EXHIBIT 10.29
AIRCRAFT LEASE AGREEMENT
(N260SK)
================================================================================
DATED AS OF
JUNE 25, 1999
BETWEEN
ICX CORPORATION
AS
LESSOR
AND
CHAUTAUQUA AIRLINES, INC.
AS
LESSEE
================================================================================
------------
Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. The
omitted materials have been filed separately with the Securities and Exchange
Commission.
TABLE OF CONTENTS
PAGE
SECTION 1. Definitions.......................................................1
SECTION 2. Agreement to Lease; Term, Rent, Security Deposit..................6
2.1 Agreement to Lease.................................................6
2.2 Term of the Lease..................................................7
2.3 Rent...............................................................7
2.4 Supplemental Rent..................................................7
2.5 Payments in General................................................7
2.6 Maintenance Reserves/Security Deposit...ERROR! BOOKMARK NOT DEFINED.
SECTION 3. Lessor's Representations, Warranties, and Agreements.............13
3.1 Due Organization..................................................13
3.2 Due Authorization.................................................13
3.3 Enforceability..........................ERROR! BOOKMARK NOT DEFINED.
3.4 No Violations.....................................................13
3.5 Disclaimer........................................................13
SECTION 4. Lessee's Representations, Warranties, and Agreements.............15
4.1 Due Organization..................................................15
4.2 Due Authorization; Enforceability; No Violation...................15
4.3 Litigation........................................................16
4.4 No Defaults.......................................................17
4.5 Merger or Consolidation of Lessee.......ERROR! BOOKMARK NOT DEFINED.
4.6 Location of Chief Executive Offices...............................17
4.7 Lessee Duly Licensed..............................................17
4.8 Notice of Certain Events..........................................17
4.9 No Event of Loss or Event of Default..............................18
4.10 Enforceability of Lease.................ERROR! BOOKMARK NOT DEFINED.
SECTION 5. Conditions Precedent to Obligation of Lessor and Lessee.........18
SECTION 6. Delivery of the Aircraft.........................................22
6.1 Delivery Location.................................................22
6.2 Acceptance of Delivery............................................22
SECTION 7. Registration, Maintenance and Operation; Possession and Permitted
Subleases; Insignia.........................................................22
7.1 Registration......................................................22
7.2 Maintenance.......................................................22
7.3 Operation.........................................................28
7.4 Possession and Permitted Subleases................................29
7.5 Insignia..........................................................32
SECTION 8. Return of the Aircraft...........................................32
8.1 Return............................................................32
8.2 Return of Other Engines...........................................33
8.3 Condition of the Aircraft.........................................33
8.4 Engine Condition..................................................36
8.5 Inspection........................................................36
8.6 Inspections.............................ERROR! BOOKMARK NOT DEFINED.
8.7 Operational Ground Check..........................................38
8.8 Operational Check Flight..........................................38
8.9 Acceptance........................................................39
8.10 Deferred Discrepancy Correction...................................39
8.11 Indemnification.........................ERROR! BOOKMARK NOT DEFINED.
8.12 Manuals and Technical Records.....................................39
8.13 Service Bulletin Kits.............................................40
8.14 Lessee's Special Exterior Markings................................41
8.15 Ownership.........................................................41
8.16 Disputes Regarding Return Condition...............................41
SECTION 9. Liens............................................................42
SECTION 10. Loss, Destruction, Requisition, etc.............................44
10.1 Event of Loss with Respect to the Aircraft........................44
10.2 Event of Loss with Respect to an Engine...........................45
10.3 Application of Payments from Governmental Authorities for
Requisition of Title, etc.........................................47
10.4 Requisition for Use of the Aircraft by the United States
Government or the Government Under Which the Aircraft Are
Registered or Based...............................................48
10.5 Requisition for Use of an Engine by the United States
Government or the Government Under Which the Aircraft Are
Registered or Based...............................................48
10.6 Application of Payments During Existence of an Event of Default...49
10.7 Repairable Damage; Use of Insurance Proceeds......................49
SECTION 11. Insurance.......................................................50
11.1 All-Risk Insurance................................................50
11.2 War Risk Insurance................................................50
11.3 Liability Insurance...............................................51
11.4 Additional Requirements; Loss Payment.............................52
11.5 No Set-off..............................ERROR! BOOKMARK NOT DEFINED.
11.6 Application of Hull Insurance Proceeds............................54
11.7 Insurance for Own Account.........................................55
11.8 Reports...........................................................55
11.9 Continuing Insurance....................ERROR! BOOKMARK NOT DEFINED.
ii
11.10 Self-Insurance; Deductibles......................................56
SECTION 12. Indemnities.....................................................57
12.1 General Indemnification...........................................57
12.2 General Tax Indemnity.............................................61
12.3 Withholding.......................................................70
SECTION 13. Assignments and Subleasing......................................71
13.1 By Lessee.........................................................71
13.2 By Lessor.........................................................75
SECTION 14. Events of Default...............................................77
SECTION 15. Remedies........................................................79
SECTION 16. Further Assurances..............................................82
SECTION 17. Notices.........................................................83
SECTION 18. Net Lease, No Set-Off, Counterclaim, Etc........................84
SECTION 19. Lessor's Right to Perform for Lessee............................86
SECTION 20. Lessor Assignment of Rights and Warranties......................86
SECTION 21. Miscellaneous...................................................87
SECTION 22. Options to Purchase; Options to Renew...........................88
22.1 Renewal Option....................................................88
22.2 [Purchase Options.......................ERROR! BOOKMARK NOT DEFINED.
SECTION 23. Covenant of Quiet Enjoyment.....................................93
SECTION 24. Choice of Law; Service of Process...............................94
SECTION 25. Language..............................ERROR! BOOKMARK NOT DEFINED.
iii
This is Counterpart No. _____ of 4 serially numbered and manually executed
counterparts. To the extent, if any, that this document constitutes chattel
paper under the Uniform Commercial Code, no security interest in this document
may be created through the transfer and possession of any counterpart other than
Counterpart No. 1.
AIRCRAFT LEASE AGREEMENT
This AIRCRAFT LEASE AGREEMENT ("Agreement"), dated as of June 25, 1999, is
made by and between ICX Corporation, an Ohio corporation ("Lessor") and
Chautauqua Airlines, Inc., a New York corporation ("Lessee").
W I T N E S S E T H:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
1.1. "ACCEPTANCE CERTIFICATE" means the certificate in substantially the
form of Exhibit B hereto to be executed by Lessee on the Delivery Date.
1.2. "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. For purposes of this definition, "control" (including "controlled
by" and "under common control with") means the power, directly or indirectly, to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
1.3. "AIRCRAFT" means the Airframe identified and described in the Lease
Supplement, to be delivered and leased hereunder; (ii) the Engines initially
leased hereunder as described in the Lease Supplement (or any engine substituted
for any of such Engines pursuant to the terms hereof), whether or not any of
such initial or substituted Engines may from time to time be installed on such
initial or substituted Airframe or may be installed on any other airframe or on
any other aircraft; and (iii) where the context permits, the Manuals and
Technical Records.
1.4. "AIRFRAME" means (i) the Embraer ERJ-145LR aircraft (except Engines
or engines from time to time installed thereon) specified in the Lease
Supplement and having the United States registration number and manufacturer's
serial number specified in the Lease Supplement, which aircraft shall be leased
by Lessor to Lessee hereunder and under the Lease Supplement; (ii) any aircraft
(except Engines or engines from time to time installed thereon) which may from
time to time be substituted for such aircraft (except Engines or engines from
time to time installed thereon) pursuant to the terms hereof; and (iii) any and
all Parts which are from time to time incorporated or installed in or attached
thereto or which have been removed therefrom, but where title to which remains
vested in Lessor in accordance herewith.
1
1.5. "AIRWORTHINESS DIRECTIVE" means any airworthiness directive or any
other mandatory regulation, directive or instruction, including FAA-mandated
manufacturer's changes, issued by any governmental agency or authority asserting
jurisdiction over the Aircraft or over its use, operation or maintenance, which
may from time to time be issued and which is required to be carried out on
airframes or engines of the same type as the Airframe or Engines or any Parts in
order to meet the requirements of applicable law for the public transport of
passengers and/or property in common carriage.
1.6. "BASE RATE" means the rate of interest announced from time to time by
the Chase Manhattan Bank, at its principal office in New York, New York, as its
prime or reference rate.
1.7. "BASIC RENT" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 2.3(a), and, for any Renewal Term, the rent payable
for the Aircraft pursuant to Section 22.1 or Section 22.2, as the case may be.
1.8. "BASIC TERM" means the period described in Section 2.2(a).
1.9. "BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in the City of New
York.
1.10. "CODE" means the Internal Revenue Code of 1986, as amended.
1.11. "COMMENCEMENT DATE" means the Delivery Date.
1.12. "CYCLE" means one takeoff and landing of the Aircraft.
1.13. "DEFAULT" means any event which, with the giving of notice or the
lapse of time or both, would become an Event of Default.
1.14. "DELIVERY DATE" means the date on which the Aircraft is accepted by
Lessee under the Lease Supplement, which is scheduled to be on or about June 25,
1999.
1.15. "DISCREPANCY" means any difference or variation between the actual
condition of the Aircraft and the condition of the Aircraft as required
hereunder.
1.16. "ENGINE" means (i) each of the ▇▇▇▇▇▇▇ Engine Company AE3007A1
engines listed by manufacturer's serial number in the Lease Supplement and
installed on the Airframe covered by such Lease Supplement on the Delivery Date,
whether or not from time to time thereafter installed on the Airframe or
installed on any other airframe or on any other aircraft; (ii) any engine which
may from time to time be substituted, in accordance with the terms hereof, for
any of such Engines, and (iii) any and all Parts incorporated or installed in or
attached to such Engine or substituted engine or any and all Parts removed
therefrom so long as title thereto shall remain vested in Lessor in accordance
with the terms of Section 7 after removal from such Engine; provided, however,
that at such time as an engine shall be deemed part of the property leased
hereunder in substitution for an Engine in accordance with the applicable
provisions
2
hereof, the replaced Engine shall cease to be an Engine hereunder. The term
"Engines" means, as of any date of determination, all Engines then leased
hereunder.
1.17. "EVENT OF DEFAULT" has the meaning specified in Section 14.
1.18. "EVENT OF LOSS" means any of the following events with respect to
the Aircraft, the Airframe or any Engine: (i) the loss of such property or the
use thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for normal
use by Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee) for any reason whatsoever; (ii) any damage to such property which
results in an insurance settlement with respect to such property on the basis of
a total loss, or a constructive or compromised total loss; (iii) the theft or
disappearance of such property, or the confiscation, condemnation, or taking
seizure of, or requisition of use (but not of title) of such property by any
governmental or purported governmental authority (other than a requisition for
use by the United States Government or any other government of registry of the
Aircraft or under which the Aircraft is based, or any agency or instrumentality
of any thereof, except to the extent provided in Section 1.18(v) below), which
shall have resulted in the loss of possession of such property by Lessee (or, if
any Permitted Sublease is then in effect, any Permitted Sublessee) for a period
in excess of 60 consecutive days or, if earlier, through the end of the Basic
Term; (iv) as a result of any law, rule, regulation, order or other action by
the FAA or other governmental body of the government of registry of the Aircraft
or under which the Aircraft is based having jurisdiction, the use of such
property in the normal course of the business of air transportation shall have
been prohibited for a period of 180 consecutive days unless prior to the end of
such 180-day period, Lessee is diligently carrying forward all necessary and
desirable steps to permit such use, but in any event, if such use has been
prohibited for a period of twelve consecutive months; (v) the requisition for
use (but not of title) by the United States Government or any other government
of registry of the Aircraft or under which the Aircraft is based or any
instrumentality or agency of any thereof, which shall have occurred for a period
in excess of 180 consecutive days, or, if earlier, through the end of the Term;
(vi) any divestiture of title to an Engine treated as an Event of Loss pursuant
to Section 10.3 hereof; and (vii) the requisition, confiscation, condemnation or
other compulsory acquisition of title to such property by any governmental or
purported governmental authority which shall have resulted in the loss of
possession of such property by Lessee for a period of more than 60 days or, if
earlier, through the end of the Term. An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe. An Event of Loss with respect to the Airframe shall not
be deemed to have occurred by reason of an Event of Less with respect to an
Engine.
1.19. "FAIR MARKET RENTAL RATE" means the fair market rental rate
determined pursuant to Section 22 hereof.
1.20. "FAIR MARKET SALES VALUE" means the fair market sales value
determined as provided in Section 23 hereof.
1.21. "FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States
Federal Aviation Administration and any successor agency or agencies thereto.
1.22. "INCOME TAX" means any Tax based on or measured by net income
(including, without limitation, capital gains taxes, minimum taxes, and taxes on
tax preference items) and Taxes which are capital, doing business, franchise (in
the nature of a net income tax), excess profits, or net worth taxes and
interest, additions to tax, penalties, or other charges in respect thereof.
1.23. "INDEMNITEES" means Lessor and its Affiliates, officers, directors,
employees, agents, successors and permitted assigns.
1.24. "LEASE AGREEMENT", "THIS LEASE AGREEMENT", "THIS LEASE", "THIS
AGREEMENT", "HEREIN", "HEREOF", "HEREUNDER", "HEREBY" or other like words or
phrases mean this Lease Agreement as originally executed or as modified, amended
or supplemented pursuant to the applicable provisions hereof, including, without
limitation, supplementation hereof by one or more Lease Supplements entered into
between Lessor and Lessee pursuant to the provisions hereof.
1.25. "LEASE SUPPLEMENT" means a Lease Supplement substantially in the
form of Exhibit A hereto, to be entered into between Lessor and Lessee on the
Delivery Date for the purpose of leasing the Aircraft under and pursuant to the
terms of this Lease Agreement, and any subsequent Lease Supplement entered into
in accordance with the terms hereof.
1.26. "LESSEE'S SETTLEMENT PROPOSAL" has the meaning specified in Section
12.6.
1.27. "LESSOR LIENS" means any Lien or disposition of title affecting the
Aircraft, an Airframe, any Engine or Part arising as a result of (i) claims
against Lessor not related to the transactions contemplated by this Lease; (ii)
any act or omission of Lessor which is either not related to the transactions
contemplated by or is expressly prohibited under this Lease; (iii) claims
against Lessor with respect to Taxes or Liens against which Lessee is not
required to indemnify Lessor hereunder; (iv) claims against Lessor with respect
to any loss, damage or claim against which Lessee is not required to indemnify
Lessor pursuant to this Lease; or (v) claims against Lessor arising out of any
transfer by Lessor of all or any portion of its interest in the Aircraft,
including, without limitation, as security for indebtedness, other than the
transfer of the Aircraft pursuant to the exercise of the remedies set forth in
Section 15 hereof.
1.28. "LIEN" means any mortgage, pledge, lien, charge, encumbrance, lease,
sublease or security interest or other similar interest.
1.29. "MAINTENANCE PROGRAM" means Lessee's maintenance program approved by
the Federal Aviation Administration or the aviation authority of the country of
registry of the Aircraft for aircraft of the same type as the Aircraft and
engines of the same type as the Engines; provided, however, that if the country
of registry is not the United States, such program must be no less stringent
than an FAA approved program for aircraft of the same type as the Aircraft and
engines of the same type as the Engines.
1.30. "MANUALS AND TECHNICAL RECORDS" means all such manuals, technical
data, log books, maintenance records, engineering documentation and other
records pertaining to the
3
Aircraft to be maintained by Lessee as required hereunder or as shall be
required to comply with the requirements of the FAA and the Manufacturer from
time to time in force and the requirements of any other governmental body having
jurisdiction over the Aircraft.
1.31. "MANUFACTURER" means with respect to the Airframe, Embraer-Empresa
Brasileira de Aeronautica S.A. ("Embraer") and with respect to the Engines,
▇▇▇▇▇▇▇ Engine Company, and their respective successors and assigns.
1.32. "NET ECONOMIC RETURN" means anticipated after-tax yield (utilizing
the multiple investment sinking fund method of analysis), computed on the basis
of the same methodology and assumptions as were utilized by Lessor in
determining Basic Rent, Stipulated Loss Value and Termination Value.
1.33. "PARTS" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature, other than (i)
complete Engines or engines, and (ii) any items leased by Lessee from a third
party (other than Lessor). The term "Parts" shall include all components
constituting a complete system.
1.34. "PAST DUE RATE" means a rate per annum equal to the Base Rate plus
five percentage points.
1.35. "PERMITTED LIEN" means any Lien referred to in Section 9.1(i)
through (viii).
1.36. "Permitted Sublease" means a sublease of the Aircraft described in
Section 13.2.
1.37 "PERMITTED SUBLESSEE" means (i) any U.S. Air Carrier; (ii) any
foreign air carrier that is principally based in a country listed in Schedule
III hereto, provided that at the time of the Permitted Sublease, there are no
external or internal war or conflicts involving such country and such country
maintains normal diplomatic relations with the United States or in any other
country approved by Lessor; or (iii) the United States government or any
political subdivision, instrumentality or agency thereof or the government of
the country in which the Aircraft is registered or any political subdivision,
instrumentality or agency thereof, and, if not one of the foregoing, any person
to whom Lessor has given Lessee permission to sublease pursuant to Section 13.1
hereof.
1.38. "PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
1.39. "RENEWAL RENT" means the monthly rent payable during the Renewal
Term.
1.40. "RENEWAL TERM" shall have the meaning assigned in Section 22.1
hereof.
1.41. "RENT" means Basic Rent, Renewal Rent and Supplemental Rent,
collectively.
4
1.42. "RENT PAYMENT DATE" means the dates on which Basic Rent is due and
payable hereunder in accordance with the provisions of Sections 2.3 as specified
in Schedule I to this Lease.
1.43. "RESPONSIBLE OFFICER" means, with respect to Lessor and Lessee, the
President, Chief Financial Officer or any other officer customarily bearing
responsibility for matters relating to the transactions contemplated by this
Lease, or any officer specifically authorized to take responsibility for any
matter relating to the transactions contemplated by this Lease.
1.44. "RETURN LOCATION" shall have the meaning assigned to such term in
Section 8.1.
1.45. "SETTLEMENT PROPOSAL" has the meaning specified in Section 12.6.
1.46. "STIPULATED LOSS VALUE" with respect to the Aircraft as of any Rent
Payment Date means the amount specified in Schedule II attached hereto.
1.47. "SUPPLEMENTAL RENT" means all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay to Lessor or
others hereunder, including payments of Stipulated Loss Value and amounts
calculated by reference thereto.
1.48. "TAX" or "TAXES" means any and all fees (including, without
limitation, license, documentation and registration fees) and all taxes
(including, without limitation, income, gross receipts, preference, rental,
sales, use, turnover, value added, property (tangible or intangible), excise and
stamp taxes), licenses, levies, imposts, duties, charges, recording charges or
fees, assessments or withholdings of any nature whatsoever together with any
penalties, additions to tax, fines or interest thereon.
1.49. "TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated
the date hereof, between Lessor and Lessee, as amended, modified or supplemented
in accordance with the terms thereof.
1.50. "TERM" means the Basic Term and the Renewal Term(s).
1.51. "TERMINATION DATE" has the meaning assigned to such term in Section
2.2.
1.52. "TERMINATION VALUE" with respect to the Aircraft as of any Rent
Payment Date means the amount specified in Schedule II attached hereto.
1.53. "TRANSACTION COSTS" shall mean, printing and reproduction costs;
appraisal fees; placement fees and out-of-pocket expenses of Seabury Securities,
LLC; fees and expenses of counsel for Lessor and Lessee, recording costs of the
Lease and other documents, as well as fees and expenses of counsel for the
seller in connection with the sale of the Aircraft to Lessor.
1.54. "TRANSPORTATION ACT" means subtitle VII of Title 49 of the United
States Code, or any successor provision.
5
1.55. "U.S. AIR CARRIER" means any air carrier (as defined in Section
40102(a)(2) of the Transportation Act) which is a citizen of the United States
(as defined in Section 40102(a)(15) of the Transportation Act) as to which there
is in force authority from the U.S. Department of Transportation authorizing
scheduled commuter interstate air transportation pursuant to an exemption under
14 C.F.R ss. 298 or a certificate of public convenience and necessity issued
pursuant to Section 41102(a) of the Transportation Act and as to which there is
in force an air carrier operating certificate issued pursuant to 14 C.F.R. Part
121 or Part 135 of the Federal Aviation Regulations, or which may operate as an
air carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof; provided at all times such
carrier shall hold an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of the Transportation Act for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo.
SECTION 2. AGREEMENT TO LEASE; TERM; RENT
2.1. AGREEMENT TO LEASE. Lessor hereby agrees, subject to satisfaction of
the conditions set forth herein, to lease to Lessee hereunder, and Lessee hereby
agrees to lease from Lessor hereunder, the Aircraft, as evidenced by the
execution by Lessor and Lessee of this Lease, a Lease Supplement leasing the
Aircraft hereunder and execution and delivery by Lessee of an Acceptance
Certificate. Lessee hereby agrees that such acceptance of the Aircraft by Lessee
shall, without further act, irrevocably constitute acceptance by Lessee of such
Aircraft for all purposes of this Lease.
2.2. TERM OF THE LEASE.
(a) BASIC TERM. The Basic Term of this Lease shall be fifteen years from
the Commencement Date, unless sooner terminated in accordance with the
provisions hereof (the "Termination Date").
(b) RENEWAL TERM(S). The Renewal Term(s) shall be as described in Section
22.
2.3. RENT.
(a) BASIC RENT. Lessee shall promptly pay (or cause to be paid) to Lessor
Basic Rent during the Basic Term on each Rent Payment Date in the amount
provided in Schedule I to this Lease.
(b) RENEWAL RENT. Lessee shall promptly pay (or cause to be paid) to
Lessor Renewal Rent on each Rent Payment Date during the Renewal Term in the
amount determined pursuant to Section 22 hereof).
(c) SUPPLEMENTAL RENT. Lessee shall promptly pay (or cause to be paid) to
Lessor any and all Supplemental Rent as the same shall become due and owing
hereunder. In the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity or otherwise in the case of
6
nonpayment of Basic Rent. Interest on past due Basic Rent shall be computed at
the Past Due Rate, and shall be considered Supplemental Rent. The expiration or
other termination of Lessee's obligation to pay Basic Rent hereunder shall not
limit or modify Lessee's obligations with respect to Supplemental Rent.
(d) ADJUSTMENTS TO BASIC RENT. Following the Delivery Date, all
installments of Basic Rent remaining to be paid during the Basic Term shall be
recalculated and adjusted, upward or downwards as the case may be (and
corresponding adjustments shall be made to the Stipulated Loss Values and the
Termination Values applicable during the remaining Basic Term), in the event
that (i) the Transaction Costs payable by Lessor are more or less than [*] of
Lessor's Cost (unless Lessee elects to pay such excess directly), and/or (ii)
any tax indemnity payment is financed through a Basic Rent adjustment. Such
adjustment shall be made in such manner as to maintain the Net Economic Return
and to minimize the greatest extent practicable consistent therewith, the
mathematical average of the remaining Basic Rent payments. Adjustments to the
installments of Basic Rent (expressed as percentages of Lessor's Cost) and
conforming adjustments to the Stipulated Loss Values and Termination Values
shall be calculated by Lessor in accordance with the terms of this Section 3(c).
Lessor shall deliver to Lessee schedules setting forth the revised amounts,
which shall be subject to review by Lessee and verification as provided herein.
