_________________________________________________________________
THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS.
TO THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES
CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL
CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT EXECUTED BY LESSOR
OR, IF LESSOR HAS ASSIGNED ITS RIGHTS TO A THIRD PARTY IN
ACCORDANCE WITH THIS LEASE AGREEMENT, SUCH
THIRD PARTY ON THE SIGNATURE PAGE OF THIS LEASE AGREEMENT.
________________________________________________________________
DATED: August __, 1999
AIRCRAFT 22120, INC.
(Lessor)
- and -
VANGUARD AIRLINES, INC.
(Lessee)
___________________________________
LEASE AGREEMENT 22120
- relating to -
Boeing 737-230 Aircraft
Manufacturers Serial No: 22120
U.S. Registration Xxxx N122NJ
_____________________________________
FELTMAN, KARESH, MAJOR & XXXXXXX,
Limited Liability Partnership
Carnegie Hall Tower
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
TABLE OF CONTENTS
CLAUSE PAGE
1. DEFINITIONS and INTERPRETATION . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . 19
2. REPRESENTATIONS and WARRANTIES . . . . . . . . . . . . . . . . 19
2.1 Lessee's Representations and Warranties . . . . . . . . 19
2.2 Lessee's Further Representations and Warranties . . . . 21
2.3 Repetition . . . . . . . . . . . . . . . . . . . . . . . 22
2.4 Lessor's Representations and Warranties. . . . . . . . . 22
2.5 Repetition . . . . . . . . . . . . . . . . . . . . . . . 23
3. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 24
3.1 Lessor's Documentary Conditions Precedent. . . . . . . . 24
3.2 Lessor's Other Conditions Precedent. . . . . . . . . . . 25
3.3 Lessor's Waiver. . . . . . . . . . . . . . . . . . . . . 25
3.4 Lessee's Conditions Precedent. . . . . . . . . . . . . . 25
3.5 Lessee's Waiver. . . . . . . . . . . . . . . . . . . . . 26
4. COMMENCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .27
4.1 Leasing . . . . . . . . . . . . . . . . . . . . . . . . .27
4.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . .27
4.3 Delayed Delivery . . . . . . . . . . . . . . . . . . . .29
4.4 Acceptance and Risk. . . . .30
5. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
5.1 Security Deposit; Letter of Credit . . . . . . . . . . .30
5.2 Rental Periods . . . . . . . . . . . . . . . . . . . . .32
5.3 Basic Rent . . . . . . . . . . . . . . . . . . . . . . .32
5.4 Additional Rent . . . . . . . . . . . . . . . . . . . . .33
5.5 Lessor's Moneys . . . . . . . . . . . . . . . . . . . . .34
5.6 Payments . . . . . . . . . . . . . . . . . . . . . . . .34
5.7 Gross-up . . . . . . . . . . . . . . . . . . . . . . . .35
5.8 Taxation . . . . . . . . . . . . . . . . . . . . . . . .36
5.9 Information . . . . . . . . . . . . . . . . . . . . . . .36
5.10 Taxation of Indemnity Payments . . . . . . . . . . . . .37
5.11 Default Interest . . . . . . . . . . . . . . . . . . . .37
5.12 Contest . . . . . . . . . . . . . . . . . . . . . . . . .38
5.13 Absolute . . . . . . . . . . . . . . . . . . . . . . . .39
6. MANUFACTURER'S WARRANTIES . . . . . . . . . . . . . . . . . . .40
6.1 Assignment . . . . . . . . . . . . . . . . . . . . . . .40
6.2 Proceeds . . . . . . . . . . . . . . . . . . . . . . . .40
6.3 Parts . . . . . . . . . . . . . . . . . . . . . . . . . .41
6.4 Agreement . . . . . . . . . . . . . . . . . . . . . . . .41
7. LESSOR'S COVENANTS and DISCLAIMERS. . . . . . . . . . . . . . .42
7.1 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . .42
7.2 Lessor's Maintenance Contribution . . . . . . . . . . . .42
7.3 Intentionally Omitted . . . . . . . . . . . . . . . . . .45
7.4 Lessor's AD Cost Sharing Contribution . . . . . . . . . .45
7.5 Registration and Filings . . . . . . . . . . . . . . . .46
7.6 Agreed Maintenance Performers . . . . . . . . . . . . . .46
7.7 Exclusion . . . . . . . . . . . . . . . . . . . . . . . .46
7.8 Lessee's Waiver . . . . . . . . . . . . . . . . . . . . .47
7.9 Lessee's Confirmation . . . . . . . . . . . . . . . . . .47
8. LESSEE'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . .47
8.1 Duration. . . . . . . . . . . . . . . . . . . . . . . . .47
8.2 Information . . . . . . . . . . . . . . . . . . . . . . .48
8.3 Lawful and Safe Operation . . . . . . . . . . . . . . . .50
8.4 Taxes and Other Charges . . . . . . . . . . . . . . . . .52
8.5 Sub-Leasing . . . . . . . . . . . . . . . . . . . . . . .52
8.6 Inspection . . . . . . . . . . . . . . . . . . . . . . .54
8.7 Protection of Title . . . . . . . . . . . . . . . . . . .55
8.8 General . . . . . . . . . . . . . . . . . . . . . . . . .56
8.9 Records . . . . . . . . . . . . . . . . . . . . . . . . .57
8.10 Registration and Filings . . . . . . . . . . . . . . . .57
8.11 Maintenance and Repair. . . . . . . . . . . . . . . . . .58
8.12 Removal of Engines and Parts. . . . . . . . . . . . . . .59
8.13 Installation of Engines and Parts . . . . . . . . . . . .60
8.14 Non-Installed Engines and Parts . . . . . . . . . . . . .62
8.15 Pooling of Engines and Parts . . . . . . . . . . . . . .63
8.16 Equipment Changes . . . . . . . . . . . . . . . . . . . .63
8.17 Title to Engines and Parts. . . . . . . . . . . . . . . .64
8.18 Third Parties . . . . . . . . . . . . . . . . . . . . . .65
8.19 Non-Discrimination. . . . . . . . . . . . . . . . . . . .65
9. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .65
9.1 Insurances . . . . . . . . . . . . . . . . . . . . . . .65
9.2 Requirements . . . . . . . . . . . . . . . . . . . . . .66
9.3 Insurance Covenants . . . . . . . . . . . . . . . . . . .66
9.4 Failure to Insure . . . . . . . . . . . . . . . . . . . .68
9.5 Continuing Indemnity. . . . . . . . . . . . . . . . . . .68
9.6 Application of Insurance Proceeds . . . . . . . . . . . .69
10. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . .70
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . .70
10.2 Mitigation . . . . . . . . . . . . . . . . . . . . . . .71
10.3 Duration . . . . . . . . . . . . . . . . . . . . . . . .72
11. EVENTS OF LOSS. . . . . . . . . . . . . . . . . . . . . . . . .72
11.1 Total Loss. . . . . . . . . . . . . . . . . . . . . . . .72
11.2 Engine Loss . . . . . . . . . . . . . . . . . . . . . . .73
11.3 Requisition . . . . . . . . . . . . . . . . . . . . . . .74
12. RETURN OF AIRCRAFT. . . . . . . . . . . . . . . . . . . . . . .75
12.1 Redelivery . . . . . . . . . . . . . . . . . . . . . . .75
12.2 Final Checks. . . . . . . . . . . . . . . . . . . . . . .75
12.3 Final Inspection . . . . . . . . . . . . . . . . . . . .76
12.4 Non-Compliance. . . . . . . . . . . . . . . . . . . . . .77
12.5 Export Documentation . . . . . . . . . . . . . . . . . .77
12.6 Acknowledgment . . . . . . . . . . . . . . . . . . . . .77
12.7 Maintenance Program . . . . . . . . . . . . . . . . . . .78
12.8 Storage . . . . . . . . . . . . . . . . . . . . . . . . .78
13. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
13.1 Events . . . . . . . . . . . . . . . . . . . . . . . . .78
13.2 Rights. . . . . . . . . . . . . . . . . . . . . . . . . .83
13.3 Export. . . . . . . . . . . . . . . . . . . . . . . . . .83
13.4 Default Payments . . . . . . . . . . . . . . . . . . . .84
13.5 Waiver of Certain Article 2A Rights . . . . . . . . . . .85
14. ASSIGNMENT and TRANSFER . . . . . . . . . . . . . . . . . . . .85
14.1 No Assignment by Lessee . . . . . . . . . . . . . . . . .85
14.2 Lessor Assignment . . . . . . . . . . . . . . . . . . . .85
14.3 Grants of Security Interests . . . . . . . . . . . . . .88
14.4 Sale and Leaseback by Lessor . . . . . . . . . . . . . .90
14.5 Further Acknowledgments . . . . . . . . . . . . . . . . .90
14.6 Certain Protections for Lessee's Benefit . . . . . . . .90
15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .91
15.1 Waivers, Remedies Cumulative . . . . . . . . . . . . . .91
15.2 Delegation . . . . . . . . . . . . . . . . . . . . . . .91
15.3 Appropriation . . . . . . . . . . . . . . . . . . . . . .91
15.4 Currency Indemnity. . . . . . . . . . . . . . . . . . . .91
15.5 Payment by the Lessor . . . . . . . . . . . . . . . . . .92
15.6 Severability. . . . . . . . . . . . . . . . . . . . . . .92
15.7 Remedy. . . . . . . . . . . . . . . . . . . . . . . . . .92
15.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . .92
15.9 Time of Essence . . . . . . . . . . . . . . . . . . . . .93
15.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . .93
15.11 Law and Jurisdiction. . . . . . . . . . . . . . . . . . .94
15.12 Sole and Entire Agreement . . . . . . . . . . . . . . . .95
15.13 Indemnities . . . . . . . . . . . . . . . . . . . . . . .95
15.14 Counterparts . . . . . . . . . . . . . . . . . . . . . .95
15.15 Confidentiality . . . . . . . . . . . . . . . . . . . . .95
TABLE OF CONTENTS
CLAUSE PAGE
SCHEDULES
1. Basic Rent and Other Terms. . . . . . . . . . . . . . . . . . .97
2. Aircraft Specification. . . . . . . . . . . . . . . . . . . . .99
3. Operating Condition at Delivery . . . . . . . . . . . . . . . 106
4. Operating Condition at Redelivery . . . . . . . . . . . . . . 111
5. Insurance Requirements . . . . . . . . . . . . . . . . . . . 116
EXHIBITS
A. Form of Certificate of Acceptance . . . . . . . . . . . . . . 121
B. Form of Certificate of Delivery Condition . . . . . . . . . . 123
C. Form of Consent . . . . . . . . . . . . . . . . . . . . . . . 127
D. Form of Legal Opinion . . . . . . . . . . . . . . . . . . . . 128
E. Form of Letter of Credit. . . . . . . . . . . . . . . . . . . 129
F. Form of Monthly Status Report . . . . . . . . . . . . . . . . 130
G. Form of Certificate of Redelivery . . . . . . . . . . . . . . 133
THIS LEASE AGREEMENT 22120 is made the____ day of August, 1999
BETWEEN:
(1) AIRCRAFT 22120, INC., a Delaware corporation having its
principal place of business at c/o Unicapital Air Group,
Inc., 0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000, Xxxxxxx, Xxxxxxx
00000 (the "LESSOR"), and
(2) VANGUARD AIRLINES, INC., a company organized and existing
under the laws of the State of Delaware having its principal
place of business at 000 Xxxxxx Xxxx Xxxxxx, Xxxxxx City
International Airport, Xxxxxx Xxxx, Xxxxxxxx 00000 (the
"LESSEE").
WHEREAS:
(A) Pursuant to a Sale Agreement, dated as of December 23, 1997,
between the Previous Operator, as seller, and NSJ
Corporation of Florida, Inc., as buyer ("NSJ-Florida"), as
assigned by the Previous Operator to the Previous Owner and
by NSJ-Florida to Lessor pursuant to the Assignment,
Assumption and Consent Agreement, dated as of July 16, 1999,
Lessor has agreed to purchase the Leased Property from the
Previous Owner on or before the Delivery Date.
(B) Lessor wishes to lease the Leased Property to the Lessee,
and Lessee agrees to lease the Leased Property from the
Lessor, with effect immediately from the purchase of the
Aircraft upon and subject to the covenants, terms and
conditions set out in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS and INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following expressions shall, unless
the context otherwise requires, have the following
respective meanings:
ACTUAL COST as it applies to any maintenance
work on the Aircraft, means the
actual cost of replacement parts
plus the cost of the associated
labor at Lessee's in-house labor
rates (if the work is performed by
Lessee) or at third party costs
charged to Lessee (if the work is
performed by third parties) and
shall in no event include late
charges, xxxx-ups, interest or
other similar amounts.
ADDITIONAL RENT collectively, Airframe Additional
Rent, APU Additional Rent, Engine
Additional Rent and Landing Gear
Additional Rent.
AFFILIATE in relation to any Person, any
other Person controlled directly or
indirectly by that Person, any
other Person that controls directly
or indirectly that Person or any
other Person under common control
with that Person. For this purpose
"control" of any Person means
ownership of a majority of the
voting power of such Person.
AGREED MAINTENANCE
PERFORMER the Lessee or any other reputable
maintenance organization that is
(i) experienced in maintaining
aircraft and/or engines of the same
type as the Aircraft and the
Engines, (ii) duly certificated by
the FAA under FAR Part 145, and
(iii) not objected to by Lessor
pursuant to Clause 7.6.
AGREED MAINTENANCE
PROGRAM the Lessee's current Maintenance
Program, which shall at all times
be in compliance with the
Manufacturer's MPD and the Engine
Manufacturer's MPD, as the same may
be amended from time to time in
accordance with this Agreement.
AGREED VALUE the amount set forth on Schedule 1.
AIRCRAFT the aircraft described in Part l of
Schedule 2 (which term includes,
where the context admits, a
separate reference to all Engines
and Parts).
AIRCRAFT DOCUMENTS the documents, data and records
identified in Part 2 of Schedule 2
and all additions, renewals,
revisions and replacements from
time to time made in accordance
with this Agreement.
AIRFRAME the Aircraft, excluding the Engines
and the Aircraft Documents.
AIRFRAME ADDITIONAL
RENT as defined in Clause 5.4(a)(i).
AIRFRAME ADDITIONAL
RENT RATE the amount set forth in Schedule 1.
AIRFRAME REIMBURSABLE
EXPENSES as defined in Clause 7.2(a)(i).
APPLICABLE LAW all applicable (i) laws, treaties
and international agreements of any
national government, (ii) laws of
any state, province, territory,
locality or other political
subdivision of a national
government, and (iii) rules,
regulations, judgments, decrees,
orders, injunctions, writs,
directives, licenses and permits of
any Government Entity or
arbitration authority.
APPRAISAL PROCEDURE with respect to any amount to be
determined, the amount mutually
agreed by Lessor and Lessee or, if
Lessor and Lessee are unable to
agree upon any such amount to be
determined, the average of the
amounts determined by three
FAA-approved service centers in the
continental United States, one such
service center appointed by Lessor,
one by Lessee and one by their
appointed service centers, except
that if any party fails to appoint
a service center the Manufacturer
or the Engine Manufacturer
(whichever is appropriate) shall be
deemed appointed.
APU (i) the auxiliary power unit listed
in Schedule 2, (ii) any and all
Parts, so long as such Parts are
incorporated in, installed on or
attached to such auxiliary power
unit or so long as title to such
Parts is vested in the Lessor in
accordance with the terms of Clause
8.17(b) after removal from such
auxiliary power unit, and
(iii) insofar as the same belong to
Lessor, all substitutions,
replacements or renewals from time
to time made in or to such
auxiliary power unit or to any of
the Parts referred to in clause
(ii) above, as required or
permitted under this Agreement.
APU ADDITIONAL RENT as defined in Clause 5.4(a)(iv).
APU ADDITIONAL RENT
RATE the amount set forth in Schedule 1.
APU REIMBURSABLE
EXPENSES as defined in Clause 7.2(d)(i).
ASSIGNMENT the Assignment of Lease Agreement,
dated the Delivery Date, between
Lessor and Mortgagee, and any
present or future assignment by the
Lessor in favor of any Financing
Party of the Lessor's rights under
this Agreement as security for its
obligations to a Financing Party.
AVIATION AUTHORITY the FAA or, if the State of
Registration ceases to be the
United States of America, the
authority and/or Government Entity
and/or agency which, under the laws
of the State of Registration, from
time to time (i) has control or
supervision of civil aviation; or
(ii) has jurisdiction over
registration, airworthiness or
operation of the Aircraft.
BASIC RENT all amounts payable pursuant to
Clause 5.3.
BASIC RENT AMOUNT the amount set forth in Schedule 1.
BUSINESS DAY a day (other than a Saturday or
Sunday) on which business of the
nature required by this Agreement
is carried out in Orlando, Florida
and the city in which Lessee's
office listed in Clause 15.10(b) is
located or, where used in relation
to payments, on which banks are
open for business in New York, New
York.
C-CHECK a maintenance check on the Airframe
under the Agreed Maintenance
Program designated as a "C" check
and consisting of full and complete
zonal, systems and structural check
including the corresponding lower
checks ("A" and "B" or equivalent)
and any other maintenance and
inspections tasks that are a part
of such checks, all in accordance
with the Agreed Maintenance
Program, or if the Agreed
Maintenance Program changes and no
longer refers to a full and
complete zonal, systems and
structural block "C" check, then a
check consisting of those items of
maintenance characterized by the
MPD and best industry practice as a
"C" check (or its equivalent), but
in any event not including repairs
arising as the result of
operational or maintenance
mishandling or accidental damage.
CER an engine refurbishment, including
with respect to any Engine the
complete visual inspection and
repair as necessary of required
modules of the Engine in an engine
repair/overhaul station, including
complete or partial disassembly,
complete or partial visual
inspection, de-blading of LLPs as
required, visual inspection of all
LLPs, verification that all snap
diameters on LLPs are within
limits, inspection of all blades
for proper chord dimensions and
cracking, repair or replacement of
all blades below minimums,
inspection and repair of stators as
necessary, blade-up of LLPs using
new lock plates, assembly of rotors
in the turbine, balance of all
rotors, and installation of rotors
in the Engine.
CERTIFICATE OF
ACCEPTANCE a certificate in the form attached
as Exhibit A to be completed and
executed by Lessor and Lessee on
Delivery.
CERTIFICATE OF
DELIVERY CONDITION a certificate in the form attached
as Exhibit B to be completed and
executed by Lessor and Lessee on
Delivery.
CERTIFICATE OF
REDELIVERY a certificate in the form attached
as Exhibit G to be completed and
executed by Lessor upon redelivery
of the Aircraft and Aircraft
Documents in accordance with this
Agreement.
CONSENT the Lessee's Acknowledgment of and
Consent to Assignment of Lease,
dated the Delivery Date, between
Lessor, Lessee and Mortgagee in the
form attached as Exhibit C pursuant
to which, inter alia, Lessee
consents to the Assignment and
Mortgagee covenants to preserve
Lessee's quiet enjoyment.
COOPESA The Self-Managed Cooperative of
Aero Industrial Services X.X.
CPCP Lessee's Corrosion Prevention and
Control Program under the Agreed
Maintenance Program.
CREDIT AGREEMENT the Secured Loan Agreement, dated
as of August___, 1999, between
Lender and Lessor.
CYCLE one take-off and landing of an
airframe.
DAMAGE NOTIFICATION
THRESHOLD the amount set forth in Schedule 1.
DEFAULT any Event of Default and any event
which with the giving of notice,
lapse of time or fulfilment of any
other condition or any combination
of the foregoing would constitute
an Event of Default.
DEFAULT RATE at any time and from time to time,
3.0% plus the prime or base
commercial lending rate as
announced (i) if the Mortgagee is a
bank or trust company, by the
Mortgagee at its principal banking
office in New York City, New York,
or (ii) if the Mortgagee is not a
bank or trust company, by Citibank,
N.A., in either case compounded
monthly and calculated on the basis
of the actual number of days
elapsed and on a 360 day year.
DELIVERY the delivery of the Aircraft to the
Lessee in accordance with the terms
of this Agreement.
DELIVERY DATE the date on which Delivery takes
place, which shall be the Scheduled
Delivery Date or such other date
notified by Lessor to Lessee in
accordance with the provisions of
this Agreement, including Clauses
4.2(e) and 4.3.
DELIVERY LOCATION Coopesa in San Xxxx, Costa Rica.
DOLLARS AND $ the lawful currency of the United
States of America.
ENGINE whether or not installed on the
Aircraft:
(a) each engine, including the
Spare Engine, of the
manufacture, model and serial
number specified in Part 1 of
Schedule 2 and having 750 or
more rated take-off
horsepower, title to which
shall belong to the Lessor; or
(b) any engine which replaces that
engine, title to which passes
to the Lessor in accordance
with Clause 8.17(d);
and in each case includes all
modules and Parts from time to time
belonging to, installed in or
appurtenant to that engine.
ENGINE ADDITIONAL RENT as defined in Clause 5.4(a)(ii).
ENGINE ADDITIONAL RENT
RATE the amount set forth in Schedule 1.
ENGINE LOSS the occurrence, with respect to an
Engine, of one of the events set
forth in clauses (a) through (d) of
the definition of "Total Loss" as
if references to the "Airframe"
were to such "Engine".
ENGINE LOSS DATE the relevant date determined in
accordance with the definition of
"Total Loss Date" as if that
definition applied to an Engine
Loss.
ENGINE MANUFACTURER the Xxxxx & Whitney Division of
United Technologies Corporation.
ENGINE REIMBURSABLE
EXPENSES as defined in Clause 7.2(b)(i).
ENGINE SHOP VISIT a shop visit requiring disassembly
of an Engine (but excluding for
this purpose any removal,
installation, maintenance and
repair of "Quick Engine Change"
kits) and during which there shall
be performed a hot section
restoration or repair or a cold
section restoration or repair or a
replacement of LLPs.
EQUIPMENT CHANGE as defined in Clause 8.16(a).
EVENT OF DEFAULT an event specified in Clause 13.1.
EXCUSABLE DELAY with respect to delivery of the
Aircraft, delay or non-performance
due to or arising out of acts of
God or public enemy, civil war,
insurrection or riot, fire, flood,
explosion, earthquake, serious
accident, epidemic, quarantine
restriction, import restriction,
any act of government, governmental
priority, allocation, regulation or
order affecting directly or
indirectly, the Aircraft, any
manufacturer, Lessor or any
materials or facilities, strike or
labor dispute causing cessation,
slowdown or interruption of work,
inability after due and timely
diligence to procure equipment,
data or materials from
manufacturers, suppliers, any
existing owner, seller or lessee in
a timely manner, damage,
destruction or loss, adverse
weather conditions preventing any
services, inspections or flights of
the Aircraft or any other cause to
the extent that such cause is
beyond the control of Lessor,
whether above mentioned or not and
whether or not similar to the
foregoing.
EXPIRY DATE the Scheduled Expiry Date or any
other date on which:
(a) the Aircraft has been
redelivered in accordance with
this Agreement and all
obligations of Lessee have
been satisfied; or
(b) the Lessor receives the Agreed
Value following a Total Loss
and any other amounts then due
and owing in accordance with
this Agreement.
FAA the Federal Aviation Administration
of the U.S. Department of
Transportation, or any successor
Government Entity succeeding to the
functions thereof.
FARs the Federal Aviation Regulations
for the time being in force, issued
by the FAA pursuant to the Federal
Aviation Law and published in Title
14 of the Code of Federal
Regulations.
FEDERAL AVIATION LAW Title 49 of the United States Code,
as amended, or any successor
statutory provisions and the
regulations promulgated under such
provisions.
