AIRCRAFT LEASE AGREEMENT
Agreement Date: Xxxxx 0, 0000
Xxxxxx: Verde Investments, Inc.
0000 Xxxx Xxxxxx Xxxxxx Xxxx, Xxxxx X
Xxxxxxx, Xxxxxxx 00000
Lessee: Ugly Duckling Corporation
0000 Xxxx Xxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Aircraft: Raytheon Hawker 125-700A
Manufacturer's Serial No. NA0280
U.S. Registration No. N280AJ
described in Exhibit A
Aircraft Lease Agreement
This Aircraft Lease Agreement (this "Lease") is made by and between Verde
Investments, Inc., an Arizona corporation ("Lessor") and Ugly Duckling
Corporation, a Delaware corporation ("Lessee"), effective as of April 1, 2002
(the "Lease Date").
Recitals.
The parties acknowledge that the following recitals are correct statements
of fact and are relied upon as a material part of this Agreement:
1. Lessor is the owner of one (1) Raytheon Hawker 125-700A (commonly known
as Hawker 125-700A) aircraft, bearing manufacturer's serial number NA0280 and
U.S. registration number N280AJ, together with two (2) installed Xxxxxxx TFE
731-3R-1H engines, bearing manufacturer's serial numbers P84227 and P84236,
auxiliary power unit, avionics, instruments, equipment, and components installed
in or attached to the airframe and engines, and related aircraft log books,
maintenance and flight manuals, wiring diagrams, and any other documentation and
equipment specific to the Aircraft currently owned by and in the Lessor's
possession, as described in Exhibit A attached hereto (collectively the
"Aircraft");
2. Lessor desires to lease to Lessee and Lessee desires to lease from
Lessor the Aircraft on a "dry lease" basis.
NOW, THEREFORE, in consideration of the covenants, representations and
warranties of the parties stated herein, the performances of the parties
required hereby and the benefits accruing to the parties hereunder, Lessor and
Lessee mutually agree and expressly intend to be legally bound as follows:
Section 1. Terms of Lease
1.1 Lease Grant. Subject to the terms and conditions of this Agreement,
Lessor leases the Aircraft to Lessee and Lessee leases the Aircraft from Lessor.
Lessor shall deliver possession of the Aircraft to Lessee on the Lease Date.
1.2 Lease Term. The term of this Lease (the "Lease Term") shall commence on
the Lease Date and expire March 31, 2003 (the "Expiration Date"). On the
Expiration Date the Lease Term shall automatically renew and the Expiration Date
shall be extended on a year-to-year basis under the same terms and conditions,
unless either party gives written notice of termination of the Lease at least 30
days prior to the Expiration Date, or any extention thereof.
1.3. Use of Aircraft. Lessee shall use the Aircraft exclusively for
Lessee's commercial purposes (the "Permitted Use"). Lessee shall not charter the
Aircraft, "dry lease" the Aircraft, sublet the Aircraft or otherwise use the
Aircraft as a commercial carrier. Nor shall the Aircraft be used for a use which
would have a permanent and material adverse effect on the value of the Aircraft.
Lessee shall not create or suffer to exist any public or private nuisance,
hazardous or illegal condition or waste on or with respect to the Aircraft.
Lessee shall not use, occupy or permit any of the Aircraft to be used or
occupied, nor do or permit anything to be done in or on any of the Aircraft, in
a manner which would (a) make void or voidable any insurance which Lessee is
required hereunder to maintain then in force with respect to any of the
Aircraft, or (b) affect the ability of Lessee to obtain any insurance which
Lessee is required to furnish hereunder, (c) impair Lessor's title to the
Aircraft, or in such manner as might reasonably make possible a claim or claims
of adverse usage or adverse possession by the public, as such, or third persons,
or (d) conflict with the terms or conditions of any instrument or agreement
between Lessor and Lessee. Nothing contained in this Lease and no action by
Lessor shall be construed to mean that Lessor has granted to Lessee any
authority to do any act or make any agreement that may create any such third
party or public right, title, interest, lien, charge or other encumbrance upon
the estate of the Lessor in the Aircraft. Lessee shall, at its expense, comply
with and shall cause the Aircraft to comply with all governmental statutes,
laws, rules, orders, regulations and ordinances, as the same may be amended from
time to time, all federal aviation administration regulations, and any other law
the failure to comply with which at any time would materially affect Lessor or
the Aircraft or any part thereof, or the use thereof, including those which
require the making of any structural, unforeseen or extraordinary changes,
whether or not any of the same involve a change of policy on the part of the
body enacting the same. Lessee shall, at its expense, comply with all changes
required in order to obtain the Required Insurance (as hereinafter defined), and
with the provisions of all contracts, agreements, instruments and restrictions
existing at the commencement of this Lease or thereafter suffered or permitted
by Lessee affecting the Aircraft or any part thereof or the ownership, occupancy
or use thereof.
1.4. Quiet Enjoyment. For so long as no Event of Default (as hereinafter
defined) has occurred and is continuing hereunder, Lessor warrants peaceful and
quiet enjoyment of the Aircraft by Lessee against acts of Lessor or anyone
claiming through Lessor, provided that Lessor and its agents may enter upon and
examine the Aircraft at reasonable times. Exercise by Lessor of its rights to
come upon the Aircraft as set forth in this Lease shall not constitute a
violation of this Section. To secure a loan made to Lessor to acquire the
Aircraft, Lessor has granted a security interest in the Aircraft to Bank One
Arizona ("Lender") and Lessor shall pay when due all amounts payable to Lender
in connection with the loan secured by the Aircraft.
Section 2. Rents.
-----------------
2.1 Basic Rent. Lessee shall pay to Lessor in advance rent in the amount of
$100,000.00 per calendar month for each month of the Lease Term (the "Basic
Rent").
2.2 Additional Rent. Lessee shall pay and discharge before the imposition
of any fine, lien, interest or penalty may be added thereto for late payment
thereof, all other amounts and obligations which Lessee assumes or agrees to pay
or discharge pursuant to this Lease, together with every fine, penalty, interest
and cost which may be added by the party to whom such payment is due for
nonpayment or late payment thereof ("Additional Rent"). In the event of any
failure by Lessee to pay or discharge any of the foregoing, Lessor shall have
all the same rights, powers and remedies provided herein, by law or otherwise,
as in the event of nonpayment of Basic Rent.
