1
EXHIBIT 4.20
THE RIGHTS OF LESSOR UNDER THIS SECOND AMENDED AND RESTATED AIRCRAFT LEASE
AGREEMENT [GPA 1989 BN-6] AND IN THE AIRCRAFT COVERED HEREBY WILL BE OR HAVE
BEEN ASSIGNED TO, AND ARE OR WILL BE SUBJECT TO A SECURITY INTEREST IN FAVOR
OF, THE CHASE MANHATTAN BANK, AS SUCCESSOR IN INTEREST TO MANUFACTURERS HANOVER
TRUST COMPANY, AS INDENTURE TRUSTEE UNDER A SECOND AMENDED AND RESTATED TRUST
INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-6] DATED AS OF SEPTEMBER 22,
1989, AMENDED AND RESTATED AS OF OCTOBER 1, 1991, AND FURTHER AMENDED AND
RESTATED AS OF NOVEMBER __, 1996. AS PROVIDED IN SECTION 21(e) HEREOF, TO THE
EXTENT, IF ANY, THAT THIS SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL
CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS
AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT MAY BE CREATED THROUGH THE
TRANSFER OF POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART,
WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR
EXECUTED BY THE CHASE MANHATTAN BANK, AS SUCCESSOR IN INTEREST TO MANUFACTURERS
HANOVER TRUST COMPANY, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF.
--------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
[GPA 1989 BN-6]
Dated as of September 22, 1989
Amended and Restated as of October 1, 1991
And Further Amended and Restated as of November __, 1996
between
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as otherwise expressly provided herein,
but solely as Owner Trustee under a
Trust Agreement [GPA 1989 BN-6] dated
as of September 22, 1989, as amended
Lessor
and
AMERICA WEST AIRLINES, INC.
Lessee
One Airbus A320-231 Aircraft
Manufacturer's Serial ▇▇. ▇▇
▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
Page
----
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Agreement to Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3. Delivery and Acceptance; Term; Rental Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Time of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Place of Delivery and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Acceptance of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Term of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Rental Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4. Rent; Minimum Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Minimum Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Date, Place and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Prohibition Against Setoff, Counterclaim, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5. Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Warranties and Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Representations and Warranties of Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) No Amendments to Financing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Suppliers' Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6. Possession and Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Reciprocal Recognition of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Lawful Insured Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) Registration and Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8. Additional Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) Maintenance of Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(f) Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Certain Limitations on Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(i) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(j) Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(k) Security Opinion; Annual Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(l) Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(m) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(i)
3
Page
----
Section 9. Replacement of Parts; Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . 48
(a) Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(c) Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10. General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(b) Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(c) Covered Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(d) Reports and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(e) After-Tax Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(f) Tax Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(g) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(h) Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(i) Refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(j) Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(k) Affiliated Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11. Loss, Damage and Requisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(a) Event of Loss with Respect to the Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(b) Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
(c) Conveyance of Replacement Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(d) Application of Proceeds and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
(e) Requisition for Use by Government with Respect to the Aircraft . . . . . . . . . . . . . . . . . . . . . 69
(f) Application in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(a) Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(b) Insurance Against Loss or Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(c) Application of Insurance Proceeds for an Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . 75
(d) Application of Insurance Proceeds for Other than an Event of Loss . . . . . . . . . . . . . . . . . . . . 76
(e) Application in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
(f) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
(g) Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
(h) Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
(i) Amounts Held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
(j) After the Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
(k) Governmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 13. General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 14. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
(ii)
4
Page
----
Section 15. Protection of Title and Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 16. Return of Aircraft and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
(a) Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
(b) Status Upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
(c) Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
(d) Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
(e) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
(f) Final Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
(g) Aircraft Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
(h) Corrections and Subsequent Corrections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
(i) Functional Flight Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
(j) Export Certificate of Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
(k) Service Bulletin and Modification Kits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
(l) Storage Upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
(m) Resale/Release Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 17. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 18. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 19. Alienation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(a) Lessor Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(b) Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 20. Renewal Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 21. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
(a) Severability, Amendment, and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
(b) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
(d) Lessor's Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
(f) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
(g) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
(h) Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
(i) Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
(j) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
(k) Federal Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
(l) U.S. Registration Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
(m) Submission to Jurisdiction; Service of Process; Waiver of Forum Non Conveniens; Waiver of Jury Trial . . 108
(n) Limitation on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
(o) Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
(p) Article 2-A of the UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
(iii)
5
ANNEXES
ANNEX I - Description of Original Head Lease
EXHIBITS
Exhibit A - Stipulated Loss Values
Exhibit B - Aircraft Records and Documents
Exhibit C - Definitions and Values
Exhibit D1 - Lease Supplement No. 3
Exhibit D2 - Letter of Credit
Exhibit E - Return Condition Requirements
Exhibit F-1 - Foreign Air Carriers
Exhibit F-2 - Permitted Foreign Sublessee Domiciles
Exhibit G - Opinion of Lessee's Special Counsel
(iv)
6
SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
THIS SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
dated as of September 22, 1989, as amended and restated as of October 1, 1991,
and as further amended and restated as of November __, 1996 is entered into
between WILMINGTON TRUST COMPANY, not in its individual capacity except as
otherwise expressly provided herein, but solely as Owner Trustee under a Trust
Agreement [GPA 1989 BN-6] dated as of September 22, 1989, as amended, and with
its principal place of business at ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (together with its successors and permitted assigns, "Lessor"), and
AMERICA WEST AIRLINES, INC., a Delaware corporation, with its chief executive
office at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (together with
its successors and permitted assigns, "Lessee").
W I T N E S E T H:
WHEREAS, Lessor and Lessee desire to amend and, solely for the
convenience of the parties, restate in its entirety the Original Head Lease (as
hereinafter defined) as of the Restatement Date (as hereinafter defined) as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions.
The following terms shall have the following respective
meanings for all purposes of this Lease (including the Recitals) and shall be
equally applicable to both the singular and the plural forms of the terms
defined herein:
As used herein, the terms "Equipment Notes," "Excepted
Payments," "Indenture Supplement," "Note Holder," "Pass Through Trust," "Pass
Through Trust Agreement," "Pass Through Trustee," "Past Due Rate," Principal
Amount," "Refinancing Transaction," "Refunding Agreement," "Restatement Date,"
"Trust Company" and "Trust Indenture Estate" shall have the meanings specified
in the Indenture and the terms "Intercreditor Agreement," "Liquidity
Facility," "Liquidity Provider" and "Subordination Agent" shall have the
meanings specified in the Intercreditor Agreement (as defined in the Pass
Through Trust Agreement).
7
"Affiliate" shall mean, with respect to any specified Person,
any other Person which, directly or indirectly, owns or controls, is controlled
by or is under common control with such specified Person. Control will be
deemed to exist based on (i) ownership of 25% or more of the voting securities
of a Person or (ii) the power to direct or cause the direction of the
management and policies of a Person whether by contract or otherwise.
"Airbus Industrie" shall mean Airbus Industrie G.I.E., a
groupement d'interet economique formed under the laws of the French Republic,
and its successors and assigns.
"Aircraft" shall mean the Airframe leased hereunder and
described in Lease Supplement No. 1 (or any airframe from time to time
substituted for such Airframe pursuant to Section 11(a)(i) hereof) together
with the (i) two IAE Model V2500 Engines described in Lease Supplement No. 1
(or any Engine substituted therefor hereunder) with respect to such Airframe,
whether or not any such initial or substituted Engines may from time to time no
longer be installed on the Airframe or may be installed on any other airframe,
(ii) Parts or components thereof, (iii) spare parts or ancillary equipment or
devices furnished therewith under this Lease (including any separate equipment
described on one or more Lease Supplements hereto), (iv) the Aircraft Records
and Documents and all other logs, manuals and records with respect to such
Aircraft, and (v) all substitutions, replacements and renewals of any and all
thereof.
"Aircraft Records and Documents" shall mean the items
identified in Exhibit B hereto, all of which shall be maintained in the English
language.
"Airframe" shall mean (a) the Airbus Industrie model A320-231
aircraft (except Engines or engines from time to time installed thereon)
described in Lease Supplement No. 1 and leased by Lessor to Lessee hereunder,
and any such model aircraft (except Engines or engines from time to time
installed thereon) which may from time to time be substituted for such aircraft
(except Engines or engines from time to time installed thereon) pursuant to
Section 11(a)(i); and (b) any and all Parts so long as the same shall be
incorporated or installed on or attached to the Airframe, or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section 9
hereof after removal from the Airframe (or, so long as the Foreign Lease
Agreement is in effect, Foreign Lessor in accordance with Section 8 of the
Foreign Lease Agreement); provided,
- 2 -
8
however, that at such time as an aircraft (except Engines or engines from time
to time installed thereon) shall be deemed part of the property leased
hereunder in substitution for the Airframe pursuant to the applicable
provisions hereof and the replacement Airframe shall have been subjected to the
Lien of the Indenture (if the Lien of the Indenture has not been discharged)
and shall be subject to the Foreign Lease Agreement, the replaced Airframe
shall cease to be the Airframe hereunder.
"Appraisal Procedure" shall mean the following procedure for
determining the "fair market sales value" or "fair market rental value" of the
Aircraft, Airframe, an Engine or a Part. Except as provided in Section 18,
"fair market sales value" or "fair market rental value" shall mean the value
that would be obtained in an arm's-length transaction between an informed and
willing seller or lessor, as the case may be, and an informed and willing buyer
or lessee, as the case may be, both under no compulsion to sell and purchase or
to lease (and other than a lessee in possession or a used equipment scrap
dealer), as the case may be, as such value is determined by an appraisal which
assumes: (i) that such Aircraft, such Airframe, such Engine or such Part is
unencumbered by this Lease (or any sublease) or any of the other Operative
Documents or any of the Financing Documents and the terms thereof; (ii) that
such Aircraft, Airframe, Engine or Part has been maintained in all respects in
accordance with the terms of this Lease (whether or not in fact in such
condition), (iii) that such Aircraft, Airframe, Engine or Part meets the return
conditions specified in Section 16 and Exhibit E (whether or not in fact
meeting such conditions) and (iv) that Lessee has removed the Removable Parts
entitled to be removed under Section 9(b) (it being agreed that no such removal
is permitted in connection with an appraisal pursuant to Section 18) and
replaced any part which was removed from the Aircraft as a result of such
Removable Part being installed; provided, however, that costs of removal from
the location of current use and costs of sale shall not be a consideration in
determining such value except in connection with any determination of "fair
market sales value" or "fair market rental value" pursuant to Section 18; and
provided, further, that any determination of "fair market sales value" or "fair
market rental value" pursuant to Section 18 shall be on an "as is, where is"
basis in its actual condition and location subject to this Lease and any
sublease and any and all Liens thereon (other than a Lessor's Lien, Head
Lessor's Lien or Lenders' Lien). Lessor and Lessee shall, except for any
appraisal pursuant to Section 18 in which case only Lessor shall select such
appraiser (which appraiser does not
- 3 -
9
have to be acceptable to Lessee), select an independent nationally-recognized
aircraft appraiser, mutually acceptable to each of them, who shall make the
determination as to the "fair market sales value" or "fair market rental value"
of such Aircraft, Airframe, Engine or Part for which such appraisal is to be
conducted. If Lessor and Lessee fail to agree upon a mutually acceptable
appraiser within ten (10) days, then each of Lessor and Lessee shall select an
appraiser and such determination shall be made by such appraisers (if either
party shall fail to appoint an appraiser within ten (10) days after notice from
the other party of the selection of its appraiser, then the appraisal made by
the other party's appraiser shall be determinative). If the two appraisers
chosen pursuant to the preceding sentence fail to agree upon a determination of
the "fair market sales value" or "fair market rental value" of such Aircraft,
Airframe, Engine or Part within twenty (20) days after their appointment, then
such appraisers shall mutually choose a third appraiser within ten (10) days
thereafter, provided that if such appraisers fail to mutually choose a third
appraiser within said 10-day period, such appointment shall be made by the
American Arbitration Association (or any successor) in New York, New York, and
the three appraisers so chosen shall each make such determination. The
appraisal determined by each of the three appraisers chosen pursuant to the
preceding sentence shall be averaged and the appraisal furthest from the
average of the three appraisals shall be disregarded. The appraisal determined
by each of the two remaining appraisers shall be averaged and such average
shall be the appraised "fair market sales value" or "fair market rental value"
of such Aircraft, Airframe, Engine or Part. Lessee shall bear all the fees and
expenses of the Appraisal Procedure.
"Approved Broker" shall mean any reputable insurance broker of
recognized responsibility and standing experienced in aircraft insurance.
"Approved Insurers" shall mean any reputable and creditworthy
insurance company of recognized responsibility and standing experienced in
aircraft insurance.
"Basic Rent" for the Aircraft shall mean the Basic Rent
specified in Exhibit C and payable throughout the Basic Term for the Aircraft
pursuant to Section 4(a)(i).
"Basic Rent Payment Date" shall mean each day determined in
accordance with Exhibit C upon which a payment of Basic Rent becomes payable.
If a Basic Rent Payment Date shall fall on a day which is not a Business Day,
any payment
- 4 -
10
due on such Basic Rent Payment Date shall be made on the next succeeding
Business Day.
"Basic Term" shall mean the period specified in Lease
Supplement No. 3.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banking institutions in New York, New York are
authorized or required by Law to be closed.
"Buyer Furnished Equipment" shall mean the equipment which was
to be furnished by ▇▇▇▇▇▇▇, Inc. or, if applicable, Original Head Lessee and
installed on the Aircraft pursuant to Clause 18 of the Purchase Agreement, and
any similar equipment furnished to Lessee.
"Certificated Air Carrier" shall mean any corporation (except
the United States Government) domiciled in the United States of America and
holding a Certificate of Convenience and Necessity issued under Section
41102(a) of the Federal Aviation Act by the Department of Transportation or any
predecessor or successor agency thereto, or, in the event such Certificates
shall no longer be issued, any corporation (except the United States
Government) domiciled in the United States of America and legally engaged in
the business of transporting for hire passengers or cargo by air predominantly
to, from or between points within the United States of America, and, in either
event, operating commercial jet aircraft, which also is a citizen of the United
States (as defined in Section 40102 of the Federal Aviation Act) holding an air
carrier operating certificate issued by the Secretary of Transportation
pursuant to chapter 447 of the Federal Aviation Act for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo so as to fall
within the purview of 11 U.S.C. Section 1110 or any analogous statute.
"Civil Reserve Air Fleet Program" shall mean the Civil Reserve
Air Fleet Program administered by the United States Government and authorized
under 10 U.S.C. Section 9511, et seq., as amended, or any substantially similar
or substitute program of the United States Government.
"Claims" shall have the meaning specified in Section 13.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
- 5 -
11
"Commonly Controlled Person" shall mean an entity, whether or
not incorporated, which is under common control with Lessee within the meaning
of Section 414(b) or (c) of the Code.
["Consent and Guaranty" shall mean the Amended and Restated
Consent and Guaranty of Airbus Industrie, dated as of May 1, 1985, as amended
and restated as of December 30, 1988, in the form attached to the Purchase
Agreement.]
"Default" shall mean an event or condition which would
constitute an Event of Default with the lapse of time or the giving of notice
or both.
"Delivery Date" shall mean December 22, 1989, being the date
the Aircraft was delivered to and accepted by the Original Head Lessee as
Lessee hereunder for all purposes of this Lease.
"Delivery Location" shall mean the location for the delivery
of the Aircraft specified in Exhibit C.
"$" and "dollars" shall mean the lawful currency of the United
States of America.
"Engine" shall mean (i) each of the two IAE Model V2500
engines listed by manufacturer's serial number in Lease Supplement No. 1 and
initially installed on the Airframe covered by such Lease Supplement, whether
or not from time to time thereafter no longer installed on the Airframe or
installed on any other aircraft or airframe, and (ii) any replacement engine
which may from time to time be substituted, pursuant to Section 6(a), 11(a),
11(b) or 16(c), for any Engine leased hereunder; together in each case with any
and all Parts incorporated or installed in or attached thereto or any and all
Parts removed therefrom so long as title thereto after removal from such Engine
shall remain vested in Lessor in accordance with the terms of Section 9 hereof
(or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor in
accordance with Section 8 of the Foreign Lease Agreement). Except as otherwise
set forth herein, at such time as a replacement Engine shall be so substituted
and leased hereunder and the replacement engine shall have been subjected to
the Lien of the Indenture (if the Lien of the Indenture has not been
discharged), such replaced Engine shall cease to be an Engine hereunder. The
term "Engines" means, as of any date of determination, both Engines then leased
hereunder.
- 6 -
12
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, as from time to time in effect.
"Event of Default" shall have the meaning specified in any one
or more clauses in Section 17.
"Event of Loss" shall mean any of the following events with
respect to the Aircraft, Airframe or either Engine: (a) the actual or
constructive total loss of such property or the use thereof due to theft or
disappearance for a period in excess of sixty (60) consecutive days; (b)
destruction or damage of such property that renders repair uneconomic or such
property permanently unfit for normal use by Lessee (or, if a Permitted
Sublease is in effect, the Permitted Sublessee) for any reason whatsoever; (c)
any loss or disappearance of or damage to or destruction of such property which
results in an insurance settlement with respect to such property on the basis
of an actual or constructive total loss; (d) the condemnation, confiscation,
appropriation, seizure or requisition of title to any such property by any
Governmental Entity which results in the loss of title by Lessor for ten (10)
days or more but excluding requisition for use or hire which does not include
requisition of title; (e) the condemnation, confiscation, appropriation,
seizure or requisition of the use of any such property by any Governmental
Entity (other than a requisition for use by the federal government of the
United States or any instrumentality or agency thereof bearing the full faith
and credit of the United States of America), which in any such case shall have
resulted in the loss of possession thereof by Lessee for a period in excess of
the earlier of ninety (90) consecutive days or the last day of the Term (or for
such shorter period ending on the date which is the next Business Day after the
date of receipt of an insurance settlement with respect to such property on the
basis of a total loss); (f) the requisition for use of such property by the
federal government of the United States or any agency or instrumentality
thereof bearing the full faith and credit of the United States of America,
which purports to or does continue beyond the Term; (g) as a result of any
rule, regulation, order or other action by the FAA, the Department of
Transportation or any other Governmental Entity having jurisdiction, the use of
such Aircraft, Airframe or Engine in the normal course of Lessee's (or, if a
Permitted Sublease is in effect, the Permitted Sublessee's) business of air
transportation of passengers shall have been prohibited for a period of six (6)
consecutive months, unless Lessee (or the Permitted Sublessee), prior to the
expiration of such six-month period, shall have
- 7 -
13
undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit such normal use of such item of equipment by
Lessee (or the Permitted Sublessee), or, in any event, if such normal use shall
have been so prohibited by any such Governmental Entity for a period of twelve
(12) consecutive months or is continuing on the last day of the Term; or (h) as
otherwise provided herein. An Event of Loss with respect to the Aircraft shall
be deemed to have occurred if an Event of Loss occurs with respect to the
Airframe which is a part of such Aircraft. An Event of Loss with respect to an
Engine shall not, absent an Event of Loss with respect to the Airframe, be
deemed an Event of Loss with respect to the Airframe.
"Excluded Property" shall have the meaning set forth in
Section 9(b) hereto.
"Expiration Date" shall mean the date specified in Lease
Supplement No. 3, on which date the Basic Term of this Lease shall expire.
"FAA" shall mean the Federal Aviation Administration of the
United States Department of Transportation or any successor agency.
"FAA Bills of Sale" shall mean, collectively, (i) the ▇▇▇▇ of
Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from
Manufacturer's Subsidiary to the Original Head Lessee, and (ii) the ▇▇▇▇ of
Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from the
Original Head Lessee to Foreign Lessee, and (iii) the ▇▇▇▇ of Sale for the
Aircraft dated the Delivery Date, from Foreign Lessee to Foreign Lessor.
"Federal Aviation Act" shall mean the sections of Title 49 of
the United States Code relating to aviation, as amended and in effect from time
to time, or any similar legislation of the United States of America enacted in
substitution or replacement thereof.
"Financials" shall mean Lessee's most recent fiscal year-end
audited consolidated balance sheet and statements of income and cash flow for
the period then ending, copies of which for the fiscal year ending December 31,
1995, have been provided to Lessor prior to the date hereof.
"Financing Documents" shall mean the Lease Agreement, each
Lease Supplement, the Trust Agreement, each Trust Supplement, the Indenture,
each Indenture Supplement,
- 8 -
14
the Foreign Lease Documents, the Refunding Agreement, the Equipment Notes
issued under the Indenture, the Intercreditor Agreement, each Liquidity
Facility, each Pass-Through Trust Agreement and each supplement thereto and any
other agreement, document or certificate delivered or entered into in
accordance with the foregoing, as amended, supplemented or otherwise modified.
"Foreign Air Carrier" shall mean any air carrier listed in
Exhibit F-1, as amended, supplemented or otherwise modified from time to time,
whose principal place of business and legal domicile at the time of entering
into the applicable sublease is located in a country listed on Exhibit F-2, as
amended, supplemented or otherwise modified from time to time, and not
prohibited by the terms of the insurance then in effect, with which the United
States has diplomatic or, such as in the case of Taiwan, similar relations, in
each case which is obligated under the applicable sublease to perform all
maintenance required by applicable foreign governmental standards made
mandatory to the Aircraft by such jurisdiction and, to the extent not
inconsistent therewith, all FAA-airworthiness directives and other requirements
made mandatory to the Aircraft by the FAA.
"Foreign Lease Agreement" shall mean the "Japanese Lease
Agreement," as defined in the Indenture.
"Foreign Lease Documents" shall mean the "Japanese Financing
Documents," as defined in the Indenture.
"Foreign Lease Supplement" shall mean the "Japanese Lease
Supplement," as defined in the Indenture.
"Foreign Lender" shall mean the "Japanese Lender," as defined
in the Indenture.
"Foreign Lessee" shall mean Air ▇▇▇▇ Caymans II, Limited.
"Foreign Lessor" shall mean the "Japanese Lessor," as defined
in the Indenture.
"GAAP" shall mean United States generally accepted accounting
principles and practices consistently applied as in effect from time to time,
which shall include the official interpretations thereof by the Financial
Accounting Standards Board. All accounting terms not otherwise defined herein
shall have the meanings assigned to such terms in accordance with GAAP.
- 9 -
15
"Governmental Entity" shall mean and include (i) any national
government, political subdivision thereof, or local jurisdiction therein; (ii)
any board, commission, department, division, organ, instrumentality, court, or
agency of any thereof, however constituted; and (iii) any association,
organization, or institution of which any entity described in (i) or (ii) above
is a member or to whose jurisdiction any such entity is subject or in whose
activities any such entity is a participant but only to the extent that any
entity described in clause (i), (ii) or (iii) has jurisdiction over Lessor,
Lessee, Indenture Trustee, Note Holders, the Aircraft or its operations.
"Head Lessor's Lien" shall mean a Lessor's Lien under and as
defined in the Original Head Lease.
"IAE" shall mean IAE International Aero Engines AG, a company
organized and existing under the laws of Switzerland.
"Indemnitee" shall mean Foreign Lessor, Foreign Lessee,
Foreign Lender, Lessor (in its individual capacity and as trustee under the
Trust Agreement), the Original Head Lessee, the Trust Estate, Parent, Owner
Participant, the Trust Indenture Estate, Indenture Trustee (in its individual
capacity and as trustee under the Indenture), each Pass-Through Trust, each
Pass-Through Trustee (in its individual capacity and as trustee under the
Pass-Through Trusts), the Subordination Agent and each Liquidity Provider, and
their respective successors and permitted assigns, and any combination thereof
and their respective officers, directors, agents, servants, subcontractors,
employees, subsidiaries, Affiliates, shareholders and partners.
"Indenture" shall mean the Second Amended and Restated Trust
Indenture and Security Agreement [GPA 1989 BN-6] dated as of December 15, 1989,
amended and restated as of October 1, 1991, and further amended and restated as
of November __, 1996, as the same may be further amended, supplemented or
modified from time to time, between Indenture Trustee and Lessor. The term
"Indenture" shall also include the Indenture Supplements entered into pursuant
to the terms of the Indenture.
"Indenture Trustee" shall mean the bank or trust company
serving as Indenture Trustee under the Indenture, and its successors and
assigns.
"Interest Rate" mean (i) with respect to the portion of any
payment of Rent that may be required by the
- 10 -
16
Indenture to be paid to the holders of any outstanding Equipment Notes issued
thereunder, a per annum rate of interest equal to the Past Due Rate applicable
thereto under and as defined in the Indenture, computed on the basis of a year
of 360 days and twelve 30-day months and (ii) with respect to any other amount,
a per annum rate of interest equal to the sum of the rate of interest publicly
announced by Citibank, N.A., at its principal office in New York City, as its
prime or similar base rate from time to time in effect from the date the amount
becomes due to the date it is paid in full, plus 2%, computed on the basis of a
year of 365 or 366 days, as the case may be, and actual number of days elapsed.
"Law" shall mean and include (i) any statute, regulation,
rule, decree, constitution, regulation, order, judgment or other directive of
any Governmental Entity; (ii) any treaty, pact, compact or other agreement to
which any Governmental Entity is a signatory or party; (iii) any judicial or
administrative interpretations of the application of any Law described in (i)
or (ii) above; and (iv) except where expressly excluded herein, any amendment
or revision of any Law described in (i), (ii), or (iii) above.
"Lease Agreement," "this Lease Agreement," "this Lease," "this
Agreement," "herein," "hereunder," "hereby," "hereof" or other like words shall
mean this Lease as originally executed and as amended, supplemented or
otherwise modified from time to time, including, without limitation, by one or
more Lease Supplements, as a whole and not to any particular Section or other
subdivision, and any reference to a "Section" or an "Exhibit" shall refer to a
Section or Exhibit of this Lease, as so amended, supplemented or modified,
unless expressly provided to the contrary.
"Lease Identification" shall have the meaning set forth in
Section 6(e) hereto.
"Lease Supplement" shall mean Lease Supplement No. 1, Lease
Supplement No. 2, Lease Supplement No. 3 and each subsequent Lease Supplement
entered into hereunder.
"Lease Supplement No. 1" shall mean Lease Supplement [GPA 1989
BN-6] No. 1, dated December 22, 1989 between Lessor and Original Head Lessee,
as Lessee.
"Lease Supplement No. 2" shall mean Lease Supplement [GPA 1989
BN-6] No. 2, dated October 24, 1991 between Lessor and Original Head Lessee, as
Lessee.
- 11 -
17
"Lease Supplement No. 3" shall mean Lease Supplement [GPA
1989 BN-6] No. 3, substantially in the form of Exhibit D hereto, entered into
between Lessor and Lessee on the Restatement Date for the purpose of confirming
the leasing of the Aircraft hereunder.
"Lenders' Lien" shall mean any Lien or disposition of title
attributable to Indenture Trustee in its individual capacity (and not as
Indenture Trustee) on or in respect of (as the case may be) the Aircraft or any
other portion of the Trust Estate or the Trust Indenture Estate arising as a
result of (i) Claims (as defined herein) against Indenture Trustee in its
individual capacity (and not as Indenture Trustee) not related to its interest
in the Aircraft or the administration of the Trust Estate or the Trust
Indenture Estate pursuant to the Indenture, whether under Section 9-207(2)(e)
of the Uniform Commercial Code or otherwise, (ii) acts or omissions of
Indenture Trustee in its individual capacity (and not as Indenture Trustee) not
contemplated hereunder or under the other Operative Documents, or acts or
omissions of Indenture Trustee in its individual capacity (and not as Indenture
Trustee) which are in violation of any of the Operative Documents, or (iii)
Taxes imposed on or Claims against Indenture Trustee in its individual capacity
(and not as Indenture Trustee) which are excluded from indemnification by
Lessee, or (iv) Claims against Indenture Trustee in its individual capacity
(and not as Indenture Trustee) arising out of the voluntary or involuntary
transfer by Indenture Trustee in its individual capacity (and not as Indenture
Trustee) of all or any portion of its interest in the Aircraft, the Airframe,
any Engine, the Trust Estate, the Trust Indenture Estate or the Operative
Documents (except a Claim resulting from the exercise of remedies under and in
accordance with the Indenture or for a transfer provided for in the Operative
Documents).
"Lessee" shall have the meaning set forth in the Recitals
hereto.
"Lessor" shall have the meaning set forth in the Recitals
hereto.
"Lessor's Lien" shall mean any Lien or disposition of title
affecting the Aircraft, the Airframe, any Engine or any Part arising as a
result of (i) any claim against Lessor, Owner Participant, Trust Company or any
of their Affiliates not related to, the transactions contemplated by this Lease
or the other Operative Documents, the Financing Documents or the Purchase
Documents; (ii) any affirmative act of Lessor, Owner Participant, Trust Company
or any of
- 12 -
18
their Affiliates not expressly contemplated by this Lease or the other
Operative Documents, the Financing Documents, the Foreign Lease Documents or
the Purchase Documents or not permitted without consent (which consent has not
been granted) by any party hereto or thereto or that is in violation of any
term of this Lease or the other Operative Documents, the Financing Documents or
the Purchase Documents; (iii) Taxes imposed against the Trust Estate, Trust
Company, Lessor or Owner Participant or any of their Affiliates or the
consolidated group of taxpayers of which any of them is a member which are not
to be indemnified against by Lessee under the Operative Documents, the Purchase
Documents or the Financing Documents; (iv) claims against the Trust Estate,
Trust Company, Owner Participant or Lessor or any of their Affiliates arising
out of the transfer of all or any part of their respective interest in the
Aircraft, the Airframe, either Engine, the Trust Estate or the Operative
Documents other than any transfers or dispositions pursuant to Sections 2, 6,
9, 11, 16, 18 or 19 (except Liens resulting from a transfer not permitted by
such Section) of this Lease or pursuant to Section 8(n) of the Participation
Agreement, pursuant to Section 10 of the Refunding Agreement or similar types
of provisions in the Foreign Lease Agreement; provided, however, that there
shall be excluded from this definition and Lessor shall not be required to
remove any Lien which would otherwise constitute a Lessor's Lien, if it is
being diligently contested in good faith so long as neither such proceedings
nor Lien involves a material danger of the sale, forfeiture or loss of the
Aircraft or adversely affects Lessee's rights under Section 21(f); and
provided, further, that Lessor's Liens shall not include the Lien of the
Indenture, Lenders' Liens, or Liens contemplated by the Foreign Lease
Documents.
"Lien" shall mean any mortgage, chattel mortgage, pledge,
lien, charge, encumbrance, lease, exercise of rights, security interest, lease
in the nature of a security interest, statutory right in rem, or claim of any
kind, including any thereof arising under any conditional sale agreement,
equipment trust agreement or title retention agreement.
"Lien of the Indenture" shall mean the Lien created by the
Indenture on the Trust Indenture Estate.
"Maintenance Program" shall mean (i) the America West
Maintenance Program approved by the FAA for America West Airbus model A320-231
aircraft in effect on the date hereof or as modified with the approval of the
FAA without affecting, or any other FAA approved maintenance program
- 13 -
19
which does not affect, the return condition standards set forth in Section 16
and Exhibit E or (ii) if the Aircraft is subject to a Permitted Sublease to a
Foreign Air Carrier, any other maintenance program for the Aircraft which is
approved by the aviation authority of the country of registry and complies with
the requirements applicable to maintenance of the Aircraft contained in the
definition of Foreign Air Carrier. The Maintenance Program shall encompass
scheduled maintenance, condition monitored maintenance, and on-condition
maintenance of the Airframe, Engines, and components of the Aircraft,
including, but not limited to, servicing, testing, preventive maintenance,
repairs, structural inspections, structure life improvements, system checks,
overhauls, approved modifications, service bulletins, engineering orders,
airworthiness directives, and corrosion control inspections and treatments.