FINANCIAL INDEBTEDNESS any indebtedness in respect of:
(a) moneys borrowed;
(b) any liability under any
debenture, bond, note, loan
stock, acceptance credit,
documentary credit or other
security;
(c) the acquisition cost of any
asset to the extent payable
before or after the time of
acquisition or possession; or
(d) the capitalized value
(determined in accordance with
accounting practices generally
accepted in the United States
of America) of obligations
under finance leases; or
(e) any guarantee, indemnity or
similar assurance against
financial loss of any Person
in respect of the above.
FINANCING PARTIES collectively (i) Lender, (ii)
Mortgagee, (iii) any Additional
Mortgagee, (iv) any Person that
lends money to Lessor and for whom
an Additional Mortgagee holds a
Security Interest in the Leased
Property, and (v) the successors
and permitted assigns of such
Persons.
FLIGHT HOUR each hour or part thereof (rounded
up to one decimal place) elapsing
from the moment the wheels of the
Airframe leave the ground on take
off until the moment the wheels of
the Airframe next touch the ground.
GAAP generally accepted accounting
principles as in effect from time
to time and, subject to changes in
such principles from time to time,
consistently applied in accordance
with the past practices of a
Person.
GOVERNMENT ENTITY (a) any national, state or local
government, political
subdivision thereof or local
jurisdiction therein;
(b) any board, commission,
department, division,
instrumentality, court, agency
or political subdivision
thereof; and
(c) any association, organization
or institution of which any of
the above is a member or to
whose jurisdiction any thereof
is subject or in whose
activities any of the above is
a participant.
HEAVY CHECK the maintenance checks under the
Agreed Maintenance Program
designated as "Q1" and "Q2", or any
comparable major airframe overhaul
under any other or amended
maintenance program.
IATA the International Air Transport
Association.
INDEMNITEES Lessor, each of the Financing
Parties, the respective successors
and assigns of such Persons and the
shareholders, directors, officers,
agents and employees of such
Persons.
INSURANCES as defined in Clause 9.1.
LANDING GEAR the landing gear assembly of the
Aircraft excluding the wheels and
brake units.
LANDING GEAR
ADDITIONAL RENT as defined in Clause 5.4(a)(iii).
LANDING GEAR
ADDITIONAL RENT the amount set forth in Schedule 1.
RATE
LANDING GEAR
REIMBURSABLE
EXPENSES as defined in Clause 7.2(c)(i).
LEASED PROPERTY the Aircraft and the Aircraft
Documents.
LENDER FINOVA Capital Corporation and its
successors and assigns as "Lender"
under the Credit Agreement.
LESSEE INSTALLED PART a Part installed on the Aircraft
after Delivery not in replacement
for any Part and not required under
the FARs on the Aircraft, title to
which is held by Lessee (and which
may be subject to a Security
Interest in favor of an unrelated
third party) or title to which is
held by an unrelated third party
and such Part is leased or
conditionally sold to Lessee.
LESSOR LIEN (a) the Mortgage and any other
Security Interest whatever
from time to time created by
or arising through the Lessor
and/or any Financing Party in
connection with the financing
or refinancing of the
Aircraft;
(b) any other Security Interest in
respect of the Aircraft that
results from acts or omissions
of, or claims against, the
Lessor and/or any Financing
Party not related to the
operation of the Aircraft or
the transactions contemplated
by or permitted under this
Agreement; and
(c) liens in respect of the
Aircraft for Non-Indemnified
Taxes.
LETTER OF CREDIT an irrevocable standby letter of
credit, in the form set out in
Exhibit E or otherwise in form and
substance reasonably satisfactory
to Lessor, to be issued (at the
Lessee's option) in favor of Lessor
(or, if designated by Lessor, in
favor of Mortgagee) by a bank
reasonably acceptable to Lessor and
Mortgagee for the payment of the
Security Deposit.
LLPs life limited Parts.
MAINTENANCE PROGRAM an Aviation Authority approved
maintenance program for the
Aircraft encompassing scheduled
maintenance, condition monitored
maintenance and/or on-condition
maintenance of Airframe, Engines
and Parts, including servicing,
testing, preventative maintenance,
repairs, structural inspections,
system checks, overhauls, approved
modifications, service bulletins,
engineering orders, airworthiness
directives, corrosion control,
inspections and treatments.
MAJOR CHECKS any Heavy Check, C-Check, "C"
check, multiple or phase "C" check,
"D" check or annual heavy
maintenance visit or segment
thereof suggested for commercial
aircraft of the same model as the
Aircraft by the Manufacturer
(however denominated in the Agreed
Maintenance Program).
MANUFACTURER The Boeing Company, a Delaware
corporation with a place of
business in Seattle, Washington.
MINIMUM LIABILITY
COVERAGE the amount set forth on Schedule 1.
MORTGAGE the First Priority Aircraft Chattel
Mortgage and Security Agreement,
dated the Delivery Date, between
Lessor, as debtor, and Mortgagee,
as secured party, whereby Lessor
has granted to Mortgagee a first
priority security interest in the
Aircraft and its right, title and
interest in the Operative
Documents.
MORTGAGEE FINOVA Capital Corporation and its
successors and assigns as mortgagee
under the Mortgage.
MPD for any manufacturer, such
manufacturer's Maintenance Planning
Document.
NON-INDEMNIFIED
TAXES (a) Taxes imposed as a direct
result of activities of any
Tax Indemnitee in the
jurisdictions imposing the
liability unrelated to such
Tax Indemnitee's dealings with
Lessee pursuant to the
Operative Documents or to the
transactions contemplated by
the Operative Documents or the
operation of the Aircraft by
Lessee;
(b) Taxes on or measured by the
income, profits, gains,
capital or net worth
(including minimum taxes,
withholding taxes and taxes on
or measured by any items of
tax preference) and any doing
business or franchise taxes,
and interest, additions to
tax, penalties or other
charges in respect thereof,
imposed on any Tax Indemnitee
(i) by any Federal Government
Entity in the United States of
America, (ii) by any
Government Entity in the
jurisdictions where such Tax
Indemnitee is incorporated,
formed or organized or has its
principal place of business,
(iii) by any state or local
Government Entity in the
United States of America in
which such Tax Indemnitee has
a nexus as a result of
activities other than those
contemplated by the Operative
Documents, or (iv) by any
Government Entity in any other
jurisdiction where such Tax
Indemnitee is liable for such
Taxes in the absence of the
transactions contemplated by
this Agreement;
(c) Taxes imposed with respect to
any period ending or event
occurring before the date of
this Agreement or any period
commencing or event occurring
after the Expiry Date;
(d) Taxes imposed as a direct
result of the sale, financing
or other disposition or
assignment of the Aircraft, or
any interest in any trust or
other entity that holds a
direct or indirect interest in
the Aircraft, unless such sale
or disposition occurs as a
consequence of an Event of
Default;
(e) Taxes imposed by a taxing
jurisdiction for a particular
tax period in which none of
the following is true for that
tax period: (i) the
operation, registration,
location, presence or use of
the Aircraft, the Airframe,
any Engine or any Part
thereof in such jurisdiction,
(ii) the place of
incorporation, commercial
domicile or other presence in
such jurisdiction of the
Lessee, any sublessee or any
user of or Person in
possession of the Aircraft,
the Airframe, any Engine or
any Part thereof in such
jurisdiction, or (iii) any
payments made under this
Agreement and related
documents being made from such
jurisdiction;
(f) Taxes to the extent caused by
the gross negligence or
willful misconduct of any Tax
Indemnitee or the breach by
any Tax Indemnitee of any of
their obligations under the
Operative Documents;
(g) Taxes to the extent caused by
a failure by any Tax
Indemnitee to furnish in a
timely manner notice or
information which it is
required to furnish to Lessee
by the terms of this
Agreement;
(h) any Taxes imposed on or with
respect to a transferee or
assignee of the Aircraft or
any interest therein to the
extent that, under Applicable
Law in effect at the time of
the transfer or assignment,
such Taxes would not have been
imposed on or with respect to
the transferor or assignor;
and
(i) any Taxes resulting from or
attributable to a Lessor Lien.
OPERATIVE DOCUMENTS this Agreement, the Certificate of
Acceptance, the Certificate of
Delivery Condition and the Consent.
PART whether or not installed on the
Aircraft:
(a) any component, furnishing or
equipment (other than a
complete Engine) furnished
with, installed on or
appurtenant to the Airframe
and Engines on Delivery; and
(b) any other component,
furnishing or equipment (other
than a complete Engine) title
to which has, or should have,
passed to the Lessor pursuant
to the Sale Agreement or
Clause_8.17(b),
but excludes any such items title
to which has, or should have,
passed to Lessee pursuant to
Clause_8.17(c) and any Lessee
Installed Part.
PERMITTED LIEN (a) any lien for Taxes not
assessed or, if assessed, not
yet due and payable, or being
contested in good faith by
appropriate proceedings;
(b) any lien of a repairer,
mechanic, carrier, hangar
keeper, unpaid seller or other
similar lien arising in the
ordinary course of business or
by operation of law in respect
of obligations which are not
overdue in accordance with
Applicable Law (or, if
applicable, generally accepted
accounting principles and
practices in the relevant
jurisdiction) or are being
contested in good faith by
appropriate proceedings; and
(c) any Lessor Lien;
but only if, in the case of (a) and
(b): (i) adequate reserves have
been provided by Lessee for the
payment of the Taxes or obligations
in accordance with generally
accounting principles and practices
in the relevant jurisdiction; and
(ii) such proceedings, or the
continued existence of the lien, do
not give rise to any reasonable
likelihood of the sale, forfeiture
or other loss of the Aircraft or
any interest therein or of criminal
liability on the Lessor or any
Financing Party.
PERSON any individual, corporation,
partnership, limited liability
company, limited liability
partnership, joint venture,
association, joint stock company,
trust, unincorporated organization
or Government Entity.
PREVIOUS OPERATOR Deutsche Lufthansa
Aktiengesellschaft.
PREVIOUS OWNER First Security Bank, National
Association, as trustee f/b/o the
Previous Operator
REDELIVERY LOCATION Kansas City International Airport
or any other location agreed by
Lessor and Lessee.
REIMBURSABLE
EXPENSES collectively, Airframe Reimbursable
Expenses, APU Reimbursable
Expenses, Engine Reimbursable
Expenses and Landing Gear
Reimbursable Expenses.
RENT collectively, all Basic Rent,
Additional Rent and Supplemental
Rent.
RENTAL PERIOD each period ascertained in
accordance with Clause 5.2.
RENT DATE the Delivery Date and the
corresponding day of each calendar
month during the Term or, for any
calendar month that does not have a
corresponding day, the last day of
such calendar month.
SCHEDULED DELIVERY
DATE August ___, 1999.
SPARE ENGINE the Engine bearing manufacturer's
serial number 702999.
SCHEDULED EXPIRY
DATE the fifth anniversary of the
Delivery Date.
SECURITY DEPOSIT the amount set forth on Schedule 1.
SECURITY INTEREST any mortgage, charge, pledge, lien,
assignment, hypothecation, right of
set-off, or any agreement or
arrangement having the effect of
creating a security interest.
SPECIAL FAA COUNSEL McAfee & Xxxx of Oklahoma City,
Oklahoma.
SRM the Manufacturer's structural
repair manual.
STATE OF
INCORPORATION State of Delaware.
STATE OF
REGISTRATION United States of America.
SUBSIDIARY (a) in relation to any reference
to accounts, any company
wholly or partially owned by
Lessee whose accounts are
consolidated with the accounts
of the Lessee in accordance
with accounting principles
generally accepted under
accounting standards of the
State of Incorporation; and
(b) for any other purpose, an
entity from time to time:
(i) of which another has
direct or indirect
control or owns directly
or indirectly more than
50% of the voting share
capital; or
(ii) which is a direct or
indirect subsidiary of
another under the laws of
the jurisdiction of its
incorporation.
SUPPLEMENTAL RENT all amounts, liabilities and
obligations (other than Basic Rent
and Additional Rent) that Lessee
assumes or agrees to pay under this
Agreement to Lessor or any other
Person, including payment of
deposits, indemnities and the
Agreed Value.
TAX INDEMNITEES Lessor and each of the Financing
Parties.
TAXES all present and future taxes,
levies, imposts, duties or charges
in the nature of taxes, whatever
and wherever imposed, including
customs duties, value added taxes
or similar taxes and any franchise,
transfer, sales, use, business,
occupation, excise, personal
property, stamp or other tax or
duty imposed by any national or
local taxing or fiscal authority or
agency, together with any
withholding, penalties, additions
to tax, fines or interest thereon
or with respect thereto.
TERM the period commencing on the
Delivery Date and ending on the
Expiry Date or any later date
pursuant to Clause 12.4.
TOTAL LOSS with respect to the Airframe:
(a) the actual, arranged or
constructive total loss of the
Airframe (including any damage
to the Airframe which results
in an insurance settlement on
the basis of a total loss, or
requisition for use or hire
which results in an insurance
settlement on the basis of a
total loss);
(b) the Airframe being destroyed,
damaged beyond repair or
permanently rendered unfit for
normal use for any reason
whatsoever;
(c) the requisition of title, or
other compulsory acquisition,
capture, seizure, deprivation,
confiscation or detention for
any reason of the Airframe by
the government of the State of
Registration (whether de jure
or de facto), but excluding
requisition for use or hire
not involving requisition of
title; or
(d) the hi-jacking, theft,
condemnation, confiscation,
seizure or requisition for use
or hire of the Airframe
(excluding any of the
foregoing which is
attributable to a Lessor Lien
or the enforcement thereof)
which deprives any Person
permitted by this Agreement to
have possession and/or use of
the Airframe for more than 60
consecutive days.
TOTAL LOSS DATE (a) in the case of an actual total
loss, the actual date on which
the loss occurs or, if such
date is unknown, the day on
which the Aircraft was last
heard of;
(b) in the case of any of the
events described in
sub-paragraph (a) of the
definition of "Total Loss"
(other than an actual total
loss), the earlier of (i) 30
days after the date on which
notice claiming such total
loss is given to the relevant
insurers, and (ii) the date on
which such loss is admitted or
compromised by the insurers;
(c) in the case of any of the
events described in
sub-paragraph (b) of the
definition of "Total Loss",
the date on which such
destruction, damage or
rendering unfit occurs;
(d) in the case of any of the
events described in
sub-paragraph (c) of the
definition of "Total Loss",
the date on which the relevant
requisition of title or other
compulsory acquisition,
capture, seizure, deprivation,
confiscation or detention
occurs;
(e) in the case of any of the
events described in
sub-paragraph (d) of the
definition of "Total Loss",
the expiry of the period of 60
days referred to in such
sub-paragraph (d);
and, in each case, the Total Loss
shall be deemed to have occurred at
noon Greenwich Mean Time on such
date.
1.2 INTERPRETATION
(a) In this Agreement, unless the contrary intention
is stated, a reference to:
(i) each of "LESSOR", "LESSEE", "FINANCING
PARTY" or any other Person includes without
prejudice to the provisions of this
Agreement any successor in title to it and
any permitted assignee;
(ii) words importing the plural shall include
the singular and vice versa;
(iii) the term "including", when used in this
Agreement, means "including without
limitation" and "including but not limited
to".
(iv) any document shall include that document as
amended, novated or supplemented from time
to time unless expressly stated to the
contrary;
(v) a law (1) includes any statute, decree,
constitution, regulation, order, judgment
or directive of any Government Entity; (2)
includes any treaty, pact, compact or other
agreement to which any Government Entity is
a signatory or party; (3)_includes any
judicial or administrative interpretation
or application thereof; and (4) is a
reference to that provision as amended,
substituted or re-enacted; and
(vi) a Clause, Schedule or Exhibit is a
reference to a clause of, a schedule to or
an exhibit to this Agreement.
(b) The headings in this Agreement are to be ignored
in construing this Agreement.
2. REPRESENTATIONS and WARRANTIES
2.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
The Lessee represents and warrants as of the date
hereof to the Lessor as follows:
(a) STATUS: The Lessee is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Incorporation, has
the corporate power to own its assets and carry on
its business as it is being conducted and is (or
will at the relevant time be) the holder of all
necessary air transportation licenses required in
connection therewith and with the use and
operation of the Aircraft.
(b) POWER AND AUTHORITY: The Lessee has the corporate
power to enter into and perform, and has taken all
necessary corporate action to authorize the entry
into, performance and delivery of, each of the
Operative Documents and the transactions
contemplated by the Operative Documents.
(c) LEGAL VALIDITY: Each of the Operative Documents
constitutes the Lessee's legal, valid and binding
agreement, enforceable against Lessee in
accordance with its terms.
(d) NON-CONFLICT: The entry into and performance by
the Lessee of, and the transactions contemplated
by, the Operative Documents do not and will not:
(i) conflict with any Applicable Laws binding
on the Lessee;
(ii) conflict with the constitutional documents
of the Lessee; or
(iii) conflict with or result in default under
any document which is binding upon the
Lessee or any of its assets, or result in
the creation of any Security Interest over
any of its assets, other than Permitted
Liens.
(e) AUTHORIZATION: All authorizations, consents and
registrations required by, and all notifications
to be given by, the Lessee in connection with the
entry into, performance, validity and
enforceability of, the Operative Documents and the
transactions contemplated by the Operative
Documents have been (or will on or before Delivery
have been) obtained, effected or given (as
appropriate) and are (or will on their being
obtained or effected be) in full force and effect.
(f) NO IMMUNITY:
(i) The Lessee is subject to civil commercial
law with respect to its obligations under
this Agreement.
(ii) Neither the Lessee nor any of its assets is
entitled to any right of immunity and the
entry into and performance of the Operative
Documents by the Lessee constitute private
and commercial acts.
(g) FINANCIAL STATEMENTS: the audited consolidated
financial statements of the Lessee and its
Subsidiaries most recently delivered to the
Lessor:
(i) have been prepared in accordance with
accounting principles and practices
generally accepted and consistently applied
in the State of Registration; and
(ii) fairly present the consolidated financial
condition of the Lessee and its
Subsidiaries as at the date to which they
were drawn up and the consolidated results
of operations of the Lessee and its
Subsidiaries for the periods covered by
such statements.
(h) PARI PASSU: The obligations of the Lessee under
this Agreement rank at least pari passu with all
other present and future unsecured and
unsubordinated obligations (including contingent
obligations) of the Lessee, with the exception of
such obligations as are mandatorily preferred by
law and not by virtue of any contract.
2.2 LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES
The Lessee further represents and warrants as of the
date hereof to the Lessor that:
(a) NO DEFAULT: No Event of Default has occurred and
is continuing or might reasonably be expected to
result from the entry into or performance of any
of the Operative Documents.
(b) REGISTRATION:
(i) It is not necessary or advisable under the
laws of the State of Registration in order
to ensure the validity, effectiveness and
enforceability of the Operative Documents
or to establish, perfect or protect the
property rights of Lessor or any Financing
Party in the Leased Property that any
instrument relating thereto other than this
Agreement, the Certificate of Acceptance,
the Assignment or the Mortgage be filed,
registered or recorded or that any other
action be taken or, if any such filings,
registrations, recordings or other actions
are necessary, the same have been effected
or will have been effected on or before
Delivery.
(ii) Under all Applicable Laws, including the
laws of the State of Incorporation and the
State of Registration, the property rights
of the Lessor and the Financing Parties
(pursuant to the Assignment and Mortgage)
in the Leased Property as of the Delivery
Date have been fully established, perfected
and protected and this Agreement will have
priority in all respects over the claims of
all creditors of the Lessee, with the
exception of such claims as are mandatorily
preferred by law and not by virtue of any
contract.
(c) LITIGATION: No litigation, arbitration or
administrative proceedings are pending or, to the
Lessee's knowledge, threatened against the Lessee
which, if adversely determined, would have a
material adverse effect upon its financial
condition or business or its ability to perform
its obligations under the Operative Documents.
(d) TAXES: The Lessee has delivered all necessary
returns and payments due to all tax authorities
having jurisdiction over Lessee, including those
in the State of Incorporation and the State of
Registration, except where the failure to do so
would not have a material adverse effect upon its
financial condition or business or its ability to
perform its obligations under the Operative
Documents, and based upon the representations of
Lessor in Clause 2.4 and on the assumption that
Lessor is a "United States person" within the
meaning of Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended, Lessee is not
required by law to deduct or withhold any Taxes
from any payments under this Agreement.
2.3 REPETITION
The representations and warranties in Clause 2.1 and
Clause 2.2 will survive the execution of this
Agreement. The representations and warranties
contained in Clause 2.1 and Clause_2.2 will be deemed
to be repeated by the Lessee on Delivery with reference
to the facts and circumstances then existing. The
representations and warranties contained in Clause 2.1
will be deemed to be repeated by the Lessee on each
Rent Date as if made with reference to the facts and
circumstances then existing.
2.4 LESSOR'S REPRESENTATIONS AND WARRANTIES
The Lessor represents and warrants to the Lessee that:
(a) STATUS: Lessor is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Delaware and has the
corporate power to own the Leased Property and
carry on the business contemplated of Lessor under
the Operative Documents. Lessor is a "citizen of
the United States" within the meaning of Section
40102(a)(15) of the Federal Aviation Law.
(b) POWER AND AUTHORITY: Lessor has the corporate
power to enter into and perform, and has taken all
necessary corporate action to authorize the entry
into, performance and delivery of, each of the
Operative Documents and the transactions
contemplated by the Operative Documents.
(c) LEGAL VALIDITY: Each of the Operative Documents
constitutes Lessor's legal, valid and binding
agreement, enforceable against Lessor in
accordance with its terms.
(d) NON-CONFLICT: The entry into and performance by
Lessor of, and the transactions contemplated by,
the Operative Documents do not and will not:
(i) conflict with any Applicable Laws binding
on Lessor;
(ii) conflict with the certificate of
incorporation or bylaws of Lessor; or
(iii) conflict with or result in default under
any document which is binding upon Lessor
or any of its assets.
(e) AUTHORIZATION: So far as concerns the obligations
of Lessor, all authorizations, consents,
registrations and notifications required in
connection with the entry into, performance,
validity and enforceability of, and the
transactions contemplated by, the Operative
Documents by Lessor have been (or will on or
before Delivery have been) obtained, effected or
given (as appropriate) and are (or will on their
being obtained or effected be) in full force and
effect.
(f) NO IMMUNITY:
(i) Lessor is subject to civil commercial law
with respect to its obligations under the
Operative Documents.
(ii) Neither Lessor nor any of its assets is
entitled to any right of immunity and the
entry into and performance of the Operative
Documents by Lessor constitute private and
commercial acts.
(g) RIGHT TO LEASE: On the Delivery Date, Lessor
shall have the right to lease the Aircraft to
Lessee under this Agreement.
2.5 REPETITION
The representations and warranties in Clause 2.4 will
survive the execution of this Agreement. The
representations and warranties contained in Clause 2.4
will be deemed to be repeated by Lessor on Delivery and
on each subsequent Rent Date as if made with reference
to the facts and circumstances then existing.