2.3 Late Charge. If any installment of Basic Rent is not paid within five
(5) days after the same is due and not paid, Lessee shall pay to Lessor, on
demand, as Additional Rent, a late charge equal to three percent (3%) on such
overdue installment of Basic Rent (the "Late Charge"). Such payment shall be in
addition to, and not in lieu of, all other remedies provided in the Lease or
applicable law.
2.4 Security Deposit. To secure the faithful performance by Lessee of the
covenants, conditions and agreements set forth in this Lease to be performed by
it, Lessee shall deposit with Lessor, on the Commencement Date, and thereafter
at all times during the continuance of this Lease shall maintain on deposit with
Lessor, a security deposit of $100,000.00 ("Security Deposit"). Lessee shall pay
the Security Deposit on the understanding (a) that the Security Deposit or any
portion thereof may be applied to the curing of any default that may exist,
without prejudice to any other remedy or remedies that Lessor may have on
account thereof, and upon such application Lessee shall pay Lessor on demand the
amount so applied which shall be added to the Security Deposit so that the same
will be restored to the required amount; (b) that should the Aircraft be
transferred by Lessor, the Security Deposit or any balance thereof may be turned
over to Lessor's successor or transferee, and Lessee agrees to look solely to
such successor or transferee for such application or return; (c) that Lessor or
its successors shall not be obligated to hold the Security Deposit as a separate
fund, but may commingle it with other funds; (d) that the Security Deposit shall
not be deemed prepaid rent; and (e) that if Lessee shall faithfully perform all
of the covenants and agreements in this Lease contained on the part of Lessee to
be performed, the Security Deposit, or any then remaining balance thereof, shall
be returned to Lessee, without interest, within 30 days after the expiration of
the Lease Term.
2.5 True Lease. Lessor and Lessee agree that this Lease is a true lease and
does not represent a financing arrangement. Each party shall reflect the
transactions represented by this Lease in all applicable books, records and
reports (including, without limitation, income tax filings) in a manner
consistent with "true lease" treatment rather than "financing" treatment.
2.6 Net Lease; Non-Terminability. This is an absolutely net lease to
Lessor. It is the intent of the parties hereto that the Basic Rent payable under
this Lease shall be an absolutely net return to Lessor and that Lessee shall pay
all costs and expenses relating to the Aircraft and operation thereof. Any
amount or obligation herein relating to the Aircraft which is not expressly
declared to be that of Lessor shall be deemed to be an obligation of Lessee to
be timely performed by Lessee at Lessee's expense. Basic Rent, Additional Rent
and all other sums payable hereunder by Lessee, shall be paid without notice,
demand, set-off, counterclaim, abatement, suspension, deduction or defense. To
the extent permitted by applicable law, Lessee waives all rights which may now
or hereafter be conferred by law (i) to quit, terminate or surrender this Lease
or the Aircraft or any part thereof, or (ii) to any abatement, suspension,
deferment or reduction of the Basic Rent, Additional Rent or any other sums
payable under this Lease.
Section 3. Maintenance and Repair.
----------------------------------
3.1 Maintenance and Repair. Lessee acknowledges that it has received the
Aircraft in good condition, repair and appearance. Lessee agrees that, at its
expense, it will keep and maintain the Aircraft in good condition and repair. It
will make promptly, all structural and nonstructural, foreseen and unforeseen,
ordinary and extraordinary changes and repairs or replacements of every kind
which may be required to be made to keep and maintain the Aircraft in such good
condition, repair and appearance. Lessee agrees that its obligation to maintain
and repair the Aircraft as set forth in this Lease benefit both Lessor and
Lessee, are the sole responsibility of Lessee, and may not be delegated. Lessor
shall not be required to maintain, repair or rebuild, or to make any alterations
of any nature to the Aircraft, or any part thereof, whether ordinary or
extraordinary, structural or nonstructural, foreseen or not foreseen, or to
maintain the Aircraft or any part thereof in any way. Lessee hereby expressly
waives the right to make repairs at the expense of Lessor which may be provided
for in any law in effect at the time of the commencement of the term of this
Lease or which may thereafter be enacted.
3.2 No Liens. Lessee will not, directly or indirectly, create or permit to
be created or to remain, and shall within thirty (30) days of filing of any,
mechanics, contractors or other liens, discharge or bond, at its expense, any
liens with respect to, the Aircraft or any part thereof or Lessee's interest
therein or the Basic Rent, Additional Rent or other sums payable by Lessee under
this Lease, other than the lien for ad valorem taxes which are not yet due and
payable. Notice is hereby given that Lessor will not be liable for any labor,
services or materials furnished or to be furnished to Lessee, or to anyone
holding the Aircraft or any part thereof, and that no mechanic's or other liens
for any such labor services or materials shall attach to or affect the interest
of Lessor in and to the Aircraft.
Section 4. Insurance; Indemnification.
--------------------------------------
4.1 Insurance. Lessee shall maintain, or cause to be maintained, at its
sole expense, the following insurance on the Aircraft (herein called the
"Required Insurance"):
(a) Insurance against loss or damage to the Aircraft under a fire and
broad form of all risk extended coverage insurance policy together with an
agreed value endorsement. Such insurance shall be in amounts sufficient to
prevent Lessor or Lessee from becoming a co-insurer under the applicable
policies, and not less than the full replacement cost of the Aircraft as
reasonably determined from time to time by Lessor but not more frequently
than once in any 12 month period. Such insurance policies may contain
reasonable exclusions and deductible amounts as are common to properties
similar to the Aircraft.
(b) General public liability insurance for the benefit of Lessor,
Lessee and Lender against claims for damages to person or property
occurring on, in or about the Aircraft with a combined single limit of at
least One Hundred Million Dollars ($100,000,000.00) for personal injury and
property damage, such insurance to include full coverage of the indemnity
set forth in this Section. Policies for such insurance shall be for the
mutual benefit of Lessor, Lessee and Lender, as their respective interests
may appear.