All modifications and supplements to the Maintenance Program shall be provided
to Lessor upon its reasonable request and Lessor shall be given reasonable
access to the Maintenance Program upon its request.
"Manufacturer" shall mean, collectively, Manufacturer's
Subsidiary, IAE, Airbus Industrie or, as the case may be, any one or more
thereof as may be applicable in any given circumstance, together in each case
with any subcontractor or supplier thereof.
"Manufacturer's Subsidiary" shall mean AVSA, S.A.R.L., a
French societe a responsabilite limitee, which as of the date hereof is owned
by Airbus Industrie.
"Maximum Foreign Use Percentage" shall have the meaning
specified in Exhibit C.
"Mortgage Convention" shall mean the Convention for the
International Recognition of Rights in Aircraft, signed (ad referendum) at
Geneva, Switzerland, on June 19, 1948, and amended from time to time, but
excluding the terms of any adhesion thereto or ratification thereof containing
reservations to which the United States of America does not accede.
"Net Worth" shall mean, with respect to any Person, such
Person's stockholders' equity minus any intangible assets.
"Operative Documents" shall mean this Lease, each Lease
Supplement, the Tax Indemnification Agreement, the Financing Documents, and any
other agreement, document or
- 14 -
20
certificate delivered or entered into pursuant to the foregoing, as amended,
supplemented or otherwise modified.
"Original Head Lease" shall mean this Aircraft Lease Agreement
[GPA 1989 BN-6], with respect to the Aircraft, dated as of December 15, 1989,
between Lessor, as lessor, and the Original Head Lessee, as lessee, as amended,
supplemented or otherwise modified and as in effect immediately prior to the
Restatement Date, as more particularly described in Annex I attached hereto.
"Original Head Lease Tax Indemnification Agreement" shall mean
the Head Lease Tax Indemnification Agreement [GPA 1989 BN-6], dated as of
December 15, 1989, and amended and restated as of October 1, 1991, and amended
and restated as of the Restatement Date, between the Original Head Lessee and
Owner Participant, as the same may be amended, supplemented or otherwise
modified from time to time.
"Original Head Lessee" shall mean GPA Leasing USA I, Inc., a
Connecticut corporation.
"Owner Participant" shall mean _________________, a Delaware
corporation, as Owner Participant under the Trust Agreement, and its successors
and permitted assigns.
"Owner Trustee" shall mean Wilmington Trust Company, as Owner
Trustee under the Trust Agreement, and its successors and assigns.
"Parent" shall mean GPA Group plc, a public limited company
organized and existing under the laws of Ireland.
"Partial Assignment" shall mean the A320 Partial Assignment,
Assumption, Release and Amendment Agreement, dated as of December 30, 1988,
among Parent, ▇▇▇▇▇▇▇, Inc., and Manufacturer's Subsidiary, as amended,
supplemented or otherwise modified.
"Participation Agreement" shall mean the Participation
Agreement [GPA 1989 BN-6], dated as of December 15, 1989 and amended as of
October 1, 1991, among Original Head Lessee, Parent, Owner Participant, Owner
Trustee, Indenture Trustee and the Lenders named therein, as amended,
supplemented or otherwise modified from time to time and as in effect
immediately prior to the Restatement Date.
- 15 -
21
"Parts" shall mean all appliances, components, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature (excluding complete Engines or engines), including Buyer
Furnished Equipment, which may now or from time to time be incorporated or
installed in or attached to or were provided by the Manufacturer with the
Airframe or any Engine or so long as title thereto shall remain vested in
Lessor in accordance with the terms of Section 9 hereof after removal from such
Airframe or Engine (or so long as the Foreign Lease Agreement is in effect,
Foreign Lessor in accordance with Section 8 of the Foreign Lease Agreement).
Except as otherwise set forth herein, at such time as a replacement part shall
be substituted for a Part in accordance with Section 9 hereof, the Part so
replaced shall cease to be a Part hereunder.
"Payment Location" shall have the meaning set forth in Exhibit
C, as the same may be changed from time to time by Lessor as provided in
Section 4(c).
"Permitted Lien" shall mean any Lien referred to in clauses
(i) through (vii) of the first sentence of Section 14 hereof.
"Permitted Sublease" shall have the meaning specified in
Section 6(a)(iii)(1).
"Permitted Sublessee" shall mean a Certificated Air Carrier
or, after the Restricted Use Period, (a) any Foreign Air Carrier, (b) the
United States Government or an agency or instrumentality thereof which bears
the full faith and credit of the United States of America which has agreed (in
form and substance satisfactory to Lessor) that all of its indemnity
obligations which by the terms of this Lease are permitted in lieu of insurance
shall be enforceable by and payable to Lessor directly or (c) any other Person
approved in writing by the Owner Participant and the Indenture Trustee, which
approval shall not be unreasonably withheld.
"Person" shall mean and include any individual person,
corporation, partnership, firm, joint stock company, joint venture, trust,
estate, unincorporated organization, association, Governmental Entity, or
organization or association of which any of the above is a member or a
participant.
"Purchase Agreement" shall mean the Amended and Restated
Airbus A310/A320 Purchase Agreement, dated as of
- 16 -
22
May 1, 1985, as amended and restated as of December 30, 1988 (insofar as the
same relates to Model A320 Aircraft), between Manufacturer's Subsidiary and
▇▇▇▇▇▇▇, Inc., including the Consent and Guaranty, together with Letter
Agreements, Exhibits and Appendices thereto, as partially assigned to Parent
pursuant to the Partial Assignment, to which Airbus Industrie, as guarantor,
has consented, and as the same may from time to time be further amended,
supplemented or otherwise modified to the extent permitted by the terms
thereof.
"Purchase Documents" shall mean the Purchase Agreement, the
Partial Assignment and any other agreement, document or certificate delivered
or entered into pursuant to the foregoing, as amended, supplemented or
otherwise modified.
"Removable Part" shall have the meaning set forth in Section
9(b).
"Renewal Rent" shall mean the rent payable pursuant to Section
20.
"Renewal Rent Payment Date" shall mean each day determined in
accordance with Exhibit C upon which a payment of Renewal Rent becomes payable.
"Renewal Term" shall mean the period described in Section 20
following the end of the Basic Term if Lessee shall have exercised its renewal
option in accordance with Section 20.
"Rent" shall mean Basic Rent or Renewal Rent, as the case may
be, and Supplemental Rent, collectively.
"Replacement Airframe" and "Replacement Engine" shall have the
meanings specified in accordance with their description in Section 11.
"Replacement Period" shall have the meaning specified in
Section 11.
"Responsible Officer" shall mean, with respect to Lessee, any
of the Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer or Controller.
"Restricted Use Period" shall have the meaning specified in
Exhibit C.
- 17 -
23
"Return Occasion" shall mean the event that occurs when
possession of the Aircraft is to be returned from Lessee to Lessor at the end
of the Term of this Lease or upon Lessor taking possession pursuant to Section
18 or for any other reason.
"Specified Investments" shall mean (i) direct obligations of
the United States Government, the obligations of which bear the full faith and
credit of the United States; (ii) obligations fully guaranteed by the United
States; (iii) certificates of deposit issued by any commercial bank
incorporated under the laws of the United States or one of the States thereof
(but not exceeding $10,000,000 in principal amount or deposits at any given
time for any one bank) having a combined capital surplus and undivided income
of at least $750,000,000 and having a rating of "B" or better from ▇▇▇▇▇▇▇▇
BankWatch, Inc.; (iv) repurchase agreements (but not exceeding $10,000,000 in
principal amount or deposits at any given time for any one bank) with any
financial institution having combined capital and fully collateralized by an
obligation of the type described in clauses (i) through (iii) as collateral
pursuant to which an entity referred to in clause (iii) above or another
financial institution having a net worth of at least $750,000,000 and having a
rating of "B" or better from ▇▇▇▇▇▇▇▇ BankWatch, Inc. is obligated to
repurchase any such obligation not later than ninety (90) days after the
purchase of any such obligation; and (v) money market funds which invest solely
in obligations described in clause (i); provided that if all of the above
investments are unavailable, the entire amounts to be invested may be used to
purchase Federal funds from an entity described in clause (iii) above; and
provided further that no investment shall be eligible as a "Specified
Investment" unless the final maturity or date of return of such investment is
on or before the [date which is ninety (90) days from the date of purchase
thereof].
"Stipulated Loss Value" shall mean as of the applicable date
during the Basic Term the amount set forth on Exhibit A hereto and, thereafter,
the amount described in Section 20 (ii) (it being understood and agreed that
the amounts set forth in Exhibit A take into account fully the amount and
application of each installment of Basic Rent or Renewal Rent on each
Stipulated Loss Value Date (other than a Stipulated Loss Value Date that is a
Basic Rent Payment Date or Renewal Rent Payment Date) so that no additional
credit of such Basic Rent or Renewal Rent is to be made in respect thereof)
except as expressly provided herein on a Basic Rent Payment Date or a Renewal
Rent Payment Date. In
- 18 -
24
the event that it is necessary to determine a separate Stipulated Loss Value
for the Airframe or an Engine, such Stipulated Loss Value shall be based on the
ratio that the original cost to Lessor of the Airframe or such Engine bears to
Lessor's Cost (as set forth in the Original Head Lease) for the Aircraft.
"Stipulated Loss Value Date" shall mean each monthly date
listed, or with respect to any Renewal Term determined as set forth on, Exhibit
A hereto.
"Supplemental Agreement" shall mean the Supplemental Agreement
dated as of September 22, 1989 between Foreign Lessor and Foreign Lessee (as
the same may be amended, modified or supplemented from time to time).
"Supplemental Rent" shall mean any and all amounts,
liabilities and obligations other than Basic Rent and Renewal Rent which Lessee
assumes or agrees to pay to Lessor or any other Indemnitee hereunder or under
any other Operative Document, including, without limitation, (i) any payment of
Stipulated Loss Value and any payment provided for in Section 11 or 18; (ii)
any payment of indemnity required by Section 10 or 13 hereof; (iii) any payment
of an amount equal to average daily Basic Rent or Renewal Rent in connection
with an extension of the Term of this Lease as a result of the need to correct
any failure of the Aircraft to satisfy the requirements of Section 16 hereof;
(iv) [Intentionally Left Blank]; (v) an amount equal to any payment due to
Owner Trustee in respect of fees or expenses as provided in Section 21(j)
hereof; (vi) an amount equal to any payment due to any Indenture Trustee in
respect of fees or expenses as provided in the [Indenture and/or] the Refunding
Agreement, and/or Section 21(j) hereof; (vii) Lessor's pro rata share of any
payment due to any Pass-Through Trustee in respect of fees or expenses pursuant
to the Pass-Through Trust Agreement and/or the Refunding Agreement; (viii)
Lessor's pro rata share of any payment due to the Subordination Agent in
respect of fees, compensation, costs or expenses pursuant to the Intercreditor
Agreement and/or the Refunding Agreement; [(ix) an amount equal to the amount
payable by Owner Trustee pursuant to Section 2.02 of the Indenture in respect
of the amount referred to as Net Interest and Related Charges (as defined
therein) referred to therein; and (x) to the extent permitted by applicable
Law, interest at the Interest Rate (all computations of interest under this
Lease to be made on the basis of a 360-day year, as applicable, and twelve
30-day months) calculated: (1) on any part of any installment of Basic Rent or
Renewal Rent, as the case may be, not paid on the due
- 19 -
25
date thereof for the period for which the same shall be overdue and (2) on any
Supplemental Rent not paid when due hereunder from and including the due date
until the same shall be paid. As used herein, "Lessor's pro rata share" means
as of any date of determination a fraction the numerator of which is the
aggregate Principal Amount then outstanding of the Equipment Notes issued under
the Indenture and the denominator of which is the aggregate principal balance
then outstanding of all Equipment Notes issued under the Indenture (as defined
in the Intercreditor Agreement).
"Tax Indemnification Agreement" shall mean the Amended and
Restated Sublease Tax Indemnification Agreement [GPA 1989 BN-6], dated as of
December 15, 1989, as amended and restated as of October 1, 1991, and as
amended and restated as of November __, 1996, between Original Head Lessee and
Lessee, as the same may be amended, supplemented or otherwise modified from
time to time.
"Taxes" shall mean any and all fees (including, without
limitation, license and registration fees), taxes (including, without
limitation, sales, personal property (tangible and intangible), transfer, fuel,
leasing, use, occupational, value added, excess profits, excise, gross
receipts, franchise, stamp, and income taxes), levies, imposts, withholdings,
assessments, or other taxes, duties or charges of any nature whatsoever,
together with any penalties, fines, additions to tax charges or interest
thereon or computed with reference thereto.
"Term" shall mean, collectively, the Basic Term specified in
Lease Supplement No. 3 and, if Lessee extends the Term in accordance with
Section 20, the Renewal Term, for which the Aircraft is leased hereunder
pursuant to Section 2.
"Trust Agreement" shall mean the Trust Agreement [GPA 1989
BN-6] dated as of December 15, 1989 as amended by Trust Supplement No. 1, as
further amended by Trust Supplement No. 2 and as further amended by Trust
Supplement No. 3 between Lessor, in its individual capacity, and Owner
Participant, as beneficiary, as the same may be amended, supplemented or
otherwise modified from time to time. The term "Trust Agreement" shall also
include the Trust Supplements.
"Trust Estate" shall have the meaning specified in the Trust
Agreement.
- 20 -
26
"Trust Supplements" shall mean Trust Supplement ▇▇. ▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇, Trust Supplement No. 3 and each subsequent Trust Supplement
entered into thereunder and any further supplement to the Trust Agreement.
"Trust Supplement No. 1" shall mean Trust Agreement Supplement
[GPA 1989 BN-6] No. 1 dated December 22, 1989 between Lessor and Owner
Participant for the purpose of bringing the Aircraft and the Original Head
Lease into the Trust Estate.
"Trust Supplement No. 2" shall mean Trust Agreement Supplement
[GPA 1989 BN-6] No. 2 dated October 24, 1991 between Lessor and Owner
Participant.
"Trust Supplement No. 3" shall mean Trust Agreement Supplement
[GPA 1989 BN-6] No. 3 dated the Restatement Date between Lessor and Owner
Participant and conforming the references therein to this Agreement.
"United States Government" shall mean the federal government
of the United States of America and any board, commission, department,
division, organ, instrumentality, court or agency thereof.
"Wet Lease" shall mean any arrangement whereby Lessee agrees
to furnish the Aircraft or the Airframe and Engine or engines installed thereon
at that time to a third party pursuant to which such Aircraft or the Airframe
and Engine or engines (i) shall be operated solely by regular employees of
Lessee (or any Permitted Sublessee) possessing all current certificates and
licenses required under the Federal Aviation Act or, if the Aircraft is not
registered under the Federal Aviation Act, all certificates and licenses
required by the laws of the jurisdiction of registry (it is understood that
cabin attendants need not be regular employees of Lessee (or any Permitted
Sublessee)) and Lessee (or any Permitted Sublessee) otherwise maintains
operational control and possession thereof, and (ii) shall be maintained by
Lessee (or any Permitted Sublessee) in accordance with its normal maintenance
practices and this Lease, and otherwise the insurance required hereunder shall
be maintained and the Aircraft shall be used and operated in accordance with
this Lease.
Section 2. Agreement to Lease. Lessor hereby agrees to lease
the Aircraft to Lessee, and Lessee hereby agrees to lease the Aircraft from
Lessor, on the terms and subject to the conditions set forth in this Lease.
- 21 -
27
Section 3. Delivery and Acceptance; Term; Rental Period.
(a) Time of Delivery. The Aircraft was delivered to Lessee,
and Lessee accepted delivery of the Aircraft, on December 22, 1989.
(b) Place of Delivery and Acceptance. The Aircraft was
delivered to and accepted by Lessee at the Delivery Location.
(c) Acceptance of Aircraft. The Aircraft leased hereunder was
delivered to Lessee "AS IS," "WHERE IS" and SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a) AND (b)
HEREOF.
Lessee hereby agrees that it has accepted the Aircraft for all
purposes of this Lease and Lessee's acceptance of the Aircraft was conclusive
evidence that, as between Lessor and Lessee, the Aircraft was in all respects
satisfactory to Lessee and was in compliance with this Lease.
(d) Term of Lease. The Basic Term of this Lease shall
commence on the Delivery Date and shall continue until the Expiration Date;
provided, however, that the Term of this Lease may be earlier terminated
pursuant to the provisions hereof.
(e) Rental Period. Lessor and Lessee agree that the
period between each Basic Rent Payment Date shall constitute a rental period
for purposes of Section 467 of the Code.
Section 4. Rent; Minimum Payments.
(a) Rent. Lessee covenants and agrees to pay the following as
Rent hereunder:
(i) Basic Rent. The Basic Rent, as set forth in
Exhibit C throughout the Basic Term hereof, in consecutive installments, in
advance and allocable to the rental period beginning on such date, as set forth
on Schedule I to Exhibit C, due and payable on each Basic Rent Payment Date;
and
(ii) Supplemental Rent. Any and all Supplemental
Rent, which shall be due and payable within fifteen (15) days after demand
unless otherwise specifically provided. In the event of any failure on the
part of Lessee
- 22 -
28
to pay any Supplemental Rent when due, Lessor shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise in the case of
nonpayment of Basic Rent or Renewal Rent.
(b) Minimum Payments. Notwithstanding any provision in
this Lease or in any other Operative Document to the contrary, under all
circumstances and in any event, (i) the Stipulated Loss Value, together with
the payment of Supplemental Rent and all other Rent then due hereunder, as of
any time and as of the date of any payment thereof shall (both before and after
giving effect to any reductions therefrom) be in an amount at least sufficient
to pay in full as of such time or date the aggregate unpaid principal amount of
the Equipment Notes then outstanding and all accrued and unpaid interest
(assuming interest has been timely paid) thereon and (ii) Basic Rent payable on
any Basic Rent Payment Date shall at least equal the aggregate amount of
principal and interest due and payable on the Equipment Notes on such Basic
Rent Payment Date. It is agreed, however, that no installment of Basic Rent or
Stipulated Loss Value shall be increased or adjusted by reason of (A) any
attachment or diversion of Rent on account of any Lessor's Lien or Head
Lessor's Lien or any Lenders' Lien, (B) any modification of the terms of the
Equipment Notes or the other Financing Documents made without the prior written
consent of Lessee or (C) the acceleration of any Equipment Note due to the
occurrence of any "Indenture Event of Default" (as defined in the Indenture)
which does not constitute an Event of Default hereunder. It is further agreed
that nothing in this Lease or any other Operative Document shall be deemed to
constitute a guaranty of the value, utility or useful life of the Aircraft or a
guaranty in respect of interest, principal or any other amounts payable in
respect of or under the Equipment Notes.
(c) Date, Place and Method of Payment. If any date on
which a payment of Rent becomes due and payable is not a Business Day, the Rent
otherwise due on such date shall be due and payable on the next succeeding
Business Day. All Basic Rent, Renewal Rent and Supplemental Rent payable under
this Lease shall be paid by wire transfer in immediately available currency of
the United States of America, no later than 12:00 p.m. (noon), New York City
time, on the date payable hereunder, and, so long as the Lien of the Indenture
shall not have been discharged, to Indenture Trustee in accordance with the
payment instructions set forth in Exhibit C hereto or at such other address in
The City of New York as Indenture Trustee may direct by thirty (30) days prior
written notice to Lessee,
- 23 -
29
except that all Excepted Payments, and upon discharge of the Lien of the
Indenture, all payments of Rent thereafter made hereunder, shall be paid in
such immediately available funds no later than 12:00 p.m. (noon), New York City
time, on the date payable hereunder, to Lessor or to Owner Participant, as
appropriate, in accordance with the payment instructions set forth in Exhibit C
or at such other address in The City of New York as Lessor may direct by thirty
(30) days prior written notice to Lessee.
(d) Prohibition Against Setoff, Counterclaim, Etc. This
Lease is a net lease. Lessee's obligations to pay all Rent and to perform all
other obligations hereunder are absolute and unconditional and shall not be
affected or reduced by any circumstances, including, without limitation, (i)
any setoff, counterclaim, recoupment, defense, or other right which Lessee may
have against Lessor, Original Head Lessee, Owner Participant, Indenture
Trustee, any Note Holder, any Manufacturer, any Person providing services with
respect to the Aircraft, or any other Person, for any reason whatsoever
(whether in connection with the transactions contemplated hereby or otherwise),
including, without limitation, any breach by Lessor of its representations,
warranties or covenants contained herein or in the other Operative Documents;
(ii) any defect in the title, airworthiness, eligibility for registration under
the Federal Aviation Act, condition, design, operation, or fitness for use of,
or any damage to or loss or destruction of, the Aircraft (subject to the
provisions of Section 11(a)(ii) hereof), any interruption or cessation in the
use of or possession thereof by or availability to Lessee for any reason
whatsoever, whether arising out of or related to an act or omission of Lessee,
Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any Note
Holder, any Manufacturer, any Person providing services with respect to the
Aircraft or any other Person; (iii) any Liens with respect to the Aircraft;
(iv) the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any absence of right, power or authority of Lessor,
Original Head Lessee, Lessee or Indenture Trustee to enter into this Lease or
the Indenture, as the case may be; (v) any insolvency, bankruptcy,
reorganization, or similar proceedings by or against Lessor, Original Head
Lessee, Lessee, any Permitted Sublessee, Indenture Trustee or any Note Holder;
(vi) any Taxes or (vii) any other circumstance or happening of any nature
whatsoever, whether or not similar to any of the foregoing; it being the
expressed intention of Lessor and Lessee that all Rent payable hereunder shall
be payable in all events,
- 24 -
30
unless the obligation to pay the same shall be terminated pursuant to the
express provisions of this Agreement.
Except as expressly set forth elsewhere in this Agreement,
Lessee hereby waives, to the extent permitted by applicable Law, any and all
rights which it may now have or which at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, ▇▇▇▇▇, cancel, quit, reduce,
defer, suspend or surrender this Lease or the Aircraft or any obligation
imposed upon Lessee hereunder or under the other Operative Documents
(including, without limitation, payment of Rent), except in accordance with the
terms hereof.
Each payment of Rent made by Lessee shall be final. Lessee
will not seek to recover all or any part of any payment of Rent for any reason
whatsoever except manifest error.
If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of Law, except as specifically provided herein,
Lessee waives all rights (if any) to any diminution in its Rent obligations
hereunder and nonetheless agrees to pay to Indenture Trustee or Lessor as
provided in Section 4(c) hereof an amount equal to each Basic Rent or Renewal
Rent, as the case may be, payment and any Supplemental Rent payment at the time
such payments would have become due and payable in accordance with the terms
hereof had this Lease not been terminated in whole or in part, and so long as
such payments are made and all other terms and conditions hereof are complied
with by Lessee, Lessor and Lessee will deem this Lease to remain in full force
and effect.
The foregoing shall not, however, be construed as a waiver of
Lessee's other rights to seek damages, specific performance, other remedies at
law or equity or any combination thereof, as against the Original Head Lessee,
Lessor, Indenture Trustee or any other Person having an interest herein through
the Original Head Lessee, Lessor, Indenture Trustee or any other Person as
shall be liable therefor, on account of any failure of the Original Head
Lessee, Lessor, Indenture Trustee or any other such Person to perform its
express obligations under this Lease and the other Operative Documents, or to
enforce any judgment obtained therefor.
- 25 -
31
Section 5. Representations, Warranties and Covenants.
(a) Warranties and Disclaimer of Warranties. THE AIRCRAFT WAS
DELIVERED AND IS BEING LEASED BY LESSOR TO LESSEE "AS IS" AND "WHERE IS".
LESSEE EXPRESSLY AGREES THAT IT TOOK THE AIRCRAFT ON SUCH BASIS. LESSOR HAS
NOT AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE
AIRCRAFT UNDER THIS LEASE OR BY ONE OF ITS AFFILIATES HAVING ACQUIRED THE
AIRCRAFT OR DONE OR FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO ACQUIRE ANY
STATUS UNDER OR IN RELATION TO THIS LEASE, AND LESSOR HEREBY SPECIFICALLY
DISCLAIMS, ANY GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
THE TITLE (EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR OR ANY
PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF
THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS WHETHER OR NOT
DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR AS TO ANY OTHER GUARANTY, REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT LIMITATION
ANY LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT
LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR DEALING
OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR
OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND
DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH GUARANTY, REPRESENTATION OR
WARRANTIES. NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY
RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, REGARDLESS OF ANY
NEGLIGENCE (OTHER THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS
NOT ATTRIBUTABLE TO ITS INTEREST IN THE AIRCRAFT) OF LESSOR OR ANY OTHER
INDEMNITEE, AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS ANY
RIGHTS OR REMEDIES, WITH RESPECT TO (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR BY ANY
INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE
IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT
OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS OF
BUSINESS OR ANTICIPATED PROFITS OR DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
OR (iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR
REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN
THIS SECTION 5(a) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR
WARRANTIES WHATSOEVER WITH RESPECT TO THE AIRCRAFT, EXPRESS OR IMPLIED, AND
LESSOR SHALL NOT BE DEEMED TO HAVE
- 26 -
32
MADE ANY OTHER IMPLIED WARRANTIES, OR GUARANTEES, INCLUDING BUT NOT LIMITED TO
ANY IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, OR ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR OR ANY USE, EXCEPT THAT: Lessor represents
and warrants that (x) on the Delivery Date, Lessor had, and on the Restatement
Date Lessor has, the right to lease the Aircraft hereunder, (y) on the Delivery
Date the Aircraft was, and on the Restatement Date the Aircraft is, free of
Lessor's Liens and Head Lessor's Liens, and (z) on the Restatement Date Lessor
has such title to the Aircraft as was transferred to it on the Delivery Date
and (B) Lessor covenants that it shall maintain such title to the Aircraft as
was transferred to it on the Delivery Date and shall not create, incur, assume
or suffer to exist any Lessor's Lien or Head Lessor's Lien on the Aircraft.
(b) Representations and Warranties of Lessor. Lessor hereby
represents and warrants, as of the Delivery Date and as of the Restatement Date
that its representations and warranties set forth in Section 9(b) of the
Refunding Agreement were true when made and continue to be true and correct.
(c) No Amendments to Financing Documents. Lessor covenants
and agrees that Lessor will not, without the prior written consent of Lessee,
amend, modify, supplement or waive any provision of any Financing Document in
such a way as to materially increase Lessee's obligations hereunder or
materially reduce Lessee's rights hereunder.
The representations, warranties and covenants of Lessor under
Sections 5(a) and 5(b) and this Section 5(c) shall survive the execution and
delivery of this Lease and the delivery of the Aircraft and the Restatement
Date.
(d) Suppliers' Warranties. So long as a Default or an Event
of Default has not occurred and is continuing and provided that the Aircraft
continues to be maintained, modified and repaired as required hereunder, Lessor
hereby assigns or, if by their terms not assignable, agrees otherwise to make
available to Lessee the right to exercise in Lessee's name such rights as
Lessor may have or may subsequently obtain (but without representation or
warranty by or recourse to Lessor) with respect to any product warranty,
service life policy, trademark, patent or copyright infringement indemnity, or
airframe or propulsion system performance guaranty, of Airbus Industrie, the
Manufacturer's Subsidiary, IAE or any subcontractor or vendor with respect
thereto under the Purchase Agreement
- 27 -
33
(except those which were given directly to Parent, the Original Head Lessee or
any of their Affiliates and are not directly related to the operator's use of
the Aircraft), to the extent that the same may be assigned or otherwise made
available to Lessee, and Lessor agrees to exert its reasonable efforts, at
Lessee's expense and upon its request, to enforce such rights as Lessor may
have with respect thereto for the benefit of Lessee; provided, however, that
upon and during the continuance of a Default or an Event of Default, such
assignment or other rights which are otherwise made available to Lessee shall
immediately and automatically without further action be deemed cancelled and,
to the extent of any remaining interest held by Lessee, deemed reassigned to
Lessor and all such rights shall revert to Lessor automatically including all
claims thereunder whether or not perfected and all amounts payable shall be
paid to and held by Lessor. In no event, however, shall Lessee have any right
to amend, supplement or otherwise modify the Purchase Agreement (by change
order or otherwise). In connection with the foregoing, Lessee agrees to be
bound by and comply with all applicable terms, conditions and limitations of
the provisions of the Purchase Agreement.
Section 6. Possession and Use.
(a) Possession.
(i) Lease, Assignment and Transfer. LESSEE WILL NOT
ASSIGN THIS LEASE OR ANY RIGHTS OR OBLIGATIONS HEREUNDER OR INTEREST HEREIN
(EXCEPT AS PROVIDED IN SECTION 8(e) BELOW) OR SUBLEASE, WET LEASE OR OTHERWISE
IN ANY MANNER TRANSFER, DELIVER OR RELINQUISH POSSESSION OR USE OF THE
AIRCRAFT, AIRFRAME OR ANY ENGINE OR INSTALL ANY ENGINE OR PERMIT ANY ENGINE TO
BE INSTALLED ON ANY AIRFRAME OTHER THAN THE AIRFRAME; provided, that, so long
as no Event of Default or Default shall have occurred and be continuing or
would result therefrom and so long as the action to be taken shall not
adversely affect Lessor's title to or other interest in, or the Lien of the
Indenture on, the Aircraft, the Airframe or either of the Engines or this Lease
or the insurance required to be maintained hereunder and Lessee is otherwise in
full compliance with Section 12, and so long as all necessary approvals of the
FAA and any other Governmental Entity having jurisdiction have been obtained,
then Lessee, without the prior written consent of Lessor, may, only to the
extent provided below and subject to the limitations of Sections 6(a)(ii) and
6(a)(iii) below:
- 28 -
34
(1) subject any Engine to a normal interchange, maintenance,
servicing or pooling agreement or similar arrangement with a Permitted
Sublessee, in each case customary in the airline industry of which
Lessee is a part and entered into in the ordinary course of its
business; provided that no transfer of the registration of any Engine
shall be effected in connection therewith; and provided, further, that
(A) no such agreement or arrangement contemplates, results in or
requires the transfer of title to any Engine, and (B) if Lessor's
title or Foreign Lessor's (so long as the Foreign Lease Agreement is
in effect) to any Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss
with respect to such Engine and not an Event of Default and Lessee
shall comply with Section 11(b) hereof in respect thereof;
(2) deliver possession of the Aircraft, the Airframe or any
Engine to the manufacturer thereof, or in accordance with the
Maintenance Program to an FAA certified repair station, for testing,
service, storage, repair, maintenance, inspection or overhaul work on
such Aircraft, Airframe or Engine or any part thereof or for
alterations or modifications in or additions to such Aircraft,
Airframe or Engine to the extent required or permitted by the terms of
Section 9 hereof;
(3) transfer possession of the Aircraft or the Airframe to the
United States of America or any instrumentality or agency thereof
pursuant to a sublease;
(4) (i) subject the Airframe to the Civil Reserve Air Fleet
Program and transfer possession of the Airframe or any Engine to the
United States Government pursuant to the Civil Reserve Air Fleet
Program, so long as Lessee shall promptly notify Lessor upon
transferring possession of the Airframe or any Engine to the United
States Government pursuant to the Civil Reserve Air Fleet Program and
provide Lessor with the name and address of the Contracting Office
Representative for the Military Airlift Command of the United States
Air Force to whom notices must be given; or
(ii) subject the Airframe to (a) a service contract with the
United States Government, a copy of which shall be provided to Lessor,
providing for
- 29 -
35
possession to be held by the United States Government for a period not
extending beyond the end of the Term, or (b) a requisition for use by
the United States Government not constituting an Event of Loss;
(5) install an Engine on an airframe (other than the Airframe)
owned by Lessee free and clear of all Liens except (A) Permitted Liens
and Liens which apply only to engines (other than the Engines),
appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety) and (B) the rights
of participants under normal interchange agreements which are
customary in the airline industry and do not contemplate, permit,
result in or require the transfer of title to the airframe or engines
installed thereon;
(6) install an Engine on an airframe leased to Lessee or owned
by Lessee subject to a conditional sale or other security agreement;
provided that: (A) such airframe is free and clear of all Liens except
the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except Liens of the type
permitted by clauses (A) and (B) of Section 6(a)(i)(5) and the Lien of
any mortgage which provides that each Engine leased to Lessee hereby
shall not become subject to the lien thereof or to any rights of any
party thereunder other than Lessee (with respect to Lessee's rights
expressly granted hereunder), notwithstanding the installation of such
Engine on any airframe subject to the Lien of such mortgage, unless
and until Lessee shall become the owner of such Engine and Lessor
shall have no further interest therein, all pursuant to the express
terms of this Lease; and (B) there shall be in effect a written
agreement of the lessor or secured party of such airframe (which may
be contained in the lease or conditional sale or other security
agreement covering such airframe) substantially similar in effect to
the agreement of Lessor in Section 6(b) below whereby such lessor or
secured party effectively and expressly agrees that neither it nor its
successors or assigns will acquire or claim any right, title or
interest in any Engine by reason of such Engine being installed on
such airframe at any time while such Engine is subject to this Lease
or is owned by Lessor, and a copy of such agreement shall be provided
to Lessor upon written request;
- 30 -
36
(7) install an Engine on an airframe owned by Lessee, leased
to Lessee or purchased by Lessee subject to a conditional sale or
other security agreement under circumstances where neither Section
6(a)(i)(5) or Section 6(a)(i)(6) is applicable; provided that such
installation shall be deemed an Event of Loss with respect to such
Engine and Lessee shall comply with Section 11(b) hereof in respect
thereof, Lessor not intending hereby to waive any right or interest it
may have to or in such Engine under applicable law until compliance by
Lessee with such Section 11(b);
(8) enter into a Wet Lease for the Aircraft or the Airframe
and engines installed thereon in the ordinary course of Lessee's
business for a period not extending beyond the Term; provided that if
Lessee (or any Permitted Sublessee) shall enter into any Wet Lease for
a period of more than one year (including renewal options) Lessee
shall provide to Lessor written notice of such Wet Lease (such notice
to be given prior to entering into such Wet Lease, if practicable, but
in any event promptly after entering into such Wet Lease); or
(9) sublease the Aircraft or the Airframe to any Permitted
Sublessee on the terms and conditions set forth in Section 6(a)(iii)
below.
