-----------------------------------
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as otherwise expressly provided herein,
but solely as owner trustee
(Lessor)
- and -
WESTERN PACIFIC AIRLINES, INC.
(Lessee)
-----------------------------------
LEASE AGREEMENT
- relating to -
One Boeing 737-300 Aircraft
Manufacturer's Serial No: 28871
Registration ▇▇▇▇: N966WP
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CONTENTS
CLAUSE PAGE
1. DEFINITIONS and INTERPRETATION.................................. 1
1.1 Definitions............................................... 1
1.2 Interpretation............................................ 21
2. REPRESENTATIONS AND WARRANTIES.................................. 22
2.1 Lessee's Representations and Warranties................... 22
2.2 Lessee's further Representations and Warranties........... 23
2.3 Repetition................................................ 24
2.4 Lessor's and Trust Company's Representations and
Warranties................................................ 24
2.5 Repetition................................................ 26
3. CONDITIONS PRECEDENT............................................ 26
3.1 Documentary Conditions Precedent.......................... 26
3.2 Other Conditions Precedent................................ 28
3.3 Waiver.................................................... 28
3.4 Lessee's Conditions Precedent............................. 29
3.5 Waiver.................................................... 29
4. COMMENCEMENT.................................................... 30
4.1 Leasing................................................... 30
4.2 Delivery.................................................. 30
4.3 Condition on Delivery..................................... 30
4.4 (intentionally left blank)................................ 30
4.5 Indemnity................................................. 30
4.6 Acceptance and Risk....................................... 31
4.7 Delayed Delivery.......................................... 31
4.8 Options................................................... 32
5. PAYMENTS........................................................ 32
5.1 Aircraft Commitment Fee................................... 32
5.2 Rental Periods............................................ 33
5.3 Rent...................................................... 33
5.4 Supplemental Rent......................................... 34
5.5 Payments.................................................. 34
5.6 Gross-up.................................................. 35
5.7 Taxation.................................................. 35
5.8 Value Added Tax........................................... 36
5.9 Information............................................... 37
5.10 Taxation of Indemnity Payments............................ 37
5.11 Default Interest.......................................... 38
5.12 Contest................................................... 38
5.13 Absolute.................................................. 39
5.14 Lessor's Moneys........................................... 40
5.15 Letter of Credit.......................................... 41
5.16 Verification.............................................. 42
6. MANUFACTURER'S WARRANTIES....................................... 43
6.1 Assignment................................................ 43
6.2 Proceeds.................................................. 43
6.3 Parts..................................................... 44
6.4 Agreement................................................. 44
7. LESSOR'S COVENANTS and DISCLAIMERS.............................. 44
7.1 Quiet Enjoyment........................................... 44
7.2 Maintenance Contribution ................................. 45
7.3 The Lessor's Obligations Following Expiry Date............ 46
7.4 Exclusion................................................. 47
7.5 Lessee's Waiver........................................... 48
7.6 Lessee's Confirmation..................................... 48
8. LESSEE'S COVENANTS.............................................. 49
8.1 Duration.................................................. 49
8.2 Information............................................... 49
8.3 Lawful and Safe Operation................................. 50
8.4 Taxes and other outgoings................................. 52
8.5 Sub-Leasing............................................... 52
8.6 Inspection................................................ 54
8.7 Protection of Title....................................... 55
8.8 General................................................... 57
8.9 Records................................................... 57
8.10 Registration and Filings.................................. 58
8.11 Maintenance and Repair.................................... 58
8.12 Removal of Engines and Parts.............................. 60
8.13 Installation of Engines and Parts ........................ 60
8.14 Non-Installed Engines and Parts........................... 61
8.15 Pooling of Engines and Parts.............................. 62
8.16 Equipment Changes; Non-Severable Modifications and
Severable Modifications................................... 63
8.17 Title to Engines and Parts ............................... 64
9. INSURANCE ...................................................... 64
9.1 Insurances................................................ 64
9.2 Requirements.............................................. 65
9.3 Change.................................................... 65
9.4 Insurance Covenants....................................... 66
9.5 Failure to Insure......................................... 68
9.6 Continuing Indemnity...................................... 68
9.7 Application of Insurance Proceeds......................... 68
10. INDEMNITY....................................................... 69
10.1 General................................................... 69
10.2 Duration.................................................. 73
11. EVENTS OF LOSS.................................................. 73
11.1 Total Loss................................................ 73
11.2 Requisition............................................... 74
11.3 Application of Payments from Governmental Authorities
in Respect of Event of Loss............................... 75
12. RETURN OF AIRCRAFT.............................................. 75
12.1 Redelivery................................................ 75
12.2 Final Inspection ......................................... 76
12.3 Non-Compliance............................................ 77
12.4 Obligation to Return the Aircraft......................... 77
12.5 APU Adjustment............................................ 78
12.6 Documentation............................................. 78
12.7 Acknowledgement........................................... 78
12.8 Maintenance Programme..................................... 78
12.9 Fuel...................................................... 79
12.10 Storage................................................... 79
13. DEFAULT ....................................................... 79
13.1 Events.................................................... 79
13.2 Rights.................................................... 82
13.3 Deregistration............................................ 83
13.4 Default Payments.......................................... 83
13.5 Exercise of Remedies...................................... 85
14. ASSIGNMENT and TRANSFER......................................... 85
14.1 No assignment by Lessee................................... 85
14.2 Assignment................................................ 85
14.3 No increased liability.................................... 86
14.4 Right to grant mortgage................................... 86
15. ILLEGALITY...................................................... 86
16. MISCELLANEOUS................................................... 86
16.1 Waivers, Remedies Cumulative.............................. 86
16.2 Delegation................................................ 87
16.3 Certificates.............................................. 87
16.4 Appropriation............................................. 87
16.5 Currency Indemnity........................................ 87
16.6 Set-off................................................... 88
16.7 Severability.............................................. 88
16.8 Remedy.................................................... 88
16.9 Expenses.................................................. 89
16.10 Time of Essence........................................... 89
16.11 Notices................................................... 89
16.12 Law and Jurisdiction...................................... 91
16.13 Sole and Entire Agreement................................. 93
16.14 Indemnities............................................... 93
16.15 Cost of Lessee's Work..................................... 93
16.16 Counterparts.............................................. 93
16.17 English Language.......................................... 93
16.18 Confidentiality........................................... 94
16.19 Geneva Convention......................................... 94
16.20 Civil Reserve Air Fleet Program........................... 94
16.21 Section 1110.............................................. 95
16.22 Article 2-A of the UCC.................................... 95
SCHEDULES
1. Aircraft Specification
2. Certificate of Acceptance
3. Operating Condition at Redelivery
4. Insurance Requirements
5. Acknowledgments in Connection with Financing
6. Forms of Legal Opinions
7. Form of Letter of Credit
8. Engine Life-Limited Parts
9. Form of Monthly Status Report
10. Approved Jurisdictions for Sub-Leasing
12. Letter of Quiet Enjoyment
THIS LEASE AGREEMENT is made the day of June 1997
BETWEEN: WILMINGTON TRUST COMPANY, a banking corporation organized under the
laws of the State of Delaware whose chief executive office is located at ▇▇▇▇▇▇
Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, not in
its individual capacity except as otherwise expressly provided herein, but
solely as owner trustee (the "OWNER TRUSTEE"), as lessor (the "LESSOR")
and
WESTERN PACIFIC AIRLINES, INC., a company incorporated under the laws of
Delaware whose principal address is at ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, as lessee (the "LESSEE").
WHEREAS:
NBB Stream Lease Co., Ltd. has leased the Aircraft to Sunrock Aircraft
Corporation Limited which, pursuant to the head lease assignment (the "Head
Lease Assignment"), has assigned its rights but not its obligations under the
Head Lease (as defined below) to Wilmington Trust Company, as the Owner Trustee
and the Lessor under this Agreement. The Lessee has requested the Lessor to
lease the Aircraft to the Lessee which the Lessor has agreed to do in
consideration of, and subject to, the covenants, terms and conditions contained
in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following expressions shall, unless the context
otherwise requires, have the following respective meanings:
AFFILIATE in relation to any person, any entity
controlled directly or indirectly by that
person, any entity that controls directly or
indirectly that person, or any entity under
common control with that person. For this
purpose "control" of any entity or person
means ownership of a majority of the voting
power of the entity or person.
AFTER-TAX BASIS a basis whereby any payment required to be
made on such basis shall, if necessary, be
supplemented by a further payment so that
the aggregate of the two payments, after
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deduction of all Taxes resulting from the
receipt (actual or constructive) or accrual
of such payments, and after taking into
account all related Tax savings (whether by
relief, deduction, credit or otherwise)
actually realised as a result of such
payments, shall be equal to the payment so
required.
AGREED APPRAISER a reputable aircraft appraisal organization
of recognized expertise in the field of
valuation of commercial passenger jet
aircraft (including, without limitation,
Avitas, Avmark Inc., Avmark Services Limited
and Airclaims Limited) which is mutually
acceptable to the Lessor and the Lessee;
provided that if the Lessor and the Lessee
are unable to agree upon such an appraiser
within five (5) Business Days after the need
for such appraiser arises, the Lessor and
the Lessee shall each appoint such an
appraiser and the two appraisers so
appointed shall select a third such
appraiser which shall be the Agreed
Appraiser; and provided further that if
either party hereto fails to appoint an
appraiser as provided above, the Agreed
Appraiser shall be the appraiser appointed
by the other party.
AGREED MAINTENANCE PERFORMER (i) the Lessee or (ii) any other reputable
maintenance facility certified by the FAA
for the relevant work on Boeing 737-300
aircraft or engines such as the Engines,
which is then under contract with the Lessee
to perform comparable work on similar
aircraft or engines in the Lessee's fleet;
provided that any such maintenance facility
located outside the United States has been
approved in writing in advance by the
Lessor, such approval not to be unreasonably
withheld or delayed; or (iii) with the prior
written approval of the Lessor, such
approval not to be unreasonably withheld or
delayed, any other maintenance or repair
facility.
AGREED MAINTENANCE PROGRAMME the Maintenance Programme for the Lessee's
fleet of Boeing 737-300 aircraft approved
in writing by the Lessor prior to the
2
Delivery Date, as subsequently amended from
time to time by the Lessee with all
required approvals of the FAA; provided
that any amendment or modification of such
Maintenance Programme effecting a change
from a programme based on block maintenance
to a programme not based on block
maintenance which is not required by the
FAA or the Manufacturer, shall require the
prior written approval of the Lessor, such
approval not to be unreasonably withheld or
delayed.
AGREED VALUE as of any date means the applicable amount
set forth in Letter Agreement No. 1 with
respect to such date.
AIRCRAFT the aircraft described in Part 1 of Schedule
1, (which term includes, where the context
admits, a separate reference to all Engines,
Parts and the Aircraft Documents.
AIRCRAFT DOCUMENTS the documents, data and records identified
in Part 2 of Schedule 1 and all additions,
renewals, revisions and replacements from
time to time made in accordance with this
Agreement.
AIRCRAFT SALE AGREEMENT the Aircraft Sale Agreement as defined in
the Purchase Agreement Assignment.
AIRFRAME the Aircraft, excluding the Engines and the
Aircraft Documents.
APU the auxiliary power unit installed on the
Aircraft on the Delivery Date or any
replacement auxiliary power unit which may
be substituted therefor in accordance with
this Agreement.
ASSIGNMENT any present or future assignment by the
Lessor in favour of the Bank of all or any
portion of the Lessor's rights, title and
interest in the Aircraft and under this
Agreement as security for its obligations.
AVIATION AUTHORITY the FAA or, if the State of Registration is
not then the United States of America, the
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authority and/or Government Entity and/or
agency which, under the laws of the State of
Registration, from time to time: (a) has
control or supervision of Civil Aviation; or
(b) has jurisdiction over registration,
airworthiness or operation of the Aircraft.
BANK(S) such financial institution(s) which from
time to time finance the Aircraft for the
Lessor or the Head Lessor and/or for whose
benefit security over, or rights relating
to, the Aircraft and/or this Agreement is
granted by the Lessor or the Head Lessor or
at their request, as applicable.
BENEFICIAL OWNER Sunrock Aircraft Corporation Limited, a
company incorporated under the laws of
Ireland whose registered office is at ▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇ of Ireland, its successors and/or,
to the extent permitted hereunder, its
assignees, as beneficial owner under the
Trust Agreement.
BLOCK HOUR each hour or part of any hour (rounded to
one decimal place) elapsing from the moment
the chocks are removed from the wheels of
the Aircraft until the chocks are next again
returned to the wheels.
BOEING The Boeing Company, a Delaware corporation
with its principal office in Seattle, State
of Washington, USA.
BSC Boeing Sales Corporation, a corporation
incorporated under the laws of the United
States Territory of Guam, with its principal
office in Seattle, State of Washington, USA.
BUSINESS DAY a day (other than a Saturday or Sunday) on
which banks are open for business in New
York and Denver.
CERTIFICATE OF ACCEPTANCE a certificate in the form of Schedule 2 to
be completed and executed by the Lessee on
Delivery.
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CIVIL RESERVE AIR FLEET PROGRAM the Civil Reserve Air
Fleet Program administered by the United
States government and authorized under 10
U.S.C. Sec. 9511, et seq., as amended, or
any substantially similar or substitute
program of the United States Government.
COMMITMENT FEE means such sums as shall be paid by the
Lessee to the Lessor pursuant to Clause 5.1
in the amounts, and at the times, set forth
in Letter Agreement No. 1.
CYCLE one take-off and landing of the Aircraft.
DAMAGE NOTIFICATION THRESHOLD $[ ]*
DEFAULT any Event of Default and any event which
with the giving of notice or lapse of time
would constitute an Event of Default.
DELIVERY the acceptance by the Lessee of delivery of
the Aircraft in accordance with the terms of
this Agreement.
DELIVERY DATE the date on which Delivery takes place.
DELIVERY LOCATION Seattle, State of Washington, U.S.A.
DOLLARS AND $ the lawful currency of the United States of
America.
ENGINE whether or not installed on the Aircraft:
(a) each of the CFM International CFM56-3C1
engines specified by manufacturer's
serial numbers in the Certificate of
Acceptance to be executed by the Lessee
upon Delivery; or
(b) any engine which has replaced an engine
referred to in clause (a) above, title
to which has or should have passed to
the Holder of Legal Title in accordance
with Clause
8.17(a);
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and in each case includes all modules and
Parts from time to time belonging to or
installed in that engine but excludes any
engine replaced in accordance with Clause
8.13(a), title to which has, or should have,
passed to the Lessee in accordance with
Clause 8.17(c).
ENGINE LLP those life-limited Engine Parts specified in
Schedule 8.
ENGINE LOSS the occurrence of any of the events referred
to in the definition of "Total Loss", but
with the references therein to "Airframe"
being construed as references to an Engine.
ENGINE LOSS DATE the relevant date determined in accordance
with the definition of "Total Loss Date" as
if that definition applied to an Engine
Loss.
EVENT OF DEFAULT shall have the meaning specified in any one
or more provisions of Clause 13.1.
EXCUSABLE DELAY with respect to delivery of the Aircraft,
delay or non-performance due to or arising
out of acts of God or public enemy, civil
war, insurrection or riot, fire, flood,
explosion, earthquake, accident, epidemic,
quarantine restriction, any act of
government, governmental priority,
allocation, regulation or order affecting
directly or indirectly, the Aircraft, any
manufacturer, the Lessor or any materials or
facilities, strike or labour dispute causing
cessation, slowdown or interruption of work,
inability after due and timely diligence to
procure equipment, data or materials from
manufacturers, suppliers, any existing
owner, seller or lessee in a timely manner,
damage, destruction or loss, or any other
cause to the extent that such cause is
beyond the control of the Lessor whether
above mentioned or not and whether or not
similar to the foregoing.
EXPIRY DATE the day preceding the numerically
corresponding day 96 months after the
Delivery Date or if earlier the date on
which:
6
(a) the Aircraft has been redelivered in
accordance with this Agreement; or
(b) the Lessor receives the Agreed Value
following a Total Loss.
FAA the Federal Aviation Administration of the
United States of America and any successor
thereof.
FAR the Federal Aviation Regulations for the
time being in force, issued by the FAA
pursuant to Subtitle VII of Title 49 of the
United States Code published in Title 14 of
the Code of Federal Regulations.
FAIR MARKET VALUE means the value of the Aircraft in Dollars
(free of any lease, sub-lease, conditional
sale agreement, option, mortgage, charge,
lien or other encumbrance) payable by a
willing buyer to a willing seller on an
"arm's length" basis, as determined at the
relevant time on a "desk top" basis by the
Agreed Appraiser.
FINANCIAL INDEBTEDNESS any indebtedness in excess of $[ ]*
principal amount in respect of:
(a) moneys borrowed;
(b) any liquidated liability under any
debenture, bond, note, loan stock,
acceptance credit, documentary credit
or other security;
(c) the acquisition cost of any asset to
the extent payable more than 120 days
after the time of acquisition or
possession; or
(d) the capitalised value (determined in
accordance with GAAP) of obligations
under finance leases; or
(e) any guarantee, indemnity or similar
assurance against financial loss of any
person in respect of the above.
7
FLIGHT HOUR each hour or part thereof (rounded to one
decimal place) elapsing from the moment the
wheels of the Aircraft leave the ground on
take off until the moment the wheels of the
Aircraft next touch the ground.
GAAP United States generally accepted accounting
principles consistently applied as in effect
from time to time, which shall include the
official interpretations thereof by the
Financial Accounting Standards Board.
GOVERNMENT ENTITY (a) any national government, political
subdivision thereof, or local
jurisdiction therein;
(b) any instrumentality, board, commission,
court, or agency of any thereof,
however constituted whose actions,
rules or regulations have the force of
law; and
(c) any association, organization, or
institution controlled by any of the
above whose actions, rules or
regulations shall have the force of
law.
HABITUAL BASE the United States of America or, subject to
the prior written consent of the Lessor, any
other country or countries in which the
Aircraft is for the time being habitually
based.
HEAD LEASE the lease agreement relating to the Aircraft
between the Head Lessor, as lessor, and
Sunrock Aircraft Corporation Limited, as
lessee, as long so it remains in force and
effect.
HEAD LESSEE Sunrock Aircraft Corporation Limited, as
lessee, so long as it remains a lessee under
the Head Lease.
HEAD LESSOR NBB Stream Lease Co., Ltd., as lessor, so
long as it remains a lessor under the Head
Lease.
HOLDER OF LEGAL TITLE the Lessor or the Head Lessor, whoever is
the holder of legal title to the Aircraft
8
and/or any Engine and/or any Part at the
applicable time, as advised by the Lessor to
the Lessee in writing.
INDEMNITEES each of the Head Lessor, the Head Lessee,
the Beneficial Owner, the Banks, the Trust
Company and the Lessor including, any of
their respective successors and permitted
assigns (and, in the case of a permitted
assign that is a partnership, the partners
of such partnership), and any combination
thereof and their respective shareholders,
Subsidiaries, Affiliates, directors,
officers, agents and employees.
LANDING GEAR the landing gear assemblies of the Aircraft
excluding the wheels and brake units.
LESSEE'S INTEREST subject to the application of Clause 11.3,
that portion of the compensation paid by a
Government Entity in connection with a
requisition of the Aircraft, provided that
such requisition has not been caused by any
action or omission of the Lessee (other than
pursuant to the Civil Reserve Air Fleet
Program), constituting an Event of Loss
hereunder equal to the excess, if any, of
(i) an amount equal to the present value,
discounted at a rate equal to the rate in
effect for United States Treasury
obligations with a term most nearly equal to
the remaining Lease Term, of fair market
rentals, determined by independent
appraisal, for the Aircraft for the balance
of the Lease Term from the date of
requisition minus (ii) the present value,
discounted at the same U.S. Treasury rate,
of the future rent payments due under this
Agreement for the balance of the Lease Term
from the date of the requisition; provided
that, for purposes of determining the
remaining Term and the balance of the Term
under this definition, the options set forth
in Clause 4.8 hereof shall be deemed to have
been exercised.
LESSEE as defined in the introductory paragraph of
this Agreement.
9
LESSOR as defined in the introductory paragraph of
this Agreement.
LESSOR LIEN (a) any lien, encumbrance or security
interest whatever from time to time
created by or arising through the
Beneficial Owner or the Lessor in
connection with the financing or
refinancing of the Aircraft;
(b) any other lien, encumbrance or security
interest in respect of the Aircraft
which results from acts or omissions
of, or claims against, the Beneficial
Owner or the Lessor (or their
respective successors or assigns) not
related to the operation of the
Aircraft or the transactions
contemplated by or permitted under this
Agreement or resulting from affirmative
acts of the Beneficial Owner or the
Lessor not permitted without consent
(which consent has not been granted) by
the Lessee or that is in violation of
any term of this Agreement or any other
agreement executed in connection
herewith; and
(c) liens in respect of the Aircraft for
Lessor Taxes.
LESSOR TAXES (a) Taxes imposed as a direct result of
activities of the Lessor, the
Beneficial Owner or any other
Indemnitee (or any transferee of the
Lessor, the Beneficial Owner or any
other Indemnitee of any ownership
interest or Security Interest in the
Aircraft) in the jurisdiction
imposing the Tax (including, without
limitation, activities such as a
permanent establishment or doing
business in such jurisdiction) that are
unrelated to the Lessor's dealings
with the Lessee or to the transactions
contemplated by this Agreement or to
the operation of the Aircraft by the
Lessee other than such Taxes that
would not have been imposed but for the
Lessee's or any Permitted Sublessee's
use, storage, delivery or operation
of the Aircraft in such jurisdiction
10
or the making of any payments under
this Agreement or related agreements
from or through such jurisdiction;
(b) Taxes imposed on the income, profits or
gains of the Lessor or the Beneficial
Owner (including, without limitation,
minimum taxes and alternative minimum
taxes) by any Government Entity in
Ireland, or on any Indemnitee in any
other jurisdiction where the Indemnitee
is liable to such Taxes by reason of
its activities unrelated to the
transactions contemplated by this
Agreement, but only to the extent that
such Taxes would have been imposed in
the absence of the transactions
contemplated by this Agreement;
(c) Taxes imposed with respect to any
period commencing or event occurring
before the date of this Agreement or
after the Expiry Date (other than Taxes
imposed with respect to the receipt
after the Expiry Date of an amount due
from the Lessee under this Agreement);
(d) Taxes imposed as a direct result of the
Lessor's, the Beneficial Owner's or any
other Indemnitee's sale or other
disposition of any interest in the
Aircraft, unless such sale or
disposition results in whole or in part
from an Event of Default which has
occurred and is continuing;
(e) Taxes on, or with respect to any
trustee fees, commissions or
compensation received by Lessor in its
capacity as owner trustee under the
Trust Agreement;
(f) Taxes imposed against a transferee or
assignee of any Indemnitee to the
extent of the excess of such Taxes over
the amount thereof which would have
been imposed had there not been such a
transfer or assignment;
11
(g) Taxes to the extent the same would not
have been imposed but for the failure
by the Lessor, the Beneficial Owner or
any other Indemnitee to provide the
Lessee such certification with respect
to matters such as its citizenship, tax
status and address, or information of a
similar nature, in each case, in or on
the appropriate form (collectively, an
"Eligibility Certification") as shall
enable it to claim a reduced rate of
Tax or exemption from Tax for which the
Indemnitee is eligible and which may be
claimed by the Indemnitee without
material prejudice to its reporting
position with respect to any
unindemnified Tax; provided that, in
the case of an Eligibility
Certification requirement arising after
the Delivery Date (i) by reason of the
expiration of a previously provided
Eligibility Certification, (ii) in a
jurisdiction in which the Indemnitee is
not otherwise subject to Tax as the
result of operations or transactions
unrelated to this Agreement or the
transactions contemplated hereby or
(iii) arising as the result of a change
in applicable Tax law (other than in
the country in which the Indemnitee, as
applicable, is organized or has its
principal place of business), the
Lessee has requested such Eligibility
Certification in writing;
(h) Except as provided in Clause 5.12,
Taxes that are being contested in
accordance with Clause 5.12 during the
pendency of such contest;
(i) to the extent that such Taxes
constitute interest, fines or penalties
if such interest, fines or penalties
result from the failure to file or late
filing of any tax return by the Lessor,
the Beneficial Owner or any other
Indemnitee other than any such return
which the Lessee is required hereunder
to provide to the Lessor, the
Beneficial Owner or any other
Indemnitee and which the Lessee has not
provided in reasonably sufficient time
for such return to be timely filed or
has not provided notice to the Lessor,
the Beneficial Owner or any other
Indemnitee, as the case may be, of the
required filing date.
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LETTER AGREEMENT NO. 1 means that certain Letter Agreement No. 1
between the Lessor and the Lessee, relating
to the Aircraft, and dated as of the date of
this Agreement.
LETTER OF CREDIT an irrevocable standby letter of credit,
substantially in the form set out in
Schedule 7 or otherwise in form and
substance satisfactory to the Lessor, issued
in favour of the Lessor by a bank in the
United States reasonably acceptable to the
Lessor, in the face amount as provided in
Clause 5.1 hereof.
LETTER OF QUIET ENJOYMENT an executed letter of quiet enjoyment,
substantially in the form set out in
Schedule 11, provided to the Lessee by
Sunrock Aircraft Corporation Limited, as
Beneficial Owner (and any successors and
assigns of Sunrock Aircraft Corporation
Limited other than the Banks and other
security assigns).
LIBOR in respect of any day, the arithmetic mean
(rounded up to the nearest 1-16th) of the
annual rates of interest published or
reported by Reuters Limited (through its
▇▇▇▇▇▇ Monitor Service, the "Screen"), by
reference to the Screen page "LIBOR" (or any
successor to such page) at or about 11.00
a.m. (London time) on that day (or, if such
day is not a Business Day, the immediately
preceding Business Day), as being the
interest rates offered for Dollar deposits
in an amount equal (or closest) to the
amount in question and for a duration equal
to the period in question (or for whichever
period appearing on the Screen is closest to
that period). If, on the date in question,
the Screen page "LIBO" (or any successor to
such page) is not available or does not
display rates for the required period,
"LIBOR" shall be the arithmetic mean
(rounded-up to the nearest two decimal
places) of the respective rates notified to
the Lessor by the Reference Banks as the
rates at which the Reference Banks offer
deposits in Dollars to leading banks in the
London Interbank Market at or about 11.00
a.m. (London time) on the date in question
for an amount equal (or closest) to the
amount in question and for a duration equal
(or closest) to the period in question.
13
MAINTENANCE PROGRAMME an Aviation Authority approved maintenance
programme for the Aircraft encompassing
scheduled maintenance (including block
maintenance), condition monitored
maintenance, and/or on-condition maintenance
of Airframe, Engines and Parts, including
but not limited to, servicing, testing,
preventative maintenance, repairs,
structural inspections, system checks,
overhauls, approved modifications, service
bulletins, engineering orders, airworthiness
directives, corrosion control, inspections
and treatments.
MAJOR CHECKS any C-Check, multiple C-Check, structural
C-7 Check or annual heavy maintenance visit
or segment thereof suggested for Boeing
737-300 aircraft by the Manufacturer
(however denominated) as set out in the
Agreed Maintenance Programme.
MANUFACTURER Boeing except where the context otherwise
requires, in which case it shall be the
manufacturer of the specific Engine or Part,
as the case may be.
MINIMUM LIABILITY COVERAGE $[ ]* on each occurrence.
NET INCOME "net income (loss)," as determined in
accordance with GAAP.
NET WORTH "net worth," as determined in accordance
with GAAP.
NON-SEVERABLE MODIFICATION any modification, alteration or improvement
of or to the Aircraft which is not a
Severable Modification and which is not
required to be incorporated in the Aircraft
by the FAA or the terms of this Agreement.
