AIRCRAFT LEASE AGREEMENT
(MSN 22882)
This AIRCRAFT LEASE AGREEMENT (MSN 22882), dated as of
February 22, 2000 (this "Agreement" or "Lease"), is entered by
and between US AIRWAYS, INC., a Delaware corporation, as lessor
("Lessor"), and VANGUARD AIRLINES, INC., a Delaware corporation,
as lessee ("Lessee").
RECITALS:
WHEREAS, Lessee desires to lease from Lessor and Lessor is
willing to lease to Lessee the Aircraft described herein upon the
terms and conditions of this Lease.
NOW, THEREFORE, for and in consideration of the premises
and the mutual agreements contained herein and for other good and
valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and
shall be construed and interpreted in the manner described, in
Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 AGREEMENT TO LEASE
Subject to the satisfaction or waiver of the conditions set
forth herein, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to lease from Lessor hereunder, the
Aircraft for the Term, as evidenced by the execution by Lessor
and Lessee of a Lease Supplement leasing the Aircraft hereunder.
2.2 ACCEPTANCE BY LESSEE
By executing and delivering Lease Supplement No. 1, Lessee
confirms to Lessor that (i) Lessee has duly accepted delivery of
the Aircraft and Aircraft Documents for all purposes of this
Agreement, (ii) Lessee has duly accepted the Aircraft and
Aircraft Documents as being in satisfactory condition and in good
working order, without defect in design, operation or fitness for
use, whether or not discoverable by Lessee and (iii) the Aircraft
has been duly marked in accordance with Section 7.1.3(a). Subject
to the satisfaction of the conditions set forth in Section 1 of
Letter Agreement No. 1, Lessee acknowledges and agrees that
Lessee shall accept the Aircraft and Aircraft Documents in their
respective "AS-IS, WHERE-IS" condition and that Lessee shall
execute and deliver Lease Supplement No. 1, as evidence of such
satisfaction and acceptance, immediately upon tender of the
Aircraft and Aircraft Documents by Lessor to Lessee on the
Delivery Date.
2.3 CONDITIONS TO LESSOR'S OBLIGATIONS
Lessor's obligation to deliver the Aircraft to Lessee for
lease hereunder shall be subject to Lessor's receipt of the
following documents or other evidence, and to the completion of
the following actions and other requirements, in each case in
form and substance satisfactory to Lessor, on or before the
Delivery Date:
(a) This Lease, Letter Agreement No. 1 and Lease Supplement
No. 1, each executed by Lessee and Lessor;
(b) A certificate of the corporate secretary or other
officer of Lessee (i) certifying the incumbency of the person or
persons authorized to execute and deliver this Lease and the
other Operative Agreements and the documents related hereto and
thereto on behalf of Lessee and (ii) certifying and attaching a
copy of the authorizing resolutions of Lessee's Board of
Directors.
(c) A certificate signed by an authorized officer of Lessee
stating that: (i) the representations and warranties of Lessee
set forth in Schedule 4 hereto are true and accurate on and as of
such date as though made on and as of such date (except, to the
extent that such representations and warranties relate solely to
an earlier date), in which case it shall state that such
representations and warranties are true and accurate as of such
earlier date, and (ii) no Default or Event of Default has
occurred and is continuing, or would result from the lease of the
Aircraft pursuant to the Lease;
(d) An insurance certificate and broker's opinion letter
signed by Lessee's insurance brokers evidencing compliance with
the insurance provisions of Section 10 not later than five (5)
Business Days before the Delivery Date;
(e) A favorable opinion of counsel to Lessee, dated the
Delivery Date, insubstantially the form of Schedule 4 hereto,
addressed to Lessor;
(f) [Intentionally Omitted]; (g) [Intentionally Omitted];
(h) Such other evidence as Lessor may reasonably require
with respect to the satisfaction of the conditions precedent set
forth in this Lease;
(i) Lessor's receipt of the first installment of Basic Rent
hereunder not later than the Delivery Date; and
(j) Lessor's receipt of the aggregate amount of the
Security Deposit not later than two (2) Business Days before the
Delivery Date.
SECTION 3. TERM, RENT AND SECURITY DEPOSIT
3.1 TERM
The Term of this Lease will commence on the Delivery Date
and expire on the Expiration Date, unless this Agreement or the
leasing of the Aircraft is earlier terminated in accordance with
any provision of this Agreement.
3.2 RENT
3.2.1 BASIC RENT
During the Term, Lessee shall pay to Lessor, on each
Payment Date, in the manner and in funds of the type specified in
Section 3.4, Basic Rent, monthly in advance, in the amount
specified in Schedule 1 hereto.
3.2.2 SUPPLEMENTAL RENT
Lessee shall also pay to Lessor, or to whosoever shall
be entitled thereto, any and all Supplemental Rent when and as
the same shall become due and owing. Lessee will also pay to
Lessor, or to whosoever shall be entitled thereto, on demand, as
Supplemental Rent, to the extent permitted by applicable law,
interest at the Payment Due Rate on any part of any amount of
Rent (including, without limitation, Supplemental Rent) not paid
by 3:00 PM, New York City time, on the date when due, for the
period from and including the date on which the same was due to,
but excluding, the date of payment in full.
3.2.3 HOURLY RENT
Lessee shall pay with respect to each Hourly Rent
Interval, additional Rent for the use of the Aircraft during the
Term as follows:
(a) Rent for the "Q"-Check equal to the "Q"-Check
Hourly Rate multiplied by the number of Cycle/Flight Hours
(measured to two decimal places) operated by Lessee during such
Hourly Rent Interval (""Q"-Check Hourly Rent");
(b) Rent for each Engine equal to the Engine Hourly
Rate multiplied by the number of Cycle/Flight Hours (measured to
two decimal places) operated by Lessee during such Hourly Rent
Interval (for each Engine, "Engine Hourly Rent"); and
(c) Rent for each landing gear equal to the Landing
Gear Hourly Rate multiplied by the number of Cycle/Flight Hours
(measured to two decimal places) operated by Lessee during such
Hourly Rent Interval (for each year, "Landing Gear Hourly Rent").
The "Q"-Check Hourly Rent, the Engine Hourly Rent and
the Landing Gear Hourly Rent shall accrue during each Hourly Rent
Interval and shall be paid by Lessee to Lessor as Supplemental
Rent in the manner provided by Section 3.2.2 not later than 15
days after the conclusion of the Hourly Rent Interval for which
it is calculated. Concurrently with the payment thereof, Lessee
shall report to Lessor the number of flight hours and cycles
accumulated in respect of the Hourly Rent Interval for which
payment is being made.
All Hourly Rent is the property of Lessor. As such,
Lessor may commingle all Hourly Rent payments with its general
funds and Lessee has no interest therein and except as otherwise
provided in this Agreement, Lessee has no right to seek to use
any such payments, and all Hourly Rent Balances may be applied by
Lessor in its sole and reasonable discretion to satisfy any of
Lessee's obligations under the Operative Agreements.
3.3 SECURITY DEPOSIT
(a) Before the Delivery Date, Lessee shall pay to Lessor
the aggregate amount of the Security Deposit (the "Cash Deposit")
in immediately available funds, as follows: (i) Lessor hereby
acknowledges receipt of the Initial Deposit; (ii) the Additional
Deposit is payable by Lessee upon its execution of this Lease;
and (iii) the Final Deposit is payable by Lessee not later than
two (2) Business Days prior to the Delivery Date. The Cash
Deposit shall be nonrefundable unless (x) the Aircraft suffers a
total loss prior to the Delivery Date or (y) the Aircraft suffers
material deterioration to the agreed delivery condition thereof
as set forth in Letter Agreement No. 1 prior to the Delivery Date
and Lessor does not undertake to correct or cause the correction
of such material deterioration within 30 days after the projected
delivery date of February 18, 2000. Notwithstanding the
foregoing and subject to the delivery of the sixth Boeing 737-200
Advanced aircraft to Lessee from Lessor as contemplated by the
LOI, and so long as no Default or Event of Default has occurred
and is continuing hereunder, Lessee may substitute an irrevocable
freely transferable letter of credit in the amount of the Final
Deposit, in form and substance and from a U.S. bank reasonably
acceptable to Lessor for the equivalent amount of the Cash
Deposit ("Letter of Credit") which Letter of Credit together with
the balance of the Cash Deposit shall comprise the Security
Deposit. Within five (5) Business Days of Lessor's receipt of
the Letter of Credit, Lessor shall promptly return the amount of
the Final Deposit to Lessee.
(b) The Security Deposit shall be held by Lessor as
security for the timely payment by Lessee of all amounts payable
by it hereunder, under each other Operative Agreement and any
other aircraft lease agreement between Lessor or any of its
Affiliates and Lessee or any of its Affiliates ("Other Lease
Agreement"), so long as Lessor and/or any of its Affiliates has
an interest hereunder and under any such Other Lease Agreement,
and the due and punctual performance by Lessee of all of its
obligations hereunder and thereunder, and Lessee hereby assigns,
transfers and pledges to Lessor, and hereby grants to Lessor a
first-priority security interest in, the Security Deposit to
secure such payment and such performance. Lessee shall not
assign, transfer, pledge or otherwise dispose of any of its
rights or interests in the Security Deposit except as provided in
the preceding sentence.
(c) The Security Deposit may be assigned, pledged, or
charged by Lessor to or in favor of any Permitted Transferee.
Interest shall accrue on the Cash Deposit at the simple interest
rate (i.e., no compounding) of three percent (3%) per annum, and
such interest shall be retained in the Cash Deposit. Upon
Lessee's request, Lessor shall provide to Lessee on or before
January 31 of each year during the Term (or within 30 days of
such request in the event that Lessee makes such request after
January 1 of any year during the Term).
(d) If an Event of Default occurs, in addition to all other
rights Lessor shall have as a secured party under applicable law,
Lessor may apply the Security Deposit as provided in Section
13.15 hereof. If Lessor applies all or any portion of such
Security Deposit, such application shall not be deemed a cure of
any such Event of Default, unless Lessee shall within three (3)
Business Days after written demand therefor by Lessor cause the
Cash Deposit to be restored to its original amount of $220,000 or
the amount of the Final Deposit if a Letter of Credit has been
furnished by Lessee and either (i) cause the credit available
under the Letter of Credit comprising a portion of the Security
Deposit to be restored to its original level or (ii) cause a new
Letter of Credit to be issued by a bank reasonably acceptable to
the Lessor in the original amount. The failure of Lessee
to do so shall be an Event of Default under this Lease. The Cash
Deposit may be commingled with other amounts of Lessor (or its
designee). The Letter of Credit and Cash Deposit (including
accrued interest) comprising the Security Deposit shall be
released or returned by Lessor, within five (5) Business Days of
the expiration or earlier termination of this Lease and
performance by Lessee of all its obligations hereunder, and the
Letter of Credit shall expire no earlier than 30 days after the
return of the Aircraft to Lessor.
3.4 PAYMENTS
(a) Payments of Rent and any and all other amounts payable
by Lessee hereunder and under any other Operative Agreement shall
be paid by wire transfer of immediately available Dollars, in
such manner that Lessor receives the full amount of such payments
not later than 3:00 PM, New York City time, on the date when due,
to the account of Lessor specified under "Payment Location" on
Schedule 2 hereto or to such other account in the United States
as directed by Lessor to Lessee in writing or, in the case of any
payment of Supplemental Rent expressly payable to a person other
than Lessor, to the person that shall be entitled thereto to such
account in the United States as such person may specify from time
to time to Lessee.
(b) Except as otherwise expressly provided herein,
whenever any payment of Rent, or any other amount payable under
this Agreement, Letter Agreement No. 1 or any other Operative
Agreement shall be due on a day that is not a Business Day, such
payment shall be made on the next day that is a Business Day,
and, if such payment is made on such next Business Day, no
interest shall accrue on the amount of such payment during such
extension.
(c) All computations of interest under this Agreement
shall be made on the basis of a year of 360 days comprised of
twelve 30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION
1110 MATTERS
4.1 DISCLAIMER
UPON LESSEE'S EXECUTION AND DELIVERY OF LEASE SUPPLEMENT
NO. 1, LESSOR LEASES AND LESSEE ACCEPTS AND TAKES THE AIRCRAFT IN
ITS "AS-IS, WHERE-IS" CONDITION. EXCEPT AS OTHERWISE PROVIDED IN
THE OPERATIVE AGREEMENTS, LESSEE ACKNOWLEDGES AND AGREES THAT AS
BETWEEN LESSEE AND LESSOR (i) THE AIRFRAME AND EACH ENGINE ARE OF
A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT THE AIRFRAME
AND EACH ENGINE ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, AND
(iii) LESSOR DOES NOT MAKE, HAS NOT MADE AND SHALL NOT BE DEEMED
TO HAVE MADE, AND WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED,
AND LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES, ANY WARRANTY,
REPRESENTATION, GUARANTY, LIABILITY AND OBLIGATION OF LESSOR AND
ANY RIGHT, CLAIM AND REMEDY OF LESSEE AGAINST LESSOR, EXPRESS OR
IMPLIED, ARISING BY OPERATION OF LAW, COURSE OF PERFORMANCE,
COURSE OF DEALING, USAGE OF TRADE OR OTHERWISE, AS TO:
(w) THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE OF
THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA OR ANY
OTHER THING DELIVERED, SOLD OR TRANSFERRED
HEREUNDER,
(x) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH
RESPECT TO THE AIRFRAME, ANY ENGINE, ANY PART, ANY
DATA OR ANY OTHER THING DELIVERED, SOLD OR
TRANSFERRED HEREUNDER,
(y) THE ABSENCE OF LATENT OR ANY OTHER DEFECT OR
NONCONFORMANCE IN THE AIRFRAME, ANY ENGINE, ANY
PART, ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR
TRANSFERRED HEREUNDER, WHETHER OR NOT DISCOVERABLE,
OR
(z) THE ABSENCE OF ANY ACTUAL OR ALLEGED INFRINGEMENT OF
ANY PATENT, TRADEMARK OR COPYRIGHT OR THE LIKE.
EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE, LESSEE FURTHER
WAIVES, DISCLAIMS, RELEASES AND RENOUNCES ANY LIABILITY, RIGHT,
CLAIM, REMEDY OR OBLIGATION BASED ON TORT, INCLUDING STRICT
LIABILITY, WHETHER OR NOT ARISING FROM THE NEGLIGENCE (WHETHER
ACTIVE, PASSIVE OR IMPUTED) OF LESSOR, ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO THE AIRFRAME, ANY
ENGINE, ANY PART, ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR
TRANSFERRED HEREUNDER, OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY
ENGINE, ANY PART, ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR
TRANSFERRED HEREUNDER.
4.2 CERTAIN AGREEMENTS OF LESSOR
So long as no Default or Event of Default shall have
occurred and be continuing, Lessor agrees to make available to
Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made, or made available, by Airframe
Manufacturer or Engine Manufacturer or any of their respective
subcontractors or suppliers, as the case may be, or any other
party to the extent the same may be assignable.
4.3 QUIET ENJOYMENT
So long as no Default or Event of Default shall have
occurred and be continuing, Lessor shall not interfere, and shall
not permit any Person lawfully claiming through Lessor to
interfere, with Lessee's rights hereunder to quiet use,
possession and enjoyment of the Aircraft during the Term. THE
FOREGOING COVENANT IS IN LIEU OF ANY RIGHT OF LESSEE UNDER
SECTION 2A-211(1) OF THE NEW YORK UNIFORM COMMERCIAL CODE OR ANY
SIMILAR LAW, WHICH RIGHT LESSEE HEREBY WAIVES, RELEASES AND
RENOUNCES AND LESSOR EXPRESSLY DISCLAIMS. The foregoing,
however, shall not be construed or deemed to modify or condition
in any respect the obligations of Lessee pursuant to Section 15,
which obligations are absolute and unconditional.
4.4 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the
Aircraft, Airframe or any Engine to Lessee or any other person
pursuant to Sections 5.3 or 18.1, as the case may be, then (a)
Lessor shall (1) transfer to Lessee or such other person, as the
case may be, all of Lessor's right, title and interest in and to
the Aircraft, Airframe or such Engine, as the case may be, in its
respective "AS-IS, WHERE-IS" condition, (2) assign to Lessee or
such other person, as the case may be, all warranties of Airframe
Manufacturer, Engine Manufacturer or any other party with respect
to the Aircraft, Airframe or such Engine, to the extent the same
may be assignable and (3) assign to Lessee or such other person,
as the case may be, if and to the extent permitted, all claims,
if any, for damage to the Aircraft, Airframe or such Engine, in
each case free of Lessor Liens, and without recourse or warranty
of any kind whatsoever (except as to the transfer described in
clause (1) above and as to the absence of such Lessor Liens, as
aforesaid), and (b) Lessor shall promptly deliver to Lessee or
such other person, as the case may be, a ▇▇▇▇ of sale and
agreements of assignment, as aforesaid, and such other
instruments of transfer, all in form and substance reasonably
satisfactory to Lessor and Lessee (or such other person, as the
case may be), as Lessee (or such other person, as the case may
be) may reasonably request.
4.5 LESSOR'S INTEREST IN CERTAIN ENGINES
In the event Lessee shall have received from the lessor,
conditional seller, indenture trustee or secured party of any
airframe leased to, or purchased by, Lessee (which is subject to
a lease, conditional sale, trust indenture or other security
agreement) a written agreement complying with clause (b) of
Section 7.2.5, Lessor hereby agrees for the benefit of such
lessor, conditional seller, indenture trustee or secured party
that Lessor will not acquire or claim, as against such lessor,
conditional seller, indenture trustee or secured party, any
right, title or interest in any engine as the result of such
engine being installed on the Airframe at any time while such
engine is subject to such lease, conditional sale, trust
indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security
interest in favor of such indenture trustee or secured party.
4.6 LEASE FOR U.S. FEDERAL INCOME TAX LAW PURPOSES;
SECTION 1110 OF BANKRUPTCY CODE
(a) Lessee and Lessor agree that this Lease is, and shall
be treated as, a lease for U.S. federal income tax purposes of
the Aircraft, Airframe, Engines, Parts and Aircraft Documents.
(b) It is the intention of each of Lessee and Lessor that
Lessor shall be entitled to the benefits of Section 1110 with
respect to the right to take possession of the Aircraft,
Airframe, Engines, Parts and Aircraft Documents as provided in
this Lease, and in any instance where more than one construction
of the terms and conditions of this Lease or any other pertinent
Operative Agreement is possible, or of the facts and
circumstances underlying the transactions contemplated herein or
therein, Lessor and Lessee agree that a construction which would
create and preserve such benefits shall control over any
construction which would not create and preserve such benefits.
Lessee covenants and agrees with Lessor that to better ensure the
availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court
having jurisdiction over Lessee, whereby Lessor seeks recovery of
possession of the Aircraft under said Section 1110 and shall not
in any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be
fulfilled in order to entitle Lessee to continued use and
possession of the Aircraft hereunder. In the event said Section
1110 is amended, or if it is repealed and another statute is
enacted in lieu thereof, Lessor and Lessee agree to amend this
Agreement and take such other action not inconsistent with this
Agreement as Lessor reasonably deems necessary so as to afford to
Lessor the rights and benefits as such amended or substituted
statute confers upon
(c) Lessor and Lessee agree that, for all purposes of
applicable Law, this Lease constitutes an agreement of lease and
nothing contained herein shall be construed as conveying to
Lessee any right, title or interest in the Aircraft, Airframe,
Engines, Parts or Aircraft Documents except as a lessee only.
4.7 CONTRIBUTION BY LESSOR FOR CERTAIN MAINTENANCE AND
OVERHAULS
Upon submission by Lessee to Lessor of invoices,
statements, certificates, receipts or mutually acceptable
documentation which may include internal Lessee documents
(collectively, "Maintenance Invoices") in detail reasonably
satisfactory to Lessor as to the identity of the specific
Airframe, Engine or landing gear, the content of the work,
completion of the work, the date of completion of the work and
the cost of the work from an FAA-approved maintenance facility
or maintenance facility included in Lessee's FAA-approved
operations specification evidencing the performance of such
maintenance:
(a) for the Airframe, for the accomplishment of a
completed scheduled "Q"-Check (a major inspection and
rectification of structural deficiencies or overhauls of an
Airframe) in accordance with Lessee's Maintenance Program (""Q"-
Check Maintenance");
(b) for any Engine, for performance of a completed engine
shop visit (i.e. heavy maintenance visit) for an Engine which, at
a minimum, includes the repair or refurbishment of one or more of
the following: the hot section, the high pressure section, the
high or low turbines, the low compressor or high compressor,
casings, shafts, bearings, N1 Gearbox, N2 Gearbox or life limited
parts (LLPs) replacement; and
(c) with respect to any landing gear, for the
performance of an overhaul of such landing gear assembly,
including replacement of any LLPs ("Landing Gear Maintenance").