(ii) Certain Limitations on Transfers. With respect
to any transfer pursuant to Section 6(a)(i):
(1) the rights of any transferee that receives possession by
reason of a transfer permitted by Section 6(a) hereof (other than the
transfer of an Engine which is deemed to have been an Event of Loss)
shall be expressly subject and subordinate to all the terms of this
Lease and the Lien of the Indenture (if it has not been discharged);
(2) Lessee's obligations hereunder shall continue in full
force and effect and Lessee shall remain primarily liable hereunder
for the performance of all of the terms of this Lease to the same
extent as if such transfer had not occurred and no provision of this
Lease shall be deemed a waiver of Lessor's rights hereunder or under
the other Operative Documents nor discharge or diminish any of
Lessee's obligations hereunder or under the other Operative Documents;
- 31 -
37
(3) During the Restricted Use Period, no Wet Lease, Permitted
Sublease or other relinquishment of possession of the Aircraft, the
Airframe or any Engine pursuant to the terms of this Section 6(a)
shall be permitted if such Wet Lease, Permitted Sublease or other
relinquishment of possession would cause the Aircraft, the Airframe or
such Engine to be "tax-exempt use property" within the meaning of
Section 168(h) of the Code or cease to be "Section 38 property" within
the meaning of Section 48(a) of the Code (as determined after the
application of Section 47(a)(7) of the Code);
(4) The term of any transfer, Wet Lease, Permitted Sublease or
other relinquishment of possession shall not extend beyond the Basic
Term or the Renewal Term (if Lessee shall have exercised its option to
renew this Lease in accordance with the terms hereof); and
(5) No transfer, Wet Lease, Permitted Sublease or other
relinquishment of possession of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of Lessee's
obligations to Lessor or any other Lessor hereunder for which
obligations Lessee shall remain primarily liable.
(iii) Permitted Subleases. With respect to any
sublease pursuant to Sections 6(a)(i)(3) or (4) (to the extent permitted by
Law) or Section 6(a)(i)(9) above:
(1) Lessee may sublease the Aircraft or the Airframe to a
Permitted Sublessee (each of which shall constitute a "Permitted
Sublease") if (A) in any such case, the Permitted Sublessee under such
sublease is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
such sublease is entered into, (B) in the event that the Permitted
Sublessee under such sublease is a Foreign Air Carrier (other than a
Foreign Air Carrier principally based in Taiwan), the United States
maintains diplomatic relations with the country in which such proposed
Permitted Sublessee is principally based at the time such sublease is
entered into (or, in the case of a sublease to a proposed Permitted
Sublessee principally based in Taiwan, maintains diplomatic relations
at least as good as those in effect on the Restatement Date) and (C)
in the event that the Permitted Sublessee under such sublease is a
Foreign Air Carrier, Lessor and the Indenture Trustee shall have
received an opinion of counsel to Lessee, in form and substance
reasonably satisfactory
- 32 -
38
to Owner Participant and the Indenture Trustee, to the effect that (I)
the terms of the proposed sublease will be legal, valid, binding and
(subject to customary exceptions in foreign opinions generally)
enforceable against the proposed Permitted Sublessee in the country in
which the Permitted Sublessee is principally based, (II) there exist
no possessory rights in favor of the Permitted Sublessee under such
sublease under the laws of such Permitted Sublessee's country of
domicile that would, upon bankruptcy or insolvency of or other default
by Lessee, prevent the return or repossession of the Aircraft in
accordance with the terms of this Lease, (III) (unless Lessee shall
have agreed or is required to provide insurance covering the risk of
requisition of use of the Aircraft by the government of the country of
such Permitted Sublessee's country of domicile) the laws of such
Permitted Sublessee's country of domicile require fair compensation by
the government of such jurisdiction payable in currency freely
convertible into dollars for the loss of use of the Aircraft in the
event of the requisition by such government of such use, (IV) the
Permitted Sublessee is either not entitled to sovereign immunity, or
has effectively waived such sovereign immunity, with respect to its
rights and obligations under the proposed sublease; (V) the laws of
such Permitted Sublessee's country of domicile would give recognition
to Lessor's title to the Aircraft, to the registry of the Aircraft in
the name of the Lessor (or Lessee, as "lessee," or the proposed
Permitted Sublessee, as "sublessee," as appropriate) and to the Lien
of the Indenture; (VI) it is not necessary under the laws of such
Permitted Sublessee's country of domicile, solely as a consequence of
such subleasing and without giving effect to any other activity of
Owner Participant, Owner Trustee or Indenture Trustee or any Affiliate
thereof, as the case may be, for the Owner Trustee, the Owner
Participant or the Indenture Trustee to qualify to do business in such
jurisdiction; and (VII) if the Owner Participant so requests, (x)
under the laws of such Permitted Sublessee's country of domicile there
is no tort liability of the owner of an aircraft not in possession
thereof (it being agreed that in the event this opinion cannot be
given in a form reasonably satisfactory to Owner Participant, such
opinion shall be waived if insurance reasonably satisfactory to Owner
Participant is provided to cover such risk), and (y) such other
matters as the Owner Participant reasonably requests, provided,
however, that no sublease shall
- 33 -
39
extend beyond the expiration of the Basic Term or any Renewal Term
then in effect.
The rights of any Permitted Sublessee shall be expressly
subject and subordinate to all the terms of this Lease and to the Lien of the
Indenture (if it has not been discharged), including, without limitation, the
covenants contained in Sections 6(c), 6(d) and 6(e) hereof and Lessor's rights
to repossession pursuant to Section 18 hereof and to avoid or terminate such
Permitted Sublease upon such repossession, and Lessee shall remain primarily
liable hereunder for the performance of all of the terms of this Lease to the
same extent as if such Permitted Sublease had not occurred. No Permitted
Sublease shall in any way discharge or diminish any of Lessee's obligations to
Lessor hereunder or constitute a waiver of Lessor's rights or remedies
hereunder. Any Permitted Sublease shall expressly prohibit any further
sub-sublease by the Permitted Sublessee. Lessee shall provide to the Owner
Participant and the Indenture Trustee (i) written notice of any Permitted
Sublease hereunder (such notice to be given not later than ten Business Days
prior to entering into any Permitted Sublease with a Foreign Air Carrier and,
if practicable, not later than five days prior to entering into any Permitted
Sublease with any other proposed Permitted Sublessee, but, in the case of a
Permitted Sublease with a Permitted Sublessee other than a Foreign Air Carrier,
in any event promptly after entering to any such Permitted Sublease) and (ii) a
copy of each Permitted Sublease which has a term of more than three months.
(b) Reciprocal Recognition of Rights. In the event the lessor
or secured party of any airframe leased to Lessee (or a Permitted Sublessee) or
owned by Lessee (or a Permitted Sublessee) is subject to a conditional sale or
other security agreement in accordance with Section 6(a)(i)(6) hereof, and the
lease or conditional sale or other security agreement covering such airframe
also covers an engine or engines owned by the lessor under such lease or
subject to a security interest in favor of the secured party under such
conditional sale or other security agreement, Lessor hereby agrees for the
benefit of such lessor or secured party that Lessor will not acquire or claim,
as against such lessor or secured party, any right, title or interest in any
such engine as the result of such engine being installed on the Airframe at any
time while such engine is subject to such lease or conditional sale or other
security agreement and owned by such lessor or subject to a security interest
in favor of such secured party. Lessor also hereby agrees for the benefit of
the mortgagee under
- 34 -
40
any mortgage complying with Section 6(a)(i)(6) hereof, relating to installation
of an Engine on an airframe leased to Lessee (or a Permitted Sublessee), that
Lessor will not acquire or claim, as against such mortgagee, any right, title
or interest in any engine subject to the lien of such mortgage as the result of
such engine being installed on the Airframe at any time while such engine is
subject to the lien of such mortgage.
(c) Lawful Insured Operations. Lessee will not permit the
Aircraft, the Airframe or any Engine to be serviced, repaired, maintained, used
or operated in violation of any Law of any Governmental Entity having
jurisdiction, or contrary to the Manufacturers' operating manuals or
instructions, or in violation of any airworthiness certificate or limitation,
license or registration issued by any such authority or any manufacturer's
specifications, service bulletins or other requirements, including, without
limitation, such of any manufacturer's requirements as may be applicable to
keep in full force and effect each material warranty, product or performance
guaranty, service life policy or the like, in each case, to the extent made
mandatory for Part 121 operators similarly situated to Lessee or the Permitted
Sublessee if the Aircraft is registered with the FAA, or the applicable laws of
any other jurisdiction in which the Aircraft may then be registered in
accordance with Section 11 of the Refunding Agreement, unless the validity
thereof is being contested in good faith and by appropriate proceedings, but
only so long as such proceedings do not involve any danger of sale, forfeiture
or loss of the Aircraft or impair the interest of Lessor therein or impair the
validity or priority of the Lien of the Indenture or result in a risk of
criminal liability of Lessor or Indenture Trustee and are not inconsistent with
any insurance required to be maintained by Lessee hereunder. In the event that
such Law or other requirement requires alteration of the Aircraft during the
Basic Term or then-current Renewal Term, Lessee shall comply therewith at its
sole expense and shall maintain the same in proper condition for operation
under such Laws and other requirements. Lessee shall not operate in any manner
or locate in any place the Aircraft, or suffer or permit the Aircraft to be
operated by a Permitted Sublessee or otherwise in any manner or located by a
Permitted Sublessee or otherwise in any place (i) unless the Aircraft is
covered by insurance or United States Government indemnity as required by the
provisions hereof or (ii) contrary to the terms of such insurance or United
States Government indemnity. Lessee also agrees not to operate or locate the
Aircraft or suffer or permit the Aircraft to be operated or
- 35 -
41
located in any area excluded from coverage by any insurance policy issued
pursuant to the requirements of this Lease or in any war zone unless insured or
indemnified by the United States of America therefor, except in the case of
operation pursuant to a sublease or contract with, or as a result of a
requisition (not constituting an Event of Loss) by, the United States of
America, and then only if Lessee has obtained insurance or an indemnity (in
lieu of such insurance) from the United States of America covering such risks,
in the amounts and otherwise as required by this Lease. Lessee shall in no
event permit the Aircraft, the Airframe or any Engine to be used, operated or
maintained in Japan.
(d) Maintenance. Lessee, at its own cost and expense, shall:
(i) perform or cause to be performed all service, repair, maintenance,
overhaul, inspections, alterations, modifications, and testing (A) in
accordance with good airline industry practice and in such manner to provide
complete data and documentation necessary to substantiate certification, (B) as
may be necessary and required under, and in compliance with, applicable Law,
including, without limitation, FAA rules, regulations and other requirements,
the Maintenance Program, airworthiness directives having a compliance date
during the Term, and the service bulletins and other requirements of any
manufacturer, including, without limitation, such requirements as may be
applicable to keep in full force and effect any and all material warranties,
product and performance guaranties, service life policies, indemnities or the
like, (C) except during any period that a Permitted Sublease is in effect, in
the same manner and with the same care, including regard for the status and
technical condition of the Aircraft, as shall be the case with respect to
similar aircraft and engines owned by Lessee without discrimination and as if
Lessee owned the Aircraft and was going to use the Aircraft in continued
regular customer service after the expiration of the Term, and consistent with
good industry practice, and during any period in which a Permitted Sublease is
in effect, in the same manner and with the same care, including regard for the
status and technical condition of the Aircraft, as shall be the case with
respect to similar aircraft and engines owned by such Permitted Sublessee
without discrimination and as if the Permitted Sublessee owned the Aircraft and
was going to use the Aircraft in continued regular customer service after the
expiration of the Permitted Sublease, and consistent with good industry
practice, provided, however, that in all circumstances the Aircraft shall be
maintained by Lessee (or any Permitted Sublessee) in accordance with
maintenance standards required
- 36 -
42
by, or substantially equivalent to those required by, the central civil
aviation authority of the country of registry and, to the extent not
inconsistent with the FAA or the central civil aviation authority of Canada,
France, Germany, the Netherlands or the United Kingdom, and (D) so as to keep
the Aircraft in as good a condition as when delivered to Lessee, ordinary wear
and tear excepted, and in good operating condition; (ii) keep the Aircraft or
cause the Aircraft to be kept in such condition as is necessary to enable the
airworthiness certification of such Aircraft to be maintained in good standing
at all times under the Federal Aviation Act, or the applicable laws of any
other jurisdiction in which the Aircraft may be registered in accordance with
Section 11 of the Refunding Agreement (provided that if any grounding is
fleetwide in nature and so long as Lessee or a Permitted Sublessee is
contesting in good faith such grounding, Lessee shall not be deemed in
violation of this maintenance covenant); and (iii) maintain in English all
records, logs and other materials required by, and in a manner acceptable to,
the FAA or any other Governmental Entity having jurisdiction and as provided
under the Maintenance Program and Lessee's recordkeeping policies.
(e) Registration and Insignia. Lessee shall cause the
Aircraft at all times, at its expense, to be duly registered during the
Restricted Use Period and, subject to Section 11 of the Refunding Agreement,
thereafter under the Federal Aviation Act in the name of Lessor or any
successor or assignee, so long as (i) while the Aircraft is registered under
the Federal Aviation Act, each of the Lessor or its successors or assigns is a
"citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act and (ii) the applicable parties to the Refunding Agreement
cooperate with Lessee with respect thereto as reasonably requested by Lessee.
Lessee shall not register the Aircraft or permit the Aircraft to be registered
under any laws other than the Federal Aviation Act at any time except as
provided in Section 11 of the Refunding Agreement and shall cause the Indenture
to be duly recorded and maintained of record as a duly perfected mortgage on
the Aircraft and this Lease at all times. At any time after the Restricted Use
Period, Lessor, upon compliance with all of the terms of Section 11 of the
Refunding Agreement, shall, at the request and sole expense of Lessee,
cooperate with Lessee to take all actions reasonably required to change the
registration of the Aircraft to another country.
Lessee agrees at its expense to place such appropriate
insignia, plates and other identification
- 37 -
43
("Lease Identification") in the cockpit of the Aircraft and on each Engine
showing title thereto and the Lien of the Indenture as designated by Lessor and
as Lessor may from time to time reasonably request. Unless otherwise
requested, upon delivery of the Aircraft, Lessee shall fasten or cause to be
fastened in the cockpit of the Airframe in a location reasonably adjacent to
and not less prominent than the airworthiness certificate for the Aircraft, and
on each Engine (if not prohibited by applicable Law), a Lease Identification in
the form set forth in Exhibit C hereto or with any other appropriate
information in any other form subsequently designated by Lessor to Lessee.
Except as provided herein, Lessee will not allow the name of any Person to be
placed on the Aircraft or either Engine as a designation that would be
reasonably interpreted as a claim of ownership or Lien; provided, however, that
Lessee may cause the Airframe and Engines to have placed thereon the customary
colors and insignia of Lessee or any Permitted Sublessee under a Permitted
Sublease.
Section 7. Inspection.
During the Term of this Lease, Lessee shall furnish to Lessor,
Owner Participant and Indenture Trustee such information concerning the
location, condition, use and operation of the Aircraft as Lessor, Owner
Participant or Indenture Trustee may reasonably request. Lessee shall permit,
or cause its Permitted Sublessee to permit, any person designated by Lessor,
Owner Participant or Indenture Trustee on reasonable prior notice at reasonable
times to visit, inspect and survey the Aircraft (including, without limitation,
going on board the Aircraft, and inspecting the Aircraft during maintenance
checks when panels and bays are open and subject to view), its condition, use,
and operation, and the records maintained in connection therewith, and to visit
and inspect the properties and to discuss the affairs, finances and accounts of
Lessee with the principal officers of Lessee, provided, that so long as Lessor
does not believe a Default or Event of Default has occurred hereunder
inspections shall be performed during regularly scheduled maintenance checks of
the Aircraft. Each such inspection or survey shall be conducted so as to not
unreasonably interfere with the business of Lessee or the maintenance or
operation of the Aircraft. Upon Lessor's, Owner Participant's or Indenture
Trustee's request, Lessee will notify such Person of the next scheduled
maintenance check for the Airframe or any Engine. Lessor, Owner Participant
and Indenture Trustee shall have no duty to make any such inspection and shall
not incur any
- 38 -
44
liability or obligation by reason of not making any such inspection. Lessor's,
Owner Participant's or Indenture Trustee's failure to object to any condition
or procedure observed or observable in the course of an inspection hereunder
shall not be deemed to waive or modify any of the terms of this Lease with
respect to such condition or procedure.
Section 8. Additional Covenants of Lessee.
Lessee covenants and agrees that:
(a) Financial Information. Lessee agrees to furnish Lessor,
until the expiration or other termination of the Term of this Lease, the
following:
(i) within sixty (60) days following the end of each
quarter of Lessee's fiscal year, except the last such quarter of such year,
commencing after the Restatement Date, a copy of Lessee's Quarterly Report on
Form 10-Q as filed with the Securities and Exchange Commission or, if Lessee no
longer files such report, an unaudited consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of the period
ended, together with the related statements of income and cash flows for such
period, and in each case certified by a Responsible Officer of Lessee as having
been prepared in accordance with GAAP and as fairly presenting the financial
condition and results of operations and changes in financial position for such
period then ended in accordance with such principles and practices (subject to
normal year-end audit adjustments);
(ii) within one hundred five (105) days after the
close of each fiscal year of Lessee, a copy of Lessee's Annual Report on Form
10-K as filed with the Securities and Exchange Commission or, if Lessee no
longer files such reports, an audited consolidated balance sheet, income
statement, and cash flow statement of Lessee and its consolidated subsidiaries,
as of the close of such fiscal year, and in each case as certified by
independent public accountants, including their certificate and accompanying
comments, as having been prepared in accordance with GAAP and as fairly
presenting the financial condition and results of operations and changes in
financial position for such period then ended in accordance with such
principles and practices, without qualification as to the scope of the audit or
non-conformity with GAAP;
(iii) promptly upon their becoming available, copies
of all reports on Form 8-K filed by Lessee under the
- 39 -
45
Securities Exchange Act of 1934, as amended, and each other statement, report
or circular (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) generally distributed to creditors or shareholders;
(iv) prior to the expiration date of each policy of
insurance required to be maintained hereunder, a certificate signed by the
Approved Broker of Lessee as to the due compliance with the insurance
provisions of Section 12 hereof with respect to the Aircraft, together with
certificates of insurance evidencing such insurance and the opinion provided
for in Section 12(f);
(v) within fifteen (15) days following the end of
each calendar month throughout the Term, an Airframe and Engine status report,
substantially in the form of Exhibit K hereto, including, without limitation,
(A) a summation of hours and cycles accumulated on the Airframe and Engines by
individual serial number during such preceding calendar month and (B) the
identity of the airframe (including the "N" number and, at Lessor's request,
ownership and lien interests in respect thereof) on which each Engine was
installed as of the end of each such calendar month, and, if Lessor so
requests, the location of any such airframe. The foregoing shall not be deemed
to require reports regarding hours or cycles on any Parts;
(vi) together with each set of financial statements
referred to in clauses (i) and (ii), a certificate signed by a Responsible
Officer of Lessee, to the effect that such officer has reviewed the relevant
terms of this Lease and has made, or caused to be made under his or her
supervision, a review of the transactions and condition of Lessee during the
accounting period covered by such financial statements, and that such review
has not disclosed the existence during such accounting period, nor does such
officer have any knowledge of the existence, as at the date of such
certificate, of any condition or event which constitutes a Default or an Event
of Default, or, if such condition or event which constitutes a Default or an
Event of Default existed or exists, specifying the nature and period of
existence thereof and what action Lessee has taken or is taking or proposes to
take with respect thereto;
(vii) as soon as practicable after becoming aware
thereof, notice of damage or destruction to the Aircraft, either Engine or any
Part with a repair or replacement cost (including labor charges) in excess of
$1,000,000 or any
- 40 -
46
incident required to be reported to the FAA or other Government Entity;
(viii) immediately after Lessee knows or should know
of the occurrence thereof, notice of a Default; and
(ix) promptly after Lessor's written request
therefor, notice of the time and location of upcoming C Checks, major Engine
checks, major Airframe structural checks and a description of modification of
the Aircraft required by an FAA airworthiness directive, a mandatory
manufacturer service bulletin or any other modification with a materials and
labor cost in excess of $1,000,000;
(x) together with each delivery of financial
statements pursuant to Section 8(a)(ii) above, a certificate signed by Lessee's
auditors thereon (i) briefly setting forth the scope of their examination
(which shall include a review of this Section, (ii) stating whether or not
their examination has disclosed the existence, during the fiscal year covered
by such financial statements, of any Default or Event of Default and, if their
examination has disclosed such a Default or Event of Default, specifying the
nature and period of existence thereof, and (iii) stating that they have
examined the officer's certificate delivered therewith pursuant to Section
8(a)(vi) above;
(xi) As soon as possible and in any event within
thirty (30) days after Lessee knows or has reason to know thereof, a
certificate of a Responsible Officer specifying:
(X) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan; or
(Y) the institution of proceedings or the taking
or expected taking of other action by PBGC or Lessee or any Commonly
Controlled Person to terminate, withdraw or partially withdraw from
any Plan and with respect to a multi-employer Plan, the reorganization
or insolvency of the Plan and in addition to such notice, deliver to
Lessor whichever of the following may be applicable: (A) a certificate
of a Responsible Officer setting forth details as to such Reportable
Event of the action that Lessee or Commonly Controlled Person proposes
to take with respect thereto, together with a copy of any notice of
such Reportable Event that may be required to be filed with PBGC, or
(B) any notice delivered by PBGC evidencing its intent to institute
such proceedings or any notice to PBGC that such plan is to be
terminated, as the case may be; and
- 41 -
47
(xii) from time to time such other information as
Lessor may reasonably request.
(b) Maintenance of Corporate Existence. Except as provided in
Section 8(e) below, during the term of this Lease, Lessee will preserve and
maintain its corporate existence and its rights, privileges, licenses and
franchises material to Lessee's ability to perform its obligations hereunder in
each applicable jurisdiction.
(c) Maintenance of Status. Lessee is, and shall remain so
long as it shall be the Lessee under this Lease, a "citizen of the United
States" as defined in Section 40102(a)(15) of the Federal Aviation Act, and
Lessee is and shall maintain its status at all times as a Certificated Air
Carrier, including, without limitation, its status so as to fall within the
purview of 11 U.S.C. Section 1110 or any analogous statute.
(d) Payment of Taxes. Lessee will pay or cause to be paid all
Taxes imposed upon it, or upon its income or profits, or upon any property
belonging to it, on or prior to the due date thereof, including any extensions
which have been duly obtained or granted; provided, however, that Lessee shall
not be required to pay any such Taxes, the payment of which is being diligently
contested in good faith and by appropriate proceedings with appropriate
reserves so long as there is no material possibility that either failure to pay
such Taxes or such contest may result in any loss, sale, confiscation,
forfeiture or seizure of the Aircraft, the Airframe or either Engine or any
criminal liability on the part of Lessor, Indenture Trustee or any Note Holder.
(e) Consolidation, Merger, Etc. Lessee shall not liquidate or
dissolve; and Lessee shall not consolidate with or merge into or with any other
corporation or other Person, and Lessee shall not convey, transfer, lease or
otherwise dispose of all or substantially all of its property and other assets
to or, without the prior consent of Owner Participant, acquire all or any
substantial part of the property or other assets or capital stock (if such
acquisition is analogous in purpose or effect to a consolidation or merger) of
any corporation or other Person, unless:
(i) the Person formed by or surviving such consolidation
or merger or the Person which acquires by conveyance, transfer, lease or other
disposition all or substantially all of such property and other assets or
stock (the "Successor Entity"): (A) shall be a corporation
- 42 -
48
organized and existing under the laws of the United States of America or any
State thereof or the District of Columbia; (B) immediately after giving effect
to such transaction, shall be Lessee or shall have acquired or succeeded to all
or substantially all of such property and other assets (including, without
limitation, all or substantially all of Lessee's property and other assets) as
an entirety and, unless the Owner Participant otherwise agrees, shall have a
Net Worth of not less than Lessee's Net Worth immediately prior to such
transaction; (C) shall be a "citizen of the United States" of America as
defined in Section 40102(a)(15) of the Federal Aviation Act and a Certificated
Air Carrier; and (D) shall execute and deliver to Lessor such recordations and
filings with any Governmental Entity and such other documents as Lessor
determines shall be reasonably necessary or advisable (including, without
limitation, to preserve and protect the interests of the Lessor and the
priority of the Lien of the Indenture (if it has not been discharged)) to
evidence, or in connection with, such consolidation, merger, sale, lease,
transfer or other disposition and an agreement, in form and substance
reasonably satisfactory to Lessor, which is a legal, valid, binding and
enforceable assumption by such Successor Entity of the due and punctual
performance and observance of each covenant and condition of this Lease and the
other Operative Documents to which Lessee is a party and agreement to be bound
thereby, and an officer's certificate to such effect, and to the effect that
the other requirements of this paragraph have been satisfied, and a legal
opinion from counsel to such effect and otherwise in such form and substance
reasonably satisfactory to Lessor; and
(ii) prior to and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing.
No such permitted disposition to a Successor Entity shall relieve or release
Lessee of or from any obligations hereunder or under the other Operative
Documents.
(f) Information. Within 60 days after the end of each
calendar year and within 60 days of a request by Lessor or Owner Participant,
or such shorter period as may be set forth in any written request by the
Internal Revenue Service for information or documents, Lessee shall furnish in
writing to Lessor or Owner Participant such information and documents (or
copies thereof) regarding the Aircraft as may be reasonably requested by Lessor
or Owner Participant or the Internal Revenue Service in order to permit Lessor
to file its federal and state income tax returns (or to permit
- 43 -
49
the filing of the federal and state income tax returns of any affiliated group
of corporations filing a consolidated return of which Lessor is a member), or
to maintain or defend any claims related thereto and promptly, after reasonable
notice, furnish to Lessor or Owner Participant such information as may be
reasonably requested by Lessor or Owner Participant or the applicable
Governmental Entity as may be required to enable Lessor or Owner Participant to
file any reports required to be filed by it with any Governmental Entity
because of its ownership or other interest in the Aircraft, the Airframe or the
Engines.
(g) Place of Business. At all times while this Lease is in
effect, Lessee will not, without thirty (30) days prior written notice to
Lessor and Indenture Trustee (so long as the Lien of the Indenture shall not
have been discharged), change its chief executive office (as such term is
defined under Article 9 of the Uniform Commercial Code as adopted in Arizona)
or location of its books and records, from ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or such subsequent location of which Lessee shall have
so notified Lessor and, if applicable, Indenture Trustee.
(h) Certain Limitations on Use. Lessee shall use the
Aircraft, Airframe or Engines only in commercial passenger operations and
related cargo operations. Unless Owner Participant otherwise agrees, during
the Restricted Use Period, Lessee shall not use the Aircraft, Airframe or
Engines or permit the Aircraft, Airframe or Engines to be used either
"predominantly outside the United States" within the meaning of Section
48(a)(2) of the Code, or in such manner that the percentage of the income,
deduction or credit attributable to the Aircraft, Airframe or Engines for
federal income tax purposes during any taxable year of the Lessor considered to
be from foreign sources exceeds the Maximum Foreign Use Percentage. In
addition, until the expiration of the Term or termination of the Foreign Lease
Agreement, Lessee will not locate, use or permit the use of the Aircraft in, to
or from Japan. Unless the Owner Participant otherwise agrees, prior to
permitting the Aircraft to be operated in any member state of the European
Community or other European country, Lessee shall deliver to Lessor (i) a
representation and warranty to the effect that Lessee (or any Permitted
Sublessee) has no knowledge of any dispute with Eurocontrol or other relevant
air traffic control authority over delinquent charges payable by it and (ii) a
letter from Lessee (or any Permitted Sublessee) addressed to Eurocontrol or
other relevant air traffic control authority pursuant to which Lessee (or such
Permitted Sublessee) authorizes the addressee to issue to
- 44 -
50
Lessor, upon Lessor's request from time to time, a statement of account of all
sums due by Lessee (or such Permitted Sublessee) to the authority in respect of
all aircraft (including, without limitation,the Aircraft) operated by Lessee
(or such Permitted Sublessee).
(i) Section 1110. Lessee acknowledges that Lessor would not
have entered into this Second Amended and Restated Aircraft Lease Agreement
unless it had available to it the benefits of a Lessor under Section 1110 of
Title 11 of the United States Code. 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.
(j) Permits and Licenses. Lessee shall make or obtain, and
maintain in full force and effect, each and every consent, license, approval,
notice, registration, filing or other action with any Governmental Entity
necessary or advisable in connection with the operation or use of the Aircraft,
the Airframe, any Engine or Part or the execution, delivery or performance of
this Lease and the Operative Documents to which it is a party by Lessee or the
enforcement thereof against Lessee.
