4
50 105.5
51 105.7
52 105.8
53 106.0
54 106.1
55 106.2
56 106.4
57 106.6
58 106.8
59 107.0
60 107.3
61 107.1
62 104.6
63 104.5
64 104.4
65 104.3
66 104.1
67 104.0
68 103.9
69 103.7
70 103.6
71 103.4
72 103.3
2
60
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
73 103.1
74 102.9
75 102.7
76 102.5
77 102.3
78 102.1
79 101.9
80 101.7
81 101.5
82 101.2
83 100.9
84 100.7
85 100.4
86 100.1
87 99.9
88 99.6
89 99.3
90 99.0
91 98.7
92 98.4
93 98.0
94 97.7
95 97.3
96 97.0
97 96.6
98 96.2
99 95.9
100 95.5
101 95.1
102 94.7
103 94.3
104 93.8
105 93.4
106 93.0
107 92.5
108 92.1
109 91.6
3
61
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
110 91.1
111 90.6
112 90.1
113 89.6
114 89.1
115 88.6
116 88.1
117 87.6
118 87.0
119 86.5
120 85.9
121 85.4
122 84.8
123 84.3
124 83.7
125 83.1
126 82.5
127 82.0
128 81.4
129 80.8
130 80.2
131 79.6
132 79.0
133 78.4
134 77.8
135 77.1
136 76.5
137 75.9
138 75.3
139 74.7
140 74.0
141 73.4
142 72.8
143 72.1
144 71.5
145 70.9
146 70.2
4
62
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
147 69.6
148 68.9
149 68.3
150 67.6
151 66.9
152 66.3
153 65.6
154 64.9
155 64.3
156 63.6
157 62.9
158 62.2
159 61.5
160 60.8
161 60.1
162 59.4
163 58.7
164 58.0
165 57.3
166 56.6
167 55.9
168 55.2
169 54.5
170 53.7
171 53.0
172 52.3
173 51.5
174 50.8
175 50.0
176 49.3
177 48.6
178 47.8
179 47.0
180 46.3
181 45.5
182 44.8
183 44.0
5
63
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ---------
184 43.2
185 42.4
186 41.6
187 40.8
188 40.1
189 39.3
190 38.5
191 37.7
192 36.8
193 36.0
194 35.2
195 34.4
196 33.5
197 32.8
198 31.9
199 31.1
200 30.2
201 29.4
202 28.6
203 27.7
204 26.8
205 26.0
206 25.1
207 24.3
208 23.4
209 22.5
210 21.6
211 20.7
212 19.8
213 18.9
214 18.1
215 17.2
216 16.3
End of Term
and Thereafter: 15.0
6
64
EXHIBIT D
Foreign Air Carriers Constituting
Permitted Sublessees Under
Section 7(b)(ix) of the Lease
_________________________________
Aeromexico
Air Canada
Air France
Air New Zealand
Alitalia
Austrian Airlines
British Airways
British Caledonian Airways
CP Air
Finnair
Iberia
Japan Air Lines
KLM-Royal Dutch Airlines
Kuwait Airways
Lufthansa German Airlines
Qantas Airways
Sabena-Belgian Airlines
SAS-Scandinavian Airlines
Singapore Airlines
Swissair
Varig-Brazil
Viasa-Venezuela
Any successor to any such
foreign air carrier
65
LEASE SUPPLEMENT NO. 1
LEASE SUPPLEMENT NO. 1 dated March 22, 1984 between DC-9T-III,
Inc., a Delaware Corporation ("Lessor"), and Trans World Airlines, Inc., a
Delaware corporation ("Lessee").
Lessor and Lessee have heretofore entered into that certain
Lease Agreement dated as of March 15, 1984 (herein called the "Lease Agreement"
and the defined terms therein being hereinafter used with the same meaning).
The Lease Agreement provides for execution and delivery from time to time of
Lease Supplements each substantially in the form hereof for the purpose of
leasing each Aircraft under the Lease Agreement as and when delivered by Lessor
to Lessee in accordance with the terms thereof.
The Lease Agreement relates to the aircraft and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation on the date hereof with the Federal
Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premise. and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the
Lease Agreement and Lessee hereby accepts and leases from Lessor under the
Lease Agreement, the following described McDonnell Douglas Model DC-9-82
Aircraft ("Delivered Aircraft") which Delivered Aircraft as of the date hereof
consists of the following components:
(i) airframe U.S. Identification Number N913TW; manufacturer's
serial No. 49184;
(ii) two (2) Pratt & Whitney Aircraft Model JT8D-217A engines
bearing, respectively; manufacturer's serial Nos. P709733D, and P709734D (each
of which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement as set forth in the opening paragraph hereof.
3. The Initial Lease Period for the Delivered Aircraft shall
commence on the Delivery Date and shall end on March 21, 1989.