14
OWNER TRUSTEE Wilmington Trust Company, not in its
individual capacity, but solely as owner
trustee under the Trust Agreement.
PART whether or not installed on the Aircraft:
(a) any component, furnishing or equipment
(other than a complete Engine)
installed in or furnished with the
Aircraft at Delivery; and
(b) any other component, furnishing or
equipment (other than a complete Engine
or engine) title to which has, or
should have, passed to the Holder of
Legal Title pursuant to Clause 8.17(a),
but, in the case of both clause (a) and
clause (b), excluding any such items title
to which has, or should have, passed to the
Lessee pursuant to Clause 8.17(c).
PERMITTED LIEN (a) any lien for Taxes not assessed or, if
assessed, not yet due and payable, or
being contested in good faith by
appropriate proceedings;
(b) any lien of a repairer, mechanic,
carrier, hangarkeeper, unpaid seller or
other similar lien arising in the
ordinary course of business or by
operation of law in respect of
obligations which are not overdue or
are being contested in good faith by
appropriate proceedings;
(c) any leasehold interest, interest of a
conditional sale vendor, security
interest or license as to which the
Lessor has provided its express consent
with respect to and affecting only any
Severable Modification installed on the
Aircraft in accordance with Clause
8.16(c);
15
but only if (in the case of each (a) and
(b)): (i) so long as adequate reserves have
been established by the Lessee in accordance
with GAAP with respect to such liens for the
payment of the Taxes or obligations; and
(ii) such proceedings, or the continued
existence of the lien, do not give rise to
the likelihood of the sale, forfeiture or
other loss of the Aircraft or any interest
therein or of criminal liability on the
Lessor, or any Bank; and
(d) any Lessor Lien.
PERMITTED TRANSFEREE a financially sound (determined at the time
of the transfer) person or entity which
shall not operate an airline, or be an
Affiliate of an airline, competing with the
Lessee and which meets one of the following
criteria: (i) has at the time of the
transfer a minimum Net Worth of not less
than $[ ]*, or (ii) if such transferee's Net
Worth is less than $[ ]* but at least $[ ]*,
the Beneficial Owner guarantees for the
benefit of the Lessee the Lessor's
obligations to pay the Commitment Fee as set
forth in Clauses 5.1, 7.3 and 11.1(a) and
the maintenance contributions as set forth
in Clause 7.2, or (iii) such other person or
entity to which the Lessee shall consent,
such consent not to be unreasonably withheld
or delayed.
PURCHASE AGREEMENT the Purchase Agreement as defined in the
Purchase Agreement Assignment.
PURCHASE AGREEMENT ASSIGNMENT the agreement relating to the Aircraft,
dated July 1, 1997, among Boeing, BSC, the
Beneficial Owner and the Lessee.
REDELIVERY LOCATION at a commercial airport chosen by the Lessor
on the Lessee's then prevailing scheduled
network. The technical acceptance will occur
at the Lessee's home base or at the facility
of the Approved Maintenance Provider.
REFERENCE BANKS Barclays Bank PLC, Societe Generale, Bankers
Trust and National Westminster Bank PLC (or,
in the absence of any such bank, any other
reputable bank selected by the Lessor).
16
RELATED RELEVANT PERIOD in relation to any Rental Period, the
Relevant Period in which the first day of
that Rental Period falls.
RELEVANT PERIOD each period ascertained in accordance with
Clause 5.3.
RENT all amounts payable pursuant to Clause 5.3
RENTAL PERIOD each period ascertained in accordance with
Clause 5.2.
RENT DATE the first day of each Rental Period.
SCHEDULED DELIVERY DATE July 2, 1997.
SECURITY INTEREST any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off,
or any agreement or arrangement having the
effect of creating a security interest,
other than a Permitted Lien.
SEVERABLE MODIFICATION any modification, alteration or improvement
of or to the Aircraft (including, without
limitation, severable components or systems
installed on or affixed to the Airframe
which (A) is not required to be incorporated
in the Aircraft by the FAA or the terms of
this Agreement, (B) at the time made does
not diminish the value, utility, condition
or airworthiness of the Aircraft below its
value, utility, condition or airworthiness
immediately before such modification,
alteration or improvement is made, and (C)
is removable from the Aircraft without
causing damage to the Aircraft (unless such
damage is promptly repaired) and without
diminishing the value, utility, condition or
airworthiness which the Aircraft would have
had at such time if the modification,
alteration or improvement had not been made.
SIGNIFICANT DEFAULT (a) any Default which with the giving of
notice or the passage of time would
constitute an Event of Default
specified in paragraphs (a), (b), (g)
or (h) of Clause 13.1; or
17
(b) the Lessee shall be materially in
default of its maintenance and repair
obligations under Clause 8.11;
(c) the Lessee shall be operating the
Aircraft in violation of applicable
law;
(d) the Lessee shall be subleasing the
Aircraft to a sublessee which is not a
sublessee permitted under the terms of
this Agreement; or
(e) the Lessee shall be in default of any
other material provision hereof which
causes the Lessor to reasonably and in
good ▇▇▇▇▇ ▇▇▇▇ itself insecure.
STATE OF INCORPORATION the State of Delaware.
STATE OF REGISTRATION the United States of America.
SUBSIDIARY (a) in relation to any reference to
accounts, any company whose accounts
are consolidated with the accounts
of the Lessee in accordance with
GAAP; and
(b) for any other purpose, an entity from
time to time:
(i) of which another has direct or
indirect control or owns directly
or indirectly more than 50 per cent
of the voting share capital; or
(ii)which is a direct or indirect
a direct or indirect subsidiary
of another under the laws of the
jurisdiction of its incorporation.
SUPPLEMENTAL RENT all amounts payable under Clause 5.4(a).
TAXES any and all present and future taxes,
levies, imposts, duties or charges in the
nature of taxes, whatever and wherever
18
imposed, including customs duties, value
added taxes or similar taxes and any gross
or net income, gross or net receipts,
minimum, alternative minimum, excess
profits, accumulated earnings, capital
gains, doing business, franchise, transfer,
sales, use, business, occupation, excise,
personal property (tangible or intangible),
stamp or other tax or duty imposed by any
national (domestic or foreign), state or
local taxing or fiscal authority or agency,
together with any penalties, additions to
tax, fines or interest thereon;
TERM the period commencing on the Delivery Date
and ending on the Expiry Date.
TOTAL LOSS with respect to the Airframe:
(a) the actual, arranged or constructive
total loss of the Airframe (including
any damage to the Airframe which
results in an insurance settlement on
the basis of a total loss, or
requisition for use or hire which
results in an insurance settlement on
the basis of a total loss); or
(b) it being destroyed, damaged beyond
repair or permanently rendered unfit
for normal use for any reason
whatsoever; or
(c) (i) the requisition of title, or (ii)
other compulsory acquisition, capture,
seizure, deprivation, confiscation or
detention for any reason of the
Airframe by the government of the State
of Registration or other competent
authority (whether de jure or de facto)
for a period in excess of 120
consecutive days, but excluding
requisition for use or hire not
involving requisition of title; or
(d) (i) the hi-jacking, theft,
condemnation, confiscation, seizure or
(ii) requisition for use or hire of the
Airframe (other than by the federal
19
government of the United States),
which, in the case of each clause (i)
and (ii) above, deprives any person
permitted by this Agreement to have
possession and/or use of the Airframe
of its possession and/or use for more
than 120 consecutive days or (iii)
requisition for use or hire by the
federal government of the United
States, extending beyond the Expiry
Date.
TOTAL LOSS DATE (a) in the case of an actual
total loss, the actual date on which
the loss occurs or, if such date is
unknown, the day on which the Aircraft
was last heard of;
(b) in the case of any of the events
described in sub-paragraph (a) of the
definition of "Total Loss" (other than
an actual total loss), whichever is the
earlier of (i) 60 days after the date
on which notice claiming such total
loss is given to the relevant insurers,
and (ii) the date on which such loss is
admitted or compromised by the
insurers;
(c) in the case of any of the events
described in sub-paragraph (b) of the
definition of "Total Loss", the date on
which such destruction, damage or
rendering unfit occurs;
(d) in the case of any of the events
described in sub-paragraph (c) of the
definition of "Total Loss", with
respect to a requisition of title, the
date on which the relevant requisition
of title occurs, or with respect to any
other compulsory acquisition, capture,
seizure, deprivation, confiscation or
detention described in such
sub-paragraph, the expiry of the 120
consecutive day period referred to in
such sub-paragraph;
(e) in the case of any of the events
described in sub-paragraph (d) of the
definition of "Total Loss", (A) with
respect to clauses (i) and (ii)
thereof, the expiry of the period of
20
120 consecutive days or (B) with
respect to clause (iii) thereof, the
Expiry Date;
and, in each case, the Total Loss shall be
deemed to have occurred at noon Greenwich
Mean Time on such date.
TRUST AGREEMENT the Trust Agreement dated as of June ___,
1997 between Sunrock Aircraft Corporation
Limited, as Beneficial Owner, and Wilmington
Trust Company, as Owner Trustee.
TRUST COMPANY Wilmington Trust Company, in its individual
capacity.
1.2 INTERPRETATION
(a) In this Agreement, unless the contrary intention is stated, a
reference to:
(i) each of "THE LESSOR," "THE BENEFICIAL OWNER," "THE HEAD LESSOR,"
"THE HEAD LESSEE" or "THE LESSEE" or any other person includes
without prejudice to the provisions of this Agreement any
successor in title to it and any permitted assignee;
(ii)a "PERSON" includes, without limitation, an individual, firm,
partnership, company, corporation, unincorporated body or any
Government Entity and shall also include their respective
successors and assignees;
(iii)words importing the plural shall include the singular and vice
versa;
(iv)any document shall include that document as amended, novated or
supplemented;
(v) a law (1) includes any statute, decree, constitution, regulation,
order, judgment or directive of any Government Entity; (2)
includes any treaty, pact, compact or other agreement to which any
Government Entity is a signatory or party; (3) includes any
judicial or official administrative interpretation or official
application thereof and (4) is a reference to that provision as
amended, substituted or re-enacted;
(vi)a Clause or a Schedule is a reference to a clause of or a
schedule to this Agreement.
(a) The headings in this Agreement are to be ignored in construing this
Agreement.
21
(b) For the purposes of Clauses 7.4 and 7.5, "THE LESSOR" includes the
Lessor, the Beneficial Owner and the Head Lessor.
2. REPRESENTATIONS AND WARRANTIES
2.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
The Lessee represents and warrants to the Lessor as of the date of this
Agreement that:
(a) STATUS: the Lessee is a corporation duly incorporated and validly
existing under the laws of the State of Incorporation and has the
corporate power to own its assets and carry on its business as it is
now being conducted and is (or will, at the relevant time, be) the
holder of all necessary air transportation licenses required in
connection therewith and with its use and operation of the Aircraft;
(b) POWER AND AUTHORITY: the Lessee has the corporate power to enter into
and perform, and has taken all necessary corporate action to authorize
the entry into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement;
(c) LEGAL VALIDITY: This Agreement constitutes the Lessee's legal, valid
and binding obligation;
(d) NON-CONFLICT: The entry into and performance by the Lessee of, and the
transactions contemplated by, this Agreement do not and will not:
(i) conflict with any existing laws binding on the Lessee; or
(ii)conflict with the constitutional documents of the Lessee; or
(iii)conflict with or result in default under any document which is
binding upon the Lessee or any of its assets, nor result in the
creation of any Security Interest over any of its assets;
(e) AUTHORIZATION: All authorizations, consents, registrations and
notifications required in connection with the Lessee's entry into,
performance, validity and enforceability against the Lessee of, this
Agreement and the transactions contemplated by this Agreement, have
been (or will on or before the Delivery Date have been) obtained or
effected (as appropriate) and are (or will on their being obtained or
effected be) in full force and effect;
22
(f) NO IMMUNITY:
(i) the Lessee is subject to civil commercial law with respect to its
obligations under this Agreement; and
(ii)neither the Lessee nor any of its assets is entitled to any right
of sovereign immunity and the entry into and performance of this
Agreement by the Lessee constitute private and commercial acts;
and
(g) ACCOUNTS: the audited accounts of the Lessee, and, if required by
GAAP, the audited consolidated accounts of the Lessee and its
Subsidiaries and Affiliates most recently delivered to the Lessor:
(i) have been prepared in accordance with GAAP consistently applied
(except as otherwise disclosed therein); and
(ii)fairly represent in accordance with such accounting principles the
consolidated financial condition of the Lessee as at the date to
which they were drawn up.
2.2 LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES
The Lessee further represents and warrants to the Lessor as of the date of
this Agreement that:
(a) NO DEFAULT:
(i) no Default has occurred and is continuing or would result from the
entry into or performance of this Agreement; and
(ii)no other event has occurred and is continuing which constitutes
(or with the giving of notice, lapse of time, determination of
materiality or the fulfillment of any other applicable condition
or any combination of the foregoing, would reasonably be expected
to constitute) a material default under any document which is
binding on the Lessee or any assets of the Lessee;
(b) REGISTRATION: Except for the registration of the Aircraft and the
filing of this Agreement with the FAA and the filing of Uniform
Commercial Code financing statements in the State of Colorado, it is
not necessary under the laws of the State of Incorporation, the State
of Registration or the State of Colorado in order to ensure the
validity, effectiveness and enforceability of this Agreement or to
establish, perfect or protect the property rights of the Lessor in the
Aircraft or any Engine or Part that this Agreement or any other
instrument relating thereto be filed, registered or recorded or that
23
any other action be taken or, if any such filings, registrations,
recordings or other actions are necessary or advisable, the same have
been effected or will have been effected on or before Delivery;
(c) LITIGATION: no litigation, arbitration or administrative proceedings
are pending, or to its knowledge, threatened against the Lessee which
would reasonably be expected to have a material adverse effect upon
its financial condition or business or its ability to perform its
obligations under this Agreement;
(d) PARI PASSU: the obligations of the Lessee under this Agreement rank at
least pari passu with all other present and future unsecured and
unsubordinated obligations (including contingent obligations) of the
Lessee, with the exception of such obligations as are mandatorily
preferred by law and not by virtue of any contract;
(e) MATERIAL ADVERSE CHANGE: there has been no material adverse change in
the financial condition of the Lessee since the date to which the
accounts most recently provided to the Lessor on or prior to the
Delivery Date were drawn up;
(f) TAXES: the Lessee has filed all necessary returns and made all
payments shown due thereon to the tax authorities in the State of
Incorporation, the State of Registration and the State of Colorado and
is not required by law to deduct any Taxes from any payments under
this Agreement (other than those the Lessee is diligently contesting
in good faith and for which the Lessee has established adequate
reserves in accordance with GAAP; and
(g) INFORMATION: the financial and other information furnished by the
Lessee in connection with this Agreement is true and accurate in all
material respects.
2.3 REPETITION
The representations and warranties in Clause 2.1 and Clause 2.2 will
survive the execution of this Agreement. The representations and
warranties contained in Clause 2.1 and Clause 2.2 will be deemed to be
repeated by the Lessee on the Delivery Date with reference to the facts
and circumstances then existing.
2.4 LESSOR'S AND TRUST COMPANY'S REPRESENTATIONS AND WARRANTIES
The Trust Company represents and warrants to the Lessee as of the date of
this Agreement that:
(a) STATUS: the Trust Company is a banking corporation duly organized and
validly existing under the laws of the State of Delaware and has the
corporate power to own its assets and carry on its business as it is
now being conducted;
24
(b) POWER AND AUTHORITY: the Trust Company has the corporate power to
enter into and perform, and has taken all necessary corporate action
to authorize the entry into, performance and delivery of, this
Agreement and the transactions contemplated by this Agreement.
(c) LEGAL VALIDITY: This Agreement, to the extent entered into by the
Trust Company, constitutes the Trust Company's legal, valid and
binding obligation.
(d) NON-CONFLICT: The entry into and performance by the Trust Company of,
and the transactions contemplated by, this Agreement do not and will
not:
(i) conflict with any existing laws of the State of Delaware or
federal laws of the United States of America governing the banking
and trust powers of the Trust Company; or
(ii)conflict with the constitutional documents of the Trust
Company; or
(iii) conflict with any document which is binding upon the Trust
Company or any of its assets.
(e) AUTHORIZATION: So far as concerns the obligations of the Trust
Company, all authorizations, consents, registrations and notifications
required under the laws of the State of Delaware in connection with
the Trust Company's entry into, performance, validity and
enforceability against the Trust Company of, and the transactions
contemplated by, this Agreement by the Trust Company have been (or
will on or before the Delivery Date have been) obtained or effected
(as appropriate) and are (or will on their being obtained or effected
be) in full force and effect.
The Lessor represents and warrants to the Lessee as of the date of this
Agreement that:
(1) LEGAL VALIDITY: This Agreement constitutes the Lessor's legal, valid
and binding obligation.
(2) NO IMMUNITY:
(i) the Lessor is subject to civil commercial law with respect to its
obligations under this Agreement; and
(ii)neither the Lessor nor any of its assets is entitled to any right
of sovereign immunity and the entry into and performance of this
Agreement by the Lessor constitute private and commercial acts.
25
2.5 REPETITION
The representations and warranties in Clause 2.4 will survive the
execution of this Agreement. The representations and warranties contained
in Clause 2.4 will be deemed to be repeated by the Lessor on the Delivery
Date with reference to the facts and circumstances then existing.
3. CONDITIONS PRECEDENT
3.1 DOCUMENTARY CONDITIONS PRECEDENT
The Lessor's obligation to deliver and lease the Aircraft under this
Agreement is subject to the receipt or waiver of the following by the
Lessor on or before the Delivery Date in form and substance reasonably
satisfactory to the Lessor:
(a) CONSTITUTIONAL DOCUMENTS: a copy of the constitutional documents of
the Lessee;
(b) RESOLUTIONS: a copy of a resolution of the board of directors of the
Lessee approving the terms of, and the transactions contemplated by,
this Agreement, resolving that it enter into this Agreement, and
authorizing one or more officers or representatives to execute this
Agreement and accept delivery of the Aircraft on its behalf;
(c) OPINION: an opinion or opinions, substantially in the form set out in
Schedule 6, Part 1, issued on the Delivery Date by ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP and/or other legal counsel reasonably acceptable to the
Lessor;
(d) ASSISTANT GENERAL COUNSEL OPINION: an opinion or opinions,
substantially in the form set out in Schedule 6, Part 2, issued on the
Delivery Date by the Assistant General Counsel of the Lessee and/or
other legal counsel reasonably acceptable to the Lessor;
(e) FAA OPINION: an opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other
counsel reasonably acceptable to the Lessor who are recognized
specialists with regard to FAA registration matters in a form
acceptable to the Lessor acting reasonably as to the due filing for
recordation of this Agreement;
(f) APPROVALS: evidence of the issue of each governmental approval,
license and consent required of the Lessee for the performance by the
Lessee of any of its obligations hereunder;
(g) LICENSES: copies of the Lessee's air transport license, air operator's
certificates and all other licenses, certificates and permits required
by the Lessee in relation to, or in connection with, the operation of
the Aircraft;
26
(h) PROCESS AGENT: a letter from the process agent appointed by the
Lessee in this Agreement accepting that appointment;
(i) CERTIFICATE: a certificate of a duly authorized officer of the Lessee:
(i) setting out a specimen of each signature referred to in Clause
3.1(b); and
(ii)certifying that each copy document specified in this Clause 3.1 is
correct, complete and in full force and effect;
(j) INSURANCES: (x) certificates of insurance (and, if applicable,
reinsurance), (y) brokers' undertakings and (z) if reasonably
requested by the Lessor, other evidence (other than any insurance
policy or portion or extract thereof or any copy of any thereof and
other than any information that would violate any confidentiality
agreement or undertaking between the Lessee and the insurers)
reasonably satisfactory to the Lessor that the Lessee is taking the
required steps to ensure due compliance with the provisions of this
Agreement as to insurances with effect on and after Delivery;
(k) ACKNOWLEDGEMENT: an acknowledgement in the form set out in Part 2 of
Schedule 5 relating to the notice of assignment set out in Part 1 of
that Schedule
(l) ACCOUNTS: the latest available accounts of the Lessee as described in
Clause 8.2(b)(i) and (ii);
(m) MAINTENANCE PROGRAMME: receipt by the Lessor of such information and
documents relating to the Maintenance Programme as the Lessor may
reasonably require, and the Lessor having agreed to the Maintenance
Programme on or prior to the Delivery Date;
(n) LETTER OF CREDIT: receipt by Lessor of the Letter of Credit, if
applicable pursuant to Clause 5.1 hereof, duly executed by the issuing
bank; and
(o) FINANCING STATEMENTS: evidence that on the Delivery Date any financing
statements reasonably requested by the Lessor have been duly filed in
the State of Colorado and that all filings, registrations, recordings
and other actions have been or will be taken which are necessary or
advisable to ensure the validity, effectiveness and enforceability of
this Agreement and to protect the property rights of the Lessor in the
Aircraft, any Engine or any Part;
(p) GENERAL: such other documents as the Lessor may reasonably request
provided that such documents do not deprive the Lessee of any right or
privilege hereunder or impose on the Lessee any additional material
obligation.
27
3.2 OTHER CONDITIONS PRECEDENT
The obligation of the Lessor to deliver and lease the Aircraft under this
Agreement is also subject to the satisfaction or waiver of the following
additional conditions precedent:
(a) that the conditions precedent to the obligation of the Beneficial
Owner to (i) purchase the Aircraft from Boeing and/or BSC pursuant to
the Purchase Agreement and the Purchase Agreement Assignment shall
have been satisfied or waived, and Boeing and/or BSC shall have
tendered the Aircraft to the Beneficial Owner in accordance with the
Purchase Agreement and the Purchase Agreement Assignment and (ii)
accept delivery of the Aircraft under the Head Lease shall have been
satisfied or waived;
(b) that the representations and warranties of the Lessee under Clauses
2.1 and 2.2 are true and correct and would be true and correct if
repeated on the Delivery Date;
(c) that no Default shall have occurred and be continuing or would result
from the leasing of the Aircraft to the Lessee under this Agreement;
and
(d) there has been no material adverse change in the financial condition
of the Lessee since the date to which the accounts most recently
provided to the Lessor on or prior to the Delivery Date were drawn up;
(e) that the Aircraft shall be in the condition required under the
Purchase Agreement and that the Beneficial Owner shall have had a
reasonable opportunity to inspect the Aircraft prior to the Delivery
Date to satisfy itself that the Aircraft is in such condition; and
(f) that all payments due to the Lessor under this Agreement before the
Delivery Date shall have been received by the Lessor.
3.3 WAIVER
The conditions specified in Clauses 3.1 and 3.2 are for the sole benefit
of the Lessor and the Beneficial Owner, as the case may be, and may be
waived or deferred in whole or in part and with or without conditions by
the Lessor and the Beneficial Owner, respectively. If any of those
conditions are not satisfied on or before Delivery and the Lessor (in its
absolute discretion) nonetheless agrees to deliver the Aircraft to the
Lessee, the Lessee will ensure that those conditions are fulfilled within
15 days after the Delivery Date and the Lessor may treat as an Event of
Default the failure of the Lessee to do so.
28
3.4 LESSEE'S CONDITIONS PRECEDENT
Lessee's obligation to Lease the Aircraft under this Agreement shall be
subject to satisfaction or waiver of the following conditions precedent:
(a) the Beneficial Owner shall have purchased the Aircraft pursuant to the
Purchase Agreement and the Purchase Agreement Assignment;
(b) The Aircraft shall be registered in the Lessor's name in the United
States;
(c) The Aircraft shall be in the same condition and configuration as when
delivered to the Beneficial Owner under the Purchase Agreement and the
Purchase Agreement Assignment and will be in such a condition as to
permit immediate operation by the Lessee in the United States under
FAR Part 121;
(d) The representations and warranties set out in Clause 2.4 are true and
correct and would be true and correct if repeated on the Delivery
Date;
(e) The Lessee shall have received a letter from the process agent
appointed by the Beneficial Owner in this Agreement accepting that
appointment;
(f) The Lessee shall have received a Letter of Quiet Enjoyment from
Sunrock Aircraft Corporation Limited, as Beneficial Owner;
(g) The Lessor shall have approved the Maintenance Programme on or before
the Delivery Date; and
(h) The Lessee shall have received such other documents as the Lessee
shall reasonably request provided that such documents do not deprive
the Lessor of any right or privilege hereunder or impose on the Lessor
any additional material obligation.
3.5 WAIVER
The conditions specified in Clause 3.4 are for the sole benefit of the
Lessee and may be waived or deferred in whole or in part and with or
without conditions by the Lessee. If any of those conditions are not
satisfied on or before Delivery and the Lessee (in its absolute
discretion) nonetheless agrees to accept delivery of the Aircraft from the
Lessor, the Lessor will ensure that those conditions are fulfilled within
15 days after the Delivery.
29
4. COMMENCEMENT
4.1 LEASING
The Lessor will lease the Aircraft to the Lessee and the Lessee will take
the Aircraft on lease in accordance with this Agreement for the duration
of the Term.
4.2 DELIVERY
The Aircraft will be delivered to and accepted by the Lessee, as lessee,
(in a new condition as delivered by Boeing and/or BSC to the Beneficial
Owner under the Purchase Agreement and the Purchase Agreement Assignment,
at the Delivery Location, or such other location as may be agreed, on the
Scheduled Delivery Date (subject to Clause 4.7) or on such other day as
may be agreed.
4.3 CONDITION ON DELIVERY
When the Aircraft is presented by the Lessor for acceptance by the Lessee
under this Agreement:
(a) it shall comply in all respects with the specification set out in
Schedule 1 or, if different, the Purchase Agreement;
(b) it shall have been issued with a current valid Certificate of
Airworthiness issued by the FAA; and
(c) it shall be in such a condition as to permit immediate operation by
the Lessee in the United States under U.S. Federal Aviation
Regulation Part 121.
4.4 (INTENTIONALLY LEFT BLANK)
4.5 INDEMNITY
(a) The Lessee will indemnify and hold harmless the Indemnitees from and
against all Claims (as defined in Clause 10) arising from the death
of, or injury to, any observer or any employee or agent of the Lessee
in connection with any inspection of the Aircraft pursuant to (i) the
Purchase Agreement and/or the Purchase Agreement Assignment and (ii)
the Head Lease and the Aircraft Sale Agreement (which inspection and
delivery procedures will be the same as those provided for under the
Purchase Agreement and the Purchase Agreement Assignment).
(b) The Lessor or the Beneficial Owner, as the case may be, will indemnify
and hold harmless the Lessee from and against all Claims (as defined
in Clause 10) arising from the death of, or injury to, any observer or
any employee or agent of the Lessor or the Beneficial Owner in
30
connection with any inspection of the Aircraft pursuant to (i) the
Purchase Agreement and/or the Purchase Agreement Assignment and (ii)
the Head Lease and the Aircraft Sale Agreement (which inspection and
delivery procedures will be the same as those provided for under the
Purchase Agreement and the Purchase Agreement Assignment).
4.6 ACCEPTANCE AND RISK
(a) When the conditions precedent set forth in Clause 3.4 have been
satisfied in full or waived by the Lessee and the Lessor has tendered
the Aircraft to the Lessee in compliance with the conditions set forth
in Clause 4.3, the Lessee shall immediately sign and deliver to the
Lessor the Certificate of Acceptance. Delivery of the signed
Certificate of Acceptance to the Lessor shall constitute conclusive
evidence for all purposes that the Aircraft has been accepted by the
Lessee for all purposes of this Agreement.
(b) After acceptance by the Lessee, the Aircraft and every Part will be in
every respect at the sole risk of the Lessee, who will bear all risk
of loss, theft, damage or destruction to the Aircraft from any cause
whatsoever.
