CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL AIRCRAFT LEASE AGREEMENT Dated as of March 4, 2004 BETWEEN COMPANIA PANAMENA DE...
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT
BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT
TREATS AS PRIVATE OR CONFIDENTIAL
Exhibit 4.2
Dated as of March 4, 2004
BETWEEN
COMPANIA PANAMENA DE AVIACION, S.A. (COPA)
as LESSEE
and
INTERNATIONAL LEASE FINANCE CORPORATION
as LESSOR
Aircraft Make and Model: | New B737-700 or 800 | |
Aircraft Manufacturer’s Serial Number: | 32800 | |
Aircraft Registration Xxxx: | Per Estoppel and Acceptance Certificate | |
Make and Model of Engines: | Per Estoppel and Acceptance Certificate | |
Serial Numbers of Engines: | Per Estoppel and Acceptance Certificate |
NEW AIRCRAFT NO. 2
TABLE OF CONTENTS
PAGE | ||||||
ARTICLE 1 SUMMARY OF TRANSACTION | 1 | |||||
1.1 |
Description of Aircraft |
1 | ||||
1.2 |
Scheduled Delivery Date and Location |
1 | ||||
1.3 |
Initial Lease Term |
1 | ||||
1.4 |
**Material Redacted** |
1 | ||||
1.5 |
Security Deposit |
2 | ||||
1.6 |
Transaction Fee |
2 | ||||
1.7 |
Rent During Initial Lease Term |
2 | ||||
1.8 |
**Material Redacted** |
3 | ||||
1.9 |
Reserves |
3 | ||||
1.10 |
Additional Rent for Excess Airframe and Engine Cycles |
3 | ||||
1.11 |
Country of Aircraft Registration |
4 | ||||
1.12 |
Maintenance Program |
4 | ||||
1.13 |
Agreed Value of Aircraft |
4 | ||||
1.14 |
LESSOR’s Bank Account |
4 | ||||
ARTICLE 2 DEFINITIONS | 5 | |||||
2.1 |
General Definitions |
5 | ||||
2.2 |
Specific Definitions |
9 | ||||
ARTICLE 3 Place and Date of Delivery | 11 | |||||
3.1 |
Place of Delivery |
11 | ||||
3.2 |
Scheduled Delivery Date |
11 | ||||
3.3 |
Delivery subject to Manufacturer Delivery |
11 | ||||
3.4 |
No LESSOR Liability |
11 | ||||
3.5 |
Total Loss of Aircraft prior to Delivery |
11 | ||||
3.6 |
Cancellation for Delay |
11 | ||||
ARTICLE 4 LEASE TERM **Material Redacted** | 12 | |||||
4.1 |
Initial Lease Term |
12 | ||||
4.2 |
**Material Redacted** |
12 | ||||
4.3 |
“Lease Term” and “Expiration Date” |
12 | ||||
4.4 |
“Termination Date” |
12 | ||||
ARTICLE 5 SECURITY DEPOSIT, TRANSACTION FEE, RENT, RESERVES AND OTHER PAYMENTS | 13 | |||||
5.1 |
Security Deposit |
13 | ||||
5.2 |
Transaction Fee |
14 | ||||
5.3 |
Rent |
14 | ||||
5.4 |
Reserves |
15 | ||||
5.5 |
Additional Rent for Excess Cycles |
16 | ||||
5.6 |
LESSOR’s Bank Account |
17 | ||||
5.7 |
Default Interest |
17 |
i
5.8 |
No Deductions or Withholdings |
18 | ||||
5.9 |
Net Lease |
18 | ||||
5.10 |
Currency Indemnity |
19 | ||||
5.11 |
LESSOR Performance of LESSEE Obligation |
19 | ||||
5.12 |
Consideration for Rent and other Amounts |
19 | ||||
ARTICLE 6 INVOLVEMENT WITH AIRCRAFT MANUFACTURER | 20 | |||||
6.1 |
LESSEE Selection of Aircraft |
20 | ||||
6.2 |
Agency Agreement |
20 | ||||
6.3 |
Procurement of BFE |
20 | ||||
6.4 |
Assignment of Training |
20 | ||||
6.5 |
LESSEE Inspection of Aircraft |
20 | ||||
6.6 |
Aircraft at Delivery |
20 | ||||
6.7 |
Delivery of the Aircraft to LESSEE |
21 | ||||
6.8 |
LESSEE Acceptance of Aircraft |
21 | ||||
ARTICLE 7 PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER REQUIREMENTS | 22 | |||||
7.1 |
Pre-Delivery Requirements |
22 | ||||
7.2 |
Delivery Requirements |
23 | ||||
7.3 |
Post-Delivery Requirements |
24 | ||||
ARTICLE 8 DISCLAIMERS | 25 | |||||
8.1 |
“As Is, Where Is” |
25 | ||||
8.2 |
Waiver of Warranty of Description |
25 | ||||
8.3 |
LESSEE Waiver |
26 | ||||
8.4 |
Conclusive Proof |
26 | ||||
8.5 |
No LESSOR Liability for Losses |
26 | ||||
8.6 |
No Liability to Repair or Replace |
26 | ||||
8.7 |
No Waiver |
26 | ||||
ARTICLE 9 MANUFACTURERS’ AND VENDORS’ WARRANTIES | 27 | |||||
9.1 |
Warranties |
27 | ||||
9.2 |
Reassignment |
27 | ||||
9.3 |
Warranty Claims |
27 | ||||
ARTICLE 10 OPERATION OF AIRCRAFT | 28 | |||||
10.1 |
Costs of Operation |
28 | ||||
10.2 |
Compliance with Laws |
28 | ||||
10.3 |
Training |
28 | ||||
10.4 |
No Violation of Insurance Policies |
28 | ||||
10.5 |
Flight and Airport Charges |
28 | ||||
ARTICLE 11 SUBLEASES | 30 | |||||
11.1 |
No Sublease without LESSOR Consent |
30 | ||||
11.2 |
LESSOR Costs |
30 | ||||
11.3 |
Any Approved Sublease |
30 |
ii
11.4 |
Assignment of Sublease |
30 | ||||
11.5 |
Wet Leases |
30 | ||||
11.6 |
Continued Responsibility of LESSEE |
30 | ||||
ARTICLE 12 MAINTENANCE OF AIRCRAFT | 31 | |||||
12.1 |
General Obligation |
31 | ||||
12.2 |
Specific Engine Requirements |
31 | ||||
12.3 |
Specific Obligations |
32 | ||||
12.4 |
Replacement of Parts |
33 | ||||
12.5 |
Removal of Engines |
34 | ||||
12.6 |
Removal of APU |
35 | ||||
12.7 |
Pooling of Engines, APU and Parts |
35 | ||||
12.8 |
Installation of Engines on other aircraft |
35 | ||||
12.9 |
Engine Thrust Rating |
36 | ||||
12.10 |
Modifications |
36 | ||||
12.11 |
Performance of Work by Third Parties |
37 | ||||
12.12 |
Reporting Requirements |
37 | ||||
12.13 |
Information Regarding Maintenance Program |
38 | ||||
12.14 |
LESSOR Rights to Inspect Aircraft |
38 | ||||
ARTICLE 13 USE OF RESERVES | 39 | |||||
13.1 |
Airframe Reserves |
39 | ||||
13.2 |
Engine Performance Restoration Reserves |
39 | ||||
13.3 |
Engine LLP Reserves |
39 | ||||
13.4 |
Reimbursement |
40 | ||||
13.5 |
Reimbursement Adjustment |
40 | ||||
13.6 |
Costs in Excess of Reserves |
40 | ||||
13.7 |
Reimbursement after Termination Date |
41 | ||||
ARTICLE 14 TITLE AND REGISTRATION | 42 | |||||
14.1 |
Title to the Aircraft During Lease Term |
42 | ||||
14.2 |
Registration of Aircraft |
42 | ||||
14.3 |
Filing of Xxxx Lease |
42 | ||||
14.4 |
Evidence of Registration and Filings |
42 | ||||
ARTICLE 15 IDENTIFICATION PLATES | 43 | |||||
15.1 |
Airframe Identification Plates |
43 | ||||
15.2 |
Engine Identification Plates |
43 | ||||
15.3 |
APU Identification Plate |
43 | ||||
ARTICLE 16 TAXES | 44 | |||||
16.1 |
General Obligation of LESSEE |
44 | ||||
16.2 |
Exceptions to Indemnity |
44 | ||||
16.3 |
After-Tax Basis |
45 | ||||
16.4 |
Timing of Payment |
45 | ||||
16.5 |
Contests |
45 | ||||
16.6 |
Refunds |
46 |
iii
16.7 |
Cooperation in Filing Tax Returns |
46 | ||||
16.8 |
Tax Restructuring |
46 | ||||
16.9 |
Survival of Obligations |
46 | ||||
ARTICLE 17 INDEMNITIES | 47 | |||||
17.1 |
General Indemnity |
47 | ||||
17.2 |
Exceptions to General Indemnities |
48 | ||||
17.3 |
After-Tax Basis |
48 | ||||
17.4 |
Timing of Payment |
48 | ||||
17.5 |
Subrogation |
48 | ||||
17.6 |
Notice |
49 | ||||
17.7 |
Refunds |
49 | ||||
17.8 |
Defense of Claims |
49 | ||||
17.9 |
Survival of Obligation |
49 | ||||
ARTICLE 18 INSURANCE | 50 | |||||
18.1 |
Categories of Insurance |
50 | ||||
18.2 |
Write-back of any Date Recognition Exclusion |
50 | ||||
18.3 |
Installation of Third Party Engine |
50 | ||||
18.4 |
Insurance for Indemnities |
50 | ||||
18.5 |
Insurance required by Manufacturer |
50 | ||||
18.6 |
Renewal |
50 | ||||
18.7 |
Assignment of Rights by LESSOR |
50 | ||||
18.8 |
Deductibles |
51 | ||||
18.9 |
Insurance for Wet Lease Operations |
51 | ||||
18.10 |
Other Insurance |
51 | ||||
18.11 |
Information |
51 | ||||
18.12 |
Currency |
51 | ||||
18.13 |
Grounding of Aircraft |
51 | ||||
18.14 |
Failure to Insure |
51 | ||||
18.15 |
Reinsurance |
52 | ||||
18.16 |
Limit on Hull in favor of LESSEE |
52 | ||||
ARTICLE 19 LOSS, DAMAGE AND REQUISITION | 53 | |||||
19.1 |
Definitions |
53 | ||||
19.2 |
Notice of Total Loss |
54 | ||||
19.3 |
Total Loss of Aircraft or Airframe |
54 | ||||
19.4 |
Surviving Engine(s) |
55 | ||||
19.5 |
Total Loss of Engine and not Airframe |
55 | ||||
19.6 |
Total Loss of APU |
56 | ||||
19.7 |
Other Loss or Damage |
56 | ||||
19.8 |
Copy of Insurance Policy |
57 | ||||
19.9 |
Government Requisition |
57 | ||||
19.10 |
LESSOR Retention of Reserves |
57 |
iv
ARTICLE 20 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE | 58 | |||||
20.1 |
Representations and Warranties |
58 | ||||
20.2 |
Covenants |
60 | ||||
ARTICLE 21 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR | 61 | |||||
21.1 |
Representations and Warranties |
61 | ||||
21.2 |
Covenant of Quiet Enjoyment |
62 | ||||
ARTICLE 22 FINANCIAL AND OTHER INFORMATION | 63 | |||||
ARTICLE 23 RETURN OF AIRCRAFT | 64 | |||||
23.1 |
Date of Return |
64 | ||||
23.2 |
Last Engine Shop Visits |
64 | ||||
23.3 |
Technical Report |
64 | ||||
23.4 |
Return Location |
64 | ||||
23.5 |
Full Aircraft Documentation Review |
64 | ||||
23.6 |
Copy of LESSEE’s Maintenance Program |
65 | ||||
23.7 |
Aircraft Inspection |
65 | ||||
23.8 |
Certificate of Airworthiness Matters |
66 | ||||
23.9 |
General Condition of Aircraft at Return |
66 | ||||
23.10 |
Checks Prior to Return |
69 | ||||
23.11 |
Part Lives |
71 | ||||
23.12 |
Export and Deregistration of Aircraft |
73 | ||||
23.13 |
LESSEE’s Continuing Obligations |
73 | ||||
23.14 |
Airport and Navigation Charges |
74 | ||||
23.15 |
Return Acceptance Receipt |
74 | ||||
23.16 |
Indemnities and Insurance |
74 | ||||
23.17 |
Storage |
74 | ||||
ARTICLE 24 ASSIGNMENT | 75 | |||||
24.1 |
No Assignment by LESSEE |
75 | ||||
24.2 |
Sale or Assignment by LESSOR |
75 | ||||
24.3 |
LESSOR’s Lender |
75 | ||||
24.4 |
LESSEE Cooperation |
75 | ||||
24.5 |
Protections |
76 | ||||
ARTICLE 25 DEFAULT OF LESSEE | 77 | |||||
25.1 |
LESSEE Notice to LESSOR |
77 | ||||
25.2 |
Events of Default |
77 | ||||
25.3 |
LESSOR’s General Rights |
78 | ||||
25.4 |
Deregistration and Export of Aircraft |
79 | ||||
25.5 |
LESSEE Liability for Damages |
79 | ||||
25.6 |
Waiver of Default |
80 | ||||
25.7 |
Present Value of Payments |
80 | ||||
25.8 |
Use of “Termination Date” |
80 |
v
ARTICLE 26 NOTICES | 81 | |||||
26.1 |
Manner of Sending Notices |
81 | ||||
26.2 |
Notice Information |
81 | ||||
ARTICLE 27 GOVERNING LAW AND JURISDICTION | 82 | |||||
27.1 |
California Law |
82 | ||||
27.2 |
Non-Exclusive Jurisdiction in California |
82 | ||||
27.3 |
Service of Process |
82 | ||||
27.4 |
Prevailing Party in Dispute |
82 | ||||
27.5 |
Waiver |
82 | ||||
ARTICLE 28 MISCELLANEOUS | 83 | |||||
28.1 |
Press Releases |
83 | ||||
28.2 |
Power of Attorney |
83 | ||||
28.3 |
LESSOR Performance for LESSEE |
83 | ||||
28.4 |
LESSOR’s Payment Obligations |
83 | ||||
28.5 |
Application of Payments |
83 | ||||
28.6 |
Usury Laws |
83 | ||||
28.7 |
Delegation of Authority by LESSOR |
83 | ||||
28.8 |
Confidentiality |
83 | ||||
28.9 |
Rights of Parties |
84 | ||||
28.10 |
Further Assurances |
84 | ||||
28.11 |
Translations of Lease |
84 | ||||
28.12 |
Use of Word “including” |
84 | ||||
28.13 |
Headings |
84 | ||||
28.14 |
Invalidity of any Provision |
84 | ||||
28.15 |
Negotiation |
84 | ||||
28.16 |
Time is of the Essence |
84 | ||||
28.17 |
Amendments in Writing |
85 | ||||
28.18 |
Counterparts |
85 | ||||
28.19 |
Delivery of Documents by Fax |
85 | ||||
28.20 |
Entire Agreement |
85 | ||||
28.21 |
**Material Redacted** |
85 |
vi
EXHIBIT A AIRCRAFT DESCRIPTION |
104 | |||
EXHIBIT B AGENCY AGREEMENT |
106 | |||
EXHIBIT C CERTIFICATE OF INSURANCE |
110 | |||
EXHIBIT D BROKERS’ LETTER OF UNDERTAKING |
117 | |||
EXHIBIT E ESTOPPEL AND ACCEPTANCE CERTIFICATE |
119 | |||
EXHIBIT F OPINION OF COUNSEL |
126 | |||
EXHIBIT G FORM OF POWER OF ATTORNEY |
131 | |||
EXHIBIT H ASSIGNMENT OF RIGHTS (AIRFRAME) |
133 | |||
EXHIBIT I ASSIGNMENT OF RIGHTS (ENGINES) |
138 | |||
EXHIBIT J RETURN ACCEPTANCE RECEIPT |
141 | |||
EXHIBIT K MONTHLY REPORT |
154 | |||
EXHIBIT L AIRCRAFT DOCUMENTATION |
157 | |||
EXHIBIT M TECHNICAL EVALUATION REPORT |
159 |
vii
THIS AIRCRAFT LEASE AGREEMENT is made and entered into as of March 4, 2004.
BETWEEN:
COMPANIA PANAMENA DE AVIACION, S.A. (COPA), a Panamanian corporation whose address and principal place of business is at Avenida Xxxxx Xxxxxxxxx y Xxxxx 00, Xxxxxxxx 0000, Xxxxxx 0, Xxxxxx (“LESSEE”) and
INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation whose address and principal place of business is at 1999 Avenue of the Stars, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America (“LESSOR”).
The subject matter of this Lease is one (1) new B737 - 700 or B737 - 800 aircraft (election to be made by LESSEE in accordance with the terms of this Lease). In consideration of and subject to the mutual covenants, terms and conditions contained in this Lease, LESSOR hereby agrees to lease to LESSEE and LESSEE hereby agrees to lease from LESSOR the aircraft and the parties further agree as follows:
ARTICLE 1
SUMMARY OF TRANSACTION
The following is a summary of the lease transaction between LESSEE and LESSOR. It is set forth for the convenience of the parties only and will not be deemed in any way to amend, detract from or simplify the other provisions of this Lease.