(k) Security Opinion; Annual Certificate. (i) During such
times that the Aircraft is registered under the Federal Aviation Act, Lessee
shall furnish to Lessor and to Indenture Trustee:
(1) (X) prior to the expiration of the time period
covered by the opinion of counsel rendered on the Restatement Date
and, thereafter, the immediately preceding opinion of counsel rendered
pursuant to this Section 8(k)(i) and (Y) upon any change in Law that
would render the opinion of counsel rendered on the Restatement Date
or such immediately preceding opinion of counsel inaccurate, an
opinion of counsel with respect to Lessee and the FAA reasonably
satisfactory to each addressee of such opinion (which counsel may be
internal legal counsel of Lessee and FAA counsel) stating, in the
opinion of such counsel, that such action has been taken with respect
to the recording, filing, re-recording and refiling of (i) the
- 45 -
51
appropriate Operative Documents and any supplements and amendments
thereto and (ii) such other appropriate documents, as is necessary to
maintain the perfection of Owner Trustee's title to and/or interest in
and Indenture Trustee's security interest in the Aircraft and the
Operative Documents for the next six (6) years (or such other period
of time as reflects the then-current applicable Law), reciting the
details of such actions; or
(2) at any time that an opinion is not required
pursuant to Section 8(k)(i)(1), a certificate reasonably satisfactory
to each recipient thereof signed by a Responsible Officer of Lessee
certifying that no such action is necessary to maintain the perfection
of such title and/or interest and security interest.
(ii) During such times that the Aircraft is
registered under any Laws other than the Federal Aviation Act, Lessee shall
furnish to Lessor and to Indenture Trustee annually (but in any case, (X) prior
to the expiration of the time period covered by the immediately preceding
opinion of counsel rendered pursuant to this Section 8(k)(ii) and (Y) promptly
upon any change in Law that would render such immediately preceding opinion of
counsel inaccurate), an opinion of counsel reasonably satisfactory to each
addressee of such opinion stating, in the opinion of such counsel, that such
action has been taken with respect to the recording, filing, re-recording and
refiling of (i) the appropriate Operative Documents and any supplements and
amendments thereto and (ii) such other appropriate documents, as is necessary
to maintain the perfection of Owner Trustee's title to and/or interest in and
Indenture Trustee's security interest in the Aircraft and the Operative
Documents for the next six (6) years (or such other period of time as reflects
the then-current applicable Law), reciting the details of such actions.
(iii) Whether the Aircraft is registered under the
Federal Aviation Act or under any Laws other than the Federal Aviation Act,
Lessee shall furnish to Lessor annually a certificate (reasonably satisfactory
to Lessor) signed by a Responsible Officer of the Lessee certifying that Lessee
is in compliance with the provisions of the penultimate paragraph of Section
9(b) regarding Excluded Property and any equipment or seats which such Excluded
Property replaces.
- 46 -
52
(l) Letter of Credit. (X) Lessee shall provide to Lessor, as
named beneficiary thereof, one or more irrevocable standby letters of credit,
in form and substance acceptable to Lessor in its sole and absolute discretion
(the "Letter of Credit"), including, without limitation, as to renewal
provisions, with a face amount available for drawdown at all times equal to
$1,000,000, which Letter of Credit shall:
(i) provide that the full amount thereof shall be
available for drawdown thereunder and payable in New York, New York, on first
demand by Lessor at any time, if accompanied by (i) its statement that it
believes that a Default under Section 17(e), (f) or (g) or an Event of Default
has occurred or (ii) that the letter of credit will expire within [thirty]
(30)] days from the date of demand, which amount may be applied, retained or
utilized as provided in clause (Y);
(ii) be maintained in full force and effect at all
times until ninety-one (91) days after the end of the Term date with a
commercial bank acceptable to Lessor, in its sole and absolute discretion,
having a long-term unsecured debt rating of "A" or better by Standard & Poor's
Rating Group (if the issuing bank's credit rating is lower than such rating,
Lessee shall replace such Letter of Credit issuer within five (5) Business Days
of any such reduction in rating with a commercial bank meeting such rating
requirement), provided, that a Letter of Credit in the form set forth in
Exhibit D-2 issued by the Industrial Bank of Japan, Limited will be acceptable
to Lessor for so long as the Industrial Bank of Japan, Limited maintains a
long-term unsecured debt rating at least equal to its rating on the date
hereof;
(iii) be expressly designated as transferable and
assignable; and
(iv) permit partial drawings. If the Letter of Credit
is still in effect at the end of the Term, then Lessor shall return the Letter
of Credit to Lessee or terminate it.
(Y) If an Event of Default has occurred and is continuing, in addition to any
other rights or remedies Lessor may have hereunder, Lessor shall be entitled,
in each case as it may elect in its sole and absolute discretion, to draw on
the Letter of Credit and, with respect to amounts so drawn, hold same as
security for Lessee's obligations under this Lease, retain same for its own
account or apply (including, without
- 47 -
53
limitation, by way of set off against) same or such amounts thereof as it may
elect to remedy any breach by Lessee of this Lease and the other Operative
Documents or to recompense Lessor for any loss, damage, cost or expense or
other Claim unless and until the Lien of the Indenture shall have been
discharged in accordance with the provisions of Section 10.06 thereof, Lessor
may apply (whether by way of set-off or otherwise) the amounts drawn under the
Letter of Credit solely to amounts that if received by Indenture Trustee would
then be distributable under the Indenture to Lessor or Owner Participant; and
provided, however, that neither the amount offset at any one time nor the
aggregate amount offset at different times shall reduce the amount of any
installment or payment of Rent (whether upon the termination of the Lease or
otherwise) payable by Lessee to an amount insufficient to pay in full the
amounts then required to be paid on account of the principal of and any
interest on the Equipment Notes or otherwise owing to a Note Holder or other
Person under the Indenture (other than to Lessor or Owner Participant).
(m) ERISA. Lessee will not, nor will it permit any of its
subsidiaries to, (a) terminate, within the meaning of Title IV of ERISA, any
Plan so as to result in any material liability to the PBGC, (b) engage in any
"prohibited transaction" (as defined in Section 4975 of the Code) involving any
Plan that would result in material liability for an excise tax or civil penalty
in connection therewith, (c) incur or suffer to exist any material "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not
waived, involving any Plan, or (d) allow or suffer to exist any event or
condition with respect to ERISA, which would be likely to have a material
adverse effect on Lessee's condition (financial or otherwise), business,
operations or prospects or on Lessor's interests, rights or remedies.
Section 9. Replacement of Parts; Alterations, Modifications
and Additions.
(a) Replacement of Parts. Lessee, at its own cost and
expense, will promptly replace, or cause to be replaced, all Parts which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever. In addition, in the ordinary course of maintenance,
service, repair, overhaul or testing, Lessee (or, if a Permitted Sublease is in
effect, a Permitted Sublessee) may at its own cost and expense remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized,
- 48 -
54
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) shall replace at its own cost and expense such Parts as promptly as
possible. All replacement Parts shall be free and clear of all Liens (except
for pooling arrangements to the extent permitted by paragraph (c) of this
Section and Permitted Liens), be in at least the equivalent or better
modification status and service bulletin accomplishment status, be fully
interchangeable as to form, fit and function and shall be in as good operating
condition as, and have a value, remaining useful life and utility at least
equal to, the Parts replaced (assuming such replaced parts were in the
condition and repair in which they were required to be maintained by the terms
hereof).
All Parts which are at any time removed from the Aircraft
shall remain the property of Lessor (provided that, so long as the Foreign
Lease Agreement is in effect, title to such Parts shall remain with Foreign
Lessor), subject to the Lien of the Indenture if it has not been discharged,
and subject to this Lease no matter where located until such time as such Parts
shall be replaced by parts which have been incorporated or installed in or
attached to the Aircraft and which meet the requirements for replacement Parts
specified above. Immediately upon any replacement Part becoming incorporated
or installed in or attached to the Aircraft as above provided, or as provided
in Section 9(c), without further act, (i) title to the removed Part shall
thereupon vest in Lessee free and clear of all rights of Lessor, Indenture
Trustee, Owner Participant and Note Holders and shall no longer be deemed a
Part hereunder, (ii) title to such replacement Part shall thereupon vest in
Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign
Lessor) and become subject to the Lien of the Indenture if it has not been
discharged, and (iii) such replacement Part shall become subject to the Lien of
the Indenture (if it has not been discharged) and this Lease and be deemed a
Part for all purposes hereof to the same extent as the Part which it has
replaced.
(b) Alterations, Modifications and Additions. Lessee, at its
own cost and expense, shall make or cause to be made such alterations and
modifications in and additions to the Airframe and each Engine to the extent
made mandatory for Lessee in respect of the Aircraft, Engines or Parts from
time to time to meet the applicable standards of the FAA or under any Law of
any Governmental Entity having jurisdiction or issued by the manufacturer of
the Airframe, Engines or Parts. In addition, so long as no Default or Event of
- 49 -
55
Default has occurred and is continuing, Lessee (or, if a Permitted Sublease is
in effect, a Permitted Sublessee), at its own expense, may from time to time
make such alterations and modifications in and additions to the Airframe and
either Engine as Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) may deem desirable in the proper conduct of its business, provided,
no such alteration, modification or addition diminishes the value, remaining
useful life or utility, or impairs the condition or airworthiness, of the
Airframe, either Engine or any Part below that immediately prior to such
alteration, modification or addition assuming that the Airframe, Engines and
Parts were then of the value, utility and remaining useful life and in the
condition and airworthiness required by the terms of this Lease. Except as
otherwise provided herein, title to all Parts incorporated or installed in or
attached or added to the Aircraft as the result of such alteration,
modification or addition, shall immediately vest in Lessor (or, so long as the
Foreign Lease Agreement is in effect, Foreign Lessor) and become subject to the
Lien of the Indenture (if it has not been discharged) and this Lease, without
the necessity for any further act of transfer, document or notice.
Notwithstanding the foregoing sentence of this Section 9(b), Lessor agrees that
so long as no Default or Event of Default shall have occurred and be continuing
Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may,
at such time during the Term for the Aircraft, remove any Part of such
Aircraft, provided, that (i) such Part is in addition to, and not in
replacement or substitution for, any Part originally incorporated or installed
in or attached to, or delivered with, the Aircraft on the Delivery Date or any
Part in replacement of, or substitution for, any such originally incorporated,
installed, attached or delivered Part, (ii) such Part is not required to be
incorporated or installed in or attached or added to the Aircraft pursuant to
the terms of Section 6 or this Section 9 or to maintain the insurance required
by Section 12 and (iii) such Part can be removed from the Aircraft without
causing any material damage thereto and without diminishing or impairing the
value, utility, remaining useful life, condition or airworthiness which the
Aircraft would have had at such time had such alteration, modification or
addition not occurred. Upon the removal by Lessee of any such Part as provided
in the preceding sentence, title thereto shall, without further act, vest in
Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) and
such Part shall no longer be deemed part of the Aircraft (such a part is herein
called a "Removable Part"). Any Part not removed by Lessee as above provided
prior to the return of the Aircraft to Lessor
- 50 -
56
hereunder, whether pursuant to Section 16, Section 18 or otherwise, shall
remain the property of Lessor (provided that, so long as the Foreign Lease
Agreement is in effect, title to such Parts shall remain with Foreign Lessor).
If any Removable Part is (i) owned by any third party and
leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee), (ii) sold to Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) subject to a conditional sale contract or other security
interest or (iii) leased to Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) pursuant to a lease which is subject to a security
interest in favor of any third party, then Lessor will not acquire or claim, as
against such lessor, conditional vendor or secured party, any right, title or
interest in any such Removable Part as the result of such Removable Part being
installed on the Aircraft; provided, however, that (A) Lessor's inability to so
acquire or claim is subject to the express condition that such lessor,
conditional vendor, or secured party shall have agreed in writing (which
agreement may be contained in the lease, conditional sale agreement or security
agreement) not to acquire or claim, as against Lessor, any right, title or
interest in the Aircraft, or any Part other than its interest in such Removable
Part by reason of such Removable Part being installed thereon, and (B) any
Removable Part not removed by Lessee upon the termination or expiration of this
Lease, at such time, shall become the property of Lessor or Foreign Lessor, as
the case may be, and be subject to this Lease, and provided, further, that (1)
if removal of any such Part shall affect the operation of the Aircraft in any
way whatsoever, Lessee shall replace such Part with an owned Part of the same
value, utility and remaining useful life and (2) Lessee shall repair any
unsightly area of the Aircraft as a result of such removal and make all other
repairs which are advisable and result from such removal.
In the event Lessee (or, if a Permitted Sublease is in effect,
a Permitted Sublessee) replaces a Part which is not required to be replaced
under Section 9(a) or 9(b) hereof, Lessee (or, if a Permitted Sublease is in
effect, a Permitted Sublessee) may remove the replacement Part so long as it
reinstalls the original Part and such original Part is free and clear of all
Liens, other than Permitted Liens, is in at least the same modification status
and service bulletin accomplishment status, is fully interchangeable as to
form, fit and function, has been overhauled, repaired and inspected by an
agency acceptable to the FAA or other Governmental Entity having jurisdiction,
and is in as good operating condition as, and has a utility, remaining useful
- 51 -
57
life and a value at least equal to that of such Part when it was removed from
the Aircraft.
Notwithstanding any other provision hereof, and without
limiting the foregoing, Lessee (or, if a Permitted Sublease is in effect,
Permitted Sublessee) may install in the Aircraft audio visual, entertainment or
telephonic equipment (including seats with such equipment installed therein)
(any or all of which are hereafter referred to as "Excluded Property") in the
ordinary course of business, and Lessor shall not claim or acquire title
thereto and the rights of the owners thereof therein shall not constitute a
default hereunder; provided that (i) any such Excluded Property shall be
removed prior to the date of a Return Occasion without causing any damage to
the Aircraft and without diminishing or impairing the value, utility, remaining
useful life or condition which the Aircraft would have had at such time had
such Excluded Property not been installed, (ii) any equipment or seats which
such Excluded Property replaces shall be properly stored with the interests of
Lessor and, if the Lien of the Indenture is in effect, the Indenture Trustee,
duly noted thereon and acknowledged by any applicable bailee or warehouse, and
properly reinstalled on the Aircraft prior to the date of a Return Occasion,
and (iii) Lessee (or such Permitted Sublessee) shall make all repairs which are
required as a result of such removal and/or reinstallation.
In no event shall Lessor bear any liability or cost for any
alteration, modification, or addition, or for any grounding or suspension of
certification of the Aircraft, or for any loss of revenue arising therefrom.
(c) Pooling. Any Part removed from the Airframe or either
Engine as provided in Section 9(a) may so long as no Default or Event of
Default shall have occurred and be continuing or would result therefrom be
subjected by Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) to a normal pooling arrangement customary in the airline industry of
which Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee)
is a part entered into in the ordinary course of Lessee's or such Permitted
Sublessee's business, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Aircraft in accordance with
Section 9(a) as promptly as possible, and in any event within sixty (60) days,
after the removal of such removed Part. In addition, any Replacement Part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 9(a) may be owned by another Person subject to such
- 52 -
58
a normal pooling agreement; provided, however, that Lessee (or, if a Permitted
Sublease is in effect, a Permitted Sublessee), at its own expense, as promptly
thereafter as possible, and in any event within sixty (60) days, either (i)
causes title to such replacement Part to vest with Lessor (or, so long as the
Foreign Lease Agreement is in effect, Foreign Lessor) in accordance with
Section 9(a) (and to be subjected to the Lien of the Indenture if it has not
been discharged) by Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) acquiring title thereto for the benefit of Lessor (or, so
long as the Foreign Lease Agreement is in effect, Foreign Lessor) free and
clear of all Liens except Permitted Liens, whereupon such replacement Part
shall become subject to this Lease and the Lien of the Indenture (if in effect)
without the necessity for any further act, document or notice, or (ii) replaces
such replacement Part by incorporating or installing in or attaching to the
Aircraft a further replacement Part owned by Lessee (or, if a Permitted
Sublease is in effect, a Permitted Sublessee) free and clear of all Liens other
than Permitted Liens and by causing title to such further replacement Part to
vest in Lessor (or, so long as the Foreign Lease Agreement is in effect,
Foreign Lessor) as above provided and to be subjected to the Lien of the
Indenture if it has not been discharged, whereupon such replacement Part shall
become subject to this Lease and the Lien of the Indenture (if in effect)
without the necessity for any further act, document or notice.
Section 10. General Tax Indemnity.
(a) Indemnity. Lessee agrees that each payment of Rent shall
be free and clear of, and without deduction for, any and all withholdings on
account of Taxes of any nature whatsoever, whether or not an exclusion pursuant
to Section 10(b) applies, except as required by law. If any such deduction or
withholding of Taxes is required with respect to Rent, Lessee shall pay an
additional amount of Rent such that the net amount actually received by each
Indemnitee, after such deduction or withholding, will be equal to all such
amounts that would be received by such Indemnitee if no such deduction or
withholding had been required. If Lessee pays any withholding Tax to any
Indemnitee (or to any taxing authority for the account of any such Indemnitee)
as a result of the application of the preceding sentence with respect to any
withholding Tax which is an excluded tax in respect of such Indemnitee pursuant
to Section 10(b), then such Indemnitee (or, in the case of Taxes imposed on the
Owner Trustee, the Owner Participant to the extent the exclusion pursuant to
Section 10(b) is by
- 53 -
59
reason of the place of organization or business, or activities of, or is
otherwise attributable to, the Owner Participant or any of its related
Indemnitees (other than the Owner Trustee)), shall reimburse Lessee for such
withholding Tax within 30 days of written notice accompanied by evidence of
payment for such withholding Taxes (exclusive of interest, penalties and
additions to Tax) paid by Lessee. Except as provided in Section 10(b), Lessee
agrees to pay, and to indemnify and hold each Indemnitee harmless from, any and
all Taxes, howsoever levied or imposed, whether levied or imposed upon or with
respect to or asserted against any Indemnitee, Lessee, the Aircraft, the
Airframe, any Engine or any Part thereof or interest therein, or otherwise by
any Federal, state or local government or taxing authority in the United States
of America or by any foreign government or any taxing authority or governmental
subdivision of a foreign country or of a territory or possession of the United
States (each such governmental subdivision or taxing authority referred to as a
"Taxing Authority"):
(i) upon or with respect to, based upon or measured
by (A) the Aircraft, the Airframe, any Engine or any Part thereof, or
interest therein, (B) the manufacture, purchase, ownership, delivery,
leasing, acceptance, rejection, assigning, possession, use, operation,
location, settlement of any insurance claim, sale, mortgaging,
pledging, financing, subleasing, rental, retirement, abandonment,
registration, re-registration, preparation, installation,
modification, repair, maintenance, replacement, transportation,
storage, transfer of title, return or other disposition of the
Aircraft, the Airframe, any Engine or any Part thereof or interest
therein; or (C) the rentals, receipts, income or earnings arising
therefrom (including without limitation the Rent),
(ii) upon or with respect to the Operative Documents
(including the Equipment Notes), any interest in any thereof, or any
future amendment, supplement, waiver or consent thereto requested by
Lessee with respect to any thereof, or the execution, delivery, or
performance of any thereof, or the acquisition or subsequent transfer
thereof or the issuance of the Equipment Notes or any other document
executed and delivered in connection with the consummation or
confirmation of the transactions contemplated by the Operative
Documents or any Indemnitee's interest in any of the foregoing, or the
execution, amendment, supplement, issuance, reissuance, refinancing or
delivery of any of the foregoing,
- 54 -
60
(iii) the Trust Indenture Estate or the property, or
the income or other proceeds received with respect to the property,
held by the Indenture Trustee under the Indenture,
(iv) the payment of the principal of, or interest or
premium on, or other amounts payable with respect to the Equipment
Notes, whether as originally issued or pursuant to any refinancing,
modification or reissuance or any other obligation evidencing any new
loan, or
(v) otherwise with respect to or in connection with
the transactions contemplated by the Operative Documents.
(b) Exclusions. The following Taxes shall not be subject to
indemnification under subsection (a) of this Section 10:
(i) In the case of any Indemnitee, any Taxes imposed
by the Federal government of the United States of America upon or with
respect to, based on or measured by, the gross or net income,
receipts, capital, or net worth, franchises, excess profits or conduct
of business of such Indemnitee (other than Taxes included in the
calculation of an after-tax payment, Covered Income Taxes described in
subsection (c) of this Section 10, or Taxes in the nature of sales or
use Taxes, license Taxes, value-added Taxes or property Taxes),
(ii) In the case of any Indemnitee, Taxes on, based
on, or measured by the gross or net income, receipts, capital, or net
worth, franchises, excess profits or conduct of business of such
Indemnitee (including minimum taxes, withholding taxes and taxes on or
measured by any items of tax preference), imposed by any foreign,
state or local government or taxing authority (other than Taxes
included in the calculation of an after-tax payment, Taxes in the
nature of sales Taxes, use Taxes, property Taxes, value-added Taxes or
rental Taxes, and Covered Income Taxes described in subsection (c) of
this Section 10),
(iii) In the case of any Indemnitee, Taxes which are
the direct result of gross negligence or willful misconduct of such
Indemnitee,
- 55 -
61
(iv) In the case of any Indemnitee, any Taxes
imposed as a result of a voluntary or involuntary bankruptcy of such
Indemnitee (other than, in the case of Owner Trustee, as a result of
the occurrence of an Event of Default) or any voluntary sale, transfer
of title, transfer or other disposition by such Indemnitee or a
related Indemnitee (for such purpose, Owner Trustee and Owner
Participant are related Indemnitees with respect to each other) of the
Aircraft, the Airframe, any Engine or any Part thereof or interest
therein, or any interest in the Rent or part thereof or any interest
in the Operative Documents or part thereof, unless such sale, transfer
or disposition occurs in connection with (y) an Event of Default and
the exercise by any Indemnitee of its remedies under the Lease or the
Indenture, as the case may be, and (z) the substitution, pooling or
interchange of the Aircraft, the Airframe, any Engine or any Part
pursuant to the terms of the Lease; provided, however, that in all
cases Owner Participant and Owner Trustee shall consider in good faith
such request as Lessee shall make concerning the appropriate
jurisdiction in which such sale, transfer or disposition shall be
made,
(v) Taxes imposed as a result of a transferee of
such Indemnitee of any interest in the Aircraft, the Airframe, any
Engine or any Part or any interest in the Operative Documents being a
foreign entity or not having its principal office in the United
States,
(vi) Any interest, penalties, fines and additions to
tax imposed on an Indemnitee (other than Taxes that are due and
payable with a return when properly filed) resulting from such
Indemnitee's failure to file returns that are timely and proper,
provided such failure was not attributable to such Indemnitee
contesting any claim in accordance with this Section 10 or to a
failure by Lessee to satisfy its obligations related to such return,
(vii) Taxes imposed on an Indemnitee as a result of
a breach of its representations, warranties or covenants contained in
Sections 9(a), 9(b)(11), 9(c), 12, or 16 of the Refunding Agreement or
Section 21(f) of this Agreement in any material respect or from a
failure by an Indemnitee to fulfill its contest obligations,
- 56 -
62
(viii) So long as no Event of Default shall have
occurred and be continuing, Taxes attributable to the Aircraft related
to acts or events occurring after the later of the termination of the
Lease and the redelivery of the Aircraft, and
(ix) In the case of the Indenture Trustee, Taxes
imposed with respect to the Equipment Notes as a result of activities
of such Indemnitee unrelated to the transactions contemplated by the
Operative Documents.
Notwithstanding anything to the contrary contained in this
Section 10, the provisions of this Section 10(b) shall not apply to, and Lessee
shall hold each Indemnitee harmless against, and indemnify each Indemnitee on
an after-tax basis (as provided under Section 10(e)) for, any Taxes imposed by
any Taxing Authority in connection with or relating to the transactions
undertaken pursuant to the Japanese Financing Documents (and any other
documents or agreements relating thereto unless such documents or agreements
are or relate solely to Operative Documents other than the Japanese Financing
Documents) including, without limitation, sales Taxes, value-added Taxes and
any Taxes required to be withheld and paid over to the United States Federal
government pursuant to Subtitle A of the 1986 Code or any successor provisions
with respect to any amounts paid or deemed to be paid to the Japanese Lessor by
any Indemnitee pursuant to the Japanese Financing Documents, but excluding any
net income taxes payable to the United States Federal government or any state
or local Taxing Authority as a consequence of a determination that the Lease is
not a true lease for Federal income tax purposes.
(c) Covered Income Tax. For purposes of clauses (i) and (ii)
of subsection (b) of this Section 10, a Covered Income Tax includes:
(i) any Tax based on or measured by gross or net
income, capital or net worth, franchises, excess profits or conduct of
business imposed on an Indemnitee by a Taxing Authority in or of any
foreign jurisdiction or a territory or possession of the United
States, other than any such Tax which would not have been imposed in
the absence of such Indemnitee's (including for purposes of this
definition, all entities with which such Indemnitee is combined,
integrated, or consolidated in such Taxing Authority's jurisdiction)
engaging in business, maintaining an office or other place of business
or otherwise being located in such
- 57 -
63
jurisdiction (other than merely by reason of such Indemnitee's
participation in the transactions contemplated by the Operative
Documents); and
(ii) a Tax imposed by any Taxing Authority other
than the Federal government of the United States of America based on,
or measured by gross income or receipts, to the extent such Tax is
attributable to the operation or registration of the Aircraft in such
jurisdiction or to the transactions contemplated by the Operative
Documents or is the result of the activities of Lessee or any
Affiliate of either thereof in such jurisdiction, including residence.
(d) Reports and Returns. In case any report or return is
required to be made by Lessee with respect to any Taxes which are subject to
indemnification by Lessee under this Section 10, Lessee will either make such
report or return in such manner as will show the ownership of the Aircraft in
Owner Trustee or the interest of Owner Participant or its permitted assigns and
send a copy of such report or return to Owner Trustee and Owner Participant or
will notify Owner Trustee or Owner Participant of such requirement and make
such report or return in such manner as shall be reasonably satisfactory to
Owner Participant or Owner Trustee. If actual notice is given by any taxing
authority to an Indemnitee that a report or return is required to be filed with
respect to any such Taxes, the Indemnitee shall promptly notify Lessee of such
required report or return and Lessee shall either file such report or return in
the manner prescribed in the preceding sentence, or shall use its best efforts
to cause such report or return to be filed by the appropriate entity. Each
Indemnitee agrees to respond to any reasonable request of Lessee for
information not within Lessee's control and within the control of and
reasonably available to such Indemnitee with respect to the filing of any such
report or return, but Lessee agrees to pay any reasonable costs, fees,
disbursements or other charges of independent counsel or independent
accountants incurred in connection with such request.
(e) After-Tax Basis. Lessee further agrees that, with
respect to any payment or indemnity under this Section 10 and under Section 13
hereof, such payment or indemnity shall include the net amount necessary to
hold the recipient of the payment or indemnity harmless on an after-tax basis
from all Taxes required to be paid or credited by such recipient with respect
to such payment or indemnity under the laws of any Taxing Authority; provided,
however, that in
- 58 -
64
the case of federal income taxes imposed on Owner Participant, such Taxes shall
be calculated on the basis of the assumption that Owner Participant shall be
subject to the highest federal corporate income tax rate applicable to Owner
Participant in the year of payment.
(f) Tax Benefit. If, by reason of any payment made to or for
the account of an Indemnitee by Lessee pursuant to this Section 10 or Section
13 hereof, such Indemnitee subsequently actually realizes a tax deduction or
credit (including foreign tax credit and any reduction in Taxes) not previously
taken into account in computing the amount of such payment, such Indemnitee
shall promptly pay to Lessee, but only if there shall then be no Lease Event of
Default and if Lessee shall have made all payments then due and owing to such
Indemnitee under the Operative Documents, an amount equal to the sum of (A) the
actual reduction in Taxes, if any, realized by such Indemnitee which is
attributable to such deduction or credit and (B) the actual reduction in Taxes
realized by such Indemnitee as a result of any payment made by such Indemnitee
pursuant to this sentence; provided, however, that such Indemnitee shall not be
obligated to make any payment pursuant to this Section 10 or Section 13 hereof
to the extent that the amount calculated pursuant to (A) above would exceed (x)
the amount of all prior payments by Lessee to such Indemnitee, pursuant to this
Section 10 or Section 13 hereof, net of any amount paid in respect of Taxes
required to be paid by such Indemnitee in respect of the receipt or accrual of
such amounts received by such Indemnitee from Lessee, less (y) the portion of
all prior payments computed pursuant to (A) above by such Indemnitee to Lessee
hereunder.
(g) Payment If a claim is made against any Indemnitee for
any Taxes which may be subject to indemnification by Lessee hereunder and if
such Indemnitee has notice thereof, such Indemnitee shall promptly notify
Lessee; provided that the failure to provide such notice shall not release
Lessee from any of its obligations hereunder except to the extent Lessee's
right to contest such claim is precluded thereby. Any amount payable as an
indemnity to any Indemnitee or any amount payable to Lessee pursuant to this
Section 10 is to be paid to such party directly, in immediately available
funds, within thirty (30) days after receipt of a written demand therefor from
such Indemnitee or Lessee, as the case may be, except in the case of a payment
to an Indemnitee to the extent that such Taxes are being contested in good
faith pursuant to this Section 10, in which event the payment of such indemnity
shall be made by the due date for the payment of any Taxes
- 59 -
65
that are the subject of such contest taking into account all extensions of the
due date that are available as a result of the contest. In the event an
Indemnitee makes a tax payment with respect to any such Taxes (other than with
funds advanced to such Indemnitee on an interest-free basis by Lessee pursuant
to this Section 10), Lessee shall reimburse the amount of such payment and also
shall pay to the Indemnitee interest on the amount of such payment by such
Indemnitee at the Interest Rate from the date of any such payment by such
Indemnitee to the date of such reimbursement by Lessee to the Indemnitee
hereunder. In the event an amount is payable to Lessee under this Section 10,
the Indemnitee owing such amount shall pay interest on such amount at the
Interest Rate from the date of receipt by such Indemnitee of any amount giving
rise to such obligation to pay Lessee until the date of payment to Lessee.
(h) Contest. If reasonably requested by Lessee in writing,
an Indemnitee shall upon receipt of an indemnity reasonably satisfactory to it
and at the sole expense of Lessee (including, without limitation, payment on
demand of all out-of-pocket costs, expenses, additions to tax because of
underpayments of estimated Taxes, losses, legal and accounting and
investigatory fees and disbursements, penalties, and interest) in good faith
contest or shall permit Lessee, if desired by Lessee and such contest may be
conducted in the name of Lessee without involving Taxes of such Indemnitee not
indemnified hereunder, to contest in the name of Lessee and/or the Indemnitee,
the validity, applicability or amount of such Taxes by (x) resisting payment
thereof if practicable, (y) not paying the same except under protest, if
protest is necessary and proper, and (z) if payments be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings; provided, however, that, in each such instance, such proceedings
do not involve any substantial risk or danger of the sale, forfeiture or loss
of the Aircraft, and provided further that the Indemnitee shall have the right
to forego administrative proceedings with respect to the claim and contest the
claim in an appropriate court of its choosing and provided further that the
Indemnitee shall not be required to undertake or allow in its name or on its
behalf any contest unless the following conditions are satisfied:
(i) no Event of Default has occurred and is
continuing,
(ii) the amount of such Taxes shall be at least
$50,000,
- 60 -
66
(iii) in the event an administrative proceeding is
to be appealed in a judicial proceeding, as for the first level of
judicial proceeding, Lessee shall have provided the Indemnitee with an
opinion of legal counsel selected by the Indemnitee and reasonably
acceptable to Lessee ("Tax Counsel") to the effect that a reasonable
basis exists to contest such claim (which opinion shall be obtained at
Lessee's sole cost and expense),
(iv) if such contest is to be initiated by the
payment of, and the claiming of a refund for, such Taxes, Lessee shall
have advanced or caused to be advanced to such Indemnitee sufficient
funds (on an interest-free basis) to make such payments and shall have
agreed to indemnify such Indemnitee against any adverse tax
consequences of such advance, and
(v) in the event a judicial decision is to be
appealed, the amount of such Taxes is at least $150,000 and the
Indemnitee shall have received an opinion of Tax Counsel (which
opinion shall be obtained at Lessee's sole expense) to the effect that
it is more likely than not that the Indemnitee will prevail, and in
the event that the subject matter of the contest is of a continuing
nature and has previously been decided adversely pursuant to the
contest provisions of this Section 10, there has been a change in the
law (including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after such
claim shall have been so previously decided and such Indemnitee shall
have received an opinion of Tax Counsel, which opinion shall be
obtained at Lessee's sole expense, to the effect that, as a result of
such change other than a change in statutory law, it is more likely
than not that the position which such Indemnitee or Lessee, as the
case may be, had asserted in such previous contest would prevail and,
in the case of a statutory change in law, it is as likely as not that
the position will prevail.
