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EXHIBIT 4.30
AMENDED AND RESTATED ENGINE LEASE AGREEMENT
THIS AMENDED AND RESTATED ENGINE LEASE AGREEMENT dated as of March
15, 1991 and amended and restated as of November 26, 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 1991 AWA-E1] dated as of March 15, 1991, 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 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 "Assigned Sublease", "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", "Sublease Assignment", "Trust Company", and "Trust Indenture
Estate" shall have the meanings specified in the Indenture; the terms
"Intercreditor Agreement", "Liquidity Facility", "Liquidity Provider" and
"Subordination Agent" shall have the meanings specified in the Intercreditor
Agreement (as
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defined in the Pass Through Trust Agreement); and the term "Lease Amendment No.
1" shall have the meaning specified in the Refunding Agreement.
"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 elect or cause the direction or election of the
management and policies of a Person whether by contract or otherwise.
"Appraisal Procedure" shall mean the following procedure for
determining the "fair market sales value" or "fair market rental value" of the
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 the 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 the Engine or such 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 the Engine or such 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 Engine 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 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
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appraiser does not 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 the Engine or such 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 the Engine or
such 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 the Engine
or such 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 Engine shall mean the Basic Rent specified in
Exhibit C and payable throughout the Basic Term for the Engine 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
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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.
2.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in New York, New York or Hartford,
Connecticut are authorized or required by Law to be closed.
"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, and
the rules and regulations promulgated thereunder.
"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.
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"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 March 27, 1991 being the date the Engine
was delivered to and accepted by the Original Head Lessee as Lessee hereunder
for all purposes of this Lease.
"$" and "dollars" shall mean the lawful currency of the United
States of America.
"Engine" shall mean (i) the IAE Model V2500-A1 engine listed by
manufacturer's serial number in Lease Supplement No. 1, (ii) Parts or components
thereof, (iii) ancillary equipment or devices furnished therewith under this
Lease (including any separate equipment described on one or more Lease
Supplements hereto), (iv) the Engine Records and Documents and all other manuals
and records with respect to such Engine, and (v) all substitutions, replacements
and renewals of any and all thereof, including but not limited to, any
replacement engine which may from time to time be substituted, pursuant to
Section 6(a) or 11(a), for the 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. 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.
"Engine Records and Documents" shall mean the items identified in
Exhibit B hereto, all of which shall be maintained in the English language.
"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 Engine: (a) loss of such property or the use thereof due to theft or
disappearance for a period in excess of sixty (60) consecutive days, but in no
event later than the last day of the Term;
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(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 involve
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 law, rule, regulation,
order or other action by the FAA, the Department of Transportation or any other
Governmental Entity having jurisdiction, the use of the 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 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 beyond the last day of the Term; or (h)
as otherwise provided herein.
"Expiration Date" shall mean the date specified in Lease Supplement
No. 2, on which date the Basic Term of this Lease shall expire.
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"FAA" shall mean the Federal Aviation Administration of the United
States Department of Transportation or any successor agency.
"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, Lease Amendment No. 1, the Trust Agreement, each Trust Supplement,
the Indenture, each Indenture Supplement, 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
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
Engine by such jurisdiction and, to the extent not inconsistent therewith, all
FAA-airworthiness directives and other requirements made mandatory to the Engine
by the FAA.
"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.
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"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, any sublessee, the Engine or its
operations.
"GPA Aircraft" shall mean any aircraft which is the subject of any
of the Other Leases.
"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 Lessor (in its individual capacity and as
trustee under the Trust Agreement), the Trust Estate, Owner Participant, the
Trust Indenture Estate, Indenture Trustee (in its individual capacity and as
trustee under the Indenture) and 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, their respective
successors and permitted assigns and (and, in the case of a permitted assign of
Owner Participant that is a partnership, the partners of such partnership), and
any combination thereof and their respective officers, directors, agents,
servants, employees, subsidiaries, Affiliates and shareholders.
"Indenture" shall mean the Amended and Restated Trust Indenture and
Security Agreement [GPA 1991 AWA-E1] dated as of March 15, 1991, and amended and
restated as of November 26, 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.
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"Interest Rate" shall mean (i) with respect to the portion of any
payment of Rent that may be required by the 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 360-day year 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, 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 and Lease
Supplement No. 2 and each subsequent Lease Supplement entered into hereunder.
"Lease Supplement No. 1" shall mean Lease Supplement [GPA 1991
AWA-E1] No. 1 dated March 27, 1991 between Lessor and Original Head Lessee, as
Lessee.
"Lease Supplement No. 2" shall mean Lease Supplement [GPA 1991
AWA-E1] No. 2, substantially in the
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form of Exhibit D-1 hereto, entered into between Lessor and Lessee on the
Restatement Date for the purpose of confirming the leasing of the Engine
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 Engine or any
other portion of the Trust Estate or the Trust Indenture Estate arising as a
result of (i) Claims against Indenture Trustee in its individual capacity (and
not as Indenture Trustee) not related to its interest in the Engine 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 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 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 their Affiliates not
expressly contemplated by this Lease or the other Operative Documents, the
Financing Documents or the Purchase Documents or not permitted without consent
(which consent has not been
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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 or by Original Head Lessee under the Original Head Lease Tax
Indemnification Agreement; (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 Engine, the
Trust Estate, the Operative Documents or the Financing Documents other than any
transfers or dispositions pursuant to Sections 2, 6, 9, 11, 16, 18, 19 (except
Liens resulting from a transfer not permitted by such Section ) or 20 of this
Lease or pursuant to Section 10 of the Refunding 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 Engine 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 or Lenders' Liens.
"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
which is applicable to IAE AG V2500 Engines in effect on the date hereof or as
modified with the approval of the FAA without affecting, or any other FAA
approved maintenance program which does not affect, the return condition
standards set forth in Section 16 and Exhibit E or (ii) if the Engine is subject
to a Permitted Sublease to a Foreign Air Carrier any other FAA approved
maintenance program for the Engine which is approved by the aviation authority
of the country of
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registry and complies with the requirements applicable to maintenance of the
Engine contained in the definition of Foreign Air Carrier. The Maintenance
Program shall encompass scheduled maintenance, condition monitored maintenance,
and on-condition maintenance of the Engine, 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 IAE in its capacity as manufacturer of the
Engine, together with any subcontractor or supplier thereof.
"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,
any sublease, the Tax Indemnification Agreement, the Financing Documents, that
certain letter dated as of the Restatement Date and any certificate delivered or
entered into pursuant to the foregoing, as amended, supplemented or otherwise
modified.
"Original Head Lease" shall mean this Engine Lease Agreement [GPA
1991 AWA-E1], with respect to the Aircraft, dated as of March 15, 1991, 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
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Agreement [GPA 1991 AWA-E1], dated as of March 15, 1991, and amended and
restated as of the Restatement Date between the Original Head Lessee and Owner
Participant, as amended, supplemented or otherwise modified from time to time.
"Original Head Lessee" shall mean GPA Leasing USA I, Inc., a
Connecticut corporation.
"Original Sublease" shall mean the Initial Sublease (as defined in
the Original Head Lease) as in effect immediately prior to the Restatement Date.
"Other Leases" shall mean the Amended and Restated Aircraft Lease
Agreement [GPA 1989 BN-12] amended and restated as of the Restatement Date
between Wilmington Trust Company as Owner Trustee, Lessor, and America West
Airlines, Inc. as Lessee, the Amended and Restated Aircraft Lease Agreement [GPA
1990 AWA-13] amended and restated as of the Restatement Date between Wilmington
Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as
Lessee, the Amended and Restated Aircraft Lease Agreement [GPA 1990 AWA-14]
amended and restated as of the Restatement Date between Wilmington Trust Company
as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee, the Amended
and Restated Aircraft Lease Agreement [GPA 1990 AWA-15] amended and restated as
of the Restatement Date between Wilmington Trust Company as Owner Trustee,
Lessor, and America West Airlines, Inc. as Lessee, the Amended and Restated
Aircraft Lease Agreement [GPA 1990 AWA-16] amended and restated as of the
Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and
America West Airlines, Inc. as Lessee, the Amended and Restated Engine Lease
Agreement [GPA 1991 AWA-E2] amended and restated as of the Restatement Date
between Wilmington Trust Company as Owner Trustee, Lessor and America West
Airlines, Inc. as Lessee, and the Amended and Restated Engine Lease Agreement
[GPA 1991 AWA-E3] amended and restated as of the Restatement Date between
Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines,
Inc. as Lessee, each as amended, supplemented or otherwise modified from time to
time.
"Other Letters of Credit" shall mean any and all letters of credit
pursuant to Section 8(l) of the Other Leases.
"Owner Participant" shall mean _____________ ___________________, a
Delaware corporation, as Owner Participant under the Trust Agreement, and its
successors and permitted assigns.
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"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.
"Participation Agreement" shall mean the Participation Agreement
[GPA 1991 AWA-E1], dated as of March 15, 1991, among Original Head Lessee,
Parent, Owner Participant, Owner Trustee, Indenture Trustee and the "Lender"
named therein, as amended by the Letter Agreement dated as of July 29, 1993, as
the same may be further amended, supplemented or otherwise modified from time to
time and as in effect immediately prior to the Restatement Date.
"Parts" shall mean all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
which may now or from time to time be incorporated or installed in or attached
to or were provided by the Manufacturer with the 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 Engine. 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 or (c) any other Person
approved in writing by the Owner Participant and the Indenture Trustee.
"Person" shall mean and include any individual person, corporation,
partnership, firm, joint stock company,
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▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇, 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 Engine Sale Agreement dated as
of September 28, 1990, among IAE and Original Head Lessee, as the same may be
amended, supplemented or otherwise modified to the extent permitted by the terms
thereof from time to time.
