No. BK-S-00-19258 (LBR)United States Bankruptcy Court, D. Nevada
August 6, 2002
Laurence M. Frazen, Esq., BRYAN CAVE LLP, Kansas City, Missouri, Special Counsel for Debtor;
James P.Shea, Esq., SHEA CARLYON, LTD., Las Vegas, Nevada, Local Counsel for Debtor;
KAYE SCHOLER LLP, Amiee Dominguez, Counsel to ANSETT WORLDWIDE AVIATION, U.S.A. and MSA I, Lessors.
STIPULATION AND AGREED ORDER REGARDING EXTENSION OF THE 11 U.S.C. § 1110 PERIOD THROUGH JANUARY 31, 2003 FOR AIRCRAFT N757NA AND N517NA
LINDA B. RIEGLE, United States Bankruptcy Judge
Ansett Worldwide Aviation, U.S.A. (“Ansett”) and MSA I (Ansett and MSA I, collectively, “Lessors”) and National Airlines, Inc. (“Debtor”) hereby agree to this Stipulation and Agreed Order Regarding Extension of the 11 U.S.C. § 1110 Period (“Stipulation”) as follows:
1. On December 6, 2000 (“Filing Date”), Debtor filed a petition for relief (“Case”) under Chapter 11, Title 11 of the United States Code (“Bankruptcy Code”).
2. Debtor is in possession of its assets and operates its business as a debtor-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code.
3. Debtor and Ansett are parties to a sublease agreement dated as of April 30, 1999 (the “757 Lease”) respecting a Boeing Model 757-23A Aircraft, Manufacturer’s Serial Number 24567, bearing FAA Registration number N757NA (the “757 Aircraft”), including two (2) Rolls Royce RB211-535E4 engines, bearing manufacturer’s serial numbers 30721 (“Engine 30721”) (which engine is now on the 541 Aircraft described below) and 30725 (“Engine 30725”). The sub-lease is collectively referred to herein as the “Ansett Lease”, together with any and all amendments, modifications, assignments, supplements, agreements, chattel mortgages, financing statements and other documents and instruments executed in connection therewith or pursuant thereto (collectively, the “Lease Documents”) pursuant to which Debtor leased from Ansett the described aircraft, the described engines and all parts installed thereon and logs and other records relating thereto (being hereinafter collectively referred to as the “Ansett Aircraft Equipment”); and
4. Debtor and Ansett have previously terminated a sublease agreement dated as of March 14, 2000 (the “541 Lease”) respecting a Boeing Model 757-23A Aircraft, Manufacturer’s Serial Number 24291, bearing FAA Registration number N541NA (the “541 Aircraft”), including two (2) Rolls Royce RB211-535E4 engines, manufacturer’s serial numbers 30687 (“Engine 30687”) and 30689 (“Engine 30689”) (which engine is now on the 757 Aircraft). Pursuant to agreement between the Debtor and Ansett the 541 Aircraft has been returned to Ansett.
5. Debtor and MSA I are parties to an Aircraft Lease Agreement dated June 8, 1999 (the “MSA I Lease” or the “517 Lease”) (the Ansett Lease and the MSA I Lease are collectively referred to as the “Leases”) respecting a Boeing Model 757-23A Aircraft, Manufacturer’s Serial Number 24260, bearing FAA Registration number N517NA (the “517 Aircraft”), including two (2) Rolls Royce RB211-535-114 engines, bearing manufacturer’s serial numbers 30674 (“Engine 30674”) and 30677 (“Engine 30677”); together with any and all amendments, modifications, assignments, supplements, agreements, chattel mortgages, financing statements and other documents and instruments executed in connection therewith or pursuant thereto (collectively, the “MSA I Lease Documents”) pursuant to which Debtor leased the described aircraft, the. described engines and all parts installed thereon and logs and other records relating thereto (being hereinafter collectively referred to as the “MSA I Aircraft Equipment”; the Ansett Aircraft Equipment and the MSA I Aircraft Equipment, collectively, the “Aircraft Equipment”).
6. Section 1110 of the Bankruptcy Code provides Lessors, among other things, with certain rights to take possession of the Aircraft Equipment in accordance with the terms of the Lease Documents under certain circumstances after the expiration of the 60-day period following entry of an order for relief with respect to Debtor (“Initial 1110 Period”). Pursuant to various stipulations and orders (“Prior Orders”) the Initial 1110 Period has been extended until the earlier of the Effective Date of Debtor’s Plan (as defined below) or 5:00 p.m. on July 31, 2002 (the extensions of the Initial 1110 Period being hereinafter referred to as the “Extended 1110 Period”).