4. Lessee hereby agrees to pay Lessor Basic Rent for the
Delivered Aircraft during the Initial Lease Period in 60 payments,
monthly in advance, of $210,000 each and thereafter,
66
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the Base Lease Period, in 156 payments, monthly in advance, of $225,000 each.
5. Lessee hereby confirms to Lessor that the Delivered
Aircraft and each delivered Engine have been duly marked in accordance with the
terms of Section 7(c) of the Lease Agreement and that Lessee has accepted the
Delivered Aircraft for all purposes hereof and of the Lease Agreement, as being
airworthy, in accordance with specifications, in good working order and repair
and without defect or inherent vice in title, condition, design, operation or
fitness for use, whether or not discoverable by Lessee as of the date hereof,
and free and clear of all Liens except such Liens as are covered by Lessor's
Warranty.
6. All of the terms and provisions of the Lease Agreement are
hereby incorporated by reference in the Lease Supplement to the same extent as
if fully set forth herein.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written and
to be delivered in the State of New York.
LESSOR
DC-9T-III, INC.
By: /s/ Scott W. Cleveland
-------------------------------
Title: Vice President
LESSEE
TRANS WORLD AIRLINES, INC.
By: /s/ [signature]
-------------------------------
Title: Vice President and Treasurer
67
DC-9T-III
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT dated as of December 15, 1986 between TRANS
WORLD AIRLINES, INC., a Delaware corporation (the "Lessee") and DC-9T-III,
INC., a Delaware Corporation (the "Lessor") WITNESSETH:
WHEREAS, the Lessor and Lessee are parties to a Participation
Agreement and a Lease Agreement, each dated as of March 15, 1984;
WHEREAS, pursuant to the Lease, Lessor leased the Aircraft to Lessee
(the capitalized terms used herein without definition having the respective
meanings ascribed to them in the Lease);
WHEREAS, the Lease, to which was attached Lease Supplement No. 1 dated
March 22, 1984, was recorded with the FAA on April 26, 1984 as Conveyance No.
S47200.
WHEREAS, the parties acknowledge, for purposes of reference, that the
Aircraft consists of (i) one McDonnell Douglas Model DC-9-82 airframe, bearing
U.S. Identification Number N913TW and manufacturer's serial No. 49184; and (ii)
two Pratt & Whitney Model JT8D-217A engines bearing, respectively,
manufacturer's serial Nos. P709733D and P709734D; and
WHEREAS, the parties desire to amend the Lease, Lease Supplement and
Participation Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties hereby consent and agree as follows:
68
1. Section 1 of the Lease is amended by deleting the definition
of "Initial Lease Period" and inserting in lieu thereof the following:
"'Initial Lease Period' means the period commencing on the
Delivery Date for the Aircraft and ending on December 21,
1986."
2. Section 3(a) of the Lease is amended to read as follows:
"(a) Term for Aircraft. The Term for the Aircraft shall
consist of (i) the Initial Lease Period; (ii) the Base Lease
Period; and (iii) upon written notice given at least six (6)
months prior to the end of the Base Lease Period, any Renewal
Period elected by the Lessee pursuant to Section 20(b)
hereof."
3. The Stipulated Loss Value and Termination value Schedules
attached to the Lease are deleted in their entirety and replaced with the
Stipulated Loss Value and Termination Value Schedules attached hereto as
Exhibits A and B, respectively.
4. Section 3 of Lease Supplement No. 1 is amended to read as
follows:
"The Initial Lease Period for the Aircraft shall commence on
the Delivery Date and end on December 21, 1986. The Base
Lease Period shall commence on December 22, 1986."
5. Section 4 of Lease Supplement No. 1 is amended to read as
follows:
"Lessee hereby agrees to pay Lessor Basic Rent for the
Aircraft during the Initial Lease Period in 33 payments,
monthly in advance, of $210,000 each, and during the Base
Lease Period in 183 payments, monthly in advance, of $200,000
each. The first Basic Rent payment for the Base Lease Period
will be due December 22, 1986 and the last such payment will
be due February 22, 2002."
-2-
69
6. Section 13 of the Participation Agreement is amended by
deleting "$225,000" in clause (ii) and inserting in lieu thereof "$200,000".
7. Each party represents and warrants to the other party that:
(i) It is a corporation duly organized, validly existing
and in good standing under the laws of the state of
its incorporation and has all requisite corporate
power and authority to enter into and perform its
obligations under this Amendment Agreement.
(ii) This Amendment Agreement has been duly authorized,
executed and delivered by it and constitutes its
legal, valid and binding obligation enforceable
against it in accordance with its terms.