Lessor shall, so long as no Financial Default or Event of
Default exists, pay, as an independent obligation to (i) Lessee,
or (ii) at Lessor's option, to the maintenance or overhaul
facility, if Lessee has not paid such maintenance performer such
amounts if they are due, in the case of "Q"-Check Maintenance,
from the applicable "Q"-Check Hourly Rent Balance for such
Airframe, in the case of Engine Maintenance, from the applicable
Engine Hourly Rent Balance for such Engine, and, in the case of
Landing Gear Maintenance, from the applicable Landing Gear Hourly
Rent Balance for such gear, a sum equal to the applicable amount
evidenced by such Maintenance Invoices to the extent that
there are funds sufficient for such payment then remaining from
the applicable Hourly Rent Balance, as the case may be. To the
extent the applicable Hourly Rent Balance is insufficient to pay
such Maintenance Invoice in full, the deficiency shall be the
responsibility of Lessee and paid by Lessee to the applicable
maintenance performer, and Lessee shall not be entitled to
payment with respect to an inapplicable or insufficient Hourly
Rent Balance, nor to a credit against Hourly Rent payments then
payable or to be made in the future or to be made against any
other Item or Part.
Lessee understands and agrees that in no event shall
Lessor be required to make any payments if there exists a zero or
deficit balance in any specific Hourly Rent Balance nor shall
Lessor be obliged to apply funds from any other Hourly Rent
Balance or otherwise. Lessee further understands and agrees that
Lessor shall have no obligation to reimburse or otherwise pay,
indemnify or compensate Lessee for the cost of any maintenance or
repair except as expressly and specifically enumerated in sub-
clauses (a) - (c) of this Section 4.7. Without limiting the
generality of the foregoing, and except as otherwise provided
herein, it is understood that Lessor shall not reimburse Lessee
for maintenance or repairs covered by insurance or warranty or
required as a result of an airworthiness directive (including
Stage 3 noise regulations), manufacturer's service bulletin,
routine airframe maintenance, i.e., "▇," "▇," or "C" checks, non-
routine or improper operations, misuse, neglect, accident,
ingestion, foreign object damage or other accidental cause. No
other reimbursement of Hourly Rent will be made in any other
circumstances.
Hourly Rent Balances shall bear simple interest (i.e.,
without compounding) at a rate of three percent (3%) per annum.
Such interest shall be deemed to become part of the respective
Hourly Rent Balances and may be available for the above-described
maintenance.
SECTION 5. RETURN OF AIRCRAFT
5.1 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B
hereto, which provisions are hereby incorporated by this
reference as if set forth in full herein. Without limiting any
other rights of Lessor under this Lease or any other Operative
Agreement, Lessee acknowledges that the provisions of this
Section 5 and of Annex B, are of the essence of this Lease and
the transactions contemplated herein.
5.2 RETURN OF OTHER ENGINES
In the event that any Engine owned by Lessor shall not be
installed on the Airframe at the time of return hereunder, such
Engine shall be deemed to have suffered an Event of Loss as of
the sixty-first day prior to the date of such return, with the
effect that Lessee shall be required to return the Airframe
hereunder with a Replacement Engine meeting the requirements of,
and in accordance with, Section 10 hereof and Annex B hereto.
5.3 FAILURE TO RETURN AIRCRAFT
If Lessee shall, for any reason whatsoever, fail to return
the Aircraft and the Aircraft Documents at the time specified
herein, all obligations of Lessee under this Lease (including,
without limitation, the obligation to pay Basic Rent
hereunder, at a daily rate equal to (a) Basic Rent divided by 30
days for the first 15 days and (b) 150% of Basic Rent divided by
30 days for each day in excess of 15 days, shall continue in
effect with respect to the Aircraft until the Aircraft is
returned to Lessor in compliance with the requirements of this
Section 5 and Annex B to this Lease; provided, however, that this
Section 5.3 shall not be construed as permitting Lessee to fail
to meet its obligation to return the Aircraft or the Aircraft
Documents in accordance with the requirements hereof or
constitute, or be deemed to constitute, a waiver of any Event of
Default resulting from Lessee's failure to return the Aircraft or
the Aircraft Documents or otherwise.
SECTION 6. LIENS
Lessee shall not, directly or indirectly, create, incur,
assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe, any Engine, any Part or any Aircraft
Documents, title to any of the foregoing or any interest therein,
or this Lease or any interest of Lessor herein, or any amount
payable hereunder, including, without limitation, any Rent,
except (a) the respective rights of Lessor or Lessee under the
Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens; (c) the rights of others
under agreements or arrangements to the extent expressly
permitted by the terms of Sections 7.2 and 7.3 and Section F of
Annex C; (d) Liens for Taxes of Lessee (and its U.S. federal tax
law consolidated group), or Liens for Taxes of any Tax Indemnitee
(and its U.S. federal tax law consolidated group) for which
Lessee is obligated to indemnify such Tax Indemnitee under any of
the Operative Agreements, in any such case either not yet due or
being contested in good faith by appropriate proceedings so long
as such Liens and such proceedings do not involve any material
risk of the sale, forfeiture or loss (including loss of use) of
the Aircraft, the Airframe, any Engine or any of the Aircraft
Documents, or any interest therein or any discernible risk of
criminal liability or any material risk of civil penalty against
Lessor; (e) materialmen's, mechanics', workers', repairers',
employees' or other like Liens arising in the ordinary course of
business for amounts the payment of which is either not yet
delinquent or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not
involve any material risk of the sale, forfeiture or loss
(including loss of use) of the Aircraft, the Airframe, any Engine
or any of the Aircraft Documents, or any interest therein or any
discernible risk of criminal liability or any material risk of
civil penalty against Lessor; and (f) Liens arising out of any
judgment or award against Lessee (or any Permitted Sublessee), so
long as such judgment shall, within 30 days after the entry
thereof, have been discharged or vacated, or execution thereof
stayed pending appeal or shall have been discharged, vacated or
reversed within 30 days after the expiration of such stay, and so
long as during any such 30-day period there is not, or any such
judgment or award does not involve, any material risk of the
sale, forfeiture or loss (including loss of use) of the Aircraft,
the Airframe, any Engine or any of the Aircraft Documents, or any
interest therein or any discernible risk of criminal liability or
any material risk of civil penalty against Lessor. Lessee shall
promptly take such action as may be necessary duly to pay,
satisfy, remove and discharge any Lien on or with respect to the
Aircraft, the Airframe, any Engine, any Part or any Aircraft
Documents, title to any of the foregoing or any interest therein,
or this Lease or any interest of Lessor herein, or any amount
payable hereunder not excepted above if the same shall at any
time arise in respect of the Aircraft, the Airframe, any Engine,
any Part, or the Aircraft Documents and shall promptly provide to
Lessor evidence of such payment, satisfaction, removal or
discharge.
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND
RECORDS
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Lessor shall cause the Aircraft to be, and at all times
during the Term to remain, duly registered with the FAA under the
Act in the name of Lessor as owner and lessor, at Lessor's
expense.
7.1.2 MARKINGS
(a) On or prior to the Delivery Date, Lessee will
cause to be affixed to, and maintained in, the cockpit of the
Airframe and on each Engine, in each case, in a clearly visible
location (it being understood that the location of such placards,
as identified to the Lessor prior to the Delivery Date, shall be
deemed to be in compliance with this requirement), a placard of a
reasonable size and shape bearing the legend, in English, set
forth under the option "Lease Identification" in Schedule 3.
Lessee shall not remove or permit the removal of such placards,
except that such placards may be removed temporarily, if
necessary, in the course of maintenance of the Airframe or
Engines. If any such placard is damaged or becomes illegible,
Lessee shall promptly replace it with a placard complying with
the requirements of this Section 7.1.2.
(b) During the Term, Lessee may letter, paint or ▇▇▇▇
the Aircraft with the name and logo of Lessee or any Permitted
Sublessee and may cause the Aircraft to bear insignia plates or
other markings identifying the supplier or manufacturer of the
Airframe or the Engines or any Parts. Except as provided above,
Lessee will not allow the name of any person to be placed on the
Airframe or on any Engine as a designation that could reasonably
be interpreted as a claim of ownership.
7.1.3 COMPLIANCE WITH LAWS
Lessee shall not, and shall not allow any other person
to, operate, use, maintain, service, repair, overhaul or
otherwise similarly deal with the Aircraft (a) in violation of
any Law binding on or applicable to the Lessee or to the
Aircraft, the Airframe or any Engine, or any of the Aircraft
Documents, or to the operation, use, maintenance, service, repair
or overhaul of, or similar dealings in, the Aircraft, Airframe or
any Engine, or (b) in violation of any airworthiness certificate,
license or registration of any Government Entity relating to
Lessee or to the Aircraft, the Airframe or any Engine, except (1)
immaterial or non-recurring violations of which Lessee or any
Permitted Sublessee had no prior knowledge or information and
with respect to which corrective measures are taken promptly by
Lessee or a Permitted Sublessee, as the case may be, upon
discovery thereof, and (2) to the extent Lessee or any Permitted
Sublessee is contesting the validity or application of any such
law, rule, regulation, order, certificate, license or
registration in good faith in any reasonable manner which does
not involve any material risk of the sale, forfeiture or loss
(including loss of use) of the Aircraft, the Airframe, any Engine
or any of the Aircraft Documents or any interest therein or any
discernible risk of criminal liability or any material risk of
civil penalty against Lessor.
7.1.4 OPERATION
Lessee agrees not to operate, use or locate the
Aircraft, the Airframe or any Engine, or allow the Aircraft, the
Airframe or any Engine to be operated, used or located (a) in any
area excluded from coverage by any insurance required by the
terms of Section 10, or (b) in any recognized or threatened area
of hostilities.
7.2 POSSESSION
Lessee will not, without the prior written consent of
Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine
or install any Engine, or permit any Engine to be installed, on
any airframe other than the Airframe; provided, however, subject
to the provisions of Section 7.3, that if and for so long as (a)
no Event of Default shall have occurred and be continuing, (b)
with respect to any sublease or transfer contemplated by Section
7.2.6 below, no Default or Event of Default shall have occurred
and be continuing at the time of such sublease and (c) all
approvals, consents or authorizations required by the FAA in
connection with any such sublease or such delivery, transfer or
relinquishment of possession have been obtained and remain in
full force and effect, then Lessee may, without such prior
written consent:
7.2.1 INTERCHANGE AND POOLING
Subject or permit any Permitted Sublessee to subject
any Engine to normal interchange agreements or pooling agreements
or arrangements, in each case customary in the commercial airline
industry and entered into in writing by Lessee or such Permitted
Sublessee, as the case may be, in the ordinary course of business
and with any U.S. Air Carrier. If, notwithstanding the
foregoing, Lessor's title to any such Engine is divested under
any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such
divestiture, with the effect that Lessee shall be required to
replace such Engine with a Replacement Engine meeting the
requirements of, and in accordance with, Section 9.
7.2.2 TESTING AND SERVICE
Deliver or permit any Permitted Sublessee to deliver
possession of the Aircraft, Airframe, any Engine or any Part to
the manufacturer thereof or, to the extent permitted by Section B
of Annex C, to any third-party maintenance provider, for testing,
service, repair, maintenance or overhaul work on the Aircraft,
Airframe, any Engine or any Part, or, to the extent required or
permitted by the terms of Section D of Annex C, for alterations
or modifications in or additions to the Aircraft, Airframe or any
Engine, it being understood that, with respect to Engines and
Parts, delivery may be accomplished by transport on licensed or
bonded common carriers qualified in the shipping and transport of
such items.
7.2.3 INSTALLATION OF ENGINES ON OWNED AIRCRAFT
Install or permit any Permitted Sublessee to install an
Engine on an airframe owned by Lessee or such Permitted
Sublessee, as the case may be, free and clear of all Liens,
except (a) those of the type permitted under clauses (d), (e) and
(f) of Section 6 and those that apply only to engines
(other than Engines) and/or only to parts, appliances,
instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts), and (b) the rights of third parties
under normal interchange or pooling agreements and arrangements
of the type that would be permitted under Section 7.2.1.
7.2.4 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
Install or permit any Permitted Sublessee to install an
Engine on an airframe leased to Lessee or such Permitted
Sublessee, or purchased by Lessee or such Permitted Sublessee
subject to a mortgage, security agreement, conditional sale or
other secured financing arrangement, but only if (a) such
airframe is free and clear of all Liens, except (i) the rights of
the parties to such lease, or any such secured financing
arrangement, covering such airframe and (ii) Liens of the type
permitted by clauses (a) and (b) of Section 7.2.3 and (b) Lessee
shall have received from the lessor, mortgagee, secured party or
conditional seller, in respect of such airframe, a written
agreement (which may be a copy of the lease, mortgage, security
agreement, conditional sale or other agreement covering such
airframe), whereby such Person agrees, for the effective and
enforceable benefit of, among others, Lessor, that neither such
Person nor its successors or assigns will acquire or claim any
right, title or interest in, or Lien on, such Engine by reason of
such Engine being installed on such airframe.
7.2.5 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT
Install or permit any Permitted Sublessee to install an
Engine on an airframe owned by Lessee or such Permitted
Sublessee, leased to Lessee or such Permitted Sublessee, or
purchased by Lessee or such Permitted Sublessee subject to a
conditional sale or other security agreement under circumstances
where neither Section 7.2.3 or 7.2.4 is applicable; provided,
however, that in the event of any such installation, such Engine
shall be deemed to have suffered an Event of Loss as of the date
of such installation, with the effect that Lessee shall be
required to replace such Engine with a Replacement Engine meeting
the requirements of, and in accordance with, Section 10. Until
Section 10 has been fully complied with, Lessor's interest in any
such Engine shall continue in full force and effect.
7.2.6 SUBLEASING
With respect to the Aircraft, Airframe or any Engine,
enter into a sublease with any U.S. Air Carrier or certificated
Canadian air carrier, but only if:
(a) Lessee shall provide 15 days' advance written
notice to Lessor;
(b) At the time that Lessee enters into such sublease,
no such U.S. Air Carrier or certificated Canadian air carrier
shall be insolvent or subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding,
or any similar non-ordinary course transaction, shall be seeking
any reorganization or any readjustment of its debts or shall be,
or shall have substantially all of its property, in the
possession of any liquidator, trustee, receiver or similar
person;
(c) No such sublease shall provide for payment of
rent, or any amount in lieu of rent, (i) more than three months
in advance, or (ii) less frequently than once every month;
(d) Any such sublease (i) shall include provisions for
the registration, maintenance, operation, possession, insurance
and inspection of the Aircraft that are substantially the same
as, or (from a lessor's perspective) more favorable than, the
applicable provisions of Sections 7, 10 and 11, (ii) shall
provide that such U.S. Air Carrier or certificated Canadian air
carrier may not further sublease or transfer its interests
(except transfers of the type permitted in Sections 7.2.1 through
7.2.5, inclusive) in the Aircraft, Airframe, Engines or Aircraft
Documents, (iii) shall not extend beyond the end of the Term, and
(iv) shall be expressly subject and subordinate to all the terms
of this Agreement and to the rights, powers and remedies of
Lessor hereunder, including, without limitation, Lessor's rights
under Section 14 to repossess the Aircraft, Airframe, Engines and
Aircraft Documents and to terminate such sublease, upon the
occurrence of an Event of Default;
(e) Lessee shall furnish to Lessor evidence reasonably
satisfactory to Lessor that the insurance required by Section 10
remains in effect;
(f) All necessary action, if any, shall have been
taken to continue in full force and effect (i) the perfection of
Lessor's title to and interest in the Aircraft, Airframe, Engines
and Aircraft Documents and (ii) Lessor's rights under this Lease;
(g) All necessary documents shall have been duly
filed, registered or recorded in such public offices as may be
required fully to preserve the title of, and the priority of the
interest of, Lessor and Lessor's Lender, if any, in the Aircraft,
Airframe, Engines and Aircraft Documents;
(h) Each such sublease shall be assigned by Lessee to
Lessor as security for the performance of all of Lessee's
obligations under this Lease (with Lessee retaining all rights of
sublessor thereunder, to the extent consistent with this Section
7.2.6, (i) except the right to receive rents and (ii) if and for
so long as there shall not have occurred and be continuing an
Event of Default);
(i) Lessee shall reimburse the reasonable out-of-
pocket fees and expenses, including, without limitation,
reasonable fees and disbursements of counsel, incurred by Lessor
in connection with any such sublease; and
(j) For all purposes of this Section 7.2.6, the term
"sublease" shall be deemed to include interchange agreements with
respect to the Aircraft or Airframe.
7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER
RELINQUISHMENT OF POSSESSION
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives possession of
the Aircraft in accordance with Section 7.2 shall be subject and
subordinate to all the terms of this Lease, and to Lessor's
rights, powers and remedies hereunder, including, without
limitation (i) Lessor's right to repossess the Aircraft pursuant
to Section 14, (ii) Lessor's right to terminate and avoid such
sublease, delivery, transfer or relinquishment of possession upon
the occurrence of an Event of Default and (iii) the right to
require such person to forthwith deliver the Aircraft, the
Airframe, Engines and Aircraft Documents subject to such transfer
upon the occurrence of an Event of Default;
(b) Lessee shall remain primarily liable hereunder for the
performance of all the terms of this Lease to the same extent as
if such transfer had not occurred and no transfer of possession
of the Aircraft, the Airframe or any Engine, any Part or any
Aircraft Documents shall in any way discharge or diminish any of
Lessee's obligations to Lessor hereunder or under any Operative
Agreement;
(c) Lessee shall ensure that no sublease, delivery,
transfer or relinquishment permitted under Section 7.2 shall
affect the United States registration of the Aircraft;
(d) Any event that constitutes or would, with the passage
of time, constitute an Event of Loss under paragraph (c), (d), or
(e) of the definition of such term (as set forth in Annex A)
shall not be deemed to violate the provisions of Section 7.2; and
(e) Any Wet Lease customary in the North American
commercial airline industry and entered into by Lessee for a term
of less than six (6) months in the ordinary course of its
business with U.S. Air Carriers and certificated Canadian air
carriers that are not insolvent or subject to any bankruptcy,
insolvency, liquidation, reorganization, dissolution or similar
proceeding, or any similar non-ordinary course transaction, shall
be seeking any reorganization or any readjustment of its debts or
shall be, or shall have substantially all of its property, in the
possession of any liquidator, trustee, receiver or similar person
shall not constitute a delivery, transfer or relinquishment of
possession for purposes of Section 7.2.
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS; OTHER
LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
At all times during the Term, Lessee shall comply with, or
cause to be complied with, each of the provisions of Annex C,
which provisions are hereby incorporated by this reference as if
set forth in full herein. Without limiting any other rights of
Lessor under this Lease or any other Operative Agreement, Lessee
acknowledges that the provisions of this Section 8 and of Annex C
are of the essence of this Lease and the transactions
contemplated herein.
8.2 Information, Certificates, Notices and Reports
8.2.1 FINANCIAL INFORMATION
Upon Lessor's request, Lessee will furnish to Lessor to
the extent not already provided pursuant to Section 8.2.3:
(a) Within 60 days after the end of each of the first
three fiscal quarters in each fiscal year of Lessee, a
consolidated balance sheet of Lessee as of the end of such
quarter and related statements of income and cash flows for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, setting forth in each case
in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, prepared in
accordance with GAAP; provided that so long as Lessee is subject
to the reporting requirements of the Securities Exchange
Act of 1934, a copy of Lessee's report on Form 10-Q for such
fiscal quarter (together with all documents containing such
financial information incorporated by reference therein) will
satisfy this paragraph (a).
(b) Within 120 days after the end of each fiscal year
of Lessee, a consolidated balance sheet of Lessee as of the end
of such fiscal year and related statements of income and cash
flows of Lessee for such fiscal year, in comparative form with
the preceding fiscal year, prepared in accordance with GAAP,
together with a report of Lessee's independent certified public
accountants with respect to their audit of such financial
statements; provided that so long as Lessee is subject to the
reporting requirements of the Securities Exchange Act of 1934, a
copy of Lessee's report on Form 10-K for such fiscal year
(including all corresponding publicly-available annual reports to
stockholders, if not previously furnished) will satisfy this
paragraph (b).
8.2.2 ANNUAL CERTIFICATE
Upon Lessor's request, within 120 days after the close
of each fiscal year of Lessee, Lessee shall deliver to Lessor a
certificate of Lessee, signed by any Vice President of Lessee, to
the effect that such Vice President is familiar with or has
reviewed or caused to be reviewed the relevant terms of this
Lease and the other Operative Agreements and has made, or caused
to be made under his or her supervision, a review of the
transactions and condition of Lessee during the preceding fiscal
year, and that such review has not disclosed the existence during
such fiscal year, nor does such Vice President have knowledge of
the existence as at the date of such certificate, of any Default
or Event of Default or, if any such Default or Event of Default
existed or exists, specifying the nature and period of existence
thereof and the action Lessee has taken or is taking or proposes
to take with respect thereto.