4.2 Permitted Insurers. The Required Insurance shall be written by
companies of recognized financial standing and have Bests ratings of A X or
better. The Required Insurance shall name as the insured parties thereunder
Lessor and Lessee, as their interests may appear, and Lender as an additional
insured under a standard "mortgagee" endorsement or its equivalent satisfactory
to Lessor. Lessor shall not be required to prosecute any claim against, or to
contest any settlement proposed by, an insurer. Lessee may, at its expense,
prosecute any such claim or contest any such settlement in the name of Lessor,
Lessee or both with the consent of Lessor, and Lessor will join therein at
Lessee's written request upon the receipt by Lessor of an indemnity from Lessee
against all costs, liabilities and expenses in connection therewith.
4.3 Insurance Claims. Insurance claims by reason of damage to or
destruction of any portion of the Aircraft shall be primarily adjusted by
Lessee, but both Lessor and Lender shall have the right to join with Lessee in
adjusting any such loss and approve any adjustment proposed by Lessee.
4.4 Insured Parties. Any loss under any such policy shall be made payable
to Lessor (or, if Lessor so elects, to Lender), subject to the requirements of
this Section. Every policy of Required Insurance shall contain an agreement that
the insurer will not cancel such policy except after thirty (30) days' written
notice to Lessor and Lender and that any loss otherwise payable thereunder shall
be payable notwithstanding any act or negligence of Lessor, Lessee or Lender
which might, absent such agreement, result in a forfeiture of all or a part of
such insurance payment and notwithstanding (a) any foreclosure or other action
taken by a creditor pursuant to any provision of any loan upon the happening of
a default or Event of Default thereunder or (b) any change in ownership of the
Aircraft.
4.5 Delivery of Policies. Lessee shall deliver to Lessor promptly after the
delivery of this Lease, the original or duplicate policies or Accord-27 form
certificates of insurers, satisfactory to Lender, evidencing all of the Required
Insurance. Lessee shall, prior to the expiration of any such policy, deliver to
Lessor another original or duplicate of such policy or certificates evidencing
the renewal of any such policy. If Lessee fails to maintain or renew any
Required Insurance, or to pay the premium therefor, or to deliver such
certificate, then Lessor, at its option, but without obligation to do so,
procure such insurance. Any sums so expended by Lessor shall be Additional Rent
hereunder and shall be repaid by Lessee within five (5) days after notice to
Lessee of such expenditure and the amount thereof. together with interest
thereon at the Interest Rate.
4.6 No Double Coverage. Lessee shall not obtain or carry separate insurance
covering the same risks as any Required Insurance unless Lessee, Lessor and
Lender are included therein as named insured, with loss payable as provided in
this Lease and the policy contains a first mortgagee endorsement in favor of the
Lender. Lessee shall immediately notify Lessor whenever any such separate
insurance is obtained and shall deliver to Lessor the policies or certificates
evidencing the same. Any insurance which Lessor may elect to carry shall be
excess and not primary coverage.
4.7 Blanket Insurance. Anything contained in this Section to the contrary
notwithstanding, all Required Insurance may be carried under a "blanket" or
"umbrella" policy or policies covering other property or liabilities of Lessee,
provided that such policies otherwise comply with the provisions of this Lease
and specify the coverage and amounts thereof with respect to the Aircraft.
4.8 Damages for Lessee's Failure to Properly Insure. Lessor or Lender shall
not be limited in the proof of any damages which Lessor or Lender may claim
against Lessee arising out of or by reason of Lessee's failure to provide and
keep in force insurance, as provided above, to the amount of the insurance
premium or premiums not paid or incurred by Lessee and which would have been
payable under such insurance; but Lessor and Lender shall also be entitled to
recover as damages for such breach, the uninsured amount of any loss, to the
extent of any deficiency in the Required Insurance and damages, costs and
expenses of suit suffered or incurred by reason of or damage to, or destruction
of, the Aircraft, occurring during any period when Lessee shall have failed to
provide the Required Insurance. Lessee shall indemnify, defend and hold harmless
Lessor and Lender for any liability incurred by Lessor or Lender arising out of
any deductibles for Required Insurance.
4.9 Casualty. If all or any part of the Aircraft shall be damaged or
destroyed by casualty which is insured or required to be insured under this
Lease, Lessee shall promptly notify the Lessor thereof, and shall, with
reasonable promptness and diligence, rebuild, replace and repair any damage or
destruction to the Aircraft, at its expense, in conformity with the requirements
of this Lease, in such manner as to restore the same to the same or better
condition as existed prior to such casualty, using materials of the same or
better grade than that of the materials being replaced, and there shall be no
abatement of Basic Rent or Additional Rent. Proceeds of casualty insurance of
$100,000.00 or less shall be paid to Lessee. Proceeds in excess of $100,000.00
shall be held by Lessor or a proceeds trustee (which may be Lender, an escrow or
title company, or a bank or trust company designated by Lessor) and paid to
Lessee, but only against certificates of Lessee, appropriate lien waivers and
such other information reasonably required by Lessor or the proceeds trustee
delivered to Lessor from time to time, but not more frequently than once per
calendar month, as such work or repair progresses. Each such certificate shall
describe the work or repair for which Lessee is requesting payment and the cost
incurred by Lessee in connection therewith and stating that Lessee has not
theretofore received payment for such work and has sufficient funds remaining to
complete the work free of liens or claims. Any proceeds remaining after Lessee
has repaired the Aircraft shall be delivered to Lessee No payment shall be made
to Lessee if there exists any Event of Default under this Lease. If Lessee is
not required to restore after a casualty, this Lease shall nevertheless remain
in full force and effect, with no abatement of Basic Rent or Additional Rent,
except that Lessor shall have the right to terminate this Lease by notice to
Lessee if Lessee does not agree to restore within sixty (60) days after the
casualty, or if Lessee agrees to restore but does not diligently proceed to do
so.