In the event that a dispute regarding any such adjustment is not resolved by
written agreement of Lessor and Lessee within 30 days following receipt by
Lessee of Lessor's schedules of proposed adjustments, Lessee shall have the
right by written notice to Lessor within 30 days after receipt of Lessor's
proposed adjustments to cause a lease advisory firm or a nationally-recognized
firm of accountants selected by Lessor and reasonably acceptable to Lessee to
verify shall proposed adjustments. Lessor shall provide to such firm, but not,
in any circumstances, to Lessee or any representatives of Lessee, on a
confidential basis, such information as such firm may reasonably require,
including, without limitation, a true copy of this Lease and a full description
of the methodology and assumptions employed by Lessor in calculating the Basic
Rent and Stipulated Loss Values and Termination Values as in effect on the
Delivery Date and a true copy of the calculations of the adjustments performed
by Lessor at the time, to enable such firm to determine whether the adjustments
proposed by Lessor are mathematically accurate, apply the same methodology and
assumptions (except to the extent changed by the events giving rise to such
recalculation) as were employed in the calculations of the Basic Rent,
Stipulated Loss Values and Termination Values in effect on the Delivery Date,
and are otherwise in conformity with the provisions of this Lease. Lessee and
its financial advisors shall be entitled to submit to such firm such data and
views concerning the proposed adjustments as Lessee may elect. The firm shall be
requested to deliver to each of Lessor and Lessee within 30 days after its
appointment its determination as to the changes, if any, that are appropriate
with respect to the adjustments proposed by Lessor. The adjustments proposed by
Lessor, if not disputed by Lessee as provided above, or the determination of the
firm as provided above, as the case may be, shall be conclusive, final and
binding upon Lessor and Lessee. No dispute concerning any adjustment shall
release Lessee from its obligations to pay the Basic Rent or Stipulated Loss
Value or Termination Value as then set forth herein. All reasonable fees and
expenses payable to the outside firm pursuant to this Section 3(c) shall be paid
by Lessee, except that such fees and expenses shall be shared equally by Lessor
and Lessee if, as a result of changes determined by the firm, the net present
value, discounted at the Base Rate, of Basic Rent
7
--------
* Confidential
remaining to be paid is [*] or more lower than it would have been under the
adjustments proposed by Lessor. Any adjustments made pursuant to this Section
3(c) shall (i) be made so as to avoid characterization of this Lease as a
"disqualified leaseback or long-term agreement" within the meaning of Section
467 of the Code and the Treasury Regulations promulgated thereunder, and (ii)
comply with the requirements of Revenue Procedure 75-21 and 75-28 (or any
successor relevant procedures), except to the extent that on the Delivery
Date the Lease constituted such a "disqualified leaseback or long-term
agreement" or was not in compliance with the revenue procedure referred to
above. All adjustments required pursuant to this Section 3(c) shall be set
forth in a Lease Supplement or in an amendment to this Lease.
(e) PAYMENTS IN GENERAL. All payments of Rent shall be made to Lessor in
the United States of America by wire transfer of immediately-available funds
prior to noon (12:00) p.m. Eastern time on the due date thereof, to Lessor's
account at the Charter One Bank, F.S.B., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ICX Corporation account no. ▇▇-▇▇▇▇▇▇▇, ABA number ▇▇▇-▇▇▇-▇▇▇ (or such
other account as Lessor shall direct in a written notice to Lessee at least five
Business Days prior to the date such payment of Rent is due). Notwithstanding
anything in this Lease to the contrary, if any date on which a payment of Rent
becomes due and payable is not a Business Day, such payment shall not be made on
such scheduled date but shall be made on the next succeeding Business Day with
the same force and effect as if made on such scheduled date and, provided such
payment is made on such next succeeding Business Day, no interest shall accrue
on the amount of such payment from and after such scheduled date.
SECTION 3. LESSOR'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Lessor hereby represents and warrants to, and covenants and agrees with,
Lessee as follows:
3.1. DUE ORGANIZATION. Lessor is a corporation duly organized and validly
existing in good standing under the laws of the State of Ohio and has the
corporate power and authority to enter into and perform its obligations under
this Lease and the Lease Supplement.
3.2. DUE AUTHORIZATION; ENFORCEABILITY. This Lease has been, and on the
Delivery Date, the Lease Supplement will be, duly executed and delivered by a
Responsible Officer who is duly authorized to execute and deliver such
instruments on behalf of Lessor. Each of the Lease and the Lease Supplement
(when so executed and delivered) will be the legal, valid and binding obligation
of Lessor, enforceable against Lessor in accordance with its terms, except as
such enforceability is affected by applicable laws or judicial decisions
regarding bankruptcy, bankruptcy moratorium, fraudulent transfers or other laws
affecting creditors' rights or by application of the principles of equity.
3.3. NO VIOLATIONS. Neither the execution and delivery by Lessor of this
Lease and the Lease Supplement nor the performance by Lessor of its obligations
hereunder and thereunder, will be inconsistent with its charter or bylaws, does
not and will not contravene any currently existing law, governmental rule or
regulation, judgment or order, including, but not limited to, any statute, rule,
regulation, franchise or permit applicable to or binding on Lessor, and does not
and will not contravene any provision of, or constitute a default under, any
currently existing
8
--------
* Confidential
indenture, mortgage, contract or other instrument to which Lessor is a party or
by which it or any of its properties is bound.
3.4. DISCLAIMER. LESSEE EXPRESSLY AGREES TO LEASE THE AIRCRAFT IN "AS IS,
WHERE IS" CONDITION "WITH ALL FAULTS", EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS LEASE. LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSOR AND LESSEE (A)
THE AIRFRAME AND EACH ENGINE IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME
AND EACH ENGINE IS SUITABLE FOR ITS PURPOSE, (C) LESSOR IS NOT A MANUFACTURER
NOR A DEALER IN PROPERTY OF SUCH KIND, AND (D) LESSOR DOES NOT MAKE, HAS NOT
MADE AND SHALL NOT BE DEEMED TO HAVE MADE, AND WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, THE QUALITY OF
MATERIAL OR WORKMANSHIP, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE AIRCRAFT, THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.
LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR ANY DAMAGE OR LOSS (INCLUDING,
BUT NOT LIMITED TO, INCIDENTAL, CONSEQUENTIAL AND SPECIAL DAMAGES) SUFFERED BY
LESSEE DIRECTLY OR INDIRECTLY BECAUSE OF ANY DEFECT IN THE AIRCRAFT. NONE OF THE
PROVISIONS OF THIS SECTION 3.4 OR ANY OTHER PROVISION OF THIS LEASE IS INTENDED
TO AMEND, MODIFY OR OTHERWISE AFFECT THE EXPRESS REPRESENTATIONS, WARRANTIES OR
OTHER OBLIGATIONS OF THE MANUFACTURER, OR ANY OTHER VENDOR, MANUFACTURER,
SUBCONTRACTOR OR SUPPLIER WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, OR
TO RELEASE MANUFACTURER OR ANY OTHER VENDOR, MANUFACTURER, SUBCONTRACTOR OR
SUPPLIER FROM ANY SUCH REPRESENTATION, WARRANTY OR OBLIGATION OR ANY RIGHTS OF
LESSOR OR LESSEE WITH RESPECT THERETO.
SECTION 4. LESSEE'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Lessee hereby represents and warrants to, and covenants and agrees with,
Lessor as follows:
4.1. DUE ORGANIZATION. Lessee is a corporation duly organized and validly
existing in good standing under the laws of the state of New York; is duly
qualified as a foreign corporation to do business in each jurisdiction in which
its operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on this Lease,
Lessee or its business; is a U.S. Air Carrier; and has the corporate power and
authority to conduct
9
its business as it is presently being conducted, to lease the Aircraft, and to
enter into and perform its obligations under this Lease, the Lease Supplement
and the Tax Indemnity Agreement.
4.2. DUE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by Lessee of this Lease, the Lease Supplement and the Tax Indemnity
Agreement will on the Delivery Date be duly authorized by all necessary
corporate actions and will be executed and delivered by a Responsible Officer
who is duly authorized to execute and deliver such instruments on behalf of
Lessee. Each of the Lease, the Lease Supplement (when so executed and delivered)
and the Tax Indemnity Agreement will be the legal, valid and binding obligation
of Lessee, enforceable against Lessee in accordance with its terms, except as
such enforceability is affected by applicable laws or judicial decisions
regarding bankruptcy, bankruptcy moratorium, fraudulent transfers or other laws
affecting creditors' rights or by application of the principles of equity.
4.3. NO VIOLATIONS. Neither the execution and delivery by Lessee of this
Lease, the Lease Supplement and the Tax Indemnity Agreement, nor the performance
by Lessee of its obligations hereunder and thereunder, will be inconsistent with
its charter or bylaws, does not and will not contravene any currently existing
law, governmental rule or regulation, judgment or order, including, but not
limited to, any statute, rule, regulation, franchise or permit applicable to or
binding on Lessee, and does not and will not contravene any provision of, or
constitute a default under, any currently existing indenture, mortgage, contract
or other instrument to which Lessee is a party or by which it or any of its
properties is bound, and does not and will not require the consent or approval
of any holders of the stockholders of Lessee or any currently existing
indebtedness or obligation of Lessee.
4.4. NO GOVERNMENTAL APPROVALS, NOTICES AND FILINGS. Except for (i) the
filing for recording of the Lease and Lease Supplement pursuant to the
Transportation Act, and (ii) the filing of financing statements (and
continuation statements at periodic intervals) with respect to the interests
created by such documents under the Uniform Commercial Code of New York,
Connecticut, Ohio and Indiana (which filing statements Lessor has prepared and
Lessee shall cause to be presented in due form for filing to the appropriate
filing office in New York, Connecticut, Ohio and Indiana), no consent or
approval of, giving of notice to, registration with, filing or recording of any
document, or taking of any action in respect of or by, any United States
Federal, state or local or foreign governmental authority or agency or other
person is necessary with respect to the execution, delivery or performance by
Lessee of this Lease and the Lease Supplement, or the consummation by Lessee of
any of the transactions contemplated hereby or thereby, or to establish and
perfect Lessor's title to and interest in the Aircraft as against Lessee and as
against any third parties in any applicable jurisdictions.
4.5. LITIGATION. There are no actions, suits, claims or proceedings
pending or, to the knowledge of Lessee, threatened against or affecting Lessee
in any court or before any governmental commission, arbitrator, agency, board or
authority, domestic or foreign, which relate to any of the transactions
contemplated by this Lease or the Lease Supplement or which, if adversely
determined, could have a material adverse effect on either the business,
operations or financial condition of Lessee or the ability of Lessee to perform
its obligations under this Lease
10
or the Lease Supplement, or which may adversely affect the legality or
enforceability of the terms of this Lease or any other such document, except as
otherwise specifically disclosed herein.
4.6. NO DEFAULTS. Lessee is not in default under any indenture, pledge,
contract, mortgage, loan agreement or other instrument to which Lessee is a
party, nor is Lessee in violation of any law, order, injunction, decree, rule or
regulation applicable to Lessee of any court or administrative body, which
default or violation could materially and adversely affect the business,
property, assets, operations or condition, financial or otherwise, of Lessee.
4.7. LOCATION OF CHIEF EXECUTIVE OFFICES. The chief executive office or
chief place of business of Lessee is located at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. Lessee agrees to give Lessor written notice of any
relocation of its chief executive office or chief place of business from the
present location.
4.8. LESSEE DULY LICENSED. Lessee holds all licenses, certificates,
permits and franchises from the appropriate agencies of the United States and/or
all other governmental authorities having jurisdiction necessary to perform
under this Lease.
4.9. NO EVENT OF LOSS OR EVENT OF DEFAULT. On the Delivery Date, no event
exists which would be an Event of Default hereunder or an Event of Loss
hereunder.
4.10. FINANCIAL STATEMENTS. The statements of financial position of Lessee
as of March 31, 1999 and the related statements of earnings and cash flow of
Lessee, copies of which have been furnished to Lessor, fairly present the
financial condition of Lessee at such date and the results of operations and
cash flow of Lessee for the period ended on such date, in accordance with
generally accepted accounting principles consistently applied, and since March
31, 1999, there has been no material and adverse change in such condition or
operations.
4.11. TITLE. Lessor will receive good title to the Aircraft free and clear
of all Liens, except the rights of Lessee under the Lease and the Lease
Supplement covering the Aircraft, and the Liens permitted by clauses (v) (solely
for Taxes not yet due) and (vi) (contested liens) of Section 9.1 hereof.
4.12. NON-SOLICITATION. Neither Lessee nor anyone acting on behalf of
Lessee has directly or indirectly offered any interest in the Aircraft for sale
to, or solicited any offer to acquire any of the same from, anyone other than
Lessor and not more than forty (40) other institutions believed capable of
evaluating and bearing the risks of investment in the transactions contemplated
hereby.
4.13. APPROVALS. No governmental approval of any kind is required of
Lessor for its executions of or performance under this Agreement or any
agreement contemplated hereby solely by reason of any fact or circumstance
peculiar to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's
proposed operations or use of the Aircraft.
4.14. TAXES. Lessee has filed or caused to be filed all Federal, state,
local and (in Lessee's reasonable opinion) foreign tax returns which are
required to be filed and has paid or
11
caused to be paid all taxes shown to be due and payable on such returns or
(except to the extent being contested in good faith and by appropriate
proceedings and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) on any assessment
received by Lessee, to the extent that such taxes have become due and payable,
except such returns or taxes as do not materially and adversely affect the
business, property or assets, operations or condition, financial or otherwise,
of Lessee and do not involve a material risk of the sale, forfeiture or loss of,
or the creation of any Lien (other than a Permitted Lien) on the Aircraft.
4.15. AIRCRAFT. The Aircraft has been duly certified by the FAA as to type
and airworthiness, has been insured by Lessee in accordance with the terms of
this Lease, is in the condition and state of repair required under the terms of
this Lease, and the Airframe and Engines are in Lessee's possession.
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATION OF LESSOR AND LESSEE.
5.1. LESSOR'S CONDITIONS. Lessor's obligation to deliver the Aircraft to
Lessee for lease hereunder shall be subject to the receipt of the following
documents, in form and substance satisfactory to Lessor, prior to such delivery
(unless otherwise provided):
(a) The Lease, executed by Lessee and Lessor.
(b) A copy of resolutions of the Board of Directors of Lessee or other
written evidence of appropriate corporate action, certified by the
Secretary of Lessee, duly authorizing or ratifying the lease of the
Aircraft hereunder and the execution, delivery and performance of
this Lease and the Lease Supplement.
(c) An incumbency certificate as to the person or persons authorized to
execute and deliver this Lease and the Lease Supplement.
(d) An Acceptance Certificate for the Aircraft executed by Lessee.
(e) A Lease Supplement for the Aircraft executed by Lessee.
(f) A certificate signed by Lessee's insurance brokers evidencing
compliance with the insurance provisions of Section 11.
(g) Opinions of counsel to Lessee, dated the Delivery Date, in
substantially the form of Exhibit E hereto.
(h) Such financing statements under the Uniform Commercial Code or other
law with respect to the Lease and the Aircraft as shall have been
reasonably requested by Lessor.
(i) All appropriate action required to have been taken by the Federal
Aviation Administration and any other applicable governmental or
political agency, subdivision or instrumentality of the United
States, on or prior to the Delivery
12
Date in connection with the transactions contemplated by this Lease
and the Lease Supplement shall have been taken, and all orders,
permits, waivers, authorizations, exemptions and approvals of such
entities required to be in effect on the Delivery Date in connection
with the transactions contemplated by this Lease and the Lease
Supplement shall have been issued, and all such orders, permits,
waivers, authorizations, exemptions and approvals shall be in full
force and effect on the Delivery Date.
(j) Receipt by Lessor of an appraisal of the Aircraft in form and
substance satisfactory to Lessor.
(k) Delivery to Lessor by Solitair Corporation of an executed warranty
▇▇▇▇ of sale for the Aircraft in form and substance satisfactory to
Lessor.
(l) Delivery to Lessor by Solitair Corporation of an executed assignment
of warranties for the Aircraft and the Engines in form and substance
satisfactory to Lessor.
5.2. LESSEE'S CONDITIONS. Lessee's obligation to accept delivery of the
Aircraft from Lessor for lease hereunder shall be subject to the following
conditions precedent:
(a) The Aircraft is tendered by Lessor for delivery on the Delivery
Date.
(b) Lessor, at Lessee's expense, shall have delivered to Lessee a
temporary FAA certificate of registration for the Aircraft (a "pink
slip") in Lessor's name, or if Lessee requests, Lessor shall execute
and deliver an application for an authorization, telex or facsimile
(a "flying time wire") which permits the Aircraft to be operated
outside of the United States, at Lessee's cost.
13
SECTION 6. DELIVERY OF THE AIRCRAFT.
6.1. DELIVERY LOCATION. The Aircraft shall be delivered to Lessee "As-Is,
Where-Is" at Memphis, Tennessee.
6.2. ACCEPTANCE OF DELIVERY. Lessee's execution of the Acceptance
Certificate shall constitute Lessee's acknowledgment and agreement that, as
between Lessor and Lessee, the Aircraft has been inspected to Lessee's
satisfaction, and that Lessee has unconditionally accepted the Aircraft for
lease hereunder. Concurrently with the execution of the Acceptance Certificate,
Lessee shall also execute and deliver to Lessor the Lease Supplement, dated the
Delivery Date, and Lessor shall also execute such Lease Supplement. Execution of
the Lease Supplement by Lessee and Lessor shall evidence that the Aircraft has
been leased hereunder upon and subject to all of the terms, conditions, and
provisions hereof. Without limiting or diminishing the disclaimers set forth in
Section 3.4, Lessee's failure to notify Lessor or any defect or discrepancy
shall not establish or evidence the absence thereof insofar as the Manufacturer
or any supplier is concerned.
SECTION 7. REGISTRATION; MAINTENANCE; OPERATION; POSSESSION; PERMITTED
SUBLEASES; INSIGNIA.
7.1. REGISTRATION.
(a) On the Delivery Date, Lessee shall, at its own cost and expense, cause
this Lease and the Lease Supplement to be duly filed with the FAA under the
Transportation Act, and except as provided in Section 7.1(b), Lessee shall not
take any action or fail to take any action that would cause the Aircraft not to
remain at all times duly registered under the Transportation Act unless Lessor
consents in advance in writing to the registration of the Aircraft in another
jurisdiction. Lessee shall execute and deliver all such documents at its own
cost and expense as Lessor may reasonably request for the purpose of effecting
and continuing such registration. In addition, Lessee shall take such other
actions as may be necessary in any other jurisdiction in which the Aircraft may
be operated to protect Lessor's interest as owner of the Aircraft and as Lessor
hereunder. Lessee shall have the right, upon written notice to Lessor, to cause
the United States registration number for the Aircraft to be changed to another
United States registration number selected by Lessee. Lessor agrees to cooperate
with Lessee, at Lessee's sole cost and expense, including, without limitation,
executing and delivering to Lessee a Form AC 8050-64, "Assignment of Special
Registration Number," for the Aircraft. Lessee shall solely be responsible for
the cost of painting its designated United States registration number on the
Aircraft and for all other costs associated with or resulting from the change of
the registration number of the Aircraft.
(b) Lessee shall have the right, in connection with a Permitted Sublease
to a Permitted Sublessee pursuant to Section 13.2, to change the registration of
the Aircraft to any country listed on Schedule III hereto approved for
re-registration. Lessee's right to change the registration shall be subject to
appropriate recordation in the country of registry of the rights of Lessor,
provided
14
that Lessee shall deliver to Lessor an opinion of counsel reasonably
satisfactory in form and substance to Lessor to the effect that the rights of
Lessor in and to the Aircraft and the Lease and the obligations of Lessee under
the Lease will not be impaired under the laws of such country, Lessor will not
be required to qualify to do business in such jurisdiction as a result of such
re-registration, the laws of such Permitted Sublessee's country of domicile
require fair compensation by the government of such jurisdiction for the loss of
use of or title to such Engine or the Airframe in the event of the requisition
by such government of such use or title (it being understood that in the event
such opinion cannot be given in a form reasonably satisfactory to Lessor, such
opinion will be waived if insurance reasonably satisfactory to Lessor is
provided to cover such requisition) and provided, further, that Lessee shall
also provide Lessor with satisfactory assurances that the Lessor's title to the
aircraft will be recognized in such new jurisdiction of registry. In addition,
Lessee shall provide to Lessor evidence reasonably satisfactory to Lessor that
(i) the country of proposed re-registration provides promulgated guidelines
establishing that the prompt and orderly de-registration of the Aircraft will
not be unreasonably impeded, and (ii) the jurisprudence and laws of such country
do not clearly provide for greater tort liability to Lessor than under similar
circumstances in the United States. All costs incurred with such change of
registry shall be for the account of Lessee.
7.2. MAINTENANCE. During the Term, Lessee, at its own cost and expense,
shall (or, if any Permitted Sublease is then in effect, shall cause any
Permitted Sublessee to):
(a) maintain, inspect, service, repair, test, operate and overhaul (or
cause to be maintained, inspected, serviced, repaired, tested, operated
and overhauled) the Aircraft in accordance with the Maintenance Program so
as to keep (A) the Aircraft in good operating condition, and (B) the
Aircraft in such condition as may be necessary to enable the applicable
airworthiness certification for the Aircraft to be maintained in good
standing at all times under (I) the Transportation Act, except when a
group of aircraft of the same type and series as the Aircraft powered by
engines of the same type and series as those with which the Airframe is
from time to time equipped and registered in the United States and flying
in commercial passenger service have been grounded by the Federal Aviation
Administration, and (II) the applicable laws of any other jurisdiction in
which the Aircraft may then be registered, based and/or operated from time
to time. In any event, the Aircraft shall be maintained at least at the
level as Lessee maintains, and utilizing the same manner of maintenance,
service, repair or overhaul as used by Lessee with respect to, similar
aircraft owned, leased or operated by Lessee. Notwithstanding anything
herein to the contrary, all maintenance, including "C" checks and engine
overhauls, shall be performed by Lessee or an FAA-approved repair station;
(b) maintain or cause to be maintained in the English language all Manuals
and Technical Records, and other materials required to be maintained in
respect of the Aircraft by the Federal Aviation Administration and the
applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered and/or based from time to time,
including, but not limited to, all documents necessary to establish
compliance with applicable FAA requirements for the Airframe, the Engines
and life-limited parts (which records, logs and other materials, as
between Lessor and Lessee and
15
all parties claiming through Lessee, shall be the property of Lessor but
shall be maintained by Lessee during the Term of this Lease and shall
become the property of Lessee upon the occurrence of an Event of Loss and
Lessee's compliance with Section 10.1); and
(c) promptly furnish or cause to be furnished to Lessor such information
as may be required to enable Lessor to file any reports required to be
filed by Lessor with any governmental authority or lending institution.
7.3. COMPLIANCE WITH AIRWORTHINESS DIRECTIVES. Lessee shall ensure at its
cost and expense that the Aircraft shall at all times have a currently effective
airworthiness certificate issued by the FAA under the Federal Aviation
Regulations (or by any other governmental authority having jurisdiction over the
operation of the Aircraft). Lessee (or during the term of any Permitted
Sublease, the Permitted Sublessee), at its cost and expense, shall ensure that
the Aircraft is in compliance with all applicable Airworthiness Directives, and
Federal Aviation Regulation requirements (or the requirements of any other
governmental authority having jurisdiction over the Aircraft). All Airworthiness
Directives shall be accomplished in accordance with all applicable bulletins and
manuals published by the manufacturer of the Airframe or Engines or Parts or
FAA-approved data developed by Lessee, and in a manner consistent with similar
aircraft owned, leased or operated by Lessee.
7.4. REPLACEMENT OF PARTS. Lessee (or, if any Permitted Sublease is then
in effect, any Permitted Sublessee), shall, at its own cost and expense,
promptly replace or cause to be replaced all Parts which may from time to time
be incorporated or installed in or attached to the Airframe or any Engine and
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever, except as otherwise provided in Section 7.6. In addition,
Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee) may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that Lessee (or, if any Permitted
Sublease is then in effect, any Permitted Sublessee), except as otherwise
provided in Section 7.6, will, at its own cost and expense, replace such Parts
as promptly as practicable. If not obtained from an original equipment
manufacturer, all Parts installed during the Term must have been
repaired/overhauled by an FAA-approved repair station and be accompanied by
appropriate certification and documentation to demonstrate compliance with
applicable requirements. All replacement Parts shall be free and clear of all
Liens (except for Permitted Liens and pooling arrangements to the extent
permitted by Section 7.5 and except for replacement property temporarily
installed on an emergency basis) and shall be in as good operating condition as,
and shall have a value, utility and remaining useful life at least equal to, the
Parts replaced, but in all events such replacement Parts shall be no less than
in the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts have
been replaced by Parts which have been incorporated or installed in or attached
to the Airframe or such Engine and which meet the requirements for replacement
parts specified above.