"Purchase Documents" shall mean the Purchase Agreement 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.
If a Renewal Rent Payment Date shall fall on a day which is not a Business Day,
any payment due on such Renewal Rent Payment Date shall be made on the next
succeeding Business Day.
"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 Engine" shall have the meanings specified in accordance
with its 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.
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"Return Occasion" shall mean the event that occurs when possession
of the Engine 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.
"Shipping Stand" shall mean the cradle designed to hold an engine
which has a suitable shock mounting system to allow the engine to be transported
by truck or other vehicle without damage, listed by part number and
manufacturer's serial number in Lease Supplement No. 1.
"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 the
▇▇▇▇▇▇▇▇ 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
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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 the event that it is
necessary to determine a separate Stipulated Loss Value for the Engine, such
Stipulated Loss Value shall be based on the ratio that the original cost to
Lessor of the Engine bears to Lessor's Cost (as set forth in the Original Head
Lease) for the Engine.
"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 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 (a) an incipient Event of
Loss and the operation of Section 11 hereof or (b) the need to correct any
failure of the Engine to satisfy the requirements of Section 16 and Exhibit E
hereof; (iv) [Intentionally Left Blank]; (v) an amount equal to any payment due
to the Owner Trustee in respect of fees or expenses as provided in Section 21(j)
hereof; (vi) an amount equal to any payment due to the Indenture Trustee in
respect of fees or expenses as provided in the Indenture and/or Section 21(j)
hereof; (vii) the 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;
(viii) the Pro Rata Share of any payment due to the Subordination Agent in
respect of fees, compensation, costs or expenses pursuant to the Intercreditor
Agreement; (ix) an amount equal to the amount specified in clause (b) of the
fourth paragraph of Section 2.02 of the Indenture; and (x) to the extent
permitted by applicable Law, interest at the Interest Rate calculated: (1) on
any part of any installment of Basic Rent or Renewal Rent, or average daily
Basic Rent referred to in clause (iii) of this definition of "Supplemental
Rent", not paid on the due 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, "Pro Rata
Share" means as of any date of determination a fraction the numerator of which
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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 Indentures
(as defined in the Intercreditor Agreement).
"Tax Indemnification Agreement" shall mean the Amended and Restated
Sublease Tax Indemnification Agreement [GPA 1990 AWA-E1], dated as of December
12, 1990, and as amended and restated as of November 26, 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.
"Taxing Authority" shall have the meaning specified in Section
10(a).
"Term" shall mean, collectively, the Basic Term specified in Lease
Supplement No. 2 and the Renewal Term, if Lessee extends the Term in accordance
with Section 20, in either case, as extended or deemed extended as a result of
the occurrence of an event described in clause (iii) to the definition of
"Supplemental Rent" in this Lease, for which the Engine is leased hereunder
pursuant to Section 2.
"Trust Agreement" shall mean the Trust Agreement [GPA 1991 AWA-E1]
dated as of March 15, 1991 as amended by Trust Supplement No. 1, and as further
amended by Trust Supplement No. 2, 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 each Trust Supplement.
"Trust Estate" shall have the meaning specified in the Trust
Agreement.
"Trust Supplement" shall mean Trust Supplement No. 1 and Trust
Supplement No. 2 and each subsequent Trust Supplement entered into thereunder
and any further supplement to the Trust Agreement.
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"Trust Supplement No. 1" shall mean Trust Agreement Supplement [GPA
1991 AWA-E1] No. 1 dated the Delivery Date 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
1991 AWA-E1] No. 2 dated the Restatement Date between Lessor and Owner
Participant conforming the references in the Trust Agreement 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 Engine to a third party pursuant to which such Engine (i) shall be
operated solely by regular employees of Lessee possessing all current
certificates and licenses required under the Federal Aviation Act (it is
understood that cabin attendants need not be regular employees of Lessee) and
Lessee otherwise maintains operational control and possession thereof, and (ii)
shall be maintained by Lessee in accordance with its normal maintenance
practices and this Lease to which the Engine is subject, and otherwise the
insurance required hereunder shall be maintained and the Engine shall be used
and operated in accordance with this Lease.
Section 2. Agreement to Lease. Lessor hereby agrees to lease the
Engine to Lessee, and Lessee hereby agrees to lease the Engine from Lessor, on
the terms and subject to the conditions set forth in this Lease.
Section 3. Delivery and Acceptance; Term.
(a) Time of Delivery. The Engine was delivered to Lessee, and Lessee
accepted delivery of the Engine, on March 27, 1991.
(b) [Intentionally Left Blank.]
(c) Acceptance of Engine. The Engine 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 Engine for all
purposes of this Lease and Lessee's
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acceptance of the Engine was conclusive evidence that, as between Lessor and
Lessee, the Engine 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.
Section 4. Rent.
(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 arrears as set
forth on Schedule I attached to Exhibit C, due and payable on each Basic Rent
Payment Date to the Lessor; and
(ii) Supplemental Rent. Any and all Supplemental Rent, which
shall be due and payable ten (10) Business Days after demand unless otherwise
specifically provided. In the event of any failure on the part of Lessee 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 or Renewal Rent. Lessee's obligation to pay Supplemental
Rent which is due and owing pursuant to the terms hereof shall survive the
expiration or termination of Lessee's obligation to pay Basic Rent or Renewal
Rent hereunder.
(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
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reason of (A) any attachment or diversion of Rent on account of any Lessor's
Lien or 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 or as directed by 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 or Hartford, Connecticut as Indenture
Trustee may direct by thirty (30) days prior written notice to Lessee, except
for all Excepted Payments. 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 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
Engine, or any other Person, for any reason whatsoever (whether in connection
with the transactions contemplated hereby or otherwise), including, without
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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 Engine (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 Engine or any other Person; (iii)
any Liens with respect to the Engine; (iv) the invalidity or unenforceability or
lack of due authorization or other infirmity of this Lease or any sublease 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 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, 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 Engine 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
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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.
Section 5. Representations, Warranties and Covenants.
(a) Warranties and Disclaimer of Warranties.
THE ENGINE WAS DELIVERED AND IS BEING LEASED BY LESSOR TO
LESSEE "AS IS" AND "WHERE IS". LESSEE EXPRESSLY AGREES THAT IT TOOK THE ENGINE
ON SUCH BASIS. LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF
HAVING LEASED THE ENGINE UNDER THIS LEASE OR BY HAVING ACQUIRED THE ENGINE OR
DONE OR FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER
OR IN RELATION TO THIS LEASE, AND NEITHER LESSOR NOR OWNER PARTICIPANT HAS MADE,
AND LESSOR FOR ITSELF AND OWNER PARTICIPANT, 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 ENGINE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
ENGINE, 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 ENGINE, INCLUDING WITHOUT LIMITATION ANY
LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT
LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR
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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 ENGINE) 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 ENGINE OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN
CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE ENGINE 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 ENGINE. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS
SECTION 5(a)(i) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR
WARRANTIES WHATSOEVER WITH RESPECT TO THE ENGINE, EXPRESS OR IMPLIED, AND LESSOR
SHALL NOT BE DEEMED TO HAVE 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: (A) Lessor represents and warrants that, (x) on the Delivery Date, Lessor
had, and on the Restatement Date Lessor has, the right to lease the Engine
hereunder and (y) on the Delivery Date the Engine was free of Head Lessor's
Liens and on the Restatement Date the Engine is free of Lessor's Liens and Head
Lessor's Liens and (B) Lessor covenants that it shall not create, incur, assume
or suffer to exist any Lessor's Lien on the Engine.
(b) Representations and Warranties of Lessor. Lessor hereby
represents and warrants, 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.