4.7 DELAYED DELIVERY
If owing to:
(a) any seller, manufacturer or maintenance performer of the Aircraft
delaying in the delivery of, or failing to deliver, the Aircraft to
the Lessor for any reason (other than because of any default of the
Beneficial Owner in the performance of its obligations under an
agreement with that seller, manufacturer or maintenance performer
(including, without limitation, the Purchase Agreement and/or the
Purchase Agreement Assignment) unless the default arises from any act
or omission of the Lessee whether or not in circumstances entitling
that seller, manufacturer or maintenance performer to terminate that
agreement); or
(b) any Excusable Delay the Lessor delays in the delivery of, or fails to
deliver, the Aircraft under this Agreement:
(i) the Lessor will not be responsible for any losses, including loss
of profit, costs or expenses arising from or in connection with
the delay or failure suffered or incurred by the Lessee; and
(ii)the Lessee will not be entitled to terminate this Agreement or to
reject the Aircraft when tendered for delivery by the Lessor, on
the grounds of any such delay; provided that this Agreement shall
automatically terminate upon the termination of the Purchase
Agreement prior to the Delivery Date and the Lessee shall have the
31
right to terminate this Agreement upon the termination of the
Purchase Agreement Assignment by the Beneficial Owner.
4.8 OPTIONS
(a) Notwithstanding the other provisions of this Agreement, the Lessor
hereby grants the Lessee the option (the "EXTENSION OPTION") to extend
the Term for a period of twenty-four (24) months (the "PERIOD OF
EXTENSION") provided that:
(i) the Lessee shall give the Lessor notice in writing not later than
the date eighteen (18) months prior to the Expiry Date (the
"LESSEE EXTENSION NOTICE") of the Lessee's election to exercise
the option, which Lessee Extension Notice, once given, shall be
irrevocable; and
(ii)no Significant Default or Event of Default shall have occurred and
be continuing on the date that the Lessee Extension Notice is
given or on the day before the Period of Extension commences.
(b) In the event the Lessee does not exercise the Lessee Extension Option,
the Lessor shall have the option (the "LESSOR EXTENSION OPTION") to
extend the Term for a period of twenty-four (24) months (the "PERIOD
OF EXTENSION"), provided that the Lessor shall give the Lessee notice
in writing not later than the date twelve (12) months prior to the
Expiry Date (the "LESSOR EXTENSION NOTICE") of the Lessor's election
to exercise the option, which Lessor Extension Notice, once given,
shall be irrevocable;
Upon the exercise of the Lessee Extension Option or the Lessor Extension
Option, all references in this Agreement to the Expiry Date shall be
deemed to refer to the last day of the Period of Extension and all other
terms and conditions of this Agreement shall remain in full force and
effect.
5. PAYMENTS
5.1 AIRCRAFT COMMITMENT FEE
Lessee shall pay to the Lessor a Commitment Fee in the amount and in
accordance with the schedule set forth in Letter Agreement No. 1:
The Commitment Fee shall be returned to the Lessee five Business Days
following the Expiry Date, but not before the Lessee shall have completely
performed all of its obligations then due under this Agreement. If the
Commitment Fee is in the form of cash, interest shall accrue on the
Commitment Fee at six months (6 months) LIBOR minus 1.00 % and shall be
payable to the Lessee together with the Commitment Fee unless any Event of
32
Default occurs and is continuing at such time, in which case, such
interest shall be paid to the Lessee at such time as all amounts then due
from the Lessee to the Lessor hereunder shall have been paid in full.
At the Lessor's option, payment of the Commitment Fee may take the form of
the provision by the Lessee to the Lessor of a Letter of Credit, and in
such case, the Lessor agrees to exchange such Letter of Credit for a new
Letter of Credit in an appropriately reduced amount if and when the
Commitment Fee is reduced as provided in this Clause 5.1; provided that
the Lessee shall have the right to maintain the Commitment Fee in the form
of cash, subject to the conditions set forth in Clause 5.15(a).
5.2 RENTAL PERIODS
The first Rental Period shall commence on the Delivery Date and each
subsequent Rental Period shall commence on the date succeeding the last
day of the previous Rental Period. Each Rental Period shall end on the
date immediately preceding the day in the next month numerically
corresponding to the first day of such Rental Period except that:
(a) if there is no such numerically corresponding day in that month, it
shall end on the last day of that month; and
(b) if a Rental Period would otherwise overrun the Expiry Date, it shall
end on the Expiry Date.
5.3 RENT
(a) TIME OF PAYMENT: the Lessee shall pay to the Lessor or its order Rent
in advance on each Rent Date. Payment must be initiated adequately in
advance of the Rent Date to ensure that the Lessor receives credit for
the payment on the Rent Date.
(b) AMOUNT: The Rent payable in respect of each Rental Period will be
calculated as set forth in Letter Agreement No. 1.
(c) RELEVANT PERIODS: The Term will be divided into successive periods
("RELEVANT PERIODS"), the first of which will begin on the Delivery
Date and end on the date immediately preceding the numerically
corresponding day in the 6th calendar month after the Delivery Date.
Each succeeding Relevant Period shall be of six months (6 months)
duration commencing on the date succeeding the last day of the
preceding Relevant Period, save that if any Relevant Period would
otherwise end on a day which is not a Business Day, that Relevant
Period shall end on the immediately preceding Business Day.
33
5.4 SUPPLEMENTAL RENT
(a) AMOUNT: the Lessee will also pay to the Lessor Supplemental Rent in
relation to each Rental Period (including without limitation the last
Rental Period of the Term) on the 15th day following the end of that
Rental Period:
(i) in respect of the Airframe, the applicable amount set forth in
Letter Agreement No. 1 for each Flight Hour flown by the Aircraft
during that Rental Period ("AIRFRAME SUPPLEMENTAL Rent"); and
(ii)in respect of each Engine, the applicable amount set forth in
Letter Agreement No. 1 for each Flight Hour operated by that
Engine during that Rental Period ("ENGINE SUPPLEMENTAL RENT"); and
(iii) in respect of each Engine's LLPs, the applicable amount set
forth in Letter Agreement No. 1 for each Flight Cycle operated by
the Engine on which the Engine LLP's are installed (taken as a
whole in relation to that Engine) during that Rental Period
("ENGINE LLP SUPPLEMENTAL RENT"); and
(iv)in respect of the Landing Gear, the applicable amount set forth in
Letter Agreement No. 1 for each Flight Hour operated by the
Landing Gear during that Rental Period ("LANDING GEAR SUPPLEMENTAL
RENT").
(b) ADJUSTMENT: On each anniversary of the Delivery Date, the Lessor and
the Lessee shall adjust the amount of the Supplemental Rent as set
forth in Letter Agreement No. 1.
5.5 PAYMENTS
(a) All payments by the Lessee to the Lessor under this Agreement will be
made for value on the due date, for the full amount due, in Dollars
and in same day funds, settled through the New York Clearing House
System or such other funds as may for the time being be customary for
the settlement in New York City of international payments in Dollars
by telegraphic transfer to the following account:
(i) ▇▇▇▇▇▇ Guaranty Trust Company, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, for the account of the Bank of Ireland, Group
Treasury, Dublin (Account No: ▇▇▇▇▇▇▇▇), to be credited to
Sunrock Aircraft Corporation Limited (Account No: ▇▇▇▇▇▇▇); and
(b) if any Rent or other payment would otherwise become due on a day which
is not a Business Day, it shall be due on the immediately succeeding
Business Day.
34
5.6 GROSS-UP
(a) All payments by the Lessee under or in connection with this Agreement
will be made without set-off or counterclaim, free and clear of and
without deduction or withholding for or on account of all Taxes.
(b) All Taxes (other than Lessor Taxes) in respect of payments under this
Agreement shall be for the account of the Lessee.
(c) If the Lessee is compelled by law to make payment to the Lessor under
or in connection with this Agreement subject to any Tax and the Lessor
does not actually receive for its own benefit on the due date a net
amount equal to the full amount provided for under this Agreement, the
Lessee will pay all necessary additional amounts to ensure receipt by
the Lessor of the full amount so provided for.
5.7 TAXATION
(a) The Lessee will on demand pay and indemnify each Indemnitee against
all Taxes (other than Lessor Taxes) levied or imposed against or upon
the Indemnitee or the Lessee or on any payments to such Indemnitee or
imposed against the Aircraft, any Engine or any Part and relating to
or attributable to the Lessee, this Agreement or the Aircraft, any
Engine or any Part directly or indirectly in connection with the
importation, exportation, registration, abandonment, ownership,
leasing, sub-leasing, pooling, purchase, delivery, possession, use,
operation, repair, condition, maintenance, modification, overhaul,
transportation, landing, storage, presence, transfer of title, other
disposition or redelivery of the Aircraft or any part thereof or any
rent, receipts, insurance proceeds, income or other amounts arising
therefrom or otherwise with respect to the transactions contemplated
hereby and the performance by the parties under this Agreement and the
related operative documents.
(b) If an Indemnitee shall actually realize any Tax savings (by way of
refund, deduction or credit) in respect of any amount with respect to
which the Lessee shall have made a payment (or increased payment)
pursuant to Clause 5.6, 5.10 or 8.4, or shall have indemnified such
Indemnitee pursuant to sub-clause (a) above, and such Tax savings
shall not have been taken into account previously in calculating any
indemnity payment made by the Lessee, then such Indemnitee shall pay
to the Lessee the amount of such Tax savings (together with, in the
case of a refund, any interest received thereon) PROVIDED HOWEVER that
35
such Indemnitee shall not be obliged to make any payment to the Lessee
pursuant to this sub-clause (b) to the extent that the amount of any
Tax savings in respect of which such payment is to be made (other than
any portion thereof comprising interest on a refund) would exceed the
aggregate amount of all prior payments made by the Lessee to, on
behalf of, or as indemnification of, such Indemnitee under this
Agreement for Taxes less the amount of all prior payments made
pursuant to this sub-clause (b) in respect of such Tax savings and
PROVIDED FURTHER that should any Tax savings with respect to which an
Indemnitee shall have made a payment under this Clause 5.7
subsequently be disallowed or reduced, the Lessee shall, on demand,
refund such amount together with interest at LIBOR from the date which
is the later of the date of disallowance or the date payment was
demanded. Such Indemnitee shall have the right to arrange its Tax
affairs in whatever manner it sees fit; provided that each Indemnitee
shall act in good faith to claim any refund, deduction or credit to
which it is entitled and which, if allowed by the applicable taxing
authority, would result in a required payment from such Indemnitee to
the Lessee or a reduction in the amount of a payment to such
Indemnitee from the Lessee under this Clause 5 and would not adversely
affect such Indemnitee. Except to the extent provided in Clause 5.9 or
Clause 5.16, the Lessee shall not have the right to require any
Indemnitee to disclose its Tax filing information.
(c) The Lessee shall hold each Indemnitee harmless on an After Tax Basis
for any Taxes that result in whole or in part from any acts of the
Lessee or a permitted user under Clauses 8.15 and 8.16.
(d) The Provisions of this Clause 5.7 and Clauses 5.8, 5.9, 5.10, 5.12,
5.16, 8.15 and 8.16 shall survive the termination of this Agreement
and the related operative documents, and shall continue in full force
and effect beyond the Expiry Date.
5.8 VALUE ADDED TAX
(a) For the purposes of this sub-clause:
(i) "VAT" means value added tax and any sales or turnover tax,
imposition or levy of a like nature (other than Lessor Taxes);
(ii)"SUPPLY" includes anything on which VAT is chargeable.
(b) The Lessee will pay to the Lessor or the Trust Company, as the case
may be, the amount of any VAT chargeable in respect of any supply for
VAT purposes under this Agreement.
(c) Each amount stated as payable by the Lessee under this Agreement is
exclusive of VAT (if any) and is, accordingly, to be construed as a
reference to that amount plus any VAT in respect of it.
36
5.9 INFORMATION If the Lessee is required by any applicable law, by the
Lessor, the Trust Company or the Beneficial Owner or by any third party,
to deliver any report or return in connection with any Taxes, the Lessee
will duly complete the same and, in particular, will not state or imply
therein that the Lessee is not exclusively responsible for the use and
operation of the Aircraft and for the Taxes (other than Lessor Taxes)
arising therefrom or take any position inconsistent with the Lessor's
status as the owner of the Aircraft for the United States tax purposes,
and the Lessee will, on reasonable request, supply a copy of the report or
return to the Lessor, the Trust Company or the Beneficial Owner, as the
case may be. The Lessor, the Trust Company and the Beneficial Owner shall
provide to the Lessee such information within their possession or control
as is reasonably requested by the Lessee and necessary for the proper
completion of any such report or return and the Lessee shall (except to
the extent incorporated in such report or return, or necessary to the
verification process described in Clause 5.16 or otherwise as the Lessor,
the Trust Company or the Beneficial Owner, as the case may be, shall
expressly permit in writing after the Lessee's request setting forth in
detail the reasons disclosure is otherwise necessary) keep all such
information strictly confidential.
5.10 TAXATION OF INDEMNITY PAYMENTS
(a) If and to the extent that any sums payable to an Indemnitee by the
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for the
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse the
Indemnitee for the cost incurred by it to a third party (including any
taxation authority), in each case after taking into account any Tax
benefits actually realized by the Indemnitee (whether in the form of
credits, deductions or otherwise) as a result of the matter
indemnified against, the Lessee will pay to the Indemnitee such sum as
will, after the tax liability has been fully satisfied, leave the
Indemnitee with the same amount as it would have been entitled to
receive in the absence of that liability, together with interest on
the amount of the deficit at the Default Rate in respect of the period
commencing on the date on which the payment of taxation is due (or, if
later, the date the Lessee receives notice from the Indemnitee of the
amount of such deficit) until payment by the Lessee.
(b) If and to the extent that any sums constituting (directly or
indirectly) an indemnity to an Indemnitee but paid by the Lessee to
any person other than the Indemnitee are treated as taxable in the
hands of the Indemnitee, the Lessee will pay to the Indemnitee such
sum as will, after the tax liability (computed by taking into account
any Tax benefits actually realised by the Indemnitee (whether in the
form of credits, deductions or otherwise) as a result of the payment
to such other person) has been fully satisfied, indemnify the
Indemnitee to the same extent as it would have been indemnified in the
37
absence of such liability, together with interest on the amount
payable by the Lessee under this sub-clause (b) at: (i) LIBOR in
respect of the period commencing on the date on which the payment of
taxation is due through and including the date which is five (5) days
after demand for such payment by the Indemnitee and (ii) the Default
Rate thereafter until payment by the Lessee.
5.11 DEFAULT INTEREST
If the Lessee or any Indemnitee fails to pay the other any amount payable
under this Agreement on the due date, such non-performing party will pay
on demand from time to time to the party entitled to such payment interest
(both before and after judgment) on the amount, from the due date to the
day of payment in full, at the rate of one month Dollar LIBOR plus 300
basis points (the "DEFAULT RATE").
All such interest will be compounded monthly and calculated on the basis
of the actual number of days elapsed and on a 365 day year.
5.12 CONTEST
If a claim is made against any Indemnitee for any Taxes for which the
Indemnitee intends to seek indemnification hereunder, the Indemnitee shall
promptly notify the Lessee. If requested by the Lessee in writing and
provided that no Event of Default is then continuing, the Indemnitee shall
at the expense of the Lessee (including without limitation, all costs,
expenses, losses, legal and accounting fees and disbursements incurred by
the Indemnitee reasonably allocable to such contest) in good faith contest
or, at the Lessee's request, if permitted by applicable law, permit the
Lessee to contest (and in such case, provide all reasonable cooperation to
the Lessee) the validity, applicability or amount of such Taxes by (A)
resisting payment thereof if practicable, (B) paying the same under
protest, if protest is necessary and proper, or (C) if payment be made,
using reasonable efforts to obtain a refund thereof, in appropriate
administrative and judicial proceedings (including, without limitation, by
pursuit of available appeals if requested by the Lessee and if the Lessee
provides the Indemnitee with an opinion of outside counsel (at the expense
of the Lessee) that such appeal has a realistic possibility of success;
provided that no appeal shall be required to be taken to the United States
Supreme Court). In any case in which the Indemnitee shall determine to
pursue the contest by payment of the Tax, the Lessee shall advance, on an
interest free basis and at no net after tax cost to the Indemnitee, the
amount of the Tax and any interest, penalties or additions to Tax required
to be paid as a precondition to such contest. The Indemnitee shall consult
with the Lessee in good faith regarding the manner of contesting such
claim and shall keep the Lessee reasonably informed regarding the progress
of such contest and shall not release, settle, compromise or abandon the
contest of the Tax without the consent of the Lessee, such consent not to
38
be unreasonably withheld or delayed. If the Indemnitee shall obtain a
refund of or be entitled to a credit against other liability for all or
any part of such Taxes paid by the Lessee, the Indemnitee shall pay the
Lessee the amount of such refund attributable to such Taxes paid by the
Lessee, after deducting any costs and expenses that were incurred by the
Indemnitee in connection therewith; provided that such amount shall not be
payable before such time as the Lessee shall have made all payments and
indemnities then due to the Indemnitee hereunder. If in addition to such
refund the Indemnitee shall receive an amount representing interest on the
amount of such refund, the Lessee shall be paid that proportion of such
interest which is fairly attributable to Taxes paid by the Lessee prior to
the receipt of such refund; provided, however, that no amount shall be
payable under this or the preceding sentence during any period in which an
Event of Default has occurred and is continuing. If the Indemnitee
receives an award of attorneys' fees in a contest for which the Lessee has
paid an allocable portion of the contest expenses, the Indemnitee shall
pay to the Lessee the same proportion of the amount of such award as the
amount of attorneys' fees paid or reimbursed by the Lessee bears to the
total amount of the attorneys' fees actually incurred by the Indemnitee in
conducting such contest.
Notwithstanding the foregoing, neither the Lessor nor the Trust Company
shall be required to contest a Tax if the action to be taken creates a
material danger of sale, forfeiture, loss or creation of a lien on the
Aircraft, the Airframe, any Engine or any Part or on the Lessor (or Head
Lessee's) interest therein, and shall not be obligated to continue the
contest of any Tax if (i) the Lessee has failed to pay, as and to the
extent provided above, the expenses of such contest incurred by the Lessor
or (ii) an Event of Default has occurred and is then continuing, unless
such contest is being conducted as a claim for refund or the Lessee has
provided security for the contested Tax liability satisfactory to the
Lessor or the Trust Company, as the case may be.
Notwithstanding the foregoing, neither the Lessor nor the Trust Company
will be required to contest the imposition of any Taxes and shall be
permitted to settle or compromise any claim without the Lessee's consent
if the Lessor or the Trust Company, as the case may be, (i) shall waive
its right to indemnity under Clauses 5.6, 5.7, 5.10 and 8.4 with respect
to such Taxes (and any directly related claim and any claim the outcome of
which is determined based upon the outcome of such claim) and (ii) shall
pay to the Lessee any amount previously paid or advanced by the Lessee
pursuant to this Clause 5.12 with respect to such Tax other than, in the
case of a contest conducted by means of payment of the Tax, the amount of
the Tax.
5.13 ABSOLUTE
The Lessee's obligations under this Agreement, including its obligations
to pay Rent and Agreed Value, are, subject to the Lessor's compliance with
its covenant of quiet enjoyment as specifically set forth in Clause 7.1
hereof and the Beneficial Owner's compliance with its undertakings as set
forth in the letter of Quiet Enjoyment delivered to the Lessee, absolute
and unconditional irrespective of any contingency whatever including (but
not limited to):
39
(a) any right of set-off, counterclaim, recoupment, defence or other right
which either party to this Agreement may have against the other;
(b) any unavailability of the Aircraft for any reason, including, but not
limited to, a requisition of the Aircraft for any prohibition or
interruption of or interference with or other restriction against the
Lessee's use, operation or possession of the Aircraft;
(c) any lack or invalidity of title or any other defect in title (provided
always that such lack or invalidity of title or other defect does not
result in the Lessee being deprived of its possession of the
Aircraft), airworthiness, merchantability, fitness for any purpose,
condition, design, or operation of any kind or nature of the Aircraft
for any particular use or trade, or for registration or documentation
under the laws of any relevant jurisdiction, or any Total Loss in
respect of or any damage to the Aircraft;
(d) any insolvency, bankruptcy, reorganization, arrangement readjustment
of debt, dissolution, liquidation or similar proceedings by or against
the Lessor or the Lessee;
(e) any invalidity or unenforceability or lack of due authorization of, or
other defect in, this Agreement;
(f) any other cause which, but for this provision, would or might
otherwise have the effect of terminating or in any way affecting any
obligation of the Lessee under this Agreement.
PROVIDED ALWAYS that this Clause 5.13 shall be without prejudice to the
Lessee's right to claim damages and/or other relief from the courts in the
event of any breach by the Lessor of its obligations under this Agreement,
or in the event that, as a result of any lack or invalidity of title to
the Aircraft on the part of the Holder of Legal Title, the Lessee is
deprived of its possession of the Aircraft.
5.14 LESSOR'S MONEYS
(a) It is intended by the Lessor and the Lessee that the Commitment Fee
payable by the Lessee to the Lessor pursuant to Clause 5.1 and the
Supplemental Rent are amounts paid by the Lessee to the Lessor in
consideration for the Lessor removing the Aircraft from the market,
the use of the Aircraft by the Lessee and the satisfaction of the
Lessor's obligations under this Agreement and that, once paid, those
moneys, as well as any interest earned thereon or other proceeds
thereof, irrevocably and unconditionally shall be the property of the
Lessor, and the Lessor may commingle with its other funds all funds
paid by the Lessee under Clause 5.1 and this Clause. Notwithstanding
that stated intent, if and to the extent that those moneys or any part
thereof, under any applicable law or otherwise, are determined to be
40
security deposits or otherwise the property of the Lessee or if it is
so determined those moneys are a debt owed to the Lessee or that the
Lessee shall have any interest in those moneys (the "LESSOR'S
MONEYS"), the parties agree that subclauses (b) and (c) below shall
apply.
(b) To the fullest extent permitted by law and by way of continuing
security the Lessee charges and grants a security interest in the
Lessor's Moneys and all rights of the Lessee to payment thereof, the
debt represented thereby and all interest thereon and/or any and all
interest of the Lessee therein to the Lessor by way of first priority
security interest and first fixed charge as security for the Lessee's
obligations and liability under this Agreement (the "LESSEE'S
LIABILITIES"). Except as expressly permitted under this Agreement, the
Lessee will not be entitled to payment of the Lessor's Moneys. The
Lessee will not assign, transfer or otherwise dispose of all or part
of its rights or interest in the Lessor's Moneys and the Lessee agrees
that it will enter into any additional documents and instruments
necessary or reasonably requested by Lessor to evidence, create or
perfect the Lessor's rights to the Lessor's Moneys.
(c) If a Significant Default or an Event of Default has occurred and is
continuing the Lessor may immediately or at any time thereafter, so
long as such Significant Default or Event of Default is continuing,
without prior notice to the Lessee:
(i) set-off all or any part of the Lessee's Liabilities then due and
owing against the liabilities of the Lessor in respect of the
Lessor's Moneys; or
(ii)apply or appropriate the Lessor's Moneys in or towards the payment
or discharge of the Lessee's Liabilities then due and owing in
such order as the Lessor sees fit.
5.15 LETTER OF CREDIT
(a) If an Event of Default occurs and for as long as it continues, the
Lessor may (but shall not be obliged to) call on the Letter of Credit
and use or apply the proceeds in or towards satisfaction of any sums
due and payable to the Lessor under this Agreement or to compensate
the Lessor for any sums which it advances or expends as a result of
any such Event of Default. Notwithstanding any such use or application
by the Lessor, the Lessee shall remain in default under this Agreement
until the full amount owed by the Lessee, including interest accrued
thereon pursuant to Clause 5.11, shall have been paid to the Lessor,
subject to the conditions set forth in the immediately following
paragraph, as a cash portion of the Commitment Fee or the Lessee
procures the issue of a new Letter of Credit acceptable to the Lessor
for an amount equal to the amount so used or applied and pays to the
Lessor an amount equal to the excess, if any, of (i) the amount so
advanced or expended by the Lessor plus interest accrued thereon
41
pursuant to Clause 5.11 over (ii) the amount of the Letter of Credit
proceeds drawn by the Lessor and so used or applied.
Notwithstanding the foregoing, if, and to the extent that, the form of
a new Letter of Credit procured or proposed by the Lessee in
accordance with this Agreement (using its best efforts and acting in
good faith to procure a new Letter of Credit to the Lessor's
satisfaction), is deemed unsatisfactory by the Lessor, the Lessee
shall have the right to pay the equivalent amount to the Lessor in
cash as a cash portion of the Commitment Fee.
(b) The Letter of Credit applicable at the Expiry Date shall not expire
until 45 days after the scheduled Expiry Date.
(c) The Letter of Credit shall be returned to the Lessee within 20
Business Days of:
(i) redelivery of the Aircraft to the Lessor in the condition required
by Clause 12 of, and Schedule 3 to, this Agreement; or
(ii)receipt by the Lessor of the Agreed Value following a Total Loss
and all other amounts due under Clause 11.1(b); or
in either case, at such later time that the Lessee has paid to the
Lessor all amounts which are then outstanding or will be payable under
this Agreement, PROVIDED ALWAYS that the Lessor shall not be obliged
to return the Letter of Credit if and for so long as, at the relevant
time, an Event of Default shall have occurred and be continuing under
Clause 13.1(g) or (h).
5.16 VERIFICATION
At the Lessee's request, the computation of any amount owed by the Lessee
or any amount owed to the Lessee pursuant to Clause 5 or Clause 10 hereof
shall be verified and certified by an independent public accounting firm
selected by the Lessor and reasonably satisfactory to the Lessee (which
shall be a firm other than one typically employed by the Lessor respecting
its tax matters and other than the firm originally preparing or previously
reviewing the computation subject to verification). Such verification
shall be binding on both the Lessee and the Lessor absent manifest error.
The costs of such verification (including the fee of such public
accounting firm) shall be borne by the Lessee unless such verification
shall result in an adjustment in the Lessee's favor of the greater of (i)
5% or more of the payment as computed by the Lessor, and (ii) the costs of
such verification in which case the costs shall be paid by the Lessor. The
Lessor and the Lessee shall provide to such public accounting firm all
information within its possession or control that is reasonably necessary
for such verification and such firm shall keep all such information
42
strictly confidential, and shall not provide either the Lessor or the
Lessee access to any information provided by the other to such firm for
purposes of such verification.
6. MANUFACTURER'S WARRANTIES
6.1 ASSIGNMENT
Notwithstanding this Agreement, except as provided in this Clause 6.1 and
Clause 6.2, the Lessor will remain entitled to the benefit of each
warranty, express or implied, and any unexpired customer and/or product
support given or provided in respect of the Aircraft, any Engine or Part
by any manufacturer, vendor, maintenance performer, subcontractor or
supplier. Unless a Significant Default or an Event of Default shall have
occurred and be continuing, the Lessor hereby assigns to the Lessee and
authorizes the Lessee to exercise such rights as the Lessor may have
thereunder and the Lessee agrees to diligently pursue, to the extent
deemed commercially reasonable, any such claim which arises at its own
cost. The Lessee will notify the Lessor promptly upon becoming aware of
any such claim. The Lessor will provide such assistance to the Lessee in
making a claim under any such warranties or customer and/or product
support as the Lessee may reasonably request, and, if requested by the
Lessee and at the Lessee's expense, will pursue a claim in its own name
where the relevant manufacturer, vendor, maintenance performer,
subcontractor or supplier has refused to acknowledge the Lessee's right to
pursue that claim. Where the Lessee has exercised its option not to pursue
a claim on the basis that it is not commercially reasonable, the Lessee
shall, at no out-of-pocket expense to the Lessee, provide the Lessor all
information and technical support as reasonably requested by the Lessor in
order for the Lessor to pursue such claim at its own expense.
