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DATED AS OF MARCH 26, 1997
WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE (1)
LESSOR
and
WESTERN PACIFIC AIRLINES, INC. (2)
LESSEE
AIRCRAFT LEASE AGREEMENT
for
One Boeing 737-300 Aircraft
Manufacturer's Serial Number 28868
To the extent, if any, that this Aircraft Lease Agreement
constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Aircraft Lease
Agreement may be created through the transfer or possession
of any counterpart other than the original executed
counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by the secured party
or the Beneficiary on the signature page thereof.
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CONTENTS
CLAUSE HEADING PAGE
1. Definitions...................................................... 1
2. Representations and Warranties................................... 13
3. Term of Lease.................................................... 18
4. Conditions....................................................... 18
5. Delivery and Acceptance.......................................... 20
6. Lessor's Warranties and Manufacturer's Warranties................ 25
7. Rent............................................................. 26
8. Payments, Interest and Calculations.............................. 27
9. Costs and Indemnities............................................ 28
10. Taxation......................................................... 33
11. General Undertakings............................................. 44
11.1 ..........................................................44
(a) Consents and Authorizations........................ 44
(b) Preparation of Accounts............................ 45
(c) Supply of Accounts and Officer's Certificate....... 45
(d) Lessee Financial Information....................... 45
11.2 ..........................................................45
(a) Status Report...................................... 45
(b) Information Concerning the Aircraft................ 46
(c) Inspection......................................... 46
(d) No Operational Interest............................ 47
(e) Compliance with Insurances......................... 47
(f) Air Traffic Control Information and
Third Party Information............................ 47
(g) Status of the Lessee............................... 47
(h) Certificated Air Carrier........................... 47
(i) Citizen of the United States....................... 47
11.3 ..........................................................48
(a) Disposal and Encumbrance of the Aircraft........... 48
(b) Prevention of Arrest............................... 48
(c) No Pledging of Credit.............................. 48
(d) Protection of Rights in the Aircraft............... 48
12. Sub-Leasing...................................................... 49
13. Operations and Maintenance....................................... 50
13.1 ..........................................................50
(a) Certificates and Licenses.......................... 50
(b) Operation and Use.................................. 51
(c) Base of Operations................................. 52
(d) Maintenance........................................ 52
(e) Replacement of Engines and Parts................... 54
(f) Removal of Parts................................... 55
(g) Installation of Engines and Parts.................. 55
(h) Non-installed Engines.............................. 55
(i) Nameplates......................................... 55
(j) Alterations........................................ 56
(k) Changes to Approved Maintenance Programme.......... 56
13.2 Temporary Installation of Parts........................... 56
13.3 Interchange of Engines.................................... 57
13.4 Maintenance Accruals...................................... 60
13.5 ..........................................................63
14. Manuals and Technical Records.................................... 63
15. Title and Registration........................................... 64
16. Insurance........................................................ 65
17. Loss and Damage.................................................. 69
18. Requisition or Grounding......................................... 71
19. Re-delivery...................................................... 72
20. Termination Events............................................... 76
21. Lessor's Rights Following a Termination Event.................... 79
22. Notices.......................................................... 81
23. Assignment....................................................... 83
24. Miscellaneous.................................................... 84
25. Law and Jurisdiction............................................. 86
26. Section 1110..................................................... 86
27. True Lease....................................................... 87
SCHEDULE
1 Part 1 ..........................................................89
Part 2 ..........................................................91
Part 3 ..........................................................93
Part 4 ..........................................................95
2 Acceptance Certificate........................................... 98
3 Insurance Requirements...........................................102
4 Return Conditions................................................106
5 Form of Brokers' Letter of Undertaking...........................112
6 Form of Letter of Quiet Enjoyment................................114
7 Form of Status Report............................................117
8 Officer's Certificate............................................121
A LEASE AGREEMENT dated as of March 26, 1997, and made BETWEEN:
1) WILMINGTON TRUST COMPANY, a Delaware banking corporation with its chief
executive office at ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement (the "LESSOR"); and
(2) WESTERN PACIFIC AIRLINES, INC., a Delaware corporation with its chief
executive office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ (the "LESSEE").
BY WHICH IT IS AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement, unless the context otherwise requires:
"ACCEPTANCE CERTIFICATE" means an Acceptance Certificate in the form set
out in Schedule 2 to be signed by the Lessee and delivered to the Lessor
on the Delivery Date pursuant to Clause 5.1 (Delivery and Acceptance);
"ACCRUAL PERIOD" means (except for the last Accrual Period) each period
of one (1) month during the Lease Period, the first Accrual Period
commencing on the Delivery Date and each subsequent Accrual Period
commencing on the expiry of the previous Accrual Period; provided,
however, that, notwithstanding the foregoing, the last Accrual Period
shall end upon the expiry or earlier termination of the Lease Period;
"ADVANCE PAYMENT DATE" means the date on which the Lessor makes the
advance payments for the Aircraft to the Manufacturer pursuant to the
Purchase Assignment.
"AGREED VALUE" as of any date means, with respect to the Aircraft, the
Airframe and any Engine, the applicable amounts set forth in Letter
Agreement No. 1 with respect to such date;
"AGREEMENT" means this Lease Agreement and Letter Agreement No. 1 as
they may from time to time be supplemented or amended;
"AIRCRAFT" means the Airframe together with the Engines (whether or not
any of the Engines may from time to time be installed on the Airframe)
and, where the context permits, references to the "AIRCRAFT" shall
include the Manuals and Technical Records and, unless otherwise provided
herein, shall mean the Aircraft as a whole and any portion thereof;
"AIRCRAFT COMMITMENT FEE" means such sums as shall be paid by the Lessee
to the Lessor (or the Lessor's order) pursuant to Clause 7.3 in the
amounts, and at the times, set forth in paragraph 1 of Letter Agreement
No. 1;
"AIRFRAME" means the new Boeing 737-300 aircraft with manufacturer's
serial number 28868 and the United States Registration Number set forth
in the Acceptance Certificate (excluding the Engines or engines from
time to time installed thereon), and all Parts installed at Delivery, or
installed on the Airframe thereafter, or which having been removed
therefrom remain the property of the Head Lessor pursuant to this
Agreement, and all replacements, renewals and additions made to the
foregoing in accordance with this Agreement;
"AIRLINE STANDARDS" means the interpretation applied to assessing the
cleanliness and general appearance of the Aircraft and as a benchmark
standard should be considered as the standards acceptable to a United
States scheduled airline ex- C Check, external wash and/or interior deep
clean;
"APPROVED MAINTENANCE PERFORMER" means, as the context so admits, the
Lessee or any of the independent maintenance performers listed in
Schedule I to Letter Agreement No. 1 engaged by the Lessee to perform
major maintenance work on the Aircraft or, as the case may be, the
Engine Manufacturer or the independent engine overhaul shops listed in
Schedule I to Letter Agreement No. 1 engaged by the Lessee to perform
engine repair and overhaul work on the Engines; additional airframe
and/or engine maintenance performers may be added to the list in
Schedule I to Letter Agreement No.1 subject only to the Lessor receiving
notification of the addition 30 days prior to first use of the new
maintenance performer and such maintenance performer being appropriately
licensed or approved by the FAA. No Lessor approval of maintenance
performers or engine overhaul shops shall be required for overhaul of
components, rotables or Parts other than the Landing Gear and APU.
"APPROVED MAINTENANCE PROGRAMME" means the Aviation Authority approved
maintenance programme for the Aircraft approved by the Lessor prior to
the Delivery Date, as subsequently amended from time to time by the
Lessee as approved by the FAA, encompassing scheduled maintenance
(including block maintenance), condition monitored maintenance and
on-condition maintenance of Airframe, Engines and Parts of the Aircraft
including, but not limited to, servicing, testing, preventive
maintenance, repairs, structural inspections, system checks, overhauls,
approved modifications, service bulletins, engineering orders,
Airworthiness Directives, Corrosion Control, inspections and treatments,
in each case as described in the MPD;
"APU" means the auxiliary power unit installed on the Aircraft on the
Delivery Date or any substitute or replacement auxiliary power unit
installed in accordance with this Agreement title to which has been
transferred to the Head Lessor;
"ASSIGNMENT" means the assignment of the Lessor's rights, title and
interest in and under this Agreement granted or, as the context may
require, to be granted by the Lessor in favor of the Head Lessor or the
Lenders;
"AVIATION AUTHORITY" means the FAA and/or any Government Entities which,
under the laws of the State of Registration or, to the extent
applicable, any other jurisdiction in which the Aircraft is operated,
have control over civil aviation or the registration, airworthiness or
operation of aircraft;
"BANKING DAY" means each day (other than a Saturday or a Sunday) on
which banks are open for business in London, the State of Colorado and,
(if payment is required to be made on such day) in New York City;
"BENEFICIARY" means ORIX Aviation Systems Limited, a company
incorporated under the laws of Ireland and having its registered office
at 2nd Floor, IFSC House, International Financial Services Centre,
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇;
"CERTIFICATED AIR CARRIER" means any Person (except the United States
Government) domiciled in the United States of America and holding a
Certificate of Convenience and Necessity issued under Section 41101 of
Title 49 of the United States Code by the Department of Transportation
or any predecessor or successor agency thereto, or, in the event such
Certificates shall no longer be issued, any Person (except the United
States Government) domiciled in the United States of America and legally
engaged in the business of transporting for hire passengers or cargo by
air predominately to, from or between points within the United States of
America, and, in either event, operating commercial jet aircraft, which
also is certificated so as to fall within the purview of Section 1110 of
Title 11 of the United States Code or any analogous statute;
"CITIZEN OF THE UNITED STATES" shall have the meaning given in Section
40102(a)(15) of Title 49 of the United States Code;
"COMPULSORY ACQUISITION" means compulsory acquisition, requisition,
appropriation, expropriation, deprivation or confiscation of title or
ownership of the Aircraft for any reason by any Government Entity of the
State of Registration or by any other Government Entity or other
competent authority, whether de jure or de facto, but shall exclude
requisition for use or hire not involving requisition of title or
ownership;
"COURTS" means the courts of the State of New York located in New York
City and any United States District Court located in New York City;
"CYCLE" means one take-off and landing of the Aircraft or, in respect of
any Engine or Part temporarily installed on another aircraft, that other
aircraft and for this purpose "take-off and landing" shall include
"touch and go" take-offs and landings;
"DELIVERY" means the time at which the Aircraft is delivered to and
accepted by the Lessee pursuant to the terms of this Agreement;
"DELIVERY DATE" means the date on which Delivery shall occur, which date
shall be the date of the Acceptance Certificate delivered to the Lessor
by the Lessee pursuant to Clause 5 of this Agreement;
"DELIVERY LOCATION" means the Manufacturer's facility in Seattle,
Washington, USA or such other location mutually agreed to by Lessor and
Lessee;
"DOLLARS" and "$" mean the lawful currency of the United States of
America and in respect of all payments to be made under this Agreement
in Dollars, mean funds which are for same day settlement in the New York
Clearing House Interbank Payments System (or such other US dollar funds
as may at the relevant time be customary for the settlement of
international banking transactions denominated in United States
dollars);
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment, security interest, title
retention or other encumbrance of any kind securing, or any right
conferring a priority of payment in respect of, any obligation of any
person;
"ENGINE" means either of the CFM International CFM56-3C-1 engines
specified in the Acceptance Certificate as being installed on the
Airframe at Delivery, or any other similar engine substituted therefor
in accordance with Clauses 13.1(e) and 13.(g) from time to time
installed on the Airframe thereafter title to which has been transferred
to the Head Lessor pursuant to this Agreement, or any Removed Engine
which remains the property of the Head Lessor pursuant to this
Agreement, together with all Parts from time to time belonging to,
installed in or appurtenant to any such engine;
"ENGINE LIFE LIMITED PARTS" means those Parts, defined by the engine
manufacturer in the CFM International Engine Shop Manual, Revision 43,
or as the same may be further revised from time to time, or through
airworthiness directive action, requiring retirement and replacement on
a mandatory basis prior to or upon the expiration of the engine
manufacturer's stated life, such life being expressed in terms of
Cycles, Flight Hours, landings or calendar time;
"ENGINE MANUFACTURER" means CFM International, Inc.
"ENGINE SHOP VISIT" means the work carried out on an Engine by an
Approved Maintenance Performer of refurbishment, restoration or overhaul
following normal in-service deterioration of the Engine to restore
performance to the workscope standard developed by Lessee and agreed by
Lessor, Lessor's agreement not to be unreasonably withheld, at each shop
visit event, and based upon the CFM 56-3 Workscope Planning Guide (WPG3)
and Engine Shop Manual involving separation of pairs of major mating
engine flanges other than (1) work for the purposes of transportation;
and/or (2)(a) inspections at which no maintenance and/or repair is
required and/or (b) repairs of foreign object damage or operational
mishandling (being an operation or event on the ground or in the air
whereby, due to negligence, the tolerances, limits and/or recommended
maximums and minimums and/or other operation matters as specified in the
Aircraft flight, operational, maintenance and other relevant manuals and
documents are not complied with by any person) of the Engine save to the
extent such repairs and/or associated refurbishment carried out during
the shop visit result in refurbishment or "betterment" of the Engine to
the standard specified for an Engine Shop Visit (as herein defined);
and/or (c) maintenance and repair of spare engines and associated engine
build-up units; and/or (d) the removal, installation, maintenance and
repair of QEC (Quick Engine Change) kits; and/or (e) repair or
modification of external engine line repairable units;
"EXPECTED DELIVERY DATE" means May 12, 1997 or such other date as the
Aircraft is scheduled to be delivered by the Manufacturer pursuant to
the Purchase Agreement, as advised by the Manufacturer;
"FAA" means the Federal Aviation Administration of the United States of
America, the Administrator thereof and any agency or instrumentality of
the United States government succeeding to their functions;
"FAR" means the Federal Aviation Regulations set forth in Title 14 of
the United States Code of Federal Regulations, as amended and modified
from time to time;
"FEDERAL AVIATION ACT" means the United States Federal Aviation Act of
1958, as amended and as recodified in Subtitle VII of Title 49 of the
United States Code, or any similar legislation of the United States of
America enacted in substitution or replacement thereof;
"FINANCING STATEMENTS" means Uniform Commercial Code Financing
Statements in respect of the Aircraft and Engines leased hereunder,
prepared in a form acceptable for filing with the applicable Government
Entities in the State in which the chief executive office of the Lessee
is located and, in the case of a sublessee, such other jurisdictions as
the Lessor shall reasonably require;
"FLIGHT HOUR" shall mean each hour or part thereof of operation of the
Aircraft elapsing from the moment at which the wheels of the Aircraft
(or other aircraft in the case of temporarily installed Parts or
Engines) leave the ground on the take-off of such aircraft until the
wheels of such aircraft touch the ground on the landing of such aircraft
following such take-off; for the purpose of all calculations under this
Agreement measured in Flight Hours, such hours, including fractions
thereof measured to one decimal place, shall be accumulated throughout
each Accrual Period; Lessee will record sector flight times in hours and
minutes in the aircraft flight logs and historical records unless the
FAA specifically requires otherwise;
"FUNDING AGREEMENT" means the agreement or agreements, if any, entered
or to be entered into between the Head Lessor and the Lenders whereby
the Lenders will agree, on the terms and conditions therein contained,
to make finance available for the purchase or continued ownership of the
Aircraft;
"GOVERNING LAW" means the laws of the State of New York;
"GOVERNMENT ENTITY" means and includes (whether having a distinct legal
personality or not) any national or local government authority, board,
commission, department, division, organ, instrumentality, court or
agency and any association, organization or institution of which any of
the foregoing is a member or to whose jurisdiction any of the foregoing
is subject or in whose activities any of the foregoing is a participant;
"HEAD LEASE" means the Aircraft Lease Agreement entered into or to be
entered into between the Head Lessor, as lessor, and the Beneficiary, as
lessee, relating to the Aircraft;
"HEAD LESSOR" means, if applicable, such company or entity that the
Lessor may notify to the Lessee from time to time and, in the absence of
such notification, references to Head Lessor shall be deemed to be
references to the Lessor;
"INDEBTEDNESS" means any obligation for the payment or repayment of
money, whether as principal or as surety, and whether present or future,
actual or contingent;
"INDEMNITEES" means the Head Lessor, the Beneficiary, the Lessor
individually and as trustee and the Lenders or any of them and, in each
case, their respective shareholders, affiliates, directors, officers,
servants, agents and employees;
"INSURANCES" means any and all contracts or policies of insurance and
reinsurance required to be effected and maintained under this Agreement;
"LANDING GEAR" means the landing gear assembly of the Aircraft;
"LEASE PERIOD" means, save as otherwise provided in this Agreement, the
Lease Term and any period during which the Lessee shall have the
possession of the Aircraft pursuant to this Agreement and/or shall have
failed to redeliver the Aircraft to the Lessor in the condition required
by this Agreement following expiry of the Lease Term and, for the
avoidance of doubt, shall include (i) any period during which the
Aircraft is requisitioned for hire by any governmental or other
competent authority; and (ii) any period prior to the payment of the
Agreed Value in accordance with Clauses 17.3(a) and Clause 17.4
following a Total Loss which occurs prior to the redelivery of the
Aircraft to the Lessor;
"LEASE TERM" means the period commencing on the Delivery Date and ending
on 31 March 2007 except as otherwise provided in this Agreement;
"LENDERS" means the banks, financial institutions and other parties to
the Funding Agreement other than the Head Lessor and the Lessor;
"LENDERS DOCUMENTS" means the Funding Agreement, the Assignment and the
Mortgage and any other Security Documents or similar documents referred
to in the Funding Agreement;
"LESSEE'S COUNTRY" means the United States of America or, where the
context so admits, the State of Colorado;
"LESSEE DOCUMENTS" means this Agreement, Letter Agreement No. 1, the
Purchase Assignment and other agreements to which the Lessee is a party
to be issued pursuant to or in connection with any of the foregoing;
"LESSEE'S INTEREST" means that portion of the Requisition Compensation
equal to the excess, if any, of (i) an amount equal to the present
value, discounted at a rate equal to the rate in effect for United
States Treasury obligations with a term most nearly equal to the
remaining Lease Term, of fair market rentals, determined by independent
appraisal, for the Aircraft for the balance of the Lease Term from the
date of the Compulsory Requisition minus (ii) the present value,
discounted at the same U.S. Treasury rate, of the future rent payments
due under this Agreement for the balance of the Lease Term from the date
of the Compulsory Requisition;
"LESSOR'S ENCUMBRANCE" means:
(a) any Encumbrance arising out of the Lender Documents and
any other Encumbrance whatsoever from time to time created
by or through any Indemnitee in connection with any such
Indemnitee's financing, transfer or purchase of the
Aircraft;
(b) any other Encumbrance in respect of the Aircraft which
results from acts of or claims against any of the
Indemnitees not related to the transactions contemplated
by or permitted under this Agreement or which arise as a
result of any obligation of any Indemnitee under the
Lessee Documents or Lender Documents;
(c) Encumbrances in respect of the Aircraft for Taxes imposed
against any Indemnitee not indemnified by the Lessee
pursuant to this Agreement; and
(d) any Encumbrance arising out of a voluntary transfer by any
Indemnitee of an interest in the Aircraft unless such
transfer is made pursuant to an exercise of remedies after
the occurrence and during the continuance of a Termination
Event;
"LETTER OF QUIET ENJOYMENT" means a letter of quiet enjoyment in the
form attached hereto as Schedule 6;
"LETTER AGREEMENT NO. 1" means that certain Letter Agreement No. 1
between the Lessor and the Lessee, relating to the Aircraft, and dated
as of the date of this Agreement;
"LIBOR" means the rate which is either
(a) the rate quoted by Citibank on the display designated as page
"LIBO" on the Reuters Monitor Rates Service; or
(b) if the required rate is not displayed and ascertainable in
accordance with paragraph (a) above, the rate quoted by Bank of
America in the London inter-bank market;
for acquiring deposits in Dollars for a period of six (6) months at or
about 11.00 a.m. (London time) on the fifth (5th) Banking Day before the
date as to which, or the commencement of any period for which LIBOR is
required to be calculated;
"MAJOR CHECK" means any of the heavy maintenance visits for which
Airframe Maintenance Accruals have been accrued which comprise the
Structural Inspection tasks as defined in Section 7 of the MPD, Hard
Time Components requiring overhaul at 22,400 Flight Hours (as the same
may be revised from time to time in the MPD in respect of any of such
items) as defined in Section 6 of the MPD and/or Zonal Inspection and
Related Corrosion Prevention and Protection Program requirements as
defined in Section 10 of the MPD;
"MANUALS AND TECHNICAL RECORDS" means all such records, logs, manuals,
technical data, serviceable parts tags (including JAA Form 1 and/or FAA
8130 Tags) and other materials and documents relating to the Aircraft
and required to be kept for Lessee to operate the Aircraft lawfully and
in compliance with any regulation of the Aviation Authority, including,
but not limited to, those listed in Part 1 of the appendix to the
Acceptance Certificate and the Technical Publications;
"MANUFACTURER" means The Boeing Company of Seattle, Washington, USA;
"MINOR DEFECTS" shall have the meaning given in Clause 19.4(a) hereof;
"MONTH" means a period beginning in one (1) calendar month and ending in
the next following calendar month on the day immediately preceding the
day numerically corresponding to the day of the calendar month on which
it started; provided that (i) if the period started on the last Banking
Day in a calendar month or if there is no such numerically corresponding
day, it shall end on the last Banking Day in such next following
calendar month and (ii) if such numerically corresponding day is not a
Banking Day, the period shall end on the next following Banking Day in
the same calendar month but if there is no such Banking Day it shall end
on the immediately succeeding Banking Day and "months" and "monthly"
shall be construed accordingly;
"MORTGAGE" means an aircraft mortgage relating to the Aircraft in favor
of the Lenders or a trustee on behalf of the Lenders or such other
security over the Aircraft as may be created by the Beneficiary or the
Head Lessor in connection with the Beneficiary's or Head Lessor's
financing of the Aircraft from time to time;
"MPD" means the Manufacturer's maintenance planning data with reference
number D6-38278, revision 4 dated July 1996 relating to Boeing 737-300,
-400 and -500 aircraft, as the same may be revised from time to time by
the Manufacturer;
"PART" means all appliances, parts, accessories, auxiliary power units,
instruments, navigational and communications equipment, furnishings,
modules, components and other items of equipment (other than complete
Engines or engines);
"PAYMENT DATE" means, subject to Clause 8.2, the Delivery Date and the
dates falling at successive one (1) monthly intervals thereafter
throughout the Lease Period;
"PERMITTED LIEN" means in respect of the Aircraft or any Engine:
(a) the Mortgage and any other Lessor Encumbrance;
(b) any Encumbrance for Taxes either not yet assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings (and for the payment of which
adequate reserves have been set aside) so long as any such
proceedings or the continued existence of such Encumbrance do not
involve the likelihood of the sale, forfeiture or loss of, or of
any interest in, the Aircraft or any Engine;
(c) airport hangar keepers', mechanics', material men's, carriers',
employees' or other similar Encumbrances arising in the ordinary
course of business by statute or by operation of law in respect
of obligations which are not overdue or which are being contested
in good faith by appropriate proceedings (and for the payment of
which adequate reserves have been set aside) so long as any such
proceedings or the continued existence of such Encumbrance do not
involve the likelihood of the sale, forfeiture or loss of, or of
any interest in, the Aircraft or any Engine;
"PERSON" means and includes any individual person, corporation,
partnership, firm, joint stock company, joint venture, trust, estate,
unincorporated organization, association, Government Entity or
organization or association of which any of the above is a member or a
participant;
"PURCHASE AGREEMENT" means the" Purchase Agreement" as defined in the
Purchase Assignment;
"PURCHASE ASSIGNMENT" means the Purchase Agreement Assignment of even
date herewith among the Lessor, Lessee and Manufacturer in respect of
the Lessee's right, title and interest in and to the Purchase Agreement
to the extent relating to the Aircraft (but excluding certain side
letters thereto to the extent specified in such assignment) and the
Manufacturer's Consent and Agreement thereto;
"REDELIVERY LOCATION" means such airport in the United Kingdom as may be
specified by the Lessor or such other location as the Lessor may agree;
"RELEVANT EVENT" means any Termination Event or any event which with the
giving of notice or lapse of time or the satisfaction of any other
condition (or any combination thereof) would constitute a Termination
Event;
"RELEVANT RATE OF INTEREST" means:
(a) for amounts due but unpaid for a period not exceeding ten (10)
days, two per cent (2%) per annum above the United States Dollar
Prime Rate offered by Citibank, N.A. (or if not available, the
United States Dollar Prime Rate offered by Bank of America) on
the first date in the period in respect of which the Relevant
Rate of Interest falls to be determined; or
(b) for amounts due but unpaid for a period exceeding ten (10) days,
four per cent (4%) per annum above the United States Dollar Prime
Rate offered by Citibank, N.A. (or if not available, the United
States Dollar Prime Rate offered by Bank of America) on the first
date in the period in respect of which the Relevant Rate of
Interest falls to be determined;
"REMOVED ENGINE" means an Engine which is not installed on the Airframe.
"REQUISITION COMPENSATION" means all moneys or other compensation from
time to time payable in respect of the Compulsory Acquisition of the
Aircraft;
"SECURITY DOCUMENTS" means the Assignment and the Mortgage and any other
document or agreement entered or to be entered into between any of the
Lessor, the Beneficiary, the Head Lessor and the Lenders and all
notices, consents, certificates and other documents and agreements to be
issued pursuant to the foregoing;
"SERVICEABLE" means that a system operates in full compliance with the
Aircraft Maintenance Manual specifications and limitations, disallowing
consideration for any Minimum Equipment List or other form of
dispensation. In the case of an individual component part or assembly
serviceable means the item is in such a state of repair that it is fit
for its intended use and purpose and complies with the applicable rules
and regulations of the FAA and, if not specified in the Aircraft
Maintenance Manual, otherwise conforms to the specifications in the
relevant Manufacturer's component maintenance manual;
"STATE OF REGISTRATION" means the United States of America or such other
jurisdiction in which the Aircraft is from time to time registered with
the consent of the Lessor and the Lenders;
"SUBSIDIARY" of a person means any company or entity directly or
indirectly controlled by such person for which purpose "CONTROL" means
either ownership of more than fifty per cent. (50%) of the voting share
capital (or equivalent right of ownership) of such company or entity, or
power to direct its policies and management whether by contract or
otherwise;
"TAXES" includes all present and future taxes, levies, imposts, duties,
fees or charges of whatever nature, including, without limitation, any
value added or similar tax at the rate applicable for the time being,
imposed by any national or local taxing authority or any other agency or
government, together with any interest thereon and penalties imposed in
respect thereof and "TAXATION" shall be construed accordingly;
"TECHNICAL PUBLICATIONS" means the technical publications relating to
the Aircraft listed in Part 2 of the appendix to the Acceptance
Certificate;
"TERMINATION EVENT" shall have the meaning given in Clause 20;
"THRESHOLD AMOUNT" means, when used in Clauses 6.3 and 11.2, $[ ]*, and,
when used in Schedule 3, $[ ]*;
"TOTAL LOSS" means any of the following events:
(a) the actual or constructive total loss of the Aircraft (including
any damage to the Aircraft which results in an insurance
settlement on the basis of a total loss, or requisition for use
or hire of the Aircraft which results in an insurance settlement
on the basis of a total loss);
(b) the Aircraft being destroyed, damaged beyond repair, or
permanently rendered unfit for normal use for any reason
whatsoever;
(c) the Compulsory Acquisition of the Aircraft; or
(d) the hijacking, theft, condemnation, confiscation, capture,
detention, seizure or requisition for use or hire of the
Aircraft, other than where the same amounts to Compulsory
Acquisition of the Aircraft, which deprives the operator of the
use of the Aircraft for more than ninety (90) days, but excluding
requisition for use or hire by the government of the State of
Registration;
"TRUST AGREEMENT" means the Master Trust Agreement dated as of 22 June
1992 between the Beneficiary, as beneficiary, and the Lessor, as amended
and supplemented from time to time.
1.2 Clause headings and the Index are inserted for convenience of reference
only and shall be ignored in the interpretation of this Agreement.
1.3 In this Agreement, unless the context otherwise requires:
(a) references to Clauses and Schedules are to be construed as
references to the Clauses of, and Schedules to, this Agreement
and references to this Agreement include its Schedules;
(b) references to (or to any specified provision of) this Agreement
or any other document shall be construed as references to this
Agreement, that provision or that document as in force for the
time being and as amended in accordance with the terms hereof or
thereof, or as the case may be, with the agreement of the
relevant parties and (where such consent is, by the terms of this
Agreement or the relevant document required to be obtained as a
condition to such amendment being permitted) the prior written
consent of the Lessor;
(c) words importing the plural shall include the singular and vice
versa;
(d) references to a person shall be construed as including, without
limitation, references to an individual, firm, company,
corporation, unincorporated body of persons and any Government
Entity; and
(e) references to the Beneficiary, the Lessor or the Lessee shall be
construed as including any successor in title to the Beneficiary,
the Lessor or the Lessee respectively and references to the
Beneficiary, the Lessor or the Lenders shall be construed as
including any permitted assignee or transferee of the
Beneficiary, the Lessor or the Lenders respectively.