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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 Engine 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 Engine
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 propulsion
system performance guaranty, of the Manufacturer or Manufacturer's subsidiary,
if any, or any subcontractor or vendor with respect thereto under the Purchase
Documents (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 Engine), 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
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THE ENGINE; 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 Engine 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:
(1) subject the 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 Lessor has been given an opportunity to review the
interchange, maintenance, servicing, pooling or similar arrangement,
including but not limited to all agreements and other documents relating
thereto and has consented, which consent shall not be unreasonably
withheld, to the placement of the Engine into such interchange,
maintenance, servicing, pooling or similar arrangement and provided,
further that (A) no transfer of the registration of the Engine shall be
effected in connection therewith and (B) (i) no such agreement or
arrangement contemplates, results in or requires the transfer of title to
the Engine, and (ii) if Lessor's title to the Engine shall be divested
under any such agreement or arrangement, such divestiture shall be deemed
to be an Event of Loss with respect to the Engine and not an Event of
Default and Lessee shall comply with Section 11(a) hereof in respect
thereof;
(2) deliver possession of the Engine to the
Manufacturer, or in accordance with the Maintenance Program to an FAA
certified repair station, for testing, service, storage, repair,
maintenance, inspection or overhaul work on the Engine or any part thereof
or for alterations or modifications in or additions to the Engine to the
extent required or permitted by the terms of Section 9 hereof;
(3) transfer possession of the Engine to the United
States of America or any instrumentality or agency thereof pursuant to a
sublease;
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(4) (i) subject the Engine to the Civil Reserve Air
Fleet Program and transfer possession of the 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
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;
(ii) subject the Engine to (a) a service contract
with the United States Government, a copy of which shall be provided to
Lessor, providing for 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 the Engine on an airframe owned by Lessee
free and clear of all Liens except (A) Permitted Liens and Liens which
apply only to engines (other than the Engine), 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 the engine installed thereon;
(6) install the 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 the 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 the Engine on any
airframe subject to the Lien of such mortgage, unless and until Lessee
shall become the owner of the 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
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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 the Engine
by reason of the 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;
(7) install the 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 the Engine
and Lessee shall comply with Section 11(a) hereof in respect thereof,
Lessor not intending hereby to waive any right or interest it may have to
or in the Engine under applicable Law until compliance by Lessee with such
Section 11;
(8) enter into a Wet Lease for the aircraft on which the
Engine is installed in the ordinary course of Lessee's business for a
period not extending beyond the Term; provided that if Lessee shall enter
into any Wet Lease for a period of more than six months (including renewal
options) Lessee shall provide to Lessor written notice of such Wet Lease
(such notice to be given at least ten (10) Business Days prior to entering
into such Wet Lease); or
(9) sublease the Engine 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 the Engine which is deemed to have been an Event of
Loss) and any Wet Lease shall be expressly subject and
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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 and under the other
Operative Documents 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 the
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;
(3) During the Restricted Use Period, no Wet Lease,
Permitted Sublease or other relinquishment of possession of the 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 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);
(5) No transfer, Wet Lease, Permitted Sublease or other
relinquishment of possession of the Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor or any other Person
hereunder for which obligations Lessee shall remain primarily liable;
(6) The sublessee under any Permitted Sublease, in its
consent thereto, shall confirm that from and after the occurrence and
continuance of an Event of Default and, unless an Event of Default
specified in Section 17(e), (f) or (g) of this Lease has occurred and is
continuing, this Lease being deemed or declared in default, Lessor (and,
so long as the Lien of the Indenture shall not have been discharged,
Indenture Trustee) shall be entitled to enforce directly and in its own
name all representations,
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warranties, indemnities, covenants and agreements under the applicable
Permitted Sublease; and
(7) Each Permitted Sublease shall (A) provide that (I)
the Engine may not be operated or used other than as provided in this
Lease and shall be maintained and operated as required hereunder, (II)
Lessor may avoid or terminate such sublease following an Event of Default
hereunder and (III) to the extent not accomplished by an assignment of the
Permitted Sublease, upon the occurrence of an Event of Default hereunder,
Lessee's rights under such Permitted Sublease shall automatically be
deemed assigned to Lessor; and (B) be a "net lease" in accordance with
industry practice and shall be comparable to, or more restrictive than,
this Lease and under such Permitted Sublease (except a sublease to the
United States Government or a Foreign Air Carrier after the Restricted Use
Period), Lessee as lessor under such Permitted Sublease, must be entitled
to the same benefits under 11 U.S.C. Section 1110 as Lessor is entitled
hereunder and such Permitted Sublease shall contain provisions regarding
such Section 1110 which are substantially the same as the related
provisions of this Lease. In addition, from and after the occurrence and
continuance of an Event of Default, all rent and other amounts payable by
the Permitted Sublessee under such Permitted Sublease shall be paid
directly to Indenture Trustee and, upon discharge of the Lien of the
Indenture, to Lessor.
(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 Engine or the aircraft on
which the Engine is installed 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
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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 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 Engine 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 Engine
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
Engine 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 Engine, to the registry of the Engine 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
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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
extend beyond the expiration of the Basic Term or any Renewal Term then in
effect.
Any Permitted Sublease shall expressly provide that 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 under
the other Operative Documents or constitute a waiver of Lessor's rights or
remedies hereunder or under the other Operative Documents, and such rights shall
continue as if such Permitted Sublease had not occurred. Any Permitted Sublease
shall expressly prohibit any further sub-sublease or assignment or any other
similar transfer of the Engine or rights thereto 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
any proposed Permitted Sublessee), and (ii) a copy of each Permitted Sublease
together with an assignment, as security for Lessee's obligations hereunder, of
such Permitted Sublease, and if Lessor or the Indenture Trustee so requests, a
consent thereto from such Permitted Sublessee, substantially in the form of
Exhibit F-3 hereto, within ten (10) Business Days following the effective date
of such Permitted Sublease.
(b) [Intentionally Left Blank]
(c) Lawful Insured Operations. Lessee will not permit the 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, any
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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 on which the Engine is installed is registered with the FAA, or the
applicable laws of any other jurisdiction in which the aircraft on which the
Engine is installed 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 Engine 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, Owner Participant
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 Engine 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 Engine, or
suffer or permit the Engine 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 Engine 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 Engine or suffer or permit the Engine to be operated or
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.
(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
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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, any other applicable rules, regulations and
requirements by any other applicable Governmental Entity, 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 Engine, as
shall be the case with respect to similar engines owned by Lessee without
discrimination and as if Lessee owned the Engine and was going to use the Engine
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 Engine, as shall
be the case with respect to similar engines owned by such Permitted Sublessee
without discrimination and as if the Permitted Sublessee owned the Engine and
was going to use the Engine 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 Engine shall be
maintained by Lessee (or any Permitted Sublessee) in accordance with maintenance
standards required by, or substantially equivalent to those required by the
central civil aviation authority of the country of registry, and, to the extent
not inconsistent therewith, the FAA and (D) so as to keep the Engine in as good
a condition as when delivered to Lessee, ordinary wear and tear excepted, and in
good operating condition; (ii) keep the Engine or cause the Engine to be kept in
such condition as is necessary to maintain in good standing the airworthiness of
such Engine at all times under the Federal Aviation Act and any other applicable
law or the applicable laws of any other jurisdiction in which the Engine 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
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under the Maintenance Program and Lessee's recordkeeping policies.
(e) Registration and Insignia. Lessee shall cause the interests of
Lessor and Indenture Trustee with respect to the Engine at all times, at its
expense, to be duly recorded under the Federal Aviation Act in the name of
Lessor or any successor or assignee, so long as the applicable parties to the
Refunding Agreement cooperate with Lessee with respect thereto as reasonably
requested by Lessee. Lessee shall cause the Indenture to be duly recorded and
maintained of record as a duly perfected mortgage on the Engine and this Lease
at all times. Lessee agrees at its expense to place such appropriate insignia,
plates and other identification ("Lease Identification") on the 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,
within five (5) Business Days of delivery of the Engine, Lessee shall fasten or
cause to be fastened 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 Engine as a designation that would be reasonably interpreted
as a claim of ownership or Lien; provided, however, that Lessee may cause the
Engine 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 Engine as Lessor, Owner Participant or
Indenture Trustee may reasonably request. Lessee shall permit, or cause any
sublessee to permit, any person designated by Lessor, Owner Participant or
Indenture Trustee
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on reasonable prior notice at reasonable times to visit, inspect and survey the
Engine, 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 no Default or Event of Default has occurred hereunder
inspections shall be endeavored to be performed during regularly scheduled
maintenance checks of the Engine. 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 Engine. Upon Lessor's, Owner Participant's or
Indenture Trustee's request, Lessee will notify such Person of the next
scheduled maintenance check for the Engine. Lessor, Owner Participant and
Indenture Trustee shall have no duty to make any such inspection and shall not
incur any liability or obligation by reason of not making any such inspection.
Lessor's, 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
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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 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 Engine, 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 Engine status report, substantially in
the form of Exhibit K hereto, including, without limitation, (A) a summation of
hours and cycles accumulated on the Engine 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 the 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
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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 Engine (or any Part) with a repair or
replacement cost (including labor charges) in excess of $1,000,000;
(viii) immediately after Lessee knows or should know of the
occurrence thereof, notice of a Default; and
(ix) 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 Engine or any criminal liability on the part of Lessor, Indenture
Trustee or any Note Holder.
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(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
(in one or a series of transactions) to 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 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 and Indenture Trustee 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.
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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 Engine 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 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 Engine.
(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 Engine only in
commercial passenger operations and related cargo operations. Unless the Owner
Participant otherwise agrees, during the Restricted Use Period, Lessee shall not
use the Engine or permit the Engine 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 Engine for federal income tax purposes during any taxable year of the Lessor
considered to be from foreign sources exceeds the Maximum Foreign Use
Percentage. Unless Owner Participant otherwise agrees, prior to permitting the
Engine to be operated in any member state of the European Union or other
European country, Lessee shall
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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
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 engines (including, without limitation, the Engine) operated by Lessee (or
such Permitted Sublessee).
(i) Section 1110. Lessee acknowledges that Lessor would not have
entered into this Amended and Restated Engine Lease Agreement [GPA 1991 AWA-E1]
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
Engine 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 Engine hereunder. The acknowledgement, covenant and agreement contained
in this Section 8(i) shall continue in full force and effect and survive the
expiration or other termination of this Lease and are expressly made for the
benefit of and shall be enforceable by Lessor, Owner Participant and, if the
Lien of the Indenture has not been discharged, Indenture Trustee.
(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 Engine or any Part or
the execution, delivery or performance of this Lease or the enforcement thereof
against Lessee.
(k) Security Opinion; Annual Certificate. (i) During such times that
the Engine is recorded 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
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rendered on the Restatement Date, any opinion of counsel
rendered pursuant to Section 11(C) of the Refunding Agreement,
and any 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,
rerecording and refiling of (i) the appropriate Operative
Documents and any supplements and amendments thereto, (ii) UCC
financing statements and (iii) such other appropriate
documents, as is necessary to maintain the perfection of
Lessor's title to and/or interest in and Indenture Trustee's
security interest in the Engine and the Operative Documents
for such period of time as reflects the then-current
applicable Law, reciting the details of such actions or no
action is necessary to maintain the perfection of such title
and/or security interest; or
(2) at any time that an opinion is not required pursuant to
Section 8(k)(i)(1), annually, 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 Engine is recorded 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 any opinion of counsel rendered pursuant to Section 11(C)
of the Refunding Agreement, and any 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
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Owner Trustee's title to and/or interest in and Indenture Trustee's security
interest in the Engine and the Operative Documents for such period of time as
reflects the then-current applicable Law, reciting the details of such actions.