16
Immediately upon any replacement part becoming incorporated or installed in or
attached to the Airframe or any Engine as above provided, without further act
(subject only to Permitted Liens and any pooling arrangement to the extent
permitted by Section 7.5 and except for replacement property temporarily
installed on an emergency basis), (i) title to such replacement Part shall
thereupon vest in Lessor, (ii) such replacement Part shall become subject to
this Lease and be deemed part of the Airframe or such Engine for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to the Airframe or such Engine, and (iii) title to the replaced Part
shall thereupon vest in Lessee (or, if a Permitted Sublease is then in effect,
any Permitted Sublessee), free and clear of all Lessor Liens and rights of
Lessor, and shall no longer be deemed a part hereunder.
7.5. POOLING OF PARTS. Any Part removed from an Airframe or any Engine as
provided in Section 7.4 may be subjected by Lessee (or, if any Permitted
Sublease is then in effect, any Permitted Sublessee) to a customary pooling or
interchange arrangement with other aircraft or engines owned or leased by Lessee
(or, if any Permitted Sublease is then in effect, any Permitted Sublessee);
provided that if as a consequence thereof a Part is removed, the Part replacing
such removed Part shall be incorporated or installed in or attached to the
Airframe or Engine in accordance with Section 7.4 as promptly as practicable
after the removal of such removed Part. When incorporated or installed in or
attached to the Airframe or any Engine in accordance with Section 7.4, any Part
replacing a Part that is removed under a customary pooling or interchange
arrangement may be owned by any third party, provided that Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee), at its cost and
expense, as promptly thereafter as practicable, either (i) causes title to such
replacement Part to vest in Lessor in accordance with such Section 7.4 by Lessee
(or, if any Permitted Sublease is then in effect, any Permitted Sublessee)
acquiring title thereto for the benefit of, and transferring such title to,
Lessor free and clear of all Liens other than Permitted Liens, or (ii) replaces
such replacement Part by incorporating or installing in or attaching to the
Airframe or Engine a further replacement Part owned by Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee) free and clear of
all Liens other than Permitted Liens and by causing title to such further
replacement Part to vest in Lessor in accordance with Section 7.4. All such
replacement Parts shall be in as good operating condition as, and shall have a
value, utility and remaining useful life at least equal to, the Parts replaced,
but in all events such replacement Parts shall be no less than in the condition
and repair required to be maintained by the terms hereof. No pooling or
interchange arrangement will result in a change of title or registration of the
Aircraft or effect Lessor's status under this Lease.
7.6. ALTERATIONS, MODIFICATIONS AND ADDITIONS. Lessee (or, if a Permitted
Sublease is then in effect, any Permitted Sublessee), shall, at its own cost and
expense, make (or cause to be made) such alterations and modifications in and
additions to the Airframe and Engines as may be required from time to time to
meet the applicable standards of the FAA or any applicable regulatory agency or
body of any other jurisdiction to which the Aircraft may then be subject, and
such other modifications, alterations and improvements as do not decrease the
fair market value utility or remaining useful life of the Aircraft. Title to all
Parts incorporated or installed in or attached or added to the Airframe or an
Engine as the result of such alteration, modification, removal or addition
shall, without further act, vest in Lessor. Notwithstanding the foregoing,
17
Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee) may, at any time during the Term, so long as no Event of Default has
occurred and is continuing, remove or suffer to be removed any Part, provided
that such Part (i) is in addition to, and not in replacement of or substitution
for, any Part originally incorporated or installed in or attached to the
Airframe or any Engine at the time of delivery thereof hereunder or any Part in
replacement of or substitution for any such Part, (ii) is not required to be
incorporated or installed in or attached or added to the Airframe or any Engine
pursuant to the terms of Section 7.2(a) or the first sentence of this Section
7.6, (iii) can be removed from the Airframe or such Engine without (A) causing
material damage to the Airframe or such Engine (it being understood that Lessee
shall repair any damage caused by a permitted removal), or (B) diminishing or
impairing the value, utility, condition, remaining useful life or airworthiness
which the Airframe or such Engine would have had at such time had such
alteration, modification, removal or addition not originally occurred, assuming
such Airframe or such Engine was then of the value, utility, and remaining
useful life and in the condition of airworthiness required to be maintained by
the terms of this Lease, and (iv) was not paid for by Lessor; provided, however,
that the value of all parts removed pursuant to this sentence shall not exceed
$100,000 in the aggregate. Upon the removal by Lessee (or Permitted Sublessee)
of any Part as provided above, title thereto shall, without further act, vest in
Lessee (or any Permitted Sublessee, as the case may be) and such Part shall no
longer be deemed part of the Airframe or Engine from which it was removed. Any
Part not removed by Lessee (or any Permitted Sublessee) as above provided prior
to the return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.
7.7. OPERATION.
(a) Lessee will not maintain, use, service, repair, overhaul,
operate or locate the Aircraft (or, if any Permitted Sublease is then in effect,
permit any Permitted Sublessee to maintain, use, service, repair, overhaul,
operate or locate the Aircraft) in violation of any law or any rule, regulation,
order, directive, bulletin or certificate of any government or governmental
authority (domestic or foreign) having jurisdiction, or in violation of any
airworthiness certificate, license or registration relating to the Aircraft
issued by any such authority, except to the extent Lessee (or, if a Permitted
Sublease is then in effect, any Permitted Sublessee) is contesting in good faith
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not involve any material risk of liabilities or any
civil or criminal penalties being imposed on or against Lessor, that does not
involve any material risk of loss, forfeiture or sale of the Aircraft or any
Engine, and that does not adversely affect Lessor, Lessor's title or interest in
the Aircraft or any Engine, or Lessor's interest in this Lease. Except as
provided in Section 7.3, if any such law, rule, regulation, order, directive,
bulletin, certificate, license or registration requires alteration of the
Aircraft or any Engine, Lessee will conform the same therewith at its own cost
and expense and will maintain the Aircraft and each Engine in compliance with
such law, rule, regulation, order, directive, bulletin, certificate, license or
registration.
(b) Lessee will not operate or locate the Aircraft, or permit any
Permitted Sublessee to operate or locate the Aircraft, in any area excluded from
coverage by any insurance
18
policy required by the terms of this Lease, except in the case of temporary
operations due to unforeseen circumstances beyond Lessee's control (e.g.,
weather, hijacking, malfunctions, ETC.)
(c) The Aircraft shall be operated only by pilots and other airmen
holding valid licenses or other necessary authorizations as may be required by
applicable laws and regulations.
7.8. POSSESSION AND PERMITTED SUBLEASES.
(a) During the Basic Term, Lessee will not, without the prior
written consent of Lessor, sublease or otherwise in any manner deliver, transfer
or relinquish possession of the Aircraft, the Airframe or any Engine, or install
or permit to be installed any Engine on any airframe other than the Airframe, or
to install or permit to be installed on the Airframe any engines other than the
Engines (other than to the extent an Engine is receiving off-wing maintenance
service). The wet lease or charter of the Aircraft shall not be considered a
sublease; provided, however, that at all times, Lessee has operational control
of the Airframe and Engines.
(b) Notwithstanding anything herein to the contrary, Lessee may,
without the prior written consent of Lessor:
(i) install a substitute engine owned by Lessee on the
Airframe so long as the substitute engine is free and clear of all
Liens except Permitted Liens;
(ii) install or permit the installation of an Engine on an
airframe which is owned by Lessee (or, if any Permitted Sublease is
then in effect, any Permitted Sublessee) free and clear of all Liens
except (A) Permitted Liens and those which apply only to the engines
(other than Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety),
and (B) mortgage liens or other security interests, provided that
such mortgage liens or other security interests effectively provide
that such Engine shall not become subject to the lien of such
mortgage or security interest, notwithstanding the installation
thereof on such airframe;
(iii) provided no Event of Default has occurred and is
continuing, install or permit the installation of an Engine on an
airframe leased to Lessee (or, if any Permitted Sublease is then in
effect, any Permitted Sublessee) or purchased by Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee)
subject to a conditional sale or other security agreement, provided
that (A) such airframe is and remains free and clear of all Liens
except (I) the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe, or their
assignees, and (II) Liens of the type permitted by Section
7.8(b)(ii) hereof and (B) such lease, conditional sale or other
security agreement expressly provides that such Engine shall not
become subject to the lien of such
19
lease, conditional sale or other security agreement, notwithstanding
the installation thereof on such airframe; or
(iv) install or permit the installation of an Engine on an
airframe owned by Lessee (or, if any Permitted Sublease is then in
effect, any Permitted Sublessee), leased to Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee) or
purchased by Lessee (or if any Permitted Sublease is then in effect,
any Permitted Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither Section
7.8(b)(ii) nor Section 7.8(b)(iii) is applicable, provided that such
installation shall be deemed an Event of Loss with respect to such
Engine and Lessee shall (or shall cause any Permitted Sublessee to)
comply with Section 10.2 hereof in respect thereof.
(c) The rights of any Permitted Sublessee or other transferee who
receives possession by reason of a transfer permitted by this Section or
Section 13 hereof, other than the transfer of an Engine which is deemed an
Event of Loss, shall be and shall be deemed to be effectively subject and
subordinate to, and any Permitted Sublease permitted by this Section or
Section 13 hereof shall be effectively and expressly subject and
subordinate to, all the terms of this Lease, including, without
limitation, Lessor's rights to repossession and to avoid such Permitted
Sublease upon such repossession. The terms of such Permitted Sublease
shall not permit any Permitted Sublessee to take any action not permitted
to be taken by Lessee under this Lease. Lessee shall remain primarily
liable hereunder for the performance of all of the terms and conditions of
this Lease to the same extent as if such Permitted Sublease had not
occurred. No pooling agreement, interchange agreement, Permitted Sublease
or other relinquishment of possession of the Airframe or any Engine or
part shall in any way discharge or diminish any of Lessee's obligations to
Lessor hereunder or constitute a waiver of Lessor's rights or remedies
hereunder. All necessary action shall be taken by Lessee at its expense
which is required in connection with any Permitted Sublease to continue
the perfection of the right, title and interest of Lessor in the Aircraft,
the Airframe and the Engines and Lessor's rights under the Lease, and such
Permitted Sublease and all other actions necessary or required to preserve
the right, title and interest of Lessor in the Aircraft, Airframe and
Engines. Notwithstanding any provision herein to the contrary, no
Permitted Sublease permitted pursuant to this Section or Section 13 shall
permit any further sub-subleasing of the Aircraft.
7.9. INSIGNIA. Lessee agrees to maintain (or cause to be maintained) in a
convenient location in the cockpit of the Airframe a nameplate setting forth the
name of Lessor and its status as owner/lessor of the Aircraft. Such nameplate
shall be replaced, if necessary, with a nameplate reflecting the name of any
successor Lessor, as permitted in this Agreement. Except as above provided,
Lessee will not allow the name of any Person to be placed on an Airframe as a
designation that might be interpreted as a claim of ownership; provided that
nothing herein contained shall prohibit Lessee (or any Permitted Sublessee) from
placing its customary colors and insignia on the Airframe.
20
7.10. INSPECTIONS BY LESSOR. Not more than once annually during the Term,
Lessor or its authorized representatives may upon at least 15 days' prior notice
to Lessee (unless an Event of Default has occurred and continuing, in which
event, Lessor may exercise its rights under this Section 7.10 as often as it
deems necessary upon one Business Day's prior notice) and at a time and place
reasonably acceptable to Lessee, at its own expense and risk, conduct a visual
walk-around inspection of the Aircraft and any Engines, which shall not include
opening any panels or bays and may inspect the Manuals and Technical Records
relating to the operation and maintenance thereof (which Lessee shall provide
copies of to Lessor upon Lessor's reasonable request), provided that (a) any
such inspection shall be subject to the safety, security and workplace rules
applicable at the location where such inspection is conducted and any applicable
governmental rules or regulations, (b) in the case of an inspection during a
maintenance visit, such inspection shall not interfere with the normal conduct
of such maintenance visit or extend the time required for such maintenance visit
or, in any event, at any time interfere with the use or operation of the
Airframe or any Engine or with the normal conduct of Lessee's or a Permitted
Sublessee's business (provided further, that in no event shall this provision
adversely affect Lessor's right to inspect the Aircraft at least once annually
during the Term), and (c) Lessor shall not be required to undertake or incur any
additional liabilities in connection with any such inspection. All information
obtained in connection with any such inspection shall be held confidential by
Lessor, except as may be required by an order of any court or administrative
agency or by any statute, rule, regulation or order of any governmental
authority or as may be necessary to enforce the terms of this Lease. If
requested by Lessor, Lessee shall provide, or shall cause any Permitted
Sublessee to provide, the date (if then scheduled) upon which the Airframe
undergoes its next scheduled major check and shall advise Lessor of the name and
location (if then known) of the relevant maintenance performer.
SECTION 8. RETURN OF THE AIRCRAFT.
8.1. RETURN. Upon the termination of this Lease at the end of the Term
(unless there has been an Event of Loss with respect to the Aircraft or unless
Lessee exercises its option to purchase the Aircraft or upon Lessor's exercise
of its remedies pursuant to Section 15), Lessee shall, at its own cost and
expense, return the Aircraft to Lessor at a location in the continental United
States on Lessee's regional jet route system where Lessee has appropriate
maintenance and repair facilities specified by Lessor (the "Return Location") in
compliance with the provisions of this Section 8. At the time of its return, the
Aircraft shall be free and clear of all Liens, other than Lessor Liens, and
Lessor and Lessee shall execute a return acceptance certificate (the "Return
Acceptance Certificate") in substantially the form attached hereto as Exhibit F.
Lessee shall execute and deliver to Lessor such instruments of release and
termination of this Lease as to the Aircraft, in form suitable for recording at
FAA and other public offices, as Lessor may reasonably request in order to make
clear upon public records that the Aircraft is free and clear of all rights of
Lessee therein, and shall authorize Lessor to date such instruments with the
effective date of expiration or earlier cancellation or termination of the Term
of this Lease as to the Aircraft.
8.2. RETURN OF OTHER ENGINES. In the event that any engine not owned by
Lessor and leased to Lessee hereunder shall be delivered with the returned
Airframe (a "Replacement
21
Engine"), Lessee shall, concurrently with such delivery, at no cost to Lessor,
furnish, or cause to be furnished, to Lessor a full warranty (as to title) ▇▇▇▇
of sale with respect to each such Replacement Engine, in form and substance
reasonably satisfactory to Lessor, and shall take such other action as Lessor
may reasonably request with respect to the transfer of title thereof to Lessor.
Upon transfer of title to Lessor, such Replacement Engine shall be deemed to be
an Engine for all purposes hereof and thereupon Lessor will transfer to Lessee,
without any representation, warranty or recourse of any kind whatsoever, express
or implied, except a warranty as to the absence of Lessor's Liens, all of
Lessor's right, title, and interest in and to any Engine not installed on such
Airframe at the time of the return thereof. A Replacement Engine shall be the
same or improved make and model as the Engines and, in any event, both engines
on the returned Airframe shall be of the same make and model. Any engine
returned shall meet the requirements set forth in Section 8.10, and shall be in
the same or better condition and have the same or greater remaining value,
utility and useful life as the replaced Engine, assuming that the replaced
Engine was in such condition and repair and of the value, utility and useful
life as required by this Lease.
8.3. CONDITION OF THE AIRCRAFT. The Aircraft at the time of return to
Lessor shall have been maintained and repaired in accordance with the
Maintenance Program and this Lease, shall be in as good operating condition and
appearance as when delivered, with all of the Aircraft equipment, components and
systems functioning in accordance with their intended use, taking due account in
each case of ordinary wear and tear, with no obvious damage. The Airframe shall
satisfy the following conditions: if the C Check (or its then equivalent) is
performed in segments, Lessee shall complete the next segment check within 100
Flight Hours prior to return and shall rectify all Discrepancies revealed by
such check. If the Airframe is not on a segmented maintenance program, it shall
have not less than the lesser of (i) one-half time, or (ii) 2,000 Flight Hours
or 12 months, whichever is applicable, remaining until the next scheduled
structural inspection. Upon return of the Aircraft, all on-condition and
condition-monitored components shall be serviceable. Each applicable Airframe
component shall have remaining not less than the lesser of (i) one-half time, or
(ii) 12 months.
8.4. REGISTRATION AND CERTIFICATION OF THE AIRCRAFT. Lessee will, unless
otherwise requested by Lessor in writing at least 30 days prior to expiration of
the Term, cause the Aircraft (including for this purpose any engines installed
on the Airframe which are not Engines), if it is not then so registered, to be
registered under the laws of the United States with the Federal Aviation
Administration in the name of Lessor or its designee. In addition, the Aircraft
shall have a valid Certificate of Airworthiness issued by the Federal Aviation
Administration permitting use of the Aircraft in commercial passenger service,
and shall have been continuously maintained in compliance with the Lease and
shall comply with the provisions of Federal Aviation Regulations, and all
applicable noise, corrosion, environmental and aging aircraft requirements. If
the Aircraft, with the prior written consent of Lessor, was not on an
FAA-approved maintenance program immediately prior to its return hereunder,
Lessee shall perform prior to the return of the Aircraft, at Lessee's cost and
expense, all work necessary, if any, to bridge the Aircraft onto a maintenance
program approved by the FAA so as to permit operation of the Aircraft under the
Federal Aviation Regulations.
22
8.5. OVERHAUL, REPAIRS, MODIFICATIONS; COMPLIANCE WITH GOVERNMENTAL
REQUIREMENTS.
(a) The Aircraft shall be properly documented to have been repaired or
overhauled by certified repair stations acceptable to the FAA and in such a
manner so that the Aircraft is approved by the FAA for use in the United States.
All major repairs performed since the Aircraft was delivered to Lessee by the
Manufacturer and which still exist on the Aircraft, must be immediately eligible
to receive approval by the FAA (or a designee of the FAA), if so required. All
data and documentation necessary to substantiate their certification, approval,
and methods of compliance, as required, shall accompany all such repairs. All
modifications performed since the Delivery Date which deviate from the certified
configuration and which still exist on the Aircraft shall have approval by the
FAA (or a designee of the FAA) or certification if so required. Complete data
and documentation necessary to substantiate their certification and approval and
methods of compliance shall accompany all such modifications.
(b) The Aircraft shall, at Lessee's cost and expense, be in compliance
with all amendments or changes to the Federal Aviation Regulations and
Airworthiness Directives applicable to the Airframe, the Engines (or Replacement
Engines) or Parts accomplished by terminating action in compliance with the
issuing agency's or manufacturer's specific instructions, as the case may be, to
the extent that such Regulations or Directives have an effective date for
terminating compliance on or before the date of return or within 60 days
thereafter. In addition to the foregoing, if Lessor by prior written consent
allows the Aircraft to be registered under the laws of another jurisdiction, the
Aircraft shall, at Lessee's expense, (i) be in compliance with all Airworthiness
Directives and standards of the aviation authority of such jurisdiction, and
(ii) be in such physical condition, and accompanied by such documents and
certificates (including, without limitation, any export airworthiness
certificate), as may be required in order for the Aircraft to be eligible to be
registered under the Transportation Act without expense to Lessor.
8.6. DEFERRED MAINTENANCE. Lessee agrees that it will not defer
maintenance or service, scheduled or unscheduled, with respect to the Aircraft
in contemplation of return of the Aircraft and will maintain the Aircraft in
accordance with the Maintenance Program; provided, however, that the Aircraft
shall have no deferred maintenance items, inspection items or placards. Items
deferred because of maintenance concessions (I.E., an exemption to operate
beyond the normal limits by monitoring) shall be brought up-to-date as if such
maintenance concessions or exemptions did not exist. Components whose time
status exceed the conditions or requirements imposed by this Lease shall be
brought into compliance with such conditions or requirements.
8.7. CONFIGURATION. The Aircraft shall be returned in full passenger
seating configuration. In the event that the then-current seating configuration
has fewer seats than the seating configuration on the Delivery Date, Lessee
shall also deliver any remaining seats to Lessor. Installed seats shall be fully
serviceable and seat covers and other soft furnishings shall be in good
condition.
8.8. AIRCRAFT INTERIOR. The interiors and exteriors of the Aircraft shall
be clean in
23
accordance with U.S. commuter air carrier industry standards.
8.9. FUEL AND OIL. All fuel and oil on board the Aircraft shall be the
property of Lessor without charge.
8.10. ENGINE CONDITION.
(a) Upon return of the Aircraft, the Engines shall be in good operating
and serviceable condition and ready for flight with all equipment, accessories
and systems fully functional and operating within in-service limits and
guidelines established by the relevant manufacturers, including any equipment,
accessories or systems which would not otherwise be functioning due to an
authorized deviation or variation. If the Maintenance Program for major
overhauls and hot section inspections for the Engines is based on engine
condition trend monitoring in accordance with the engine manufacturer's or an
FAA-approved trend monitoring program, each Engine (or other engine returned
with the Airframe) shall have satisfactorily completed, immediately prior to
return, any boroscope inspection required under the trend monitoring program,
and Lessee shall provide all trend data for each Engine (or other engine
returned with the Airframe). If the boroscope inspection and the trend data
indicate that any action (other than inspection and monitoring) should be taken
in order to prevent serious engine deterioration or engine damage, Lessee shall
complete or cause to be completed at its sole cost and expense all such action
required, prior to return.
(b) If the Maintenance Program is not based on engine condition trend
monitoring, the Engines shall have individually 2,000 Flight Hours and in the
aggregate 6,000 Flight Hours until scheduled overhaul, based upon the
Maintenance Program at the time of return.
(c) If, at the time of return, the Engines are subject to a
Power-By-The-Hour Agreement under which Lessee (or Permitted Sublessee) is
current on all payments and otherwise in good standing, in lieu of the foregoing
requirements, Lessee shall return each Engine in such condition as shall make it
eligible for continuous maintenance under a Power-By-The-Hour Agreement, in the
hands of any U.S. air carrier. A "Power-By-The-Hour Agreement" is an engine
maintenance program provided by the Engines' manufacturer or one of its
affiliates or by another responsible maintenance provider, providing full
maintenance (other than routine day-to-day maintenance; provided, that
foreign-object damage, life-limited parts, line replacement units and abuse may
be excluded or separately charged) for the Engines at no cost other than
standard per-Cycle rates (I.E., excluding charges based on the current
maintenance status of the Engines), all benefits of which program are generally
available to qualifying U.S. air carriers.
8.11. INSPECTION.
(a) During the last three months of the Term, with not less than five days
prior notice, Lessee will cooperate, in all reasonable respects, with the
efforts of Lessor to sell or lease the Aircraft, including, without limitation,
permitting prospective purchasers or lessees to inspect the Aircraft and the
records relating thereto at reasonable times, provided that such cooperation
shall not interfere with the normal operation of the Aircraft by Lessee or any
Permitted Sublessee.
24
(b) Immediately prior to the redelivery of the Aircraft, Lessee will make
the Aircraft and the Manuals and Technical Records available to Lessor at a
mutually-agreeable location for inspection by Lessor in order to verify that the
Aircraft complies with the Lease. Lessee shall make available to Lessor at the
Return Location, not less than ten days prior to the redelivery of the Aircraft,
such documentation regarding the condition, use, maintenance, operation and
history of the Aircraft during the Term of the Lease as Lessor may reasonably
request. Except in regard to the costs associated with Lessee's personnel, the
inspection shall be at Lessor's cost and expense.
8.12. OPERATIONAL GROUND CHECK. Prior to the return of the Aircraft to
Lessor hereunder, Lessee shall, at its cost and expense, conduct an operational
ground check in accordance with the requirements of the Manufacturers, the
Maintenance Program and this Lease, and shall promptly correct any Discrepancies
at Lessee's cost and expense.