(i) Refund. If any Indemnitee shall obtain a refund of all
or any part of any Taxes paid by Lessee or from an advance by Lessee, such
Indemnitee shall pay Lessee the amount of such refund together with any
interest paid thereon attributable to the Taxes paid or advanced by Lessee less
the amount of any Taxes payable by such Indemnitee in respect of the receipt of
such refund and interest after giving credit to Lessee for any savings by such
Indemnitee in respect to any such Taxes by reason of deductions,
- 61 -
67
credits, allocations or allowances in respect of the payment of any such Taxes;
provided that such amount shall not be payable before such time as Lessee shall
have made all payments or indemnities then due to the Lessor and the Indemnitee
under the Lease and all other Operative Documents, and provided further that no
amount shall be payable during any period in which an Event of Default under
the Lease has occurred and is continuing unremedied unless this Lease has
terminated and Lessee has paid all amounts due the Lessor thereunder.
(j) Diligence. Lessee shall not be deemed to be in default
under any of the above indemnification provisions of this Section 10 so long as
Lessee or the Indemnitee shall diligently prosecute such contest in accordance
with the provisions of this Section 10. Notwithstanding the foregoing, if a
claim is made against any Indemnitee for any Taxes which, if successful, would
result in the imposition of Taxes under circumstances which would require
Lessee to indemnify such Indemnitee, the Indemnitee shall be released from its
responsibility to contest such claim, or part thereof, if it agrees in writing
not to seek indemnification from Lessee in respect of the claim, or such part
thereof to be contested. In the event an Indemnitee fails to contest, or
refuses to permit Lessee to contest, a claim or part thereof which the
Indemnitee has the obligation to contest or to permit Lessee to contest under
this Section 10, then Lessee shall not be obligated to indemnify the Indemnitee
for such claim or such part thereof.
(k) Affiliated Group. In the event that the Indemnitee is a
member of an affiliated group (within the meaning of Section 1504(a) of the
Code) which files a consolidated Federal income tax return, the term
"Indemnitee" shall mean and include such affiliated group.
Section 11. Loss, Damage and Requisition.
(a) Event of Loss with Respect to the Airframe. Subject to
the other provisions of this Section 11, upon an Event of Loss with respect to
the Airframe or the Airframe and any Engines then installed thereon, Lessee
shall forthwith (and, in any event, within five (5) Business Days after such
occurrence) give Lessor written notice of such occurrence and within thirty
(30) days after such occurrence give Lessor written notice of its election,
subject to the terms hereof and of the Indenture, to perform one of the
following two options (it being agreed that if Lessee shall not have given
Lessor notice of such election within thirty (30) days after such occurrence,
Lessee shall be deemed to
- 62 -
68
have elected to perform the option set forth in the following clause (ii)),
provided, that Lessee shall not have the right to select the option set forth
in clause (i) if a Default or an Event of Default shall have occurred and be
continuing at the time of such election or at the time of replacement or if the
Foreign Lease Agreement does not permit such replacement or requires the
payment of additional amounts thereunder (unless Lessee in its election pays
such amount due as a result thereof under the Foreign Lease Agreement):
(i) within one hundred twenty (120) days (the
"Replacement Period") after the date of the Event of Loss (but in no event
later than the last day of the Term) Lessee shall convey, or cause to be
conveyed to Lessor as provided in Section 11(c) hereof, to be subjected to the
Lien of the Indenture if it has not been discharged, and to be leased by Lessee
hereunder in replacement of the Airframe and such Engines then installed
thereon, title to (or, so long as the Foreign Lease Agreement is in effect,
beneficial ownership of) a replacement Airframe (together with the same number
of replacement Engines as the Engines), such replacement Airframe and Engines
(A) to be free and clear of all Liens (it being understood that, upon such
conveyance, such replacement Airframe and replacement Engines may be subject to
Permitted Liens), (B) to have a value, utility and remaining useful life,
determined in accordance with the Appraisal Procedure as provided in Section
11(c) hereof, at least equal to, and to be in at least as good operating
condition as, the Airframe and the Engines, if any, so replaced (assuming the
Airframe and the Engines were maintained in accordance with the requirements of
this Agreement, whether or not they are in fact so maintained), and (C) to be a
like Airbus A320-231 model aircraft with equivalent or better modification
status and, in the case of Engines, in compliance with Section 11(b); provided
that if Lessee shall not perform its obligation to effect such replacement
under this clause by the end of the Replacement Period, Lessee shall then be
deemed to have elected to comply, and shall comply, with the provisions of
clause (ii) of this Section 11(a); provided, further, that the payment
specified therein shall be deemed to have become due and payable on the
Stipulated Loss Value Date occurring on or immediately preceding the last day
of the Replacement Period. Upon compliance with the foregoing, Lessor will,
subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS,"
without recourse, representation or warranty (except a warranty that such
Airframe and Engines are free and clear of Lessor's Liens and Head Lessor's
Liens and any Lien arising out of the Foreign Lease Agreement),
- 63 -
69
all of Lessor's right, title and interest, if any, in and to the Airframe and
the Engines suffering the Event of Loss as well as all of Lessor's right, title
and interest in and to any Engine constituting part of the Aircraft and
replaced as provided above but not installed thereon at the time of the Event
of Loss. For all purposes hereof, a replacement Airframe shall be deemed part
of the property leased hereunder and shall be deemed the "Airframe" as defined
herein. No Event of Loss resulting in replacement of the Airframe or Engines
under this Section 11(a)(i) shall result in any reduction of Rent.
(ii) On a Stipulated Loss Value Date on or before one
hundred twenty (120) days after the date of the Event of Loss (but in no event
later than the last day of the Term) Lessee shall pay to Lessor in immediately
available funds the sum of (A) the Stipulated Loss Value of the Aircraft as
shown on Exhibit A for such Stipulated Loss Value Date, plus all Basic Rent or
Renewal Rent, as the case may be, payable on each Basic Rent Payment Date or
Renewal Rent Payment Date, respectively, prior to the date of payment of such
Stipulated Loss Value which has not been paid when due, plus, if such
Stipulated Loss Value Date is also a Basic Rent Payment Date or a Renewal Rent
Payment Date, the amount of Basic Rent or Renewal Rent, as the case may be,
payable by Lessee on such Stipulated Loss Value Date, and (B) all Supplemental
Rent payable, whereupon (1) the obligation of Lessee to pay Basic Rent or
Renewal Rent, as the case may be, hereunder with respect to the Aircraft for
any period commencing after the date on which such Stipulated Loss Value is
paid shall terminate; provided that Lessee shall remain liable for, and shall
pay on or before the date the Stipulated Loss Value and Supplemental Rent are
paid, all payments of Basic Rent or Renewal Rent, as the case may be, for the
Aircraft due on or before the date of such payment of Stipulated Loss Value and
Supplemental Rent, (2) the Term shall terminate with respect to such Aircraft,
and (3) Lessor will, subject to the rights of any insurers, transfer to Lessee,
"AS IS, WHERE IS," without recourse, representation or warranty (except a
warranty that such Airframe and Engines are free and clear of Lessor's Liens,
Head Lessor's Liens and Liens arising out of the Foreign Lease Agreement), all
of Lessor's right, title and interest, if any, in and to the Airframe and
Engines suffering the Event of Loss, as well as all of Lessor's right, title
and interest, if any, in and to any Engine constituting part of the Aircraft
but not installed thereon at the time of the Event of Loss.
- 64 -
70
(b) Event of Loss with Respect to an Engine. Upon an Event of
Loss with respect to an Engine only, Lessee shall give Lessor prompt written
notice thereof and shall, at its own cost and expense, within sixty (60) days
after such occurrence (but in no event later than the last day of the Term),
pay all amounts due under the Foreign Lease Agreement as a result thereof and
convey or cause to be conveyed to Lessor as replacement for the Engine
suffering an Event of Loss, title to (or so long as the Foreign Lease Agreement
is in effect, beneficial ownership of) another IAE Model V2500 engine of like
model and equivalent or better modification status or, at Lessee's option, an
IAE engine of an improved model, in each such case which has a value, remaining
useful life and utility determined in accordance with the Appraisal Procedure
at least equal to such Engine and is suitable for installation and use on the
Airframe without diminishing the value, remaining useful life or utility of
such Airframe, free of all Liens (it being understood that, upon such
conveyance, such replacement Engine may be subject to Permitted Liens) and
being in as good operating condition as (including no greater number of cycles
or hours than) the Engine being replaced assuming the Engine being replaced was
serviceable and otherwise in the condition and repair required by the terms
hereof immediately prior to the Event of Loss. Prior to or at the time of any
such conveyance, Lessee, at its own cost and expense, will (i) furnish Lessor
(or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) with
a full warranty ▇▇▇▇ of sale, in form and substance reasonably satisfactory to
Lessor and Indenture Trustee, as applicable, with respect to such Replacement
Engine; (ii) cause supplements, in form and substance reasonably satisfactory
to Lessor and Indenture Trustee (if the Lien of the Indenture has not been
discharged), subjecting such replacement Engine to this Lease, the Indenture
(if in effect), the Foreign Lease Agreement (if then in effect) and the Trust
Agreement (if in effect), to be duly executed by Lessee, if applicable, and
duly filed for recordation pursuant to the Federal Aviation Act; (iii) furnish
Lessor and Indenture Trustee (if the Lien of the Indenture has not been
discharged) with such evidence of title to or, so long as the Foreign Lease
- 65 -
71
Agreement is in effect, beneficial ownership of such Replacement Engine and of
compliance with the insurance provisions of Section 12 hereof with respect to
such Replacement Engine as Lessor or Indenture Trustee (if the Lien of the
Indenture has not been discharged) may reasonably request; (iv) furnish Owner
Participant, Lessor and Indenture Trustee (if the Lien of the Indenture has not
been discharged) with an opinion of Lessee's counsel addressed to such parties
and to Lessor to the effect that title to or, so long as the Foreign Lease
Agreement is in effect, beneficial ownership of such Replacement Engine has
been duly conveyed to Lessor free and clear of all Liens (except Permitted
Liens), and is duly leased hereunder and under the Foreign Lease Agreement (if
in effect), and subject to the Lien of the Indenture (if it has not been
discharged); (v) furnish a certificate signed by a Responsible Officer of
Lessee certifying that, upon consummation of such replacement, no Default or
Event of Default will exist hereunder; (vi) furnish such documents and evidence
with respect to Lessee, Lessor or Indenture Trustee (if the Lien of the
Indenture has not been discharged), as such parties or their respective counsel
may reasonably request in order to establish the consummation of the
transactions contemplated by this Section 11(b), the taking of all corporate
proceedings in connection therewith and compliance with the conditions set
forth in this Section 11(b), in each case in form and substance satisfactory to
such party; (vii) furnish such Uniform Commercial Code financing statements
covering the Replacement Engine as may be requested by Lessor or Indenture
Trustee (if the Lien of the Indentures has not been discharged); (viii) furnish
Owner Participant, at Lessee's election, with (x) an opinion of tax counsel
mutually satisfactory to Owner Participant and Lessee and which opinion is
reasonably satisfactory to Owner Participant to the effect that such
replacement will have no adverse tax consequences to Lessor and Owner
Participant or (y) an indemnity for any adverse tax consequences to Lessor and
Owner Participant; and (ix) furnish the appraisal referred to above. Upon full
compliance by Lessee with the terms of this Section 11(b), Lessor will, subject
to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS" without
recourse, representation or warranty (except a warranty that such Engine is
free and clear of Lessor's Liens, Head Lessor's Liens and any Lien arising out
of the Foreign Lease Documents), all of Lessor's right, title and interest, if
any, in the Engine which suffered the Event of Loss. For all purposes hereof,
each such Replacement Engine shall be deemed an "Engine" as defined herein and
shall be deemed part of the same Aircraft as was the Engine replaced thereof.
No Event of Loss covered by this Section 11(b) shall result in any reduction in
Rent.
(c) Conveyance of Replacement Airframe. Prior to or at the
time of any conveyance of a replacement Airframe pursuant to Section 11(a)
above, Lessee, at its own cost and expense, will furnish Lessor with the
following documents which shall have been duly authorized, executed and
delivered by the respective parties thereto and shall be in full force and
effect on said date: (i) a full warranty ▇▇▇▇
- 66 -
72
of sale, in form and substance satisfactory to Owner Participant and Indenture
Trustee (if the Lien of the Indenture has not been discharged), and an AC Form
8050-2 ▇▇▇▇ of Sale (or such other form of ▇▇▇▇ of sale as may be approved by
the FAA on said date), executed by the owner thereof, in favor of Lessor (or,
so long as the Foreign Lease Agreement is in effect, Foreign Lessor) and, cause
supplements, reasonably satisfactory to Owner Participant and Indenture Trustee
(if the Lien of the Indenture has not been discharged), to this Lease, the
Foreign Lease Agreement (if then in effect), the Indenture (if then in effect)
and the Trust Agreement (if then in effect), with respect to such replacement
Airframe and to be duly filed for recordation pursuant to the Federal Aviation
Act or other applicable Governmental Entity; (ii) the certificate specified in
Section 12(f) hereof demonstrating compliance with the insurance requirements
of Section 12 with respect to the replacement Airframe and Engines; (iii) an
opinion (addressed to Indenture Trustee, Lessor, and Owner Participant) of
Lessee's counsel (and such other evidence of title as Owner Participant or
Indenture Trustee (if the Lien of the Indenture has not been discharged) may
reasonably request) to the effect that, upon such conveyance, Lessor will
acquire good title to, or, so long as the Foreign Lease Agreement is in effect,
beneficial ownership of, such replacement Airframe free and clear of all Liens
(it being understood that, upon such conveyance, such replacement Airframe may
be subject to Permitted Liens), that such replacement Airframe will be leased
hereunder and under the Foreign Lease Agreement (if then in effect) to the same
extent as the Airframe replaced thereby and will be subject to the Lien of the
Indenture (if it has not been discharged) and that Lessor and Indenture
Trustee, as the assignee of Lessor, is entitled to the benefits of Section 1110
of Title 11 of the United States Code with respect to such replacement airframe
and engines to the same extent as with respect to the Airframe and Engines then
installed thereon prior to such replacement; (iv) a certificate signed by a
Responsible Officer of Lessee certifying that, upon consummation of such
replacement, no Default or Event of Default will exist hereunder; (v) such
documents and evidence with respect to Lessee, Owner Participant or Indenture
Trustee (if the Lien of the Indenture has not been discharged), as such parties
or their respective counsel may reasonably request in order to establish the
consummation of the transactions contemplated by this Section 11(c), the taking
of all corporate proceedings in connection therewith and compliance with the
conditions set forth in this Section 11(c), in each case in form and substance
satisfactory to each such party, including evidence that the Aircraft of
- 67 -
73
which the replacement Airframe is a part has been duly certificated by the FAA
as to type and airworthiness in accordance with the terms of this Lease and
application for registration of such replacement Airframe in the name of Lessor
has been duly made with the FAA or other applicable Governmental Entity and
Lessee has temporary or permanent authority to operate the replacement
Airframe; (vi) furnish such Uniform Commercial Code financing statements
covering the replacement Airframe as may be requested by Lessor or Indenture
Trustee, (vii) furnish Owner Participant with an opinion of tax counsel
mutually satisfactory to Owner Participant and Lessee and which opinion is
reasonably satisfactory to Owner Participant to the effect that such
replacement will have no adverse tax consequences to Lessor and Owner
Participant; and (viii) an appraisal prepared in accordance with the Appraisal
Procedure which confirms that the replacement Airframe and any replacement
Engine has a value, utility and remaining useful life at least equal to that of
the Airframe and Engines which suffered the Event of Loss assuming that the
same were maintained in accordance with the requirements of this Lease whether
or not they are in fact so maintained. Upon full compliance by Lessee with the
terms of this Section 11(c), Lessor will, subject to the rights of any
insurers, transfer to Lessee "AS IS, WHERE IS," without recourse,
representation or warranty (except a warranty that such Airframe is free and
clear of Lessor's Liens, Head Lessor's Liens and any Lien arising out the
Foreign Lease Documents), all of Lessor's right, title and interest in and to
the Aircraft which suffered the Event of Loss. No Event of Loss with respect
to the Aircraft under the circumstances contemplated by the terms of this
Section 11(c) shall result in any reduction in Rent.
For all purposes of this Lease, each such replacement Aircraft
(together with any Engines constituting part of the Aircraft being replaced as
to which an Event of Loss has not occurred) shall be deemed part of the
property leased hereunder and shall be deemed the "Aircraft" as defined herein.
(d) Application of Proceeds and Payments. Any payments
received at any time by Lessor or by Lessee from any insurer with respect to an
Event of Loss shall be applied in the manner specified in Sections 12(c) and
(e) hereof. Subject to Section 11(f) below, any payments (other than insurance
proceeds) received at any time by Lessor or Lessee from any Governmental Entity
or other Person with respect to an Event of Loss will be applied as follows
(after reimbursement of Lessor, Indenture Trustee and Owner
- 68 -
74
Participant for their reasonable out-of-pocket costs and expenses):
(i) unless clause (ii) below is applicable, so much
of such payments as shall not exceed the Stipulated Loss Value required to be
paid by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to
Lessor in reduction of Lessee's obligation to pay such Stipulated Loss Value if
not already paid by Lessee, or, if already paid by Lessee, shall (unless a
Default or an Event of Default shall have occurred and be continuing) be
applied by Lessor to reimburse Lessee for its payment of such Stipulated Loss
Value and the balance, if any, of such payment remaining thereafter shall be
paid over to, or retained by, Lessor; or
(ii) if such payments are received as a result of an
Event of Loss with respect to the Airframe or an Engine which is being replaced
pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall
be paid over to, or retained by, Lessee if Lessee shall have fully performed
or, concurrently therewith fully performs, the terms of Sections 11(a)(i) and
(c) or Section 11(b) hereof, as the case may be, and of Section 15 hereof with
respect to the Event of Loss for which such payments are made and if no Default
or Event of Default shall have occurred and be continuing.
(e) Requisition for Use by Government with Respect to the
Aircraft. Subject to Section 11(f) below, in the event of the requisition for
use by a Governmental Entity of the Aircraft, the Airframe or an Engine (other
than a requisition constituting an Event of Loss), Lessee shall promptly notify
Lessor and Indenture Trustee (if the Lien of the Indenture has not been
discharged) thereof and all of Lessee's obligations under this Lease with
respect to such Airframe or Engine shall continue to the same extent as if such
requisition had not occurred. All payments received by Lessor or Lessee from
the Governmental Entity for the use of such Airframe or Engine during the Term
shall be paid over to, or retained by, Lessee if no Default or Event of Default
shall have occurred and be continuing; and all other payments received by
Lessor or Lessee from the Governmental Entity shall be paid over to, or
retained by, Lessor. If the Airframe and such Engines or engines are not
returned by the end of the Term, an Event of Loss shall be deemed to have
occurred on the last day of the Term and, on the last day of the Term, Lessee
shall either pay to Lessor the amount provided herein for an Event of Loss to
the Airframe and such Engines or engines on such date or provide a replacement
Aircraft and Engine on such date in the
- 69 -
75
condition provided for in Section 16. In the event of the requisition for use
by the Governmental Entity of any Engine without the requisition for use of the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 11(b) to the same extent as if an Event of Loss had occurred with
respect to such Engine, and thereafter any payments received by Lessor or
Lessee from the Governmental Entity with respect to such requisition shall be
paid over to, or retained by, Lessee.
(f) Application in Default. Any amount referred to in clause
(i) or (ii) of Section 11(d) or Section 11(e) which is otherwise payable to
Lessee shall not be paid to Lessee, or, if it has been previously paid to or
retained by Lessee, shall be paid by Lessee to Lessor, if at the time of such
payment or retention a Default or an Event of Default shall have occurred and
be continuing. In such case, all such amounts shall be paid to and held by
Indenture Trustee so long as the Lien of the Indenture shall not have been
discharged and thereafter by Lessor as security for the obligations of Lessee,
or, at the option of Lessor or the Indenture Trustee, as the case may be,
applied by Lessor or the Indenture Trustee, as the case may be, toward payment
of any of Lessee's obligations at the time due hereunder, as Lessor or the
Indenture Trustee, as the case may be, may elect, including, without
limitation, by reason of this Lease being declared or deemed in default. At
such time as there shall not be continuing any such Event of Default or
Default, all such amounts at the time held by Lessor or Indenture Trustee in
excess of the amount, if any, which Lessor or Indenture Trustee has elected for
application as provided above, shall be paid to Lessee.
Section 12. Insurance.
(a) Public Liability and Property Damage Insurance. Lessee
will carry and maintain in effect, or cause to be carried and maintained in
effect, at its own cost and expense, with Approved Insurers, comprehensive
aircraft and general public liability insurance (including, without limitation,
contractual liability, liability war risk and passenger legal liability but
excluding manufacturer's product liability insurance), and property damage
insurance with respect to the Aircraft, in an amount not less than three
hundred fifty million dollars ($350,000,000), combined single limit, per
occurrence or such higher amount, and of such type and terms, as are
customarily carried by prudent Certificated Air Carriers, similarly situated to
Lessee, operating aircraft of similar size and engines and as hereinafter
provided. Each and any
- 70 -
76
policy of insurance carried in accordance with this Section 12(a), and each and
any policy obtained in substitution or replacement for any of such policies,
(i) shall designate Lessor (in both its individual and trustee capacity), Owner
Participant, Indenture Trustee (in both its individual and trustee capacity)
Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and
their respective permitted assigns, as additional insureds as their interests
may appear (but without imposing upon any such Person any obligation imposed
upon the insured, including, without limitation, the liability to pay any
premiums for any such policies), (ii) shall expressly provide that, in respect
of the interests of Lessor, Owner Participant, Indenture Trustee, Foreign
Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and their
respective permitted assigns, in such policies, the insurance shall not be
invalidated as to an insured by any act or omission of Lessee or any other
insured and shall insure Lessor, Owner Participant, Indenture Trustee and the
other Indemnitees and their respective permitted assigns, regardless as to any
insured of any breach or violation by Lessee or any other insured of any
warranty, declaration or condition contained in such policies, (iii) shall
provide that if such insurance is cancelled for any reason whatsoever, or is
changed in any adverse way with respect to the interests of Lessor, Owner
Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender
and the other Indemnitees or if such insurance is allowed to lapse for
non-payment of premium, such cancellation, change or lapse shall not be
effective as to Lessor, Owner Participant, Indenture Trustee, Foreign Lessor,
Foreign Lessee, Foreign Lender and the other Indemnitees, and their respective
permitted assigns, until thirty (30) days, in each instance (seven (7) days or
such lesser period of time as is customarily available at the time in the case
of any war risk and allied perils coverage), after notice to Lessor, Owner
Participant, Indenture Trustee from such insurer or insurers, of such
prospective cancellation, change or lapse provided, however, that if any such
notice period is not reasonably obtainable, such policies shall provide for as
long a period of prior notice as shall then be reasonably obtainable, (iv)
shall include coverage for any country in or over which the Aircraft is located
or operated, and (v) shall provide that, as against Lessor, Owner Participant,
Indenture
- 71 -
77
Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other
Indemnitees, and their respective permitted assigns, each insurer shall waive
any rights of set-off, counterclaim or any other deduction, whether by
attachment or otherwise, and waives any rights it may have to be subrogated to
any right of any insured against Lessor, Owner Participant, Indenture Trustee,
Foreign Lessor, Foreign Lessee, Foreign Lender or the other Indemnitees, or
their respective permitted assigns, with respect to the Aircraft. Each
liability policy shall be primary without right of contribution from any other
insurance which may be carried by Lessor, Owner Participant, Indenture Trustee,
Foreign Lessor, Foreign Lessee, Foreign Lender or the other Indemnitees, or
their respective permitted assigns, and shall expressly provide that all of the
provisions thereof shall operate in the same manner as if there were a separate
policy covering each insured, provided, that such policies shall not operate to
increase the insurer's limit of liability. Lessee shall cause its insurers to
agree that the indemnity and hold harmless provisions of Section 13 are insured
as a contractual assumption of liability by Lessee's insurers, subject to the
terms, coverage, conditions, limitations and exclusions of the policy of
insurance. Without limiting the foregoing, the type and amount of the
insurance carried by Lessee hereunder shall be no less in amount and no less
comprehensive or favorable to Lessor, Owner Participant, Indenture Trustee and
the other Indemnitees then that carried by Lessee with respect to other
A320-231 aircraft or similar-size aircraft owned or leased by Lessee.
(b) Insurance Against Loss or Damage. Lessee, at its own
expense, will maintain in effect, or cause to be carried and maintained in
effect, with Approved Insurers "all-risk" ground and flight aircraft hull
insurance (which shall include, but not be limited to, hijacking, a
disappearance clause and coverage against strikes, riots, commotions or labor
disturbances, air piracy, malicious acts or acts of sabotage and unlawful
seizure or wrongful exercise of control of the Aircraft in flight by a person
on board such Aircraft acting without the consent of Lessee) covering the
Aircraft, and "all-risk" coverage including transit insurance with respect to
Engines and Parts while not installed on such Aircraft or an aircraft, which in
each case considering all policy terms, limitations and exclusions is of the
type, terms and amount customarily maintained by prudent Certificated Air
Carriers similarly situated to Lessee and operating similar size aircraft and
engines and as hereinafter provided. Lessee shall also maintain, or cause to
be maintained, war risk and allied perils hull insurance reasonably acceptable
to Lessor with Approved Insurers if the Aircraft, Airframe or Engines are
operated on routes or kept in locations outside of the United States of
America. In addition, at least ten (10) Business Days (or, in the case of an
emergency, at least two (2) Business Days) prior to permitting the Aircraft,
Airframe or Engines to be operated or located outside of the
- ▇▇ -
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, other than in Canada or Mexico, Lessee shall notify
Lessor thereof. If Owner Participant or Indenture Trustee reasonably requests
at any time and if such insurance is then customarily being obtained by or for
Persons leasing or financing similarly-sized aircraft operating on similar
routes to operators located in the jurisdiction of Lessee's or, if a Permitted
Sublease is in effect, the Permitted Sublessee's jurisdiction of domicile,
Lessee shall pay or reimburse Lessor for political risk, repossession,
expropriation, confiscation and similar insurance as Lessor may arrange or
cause to be arranged. Anything herein to the contrary notwithstanding, at all
times while the Aircraft is subject to this Lease, the insurance required by
this Section 12(b) shall be for an amount on an "agreed value" basis not less
than the Stipulated Loss Value from time to time determined for the Aircraft.
Without limiting the foregoing, the type and amount of insurance carried by
Lessee hereunder shall be no less comprehensive or favorable to Lessor, Owner
Participant, Indenture Trustee and the other Indemnitees than that carried by
Lessee with respect to similar-size aircraft owned or leased by Lessee.
Each and any policy of insurance obtained and maintained
pursuant to this Section 12(b), and each and any policy obtained in
substitution or replacement for any such policies, (i) shall designate Lessor
as owner of the Aircraft, shall designate, so long as the Lien of the Indenture
has not been discharged, Indenture Trustee and, thereafter, Lessor, as sole
loss payee, as provided below and shall designate Lessor, Owner Participant,
Indenture Trustee (in both its individual capacity and its trustee capacity)
and the other Indemnitees and their respective permitted assigns as additional
insureds, as their respective interests may appear (but without imposing upon
Lessor, Owner Participant, Indenture Trustee and their respective permitted
assigns, any obligation imposed upon the insured, including, without
limitation, the liability to pay any premiums for any such policies), (ii)
shall expressly provide that, in respect of the interests of such an additional
insured and its permitted assigns, in such policies, the insurance shall not be
invalidated as to an insured by any act or omission of Lessee or any other
additional insured, and shall insure each such additional insured and its
permitted assigns, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by the Lessee or another
additional insured, (iii) shall provide that if such insurance is cancelled for
any reason whatsoever, or is changed in any adverse way with respect to the
interests of
- 73 -
79
Lessor, Owner Participant, Indenture Trustee and to the other Indemnitees and
their respective permitted assigns, or if such insurance is allowed to lapse,
such cancellation, change or lapse shall not be effective as to Lessor, Owner
Participant, Indenture Trustee, the other Indemnitees or their respective
permitted assigns, until thirty (30) days (seven (7) days or such lesser period
of time as is customarily available at the time in the case of any war risks or
allied perils coverage) after written notice to Lessor, Owner Participant and
Indenture Trustee from such insurer or insurers, as the case may be, of such
prospective cancellation, change or lapse provided, however, that if any such
notice period is not reasonably obtainable, such policies shall provide for as
long a period of prior notice as shall then be reasonably obtainable, (iv)
shall include coverage for any country in or over which the Aircraft may at any
time be located or operated, (v) shall provide that, as against Lessor, Owner
Participant, Indenture Trustee, Foreign Lessor, the other Indemnitees and their
respective permitted assigns, each insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waives any rights it may have to be subrogated to any right of any insured
against Lessor, Owner Participant, Indenture Trustee, Foreign Lessor, and the
other Indemnitees and their respective permitted assigns, with respect to the
Aircraft, (vi) shall provide that in the event of any damage or loss which is
an Event of Loss hereunder and which results in a payment, such payment shall
be payable directly to Indenture Trustee as sole loss payee, so long as the
Lien of the Indenture shall not have been discharged and thereafter to Lessor,
as sole loss payee, and (vii) shall provide that in the event of any damage or
loss which is not an Event of Loss hereunder and which results in a payment,
such payment shall be payable directly to Indenture Trustee, as sole loss payee
for the account of all interests, so long as the Lien of the Indenture shall
not have been discharged and thereafter to Lessor, as sole loss payee for the
account of all interests. The insurance required under this Section 12(b) may
incorporate deductible amounts which shall not exceed one million dollars
($1,000,000).
Each of Lessor, Owner Participant and Foreign Lessor shall
have the right to carry additional and separate excess or contingent insurance
for its own benefit at its own expense, without, however, thereby limiting
Lessee's obligations under this Section 12, and Lessee shall not carry any such
insurance if it would conflict with or adversely affect other insurance carried
by Lessor, Foreign Lessor, or Owner Participant. Lessee shall have the right
- 74 -
80
to carry insurance in excess of the amounts required hereunder and the proceeds
of such excess insurance shall be payable to Lessee, provided, however, that
such insurance does not conflict with or adversely affect the insurance
required hereunder or any excess or contingent insurance carried by Lessor,
Foreign Lessor, or Owner Participant. Lessee shall give Lessor reasonable
prior written notice of any insurance to be carried by Lessee in addition to
that required to be carried by Lessee as provided herein.