(l) Letter of Credit. As security for the obligations to Lessor,
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 the amount set forth on Exhibit C (the "Face
Amount"), 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 demand at any
time, if a Default under Section 17(e), (f) or (g) or an Event of Default has
occurred, which amount may be applied, retained or utilized as provided in the
penultimate paragraph of this Section 8(l);
(ii) be maintained in full force and effect at all times until
ninety-one (91) days after the Expiration 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 Business Days of any such reduction in rating with
a commercial bank meeting such rating requirement), provided, that the Letter of
Credit 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 transferrable and assignable;
and
(iv) permit partial drawings. If the Letter of Credit is still
in effect at the end of the Term or the Lessor is holding proceeds of the Letter
of Credit that were retained and not applied as provided herein, then Lessor
shall return the Letter of Credit to Lessee or terminate it, and/or return any
retained or unapplied proceeds, ninety-one (91) days following the date of such
expiration or other termination of this Lease so long as no Default or Event of
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Default has occurred or is continuing hereunder or under any Other Lease, upon
payment in full of all amounts then due and owing to Owner Trustee and Owner
Participant under the Operative Documents.
If an Event of Default has occurred or is continuing under this
Lease or an Event of Default has occurred or is continuing under any Other Lease
(as therein defined), in addition to any other rights and remedies Lessor may
have hereunder, under any Other Lease, any sublease and any and all other
remedies available at Law (including, without limitation, the Uniform Commercial
Code as adopted in New York) or equity and upon exercising its rights under the
Letter of Credit and any Other Letters of Credit, Lessor shall be entitled, in
each case as it may elect in its sole and absolute discretion, to (i) hold any
amounts drawn under the Letter of Credit or Other Letters of Credit as security
for Lessee's obligations under this Lease or, the Other Leases, (ii) retain any
amounts drawn under the Letter of Credit or Other Letters of Credit for its own
account and apply (including, without limitation, by way of set off against)
such drawn amounts, as it may elect (it being understood that amounts not so
applied will be held as security for Lessee's obligations under this Lease and
the Other Leases) to remedy any breach by Lessee of this Lease or any other
Operative Documents or Other Leases or (iii) recompense Lessor, Owner
Participant or any of their respective Affiliates for any loss, damage, cost or
expense or other Claim due or owing hereunder or under the Other Leases;
provided, however, that in the case of any drawing in respect of any claim for
payment of Rent, Lessee's right to apply the same to such claim shall be limited
to amounts which would (absent such Event of Default) be distributable under the
Indenture at the time such payment is made to Lessor, Owner Participant or any
of their respective Affiliates (and shall not include any amounts distributable
to Indenture Trustee in its individual capacity or to the Note Holders);
provided further, however, that neither the amount so applied at any one time
nor the aggregate amount so applied 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 required to be paid on account of the principal of and any interest on
the Equipment Notes or otherwise owing to a Note Holder. Lessee shall not be
entitled to any refund or credit with respect to any amounts so applied. Any
amount retained shall be considered the property of Lessor and Lessor may
commingle such amount with its general funds and Lessee, further, hereby
absolutely and irrevocably disclaims, to the maximum extent permitted by
applicable Law, any interest therein.
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Lessee shall not be entitled to any interest or other earnings on such retained
amount and such amount shall not be refundable.
On application of all or any portion of the amounts drawn under the
Letter of Credit or any Other Letters of Credit in accordance with this Section
8(l) or the Other Leases, Lessee shall on demand reinstate the amount of the
Letter of Credit or Other Letters of Credit, as the case may be, to its or their
full Face Amount or provide to Lessor one or more additional Letters of Credit
meeting the requirements of this Section 8(l), so that the Letter of Credit and
each of the Other Letters of Credit at all times equals the original Face Amount
provided for herein. During such times as Lessor shall elect to hold all or part
of the proceeds of the Letter of Credit or Other Letters of Credit as security
for Lessee's obligations to Lessor under the Lease and the Other Leases, Lessee
shall not be obligated to reinstate the amount of the Letter of Credit or
Letters of Credit, as the case may be, in respect of the proceeds so held.
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, 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).
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All Parts which are at any time removed from the Engine shall remain
the property of 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 Engine and which meet the requirements for replacement
Parts specified above. Immediately upon any replacement Part becoming
incorporated or installed in or attached to the Engine 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 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 Engine to the extent made mandatory for
Lessee (or a sublessee) in respect of the Engine 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 Engine or Parts.
In addition, so long as no Default or Event of 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 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 Engine or any Part below that immediately prior to such
alteration, modification or addition assuming that the Engine 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 Engine as the result of such alteration, modification or addition, shall
immediately vest in 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.
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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 Engine, remove any Part of such Engine,
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 Engine 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 Engine 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 Engine without causing
any material damage thereto and without diminishing or impairing the value,
utility, remaining useful life, condition or airworthiness which the Engine
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 Engine (such a part is herein called a
"Removable Part"). Any Part not removed by Lessee as above provided prior to the
return of the Engine to Lessor hereunder, whether pursuant to Section 16,
Section 18 or otherwise, shall remain the property of 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
Engine; 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 Engine, 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
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removed by Lessee upon the termination or expiration of this Lease, at such
time, shall become the property of Lessor and be subject to this Lease, and
provided, further, that (1) if removal of any such Part shall affect the
operation of the Engine 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 Engine 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 life and a value at
least equal to that of such Part when it was removed from the Engine.
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 Engine, or for any loss of revenue arising therefrom.
(c) Pooling. Any Part removed from the 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 that Lessor
has been given an opportunity to review the pooling arrangement, including but
not limited to all agreements and other documents relating thereto, and has
consented, which consent shall not be unreasonably withheld, to the placement of
Parts into such pooling arrangement and provided further that the Part replacing
such removed Part shall be incorporated or installed in or attached to the
Engine 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
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Engine in accordance with Section 9(a) may be owned by another Person subject to
such 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 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 and transferring
title to 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 Engine 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 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 Basic Rent
hereunder 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 such payments
of Basic Rent, Lessee shall pay an additional amount of Basic Rent such that the
net amount actually received by Lessor, after such deduction or withholding,
will be equal to all such amounts that would be received by Lessor if no such
deduction or withholding had been required, but only to the extent necessary to
ensure that the holders of the outstanding Equipment Notes receive such amount
as may be required by the Indenture. If Lessee pays any amount to Lessor (or to
any taxing authority for the account of Lessor) as a result of the application
of the preceding sentence with respect to any withholding Tax which is an
excluded tax in respect of Lessor pursuant to Section 10(b), then Lessor (or, in
the case of Taxes imposed on the Owner Trustee, the Owner Participant to the
extent such Tax would give rise to a Lessor's Lien for which the Owner
Participant
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would be liable) 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 provided
that in any circumstance in which the Lessor is required to reimburse the Lessee
for any such withholding Taxes and the Lessee has not received such
reimbursement from Lessor or the Owner Participant, then to the extent of such
shortfall and so long as no Lease Event of Default has occurred and is
continuing, Lessee shall be entitled to obtain reimbursement from Lessor by
reducing the succeeding payments of Rent payable to Lessor (other than any
portion of Rent that may be required by the Indenture to be paid to the holders
of any outstanding Equipment Notes issued thereunder) until the aggregate amount
of reduction is equal to the sum of the amount of such shortfall and interest on
that amount at the Interest Rate from the date reimbursement is required to be
made until the date of such reduction in Rent. Except as provided in Section
10(b), and taking into account any payments received by Lessor pursuant to the
second sentence of this Section 10(a), 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, any Engine or any Part thereof or interest therein, or
otherwise, with respect to any period beginning, or events or circumstances
occurring, on or after the Restatement Date, 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) 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, deregistration, 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), or
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(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, or
(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, or
(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 modification or reissuance, 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, Taxes imposed on, based on,
or measured by, the gross or net income of such Indemnitee or Taxes in
lieu thereof (including minimum taxes, withholding taxes and taxes on or
measured by any item of tax preference) imposed by the federal government
of the United States of America (other than taxes in the nature of sales
or use taxes, license taxes, or property taxes),
(ii) In the case of any Indemnitee, Taxes imposed 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 state, local or
foreign government or taxing authority (other than Taxes in the
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nature of sales Taxes, use Taxes, license Taxes or property Taxes, and
Covered Income Taxes described in subsection (c) of this Section 10),
(iii) In the case of any Indemnitee, Taxes which arise out of
or are caused by any gross negligence or willful misconduct of such
Indemnitee,
(iv) In the case of any Indemnitee, any Taxes imposed as a
result of a voluntary or involuntary bankruptcy of such Indemnitee or any
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 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 (A) an Event of Default and the exercise by any Indemnitee of its
remedies under this Lease or the Indenture, as the case may be or (B) the
substitution, pooling or interchange of the Aircraft, the Airframe, any
Engine or any Part pursuant to the terms hereof; 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) In the case of any Indemnitee, Taxes imposed on a
transferee of such Indemnitee of any interest in the Engine or any Part or
any interest in the Operative Documents to the extent the amount of any
such Taxes exceeds the amount of such Taxes that would have been imposed
had there not been any such transfer, unless such transfer results from
action by or on behalf of such Indemnitee taken in connection with any
Event of Default that has occurred and is continuing or upon the request
of the Lessee,
(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(b) or to a failure by Lessee to satisfy its obligations
related to such return,
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(vii) With respect to an Indemnitee other than the Indenture
Trustee or the Trust Indenture Estate, Taxes which arise out of or are
caused by (i) any act or omission or material misrepresentation of any
Indemnitee where such act or omission is not permitted by the Financing
Documents or the Operative Documents, or (ii) a failure by an Indemnitee
to fulfill its contest obligations, and, in the case of the Indenture
Trustee and the Trust Indenture Estate, Taxes imposed as a result of a
breach of such Indemnitee's representations, warranties, or covenants
contained in Sections 9(a), 12 or 16 of the Refunding Agreement in any
material respect, or from a failure by such Indemnitee to fulfill its
contest obligations,
(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 Engine,
(ix) In the case of 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, United
States withholding taxes imposed as a result of the place of organization
or other status of a holder of an interest in a Pass-Through Trust, or
(x) In the case of the Indenture Trustee, each Pass-Through
Trust, each Pass-Through Trustee (in its individual capacity), the
Subordination Agent and each Liquidity Provider, 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.
