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EXHIBIT 10.4
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AIRCRAFT LEASE AGREEMENT
DATED AS OF
NOVEMBER 25, 1996
BETWEEN
PEGASUS CAPITAL CORPORATION
AS LESSOR
AND
KITTY HAWK AIRCARGO, INC.
AS LESSEE
ONE (1) BOEING MODEL 727-251 AIRCRAFT
U.S. REGISTRATION N264US
MANUFACTURER'S SERIAL NUMBER 19983
AND THREE (3) ▇▇▇▇▇ AND ▇▇▇▇▇▇▇ JT8D-7B ENGINES
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COUNTERPART NO. 3 OF 6 SERIALLY NUMBERED, MANUALLY EXECUTED COUNTERPARTS. TO THE
EXTENT THAT THIS AIRCRAFT LEASE AGREEMENT CONSTITUTES CHATTEL PAPER UNDER THE
UNIFORM COMMERCIAL CODE IN THE U.S. OR ANY CORRESPONDING LAW IN ANY FOREIGN
JURISDICTION, NO SECURITY INTEREST IN THIS AIRCRAFT LEASE AGREEMENT MAY BE
CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HERETO OTHER THAN
COUNTERPART NO.1.
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INDEX
SECTION HEADING PAGE
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Preamble 1
1. Definitions 1
2. Lease and Conditions 7
3. Delivery and Acceptance; Term 9
4. Rent 10
5. Representations and Warranties 12
6. Possession and Use 15
7. Information 21
8. Covenants of Lessee 22
9. Replacement of Parts; Alterations, Modifications and
Additions 24
10. General Tax Indemnity 25
11. Casualty Occurrences 26
12. Insurance 29
13. Indemnification 32
14. Liens 33
15. Perfection of Title and Further Assurances 33
16. Return of Aircraft and Records 34
17. Events of Default 37
18. Remedies 39
19. Alienation 42
20. Miscellaneous 43
EXHIBITS
EXHIBIT A Description of Aircraft I
EXHIBIT B Aircraft Document Summary II
EXHIBIT C Definitions and Values III
EXHIBIT D Form of Lease Supplement VI
EXHIBIT E Return Condition Requirements IX
EXHIBIT F Delivery and Other Requirements XII
EXHIBIT G Maintenance Recording Requirements XIV
EXHIBIT H (Intentionally Omitted) XVI
EXHIBIT ▇-▇/J-2 Casualty Values XVII
EXHIBIT K Hush Kits
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AIRCRAFT LEASE AGREEMENT
THIS AGREEMENT, dated as of November 25, 1996, is by and between PEGASUS CAPITAL
CORPORATION a California corporation ("Lessor"), and KITTY HAWK AIRCARGO, INC.,
a Texas corporation ("Lessee").
WITNESSETH
WHEREAS, Lessee desires to lease from Lessor, and Lessor is willing to lease to
Lessee, the Aircraft described herein, upon and subject to the following terms
and conditions.
NOW THEREFORE, for and in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
Section 1. Definitions.
Unless the context otherwise requires, the following terms shall have the
following respective meanings for all purposes of this Agreement and shall be
equally applicable to both the singular and the plural forms of the terms
herein defined:
Aircraft shall mean the Airframe, together with: (i) the three (3) Engines,
whether or not installed on the Aircraft; (ii) all Parts and all components
thereof; (iii) all ancillary Aircraft or devices furnished with the Aircraft
under this Lease; (iv) all Aircraft Documents, and (v) all substitutions,
replacements and renewals of any and all thereof.
Aircraft Documents shall mean the maintenance and inspection records and all
other current and historical records and documentation pertaining to the
Aircraft, including, without limitation, the items identified in Exhibit B
hereto, those generated by Lessee during the Term, and all such documents and
records required to be maintained under Applicable Law and in accordance with
the requirements of the FAR Part 121.380, as set forth in Exhibit G hereto.
Airframe shall mean: (a) the Boeing model 727-251 airframe (excluding Engines
or engines from time to time installed thereon) bearing manufacturer's serial
number 19983 and U.S. Registration N264US; and (b) any and all Parts which are
from time to time incorporated or installed on or attached thereto or which
have been removed therefrom so long as title thereto remains vested in Lessor
in accordance herewith, including the terms of Section 9 hereof.
Applicable Law shall mean: (i) any law, statute, decree, constitution,
regulation, order, judgment, rule, license, permit, injunction or other
directive of any Governmental Entity; (ii) any treaty, pact, compact or other
agreement to which any Governmental Entity is a signatory or party; (iii) any
judicial interpretation with binding characteristics or
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application of those described in (i) or (ii) above; (iv) any administrative
interpretation with binding characteristics or application of those described
in (i) or (ii) above; and (v) any amendment or revision of any of those
described in (i), (ii), (iii) or (iv) above, and in each case, which is
applicable to the Aircraft and its use and operation, the Lessee, any
Sublessee, or the transactions contemplated by this Lease and the Operative
Agreements.
Approved Insurance Broker shall mean that insurance broker of internationally
recognized responsibility and standing specializing in Aircraft insurance as is
reasonably acceptable to and approved by Lessor.
Approved Insurer shall mean that insurer of internationally recognized
responsibility and standing effecting Aircraft insurance as is reasonably
acceptable to and approved by Lessor.
Approved Maintenance Provider shall mean: (i) with respect to any scheduled
maintenance or any modification or alteration to the Aircraft, Lessee, ▇▇▇▇▇▇▇▇
Aviation of Tucson, Arizona or Aero Corporation of Lake City, Florida, or AAR
of Oklahoma, or any other Person which is an FAA approved maintenance facility
and which is approved in advance in writing by Lessor to perform maintenance on
the Aircraft; and (ii) with respect to any other required maintenance
hereunder, an FAA approved maintenance facility which is approved in writing,
in advance, by Lessor.
Basic Rent shall mean the rent for the Aircraft specified on Exhibit C and
payable throughout the Term for the Aircraft pursuant to Section 4(a) hereof.
Basic Rent Payment Date shall mean the day for payment of Basic Rent determined
in accordance with Exhibit C. It is further understood and agreed that if a
Basic Rent Payment Date shall fall on a day which is not a Business Day, any
payment due on such Basic Rent Payment Date shall be made on the preceding
Business Day.
Business Day shall mean any day other than a Saturday, Sunday or other day on
which banking institutions in Dallas, Texas, or San Francisco, California are
authorized or required by law to be closed.
Cargo Door shall mean the modifications made to the Airframe to convert the
same from passenger to cargo configuration, including the cargo door kit
manufactured by Aeronautical Engineers, Inc., STC #'s SA1797SO and SA1798SO.
Casualty Occurrence shall mean any of the following events with respect to the
Aircraft, Airframe or any Engine: (a) loss of such property or its use due to
theft or disappearance for a period in excess of sixty (60) consecutive days,
or destruction, damage beyond economic repair, or rendition of such property
permanently unfit for normal use by Lessee for any reason whatsoever; (b) any
damage to such property which results in an insurance settlement with respect
to such property on the basis of a
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total loss or on the basis of a compromised or constructive total loss; (c) the
condemnation, confiscation, appropriation or seizure of, or requisition of
title to, such property; or the use of such property by any Governmental Entity
or purported Governmental Entity, which in any such case shall have resulted in
the loss of possession thereof by Lessee for a period in excess of sixty (60)
consecutive days (or for such shorter period ending on the date which is the
date of receipt of an insurance settlement with respect to such property on the
basis of a total loss); (d) the disposal of such property by an administrator
of Lessee (including a receiver, manager, liquidator or provisional liquidator)
or any official exercising similar powers pursuant to applicable bankruptcy
law, or any similar statute, or any disposal of such property by an
administrator of Lessee or any person exercising similar powers pursuant to any
security interest over the assets of Lessee; or (e) the occurrence of any event
described in Section 6(a)(iii)(4) hereof. A Casualty Occurrence with respect to
the Airframe shall constitute a Casualty Occurrence with respect to the
Aircraft.
Casualty Value shall mean Six Million Four Hundred Thousand Dollars
(US$640,000.00), or if the Lessee notifies Lessor that the Hush Kits are to be
insured by Lessee under policies of insurance as provided in Exhibit K hereto,
then Four Million Five Hundred Thousand Dollars (U.S.$4,500,000.00), or, in
either case, such greater value as shall be agreed between Lessor and Lessee
during the Term, as allocated in Exhibits J-1 and J-2 hereto.
Commencement Date shall mean the date of Lease Supplement No.1.
Default shall mean an event which would constitute an Event of Default but for
the lapse of time or the giving of notice or both.
Delivery Location shall mean the location specified in Exhibit C hereto for the
delivery of the Aircraft by Lessor to Lessee.
Dollars shall mean lawful currency of the United States of America.
Engine shall mean any Engine installed on or furnished with the Aircraft on the
Delivery Date, such Engines being identified as to manufacturer, type and
manufacturer serial number in Exhibit A hereto, and any Replacement Engine
which may from time to time be substituted therefor pursuant to Section 11 or
16 hereof; together in each case with any and all Parts (excluding the Hush
Kits) incorporated or installed in or attached thereto and any and all Parts
(excluding the Hush Kits) removed therefrom so long as title thereto remains
vested in Lessor in accordance with the terms of Section 9 hereof after removal
from such Engine. Except as otherwise set forth herein, at such time as a
Replacement Engine shall be so substituted, such replaced Engine shall cease to
be an Engine hereunder. The term "Engines" means, as of any date of
determination, all Engines then leased hereunder.
Estimated Delivery Date shall mean the date specified on Exhibit C hereto.
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Event of Default shall mean the occurrence of any of the events specified in
Section 17 hereof.
Expiration Date shall mean the date which is thirty (30) days after the Last
Basic Rent Payment Date, unless sooner terminated as provided herein, or
extended pursuant to Section 21 hereof.
FAA shall mean the Federal Aviation Administration of the United States
Department of Transportation or any successor thereto.
FAR shall mean the Federal Aviation Regulations promulgated under the Federal
Aviation Act, as amended and supplemented from time to time.
Federal Aviation Act shall mean 49 U.S.C. Section 40101 et. seq., as amended
and as in effect on the date of this Lease, or any successor or substituted
U.S. legislation at the time in effect and applicable.
Governmental Entity shall mean and include: (i) the FAA; (ii) any national,
state, or local government (whether domestic or foreign), any political
subdivision thereof or local jurisdiction therein; (iii) any board, commission,
department, division, organ, instrumentality, court or agency of any entity
described in (ii) above, however constituted, and (iv) any association,
organization or institution of which any entity described in (ii) or (iii) above
is a member or to whose jurisdiction any such entity is subject or in whose
activities any such entity is a participant but only (except for purposes of
defining "Applicable Law" above) to the extent that any entity described in (i)
through (iv) above has jurisdiction over this Lease, the Operative Agreements or
the Aircraft and its operations, or any of the parties hereto.
Hush Kit shall mean all noise reduction hardware as described in Exhibit K
hereto, and as acquired by the Lessee from the Federal Express Corporation, as
may be installed by Lessee on the Airframe and the Engines from time to time,
together with relevant data, manuals, and documents.
Indemnities shall mean, collectively, the Lessor, and any Lessor Lender, and
their respective officers, directors, shareholders, controlling persons,
agents, and employees, and their respective successors and assigns.
Lease Agreement, this Lease Agreement, this Lease, this Agreement, herein,
hereunder or other like words shall mean this Lease and all Exhibits, Lease
Supplements, amendments or modifications hereto or thereto from time to time
entered into.
Lease Identification shall mean a placard in the form set forth in Exhibit C
hereto.
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Lease Payment shall mean the amount specified in Exhibit C hereto.
Lease Supplement shall mean Lease Supplement No. 1, substantially in the form of
Exhibit D hereto.
Lessor Lender shall mean any Person(s) to whom Lessor grants a security
interest in the Aircraft and/or this Lease and the other Operative Agreements,
pursuant to Section 19 hereof, for the purpose of any financing by Lessor.
Lessor's Estate shall mean all estate, right, title and interest of the Lessor
in and to the Aircraft, the Lease, the Lease Supplement, any ▇▇▇▇ of sale, any
warranty with respect to the Airframe or the Engines, all amounts of Basic Rent
and Supplemental Rent, including, without limitation, insurance proceeds and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (other than the Hush Kits).
Lessor's Liens shall mean Liens on the Aircraft (other than the Hush Kits) or
the Lessor's Estate arising as a result of: (i) claims against Lessor or the
Lessor's Estate not related to the transactions contemplated by this Lease; or
(ii) acts or omissions of Lessor, not contemplated and expressly permitted
under this Lease; or (iii) Taxes imposed against Lessor, the Lessor's Estate,
or the Aircraft which are not indemnified against by Lessee pursuant to Section
10 hereof; or (iv) claims against Lessor, Lessor's Estate or the Aircraft
arising out of the voluntary transfer by Lessor of all or any part of its
interests in the Lessor's Estate, the Aircraft or this Lease, other than a
transfer pursuant to Sections 11 or 18 hereof; or (v) Liens granted by the
Lessor to any Lessor Lender.
Lien shall mean any mortgage, pledge, lien, charge, encumbrance, hypothecation,
lease, exercise of rights, security interest or claim (including any imposed
with respect to any Taxes, or any airport or landing fees or related charges).
Maintenance Program shall mean the Lessee's FAA-approved maintenance program
for Boeing model 727-200 Aircraft, or such other FAA-approved manufacturer's
maintenance program as in effect from time to time for the Aircraft
encompassing scheduled maintenance, condition-monitored maintenance and
on-condition maintenance of the Airframe, Engines and components of the
Aircraft as shall be approved by Lessor. Upon request by Lessor, a copy of such
Maintenance Program shall be provided to Lessor by Lessee.
Maintenance Reserves shall mean the Maintenance Reserve Payments for the
Aircraft specified on Exhibit C payable by the Lessee throughout the Term
pursuant to Section 4(a) and Section 6(g) hereof.
Operative Agreements shall mean this Lease, any Lease Supplement, any Permitted
Sublease, the Letter Agreement (as defined in Lease Supplement No. 1), and any
other documents and agreements executed and delivered by Lessor, Lessee and any
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Sublessee, or any Lessor Lender or any other Person in furtherance of the
transactions contemplated hereby.
Parts shall mean all appliances, components, parts, instruments, appurtenances,
avionics, accessories, furnishings, Hush Kits, the Cargo Door, and all other
equipment of whatever nature (other than complete Engines or engines), which
may now or from time to time be incorporated or installed in or attached to the
Airframe or any Engine. Except as otherwise set forth herein, only at such time
as a replacement part shall be substituted for a Part in accordance with
Section 9 hereof, shall the Part so replaced cease to be a Part hereunder.