4.10 Indemnification.
---------------
(a) Lessee agrees to pay, and to protect, defend, indemnify and save
harmless Lessor, Lender and their agents from and against any and all
actual liabilities, losses, damages, costs, expenses (including all
reasonable attorneys' fees and expenses of Lessor but excluding lost
profits and all other indirect or consequential damages), causes of action,
suits, claims, demands or judgments of any nature whatsoever (i) arising
from any injury to, or the death of, any person or damage to property
(including property of employees and invitees of Lessee) on the Aircraft or
to the extent not occasioned by the actual gross negligence or willful
misconduct of Lessor, (ii) arising from the use, non-use, condition,
maintenance, repair or occupation of the Aircraft or any part thereof, to
the extent not occasioned by the actual gross negligence or willful
misconduct of Lessor, (iii) arising from violation by Lessee of any
agreement or condition of this Lease or any sublease (including without
limitation the failure to pay Impositions), or any contract or agreement to
which Lessee is a party, or any restriction, law, ordinance or regulation
affecting the Aircraft or any part thereof or the ownership, occupancy or
use thereof, to the extent not occasioned by the actual gross negligence or
willful misconduct of Lessor; or (iv) arising out of any permitted contest
referred to in Section 4.3 (collectively, "Indemnified Matters"). If
Lessor, Lender or any agent of Lessor or Lender shall be made a party to
any such litigation commenced against Lessee, and if Lessee, at its
expense, shall fail to provide Lessor, Lender or their agents with counsel
(upon Lessor's request) reasonably approved by Lessor, Lessee shall pay all
costs and attorneys' fees and expenses incurred or paid by Lessor, Lender
or their agents in connection with such litigation. Lessee's obligations
and liabilities under this Section 4.10 shall survive the expiration of
this Lease. Lessee waives all claims against Lessor arising from any
liability described in this Section 4.10 (a), except to the extent caused
by the actual gross negligence or willful misconduct of Lessor. The waiver
and indemnity provisions in this paragraph are intended to exculpate and
indemnify Lessor (i) from and against the direct consequences of its own
negligence or fault when Lessor is solely negligent or contributorily,
partially, jointly, comparatively or concurrently negligent with Lessee or
any other person (but is not grossly negligent and has not committed
willful misconduct) and (ii) from and against any liability of Lessor based
on any applicable doctrine of strict liability unless resulting from the
gross negligence or willful misconduct of Lessor.
(b) Should any claim be made against Lessor by a person not a party to
this Lease with respect to any Indemnified Matter, Lessor shall promptly
give Lessee written notice of any such claim, and Lessee shall thereafter
defend or settle any such claim, at its sole expense, on its own behalf and
with counsel of its selection; provided, however, that Lessee's counsel
shall be competent counsel experienced in the type of litigation or claim
at issue and shall be acceptable to Lessor, acting reasonably. Upon
Lessee's assumption of the defense of any claim against Lessor pursuant to
Lessee's indemnity, Lessor shall have the right to participate in the
defense or settlement of the claim with counsel retained and paid by it and
Lessee shall cause the attorneys retained by it to consult and cooperate
fully with counsel for Lessor. In such defense or settlement of any claims,
Lessor shall provide Lessee with originals or copies of all relevant
documents and shall cooperate with and assist Lessee, at no expense to
Lessor. Notwithstanding any provision of this Section 4.10 to the contrary,
Lessee shall not enter into any settlement or agreement in connection with
any Indemnified Matters binding upon or adversely affecting either Lessor
or Lender, or admit any liability or fact in controversy binding upon or
adversely affecting either Lessor or Lender, without the prior written
consent of Lessor or Lender, as the case may be, in such party's sole
discretion.
(c) Lessor agrees to pay, and to protect, defend, indemnify and save
harmless Lessee and its agents from and against any and all liabilities,
losses, damages (actual and consequential), costs, expenses (including all
reasonable attorneys' fees and expenses of Lessee), causes of action,
suits, claims, demands or judgments of any nature whatsoever arising from
the actual gross negligence or willful misconduct of Lessor in connection
with the Aircraft.
Section 5. Representations and Warranties
5.1 Lessor's Representations and Warranties. Lessor represents and warrants
---------------------------------------
to Lessee as follows:
(a) Organization and Standing. Lessor is a corporation duly organized,
validly existing and in good standing under the laws of Arizona.
(b) Power and Authority. Lessor is the owner of the Aircraft and has
all requisite power and authority to execute and to deliver this
Agreement and all documents related any of them, and to carry out the
transactions contemplated therein and hereby.
(c) Due Authorization; Binding Obligation. This Agreement has been
duly authorized by Lessor. This Agreement is valid, binding and
enforceable against Lessor in accordance with its terms.
(d) No Conflict. The execution of this Agreement and the consummation
of the transactions contemplated hereby or thereby will not result in
a breach of the terms and conditions of, nor constitute a default,
nor, to the best of Lessor's knowledge, violate any agreements,
covenants, obligations licenses or other instruments to which Lessor
is a party or by which Lessor or any of its assets may be bound or
affected, or any law, regulation or court order applicable to Lessor,
including, without limitation, any applicable regulations governing
sales of Aircraft.
(e) Title to Aircraft. Lessor has good and marketable title to the
Aircraft, free and clear of any and all adverse claims.
(f) disclaimer of warranties. Lessor is leasing the Aircraft to Lessee
"AS-IS". Lessor has not made and does not make any express or implied
representations or warranties whatsoever regarding the Aircraft
including, without limitation, its merchantability, suitability or
fitness for a particular purpose. EXCEPT AS EXPRESSLY STATED IN THIS
LEASE, Lessor shall have no liability to Lessee or any third party for
any direct, indirect, incidental or consequential damages relating to
the CONDITION OR OPERATION OF THE aircraft. Lessee waives all rights
and remedies conferred upon a lessee by Article 2A (Sections 508-522)
of the Uniform Commercial code. Lessor is not responsible for any
claims, losses or injuries relating to design, manufacture,
installation, lease, use ownership or possession of the Aircraft
(collectively, "Claims"). Lessee agrees to reimburse Lessor for and
defend Lessor against all Claims. Lessee's obligations under this
Section shall survive the termination of the Lease for acts or
omissions which occurred during the Lease Term.
5.2 Lessee's Representations and Warranties. Lessee represents and warrants
---------------------------------------
to Lessor as follows:
(a) Organization and Standing. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of Delaware.
(b) Power and Authority. Lessee has all requisite power and authority
to execute and to deliver this Agreement and all documents related to
it, and to carry out the transactions contemplated hereby.
(c) Due Authorization; Binding Obligation. This Agreement has been
duly authorized by Lessee and is valid, binding and enforceable
against Lessee in accordance with its terms.
(d) No Conflict. The execution by Lessee of this Agreement and the
consummation of the transactions contemplated hereby will not result
in a breach of the terms and conditions of, nor constitute a default,
nor, to the best of Lessee's knowledge, violate any agreements,
covenants, obligations licenses or other instruments to which Lessee
is a party or by which Lessee or any of its assets may be bound or
affected, or any law, regulations or court order applicable to Lessee,
including without limitation, any applicable regulations governing the
registration of Aircraft.