(c) Covered Income Tax. For purposes of clause (ii) of subsection
(b) of this Section 10, a Covered Income Tax includes:
(i) in the case of an Indemnitee other than the Indenture
Trustee or the Trust Indenture Estate, any Tax imposed on, based on or
measured by gross or net income, receipts, capital or net worth,
franchises, excess profits or conduct of business (other than taxes which
are in the nature of sales or use taxes, license taxes or property taxes)
imposed on an Indemnitee (A) by any state or local Taxing Authority other
than Taxes imposed by any such state or local jurisdiction in which the
Indemnitee has its principal place of
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business or is subject to such Tax as a result of business transactions or
other presence unrelated to the transactions contemplated by the Financing
Documents or the Operative Documents, unless such Taxes are imposed by
such jurisdiction solely as a result of (x) the operation of the Engine in
such jurisdiction or (y) the transactions contemplated by the Operative
Documents, to the extent such taxes are directly attributable to such
operation of the Engine or to such transactions, and (B) by any foreign
jurisdiction which are imposed as a result of Lessee's or sublessee's
activities in such foreign jurisdiction in connection with the
transactions contemplated by the Financing Documents or the Operative
Documents, provided, however, a Covered Income Tax also includes the
incremental amount of franchise taxes, taxes on doing business, capital
stock taxes or taxes on, based on or measured by gross or net income of
the original Owner Participant attributable to the Lease (excluding,
however, any taxes that would be excluded under any provision other than
clauses (i) and (ii) of subsection (b) of this Section 10) which are
imposed by the "Home State" of a sublessee (the Home State of a sublessee
being the jurisdiction in which such sublessee maintains its principal
operations and maintenance center), or in the absence of a Permitted
Sublessee, the jurisdiction where the Engine is stored, but only to the
extent such incremental taxes result from activities of Lessee or
Permitted Sublessee under the Lease in or with respect to the Home State
or the jurisdiction where the Engine is stored, and taking into account in
calculating such incremental taxes all state tax benefits and savings in
the Home State resulting from activities of Lessee or Permitted Sublessee
under the Lease, disregarding for such purpose any actual or constructive
changes in ownership of the original Owner Participant, provided, however,
that Owner Participant and Lessee agree to negotiate, in good faith, a cap
to Lessee's liability for indemnity payments attributable to taxes
incurred in sublessee's Home State with respect to each Permitted
Sublessee; and
(ii) in the case of the Indenture Trustee or the Trust
Indenture Estate, any Tax based on or measured by gross or net income,
receipts, capital or net worth, franchises, excess profits or conduct of
business (including minimum taxes, withholding taxes, and taxes on or
measured by any item of tax preference) imposed on such Indemnitee by a
Taxing Authority in or of any foreign jurisdiction or a territory or
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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 jurisdiction other than
merely by reason of such Indemnitee's participation in the transactions
contemplated by the Operative Documents.
(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 the Owner Participant or Owner Trustee or will notify
the Owner Participant or Owner Trustee of such requirement and make such report
or return in such manner as shall be reasonably satisfactory to the 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 the case of Taxes imposed on the Owner Participant, such Taxes shall be
calculated on the basis of the assumption that Owner Participant shall be
subject to the highest
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federal corporate income tax rate applicable to Owner Participant in the year of
payment and the highest corporate income tax rate in the jurisdiction in which
Owner Participant files a consolidated state income tax return (currently
Virginia).
(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 (i) the
actual reduction in Taxes, if any, realized by such Indemnitee which is
attributable to such deduction or credit and (ii) the reduction calculated on
the same basis as the gross up in Section 10(e) hereof 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 (i) above would exceed (A) 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 (B) the portion of all prior
payments computed pursuant to (i) 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 that are
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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. In the event that an Indemnitee receives a written
notice of a claim which, if sustained, would require the payment of an indemnity
by Lessee pursuant to this Section 10, such Indemnitee shall promptly notify
Lessee of such claim and, if requested by Lessee in writing, shall, at Lessee's
sole expense, in good faith contest or shall permit Lessee, if desired by Lessee
and such contest may be conducted in whole or in part separately 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, the
Lessee shall not be permitted to contest in the name of such Indemnitee if such
contest involves Taxes imposed against such Indemnitee that are unrelated to the
transactions contemplated by the Financing Documents or the Operative Documents
or Taxes based on or measured by the gross or net income of the Indemnitee, and
provided, that if the Indemnitee determines in good faith that there is a
material possibility of a material adverse impact upon the Indemnitee with
respect to such contest, such Indemnitee may retain or reassert control of any
contest that Lessee would otherwise be permitted to contest; 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) Lessee shall have (a) furnished Indemnitee with a written
opinion of tax counsel selected by Indemnitee and reasonably acceptable to
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Lessee to the effect that a reasonable basis (as defined in ABA Opinion
85-352) exists to contest such claim (which opinion shall be obtained at
Lessee's sole cost and expense), provided however, that in the event 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, 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 the Indemnitee or the
Lessee, as the case may be, had asserted in such previous contest would
prevail and, in the case of statutory changes-in-law, it is as likely as
not that the position will prevail, and (b) agreed to pay Indemnitee for
all reasonable costs and expenses which Indemnitee may incur in contesting
such claim (including without limitation, payment on demand of all
out-of-pocket costs, expenses, additions to tax because of underpayment of
estimated taxes, losses, legal and accounting and investigatory fees and
disbursements, penalties, and interests),
(ii) a threshold amount of $50,000 for any individual claim is
at issue,
(iii) there is no substantial risk or danger of the sale, loss
or forfeiture of the Engine,
(iv) Lessee shall have admitted its liability to indemnify
Owner Participant for such claim or set forth in writing why it is not so
liable,
(v) if such contest is to be initiated by the payment of, and
the claiming of a refund for, such Taxes, the Lessee shall have advanced
to such Indemnitee sufficient funds (on an interest free basis) to make
such payments,
(vi) no claim shall be appealed to the U.S. Supreme Court,
(vii) no appeal of a trial court decision shall be undertaken
unless Lessee at its sole cost and expense shall have furnished Indemnitee
with a written opinion of tax counsel selected by Indemnitee and
reasonably acceptable to Lessee to the effect that
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Indemnitee is more likely than not to prevail in such appeal, and
(viii) no Event of Default has occurred and is continuing.
(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, 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 any member of such affiliated group.
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(l) Verification. At Lessee's request, the amount of any indemnity
payment by Lessee pursuant to this Section 10 or any payment by an Indemnitee to
Lessee pursuant to this Section 10 shall be verified and certified by an
independent public accounting firm selected by such Indemnitee and reasonably
satisfactory to Lessee. In order to enable such accountants to verify the
indemnity amount, such Indemnitee shall provide to the accountants (for their
own confidential use) information reasonably necessary for such verification to
which Lessor has access; provided, however, such information shall not be
disclosed to Lessee or any person other than such accountants. The fee of such
firm shall be payable by Lessee unless such verification shall result in an
adjustment in Lessee's favor exceeding 10% of the amount of the indemnity
payment.
(m) Survival. All of the obligations and rights of Lessee and Lessor
under this Section 10 with respect to the Aircraft, the Airframe, the Engines or
any Part thereof shall survive the assignment, or expiration or other
termination, of the Lease with respect to the Aircraft for a period of six (6)
years from the occurrence of such assignment, or expiration or termination,
except that such obligations shall survive the expiration of such six (6) year
period with respect to any claim asserted prior to the expiration of such six
(6) year period but in either case only to the extent such obligation or claim
relates to events which occurred or conditions which existed during the Term.
Such obligations are expressly undertaken by Lessee for the benefit of, and
shall be enforceable by, Lessor. The provisions of this Section 10(m) are
subject to the exclusions of Section 10(b)(viii).
Section 11. Loss, Damage and Requisition.
(a) Event of Loss with Respect to the Engine. Subject to the other
provisions of this Section 11, upon an Event of Loss with respect to the Engine,
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 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
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continuing at the time of such election or at the time of replacement:
(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(b) 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 Engine, title to a replacement Engine, such replacement
Engine (A) to be free and clear of all Liens (it being understood that, upon
such conveyance, such replacement Engine 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(b) hereof, at least equal
to, and to be in at least as good operating condition as, the Engine (assuming
the Engine was maintained in accordance with the requirements of this Agreement,
whether or not it is in fact so maintained), and (C) to be another IAE V2500
Engine of like model and equivalent or better modification status delivered by
the Manufacturer not earlier than June 30, 1988 or, at Lessee's option, an IAE
engine of an improved model and 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 the Engine is free and clear
of Lessor's Liens), all of Lessor's right, title and interest, if any, in and to
the Engine suffering the Event of Loss. For all purposes hereof, a replacement
Engine shall be deemed part of the property leased hereunder and shall be deemed
the "Engine" as defined herein. No Event of Loss resulting in replacement of the
Engine under this Section 11(a)(i) shall result in any reduction of Rent. In
addition to the foregoing, if Lessor so requests, as a condition to any
substitution of the Engine under this Lease, Lessee shall use its best efforts
to ensure that IAE acknowledges that such substitution shall not affect any
product support or other agreements between or among IAE, Parent, Lessor or
Lessee.