(c) Application of Insurance Proceeds for an Event of Loss.
It is agreed that insurance payments which arise from insurance required to be
carried by Lessee pursuant to this Section 12 and received as the result of the
occurrence of an Event of Loss shall be applied as follows (after reimbursement
of Lessor, Owner Participant, Indenture Trustee and Foreign Lessor for their
reasonable out-of-pocket costs and expenses):
(i) unless clause (ii) below is applicable, so much
of such payments as shall not exceed the Stipulated Loss Value required to be
paid by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to
Indenture Trustee so long as the Lien of the Indenture has not been discharged
and thereafter to Lessor in reduction of Lessee's obligation to pay such
Stipulated Loss Value if not already paid by Lessee, or, if already paid by
Lessee, shall (unless a Default or an Event of Default shall have occurred and
be continuing) be applied by Indenture Trustee or Lessor, as the case may be,
to reimburse Lessee for its payment of such Stipulated Loss Value and the
balance, if any, of such payment remaining thereafter shall be paid over to, or
retained by, Lessor; or
(ii) if such payments are received as a result of an
Event of Loss with respect to the Airframe or an Engine which is being replaced
pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall
be paid over by the Indenture Trustee or Lessor, as the case may be, to, or
retained by, Lessee if Lessee shall have fully performed or, concurrently
therewith fully performs, the terms of Section 11(a)(i) and (c) or Section
11(b) hereof, as the case may be, and of Section 15 hereof with respect to the
Event of Loss for which such payments are made and if no Default or Event of
Default shall have occurred and be continuing.
(d) Application of Insurance Proceeds for Other than an Event
of Loss. The insurance payments of any property damage loss to the Airframe or
any Engine not
- 75 -
81
constituting an Event of Loss with respect thereto will be applied in payment
for the actual costs of repairs or for replacement property which Lessee has
incurred in accordance with the terms of Section 9, 11 or 12(c) of this Lease
against such documentation evidencing payment by Lessee as Lessor may
reasonably request to reimburse Lessee for such repairs or replacements already
paid for by Lessee, and any balance remaining after compliance with such
Sections with respect to such loss shall be paid to Lessor. Lessee shall be
entitled to receive from the insurer any insurance proceeds not in excess of
five hundred thousand dollars ($500,000) as soon as such funds are paid and
shall promptly receive such additional insurance proceeds from the loss payee
upon invoices for repair work in progress, replacement parts which are ordered
or for work completed as provided above in this Section 12(d). Any amount
referred to in this Section 12(d) which is payable to Lessee shall not be paid
to Lessee if at the time of such payment any Default or Event of Default shall
have occurred and be continuing, but shall be held by Lessor as security for
the obligations of Lessee under this Lease or applied as provided in Section
12(e).
(e) Application in Default. Any amount referred to in clause
(ii) of Section 12(c) or Section 12(d) which is otherwise payable to Lessee
shall not be paid to Lessee, or if it has been previously paid to or retained
by Lessee, shall be paid by Lessee to Indenture Trustee, so long as the Lien of
the Indenture shall not have been discharged, and thereafter to Lessor, if at
the time of such payment or retention a Default or an Event of Default shall
have occurred and be continuing. In such case, all such amounts shall be paid
to and held by Indenture Trustee so long as the Lien of the Indenture shall not
have been discharged, and thereafter held by Lessor as security for the
obligations of Lessee, or, at the option of Indenture Trustee or Lessor,
applied by Indenture Trustee or Lessor toward payment of any of Lessee's
obligations at the time due hereunder, including, without limitation, by reason
of this Lease being declared or deemed declared in default, as Indenture
Trustee or Lessor may elect. At such time as there shall not be continuing any
such Event of Default or Default, all such amounts at the time held by
Indenture Trustee or Lessor in excess of the amount, if any, which Indenture
Trustee or Lessor has elected for application as provided above, shall be paid
to Lessee.
(f) Certificates. On or before the Delivery Date, and
thereafter on any renewal by the Lessee of the insurance required hereby (but
in no event less than once in every
- 76 -
82
twelve (12) month period), Lessee will furnish to Lessor and Indenture Trustee
a certificate executed and delivered by an Approved Insurer or the Approved
Broker, describing in reasonable detail, and in accordance with customary
practice, insurance carried on the Aircraft and Lessee shall also furnish an
opinion or report by the Approved Insurer or the Approved Broker certifying
that the insurance then maintained on the Aircraft complies with the terms of
this Lease. Lessee will cause the Approved Broker to agree to advise Lessor,
Owner Participant and Indenture Trustee in writing at least thirty (30) days
(seven (7) days or such lesser period of time as is customarily available at
the time in the case of any war risk and allied perils coverage) prior to the
expiration, non-renewal, termination or cancellation for any reason (including,
without limitation, failure to pay premium therefor) or material modification
of any such insurance; provided, however, that if any such notice period is not
reasonably obtainable, such Approved Broker shall provide for as long a period
of prior notice as shall then be reasonably obtainable.
In the event Lessee shall fail to maintain insurance as herein
provided, Lessor, Owner Participant or Indenture Trustee at their respective
options, may provide such insurance and, in such event, Lessee shall, upon
demand, reimburse Lessor, as Supplemental Rent, or any other such other Person
who may have provided such insurance, for the cost thereof.
(g) Reinsurance. Lessee (or, if a Permitted Sublease is in
effect, the Permitted Sublessee) may carry primary insurance outside of the
aviation insurance markets in New York, London or Paris if the relevant primary
insurer shall have obtained reinsurance and such reinsurance will (i) be on the
same terms as the original insurance and will include the provisions required
by this Agreement, (ii) provide in case of any bankruptcy, insolvency,
liquidation, dissolution or similar proceedings of or affecting the original
insurer that the reinsurers' liability will be to make such payment as would
have fallen due under the relevant policy of reinsurance if the original
insurer had (immediately before such bankruptcy, insolvency, liquidation,
dissolution or similar proceedings) discharged its obligations in full under
the original insurance policies in respect of which the then relevant policy of
reinsurance has been effected; and (iii) contain a "cut-through" clause in the
following form (or otherwise, satisfactory to Owner Participant): "The
Reinsurers and the Reinsured hereby mutually agree that in the event of any
claim arising under the reinsurances in respect of a total
- 77 -
83
loss or other claim where as provided by the Amended and Restated Aircraft
Lease Agreement dated as of September 22, 1990 as amended and restated as of
November __, 1996 and made between Wilmington Trust Company, as Owner Trustee,
and America West Airlines, Inc. such claim is to be paid to the person named
as sole loss payee under the primary insurances, the Reinsurers will in lieu of
payment to the original insured, its successors in interest and assigns pay to
the person named as sole loss payee under the primary insurances effected by
the original insured that portion of any loss due for which the Reinsurers
would otherwise be liable to pay the original insurer (subject to proof of
loss), it being understood and agreed that any such payment by the Reinsurers
will (to the extent of such payment) fully discharge and release the Reinsurers
from any and all further liability in connection therewith."
(h) Storage. During any period that the Aircraft is in storage
or otherwise grounded, Lessee may carry or cause to be carried, in lieu of the
insurance required by Sections 12(a) and (b) above, insurance otherwise
conforming with the provisions of said Sections 12(a) and (b) except that the
scope of the risk and the type of insurance, and the amount of the insurance in
the case of the insurance described in Section 12(a) above (but not the amount
of insurance to be carried under Section 12(b) above), shall be the same as
from time to time applicable to similar size passenger aircraft that comprise
Lessee's fleet in similar storage or grounding, and in any event (including,
without limitation, at any time when there shall be in existence a Permitted
Sublease), the same as from time to time customarily carried by
similarly-situated, prudent Certificated Air Carriers for passenger aircraft of
similar size as the Aircraft in similar storage or grounding.
(i) Amounts Held. So long as no Default or Event of Default
has occurred and is continuing, any amount held by Lessor or Indenture Trustee,
as the case may be, until application by Lessor or Indenture Trustee, as the
case may be, pursuant to this Section 12 shall be invested as provided in
Section 21(h) hereof.
(j) After the Term. Lessee shall continue to maintain at its
expense the insurance described in Section 12(a) for three years after the
expiration or termination of the Basic Term or Renewal Term, if Lessee has
elected to renew the Lease in accordance with Section 20, covering each
Indemnitee as its interest may appear and specifically insuring the indemnity
contained in Section 13 to the extent of the coverage of such policy.
- 78 -
84
(k) Governmental Indemnity. In lieu of certain of the
insurance described in Section 12 above, Lessee may provide a United States
governmental indemnity, to the extent and subject to the terms and conditions
specified in Section 6(c).
Section 13. General Indemnity.
Lessee hereby agrees to indemnify, reimburse, defend and hold
harmless each Indemnitee on an after-tax basis, as provided in Section 10(e),
within fifteen (15) days after demand from and against any and all claims,
damages (whether direct, indirect, incidental, special or consequential),
losses, charges, fees, liabilities, obligations, demands, suits, judgments,
actions and other legal proceedings (whether civil or criminal), penalties,
fines, other sanctions, and any reasonable costs and expenses, in connection
herewith, including, without limitation, reasonable attorney's fees and
expenses of whatever kind or nature (any and all of which are hereafter
referred to as "Claims") imposed on, or asserted by or against, or suffered or
incurred by, any Indemnitee from and after the Restatement Date, including,
without limitation, injury, death or property damage of passengers, shippers
and others, environmental control, noise and pollution regulations, which in
any way may result from, pertain to, or arise in any manner out of, or are in
any manner related to (1) the Operative Documents, the Purchase Documents or
the Financing Documents, or any of the transactions contemplated thereby; (2)
the Aircraft, the Airframe, any Engine or any engine used in connection with
the Airframe or any Part thereof, including, but not limited to, (A) the
importation, exportation, condition, manufacture, design, purchase, ownership,
registration, reregistration, deregistration (other than any deregistration
caused by the failure of the registered owner of the Aircraft to be a "citizen
of the United States" as defined under the Federal Aviation Act and the
regulations thereunder or to file the documentation necessary to continue FAA
registration of the Aircraft), delivery, nondelivery, assignment, leasing,
subleasing, sub-subleasing, acceptance, rejection, possession, repossession,
return, financing, Liens (excluding Lessor's Liens, Head Lessor's Liens and
Lenders' Liens, but including the Lien of the Indenture), use, performance,
modification, maintenance, overhaul, operation, pooling, interchange, repair,
testing, sale, return or other disposition or application of the Aircraft, the
Airframe, any Engine, any engine used in connection with the Airframe or any
Part (including, but not limited to, latent and other defects whether or not
discoverable by Lessee or Lessor,
- 79 -
85
Claims related to any actual or alleged violation of Law, loss or damage to any
property of passengers, shippers or otherwise or any Claim related to patent,
copyright, trademark or other infringement) either in the air or on the ground,
and, including, without limitation, any interest therein of an Indemnitee or
imposition of a Lien thereon (excluding Lessor's Liens, Head Lessor's Liens and
Lenders' Liens but including the Lien of the Indenture), or the rentals,
receipts or earnings therefrom (including, without limitation, the Rent and any
other amounts paid or payable with respect thereto); or (B) any defect in the
Aircraft, the Airframe, any Engine, any engine used in connection with the
Airframe or any Part thereof arising from the material or any article used
therein, whether from the design, testing or use thereof from any maintenance,
service, repair, overhaul or testing of such Aircraft, Airframe, Engine, engine
or Part, or otherwise regardless of when such defect shall be discovered,
whether or not such Aircraft, Airframe, Engine, engine or Part is at the time
in the possession of Lessee, and regardless of where such Aircraft, Airframe,
Engine, engine or Part may then be located; or (3) the breach of any
representation, warranty or covenant made by Lessee hereunder or under any of
the other Operative Documents or any Default or Event of Default; provided,
however, that the indemnity provided for in this Section 13 shall not apply to
any portion of a Claim of an Indemnitee to the extent it results from: (i) the
gross negligence or willful misconduct of such Indemnitee or any of its
directors, officers, employees, servants or agents (except any such gross
negligence or willful misconduct as may be attributed to an Indemnitee due to
its interest in the Aircraft, the Airframe, an Engine, any Operative Document,
any Purchase Document or any Financing Document), (ii) the material breach of
any express representation, warranty or covenant made by such Indemnitee herein
or in any other Operative Document, or the Financing Documents (not resulting
from a breach by Lessee of any of its representations, warranties or covenants
in the Operative Documents or in the Financing Documents), (iii) any Taxes,
whether or not Lessee is required to indemnify such Taxes under Section 10
hereof or the Tax Indemnification Agreement (it being understood that Section
10 hereof and the Tax Indemnification Agreement exclusively provide for
Lessee's liability with respect to Taxes), (iv) any Claim which relates solely
to events which occurred prior to the beginning of the Term (other than Claims
related to the condition, manufacture or design of the Aircraft) and any Claim
concerning payment for or the ownership of Buyer Furnished Equipment, (v) an
underlying act which occurs after the Aircraft has been returned to Lessor in
accordance
- 80 -
86
with the terms hereof and the Term of this Lease has been terminated or has
expired and the return is not related to an Event of Default, (vi) as to such
Indemnitee, an underlying act which occurs after a disposition or other
transfer (voluntary or involuntary) by such Indemnitee of all or any part of
its interest in the Aircraft, the Airframe, any Engine, or any Part, or in the
Financing Documents, the Purchase Documents or the Operative Documents, except
as contemplated under or pursuant to the Operative Documents, the Financing
Documents or the Purchase Documents and except as resulting from the exercise
of its remedies during the period while an Event of Default has occurred and is
continuing and prior to the time such Indemnitee has received payment of all
amounts owing to it hereunder and except any Claim which is alleged or does
relate to the period prior to such disposition or (vii) the authorization or
giving or withholding of any future amendments, supplements, waivers or
consents with respect to any of the Financing Documents, the Purchase Documents
or the Operative Documents, which amendments, supplements, waivers or consents
were not requested by Lessee or are not required to give effect to the
provisions of the Operative Documents, the Financing Documents or the Purchase
Documents (provided, however, in no event will Lessee be liable for any Claims
resulting from, pertaining to or arising from or related to Lessor's granting
or creating a Lessor's Lien or the granting or creation of a Head Lessor's Lien
or an Original Head Lessee's Lien). Upon full payment of the indemnities
herein, Lessee shall be subrogated to all rights and remedies which such
Indemnitee may have against any third party against whom such Indemnitee has
the right to assert a Claim which arises under any action described in this
Section 13 (except Claims under such Indemnitee's own insurance policies or
under the indemnification provisions of any of the Financing Documents).
Without limiting Lessee's liability under this Section 13,
Lessee hereby waives and releases any Claim now or hereafter existing against
any Indemnitee, on account of any Claims 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 arise in any manner out of or in relation to the importation,
exportation, ownership, purchase, registration, reregistration, deregistration
(except as to Owner Participant or Lessor as and to the extent such Indemnitee
is responsible under the Refunding Agreement for Claims related to such
deregistration), delivery, non-delivery, assignment, leasing, subleasing,
manufacture, acceptance, rejection,
- 81 -
87
possession, return, financing, performance, modification, maintenance,
condition, use, operation, pooling, interchange, repair, testing, sale, return
or other disposition of the Aircraft, the Airframe, any Engine or any engine
used in connection with the Airframe or any Part thereof, either in the air or
on the ground, or which may be caused by any defect in such Aircraft, Airframe,
Engine, engine or Part from the material or any article used therein or from
the design or testing thereof, or use thereof or from any maintenance, service,
repair, overhaul, or testing of such Aircraft, Airframe, Engine, engine or
Part, claims for infringement, loss of or injury to any person, loss of or
damage to any property or environmental damage, regardless of when such defect
may be discovered, whether or not such Aircraft, Airframe, Engine, engine or
Part is at the time in the possession of Lessee, and regardless of the location
of such Aircraft at any such time except to the extent that such Claim results
from (i) the gross negligence or willful misconduct of such Indemnitee (except
any such gross negligence or willful misconduct as may be attributed to an
Indemnitee due to its interest in the Aircraft, the Airframe, an Engine, any
Operative Document, any Purchase Document or any Financing Document), (ii) or
the breach of any of its express representations, warranties or covenants
hereunder, under any other Operative Document or Financing Document (not
resulting from a breach by Lessee of any of its representations, warranties or
covenants in the Operative Documents or in the Financing Documents), (iii) any
Taxes, whether or not Lessee is required to indemnify such Taxes under Section
10 hereof or the Tax Indemnification Agreement (it being understood that
Section 10 hereof and the Tax Indemnification Agreement exclusively provide for
Lessee's liability with respect to Taxes), (iv) any Claim which relates solely
to events which occurred prior to the Restatement Date (other than Claims
related to the condition, manufacture or design of the Aircraft) and any Claim
concerning payment for or the ownership of Buyer Furnished Equipment, (v) an
underlying act which occurs after the Aircraft has been returned to Lessor in
accordance with the terms hereof and the Term of this Lease has been terminated
or has expired and the return is not related to an Event of Default, (vi) as to
such Indemnitee, an underlying act which occurs after a disposition or other
transfer (voluntary or involuntary) by such Indemnitee of all or any part of
its interest in the Aircraft, the Airframe, any Engine, or any Part, or in the
Financing Documents, the Purchase Documents or the Operative Documents, except
as contemplated under or pursuant to the Operative Documents, the Financing
Documents or the Purchase Documents and except as resulting from the exercise
of its
- 82 -
88
remedies during the period while an Event of Default has occurred and is
continuing and prior to the time such Indemnitee has received payment of all
amounts owing to it hereunder or thereunder and except any Claim which is
alleged or does relate to the period prior to such disposition, (vii) or the
authorization or giving or withholding of any future amendments, supplements,
waivers or consents with respect to any of the Financing Documents, the
Purchase Documents or the Operative Documents, which amendments, supplements,
waivers or consents were not requested by Lessee or are not required to give
effect to the provisions of the Operative Documents, the Financing Documents or
the Purchase Documents or (viii) a Lessor's Lien, a Head Lessor's Lien or a
Lenders' Lien attributable to such Indemnitee.
Each Indemnitee shall, at Lessee's sole cost and expense and
with Lessee's cooperation, be entitled to conduct the defense of any Claim
against it; provided, however, that Lessee shall, at the request of any
Indemnitee and so long as no Event of Default has occurred and is continuing,
assume and conduct promptly and diligently, at its sole cost and expense, the
defense of such Indemnitee against any Claim of a third party with counsel
reasonably acceptable to such Indemnitee; and provided, further, however, that
Lessee shall have the right as well as the obligation to assume such defense to
the extent required under the terms of the applicable insurance policies so
long as no Default or Event of Default has occurred and is continuing. In the
event Lessee shall so assume the defense of any Claim, such Indemnitee shall
cooperate with Lessee in defending such Claim, but any expenses incurred by
such Indemnitee in connection therewith shall either be paid by Lessee to such
Indemnitee in advance, or reasonable security shall be provided by Lessee to
such Indemnitee for such payments. Neither Lessee nor an Indemnitee shall
enter into a settlement or other compromise with respect to any Claim which
Lessee or such Indemnitee is defending hereunder in excess of $100,000 without
the prior written consent of the other, which consent shall not be unreasonably
withheld.
Each Indemnitee agrees to give Lessee prompt notice of any
Claims by a third party hereunder following such Indemnitee's actual knowledge
of such Claims by third parties, but the failure of such Indemnitee to give the
notice required by this Section 13 shall not constitute a release by Lessor or
such Indemnitee of, or reduce, any of the obligations or liabilities of Lessee
to such Indemnitee in respect of any such Claim or otherwise affect the
obligations or liabilities of Lessee to any Indemnitee in
- 83 -
89
respect of any such Claim, except to the extent that Lessee's ability to
control the defense thereof where Lessee has the right to control the defense
thereof is materially prejudiced as a result solely of such failure of such
Indemnitee to give such notice.
An Indemnitee or Lessee shall supply the other with such
information requested by the other as is reasonably necessary or advisable for
the other to control the defense of a Claim to the extent permitted by this
Section.
Nothing in this Section shall be construed as a guaranty by
Lessee of payments due pursuant to any indebtedness incurred with respect to
the purchase of the Aircraft or of the residual value of the Aircraft.
Notwithstanding anything herein or in any other Operative
Document to the contrary, with respect to any Claim for which any Indemnitee is
entitled to indemnification under more than one provision of this Lease or any
other Operative Document, such Indemnitee shall be entitled to recovery for
such Claim only pursuant to one such provision as it may select in its sole
discretion (and, for the avoidance of doubt, such Indemnitee shall not be
entitled to any double recovery for the same Claim).
The indemnities contained in this Section 13 shall continue in
full force and effect notwithstanding the expiration or other termination of
this Lease and are expressly made for the benefit of and shall be enforceable
by each Indemnitee.
Section 14. Liens.
Lessee shall not directly or indirectly create, incur, assume,
or suffer to exist any Lien on or with respect to the Aircraft, the Airframe,
any Engine or any Part thereof, title thereto, or any interest of Lessor
therein or in this Lease, except (i) the respective rights of Lessor, Lessee,
Owner Participant, Indenture Trustee, Foreign Lessor and any other Indemnitee
as herein provided or provided under the other Operative Documents or the
Financing Documents; (ii) Lessor's Liens, Head Lessor's Liens and Original Head
Lessee's Liens (including, without limitation, Claims against Lessor and
Original Head Lessee with respect to Buyer Furnished Equipment), Lenders' Liens
and Liens arising out of the Financing Documents; (iii) Liens for Taxes either
not yet due or being diligently contested in good faith by appropriate
proceedings in accordance with Section 10 and so long as adequate reserves
- 84 -
90
are maintained with respect to such Liens and only so long as neither such
proceedings nor such Liens involve any material danger of the sale, forfeiture
or loss of any of the Aircraft, the Airframe or any Engine, or any interest of
Lessor, Foreign Lessor or Indenture Trustee therein or any risk of criminal
liability of Lessor, Foreign Lessor or Indenture Trustee; (iv) inchoate
materialmen's, mechanics', workmen's, repairmen's employees', or other like
inchoate Liens arising in the ordinary course of business for sums not overdue
by more than 45 days or being diligently contested in good faith and only so
long as neither such proceedings nor any such Liens involve any material danger
of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any
Engine, or any interest of Lessor or Indenture Trustee therein; (v) the rights
of other Persons to the extent expressly permitted by the provisions of Section
6(a), 9(c) or 19; (vi) Liens arising out of any judgment or award against
Lessee (or any Permitted Sublessee) unless the judgment or award shall not,
within thirty (30) days after the entry thereof, have been discharged, vacated,
reversed, or execution thereof stayed pending appeal or shall not have been
discharged, vacated or reversed within thirty (30) days after the expiration of
such stay and only so long as such Liens shall not involve any material danger
of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any
Engine, or any interest of Lessor, Foreign Lessor or Indenture Trustee therein
and provided that the execution of such judgment or award or an attachment
relating thereto shall not have occurred within such thirty (30) day period;
and, (vii) any other Lien with respect to which Lessee (or a Permitted
Sublessee) shall have provided a bond adequate in the reasonable opinion of
Indenture Trustee (if the Lien of the Indenture has not been discharged) and
Owner Participant. Lessee shall promptly, at its own expense, take or cause to
be taken such action as may be necessary to duly discharge any Lien (except for
the Liens referred to in clauses (i) through (vii) of this Section 14) directly
or indirectly created, incurred, assumed, or suffered to exist by Lessee if the
same shall arise at any time.
Section 15. Protection of Title and Further Assurances.
Forthwith upon the execution and delivery of this Lease, the
Indenture, the Trust Agreement, the Lease Supplement, Indenture Supplement and
Trust Supplement, and any other supplement from time to time required by the
terms hereof, Lessee will cause this Lease, the Indenture, the Trust Agreement,
the Lease Supplement, Indenture Supplement,
- 85 -
91
the Trust Supplement and such other supplements to be duly filed and recorded,
and maintained of record, in accordance with the applicable laws of the
government of registry of the Aircraft. If any filing or recording is
reasonably necessary to protect the interests of Lessor, Foreign Lessor or
Indenture Trustee, Lessee shall, at its own cost and expense (except it shall
be at Lessor's expense if in connection with a change in ownership of the
Aircraft or any other transfer or assignment by Lessor other than as
contemplated hereunder or under the Financing Documents or in connection with
an Event of Default) and upon request by Lessor, Foreign Lessor or Indenture
Trustee, cause any financing statements and any and all additional instruments
and other documents, so far as permitted by applicable Law, to be kept, filed,
and recorded and to be re-executed, refiled and re-recorded at all times in the
appropriate office pursuant or in relation to any applicable Laws of any
Governmental Entity, to protect and preserve the rights and interests of
Lessor, Foreign Lessor or Indenture Trustee hereunder, under the Indenture and
in the Aircraft, and Lessee shall furnish to Lessor, Foreign Lessor and
Indenture Trustee, evidence, reasonably satisfactory to Lessor and Indenture
Trustee, of each such filing or refiling and recordation and re-recordation.
Without limiting the foregoing, Lessee shall do or cause to be
done, at Lessee's cost and expense (except it shall be at Lessor's expense if
in connection with a change in ownership of the Aircraft or any other transfer
or assignment by Lessor other than as contemplated hereunder or under the
Financing Documents or in connection with an Event of Default), any and all
acts and things within its control which may be required under the terms of the
Mortgage Convention to protect and preserve the title of Lessor, the Lien of
the Indenture, this Lease, and the interests of Lessor and Indenture Trustee
within the jurisdiction of any signatory which has ratified the Mortgage
Convention in such jurisdiction and in the territories thereof in which Lessee,
any Permitted Sublessee or any wet sublessee may operate the Aircraft, as
Lessor or Indenture Trustee may reasonably request. Lessee shall also do or
cause to be done, at its own expense (except it shall be at Lessor's expense if
in connection with a change in the ownership of the Aircraft or any other
transfer or assignment by Lessor other than as contemplated hereunder or under
the Financing Documents or in connection with an Event of Default), any and all
acts and things which may be required under the terms of any other Law
involving any jurisdiction in which Lessee, any Permitted Sublessee or any wet
lessee may operate the Aircraft, which Owner Participant or Indenture Trustee
may
- 86 -
92
reasonably request, to protect and preserve the title of the Lessor, this
Lease, the Indenture and Lessor's, Foreign Lessor's and Indenture Trustee's
interest in the Aircraft and under any of the Operative Documents or Financing
Documents within any such jurisdiction.
In addition, at Lessee's expense, Lessee will promptly and
duly execute and deliver to Lessor or Indenture Trustee, as applicable, such
further documents and assurances and take such further actions as Owner
Participant or Indenture Trustee may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this Lease and
the other Operative Documents and the Financing Documents and to protect the
rights and remedies created or intended to be created in favor of Lessor,
Foreign Lessor or Indenture Trustee hereunder and the other Operative Documents
and the Financing Documents including, without limitation, if reasonably
requested by Owner Participant or Indenture Trustee, at the expense of Lessee
(except it shall be at Lessor's expense if in connection with a change in the
ownership of the Aircraft or any other transfer or assignment by Lessor,
Foreign Lessor or Indenture Trustee other than as contemplated hereunder or
under the Financing Documents or in connection with an Event of Default), the
execution and delivery of supplements or amendments hereto in recordable form,
subjecting to this Lease, the Indenture, the Foreign Lease Documents and the
other Financing Documents, any replacement Aircraft or Engine and the recording
or filing of counterparts thereof in accordance with the laws of any
appropriate jurisdiction.
Lessee's obligations under this Section 15 are subject to the
reasonable cooperation of the applicable parties.
Section 16. Return of Aircraft and Records.
(a) Return. On any Return Occasion, Lessee, at its own
expense and risk, shall return the Aircraft to Lessor (or any Person designated
by Lessor) in at least the condition specified in this Section and Exhibit E
hereto at any Lessee system location in the continental United States selected
by Lessor, as Lessor may elect, or such other location as Lessor and Lessee may
agree, fully equipped with all required Engines, or other engines owned by
Lessee (which shall thereupon become Engines as hereinafter provided) meeting
the conditions specified in this Section and Exhibit E, duly installed thereon
by delivering the same to the Lessor at such location. Lessee shall comply
with
- 87 -
93
Section 11(b) and this Section 16 with respect to any engines installed on the
Aircraft returned to Lessor hereunder and meeting the conditions described
herein which were not originally installed on the Aircraft.
(b) Status Upon Return. Upon any Return Occasion hereunder,
the Aircraft shall be: (i) free and clear of all Liens, except for the Lien of
the Indenture, Head Lessor's Liens, Original Head Lessee's Liens, Lessor's
Liens, Lenders' Liens and Liens arising out of the Foreign Lease Agreement,
(ii) duly certified as an airworthy aircraft by the FAA under Part 121 of the
regulations promulgated under the Federal Aviation Act and with a current and
valid Airworthiness Certificate installed on the Aircraft, unless such
certificate shall have been suspended or revoked as a result of the suspension
or revocation of the registration of the Aircraft under the Federal Aviation
Act due to the ineligibility of the Aircraft to be registered in the name of
Lessor under the Federal Aviation Act (whether by means of a voting trust
agreement or otherwise) in which case the Aircraft shall nevertheless meet all
conditions for such certification and for the issuance of such certificate;
(iii) in full airworthy condition for over water and EROPS operation according
to the FAA standards required to allow the Aircraft to be operated under, and
in full compliance with, such Airworthiness Certificate and Part 121 of the
regulations promulgated under the Federal Aviation Act for such operation, such
compliance to be by means of such mechanical repairs or modifications or such
inspections as may be required thereby, but not by operational restrictions, by
logbook entries or other method of acceptance of such restrictions; (iv) in
full compliance with Lessee's Maintenance Program; (v) to the extent the owner
of the Aircraft is a "citizen of the United States" within the meaning of
Section 40102(a)(15) of the Federal Aviation Act and reasonably cooperative
with Lessee at Lessee's expense with respect to effecting such registration,
duly registered in the name of the Lessor or other then owner of the Aircraft
under the Federal Aviation Act; (vi) in full compliance with the maintenance
and operation provisions of this Lease and all FAA airworthiness directives,
mandatory service bulletins and equivalent requirements which by their terms
require compliance on or before the last day of the Term (without regard to any
deferral, waiver, deviation or exemption granted by the FAA specifically to
Lessee delaying such compliance); (vii) in good and airworthy operating
condition, and in the same condition (including, without limitation, in a
passenger configuration suitable for passenger revenue service) as when
delivered to Lessee hereunder, ordinary wear and tear
- 88 -
94
excepted, with no open or outstanding deferred maintenance items, scheduled or
unscheduled, with all systems and components fully serviceable and operational
and with no placards restricting operation or use, and (viii) with all
remaining warranties, indemnities, policies and guarantees referred to in
Section 5(d) made available to Lessor in a manner and by documents in form and
substance reasonably satisfactory to Lessor.
(c) Engines. In the event any engine not owned by Lessor
shall be installed on the Aircraft on any Return Occasion, without limiting
Lessee's obligations under the Tax Indemnification Agreement, such engine shall
be of the same model and equivalent modification status as the Engines or, at
Lessee's option, an IAE engine of an improved model suitable for installation
and use on the Airframe without diminishing the value, remaining useful life or
utility of such Airframe, in each such case having a value, remaining useful
life and utility at least equal to (as determined in accordance with the
Appraisal Procedure), and be in an operating condition as good as the Engines,
assuming the Engines were in the condition and repair as required by the terms
hereof immediately prior to such termination and shall conform to the return
condition requirements set forth in this Section 16 and Exhibit E, and Lessee,
at its own expense and concurrently with such delivery, shall cause such engine
to become an Engine by complying with Section 11(b) hereof. Lessee's
obligation to comply with the terms of this Section 16(c) shall be conditioned
on Lessor's transferring to Lessee all of Lessor's right, title and interest in
and to any Engine not installed on the Aircraft at the Return Occasion "AS IS,
WHERE IS," without any representation, warranty or recourse of any kind
whatsoever, express or implied, except a warranty that such Engine is free and
clear of Lessor's Liens, Liens arising out of the Foreign Lease Agreement and
Head Lessor's Liens.