Permitted Lien shall mean: (i) any Lien for Taxes which are either not assessed
or, if assessed, are not yet due and payable or are being contested in good
faith by appropriate proceedings so long as such proceedings shall not involve
any danger of the sale, forfeiture or loss of the Aircraft; or (ii) any
undetermined or inchoate Lien of a repairer, carrier, hangarkeeper, material
supplier or other similar Lien arising in the ordinary course of business in
respect of obligations which are not overdue or which have been adequately
bonded or are being contested in good faith by appropriate proceedings;
provided that (in the case of both (i) and (ii)) such proceedings, or the
continued existence of such Lien, do not involve any danger of the sale,
forfeiture or loss of the Aircraft; or (iii) the respective rights of the
parties to the Operative Agreements as set forth therein, and any Liens
expressly permitted thereby including Liens granted by the Lessor to any Lessor
Lender.
Permitted Sublease shall mean: (i) any charter agreement, "wet lease", ACMI
agreement, or other contract for the use of the Aircraft under the terms of
which Lessee retains possession and operational control of the Aircraft at all
times; or (ii) or any sublease or other contract between Lessee and a Sublessee
whereby Lessee does not retain possession and operational control of the
Aircraft, provided that Lessor has expressly accepted and approved the same in
writing subject to the provisions of Section 6(a)(ii) hereof.
Person shall mean and include any individual, corporation, company, limited
liability company, partnership, firm, joint stock company, joint venture,
trust, estate, unincorporated organization, association or Governmental Entity.
Rent shall mean Basic Rent and Supplemental Rent, collectively.
Replacement Engine shall mean an engine of the same manufacturer and model, and
having equivalent value, utility, modification status and remaining useful life
as the Engine it is intended to replace under Section 11 (b) hereof, or, at
Lessee's option, an engine of the same manufacturer as such Engine but of an
improved model, and otherwise of an equivalent value, utility and remaining
useful life and suitable for installation and use on the Airframe without any
diminution in the value, utility or remaining useful life of the Airframe.
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Return Occasion shall mean the return of possession of the Aircraft from Lessee
to Lessor at the end of the Term of this Lease, or upon Lessor demanding that
Lessee return or Lessor taking possession of the Aircraft pursuant to Section
18 hereof.
Sublessee shall mean any Person in possession of the Aircraft pursuant to a
Permitted Sublease.
Supplemental Rent shall mean any and all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay hereunder to
Lessor, or any Lessor Lender, including without limitation: (i) any payment of
Casualty Value; (ii) any payment of indemnity required by Sections 10 and 13
hereof; (iii) to the extent permitted by any Applicable Law, interest at the
Interest Rate (all computations of interest under this Lease to be made on the
basis of a 365 day year for the actual number of days elapsed) calculated: (1)
on any part of any installment of Basic Rent not paid on the due date thereof
for the period the same remains unpaid, and (2) on any Supplemental Rent not
paid when due hereunder until the same is paid; (iv) Maintenance Reserves; and
(v) the Lease Payment.
Taxes shall mean any and all sales, use, business, gross income, personal
property, transfer, fuel, leasing, occupational, value added, excess profits,
excise, gross receipts, franchise, stamp, ad valorem, documentation,
registration, income, levies, imposts, customs, import, export, withholdings or
other taxes, excises, or duties of any nature whatsoever, together with any
penalties, fines, charges or interest thereon.
Term shall mean the term of this Lease which shall commence on the Commencement
Date and which shall end on the Expiration Date.
The terms Engine Manufacturer, First Basic Rent Payment Date, Interest Rate,
Last Basic Rent Payment Date, Lease Identification, Lessee's Address, Lessor's
Address, Manufacturer, and Payment Location, shall have the meanings set forth
in Exhibit C hereto.
Section 2. Lease and Conditions.
(a) Lessor hereby agrees to lease the Aircraft to Lessee, and Lessee
hereby agrees to lease the Aircraft from Lessor, subject to and in accordance
with the terms hereof, as supplemented by the Lease Supplement.
(b) Lessor shall deliver the Aircraft hereunder to Lessee upon the
receipt by Lessor of the following items on or before the Commencement Date (or
such other date as may be designated by Lessor), all of which shall be
reasonably satisfactory to Lessor in form and substance, and duly authorized
and executed:
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(1) this Lease and the Lease Supplement in the form of
Exhibit D hereto, along with each of the other Operative Agreements;
(2) a copy of the certificate of incorporation and by-laws of
Lessee certified by the Secretary or a Director of Lessee as being correct and
as containing all amendments and additions, a certificate of good standing
issued by the state of Lessee's incorporation, as well as a certificate of the
Secretary or a Director of Lessee certifying as to the resolutions of the board
of directors of Lessee authorizing the execution, delivery and performance of
this Lease, the Operative Agreements, and all other documents related thereto,
together with an incumbency certificate as to the Person or Persons authorized
to execute and deliver such documents on behalf of Lessee;
(3) a certificate signed by a duly authorized officer of
Lessee, dated the Commencement Date, stating that: (i) the representations and
warranties contained in Section 5(c) hereof are true and accurate on and as of
such date as though made on and as of such time; and (ii) no event has occurred
and is continuing, or would result from the execution, delivery and performance
by Lessee of this Lease and the Operative Agreements which constitutes a
Default or an Event of Default;
(4) an opinion or report, dated the Commencement Date,
signed by an Approved Insurance Broker or Approved Insurer as to the due
compliance with the insurance provisions of Section 12 hereof with respect to
the Aircraft in form and substance reasonably satisfactory to Lessor;
(5) certificates of an Approved Insurance Broker
evidencing the insurance as required by Section 12 hereof in form and substance
reasonably satisfactory to Lessor;
(6) the first installment of Basic Rent;
(7) legal opinions from Lessee's counsel, and from ▇▇▇▇▇
& ▇▇▇▇▇▇▇, special FAA counsel, as to all required filings under Applicable Law
with Governmental Entities, recordation and registration of the Lease, and the
perfection of any Lessor Lender's security interest thereunder and therein, and
as to such matters as may reasonably be requested by Lessor, in form and
substance reasonably satisfactory to Lessor;
(8) certified copies of all necessary governmental and
corporate consents to the Lease, including but not limited to any approvals
required from the FAA;
(9) a copy of Lessee's Operating Certificate and
Operations Specifications or any other documentation or authority pursuant to
which the Aircraft will be operated by Lessee;
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(10) payment of the Security Deposit;
(11) six (6) original, executed counterparts of the
Lease, and evidence of its filing and registration with the FAA, and the
payment of all fees and Taxes in connection therewith; and
(12) such other documents and matters incident to any of
the foregoing as Lessor may reasonably request (including but not limited to a
precautionary UCC-1 filing in Texas).
(c) Lessee's obligation to lease the Aircraft hereunder from
Lessor shall be conditioned upon the tender of Aircraft for delivery and the
receipt by Lessee of the following documents on or before the Commencement Date
for the Aircraft, all of which shall be reasonably satisfactory in form and
substance to Lessee;
(1) this Lease and the Lease Supplement in the form of
Exhibit D hereto;
(2) an officer's certificate evidencing the due
authority of Lessor for the execution, delivery and performance of this Lease
and all other documents related thereto, together with an incumbency
certificate as to the person or persons authorized to execute and deliver such
documents on behalf of Lessor;
(3) (Intentionally Omitted);
(4) a copy of a currently effective airworthiness
certificate for the Aircraft;
(5) a copy of the current registration certificate for
the Aircraft; and
(6) an opinion, at Lessee's expense, from ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
special FAA counsel, to the effect that Lessor is the owner of record of the
Aircraft and that the Aircraft is duly registered in the United States, that
the Aircraft is unencumbered but for this Lease, and as to such other matters
as may reasonably be requested by Lessee.
Section 3. Delivery and Acceptance; Effective Date, Term.
(a) Delivery. The Aircraft will become available for delivery on
or about the Estimated Delivery Date set forth in Exhibit C.
(b) Place of Delivery and Acceptance. The Aircraft shall be
delivered to and accepted by Lessee at the Delivery Location set forth in
Exhibit C. After acceptance by Lessee, Lessee may conduct a test flight of the
Aircraft at the Delivery Location, at
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Lessor's expense, such test flight not to exceed one (1) hour in duration.
Lessor shall repair, at Lessor's expense, discrepancies in the condition of the
Aircraft which render the Aircraft unairworthy, noted by Lessee during the test
flight. Lessor and Lessee agree that the first hour of the ferry flight shall
be deemed to be the test flight hereunder.
(c) Casualty to the Aircraft Preceding Delivery. In the event of a
Casualty Occurrence with respect to the Aircraft prior to its delivery, Lessor
shall promptly notify Lessee in writing and the obligation of the Lessor to
make the Aircraft available to the Lessee shall terminate. In such event,
Lessor shall promptly return to Lessee any monies paid by Lessee hereunder with
respect to the Lease Payment. Notwithstanding anything to the contrary
contained in this Lease or any other Operative Agreement, Lessor shall not be
liable for any delay in delivery of the Aircraft, or failure to deliver the
Aircraft, caused by acts of God, (including but not limited to fire, floods,
earthquakes or other natural disasters) or caused by acts of any Governmental
Entity.
(d) Acceptance of Aircraft. The Aircraft to be leased hereunder
shall be delivered to Lessee in compliance with Exhibit F hereto, but otherwise
in "AS IS, WHERE IS" condition and SUBJECT TO EACH AND EVERY DISCLAIMER OF
WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a) AND (b) HEREOF. Upon
tender of delivery in the condition required by this Lease, Lessee shall
immediately accept delivery of the Aircraft. Upon acceptance of the Aircraft,
Lessee shall hereupon indicate and confirm its acceptance of the Aircraft by
delivery to Lessor of a Lease Supplement, dated the Commencement Date, in the
form set forth in Exhibit D hereto.
(e) Effective Date and Term of Lease. The effective date of this
Lease shall be the Commencement Date and the Term of this Lease shall continue
until the Expiration Date; provided that this Lease may be earlier terminated
by Lessor pursuant to the provisions of Sections 3(c) or 18 hereof.
Section 4. Rent.
(a) Rent. Lessee covenants and agrees to pay to Lessor, or its
assigns (including but not limited to any Lessor Lender), the following as
Rent:
(i) the Basic Rent as set forth in Exhibit C hereto
throughout the Term hereof, payable in consecutive monthly installments and due
on each Basic Rent Payment Date; and
(ii) any and all Supplemental Rent as the same becomes due,
including without limitation the Maintenance Reserves, payable in accordance
with Section 6(g) hereof.
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(b) Place and Method of Payment. All Basic Rent and Supplemental
Rent payable under this Lease shall be paid in U.S. Dollars, by wire transfer
of immediately available funds at the Payment Location specified on Exhibit C
hereto, or at such other location as Lessor shall designate in writing.
(c) Prohibition Against Setoff, Counterclaim, Etc. This Lease is a
net lease. Lessee's obligation to pay all Rent hereunder shall be absolute and
unconditional and shall not be affected or reduced by any circumstances,
including, without limitation: (i) any setoff, counterclaim, recoupment,
defense or other right which Lessee may have against Lessor, the Manufacturer,
any seller of or Person providing services with respect to the Aircraft or any
other Person, for any reason whatsoever; (ii) any defect in the title,
airworthiness or eligibility for registration under Applicable Law, or any
condition, design, operation, merchantability or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any interruption or
cessation in the use or possession thereof by Lessee for any reason whatsoever,
whether arising out of or related to an act or omission of Lessee, or any other
Person; (iii) any Liens, Lessor Liens, or Permitted Liens with respect to the
Aircraft; (iv) the invalidity or unenforceability or lack of due authorization
or other infirmity of this Lease or any absence of right, power or authority of
Lessor or Lessee to enter into this Lease; (v) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessor or Lessee or any
other Person; (vi) any other circumstance or happening of any nature
whatsoever, whether or not similar to any of the foregoing; or (vii) any Taxes
(with respect to which Lessee's obligations shall be as set forth in Section 10
hereof); it being the express intention of Lessor and Lessee that all Rent
payable hereunder shall be payable in all events, unless the obligation to pay
the same shall be terminated pursuant to the express provisions of this Lease.
Notwithstanding anything to the contrary contained herein, in the
event that the Aircraft is lost or destroyed, in lieu of paying Rent
thereafter, Lessee shall indemnify the Lessor for all losses, liabilities and
damages arising out of such loss or destruction, and pay to the order of Lessor
all amounts due and owing pursuant to Section 11 hereof, on demand.
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 law or otherwise, to terminate this Lease or any
obligation imposed upon Lessee hereunder or in relation hereto.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or Applicable Law, and so long as Lessor honors
its covenant of quiet enjoyment under Section 20(f) hereof, Lessee nonetheless
agrees to pay to Lessor amounts equal to the Rent payments hereunder at the
time such payments would have become due and payable in accordance with the
terms hereof had this Lease not been so terminated.
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Section 5. Representations and Warranties.
(a) In reliance on Lessee's representations, warranties and covenants
contained in this Agreement, LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE
(WHETHER BY VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS LEASE, OR HAVING
ACQUIRED THE AIRCRAFT, OR HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING
ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS LEASE OR
OTHERWISE) AND LESSOR HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED (EXCEPT AS HEREIN BELOW PROVIDED IN THIS SECTION
5(a)), AS TO AIRWORTHINESS, CONDITION, DESIGN, OPERATION, MERCHANTABILITY,
FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE LIKE, OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A
COURSE OF PERFORMANCE OR DEALING OR USAGE OF TRADE), WITH RESPECT TO THE
AIRCRAFT; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS
EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES. LESSOR SHALL
HAVE NO RESPONSIBILITY OR LIABILITY WHATSOEVER TO LESSEE OR ANY OTHER PERSON,
WHETHER ARISING IN CONTRACT OR TORT, OUT OF ANY NEGLIGENCE OR STRICT LIABILITY
OF LESSOR OR OTHERWISE, FOR: (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED
TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY
INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE
IN CONNECTION THEREWITH; (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT
OR ANY ENGINE OR ANY RISKS RELATING THERETO; (iii) ANY INTERRUPTION OF SERVICE,
LOSS OF BUSINESS OR ANTICIPATED PROFITS OR CONSEQUENTIAL DAMAGES; OR (iv) THE
DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT
OF THE AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION
5(a) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY
OTHER WARRANTIES, EXCEPT THAT:
(i) Lessor warrants that on the Commencement Date the
Aircraft shall be free and clear of any and all Lessor Liens;
(ii) Lessor further represents and warrants that the making
and performance by Lessor of this Lease has been duly authorized by all
necessary action on the part of Lessor and will not violate any provision of
its articles of incorporation or by-laws; and
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(iii) Lessor further represents and warrants that this Lease
has been duly executed and delivered by Lessor, and that this Lease and the
Lease Supplement when executed and delivered hereunder constitute legal, valid
and binding obligations of Lessor, enforceable in accordance with their
respective terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and, to the extent that certain remedies require
or may require enforcement by a court of equity, by such principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) as a court having jurisdiction may impose and by laws which
may affect some of such remedies;
(iv) no consent, approval or authorization of, or notice to,
any Governmental Entity having jurisdiction with respect to the execution,
delivery or performance by Lessor of this Lease, and each of the Operative
Agreements to which Lessor is a party (including all monetary and other
obligations hereunder or thereunder) is required for Lessor to execute and
deliver this Lease, and to perform the transactions contemplated hereby; and
(v) there are no suits or proceedings pending or, to the
knowledge of Lessor, threatened in any court or before any Governmental Entity
against or affecting Lessor which will have a materially adverse effect on the
current business or financial condition of Lessor.