8.13. OPERATIONAL CHECK FLIGHT. Promptly after completion of all
corrections required under Section 8, the Aircraft shall be check flown by
Lessee at its cost and expense, using qualified flight personnel, for the
purpose of demonstrating to lessor compliance with the requirements of this
Lease and the satisfactory operation of the Aircraft and its equipment and
systems. Two of Lessor's employees or representatives may participate in such
flight as observers. Lessee's pilot shall be in command of the Aircraft. Such
flight shall be flown using the Manufacturer's operational check flight
procedures sufficient to demonstrate the proper operation of all systems for
normal passenger use and compliance with the requirements of this Lease. Upon
completion of such operational check flight, Lessor shall set forth in writing
any Discrepancies required to be corrected by Lessee in order to comply with
provisions of this Section 8, and Lessee shall promptly correct or cause to be
corrected at Lessee's cost and expense any such Discrepancies. Lessee shall
provide for such additional test flights as are necessary to demonstrate that
any Discrepancies identified on prior test flights have been corrected. If any
of the Discrepancies referred to in Section 8.12 or this Section 8.13 continues
to persist, Lessor may (but shall not be obligated to) accept return of the
Aircraft and apply the procedure set forth in Section 8.15 for such
Discrepancies.
8.14. ACCEPTANCE. Unless otherwise mutually agreed, the operational check
flight(s) shall take place at the Return Location. Upon satisfactory completion
of the operational check flight(s), and after Lessee has corrected the
Discrepancies as required to comply with this Section 8 or, in the discretion of
Lessor, pursuant to the last sentence of Section 8.13, the Aircraft shall be
technically accepted by Lessor's representatives at the Return Location. Such
technical acceptance shall be evidenced by the execution and delivery of a
return acceptance certificate in substantially the form of Exhibit F hereto.
Subject to Section 8.15, Lessor hereby agrees that such acceptance of the
Aircraft by Lessor or Lessor's representatives shall, without further act,
irrevocably constitute acceptance of the redelivery of the Aircraft.
8.15. DEFERRED DISCREPANCY CORRECTION. Any Discrepancies identified during
the inspection, operational ground checks and operational check flight(s)
referred to in Sections 8.11, 8.12 and 8.13 which were not corrected by Lessee
prior to the acceptance of the Aircraft by Lessor pursuant to Section 8.14 shall
be corrected by Lessee at Lessee's cost and expense or, at
25
Lessor's option, may be corrected by Lessor or its designee after return of
the Aircraft and Lessee shall reimburse Lessor for all reasonable costs and
expenses incurred by Lessor or its designee for accomplishing such
Discrepancy corrections. Lessee shall, not later than 30 days after the date
of Lessor's invoice, pay Lessor for all such costs and expenses.
8.16. MANUALS AND TECHNICAL RECORDS. Lessee shall deliver or cause to be
delivered to Lessor, at the time the Aircraft is returned to lessor, all of the
Manuals and Technical Records, inspection, modification, maintenance and
overhaul records, updated and maintained by Lessee through the date of return of
the Aircraft as required by the FAA and the Maintenance Program. Such Manuals
and Technical Records and other records shall be sufficient to establish and
certify that the Aircraft has been maintained on an FAA-approved maintenance
program. If hard (non-computerized) copies of the Manuals and Technical Records
are not available, Lessee shall provide records maintained in accordance with
alternate methods approved by the FAA. In addition, Lessee shall also provide
Lessor, at the time the Aircraft is returned to Lessor, all records, documents,
manuals, authorizations, drawings and data in English which were developed or
caused to be developed by Lessee and/or required to be maintained with respect
thereto under applicable rules and regulations of each country under the laws of
which the Aircraft has been registered or to which the Aircraft was otherwise
subject during the Term. If any Manuals and Technical Records are missing,
incomplete, or otherwise not in accordance with FAA standards and requirements,
Lessee shall re-accomplish the maintenance tasks necessary to produce such
Manuals and Technical Records in accordance with the Maintenance Program prior
to delivery of the Aircraft or otherwise perform all necessary acts (without
regard to applicable waivers or deferrals) to obtain or recreate such Manuals
and Technical Records in a manner satisfactory to the FAA. All life-limited
Parts shall have full documentation necessary to trace compliance with the
Maintenance Program and FAA requirements throughout the Term. All Manuals and
Technical Records shall be in English and shall be made available upon request
by Lessor for review at the central maintenance record facility for aircraft of
the same type a minimum of 15 Business Days prior to the required date of
Aircraft delivery to Lessor.
8.17. SERVICE BULLETIN KITS. All vendors and manufacturers Service
Bulletin Kits for the Aircraft obtained by Lessee (or, if a Permitted Sublease
is then in effect, any Permitted Sublessee) free of charge but not installed
therein shall be returned with the Aircraft, as part of the Aircraft at the time
of return.
8.18. LESSEE'S SPECIAL EXTERIOR MARKINGS. At the time of the return of the
Aircraft, Lessee shall, at its cost and expense, shall have all of Lessee's and
any Permitted Sublessee's special exterior markings and insignia removed or
painted over, and the areas where such markings have been removed or painted
over refurbished as necessary to blend with adjacent areas; provided that the
FAA registration number shall not be removed from the Aircraft. in the event
that, notwithstanding Lessee's obligation to do so, Lessee does not remove such
markings, Lessor shall have the right to do so at Lessee's cost and expense, but
Lessor shall have no obligation to remove such markings prior to the sale,
lease, or other disposition of the Aircraft by Lessor after its return.
8.19. OWNERSHIP. Any documents, equipment and any other items returned to
Lessor
26
pursuant to this Section 8 which are not already owned by Lessor shall thereupon
become the property of Lessor.
8.20. EQUIVALENCY CHARGE. Failure to comply with the above standards
relating to average time or average cycles, if then applicable, with respect to
the Aircraft or Engines shall result in a compensating payment by Lessee equal
to the value of such Discrepancy, net of the value to the extent that any of the
foregoing standards is exceeded with respect to the Aircraft or Engines (such
value to be based on the then-current estimated third-party cost to Lessee of
the overhaul involved to meet such standards); provided, however, that for
purposes of determining the value of any components that exceed such standards,
no credit shall be given to Lessee for any major components with less than 25%
life remaining at return.
8.21. DISPUTES REGARDING RETURN CONDITION. Any dispute between Lessor and
Lessee regarding the condition of the Airframe or any Engine arising under this
Section 8 shall be referred to an aviation auditing firm selected by Lessor and
Lessee. Lessee shall bear the cost of such aviation auditing firm. The parties
will use their best efforts to obtain a final resolution of the dispute under
the foregoing procedures within 30 days following the date on which the dispute
arises.
8.22. STORAGE. Following return of the Aircraft, Lessee shall, at Lessor's
written request, assist Lessor in arranging storage for the Aircraft (which may
be outdoors) at the Return Location for a period not exceeding 60 days. Such
storage shall be at Lessor's sole cost and expense (not to exceed Lessee's
actual cost); provided, however, that if such termination occurs as a result of
an Event of Default, such storage shall be at Lessee's cost. Lessor shall, at
its sole cost and expense, maintain in effect during such storage period
insurance covering the Aircraft, in such amounts and against such risks as would
be customarily carried in similar circumstances by a reasonably prudent Lessor;
provided, however, that if such termination occurs as a result of an Event of
Default, Lessee shall reimburse Lessor upon demand for the cost of such
insurance and shall [co-operate] COOPERATE with Lessor in obtaining such
insurance.
SECTION 9. LIENS.
9.1. Lessee (or, if any Permitted Sublease is in effect, any Permitted
Sublessee) will not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to the Aircraft, any Engine, any Part, title
thereto or any interest therein or in this Lease, except (i) the rights of
Lessor as owner of the Aircraft, (ii) the respective rights of Lessor and Lessee
as provided herein, (iii) the rights of others under agreements or arrangements
to the extent permitted by the terms of Section 7.5 and Section 7.8(b)(iii)
hereof, (iv) Lessor Liens, (v) Liens for Taxes of Lessee (or, if any Permitted
Sublease is then in effect, any Permitted Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such proceedings
do not involve any material danger of the sale, forfeiture, loss or loss of use
of the Airframe, or any Engine or an interest therein, or any risk of material
liability (other than for the Taxes being contested), or any risk of civil or
criminal penalties being imposed on any Indemnitee, (vi) materialmen's,
mechanic's, workmen's, repairmen's, employees, or other like liens arising in
the ordinary course of Lessee's (or, if a Permitted Sublease is then in effect,
27
Permitted Sublessee's) business (including those arising under maintenance
agreements entered into in the ordinary course of business) securing obligations
that are not overdue or are being contested in good faith by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture, loss or loss of use of the Airframe or any Engine or any
interest therein, or any risk of material liability (other than for payment of
the amount being contested), or any risk of civil or criminal penalties being
imposed on any Indemnitee, (vii) Liens arising out of any judgment or award
against Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee), unless the judgment secured shall not, within 30 days after the
entry thereof, have been discharged, vacated, reversed or execution thereof
stayed pending appeal or shall not have been discharged, vacated or reversed
within 30 days after the expiration of such stay, and (viii) any Lien with
respect to which Lessee (or, if any Permitted Sublease is then in effect, any
Permitted Sublessee) shall have provided a bond adequate in the reasonable
opinion of Lessor. Lessee will promptly, at its own expense, take (or cause to
be taken) such actions as may be necessary duly to discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1. EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.
(a) Upon the occurrence of an Event of Loss with respect to the Airframe
or the Airframe and the Engines and/or engines then installed thereon, Lessee
shall promptly, and in any event, within 15 Business Days after such occurrence,
give Lessor written notice of such Event of Loss. After an Event of Loss and
until receipt by Lessor of the Stipulated Loss Value and all other amounts due
under the Lease, Lessee shall continue to pay Basic Rent and the parties shall
perform all of their other obligations under the Lease that remain possible of
performance taking into consideration the Event of Loss. Lessee shall, within 45
days after such occurrence, give Lessor written notice of its election to
perform one of the following options (it being agreed that if Lessee has not
have given Lessor notice of such election, Lessee shall be deemed to have
elected the option described in clause (ii) below:
(i) subject to the satisfaction of the conditions contained in Section
10(c), on a date not more than 150 days after the occurrence of the Event of
Loss (or, if earlier, the last day of the Term), convey or cause to be conveyed
to Lessor, and to be leased by Lessee hereunder in replacement of the Airframe
and Engines with respect to which the Event of Loss occurred, a Replacement
Airframe (together with the same number of Replacement Engines as the number of
Engines, if any, which were subject to such Event of Loss), such Replacement
Airframe and Replacement Engines to be free and clear of all Liens except
Permitted Liens and to have a remaining useful life, estimated residual value,
value and utility at least equal to the Airframe and Engines, if any, so
replaced (assuming that such Airframe and Engines were in the condition and
repair required by the terms hereof) and to be an airframe that is the same make
and model and same or later vintage as the Airframe to be replaced thereby, or
an improved make and model; provided that, if Lessee has not performed its
obligation to effect such replacement under this clause (i) during the 150-day
period provided herein (or, if earlier, the last day of the Term), it shall give
Lessor notice to such effect upon or before the expiration of such period and
shall
28
promptly pay on the 30th day after the date of such notice to Lessor (or, if
earlier, the last day of the Term), in immediately-available funds, the amount
specified in clause (ii) below; or
(ii) pay to Lessor on the earlier to occur of the third Business Day
following the date of receipt of insurance proceeds in respect of the Event of
Loss or 120 days following the date of the Event of Loss, the sum of (i) any
amounts then accrued under this Lease (including Basic Rent due and payable
hereunder), plus (ii) the Stipulated Loss Value of the Aircraft computed as of
the Rent Payment Date next following the date on which the Event of Loss
occurred, plus (iii) any Supplemental Rent and other amounts otherwise due and
payable hereunder plus (iv) any reasonable expenses and costs incurred in
connection with such Event of Loss by Lessor, minus (v) any prepaid rent
attributable to the period following the date of such payment.
(b) In the event that Lessee has provided a Replacement Aircraft as
provided in Section 10(a)(i) hereof, (i) this Lease shall continue with respect
to such Replacement Aircraft as though no Event of Loss had occurred; (ii)
Lessor shall, at the expense of Lessee, convey to Lessee "as-is, where-is",
without recourse or warranty except for a warranty against Lessor's Liens, all
right, title and interest of Lessor in and to the Airframe and the Engine or
Engines, if any, installed on the Airframe upon the occurrence of the Event of
Loss by executing and delivering to Lessee such bills of sale and other
documents and instruments as Lessee may reasonably request to evidence such
conveyance; (iii) Lessor shall, at the request and expense of Lessee, to the
extent assignable, assign to Lessee all claims it may have against any other
Person arising from the Event of Loss; and (iv) Lessee shall be entitled to
receive all insurance proceeds and proceeds from any award in respect of
condemnation, confiscation, seizure or requisition, including any interest
thereon, to the extent not previously applied to the purchase price of the
Replacement Aircraft.
(c) Lessee's right to substitute a Replacement Aircraft as provided in
Section 10(a)(i) shall be subject to the fulfillment, as Lessee's sole cost and
expense, in addition to the conditions continued in Section 10(a)(i), of the
following conditions precedent:
(i) On the date of delivery of the Replacement Aircraft to Lessor
(such date being referred to in this Section 10(c) as the "Replacement Closing
Date"), no Event of Default shall have occurred and be continuing;
(ii) On the Replacement Closing Date, the following documents shall
have been duly authorized, executed and delivered by the respective party or
parties thereto and shall be in full force and effect, and an executed
counterpart of each such document (or, in the case of the FAA ▇▇▇▇ of Sale, a
photocopy thereof) shall have been delivered to Lessor:
(A) a Lease Supplement covering the Replacement Aircraft, which has been
duly filed for recordation with the FAA;
(B) an FAA ▇▇▇▇ of Sale covering the Replacement Aircraft, executed by the
owner thereof in favor of Lessor, and dated the Replacement Closing Date;
(C) a full warranty (as to title) ▇▇▇▇ of sale, in form and substance
satisfactory to
29
Lessor, covering the Replacement Aircraft, executed by the owner thereof in
favor of Lessor, dated the Replacement Closing Date;
(D) an assignment of manufacturer's and vendor's warranties with respect
to the Replacement Aircraft;
(iii) On or before the Replacement Closing Date, Lessor shall have
received such documents and evidence with respect to Lessee (including, without
limitation, a certificate of a Responsible Officer regarding the particulars of
the Replacement Aircraft and its compliance with the terms of this Lease), or
the owner of the Replacement Aircraft, as Lessor may reasonably request in order
to establish the consummation of the transaction contemplated by Section
10(a)(i) and this Section 10(c), the taking of all necessary corporate action in
connection therewith and compliance with the conditions set forth in this
Section 10(c), in each case in form and substance reasonably satisfactory to
Lessor;
(iv) Lessor shall have received satisfactory evidence as to the
compliance with Section 11 hereof with respect to the Replacement Aircraft;
(v) On the Replacement Closing Date, (A) Lessor shall receive good
title to the Replacement Aircraft free and clear of Liens, (B) the Replacement
Aircraft shall have been duly certified by the FAA as to type and airworthiness
in accordance with the terms of this Lease, and (C) application for registration
of the Replacement Aircraft shall have been duly made with the FAA:
(vi) Lessor shall have received an appraisal reasonably satisfactory
to it with respect to the Replacement Aircraft.
(vii) Lessor, shall have received (A) an opinion of counsel to
Lessee, satisfactory in form and substance to Lessor, to the effect that (w) the
Replacement Aircraft is free and clear of all Liens, (x) the ▇▇▇▇ of sale
referred to in Section 10(c)(ii)(C) constitutes an effective instrument for
conveying title to the Replacement Airframe and Replacement Engines, if any, to
Lessor, (y) all documents executed and delivered by Lessee pursuant to this
Section 10(c) have been duly authorized executed and delivered by Lessee and
constitute legal, valid and binding obligations of, and are enforceable against,
Lessee in accordance with their respective terms and no further action is
necessary or advisable in order to establish and perfect the title of Lessor in
the Replacement Aircraft, and (z) Lessor is entitled to the benefits of 11
U.S.C. Section 1110 with respect to such Replacement Aircraft to the same extent
as with respect to the replaced Aircraft immediately preceding such replacement;
and (B) an opinion of qualified FAA counsel (or counsel in such jurisdiction
outside of the United States where the Aircraft may be registered) as to, in the
case of FAA counsel, the due recordation of the Lease Supplement and all other
documents or instruments the recordation of which is necessary to perfect and
protect the rights of Lessor in the Replacement Aircraft or, in the case of
counsel in another jurisdiction, the taking of all action necessary in such
jurisdiction for such purposes; and
(ix) either (1) Lessor shall have received an opinion of independent
tax counsel (selected by Lessor and reasonably acceptable to Lessee), reasonably
satisfactory to the Lessor, to
30
effect that there are no adverse tax consequences resulting from such
replacement (and Lessor shall use its best efforts to cause such a timely
opinion to be delivered) or (2) Lessee shall have provided, or caused to be
provided, an indemnity in respect of any adverse tax consequences in form and
substance satisfactory to Lessee.
10.2. TERMINATION UPON PAYMENT. At such time as Lessor shall have received
the sum of the amounts specified Section 10.1(a)(ii) hereof, (a) the obligation
of Lessee to pay succeeding installments of Basic Rent shall cease to accrue,
(b) the Term shall terminate, (c) Lessor will transfer to or at the direction of
Lessee (or, if any Permitted Sublease is then in effect, any Permitted
Sublessee), without recourse or warranty (except as to the absence of Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and any
Engines subject to such Event of Loss, as well as any Engines not subject to
such Event of Loss, and furnish to or at the direction of Lessee (or, if any
Permitted Sublease is then in effect, any Permitted Sublessee) a warranty ▇▇▇▇
of sale and an FAA ▇▇▇▇ of sale evidencing such transfer, and (d) Lessee (or, if
any Permitted Sublease is then in effect, any Permitted Sublessee) shall be
subrogated to all claims of Lessor, if any, against third parties, for damage to
or loss of the Airframe and any Engines which were subject to such Event of
Loss.
10.3. EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon the occurrence of an
Event of Loss with respect to an Engine under circumstances not involving an
Event of Loss with respect to an Airframe, Lessee (or, if any Permitted Sublease
is then in effect, any Permitted Sublessee) shall promptly (and in any event,
not later than 15 days after such occurrence) give Lessor written notice thereof
and shall, within 60 days after the occurrence of such Event of Loss, convey or
cause to be conveyed to Lessor as replacement for the Engine with respect to
which such Event of Loss occurred, title to another engine of the same or
improved type as the Engine (or an equivalent or improved engine of the same
manufacturer and suitable for installation and use on the Airframe and
compatible with the other Engine(s) leased hereunder) free and clear of all
Liens (other than Permitted Liens, which engine may upon its transfer to Lessor
become subject to any and all Permitted Liens) and having (if no Event of
Default has occurred and is continuing) without regard to Cycles) a value,
utility and remaining economic useful life at least equal to the Engine with
respect to which such Event of Loss occurred (assuming that such Engine was of
the value, utility and useful life and in such condition and repair as required
by the terms of this Lease immediately prior to such Event of Loss). Prior to
any such conveyance, Lessee (or, if any Permitted Sublease is then in effect,
any Permitted Sublessee), shall, at its own expense, (a) furnish Lessor with a
full warranty ▇▇▇▇ of sale and a FAA ▇▇▇▇ of sale, in form and substance
reasonably satisfactory to Lessor, evidencing such transfer of title, (b) cause
a Lease Supplement to be duly executed by Lessee (or, if any Permitted Sublease
is then in effect, Permitted Sublessee) and filed for recording pursuant to the
Transportation Act or the applicable laws, rules and regulations of any other
jurisdiction in which the Airframe may then be registered, (c) furnish Lessor
with such evidence of compliance with the insurance provisions of Section 11
with respect to such substituted property as Lessor may reasonably request, (d)
provide an opinion in form and substance reasonably satisfactory to Lessor of
tax counsel reasonably satisfactory to Lessor to the effect that such
substitution will not result in any adverse tax consequences to Lessor, (e) at
Lessor's request, furnish an appraisal of an independent appraiser selected by
Lessor in form and substance reasonably satisfactory to Lessor evidencing
31
compliance with the requirements as to value, utility and remaining economic
useful life of the substitute engine, (f) provide opinions in form and substance
reasonably satisfactory to Lessor of counsel reasonably acceptable to Lessor to
the same effect as set forth in Section 10(c)(vii) hereof, and (g) assign to
Lessor the benefit of all assignable manufacturer's and vendor's warranties with
respect to the replacement engine. Lessor shall transfer to or at the direction
of Lessee without recourse or warranty, except as to absence of Lessor Liens,
all of Lessor's right, title and interest, if any, in and to (i) the Engine with
respect to which such Event of Loss occurred by furnishing to or at the
direction of Lessee a warranty ▇▇▇▇ of sale and an FAA ▇▇▇▇ of sale evidencing
such transfer and (ii) all claims, if any, against third parties, for damage to
or loss of the Engine subject to such Event of Loss, and such Engine shall
thereupon cease to be an Engine leased hereunder. For all purposes hereof, each
such replacement engine shall, after such conveyance, be deemed part of the
property leased hereunder, and shall be deemed an Engine. No Event of Loss with
respect to an Engine under the circumstances contemplated by the terms of this
Section 10.3 shall result in any reduction in Basic Rent.
10.4. APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR
REQUISITION OF TITLE, ETC. Provided no Event of Default has occurred and is
continuing, any payments (other than insurance proceeds, the application of
which is provided for in Section 11) received at any time by Lessor or by Lessee
from any governmental authority or other person with respect to an Event of Loss
resulting from the theft, disappearance, condemnation, confiscation or seizure
of, or requisition of title to or use of, the Airframe or any Engine, other than
a requisition for use (but not of title) by the United States Government or
other government of registry of the Aircraft or under which the Aircraft is
based or any instrumentality or agency of any thereof not constituting an Event
of Loss, shall be applied as follows:
(a) If payments are received with respect to the Airframe (or the
Airframe and any Engine or engines then installed thereon), (i) if
such property has not been replaced pursuant to the provisions
hereof, after reimbursement of Lessor for reasonable costs and
expenses, so much of such payments remaining as shall not exceed the
Stipulated Loss Value and other amounts required to be paid by
Lessee to Lessor pursuant to Section 10.1 hereof shall be applied in
reduction of Lessee's obligation to pay such Stipulated Loss Value
and such other amounts, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of such Stipulated Loss Value and such other amounts, and
the balance, if any, of such payments remaining thereafter shall be
paid to Lessor; or (ii) if such property has been replaced pursuant
to the provisions hereof, after reimbursement of Lessor for
reasonable costs and expenses, such payments shall be paid over to,
or retained by, Lessee, provided that Lessee shall have fully
performed or concurrently therewith, shall perform, its obligations
under Section 10.1 with respect to the Event of Loss; and
(b) If such payments are received with respect to an Engine under
circumstances contemplated by Section 10.3 hereof, so much of such
payments remaining after reimbursement of Lessor for reasonable
costs and expenses shall be paid over to, or retained by, Lessee,
provided that Lessee shall have fully performed, or
32
concurrently therewith shall perform, its obligations under Section
10.2 with respect to the Event of Loss for which such payments are
made.
(c) If an Event of Default has occurred and is continuing, all payments
shall be paid over to Lessor or held for the account of Lessor until
such time as the Event of Default has been cured.