1.1 DESCRIPTION OF AIRCRAFT
One new B737-700 or B737-800 aircraft (LESSEE must elect model type on or before March 1, 2004)
1.2 SCHEDULED DELIVERY DATE AND LOCATION
In the month of February 2005 at Seattle, Washington
1.3 INITIAL LEASE TERM
The term of leasing of the Aircraft will commence on the delivery date and continue for twelve (12) months with six (6) successive, automatic twelve (12) month extensions and one (1) automatic three (3) month extension
1.4 **MATERIAL REDACTED**
**Material Redacted**
1.5 SECURITY DEPOSIT
**Material Redacted**, payable as follows (in U.S. Dollars) to be held, returned, applied and/or refunded in accordance with the terms of this Lease:
PAYMENT DATE |
AMOUNT | |
2 business days following LOI Execution | **Material Redacted** | |
2 business days following Lease execution | **Material Redacted** | |
On or before March 15, 2004 | **Material Redacted** | |
On or before August 2, 2004 | **Material Redacted** |
1.6 TRANSACTION FEE
**Material Redacted**, payable within 2 business days after execution of this Lease
1.7 RENT DURING INITIAL LEASE TERM
Payable monthly in advance and equal to the sum of:
(a)
Month 1 | **Material Redacted** | **Material Redacted** | ||
Month 2 |
**Material Redacted** | **Material Redacted** | ||
Remainder of initial lease term |
**Material Redacted** | **Material Redacted** |
All amounts in the table above are per month expressed in January 2004 U.S. Dollars*
*The above base rent is expressed in January 2004 U.S. Dollars and will increase in accordance with Boeing’s announced escalation rates for the period from and including the 1st day of January 2004 through and including the delivery date of the Aircraft;
plus
(b) **Material Redacted** per month of the incremental cost (net of Manufacturer charges) of (i) all BFE approved by LESSOR (whether buyer-furnished equipment or seller-purchased equipment) paid for by LESSOR in place of or in addition to LESSEE’s specification BFE for the Aircraft as specified in LESSEE’s specification for the Aircraft and (ii) all other agreed-to changes to LESSEE’s specification for the Aircraft paid for by LESSOR. **Material Redacted**
2
*The election of -700 or -800 will be made by giving written notice to LESSOR on or before March 1, 2004. In the event that LESSEE makes no election, the Aircraft will be a -700.
1.8 **MATERIAL REDACTED**
**Material Redacted**
1.9 RESERVES
Payable as follows:
TYPE OF RESERVES |
AMOUNT OF RESERVES | |
Airframe Reserves: | Year 1: **Material Redacted** * per airframe flight hour | |
Year 2: **Material Redacted** * per airframe flight hour | ||
Year 3: **Material Redacted** * per airframe flight hour | ||
Year 4: **Material Redacted** * per airframe flight hour | ||
Years 5 - 8: **Material Redacted** * per airframe flight hour | ||
*Each of the airframe reserves amounts will be increased by | ||
**Material Redacted** per airframe flight hour in the event that LESSEE elects the -800 | ||
Engine Performance | Each of the figures below is per engine flight hour for each engine*: | |
Restoration Reserves: * | Year 1: **Material Redacted** | |
Year 2: **Material Redacted** | ||
Year 3: **Material Redacted** | ||
Year 4: **Material Redacted** | ||
Years 5 - 8: **Material Redacted** | ||
Engine LLP Reserves: | **Material Redacted** per engine cycle for each engine |
*Engine reserves will be paid each month at the applicable rate based on the thrust rating at which a particular Engine is operated.
1.10 ADDITIONAL RENT FOR EXCESS AIRFRAME AND ENGINE CYCLES
**Material Redacted** for each cycle the airframe and **Material Redacted** for each cycle an engine operated during a calendar year in excess of the maximum number of cycles which would result from an average hour/cycle ratio of **Material Redacted** hours to **Material Redacted** cycle
3
1.11 COUNTRY OF AIRCRAFT REGISTRATION
Republic of Panama or at LESSEE’s request, the United States (if permitted by law)
1.12 MAINTENANCE PROGRAM
LESSEE’s Maintenance Program
1.13 AGREED VALUE OF AIRCRAFT
**Material Redacted**
**Material Redacted**
*The agreed value is expressed in January 2004 U.S. Dollars and will increase in accordance with Boeing’s announced escalation rates for the period from and including the 1st day of January 2004 through and including the delivery date of the Aircraft. **Material Redacted**
1.14 LESSOR’S BANK ACCOUNT
International Lease Finance Corporation
JPMorgan Chase Bank
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
4
ARTICLE 2
Except where the context otherwise requires, the following words have the following meanings for all purposes of this Lease. The definitions are equally applicable to the singular and plural forms of the words. Any agreement defined below includes each amendment, modification, supplement and waiver thereto in effect from time to time.
“AIRCRAFT” means the Airframe, two (2) Engines, APU, Parts and as the context permits, Aircraft Documentation, collectively. As the context requires, “Aircraft” may also mean the Airframe, any Engine, the APU, any Part, the Aircraft Documentation or any part thereof individually. For example, in the context of return to LESSOR the term “Aircraft” means the Airframe, Engines, APU, Parts and Aircraft Documentation collectively, yet in the context of LESSEE not creating any Security Interests other than Permitted Liens on the Aircraft, the term “Aircraft” means any of the Airframe, any Engine, the APU, any Part or the Aircraft Documentation individually.
“AIRCRAFT DOCUMENTATION” means all (a) log books, Aircraft records, manuals and other documents provided to LESSEE in connection with the Aircraft, (b) documents listed in the Estoppel and Acceptance Certificate and Exhibit L and (c) any other documents required to be maintained during the Lease Term and until the Termination Date by the Aviation Authority, LESSEE’s Maintenance Program and this Lease.
“AIRFRAME” means the airframe listed in the Estoppel and Acceptance Certificate executed at Delivery together with all Parts relating thereto (except Engines or engines and the APU).
“AIRWORTHINESS DIRECTIVES” or “ADS” means all airworthiness directives (or equivalent) applicable to the Aircraft issued either by the Aviation Authority or the aviation authority of the country of manufacture of the Aircraft.
“APU” means (a) the auxiliary power unit of the Aircraft listed in the Estoppel and Acceptance Certificate executed at Delivery, (b) any replacement auxiliary power unit acquired by LESSOR and leased to LESSEE pursuant to Article 19.6 following a Total Loss of the APU; and (c) all Parts installed in or on such APU at Delivery (or substituted, renewed or replacement Parts in accordance with this Lease) so long as title thereto is or remains vested in LESSOR in accordance with the terms of Article 12.4.
“AVIATION AUTHORITY” means the Authoridad de Aeronautica Civil of the Republic of Panama or any Government Entity which under the Laws of the Republic of Panama from time to time has control over civil aviation or the registration, airworthiness or operation of aircraft in the Republic of Panama. If the Aircraft is registered in a country other than the Republic of Panama, “Aviation Authority” means the agency which regulates civil aviation in such other country.
5
“AVIATION DOCUMENTS” means any or all of the following which at any time may be obtainable from the Aviation Authority: (a) if required, a temporary certificate of airworthiness from the Aviation Authority allowing the Aircraft to be flown after Delivery to the State of Registration, (b) an application for registration of the Aircraft with the appropriate authority in the State of Registration, (c) the certificate of registration for the Aircraft issued by the State of Registration, (d) a full certificate of airworthiness for the Aircraft specifying transport category (passenger), (e) an air transport license, (f) an air operator’s certificate, (g) such recordation of LESSOR’s title to the Aircraft and interest in this Lease as may be available in the State of Registration and (h) all such other authorizations, approvals, consents and certificates in the State of Registration as may be required to enable LESSEE lawfully to operate the Aircraft.
“BASIC ENGINE” means those units and components of the Engine which are used to induce and convert fuel/air mixture into thrust/power; to transmit power to the fan and accessory drives; to supplement the function of other defined systems external to the Engine; and to control and direct the flow of internal lubrication, plus all essential accessories as supplied by the Engine manufacturer. The nacelle, installed components related to the Aircraft systems, thrust reversers, QEC and the primary exhaust nozzle are excluded.
“BEE” means any equipment which is to be provided by the purchaser of the Aircraft (whether actually provided by LESSOR as buyer-furnished equipment or Manufacturer as seller-purchased equipment).
“BUSINESS DAY” means a day other than a Saturday or Sunday on which the banks in the Republic of Panama and the city where LESSOR’s Bank is located are open for the transaction of business of the type required by this Lease.
“CREDITOR” means any lessor, owner, bank, lender, mortgagee or other Person which is the owner of or has any interest in an aircraft engine or aircraft operated by LESSEE.
“CREDITOR AGREEMENT” means the applicable agreement between a Creditor and LESSEE or between Creditors pursuant to which such Creditor owns, leases or has an interest in either a Boeing B737-NG aircraft operated by LESSEE on which an Engine may be installed or in an aircraft engine which may be installed on the Airframe.
“DEFAULT” means any event which, upon the giving of notice, the lapse of time and/or a relevant determination, would constitute an Event of Default.
“DELIVERY” means the delivery of the Aircraft from LESSOR to LESSEE pursuant to Articles 3 and 6.
“DELIVERY DATE” means the date on which Delivery takes place. “DOLLARS,” and “$” means the lawful currency of the U.S.
“ENGINE” means (a) each of the engines listed on the Estoppel and Acceptance Certificate; (b) any replacement engine acquired by LESSOR and leased to LESSEE pursuant to Article 19.5 following a Total Loss of an Engine; and (c) all Parts installed in or on any of such engines at Delivery (or substituted, renewed or replacement Parts in accordance with this Lease) so long as title thereto is or remains vested in LESSOR in accordance with the terms of Article 12.4.
6
“EUROCONTROL” means the European Organization for the Safety of Air Navigation established by the Convention related to the Co-operation for the Safety of Air Navigation (Eurocontrol) signed on December 13, 1960, as amended.
“EVENT OF DEFAULT” means any of the events referred to in Article 25.2.
“FAA” means the Federal Aviation Administration of the Department of Transportation or any successor thereto under the Laws of the U.S.
“FARS” means the U.S. Federal Aviation Regulations embodied in Title 14 of the U.S. Code of Federal Regulations, as amended from time to time, or any successor regulations thereto.
“GENEVA CONVENTION” means the Convention on the International Recognition of Rights in Aircraft signed in Geneva, Switzerland on June 19, 1948.
“GOVERNMENT ENTITY” means any (a) national, state or local government, (b) board, commission, department, division, instrumentality, court, agency or political subdivision thereof and (c) association, organization or institution of which any of the entities listed in (a) or (b) is a member or to whose jurisdiction any such entity is subject.
“LANDING GEAR” means the installed main and nose landing gear, components and their associated actuators, side braces and parts.
“LAW” means any (a) statute, decree, constitution; regulation, order or any directive of any Government Entity, (b) treaty, pact, compact or other agreement to which any Government Entity is a signatory or party, (c) judicial or administrative interpretation or application of any of the foregoing or (d) any binding judicial precedent having the force of law.
“LEASE” means this Aircraft Lease Agreement, together with all Exhibits hereto.
“LESSOR’S LIEN” means any Security Interest created by LESSOR.
“MAINTENANCE PROGRAM” means LESSEE’s maintenance program as approved by the Aviation Authority or such other maintenance program as LESSOR may, in its discretion, accept in writing.
“MANUFACTURER” means The Boeing Company.
“MPD” means the Maintenance Planning Document published by Manufacturer and applicable to the Aircraft.
“OVERHAUL” means the full reconditioning of the Aircraft, an Engine, the APU, Landing Gear, module or Part, as the case may be, in which such equipment has been fully disassembled; cleaned; thoroughly inspected; and returned to such condition specified by the applicable manufacturer’s manual as shall permit the operation of such Engine, APU, Part, Landing Gear, etc. for the maximum period of time, hours or cycles, as applicable, as specified by the relevant manufacturer’s Overhaul manual.
7
“PART” means any part, component, appliance, system module, engine module, accessory, material, instrument, communications equipment, furnishing, LESSEE-furnished or LESSOR-purchased equipment or other item of equipment (other than complete Engines or engines or the APU) for the time being installed in or attached to the Airframe, any Engine or the APU or which, having been removed from the Airframe, any Engine or the APU, remains the property of LESSOR.
“PDM” means the post Delivery modification during which the installation of a blended winglet system and LESSEE’s in flight entertainment system will be installed. Scheduling, arranging and coordinating the arrival at the PDM location of the Aircraft, BFE, material and parts will be LESSEE’s responsibility.
“PERMITTED LIEN” means (a) LESSOR’s Liens; (b) Security Interests arising in the ordinary course of LESSEE’s business for Taxes either not yet assessed or, if assessed, not yet due or being contested in good faith in accordance with Article 16.5; (c) materialmen’s, mechanics’, workmen’s, repairmen’s, employees’ liens or similar Security Interests (including liens for airport and navigation facility fees) arising by operation of Law after the Delivery Date in the ordinary course of LESSEE’s business for amounts which are either not yet due or are being contested in good faith by appropriate proceedings (and for which adequate reserves have been made or, when required in order to pursue such proceedings, an adequate bond has been provided) so long as such proceedings do not involve any danger of sale, forfeiture or loss of the Aircraft; or liens on LESSEE’s interest arising out of judgments or awards against LESSOR.
“PERSON” means any individual, firm, partnership, joint venture, trust, corporation, company, Government Entity, committee, department, authority or any body, incorporated or unincorporated, whether having distinct legal personality or not.
“PRIME RATE” means the rate of interest from time to time announced by JPMorgan Chase Bank in New York as its prime commercial lending rate.
“PROHIBITED COUNTRY” means any country to which the export and/or use (as applicable) of a B737-700 / 800 aircraft with CFM56-7B engines attached thereto is not permitted under (a) any United Nations sanctions, (b) the Council Regulation (EC) No. 149/2003 which updates and amends Council Regulation (EC) 1334/2000, (c) the United States Export Administration Act 1979 (as amended) or any successor legislation and/or the Export Administration Regulations promulgated thereunder, (d) where applicable, the various regulations administered from time to time by the Office of Foreign Assets Control of the U.S. Treasury Department, (e) any similar or corresponding legislation then in effect in the U.S., the United Kingdom, France, Spain or Germany or (f) any subsequent United Nations Sanctions Orders the effect of which prohibits or restricts the export and/or use of B737-700 / 800 aircraft with CFM56-7B engines attached thereto to such country. For purposes of this Lease, Prohibited Country will be defined by applicable regulations listed above which are updated, amended and superseded from time to time, the violation of which may reasonably be expected to result in civil, criminal or seizure liability for LESSEE, LESSOR or the Aircraft.
8
“QEC” means all interface parts which are installed between the Engine pylon and the Basic Engine.
“RETURN CHECK” means the accomplishment of all work cards specified in the Maintenance Program and the MPD which (a) are necessary to clear the Aircraft of all such tasks **Material Redacted**, or (b) are required to be performed at lesser intervals than **Material Redacted**. If pursuant to the then-current MPD, the performance interval for a task is shorter than every **Material Redacted**, then such task will also be performed. All non-routine tasks generated as a result of the performance of these work cards must also be performed. For avoidance of doubt, if the inspection interval pursuant to the then-current MPD for a particular work card only refers to one or two of the three measurement tests, then the most restrictive measurement test or tests referred to in the then-current MPD will be utilized in determining whether the task must be performed.
“SECURITY INTEREST” means any encumbrance or security interest, however and wherever created or arising including (without prejudice to the generality of the foregoing) any right of ownership, security, mortgage, pledge, charge, encumbrance, lease, lien, statutory or other right in rem, hypothecation, title retention, attachment, levy, claim or right of possession or detention.
“STATE OF REGISTRATION” means the Republic of Panama, the United States of America at LESSEE’s request (if permitted by Law) or such other country or state of registration of the Aircraft as LESSOR may, in its sole, but reasonable discretion, approve in writing.
“U.S.” means the United States of America.
2.2 SPECIFIC DEFINITIONS. The following terms are defined in the Articles referenced below:
TERMS |
ARTICLE | |||
Agreed Value |
19.1 | |||
Airframe Reserves |
5.4.1 | |||
Default Interest |
5.7 | |||
Delivery Location |
3.1 | |||
Engine LLP Reserves |
5.4.1 | |||
Engine Performance Restoration |
5.4.1 | |||
Reserves |
||||
Expenses |
17.1 | |||
Expiration Date |
4.3 | |||
**Material Redacted** |
4.2.1 | |||
Indemnitees |
17.1 | |||
Initial Lease Term |
4.1 | |||
Lease Term |
4.3 | |||
LESSOR’s Assignee |
24.2.1 |
9
LESSOR’s Bank |
5.6 | |||
LESSOR’s Lender |
24.3 | |||
Manufacturer’s Escalation Rate |
5.3.1 | |||
Modification |
12.10.1 | |||
Net Total Loss Proceeds |
19.1 | |||
Operative Documents |
20.1.3 | |||
Rent |
5.3.1 | |||
Reserves |
5.4.1 | |||
Scheduled Delivery Date |
3.2 | |||
Security Deposit |
5.1.1 | |||
Taxes |
16.1 | |||
Termination Date |
4.4 | |||
Total Loss |
19.1 | |||
Total Loss Date |
19.1 | |||
Total Loss Proceeds |
19.1 | |||
Transaction Fee |
5.2 |
10
ARTICLE 3
11
ARTICLE 4
LEASE TERM AND **MATERIAL REDACTED**
4.1 INITIAL LEASE TERM. The term of leasing of the Aircraft will commence on the Delivery Date and continue for twelve (12) months with six (6) successive, automatic twelve (12) month extensions and one (1) automatic three (3) month extension (the “INITIAL LEASE TERM”) unless this Lease shall be earlier terminated or extended pursuant to the provisions of Article 4.2.1.