(b) Manufacturers' Warranties. So long as Lessee is not in Default
and Lessor has not terminated this Lease, Lessor hereby assigns to Lessee such
rights as Lessor may have under any warranty, express or implied, with respect
to the Aircraft and the Engines made by the Manufacturer, the Engine
Manufacturer, or any other Person (including any Approved Maintenance
Provider), to the extent that the same exist or may be assigned or otherwise
made available to Lessee; and that any monies recovered by Lessor pursuant to
such warranties which are suffered by Lessee during the Term shall be paid over
by Lessor to Lessee; provided, however, that upon the occurrence of an Event of
Default and any termination of this Lease pursuant thereto, all such rights
shall immediately revert to Lessor including all claims thereunder whether or
not perfected.
(c) Lessee's Representations and Warranties. Lessee hereby
represents, warrants, and covenants, each of which shall survive the execution
and delivery of this Lease, and the delivery by Lessor and acceptance by Lessee
of the Aircraft:
(i) Lessee is a corporation duly incorporated and validly
existing under the laws of the State of Texas and has the full power and
authority to carry on its business as presently conducted and to perform its
obligations under this Lease;
(ii) this Lease, and each of the Operative Agreements to
which Lessee is a party, has been duly authorized by all necessary action on
the part of Lessee, does
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not require any approval of stockholders of Lessee, and neither the execution
and delivery hereof nor the consummation of the transactions contemplated
hereby nor compliance by Lessee with any of the terms and provisions hereof
will, to the knowledge of Lessee after having made due inquiry, contravene any
Applicable Law or result in any breach of, or constitute any default under, or
result in the creation of any Lien upon any property of Lessee under Lessee's
articles of incorporation or any credit agreement or instrument or other
agreement or instrument to which Lessee is a party or by which Lessee or its
properties or assets are bound or affected;
(iii) no consent, approval or authorization of, or notice to,
any Governmental Entity having jurisdiction with respect to the execution,
delivery or performance by Lessee of this Lease, and each of the Operative
Agreements to which Lessee is a party (including all monetary and other
obligations hereunder or thereunder) is required for Lessee to execute and
deliver this Lease, and to perform the transactions contemplated hereby;
(iv) this Lease has been duly executed and delivered by
Lessee, and the Lease, the Lease Supplement and the other Operative Agreements,
when executed and delivered by Lessee, constitute legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective terms;
(v) there are no suits or proceedings pending or, to the
knowledge of Lessee, threatened in any court or before any Governmental Entity
against or affecting Lessee which will have a materially adverse effect on the
current business or financial condition of Lessee;
(vi) except for the registration on the Aircraft registry
maintained by the FAA and the placing on the Aircraft and on each Engine of the
plates containing the legends referred to in Section 6(f) hereof, and the
precautionary filing of a UCC-1 financing statement in Texas, no further filing
or recording of this Lease or of any other document and no further action, is
necessary under the Laws of any Governmental Entity in order to fully protect
and establish Lessor's title to the Aircraft as against Lessee or any third
party;
(vii) other than with respect to the Hush Kits, Lessee will
not claim to have any legal or beneficial interest in the Aircraft or make any
demands with respect thereto against Lessor, other than in respect of the
Lessee's interest conferred by this Lease;
(viii) Lessee has not received notice of default or exercise
of remedies with respect to any of its obligations: (a) for the payment of
indebtedness for borrowed money, of any currency, equal to an amount in excess
of the equivalent of One Hundred Thousand Dollars (US $100,000.00) or of any
interest or premium thereon; or (b) for the payment of rent under any lease or
agreement to lease real, personal or mixed property where the aggregate rentals
over the term thereof is more than an
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amount equal to or greater than the equivalent of One Hundred Thousand Dollars
(US $100,000.00);
(ix) the Maintenance Program will comply with all FAA
requirements (including but not limited to those under Part 121 of the FAR's);
(x) subject to compliance with Section 8(h) hereof, Lessee
will maintain in full force and effect during the Term of this Lease, or cause
any Sublessee to maintain to the satisfaction of Lessor, a current operating
certificate, air transport license and a current certificate of airworthiness
for the type of operations conducted by Lessee or Sublessee, as the case may be
(in accordance with Applicable Law and the requirements of the FAA, the Lessee,
any Sublessee, and each of the transactions contemplated hereby and by the other
Operative Agreements); and
(xi) Lessee is a duly authorized and certificated air
carrier in good standing under Applicable Law, has satisfied all of the
requirements of and is in good standing with the FAA, and has complied with and
satisfied all requirements of the FAA, as applicable, so as to enable it to
fulfill its obligations hereunder, and to otherwise lawfully operate, possess,
use and maintain the Aircraft.
Section 6. Possession and Use.
(a) Possession.
(i) Sublease, Assignment and Transfer. Subject only to
Section 22 hereof, Lessee hereby covenants and agrees that it will not, and
hereby acknowledges and confirms that it has no right to, without the prior
written consent of Lessor (which consent Lessor may withhold in its reasonable
sole discretion), assign this Lease or sublet or transfer possession of the
Aircraft, Airframe or any Engine pursuant to a Permitted Sublease or otherwise,
or install any Engine or permit any Engine to be installed on any airframe
other than the Airframe, provided that so long as no Default or Event of
Default shall have occurred and be continuing and as long as the action to be
taken shall not affect the registration of, Lessor's title to, or the priority
of any Lien of any Lessor Lender in and to, the Aircraft and so long as all
necessary approvals of each Governmental Entity having jurisdiction over
Lessee, and its operations, have been obtained, then Lessee may:
(1) without the prior written consent of Lessor,
deliver possession of the Aircraft, the Airframe or any Engine, or any Part
thereof, to the manufacturer thereof for testing or other similar purposes or
to any Approved Maintenance Provider for service, repair, maintenance, testing
or overhaul work on the Aircraft, Airframe or Engine or any Part thereof to the
extent required or permitted by the terms of Section 9 hereof;
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(2) without the prior written consent of Lessor,
install an Engine on an airframe (other than the Airframe) owned by Lessee free
and clear of all Liens except: (A) those of the type permitted under Section 14
hereof and those which apply only to the engines (other than Engines),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other Aircraft (other than Parts) installed on such airframe (but not to the
airframe as an entirety); and (B) the rights of the participants under normal
interchange or pooling agreements which are customary in the airline industry
and do not contemplate, permit, result in or require the transfer of title to
the airframe or engines installed thereon;
(3) without the prior written consent of Lessor,
install an Engine on an airframe leased to Lessee or in the possession of
Lessee subject to a conditional sale agreement or owned by Lessee subject to a
security agreement, provided, that: (A) such airframe is free and clear of all
Liens except the rights of the parties to the lease or conditional sale or
other security agreement covering such airframe and except Liens of the type
permitted by clauses (A) and (B) of Section 6(a)(i)(2), and except the lien of
any mortgage which either by its terms does not apply to the Engine or which
effectively provides that each Engine leased to Lessee hereby shall not become
subject to the lien thereof or to any rights of any party thereunder other than
Lessee (with respect to Lessee' rights expressly granted hereunder),
notwithstanding the installation of such Engine on any airframe subject to the
lien of such mortgage; and (B) there shall be in effect a written agreement of
the lessor or owner or secured party of such airframe (which may be a lease or
conditional sale or other security agreement covering such airframe)
substantially similar in effect to the agreement of Lessor in Section 6(b)
below whereby such lessor or owner or secured party effectively and expressly
agrees that neither it nor its successors or assigns will acquire or claim any
right, title or interest in any Engine by reason of such Engine being installed
on such airframe at any time while such Engine is subject to this Lease, and a
copy of such agreement shall be provided to Lessor and any Lessor Lender upon
written request, provided, however, that the restriction contained in this
clause shall not apply to the installation of an Engine on an airframe leased
to Lessee or in the possession of Lessee subject to a conditional sale
agreement or owned by Lessee subject to a security agreement for a period not
to exceed sixty (60) days so long as Lessee installs a Replacement Engine or
re-installs such Engine on the Airframe at the expiration of such period free
and clear of any Liens other than those of the type permitted under Section 14
hereof;
(4) without the prior written consent of Lessor,
install an engine (other than an Engine) on the Airframe or a part (other than
a Part) on the Aircraft, provided that such installation does not create, or
permit to exist, any Liens on the Aircraft except those of the type permitted
under Section 14 hereof and those which apply only to such engine or part which
has been installed on the Aircraft; and
(5) without the prior written consent of Lessor,
and provided that it is in the ordinary course of Lessee's business, enter into
a Permitted Sublease as described in clause (i) of the definition of "Permitted
Sublease".
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(ii) Subleases. In the event that Lessee seeks to sublease
the Aircraft pursuant to a Permitted Sublease whereby Lessee does not retain
possession and operational control of the Aircraft at all times, in addition to
securing Lessor's advance written consent to any such Permitted Sublease and
the terms and conditions thereof, Lessee shall execute and deliver any and all
such documents and agreements, and secure all such approvals and consents from
any Person or Governmental Entity, as Lessor and any Lessor Lender shall deem
reasonably necessary or desirable in order to preserve and protect its
respective rights and interests hereunder and under the other Operative
Agreements; and provided further that:
(1) any Sublessee shall be a duly certificated air
carrier holding a current and valid U.S. air operator's certificate;
(2) any such Sublessee shall have duly executed and
delivered a Permitted Sublease and all documents and agreements contemplated
thereby, each in form and substance satisfactory to, and approved in writing
by, Lessor, such approval not to be unreasonably withheld; and
(3) Lessee and Sublessee shall have executed and
delivered to Lessor and any Lessor Lender any and all such documents, and
secured all such approvals and consents from any Person or Governmental Entity,
as Lessor and any Lessor Lender shall reasonably require in order to preserve
and protect their respective rights and interests hereunder, Lessor's rights as
owner and lessor of the Aircraft, and Lessor's rights to the proceeds hereof,
including but not limited to an opinion of legal counsel addressing the
foregoing and otherwise in form and substance and from a qualified law firm of
recognized standing acceptable to Lessor.
Notwithstanding anything to the contrary contained in this Lease,
including but not limited to Sections 6(a)(i) and 6(a)(ii), (x) any transfer of
possession or control of the Aircraft by reason of any Permitted Sublease shall
be, and shall expressly provide that it is, subject and subordinate to all of
the terms of this Lease, including, without limitation, Lessor's right to the
return and/or repossession of the Aircraft upon the occurrence of an Event of
Default or otherwise pursuant hereto; (y) none of the terms and provisions of
such Permitted Sublease shall be adverse or inconsistent with the terms and
provisions hereof and the rights and privileges of Lessor hereunder; and (z)
Lessee shall remain primarily liable hereunder for the performance of all the
provisions hereof, and obligations and duties of Lessee hereunder to the same
extent as if such transfer of possession of the Aircraft had not occurred and
notwithstanding the terms and provisions of any Permitted Sublease. Lessee
shall advise Lessor in writing of its request for consent to sublease the
Aircraft at least ninety (90) days prior to the proposed commencement date, and
shall provide Lessor with copies of the various documents and agreements
proposed to be executed and delivered between it and any Sublessee, as soon as
practicable Lessor shall review the same with
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reasonable diligence and expedition, and promptly either approve or reject the
same in writing to Lessee.
(iii) Certain Limitations on Transfers. With respect to any
transfer pursuant to Section 6(a)(i) or 6(a)(ii) hereof:
(1) the rights of any transferee that received
possession by reason of a transfer permitted by this Section 6(a) shall be
subject and subordinate to all of the terms of this Lease;
(2) Lessee shall remain primarily liable hereunder
for the performance of all terms of this Lease to the same extent as if such
transfer had not occurred;
(3) no relinquishment of possession of the
Aircraft, the Airframe or any Engine pursuant to the terms of this Section 6(a)
shall in any way discharge or diminish any of Lessee's obligations to Lessor
hereunder; and
(4) if any of the actions permitted under Section
6(a)(i), or accomplished pursuant to Section 6(a)(ii), shall result in the
divestiture of Lessor's title in and to such Aircraft, Airframe, Engine or
Part, such action shall be deemed a Casualty Occurrence with respect to such
Aircraft, Airframe, Engine or Part, and Lessee shall comply with Section 11 in
respect thereof.
(b) Reciprocal Recognition of ▇▇▇▇▇▇.▇▇ the event Lessee shall
have received from the lessor or secured party of any airframe leased to Lessee
or owned by Lessee subject to a conditional sale or other security agreement a
written agreement complying with clause (B) of Section 6(a)(i)(3) hereof (which
agreement may be contained in the lease, conditional sale agreement or security
agreement relating to such airframe), and the lease or conditional sale or
other security agreement covering such airframe also covers an engine or
engines owned by the lessor under such lease or subject to a security interest
in favor of the secured party under such conditional sale or other security
agreement, Lessor hereby agrees for the benefit of such lessor or secured party
that Lessor will not acquire or claim, as against such lessor or secured party,
any right, title or interest in any such engine as the result of such engine
being installed on the Airframe at any time while such engine is subject to
such lease or conditional sale or other security agreement and owned by such
lessor or subject to a security interest in favor of such secured party.