10.5. REQUISITION FOR USE OF THE AIRCRAFT BY THE UNITED STATES GOVERNMENT
OR THE GOVERNMENT UNDER WHICH THE AIRCRAFT IS REGISTERED OR BASED. In the event
of the requisition for use of the Airframe and the Engines or engines installed
on the Airframe during the Term by the United States Government or any other
government under which the Aircraft is registered or based or any
instrumentality or agency of any thereof, Lessee shall notify Lessor of such
requisition, and all of Lessee's obligations under this Lease with respect to
the Aircraft shall continue to the same extent as if such requisition had not
occurred. All payments received by Lessor or Lessee from such government for the
use of such Airframe and Engines or engines during the Term shall be paid over
to, or retained by, Lessee (or, if directed by Lessee, any Permitted Sublessee);
and all payments received by Lessor or Lessee from such government for the use
of such Airframe and Engines or engines after the end of the Term shall be paid
over to, or retained by, Lessor.
10.6. REQUISITION FOR USE OF AN ENGINE BY THE UNITED STATES GOVERNMENT OR
THE GOVERNMENT UNDER WHICH THE AIRCRAFT IS REGISTERED OR BASED. In the event of
the requisition for use of an Engine (but not an Airframe) by the United States
Government or any other government under which the Aircraft equipped with such
Engine is registered or based or any agency or instrumentality of any thereof,
Lessee shall replace such Engine hereunder by complying (or causing any
Permitted Sublessee to comply) with the terms of Section 10.3 to the same extent
as if an Event of Loss had occurred with respect thereto, and, upon compliance
with Section 10.3 hereof, any payments received by Lessor or Lessee from such
government with respect to such requisition shall be paid over to, or retained
by, Lessee.
10.7. REPAIRABLE DAMAGE; USE OF INSURANCE PROCEEDS. In the event of
repairable damage to the Aircraft or any of the Engines, or of any Event of Loss
with respect to an Engine when no Event of Loss has occurred with respect to the
Airframe, Lessor shall forthwith, provided that no Event of Default has occurred
and is continuing, either pay any insurance proceeds received by it to Lessee
(or, if any Permitted Sublease is then in effect, any Permitted Sublessee) upon
Lessee's furnishing evidence to Lessor that such damage has been repaired in
accordance with the provisions of this Lease or is undergoing repair such that
the condition of the Aircraft shall be at least equivalent to its condition
immediately prior to the event of damage as if such event had not occurred, or,
in the case of an Event of Loss with respect to an Engine when no Event of Loss
has occurred with respect to the Airframe equipped with such Engine, utilize the
relevant insurance proceeds in the purchase of a Replacement Engine (or to
reimburse Lessee for amounts paid by Lessee to purchase a Replacement Engine, as
the case may be).
33
SECTION 11. INSURANCE.
11.1. INSURANCE REQUIREMENTS. On or before the Delivery Date and
throughout the Term, Lessee shall, without cost or expense to Lessor, obtain,
maintain and keep in full force and effect the following insurance coverage with
respect to the Aircraft, carried with insurers of recognized responsibility
acceptable to Lessor; with proceeds payable in United States dollars:
(a) All-risk aircraft hull, ground, taxiing and flight insurance on the
Aircraft (with flight, taxiing and ingestion coverage) and all-risk coverage of
Engines and Parts while temporarily removed from the Aircraft and not replaced
by similar components, in an amount not less than the Stipulated Loss Value in
effect from time to time. Such hull insurance shall cover Engines or engines and
Parts temporarily removed from the Airframes pending installation of the same or
similar Engines, engines or Parts on the Airframes in an aggregate amount not
less than their replacement cost.
(b) In the event that the Aircraft is operated in a war zone or hostile
area, war risk and allied perils insurance on the Aircraft in an amount not less
than the Stipulated Loss Value in effect from time to time and covering the
perils of:
(i) war, invasion, acts of foreign enemies, hostilities (whether or
not war is declared), civil war, rebellion, revolution, insurrection,
martial law, military or usurped power, or attempts at usurpation of
power;
(ii) strikes, riots, civil commotions or labor disturbances;
(iii) any act of one or more persons, whether or not agents of a
sovereign power, for political or terrorist purposes and whether the loss
or damage therefrom is accidental or intentional;
(iv) any malicious act or act of sabotage;
(v) confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition of title or use by or under the order of any
government (whether civil, military or de facto) or public or local
authority, including the government or any public or local authority of
the country where the Aircraft is registered or based; and
(vi) hijacking or any unlawful seizure or wrongful seizure or
wrongful exercise of control of the Aircraft or crew in flight (including
any attempt at such seizure or control) made by any person or persons on
board the Aircraft acting without the consent of Lessee.
(c) Comprehensive aircraft and general liability insurance for a combined
single limit of not less than $200,000,000 per occurrence, which shall include
public liability insurance, passenger legal liability insurance, bodily injury
liability insurance, aviation general third party liability insurance (including
products legal liability, but excluding manufacturer's product liability
insurance), cargo liability insurance and property damage liability insurance.
34
11.2 ADDITIONAL REQUIREMENTS; LOSS PAYMENT. The insurance required under
Section 11.1 shall be provided on an agreed-value basis, and the policies shall:
(a) name Lessor as an additional insured as sole loss payee;
(b) provide that the insurance shall not be invalidated by any
action or inaction by Lessee (or of any Permitted Sublessee) and shall
insure the interests of Lessor regardless of any breach or violation by
Lessee (or any Permitted Sublessee) or any other named insured of any
warranty, declaration or condition contained in such policies;
(c) provide that the insurers shall waive any right of subrogation
against Lessor (or, if any Permitted Sublease shall then be in effect,
Lessee in its capacity as sublessor under such Permitted Sublease);
(d) provide that the liability of the insurers shall not be affected
by any other insurance which may be available to or carried by Lessor (or
Lessee in its capacity as sublessor under any Permitted Sublease that
shall then be in effect) so as to reduce the amount payable to Lessor;
(e) extend to the indemnification provided in Section 12.1 hereof,
to the extent that such indemnification is insurable under Lessee's
liability policy;
(f) be of the type usually carried for aircraft similar to the
Aircraft and covering risks of the kind customarily insured against by
corporations that are engaged in the same type of scheduled commuter
business in the United States as Lessee;
(g) be primary and without right of contribution from other
insurance which may be available to or carried by Lessor (or by Lessee in
its capacity as sublessor);
(h) provide that Lessor shall have no liability for premiums,
commissions, calls or assessments with respect to such policies;
(i) provide in the case of the insurance required by Sections
11.1(a)-(b) that (A) so long as an Event of Default has not occurred and
is not continuing, if the amount of proceeds are less than One Million
Five Hundred Thousand Dollars ($1,500,000), such proceeds shall be payable
to Lessee (or, if a Permitted Sublease is then in effect, Permitted
Sublessee); and (B) if the amount of proceeds exceeds Two Million Three
Hundred Thousand Dollars ($2,300,000) or the proceeds are in respect of an
Event of Loss with respect to the Airframe, such proceeds shall be payable
to Lessor; and (C) if an Event of Default has occurred and is continuing,
any single loss regardless of the amount, shall be payable to Lessor and
held by Lessor for so long as such Event of Default is continuing, as
security for the obligations of Lessee hereunder;
(j) provide that if the insurers cancel such insurance, or any part
thereof, or
35
any such insurance lapses for any reason whatsoever, or if any material
change is made in such insurance which adversely affects the interests of
Lessor, such cancellation or change shall not be effective as to Lessor
for thirty (30) days (seven (7) days or, if less, the longest period of
time that is commercially available, in the case of war risk and allied
perils coverage) after receipt by Lessor of written notice by such
insurers;
(k) shall expressly provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner as if a
separate policy covered each insured;
(l) shall include a United States service of suit clause with
respect to insurers not domiciled within the United States;
(m) shall be effective with respect to both domestic and
international operations; and
(n) shall contain a waiver of any right of the insurers to any
set-off or counterclaim or any other deduction (whether by attachment or
otherwise) in respect of any liability of or against Lessee or Lessor
(including for the payment of premiums).
11.3. APPLICATION OF HULL INSURANCE PROCEEDS. As between Lessor and
Lessee, any payments received by Lessor under policies of insurance required to
be maintained by Lessee pursuant to Sections 11.1(a) or (b), shall be applied as
follows provided no Event of Default has occurred and is continuing (for so long
as an Event of Default has occurred and is continuing, all payments shall be
held by Lessor as security for Lessee's obligations under this Lease and if
Lessor has exercised its remedies pursuant to Section 15 hereof, applied against
Lessee's obligations hereunder):
(a) If such payments are received by Lessor with respect to loss or
damage (including an Event of Loss with respect to an Engine) not
constituting an Event of Loss with respect to an Airframe, so much of such
payments remaining after reimbursement of Lessor for reasonable
out-of-pocket costs and expenses shall be paid over to Lessee upon
Lessee's performance of its repair or replacement obligations under this
Lease pursuant to Section 10.7 hereof.
(b) If such payments are received by Lessor with respect to an Event
of Loss with respect to an Airframe, so much of such payments remaining
after reimbursement of Lessor for reasonable out-of-pocket costs and
expenses as shall not exceed the amount required to be paid by Lessee
pursuant to Section 10.1 shall be applied in reduction of Lessee's
obligation to pay such amount if not already paid by Lessee, and to
reimburse Lessee if it shall have paid all or part of such amount, and the
balance, if any, of such payments shall be paid over to Lessee.
(c) If such payments are received with respect to an Airframe or an
Airframe and Engines or engines installed on such Airframe and the
Airframe has been or is being replaced by Lessee , so much of such
payments remaining after reimbursement of Lessor for reasonable
out-of-pocket costs and expenses shall be paid over to, Lessor, and upon
36
completion of (or, if requested by Lessee, simultaneously with) such
replacement be paid over to Lessee.
11.4. INSURANCE FOR OWN ACCOUNT. Nothing in this Section 11 shall prohibit
Lessor or Lessee from obtaining insurance for its own account and any proceeds
payable thereunder shall be payable as provided in the insurance policy relating
thereto, provided that no such insurance may be obtained that would limit or
otherwise adversely affect the coverage or payment of any insurance required to
be obtained or maintained pursuant to this Section 11.
11.5. REPORTS. Lessee shall furnish or cause to be furnished to Lessor not
later than the Delivery Date and at least annually thereafter on or before the
renewal dates of Lessee's (or, if any Permitted Sublease is then in effect,
Permitted Sublessee's) relevant insurance policies, a report signed by Lessee's
(or, if any Permitted Sublease is then in effect, Permitted Sublessee's)
independent firm of insurance brokers reasonably satisfactory to Lessor stating
the opinion of such firm that the insurance coverage then carried and maintained
on the Aircraft complies with the terms hereof and describing in reasonable
detail the insurance coverage then carried and maintained with respect to the
Aircraft. Lessee shall (and shall cause any Permitted Sublessee to) during the
Term furnish to Lessor evidence of renewal of the insurance policies required
pursuant to this Section 11 prior to the cancellation, lapse or expiration of
such insurance policies. Lessee shall cause its insurance brokers to advise
Lessor in writing promptly of any default in the payment of any premium and of
any other act or omission on the part of Lessee of which they have knowledge
which would in such firm's opinion invalidate or render unenforceable, in whole
or in any material part, any insurance on the Aircraft. Lessee shall also cause
the insurer to advise Lessor in writing at least 30 days prior to the
termination or cancellation of, or material adverse change in, such insurance
carried and maintained on the Aircraft pursuant to Section 11.1. In the event
that Lessee (or, if any Permitted Sublease is in effect, Permitted Sublessee)
fails to maintain or cause to be maintained insurance as herein provided, Lessor
may at its sole option, but shall be under no duty to, provide such insurance
and, in such event, Lessee shall, upon demand, reimburse Lessor, as Supplemental
Rent, for the cost thereof; provided, however, that no exercise by Lessor of
such option shall affect the provisions of this Lease, including the provisions
that failure by Lessee to maintain the required insurance shall constitute an
Event of Default.
11.6. SELF-INSURANCE; DEDUCTIBLES. In addition to any applicable
deductible per aircraft that does not exceed industry standards for similar U.S.
airlines operating similar equipment under a program applicable to all aircraft
in Lessee's fleet, Lessee may self-insure by way of deductible, premium
adjustment or otherwise, but in no case shall the aggregate amount of
self-insurance with respect to public liability, property damage and all-risk
hull insurance exceed during any policy year, with respect to all of the
aircraft in the Lessee's fleet (including, without limitation, the Aircraft),
the lesser of (a) 50% of the highest replacement value of any one aircraft in
the Lessee's fleet or (b) $7 million, increased by any increase in the Consumer
Price Index All Urban Consumers - U.S. All Items from the date hereof through
the date of determination, using the base year immediately preceding the
Delivery Date.
37
SECTION 12. INDEMNITIES.
12.1 GENERAL INDEMNIFICATION.
(a) Lessee hereby assumes liability for, and does hereby agree, and shall
require any Permitted Sublessee or assignee to agree, to indemnify, protect,
save, defend, and hold harmless the Indemnitees from and against any and all
obligations, fees, liabilities, losses, damages, claims, demands, actions,
suits, judgments, costs and expenses, including reasonable legal expenses of
every kind and nature whatsoever (collectively, "Expenses") imposed on, incurred
or suffered by, or asserted against any Indemnitee, in any way relating to,
based on or arising out of:
(i) this Lease and any other document entered into in connection
with this Lease or any Permitted Sublease or transfer or any transactions
contemplated hereby or thereby;
(ii) the ordering, purchase, documentation, importation,
exportation, acceptance or rejection, manufacture, construction, design,
condition, modification, airworthiness, alteration, registration, fitness
for use, merchantability, ownership, improvement, insuring, titling or
retitling, registration or re-registration, licensing, financing,
refinancing, delivery, non-delivery, control, transportation, testing,
overhaul, repair, imposition of any Lien, leasing, re-leasing, possession,
use, operation, maintenance, location, storage, removal, replacement,
return, sale, abandonment, any transfer of any kind or other disposition
of the Aircraft, or any portion thereof (including the Airframe and each
Engine or any engine used with the Airframe), or otherwise in connection
with or with respect to the transactions contemplated by this Lease,
whether or not such ordering, purchase, documentation, importation,
exportation, acceptance or rejection, manufacture, construction, design,
condition, modification, airworthiness, alteration, registration, fitness
for use, merchantability, ownership, improving, insuring, titling or
retitling, registration or re-registration, licensing, financing,
refinancing, delivery, non-delivery, control, transportation, testing,
overhaul, repair, imposition of any Lien, leasing, re-leasing, possession,
use, operation, maintenance, location, storage, removal, replacement,
return, sale, abandonment, any transfer of any kind or other disposition
is in compliance with the terms of this Lease, including, without
limitation, any of such as may arise from (i) loss or damage, loss or harm
to any property or death of or injury to any person, (ii) patent or latent
defects in the Aircraft or any portion thereof (whether or not
discoverable), (iii) any claims based on strict liability in tort or
otherwise, (iv) any claims based on patent, trademark or copyright
infringement, and (v) any claims based on liability arising under any
applicable environmental or noise or pollution control law or regulation;
(iii) any breach or failure on the part of Lessee or any Permitted
Sublessee to perform, observe or comply with any of the terms of this
Lease, or the falsity or inaccuracy of any representation or warranty of
Lessee under this Lease or any other instrument or agreement executed in
connection with this Lease which falsity has a material and adverse effect
on the Indemnitee; or
38
(iv) the enforcement by Lessor of the terms of this Lease.
(b) Lessee agrees that any payment or indemnity pursuant to this Section
12.1 in respect of any Expenses shall be in an amount which, after deduction of
all Taxes required to be paid by the recipient with respect to such payment or
indemnity under the laws of any federal, state or local government or taxing
authority in the United States, or under the laws of any taxing authority or
governmental subdivision of a foreign country, or any territory or possession of
the United States or any international authority, shall be equal to the excess,
if any, of (i) the amount of such Expense, over (ii) the net reduction in Taxes
required to be paid by such recipient by reason of the accrual or payment of
such Expense. For purposes of the foregoing, it shall be assumed that each
Indemnitee is subject to tax at the highest marginal rate imposed on or measured
by the income of corporations in each applicable taxing jurisdiction.
(c) Lessee shall give each Indemnitee prompt notice of any occurrence,
event or condition known to Lessee as a consequence of which any Indemnitee may
be entitled to indemnification hereunder. Lessee shall forthwith upon demand of
any such Indemnitee reimburse such Indemnitee for reasonable expenses actually
incurred by it in connection with any of the foregoing or pay such amounts
directly.
(d) Lessee shall be subrogated to an Indemnitee's rights in any matter
with respect to which Lessee has actually reimbursed such Indemnitee for amounts
expended by it or has actually paid such amounts directly pursuant to this
Section 12.1. Lessee shall not be entitled to exercise its subrogation rights
hereunder for so long as an Event of Default has occurred and is continuing
hereunder.
(e) In case any action, suit or proceeding is brought against any
Indemnitee in connection with any Expense indemnified against hereunder, such
Indemnitee shall, promptly after receipt of notice of the commencement of such
action, suit or proceeding, notify Lessee thereof, enclosing a copy of all
papers served upon such Indemnitee; provided that the failure to provide such
notice shall not release Lessee from any of its obligations to indemnify
hereunder, except to the extent that such failure precludes Lessee's ability to
defend or resist such action. Lessee may, provided that Lessee has acknowledged
in writing its responsibility for such Expense hereunder, and upon such
Indemnitee's request shall, at Lessee's expense, resist and defend such action,
suit or proceeding, or cause the same to be resisted or defended by counsel
selected by Lessee and reasonably satisfactory to such Indemnitee (provided such
claim relates solely to one or more Expenses or can be severed from other
claims; if not, Lessee shall be consulted by such Indemmitee and be allowed, at
Lessee's sole cost and expense, to participate therein) and in the event of any
failure by Lessee to do so, Lessee shall pay all costs and expenses (including,
without limitation, reasonable legal expenses, including but not limited to
attorney's fees and expenses) incurred by such Indemnitee in connection with
such action, suit or proceeding.
(f) Provided that no Event of Default has occurred and is continuing, no
Indemnitee shall enter into a settlement or other compromise with respect to any
Expense without the prior written consent of Lessee so long as (i) Lessee has
agreed in a writing acceptable to such Indemnitee that Lessee is liable to such
Indemnitee for such Expense hereunder, and (ii) Lessee
39
has provided such evidence, certifications and assurances as such Indemnitee may
reasonably request that Lessee has the ability to promptly pay any such Expense
in full.
(g) Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
(h) The obligations of Lessee under this Section 12.1 shall survive the
expiration or earlier termination of this Lease.
12.2. EXCEPTIONS TO GENERAL INDEMNIFICATION. The indemnity provided for in
Section 12.1 shall not extend to Expenses of an Indemnitee arising out of or
resulting from, or which would not have been incurred but for, one or more of
the following:
(i) the inaccuracy or breach of any representation or warranty
made by Lessor or the failure of Lessor to perform its obligations
under this Lease;
(ii) the gross negligence or willful misconduct of such
Indemnitee (other than gross negligence imputed to such Indemnitee
solely by reason of its interest in the Aircraft or occurring as a
result of Lessee's breach of its duties under this Lease or the
Lease Supplement);
(iii) a voluntary disposition by Lessor of all or any part of
its interest in the Aircraft, the Airframe or any Engine or Part or
in this Lease other than pursuant to an exercise of remedies after
an Event of Default has occurred and is continuing;
(iv) acts or events that occurred or failed to occur prior to
the Delivery Date or after the expiration of the Term and the return
of possession of the Aircraft to Lessor in accordance with the terms
of Section 8;
(v) the failure of any Indemnitee to comply with any covenant,
or the breach of any covenant made by an Indemnitee;
(vi) expenses which relate to a Lessor Lien or other Lien;
(vii) any Taxes, it being understood that Lessee's liability
for Taxes (other than the gross-up provided in Section 12.1) of an
Indemnitee shall be as set forth in Section 12.3; or
(viii) costs or expenses which under the express terms of this
Lease are required to be paid by Lessor or its transferees.
12.3 GENERAL TAX INDEMNITY.
40
(a) Lessee agrees, and shall require any Permitted Sublessee or assignee
to agree, to pay, and indemnify, defend and hold harmless each Indemnitee from
any and all Tax, howsoever imposed, whether levied or imposed upon or asserted
against such Indemnitee, Lessee, the Aircraft, the Airframe or any Engine or
Part by any federal, state or local government or taxing authority in the United
States, or by any taxing authority or governmental subdivision of a foreign
country, or by any territory or possession of the United States or by any
international authority, upon or with respect to (a) the Aircraft, the Airframe
or any Engine or Part or any part thereof or any contract relating to the
manufacture, construction, acquisition or delivery thereof, (b) the manufacture,
construction, ordering, purchase, ownership, improvement, location, storage,
transportation, delivery, non-delivery, acceptance, operation, leasing,
re-leasing, possession, control, use, maintenance, replacement, modification,
insuring, registration, reregistration, titling, licensing, financing,
refinancing, documentation, importation, exportation, transfer of title,
transfer of registration, imposition of any Lien, return, abandonment, sale or
other application or disposition thereof, (c) the rentals, receipts or earnings
arising from the Aircraft, the Airframe or any Engine or Part, (d) this Lease,
the Lease Supplement, and any other documents contemplated hereby and amendments
and supplements hereto and thereto which have been approved by Lessee or the
execution, delivery or performance of any thereof or the issuance, acquisition,
holding or subsequent transfer thereof, (e) any amount paid or payable pursuant
to this Lease or any document related hereto or the property or the income or
other proceeds with respect to the Aircraft, or upon the Rent payable by Lessee
hereunder, or (f) otherwise with respect to or in connection with the
transactions contemplated by this Lease. Lessee further agrees that any payment
or indemnity pursuant to this Section 12.3 in respect of any Tax shall be in an
amount which, after deduction of all Taxes required to be paid by such recipient
with respect to such payment or indemnity under the laws of any federal, state
or local government or taxing authority in the United States, or under the laws
of any taxing authority or governmental subdivision of a foreign country, or any
territory or possession of the United States or any international authority,
shall be equal to the excess, if any, of (i) the amount of such Tax over (ii)
the net reduction in Tax required to be paid by such recipient by reason of the
accrual or payment of such Tax. For purposes of the foregoing, it shall be
assumed that each Indemnitee is subject to tax at the highest marginal rate
imposed on or measured by the income of corporations in each applicable taxing
jurisdiction. With respect to any Tax in the nature of a withholding tax, Lessee
shall comply with the requirements set forth in Section 12.8 hereof. All of the
indemnities contained in this Section 12.3 shall continue in full force and
effect notwithstanding the expiration or other termination of the Term.
12.4. EXCLUSIONS FROM GENERAL TAX INDEMNITY. The indemnity provided for in
Section 12.3 above shall not extend or apply to any of the following:
(a) any Income Tax imposed on an Indemnitee by (i) the United
States federal government, (ii) any state or local government, (iii)
any foreign government or any political subdivision or taxing
authority thereof, (iv) any territory or possession of the United
States, or (v) any international authority; provided, however, that
such exclusion shall not apply to any Income Tax to the extent that
(A) such Income Tax is imposed by any jurisdiction in which such
Indemnitee would not be subject to Income Tax but for or as a result
of (I) the
41
operation, registration, location, presence, or use of the Aircraft,
the Airframe, any Engine or any Part thereof, or (II) the place of
organization or principal office or the activities of Lessee or any
Permitted Sublessee in such jurisdiction, and (B) exceeds the amount
of Income Tax for which the Indemnitee would otherwise have been
liable in the absence of the circumstances referred to in (I) and
(II).
(b) any tax imposed on or with respect to an Indemnitee
resulting from any voluntary transfer by such Indemnitee of any
interest in the Aircraft, the Airframe, any Engine or any Part, or
any involuntary transfer of the Aircraft, the Airframe or any Engine
or any Part in connection with any bankruptcy or similar proceeding
for the relief of debtors in which such Indemnitee is the debtor or
any foreclosure by a creditor of such Indemnitee with respect
thereto, other than a transfer pursuant to the exercise of remedies
while an Event of Default shall have occurred and be continuing;
(c) any tax imposed on or with respect to an Indemnitee
resulting from such Indemnitee's gross negligence or willful
misconduct.