3. CONDITIONS PRECEDENT
3.1 LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT
Lessor's obligation to lease the Leased Property to
Lessee under this Agreement is subject to the receipt
of the following by Lessor and Mortgagee from Lessee on
or before Delivery in form and substance satisfactory
to the Lessor, provided that it shall not be a
condition precedent to the obligations of the Lessor
that any document be produced, or action taken, which
is to be produced or taken by it or any Person within
its control:
(a) CONSTITUTIONAL DOCUMENTS: a copy of the
constitutional documents of the Lessee;
(b) RESOLUTIONS: a copy of a resolution of the board
of directors of the Lessee approving the terms of,
and the transactions contemplated by, the
Operative Documents, resolving that it enter into
the Operative Documents, and authorizing a
specified individual or individuals to execute the
Operative Documents and accept delivery of the
Aircraft on its behalf;
(c) OPINIONS: (i) an opinion, in the form set out in
Exhibit D, in respect of Lessee's obligations
under the Operative Documents issued by
independent legal counsel acceptable to Lessor,
and (ii) an opinion from Special FAA Counsel as to
such matters as Lessor may reasonably request;
(d) APPROVALS: evidence of the issuance of each
approval, license and consent which may be
required in relation to, or in connection with,
the performance by Lessee of any of its
obligations hereunder;
(e) LICENSES: copies of the Lessee's air transport
license, air operator's certificate and all other
licenses, certificates and permits required by the
Lessee in relation to, or in connection with, the
operation of the Aircraft;
(f) CERTIFICATE: a certificate of a duly authorized
officer of the Lessee:
(i) setting out a specimen of each signature
referred to in Clause 3.1(b); and
(ii) certifying that each copy of a document
specified in this Clause 3.1 is correct,
complete and in full force and effect;
(g) INSURANCES: certificates of insurance, brokers'
undertakings and other evidence satisfactory to
the Lessor and Mortgagee that the Lessee is taking
the required steps to ensure due compliance with
the provisions of this Agreement as to insurances
with effect on and after Delivery;
(h) FILINGS: evidence that all filings,
registrations, recordings and other actions have
been or will be taken which are necessary to
ensure the validity, effectiveness and
enforceability of the Operative Documents and to
protect the respective rights of the Lessor and
the Mortgagee in the Leased Property; and
(i) GENERAL: such other documents as Lessor may
reasonably request.
3.2 LESSOR'S OTHER CONDITIONS PRECEDENT
The obligation of the Lessor to deliver and lease the
Leased Property under this Agreement is also subject to
the following additional conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES: the
representations and warranties of Lessee under
Clauses 2.1 and 2.2 are correct and would be
correct if repeated on Delivery; and
(b) PAYMENTS: all payments due to Lessor under this
Agreement on or before Delivery, including the
first payment of Basic Rent, shall have been
received by Lessor.
3.3 LESSOR'S WAIVER
The conditions specified in Clauses 3.1 and 3.2(a) and
(b) are for the sole benefit of the Lessor and the
Financing Parties and may be waived or deferred in
whole or in part and with or without conditions by the
Lessor.
3.4 LESSEE'S CONDITIONS PRECEDENT
The Lessee's obligation to accept the Leased Property
on lease from Lessor under this Agreement is subject to
the satisfaction by the Lessor of the following
conditions precedent:
(a) RESOLUTIONS: a copy of a resolution of the board
of directors of the Lessor approving the terms of,
and the transactions contemplated by, the
Operative Documents, resolving that it enter into
the Operative Documents, and authorizing a
specified individual or individuals to execute the
Operative Documents;
(b) CERTIFICATE: the receipt by the Lessee of a
certificate of a duly authorized officer of the
Lessor:
(i) setting out a specimen of each signature
referred to in sub-clause (a) above; and
(ii) certifying that the copy of the resolutions
referred to in sub-clause (a) above is
correct, complete and in full force and
effect;
(c) REPRESENTATIONS AND WARRANTIES: the
representations and warranties of the Lessor under
Clause 2.4 are correct and would be correct if
repeated on Delivery;
(d) REGISTRATION: evidence that title to the Aircraft
is held by Lessor and that the Aircraft has been
validly registered under the laws of the State of
Registration;
(e) DELIVERY CONDITION: the Aircraft shall be in the
condition set forth on Schedule_3;
(f) CONSENT: the receipt by Lessee of the Consent,
duly signed by Lessor and Mortgagee;
(g) NO INJUNCTIONS: no action or proceedings shall
have been instituted nor shall governmental action
be threatened before any Government Entity, nor
shall any order, judgment or decree have been
issued or proposed to be issued by any Government
Entity at the time of the Delivery Date to set
aside, restrain, enjoin or prevent the completion
and consummation of this Agreement or the
transactions contemplated hereby;
(h) OPERATIVE DOCUMENTS: Lessee shall have received
executed counterparts of each of the Operative
Documents; and
(i) NO CHANGE IN LAW: no change shall have occurred
after the date of this Agreement in Applicable Law
(including changes in interpretations thereof by
Government Entities) which, in the reasonable
opinion of Lessee, would make it a violation of
Applicable Law for Lessee to enter into any
transaction contemplated by the Operative
Documents.
3.5 LESSEE'S WAIVER
The conditions specified in Clause 3.4 are for the sole
benefit of the Lessee and may be waived or deferred in
whole or in part and with or without conditions by the
Lessee. If any of those conditions are not satisfied
on or before Delivery and the Lessee (in its absolute
discretion) nonetheless agrees to lease the Leased
Property from the Lessor, then Lessor will ensure that
those conditions are fulfilled within one month after
the Delivery Date.
4. COMMENCEMENT
4.1 LEASING
(a) The Lessor will lease the Leased Property to the
Lessee and the Lessee will take the Leased
Property on lease in accordance with this
Agreement for the duration of the Term.
(b) The Lessor and the Lessee intend that this
Agreement constitute a "true lease" and a lease
for all United States federal income tax purposes.
Lessor and Lessee further intend and agree that
the Lessor shall be entitled to the full benefits
afforded lessors of aircraft under 11 U.S.C.
Section 1110, as amended.
4.2 DELIVERY
(a) DELIVERY CONDITION: Lessor shall deliver the
Leased Property in compliance with the delivery
conditions set forth in Schedule 3 and otherwise
"as is, where is and with all faults", except for
any items set forth on Annex 2 to the Certificate
of Delivery Condition and any other items agreed
in writing by Lessor and Lessee. Lessor
represents and warrants to Lessee that Lessor has
an agreement with Coopesa for the modification of
the Aircraft, which commenced ________ 1999, to
cause the Aircraft to comply with the delivery
conditions set forth on Schedule 3.
(b) DELIVERY INSPECTION: Before the Delivery Date,
Lessor shall cause Coopesa to make the Leased
Property available for Lessee to conduct a ground
inspection of the Aircraft and an inspection of
the Aircraft Documents to its satisfaction
(collectively, the "Ground Inspection"). The
Ground Inspection of the Aircraft shall include
the following:
(i) Lessee shall be entitled to perform, at
Lessee's expense, a videotape borescope
inspection of all accessible gas path
sections of each Engine (accessible whether
by borescope port or other means),
including the low pressure and high
pressure compressors and the turbine area
of such Engine. All items beyond the
Engine Manufacturer's maintenance manual
limits will be rectified at Lessor's sole
cost and expense. No Engine will be "on
watch" for any reason requiring special or
out of sequence inspection.
(ii) In accordance with the Engine
Manufacturer's MPD, Lessor shall cause
Coopesa to perform a maximum power
assurance run and condition, acceleration
and bleed valve scheduling checks on each
Engine other than the Spare Engine. Coopesa
will record and evaluate each such Engine's
performance, with Lessee's representatives
entitled to be present. Each such Engine
shall pass such tests without operational
limitations throughout the operating
envelope in accordance with the Engine
Manufacturer's maintenance manual.
(iii) Lessor shall perform a videotape borescope
inspection of the APU, and all items beyond
the manufacturer's recommended limits will
be rectified at Lessee's sole cost and
expense.
(iv) The Aircraft shall be weighed just prior to
Delivery.
(c) AIRCRAFT DOCUMENTS: The Aircraft will be
accompanied by the Aircraft Documents listed on
Part_2 of Schedule_2. Lessor will also provide to
Lessee all historical and current maintenance
manuals, aircraft and engine technical records and
data, and other aircraft documentation provided to
the Lessor by the Previous Operator. Upon the
request of Lessee, Lessor shall use reasonable
efforts to obtain any required maintenance and
technical records or documents not in its custody.
(d) ACCEPTANCE FLIGHT: Before the Delivery Date,
Lessee shall be entitled to perform on behalf of
the Previous Owner, Previous Operator and Lessor a
demonstration flight of the Aircraft pursuant to a
FAR Part 125 deviation of up to two hours with up
to four representatives of Previous Operator and
Lessor on-board as observers (the "Acceptance
Flight"). The Lessee shall perform its flight
protocol during such Acceptance Flight. Lessee
shall also perform on behalf of Lessor such
further acceptance flights as may be necessary in
the event that the first or subsequent flights do
not confirm that the Aircraft complies with the
delivery requirements of this Agreement. Lessee
shall insure the Aircraft during all such
acceptance flights, and Lessor shall reimburse
Lessee for all of its costs in connection with all
such acceptance flights.
(e) CORRECTION OF DISCREPANCIES: The obligation of
Lessee to lease the Leased Property from Lessor is
subject to Lessor delivering the Leased Property
to Lessee in compliance with the conditions set
forth on Schedule 3. If Lessor corrects all
material discrepancies from the conditions set
forth on Schedule 3 before delivery, or if Lessor
and Lessee agree that Lessor will correct or pay
for their correction as set forth on Annex 2 to
the Certificate of Delivery Condition, then Lessee
shall accept the Leased Property. If, on the
Scheduled Delivery Date, the Aircraft is not, in
all material respects, in the condition set forth
in Schedule 3 and Lessor and Lessee do not agree
upon the correction of or payment for such
material discrepancies within 60 days after the
Scheduled Delivery Date, then Lessee may by notice
to Lessor given not later than 75 days after the
Scheduled Delivery Date terminate this Agreement.
If Lessee fails to give any such termination
notice within 75 days after the Scheduled Delivery
Date, Lessee shall be deemed to have accepted the
Leased Property for all purposes of this
Agreement.
(f) LESSEE'S PRE-DELIVERY MODIFICATIONS: During the
pre-Delivery modifications performed by Coopesa,
Lessee shall be permitted to request that Lessor
cause Coopesa to replace or deactivate certain
aircraft systems identified by Lessee, so long as
such requested maintenance work will not prevent
Lessor from delivering the Aircraft on the
Scheduled Delivery Date and are reasonably agreed
to by Lessor. Lessee shall pay Coopesa, or
reimburse Lessor for, all charges of Coopesa for
performing such replacement or deactivation. Any
materials or components that are removed from the
Aircraft and replaced shall be the property of
Lessee. Any materials or components that are
deactivated or are otherwise removed and not
replaced shall remain the property of Lessor and
be returned to Lessor at Lessor's cost.
4.3 DELAYED DELIVERY
If owing to Coopesa delaying in the completion of the
performance of the pre-Delivery modifications referred
to in Clause 4.2(f) above or any Excusable Delay,
Lessor delays in the delivery of, or fails to deliver,
the Aircraft under this Agreement on the Scheduled
Delivery Date, then in any such case:
(a) Lessor will not be responsible for any losses,
including loss of profit, costs or expenses
arising from or in connection with the delay or
failure suffered or incurred by Lessee; and
(b) Lessee will not be entitled to terminate this
Agreement or to reject the Aircraft when tendered
for delivery by Lessor, on the grounds of any such
delay, unless 60 days have elapsed after the
Scheduled Delivery Date and Lessee has given
written notice to Lessor to the effect that Lessee
terminates this Agreement.
4.4 ACCEPTANCE AND RISK
(a) The Leased Property will be delivered to, and will
be accepted by, the Lessee at the Delivery
Location on the Delivery Date immediately
following satisfaction of the conditions precedent
specified in Clauses 3.1, 3.2 and 3.4 (or their
waiver or deferral by the party entitled to grant
such waiver or deferral).
(b) Immediately following satisfaction of the
conditions precedent specified in Clauses_3.1, 3.2
and 3.4 (or their waiver or deferral by the party
entitled to grant such waiver or deferral), the
Lessee and the Lessor shall forthwith complete
Annex 1 to the Certificate of Delivery Condition
(specifying the maintenance status of the
Airframe, Engines, APU and Landing Gear) and
Lessor and Lessee shall sign and deliver to each
other the Certificate of Acceptance and the
Certificate of Delivery Condition. Delivery of
the signed Certificate of Acceptance to the Lessor
shall constitute deemed delivery of the Aircraft
to the Lessee.
(c) On and from Delivery, the Leased Property will be
in every respect at the sole risk of the Lessee,
which will bear all risk of loss, theft, damage or
destruction to the Leased Property from any cause
whatsoever.
(d) Concurrently with Delivery, Lessor shall file for
recordation this Agreement at the FAA Aircraft
Registry.
5. PAYMENTS
5.1 SECURITY DEPOSIT; LETTER OF CREDIT
(a) SECURITY DEPOSIT: On the date of this Agreement,
Lessee shall pay to Lessor an amount that, when added
to amounts previously paid to Lessor, equal the
Security Deposit. The Security Deposit shall
constitute additional security for performance by
Lessee of its obligations under this Agreement, and the
following provisions shall apply:
(i) If an Event of Default occurs and for as long as
it continues, the Lessor may (but shall not be
obligated to) apply all or any portion of the
Security Deposit in or towards satisfaction of any
sums due and payable to the Lessor under the
Operative Documents or to compensate the Lessor
for any sums which it may, in its discretion,
advance or expend as a result of any such Event of
Default. Notwithstanding any such use or
application by the Lessor, the Lessee shall remain
in default under this Agreement until the full
amount owed by the Lessee, including interest
accrued thereon pursuant to Clause 5.11, shall
have been paid to the Lessor. If the Lessor so
uses or applies all or any portion of the Security
Deposit, the Lessee shall, on demand of the
Lessor, replenish the Security Deposit in an
amount equal to the amount so used or applied
within five Business Days after Lessor's demand
therefor.
(ii) Lessor may commingle the Security Deposit with its
general funds and may deposit the Security Deposit
in any account selected by Lessor, whether
interest-bearing or not, and any interest earned
on the Security Deposit will be the sole property
of Lessor.
(iii) The Security Deposit shall be returned to
Lessee within five Business Days of (1)
delivery to Lessor of a Letter of Credit in
accordance with Clause 5.1(b),
(2) redelivery of the Aircraft to the
Lessor in the condition required by
Clause 12 and Schedule 4, or (3) receipt by
the Lessor of the Agreed Value following a
Total Loss and all other amounts due under
Clause 11.1(b); provided, that if, upon the
occurrence of any event specified in the
foregoing subclause (1), (2) or (3), any
amounts payable by Lessee under this
Agreement remain outstanding, then the
Security Deposit shall be returned to
Lessee within five Business Days of the
Lessor being satisfied that the Lessee has
irrevocably paid to the Lessor all amounts
that are at that time outstanding under
this Agreement.
(b) LETTER OF CREDIT: At any time on or after the
Delivery Date, Lessee shall be entitled, instead
of paying and having the Lessor hold the Security
Deposit in cash in accordance with Clause 5.1(a)
above, to provide the Lessor with the Letter of
Credit. In the event that the Lessee elects to
provide the Letter of Credit, the following
provisions shall apply:
(i) Lessee shall cause the Letter of Credit to
be renewed or replaced by the issuing bank
not later than 30 days before the
expiration of such Letter of Credit, and
shall cause the Letter of Credit to remain
in effect, as renewed, until 90 days after
the Expiry Date, subject to Clause
5.1(b)(iii) below.
(ii) If an Event of Default occurs and for as
long as it continues, the Lessor may (but
shall not be obliged to) call on the Letter
of Credit and use or apply the proceeds in
or towards satisfaction of any sums due and
payable to the Lessor under this Agreement
or to compensate the Lessor for any sums
which it may, in its discretion, advance or
expend as a result of any such Event of
Default. Notwithstanding any such use or
application by the Lessor, the Lessee shall
remain in default under this Agreement
until the full amount owed by the Lessee,
including interest accrued thereon pursuant
to Clause 5.11, shall have been paid to the
Lessor. If the Lessor so uses or applies
all or any portion of the amount available
under the Letter of Credit, the Lessee
shall immediately, on demand of the Lessor,
procure the issue of a new Letter of Credit
acceptable to the Lessor for an amount
equal to the amount so used or applied, or
shall pay to the Lessor an amount in cash
equal to the amount so used or applied to
be held pursuant to Clause 5.1(a).
(iii) The Letter of Credit shall be returned to
the Lessee within five Business Days of:
(1) redelivery of the Aircraft to the
Lessor in the condition required by
Clause 12 and Schedule 3; or
(2) receipt by the Lessor of the Agreed
Value following a Total Loss and
all other amounts due under Clause
11.1(b);
provided, that if, upon the occurrence of any
event specified in the foregoing subclause (1) or
(2), any amounts payable by Lessee under this
Agreement remain outstanding, then the Letter of
Credit shall be returned to Lessee within five
Business Days of the Lessor being satisfied that
the Lessee has irrevocably paid to the Lessor all
amounts which are at that time outstanding under
this Agreement.
5.2 RENTAL PERIODS
The first Rental Period will commence on the Delivery
Date and each subsequent Rental Period will commence on
the date succeeding the last day of the previous Rental
Period. Each Rental Period will end on the date
immediately preceding the next succeeding Rent Date
except that if a Rental Period would otherwise overrun
the Expiry Date, it will end on the Expiry Date.
5.3 BASIC RENT
(a) TIME OF PAYMENT: The Lessee will pay to the
Lessor or its order Basic Rent in advance on each
Rent Date. Payment must be initiated adequately
in advance of the Rent Date to ensure that the
Lessor receives credit for the payment on the Rent
Date.
(b) AMOUNT: The Basic Rent payable in respect of each
Rental Period will be the Basic Rent Amount as set
forth in Schedule 1.
5.4 ADDITIONAL RENT
(a) AMOUNT: Subject to the proviso to Clause
7.2(e)(iii), Lessee will pay to Lessor Additional
Rent in relation to each calendar month (or
portion thereof) during the Term on the 12th day
following the end of that calendar month (or, with
respect to the last calendar month during the
Term, on the Expiry Date):
(i) in respect of the Airframe, the Airframe
Additional Rent Rate for each Flight Hour
flown by the Airframe during that calendar
month ("AIRFRAME ADDITIONAL RENT");
(ii) in respect of the Engines, the Engine
Additional Rent Rate for each Flight Hour
operated by each Engine during that
calendar month ("ENGINE ADDITIONAL RENT");
(iii) in respect of the Landing Gear, the Landing
Gear Additional Rent Rate for each Flight
Hour flown by the Airframe during that
calendar month ("LANDING GEAR ADDITIONAL
RENT"); and
(iv) in respect of the APU, the APU Additional
Rent Rate for each Flight Hour flown by the
Airframe during that calendar month ("APU
ADDITIONAL RENT");
(b) ADJUSTMENT: Lessor and Lessee, acting in good
faith, may mutually adjust the amount of
Additional Rent after the Delivery Date, upon
notice from one to the other, not more frequently
than annually based on the following:
(i) by reference to increases in the Consumer
Price Index as released by the Bureau of
Labor Statistics, United States Department
of Labor since the date of this Agreement;
(ii) by reference to Manufacturer's and Engine
Manufacturer's recommendations, industry
experience, any change in the operational
environment of the Aircraft that materially
affects the cost of maintaining the
Aircraft and any change in the Flight Hour
to Cycle ratio of the operation of the
Aircraft (it being understood that the
Additional Rent is based on the assumption
that the operation of the Aircraft during
the Term will, on average, be not less than
one Flight Hour for each Cycle); and
(iii) by reference to the Actual Costs
experienced by Lessee in the maintenance of
the Aircraft under this Agreement.
5.5 LESSOR'S MONEYS: Lessor and Lessee intend that the
Additional Rent are amounts paid by Lessee to the
Lessor in consideration for the use of the Leased
Property by the Lessee and the satisfaction of the
Lessor's obligations under the Operative Documents and
that, when paid, the Additional Rent is irrevocably and
unconditionally the property of Lessor.
Notwithstanding that stated intent, if and to the
extent that the Additional Rent or any part thereof,
under any Applicable Law or otherwise, is determined to
be security deposits or otherwise the property of
Lessee or if it is so determined those moneys are a
debt owed to Lessee or that the Lessee shall have any
interest in those moneys (the "LESSORS' MONEYS"),
Lessee and Lessor agree that subclauses (a) and (b)
below shall apply:
(a) To the fullest extent permitted by law and by way
of continuing security, Lessee grants a Security
Interest in the Lessor's Moneys and all rights of
Lessee to payment thereof, the debt represented
thereby and all interest thereon and/or any and
all interest of Lessee therein to Lessor by way of
first priority Security Interest as security for
the Lessee's obligations and liability under this
Agreement (the "LESSEE'S LIABILITIES"). Except as
expressly permitted under this Agreement, Lessee
will not be entitled to payment of the Lessor's
Moneys. Lessee will not assign, transfer or
otherwise dispose of all or part of its rights or
interest in the Lessor's Moneys and Lessee agrees
that it will enter into any additional documents
and instruments necessary or reasonably requested
by Lessor or the Mortgagee to evidence, create or
perfect the Lessor's rights to the Lessor's
Moneys.
(b) If Lessee fails to comply with any provision of
this Agreement or any Event of Default has
occurred and is continuing, Lessor may immediately
or at any time thereafter, without prior notice to
Lessee:
(i) offset all or any part of the Lessee's
Liabilities against the liabilities of the
Lessor in respect of the Lessor's Moneys;
or
(ii) apply or appropriate the Lessor's Moneys in
or towards the payment or discharge of the
Lessee's Liabilities in such order as
Lessor sees fit.
5.6 PAYMENTS
(a) All payments of Rent by the Lessee to the Lessor
under this Agreement will be made for value on the
due date, for the full amount due, in Dollars and
in same day funds, settled through the New York
Clearing House System or such other funds as may
for the time being be customary for the settlement
in New York City of payments in Dollars by
telegraphic transfer to the account of the
Mortgagee at Citibank, N.A., ABA No. 000000000,
Account No. 4068-0522, Reference: "Vanguard
22120".
(b) If any Rent or other payment would otherwise
become due on a day which is not a Business Day,
it shall be due on the immediately succeeding
Business Day.
5.7 GROSS-UP
(a) All payments by the Lessee under or in connection
with this Agreement will be made without offset or
counterclaim, free and clear of and without
deduction or withholding for or on account of any
Taxes (other than Non-Indemnified Taxes that
Lessee is compelled by law to deduct or withhold).
(b) All Taxes (other than Non-Indemnified Taxes) in
respect of payments under this Agreement shall be
for the account of the Lessee.
(c) If the Lessee is compelled by law to make payment
to an Indemnitee under or in connection with this
Agreement subject to any Tax and such Indemnitee
does not actually receive for its own benefit on
the due date a net amount equal to the full amount
provided for under this Agreement (other than
Non-Indemnified Taxes that Lessee is compelled by
law to deduct or withhold), the Lessee will pay
all necessary additional amounts to ensure receipt
by such Indemnitee of the full amount (other than
Non-Indemnified Taxes that Lessee is compelled by
law to deduct or withhold) so provided for.
5.8 TAXATION
(a) The Lessee will on demand pay and indemnify each
Tax Indemnitee against all Taxes (other than
Non-Indemnified Taxes) levied or imposed against
or upon such Tax Indemnitee or the Lessee and
relating to or attributable to the Lessee, the
Operative Documents or the Aircraft directly or
indirectly in connection with the registration,
ownership, leasing, sub-leasing, delivery,
possession, use, operation, repair, maintenance,
overhaul, transportation, landing, storage,
presence or redelivery of the Aircraft or any part
thereof or any rent, receipts, insurance proceeds,
income or other amounts arising therefrom.