(c) Lawful Insured Operations. Lessee will not permit the Aircraft
to be maintained, used or operated in violation of any Applicable Law or law of
any Governmental Entity, or in violation of any airworthiness certificate, or
license or registration issued by any such authority, or contrary to the
Manufacturer's operating manuals or instructions for the Aircraft. In the event
that any Applicable Laws require alteration of the Aircraft (other than Stage 3
noise requirements under FAR Part 36),
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Lessee shall comply therewith at its sole cost and expense and shall maintain
the same in proper condition for operation under all Applicable Laws. Lessee
agrees not to operate the Aircraft, or permit the Aircraft to be operated: (i)
unless the Aircraft is covered by insurance as required by the provisions
hereof, or (ii) contrary to the terms of such insurance. Lessee also agrees not
to operate or locate the Aircraft or suffer or permit the Aircraft to be
operated or located in any area excluded from coverage by any insurance policy
issued pursuant to the requirements of this Lease.
(d) Maintenance. Lessee, at its own cost and expense, shall:
(i) perform or cause the Approved Maintenance Provider to
perform all airworthiness directives, mandatory manufacturer's service
bulletins, and all other mandatory service, inspections, repair, maintenance,
overhaul and testing: (A) as may be required under applicable FAA rules and
regulations and in compliance with the Maintenance Program, (B) in the same
manner and with the same care as shall be the case with similar Aircraft and
engines owned by or operated on behalf of Lessee without discrimination, and
(C) so as to keep the Aircraft in as good operating condition as when delivered
to the Lessee, ordinary wear and tear excepted, with all systems in good
operating condition;
(ii) keep the Aircraft in such condition as is necessary to
enable the airworthiness certification of the Aircraft to be maintained at all
times under applicable FAA regulations and any other Applicable Law, including,
but not limited to any Aircraft modifications or installations required by the
FAA (provided, however, that nothing contained herein shall preclude Lessee
from removing the Hush Kits so long as the Airframe and Engines are restored to
their respective configurations as existed prior to Hush Kit installation);
(iii) maintain, in the English language, all records, logs
and other materials required by, and in accordance with the requirements of
Exhibit G hereto, and in a manner acceptable to the FAA and any other
Governmental Entity having jurisdiction over the Aircraft and its operation;
and
(iv) Lessee shall furnish Lessor reports on a monthly basis,
concurrent with its payment of Maintenance Reserves: (A) on the hours/cycles
operated for the Airframe, APU, and Landing Gear; (B) on the hours/cycles
operated for each Engine (noting its location); and (C) on an annual basis, a
list of those service bulletins, airworthiness directives and engineering
modifications incorporated on the Aircraft during the preceding calendar year.
(e) Registration. At all times during the Term: (i), Lessor shall,
at its sole cost and expense, cause the Aircraft to continue to be registered
in the United States in accordance with Applicable Law in the name of Lessor as
owner and lessor hereunder; (ii) Lessee shall, at its sole cost and
expense, make all such other filings as are required by the FAA and Applicable
Law and any other government or Governmental
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Entity having jurisdiction over Lessee, the Aircraft and its operation; and
(iii) each of Lessee and Lessor (provided that no Event of Default has occurred
and is continuing) shall refrain from taking any action or inaction that would
adversely affect the United States registration of the Aircraft and the Lease.
(f) Lease Identification. Upon delivery of the Aircraft, Lessee
agrees to place the Lease Identification, as delivered by Lessor, in the
cockpit in a location reasonably adjacent to, and not less prominent than, the
airworthiness certificate for the Aircraft and to place the Lease
Identification on each Engine. Lessee agrees to make such changes to the Lease
Identification as Lessor may reasonably request from time to time.
(g) Maintenance Reserves.
(i) Lessee shall pay in arrears, no later than the tenth
(10th) calendar day following the last day of each calendar month during the
Term, to Lessor, as Supplemental Rent, the Maintenance Reserves on such dates
and in such amounts with respect to the Airframe and each Engine, as specified
in Exhibit C hereto. Such payments are Supplemental Rent and are the exclusive
property of Lessor, and Lessee shall have no rights thereto except as expressly
provided herein.
(ii) Use of Maintenance Reserves. Lessor shall hold the
aggregate amounts of Maintenance Reserves paid by Lessee less any disbursements
from Maintenance Reserves pursuant to this Section 6(g) in reserve to reimburse
Lessee for the actual cost of: (A) the replacement of time expired life-limited
Parts during Engine restoration visits (where such visits constitute scheduled
shop visits requiring teardown and disassembly, or where Engine flanges are
split and time is restored to life limited parts within the Engine) in
accordance with the Maintenance Program; (B) major overhauls of the Landing
Gear and APU, and (C) such other major maintenance project as Lessor shall
approve in writing (any of which events contemplated by (A), (B), or (C) hereof
being a "Major Maintenance Program"). If Lessee intends to undertake a Major
Maintenance Program, the cost for which it will seek reimbursement from the
Maintenance Reserves, Lessee shall notify Lessor at least thirty (30) days in
advance and shall request Lessor's consent in writing, of the workscope Lessee
desires to accomplish, the estimated cost thereof and the maintenance facility
Lessee proposes to have accomplish the work. Lessor shall advise in writing of
its consent or rejection within ten (10) days after receipt of Lessee's notice.
(iii) Payment by Lessor. Any claims by Lessee for
reimbursement from Maintenance Reserves shall be made not later than ninety
(90) days after completion of the related work for which reimbursement is
sought.
Provided no Event of Default shall have occurred and be continuing,
Lessor shall pay to Lessee, or directly to the repair facility if Lessee so
directs Lessor in writing, within thirty (30) days after presentation of an
invoice together with supporting evidence
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reasonably acceptable to Lessor, such as third party bills and work package
certified completed, such amounts as are equal to the cost incurred by Lessee,
during the Term of the Lease and claimed by Lessee (together with supporting
evidence of the purpose and amount of the expenditure satisfactory to Lessor),
in respect of a Major Maintenance Program, including without limitation a Major
Maintenance Program undertaken to comply with the requirements set forth in
Section 16 and in Exhibit E hereof provided, however, that:
(1) no payment shall be made in respect of
replacements or repairs caused by premature failure, ingestion, faulty
maintenance or installation, or covered by manufacturer's service bulletins,
improper operations, misuse, neglect, accidental cause, or any cost which is
reimbursable by a claim under the manufacturer's warranties or by insurance
(deductibles being treated as reimbursable by insurance for this purpose) after
due diligence in effecting recovery, or any other replacements or repairs paid
for or reimbursable by any other Person;
(2) the total amounts payable at any time by Lessor
to Lessee in respect of each Engine, individually, shall not in any event
exceed with respect to each Engine the balance of any funds paid by Lessee to
Lessor pursuant to this Section 6(g) in respect of each such Engine
respectively (after taking account of all such previous payments by Lessor
hereunder), less any repair or overhaul expenditure which Lessor may incur in
accordance with the terms of this Lease, and provided further that payments for
overhaul of an Engine shall be reimbursed up to the amount proportionately
allocated for each Engine as set forth in the description of Maintenance
Reserves in Exhibit C; and
(3) (Intentionally Omitted)
(4) if, on any occasion during the Term, the
maximum amount available to Lessee in respect of each Engine, respectively, is
insufficient to meet a claim for payment, the shortfall is for the account of
Lessee and may not be carried forward or made the subject of any further claim
for payment.
(iv) Lessee's Right to Payment. For the avoidance of doubt,
Lessee has no right to the payment or return of any Maintenance Reserves except
as expressly provided in this Section 6(g), and as provided in Exhibit E
hereto, and without limitation no such right shall be deemed to arise on
termination or expiry of this Lease for any reason.
Section 7. Information and Inspection.
During the Term of this Lease, Lessee agrees to furnish Lessor the following:
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(a) promptly upon the same being made generally available to the
shareholders of Lessee, after the end of each calendar quarter, a copy of the
interim financial statements of Lessee;
(b) promptly upon the same being made available to the
shareholders of Lessee and any Sublessee, but in no event later than ninety
(90) days after the end of each fiscal year, a copy of Lessee's annual audited
consolidated profit and loss account and balance sheet; and
(c) from time to time at the request for the same from Lessor, and
no more frequently than quarterly (unless a Default has occurred), such
information concerning the location, condition, use and operation of the
Aircraft, as well as financial and system-wide operational data of Lessee, as
the Lessor may reasonably request.
Lessee shall permit Lessor or its designee, on three (3) days' prior
written notice or at each "C" check or any portion thereof, to visit and
inspect the Aircraft, its condition, use and operation, and the records
maintained in connection therewith, at any reasonable time without interfering
with the normal commercial operation of the Aircraft. Lessee shall provide
Lessor with ten (10) Business Days' prior written notice of each "C" check or
portion thereof. Lessor shall have no duty to make any such inspection and
shall not incur any liability or obligation by reason of not making any such
inspection. Lessor's failure to object to any condition or procedure observed
or observable in the course of an inspection hereunder shall not be deemed to
waive or modify any of the terms of this Lease with respect to such condition
or procedure.
Section 8. Covenants of Lessee.
In addition to and not in limitation of Lessee's other
representations, warranties, covenants and agreements set forth elsewhere in
this Lease, Lessee covenants and agrees that:
(a) Maintenance of Corporate Existence. Subject only to Section 22
hereof, during the term of this Lease, Lessee will preserve and maintain its
corporate existence and such of its rights, privileges, licenses and franchises
in any jurisdiction where failure to obtain such licensing or qualification
would have a material adverse effect upon Lessee and its business and its
ability to perform hereunder.
(b) Maintenance of Status. Lessee is, and shall remain so long as
it shall be the Lessee under this Lease, duly qualified to operate and maintain
the Aircraft under Applicable Law and in accordance with the requirements of
this Agreement.
(c) Payment of Taxes. Lessee will pay or cause to be paid all
Taxes (including but not limited to any withholding tax imposed under
Applicable Law on Rent payments made to Lessor hereunder), assessments and
governmental charges or levies imposed upon it, the Lessor, any Lessor Lender
and the Aircraft and its use and
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operation (including all landing fees, customs duties, airport fees and the
like), or upon Lessee's income or profits, or upon any property belonging to
it, prior to the date on which the same, if not paid, would give rise to a Lien
(other than a Lien permitted by Section 14 hereof) upon the Aircraft, including
the Airframe, the Engines or any of the Parts thereof, except as may be
excluded by the proviso to Section 10(a) hereof. Lessee shall promptly pay any
and all such Taxes as and when the same are due, and Lessee, on reasonable
demand from time to time, shall provide written evidence to Lessor that it has
paid, or set aside adequate reserves to pay, any Taxes so imposed.
(d) Place of Business. Lessee will not, without prior written
notice to Lessor, change its principal place of business or chief executive
office if there is more than one place of business.
(e) Notice of Default. Immediately after Lessee or any of its
corporate officers obtains knowledge of an Event of Default hereunder or under
any other Operative Agreement, Lessee shall notify Lessor in writing of such
Event of Default.
(f) Governmental Consents. Lessee, at its sole cost and expense,
shall maintain in full force and effect all governmental consents, licenses,
authorizations, approvals, declarations, filings and registrations obtained or
effected in connection with this Lease, each Operative Agreement, and/or
required by any Applicable Law or by any other Governmental Entity, and every
document or instrument contemplated hereby or thereby and to take all such
additional action as may be proper in connection herewith or therewith. Lessee
further undertakes, at its sole cost and expense, to obtain or effect any new
or additional governmental consents, licenses, authorizations, approvals,
declarations, filings or registrations of any Governmental Entity as may become
necessary for the performance of any of the terms and conditions of this
Lease, each Operative Agreement, or any other document or instrument
contemplated hereby or thereby or as is otherwise required by Applicable Law.
(g) No Liens. Lessee, at its sole cost and expense, shall at all
times keep the Aircraft free and clear of Liens (excluding, however, any
Permitted Liens).
(h) Licenses. Subsequent to the execution and delivery of this
Lease, Lessee will diligently pursue and acquire, and thereafter maintain in
full force and effect during the Term of this Lease, or cause any Sublessee to
maintain to the satisfaction of Lessor, a current operating certificate, air
transport license and a current certificate of airworthiness for the type of
operations conducted by Lessee or Sublessee, as the case may be, in accordance
with Applicable Law and each other Governmental Entity having jurisdiction over
the Aircraft, the Lessee, any Sublessee and each of the transactions
contemplated hereby and by the other Operative Agreements.
(i) No Discrimination. Lessee shall not discriminate in its
maintenance and care of the Aircraft as between it and the other Boeing model
727-200 Aircraft operated by Lessee.
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Section 9. Replacement of Parts; Alterations, Modifications and Additions.
(a) Replacement of Parts. Other than Parts which constitute the
Hush Kits, Lessee, at its own cost and expense, will promptly replace or cause
to be replaced by the Approved Maintenance Provider, or applicable vendor of
the same, all Parts 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. In addition, in the ordinary course of
maintenance, service, repair, overhaul or testing, Lessee may, at its own cost
and expense, cause to be removed any Parts, whether or not worn out, destroyed,
damaged beyond repair or permanently rendered unfit for use, provided that
Lessee shall immediately replace such Parts (other than Parts constituting the
Hush Kits, which may be removed or replaced at Lessee's option), at its own
cost and expense. All replacement Parts (other than the Hush Kits) shall be
free and clear of all Liens, other than Liens permitted by Section 14 hereof,
shall be in at least the same modification status and service bulletin
accomplishment status, shall be interchangeable as to form, fit and function,
shall have been overhauled, repaired and inspected by an FAA-approved agency
and shall bear FAA acceptable tags, and shall be in as good an operating
condition as, and have a value, utility and remaining useful life at least
equal to, the Parts replaced (assuming such replaced Parts were in the
condition and repair in which they were required to be maintained by the terms
hereof) and all historical records relating to such replacement Parts shall be
maintained by Lessee in English, and in compliance with the requirements of the
FAA.
All Parts (other than the Hush Kits) which are at any time removed
from the Aircraft shall remain the property of Lessor and subject to this Lease,
no matter where located, until such time as such Parts shall be replaced by
Parts which have been incorporated or installed in or attached to the Aircraft
and which meet the requirements for replacemeent Parts specified above.
Immediately upon any replacement Part becoming incorporated or installed in or
attached to the Aircraft as above provided, (i) title to the removed Part shall
thereupon vest in Lessee, free and clear of all rights of Lessor, (ii) title to
such replacement Part shall thereupon vest solely in Lessor, and (iii) such
replacement Part shall become subject to this Lease and be deemed a Part for all
purposes hereof to the same extent as the Part which it has replaced.