2. REPRESENTATIONS AND WARRANTIES
2.1 The Lessee acknowledges that the Lessor has entered into this Agreement
in full reliance on the representations and warranties in this Clause 2,
and the Lessee represents and warrants to the Lessor that:
(a) the Lessee is duly incorporated and validly existing in good
standing under the laws of the State of Delaware as a corporation
and has power to carry on its business as it is now being
conducted and to own its property and other assets;
(b) the Lessee has the corporate power to execute, deliver and
perform its obligations under the Lessee Documents and all
necessary corporate, shareholder and other action has been taken
to authorize the execution, delivery and performance by Lessee of
the same and the transactions contemplated by the Lessee
Documents;
(c) the Lessee Documents have been duly entered into and delivered by
the Lessee and constitute or will, upon execution thereof,
constitute valid and legally binding obligations of the Lessee
enforceable in accordance with their respective terms, except as
such enforcement may be affected by bankruptcy, insolvency,
reorganization or other laws of general application affecting
creditors or Lessor's rights and except for general principles of
equity;
(d) the execution and delivery of, the performance of its obligations
under, and compliance with the provisions of, the Lessee
Documents by the Lessee will not (i) contravene any existing
applicable law, statute, rule or regulation, or, to the extent
known to Lessee, any judgment, decree or permit to which the
Lessee is subject, (ii) conflict with, or result in any breach of
any of the terms of, or constitute a default under, any agreement
or other instrument to which the Lessee is a party or is subject
or by which it or any of its property is bound, or (iii)
contravene or conflict with any provision of the Lessee's
constituent documents;
(e) no litigation, arbitration or administrative proceeding is taking
place, pending or, to the best knowledge of the officers of the
Lessee, threatened against the Lessee which may reasonably be
expected to have a material adverse effect on the business,
assets or financial condition of the Lessee or its ability to
perform its obligations under the Lessee Documents;
(f) the consolidated audited financial statements of the Lessee and
its Subsidiaries in respect of the financial year ended on
December 31, 1995 as delivered to the Lessor, and the quarterly
financial statements of the type referred to in Clause 11.1(c)
and previously delivered by Lessee to Lessor have been prepared
in accordance with generally accepted accounting principles and
practices in the United States which have been consistently
applied and present fairly in accordance with such principles the
consolidated financial position of the Lessee and its
Subsidiaries as at such date and the results of the operations of
the Lessee and the consolidated results of the operations of the
Lessee and its Subsidiaries respectively for the financial year
ended on such date, and the unaudited consolidated financial
statements in respect of each quarter delivered to the Lessor
have been prepared on the same basis as the annual statements
except as to absence of footnotes and subject to year-end
adjustments;
(g) except for registration of the Aircraft and the filing of this
Agreement with the FAA and the filing of the Financing
Statements, it is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of the Lessee
Documents that any of them or any other instrument be notarized,
filed, recorded, registered or enrolled in any court, public
office or elsewhere in Lessee's Country;
(h) the choice of the Governing Law to govern this Agreement and the
submission by the Lessee to the jurisdiction of the Courts are
valid and binding and not subject to unilateral revocation by
Lessee;
(i) the Lessee is subject to civil and commercial law with respect to
its obligations under the Lessee Documents and the transactions
contemplated thereby constitute private and commercial acts done
for private and commercial purposes and neither the Lessee nor
any of its assets is entitled to any immunity on the grounds of
sovereignty from any legal actions or proceeding (which shall
include, without limitation, suit, attachment prior to judgment,
execution or other enforcement);
(j) the Lessee's chief executive office (as that term is defined in
Article 9 of the Uniform Commercial Code as in effect in the
State of Colorado) is located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇;
(k) the Lessee is a Certificated Air Carrier and the Lessor, as the
lessor of the Aircraft to the Lessee, is entitled to the benefit
of Section 1110 of Title 11 of the United States Code with
respect to the Aircraft;
(l) the Lessee is a Citizen of the United States; and
(m) the Purchase Agreement is in full force and effect, neither the
Manufacturer, to Lessee's knowledge and belief, nor Lessee is in
breach of any of its obligations thereunder and Lessor has been
given a full and complete copy thereof.
2.2 The Lessee further represents and warrants to the Lessor that:
(a) there has been no material adverse change in the consolidated
financial position of the Lessee and its Subsidiaries from that
set forth in the unaudited consolidated financial statements
delivered to the Lessor and Beneficiary for the quarter ending
December 31, 1996;
(b) except for registration of the Aircraft and the filing of this
Agreement with the FAA and the filing of the Financing
Statements, every consent, authorization, license or approval of,
or registration with, or declaration to, governmental or public
bodies or authorities or courts required by the Lessee to
authorize, or required by the Lessee in connection with, the
execution, delivery, validity or enforceability of the Lessee
Documents or the performance by the Lessee of its obligations
under the Lessee Documents has been obtained or made and is in
full force and effect, and there has been no default in the
observance of the conditions or restrictions (if any) imposed in,
or in connection with, any of the same;
(c) the obligations of the Lessee under the Lessee Documents are
direct and general obligations of the Lessee and rank at least
pari passu with all other present and future unsecured and
unsubordinated obligations (including contingent obligations) of
the Lessee with the exception of such obligations as are
mandatorily preferred by law and not by contract;
(d) the Lessee is not (nor would with the giving of notice or lapse
of time or both be) in breach of or in default under any
agreement relating to Indebtedness to which it is a party or by
which it may be bound;
(e) the information, exhibits and reports furnished by the Lessee to
the Lessor in connection with the matters contemplated by this
Agreement or with the negotiation and preparation of this
Agreement are true and accurate in all material respects;
(f) no Relevant Event has occurred and is continuing; and
(g) as of the date of this Agreement, the Lessee does not hold any
contract or other obligation to operate the Aircraft to any of
the countries designated under the United States Foreign Asset
Control Regulations (31 C.F.R. Parts 500 - 599), including, as of
the date of this ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and
the Federal Republic of Yugoslavia (Serbia and Montenegro).
2.3 The representations and warranties in Clauses 2.1 and 2.2 shall be
deemed to be repeated by the Lessee on the Advance Payment Date and on
the Delivery Date as if made with reference to the facts and
circumstances then existing.
2.4 The rights and remedies of the Lessor in relation to any
misrepresentation or breach of warranty on the part of the Lessee shall
not be prejudiced by any investigation by or on behalf of the Lessor.
2.5 The Lessor acknowledges that the Lessee has entered into this Agreement
in full reliance on the representations and warranties in this Clause
2.5, and the Lessor represents and warrants to the Lessee that:
(a) the Lessor is a banking corporation duly incorporated and validly
existing under the laws of Delaware and has the power to carry on
its business as it is now being conducted and to own its property
and other assets;
(b) the Lessor has the power and authority to execute, deliver and
perform its obligations under the Lessee Documents to which it is
a party and all necessary corporate, shareholder and other action
has been taken to authorize the execution, delivery and
performance of the same and the transactions contemplated by the
Lessee Documents to which it is a party;
(c) the Lessee Documents to which it is a party have been duly
entered into and delivered by the Lessor and constitute or will,
upon execution thereof, constitute valid and legally binding
obligations of the Lessor enforceable in accordance with their
respective terms (subject to applicable bankruptcy, insolvency or
other laws affecting creditor's rights generally and to general
principles of equity from time to time in effect);
(d) the execution and delivery of, the performance of its obligations
under, and compliance with the provisions of, the Lessee
Documents to which it is a party by the Lessor will not (i)
contravene any existing applicable law, statute, rule or
regulation of the State of Delaware or any federal law, statute
or regulation of the United States of America governing the
banking or trust power of the Lessor, or any judgment, decree or
permit to which the Lessor is subject; (ii) conflict with, or
result in any breach of any of the terms of, or constitute a
default under, any agreement or other instrument to which the
Lessor is a party or is subject or by which it or any of its
property is bound; or (iii) contravene or conflict with any
provision of the Lessor's constituent documents;
(e) no litigation, arbitration or administrative proceeding is taking
place, pending or, to the knowledge of the officers of the
Lessor, threatened against the Lessor which could have a material
adverse effect on the Lessor's ability to perform its obligations
under the Lessee Documents to which it is a party;
(f) the Lessor is subject to civil and commercial law with respect to
its obligations under the Lessee Documents to which it is a party
and the transactions contemplated thereby constitute private and
commercial acts done for private and commercial purposes and
neither the Lessor nor any of its assets is entitled to any
immunity on the grounds of sovereignty or otherwise from any
legal actions or proceeding (which shall include, without
limitation, suit, attachment prior to judgment, execution or
other enforcement);
(g) the Lessor is a citizen of the United States as defined in
Section 40102 of Title 49 of the United States Code;
(h) every consent, authorization, license or approval of, or
registration with, or declaration to, governmental or public
bodies or authorities or courts required by the Lessor to
authorize, or required by the Lessor in connection with, the
execution, delivery, validity or enforceability of the Lessee
Documents has been obtained or made and is in full force and
effect, and there has been no default in the observance of the
conditions or restrictions (if any) imposed in, or in connection
with, any of the same;
(i) the Head Lessor shall hold at Delivery whatever title to the
Aircraft as shall have been conveyed to it by the Manufacturer
and shall hold whatever title to any replacement Engine or Part
as shall have been conveyed to Head Lessor by or on behalf of the
Lessee during the Lease Term pursuant to the provisions of this
Agreement; and
(j) the choice of the Governing Law to govern this Agreement and the
submission by the Lessor to the jurisdiction of the Courts are
valid and binding and not subject to unilateral revocation by
Lessor.
2.6 The rights and remedies of the Lessee in relation to any
misrepresentation or breach of warranty on the part of the Lessor shall
not be prejudiced by any investigation by or on behalf of the Lessee.
3. TERM OF LEASE
3.1 The Lessor shall lease and the Lessee shall take on lease the Aircraft,
subject to the terms and conditions of this Agreement, for the Lease
Term.
4. CONDITIONS
4.1 The obligation of the Lessor to lease the Aircraft to the Lessee under
this Agreement is subject to the condition that, not later than three
(3) Banking Days prior to the Expected Delivery Date, the Lessor shall
have received the documents and evidence specified in Part 1 of Schedule
1 in form and substance reasonably satisfactory to the Lessor.
4.2 The obligation of the Lessor to lease the Aircraft to the Lessee under
this Agreement is subject to the further condition that, prior to
Delivery, the Lessor shall have received the documents and evidence
specified in Part 2 of Schedule 1 in form and substance reasonably
satisfactory to the Lessor.
4.3 The obligation of the Lessor to lease the Aircraft to the Lessee under
this Agreement is subject to the further conditions that:
(a) the Manufacturer shall have delivered the Aircraft in accordance
with the Purchase Agreement and Purchase Assignment;
(b) all necessary governmental and regulatory consents and approvals
required to permit the Lessor to lease the Aircraft to the Lessee
and the Lessor to register the Aircraft in the State of
Registration shall have been received by the Lessor and/or the
Lessee as appropriate;
(c) the representations and warranties set out in Clauses 2.1 and 2.2
shall be true and correct as if each were made with respect to
the facts and circumstances existing immediately prior to the
time when Delivery is to take place;
(d) no Relevant Event shall have occurred and be continuing or would
arise by reason of Delivery taking place;
(e) the Lessee shall have executed and delivered the Lessee Documents;
and
(f) the conditions precedent to the Lessor's obligations in the
Purchase Assignment in Sections 7(a) and 7(c) thereof shall have
been satisfied.
4.4 The obligation of the Lessor to execute and deliver the Lessee Documents
and to make the advance payments for the Aircraft to the Manufacturer
pursuant to the Purchase Assignment on the Advance Payment Date is
subject to the following conditions:
(a) the Lessor shall have received the documents and evidence
specified in Part 3 of Schedule 1 in form and substance
reasonably satisfactory to the Lessor;
(b) the representations and warranties set out in Clauses 2.1 and 2.2
shall be true and correct as if each were made with respect to
the facts and circumstances existing immediately prior to the
time when Lessor makes such advance payments;
(c) no Relevant Event shall have occurred and be continuing or would
arise by reason of Lessor executing and delivering the Lessee
Documents or making such advance payments; and
(d) the Lessee shall have executed and delivered the Lessee Documents.
4.5 The conditions specified in Clauses 4.1, 4.2, 4.3 and 4.4 are inserted
for the sole benefit of the Lessor and may be waived in whole or in part
and with or without conditions by the Lessor. If any of those conditions
are not satisfied on the Delivery Date and the Lessor (in its absolute
discretion) nonetheless agrees to make the advance payments or deliver
the Aircraft to the Lessee, the Lessee will ensure that those
outstanding conditions are fulfilled within such period as the Lessor
may reasonably require.
4.6 The obligation of the Lessee to lease the Aircraft from the Lessor under
this Agreement is subject to the conditions that:
(a) the Manufacturer shall have delivered the Aircraft in accordance
with the Purchase Agreement and Purchase Assignment;
(b) the Lessor shall have registered the Aircraft in the State of
Registration;
(c) the representations and warranties set out in Clause 2.5 shall be
true and correct as if each were made with respect to the facts
and circumstances existing immediately prior to the time when
Delivery is to take place; and
(d) the Lessor shall have executed and delivered the Lessee
Documents.
4.7 The conditions specified in Clause 4.6 are inserted for the sole benefit
of the Lessee and may be waived in whole or in part and with or without
conditions by the Lessee. If any of those conditions are not satisfied
on the Delivery Date and the Lessee (in its absolute discretion)
nonetheless agrees to accept delivery of the Aircraft from the Lessor,
the Lessor will ensure that those outstanding conditions are fulfilled
within such period as the Lessee may reasonably require.
5. DELIVERY AND ACCEPTANCE
5.1 Subject to Clauses 4 and 5.8 hereof, the Aircraft shall be delivered to
and accepted by the Lessee at the Delivery Location when the
Manufacturer delivers the Aircraft in compliance with the Purchase
Agreement. The Lessee and Lessor shall jointly determine when the
Aircraft has been delivered in accordance with the Purchase Agreement,
as further set out in the Purchase Assignment. If the Lessee and Lessor
jointly determine that the Aircraft does not meet the conditions
required at delivery under the Purchase Agreement or there is a
disagreement between the Lessee and Lessor as to whether such conditions
have been met, Clauses 5.7 through 5.8 (as applicable) shall govern.
Upon such delivery and acceptance, the Aircraft shall become subject to
and be governed by this Agreement, the Lease Period shall commence and
the Lessee shall thereupon sign and deliver to the Lessor the Acceptance
Certificate. After Delivery, the Aircraft and every part thereof will
be, in every respect, at the sole risk of the Lessee who will bear all
risk of loss, theft, damage or destruction to the Aircraft from any
cause whatsoever. Prior to Delivery, the risk of loss, theft, damage or
destruction to the Aircraft shall be borne by the Manufacturer pursuant
to the Purchase Agreement.
5.2 The Lessor shall not be responsible for any loss or expense, or any loss
of profit, arising from any delay in the delivery of, or failure to
deliver, the Aircraft to the Lessee under this Agreement unless such
delay or failure arises as a direct consequence of the default or
failure of the Lessor to perform its obligations hereunder or to pay the
advance payments and aircraft price for the Aircraft to the Manufacturer
when it is obligated to do so under the Purchase Assignment and (to the
extent provided in the Purchase Assignment) the Purchase Agreement.
5.3 (a) The Lessee shall indemnify and hold harmless the Indemnitees from
and against any and all liabilities, damages, losses (including
costs and expenses incidental thereto) arising by reason of death
or injury to any observer or any employee of the Lessee, arising
out of, or in any way connected with any demonstration flight and
inspection of the Aircraft conducted pursuant to the Purchase
Agreement.
(b) The Lessor shall indemnify and hold harmless the Lessee and its
shareholders, affiliates, directors, officers, agents and
employees from and against any and all liabilities, damages,
losses (including costs and expenses incidental thereto) arising
by reason of death or injury to any observer or any employee of
the Lessor or any Indemnitee, arising out of, or in any way
connected with any demonstration flight and inspection of the
Aircraft conducted pursuant to the Purchase Agreement.
5.4 (a) If by reason of a default by the Manufacturer (including, but not
limited to, failure to tender the Aircraft for delivery in the
condition required by the Purchase Agreement), the Aircraft shall
not have been delivered to and accepted by the Lessee in
accordance with Clause 5.1 by August 31, 1997, (i) the Lessor's
obligation contained in this Agreement to lease the Aircraft to
the Lessee and the Lessee's obligation to lease the Aircraft from
the Lessor shall expire and (ii) not later than fifteen (15) days
after August 31, 1997, Lessee shall repay Lessor all advance
payments theretofore made by Lessor for the Aircraft plus
interest thereon at an interest rate of LIBOR plus one percent
(1.0%) (net of any interest paid to Lessor by the Manufacturer)
from the date of payment through the day prior to the date of
repayment by Lessee and, upon such repayment, the Purchase
Assignment shall terminate. Concurrent with receipt of the
advance payments and interest as provided in the preceding
sentence, Lessor shall deliver written notice to the Manufacturer
and Lessee pursuant to the terms of the Purchase Assignment that
such Purchase Assignment has terminated. If Lessee fails to pay
such repayments fully when due, the Purchase Assignment shall not
terminate and, notwithstanding anything to the contrary in this
Clause 5, Lessor will be entitled to pursue remedies against the
Manufacturer with respect to the advance payments made by it.
Nothing in this Clause 5.4 (a) is intended to or shall be deemed
to waive any rights and remedies which either the Lessor or the
Lessee may have against the Manufacturer under the Purchase
Assignment or Purchase Agreement.
(b) If by reason of a Relevant Event the Aircraft is not leased to
the Lessee and such Relevant Event is or becomes a Termination
Event, the Lessor's obligation to lease the Aircraft to the
Lessee hereunder shall expire and the Lessor shall be entitled to
accept delivery of the Aircraft from the Manufacturer as provided
in the Purchase Assignment, in each case without adversely
affecting any right of Lessor to pursue remedies available
against Lessee hereunder, under the Purchase Assignment or at
law.
(c) The Lessee agrees to diligently perform its obligations under the
Purchase Assignment and Purchase Agreement and to take
commercially reasonable steps within its control to cause the
Aircraft to be delivered in May 1997 or as soon thereafter as
possible, subject, in all cases, to the terms of the Purchase
Agreement.
(d) If by reason of a failure by the Lessor to make advance payments
or pay the net aircraft purchase price to the Manufacturer when
the Lessor is obligated to do so under the terms of the Purchase
Assignment, the Aircraft is not leased to the Lessee when
tendered by the Manufacturer in accordance with the Purchase
Agreement, following a return to Lessor of any advance payments
previously made by it, the Lessee's obligation to lease the
Aircraft from the Lessor hereunder shall expire and this
Agreement and the Purchase Assignment shall terminate, but
without adversely affecting any right of any party to pursue
remedies available hereunder, under the Purchase Assignment or at
law against other parties thereto. Concurrent with receipt of the
advance payments as provided in the preceding sentence, Lessor
shall deliver written notice to the Manufacturer and Lessee
pursuant to the terms of the Purchase Assignment that such
Purchase Assignment has terminated.
5.5 (a) The Lessee shall (i) indemnify the Lessor in respect of any
reasonable out-of-pocket costs or expenses, if any, incurred by
the Lessor as a consequence of any delay in the delivery of or
non-delivery of the Aircraft to the Lessee, or non-acceptance of
the Aircraft by the Lessee under this Agreement (collectively, a
"Delay") and (ii) without duplication of any payment made under
the preceding clause (i), pay the Lessor interest on the advanced
payments made to the Manufacturer under the Purchase Assignment
as provided in Clause 5.5(b), in either such case, if and to the
extent that such Delay arises as a direct consequence of the
failure of the Lessee to perform its obligations hereunder or
under the Purchase Assignment or any Relevant Event, provided,
however, that nothing in this Clause 5.5 is intended to or shall
be deemed to waive any other right or remedy provided to the
Lessor in this Agreement and in the Purchase Assignment in the
event of such failure by the Lessee, including, but not limited
to Clause 5.4(b).
(b) The interest payable by Lessee pursuant to Clause 5.5(a)(ii)
shall accrue on a daily basis beginning on the first day of the
Delay and ending on the earlier of the day prior to (i) Delivery
of the Aircraft hereunder or (ii) expiration of the Lessor's
obligation to lease the Aircraft hereunder pursuant to Clause 5.4
hereof on the full amount of the outstanding advance payments
made by Lessor at an interest rate of LIBOR plus one percent
(1.0%). Such interest shall be payable upon the earlier of such
delivery or expiration and/or if the Delay exceeds one month,
monthly.
5.6 (a) If (i) there is an Excusable Delay (as defined in the Purchase
Agreement) and as a result thereof the Aircraft is not delivered
by August 31, 1997 or (ii) the Manufacturer estimates that by
reason of an Excusable Delay, the Aircraft will not be delivered
until after August 31, 1997, the Lessor may elect, by notice
delivered to the Lessee and the Manufacturer, to require the
Lessee to repay within fifteen (15) days of delivery of such
notice all advance payments theretofore made by Lessor for the
Aircraft plus interest thereon at an interest rate of LIBOR plus
one percent (1%) (net of any interest paid to Lessor by
Manufacturer) from the date of payment through the day prior to
the date of repayment by Lessee and, upon such repayment, the
Purchase Assignment shall terminate and the Lessor's obligation
to lease the Aircraft to Lessee hereunder shall expire.
Concurrent with receipt of the advance payments and interest as
provided in the preceding sentence, Lessor shall deliver written
notice to the Manufacturer and Lessee pursuant to the terms of
the Purchase Assignment that such Purchase Assignment has
terminated.
(b) If by reason of an Excusable Delay or for any other reason the
Aircraft is not delivered by the Manufacturer under the Purchase
Agreement by November 30, 1997, the Lessor may elect, by notice
delivered to the Lessee and the Manufacturer, to require the
Lessee to repay within fifteen (15) days of delivery of such
notice all advance payments theretofore made by Lessor for the
Aircraft plus interest thereon at an interest rate of LIBOR plus
one percent (1.0%) (net of any interest paid to Lessor by
Manufacturer) from the date of payment through the day prior to
the date of repayment by Lessee and, upon such repayment, the
Purchase Assignment shall terminate and the Lessor's obligation
to lease the aircraft to Lessee hereunder shall expire.
Concurrent with receipt of the advance payments and interest as
provided in the preceding sentence, Lessor shall deliver written
notice to the Manufacturer and Lessee pursuant to the terms of
the Purchase Assignment that such Purchase Assignment has
terminated.
(c) If Lessee fails to repay the advance payments and interest
thereon when required to do so by Lessor pursuant to Clause
5.6(a) or (b), the Purchase Assignment shall not terminate and,
notwithstanding anything to the contrary in this Clause 5, Lessor
will be entitled to pursue remedies against the Lessee and/or
Manufacturer with respect to the advance payments made by it.
Nothing in this Clause 5.6 is intended to or shall be deemed to
waive any rights and remedies which the Lessor may have against
the Lessee and Manufacturer under this Agreement, the Purchase
Assignment or Purchase Agreement.
5.7 (a) If the Manufacturer tenders the Aircraft for delivery under the
Purchase Agreement and the Lessor and Lessee mutually agree that
the Aircraft does not meet the conditions required under the
Purchase Agreement for such delivery, the Lessee shall not accept
delivery of the Aircraft under the Purchase Agreement or this
Agreement and, at its expense (except as provided in the last
sentence of this Clause 5.7), shall pursue diligently all
commercially reasonable actions (including, but not limited to
litigation if necessary) to cause the Manufacturer to deliver the
Aircraft as soon as practicable in the condition required by the
Purchase Agreement. The Lessee shall keep the Lessor advised of
the actions that it is taking to obtain delivery of the Aircraft
in the required condition and shall consult with the Lessor prior
to taking such actions to the extent practicable. If the Lessee
reasonably elects, in the pursuit of remedies against the
Manufacturer, to pursue litigation against the Manufacturer, the
parties shall mutually agree on an equitable sharing of the
expenses of such litigation (including prelitigation expenses
reasonably incurred, regardless of whether a lawsuit is actually
filed) and any recoveries therefrom, provided, however, that such
agreement shall include whatever provisions may be reasonably
requested by Lessor to ensure that the litigation is conducted by
Lessee to the reasonable satisfaction of Lessor with due regard
to Lessor's interest in the Aircraft.
(b) Notwithstanding anything in Clause 5.7(a) to the contrary, if the
Lessor's obligation to lease the Aircraft to Lessee expires under
Clause 5.4(a) or 5.6 hereof, the Lessor may directly pursue any
remedies that it elects to pursue against the Manufacturer under
the Purchase Assignment and Purchase Agreement. Without
limitation of the foregoing, the Lessee and Lessor will cooperate
with each other to the extent reasonably requested in any effort
or pursuit of remedies to obtain return of the advance payments
made by Lessor to the Manufacturer and any reasonable damages
sought by the Lessor and/or Lessee with respect thereto.
5.8 (a) If, following mutual consultation, the Lessee reasonably believes
that the Manufacturer has tendered the Aircraft for delivery in
the condition required by the Purchase Agreement and the Lessor
disagrees, the Lessee shall, at its option, either elect to
concur in the Lessor's position and attempt to cause the
Manufacturer to deliver the Aircraft as provided in Clause 5.7 or
accept delivery of the Aircraft under the Purchase Agreement and
this Agreement, in which case Clause 5.8(b) shall apply. If the
Lessee accepts delivery of the Aircraft as provided in the
preceding sentence, subject to satisfaction or waiver of the
conditions in Clause 4 (other than Clause 4.3(a)), the Lessor
shall pay the aircraft price to the Manufacturer and lease the
Aircraft to the Lessee under this Agreement.
(b) If the Lessee elects to accept delivery of the Aircraft under the
circumstances described in Clause 5.8(a), the Lessor shall be
entitled to require that a determination be made by an
arbitration panel as to (i) whether the Aircraft met the
conditions required by the Purchase Agreement when it was
accepted for delivery by the Lessee and (ii) if not, the amount
by which the value of the Aircraft was diminished by virtue of
its deficient condition (the "Deficiency Amount"). Such
determination shall be obtained by arbitration in the City of New
York, pursuant to the rules then obtaining of the American
Arbitration Association or any written agreement of the parties.
Such determination shall be rendered by a panel of three
arbitrators each of recognized expertise in aircraft valuation,
one arbitrator to be chosen by each of the Lessor and Lessee
within twenty (20) days of written request therefore being made
by the Lessor to the Lessee and the third arbitrator to be chosen
by the other two arbitrators within ten (10) days thereafter. If
the arbitration panel decides that the Aircraft was not in the
condition required by the Purchase Agreement when accepted by the
Lessee and that the Deficiency Amount is $[ ]* or more, the
Lessee shall pay the Lessor the Deficiency Amount within ten (10)
days after the determination of such amount by the arbitration
panel and shall pay the Lessor's reasonable legal and other
out-of-pocket costs associated with the arbitration promptly
after the Lessor submits invoices or other reasonable evidence of
such costs to the Lessee. If the arbitration panel decides that
the Aircraft was in the condition required by the Purchase
Agreement when accepted by the Lessee or, if not, that the
Deficiency Amount is less than $[ ]*, the Lessor shall pay the
Lessee's reasonable legal and other out-of-pocket costs
associated with the arbitration promptly after the Lessee submits
invoices or other reasonable evidence of such costs to the Lessor
and the Lessee shall have no obligation to pay such Deficiency
Amount.
6. LESSOR'S WARRANTIES AND MANUFACTURER'S WARRANTIES
6.1 The Lessor warrants that as long as no Termination Event has occurred
and is continuing, neither the Lessor nor the Head Lessor, nor any
person claiming by, through or under Lessor or Head Lessor, shall
interfere during the Lease Period with the use, possession and quiet
enjoyment of the Aircraft (including, but not limited to, the Manuals
and Technical Records) by the Lessee or the exercise by Lessee of its
rights and privileges hereunder.
6.2 THE LESSEE EXPRESSLY AGREES AND ACKNOWLEDGES THAT, SAVE ONLY AS PROVIDED
IN CLAUSE 6.1 AND CLAUSE 2.5, NO WARRANTY OR REPRESENTATION OF ANY KIND
IS OR HAS BEEN GIVEN BY OR ON BEHALF OF THE LESSOR IN RESPECT OF THE
AIRCRAFT OR ANY PART THEREOF AND, ACCORDINGLY, THE LESSEE CONFIRMS THAT
IT HAS NOT, IN ENTERING INTO THIS AGREEMENT, RELIED ON ANY WARRANTY OR
REPRESENTATION BY THE LESSOR OR ANY PERSON ON THE LESSOR'S BEHALF,
EXPRESS OR IMPLIED, WHETHER ARISING BY LAW OR OTHERWISE IN RELATION TO
THE AIRCRAFT OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OR REPRESENTATIONS AS TO THE DESCRIPTION, AIRWORTHINESS,
MERCHANTABILITY, FITNESS FOR ANY PURPOSE, VALUE, CONDITION, DESIGN OR
OPERATION OF ANY KIND OR NATURE OF THE AIRCRAFT OR ANY PART THEREOF, AND
THE BENEFIT OF ANY SUCH WARRANTY OR REPRESENTATION BY THE LESSOR IS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVED BY THE LESSEE. TO THE
EXTENT PERMISSIBLE UNDER APPLICABLE LAW, THE LESSEE HEREBY ALSO WAIVES
ANY RIGHTS WHICH IT MAY HAVE IN TORT IN RESPECT OF ANY OF THE MATTERS
REFERRED TO ABOVE AND IRREVOCABLY AGREES THAT THE LESSOR SHALL HAVE NO
GREATER LIABILITY TO LESSEE IN TORT IN RESPECT OF ANY SUCH MATTER THAN
IT WOULD HAVE IN CONTRACT AFTER TAKING ACCOUNT OF ALL OF THE FOREGOING
EXCLUSIONS. NO THIRD PARTY MAKING ANY REPRESENTATION OR WARRANTY
RELATING TO THE AIRCRAFT OR ANY PART THEREOF IS THE AGENT OF THE LESSOR
NOR HAS ANY SUCH THIRD PARTY AUTHORITY TO BIND THE LESSOR THEREBY.
NOTWITHSTANDING ANYTHING CONTAINED ABOVE, NOTHING CONTAINED HEREIN IS
INTENDED TO OBVIATE, REMOVE OR WAIVE ANY RIGHTS OF WARRANTY OR OTHER
CLAIMS RELATING THERETO WHICH THE LESSEE OR THE LESSOR MAY HAVE AGAINST
THE MANUFACTURER OR SUPPLIER OF THE AIRCRAFT (INCLUDING ANY ENGINE OR
PART THEREOF) OR ANY THIRD PARTY.
6.3 The Lessor agrees to assign to the Lessee the benefit of all assignable
warranties and indemnities, product support and operational benefits
given by the Manufacturer pursuant to the Purchase Agreement (as same
have been assigned to the Lessor pursuant to the Purchase Assignment) or
supplier of any part of the Aircraft as provided in the Purchase
Assignment. The Lessee acknowledges that any such assignment is subject
to the prior written consent of the Manufacturer or supplier of any part
of the Aircraft and each party hereto agrees to execute and deliver to
the other party such notices of assignment of warranties as such other
party may reasonably request. The Lessee agrees to the extent
commercially reasonable to pursue by reasonable procedures such warranty
claims in respect of the Aircraft as to its knowledge may arise having
taken reasonable steps to ascertain such claims and to notify the Lessor
of all such claims in excess of the Threshold Amount.