Notwithstanding the foregoing, LESSOR and LESSEE will cooperate to modify the return date to allow LESSEE to perform the return C-check as near as possible to the expiration of the prior C-check without unduly prejudicing the marketing of the Aircraft to a follow-on operator.
4.2 **MATERIAL REDACTED**
4.2.1 | **Material Redacted** |
4.2.2 | **Material Redacted** |
4.3 “LEASE TERM” AND “EXPIRATION DATE”. “LEASE TERM” means the term of leasing commencing on the Delivery Date and terminating on the Expiration Date. “EXPIRATION DATE” means the date on which LESSEE is required to redeliver the Aircraft to LESSOR in the condition required by this Lease on the last day of the Initial Lease Term **Material Redacted**.
4.4 “TERMINATION DATE”. If LESSEE returns the Aircraft to LESSOR on the Expiration Date in the condition required by Article 23, then “TERMINATION DATE” has the same meaning as “Expiration Date”, If LESSEE does not do so, then “TERMINATION DATE” means the date on which the first of the following events occurs:
(a) there is a Total Loss of the Aircraft prior to Delivery pursuant to Article 3.5;
(b) cancellation of this Lease occurs pursuant to Article 3.6;
(c) there is a Total Loss of the Aircraft and payment is made to LESSOR in accordance with Article 19.3;
(d) an Event of Default occurs and LESSOR repossesses the Aircraft or otherwise terminates this Lease pursuant to Article 25.3 prior to the Expiration Date and recovers possession and control of the Aircraft;
(e) an Event of Default occurs hereunder by LESSEE returning the Aircraft in the condition required by this Lease after the Expiration Date; or
(f) an Event of Default occurs and LESSOR repossesses the Aircraft or otherwise terminates this Lease pursuant to Article 25.3 after the Expiration Date and recovers possession and control of the Aircraft.
12
ARTICLE 5
SECURITY DEPOSIT, TRANSACTION FEE, RENT,
RESERVES AND OTHER PAYMENTS
5.1 SECURITY DEPOSIT.
5.1.1 | LESSEE will pay LESSOR a security deposit of **Material Redacted** for its lease of the Aircraft (the “SECURITY DEPOSIT”). The Security Deposit is payable as follows (in US$): |
PAYMENT DATE |
AMOUNT (-700) |
AMOUNT (-800) | ||
Two (2) Business Days following LOI Execution **Material Redacted** | **Material Redacted** | **Material Redacted** | ||
Two (2) Business Days following Lease execution **Material Redacted** | **Material Redacted** | **Material Redacted** | ||
On or before March 15, 2004 **Material Redacted** | **Material Redacted** | **Material Redacted** | ||
On or before August 2, 2004 **Material Redacted** | **Material Redacted** | **Material Redacted** | ||
TOTAL | **Material Redacted** | **Material Redacted** |
5.1.2 | The Security Deposit may be commingled with LESSOR’s general funds and any interest earned on such Security Deposit will be for LESSOR’s account. If the Security Deposit is reduced below the required amount by application to meet LESSEE’s unperformed obligations under this Lease, LESSEE will replenish the Security Deposit within ten (10) days after LESSOR’s demand therefor. The Security Deposit will serve as security for the performance by LESSEE of its obligations under this Lease and any other agreements between LESSEE and LESSOR relating to aircraft, engines, aircraft equipment or the extension of credit and may be applied by LESSOR upon the occurrence of an Event of Default hereunder or of a default by LESSEE under any such other agreements. |
5.1.3 | Upon termination of this Lease in accordance with Article 4.4, LESSOR will promptly return to LESSEE the amount of the Security Deposit then held by LESSOR (so long as no default by LESSEE exists under any other agreement between LESSEE and LESSOR relating to aircraft, engines or aircraft equipment or the extension of credit by LESSOR to LESSEE), without interest, less an amount determined by LESSOR to be a reasonable estimate of the costs, if any, which LESSOR will incur to remedy any Default or Event of Default which has occurred and is continuing under this Lease, including the correction of any discrepancies from the required condition of the Aircraft on return of the Aircraft. |
13
5.2 TRANSACTION FEE. Within two (2) Business Days after execution of this Lease, LESSEE will pay LESSOR a nonrefundable transaction fee of **Material Redacted** (the “TRANSACTION FEE”).
5.3 RENT.
5.3.1 | LESSEE will pay LESSOR the following amounts monthly in advance as rent for the Aircraft (the “RENT”): |
INITIAL LEASE TERM: Payable monthly in advance and equal to the sum of:
(a)
Months 1 and 2 | **Material Redacted** (in the event that LESSEE elects -700) | **Material Redacted** (in the event that LESSEE elects -800) | ||
Remainder of Initial Lease Term | **Material Redacted** (in the event that LESSEE elects -700) | **Material Redacted** (in the event that LESSEE elects - 800) |
All amounts in the table above are per month expressed in January 2004 U.S. Dollars* (prorated for any partial month during the Lease Term or during the first and last calendar month of the Lease Term if such month is less than a full month)
*The above base rent is expressed in January 2004 U.S. Dollars and will increase in accordance with Boeing’s announced escalation rates for the period from and including the 1st of January 2004 through and including the Delivery Date of the Aircraft (the “MANUFACTURER’S ESCALATION RATE”);
plus
(b) **Material Redacted** per month of the incremental cost (net of Manufacturer charges) of (i) all BFE approved by LESSOR (whether buyer-furnished equipment or seller-purchased equipment) paid for by LESSOR in place of or in addition to LESSEE’s Specification BFE for the Aircraft as specified in LESSEE’s Specification for the Aircraft and (ii) all other agreed-to changes to LESSEE’s Specification for the Aircraft paid for by LESSOR. **Material Redacted**.
Any increases to the above base rent during the Lease Term will be calculated immediately prior to Delivery. **Material Redacted**
14
**Material Redacted**:
**Material Redacted**.
5.3.2 | The first payment of Rent during the Lease Term will be paid no later than three (3) Business Days prior to the Scheduled Delivery Date. Each subsequent payment of Rent will be due monthly thereafter no later than the same day of the month as the Delivery Date of the Aircraft except that, if such day is not a Business Day, the Rent will be due on the immediately preceding Business Day. If Delivery occurred on the 29th, 30th or 31st of the month and in any given month during the Lease Term there is no such corresponding date, Rent will be payable on the last Business Day of such month. In the event that after LESSEE has paid the Rent three days prior to the Scheduled Delivery Date and then prior to Delivery the Delivery is delayed by more than seven (7) days, LESSOR will refund the Rent to LESSEE and LESSEE will repay the Rent prior to the Delivery Date. |
5.4 RESERVES.
5.4.1 | LESSEE will pay to LESSOR supplemental Rent, based on LESSEE’s use of the Aircraft during the Lease Term, in the form of the following reserves in the following amounts (individually, “AIRFRAME RESERVES”, “ENGINE PERFORMANCE RESTORATION RESERVES” and “ENGINE LLP RESERVES” and collectively “RESERVES”): |
TYPE OF RESERVES |
AMOUNT OF RESERVES | |
Airframe Reserves: | Year 1: **Material Redacted** * per Airframe flight hour | |
Year 2: **Material Redacted** * per Airframe flight hour | ||
Year 3: **Material Redacted** * per Airframe flight hour | ||
Year 4: **Material Redacted** * per Airframe flight hour | ||
Years 5 - 8: **Material Redacted** * per Airframe flight hour | ||
*Each of the Airframe Reserves amounts will be increased by **Material Redacted** per Airframe flight hour in the event that LESSEE elects the - 800. |
15
Engine Performance Restoration Reserves*: | Each of the figures below is per Engine flight hour for each Engine (payable when the Engine is utilized on the Aircraft or another aircraft)*: | |
Year 1: **Material Redacted** | ||
Year 2: **Material Redacted** | ||
Year 3: **Material Redacted** | ||
Year 4: **Material Redacted** | ||
Years 5 - 8: **Material Redacted** | ||
Engine LLP Reserves: | **Material Redacted** per Engine cycle for each Engine (payable when the Engine is utilized on the Aircraft or another aircraft) |
*Engine Reserves will be paid each month at the applicable rate based on the thrust rating at which a particular Engine is operated during such month.
5.4.2 | The amount of the Engine Performance Restoration Reserves and Engine LLP Reserves set forth in Article 5.4.1 will be increased by LESSOR in the event of an increase in the thrust rating of an Engine in accordance with Article 12.9. |
5.4.3 | Such Reserves will be paid on or before the 10th day of the calendar month next following the month in which the Delivery Date occurs and on or before the 10th day of each succeeding calendar month for flying performed during the calendar month prior to payment. All Reserves for flying performed during the month in which the Termination Date occurs will be paid on the Termination Date, unless otherwise agreed by the parties. |
5.4.4 | No interest will accrue or be paid at any time to LESSEE on such Reserves and, subject to LESSOR’s obligations under Article 13, LESSOR may commingle the Reserves with LESSOR’S general funds. |
5.5 ADDITIONAL RENT FOR EXCESS CYCLES. If in any calendar year (or portion thereof) of the Lease Term the Airframe or any Engine operated more cycles than the maximum number of cycles which would result from an average hour/cycle ratio of **Material Redacted** hours to **Material Redacted** cycle, LESSEE will pay LESSOR as additional Rent **Material Redacted** for each Airframe cycle and **Material Redacted** **Material Redacted** for each Engine cycle the Airframe and any Engine actually operated during such calendar year (or portion thereof) in excess of the number of cycles which result from an average hour/cycle ratio of **Material Redacted** hours to **Material Redacted** cycle. A calculation will be made as of December 31 of each year and such additional Rent will be due and payable by LESSEE on the date on which the next Reserves payment is due (in accordance with Article 5.4.3) following such hour/cycle calculation period.
Example: If the Airframe operated **Material Redacted** hours in a calendar year, it would have **Material Redacted** cycles resulting from an average hour/cycle ratio of **Material Redacted** hours to **Material Redacted** cycle. If in fact the Airframe operated **Material Redacted** cycles in such calendar year, the Airframe operated **Material Redacted** excess cycles in such calendar year and LESSEE will pay LESSOR **Material Redacted** (**Material Redacted** excess cycles x **Material Redacted** = **Material Redacted**).
16
Similarly, if an Engine which is rated at **Material Redacted** thrust operated **Material Redacted** cycles in such calendar year, such Engine operated **Material Redacted** excess cycles in such calendar year and LESSEE will pay LESSOR **Material Redacted** (**Material Redacted** excess cycles x **Material Redacted** = **Material Redacted**).
Alternatively, if an Engine which is rated at **Material Redacted** thrust operated **Material Redacted** cycles in such calendar year, such Engine operated **Material Redacted** excess cycles in such calendar year and LESSEE will pay LESSOR **Material Redacted** (**Material Redacted** excess cycles x **Material Redacted** = **Material Redacted**).
5.6 LESSOR’S BANK ACCOUNT. The Security Deposit, Transaction Fee, Rent, Reserves and any other payment due under this Lease will be paid by wire transfer of immediately available U.S. Dollar funds to LESSOR’s bank account at:
International Lease Finance Corporation
JPMorgan Chase Bank
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
or to such other bank account in the United States (or such other jurisdiction as may be agreed) as LESSOR may from time to time designate by at least three (3) days prior written notice (“LESSOR’S BANK”). When it is stated in this Lease that an installment of the Security Deposit, the monthly Rent, Reserves or any other payment is due or must be paid or made by LESSEE by a specific date, then such payment actually must be received by LESSOR’s Bank on or before such specific date on or before close of business (local time), even if, in order for such payment to be received by LESSOR’s Bank by such specific date, LESSEE must initiate the wire transfer prior to such specific date.
5.7 DEFAULT INTEREST. If LESSOR’s Bank does not receive the Rent or any other amount on or before the specific date when due, LESSOR will suffer loss and damage the exact nature and amount of which are difficult or impossible to ascertain. LESSEE will pay LESSOR as supplemental Rent (by way of agreed compensation and not as a penalty) interest on any due and unpaid amounts payable by LESSEE under this Lease. Interest will be calculated at a per annum rate (based on a 360 day year) which is equal to **Material Redacted** plus the Prime Rate in effect on the date on which the amount was originally due for the period from the date the amount originally was due through the date the amount actually is received at LESSOR’s Bank or, in the case of LESSOR’s performance of LESSEE’s obligations hereunder, from the date of payment by LESSOR through the date of LESSEE’s repayment to LESSOR (“DEFAULT Interest”). Default Interest will accrue on a day-to-day basis and be compounded monthly.
17
5.8 NO DEDUCTIONS OR WITHHOLDINGS. Subject to Article 16 of this Lease, All payments by LESSEE under this Lease, including the Security Deposit, Transaction Fee, Rent, Reserves, Default Interest, fees, indemnities or any other item, will be made in full without any deduction or withholding whether in respect of set-off, counterclaim, duties, or Taxes (in accordance with Article 16) imposed in the State of Registration or any jurisdiction from which such payments are made unless LESSEE is prohibited by Law from doing so, in which event LESSEE will gross up the payment amount such that the net payment received by LESSOR after any deduction or withholding equals the amounts called for under this Lease. LESSEE will also do all of the following:
(a) Ensure that the deduction or withholding does not exceed the minimum amount legally required;
(b) Pay to the relevant Government Entities within the period for payment permitted by applicable Law the full amount of the deduction or withholding (including the full amount of any deduction or withholding from any additional amount paid pursuant hereto); and
(c) Furnish to LESSOR within thirty (30) days after each payment an official receipt of the relevant Government Entities involved for all amounts so deducted or withheld.
5.9 NET LEASE.
5.9.1 | This Lease is a net lease and LESSEE’s obligation to pay Rent and make other payments in accordance with this Lease will be absolute and unconditional under any and all circumstances and regardless of other events, including the following: |
(a) any right of set-off, counterclaim, recoupment, defense or other right (including any right of reimbursement) which LESSEE may have against LESSOR, Manufacturer, the Engine manufacturer or any other person for any reason, including any claim LESSEE may have for the foregoing;
(b) unavailability or interruption in use of the Aircraft for any reason, including a requisition thereof or any prohibition or interference with or other restriction against LESSEE’s use, operation or possession of the Aircraft (whether by Law or otherwise), any defect in title, airworthiness, merchantability, fitness for any purpose, condition, design, specification or operation of any kind or nature of the Aircraft, the ineligibility of the Aircraft for any particular use or trade or for registration under the Laws of any jurisdiction or Total Loss of the Aircraft in accordance with Article 19.3;
(c) insolvency, bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, administration or similar proceedings by or against LESSOR, LESSEE, Manufacturer, the Engine manufacturer or any other Person;
18
(d) invalidity or unenforceability or lack of due authorization of or other defect in this Lease;
(e) failure or delay on the part of any party to perform its obligations under this Lease; or
(f) any other circumstance which but for this provision would or might have the effect of terminating or in any other way affecting any obligation of LESSEE hereunder.
5.9.2 | Nothing in Article 5.9 will be construed to limit LESSEE’s rights and remedies in the event of LESSOR’s breach of its warranty of quiet enjoyment set forth in Article 21.2 or to limit LESSEE’s rights and remedies to pursue in a court of law any claim it may have against LESSOR or any other Person. |
5.10 CURRENCY INDEMNITY. If under any applicable Law, whether as a result of a judgment against LESSEE or the liquidation of LESSEE or for any other reason, any payment hereunder is required to be made or recovered in a currency other than Dollars then, to the extent that the payment (when converted into Dollars at the “rate of exchange” on the date of payment or, in the case of a liquidation, the latest date for the determination of liabilities permitted by the applicable Law) falls short of the amount payable under this Lease, LESSEE will as a separate and independent obligation, fully indemnify LESSOR against the amount of the shortfall. If the amount received by LESSOR upon converting the payment into Dollars exceeds the amount payable under this Lease, LESSOR will remit such excess to LESSEE. For the purposes of this paragraph “rate of exchange” means the rate at which LESSOR is able on the relevant date to purchase Dollars in New York or London (at LESSOR’s option) with such other currency.
5.11 LESSOR PERFORMANCE OF LESSEE OBLIGATION. If LESSEE fails to make any payment under this Lease to a third party in connection with the Aircraft or fails to perform any other obligation required under this Lease, LESSOR may (but is not required to) at its election and without waiver of its rights perform such obligation and/or pay such amount. Within five (5) Business Days after written notice to LESSEE of the amount paid by LESSOR on behalf of LESSEE, LESSEE will repay such amount to LESSOR together with Default Interest. Such payment to LESSOR will constitute additional Rent payable by LESSEE to LESSOR hereunder. Any payment, performance or compliance by LESSOR of a LESSEE obligation hereunder will not affect the occurrence or continuance of a Default or Event of Default, as the case may be.
5.12 CONSIDERATION FOR RENT AND OTHER AMOUNTS. The amount of the Rent and other payments contained herein are in consideration of LESSEE’s waiver of warranties and indemnities set forth in Articles 8 and 17, respectively, and the other provisions of this Lease.