(e) Inspection. Lessee has inspected the Aircraft and conducted a test
flight of the Aircraft to determine that the Aircraft (i) has a
current and valid Federal Aviation Administration ("FAA") Standard
Airworthiness Certificate; (ii) is in airworthy condition with all
systems functioning and in proper working order per manufacturers
maintenance program. For purposes of this Agreement, "proper working
order" shall mean a condition which (a) is consistent with the
maintenance manuals limitations applicable to the unit; (b) is good,
but not necessarily perfect, it being understood and agreed that
normal wear and tear which does not materially impair performance
shall be acceptable; and (c) does not require a modification to the
normal life limitation, overhaul or inspection interval; (iii) has its
log books, maintenance and flight manuals in order; (iv) is current on
its maintenance in accordance with the Manufacturer's Computerized
Maintenance Program ("CAMP"); (v) does not have damage history, or
undisclosed damage or known corrosion; and (vi) has all FAA
airworthiness directives ("AD's") and mandatory service changes
("SB's") with effective dates on or prior to the Closing Date.
Section 6. Default.
-------------------
6.1. Events of Default. Any of the following occurrences or acts shall
-------------------
constitute an event of default (herein called an "Event of Default") under this
Lease:
(a) If Lessee, at any time during the continuance of this Lease (and
regardless of the pendency of any bankruptcy, reorganization,
receivership, insolvency or other proceedings at law, in equity, or
before any administrative tribunal, which have or might have the
effect of preventing Lessee from complying with the terms of this
Lease), shall (i) fail to make any payment when due of Basic Rent,
Additional Rent or other sum herein required to be paid by Lessee
hereunder for ten (10) days after written notice of such failure; (ii)
fail to use the Aircraft for the Permitted Use in accordance with the
terms and conditions of Section 1.3 of this Lease for thirty (30) days
after written notice of such failure; or (iii) fail to observe or
perform any other provision hereof for thirty (30) days after written
notice of such failure to observe or perform; or
(b) If any representation or warranty of Lessee hereunder or set forth
in any notice, certificate, demand, request or other instrument
delivered pursuant to, or in connection with this Lease or in
connection with the acquisition of the Aircraft by Lessor, shall
either prove to be false or misleading in any material respect as of
the time when the same shall have been made and Lessor actually
suffers damages as a proximate cause thereof which are not paid by
Lessee; or
(c) If Lessee shall file a petition commencing a voluntary case under
the Federal Bankruptcy Code or any federal or state law (as now or
hereafter in effect) relating bankruptcy, insolvency, reorganization,
winding-up or adjustment of debts (hereinafter collectively called
"Bankruptcy Law") or if Lessee shall: (i) apply for or consent to the
appointment of, or the taking of possession by, any receiver,
custodian, trustee, United States Trustee or liquidator (or other
similar official) of the Aircraft or any part thereof or of any
substantial portion of Lessee's property; or (ii) generally not pay
its debts as they become due, or admit in writing its inability to pay
its debts generally as they become due; or (iii) make a general
assignment for the benefit of its creditors; or (iv) file a petition
commencing a voluntary case under or seeking to take advantage of any
Bankruptcy Law; or (v) fail to controvert in timely and appropriate
manner, or in writing acquiesce to, any petition commencing an
involuntary case against Lessee or otherwise filed against Lessee
pursuant to any Bankruptcy Law; or (vi) take any action in furtherance
of any of the foregoing; or
(d) If an order for relief against Lessee shall be entered in any
involuntary case under the Federal Bankruptcy Code or any similar
order against Lessee shall be entered pursuant to any other Bankruptcy
Law, or if a petition commencing an involuntary case against Lessee or
proposing the reorganization of Lessee under any Bankruptcy Law shall
be filed and not be discharged or denied within ninety (90)) days
after such filing, or if a proceeding or case shall be commenced in
any court of competent jurisdiction seeking: (i) the liquidation,
reorganization, dissolution, winding-up or adjustment of debts of
Lessee; or (ii) the appointment of a receiver, custodian, trustee,
United States Trustee or liquidator (or any similar official) of the
Aircraft or any part thereof or of Lessee or of any substantial
portion of Lessee's property; (iii) the attachment of the Aircraft or
any portion thereof, or (iv) any similar relief as to Lessee pursuant
to any Bankruptcy Law, and any such proceeding or case shall continue
undismissed for ninety (90) days after such relief is granted; or
(e) If the Aircraft shall be left both unattended and without
maintenance as provided herein, for a period of thirty (30)
consecutive days or more.
6.2 Lessor's Remedies.
-----------------
(a) In the event of an Event of Default and Lessee's failure to cure
the Event of Default within the applicable cure period, Lessor shall
have the right at its election to give Lessee ten (10) days' written
notice of Lessor's intention to terminate the term of this Lease on a
date specified in such notice. Thereupon, the term of this Lease and
the estate hereby granted shall terminate on such date as completely
and with the same effect as if such date were the date fixed herein
for the expiration of the term of this Lease, and all rights of Lessee
hereunder shall terminate, but Lessee shall remain liable as provided
herein.
(b) In the event of an Event of Default and Lessee's failure to cure
the Event of Default within the applicable cure period, Lessor shall
have the immediate right, whether or not the term of this Lease shall
have been terminated, to (i) re-enter and repossess the Aircraft or
any part thereof by force, summary proceedings, ejection or otherwise,
and (ii) remove all persons and property therefrom, Lessee hereby
expressly waiving any and all notices to quit, cure or vacate provided
by current or any future law. Lessor shall be under no liability by
reason of any such re-entry, repossession or removal. No such re-entry
or taking of possession of the Aircraft by Lessor shall be construed
as an election on Lessor's part to terminate the term of this Lease
unless a written notice of such intention to be given to Lessee.