6.4 The Lessee agrees to assign or re-assign to the Lessor or its nominee at
the time of redelivery of the Aircraft or thereafter, the benefit of all
remaining warranties and indemnities, product support and operational
benefits that are given to the Lessee during the Lease Period by the
Manufacturer or supplier of any part of the Aircraft and any person who
has repaired the Aircraft or any part thereof to the extent
transferable.
7. RENT
7.1 During the Lease Period the Lessee shall pay to the Lessor (or to the
Lessor's order) installments of rent for the Aircraft monthly in
advance, each such instalment being of the amount specified in paragraph
2 of Letter Agreement No. 1 opposite the relevant Payment Date and being
payable on such Payment Date.
7.2 The Lessee's obligation to pay rent and make other payments in
accordance with this Agreement shall be absolute and unconditional
irrespective of any contingency whatsoever including, but not limited
to, (i) any right of set-off, counterclaim, recoupment, defence or other
right which either party hereto may have against the other, (ii) any
unavailability of the Aircraft for any reason, including, but not
limited to, any lack or invalidity of title or any other defect in the
title, airworthiness, merchantability, fitness for any purpose,
condition, design, or operation of any kind or nature of the Aircraft,
or the ineligibility of the Aircraft for any particular use or trade, or
for registration or documentation under the laws of any relevant
jurisdiction, or the Total Loss of, or any damage to, the Aircraft,
(iii) any failure or delay on the part of either party hereto, whether
with or without fault on its part, in performing or complying with any
of the terms or conditions of this Agreement, (iv) any insolvency,
bankruptcy, administration, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceedings by or against the
Lessor, the Lessee or any permitted sub-lessee, or (v) any lack of due
authorization of, or other defect in, this Agreement, excluding,
however, any period in which the Lessee cannot operate the Aircraft due
to a breach by the Lessor of Clause 6.1 hereof.
7.3 In addition to all other payments to be made by the Lessee under this
Agreement, the Lessee shall pay to the Lessor (or to the Lessor's order)
an Aircraft Commitment Fee in the amount, and in accordance with the
schedule, set forth in paragraph 1 of Letter Agreement No. 1.
8. PAYMENTS, INTEREST AND CALCULATIONS
8.1 All payments to be made by the Lessee under this Agreement shall be made
(unless specifically otherwise provided in this Agreement) without prior
demand and in full, without any set-off or counterclaim whatsoever and,
subject as provided in Clause 10.3 (Taxation), free and clear of any
deductions or, to the extent provided in Clauses 10.2 and 10.3,
withholdings in Dollars for value on the day on which payment is due to
such bank and account as the Lessor may from time to time notify to the
Lessee in writing.
8.2 When any payment under this Agreement would otherwise be due on a day
which is not a Banking Day, the due date for payment shall be extended
to the next following Banking Day unless such Banking Day falls in the
next calendar month in which case payment shall be made on the
immediately preceding Banking Day.
8.3 If the Lessee fails to pay any sum payable to any Indemnitee (including
without limitation, any sum payable pursuant to this Clause 8.3) on its
due date for payment under this Agreement the Lessee shall pay to such
Indemnitee on demand interest on such sum from the due date through the
day prior to the date of actual payment (as well after as before any
relevant judgment) at the Relevant Rate of Interest.
8.4 All interest under this Agreement shall accrue from day to day and shall
be calculated on the basis of the actual days elapsed and a 365 day
year.
8.5 Any certificate or determination of the Lessor as to any rate of
interest or any other amount payable under this Agreement shall, in the
absence of manifest error, be entitled to a rebuttable presumption of
correctness.
8.6 If any sum due from the Lessee under this Agreement or under any order
or judgment given or made in relation thereto has to be converted from
the currency ("the first currency") in which the same is payable under
this Agreement or under such order or judgment into another currency
("the second currency") for the purpose of (i) making or filing a claim
or proof against the Lessee, (ii) obtaining an order or judgment in any
court or other tribunal or (iii) enforcing any order or judgment given
or made in relation to this Agreement, the Lessee shall indemnify and
hold harmless the Lessor from and against any loss suffered as a result
of any difference between (a) the rate of exchange used for such purpose
to convert the sum in question from the first currency into the second
currency and (b) the rate or rates of exchange at which the Lessor may
in the ordinary course of business purchase the first currency with the
second currency upon receipt of a sum paid to it in satisfaction, in
whole or in part, of any such order, judgment, claim or proof. Any
amount due from the Lessee under this Clause 8.6 shall be due as a
separate debt and shall not be affected by judgment being obtained for
any other sums due under or in respect of this Agreement and the term
"rate of exchange" includes any premium and costs of exchange payable in
connection with the purchase of the first currency with the second
currency.
9. COSTS AND INDEMNITIES
9.1 The Lessee shall pay promptly all costs or expenses incurred by Lessee
in connection with the performance of the Lessee's obligations under
this Agreement, including, but not limited to, the pre-Delivery testing
by the Lessee, the delivery of the Aircraft to Lessee, the registration
of the Aircraft and filing of the Agreement at the FAA, including, but
not limited to, the fees and expenses of special FAA counsel. During the
Lease Period, Lessee will pay (or cause a permitted sublessee to pay)
promptly all costs and expenses of registration, possession, control,
use, operation, leasing, sub-leasing, insurance, maintenance, repair,
refurbishment, overhaul, modification, alteration, damage, storage and
re-delivery of the Aircraft.
9.2 Whether or not the Aircraft is delivered to the Lessee pursuant to this
Agreement, the Lessee shall pay to the Lessor:
(a) no later than the date of this Agreement, the sum of $[ ]* as a
contribution towards the legal costs incurred by the Lessor in
connection with the negotiation and preparation of the Lessee
Documents and the Security Documents;
(b) on demand, all out-of-pocket expenses (including reasonable legal
fees and expenses) reasonably incurred by the Lessor and
Beneficiary in connection with any amendment or extension of, or
the granting of any waiver or consent under any of the Lessee
Documents or the Security Documents requested by the Lessee and
all out-of-pocket expenses (including reasonable legal fees and
expenses) reasonably incurred by the Lessor and Beneficiary
resulting from (i) the enforcement of, or preservation of any
rights under, any of the Lessee Documents in any such case after
the occurrence and during the continuance of a Termination Event
or (ii) breach of any representation, warranty, covenant,
agreement, condition or stipulation by the Lessee therein
contained.
All expenses payable pursuant to this Clause 9.2 shall be paid in the
currency in which the same are incurred.
9.3 The Lessee shall indemnify and hold harmless the Indemnitees, without
prejudice to any of the Indemnitees' other rights under any of the
Lessee Documents, from and against any costs or expenses which the
Lessee has agreed to pay in any Lessee Document but which shall
nevertheless be claimed from or assessed against or paid by any
Indemnitee (after prior consultation with Lessee to the extent
practicable as reasonably determined by the Lessor), and against any
liability incurred by any Indemnitee by reason of any delay or failure
of the Lessee to pay any such costs or expenses.
9.4 Without prejudice to the Lessee's obligations under Clauses 9.1 to 9.3
inclusive (Costs and Indemnities), the Lessee agrees at all times during
or after the Lease Period, to indemnify and hold harmless the
Indemnitees from and against all costs, expenses, payments, charges,
losses, demands, liabilities, claims, actions, proceedings, penalties,
fines, damages, judgements, orders or other sanctions (in this Clause 9
together referred to as "Losses") which may be incurred by, or made or
asserted against such Indemnitee at any time:
(a) relating to, or arising directly or indirectly in any manner or
for any cause or reason whatsoever out of, the design,
manufacture, testing, delivery, import, export, registration,
ownership, possession, control, use, operation, leasing,
sub-leasing, insurance, maintenance, repair, refurbishment,
condition, service, overhaul, modification, change, alteration,
loss, damage, removal, storage, re-delivery, sale or disposal of,
in or to the Aircraft, or otherwise in connection with the
Aircraft, or relating to loss or destruction of or damage to any
property, or death or injury of, or other loss of whatsoever
nature suffered by, any person caused by, relating to, or arising
from or out of (in each case whether directly or indirectly) any
of the foregoing matters; or
(b) on the grounds that, as the result of any alterations or
modifications of the Aircraft, any Engine or any Part after the
Delivery Date, any design, article or material in the Aircraft or
the operation or use thereof constitutes an infringement of
patent, intellectual property right or any other right
whatsoever.
9.5 Any Loss is excluded from Lessee's agreement to indemnify under Clause
9.4 to the extent such Loss:
(a) Is attributable to acts or events occurring after the Aircraft is
redelivered to Lessor or its designee or to the Head Lessor or
the Lenders, as the case may be, in compliance with Clause 19 and
Schedule 4 hereof;
(b) Is a Tax, whether or not Lessee is required to indemnify therefor
under Clause 10 hereof;
(c) Arises as a result of a Lessor Encumbrance;
(d) Is attributable to the gross negligence or willful misconduct of
any Indemnitee or the breach by any Indemnitee of any of its
representations or obligations under any of the Lease Documents;
(e) Is a cost or expense imposed on Lessor or any Indemnitee by the
terms of any of the Lessee Documents or incurred by Lessor or any
Indemnitee in performing its obligations to Lessee hereunder or
thereunder;
(f) Consists of a cost, fee or expense arising out of the transfer by
Lessor or transfer or acquisition by any Indemnitee of any
interest in the Aircraft or Lessee Documents at a time when no
Termination Event has occurred and is continuing;
(g) Arises out of or results from the acts of any Indemnitee prior to
the date of this Agreement;
(h) Consists of any cost, fee or other expense incurred in connection
with preparing or negotiating any Lenders Document and any
amendment to or restructuring of any Lenders Document unless
Lessee has expressly agreed to pay such cost, fee or expense
under any Lessee Document or such Lender Document or amendment or
restructuring results from the occurrence and continuance of a
Termination Event;
(i) With respect to a Loss incurred under Clause 9.5(b) only, is
indemnified by the Manufacturer under the Purchase Agreement;
(j) With respect to any Indemnitee, arises from acts, events or
omissions by such Indemnitee in such Indemnitee's capacity as
designer, manufacturer of or maintenance performer for the
Aircraft or any Part;
(k) Consists of costs, fees or expenses related to the negotiation,
preparation or execution of the Lessee Documents in excess of the
$[ ]* specified in Clause 9.2(a);
(l) Arises out of any default under any Lenders Document that is not
a Relevant Event hereunder; or
(m) Consists of costs, fees and/or expenses incurred in connection
with the establishment, maintenance or restructuring of the
financing or refinancing of the Aircraft (including, without
limitation, the Head Lease) or any Indemnitee's interest in the
Trust Estate established under the Trust Agreement or any action
or dispute between or among the parties to any Lenders Document,
in each case not resulting from the occurrence and continuance of
a Relevant Event hereunder;
9.6 In the case of any Loss indemnified by Lessee under Clause 9.4 which is
covered by a policy of insurance maintained by Lessee pursuant to Clause
16 and Schedule 3 of this Agreement, as a condition to such
indemnification, each Indemnitee shall agree to cooperate with the
insurers in the exercise of their rights to investigate, defend or
compromise such Loss as may be required to retain the benefits of such
insurance with respect to such Loss.
9.7 An Indemnitee shall promptly notify Lessee of any Loss as to which
indemnification is sought, provided that failure to provide such notice
promptly shall not affect Lessee's obligation to indemnify any Loss
hereunder except to the extent that such failure materially adversely
affects the ability of the Lessee to contest such Loss. Subject to the
rights of insurers under policies of insurance maintained pursuant to
Section 16 and Schedule 3 this Agreement, Lessee shall have the right to
contest and defend any Loss, in its own name or in the name of the
applicable Indemnitee, and shall be entitled to assume responsibility
for and control of the defense of any Loss in respect of which any
Indemnitee makes or intends to make a claim against Lessee for indemnity
pursuant to this Clause 9 (other than a Loss or claim arising out of any
Relevant Event) PROVIDED THAT (a) the legal counsel retained by Lessee
for such purpose is reasonably acceptable to Lessor and (b) Lessee
pursues such contest diligently and in good faith and, upon the
reasonable request of the Indemnitee, provides the Indemnitee with
reasonable details of the status of the contest and copies of all legal
briefs, court filings and, subject to applicable considerations of legal
privilege, counsel's memoranda relevant to such contest; and provided
further, that if Lessee is legally precluded from pursuing such contest
or defense itself or from impleading any party which the Lessee
reasonably believes is ultimately responsible for such Loss or from
asserting any defense, cross-claim reasonably deemed required by Lessee,
the applicable Indemnitee shall, upon Lessee's request and at Lessee's
expense (with respect to reasonable out-of-pocket costs and expenses)
and if legally able to do so and fully indemnified by Lessee hereunder,
diligently and in good faith pursue such contest, defense, impleader or
cross-claim and provide Lessee information and documents thereon
comparable to that described above. In the event that (1) a Termination
Event has occurred and is continuing or (2) the Lessee fails to comply
with the foregoing requirements in any material respect, the applicable
Indemnitee may assume responsibility for and control the relevant
contest. To the extent Lessee is entitled to defend any claim hereunder,
the Indemnitee shall cooperate with all reasonable requests of Lessee in
connection with such defense. Subject to the requirements of any policy
of insurance, an Indemnitee may participate at its own expense in any
judicial proceeding controlled by Lessee pursuant to the preceding
provisions, and such participation shall not constitute a waiver of the
indemnification provided in Clause 9.4. Except as above provided in this
Clause 9.7, an Indemnitee shall not be required to contest any Loss or
to assume responsibility for or control of any judicial proceeding with
respect thereto.
9.8 (a) To the extent that a Loss indemnified by Lessee under Clause 9.4
is in fact paid in full by Lessee and/or an insurer under a
policy of insurance maintained by Lessee pursuant to Clause 16
and Schedule 3 of this Agreement, Lessee and/or such insurer, as
the case may be, shall be subrogated to the rights and remedies
of the Indemnitee on whose behalf such Loss was paid with respect
to the transaction or event giving rise to such Loss. Should an
Indemnitee receive any refund, in whole or in part, with respect
to any Loss paid by Lessee hereunder and no Relevant Event has
occurred and is continuing, it shall promptly pay the amount
refunded (but not an amount in excess of the amount Lessee has
paid in respect of such Loss plus interest attributable thereto
in an amount reasonably determined by the Indemnitee and in no
event will the amount paid by the Indemnitee exceed the amount
refunded to the Indemnitee) over to Lessee less any net tax
detriment realized by such Indemnitee as a result of the receipt
or accrual of such refund plus any net tax savings realized by
such Indemnitee as a result of such payment. If the Indemnitee is
later required to repay all or part of such refund, such
repayment shall be a Loss and the Lessee shall indemnify the
Indemnitee against such Loss in accordance with the terms of
Clause 9.
(b) No Indemnitee shall enter into a settlement or other compromise
or consent to a judgment with respect to any Loss without the
prior written consent of the Lessee, which consent shall not be
unreasonably withheld or delayed, unless such Indemnitee waives
its rights under this Clause 9 with respect to such Losses. The
entering into any such settlement or compromise or consent
without the prior written consent of Lessee shall constitute a
waiver by such Indemnitee of all its rights of indemnification
with respect to the Loss which is the subject of such settlement
or compromise or consent.
9.9 In the event Lessee is required to indemnify any Indemnified Person
under Clause 9.4, Lessee shall pay to such Indemnified Person an amount
which, after deduction of all taxes actually required to be paid by such
Indemnified Person in respect of the receipt of such amount under the
applicable laws of any government or taxing jurisdiction (after giving
credit for any saving in respect of any such taxes by reason of
deductions, credits or allowances related to the payment of the Loss
indemnified against and the payment of related taxes), shall be equal to
the amount of the indemnification required.
9.10 The general indemnification provisions of Clauses 9.4 through Clause 9.9
are not intended to waive or supersede any specific provisions of this
Agreement to the extent such provisions apply to any Loss.
9.11 The Lessee's obligations under Clause 9 shall survive the end of the
Lease Period.
10. TAXATION
10.1 (a) Sums payable to the Indemnitees by the Lessee under this
Agreement by way of indemnity or reimbursement shall be
calculated on an after-tax basis. Accordingly, if and to the
extent that any such sum payable to any Indemnitee is taxable in
the hands of such Person (as the auditors of such Person acting
as experts and not as arbitrators shall certify from time to
time) such sum shall be increased to an amount which (after
subtracting any Taxes suffered by such Person in respect of the
receipt of such amount and after taking into account any
deduction, credit or other benefit for Tax purposes for Taxes
available in the same taxable year as such sum is taxable to such
Person in respect of the discharge by such Person of any
corresponding liability to a third party) shall equal the amount
which such Person would have received had the sum payable by the
Lessee not been taxable in the hands of such Person. If the sum
payable by the Lessee is initially paid on the basis that it is
not taxable in the hands of any Indemnitee and it is subsequently
determined to be taxable or vice versa, subject to the terms of
Clause 10.9 hereof, such adjustment and payment shall be made
between such Person and the Lessee as the auditors of such
Indemnitee (acting as experts and not as arbitrators) shall
certify as appropriate to restore the after-tax position of such
Person to that which it would have been had the adjustment not
been necessary.
(b) If and to the extent that any sum (the "indemnity sum")
constituting (directly or indirectly) an indemnity to any
Indemnitee but paid by the Lessee to any person other than such
Indemnitee, shall properly be treated under applicable law as
taxable in the hands of such Indemnitee, the Lessee shall pay to
such Person such sum (the "compensating sum") as (after
subtracting any Taxes incurred by such Person in respect of the
compensating sum and after taking into account any deductions,
credits and other Tax benefits currently available to such
Indemnitee in respect of the payment of the indemnity sum to such
third person for the benefit of, or on behalf of, such
Indemnitee) shall reimburse such Indemnitee for any Taxes
incurred by it in respect of the indemnity sum.
(c) For the purposes of this Clause 10.1(a) a sum shall be deemed to
be taxable in the hands of an Indemnitee if it is required under
applicable law to be taken into account in computing the taxable
profits or gains of such Indemnitee, and if so such Indemnitee
shall be deemed to have suffered Taxes thereon at the rate of
taxation applicable to such Person's profits or gains for the
period in which the payment is so required to be taken into
account for the purposes of such taxation, and any associated or
resulting deduction, credit or other benefit to the extent
realized in the same taxable year as the sum referred to in
Clause 10.1(a) or 10.1(b) is deemed to be taxable shall be taken
into account. Each Indemnitee shall use good faith in filing its
Tax returns and in dealing with taxing authorities to the extent
required to seek and claim Tax benefits which would reduce the
amount of any indemnity payment required pursuant to this Clause
10, it being understood and agreed, however, that no Indemnitee
will be under any obligation to take any such actions which are
not consistent with the Tax reporting practices and policies of
such Indemnitee without regard to this transaction.
(d) If any Indemnitee shall actually recognize (as determined in good
faith by the relevant Indemnitee) a tax benefit by reason of any
Tax paid or indemnified against by Lessee pursuant to this Clause
10 or a Loss indemnified against by Lessee pursuant to Clause 9,
(whether such tax benefit shall be by means of a foreign tax
credit, depreciation or cost recovery deduction or otherwise) not
otherwise taken into account in computing any payment or
indemnity by Lessee under this Agreement, such Indemnitee shall
pay to Lessee an amount equal to such tax benefit plus any tax
benefit recognized as the result of any payment made pursuant to
this sentence; PROVIDED, that such Indemnitee shall not be
required to make any payment pursuant to this sentence if and so
as long as Termination Event of a monetary nature has occurred
and is continuing; provided, FURTHER, that payments to the Lessee
by an Indemnitee hereunder shall not exceed (i) the aggregate
amount of all prior payments (plus any interest reasonably
attributable thereto in an amount reasonably determined by the
Indemnitee) with respect to such Tax or Loss by the Lessee to the
Indemnitee LESS (ii) the aggregate amount of all prior payments
with respect to such Tax or Loss by the Indemnitee to the Lessee
pursuant to this Clause 10.1(d). Any Taxes that are imposed on
any Indemnitee as a result of the disallowance or reduction
(including the expiration of any tax credit carryovers or
carrybacks of such Indemnitee that would not otherwise have
expired) of any reduction in Taxes or refund referred to in this
Clause 10.1(d), as to which (and to the extent) such Indemnitee
has made any payment to the Lessee required hereby, shall be
treated as a Tax for which the Lessee is obligated to indemnify
such Indemnitee pursuant to the provisions of Clause 10 without
regard to the exclusions set forth in Clause 10.4 hereof.
10.2 WITHHOLDING. If at any time any applicable law, regulation or regulatory
requirement, or any governmental authority, monetary agency or central
bank requires the Lessee to make any deduction or withholding in respect
of Taxes from any payment due to the Lessor or the Beneficiary under the
Lease Documents as a result of any change occurring after the date of
this Agreement in applicable law, regulation, treaty or ruling:
(1) the sum due from the Lessee in respect of such payment shall be
increased to the extent necessary to ensure that, after the
making of such deduction or withholding, each Indemnitee receives
on the due date for such payment a net sum equal to the sum which
it would have received had no such deduction or withholding been
required to be made; PROVIDED, HOWEVER, that the Lessee shall not
be required to pay any such additional amount to the extent that
such Tax would not have been imposed but for (x) Taxes in effect
on the date of a voluntary transfer by a Indemnitee of any
interest in the Aircraft or any of the Lease Documents (other
than any such transfer that occurs after the occurrence and
during the continuance of a Termination Event) which would not
have been imposed had such Indemnitee not transferred its
interest in the Aircraft or the Lease Documents or (y) in the
case of the Beneficiary, failure to deliver a properly completed
Internal Revenue Service Form 1001 (or any substitute form) under
the applicable United States income tax convention (i) initially,
on or prior to the due date of the first payment due to the
Lessor under this Agreement, or (ii) after the form referred to
in clause (i) has expired, after a request by the Lessee for such
form, unless it shall no longer be entitled to deliver such form
due to a change in law, regulation ruling or such convention;
(2) the Lessee shall pay to the relevant authority within the period
for payment permitted by applicable law the full amount of the
deduction or withholding (including, but without prejudice to the
generality of the foregoing, the full amount of any deduction or
withholding from any increased amount paid pursuant to this
Clause 10.2); and
(3) the Lessee shall furnish to the appropriate Indemnitee written
evidence of payment to the relevant authority within the period
for payment permitted by applicable law, of all amounts deducted
or withheld as aforesaid.
10.3 TAXES INDEMNIFIED. The Lessee agrees to indemnify and hold harmless each
Indemnitee against and agrees to protect, save and keep harmless each
Indemnitee against, all Taxes that may be imposed upon or with respect
to any Indemnitee, the Lessee, this Agreement, the Lease Documents, the
Aircraft, the Airframe, any Engine, or any Part or any interest in any
of the foregoing, upon, based upon, measured by, in whole or in part, or
with respect to:
(a) the Aircraft, the Airframe, any Engine, any Part or any interest
in or with respect to the foregoing;
(b) the delivery, location, ownership, manufacture, design,
importation, exportation, transfer of title, return, storage,
leasing, operation, use, maintenance, repair, alteration,
location, subleasing, ownership, purchase, sale, registration,
presence, re-registration, subleasing, hire, conditional sale,
delivery, redelivery, nondelivery, acceptance, rejection,
transport, modification, substitution, replacement or other
disposition of or other action or event with respect to the
Aircraft, the Airframe, any Engine or Part or any interest with
respect to the foregoing;
(c) rent, including all installments of rent, payable under this
Agreement;
(d) this Agreement and the other Lease Documents or amendments or
supplements thereto and any other documents contemplated thereby
or the transactions contemplated thereby or resulting therefrom
or the exercise of any rights or remedies thereunder or the
enforcement thereof; or
(e) otherwise with respect to or in connection with the transactions
contemplated by this Agreement or the other Lease Documents.
10.4 TAXES EXCLUDED. The indemnity provided for in Clause 10.3 above shall
not apply to, and the Lessee shall have no indemnity liability with
respect to, any of the following:
(a) Taxes (other than Taxes in the nature of sales, use, property,
rental, value-added, goods and services, transfer or turnover
taxes or, in the case of Taxes imposed by any jurisdiction, to
the extent such Taxes are required pursuant to Clause 10.1 for
the computation of amounts payable by the Lessee on an after-tax
basis) on, based on, measured by or with respect to the net or
gross income, capital or net worth, net or gross receipts,
franchises, excess profits or conduct of business of such
Indemnitee (including, without limitation, capital gains taxes,
minimum taxes, alternative minimum taxes, branch profits taxes
and accumulated earnings taxes) imposed by (A) any federal, state
or local government, political subdivision or taxing authority in
the United States other than (x) any such Taxes imposed by
withholding on or with respect to amounts payable under this
Agreement by any federal, state or local government, political
subdivision or taxing authority in the United States by reason of
a change of law, regulation, treaty or ruling as in effect on the
date hereof and (y) any such Taxes that are imposed by any state
or local government, political subdivision or taxing authority
thereof in the United States (other than any state in which the
applicable Indemnitee is organized, has its principal place of
business or is otherwise subject to taxation as a result of
transactions unrelated to the transactions contemplated hereby
(unless such Indemnitee would not have been subject to taxation
by such taxing authority but for leasing transactions involving
aircraft in which the Lessor is the owner or the Beneficiary is
the owner or beneficial owner of such aircraft) or any local
government or political subdivision or taxing authority in any
such state) to the extent that such Taxes would not have been
imposed but for (1) the registration, operation, location or use
of the Aircraft, Airframe, any Engine or any Part in the
jurisdiction imposing such Tax or (2) the activities or presence
of any of the Lessee, any affiliate of the Lessee or any Person
in possession of the Aircraft, Airframe, any Engine or any Part
(other than the Lessor or the Beneficiary) (each referred to as a
"Lessee Person") in or any payment under this Agreement being
made by a Lessee Person from the jurisdiction imposing such Tax,
(B) any government or taxing authority of or in any jurisdiction
(other than the United States or any political subdivision or
taxing authority thereof or therein) other than Taxes that are
imposed as a result of the registration, operation, location or
use of the Aircraft, Airframe, any Engine or any Part in, the
existence of an office, fixed place of business or permanent
establishment of a Lessee Person in, a Lessee Person making
payments from or other activities or presence of a Lessee Person
in the jurisdiction imposing the Tax, provided that the
applicable Indemnitee is not organized, does not have its
principal place of business and is not otherwise subject to
taxation in such jurisdiction as the result of transactions
unrelated to the transactions contemplated hereby (unless such
Indemnitee would not have been subject to taxation by such taxing
authority but for leasing transactions involving aircraft in
which the Lessor is the owner or the Beneficiary is the owner or
beneficial owner of such aircraft), or (C) any taxing authority
in Ireland;
(b) Taxes to the extent resulting from (1) any voluntary sale,
assignment, transfer or other voluntary disposition by such
Indemnitee of the Aircraft, Airframe, any Engine or any Part or
interest with respect to the foregoing, (2) any involuntary
transfer by such Indemnitee of the Aircraft, Airframe, any
Engine, any Part, the rent, the trust on behalf of which the
Lessor is acting or any interest with respect to any of the
foregoing resulting from any bankruptcy or other proceeding for
the relief of debtors in which such Indemnitee is the debtor, or
(3) any involuntary transfer by such Indemnitee of the Aircraft,
Airframe, any Engine or any Part or interest with respect to the
foregoing resulting from a default by such Indemnitee under any
secured financing transaction relating to the Aircraft (unless,
in each preceding case, such sale, assignment, transfer or
disposition occurs pursuant to the exercise of remedies after the
occurrence and during the continuance of a Termination Event);
(c) Taxes that are imposed on a transferee from an Indemnitee to the
extent of the excess of such Taxes imposed under applicable law
in effect on the date of transfer, over the amount of Taxes which
would have been imposed had there not been a sale, assignment,
transfer or other disposition to such transferee, unless such
sale, assignment, transfer or other disposition occurs pursuant
to an exercise of remedies hereunder after a Termination Event
has occurred and while such Termination Event is continuing (it
being understood and agreed that this Clause 10.4(c) shall not
apply to the calculation of the amount necessary for any payment
required to be made on an after-tax basis);
(d) Taxes imposed in respect of any period after the expiration or
earlier termination of this Agreement in accordance with its
terms, except to the extent such Taxes are imposed with respect
to the receipt by an Indemnitee of any amounts due under the
Lease Documents after such expiration or termination of the
Lease, it being understood that the exception from indemnity set
forth in this Clause 10.4(d) shall not apply to Taxes to the
extent such Taxes relate to events occurring or matters arising
prior to or simultaneously with the time of the earliest
occurrence of the events covered by this Clause 10.4(d);
(e) Taxes imposed upon the Lessor that are on, based on, measured by
or with respect to any fees, commissions or compensation for
services rendered by the Lessor in its capacity as trustee under
the Trust Agreement, or fees, commissions or compensation
received by the Head Lessor or any Lender;
(f) Without affecting the Lessee's rights and obligations under
Clauses 10.2 and 10.6, Taxes for so long as such Taxes are being
contested in accordance with the provisions of Clause 10.6
hereof;
(g) Taxes that would not have been imposed with respect to a
Indemnitee but for any failure of such Indemnitee (after timely
written notice from the Lessee accompanied by a properly
completed draft form of any such requirement prepared by Lessee
at Lessee's expense, other than the Form 1001 to be delivered
prior to the date the first payment is due to the Lessor under
this Agreement) to comply with certification, information,
documentation, reporting or other similar requirements concerning
the nationality, residence, identity, connection with the
jurisdiction imposing such Taxes or any other matters, that is
required by law as a condition to exemption or the relief from,
or reduction of, such Tax (but only if and to the extent that
such compliance may be effected by such Indemnitee without
materially increasing such Indemnitee's risk of exposure to any
Tax in the applicable jurisdiction, related expenses or other
adverse consequences not indemnified by the Lessee hereunder);
(h) Taxes to the extent that such Taxes would not have been imposed
on or with respect to a Indemnitee but for the willful misconduct
or gross negligence of any Indemnitee thereof;
(i) Taxes which an Indemnitee would be required to contest pursuant
to Clause 10.6 and which such Indemnitee has failed to contest as
and to the extent required by clause 10.6 and any other Taxes for
which a successful contest is foreclosed because of such failure
of the Indemnitee, provided that such failure by the Indemnitee
has a material adverse effect on the ability of the Lessee to
contest such Tax or if and to the extent such failure results in
an increase in the amount of any penalties, interests or addition
to such Tax (unless any such failure by an Indemnitee is the
result of a failure by the Lessee to fulfill its obligations
under Clause 10.6);
(j) Taxes imposed on any Indemnitee resulting from such Indemnitee's
original purchase or other acquisition of the Aircraft, any
Engine or any Part or any interest in any thereof;
(k) Taxes imposed with respect to any period prior to the Delivery
Date;
(l) Taxes which have been included in the cost of the Aircraft; or
(m) Taxes, to the extent that (1) such Taxes constitute interest or
penalties relating to a Tax (but not the underlying Tax) and (2)
such interest or penalties result from the failure to file or
late filing of any Tax return by any Indemnitee, unless such
failure by the Indemnitee to file or late filing results from a
failure of the Lessee to fulfill its obligation under clause 10.7
or any other provision of this Agreement compliance with which by
Lessee is necessary in order for such Indemnitee to be able to
file such Tax return.