8.2.3 SEC REPORTS
Lessee will furnish to Lessor:
(a) upon Lessor's request, promptly after filing with
the SEC, copies of Lessee's annual reports on Form 10-K
(including all corresponding publicly-available annual reports to
stockholders, if not previously furnished), and quarterly reports
on Form 10-Q (in each case, excluding exhibits unless Lessor
requests otherwise); and
(b) promptly after filing with the SEC, copies of
current reports on Form 8-K, or any similar reports filed with
the SEC (in each case, excluding exhibits unless Lessor requests
otherwise), and (ii) upon Lessor's request, promptly upon
distribution thereof, copies of all periodic reports furnished by
Lessee to its stockholders generally.
8.2.4 NOTICE OF DEFAULT
Lessee will furnish to Lessor, immediately upon any
senior officer or financial officer of Lessee, or other
administrative officer of Lessee having any material
responsibility for Lessee's day-to-day compliance with its
obligations under this Lease, becoming aware that a Default or an
Event of Default has occurred, a certificate of Lessee, signed by
any such officer of Lessee, describing such Default or
Event of Default in reasonable detail, with a statement
describing the action Lessee has taken or is taking or proposes
to take with respect thereto.
8.2.5 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Lessor such
information (other than with respect to the citizenship of
Lessor) within Lessee's or any Permitted Sublessee's possession,
or reasonably available to or obtainable by Lessee or such
Permitted Sublessee, as may be required to enable Lessor timely
to file any reports required to be filed by it as lessor under
the Lease with any Government Entity because of, or in connection
with, the interest of Lessor in the Aircraft, Airframe, Engines
or Aircraft Documents or this Lease; provided, however, that with
respect to any such information which Lessee reasonably deems
commercially sensitive or confidential, Lessor shall afford
Lessee a reasonable opportunity to seek from any such Government
Entity a waiver of the obligation of Lessor to file any such
information, or shall consent to the filing of such information
directly by Lessee in lieu of filing by Lessor and if any such
waiver or consent is evidenced to the reasonable satisfaction of
Lessor, then Lessee shall not be required to furnish such
information to Lessor.
8.2.6 OTHER INFORMATION
Lessee shall provide to Lessor from time to time such
other information or data as Lessor may reasonably request
concerning the Aircraft, Airframe, Engines or Aircraft Documents,
or Lessee's financial condition, or otherwise relating to the
transactions or matters contemplated herein and in the other
Operative Agreements, in each case if and to the extent within
Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee.
8.3 REPRESENTATIONS AND WARRANTIES
(a) Lessee hereby makes each of the representations and
warranties set forth in Part A of Schedule 3 hereto.
(b) Lessor hereby makes each of the representations and
warranties set forth in Part B of Schedule 3 hereto.
SECTION 9. LOSS, DESTRUCTION, REQUISITION, ETC.
9.1 EVENT OF LOSS WITH RESPECT TO AIRCRAFT
9.1.1 NOTICE
(a) Upon the occurrence of an Event of Loss with
respect to the Airframe, or the Airframe and the Engines and/or
engines installed thereon at the time of such Event of Loss,
Lessee shall promptly (and in any event within five (5) days
after such occurrence) give Lessor written notice of such Event
of Loss.
9.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) On or before the Business Day next following the
earlier of (x) the sixty-first day following the date of the
occurrence of such Event of Loss, and (y) the second Business Day
following the receipt of insurance proceeds with respect to such
occurrence (the actual date of payment being sometimes referred
to as the "Event of Loss Payment Date"), Lessee shall pay to
Lessor: (A) the Stipulated Loss Value of the Aircraft, plus
(B) all unpaid Basic Rent due on or before the Event of Loss
Payment Date, plus (C) all unpaid Supplemental Rent due on or
prior to the Event of Loss Payment Date, minus (D) any prepaid
Basic Rent applicable to the period following the date of payment
in full of all amounts specified in clauses (A) - (C).
(b) Upon payment in full of all amounts described in
the foregoing paragraph (a), (i) the obligation of Lessee to pay
Basic Rent hereunder with respect to the Aircraft shall
terminate, (ii) the Term for the Aircraft shall end, and (iii)
Lessor will transfer the Aircraft to Lessee in its "AS-IS, WHERE-
IS" condition and subject to any insurer's salvage rights, but
otherwise in the manner described in Section 4.5.
9.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE
9.2.1 NOTICE
Upon the occurrence of an Event of Loss with respect to
an Engine under circumstances in which an Event of Loss with
respect to the Airframe has not occurred, Lessee shall promptly
(and in any event within 15 days after such occurrence) give
Lessor written notice of such Event of Loss.
9.2.2 REPLACEMENT OF ENGINE
Lessee shall, as promptly as possible and in any event
within 60 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, in compliance with Section
9.2.3 and as replacement for the Engine with respect to which any
Event of Loss occurred, title to a Replacement Engine free and
clear of all Liens other than Permitted Liens. Such Replacement
Engine shall be an engine manufactured by Engine Manufacturer
that is the same model and modification status as the Engine to
be replaced thereby, or an improved model and/or modification
status, and that is suitable for installation and use on the
Airframe, and that has performance and durability
characteristics, and a value, utility and remaining useful life,
at least equal to, and is in at least as good operating condition
as, the Engine to be replaced thereby (assuming that such Engine
was of the value and utility and in the condition and repair
required by the terms hereof immediately prior to the occurrence
of the Event of Loss).
9.2.3 CONDITIONS TO REPLACEMENT OF ENGINE
Prior to or at the time of conveyance of title to any
Replacement Engine to Lessor, Lessee shall promptly take each of
the following actions at its cost and expense, and shall promptly
furnish the following agreements, instruments, certificates and
documents to (and in each case reasonably satisfactory in form
and substance to) Lessor:
(a) furnish Lessor with a full warranty ▇▇▇▇ of sale
duly conveying to Lessor such Replacement Engine, together with
such evidence of title as Lessor may reasonably request;
(b) cause (i) a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to be
delivered to Lessor for execution and, upon such execution, to be
filed for recordation with the FAA pursuant to the Act and (ii)
such Financing Statements and other filings, as Lessor may
reasonably request, duly executed by Lessee and, to the extent
applicable, Lessor (and Lessor shall execute and deliver the
same), to be filed in such locations as any such party may
reasonably request;
(c) furnish such evidence of compliance with the
insurance provisions of Section 10 with respect to such
Replacement Engine as Lessor may reasonably request;
(d) furnish an opinion of Lessee's counsel reasonably
satisfactory to Lessor to the effect that (i) upon such
conveyance, Lessor will acquire full legal and marketable title
to such Replacement Engine free and clear of all Liens other than
Permitted Liens, (ii) such Replacement Engine will be leased
hereunder to the same extent as the Engine replaced thereby and
(iii) to such further effect as Lessor may reasonably request;
(e) furnish an opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, as special
FAA counsel, at Lessee's cost and expense, as to the due
recordation of each Lease Supplement with respect to such
Replacement Engine and as to such other matters concerning the
Act as Lessor may reasonably request;
(f) furnish a certificate of an Appraiser, certifying
that such Replacement Engine has performance and durability
characteristics, and a value, utility and remaining useful life
at least equal to, and is in at least as good operating condition
as, the Engine so replaced, assuming such Engine was of the
value, utility and remaining useful life, and in the condition
and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss;
(g) take such other actions and furnish such other
certificates and documents, as Lessor may reasonably request in
order that such Replacement Engine be duly and properly titled in
Lessor and leased hereunder to the same extent as initially
required with respect to the Engine so replaced.
9.2.4 CONVEYANCE TO LESSEE
Upon full compliance by Lessee with the applicable
terms of Sections 9.2.2 and 9.2.3, Lessor will transfer to Lessee
the Airframe or Engine, as the case may be, with respect to which
such Event of Loss occurred, in accordance with Section 4.4,
provided that Lessor shall not be required to effect any such
transfer if and for so long as there shall have occurred and be
continuing any Default (other than with respect to Section 14.4
or 14.5) or Event of Default.
9.3 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of
damage or loss not constituting an Event of Loss (the application
of which is provided for in Section 10), received at any time by
Lessor, Lessee or any Permitted Sublessee from any Person in
respect of any Event of Loss will be applied as follows:
9.3.1 LOSS OF AIRFRAME
If such amounts are received, in whole or in part, with
respect to the Airframe, such amounts shall be applied as
follows:
(a) first, if the sum described in Section 9.1.2 has
not then been paid in full by Lessee, such amounts shall be paid
to Lessor to the extent necessary to pay in full such sum;
(b) second, the remainder, if any, shall, subject to
Section 9.4, be paid to Lessee.
9.3.2 LOSS OF ENGINE
If such amounts are received with respect to an Engine
under the circumstances contemplated in Section 9.2.1, such
amounts shall be paid over to, or retained by, Lessor and shall
be held in accordance with Section 9.4 and if, and at such time
as, Lessee shall have fully complied with the applicable terms of
Sections 9.2.2 and 9.2.3 with respect to the Event of Loss for
which such amounts are received, such amounts shall, subject to
Section 9.4, be paid to Lessee.
9.4 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT
Any amount described in this Section 9 that is payable or
creditable to, or retainable by, Lessee shall not be paid or
credited to, or retained by, Lessee if at the time such payment,
credit or retention would otherwise occur a Default or an Event
of Default shall have occurred and be continuing, but shall
instead be held by or paid over to Lessor as security for the
obligations of Lessee under this Lease and the other Operative
Agreements and applied to Lessee's obligations under this Lease
and the other Operative Agreements as and when due. At such time
as there shall not be continuing any Default or any Event of
Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 9.4.
SECTION 10. INSURANCE
10.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each
of the provisions of Annex D, which provisions are hereby
incorporated by this reference as if set forth in full herein.
Without limiting any other rights of Lessor under this Lease or
any other Operative Agreement, Lessee acknowledges that the
provisions of this Section 10 and of Annex D are of the essence
of this Lease and the transactions contemplated herein.
10.2 LESSOR'S RIGHT TO MAINTAIN INSURANCE
In the event that Lessee shall fail to maintain, or cause to
be maintained, insurance as herein provided, Lessor may at its
option (but shall not be obligated to) provide such insurance
and, in such event, Lessee shall, upon demand, reimburse Lessor,
as Supplemental Rent, for the cost thereof. No such payment,
performance or compliance shall be deemed to cure any Default or
Event of Default or otherwise relieve Lessee of its obligations
with respect thereto.
10.3 INSURANCE FOR OWN ACCOUNT
Nothing in Section 10 shall limit or prohibit (a) Lessee
from maintaining the policies of insurance required under Annex D
with higher limits than those specified in Annex D, or (b) Lessor
from obtaining insurance for its own account (and any proceeds
payable under such separate insurance shall be payable as
provided in the policy relating thereto); provided, however, that
no insurance may be obtained or maintained by Lessee or Lessor
that would limit or otherwise adversely affect the coverage of
any insurance required to be obtained or maintained by Lessee
pursuant to this Section 10 and Annex D.
10.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds
received as a result of the occurrence of an Event of Loss with
respect to the Aircraft or any Engine under policies required to
be maintained by Lessee pursuant to this Section 10 will be
applied in accordance with Section 9.3. All proceeds of
insurance required to be maintained by Lessee, in accordance with
Section 10 and Section B of Annex D, in respect of any property
damage or loss not constituting an Event of Loss with respect to
the Aircraft, Airframe or any Engine will be applied in payment
(or to reimburse Lessee) for repairs or for replacement property
in accordance with the terms of Section 8.1, and any balance
remaining after compliance with said Section 8.1 with respect to
such damage or loss shall be paid over to, or retained by,
Lessee.
10.5 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT
Any amount described in this Section 10 that is payable or
creditable to, or retainable by, Lessee shall not be paid or
credited to, or retained by, Lessee if at the time such payment,
credit or retention would otherwise occur a Default or an Event
of Default shall have occurred and be continuing, but shall
instead be held by or paid over to Lessor as security for the
obligations of Lessee under this Lease and the other Operative
Agreements and applied to Lessee's obligations under this Lease
and the other Operative Agreements as and when due. At such time
as there shall not be continuing any Default or any Event of
Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 10.5.
SECTION 11. INSPECTION
(a) At all reasonable times Lessor and its authorized
representatives (collectively, the "Inspecting Parties") may
inspect the Aircraft, Airframe, Engines and Aircraft Documents
and Lessee shall cooperate, and shall cause any Permitted
Sublessee to cooperate, with the Inspecting Parties in connection
with any such inspection (including, without limitation,
permitting any such Inspecting Party to make copies of
such Aircraft Documents not reasonably deemed confidential by
Lessee or such Permitted Sublessee).
(b) Subject to the provisions of Section 11(c)(ii) below,
such inspection of the Aircraft hereunder shall not restrict
Lessor from opening any panels, bays, doors, etc..
(c) With respect to such rights of inspection, Lessor
shall not:
(i) have any duty or liability to make, or any duty
or liability arising out of, any such visit, inspection or
survey or failure to make any such visit, inspection or
survey; or
(ii) so long as no Default or Event of Default has
occurred and is continuing, exercise its inspection rights
hereunder other than on reasonable notice and so as not to
unreasonably interfere with Lessee's maintenance and
operation of the Aircraft, Airframe and Engines.
(d) Each Inspecting Party inspecting the Aircraft,
Airframe, Engines and Aircraft Documents hereunder shall bear its
own expenses in connection with any such inspection, unless (i) a
Default or Event of Default has occurred and is continuing or
(ii) such person discovers, in connection therewith, any material
failure by Lessee or any Permitted Sublessee to comply with the
provisions of this Lease, in each such case Lessee shall bear all
such expenses.
(e) Lessor will indemnify and hold harmless Lessee from
and against all losses arising from death or injury to any
Inspecting Party in connection with any such visit, inspection or
survey unless arising from the gross negligence or willful
misconduct of Lessee.
(f) If requested by Lessor, Lessee shall give, or shall
cause any Permitted Sublessee to give, reasonable prior notice to
Lessor of the date upon which the Aircraft, Airframe or any
Engine undergoes its next scheduled maintenance visit and/or next
major check, and with respect to any Engine the next off-the-wing
maintenance, and shall advise Lessor of the name and location of
the relevant maintenance performer and shall, at least 5 days
prior to commencement of such major check or maintenance, make
available for inspection by Lessor all relevant Aircraft
Documents at Lessee's records facility in the United States, or
at such Permitted Sublessee's records facility, or at the
premises of the maintenance performer.
SECTION 12. ASSIGNMENT; MERGER; LESSEE COVENANTS
12.1 IN GENERAL
(a) This Lease and the other Operative Agreements shall
be binding upon and inure to the benefit of Lessor and Lessee and
their respective successors and permitted assigns. Except as
otherwise expressly permitted in Section 7.2 or 7.3, or as
permitted by Section 12.2.1, Lessee will not, without the prior
written consent of Lessor, assign any of its rights under this
Lease.
(b) Lessee acknowledges and agrees that Lessor shall have
the absolute right to transfer or assign to any person, firm,
corporation or other entity (whether or not an affiliate of
Lessor), including, but not limited to, a special purpose
corporation owned directly or indirectly by Lessor, any or
all of Lessor's rights, obligations, benefits and interests under
this Lease, including, without limitation, the right to receive
Rent or any other payment due under this Lease, the right to
transfer, assign or pledge title to any Item or to transfer or
assign the right to purchase any Item and the right to make all
waivers and agreements, to give all notices, consents and
releases, to take all action upon the occurrence of an Event of
Default, or to do any and all other things which Lessor is or may
become entitled to do under this Lease; provided, however, that
in the event any transfer, pledge or assignment would otherwise
cause any increase in the tax indemnification obligations of
Lessee, Lessee's obligations in respect of any tax
indemnification obligations hereunder shall be limited to the
amount that would have been payable had no such transfer, pledge
or assignment taken place. Notwithstanding the foregoing, Lessor
shall not transfer, assign or pledge title to the Aircraft or any
Item (i) if, as a result of such transfer, assignment or pledge,
the Aircraft would be deregistered or (ii) if such transferee,
assignee or pledgee shall be a Person (other than a special
purpose corporation owned directly or indirectly by Lessor) with
a Net Worth of less than $20,000,000. Lessee agrees that no such
transfer, pledge or assignment will materially change the duty of
or materially increase the burden of risk imposed on Lessee, and
Lessee waives any provision of applicable Law that would or might
grant Lessee the right to demand assurances or compensation of
any kind from the transferee or to require the transferee to take
any action on account of such transfer or assignment, other than
as expressly required herein. Lessee acknowledges that, if
Lessor should sell or transfer to a third party all of Lessor's
interest under this Lease and in the Aircraft, Lessor shall
thereupon be relieved of all of its obligations hereunder (except
in the case of a transfer to a special purpose corporation owned
or controlled by Lessor) and Lessor's transferee (and, if the
transferee is a trust, the beneficial owners of such trust) shall
succeed to all of Lessor's rights, interests and obligations
under this Lease as though Lessor's transferee had been the
initial lessor hereunder. Lessor shall notify Lessee in writing
written 10 days of any assignment or transfer pursuant to this
Section 12.1(b) (but failure to do so shall not constitute a
default by Lessor under this Lease).
(c) Without limiting the generality of Section 12.1(b),
Lessee acknowledges and agrees that the terms and conditions of
this Lease have been agreed to by Lessor in anticipation of its
being able to sell, assign, transfer or otherwise dispose of its
rights under and interests in this Lease and its rights in the
Aircraft and/or its being able to grant a pledge or security
interest in all or any of its rights and interest under this
Lease and in the Aircraft or any Item to one or more lenders, to
an agent or trustee representing such lenders, or to any other
party having an interest in any Item or participation in the
transaction which is the subject of this Lease, any or all of
which may rely on and shall be entitled to the benefit of the
provisions of this Section 12.1(c). Lessee shall, upon the
written instruction of Lessor: (i) consent to and recognize any
such assignment or pledge; (ii) accept the directions or demands
or such assignee in place of those of Lessor; (iii) surrender any
leased property only to such assignee; (iv) pay all Rent payable
hereunder and do any and all things required of Lessee hereunder
directly to or for the benefit of such assignee, and not
terminate this Lease, notwithstanding any default by Lessor or
the existence of any other liability or obligation of any kind or
character on the part of Lessor to Lessee whether or not arising
hereunder; provided, however, nothing herein shall constitute a
waiver by Lessee of any rights or claims it may have against
Lessor with respect to such default, liability or obligation; (v)
not require any assignee or pledgee of this Lease to perform any
duty, covenant or condition required to be performed by Lessor
under the terms of this Lease for which Lessor agrees to remain
liable, all rights of Lessee in any such connection aforesaid
being hereby waived as to any and all such assignees to
the extent permitted by applicable law; (vi) expand general tax
indemnity and general indemnity obligations under Sections 16 and
17 to cover, and cause to be named as loss payee/additional
insured under policies of insurance maintained by Lessee under
Section 10, as instructed by Lessor, any purchaser/assignee of
the Aircraft and this Lease or any lender/collateral
assignee/pledgee of the Aircraft and this Lease, while
maintaining such indemnity obligations for the benefit of Lessor;
(vii) extend to such assignees, representations, warranties,
waivers and disclaimers of Lessee under the Operative Agreements
which remain in effect on the date of any such sale, assignment,
transfer, other disposition, grant or pledge, and otherwise
cooperate and execute or provide any documents, certificates or
opinions which Lessor may reasonably request in order to
effectuate any such transfer, pledge or assignment or any of the
foregoing; (viii) execute an estoppel certificate regarding the
existence or absence of defaults hereunder and a consent to such
financing, in each case in such form and containing such
additional terms as Lessor may reasonably request and at Lessor's
sole cost and expense; (ix) enter into a lease amendment and
novation agreement and/or a pledge agreement between Lessor, the
Pledgee and Lessee (or any permitted sublessee) in its capacity
of third party holder of the pledged Aircraft in each case in
such form as Lessor may reasonably request to the extent that
such lease amendment and novation agreement and/or pledge
agreement does not adversely affect Lessee's rights in any
material respect or materially increase Lessee's obligations
under the Operative Agreements; and (x) subject to mutual
agreement between the parties as to schedule, Lessee will,
consistent with its operational requirements, make the Aircraft
and the Aircraft Documents available for inspection by any
potential transferee or assignee of Lessor; provided that
arrangements for such inspection are made through Lessor and that
such potential transferee or assignee shall be accompanied by
Lessor during such inspection. Notwithstanding the foregoing,
Lessor agrees to obtain from any lender/collateral
assignee/pledgee of the Aircraft or Lease on behalf of Lessee
quiet enjoyment rights substantially equivalent to the rights
provided under Section 4.3 hereof. Lessor further agrees that
to the extent Lessee incurs reasonable out-of-pocket costs,
including, without limitation, reasonable attorneys' fee, in
connection with the preparation, review and execution of
documentation referenced in the foregoing clauses (vii), (viii)
and (ix) of this Section 12.1(c), such costs shall be for the
account of Lessor.