6.2 PROCEEDS
The Lessee covenants and agrees to apply any proceeds of any claims
assigned to the Lessee by the Lessor under Clause 6.1 to remedy the
defect, if any, in the Aircraft, any Engine or any Part giving rise to
such claim if and to the extent that such defect has not already been
remedied. So long as no Significant Default or Event of Default has
occurred and is continuing and this Agreement has not terminated, the
Lessor agrees to cooperate with the Lessee to cause any proceeds from any
rights assigned by the Lessor to the Lessee under Clause 6.1 to be paid
directly to the Lessee, and, if any such proceeds are nonetheless paid to
the Lessor, the Lessor agrees to remit promptly such proceeds to the
Lessee. However, upon the occurrence of an Event of Default or termination
of this Agreement, whichever occurs earlier, the Lessor may immediately:
(a) retain any such proceeds previously paid to the Lessor which would
have been remitted to the Lessee under this Clause 6.2 absent such
Event of Default; and
43
(b) seek to cause any proceeds of any pending claims to be paid to the
Lessor, rather than to the Lessee; and
(c) seek recovery from the Lessee the proceeds of any such claims
previously paid to the Lessee to the extent that such claims relate to
any defect in the Aircraft, any Engine or any part not fully and
completely rectified by the Lessee before such Event of Default or
termination.
Provided, however, that if payment of any such proceeds to the Lessee is
withheld due to one or more Events of Default, such proceeds shall be paid
or remitted to the Lessee after all Events of Default are cured.
6.3 PARTS
Except to the extent the Lessor otherwise agrees in a particular case, the
Lessee will procure that all engines, components, furnishings or equipment
provided by the manufacturer, vendor, maintenance performer, subcontractor
or supplier as a replacement for a defective Engine or Part pursuant to
the terms of any warranty or customer and/or product support arrangement
comply with Clause 8.13(a), are installed on the Aircraft promptly and
that title thereto vests in the Holder of Legal Title in accordance with
Clause 8.17(a). On installation those items will be deemed to be an Engine
or Part, as applicable.
6.4 AGREEMENT
To the extent any warranties or customer and/or product support relating
to the Aircraft are made available under an agreement between any
manufacturer, vendor, maintenance performer, subcontractor or supplier and
the Lessee, this Clause 6 is subject to that agreement.
However the Lessee will:
(a) pay the proceeds of any claim thereunder to the Lessor to the extent
such proceeds would not be payable to the Lessee pursuant to Clause
6.2 and, pending such payment, will hold the claim and the proceeds on
trust for the Lessor; and
(b) the Lessee will take all such steps as are necessary at the end of the
Term to ensure the benefit of any of those warranties or customer
and/or product support which have not expired are vested in the
Lessor.
7. LESSOR'S COVENANTS AND DISCLAIMERS
7.1 QUIET ENJOYMENT
The Lessor covenants that neither the Lessor nor any person or entity
lawfully claiming by or through the Lessor will interfere with the quiet
use, possession and enjoyment of the Aircraft by the Lessee or the
exercise by the Lessee in accordance with this Agreement of its rights
44
with respect to the Aircraft and all rents, revenues, profits and income
therefrom; provided, however, that the exercise by the Lessor of its
rights in accordance with this Agreement will not constitute such an
interference.
7.2 MAINTENANCE CONTRIBUTION
Provided no Significant Default or Event of Default has occurred and is
continuing (but in such case, at such time as such Significant Default or
Event of Default is no longer continuing), the Lessor will pay to the
Lessee, by way of contribution to the cost of maintenance of the Aircraft,
within 14 days after submission by the Lessee to the Lessor of an invoice
and supporting documentation reasonably satisfactory to the Lessor
evidencing:
(a) with respect to the Airframe, the completion, in accordance with this
Agreement, of those items of maintenance characterized by the
manufacturer's maintenance planning document as "Structural C-7"
Check, as defined by the Agreed Maintenance Programme, (or equivalent)
(but not including repairs arising as the result of operational or
maintenance mishandling or accidental damage), the lesser of (i) the
amount of that invoice and (ii) an amount equal to the aggregate
amount of Airframe Supplemental Rent paid under this Agreement, LESS
the aggregate amount previously paid by the Lessor under this
sub-clause (a);
(b) with respect to any Engine, the performance, in accordance with this
Agreement, of all shop visits requiring an off-wing teardown and/or
disassembly and resulting in the refurbishment and restoration of
operating performance and/or the replacement of Engine LLP's (other
than (aa) the repairs of foreign object damage or damage resulting
from operational or from maintenance mishandling except to the extent
such overhaul or replacement results in the refurbishment or
"betterment" of the Engine and/or (bb) removal, installation,
maintenance and repair of QEC (Quick Engine Change) kits), the lesser
of (i) the amount of that invoice and (ii) an amount equal to the
aggregate amount of Engine Supplemental Rent paid in respect of that
Engine under this Agreement, LESS the aggregate amount previously paid
in respect of that Engine by the Lessor under this sub-clause (b); and
(c) with respect to any Engine LLP's, the performance, in accordance with
this Agreement, of all work on such Engine LLP's, including overhaul
or replacement (other than overhaul or replacement of foreign object
damage or operational or maintenance mishandling except to the extent
such overhaul or replacement results in the refurbishment or
"betterment" of the Engine), the lesser of (i) the amount of that
invoice and (ii) an amount equal to the aggregate amount of Engine LLP
Supplemental Rent paid under this Agreement (in respect of such
Engine), LESS the aggregate amount previously paid in respect of the
45
overhaul or replacement of Engine LLP's by the Lessor in respect of
such Engine under this sub-clause (c);
(d) with respect to the Landing Gear, the performance in accordance with
this Agreement, of all work on the Landing Gear in the nature of
overhaul and requiring removal and disassembly (other than the repair
of damage arising as the result of operational or maintenance
mishandling or accident), the lesser of (i) the amount of that invoice
and (ii) an amount equal to the aggregate amount of Landing Gear
Supplemental Rent paid under this Agreement, LESS the aggregate amount
previously paid by the Lessor under this sub-clause (d); and
(e) with respect to the cost of incorporation of airworthiness directives,
the contributions pursuant to the formula and in accordance with the
terms as set forth in Letter Agreement No. 1.
Notwithstanding the above provisions of this Clause 7.2, the Lessee shall
not be entitled to receive any such contributions in respect of the cost
of the incorporation of airworthiness directives and mandatory
modifications to the extent paid by insurance or a warranty claim.
7.3 THE LESSOR'S OBLIGATIONS FOLLOWING EXPIRY DATE
So long as no Significant Default or Event of Default has occurred and is
continuing, within 3 Business Days of:
(a) redelivery of the Aircraft to the Lessor in accordance with and in
the condition required by this Agreement; or
(b) payment to the Lessor of the Agreed Value following a Total Loss after
Delivery,
the Lessor will pay to the Lessee:
(i) by way of (A) rebate of the Commitment Fee that is in the form of
cash, an amount equal to the sums paid by the Lessee pursuant to
Clause 5.1 (and not otherwise applied by the Lessor pursuant to
Clause 5.14(c) plus interest accrued thereon pursuant to Clause
5.1) or (B) if the Commitment Fee is in the form of a Letter of
Credit, returning the Letter of Credit, net of any amounts drawn
pursuant to Clause 5.14(c);
(ii)the amount of any Rent received in respect of any period falling
after the date of redelivery of the Aircraft or payment of the
Agreed Value, as the case may be; and
46
(iii) in the case of a Total Loss only, by way of further contribution
to the cost of maintenance of the Aircraft, an amount equal to the
amount by which the aggregate amount of Supplemental Rent paid by
the Lessee exceeds the aggregate amount paid by the Lessor under
Clause 7.2 (other than paragraph (e) thereof).
(c) anything in this Agreement to the contrary notwithstanding, in the
event that any amount otherwise payable to the Lessee is retained by
the Lessor as the result of the occurrence of a Significant Default or
an Event of Default hereunder, the Lessor shall pay such amount to the
Lessee at such time as such Significant Default or Event of Default is
no longer continuing and, in the event that the Significant Default or
the Event of Default giving rise to the Lessor's right to retain such
amount constitutes a default in the payment of money owed by the
Lessee to the Lessor and the aggregate amount so retained by the
Lessor (the "Retained Amount") equals or exceeds the amount which is
the subject of such payment default (the "Default Amount"), the Lessor
shall deduct from the Retained Amount an amount equal to the Default
Amount (and such deduction shall constitute payment by the Lessee of
the payment obligations which is the subject of the Significant
Default or the Event of Default) and shall pay over to the Lessee the
amount, if any, equal to the balance of the Retained Amount.
7.4 EXCLUSION EXCEPT AS PROVIDED IN CLAUSE 4.3, THE AIRCRAFT IS TO BE LEASED
AND DELIVERED HEREUNDER "AS IS, WHERE IS" AND THE LESSEE AGREES AND
ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN THIS AGREEMENT, THE LESSOR
WILL HAVE NO LIABILITY IN RELATION TO, AND THE LESSOR HAS NOT AND WILL NOT
BE DEEMED TO HAVE MADE OR GIVEN (WHETHER BY VIRTUE OF HAVING DONE OR
FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS
UNDER OR IN RELATION TO THIS AGREEMENT AND THE RELATED DOCUMENTS OR
OTHERWISE), ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO:
(a) THE TITLE, AIRWORTHINESS, COMPLIANCE WITH SPECIFICATIONS, OPERATION,
MERCHANTABILITY, FREEDOM FROM CLAIMS OF INTERFERENCE OR INFRINGEMENT
OR THE LIKE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, VALUE,
DURABILITY, CONDITION, OR DESIGN, OR AS TO THE QUALITY OF THE MATERIAL
OR WORKMANSHIP, THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY
47
WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING
FROM A COURSE OF PERFORMANCE OR DEALING OR USAGE OF TRADE) WITH
RESPECT TO THE AIRCRAFT, ANY ENGINE OR ANY PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR
NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED, OR STRICT
LIABILITY OR OTHERWISE, FOR:
(i) ANY LIABILITY, LOSS OR DAMAGE (INCLUDING ANY LIABILITY OF THE
LESSEE TO ANY THIRD PARTY) CAUSED OR ALLEGED TO BE CAUSED DIRECTLY
OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN;
(ii)THE USE, OPERATION, OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS
RELATING THERETO;
(iii)ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED
ANTICIPATED PROFITS OR CONSEQUENTIAL DAMAGES;
(iv)THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT, ANY ENGINE OR ANY
PART; OR
(v) ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
7.5 LESSEE'S WAIVER
THE LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS RIGHTS
IN RESPECT OF ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, ON THE
PART OF THE LESSOR AND ALL CLAIMS AGAINST THE LESSOR HOWSOEVER AND
WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OF THE
AIRCRAFT EXCEPT TO THE EXTENT ARISING UNDER WARRANTIES OR REPRESENTATIONS
IN CLAUSE 2.4 OR ARISING UNDER ANY MANUFACTURER'S WARRANTY, CUSTOMER
SUPPORT AGREEMENT OR PRODUCT SUPPORT AGREEMENT DESCRIBED IN CLAUSE 6
HEREOF.
7.6 LESSEE'S CONFIRMATION
LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.4
AND 7.5 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE BEEN
CALCULATED NOTWITHSTANDING ITS PROVISIONS.
48
8. LESSEE'S COVENANTS
8.1 DURATION
The undertakings in this Clause and in Clause 12 will:
(a) except as otherwise stated in this Agreement, be performed at the
expense of the Lessee; and
(b) remain in force until redelivery of the Aircraft to the Lessor in
accordance with this Agreement and thereafter to the extent of any
accrued rights of the Lessor in relation to those undertakings.
8.2 INFORMATION
The Lessee will:
(a) notify the Lessor forthwith of the occurrence of any Significant
Default or Event of Default;
(b) furnish to the Lessor on a confidential basis:
(i) upon request, the unaudited consolidated management accounts of
the Lessee (comprising a balance sheet and profit and loss
statement) prepared for the most recent previous financial
quarter;
(ii)as soon as available but not in any event later than 120 days
after the last day of each financial year of the Lessee, its
audited consolidated balance sheet as of such day and its audited
consolidated profit and loss statement for the year ending on such
day;
(iii) at the same time as it is issued to the shareholders or
creditors of the Lessee, a copy of each notice or circular issued
to the Lessee's shareholders or creditors as a group with respect
to the Lessee's financial condition or the taking of any action
which may reasonably be expected to materially and adversely
affect the Lessee's ability to perform its obligations hereunder;
and
(iv)on request from time to time such other information regarding the
Lessee and its business and affairs as the Lessor may reasonably
request;
(c) keep the Lessor informed as to current serial numbers of the Engines
and any engine installed on the Aircraft;
49
(d) promptly furnish to the Lessor all information which the Lessor from
time to time reasonably requests regarding the Aircraft, any Engine or
any Part, its use, location and condition including, without
limitation, the hours available on the Aircraft and any Engine until
the next scheduled check, inspection, overhaul or shop visit, as the
case may be;
(e) within 20 days after the end of any Rental Period, furnish to the
Lessor, evidence reasonably satisfactory to the Lessor of payment of
all Taxes (other than Lessor Taxes) due during that or any previous
Rental Period, and promptly upon receipt from a taxing authority,
forward to the Lessor or the Beneficial Owner notice of any assessment
or proposed assessment of any Lessor Tax;
(f) on request, furnish to the Lessor evidence reasonably satisfactory to
the Lessor that all Taxes and charges incurred by the Lessee with
respect to the Aircraft have been paid and discharged in full;
(g) provide the Lessor within 15 days after the end of each Rental Period
with a monthly report on the Aircraft and each Engine in the form set
out in Schedule 9 or such other form as the Lessor may, from time to
time, reasonably require;
(h) give the Lessor not less than 60 days' written notice as to the time
and location of all Major Checks;
(i) promptly notify the Lessor of:
(i) any loss, theft, damage or destruction to the Aircraft, any Engine
or any Part, or any modification to the Aircraft if the reasonably
expected cost may exceed the Damage Notification Threshold; and
(ii)any claim or other occurrence likely to give rise to a material
recovery under the public liability Insurances and details of any
negotiations with the insurance brokers over any such claim.
8.3 LAWFUL AND SAFE OPERATION
The Lessee shall (and shall cause any Permitted Sublessee to):
(a) comply with the law for the time being in force in any country or
jurisdiction which is applicable to the Aircraft or, so far as
concerns the use and operation of the Aircraft, an owner or operator
thereof;
(b) not use the Aircraft in any manner contrary to any rule or regulation
of the Aviation Authority or for any purpose for which the Aircraft is
not designed or reasonably suitable;
50
(c) ensure that the crew and engineers employed by it in connection with
the operation and maintenance of the Aircraft have the qualifications
and hold the licenses required by the Aviation Authority and
applicable law;
(d) use the Aircraft solely in commercial or other operations for which
the Lessee is duly authorized by the Aviation Authority and applicable
law;
(e) not knowingly use the Aircraft for the carriage of:
(i) whole animals, living or dead, except in the cargo compartments
according to I.A.T.A. regulations, and except domestic pet animals
carried in a suitable container to prevent the escape of any
liquid and to ensure the welfare of the animal;
(ii)acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes, or any nuclear assemblies or
components, except as permitted for cargo aircraft under the
"Restriction of Goods" schedule issued by I.A.T.A. from time to
time and provided that all the requirements for packaging or
otherwise contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could
reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the Insurances; or
(iv)any illegal item or substance;
(f) not utilize the Aircraft for purposes of training, qualifying or
re-confirming the status of cockpit personnel except for the benefit
of the Lessee's cockpit personnel, and then only if the use of the
Aircraft for such purpose is not substantially disproportionate to the
use for such purpose of other aircraft of the same type operated by
the Lessee;
(g) not cause or permit the Aircraft to proceed to, or remain at, any
location which is for the time being the subject of a prohibition
order (or any similar order or directive) by:
(i) any Government Entity of the State of Registration or the
Habitual Base; or
(ii)any Government Entity of the country in which such location is
situated; or
(iii)any Government Entity having jurisdiction over the Lessor
51
Lessor, the Banks or the Aircraft;
(h) not operate or locate, or permit any Permitted Sub-Lessee to operate
or locate, the Aircraft or any Engine, or suffer the Airframe or any
Engine to be operated or located in, to or from Japan;
(i) obtain and maintain in full force all certificates, licenses, permits
and authorizations required for the use and operation of the Aircraft
for the time being, and for the making of payments required by, and
the compliance by the Lessee with its other obligations under, this
Agreement.
8.4 TAXES AND OTHER OUTGOINGS
The Lessee will promptly pay:
(a) all license and registration fees, Taxes and other amounts of any
nature imposed by any Government Entity (other than Lessor Taxes)
which are imposed on the Lessee or for which the Lessee is responsible
under this Agreement with respect to the Aircraft, including, without
limitation, the purchase, ownership, delivery, leasing, possession,
use, operation, return, sale or other disposition of the Aircraft; and
(b) all rent, fees, charges, Taxes and other amounts imposed on the Lessee
in respect of any premises where the Aircraft, any Engine or any Part
thereof is located from time to time during the Term;
except to the extent that such payment is being contested in good faith by
appropriate proceedings, in respect of which adequate reserves have been
established by the Lessee in accordance with GAAP and non-payment of which
does not give rise to the likelihood of the Aircraft or any interest
therein being seized, condemned, sold, forfeited or otherwise lost or of
criminal liability or unindemnified liability on the part of any
Indemnitee.
8.5 SUB-LEASING
(a) Subject to sub-clauses (b) and (c) below, the Lessee will not,
without the prior written consent of the Lessor (which consent shall
not be unreasonably withheld or delayed), sub-lease (other than in
the form of a "wet lease") or otherwise part with possession of the
Aircraft, the Engines or any Part except that the Lessee may part
with possession:
(i) with respect to the Aircraft, the Engines or any Part to the
relevant manufacturers for testing or similar purposes or to the
Agreed Maintenance Performer for service, repair, maintenance or
overhaul work, or alterations, modifications or additions to the
extent required or permitted by this Agreement; and
52
(ii) with respect to an Engine or Part, as expressly permitted by
this Agreement.
(b) The Lessor shall not withhold its consent to a proposed sub-lease of
the Aircraft provided the following conditions are satisfied:
(i) no Event of Default shall have occurred and be continuing;
(ii) the proposed sub-lessee (the "PERMITTED SUB-LESSEE") is a
reputable, duly licensed and certificated operator of aircraft
of the same type as the Aircraft and is incorporated and
resident in one of the jurisdictions specified in Schedule 10;
(iii)the terms of the proposed sub-lease (the "PERMITTED Sub-Lease")
shall, when taken together with this Agreement, allow for full
compliance with the Lessee's obligations hereunder;
(iv) during the term of the Permitted Sub-Lease, the Lessee shall
remain primarily liable for the performance of all its
obligations under this Agreement;
(v) the term of the Permitted Sub-Lease shall not extend, or be
capable of being extended, beyond the scheduled Expiry Date;
(vi) the Permitted Sub-Lease shall be expressly subject and
subordinate to this Agreement and the rights of the Lessor
hereunder;
(vii)the Permitted Sub-Lease shall not be amended without the
Lessor's prior written consent (such consent not to be
unreasonably withheld);
53
(viii) prior to delivery of the Aircraft to the Permitted Sub-Lessee,
the Lessee shall execute and deliver to the Lessor a security
assignment of the benefit of the Permitted Sub-Lease in form and
substance reasonably satisfactory to the Lessor, shall deliver
notice of such assignment to the Permitted Sub-Lessee, and shall
procure that the Permitted Sub-Lessee acknowledges such notice
to the Lessor (which such acknowledgment shall contain the
Permitted Sub-Lessee's confirmation of the matters set out in
sub-clauses (vi) and (vii) above). Any such security assignment
shall provide that the Lessee as the sub-lessor under the
Permitted Sub-Lease, shall be entitled to receive and retain the
rentals paid by the Permitted Sub-Lessee unless and until an
Event of Default occurs under this Agreement; provided that,
during the continuation of an Event of Default, the Lessor shall
have the right, but not the obligation, to receive the rentals
paid by the Permitted Sub-Lessee and to apply such rentals
toward the obligations of the Lessee then due hereunder; and
provided further that at such time as no Event of Default shall
be continuing hereunder, the Lessor shall pay over to the Lessee
that portion of such rentals received by the Lessor and not so
applied by the Lessor toward such obligations of the Lessee.
(ix) in the event that, pursuant to the Permitted Sub-Lease, the
Aircraft is to be de-registered from the national aircraft
register in the State of Registration, the Permitted Sub-Lessee
shall have provided the Lessor and the Lessee with a valid and
irrevocable power of attorney authorizing the Lessor and/or the
Lessee to de-register the Aircraft from the national aircraft
register of the new State of registration in the event of a
termination of the Permitted Sub-Lease as a consequence of a
default on the part of the Permitted Sub-Lessee;
(x) the Lessor shall have received a legal opinion reasonably
satisfactory to it in all respects from a reputable counsel in
the jurisdiction in which the Permitted Sub-Lessee is
incorporated and resident and (if different) in the new State of
registration. Such opinion shall be substantially in the form of
Schedule 6, mutatis mutandis;
(xi) all costs and expenses reasonably incurred by the Lessor
(including the cost of obtaining the legal opinion or opinions
referred to in sub-clause (x) above) in connection with the
Permitted Sub-Lease, whether or not the Lessor grants its
consent, shall be paid or provided for by the Lessee;
(xii)the Lessor shall receive a true and correct copy of the
Permitted Sub-Lease; and
(xiii) both the Permitted Sub-Lease and the Permitted Sub-Lessee
shall satisfy the requirements set forth in Clause 9.2 of the
Head Lease.
(c) The Lessor's consent shall not be required in relation to a "wet
lease" or charter of the Aircraft (whereby operational control of the
Aircraft remains with the Lessee at all times), provided the Aircraft
remains registered on the national aircraft register of the State of
Registration.
8.6 INSPECTION
(a) The Lessor and any person designated by the Lessor to the Lessee
in writing (including, without limitation, the Head Lessor and the
Banks, but other than an airline competing with the Lessee or an
Affiliate of such an airline or an employee or representative of
either thereof) may at any time visit, inspect and survey the
Aircraft Documents, the Aircraft, any Engine or any Part and for
such purpose take such other action as set forth in Letter
Agreement No. 1. Except as set forth in this clause, any such
54
inspection of the Aircraft, any Engine or any Part shall be a
visual, walk-around inspection which shall not include opening any
panels, bays or the like or any disassembly or removal of
components which are not then opened, disassembled or removed in
the course of the Lessee's maintenance of the Aircraft at the time
of such inspection.
(b) The Lessor shall bear its own costs and expenses in connection with
any such visit, inspection or survey unless the visit, inspection or
survey occurs while a Significant Default or an Event of Default has
occurred is then continuing, in which case such costs and expenses
shall be paid by the Lessee on demand.
(c) The Lessor will:
(i) have no duty to make, or liability arising out of, any such
visit, inspection or survey; and
(ii) not exercise such right other than on reasonable notice and so
as not to disrupt unreasonably the maintenance or commercial
operation of the Aircraft.
8.7 PROTECTION OF TITLE
The Lessee shall:
(a) not do or knowingly permit to be done or omit or knowingly permit
to be omitted to be done any act or thing which might reasonably
be expected to jeopardize the rights, title and interest of the
Holder of Legal Title as owner of and title holder to the Aircraft
and lessor under this Agreement or under the Head Lease,
respectively, or assignee of this Agreement or of the Head Lease
or the rights of any assignee of the benefit of the Aircraft hull
Insurances or the validity, enforceability or priority of the
Assignment;
(b) on all occasions when the ownership of the Aircraft, any Engine or
any Part is relevant, inform applicable third parties that title is
held by the Holder of Legal Title;
(c) not at any time:
(i) represent or hold out the Lessor, the Beneficial Owner, the Head
Lessor or the Banks as carrying goods or passengers on the
Aircraft or as being in any way connected or associated with any
operation or carriage (whether for hire or reward or
gratuitously) which may be undertaken by the Lessee; or
55
(ii) pledge the credit of the Lessor, the Head Lessor, the Beneficial
Owner or the Banks;
(d) ensure that there is always affixed, and not removed or in any way
obscured, a fireproof plate (having dimensions of not less than 10
cm. x 7 cm.) in a reasonably prominent position on the Aircraft and
on each Engine stating:
"This Aircraft/Engine is leased by Wilmington Trust Company, not in
its individual capacity but solely as Owner Trustee (for the benefit
of Sunrock Aircraft Corporation Limited), as Lessor, which is the
registered owner thereof on the U.S. FAA Aircraft Registry, and which
has leased the Aircraft/Engine to Western Pacific Airlines, Inc., as
Lessee, and may not be flown by any other person without the prior
written consent of the Owner Trustee and Sunrock Aircraft Corporation
Limited. Title to this Aircraft/Engine is held by NBB Stream Lease
Co., Ltd.";
(e) not create or permit to exist any Security Interest upon the
Aircraft, any Engine or any Part;
(f) not do or permit to be done anything which may reasonably be
expected to expose the Aircraft, any Engine or any Part to
penalty, forfeiture, impounding, detention, appropriation, damage
or destruction and, without prejudice to the foregoing, if any
such penalty, forfeiture, impounding, detention or appropriation,
damage or destruction occurs, give the Lessor notice and use best
endeavors to procure the immediate release of the Aircraft, any
Engine or the Part, as the case may be;
(g) not during the Term abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and discharged when due and
payable or establish adequate reserves in accordance with GAAP by
way of security or otherwise for all debts, damages, claims and
liabilities which have given or may reasonably be expected to give
rise to a Security Interest over or affecting the Aircraft, any
Engine or any Part except to the extent that such debts, damages,
claims and liabilities, in respect of which adequate reserves have
been established by the Lessee in accordance with GAAP, are being
contested in good faith by appropriate proceedings and nonpayment
of which does not give rise to the likelihood of the Aircraft or
any interest therein being seized, condemned, sold, forfeited or
otherwise lost or of criminal liability or unindemnified liability
on the part of any Indemnitee; and
(i) not attempt, or hold itself out as having any power, to sell, lease
or otherwise dispose of the Aircraft, any Engine or any Part other
than as expressly permitted by this Agreement.
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8.8 GENERAL
The Lessee shall:
(a) not make any substantial change in the type of the business in which
it is engaged, will preserve its corporate existence (other than in
connection with a solvent reconstruction the terms of which have been
approved by the Lessor, such approval not to be unreasonably withheld
or delayed), and will endeavor to conduct its business in an orderly
and efficient manner;
(b) maintain all rights, privileges, licenses and franchises material to
its status or activities set forth in clause (a) above and to
performing its obligations under this Agreement;
(c) not, without giving the Lessor 30 days prior written notice (in
accordance with this Agreement), change its executive office (as such
is defined in Article 9 of the Uniform Commercial Code as in effect
in the State of Colorado) from ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, to another state;
(d) remain a certificated air carrier and maintain its status so as to
entitle the Lessor to the benefits of a lessor under Section 1110 of
Title 11 of the United States Code or any analogous statute;
(e) remain a "citizen of the United States" as defined in Section 40102
of Title 49 of the United States Code; and
(f) ensure that no change will occur in the Habitual Base of the Aircraft
without the prior written consent of the Lessor.