(b) Alterations, Modifications and Additions. Lessee, at its own
cost and expense, shall make or cause to be made such alterations and
modifications in and additions to the Aircraft as may be required from time to
time to meet the applicable standards of the FAA, or to comply with any
Applicable Law, rule, directive, bulletin, regulation or order of any
Governmental Entity or of the manufacturer of the Aircraft, Engines or Parts
(provided, however, that neither Lessee or Lessor shall have any obligation to
equip the Aircraft with Hush Kits so as to comply with Stage 3 noise
requirements of FAR Part 36). In addition, Lessee, at its own cost and expense,
and with the advance written consent of Lessor, may from time to time make
alterations and
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modifications in and additions to the Aircraft (including the installation of
the Cargo Door, and installation and removal of the Hush Kits for which no
additional consent of Lessor is required), provided no such alteration,
modification or addition diminishes the remaining warranty, value or utility,
or impairs the condition or airworthiness of the Aircraft. Title to all Parts
(excluding, however, the Hush Kits) incorporated or installed in or attached or
added to the Aircraft as the result of such alteration, modification or
addition shall vest immediately in Lessor and shall become subject to this
Lease, without the necessity for any further act or transfer, document or
notice, provided, however, that Lessee may remove such Parts (including the
Hush Kits, so long as the Airframe and Engines are restored to their respective
configurations as existed prior to Hush Kit installation) prior to return of
the Aircraft to Lessor on the Expiration Date if such removal does not damage
or otherwise result in any diminution in value of the Aircraft. (The removal of
the Hush Kits, in accordance herewith, will not constitute an impairment or
diminution in value of the Aircraft.)
In no event shall Lessor bear any liability or cost for any
alteration, modification or addition to, or for any grounding or suspension of
certification of the Aircraft, or for any loss of revenue arising therefrom.
(c) Airworthiness Directives. The costs of complying with and
otherwise accomplishing any airworthiness directive shall be paid by, and such
compliance shall be the sole responsibility of, Lessee.
Section 10. General Tax Indemnity.
(a) Indemnity. Lessee shall pay when due and indemnify and hold
each Indemnitee harmless from and against any and from all Taxes imposed
against any such Indemnitee, Lessee, the Aircraft or any interest therein or
use thereof, and any and all license, registration and recording fees and
assessments, as well as Taxes arising directly or indirectly out of this Lease,
and each other Operative Agreement, or based on or measured by, the payments of
Rent and other amounts due hereunder or thereunder, the terms, covenants and
conditions hereof and thereof, or the use, operation, maintenance,
possession, condition, control, occupancy, servicing, installation,
transportation, storage, substitution, recording, documentation, import,
export, hypothecation, rental, lease, pledge, modification, location, repair,
abandonment, replacement, delivery, registration, repossession, improvement,
subleasing, manufacture, rental, settlement of any insurance claim, return or
other disposition of the Aircraft or any Part thereof or interest therein
regardless of the method of calculation; provided, however, that Lessee shall
have no obligation to pay any Taxes assessed by the federal government of the
United States, or any state thereof, against the Lessor or any Lessor Lender
which are based upon or measured by their respective gross annual incomes or
profits, capital gains, personal holding company Taxes or Taxes incurred under
Internal Revenue Code Section 341, or any sales or use taxes in the event that
Lessor, or any Indemnitee sells the Aircraft (other than pursuant to the
exercise of remedies under Section 18 hereof).
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(b) Miscellaneous. In case any report or return is required to be
made with respect to any Taxes which are an obligation of Lessee under this
Section 10, Lessee will either make such report or return in such manner as
will show the ownership of the Aircraft in Lessor and send a copy of such
report or return to Lessor or will notify Lessor of such requirement and make
such report or return in such manner as shall be reasonably satisfactory to
Lessor. If actual notice is given by any taxing authority to Lessor that a
report or return is required to be filed with respect to any such Taxes
referred to in this Section 10, Lessor shall promptly notify Lessee of such
required report or return. Lessor agrees to respond to any reasonable request
of Lessee for information within the control of Lessor with respect to the
filing of any report or return, but Lessee agrees to pay any reasonable costs,
fees or other charges of independent counsel or independent accountants
incurred in connection with such request.
Lessee's obligations under this Section 10 shall not be affected by
any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which Lessee may have against Lessor or any
other Person for any reason whatsoever. Lessee will pay to an Indemnitee, on
demand, to the extent permitted by Applicable Law, interest at the Interest
Rate on any amount not paid when due pursuant to this Section 10 until the same
shall be paid in full. All indemnities, obligations, adjustments and payments
provided for in this Section 10 shall survive, and remain in full force and
effect, notwithstanding the expiration or other termination of this Lease. The
obligations of Lessee in respect of all such indemnities, obligations,
adjustments and payments are expressly made for the benefit of, and shall be
enforceable by, an Indemnitee, without declaring this Lease to be in default or
taking other action thereunder, and notwithstanding any provision to the
contrary contained herein.
(c) Gross-Up. The Lessee further agrees that if at any time any
Applicable Law or any Governmental Entity requires any deduction or withholding
in respect of Taxes from any payment of Rent or other amounts due under this
Lease or under any other Operative Agreement, the sum due from the Lessee in
respect of such payment shall be increased to the extent necessary to ensure
that, after paying such Taxes or making such deductions or withholding, the
Lessor or other Person entitled to the same, receives on the due date for such
payment a net sum equal to the sum which it would have received had no such
deduction or withholding been required to be made.
Section 11. Casualty Occurrences.
(a) Casualty Occurrence with respect to the Airframe. Upon a
Casualty Occurrence with respect to the Airframe, Lessee shall give Lessor
written notice of such occurrence. On or before ninety (90) days after the date
of the Casualty Occurrence, or upon receipt of insurance proceeds in an amount
equal to the Casualty Value, whichever is sooner, Lessee shall pay to Lessor in
immediately available funds the Casualty Value to which it is entitled (as set
forth in Exhibit J hereto). Upon such
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payment, and the payment of all other amounts then due and payable under this
Lease: (i) the obligation of Lessee to make further payments of Basic Rent
hereunder shall terminate, (ii) this Lease shall terminate with respect to the
Aircraft, and (iii) Lessor will transfer to Lessee, without recourse or
warranty, all of Lessor's right, title and interest, in and to the Airframe and
Engines (if any) suffering the Casualty Occurrence, free and clear of Lessor's
Liens, as well as all of Lessor's right, title and interest in and to any
Engine constituting part of the Aircraft but not installed thereon at the time
of the Casualty Occurrence. No Casualty Occurrence shall result in any
abatement of Rent until receipt by Lessor of the Casualty Value.
(b) Casualty Occurrence with respect to an Engine. Upon a Casualty
Occurrence with respect to an Engine only, Lessee shall give Lessor prompt
written notice thereof and shall, within thirty (30) days after the date of
such Casualty Occurrence, convey to Lessor, as replacement for the Engine
suffering a Casualty Occurrence, title to a Replacement Engine. Each
Replacement Engine shall be free of all Liens (except those Liens which are
permitted by Section 14 hereof), shall be the same or better make and model,
and shall be in as good an operating condition as the Engine being replaced,
assuming the Engine being replaced was in the condition and repair required by
the terms hereof immediately prior to the Casualty Occurrence, it being
understood that Lessee shall have no obligation to provide a Hush Kit for any
such Replacement Engine whether or not a Hush Kit had been provided with
respect to the Engine being replaced. Upon full compliance by Lessee with the
terms of this paragraph, Lessor will transfer to Lessee title to the Engine
which suffered the Casualty Occurrence. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will promptly: (i) furnish Lessor with
a full warranty ▇▇▇▇ of sale, in form and substance reasonably satisfactory to
Lessor, with respect to such Replacement Engine; (ii) cause a further Lease
Supplement hereto, in form and substance reasonably' satisfactory to Lessor,
subjecting such Replacement Engine to this Lease, to be duly executed by
Lessee, and recorded pursuant to Applicable Law; (iii) furnish Lessor with such
evidence of title to such Replacement Engine and of compliance with the
insurance provisions of Section 12 hereof with respect to such Replacement
Engine as Lessor may reasonably request; (iv) furnish Lessor with an opinion of
Lessee's counsel acceptable to Lessor and any Lessor Lender to the effect that
title to such Replacement Engine has been duly conveyed to Lessor, free and
clear of all Liens, that such Replacement Engine is duly leased hereunder and
that such Replacement Engine is duly subjected to the Operative Agreements and
the Lien of the Lessor Lender's mortgage or security agreement; (v) furnish a
certificate signed by a duly authorized financial officer or executive of
Lessee certifying that, upon consummation of such replacement, no Default or
Event of Default will exist hereunder; (vi) furnish Lessor with such documents
as Lessor may reasonably request in connection with the consummation of the
transactions contemplated by this Section 11(b), in each case in form and
substance satisfactory to Lessor; (vii) furnish such financing statement
covering the Replacement Engine as may be reasonably requested by Lessor; and
(viii) furnish Lessor with a report by an independent power plant engineer,
acceptable to Lessor, that the Replacement Engine meets the requirements of
this Lease. Upon full
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compliance by Lessee with the terms of this Section 11(b), Lessor will
transfer to Lessee all of the right, title and interest in the Engine, free and
clear of Lessor's Liens, which suffered the Casualty Occurrence and which was
originally leased to Lessee. For all purposes hereof, each such Replacement
Engine shall be deemed part of the property leased hereunder, shall be deemed
an "Engine" as defined herein and shall be deemed part of the Aircraft. No
Casualty Occurrence covered by this Section 11(b) shall result in any
reduction in Rent.
(c) Application of Proceeds and Payments. Any payments received at
any time by Lessor or by Lessee from any insurer under insurance (other than
liability insurance), or from any Governmental Entity or other Person with
respect to a Casualty Occurrence will be applied as follows:
(i) unless clause 11(c)(ii) below is applicable, so much
of such payments as shall not exceed the Casualty Value required to be paid by
Lessee pursuant to Section 11(a) of this Lease shall be paid to or as directed
by Lessor in reduction of Lessee's obligation to pay such Casualty Value if not
already paid by Lessee, or, if already paid by Lessee (unless a Default or an
Event of Default shall have occurred and be continuing) shall be applied by
Lessor to reimburse Lessee for its payment of such Casualty Value and the
balance of such payment, if any, remaining thereafter, if such payment is
received with respect to insurance other than liability insurance (unless a
Default or an Event of Default shall have occurred and be continuing) shall be
paid over to, or retained by Lessee; or
(ii) if such payments are received as a result of a
Casualty Occurrence with respect to an Engine which is being replaced by Lessee
with a Replacement Engine pursuant to Section 11(b) hereof, unless a Default
or Event of Default shall have occurred and be continuing, all such payments
shall be paid over to, or retained by, Lessee if Lessee shall have satisfied
Lessor, in its sole discretion, that Lessee has fully performed or,
concurrently therewith will fully perform, the terms of Section 11(b) and of
Section 15 hereof with respect to the Casualty Occurrence for which such
payments are made.
(d) Requisition for Use by Government with Respect to the
Aircraft. In the event of the requisition for use by a Governmental Entity of
the Airframe or any Engine (other than a requisition constituting a Casualty
Occurrence), all of Lessee's obligations under this Lease, including without
limitation those with respect to the Airframe or such Engine, shall continue to
the same extent as if such requisition had not occurred; provided, however,
that if it is impossible for Lessee to perform its maintenance obligations with
respect to the Airframe or such Engine because of the possession of the
Airframe or such Engine by such Governmental Entity, promptly upon the return
of the Airframe or such Engine to Lessee, Lessee shall undertake all actions
necessary to restore the Aircraft or such Engine to the condition it would have
been in had Lessee fully performed such obligations throughout the period of
time the Aircraft or such Engine was in the possession of such Governmental
Entity. All payments received by
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Lessor or Lessee from the Governmental Entity for the use of the Airframe or
such Engine during the Term therefor shall be paid over to, or retained by,
Lessee if no Default or Event of Default shall have occurred and be continuing;
and all payments received by Lessor or Lessee from the Governmental Entity for
the use of such item after the Term therefor shall be paid over to, or retained
by, Lessor.
(e) Other Applications. Any amounts not payable to or retained by
Lessee pursuant to this Section 11 or Section 12 hereof because a Default or an
Event of Default shall have occurred and be continuing shall be paid to Lessor
until such Default or Event of Default shall cease to be continuing, except
that if Lessor shall have theretofore declared this Lease to be in default
pursuant to Section 18 hereof, such amounts shall be retained by Lessor and
disposed of in accordance with the provisions thereof.
Section 12. Insurance.
(a) Public Liability and Property Damage Insurance. Lessee will
carry and maintain in effect, at its own cost and expense, with Approved
Insurers, comprehensive public liability insurance (including, without
limitation, contractual liability to cover Lessee's obligations under Section
13 of this Lease, and passenger legal liability), and property damage insurance
with respect to the Aircraft. Such insurance shall be in an amount not less
than the amount applicable to similar aircraft and engines which comprise
Lessee's fleet, shall be of the type usual and customary by international
airline standards for airline carriers operating other similar Aircraft in
international operations and carried by Lessee on the other Aircraft in
Lessee's fleet and shall at all times be in amounts not less than Two Hundred
Fifty Million Dollars (US$250,000,000.00), per occurrence, with zero
deductible. Lessee shall not discriminate against the Aircraft in providing such
insurance.
(b) Insurance Against Loss or Damage. Lessee, at its own cost and
expense, will maintain in effect with Approved Insurers "all-risk" ground and
flight Aircraft hull insurance (which shall include, but not be limited to,
full war risk and allied perils, hijacking, a disappearance clause and coverage
against strikes, riots, commotions or labor disturbances, malicious acts or
acts of sabotage and unlawful seizure or wrongful exercise of control of the
Aircraft in flight by a person on board such Aircraft acting without the
consent of Lessee, and foreign object damage to Engines) covering such
Aircraft, and fire, transit and extended and "all-risk" coverage insurance with
respect to Engines and Parts while not installed on such Aircraft or an
Aircraft, which in each case is at least as broad as coverage of the type usual
and customary by international airline standards for airline carriers operating
other similar Aircraft in international operations and carried by Lessee on the
other Aircraft in Lessee's fleet. Such insurance shall be for an amount not
less than the Casualty Value. Such insurance shall include provisions for
deductibles in an amount of not more than Two Hundred Fifty Thousand Dollars
(US$250,000.00). No deductible shall apply in the event of a Casualty occurrence
with repect to the Airframe.