(c) At any time or from time to time after the repossession of the
Aircraft or any part thereof, whether or not the term of this Lease
shall have been terminated, Lessor may (but shall be under no
obligation to) relet the Aircraft or any part thereof for the account
of Lessee, in the name of Lessee or Lessor or otherwise, without
notice to Lessee, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of
the term of this Lease) and on such reasonable conditions (which may
include concessions or free rent) and for such uses as Lessor may
reasonably determine, and Lessor may collect and receive any rents
payable by reason of such reletting. Lessor shall not be responsible
or liable for any failure to relet the Aircraft or any part thereof or
for any failure to collect any rent due upon any such reletting.
(d) No termination of the term of this Lease, by operation of law or
otherwise, and no repossession of the Aircraft or any part thereof,
and no reletting of the Aircraft or any part thereof, shall relieve
Lessee of its liabilities and obligations hereunder, all of which
shall survive such expiration, termination, repossession or reletting.
(e) In the event of any such termination or repossession, Lessee will
pay to Lessor the Basic Rent, Additional Rent and other sums required
to be paid by Lessee to and including the date of such termination or
repossession (together with interest at the Interest Rate on past due
amounts); and, thereafter, Lessee shall, until the end of what would
have been the term of this Lease in the absence of such termination or
repossession, and whether or not the Aircraft or any part thereof
shall have been relet, be liable to Lessor for, and shall pay to
Lessor, as liquidated and agreed current damages: (i) the Basic Rent,
Additional Rent and other sums which would be payable under this Lease
by Lessee in the absence of such termination or repossession, less
(ii) the net proceeds, if any, of any reletting effected for the
account of Lessee, after deducting from such proceeds all of Lessor's
reasonable out-of-pocket expenses incurred in connection with such
reletting (including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, employees'
expenses, and expenses of preparation for such reletting). Lessee will
pay such current damages on the days on which the Basic Rent would
have been payable under this Lease in the absence of such termination
or repossession, and Lessor shall be entitled to recover the same from
Lessee on each such day.
(f) At any time after such termination or repossession by reason of
the occurrence of any Event of Default, whether or not Lessor shall
have collected any current damages, Lessor shall be entitled to
recover from Lessee, and Lessee will pay to Lessor on demand, as and
for liquidated and agreed final damages for Lessee's default and in
lieu of all current damages beyond the date of such demand (it being
agreed that it would be impracticable or extremely difficult to fix
the actual damages), an amount equal to the present value of all rent
payable under the Lease beyond the date of such demand over the then
present value of the then fair market rental for the Aircraft, at the
date of such demand for what would be the unexpired term of the Lease,
which present value shall in each case be determined by the
application of a discount factor of ten percent (10%) per annum. If
any law, shall be construed to limit the amount of such liquidated
final damages to less than the amount above agreed upon, Lessor shall
be entitled to the maximum amount allowable under such statute or rule
of law.
(g) Notwithstanding anything to the contrary stated herein, if an
Event of Default shall have happened and be continuing, whether or not
Lessee shall have abandoned the Aircraft, Lessor may elect to continue
this Lease in effect for so long as the Lessor does not terminate
Lessee's right to possession of the Aircraft and Lessor may enforce
all of its rights and remedies hereunder including, without
limitation, the right to recover all Basic Rent, Additional Rent and
other sums payable hereunder as the same become due.
6.3. Additional Rights of Lessor. No right or remedy herein conferred upon
or reserved to Lessor is intended to be exclusive of any other right or remedy,
and each and every right and remedy shall be cumulative and in addition to any
other right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute. The failure of Lessor to insist at any time upon the
strict performance of any covenant or agreement or to exercise any option,
right, power or remedy contained in this Lease shall not be construed as waiver
or a relinquishment thereof for the future. A receipt by Lessor of any Basic
Rent, any Additional Rent or any other sum payable hereunder with knowledge of
the breach of any covenant or agreement contained in this Lease shall not be
deemed a waiver of such breach, and no waiver by Lessor of any provision of this
Lease shall be deemed to have been made unless expressed in writing and signed
by Lessor. In addition to other remedies provided in this Lease, Lessor shall be
entitled, to the extent permitted by applicable law, to injunctive relief in
case of the violation, or attempted or threatened violation, of any of the
covenants, agreements, conditions or provisions of this Lease, or to a decree
compelling performance of any of the covenants, agreements, conditions or
provisions of this Lease, including but not limited to the provisions of this
Lease setting forth Lessee's operating covenant, or to any other remedy allowed
to Lessor at law or in equity.
6.4 Waivers by Lessee. To the extent permitted by applicable law, Lessee
hereby waives and surrenders for itself and all those claiming under it,
including creditors of all kinds, (i) any right or privilege which it or any of
them may have under any present or future construction, statute or rule of law
to redeem the Aircraft or to have a continuance of this Lease for the term
hereby demised after termination of Lessee's right of occupancy by order or
judgment of any court or by any legal process or writ, or under the terms of
this Lease or after the termination of the term of this Lease as herein
provided, and (ii) the benefits of any present or future constitution, statute
or rule of law which exempts property from liability for debt or for distress
for rent.
6.5 Attorneys' Fees. In the event of an Event of Default and Lessee's
failure to cure the Event of Default within the applicable cure period, if an
action shall be brought by Lessor for the enforcement of any right set forth
herein in connection with, and subject to, the indemnification provisions
contained herein, Lessee shall be liable for all of the reasonable out-of-pocket
expenses incurred by Lessor in connection therewith, including without
limitation, attorneys' fees. However, should Lessee prevail in an action for
violation of quiet enjoyment under this Lease, then and only in such event shall
Lessor be liable for reasonable out-of-pocket expenses incurred by Lessee in
connection therewith, including attorneys' fees.
Section 7. Miscellaneous
7.1 Notices, Demands and Other Instruments All notices, demands, requests,
consents, approvals and other instruments required or permitted to be given
pursuant to the terms of this Lease shall be in writing and shall be deemed to
have been properly given if (a) with respect to Lessee, sent by registered or
certified mail with a return receipt requested, postage prepaid, or sent by
facsimile, nationally recognized overnight express carrier or delivered by hand,
in each case addressed to Lessee at its notice address first above set forth,
and (b) with respect to Lessor, sent by registered or certified mail with a
return receipt request, postage prepaid, or sent by facsimile, nationally
recognized overnight express courier or delivered by hand in each case,
addressed to the Lessor at its address first above set forth along with a copy
to the Lender (if Lessee shall have been given Lender's address). Lessor and
Lessee shall each have the right from time to time to specify as its address for
purposes of this Lease any other address in the United States of America upon
giving fifteen (15) days written notice thereof, similarly given, to the other
party. Notices shall be deemed communicated upon the earlier of receipt, or
seventy-two (72) hours from the time of mailing if mailed as provided in this
Section.