(iii) Neither the execution, delivery or performance by it
of this Amendment Agreement nor the consummation of
any of the transactions by it contemplated hereby
contravenes any Federal or state law, regulation,
order or judgment applicable to it, or any provision
of its charter or by-laws or will result in a breach
of, or constitute a default under, or contravene any
provisions of, any material indenture, mortgage,
credit agreement, or other similar agreement to which
it is a party or by which it is bound.
-3-
70
8. On the date of execution of this Amendment Agreement, counsel
to each party agrees to provide to the other party an opinion of its counsel
substantially to the effect set forth in the preceding Section 7.
9. Except as amended hereby, the Lease and the Participation
Agreement are in all respects ratified and confirmed and the terms thereof
shall remain in full force and effect.
10. This Amendment Agreement may be executed by the parties hereto
in separate counterparts, all of which when so executed and delivered shall be
an original for all purposes but all such counterparts shall together
constitute one and the same instrument.
11. This Amendment Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of New York, including
all matters of construction, validity and performance.
-4-
71
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment Agreement to be executed as of the date hereinabove first set forth.
LESSOR LESSEE
DC-9T-III, INC. TRANS WORLD AIRLINES, INC.
By /s/ R.P. Webb By /s/ Robert J. Mitchell
------------------------------------ ---------------------------------
Name R.P. Webb Name Robert J. Mitchell
---------------------------------- -------------------------------
Title President Title Treasurer
--------------------------------- ------------------------------
-5-
72
Lessor: DC-9T-III, Inc. EXHIBIT A
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
1 100.483133
2 100.942457
3 101.502794
4 101.785635
5 102.282305
6 102.774523
7 103.196116
8 103.654750
9 104.108126
10 104.536001
11 104.946788
12 105.352426
13 102.400618
14 102.785383
15 103.180497
16 103.573328
17 103.970729
18 104.362895
19 104.754706
20 105.157476
21 105.555038
22 105.951641
23 105.535490
24 105.785296
25 102.720403
26 102.958925
27 103.206610
28 103.379554
29 103.619979
30 103.853844
31 104.086102
32 104.327976
33 104.563392
34 104.796642
35 104.472566
36 104.616783
37 101.448266
38 101.574874
39 101.709837
40 101.589542
41 101.715167
42 101.833833
43 101.950244
44 102.075246
45 102.193277
46 102.308370
73
Lessor: DC-9T-III, Inc. EXHIBIT A
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
47 101.995759
48 101.969908
49 98.630489
50 98.584155
51 98.545074
52 98.076959
53 98.025965
54 97.967292
55 97.905004
56 97.849962
57 97.786639
58 97.718944
59 97.389321
60 97.176944
61 93.648727
62 93.412035
63 93.178092
64 92.355873
65 92.125474
66 91.885349
67 91.639420
68 91.396702
69 91.144242
70 90.886704
71 91.185494
72 90.928384
73 90.663962
74 90.402045
75 90.143291
76 89.308075
77 89.052282
78 88.786466
79 88.514675
80 88.245970
81 87.967321
82 87.683375
83 87.944274
84 87.660194
85 87.368467
86 87.078951
87 86.792457
88 85.941118
89 85.656958
90 85.362479
91 85.061823
92 84.764108
93 84.456230
94 84.142807
74
Lessor: DC-9T-III, Inc. EXHIBIT A
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
95 84.362756
96 84.048585
97 83.726392
98 83.406034
99 83.088378
100 82.217765
101 81.902838
102 81.577303
103 81.245321
104 80.915956
105 80.576162
106 80.230592
107 80.401481
108 80.054699
109 79.699559
110 79.346130
111 78.995056
112 78.108552
113 77.760520
114 77.401515
115 77.035785
116 76.672322
117 76.298188
118 75.918038
119 76.032275
120 75.650375
121 75.259719
122 74.870596
123 74.483485
124 73.583589
125 73.199723
126 72.804571
127 72.402342
128 72.002055
129 71.590802
130 71.173288
131 71.222898
132 70.803052
133 70.374002
134 69.946287
135 69.520209
136 68.609239
137 68.186575
138 67.752253
139 67.310594
140 66.870457
141 66.419054
142 65.961103
75
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
143 65.937690
144 65.476675
145 65.006087
146 64.536601
147 64.068356
148 63.148591
149 62.683881
150 62.207158
151 61.722741
152 61.239465
153 60.744580
154 60.242834
155 60.137696
156 59.631762
157 59.116172
158 58.601452
159 58.087624