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(c) Required Policy Designations and Provisions. Each policy of
insurance obtained and maintained pursuant to this Section, and each policy
obtained in substitution or replacement for any such policies, shall: (i)
designate Lessor as owner of the Aircraft (excluding the Hush Kits) covered
thereby, and shall designate the Indemnities as additional named insureds, and
the Lessor and/or the Lessor Lender as sole loss payee, as their interests may
appear (but without imposing upon the Indemnities any obligation imposed upon
the insured, including, without limitation, the liability to pay any premiums
for any such policies); provided, however, that Lessee shall be sole loss payee
with respect to insurance relating to the Hush Kits; (ii) expressly provide
that, in respect of the interests of the Indemnities in such policies, the
insurance shall not be invalidated by any action or inaction of Lessee, and
shall insure the Indemnities regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Lessee; (iii)
provide that if such insurance is canceled by the Approved Insurers for any
reason whatsoever, or is adversely changed in any way with respect to the
interests of the Indemnities or if such insurance is allowed to lapse for
nonpayment of premium, such cancellation, adverse change or lapse shall not be
effective as to the Indemnities for thirty (30) days (seven (7) days in the
case of any war risks or allied perils coverage or such lesser period of time
as may be customarily applicable) after issuance to the Indemnities of written
or telex notice by such insurer or insurers to Lessor and Lessor's Lender of
such prospective cancellation, change or lapse; (iv) include coverage for the
territorial limits of any country in which the Aircraft may at any time be
located; (v) provide that, as against the Indemnities, the insurer waives any
rights of set-off, counterclaim or any other deduction, whether by attachment
or otherwise, and waives the rights it may have to be subrogated to any right
of any insured against the Indemnities with respect to the Aircraft; and (vi)
provide that in the event of any damage or loss, other than damage or loss to
a Hush Kit, whether or not a Casualty Occurrence hereunder, and which results
in a payment, such payment shall be payable directly to Lessor as the sole loss
payee, for the account of all interests. Any payment with respect to loss or
damage to a Hush Kit shall be payable to Lessee directly. Each such policy
shall be primary without right of contribution from any other insurance which
may be carried by the Indemnities.
Lessee shall have the right to carry insurance in excess of the
amounts required hereunder and the proceeds of such excess insurance shall be
payable to Lessee. Similarly, the Indemnities shall have the right to carry
additional and separate insurance for their own benefit at their own expense,
without, however, thereby limiting Lessee's obligations under this Section 12.
(d) Application of Insurance Proceeds for a Casualty Occurrence.
It is agreed that insurance payments which arise from insurance obtained
hereunder and received as the result of the occurrence of a Casualty Occurrence
shall be applied in accordance with Section 11(c) hereof.
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(e) Application of Insurance Proceeds for Other than a Casualty
Occurrence. The insurance payments for any property damage loss to the Airframe
or any Engine (but excluding payments with respect to the Hush Kits) not
constituting a Casualty Occurrence, or to any Part, shall be paid to Lessor,
and thereafter be applied by Lessor in payment for the repairs or for
replacement property Lessee is required to perform or that Lessee must obtain
in accordance with the terms of Sections 9 or 11 of this Lease, or, if such
repair or replacement has already been paid for by the Lessee, to reimburse
Lessee for such repairs or replacements, and any balance remaining after
compliance with such sections with respect to such loss shall be applied, in
the sole discretion of Lessor, towards any amounts due and owing to Lessor
hereunder by Lessee.
(f) Application in Default. Any amount (other than amounts
relating to the Hush Kits) referred to in Section 11(c) or Section 12(e) hereof
which is otherwise payable to Lessee shall not be paid to Lessee, or, if it has
been previously paid to Lessee, and not yet applied by Lessee as permitted or
required hereunder, shall be immediately delivered by Lessee to Lessor, if at
the time of such payment, a Default or an Event of Default shall have occurred
and be continuing. In either case, all such amounts shall be held by Lessor as
security for the obligations of Lessee, or, at the option of Lessor, applied by
Lessor toward payment of any of Lessee's obligations at the time due hereunder.
At such time as there shall not be continuing any such Default or Event of
Default, all such amounts at the time held by Lessor in excess of the amount,
if any, which Lessor has elected for application as provided above, shall be
paid to Lessee.
(g) Certificates of Insurance. On or before the Delivery Date, and
thereafter on each renewal by the Lessee of the insurance required hereby,
Lessee will furnish to Lessor a certificate and a letter of undertaking
executed and delivered by an Approved Insurance Broker who is authorized by an
Approved Insurer, appointed by Lessee, describing in reasonable detail
insurance carried on the Aircraft and certifying that the insurance then
maintained on the Aircraft complies with the terms of this Lease. Lessee will
cause such Approved Insurance Broker who is authorized by an Approved Insurer
to agree to advise Lessor in writing or by telex: (i) at least thirty (30) days
(seven (7) days in the case of any war risk and allied perils coverage or such
lesser period of time as may be customarily applicable) prior to the
termination or cancellation by the underwriters for any reason (including,
without limitation, failure to pay the premium therefor) of any such insurance;
and (ii) at least three (3) Business Days or, in the case of any war risk and
allied perils coverage, such lesser period of time as may be customarily
applicable, prior to any non-renewal by the underwriters for any reason
(including, without limitation, failure to pay the premium therefor) of any
such insurance.
(h) Reinsurance. In the event that the insurances required
hereunder are reinsured, such reinsurance shall contain a "cut-through" clause
reasonably satisfactory to Lessor, and Lessee will furnish to Lessor a
certificate and a letter of undertaking executed and delivered by an Approved
Insurance Broker who is authorized by an Approved Insurer appointed by Lessee,
describing in reasonable detail the reinsurance
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carried on the Aircraft and certifying that the reinsurance then maintained on
the Aircraft complies with the terms of this Lease.
Section 13. Indemnification,
Lessee hereby agrees and undertakes, from and after the delivery of the
Aircraft on the Commencement Date (or such earlier time as Lessee takes
possession of the Aircraft), to indemnify, reimburse and hold harmless each
Indemnitee from and against any and all claims, damages, losses, liabilities,
demands, suits, judgments, settlements, causes of action, legal proceedings
(whether civil or criminal), penalties, fines, Taxes, other actions, and any
attorneys' fees and all other costs and expenses in connection therewith,
including any of the foregoing arising or imposed with or without any such
Indemnitee's fault or negligence or under the doctrine of strict liability or
any other theory of liability (any and all of which are hereafter referred to
as "Claims") which in any way may result from, pertain to, or arise in any
manner out of, or are in any manner related to: (i) the Aircraft or this Lease
or the enforcement of any of the terms hereof and thereof, including but not
limited to the breach of any representation, warranty, covenant, obligation or
duty of Lessee hereunder or under any Operative Agreement or any other document
of agreement executed and delivered in connection herewith or with respect to
any Indemnitee; or (ii) the condition, ownership, manufacture, purchase,
delivery, lease, acceptance, possession, repossession, return, disposition,
use, registration, import, export, maintenance, storage or operation of the
Aircraft either in the air or on the ground; or (iii) any defect in the
Aircraft (whether or not discovered or discoverable by Lessee or Lessor)
arising from any material or articles or Parts used therein or from the design,
testing, or use thereof or from any maintenance, service, repair, overhaul, or
testing of the Aircraft, whether or not the Aircraft is in the possession of
Lessee, and regardless of where the Aircraft may then be located; or (iv) any
transaction, approval, or document contemplated by this Lease or any Operative
Agreement, or given or entered into in connection herewith or therewith;
provided, however, that Lessee shall be subrogated to all rights and remedies
of Lessor against any Person pursuant to which Lessee has paid a Claim
hereunder, including but not limited to any rights or remedies that Lessor may
have against the Manufacturer, the Engine Manufacturer, the Approved
Maintenance Provider, or the manufacturer of any Part, or any of their
subcontractors. In the event Lessee is required to indemnify any Indemnitee
hereunder, Lessee shall pay to such Indemnitee an amount which, after deduction
of all Taxes and like charges required to be paid by such Indemnitee in respect
of such payment, is equal to the amount of the indemnification required,
provided, however, that all of the provisions of Section 10 hereof shall apply
to such payment; and provided further, however, that Lessee shall not be
required to indemnify any Indemnitee against Claims arising out of such
Indemnitee's gross negligence or willful misconduct.
Lessee hereby waives, and releases each Indemnitee from any Claims
(whether now existing or hereafter arising) for or on account of or arising or
in any way connected with injury to or death of personnel or any agent of
Lessee or loss or damage to
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property of Lessee or the loss of use of any property which may result from or
arise in any manner out of or in relation to the ownership, manufacture,
purchase, delivery, leasing, condition, use, maintenance, storage, repossession
or operation of the Aircraft, either in the air or on the ground, or which may
be caused by any defect in the Aircraft from the material or any article or
Part used therein or from the design or testing thereof, or use thereof or from
any maintenance, service, repair, overhaul, or testing of the Aircraft
regardless of when such defect may be discovered, whether or not the Aircraft
is at the time in the possession of Lessee, and regardless of the location of
the Aircraft at any such time.
The indemnities contained in this Section 13 shall survive the
execution and delivery of this Lease and the other Operative Agreements, and
shall continue in full force and effect notwithstanding the expiration or other
termination of this Lease or other Operative Agreement and are expressly made
for the benefit of and shall be enforceable by each Indemnitee.
Section 14. Liens.
Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, title thereto or
any interest therein, except: (i) the respective rights of Lessor and Lessee as
herein provided; (ii) Lessor's Liens with respect to the Aircraft; (iii)
Permitted Liens; and (iv) Liens in favor of any Lessor Lender; provided,
however, that Lessee may create a Lien on the Hush Kits, provided that any such
lienholder expressly acknowledges and agrees with Lessor or any Lessor Lender
that it shall have no Lien on the Aircraft or any other Part thereof
Section 15. Perfection of Title and Further Assurances.
(a) Recordation of Lease. Lessee shall, at its sole cost and
expense, and as may otherwise be directed by Lessor from time to time, cause
this Lease, all exhibits hereto, any amendments or supplements hereto, and any
and all additional instruments which shall be executed pursuant to the terms
hereof to be kept, filed and recorded, and to be re-executed, re-filed and
re-recorded at all times during the Term with the FAA and each other
Governmental Entity having jurisdiction over the Aircraft, this Lease, the
Operative Agreements and the transactions contemplated hereby and thereby to
the extent required to perfect and preserve Lessor's and Lessor Lender's
interest and title in and to the Aircraft, this Lease and each Operative
Agreement to the maximum extent possible under Applicable Law.
(b) Other Filings.
(i) If at any time any filing or recording is reasonably
necessary to protect the interest of Lessor or any Lessor Lender, Lessee, at
Lessor's cost and expense (unless an Event of Default shall have occurred and
be continuing or unless in the event of a Permitted Sublease, then, at Lessee's
cost and expense) and upon
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request by Lessor or any Lessor Lender, shall cause this Lease and any Lessor
Lender's security agreement and any and all additional instruments which shall
be executed pursuant to the terms hereof or thereof, to be kept, filed and
recorded and to be re-executed, refiled and re-recorded in the appropriate
office pursuant to Applicable Law to perfect, protect and preserve the rights
and interests of Lessor and any Lessor Lender hereunder and in the Aircraft. At
the reasonable request of Lessor or any Lessor Lender, Lessee shall furnish to
Lessor and any Lessor Lender opinions of counsel or other evidence satisfactory
to Lessor and any Lessor Lender of each such filing or refiling and recordation
or re-recordation.
(ii) Without limiting the foregoing, Lessee shall do or
cause to be done, and pay all Taxes in connection with (pursuant to Section 10
hereof), at Lessee's sole cost and expense, any and all acts and things which
may be required to perfect and preserve the title and interest of Lessor and
the Lien of any Lessor Lender in the Aircraft and this Lease, as Lessor and any
Lessor Lender may reasonably request, arising out of or in any way related to
Lessee's or Sublessee's use or operation of the Aircraft. Lessee shall also do
or cause to be done, at its sole cost and expense, any and all acts and things
which may be required under the terms of any other Applicable Law involving any
jurisdiction in which Lessee may operate, or any and all acts and things which
the Lessor or any Lessor Lender may reasonably request, to perfect and preserve
Lessor's ownership rights regarding and any Lessor Lender's Lien in and to the
Aircraft within any such jurisdiction.
(iii) In addition, Lessee will promptly and duly execute and
deliver to Lessor such further documents and assurances and take such further
actions as Lessor may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish,
protect and perfect the rights and remedies created or intended to be created
in favor of Lessor and any Lessor Lender hereunder, including, without
limitation, if reasonably requested by Lessor at the expense of Lessee, the
execution and delivery of supplements or amendments hereto or to any Lessor
Lender's security agreement in recordable form, subjecting to this Lease and to
the Lien of any Lessor Lender's security agreement, any Replacement Engine and
the recording or filing of counterparts thereof, in accordance with the laws of
any appropriate jurisdiction. Lessee shall not consolidate with or merge into
any other corporation unless Lessee has notified Lessor and any Lessor Lender
in writing prior to the consummation of such transaction and Lessee shall have
taken all such actions requested by Lessor or Lender pursuant to this Section
15.
Section 16. Return of Aircraft and Records.
(a) Return. On the Expiration Date or such other Return Occasion,
Lessee, at its own expense, shall return the Aircraft to Lessor in the
condition specified in Exhibit E hereto (it being agreed, however, that Lessee
need not comply with Stage 3 noise requirements of FAR Part 36 for the
Aircraft) at a location designated by Lessor in the United States (the "Return
Location"), fully equipped, with all required Parts
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(excluding, however, the Hush Kits) and Engines, duly installed thereon, by
delivering the same to Lessor at such location. At such time as the Aircraft
has been inspected by Lessor and found to be in the condition required
hereunder, Lessor shall issue a redelivery receipt to Lessee confirming the
same. Any engines installed on the Aircraft returned to Lessor hereunder which
had not originally been installed on the Aircraft will be deemed to be part of
the Aircraft and owned by Lessor, and Lessor shall, subject to such engines
fulfilling all requirements of a Replacement Engine under Section 11(b) hereof,
and otherwise complying with all requirements of Exhibit E hereto, relinquish
title to any Engines previously removed and replaced by such last-installed
engines.
(b) Engines. Lessee may return the Aircraft on the Return Occasion
with an engine not owned by Lessor, so long as (i) such engine conforms in all
respects to the requirements set forth in Section 11(b) hereof with respect to
a Replacement Engine; (ii) such engine conforms to the return condition
requirements set forth in Subsections 16(d) and 16(f) hereof; and (iii) Lessee,
at its own expense and concurrently with such delivery, furnishes Lessor with a
warranty ▇▇▇▇ of sale, in form and substance reasonably satisfactory to Lessor,
with respect to such engine and with evidence of Lessee's full and unencumbered
title to such engine (including, if requested, an opinion of Lessee's counsel
to the effect of the opinion required by Section 11(b)(iv) hereof) and Lessee
takes such other action as Lessor may reasonably request in order that full
legal and beneficial ownership and title to such engine shall be duly and fully
vested in Lessor. Lessee's obligation to comply with the terms of this
Subsection 16(c) shall be conditioned on the Lessor's transferring to Lessee
full legal and beneficial ownership and title to any Engine not installed on
the Aircraft at the Return Occasion, without any representation, warranty or
recourse of any kind whatsoever, express or implied, except a warranty that
such Engine is free and clear of Liens, other than Liens which Lessee is
required to discharge hereunder.