12.2 MERGER OF LESSEE
12.2.1 IN GENERAL
Lessee shall not consolidate or merge with or into any
other Person under circumstances in which Lessee is not the
surviving corporation, or convey, transfer or lease in one or
more transactions all or substantially all of its assets to any
other Person, unless:
(a) such person is organized, existing and in good
standing under the Laws of the United States, any State of the
United States or the District Columbia;
(b) such person is a U.S. Air Carrier;
(c) such person executes and delivers to Lessor a duly
authorized, legal, valid, binding and enforceable agreement,
reasonably satisfactory in form and substance to Lessor,
containing an express assumption by such person of the due and
punctual performance and observance of each covenant, agreement
and condition in the Operative Agreements to be performed or
observed by Lessee;
(d) such person makes such filings and recordings,
including, without limitation, any filing or recording with the
FAA pursuant to the Act, as shall be necessary or desirable to
evidence such consolidation or merger;
(e) immediately after giving effect to such
consolidation or merger (i) no Default or Event of Default shall
have occurred and be continuing and (ii) the Net Worth of such
person shall not be less than the Net Worth of Lessee immediately
prior to such consolidation or merger; and
(f) Lessee shall deliver to Lessor a certificate
signed by the President or any Vice President of Lessee stating
that such consolidation or merger and the assumption agreement
described in clause (c) above comply with this Section 12.2, and
an opinion in form and substance satisfactory to Lessor of
outside counsel satisfactory to Lessor to the effect that the
agreements entered into to effect such consolidation or merger
and such assumption agreement are legal, valid and binding
obligations of such person, and such other matters as Lessor may
reasonably request.
12.2.2 EFFECT OF MERGER
Upon any such consolidation or merger of Lessee with or
into, or the conveyance, transfer or lease by Lessee of all or
substantially all of its assets to, any Person in accordance with
this Section 12.2, such Person will succeed to, and be
substituted for, and may exercise every right and power of,
Lessee under the Operative Agreements with the same effect as if
such person had been named as "Lessee" therein. No such
consolidation or merger, or conveyance, transfer or lease, shall
have the effect of releasing Lessee or such Person from any of
the obligations, liabilities, covenants or undertakings of Lessee
under the Operative Agreements.
12.3 COVENANTS OF LESSEE
Lessee covenants and agrees, at its own cost and expense, as
follows:
(a) Lessee shall at all times maintain its corporate
existence, except as permitted by Section 12.2 of this Lease, and
shall not wind-up, liquidate or dissolve or take any action, or
fail to take any action, that would have the effect of any of the
foregoing. Lessee will do or cause to be done all things
necessary to preserve and keep in full force and effect its
rights (charter and statutory) and franchises, except that Lessee
shall not be required to preserve or keep in full force and
effect any right or franchise if Lessee shall reasonably
determine that the preservation thereof is no longer necessary or
desirable in the conduct of its business and if the loss thereof
does not (i) adversely affect or diminish the rights of Lessor
under the Operative Agreements or (ii) materially and adversely
affect Lessee's ability to observe or perform its obligations,
liabilities and agreements under the Operative Agreements.
(b) Lessee shall at all times remain a U.S. Air Carrier
and shall at all times be otherwise certificated and registered
to the extent necessary to entitle Lessor the rights afforded to
lessors of aircraft equipment under Section 1110.
(c) Lessee will give Lessor timely written notice (but in
any event not later than three Business Days after its
occurrence) of any relocation of its chief executive office (as
such term is defined in Article 9 of the UCC) from its then
present location and will promptly take any action required by
Section 12.3(d)(iii) as a result of such relocation.
(d)(i) Lessee shall duly execute, acknowledge and
deliver, or shall cause to be executed, acknowledged and
delivered, all such further agreements, instruments, certificates
or documents, and shall do and cause to be done such further acts
and things, in any case, as Lessor shall reasonably request in
connection with its administration of, or to carry out more
effectually the purposes of, or to better assure and confirm unto
it the rights and benefits to be provided under, this Agreement
and the other Operative Agreements; provided, however, that no
such agreement, instrument, certificate or document shall
adversely affect Lessor's rights in any material respect or
materially increase Lessee's obligations under the Operative
Agreements.
(ii) Lessee shall promptly take such action with
respect to the recording, filing, rerecording and refiling of
this Lease and the supplements hereto, including, without
limitation, Lease Supplement No. 1, as shall be necessary to
establish, perfect and protect the interests and rights of Lessor
in and to the Aircraft and under the Lease. Lessee shall furnish
to Lessor such information in Lessee's possession or otherwise
reasonably available to Lessee as may be required to enable
Lessor to make application for registration of the Aircraft under
the Act (subject to Lessee's rights under Section 7.1.2 of this
Lease). Lessee shall bear the reasonable attorneys' fees and
disbursements of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, special FAA Counsel, in
connection with the filing for recordation of the FAA Filed
Documents with the FAA Aircraft Registry in Oklahoma City.
(iii) Lessee, at its sole cost and expense, will
cause the Financing Statements and all continuation statements
(and any amendments necessitated by any combination,
consolidation or merger pursuant to Section 12.2 of this Lease,
or any relocation of its chief executive office) in respect of
the Financing Statements to be prepared and, subject only to the
execution and delivery thereof by Lessor, duly and timely filed
and recorded, or filed for recordation, to the extent permitted
under the UCC or similar law of any other applicable
jurisdiction.
(e) Neither Lessee nor any person authorized to act on
its behalf will directly or indirectly offer any beneficial
interest or Security relating to the ownership of the Aircraft or
this Lease for sale to, or solicit any offer to acquire any such
interest or Security from, or sell any such interest or Security
to, any person in violation of the Securities Act or applicable
state or foreign securities Laws.
SECTION 13. EVENTS OF DEFAULT
The occurrence of any one or more of the following
circumstances, conditions, acts or events, for any reason
whatsoever and whether any such circumstance, condition, act or
event shall be voluntary or involuntary or come about or
be effected by operation of Law or pursuant to or in compliance
with any judgment, decree, order, rule or regulation of any
Government Entity, shall constitute an Event of Default:
13.1 PAYMENTS
Lessee shall fail to pay any amount of Basic Rent,
Supplemental Rent and/or Stipulated Loss Value within three (3)
Business Days after the same shall have become due, or Lessee
shall fail to pay any other amount due hereunder or under any
other Operative Agreement related to this Lease and such failure
shall continue for a period in excess of ten (10) days from and
after the date of any written demand therefor from Lessor,
accompanied by reasonably detailed invoices or other supporting
documentation establishing that Lessor is entitled to the amount
demanded.
13.2 INSURANCE
Lessee shall fail to carry and maintain, or cause to be
carried and maintained, insurance on and in respect of the
Aircraft, Airframe and Engines in accordance with the provisions
of Section 10, or Lessee shall operate the Aircraft, Airframe or
Engines, or permit the Aircraft, Airframe or Engines to be
operated, at any time when such insurance shall not be in effect.
13.3 CORPORATE EXISTENCE
Lessee shall fail to maintain at all times its corporate
existence (except as permitted by Section 12.2), or Lessee shall
otherwise wind-up, liquidate or dissolve, or Lessee shall take or
fail to take any action that would have the effect of any of the
foregoing.
13.4 CERTAIN COVENANTS
Lessee shall not observe, perform or comply with, or shall
otherwise breach, any of its obligations under Section 7.1 (other
than Sections 7.1.3 and 7.1.4, which shall be subject to Section
13.5), Section 7.2 (in respect of the Aircraft or Airframe) or
Sections 12.1 or 12.2.
13.5 OTHER COVENANTS
Lessee shall fail to observe, perform or comply with, or
shall otherwise breach, any other covenant, agreement or
obligation set forth herein or in any other Operative Agreement
(other than the covenants, agreements and obligations set forth
in the first sentence of Section 4.6 (a) of this Lease), and such
failure shall continue unremedied for a period of ten (10) days
(or any shorter period as may be expressly set forth in such
other Operative Agreement) from and after the earliest of (i) the
date of written notice thereof to Lessee and (ii) an officer of
Lessee having actual or constructive knowledge of such failure to
perform or observe; provided, that if the Airworthiness
Certificate of an Aircraft is revoked and Lessor provides Lessee
with written notice of such revocation or Lessee has actual or
constructive knowledge of such revocation, any subsequent flight
operation of such Aircraft shall constitute an immediate Event of
Default.
13.6 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee herein or in
any other Operative Agreement (a) shall prove to have been
untrue, inaccurate or misleading in any material respect as of
the date made, and (b) if curable, the same shall remain uncured
for a period in excess of 10 days from and after the earlier of
(i) the date of written notice thereof to Lessee and (ii) an
officer of the Lessee having actual or constructive knowledge of
the falsity of such representation or warranty.
13.7 BANKRUPTCY AND INSOLVENCY
(a) Lessee shall consent to the appointment of or the
taking of possession by a receiver, trustee or liquidator of
itself or of a substantial part of its property, or Lessee shall
admit in writing its inability to pay its debts generally as they
come due, or does not pay its debts generally as they become due
or shall make a general assignment for the benefit of creditors,
or Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization,
liquidation or other relief in a case under any bankruptcy Laws
or other insolvency Laws (as in effect at such time) or an answer
admitting the material allegations of a petition filed against
Lessee in any such case, or Lessee shall seek relief by voluntary
petition, answer or consent, under the provisions of any other
bankruptcy or other similar Law providing for the reorganization
or winding-up of corporations (as in effect at such time) or
Lessee shall seek an agreement, composition, extension or
adjustment with its creditors under such Laws, or Lessee's board
of directors shall adopt a resolution authorizing corporate
action in furtherance of any of the foregoing; or
(b) an order, judgment or decree shall be entered by any
court of competent jurisdiction appointing, without the consent
of Lessee, a receiver, trustee or liquidator of Lessee or of any
substantial part of its property, or any substantial part of the
property of Lessee shall be sequestered, or granting any other
relief in respect of Lessee as a debtor under any bankruptcy Laws
or other insolvency Laws (as in effect at such time), and any
such order, judgment or decree of appointment or sequestration
shall remain in force undismissed, unstayed and unvacated for a
period of 60 days after the date of entry thereof; or
(c) a petition against Lessee in a case under any
bankruptcy Laws or other insolvency Laws (as in effect at such
time) is filed and not withdrawn or dismissed within 60 days
thereafter, or if, under the provisions of any Law providing for
reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction,
custody or control of Lessee or of any substantial part of its
property and such jurisdiction, custody or control remains in
force unrelinquished, unstayed and unterminated for a period of
60 days.
13.8 OTHER AGREEMENTS WITH LESSOR
Any "Event of Default" exists under any Other Lease
Agreement between Lessee and Lessor (or any Affiliate of either)
so long as either Lessor or any Affiliate thereof is the owner of
the Aircraft and/or the aircraft subject to such Other Lease
Agreement at the time of such "Event of Default."
13.9 DEREGISTRATION
Lessee causes the Aircraft to be deregistered in
contravention of Section 7.1.1 hereof or ceases to be a U.S. Air
Carrier.
13.10 TRANSFER
Lessee wrongfully transfers possession of the Aircraft,
Airframe, any Engine or any Part.
13.11 JUDGMENTS
A single uninsured judgment rendered by a court of
competent jurisdiction against the Lessee for the payment of more
than $1,000,000 is entered and not stayed, bonded (to Lessor's
reasonable satisfaction), or discharged within 30 days of the
date of entry.
13.12 MATERIAL ADVERSE CHANGE
Any Material Adverse Change, as determined by Lessor in
its sole and reasonable discretion, shall occur.
13.13 INDEBTEDNESS
Any indebtedness (defined in the broadest context) of at
least $1,000,000 in principal amount shall be accelerated by
reason of default.
13.14 OPERATIVE AGREEMENTS
The validity or enforceability of any Operative Agreement
shall be contested by Lessee.
13.15 SECURITY DEPOSIT
Upon the occurrence of an Event of Default hereunder,
Lessor shall have the right to apply all or any portion of the
Cash Deposit and to draw immediately, and without notice to
Lessee, upon the Letter of Credit. One or more drawings may be
made upon, or cash applied from, the Security Deposit up to the
amount of Lessor's damages resulting from all existing Events of
Default. If Lessor applies all or any portion of the amount so
drawn or applied for the purpose of curing any Event of Default
of Lessee hereunder, such Event of Default shall not be deemed
cured unless Lessee shall, within three (3) Business Days after
written demand therefor by Lessor, cause (i) the credit available
under the original Letter of Credit or any new or replacement
Letter of Credit and (ii) the Cash Deposit, together comprising
the Security Deposit, to be restored to their respective levels
(i.e., prior to such application or draw, as the case may be).
SECTION 14. REMEDIES AND WAIVERS
14.1 REMEDIES
If any Event of Default shall occur and be continuing,
Lessor may, at its option and at any time and from time to time,
exercise any one or more of the following remedies as Lessor in
its sole discretion shall elect:
14.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to
Lessee, to return promptly, and Lessee shall return promptly, all
or any part of the Aircraft, Airframe, Engines and Aircraft
Documents as Lessor may so demand, to Lessor or its order in the
manner and condition required by, and otherwise in accordance
with, all the provisions of Section 5 as if the Aircraft or
Aircraft Documents or any part thereof were being returned at the
end of the Term, or Lessor, at its option, may enter upon the
premises where the Aircraft, Airframe, any Engine, Aircraft
Documents, or any part thereof, are located and take immediate
possession of and remove the same 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 caused by such taking or
otherwise (except for any thereof arising from Lessor's gross
negligence or willful misconduct), and Lessee expressly waives
any right it may have under applicable Law to a hearing prior to
repossession of the Aircraft, Airframe, any Engine, Aircraft
Documents, or any part thereof.
14.1.2 SALE AND USE
Lessor may sell the Aircraft, Airframe, any Engine,
Aircraft Documents, or any part thereof, at public or private
sale, at such times and places, and to such Persons (including
Lessor), as Lessor may determine and, without limiting the
generality of the provisions of this Section 14, Lessor may hold
Lessee liable for the payment of any Basic Rent or Supplemental
Rent remaining unpaid at the time of such sale and relating to
any period prior to the date of such sale; or Lessor may
otherwise dispose of, hold, use, operate, lease to others or keep
idle the Aircraft, Airframe, any Engine, Aircraft Documents, or
any part thereof, as Lessor, in its sole discretion, may
determine, all free and clear of any rights of Lessee, except as
hereinafter set forth in this Section 14, and without any duty to
account to Lessee with respect to such action or inaction or for
any proceeds with respect thereto (except in connection with any
calculation of liquidated damages under Section 14.1.3(b) below
and except to the extent that such proceeds would constitute,
under applicable Law, a mitigation of Lessor's damages suffered
or incurred as a result of the subject Event of Default).
14.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Section
14.1.1 or 14.1.2 with respect to the Aircraft, Airframe, any
Engine, Aircraft Documents, or any part thereof, Lessor, by
written notice to Lessee specifying a payment date (which shall
be a Payment Date occurring not less than 10 days after the date
of such notice), may demand Lessee to pay to Lessor, and Lessee
shall pay to Lessor, on the payment date so specified and in the
manner and in funds of the type specified in Section 3.3,
as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent for the Aircraft in respect of all
periods commencing on or after the date specified for payment in
such notice), the following amounts:
(a) all unpaid Basic Rent and Supplemental Rent due at
any time prior to the Payment Date specified in such notice; plus
(b) whichever of the following amounts that Lessor, in
its sole discretion, shall specify in such notice:
(i) the amount, if any, by which the aggregate
Rent for the remainder of the Term (determined without
reference to any right of Lessor to terminate the leasing of
the Aircraft, whether or not such right is exercised),
discounted periodically (equal to installment frequency) to
present worth at the Discount Rate, exceeds the Fair Market
Rental Value of the Aircraft for the remainder of the Term,
after discounting such Fair Market Rental Value periodically
(equal to installment frequency) to present worth as of the
Payment Date specified in such notice at the Discount Rate;
or
(ii) if Lessor shall have re-let the Aircraft,
the amount, if any, by which the aggregate Rent for the
Aircraft, which would otherwise have become due over the
remainder of the Term (determined without reference to any
right of Lessor to terminate the leasing of the Aircraft,
whether or not such right is exercised), discounted
periodically (equal to installment frequency) to present
worth as of the date of re-letting at the Discount Rate,
exceeds the aggregate basic rental payments to become due
under the re-letting from the date of such re-letting to
the date upon which the Term for the Aircraft would have
expired but for Lessee's default, discounted periodically
(equal to installment frequency) to present worth as of the
date of the re-letting at the Discount Rate; plus
(c) interest on the amounts specified in the foregoing
clause (a) at the Payment Due Rate from and including the date on
which any such amount was due to the date of payment of such
amount in full; plus
(d) interest on the amount specified in the foregoing
clause (b)(i) or (b)(ii), according to Lessor's election, at the
Payment Due Rate from and including the Payment Date specified in
such notice to the date of payment of such amount in full.
14.1.4 RESCISSION, COSTS AND LOSSES
Lessor may (i) at its option, rescind or terminate this
Lease as to the Aircraft, Airframe, any Engine, Aircraft
Documents, or any part thereof, or (ii) exercise any other right
or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof
or to recover damages for the breach hereof, including, without
limitation:
(a) all Rent and other amounts which are or become due
and payable hereunder prior to the date Lessor recovers
possession of the Aircraft;
(b) at Lessor's election, either one of the amounts
determined pursuant to Section 14.1.3(b) or any lost profits
suffered by Lessor as a consequence of Lessor's inability to
place the Aircraft with another lessee on financial terms that
are as favorable to Lessor as the terms of this Agreement;
(c) all costs associated with Lessor's exercise of its
remedies hereunder, including, but not limited to, repossession
costs, legal fees, Aircraft storage costs, Aircraft re-lease or
sale costs, any other out-of-pocket costs incurred by Lessor;
(d) any loss, cost, expense or liability sustained by
Lessor due to Lessee's failure to redeliver the Aircraft in the
condition required by this Agreement; and
(e) any other losses (including lost profits), damage,
expense, cost or liability which Lessor suffers or incurs as a
result of the Event of Default and/or termination of this
Agreement, including an amount sufficient to fully compensate
Lessor for any loss of or damage to Lessor's residual interest in
the Aircraft caused by such Event of Default.
14.1.5 OTHER REMEDIES
In addition to the foregoing remedies (but without
duplication of amounts otherwise paid under this Section 14),
Lessee shall be liable for any and all unpaid Rent due hereunder
before, during or after (except as otherwise provided in Sections
14.1.2, 14.1.3 and 14.1.4 hereof ) the exercise of any of the
foregoing remedies and for all attorneys' fees and other costs
and expenses of Lessor, including, without limitation, interest
on overdue Rent at the rate as herein provided, incurred 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, Airframe, any Engine, the Aircraft Documents, or any
part thereof, in accordance with the terms of Section 5 or in
placing the Aircraft, Airframe, any Engine, the Aircraft
Documents, or any part thereof, in the condition and
airworthiness required by Section 5.
14.2 RIGHT TO PERFORM FOR LESSEE
If Lessee fails to make any payment of Rent required to be
made by it hereunder or fails to perform or comply with any of
its agreements contained herein, Lessor may (but shall not be
obligated to) make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the
expenses of Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, as the case
may be, together with interest thereon at the Payment Due Rate,
shall be deemed Supplemental Rent, payable by Lessee upon demand.
No such payment, performance or compliance by Lessor shall be
deemed to cure any Default or Event of Default or otherwise
relieve Lessee of its obligations with respect thereto.
14.3 DETERMINATION OF FAIR MARKET RENTAL VALUE
For the purpose of this Section 14, the "Fair Market
Rental Value" of the Aircraft, Airframe or any Engine, or any
part thereof shall be determined on an "AS-IS, WHERE-IS" basis
and shall take into account customary brokerage and other out-of-
pocket fees and expenses which typically would be incurred in
connection with a re-lease or sale of the Aircraft, Airframe or
any Engine. Any such determination shall be made by an Appraiser
selected by Lessor and the costs and expenses associated
therewith shall be borne by Lessee, unless Lessor does not obtain
possession of the Aircraft, Airframe, Engines and Aircraft
Documents pursuant to this Section 14, in which case an Appraiser
shall not be appointed and Fair Market Rental Value for purposes
of this Section 14 shall be zero.
14.4 LESSOR APPOINTED ATTORNEY-IN-FACT
Lessee hereby appoints Lessor as the attorney-in-fact of
Lessee, with full authority in the place and stead of Lessee and
in the name of Lessee or otherwise, for the purpose of carrying
out the provisions of this and any other Operative Agreement and
taking any action and executing any instrument that Lessor may
deem necessary or advisable to accomplish the purposes hereof;
provided, however, that Lessor may only take action or execute
instruments under this Section 14.4 after a Event of Default has
occurred and is continuing. Lessee hereby declares that the
foregoing powers are granted for valuable consideration,
constitute powers granted as security for the performance of the
obligations of Lessee hereunder and are coupled with an interest
and shall be irrevocable. Without limiting the generality of the
foregoing or any other rights of Lessor under the Operative
Agreements, upon the occurrence and during the continuation of an
Event of Default, Lessor shall have the sole and exclusive right
and power to (i) settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to or pertaining to
the Aircraft, Airframe or any Engine, or this Lease and (ii) make
proof of loss, appear in and prosecute any action arising from
any policy or policies of insurance maintained pursuant to this
Lease, and settle, adjust or compromise any claims for loss,
damage or destruction under, or take any other action in respect
of, any such policy or policies.