(d) any Tax attributable to the Aircraft that is imposed with
respect to any period after the expiration of the Term and the
return of possession of the Aircraft to Lessor in accordance with
the terms of Section 8; provided, however, that the exclusion set
forth in this paragraph shall not apply to any Taxes or other
impositions relating to events occurring or matters arising prior to
or simultaneously with such expiration.
(e) any Tax imposed on or with respect to an assignee or
successor of the interest of an Indemnitee to the extent that such
Tax would not have been imposed on or with respect to the assignor
Indemnitee (other than a Tax imposed on an assignee of the
Indemnitee who became such following the exercise by Lessor of its
remedies under Sectionn 15).
(f) any Tax that would not have been imposed but for a Lessor
Lien.
(g) any event or occurrence for which Lessee is obligated
under this Lease to make a payment of Stipulated Loss Value or an
amount determined by reference to the Stipulated Loss Value;
(h) the failure of an Indemnitee to exercise its contest
rights as and to the extent required hereunder; or
(i) the failure of any Indemnitee to file proper and timely
reports or returns or to pay any taxes when due or to claim an
applicable exemption.
12.5. CONTESTS. If a written claim is made by any taxing authority against
an Indemnitee for any Tax with respect to which Lessee is required to indemnify
hereunder, such Indemnitee shall promptly give Lessee written notice of such
claim. An Indemnitee's failure to
42
provide such notice to Lessee (for reasons other than Lessee's failure to
fulfill its obligations to Indemnitee under this Lease) shall not diminish
Lessee's obligations or such Indemnitee's rights hereunder except to the extent
that such failure precludes Lessee's and such Indemnitee's ability to contest
such Tax. If Lessee promptly (and, in any event, within 15 days of receipt of
notice from the Indemnitee) requests the Indemnitee to do so, the Indemnitee
shall, at Lessee's expense, contest (or, at the Indemnitee's option, require
Lessee to contest in Lessee's name, if permitted by law) the validity,
applicability or amount of any such Tax. The Indemnitee shall determine in its
sole discretion the forum in which the contest of such Tax shall be pursued and
whether such contest shall be by (i) resisting payment thereof, if lawful and
practicable, (ii) not paying the same except under protest, if protest is
necessary or advisable and proper, or (iii) if the payment is made, using
reasonable efforts to obtain a refund thereof in appropriate administrative and
judicial proceedings. If the Indemnitee determines that such contest shall be by
the manner described in either of clauses (ii) or (iii) above, Lessee shall
advance sufficient funds on an interest-free basis to the Indemnitee to make the
payment required. If an Indemnitee contests the validity, applicability or
amount of any Tax hereunder, Lessee shall have the right to participate in such
contest at its own expense, including the right to attend governmental or
judicial conferences concerning such claim for Tax and the right to review and
advise the Indemnitee as to all material written submissions to any governmental
or other authority relating to the Tax for which indemnification is sought.
Notwithstanding the foregoing, the Indemnitee shall only be required to contest
(and Lessee shall only be permitted to contest) any Tax if (A) independent tax
counsel selected by the Indemnitee is of the opinion that there is a reasonable
basis for contesting the matter in question; (B) Lessee has acknowledged in
writing its liability to indemnify the Indemnitee with respect to the Tax in
question; (C) Lessee shall pay (and shall acknowledge in writing Lessee's
liability to pay) the Indemnitee on demand for all reasonable costs and expenses
incurred by such Indemnitee incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable legal
and accounting fees (including fees associated with the Indemnitee's
consultation with independent tax counsel as described herein), disbursements,
penalties, interest and additions to tax); (D) the issue shall not be the same
as an issue previously contested hereunder and decided adversely unless
independent tax counsel selected by the Indemnitee is of the opinion that the
applicable law has changed, and (E) the amount of Tax at issue exceeds $25,000.
The Indemnitee shall not be required to appeal any judicial decision unless it
receives an opinion of independent counsel selected by such Indemnitee to the
effect that it is more likely than not that such appeal would be successful.
Under no circumstances shall the Indemnitee be required to appeal a decision to
or request a hearing by the United States Supreme Court. Nothing in this Section
12.5 shall require any Indemnitee to contest, or permit Lessee to contest, a
claim with respect to the imposition of any Tax if such Indemnitee shall waive
its right to indemnification under Section 12.3 with respect to such claim.
12.6. SETTLEMENTS. If, in the course of exercising its contest rights on
Lessee's behalf, an Indemnitee learns that a taxing authority asserting a claim
for which indemnity is sought hereunder is willing to agree to a settlement of a
claim, such Indemnitee shall notify Lessee of such settlement proposal
("Settlement Proposal"). If the Settlement Proposal is acceptable to Lessee,
Lessee shall so notify such Indemnitee, provided that an Indemnitee shall not be
obligated to agree to the Settlement Proposal if such Indemnitee releases Lessee
from any
43
additional obligations pursuant to Section 12.3 with respect to such tax claim
and agrees that the amount of any indemnity payment under this Section 12.3 in
respect of such tax claim which Lessee shall be required to pay to such
Indemnitee shall not exceed the amount of such indemnity payment that would have
been required if such Indemnitee had agreed to the Settlement Proposal. If
Lessee declines the Settlement Proposal, Lessee shall notify Indemnitee in
writing of the amount for which Lessee would be reasonably willing to settle
such claim ("Lessee's Settlement Proposal"), and Indemnitee shall notify the
taxing authority of Lessee's Settlement Proposal. If the taxing authority does
not accept Lessee's Settlement Proposal, Indemnitee shall have the option of (i)
rejecting the Settlement Proposal, (ii) requiring Lessee to assume full
responsibility for the tax claim, or (iii) accepting the Settlement Proposal, in
the case of the Lessee's acceptance of the Settlement Proposal, the amount of
any indemnity payment determined under this Section 12.6 in respect of such tax
claim that Lessee shall be required to pay shall not exceed the amount for which
Lessee would have been willing to settle such tax claim.
12.7. REPORTS. Lessee shall promptly notify Indemnitee of all reports or
returns required to be made with respect to any Tax with respect to which Lessee
is required to indemnify hereunder (provided, however, that this shall not be
deemed to require Lessee to file Indemnitee's Income Tax returns), and will
provide Indemnitee with all information necessary for the making and timely
filing of such reports or returns by Indemnitee. If Indemnitee requests that any
such reports or returns be prepared and filed by Lessee, Lessee shall prepare
and file the same, if permitted by applicable law to do so, and if not so
permitted, Lessee shall prepare such reports or returns for signature by Lessor,
and shall forward the same, together with immediately available funds for
payment of any Tax due, at least five Business Days in advance of the date such
payment is to be made, unless payment of such Tax is being resisted in
accordance with the provisions of Section 12.5.
12.8. PAYMENT. Lessee shall pay any Tax directly to the appropriate taxing
authority if legally permissible, unless such Tax is being contested or resisted
in accordance with the provisions of Section 12.5, and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within five Business Days of such demand, but in no event shall any
such payments be made less than three Business Days prior to the date the Tax to
which any such payment hereunder relates is due (unless Lessee has not received
such demand at least 15 Business Days prior to such date, in which case payment
shall be made within five Business Days after receipt of such demand), in
immediately available funds, unless such Tax is being resisted in accordance
with the provisions of Section 12.5. Any such demand for payment from an
Indemnitee shall specify in reasonable detail the payment and the facts upon
which the right to payment is based. Each Indemnitee shall promptly forward to
Lessee any correspondence, notice, ▇▇▇▇ or advice received by it concerning any
Tax indemnified against hereunder unless such correspondence, notice, ▇▇▇▇ or
advice also addresses issues unrelated to the transactions contemplated under
this Lease (in which case, the unrelated issues shall be redacted). As soon as
practicable after each payment by Lessee of any Tax indemnified against
hereunder, Lessee shall furnish the appropriate Indemnitee the original or a
certified copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment of such Tax as is reasonably acceptable to such Indemnitee.
Lessee shall also furnish promptly upon request such
44
data as any Indemnitee may reasonably require to enable such Indemnitee to
comply with the requirements of any taxing jurisdiction.
12.9. REFUNDS. Upon receipt by an Indemnitee of a refund of any amounts
paid by it in respect of any contested Tax which amounts were advanced to the
Indemnitee by Lessee or otherwise paid by Lessee, such Indemnitee shall pay to
Lessee the amount of such refund, together with any interest received by such
Indemnitee on such refund that is fairly attributable to the amount and the
period of such payment or advance by Lessee (net of any taxes payable with
respect to the receipt or accrual of such interest by such Indemnitee); and,
upon disallowance of any portion of such requested refund, Lessee shall forgive
the related amount advanced to such Indemnitee with respect to the contested
Tax, and such forgiveness shall be treated for purposes of this Agreement as a
payment pursuant to Section 12.2.
12.10. WITHHOLDING. If Lessee is required at any time to deduct or
withhold any Tax imposed by any taxing authority on any payment hereunder,
Lessee shall immediately pay to Lessor or other affected Indemnitee such
additional amounts (as Supplemental Rent) at such times as shall result in the
net amount actually received by the Lessor or such other Indemnitee being, after
taking into account (i) the amount of such deduction or withholding and (ii) the
amount of any Tax required to be paid by Lessor or such other Indemnitee by
reason of any payments made by Lessee pursuant to this Section 12.10, equal to
the full amount which would have been received by Lessor or such other
Indemnitee had such deduction or withholding not been made and such additional
Tax imposed and shall ensure that the foregoing shall be free of expense to
Lessor or such other Indemnitee for collection or other charges and shall pay to
the relevant taxing authority within the period for payment permitted by
applicable law the full amount of the deduction or withholding.
12.11. INTEREST. Lessee shall pay to each Indemnitee upon demand, to the
extent permitted by law, interest on the amount of any indemnity under this
Section 12 not paid when due at the Past Due Rate.
SECTION 13. ASSIGNMENTS AND SUBLEASING.
13.1. BY LESSEE. Except as specifically permitted under this Lease, Lessee
shall not, without the prior written consent of Lessor, assign any of its rights
in, to or under this Lease or the Lease Supplement, or Permitted Sublease or
otherwise transfer its interest in the Aircraft. Any such assignment, Permitted
Sublease or transfer shall in no way relieve Lessee from any obligation under
this Lease, which shall be and remain primary obligations of Lessee. The rights
of any Permitted Sublessee shall be subject and subordinate to all the terms of
this Lease (and the Permitted Sublease shall expressly so state). Each Permitted
Sublease in excess of one year by its term shall be assigned to or for the
benefit of Lessor. Notwithstanding the foregoing, Lessee shall not sell all or
substantially all of its assets or merge or consolidate with any other Person,
without the consent of the Lessor; provided, however, that notwithstanding the
foregoing, Lessee shall have the right, without the consent of Lessor, to merge
with any Person, provided that (A) immediately after any such transaction, no
Event of Default has occurred and is continuing, and (B) such Person which is to
be the transferee or surviving or acquiring corporation in such transaction (i)
shall be duly organized and validly existing under the laws of the United States
of
45
America or a state thereof, or the District of Columbia, and a "citizen of the
United States" as defined in 49 U.S.C. ss. 40102(a)(15) of the Transportation
Act, (ii) shall be a U.S. Air Carrier, (iii) shall (unless Lessee is the
survivor), by agreement in writing, which shall be in form and substance
reasonably satisfactory to Lessor, expressly assume the due and punctual payment
of the Rent and other sums due and to become the due under this Lease and the
due and punctual performance and observance of all the covenants and provisions
of this Lease, and (C) in all cases, the assignee or transferee of Lessee's
assets or the survivor of the merger or consolidation has a tangible net worth
at least equal to Lessee's tangible net worth as of the date hereof.
13.2. PERMITTED SUBLEASES. Provided that no Event of Default has occurred
and is continuing, Lessee may, during the Basic Term, without the prior consent
of Lessor, enter into a Permitted Sublease with respect to any Engine or the
Airframe and Engines or engines then installed on the Airframe to any Permitted
Sublessee if:
(a) Lessee provides written notice to Lessor promptly after entering into
any such Permitted Sublease.
(b) The Permitted Sublessee under such Permitted Sublease is not subject
to a proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date such Permitted Sublease is entered into or has
not declared a general moratorium on payment to U.S. creditors.
(c) In the event that the Permitted Sublessee under such Permitted
Sublease is a foreign air carrier or Person based in a country other than the
United States, there has been no material adverse change in Lessee's tangible
net worth as of the date hereof and there are no external or internal wars or
conflicts involving such country at the time such Permitted Sublease is entered
into and the United States maintains normal diplomatic relations with the
country in which such proposed Permitted Sublessee is principally based;
(d) In the event that the Permitted Sublessee under such Permitted
Sublease is a foreign air carrier or Person based in a country other than the
United States, prior to the effectiveness of such Permitted Sublease Lessor
shall have received an opinion, in form and substance reasonably acceptable to
Lessor of counsel to Lessee reasonably acceptable to Lessor to the effect that
(i) the terms of the proposed Permitted Sublease will be legal, valid, binding
and (subject to customary exceptions) enforceable against the proposed Permitted
Sublessee in the country in which the proposed Permitted Sublessee is
principally based; (ii) there exist no possessory rights in favor of the
Permitted Sublessee under such Permitted Sublease under the laws of such
Permitted Sublessee's country of domicile that would, upon bankruptcy or
insolvency of or other default by the Lessee and assuming that at such time such
Permitted Sublessee is not insolvent or bankrupt, prevent or unreasonably delay
the return or repossession of the Aircraft in accordance with and when permitted
by the terms of Section 14 upon the exercise by Lessor of its remedies under
Section 15; (iii) the laws of such Permitted Sublessee's country of domicile
require fair compensation by the government of such jurisdiction for the loss of
use of or title to such Engine or Airframe in the event of the requisition by
such government of such use or title (it being understood that in the event such
opinion cannot be given in a form reasonably satisfactory to Lessor, such
opinion shall be waived if insurance reasonably
46
satisfactory to Lessor is provided to cover such requisition), (iv) the laws of
such Permitted Sublessee's country of domicile would give recognition to
Lessor's title to such Engine or the Airframe and to the registration of such
Engine or the Airframe in the name of Lessor (or Lessee as the proposed
sublessor or the proposed Permitted Sublessee, as appropriate), (v) all filings,
if any, required to be made in such jurisdiction in connection with the
execution of such Permitted Sublease in order to protect the interest of Lessor
in such Engine or the Airframe have been made, and (vi) the agreement of such
Permitted Permitted Sublessee that its rights under the Permitted Sublease are
subject to subordinate and all the terms of this Lease is enforceable against
such Permitted Permitted Sublessee under the applicable law of such country;
(e) If the Permitted Permitted Sublessee is not a U.S. Air Carrier or is a
tax-exempt entity within the meaning of Section 168(h) of the Code, no Permitted
Sublease shall be allowed prior to the end of the recovery period with respect
to the Aircraft, unless Lessee prepays on a lump-sum basis any resulting
liability due under the Tax Indemnity Agreement based upon the assumption that
such Permitted Sublease will continue for the full term of such Permitted
Sublease; and
(f) Lessee shall include in such Permitted Sublease appropriate provisions
which (i) make such Permitted Sublease expressly subject and subordinate to all
of the terms of this Lease, including the rights of Lessor to avoid such
Permitted Sublease in the exercise of its rights to repossession of the Airframe
and Engines hereunder and thereunder; (ii) expressly prohibit any further
subleasing of the Airframe and Engines; (iii) require that the Airframe and
Engines be maintained in accordance with a Maintenance Program; (iv) limit the
term of such Permitted Sublease (including renewal rights) to a period not
beyond the end of the Term, unless Lessee has then irrevocably committed to
exercise a purchase or extension option in accordance with the terms hereof; (v)
require that the Airframe and Engines be used in accordance with the limitations
applicable to Lessee's possession and use provided in this Lease; (vi) shall
include provisions for the maintenance, operation, possession and inspection of
the Aircraft that are the same in all material respects as the applicable
provisions of this Lease; and (vii) require insurance coverage to be maintained
to at least the same extent as set forth in this Lease.
13.3. ASSIGNMENT BY LESSOR.
(a) Lessor may voluntarily, at any time, upon ten Business Days prior
written notice to Lessee, assign, sell or transfer, all, but not less than all
of its right, title and interest in, to and under the Aircraft, this Lease and
the Lease Supplement, to a single transferee either through assignment of its
beneficial interest or through the sale or other transfer of all or
substantially all of its assets or business, in either case only if the
transferee (i) is a corporation or financial institution which is a "citizen of
the United States" as defined in the Transportation Code, (ii) has a net worth
of not less than $50,000,000 (or provides a guarantee of all of its obligations
by an entity meeting such net worth requirement), (iii) assumes the obligations
of Lessor in the transaction, and (iv) is not, without the written consent of
Lessee, an airline or any other competitor of Lessee or an affiliate of any
thereof. The provision of this Section 14(a) shall not apply to any transfer or
assignment pursuant to an exercise by Lessor of its remedies under Section 15.
47
(b) Lessor may encumber the Aircraft or assign its interest or any part
thereof under this Lease to a lender as security for the purpose of refinancing
its interest in the Aircraft.
(c) Any assignment or encumbrance by Lessor pursuant to this Section 13.3
shall be subject to Lessee's rights hereunder. Lessee shall be under no
obligation to any assignee except upon written notice of such assignment from
Lessor. Upon written notice to Lessee of such assignment, Lessee agrees to pay
Rent to the assignee in accordance with the instructions specified in such
notice, and to give all notices which are required or permitted to be given by
Lessee to Lessor hereunder to the Person(s) specified to receive the same in
such written notice of assignment, and to otherwise comply with all notices,
directions and demands which may be given by such assignee in accordance with
the provisions of this Lease. Lessor shall pay all costs and expenses incurred
in connection with any such transfer, assignment or encumbrance, including those
of Lessee, except if such transfer, assignment or encumbrance is pursuant to the
exercise by Lessor of its rights and remedies under Section 15 hereof.
SECTION 14. EVENTS OF DEFAULT.
(a) Each of the following events shall separately constitute an Event of
Default (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), and each such Event of Default shall
continue for so long as, but only for so long as, it shall not have been
remedied:
(i) Lessee shall fail to make a payment of Basic Rent or Stipulated
Loss Value within five Business Days after the same shall have become due;
(ii) Lessee shall fail to make any other payment required hereunder
or under any other agreement executed by Lessee in respect hereof within
ten days after receipt by Lessee of written notice that such amount was
not paid when due;
(iii) Lessee shall have failed to perform or observe (or caused to
be performed and observed) in any material respect any other non-financial
covenant or agreement hereunder or under the Lease Supplement, or in any
other document or certificate furnished by Lessee in connection herewith
or therewith or pursuant hereto or thereto (other than the Tax Indemnity
Agreement) and such failure shall continue unremedied for a period of more
than 30 days after Lessee's receipt of written notice thereof by Lessor,
unless such failure is not reasonably capable of being corrected within 30
days, provided, however, that Lessee shall not be in default for so long
as Lessee diligently commences and continues to diligently to correct such
failure; provided, further, that Lessee shall in all events be in default
or if Lessee does not remedy such failure within 120 days after receipt of
such notice;
(iv) Any representation or warranty (other than tax representations)
set forth herein shall prove to have been incorrect in any material
respect when made and, except
48
in the case of any financial representations, such incorrectness has a
material adverse effect on Lessor or on Lessee's ability to perform its
obligations under this Lease;
(v) the commencement of an involuntary case or other proceeding in
respect of Lessee (or, if a Permitted Sublease is then in effect, of
Permitted Sublessee) under the federal bankruptcy laws, as now constituted
or hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law in the United States, or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Lessee (or, if a Permitted Sublease
is then in effect, Permitted Sublessee) or for all or substantially all of
its property, or seeking the winding-up or liquidation of its affairs and
the continuation of any such case or other proceeding undismissed and
unstayed for a period of 60 consecutive days, or an order, judgment or
decree shall be entered in any proceeding by any court of competent
jurisdiction appointing without Lessee's (or Permitted Sublessee's)
consent, a receiver, trustee or liquidator of Lessee (or Permitted
Sublessee) or for all or substantially all of its property, and any such
order, judgment or decree shall remain in force and unvacated for a period
of 60 consecutive days after the date of entry;
(vi) the commencement by Lessee (or, if a Permitted Sublease is then
in effect, Permitted Sublessee) of a voluntary case or proceeding under
the federal bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency or other
similar law in the United States, or the filing of an answer or petition
seeking reorganization in a proceeding under any such laws or the filing
of an answer admitting the material allegations of a petition filed
against Lessee (or Permitted Sublessee) in any such proceeding or the
consent by Lessee (or, if a Permitted Sublease is then in effect,
Permitted Sublessee) to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of Lessee or for all or substantially all of its
property, or the making by Lessee (or, if a Permitted Sublease is then in
effect, Permitted Sublessee) of any assignment for the benefit of
creditors or the taking of any corporate action by Lessee to authorize any
of the foregoing or to authorize a general payment moratorium;
(vii) Lessee (or, if a Permitted Sublease is then in effect,
Permitted Sublessee) shall fail to procure, carry and maintain on or with
respect to the Aircraft (or cause to be procured, carried and maintained)
insurance required to be maintained in accordance with the provisions of
Section 11 hereof; and
(viii) Lessee shall attempt to sell or alienate the Aircraft except
in compliance with the provisions of this Lease.
SECTION 15. REMEDIES.
15.1. LESSOR'S REMEDIES. Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, Lessor may, at
its option, declare this Lease to be in default by written notice to Lessee;
provided, however, that this Lease shall be deemed to be declared in default
without the necessity of such written declaration upon the occurrence of
49
any Event of Default described in Section 14(v) or Section 14(vi); and at any
time thereafter, so long as any such outstanding Event of Default shall not have
been cured or remedied, Lessor may do one or more of the following with respect
to all or any part of the Airframe and any or all of the Engines as Lessor in
its sole discretion shall elect, to the extent permitted by, and subject to
compliance with any requirements of, applicable law then in effect:
(a) Lessor may, upon the written demand of Lessor and at Lessee's
expense, cause Lessee to return promptly, and Lessee shall return
promptly, all or such part of the Airframe or any Engine as Lessor may so
demand, to Lessor or its order in the manner and condition required by,
and otherwise in accordance with all the provisions of, Section 8 as if
the Airframe or Engine were being returned at the end of the Term, or
Lessor (or Lessor's designee) may, at its option, enter upon the premises
where all or any part of the Airframe or any Engine is located and take
immediate possession of and remove the same (together with any engine that
is installed on the Airframe which is not an Engine, subject to the rights
of any owner, lessor, lienholder or secured party of such engine) by
summary proceedings or otherwise (and/or, at Lessor's option, store the
same at Lessee's premises, at Lessee's cost and expense, until disposal
thereof by Lessor);
(b) Lessor may sell all or any part of the Aircraft, the Airframe or
any Engine at public or private sale and with or without advertisement or
notice to Lessee or any Permitted Sublessee, as Lessor in its sole
discretion may determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle all or any part of the Aircraft, the Airframe
or any Engine as Lessor, in its sole discretion, may determine, all free
and clear of any rights of Lessee or any Permitted Sublessee and without
any duty to account to Lessee or any Permitted Sublessee with respect to
such action or inaction, except as hereinafter set forth in this Section
15; and in the event of a sale in accordance with the foregoing, Lessor
shall have the right to bid for and purchase such property;
(c) In the event Lessor, pursuant to Section 15.1(b), shall have
sold the Aircraft, Lessor may, if it shall so elect, demand that Lessee
pay Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty, any unpaid
Basic Rent and Supplemental Rent with respect to the Aircraft due on or
prior to such date plus the amount of any deficiency between the net
proceeds of such sale (after deduction of all reasonable costs of sale)
and the Stipulated Loss Value of the Aircraft, computed as of the Rent
Payment Date immediately following the date of such sale, together with
interest, if any, on the amount of such deficiency, at the Past Due Rate,
from the date of such demand to the date of actual payment of such amount;
(d) In lieu of exercising its rights under Section 15.1(a), (b) or
(c) above, Lessor may, by notice to Lessee specifying a payment date not
earlier than ten days or more than 30 days from the date of such notice,
require Lessee to pay to Lessor, and Lessee hereby agrees that it will pay
to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain, and not as a penalty, and in lieu of any
further payments of Basic Rent hereunder, an amount equal to the sum of
(i) all unpaid Basic Rent payable or that would have been payable on or
before the date of payment
50
specified in such notice and any Supplemental Rent then owing, plus (ii)
an amount equal to the Stipulated Loss Value for the Aircraft computed as
of the Rent Payment Date immediately following the date of payment
specified in such notice, together with interest, if any, at the Past Due
Rate on the amount of such Basic Rent and Stipulated Loss Value from the
payment date specified in such notice until the date of actual payment;
and upon such payment of liquidated damages and all other Rent then due
and payable by Lessee hereunder, Lessor shall transfer (without any
representation, recourse or warranty whatsoever other than as to the
absence of Lessor Liens) the Aircraft to Lessee or as Lessee may direct,
and Lessor shall execute and deliver such documents evidencing such
transfer and take such further action as Lessee shall reasonably request;
(e) Lessor may rescind this Lease Agreement and/or may exercise any
other right or remedy which may be available to it under applicable law or
proceed by appropriate court action to enforce the terms hereof or to
recover damages for breach hereof;
15.2. Except as otherwise expressly provided above, no remedy referred to
in this Section 15 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity, and the exercise or beginning of exercise by Lessor
of any one or more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies. No waiver by Lessor of
any Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default;
SECTION 16. FURTHER ASSURANCES; INFORMATION.