8.9 RECORDS
The Lessee shall:
(a) procure that accurate, complete and current records of all flights
made by, and all maintenance carried out on, the Aircraft (including,
in relation to each Engine and Part subsequently installed, before
the installation) are kept; and keep the records in such manner as
the Aviation Authority may from time to time require. The records
will form part of the Aircraft Documents; and
(b) procure access to a revision service in respect of, and will maintain
with appropriate revisions in English, all Aircraft Documents,
records, logs, and other materials required in respect of the
Aircraft by applicable laws and in accordance with customary United
States airline practice.
57
8.10 REGISTRATION AND FILINGS
The Lessee shall:
(a) maintain the registration of the Aircraft with the Aviation Authority
reflecting (so far as permitted by applicable law) the interest of
the Lessor and not do or suffer to be done anything which may
reasonably be expected to affect adversely that registration;
(b) do such reasonable acts and things (including, without limitation,
making any filing or registration with the Aviation Authority or any
other Government Entity) and executing and delivering all documents
(including, without limitation, any amendment of this Agreement) as
may be reasonably requested by the Lessor:
(i) at the Lessor's expense following any change or proposed change
in the ownership or financing of the Aircraft or in the manner
of securing the Lessor's obligations to the Banks; or
(ii) at the Lessee's expense following any modification of the
Aircraft, any Engine or any Part or the permanent replacement of
any Engine or Part in accordance with this Agreement, so as to
ensure that the rights of the Lessor under this Agreement apply
with the same effect as before; or
(iii)to establish, maintain, preserve, perfect and protect the rights
in the Aircraft of the Lessor under this Agreement and the Banks
or other assignees in the Assignment, provided that no such
action need be taken by the Lessee pursuant to this provision if
such action would adversely affect any of its material rights or
privileges or materially increase its obligations or liabilities
hereunder, and shall not knowingly take any action that would
prejudice the rights of the Head Lessor in the Aircraft under
the Head Lease.
8.11 MAINTENANCE AND REPAIR
The Lessee shall:
(a) keep the Aircraft in good repair and condition;
(b) not change the Agreed Maintenance Programme or the schedule of the
Agreed Programme except in accordance with the rules and regulations
of the FAA;
(c) maintain the Aircraft in accordance with the Agreed Maintenance
Programme through the Agreed Maintenance Performer and perform (at
the respective intervals provided in the Agreed Maintenance
Programme) all Major Checks;
58
(d) maintain the Aircraft in accordance with FAR Part 121 and/or any
other applicable rules and regulations of the FAA, except to the
extent that they conflict with the rules and regulations of the
Aviation Authority;
(e) comply with all mandatory inspection and modification requirements,
airworthiness directives and similar requirements applicable to the
Aircraft, any Engine or Part having a compliance date during the Term
or, in the case of airworthiness directives, within 180 days after
the Expiry Date and which are required by the FAA.
(f) comply with any service bulletin issued by the Manufacturer if and
to the extent that (i) the Lessee has decided to comply with such
service bulletin with respect to substantially all of the Boeing
737-300 aircraft in its fleet and has commenced such compliance
with respect to other such aircraft and (ii) after the Lessee has
reached such decision and before the Expiry Date, the Aircraft
undergoes the applicable check or maintenance procedure at which
compliance with such service bulletin is normally effected with
respect to the Lessee's other Boeing 737-300 aircraft.
(g) comply with all applicable laws and applicable regulations of the
Aviation Authority and other aviation authorities with jurisdiction
over the Lessee or the Aircraft, any Engine or Part regardless of
upon whom such requirements are imposed and which relate to the
maintenance, condition, use or operation of the Aircraft or require
any modification or alteration to the Aircraft, any Engine or Part;
(h) maintain in good standing a current certificate of airworthiness (in
the appropriate category for the nature of the operations of the
Aircraft) for the Aircraft issued by the Aviation Authority except
when the Aircraft is undergoing maintenance, modification or repair
required or permitted by this Agreement and will from time to time
provide to the Lessor a copy on request;
(i) if required by the Aviation Authority with respect to the maintenance
functions which the Lessee is itself performing on the Aircraft or
any Engine, maintain a current certification as to maintenance issued
by or on behalf of the Aviation Authority in respect of the Aircraft
and will from time to time provide to the Lessor a copy on request;
(j) maintain the Engines with respect to overhaul build standards and
disc replacements at a level which is not inferior to the level
applied by the Lessee in relation to the engines in the Lessee's
fleet generally which are of the same type as the Engines; and
59
(k) subject to Clause 11.1(c), procure promptly the replacement of any
Engine or Part which has become time, cycle or calendar expired,
lost, stolen, seized, confiscated, destroyed, damaged beyond
repair, unserviceable or permanently rendered unfit for use, with
an engine or part complying with the conditions set out in Clause
8.13(a). The Lessee shall ensure that any such replacement engine
or part has attached to it a current "serviceability tag" issued
by the manufacturer or supplier or overhaul agency, indicating
that the engine or part is new, serviceable or overhauled, and the
Lessee shall retain all such tags.
8.12 REMOVAL OF ENGINES AND PARTS
The Lessee will ensure that no Engine or Part installed on the Aircraft is
at any time removed from the Aircraft other than:
(a) if replaced as permitted by and in accordance with this Agreement;
or
(b) if the removal is of an obsolete item and is in accordance with the
Agreed Maintenance Programme; or
(c) pursuant to, and in accordance with, Clause 8.15; or
(d (i) during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or the Aircraft, as the case
may be; or
(ii) as part of a normal engine or part rotation programme; or
(iii)for the purpose of making such modifications to the Engine or
the Aircraft, as the case may be, as are permitted under this
Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Clause 8.13(a) as soon as practicable
and in any event no later than the Expiry Date.
8.13 INSTALLATION OF ENGINES AND PARTS
The Lessee will:
(a) ensure that, except as permitted by this Agreement, no engine or part
is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model as,
or an improved or advanced version of the Engine it replaces,
which is in the same or better operating condition, has
substantially similar hours/cycles available until the next
scheduled checks, inspections, overhauls and shop visits and has
the same or greater value and utility as the replaced Engine;
60
(ii) in the case of a part, it is in as good operating condition, is
of the same or a more advanced make and model and has a value,
utility and remaining useful life, and at least the equivalent
or better modification status and service bulletin
accomplishment status, as the replaced Part;
(iii)in each case, it has become and remains the property of the
Holder of Legal Title free from Security Interests and on
installation on the Aircraft will, without further act, be
subject to this Agreement; and
(iv) in each case, the Lessee has full details as to its source and
maintenance records;
(b) if no Significant Default or Event of Default has occurred which
is continuing, be entitled to install any engine or part on the
Aircraft by way of replacement notwithstanding Clause 8.13(a)
provided that as soon as practicable after installation of the
same on the Aircraft but, in any event, no later than the Expiry
Date, the Lessee removes any such engine or part and replaces it
with the Engine or Part replaced by it or by an engine or part, as
the case may be, complying with Clause 8.13(a).
Lessor agrees, and will at the request of Lessee acknowledge in writing to
the owner of any installed engine, that it will recognize the interests of
such owner and any lessor in the installed engine and will not seek to
exercise any rights whatsoever in relation to it.
8.14 NON-INSTALLED ENGINES AND PARTS
The Lessee will:
(a) ensure that any Engine or Part which is not installed on the Aircraft
(or any other aircraft as permitted by this Agreement) is, except as
permitted by and in accordance with this Agreement, properly and
safely stored, and kept free from Security Interests;
(b) notify the Lessor whenever any Engine is removed from the Aircraft
and, from time to time, on request procure that any person to whom
possession of an Engine is given acknowledges in writing to the
Lessor, in form and substance reasonably satisfactory to the Lessor,
that it will respect the title and interest of the Holder of Legal
Title to and in the Engine and will not seek to exercise any rights
whatsoever in relation to it;
61
(c) (notwithstanding any other provision in this Agreement), be
permitted, if no Significant Default or Event of Default has occurred
and is continuing, to install any Engine or Part on an aircraft, or
in the case of a Part, an engine:
(i) owned and operated by the Lessee free from Security
Interests; or
(ii) leased or hired to the Lessee pursuant to a lease or conditional
sale agreement on a long-term basis and on terms whereby the
Lessee has full operational control of that aircraft or engine;
or
(iii)acquired by the Lessee and/or financed or refinanced, and
operated by the Lessee, on terms that ownership of that aircraft
or engine, as the case may be, pursuant to a lease or
conditional sale agreement, or a Security Interest therein, is
vested in or held by any other person,
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
title and interest of the Holder of Legal Title to and in that
Engine or Part or the interests of the Banks in respect thereof
under the Assignment; and
(2) as provided in Section 8 of Letter Agreement No. 1, the lessor
under such lease, the seller under such conditional sale
agreement or the holder of such Security Interest, as the case
may be, has confirmed that it will respect the title and
interest of the Holder of Legal Title and the Banks to and in
that Engine or Part and that it will not seek to exercise any
rights whatever in relation thereto.
8.15 POOLING OF ENGINES AND PARTS
The Lessee will not enter into nor permit any pooling agreement or
arrangement in respect of an Engine or Part without the prior written
consent of the Lessor, such consent not to be unreasonably withheld in any
case where an Engine or Part is leased, let on hire or otherwise made
available by the Lessee. So long as no Significant Default or Event of
Default has occurred and is continuing, the Lessee may lease, let or hire
or charter or otherwise part with possession of (i) any Engine so long as
such Engine is transferred to such Engine's manufacturer or (ii) Part (in
the case of each clause (i) and (ii) above, on terms conferring no more
than a contractual right in personam against the Lessee and not a right in
rem against such Part) pursuant to a pooling or interchange arrangement to
which the Lessee is a party; and:
(a) (A) with respect to an Engine, the other party to which is an Engine
manufacturer and (B) with respect to Part, the other parties to which
are reputable, solvent commercial air carriers or the manufacturers
62
or suppliers of Part (or other reputable, solvent organizations whose
business includes the administration of and participation in such
pooling agreements or arrangements); and
(b) which does not contemplate the transfer of title to the pooled Engine
or Part (or if title to the Engine is transferred, it will be treated
as a Total Loss); and
(c) either provides that the Lessor (or the Banks, as the case may be)
will be sole loss payee in respect of any loss or damage to the
Engine or Part, or provides for Holder of Legal Title to acquire
title to a substitute engine or part satisfying the conditions set
out in Clause 8.13(a) if the Engine or Part is destroyed.
8.16 EQUIPMENT CHANGES; NON-SEVERABLE MODIFICATIONS AND SEVERABLE
MODIFICATIONS
(a) The Lessee will not make any modification or addition to the Aircraft
(each an "EQUIPMENT CHANGE"), except for an Equipment Change which:
(i) is permitted by and in accordance with this Agreement or
required by the Aviation Authority, or
(ii) has the prior written consent of the Lessor (which consent shall
state whether or not the Equipment Change needs to be removed
and the Aircraft restored to the prior condition on or before
the Expiry Date).
(b) The Lessee will not, without the prior written consent of the Lessor,
make any Non-Severable Modification to the Aircraft, such consent not
to be unreasonably withheld or delayed. Any such Non-Severable
Modification shall, upon incorporation in the Aircraft, become the
property of the Holder of Legal Title.
(c) Notwithstanding Clause 8.16(a) above, the Lessee may at any time,
and from time to time, without the prior consent of the Lessor, so
long as no Significant Default or Event of Default has occurred
and is continuing, install on the Aircraft any Severable
Modification. Title to any such Severable Modification shall
remain in the Lessee and shall not be conveyed to the Lessor as
the result of its installation in the Aircraft. Provided no
Significant Default or Event of Default shall have occurred and be
continuing, the Lessee may remove any such Severable Modification
at any time, provided that, in connection with such removal, the
Lessee restores the Aircraft in to the condition it would have
been in had the installation of such Severable Modification not
occurred. Any such Severable Modification which is not removed
from the Aircraft prior to its return to the Lessor hereunder
shall, subject to such rights as any third party may have, become
the property of the Holder of Legal Title.
63
For the avoidance of doubt (i) no Equipment Change, whether in the form of
Severable Modification or Non-Severable Modification, may diminish the
value, utility, condition or airworthiness of the Aircraft and (ii) any
Severable Modification to which title is not vested in the Lessee shall
require the Lessor's consent, such consent not to be unreasonably withheld
or delayed.
8.17 TITLE TO ENGINES AND PARTS
(a) Title to al engines and parts installed on the Aircraft, whether
by way of replacement, as the result of an Equipment Change (other
than Severable Modification) or otherwise (except those installed
pursuant to Clauses 8.13(b), 8.14(c), 8.15 or 8.16 (in relation to
parts which are leased to the Lessee)) will on installation, be
conveyed to the Holder of Legal Title subject to this Agreement
free and clear of all Security Interests. The Lessee will at its
own expense take all such steps and execute, and procure the
execution of, all such instruments as the Lessor or Head Lessor,
as the case may be, may reasonably request and which are necessary
to ensure that title to any such Engine or Part so passes to the
Holder of Legal Title according to all applicable laws. At any
time when requested by the Holder of Legal Title, the Lessee will
provide, at the Lessee's expense, evidence to the Lessor's
reasonable satisfaction (including the provision, if required, to
the Lessor of one of more legal opinions) that title has so passed
to the Holder of Legal Title;
(b) The Lessor may require the Lessee to remove any Equipment Change
(other than Non-Severable Modification) and to restore the Aircraft
to its condition prior to that Equipment Change, except as the Lessor
expressly stated otherwise in its prior written consent pursuant to
Clause 8.16(a)(ii);
(c) Except as referred to in Clause 8.16(b), any Engine or Part at any
time removed from the Aircraft will remain the property of the
Holder of Legal Title until a replacement has been made in
accordance with this Agreement and until title to that replacement
has passed, according to applicable laws, to the Holder of Legal
Title subject to this Agreement free of all Security Interests
whereupon title to the Engine or Part, will, provided no
Significant Default or Event of Default has occurred and is
continuing, pass to the Lessee free of Lessor Liens and in such
event the Holder of Legal Title will provide, at the Lessee's
expense, evidence to the Lessee's reasonable satisfaction that
title has so passed to the Lessee.
9. INSURANCE
9.1 INSURANCES
The Lessee, at its expense, will maintain in full force and effect during
the Term, and thereafter as expressly required in this Agreement,
64
insurances in respect of the Aircraft in form and substance reasonably
satisfactory to the Lessor (the "INSURANCES" which expression includes,
where the context so admits, any relevant re-insurance(s)) through such
brokers and with such insurers and having such deductibles and being
subject to such exclusions as may be approved by the Lessor, such approval
not to be unreasonably withheld, it being understood that (i) the Lessee's
brokers and insurers will be deemed satisfactory to the Lessor if such
brokers and insurers are of recognized responsibility and good repute
specializing in aviation insurances in the World Aviation Insurance
Markets (as defined below) at the time and (ii) the Lessee's insurances,
including deductibles and exclusions, will be deemed satisfactory to
Lessor if consistent with insurances maintained with respect to air
carriers of a similar size as Lessee and operating similar aircraft on
similar routes as Lessee at the time of any such approval. The Insurances
will be effected either:
(a) on a direct basis with insurers of recognized standing who regularly
participate in aviation insurances in the London, United States,
European, Japanese or other leading international insurance markets
and led by reputable underwriter(s) ("World Aviation Insurance
Markets"); or
(b) with a single insurer or group of insurers specializing in
aviation insurances in the World Aviation Insurance Markets who do
not retain the risk but effect substantial reinsurance with
reinsurers in the World Aviation Insurance Markets and through
brokers each of recognized responsibility and standing
specializing in aviation insurances in the World Aviation
Insurance Markets for a percentage of all risks insured (the
"Reinsurances").
9.2 REQUIREMENTS
The requirements with regard to the Insurances are as specified in this
Clause and in Part 1 of Schedule 4. The Lessor acting reasonably and in
consultation with Lessee, may from time to time stipulate such other
requirements for the Insurances as may be necessary to ensure that the
scope and level of cover is maintained in accordance with the then
prevailing industry practice in the World Aviation Insurance Markets in
relation to aircraft of the same type as the Aircraft in relation to
United States airlines of similar standing to the Lessee; provided,
however, that any such further requirements shall be of the type generally
available in such markets at commercially reasonable rates. If the Lessor
determines that the Agreed Value shall be adjusted in accordance with this
Agreement, the Lessor may, upon prior written notice to the Lessee at
least 30 days prior to the expiry of the respective Insurances, require
the Lessee to renew the Insurances reflecting the Agreed Value so adjusted
in accordance with this Agreement.
9.3 CHANGE
If at any time, the Lessor decides, on reasonable grounds, to revoke its
approval of any insurer, reinsurers, Insurances or Reinsurances, the
65
Lessor shall notify the Lessee accordingly and the Lessor and/or its
brokers will then consult in good faith with the Lessee and the Lessee's
brokers (as for the time being approved by the Lessor) with regard to such
proposed revocation. If, following the consultation, the Lessor is
satisfied that changes should be made, the Lessee will then arrange or
procure the arrangement of alternative cover reasonably satisfactory to
the Lessor. For purposes of this Clause 9.3, "reasonable grounds" for the
Lessor's decision hereunder shall include any similar decision under
similar conditions by the Head Lessor or the Security Trustee (as defined
in the Head Lease) under Clause 13.11 of the Head Lease.
9.4 INSURANCE COVENANTS
The Lessee shall:
(a) ensure that all legal requirements as to insurance of the Aircraft,
any Engine or any Part which may from time to time be imposed by the
laws of the State of Registration or any state to, from or over which
the Aircraft may be flown in so far as they affect or concern the
operation of the Aircraft, are complied with and, in particular,
those requirements compliance with which is necessary to ensure that:
(i) the Aircraft is not in danger of detention or forfeiture;
(ii) the Insurances remain valid and in full force and effect; and
(iii)the interests of the Indemnitees in the Insurances and the
Aircraft or any Part are not thereby prejudiced;
(b) not use, cause or permit the Aircraft, any Engine or any Part to be
used for any purpose or in any manner not covered by the Insurances
or outside any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each policy of the Insurances
and not do, consent or agree to any act or omission which:
(i) invalidates or is reasonably expected to invalidate the
Insurances; or
(ii) renders or is reasonably expected to render void or voidable the
whole or any part of any of the Insurances; or
(iii) brings any particular liability within the scope of an
exclusion or exception to the Insurances;
(d) not take out without the prior written consent of the Lessor any
insurance or reinsurance in respect of the Aircraft other than
66
those required under this Agreement, if such other insurance would
prejudice the Lessor's or any other Indemnitee's rights with
respect to the Insurances. The Lessor agrees that, subject to the
foregoing, the Lessee may maintain additional hull or other
insurance in relation to the Aircraft, Engines or Parts thereof or
insurance in excess of the amounts required to be maintained
hereunder. Insurance proceeds arising out of such other or excess
insurance shall be paid solely to the Lessee.
(e) commence renewal procedures at least 30 days prior to expiry of any
of the Insurances and provide to the Lessor:
(i) if requested by the Lessor, a written status report of renewal
negotiations 14 days prior to each expiry date;
(ii) telexed confirmation of completion of renewal prior to each
expiry date;
(iii)certificates of insurance (and where appropriate certificates of
reinsurance), and broker's (and any reinsurance brokers') letter
of undertaking substantially in the form set out in Parts 2 and
3 of Schedule 4, detailing the coverage and confirming the
insurers' (and any reinsurers') agreement to the specified
insurance requirements of this Agreement within 7 days after
each renewal date;
(f) on request and subject to clause (j) below, provide to the Lessor
copies of documents evidencing the Insurances;
(g) on request, provide to the Lessor evidence that the Insurance
premiums have been paid;
(h) not make any modification or alteration to the Insurance material and
adverse to the interests of any of the Indemnitees;
(i) be responsible for any deductible under the Insurances; and
(j) provide any other insurance and reinsurance related information,
or assistance, in respect of the Insurances as the Lessor may
reasonably request, provided always that the provision thereof
would not violate any confidentiality undertaking of the Lessee
with such insurers and that the Lessor shall not disclose such
information to any third parties other than the Beneficial Owner,
the Banks, the Head Lessor and their respective professional
advisors or as may be required by applicable law, in each case
obtaining such undertakings and taking such precautions as shall
be commercially reasonable under the circumstances to protect the
confidentiality of such information. The Lessee shall not be
required to provide any actual insurance policy hereunder unless
67
the insurers decline coverage and a good faith dispute exists in
respect thereof with the Lessor in which event the Lessee shall
provide such portions of such policies bearing on such coverage or
dispute as the Lessor may reasonably request.
9.5 FAILURE TO INSURE
If the Lessee fails to maintain the Insurances in compliance in all
material respects with this Agreement, each of the Indemnitees will be
entitled but not bound (without prejudice to any other rights of the
Lessor under this Agreement, but after such consultation with the Lessee
as shall be reasonable under the circumstances):
(a) to pay the premiums due or to effect and maintain insurances
satisfactory to it or otherwise remedy the Lessee's failure in
such manner (including, without limitation, to effect and maintain
similar insurance cover through an "owners' interest" policy) as
it reasonably considers appropriate. Such sums as shall have been
reasonably so expended by it will upon written demand become
immediately due and payable by the Lessee to the Lessor together
with interest thereon at the Default Rate, from the date of
expenditure by it up to the date of reimbursement by the Lessee
(before and after any judgment);
(b) at any time while such failure is continuing to require the Aircraft
to remain at any airport or to proceed to and remain at any airport
designated by it until the failure is remedied to its reasonable
satisfaction.
9.6 CONTINUING INDEMNITY
The Lessor or the Trust Company may require the Lessee to effect and/or
maintain public liability insurance under the Lessee's normal fleet
policies after the Expiry Date with respect to its liability under the
indemnities in Clause 10 for such period as the Lessor may reasonably
require (but in any event not more than 2 years) which provides for each
Indemnitee to be named as additional insured. The Lessee's obligation
under this Clause 9.6 shall not be affected by the Lessee ceasing to be
lessee of the Aircraft and/or any of the Indemnitees ceasing to have any
interest in respect of the Aircraft.
9.7 APPLICATION OF INSURANCE PROCEEDS
As between the Lessor and the Lessee:
(a) all insurance payments received as the result of a Total Loss
occurring during the Term will be paid to the Lessor up to but not
exceeding the Agreed Value;
(b) all insurance proceeds in respect of any damage or loss to the
Aircraft, any Engine or any Part occurring during the Term not
constituting a Total Loss and equal or in excess of $[ ]* will
68
be paid to the Lessor and applied in payment (or to reimburse the
Lessee) for repairs or replacement property upon the repairs being
made or replacement being effected to the reasonable satisfaction
of the Lessor in accordance with this Agreement. Insurance
proceeds in amounts below $[ ]* may be paid by the insurer
directly to the Lessee. Any balance remaining after completion of
repairs and/or replacement may be retained by the Lessee;
(c) all insurance proceeds in respect of third party liability will,
except to the extent paid by the insurers to the relevant third
party, be paid to the Lessor to be paid directly in satisfaction of
the relevant liability or to the Lessee in reimbursement of any
payment so made;
(d) notwithstanding Clauses 9.7(b) and (c), if at the time of the payment
of any such insurance proceeds a Significant Default or an Event of
Default has occurred and is continuing all such proceeds will be paid
to or retained by the Lessor to be applied toward payment of any
amounts which is or will become payable by the Lessee in such order
as the Lessor sees fit or as the Lessor may elect.
10. INDEMNITY
10.1 GENERAL
The Lessee agrees to defend, indemnify and hold harmless the Indemnitees
on an After-Tax-Basis from and against any and all claims, proceedings,
losses, liabilities, suits, judgments, costs, expenses, penalties or fines
(each a "Claim"):
(a) which may at any time be suffered or incurred directly or
indirectly as a result of or connected with the manufacture,
design, airworthiness, merchantability, fitness for use,
possession, delivery, performance, management, ownership,
registration, deregistration, control, maintenance, condition,
service, repair, overhaul, import, export, leasing, subleasing,
pooling, use, operation or return of the Aircraft, any Engine or
Part (either in the air or on the ground) whether or not the Claim
may be attributable to any defect in the Aircraft, any Engine or
any Part or to its design, testing or use or otherwise;
(b) which arise out of any act or omission which invalidates or which
renders voidable any of the Insurances;
(c) which may at any time be suffered or incurred as a consequence of any
design, article or material in the Aircraft, any Engine or any Part
or its operation or use constituting an infringement of patent,
copyright, trademark, design or other proprietary right or a breach
of any obligation of confidentiality owed to any person;
69
(d) the Lessee's breach of any of its representations, warranties or
covenants hereunder or any other Event of Default under this
Agreement
but excluding any Claim to the extent (and only to the extent that):
(aa) it arises as a result of the wilful misconduct or gross
negligence of such Indemnitee;
(bb) it arises as a result of a material breach by the Lessor of any
of its obligations under this Agreement or the Beneficial
Owner's breach of its covenants under its Letter of Quiet
Enjoyment (which did not result from a breach by the Lessee of
any of its representations, warranties, covenants or other
obligations hereunder);
(cc) it constitutes a Lessor Tax or constitutes or results solely
from a Lessor Lien;
(dd) it is attributable to an event occurring after the Expiry Date
following the redelivery of the Aircraft by the Lessee to the
Lessor in full compliance with the terms and conditions of this
Agreement (including without limitation, in the condition
required or permitted by the terms of this Agreement, to the
extent that such Claim is solely attributable to acts,
omissions, events or circumstances (which are not the result of
acts or omissions of the Lessee, its employees, agents,
contractors or other representatives) which occur after such
redelivery;
(ee)it is the subject matter of another indemnity provision of this
Agreement or consists of a cost or expense imposed on the Lessor
or the Beneficial Owner by the terms hereof or is incurred by
the Lessor or the Beneficial Owner or any other Indemnitee in
performing its express obligations hereunder;
(ff) it consists of costs, fees or expenses related to the
negotiation, preparation or execution of this Agreement or any
other document executed in connection herewith;
(gg) it consists of costs, fees or expenses arising out of the
acquisition or transfer by the Lessor or any Indemnitee of any
interest in the Aircraft or this Agreement except any such
transfer in connection with the exercise of remedies hereunder
in accordance with the terms of Clause 13.2 hereof after the
occurrence of an Event of Default or as a result of a
replacement of a Part or an Engine pursuant to the terms hereof;
70
(hh) it arises out of or results from acts of any Indemnitee prior
to the Delivery Date;
(ii) it relates to the costs, fees and any other out-of-pocket
expenses incurred in connection with the establishment,
maintenance or restructuring of or charges to the financing or
refinancing of the Aircraft, any Engine or any Part by any
Indemnitee (including without limitation, the Head Lessee) or
the creation or maintenance of the trust estate established
under the Trust Agreement (including, without limitation, any
fees payable to the Owner Trustee).
The following shall apply to all claims for indemnity under this Clause
10.1:
(i) If any Indemnitee has actual knowledge of any Claim hereby
indemnified against it shall give prompt written notice
thereof to the Lessee; provided, however, that the failure of
an Indemnitee to give such notice shall not relieve the
Lessee of its obligations hereunder, except to the extent
that such failure impairs the Lessee's ability to contest or
to participate in the contest of such Claim in any material
respect or materially increases the amount of such Claim.