19
21
ARTICLE 7
PRE-DELIVERY, DELIVERY AND POST-DELIVERY
DOCUMENTARY AND OTHER REQUIREMENTS
7.1 PRE-DELIVERY REQUIREMENTS. LESSEE will do each of the following prior to the Scheduled Delivery Date of the Aircraft within the time frames set forth below:
7.1.1 | Within one (1) month after execution of this Lease, LESSEE will deliver to LESSOR each of the following: |
(a) copies of resolutions of the Board of Directors of LESSEE or other written evidence of appropriate corporate action, duly certifying and authorizing the lease of the Aircraft hereunder and the execution, delivery and performance of this Lease, together with an incumbency certificate as to the person or persons authorized to execute and deliver documents on behalf of LESSEE hereunder;
(b) an opinion of counsel in the form and substance of Exhibit F.
7.1.2 | At least ten (10) days prior to the Scheduled Delivery Date, LESSEE will have delivered to LESSOR a Certificate of Insurance and Brokers’ Letter of Undertaking in the form and substance of Exhibits C and D, respectively, (or other form reasonably satisfactory to LESSOR) from LESSEE’s insurance brokers evidencing insurance of the Aircraft in accordance with this Lease from the Delivery Date. |
7.1.3 | At least three (3) Business Days prior to the Scheduled Delivery Date, LESSEE will do each of the following: |
(a) pay to LESSOR the first monthly installment of Rent in accordance with Article 5.3.2;
(b) provide LESSOR with a copy of such Aviation Documents as may be available prior to the Scheduled Delivery Date;
(c) provide LESSOR with a power of attorney empowering LESSEE’s representative, who may be an officer or employee of LESSEE, to accept the Aircraft on behalf of LESSEE;
(d) provide LESSOR with a power of attorney in the form of Exhibit G; and
(e) provide LESSOR with such other documents as LESSOR may reasonably request.
22
7.2 DELIVERY REQUIREMENTS. On the Delivery Date of the Aircraft, each of the following will occur:
7.2.1 | LESSEE will execute and deliver to LESSOR an Estoppel and Acceptance Certificate in the form of Exhibit E covering the Aircraft and effective as of the Delivery Date. |
7.2.2 | if not previously done, LESSEE and LESSOR will sign an amendment or supplement to Exhibit A evidencing all agreed-to changes to the specification of the Aircraft. |
7.2.3 | LESSEE will deliver a certificate signed by an officer of LESSEE stating all of the following: |
(a) the representations and warranties contained in Article 20 are true and accurate on and as of the Delivery Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);
(b) no Default or Event of Default has occurred and is continuing or will result from LESSEE’s lease of the Aircraft hereunder; and
(c) to the extent applicable, such officer has examined the Creditor Agreements between LESSEE and the other Creditors and such Creditor Agreements contain terms pursuant to which, subject to reciprocal rights, such Creditors have agreed that they will not obtain any right, title or interest in an Engine which is installed on another aircraft (or, if this is not the case, such officer will identify in the certificate the parties, the aircraft and the Creditor Agreements for which this statement is untrue).
7.2.4 | LESSEE’s counsel will deliver an opinion confirming the matters set forth in the opinion of counsel described in Article 7.1 and advising that all filing and other requirements described in the earlier opinion of counsel have been met to the extent the same may be met prior to Delivery of the Aircraft. |
7.2.5 | If any Creditor Agreement provides or contemplates that such Creditor will obtain any right, title or interest in an Engine which is installed on such Creditor’s aircraft, LESSEE will deliver (if reasonably available) to LESSOR an engines cooperation agreement in form and substance acceptable to LESSOR which is executed by LESSEE and LESSEE’s Creditors (as defined therein); provided, however, to the extent such agreement has not been so delivered, LESSEE hereby agrees that LESSEE will not install an Engine on such Aircraft until such agreement shall have been delivered. |
7.2.6 | LESSOR will deliver to LESSEE an assignment of Manufacturer and Engine manufacturer rights in the form and substance of Exhibits H and I, respectively, and concurrently therewith LESSOR, to the extent it has not previously done so, will be deemed to have assigned all product assurance and product support applicable to the owner or operator of the Aircraft to LESSEE during the Lease Term. |
23
7.2.7 | LESSEE will deliver to LESSOR a copy of such Aviation Documents as have not been previously delivered which are available. |
7.3 POST-DELIVERY REQUIREMENTS.
7.3.1 | As soon as reasonably practicable after Delivery but not later than thirty (30) days after arrival of the Aircraft in Panama, if not previously provided, LESSEE will do each of the following: |
(a) procure registration of the Aircraft in the register of aircraft of the State of Registration showing LESSOR as the owner and provide evidence of the same to LESSOR;
(b) provide LESSOR with copies of all Aviation Documents not previously delivered; and
(c) if the Aircraft could not be registered at Delivery, provide LESSOR with a follow-up opinion of counsel advising that the Aircraft has been registered in the State of Registration and that all necessary filings have been made.
7.3.2 | Within forty five (45) days after Delivery, LESSEE will provide LESSOR with a Technical Evaluation Report for the Aircraft in the form and substance of Exhibit M, as revised. |
24
ARTICLE 8
LESSOR HAS COMMITTED TO LESSEE THAT ON THE DELIVERY DATE THE AIRCRAFT WILL BE IN THE CONDITION REQUIRED BY ARTICLE 6. SUCH COMMITMENT OR COVENANT ON THE PART OF LESSOR EXPIRES AND THE DISCLAIMERS SET FORTH IN THIS ARTICLE 8 APPLY UPON LESSEE’S ACCEPTANCE OF THE AIRCRAFT AND EXECUTION OF THE ESTOPPEL AND ACCEPTANCE CERTIFICATE. AFTER SUCH TIME, THEN AS BETWEEN LESSOR AND LESSEE:
8.1 “AS IS, WHERE IS”. LESSEE AGREES THAT IT IS LEASING THE AIRCRAFT “AS IS, WHERE IS”. LESSEE UNCONDITIONALLY ACKNOWLEDGES AND AGREES THAT NEITHER LESSOR NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR REPRESENTATIVES HAVE MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM, CONDITION, REPRESENTATION, WARRANTY OR COVENANT EXPRESS OR IMPLIED (WHETHER STATUTORY OR OTHERWISE) AS TO (a) THE CAPACITY, AGE, AIRWORTHINESS, VALUE, QUALITY, DURABILITY, CONFORMITY TO THE PROVISIONS OF THIS LEASE, DESCRIPTION, CONDITION (WHETHER OF THE AIRCRAFT, ANY ENGINE, ANY PART THEREOF OR THE AIRCRAFT DOCUMENTATION), DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE, CONSTRUCTION, OPERATION, DESCRIPTION, STATE, MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE (INCLUDING THE ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR USE THE AIRCRAFT DOCUMENTATION IN ANY OR ALL JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT OR ANY PART THEREOF, OR THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR CONCEALED, EXTERIOR OR INTERIOR, (b) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS, (c) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE OR (d) ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND EXTINGUISHED.
25
VALUE AND UTILITY OF THE AIRCRAFT AND EITHER (i) LESSEE ACCEPTED THE AIRCRAFT BASED ON A REASONABLE ASSUMPTION THAT THE NONCONFORMITY WOULD BE CURED AND IT WAS NOT SEASONABLY CURED OR (ii) LESSEE ACCEPTED THE AIRCRAFT WITHOUT DISCOVERING THE NONCONFORMITY BUT LESSEE’S ACCEPTANCE OF THE AIRCRAFT WAS REASONABLY INDUCED EITHER BY LESSOR’S ASSURANCES OR BY THE DIFFICULTY OF DISCOVERING ANY DEFECT PRIOR TO ACCEPTANCE, LESSEE AGREES NOT TO LOOK TO LESSOR FOR DAMAGES OR RELIEF ARISING OUT OF THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION.
26
ARTICLE 10
10.5 FLIGHT AND AIRPORT CHARGES.
10.5.1 | LESSEE will pay promptly when due all airport or enroute navigation charges (including Eurocontrol charges if and when applicable), navigation service charges, landing fees and all charges payable by LESSEE for the use of or for services provided at any airport, whether in respect of the Aircraft or any other aircraft of LESSEE which, if unpaid, may reasonably be expected to subject the Aircraft to any lien, and will indemnify and hold LESSOR harmless in respect of the same. This indemnity will continue in full force and effect notwithstanding the termination or expiration of the Lease Term for any reason or the return of the Aircraft. |
28
10.5.2 | If requested by LESSOR (but not more often than each six (6) months unless a Default or Event of Default shall have occurred and be continuing), LESSEE will provide LESSOR with a list of the airports to which LESSEE regularly operates the Aircraft or its other aircraft (in the event that the operation of such other aircraft may reasonably be expected to give rise to a lien on the Aircraft for navigation, landing, parking, storage or other similar charges). LESSEE hereby authorizes Eurocontrol (if and when applicable) or another aviation authority or airport or creditor claiming rights on the Aircraft to confirm the status of LESSEE’S payments to such creditor for the Aircraft and its other aircraft, as and when requested by LESSOR. |
29
ARTICLE 11
11.3 ANY APPROVED SUBLEASE. Any sublease approved by LESSOR will be for a term no greater than the remaining Lease Term. The applicable sublease agreement will contain provisions consistent with this Lease protecting LESSOR’s title to the Aircraft, providing appropriate LESSOR disclaimers and indemnities, regarding the maintenance and repair standards for the Aircraft and concerning the insurances which will be carried by the sublessee and the circumstances which constitute a Total Loss of the Aircraft. Any such sublease will be subject and subordinate to this Lease. LESSOR will have an opportunity to review the proposed sublease agreement reasonably in advance in order to determine that it meets the requirements of this Article 11.3. In its sole and reasonable discretion, LESSOR may require an opinion of counsel in connection with such sublease, including LESSOR’s right to repossess the Aircraft in the event of an Event of Default hereunder or under the sublease. LESSEE will not amend the terms of any approved sublease agreement without the prior written consent of LESSOR, which consent will not be unreasonably withheld.
30
ARTICLE 12
12.2 SPECIFIC ENGINE REQUIREMENTS.
12.2.1 | No Engine will remain in an unserviceable condition for more than three (3) months unless engine restoration is ongoing and has not been suspended or delayed without reasonable technical cause and LESSEE uses commercially reasonable efforts to cause such Engine to be returned to service. |
12.2.2 | When replacing Parts in the Engines, LESSEE will utilize only original equipment manufacturer parts (OEM parts). The foregoing will not apply to QEC and thrust reverser Parts. |
12.2.3 | LESSEE will not discriminate against the Engines with respect to Overhaul build standards and life-limited Part replacements and, in any event, at each performance restoration shop visit on an Engine, LESSEE will (a) build the Engine life-limited Parts to at least **Material Redacted** cycles remaining and (b) perform, at a minimum, a performance restoration workscope sufficient to allow such Engine to achieve at least **Material Redacted** hours and **Material Redacted** cycles of operation following such shop visit. Notwithstanding the foregoing, LESSOR agrees that the performance restoration workscope contained in the maintenance cost per flight hour when agreed to among LESSEE, LESSOR and LESSEE’s engine maintenance provider will be substituted for the performance restoration workscope described above. Failing the foregoing, LESSOR and LESSEE agree to negotiate in good faith and agree on a performance restoration workscope for the last engine shop visit which is reasonable in view of the age and condition of the Engine, the required condition at return and the cost of such restoration to LESSEE and LESSOR. |
31
12.2.4 | With respect to the last Engine shop visit of an Engine prior to return of the Aircraft, LESSEE will submit to LESSOR in advance the intended workscope of such shop visit. If LESSOR requests, LESSEE will perform additional work at such shop visit at LESSOR’s cost provided that if the same shall result in delay in redelivery, extension of the Lease Term or cause the Engine to be removed from service for a period in excess of the period the Engine would have been removed to revenue service absent such additional work, no Rent or other costs will be payable by LESSEE for the period which is attributable solely to LESSOR’s requested work (unless and to the extent LESSOR and LESSEE shall have otherwise agreed in writing). |
12.2.5 | Except as otherwise agreed by the parties (including, pursuant to any side letter) LESSEE will not enter into any Engine maintenance cost per flight hour, power-by-the-hour or similar agreement with the Engine manufacturer or any other Engine maintenance facility or organization without LESSOR’s prior written consent which consent shall not be unreasonably withheld or delayed. LESSEE will at its cost be responsible for performing all work necessary to meet the return conditions with respect to the Engines set forth in Article 23 even if such work is not covered by LESSEE’s Engine maintenance agreement. Without limiting the foregoing, any such Engine maintenance agreement will provide that: |
(a) LESSOR will receive and retain the monthly Engine Performance Restoration Reserves paid by LESSEE until an Engine shop visit has been completed;
(b) LESSEE will pay the Engine maintenance facility directly for any Engine Overhaul and repair costs in excess of the Engine Performance Restoration Reserves, including any differential between the hourly Engine Performance Restoration Reserves payable by LESSEE to LESSOR and the hourly rates charged by the Engine maintenance facility; and
(c) LESSEE will pay the Engine maintenance facility directly for any services provided by the Engine maintenance facility over and above repair of the Engines, such as trend monitoring, spare engines or spare parts.
(a) performance in accordance with the Maintenance Program of all routine and non-routine maintenance work;
(b) incorporation in the Aircraft of all Airworthiness Directives, all mandatory service bulletins of Manufacturer, the Engine manufacturer and other vendors or manufacturers of Parts incorporated on the Aircraft and any service bulletins which must be performed in order to maintain the warranties on the Aircraft, Engines, APU and Parts;
32
(c) incorporation in the Aircraft of all other service bulletins of Manufacturer, the Engine manufacturer and other vendors which LESSEE schedules to adopt within the Lease Term for the rest of its B737-700 / 800 aircraft fleet. It is the intent of the parties that the Aircraft will not be discriminated from the rest of LESSEE’s fleet in service bulletin compliance (including method of compliance) or other maintenance matters unless LESSEE’s exclusion of the such modification is reasonable giving consideration to the remaining Lease Term and industry practice;
(d) incorporation in the Maintenance Program for the Aircraft of a corrosion prevention and control program as recommended by Manufacturer and the correction of any discrepancies in accordance with the recommendations of Manufacturer and the Structural Repair Manual. In addition, all inspected areas will be properly treated with corrosion inhibitor as recommended by Manufacturer;
(e) maintaining in English and keeping in an up-to-date status the records and historical documents set forth in Attachment 1 of Exhibit J;
(f) maintaining historical records, in English, for on condition, condition-monitored, hard time and life-limited Parts (including an FAA Form 8130 or JAA Form 1) from the manufacturer of such Part or a repair facility which evidence that such Part is new or overhauled and establish authenticity, total time in service and time since overhaul for such Part), the hours and cycles the Aircraft and Engines operate and all maintenance and repairs performed on the Aircraft; and
(g) properly documenting all repairs, Modifications and alterations and the addition, removal or replacement of equipment, systems or components in accordance with the rules and regulations of the Aviation Authority and reflecting such items in the Aircraft Documentation, including Manufacturer’s manuals, as required by such rules and regulations. In addition, all repairs to the Aircraft will be accomplished in accordance with Manufacturer’s Structural Repair Manual (or FAA-approved data supported by an FAA Form 8110-3 or equivalent). All Modifications and alterations will also be accomplished in accordance with FAA-approved data supported by FAA Form 8110-3 or equivalent.
12.4.1 | LESSEE, at its own cost and expense, will promptly replace all Parts which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or rendered unfit or beyond economical repair (BER) for use for any reason. In the ordinary course of maintenance, service, repair, overhaul or testing, LESSEE may remove any Part provided that LESSEE replaces such Part as promptly as reasonably practicable. All replacement Parts will (a) be owned by LESSEE free and clear of all Security Interests (except Permitted Liens) of any kind or description (or, if not owned by LESSEE, LESSEE guarantees to LESSOR such title and clearance of all Security Interests), (b) be in airworthy condition, and of at least equivalent model, service bulletin and modification status and have a value and utility at least |
33
equal to the Parts replaced, assuming such replaced Parts were in the condition and repair required to be maintained by the terms hereof and (c) have a current “serviceable tag” (an FAA Form 8130 or JAA Form 1) of the manufacturer or maintenance facility providing such items to LESSEE, indicating that such Parts are new, serviceable or Overhauled. So long as a substitution meets the requirements of the Maintenance Program and Aviation Authority, LESSEE may substitute for any Part a part that does not meet the requirements of the foregoing sentence if a complying Part cannot be procured or installed within the available ground time of the Aircraft and as soon as practicable the noncomplying part is removed and replaced by a complying Part. With respect to replacement modules in an Engine, the replacement module will not have been previously operated at a higher thrust rating than the replaced module. As set forth in Article 12.2.2, LESSEE may not replace any Part in the Engines, excluding QEC and thrust reversers, with a part other than an original equipment manufacturer part (an OEM part). With respect to replacement modules in an Engine, the replacement module will not have been previously operated at a higher thrust rating than the replaced module. |
12.4.2 | All Parts removed from the Airframe, any Engine or the APU will remain the property of LESSOR and subject to this Lease no matter where located, until such time as such Parts have been replaced by Parts (which have been incorporated or installed in or attached to the Airframe, such Engine or the APU) which meet the requirements for replacement Parts specified above and title to such replacement Parts has passed to LESSOR under the Laws of the State of Registration and the lex situs. To the extent permitted by the Laws of the State of Registration and the lex situs it is the intent of LESSOR and LESSEE that without further act and immediately upon any replacement Part becoming incorporated, installed or attached to the Airframe, an Engine or the APU as above provided, (a) title to the removed Part will thereupon vest in LESSEE, free and clear of all rights of LESSOR and LESSOR Liens and LESSOR will, upon LESSEE’s reasonable request, provide LESSEE with a xxxx of sale thereto, (b) title to the replacement Part will thereupon vest in LESSOR free and clear of all rights of LESSEE free and clear of all rights of LESSEE and liens (other than LESSOR Liens) and LESSEE will, upon LESSOR’s reasonable request, provide LESSOR with a xxxx of sale thereto and (c) such replacement Part will become subject to this Lease and be deemed to be a Part hereunder to the same extent as the Parts originally incorporated or installed in or attached to the Airframe, such Engine or the APU. |
12.5.1 | If an Engine is removed for testing, service, repair, maintenance, Overhaul work, alterations or modifications, title to such Engine will at all times remain vested in LESSOR. |
34
12.5.2 | LESSEE will be entitled to remove any of the Engines from the Aircraft and install another engine or engines on the Aircraft, provided that LESSEE complies with each of the following obligations: |
(a) the insurance requirements set forth in Article 18 and Exhibit C are in place;
(b) LESSEE ensures that the identification plates referred to in Article 15 are not removed from any Engine upon such Engine being detached from the Aircraft; and
(c) title to the Engine remains with LESSOR free from all Security Interests (except Permitted Liens) regardless of the location of the Engine or its attachment to or detachment from the Aircraft.