10.5 PAYMENTS. Each Indemnitee shall promptly forward to Lessee any written
notice, ▇▇▇▇ or advice received by it from any taxing authority
concerning any Tax for which it seeks indemnification under this clause
10. The Lessee shall pay any Tax for which it is liable pursuant to this
Clause 10 directly to the appropriate taxing authority when due or to
the Indemnitee within 30 days after receipt of a written demand therefor
from such Indemnitee accompanied by a written statement describing in
reasonable detail the Taxes which are the subject of and basis for such
indemnity and the computation of the amount so payable, but not prior to
the later of (i) in the case of Taxes paid to an Indemnitee, five
Business Days prior to the date payment of such Taxes is due, or in the
case of Taxes paid directly to the appropriate taxing authority, the
date such Taxes are due, in each case, provided Lessee has actual
knowledge of the date such Tax is due or (ii) in the case of amounts
which are being contested, within 30 Business Days after a Final
Determination (as defined below). For purposes of this Clause 10, a
"Final Determination" shall mean (I) a decision, judgment, decree or
other order by any court of competent jurisdiction that occurs pursuant
to the provisions of Clause 10.6, which decision, judgment, decree or
other order has become final and unappealable, (II) a closing agreement
or settlement agreement entered into in accordance with Clause 10 that
has become binding and is not subject to further review or appeal
(absent fraud, misrepresentation, etc.), or (III) the termination of
administrative proceedings and the expiration of the time for
instituting a claim in a court proceeding, in each case, in accordance
with Clause 10.6.
10.6 CONTESTS; REFUNDS. If a written claim is made against any Indemnitee for
any Taxes that the Lessee could be required to indemnify against
pursuant to this Clause 10, such Indemnitee shall promptly notify the
Lessee in writing (and shall take no action with respect to such claim
to the extent reasonably practicable for a period of 30 days following
such notice to the Lessee), but the failure to give such notice shall
not diminish the Lessee's obligation hereunder, except to the extent
that the Lessee's ability to contest such Tax is materially adversely
affected or if and to the extent such failure results in the imposition
of or an increase in the amount of any penalties, interest or additions
to such Tax. If requested by the Lessee in writing, within 30 days of
receipt of such notice from the Indemnitee, such Indemnitee shall in
good faith contest (including pursuing all judicial appeals other than
appeals to the United States Supreme Court), at the expense of the
Lessee, in the name of such Indemnitee (or the Indemnitee, in its sole
discretion, may permit the Lessee, if permitted by law, to contest in
the name of the Lessee or such Indemnitee) the validity, applicability
and amount of such Taxes by (in the sole discretion of the Person
conducting such contest) (i) resisting payment thereof, (ii) not paying
the same except under protest, if protest is necessary and proper, or
(iii) if payment shall be made, seeking a refund thereof in appropriate
administrative and judicial proceedings; PROVIDED that (u) prior to
taking such action, the Lessee shall have agreed to pay such Indemnitee
all reasonable out-of-pocket costs and expenses that such Indemnitee
incurs in connection with and reasonably allocable to contesting such
claim, including, without limitation, all reasonable out-of-pocket
legal, accountants' and investigatory fees and disbursements, (v) if
such contest is to be initiated by the payment of, and the claiming of a
refund for, such Taxes, then notwithstanding Clauses 10.4 or 10.5, the
Lessee shall provide such Indemnitee with sufficient funds (on an
interest-free basis and at no additional net after-tax cost to such
Indemnitee) to make such payment, (w) such proceedings do not involve
(A) the likelihood of the sale, forfeiture or loss of the Aircraft,
Airframe any Engine or any Part, unless the Lessee shall have provided
security for the Lessee's obligations under this Clause 10 with respect
to such claim reasonably satisfactory to such Indemnitee and the
Beneficiary, or (B) any material risk of the imposition of criminal
penalties arising from the proper conduct of such proceeding, (x) the
Lessee shall have provided to the Indemnitee an opinion of the Lessee's
independent tax counsel (such counsel to be reasonably acceptable to the
Indemnitee) to the effect that a reasonable basis, within the meaning of
ABA Formal Opinion No. 85-352, exists for such contest, and (y) no
Termination Event shall have occurred and be continuing, unless the
Lessee shall have provided security for the Lessee's obligations under
this Clause 10 with respect to such claim satisfactory to such
Indemnitee. In any contest conducted by a Indemnitee, the Indemnitee
shall consult in good faith with the Lessee concerning the method and
the forum for such contest and shall permit the Lessee to review and
comment upon all written claims and submissions, but the Indemnitee
shall have ultimate control over all aspects of such contest. The Lessee
shall keep the Indemnitee fully informed as to the nature, conduct and
results of any contest conducted by the Lessee in the name of such
Indemnitee. Any Indemnitee may elect not to contest pursuant to this
Clause 10.6, or to settle any contest, but such election to settle or
not to contest without the written consent of Lessee (which consent
shall not be unreasonably withheld) shall constitute a waiver by such
Indemnitee of any right to indemnification pursuant to this Clause 10
with respect to the claim which was the subject of such proposed contest
or settlement, as the case may be (and any other claim or Tax with
respect to which a successful contest is foreclosed as the result of
such settlement or election not to contest) and, if the Lessee has
theretofore provided such Indemnitee with the funds to pay the Taxes
that are the subject of such proposed contest or settlement, as the case
may be, such Indemnitee shall promptly repay such funds.
Notwithstanding anything contained in this Clause 10 to the contrary,
the Indemnitee shall not be required to contest any claim if the subject
matter thereof shall be of a continuing nature and shall have previously
been decided adversely by a court of competent jurisdiction pursuant to
the contest provisions of this Clause 10.6, unless there shall have been
a change in law (or interpretation thereof) or a change in facts after
the date with respect to which such previous contest shall have been
decided, and the Indemnitee shall have received, at the Lessee's
expense, an opinion of independent tax counsel selected by the Lessee
and reasonably acceptable to such Indemnitee to the effect that as a
result of such change in law (or interpretation thereof) or a change in
facts, it is more likely than not that the Indemnitee will prevail in
such contest.
If any Indemnitee shall obtain a refund or credit of all or any part of
any Taxes that the Lessee, pursuant to this Clause 10.6, shall have paid
for or advanced to such Indemnitee or for which the Lessee shall have
reimbursed such Indemnitee, such Indemnitee shall, at such time as no
Termination Event shall have occurred and be continuing, promptly pay to
the Lessee an amount which, after the subtraction of the amount of any
further net tax savings actually realized by such Indemnitee as a result
of the payment under this paragraph, and the addition of any net tax
detriment realized by such Indemnitee as a result of the receipt or
accrual of such refund and any interest received or accrued by such
Indemnitee on such refund, is equal to the amount of such refund or
credit, plus any interest actually received or credited by such
Indemnitee on such refund or credit that is fairly attributable to any
Taxes paid by the Lessee to or for such Indemnitee; PROVIDED that such
Indemnitee shall not be obligated to make any payment to the Lessee
pursuant to this sentence (other than on account of interest actually
received or credited) to the extent that the amount of such payment
would exceed (x) the amount of all prior payments made by the Lessee to
such Indemnitee pursuant to this Clause 10 less (y) the amount of all
prior payments by such Indemnitee to the Lessee (other than that portion
of such payments attributable to interest payable to the Lessee
hereunder) pursuant to this Clause 10 (and the amount of any excess
described in this proviso shall reduce PRO TANTO the amount that the
Lessee is subsequently obligated to pay pursuant to this Clause 10
hereof). If it is later determined that the Indemnitee was not entitled
to such refund and such refund would not otherwise have been available
as a credit against a tax liability of such Indemnitee not indemnified
by the Lessee hereunder, the portion of such refund that is repaid,
recaptured or disallowed will be treated as Taxes for which the Lessee
must indemnify the Indemnitee pursuant to this Clause 10 without regard
to Clause 10.4. If the Indemnitee receives an award of attorney's fees
in a contest for which Lessee has paid an allocable portion of the
contest expenses, such Indemnitee shall pay to Lessee the same
proportion of the amount of such award as the amount of such
Indemnitee's attorney's fees paid or reimbursed by Lessee bears to the
total amount of the attorneys' fees actually incurred by the Indemnitee
in conducting such contest.
10.7 REPORTS. The Lessee will provide (at the Lessee's expense) such
information as is within its control and reasonably requested in writing
by an Indemnitee that is required or reasonably necessary to enable such
Indemnitee to fulfill its tax filing, audit or litigation requirements
with respect to the transactions contemplated by the Lease Documents. In
case any report, return or statement is required to be made or filed
with respect to Taxes for which the Lessee has an indemnity obligation
under this Clause 10, the Lessee shall promptly notify the Indemnitee of
such requirement and shall take the appropriate action specified in the
next succeeding sentence, PROVIDED that such Indemnitee shall have
furnished the Lessee at the Lessee's expense (with respect to reasonable
out-of-pocket costs and expenses only) with such information requested
by the Lessee, not within the control of the Lessee, as is in such
Indemnitee's control reasonably necessary to file such report, return or
statement. The Lessee shall either (i) to the extent permitted by law
(except for any such report, return or statement which the affected
Indemnitee has notified the Lessee that such Indemnitee intends to
prepare and file in its own name) or required by law, file in its own
name any report, return or statement required to be filed with respect
to Taxes for which the Lessee has an indemnity obligation under this
Clause 10, so as to show the beneficial ownership of the Aircraft,
Airframe and Parts in the Beneficiary and furnish the Indemnitee with a
copy of such report, return or statement, (ii) where such report, return
or statement is required to be in the name of or filed by such
Indemnitee or the Indemnitee otherwise requests that such report, return
or statement be filed in its name, if permitted by applicable law
prepare and deliver such report, return or statement (in each case, at
the expense of the Lessee (with respect to reasonable out-of-pocket
costs and expenses only)) to the Indemnitee in such manner as shall be
reasonably satisfactory to the Indemnitee within a reasonable time prior
to the time such report, return or statement is to be filed (but in no
event later than fifteen (15) days prior to the due date thereof) or
(iii) where such report, return or statement is required to reflect
items in addition to Taxes imposed on or indemnified against under this
Clause 10 as determined by such Indemnitee, provide such Indemnitee with
information with respect to such indemnified Taxes within Lessee's
control and required for the completion of such report, return or
statement within a reasonable time, sufficient to permit such report,
return or statement to be properly made and timely filed. Nothing in
this Agreement shall require the Lessee or an Indemnitee to violate any
law, regulation or administrative pronouncement of any taxing authority.
10.8 FORMS. Each Indemnitee agrees to furnish from time to time to the Lessee
or to such other person as the Lessee may designate, at the Lessee's
written request and expense (limited to reasonable out-of-pocket
expenses of such Indemnitee), such duly executed and properly completed
forms or other documentation as may be necessary or appropriate in order
to claim any reduction of or exemption from any withholding or other Tax
which the Lessee may be required to indemnify against hereunder (but
only if and to the extent such (x) Indemnitee is legally entitled to
furnish such forms or other documentation and (y) such forms or other
documentation may be filed by such Indemnitee without the imposition of
any Tax or related expense not indemnified by the Lessee hereunder). If
and to the extent that an Indemnitee fails to file or provide any such
form or other documentation and as a result thereof either (i) Tax
withholding is required at a rate which is higher than that which would
have been applicable had such return, statement or other documentation
been filed or provided or (ii) Tax withholding is required which would
not have been required had such form or other documentation been filed
or provided, Lessee's obligation to make the increased payment otherwise
required by Clause 10.2(a) hereof shall be limited to the amount which
would have been required if such Indemnitee had filed or provided such
form or other documentation.
10.9 VERIFICATION. At the Lessee's written request, the amount of any
indemnity payment by the Lessee to any Indemnitee or any payment by an
Indemnitee to the Lessee pursuant to Clause 10 shall be reviewed by an
internationally recognized independent accounting firm mutually
acceptable to the Indemnitee and the Lessee. In the case of indemnity
payments by the Lessee to an Indemnitee, such written request must be
received within ninety (90) days of receipt of the written demand under
Clause 10.5. In the case of payments by an Indemnitee to the Lessee, (i)
such written request must be received within ninety (90) days after
payment by an Indemnitee of any amounts due to the Lessee under this
Clause 10 (or, if later, ten (10) days after receipt of the
certification from the Indemnitee's firm of outside auditors, described
below, provided that the Indemnitee's firm of outside auditors receives
such request within ninety (90) days after such payment by the
Indemnitee), and (ii) within such notice period, the Lessee (or its firm
of outside auditors) has set forth in writing to the Indemnitee a
reasonable basis to assert that the amount of the payment was erroneous.
The Lessee may, at its sole cost and expense, request that the firm of
independent outside auditors of the Indemnitee certify to the firm of
independent outside auditors of the Lessee the basis for the computation
of such payment by the Indemnitee; PROVIDED that both auditing firms and
the Lessee agree to treat such matter on a confidential basis in
accordance with the confidentiality provisions set forth below, and that
the Lessee will have no right to review or inspect such certification or
any information referred to therein. The verifying accounting firm shall
be asked to verify, after consulting with the Lessee and the Indemnitee,
whether the Indemnitee's computations are correct, and to report its
conclusions simultaneously to both the Lessee and the Indemnitee. Each
Indemnitee and the Lessee hereby agree to provide such accountants with
all information and materials as shall be reasonably necessary or
desirable in connection herewith. The fees and expenses of the
accountants in verifying a payment amount pursuant to this Clause 10.9
shall be paid by the Lessee, unless the accountants shall determine that
the amount calculated by the Indemnitee is (i) more than 105 percent of
the correct amount in the case of a payment due from the Lessee to an
Indemnitee, or (ii) less than 95 percent of the correct amount in the
case of a payment made by an Indemnitee to the Lessee. In all other
cases, such fees and expenses of the accountants shall be paid by the
Lessee. Such accounting firm shall be requested to make its
determination within 30 days. In the event such accounting firm shall
determine that such computations are incorrect, then such firm shall
determine what it believes to be the correct computations. The
computations of the accounting firm shall be final, binding and
conclusive upon the Lessee and the Indemnitee, as the case may be. Any
information provided to such accountants by any Indemnitee shall be and
remain the exclusive property of and shall be deemed by the parties to
be (and the accountants will confirm in writing in a manner satisfactory
to the Indemnitee that they will treat such information as) the private,
proprietary and confidential property of such Indemnitee, and shall not
be disclosed by the accountants to any Person for any purpose, and all
such materials shall be returned to such Indemnitee. The Lessee shall
have no right to inspect the books, records, tax returns or other
documents of or relating to the Indemnitee, as the case may be. The
Lessee and each Indemnitee agree that the accounting firm's sole
responsibility shall be to verify the amount of any payment, and that
matters of interpretation of the terms of this Agreement are not within
the scope of such firm's responsibilities.
10.10 SURVIVAL. The rights and obligations of each Indemnitee and of the
Lessee under this Clause 10 shall survive the expiration or other
termination of this Agreement and the other Lease Documents.
11. GENERAL UNDERTAKINGS
11.1 The Lessee undertakes with the Lessor, until redelivery of the Aircraft
to the Lessor in accordance with this Agreement and thereafter until
satisfaction of all outstanding obligations of the Lessee under this
Agreement, that it will:
(a) CONSENTS AND AUTHORIZATIONS
without prejudice to paragraph 4 of Schedule 1, Part 1, obtain or
cause to be obtained, maintain in full force and effect and
comply in all material respects with the conditions and
restrictions (if any) imposed in, or in connection with, every
consent, authorization, license or approval of governmental or
public bodies or authorities or courts which are from time to
time reasonably necessary to enable the Lessee to perform its
obligations hereunder and under the Lessee Documents;
(b) PREPARATION OF ACCOUNTS
cause to be prepared in each financial year and cause to be
certified by its auditors consolidated financial statements which
are prepared in accordance with generally accepted accounting
principles and practices in Lessee's Country, which have been
consistently applied (save as disclosed in the relevant financial
statements)and correctly present in accordance with such
principles the consolidated financial position of the Lessee and
its Subsidiaries as at the end of the relevant financial year;
(c) SUPPLY OF ACCOUNTS AND OFFICER'S CERTIFICATE
deliver to the Lessor and Beneficiary as soon as available but
not in any event later than sixty (60) days after the last day of
each of the first three financial quarters of the Lessee, a copy
of its quarterly report on Form 10-Q, as filed with the
Securities and Exchange Commission; and as soon as available but
not in any event later than one hundred twenty (120) days after
the last day of each financial year of the Lessee, a copy of its
annual report on Form 10-K, as filed with the Securities and
Exchange Commission and, together with such report, an officer's
certificate, in the form attached hereto as Schedule 8, from a
responsible officer of the Lessee certifying that he is familiar
with the terms of this Agreement and that no Termination Event
has occurred and is continuing hereunder; and a copy of every
report, notice or like document issued by it to its shareholders
or creditors generally (in each case at or about the time of
issue thereof);
(d) LESSEE FINANCIAL INFORMATION
as promptly as practicable, provide the Lessor on a confidential
basis with such financial, operational and other information
concerning the Lessee and its affairs and (where relevant to the
Aircraft operations) its Subsidiaries and their respective
affairs as the Lessor may from time to time reasonably request in
writing.
11.2 The Lessee further undertakes with the Lessor that it will:
(a) STATUS REPORT
provide to the Lessor (aa) no later than the fifteenth (15th) day
after the expiration of each Accrual Period; (bb) no later than
the date falling within fifteen (15) days after the date of
expiry or termination of the Lease Period; and (cc) whenever
reasonably requested by the Lessor, a status report on the
Aircraft and the Engines in the form set out in Schedule 7
containing or indicating, inter alia, (i) the serial numbers of
the engines, then installed on the Aircraft and the owners of
such engines, (ii) the serial numbers, condition and whereabouts
of any Engines not then installed on the Aircraft, (iii) Engine
and Airframe utilization in Flight Hours and Cycles, (iv)
scheduled and unscheduled engine changes, (v) any variations in
the Approved Maintenance Programme for the Airframe and the
Engines, (vi) any material deferred items carried forward and
(vii) any damage reports in excess of the Threshold Amount;
(b) INFORMATION CONCERNING THE AIRCRAFT
provide the Lessor as promptly as practicable with such
information regarding the location, operation, use, insurance,
maintenance and condition of the Aircraft as the Lessor may from
time to time reasonably request in writing, including, without
limitation, copies of any agreement relating to the Aircraft in
the Lessee's possession. The Lessee will provide the Lessor with
a forecast of the major scheduled maintenance events (such as
Engine scheduled repairs, C Checks or their equivalent) so that
the Lessor may plan to be present during such events;
(c) INSPECTION
throughout the Lease Period permit the Lessor and/or its agents
or representatives to inspect the Aircraft at any reasonable time
upon giving the Lessee reasonable prior written notice and
provide them with appropriate temporary access to an office and
telephone. The Lessee will permit the Lessor to have the Lessor's
designated representatives present during any C Check or its
equivalent or major check or unscheduled repair or overhaul of
the Aircraft and will provide reasonable notice of such C Check
or equivalent or major check or (as soon as reasonably
practicable) a major repair to enable Lessor's representatives to
be present. The cost of such inspections shall be paid by the
Lessor in respect of the Lessor's annual inspection and survey of
the Aircraft and by the Lessee in respect of any inspection and
survey carried out by the Lessor as a result of any maintenance
failure by Lessee constituting a Relevant Event. All time taken
in respect of such inspections shall form part of the Lease
Period. The Lessor shall have no duty or liability whatsoever to
carry out or take any action arising out of any such visit or
inspection. Any such inspections by the Lessor of the Aircraft
shall not interfere with the Lessee's commercial flight
operations or delay the completion of any maintenance and will be
relevant to the work being accomplished on the Aircraft at the
time of inspection and any such inspection by Lessor shall be a
visual walk-around inspection which shall not include opening any
panels, bays or the like or any disassembly or removal of
components which are not then opened, disassembled or removed in
the course of Lessee's maintenance of the Aircraft at the time of
such inspection, provided that such limitations shall not apply
to inspections occurring (i) under Clause 19 hereof except to the
extent expressly provided therein or (ii) within a reasonable
time following a maintenance failure by Lessee constituting a
Relevant Event;
(d) NO OPERATIONAL INTEREST
not represent in any way that any Indemnitee is carrying goods or
passengers on the Aircraft or engaging in any operation of the
Aircraft or caring for, repairing or having any responsibility
for the condition of the Aircraft;
(e) COMPLIANCE WITH INSURANCES
comply with the terms and conditions of the Insurances, and not
do, consent to, or permit any act or omission which would
invalidate or render unenforceable the whole or any part of the
Insurances;
(f) AIR TRAFFIC CONTROL INFORMATION AND THIRD PARTY INFORMATION
where relevant when the Aircraft is under sublease, procure that
the Aviation Authority, Eurocontrol and any other relevant air
traffic control authority or airport shall furnish to the Lessor
upon the Lessor's request from time to time, statements of
account of all sums due by the sub-lessee to such authorities or
airports in respect of all aircraft (including, but not limited
to, the Aircraft) operated by the sub-lessee and shall provide
and, if applicable, procure that any sub-lessee shall provide to
the Lessor a letter substantially in the form of Schedule 8;
(g) STATUS OF THE LESSEE
not, without giving the Lessor thirty (30) day's prior notice,
change its chief executive office (as such term is defined in
Article 9 of the Uniform Commercial Code as in effect in the
State of Colorado) from ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇;
(h) CERTIFICATED AIR CARRIER
remain a Certificated Air Carrier and maintain its status so as
to fall within the purview of Section 1110 of Title 11 of the
United Status Code or any analogous statute which may replace
such statute and then be applicable;
(i) CITIZEN OF THE UNITED STATES
remain a Citizen of the United States.
11.3 The Lessee further undertakes with the Lessor that it will:
(a) DISPOSAL AND ENCUMBRANCE OF THE AIRCRAFT
not attempt or hold itself out as having any power to sell,
charge, lease or otherwise encumber or dispose of the Aircraft
(save as provided in Clause 12 (Sub-Leasing)), nor create, incur
or suffer to exist any Encumbrance over the Aircraft (other than
Permitted Liens);
(b) PREVENTION OF ARREST
not do, and will use its best reasonable endeavors to prevent,
any act which could reasonably be expected to result in the
Aircraft being arrested, confiscated, seized, taken in execution,
impounded, forfeited, detained in exercise or purported exercise
of any possessory lien or other claim or otherwise taken from the
possession of the Lessee and, if any such arrest, confiscation,
seizure, taking, impounding, forfeiture or detention occurs, the
Lessee will give the Lessor immediate notice thereof and will use
its best efforts to procure the prompt release of the Aircraft;
(c) NO PLEDGING OF CREDIT
not pledge nor allow any operator of the Aircraft to pledge the
credit of any Indemnitee for any maintenance, service, repairs,
overhauls of, or modifications to, or changes or alterations in,
the Aircraft or for any other purpose whatsoever;
(d) PROTECTION OF RIGHTS IN THE AIRCRAFT
The Lessee will do all acts and things which the Lessor may
reasonably request to protect and preserve the title, rights and
interest of the Head Lessor, the Beneficiary, the Lessor and the
Lenders (and to protect or perfect their rights under the
Security Documents) to and in the Aircraft within the
jurisdiction of any State of Registration or in any territory in
which the Aircraft is or may be based or operated. The Lessee
shall do such acts and things at its own cost and expense except
that, unless a Termination Event has occurred and is continuing,
the Lessor shall pay the reasonable out-of-pocket expenses
incurred by Lessee in doing such acts and things to protect and
preserve the rights and interest of the Head Lessor, the
Beneficiary or the Lenders. No action which may otherwise be
required by this Clause 11.3(d) shall deprive Lessee of any right
or privilege or result in the incurrence by Lessee of any
additional obligations except as otherwise expressly provided
herein.
12. SUB-LEASING
12.1 The Lessee will not at any time, without the prior written consent of
the Lessor, sub-lease, charter, hire or otherwise part with the
possession or operational control of the Aircraft; provided that this
Clause shall not prevent the Lessee from:
(a) putting the Aircraft in the possession of any qualified person
for the purpose of maintenance, service, repair or overhaul work
or any modifications, changes or alterations permitted under this
Agreement being carried out thereon;
(b) entering into and carrying out any charter, wet lease or other
agreement with respect to the Aircraft on terms whereby the
Aircraft will at all times be operated by air crew employed by
and subject to the operational control of the Lessee; provided
that any such charter or other agreement shall be permitted by
the laws of the Lessee's Country and shall be subordinate in all
respects to this Agreement and will not in any event be capable
of extending beyond the end of the Lease Period.
The consent of the Lessor to any approved sub-lease to another aircraft
operator shall not be unreasonably withheld or delayed but may be based,
among other things, on the criteria that:
(i) any such sub-lease does not extend beyond the Lease Term;
(ii) any such sub-lease does not allow such operator to take any
action that the Lessee is not permitted to take under this
Agreement, is consistent with the terms of this Agreement and
permits discharge of all of the Lessee's undertakings under this
Agreement;
(iii) any such sub-lease shall be subject to and subordinate to all of
the terms of this Agreement and the Sub-Lessee signs a
subordination and undertaking in favor of the Lessor and the Head
Lessor;
(iv) the Aircraft remains registered in the State of Registration
unless the consent of the Lessor to re-register the Aircraft in
the state where any proposed Sub-Lessee has its principal place
of business has been obtained and the Lessee pays all reasonable
out-of-pocket expenses incurred by Lessor, Head Lessor and
Lenders (including, but not limited to legal fees and filing
expenses) in connection with such re-registration;
(v) such operator is not subject to proceedings of the type described
in clauses 20.1(b), 20.1(i), 20.1(j) or 20.1(k) at the
commencement of any such sub-lease;
(vi) no such operator shall have any right to further sub-lease the
Aircraft;
(vii) the country in which the principal place of business of such
operator is located maintains diplomatic relations with Ireland,
Japan, the United Kingdom and the United States of America and
there are no hostilities or any imminent threat of hostilities
between such country and the aforementioned countries;
(viii) the Lessee shall, regardless of any sublease remain primarily
liable for all obligations under this Agreement;
(ix) the Lessee shall provide the Lessor with a copy of any proposed
sub-lease for review twenty (20) days prior to delivery of the
Aircraft thereunder together with such financial and other
information in relation to the proposed Sub-Lessee as the Lessor
may reasonably request and the Lessee shall provide evidence
reasonably requested by the Lessor of the ability of the proposed
Sub-Lessee to perform its obligations under the proposed
sub-lease;
(x) the Lessee shall assign any such sub-lease to the Lessor as
security for the Lessee's obligations hereunder; and
(xi) the Lessee adequately indemnifies the Lessor and the Head Lessor
in respect of any out-of-pocket costs incurred or adverse tax
consequences arising resultant upon such proposed sub-lease and
pays their reasonable out-of-pocket fees and expenses (including,
but not limited to legal fees) reasonably incurred in connection
with such proposed sublease.