(c) Records. Upon the Return Occasion, Lessee shall deliver to
Lessor all logs, manuals, data and inspection, modification, and overhaul
records which are required to be maintained with respect to the Aircraft under
applicable rules and regulations of the FAA, and otherwise in accordance with
the terms of this Lease and Exhibit G hereto. Lessee shall deliver to Lessor
all such Maintenance Program data and task cards as required to transition the
Aircraft to another operator's maintenance program.
(d) Service Bulletin and Modification Kits. At or upon the return
of the Aircraft pursuant to this Section 16, Lessee shall deliver to Lessor, at
no cost to Lessor, all service bulletin kits furnished without charge by a
manufacturer for installation on the Aircraft which have not been so installed,
together with appropriate instructions for installation. In the event such
uninstalled kits were purchased or manufactured by Lessee, then Lessor shall
have a right to purchase such kits at Lessee's acquisition price for a period
of ninety (90) days after return of the Aircraft.
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(e) Condition of Aircraft. Upon the Return Occasion, Lessee shall
return the Aircraft (other than the Hush Kits) to Lessor in such condition that
the Aircraft (other than the Hush Kits) shall comply with all of the conditions
set forth in Exhibit E hereto, with all Aircraft systems fully functional and
in good working order.
(f) Final Inspection. Upon the Return Occasion, Lessee shall make
the Aircraft available, at Lessee's expense, to Lessor at Lessee's principal
maintenance base or such other location mutually agreed to by Lessor and Lessee
for detailed inspection in order to verify that the condition of the Aircraft
(other than the Hush Kits) complies with the requirements set forth above, and
Lessee shall thereafter make the Aircraft available at the Return Location for a
further and final Engine inspection, including borescope and power assurance
runs (such inspection being hereinafter collectively referred to as the "Final
Inspection"). Lessor shall cause the Final Inspection to be conducted only
during those times when the Aircraft is not engaged in operation. Lessee shall
give Lessor not less than ten (10) days prior written notice of the commencement
date of such Final Inspection. The period allowed for the Final Inspection shall
have such duration as to permit the opening of any areas of the Aircraft which
would be opened by Lessee to satisfy the requirements of Exhibit E. The Final
Inspection shall commence on or before the Expiration Date with respect to the
Aircraft and shall continue on consecutive days until all activity required
above to be conducted during the Final Inspection has been concluded. To the
extent that any portion of the Final Inspection extends beyond the Expiration
Date, the Term shall be deemed to have been automatically extended, and the
obligation to pay Rent hereunder shall continue on a daily basis at the rate of
125% of the Basic Rent until the Final Inspection shall have been concluded. All
storage expenses attributable to any extension of the Term pursuant to the
preceding sentence shall be payable by Lessee, and Lessee shall continue to
insure the Aircraft in accordance with Section 12 during any such extension
period. Lessor shall work diligently in its inspection of the Aircraft, such
that any delay in completion of the Final Inspection is not caused solely by any
act or omission by or on behalf of Lessor.
(g) Aircraft Documentation. In order to enable Lessor to prepare
for the Final Inspection of the Aircraft pursuant to Subsection 16(g) above,
Lessee agrees to make available to Lessor at Lessee's principal maintenance
base not later than ten (10) days prior to the commencement of such Final
Inspection, the Aircraft Documents, together with such other documentation
regarding the condition, use, maintenance, operation and history of the
Aircraft generated during Lessee's possession of the Aircraft, and as Lessor
may otherwise reasonably request.
(h) Corrections and Subsequent Corrections. To the extent that the
Aircraft or any Engine fails upon the Return Occasion to conform to any
requirement imposed by this Lease and particularly Section 16(f), Lessor, at
its sole option, may continue the Lease in effect in the manner provided for in
Section 16(f) above with regard to automatic extension until such time as the
Aircraft (other than the Hush Kits) is brought up to the condition required by
Section 16(f) above; or Lessor may accept the return of
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the Aircraft and thereafter have any such nonconformance corrected at such time
as Lessor may deem appropriate but not to occur later than ninety (90) days
following the return of the Aircraft, at commercial rates then charged by the
Person selected by Lessor to perform such correction and Rent shall continue as
set forth in Section 16(f) above for the number of days required to perform
such correction. Any direct expense incurred by Lessor for such correction
shall become Supplemental Rent payable by Lessee within thirty (30) days
following the submission of a written statement by Lessor to Lessee,
identifying the items corrected and setting forth the expense of such
correction. Lessee's obligation to pay such Supplemental Rent shall survive the
passage of the Expiration Date or other termination of this Lease.
(i) Functional Check Flight. Immediately prior to the expiration
of the Term, observers (not to exceed three (3) in number) selected by and at
the expense of Lessor, will accompany Lessee's flight crew on a functional
check flight (not to exceed two (2) hours in duration) to be accomplished in
accordance with Manufacturer's procedures and at Lessee's expense to
demonstrate the airworthiness of the Aircraft being returned and proper
functioning of all systems and components. At all times during such functional
check flight Lessee's flight crew shall be in command of the Aircraft;
provided, however, that Lessor's qualified pilots may operate the controls. Any
discrepancy or malfunction detected shall be corrected at Lessee's expense and
subject to the requirements of this Section 16.
Section 17. Events of Default.
Any one or more of the following occurrences or events shall
constitute an Event of Default:
(a) Lessee shall fail to make any payment of Rent to Lessor when
due under this Lease and such payment shall be overdue for a period of five (5)
Business Days;
(b) Lessee shall fail to obtain and maintain any insurance
required under the provisions of Section 12 hereof, or shall let any such
insurance coverage lapse, or shall operate the Aircraft outside of the scope of
the insurance coverage maintained with respect to the Aircraft;
(c) any representation or warranty made by Lessee in Sections
5(c)(i) through 5(c)(vi) hereof inclusive is incorrect at the time given in any
material respect; any other representation or warranty made by Lessee herein or
in any document or certificate furnished to Lessor in connection herewith or
therewith or pursuant hereto is incorrect in any material respect at any time
during the Term and the Lessee fails to cure the same so as to make the
representation or warranty correct within fifteen (15) days after Lessee has
actual notice thereof (or such longer period as Lessor may agree, in its sole
discretion, provided that Lessee is diligently pursuing efforts to cure the
same and the defect is capable of correction);
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(d) Lessee shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it pursuant to this Lease
and such failure shall continue for a period of fifteen (15) days after notice
thereof is given by Lessor to Lessee, or if Lessee shall fail to observe its
covenant to keep the Aircraft free and clear of Liens, seven (7) days after the
date of imposition of any such Lien (or such longer period as Lessor may agree,
in its sole discretion, provided that Lessee is diligently pursuing efforts to
cure the same and the defect is capable of correction);
(e) Lessee consents to the appointment of a receiver, trustee or
liquidator of itself or of a substantial part of its property, or Lessee admits
in writing its inability to pay its debts generally as they come due, or makes
a general assignment for the benefit of creditors, or Lessee files a voluntary
petition in bankruptcy or a voluntary petition seeking reorganization in a
proceeding under any bankruptcy laws, as now or hereafter in effect (other than
for purposes of a solvent reorganization on terms previously approved by
Lessor), or an answer admitting the material allegations of a petition filed
against Lessee in any such proceeding, or Lessee by voluntary petition, answer
or consent seeks relief under the provisions of any bankruptcy, insolvency or
other similar law providing for the reorganization or winding-up of
corporations, or provides for an agreement, composition, extension or
adjustment with its creditors;
(f) an order, judgment or decree is entered by any court, with or
without the consent of Lessee, appointing a receiver, trustee or liquidator for
Lessee or of all or any substantial part of its property, or all or any
substantial part of the property of Lessee is sequestered, and any such order,
judgment or decree of appointment or sequestration remains in effect,
undismissed, unstayed or unvacated for a period of sixty (60) days after the
date of entry thereof;
(g) a petition against Lessee in a proceeding under bankruptcy,
insolvency or other similar laws of any Governmental Entity (as now or
hereafter in effect) is filed and is not withdrawn or dismissed within sixty
(60) days thereafter, or if, under the provisions of any Applicable Law
providing for reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction over, or
custody or control of, Lessee or of all or any substantial part of its property
and such jurisdiction, custody or control remains in effect, unrelinquished,
unstayed or unterminated for a period of sixty (60) days;
(h) a final judgment for the payment of money not covered by
insurance in excess of One Hundred Thousand Dollars (US $100,000.00), or final
judgments for the payment of money not covered by insurance in excess of One
Hundred Fifty Thousand Dollars (US $150,000.00) in the aggregate, shall be
rendered against Lessee and the same shall remain undischarged for a period of
thirty (30) days during which execution thereof shall not be effectively stayed
by agreement of the parties involved, stayed by court order or adequately
bonded or attachments or other Liens, except for security interests;
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(i) Lessee shall receive notice of default or exercise of remedies
with respect to the payment of any obligation for the payment of borrowed
money, for the deferred purchase price of property or for the payment of rent
or hire under any lease of Aircraft which has a principal amount of One Hundred
Thousand Dollars (US $100,000.00) or more (determined in the case of borrowed
money by the amount outstanding under the agreement pursuant to which such
borrowed money was borrowed, in the case of a deferred purchase price by the
remaining balance and in the case of a lease by the present discounted value of
the remaining rent or hire payable thereunder (ignoring any fair market
renewal)) when the same becomes due; or Lessee shall receive notice of default
or exercise of remedies with respect to the performance of any other term,
agreement or condition contained in any material agreement or instrument under
or by which any such obligation is created, evidenced or secured, and Lessee
fails to cure the same;
(j) except as permitted under Section 22 hereof, Lessee shall
either temporarily or permanently discontinue its business or sell or otherwise
dispose of all or substantially all of its assets or Lessee shall voluntarily
suspend all or substantially all of its commercial airline operations or the
franchises, concessions, permits, rights or privileges required for the conduct
of the business and operations of Lessee shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result thereof the preponderant business
activity of Lessee ceases to be that of a commercial airline, or Lessee shall
cease to be an "air carrier operating under a certificate of convenience and
necessity" within the meaning of 11 U.S. C. Section 11 10;
(k) a default or an event of default by Lessee shall occur under
any other Operative Agreement, or other agreement between Lessor and Lessee;
or
(l) any of the foregoing occurrences or events shall have occurred
or be continuing with respect to any Sublessee, if any, or under any Permitted
Sublease, mutatis mutandis, as if Sublessee were substituted in the place of
Lessee hereunder.
Section 18. Remedies.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, Lessor may, at its option and without notice to Lessee, declare
this Lease to be in default and Lessor may exercise one or more of the
following remedies as Lessor in its sole discretion shall elect, to the extent
available and permitted by, and subject to compliance with any mandatory
requirements of any applicable Law then in effect:
(i) demand that Lessee, and Lessee shall upon such demand
of Lessor and at Lessee's expense, immediately return the Aircraft to Lessor at
such location as may be directed by Lessor, in the manner specified in such
notice, and such return shall not be delayed for purposes of complying with the
return conditions specified in Section 16 hereof (none of which conditions
shall be deemed to affect
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Lessor's possession of the Aircraft) or delayed for any other reason.
Notwithstanding the foregoing, at Lessor's option, Lessee shall be required
thereafter to take such actions, at Lessee's expense, as would be required by
the provisions of this Lease if the Aircraft were being returned at the end of
the Term hereof. In addition, Lessor, at its option and to the extent permitted
by Applicable Law, may enter upon the premises where all or any part of the
Aircraft is located and take immediate possession of and, at Lessor's sole
option, remove the same (and/or any engine which is not an Engine but which is
installed on the Airframe, subject to the rights of the owner, lessor or
secured party thereof) by summary proceedings or otherwise, all without
liability accruing to Lessor for or by reason of such entry or taking of
possession whether for the restoration of damage to property, or otherwise,
caused by such entry or taking, except damage caused by gross negligence or
willful misconduct of Lessor;
(ii) sell at private or public sale, as Lessor may
determine, or hold, use, operate or lease to others the Aircraft as Lessor in
its sole discretion may determine, all free and clear of any rights of Lessee;
(iii) proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease and to recover damages for the breach thereof and to
rescind this Lease;
(iv) retain and/or liquidate the Security Deposit;
(v) terminate this Lease by written notice to Lessee
and/or repossess the Aircraft; and
(vi) exercise any other remedy available under Applicable
Law.
In addition to the foregoing, Lessee shall be liable for any and all
unpaid Rent during or after the exercise of any of the aforementioned remedies,
together with interest on such unpaid amounts at the Interest Rate, and until
satisfaction of all of Lessee's obligations to Lessor hereunder and for all
reasonable legal fees and other costs and out-of-pocket expenses actually
incurred by Lessor by reason of the occurrence of any Event of Default or the
exercise of Lessor's remedies with respect thereto, including all costs and
expenses incurred in connection with the return of the Aircraft in accordance
with the terms of Section 16 hereof or in placing the Aircraft in the condition
and with airworthiness certification as required by such Section. Further, upon
the occurrence of any of the events specified in Sections 17(e), 17(f),
and/or 17(g), this Lease shall immediately terminate and Lessee shall forthwith,
or shall require and instruct any such receiver or trustee to return the
Aircraft to Lessor in the condition required by and otherwise in accordance with
Section 16 hereof.
(b) In effecting any repossession, Lessor, its representatives and
agents, to the extent permitted by Applicable Law shall: (i) have the right to
enter upon any premises where it reasonably believes the Aircraft, the
Airframe, an Engine or Part to
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be located; (ii) not be liable, in conversion or otherwise, for the taking of
any personal property of Lessee which is in or attached to the Aircraft, the
Airframe, an Engine or Part which is repossessed; provided, however, that
Lessor shall return to Lessee all personal property of Lessee which was on the
Aircraft at the time Lessor re-takes possession of the Aircraft; (iii) not be
liable or responsible, in any manner, for any inadvertent damage or injury to
any of Lessee's property in repossessing and holding the Aircraft, the
Airframe, an Engine or Part, except for that caused by or in connection with
Lessor's gross negligence or willful misconduct; (iv) have the right to
maintain possession of and dispose of the Aircraft, the Airframe, an Engine or
Part on any premises owned by Lessee or under Lessee's control; and (v) have
the right to obtain a key to any premises at which the Aircraft, the Airframe,
an Engine or Part may be located from the landlord or owner thereof.