(b) If any Tax Indemnitee shall realize any Tax
savings (by way of refund, deduction, credit or
otherwise) in respect of any amount with respect
to which the Lessee shall have made a payment (or
increased payment) pursuant to Clause 5.7 or 5.10
or shall have indemnified such Tax Indemnitee
pursuant to Clause 5.8(a), or in respect of the
occurrence or transaction which gave rise to such
payment or indemnification, and such Tax savings
shall not have been taken into account previously
in calculating any indemnity payment made by the
Lessee, then such Tax Indemnitee shall, subject to
the Lessee's obligations to repay such amount to
such Tax Indemnitee if the relevant savings are
subsequently disallowed or canceled, pay to the
Lessee the amount of such Tax savings (together
with, in the case of a refund, any interest
received thereon); provided, that no Tax
Indemnitee shall be obliged to make any payment to
the Lessee pursuant to this Clause 5.8(b) to the
extent that the amount of any Tax savings in
respect of which such payment is to be made would
exceed the aggregate amount of all prior payments
made by the Lessee to, on behalf of or as
indemnification of such Tax Indemnitee under this
Agreement for Taxes less the amount of all prior
payments made pursuant to this Clause 5.8(b) in
respect of such Tax savings. The Lessee
acknowledges that nothing contained in this Clause
5.8(b) shall interfere with the right of any Tax
Indemnitee to arrange its tax affairs in
whatsoever proper manner it thinks fit and, in
particular, no Tax Indemnitee shall be under any
obligation to claim any Tax savings in priority to
any other savings available to it; provided, that
subject to the foregoing each Tax Indemnitee shall
use reasonable good faith diligence to realize Tax
savings as described above.
5.9 INFORMATION
If Lessee is required by any Applicable Law, or by any
third party, to deliver any report or return in
connection with any Taxes (other than Non-Indemnified
Taxes), the Lessee will duly complete the same and, in
particular, will not state therein that any Person
other than Lessee is responsible for the use and
operation of the Aircraft and for the Taxes (other than
Non-Indemnified Taxes) arising therefrom, and the
Lessee will, on request, supply a copy of the report or
return to any Tax Indemnitee. If Lessee requires any
information or cooperation from any Tax Indemnitee in
order to satisfy its obligations as set forth above,
such Tax Indemnitee shall promptly furnish such
information or cooperation as Lessee may reasonably
request upon written request by Lessee. If actual
notice is given by any taxing authority to Lessor that
a report or return is required to be filed with respect
to any Taxes (other than Non-Indemnified Taxes), the
Lessor shall promptly notify Lessee of such required
report or return.
5.10 TAXATION OF INDEMNITY PAYMENTS
(a) If and to the extent that any sums payable to any
Tax Indemnitee by Lessee under this Agreement by
way of indemnity are insufficient, by reason of
any Taxes (other than Non-Indemnified Taxes)
payable in respect of those sums, for such Tax
Indemnitee to discharge the corresponding
liability to the relevant third party (including
any taxation authority), or to reimburse such Tax
Indemnitee for the cost incurred by it to a third
party (including any taxation authority), Lessee
will pay to such Tax Indemnitee such sum as will,
after the tax liability has been fully satisfied,
leave such Tax Indemnitee with the same amount as
it would have been entitled to receive in the
absence of that liability, together with interest
on the amount of the deficit at the Default Rate
in respect of the period commencing on the date on
which the payment of taxation is finally due until
payment by the Lessee (both before and after
judgment).
(b) If and to the extent that any sums constituting
(directly or indirectly) an indemnity to any Tax
Indemnitee but paid by the Lessee to any Person
other than such Tax Indemnitee are treated as
taxable in the hands of such Tax Indemnitee (other
than as a result of Non-Indemnified Taxes), then
Lessee will pay to such Tax Indemnitee such sum as
will, after the tax liability has been fully
satisfied, indemnify such Tax Indemnitee to the
same extent as it would have been indemnified in
the absence of such liability, together with
interest on the amount payable by Lessee under
this Clause 5.10(b) at the Default Rate in respect
of the period commencing on the date on which the
payment of taxation is finally due until payment
by the Lessee (both before and after judgment).
5.11 DEFAULT INTEREST
If the Lessee fails to pay any amount payable under
this Agreement on the due date, the Lessee will pay on
demand from time to time to Lessor or any Financing
Party (as the case may be) interest (both before and
after judgment) at the Default Rate on such amount from
the due date to the day of payment in full by Lessee to
Lessor or such Financing Party. All such interest
shall be compounded monthly and calculated on the basis
of the actual number of days elapsed assuming a year of
360 days.
5.12 CONTEST
If written claim is made against any Tax Indemnitee for
or with respect to any Taxes (other than
Non-Indemnified Taxes), such Tax Indemnitee shall
promptly notify the Lessee. If reasonably requested by
the Lessee in writing within 30 days after such
notification, such Tax Indemnitee shall, upon receipt
of indemnity satisfactory to such Tax Indemnitee and at
the expense of the Lessee (including all reasonable
out-of-pocket costs, expenses, losses, legal and
accountants' fees and disbursements, penalties and
interest), in good faith contest or to the extent
permissible by law allow Lessee to contest in Lessee's
or such Tax Indemnitee's name, the validity,
applicability or amount of such Taxes by either (i)
resisting payment thereof if practicable and permitted
by Applicable Law, or (ii) if payment is made, using
reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings,
and in the contest of any such claim by any Tax
Indemnitee, such Tax Indemnitee shall apprise the
Lessee of all material developments with respect to
such contest, shall forward copies of all material
submissions made in such contest and shall materially
comply in good faith with any reasonable request
concerning the conduct of any such contest; provided,
that no Tax Indemnitee will be obliged to take any such
action:
(a) if it waives its right under this Agreement to the
indemnity at issue in such contest; or
(b) unless there is a reasonable basis for such
contest, and if the amount of Tax in controversy
exceeds $50,000, Lessee provides such Tax
Indemnitee with an opinion of independent tax
counsel satisfactory to such Tax Indemnitee, both
as to counsel and substance, to the effect that
there is a reasonable basis for such contest; or
(c) for which Lessee has not made adequate provision
to the reasonable satisfaction of the Lessor or
such Financing Party (as the case may be) in
respect of the expense concerned; or
(d) if such action gives rise to any material
likelihood of the Aircraft or any interest therein
being sold, forfeited or otherwise lost or of
criminal liability on the part of the Lessor or
any Financing Party.
If any Tax Indemnitee, in accordance with the
foregoing, determines to pay such Taxes and seek a
refund, Lessee will either pay such Taxes on such Tax
Indemnitee's behalf and pay such Tax Indemnitee any
amount due with respect to such payment or will
promptly reimburse such Tax Indemnitee for such Taxes.
If any Tax Indemnitee shall obtain a refund of all or
any part of such Taxes paid by the Lessee, such Tax
Indemnitee shall pay Lessee the amount of such refund;
provided, that such amount shall not be payable before
such time as the Lessee shall have made all payments or
indemnities to any Tax Indemnitee then due with respect
to Taxes and so long as no Default has occurred and is
continuing. If in addition to such refund any Tax
Indemnitee shall receive an amount representing
interest, attorneys fees or any other amount with
respect to such refund, Lessee shall be paid that
proportion of such interest, attorneys fees or any
other amount which is fairly attributable to the Taxes
paid by the Lessee prior to the receipt of such refund.
No Tax Indemnitee shall enter into a settlement or
other compromise with respect to, or otherwise concede,
any claim by a taxing authority on account of Taxes
being contested by Lessee pursuant to this Clause 5.12
without the written consent of Lessee, which consent
shall not be unreasonably withheld. If a Tax
Indemnitee enters into a settlement or other compromise
without the written consent of Lessee in accordance
with the preceding sentence, such Tax Indemnitee shall
be deemed to have waived its right to be indemnified by
Lessee with respect to such claim (but not with respect
to any future claims).
5.13 ABSOLUTE
Lessee's obligations under this Agreement are absolute
and unconditional irrespective of any contingency
whatever including (but not limited to):
(a) any right of offset, counterclaim, recoupment,
defense or other right which either party to this
Agreement may have against the other;
(b) any unavailability of the Aircraft for any reason,
including a requisition of the Aircraft or any
prohibition or interruption of, interference with
or other restriction against the Lessee's use,
operation or possession of the Aircraft;
(c) any lack or invalidity of title or any other
defect in title, airworthiness, merchantability,
fitness for any purpose, condition, design or
operation of any kind or nature of the Aircraft
for any particular use or trade, or for
registration or documentation under the laws of
any relevant jurisdiction, or any Total Loss in
respect of or any damage to the Aircraft;
(d) any insolvency, bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution,
liquidation or similar proceedings by or against
the Lessor or the Lessee;
(e) any invalidity, unenforceability or lack of due
authorization of, or other defect in, this
Agreement; or
(f) any other cause which, but for this provision,
would or might otherwise have the effect of
terminating or in any way affecting any obligation
of the Lessee under this Agreement;
provided always, however, that this Clause 5.13 shall
be without prejudice to the Lessee's right to claim
damages and other relief from the courts in the event
of any breach by the Lessor of its obligations under
this Agreement, or in the event that, as a result of
any lack or invalidity of title to the Aircraft on the
part of the Lessor, the Lessee is deprived of its
possession of the Aircraft.
6. MANUFACTURER'S WARRANTIES
6.1 ASSIGNMENT
Notwithstanding this Agreement and subject to the
rights of Mortgagee pursuant to the Assignment, the
Lessor will remain entitled to the benefit of each
warranty, express or implied, and any unexpired
customer and/or product support given or provided in
respect of the Aircraft, any Engine or Part by any
manufacturer, vendor, maintenance performer,
subcontractor or supplier. Unless an Event of Default
shall have occurred and be continuing, Lessor hereby
authorizes Lessee to pursue any claim thereunder in
relation to defects affecting the Aircraft, any Engine
or Part, and the Lessee agrees diligently to pursue any
such claim which arises at its own cost. The Lessee
will notify the Lessor promptly upon becoming aware of
any such claim. The Lessor will provide such
assistance to the Lessee in making a claim under any
such warranties or customer and/or product support as
the Lessee may reasonably request, and, if requested by
the Lessee and at the Lessee's expense, will pursue a
claim in its own name where the relevant manufacturer,
vendor, maintenance performer, subcontractor or
supplier has refused to acknowledge the Lessee's right
to pursue that claim.
6.2 PROCEEDS
Unless an Event of Default shall have occurred and be
continuing, all proceeds of any such claim as is
referred to in Clause 6.1 and which exceed $250,000
will be paid directly to Lessor at the account set
forth in Clause 5.6(a), but if and to the extent that
such claim relates:
(a) to defects affecting the Aircraft which the Lessee
has rectified; or
(b) to compensation for loss of use of the Aircraft,
an Engine or any Part during the Term; or
(c) to costs incurred by the Lessee in pursuing such
claim (whether or not proceeds of such claim are
payable to the Lessee);
and provided no Default shall have occurred and be
continuing, the proceeds will be promptly paid to the
Lessee by Lessor but, in the case of (a), only on
receipt of evidence reasonably satisfactory to Lessor
that Lessee has rectified the relevant defect.
6.3 PARTS
Except to the extent the Lessor otherwise agrees in a
particular case, the Lessee will procure that all
engines, components, furnishings or equipment provided
by the manufacturer, vendor, maintenance performer,
subcontractor or supplier as a replacement for a
defective Engine or Part pursuant to the terms of any
warranty or customer and/or product support arrangement
comply with Clause 8.13(a), are installed on the
Aircraft promptly and that title thereto vests in the
Lessor in accordance with Clause 8.17(a). On
installation those items will be deemed to be an Engine
or Part, as applicable.
6.4 AGREEMENT
To the extent any warranties or customer and/or product
support relating to the Aircraft are made available
under an agreement between any manufacturer, vendor,
maintenance performer, subcontractor or supplier and
the Lessee, this Clause 6 is subject to that agreement.
However, Lessee will:
(a) pay the proceeds of any claim thereunder that
exceed $250,000 to Lessor at the account set forth
in Clause 5.6(a) to be applied pursuant to
Clause_6.2 and, pending such payment, will hold
the claim and the proceeds on trust for Lessor;
and
(b) take all such steps as are necessary and requested
by the Lessor at the end of the Term to ensure the
benefit of any of those warranties or customer
and/or product support which have not expired are
vested in the Lessor (but subject to the rights of
Mortgagee under the Mortgage).
7. LESSOR'S COVENANTS and DISCLAIMERS
7.1 QUIET ENJOYMENT
Provided no Event of Default shall have occurred and be
continuing, none of the Lessor, its successors and
assigns, any Financing Party or any Person claiming by,
through or on account of any of such parties will
interfere with the quiet use, possession and enjoyment
of the Aircraft by the Lessee.
7.2 LESSOR'S MAINTENANCE CONTRIBUTION
(a) AIRFRAME REIMBURSABLE EXPENSES:
(i) Upon the performance by Lessee of a Heavy
Check on the Airframe during the Term of
this Lease, the Lessee's Actual Costs
incurred in completing, with respect to the
Airframe, all routine Heavy Check tasks
shall constitute "AIRFRAME REIMBURSABLE
EXPENSES".
(ii) In connection with the performance of any
part of a Heavy Check, Lessee shall present
written evidence satisfactory to Lessor as
to the workscope to be performed and
payment installments relating to the
performance thereof in connection with such
Heavy Check and the amount of the Airframe
Reimbursable Expenses for approval by
Lessor. Upon receipt of such written
evidence, and provided there then exists no
Default, Lessor shall pay to Lessee, or to
the independent repair facility performing
such work if directed by Lessee, an amount
equal to the lesser of (i) the Airframe
Reimbursable Expenses or (ii) an amount
equal to (1) all Airframe Additional Rent
previously paid by Lessee under this Lease,
minus (2)_all previous payments by Lessor
under this Clause 7.2(a).
(b) ENGINE REIMBURSABLE EXPENSES:
(i) Upon the accomplishment of any CER for any
Engine during the Term requiring shop
repair, including any premature removal of
an Engine due to accelerated performance
deterioration revealed by Lessee's trend
monitoring data and replacement of LLPs
during any such shop visit, the Lessee's
Actual Cost incurred in completing such CER
shall constitute "ENGINE REIMBURSABLE
EXPENSES".
(ii) Upon accomplishment of any CER for an
Engine, Lessee shall present written
evidence satisfactory to Lessor as to the
completion of such CER to such Engine and
the amount of Engine Reimbursable Expenses
for approval by Lessor. Such shop visit
shall include a build standard to be
mutually agreed upon by Lessor and Lessee.
Upon receipt of such written evidence, and
provided there then exists no Default,
Lessor shall pay to Lessee, or to the
independent repair facility performing such
work if directed by Lessee, an amount equal
to the lesser of (i) the Engine
Reimbursable Expenses with respect to such
Engine or (ii) an amount equal to (1) all
Engine Additional Rent previously paid by
Lessee for such Engine pursuant to this
Lease, minus (2)_all previous payments for
such Engine by Lessor under this Clause
7.2(b).
(c) LANDING GEAR REIMBURSABLE EXPENSES:
(i) Upon the performance by Lessee of an
overhaul of any Landing Gear or the
replacement of LLPs of any Landing Gear, in
each case in accordance with the Agreed
Maintenance Program, the Lessee's Actual
Cost incurred in completing such overhaul
shall constitute "LANDING GEAR REIMBURSABLE
EXPENSES".
(ii) Upon accomplishment of any such overhaul,
Lessee shall present written evidence
satisfactory to Lessor as to the completion
of such overhaul and the amount of Landing
Gear Reimbursable Expenses for approval by
Lessor. Upon receipt of such written
evidence, and provided there then exists no
Default, Lessor shall pay to Lessee, or to
the independent repair facility performing
such work if directed by Lessee, an amount
equal to the lesser of (i) the Landing Gear
Reimbursable Expenses or (ii) an amount
equal to (1) all Landing Gear Additional
Rent previously paid by Lessee pursuant to
this Lease, minus (2) all previous payments
by Lessor under this Clause 7.2(c).
(d) APU REIMBURSABLE EXPENSES:
(i) Upon the performance by Lessee of an
overhaul of the APU in accordance with the
Agreed Maintenance Program, the Lessee's
Actual Cost incurred in completing such
overhaul shall constitute "APU REIMBURSABLE
EXPENSES".
(ii) Upon accomplishment of any such overhaul,
Lessee shall present written evidence
satisfactory to Lessor as to the completion
of such overhaul and the amount of APU
Reimbursable Expenses for approval by
Lessor. Upon receipt of such written
evidence, and provided there then exists no
Default, Lessor shall pay to Lessee, or to
the independent repair facility performing
such work if directed by Lessee, an amount
equal to the lesser of (i) the APU
Reimbursable Expenses or (ii) an amount
equal to (1) all APU Additional Rent
previously paid by Lessee pursuant to this
Lease, minus (2) all previous payments by
Lessor under this Clause 7.2(d).
(e) ADDITIONAL PROVISIONS:
(i) Notwithstanding the provisions of Clauses
7.2(a)(i), (b)(i), (c)(i) and (d)(i),
Reimbursable Expenses shall not include the
cost of (1) any replacements or repairs
caused by foreign object damage, ingestion,
accident, faulty maintenance or
installation, any incident, improper
operations, abuse, neglect, misuse or
elective parts replacement (except to the
extent ordinarily accomplished during such
maintenance or overhaul), (2) any
modifications or interior reconfiguration,
(3) the accomplishment of all airworthiness
directives or manufacturer's service
bulletins not incorporated into the
Maintenance Program, (4) maintenance work
that is reimbursable by a claim under the
manufacturer's warranties or by insurance
(but including deductibles for purposes of
this provision) or (5)_any overhaul of time
controlled components accomplished during
the Heavy Check, CER or overhaul except
such as are part of the routine tasks
included at such Heavy Check, CER or
overhaul or that, when tested during such
Heavy Check, CER or overhaul, fail and need
to be replaced.
(ii) Notwithstanding anything to the contrary
contained in this Clause 7.2, any such
maintenance and the extent and nature of
such maintenance to be performed shall be
conducted at an Agreed Maintenance
Performer. Lessor shall be entitled to
have representatives present during the
performance of such maintenance to oversee
and approve all aspects of such
performance, including the workscope
thereof to ensure that such maintenance is
in accordance with the Agreed Maintenance
Program. Lessor shall be notified by
Lessee prior to the commencement of any
maintenance work described in this Clause
7.2, including as to the Agreed Maintenance
Performer and for Lessor's approval of the
workscope.
(iii) Lessee acknowledges that Lessee is required
to pay the full cost of and to perform (or
cause to be performed) any check, shop
visit, overhaul or other maintenance
required by the Agreed Maintenance Program,
whether or not Lessor is required to make
any payments pursuant to this Clause 7.2,
and any costs incurred by Lessee in
performing any such check, shop visit,
overhaul or other maintenance required by
the Agreed Maintenance Program shall be for
Lessee's account solely; provided, that if
Lessor's contribution pursuant to Clause
7.2(a), (b), (c) or (d) above is ever less
than the Reimbursable Expenses incurred by
Lessee with respect to the Airframe,
Engines, Landing Gear or APU, then Lessee's
obligation under Clause_5.4 to make
payments of Additional Rent with respect to
the Airframe, Engines, Landing Gear or APU,
respectively, shall be suspended until an
equivalent amount to such shortfall has
been retained by Lessee.
(iv) Lessor shall deposit all Additional Rent in
an interest-bearing account with the
Mortgagee or with another financial
institution that Mortgagee uses for other
similar amounts deposited with it. Lessor
shall not commingle its general funds in
such account, but such account may hold
security deposits, additional rent and
similar payments paid to Affiliates of
Lessor under other aircraft leases. Any
interest earned on the Additional Rent will
be added to and become a part of the
Additional Rent.
7.3 INTENTIONALLY OMITTED
7.4 LESSOR'S AD COST SHARING CONTRIBUTION
(a) Provided no Default has occurred and is
continuing, upon the performance by Lessee of
"Qualifying AD Work" (as hereinafter defined)
relating to (i) any single airworthiness directive
issued by the Aviation Authority after the
Delivery Date and requiring terminating action
during the Term, (ii) any FAR regulation
promulgated after the Delivery Date requiring the
installation on the Aircraft during the Term of a
16-parameter flight data recorder or (iii) any FAR
regulation promulgated after the Delivery Date
requiring the installation in the cargo
compartment of the Aircraft during the Term of
fire indicators, Lessor will pay to Lessee, by way
of contribution to the cost of maintenance of the
Aircraft, an amount equal to the product of
(1)_the amount by which the Actual Cost of the
Qualifying AD Work for such single airworthiness
directive or either of such regulations exceeds
$50,000, multiplied by (2)_a fraction the
numerator of which is 84 minus the number of
months (rounded to the nearest whole number of
months) from the Delivery Date to the date of
completion of such Qualifying AD Work and the
denominator is 84.
(b) "Qualifying AD Work" means maintenance work
performed on the Aircraft solely in order to
comply fully with airworthiness directives issued
by the Aviation Authority after the Delivery Date
on a terminating action basis or with the two FAR
regulations described in Clause 7.4(a)(ii) and
(iii), and excluding work performed for any other
purpose, such as compliance with airworthiness
directives by means of repetitive inspections,
recording compliance work in the Aircraft
Documents and all other maintenance work.
(c) The Lessor will be obligated to pay any amount
specified in Clause 7.4(a) within 14 days after
submission by the Lessee to the Lessor of an
invoice and supporting documentation reasonably
satisfactory to the Lessor evidencing the
performance of Qualifying AD Work for an
airworthiness directive.
7.5 REGISTRATION AND FILINGS
The Lessor shall, at the Lessor's cost:
(a) maintain the registration of the Aircraft with the
Aviation Authority reflecting (so far as permitted
by Applicable Law) the respective interests of
Lessor and Lessee and not do or suffer to be done
anything which might reasonably be expected to
adversely affect that registration; and
(b) do all acts and things (including making any
filing or registration with the Aviation Authority
or any other Government Entity) as may be required
following any change in the ownership or financing
of the Aircraft.
7.6 AGREED MAINTENANCE PERFORMERS
The Lessor may object to and may exclude any
maintenance organization (other than Lessee) being
included as an "Agreed Maintenance Performer" for a
valid business reason; provided, that Lessor must
provide such objection within 45 days of scheduled
maintenance. The Lessor shall furnish to Lessee in
writing from time to time a list of all maintenance
organizations excluded from the definition of "Agreed
Maintenance Performer" pursuant to the preceding
sentence, which list may be amended by Lessor from time
to time. The Lessor and the Lessee shall consult in
good faith regarding any organizations on such list
from time to time at the request of either party.
7.7 EXCLUSION
THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS
WITH ALL FAULTS" AND LESSEE AGREES AND ACKNOWLEDGES
THAT, SAVE AS IS EXPRESSLY STATED IN THIS AGREEMENT,
LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND
LESSOR HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR
GIVEN, ANY CONDITIONS, WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT,
INCLUDING:
(a) THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY,
FITNESS FOR ANY USE OR PURPOSE, VALUE, CONDITION,
OR DESIGN, OF THE AIRCRAFT OR ANY PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
IN TORT, WHETHER OR NOT ARISING FROM LESSOR'S
NEGLIGENCE, ACTUAL OR IMPUTED (BUT EXCLUDING ANY
SUCH OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
IN TORT WHICH ARISES FROM LESSOR'S GROSS
NEGLIGENCE OR WILFUL MISCONDUCT); OR
(c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
FOR LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR ANY
LIABILITY OF LESSEE TO ANY THIRD PARTY, OR FOR ANY
OTHER DIRECT, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES.