12.6.1 | If the APU is removed for testing, service, repair, maintenance, Overhaul work, alterations or modifications, title to the APU will at all times remain vested in LESSOR. |
12.6.2 | LESSEE will be entitled to remove the APU from the Aircraft and install another auxiliary power unit on the Aircraft, provided that LESSEE complies with each of the following obligations: |
(a) the insurance requirements set forth in Article 18 and Exhibit C are in place;
(b) LESSEE ensures that the identification plates referred to in Article 15 are not removed from the APU; and
(c) title to the APU remains with LESSOR free from all Security Interests (except Permitted Liens) regardless of the location of the APU or its attachment to or detachment from the Aircraft.
35
12.8.1 | LESSEE or LESSOR has title to such other aircraft free and clear of all Security Interests (except Permitted Liens). |
12.8.2 | LESSEE, LESSOR and all of the Creditors of LESSEE of such aircraft enter into an engines cooperation agreement in form and substance acceptable to LESSOR in which each party agrees to recognize one another’s rights in the engines. LESSEE will reimburse LESSOR and LESSOR’s Lender for their reasonable attorneys’ fees and costs in negotiating and finalizing engine cooperation agreement arrangements with LESSEE and its Creditors. |
12.8.3 | Such other aircraft is subject to a Creditor Agreement (but no other Security Interests except Permitted Liens) which by its terms expressly or effectively states that such Creditor and its successors and assigns will not acquire any right, title or interest in any Engine by reason of such Engine being installed on such aircraft provided the owner of such Engine provides reciprocal title recognition provisions. To evidence the foregoing, at or before Delivery, LESSEE will provide LESSOR with an officer’s certificate as to this matter (and, officer’s certificate will be provided during the Lease Term with respect to other Creditor Agreements regarding aircraft entering LESSEE’s operating fleet subsequent to Delivery). LESSEE hereby agrees that if LESSOR’s title to an Engine is in fact impaired under any such Creditor Agreement, such impairment will be a Total Loss of such Engine and the provisions of Article 19.5 will apply. To the extent another Creditor Agreement contains such provisions, then LESSOR hereby agrees for the benefit of the Creditor of such Creditor Agreement that neither LESSOR nor its successors or assigns will acquire or claim any right, title or interest in any engine in which LESSEE or another Creditor has an interest as a result of such engine being installed on the Airframe. |
12.10.1 | No modification, alteration, addition or removal to the Aircraft (“MODIFICATION”) expected to cost over **Material Redacted** **Material Redacted** or deviation from the Aircraft’s original type design or configuration will be made without the prior written consent of LESSOR, which consent will not be unreasonably withheld or delayed. The term Modification does not include Airworthiness Directives or Manufacturer’s recommended service bulletins, for which LESSOR’s consent is not required. **Material Redacted**. |
36
12.10.2 | LESSOR may review LESSEE’s proposed designs, plans, engineering drawings and diagrams, and flight and maintenance manual revisions for any proposed Modification. If requested by LESSOR, LESSEE will furnish LESSOR (at LESSEE’s expense) with such documents in final form and any other documents required by Law, as a result of such Modification. All Modifications incorporated on the Aircraft will be properly documented in the Aircraft Documentation and be fully approved by the Aviation Authority. |
12.10.3 | Notwithstanding any other provision of this Lease, no Modification will be made which has the effect of decreasing the utility or value of the Aircraft or invalidating any warranty applicable to the Aircraft. |
12.10.4 | No Modification will be made by LESSEE if an Event of Default exists and is continuing hereunder. |
12.10.5 | Unless otherwise agreed by LESSOR in writing, all permanent or structural Modifications will promptly become a part of the Aircraft and LESSEE relinquishes to LESSOR all rights and title thereto. However, all temporary and non-structural Modifications will remain the property of LESSEE and, at LESSOR’s request and LESSEE’s cost, will be removed from the Aircraft prior to return of the Aircraft, with LESSEE restoring the Aircraft to the condition it was in prior to the Modification in a manner cosmetically acceptable to LESSOR (considering international passenger airline standards). Notwithstanding the foregoing, no such removal will be permitted without LESSOR’s permission after the occurrence of an Event of Default hereunder and immediately upon the occurrence of an Event of Default hereunder, without the requirement of any further act or notice, all right, title and interest in such Modifications will immediately vest in LESSOR. |
12.10.6 | LESSOR will bear no liability for the cost of Modifications of the Aircraft whether in the event of grounding or suspensions of certification, or for any other cause. |
12.12.1 | Commencing with a report furnished ten (10) days after the end of the calendar month in which Delivery occurs, LESSEE will furnish to LESSOR a Monthly Report in English in the form attached hereto as Exhibit K. Each Monthly Report will be furnished within ten (10) days after the end of each calendar month, except that the Monthly Report pertaining to the last month (or any portion thereof) of this Lease will be furnished to LESSOR on the Termination Date. |
37
12.12.2 | Once each eighteen months during the Lease Term, LESSEE will provide LESSOR with an updated Technical Evaluation Report for the Aircraft in the form and substance of Exhibit M, as revised. |
12.12.3 | From time to time, LESSEE will provide LESSOR with such other technical information or documents as LESSOR may reasonably request. |
38
ARTICLE 13
13.2 ENGINE PERFORMANCE RESTORATION RESERVES.
13.2.1 | Restoration LESSOR will reimburse LESSEE from the Engine Performance Restoration Reserves for the actual cost associated with performance restoration of the Basic Engine during completed Engine shop visits (i.e. heavy maintenance visits) requiring off-wing teardown and/or disassembly as described in Article 12.2.3, with work performed for all other causes excluded, including those causes set forth in Article 13.5. Subject to Article 16.1 and excluding exchange fees and handling, packaging and shipping charges, reimbursement for an Engine will be made up to the amount in the Engine Performance Restoration Reserves applicable to such Engine at the time of removal of such Engine. |
13.2.2 | Reimbursement from the Engine Performance Restoration Reserves will be limited as to each module of such Engine in accordance with the following percentages of the remaining total amount in the Engine Performance Restoration Reserves for such Engine: |
**Material Redacted** % Fan and Accessory Gearbox Module
**Material Redacted** % High Pressure Compressor
**Material Redacted** % High Pressure Turbine
**Material Redacted** % Low Pressure Turbine
13.2.3 | LESSEE will not enter into any Engine maintenance cost per flight hour, power-by-the-hour or similar agreement for the Engines with the Engine manufacturer or any other Engine maintenance facility or organization without LESSOR’s consent. |
39
excluded, including those causes set forth in Article 13.5. Subject to Article 16.1 and excluding exchange fees and handling, packaging and shipping charges, reimbursement for replacement of life-limited Parts in an Engine will be made up to the amount in the Engine LLP Reserves applicable to such Engine at the time of removal of such Engine.
40
ARTICLE 14
42
ARTICLE 15
IDENTIFICATION PLATES
LESSOR will affix and LESSEE will at all times maintain on the Airframe, each Engine and the APU the identification plates containing the following legends or any other legend requested by LESSOR in writing:
15.1 AIRFRAME IDENTIFICATION PLATES.
Location: | One to be affixed to the Aircraft structure above the forward entry door adjacent to and not less prominent than that of Manufacturer’s data plate and another in a prominent place on the flight deck. | |
Size: | No smaller than 2” x 3”. | |
Legend: | “THIS AIRCRAFT IS OWNED BY INTERNATIONAL LEASE FINANCE CORPORATION AND IS OPERATED UNDER LEASE BY COMPANIA PANAMENA DE AVIACION, S.A.
MANUFACTURER’S SERIAL NO: 32800
OWNER’S ADDRESS:
INTERNATIONAL LEASE FINANCE CORPORATION 10250 Constellation Boulevard, 00xx Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000, X.X.X. Fax: (000) 000-0000 |
15.2 ENGINE IDENTIFICATION PLATES.
Location: | The legend on the plate must be no less prominent than the Engine data plate and must be visible. | |
Size: | No smaller than 1” x 4”. | |
Legend: | “THIS ENGINE IS OWNED BY INTERNATIONAL LEASE FINANCE CORPORATION, LOS ANGELES, CALIFORNIA, USA AND IS OPERATED UNDER LEASE BY COMPANIA PANAMENA DE AVIACION, S.A.” |
15.3 APU IDENTIFICATION PLATE.
Location: | The legend on the plate must be visible. | |
Size: | No smaller than 1” x 3”. | |
Legend: | “THIS APU IS OWNED BY INTERNATIONAL LEASE FINANCE CORPORATION, LOS ANGELES, CALIFORNIA, USA AND IS OPERATED UNDER LEASE BY COMPANIA PANAMENA DE AVIACION, S.A.” |
43
ARTICLE 16
(a) the Aircraft, Engines, APU or any Parts;
(b) the use, operation or maintenance of the Aircraft or carriage of passengers or freight during the Lease Term and until the Termination Date;
(c) this Lease, the payments due hereunder and the terms and conditions hereof; and
(d) the ownership, financing, delivery, import or export, return, sale, payment of Total Loss Proceeds or other disposition of the Aircraft.
(a) Taxes imposed by the U.S. or the State of California on the net income, gross receipts, capital, turnover or net worth and franchise taxes of LESSOR;
(b) Taxes in jurisdictions in which LESSOR would have been subject to Tax to the extent that the parties had not consummated this transaction; provided, however, that if LESSEE’s operation of the Aircraft to a jurisdiction and the operation of other aircraft owned by LESSOR to such jurisdiction causes LESSOR to be liable for any tax, then LESSEE will pay the portion of such Tax attributed to LESSEE’s operations in such jurisdiction;
(c) Taxes imposed in connection with a LESSOR’s voluntary transfer or other disposition of all or any part of its interest in the Aircraft (or any part thereof) or this Lease other than resulting from an Event of Default which shall have occurred and be continuing or other foreclosure, seizure or sale of the Aircraft resulting from LESSEE’s action or inaction;
(d) Taxes imposed as a direct result of any LESSOR Lien;
44
(e) any additional or incremental tax which arise solely as a result of LESSOR’s failure to provide information necessary, for LESSEE to properly complete and file any tax return or request an otherwise legally available exemption;
(f) Taxes solely attributable a sale or transfer of the Aircraft not resulting from an act or omission of LESSEE;
(g) Taxes attributable to the period prior to Delivery or after the Termination Date; or
(h) Taxes attributable to LESSOR’s gross negligence, willful misconduct or breach of this Lease.
16.3 AFTER-TAX BASIS. The amount which LESSEE is required to pay with respect to any Taxes indemnified against under Article 16.1 is an amount sufficient to restore LESSOR on an after-tax basis to the same position LESSOR would have been in had such Taxes not been incurred. LESSEE may satisfy its obligations under this Article 16 by paying and indemnifying LESSOR for Taxes payable by LESSEE hereunder or grossing up payments made pursuant to this Lease in an amount sufficient to allow LESSOR to pay such Taxes and receive the full benefit of this Lease provided LESSEE will not be obligated to pay such Tax obligations twice as a result of gross-up and indemnity.
45
46
ARTICLE 17
(a) this Lease or any transactions contemplated hereby;
(b) the operation, possession, use, non-use, control, leasing, subleasing, maintenance, storage, overhaul, testing or inspections of the Aircraft, any Engine, the APU or any Part (whether by LESSEE, any sublessee or any other Person other than LESSOR or any Person claiming by or through LESSOR in violation of LESSOR’s covenant of quiet enjoyment contained in Article 21.2) during the Lease Term and until the Termination Date or the acceptance flights at return, whether or not the same is in compliance with the terms of this Lease, including without limitation claims for death, personal injury, property damage, other loss or harm to any Person and claims relating to any Laws, including without limitation environmental control, noise and pollution laws, rules or regulations;
(c) the manufacture, design, acceptance, improper rejection, delivery, return, sale after an Event of Default, import, export, condition, repair, modification, servicing, customer, product support, information or training provided by Manufacturer and other vendors, airworthiness, registration, reregistration, performance, sublease, merchantability, fitness for use, substitution or replacement of an Engine, APU or any Part by LESSEE under this Lease or other transfer of use or possession of the Aircraft, an Engine, the APU or any Part, including under a pooling or interchange arrangement, including without limitation latent and other defects, whether or not discoverable and patent, trademark or copyright infringement;
(d) the prevention or attempt to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Aircraft, or in securing the release of the Aircraft; or
(e) as a consequence of any Default or Event of Default by LESSEE.
The foregoing indemnity by LESSEE is intended to include and cover any Expense to which an Indemnitee may be subject (in contract, tort, strict liability or under any other theory) regardless of the negligence, active or passive or any other type, of such Indemnitee, so long as such Expense does not fall within any of the exceptions listed in Article 17.2.
47
(a) Expenses which have resulted from the willful misconduct of such Indemnitee;
(b) Expenses which are attributable to acts or events which occur after the Termination Date and return of the Aircraft to LESSOR in the condition required hereunder, but in any such case only to the extent not attributable to acts or omissions of LESSEE;
(c) **Material Redacted**;
(d) **Material Redacted**;
(e) **Material Redacted**;
(f) Expenses solely attributable a sale or transfer of the Aircraft not resulting from an act or omission of LESSEE;
(g) Expenses representing Taxes, it being acknowledged that the terms of Article 16 apply exclusively to LESSEE’s indemnity obligations with respect to Taxes; or
(h) Expenses due to the breach by LESSOR (or any person lawfully claiming through LESSOR) of its covenant of quiet enjoyment pursuant to Article 21.2 (except to the extent covered by the insurances LESSEE is required to carry pursuant to Article 18 or other LESSEE insurances).
17.3 AFTER-TAX BASIS. The amount which LESSEE will be required to pay with respect to any Expense indemnified against under Article 17.1 will be an amount sufficient to restore the Indemnitee, on an after-tax basis, to the same position such Indemnitee would have been in had such Expense not been incurred after taking into account the amount of any credits, deductions or other Tax benefits or savings realized by such Indemnitee.
48
49
ARTICLE 18
50
(a) to pay any premiums due or to effect or maintain insurance meeting the requirements hereof or otherwise remedy such failure in such manner as LESSOR considers appropriate (and LESSEE will upon demand reimburse LESSOR in full for any amount so expended in that connection); or
51
(b) at any time while such failure is continuing, to require the Aircraft to remain at any airport or (as the case may be), proceed to and remain at any airport designated by LESSOR, until such failure is remedied.
(a) the same terms as the original insurance;
(b) a cut-through and assignment clause satisfactory to LESSOR (acting reasonably and in consultation with the other providers of LESSEE’s aircraft) and in accordance with industry practice; and
(c) payment will be made notwithstanding (i) any bankruptcy, insolvency, liquidation or dissolution of any of the original insurers and/or (ii) that the original insurers have made no payment under the original insurance policies.
52
ARTICLE 19
Throughout the Lease Term and until the Termination Date, LESSEE will bear all risk of loss, theft, damage and destruction to the Aircraft.
19.1 DEFINITIONS. In this Article 19 and this Lease:
“AGREED VALUE” means an amount equal to **Material Redacted** is expressed in January 2004 U.S. Dollars which amount will increase in accordance with Manufacturer’s Escalation Rate. **Material Redacted**.
“NET TOTAL LOSS PROCEEDS” means the Total Loss Proceeds actually received by LESSOR following a Total Loss, less any legal and other out-of-pocket expenses, taxes or duties incurred by LESSOR in connection with the collection of such proceeds.
“TOTAL LOSS” means any of the following in relation to the Aircraft, Airframe, any Engine or the APU and “TOTAL LOSS DATE” means the date set forth in parenthesis after each Total Loss:
(a) destruction, damage beyond repair or being rendered permanently unfit for normal use for any reason (the date such event occurs or, if not known, the date on which the Aircraft, Airframe, Engine or APU was last heard of);
(b) actual, constructive, compromised, arranged or agreed total loss (the earlier of the date on which the loss is agreed or compromised by the insurers or forty five (45) days after the date of notice to LESSEE’s brokers or insurers claiming such total loss);
(c) requisition of title, confiscation, forfeiture or any compulsory acquisition or other similar event (the date on which the same takes effect);
(d) sequestration, detention, seizure or any similar event for more than forty-five (45) consecutive days (the earlier of the date on which insurers make payment on the basis of a total loss or the date of expiration of such period);
(e) requisition for use for more than one hundred eighty (180) consecutive days, except as set forth in Article 19.9 (the earlier of the date on which the insurers make payment on the basis of a total loss or the date of expiration of such period);
(f) in the case of an Engine, the event described in Article 12.8.3 (the date on which the same takes effect);
(g) a proper, lawful sale of the Aircraft in connection with Eurocontrol charges owed by LESSEE (the date on which the sale occurs);
53
(h) any sale of the Aircraft in connection with a LESSEE bankruptcy, whether by an administrator, trustee or court (the date on which the intent to sell the Aircraft becomes known); or
(i) any other occurrence not permitted under this Lease (including a violation of the covenant of quiet enjoyment contained in Article 21.2) which deprives LESSEE of use or possession for a period of ninety (90) consecutive days or longer (the 90th day of such period) except where full insurance on the Aircraft is in effect or a full indemnity acceptable to LESSOR in lieu thereof exists and all other provisions of this Lease are being complied with (the ninetieth (90th) day of such period).