7.2 Estoppel Certificates and Consents
----------------------------------
(a) Lessee will, from time to time, upon not less than twenty (20)
days prior written request by Lessor or by Lender, execute,
acknowledge and deliver a certificate certifying: (i) that this Lease
is unmodified and in full effect (or setting forth any modifications
along with the statement that this Lease as modified is in full effect
); (ii) that the Basic Rent and Additional Rent payable and the dates
to which the Basic Rent, Additional Rent and other sums payable
hereunder have been paid; (iii) that to the best knowledge of Lessee,
Lessor is not in any default of the Lease; (iv) the commencement and
expiration dates of the Lease; (v) the amount of any security or other
deposits; (vi) that either Lessee is in possession of the Aircraft or
who is in possession; (vii) any concessions or other rights that
Lessee (including first refusal, option or other occupancy claims) or
Lessor may have; and (viii) such other matters as may reasonably be
required by the requesting party. Any such certificate may be relied
upon by any Lender, prospective purchaser, or prospective Lender of
the Aircraft. Lessee further agrees to reasonably cooperate with
Lender and its affiliates in the preparation of disclosure documents
which may be issued in connection with a secondary market transaction
involving a sale or securitization of its loan.
(b) From time to time during the term of this Lease, Lessor expects to
secure financing of its interest in the Aircraft by assigning Lessor's
interest in this Lease and the sums payable hereunder. In the event of
any such assignment to the Lender, Lessee will, upon not less than
twenty (20) days prior written request by Lessor, execute, acknowledge
and deliver to Lessor a consent clearly indicating (i) that Lessee is
to make Basic Rent payments or portions thereof directly to Lender if
required by Lender, and (ii) consent to such assignment addressed to
such Lender in a form satisfactory to Lender; and Lessee will produce,
at Lessee's expense, such certificates and other documents as may be
reasonably requested by the Lender. Lessee acknowledges that, by
execution hereof, it has agreed to make payments of Basic Rent or
portions thereof directly to Lender, without further notice or
direction if required by Lender, and Lessor consents to said payments
by Lessee to Lessor.
7.3 Surrender Upon the termination of this Lease, Lessee shall peaceably
surrender the Aircraft to Lessor in the same condition in which it was received
from Lessor at the commencement of this Lease, except as repaired, replaced and
altered as permitted or required by this Lease and except for normal wear and
tear. Upon surrender, the Aircraft shall be in full compliance with all
applicable regulations and shall have a current and valid FAA Standard
Airworthiness Certificate. Lessee shall remove from the Aircraft prior to or
within a reasonable time after such termination (not to exceed thirty (30) days)
all its personal property that is capable of removal without causing damage to
the Aircraft, and, at Lessee's expense, shall at such times of removal, repair
any damage caused by such removal. Property not so removed shall become the
property of Lessor. Lessor may thereafter cause such property to be removed and
disposition of and the cost of repairing any damage caused by such removal shall
be borne by Lessee. Any holding over by Lessee of the Aircraft after the
expiration or earlier termination of the term of this Lease or any extensions
thereof, with the consent of Lessor, shall operate and be construed as a tenancy
from month to month only, at one hundred ten (110%) of the Basic Rent reserved
herein and upon the same terms and conditions as contained in this Lease.
Notwithstanding the foregoing, any holding over without Lessor's consent shall
entitle Lessor, in addition to collecting Basic Rent at a rate of one hundred
ten percent (110%) thereof, to exercise all rights and remedies provided by law
or in equity.
7.4 Separability Each and every covenant and agreement contained in this
Lease is separate and independent, and the breach of any thereof by Lessor other
than the covenant of quiet enjoyment in Section 1.4, shall not discharge or
relieve Lessee from any obligation hereunder. If any term or provision of this
Lease or the application thereof to any person or circumstances or at any time
to any extent be invalid and unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances or at any time
other than those to which it is invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Lease shall be valid and shall be
enforced to the extent permitted by law.
7.5 Merger, Consolidation or Sale of Assets It shall be a condition
precedent to the merger of Lessee into another corporation, to the consolidation
of Lessee with one or more other corporations and to the sale or other
disposition of all or substantially all the assets of Lessee to one or more
other entities that the surviving entity or transferee of assets, as the case
may be, shall deliver to Lessor and to Lender an acknowledged instrument in
recordable form assuming all obligations, covenants and responsibilities of
Lessee hereunder and under any instrument executed by Lessee consenting to the
assignment of Lessor's interest in this Lease to the Lender as security for
indebtedness. Lessee covenants that it will not merge or consolidate or sell or
otherwise dispose of all or substantially all of its assets unless such an
instrument shall have been so delivered and unless the entity with which it
intends to merge, consolidate, sell or otherwise transfer its assets to has a
credit rating at least equal to Lessee's then current credit rating.
7.6 Savings Clause No provision contained in this Lease which purports to
obligate Lessee to pay any amount of interest or any fees, costs or expenses
which are in excess of the maximum permitted by applicable law, shall be
effective to the extent that it calls for payment of any interest or other sums
in excess of such maximum.
7.7 Binding Effect; Limitation of Liability All of the covenants,
conditions and obligations contained in this Lease shall be binding upon and
inure to the benefit of the respective successors and assigns of Lessor and
Lessee to the same extent as if each successor and assign were in each case
named, except that a successor and assign of Lessor shall only be bound as to
covenants, conditions and obligations arising after the transfer.
Notwithstanding anything to the contrary set forth in this Lease, if Lessor
shall fail to perform any covenant, term or condition of this Lease upon
Lessor's part to be performed, and if as a consequence of such default Lessee
shall recover a judgment against Lessor, such judgment shall be satisfied only
out of the proceeds of sale received upon execution of such judgment and levy
thereon against the right, title and interest of Lessor in the Aircraft, and
Lessor shall not be personally liable therefor, provided Lessor then owns the
Aircraft and such limitation of liability shall not apply if Lessor does not
then own the Aircraft.