(a) On the Delivery Date, Lessee shall cause this Lease and the Lease
Supplement to be duly filed at the FAA. In addition, Lessee will promptly and
duly execute and deliver to Lessor and any assignee of Lessor permitted under
Section 13.3 hereof such other documents and assurances, and will take such
further actions as Lessor or any such assignee may from time to time reasonably
request in order to carry out more effectively the intent and purposes of this
Lease and to establish and protect the rights and remedies created or intended
to be created hereunder in favor of Lessor and any such assignee, including,
without limitation, if requested by Lessor, at the expense of Lessee, the
execution and delivery of supplements or amendments hereto, subjecting to this
Lease any airframe or engine substituted for an Airframe or any Engine, and the
recording or filing of counterparts thereof in accordance with the laws of such
jurisdictions as Lessor may from time to time reasonably deem advisable.
(b) Lessee convenants to furnish to Lessor such information concering the
business, assets and financial condition of Lessee as Lessor may request and,
without request, furnish to Lessor:
(i) as soon as available, quarterly financial statements for
such quarter and the fiscal year to date;
(ii) as soon as available, a copy of the detailed annual audit
report and accompanying consolidated financial statements,
accompanied by a certificate of a
51
Responsible Officer to the effect that no Event of Default has
occurred and is continuing hereunder; and
(iii) as soon as possible after such Responsible Officer has
notice of the occurrence of an Event of Default.
SECTION 17. NOTICES. All notices and other communications required or permitted
under the terms and provisions hereof shall be by registered mail, return
receipt requested, or by nationally-recognized overnight courier service, or by
confirmed facsimile transmission, and any such notice shall become effective
when received, addressed: if to Lessor, at:
ICX Corporation
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer and General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or facsimile number as Lessor shall from time to time
designate in writing to Lessee, and if to Lessee, at:
Chautauqua Airlines, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Avenue
Greenwich, Conn., 06830
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇ ▇▇▇▇▇▇▇▇)
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇▇)
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇ ▇▇▇▇▇▇▇▇)
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇▇)
52
or to such other address or facsimile number as Lessee shall from time to time
designate in writing to Lessor.
SECTION 18. NET LEASE, NO SET-OFF, COUNTERCLAIM, ETC. This is a triple-net
lease, and Lessee's obligations to pay all Rent payable hereunder and to pay all
costs and expenses of every kind in connection with the use, operation,
maintenance and repair of the Airframe and each Engine by Lessee shall be
absolute and unconditional and shall not be affected by or subject to any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, abatement, defense or other right which Lessee may have against
Lessor or anyone else for any reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions), (ii) any defect in
the title, registration, airworthiness, condition, design, operation, or fitness
for use of, or any damage to or loss or destruction of, the Aircraft, or any
interruption, interference or cessation in or prohibition of the use or
possession thereof by Lessee (or any Permitted Sublessee) for any reason
whatsoever, including, without limitation, any such interruption, interference,
cessation or prohibition resulting from the act of any government authority,
(iii) any insolvency, bankruptcy, reorganization or similar case or proceedings
by or against Lessee (or any Permitted Sublessee), Lessor or any other Person,
(iv) the invalidity or unenforceability or lack of due authorization of this
Lease or any instrument or document executed in connection herewith or
therewith, or (v) any other circumstance, happening, or event whatsoever,
whether or not unforeseen or similar to any of the foregoing. If for any reason
whatsoever this Lease shall be terminated in whole or in part by operation of
law or otherwise except as specifically provided herein, Lessee nonetheless
agrees without limitation of the other rights or remedies of Lessor hereunder,
to pay to Lessor an amount equal to each Rent payment at the time such payment
would have become due and payable in accordance with the terms hereof had this
Lease not been terminated in whole or in part. Lessee hereby waives, to the
extent permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease except in accordance with the
express terms hereof. Each payment of Rent by Lessee shall be final, and Lessee
shall not seek to recover, ▇▇▇▇▇, suspend, defer or reduce all or any part of
such payment for any reason whatsoever, except for any payments not required
hereunder which were made in error. Nothing in this Section 18 shall be
construed to preclude Lessee from bringing any suit at law or in equity which it
would otherwise be entitled to bring for breach of any representation, warranty,
or covenant hereunder, or as a waiver of or consent to any act or failure to act
by any person except as otherwise expressly provided in this Lease.
SECTION 19. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make any
payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, in either case,
after the expiration of any applicable notice and cure periods, whether or not
such failure shall constitute an Event of Default hereunder, Lessor may itself
make such payment or perform or comply with such agreement but shall not be
obligated hereunder to do so, and the amount of such payment and the amount of
the reasonable expenses of Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent hereunder payable by Lessee to Lessor on
53
demand. No such payment or performance by Lessor shall be deemed to waive any
Default or Event of Default or relieve Lessee of its obligations hereunder.
SECTION 20. LESSOR ASSIGNMENT OF RIGHTS AND WARRANTIES. On the Delivery Date,
Lessor shall assign to Lessee for the duration of the Lease Term, the benefit of
all assignable manufacturer's warranties with respect to the Aircraft as well as
all manuals and related services and documentation available to Lessor, and
Lessor agrees to use its reasonable efforts, at Lessee's expense and upon its
written request, to assist Lessee in enforcing such rights as Lessor may have
with respect to the warranties for the benefit of Lessee; provided, however,
that upon notice from Lessor to Lessee after and during the continuance of an
Event of Default, such assignments which are otherwise made available to Lessee
shall immediately upon notice by Lessor be deemed canceled and shall be deemed
reassigned to Lessor, including all claims thereunder, whether or not perfected,
and all amounts payable shall be paid to and held by Lessor, until such time as
an Event of Default is no longer continuing. At the expiration of the Term of
this Lease (other than by reason of the exercise by Lessee of its purchase
option), the benefit of any assignment to Lessee shall automatically and without
further action by Lessor revert to Lessor or its designee. Lessee shall at its
own cost and expense do all such things and execute all such documents as may be
required for this purpose. Lessee shall maintain all necessary records and take
all necessary actions to qualify it for claims, and shall diligently and
promptly pursue any valid claims it may have against the manufacturers with
respect to the Aircraft and will provide notice of same to Lessor. Lessee shall
cooperate with Lessor, and shall furnish Lessor with such documents, records and
other information as Lessor shall reasonably request in order to assist Lessor
in pursuing any claim Lessor may have against any manufacturer with respect to
any warranty.
SECTION 21. MISCELLANEOUS. Any provision of this Lease which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. No term or provision of this Lease may be changed, amended,
waived, discharged or terminated orally, but only by an instrument in writing
signed by Lessor and Lessee. This Lease shall constitute an agreement of lease,
and nothing contained herein shall be construed as conveying to Lessee any
right, title or interest in the Aircraft other than as a lessee. Neither Lessee
nor any Affiliate of Lessee shall file any tax returns in a manner inconsistent
with the foregoing or with Lessor's ownership of the Aircraft, and any Permitted
Sublease shall require a similar undertaking by the Permitted Sublessee
thereunder. The section and paragraph headings in this Lease and the table of
contents are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof. This Lease may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 22. OPTIONS TO RENEW.
22.1 CAPPED RENEWAL OPTIONS. Lessee shall have the right to extend the
term of this
54
Lease for a period of one year commencing at the end of the Basic Term by
irrevocable written notice to Lessor not less than 180 days prior to the end of
the Basic Term, provided that no Event of Default has occurred and is continuing
at the time of notice and commencement of the Renewal Term. In the event that
Lessee has elected to extend the Term in accordance with the preceding sentence,
Lessee shall have the right to extend the then-current Term for an additional
one-year period by irrevocable written notice given to Lessor not less than 180
days prior to the expiration of the then-current Term. The Rent payable during
each Renewal Term under this Section 22.1 shall be [*] (i) [*], or (ii) [*] of
the average Basic Rent paid during the Basic Term, and shall be paid on the
Rent Payment Dates.
22.2 UNCAPPED RENEWAL OPTIONS. In the event that Lessee has exercised both
of its options to extend the Term pursuant to Section 22.1, Lessee shall have
two successive options to extend the Term for a period of one year each,
exercisable by written irrevocable notice to Lessor not less than 180 days prior
to the expiration of the then-current Term, provided no Event of Default has
occurred and is continuing at the time of the notice and the commencement of the
Renewal Term. The Basic Rent payable during each Renewal Term under this Section
22.2 shall be equal to [*], and shall be paid on the Rent Payment Dates.
22.3 FAIR MARKET RENTAL VALUE. For the purposes of this Lease, the "Fair
Market Rental Value" of the Aircraft shall be the rent which would be payable in
an arm's length transaction between an informed and willing lessor under no
compulsion to lease and an informed and willing lessee under no compulsion to
lease, based upon the condition and location of the Aircraft (assuming the
Aircraft is in the condition in which it is required to be maintained and
further assuming half-life condition), which value shall be determined by mutual
written agreement or, in the absence of mutual written agreement, pursuant to
the appraisal procedure described in Section 23.3.
SECTION 23. PURCHASE OPTIONS.
23.1 PURCHASE OPTIONS. Lessee shall have the right to purchase the
Aircraft (i) upon the termination of the Basic Term, for a purchase price equal
to the lesser of then Fair Market Sales Value of the Aircraft or the amount
specified on Schedule II; or (ii) at the end of any Renewal Term, for a purchase
price equal to the then Fair Market Sales Value of the Aircraft. Upon payment by
Lessee of the purchase price for the Aircraft and the Basic Rent or Renewal
Rent, if any, payable though the date of purchase, together with all
Supplemental Rent then due and payable hereunder (and provided that Lessee has
cured (or with such payments will cure) all Defaults, the Term shall end and the
obligation of Lessee to pay Rent hereunder (except for Supplemental Rent
obligations otherwise accrued but unpaid as of the date of such payment) shall
cease, and Lessor shall convey to Lessee all right, title and interest of Lessor
in and to the Aircraft on an "as-is, where is" basis, without recourse or
warranty except a warranty against Lessor's Liens.
23.2 NOTICE. Lessee's right to purchase provided for Section 23.1 shall be
exercised by written notice to Lessor not less than 180 days before the
applicable date of purchase provided in Section 23.1(i) or Section 23.1(ii), as
the case may be. Such notice shall be irrevocable, except that Lessee may revoke
its exercise of an option to purchase the Aircraft within 15 days
55
---------
* Confidential
following the determination of the Fair Market Sales Value. In the event that
Lessee exercises its right of revocation, the Term of this Lease shall be
extended to a date that is not earlier than 180 days following the notice of
revocation.
23.3 FAIR MARKET SALES VALUE. For the purposes of this Lease, the "Fair
Market Sales Value" of the Aircraft shall be the sales value which would be
obtained in an arm's-length transaction between an informed and willing
purchaser under no compulsion to purchase and an informed and willing seller
under no compulsion to sell, based upon the condition and location of the
Aircraft (assuming the Aircraft is in the condition in which it is required to
be maintained and further assuming half-life condition), which value shall be
determined by mutual written agreement or, in the absence of mutual written
agreement, pursuant to an appraisal prepared and delivered by a nationally
recognized firm of independent aircraft appraisers nominated by Lessor and
approved by Lessee, and Lessor shall immediately notify Lessee in writing of
such nomination. The appraiser shall determine the Fair Market Sales Value
within seven Business Days, and its determination shall be final and binding
upon the parties. The cost of such appraisal or appointment shall be borne by
Lessee.
SECTION 24 VOLUNTARY TERMINATION FOR OBSOLESCENCE.
24.1 RIGHT TO TERMINATE. So long as no Event of Default has occurred and
is continuing, Lessee shall have the right on at least [*] (which notice shall
be irrevocable, except as provided below), to terminate this Lease by written
notice from its chief financial officer to Lessor to the effect that the
Aircraft has become [*] to Lessee's equipment requirements. Such notice shall
specify a proposed date of termination, which shall be a Rent Payment Date at
any time on or after the [*] anniversary of the Commencement Date. During the
period following the giving of such notice of termination until the
Termination Date, Lessee, as agent for Lessor, shall use commercially
reasonable efforts to sell the Aircraft no later than the Termination Date
"as is", without any warranty by Lessor except as to Lessor's title, on
behalf of Lessor. If Lessee receives any bid, it shall, at least 10 Business
Days prior to the proposed day of sale, certify to Lessor in writing the
amount and terms of such bid, the proposed date of sale and the name and
address of the potential buyer (which may be Lessor or any Affilate of
Lessor, but shall not be Lessee or any Affiliate of Lessee). Lessor may also
solicit bids directly or through agents other than Lessee. Lessee may, by
notice to Lessor, withdraw its notice of termination at any time on or before
the date 10 days prior to the proposed Termination Date (unless such
withdrawal is due to the cancellation of the proposed purchase of the
Aircraft by the potential buyer, in which event, such notice may be given at
any time on or prior to the proposed Termination Date), and thereupon this
Lease shall continue in full force and effect. Withdrawal of notice of
termination shall not exhaust the Lessee's right to give a further notice of
termination as provided herein. On the Termination Date or such other date of
sale as shall be consented to in writing by Lessor and Lessee, which date
shall thereafter be deemed the Termination Date, Lessee shall, upon payment
in full of the amounts described in Section 24.2, deliver the Airframe and
Engines or engines installed thereon to the party which shall have prior to
such date submitted the highest bona fide cash bid to close such sale and
purchase of the same, and shall duly transfer to such party title to any
engines which are not Engines delivered with the Airframe. Lessor shall
simultaneously therewith sell and convey title
56
-------
* Confidential
to the Airframe and the Engines or engines conveyed to Lessor as provided in
Section 10 to such party, in "as-is, where-is" condition, without recourse or
warranty (except a warranty as to the absence of Lessor's Liens). Upon receipt
by Lessor of all amounts referred to in Section 24.2, Lessor will transfer to
Lessee, in "as-is, where-is" condition, without recourse or warranty (except a
warranty as to the absence of Lessor's Liens), all right, title and interest of
Lessor in and to any Engines constituting part of the Aircraft which were not
delivered to the purchaser with the Airframe. Lessee shall pay all reasonable
out-of-pocket expenses of Lessor in connection with any termination or proposed
termination of this Lease.
24.2 PAYMENTS. The total selling price realized at any sale of the
Airframe and Engines or engines installed thereon in accordance with this
Section 24 shall be retained by Lessor. In addition, on the Termination Date
(including any tax indemnity payments that may have been paid by adjustment to
Basic Rent hereunder), Lessee shall pay to Lessor in immediately-available
funds, an amount equal to the sum of (i) the excess, if any, of the Termination
Value as of the Termination Date over the net proceeds of the sale of the
Aircraft, plus (ii) all unpaid Supplemental Rent due on or before the
Termination Date, plus (iii) the portion, if any, of Basic Rent payable through
Termination Date, together with all unpaid Basic Rent, if any, payable before
the Termination Date, plus (iv) the reasonable fees and expenses of Lessor in
connection therewith.
24.3. TERMINATION OF LEASE. Upon delivery by Lessee of the Airframe and
Engines or engines installed thereon and payment by Lessee of all amounts
payable by Lessee under Section 24.2, the obligations of Lessee to pay Rent
shall cease and the Term shall end.
24.4 EFFECT OF NO SALE. If, on the Termination Date, no sale of the
Aircraft has occurred, Lessee's termination notice given pursuant to Section
24.1 shall be deemed to be withdrawn as of such date, and this Lease shall
continue in full force and effect.
24.5. NO DUTY ON PART OF LESSOR. Lessor shall be under no duty to solicit
bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take
any action in connection with any such sale other than to cooperate with such
efforts as Lessee may reasonably request and to make the transfers described in
Section 24.1.
SECTION 25. COVENANT OF QUIET ENJOYMENT. Lessor covenants and agrees that, so
long as no Event of Default has occurred and is continuing hereunder, it will
not, nor will it permit another Person claiming by, under or through it to,
interfere with Lessee's right to quiet enjoyment and continuing possession, use
and operation of the Aircraft during the Term of this Lease, and this Lease
shall not be terminated except as expressly provided herein.
SECTION 26. BANKRUPTCY. It is the intention of the parties that Lessor shall be
entitled to the benefits of 11 U.S.C. ss. 1110 with respect to the right to
repossess the Airframe, Engines and Parts as provided herein. In any
circumstance where more than one construction of the terms and conditions of
this Lease is possible, a construction that would preserve such benefits shall
control over any construction which would not preserve such benefits or render
them doubtful. To the extent consistent with the provisions of 11 U.S.C. ss.
1110 or any analogous section of the Federal bankruptcy laws, as amended from
time to time, it is hereby expressly agreed and provided that,
57
notwithstanding any other provisions of the Federal bankruptcy laws, as amended
from time to time, to the contrary, any right of Lessor to take possession of
the Aircraft in compliance with the provisions of this Lease shall not be
effected by the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to
time, or any analogous provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
SECTION 27. CHOICE OF LAW; SERVICE OF PROCESS.
27.1. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of New York, without regard to or
application of its conflict of laws rules.
27.2 CONSENT TO JURISDICTION. Each Lessee and Lessor voluntarily submits
itself to the exclusive jurisdiction of the state and federal courts situated in
New York, New York for any dispute arising hereunder. Each of Lessee and Lessor
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Lease brought in the Courts located in New York, New York, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any such Court has been brought in an inconvenient forum. To the
extent that either Lessor or Lessee may be entitled at any time to claim for
itself or its assets any immunity (whether by reason of sovereignty or
otherwise) from suit, from the jurisdiction of any Court, from execution of
judgment or otherwise, Lessor or Lessee, as the case may be, hereby irrevocably
agrees not to claim and hereby irrevocably waives such immunity in respect of
this Lease and any proceeding under this Lease.
27.3 WAIVER OF JURY TRIAL. Each party hereby unconditionally waives its
rights to a jury trial of any claim or cause of action based upon or arising out
of, directly or indirectly, this Lease, any of the documents relating hereto,
any dealings between Lessee and Lessor relating to the subject matter of this
transaction, and/or the relationship that is being established hereunder between
Lessee and Lessor. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court (including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims). This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Lease, any related
documents, or to any other documents or agreements relating to this transaction
or any related transaction. In the event of litigation, this Lease may be filed
as a written consent to a trial by the court.
27.4 SERVICE OF PROCESS. Lessee hereby agree that service of all writs,
process and summonses in any such suit, action or proceeding brought in the
State of New York may be made upon ▇▇▇▇▇▇ ▇▇▇▇▇. Lessor agrees that service of
all writs, process and summonses in any such suit, action or proceeding brought
in the State of New York may be made upon ▇▇▇▇▇▇▇ ▇▇▇▇▇▇. Each party hereby
irrevocably appoints its process agent as its true and lawful attorney-in-fact
in its name, place and stead to accept such service of any and all such writs,
process and summonses, and agrees that the failure of its process agent to give
any notice of any such service of process to it shall not impair or affect the
validity of such service or of any judgment based thereon. Each of Lessee and
Lessor hereby further irrevocably consents to the service of process
58
in any suit, action or proceeding in said courts by the mailing thereof by the
other party by registered or certified mail, postage prepaid, or express mail to
it at its address set forth in Section 17 hereof.
59
28. OWNERSHIP. Notwithstanding any provision herein or elsewhere contained
to the contrary, it is understood and agreed between the parties that the
leasing transaction contemplated hereby is expressly intended to be, and shall
be and should be construed to be, a lease for Federal income tax purposes.
60
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Aircraft Lease
Agreement to be duly executed as of the date first written above.
LESSOR:
ICX CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Title:
----------------------------------
LESSEE:
CHAUTAUQUA AIRLINES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Title: Vice President
----------------------------------
61
SCHEDULE I
[*]
--------
* Confidential
SCHEDULE II
[*]
--------
* Confidential
SCHEDULE III
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED PERMITTED SUBLESSEE AND RE-REGISTRATION
Australia Japan
Austria Luxembourg
Belgium Netherlands
Canada *New Zealand
Denmark Norway
Finland Switzerland
France United Kingdom
Germany
Iceland
Ireland
*Italy
--------------------------------------------------------------------------------
*No Reregistration
EXHIBIT A
THIS IS COUNTERPART NO. _____ OF 4 SERIALLY NUMBERED AND MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN
COUNTERPART NO. 1.
FORM OF LEASE SUPPLEMENT EXHIBIT A: FORM OF LEASE SUPPLEMENT
AND RECEIPT
THIS LEASE SUPPLEMENT dated June ___, 1999 is made by and between ICX
Corporation ("Lessor"), and Chautauqua Airlines, Inc. ("Lessee").
Lessor and Lessee have entered into an
Aircraft Lease Agreement, dated as
of June ___, 1999 (the "Lease"), relating to Embraer ERJ-145LR aircraft,
manufacturer's serial number EMB 145128, United States registration number
N260SK, which provides for the execution and delivery of a Lease Supplement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Lessor and
Lessee hereby agree as follows:
1. THE LEASE. The Lease and all related documents to be executed by Lessee
in order to accomplish the transaction contemplated by the Lease have been duly
authorized, executed and delivered by Lessee and constitute valid, legal and
binding agreements, enforceable against Lessee in accordance with their terms.
All of the terms and provisions (including defined terms) of the Lease are
hereby incorporated by reference in this Lease Supplement to the same extent as
if fully set forth herein. The parties confirm that the Delivery Date is the
date of this Lease Supplement.
2. THE AIRCRAFT. Lessee hereby certifies that the Aircraft described in
Schedule 1 hereto has been delivered to Lessee, inspected by Lessee, and
accepted under, and for all purposes of, the Lease in accordance with the
Acceptance Certificate annexed hereto, all on the date hereof. Lessee accepts
delivery of the Aircraft "AS IS," "WHERE IS," AND SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTION 3.4 OF THE
LEASE.
3. REPRESENTATIONS BY LESSEE. Lessee hereby represents and warrants to
Lessor that on the date hereof:
(a) The representations and warranties of Lessee set forth in the
Lease are true and correct in all material respects as though made
on and as of the date thereof, except to the extent that they
expressly relate to a particular date.
(b) Lessee has satisfied or complied with all requirements set forth
in the Lease to be satisfied or complied with on or prior to the
date thereof.
(c) No Event of Default or Event of Loss under the Lease has
occurred and is continuing on the date hereof, nor has any event
occurred which, with the giving
A-1
of notice or lapse of time or both, would become an Event of Default
or an Event of Loss.
(d) The Lessee has obtained, and there are in full force and effect,
such insurance policies with respect to the Aircraft as are required
to be obtained under the terms of the Lease.