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(ii) On a Stipulated Loss Value Date on or before one hundred
twenty (120) days after the date of the Event of Loss (or, if earlier, with
respect to insurance proceeds, on the date on which insurance proceeds with
respect to the Event of Loss are received by the loss payee) Lessee shall pay to
Lessor in immediately available funds the sum of (A) the Stipulated Loss Value
of the Engine 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, or, if such Stipulated
Loss Value Date occurs after the last day of the Term, plus an amount equal to
the average daily Basic Rent or Renewal Rent, as the case may be, in effect on
the last day of the Term, for each day from and including the last day of the
Term to and excluding 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 Engine 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 Engine 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 Engine, 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
Engine is free and clear of Lessor's Liens), all of Lessor's right, title and
interest, if any, in and to the Engine suffering the Event of Loss.
(b) Conveyance of Replacement Engine. Upon an Event of Loss with
respect to the Engine, Lessee shall give Lessor prompt written notice thereof
and shall, at its own cost and expense, within sixty (60) days after such
occurrence convey or cause to be conveyed to Lessor as replacement for the
Engine suffering an Event of Loss, title to 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 free of all Liens (it being
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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 with a full warranty ▇▇▇▇ of sale, in form and substance
reasonably satisfactory to Owner Participant and Indenture Trustee, as
applicable, with respect to such replacement Engine; (ii) cause supplements, in
form and substance reasonably satisfactory to Owner Participant 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) 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 such Replacement Engine and of compliance with
the insurance provisions of Section 12 hereof with respect to such Replacement
Engine as Owner Participant or Indenture Trustee (if the Lien of the Indenture
has not been discharged) may reasonably request; (iv) furnish Owner Participant
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 such Replacement Engine has been duly conveyed to
Lessor free and clear of all Liens (except Permitted Liens) and it is duly
leased hereunder and subject to the Lien of the Indenture (if it has not been
discharged), the instruments subjecting such Replacement Engine to the Lien of
the Indenture and the Lease, and subjecting to any relevant Assigned Sublease
and Sublease Agreement, as the case may be, have been duly filed for recordation
pursuant to the Federal Aviation Act or any other law then applicable to the
registration of the Aircraft, and no further action, filing or recording of any
document is necessary in order to establish and perfect, in the United States
and, if the Aircraft is registered outside the United States, in the
jurisdiction of registration, the legal title to such Replacement Engine and the
Lien of the Indenture on such Replacement Engine and that Lessor, and Indenture
Trustee as assignee of Lessor, is entitled to the benefits of Section 1110 of
Title 11 of the United States Code with respect to such replacement engine to
the same extent as with respect to the Engine prior to such replacement; (v)
furnish a certificate signed by a Responsible Officer of Lessee certifying that,
upon
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consummation of such replacement, no Default or Event of Default will exist
hereunder; (vi) furnish 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(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 Indenture
has not been discharged); (viii) 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; (ix) furnish the appraisal referred to above; and (x) furnish Owner
Trustee and Indenture Trustee with the opinion of counsel to Lessee specified in
Section 5.06(a)(5)(i) of the Indenture. 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), 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. No Event of Loss covered
by this Section 11(b) shall result in any reduction in Rent.
(c) Application of Proceeds and Payments. Any payments received at
any time by Lessor or by Lessee from any insurer (including a Governmental
Entity providing an indemnity in lieu thereof) 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(e) below, any payments (other than insurance or such
indemnity 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
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 and other payments
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
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Stipulated Loss Value and other payments 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 other payments 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 Engine which is being replaced pursuant to Section
11(a)(i) and (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 (b) hereof, 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) Requisition for Use by Government with Respect to the Engine.
Subject to Section 11(e) below, in the event of the requisition for use by a
Governmental Entity of the Engine, Lessee will replace such Engine hereunder by
complying with the terms of Section 11(a) 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.
(e) Application in Default. Any amount referred to in clause (i) or
(ii) of Section 11(c) or Section 11(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 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
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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 products, completed
operation liability covering maintenance of aircraft, but excluding
manufacturer's product liability insurance), and property damage insurance with
respect to the Engine and any airframe on which the Engine is installed (for
purposes of this Section 12, any such airframe together with the Engine which is
installed thereon shall be referred to as, 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 similar type engines and as
hereinafter provided. Each and any 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) 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 and the other
Indemnitees and their respective permitted assigns, in such policies, the
insurance shall not be invalidated as to an insured or additional insured by any
act or omission of Lessee or any other insured or additional insured and shall
insure Lessor, Owner Participant, Indenture Trustee and the other Indemnitees
and their respective permitted assigns, regardless as to any insured or
additional insured of any breach or violation by Lessee or any other insured or
additional 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 and the other Indemnitees or if
such
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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 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 the insurance industry standard for war/allied perils
coverage), after notice to Lessor, Owner Participant and Indenture Trustee from
such insurer or insurers, of such prospective cancellation, change or lapse,
(iv) shall include coverage for any country in or over which the Engine is
located or operated and (v) shall provide that, as against Lessor, Owner
Participant, Indenture Trustee 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 or the other Indemnitees, or their
respective permitted assigns, with respect to the Engine. Each liability policy
shall be primary without right of contribution from any other insurance which
may be carried by Lessor, Owner Participant, Indenture Trustee 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 IAE
V2500 engines or similar type engines or similar-type 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 and spares 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
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consent of Lessee) covering the Engine and/or the Aircraft, as the case may be,
and "all-risk" coverage including transit insurance with respect to the Engine
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 and spares insurance reasonably acceptable to
Lessor with Approved Insurers. 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 Engine or the Aircraft to be operated or located outside of the United
States of America, 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; provided that Indenture Trustee shall not be obligated to request such
insurance and shall not be liable for any failure to request such insurance.
Anything herein to the contrary notwithstanding, at all times while the Engine
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 Engine. 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 or similar engines 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
Engine, 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
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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 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 the insurance industry standard for war/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, (iv) shall include coverage for any country in or
over which the Engine or the Aircraft may at any time be located or operated,
(v) shall provide that, as against Lessor, Owner Participant, Indenture Trustee,
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
and the other Indemnitees and their respective permitted assigns, with respect
to the Engine, (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
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12(b) may incorporate deductible amounts which shall not exceed one million
dollars ($1,000,000).
Each of Lessor and Owner Participant 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 or Owner
Participant. Lessee shall have the right to carry insurance in excess of the
amounts required hereunder and the proceeds of such excess insurance shall be
payable to Lessee, 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 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.
In the event that separate policies are maintained to cover
"all-risk" ground and flight aircraft, hull and war risks and allied perils
insurance, Lessee shall include a 50/50 provisional claims settlement clause as
contained in the policies of insurance maintained by Lessee with respect to all
other aircraft in Lessee's fleet, and a copy of the 50/50 provisional claims
settlement clause in effect on the Restatement Date shall be attached to the
insurance certificate issued on the Restatement Date.
(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 and Indenture Trustee 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 and other payments
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 and any other payments 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
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reimburse Lessee for its payment of such Stipulated Loss Value and other
payments 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 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 (b) hereof and of Section 15 hereof, as the case
may be, 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 Engine not
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
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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 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 Engine 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 Engine 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 the insurance industry
standard for war/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.
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 (i) is on the same terms as
the original insurance and includes the provisions required by this Agreement;
(ii)
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provides 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) contains 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 loss or other claim where as provided by the Amended and
Restated Engine Lease Agreement [GPA 1991 AWA-E1] dated as of November 26, 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 Engine or 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 engines or 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 similar engines as the
engines 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
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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.
(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 a net after-tax basis, as provided in Section 10(e),
within fifteen (15) days after demand from and against any and all claims
(whether or not based on strict liability), 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, costs and expenses set forth in Section 21(j) hereof and 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 including) 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 Engine 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 Engine
to be a "citizen of the United States" as defined under the Federal Aviation Act
and the regulations
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thereunder or to file the documentation necessary to continue FAA registration
of the Engine), delivery, non- delivery, assignment, leasing, subleasing,
sub-subleasing, acceptance, rejection, possession, repossession, control,
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 Engine or any
Part (including, but not limited to, latent and other defects whether or not
discoverable by Lessee or Lessor, 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 or in the Operative Documents 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
Engine 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 the Engine or such Part, or otherwise
regardless of when such defect shall be discovered, whether or not the Engine or
such Part is at the time in the possession of Lessee, and regardless of where
the Engine or such 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 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
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for Lessee's liability with respect to Taxes), (iv) any Claim which relates
solely to events which occurred prior to (but excluding) the Restatement Date
(other than Claims related to the condition, manufacture or design of the
Engine), (v) an underlying act which occurs after the Engine 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) 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 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). 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
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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, possession, return,
financing, performance, modification, maintenance, condition, use, operation,
pooling, interchange, repair, testing, sale, return or other disposition of the
Engine or any Part thereof, either in the air or on the ground, or which may be
caused by any defect in the Engine or such 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 the Engine or such 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 the Engine or such Part is at the time in the
possession of Lessee, and regardless of the location of the Engine 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 Engine, any Operative Document, any Purchase Document or any Financing
Document), (ii) the material 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 but excluding 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) 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
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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), (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 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 respect of any such Claim, except
to the extent that Lessee's ability to control the defense thereof where Lessee
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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 Engine or of the residual value of the Engine.