14.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit
in any way any right, power, remedy or privilege of Lessor
hereunder or under any other Operative Agreement or now or
hereafter existing at law or in equity. Each and every right,
power, remedy and privilege hereby given to, or retained by,
Lessor in this Lease shall be in addition to and not in
limitation of every other right, power, remedy and privilege
given under the Operative Agreements or now or hereafter existing
at law or in equity. Each and every right, power, remedy and
privilege of Lessor under this Lease and any other Operative
Agreement may be exercised from time to time or simultaneously
and as often and in such order as may be deemed expedient by
Lessor. All such rights, powers, remedies and privileges shall
be cumulative and not mutually exclusive, and except as expressly
provided herein, the exercise of one shall not be deemed a waiver
of the right to exercise any other. Lessee hereby waives to the
extent permitted by applicable Law any right which it may have to
require Lessor to choose or elect remedies.
SECTION 15. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent and all other amounts
payable hereunder, under Letter Agreement No. 1 or under any
other Operative Agreement shall be absolute and unconditional,
and shall be construed as covenants separate and independent from
the agreements or undertakings of any other Person, including,
without limitation, Lessor, and shall not be affected by any
event or circumstance, including, without limitation: (i) any
setoff, counterclaim, recoupment, defense or other right that
Lessee may have against Lessor, Airframe Manufacturer, Engine
Manufacturer, any Indemnitee or any other Person for any reason
whatsoever; (ii) any defect in the title, airworthiness,
condition, design, operation or fitness for use of, or any damage
to or loss or destruction of, the Aircraft, Airframe or any
Engine, or any interruption or cessation in the use or possession
thereof by Lessee for any reason whatsoever; (iii) any
insolvency, bankruptcy, reorganization or similar proceedings by
or against Lessee or any other Person; (iv) any restriction,
prevention or curtailment of or interference with any use of the
Aircraft, Airframe, any Engine, Aircraft Documents, or any part
thereof; (v) any change, waiver, extension, indulgence or other
action or omission in respect of any obligation or liability of
Lessee or Lessor; (vi) any claim that Lessee has or might have
against any Person; (vii) any failure on the part of Lessor to
perform or comply with any of the terms of this Lease or any
other Operative Agreement; (viii) any invalidity or
unenforceability or disaffirmance of this Lease or any provision
hereof or any of the other Operative Agreements or any provision
thereof, in each case whether against or by Lessee or otherwise;
or (ix) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(b) If for any reason whatsoever this Lease shall be
terminated in whole or in part by operation of Law or otherwise
except as specifically provided herein, Lessee nonetheless agrees
to pay an amount equal to each Basic Rent and Supplemental Rent
payment at the time such payment would have become due and
payable in accordance with the terms hereof had this Agreement
not been terminated in whole or in part. All Rent payable by
Lessee shall be paid without notice or demand (except as
otherwise expressly provided) and without abatement, suspension,
deferment, deduction, diminution or proration by reason of any
circumstance or occurrence whatsoever. Lessee hereby waives, to
the extent permitted by applicable Law, any and all rights that
it may now have or that at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or
surrender this Agreement or any part hereof, or to any abatement,
suppression, deferment, diminution, reduction or proration of
Rent, except in accordance with the express terms hereof. Each
payment of Rent made by Lessee shall be final as to Lessor and
Lessee and, except for any manifest clerical computational error,
Lessee will not seek to recover all or any part of any such
payment of Rent for any reason whatsoever.
(c) All obligations, liabilities, covenants and
undertakings of Lessee in this Agreement or in any other
Operative Agreement shall be performed, observed and complied
with at Lessee's sole cost and expense, whether or not so
expressed, unless otherwise expressly provided.
(d) Nothing set forth in this Section 15 shall be
construed to prohibit Lessee from separately pursuing any claim
that it may have from time to time against Lessor or any other
Person with respect to any matter (other than the absolute and
unconditional nature of Lessee's obligations hereunder to pay
Rent, and other than the matters specified in paragraphs (b) and
(c) above).
SECTION 16. GENERAL TAX INDEMNITY
16.1 GENERAL
(a) Indemnity
Lessee agrees to pay and, on written demand, in indemnify,
protect, save and hold Lessor and any of its successors,
Permitted Transferees and affiliates ("Tax Indemnitee") harmless
from all license, recording, documentation and registration fees,
sales and use taxes, personal property taxes, value added and any
and all other taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever together
with any and all penalties, additions to tax, fines or interest
thereon (collectively, "Taxes") imposed against Tax Indemnitee,
Lessee or any Item of Equipment, by any Federal, state or local
government or taxing authority in the United States, or territory
or possession of the United States, or by any taxing authority or
governmental subdivision of a foreign country or international
organization, upon or in connection with or with respect to any
Item of Equipment arising out of this Agreement, or upon the
ownership, delivery, leasing, charter, subleasing, possession,
presence, use operation, registration, change in registration,
transfer or title, documentation, landing, rejection, departure,
financing, maintenance, repair, overhaul, location, storage,
replacement, improvement, modification, abandonment, return or
other disposition thereof pursuant to this Agreement, or upon the
rentals, receipts or upon the earnings of Lessee arising
therefrom, or upon or with respect to this Lease or related
documents and amendments and supplements hereto and thereto and
the transactions contemplated thereby,
(b) Limitation on Indemnity
Notwithstanding the provisions or paragraph (a) of this
Section 16.1, Lessee shall have no obligation thereunder as to
(i) Taxes based on or measured by the gross receipts or net
income of Lessor (including, without limitation, capital gains
taxes, minimum taxes, and taxes on tax preference items and
whether imposed by withholding or otherwise) and taxes which are
capital, doing business, franchise excess profits or net worth
taxes and interest, additions to tax, penalties or other charges
in respect thereof but excluding sales, use and similar taxes
(collectively, "Income Taxes").imposed by the United States of
America or by any state or local taxing authorities within the
United States and Income Taxes a Tax Indemnitee by the country
of tax domicile of any such Tax Indemnitee; provided, however,
Lessee shall be liable for Income Taxes based on or measured by
such Tax Indemnitee's net income if, but only if, (a) such taxes
are in lieu of Income Taxes on any Item of Equipment which Lessee
would otherwise be required to pay hereunder, or (b)such Tax
Indemnitee would not otherwise be subject to Income Taxes in such
taxing jurisdiction, but for use or operation of any Item of
Equipment within the jurisdiction of such taxing authority or
other activities or the residency of Lessee in the jurisdiction
of such taxing authority; (ii) Taxes imposed upon a sale,
transfer or assignment of any interest in any Item of Equipment
by such Tax Indemnitee other than in the exercise of its remedies
hereunder after an Event of Default or upon Lessee's request;
(iii) Taxes to the extent they exceed the Taxes which would have
been imposed had there not been a sale, transfer or assignment of
any interest in any Item of Equipment by Lessor, but excluding
any transfer in the exercise of Lessor's remedies hereunder after
an Event of Default or upon Lessee's request, (; and (iv) Taxes
imposed with respect to any period prior to Delivery Date or
after the return of possession of the Aircraft to Lessor
in accordance with the terms of this Lease; (v) Taxes resulting
from or attributable to a Lessor Lien; (vi) Taxes imposed as a
result of a Tax Indemnitee's gross negligence, misconduct, breach
of this Lease or misrepresentation; and (vii) Taxes for which Tax
Indemnitee's entitlement to indemnification is governed by
Section 17.3. If there is a change in any law after the date
hereof that results in the imposition of Taxes that would be the
responsibility of Lessee under this Section 16, Lessor shall
reasonably cooperate with Lessee, upon Lessee's written request
and at Lessee's expense, to minimize in a lawful manner such
Taxes relating to the Aircraft; provided, however, that Lessor
shall not be obligated under this paragraph to take any action
which in Lessor's reasonable judgment would increase Lessor's
risk or expenses under, or adversely affect Lessor's financial
interests in, this Lease or the Aircraft or any interest therein
or which would result in any other material detriment to Lessor's
commercial interests.
16.2 AFTER-TAX NATURE OF INDEMNITY
Lessee further agrees that, with respect to any payment or
indemnity hereunder, such payment or indemnity shall include any
amount necessary to hold Tax Indemnitee harmless on an after-tax
basis from all Taxes required to be paid by the Tax Indemnitee
with respect to such payment or indemnity under the laws of any
Federal, state or local government or taxing authority in the
United States, or under the laws of any taxing authority or
governmental subdivision of a foreign country or international
organization; provided that, if Tax Indemnitee realizes a tax
benefit by reason of such payment or indemnity (whether such tax
benefit shall be by means of a depreciation deduction or
otherwise) and actually utilizes such benefit in reducing its
Taxes, Tax Indemnitee shall pay Lessee an amount equal to the net
value to Tax Indemnitee of such tax benefit when, as, if and to
the extent realized (such payments not to exceed in the aggregate
the amount of the related indemnity paid by Lessee including,
without limitation, payments made in respect to withholding taxes
under Section 16.5 hereof), but not before Lessee shall have made
all payments of indemnities to Tax Indemnitee required pursuant
to this Section 16; provided further, however, that if
subsequent to any payment to Lessee in accordance with the
foregoing, it is determined that such tax benefit is not
allowable in whole or in part, Lessee shall return the
appropriate portion of the payment made to Lessee by such Tax
Indemnitee.. Tax Indemnitee shall in good faith use reasonable
diligence in filing its tax returns and in dealing with taxing
authorities to seek and claim any such tax benefit.
16.3 CONTEST
If written claim is made against a Tax Indemnitee for any
Taxes referred to in this Section 16, Tax Indemnitee shall
promptly notify Lessee, provided that a failure to so notify
shall not relieve the Lessee of its obligation under this Section
16 unless it actually or effectively precludes or materially
adversely impacts a contest of such claim. If reasonably
requested by Lessee in writing within 30 days after such
notification, Tax Indemnitee shall upon receipt of an indemnity
satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal
and accountants' fees and disbursements, penalties and interest)
in good faith contest the validity, applicability or amount of
such Taxes by either (i) resisting payment thereof if
practicable, or (ii) if payment is made, using reasonable efforts
to obtain a refund thereof in appropriate administrative and
judicial proceedings; provided, however, that the Tax Indemnitee
shall not be required to take any action to contest a claim
unless (a) Lessee provides with such written request an
opinion of independent counsel, satisfactory both as to counsel
and substance, to the effect that there is a meritorious basis
for such contest, (b) such action to be taken will not result in
a material risk of a sale, forfeiture or loss of, or creation of
a Lien (other than a Permitted Lien) on, any Item of Equipment,
(c) the Lessee acknowledges its liability under this Section 16
for any Taxes being contested, and (d) no Event of Default shall
have occurred or be continuing. If Tax Indemnitee determines to
pay such Taxes and seek a refund, Lessee will either pay such
Taxes on Tax Indemnitee's behalf and pay Tax Indemnitee any
amount due with respect to such payment pursuant to Section 16.2
hereof or will promptly reimburse Tax Indemnitee for such Taxes
pursuant to Sections 16.1 and 16.2. If Tax Indemnitee shall
obtain a refund of all or any part of such Taxes paid by Lessee,
Tax Indemnitee shall pay Lessee the amount of such refund net of
any recovery expenses; provided that such amount shall not be
payable during such time as a Default or Event of Default shall
have occurred and be continuing or before such time as Lessee
shall have made all payments of indemnities to Tax Indemnitee
then due under this Section 16 and such payment shall be limited
to the amount previously paid by Lessee hereunder with respect to
such Taxes. If in addition to such refund Tax Indemnitee shall
receive an amount representing interest on the amount of such
refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to the Taxes paid by Lessee prior to
the receipt of such refund. In case any report or return is
required to be made with respect to any obligation of Lessee
under this Section 16 or arising out of this Section 16, Lessee
will promptly notify Lessor of such requirement and will inform
Lessor whether Lessee (i) will file such report or return in such
manner as will show the ownership in Lessor of each Item of
Equipment and send a copy of such report or return to Lessor or
(ii) will make such report or return for filing by Lessor in such
manner as shall be satisfactory to Lessor. In the event of a
contest of any Taxes hereunder, Tax Indemnitee shall apprise
Lessee of all material developments with respect to such contest,
shall forward copies of all material submissions made in such
contest and the forum of such contest, shall consider in good
faith any request concerning the conduct of any such contest and
without waiving its right to be indemnified hereunder with
respect to such claim shall not settle or concede any such
contest without the written consent of Lessee. At Lessee's
written request and at Lessee's expense (including, without
limitation, all reasonable costs, expenses, losses, legal and
accountant's fees and disbursements, penalties, if any, and
interest). Tax Indemnitee shall appeal an adverse decision at the
administrative or judicial level to the appropriate forum,
provided that Tax Indemnitee shall not be required to request a
hearing before the U.S. Supreme Court.
16.4 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF
DEFAULT
Any amount payable to Lessee pursuant to the terms of this
Section 16 shall not be paid to or retained by Lessee if at the
time of such payment or retention a Financial Default or an Event
of Default shall have occurred and be continuing under the Lease.
At such time as there shall not be continuing any such Financial
Default or Event of Default, such amount shall be paid to Lessee
to the extent not previously applied against Lessee's obligations
hereunder as and when due.
16.5 WITHHOLDING TAX
Notwithstanding any other provision of this Section 16, in
the event a withholding tax is imposed by a jurisdiction outside
the United States in connection with any payment due by
Lessee hereunder, Lessee agrees to (i) pay Tax Indemnitee an
additional amount such that the net amount actually received per
month by Tax Indemnitee equals the amount which Tax Indemnitee
would have received under the terms hereof from Lessee had such
withholding tax not been imposed, (ii) pay to the relevant
taxation or other authority the full amount of the withheld tax,
and (iii) provide Tax Indemnitee with proof that such tax has
been paid as set forth in clause (ii).
16.6 SURVIVAL OF INDEMNITIES
All of the obligations of Lessee under this Section 16 shall
continue in full force and effect notwithstanding the expiration
or earlier termination of this Lease and are expressly made for
the benefit of, and shall be enforceable by, the Tax Indemnitees
and their successors and assigns.
SECTION 17. GENERAL INDEMNIFICATION
17.1 THE INDEMNITY
Lessee agrees to assume liability for, and does hereby
indemnify, protect, save and keep harmless Lessor and its
affiliates and Permitted Transferees, and the respective
directors, officers, employees, agents and servants of each of
the foregoing and the successors and assigns thereof (all of the
foregoing, an "Indemnitee") from and against any and all claims,
damages, losses, liabilities (including, but not limited to, any
claim or liability for strict liability in tort or otherwise
imposed including, without limitation, liability arising under
any applicable environment or noise or pollution control statute,
rule or regulation), obligations, demands, suits, penalties,
judgments or causes of action and all legal proceedings, whether
civil or criminal, penalties, fines and other sanctions
("Claims"), and any costs and expenses in connection therewith
including, without limitation, reasonable legal fees and expenses
of whatever kind and nature (whether or not also indemnified
against by any other person under any other document and whether
arising before, on or after the Delivery Date), which may result
from or grow or arise in any manner directly or indirectly out of
any one or more of the following:
(a) the condition, ownership, manufacture, construction,
design (including, without limitation, latent and other defects
whether or not discoverable by Lessee or Lessor and any claim for
patent, trademark or copyright infringement), acceptance, non-
acceptance, rejection, delivery, lease, possession, return,
disposition, use or operation during the Term (in each and every
case) of the Aircraft or any Item of Equipment either in the air
or on the ground (except claims arising out of the gross
negligence or willful misconduct of an Indemnitee or its
successors or assigns), or
(b) from the material or any article used in the Aircraft
or any Item of Equipment or from the design, testing or use
thereof or from any maintenance, service, repair, overhaul or
testing of the Aircraft or any Item regardless of when such
defect shall be discovered, whether or not such Aircraft or any
Item is at the time in the possession of Lessee and whether it is
in the United States of America or any other country, or
(c ) any breach of or failure to perform or observe, or any
other noncompliance with, any covenant or agreement or other
obligation to be performed by Lessee under any Operative
Agreement or the falsity of any representation or warranty of
Lessee in any Operative Agreement or the occurrence of any
Default or Event of Default, or
(d) any claim or penalty arising out of violations of
applicable Law by Lessee, or
(e) tort liability, or
(f) death or property damage of passengers, shippers or
others, or
(g) environmental control, noise or pollution, or
(h) any Liens in respect of the Aircraft or any Item of
Equipment.
As to claims arising upon or prior to the end of the Term,
the indemnities contained in this Section shall continue in full
force and effect, notwithstanding the assignment, expiration or
other termination of this Lease.
17.2 EXCEPTIONS TO GENERAL INDEMNITY
The indemnity provided for in Section 17.1 will not extend
to Claims of or against any Indemnitee to the extent arising from
or attributable to any one or more of the following:
(a) The gross negligence or willful misconduct of an
Indemnitee;
(b) Acts or events occurring prior to the Delivery Date or
after the return of possession of the Aircraft to Lessor in
accordance with the terms of this Lease;
(c) Claims representing Taxes, it being acknowledged that
the terms of Section 16 are the exclusive provisions governing
Lessee's indemnity obligations for Taxes;
(d) A breach by Lessor of any of the terms of this
Agreement or any other Operative Agreement;
(e) The inaccuracy of any representation or warranty made
by Lessor in this Agreement or any other Operative Agreement;
(f) Expenses which under the terms of this Agreement or any
other Operative Agreement are required to be paid by an
Indemnitee;
(g) The existence, incurrence, recordation, release,
discharge, assignment or enforcement of any Lessor Lien;or
(h) The sale, assignment, transfer, pledge or other disposition
of the Aircraft or any interest therein or in the Operative
Agreements other than a transfer in the exercise of Lessor's
remedies hereunder after an Event of Default.
17.3 THE LESSEE WAIVER
Lessee hereby waives and releases any claim now or hereafter
existing against Lessor and any other Indemnitee on account of
any and all claims, demands, suits, judgments or causes of action
for or on account of or arising or in any way connected with
injury to or death of personnel of Lessee or loss or damage to
property of Lessee or the loss of use of any property which may
result from or grow or arise in any manner out of the condition,
use or operation of the Aircraft or any Item, either in the air
or on the ground during the Term hereof (except claims arising
out of the gross negligence or willful misconduct of such
Indemnitee), or which may be caused during the Term hereof by any
defect (whether latent or patent) in the Aircraft or any Item
from the material or any article used therein or from the design,
testing or use thereof or from any maintenance, service, repair,
overhaul or testing of the Aircraft or any Item regardless of
when such defect shall be discovered, whether or not such
Aircraft or any Item is at the time in the possession of Lessee
and whether it is in the United States of America or any other
country.
17.4 THE GROSS-UP
Lessee further agrees that, with respect to any payment or
indemnity hereunder, such payment or indemnity shall include any
amount necessary to hold the recipient of the indemnity harmless
on an after-tax basis from all taxes required to be paid by such
recipient with respect to such payment or indemnity under the
laws of any Federal, state or local government or taxing
authority in the United States, or under the laws of any taxing
authority or governmental subdivision of a foreign country;
provided that, if any recipient of a payment or indemnity
realizes a tax benefit by reason of such payment or indemnity
(whether such tax benefit shall be by means of a depreciation
deduction or otherwise), such recipient shall pay Lessee an
amount equal to the sum of such tax benefit plus any tax benefit
realized as the result of any payment made pursuant to this
proviso, when, as, if and to the extent realized (such payments
not to exceed in the aggregate the amount of the related
indemnity paid by Lessee) but not before Lessee shall have made
all payments or indemnities to such recipient with respect to
such loss pursuant to the provisions of this Section 17; provided
further, however, that if any Indemnitee loses such benefit
subsequent to any payment to Lessee with respect thereto, Lessee
shall indemnify such Indemnitee with respect to such loss
pursuant to the provisions of Section 16 (but without regard to
Section 16.1(b) thereof). Each such recipient shall in good
faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax
benefit.