(ii) Each claim against an Indemnitee by a third party which
constitutes a Claim shall, if reasonably requested by the
Lessee, be contested by the Indemnitee in good faith by
appropriate proceedings, provided that the Lessee shall
indemnify such Indemnitee in respect of any reasonable
out-of-pocket fees, costs or expenses actually incurred by such
Indemnitee in conducting such contest and the amount of any
interest or penalties or any other losses which are required to
be paid as a direct result of contesting such Claim, and
provided further that such contest proceedings would not result
in the likelihood of the seizure, condemnation, sale, forfeiture
or other loss of the Aircraft or any interest therein or of
criminal liability or unindemnified liability on the part of
such Indemnitee. The Lessee shall be entitled to assume
responsibility for and control of the defense of any Claim in
respect of which any Indemnitee (other than the Head Lessor or
any Bank) makes a claim against the Lessee for indemnity
pursuant to this Clause 10.1, provided that (i) the legal
counsel retained by the Lessee for such purpose is reasonably
acceptable to such Indemnitee and (ii) the Lessee pursues such
contest diligently and in good faith and, upon the reasonable
request of such Indemnitee, provides such Indemnitee with
reasonable details of the status of the contest and copies of
all legal briefs, court filings and, subject to applicable
considerations of legal privilege, counsel's memoranda relevant
to such contest. In the event that (1) an Event of Default shall
have occurred and be continuing or (2) the Lessee fails to
71
comply with the foregoing requirements in any material respect,
the applicable Indemnitee may, if such Event of Default or
failure, as the case may be, continues after such Indemnitee has
given the Lessee a reasonable opportunity to effect the
applicable level of compliance, reassume responsibility for and
control of the relevant contest, which, in such circumstances,
such Indemnitee agrees to pursue diligently and in good faith.
To the extent the Lessee is entitled to defend any Claim
hereunder, the Indemnitee shall cooperate in good faith with the
Lessee and may participate (with its own counsel, if it so
desires) at such Indemnitee's sole cost and expense.
(iii)Each Indemnitee shall supply the Lessee with such information as
the Lessee shall reasonably request to defend or participate in
any proceeding permitted by this Clause 10.1.
(iv) No Indemnitee shall enter into a settlement or other compromise
or consent to a judgment with respect to any Claim without the
prior written consent of the Lessee, which consent shall not be
unreasonably withheld or delayed, unless such Indemnitee waives
its rights with respect to such Claims under this Clause 10.1;
provided that the payment of an amount to which a Claim relates
when legally compelled to do so by a Government Entity of
competent jurisdiction after which a request for a refund (if
not prohibited by law) of such amount is diligently pursued by
appropriate procedures in accordance with the terms of this
Clause 10.1 will not be considered a settlement, compromise or
consent to judgment requiring the Lessee's prior consent.
(v) In the event the Lessee shall be obligated to indemnify any
Indemnitee pursuant to this Clause 10.1, the Lessee shall
(provided no Event of Default shall have occurred and then be
continuing) be subrogated (without warranty by the
Indemnitee) to the rights of such Indemnitee in respect of
the matter as to which the indemnity was paid (except rights
under such Indemnitee's own insurance policies or under the
indemnification provisions of the Head Lease or any other
documents or agreements relating to the Aircraft between the
Head Lessor and the Banks) and may pursue the same at the
Lessee's expense. If any Indemnitee shall obtain a recovery
of all or any part of any amount which the Lessee shall have
paid to such Indemnitee or for which the Lessee shall have
reimbursed such Indemnitee pursuant to this Clause 10.1, such
Indemnitee shall promptly (or if such Indemnitee is the
Lessor, at such time as no Event of Default may have occurred
is then continuing) pay or cause to be paid to the Lessee an
amount equal to such recovery (but only up to the amount
previously paid by the Lessee to such Indemnitee).
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10.2 DURATION
The indemnities contained in this Agreement will continue in full force
after the Expiry Date.
11. EVENTS OF LOSS
11.1 TOTAL LOSS
(a) PRE-DELIVERY: If a Total Loss occurs prior to Delivery, this
Agreement will immediately terminate and, except as expressly
stated in this Agreement, neither party will have any further
obligation or liability under this Agreement other than the
obligation of the Lessor to return to the Lessee that portion of
the Commitment Fee that has been paid to the Lessor, if paid in
cash, or to return the Letter of Credit, if the Commitment Fee is
in the form of a Letter of Credit.
(b) POST-DELIVERY: If a Total Loss occurs after Delivery, the Lessee
will pay the Agreed Value (minus all insurance proceeds received
by the Lessor or paid to a third party pursuant to the Lessor's
instruction in respect of such Total Loss) to the Lessor on or
prior to the earlier of (i) ninety (90) days after the Total Loss
Date and (ii) the date of receipt of insurance proceeds in respect
of that Total Loss (the "SETTLEMENT DATE") unless the Aircraft is
restored to the Lessor or the Lessee within that period (or, in
the case of a Total Loss coming within paragraph (c) of the
definition of Total Loss and involving the loss of the Lessor's or
the Head Lessor's, as the case may be, title to the Aircraft, if
both the Aircraft and title thereto are restored to the Holder of
Legal Title or, in the case of the Aircraft, to the Lessee). The
receipt by the Lessor of the insurance proceeds in respect of the
Total Loss shall, to the extent of such proceeds, discharge or
partially discharge the Lessee from its obligation to pay the
Agreed Value to the Lessor pursuant to this sub-clause (b). In
the event that the Lessor received insurance proceeds with respect
to such Event of Loss (or such proceeds were paid as directed by
the Lessor) after the Lessee has paid the Agreed Value to the
Lessor, the Lessor shall pay or cause to be paid to the Lessee the
amount of such insurance proceeds (less any amounts which are or
will become due to the Lessor from the Lessee hereunder) plus
monthly interest at the rate equal to LIBOR from the date of
receipt of such insurance proceeds by the Lessor (or by the party
to whom such proceeds are paid as directed by the Lessor) to the
date such insurance proceeds are paid over to the Lessee. In the
event that the insurance proceeds are paid initially to the Lessee
and not to the Lessor, the amount, if any, by which such insurance
proceeds together with other amounts, if any, paid by the Lessee
to the Lessor with respect to the Lessee's obligation to pay the
Agreed Value, or any portion thereof, exceed the Agreed Value may
be retained by the Lessee, otherwise the Lessee shall pay the
73
Agreed Value to the Lessor not later than the Settlement Date. In
the event that the Lessee pays the Agreed Value to the Lessor in
accordance with this sub-clause (b), the Lessor shall promptly
assign to the Lessee its rights under the Insurances to receive
the insurance proceeds in respect of the Total Loss (to the extent
that such proceeds shall not have been paid to the Lessee).
Subject to the rights of any insurers and reinsurers or other
third party, upon payment in full to the Lessor of that amount and
all other amounts which are or will become payable to the Lessor
under this Agreement, the Lessor will, without recourse or
warranty (except as to the absence of Lessor Liens), convey and
transfer, or cause to be conveyed and transferred, to the Lessee
by instrument in form and substance reasonably satisfactory to the
Lessee full legal and beneficial title to the Aircraft and to any
Engines or Parts not installed when the Total Loss occurred, all
on an "as-is where is" basis, and will, at the Lessee's expense,
execute and deliver, or cause to be executed and delivered, such
bills of sale and other documents and instruments as the Lessee
may reasonably request to evidence (on the public record or
otherwise) the transfer and conveyance of such title to the
Aircraft and such Engines and Parts to the Lessee, free and clear
of all rights of the Lessor and any Lessor Liens.
(c) ENGINE LOSS: Upon the occurrence of an Engine Loss (including,
for the avoidance of doubt, at time when the Engine is not
installed on the Airframe) in circumstances in which there has not
also occurred a Total Loss, the Lessee shall give the Lessor
written notice promptly upon becoming aware of the same and shall
within days after the Engine Loss Date, convey or cause to be
conveyed to the Holder of Legal Title as replacement for such
Engine, title, free and clear of all Security Interests, to a
replacement engine complying with the conditions set out in Clause
8.13(a). The Lessee shall, at the time of such conveyance, comply
in all respects with Clause 8.17(a) so that the replacement engine
becomes an Engine, whereupon the leasing of the replaced Engine
the subject of the Engine Loss shall cease and title to such
replaced Engine shall (subject to any salvage rights of insurers)
be conveyed to the Lessee pursuant to Clause 8.17(c). If the
Lessor receives any insurance proceeds relating to such Engine
Loss, the Lessor shall promptly remit such proceeds to the
Lessee. No Engine Loss with respect to any Engine which is
replaced in accordance with the provisions of this Clause 11.1(c)
shall result in any increase or decrease in Rent or the Agreed
Value.
11.2 REQUISITION
During any requisition for use or hire of the Aircraft, any Engine or Part
which does not constitute a Total Loss:
(a) the Rent and other charges payable under this Agreement will not be
suspended or abated either in whole or in part, and the Lessee will
not be released from any of its other obligations under this
Agreement (other than operational obligations with which the Lessee
is unable to comply solely by virtue of the requisition); and
74
(b) so long as no Significant Default or Event of Default has occurred
and is continuing, the Lessee will be entitled to any hire paid by
the requisitioning authority in respect of the Term. The Lessee
will, as soon as practicable after the end of any such
requisition, cause the Aircraft to be put into the condition
required by this Agreement. The Lessor will be entitled to all
compensation payable by the requisitioning authority in respect of
any change in the structure, state or condition of the Aircraft
arising during the period of requisition, and the Lessor will
apply such compensation in reimbursing the Lessee for the cost of
complying with its obligations under this Agreement in respect of
any such change, but so that, if any Significant Default or Event
of Default has occurred and is continuing, the Lessor may apply
the compensation or hire in or towards settlement of any amounts
then due and owing by the Lessee under this Agreement.
11.3 APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES IN RESPECT OF
EVENT OF LOSS.
Any payments (other than insurance covered by Clause 9) received at any
time by the Lessor or the Lessee from any Government Entity or other
person with respect to an Event of Loss with respect to the Aircraft or
any Engine will be applied as follows:
(a) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and the Engines or
engines installed on such Airframe, (A) so much of such payment as
shall not exceed the Agreed Value due under Clause 11.1(b) shall
be applied (i) in reduction of the Lessee's obligation to pay such
amount, if not already paid by the Lessee, or (ii) if the Agreed
Value is already paid by the Lessee to the Lessor, to reimburse
the Lessee for its payment of such amount, and (B) the balance, if
any, of such payment remaining thereafter to the extent not
exceeding the Lessee's Interest shall be paid to the Lessee, and
(C) the balance, if any, of such payment remaining thereafter will
be paid over to or retained by the Beneficial Owner; and
(b) if such payments are received with respect to an Engine under
circumstances contemplated by Clause 11.1(c), such payments shall be
paid over to, or retained by, the Lessee, provided that the Lessee
shall have fully performed or concurrently therewith will fully
perform the requirements of Clause 11.1(c).
12. RETURN OF AIRCRAFT
12.1 REDELIVERY
On the Expiry Date or termination of the leasing of the Aircraft under
this Agreement, the Lessee will, unless a Total Loss has occurred, at its
expense, redeliver the Aircraft and Aircraft Documents to the Lessor at
the Redelivery Location or such other airport as is mutually acceptable to
the parties hereto, in a condition complying with Schedule 3, free and
clear of all Security Interests and Permitted Liens (other than Lessor
75
Liens), in a condition qualifying for immediate issuance of a Certificate
of Airworthiness by the FAA and complying with the operational
requirements of FAR Part 121, or as otherwise agreed by the Lessor and the
Lessee.
12.2 FINAL INSPECTION
During the 15 days immediately prior to redelivery of the Aircraft, the
Lessee will make the Aircraft available to the Lessor for inspection
("FINAL INSPECTION") in order to verify that the condition of the Aircraft
complies with this Agreement. The Final Inspection will be long enough to
permit the Lessor to inspect:
(a) the Aircraft Documents;
(b) the Aircraft and uninstalled Parts; and
(c) the Engines, including without limitation (i) at the Lessee's cost, a
video-taped borescope inspection of (A) the low pressure and high
pressure compressors and (B) the turbine area, all performed, at the
Lessor's option, by engine manufacturer, (ii) at the Lessee's cost,
an engine condition run of each Engine, and (iii) magnetic chip
inspection.
At the Lessor's request, the Lessee shall permit the Lessor's
representatives reasonable access to the Aircraft. Notwithstanding the
preceding sentence, the Lessor shall not open any panels, bays or the like
or disassemble any components which are not otherwise opened or
disassembled or removed in the course of the Lessee's maintenance of the
Aircraft unless the Lessor has reasonable cause to believe that the
relevant portion of the Aircraft or component may not be in compliance
with the return conditions as set forth in Schedule 3 hereof. The cost of
opening, inspecting and closing any such areas shall be borne by the
Lessor unless such action reveals any discrepancies from the return
conditions required by this Clause 12 and Schedule 3 in which case the
cost of opening, inspecting and closing any such areas and the correcting
such discrepancies shall be borne by the Lessee.
The Lessor shall also be entitled, as part of the Final Inspection, to
require the Lessee to perform a 2 hour demonstration flight at the
Lessee's cost (with the Lessor's representatives as on-board observers).
In the event that a defect is discovered during such demonstration flight
and the Boeing test flight guide requires an in-flight verification of the
correction of such defect, the Lessee will, at the Lessee's expense,
perform an additional demonstration flight (or flights, as applicable) to
the extent required for the sole purpose of verifying the correction of
such defect.
On redelivery, the Lessee will comply with Clause 8.17(b) hereof.
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The Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages and losses (including costs and
expenses incidental thereto) arising by reason of death or injury to any
observer or employee of the Lessee, arising out of, or in any way
connected with such demonstration flight and Final Inspection of the
Aircraft.
The Lessor shall indemnify and hold harmless the Lessee from and against
any and all liabilities, damages and losses (including costs and expenses
incidental thereto) arising by reason of death or injury to any observer,
representative or employee of the Lessor or any Indemnitee, arising out
of, or in any connected with such demonstration flight and Final
Inspection of the Aircraft.
12.3 NON-COMPLIANCE
To the extent that, at the time of Final Inspection, the condition of the
Aircraft does not comply with this Agreement, the Lessee will at the
Lessee's option:
(a) immediately rectify the non-compliance and, to the extent the
non-compliance extends beyond the Expiry Date, the Term will be
automatically extended and this Agreement will remain in force until
the non-compliance has been rectified; or
(b) redeliver the Aircraft to the Lessor and indemnify the Lessor, and
provided that the Lessor shall have security for that indemnity,
against the cost of putting the Aircraft into the condition required
by this Agreement, provided that, notwithstanding such
non-compliance, the Aircraft is in such condition as to allow it to
be immediately placed into commercial passenger service.
Notwithstanding the Lessee's election of the option set forth in clause
(a) above, if the Lessor so directs the Lessee in writing, the Lessee
shall redeliver the Aircraft to the Lessor and indemnify the Lessor
against the cost of putting the Aircraft into the condition required by
this Agreement, in which case the Term of this Agreement shall not be
extended as provided in such clause (a).
12.4 OBLIGATION TO RETURN THE AIRCRAFT
Except with respect to the return of the Aircraft pursuant to Clause
12.3(b) and as otherwise provided in Clause 12.3, the failure to return
the Aircraft at the Expiry Date in full compliance with Clause 12 and
Schedule 3 of this Agreement, for any reason, shall result in an extension
of the Term, and this Agreement remaining in full force and effect,
including the Lessee's obligation to pay Rent (which the Lessee shall pay
on a per diem basis weekly in arrears); provided, however, that the Lessee
shall not operate, or permit others to operate (except during any period
77
described in the definition of Total Loss in which possession of the
Aircraft is held by a third party) the Aircraft after the Expiry Date
except for testing and acceptance flights pursuant to Clause 12.2 hereof
and a ferry flight to the Redelivery Location and shall promptly return
the Aircraft to the Lessor after such non-compliance is rectified. Except
as expressly set forth in this Agreement, the Lessee has no right to keep
the Aircraft beyond the Expiry Date.
▇▇.▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇ shall be adjusted as set forth in Letter Agreement No. 1.
12.6 DOCUMENTATION
Upon redelivery the Lessee shall reasonably assist and cooperate with the
Lessor, to the extent reasonably requested by the Lessor, in obtaining all
documents necessary to export the Aircraft from the Habitual Base
(including, without limitation, a valid and subsisting export license for
the Aircraft) and required in relation to the deregistration of the
Aircraft with the Aviation Authority.
12.7 ACKNOWLEDGEMENT
Upon redelivery of the Aircraft by the Lessee to the Lessor at the
Redelivery Location in accordance with and in compliance with this
Agreement, the Lessor will deliver to the Lessee an acknowledgment
confirming that the Lessee has redelivered the Aircraft to the Lessor in
accordance with this Agreement.
12.8 MAINTENANCE PROGRAMME
(a) Prior to the Expiry Date and upon the Lessor's request, the Lessee
will provide the Lessor or its agent reasonable access to the Agreed
Maintenance Programme and the Aircraft Documents solely in order to
facilitate the Aircraft's integration into any subsequent operator's
fleet;
(b) The Lessee will, if requested by the Lessor to do so, upon return of
the Aircraft deliver to the Lessor a current and complete copy of the
Agreed Maintenance Programme.
(c) The Lessor agrees that it will not disclose, and will use its
reasonable efforts to ensure that no other person receiving such
Maintenance Programme from or through the Lessor discloses, the
contents of the Agreed Maintenance Programme to any person or
entity except to the extent necessary to monitor the Lessee's
compliance with this Agreement and/or to bridge the maintenance
programme for the Aircraft from the Agreed Maintenance Programme
to another programme after the Expiry Date.
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12.9 FUEL
Upon redelivery of the Aircraft to the Lessor, an adjustment will be made
in respect of fuel on board at Delivery and the Expiry Date at the price
then prevailing at the Redelivery Location.
12.10 STORAGE
If the Lessor so requests, and subject to the availability of the
requisite space, the Lessee shall, at the Lessor's expense, park and store
the Aircraft at the Redelivery Location on behalf of the Lessor for a
period not exceeding 120 days from the Expiry Date. During that period the
Aircraft shall be at the Lessor's risk (save as to any loss or damage
caused by the Lessee's wilful misconduct or recklessness), but the Lessee
shall continue to maintain and insure the Aircraft in accordance with the
maintenance and insurance provisions of this Agreement. All reasonable
storage, maintenance and insurance costs incurred by the Lessee (excluding
any profit element accruing to the Lessee) pursuant to this Clause 12.10
shall be reimbursed by the Lessor promptly upon presentation of supporting
invoices and/or receipts.
13. DEFAULT
13.1 EVENTS
Each of the following events will constitute an Event of Default and a
repudiation of this Agreement by the Lessee:
(a) NON-PAYMENT: the Lessee fails to pay any Rent or Agreed Value under
this Agreement within 5 Business Days of the due date for payment or,
in the case of other sums payable to the Lessor or any Indemnitee,
within 10 Business Days of demand; or
(b) INSURANCE: the Lessee fails to obtain or maintain in full force
and effect any insurance required under the provisions of Clause 9
or shall operate the Aircraft outside the scope of or in violation
of the terms of the insurance or, if applicable, the United States
government indemnity coverage required to be maintained with
respect to such Aircraft; provided that, in the event that any
such insurance is cancelled or terminated or notice of
cancellation is given in respect of any such insurance, such
insurance is not replaced by insurance complying with Clause 9 and
Schedule 4 at least 10 days prior to the effective date of such
cancellation or termination date; or
(c) BREACH: the Lessee fails to comply with any other provision of
this Agreement provided, however, that if such failure is capable
of remedy and the Lessee is diligently proceeding to cure such
failure by appropriate means, (A) the failure continues for thirty
79
(30) days after notice from the Lessor to the Lessee and (B) if,
in the reasonable opinion of the Lessor, any such default is not
capable of being cured or remedied within the said thirty (30)
days (notwithstanding diligent efforts of the Lessee), but is
capable of being cured or remedied within sixty (60) days, such
default is not cured or remedied within additional thirty (30)
days after such initial thirty (30) day period; or
(d) REPRESENTATION: any representation or warranty made (or deemed to be
repeated) by the Lessee in this Agreement is or proves to have been
incorrect in any material respect when made or deemed to be repeated;
or
(e) CROSS DEFAULT: any default or event of default occurs under any
Financial Indebtedness or any aircraft lease of the Lessee and, in
consequence thereof, the holder of such Financial Indebtedness
accelerates such indebtedness or enforces the security therefor or
the lessor under such aircraft lease terminates such lease or
exercises its remedies thereunder.
(f) APPROVALS: any consent, authorization, license, certificate or
approval of or registration with or declaration to any Government
Entity of or by the Lessee in order to perform its obligations under
this Agreement is not granted or is revoked or terminated or expires
and is not replaced or reinstated in full force and effect within
thirty (30) days thereof; or
(g) INSOLVENCY:
(i) the Lessee is, or is deemed for the purposes of any relevant law
to be, unable to pay its debts as they fall due or to be
insolvent, or admits inability to pay its debts as they fall
due; or
(ii) the Lessee suspends making payments on all or any class of its
debts or announces an intention to do so, or a moratorium is
declared in respect of any of its indebtedness;
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(h) BANKRUPTCY AND SIMILAR PROCEEDINGS:
(i) the Lessee consents to the appointment of a custodian, receiver,
trustee or liquidator of itself or all or any substantial part
of the Lessee's property or the Lessee's consolidated property;
or
(ii) the Lessee admits in writing its inability to pay its debts
generally as they become due, or the Lessee shall make a general
assignment for the benefit of creditors; or
(iii)the Lessee files a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization in a proceeding under
11 U.S.C. ▇▇.▇▇. 101 et seq. or under any other laws dealing
with bankruptcy, insolvency, moratorium, winding-up of
corporations or creditors' rights generally, as now or hereafter
in effect, (any or all of which are hereinafter referred to as
"Bankruptcy Laws"), or an answer admitting the material
allegations of a petition filed against the Lessee in any such
proceeding, or the Lessee by voluntary petition, answer or
consent seeks relief under the provisions of any Bankruptcy
Laws; or
(iv) an order, judgment or decree is entered by any court appointing,
without the consent of the Lessee, a custodian, receiver,
trustee or liquidator of the Lessee, or of all or any
substantial part of the Lessee's property or the Lessee's
consolidated property is to be sequestered, and any such order,
judgment or decree of appointment or sequestration remains in
effect, undismissed, unstayed or unvacated for a period of 90
days after the date of entry thereof or at any time an order for
relief is granted; or
(v) an involuntary petition against the Lessee in a proceeding
under the Bankruptcy Laws is filed and is not withdrawn or
dismissed within 90 days thereafter or any time an order for
relief is granted in such proceeding, or if, under the
provisions of any Law providing for reorganization or which
may apply to the Lessee, any court of competent jurisdiction
assumes jurisdiction over, or custody or control of, the
Lessee or of all or any substantial part of the Lessee's
property, or the Lessee's consolidated property and such
jurisdiction, custody or control remains in effect,
unrelinquished, unstayed or unterminated for a period of 90
days or at any time an order for relief is granted in such
proceeding; or
(vi) any step (including petition, proposal or convening a meeting)
is taken by the Lessee with a view to a composition, general
assignment for the benefit of creditors or workout with its
creditors generally, or the reorganization, rehabilitation,
administration, liquidation, or dissolution of the Lessee, or
any corporate action (including, without limitation, any board
of directors or shareholder action) is taken by the Lessee in
furtherance of any of the foregoing, whether or not the same is
fully effected or accomplished.
(i) SUSPENSION OF BUSINESS: the Lessee suspends or ceases or threatens in
writing to suspend or cease to carry on its business such that the
ability of the Lessee to perform its obligations hereunder may
reasonably be expected to be materially adversely affected; or
(j) DISPOSAL: the Lessee disposes, conveys or transfers or threatens in
writing to dispose, convey or transfer of all or a substantial part
of its assets, other than for the purpose of a reconstruction or
81
amalgamation the terms of which have received the previous consent in
writing of the Lessor and such disposition would have a material
adverse effect on the ability of the Lessee to perform its
obligations hereunder; or
(k) RIGHTS: the existence, validity, enforceability or priority of the
rights of the Lessor as owner and lessor in respect of the Aircraft
or the rights of the Banks as assignee of this Agreement under the
Assignment are challenged by the Lessee or any other person claiming
by or through the Lessee without appropriate cause; or
(l) DELIVERY: the Lessee fails to accept delivery of the Aircraft when
validly tendered pursuant to this Agreement by the Lessor at a time
when the Lessee is obligated to accept the Aircraft in accordance
with the terms hereof; or
(m) LETTER OF CREDIT: the Letter of Credit (i) ceases for any reason
to be in full force and effect, or (ii) is not renewed or replaced
at least 15 Business Days prior to its expiry (so that the renewal
or replacement becomes effective immediately following such
expiry) or (iii) in the event such Letter of Credit is drawn upon
by the Lessor prior to its expiration, such Letter of Credit is
not (x) reinstated by the Lessee to its original sum within five
(5) days of written notice by the Lessor, or (y) subject to
5.15(a), replaced by a cash deposit from the Lessee in the
required amount of such Letter of Credit.
13.2 RIGHTS
If an Event of Default occurs, the Lessor may at its option (and without
prejudice to any of its other rights under this Agreement), at any time
thereafter:
(a) treat such event as a repudiation by the Lessee of its obligations
under this Agreement and/or by notice to the Lessee with immediate
effect terminate the letting of the Aircraft (but without
prejudice to the continuing obligations of the Lessee under this
Agreement), whereupon all rights of the Lessee under this
Agreement, including, without limitation, the Lessee's rights to
possession and use of the Aircraft (other than for the purposes of
redelivery of the Aircraft to or as directed by the Lessor), shall
cease; and/or
(b) proceed by appropriate court action or actions to enforce performance
of this Agreement or to recover damages for the breach of this
Agreement; and/or
(c) either:
(i) take possession of the Aircraft, for which purpose the Lessor
may enter any premises belonging to or in the occupation of
or under the control of the Lessee (for which purpose the
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Lessee hereby grants to the Lessor an irrevocable license)
where the Aircraft may be located, or cause the Aircraft to
be redelivered to the Lessor at the Redelivery Location (or
such other location as the Lessor may require), and the
Lessor is hereby irrevocably authorized and empowered to
direct pilots of the Lessee or other pilots to fly the
Aircraft to that airport and will have all the powers and
authorizations necessary for taking such action; or
(ii) by serving notice, require the Lessee to redeliver the Aircraft
to the Lessor at the Redelivery Location (or such other location
as the Lessor may require).
13.3 DEREGISTRATION
If an Event of Default occurs, the Lessor may sell or otherwise deal with
the Aircraft as if this Agreement had never been made and the Lessee will,
at the request of the Lessor, take all steps necessary to effect (if
applicable) deregistration of the Aircraft and its export from the country
where the Aircraft is for the time being situated and any other steps
necessary to enable the Aircraft to be redelivered to the Lessor in
accordance with this Agreement.
13.4 DEFAULT PAYMENTS
If an Event of Default occurs, the Lessee will indemnify the Lessor on
demand against any loss, damage, expense, cost or liability, including,
without limitation, all reasonable attorneys' fees and disbursements,
which the Lessor may sustain or incur directly or indirectly as a result,
including but not limited to:
(i) any loss of profit suffered by the Lessor because of the
Lessor's inability to place the Aircraft on lease with
another lessee on terms as favourable to the Lessor as this
Agreement or because whatever use, if any, to which the
Lessor is able to put the Aircraft upon its return to the
Lessor, is not as profitable (calculated on an After-Tax
Basis) to the Lessor as this Agreement would have been but
for such Default or non-delivery;
(ii) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Clause
13.2 hereof with respect to all or any part of the Aircraft, the
Lessor, by written notice to the Lessee specifying a payment
date not earlier than ten (10) days from the date of such
notice, may demand that the Lessee pay to the Lessor, and the
Lessee shall pay to the Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and not
as a penalty, in lieu of the installments of Rent due on the
Aircraft, Airframe, Engines or Part thereof for periods
commencing on or after the payment date specified in such
notice, any unpaid Rent due for periods prior to the period
commencing with the payment date specified in such notice and
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other amounts owing under this Agreement (prorated in the case
of Rent on a daily basis), including interest thereon at the
Default Rate from the original date due under this Agreement to
and including the payment date specified in such notice, plus
the amount equal to the excess, if any, of the present value of
the aggregate of the remaining installments of Rent for the
remainder of the Term (determined without reference to any right
of the Lessor to terminate the leasing of the Aircraft, whether
or not such right is exercised) over the present value of the
fair market rental value of the Aircraft, Airframe, Engine or
Part thereof, for the remainder of such Term, using in each case
a discount rate of the amount of interest then paid on U.S.