4. COUNTERPARTS. This Lease Supplement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed as of the date and year first above written.
LESSOR:
ICX CORPORATION:
By: _________________________
Title: ______________________
LESSEE:
CHAUTAUQUA AIRLINES, INC.
By: _________________________
Title: ______________________
A-2
SCHEDULE 1 TO LEASE SUPPLEMENT
AIRCRAFT DESCRIPTION
Airframe: Embraer EJR-145LR , manufacturer's serial number EMB 145128,
United States Registration Number: N260SK
Engine: ▇▇▇▇▇▇▇ Engine Company AE3007A1, manufacturer serial number CAE
311142.
Engine: ▇▇▇▇▇▇▇ Engine Company AE3007A1, manufacturer serial number CAE
311143.
EXHIBIT B
FORM OF ACCEPTANCE CERTIFICATE
This Acceptance Certificate is executed pursuant to that certain
Aircraft
Lease Agreement dated as of June ____, 1999 ("Lease"), between ICX Corporation
("Lessor") and Chautauqua Airlines, Inc. ("Lessee").
The terms used in this Acceptance Certificate shall have the meanings
ascribed to them in the Lease.
Lessor and Lessee hereby confirm that the Aircraft described in this
Acceptance Certificate has been delivered as of the above date at Memphis,
Tennessee, and that the term of the Lease with respect to said Aircraft shall
commence as of the said date.
Lessee confirms that said Aircraft has been examined by its duly appointed
and authorized representatives and that such examination shows that (a) there
are affixed to the Airframe metal tags bearing the following legend: "ICX
Corporation, Owner and Lessor", (b) the Aircraft is in the configuration and
condition required by the Lease on the date the Aircraft is delivered to Lessee,
and (c) the Airframe and Engines were plainly and distinctly marked with the
serial numbers set forth below:
Description of Equipment: Manufacturer's Serial Numbers
------------------------ -----------------------------
Airframe: Embraer EJR-145LR EMB 145128
Engines:
▇▇▇▇▇▇▇ Engine Company AE3007A1 CAE 311142
CAE 311143
B-1
Lessee confirms that on the date hereof (i) the Aircraft described in this
Acceptance Certificate was duly and unconditionally accepted by Lessee as the
Aircraft for leasing under the Lease, provided that nothing contained herein or
in the Lease diminishes or affects any right Lessor or Lessee may have with
respect to the Aircraft against the Manufacturer, any vendor or any
subcontractor or supplier thereof, (ii) the Aircraft became subject to and
governed by the terms of the Lease, and (iii) Lessee became unconditionally
obligated to pay to Lessor the rentals provided for in the Lease.
This Acceptance Certificate is dated this ____ day of June, 1999.
LESSOR:
ICX CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
-----------------------------------
LESSEE:
CHAUTAUQUA AIRLINES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Title: Vice President
-----------------------------------
B-2
EXHIBIT E
FORMS OF OPINIONS OF COUNSEL
I. TO BE GIVEN BY INDEPENDENT OUTSIDE COUNSEL OF LESSEE OR OTHER LAWYERS
ACCEPTABLE TO LESSOR
June ___, 1999
ICX Corporation
Three ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer and General Counsel
Re: CHAUTAUQUA AIRLINES, INC.
Gentlemen:
Chautauqua Airlines, Inc., a New York corporation (the
"Corporation"), has asked us to render certain opinions to you regarding the
Corporation, and the following agreements to which the Corporation is a party:
(i) an
Aircraft Lease Agreement, dated as of June 25, 1999, between ICX
Corporation, an Ohio corporation ("ICX"), and the Corporation (the "Lease");
(ii) a Lease Supplement, dated as of June 25, 1999, between ICX and the
Corporation; (iii) an Acceptance Certificate, dated as of June 25, 1999, between
ICX and the Corporation; and (iv) a Tax Indemnity Agreement, dated as of June
25, 1999, between ICX and the Corporation (collectively, the "Lease Documents").
We have examined and relied upon originals, or copies certified or
otherwise identified to our satisfaction, of the following documents,
certificates and other statements of the Corporation and its officers and other
representatives as the basis for our opinion: (a) copies of the Lease Documents
in the form furnished to us by the Corporation; and (b) the opinion, dated as of
June 25, 1999, of ▇▇▇▇▇▇ ▇▇▇▇▇, General Counsel of the Corporation ("Counsel's
Opinion").
In our examination of the Lease Documents, Counsel's Opinion and the
other documents, instruments, certificates and statements referred to above, we
have assumed, without any independent investigation, that (a) all statements,
representations, warranties and certifications set forth therein are true,
correct and complete; (b) the Lease Documents actually executed by the
Corporation are identical to the documents submitted to us by the Corporation;
(c) all documents submitted to us as originals are genuine and the signatures
thereon are authentic; (d) the agreements, documents, instruments and
certificates submitted to us as copies are genuine and conform to the originals;
and (e) the Lease Documents and all of the other agreements, documents,
instruments and certificates have been duly authorized, delivered and fully
performed by all persons other than the Corporation in all respects, and are the
legal, valid and binding obligations of all such persons, enforceable against
them in accordance with their respective terms. We have not represented the
Corporation generally as outside counsel, and,
E-1
accordingly, we have extremely limited familiarity with its business and
activities. Therefore, as to all factual matters, we have, without any
independent investigation, relied upon, and assumed the accuracy of, Counsel's
Opinion and all of the statements, representations and warranties made in the
Lease Documents and in each of the other agreements, documents, instruments,
certificates and statements referred to above.
Based upon and subject to the foregoing, and subject to the
assumptions and qualifications set forth below, it is our opinion that:
1. No authorization, approval, consent, license or order of, or
registration with, or giving notice to, any Federal governmental or other
regulatory body or authority having jurisdiction over the Corporation is
required or necessary for the valid authorization, execution, delivery and
performance by the Corporation of the Lease Documents.
2. Each of the Lease Documents is a valid and a binding obligation
of the Corporation, enforceable against the Corporation in accordance with its
terms.
3. The Corporation is a "citizen of the United States" as defined in
49 U.S. Code ss.40102(a)(15).
4. The Corporation is an "air carrier" as defined in 49 U.S. Code
ss.40102(a)(2).
5. Except for (i) registrations and filings with the FAA, with
respect to which we express no opinion; (ii) the filing of appropriate Uniform
Commercial Code financing statements in the appropriate offices in Indiana,
Ohio, New York and Connecticut, and any jurisdiction in which records relating
to the aircraft to which the Lease pertains (the "Aircraft") is located; (iii)
the filing of continuation statements at appropriate intervals with respect to
any Uniform Commercial Code financing statements; (iv) the filing of new
appropriate financing statements under the circumstances described in
ss.9-402(7) of the Uniform Commercial Code; and (v) the filing of new
appropriate financing statements in the appropriate offices in the appropriate
jurisdictions if the Corporation changes its location as determined under
ss.9-103(3)(d) of the Uniform Commercial Code, no further filing or recording of
any document with any court or governmental agency or body is necessary under
the laws of the States of Indiana, Ohio, New York or Connecticut in order to
give notice to third parties of ICX's right, title and interest in the Aircraft
as against the Corporation.
The opinions expressed herein are qualified in their entirety as
follows: (a) no opinion is expressed with respect to laws other than the laws of
the United States and the State of New York; (b) in rendering our opinions
hereunder, we have made no independent factual investigation other than as
expressly set forth herein (c) in rendering the opinion set forth in Paragraph 2
above, we have relied on the opinion set forth in Paragraph 2 of Counsel's
Opinion; (d) in rendering the opinion set forth in Paragraph 3 above, we have
relied upon the opinion set forth in Paragraph 7 of Counsel's Opinion; (e) in
rendering the opinion set forth in Paragraph 4 above, we have relied upon the
opinion set forth in Paragraph 4 of Counsel's Opinion; (f) no
E-2
opinion is expressed as to whether any of the conditions precedent set forth in
the Lease has been satisfied; and (g) to the extent that any one or more of the
foregoing opinions relates to the enforceability of any agreement or instrument:
(1) the opinions are subject to the effect of applicable laws or judicial
decisions regarding bankruptcy, reorganization, insolvency, fraudulent
transfers, moratorium and other laws affecting creditors' rights and debtors'
relief generally; (2) the enforceability of the provisions of any such agreement
or instrument is subject to the application of principles of equity, whether in
a proceeding at law or in equity, including the exercise of discretionary powers
of any tribunal before which equitable remedies may be sought (including,
without limitation, specific performance and injunctive relief); and (3) the
enforceability of the provisions of any such agreement or instrument in
accordance with its respective terms may be limited by laws affecting the
remedies which it provides, including, but not limited to, laws and judicial
decisions limiting such enforceability.
This opinion is rendered solely to you for your use in connection
with the transactions contemplated by the Lease Documents, and may not be relied
upon by you for any other purpose, and may not be furnished to or relied upon by
any other person for any purpose, or otherwise used, circulated or quoted,
without our prior written consent. This opinion is rendered as of the date
hereof, and we disclaim any undertaking to advise of any changes which may
hereafter be brought to our attention.
Very truly yours,
E-3
II. FORM OF OPINION TO BE GIVE BY LESSEE'S GENERAL COUNSEL
CHAUTAUQUA AIRLINES, INC.
c/o Wexford Management LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Direct Dial: ▇▇▇-▇▇▇▇
Direct Fax: ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
June 25, 1999
ICX Corporation
Three ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer and General Counsel
Re: Chautauqua Airlines,
Inc.
Gentlemen:
I have acted as counsel for Chautauqua Airlines, Inc., a New York
corporation (the "Corporation"), in connection with the execution and delivery
of
Aircraft Lease Agreement (N260SK) (the "Lease") between the Corporation and
ICX Corporation ("Lessor"), dated as of June 25, 1999, relating to the Embraer
ERJ-145LR aircraft bearing manufacturer's serial number EMB 145128; Lease
Supplement No. 1, dated as of June 25, 1999, between Lessor and Lessee; an
Acceptance Certificate, dated as of June 25, 1999, between Lessor and the
Corporation; and a Tax Indemnity Agreement, dated as of June 25, 1999, between
Lessor and Lessee (the Lease, the Lease Supplement, the Acceptance Certificate
and the Tax Indemnity Agreement are hereinafter collectively referred to as the
"Lessee Documents"). This opinion is being delivered to you pursuant to Section
5.1(g) of the Lease. Unless otherwise defined herein, capitalized terms used
herein have the meanings assigned to them in the Lease.
In rendering this opinion, I have examined originals or copies, certified
or otherwise identified to my satisfaction, of the Lessee Documents, and have
investigated such questions of law, and have examined such other corporate
records of the Corporation and other documents, and have obtained and relied
(without independent investigation) upon such certificates and
assurances from public officials, as I have deemed necessary as a basis for the
purpose of rendering this opinion.
For the purpose of rendering this opinion, I have assumed, without any
independent investigation:
A. the genuineness of all signatures other than those of the
Corporation, the capacity of all natural persons, the authenticity
of all documents and instruments submitted to me as originals, and
the conformity to authentic original documents and instruments of
all documents and instruments submitted to me as certified,
conformed photostatic or facsimile copies; and
B. that the documents reviewed by me constitute legal, valid and
binding obligations of each party thereto, other than the
Corporation, enforceable against each such party in accordance with
their respective terms.
Based upon and subject to the foregoing, and subject to the qualifications
set forth below, I am of the opinion that:
1. The Corporation is duly incorporated, validly existing, and in good
standing under the laws of the State of New York, and has the corporate power
and authority to carry on its business as presently conducted and to perform its
obligations under the Lessee Documents.
2. Each of the Lessee Documents has each been duly authorized, executed
and delivered by the Corporation.
3. The execution and delivery of the Lessee Documents, the consummation by
the Corporation of the transactions contemplated thereby and compliance by the
Corporation with the terms and provisions thereof do not contravene, and will
not result in any breach of or constitute any default under, or result in the
creation of any lien, charge or encumbrance upon any property of the
Corporation, under any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan, credit agreement, corporate charter,
by-law or other agreement or instrument to which the Corporation is a party or
by which the Corporation or its properties or assets may be bound.
4. The Corporation provides interstate transportation of passengers
or property by aircraft as a common carrier for compensation. The Corporation is
the holder of an air carrier operating certificate issued by the Federal
Aviation Administration under Part 135 of the Federal Aviation Regulations and
49 U.S. Code ss.44705 for aircraft capable of carrying ten or more individuals
or 6,000 pounds or more of cargo. The Corporation is an air carrier that
conducts air taxi operations under an exemption issued by the Department of
Transportation under authority of Part 298 of the Federal Aviation Regulations.
The Corporation holds all licenses, certificates and permits from applicable
governmental authorities necessary for the conduct of its business as an air
carrier and the performance of its obligations under the Lease.
5. There are no suits or proceedings, pending or threatened, against
the Corporation before any executive, legislative, judicial, administrative or
regulatory body which might, if adversely determined, have a material adverse
effect on the financial condition or business of the Corporation or its ability
to perform its obligations under the Lessee Documents.
6. Neither the Corporation nor any of its properties or assets has
the right of immunity from suit or execution on the grounds of sovereignty.
7. The Corporation is organized under the laws of the State of New
York. The president and at least two-thirds of the board of directors and other
managing officers of the Corporation are individuals who are citizens of the
United States. At least 75% of the voting interest in the Corporation is owned
or controlled, directly or indirectly, by individuals who are citizens of the
United States.
The opinions expressed herein are qualified in their entirety as
follows: (a) no opinion is expressed with respect to laws other than the federal
laws of the United States and the State of New York; and (b) to the extent that
any one or more of the foregoing opinions relates to the enforceability of any
agreement or instrument: (1) the opinions are subject to the effect of
applicable laws or judicial decisions regarding bankruptcy, reorganization,
insolvency, fraudulent transfers, moratorium and other laws affecting creditors'
rights and debtors' relief generally; (2) the enforceability of the provisions
of any such agreement or instrument is subject to the application of principles
of equity, whether in a proceeding at law or in equity, including the exercise
of discretionary powers of any tribunal before which equitable remedies may be
sought (including, without limitation, specific performance and injunctive
relief); and (3) the enforceability of the provisions of any such agreement or
instrument in accordance with its respective terms may be limited by laws
affecting the remedies which it provides, including, but not limited to, laws
and judicial decisions limiting such enforceability.
This opinion is rendered solely to you for your use in connection with the
transactions contemplated by the Lessee Documents, and may not be relied upon by
you for any other purpose, and may not be furnished to or relied upon by any
other person (other than Pearl Professional Corporation, which may rely upon
this opinion for purposes of rendering a separate opinion to you pursuant to
Section 5.1(g) of the Lease) for any purpose, or otherwise used, circulated or
quoted, without my prior written consent. This opinion is rendered as of the
date hereof, and I disclaim any undertaking to advise of any changes which may
hereafter be brought to my attention.
Very truly yours,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
General Counsel
III. FORM OF OPINION LETTER TO BE GIVEN BY DAUGHERTY,
FOWLER, PEREGRIN & ▇▇▇▇▇▇, LESSEE'S OUTSIDE INDEPENDENT FAA COUNSEL
ICX Corporation
Three ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Dear ______________:
This opinion is furnished to you pursuant to Section 5.1 of the
Aircraft
Lease Agreement dated as of June ___, 1999 (the "Lease") between ICX Corporation
("Lessor") and Chautauqua Airlines, ("Lessee") with respect to that portion of
the Federal Aviation Act of 1958, as amended (the "Act"), relative to the
recordation of instruments and the registration of aircraft under the Act.
Capitalized terms not otherwise defined herein shall have the meanings
given them in the Lease.
We have examined and filed on this date with the Federal
Aviation Administration (the "FAA") the following described
instruments at the respective times listed below: the Lease and
Lease Supplement with respect to the Aircraft, which Lease and Lease
Supplement were filed at ___ p.m., C.D.T.
Based on our examination of the above described instruments and of such
records of the FAA as we deemed necessary to render this opinion, it is our
opinion that:
1. the Lease is in due form for recordation by and has been duly filed
for recordation with the FAA pursuant to and in accordance with the
provisions of the Transportation Act;
2. the Airframe is duly registered in the name of the Lessor pursuant
to and in accordance with the provisions of the Transportation Act;
3. the Aircraft is free and clear of liens and encumbrances of record
except as created by the Lease;
4. the rights of the Lessor and the Lessee, under the Lease, with
respect to the Aircraft, are perfected; and,
5. no authorization, approval, consent, license or order of, or
registration with, or the giving of notice to, the FAA is required
for the valid authorization, delivery and performance of the Lease,
except for such filings as are referred to above.
Since title to the Airframe originated with an AC Form 8050-2 Aircraft
▇▇▇▇ of Sale from EMBRAER, a foreign vendor, our opinion with respect to the
Airframe covers only that period of time subsequent to the commencement of its
United States registration on April ___, 1999.
No opinion is expressed as to laws other than Federal laws of the United
States. In rendering this opinion, we were subject to the accuracy of the FAA,
its employees and agents, in the filing, indexing and recording of instruments
filed with the FAA and in the search for encumbrance cross-reference index cards
for the Engines. Further, in rendering this opinion we are assuming the validity
and enforceability of the above-described instruments under local law. Since our
examination was limited to records maintained by the FAA, our opinion does not
cover liens which are perfected without the filing of notice thereof with the
FAA, such as federal tax liens, liens arising under Section 1368(a) of Title 29
of the United States Code, possessory artisan's liens, or matters of which the
parties have actual notice. In rendering this opinion we are assuming that there
are no documents with respect to the Aircraft which have been filed for
recording under the recording system of the FAA but have not yet been listed in
the available records of such system as having been so filed.
Very truly yours,
-------------------------
EXHIBIT F
FORM OF RETURN ACCEPTANCE CERTIFICATE
Return Acceptance Certificate No. ___ dated this ___ day of _______,
_______.
This Return Acceptance Certificate is executed pursuant to that
certain
Aircraft Lease Agreement dated as of June ___, 1999 (the "Lease")
between ICX Corporation ("Lessor") and Chautauqua Airlines, Inc. ("Lessee").
The terms used in this Return Acceptance Certificate No. ____ shall
have the meanings ascribed to such terms in the Lease.
This Return Acceptance Certificate is executed by the parties hereto
to confirm, among other things, that on the date of this Return Acceptance
Certificate at [ ] time the following items are herewith delivered by Lessee to
Lessor:
(a) One aircraft:
Manufacturer: Embraer
Model: ERJ-145LR
Manufacturer's Serial No.: EMB 145128
Including:
F-1
(b) the following described aircraft engines installed thereon:
Manufacturer's
Manufacturer Make and Model Serial Nos.
------------ -------------- ----------
▇▇▇▇▇▇▇ Engine Company AE3007A1 CAE 311142
Engine
CAE 311143
Together with:
(c) the aircraft documentation set forth in Attachment 2 hereto.
2. HOURS AND CYCLES. The Airframe, Engines and Parts had the following
hours/cycles at return:
A. Airframe:
_____ hours/_____ cycles since last "C" check
_____ months remaining until next Major Structural Inspection
B. Engines:
F-2
TIME SINCE LAST HEAVY ENGINE VISIT
HOURS CYCLES
MSN
MSN
TIME REMAINING TO NEXT LIFE-
LIMITED PART REMOVAL
HOURS CYCLES
MSN
MSN
C. APU:
_____ hours/_____ cycles remaining until next inspection
_____ hours/_____ cycles remaining on turbine and compressor
life-limited parts
D. Landing Gears:
_____ hours/_____ cycles remaining to next scheduled removal on each
landing gear
TIME REMAINING TO NEXT
F-3
SCHEDULED REMOVAL
HOURS CYCLES
MSN
MSN
E. Status of components or Parts with time/cycle and calendar limits
(see attached sheet)
F. Fuel on board at Delivery: _____ pounds (_____ gallons).
ACCEPTANCE BY LESSOR. The above specified Aircraft, Engines, parts and
documentation are hereby accepted by Lessor subject to (a) the provisions of the
Lease and (b) correction by Lessee of the Discrepancies specified in Attachment
3 hereto (which corrections Lessee hereby undertakes to perform as soon as
reasonably possible). The acceptance of the Aircraft, Engines and Parts
hereunder by Lessor shall not constitute any waiver by Lessor of any right or
remedy it may have under the Lease, and shall not relieve or diminish any
obligation of Lessee under the Lease.
NO DISCREPANCIES, NO LIENS, NAVIGATION AND AIRPORT CHARGES. Lessee
represents and warrants to Lessor that (a) the Aircraft is hereby returned to
Lessor in the condition and the manner required by the Lease (other than the
Discrepancies listed on Attachment 3 hereto), (b) there are no Liens on the
Aircraft, other than Liens arising by or through Lessor, and (c) all navigation
charges, landing fees and other charges and fees payable for the use of or
services provided by any airport, whether in respect of the Aircraft or any
other aircraft owned, leased or operated by Lessee have been paid in full.
PLACE OF EXECUTION. This Return Acceptance Receipt is executed and
delivered by the parties in _______ [place].
IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptance
Receipt to be executed in their respective corporate names by their duly
authorized representatives as of the day and year first above written.
LESSOR:
F-4
ICX CORPORATION
By: __________________
Its __________________
LESSEE:
CHAUTAUQUA AIRLINES, INC.
By: __________________
Its __________________
F-5
ATTACHMENTS TO RETURN ACCEPTANCE CERTIFICATE:
1. Aircraft Hours and Cycles
2. Aircraft Documentation
3. List of Discrepancies
ATTACHMENT 1
TO RETURN ACCEPTANCE CERTIFICATE
AIRCRAFT HOURS AND CYCLES
ATTACHMENT 2
TO RETURN ACCEPTANCE CERTIFICATE
AIRCRAFT DOCUMENTATION
The following documents are to be returned with the Aircraft in a current,
up-to-date and correct status:
MANUALS
NAME
1. Approved Flight Manual
2. Flight Crew Operating Manual
3. Weight and Balance Manual
4. Wiring Diagram Manual (including aircraft wiring list)
5. Illustrated Parts Catalog for Airframe and Engines
6. Aircraft and Engine Maintenance Manual
7. Minimum Equipment Lists
8. All Checklists
9. Structural Repair Manual
AIRCRAFT RECORDS AND HISTORICAL DOCUMENTS
1. Log book (currently on Aircraft)
2. Airframe Maintenance Status (with time-to-go or time since last)
3. Airworthiness Directive Compliance Report
4. Modification Status Report (with documentation of authority for
modifications)
5. Weighing Report (most recent)
6. Accident and Incident Report
7. List of Life Limited Components (with time-to-go with installation and use
history since new)
8. List of all Major Repairs
9. Report of all Maintenance Reliability Reports Filed with the FAA
10. Test Flight Reports
11. Job Cards and Work Accomplishment Documents (copies)
12. X-ray Pictures (most recent)
13. Maintenance Technical Log books
14. Aircraft Maintenance History Cards
15. All Mechanical Interruption Summary and Mechanical Reliability Reports
submitted to the FAA
16. Last Overhaul and Repair Documents
17. Airworthiness Directive Compliance Report
18. List of Life Limited Components (with time-to-go with installation and use
history since new)
19. Component records maintained in accordance with a record-keeping policy
approved by and acceptable to the FAA to certify the status and
maintenance histories of the components.
ENGINE RECORDS (FOR EACH ENGINE)
1. Last Overhaul and Repair Documents
2. Airworthiness Directive Compliance Report
3. List of Life Limited Components (with time-to-go with installation and use
history since new)
4. Modification Status Report (with documented authority for such
modifications)
CERTIFICATES
1. Certificate of Airworthiness
2. Certificate of Registration
MISCELLANEOUS TECHNICAL DOCUMENTS
1. Passenger Cabin Configuration Drawings
2. Emergency Equipment Location Drawings
Receipt of the foregoing documents, except as noted, is hereby acknowledged.
ICX CORPORATION
By: _______________________________
Title: ____________________________
ATTACHMENT 3
TO RETURN ACCEPTANCE CERTIFICATE
DISCREPANCIES