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 or any of the other Operative Documents 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 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
and any other Indemnitee as herein provided or provided under the other
Operative Documents or the Financing Documents; (ii) Head Lessor's Liens,
Lessor's Liens and Lenders' Liens; (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 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
Engine or any Part, or any interest of Lessor or Indenture Trustee therein or
any risk of criminal liability of Lessor or Indenture Trustee; (iv) inchoate
materialmen's, mechanics', workmen's, repairmen's employees', or other like
inchoate Liens arising
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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 the Engine or any Part, 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
the Engine or any Part, or any interest of 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, 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, Lease
Supplement, Indenture Supplement, 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 and the Engine. If
any filing or recording is reasonably necessary to protect the interests of
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 Engine 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 cause
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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
or Indenture Trustee hereunder, under the Indenture and in the Engine, and
Lessee shall furnish to Lessor and Indenture Trustee, evidence, reasonably
satisfactory to Lessor and Indenture Trustee, of each such filing or refiling
and recordation and rerecordation.
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 Engine 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 Engine, as Lessor 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 Engine 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 Engine, which Lessor may reasonably
request, to protect and preserve the title of the Lessor, this Lease, the
Indenture and Lessor's and Indenture Trustee's interest in the Engine 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
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favor of 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 Engine or any other transfer or assignment by 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 and the other Financing Documents, any replacement Engine
and the recording or filing of counterparts thereof in accordance with the laws
of any appropriate jurisdiction.
Section 16. Return of Engine and Records.
(a) Return. On any Return Occasion, Lessee, at its own expense and
risk, shall return the Engine 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.
(b) Status Upon Return. Upon any Return Occasion hereunder, the
Engine shall be: (i) free and clear of all Liens, except for the Lien of the
Indenture, Head Lessor's Liens, Lessor's Liens and Lenders' Liens, (ii) duly
certified as an airworthy engine by the FAA under Part 121 of the regulations
promulgated under the Federal Aviation Act which are in effect on the date of
such Return Occasion; (iii) in full airworthy condition for over water and EROPS
operation according to the FAA standards required to allow the Engine to be
operated under, and in full compliance with, an applicable standard certificate
of airworthiness 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) 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); (vi) in good and airworthy operating condition, and in the same
condition as when delivered to
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Lessee hereunder, ordinary wear and tear 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 (vii) 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) Substitute Engine. In the event any engine not owned by Lessor
shall be redelivered 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 Engine or, at Lessee's
option, an IAE engine of an improved model suitable for installation and use on
an 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 Engine, assuming the
Engine was 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
such Engine 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.
(d) Records and Documents. Upon the return of the Engine, Lessee
shall deliver to Lessor (i) all logs, manuals and data, and inspection,
modification, overhaul and other records, related to the Engine, 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 Engine and shall
provide Lessor and its designees access to the Maintenance Program which is
sufficient for a Person to maintain the Engine 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 Event of
Default shall have occurred, to continue to maintain the Engine under the
Maintenance Program, in each case as Lessor
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may reasonably request, and all documentation with respect to the Engine 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
Engine 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 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 Engine,
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; such identification shall be sufficient to allow
traceability of such components and assemblies from the date on which such
components and assemblies were manufactured to the date on which such
identification is made, and to measure the service histories, accumulated cycles
or flight hours as applicable and remaining service lives in each engine,
including but not limited to the Engine, in which such components and assemblies
have been used. 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 engine which has been operating in regulated
commercial air service, shall be delivered to Lessor with the Engine. Any
documents or records required to be delivered hereunder shall be in English.
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(e) Condition of Engine. Upon any Return Occasion, Lessee shall
return such Engine to Lessor in such condition that the Engine shall also comply
with each and every condition and requirement set forth elsewhere in this Lease,
including Exhibit E hereto.
(f) Final Inspection. Upon any Return Occasion, Lessee shall make
the Engine available to Lessor at the location where the 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 Engine and Parts structure and parts, at Lessee's expense
(excluding compensation to representatives of Lessor), in order to verify that
the condition of such Engine 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 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 checks are being performed and shall have such duration
as to permit the opening of any areas of the Engine which are customarily
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 Engine 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(g) hereof, the
Term with respect to the Engine undergoing the Final Inspection shall be deemed
to have been automatically extended, and all obligations hereunder continued, on
a daily basis until the Final Inspection shall have been concluded and Lessee
shall pay Rent during any such extension in an amount equal to the average daily
Basic Rent or Renewal Rent, as the case may be, paid in respect of the last year
of the Basic Term or Renewal Term, as the case may be (and Stipulated Loss Value
during such extension shall equal the Stipulated Loss Value on the last day of
the Basic Term or Renewal Term, as the case may be); provided, however, that
Lessee shall not be required to pay Rent with respect to the Engine 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
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that Lessee shall not be liable for any storage expenses which are incurred
after the sixtieth (60th) day after the Term to the extent that storage
continues thereafter due to Lessor's delay in completion of the Final
Inspection.
(g) Engine Records and Documents. In order to enable Lessor to
prepare for the Final Inspection of the Engine 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 Engine 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 Engine. Such Records and Documents
shall be sufficient to enable Lessor to trace the service history, accumulated
cycles or flight hours as applicable and remaining service life of the Engine,
including but not limited to a listing of each airframe on which the Engine has
been installed.
(h) Corrections and Subsequent Corrections. To the extent that the
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 the Engine is brought up to the condition required by this
Section 16, including Exhibit E, or (ii) accept the return of the Engine 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 the Engine, at commercial rates then charged by the Person selected by
Lessor to perform such correction. Lessee's obligations to pay such Supplemental
Rent shall survive the Expiration Date or other termination of this Lease.
Nothing set forth in this paragraph shall constitute a limitation on Lessor's or
Owner Participant's ability to recover from Lessee any damages, expenses or
losses pursuant to Sections 13 or 18 hereof suffered as a result of Lessee's
failure to effect the return of the Engine at the time, in the place and in the
condition as specified in this Section 16 and Exhibit E hereto.
(i) [Intentionally Left Blank].
(j) Exportation of the Engine. Lessee shall, at Lessee's expense,
take such action as Lessor may reasonably
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request to assist Lessor in obtaining any required documents in relation to the
export of the Engine from the United States (including, without limitation, a
valid and subsisting export license).
(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 Engine 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 Engine
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.
(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 Engine after the end
of the Term, by permitting prospective purchasers or lessees, except to the
extent prohibited by applicable Law, to inspect the Engine and the records
relating thereto to the extent it does not unreasonably interfere with the
operation or maintenance of the Engine 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
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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 of Lessee to pay to Lessor or Owner Participant when due any
Excepted Payments (as defined in the Indenture) shall not constitute an Event of
Default unless Lessor delivers notice to Lessee; 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 Engine 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 Engine; or
(c) Any representation or warranty made by Lessee herein or in the
Refunding Agreement or in any certificate furnished by Lessee in connection
herewith or therewith is or was 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 the
Refunding 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
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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 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 ninety (90) 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 ninety (90) 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 ninety (90) 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
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(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.
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 the Engine 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 cost and expense, immediately return, and Lessee hereby
agrees that it shall return promptly, the Engine 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 Engine) 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 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 the Engine were being returned at the end of the
Term hereof with respect to the Engine. In addition, Lessor or Lessor's agent,
at its option and to the extent permitted by applicable Law, may but shall not
be obligated to enter upon the premises where the Engine is located to take
immediate possession of and, at Lessor's option, remove the same by summary
proceedings or otherwise, all without liability accruing to Lessor or Lessor's
agent for or by reason of such entry or taking of possession or removal 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.
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(b) With or without taking possession thereof, sell or cause to be
sold, the Engine 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 Engine, 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 Engine 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
Engine 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 Engine 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 Engine 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 Engine 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 Engine, 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 such sale occurs), any unpaid Rent
due to and including the
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date of sale, plus the amount by which the Stipulated Loss Value of the Engine,
computed as of such Stipulated Loss Value Date, exceeds the net proceeds of such
sale (after deducting all costs of such sale).
(e) In lieu of exercising its rights under paragraph (b), (c) or (d)
above, by notice to Lessee, Lessor may require Lessee to pay, on the next
Stipulated Loss Value Date, to Lessor, and Lessee hereby agrees that it will so
pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, payable in
advance for the period on and after the Stipulated Loss Value Date), any unpaid
Basic Rent or Renewal Rent, as the case may be, for such Engine due and unpaid
for any period prior to and including, and any Basic Rent or Renewal Rent
payable on, the Stipulated Loss Value Date, plus, an amount equal to the
Stipulated Loss Value for the Engine computed as of such Stipulated Loss Value
Date; and upon such payment of liquidated damages and the payment of all other
Rent then due hereunder and the discharge of the Lien of the Indenture pursuant
to Section 10.01 thereof, Lessor shall, at Lessee's expense, transfer, without
recourse or warranty (except as to the absence of Lessor's Liens and the Lien of
the Indenture), all right, title and interest of Lessor in and to the Engine to
Lessee or as it may direct and Lessor shall, at Lessee's expense, execute and
deliver such documents evidencing such transfer and take such further action as
Lessee shall reasonably request.
(f) In the event that Lessor, pursuant to paragraph (b) above, shall
have relet the or Engine under a long term lease, Lessor, in lieu of exercising
its rights under paragraph (c) above with respect to such or Engine, 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 Engine due
after the time of reletting) any unpaid Rent for such Engine 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 Engine 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 the Engine would have expired but for Lessee's
default, discounted periodically (equal to
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installment frequency) to present worth as of the date of the reletting at the
rate of 8.50% per annum.
(g) 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 Engine 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.
(h) Lessor may exercise any other right or remedy which may be
available to it under applicable laws, or may 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 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 Engine in accordance
with the terms of Section 16 and Exhibit E hereof or in placing the Engine 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.
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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 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 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 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 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 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 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
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
Engine or Part to the condition required by Section 16 and Exhibit E hereof and
(ii) preparing the Engine or Part for sale or lease, advertising the sale or
lease of the Engine or Part and selling or releasing the Engine or Part. Lessor
is hereby authorized and instructed, at its option, to make expenditures which
Lessor considers advisable to repair and restore the 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 Engine or Part shall be determined
pursuant to the Appraisal Procedure.