SECTION 18. MISCELLANEOUS
18.1 PURCHASE OPTIONS
Lessor hereby grants to Lessee, or its assignee for
financing purposes, an option to purchase the Aircraft on the
respective dates and at the applicable Purchase Price set forth
in Schedule 1 plus the amount, if any, contributed by Lessor to
the performance of ADs and/or FARs pursuant to Section D.2 of
Annex C attached hereto. Not less than ten (10) days prior to
the Delivery Date and ninety (90) days prior to each six month
anniversary of the Delivery Date, up to and including the twenty
four month anniversary thereof, Lessee may give Lessor written
notice irrevocably electing to purchase the Aircraft and Aircraft
Documents pursuant to the provisions hereof. Should Lessee elect
to purchase the Aircraft and Aircraft Documents as above
provided, then Lessee shall pay such purchase price, plus all
taxes, recordation fees and other charges and expenses incurred
or payable in connection with such purchase, and all other
amounts due and owing hereunder or in any Operative Agreement in
immediately available funds, and Lessor shall transfer to Lessee
all of its right, title and interest in and to the Aircraft and
the Aircraft Documents, with a warranty of good title (other than
for Liens arising by, through or under Lessee), in its "AS-IS,
WHERE-IS" condition, and otherwise without recourse,
representation or warranty, express or implied. Also, in
connection with such purchase of the Aircraft and Aircraft
Documents by Lessee, Lessor shall issue a credit memorandum in
favor of Lessee in the amount of $100,000, which may be used by
Lessee to purchase engines, parts, other equipment and/or
services (including simulator time) that Lessor has for sale from
time-to-time. Further, Lessor agrees to provide Lessee with a
25% discount on then-current rates for services and simulator
time in the event that Lessee elects to use such credit
memorandum to purchase services (including simulator time) from
Lessor.
18.2 AMENDMENTS
No provision of this Agreement may be amended, supplemented,
waived, modified, discharged, terminated or otherwise varied
orally, but only by an instrument in writing that specifically
identifies the provision of this Agreement that it purports to
amend, supplement, waive, modify, discharge, terminate or
otherwise vary and is signed by Lessor and Lessee. Each such
amendment, supplement, waiver, modification, discharge,
termination or variance shall be effective only in the specific
instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by
oral communication, course of dealing or performance or other
manner not set forth in an agreement, document or instrument in
writing and signed by Lessor and Lessee.
18.3 SEVERABILITY
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the
extent permitted by Law (a) all other provisions hereof shall
remain in full force and effect in such jurisdiction and (b) such
invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such
provisions are held invalid, illegal or unenforceable may be
waived, such Law is hereby waived by the parties hereto to the
full extent permitted, to the end that this Agreement shall be
deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
18.4 SURVIVAL
The representations, warranties, indemnities and covenants
set forth herein shall survive the delivery or return of the
Aircraft, the transfer of any interest of Lessor in this
Agreement and the other Operative Agreements, and the expiration
or other termination of this Agreement or any other Operative
Agreement.
18.5 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto
and all agreements, instruments and documents relating hereto,
including, without limitation (a) consents, waivers and
modifications that may hereafter be executed and (b) financial
statements, certificates and other information previously or
hereafter furnished to any party hereto, may be reproduced by
such party by any photographic, photostatic, microfilm, micro-
card, miniature photographic or other similar process, and such
party may destroy any original documents so reproduced. Any such
reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such
reproduction was made by such party in the regular course of
business) and any enlargement, facsimile or further reproduction
of such reproduction likewise is admissible in evidence.
18.6 COUNTERPARTS
This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts
(or upon separate signature pages bound together into one or more
counterparts), each of which when so executed shall be deemed to
be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
18.7 NO WAIVER
No failure on the part of Lessor to exercise, and no delay
by Lessor in exercising, any of its rights, powers, remedies or
privileges under this Agreement or provided at Law, in equity or
otherwise shall impair, prejudice or constitute a waiver of any
such right, power, remedy or privilege or be construed as a
waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of
any such right, power, remedy or privilege preclude any other or
further exercise thereof by Lessor or the exercise of any other
right, power, remedy or privilege by Lessor. No notice to or
demand on Lessee in any case shall, unless otherwise required
under this Agreement, entitle Lessee to any other or further
notice or demand in similar or other circumstances or constitute
a waiver of the rights of Lessor to any other or further action
in any circumstances without notice or demand.
18.8 NOTICES
Unless otherwise expressly permitted by the terms hereof,
all notices, requests, demands, authorizations, directions,
consents, waivers and other communications required or permitted
to be made, given, furnished or filed hereunder shall be in
writing (it being understood that the specification of a writing
in certain instances and not in others does not imply an
intention that a writing is not required as to the latter), shall
refer specifically to this Agreement and shall be personally
delivered, sent by registered mail or certified mail, return
receipt requested, postage prepaid, or sent by overnight courier
service, in each case to the respective address or facsimile
number set forth for such party in Schedule 3 hereto to, or to
such other address or number as either party hereto may hereafter
specify by notice to the other party hereto. Each such notice,
request, demand, authorization, direction, consent, waiver or
other communication shall be effective when received or, if made,
given, furnished or filed (a) by facsimile or telecommunication
transmission, when confirmed, or (b) by registered or certified
mail, three Business Days after being deposited, properly
addressed, with the U.S. Postal Service.
18.9 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS. THIS AGREEMENT IS BEING
DELIVERED IN THE STATE OF NEW YORK.
(b) Each party hereto agrees that the United States
District Court for the Eastern District of Virginia and any
Virginia court of general jurisdiction in the district where
Lessor is located are to have nonexclusive jurisdiction to settle
any disputes arising out of or relating to this Agreement and
submits itself and its property to the nonexclusive jurisdiction
of the foregoing courts with respect to such disputes.
(c) Without prejudice to any other mode of service, each
party hereto consents to the service of process relating to any
such proceedings by prepaid mailing by air mail, certified or
registered mail of a copy of the process, at the address for such
party set forth in Schedule 3.
(d) LESSEE HEREBY:
(i) WAIVES TO THE FULLEST EXTENT PERMITTED BY
LAW ANY OBJECTION WHICH LESSEE MAY NOW OR HEREAFTER HAVE TO
THE COURTS REFERRED TO IN 18.9(b) ABOVE ON GROUNDS OF
INCONVENIENT FORUM OR OTHERWISE AS REGARDS PROCEEDINGS IN
CONNECTION WITH THIS AGREEMENT;
(ii) WAIVES TO THE FULLEST EXTENT PERMITTED BY
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 AGREEMENT BROUGHT IN THE
COURTS REFERRED TO IN SECTION 18.9(b); AND
(iii)AGREES THAT A JUDGMENT OR ORDER OF ANY COURT
REFERRED TO IN SECTION 18.9(b) IN CONNECTION WITH THIS
AGREEMENT IS CONCLUSIVE AND BINDING ON IT AND MAY BE
ENFORCED AGAINST IT IN THE COURTS OF ANY OTHER
JURISDICTION.
(e) NOTHING IN THIS SECTION 18.9 LIMITS THE RIGHT OF
EITHER PARTY TO BRING PROCEEDINGS AGAINST THE OTHER PARTY IN
CONNECTION WITH THIS AGREEMENT:
(i) IN ANY OTHER COURT OF COMPETENT JURISDICTION; OR
(ii) CONCURRENTLY IN MORE THAN ONE JURISDICTION.
(f) LESSEE AND LESSOR EACH HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) WAIVE ANY RIGHT OF IMMUNITY IN RELATION TO
THIS AGREEMENT NO IMMUNITY FROM SUCH LEGAL PROCEEDINGS
(WHICH WILL BE DEEMED TO INCLUDE WITHOUT LIMITATION,
SUIT, ATTACHMENT PRIOR TO JUDGMENT, OTHER ATTACHMENT, THE
OBTAINING OF JUDGMENT, EXECUTION OR OTHER ENFORCEMENT WHICH
IT OR ITS ASSETS NOW HAS OR MAY IN THE FUTURE ACQUIRE; AND
(ii) CONSENT GENERALLY IN RESPECT OF ANY SUCH
PROCEEDINGS TO THE GIVING OF ANY RELIEF OR THE ISSUE OF ANY
PROCESS IN CONNECTION WITH SUCH PROCEEDINGS INCLUDING,
WITHOUT LIMITATION, THE MAKING, ENFORCEMENT OR EXECUTION
AGAINST ANY PROPERTY WHATSOEVER (IRRESPECTIVE OF ITS USE OR
INTENDED USE) OF ANY ORDER OR JUDGMENT WHICH MAY BE MADE OR
GIVEN IN SUCH PROCEEDINGS.
(g) NOTHING HEREIN SHALL, OR SHALL BE CONSTRUED SO AS TO,
LIMIT THE RIGHT OF EITHER PARTY HERETO TO DEFEND OR TO ASSERT A
COUNTERCLAIM IN, OR TO SEEK RECOGNITION OF OR ENFORCEMENT OF ANY
JUDGMENT RENDERED IN, ANY ACTION, SUIT OR PROCEEDING IN THE
COURTS OF WHATEVER JURISDICTION THAT MAY BE APPROPRIATE IN THE
OPINION OF EITHER SUCH PARTY.
18.10 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide
any person not a party hereto with any rights of any nature
whatsoever against either of the parties hereto, and no person
not a party hereto shall have any right, power or privilege in
respect of, or have any benefit or interest arising out of, this
Agreement.
18.11 ENTIRE AGREEMENT
This Agreement, together with the other Operative
Agreements, on and as of the date hereof constitutes the entire
agreement of the parties hereto with respect to the subject
matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, between the parties hereto
with respect to such subject matter are hereby superseded in
their entireties.
[This space intentionally left blank.]
IN WITNESS WHEREOF, Lessor and Lessee have each caused
this Aircraft Lease Agreement to be duly executed as of the day
and year first above written.
US AIRWAYS, INC., as Lessor
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President - Purchasing
VANGUARD AIRLINES, INC., as Lessee
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
and President
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly
provided, a reference to:
(i) each of "Lessee," "Lessor" or any other person
includes, without prejudice to the provisions of any
Operative Agreement, any successor in interest to it and any
permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular
and words importing the singular include the plural;
(iii) any agreement, instrument or document, or any
annex, schedule or exhibit thereto, or any other part
thereof, includes, without prejudice to the provisions of
any Operative Agreement, that agreement, instrument or
document, or annex, schedule or exhibit, or part,
respectively, as amended, modified or supplemented from time
to time in accordance with its terms and in accordance with
the Operative Agreements, and any agreement, instrument or
document entered into in substitution or replacement
therefor;
(iv) any provision of any Law includes any such
provision as amended, modified, supplemented, substituted,
reissued or reenacted prior to the Delivery Date, and
thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby,"
"herein," "hereto," "hereof" and "hereunder" and words of
similar import when used in any Operative Agreement refer to
such Operative Agreement as a whole and not to any
particular provision of such Operative Agreement;
(vi) the words "including," "including, without
limitation," "including, but not limited to," and terms or
phrases of similar import when used in any Operative
Agreement, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a "Section," an "Exhibit," an "Annex" or a
"Schedule" in any Operative Agreement, or in any annex
thereto, is a reference to a section of, or an exhibit, an
annex or a schedule to, such Operative Agreement or such
annex, respectively.
(b) Each exhibit, annex and schedule to each Operative
Agreement is incorporated in, and shall be deemed to be a part
of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative
Agreement, all accounting terms therein shall be construed and
all accounting determinations thereunder shall be made in
accordance with GAAP.
(d) Headings used in any Operative Agreement are for
convenience only and shall not in any way affect the construction
of, or be taken into consideration in interpreting, such
Operative Agreement.
DEFINED TERMS
"ACT" means Part A of Subtitle VII of ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ Code.
"ACTUAL KNOWLEDGE" as it applies to Lessee or Lessor, means
actual knowledge of a Vice President or more senior officer of
Lessor or Lessee, respectively, or any other officer of Lessor
or Lessee, respectively, in each case having responsibility for
the transactions contemplated by the Operative Agreements;
provided, that each of Lessee and Lessor shall be deemed to have
"Actual Knowledge" of any matter as to which it has received
notice from the other, such notice having been given pursuant to
Section 18.8 of the Lease.
"ADDITIONAL DEPOSIT" is defined in Schedule 1 to the Lease.
"ADDITIONAL INSURED" is defined by reference to Section 10
of and Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other
person directly or indirectly controlling, controlled by or under
common control with such person. For purposes of this
definition, "control" means the power, directly or indirectly, to
direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities
or by contract or otherwise and "controlling," "controlled by"
and "under common control with" have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe, Engines and
Aircraft Documents.
"AIRCRAFT DOCUMENTS" means all updated and current technical
data, manuals and log books, and all inspection, modification and
overhaul records and other service, repair, maintenance and
technical records, including without limitation, Airworthiness
Directives (ADs) status and method of compliance and Supplemental
Type Certificates (STC) amended to the latest amendment revision,
that are required by the FAA, the Lease or the Maintenance
Program to be maintained with respect to the Aircraft, Airframe,
Engines or Parts, or that are of a type required to be delivered
by Lessee upon return of the Aircraft, Airframe or Engines under
Section 5 of the Lease; and such term shall include all
additions, renewals, revisions and replacements of any such
materials from time to time made, or required to be made, in
accordance with the Lease, the Maintenance Program or applicable
FAA Regulations, and in each case in whatever form and by
whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may
be maintained or retained by or on behalf of Lessee (provided,
that all such materials shall be maintained in the English
language); and such term shall include, without limitation, the
documents described in Section N of Annex B to the Lease.
"AIRFRAME" means (a) the Aircraft (excluding Engines or
engines from time to time installed thereon) manufactured by
Airframe Manufacturer and identified by Airframe Manufacturer's
model number, United States registration number and Airframe
Manufacturer's serial number set forth in Lease Supplement No. 1
and (b) any and all Parts incorporated or installed in or
attached or appurtenant to such airframe, and any and all Parts
removed from such airframe, unless title to such Parts shall not
be vested in Lessor in accordance with Section 8.1 and Annex C of
the Lease.
"AIRFRAME MANUFACTURER" means The Boeing Company, a Delaware
corporation.
"APPRAISER" means a firm of internationally recognized,
independent aircraft appraisers.
"APU" means the auxiliary power unit installed on the
Aircraft on the Delivery Date, whether or not installed on the
Aircraft from time to time thereafter, unless title to such APU
shall not be vested in Lessor in accordance with Section 8.1 of
the Lease, and any replacement or substituted auxiliary power
unit installed on the Aircraft in accordance with the Lease.
"AVIATION AUTHORITY" means the FAA.
"BANKRUPTCY CODE" means the United States Bankruptcy Code,
11 U.S.C. Sections 101 et seq.
"BASIC RENT" means the rent payable for the Aircraft
pursuant to Section 3.2.1 of the Lease.
"BUSINESS DAY" means any day other than a Saturday, Sunday
or other day on which commercial banks are authorized or required
by law to close in New York, New York, Pittsburgh, Pennsylvania,
or Kansas City, Missouri.
"CITIZEN OF THE UNITED STATES" is defined in Section
40102(a)(15) of the Act and in the FAA Regulations.
"CLOSING" means the closing of the transactions contemplated
by the Lease on the Delivery Date.
"CYCLE/FLIGHT HOURS" for the Airframe, any Engine or any
landing gear, means the number of flight hours or cycles,
whichever is greater, flown by Lessee on such Airframe, Engines,
landing gear during such Hourly Rent Interval.
"DAMAGE PAYMENT THRESHOLD" is defined in Schedule 1 to the
Lease.
"DEBT" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter
of credit transaction or any other liabilities evidenced or to be
evidenced by bonds, debentures, notes or other similar
instruments.
"DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would
constitute an Event of Default.
"DELIVERY DATE" means the Business Day specified in Lease
Supplement No. 1 as the date on which, among other things, the
Aircraft is delivered to and accepted by Lessee under the Lease
and the Closing occurs.
"DISCOUNT RATE" is defined in Schedule 1.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful
currency of the United States.
"DOT" means the Department of Transportation of the United
States or any Government Entity succeeding to the functions of
such Department of Transportation.
"ENGINE" means (a) each of the engines manufactured by
Engine Manufacturer and identified by Engine Manufacturer's model
number and Engine Manufacturer's serial number set forth in Lease
Supplement No. 1 and any Replacement Engine, in any case whether
or not from time to time installed on such Airframe or installed
on any other airframe or aircraft, and (b) any and all Parts
incorporated or installed in or attached or appurtenant to such
engine, and any and all Parts removed from such engine, unless
title to such Parts shall not be vested in Lessor in accordance
with Section 8.1 and Annex C of the Lease. Upon substitution of
a Replacement Engine under and in accordance with the Lease, such
Replacement Engine shall become subject to the Lease and shall be
an "Engine" for all purposes of the Lease and the other Operative
Agreements and thereupon the Engine for which the substitution is
made shall no longer be subject to the Lease, and such replaced
Engine shall cease to be an "Engine."
"ENGINE HOURLY RATE" is defined in Schedule 1.
"ENGINE HOURLY RENT BALANCE" means with respect to each
Engine, all Engine Hourly Rent received by Lessor with respect to
such Engine, less any payments made by Lessor for Engine
Maintenance for such Engine or as otherwise applied by Lessor in
its sole and reasonable discretion in connection with an
obligation of Lessee under the Operative Agreement.
"ENGINE MANUFACTURER" means ▇▇▇▇▇ & ▇▇▇▇▇▇▇/United
Technologies.
"ERISA" means the Employee Retirement Income Security Act of
1974 and any regulations and rulings issued thereunder all as
amended and in effect from time to time.
"EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the
Lease.
"EVENT OF LOSS" means, with respect to the Aircraft,
Airframe or any Engine, any of the following circumstances,
conditions or events with respect to such property, for any
reason whatsoever:
(a) the destruction of such property, damage to such
property beyond practical or economic repair or rendition of
such property permanently unfit for normal use;
(b) the actual or constructive total loss of such
property or any damage to such property, or requisition of
title or use of such property, which results in an insurance
settlement with respect to such property on the basis
of a total loss or constructive or compromised total loss;
(c) any loss of such property or loss of use of such
property for a period of 90 days or more as a consequence of
any theft, hijacking or disappearance of such property;
(d) any seizure, condemnation, confiscation, taking or
requisition of title to such property by any Government
Entity or purported non-U.S. Government Entity;
(e) any seizure, condemnation, confiscation, taking or
requisition of use of such property, that continues until
the earliest of (i) the last day of the Term, (ii) the date
upon which the Aircraft is modified, altered or adapted in
such a manner as would render conversion of such property
for use in normal commercial passenger service impractical
or uneconomical, (iii) the date on which such property is
operated or located in any area excluded from coverage by
any insurance policy required to be maintained in respect of
such property pursuant to the Lease (unless an indemnity in
lieu of insurance is provided to Lessor in accordance with
Section 10.4 of the Lease) or (iv) the date that is 90 days
following the commencement of such loss of use (unless such
loss of use results from action by the U.S. Government, in
which case this clause (iv) shall not apply to such loss of
use); and
(f) as a result of any law, rule, regulation, order or
other action by the Aviation Authority or by any Government
Entity of the government of registry of the Aircraft or by
any Government Entity otherwise having jurisdiction over the
operation or use of the Aircraft, the use of such property
in the normal course of Lessee's business of passenger air
transportation is prohibited for a period expiring on the
earlier to occur of (i) the last day of the Term or (ii) the
date that is 180 days following commencement of such
prohibition, provided, that if Lessee, prior to the
expiration of such 180-day period, shall have undertaken and
shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such
property by Lessee, then the date that is 360 days following
commencement of such prohibition.
The date of such Event of Loss shall be the date of such loss,
damage, insurance settlement, seizure, condemnation,
confiscation, taking or requisition of title or use or
prohibition, except that for purposes of clauses (c), (e) and (f)
above, no Event of Loss shall be deemed to have occurred until
the date of expiration of the applicable period referred to
therein.
"EXPENSES" means any and all liabilities, obligations,
losses, damages, settlements, penalties, claims (including,
without limitation, claims or liabilities based or asserted upon
(a) negligence, (b) strict or absolute liability, (c) liability
in tort, (d) infringement of patent, trademark or other property
or other right and (e) liabilities arising out of violation of
any Law), actions, suits, costs, expenses and disbursements
(including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other
professionals, and costs of investigation), including, without
limitation, all such costs, expenses and disbursements incurred
by any person in asserting or establishing, or in defending any
claims arising out of its assertion of, any rights it may have
under, or its cooperation in connection with any Expenses
indemnified pursuant to, this Lease.
"EXPIRATION DATE" means the Business Day next preceding the
fifth anniversary of the Delivery Date.
"FAA" means the Federal Aviation Administration of the
United States or any Government Entity succeeding to the
functions of such Federal Aviation Administration.
"FAA FILED DOCUMENTS" means the Lease and Lease Supplement
No. 1.
"FAA REGULATIONS" means the Federal Aviation Regulations
(FARs) issued or promulgated pursuant to the Act from time to
time.
"FAIR MARKET RENTAL VALUE" has the meaning specified in
Section 14.4 of the Lease.
"FINAL DEPOSIT" is defined in Schedule 1 to the Lease.
"FINANCING STATEMENTS" means, collectively, UCC-l (and,
where appropriate, UCC-3) financing statements covering the Lease
and the Aircraft, as a precautionary matter, by Lessee, as
lessee, showing Lessor as lessor for filing in the office of the
Secretary of State of the State of Missouri and each other
jurisdiction that, in the opinion of Lessor, is reasonably
desirable.