7.8 Governing Law This Lease shall be governed by and interpreted under the
laws of the State of Arizona, but not including such state's conflict of laws
rules. All judicial proceedings shall be in the courts of Maricopa County,
Arizona and the parties consent to the exclusive jurisdiction of said Courts.
The parties waive trial by jury in all judicial proceedings relating to this
Lease.
7.9 Integration This Lease, the exhibits hereto, if any, hereof, constitute
the entire agreement between the parties hereto with regard to the subject
matter hereof, and supersede any prior understandings, agreements or
negotiations. This Lease may not be amended or modified except by a writing
executed by Lessee and Lessor, with the consent of any Lender.
7.10 Subordination to Lessor Financing
(a) (i) Subject to the provisions of Section (a)(ii) below, Lessee
agrees that this Lease shall at all times be subject and subordinate
to the lien of any Mortgage, and Lessee agrees, upon demand, without
cost, to execute instruments as may be reasonably required to further
effectuate or confirm such subordination.
(ii) Lessee's agreement to subordinate set forth in Section (a)(ii)
above is conditioned upon the Lender agreeing that: Lessee's tenancy
and Lessee's rights under this Lease shall not be disturbed,
terminated or otherwise adversely affected, nor shall this Lease be
affected, by any default under any Mortgage, and in the event of a
foreclosure or other enforcement of any Mortgage, or sale in lieu
thereof, the purchaser at such foreclosure sale shall be bound to
Lessee for the Term of this Lease, the rights of Lessee under this
Lease shall expressly survive, and this Lease shall in all respects
continue in full force and effect so long as no Event of Default has
occurred and is continuing; provided, however, that such purchaser
shall not:
(A)be liable for any prior act or omission of Lessor;
(B)be subject to any defense, counterclaim, set-off or offset
which Lessee may then have against Lessor;
(C)be bound by any payment of rent that Lessee may have made to
Lessor more than thirty (30) days before the date such rent was
first due and payable under this Lease with respect to any period
after the date of attornment other than, and only to the extent
that, this Lease expressly required such a prepayment;
(D)be bound by any obligation to make any payment to Lessee which
was required to be made prior to the time such successor Lessor
succeeded to Lessor's interest;
(E)be bound by any obligation to perform any work or to make
improvements to the Aircraft; or
(b) Notwithstanding the provisions of this Section, the holder of any
Mortgage to which this Lease is subject and subordinate shall have the
right, at its sole option, at any time, to subordinate and subject the
Mortgage, in whole or in part, to this Lease by recording a unilateral
declaration to such effect.
(c) At any time prior to the expiration of the Term, Lessee agrees, at
the election and upon demand of any owner of the Aircraft, or of a
Lender who has granted non-disturbance to Lessee pursuant to this
Section, to attorn, from time to time, to any such owner or lender,
upon the terms and conditions of this Lease, for the remainder of the
Term. The provisions of this Section shall inure to the benefit of any
such owner or Lender, shall apply notwithstanding that, as a matter of
law, this Lease may terminate upon the foreclosure of the Mortgage,
shall be self-operative upon any such demand, and no further
instrument shall be required to give effect to said provisions.
(d) Each of Lessee, Lessor and Lender, however, upon written demand of
the other, hereby agrees to execute, from time to time, instruments in
confirmation of the foregoing provisions of this Section, in the form
customarily used by such Lender to the extent consistent with the
requirements of such Sections, acknowledging such subordination,
non-disturbance and attornment as are provided in such Sections and
setting forth the terms and conditions of its tenancy.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first indicated above.
LESSOR: LESSEE:
Verde Investments, Inc., Ugly Duckling Corporation,
an Arizona corporation a Delaware corporation
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Its: ___________________________ Its: ___________________________
EXHIBIT A
SPECIFICATIONS
1980 Hawker 700 A SERIAL NO. 280
------------------------------------------------------------------------------
TOTAL TIME AIRFRAME: 6992 SNEW 48 Month Inspection Completed By Xxxxxx
4621 CSN 3/96*
Part 135 Ready*
ENGINES: Xxxxxxx TFE 731-3R-1H --100% MSP Gold--
-------
Left Eng. 6969.3 SNEW 4580 CSN
Right Eng. 6938.0 SNEW 4655 CSN
APU: Xxxxxxx GTCP-36-100 2376 SNEW
---
AVIONICS: Dual Xxxxxxx VHF-20B Comms
--------
Dual Xxxxxxx XX-109 Flight Directors Dual Xxxxxxx ADF-60 ADF
Primus 300SL Color Radar with Data Nav Dual Xxxxxxx VIR-30 Navs
Xxxxx Audio Dual Xxxxxxx DME-40 DME
Xxxxxxxxx GA-100CVR Dual Xxxxxxx TDR-90 Transponders
Xxxxxxx 618T-3 HF Comms Xxxxxxx ALT-55B Radar Altimeter
Xxxxxxx XXX-80A Encoder Dual Xxxxxxx ADC-80A Altitude Alert
King KLN-90B GPS (IFR Appr. Certified) Dual Xxxxxxx 331A-9G HIS
Wulfsberg Flitefone VI Xxxxxxx PRE-80A Altitude Alert
Allied GNS-XLS-FMS (Appr. Certified) Xxxxxxx Backup Vertical Gyro
J.E.T. Standby Horizon TCAS - I
Vandling NDB-2 Database Dual Davtron 811-B Digital Clocks
Dual Sperry C-14 Compass Systems Teledyne Angle of Attack
Xxxxxxx APS-80 Autopilot W/Alt. Pre-select
ADDITIONAL EQUIPMENT: 5" Monitor
Intelliflight Airshow System 14" Monitor
DVD/CD Changer Stereo & Airshow Remote Control
Wireless Headsets
NOTES: No damage history. Aircraft is currently operated under Part 135
commercial certificate. 12/24 month complied with 7/9/98. Major X-rays performed
3/96.
Interior: Beautiful eight place leather interior, new in 2000. Three place aft
divan with additional storage underneath. Complete aft lav with hot/cold running
water. Excellent audio-video system with CD changer and DVD player integrated.
Audio-visual and Airshow completely controllable by remote control. Interior is
fire-blocked for Part 135 operations.
EXTERIOR: Paint in excellent condition. White with green stripes.
All airframe and engine times and cycles to be
re-verified upon Delivery of Aircraft
Specification subject to verification upon
inspection.