Treasury bills of similar maturity;
(iii)any amount of principal, interest, fees or other sums whatsoever
paid or payable on account of funds borrowed in order to carry
any amount unpaid by the Lessee;
(iv) any loss, premium, penalty or expense which may be incurred in
repaying funds raised to finance the Aircraft or in unwinding
any swap, forward interest rate agreement or other financial
instrument relating in whole or in part to the Lessor's
financing of the Aircraft; and
(v) any loss, cost, expense or liability sustained or incurred by
or on behalf of the Lessor, together with interest thereon at
the Default Rate from the date such cost or expense is
incurred by the Lessor until the date of reimbursement
thereof by the Lessee, owing to such Event of Default, the
exercise of remedies hereunder or the Lessee's failure to
redeliver the Aircraft on the date, at the place and in the
condition required by this Agreement.
For the avoidance of doubt, the provisions of Clause 5.10(a) will apply to
any sums payable by the Lessee pursuant to this Clause 13.4.
For the purpose of Clause 13.4(ii) above, the "fair market rental value"
of the Aircraft, the Airframe, any Engine or Part thereof shall be the
rental value, net of all costs and expenses of recovering the Aircraft,
the Airframe or any Engine or Part thereon and restoring its condition to
the condition required hereunder, which would be obtained in an arm's
length transaction between informed and willing lessee and an informed and
willing lessor, based upon the actual condition and location of the
Aircraft, Airframe or any Engine or Part thereof, which value shall be
determined by a reputable firm of aircraft appraisers selected by the
Lessor, the Head Lessor or the Beneficial Owner. The cost of such
appraisal shall be borne by the Lessee.
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13.5 EXERCISE OF REMEDIES
Except as otherwise expressly set forth herein, no remedy referred to in
Clause 13 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to
the Lessor at law or in equity. The exercise or beginning of exercise by
the Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by the Lessor of any or all such other
remedies. No express or implied waiver by the Lessor of any Event of
Default hereunder shall in any way be or be construed to be, a waiver of
any future or subsequent Event of Default.
The Lessor's rights and the Lessee's obligations under Clause 13 shall
survive the Expiry Date.
14. ASSIGNMENT AND TRANSFER
14.1 NO ASSIGNMENT BY LESSEE
The Lessee will not assign or create or permit to exist any Security
Interest over any of its rights under this Agreement without the prior
written consent of the Lessor.
14.2 ASSIGNMENT
The Lessor may assign all or any of its rights, title and interest under
this Agreement and in the Aircraft but in the case of an assignment (other
than by way of security) only to any Permitted Transferee provided that
the assignment or any act required of the Lessee in connection therewith
will not result in any material respect (i) in the deprivation of any
material rights or privileges of the Lessee or (ii) an increase of the
Lessee's obligations. The Lessor will, however, in the case of an
assignment (other than by way of security) have no further obligation
under this Agreement with respect to periods following such assignment of
all its rights, title and interest under this Agreement and will remain
entitled to the benefit of each indemnity under this Agreement provided,
in any such event, the Permitted Transferee assumes in writing in form and
substance reasonably satisfactory to the Lessee all the Lessor's
obligations under this Agreement including, without limitation, all
obligations with respect to acts and events which occur prior to such
assignment and will agree not to interfere, except as otherwise permitted
by this Agreement, with the quiet use, possession and enjoyment of the
Aircraft by the Lessee or the exercise by the Lessee of its right
hereunder.
The Lessee will, at the Lessor's cost, comply with all reasonable requests
of the Lessor, its successors and assigns in respect of the consummation
of any such assignment. The Lessor will promptly notify the Lessee of any
85
proposed assignment and, as a condition thereto, shall obtain the written
consent of the Lessee, such consent not to be unreasonably withheld or
delayed, to any proposed assignment (other than by way of security) to any
successor other than a Permitted Transferee.
14.3 NO INCREASED LIABILITY
Any assignment or transfer by the Lessor pursuant to Clause 14.2 shall be
subject to the condition that the tax risk exposure of the Lessee shall
not, as a consequence of such assignment or transfer, be greater than it
would have been in the absence of such assignment or transfer.
14.4 RIGHT TO GRANT MORTGAGE
The Lessee shall co-operate with the Banks, the Lessor and the Head Lessor
in taking or receiving a legal mortgage or other security interest over
the Aircraft or an assignment of the Lessor's interest in the Insurances
or other interest of the Lessor in favour of the Banks as security and
provide a written confirmation of its consent thereto, in each case, at no
cost to the Lessee, as may reasonably be required in order to facilitate
the financing of the acquisition of the Aircraft, including, without
limitation, the registration and/or other perfection and/or priority of
such mortgage or other security interest and shall execute such
agreements, at no cost to the Lessee, as the Lessor or the Head Lessor may
reasonably require for the purposes of effecting all necessary amendments
to this Agreement (including, without limitation, Clauses 8, 9 and 10 and
Schedule 4) subject, in each case, to the same limitations set forth in
Clause 14.3.
15. ILLEGALITY
If it is or becomes unlawful in any relevant jurisdiction for the Lessor
or the Lessee to give effect to any of its material obligations under this
Agreement or to continue this Agreement, the Lessor will consult in good
faith with the Lessee as to any steps which may reasonably be taken (at no
cost to the Lessor in the case of illegality with respect to the Lessee,
and at no cost to the Lessee in the case of illegality of the Lessor) to
restructure the transaction in order to avoid such unlawfulness. In the
event that no such steps can reasonably be taken, the Lessor or the
Lessee, as applicable, may, by notice in writing to the other, terminate
the leasing of the Aircraft under this Agreement and the Lessee will
forthwith redeliver the Aircraft to the Lessor in accordance with Clause
12.
16. MISCELLANEOUS
16.1 WAIVERS, REMEDIES CUMULATIVE
The rights of either party under this Agreement:
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(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of that party's rights under any
law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver of
that right.
16.2 DELEGATION
The Lessor may delegate to any person or persons (other than an airline
competing with the Lessee, an Affiliate of such an airline or an employee
or representative of either thereof) all or any of the trusts, powers or
discretions vested in it by these presents and any such delegation may be
made upon such terms and conditions and subject to such regulations
(including power to sub-delegate) to a person eligible to be delegated by
the Lessor as the Lessor in its reasonable discretion thinks fit.
16.3 CERTIFICATES
Any certificate or determination by the Lessor as to any rate of interest
or as to any other amount payable under this Agreement will, at the
request of the Lessee be subject to verification in accordance with the
procedures set forth in Clause 5.16.
16.4 APPROPRIATION
If any sum paid or recovered in respect of the liabilities of the Lessee
under this Agreement is less than the amount then due, the Lessor may
apply that sum to amounts then due under this Agreement in such
proportions and order and generally in such manner as the Lessor may
determine.
16.5 CURRENCY INDEMNITY
(a) If the Lessor receives an amount in respect of the Lessee's liability
under this Agreement or if such liability is converted into a claim,
proof, judgment or order in a currency other than the currency (the
"CONTRACTUAL CURRENCY") in which the amount is expressed to be
payable under this Agreement:
(i) the Lessee will indemnify the Lessor, as an independent
obligation, against any loss arising out of or as a result of
such conversion;
(ii) if the amount received by the Lessor, when converted into the
contractual currency (at the market rate at which the Lessor is
able on the relevant date to purchase the contractual currency
in London or, at its option, New York with that other currency)
is less than the amount owed in the contractual currency, the
87
Lessee will, forthwith on demand, pay to the Lessor an amount in
the contractual currency equal to the deficit; and
(iii)the Lessee will pay to the Lessor on demand any exchange costs
and Taxes payable in connection with the conversion.
(b) The Lessor hereby agrees to indemnify the Lessee mutatis mutandis,
with respect to the matters set forth above in Clause 16.5(a).
(c) The Lessee and the Lessor each waives any right it may have in any
jurisdiction to pay any amount under this Agreement in a currency
other than that in which it is expressed to be payable.
16.6 SET-OFF
The Lessor may set off any matured, liquidated obligation owed by the
Lessee under this Agreement or under any other agreement between the
Lessor (or any affiliate or associate of the Lessor) and the Lessee (to
the extent beneficially owned by the Lessor) against any obligation owed
by the Lessor to the Lessee, regardless of the place of payment or
currency. If the obligations are in different currencies, the Lessor may
convert either obligation at the market rate of exchange available in
London, or at its option, New York for the purpose of such set-off. The
Lessor will not be obliged to pay any amounts to the Lessee under this
Agreement so long as any sums which are then due from the Lessee under
this Agreement remain unpaid and any such amounts which would otherwise be
due will fall due only if and when the Lessee has paid all such sums,
except to the extent the Lessor otherwise agrees or sets off such amounts
against such payment pursuant to the foregoing.
16.7 SEVERABILITY
If a provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, that will not affect:
(a) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(b) the legality, validity or enforceability in any other jurisdiction of
that or any other provision of this Agreement.
16.8 REMEDY
If the Lessee fails to comply with any provision of this Agreement, the
Lessor may, without being in any way obliged to do so or responsible for
so doing and without prejudice to the ability of the Lessor to treat the
non-compliance as a Default or an Event of Default, effect compliance on
88
behalf of the Lessee after such notice to, and consultation with, the
Lessee as is reasonable under the circumstances, whereupon the Lessee
shall become liable to pay immediately any sums expended by the Lessor
together with all costs and expenses (including legal costs) in connection
therewith.
16.9 EXPENSES
(a) The Lessor and the Lessee shall each bear their respective
expenses (including legal, professional and out-of-pocket
expenses) incurred or payable in connection with the negotiation,
preparation and execution of this Agreement; provided, however,
that Lessee shall be responsible for all costs associated with
filing this Agreement with FAA and filing UCC financing statements
in the State of Colorado, including (but not limited to) the
provision of legal opinions, tax advice, stamp duties and
registrations; and
(b) The Lessee will pay to the Lessor on demand all expenses (including
legal, survey and other costs) payable or incurred by the Lessor as
the direct result of the Lessor's exercise of remedies in accordance
with this Agreement.
16.10 TIME OF ESSENCE
The time stipulated in this Agreement for all payments payable by the
Lessee to the Lessor and by the Lessor to the Lessee and for the
performance of the Lessee's and the Lessor's other obligations under this
Agreement will be of the essence of this Agreement.
16.11 NOTICES
(a) All notices and other communications given under or in connection
with this Agreement shall be in writing (including telex, facsimile
or similar writing) and shall be deemed to have been received
(i) in the case of a telex, at the time such telex is transmitted
(provided it is transmitted on a Business Day to the country of
receipt between 09.00 and 17.30 hours (local time) in the
country of receipt) and, if transmitted later, then at 09.00
hours (local time) in the country of receipt) on the next
succeeding Business Day) to the telex number specified in Clause
16.11(b) and the corresponding answerback received,
(ii) in the case of a facsimile, at the time of receipt by the sender
of a transmission report indicating that all pages of the
facsimile transmission were properly transmitted (unless the
recipient notifies the sender promptly, or if received after
17.30 hours (local time) in the country of receipt), by no later
89
than 10.00 hours the following Business Day, that the
transmission was incomplete and/or illegible, in which case the
facsimile shall be deemed to have been received at the time of
receipt by the sender of a further clear transmission report on
retransmitting the facsimile, provided the transmitted document
is also then immediately sent by recorded delivery post or
delivered by hand to the recipient), PROVIDED the relevant
facsimile transmission (or retransmission, as the case may be)
was transmitted to the country of receipt on a Business Day
between 09.00 and 17.30 hours (local time) of the country of
receipt). If it was transmitted later, then it shall be deemed
to have been received at 09.00 hours (local time) on the
succeeding Business Day; and
(iii)in any other case, when delivered to the address specified in
Clause 16.11(b).
(b) All such notices, requests, demands and other communications shall be
sent:
(i) if to the Lessor, to it at:
Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Telex No: 835437
Answerback: WILM-TR
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Sunrock Aircraft Corporation Limited
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇
Republic of Ireland
Attention: Chief Financial Officer
Facsimile No: (▇▇▇-▇) ▇▇▇-▇▇▇▇
Telex No: 32316 SACL EI
90
(ii) if to the Lessee, to it at:
Western Pacific Airlines
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address, facsimile number or telex number as shall
have been notified by one party to the other in the manner set out in
this Clause 16.11.
16.12 LAW AND JURISDICTION
(a) THIS AGREEMENT HAS BEEN DELIVERED IN NEW YORK AND SHALL, IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH NEW YORK
LAW WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES CONTAINED
THEREIN.
(b) For the benefit of the Lessor, the Lessee agrees, and for the benefit
of the Lessee, the Lessor and the Beneficial Owner agree, that the
United States District Court for the District Court for the Southern
District of New York (the "AGREED COURT") is to have the non-exclusive
jurisdiction to settle any claims or disputes in connection with this
Agreement and irrevocably submits to the jurisdiction of the Agreed
Court in connection with this Agreement.
(c) Without prejudice to any other mode of service:
(i) each of the Lessee and the Beneficial Owner appoints CT
Corporation in New York presently at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ as its respective agent for service of process
relating to any proceedings before the Agreed Court in connection
with this Agreement and agrees to maintain the process agent in
New York;
(ii) each of the Beneficial Owner and the Lessee agrees that failure
by its respective process agent to notify it of the process shall
not invalidate the proceedings concerned;
(iii)each of the Lessor, Beneficial Owner and Lessee consents to the
service of process relating to any such proceedings by prepaid
posting of a copy of the process to its respective process agent
at the address identified in sub-clause (c)(i).
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(d) The Lessor, Beneficial Owner and the Lessee:
(i) waive objection to the Agreed Court on grounds of the laying of
venue, inconvenient forum or otherwise as regards proceedings in
connection with this Agreement;
(ii) agree that a judgment or order of the Agreed Court in connection
with this Agreement is conclusive and binding on it and may be
enforced against it in the courts of any other jurisdiction by
suit on the judgment or otherwise as permitted by applicable law,
a certified or true copy of which shall be conclusive evidence of
the facts and of the amount of any indebtedness or liability of
the Lessee or the Lessor;
(e) Nothing in this clause limits the right of the Lessor or the Lessee to
bring proceedings against the other in connection with this Agreement:
(i) in any other court of competent jurisdiction; or
(ii) concurrently in more than one jurisdiction;
(f) The Lessor, Beneficial Owner and the Lessee each irrevocably and
unconditionally:
(i) agree that, if any other party brings legal proceedings against
it or its assets in relation to this Agreement, no immunity from
such legal proceedings (which will be deemed to include without
limitation, suit, attachment prior to judgment, other attachment,
the obtaining of judgment, execution or other enforcement) will
be claimed by or on behalf of itself or with respect to its
assets;
(ii) waives any such right of immunity which it or its assets now has
or may in the future acquire;
(iii)consents generally in respect of any such proceedings to the
giving of any relief or the issue of any process in connection
with such proceedings including, without limitation, the making,
enforcement or execution against any property whatsoever
(irrespective of its use or intended use) of any order or
judgment which may be made or given in such proceedings.
(g) EACH OF THE LESSEE AND THE LESSOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BETWEEN THEM BASED UPON OR ARISING, DIRECTLY OR
INDIRECTLY, OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED
92
THEREBY OF THE LESSOR/LESSEE RELATIONSHIP BEING ESTABLISHED,
including, without limitation, contract claims, tort claims, breach of
duty claims and other common law and statutory claims. The Lessor and
the Lessee represent and warrant 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
THIS AGREEMENT AND THE RELATING DOCUMENTS.
16.13 SOLE AND ENTIRE AGREEMENT
This Agreement is the sole and entire agreement between the Lessor and the
Lessee in relation to the leasing of the Aircraft, and supersedes all
previous agreements in relation to that leasing. The terms and conditions
of this Agreement can only be varied by an instrument in writing executed
by both parties or by their duly authorised representatives.
16.14 INDEMNITIES
All rights expressed to be granted to each Indemnitee under this Agreement
(other than the Lessor) are given to the Lessor as agent for and on behalf
of that Indemnitee.
16.15 COST OF LESSEE'S WORK
Whenever the Lessee itself performs work on the Aircraft (whether pursuant
to Clauses 7.2, 8.11(e) or otherwise) and is entitled, pursuant to this
Agreement, to receive reimbursement from the Lessor of all or part of the
cost of performing such work, the Lessee agrees that it will claim
reimbursement of the actual cost to it of carrying out the work at its
then prevailing fully burdened cost (provided always that such actual cost
is reasonable when compared with the cost typically charged for carrying
out the same or substantially the same work by similar organisations) and
not at the rate or rates charged by it at the time for the same or similar
work undertaken for third parties.
16.16 COUNTERPARTS
This Agreement may be executed in counterparts each of which will
constitute one and the same document.
16.17 ENGLISH LANGUAGE
All notices to be given under this Agreement will be in English. All
documents delivered pursuant to this Agreement will be in English, or if
not in English, will be accompanied by a certified English translation. If
93
there is any inconsistency between the English version of this Agreement
and any version in any other language, the English version will prevail.
16.18 CONFIDENTIALITY
Neither the Lessor nor the Lessee shall, without the other's prior written
consent, communicate or disclose the terms of this Agreement or any
information or documents furnished pursuant to this Agreement (except to
the extent that the same are within the public domain) to any third party
(other than their respective external legal advisers, auditors, insurance
brokers and/or underwriters, the Airframe and/or Engine manufacturers, the
Head Lessor and the Banks) PROVIDED HOWEVER that disclosure will be
permitted, to the extent required:
(a) pursuant to an order of any court of competent jurisdiction; or
(b) pursuant to any procedure for discovery of documents in any
proceedings before any such court; or
(c) pursuant to any law or regulation having the force of law; or
(d) pursuant to a lawful requirement of any authority with whose
requirements the disclosing party is legally obliged to comply; or
(e) in order to perfect any assignment of any assignable warranties.
16.19 GENEVA CONVENTION
To the extent permitted by any applicable law, if and when the State of
Registration shall ratify the Convention on the International Recognition
of Rights in Aircraft signed at Geneva, Switzerland, on June 19, 1948, the
Lessee shall, at its own cost, do any and all things necessary in the
State of Registration to perfect recognition of the rights of the Title
Holder by every signatory state which has ratified such Convention.
16.20 CIVIL RESERVE AIR FLEET PROGRAM
So long as no Significant Default or Event of Default has occurred and is
continuing, the Lessee may subject the Aircraft, the Airframe or an Engine
to the Civil Reserve Air Fleet Program and transfer possession of the
Airframe or an Engine to the United States government, or any agency or
instrumentality thereof, pursuant to the Civil Reserve Air Fleet Program
so long as (i) the Lessee shall promptly notify the Lessor upon subjecting
the Airframe or an Engine to the Civil Reserve Air Fleet Program and
provide the Lessor with a name and address of the appropriate contracting
94
officer representative for the Military Airlift Command of the United
States Air Force, (ii) the Lessee shall promptly notify the Lessor of any
such transfer and (iii) the period of such transfer does not extend beyond
the end of the Term. Except as expressly provided herein, all of the
Lessee's obligations under this Agreement shall continue and the Lessee
shall remain primarily liable for the performance of all of the terms of
this Agreement to the same extent as if the Aircraft had never become
subject to such Civil Reserve Air Fleet Program.
16.21 SECTION 1110
The Lessee acknowledges that the Lessor would not have entered into this
Agreement unless it had available to it the benefits of a lessor under
Section 1110 of Title 11 of the United States Code. The Lessee covenants
and agrees with the Lessor that to better ensure the availability of such
benefits, the Lessee shall support any motion, petition or application
filed by the Lessor with any bankruptcy court having jurisdiction over the
Lessee, whereby the Lessor seeks recovery of possession of the Aircraft
under said Section 1110 and shall not in any way oppose such action by the
Lessor unless the Lessee shall have complied with the requirements of said
Section 1110 to be fulfilled in order to entitle the Lessee to continued
use and possession of the Aircraft hereunder. In the event said Section
1110 is amended, or if it is repealed and another statute is enacted in
lieu thereof, the Lessor and the Lessee agree to amend this Agreement and
take such other action not inconsistent with this Agreement as the Lessor
reasonably deems necessary so as to afford to the Lessor the rights and
benefits as such amended or substituted statute confers upon owners and
lessors of aircraft similarly situated to the Lessor.
16.22 ARTICLE 2-A OF THE UCC
The parties hereto agree that this Agreement as extended, amended,
modified, renewed or supplemented, shall be governed by Article 2-A of the
Uniform Commercial Code of New York.
[The remainder of this page is intentionally left blank]
95
IN WITNESS whereof the parties hereto have executed this Agreement on the date
shown at the beginning of this Agreement.
SIGNED on behalf of
WILMINGTON TRUST COMPANY, not in its individual capacity, except to the extent
expressly set forth herein, but solely as Owner Trustee
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
SIGNED on behalf of
WESTERN PACIFIC AIRLINES, INC.
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
96
SCHEDULE 1
PART 1
AIRCRAFT SPECIFICATIONS
AIRCRAFT
Aircraft will be defined in accordance with Boeing Detail Specification
D6-38604-28.
AIRFRAME
Manufacturer BOEING
Model: 737-33R
Registration Number: N966WP
Serial Number: 28871
Date of Manufacture: July 2, 1997
Production/Line Number: PR044/2900
ENGINES
Manufacturer: CFM International, Inc.
Model Number: CFM56-3C-1
Serial Numbers: 858-578/858-574
AUXILIARY POWER UNIT (APU)
Manufacturer: ALLIED SIGNAL
Model Number: 85-129H
Serial Number: P-100807
LANDING GEAR
Nose Gear Part Number: ▇▇-▇▇▇▇▇-▇▇
Serial Number: T5611P2900
Left Main Gear Part Number: ▇▇-▇▇▇▇▇-▇▇
Serial Number: MC05795P2900
Right Main Gear Number: ▇▇-▇▇▇▇▇-▇▇
Serial Number: MC05798P2900
97
AVIONICS
DESCRIPTION MANUFACTURER PART NUMBER QTY
Cockpit Voice Recorder ▇▇▇▇▇▇▇▇▇ S100-0080-00 1
VHF Transceiver ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 3
SELCAL Decoder Motorola NA138-714B 1
Dig. Flt Control Computer Honeywell 4051600-914 2
Dig. Flt Data Recorder Allied Signal ▇▇▇-▇▇▇▇-▇▇▇ 1
Dig. Flt Data Acq. Unit Teledyne 2233000-45 1
Dig. Air Data Computer Smiths 501FAD1-1 2
Heads Up Guidance Comp. Flight Dynamics ▇▇▇▇-▇▇▇▇-▇▇▇ 1
Flt Mgmt Computer Smiths 171497-05-01 1
Marker Beacon Receiver ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 2
Weather Radar Transceiver ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 1
Radio Altimeter ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 2
Grnd Prox Warn Computer Allied Signal ▇▇▇-▇▇▇▇-▇▇▇ 1
VOR/ILS Transceiver ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 2
D.M.E. Transceiver ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 2
A.D.F. Receiver ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 2
ATC (Mode S) Transponder ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇-▇▇▇ 2
TCAS Computer Rockwell ▇▇▇-▇▇▇▇-▇▇▇ 1
Inertial Reference Unit Honeywell HG1050AE09 2
98
SAFETY EQUIPMENT/FURNISHINGS
DESCRIPTION MANUFACTURER PART NO. or LOCATION QTY
First Class Seats n/a
Business Class Seats n/a
Tourist Class Seats BE Aerospace 136
Lavatories/Locations n/a (1) Fwd/(2) Aft ▇
▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇, ▇▇ (▇▇▇) ▇▇▇ (Aft) 3
Life Rafts n/a
Crew Life Vests Air Cruisers D21344-101 10
Escape Slides (Fwd) Air Cruisers 61620-468 2
Escape Slides (Aft) Air Cruisers 61620-469 2
PBE Smoke Hood Puritan 119003 4
Flashlights DME P2-07-001-10 6
First Aid Kits DME S6-01-0005-30 3
BCF Fire Extinguisher Kidde 898052 3
H2O Fire Extinguisher Kidde 892480 1
Hand Megaphone ACR ACRE/M1A 2
Port. Oxygen Cylinders ▇▇▇▇▇ 5500C1ABF23A 5
Fire Axe 1
Smoke Goggles 4
Fire Resistant Gloves 4
99
LOOSE EQUIPMENT
CARGO NETS (1) SET
FLYAWAY KIT
Thrust Reverser Lockout Kit (1)
Towing Eyebolt Assy (2)
Landing Gear Lock Pins (Main) (2)
Landing Gear Lock Pins (Nose) (1)
Steering Valve Lock Pin (1)
C Duct Pump (Part Number C-78005-1)
PMC Rig Pin (Part Number C-76001-2)
100
SCHEDULE 1
PART 2
AIRCRAFT DOCUMENTS
MANUALS
Maintenance Manual Microfilm [3] Hard Copy [1]
Wiring Diagrams Microfilm [3] Hard Copy [1]
Illustrated Parts Catalog Microfilm [3] Hard Copy [1]
Systems Schematics Microfilm [3] Hard Copy [1]
Weight & Balance Manual Microfilm [-] Hard Copy [2]
Operations Manual Microfilm [-] Hard Copy [2]
Flight Manual Microfilm [-] Hard Copy [2]
Galley Manual Microfilm [-] Hard Copy [1]
Seat Manual Microfilm [-] Hard Copy [1]
Quick Reference Handbook Microfilm [ ] Hard Copy [2]
Structural Repair Manual Microfilm [3] Hard Copy [1]
Overhaul Manual Microfilm [2] Hard Copy [-]
Performance Engineer's Manual Microfilm [ ] Hard Copy [2]
Detail Specification Microfilm [ ] Hard Copy [2]
101
TECHNICAL RECORDS
Certificate of Airworthiness
Aircraft Registration Certificate
Sanitation Certificate
Weight & Balance Report
Aircraft Readiness Log (ARL)
Engine Log Book (2 ea)
APU Log Book
Landing Gear Status Log
Statement of Airworthiness Directives
Miscellaneous Brochure
Fuel Calibration Brochure
Rigging Brochure
Engine Delivery Brochure (including LLP's and AD's)
APV Delivery documentation
102
SCHEDULE 2
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on the date set out below by
Western Pacific Airlines, Inc. (the "LESSEE"), to Wilmington Trust
Company, not in its individual capacity, but solely as Owner Trustee (the
"LESSOR"), pursuant to the Aircraft Lease Agreement dated June ___, 1997
between the Lessor and the Lessee (the "AGREEMENT"). The capitalised terms
used in this Certificate shall have the meaning given to such terms in the
Agreement.
1. DETAILS OF ACCEPTANCE
The Lessee hereby confirms to the Lessor that the Lessee has at ___
o'clock on this ____ day of July 1997, at _______________, accepted the
following, in accordance with the provisions of the Agreement:
(a) Boeing 737-300 airframe, Manufacturer's Serial No. 28871;
(b) CFM International, Inc. CFM56-3C1 Engines, bearing Manufacturer's
Serial Nos. 858-578 and 858-574; each of which Engines is 750 or more
rated takeoff horsepower;
(c) Fuel Status: Pounds ________
(d) Safety and Loose Equipment as specified in Schedule 1 - Part 1 of
the Agreement.