7.8 LESSEE'S WAIVER
LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR,
ALL ITS RIGHTS IN RESPECT OF ANY CONDITION, WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, ON THE PART OF
LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND
WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF
THE OPERATION OR PERFORMANCE OF THE AIRCRAFT OR THIS
AGREEMENT EXCEPT AS IS OTHERWISE EXPRESSLY STATED IN
THIS AGREEMENT.
7.9 LESSEE'S CONFIRMATION
LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE
PROVISIONS OF CLAUSES 7.7 AND 7.8 AND ACKNOWLEDGES THAT
BASIC RENT AND OTHER AMOUNTS HAVE BEEN CALCULATED
NOTWITHSTANDING ITS PROVISIONS.
8. LESSEE'S COVENANTS
8.1 DURATION
The undertakings in this Clause 8 and in Clause 12
will:
(a) except as otherwise stated, be performed at the
expense of the Lessee; and
(b) remain in force until redelivery of the Aircraft
to the Lessor in accordance with this Agreement
and thereafter to the extent of any accrued rights
of the Lessor in relation to those undertakings.
8.2 INFORMATION
The Lessee shall:
(a) furnish to the Lessor, with a copy to Mortgagee:
(i) within 60 days after the last day of the
first three fiscal quarters of each fiscal
year of the Lessee, unaudited consolidated
quarterly financial statements of the
Lessee prepared for such quarter, including
a consolidated balance sheet of the Lessee
and its Subsidiaries as of the last day of
such quarter and consolidated statements of
income and retained earnings for such
fiscal quarter and for the year to date
and, on a comparative basis, figures for
the corresponding periods of the
immediately preceding fiscal year, all in
reasonable detail, each such statement to
be certified in a certificate of Lessee's
chief financial officer or chief accounting
officer as fairly presenting the financial
position and the results of operations of
the Lessee as at its date and for such
quarter (subject to year-end audit
adjustments) and as having been prepared in
accordance with GAAP;
(ii) as soon as available but not in any event
later than 105 days after the last day of
each fiscal year of the Lessee, audited
consolidated financial statements of the
Lessee prepared for such year, including a
consolidated balance sheet of the Lessee
and its Subsidiaries as of the last day of
such year, consolidated statements of
income and retained earnings of the Lessee
and its Subsidiaries for such fiscal year,
a consolidating balance sheet of the Lessee
and its Subsidiaries as of the last day of
such year and consolidating statements of
income and retained earnings of the Lessee
and its Subsidiaries for such fiscal year
and in all cases on a comparative basis
figures for the immediately preceding
fiscal year, all in reasonable detail, each
prepared in accordance with GAAP and
certified without qualification by Ernst &
Young or another of the largest
international firms of independent
certified public accountants as fairly
presenting the financial position and the
results of operations of Lessee and its
Subsidiaries at the end of and for such
fiscal year and as having been prepared in
accordance with GAAP;
(iii) in lieu of delivering the financial
statements referred to in sub-clauses (i)
and (ii) above, (1) Lessee may deliver
Quarterly Reports on Form 10-Q and Annual
Reports on Form 10-K for the respective
periods filed by the Lessee pursuant to and
in accordance with the Securities Exchange
Act of 1934, as amended, and (2) Lessee may
cause such financial statements (or 10-Qs
and 10-Ks) to be publicly available on the
internet through XXXXX filings with the
Securities and Exchange Commission or
otherwise;
(iv) at the same time as it is issued to the
creditors of the Lessee, a copy of each
notice or circular issued to the Lessee's
creditors as a group; and
(v) on request from time to time such other
information regarding the Lessee and its
business and affairs as the Lessor or
Mortgagee may reasonably request;
(b) on request, inform the Lessor as to the current
location of the Airframe and Engines and the
serial number and owner of any engine installed on
the Airframe;
(c) promptly furnish to Lessor all information that
Lessor from time to time reasonably requests
regarding the Aircraft, any Engine or any Part and
its use, location and condition, including the
hours available on the Aircraft and any Engine
until the next scheduled check, inspection,
overhaul or shop visit, as the case may be;
(d) on request, furnish to the Lessor evidence
reasonably satisfactory to the Lessor that all
Taxes and charges incurred by the Lessee with
respect to the Aircraft have been paid and
discharged in full;
(e) provide to the Lessor, within five days following
the end of each calendar month during the Term, a
monthly report on the Aircraft in the form set out
in Exhibit_F or such other form as the Lessee may
select providing substantially the same
information;
(f) promptly notify Lessor and Mortgagee of:
(i) any Total Loss, any Engine Loss, any theft
of the Airframe or any Engine, any damage
to the Aircraft if the potential cost of
repair may reasonably be expected to exceed
the Damage Notification Threshold or any
modification to the Aircraft if the
potential cost may reasonably be expected
to exceed the Damage Notification
Threshold;
(ii) any claim or other occurrence likely to
give rise to a claim under the Insurances
(but, in the case of hull claims only, in
excess of the Damage Notification
Threshold) and details of any negotiations
with the insurance brokers over any such
claim; and
(iii) any litigation, arbitration or
administrative proceedings that are pending
or, to the Lessee's knowledge, threatened
against the Lessee which, if adversely
determined, would have a material adverse
effect upon its financial condition or
business or its ability to perform its
obligations under this Agreement.
8.3 LAWFUL AND SAFE OPERATION
The Lessee shall:
(a) comply with all Applicable Law for the time being
in force in any country or jurisdiction in which
the Aircraft is being operated which is applicable
to the Aircraft or the use and operation of the
Aircraft;
(b) not use the Aircraft in any manner contrary to any
requirement or regulation of the Aviation
Authority or for any purpose for which the
Aircraft is not designed or reasonably suitable;
(c) ensure that the crew and engineers employed by it
in connection with the operation and maintenance
of the Aircraft have the qualifications and hold
the licenses required by the Aviation Authority
and Applicable Law;
(d) use the Aircraft solely in commercial or other
operations for which the Lessee is duly authorized
by the Aviation Authority and Applicable Law;
(e) not knowingly use the Aircraft (or use it when the
Lessee ought reasonably to have known that it was
being so used) for the carriage of:
(i) whole animals, living or dead, except in
the cargo compartments according to IATA
regulations, and except domestic pet
animals carried in a suitable container to
prevent the escape of any liquid and to
ensure the welfare of the animal;
(ii) acids, toxic chemicals, other corrosive
materials, explosives, nuclear fuels,
nuclear wastes or any nuclear assemblies or
components, except as permitted for cargo
aircraft under the "Restriction of Goods"
schedule issued by IATA from time to time
and provided that all the requirements for
packaging or otherwise contained therein
are fulfilled;
(iii) any other goods, materials or items of
cargo which could reasonably be expected to
cause damage to the Aircraft and which
would not be adequately covered by the
Insurances; or
(iv) any item or substance whose carriage is
illegal under Applicable Law;
(f) not utilize the Aircraft for purposes of training,
qualifying or re-confirming the status of cockpit
personnel except for the benefit of the Lessee's
cockpit personnel, and then only if the use of the
Aircraft for such purpose is not disproportionate
to the use for such purpose of other aircraft of
the same type operated by the Lessee;
(g) not (other than for bona fide safety reasons)
cause or permit the Aircraft to proceed to, or
remain at, any location which is for the time
being the subject of a prohibition order (or any
similar order or directive) by:
(i) any Government Entity of the State of
Registration; or
(ii) any Government Entity of the country in
which such location is situated; or
(iii) any Government Entity having jurisdiction
over the Lessee or the Aircraft;
(h) obtain and maintain in full force all
certificates, licenses, permits and authorizations
required for the use and operation of the Aircraft
for the time being, and for the making of payments
required by, and the compliance by the Lessee with
its other obligations under, this Agreement.
8.4 TAXES AND OTHER CHARGES
The Lessee will promptly pay:
(a) all license and registration fees, Taxes (other
than Non-Indemnified Taxes) and other amounts of
any nature imposed by any Government Entity that
are imposed on the Lessee or for which the Lessee
is responsible under this Agreement with respect
to the Aircraft, including the purchase,
ownership, delivery, leasing, possession, use,
operation, return, sale or other disposition of
the Aircraft; and
(b) all rent, fees, charges, Taxes (other than
Non-Indemnified Taxes) imposed on the Lessee and
other amounts in respect of any premises where the
Aircraft or any Part thereof is located from time
to time during the Term;
except to the extent that such payment is being
contested in good faith by appropriate proceedings in
accordance with Clause 5.12.
8.5 SUB-LEASING
Lessee will not sub-lease or otherwise part with
possession of the Aircraft, the Engines or any Part
except that the Lessee may part with possession:
(a) with respect to the Aircraft, the Engines or any
Part, to the relevant manufacturers for testing or
similar purposes or to an Agreed Maintenance
Performer for service, repair, maintenance or
overhaul work or for alterations, modifications or
additions to the extent required or permitted by
this Agreement;
(b) with respect to an Engine or Part, as expressly
permitted by this Agreement;
(c) with respect to the Aircraft or an Engine,
pursuant to an ACMI (aircraft crew, maintenance
and insurance) "wet" lease or charter of the
Aircraft in which operational control of the
Aircraft remains with the Lessee at all times,
provided the Aircraft remains registered with the
Aviation Authority;
(d) with respect to the Aircraft or an Engine, and
with the consent of Lessor and Mortgagee (which
consent shall not be unreasonably withheld),
pursuant to a sublease to a certificated air
carrier under the following conditions:
(i) no Default shall have occurred and be
continuing;
(ii) notwithstanding such sublease, Lessee shall
remain primarily responsible to Lessor
hereunder and the sublease, by its terms,
shall be expressly subject and subordinate
in all respect to this Agreement;
(iii) the sublease shall include clauses
identical to or having the same substantive
effect as Clauses 2.1, 2.2, 5, 7.7, 7.8, 8,
9, 10, 13, 15.11 and Schedule 5 of this
Agreement, except that a sublease may
impose additional or more stringent
obligations on, or give fewer rights to,
any sublessee than are imposed on Lessee
under the provisions of this Agreement and
that the term of the sublease shall not be
capable of extending beyond the Expiry
Date; provided, that any sublease to a
certificated air carrier that is an
Affiliate of Lessee (an "Affiliate
Sublease") need only include clauses
identical to or having the same substantive
effect as Clauses 8 and 9 and Schedule 5 of
this Agreement;
(iv) the rights, title and interests of Lessor
and the Financing Parties in and to the
Leased Property and this Agreement shall be
duly evidenced and protected to the
satisfaction of Lessor and such Financing
Parties (including as to the making of all
necessary filings and registrations) and
such interests shall not, in Lessor's
reasonable opinion, be prejudiced by the
sublease;
(v) Lessee and the sublessee shall have
executed and delivered to Lessor a security
assignment in respect of the sublease
together with an acknowledgment of such
assignment, each such document to be in
such form as Lessor and Mortgagee shall
reasonably require;
(vi) the sublessee shall be a reputable air
carrier, experienced in operating aircraft
of the same type as the Aircraft, shall
hold all necessary consents, licenses,
permits and authorizations required under
the applicable law of the state of
incorporation or establishment of such
carrier for the public transport of
passengers and cargo, and shall not be
subject to any event of the types described
in Clauses 13.1(g), (h) or (i) as of the
commencement of the sublease;
(vii) the Aircraft shall not be based or
re-registered outside the State of
Registration if the Lessor or Mortgagee
determines, in its absolute discretion,
that the foreign jurisdiction is not
acceptable in terms of political and
judicial risk;
(viii) Lessee shall give written notice to
Lessor and the Financing Parties of any
proposed sublease at least 30 days prior
to the date on which it is proposed that
such sublease be executed (which notice
shall include the identity of any
proposed change in the State of
Registration and, if then determined,
the term and the delivery date of the
proposed Sublease), and within a
reasonable period prior to the execution
by Lessee of any sublease, Lessee will
provide Lessor and the Financing Parties
with a copy of the draft sublease in
order for Lessor and the Financing
Parties to satisfy themselves that the
conditions set out in this Clause 8.5(d)
as to the form of the sublease are
fulfilled; provided, that in connection
with an Affiliate Sublease that does not
contemplate a change in the State of
Registration, Lessee need only give
Lessor and the Financing Parties written
notice of such Affiliate Sublease five
days prior to the date on which such
Affiliate Sublease is proposed to be
executed;
(ix) prior to delivery of the Aircraft to the
sublessee under any sublease, Lessee shall
deliver to Lessor an original counterpart
of the sublease duly executed by Lessee and
sublessee, and except in connection with an
Affiliate Sublease shall provide Lessor
with the equivalent of the conditions
precedent set forth in Clause 3.1 and 3.2
applicable to such sublessee;
(x) Lessee shall be responsible for all
reasonable costs incurred by Lessor and any
Financing Party in connection with the
Sublease; and
(xi) the sublease shall provide that no further
subleases of the Aircraft by the sublessee
shall be permitted.
8.6 INSPECTION
(a) Lessor, any Financing Party and any Person
designated by Lessor or any Financing Party may at
any time visit, inspect and survey the Aircraft,
any Engine or any Part and for such purpose may,
subject to any applicable Aviation Authority
regulation, travel on the flight deck as observer.
Subject to Clause 8.6(c)(ii) below, Lessor, any
Financing Party or any designee shall not be
restricted during such inspection from opening any
panels, bays or doors on the Aircraft or from
inspecting any part of the Aircraft.
(b) Lessee shall have no responsibility for the costs
and expenses of Lessor and any Financing Party in
connection with any such visit, inspection or
survey.
(c) The Lessor shall:
(i) have no duty to make, or liability arising
out of, any such visit, inspection or
survey; and
(ii) so long as no Default has occurred and is
continuing, not exercise such right other
than on reasonable notice and so as not to
disrupt unreasonably the maintenance or
operation of the Aircraft.
8.7 PROTECTION OF TITLE
The Lessee shall:
(a) not do or knowingly permit to be done or omit or
knowingly permit to be omitted to be done any act
or thing which might reasonably be expected to
jeopardize the respective rights, title and
interest of Mortgagee as mortgagee of the Aircraft
and assignee of this Agreement or the Lessor as
owner of the Aircraft and lessor under this
Agreement or the validity, enforceability or
priority of the Mortgage and the Assignment;
(b) on all occasions when the ownership of the
Aircraft, any Engine or any Part is relevant, make
clear to third parties that title is held by the
Lessor and is subject to the Mortgage;
(c) not at any time:
(i) represent or hold out the Lessor or any
Financing Party as carrying goods or
passengers on the Aircraft or as being in
any way connected or associated with any
operation or carriage (whether for hire or
reward or gratuitously) which may be
undertaken by the Lessee; or
(ii) pledge the credit of the Lessor or any
Financing Party;
(d) ensure that there is always affixed, and not
removed or in any way obscured, a fireproof plate
(having dimensions of not less than 6 in. x 4 in.)
in a reasonably prominent position on the Aircraft
and on each Engine stating:
"This [Aircraft/Engine] is owned by
Aircraft 22120, Inc., is leased to
Vanguard Airlines, Inc. and is
subject to a mortgage and security
agreement in favor of FINOVA Capital
Corporation. It may not be operated
by any other person without the prior
written consent of Aircraft 22120,
Inc. and FINOVA Capital Corporation."
(e) not create or permit to exist any Security
Interest upon the Aircraft, any Engine or any
Part, except Permitted Liens;
(f) not do or permit to be done anything which may
reasonably be expected to expose the Aircraft, any
Engine or any Part to penalty, forfeiture,
impounding, detention, appropriation, damage or
destruction and, without prejudice to the
foregoing, if any such penalty, forfeiture,
impounding, detention, appropriation, damage or
destruction occurs, give the Lessor notice and use
its best efforts to procure the immediate release
of the Aircraft, such Engine or such Part, as the
case may be;
(g) not abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and
discharged when due and payable or make adequate
provision by way of security or otherwise for all
debts, damages, claims and liabilities which have
given or might reasonably be expected to give rise
to a Security Interest (other than a Permitted
Lien) over or affecting the Aircraft, any Engine
or any Part; and
(i) not attempt, or hold itself out as having any
power, to sell, lease or otherwise dispose of the
Aircraft, any Engine or any Part other than as
expressly permitted by this Agreement.
8.8 GENERAL
Lessee will:
(a) not make any substantial change in the nature of
the business in which it is engaged if such
change, in the reasonable opinion of the Lessor or
Mortgagee, might reasonably be expected to have a
material adverse effect on the Lessee's
performance of its obligations under this
Agreement;
(b) preserve its corporate existence, and will not
merge or consolidate with any Person unless the
successor Person resulting from such merger or
consolidation (the "SUCCESSOR")
(i) is a Person incorporated, formed or
organized under the laws of a State of the
United States of America;
(ii) shall have a net worth immediately after
such merger or consolidation of not less
than the Lessee's net worth immediately
prior thereto;
(iii) shall be authorized under Applicable Law to
perform the Lessee's obligations under this
Agreement to the same extent as the Lessee;
(iv) shall deliver to Lessor and Mortgagee an
agreement in form and substance reasonably
satisfactory to Lessor containing an
assumption by the Successor of Lessee's
representations and warranties under this
Agreement, together with the due and
punctual performance of all of Lessee's
obligations under this Agreement; and
(v) shall deliver to Lessor and Mortgagee an
opinion of counsel reasonably satisfactory
in form and substance to Lessor and
Mortgagee covering the Operative Documents
and the agreement referred to in sub-clause
(iv) above and substantially in the form of
the legal opinion set forth in Exhibit_D.
8.9 RECORDS
The Lessee shall procure that accurate, complete and
current records of all flights made by, and all
maintenance carried out on, the Aircraft (including, in
relation to each Engine or Part subsequently installed,
before its installation) are kept in English, and shall
keep the records in such manner as the Aviation
Authority may from time to time require. The records
will form part of the Aircraft Documents.
8.10 REGISTRATION AND FILINGS
Lessee shall:
(a) not do anything that might reasonably be expected
to adversely affect the registration of the
Aircraft with the Aviation Authority reflecting
(so far as permitted by Applicable Law) the
respective interests of the Lessor and Mortgagee;
and
(b) do all acts and things (including making any
filing or registration with the Aviation Authority
or any other Government Entity) and executing and
delivering all documents (including any amendment
of this Agreement) as may be required by the
Lessor following any modification of the Aircraft,
any Engine or any Part or the permanent
replacement of any Engine or Part in accordance
with this Agreement, so as to ensure that the
respective rights of the Lessor and Mortgagee
under this Agreement apply with the same effect as
before.
8.11 MAINTENANCE AND REPAIR
The Lessee shall:
(a) keep the Aircraft airworthy in all respects and in
good repair and condition, and all maintenance
will be carried out in accordance with the Agreed
Maintenance Program;
(b) advise the Lessor and Mortgagee in writing of all
material changes to the Agreed Maintenance
Program;
(c) maintain the Aircraft in accordance with the
Agreed Maintenance Program through Agreed
Maintenance Performers and perform (at the
respective intervals provided in the Agreed
Maintenance Program) all Major Checks, and before
performing any Major Check Lessee will consult
with Lessor as to the workscope for such Major
Check;
(d) maintain the Aircraft in accordance with FAR Part
121 and all other rules and regulations of the
Aviation Authority as are applicable to aircraft
of the same type as the Aircraft operated by
United States of America air carriers;
(e) without limiting the provisions of Clause 7.4,
comply with all mandatory inspection and
modification requirements, airworthiness
directives and similar requirements applicable to
the Aircraft, any Engine or Part having a
compliance date on or before 90 days after the
Expiry Date and that are required by the Aviation
Authority;
(f) comply with all alert service bulletins issued by
any manufacturer of the Aircraft, Engines or
Parts, and comply (including scheduling compliance
work and then performing such work on schedule)
with all other service bulletins issued by any
such manufacturer if and to the extent that the
Lessee brings or schedules to bring in compliance
at least one-half of the applicable aircraft it
operates (excluding for purposes of such
calculation aircraft acquired from unrelated third
parties that already comply with such other
service bulletins);
(g) comply with all Applicable Laws and the
regulations of the Aviation Authority and any
other aviation authorities with jurisdiction over
the Lessee or the Aircraft, any Engine or Part
that relate to the maintenance, condition, use or
operation of the Aircraft or require any
modification or alteration to the Aircraft, any
Engine or Part;
(h) maintain in good standing a current U.S. Standard
Transport Category Certificate of Airworthiness
for the Aircraft issued by the Aviation Authority
in accordance with FAR Part 21 except when the
Aircraft is undergoing maintenance, modification
or repair required or permitted by this Agreement,
and shall from time to time provide to the Lessor
a copy on request;
(i) if required by the Aviation Authority, maintain a
current certification as to maintenance issued by
or on behalf of the Aviation Authority in respect
of the Aircraft and shall from time to time
provide to the Lessor a copy on request;
(j) maintain the Engines with respect to overhaul
build standards and disc replacements at a level
which is consistent with the level applied by the
Lessee in relation to other engines of the same
type as the Engines in its fleet;
(k) maintain the Engines and the APU in an "on
condition" program as set forth in the respective
manufacturer's maintenance planning document;
(l) subject to Clause 11.2, procure promptly the
replacement of any Engine or Part which has become
time, cycle or calendar expired, lost, stolen,
seized, confiscated, destroyed, damaged beyond
repair, unserviceable or permanently rendered
unfit for use, with an engine or part complying
with the conditions set out in Clause 8.13(a); and
(m) maintain the Airframe at all times in compliance
with the requirements of the Manufacturer's Aging
Aircraft Program, SID Program and CPCP and related
mandates of the Aviation Authority, with all
documentation necessary to assure and demonstrate
compliance becoming part of the Aircraft
Documents.
8.12 REMOVAL OF ENGINES AND PARTS
The Lessee will ensure that no Engine or Part installed
on the Aircraft is at any time removed from the
Aircraft other than:
(a) if replaced as expressly permitted by this
Agreement; or
(b) If the removal is of an obsolete item and is in
accordance with the Agreed Maintenance Program; or
(c) pursuant to, and in accordance with, Clause 8.15;
or
(d) (i) during the course of maintaining,
servicing, repairing, overhauling or
testing that Engine or the Aircraft, as the
case may be; or
(ii) as part of a normal engine or part rotation
program; or
(iii) for the purpose of making such
modifications to the Engine or the
Aircraft, as the case may be, as are
permitted under this Agreement,
and then in each case only if it is reinstalled or
replaced by an engine or part complying with
Clause 8.13(a) as soon as practicable and in any
event no later than the Expiry Date.
8.13 INSTALLATION OF ENGINES AND PARTS
(a) The Lessee will ensure that, except as permitted
by this Agreement, no engine or part is installed
on the Aircraft unless:
(i) in the case of an engine, it is an engine
of the same model as, or an improved or
advanced version of the Engine it replaces
(provided, in the case of an improved or
advanced version, it can be installed and
operated on the Airframe without
modification of the Airframe or the engine,
whether or not the other installed Engine
is also such an improved or advanced
version), which has attached to it a
current "serviceable tag" issued by the
manufacturer or supplier indicating that
the engine is new, serviceable or
overhauled, and the Lessee shall retain all
such tags;
(ii) in the case of a part, it is in as good
operating condition, is of the same
interchangeable modification status as the
replaced Part and has attached to it a
current "serviceable tag" issued by the
manufacturer or supplier indicating that
the part is new, serviceable or overhauled,
and the Lessee shall retain all such tags;
(iii) in the case of a part, it has become and
remains the property of the Lessor free
from Security Interests and on installation
on the Aircraft will, without further act,
be subject to this Agreement and to the
Security Interest created by the Mortgage,
in which case title to the removed part
shall automatically become vested in Lessee
without further action or warranty on the
part of Lessor except that such Part shall
be free of Lessor Liens; and
(iv) in each case, the Lessee has full details
as to its source and maintenance records.