(d) Records and Documents. Upon the return of the Aircraft,
Lessee shall deliver to Lessor (i) all logs, manuals and data, and inspection,
modification, overhaul and other records, related to the Aircraft, including,
without limitation, those required to be maintained with respect thereto under
applicable rules and regulations of the FAA, together with a detailed
description of the Maintenance Program then applied to the Aircraft and shall
provide Lessor and its designees access to the Maintenance Program which is
sufficient for a Person to maintain the Aircraft under an FAA approved
maintenance program after the Term or to transition maintenance to another
program, including, without limitation, another registry, or, in the event an
- 89 -
95
Event of Default shall have occurred, to continue to maintain the Aircraft
under the Maintenance Program, in each case as Lessor may reasonably request,
and all documentation with respect to the Aircraft set forth on Exhibit B or
otherwise delivered to Lessee at delivery thereof, and (ii) all records
necessary or required by the FAA to certify and place the Aircraft on an FAA or
other country's, as the case may be, approved maintenance program. All of the
foregoing shall, at Lessee's expense, be up-to-date and in the latest revision
status as of the last day of the Term, including, without limitation, all
software and other electronically-held materials which have been supplied by or
on behalf of Manufacturer, Manufacturer's Subsidiary or Original Head Lessee,
which must be updated to the latest revision status as of the last day of the
Term within such software base and all data therein or pertaining thereto shall
be deemed property of Lessor and shall be delivered to Lessor. If hard, i.e.,
non-computerized, copies of English language maintenance records are not
available, then Lessee shall cause the appropriate action to be taken with the
pertinent regulatory agencies to ensure that Lessor and the FAA are provided
with all requested necessary and proper guarantees of methods of compliance,
component overhaul and management, scheduling, quality control, serial number
verification, etc. These records shall be all inclusive to the Aircraft,
Airframe, Engines, components, rotables, and assemblies and, as a minimum,
extend to include all activities associated with each of the last completed
maintenance checks, repairs, scheduled inspections and functional tests, and
overhauls performed under Lessee's Maintenance Program. All components and
assemblies identified with safe life limits shall be identified with their
service histories, accumulated cycles or flight hours as applicable and
remaining service lives on a separate listing. All components and assemblies
which are identified on the maintenance records by part numbers and serial
numbers other than the manufacturer's shall be provided with interchange or
cross reference listing necessary to establish complete traceability. All
documentation, flight, and maintenance records as specified by United States
Federal Aviation Regulations 91.173, 91.174, and each paragraph of regulation
121.380 which normally accompany the transfer of an aircraft which has been
operating in regulated commercial air service, shall be delivered to Lessor
with the Aircraft. Any documents or records required to be delivered hereunder
shall be in English.
(e) Condition of Aircraft. Upon any Return Occasion, (i)
Lessee shall return such Aircraft to Lessor in such condition that the Aircraft
shall also comply with each
- 90 -
96
and every condition and requirement set forth elsewhere in this Lease,
including Exhibit E hereto and (ii) shall provide that each oil tank on the
Aircraft shall be full and the fuel tanks shall contain as much fuel as such
tanks contained at the time the Aircraft was accepted by Lessee.
(f) Final Inspection. Upon any Return Occasion, Lessee shall
make the Aircraft available to Lessor at the location where the "block 'C'
Check" (or equivalent level designated check or checks) required hereunder to
be performed immediately prior to redelivery is to be performed for detailed
inspection of the documents referred to in paragraph (d) above and the
Airframe, Engines and Parts structure and parts, at Lessee's expense (excluding
compensation to representatives of Lessor), in order to verify that the
condition of such Aircraft complies with the requirements set forth above (such
inspection being hereinafter referred to as the "Final Inspection"). The Final
Inspection shall be combined with such "block 'C' Check" (or equivalent level
check or checks) and may include such other items as reasonably requested by
Lessor. Lessee shall give Lessor not less than thirty (30) days prior written
notice of the commencement date of such Final Inspection. The period allowed
for the Final Inspection shall be the same period during which such "block 'C'
Check" is being performed and shall have such duration as to permit the opening
of any areas of the Aircraft which are necessary or advisable to satisfy Lessor
as to compliance with the requirements of this Section 16 and Exhibit E. The
Final Inspection shall commence on the date so noticed which shall be on or
before the expiration of the Term with respect to the Aircraft and shall
continue on consecutive days until all activity required above to be conducted
has been concluded. To the extent that any portion of the Final Inspection
extends beyond the expiration of the Term, unless Lessor has terminated the
Lease pursuant to Section 18(f) hereof, the Term with respect to the Aircraft
undergoing the Final Inspection shall be deemed to have been automatically
extended, and all obligations (including, without limitation, the obligation to
pay Rent hereunder) continued, on a daily basis until the Final Inspection
shall have been concluded; provided, however, that Lessee shall not be required
to pay Rent with respect to the Aircraft during the period of extension to the
extent that Lessor is responsible for the delay in completion of the Final
Inspection. All storage expenses attributable to any Term extension pursuant
to the preceding sentence shall be payable by Lessee, except that Lessee shall
not be liable for any storage expenses which are incurred after the sixtieth
(60th) day after the
- 91 -
97
Term to the extent that storage continues thereafter due to Lessor's delay in
completion of the Final Inspection.
(g) Aircraft Records and Documents. In order to enable Lessor
to prepare for the Final Inspection of the Aircraft pursuant to Subsection
16(f) above, Lessee agrees to make available to Lessor at a maintenance base of
Lessee with adequate facilities for short-term maintenance, where the Final
Inspection is to occur, not later than ten (10) days prior to the commencement
of such Final Inspection, the Aircraft Records and Documents listed in Exhibit
B hereto, together with such other documentation (including, without
limitation, original airworthiness directive compliance documents and other
work documents) regarding the condition, use, maintenance, or operation as
Lessor may reasonably request or require to substantiate the status of the
Aircraft.
(h) Corrections and Subsequent Corrections. To the extent
that the Aircraft or any Engine fails upon a Return Occasion to conform to any
requirement imposed by this Lease Lessor may, at its option, (i) continue the
Lease in effect in the manner provided for in Section 16(f) above with regard
to automatic extension until such time as such Aircraft is brought up to the
condition required by this Section 16, including Exhibit E, or (ii) accept the
return of such Aircraft and thereafter have any such nonconformance corrected,
at such time as Lessor may deem appropriate but not to commence later than
ninety (90) days following the return of such Aircraft, at commercial rates
then charged by the Person selected by Lessor to perform such correction. The
Letter of Credit shall not be released and any costs and expenses (including,
materials and labor) incurred by Lessor for such correction shall be
indemnified by Lessee in favor of Lessor (and prior to the end of the Term,
Lessee shall make adequate provision to Lessor's satisfaction in respect of
such indemnity) and shall become Supplemental Rent payable by Lessee within ten
(10) days following the submission of a written statement by Lessor to Lessee,
identifying the items corrected and setting forth the expense of such
correction. Lessee's obligations to pay such Supplemental Rent shall survive
the Expiration Date or other termination of this Lease.
(i) Functional Flight Check. Immediately prior to the
expiration of the Term, Lessor will be permitted to conduct a non-commercial
functional flight check flight of no more than two (2) hours duration in
accordance with the Manufacturer's functional flight check procedures at
Lessee's expense to demonstrate the airworthiness of the
- 92 -
98
Aircraft and proper functioning of all systems and components. A qualified
pilot and up to five (5) other representatives selected by Lessor may take part
in such flight to verify compliance of the Aircraft with the requirements of
this Lease, provided, that Lessor shall be responsible for the charges of such
qualified pilot and representatives. Lessee may combine the functional flight
check provided in this Section 16(i) with the delivery flight specified in
Section 16(a) and such functional flight check shall include the landing. Any
discrepancy or malfunction detected during any functional flight check
(including a functional flight check combined with a delivery flight) shall be
corrected, at Lessee's expense, and prior to the expiration of the Term. To
the extent that any actions to correct any such discrepancy or malfunction
extend beyond the Term, the provisions of the first sentence of Section 16(h)
shall apply. All storage expenses attributable to any Term extension pursuant
to the preceding sentence shall be payable by Lessee.
(j) Export Certificate of Airworthiness. Lessee shall, at
Lessee's expense, take such action as Lessor may reasonably request to assist
Lessor in obtaining any required documents in relation to the export of the
Aircraft from the United States (including, without limitation, a valid and
subsisting export certificate of airworthiness with respect to the Aircraft and
export license) and in relation to the deregistration of the Aircraft.
(k) Service Bulletin and Modification Kits. Lessee shall
deliver to Lessor, at no cost to Lessor, all service bulletin kits furnished
without charge by the manufacturer for installation on the Aircraft which have
not been so installed together with appropriate instructions for installation.
In the event such uninstalled kits were purchased or manufactured by Lessee,
then Lessor shall be advised of such kits by Lessee and have a right of first
refusal to purchase such kits at Lessee's cost for a period of ninety (90) days
after return.
(l) Storage Upon Return. Upon any Return Occasion, Lessee
shall, at Lessor's request and at Lessee's risk and expense, in addition to
other storage referred to above, arrange for the parking, storage and insurance
of the Aircraft for a period not exceeding sixty (60) days at such reasonable
location as Lessor requests where Lessee has or can arrange for storage.
Lessee shall pay or cause to be paid all costs and expenses for such parking,
storage and insurance.
- 93 -
99
(m) Resale/Release Cooperation. During the last twelve (12)
months of the Term, with reasonable notice and at reasonable times, Lessee will
cooperate, and cause any Permitted Sublessee to cooperate, in all reasonable
respects, with the efforts of Lessor to sell or lease the Aircraft after the
end of the Term, by permitting prospective purchasers or lessees, except to the
extent prohibited by applicable Law, to inspect the Aircraft and the records
relating thereto to the extent it does not unreasonably interfere with the
operation or maintenance of the Aircraft or the conduct of Lessee's business.
Section 17. Events of Default.
Any one or more of the following occurrences or events shall
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of Law or pursuant to or
in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any other Governmental Entity):
(a) Lessee shall fail to make (i) any payment of Basic Rent,
Renewal Rent or Stipulated Loss Value to Lessor within three (3) Business Days
after the date on which such payment is due, or (ii) any other payment of
Supplemental Rent due hereunder within ten Business Days after the date on
which such payment is due and Lessee has received written demand therefor by
the party entitled thereto (provided that any failure to pay any amount owed by
Lessee under the Tax Indemnification Agreement or any failure of Lessee to pay
to Lessor or the Owner Participant when due any Excepted Payments (as defined
in the Indenture) shall not constitute an Event of Default unless notice is
given by the Owner Participant to Lessee and the Indenture Trustee that such
failure shall constitute an Event of Default); or
(b) Lessee shall fail to obtain and maintain in full force and
effect any insurance required under the provisions of Section 12 hereof or
shall operate the Aircraft outside of the scope or in violation of the terms of
the insurance or United States Government indemnity coverage required to be
maintained with respect to such Aircraft; or
(c) Any representation or warranty made by Lessee in the
Operative Documents (other than the Trust Agreement, each Trust Supplement, the
Indenture, each Indenture Supplement, the Equipment Notes, the Intercreditor
Agreement, each Liquidity Facility, the Underwriting
- 94 -
100
Agreement and the Tax Indemnification Agreement) or in any certificate
furnished by Lessee in connection therewith is incorrect at the time made in
any material respect and such incorrectness shall not have been cured within
thirty (30) days after the receipt by Lessee of a written notice from Lessor or
the Indenture Trustee advising Lessee of the existence of such incorrectness;
or
(d) Lessee shall fail to perform or observe any covenant,
condition, or agreement to be performed or observed by it pursuant to this
Lease or any other Operative Document (other than the Trust Agreement, each
Trust Supplement, the Indenture, each Indenture Supplement, the Equipment
Notes, the Intercreditor Agreement, each Liquidity Facility, the Underwriting
Agreement, and [the Tax Indemnification Agreement]), and such failure shall
continue uncured for thirty (30) days after written notice thereof is given by
Lessor or Indenture Trustee to Lessee; provided, however, that if Lessee shall
have undertaken to cure any such failure which arises under the first or second
sentence of Section 6(c), or Section 6(d), as such provisions of Section 6
relate to maintenance, service, repair or overhaul, or Section 9, and
notwithstanding the diligence of Lessee in attempting to cure such failure,
such failure is not cured within said thirty (30) day period but is curable
with future due diligence, there shall exist no Event of Default under this
Section 17 so long as Lessee is proceeding with due diligence to cure such
failure and such failure is remedied not later than one hundred eighty (180)
days after receipt by Lessee of such written notice; or
(e) Lessee consents to the appointment of a custodian,
receiver, trustee or liquidator of itself or all or any material part of
Lessee's property or Lessee's consolidated property, or Lessee admits in
writing its inability to, or is unable to, or does not, pay its debts generally
as they come due, or makes a general assignment for the benefit of creditors,
or Lessee files a voluntary petition in bankruptcy or a voluntary petition
seeking reorganization in a proceeding under any bankruptcy or insolvency Laws
(as now or hereafter in effect), or an answer admitting the material
allegations of a petition filed against Lessee in any such proceeding, or
Lessee by voluntary petition, answer or consent seeks relief under the
provisions of any other bankruptcy, insolvency or other similar Law providing
for the reorganization or winding-up of corporations, or provides for an
agreement, composition, extension or adjustment with its creditors, or any
corporate action (including, without limitation, any board of directors or
shareholder action) is taken by Lessee in
- 95 -
101
furtherance of any of the foregoing, whether or not the same is fully effected
or accomplished; or
(f) An order, judgment or decree is entered by any court
appointing, without the consent of Lessee, a custodian, receiver, trustee or
liquidator of Lessee, or of all or any material part of Lessee's property, or
Lessee's consolidated property, or all or any material part of Lessee's
property or Lessee's consolidated property is sequestered, and any such order,
judgment or decree of appointment or sequestration remains in effect,
undismissed, unstayed or unvacated for a period of sixty (60) days after the
date of entry thereof or at any time an order for relief is granted; or
(g) An involuntary petition against Lessee in a proceeding
under the Federal bankruptcy laws or other insolvency Laws (as now or hereafter
in effect) is filed and is not withdrawn or dismissed within sixty (60) days
thereafter or at any time an order for relief is granted in such proceeding, 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 over, or custody or control of, Lessee or of all or any
material part of Lessee's property, or Lessee's consolidated property and such
jurisdiction, custody or control remains in effect, unrelinquished, unstayed or
unterminated for a period of sixty (60) days or at any time an order for relief
is granted in such proceeding; or
(h) Lessee's cessation of business as a commercial passenger
Certificated Air Carrier or, except in either case in connection with a labor
dispute, announcement thereof or Lessee's suspension of its business as a
commercial passenger Certificated Air Carrier, or for any reason the
preponderant business activity of Lessee shall cease to be that of a commercial
passenger Certificated Air Carrier; or
(i) Lessee's loss or suspension of its United States air
carrier license or certificate under Part 121 of the Federal Aviation
Regulations or certificate under Section 41102(a) of the Federal Aviation Act;
or
(j) if the existence, validity, enforceability or priority of
the rights or interests of Lessor under this Lease, or the rights or ownership
of Lessor of the Aircraft under this Lease in respect of the Aircraft or the
rights or interests of Note Holders under the Indenture are challenged by
Lessee or any Person claiming by, through or on behalf of
- 96 -
102
Lessee unless Lessee demonstrates that such a claim was not rightfully made by,
through or on behalf of Lessee.
Section 18. Remedies.
Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare by written notice to Lessee this Lease to be in default, provided,
however, that this Lease shall be deemed to be declared in default
automatically without the necessity of such written declaration upon the
occurrence of any Event of Default described in paragraph (e), (f) or (g) of
Section 17 hereof; and at any time thereafter, so long as any outstanding Event
of Default shall not have been remedied, Lessor may do one or more of the
following with respect to all or any part of the Airframe and any or all of the
Engines as Lessor in its sole discretion shall elect, to the extent permitted
by, and subject to compliance with any mandatory requirements of, applicable
Law then in effect:
(a) Demand that Lessee, and Lessee shall upon the written
demand of Lessor and at Lessee's expense, immediately return the Aircraft to
Lessor in the manner specified in such notice, in which event such return shall
not be delayed for the purposes of complying with the return conditions
specified in Section 16 and Exhibit E hereof (none of which conditions shall be
deemed to affect Lessor's possession of the Aircraft) or delayed for any other
reason; provided, however, that Lessee shall remain and be liable to Lessor for
amounts provided for herein or other damages resulting from the Aircraft or any
Engine not being in the condition required by Section 16 and Exhibit E.
Notwithstanding the foregoing, at Lessor's option, Lessee shall be required
thereafter to take such actions as would be required by the provisions of this
Lease if such Aircraft were being returned at the end of the Term hereof with
respect to such Aircraft. In addition, Lessor, at its option and to the extent
permitted by applicable Law, may enter upon the premises where all or any part
of the Aircraft is located to take immediate possession of and, at Lessor's
option, remove the same (and/or any engine which is not an Engine but which is
installed on the Airframe, subject to the rights of the owner, lessor or
secured party thereof) by summary proceedings or otherwise, all without
liability accruing to Lessor for or by reason of such entry or taking of
possession whether for the restoration of damage to property, or otherwise,
caused by such entry or taking, except direct damages to the extent caused by
Lessor's gross negligence or willful misconduct.
- 97 -
103
(b) Sell or cause to be sold, the Aircraft or any part
thereof, or Lessor's interest therein, at private or public sale, as Lessor in
its sole discretion may determine, or otherwise dispose of, hold, use, operate,
or lease to others, or keep idle the Aircraft, as Lessor in its sole discretion
may determine, all free and clear of any rights of Lessee or any Permitted
Sublessee and except as hereinafter set forth in this Section 18. Lessor may
be the purchaser at any such sale.
(c) Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) or
paragraph (b) above, Lessor, by written notice to Lessee specifying a payment
date which shall be a Stipulated Loss Value Date may demand that Lessee pay to
Lessor, and Lessee shall pay to Lessor, on the Stipulated Loss Value Date
specified in such notice, as liquidated damages for loss of bargain and not as
a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due
for the period commencing after the Stipulated Loss Value Date specified for
payment in such notice), any unpaid Rent for the Aircraft to and including the
Stipulated Loss Value Date specified in such notice, plus whichever of the
following amounts as Lessor may specify, in its sole and absolute discretion,
in such notice: (i) an amount equal to the excess, if any, of the sum of the
Stipulated Loss Value for the Aircraft computed as of the date specified in
such notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent
Payment Date, an amount equal to the Basic Rent or Renewal Rent, as the case
may be, due on such date, over the fair market sale value of the Aircraft as of
the date specified in such notice or (ii) an amount equal to the excess, if
any, of the sum of the Stipulated Loss Value for the Aircraft computed as of
the date specified in such notice plus, if such date is a Basic Rent Payment
Date or Renewal Rent Payment Date, an amount equal to the Basic Rent or the
Renewal Rent, as the case may be, due on such date, over the fair market rental
value of the Aircraft for the remainder of the Term as of the date specified in
such notice.
(d) In the event Lessor, pursuant to paragraph (b) above,
shall have sold the Aircraft, or its interest therein, Lessor, in lieu of
exercising its rights under paragraph (c) above, may, if it shall so elect,
demand that Lessee pay Lessor, and Lessee shall pay to Lessor on such demand,
as liquidated damages for loss of bargain and not as a penalty (in lieu of the
Basic Rent or Renewal Rent, as the case may be, due for the period commencing
after the Stipulated Loss Value Date immediately prior to the date
- 98 -
104
such sale occurs), any unpaid Rent for such Aircraft due to and including the
date of sale, plus the amount by which the Stipulated Loss Value of such
Aircraft, computed as of such Stipulated Loss Value Date, exceeds the net
proceeds of such sale (after deducting all costs of such sale).
(e) In the event that Lessor, pursuant to paragraph (b) above,
shall have relet the Aircraft under a long term lease, Lessor, in lieu of
exercising its rights under paragraph (c) above with respect to such Aircraft,
may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay
Lessor on such demand, as liquidated damages for loss of bargain and not as a
penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, for
such Aircraft due after the time of reletting) any unpaid Rent for such
Aircraft due up to the date of reletting, plus the amount, if any, by which the
aggregate Basic Rent or Renewal Rent, as the case may be, for such Aircraft,
which would otherwise have become due over the Basic Term or Renewal Term, as
the case may be, discounted periodically (equal to installment frequency) to
present worth as of the date of reletting at the rate of 8.50% per annum,
exceeds the aggregate basic rental payments to become due under the reletting
from the date of such reletting to the date upon which the Term for such
Aircraft would have expired but for Lessee's default, discounted periodically
(equal to installment frequency) to present worth as of the date of the
reletting at the rate of 8.50% per annum.
(f) Cancel, rescind and/or terminate this Lease by written
notice to Lessee which cancellation, rescission and/or termination shall be
effective upon dispatch, whereupon Lessee's right to possess and use the
Aircraft shall immediately cease, however, Lessee shall be and remain liable
for damages and losses suffered by Lessor and all other amounts payable by
Lessee hereunder.
(g) Proceed by appropriate court action or actions, either at
law or in equity, to enforce any other remedy or right Lessor may have
hereunder, under the other Operative Documents, at law or in equity, including,
without limitation, proceed by court order to enforce performance by Lessee of
the applicable covenants of this Lease or to recover damages for the breach
thereof.
In addition to the foregoing, Lessee shall be liable (without
duplication of the remedies above and of Lessee's obligations under Section 10
and Section 13 hereof and subject to the exclusions set forth therein) for any
and all unpaid Rent before, during or after the exercise of any
- 99 -
105
of the above mentioned remedies (including without limitation interest on
unpaid amounts with respect to all amounts not paid when due, including,
without limitation, any amounts payable pursuant to the foregoing provisions of
this Section 18), and, except as specified above until satisfaction of all of
Lessee's obligations to Lessor hereunder and for all legal fees and other costs
and expenses incurred by any Indemnitee by reason of the occurrence of any
Event of Default or the exercise of an Indemnitee's remedies with respect
thereto, including all costs and expenses incurred in connection with the
return of the Aircraft in accordance with the terms of Section 16 and Exhibit E
hereof or in placing the Aircraft in the condition and with airworthiness
certification as required by such Section and such Exhibit and costs and
expenses related to the Lease, the Refunding Agreement, the Indenture, the
Pass-Through Trust Agreements, the Intercreditor Agreement or each Liquidity
Facility. All liquidated damages payable pursuant to the foregoing shall bear
interest, which shall be payable on the date the payment of such liquidated
damages is due at a rate equal to the Interest Rate from and including the date
due to and excluding the date actually paid.
In effecting any repossession, Lessor, its representatives and
agents, to the extent permitted by applicable Law, (i) shall have the right to
enter upon any premises where it reasonably believes the Aircraft, the
Airframe, an Engine or Part to be located, (ii) shall not be liable, in
conversion or otherwise, for the taking of any personal property of Lessee
which is in or attached to the Aircraft, the Airframe, an Engine or Part which
is repossessed, (iii) shall not be liable or responsible, in any manner, for
any damage or injury to any of Lessee's property in repossessing and holding
the Aircraft, the Airframe, an Engine or Part, except for direct damages caused
by Lessor's gross negligence or willful misconduct, and (iv) shall have the
right to maintain possession of and dispose of the Aircraft, the Airframe, an
Engine or Part on any premises owned by Lessee or under Lessee's control.
If requested by Lessor, Lessee shall, at its sole expense,
assemble and make the Aircraft, the Airframe, an Engine or Part available at a
place designated by Lessor in accordance with Section 16 and Exhibit E hereof.
Lessee hereby agrees that, in the event of the return to or repossession by
Lessor of the Aircraft, the Airframe, an Engine or Part, or otherwise upon the
occurrence of an Event of Default, any rights in any warranty (express or
implied), service life policy, infringement indemnity, performance
- 100 -
106
guaranty or the like heretofore made available to Lessee or otherwise held by
Lessee shall without further act, notice or writing be deemed automatically
cancelled and shall be enforceable solely by and for the benefit of, and
assigned to, Lessor. Lessee shall be liable to Lessor (without duplication)
for all expenses, disbursements, costs and fees incurred in (i) repossessing,
storing, preserving, shipping, maintaining, repairing and refurbishing the
Aircraft, the Airframe, an Engine or Part to the condition required by Section
16 and Exhibit E hereof and (ii) preparing the Aircraft, the Airframe, an
Engine or Part for sale or lease, advertising the sale or lease of the
Aircraft, the Airframe, an Engine or Part and selling or releasing the
Aircraft, the airframe, an Engine or Part. Lessor is hereby authorized and
instructed, at its option, to make expenditures which Lessor considers
advisable to repair and restore the Aircraft, the Airframe, an Engine or Part
to the condition required by Section 16 and Exhibit E hereof, all at Lessee's
sole expense.
For the purpose of this Section 18, the "fair market rental
value" or the "fair market sales value" of the Aircraft, Airframe, an Engine or
Part shall be determined pursuant to the Appraisal Procedure.
At any sale of the Aircraft, the Airframe, an Engine or Part
pursuant to this Section, Owner Participant may bid for and purchase such
property and Lessee agrees that the amounts paid therefor shall be used in the
computations contemplated herein and Lessee shall remain liable for any
deficiency.
No remedy referred to in this Section is intended to be
exclusive, but, to the extent permitted by Law, each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity; and, to the extent permitted by Law, the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all of such
other remedies. No waiver by Lessor of any Event of Default shall in any way
be, or be construed to be, a waiver of the same Event of Default in the future
or any other prior or future Event of Default. To the extent permitted by Law,
Lessee hereby waives any right it may have to require Lessor to mitigate
damages in connection with the remedies described in Sections 18(c), (d) or (e)
above.
Lessee hereby irrevocably appoints Lessor as Lessee's
attorney-in-fact (which appointment is coupled with
- 101 -
107
an interest) to execute all documents deemed necessary to release, terminate
and void Lessee's interest in the Aircraft leased hereunder or otherwise to
more effectively carry out Lessor's rights and remedies and to file said
documents for recordation with the FAA, under the Uniform Commercial Code, and
with any other appropriate Governmental Entity, and otherwise act in Lessee's
name and place with respect to the Aircraft, provided that an Event of Default
has occurred and is continuing and this Lease has been declared or deemed to be
in default.
Section 19. Alienation.
(a) Lessor Assignments. In addition, and subject, to the
transactions contemplated by Section 19(b), Lessor shall not assign or transfer
any interest of Lessor in this Lease and/or the Aircraft and/or the proceeds
hereof to any Person except as provided herein, in the Trust Agreement, in the
Indenture and in the Refunding Agreement.
Any such assignment shall be subject to the condition that the
transferee shall agree not to disturb the quiet enjoyment by Lessee of the
Aircraft as and to the extent so agreed by Lessor in Section 21(f).
(b) Security for Obligations. In order to secure the
Equipment Notes, Lessor has created, by the Indenture, a security interest in
the Trust Indenture Estate, including, without limitation, this Lease and all
Rent and other sums payable hereunder, except as provided in the Indenture and
subject in each case to Liens permitted hereunder. The Indenture provides,
among other things for the assignment by Lessor to Indenture Trustee of its
right, title and interest in, to and under this Lease, to the extent set forth
in the Indenture, for the creation of a first-mortgage lien on and perfected
security interest in all of Lessor's right, title and interest in and to the
Aircraft in favor of Indenture Trustee. Lessee hereby consents to such
assignment and to the creation of such mortgage and security interest and
acknowledges receipt of copies of the Trust Agreement and the Indenture, it
being understood that such consent shall not affect any requirement or the
absence of any requirement for any consent under any other circumstances.
Until the Lien of the Indenture has been discharged, Lessee will furnish to
Indenture Trustee counterparts of all notices and other writings of any kind
required to be delivered hereunder by Lessee to Lessor. Until the Lien of the
Indenture has been discharged, (a) Lessee shall make all payments of Rent,
Stipulated Loss Value and all other amounts payable hereunder (other than
Excepted Payments) to
- 102 -
108
Indenture Trustee as provided in Sections 4(c) and 4(d), and (b) Indenture
Trustee shall be entitled to exercise the rights of Lessor (but not Owner
Participant) herein as and to the extent provided herein or in the Indenture
and any express reference to Indenture Trustee in any Section of this Lease
shall not give rise to any implication that Indenture Trustee may not exercise
the rights of Lessor in any other Section of this Lease as and to the extent
provided in the Indenture.
The provisions of this Lease and the Refunding Agreement which
require or permit action by, the payment of monies to, the consent or approval
of, the furnishing of any instrument or information to, or the performance of
any other obligation to, Indenture Trustee, shall not be effective, and the
Sections hereof containing such provisions shall be read as though there were
no such requirements or provisions and all moneys otherwise payable to
Indenture Trustee hereunder shall be paid to Lessor, after Lessee shall have
received from Indenture Trustee notice of discharge of the Lien of the
Indenture.
Any payment or performance by Lessee to Indenture Trustee
shall constitute payment or performance of such obligation to Lessor by Lessee
under this Lease.
Any payment or performance of an obligation of Lessee under
this Lease by a Permitted Sublessee shall constitute payment or performance of
such obligation by Lessee.
Section 20. Renewal Option.
Lessee may renew this Lease as provided in the following
clause (i) and subject to the following clause (ii):
(i) Exercise of Renewal Option. Provided that this
Lease has not been previously terminated and that no Default or Event of
Default shall have occurred and be continuing at the time of the giving of
irrevocable notice hereinafter referred to in this clause (i) or at the time of
the commencement of the Renewal Term, Lessee, at its option, may renew this
Lease for one Renewal Term consisting of a period equal to five years. The
right to renew this Lease for such Renewal Term pursuant to this clause (i)
shall be exercised upon irrevocable notice from Lessee received by Lessor of
Lessee's election to so renew this Lease not less than twelve (12) months and
not more than twenty-four (24) months prior to the last day of the Basic Term.
The Renewal
- 103 -
109
Rent for the Renewal Term shall be the "fair market rental value" of the
Aircraft for such Renewal Term (the "renewal fair market rental value") as
determined in accordance with the Appraisal Procedure. For purposes of this
paragraph (i), the Appraisal Procedure shall be initiated by Lessee no earlier
than nine (9) months prior to the end of the Basic Term. If Lessee shall fail
to exercise its option to extend the term of this Lease for the Renewal Term in
accordance with the provisions of this paragraph, all of Lessee's rights to
extend the Term for such Renewal Term shall expire. Lessee shall pay all
reasonable costs and expenses, including, without limitation, reasonable legal
fees and expenses, incurred by Lessor, Owner Participant and the Indenture
Trustee in connection with the exercise of such option.
(ii) Provisions Applicable During Renewal Term. All
provisions of this Lease, including, without limitation, as to Rent and
Stipulated Loss Values (with appropriate adjustments, an amount equal to the
greater of 120% of the "fair market sales value" of the Aircraft as of the
first day of the Renewal Term as determined pursuant to the Appraisal Procedure
or the amount set forth on Exhibit A as of the end of the Basic Term), shall
remain in effect and be applicable during such Renewal Term, except that Lessee
shall pay to Lessor, semi-annually [in advance] as Renewal Rent on each Renewal
Rent Payment Date, the amount for such Renewal Term as determined in accordance
with clause (i) of this Section 20.