(e) Aircraft Documents as specified in Schedule 1 - Part 2 of the
Agreement.
2. CONFIRMATION
The Lessee confirms to the Lessor that as at the time indicated above,
being the time of Delivery:
(a) the representations and warranties of the Lessee contained in
Clause 2 are hereby repeated;
(b) the Aircraft is insured as required by the Agreement;
(c) the Lessee confirms that there have been affixed to the Aircraft and
the Engines the fireproof notices required by the Agreement;
103
(d) the Lessee's authorised technical experts have inspected the Aircraft
to ensure the Aircraft conforms to the Lessee's requirements.
SIGNED on behalf of
WESTERN PACIFIC AIRLINES, INC.
By: ............................................
Name: ............................................
Title: ............................................
104
SCHEDULE 3
OPERATING CONDITION AT REDELIVERY
On the Expiry Date the Aircraft, subject to fair wear and tear generally,
will be in the condition set out below.
1. GENERAL CONDITION
The Aircraft shall:
(a) be clean by airline standards;
(b) have installed the full complement of engines and other equipment,
parts and accessories and loose equipment (including one complete set
of removable catering trolleys, standard containers and drawers and
trays) as is normally installed in the Aircraft, and shall be in a
condition suitable for immediate operation in commercial service;
(c) have existing seat configuration;
(d) have a Maximum Take Off Weight (MTOW) of 138,500 lbs
(e) have in existence a valid certificate of airworthiness (or if required
by the Lessor, a valid export certificate of airworthiness) with
respect to the Aircraft issued by the Aviation Authority;
(f) comply with the manufacturer's original specifications;
(g) have undergone, immediately prior to redelivery, the next scheduled
"C" Check and lower multiple check required under the Approved
Maintenance Programme so that all Airframe inspections falling due
within the next following 3,200 Flight Hours of operation in
accordance with the Manufacturer's Maintenance Planning Document, have
been accomplished;
(h) have had accomplished all outstanding airworthiness directives and
mandatory orders affecting that model of Aircraft issued by the FAA
which, if the Aircraft were registered with the FAA, would have to be
complied with during the Term or within 180 days after the Expiry
Date;
(i) all changes (whether by way of modification, repair or otherwise)
carried out to the Aircraft subsequent to the Delivery Date shall have
been carried out in accordance with all FAA requirements and any
repairs shall be classified as permanent by the FAA;
105
(j) have installed all applicable Vendor's and manufacturer's service
bulletin kits received free of charge by the Lessee that are
appropriate for the Aircraft and to the extent not installed, those
kits will be furnished free of charge to the Lessor;
(k) Lessee's external livery shall be fully stripped down reasonably and
repainted in such external livery as advised by the Lessor;
(l) have no installed life-limited Parts which shall have a total time
since new greater than 120% that of the Airframe provided that with
respect to all installed life limited Parts taken as a group, they
shall have on average a total time since new no greater than that of
the Airframe; and
2. PARTS
(a) Each life-limited Part shall have not less than 3,000 Flight Hours of
life remaining to the next scheduled removal, in accordance with the
Agreed Maintenance Programme;
(b) Each calendar-limited Part will have not less than twelve months (12
months) life remaining to its next scheduled removal in accordance
with the Agreed Maintenance Programme or 100% of its life if such life
is less than twelve months (12 months); and
(c) Each "on-condition" and "condition monitored" Part will be serviceable
in accordance with the Aviation Authority prescribed parameters.
3. ENGINES
Each engine installed on the Aircraft shall be an Engine and (if not the
engine installed at Delivery) shall be accompanied by all documentation
not previously provided by the Lessee to the Lessor as the Lessor may
require to evidence that title thereto has been properly conveyed to the
Holder of Legal Title in accordance with Clause 8.17(a) and will:
(a) have not less than 3,000 Flight Hours or Cycles expected life
remaining (whichever is applicable and the more limiting factor) to
the next complete major overhaul or refurbishment of its compressor
and turbine sections. The expected life remaining will be determined
by reference to the average number of Flight Hours or Cycles
(whichever is applicable and the more limiting factor) between the
overhaul of engines for the last twelve months (12 months) operation
of B737-300 in the Lessee's fleet.
106
(b) have no defect which reduces the remaining life pursuant to
Manufacturer's or airworthiness requirements until overhaul to less
than 3,000 Flight Hours or Cycles;
(c) have no less than 3,000 Flight Hours (or Cycles) life remaining of any
hard time limited part; and
(d) have a full power assurance check to be carried out in accordance with
the Lessee's Maintenance Programme and any required remedial action
shall be undertaken.
4. LANDING GEAR
(a) The installed main and nose landing gear components and their
associated actuators and parts will be cleared of all inspections for
3,000 Flight Hours or Cycles (whichever is the more limiting factor)
of operation.
(b) The landing tyres and brakes will have 50% of the wear, as specified
by the manufacturer as serviceable limits, remaining until next
removal.
(c) The landing gear and wheel ▇▇▇▇▇ will be clean, free of leaks and
repaired as necessary.
5. AUXILIARY POWER UNIT (APU)
The APU shall be no more than 500 Flight Hours since its last overhaul.
6. FUSELAGE, WINDOWS AND DOORS
(a) The fuselage will not contain any dents, corrosion or abrasions which
exceed the prescribed parameters under the Manufacturer's structural
repair manual and shall be free of scab patches and loose, pulled or
missing rivets;
(b) The windows will not contain any delamination, blemishes or crazing
which exceed the prescribed parameters under the Manufacturer's
maintenance manual and will be properly sealed; and
(c) The doors will be free moving, correctly rigged and be fitted with
serviceable seals.
7. WINGS AND EMPENNAGE
(a) Leading edges will not contain any damage which exceeds the prescribed
parameters under the Manufacturer's structural repair manual;
107
(b) Control surfaces will be waxed and polished;
(c) Unpainted cowlings and fairings will be polished; and
(d) Wings will be free of fuel leaks.
8. INTERIOR
(a) Interior will be fully serviceable and as at delivery otherwise as
mutually agreed between the parties;
(b) Emergency equipment shall meet FAA standard and have a calendar life
with a minimum of 1 year or 100% of its total approved life, whichever
is less, remaining;
(c) Curtains, carpets and seat covers will be clean and free from stains
and worn out (threadbare) areas, and will meet FAR fire resistance
regulations.
(d) Seats and panels will meet FAR fire resistance regulations which are
effective at redelivery and will be serviceable in good condition and
repaired as necessary; and
(e) All decals shall be clean, secure and legible.
9. COCKPIT
(a) Fairing panels shall be free of stains and cracks, will be clean
secure and repainted as necessary;
(b) Floor coverings will be clean and effectively sealed;
(c) Seat covers will be in good condition, clean and free of stains, and
will meet FAR fire resistance regulations which are effective at
redelivery; and
(d) Seats will be serviceable, in good condition and will meet FAR fire
resistance regulations which are effective at redelivery and will be
repainted as necessary.
10. CARGO COMPARTMENTS
(a) Panels will be in good condition and effectively sealed; and
(b) Nets will be in good condition.
108
11. FLY-AWAY KIT
The fly-away kit will be complete as delivered in the detail spec of the
Aircraft.
12. CORROSION
(a) The Aircraft will have been inspected and treated with respect to
corrosion as defined in the Agreed Maintenance Programme;
(b) The entire fuselage will be substantially free from corrosion and will
be adequately treated and an approved corrosion prevention programme
will be in operation; and
(c) Fuel tanks will be free from contamination and corrosion and a tank
treatment programme will be in operation.
109
SCHEDULE 4
PART 1
INSURANCE REQUIREMENTS
1. The Insurances required to be maintained are as follows:
(a) HULL "ALL RISKS" of Loss or Damage whilst flying and on the ground
with respect to the Aircraft for the Agreed Value and with a
deductible as shall be customary for United States airlines similarly
situated with Lessee but in any event not exceeding $[ ]*, subject to
any aggregate limit stipulated in such insurance; provided, however,
that the Lessee insures for any deductible in excess of $[ ]*.
(b) HULL WAR AND ALLIED PERILS, covering those risks excluded by AVN48B or
its equivalent from the Hull 'All Risks' Policy to the extent such
coverage is available from World Aviation Insurance Markets, including
confiscation and requisition by the State of Registration, for the
Agreed Value;
(c) "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK except
when on the ground or in transit other than by air or sea) on all
Engines on an "agreed value" basis and on Parts, on a "repair or
replace basis", in each case when not installed on the Aircraft (to
the extent not covered under the Aircraft hull insurances described in
paragraphs (a) and (b) above), including Engine test and running
risks, on an agreed value basis in the case of the Engines;
(d) AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER,
BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING
PRODUCTS) LEGAL LIABILITY for a combined single limit (Bodily
Injury/Property Damage) of an amount not less than the Minimum
Liability Coverage for the time being in respect of any one occurrence
(but, in respect of products liability, this limit may be an aggregate
limit for any and all losses occurring during the currency of the
policy, and in respect of liability arising out of certain offences,
the limit (within the said combined single limit) may be $[ ]* in
respect of any one offense and in the aggregate); War and Allied Risks
are also to be covered under the Policy to the extent customarily
available in the World Aviation Insurance Markets.
2. All required hull and spares insurance (specified in (1)(a), (b) and (c)
above), so far as it relates to the Aircraft, will:
110
(a) include the Lessor, the Trust Company, the Head Lessor, the Beneficial
Owner and the Banks, and their respective successors and assigns, as
additional assureds;
(b) provide that any loss equal or in excess of $[ ]* will be settled
jointly with the Lessor and the Lessee and any claim which becomes
payable on the basis of a Total Loss shall be paid in Dollars to the
Lessor up to the Agreed Value as sole loss payee; with any other claim
below $[ ]* to be settled by Lessee and being payable as may be
necessary for the repair of the damage to which it relates;
(c) if separate Hull "All Risks" and "War Risks" insurances are arranged,
include a 50/50 provision in the terms of Lloyd's endorsement AVS.103
or its equivalent;
(d) if required under the Head Lease, confirm that the Insurers are not
entitled to replace the Aircraft in the event of a Total Loss;
(e) include a notice and/or acknowledgement of assignment (relating to the
assignment of the Lessor's interest in the Insurances to the Head
Lessor or the Banks, as applicable) in a form reasonably acceptable to
the Lessor; and
(f) provide that insurance proceeds in excess of the Agreed Value shall be
settled with and payable to the Lessee.
3. All required liability insurances (specified in (1)(d) above) will:
(a) include the Lessor, the Trust Company, the Beneficial Owner, the Head
Lessor and the Banks and their respective successors and assigns and
their respective shareholders, subsidiaries, directors, officers,
agents, employees and indemnitees as additional assureds for their
respective rights and interests, warranted (each as to itself only) no
operational interest; but the coverage provided will not include
claims arising out of their legal liability as manufacturer, repairer
or servicing agent;
(b) include a severability of interest clause, in the terms of clause 2.1
of the Lloyd's endorsement AVN 67B or its equivalent;
(c) contain a provision confirming that the policy is primary without
right of contribution and that the liability of the insurers will not
be affected by any other insurance of which the Lessor, the Beneficial
Owner, the Head Lessor, the Banks or the Lessee have the benefit.
(d) accept and insure the indemnity provisions of this Agreement to the
extent of the risks covered by the relevant policy or policies.
111
4. All Insurances will:
(a) be in accordance with normal industry practice of persons operating
similar aircraft in similar circumstances;
(b) operate on a worldwide basis as is customarily available subject to
such limitations and exclusions as may be notified to the Lessor;
(c) acknowledge that the insurers are aware that title to the Aircraft is
held by the Holder of Legal Title and the Aircraft is subject to this
Agreement and the Head Lease, and that the Lessor's interests in the
Insurances are subject to a security assignment in favour of the
Banks, if applicable;
(d) provide that, in relation to the interests of each of the additional
assureds, the Insurances will not be invalidated by any act or
omission of any other person or party which results in a breach of any
terms conditions or warranty of the policy/ies PROVIDED THAT the
additional assured so protected has not caused, contributed to or
knowingly condoned such act or omission;
(e) provide that the Insurers will waive any rights of recourse and/or
subrogation against the additional assureds, (subject to and in
accordance with clause 3.5 of the Lloyd's endorsement AVN 67B) or its
equivalent;
(f) provide that the additional assured will have no obligation or
responsibility for the payment of any premiums (but reserve the right
to pay the same should any of them elect to do so) and that the
Insurers will waive any right of set-off or counterclaim against the
respective additional assureds other than for outstanding premiums in
respect of the Aircraft, any Engine or Part;
(g) provide that, except in the case of any provision for Cancellation or
Automatic Termination specified in the Policy/ies or Endorsements
thereof, the Insurance can only be cancelled or materially altered in
a manner adverse to the additional assureds by giving at least 30
days' written notice to the Lessor, the Head Lessor and the Banks,
except in the case of radioactive contamination as per Lloyd's
endorsement AVN 38A or its equivalent, for which 7 days' written
notice (or such lesser period as is or may be customarily available in
respect thereof) will be given;
(h) if required under the Head Lease (with respect to the Head Lessor)
contain a provision entitling the Lessor to initiate a claim under any
policy, if so desired; and
(i) provide cover denominated in Dollars and any other covenances which
the Lessor may reasonably require in relation to liability insurance.
112
5. Reinsurances will:
(a) be on the same terms as the Insurances and will include the
provisions of this Schedule;
(b) provide that, notwithstanding any bankruptcy, insolvency, liquidation,
dissolution or similar proceedings of or affecting the reinsured, the
reinsurers' liability will be to make such payment thereunder as would
have fallen due under the relevant policy of reinsurance if the
reinsured 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
(c) contain a "cut-through" clause in the following form (or such other
form as is satisfactory to the Lessor), subject to the provisions of
such clause not contravening any law of the State of Incorporation:
"The Reinsurers and the Reinsured hereby 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 Lease
Agreement dated , 1997 and made between Wilmington Trust
Company, as lessor, and Western Pacific Airlines, Inc., as
lessee, 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 Reinsured, its successors in interest and
assigns, pay to the person named as sole loss payee under the
primary insurances effected by the Reinsured that portion of any
loss for which the Reinsurers would otherwise be liable to pay
the Reinsured (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".
113
PART 2
FORM OF BROKER'S UNDERTAKING
[Broker's Letter Issued by ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Attached]
114
PART 3
FORM OF INSURANCE CERTIFICATE
[Certificate Issued by ▇▇▇▇▇ & McLennan Attached]
115
SCHEDULE 5
ACKNOWLEDGEMENTS IN CONNECTION WITH FINANCING
PART 1
NOTICE OF ASSIGNMENT
FROM: _____________________________________
TO: _____________________________________
Date
Dear Sirs,
We hereby give you notice that by an Assignment dated _____________, 19___ (the
"ASSIGNMENT") between us and _______________________ of
_________________________ (the "ASSIGNEE") we have assigned absolutely to
Assignee all our right, title and interest in and to the Aircraft Lease
Agreement dated June ___, 1997 (the "LEASE") between ourselves and yourselves
relating to one Boeing 737-300 aircraft with manufacturer's serial number 28871
together with the installed ______________ engines (the "AIRCRAFT").
Accordingly, all moneys which may be payable by you under the Lease shall
continue to be paid to the bank account specified in the Lease unless and until
the Assignee otherwise directs, whereupon you are authorised and required to
comply with the Assignee's directions.
This notice and the instructions herein contained are irrevocable. Please
acknowledge receipt of this notice to the Assignee on the enclosed
Acknowledgement. You are hereby authorised to assume the obligations expressed
to be assumed by you thereunder to the effect that, so far as the same would
otherwise be incompatible therewith, your obligations to us under the Lease will
be modified accordingly.
Yours faithfully,
For and on behalf of
---------------------------------------
116
PART 2
ACKNOWLEDGEMENT
FROM: ________________________________________
TO: ________________________________________
Date_____________________
Dear Sirs,
We acknowledge receipt of a Notice of Assignment dated ____________________ (the
"ASSIGNMENT NOTICE") relating to an assignment (the "ASSIGNMENT") between
_________________ (the "ASSIGNOR") and you. We acknowledge that we will not
challenge the effectiveness of the Assignment to confer on you all rights, title
and interest of the Assignor under the Aircraft Lease Agreement dated June ___,
1997 between Assignor and ourselves (the "LEASE") in respect of one Boeing
737-300 aircraft with manufacturer's serial number 28871 together with the
installed __________________ engines.
In consideration of payment to us of $1 and the issue to us of a quiet enjoyment
letter, receipt of which we hereby acknowledge, we hereby agree as follows:
If you issue to us a notice (a the "LESSOR DEFAULT NOTICE") that your rights as
assignee under the Assignment have become exercisable we agree that we shall
thereafter:
(a) pay to you at such account as you may nominate all rentals and other
amounts from time to time payable by us under the Lease;
(b) perform, observe and comply with all our other undertakings and
obligations under the Lease in your favour and for your benefit as if you
were named as the Lessor therein instead of the Assignor; and
(c) if you so request, enter into a lease with you or your nominee, on the
same terms (mutatis mutandis) as the Lease, provided that the Lease is
thereby terminated.
If the Assignor is in breach of any of its obligations, express or implied,
under the Lease, or if any event occurs which would permit us to terminate,
cancel or surrender the Lease we will:
(a) promptly upon becoming aware of it, give you notice of such breach or
event;
117
(b) accept as adequate remedy for any such breach performance by you of such
obligations within 7 days of our written notice to you, provided that
such performance by you fully compensates the Lessee for any damages,
costs and expenses suffered or incurred by the Lessee as the result of
such breach; and
(c) if you so request, enter into a lease with you or your nominee on terms
identical to the Lease, mutatis mutandis, provided that the Lease is
hereby terminated.
We agree that after issue by you of any Lessor Default Notice, we will not
recognise the exercise by the Assignor of any of its rights and powers under the
Lease unless and until requested to do so by you.
We agree that you will have the benefit of Clause 10 of the Lease (Indemnity)
and agree that we are bound by the terms of such clause for your benefit,
provided that you agree that you are also bound by the terms of such clause, in
each case, as though the same were set out herein in full, mutatis mutandis.
Yours faithfully,
For and on behalf of
--------------------------------------
118
SCHEDULE 6
PART 1
FORM OF LEGAL OPINION
[▇▇▇▇▇, Gambrell's Opinion Attached]
119
SCHEDULE 6
PART 2
FORM OF LEGAL OPINION OF ASSISTANT GENERAL COUNSEL OF LESSEE
[Assistant General Counsel's Opinion Attached]
120
SCHEDULE 7
FORM OF LETTER OF CREDIT]
TO: WILMINGTON TRUST COMPANY,
not in its individual capacity,
but solely as Owner Trustee
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
DATE: _____________________
STANDBY LETTER OF CREDIT
At the request of Western Pacific Airlines, Inc. (the "LESSEE") for account of
same we hereby establish this irrevocable Standby Letter of Credit to authorise
you to draw on ______________ amount or amounts not exceeding in aggregate US$
_________________ upon receipt by us of the following demand certificate from
you:
"The undersigned are authorised officers of Wilmington Trust Company, not
in its individual capacity, but solely as Owner Trustee (the "LESSOR").
We refer to the Lease Agreement dated June ___, 1997 (as amended and
supplemented from time to time, the "LEASE AGREEMENT") between the Lessor
and Western Pacific Airlines, Inc. (the "LESSEE") and we hereby certify
that the Lessee has defaulted under the Lease Agreement. Accordingly, the
Lessor hereby draws upon your irrevocable Letter of Credit dated
________________ and we hereby instruct you to transfer immediately, with
telex confirmation to us, the sum of US$ _______________ (US Dollars
___________________________________) to ▇▇▇▇▇▇ Guaranty Trust Company, ▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇, for the account of Bank of
Ireland, Group Treasury, Dublin (Account No. ▇▇▇▇▇▇▇▇) to be credited to
Sunrock Aircraft Corporation Limited (Account No. ▇▇▇▇▇▇▇).
We hereby agree with you that drawings drawn under and in compliance with the
terms of this Letter of Credit received on or prior to ____________________ will
be duly honoured upon receipt by us of such a demand certificate. Partial
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drawings are permitted. Payment of amounts drawn under this Letter of Credit
shall be made in full, without any set-off or counterclaim whatsoever and free
and clear of any deductions or withholdings.
All our charges and commissions are for the account of the Lessee.
References in this Letter of Credit to the Lease Agreement dated June ___, 1997,
(as amended and supplemented from time to time, the "LEASE AGREEMENT") between
the Lessor and the Lessee are for identification purposes only. The terms and
conditions of the Lease Agreement are not incorporated in nor made part of this
Letter of Credit and our obligations hereunder will not be affected by any
matter relating to the Lease Agreement or the obligations of the Lessee
thereunder including, without limitation, (i) any time or indulgence granted to,
or composition with, the Lessee or any other person; (ii) the taking, exercise,
variation, renewal or release of, or neglect to perfect or enforce, any
securities or any rights or remedies against the Lessee or any other person; or
(iii) any unenforceability or invalidity of any obligation of the Lessee.
Until all amounts which are or will become payable to the Lessor by the Lessee
have been irrevocably paid in full we shall not by virtue of this Letter of
Credit be subrogated to any of the Lessor's rights or claim in competition with
the Lessor against the Lessee.
This Letter of Credit is not transferable and constitutes an obligation to make
payment against documents. Except to the extent the express provisions hereof
conflict, this Letter of Credit is issued subject to the Uniform Customs and
Practice for Documentary Credits, 1993 Revision, ICC Publication no. 500 (to the
extent applicable to Standby Letters of Credit).
This Letter of Credit is governed by and construed in accordance with the laws
of New York.
Upon expiry this Standby Letter of Credit shall become null and void (but
without prejudice to any claims made prior to expiry), whether returned to us
for cancellation or not, and any claim or statement received after expiry shall
be ineffective.
SIGNED
-----------------------------------
Authorised Signatory
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SCHEDULE 8
ENGINE LIFE-LIMITED PARTS
[To be provided by Lessee and approved by Beneficial Owner]
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SCHEDULE 9
FORM OF MONTHLY STATUS REPORT
AIRCRAFT TYPE REG. ▇▇▇▇ SERIAL NO. MONTH ENDING
Boeing 737-300 N966WP 28871 .............
1. AIRCRAFT UTILISATION:
(a) Airframe Total Flight Hours
..................................................
(b) Airframe Total Cycles
..................................................
(c) Airframe Flight Hours for Month
.................................................
(d) Airframe Flight Cycles for Month
.................................................
2. POWERPLANT STATUS: NO.1 NO.2
(a) Serial Nos. of Delivered Engines ............ .............
(b) Serial Nos. of Replacement Engines ............ .............
(if applicable)
(c) Serial Nos. of Installed Engines ............ .............
(if different from (a) or (b) above)
(d) Current Location of Delivered or ............ .............
Replacement Engines (as applicable)
(if not installed on Airframe)
(e) Total Time Since New of Delivered ............ ............
or Replacement Engines (as applicable)
(f) Total Cycles Since New of Delivered ............ ............
or Replacement Engines (as applicable)
(g) Total Flight Hours for the Month for ............ ............
each Delivered or Replacement Engine
(as applicable)
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(h) Total Cycles for the Month for each ............ ............
Delivered or Replacement Engine
(as applicable)
(i) Serial No. of Delivered APU ..............
(j) Serial No. of Replacement APU ..............
(if applicable)
(k) Serial No. of Installed APU .............
(if different from (a) or (b) above)
(l) Current Location of Delivered or .............
Replacement APU (as applicable)
(if not installed on Airframe)
(m) Total Time Since New of Delivered .............
or Replacement APU (as applicable)
(n) Total Cycles Since New of Delivered .............
or Replacement APU (as applicable)
(o) Total Hours for the Month for .............
Delivered or Replacement APU
(as applicable)
(p) Total Cycles for the Month for .............
Delivered or Replacement APU
(as applicable)
3. ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:
(a) Routine Checks (A and above) ....................
performed during Month ....................
....................
(b) A.D.'s complied with during Month ....................
....................
....................
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(c) S.B.'s complied with during Month ....................
....................
....................
4. AIRCRAFT DAMAGE OR ENGINE CHANGES:
Details of any repairs carried out to the Aircraft beyond SRM limits,
and Engine changes, giving reasons for repair or
change...................................................................
.........................................................................
CERTIFIED BY .......................
For and on behalf of
[
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SCHEDULE 10
APPROVED JURISDICTIONS FOR SUB-LEASING
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Iceland
Indonesia
Ireland
Italy
Luxembourg
Malaysia
Netherlands
New Zealand
Norway
Portugal
Singapore
South Korea
Spain
Sweden
Switzerland
Thailand
United Kingdom
United States of America
The Lessor shall be entitled from time to time to give notice to the Lessee that
it wishes to delete one or more of the above jurisdictions and the Lessee shall
be entitled from time to time to give notice to the Lessor that it wishes to add
one or more jurisdictions to the above list. In the event of the issue of any
such notice the Lessor and the Lessee shall, as soon as reasonably practicable,
consult in good faith as to the relevant deletion(s) or addition(s), as the case
may be. In the event that agreement is reached, the above list shall be amended
accordingly. If no such agreement is reached, the above list may be amended in
such a manner as the Lessor may, in its reasonable discretion consider
appropriate, provided that no jurisdiction shall be deleted unless the Lessor
specifies the reasons are commercially reasonable for such deletion and such
reasons are concerned exclusively with the jurisdiction itself (and not with a
particular operator in that jurisdiction).
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SCHEDULE 11
FORM OF LETTER OF QUIET ENJOYMENT
From: SUNROCK AIRCRAFT CORPORATION LIMITED (the "undersigned")
To: WESTERN PACIFIC AIRLINES, INC. (the "Lessee")
1997
In Re: One Boeing 737-300 Aircraft, Manufacturer's Serial Number 28871 (the
"Aircraft")/Aircraft Lease Agreement (the "Lease") dated 1997
between Wilmington Trust Company (the "Lessor") and the Lessee
Dear Sirs:
1. In consideration of $10 and other good and valuable consideration received
from the Lessee and/or the Lessor the receipt of which is hereby acknowledged,
we confirm to you that, so long as no Significant Default or Event of Default
(as defined in the Lease) has occurred and is continuing, neither we nor any
person or entity lawfully claiming by or through Sunrock Aircraft Corporation
Limited, as Beneficial Owner, will interfere with the quiet possession and use
of the Aircraft by the Lessee, subject at all times to the terms of the Lease;
provided that the exercise by us or our assigns of our rights or remedies under
or in connection with the Lease will not constitute such an interference.
2. The foregoing undertaking is not to be construed as restricting the rights of
the undersigned to dispose of its interest in the Aircraft to such persons and
on such terms as it considers appropriate. However, if the undersigned exercises
such rights during the term of the Lease and provided that at or prior to the
time of such disposal a Significant Default or an Event of Default (as defined
in the Lease) has not occurred and is continuing the undersigned will dispose of
the Aircraft expressly subject to the Lease and procure a letter of quiet
enjoyment with the same terms (mutatis mutandis) as this letter from such
transferee.
3. The undersigned hereby represents to Lessee that (i) it is a limited
liability company duly organized and validly existing under the laws of the
Republic of Ireland and has the organizational power to enter into and perform
its obligations under this letter of quiet enjoyment and to own its assets and
carry on its business as it is now being conducted and (ii) this letter of quiet
enjoyment is the legal, valid and binding obligation of the undersigned.
4. This Letter of Quiet Enjoyment shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
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Please countersign this letter to confirm your agreement to the arrangements
contained herein.
For and on behalf of
SUNROCK AIRCRAFT CORPORATION LIMITED,
as Beneficial Owner
--------------------
Agreed and accepted
--------------------
For and on behalf of
WESTERN PACIFIC AIRLINES, INC.
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