"GAAP" means generally accepted accounting principles as set
forth in the statements of financial accounting standards issued
by the Financial Accounting Standards Board of the American
Institute of Certified Public Accountants, as such principles may
at any time or from time to time be varied by any applicable
financial accounting rules or regulations issued by the SEC and,
with respect to any person, shall mean such principles applied on
a basis consistent with prior periods except as may be disclosed
in such person's financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial
or similar government, and any body, board, department,
commission, court, tribunal, authority, agency or other
instrumentality of any such government or otherwise exercising
any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other
government entity having jurisdiction over any matter
contemplated by the Operative Agreements or relating to the
observance or performance of the obligations of any of the
parties to the operative Agreements.
"HOURLY RENT" means Engine Hourly Rent, "Q"-Check Hourly
Rent and Landing Gear Hourly Rent, collectively.
"HOURLY RENT BALANCE" means the Engine Hourly Rent Balance,
the "Q"-Check Hourly Rent Balance and the Landing Gear Hourly
Rent Balance, collectively.
"HOURLY RENT INTERVAL" means the time period commencing on
the first day of each calendar month during the Term of this
Lease and ending on the last day of such calendar month, except
that with respect to the final Hourly Rent Interval, such period
shall end on the last day of the Term of this Lease.
"INDEMNITEE" means (a) Lessor, (b) Lessor's Lender, if any,
(c) each Affiliate of Lessor and Lessor's Lender, if any, (d) the
respective directors, officers, employees, agents and servants of
each of the persons described in clauses (a) through (c), and (e)
the successors and permitted assigns of the persons described in
clauses (a) through (d), inclusive.
"INITIAL DEPOSIT" is defined in Schedule 1 to the Lease.
"LANDING GEAR HOURLY RATE" is defined in Schedule 1.
"LANDING GEAR HOURLY RENT BALANCE" for each landing gear
(i.e., one of the three (3) such gear installed on the Airframe),
means all Landing Gear Hourly Rent received by Lessor with
respect to such gear, less any payments made by Lessor for
Landing Gear Maintenance for the applicable gear or as otherwise
applied by Lessor in its sole discretion in connection with an
obligation of Lessee under the Operative Agreements.
"LAW" means (a) any constitution, treaty, statute, law,
decree, regulation, order, rule or directive of any Government
Entity, and (b) any judicial or administrative interpretation or
application of, or decision under, any of the foregoing.
"LEASE" or "LEASE AGREEMENT" means the Aircraft Lease
Agreement (MSN 22882), dated as of February 22, 2000, between
Lessor and Lessee, as supplemented by Lease Supplement No. 1, as
the same may be subsequently amended, modified or supplemented.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the
form of Exhibit A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement,
dated the Delivery Date.
"LESSEE" means Vanguard Airlines, Inc., a Delaware
corporation.
"LESSEE PERSON" means Lessee, any sublessee, assignee or
successor of Lessee or any other user, or person in possession,
of the Aircraft, the Airframe or any Engine, with or without
color of right, or any Affiliate of any of the foregoing (other
than any Indemnitee or any Affiliate thereof).
"LESSOR" means US Airways, Inc., a Delaware corporation, or
any successor lessor under the Lease.
"LESSOR LIEN" with respect to the Aircraft, Airframe or an
Engine means (a) any Lien on such property whatsoever from time
to time created by or through Lessor in connection with the
financing of the Aircraft, (b) any other Lien on such property
which results from acts of or claims against Lessor not related
to the transactions contemplated by or permitted under this
Agreement, or (c) any Lien on such property imposed as a result
of Taxes against which Lessor (or any other Tax Indemnitee) is
not required to be indemnified by Lessee under this Lease;
provided, that any Lien that would otherwise constitute a Lessor
Lien hereunder shall not constitute a Lessor Lien hereunder, so
long as (A) the existence of such Lien poses no material risk of
the sale, forfeiture or loss of the Aircraft, Airframe or any
Engine or any interest therein, (B) the existence of such
Lien does not interfere in any way with the use or operation of
the Aircraft by Lessee (or any Permitted Sublessee), (C) Lessor
is diligently contesting such Lien by appropriate proceedings,
and (D) any property subject to such Lien is not then required to
be conveyed to any other Person pursuant to Section 4.5 of the
Lease.
"LESSOR'S LENDER" means the financial institution(s) or
other Person(s) in whose favor Lessor may, from time to time,
grant a security interest in the Aircraft and/or this Lease
pursuant to Section 12.1(c) of the Lease in connection with any
financing made available to Lessor by such financial
institution(s) or Person(s), including any trustee or collateral
agent acting on behalf of any such financial institution(s) or
other Person(s).
"LETTER AGREEMENT NO. 1" means that certain Letter Agreement
No. 1, dated as of February 22, 2000 between Lessor and Lessee
relating to certain matters with respect to the Aircraft.
"LIABILITY DEDUCTIBLE" is defined in Schedule 1 to the
Lease.
"LIEN" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease or security interest affecting the title to or
any interest in property.
"LOI" means that certain Letter of Intent dated October 29,
1999 between Lessor and Lessee, with respect to the proposed
lease of six (6) Boeing Model 737-200 Advanced aircraft.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MATERIAL ADVERSE CHANGE" means, with respect to any person,
any event, condition or circumstance that materially and
adversely affects such person's business or consolidated
financial condition, or its ability to observe or perform its
obligations, liabilities and agreements under the Operative
Agreements.
"MINIMUM LIABILITY INSURANCE AMOUNT" is defined in Schedule
1 to the Lease.
"NET WORTH" means, for any person, the excess of its total
assets over its total liabilities.
"OFFICER'S CERTIFICATE" means, a certificate signed by the
Chairman, the President, any Vice President, the Treasurer or the
Secretary of such party.
"OPERATIVE AGREEMENTS" means, collectively, the Lease, Lease
Supplement No. 1, any other Lease Supplements, Letter Agreement
No. 1, and each other agreement between Lessor and Lessee
relating to the transactions contemplated by the Lease.
"PARTS" means all appliances, parts, components,
instruments, appurtenances, accessories, furnishings, seats and
other equipment of whatever nature (including, without
limitation, all avionics, the APU and Passenger Convenience
Equipment, but excluding Engines or engines), that may from time
to time be installed or incorporated in or attached or
appurtenant to the Airframe or any Engine; provided, that the
term "Parts" shall not be deemed to include any Passenger
Convenience Equipment if and for so long as such Equipment shall
be owned by, or shall be subject to a security interest,
license or other interest of, another Person (other than any
Affiliate of Lessee) as provided under Section D.3 of Annex C to
the Lease.
"PASSENGER CONVENIENCE EQUIPMENT" means components or
systems installed on or affixed to the Airframe that are used to
provide individual telecommunications or electronic entertainment
to passengers aboard the Aircraft.
"PAYMENT DATE" means the Delivery Date and the numerically
corresponding day in each successive calendar month thereafter
during the Term or, if any such day is not a Business Day, the
immediately succeeding Business Day.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PERMITTED LIEN" means any Lien described in clauses (a)
through (f), inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under
Section 7.2.6 of the Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted
Sublease.
"PERMITTED TRANSFEREE" means any Person that (i)
acknowledges, accepts and confirms in writing for the benefit of
Lessee the obligations set forth in Section 4.3 of the Lease,
(ii) is a Citizen of the United States, (iii) is neither a
commercial airline in the business of operating scheduled
passenger flights nor an Affiliate of a commercial airlines and
(iv) has a minimum net worth of $20,000,000.
"PERSONS" or "PERSONS" means individuals, firms,
partnerships, joint ventures, trusts, trustees, Government
Entities, organizations, associations, corporations, government
agencies, committees, departments, authorities and other bodies,
corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
""Q"-CHECK HOURLY RATE" is defined in Schedule 1 to the
Lease.
""Q"-CHECK HOURLY RENT BALANCE" means all "Q"-Check Hourly
Rent received by Lessor with respect to the Airframe, less any
payments made by Lessor for "Q"-Check Maintenance for the
Airframe or as otherwise applied by Lessor in its sole discretion
in connection with an obligation of Lessee under the Operative
Agreements.
"RENT" means, collectively, Basic Rent and Supplemental
Rent.
"REPLACEMENT ENGINE" means an engine substituted for an
Engine pursuant to Section 5.3, 7.2, 8 or 9 of or Annex C to the
Lease.
RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance
Supplement, dated as of the date the Aircraft is returned to
Lessor pursuant to Section 5 of the Lease, by Lessor and Lessee
substantially in the form of Exhibit B to Annex B to the Lease.
"RETURN LOCATION" means Kansas City, Missouri or such other
location as may be mutually agreed to by Lessor and Lessee.
"SEC" means the Securities and Exchange Commission of the
United States, or any Government Entity succeeding to the
functions of such Securities and Exchange Commission.
"SECTION 1110" means 11 U.S.C. Sections 1110 of the
Bankruptcy Code or any successor or analogous section of the
federal bankruptcy Law in effect from time to time.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY" means a "security" as defined in Section 2(1) of
the Securities Act.
"STIPULATED LOSS VALUE" is defined in Schedule 1 to the
Lease.
"SUPPLEMENTAL RENT" means all Hourly Rent, Expenses, and all
other amounts, liabilities, indemnities and obligations (other
than Basic Rent) that Lessee assumes or becomes obliged to or
agrees to pay under the Lease to or on behalf of Lessor or any
other person, including, without limitation, payments of
Stipulated Loss Value and payments of indemnities under the
Lease.
"TAXES" means all license, recording, documentary,
registration and other similar fees and all taxes, levies,
imposts, duties, charges, assessments or withholdings of any
nature whatsoever imposed by any Taxing Authority, together with
any penalties, additions to tax, fines or interest thereon or
additions thereto.
"TAX INDEMNITEE" means (a) Lessor, (b) Lessor's Lender, if
any, (c) any Affiliate of Lessor, (d) each group of corporations
(and each member thereof) that includes Lessor and Lessor's
Leader, if any, and for which a consolidated, combined, unitary
or other group tax return is filed, and (d) each of the
respective successors, assigns, directors, officers, agents and
servants of the persons described in clauses (a) through (c).
"TAXING AUTHORITY" means any federal, state or local
government or other taxing authority in the United States, any
government or other taxing authority in any jurisdiction outside
the United States, and any international taxing authority.
"TERM" means the term of five years, commencing on the
Delivery Date and ending on the Expiration Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease.
"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
U.S. AIR CARRIER" means any United States air carrier as to
which there is in force a certificate issued pursuant to Section
41101 of the Act, and as to which there is in force an air
carrier operating certificate issued pursuant to Part 121 of the
regulations promulgated under the Act, or which may operate as an
air carrier by certification or otherwise under any successor or
substitute provisions therefor or in the absence thereof.
"UNITED STATES" or "U.S." means the United States of
America; provided, that for geographic purposes, "United States"
means, in aggregate, the 50 states and the District of Columbia
of the United States of America.
"U.S. GOVERNMENT" means the federal government of the United
States, or any instrumentality or agency thereof the obligations
of which are guaranteed by the full faith and credit of the
federal government of the United States.
WET LEASE" means any arrangement whereby Lessee agrees to
furnish the Airframe and Engines or engines installed thereon to
a third party pursuant to which the Airframe and such Engines or
engines (i) shall at all times be in the sole possession and
control of Lessee, (ii) shall be operated in all respects solely
by regular employees of Lessee possessing all current
certificates and licenses that are required under the Act or any
FAA Regulations for the possession, use and operation of the
Airframe and such Engines or engines, and (iii) shall in all
events be maintained, insured and otherwise used and operated in
compliance with the terms and provisions of the Lease.
ANNEX B
[INTENTIONALLY OMITTED]
ANNEX C
[INTENTIONALLY OMITTED]
ANNEX D -
INSURANCE
ANNEX D
INSURANCE
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference in
Annex A to the Lease.
A. LIABILITY INSURANCE
As of the Delivery Date and throughout the Term and, subject
to the provisions of Section G, for a period of two years
following the termination or expiration of the Lease, Lessee will
carry or cause to be carried at all times, at no expense to
Lessor, comprehensive airline legal liability (including, without
limitation, third-party and passenger liability and property
damage, including baggage (checked and unchecked), cargo and mail
and premises, hangarkeeper's and products liability and
contractual liability insurance with respect to the Aircraft, the
Airframe and the Engines, which is:
(i) in an amount not less than the greater of (x) the
amount of comprehensive airline legal liability insurance
from time to time applicable to aircraft owned or leased and
operated by Lessee of the same type and operating on similar
routes as the Aircraft and (y) the Minimum Liability
Insurance Amount per occurrence;
(ii) of the type usually carried by prudent major
United States commercial air carriers, engaged in the same
or similar business, similarly situated, and owning or
operating similar aircraft and engines and which covers
risks of the kind customarily insured against by such
prudent United States commercial air carriers; and
(iii) maintained in effect with insurers of nationally
or internationally recognized reputation and responsibility
and substantial financial capacity used by other major
United States commercial air carriers which are reasonably
acceptable to Lessor (such insurers being referred to
herein as "Approved Insurers").
▇. ▇▇▇▇ INSURANCE
As of the Delivery Date and throughout the Term, Lessee will
carry or cause to be carried at all times, at no expense to
Lessor, with Approved Insurers:
(1) "all-risk" aircraft hull insurance covering each
Aircraft (including the Engines when they are installed on
the Airframe or any other airframe) for an amount
denominated in United States Dollars not less than the
Stipulated Loss Value of the Aircraft; and
(ii) all risk of physical loss or damage (including
while in transit and including the risks of fire, flood, and
earthquake, and including war and confiscation while in
international transit) insurance on Engines and Parts while
removed from the Aircraft (to the extent such Engines and
Parts are not covered by aircraft hull insurance) in amounts
not less than that usually carried by prudent major United
States commercial air carriers and in no event less than the
replacement cost of such Engines and Parts.
Any policies of insurance carried in accordance with this
Section B covering the Aircraft and any policies taken out in
substitution or replacement for any such policies shall name
Lessor as exclusive loss payee for any proceeds to be paid under
such policies up to an amount equal to the Stipulated Loss Value
pursuant to a loss payable clause in the form attached as Exhibit
D-l hereto.
C. WAR-RISK, HIJACKING AND ALLIED PERILS INSURANCE
If Lessee (or any Permitted Sublessee) shall at any time
operate or propose to operate the Aircraft, Airframe or any
Engine in any area of recognized or threatened hostilities, or if
war-risk, hijacking or allied perils insurance is maintained by
Lessee (or any Permitted Sublessee) with respect to other
aircraft owned or operated by Lessee (or any Permitted Sublessee)
on the same routes or in such areas, or if the Aircraft is
operated outside the United States or Canada, Lessee shall
maintain or cause to be maintained war-risk, hijacking and
related perils insurance of substantially the same type carried
by major United States commercial air carriers operating the same
or comparable models of aircraft on similar routes or in such
areas and in no event in an amount less than (x) the amount set
forth in Section A with respect to liability coverage and (y) the
values stated in Sections B(i) and (ii) with respect to hull
coverage, and such insurance shall, to the extent available,
cover the perils of (i) war, invasion, acts of foreign enemies,
hostilities (whether war be declared or not), civil war,
rebellion, revolution, insurrection, martial law, military or
usurped power or attempts at usurpation of power; (ii) strikes,
riots, civil commotion or labor disturbances; (iii) any act of
one or more Persons, whether or not agents of a sovereign power,
for political or terrorist purposes and whether the loss or
damage resulting therefrom is accidental or intentional; (iv) any
malicious act or act of sabotage; (v) confiscation,
nationalization, seizure, restraint, detention, appropriation,
requisition for title or use by or under the order of any
government (whether civil, military or de facto) or public or
local authority; and (vi) hijacking or any unlawful seizure or
wrongful exercise of control of the Aircraft or any Engine or any
airframe on which any Engine is installed or of crew in flight
(including any attempt at such seizure or control) made by any
Person or Persons on board the Aircraft or such airframe acting
without the consent of Lessee.
D. GENERAL PROVISIONS
Any policies of insurance carried in accordance with
Sections A, B and C, including any policies taken out in
substitution or replacement for such policies:
(i) shall name each Indemnitee as an additional
insured (collectively, the "Additional Insureds");
(ii) shall apply worldwide and have no territorial
restrictions or limitations (except only in the case of war,
hijacking and related perils insurance required under
Section C, which shall apply to the fullest extent available
in the international insurance market);
(iii) by means of an endorsement submitted to and
approved by Lessor, prior to the Delivery Date, shall
provide that, in respect of the interests of the Additional
Insureds in such policies, the insurance shall not be
invalidated or impaired by any act or omission (including
misrepresentation and nondisclosure) by Lessee (or any
Permitted Sublessee) or any other Person and shall insure
the Additional Insureds regardless of any breach or
violation of any representation, warranty, declaration, term
or condition contained in such policies by Lessee (or any
Permitted Sublessee) or any other Person;
(iv) shall provide that, if the insurers cancel such
insurance for any reason whatsoever, or if the same is
allowed to lapse for nonpayment of premium, or if any
material change is made in the insurance which adversely
affects the interest of any of the Additional Insureds, such
cancellation, lapse or change shall not be effective as to
the Additional Insureds for (a) except only in the case set
forth in subclause (b) below, 30 calendar days after receipt
by Lessor of written notice by such insurers of such
cancellation, lapse or change or (b) in respect of war,
hijacking and related perils insurance required under
Section C, seven days (or such shorter period as may be
available in the international insurance market with respect
to such insurance) after the receipt by Lessor of written
notice of such cancellation, lapse or change, as the case
may be;
(v) shall waive any rights of setoff (including for
unpaid premiums), recoupment, counterclaim or other
deduction, whether by attachment or otherwise, against each
Additional Insured;
(vi) shall waive any right of recourse, subrogation,
setoff, recoupment, counterclaim or other deduction against
any Additional Insured;
(vii) shall be primary without right of contribution
from any other insurance that may be available to any
Additional Insured;
(viii) shall provide that all of the liability insurance
provisions thereof, except the limits of liability, shall
operate in all respects as if a separate policy had been
issued covering each party insured thereunder;
(ix) shall provide that none of the Additional Insureds
shall be liable for any insurance premium;
(x) shall contain a 50/50% Clause per Lloyd's Aviation
Underwriters' Association Standard Policy Form AVS 103 or
it's current equivalent; and
(xi) shall contain endorsements reversing any data
recognition exclusions; and
(xii) shall specifically refer to this Annex D.
E. REPORTS AND CERTIFICATES; OTHER INFORMATION
On or prior to the Delivery Date and on or prior to each
renewal date of its insurance policies, Lessee will furnish or
cause to be furnished to Lessor insurance certificates describing
in reasonable detail the hull and liability insurance (and
property insurance for detached Engines and Parts) and a report,
signed by a nationally recognized insurance broker (the
"Insurance Broker"), stating the opinion of such Insurance Broker
that (a) all premiums in connection with the insurance then due
have been paid, (b) such insurance complies with the terms of
this Annex D, and (c) such insurance provides coverage against
risks that are customarily insured against by major United States
commercial air carriers. Such Insurance Broker shall further
agree to advise Lessor in writing of any default in the payment
of any premium and of any other act or omission on the part of
Lessee of which it has knowledge and which might invalidate or
render unenforceable, in whole or in part, any insurance on the
Aircraft or Engines or cause the cancellation or termination of
such insurance, and to advise Lessor in writing at least 30 days
(seven days in the case of war-risk and allied perils coverage or
such shorter period as may be available in the international
insurance market, as the case may be) prior to the cancellation,
lapse or material adverse change of any insurance maintained
pursuant to this Annex D. The Additional Insureds shall also be
entitled to such other information as they may reasonably request
of Lessee, the Approved Insurers or the Insurance Broker from
time to time with respect to the insurances to be provided
hereunder.
F. RIGHT TO PAY PREMIUMS
The Additional Insureds shall have the rights but not the
obligations of an additional named insured. Neither Lessor nor
any other Additional Insured shall have any obligation to pay any
premium, commission, assessment or call due on any such insurance
(including reinsurance). Notwithstanding the foregoing, the
insurer shall agree that, in the event of cancellation of any
insurance due to the nonpayment of premiums, Lessor shall have
the option, in its sole discretion, to pay any such premium
reasonably set by insurers in respect of the Aircraft Engines and
Parts that is due in respect of the coverage pursuant to the
Lease and to maintain such coverage, as Lessor may require, until
the natural expiration date of such insurance.
G. EXPIRATION OR TERMINATION OF THE LEASE
Lessee covenants and agrees that, upon expiration or
termination of the Lease, it shall carry the following insurance
coverage:
(a) During each portion of the two-year period following
such expiration or termination that Lessee shall be the owner or
operator of the Aircraft or any Engine (whether resulting from
the purchase of the Aircraft or any Engine from Lessor or
otherwise), Lessee shall carry or cause to be carried, at its own
expense, liability insurance of the types and in the amounts
required under Section A and containing the terms set forth in
Section D in regard to each Indemnitee, each of whom shall be
named as an Additional Insured thereunder; and
(b) During each portion of such two-year period that
Lessee shall not be the owner or operator of the Aircraft or any
Engine, Lessee shall carry or cause to be carried products
(completed operations) liability insurance in the amount required
under Section A and containing the terms set forth in Section D
in regard to each Indemnitee, each of whom shall be named as an
Additional Insured thereunder.