Section 21. Miscellaneous.
(a) Severability, Amendment, and Construction. Any provision
of this Lease which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. To the
extent permitted by Law, [each of Lessor and] Lessee hereby waives any
provision of Law which renders any provision hereof prohibited or unenforceable
in any respect. No term or provision of this Lease may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing
expressed to be a supplement or amendment to, or waiver or termination of this
Lease signed by an officer of the party against which the enforcement of the
change, waiver, discharge, or termination is sought. This Lease shall
constitute an agreement of lease, and nothing herein
- 104 -
110
shall be construed as conveying to Lessee any right, title, or interest in the
Aircraft or any Engine or Part except as a lessee only. Without limiting the
foregoing, the parties hereto agree to treat this Agreement as a lease for
United States federal income tax purposes and Lessee will not file a tax return
which is inconsistent with the foregoing and nothing contained herein shall be
construed as an election by Lessor to treat Lessee as having acquired the
Aircraft for the purpose of the investment credit allowed by Section 38 of the
1954 Code or any similar or successor statute. The headings in this Lease are
for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
(b) GOVERNING LAW. THIS LEASE HAS BEEN EXECUTED AND DELIVERED
IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE, WITHOUT
REGARD TO PROVISIONS GOVERNING CONFLICTS OF LAW WHICH MIGHT LEAD TO THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(c) Notices. All notices required or permitted under the
terms and provisions hereof shall be in writing and shall be sent to Lessor or
Lessee at their respective addresses set forth in Exhibit C hereto (or such
other addresses as the parties may designate from time to time in writing).
Until such time as the Lien of the Indenture is discharged, all notices,
reports or other documents provided to Lessor or Lessee shall be provided
concurrently to Indenture Trustee at such address as Indenture Trustee may
designate from time to time. All notices hereunder shall become effective when
received.
(d) Lessor's 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 covenant, agreement, or obligation contained herein,
Lessor shall have the right but not the obligation to make such payment or
conform or comply with such agreement, covenant, or obligation, and the amount
of such payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance thereof or compliance
therewith, together with interest thereon at the Interest Rate, shall be
payable by Lessee to Lessor (as Supplemental Rent) upon demand. The taking of
any such action by Lessor pursuant to this Section 21(d) shall not constitute a
waiver or release of any obligation of Lessee under this Lease, nor a waiver of
any Event of Default which may arise out of
- 105 -
111
Lessee's nonperformance of such obligation, nor an election or waiver by Lessor
or any remedy or right available to Lessor under or in relation to this Lease.
(e) Counterparts. To the extent, if any, that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Lease may be created through the transfer or possession of any counterpart
other than the original counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by or on behalf of
Indenture Trustee on the signature page thereof. Subject to the preceding
sentence, this Lease may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(f) Quiet Enjoyment. Lessor covenants that, so long as no
Event of Default shall have occurred and be continuing and this Lease has not
been declared or deemed to be in default, Lessor shall not take or cause to be
taken any action to interfere with the right of Lessee to the possession, use,
operation and quiet enjoyment of and other rights with respect to the Aircraft
hereunder, and all rents, revenues, profits and income therefrom, in accordance
with the terms of this Lease without interference from Lessor or any Person
lawfully claiming by or through it and without interference from any Person
making a Claim concerning payment for or the ownership of Buyer Furnished
Equipment with respect to the Aircraft, provided, that the foregoing shall not
be deemed to have modified the obligations of Lessee pursuant to Section 4(d)
hereof, which obligations remain absolute and unconditional.
(g) Brokers. Lessee and Lessor agree that, except as provided
in the Refunding Agreement, there has been no third party as agent involved in
this Lease and each indemnifies the other from liability for fees, commissions,
or other claims made upon the other due to any such claim.
(h) Investment of Funds. Any monies which are held by Lessor
or Indenture Trustee and are payable to Lessee shall, unless a Default or an
Event of Default shall have occurred and be continuing, be invested as provided
below until paid to Lessee or applied by Lessor or Indenture Trustee to the
extent provided herein. Until paid to Lessee or applied as provided herein or
in the Indenture such monies shall be invested by Lessor or Indenture Trustee
from time to time at the expense of Lessee in Specified
- 106 -
112
Investments, as directed by Lessee in accordance with the provisions of Section
3.07 of the Indenture if the Lien of the Indenture shall not have been
discharged and thereafter as provided below. There shall be promptly (but not
more frequently than monthly) remitted to Lessee any gain (including interest
received) realized as the result of any such investment (net of any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment) unless a Default or an Event of Default shall have occurred
and be continuing. Lessee will promptly pay to Lessor or Indenture Trustee, as
the case may be, and hold Lessor or Indenture Trustee harmless from, on demand,
the amount of any loss realized as the result of any such investment (together
with any Taxes, fees, commission and other reasonable expenses, if any,
incurred in connection with such investment).
(i) Entire Agreement; Amendment. This Lease (including the
Exhibits hereto), any related letter agreements and the other Operative
Documents, the Financing Documents and the Purchase Documents (including the
Exhibits thereto) and all closing documents delivered in connection with any of
the foregoing embody the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof. This Lease may be changed,
waived, discharged, amended, revised or terminated only by an instrument in
writing signed by the party against which enforcement is sought.
(j) Expenses. Without limiting Section 13 or 18, Lessee
agrees within fifteen (15) days after demand to pay or reimburse Lessor for all
reasonable out-of-pocket costs and expenses (including, without limitation,
legal and other professional fees and expenses) incurred or payable by Lessor
in connection with or related to (i) the fees and expenses of Owner Trustee and
Indenture Trustee, (ii) to the extent requested by or relating to acts or
omissions of Lessee or as otherwise provided herein or to give effect to the
provisions hereof, or the other Operative Documents, the Financing Documents or
the Purchase Documents, any future amendments, supplements or other
modifications thereof, or waivers or consents thereunder, and (iii) any Default
or Event of Default or the enforcement of any of Lessor's rights, remedies or
privileges hereunder or at law or in equity, but not Lessor's legal fees and
expenses in connection with the negotiation and execution of this Lease or the
other Operative Documents.
(k) Federal Bankruptcy Code. In the event Section 1110 of
Title 11 of the United States Code is amended, or if
- 107 -
113
it is repealed and another statute is enacted in lieu thereof, Lessor and
Lessee agree to amend this Lease and take such other action not inconsistent
with this Lease as Lessor reasonably deems necessary so as to afford to Lessor
the rights and benefits as such amended or substituted statute confers upon
owners and lessors of aircraft similarly situated to Lessor.
(l) U.S. Registration Number. At Lessee's request, Lessor
shall use its best efforts to have the Aircraft registered under the United
States Registration Number designated by Lessee.
(m) Submission to Jurisdiction; Service of Process; Waiver of
Forum Non Conveniens; Waiver of Jury Trial. [Each of] Lessee [and Lessor]
hereby irrevocably agrees that any suit, action or proceeding related to this
Lease or any of the other Operative Documents to which it is a party or the
subject matter hereof or thereof or of any of the transactions contemplated
hereby and thereby may be instituted in, and submits for itself and its
property to the non-exclusive jurisdiction of, (i) the courts of the State of
New York in New York County and (ii) the United States District Court for the
Southern District of New York. [Each of] Lessee [and Lessor] represents and
warrants that it is not currently entitled to, and agrees that to the extent
that Lessee [or Lessor] hereinafter may acquire, any immunity (including,
without limitation, sovereign immunity) from jurisdiction of any court or from
any legal process, Lessee hereby, to the extent permitted by Law, waives such
immunity, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of the above-named courts that it is
immune from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper, or that this Lease or any of the other Operative
Documents or the subject matter hereof or thereof or any of the transactions
contemplated hereby and thereby may not be enforced in or by such courts.
[Each of] Lessee [and Lessor] hereby generally consents to service of process
by registered mail, return receipt requested, addressed to it at its address
set forth in Exhibit C, or at such other office of Lessee [or Lessor] as from
time to time may be designated by Lessee [or Lessor] in writing to Lessor or
Lessee, Foreign Lessor, Owner Participant and Indenture Trustee. [Each of]
Lessee [and Lessor] hereby agrees that
- 108 -
114
its submission to jurisdiction and its designation of service of process by
mail set forth above is made for the express benefit of Lessor, [Lessee],
Foreign Lessor, Owner Participant, Indenture Trustee, each Note Holder and
their successors and assigns. EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THE OPERATIVE DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED
THEREBY OR THE LESSOR/LESSEE RELATIONSHIP BEING ESTABLISHED, including, without
limitation, contract claims, tort claims, breach of duty claims and other
common law and statutory claims. Lessor and Lessee represent and warrant that
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with such
legal counsel. THIS WAIVER IS IRREVOCABLE, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE OPERATIVE
DOCUMENTS. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
(n) Limitation on Recourse. The parties hereto agree
that all statements, representations, covenants and agreements made by Lessor
(when made in its capacity as such and not in its individual capacity)
contained in this Agreement, unless expressly otherwise stated, are made and
intended only for the purpose of binding the Trust Estate and establishing the
existence of rights and remedies that can be exercised and enforced against the
Trust Estate. Therefore, no recourse shall be had with respect to anything
contained in this Agreement (except for any express provisions that Lessor is
responsible for in its individual capacity), against Lessor in its individual
capacity or against any institution or person that becomes a successor trustee
or co-trustee or any officer, director, trustee, servant or direct or indirect
parent or controlling Person or Persons of any of them; provided that (i) this
Section 21(n) shall not be construed to prohibit any action or proceeding
against any party hereto for its own willful misconduct or grossly negligent
conduct for which it would otherwise be liable and (ii) nothing contained in
this Section 21(n) shall be construed to limit the exercise and enforcement in
accordance with the terms of this Agreement or such other agreements of rights
and remedies against the Trust Estate. The foregoing provisions of this
Section 21(n) shall survive the termination of this Agreement and the other
Operative Documents.
- 109 -
115
(o) Successor Trustee. Lessee agrees that in the case of
the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee, succeed to all the rights, powers and title of
Lessor hereunder and shall be deemed to be Lessor and the owner of the Aircraft
for all purposes hereof without the necessity of any consent or approval by
Lessee (subject to Section 14(d) of the Refunding Agreement) and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. One
such appointment and designation of a successor Owner Trustee shall not exhaust
the right to appoint and designate further successor Owner Trustees pursuant to
the Trust Agreement, but such right may be exercised repeatedly as long as this
Lease shall be in effect.
(p) Article 2-A of the UCC. The parties hereto agree
that the Original Head Lease as amended and restated by this Second Amended and
Restated Aircraft Lease Agreement (and as otherwise extended, amended,
modified, renewed or supplemented) shall be governed by Article 2-A of the
Uniform Commercial Code of New York.
- 110 -
116
IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due
authority, have each caused this Lease to be executed by their duly authorized
officers as of the day and year first above written.
Lessor:
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely
as Owner Trustee
By:
--------------------------
Title:
Lessee:
AMERICA WEST AIRLINES, INC.
By:
--------------------------
Title:
- 111 -
117
ANNEX I
to
Second Amended and Restated Aircraft Lease Agreement
DESCRIPTION OF ORIGINAL HEAD LEASE
Aircraft Lease Agreement [GPA 1989 BN-6] dated as of September 28, 1989 between
Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-6]
dated as of December 15, 1989, as amended, as lessor, and GPA Leasing USA Sub
I, Inc., as lessee, which was recorded by the Federal Aviation Administration
on September 29, 1989 and assigned Conveyance No. G75383, as supplemented and
amended by the following described instruments:
Date of FAA FAA
Instrument Instrument Recording Date Conveyance No.
------------- ---------- -------------- --------------
Lease Supplement
[GPA 1989 BN-6]
No. 1 12/22/89 04/02/90 V79848
Amended and Restated
Aircraft Lease Agree- as of
ment [GPA 1989 BN-6] 10/01/91 11/12/91 Z91424
Lease Supplement
[GPA 1989 BN-6]
No. 2 10/24/91 11/12/91 Z91424
118
EXHIBIT A
to
Second Amended and Restated Aircraft Lease Agreement
STIPULATED LOSS VALUES
The Stipulated Loss Value of the Aircraft leased hereunder during the Term
shall be determined as of the date provided in the Lease and shall be an amount
equal to the amount shown below as of the applicable date set forth below.
Stipulated Loss
Value Date
A
119
EXHIBIT B
to
Second Amended and Restated Aircraft Lease Agreement
AIRCRAFT RECORDS AND DOCUMENTS
One original (or, if greater, the number delivered to Lessee)
of each of the following:
A. CERTIFICATES
1. Certificate of Airworthiness (FAA)
2. Lessee to supply Radio License
2a. Certificate of Sanitary Construction
B. AIRCRAFT STATUS RECORDS
3. Log Book (currently on Aircraft)
4. Airframe Maintenance Status (with time-to-go or time
since last)
5. Airworthiness Directive Compliance Report
6. Modification Status report
7. Weighing Report (most recent)
8. Accident and incident report
9. List of Life Limited Components (with time-to-go)
C. AIRCRAFT MAINTENANCE RECORDS (last heavy maintenance visits)
10. Test Flight Reports
11. Job Cards and Work Accomplishment Documents (copies)
12. X-ray pictures (most recent)
D. AIRCRAFT HISTORY RECORDS
13. Log Books
14. Aircraft Maintenance History Cards
B
120
15. Mechanical Interruption Summary
E. ENGINE RECORDS (for each engine)
16. Last overhaul and repair documents
17. Airworthiness Directive Compliance Report
18. List of Life Limited Components
19. Modification Status Report
F. APU RECORDS
20. Last Overhaul and Repair Documents
21. Airworthiness Directive Compliance Report
22. List of Life Limited Components
23. Modification Status Report
G. COMPONENT RECORDS
24. Component records maintained in accordance with a
record keeping policy approved by and acceptable to
the FAA to certify the status and maintenance
histories of the components
H. MANUALS
25. Approved Flight Manual
26. Flight Crew Operating Manual
27. Weight and Balance Manual
28. Wiring Diagram Manual
29. Illustrated Parts Catalog
I. MISCELLANEOUS TECHNICAL DOCUMENTS
30. Operations Specification
31. Passenger Cabin Configuration Drawings
J. Any other documents, manuals, reports or related information
delivered with or related to the Aircraft, updated as may be
required to reflect the current aircraft status.
B
121
EXHIBIT C
to
Second Amended and Restated Aircraft Lease Agreement
DEFINITIONS AND VALUES
Basic Rent: During the Basic Term of the
Lease, Basic Rent shall be payable in semi-annual
installments, each of which shall be in an amount equal
to the amount, and in advance, as set forth in Schedule
I hereto.
Basic Rent
Payment Date: Each such date set forth as such on Schedule I hereto.
Delivery
Location: Toulouse, France.
Manufacturer: Airbus Industrie
Maximum Foreign
Use Percentage: The Permitted Percentages as defined in the
Original Head Lease Tax Indemnification Agreement.
Payment Location: So long as the Lien of the Indenture shall remain
in effect, Citibank, N.A., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ for the account of The Chase Manhattan
Bank, as successor in interest to Manufacturers
Hanover Trust Company, Account No. _____ and
thereafter (and at all times with respect to
Excepted Payments) _____, for the account of _____
Account No. _____.
Renewal Rent: During the Renewal Term of the Lease, Renewal Rent shall
be payable in installments, semi-annually in advance.
Renewal Rent
Payment Date: The same day and month during each year of the Renewal
Term on which Basic Rent was due (the Basic Rent
Payment Dates). If a Renewal Rent Payment Date shall
fall on a day which is not a Business Day, any
C
122
payment due on such Renewal Rent Payment Date shall be
made on the next succeeding Business Day.
Restricted Use
Period: On and after the Delivery Date until and including the
last day of the Owner Participant's seventh full
fiscal year after the Delivery Date.
Lease
Identification: A fireproof metal plate bearing the following legend:
"Title to this Aircraft is held by Wilmington
Trust Company, not in its individual capacity but solely
as Owner Trustee, as Lessor, which is the registered
owner thereof on the U.S. FAA Aircraft Registry, and
which has leased this Aircraft to America West Airlines,
Inc., as Lessee" and, for so long as the Lien of the
Indenture shall not have been discharged, bearing the
following additional legend: "Mortgaged to The Chase
Manhattan Bank as Indenture Trustee."
Lessee's
Address: America West Airlines, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telex: 755089 (Answerback: AMERWEST)
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Senior Vice President -
Legal Affairs
Lessor's
Address: Wilmington Trust Company
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: ( )
Attention:
C
123
EXHIBIT D-1
to
Second Amended and Restated Aircraft Lease Agreement
LEASE SUPPLEMENT NO. 3
LEASE SUPPLEMENT NO. 3, dated November __, 1996, between
WILMINGTON TRUST COMPANY, a Delaware corporation (not in its individual
capacity but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-6]
dated as of September 22, 1989, as amended and supplemented to the date hereof
(together with its successors and assigns, "Lessor"), and AMERICA WEST
AIRLINES, INC., a Delaware corporation (together with its successors,
"Lessee").
Lessor and Lessee have heretofore entered into that certain
Second Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-6] dated as
of September 22, 1989, as Amended and Restated as of October 1, 1991, and as
further Amended and Restated as of November __, 1996 (as further amended,
supplemented or otherwise modified from time to time, herein called the "Lease
Agreement," and the defined terms therein being hereinafter used with the same
meaning) and that certain Lease Supplement [GPA 1989 BN-6] No. 1 dated December
22, 1989 ("Lease Supplement No. 1") and Lease Supplement [GPA 1989 BN-6] No. 2
dated October 24, 1991 ("Lease Supplement No. 2"). The Lease Agreement
provides for the execution and delivery from time to time of a Lease Supplement
substantially in the form hereof for the purpose of leasing the aircraft
described below (or confirming the leasing of the aircraft described below)
under the Lease Agreement as and when delivered by Lessor to Lessee in
accordance with the terms thereof.
The Lease Agreement relates to the aircraft, parts and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof, and this Lease Supplement, together with such
attachment, is being filed for recordation on the date hereof with the FAA 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 confirms that it has delivered and leased to
Lessee under the Lease Agreement on December 22, 1989 as evidenced by Lease
Supplement No. 1, and Lessee hereby confirms that it has accepted and leased
from Lessor
D-1
124
under the Lease Agreement on December 22, 1989 as evidenced by Lease Supplement
No. 1, that certain Airbus Model A320-231 commercial jet aircraft airframe and
two IAE V2500 engines (each of which Engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower) described in Schedule 1 hereto
(the "Delivered Aircraft").
2. The Delivery Date of the Delivered Aircraft is December
22, 1989.
3. The Basic Term for the Delivered Aircraft shall commence
on the Delivery Date and shall end on the Expiration Date, which shall be July
2, 2013 unless the Lease is extended or terminated prior thereto in accordance
with the terms thereof.
4. Lessee hereby agrees to and confirms its obligation to pay
Rent (as defined in the Lease Agreement) in the amounts and at the times
provided in the Lease Agreement.
5. Lessee hereby confirms to Lessor that (i) the Delivered
Aircraft and each Engine installed thereon or belonging thereto have been duly
marked in accordance with the terms of Section 6(e) of the Lease Agreement, and
(ii) Lessee has accepted the Delivered Aircraft for all purposes of Lease
Supplement No. 1 as further supplemented by Lease Supplement No. 2, hereof and
of the Lease Agreement, and the Delivered Aircraft is (A) as far as Lessee
reasonably ascertained from the acceptance procedures provided for in the
Purchase Agreement airworthy, in accordance with specifications, and in good
working order and repair, it being understood that Lessee by this confirmation
is not giving any warranty of any kind with respect to the Aircraft, and (B)
free and clear of all Liens except Permitted Liens.
6. All of the terms and provisions of the Lease Agreement,
including, without limitation, as to governing law, are hereby incorporated by
reference in this Lease Supplement No. 3 to the same extent as if fully set
forth herein.
7. This Lease Supplement No. 3 may be executed in any number
of counterparts; each of such counterparts, except as provided in Section 21(e)
of the Lease Agreement, shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same Lease
Supplement. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is
D-1
125
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Supplement may be created
except by the transfer or possession of the counterpart containing the printed
receipt therefor executed by Indenture Trustee on the signature page hereof.
D-1
126
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement No. 3 to be duly executed as of the day and year first above
written.
Lessor:
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely
as Owner Trustee
By:
-------------------------------
Title:
Lessee:
AMERICA WEST AIRLINES, INC.
By:
-------------------------------
Title:
D-1
127
The undersigned acknowledges receipt of this original
counterpart of the foregoing Lease Supplement on this _______ day of November
__, 1996 and consents to the terms hereof.
THE CHASE MANHATTAN BANK, AS
SUCCESSOR IN INTEREST TO
MANUFACTURERS HANOVER TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:
-------------------------------
Title:
----------------------------
D-1
128
SCHEDULE 1
to
LEASE SUPPLEMENT NO. 3
Airbus Model A320-231
Airframe
U.S. Registration No. Manufacturers Serial No.
N626AW 65
Installed
IAE
Engines
Model No. Serial No.
V2500 V0090
V2500 V0093
▇-▇
▇▇▇
▇▇▇▇▇▇▇ ▇-▇
to
Second Amended and Restated Aircraft Lease Agreement
LETTER OF CREDIT
D-2
130
EXHIBIT E
to
Second Amended and Restated Aircraft Lease Agreement
RETURN CONDITION REQUIREMENTS
In addition to the requirements set forth in Section 16 of the
Lease, on any Return Occasion with respect to the Aircraft, Lessee, at its own
cost and expense, shall return the Aircraft in compliance with the following:
(1) The Aircraft shall have at all times theretofore been
maintained and modified in accordance with Sections 6(d) and 9 hereof with the
same care, maintenance status and consideration for the technical condition of
the Aircraft as if such Aircraft were owned and were to have been kept in
continued regular service by Lessee, without discrimination as to any other
similar aircraft owned or leased by Lessee.
(2) The Aircraft shall be clean by good commercial airline
standards as on the Delivery Date with only such modifications to the Aircraft
as are permitted under this Lease.
(3) The Aircraft shall have installed the full complement of
Engines (as used herein the term "Engines" includes engines for which title
will be transferred to Lessor pursuant to Section 16(c)) and other equipment,
parts, components, accessories, and loose equipment subleased hereunder or
substituted therefor, each such item functioning in accordance with its
intended use.
(4) Lessee, at Lessor's request, shall activate any systems
installed on the Aircraft previously deactivated by Lessee and shall assure
each such system is properly functioning for its intended use.
(5) Each Engine shall have just completed a hot and cold
section baroscope and/or radiographic isotope inspection by Lessor (at Lessee's
cost and expense) of the low and high pressure compressors and turbine area,
and shall have just completed engine condition runs, and any discrepancies
detected shall be corrected at Lessee's cost and expense in accordance with the
Manufacturer's maintenance policies and procedures.
(6) Lessee's name, logo, and all other exterior markings shall
have been removed in a good and workmanlike manner from the Aircraft and the
Aircraft shall have been
E
131
repainted in a good and workmanlike manner in the livery specified by Lessor.
(7) The Aircraft shall have simultaneously with such return
completed a "block 'C' Check" or the equivalent level designated check or
checks (inclusive of all phases of a "block 'C' Check" or equivalent level
designated check if the Maintenance Program is a "phase" program), in
accordance with Lessee's Maintenance Program such that all inspections and
airworthiness directives having terminating actions due within the next "block
'C' Check" or equivalent level designated check(s), and all other actions as
per the Manufacturer's minimum recommendations in its then current maintenance
planning document for such check or checks, shall have been accomplished
immediately prior to redelivery.
(8) Neither the Aircraft nor any Engine shall have any
scheduled or unscheduled open or deferred maintenance items or placards.
(9) No Engine shall be on "Watch" and each Engine shall comply
with Lessee's Maintenance Program without waiver, deviations or exceptions.
(10) Each landing gear assembly shall have no less than 50% of
allowable hours or cycles, whichever is the more limiting factor, under
Lessee's Maintenance Program, remaining until the next scheduled overhaul or
replacement.
(11) Each Engine shall have not less than 5,000 hours or 5,000
cycles, whichever is the more limiting factor, remaining on any hour or cyclic
limited part, and each Engine shall have not more than 5,000 hours or 5,000
cycles, whichever is the more limiting factor, since the last engine compressor
refurbishment, and each Engine shall have not more than 2,500 hours or 2,500
cycles, whichever is the more limiting factor, since its last turbine
restoration, based on Lessee's historical experience of engine on-wing service
life or based on Lessee's hard time engine overhaul limit if in effect. The
Engine hour and cycle limits described herein shall be in accordance with
Lessee's Maintenance Program and the manufacturer's mandatory hour and cyclic
life limits and presumes an hour-to-cycle ratio of two (2.0) hours to one (1)
cycle. If the actual hour-to-cycle ratio is less than 2.0:1, then the cyclic
limit amounts described herein shall be increased proportionately.
E
132
(12) Each cycle, time or calendar controlled component in
accordance with Lessee's Maintenance Program or the Manufacturer's mandatory
life limits shall have no less than twelve months or 5,000 hours or 5,000
cycles, whichever is the more limiting factor, remaining until the next
scheduled overhaul or replacement or 100% of the allowable time if less than
twelve months.
(13) The Airframe shall be returned to Lessor with not less
than fifty percent (50%) of the total scheduled period between scheduled Major
Structural Inspections of the most comprehensive type (currently referred to as
an "eight year" heavy structural inspection" or "8C" inspection under the
Manufacturer's maintenance planning document in effect on the date hereof) with
respect to allowable hours, cycles or calendar months, whichever is the more
limiting factor, remaining until the next scheduled Major Structural Inspection
of the most comprehensive type, including, without limitation, the replacement
of any safe-life limited parts, required in accordance with the Lessee's then
current Maintenance Program or the Manufacturer's mandatory life limits and,
therefore, at a minimum, having just completed a "four-year heavy structural
inspection" or "4C" inspection as referred to in the Manufacturer's maintenance
planning document in effect on the date hereof.
(14) All software associated with or relating to any on-board
avionic equipment must be delivered to Lessor and be in a condition complying
with the Manufacturer's then recommended standards.
E
133
EXHIBIT F-1
to
Second Amended and Restated Aircraft Lease Agreement
FOREIGN AIR CARRIERS
Aer Lingus
Air Canada
Air France (Compagnie Nationale Air France)
Air New Zealand, Ltd.
Alitalia - Italy's World Airlines
Ansett Airlines of Australia
Australian Airlines
Austrian Airlines (Oesterreichische Luftverkehrs AG)
British Airways
Canadian Airlines International Ltd.
Cathay Pacific
Deutsche Lufthansa Aktiengesellschaft (Lufthansa German
Airlines)
Finnair Oy
Iberia
KLM - Royal Dutch Airlines (Koninklijke Luchtvaart
Maatschappij)
Korean Air
Malaysian Airlines
QANTAS
Sabena Belgian World Airlines (Societe Anonyme Belge
D'Exploitation De La Navigation Aerienne)
Scandinavian Airlines Systems (SAS)
Singapore Airlines
Swissair (Swiss Air Transport Company Ltd.)
TAP Air Portugal (Transportes Aeros Portugeses)
Thai Airways International Ltd.
Toa Domestic Airlines - TDA
Union Des Transports Aeriens
Varig S.A. (Viacao Aerea Rio-Grandense S.A.)
(a) Lessor may at any time, by written notice to Lessee, propose the deletion
of particular airlines from the above list of Foreign Air Carriers (as the same
may be amended pursuant to this provision) based upon Lessor's reasonable
judgment. Lessee may at any time, by written notice to Lessor, propose the
addition of particular airlines to such list of Foreign Air Carriers based upon
Lessee's reasonable judgment and which are comparable to the above airlines.
(b) If Lessee has not objected in writing to the deletion of a particular
airline proposed by Lessor as provided in paragraph (a) of this Exhibit, or if
Lessor has not objected
F-1
134
in writing to the addition of a particular airline proposed by Lessee as
provided in paragraph (a), in each case within thirty (30) days after receipt
of notice of such proposal, the list of Foreign Air Carriers shall be deemed
amended without further act to delete or add such airline. If Lessee or Lessor
delivers a timely objection in writing to a proposal made by the other pursuant
to paragraph (a), each party agrees to consult promptly at the request of the
other in a good-faith effort to resolve the disagreement through negotiation;
provided, however, that an airline which Lessor has proposed to delete shall be
deleted from such list if there will be at least twenty (20) or such lesser
number as Lessor and Lessee shall reasonably determine, if the number of
airlines of a type similar to the airlines listed above which may be included
within the definition of Foreign Air Carriers is substantially reduced as a
result of consolidation in the airline industry other airlines remaining on
such list after giving effect to such deletion and any other deletions then
proposed by Lessor.
(c) Notwithstanding any other provision hereof, no addition shall be made, and
an airline shall be deleted from such list if, such airline would not be
permitted to be a lessee under the provisions of the Lease, and no deletion of
an airline from the list of Foreign Air Carriers pursuant to this Exhibit shall
affect any existing sublease or other agreement providing for transfer of
possession of the Aircraft, the Airframe or any Engine or Part which was
permitted under the Lease at the time entered into, or preclude any subsequent
renewal or extension of such sublease or other agreement.
F-1
135
EXHIBIT F-2
to
Second Amended and Restated Aircraft Lease Agreement
PERMITTED FOREIGN SUBLESSEE DOMICILES
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Egypt Portugal
Finland Republic of China (Taiwan)*
France Singapore
Germany South Africa
Greece South Korea
Hungary Spain
Hong Kong Sweden
Iceland Switzerland
India Thailand
Indonesia Tobago
Ireland Trinidad
Italy United Kingdom
Luxembourg Uruguay
Malaysia Venezuela
------------------------
* So long as on the date of entering into the proposed sublease such
country and the United States have diplomatic relations at least as
good as those in effect on the Restatement Date.
(a) Lessor may at any time, by written notice to Lessee, propose the deletion
of a particular country from the above list of Permitted Foreign Sublessee
Domiciles (as the same may be amended pursuant to this provision) based upon
Lessor's reasonable judgment. Lessee may at any time, by written notice to
Lessor, propose the addition of particular countries which are comparable to
the above countries to such list of Permitted Foreign Sublessee Domiciles based
upon Lessee's reasonable judgment.
(b) If Lessee has not objected in writing to the deletion of a particular
country proposed by Lessor as provided in
F-2
136
paragraph (a) of this Exhibit, or if Lessor has not objected in writing to the
addition of a particular country proposed by Lessee as provided in paragraph
(a), in each case within thirty (30) days after receipt of notice of such
proposal, the list of Permitted Foreign Sublessee Domiciles shall be deemed
amended without further act to delete or add such country. If Lessee or Lessor
delivers a timely objection in writing to a proposal made by the other pursuant
to paragraph (a), each party agrees to consult promptly at the request of the
other in a good-faith effort to resolve the disagreement through negotiation.
(c) Notwithstanding any other provision hereof, no deletion of a country from
the list of Permitted Foreign Sublessee Domiciles pursuant to this Exhibit
shall affect any existing sublease or other agreement providing for transfer of
possession of the Aircraft, the Airframe or any Engine or Part which was
permitted under the Lease at the time entered into, or preclude any subsequent
renewal or extension of such sublease or other agreement.
F-2
137
EXHIBIT G
to
Second Amended and Restated Aircraft Lease Agreement
OPINION OF LESSEE'S SPECIAL COUNSEL
G