13. OPERATIONS AND MAINTENANCE
13.1 The Lessee further undertakes with the Lessor that throughout the Lease
Period it will at its own cost and expense:
(a) CERTIFICATES AND LICENSES
obtain and maintain in full force and effect all necessary
certificates, licenses, permits and authorizations required for
the use and operation of the Aircraft, including, but without
limitation, an Air Carrier's Certificate, a standard Certificate
of Airworthiness with respect to the Aircraft in the public
transport passenger category issued by the Aviation Authority
(subject to Clause 18) and such certificates of maintenance as
are required for the Aircraft to be used for the public transport
of passengers or cargo in the State of Registration;
(b) OPERATION AND USE
(i) procure that the Aircraft is used, operated and controlled
in accordance with applicable laws, ordinances, rules,
regulations, orders or requirements of the State of
Registration (and of any country or territory to, from, in
or over which the Aircraft may be flown) and in accordance
with applicable certificates, licenses, permits,
authorizations and registrations relating to the Aircraft,
and regardless of the person upon whom any of the same are
by their terms imposed;
(ii) use the Aircraft solely in commercial or other operations
for which the Lessee is duly authorized by the laws of the
State of Registration and/or any jurisdiction to whose laws
the Lessee's operation of the Aircraft is subject and the
Lessee shall procure that the Aircraft will not be used for
any purpose for which it is not designed or reasonably
suited, or outside the tolerances and limitations for which
the Aircraft was designed (provided that any such use
resulting from a nonrecurring circumstance not within the
control of the Lessee shall not be deemed to violate this
provision) and so as not to invalidate any manufacturer's
warranties and will be operated in accordance with the
Manuals and Technical Records. The Lessee shall, and shall
procure that, the Aircraft is not used for the carriage of
(A) whole animals, living or dead, except in the cargo
compartments according to IATA regulations, and except for
domestic pets carried in a suitable container designed to
prevent the escape of any liquid and to ensure the welfare
of the animal and handicap passenger help animals in the
passenger cabin, or (B) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, waste or any
nuclear assemblies or components, except as permitted for
passenger aircraft under the "Restriction of Goods Schedule"
issued by IATA, or (C) any other goods, materials or items
which would reasonably be expected to cause damage to the
Aircraft and which would not be adequately covered by the
Insurances, and, save for the benefit of the Lessee's or
sublessee's cockpit personnel, the Lessee shall, and shall
procure that, the Aircraft is not utilized for the purposes
of training, qualifying or re-confirming the status of
cockpit personnel, and then only if the use of the Aircraft
for such purpose is not reasonably disproportionate to the
use for such purpose of other Aircraft of the same type
operated by the Lessee;
(iii) procure that the Aircraft will not be used for any purpose
or in any manner not fully covered by the Insurances, or
outside any geographical limit imposed by the Insurances,
or for any illegal purpose or in an illegal manner;
(iv) ensure that the crew and engineers employed by the Lessee
in connection with the maintenance and operation of the
Aircraft shall have such qualifications and hold such
valid licenses as are required by the Aviation Authority
and all applicable laws and regulations;
(v) not cause or permit the Aircraft to proceed to, or remain
at, any location which is then the subject of a
prohibition order (or any similar order or directive),
sanctions or restriction by or under the US International
Economic Emergency Powers Act or the United Nations
Security Council;
(c) BASE OF OPERATIONS
except with the prior written consent of the Lessor, ensure that
the Aircraft shall be based in and operated from Lessee's Country
and that it will not be located outside Lessee's Country for a
period of more than fourteen (14) consecutive days or, in each
case (if longer), the term of a permitted sublease, charter or
wet lease or for the time required to accomplish any Major Check,
repair or overhaul;
(d) MAINTENANCE
ensure that the Aircraft is maintained, serviced, repaired and
overhauled by the Lessee or, in the case of Major Checks by the
Approved Maintenance Performer, in accordance with the Approved
Maintenance Programme and in full compliance with the tasks
required by the MPD by properly qualified personnel acceptable to
the Aviation Authority so as to:
(i) keep the Aircraft in good repair, condition and appearance,
airworthy so as to maintain the FAA airworthiness
certificate on the Aircraft (subject to Clause 18), clean by
Airline Standards, in as good operational condition as when
delivered to the Lessee on the Delivery Date, fair wear and
tear excepted and to at least the same standard as other
aircraft which it owns or operates, PROVIDED, HOWEVER, that,
with respect to inspections and modifications not subject to
clause 13.1(d)(ii), if no Relevant Event has then occurred
and is continuing, during the last year of the Lease Term,
the Lessee shall not be obligated to perform an alteration,
modification or addition to the Aircraft solely because it
has performed such modification, alteration or addition on
other aircraft which it owns or operates if (aa) such
modification, alteration or addition is not otherwise
required by the terms of this Clause 13.1(d)(i) or any other
provision of this Agreement, (bb) such alteration,
modification or addition is not the incorporation of a
service bulletin or, if it is such incorporation, costs in
excess of $[ ]* in April 1997 Dollars and (cc) Lessee
provides Lessor with written notice as soon as is reasonably
practicable but, in any event, not later than 6 (six) months
prior to the end of the Lease Term of its decision not to
perform any such alteration, modification or addition on the
Aircraft;
(ii) comply with all airworthiness directives or similar alert
advisory requirements affecting airworthiness and all
mandatory inspection and modification requirements
applicable to the Aircraft or any Part issued during the
Lease Term and/or having a compliance date during the Lease
Term or within three hundred and sixty (360) days after the
redelivery of the Aircraft and which are required by the
Aviation Authority and/or the FAA or by any manufacturer of
the Aircraft or any Engine or Part. If the Lessee applies to
or canvasses the Aviation Authority to postpone any
compliance date noted in this Clause and such postponement
would affect the condition of the Aircraft when it is
redelivered under Clause 19 hereof, then Lessee, not later
than the end of the Lease Term, shall, if such application
was granted by the Aviation Authority (as reasonably
evidenced in writing to Lessor), pay the out-of-pocket costs
to Lessor (as reasonably estimated by Lessor) to comply with
such requirement unless such application or canvass (aa) was
also made by other U.S. airlines similarly situated to
Lessee with respect to Boeing 737-300 aircraft and (bb) was
made by Lessee with respect to other applicable 737-300
aircraft operated by Lessee;
(iii) comply with all applicable laws, ordinances, rules,
regulations, orders and requirements of the State of
Registration and other aviation authorities with
jurisdiction over the Lessee or the Aircraft or any Part
or to, from, or over which the Aircraft may be flown;
(iv) maintain in good standing a current certificate of
airworthiness (in the appropriate category for the nature
of the operations of the Aircraft) for the Aircraft issued
by the Aviation Authority (subject to Clause 18) and will
from time to time provide to the Lessor a copy on request;
(v) if required by the Aviation Authority, maintain a current
certification as to maintenance issued by or on behalf of
the Aviation Authority in respect of the Aircraft and will
from time to time provide to the Lessor a copy on request;
(vi) maintain, inspect, function check, protect and repair the
Aircraft in accordance with the Approved Maintenance Program
to the same standards, with the same care and without
discrimination to other aircraft owned or leased by the
Lessee and perform in accordance with the MPD, each of the
Structural Inspection, Zonal Inspection, Corrosion
Protection/Prevention tasks during the Lease Period. In the
event that the Lessee operates a structural inspection
sampling program in respect of the Aircraft during the Lease
Period, such program shall be operated strictly in
accordance with the MPD. The Lessee shall accomplish all
service bulletins that the Lessee generally incorporates
into aircraft in its fleet of Boeing 737 aircraft;
(vii) maintain the Aircraft in accordance with Part 121 of the
FAR and any other Rules and Regulations of the FAA as may
be applicable to passenger category aircraft, except to
the extent that they conflict with the rules and
regulations of the Aviation Authority;
(viii) remedy any damage or defect shown to be required by any
inspection effected pursuant to Clause 11.2(c)
(Inspection) and as otherwise required by the terms of
this Agreement; and
(ix) comply with the return conditions referred to in Clause 19
(Redelivery) at the end of the Lease Period or when the
Aircraft is required to be redelivered pursuant to Clause
21;
(e) REPLACEMENT OF ENGINES AND PARTS
ensure that any Engine or any Part installed in the Airframe or
any Engine which has become worn out, lost, destroyed,
confiscated, unserviceable, time expired, or otherwise unfit for
use or which the Lessee is required to replace under any
provision of this Agreement other than this Clause 13.(e) is
promptly replaced with an item of the same make and model or an
improved or advanced version thereof, of at least equivalent
value (having regard to service bulletin modification status,
shop visit history (other than Flight Hours or Cycles since last
Engine Shop Visit in respect of time on the Engine at such Engine
Shop Visit), Engine Life Limited Parts status and component hard
time life status, but otherwise without regard to the hours and
cycles on such replacement engine or part, provided that the
applicable credits are adjusted as provided in Clause 13.4(d)
hereof), which is suitable for installation and use on the
Airframe or Engine without diminishing the value or utility
thereof and, if such replacement occurs at the end of the Lease
Period, such replacement engine or part shall meet the applicable
requirements of Clause 19 and Schedule 4;
(f) REMOVAL OF PARTS
subject to Clause 13.2 (Temporary Installation of Parts), ensure
that any Part installed in the Airframe or any Engine is not at
any time removed therefrom otherwise than during the course of
maintaining, servicing, repairing, overhauling or testing the
Airframe or such Engine, or making such modifications, changes or
alterations to the Airframe or such Engine as are permitted under
this Agreement, and then only if it is promptly reinstalled, or
promptly replaced or substituted by an item complying with the
provisions of Clause 13.1(e) and 13.1(g);
(g) INSTALLATION OF ENGINES AND PARTS
ensure that, save in accordance with Clause 13.2 and 13.3, no
engine is installed in the Airframe and no Part is installed in
the Airframe or any Engine, whether by way of substitution,
replacement, renewal, mandatory improvement or addition unless it
meets the requirements of Clause 13.3(e) and it is (i) then the
property of the Head Lessor or the Beneficiary and subject to the
Mortgage or (ii) is such that on installation in the Airframe or
Engine title thereto shall vest in the Head Lessor and become
subject to the charge created by the Mortgage but be otherwise
free from Encumbrances (other than Permitted Liens), in which
case the Lessee shall ensure that there is promptly recorded in
the Manuals and Technical Records an acknowledgement that title
thereto does so vest in the Head Lessor as aforesaid, which
acknowledgement in the case of any Engine shall specify the
manufacturer's serial number of the substitute or replacement
Engine, and the Lessee shall ensure that as soon as practicable
thereafter a notification that title does so vest in the Head
Lessor is delivered to the Lessor;
(h) NON-INSTALLED ENGINES
ensure that any Engine which is not installed on the Aircraft or
any other aircraft pursuant to the provisions of Clause 13.3
(otherwise than during the course of maintaining, servicing,
repairing, overhauling or testing any such Engine) is properly
and safely stored in accordance with its relevant maintenance
manual and kept free from Encumbrances other than Permitted Liens
and that appropriate insurance cover is effected in respect of
any Engine or Parts belonging to the Head Lessor or the
Beneficiary which are not installed on the Airframe or any
Engine;
(i) NAMEPLATES
ensure that there is affixed and kept a fireproof nameplate of
not less than 10cm x 7cm in a reasonably prominent position on
the flightdeck or cockpit of the Aircraft stating that the
Aircraft is the property of the Head Lessor, is subject to the
Trust Agreement, is leased to the Lessor and is subject to the
Mortgage, and that there is affixed and kept a fireproof
nameplate of not less than 10cm x 7cm in a reasonably prominent
position on each Engine stating that the relevant Engine is the
property of the Head Lessor, is subject to the Trust Agreement,
is leased to the Lessor and is subject to the Mortgage and in
each case will ensure that the same is not covered or painted
over;
(j) ALTERATIONS
procure that no modification to or change or alteration in the
Aircraft is made which will have the effect of reducing the value
or airworthiness of the Aircraft except as (i) necessary for
compliance with the provisions of this Agreement or (ii) required
by the Manufacturer or (iii) required by the Aviation Authority;
(k) CHANGES TO APPROVED MAINTENANCE PROGRAMME
the Lessee shall provide to the Lessor, in advance for its
approval, a copy of the Lessee's Approved Maintenance Programme
and all subsequent revisions adopted by the Lessee and approved
by the Aviation Authority as and when the same are issued,
approved and incorporated and in no event shall the Approved
Maintenance Programme be amended by the Lessee in any manner
which would have a material adverse effect on the redelivery
provisions of this Agreement and/or on the residual value of the
Aircraft without the prior written approval of the Lessor, such
approval not to be unreasonably withheld.
13.2 TEMPORARY INSTALLATION OF PARTS
Provided that no Termination Event shall have occurred and be
continuing, the Lessee shall be entitled to install any part on the
Airframe or any Engine by way of substitution or replacement
notwithstanding that such installation is not in accordance with Clause
13.1(e) and Clause 13.1(g) if such substitute or replacement part is
suitable for installation and use on the Airframe or Engine and (a)
there shall not have been available to the Lessee at the time and in the
place that such part was required to be installed on the Airframe or any
Engine a substitute or replacement Part complying with the requirements
of Clause 13.1(e) and Clause 13.1(g), and (b) it would have resulted in
an unreasonable disruption of the operation of the Aircraft and/or the
business of the Lessee as an airline to have grounded the Aircraft until
such time as a Part complying with the requirements of Clause 13.1(e)
and Clause 13.1(g) became available for installation in the Airframe or
any Engine, and (c) as soon as practicable after installation of the
same on the Airframe or any Engine, the Lessee shall ensure that any
such Part not complying with the requirements of Clause 13.1(e) and
Clause 13.1(g) is removed and replaced or substituted by a Part
complying with the requirements of Clause 13.1(e) and Clause 13.1(g).
13.3 INTERCHANGE OF ENGINES
(a) GENERAL PRINCIPLES
(i) The Lessee shall not at any time during the Lease Period
remove an Engine from the Airframe or install any engine other than an
Engine (complying with the provisions of Clause 13.1(e) and 13.1(g)) on
the Airframe except (aa) for purposes of engine management, maintenance
or repairs to an Engine permitted by this Agreement or (bb) as expressly
permitted by this Clause 13.3.
(ii) If an Engine is at any time removed from the Airframe for
purposes of maintenance or repairs, the Lessee shall complete the same
or procure that same are completed, as soon as practicable after
removal.
(iii) Except in accordance with Clause 13.3(c) or 13.3(d), the
Lessee shall not at any time during the Lease Period install a Removed
Engine on an airframe other than the Airframe.
(iv) If an Engine is at any time removed from the Airframe for
any reason whatsoever, title to such Removed Engine shall remain vested
in the Head Lessor at all times (other than as provided in Clause
13.1(e) and Clause 13.1(g)), subject to the Head Lease, the Trust
Agreement, this Agreement and the Mortgagee and the Lessee shall not
take any steps which may reasonably be expected to (aa) jeopardize the
Head Lessor's ownership rights in the Removed Engine or (bb) lead
reasonable third parties to believe that the Removed Engine is the
property of any person other than the Head Lessor or (cc) create, incur
or suffer to exist any Encumbrance other than a Permitted Lien over such
Removed Engine.
(b) TEMPORARY REMOVAL OF ENGINES
Except as provided in Clause 13.3(c), if an Engine shall become
unserviceable at any time or if scheduled maintenance works are required
to be performed on such Engine, the Lessee shall be entitled to remove
such Engine from the Airframe and to install an engine owned or operated
by the Lessee and suitable for installation and use on the Airframe
provided that the following conditions are satisfied:
(i) it would have resulted in an unreasonable disruption of the
operation of the Aircraft and/or the business of the Lessee as an
airline to have grounded the Aircraft until such time as a Removed
Engine became available for re-installation on the Airframe;
(ii) the Lessee shall have notified the Lessor prior to or, in
the case of urgency as soon as practicable after, the making of such
substitution; and
(iii) as soon as practicable after installation of the same on
the Airframe (and in any event no later than 120 days thereafter), the
Lessee shall move the installed engine and re-install a Removed Engine.
(c) POOLING OF ENGINES WITHIN THE LESSEE'S FLEET
(i) In this Clause 13.3(c), "Fleet Aircraft" means any Boeing
737-300 aircraft from time to time operated by the Lessee.
(ii) The Lessee shall be entitled, so long as no Termination
Event shall have occurred and be continuing, to remove an Engine from
the Airframe and to install on the Airframe an engine provided that:
(aa) such engine is leased to the Lessee with a Fleet
Aircraft, is owned by the Lessee or otherwise leased to the Lessee and
is suitable for installation and use on the Airframe;
(bb) the Removed Engine is, during the period of
substitution, either being safely housed and sheltered in accordance
with Manufacturer's recommendations and this Agreement or repaired or
maintained in accordance with this Agreement, or is installed on a Fleet
Aircraft in compliance with Clause 13.3(c)(iii) hereof;
(cc) the Lessee maintains insurance cover in accordance
with this Agreement for the Engine Agreed Value in respect of the
Removed Engine at all times while it is installed on a Fleet Aircraft;
and
(dd) prior to the expiration or termination of the Lease
Period, such engine is removed from the Airframe and the Removed Engine,
or, at the end of the Lease Period, an Engine complying with the
provisions of Clause 13.1(e) and 13.1(g), is installed on the Airframe.
(iii) The Lessee will be entitled, so long as no Termination
Event shall have occurred and be continuing, to install an Engine on a
Fleet Aircraft:
(aa) owned and operated by Lessee free from any Liens;or
(bb) leased to Lessee on a long-term basis and on terms
whereby Lessee has full operational control of the aircraft or purchased
by Lessee subject to a conditional sale or other security agreement
PROVIDED THAT: (1) the terms of any such lease, conditional sale
agreement or security interest will not have the effect of impairing the
title and interests of Lessor as owner and lessor of the Engine; and (2)
the lessor under such lease, the seller under such conditional sale
agreement or the holder of such security interest, as the case may be,
has confirmed and acknowledged in writing, in form and substance
reasonably satisfactory to Lessor, that it will respect the interests of
Lessor as owner and lessor of that Engine and that it will not seek to
exercise any rights whatever in relation thereto (it being understood
that such agreement may be in the form described in Clause 13.3(c)(iv),
in which case such agreement need not be provided to Lessor).
(iv) In the event the Lessee shall have received from the lessor
or secured party of any Fleet Aircraft leased to Lessee or owned by
Lessee subject to a conditional sale or other security interest a
written agreement complying with Clause 13.3(c)(iii)(bb) hereof (which
agreement may be contained in the lease, conditional sale or other
security interest covering such Fleet Aircraft) and such lease or
conditional sale or other security interest covering such Fleet Aircraft
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 interest, 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,
conditional sale or other security interest and owned by such lessor or
subject to a security interest in favor of such secured party.
(d) POOLING OF ENGINES WITH OTHER OPERATORS
the Lessee may, with the prior written consent of the
Lessor (such consent not to be unreasonably withheld) lease, let or hire
or charter or otherwise part with possession of an Engine (on terms
conferring no more than a contractual right against the Lessee but not
rights against the Engine) pursuant to pooling arrangements to which the
Lessee is a party and which either:
(i) are arrangements involving responsible, solvent
scheduled Certificated Air Carriers;
(ii) do not contemplate transfer of title to any pooled
Engine (or if title is so transferred, such transfer will be deemed an
event of loss under Clause 13.1(e)); and
(iii) either provide that the Lessor (or at the Lessor's
direction, any of the Indemnitees) will be sole loss payee in respect of
any loss or damage to such Engine for the Engine Agreed Value, or
provide for the Head Lessor to acquire title to a substitute engine free
from Encumbrances satisfying the conditions set out in Clause 13.1(e) if
the Engine is a Total Loss.
13.4 MAINTENANCE ACCRUALS
(a) In addition to rent, with respect to each Accrual Period, the
Lessee shall pay to the Lessor maintenance accruals ("MAINTENANCE
ACCRUALS") as follows:
(i) in respect of airframe maintenance accrual, an amount equal
to (a) the applicable amount set forth in paragraph 3 of
Letter Agreement No. 1; MULTIPLIED BY (b) the number of
Flight Hours operated by the Aircraft during such Accrual
Period ("AIRFRAME MAINTENANCE ACCRUAL") (as adjusted from
time to time); and
(ii) in respect of an engine maintenance accrual, in respect of
each Engine an amount equal to (a) the applicable amount set
forth in paragraph 3 of Letter Agreement No. 1; MULTIPLIED
BY (b) the number of Flight Hours operated by such Engine
during such Accrual Period ("ENGINE MAINTENANCE ACCRUAL")
(as adjusted from time to time); and
(iii)in respect of Engine Life Limited Parts maintenance accrual
in respect of each Engine, an amount equal to (a) the
applicable amount set forth in paragraph 3 of Letter
Agreement No. 1; MULTIPLIED BY (b) the number of Cycles
operated by each Engine during such Accrual Period ("ENGINE
LIFE LIMITED PART MAINTENANCE ACCRUAL" (as adjusted from
time to time); and
(iv) in respect of Landing Gear accrual, an amount equal to (a)
the applicable amount set forth in paragraph 3 of Letter
Agreement No. 1; MULTIPLIED BY (b) the number of Flight
Hours operated by the Aircraft during such Accrual Period
("LANDING GEAR MAINTENANCE ACCRUAL") (as adjusted from time
to time).
The Airframe Maintenance Accrual, Engine Maintenance Accrual,
Engine Life Limited Part Maintenance Accrual, and Landing Gear
Maintenance Accrual accruing in any Accrual Period shall be paid by the
Lessee to the Lessor not later than fifteen (15) days after the expiry
of such Accrual Period (other than the final Accrual Period) with the
amount payable in respect of the final Accrual Period being paid on the
date of the end of the Lease Period. Concurrently with the payment
thereof, the Lessee shall deliver the status report specified in
Schedule 7 duly completed.
(b) The rates of Airframe Maintenance Accrual, Engine Maintenance
Accrual, Engine Life Limited Part Maintenance Accrual and
Landing Gear Maintenance Accrual will be subject to adjustment
annually by reference to the formula contained in Schedule 1,
Part 4 to take account of movements in the cost of relevant
labor or materials.
(c) Payments by way of Maintenance Accruals received by the Lessor
shall be credited, in the proportions corresponding to the rates
specified in Clause 13.4(a), to separate credits to be known as
the "Airframe Maintenance Credit", "No.1 Engine Maintenance
Credit", "No.2 Engine Maintenance Credit" (there being one such
Engine Maintenance Credit for each Engine), "No. 1 Engine LLP
Maintenance Credit", No. 2 Engine LLP Maintenance Credit (there
being one such Engine LLP Maintenance Credit for each Engine)
and "Landing Gear Maintenance Credit" which credits shall reduce
as monies are paid to the Lessee with respect to the applicable
credit in accordance with Clause 13.4(d). The credits shall be
solely for the purpose of determining the amounts payable by
Lessor to Lessee pursuant to Clause 13.4(d) and Lessor shall
have no obligation to place the Maintenance Accruals in a
segregated account or to account for them to the Lessee in any
way other than through its payment obligations to the Lessee
under Clause 13.4(d).
(d) Upon submission by the Lessee to the Lessor of certified
invoices or receipts evidencing the performance in accordance
with the provisions of this Agreement by or at the direction of
the Lessee of:
(i) with respect to the Airframe, the accomplishment of the
Major Check tasks in accordance with the MPD ("AIRFRAME
MAINTENANCE"); or
(ii) with respect to any Engine, the performance of an Engine
Shop Visit ("ENGINE MAINTENANCE"); or
(iii) with respect to Engine Life Limited Parts, the replacement
of any Engine Life Limited Part during off-the-wing Engine
shop visit maintenance or repair other than replacement (a)
arising as a result of foreign object damage, or,
operational mishandling (being an operation or event on the
ground or in the air whereby, due to negligence, the
tolerances, limits and/or recommended maximums and minimums
and/or other operation matters as specified in the Aircraft
flight, operational, maintenance and other relevant manuals
or documents are not complied with by any person) save to
the extent such replacement results in the refurbishment or
"betterment" of the Engine; or (b) following premature
failure except that in the event of the premature failure
leading to the replacement of any Engine Life Limited Part a
drawing will be permitted by the Lessor in respect of such
replacement, however, the amount of the drawing shall be
reduced by the amount of any available warranty claim with
respect to such premature failure and capped at the funds
available in the Engine LLP Maintenance Credit, any
shortfall being for the account of the Lessee; and/or (c)
maintenance and repair of spare engines and associated
engine build up units and/or the removal, installation,
maintenance and repair of QEC (Quick Engine Change) kits
("ENGINE LLP REPLACEMENT"); or
(iv) with respect to Landing Gear, the performance of scheduled
overhaul in accordance with the Approved Maintenance
Programme ("LANDING GEAR MAINTENANCE");
the Lessor shall, provided that a Relevant Event shall not
have occurred and be continuing, pay to the Lessee or
directly to the relevant maintenance performer (as
appropriate) within fifteen (15) Banking Days of receipt of
the documentation sufficient to enable the Lessor to
determine the amounts owed as provided in Clause 13.4(e), in
the case of Airframe Maintenance, to be deducted from the
Airframe Maintenance Credit and, in the case of Engine
Maintenance, from the applicable Engine Maintenance Credit
relating to the Engine the subject of such Engine
Maintenance and, in the case of Engine LLP Replacement from
the applicable Engine LLP Maintenance Credit and, in the
case of Landing Gear Maintenance, from the Landing Gear
Maintenance Credit, a sum equal to the aggregate amount
evidenced by such invoices or receipts, to the extent there
is sufficient credit in such Airframe Maintenance Credit or
relevant Engine Maintenance Credit or relevant Engine LLP
Maintenance Credit or Landing Gear Maintenance Credit. To
the extent that there is insufficient credit in such
Airframe Maintenance Credit, relevant Engine Maintenance
Credit or relevant Engine LLP Maintenance Credit or Landing
Gear Maintenance Credit, the Lessee shall be liable to, and
shall forthwith, pay the shortfall to the relevant
maintenance performer. Lessor shall have no obligation to
make any payments or otherwise to account to Lessee for any
credits remaining in the aforementioned maintenance credits
at the expiration or other termination of the Lease Period
except that Lessor shall pay Lessee an amount equal to the
outstanding amount of such credits if the Lease Period has
terminated pursuant to Clause 17.4 hereof and the Lessor has
received the Agreed Value for the Aircraft.
(e) The Lessor shall not be required to pay moneys to the Lessee or
directly to the relevant maintenance performer (as appropriate)
as provided for by this Clause 13.4 until such time as it shall
have received reasonable documentation adequate to enable it to
determine the amount to be paid (in which case, for the
avoidance of doubt, it must pay such amounts pursuant to Clause
13.4(d) within fifteen (15) Banking Days thereafter). The
documentation delivered by the Lessee to the Lessor evidencing
the incurring of expenses shall include an invoice, a shop
workscope, a shop visit or maintenance visit report and if
reasonably requested any additional substantiating data from the
person that performed such maintenance or, if performed by the
Lessee, a statement of completion thereof together with
completed work cards or other documents requested by the Lessor
and a certificate from an authorized representative of the
Lessee that the amounts and other information set forth in such
statement and invoice are correct. Any overhaul or other work
performed by the Lessee or by any affiliated or associated
company of the Lessee shall be invoiced at the Lessee's or such
affiliated or associated company's actual cost of material
without ▇▇▇▇-up or profit and its fully burdened labor cost
capped at 130% of Lessee's internal manhour rate of performing
such work without any ▇▇▇▇-up or profit (as reasonably
demonstrated by documentation delivered to Lessor).
(f) If an Engine is replaced as provided in Clauses 13.1(e) and (g)
hereof, at the time of such replacement the applicable Engine
Credit and LLP Maintenance Credit will be adjusted either upward
by payment by Lessee of Engine Maintenance Accrual and/or Engine
Life Limited Part Accrual with respect of such Engine in amounts
determined as provided in Clause 13.4(a) hereof or downward by
payments by Lessor to Lessee if the amount of the current amount
of the credits is too high. Specifically, the value of any
Engine Maintenance Accrual Credit will be determined by direct
comparison of prior Engine Shop Visit history, work scopes and
histories of the relevant engines. The Lessee shall provide
Lessor with documentation adequate, in the reasonable
determination of the Lessor, to enable Lessor to verify the
amounts of such adjustments.
13.5 The Lessor shall have no duty to determine whether the Aircraft,
Airframe, Engine or any Part requires overhaul or maintenance, or to
observe, or inspect the overhaul or maintenance of the Aircraft,
Airframe, any Engine or any Part, and the Lessor shall not incur any
liability or obligation to Lessee by reason of the failure of the
Aircraft to be properly overhauled or maintained or by reason of the
Lessor's election to observe or inspect or not to observe or inspect any
overhaul or maintenance.
14. MANUALS AND TECHNICAL RECORDS
14.1 Throughout the Lease Period the Lessee shall keep, and shall procure
that there are kept, accurate, complete and current records of all
flights made by the Aircraft, and of all maintenance and repairs carried
out to the Airframe and each Engine, and shall maintain, and shall
procure that there are maintained, all other records, logs and documents
including, but not limited to, JAA Form 1 and/or FAA 8130 Tags and
repair or overhaul shop visit reports which are required to be
maintained in respect of the Aircraft by the Aviation Authority, and
shall allow the Lessor and/or its agents or representatives to examine
and take copies of such records at any reasonable time upon giving
notice to the Lessee.
14.2 The records so kept shall conform with the regulations from time to time
in force of the Aviation Authority, and with the normal practices of
public air transport operators, and shall disclose the whereabouts of
all Engines and Parts not installed on the Airframe.
14.3 The records so kept shall be in English, shall be part of the Manuals
and Technical Records and shall be the property of the Lessor and
subject to the Mortgage and, at the end of the Lease Period, the Lessee
shall deliver the same to the Lessor, provided that the Lessee shall be
entitled to make and retain copies thereof.
14.4 The Lessee shall (save as hereinafter provided) keep all the Manuals and
Technical Records on the Aircraft or in its possession or in the
possession of the Approved Maintenance Performer, and shall not permit
any other person (other than a person entitled to have possession or
control of the Aircraft under the terms of this Agreement) to have
possession of or control over the Manuals and Technical Records or any
of them, except with the prior written consent of the Lessor.
14.5 The Lessee will compensate the Lessor (a) for overhaul cost and/or life
limited part replacement cost, if any, reasonably incurred in respect of
the Aircraft resultant upon the failure to maintain adequate historical
records by the Lessee during the Lease Term as required by the Aviation
Authority; and (b) for all recertification costs incurred in respect of
any Parts resultant upon the failure by the Lessee to maintain JAA Forms
1 and/or FAA 8130 Tags in respect of each Part.
15. TITLE AND REGISTRATION
15.1 Title to the Aircraft shall remain vested in the Head Lessor, subject to
this Agreement, the Head Lease, the Trust Agreement, the Security
Documents and any assignments, charges or other disposals the Head
Lessor or the Beneficiary and/or the Lessor may make in accordance with
Clause 23 (Assignment).
15.2 (a) Subject to Clause 13.3, the Lessee agrees that all Engines and
Parts installed on the Airframe or any Engine at Delivery shall be the property
of the Head Lessor, subject to the Head Lease, the Trust Agreement and this
Agreement and that, subject to Clause 13.1(f), 13.2 and Clause 13.3, all
replacements, renewals or substitutions thereof shall be made with engines or,
as the case may be, parts which comply with the requirements of Clause 13.1(e)
and Clause 13.1(g).
(b) Any Engine or Part at any time removed from the Airframe or
any Engine shall remain the property of the Head Lessor and subject to the Head
Lease, the Trust Agreement, this Agreement and the Mortgage until such time as a
replacement or substitute shall have been installed (other than pursuant to
Clause 13.1(f), Clause 13.2 or Clause 13.3) on the Airframe or the relevant
Engine in accordance with this Agreement and, in particular, complying with the
requirements of Clause 13.1(e) and Clause 13.1(g).