“TOTAL LOSS PROCEEDS” means the proceeds of any insurance or any compensation or similar payment arising in respect of a Total Loss.
19.3.1 | After the Total Loss Date and until receipt by LESSOR of the Agreed Value and all other amounts then due under this Lease, LESSEE will continue to pay Rent and the parties will perform all of their other obligations under this Lease. |
19.3.2 | On the date which is the earlier of the following dates: |
(a) the date on which the Total Loss Proceeds of the Aircraft or the Airframe are paid by LESSEE’s insurance underwriters or brokers and
(b) the date which falls forty (45) days after the Total Loss Date,
LESSEE will pay to LESSOR an amount equal to the sum of:
(c) the Agreed Value and
(d) all other amounts then accrued under this Lease, less an amount equal to the Net Total Loss Proceeds received by LESSOR by such date.
19.3.3 | LESSOR will apply the Net Total Loss Proceeds and any amounts received from LESSEE pursuant to Article 19.3.2 as follows: |
(a) first, in discharge of any unpaid Rent and any other amounts accrued and unpaid up to the date of LESSOR’s receipt of the Agreed Value;
(b) second, in discharge of the Agreed Value; and
(c) third, payment of the balance, if any, to LESSEE.
54
19.3.4 | Upon receipt by LESSOR of all monies payable by LESSEE in Article 19.3, provided no Default or Event of Default has occurred and is continuing, this Lease will terminate except for LESSEE’s obligations under Articles 10.5, 16 and 17 which survive the Termination Date. |
FOR AVOIDANCE OF DOUBT, THE AGREED VALUE OF THE AIRCRAFT WILL BE PAYABLE TO LESSOR PURSUANT TO THIS ARTICLE 19.3 WHEN A TOTAL LOSS OF THE AIRFRAME OCCURS EVEN IF THERE HAS NOT BEEN A TOTAL LOSS OF AN ENGINE, ENGINES OR THE APU.
19.5 TOTAL LOSS OF ENGINE AND NOT AIRFRAME.
19.5.1 | Upon a Total Loss of any Engine not installed on the Airframe or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, LESSEE will replace such Engine as soon as reasonably possible by duly conveying or causing to be conveyed to LESSOR title to another engine from LESSEE (or another Person with reasonable net worth or a guarantee from LESSEE) (a) free and clear of all Security Interests (except Permitted Liens) of any kind or description, (b) in airworthy condition and of the same or improved model, service bulletin and modification status and having a value and utility at least equal to the Engine which sustained the Total Loss, (c) not older (by reference to serial number or manufacture date) than the older of the two Engines delivered by LESSOR to LESSEE with the Aircraft on the Delivery Date and (d) in the same or better operating condition as the Engine which sustained a Total Loss, including time in service, hours and cycles since new and hours and cycles available to the next inspection, Overhaul or scheduled or anticipated removal. Such replacement engine will be an “Engine” as defined herein and the Engine which sustained such Total Loss will cease to be an “Engine”. |
19.5.2 | LESSEE agrees at its own expense to take such action as LESSOR may reasonably request in order that any such replacement Engine becomes the property of LESSOR and is leased hereunder on the same terms as the destroyed Engine. LESSEE’s obligation to pay Rent will continue in full force and effect, but an amount equal to the Net Total Loss Proceeds received by LESSOR with respect to such destroyed Engine will, subject to LESSOR’s right to deduct therefrom any amounts then due and payable by LESSEE under this Lease, be promptly paid to LESSEE. |
55
19.5.3 | Notwithstanding Articles 19.5.1 and 19.5.2, if at the time of a Total Loss of an Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, LESSOR and LESSEE are parties to a spare engine lease pursuant to which LESSOR is leasing a spare engine to LESSEE of the same model and type as the Engine which has suffered such Total Loss, LESSOR will receive from LESSEE the replacement cost of the Engine instead of accepting a replacement engine. One (1) of such LESSOR spare engines will then be substituted under this Lease for the Engine which suffered such Total Loss and the applicable spare engine lease will terminate. |
19.6.1 | Upon a Total Loss of the APU when not installed on the Airframe or a Total Loss of the APU while installed on the Airframe not involving a Total Loss of the Airframe, LESSEE will replace such APU as soon as reasonably possible by duly conveying or causing to be conveyed to LESSOR title to another auxiliary power unit (a) free and clear of all Security Interests (except Permitted Liens) of any kind or description, (b) in airworthy condition and of the same or improved model, service bulletin and modification status and having a value and utility at least equal to the APU which sustained the Total Loss, (c) not older (by reference to serial number or manufacture date) than the APU delivered by LESSOR to LESSEE with the Aircraft on the Delivery Date and (d) in the same or better operating condition as the APU which sustained the Total Loss, including time in service, hours and cycles since new and hours and cycles available to the next inspection, Overhaul or scheduled or anticipated removal. Such replacement auxiliary power unit will be the “APU” as defined herein and the auxiliary power unit which sustained such Total Loss will cease to be the “APU”. |
19.6.2 | LESSEE agrees at its own expense to take such action as LESSOR may reasonably request in order that any such replacement APU becomes the property of LESSOR and is leased hereunder on the same terms as the destroyed APU. LESSEE’s obligation to pay Rent will continue in full force and effect, but an amount equal to the Net Total Loss Proceeds received by LESSOR with respect to such destroyed APU will, subject to LESSOR’s right to deduct therefrom any amounts then due and payable by LESSEE under this Lease, promptly be paid to LESSEE. |
19.7.1 | If the Aircraft or any Part thereof suffers loss or damage not constituting a Total Loss of the Aircraft or the Airframe or any Engine or the APU, all the obligations of LESSEE under this Lease (including payment of Rent) will continue in full force. |
19.7.2 | In the event of any loss or damage to the Aircraft or Airframe which does not constitute a Total Loss of the Aircraft or the Airframe, or any loss or damage to |
56
an Engine or the APU which does not constitute a Total Loss of such Engine or the APU, LESSEE will at its sole cost and expense fully repair the Aircraft, Engine or APU in order that the Aircraft, Engine or APU is placed in an airworthy condition and substantially the same condition as it was prior to such loss or damage. All repairs will be performed in a manner which preserves and maintains all warranties and service life policies to the same extent as they existed prior to such loss or damage. LESSEE will notify LESSOR promptly of any loss, theft or damage to the Aircraft for which the cost of repairs is estimated to exceed **Material Redacted**, together with LESSEE’s proposal for carrying out the repair. In the event that LESSOR does not agree with LESSEE’s proposals for repair, LESSOR will so notify LESSEE within two (2) Business Days after its receipt of such proposal. LESSEE and LESSOR will then consult with Manufacturer and LESSEE and LESSOR agree to accept as conclusive, and be bound by, Manufacturer’s directions or recommendations as to the manner in which to carry out such repairs. If Manufacturer declines to give directions or recommendations, LESSEE will carry out the repairs in accordance with the reasonable directions of LESSOR. |
19.10 LESSOR RETENTION OF RESERVES. **Material Redacted**.
57
ARTICLE 20
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF LESSEE
20.1 REPRESENTATIONS AND WARRANTIES. LESSEE represents and warrants the following to LESSOR as of the date of execution of this Lease and as of the Delivery Date:
20.1.1 | Corporate Status. LESSEE is a corporation duly incorporated, validly existing and in good standing under the Laws of Panama. It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations hereunder. |
20.1.2 | Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the Aviation Authority or any other Government Entity is required for the valid authorization, execution, delivery and performance by LESSEE of this Lease, except as will have been duly effected as of the Delivery Date. |
20.1.3 | Binding. LESSEE’s Board of Directors has authorized LESSEE to enter into this Lease, any Side Letters hereto and any other documentation in connection with the leasing of the Aircraft from LESSOR (collectively, the “OPERATIVE DOCUMENTS”) and perform its obligations under the Operative Documents. This Lease and the other Operative Documents have been duly executed and delivered by LESSEE and represent the valid and binding obligations of LESSEE, enforceable in accordance with their terms except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting creditors’ rights and except by general principles of equity. When executed by LESSEE at Delivery, the same will apply to the Estoppel and Acceptance Certificate. |
20.1.4 | No Breach. The execution and delivery of the Operative Documents, the consummation by LESSEE of the transactions contemplated herein and compliance by LESSEE with the terms and provisions hereof do not and will not contravene any Law applicable to LESSEE, or result in any breach of or constitute any default under or result in the creation of any Security Interest upon any property of LESSEE, pursuant to any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSEE is a party or by which LESSEE or its properties or assets may be bound or affected. When executed by LESSEE at Delivery, the same will apply to the Estoppel and Acceptance Certificate. |
20.1.5 | Filings. Except for any filing or recording that may be required by the Aviation Authority, no filing or recording of any instrument or document (including the filing of any financial statement) is necessary under the Laws of the State of Registration and any applicable states in order for this Lease to constitute a valid and perfected lease of record relating to the Aircraft. |
58
20.1.6 | Translation or Notarization. None of the Lease or any other Operative Document needs to be translated, notarized, legalized, apostilled or consularized as a condition to the legality, validity, filing, enforceability or admissibility in evidence thereof. |
20.1.7 | Licenses. LESSEE holds all required licenses, certificates and permits from applicable Government Entities in Panama for the conduct of its business as a certificated air carrier as presently conducted and performance of its obligations under this Lease. |
20.1.8 | No Suits. To the knowledge of LESSEE after reasonable inquiry, there are no suits, arbitrations or other proceedings pending or threatened before any court or administrative agency against or affecting LESSEE which, if adversely determined, would have a material adverse effect on LESSEE’s ability to perform under this Lease, except as described in the financial statements provided to LESSOR pursuant to Article 22. |
20.1.9 | No Withholding. Under the Laws of Panama currently in effect, LESSEE will not be required to deduct any withholding or other Tax from any payment it may make under this Lease. |
20.1.10 | No Restrictions on Payments. Under the Laws of Panama, there are no present restrictions on LESSEE making the payments required by this Lease. |
20.1.11 | General Obligations. The obligations of LESSEE under this Lease are direct, general and unconditional obligations of LESSEE and rank or will rank at least pari passu with all other present and future unsecured and unsubordinated obligations (including contingent obligations) of LESSEE, with the exception of such obligations as are mandatorily preferred by law and not by reason of any contract. |
20.1.12 | No Sovereign Immunity. LESSEE, under the Laws of Panama or of any other jurisdiction affecting LESSEE, is subject to private commercial law and suit. Neither LESSEE nor its properties or assets is entitled to sovereign immunity under any such Laws. LESSEE’s performance of its obligations hereunder constitute commercial acts done for commercial purposes. |
20.1.13 | Tax Returns. All necessary returns have been delivered by LESSEE to all relevant taxation authorities in the jurisdiction of its incorporation and all taxes due and payable by LESSEE (other than such Taxes the amount or imposition of which are being contested by LESSEE by appropriate proceedings) have been paid. |
20.1.14 | No Material Adverse Effect. LESSEE is not in default under any agreement to which it is a party or by which it may be bound which default would have a material adverse effect on LESSEE’s ability to perform under this Lease. |
59
20.1.15 | No Default or Event of Default under this Lease. At the time of execution of this Lease, no Default or Event of Default has occurred and is continuing and the financial statements provided to LESSOR pursuant to Article 22 fairly present the financial condition of LESSEE as of the date referenced therein. |
20.2 COVENANTS. LESSEE covenants to LESSOR that it will comply with the following throughout the entire Lease Tenn:
20.2.1 | Licensing. LESSEE will hold all required licenses, certificates and permits from applicable Government Entities in Panama for the conduct of its business as a certificated air carrier and performance of its obligations under this Lease. LESSEE will advise LESSOR promptly in the event any such licenses, certificates or permits are cancelled, terminated, revoked or not renewed. |
20.2.2 | Payments. If at any time any such restrictions may be applicable, LESSEE will obtain all certificates, licenses, permits, exemptions and other authorizations which are from time to time required for the making of the payments required by this Lease on the dates and in the amounts and currency which are stipulated herein, and will maintain the same in full force and effect for so long as the same will be required. |
20.2.3 | Sovereign Immunity. LESSEE, under the Laws of Panama or of any other jurisdiction affecting LESSEE, will continue to be subject to private commercial law and suit. Neither LESSEE nor its properties or assets are currently entitled to sovereign immunity under any such Laws. LESSEE’s performance of its obligations hereunder will constitute commercial acts done for commercial purposes. LESSEE will advise LESSOR promptly of any change in the foregoing. |
20.2.4 | Information about Suits. LESSEE will promptly give to LESSOR a notice in writing of any suit, arbitration or proceeding before any court, administrative agency or Government Entity which, if adversely determined, would materially adversely affect LESSEE’s ability to perform under this Lease. |
20.2.5 | Restrictions on Mergers. LESSEE will not sell or convey substantially all of its property and assets (except capital asset replacement in the normal course of business) or merge or consolidate with or into any other corporation unless (a) LESSEE is the surviving entity and, as such, has a net worth equivalent to its net worth as of the date hereof, or (b) LESSEE has obtained LESSOR’s prior written consent which will not be unreasonably withheld or delayed. |
20.2.6 | Restriction on Relinquishment of Possession. LESSEE will not, without the prior consent of LESSOR, deliver, transfer or relinquish possession of the Aircraft except in accordance with Articles 11 and 12. |
20.2.7 | No Security Interests. LESSEE will not create or agree to or permit to arise any Security Interest (other than Permitted Liens) on or with respect to the Aircraft, title thereto or any interest therein. LESSEE will promptly, at its own expense, take all action as may be necessary to discharge or remove any such Security Interest if it exists at any time. LESSEE will within promptly after becoming aware of the existence of any such Security Interest give written notice thereof to LESSOR. |
20.2.8 | Representations to Other Parties. LESSEE will not represent or hold out LESSOR as carrying goods or passengers on the Aircraft or as being in any way connected or associated with any operation of the Aircraft. |
60
ARTICLE 21
REPRESENTATIONS, WARRANTIES AND
21.1 REPRESENTATIONS AND WARRANTIES. LESSOR represents and warrants the following to LESSEE as of the date of execution of the Lease and as of the Delivery Date and ALL OTHER WARRANTIES, EXPRESS OR IMPLIED HAVE BEEN WAIVED IN ACCORDANCE WITH ARTICLE 8:
21.1.1 | Corporate Status. LESSOR is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of California. It has the corporate power and authority to carry on its business as presently conducted and to perform its obligations hereunder. |
21.1.2 | No Suits. To the knowledge of LESSOR after reasonable inquiry, there are no suits, arbitrations or other proceedings pending or threatened before any court or administrative agency against or affecting LESSOR which, if adversely determined, would have a material adverse effect on LESSOR’s ability to perform under this Lease. |
21.1.3 | Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to any U.S. Government Entity is required for the valid authorization, execution, delivery and performance by LESSOR of this Lease. |
21.1.4 | Binding. This Lease and the other Operative Documents have been duly authorized, executed and delivered by LESSOR and represent the valid and binding obligations of LESSOR, enforceable in accordance with their terms except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors’ rights or general principles of equity. |
21.1.5 | No Breach. The execution and delivery of the Operative Documents, the consummation by LESSOR of the transactions contemplated herein and compliance by LESSOR with the terms and provisions hereof do not and will not contravene any Law applicable to LESSOR, or result in any breach of or constitute any default under any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which LESSOR is a party or by which LESSOR or its properties or assets may be bound or affected. |
21.1.6 | Title to Aircraft. On the Delivery Date LESSOR will have good and valid title to the Aircraft. |
21.1.7 | Consents. LESSOR has obtained or will obtain all necessary consents with respect to the entry into or performance of its obligations under this Lease. |
61
21.1.8 | No Default. At the time of execution of this Lease, LESSOR is not in default under any agreement to which it is a party or by which it may be bound which default would have a material adverse effect on LESSOR’s ability to perform under this Lease. |
21.2 COVENANT OF QUIET ENJOYMENT. So long as no Default or Event of Default has occurred and is continuing hereunder, LESSOR covenants that neither LESSOR nor any person lawfully claiming by or through LESSOR will interfere with or otherwise disturb LESSEE’s quiet, peaceful use and enjoyment of the Aircraft.