160 57.161290
161 56.650607
162 56.127544
163 55.596434
164 55.066108
165 54.523807
166 53.974283
167 53.779671
168 53.224699
169 52.659899
170 52.095594
171 51.531802
172 50.598280
173 50.037190
174 49.463332
175 48.881038
176 48.299138
177 47.704863
178 47.102966
179 46.810228
180 46.201549
181 45.582808
182 44.964152
183 44.345590
184 43.404206
185 42.787845
186 42.158308
187 41.519908
188 40.881474
189 40.230227
190 39.570923
76
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
191 39.170569
192 38.503073
193 37.825204
194 37.146969
195 36.468371
196 35.518388
197 34.841423
198 34.150852
199 33.450952
200 32.750548
201 32.036851
202 31.314618
203 30.796241
204 30.064331
205 29.321649
206 28.578106
207 27.833698
208 26.874310
209 26.130893
210 25.373421
211 24.606106
212 23.837773
213 23.055621
214 22.264409
215 21.616589
216 20.814140
End of Term
and Thereafter 20.000000
77
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
1 100.477874
2 100.920743
3 101.463449
4 101.732204
5 102.211895
6 102.687051
7 103.092167
8 103.533292
9 103.969564
10 104.380325
11 104.774208
12 105.162872
13 102.194070
14 102.561835
15 102.939706
16 103.315178
17 103.695076
18 104.069621
19 104.443697
20 104.828476
21 105.207967
22 105.586372
23 105.161037
24 105.393246
25 102.309499
26 102.531014
27 102.761478
28 102.920878
29 103.144014
30 103.360530
31 103.575327
32 103.799500
33 104.017151
34 104.232528
35 103.893781
36 104.021277
37 100.835642
38 100.945510
39 101.063545
40 100.933336
41 101.041931
42 101.143575
43 101.242858
44 101.350509
45 101.451133
46 101.548719
78
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
47 101.218618
48 101.176560
49 97.820372
50 97.757845
51 97.702321
52 97.227867
53 97.160453
54 97.085290
55 97.006427
56 96.934604
57 96.854464
58 96.769873
59 96.420239
60 96.192308
61 92.648008
62 92.395857
63 92.146240
64 91.321417
65 91.075224
66 90.819237
67 90.557398
68 90.298614
69 90.030073
70 89.756392
71 90.025251
72 89.751704
73 89.470739
74 89.192126
75 88.916513
76 88.078637
77 87.805839
78 87.522969
79 87.234058
80 86.948071
81 86.652119
82 86.350798
83 86.579317
84 86.277564
85 85.968038
86 85.660561
87 85.355940
88 84.501893
89 84.199458
90 83.886641
91 83.567578
92 83.251285
93 82.924795
94 82.592690
79
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
95 82.777628
96 82.444466
97 82.103136
98 81.763475
99 81.426323
100 80.552962
101 80.218440
102 79.873171
103 79.521406
104 79.172067
105 78.812274
106 78.446617
107 78.579723
108 78.212535
109 77.836818
110 77.462640
111 77.090633
112 76.201314
113 75.832171
114 75.451977
115 75.064974
116 74.680052
117 74.284406
118 73.882667
119 73.956171
120 73.552355
121 73.139581
122 72.728158
123 72.318548
124 71.415708
125 71.009155
126 70.591206
127 70.166159
128 69.742789
129 69.308423
130 68.867690
131 68.873434
132 68.430064
133 67.977240
134 67.525551
135 67.075302
136 66.161221
137 65.714172
138 65.255376
139 64.789131
140 64.324232
141 63.847979
142 63.365072
80
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
143 63.294781
144 62.808187
145 62.312047
146 61.816802
147 61.322594
148 60.399501
149 59.908588
150 59.405567
151 58.894741
152 58.384843
153 57.863261
154 57.334695
155 57.179171
156 56.645773
157 56.102720
158 55.560329
159 55.018607
160 54.088676
161 53.549850
162 52.998538
163 52.439055
164 51.880134
165 51.309154
166 50.730819
167 50.482060
168 49.897611
169 49.303316
170 48.709289
171 48.115543
172 47.178150
173 46.586829
174 45.982638
175 45.369876
176 44.757274
177 44.132201
178 43.499366
179 43.148480
180 42.508170
181 41.857758
182 41.207191
183 40.556476
184 39.610926
185 38.962108
186 38.300013
187 37.628910
188 36.957525
189 36.273218
190 35.580698
81
Lessor: DC-9T-III, Inc. EXHIBIT B
Lessee: TWA to Amendment Agreement
Aircraft: N913TW dated as of December 15, 1986
BEGINNING PERCENT OF
OF BASE
MONTH NO. LOSS COST
--------- ----------
191 35.117906
192 34.416497
193 33.704636
194 32.992156
195 32.279058
196 31.324593
197 30.612801
198 29.887298
199 29.152306
200 28.416551
201 27.667382
202 26.909500
203 26.324110
204 25.555846
205 24.776696
206 23.996419
207 23.215009
208 22.250813
209 21.470026
210 20.675091
211 19.870142
212 19.063901
213 18.243705
214 17.414271
215 16.694584
216 15.853194
End of Term
and Thereafter 15.000000