7. On March 6, 2002 the Court confirmed the Debtor’s First Amended Plan of Reorganization (the “Plan”). Pursuant to the Plan, on the Effective Date (as defined in the Plan) the Debtor and the Lessor will enter into a modification of the Lease, Pursuant to the Plan there are certain conditions precedent that must occur prior to the Effective Date. Accordingly, pursuant to Section 1110(b) of the Bankruptcy Code, Ansett and MSA I agree to further extend the Extended 1110 Period and forbear from exercising their respective rights under Section 1110 of the Bankruptcy Code with respect to the Aircraft through and including the earlier to occur of: (x) the Effective Date of the Plan; and (y) 5:00 p.m. (Pacific Time) on January 31, 2003, as such period may be extended by mutual agreement of the parties hereto or earlier terminated pursuant to Paragraph 11 below (the “Forbearance Period”).
8. In consideration of the consent of Ansett and MSA I to forbear during the Forbearance Period:
(a) As payment of a portion of Debtor’s post-petition obligations due under the Ansett Lease, Debtor shall pay to Ansett:
(1) For the 757 Aircraft: on each Monday during the Forbearance Period the amount of $34,125.50 (or pro rata amount if such payment is for less than a full week).
(b) As payment of a portion of Debtor’s post-petition obligations due under the MSA I Lease, Debtor shall pay MSA I:
(1) For the 517 Aircraft: on each Monday during the Forbearance Period the amount of $32,987.50 (or pro rata amount if such payment is for less than a full week)
(c) Debtor shall pay to TAESL $33,556.13 on each Monday during the Forbearance Period.
(d) On the tenth (10th) day of each month during the Forbearance Period, Debtor shall pay MSA I for the 517 Aircraft the amount equal to fifty percent (50%) of the total amounts payable under the 517 Lease as Maintenance Payments for the use of the MSA I Aircraft Equipment during the preceding month.
(e) On the tenth (10th) day of each month during the Forbearance Period, Debtor shall pay Ansett for the 757 Aircraft the amount equal to fifty percent (50%) of the total amounts payable under the 757 Lease as Maintenance Payments for the use of the Ansett Aircraft Equipment relating to the 757 Aircraft during the preceding month.
Provided, however, that all amounts set forth above shall be adjusted to reflect the actual number of days in a particular month. The Debtor shall make each of the payments required in this Paragraph 8 by wire transfer, which shall be initiated by the Debtor before 2:00 p.m. (Pacific Time) on the specified date.
9. Upon the Effective Date of the Debtor’s Plan of Reorganization (the “Plan”), Debtor shall pay Ansett (i) $110,758 in respect of maintenance reserves and rent owed on the 541 Aircraft for the period November 12, 2001 through November 28, 2001; and (ii) an amount equal to the difference between the rental and maintenance rates payable hereunder with respect to the 517 Aircraft and the 757 Aircraft and one hundred percent (100%) of Maintenance Payments and one hundred percent (100%) of the “proposed rates” (being $282,750 in respect of Aircraft 517 and $292,500 in respect of Aircraft 757) for both these Aircraft, such amount to be calculated for the period of November 12, 2001 through the Effective Date of the Plan.
10. Immediately upon the entry of this Stipulation and Order, Ansett shall offset any security deposits it is currently holding against any pre or post-petition claims Ansett may have against the Debtor in such order and amounts as Ansett shall elect.
11. Without limiting the generality of the foregoing provisions of this Stipulation, from and after the date hereof through and including the end of the Forbearance Period, Debtor covenants that, unless Lessors shall otherwise consent in writing:
(a) It will comply with all of the terms and conditions contained in the Leases and Lease Documents relating to Debtor’s possession and use of the Aircraft Equipment (other than defaults that existed on the Filing Date), including, without limitation, all maintenance, airworthiness directives and insurance provisions contained therein;
(b) It will otherwise keep at no cost to Lessors the Aircraft Equipment repaired and maintained as required under Debtor’s FAA-approved maintenance program;
(c) Debtor shall deliver to Ansett and MSA I copies of all financial statements, forecasts, schedules and reports delivered to any parties other than parties which have expressed interest in providing debtor in possession financing to the Debtor and the Official Committee of Unsecured Creditors concurrently with the delivery of any financial statement, forecast, schedule or report to any such parties.
12. The occurrence of any one or more of the following specified events shall constitute a “Forbearance Default”:
(a) Debtor shall default in the payment when due of any amount due under this Stipulation and such default shall continue unremedied for I business day after receipt of faxed or other written notice from Ansett, that such payment has not been received;
(b) Debtor shall fail to carry and maintain insurance on or with respect to the Aircraft Equipment in accordance with the terms of the Leases and Lease Documents, with no grace period except as specifically set forth in the Leases and Lease Documents;
(c) Any representation or warranty made by Debtor under this Stipulation shall prove to be false or misleading as of the date when made or any covenant herein shall be breached, and, in any such case, such default shall continue unremedied for 5 business days after receipt of faxed or other written notice from Ansett of such default, which notice and cure period shall be exclusive and in lieu of any provision to the contrary in the Leases and Lease Documents or in section 1110 of the Bankruptcy Code;
(d) A chapter 11 trustee is appointed in the Case, the Case is dismissed or the Case is converted to a case under chapter 7 of the Bankruptcy Code;
(e) Debtor ceases or materially curtails its operations as constituted on the date hereof;
(f) Any aircraft in Debtor’s fleet is repossessed by or more than one aircraft is voluntarily returned to any other aircraft lessor or otherwise removed from Debtor’s possession other than for normal and ordinary maintenance purposes;
(g) An “Event of Default” under and as defined in any debtor-in-possession financing agreement with which Debtor shall either occur and be continuing and as a result thereof, Debtor’s obligations thereunder are accelerated prior to their stated maturity; and
(h) The Forbearance Period shall have expired and either (i) Debtor and Lessor shall not have reached agreement with respect to the payment of arrearages and other damages after good faith negotiations, or (ii) Debtor, Ansett and MSA I shall not have reached an agreement to extend the Forbearance Period.