(c) If demanded by Lessor, Lessee, at its sole expense, shall
assemble and make the Aircraft, the Airframe, any Engines or Parts available at
such location as may be directed by Lessor. Lessee hereby agrees that, in the
event of the return to or repossession by Lessor of the Aircraft, the Airframe,
any Engines or Parts, any rights in any warranty (express or implied)
heretofore assigned to Lessee or otherwise held by Lessee shall without further
act, notice or writing be assigned or reassigned to Lessor, if assignable.
Lessee shall be liable to Lessor for all out-of-pocket expenses, disbursements,
costs and fees incurred in: (i) repossessing, storing, preserving, shipping,
maintaining, repairing and refurbishing the Aircraft, the Airframe, an Engine
or Part to the condition required by Section 16 hereof; and (ii) preparing the
Aircraft, the Airframe, an Engine or Part for sale or lease, advertising the
sale or lease of the Aircraft, the Airframe, an Engine or Part and selling or
releasing the Aircraft, the Airframe, an Engine or Part. Lessor is hereby
authorized and instructed, at its option, to make reasonable expenditures which
Lessor, in its sole discretion, considers advisable to repair and restore the
Aircraft, the Airframe, an Engine or Part to the condition required by Section
16 hereof, all at Lessee's sole expense.
(d) Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights hereunder with respect to
the Aircraft, Lessor, by written notice to Lessee specifying a payment date not
earlier than ten (10) days from the date of such notice, may demand, and Lessee
hereby agrees to pay to Lessor on demand on the payment date specified in such
notice, as liquidated damages for loss of a bargain and not as a penalty, any
Rent due on or before such payment date plus an amount equal to the excess, if
any, of (A) the Casualty Value over (B) the fair market value of the Aircraft,
computed as of the payment date specified pursuant to this Section 18(d),
except that Lessee shall be required to pay the Casualty Value without credit
for fair market value if Lessee does not voluntarily return the Aircraft to
Lessor within such ten (10) day notice period at the location designated by
Lessor or other location mutually agreed to between Lessor and Lessee, together
with interest, to the extent permitted by Applicable Law, at the Interest Rate
on the amount of such excess, if any, from such payment date specified pursuant
to this Section 18(d) to the date of actual payment of such amount.
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(e) Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights hereunder with respect to
the Aircraft or Lessee upon the occurrence of an Event of Default, Lessee and
Lessor hereby stipulate that Lessor shall be entitled to sequester the Aircraft
and Lessee hereby agrees to deliver the Aircraft into the custody of Lessor or
its designated agents for such purpose, at Lessee's expense, upon receipt of a
written demand from Lessor with respect thereto.
(f) No remedy referred to in this Section 18 is intended to be
exclusive, but, to the extent permissible hereunder or under Applicable Law,
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 express or implied waiver by Lessor of any Default or Event
of Default shall in any way be, or be construed to be, a waiver of any future
or subsequent Default or Event of Default.
Section 19. Alienation.
Lessor shall have the right, at its sole cost and expense, to assign, sell or
encumber any interest of Lessor in the Aircraft (other than the Hush Kits) or
this Lease and/or the proceeds hereof subject to the rights of Lessee under the
provisions of this Lease, and in accordance with Applicable Law; and provided
that the Aircraft shall remain registered in the United States, and provided
further that in the event of a sale of the Aircraft, any such purchaser shall
be a Person of recognized standing and ability in the aviation industry so as
to be able to fulfill its obligations as lessor hereunder to the reasonable
satisfaction of Lessee. To effect or facilitate any such assignment, sale or
encumbrance, Lessee agrees to provide, at Lessor's sole cost and expense, such
agreements, consents, conveyances or documents as may be reasonably requested
by Lessor, which shall include, without limitation, in the event of a sale
complying herewith, an unrestricted release of Lessor from its obligations
under this Lease. The agreements, covenants, obligations and liabilities
contained herein including, but not limited to, all obligations to pay Rent and
indemnify each Indemnitee are made for the benefit of each Indemnitee and their
respective successors and permitted assigns; provided, however, that no
assignment, sale or encumbrance shall increase the aggregate financial exposure
or Rent obligations of Lessee under this Lease as compared to what such
obligations would have been had such assignment, sale or encumbrance not
occurred. In the event this Lease is assigned, sold or encumbered by Lessor,
any assignee, transferee or Lessor Lender shall agree in writing delivered to
Lessee as a condition precedent thereto not to disturb or otherwise interfere
with the quiet enjoyment by Lessee of the Aircraft so long as no Default or
Event of Default shall have occurred and be continuing, and that such assignee,
transferee or Lessor Lender shall have no interest whatsoever in the Hush Kits
absent Lessee's express transfer or conveyance thereof in a written ▇▇▇▇ of
sale. Any purchaser of the Aircraft subject to the Lease shall assume the
obligations of Lessor, specifically including Lessor's obligations
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under Exhibit E hereto, under the Lease and shall acknowledge in writing to
Lessee, receipt of the Security Deposit and Maintenance Reserves remaining at
the time of any such purchase, and that it shall receive, hold and distribute
such funds only in accordance with and subject to the terms and conditions of
this Lease. Any subsequent sale, assignment or encumbrance made by any
transferee, assignee, or mortgagee shall be subject to the terms of this
Section 19.
Section 20. Miscellaneous.
(a) Severability, Amendment and Construction. Any provision of
this Lease which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof; and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. To the extent
permitted by Applicable Law, Lessee hereby waives any provisions of Applicable
Law which renders any provisions hereof prohibited or unenforceable in any
respect. This Lease supersedes any prior or contemporaneous agreements, whether
oral or in writing, of the parties hereto and shall constitute the entire
agreement of the parties hereto. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing expressed to be a supplement to this Lease signed under hand by an
officer of the party against which the enforcement of the change, waiver,
discharge or termination is sought. This Lease shall constitute an agreement of
lease, and nothing herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft or any Engine or Part except as a lessee
only, and subject in all events to the terms and conditions hereof. The
headings in this Lease are for convenience of reference only and shall not
define or limit any terms of the provisions hereof. Whenever required by the
context hereof, the singular shall include the plural and vice versa. All
Exhibits and Schedules attached hereto are incorporated herein by reference and
are deemed to be a part hereof.
(b) Governing Law; Jurisdiction. (i) This Lease shall in all
respects be governed by, and construed in accordance with, the laws of the
State of California, including all matters of construction, validity and
performance. Lessor and Lessee hereby expressly submit to the non-exclusive
jurisdiction of California. Lessee further agrees that any legal action or
proceeding against it or any of its assets may be brought in California or in
any jurisdiction where Lessee or any of its assets may be found.
(ii) Lessee further irrevocably consents to the service of
process in any such action or proceeding by the mailing of copies thereof by
certified mail, postage prepaid, to Lessee and to Lessee's counsel at their
respective addresses set forth in Exhibit C hereto. The foregoing, however,
shall not limit the rights of the Lessor to serve process in any other manner
permitted by Applicable Law or to bring any legal action or proceeding or to
obtain execution of judgment or to recover the Aircraft in any jurisdiction.
Lessee further agrees that final judgment against Lessee in any action or
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proceeding or arbitration in connection with this Lease or any of the other
Operative Agreements shall be conclusive and may be enforced in any other
jurisdiction within or outside of California by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and the amount of Lessee's indebtedness. Lessee hereby irrevocably waives, to
the fullest extent permitted by Applicable Law, any objection which Lessee may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Lease or any of the other Operative
Agreements brought in California or the courts of any country or place where
Lessee or any of its assets may be found, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in California has
been brought in an inconvenient forum.
(iii) The foregoing submission to jurisdiction shall not be
construed so as to limit the right of either party to take proceedings to
enforce any judgment awarded against the other in whatsoever jurisdictions
shall to it seem fit nor shall the taking of proceedings in any one or more
jurisdiction, preclude the taking of proceedings in any other jurisdiction,
whether concurrently or not. To the extent that each of Lessor and Lessee may
be entitled, in any jurisdiction on which judicial proceedings may at any time
be commenced with respect to this Lease or any instrument, agreement or
documents contemplated hereby or referred to herein, to claim for itself or its
revenues or assets immunity (whether by reason of sovereignty or otherwise)
from suit, from the in rem or in personam jurisdiction of any court, from
attachment prior to judgment, from attachment in aid of execution of judgment
or from any other legal process, and to the extent that in any such
jurisdiction there may be attributed such an immunity (whether or not claimed),
each of Lessor and Lessee hereby irrevocable waives such immunity in respect of
suit, jurisdiction of any court attachment prior to judgment, attachment in aid
of execution of judgment, set-off, execution of judgment and other legal
process and consents generally in respect of any such legal action or
proceedings to the giving of any relief or the issue of any process in
connection with such action or proceedings including, without limitation, the
making, enforcement or execution against any property whatsoever (irrespective
of its use or intended use) or any order or judgment which may be made or given
in such action or proceedings. Lessee hereby expressly and irrevocably waives
any rights it may have to a trial by jury in any action or proceeding brought
to enforce any provision of this Lease or any of the other Operative
Agreements.
(c) Notices. All notices required under the terms and provisions
hereof shall be in writing, shall be sent to Lessor or Lessee at their
respective addresses or facsimile numbers set forth in Exhibit C hereto (or
such other addresses or facsimile numbers as the parties may designate from
time to time by notice pursuant to this Section 20(c)) by telefax and by air
courier.
Any such notice shall become effective upon the earlier of actual
receipt or the fifth (5th) day following the date such notice is sent by air
courier.
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(d) Lessor's 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 covenant, agreement or obligation contained herein,
Lessor shall have the right but not the obligation to make such payment or
conform or comply with such agreement, covenant or obligation, and the amount
of such payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance thereof or compliance
therewith, together with interest thereon at the Interest Rate, shall be
payable by Lessee to Lessor (as Supplemental Rent) upon demand. Lessor agrees
to notify Lessee in writing prior to making any payment under this Section
20(d), unless the Aircraft will be in danger of loss, sale, confiscation,
forfeiture or seizure should such payment not be made. The taking of any such
action by Lessor pursuant to this Subsection 20(d) shall not constitute a
waiver or release of any obligation of Lessee under the Lease, nor a waiver of
any Event of Default which may arise out of Lessee's nonperformance of such
obligation, nor an election or waiver by Lessor of any remedy or right
available to Lessor under or in relation to this Lease.
(e) Counterparts. To the extent, if any, that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in this
Lease or in any Lease Supplement may be created through the transfer or
possession of any counterpart other than the original counterpart, which shall
be so identified. Subject to the preceding sentence, this Lease and each Lease
Supplement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) Quiet Enjoyment. Lessor covenants that, so long as no Event of
Default has occurred and is continuing, Lessee shall quietly enjoy the use and
possession of the Aircraft without interference by Lessor, or by any Person
lawfully claiming by or through Lessor.
(g) Brokers. Each party agrees to indemnify and hold the other
harmless from and against any and all claims, suits, damages, costs and
expenses (including, but not limited to reasonable attorneys' fees) asserted by
any agent, broker or other third party for any commission or compensation of
any nature whatsoever based upon the lease of the Aircraft, if such claim,
damage, cost or expense arises out of any action or alleged action by the
indemnifying party, its employees or agents.
(h) Confidential Treatment. Each of the parties agrees not to
disclose to any third party (other than their auditors and respective
professional advisors, lenders or potential lenders, and except as otherwise
required by Applicable Law) any non-public, proprietary information provided by
and concerning the other party which the other party specifies as being of a
sensitive and confidential nature, including but not limited to the amount of
Basic Rent due and owing hereunder.
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(i) Section 1110. To the extent provided thereby (or to the
fullest extent it may lawfully so agree, whether or not provided thereby),
Lessee hereby agrees that any right of Lessor to take possession of such
Aircraft or Engines in compliance with the provisions of this Lease and in
accordance with Section 1110 of Title 11 of the United States Code or any
similar provision of any superseding statute, as amended from time to time,
shall not be affected by the provisions of Sections 362 or 363 of said Title,
or other analogous part of any superseding statute, as amended from time to
time, and accordingly, it is the intention of the parties hereto that this
Lease be afforded the benefits of said Section 1110.
(j) Expenses. Each party will pay all expenses (including legal,
professional and out-of-pocket expenses) incurred or payable by it in
connection with the negotiation, preparation, and execution of this Lease and
the other Operative Agreements and all such expenses related to any amendment
to or extension of or other documentation in connection with, or the granting
of any waiver or consent under this Lease and the other Operative Agreements.
Notwithstanding the foregoing, Lessee will pay to Lessor and Lessor Lender or
its order on demand all reasonable expenses (including reasonable legal and
other costs) payable or incurred by Lessor and Lessor Lender for FAA counsel
and in connection with the enforcement of, registration of or preservation of
any of Lessor's and Lessor Lender rights under this Lease and the other
Operative Agreements associated with or arising, directly or indirectly, from
the occurrence of an Event of Default or from a Permitted Sublease hereunder.
Section 21. Renewal.
Provided that no Default or Event of Default has occurred and
is continuing, then Lessee may, upon ninety (90) days advance written notice to
Lessor, elect to extend the Term of this Lease, for an additional twenty four
(24) months, from eighty four (84) months to one hundred and eight (108) months.
All other terms and conditions of this Lease, and the respective parties
obligations hereunder, including but not limited to the payment of Rent, shall
continue in full force and effect.
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Section 22. Merger.
Provided that no Default or Event of Default shall have
occurred and be continuing, in the event that Lessee consolidates with or merges
into any other corporation or conveys, transfers or leases in one or more
transactions substantially all of its assets to any Person (a "Merger
Transaction"), prior thereto the Lessee shall cause the successor entity (the
"Successor") to execute and deliver to Lessor a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
Lessor containing an assumption by the Successor of the due and punctual
performance and observance of all terms, covenants, agreements and conditions of
this Agreement to be performed or observed by Lessee, and such other matters as
Lessor may reasonably request; and provided further that the Successor shall be
solvent and shall be able to fulfill all of the obligations of Lessee hereunder.
[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due authority, have
each caused this Lease to be executed by their duly authorized officers as of
the day and year first above written.
LESSOR:
PEGASUS CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title: EXECUTIVE VICE PRESIDENT
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LESSEE:
KITTY HAWK AIRCARGO, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
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Title: VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
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