LOSS PAYABLE CLAUSE (HULL)
(1) All losses shall be adjusted by Lessee, unless Lessor shall
have notified the underwriters that any Default or an Event
of Default has occurred and is continuing, in which event
all losses shall be adjusted by Lessor or its designee.
(2) (a) The sum in respect of which the Aircraft, Airframe
and Engines are insured for total loss or the sum
negotiated in settlement of a constructive or
compromised or agreed or arranged total loss shall be
paid in full to Lessor as exclusive loss payee in
United States Dollars without any deduction or
deductions whatsoever to an account in the United
States designated by Lessor;
(b) All recoveries, in respect of repairable damage to the
Aircraft, Airframe or Engines, or the loss or
destruction of any Engine, not exceeding the Damage
Payment Threshold in any one case, shall be paid in
full to Lessee; provided, however, that if Lessor shall
have notified the underwriters that any Default or an
Event of Default has occurred and is continuing, all
such recoveries shall be paid in full to Lessor; and
(c) All recoveries in respect of repairable damage to the
Aircraft, Airframe or Engines, or the loss or
destruction of any Engine, exceeding the Damage Payment
Threshold in any one case shall be paid in full to
Lessor as exclusive loss payee in United States Dollars
to an account in the United States designated by
Lessor.
EXHIBIT A -
LEASE SUPPLEMENT
LEASE SUPPLEMENT NO. 1
LEASE SUPPLEMENT No. 1, dated ________, 2000, between US
Airways, Inc., a Delaware corporation ("Lessor"), and Vanguard
Airlines, Inc., as Lessee ("Lessee").
Lessor and Lessee have heretofore entered into that certain
Aircraft Lease Agreement dated as of February 22, 2000, relating
to one Boeing Model 737-200 Advanced aircraft (herein called the
"Lease" and the defined terms therein being hereinafter used with
the same meanings). The Lease provides for the execution and
delivery of this Lease Supplement for the purpose of evidencing
the effectiveness of the Lease with respect to the Aircraft and
Engines.
The Lease relates to the Airframe and Engines described
below, and a counterpart of the Lease to which this Lease
Supplement is attached and of which this Lease Supplement is a
part, is being filed for recordation on the date hereof with the
Federal Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree
as follows:
1. Lessor hereby delivers and leases to Lessee under the
Lease and Lessee hereby accepts and leases from Lessor under the
Lease the following described Boeing Model 737-200 Advanced
aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. N270AU;
manufacturer's serial no. 22882; and
(ii) Engines: two (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT8D-15 engines
bearing, respectively, manufacturer's serial nos. P700178
and P654988 (each of which engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of this
Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms its agreement to pay Lessor Rent
for the Aircraft in accordance with Section 3, and the other
provisions, of the Lease.
4. Lessee hereby confirms to Lessor that Lessee has duly
accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Operative Agreements.
5. All of the terms and provisions of this Lease Supplement
are hereby incorporated by reference in the Lease to the same
extent as if fully set forth therein.
6. This Lease Supplement may be executed by the parties
hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
7. To the extent, if any, that this Lease Supplement
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 Supplement may be created through
the transfer or possession of any counterpart other than the
original executed counterpart, which shall be identified as the
counterpart that states on the signature page thereof that it is
the original chattel paper counterpart.
[This space intentionally left blank.]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Supplement to be duly executed as of the day and year first
above written.
US AIRWAYS, INC.,
as Lessor
By______________________________
Name:
Title:
VANGUARD AIRLINES, INC.,
as Lessee
By______________________________
Name:
Title:
SCHEDULE 1 - CERTAIN TERMS
CERTAIN TERMS
DEFINED TERM DEFINITION
Additional Deposit $55,000
Basic Rent $110,000 per month
Damage Payment Threshold $1,000,000
Discount Rate The highest rate for Federal
Funds as quoted in the Wall
Street Journal on the
Business Day preceding the
date of determination.
Engine Hourly Rate $95.00 per flight hour or
flight cycle, whichever is
greater
Final Deposit $110,000
Initial Deposit $55,000
Landing Gear Hourly Rate $14.00 for the shipset of
landing gears per flight
hour, allocated $4.00 per
flight hour for each of the
two main gear and $6.00 per
flight hour for the nose gear
Liability Deductible $500,000
Minimum Liability Insurance $500,000,000
Amount
Payment Due Rate The lesser of (a) the
Citibank, N.A.'s prime rate
plus 2% or (b) the maximum
rate permitted under
applicable Law
SCHEDULE 1 - CERTAIN TERMS
Purchase Price Delivery Date: $6,150,000
Six Month Anniversary:
$5,800,000
Twelve Month Anniversary:
$5,450,000
Eighteen Month Anniversary:
$5,100,000
Twenty Four Month
Anniversary: $4,750,000
"Q"-Check Hourly Rate $75.00 per flight hour
(provided, however, this rate
will be reviewed following
the initial "Q"-Checks
performed on the first four
(4) 737-200 Advanced aircraft
to be leased by Lessor to
Lessee (as contemplated by
the LOI) based on the total
agreed costs applicable to
such "Q"-Checks. The maximum
rate will be $80.00 and the
minimum will be $70.00. If
the parties do not mutually
agree to a revised rate, the
rate shall remain at $75.00
per flight hour.
Stipulated Loss Value $7,072,500
SCHEDULE 2 -
LEASE IDENTIFICATION, ETC.
LEASE IDENTIFICATION AND OTHER INFORMATION
Lease Identification: "Leased from US Airways, Inc. as Owner
and Lessor"
Lessee's Address: Vanguard Airlines, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and General Counsel
Vanguard Airlines, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Lessor's Address: US Airways, Inc.
Crystal Park Four
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Director - Aircraft Sales
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇
Associate General Counsel
US Airways, Inc.
Crystal Park Four
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Payment Location: PNC Bank
Pittsburgh, Pennsylvania
United States of America
For the account of
Account Number: ▇▇▇-▇▇-▇▇▇▇▇
For the account of: US Airways, Inc.
ABA Number ▇▇▇▇▇▇▇▇▇
Reference: Vanguard MSN 22882
SCHEDULE 3 -
REPRESENTATIONS AND WARRANTIES -
PART A
REPRESENTATIONS AND WARRANTIES
PART A. LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee represents and warrants to Lessor, as of the date
hereof, that:
(i) Lessee is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State
of Delaware and has the corporate power and authority to conduct
the business in which it is currently engaged and to own or hold
under lease its properties and to enter into and perform its
obligations under the Operative Agreements. Lessee is duly
qualified to do business as a foreign corporation in good
standing in the State of Missouri and in all other jurisdictions
required by Law or in which the nature and extent of the business
conducted by it, or the ownership of its properties, makes such
qualification necessary or desirable except where the failure to
be so qualified would not give rise to a Material Adverse Change
to Lessee.
(ii) Lessee has taken, or caused to be taken, all
necessary corporate action to authorize the execution and
delivery of each of the Operative Agreements and the performance
of its obligations thereunder.
(iii) The execution and delivery by Lessee of the
Operative Agreements and the performance by Lessee of its
obligations thereunder do not and will not (a) violate or
contravene any provision of the Certificate of Incorporation or
By-Laws of Lessee, (b) violate or contravene any Law applicable
to or binding on Lessee, or (c) violate, contravene or constitute
any default under, or result in the creation of any Lien (other
than as permitted under this Lease) upon any property of Lessee
or any of its subsidiaries under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract,
lease, loan or other material agreement, instrument or document
to which Lessee is a party or by which Lessee or any of its
properties is or may be bound or affected.
(iv) The execution and delivery by Lessee of the
Operative Agreements and the performance by Lessee of its
obligations thereunder do not and will not require the consent,
approval or authorization of, or the giving of notice to, or the
registration with, or the recording or filing of any documents
with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of Lessee and (b) any
Government Entity, other than the filing of the FAA Filed
Documents and the Financing Statements (and continuation
statements periodically) and filings, recordings, notices or
other ministerial actions pursuant to any routine recording,
contractual or regulatory requirements applicable to it.
(v) The Operative Agreements have been duly
authorized, executed and delivered by Lessee and, assuming the
due authorization, execution and delivery thereof by the other
party or parties thereto, constitute the legal, valid and binding
obligations of Lessee and are enforceable against Lessee in
accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws
affecting the rights of creditors generally and general
principles of equity, whether considered in a proceeding at law
or in equity.
(vi) Except as set forth in Lessee's most recent
Annual Report on Form 10-K or its Quarterly Report on Form 10-Q
filed by Lessee with the SEC on or prior to the Delivery Date
(copies of which (excluding exhibits), in each case, have been
furnished to Lessor by Lessee), no action, claim or proceeding is
now pending or, to the Actual Knowledge of Lessee, threatened,
against Lessee, at law, in equity or otherwise, before any court,
board, commission, agency or instrumentality of any foreign
government or any federal, state or local government or of any
agency or subdivision thereof, or before any arbitrator or panel
of arbitrators, which is reasonably likely to be determined
adversely to Lessee and if determined adversely to Lessee would
result in a Material Adverse Change to Lessee.
(vii) Lessee has filed or caused to be filed all
material tax returns, reports and statements that are required to
be filed and has paid or caused to be paid all taxes shown to be
due and payable by such returns, reports or statements and any
tax assessments received by Lessee to the extent that such taxes
have become due and payable (except to the extent being contested
in good faith and for the payment of which adequate reserves have
been provided except where the failure to do so would not have a
material adverse effect upon its financial condition or business
or its ability to perform its obligations under the Operative
Agreements).
(viii) The audited consolidated balance sheet of
Lessee as of December 31, 1998 and the related consolidated
statements of cash flows and nonredeemable preferred stock and
common stockholders' deficit for the period then ended (copies of
which have been furnished to Lessor) have been prepared in
accordance with GAAP and fairly present in all material respects
the financial condition of Lessee and its consolidated
subsidiaries as of such date and the results of its operations
and cash flows for such period, and since December 31, 1998 there
has been no material adverse change in such financial condition
or operations, except for matters disclosed in the financial
statements referred to above or in any subsequent Annual Report
on Form 10-K, Quarterly Report on Form 10-Q or Current Report on
Form 8-K filed by Lessee with the SEC on or prior to the date
hereof (copies of which (excluding exhibits) have been delivered
to Lessor by Lessee).
(ix) Except for (a) the filing for recordation
(and recordation) of the FAA Filed Documents, (b) the filing of
the Financing Statements (and continuation statements relating
thereto at periodic intervals), (c) the taking of possession and
retention by Lessor of the original counterparts of the Lease and
Lease Supplement No. 1 and (d) the affixation of the nameplates
referred to in Section 7.1.3 of the Lease, no further action,
including any filing or recording of any document (including any
financing statement in respect thereof under Article 9 of the
UCC) is necessary or advisable in order to establish and perfect
the right, title or interest of Lessor in the Aircraft and the
Lease, as against Lessee or any other Person, in each case, in
any applicable jurisdictions.
(x) The chief executive office (as such term is
defined in Article 9 of the UCC) of Lessee is located at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
(xi) No event which, if the Aircraft were subject
to the Lease, would constitute a Default or Event of Default has
occurred and is continuing.
(xii) No Event of Loss has occurred with respect
to the Airframe or any Engine, and, to the Actual Knowledge of
Lessee, no circumstance, condition, act or event occurred that,
with the giving of notice or lapse of time or both gives rise to
or constitutes an Event of Loss with respect to the Airframe or
any Engine.
(xiii)(A) Lessee is not in default under, or in
violation of, any Law applicable to Lessee or to which Lessee is
subject, the violation of which would give rise to a Material
Adverse Change to Lessee.
(B) Without limiting the generality of
Part A, Section (xiii)(A) of this Schedule 3:
(I) Lessee is a U.S. Air Carrier;
(II) Lessee holds all licenses, permits
and franchises from the appropriate Government Entities necessary
to authorize Lessee to lawfully engage in air transportation and
to carry on scheduled commercial passenger service as currently
conducted, except where the failure to so hold any such license,
permit or franchise would not give rise to a Material Adverse
Change to Lessee;
(xiv) No Person acting on behalf of Lessee other
than IAMG is or will be entitled to any broker's fee, commission
or finder's fee in connection with the transactions contemplated
by the Lease and the other Operative Agreements.
(xv) Lessor, as lessor under the Lease, is
entitled to the benefits of Section 1110 (as currently in effect)
with respect to the right to take possession of the Airframe and
Engines as provided in the Lease in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
SCHEDULE 3 REPRESENTATIONS
AND WARRANTIES - PART B
PART ▇. ▇▇▇▇▇▇'▇ REPRESENTATIONS AND WARRANTIES
Lessor represents and warrants to Lessee, as of the date
hereof, that:
(i) Lessor is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State
of Delaware and has the corporate power and authority to conduct
the business in which it is currently engaged and to own or hold
under lease its properties and to enter into, and perform its
obligations under the Operative Agreements.
(ii) Lessor has taken, or caused to be taken, all
necessary corporate action to authorize the execution and
delivery of each of the Operative Agreements, and the performance
of its obligations thereunder.
(iii) The execution and delivery by Lessor of the
Operative Agreements, the performance by Lessor of its
obligations thereunder and the consummation by Lessor on the
Delivery Date of the transactions contemplated thereby, do not
and will not (a) violate or contravene any provision of the
Certificate of Incorporation or By-Laws of Lessor, (b) violate or
contravene any Law applicable to or binding on Lessor of or (c)
violate, contravene or constitute any default under, or result in
the creation of any Lien (other than as provided for or otherwise
permitted in the Operative Agreements) upon the Aircraft under,
any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, loan or other material
agreement, instrument or document to which Lessor is a party or
by which Lessor or any of its properties is or may be bound or
affected.
(iv) The execution and delivery by Lessor of the
Operative Agreements, the performance by Lessor of its
obligations thereunder and the consummation by Lessor on the
Delivery Date of the transactions contemplated thereby do not and
will not require the consent, approval or authorization of, or
the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any
other action in respect of, (a) any trustee or other holder of
any Debt of Lessor and (b) any Government Entity, other than the
filing of the FAA Filed Documents and the Financing Statements.
(v) The Operative Agreements have been duly
authorized, executed and delivered by Lessor and, assuming the
due authorization, execution and delivery by the other party or
parties thereto, constitute the legal, valid and binding
obligations of Lessor and are enforceable against Lessor in
accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws
affecting the rights of creditors generally and general
principles of equity, whether considered in a proceeding at law
or in equity.
(vi) Lessor shall have the right to lease the
Aircraft to Lessee in accordance with the terms hereof.
(vii) Lessor is a Citizen of the United States.
(viii) On the Delivery Date, there are no Lessor
Liens in respect of the Aircraft.
(ix) There are no pending or, to the Actual
Knowledge of Lessor, threatened actions or proceedings against
Lessor before any court, administrative agency or tribunal which,
if determined adversely to Lessor, would materially adversely
affect the ability of Lessor to perform its obligations under the
Operative Agreements.
(x) No Person acting on behalf of Lessor is or
will be entitled to any broker's fee, commission or finder's fee
in connection with the transactions contemplated by the Lease and
the other Operative Agreements.
SCHEDULE 4 -
OPINION OF LESSEE'S COUNSEL
FORM OF OPINION OF LESSEE'S COUNSEL
[TO COME]
THIS AIRCRAFT LEASE AGREEMENT CONTAINS CONFIDENTIAL AND
PROPRIETARY INFORMATION
______________________________________________________________________
AIRCRAFT LEASE AGREEMENT
(MSN 22882)
Dated as of February 22, 2000
Between
US AIRWAYS, INC.
Lessor
and
VANGUARD AIRLINES, INC.
Lessee
One Boeing Model ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Registration No. N270AU and
Bearing Manufacturer's Serial No. 22882
with two ▇▇▇▇▇ & Whitney JT8D-15 Engines
Bearing Engine Manufacturer's Serial Nos. P700178 and P654988
______________________________________________________________________
______________________________________________________________________
This Aircraft Lease Agreement has been executed in multiple
counterparts; to the extent, if any, that this Aircraft Lease
Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no
security interest in Lessor's right, title and interest in and to
this Aircraft Lease Agreement may be perfected through the
delivery or possession of any counterpart of this Aircraft Lease
Agreement other than the counterpart of this Aircraft Lease
Agreement that states on the signature page thereof that it is
the original chattel paper counterpart.
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS AND CONSTRUCTION 1
SECTION 2. DELIVERY AND ACCEPTANCE 1
2.1 Agreement to Lease 1
2.2 Acceptance by Lessee 1
2.3 Conditions to Lessor's Obligations 2
SECTION 3. TERM, RENT AND SECURITY DEPOSIT 3
3.1 Term 3
3.2 Rent 3
3.3 Security Deposit 4
3.4 Payments 5
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR;
SECTION 1110 MATTERS 5
4.1 Disclaimer 5
4.2 Certain Agreements of Lessor 6
4.3 Quiet Enjoyment 7
4.4 Title Transfers by Lessor 7
4.5 Lessor's Interest in Certain Engines 7
4.6 Lease For U.S. Federal Income Tax Law
Purposes; Section 1110 of Bankruptcy
Code 8
4.7 Contribution by Lessor for Certain
Maintenance and Overhauls 8
SECTION 5. RETURN OF AIRCRAFT 10
5.1 Compliance with Annex B 10
5.2 Storage and Related Matters 10
5.3 Return of Other Engines 10
5.4 Failure to Return Aircraft 10
SECTION 6. LIENS 11
SECTION 7. REGISTRATION, OPERATION, POSSESSION,
SUBLEASING AND RECORDS 12
7.1 Registration and Operation 12
7.2 Possession 13
7.3 Certain Limitations on Subleasing or
Other Relinquishment of Possession 15
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF
PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS; OTHER LESSEE COVENANTS 16
8.1 Maintenance; Replacement and Pooling of
Parts; Alterations, Modifications and
Additions 16
8.2 Information, Certificates, Notices and
Reports 16
8.3 Representations and Warranties 18
SECTION 9. LOSS, DESTRUCTION, REQUISITION, ETC. 18
9.1 Event of Loss With Respect to Aircraft 18
9.2 Event of Loss With Respect to an Engine 19
9.3 Application of Payments 21
9.4 Application of Payments During Existence
of Default 21
SECTION 10 INSURANCE 21
10.1 Lessee's Obligation to Insure 21
10.2 Lessor's Right to Maintain Insurance 22
10.3 Insurance for Own Account 22
10.4 Application of Insurance Proceeds 22
10.5 Application of Payments During Existence
of Default 22
SECTION 11. INSPECTION 22
SECTION 12. ASSIGNMENT; MERGER 23
12.1 In General 23
12.2 Merger of Lessee 25
12.3 Covenants of Lessee 26
SECTION 13. EVENTS OF DEFAULT 27
13.1 Payments 27
13.2 Insurance 27
13.3 Corporate Existence 28
13.4 Certain Covenants 28
13.5 Other Covenants 28
13.6 Representations and Warranties 28
13.7 Bankruptcy and Insolvency 28
13.8 Other Agreements with Lessor 29
13.9 Deregistration 29
13.10 Transfer 29
13.11 Judgments 29
13.12 Materially Adverse Effect 29
13.13 Indebtedness 29
13.14 Operative Agreements 30
13.15 Security Deposit 30
SECTION 14. REMEDIES AND WAIVERS 30
14.1 Remedies 30
14.2 Right to Perform for Lessee 33
14.3 Determination of Fair Market Rental
Value 33
14.4 Lessor Appointed Attorney-in-Fact 33
14.5 Remedies Cumulative 34
SECTION 15. LESSEE'S OBLIGATIONS; NO SETOFF,
COUNTERCLAIM, ETC. 34
SECTION 16. GENERAL TAX INDEMNITY 35
16.1 General 35
16.2 After-Tax Nature of Indemnity 36
16.3 Contest 37
16.4 Application of Payments During Existence
of Event of Default 38
16.5 Withholding Tax 38
16.6 Survival of Indemnities 38
SECTION 17. GENERAL INDEMNIFICATION 38
17.1 The Indemnity 38
17.2 The Lessee Waiver 39
17.3 The Gross-Up 40
SECTION 18. MISCELLANEOUS 40
18.1 Purchase Options 40
18.2 Amendments 41
18.3 Severability 41
18.4 Survival 41
18.5 Reproduction of Documents 41
18.6 Counterparts 42
18.7 No Waiver 42
18.8 Notices 42
18.9 Governing Law; Submission To
Jurisdiction; Venue 42
18.10 Third-Party Beneficiary 44
18.11 Entire Agreement 44
ANNEXES, EXHIBITS AND SCHEDULES
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
EXHIBIT A Form of Lease Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2 Lease Identification and Other Information
SCHEDULE 3 Representations and Warranties
SCHEDULE 4 Opinion of Lessee's Counsel