62
ARTICLE 22
FINANCIAL AND OTHER INFORMATION
LESSEE agrees to furnish each of the following to LESSOR:
(a) within sixty (60) days after the end of each fiscal quarter of LESSEE, three (3) copies of the unaudited consolidated financial statements (including a balance sheet and profit and loss statement) prepared for such quarter in accordance with international generally accepted accounting principles;
(b) within one hundred twenty (120) days after the end of each fiscal year of LESSEE, three (3) copies of the audited consolidated financial statements (including a balance sheet and profit and loss statement) prepared as of the close of such fiscal year in accordance with international generally accepted accounting principles. LESSEE’s chief financial officer will also provide a certificate stating that no Default or Event of Default exists under this Lease or, if a Default or Event of Default does exist, then such officer will describe both the nature of the Default or Event of Default and measures being taken by LESSEE to remedy the same;
(c) promptly after distribution, three (3) copies of all reports and financial statements which LESSEE sends or makes available to other aircraft lessors; and
(d) from time to time, such other reasonable information as LESSOR or LESSOR’s Lender (subject to the confidentiality restrictions set forth in Article 28.8) may reasonably request concerning the location, condition, use and operation of the Aircraft or the financial condition of LESSEE.
63
ARTICLE 23
64
23.7.1 | During the maintenance checks performed immediately prior to the proposed redelivery and at the actual return of the Aircraft, LESSOR and/or its representatives will have an opportunity to conduct a systems functional and operational inspection of the Aircraft (and other types of reasonable inspections based upon the Aircraft type, age, use and other known factors with respect to the Aircraft) and a full inspection of the Aircraft Documentation (including records and manuals), all to LESSOR’s reasonable satisfaction. Any deficiencies from the Aircraft return condition requirements set forth in this Article 23 will be corrected by LESSEE at its cost prior to the acceptance flight described in Article 23.7.2. |
23.7.2 | Immediately prior to the proposed redelivery of the Aircraft, LESSEE will carry out for LESSOR and/or LESSOR’s representatives an Aircraft acceptance flight in accordance with Manufacturer’s standard flight operation check flight procedures or, if agreed to in writing by LESSOR, in accordance with an airline acceptance flight procedure, either of which will be for the duration necessary to perform such check flight procedures but in any event not less than two (2) hours. Flight costs and fuel will be furnished by and at the expense of LESSEE, Any deficiencies from the Aircraft return condition requirements set forth in this Article 23 will be corrected by LESSEE at its cost prior to return of the Aircraft. |
23.7.3 | To the extent that the ground inspection and acceptance flight extend beyond the Expiration Date, the Lease Term will be deemed to have been automatically extended and the obligations of LESSEE hereunder (including Article 23.13.3) will continue on a day-to-day basis until the Aircraft is accepted by LESSOR executing the Return Acceptance Receipt in the form of Exhibit J. In the event the Lease is extended solely as a result of work performed at LESSOR’s request pursuant to Article 23.10.1, LESSEE will perform such additional work at LESSOR’s cost provided that if the same shall result in delay in redelivery, extension of the Lease Term or cause the Aircraft to be removed from service for a period in excess of the period the Aircraft would have been removed to revenue service absent such additional work, no Rent or other costs will be payable by LESSEE for the period which is attributable solely to LESSOR’s requested work (unless and to the extent LESSEE shall have otherwise agreed in writing). |
65
23.8 CERTIFICATE OF AIRWORTHINESS MATTERS.
23.8.1 | The Aircraft will possess a current Certificate of Airworthiness issued by the Aviation Authority (although this Certificate of Airworthiness may later be substituted by the Export Certificate of Airworthiness or equivalent if requested by LESSOR pursuant to Article 23.12). In addition, even if LESSEE must perform engineering, maintenance and repair work on the Aircraft beyond the requirements of Article 12, the Aircraft at return must be in the condition required in order to meet the requirements for issuance of a U.S. Standard Certificate of Airworthiness for transport category aircraft issued by the FAA in accordance with FAR Part 21 and, in addition, to meet the operating requirements of FAR Part 121 with no restrictions imposed. |
23.8.2 | At LESSOR’s request, LESSEE at its cost will demonstrate that the Aircraft meets the requirements for issuance of the U.S. Standard Certificate of Airworthiness for transport category aircraft specified in Article 23.8.1 by delivering to LESSOR at LESSOR’s option either an actual U.S. Standard Certificate of Airworthiness (if the Aircraft is to be registered in the U.S.) or a letter acceptable to LESSOR signed by an FAA Designated Airworthiness Representative (DAR) or another Person acceptable to LESSOR stating that the DAR or such Person has inspected the Aircraft and Aircraft Documentation (including records and manuals) and has found that the Aircraft meets the requirements for issuance of a U.S. Standard Certificate of Airworthiness for transport category aircraft in accordance with FAR Part 21 and, in addition, meets the operating requirements of FAR Part 121 with no restrictions imposed. |
23.8.3 | If the Aircraft is to be registered in a country other than in the U.S. after return from LESSEE, LESSOR may in its sole discretion waive the requirements of Article 23.8.2 and instead require that LESSEE at its expense (to the extent such expense is no greater than that which LESSEE would have incurred pursuant to Articles 23.8.1 and 23.8.2, with any additional expenses being for LESSOR’s account) put the Aircraft in a condition to meet the requirements for issuance of a Certificate of Airworthiness of the aviation authority of the next country of register. |
23.9 GENERAL CONDITION OF AIRCRAFT AT RETURN.
23.9.1 | The Aircraft, Engines, APU and Parts will have been maintained and repaired in accordance with the Maintenance Program, the rules and regulations of the Aviation Authority and this Lease. |
23.9.2 | Aircraft Documentation (including records and manuals) will have been maintained in an up-to-date status, in accordance with the rules and regulations of the Aviation Authority and the FAA and this Lease and in a form necessary in order to meet the requirements of Article 23.8.1. The records and historical documents set forth in Attachment 1 of Exhibit J will be in English. If LESSEE subscribes to Manufacturer’s on-line data access services, LESSEE must nonetheless return the Aircraft manuals with all current revisions provided by Manufacturer in CD, microfilm or other format acceptable to LESSOR. |
66
23.9.3 | The Aircraft will be in the same working order and condition as at Delivery (subject to the other provisions of this Article 23, reasonable wear and tear from normal flight operations excepted), with all pilot discrepancies and deferred maintenance items cleared on a terminating action basis. |
23.9.4 | The Aircraft will be airworthy (conform to type design and be in a condition for safe operation), with all Aircraft equipment, components and systems operating in accordance with their intended use and within limits approved by Manufacturer, the Aviation Authority and the FAA. |
23.9.5 | The Aircraft interior (including cabin and windows) and exterior will be clean and cosmetically acceptable to LESSOR, with all compartments free of foreign objects, dirt, grease, fluids, stains, grime, cracks, tears and rips and ready to be placed into immediate commercial airline operations. |
23.9.6 | No special or unique Manufacturer, Engine manufacturer or Aviation Authority inspection or check requirements which are specific to the Aircraft or Engines (as opposed to all aircraft or engines of their types) will exist with respect to the Airframe, Engines and Aircraft equipment, components and systems. |
23.9.7 | All repairs to the Aircraft will have been accomplished in accordance with Manufacturer’s Structural Repair Manual (or FAA-approved data supported by FAA Form 8110-3) for the Aircraft. |
23.9.8 | All modifications and alterations to the Aircraft will have been accomplished in accordance with FAA-approved data supported by FAA Form 8110-3. |
23.9.9 | The Aircraft will be returned with LESSOR’s Engines and APU installed and with the same equipment as at Delivery, subject only to those replacements, additions and Modifications permitted under this Lease. To the extent LESSEE performed a Modification which cost in excess of **Material Redacted** and LESSOR did not approve such Modification in accordance with Article 12.10.1, LESSOR may require LESSEE to return the Aircraft in its original condition prior to such Modification. |
23.9.10 | All Airworthiness Directives which are issued prior to the date of return of the Aircraft and require compliance (either by means of repetitive inspections, modifications or terminating action) prior to return of the Aircraft to LESSOR or within **Material Redacted** after the Termination Date will have been complied with on the Aircraft on a terminating action basis at LESSEE’s cost. Airworthiness Directives which do not have a terminating action will be accomplished at the highest level of inspection or modification possible. If, after using best efforts, LESSEE is unable to acquire the material, parts or components necessary to accomplish such Airworthiness Directive, LESSEE will pay to LESSOR upon return of the Aircraft the estimated cost of terminating such Airworthiness Directive. If the estimated cost cannot be mutually agreed upon by LESSEE and LESSOR, LESSEE and LESSOR will each obtain an estimate from a reputable FAA approved maintenance facility (unaffiliated with LESSEE or LESSOR) and the estimated cost will be the average of the two estimates. |
67
23.9.11 | All modifications which must be performed prior to the date of return of the Aircraft or within **Material Redacted** after the Termination Date in order to meet the FAA requirements for FAR Part 121 operations will have been incorporated on the Aircraft at LESSEE’s cost. |
23.9.12 | The Aircraft will be in compliance with Manufacturer’s Corrosion Prevention and Control Program (CPCP) specified for the model type by Manufacturer. |
23.9.13 | If any waivers, deviations, dispensations, alternate means of compliance, extensions or carry-overs with respect to maintenance or operating requirements, repairs or Airworthiness Directives are granted by the Aviation Authority or permitted by the Maintenance Program, LESSEE at its sole cost and expense will nonetheless perform such maintenance or operating requirements, repairs or Airworthiness Directives as if such waivers, deviations, dispensations, alternate means of compliance, or extensions or carry-overs did not exist. |
23.9.14 | The Aircraft will be free from any Security Interest except LESSOR’s Liens and no circumstance will have so arisen whereby the Aircraft is or could become subject to any Security Interest or right of detention or sale in favor of the Aviation Authority, any airport authority, or any other authority. |
23.9.15 | All no-charge vendor and Manufacturer’s service bulletin kits received by LESSEE for the Aircraft but not installed thereon will be on board the Aircraft as cargo. All no-charge vendor and Manufacturer’s service bulletin kits ordered by LESSEE but not yet received will, upon receipt by LESSEE, be forwarded as instructed by LESSOR. At LESSOR’s request, any other service bulletin kit which LESSEE paid for will also be delivered to LESSOR on board the Aircraft, but LESSOR will reimburse LESSEE for its actual out-of-pocket costs for such kit, unless LESSEE purchased such kit as part of its implementation of a service bulletin on its fleet of aircraft of the same type as the Aircraft but had not yet installed such kit on the Aircraft, in which case such kit will be furnished free of charge to LESSOR. |
23.9.16 | The Aircraft will be free of any leaks found to by outside of maintenance manual limits and any damage resulting therefrom. All repairs will have been performed on a permanent basis in accordance with the applicable manufacturer’s instructions. |
68
23.9.17 | The Aircraft fluid reservoirs (including oil, oxygen, hydraulic and water) will be serviced to full and the waste tank serviced in accordance with Manufacturer’s instructions. Fuel tanks will be at least as full as at Delivery. |
23.10.1 | Have performed, by an FAA-approved repair station, a Return Check (“RETURN CHECK”) means the accomplishment of all work cards specified in the Maintenance Program and the MPD which (a) are necessary to clear the Aircraft of all such tasks for **Material Redacted**, or (b) are required to be performed at lesser intervals than **Material Redacted**. If pursuant to the then-current MPD, the performance interval for a task is shorter than every **Material Redacted**, then such task will also be performed. All non-routine tasks generated as a result of the performance of these work cards must also be performed. For avoidance of doubt, if the inspection interval pursuant to the then-current MPD for a particular work card only refers to one or two of the three measurement tests, then the most restrictive measurement test or tests referred to in the then-current MPD will be utilized in determining whether the task must be performed.). LESSEE will also weigh the Aircraft. Any discrepancies revealed during such inspection will be corrected in accordance with Manufacturer’s maintenance and repair manuals or FAA-approved data. LESSEE agrees to perform during such check any other work reasonably required by LESSOR (and not otherwise required under this Lease) and LESSOR will reimburse LESSEE for such work at LESSEE’s preferred customer rates. |
23.10.2 | Perform an internal and external corrosion inspection and correct any discrepancies in accordance with the recommendations of Manufacturer and the Structural Repair Manual. In addition, all inspected areas will be properly treated with corrosion inhibitor as recommended by Manufacturer. |
23.10.3 | Remove LESSEE’s exterior markings, including all exterior paint, by pneumatically scuff sanding (or stripping, if reasonably determined by LESSOR taking into account the condition of the exterior paint) the paint from the fuselage, empennage and Engine cowlings, and clean, reseal, refinish, prepare (including application of alodine or another corrosion inhibitor) and prime the surfaces to be painted, all in accordance with Manufacturer’s and paint manufacturer’s recommendations. LESSEE will then repaint the fuselage, empennage and Engine cowlings in the colors and logo specified by LESSOR. Such painting will be accomplished in such a manner as to result in a uniformly smooth and cosmetically acceptable aerodynamic surface. All external placards, signs and markings will be properly attached, free from damage, clean and legible. **Material Redacted**. |
23.10.4 | Clean the exterior and interior of the Aircraft. |
69
23.10.5 | If reasonably required by LESSOR, apply touch-up paint to the interior of the Aircraft, including flight deck, and replace missing, broken or illegible placards. |
23.10.6 | In accordance with Article 23.9.7, permanently repair damage to the Aircraft that exceeds Manufacturer’s limits and replace any non-flush structural patch repairs installed on the Aircraft with flush-type repairs unless a flush-type repair is unavailable. |
23.10.7 | With LESSOR and/or its representatives present, perform a full and complete hot and cold section videotape borescope on each Engine and its modules in accordance with the Engine manufacturer’s maintenance manual. |
23.10.8 | If the Engine historical and technical records and/or condition trend monitoring data of any Engine indicate an acceleration in the rate of deterioration in the performance of an Engine, LESSEE will correct, to LESSOR’s reasonable satisfaction, such conditions which are determined to be causing such accelerated rate of deterioration. |
23.10.9 | With LESSOR and/or its representatives present, accomplish a power assurance run on the Engines. LESSEE will evaluate the Engine performance and record the Engine power assurance test conditions and results on the Return Acceptance Receipt. |
23.10.10 | LESSEE will provide evidence to LESSOR’s reasonable satisfaction that the Engine historical and technical records, borescope inspection, trend monitoring and other checks specified in Article 23.10.9 do not reveal any condition which would cause the Engines or any module to be unserviceable, beyond serviceable limits or serviceable with an increased frequency of inspection or with calendar time, flight hour or flight cycle restrictions under the Engine manufacturer’s maintenance manual. LESSEE will correct any discrepancies in accordance with the guidelines set out by the Engine manufacturer which may be discovered during such inspection. |
23.10.11 | In the event the Engine historical and technical records, borescope inspection, trend monitoring and other checks specified in Article 23.10.9 result in a dispute regarding the conformity of an Engine with the requirements of this Article 23, LESSEE and LESSOR will consult with the Engine manufacturer and follow the Engine manufacturer’s recommendations (including the accomplishment of an Engine test cell operational check) with regard to determining if such Engine complies with the requirements of this Article 23 and the manner in which any discrepancies from the requirements of this Article 23 will be rectified. |
23.10.12 | If the APU historical and technical records and/or condition trend monitoring data indicate an acceleration in the rate of deterioration in the performance of the APU, LESSEE will correct, to LESSOR’s reasonable satisfaction, such conditions which are determined to be causing such accelerated rate of deterioration. |
70
23.10.13 | With LESSOR and/or its representatives present, perform a full and complete hot and cold section videotape borescope on the APU in accordance with the APU manufacturer’s procedures. LESSEE will provide evidence to LESSOR’s satisfaction that the borescope inspection does not reveal any condition which would cause the APU to be unserviceable, beyond serviceable limits or serviceable with an increased frequency of inspection or with calendar time, flight hour or flight cycle restrictions. LESSEE will correct any discrepancies in accordance with the guidelines set out by the APU manufacturer which may be discovered during such inspection. |
23.11 PART LIVES. At return, the condition of the Aircraft will be as follows:
23.11.1 | The Aircraft will have zero (0) hours consumed since the last Return Check or equivalent check per the MPD (excluding hours consumed on the acceptance flight and any ferry flight) sufficient to clear the Aircraft for **Material Redacted** of operation. |
23.11.2 | Each Engine will meet all of the following: |
(a) Each Engine will have **Material Redacted** remaining until its next anticipated removal (based upon the Engine manufacturer’s estimated mean time between removals for engines of the same type as the Engines).
(b) Each Engine will have a remaining EGT margin sufficient to permit the operation of such Engine for the hours and cycles set forth in the preceding subparagraph, based upon the historical experience of LESSEE.
(c) Each Part of an Engine which has a hard time limit will have **Material Redacted** of such Part’s full allotment of hours and cycles remaining to operate until its next scheduled Overhaul or removal. However, if **Material Redacted** of such hard time Part’s full allotment of hours and cycles remaining is less than **Material Redacted**, then such hard time Part will be returned with at least **Material Redacted** remaining. If such hard time Part’s full allotment of hours and cycles is less than 4,000 hours or 4,000 cycles (whichever is applicable), then such hard time Part will be returned with zero (0) hours and cycles since its last Overhaul or refurbishment, as applicable.
(d) Each Part of an Engine which has a life-limit will have at least **Material Redacted** remaining until removal. If such life-limited Part’s full allotment of hours and cycles is less than **Material Redacted**, then such life-limited Part will be returned new.
(e) No life-limited Part of an Engine or APU will have more hours or cycles consumed than such Engine’s data plate.