(b) If no Event of Default has occurred which is
continuing, the Lessee will be entitled to install
any engine or part on the Aircraft by way of
replacement notwithstanding Clause 8.13(a) if:
(i) there is not available to Lessee at the
time and in the place that engine or part
is required to be installed on the Aircraft
a replacement engine or part complying with
the requirements of Clause 8.13(a);
(ii) it would result in an unreasonable
disruption of the operation of the Aircraft
or the business of Lessee to ground the
Aircraft until an engine or part complying
with Clause 8.13(a) becomes available for
installation on the Aircraft; and
(iii) as soon as practicable after installation
of the same on the Aircraft but, in any
event, no later than the earlier of (1) 90
days after such installation and (2) the
Expiry Date, the Lessee removes any such
engine or part and replaces it with the
Engine or Part replaced by it or by an
engine or part complying with
Clause_8.13(a).
(c) If no Default has occurred which is continuing,
the Lessee will be entitled to install Lessee
Installed Parts on the Airframe by way of
replacement notwithstanding Clause 8.13(a)(iii) so
long as:
(i) the terms of any lease, conditional sale
agreement or security agreement, as the
case may be, covering such Lessee Installed
Part will not have the effect of
prejudicing the title and interest of the
Lessor in and to the Aircraft (including
its Engines and Parts) or the interest of
Mortgagee in respect thereof under the
Mortgage;
(ii) the secured party, lessor or conditional
vendor, as the case may be, of such Lessee
Installed Part has confirmed and
acknowledged in writing (which confirmation
and acknowledgment may be contained in the
lease, conditional sale agreement or
security agreement covering such Lessee
Installed Part) to the Lessor and Mortgagee
that it will recognize the respective
rights, title and interest of the Lessor
and Mortgagee in and to the Aircraft
(including its Engines and Parts) and that
it will not seek to exercise any rights
whatever in relation thereto; and
(iii) before the Expiry Date the Lessee removes
any such Lessee Installed Part and replaces
it with the Part replaced by it or by
another part, in either case complying with
Clause 8.13(a).
(d) Lessor agrees, for the benefit of Lessee and any
mortgagee or holder of any other Security Interest
in any engine (other than an Engine) or Lessee
Installed Part owned by the Lessee, any lessor of
any engine (other than an Engine leased to the
Lessee) or Lessee Installed Part and any
conditional vendor of any engine (other than an
Engine purchased by the Lessee subject to a
conditional sale agreement or any other security
agreement) or Lessee Installed Part, that no
right, title to or interest in any such engine or
Lessee Installed Part shall be exercised or
asserted by the Lessor and the Lessor acknowledges
and confirms that it will not acquire any right,
title or interest to or in any such engine or
Lessee Installed Part as a result of its
installation on the Airframe.
8.14 NON-INSTALLED ENGINES AND PARTS
(a) The Lessee shall ensure that any Engine or Part
which is not installed on the Airframe (or any
other airframe as permitted by this Agreement) is,
except as expressly permitted by this Agreement,
properly and safely stored and kept free from
Security Interests (other than Permitted Liens),
with insurance thereon complying with the
requirements of this Agreement.
(b) Notwithstanding Clause 8.14(a), the Lessee shall
be permitted, if no Default has occurred and is
continuing, to install any Engine on an airframe
and any Part on an airframe or engine:
(i) owned and operated by the Lessee free from
Security Interests, other than Permitted
Liens;
(ii) leased or hired to the Lessee pursuant to a
lease or conditional sale agreement on a
long-term basis and on terms whereby the
Lessee has full operational control of that
aircraft or engine; or
(iii) acquired or financed by the Lessee and
operated by the Lessee on terms that
ownership of that aircraft or engine, as
the case may be, pursuant to a lease,
conditional sale agreement or Security
Interest is vested in or held by any other
Person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional
sale agreement or Security Interest will
not have the effect of prejudicing the
title and interest of the Lessor in and to
that Engine or Part or the interest of
Mortgagee in respect thereof under the
Mortgage; and
(2) the lessor under such lease, the seller
under such conditional sale agreement or
the secured party of such Security
Interest, as the case may be, has confirmed
and acknowledged in writing (which such
confirmation and acknowledgment may be
contained in the lease, conditional sale
agreement or document creating the Security
Interest covering that Engine or Part) to
the Lessor and Mortgagee, in form and
substance satisfactory to the Lessor, that
it will recognize the respective rights,
title and interest of the Lessor and
Mortgagee to and in that Engine or Part and
that it will not seek to exercise any
rights whatever in relation thereto.
8.15 POOLING OF ENGINES AND PARTS
The Lessee will not enter into nor permit any pooling
agreement or arrangement in respect of an Engine or
Part without the prior written consent of the Lessor
and Mortgagee, such consent not to be unreasonably
withheld in any case where an Engine or Part is leased,
let on hire or otherwise made available by the Lessee
(on terms conferring no more than a contractual right
in personam against the Lessee and not a right in rem
against such Engine or Part) pursuant to a pooling
agreement to which the Lessee is a party and:
(a) the other parties to which are reputable, solvent
commercial air carriers or the manufacturers or
suppliers of the Engine or Part (or other
reputable, solvent organizations whose business
includes the administration of and participation
in such pooling agreements or arrangements); and
(b) which does not contemplate the transfer of title
to the pooled Engine or Part; and
(c) either provides that Lessor (or Mortgagee, as the
case may be) will be sole loss payee in respect of
any loss or damage to the Engine or Part, or
provides for Lessor to acquire title to a
substitute engine or part satisfying the
conditions set out in Clause_8.13(a) if the Engine
or Part is destroyed.
8.16 EQUIPMENT CHANGES
(a) The Lessee will not make any modification or
addition to the Aircraft (each an "EQUIPMENT
CHANGE"), except for an Equipment Change that:
(i) is expressly permitted by any other
provision of this Agreement, or
(ii) has the prior written approval of the
Lessor and Mortgagee (which approval shall
not be unreasonably withheld provided the
proposed Equipment Change will not, in the
reasonable opinion of the Lessor and
Mortgagee, diminish the value, utility,
condition or airworthiness of the
Aircraft), except for painting or minor
cabin interior modifications not affecting
the structure of the Airframe, any or all
of which may be made without such prior
approval.
(b) So long as no Event of Default has occurred and is
continuing, the Lessee may remove any Equipment
Change if it can be removed from the Aircraft
without diminishing or impairing the value,
utility, condition or airworthiness of the
Aircraft.
8.17 TITLE TO ENGINES AND PARTS
(a) Title to any engine installed on the Aircraft,
whether by way of replacement as the result of an
Equipment Change or otherwise (except as provided
for replacement engines pursuant to Clause 11.2
below) will not vest in Lessor.
(b) Title to all Parts installed on the Aircraft,
whether by way of replacement as the result of an
Equipment Change or otherwise (except those
installed pursuant to Clause_8.13(b) or Clause
8.15) will on installation, without further act,
vest in the Lessor subject to this Agreement free
and clear of all Security Interests other than the
Mortgage. The Lessee will at its own expense take
all such steps and execute, and procure the
execution of, all such instruments that are
necessary to ensure that title so passes to the
Lessor and is subject to the Security Interest
created by the Mortgage according to all
Applicable Laws. At any time when requested by
the Lessor, the Lessee will provide evidence to
the Lessor's reasonable satisfaction (including
the provision, if required, to the Lessor of one
of more legal opinions) that title has so passed
to the Lessor and is subject to the Security
Interest created by the Mortgage.
(c) The Lessor may require the Lessee to remove any
Equipment Change other than an Equipment Change
permitted under Clause 8.16(a), and to restore the
Aircraft to its condition prior to that Equipment
Change.
(d) Any Engine at any time removed from the Aircraft
will remain the property of the Lessor until, in
the event of an Engine Loss, a replacement has
been made in accordance with Clause 11.2 and title
to that replacement has passed, according to
Applicable Laws and pursuant to Clause 11.2, to
the Lessor subject to this Agreement free of all
Security Interests, whereupon title to the removed
Engine will, provided no Default has occurred and
is continuing, pass to the Lessee free of Lessor
Liens. Except as referred to in Clause 8.16(b),
any Part at any time removed from the Aircraft
will remain the property of the Lessor until a
replacement has been made in accordance with this
Agreement and until title to that replacement has
passed, according to Clause 8.17(b) and Applicable
Laws, to the Lessor subject to this Agreement free
of all Security Interests, whereupon title to the
removed Part will, provided no Default has
occurred and is continuing, pass to the Lessee
free of Lessor Liens.
8.18 THIRD PARTIES
The Lessee shall procure that no Person having
possession of the Aircraft during the Term will act in
any manner inconsistent with the Lessee's obligations
under this Agreement and that all such Persons shall
comply with those obligations as if references to
"Lessee" included a separate reference to those
Persons.
8.19 NON-DISCRIMINATION
(a) Lessee shall not discriminate against the Aircraft
in its use, maintenance or operation of the
Aircraft compared to other similar Aircraft owned
or operated by Lessee, and Lessee shall service,
repair, maintain and overhaul the Aircraft so as
to keep the Aircraft maintained in the same manner
and with the same care as used by Lessee with
similar aircraft owned or operated by Lessee.
(b) Subject to a sublease permitted pursuant to Clause
8.5, Lessee shall continue to use the Aircraft in
its regular commercial passenger operations until
delivery to the Return Location immediately prior
to the Final Inspection.
(c) Lessee further agrees that normal progressive
maintenance will continue to be performed on the
Aircraft throughout the Term, and no unusual
maintenance procedures or cessation of maintenance
shall occur during the one year period prior to
the Expiry Date.
9. INSURANCE
9.1 INSURANCES
The Lessee will maintain in full force and effect
during the Term insurances in respect of the Aircraft
in accordance with this Clause 9 and Schedule 5 (the
"INSURANCES") through such brokers and with such
insurers and having such deductibles and being subject
to such exclusions as are usual and customary in the
worldwide aviation insurance marketplace for major
international air carriers operating similar equipment
who are similarly situated with Lessee. The Insurances
will be effected either:
(a) on a direct basis with insurers of recognized
standing who normally participate in aviation
insurances in the leading international insurance
markets and led by reputable underwriters approved
by Lessor and the Mortgagee, or
(b) with a single insurer or group of insurers
approved by Lessor and the Mortgagee who does not
retain the risk, but effects substantial
reinsurance in the leading international insurance
markets and through brokers of recognized standing
and acceptable to Lessor and the Mortgagee for a
percentage acceptable to the Lessor and the
Mortgagee of all risks insured,
and Lessor acknowledges and confirms that the current
deductibles and exclusions, together with the existing
brokers and insurers, in respect of the insurances
maintained by Lessee on the date of this Agreement are
acceptable to it and Mortgagee.
9.2 REQUIREMENTS
The Lessor's current requirements as to Insurances are
as specified in this Clause_9 and in Part 1 of Schedule
5. Except for the amount of the Agreed Value, the
Minimum Liability Coverage and the deductible under
Lessee's hull and war risk insurance policies, the
Lessor may from time to time stipulate such other
requirements for the Insurances as the Lessor
reasonably considers necessary to ensure that the scope
and level of cover is maintained in accordance with the
then prevailing industry practice in relation to
aircraft of the same type as the Aircraft and in
relation to operators of similar standing to the
Lessee. In the event that it proposes any such
stipulation, Lessor shall notify the Lessee accordingly
and the Lessor and/or its brokers will then consult in
good faith with the Lessee and the Lessee's approved
independent insurance brokers with regard to such
proposed stipulation. If, following the consultation,
the Lessee's independent insurance brokers confirm that
the proposed stipulation is in accordance with
prevailing industry practice for airlines similarly
situated to Lessee, then Lessee shall comply with the
proposed requirements at the time of its next renewal
of Insurances.
9.3 INSURANCE COVENANTS
The Lessee shall:
(a) ensure that all legal requirements as to insurance
of the Aircraft, any Engine or any Part that may
from time to time be imposed by the laws of the
State of Registration or any jurisdiction to, from
or over which the Aircraft may be flown, in so far
as they affect or concern the operation of the
Aircraft, are complied with and, in particular,
those requirements compliance with which is
necessary to ensure that:
(i) the Aircraft does not become subject to
detention or forfeiture;
(ii) the Insurances remain valid and in full
force and effect; and
(iii) the interests of the Indemnitees in the
Insurances and the Aircraft or any Part are
not thereby prejudiced;
(b) not use, cause or permit the Aircraft, any Engine
or any Part to be used for any purpose or in any
manner not covered by the Insurances or outside
any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each
policy of the Insurances and not do, consent or
agree to any act or omission that:
(i) invalidates or may reasonably be expected
to invalidate the Insurances;
(ii) renders or may reasonably be expected to
render void or voidable the whole or any
part of any of the Insurances; or
(iii) brings any particular liability within the
scope of an exclusion or exception to the
Insurances;
(d) not take out without the prior written approval of
the Lessor any insurance in respect of the
Aircraft other than those of the type required
under this Agreement unless relating solely to
hull total loss, business interruption, engine
break-down, profit commission and deductible risk
or which would otherwise have no adverse impact on
the Insurances required to be carried by Lessee
under this Agreement;
(e) commence renewal procedures at least 30 days prior
to the expiration of any of the Insurances and
provide to the Lessor and Mortgagee:
(i) if requested by the Lessor, a written
status report of renewal negotiations 14
days prior to each expiration date;
(ii) telefaxed confirmation of completion of
renewal prior to each expiration date; and
(iii) a certificate of insurance and broker's
letter of undertaking substantially in the
form set out in Parts 2 and 3 of Schedule
5, detailing the coverage and confirming
the insurers' agreement to the specified
insurance requirements of this Agreement
within seven days after each renewal date;
(f) provide to the Lessor and Mortgagee copies of
those documents evidencing the Insurances which
the Lessor and Mortgagee may reasonably request;
(g) on request, provide to the Lessor and Mortgagee
evidence that the Insurance premiums have been
paid;
(h) not make any modification or alteration to the
Insurances material and adverse to the interests
of any of the Indemnitees;
(i) be responsible for any deductible under the
Insurances; and
(j) provide any other insurance related information,
or assistance, in respect of the Insurances as the
Lessor may reasonably request.
9.4 FAILURE TO INSURE
If the Lessee fails to maintain the Insurances in
compliance with this Agreement, each of the Indemnitees
will be entitled but not obligated (without prejudice
to any other rights of the Lessor under this
Agreement):
(a) to pay the premiums due or to effect and maintain
insurances satisfactory to it or otherwise remedy
the Lessee's failure in such manner (including to
effect and maintain an "owner's interest" policy)
as it considers appropriate, and any sums so
expended by it will become immediately due and
payable by the Lessee to the Lessor on demand
(such demand being made as soon as reasonably
practicable following the incurring of such
expenditure), together with interest thereon at
the Default Rate from the date of expenditure by
it up to the date of reimbursement by the Lessee
(before and after any judgment); and
(b) at any time while such failure is continuing to
require the Aircraft to remain at any airport or
to proceed to and remain at any airport designated
by it until the failure is remedied to its
reasonable satisfaction.
9.5 CONTINUING INDEMNITY
(a) Lessor may require Lessee to effect and to
maintain insurance after the Expiry Date with
respect to its liability under the indemnities in
Clause 10 for such period as the Lessor may
reasonably require (but in any event not more than
three years) providing for each Indemnitee to be
named as additional insured.
(b) Lessee's obligation under this Clause 9.5 shall
not be affected by the Lessee ceasing to be lessee
of the Aircraft or any of the Indemnitees ceasing
to have any interest in respect of the Aircraft,
and upon a Transfer pursuant to Clause 14.2 Lessee
shall continue to name the Indemnitees as
additional insureds under the Insurance policies
covered by Clause 1(d) of Schedule 5 for three
years after the Transfer date.
9.6 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee:
(a) All insurance payments, up to the Agreed Value,
received as the result of a Total Loss occurring
during the Term will be paid to Mortgagee.
(b) All insurance proceeds in respect of any damage or
loss to the Aircraft, any Engine or any Part
occurring during the Term not constituting a Total
Loss and involving insurance proceeds in excess of
the Damage Notification Threshold will be paid to
Mortgagee and applied in payment (or to reimburse
Lessee) for repairs or replacement property upon
Lessor and Mortgagee being reasonably satisfied
that the repairs or replacement have been effected
in accordance with this Agreement. Insurance
proceeds in amounts less than the Damage
Notification Threshold may be paid by the insurer
directly to the Lessee. Any balance remaining may
be retained by the Lessee.
(c) All insurance proceeds in respect of third party
liability will be paid to the relevant third
party.
(d) Notwithstanding Clauses 9.6(a) and (b), if at the
time of the payment of any such insurance proceeds
a Default has occurred and is continuing, all such
proceeds will be paid to or retained by Mortgagee
to be applied toward payment of any amounts that
may be or become payable by the Lessee in such
order as the Lessor and Mortgagee see fit or as
the Lessor and Mortgagee may elect. In the event
that the Lessee remedies any such Default to the
reasonable satisfaction of Lessor, then Lessor
shall procure that all such insurance proceeds
then held by Mortgagee in excess of the amounts
(if any) applied by Lessor in accordance with this
sub-clause (d) shall be paid promptly to Lessee.
10. INDEMNITY
10.1 GENERAL
The Lessee shall defend, indemnify and hold harmless
the Indemnitees from and against any and all claims,
proceedings, losses, liabilities, suits, judgments,
costs, expenses, penalties or fines (each a "CLAIM")
regardless of when the same is made or incurred,
whether during or after the Term (but not before):
(a) that may at any time be suffered or incurred
directly or indirectly as a result of or connected
with possession, delivery, performance,
management, registration, control, maintenance,
condition, service, repair, overhaul, leasing,
subleasing, use, operation or return of the
Aircraft, any Engine or Part (either in the air or
on the ground) whether or not the Claim may be
attributable to any defect in the Aircraft, any
Engine or any Part or to its design, testing, use
or otherwise, and regardless of when the same
arises or whether it arises out of or is
attributable to any act or omission, negligent or
otherwise, of any Indemnitee;
(b) that arise out of any act or omission that
invalidates or that renders voidable any of the
Insurances;
(c) that may at any time be suffered or incurred as a
consequence of any design, article or material in
the Aircraft, any Engine or any Part or its
operation or use constituting an infringement of
patent, copyright, trademark, design or other
proprietary right or a breach of any obligation of
confidentiality owed to any Person,
but excluding any Claim to the extent that:
(1) it arises directly as a result of the
wilful misconduct or gross negligence of an
Indemnitee;
(2) it arises directly as a result of a breach
by an Indemnitee of its express obligations
under any Operative Document or as a result
of a representation or warranty given by an
Indemnitee in any Operative Document not
being true and correct at the date when, or
when deemed to have been, given or made;
(3) it constitutes or is attributable to a
Non-Indemnified Tax or Lessor Lien;
(4) it represents or is attributable to a Tax
or loss of tax benefits (the Lessee's
liabilities for which, to the extent
thereof, are set out in Clauses 5.7, 5.8
and 5.10);
(5) it constitutes or is attributable to a cost
or expense that is required to be borne by
the Lessor in accordance with another
provision of this Agreement;
(6) it results from any disposition of all or
any part of an Indemnitee's rights, title
or interest in or to the Aircraft or under
any Operative Document, unless such
disposition occurs as a consequence of an
Event of Default;
(7) it is attributable to an event occurring
after the Term unless the Claim results
from or arises out of an act or omission by
the Lessee, or any circumstance existing,
during the Term; or
(8) it is brought after the Term and relates to
a claimed patent infringement by the
Manufacturer occurring during the Term.
10.2 MITIGATION
(a) The Lessor agrees that it shall, as soon as
reasonably practicable after it becomes aware of
any circumstances that would, or would reasonably
be expected to, become the subject of a claim for
indemnification pursuant to Clause 10.1, notify
the Lessee in writing accordingly. Lessor (and
any other Indemnitee seeking indemnification, as
the case may be) and Lessee shall then consult
with one another in good faith in order to
determine what action (if any) may reasonably be
taken to avoid or mitigate such Claim. The Lessee
shall have the right to take all reasonable action
(on behalf and, if necessary, in the name of the
Lessor or such other Indemnitee) in order to
resist, defend or settle (provided such settlement
is accompanied by payment) any claims by third
parties giving rise to such Claim, provided always
that the Lessee shall not be entitled to take any
such action unless adequate provision, reasonably
satisfactory to the Lessor and such other
Indemnitee, shall have been made in respect of the
third party claim and the costs thereof. The
Lessee or, if the Claim is covered by Lessee's
Insurances, the Lessee's insurers shall be
entitled to select any counsel to represent it or
them, the Lessor and such other Indemnitee in
connection with any such action, subject in the
case of Lessee to the approval of the Lessor and
such other Indemnitee (such approval not to be
unreasonably withheld) and any action taken by the
Lessee shall be on a full indemnity basis in
respect of the Lessor and such other Indemnitee.
(b) Any sums paid by the Lessee to the Lessor or any
Indemnitee in respect of any Claim pursuant to
Clause 10.1 shall be paid subject to the condition
that, in the event that the Lessor or such
Indemnitee is subsequently reimbursed in respect
of that Claim by any other Person, the Lessor or
such Indemnitee shall, provided no Default shall
have occurred and be continuing, promptly pay to
the Lessee an amount equal to the sum paid to it
by the Lessee, including any interest on such
amount to the extent attributable thereto and
received by the Lessor or such Indemnitee, less
any Tax payable by the Lessor or such Indemnitee
in respect of such reimbursement (net of any tax
benefit derived from the Claim or the
reimbursement of Lessee by Lessor).
10.3 DURATION
The indemnities contained in this Agreement will
survive and continue in full force after the Expiry
Date.
11. EVENTS OF LOSS
11.1 TOTAL LOSS
(a) PRE-DELIVERY AIRFRAME LOSS: If a Total Loss
occurs prior to Delivery, this Agreement will
immediately terminate and, except as expressly
stated in this Agreement, neither party will have
any further obligation or liability under this
Agreement except that the Lessor will rebate to
the Lessee the Security Deposit (if theretofore
paid pursuant to Clause 5.1) or, as the case may
be, return the Letter of Credit to the Lessee.