At any sale of the Engine or Part pursuant to this Section , Owner
Participant may bid for and purchase such property and Lessee agrees that the
amounts paid therefor
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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), (e) or (f) above.
Lessee hereby irrevocably appoints Lessor as Lessee's
attorney-in-fact (which appointment is coupled with an interest) to execute all
documents deemed necessary to release, terminate and void Lessee's interest in
the Engine 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 Engine,
provided that an Event of Default has occurred and is continuing and this Lease
has been declared or deemed to be in default.
The provisions of this Section 18 shall continue in full force and
effect and survive the expiration or other termination of this Lease and are
expressly made for the benefit of and shall be enforceable by Lessor, Owner
Participant and, if the Lien of the Indenture has not been discharged, Indenture
Trustee.
Section 19. Security for Obligations.
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
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perfected security interest in all of Lessor's right, title and interest in and
to the Engine 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
or as directed by 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) (other than Expected Rights) 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 or as directed by 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.
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Section 20. Renewal Option.
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 Rent for the
Renewal Term shall be the "fair market rental value" of the Engine 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
Value (which shall be, with appropriate adjustments, in no event less than the
greater of 120% of the "fair market sales value" of the Engine 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 the Lessor, semi-annually in arrears 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.
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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 shall be construed as conveying to Lessee any right,
title, or interest in the Engine or any 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 Engine 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 and instructions between Lessor and Lessee
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). All notices, reports or other documents provided to Lessor
or Lessee shall be provided concurrently to Indenture Trustee
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(until such time as the Lien of the Indenture is discharged) and to Owner
Participant, at such address as Owner Participant and Indenture Trustee,
respectively, may designate from time to time. All notices and instructions
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 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 Engine
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, provided that Lessor and Owner Participant
shall not be liable for any such interference by Indenture Trustee, Pass Through
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Trustee, Note Holder or any other Person lawfully, claiming by or through them,
and provided further, 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 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.
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(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 hereof or thereof, or waivers or consents hereunder or 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 Financing Documents.
(k) Federal Bankruptcy Code. In the event Section 1110 of Title 11
of the United States Code is amended, or if 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 engines
similarly situated to Lessor.
(l) [Intentionally Left Blank].
(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 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, it 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
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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 (as applicable) in writing to Lessee or Lessor (as applicable),
Owner Participant and Indenture Trustee. Each of Lessee and Lessor hereby agrees
that 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, Owner
Participant, Indenture Trustee, each Note Holder and their successors and
assigns (as applicable). Final (after all appeals) judgment (the enforcement of
which has not been stayed) against either Lessee or Lessor obtained in any suit
originally brought in the court of the State of New York in New York County or
in the United States District of New York shall be conclusive, and, to the
extent permitted by applicable Law, may be enforced in other jurisdictions by
suit on the judgment, a certified or true copy of which shall be conclusive
evidence of the fact and of the amount of any indebtedness or liability of
Lessee therein described; provided that the plaintiff at its option may bring
suit, or institute other judicial proceedings, against Lessee or Lessor, as the
case may be, or any of their assets in the courts of any country or place where
such Person or such assets may be found. 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
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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.
(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 Engine 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 Amended and Restated Engine
Lease Agreement [GPA 1991 AWA-E1] (and as otherwise extended, amended, modified,
renewed or supplemented), shall be governed by Article 2-A of the Uniform
Commercial Code of New York.
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IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due
authority, have each caused this Lease to be executed by its duly authorized
officer 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:
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The undersigned acknowledges receipt of this original counterpart of
the foregoing Lease on this ____ day of November, 1996 and consent to the terms
hereof.
FLEET NATIONAL BANK, not in its
individual capacity, but solely as
Indenture Trustee
By:_________________________________________
Title:
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TABLE OF CONTENTS
Page
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Section 1. Definitions........................................... 1
Section 2. Agreement to Lease.................................... 19
Section 3. Delivery and Acceptance; Term......................... 19
(a) Time of Delivery................................ 19
(b) [Intentionally Left Blank.]..................... 19
(c) Acceptance of Engine............................ 19
(d) Term of Lease................................... 20
Section 4. Rent.................................................. 20
(a) Rent............................................ 20
(b) Minimum Payments................................ 20
(c) Date, Place and Method of Payment............... 21
(d) Prohibition Against Setoff,
Counterclaim, Etc............................... 21
Section 5. Representations, Warranties and Covenants............. 23
(a) Warranties and Disclaimer of
Warranties...................................... 23
(b) Representations and Warranties
of Lessor. ..................................... 24
(c) No Amendments to Financing Documents............ 24
(d) Suppliers' Warranties........................... 25
Section 6. Possession and Use.................................... 25
(a) Possession...................................... 25
(b) [Intentionally Left Blank]...................... 32
(c) Lawful Insured Operations....................... 32
(d) Maintenance..................................... 33
(e) Registration and Insignia....................... 35
Section 7. Inspection............................................ 35
Section 8. Additional Covenants of Lessee........................ 36
(a) Financial Information........................... 36
(b) Maintenance of Corporate Existence.............. 38
(c) Maintenance of Status........................... 38
(d) Payment of Taxes................................ 38
(e) Consolidation, Merger, Etc...................... 39
(f) Information..................................... 40
(g) Place of Business............................... 40
(h) Certain Limitations on Use...................... 40
(i) Section 1110.................................... 41
(j) Permits and Licenses............................ 41
(k) Security Opinion; Annual Certificate............ 41
(l) Letter of Credit................................ 43
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Page
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Section 9. Replacement of Parts; Alterations,
Modifications and Additions........................... 45
(a) Replacement of Parts............................ 45
(b) Alterations, Modifications and
Additions....................................... 46
(c) Pooling......................................... 48
Section 10. General Tax Indemnity................................. 49
(a) Indemnity....................................... 49
(b) Exclusions...................................... 51
(c) Covered Income Tax.............................. 53
(d) Reports and Returns............................. 55
(e) After-Tax Basis................................. 55
(f) Tax Benefit..................................... 56
(g) Payment......................................... 56
(h) Contest......................................... 57
(i) Refund.......................................... 59
(j) Diligence....................................... 59
(k) Affiliated Group................................ 59
(l) Verification.................................... 60
(m) Survival........................................ 60
Section 11. Loss, Damage and Requisition.......................... 60
(a) Event of Loss with Respect to
the Engine...................................... 60
(b) Conveyance of Replacement Engine................ 62
(c) Application of Proceeds and Payments............ 64
(d) Requisition for Use by Government
with Respect to the Engine...................... 65
(e) Application in Default.......................... 65
Section 12. Insurance............................................. 66
(a) Public Liability and Property
Damage Insurance................................ 66
(b) Insurance Against Loss or Damage................ 67
(c) Application of Insurance Proceeds
for an Event of Loss............................ 70
(d) Application of Insurance Proceeds for
Other than an Event of Loss..................... 71
(e) Application in Default.......................... 71
(f) Certificates.................................... 72
(g) Reinsurance..................................... 72
(h) Storage......................................... 73
(i) Amounts Held.................................... 73
(j) After the Term.................................. 74
(k) Governmental Indemnity.......................... 74
Section 13. General Indemnity..................................... 74
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Page
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Section 14. Liens................................................. 79
Section 15. Protection of Title and Further
Assurances............................................ 80
Section 16. Return of Engine and Records.......................... 82
(a) Return.......................................... 82
(b) Status Upon Return.............................. 82
(c) Substitute Engine............................... 83
(d) Records and Documents........................... 83
(e) Condition of Engine............................. 85
(f) Final Inspection................................ 85
(g) Engine Records and Documents.................... 86
(h) Corrections and Subsequent
Corrections..................................... 86
(i) [Intentionally Left Blank]...................... 86
(j) Exportation of the Engine....................... 86
(k) Service Bulletin and Modification
Kits............................................ 87
(l) Storage Upon Return............................. 87
(m) Resale/Release Cooperation...................... 87
Section 17. Events of Default..................................... 87
Section 18. Remedies.............................................. 90
Section 19. Security for Obligations.............................. 95
Section 20. Renewal Option........................................ 97
Renewal Option........................................ 97
Section 21. Miscellaneous......................................... 98
(a) Severability, Amendment, and
Construction.................................. 98
(b) GOVERNING LAW................................... 98
(c) Notices......................................... 98
(d) Lessor's Right to Perform for Lessee............ 99
(e) Counterparts.................................... 99
(f) Quiet Enjoyment................................. 99
(g) Brokers.........................................100
(h) Investment of Funds.............................100
(i) Entire Agreement; Amendment.....................100
(j) Expenses........................................101
(k) Federal Bankruptcy Code.........................101
(l) [Intentionally Left Blank]......................101
(m) Submission to Jurisdiction; Service
of Process; Waiver of Forum Non
Conveniens; Waiver of Jury Trial................101
(n) Limitation on Recourse..........................103
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(o) Successor Trustee...............................103
(p) Article 2-A of the UCC..........................103
ANNEXES
Annex A - Description of Original Head Lease
EXHIBITS
Exhibit A - Stipulated Loss Values
Exhibit B - Engine Records and Documents
Exhibit C - Definitions and Values
Exhibit D-1 - Lease Supplement No. 2
Exhibit D-2 - Letter of Credit
Exhibit E - Return Condition Requirements
Exhibit F-1 - Foreign Air Carriers
Exhibit F-2 - Permitted Foreign Sublessee Domiciles
Exhibit F-3 - Permitted Sublessee Assignment Consent
Exhibit G - [Intentionally Left Blank]
Exhibit H - [Intentionally Left Blank]
Exhibit I - [Intentionally Left Blank]
Exhibit J - [Intentionally Left Blank]
Exhibit K - Form of Engine Status Report
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