13. On the occurrence of any Forbearance Default, then, notwithstanding anything to the contrary in sections 105, 362, 363, 365 or 1110 of the Bankruptcy Code, Ansett, and MSA I, or either of them, may, by written notice to Debtor and without further order of the Bankruptcy Court, declare the Forbearance Period and the Leases to be immediately terminated, whereupon Ansett and MSA I, shall be entitled to exercise all of the default remedies of Lessors provided in the Leases and Lease Documents on the terms provided therein and under the Bankruptcy Code, including, without limitation, the right to repossess the Aircraft Equipment, and Debtor shall immediately cease using the Aircraft Equipment (except to fly it to a storage or maintenance center or to a location agreed upon pursuant to clause (2) below), notify Ansett and MSA I, as to their respective aircraft, of the Aircraft Equipment’s location, and shall: (1) to assemble the Aircraft Equipment and (2) to deliver the Aircraft Equipment (together with all of its parts and components m functional condition and in at least the condition required pursuant to Debtor’s FAA-approved maintenance program) to Ansett and MSA I as to their respective aircraft at Debtor’s sole expense (free and clear of all liens imposed at any time from and after the Filing Date other than liens in favor of Lessors) on such date(s) and at such airport(s) on Debtor’s scheduled routes within the continental United States or Mexico as may be mutually agreed by Debtor and Ansett and MSA I, as to their respective aircraft.
14. Lessors reserve their rights to approve, object to and vote against any plan of reorganization which impairs its claim or claims against Debtor. Nothing herein shall constitute an acknowledgment that any of the post-petition payments received by Lessors or either of them under the Prior Orders or this Stipulation satisfy the cure and compensation requirements of sections 1110 and 365(b)(1)(A) or (B) of the Bankruptcy Code or reflect fair rental value or adequate protection for Debtor’s use of the Aircraft Equipment, Lessors reserve their rights to seek additional payments therefor, and, subject to the forbearance set forth in paragraphs 6 and 7 of this Stipulation, to assert its rights to seek cure, compensation, fair rental value and/or adequate protection. By entering into this Stipulation, Lessors have not waived any of their respective rights under section 1110(b) of the Bankruptcy Code, or otherwise, except to the extent of the forbearance provided in paragraph 6 of this Stipulation.
15. In the event that, prior to the last day of the Forbearance Period, Debtor and Lessors have reached a written agreement as to the payment of past due amounts and damages that may be due and owing under the Leases and Lease Documents, the Leases will automatically be deemed to have been assumed, pursuant to section 365 of the Bankruptcy Code, on the date such agreement is reached without the necessity of any further order of the Bankruptcy Code unless the Official Committee of Unsecured Creditors objects to the proposed agreement, in which case such assumption shall become effective only upon entry of an order of the Bankruptcy Court approving the same. Notwithstanding the foregoing, Debtor hereby expressly reserves its right to reject the Leases at the end of the Forbearance Period in the event that Debtor and Lessors are unable after good faith negotiations to reach a financially feasible agreement as to the assumption of the Leases.
16. Notwithstanding anything to the contrary in this Stipulation, should Debtor and any other lessor of any aircraft operated by Debtor enter into a stipulation respecting the 1110 Period, which is more favorable to that lessor than the provisions contained herein (including, without limitation, a shorter extension term) then such more favorable provisions shall apply to this Stipulation as though included herein; provided, however, that Lessors recognize that the payments provided for in subparagraphs 7(a) and (b) of this Stipulation, are based on the age of the two aircraft which are the subject of the Leases, and that different amounts are being paid on account of other leases dependent on the age of the aircraft which are the subject thereof
18. Except to the extent of the forbearance provided in Paragraphs 6 and 7, above, nothing herein shall be deemed to modify or affect or waive any provisions of the Leases and Lease Documents.
19. This Stipulation may be executed in several counterparts, each of which will be a duplicate original and all of which will constitute one and the same agreement.
20. The Court shall retain jurisdiction to resolve any dispute concerning this Stipulation and Agreed Order.
STIPULATED AND AGREED TO by the undersigned parties this 6th day of August, 2002.
The Foregoing Stipulation between Ansett Worldwide Aviation, U.S.A., MSA I and National Airlines, Inc., the debtor and debtor-in-possession herein, is hereby.
ENTERED AND APPROVED.