(b) POST-DELIVERY AIRFRAME LOSS: If a Total Loss
occurs after Delivery, the Lessee will pay the
Agreed Value to Mortgagee on the earlier of
(i) the date of receipt of the insurance proceeds
payable as a result of the Total Loss, or (ii) the
60th day after the Total Loss Date (the
"SETTLEMENT DATE"), unless the Aircraft is
restored to the Lessor or the Lessee within that
period (or, in the case of a Total Loss coming
within paragraph (c) of the definition of Total
Loss and involving the loss of the Lessor's title
to the Aircraft, if both the Aircraft and the
Lessor's title thereto are restored to Lessor or,
in the case of the Aircraft, to Lessee and
Mortgagee's rights under the Mortgage are fully
restored). The receipt by Mortgagee of the
insurance proceeds in respect of the Total Loss on
or prior to the Settlement Date shall discharge
the Lessee from its obligation to pay the Agreed
Value to the Lessor pursuant to this
Clause_11.1(b), provided such proceeds are not
less than the Agreed Value. In the event that the
insurance proceeds are paid initially to the
Lessee and not to Mortgagee, they may be retained
by the Lessee if the Lessee shall have paid the
Agreed Value to Mortgagee, otherwise the Lessee
shall pay the Agreed Value to Mortgagee not later
than the next Business Day following receipt by
the Lessee of such proceeds. In the event that
the Lessee pays the Agreed Value to the Lessor or
Mortgagee in accordance with this Clause_11.1(b),
the Lessor shall promptly assign to the Lessee its
rights under the Insurances to receive the
insurance proceeds in respect of the Total Loss to
the extent that such proceeds shall not have been
paid to the Lessee. Subject to the rights of any
insurers or other third parties, upon irrevocable
payment in full to the Lessor or Mortgagee of that
amount and all other amounts that may be or become
payable to the Lessor under this Agreement, the
Lessor shall:
(i) without recourse or warranty (except as to
the absence of Lessor Liens), and without
further act, be deemed to have transferred
to the Lessee all of the Lessor's rights to
any Engines or Parts not installed when the
Total Loss occurred, all on an "as-is where
is" basis, and shall, at the Lessee's
expense, execute and deliver such bills of
sale and other documents and instruments as
the Lessee may reasonably request to
evidence (on the public record or
otherwise) the transfer and the vesting of
the Lessor's rights in such Engines and
Parts in the Lessee, free and clear of all
rights of the Lessor and any Lessor Liens;
and
(ii) pay to Lessee, as a rebate of prepaid Basic
Rent, and amount equal to the product of
(1) one month's Basic Rent multiplied by
(2) a fraction the numerator of which is
the number of days remaining in the then
current Rental Period and the denominator
of which is the number of days in the then
current Rental Period.
11.2 ENGINE LOSS
Upon the occurrence of an Engine Loss (including, for
the avoidance of doubt, at a time when the Engine is
not installed on the Airframe) in circumstances in
which there has not also occurred a Total Loss, the
Lessee shall give the Lessor and Mortgagee written
notice promptly upon becoming aware of the same and
shall (unless the Lessor has received the insurance
proceeds relating to such Engine Loss), within 60 days
after the Engine Loss Date, convey or cause to be
conveyed to the Lessor, as replacement for such Engine,
title to a replacement engine that is in the same or
better operating condition, has the same or greater
value and utility as the lost Engine and that complies
with the conditions set out in Clause 8.13(a). The
Lessee will at its own expense take all such steps and
execute, and procure the execution of, a full warranty
xxxx of sale covering such replacement engine, a
supplement to this Agreement adding such replacement
engine to the Leased Property and all such other
agreements and instruments that are necessary to ensure
that title to such Engine passes to the Lessor and is
subject to the Security Interest created by the
Mortgage and such replacement engine becomes an
"Engine", all according to Applicable Laws. At any
time when requested by the Lessor, the Lessee will
provide evidence to the Lessor's reasonable
satisfaction (including the provision, if required, to
the Lessor of one of more legal opinions) that title
has so passed to the Lessor and is subject to the
Security Interest created by the Mortgage. Upon
compliance with the foregoing title transfer
provisions, the leasing of the replaced Engine the
subject of the Engine Loss shall cease and title to
such replaced Engine shall (subject to any salvage
rights of insurers) vest in the Lessee free of Lessor
Liens. If the Lessor or Mortgagee subsequently
receives any insurance proceeds relating to such Engine
Loss, the Lessor shall promptly remit such proceeds or
cause such proceeds to be remitted to the Lessee. No
Engine Loss with respect to any Engine that is replaced
in accordance with the provisions of this Clause 11.2
shall result in any increase or decrease in Basic Rent,
Additional Rent or the Agreed Value.
11.3 REQUISITION
During any requisition for use or hire of the Aircraft,
any Engine or Part that does not constitute a Total
Loss:
(a) the Basic Rent, Additional Rent and Supplemental
Rent payable under this Agreement will not be
suspended or abated either in whole or in part,
and the Lessee will not be released from any of
its other obligations under this Agreement (other
than operational obligations with which the Lessee
is unable to comply solely by virtue of the
requisition); and
(b) so long as no Default has occurred and is
continuing, the Lessee will be entitled to any
compensation payable by the requisitioning
authority in respect of the Term. The Lessee
will, as soon as practicable after the end of any
such requisition (with the Term being extended if
and to the extent that the period of requisition
continues beyond the Scheduled Expiry Date), cause
the Aircraft to be put into the condition required
by this Agreement. The Lessor will be entitled to
all compensation payable by the requisitioning
authority in respect of any change in the
structure, state or condition of the Aircraft
arising during the period of requisition, and the
Lessor will apply such compensation in reimbursing
the Lessee for the cost of complying with its
obligations under this Agreement in respect of any
such change; provided, that, if any Default has
occurred and is continuing, the Lessor may apply
the compensation in or towards settlement of any
amounts owing by the Lessee under this Agreement.
All such sums shall be held by Mortgagee.
12. RETURN OF AIRCRAFT
12.1 REDELIVERY
On the Expiry Date or termination of the leasing of the
Aircraft under this Agreement, the Lessee shall, unless
a Total Loss has occurred, at its expense, redeliver
the Aircraft and Aircraft Documents to the Lessor at
the Redelivery Location in a condition complying with
this Clause 12 and Schedule 4, free and clear of all
Security Interests and Permitted Liens (other than
Lessor Liens).
12.2 FINAL CHECKS
Immediately prior to return of the Aircraft, Lessee
shall perform the following:
(a) Lessee shall perform (or have performed by an
Agreed Maintenance Performer) a C-Check. At
return, the Airframe will have zero Flight Hours
since such C-Check, except for the acceptance
flights and the ferry flight to the Redelivery
Location. 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 shall also perform
during such check, to the extent it is able, any
other work reasonably required by Lessor (and not
otherwise required under this Agreement) so long
as such work does not prevent Lessee from
returning the Aircraft on the Expiry Date or
extend the time the Aircraft is in maintenance,
and Lessor shall reimburse Lessee for the Actual
Cost of such work at Lessee's preferred customer
rates (if the work is performed by Lessee) or at
the third party rates charged Lessee.
(b) Lessee shall perform (or have performed by an
Agreed Maintenance Performer) an internal and
external corrosion inspection in accordance with
the CPCP so that CPCP inspection items will be
free of requirements for a minimum of two years
after the Expiry Date, and any discrepancies will
be addressed in accordance with the
recommendations of the Manufacturer and the SRM.
In addition, all inspected areas will be properly
treated with corrosion inhibitor as recommended by
Manufacturer.
(c) If Lessee performed any structural inspections or
tasks on a sampling basis on aircraft similar to
the Aircraft but did not perform such inspections
on the Aircraft, such work shall also be performed
on the Aircraft.
(d) Lessor shall perform, at Lessor's expense, a
videotape borescope inspection of all accessible
gas path sections of each Engine (accessible
whether by borescope port or other means),
including the low pressure and high pressure
compressors and the turbine area of such Engine.
All items beyond the Engine Manufacturer's
maintenance manual limits will be rectified at
Lessee's sole cost and expense. No Engine will be
"on watch" for any reason requiring special or out
of sequence inspection.
(e) In accordance with the Engine Manufacturer's MPD,
Lessee shall perform a maximum power assurance run
and condition, acceleration and bleed valve
scheduling checks on each Engine other than the
Spare Engine. Lessee will record and evaluate
each such Engine's performance, with Lessor and/or
its representatives entitled to be present. Each
such Engine shall pass such tests without
operational limitations throughout the operating
envelope in accordance with the Engine
Manufacturer's maintenance manual.
(f) Lessee shall perform a videotape borescope
inspection of the APU, and all items beyond the
manufacturer's recommended limits will be
rectified at Lessee's sole cost and expense.
(g) Lessee shall have removed and blended all external
and interior markings.
(h) If any historical and technical records, condition
trend monitoring data, power assurance runs or
borescope inspection indicate an abnormal
acceleration in the rate of performance
deterioration or oil consumption in any Engine or
the APU, Lessee shall correct such conditions
causing the accelerated rate of deterioration.
12.3 FINAL INSPECTION
(a) During the C-check prior to redelivery of the
Aircraft, the Lessee will make the Aircraft and
Aircraft Documents available to representatives of
Lessor and the Financing Parties for inspection
("FINAL INSPECTION") in order to verify that the
condition of the Aircraft complies with this
Agreement. The Final Inspection will be long
enough to permit the representatives of Lessor and
the Financing Parties to inspect, at their own
cost, the Aircraft Documents, the Aircraft and any
uninstalled Parts and Engines. The
representatives of Lessor and the Financing
Parties shall attend and conduct the Final
Inspection diligently and, without limiting their
right to conduct the full Final Inspection
permitted by this Agreement, will cooperate with
Lessee in order to complete the Final Inspection
as soon as reasonably practical.
(b) Lessor and the Financing Parties shall also be
entitled, as part of the Final Inspection, to
require Lessee to perform an acceptance flight of
up to two hours at Lessee's cost (with up to four
representatives of Lessor and the Financing
Parties on-board as observers) and such further
acceptance flights as may be necessary in the
event that the first or subsequent flights do not
confirm that the Aircraft complies with the
redelivery requirements of this Agreement.
(c) At the request of Lessor, Lessee shall perform
"bridging" maintenance procedures for the purpose
of standardizing the Aircraft to the maintenance
program of any subsequent operator of the
Aircraft; provided, that Lessor shall pay to
Lessee the Actual Cost of all "bridging"
procedures that are in excess of or not in lieu of
the "C"_Check to be performed pursuant to
Clause_12.2 and Schedule 4.
12.4 NON-COMPLIANCE
To the extent that, at the time of Final Inspection,
the condition of the Aircraft does not comply with this
Agreement, the Lessee shall immediately rectify the
non-compliance and, to the extent that the
non-compliance extends beyond the Expiry Date, the Term
will be automatically extended until the non-compliance
has been rectified. If, on any date more than 14 days
after the Expiry Date, the condition of the Aircraft
still does not comply with this Agreement, the Lessee
shall, at the option of the Lessor and Mortgagee
exercised by notice to Lessee, redeliver the Aircraft
to the Lessor and indemnify the Lessor, and provide
security reasonably acceptable to the Lessor and
Mortgagee for that indemnity, against the cost of
putting the Aircraft into the condition required by
this Agreement. During any extension of the Term
pursuant to this Clause 12.4, this Agreement will
remain in full force and effect, including the
obligation to pay Basic Rent (which Lessee shall pay on
a per diem basis weekly in advance); provided, however,
that Lessee shall not operate, or permit others to
operate, the Aircraft after the Expiry Date except for
acceptance flights pursuant to Clause 12.2 and a ferry
flight to the Redelivery Location.
12.5 EXPORT DOCUMENTATION
Upon redelivery and upon request by the Lessor, the
Lessee shall (a) provide to the Lessor all documents
necessary to export the Aircraft from the State of
Registration (including a valid and subsisting export
license for the Aircraft), and (b) provide any
documents reasonably requested by the Lessor in
connection with, and otherwise cooperate with, the
deregistration of the Aircraft by the Aviation
Authority, including causing the Aviation Authority to
issue an Export Certificate of Airworthiness to a
country specified by the Lessor.
12.6 ACKNOWLEDGMENT
Provided the Lessee has complied with its obligations
under this Agreement, upon redelivery of the Aircraft
by the Lessee to the Lessor at the Redelivery Location,
the Lessor will deliver simultaneously to the Lessee
the Certificate of Redelivery.
12.7 MAINTENANCE PROGRAM
(a) During the 20 day period preceding the Scheduled
Expiry Date and upon the Lessor's request, the
Lessee will provide the Lessor or its agent
reasonable access to the Agreed Maintenance
Program and the Aircraft Documents in order to
facilitate the Aircraft's integration into any
subsequent operator's fleet. The Lessor agrees
that it will not disclose (and will not permit its
agents to disclose) the contents of the Agreed
Maintenance Program to any Person except to the
extent necessary to monitor the Lessee's
compliance with this Agreement and/or to bridge
the maintenance program for the Aircraft from the
Agreed Maintenance Program to another program
after the Expiry Date.
(b) Concurrent with providing the Aircraft Documents
for Lessor's review, Lessee shall provide to
Lessor a written summary of all sampling programs
involving or affecting the Aircraft.
12.8 STORAGE
If the Lessor so requests, and subject to the
availability of the requisite space, the Lessee shall
park and store the Aircraft at a secure storage area,
which may be at the Redelivery Location or at any other
suitable facility of the Lessee selected by the Lessee,
wherever located (the "STORAGE LOCATION"), on behalf of
the Lessor for a period not exceeding 30 days from the
Expiry Date. During that period the Aircraft shall be
at the Lessor's risk (save as to any loss or damage
caused by the Lessee's wilful misconduct or gross
negligence), and the Lessee shall maintain and store
the Aircraft in accordance with the respective
manufacturer's maintenance planning document and shall
insure the Aircraft in accordance with a "ground risk
only" policy usual and customary in the worldwide
aviation insurance marketplace. All storage,
maintenance and insurance costs (which shall be at
Lessee's preferred customer rates or at the actual
third-party rates charged to Lessee) shall be borne by
the Lessor.
13. DEFAULT
13.1 EVENTS
Each of the following events will constitute an Event
of Default and a repudiation of this Agreement by the
Lessee:
(a) NON-PAYMENT: Lessee (i) fails to pay the Agreed
Value and all other amounts required under Clause
11.1(b) on the Settlement Date, (ii) fails to make
any payment of Basic Rent or Additional Rent
within five Business Days after the date on which
such payment is due, or (iii) fails to pay any
other amount payable by it under this Agreement
within five Business Days after written notice
from Lessor or Mortgagee that such amounts are
due; or
(b) MATERIAL COVENANTS: Lessee (i) fails to maintain
in full force and effect any insurance required to
be maintained under Clause 9, or (ii) transfers
possession of the Airframe or any Engine to
another Person other than as permitted by this
Agreement; or
(c) BREACH: Lessee fails to comply with any other
provision of this Agreement and, if such failure
is, in the reasonable opinion of the Lessor,
capable of remedy, the failure continues for 30
days after notice from the Lessor to the Lessee,
provided, that if such failure cannot reasonably
be remedied within such 30 day period and the
Lessee is diligently undertaking all necessary
remedial action, the 30 day period shall be
extended for a further 30 days; or
(d) REPRESENTATION: any representation or warranty
made (or deemed to be repeated) by the Lessee in
this Agreement or in any document or certificate
furnished to the Lessor pursuant to or in
connection with this Agreement is or proves to
have been incorrect in any material respect when
made or deemed to be repeated and the Lessee's
ability to comply with its obligations under this
Agreement, and/or the Lessor's or Mortgagee's
rights, title and interest to and in the Aircraft
and/or under this Agreement, are thereby
materially and adversely affected; or
(e) CROSS DEFAULT:
(i) any Financial Indebtedness of the Lessee or
any of its Affiliates that exceeds
$2,000,000 is not paid when due and any
applicable grace period shall have expired;
(ii) the security for any Financial Indebtedness
is enforced; or
(iii) any lease, conditional sale, installment
sale or forward purchase agreement of the
Lessee or any of its Affiliates in respect
of an aircraft is terminated as a
consequence of an event of default or
termination event (however described);
provided always, in any such case, it shall not
constitute an Event of Default under this
Agreement:
(1) if the relevant Financial Indebtedness
constitutes non-recourse borrowing or
financing; or
(2) if the non-payment, acceleration,
termination or event in question is being
contested by the Lessee in good faith and
on reasonable grounds and any declaration
of default, termination of agreement or
enforcement of security has been stayed by
a court of competent jurisdiction; or
(f) APPROVALS: any consent, authorization, license,
certificate or approval of or registration with or
declaration to any Government Entity in connection
with this Agreement, including:
(i) any authorization required by the Lessee
of, or in connection with, the execution,
delivery, validity, enforceability or
admissibility in evidence of this
Agreement or the performance by the Lessee of
its obligations under this Agreement; or
(ii) any airline license, air transport license,
franchise, concession, permit, certificate,
right or privilege required by the Lessee
for the conduct of its business,
is modified, withheld, revoked, suspended,
canceled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force and is not
reissued, reinstated or renewed within 30 days,
provided however that any such modification,
withholding, revocation, suspension, cancellation,
withdrawal, termination or non-renewal shall only
constitute an Event of Default if it has a
material adverse effect on the Lessee's ability to
perform its obligations under the Operative
Documents or on the Lessor's rights, title and
interest to and in the Aircraft or under this
Agreement; or
(g) INSOLVENCY:
(i) the Lessee or any of its Affiliates is, or
is deemed for the purposes of any relevant
law to be, unable to pay its debts as they
fall due or to be insolvent, or admits
inability to pay its debts as they fall
due; or
(ii) the Lessee or any of its Affiliates
suspends making payments on all or any
class of its debts or announces an
intention to do so, or a moratorium is
declared in respect of any of its
indebtedness; or
(h) BANKRUPTCY AND SIMILAR PROCEEDINGS
(i) Lessee shall consent to the appointment of
a receiver, trustee or liquidator for
itself or for a substantial part of its
property; or
(ii) Lessee shall admit in writing its inability
to pay its debts generally as they become
due, or Lessee shall make a general
assignment for the benefit of creditors; or
(iii) Lessee shall file a voluntary petition in
bankruptcy or a voluntary petition or
answer seeking reorganization in a
proceeding under 11 U.S.C. "101 et seq. or
under any other laws dealing with
bankruptcy, insolvency, moratorium or
creditors' rights generally (any or all of
which are hereinafter referred to as
"BANKRUPTCY LAWS"), or an answer admitting
the material allegations of a petition
filed against Lessee in any such
proceeding, or Lessee shall by voluntary
petition or answer consent to or fail to
oppose the seeking of relief under the
provisions of any Bankruptcy Laws; or
(iv) any order, judgment or decree is entered by
a court of competent jurisdiction
appointing a receiver, trustee or
liquidator of Lessee or a substantial part
of its property, or ordering a substantial
part of Lessee's property to be
sequestered, is instituted or done with the
consent of Lessee or, if instituted by
another Person, the order, judgment or
decree is not dismissed, remedied or
relinquished within 60 days; or
(v) a petition against Lessee in a proceeding
under any Bankruptcy Laws shall be filed
and shall not be withdrawn or dismissed
within 60 days thereafter, or if, under the
provisions of any Bankruptcy Laws that may
apply to Lessee, any court of competent
jurisdiction shall assume jurisdiction,
custody or control of Lessee or of any
substantial part of its property; or
(vi) any step (including petition, proposal or
convening a meeting) is taken with a view
to a composition, assignment or arrangement
with any creditors of, or the
reorganization, rehabilitation,
administration, liquidation, or dissolution
of, the Lessee or any of its Affiliates or
any other insolvency proceedings involving
the Lessee or any of its Affiliates; or
(i) OTHER JURISDICTION: there occurs in relation to
the Lessee any event anywhere which, in the
reasonable opinion of the Lessor, corresponds with
any of those mentioned in Clause 13.1(h); or
(j) UNLAWFUL: it becomes unlawful for the Lessee to
perform any of its material obligations under this
Agreement or this Agreement becomes wholly or
partly invalid or unenforceable, provided that any
such partial invalidity or unenforceability shall
only constitute an Event of Default if it has a
material adverse effect on the Lessee's ability to
perform its obligations under this Agreement or
the Lessor's rights, title and interest in and to
the Aircraft or under this Agreement; or
(k) SUSPENSION OF BUSINESS: the Lessee suspends or
ceases to carry on all or a substantial part of
its business; or
(l) DISPOSAL: the Lessee disposes or threatens to
dispose of all or a material part of its assets,
whether by one or a series of transactions,
related or not, other than pursuant to a merger or
consolidation as referred to in, and subject to,
Clause 8.8(b) or for the purpose of any other
reorganization or amalgamation the terms of which
have received the previous consent in writing of
the Lessor; or
(m) RIGHTS: the existence, validity, enforceability
or priority of the rights of the Lessor as owner
and lessor in respect of the Aircraft or the
rights of Mortgagee as mortgagee of the Aircraft
and assignee of this Agreement are challenged by
the Lessee or any other Person claiming by or
through the Lessee and, in the case of a Person
other than Lessee, such claim presents a material
risk of loss or forfeiture of the rights of Lessor
or Mortgagee with respect to the Aircraft; or
(n) DELIVERY: the Lessee fails to accept delivery of
the Aircraft when validly tendered pursuant to
this Agreement by the Lessor (provided that the
Lessor shall have satisfied the conditions
precedent set out in Clause 3.4); or
(o) ADVERSE CHANGE: any event or series of events
occurs which, in the reasonable opinion of the
Lessor, could be expected to have a material
adverse effect on the financial condition or
operations of the Lessee and its Affiliates or on
the ability of the Lessee to comply with its
obligations under this Agreement; or
(p) LETTER OF CREDIT: if the Lessee has elected to
deliver the Letter of Credit in lieu of the
Security Deposit pursuant to Clause 5.1(b), the
Letter of Credit ceases for any reason to be in
full force and effect or is not renewed or
replaced 30 days before its expiration in
accordance with Clause 5.1(b) and the Lessee does
not immediately provide the Lessor with cash in an
amount equal to the Security Deposit.
13.2 RIGHTS
If an Event of Default occurs, and for as long as it
shall continue, the Lessor may at its option (and
without prejudice to any of its other rights under this
Agreement or that may arise by operation of Applicable
Law), at any time thereafter:
(a) treat such event as a repudiation by the Lessee of
its obligations under this Agreement and by notice
to the Lessee with immediate effect terminate the
leasing of the Aircraft (but without prejudice to
the continuing obligations of the Lessee under
this Agreement), whereupon all rights of the
Lessee under this Agreement shall cease; and/or
(b) proceed by appropriate court action or actions to
enforce performance of this Agreement or to
recover damages for the breach of this Agreement;
and/or
(c) either:
(i) take possession of the Aircraft, for which
purpose the Lessor may enter any premises
belonging to, occupied by or under the
control of the Lessee (for which purpose
the Lessee hereby grants to the Lessor an
irrevocable license to the extent permitted
by Applicable Law) where the Aircraft may
be located, or cause the Aircraft to be
redelivered to the Lessor at the Redelivery
Location (or such other location as the
Lessor may require), and the Lessor is
hereby irrevocably authorized and
empowered, to the extent permitted by
Applicable Law, to direct pilots of the
Lessee or other pilots to fly the Aircraft
to that airport and will have all the
powers and authorizations necessary for
taking such action; or
(ii) by serving notice, require Lessee to
redeliver the Aircraft to Lessor at the
Redelivery Location (or such other location
as Lessor may require) in the condition
required by Clause 12 and Schedule 4.
13.3 EXPORT
If an Event of Default occurs, and for as long as it
shall continue, the Lessor may sell or otherwise deal
with the Aircraft as if this Agreement had never been
made and the Lessee will, at the request of the Lessor,
take all steps necessary to deregister the Aircraft
from the aircraft registry of the State of Registration
(if other than the United States of America) and export
the Aircraft from the country where the Aircraft is for
the time being registered or situated and any other
steps necessary to enable the Aircraft to be
redelivered to the Lessor in accordance with this
Agreement. The Lessee hereby irrevocably and by way of
security for its obligations under this Agreement
authorizes and empowers the Lessor as its
attorney-in-fact and agent (such agency being coupled
with an interest), in Lessor's own name or in the name
of Lessee, to execute and deliver any documentation and
to do any act or thing required in connection with the
foregoing.