(c) Upon installation in accordance with Clause 13.1 (e) and
Clause 13.1(g) but subject to Clauses 13.2 and 13.3, title to any replacement or
substitute engine or part shall thereupon without further act vest in the Head
Lessor subject to the Head Lease, the Trust Agreement and this Agreement and the
same shall become subject to the Mortgage for all purposes as though it had been
installed in or attached to the Airframe or an Engine at Delivery and become
subject to the Head Lease, the Trust Agreement, this Agreement and the Mortgage,
and subject thereto, title to the Engine or Part replaced or substituted (if not
replaced or substituted by an engine or part which at the time of replacement or
substitution belonged to the Head Lessor or the Beneficiary) shall vest in the
Lessee free of the Mortgage and such replaced or substituted Engine or Part
shall no longer form part of the Aircraft, Airframe or any Engine and references
herein to the Aircraft, Airframe or Engine shall be construed accordingly.
(d) The Lessee shall, without prejudice to the Head Lessor, the
Beneficiary or the Lessor, promptly and duly execute and do and deliver to the
Lessor all such acts, deeds, assurances or things as may be reasonably requested
in writing by the Head Lessor and/or the Lessor and/or the Beneficiary to ensure
that all replacement or substitute engines or parts installed in or attached to
the Airframe or any Engine (other than pursuant to Clauses 13.1(f), 13.2 or
13.3) shall satisfy the requirements of Clause 13.1(e) and become and remain
part of the Airframe or the relevant Engine and the property of the Head Lessor
subject to the Head Lease, the Trust Agreement, this Agreement and the Security
Documents and, without limiting the foregoing, the Lessee shall, if requested by
and without cost to the Lessor, (i) produce evidence reasonably satisfactory to
the Lessor that all such replacement or substitute engines meet the requirements
of Clause 13.1(e), (ii) produce evidence satisfactory to the Lessor (including,
but not limited to, legal opinions and bills of sale) that all such replacement
or substitute engines or parts have become the property of the Head Lessor
subject to the Head Lease, the Trust Agreement, this Agreement and the Security
Documents and (iii) in the case of replacement or substitute engines, make such
filings as reasonably requested by Lessor (including, but not limited to filings
at the FAA and filings of Financing Statements) to perfect any of the interests
referred to in clause (ii).
15.3 Throughout the Lease Period the Lessee shall (a) at its own cost, ensure
that the Aircraft is registered in the name of the Lessor subject to the
Head Lease, the Trust Agreement and this Agreement or, if not possible
or required by applicable law, in the name of the Lessee (or if
applicable any permitted sublessee) under the laws of the State of
Registration, such registration to reflect (so far as is permitted by
applicable law) the respective interests of the Head Lessor, the
Beneficiary, the Lessor, the Lessee, any Sublessee (if applicable) and
the Lenders under the Security Documents; and (b) ensure that the Head
Lease (if requested by the Lessor and a copy is provided to the Lessee),
this Agreement and the Mortgage (so far as permitted by applicable law)
are kept, filed, registered and recorded in such office or offices and
on such registers in the State of Registration (and, to the extent
applicable, any other state where the Aircraft is based or operated) as
may be necessary to ensure the full legality, validity, priority and
enforceability thereof and the Lessee shall not do any act or thing
which may reasonably be expected to prejudice or cancel such
registration PROVIDED THAT (i) any filing or other action undertaken
with respect to the Agreement by Lessee under this clause (b) shall be
at Lessee's own cost and (ii) the Lessor shall pay the reasonable out-of
pocket costs incurred by Lessee (unless such filing or action is
undertaken in connection with the occurrence of a Termination Event)
with respect to any filing or other action undertaken by the Lessee at
Lessor's request with respect to the Head Lease or Mortgage under this
clause (b).
16. INSURANCE
16.1 On or before Delivery and throughout the Lease Period and thereafter
until the Aircraft is redelivered to the Lessor the Lessee shall obtain,
maintain and keep in full force and effect insurance with respect to the
Aircraft and liability insurance with respect to the Aircraft reasonably
satisfactory to the Lessor. Such insurances shall comply with the
provisions of this Clause 16 and Schedule 3, and shall be in such form
and carried with such insurers and where appropriate through such
brokers, and subject to such exclusions and deductibles in each case
carried with insurers of internationally recognised responsibility and
financial standing who normally participate in international airline
insurance programmes with respect to aircraft and through brokers of
international repute, recognised in the aviation market and of good
standing. The Lessee shall provide to the Lessor a listing of
participating insurers showing the relevant percentage underwritten with
each certificate of insurance provided to the Lessor. Subject to the
satisfaction of the above criteria, the insurances shall be deemed by
the Lessor to have satisfied the requirement of the Lessor with regard
to the standing of any broker or insurer.
16.2 Throughout the Lease Period and thereafter until the Aircraft is
redelivered to the Lessor the Lessee shall ensure that all legal
requirements as to the insurance of the Aircraft which may from time to
time be imposed by the laws of the State of Registration or any state
to, from or over which the Aircraft shall be flown are duly complied
with.
16.3 On or before Delivery, the Lessee shall provide the Lessor with a
certificate of insurance prepared in accordance with normal market
practice and complying with the provisions of this Agreement and shall
procure that brokers issue a letter of undertaking addressed by the
Lessee's insurance brokers to the Lessor either in the form set out in
Schedule 6 or otherwise in form and substance reasonably satisfactory to
the Lessor) that the Insurances are and will continue in full force
after Delivery for the balance of the policy year (subject in the case
of War Risks policies to usual termination or cancellation rights). Not
less than five (5) (or such later period prior to renewal as may be
practicable having regard to the circumstances) Banking Days before the
date of expiration of any of the Insurances, the Lessee shall procure
that its brokers shall give a report to the Lessor specifying the
current status of renewal negotiations. Not less than five (5) (or such
later period prior to renewal as may be practicable having regard to the
circumstances) Banking Days prior to date of such expiration the Lessee
shall procure that its brokers shall confirm in writing to the Lessor
that the Insurances have been renewed and that all premiums in respect
thereof as are due upon renewal have been paid. At least two (2) days
(or such later period, but prior to renewal, as may be practicable
having regard to the circumstances) prior to the renewal date the
renewal certificates and letters of undertaking with respect to the
Insurances shall be furnished to the Lessor. In addition the Lessee
shall upon request furnish to the Lessor, as and when required by the
Lessor, relevant appropriate extracts of policies (where there is an
insurance issue in dispute, coverage or a claim is denied) or other
evidence satisfactory to the Lessor that the requirements of this Clause
16 and Schedule 3 are being complied with and letters of undertaking
from the Lessee's insurance brokers in the form set out in Schedule 6 or
in such other form as the Lessor may from time to time require.
16.4 The Lessee shall not, without the prior written consent of the Lessor,
take out insurances, or permit the Lessee or any Indemnitee to be named
assured in insurances with respect to the Aircraft or any Engine other
than as required under this Agreement where such insurances will or may
prejudice the Insurances or recovery thereunder (excluding insurances
carried by the Indemnitees). The Lessee shall not create or permit to
exist any Encumbrance (other than any Encumbrance created by the
Indemnitees) over the Insurances, or its interest therein, save as
constituted by this Agreement and the other Lessee Documents.
16.5 If the Insurances are not kept in full force and effect and in
accordance with the provisions of this Agreement the Lessor, without
prejudice to any other rights it may have on the occurrence of a
Termination Event, shall be entitled (but not bound):
(a) at any time while such failure is continuing to require the
Aircraft to remain at an airport or, as the case may be, (after
taking out new insurances pursuant to paragraph (b) below) to
proceed to and remain at an airport designated by the Lessor
until the Insurances are in full force and effect; and/or
(b) to pay the premiums due or to take out and maintain new
insurances complying with the requirements of this Clause 16,
including an owner's interest policy in such form as the Lessor
may reasonably require, and any sums so expended by the Lessor
shall become immediately due and payable to the Lessor by the
Lessee together with interest thereon at the Relevant Rate of
Interest from the date of expenditure by the Lessor until the
date of reimbursement thereof by the Lessee (both before and
after any relevant judgment).
16.6 The Lessor shall be entitled, after the expiry or termination of the
Lease Period, to require the Lessee at the Lessee's expense to effect
and to maintain insurance, if available, with respect to its liability
under the indemnities set forth in Clause 9.5(a) for such period (which
shall not exceed two (2) years from the date of such expiry or
termination) as the Lessor may reasonably require (having regard to the
potential exposure of the Lessor and/or the other Indemnitees to the
liabilities indemnified against pursuant to Clause 9.5(a)) such
insurance to provide for the Lessor and the other Indemnitees to be
named as additional insured thereunder to the extent of their respective
interests under the said indemnities, and the obligation of the Lessee
to effect the same to continue notwithstanding the Lessee ceasing to be
the user or operator of the Aircraft and/or any of the Engines and/or
the Lessor ceasing to be the owner of the Aircraft.
16.7 If at any time the Lessor (acting reasonably and having regard to
internationally recognised insurance principles and practices generally
accepted) considers that either (a) the Insurances effected or procured
by the Lessee hereunder do not adequately protect the interests of the
Lessor and/or the other Indemnitees, or (b) there has otherwise been any
significant and material change in circumstances (including, without
limitation, any change in the terms and conditions available for
insurances of the type of the Insurances in relevant markets or in
generally accepted market practice), the Lessor shall be entitled acting
reasonably and only where same could have a material adverse effect on
the Indemnitees interests in the Insurances (without prejudice to any
other rights which it may have or acquire under any Lessee Document) to
require the Lessee to procure that the terms and conditions of the
Insurances be changed as soon as is reasonably practicable having regard
to the circumstances and in such a way as the Lessor may reasonably
require, again having regard to the criteria set out above.
16.8 If the Insurances required by this Clause 16 and Schedule 3 are not
effected and maintained through internationally recognised aviation
markets or in any other insurance markets as the Lessor may approve
(such approval not to be unreasonably withheld) the Lessee shall procure
that the relevant insurers maintain in full force and effect
reinsurances with reinsurers of recognised standing in the international
aviation insurance market. Such reinsurances shall be on the same terms
as the original insurances and shall include, where appropriate, the
provisions set out in Schedule 3.
The Lessee shall use reasonable business efforts as evidenced to the
reasonable satisfaction of the Lessor to have included a "cut through"
clause in the following terms or otherwise reasonably satisfactory to
the Lessor in respect of reinsurances noted above:-
(a) "The reinsurers hereby agree that in the event of any claim
arising under the reinsurances in respect of a Total Loss or
other claim where, as provided by the Lease, such claim is to be
paid to the person named as sole loss payee under the primary
insurances, the reinsurers shall in lieu of payment to the
reassured, its successors in interest and assigns, pay to the
person named as sole loss payee under the primary insurances
effected by the Assured that portion of any loss due for which
the reinsurers would otherwise be liable to pay the reassured
(subject to proof of loss), it being understood and agreed that
any such payment by the reinsurers shall (to the extent of such
payment) fully discharge and release the reinsurers from any and
all further liability in connection therewith"; and
(b) provide in case of any bankruptcy, liquidation, dissolution or
similar proceedings of or affecting the reassured that the
reinsurers' liability shall be to make such payments as would
have fallen due under the relevant policy of reinsurance in
accordance with the cut-through Clause referred to above if the
reassured had (immediately before such bankruptcy, liquidation,
dissolution or similar proceedings) discharged its obligations in
full under the original insurance policies in respect of which
the then relevant policy of reinsurance has been effected.
16.9 Unless and until a Relevant Event shall occur, the Lessor will not give
any direction to the insurers as contemplated by paragraph 1.2(b)(2) of
Schedule 3.
16.10 If any of the Insurances referred to in paragraphs 1.1(a) or (c) of
Schedule 3 are subject to an annual aggregate limit and that, by reason
of any claims made thereunder during the course of any policy year in
respect of any property subject to such policy, the aggregate amount of
coverage available thereunder in respect of the balance of such policy
year shall have been reduced;
(a) the Lessee shall forthwith notify the Lessor of the amount of any
such claim; and
(b) the Lessor shall be entitled to require the Lessee to increase
the aggregate limit under the relevant policy to such amount as
the Lessor may require.
17. LOSS AND DAMAGE
17.1 Notwithstanding Clause 6.1 (Lessor's Warranties and Manufacturer's
Warranties), throughout the Lease Period the Lessee shall bear the full
risk of any loss, destruction, hijacking, theft, condemnation,
confiscation, seizure or requisition of or damage to the Aircraft and of
any other occurrence of whatever kind which shall deprive the Lessee or
the operator of the Aircraft for the time being of the use, possession
or enjoyment thereof.
17.2 (a) The Lessee shall give the Lessor prompt notice in writing of any
such occurrence as is referred to in Clause 17.1 other than
repairable damage the likely cost of rectification of which will
not exceed in aggregate $[ ]*, or, in relation to any Engine, $[
]* in aggregate.
(b) The Lessee shall supply to the Lessor all necessary information,
documentation and assistance which may be reasonably requested by
the Lessor in connection with making any claim under the
Insurances.
17.3 (a) If the Aircraft shall become a Total Loss during the Lease
Period, the Lessee shall pay, or procure that the insurers pay,
to either the Head Lessor, the Lessor or the Lenders (as the
Lessor may direct in writing) being loss payee under the
Insurances within ninety (90) days (or such longer period as may
be agreed) of the date on which the Total Loss occurred, the
Agreed Value together with all amounts of rent and any other
amounts then due and payable under this Agreement.
(b) For the purposes of this Agreement a Total Loss shall be deemed
to have occurred:
(i) in the case of an actual total loss, at noon (London time)
on the actual date the Aircraft was lost or, if such date is
not known, noon (London time) on the day on which the
Aircraft was last heard of;
(ii) in the case of any of the events described in sub-paragraph
(a) of the definition of Total Loss (other than an actual
total loss), upon the date that notice claiming the loss of
the Aircraft is given to the relevant insurers, unless the
insurers do not forthwith admit such claim, when such Total
Loss shall be deemed to have occurred at the date and time
at which either a total loss is subsequently admitted by the
insurers or a competent court or arbitration tribunal issues
a judgment to the effect that a total loss has occurred;
(iii) in the case of any of the events described in subparagraph
(b) of the definition of Total Loss, upon the date of
occurrence of such destruction, damage or rendering unfit;
(iv) in the case of Compulsory Acquisition, upon the date upon
which the relevant requisition of title or other compulsory
acquisition, requisition, appropriation, expropriation,
deprivation or confiscation occurs; and
(v) in the case of any of the events described in sub-paragraph
(d) of the definition of Total Loss, upon the expiry of the
period of ninety (90) days referred to in such subparagraph
(d) after the date upon which the relevant hijacking, theft,
condemnation, confiscation, capture, detention, seizure or
requisition for use or hire occurred.
17.4 The Lessee shall continue to pay rent on the days and in the amounts
required under this Agreement notwithstanding any Total Loss; provided
always that no further installments of rent shall become due after the
date on which all sums due under Clause 17.3(a) shall have been paid in
full, and the Lease Period shall terminate on the date of such payment.
Upon such termination of the Lease Period and following payment of the
Agreed Value, the Lessor shall make a payment to the Lessee in the
amount described in paragraph 5 of Letter Agreement No.1. to the extent
that Lessor received insurance proceeds or Requisition Compensation with
respect to such Total Loss in excess of the amounts required to be paid
by Lessee under Clause 17.3(a) and, for the avoidance of doubt, Lessor
shall be entitled to apply such excess insurance proceeds or Requisition
Compensation for the purpose of making such payment.
17.5 In the event of repairable damage to the Aircraft or any of the Engines,
or the loss or destruction of any Engine (when no Total Loss has
occurred), the Lessor or the Lenders as loss payee under the Insurances
shall either pay any insurance moneys received by it or them to the
Lessee upon the Lessee furnishing evidence to the Lessor that such
damage has been made good or repaired or put in hand for repair or, in
the case of the loss or destruction of any Engine, utilize the relevant
insurance moneys in the purchase of a replacement Engine provided always
that if a Relevant Event has occurred and is continuing, the Lessor
shall be entitled to require that such insurance moneys be applied in or
towards settlement of any amounts owing by the Lessee to the Lessor
under this Agreement.
17.6 In the event of repairable damage to the Aircraft or any of the Engines,
or the loss or destruction of an Engine (when no Total Loss has
occurred), and if the insurance moneys paid in respect thereof are
insufficient to pay the cost or estimated cost of making good or
repairing such damage or the cost of purchasing a replacement Engine,
the Lessee will pay the deficiency.
17.7 Any Requisition Compensation on account of a Compulsory Acquisition
received at any time by Lessor or by Lessee from any governmental
authority or any other source will be directed or paid to Lessor (if not
already received by Lessor) and applied by Lessor as follows: (a) so
much of such payments as shall not exceed the Agreed Value and other
amounts payable by the Lessee pursuant to Clause 17.3(a) shall be
applied in reduction of Lessee's obligation to make such payments to the
extent not already paid by Lessee and, to the extent such payments are
fully paid by such application or have already been made in full by
Lessee, to reimburse the Lessee; (b) the remaining balance, if any,
shall be paid to the Lessee up to an amount equal to Lessee's Interest
(if any) minus any amount paid by Lessor to Lessee pursuant to Clause
17.4. and (c) any amount remaining thereafter shall be retained by
Lessor.
18. REQUISITION OR GROUNDING
18.1 If the Aircraft is requisitioned for hire by any governmental or other
competent authority during the Lease Period then, unless and until the
Aircraft becomes a Total Loss following such requisition and the Lessee
shall have made payment of all sums due pursuant to Clause 17.3(a), the
lease of the Aircraft to the Lessee under this Agreement shall continue
in full force and effect (subject always to the provisions of Clause 21
(Lessor's Rights Following a Termination Event)) and the Lessee shall
remain fully responsible for the due compliance with all its obligations
under this Agreement other than such obligations which the Lessee is
unable to comply with solely by virtue of such requisition.
18.2 If the Lessee shall duly comply with all its obligations under this
Agreement, save as mentioned in Clause 18.1, the Lessee shall during the
Lease Period, be entitled to all requisition hire paid to the Lessor or
to the Lessee on account of such requisition.
18.3 The Lessee shall as soon as practicable after the end of any requisition
for hire, cause the Aircraft to be put into the condition required by
this Agreement, and where that requisition shall end after the date on
which the Lease Period would otherwise have expired or terminated but
for such requisition, the Lessee shall, as soon as practicable, cause
the Aircraft to be put into the redelivery condition required by Clause
19, allowance being made for fair wear and tear in respect of the period
from the date on which the Lease Period would otherwise have expired or
terminated but for such requisition until the actual expiry or
termination of the Lease Period.
18.4 The Lessor shall be entitled to all compensation payable in respect of
any change in the structure, state or condition of the Aircraft arising
during the period of requisition for hire. The Lessor shall apply such
compensation in reimbursing the Lessee for the cost of complying with
its obligation under Clause 18.3, provided always that if a Termination
Event has occurred and is continuing, the Lessor shall be entitled to
apply such compensation in or towards settlement of any amounts owing by
the Lessee under this Agreement.
18.5 If the Aviation Authority has grounded the Aircraft and other similar
U.S. registered Boeing 737 aircraft for reasons related to the
airworthiness of such aircraft and the Lessee has been diligently
attempting since such grounding to correct the cause of such grounding
and, notwithstanding such effort, the grounding continues: (a) no
Termination Event shall arise hereunder solely as a result of the
Aircraft not holding a currently effective Certificate of Airworthiness
due to such grounding and (b) if such grounding continues after the date
on which the Lease Period would otherwise have expired or terminated but
for such grounding, the lease of the Aircraft to the Lessee under this
Agreement shall continue in full force and effect and the Lessee shall
remain fully responsible for the due compliance with all its obligations
under this Agreement and the Lessee shall, as soon as practicable after
the cause of such grounding is corrected, cause the Aircraft to be put
into the redelivery condition required by Clause 19 and Schedule 4,
allowance being made for fair wear and tear in respect of the period
from the date on which the Lease Period would otherwise have expired or
terminated but for such requisition until the actual expiry or
termination of the Lease Period.
19. RE-DELIVERY
19.1 At the end of the Lease Period (other than following a Total Loss) the
Lessee at its own expense shall redeliver the Aircraft to the Lessor at
the Re-delivery Location, and the Lessee shall provide such assistance
as the Lessor may reasonably request in connection with the
de-registration and export of the Aircraft from the State of
Registration.
19.2 On re-delivery, the Lessee shall ensure that (i) the Aircraft shall be
maintained and repaired in compliance with Clause 13.1(d) and all other
requirements of this Agreement, (ii) the Engines installed on the
Aircraft at Delivery (or, replacement or substitute Engines pursuant to
Clause 13.1(e) or Clause 13.3(c)(ii)(dd) and, in either event, meeting
the requirements of Clause 13.1(e), Clause 13.1(g), Clause 15.2 and
Schedule 4, paragraph 3, shall be installed on the Aircraft; (iii) there
shall be a current Certificate of Airworthiness (and the Lessee shall
cooperate, where requested by the Lessor, to obtain an export
certificate of airworthiness) issued in respect of the Aircraft by the
Aviation Authority in the public transport (passenger) category and such
current certificates of maintenance issued as shall allow the Aircraft
to be used for the public transport of passengers or cargo under the
regulations of the Aviation Authority; (iv) the Aircraft shall be in a
condition qualifying for immediate certification of airworthiness by the
Aviation Authority and the FAA; (v) the Aircraft shall be clean by
Airline Standards (vi) all applicable vendor's and manufacturer's
service bulletin kits received by the Lessee or any Sub-Lessee relating
to the Aircraft shall be installed on the Aircraft at no cost to Lessor
or delivered separately (with reasonable advance notice to Lessor) at a
charge to the Lessor not to exceed Lessee's direct cost of procuring and
delivering such kits to the Lessor in a serviceable condition with all
relevant documentation attached thereto provided that the Lessor may
decline (with reasonable advance notice to Lessee) to accept any such
noninstalled kits; (vii) the livery, insignia and markings of the Lessee
or any operator of the Aircraft shall have been stripped from the
Aircraft which shall have been rubbed down and repainted at the Lessee's
cost in neutral white or such other base colour as is advised by the
Lessor prior to redelivery; (viii) the Aircraft shall be free and clear
of all Encumbrances other than Lessor's Encumbrances; (ix) the Aircraft
shall have no deferred maintenance, repair or inspection items
outstanding; and (x) all Aircraft repairs shall be permanent and where
commercially feasible flush type repairs (provided that the flush repair
does not require substantial rework of adjacent airframe structures and
a nonflush repair achieves equivalent technical standards) and in any
event be in accordance with the Manufacturer's structural repair manual
or as otherwise approved by the FAA and the Aircraft shall comply with
the Return Conditions set out in Schedule 4.
19.3 During the period of thirty (30) days prior to re-delivery of the
Aircraft, the Lessee, at no cost to the Lessor, shall, if the Lessor so
requests, make the Manuals and Technical Records available to the Lessor
and during the entire period of the C check required upon redelivery
make the Aircraft available for such detailed inspection in order to
verify that the condition of the Aircraft complies with the provisions
hereof. During such periods, the Lessor may accomplish the following:
(a) inspection of the Manuals and Technical Records;
(b) appropriate functional testing of the Aircraft, Engines and
Parts, including without limitation, a boroscope inspection, a
spectrographic oil analysis programme (SOAP) sample and/or
magnetic chip detection inspection of the Engines;
(c) up to a two hour test flight with the Lessor's representatives
(up to two) as observers, including an engine condition run on
each Engine; and
(d) The detailed inspections and checks during the redelivery
procedures specified in this Clause shall be commercially
reasonable in manner and extent and will be carried out by the
Lessor solely so as to enable the Lessor to verify that the
Aircraft complies with the provisions of this Agreement and such
inspections and checks will be appropriate and reasonable having
regarded to: (i) the age of the Aircraft; (ii) the maintenance
history of the Aircraft; and (iii) any then current aviation
industry issues regarding such model of Aircraft. Opening of bays
and panels may not be required unless Lessor reasonably
demonstrates a requirement therefor and in no event shall such
panels or bays be opened arbitrarily or unnecessarily.
19.4 (a) If on re-delivery the Aircraft (including the Manuals and
Technical Records) shall not be in the condition required by
Clause 19.2, the Lessor shall be entitled to require the Lessee
at the Lessee's expense to rectify any defects or deficiencies in
the Aircraft when it is redelivered, and the Lessee shall
promptly comply with any such requirement. To the extent that
such rectification extends beyond the Lease Term, the Lessor may
at its sole discretion (i) remedy such defects and deficiencies
and recover on demand from the Lessee the costs so incurred,
together with interest at the Relevant Rate of Interest from the
date of expenditure and demand for payment by the Lessor of the
relevant cost through the day prior to the date of recovery
thereof from the Lessee (both before and after any relevant
judgment), or (ii) continue the Lease Period on a day to day
basis until such non-compliance is rectified by the Lessee with
rent being payable by the Lessee at the rate at which rent was
payable at the date on which re-delivery would otherwise have
occurred, PROVIDED, HOWEVER, that if (aa) such defects and
deficiencies are Minor Defects, (bb) the Aircraft is capable of
being placed in immediate commercial use notwithstanding such
Minor Defects and (cc) no Relevant Event has then occurred and is
continuing other than such Minor Defects, the Lessor shall accept
re-delivery of the Aircraft as provided in clause (i) of this
sentence subject to such Minor Defects. The Lessee will
compensate the Lessor for loss of value to the Aircraft where any
damage has resulted in permanent structural changes to the
Aircraft's type design excluding fair wear and tear. Minor
Defects means defects or deficiencies in the Aircraft which the
Lessee was unable to correct by the end of the Lease Term or any
extension of the Lease Period pursuant to the preceding sentence
of this Clause through commercially reasonable efforts and which
(1) in no single case or in the aggregate will cost the Lessor
more than $[ ]*, as reasonably estimated by the Lessor, to remedy
(2) can be remedied by the Lessor or the next operator of the
Aircraft within thirty (30) days of re-delivery to Lessor, (3) do
not prevent the Aircraft from holding a fully valid and
unconditional standard Certificate of Airworthiness issued by the
FAA, (4) will not prevent the Aircraft from being granted a
standard Certificate of Airworthiness in the State of
Registration to which it is being exported (if any) and (5) does
not constitute a commercially reasonable basis for the next
operator of the Aircraft to refuse to accept delivery thereof.
(b) Prior to the re-delivery of the Aircraft and upon the Lessor's
request, the Lessee will ensure that there is provided to the
Lessor or its agent reasonable access to the Approved Maintenance
Programme and the Manuals and Technical Records in order to
facilitate the Aircraft's integration into any subsequent
operator's fleet. The Lessee will upon return of the Aircraft
deliver to the Lessor a certified true current and complete copy
of the Approved Maintenance Programme which shall be kept
confidential and promptly returned to Lessee together with all
copies thereof after any use of such Maintenance Programme by
Lessor which shall be solely for bridging to a subsequent
operator's maintenance programme.
19.5 Upon re-delivery of the Aircraft to the Lessor, an adjustment shall be
made in respect of fuel on board the Aircraft at the time of Delivery
and at the time of re-delivery at the price prevailing at the time of
re-delivery at the Re-delivery Location.
19.6 Upon re-delivery of the Aircraft provided that (i) no Relevant Event
shall have occurred or be continuing; and (ii) the Lessee has satisfied
all of its obligations then due under this Agreement (including, without
limitation, its obligation to redeliver the Aircraft in accordance with
this Clause 19 and Schedule 4), the Lessor shall make a payment to the
Lessee in the amount described in paragraph 5 of Letter Agreement No. 1.
Notwithstanding the foregoing, if the Aircraft is re-delivered subject
to Minor Defects as provided in Clause 19.4(a) and no Relevant Event has
then occurred and is continuing other than such Minor Defects, upon such
re-delivery, the Lessor shall make a payment to the Lessee in an amount
equal to the amount described in paragraph 5 of Letter Agreement No. 1
less an amount (the "Remedy Amount") reasonably estimated by Lessor to
be sufficient to pay for its costs to remedy such Minor Defects. If in
fact it costs Lessor less than the Remedy Amount to remedy such Minor
Defects, the Lessor shall make a payment to the Lessee in an amount
equal to the difference between the Remedy Amount and such actual costs.
If such actual costs exceed the Remedy Amount, the Lessee shall pay the
Lessor such deficiency as provided in Clause 19.4(a).
19.7 Notwithstanding anything to the contrary in Clause 19 or Schedule 4,
unless a Termination Event has occurred and is continuing (in which case
this Clause 19.7 shall not apply), the C Check and all other procedures
and inspections required by Schedule 4 will be performed at the Lessee's
principal maintenance facility in the United States and the inspections
and test flight set forth in Clause 19.3 shall take place at such
location. Following such procedures, inspections and test flight, either
the Aircraft will be in the condition required by Clause 19.2 or the
provisions of Clause 19.4 (a) will apply (collectively the "Predelivery
Requirements"). After the Predelivery Requirements have been satisfied,
the Lessee shall ferry the Aircraft to the Redelivery Location with the
Lessor's representatives (up to two) as observers. At the Redelivery
Location, the Aircraft shall be re-delivered by the Lessee in compliance
with all terms of Clause 19 and Schedule 4. Following the ferry flight
to the Redelivery Location, the Lessor shall conduct engine boroscope
inspections and an external walkaround inspection and Lessee shall
correct any deficiencies and defects discovered. If the Aircraft is not
in the condition required by Clause 19.2, the provisions of Clause
19.4(a) will apply.
19.8 The Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages and losses (including costs and
expenses incidental thereto) arising by reason of death or injury to any
observer or employee of the Lessee, arising out of, or in any way
connected with the ferry flight set forth in Clause 19.7.
19.9 The Lessor shall indemnify and hold harmless the Lessee from and against
any and all liabilities, damages and losses (including costs and
expenses incidental thereto) arising by reason of death or injury to any
observer or employee of the Lessor, arising out of, or in any connected
with the ferry flight set forth in Clause 19.7.