23.11.3 | The APU will have no more than **Material Redacted** consumed since the last hot section refurbishment (excluding hours consumed on the acceptance flight and any ferry flight). |
71
In addition, at return LESSEE will pay LESSOR an amount equal to the number of hours consumed on the APU at return since the last hot section refurbishment multiplied by an APU hot section refurbishment calculated as follows:
such APU hot section refurbishment cost price per hour will be the quotient obtained by dividing (a) the expected cost of the next APU hot section refurbishment cost by (b) the full allotment of hours between hot section refurbishments as approved by the MPD. If LESSEE and LESSOR are unable to agree on the expected cost of the next scheduled APU hot section refurbishment, such cost will be established by taking the average of the price quotes submitted by two (2) reputable FAA-approved APU hot section refurbishment cost facilities (unaffiliated with LESSEE or LESSOR), one selected by LESSEE and the other selected by LESSOR.
23.11.4 | The Landing Gear will have **Material Redacted** of hours/cycles/calendar time (whichever is the more limiting factor) pursuant to the MPD remaining until the next Overhaul or scheduled removal. |
In addition, at return LESSEE will pay LESSOR an amount equal to the number of hours/cycles/days (whichever is the more limiting factor) consumed on each Landing Gear at return since the last Overhaul multiplied by a Landing Gear Overhaul cost per hour/cycle/day calculated as follows:
such Landing Gear Overhaul cost price per hour/cycle/day will be the quotient obtained by dividing (a) the expected cost of the next Landing Gear Overhaul by (b) the full allotment of hours/cycles/days between scheduled Overhauls for such Landing Gear as approved by the MPD. If LESSEE and LESSOR are unable to agree on the expected cost of the next scheduled Landing Gear Overhaul, such cost will be established by taking the average of the price quotes submitted by two (2) reputable FAA-approved landing gear Overhaul facilities (unaffiliated with LESSEE or LESSOR), one selected by LESSEE and the other selected by LESSOR.
23.11.5 | Each Part of the Airframe or the APU which has a hard time (hour/cycle) limit to Overhaul or removal pursuant to the MPD will have **Material Redacted** of such Part’s full allotment of hours and cycles remaining to operate until its next scheduled Overhaul or removal pursuant to the MPD. However, if **Material Redacted** of such hard time Part’s full allotment of hours and cycles remaining is less than **Material Redacted**, then such hard time Part will be returned with at least **Material Redacted** remaining to operate until its next scheduled Overhaul or refurbishment pursuant to the MPD. If such hard time Part’s full allotment of hours and cycles between, Overhauls or refurbishment pursuant to the MPD is less than **Material Redacted**, then such hard time Part will be returned zero (0) hours and zero (0) cycles out of Overhaul (except hours accumulated on any acceptance or ferry flight). |
72
23.11.6 | Each life-limited Part of the Airframe or the APU will have **Material Redacted** of such Part’s full allotment of hours and cycles remaining to operate until removal pursuant to the MPD. However, if **Material Redacted** of such life-limited Part’s full allotment of hours and cycles remaining is less than **Material Redacted**, then such life-limited Part will be returned with at least **Material Redacted** remaining to operate pursuant to the MPD. If such life-limited Part’s full allotment of hours and cycles remaining to operate pursuant to the MPD is less than **Material Redacted**, then such life-limited Part will be returned with 100% of its total approved hours and cycles remaining. |
23.11.7 | Each Part which has a calendar limit will have **Material Redacted** remaining to operate pursuant to the MPD after return of the Aircraft to LESSOR. If a Part has a total approved life pursuant to the MPD of **Material Redacted**, then such Part will be returned with 100% of its total approved life remaining. |
23.11.8 | No Part of the Aircraft or Engine (excluding life-limited Parts on the Engine, which are covered by Article 23.11.2(e)) will have total hours and total cycles since new greater than **Material Redacted** of that of the Airframe **Material Redacted**. |
23.11.9 | Each Aircraft tire and brake **Material Redacted** (except for the acceptance flight and any ferry flight). |
23.13.1 | the obligations of LESSEE under this Lease will continue in full force and effect on a day-to-day basis until such return. This will not be considered a waiver of LESSEE’s Event of Default or any right of LESSOR hereunder. |
23.13.2 | **Material Redacted**. |
23.13.3 | LESSEE will fully indemnify LESSOR on demand for all losses (including consequential damages), liabilities, actions, proceedings, costs and expenses thereby suffered or incurred by LESSOR and, in addition, until such time as the |
73
Aircraft is redelivered to LESSOR and put into the condition required by this Article 23, instead of paying the Rent specified in Article 5.3, LESSEE will pay twice the amount of Rent for each day from the scheduled Expiration Date until the Termination Date (the monthly Rent payable under Article 5.3.1 will be prorated based on the actual number of days in the applicable month). Payment will be made upon presentation of LESSOR’s invoice.
23.13.4 | LESSOR may elect, in its sole and absolute discretion, to accept the return of the Aircraft prior to the Aircraft being put in the condition required by this Article 23 and thereafter have any such non-conformance corrected at such time as LESSOR may deem appropriate (but within ninety (90) days following the return of the Aircraft) and at commercial rates then-charged by the Person selected by LESSOR to perform such correction. Any direct expenses incurred by LESSOR for such correction will be payable by LESSEE within fifteen (15) days following the submission of a written statement by LESSOR to LESSEE, identifying the items corrected and setting forth the expense of such corrections. LESSEE’s obligation to pay such amounts will survive the Termination Date. |
74
ARTICLE 24
24.2 SALE OR ASSIGNMENT BY LESSOR.
24.2.1 | Subject to LESSEE’s rights pursuant to this Lease, LESSOR may at any time and without LESSEE’s consent sell, assign or transfer its rights, interest and obligations hereunder or with respect to the Aircraft to a third party (“LESSOR’S ASSIGNEE”). For a period of two (2) years after such sale or assignment and at LESSEE’s cost, LESSEE will continue to name LESSOR as an additional insured under the Aviation and Airline General Third Party Liability Insurance specified in Exhibit C. |
24.2.2 | The term “LESSOR” as used in this Lease means the lessor of the Aircraft at the time in question. In the event of the proper sale of the Aircraft and transfer of LESSOR’s rights and obligations under this Lease, LESSOR’s Assignee will become “LESSOR” of the Aircraft under this Lease and the transferring party (the prior “LESSOR”) will be relieved of all liability to LESSEE under this Lease for obligations arising on and after the date the Aircraft is sold. LESSEE will acknowledge and accept LESSOR’s Assignee as the new “LESSOR” under this Lease and will look solely to LESSOR’s Assignee for the performance of all LESSOR obligations and covenants under this Lease arising on and after the Aircraft sale date provided such transfer, sale or assignment is in conformity with the requirements of this Article 24. |
75
LESSOR’s Lender or LESSOR’s Assignee. LESSOR will reimburse LESSEE for its reasonable out-of-pocket costs in reviewing documents required by LESSOR or LESSOR’s Lender.
24.5 PROTECTIONS.
24.5.1 | **Material Redacted**. |
24.5.2 | LESSOR will obtain for the benefit of LESSEE an acknowledgment from any LESSOR’s Assignee or LESSOR’s Lender that, so long as no Event of Default has occurred and is continuing hereunder, such Person and any Person lawfully claiming through such Person will not interfere with LESSEE’s quiet, peaceful use and enjoyment of the Aircraft. |
24.5.3 | **Material Redacted**. |
24.5.4 | **Material Redacted**. |
24.5.5 | **Material Redacted**. |
24.5.6 | **Material Redacted**. |
24.5.7 | Wherever the term “LESSOR” is used in this Lease in relation to any of the provisions relating to disclaimer, title and registration, indemnity and insurance contained in Articles 8, 14, 17 and 18, respectively, or with respect to Article 20.2.8, the term “LESSOR” will be deemed to include LESSOR’s Assignee and LESSOR’s Lender, if applicable. For avoidance of doubt, in the event of LESSOR’s sale or financing of the Aircraft, the disclaimer and indemnity provisions contained in Articles 8 and 17 will continue to be applicable after the sale or assignment to International Lease Finance Corporation, as well as being applicable to LESSOR’s Assignee and LESSOR’s Lender. |
76
ARTICLE 25
(a) LESSEE fails to take delivery of the Aircraft when obligated to do so under the terms of this Lease;
(b) LESSEE fails to make a Rent or other scheduled payment due hereunder in the manner and by the date provided herein and fails to make such payment within three (3) Business Days after the date such payment is due;
(c) LESSEE fails to obtain or maintain the insurance required by Article 18;
(d) LESSEE fails to return the Aircraft to LESSOR on the Expiration Date
in accordance with Article 23;
(e) LESSEE fails to observe or perform any of its other obligations hereunder and fails to cure the same within thirty (30) days after written notice thereof to LESSEE. If such failure cannot by its nature be cured within thirty (30) days, LESSEE will have the reasonable number of days necessary to cure such failure (not to exceed a period of ninety (90) days) so long as it uses diligent efforts to do so;
(f) any representation or warranty of LESSEE herein proves to be untrue in any material respect and if the effect of such misrepresentation is curable, will not have been cured within thirty (30) days after LESSEE learns of such misrepresentation including by written notice from LESSOR;
(g) the registration of the Aircraft is cancelled other than as a result of an act or omission of LESSOR;
(h) LESSEE abandons the Aircraft or Engines;
(i) LESSEE temporarily discontinues (in the absence of other Defaults) or permanently discontinues business or sells or otherwise disposes of all or substantially all of its assets other than as permitted hereunder;
(j) a material adverse change occurs in the financial condition of LESSEE which effects LESSEE’s ability to perform its obligations hereunder;
(k) LESSEE no longer possesses the licenses, certificates and permits required for the conduct of its business as a certificated air carrier in Panama and the failure to possess the same is not cured within sixty (60) days;
77
(l) LESSEE (i) suspends payment on its debts or other material obligations, (ii) is unable to or admits its inability to pay its debts or other material obligations as they fall due, (iii) is adjudicated or becomes bankrupt or insolvent or (iv) proposes or enters into any composition or other arrangement for the benefit of its creditors generally;
(m) any proceedings, resolutions, filings or other steps are instituted or threatened with respect to LESSEE relating to the bankruptcy, liquidation, reorganization or protection from creditors of LESSEE or a substantial part of LESSEE’s property. If instituted by LESSEE, the same will be an immediate Event of Default. If instituted by another Person, the same will be an Event of Default if not dismissed, remedied or relinquished within sixty (60) days;
(n) any order, judgment or decree is entered by any court of competent jurisdiction appointing a receiver, trustee or liquidator of LESSEE or a substantial part of its property, or if a substantial part of LESSEE’s property is to be sequestered. If instituted by or done with the consent of LESSEE, the same will be an immediate Event of Default. If instituted by another Person, the same will be an Event of Default if not dismissed, remedied or relinquished within sixty (60) days;
(o) any indebtedness for borrowed moneys or a guarantee or similar obligation owed by LESSEE with an unpaid balance of at least **Material Redacted** is properly declared due before its stated maturity or LESSEE is properly in default beyond any applicable grace period under any agreement pursuant to which LESSEE has the right to possess and operate any aircraft; or
(p) LESSEE is in default under any other lease or agreement between LESSEE and LESSOR and the same is not cured within its specified cure period.
(a) terminate this Lease by giving written notice to LESSEE;
(b) require that LESSEE immediately cease flying the Aircraft and leave it parked in its then-current location by giving written notice to LESSEE, in which case LESSEE’s obligations under this Lease will continue (including the obligations set forth in Articles 17 and 18);
(c) require that LESSEE immediately move the Aircraft to an airport or other location designated by LESSOR and park the Aircraft there by giving written notice to LESSEE, in which case LESSEE’s obligations under this Lease will continue (including the obligations set forth in Articles 17 and 18);
(d) take possession of the Aircraft. If LESSOR takes possession of the Aircraft, it may enter upon LESSEE’s premises where the Aircraft is located without liability.
78
Upon repossession of the Aircraft, LESSOR will then be entitled to sell, lease or otherwise deal with the Aircraft as if this Lease had never been made. LESSOR will be entitled to the full benefit of its bargain with LESSEE;
(e) for LESSEE’s account, do anything that may reasonably be required to cure any default and recover from LESSEE all reasonable costs, including legal fees and expenses incurred in doing so and Default Interest;
(f) proceed as appropriate to enforce performance of this Lease and to recover any damages for the breach hereof, including the amounts specified in Article 25.5; or
(g) apply all or any portion of the Security Deposit and any other security deposits held by LESSOR pursuant to any other agreements between LESSOR and LESSEE to any amounts due.
(a) all amounts which are then due and unpaid hereunder and which become due prior to the earlier of LESSOR’s recovery of possession of the Aircraft or LESSEE making an effective tender thereof;
(b) any losses suffered by LESSOR because of LESSOR’s inability to place the Aircraft on lease with another lessee or to otherwise utilize the Aircraft on financial terms as favorable to LESSOR as the terms hereof or, if LESSOR elects to dispose of the Aircraft, the funds arising from a sale or other disposition of the Aircraft are not as profitable to LESSOR as leasing the Aircraft in accordance with the terms hereof would have been (and LESSOR will be entitled to accelerate any and all Rent which would have been due from the date of LESSOR’s recovery or repossession of the Aircraft through the Expiration Date) which rent shall be discounted to present value less any amounts (i) in respect of a lease, which over its term shall be received by LESSOR discounted to present value as set forth above or (ii) in the case of a sale or other disposition, the amounts which were received by LESSOR is a result of such sale or other disposition (or if not relet or sold, less an amount equal to the fair market rental value of the aircraft for the balance of the Lease Term determined by an independent appraiser acceptable to LESSOR and LESSEE or chosen by a court);
(c) all costs, associated with LESSOR’s exercise of its remedies hereunder, including but not limited to repossession costs, legal fees, Aircraft storage costs, Aircraft re-lease or sale costs;
79
(d) any amount of principal, interest, fees or other sums paid or payable on account of funds borrowed in order to carry any unpaid amount;
(e) any loss, premium, penalty or expense which may be incurred in repaying funds raised to finance the Aircraft or in unwinding any financial instrument relating in whole or in part to LESSOR’s financing of the Aircraft;
(f) any loss, cost, expense or liability sustained by LESSOR due to LESSEE’s failure to redeliver the Aircraft in the condition required by this Lease; and
(g) any other loss, damage, expense, cost or liability which LESSOR suffers or incurs as a direct result of the Event of Default and/or termination of this Lease, including (but without duplication of amounts due and payable pursuant to (f) above) an amount sufficient to compensate LESSOR for any loss of LESSOR’s residual interest in the Aircraft caused by LESSEE’s default.
25.8 USE OF “TERMINATION DATE”. For avoidance of doubt, it is agreed that if this Lease terminates and the Aircraft is repossessed by LESSOR due to an Event of Default, then, notwithstanding the use of the term “Termination Date” in this Lease, the period of the Lease Term and the “Expiration Date” will be utilized in calculating the damages to which LESSOR is entitled pursuant to Article 25.5. For example, it is agreed and understood that LESSOR is entitled to receive from LESSEE the Rent and the benefit of LESSEE’s insurance and maintenance of the Aircraft until expiration of the Lease Term.
80
ARTICLE 26
26.2 NOTICE INFORMATION. Notices will be sent:
If to LESSOR: | INTERNATIONAL LEASE FINANCE CORPORATION | |||
Until February 28, 2004: 1999 Avenue of the Stars, 00xx Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000, X.X.X. On and after March 1, 2004: 10250 Constellation Boulevard, 00xx Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000, X.X.X. | ||||
Attention: | Legal Department | |||
Fax: | 000-000-0000 | |||
Telephone: | 000-000-0000 |
If to LESSEE: | COMPANIA PANAMENDA DE AVIACION S.A. (COPA) | |||
Avenida Xxxxx Xxxxxxxxx y Xxxxx 00 Xxxxxxxx 0000 Xxxxxx 0, Xxxxxx | ||||
Attention: | Chief Executive Officer | |||
Fax: | 000-000-0000 | |||
Telephone: | 000-000-0000 |
or to such other places and numbers as either party directs in writing to the other party.
81
ARTICLE 27
GOVERNING LAW AND JURISDICTION
27.2 NON-EXCLUSIVE JURISDICTION IN CALIFORNIA. As permitted by Section 410.40 of the California Code of Civil Procedure, the parties hereby irrevocably submit to the non-exclusive jurisdiction of the Federal District Court for the Central District of California and the State of California Superior or Municipal Court in Los Angeles, California. Nothing herein will prevent either party from bringing suit in any other appropriate jurisdiction.
82
ARTICLE 28
83
by a party to third parties (other than to such party’s auditors or legal advisors; as required in connection with any filings of this Lease in accordance with Article 14; in connection with LESSOR’s potential sale of the Aircraft or assignment of this Lease; as required for enforcement by either party of its rights and remedies with respect to this Lease or as required by applicable Law including Tax law; or to a LESSOR’s Lender which agrees in writing to be bound by the terms of this Article 28.8 or similar confidentiality provisions) without the prior written consent of the other party. If any disclosure will result in an Operative Document becoming publicly available, LESSEE and LESSOR will cooperate with one another to obtain confidential treatment as to the commercial terms and other material provisions of such Operative Document.
28.12 USE OF WORD “INCLUDING”. The term “INCLUDING” is used herein without limitation.
28.16 TIME IS OF THE ESSENCE. Time is of the essence in the performance of all obligations of the parties under this Lease and, consequently, all time limitations set forth in the provisions of this Lease will be strictly observed.
84
28.21 **Material Redacted**.
85
INTERNATIONAL LEASE FINANCE CORPORATION | COMPANIA PANAMENA DE AVIACION, S.A. (COPA) | |||||||
By: | /s/ Xxxxx X. De Mars |
By: | /s/ Xxxxx Xxxxxxxx | |||||
Its: | Assistant Vice President | Its: | CEO |
86