13.4 DEFAULT PAYMENTS
If a Default occurs, the Lessee will indemnify and pay
to Lessor on demand against any loss, damage, expense,
cost or liability which the Lessor may sustain or incur
directly or indirectly as a result, including:
(a) all unpaid Basic Rent, Additional Rent and
Supplemental Rent then due and unpaid;
(b) any loss of profit (calculated on an after-tax
basis) suffered by the Lessor because of the
Lessor's inability to place the Aircraft on lease
with another Lessee on terms as favorable to the
Lessor as this Agreement or because whatever use,
if any, to which the Lessor is able to put the
Aircraft upon its return to the Lessor, is not as
profitable (calculated on an after-tax basis) to
the Lessor as this Agreement would have been but
for such Default or non-delivery;
(c) in the event that the Aircraft is sold prior to
Lessor entering into a replacement lease, the
amount (if any) by which (i) the aggregate of (1)
the net sale proceeds (calculated by deducting the
costs of sale together with the cost of preparing
the Aircraft for sale and the repayment of any
outstanding indebtedness in relation to the
financing of the Aircraft) plus (2) the present
value of the anticipated after-tax net income to
be derived from such net sale proceeds up to the
Scheduled Expiry Date, discounted on a monthly
basis using 9.5% per annum as the discount rate,
are less than (ii) the aggregate of (1) the
present value of the anticipated net sale proceeds
(computed on the same basis as the net sale
proceeds referred to in (i)(1) above), assuming
that the Aircraft would have been sold as soon as
reasonably practicable following the Scheduled
Expiry Date plus (2) the present value of the
income that would have been derived from the
future Basic Rent payable until the Scheduled
Expiry Date, discounted on a monthly basis using
9.5% per annum as the discount rate;
(d) any amount of principal, interest, fees or other
sums whatsoever paid or payable on account of
funds borrowed in order to carry any amount unpaid
by the Lessee;
(e) any loss, premium, penalty or expense that may be
incurred in repaying funds raised to finance the
Aircraft or in unwinding any swap, forward
interest rate agreement or other financial
instrument relating in whole or in part to the
Lessor's financing of the Aircraft; and
(f) any loss, cost, expense or liability sustained or
incurred by the Lessor owing to the Lessee's
failure to redeliver the Aircraft on the date, at
the place and in the condition required by this
Agreement.
For the avoidance of doubt, the provisions of Clause
5.7(a) will apply to any sums payable by the Lessee
pursuant to this Clause 13.4.
13.5 WAIVER OF CERTAIN ARTICLE 2A RIGHTS
To the fullest extent permitted by Applicable Law, each
of Lessor and Lessee hereby agree that no rights or
remedies referred to in Article 2A of the Uniform
Commercial Code shall be conferred upon either Lessor
or Lessee unless otherwise expressly granted in this
Agreement.
14. ASSIGNMENT and TRANSFER
14.1 NO ASSIGNMENT BY LESSEE
The Lessee will not assign any of its right, title,
interests, duties, obligations or liabilities in, to or
under this Agreement, or create or permit to exist any
Security Interest (other than Permitted Liens) over any
of its rights under this Agreement, and any such
purported assignment or grant of a security interest
shall be void ab initio and of no force or effect.
14.2 LESSOR ASSIGNMENT
The Lessor may sell, assign (for purposes of this
Clause 14.2, not including an assignment for security
purposes) or transfer all or any of its rights under
this Agreement and in the Leased Property provided that
the provisions of this Clause 14.2 are satisfied (a
"TRANSFER") and the Lessor will have no further
obligations under this Agreement following a Transfer
(other than obligations that are outstanding as of the
date of such Transfer) but, notwithstanding any
Transfer, will remain entitled to the benefit of each
indemnity under this Agreement.
(a) In connection with any Transfer, the following
conditions shall apply:
(i) Lessor shall give Lessee written notice of
such Transfer at least 10 Business Days
before the date of such Transfer,
specifying the name and address of the
proposed purchaser, assignee or transferee
(the "TRANSFEREE");
(ii) the Transferee will be either (1) a Person
reasonably experienced in aircraft leasing
(or the Transferee's rights and powers
under this Agreement shall be exercised or
serviced on its behalf pursuant to an
appropriate management or servicing
agreement by a Person having such
experience) with a net worth in excess of
$15,000,000, or (2)_a Person with at least
10 years of experience (or whose principals
have at least 10 years of experience) in
aircraft leasing (or the Transferee's
rights and powers under this Agreement
shall be exercised or serviced on its
behalf pursuant to an appropriate
management or servicing agreement by a
Person having such experience) with a net
worth in excess of $7,500,000 and which
causes a United States bank, trust company
or other financial institution to agree to
hold all Additional Rent paid to Lessor in
a segregated, interest-bearing account of
such institution to be applied to the
obligations of Lessor pursuant to Clause
7.2 of this Agreement;
(iii) the Transferee will be a "citizen of the
United States" within the meaning of
Section_40102(a)(15) of the Federal
Aviation Law and have full corporate power
and authority to enter into and perform the
transactions contemplated by this Agreement
on the part of "Lessor";
(iv) on the Transfer date the Lessor and the
Transferee shall enter into an agreement or
agreements acceptable to Lessee in its
reasonable discretion in which the
Transferee confirms that it shall be deemed
a party to this Agreement and agrees to be
bound by all the terms of, and to undertake
all of the obligations of, the Lessor
contained in this Agreement;
(v) such Transfer shall not violate any
Applicable Law;
(vi) the Transferee shall provide to Lessee an
opinion of its regular independent counsel
as to the matters set forth in sub-clause
(iii) and as to the legality, validity,
binding effect and enforceability of the
agreement or agreements between Lessor and
Transferee referred to in sub-clause (iv);
and
(vii) Lessee shall have no obligation to consent
to any changes in this Agreement requested
by the Lessor or Transferee.
(b) Upon any Transfer, the Transferee shall be deemed
Lessor for all purposes of this Agreement, each
reference in this Agreement to the "Lessor" shall
thereafter be deemed for all purposes to refer to
the Transferee, and the transferor shall be
relieved of all obligations of the "Lessor" under
this Agreement arising after the time of such
Transfer except to the extent attributable to acts
or events occurring prior to the time of such
Transfer.
(c) Upon compliance by Lessor and a Transferee with
the terms and conditions of Clause 14.2(a), Lessee
shall at the time of Transfer, at the specific
written request of Lessor and with Lessor paying
all of Lessee's reasonable out-of-pocket costs and
expenses and, if Lessee does not use outside
counsel in connection with such Transfer, Lessee's
reasonable internal legal costs:
(i) execute and deliver to Lessor and to such
Transferee an agreement, in form and
substance satisfactory to Lessor, Lessee
and such Transferee, dated the date of such
transfer, consenting to such transfer,
agreeing to pay all or such portion of the
Basic Rent, Additional Rent and other
payments under this Agreement to such
Transferee or its designee as such
Transferee shall direct, and agreeing that
such Transferee shall be entitled to rely
on all representations and warranties made
by Lessee in the Operative Documents as
though such Transferee was the original
"Lessor"; provided, that such
representations shall not be deemed to be
re-made as of the date of any Transfer;
(ii) execute and deliver to Lessor or such
Transferee, as the case may be,
precautionary Uniform Commercial Code
financing statements or amendments
reflecting the interests of such Transferee
in the Aircraft and this Agreement;
(iii) deliver to Lessor and to such Transferee a
certificate, signed by a duly authorized
officer of Lessee, dated the date of such
transfer, to the effect that no Event of
Default has occurred and is continuing or,
if one is then continuing, describing such
Event of Default;
(iv) cause to be delivered to Lessor and such
Transferee certificates of insurance and
broker's letter of undertaking
substantially in the form set out in Parts
2 and 3 of Schedule 5, detailing the
coverage and confirming the insurers'
agreement to the specified insurance
requirements of this Agreement and listing
the Lessor and Transferee as additional
insureds and the Transferee as sole loss
payee (subject to other direction by
Mortgagee);
(v) deliver to Lessor and to such Transferee an
opinion of Lessee's counsel (which may be
Lessee's General Counsel), addressed to
Lessor and such Transferee to the effect
that the agreement referred to in
sub-clause (i) has been duly authorized and
executed by Lessee and constitutes the
legal, valid and binding obligation of
Lessee, enforceable against Lessee in
accordance with its terms (subject to
customary exceptions), and (if such counsel
delivered the opinion attached as Exhibit D
on the Delivery Date) to the effect that
such Transferee may rely on the opinion
delivered by such counsel in connection
with this Agreement on the Delivery Date
with the same force and effect as if such
Transferee was an original addressee of
such opinion when given;
(vi) deliver to Lessor and such Transferee
information on the location of the Airframe
and Engines at all times requested by
Lessor in order to permit the Transfer to
take place at a time and on a date so
as to eliminate or minimize any Taxes applicable
to the Transfer; and
(vii) such other documents as Lessor or such
Transferee may reasonably request.
14.3 GRANTS OF SECURITY INTERESTS
The Lessor shall be entitled at any time after Delivery
to grant a security interest in the Leased Property or
its right, title and interest in this Agreement (each,
an "ADDITIONAL MORTGAGE") in favor of any Person (each,
an "ADDITIONAL MORTGAGEE"). Any Additional Mortgage
may be a successor mortgage to the Security Interest
granted to Mortgagee, or may be in addition to
Mortgagee's Security Interest and previous Additional
Mortgages and with a priority senior, equal or
subordinate to Mortgagee's Security Interest and
previous Additional Mortgages as Mortgagee and previous
Additional Mortgagees may permit. In the case of any
such grant by Lessor of an Additional Mortgage to an
Additional Mortgagee in all or any portion of Lessor's
rights, title and interest in and to the Aircraft and
this Agreement, Lessee shall promptly, at the specific
written request of Lessor and with Lessor paying all of
Lessee's reasonable out-of-pocket costs and expenses:
(a) execute and delivery to Lessor and to such
Additional Mortgagee an agreement, substantially
in the form of the Consent and otherwise in form
and substance satisfactory to Lessor, such
Additional Mortgagee and Lessee, dated the date of
the grant of such Additional Mortgage,
(i) consenting to such Additional Mortgage and to
any assignment of Lessor's rights, title and
interest in and to this Agreement to such
Additional Mortgagee for security purposes,
(ii) if requested by Lessor and consented to by
the previous payee, agreeing that Lessee will pay
the Basic Rent and other payments under this
Agreement to such Additional Mortgagee, and
(iii) agreeing that such Additional Mortgagee
shall be entitled to rely on all representations
and warranties made by Lessee in this Agreement or
in any certificate or document furnished by Lessee
in connection with this Agreement Documents as
though such Additional Mortgagee was originally
the "Mortgagee";
(b) execute and deliver to Lessor and such Additional
Mortgagee such agreements as the Lessor may
reasonably require and which are acceptable to
Lessee for the purposes of effecting all necessary
amendments to this Agreement;
(c) execute and deliver to Lessor or such Additional
Mortgagee, as the case may be, precautionary
Uniform Commercial Code financing statements or
amendments reflecting the assignment of Lessor's
interests in the Operative Documents to such
Additional Mortgagee;
(d) deliver to Lessor and such Additional Mortgagee a
certificate, signed by a duly authorized officer
of Lessee, dated the date of the grant of the
Additional Mortgage, to the effect that no Event
of Default has occurred and is continuing or, if
one is then continuing, describing such Event of
Default;
(e) cause to be delivered to Lessor and such
Additional Mortgagee certificates of insurance and
broker's letter of undertaking substantially in
the form set out in Parts_2 and 3 of Schedule 5,
detailing the coverage and confirming the
insurers' agreement to the specified insurance
requirements of this Agreement, adding such
Additional Mortgagee as an additional insured and,
if requested by Lessor and consented to by the
previous loss payee, listing such Additional
Mortgagee as sole loss payee;
(f) deliver to Lessor and such Additional Mortgagee an
opinion of Lessee's counsel (which may be Lessee's
General Counsel), addressed to Lessor and such
Additional Mortgagee (i) to the effect that the
agreements referred to in sub-clauses (a) and (b)
have been duly authorized and executed by Lessee
and constitute the legal, valid and binding
obligations of Lessee, enforceable against Lessee
in accordance with their terms (subject to
customary exceptions), and (ii) if such counsel
delivered the opinion attached as Exhibit D on the
Delivery Date, to the effect that such Additional
Mortgagee may rely on the opinion delivered by
such counsel in connection with this Agreement on
the Delivery Date with the same force and effect
as if such Additional Mortgagee was an original
addressee of such opinion when given; and
(g) such other documents as Lessor or such Additional
Mortgagee may reasonably request.
14.4 SALE AND LEASEBACK BY LESSOR
In addition to the Transfers and grants of Security
Interests permitted by Clauses 14.2 and 14.3, but
subject to the provisions thereof, Lessor shall be
entitled to transfer its right, title and interests in
and to the Leased Property to any Person and lease the
Aircraft from such Person (a "HEAD LESSOR"), and in
such event Lessor shall retain its rights and
obligations as the "Lessor" under this Agreement. In
the event of such a sale and lease-back by Lessor,
(a) the Head Lessor shall meet the requirements for a
"Transferee" as defined in Clause 14.2(a)(ii) above,
(b) the Lessor shall be entitled to assign its rights
in this Agreement to such Head Lessor as security for
its obligations under the head lease, (c) the Head
Lessor shall be entitled to grant to one or more
purchase money lenders, or to an indenture trustee on
behalf of such lenders, an Additional Mortgage covering
the Leased Property and the Operative Documents,
(d) Lessee shall execute and deliver to Lessor, such
Head Lessor, such Additional Mortgagee and any trustees
on their behalf, as appropriate, the documents
specified in Clauses 14.2(c)(i) through (vi) and
Clauses 14.3(a) through (f) above, and Lessee shall
cooperate with Lessor to make such other changes to
this Agreement as Lessor may reasonably request so long
as such changes do not adversely affect the rights or
increase or extend the obligations of Lessee under this
Agreement or otherwise adversely affect Lessee and with
Lessor paying all of Lessee's reasonable out-of-pocket
costs and expenses.
14.5 FURTHER ACKNOWLEDGMENTS
Lessee further acknowledges that any Transferee or
Additional Mortgagee shall in turn have the rights of,
and be subject to the conditions to, transfer and
grants of Security Interests set forth above in this
Clause 14.
14.6 CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT
The rights of Lessee under this Agreement shall be
superior to the rights of any Additional Mortgagee or
Head Lessor, and the Lessor shall require each
Additional Mortgagee and Head Lessor to agree in
writing with the Lessee that such Additional
Mortgagee's and Head Lessor's rights in and to the
Leased Property shall be subject to the terms of this
Agreement, including to the Lessee's rights to the
quiet use, possession and enjoyment provisions
contained in this Agreement. The Lessor's obligations
to perform the terms and conditions of this Agreement
shall remain in full force and effect notwithstanding
the creation of any Additional Mortgage or Head Lease.
Lessor shall not create any Additional Mortgage or
enter into any Head Lease that violates the terms of
this Clause 14.6.
15. MISCELLANEOUS
15.1 WAIVERS, REMEDIES CUMULATIVE
The rights of Lessor or Lessee under this Agreement may
be exercised as often as necessary, are cumulative and
not exclusive of that party's rights under any law and
may be waived only in writing and specifically. Delay
in exercising or non-exercise of any such right is not
a waiver of that right.
15.2 DELEGATION
Lessor or any Financing Party may delegate to any
Person or Persons all or any of the trusts, powers or
discretions vested in it by this Agreement and any such
delegation may be made upon such terms and conditions
and subject to such regulations (including power to
sub-delegate) as the Lessor or such Financing Party,
respectively, in its absolute discretion thinks fit.
15.3 APPROPRIATION
If any sum paid or recovered in respect of the
liabilities of the Lessee under this Agreement is less
than the amount then due, the Lessor may apply that sum
to amounts due under this Agreement in such proportions
and order and generally in such manner as the Lessor
may determine.
15.4 CURRENCY INDEMNITY
(a) If the Lessor receives an amount in respect of the
Lessee's liability under this Agreement or if such
liability is converted into a claim, proof,
judgment or order in a currency other than
Dollars:
(i) the Lessee will indemnify the Lessor, as an
independent obligation, against any loss
arising out of or as a result of such
conversion;
(ii) if the amount received by the Lessor, when
converted into Dollars (at the market rate
at which the Lessor is able on the relevant
date to purchase Dollars in New York City
with that other currency) is less than the
amount owed in Dollars, the Lessee will,
forthwith on demand, pay to the Lessor an
amount in Dollars equal to the deficit; and
(iii) the Lessee will pay to the Lessor on demand
any exchange costs and Taxes payable in
connection with the conversion.
(b) The Lessee waives, to the extent permitted by
Applicable Law, any right it may have in any
jurisdiction to pay any amount under this
Agreement in a currency other than Dollars.
15.5 PAYMENT BY THE LESSOR
The Lessor will not be obliged to pay any amounts to
the Lessee under this Agreement so long as any sums
which are then due from the Lessee under this Agreement
remain unpaid and any such amounts which would
otherwise be due will fall due only if and when the
Lessee has paid all such sums.
15.6 SEVERABILITY
If a provision of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, that will
not affect:
(a) the legality, validity or enforceability in that
jurisdiction of any other provision of this
Agreement; or
(b) the legality, validity or enforceability in any
other jurisdiction of that or any other provision
of this Agreement.
15.7 REMEDY
If the Lessee fails to comply with any provision of
this Agreement, the Lessor may, without being in any
way obliged to do so or responsible for so doing and
without prejudice to the ability of the Lessor to treat
the non-compliance as a Default, effect compliance on
behalf of the Lessee, whereupon the Lessee shall become
liable to pay immediately any sums expended by the
Lessor together with all costs and expenses (including
reasonable legal costs) necessarily incurred in
connection therewith.
15.8 EXPENSES
(a) The Lessor and the Lessee shall each bear their
respective expenses (including legal, professional
and out-of-pocket expenses) incurred or payable in
connection with the negotiation, preparation and
execution of this Agreement, and shall share
equally the fees and expenses of Special FAA
Counsel in connection with the transactions
contemplated by this Agreement, including in
connection with the Assignment and Mortgage.
Lessor shall otherwise bear and be responsible for
all fees and expenses in connection with the
importation and registration of the Aircraft and
the registration and recording of the Assignment
and Mortgage.
(b) The Lessee shall pay to the Lessor on demand all
expenses (including legal, professional and
out-of-pocket expenses) incurred or payable by the
Lessor in connection with the granting of any
waiver or consent under this Agreement.
(c) The Lessee will pay to the Lessor on demand all
expenses (including reasonable legal, survey and
other costs) payable or incurred by the Lessor in
contemplation of, or otherwise in connection with,
the enforcement of or preservation of any of the
Lessor's rights under this Agreement, or in
respect of the repossession of the Aircraft.
(d) The Lessor will pay to the Lessee on demand all
expenses (including reasonable legal costs)
payable or incurred by the Lessee in contemplation
of, or otherwise in connection with, the
enforcement of or preservation of any of the
Lessee's rights under this Agreement.
15.9 TIME OF ESSENCE
The time stipulated in this Agreement for all payments
payable by the Lessee to the Lessor and for the
performance of the Lessee's other obligations under
this Agreement that are due on a specified or
determinable date will be of the essence of this
Agreement (subject always to any applicable grace
period).
15.10 NOTICES
(a) All notices and other communications given under
or in connection with this Agreement shall be in
writing (including telegram) and shall be deemed
to have been received when delivered to the
address specified in clause 15.10(b).
(b) All such notices, requests, demands and other
communications shall be sent:
(i) to Lessor at:
c/o Unicapital Air Group, Inc.
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Telephone: x0-000-000-0000
Telefax: x0-000-000-0000
copied to Mortgagee at:
FINOVA Capital Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President -
Operations Management
Telefax: x0-000-000-0000
(ii) to Lessee at:
0000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx, III
Telephone: x0-000-000-0000
Telefax: x0-000-000-0000
or to such other address as shall have been notified by
one party to the other in the manner set out in this
Clause 15.10.
15.11 LAW AND JURISDICTION
(a) THIS AGREEMENT SHALL, IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS ENTERED INTO IN THE STATE
OF NEW YORK BY RESIDENTS OF SUCH STATE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
(b) The Lessor and the Lessee hereby irrevocably agree
to submit to the non-exclusive jurisdiction of the
United States District Court for the Southern
District of New York and the Supreme Court of the
State of New York located in the Borough of
Manhattan, County of New York (the "Agreed
Courts") in the event of any claims or disputes
arising under this Agreement. Such submission to
jurisdiction shall not be construed so as to limit
the right of either party to take proceedings
against the other in whatever jurisdiction shall
to it seem fit nor shall the taking of proceedings
in any one or more jurisdictions preclude the
taking of proceedings in any other jurisdiction,
whether concurrently or not. Final judgment
against Lessor or Lessee in any such suit shall be
conclusive and may be enforced in any other
jurisdiction by suit on the judgment or as
otherwise permitted by Applicable Law, a certified
or true copy of which shall be conclusive evidence
of the facts and of the amount of any indebtedness
or liability of Lessor or Lessee. Each of Lessor
and Lessee hereby irrevocably waives any objection
which it may now or hereafter have to the laying
of venue in any suit, action or proceeding brought
in any Agreed Court, and irrevocably waives any
claim that any such suit, action or proceeding
brought in any Agreed Court has been brought in an
inconvenient forum.
(c) THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
(d) Without prejudice to any other mode of service,
each of the Lessor and the Lessee consents to the
service of process relating to any proceedings
involving, directly or indirectly, any matter
arising out of or relating to this Agreement by
U.S. Postal Service or Irish postal service
registered mail (prepaid, return receipt
requested) of a copy of the process to the
Lessee's address identified in Clause 15.10(b).
15.12 SOLE AND ENTIRE AGREEMENT
This Agreement is the sole and entire agreement between
the Lessor and the Lessee in relation to the leasing of
the Aircraft, and supersedes all previous agreements in
relation to that leasing. The terms and conditions of
this Agreement can only be varied by an instrument in
writing executed by both parties or by their duly
authorized representatives.
15.13 INDEMNITIES
All rights expressed to be granted to each Indemnitee
under this Agreement (other than any Financing Party)
are given to the Lessor as agent for and on behalf of
that Indemnitee.
15.14 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which shall constitute an
original and, when taken together, all of which shall
constitute one and the same Agreement.
15.15 CONFIDENTIALITY
Neither the Lessor nor the Lessee shall, without the
other's prior written consent, communicate or disclose
the terms of this Agreement or any information or
documents furnished pursuant to this Agreement (except
to the extent that the same are within the public
domain) to any third party (other than any Financing
Party, any prospective Transferee, any material
investor in the Lessee or creditor in Lessee,
Additional Mortgagees or Head Lessors, the respective
external legal advisers, auditors, insurance brokers or
underwriters of Lessor, Lessee and such parties, and
the Manufacturer and Engine Manufacturer); provided,
that disclosure will be permitted, to the extent
required:
(a) pursuant to an order of any court of competent
jurisdiction; or
(b) pursuant to any procedure for discovery of
documents in any proceedings before any such
court; or
(c) pursuant to any law or regulation having the force
of law; or
(d) pursuant to a lawful requirement of any authority
with whose requirements the disclosing party is
legally obliged to comply; or
(e) in order to perfect any assignment of any
assignable warranties.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF Lessor and Lessee have executed this Lease
Agreement 22120 on the date shown at the beginning of this
Agreement.
SIGNED on behalf of
AIRCRAFT 22120, INC.
By:_________________________
Name:
Title:
SIGNED on behalf of
VANGUARD AIRLINES, INC.
By:_________________________
Name:
Title:
[FINOVA Capital Corporation hereby acknowledges receipt
of this Original Executed Counterpart of Lease Agreement 22120 in
Phoenix, Arizona on this ____ day of August 1999.
FINOVA CAPITAL CORPORATION
By:_________________________
Name:
Title]1/
1/ This text will only appear on one counterpart of Lease
Agreement 22120.