20. TERMINATION EVENTS
20.1 Any of the following events shall constitute a "Termination Event":
(a) the Lessee fails to pay any sum payable by it under this
Agreement when due within three (3) Banking Days of a scheduled
payment and, in the case of a nonscheduled payment, within three
(3) Banking Days after notice thereof has been delivered to the
Lessee; or
(b) (i) the Lessee fails to obtain and/or maintain the Insurances or
(ii) any insurer or reinsurer in respect of any part of the
Insurances cancels any part of the Insurances or disclaims or
repudiates liability by reason, in either case, of any
mis-statement in any proposal for the Insurances or for any other
failure or default on the part of the Lessee and, in the case of
this clause (ii), if the Insurances continue in full force and
effect as to Lessor, Beneficiary, Head Lessor and Lenders, (aa)
such cancellation, disclaimer or repudiation is not withdrawn and
(bb) the Insurances which are the subject of such cancellation,
disclaimer or repudiation are not replaced with Insurances in
full compliance with the terms of this Agreement, in each case
within ten (10) days of the occurrence of such cancellation,
disclaimer or repudiation; or
(c) the Lessee commits any breach of or omits to observe any of the
obligations or undertakings expressed to be assumed by it under
this Agreement (other than those referred to in sub-clauses (a)
and (b) above) or any of the other Lessee Documents and, in
respect of any such breach or omission which in the opinion of
the Lessor is capable of remedy, such action as the Lessor may
require shall not have been taken within thirty (30) days of the
Lessor notifying the Lessee of such default and of such required
action or, if any such breach or omission is not cured or
remedied within said thirty (30) days notwithstanding diligent
efforts by Lessee to effect such cure or remedy, Lessee continues
such diligent efforts and such breach or omission is not cured or
remedied within sixty (60) days of such notice; or
(d) any representation or warranty made or deemed to be made or
repeated by the Lessee in or pursuant to any of the Lessee
Documents is or proves to have been untrue in any material
respect when made or deemed repeated and continues to be material
at the time relied upon by Lessor for purposes of establishing a
Termination Event; or
(e) Lessee shall default in the payment of any obligation for the
payment of borrowed money, for the deferred purchase price of
property or for the payment of rent under any lease which has a
principal amount of [ ]* Dollars ($[ ]*) or more determined in
the case of borrowed money by the amount outstanding under the
agreement pursuant to which such borrowed money was borrowed, in
the case of a deferred purchase price by the remaining balance
and in the case of a lease by the present discounted value of the
remaining rent or hire payable thereunder (ignoring any fair
market renewal) when the same becomes due if such nonpayment
results in an acceleration of such indebtedness or an early
termination or declaration of default under such lease, or Lessee
shall default in the performance of any other term, agreement, or
condition contained in any agreement or instrument under or by
which any such obligation is created, evidenced or secured, if
the effect of such default is to cause such obligation to become
due prior to its stated maturity or to cause such lease to be
early terminated or declared in default or;
(f) a "Termination Event," "Event of Default" or other default (after
the lapse of any applicable grace period) shall occur under any
other aircraft lease agreement between a lessor acting as owner
trustee under a trust in which the Beneficiary is the beneficiary
and the Lessee; or
(g) any consent, authorization, license or approval of or
registration with or declaration to governmental or public bodies
or authorities or courts required by the Lessee in order to
perform its obligations under any of the Lessee Documents is not
granted or is revoked or terminated or expires and is not
replaced or reinstated in full force and effect within thirty
(30) days thereafter; or
(h) a creditor attaches or takes possession of a material part of the
assets or revenues of the Lessee and such attachment is not
discharged within sixty (60) days; or
(i) the Lessee suspends payment of its debts or becomes or is
judicially determined to be insolvent or unable to pay its debts
as they fall due or commences negotiations with its creditors
generally with a view to the re-adjustment or re-scheduling of
all or part of its indebtedness or proposes or enters into any
composition or other arrangement for the benefit of its creditors
generally or any class of creditors commence proceedings in
relation to the Lessee under any law, regulation or procedure
relating to reconstruction or readjustment of debts and the same
are not contested by Lessee; or
(j) the Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition seeking protection from creditors or
reorganization in a proceeding under any bankruptcy laws (as now
or hereafter in effect) or an answer admitting the material
allegations of a petition filed against the Lessee in any such
proceedings, or Lessee shall by voluntary petition, answer, or
consent seek relief under the provisions of any bankruptcy or
other similar law providing for the reorganization or winding-up
of corporations, or consents to the appointment of a receiver,
trustee, liquidator of itself or a substantial part of its
assets; or
(k) an order, judgment or decree is entered by any court, with or
without the consent of the Lessee, appointing a receiver, trustee
or liquidator for Lessee of all or any substantial part of its
property, or all or any substantial part of the property of the
Lessee is sequestered, and any such order, judgment or decree of
appointment or sequestration remains in effect, undismissed,
unstayed or unvacated for a period of sixty (60) days after the
date of entry thereof; or
(l) a petition against the Lessee in a proceeding under any
bankruptcy, insolvency or other similar laws (as now or hereafter
in effect) shall be filed, or if, under the provisions of any law
providing for reorganization or winding-up of corporations which
may apply to Lessee any court of competent jurisdiction shall
assume jurisdiction, custody or control of the Lessee, and such
petition is not voluntarily or otherwise dismissed within sixty
(60) days after the filing thereof; or
(m) the Lessee suspends or ceases or threatens in writing to suspend
or cease to carry on its business such that the ability of Lessee
to perform its obligations under the Lessee Documents may
reasonably be expected to be materially adversely affected; or
(n) all or substantially all of the assets or revenues of the Lessee
are seized, nationalized, expropriated or compulsorily acquired
by or under the authority of any government; or
(o) the Lessee threatens to dispose of all or substantially all of
its assets, whether by one or a series of transactions, related
or not, other than for the purpose of a reconstruction or
amalgamation the terms of which have received the previous
consent in writing of the Lessor and such disposition would have
a material adverse effect on the ability of the Lessee to perform
its obligations under the Lessee Documents;
(p) the Lessee ceases to be a Certificated Air Carrier or ceases to
hold a United States Air Carrier License or Certificate under
Part 121 of the FAR (or any successor provision) or Certificate
under Section 41101 of Title 49 of the United States Code (or any
successor provision); or
(q) delivery of the Aircraft by the Manufacturer under the Purchase
Agreement does not occur or is delayed by more than thirty days
beyond the scheduled date of delivery by reason of failure of the
Lessee to meet its obligations under the Purchase Assignment or
Purchase Agreement; or
(r) Lessee enters into any amendment, modification, supplement,
cancellation or termination of the Purchase Agreement with
respect to the Aircraft or grants any waiver or consent
thereunder with respect to the Aircraft or enters into any change
order thereunder with respect to the Aircraft, in each case
without the prior written consent of Lessor, provided, however,
that if, in any such case, such consent has been unreasonably
withheld or delayed, such case shall not constitute a Termination
Event under this Clause 20.1(r).
21. LESSOR'S RIGHTS FOLLOWING A TERMINATION EVENT
21.1 Upon the occurrence of any Termination Event and at any time thereafter
so long as the same shall be continuing, the Lessor may, at its option,
declare by written notice to the Lessee this Agreement to be in default
(provided, however, that in the case of a Termination Event under
Clauses 20.1(i), (j), (k), (l) and (m) the Lessor need not declare the
Agreement to be in default); and at any time thereafter, the Lessor may
do, and the Lessee shall comply with, one or more of the following with
respect to all or any part of the Airframe and the Engines, as the
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) Cause the Lessee, upon the written demand of the Lessor and at
the Lessee's expense, to, and the Lessee shall, promptly return
all or such part of the Airframe or the Engines as Lessor may
demand to Lessor at such location in the United Kingdom or
elsewhere as selected by Lessor in the manner and condition
required by, and otherwise in accordance with all of the
provisions of, Section 19 and Schedule 4 hereof; or Lessor, at
its option, may enter upon the premises where the Airframe or any
or all Engines are located or believed to be located and take
immediate possession of and remove such Airframe or Engines
without the necessity for first instituting proceedings, or by
summary proceedings or otherwise (and, at Lessor's option, store
the same at the Lessee's premises until disposal thereof by
Lessor), and the Lessee shall comply therewith, all without
liability to Lessor for or by reason of such entry or taking
possession or storage, whether for the restoration or damage to
property caused by such taking or storage or otherwise;
(b) Whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a) above
with respect to all or any part of the Aircraft, Lessor, by
written notice to the Lessee specifying a payment date not
earlier than ten (10) days from the date of such notice, may
demand that the Lessee pay to Lessor, and Lessee shall pay
Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty (in
lieu of the installments of rent due on the Aircraft, Airframe,
Engine or Part thereof for periods commencing on or after the
payment date in such notice), any unpaid installments of rent due
for periods prior to the period commencing with the payment date
specified in such notice plus an amount equal to the excess, if
any, of the present value of the remaining installments of rent
during the Lease Term over the present value of the fair market
rental value of the Aircraft, Airframe, Engine or Part thereof,
for the remainder of such Lease Term, using in each case a
discount rate of the amount of interest then paid on U.S.
Treasury Bills of similar maturity;
(c) Terminate the Lease Term and/or the leasing of the Airframe or
any or all of the Engines, or exercise any other right or remedy
which may be available under applicable law or proceed by
appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof.
21.2 In addition to the amounts set forth in Clause 21.1, Lessee shall be
liable for any and all unpaid amounts due hereunder before or after any
termination hereof and for all costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Lessor and Beneficiary in
connection with or as a result of any Termination Event or exercise of
remedies hereunder, including, but not limited to, (i) all costs and
expenses incurred in connection with the return of the Airframe or any
Engine in accordance with the terms of Section 19 and Schedule 4 hereof
and/ or in connection with restoring the Aircraft or any portion thereof
to the condition required by Section 19 and Schedule 4 hereof and
remarketing the Aircraft, (ii) any loss, premium, penalty or expense
which may be incurred in repaying funds raised to finance the Aircraft
or in unwinding any swap, forward interest rate agreement or other
financial instrument relating in whole or in part to the Head Lessor's
or the Beneficiary's financing of the Aircraft and (iii) interest at the
Relevant Rate on any amount not paid when due under this Agreement, and
all such obligations shall survive any termination of this Agreement or
the leasing of the Aircraft or any portion thereof hereunder. All costs
and expenses referred to in the preceding sentence shall be payable by
Lessee upon demand by the Lessor or Beneficiary unless otherwise
specified in this Agreement. Except as otherwise expressly provided
above, no remedy referred to in this Clause 21 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. The exercise or beginning of exercise by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all such other remedies. No express or
implied waiver by Lessor of any Termination Event hereunder shall in any
way be, or be construed to be, a waiver of any future or subsequent
Termination Event.
21.3 For the purposes of Subclause 21.1 (b) above, the "fair market rental
value" of the Aircraft, Airframe, any Engine or Part thereof shall be
the rental value, net of all costs and expenses of recovering the
Aircraft, Airframe or any Engine or Part thereof and restoring its
condition to the condition required hereunder, which would be obtained
in an arm's-length transaction between an informed and willing lessee,
under no compulsion to lease, and an informed and willing lessor, based
upon the actual condition and location of the Aircraft, Airframe or any
Engine of Part thereof, which value shall be determined by a reputable
firm of aircraft appraisers selected by Lessor or Beneficiary. The cost
of such appraisal shall be borne by Lessee.
21.4 If the Lessee fails to comply with any of its obligations under this
Agreement the Lessor may, without being in any way obliged so to do, and
without being responsible for so doing, and without prejudice to the
ability of the Lessor to treat that non-compliance as a Termination
Event, effect compliance on the Lessee's behalf, and if the Lessor
incurs any expenditure in effecting such compliance the Lessor shall be
entitled (without prejudice to Clause 21.1 or Clause 21.2) to recover
such expenditure from the Lessee together with interest thereon at the
Relevant Rate of Interest from the date on which such expenditure is
incurred by the Lessor until the date of reimbursement thereof by the
Lessee (both before and after any relevant judgment).
21.5 The Lessee's obligations under this Clause 21 shall survive the end of
the Lease Period.
22. NOTICES
22.1 Every notice, request,demand or other communication under this Agreement
shall:
(a) be in writing delivered personally or by prepaid first class
airmail letter or by Federal Express or similar courier service,
or facsimile transmission (confirmed in the case of a facsimile
transmission, by such courier service sent within 24 hours of
despatch but so that the non-receipt of such confirmation shall
not affect in any way the validity of the facsimile transmission
in question);
(b) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a facsimile transmission, at the
time of despatch with confirmation that the communication was
well received (provided that, in the case of a facsimile
transmission, if the date of despatch is not a business day in
the country of the addressee it shall be deemed to have been
received at the opening of business on the next such business
day), in the case of a courier service, when received and, in the
case of a letter, when delivered personally or five (5) days
after being put in the post; and
(c) be sent:
(1) to the Lessor to:
Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
(Attention: Corporate Trust Administration);
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO THE BENEFICIARY
(2) to the Beneficiary to:
ORIX Aviation Systems Limited
2nd Floor
IFSC House
International Financial Services Centre
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇
Fax: ▇▇▇-▇-▇▇▇-▇▇▇▇
(Attention: Company Secretary/Assistant Director -
Legal Affairs)
Telephone: ▇▇▇-▇▇▇-▇-▇▇▇-▇▇▇▇; or
(3) to the Lessee to:-
Western Pacific Airlines, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Fax: 001 -719-527-7480
(Attention: Chief Financial Officer)
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or facsimile number as is notified by one party
to the others under this Agreement.
23. ASSIGNMENT
23.1 (a) The Lessee may not assign or, except as herein provided with
respect to subleases, otherwise transfer any of its rights or
obligations under this Agreement without the prior written
consent of the Lessor.
(b) The Lessor may assign or otherwise transfer any or all of its
rights under, and the benefit of, this Agreement at any time
during the Lease Period with the consent of the Lessee, such
consent not to be unreasonably denied, provided, however, that
the consent of the Lessee shall not be required with respect to
any assignment (i) to the Head Lessor or Lenders as otherwise
contemplated herein, (ii) to any affiliate of the Lessor that is
a Citizen of the United States, (iii) to any financially
responsible company or person (as reasonably determined by
Lessor) that is a Citizen of the United States and is not an
airline that competes directly with Lessee on specific routes or
(iv) to any assignment that occurs after a Termination Event has
occurred and is continuing which is made in consequence of such
Termination Event. Except in the case of an assignment or
transfer that occurs after a Termination Event has occurred and
is continuing (including at the time of such assignment or
transfer), each assignee or transferee under this Clause 23.1 or
under Clause 23.2 shall deliver, as a condition to such
assignment or transfer, a Letter of Quiet Enjoyment to the Lessee
at or before such assignment or transfer. Under no circumstances
shall Lessee be obligated to pay any assignee or transferee any
greater amount or incur any greater obligation than that which it
would have been obligated to pay or incur under this Agreement if
no assignment or transfer had taken place nor shall any such
assignment impair any right of the Lessee under this Agreement or
impose any additional obligation on Lessee.
23.2 It is understood that the Head Lessor, the Beneficiary, the Lessor
and/or the Lenders may from time to time effect, amend, modify or
replace the security arrangements in respect of the financing of, or
refinance the Aircraft; the Lessee agrees to cooperate with the Lessor
in connection therewith and in connection with the Security Documents,
any mortgage and any assignment or transfer by the Lessor pursuant to
Clause 23.1 and to execute and deliver to the Lessor such documents as
are reasonably requested by the Head Lessor, the Beneficiary, the Lessor
or the Lenders relating thereto provided no such documents impair any
right granted to Lessee hereunder or impose any additional obligation on
Lessee not otherwise required by this Agreement. The Lessee agrees to
change the nameplates referred to in Clause 13.1 and to give all
reasonable assistance as may be reasonably requested in writing by
Lessor for the perfection and acknowledgement of the rights of the Head
Lessor, the Beneficiary, the Lessor and/or the Lenders and/or any
mortgagee hereunder or thereunder. The Lessor shall pay the reasonable
out-of-pocket expenses incurred by the Lessee in executing and
delivering documents or otherwise cooperating at the request of the
Lessor in connection with any assignment or transfer made as
contemplated by Clause 23.1 and Clause 23.2. Nothing in Clause 23.1 or
23.2 shall restrict the right of the Beneficiary to assign the Aircraft
and Lease to a successor trustee pursuant to the terms of the Trust
Agreement provided that such successor trustee is capable of making
substantially the same representations of the Lessor as in clause 2.5
hereof.
23.3 The agreements, covenants, obligations and liabilities contained in this
Agreement, including, but not limited to all obligations to pay rent and
indemnify the Lessor, are made for the benefit of the Lessor, any
assignee or transferee of the Lessor and their respective successors and
assigns.
24. MISCELLANEOUS
24.1 This Agreement (together with Letter Agreement No. 1 and any other
related side letters) contains the entire agreement between the Lessor
and the Lessee relating to the leasing of the Aircraft, and the terms
and conditions of this Agreement shall not be varied otherwise than by
an instrument in writing of even date herewith or subsequent hereto
executed by or on behalf of the Lessor and the Lessee.
24.2 No failure or delay on the part of the Lessor or Lessee in exercising
any right, power or remedy under this Agreement shall operate as a
waiver thereof nor shall any single or partial exercise by the Lessor or
Lessee of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
The rights and remedies provided in this Agreement are cumulative and
are not exclusive of any rights and remedies provided by law.
24.3 Subject to the periods of grace referred to in Clause 20, time shall be
of the essence as regards the performance by the Lessee and Lessor of
their respective obligations under this Agreement.
24.4 The Lessee and Lessor shall from time to time do and perform such other
and further acts and execute and deliver any and all such further
instruments as may be required by law or reasonably requested by the
other to establish, maintain and protect the rights and remedies of the
Head Lessor, the Beneficiary, the Lessor, the Lenders or the Lessee and
to carry out and effect the intent and purposes of this Agreement
provided that no party shall be required under this Clause to take any
action or execute and deliver any document that would materially
increase the obligations or impair the rights of such party under this
Agreement.
24.5 This Agreement may be executed by the parties hereto in separate
counter-parts, each of which, when so executed and delivered, shall be
an original, and both counter-parts shall constitute one and the same
instrument.
24.6 If any provision of this Agreement shall become invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not
in any way be affected or impaired.
24.7 The Lessor is entering into this Agreement in its capacity as Owner
Trustee and not in its individual capacity as such. The Lessor in its
individual capacity shall not be liable to the Lessee for or on account
of any statements, representations, warranties, covenants or obligations
stated to be those of the Lessor hereunder. The Lessor may exercise its
rights and remedies hereunder and under the other Lessee Documents
through agents and representatives, including, but not limited to, the
Beneficiary and its agents and representatives.
24.8 Any amount which the terms of this Agreement provide that the Lessor
shall pay to the Lessee but for the occurrence of a Termination Event or
Relevant Event shall, unless application of such amount is provided for
elsewhere in this Agreement and such amount has been so applied, be paid
by Lessor to Lessee at such time as no Termination Event or Relevant
Event (as the case may be) has occurred and is continuing.
24.9 All obligations under this Agreement are continuing obligations
throughout the Lease Period. The end of the Lease Period shall not
prejudice or otherwise limit the accrued or surviving rights and
obligations of the parties hereunder of under any of the Lessee
Document.
25. LAW AND JURISDICTION
25.1 This Agreement is governed by and shall be construed in accordance with
the Governing Law.
25.2 For the benefit of the Lessor and Lessee, the parties irrevocably agree
that any legal action or proceedings in connection with this Agreement
may be brought in the Courts, which shall have jurisdiction to settle
any disputes arising out of or in connection with this Agreement. The
parties hereto hereby irrevocably and unconditionally submit to the
jurisdiction of the Courts. The submissions to such jurisdiction shall
not (and shall not be construed so as to) limit the rights of the Lessor
and Lessee to take proceedings against the other in any other court of
competent jurisdiction, nor shall the taking of proceedings by the
Lessor or Lessee in any one or more jurisdictions preclude the taking of
proceedings by the Lessor or Lessee in any other jurisdiction, whether
concurrently or not. The Lessee and Lessor irrevocably waives any
objection it may now or hereafter have to the laying of venue of any
action or proceeding in any court and any claim it may now or hereafter
have that any action or proceeding has been brought in an inconvenient
forum. The Lessee hereby irrevocably designates, appoints and empowers
CT Corporation System at present of ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
to receive for it and on its behalf service of process issued out of the
Courts in any legal action or proceeding arising out of or in connection
with this Agreement and/or any other Lessee Document. The Lessor hereby
irrevocably designates, appoints and empowers ORIX USA Corporation at
present of ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇ to receive
for it and on its behalf service of process issued out of the Courts in
any legal action or proceeding arising out of or in connection with this
Agreement and/or any other lessor document.
25.3 The Lessee and Lessor agrees that in any legal action or proceedings
against it or its assets in connection with this Agreement, no immunity
from legal action or proceedings (which shall include, without
limitation, suit, attachment prior to judgment, other attachment, the
obtaining of judgment, execution or other enforcement) shall be claimed
by or on behalf of the Lessee or with respect to its assets, irrevocably
waives any such right of immunity which it or its assets now have or may
hereafter acquire or which may be attributed to it or its assets and
consents generally in respect of any such legal action or proceedings to
the giving of any relief or the issue of any process in connection with
such action or proceedings including, without limitation, the making,
enforcement or execution against any property whatsoever (irrespective
of its use or intended use) of any order of judgment which may be made
or given in such action or proceedings.
26. SECTION 1110
The Lessee acknowledges that the Lessor would not have entered into this
Agreement unless it had available to it the benefits of a lessor under
Section 1110 of Title 11 of the United States Code. The Lessee covenants
and agrees with the Lessor that, to better ensure the availability of
such benefits, the Lessee shall support any motion, petition or
application filed by the Lessor with any bankruptcy court having
jurisdiction over the Lessee, whereby the Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not in any
way oppose such action by the Lessor unless the Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled in
order to entitle the Lessee to continued use and possession of the
Aircraft hereunder. In the event said Section 1110 is amended, or if it
is repealed and another statute is enacted in lieu thereof, the Lessor
and the Lessee agree to amend this Agreement and take such other action
not inconsistent with this Agreement as the Lessor reasonably deems
necessary so as to afford to the Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of
aircraft similarly situated to the Lessor.
It is expressly agreed that the title of Head Lessor to, and the
interest of the Lessor and the Beneficiary to, and the interest of the
Lessor and the Beneficiary in, the Aircraft, and any right of the Lessor
and the Beneficiary to take possession of the Aircraft in compliance
with the provisions of this Agreement, shall not be affected by Sections
362, 363 and 1129 of the Federal Bankruptcy Code.
27. TRUE LEASE
THIS AGREEMENT SHALL CONSTITUTE AN AGREEMENT OF LEASE AND IS A TRUE
OPERATING LEASE AND NOTHING HEREIN SHALL BE CONSTRUED AS CONVEYING TO
THE LESSEE ANY RIGHT, TITLE OR INTEREST IN THE AIRCRAFT OR ANY ENGINE OR
PART EXCEPT AS A LESSEE ONLY. WITHOUT LIMITING THE FOREGOING, THE LESSEE
WILL NOT FILE A TAX RETURN OR TAKE ANY OTHER ACTION WHICH IS
INCONSISTENT WITH THE FOREGOING.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereof duly authorized as of the day and
year first above written.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement, as Lessor
By:
Title:
WESTERN PACIFIC AIRLINES, INC., as Lessee
By:
Title:
* Receipt of this original counter-part of the foregoing Aircraft Lease
Agreement is hereby acknowledged on this day of , 199 .
[ ]
As Beneficiary/Secured Party
By:
Title:
* This language is to be inserted in the original counter-part only.
SCHEDULE 1
PART 1
LIST OF DOCUMENTS AND EVIDENCE
1. A copy certified by the Secretary of the Lessee to be a true, complete
and up to date copy, of the constituent documents of the Lessee.
2. A copy, certified by the Secretary of the Lessee to be a true copy, and
as being in full force and effect and not amended or rescinded, of
resolutions of the board of directors of the Lessee:
(i) approving the transactions contemplated by the Lessee
Documents; and
(ii) authorizing a person or persons to execute and deliver on
behalf of the Lessee of the Lessee Documents to which it is
a party and any notices or other documents to be given
pursuant thereto
together with a copy of the power(s) of attorney issued to the
authorized person(s) pursuant to said board resolutions.
3. (i) Specimen signatures, authenticated by the Secretary of the Lessee of
each of the authorized signatories referred to in sub-clause 2(ii) of
this Schedule 1 and (ii) a good standing certificate.
4. An officer's certificate of the Lessee certifying that the
representations and warranties given by the Lessee in the Lessee
Documents are true and accurate as of the Delivery and no Relevant Event
has occurred.
5. Evidence that the Aircraft Commitment Fee has been received by the
Lessor's designated bank.
6. Draft opinion(s) (the "OPINION(S)") to be obtained at the Lessee's
expense of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, legal counsel to Lessee, and
, FAA counsel, each in form and substance reasonably acceptable to the
Lessor and Beneficiary.
7. Receipt by the Lessor of such information and documents relating to the
proposed maintenance programme for the Aircraft as the Lessor may
reasonably require and the Lessor having agreed the proposed maintenance
programme in its sole discretion on or prior to the Delivery Date.
8. A certificate signed by the Chief Technical Officer of the Lessee
certifying that the provisions of Clause 13 have been read by, and will
be distributed to, the relevant engineers of the Lessee following
Delivery.
9. Such other documents or evidence as the Lessor may reasonably request.
SCHEDULE 1
PART 2
1. (a) Originals or certified copies of certificates evidencing the
insurance and reinsurance required to be maintained pursuant to
Clause 16, and Schedule 3; and
(b) a letter addressed to the Head Lessor, the Beneficiary, the
Lessor and the Lenders by a recognized firm of aviation insurance
brokers reasonably satisfactory to the Lessor confirming that the
insurance required to be maintained pursuant to Clause 16 and
Schedule 3 adequately protects the interests of the Head Lessor,
the Beneficiary, the Lessor and the Lenders; and
(c) a letter of undertaking addressed to the Head Lessor, the
Beneficiary, the Lessor and the Lenders from the Lessee's
insurance brokers substantially in the form of Schedule 5 or
otherwise acceptable to Lessor.
2. A certified copy of each of the Certificate of Airworthiness in
the public transport (passenger) category issued by the Aviation
Authority with respect to the Aircraft, such certificates of
maintenance as are required for the Aircraft to be used for the
public transport of passengers or cargo, the current air
transport license, air operator's certificate issued by the
Aviation Authority to the Lessee with respect to the aircraft of
the type of the Aircraft, the current Certificate of Registration
for the Aircraft in the name of the Head Lessor and of the
application made by the Lessee for registration of the Aircraft
with the Aviation Authority.
3. Legal opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP obtained at the
Lessee's expense in form and substance reasonably acceptable to
the Lessor .
4. A legal opinion of FAA counsel acceptable to the Lessor as to the
filing for recordation of this Agreement, due registration of the
Aircraft in the name of the Lessor, to the effect that title to
the Aircraft is held by the Lessor free and clear of any
Encumbrances other than this Agreement and otherwise satisfactory
to Lessor in form and substance.
5. Evidence that the plaque required to be affixed to the Airframe
and Engines by virtue of Clause 13.1 has been duly affixed.
6. Execution copies of each of the Lessee Documents duly executed by
the parties thereto, other than the Lessor.
7. Evidence that, on the Delivery Date, the Aircraft has been
validly registered under the laws of the State of Registration,
that the Agreement has been filed with the FAA for recordation,
that supplement(s) to the Trust Agreement have been filed with
the FAA (if applicable), that the Financing Statements have been
duly filed and that all filings, registrations, recordings and
other actions have been or will be taken which are necessary or
advisable to ensure the validity, effectiveness and
enforceability of this Agreement and to protect the respective
interests of the Head Lessor, the Beneficiary, the Lessor and the
Lenders in the Aircraft.
8. A full warranty ▇▇▇▇ of sale and FAA form ▇▇▇▇ of sale for the
Aircraft delivered by the Manufacturer to the Lessor.
9. Evidence that no sales, use, doing business or other Taxes will
be payable by any Person as a result of delivery of the Aircraft
by the Manufacturer to Lessee under the Purchase Agreement and
delivery of the Aircraft by the Lessor to Lessee under this
Agreement.
10. Such other documents and evidence as the Lessor may reasonably
require.
SCHEDULE 1
PART 3
1. A copy certified by the Secretary of the Lessee to be a true, complete
and up to date copy, of the constituent documents of the Lessee.
2. A copy, certified by the Secretary of the Lessee to be a true copy, and
as being in full force and effect and not amended or rescinded, of
resolutions of the board of directors of the Lessee:
(i) approving the transactions contemplated by the Lessee
Documents; and
(ii) authorizing a person or persons to execute and deliver on
behalf of the Lessee of the Lessee Documents to which it is
a party and any notices or other documents to be given
pursuant thereto
together with a copy of the power(s) of attorney issued to the
authorized person(s) pursuant to said board resolutions.
3. Specimen signatures, authenticated by the Secretary of the Lessee of
each of the authorized signatories referred to in sub-clause 2(ii) of
this Part 3.
4. A good standing certificate of Lessee.
5. Opinion of ▇▇▇▇▇,▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in form and substance
satisfactory to Lessor and Beneficiary.
6. Evidence that the portion of the Aircraft Commitment Fee payable by the
Advance Payment date has been paid.
7. Evidence that the Lessor has been assigned all of the Lessee's rights
under the Purchase Agreement to the extent provided in the Purchase
Assignment free and clear of any Encumbrances, including, but not
limited to, a release from Newcourt Capital.
8. A copy of the Purchase Agreement certified by an officer of the Lessee
to be complete and accurate.
9. Each of the Lessee Documents shall have been executed and delivered by
the Lessee.
10. The Consent and Agreement has been executed and delivered by the
Manufacturer.
11. Opinion of in-house counsel of Manufacturer, in form and substance
reasonably satisfactory to Lessor and Beneficiary.
12. An invoice from the Manufacturer to be delivered upon receipt of the
advance payments for the Aircraft (it being understood that such invoice
will not be delivered until the closing occurs).
13. Such other documents and evidence as may be reasonably requested by
Lessor.
SCHEDULE 1
PART 4
AIRFRAME MAINTENANCE ACCRUAL ADJUSTMENT FORMULA
1. BASE RATE
The base rate per Flight Hour as set forth in Letter Agreement No. 1 and
as such rate shall be adjusted from time to time in accordance with the
provisions of Clause 13.4(b) is subject to adjustment for changes in
economic conditions as measured by data obtained from the US Department
of Labor, Bureau of Labor statistics, and in accordance with the
provisions of paragraph 3 hereof.
2. INDEXES:
LABOR INDEX : "Aircraft and Parts" Standard Industrial Classification
372 - Average Hourly Earnings (hereinafter referred to as "HE Sic 372")
as published in "Employment and Earnings".
MATERIAL INDEX:"Industrial Commodities (hereinafter referred to as "IC")
as published in "Producer Prices and Price indexes".
3. REVISION FORMULA
A = B * ((0.75 HEa/HEb) + (0.25 ICa/ICb))
A The adjusted airframe maintenance accrual
B Base accrual as per contract
HEa The arithmetic average of the HE-Index Sic 372 for the 10th, 11th
and 12th month prior to the adjustment calculation date.
HEb The arithmetic average of the HE-Index Sic 372 for the 10th, 11th
and 12th month prior to the month of the aircraft delivery to the
Beneficiary.
ICa The arithmetic average of the IC-Index for the 10th, 11th and 12th
month prior to the adjustment calculation date.
ICb The arithmetic average of the IC-Index for the 10th, 11th and 12th
month prior to the month of the aircraft delivery to the Beneficiary.
ENGINE AND ENGINE LIFE LIMITED PARTS MAINTENANCE ACCRUAL ADJUSTMENT FORMULA
1. BASE RATE
The base rate per Flight Hour per Engine for the Engine Maintenance
Accrual and the base rate per Cycle per Engine for the Engine Life
Limited Parts Maintenance Accrual, in each case as set forth in Letter
Agreement No. 1 and as such rates shall be adjusted from time to time in
accordance with the provisions of Clause 13.4(b) are subject to
adjustment for changes in economic conditions as measured by data
obtained from the US Department of Labor, Bureau of Labor statistics,
and in accordance with the provisions of paragraph 3 hereof.
2. INDEXES:
Labor Index : "Aircraft Engine and Engine Parts" Standard Industrial
Classification 3724 - Average Hourly Earnings (hereinafter referred to
as "HE Sic 3724") as published in "Employment and Earnings".
Material Index:"Metals and Metal Products" Code 10 (hereinafter referred
to as "MMP") as published in "Producer Prices and Price indexes".
3. REVISION FORMULA
A = B * ((0.75 HEa/HEb) + (0.25 MMPa/MMPb))
A The adjusted maintenance accrual
B Base accrual as per contract
HEa The arithmetic average of the HE-Index Sic 3724 for the 10th,
11th and 12th month prior to the adjustment calculation date.
HEb The arithmetic average of the HE-Index Sic 3724 for the 10th,
11th and 12th month prior to the month of the aircraft delivery to the
Beneficiary.
MMPa The arithmetic average of the MMP-Index for the 10th, 11th
and 12th month prior to the adjustment calculation date.
MMPb The arithmetic average of the MMP-Index for the 10th, 11th
and 12th month prior to the month of the aircraft delivery to the Beneficiary.
LANDING GEAR MAINTENANCE ACCRUAL ADJUSTMENT FORMULA
1. BASE RATE
The base rate per Flight Hour for the landing gear, as set forth in
Letter Agreement No. 1 and as such rate shall be adjusted from time to
time in accordance with the provisions of Clause 13.4(b), is subject to
adjustment for changes in economic conditions as measured by data
obtained from the US Department of Labor, Bureau of Labor statistics,
and in accordance with the provisions of paragraph 3 hereof.
2. INDEXES
Labor Index:"Aircraft Parts and Auxiliary Equipment" Standard Industrial
Classification 3728 - Average Hourly Earnings (hereinafter referred to
as "HE Sic 3728") as published in "Employment and Earnings".
Material Index:"Metals and Metal Products" Code 10 (hereinafter referred
to as "MMP") as published in "Producer Prices and Price indexes".
3. REVISION FORMULA
A = B * ((0.75 HEa/HEb) + (0.25 MMPa/MMPb))
A The adjusted maintenance accrual
B Base accrual as per contract
HEa The arithmetic average of the HE-Index Sic 3728 for the 10th,
11th and 12th month prior to the adjustment calculation date.
HEb The arithmetic average of the HE-Index Sic 3728 for the 10th,
11th and 12th month prior to the month of the aircraft delivery to the
Beneficiary.
MMPa The arithmetic average of the MMP-Index for the 10th, 11th
and 12th month prior to the adjustment calculation date.
MMPb The arithmetic average of the MMP-Index for the 10th, 11th
and 12th month prior to the month of the aircraft delivery to the Beneficiary.
SCHEDULE 2
ACCEPTANCE CERTIFICATE
This Acceptance Certificate is delivered, on and as of the Delivery Date set
forth below by [ [ (the "Lessee") to Wilmington Trust Company, not in its
individual capacity, but solely as Owner Trustee (the "Lessor"), pursuant to an
Aircraft Lease Agreement dated as of [ ] and made between the Lessor and the
Lessee (the "Agreement").
DETAILS OF ACCEPTANCE
The Lessee hereby confirms to the Lessor, its successors and assigns, that the
Lessee has at hours ([ ] time) on this [ ] day of
[ ] at [ ] accepted the following in accordance with
the provisions of the Agreement:
(a) Airframe: One (1) Boeing 737-300 jet airframe bearing Manufacturer's
Serial No. [ ] and United States Registration Number ;
Hours since new:
Cycles since new:
(b) Engines: Two (2) Model CFM International CFM56-3C-1 Engines bearing
Manufacturer's Serial Numbers [ ] and [ ].
Hours since new: Engine No. 1: Engine No. 2:
Cycles since new: Engine No. 1: Engine No. 2:
CONFIRMATION OF UNDERTAKINGS
The capitalised terms used in this Acceptance Certificate shall, unless
otherwise defined, have the meaning given to such terms in the Agreement.
The Lessee confirms that as at hours ([ ] time) today, being the Delivery Date
as defined in the Agreement:
(i) the Aircraft was duly accepted by the Lessee in accordance with and
subject to all of the terms and conditions contained in the Agreement
and the execution and delivery of this Acceptance Certificate further
confirms the acceptance of the Aircraft by the Lessee for all purposes
of the Agreement;
(ii) the Lease Period commenced and the Lessee became obliged to pay to the
Lessor the amounts provided for in the Agreement with respect to the
Aircraft;
(iii) the Aircraft is insured in accordance with the Agreement;
(iv) the representations and warranties made by it under Clause 2 of the
Agreement remain, and if made at the date hereof, would be, true and
correct in all respects;
(v) solely as between the Lessor and Lessee the Lessee agrees that the
Aircraft for all purposes of the Agreement conforms to the Lessee's
requirements;
(vi) affixed to the Aircraft and Engines are the fireproof plaques required
by the Agreement;
(vii) fuel on board is [ ] kgs;
(viii) no Relevant Event has occurred or will result from Delivery taking place;
(ix) [the Manuals and Technical Records listed in Part 1 of the attached
appendix, the Technical Publications listed in Part 2 of the attached
appendix and the loose equipment listed in Part 3 of the attached
appendix have been received by the Lessee in proper order and condition]
[as per the Purchase Agreement];
IN WITNESS WHEREOF the Lessee has caused this Acceptance Certificate to be
executed in its name, by its duly authorized officer on the Delivery Date.
,
as the Lessee
By:
Title:
APPENDIX TO SCHEDULE 2
PART 1
LIST OF DOCUMENTS TO BE DELIVERED WITH MSN [ ]
DESCRIPTION QUANTITY
[To be as provided as per
the Purchase Agreement]
PART 2
TECHNICAL PUBLICATIONS
[to be provided as per
the Purchase Agreement]
Part 3
LOOSE EQUIPMENT DELIVERED WITH MSN [ ]
[as per the Purchase Agreement]
SCHEDULE 3
INSURANCE REQUIREMENTS
1 INSURANCE WITH RESPECT TO THE AIRCRAFT
1.1 The Lessee shall obtain and maintain:
(a) "All-Risks" hull insurance on the Aircraft and each Engine (as
appropriate) therefor including all flight and ground risks in
such amount in Dollars as is equal to the Agreed Value as at the
time the Insurance is placed or renewed.
(b) "All-Risks" insurance on any Engine, Parts, components or spares
when not installed on the Aircraft for their full replacement
value and including engine test and running risks.
(c) "War Risks" hull insurance which shall include confiscation,
requisition (including by the State of Registration), hijacking,
strikes, riots, malicious damage and civil commotion and any
other risks excluded from the "All Risks" insurance described in
Clause 1.1(a) above (other than any peril which cannot be
insured) by any exclusion therein of these and/or similar risks
in such amount in Dollars as is equal to the Agreed Value of the
Aircraft and each Engine (as appropriate) as at the time the
insurance is placed or renewed.
1.2 The insurances required under paragraphs (a), (b) and (c) of Clause 1.1
of this Schedule 3 shall be provided on an agreed value basis, and each
of the policies related to the insurances required under Clause 1.1 of
this Schedule 3 shall:
(a) include the Lessor and each of the other Indemnitees as
additional named assured for their respective rights and
interests;
(b) include a loss payee clause which provides that (i) any payment
in respect of a Total Loss shall be payable to the Lessor or its
designated assigns for the account of all interests and (ii) any
payment other than in respect of a Total Loss shall be paid by
insurers in or towards the cost of repairs or replacement, or if
the insurers do not, for whatever reason, pay any such proceeds
to the relevant repairers or suppliers in respect of any
replacement, then the following shall apply:
(1) unless the Lessor or its designated assignee shall have
directed to the contrary, any payment in respect of any
damage or loss (other than in respect of a Total Loss) not
in excess of $[ ]* inclusive of any deductible shall be
payable directly to Lessee or its order; and
(2) (A) any payment in respect of any damage or loss in
excess of $[ ]*, or
(B) following a direction to the Insurers by the Lessor
or its designated assignee any amount payable in
respect of any loss or damage,
shall be payable directly to the Lessor or its designated
assignee as loss payee for the account of all interests;
(c) provide that the insurance shall not be invalidated, so far
as concerns the Lessor or any other Indemnitee, by any act
or omission (including non-disclosure and misrepresentation)
by the Lessee or any other person, and insure the interest
of the Lessor and each other Indemnitee regardless of any
breach or violation by the Lessee or any other person of any
term, condition or warranty contained in such policies
provided that the Lessor or, as the case may be, such other
Indemnitee has or have not caused, contributed to or
knowingly condoned the said act or omission;
(d) have deductibles of no more than (i) $[ ]* with respect to the
Aircraft and $[ ]* with respect to any Engine or Part;
and the certificate of insurance issued by the relevant brokers shall
confirm, in the event of separate insurances being arranged to cover the
"All-Risks" hull insurance and the "War Risks" and related insurance,
that the underwriters subscribing to such insurance have agreed in the
terms of AVS 103 (or equivalent) that in the event of any dispute as to
whether a claim is covered by the "All Risks" or "War Risks" policy,
such claim shall be settled on a 50/50 claim funding basis.
(1) LIABILITY INSURANCE
2.1 The Lessee shall obtain and maintain aircraft third party, passenger
(including personal injury), baggage (checked and unchecked), cargo,
mail and airline general third party liability (including premises,
hangers and products liability) insurance for a combined single limit of
not less than $[ ]* for any one accident.
2.2 The policies evidencing the insurances required under Clause 2.1 of this
Schedule 3 shall:
(a) include the Lessor and each other Indemnitee and their respective
officers, directors, employees, agents, successors and designated
assignees (together the "Liability Additional Named Assureds") as
additional named assured for their respective rights and
interests;
(b) provide by means of a Severability of Interests/Cross-Liability
clause that all the provisions thereof, except the limits of
liability, shall operate to give each assured the same protection
as if there were a separate policy issued to each named assured;
(c) be primary and without right of contribution from other insurance
which may be available to the Liability Additional Named
Assureds; and
(d) provide that the insurance shall not be invalidated, so far as
concerns any Liability Additional Named Assured, by any act or
omission (including non-disclosure and misrepresentation) by the
Lessee or any other person and insure the interests of each
Liability Additional Named Assured regardless of any breach or
violation by the Lessee or any other person of any term,
condition or warranty contained in such policy, provided that the
relevant Liability Additional Named Assured has not caused,
contributed to or knowingly condoned the said act or omission.
(2) PROVISIONS RELATING TO ALL INSURANCES
3.1 The policies evidencing the insurances required under Clause 1.1 and
Clause 2.1 of this Schedule 3 shall:
(a) specifically reference the Head Lease, this Agreement and, if
applicable, the Mortgage;
(b) provide for worldwide coverage (subject only to such exceptions
as the Lessor may agree in writing);
(c) provide that the insurers shall waive any right of subrogation
against the Lessor and each other Indemnitee;
(d) provide that neither the Lessor nor any other Indemnitee shall be
liable for any premiums in respect thereof, and that the insurers
shall not exercise any right of set-off or counterclaim (other
than in respect of unpaid premiums with respect to the Aircraft)
against the interests of the Lessor or such other Indemnitee; and
(e) provide that the brokers will be promptly notified in the event
of cancellation or of any material change in the Insurances or in
the event that any premium or instalment of premium shall not be
paid when due and that the Insurances shall continue unaltered
for the benefit of the Lessor, each other Indemnitee and its
successors and designated assigns, directors, officers, agents
and employees for at least thirty (30) days after issue by the
insurers of any such notification, except in the case of War
Risks for which seven (7) days' notice (or such lesser period as
may be customarily available in respect of War Risks or Allied
Perils) will be given, or in the case of war between any of the
five great powers, or Nuclear Peril for which termination is
automatic.
SCHEDULE 4
RETURN CONDITIONS
On redelivery of the Aircraft, the following Return Conditions shall apply in
addition to those specified in Clauses 19.2 and 19.3.
1. GENERAL CONDITION
(a) The Aircraft shall have installed the full complement of
engines and Parts as is normally installed in such Aircraft, and shall be in a
condition suitable for operation in commercial service, all installed systems to
be fully operational;
(b) The Aircraft shall comply with the Manufacturer's original
specifications as defined in the Boeing Detail Specification Document No. [ ]
and the Manuals and Technical Records delivered with the Aircraft and modified
by the incorporation of all airworthiness directives and approved service
bulletins and engineering orders which are accepted by the Lessee up to the date
of redelivery;
(c) Have undergone, immediately prior to redelivery (save for
such additional Flight Hours as are required to conduct the test flight and
ferry flight referred to in Clause 19.7), a C Check performed by the Approved
Maintenance performer in accordance with the Approved Maintenance Programme;
(d) All outstanding airworthiness directives, Structural
Inspection requirements and mandatory orders affecting such model of Aircraft
issued by the Manufacturer of the Aircraft or the Aviation Authority and/or the
FAA which require compliance or termination within three hundred and sixty (360)
days following redelivery of the Aircraft or until the next C Check of the
Aircraft following redelivery of the Aircraft, whichever is the later, shall
have been accomplished and all maintenance discrepancies cleared from the
logbook;
(e) A Spectrographic Oil Analysis Programme ("SOAP") sample shall
be taken of the oil in each Engine and auxiliary power unit and the results
shall meet the requirements of the appropriate maintenance manual; and
(f) The Aircraft shall be in the same seating configuration as at
Delivery or, subject to Lessor receiving in a serviceable condition with FAA
8130 Tags attached the removed seats from the delivery configuration, the
seating configuration used by Lessee at the time of redelivery inclusive of
associated documentation.
2. COMPONENTS
(a) Each and every life-limited component shall have not less
than 12 months, 4,000 hours and 2,500 cycles, whichever is the more limiting, of
the total approved life remaining to the next scheduled removal, in accordance
with the Approved Maintenance Programme;
(b) Each and every calendar-limited component shall have not less
than 12 months of actual life remaining to the next scheduled removal (with the
exceptions at 6(e) (emergency equipment), in accordance with the Approved
Maintenance Programme;
(c) "On-condition" and "Condition Monitored" components shall be
Serviceable and subject to inspection including, but not limited to, boroscope
and visual inspection and examination of magnetic chip detectors, and shall meet
the requirements of the appropriate maintenance manual;
(d) The APU shall be in serviceable condition and shall have the
same part number as at Delivery with a modification status at least equal to
that of the other APUs operated by the Lessee but in no event less than the
modification status of the APU at Delivery with no more than 500 Flight Hours
since its last Hot Section Inspection shop visit; and
(e) The Lessee shall have completed, contemporaneously with such
return, an inspection of the APU including a hot and cold section boroscope; any
discrepancies detected during such inspection that are required to be corrected
by the Manufacturer's maintenance manual shall be corrected in accordance with
those procedures. For the avoidance of doubt, the APU shall not be subject to
any programme of additional inspection, i.e., "on watch".
3. ENGINES
(a) The Engines shall be Serviceable and the Lessee shall have
completed, contemporaneously with such return, an on-wing inspection of each
Engine (including a hot and cold section boroscope and a power assurance run)
and engine condition runs; trend analysis should not indicate near-term failure;
and any discrepancies detected during such inspection that are required to be
corrected by the Manufacturer's maintenance manual shall be corrected in
accordance with those procedures. For the avoidance of doubt, no Engine shall be
subject to any programme of additional inspection, i.e., "on watch";
(b) All Engine Life Limited Parts shall have a minimum of 3,000
cycles of life remaining at re-delivery. If fewer than 3,000 cycles of life
remain then the Lessee shall reimburse the Lessor a pro rata amount based upon
the total life of each Part and the cost of the Part (as determined by
manufacturer's list price) as at the time of re-delivery less relevant
maintenance accrual payments in respect of such cycles, provided, however, that
in no event shall an Engine be returned with less than 1500 cycles remaining on
Engine Life Limited Parts;
(c) In any case where oil consumption of each installed Engine,
measured within 100 Flight Hours prior to re-delivery, shall not be within the
limits set forth in the approved Aircraft Maintenance Manual, the Lessee shall
take corrective action to meet the approved Aircraft Maintenance Manual; and
(d) Any installed Engine at re-delivery shall have at least ten
(10) degrees Centigrade Exhaust Gas Temperature margin remaining in accordance
with the Aircraft Maintenance Manual performance charts, such margin being
measured by the trend monitoring system with the Engine installed on the
Airframe during flight.
4. FUSELAGE, WINDOWS AND DOORS
(a) Fuselage shall be free of major dents and abrasions,
temporary repairs and loose, pulled or missing rivets;
(b) Windows shall be Serviceable in accordance with the approved
Aircraft Maintenance Manual, free of delamination, blemishes, crazing that
affects clear vision and shall be properly sealed; and
(c) Doors shall be free moving, correctly rigged and be fitted
with Serviceable seals.
5. WINGS AND EMPENNAGE
(a) All leading edges shall be free from damage that should be
repaired in accordance with the structural repair manual ("SRM") or
Manufacturer's FAA approved repair scheme where an [SRM] repair does not exist;
(b) All control surfaces shall be clean and serviceable to
industry standard;
(c) All unpainted cowlings and fairings shall be polished to
industry standard; and
(d) The Aircraft shall be shown to be free of fuel leaks by
topping off the fuel tanks for twelve (12) hours and no previous fuel leaks
shall have temporary repairs.
6. INTERIOR
(a) Ceilings, sidewalls and bulkhead panels shall be clean and
free of damage, cracks and stains beyond fair wear and tear;
(b) All carpets and seat covers shall be in good condition,
steamed or scrubbed clean (as appropriate), seat covers and aisle carpets shall
be stain free and meet FAA fire resistance regulations;
(c) All seats, including seatbelts, shall be Serviceable, with
frames repainted and trim repaired or replaced as necessary and meet FAA fire
resistance regulations;
(d) All signs and decals shall be clean, legible and in English;
(e) All emergency equipment having a calendar life shall have a
minimum of one (1) year or one hundred per cent. (100%) of its total approved
life, whichever is less, remaining; and
(f) All galleys and lavatories shall be clean and free of leaks
and corrosion beyond applicable maintenance manual limits, with all equipment
operational and all damages assessed and properly repaired as necessary.
7. COCKPIT
(a) All decals shall be clean, secure, legible and in English;
(b) All fairing and instrument panels shall be Serviceable,
clean, secure and touch-up painted as necessary;
(c) Floor coverings shall be steamed or scrubbed clean (as
appropriate) and effectively sealed;
(d) Seat covers shall be in Serviceable condition, steamed clean
and shall conform to FAA fire resistance regulations; and
(e) Seats, including seatbelts, shall be Serviceable and shall be
repainted as necessary.
8. CARGO COMPARTMENTS
(a) All panels (including floor panels) shall be Serviceable
condition; and
(b) All nets shall be installed and in Serviceable condition.
9. LANDING GEAR AND WHEEL ▇▇▇▇▇
(a) The Landing Gear and wheel ▇▇▇▇▇ shall be clean, free of
leaks, repaired if necessary and coated with corrosion inhibitor;
(b) All decals shall be clean, secure and legible;
(c) Each tyre and brake shall have not less than fifty per cent.
(50%) life remaining in accordance with the Manufacturer's recommendation; and
(d) The Landing Gear shall have not less than fifty per cent
(50%) life remaining on re-delivery. If on re-delivery the Landing Gear has no
more than 2,000 hours in excess of fifty per cent (50%) life remaining to the
next overhaul or removal, the Lessee shall compensate the Lessor for such usage
by payment to the Lessor of the sum of US$[ ]* per additional Flight Hour or
utilization (as adjusted in accordance with the provisions of Schedule 1, Part 4
hereto and Appendix B to Letter Agreement No. 1 as applied over the life of the
Lease Period), payable on the re-delivery date.
10. CORROSION
(a) The Aircraft shall fully comply with the Corrosion Protection
Corrosion Prevention (CPCP) Programme referred to in the Approved Maintenance
Programme and on redelivery the external surface of the Aircraft shall be free
from untreated corrosion; and
(b) Fuel tanks shall be subject to a tank treatment programme in
accordance with the Manufacturer's maintenance manual, the requirements of the
FAA and the Approved Maintenance Programme.
11. TEST FLIGHT/GROUND RUN
(a) All systems must be shown to be Serviceable within the
tolerances specified in the appropriate maintenance manuals;
(b) The Engines must meet the tolerances and performance
requirements specified in the appropriate maintenance manual for engine ground
runs; and
(c) The Aircraft must be free of fuel, hydraulic, pneumatic,
water or waste systems leaks as assessed in accordance with the Aircraft
Maintenance Manual and this is to be demonstrated by topping off the tanks and
reservoirs and executing a functioning check on all systems.
12. DOCUMENTS
(a) All historical Aircraft records inclusive of Component Tags
(JAA Form 1 / FAA 81-30) and a full and completely amended set of technical
publications relating to the Aircraft shall be certified as correct by the
Approved Maintenance Performer;
(b) All Aircraft Technical Publications issued by the
Manufacturers and provided by the Lessor relating to the Aircraft shall be
amended to latest revised status and redelivered with the Aircraft; and
(c) At the redelivery date, the Lessee shall redeliver to the
Lessor all the documents listed in Part 2 and Part 3 to the form of Acceptance
Certificate set out in Schedule 2, such documents, to the extent applicable,
complying with the requirements of sub-paragraph (a) above.
SCHEDULE 5
ORIX Aviation Services (Lessor)
Re: Western Pacific Airlines
Lease Agreement
For One B737-3B7 Aircraft, N___WP
As the insurance broker for Western Pacific Airlines (the "Client"), we have
been requested to provide you with this letter with respect to certain insurance
placed by us on the Client's behalf.
In connection with this letter, we have read Article 16 and Schedule 3 of the
Aircraft Lease Agreement between the Client and you dated ____________
("Agreement"), dealing with insurance requirements, a copy of which is attached
(the "Insurance Covenant"). We have not read or reviewed the balance of the
Agreements, including without limitation any provisions thereof which might
relate to or influence the meaning of the language in the Insurance Covenant.
We have placed the insurance which is the subject of this letter after
consultation with the Client and based upon the Client's instructions, which may
not have contemplated or reflected the Insurance Covenant. Terms of coverage,
including limits and deductibles are based upon information furnished to us by
the Client, which information we have not independently verified.
On the basis of the foregoing and subject to the other qualifications stated in
this letter, we are pleased to confirm the following:
1. The insurance policy(ies) listed on Exhibit A hereto (the "Policies") is
(are) in full force and effect as of the date hereof.
2. As of this date, we have not received any notice of cancellation or
non-renewal with respect to the Policies and are not aware of any
circumstances which would make the giving of such a notice by an insurer
likely.
3. In our view, based upon our understanding of the language of the
Insurance Covenant, the Policies are consistent with the minimum
requirements of the Insurance Covenant.
4. Based upon our experience as insurance brokers, the coverages provided
by the Policies are consistent with those normally provided to companies
similarly situated to the Client.
5. We will endeavor to advise Lessor of Notice of Cancellation by Insurers
as soon as practicable upon receiving the advice from the insurance
carrier.
6. We will endeavor to advise Lessor if the Client does not provide us with
renewal instructions 14 days prior to expiration.
7. We will endeavor to advise Lessor if we (MMI) cease to be the Client's
appointed broker as soon as practicable.
We express no view and assume no liability with respect to the solvency or
future ability to pay of any of the insurance companies which have issued the
Policies.
We assume no obligation to advise you of any developments regarding the Policies
subsequent to the date hereof. This letter is given on the condition that you
forever waive any liability against us based upon the placement of the Policies
and/or the statements made herein with the exception only of gross negligence or
fraud.
This letter may not be republished by you or used for any other purpose without
our prior written consent.
Very truly yours,
[SUBJECT TO CONFIRMATION BY ORIX]
SCHEDULE 6
FORM OF LETTER OF QUIET ENJOYMENT
From: (the "undersigned")
To: WESTERN PACIFIC AIRLINES, INC. (the "Lessee")
[Date]
In Re: One Boeing 737-300 Aircraft, Manufacturer's Serial Number 28868 (the
"Aircraft")\Aircraft Lease Agreement (the "Lease") dated March 26, 1997,
between Wilmington Trust Company, as Owner Trustee (the "Lessor") and
the Lessee
Dear Sirs:
1. In consideration of $10 and other good and valuable consideration received
from Lessee and/or Lessor the receipt of which is hereby acknowledged, we
confirm to you that we will not interfere with the possession and use of the
Aircraft by the Lessee or the rights of the Lessee under the Lease, in each case
throughout the term of the Lease, but subject to the terms of the Lease, so long
as no Termination Event (as defined in the Lease) has occurred and is
continuing.
2. The foregoing undertaking is not to be construed as restricting the rights of
the undersigned to dispose of its interest in the Aircraft to such persons and
on such terms as it considers appropriate. However, if the undersigned exercises
such rights during the term of the Lease and provided that no Termination Event
(as defined in the Lease) has occurred and is continuing at the time of such
disposal, the undersigned will (subject to any requirements or restrictions
imposed by applicable law) dispose of such interest expressly subject to the
Lease and on terms that the purchaser issues a written undertaking to you in
substantially the form of this letter that it will not interfere with your
possession and use of the Aircraft throughout the remaining term of the Lease,
so long as no Termination Event (as defined in the Lease) has occurred and is
continuing.
3. The undersigned hereby represents to Lessee that (i) it is a company
incorporated and validly existing under the laws of [ ] and has the corporate
power to enter into and perform its obligations under this letter of quiet
enjoyment and to own its assets and carry on its business as it is now being
conducted and (ii) this letter of quiet enjoyment is the legal, valid and
binding obligation of the undersigned.
4. This Letter of Quiet Enjoyment shall be governed by, and construed in
accordance with, the internal laws of the State of New York. It is being
delivered to you for your benefit and may be relied upon and enforced by you.
[Assignee/Transferee]
SCHEDULE
ORIX Aircraft Corporation
ORIX Corporation
Export Import Bank of Japan
SCHEDULE 7
FORM OF STATUS REPORT
MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT
Report Date Report Period
Aircraft type Engine No. 1 Original ESN
Aircraft msn Engine No. 2 Original ESN
Aircraft reg
Aircraft Status
1. A/C Total Time Since New
2. A/C Total Cycles Since New
3. Total Block Hours During Period
4. Total Cycles During Period
5. Total Flight Hours During Period
6. Non-Revenue Cycles
7. Non-Revenue Flight Hours
8. Serial No's of Engines Currently Installed Engine 1
Engine 2
9. Serial Numbers of Engines Removed and Installed During Period
ESN Reason for Removal Current Location Date Removed Date Installed
Engine Status
Orig. Engine No 1 Orig. Engine No 2 Other Engine
10. Engine Total Time Since New
11. Engine Total Cycles Since New
12. Current Location
13. Owner of Engine
14. Total Block Hours During Period
15. Total Cycles During Period
16. Total Flight Hours During Period
17. Thrust Bump Utilization (Yes/No)
If Yes, Give Reason
Other Information
18. AMS Revised (Yes/No - If Yes, See Attachment)
19. Material Deferred Items (Yes/No - If Yes, See Attachment)
20. APU Change (Yes/No - If Yes, See Attachment)
21. Damage Report (Yes/No - If Yes, See Attachment)
22. Warranty Claim Advice (Yes/No - If Yes, See Attachment
Compiled By: Date:
SCHEDULE 8
OFFICER'S CERTIFICATE
Pursuant to Section 11.1(c) of the Aircraft Lease Agreement, dated as of
February 1, 1997, between Wilmington Trust Company, as Owner Trustee, as Lessor
(the "Lessor"), and Western Pacific Airlines, Inc., as Lessee (the "Lessee"),
with respect to one Boeing 737-300 aircraft bearing manufacturer's serial number
28868 (the "Lease"), the undersigned, [responsible officer] of Lessee, hereby
certifies to Lessor and ORIX Aviation Systems Limited that:
1. I am the duly elected, qualified and acting [officer] of Lessee.
2. Unless otherwise defined herein, terms defined in the Lease shall
have the same meanings in this Certificate.
3. I have reviewed and am familiar with the terms of the Lease and I
have reviewed in reasonable detail the transactions and financial condition of
Lessee during the accounting period covered by the enclosed Form 10-K which was
filed with the Securities and Exchange Commission. Such review has not disclosed
the existence during or at the end of such accounting period, and as at the date
hereof the undersigned does not have knowledge, of any condition or event which
constitutes a Termination Event or would, with the giving of notice, the passage
of time, or both, give rise to a Termination Event.
IN WITNESS WHEREOF, th undersigned has executed this Certificate on
this __ day of .
----------------------------------
Name:
Title: