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EXHIBIT 4.25
THE RIGHTS OF LESSOR UNDER THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
[GPA 1989 BN-12] AND IN THE AIRCRAFT COVERED HEREBY WILL BE OR HAVE BEEN
ASSIGNED TO, AND ARE OR WILL BE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, THE
CHASE MANHATTAN BANK, AS INDENTURE TRUSTEE UNDER AN AMENDED AND RESTATED TRUST
INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-12] DATED AS OF NOVEMBER 26, 1996.
AS PROVIDED IN SECTION 21(e) HEREOF, TO THE EXTENT, IF ANY, THAT THIS AMENDED
AND RESTATED AIRCRAFT LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS AMENDED AND RESTATED AIRCRAFT LEASE
AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OF POSSESSION OF ANY COUNTERPART
OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE
COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE CHASE MANHATTAN
BANK, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF.
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AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
[GPA 1989 BN-12]
Dated as of December 19, 1989
Amended and Restated as of November 26, 1996
between
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as otherwise expressly provided herein,
but solely as Owner Trustee under a
Trust Agreement [GPA 1989 BN-12] dated
as of December 19, 1989, as amended
Lessor
and
AMERICA WEST AIRLINES, INC.
Lessee
One Airbus A320-231 Aircraft
Manufacturer's Serial No. 082
U.S. Registration No. N633AW
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AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT dated as of December 19, 1989
and amended and restated as of November 26, 1996 is entered into between
WILMINGTON TRUST COMPANY, not in its individual capacity except as otherwise
expressly provided herein, but solely as Owner Trustee under a Trust Agreement
[GPA 1989 BN-12] dated as of December 19, 1989, as amended, and with its
principal place of business at Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000
(together with its successors and permitted assigns, "Lessor"), and AMERICA WEST
AIRLINES, INC., a Delaware corporation, with its chief executive office at 0000
Xxxx Xxx Xxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxx 00000 (together with its successors
and permitted assigns, "Lessee").
W I T N E S E T H:
WHEREAS, Lessor and Lessee desire to amend and, solely for the
convenience of the parties, restate in its entirety the Original Head Lease (as
hereinafter defined) as of the Restatement Date (as hereinafter defined) as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions.
The following terms shall have the following respective
meanings for all purposes of this Lease (including the Recitals) and shall be
equally applicable to both the singular and the plural forms of the terms
defined herein:
As used herein, the terms "Assigned Sublease",
"Equipment Notes", "Excepted Payments", "Indenture Supplement", "Note Holder",
"Pass Through Trust", "Pass Through Trust Agreement", "Pass Through Trustee",
"Past Due Rate", "Principal Amount", "Refinancing Transaction", "Refunding
Agreement", "Restatement Date", "Sublease Assignment", "Trust Company" and
"Trust Indenture Estate" shall have the meanings specified in the Indenture; the
terms "Intercreditor Agreement", "Liquidity Facility", "Liquidity Provider" and
"Subordination Agent" shall have the meanings specified in the Intercreditor
Agreement (as defined in the Pass Through Trust Agreement); and the term
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"Lease Amendment No. 1" shall have the meaning specified in the Refunding
Agreement.
"Affiliate" shall mean, with respect to any specified Person,
any other Person which, directly or indirectly, owns or controls, is controlled
by or is under common control with such specified Person. Control will be deemed
to exist based on (i) ownership of 25% or more of the voting securities of a
Person or (ii) the power to direct or elect or cause the direction or election
of the management and policies of a Person whether by contract or otherwise.
"Airbus Industrie" shall mean Airbus Industrie G.I.E., a
groupement d'interet economique formed under the laws of the French Republic,
and its successors and assigns.
"Aircraft" shall mean the Airframe leased hereunder and
described in Lease Supplement No. 1 (or any airframe from time to time
substituted for such Airframe pursuant to Section 11(a)(i) hereof) together with
the (i) two IAE Model V2500 Engines described in Lease Supplement No. 1 (or any
Engine substituted therefor hereunder) with respect to such Airframe, whether or
not any such initial or substituted Engines may from time to time no longer be
installed on the Airframe or may be installed on any other airframe, (ii) Parts
or components thereof, (iii) spare parts or ancillary equipment or devices
furnished therewith under this Lease (including any separate equipment described
on one or more Lease Supplements hereto), (iv) the Aircraft Records and
Documents and all other logs, manuals and records with respect to such Aircraft,
and (v) all substitutions, replacements and renewals of any and all thereof.
"Aircraft Records and Documents" shall mean the items
identified in Exhibit B hereto, all of which shall be maintained in the English
language.
"Airframe" shall mean (a) the Airbus Industrie model A320-231
aircraft (except Engines or engines from time to time installed thereon)
described in Lease Supplement No. 1 and leased by Lessor to Lessee hereunder,
and any such model aircraft (except Engines or engines from time to time
installed thereon) which may from time to time be substituted for such aircraft
(except Engines or engines from time to time installed thereon) pursuant to
Section 11(a)(i); and (b) any and all Parts so long as the same shall be
incorporated or installed on or attached to the Airframe, or so long as title
thereto shall remain vested in Lessor in
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accordance with the terms of Section 9 hereof after removal from the Airframe;
provided, however, that at such time as an aircraft (except Engines or engines
from time to time installed thereon) shall be deemed part of the property leased
hereunder in substitution for the Airframe pursuant to the applicable provisions
hereof and the replacement Airframe shall have been subjected to the Lien of the
Indenture (if the Lien of the Indenture has not been discharged), the replaced
Airframe shall cease to be the Airframe hereunder.
"Appraisal Procedure" shall mean the following
procedure for determining the "fair market sales value" or "fair market rental
value" of the Aircraft, Airframe, an Engine or a Part. Except as provided in
Section 18, "fair market sales value" or "fair market rental value" shall mean
the value that would be obtained in an arm's-length transaction between an
informed and willing seller or lessor, as the case may be, and an informed and
willing buyer or lessee, as the case may be, both under no compulsion to sell
and purchase or to lease (and other than a lessee in possession or a used
equipment scrap dealer), as the case may be, as such value is determined by an
appraisal which assumes: (i) that such Aircraft, such Airframe, such Engine or
such Part is unencumbered by this Lease (or any sublease) or any of the other
Operative Documents or any of the Financing Documents and the terms thereof;
(ii) that such Aircraft, Airframe, Engine or Part has been maintained in all
respects in accordance with the terms of this Lease (whether or not in fact in
such condition), (iii) that such Aircraft, Airframe, Engine or Part meets the
return conditions specified in Section 16 and Exhibit E (whether or not in fact
meeting such conditions) and (iv) that Lessee has removed the Removable Parts
entitled to be removed under Section 9(b) (it being agreed that no such removal
is permitted in connection with an appraisal pursuant to Section 18) and
replaced any part which was removed from the Aircraft as a result of such
Removable Part being installed; provided, however, that costs of removal from
the location of current use and costs of sale shall not be a consideration in
determining such value except in connection with any determination of "fair
market sales value" or "fair market rental value" pursuant to Section 18; and
provided, further, that any determination of "fair market sales value" or "fair
market rental value" pursuant to Section 18 shall be on an "as is, where is"
basis in its actual condition and location subject to this Lease and any
sublease and any and all Liens thereon (other than a Lessor's Lien or Lenders'
Lien). Lessor and Lessee shall, except for any appraisal
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pursuant to Section 18 in which case only Lessor shall select such appraiser
(which appraiser does not have to be acceptable to Lessee), select an
independent nationally-recognized aircraft appraiser, mutually acceptable to
each of them, who shall make the determination as to the "fair market sales
value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part
for which such appraisal is to be conducted. If Lessor and Lessee fail to agree
upon a mutually acceptable appraiser within ten (10) days, then each of Lessor
and Lessee shall select an appraiser and such determination shall be made by
such appraisers (if either party shall fail to appoint an appraiser within ten
(10) days after notice from the other party of the selection of its appraiser,
then the appraisal made by the other party's appraiser shall be determinative).
If the two appraisers chosen pursuant to the preceding sentence fail to agree
upon a determination of the "fair market sales value" or "fair market rental
value" of such Aircraft, Airframe, Engine or Part within twenty (20) days after
their appointment, then such appraisers shall mutually choose a third appraiser
within ten (10) days thereafter, provided that if such appraisers fail to
mutually choose a third appraiser within said 10-day period, such appointment
shall be made by the American Arbitration Association (or any successor) in New
York, New York, and the three appraisers so chosen shall each make such
determination. The appraisal determined by each of the three appraisers chosen
pursuant to the preceding sentence shall be averaged and the appraisal furthest
from the average of the three appraisals shall be disregarded. The appraisal
determined by each of the two remaining appraisers shall be averaged and such
average shall be the appraised "fair market sales value" or "fair market rental
value" of such Aircraft, Airframe, Engine or Part. Lessee shall bear all the
fees and expenses of the Appraisal Procedure.
"Approved Broker" shall mean any reputable insurance broker of
recognized responsibility and standing experienced in aircraft insurance.
"Approved Insurers" shall mean any reputable and creditworthy
insurance company of recognized responsibility and standing experienced in
aircraft insurance.
"Basic Rent" for the Aircraft shall mean the Basic Rent
specified in Exhibit C and payable throughout the Basic Term for the Aircraft
pursuant to Section 4(a)(i).
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"Basic Rent Payment Date" shall mean each day
determined in accordance with Exhibit C upon which a payment of Basic Rent
becomes payable. If a Basic Rent Payment Date shall fall on a day which is not a
Business Day, any payment due on such Basic Rent Payment Date shall be made on
the next succeeding Business Day.
"Basic Term" shall mean the period specified in Lease
Supplement No. 3.
"Business Day" shall mean any day other than a
Saturday, Sunday or other day on which banking institutions in New York, New
York or Hartford, Connecticut are authorized or required by Law to be closed.
"Buyer Furnished Equipment" shall mean the equipment which
was to be furnished by Xxxxxxx, Inc. or, if applicable, Original Head Lessee and
installed on the Aircraft pursuant to Clause 18 of the Purchase Agreement, and
any similar equipment furnished to Lessee.
"Certificated Air Carrier" shall mean any corporation
(except the United States Government) domiciled in the United States of America
and holding a Certificate of Convenience and Necessity issued under Section
41102(a) of the Federal Aviation Act by the Department of Transportation or any
predecessor or successor agency thereto, or, in the event such Certificates
shall no longer be issued, any corporation (except the United States Government)
domiciled in the United States of America and legally engaged in the business of
transporting for hire passengers or cargo by air predominantly to, from or
between points within the United States of America, and, in either event,
operating commercial jet aircraft, which also is a citizen of the United States
(as defined in Section 40102 of the Federal Aviation Act) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant to
chapter 447 of the Federal Aviation Act for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo so as to fall within the
purview of 11 U.S.C. Section 1110 or any analogous statute.
"Civil Reserve Air Fleet Program" shall mean the Civil
Reserve Air Fleet Program administered by the United States Government and
authorized under 10 U.S.C. Section 9511, et seq., as amended, or any
substantially similar or substitute program of the United States Government.
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"Claims" shall have the meaning specified in Section 13.
"Code" shall mean the Internal Revenue Code of 1986, as
amended and the rules and regulations promulgated thereunder.
"Commonly Controlled Person" shall mean an entity,
whether or not incorporated, which is under common control with Lessee within
the meaning of Section 414(b) or (c) of the Code.
"Consent and Guaranty" shall mean the Amended and
Restated Consent and Guaranty of Airbus Industrie, dated as of May 1, 1985, as
amended and restated as of December 30, 1988, in the form attached to the
Purchase Agreement.
"Default" shall mean an event or condition which
would constitute an Event of Default with the lapse of time or the giving of
notice or both.
"Delivery Date" shall mean December 28, 1989, being the
date the Aircraft was delivered to and accepted by the Original Head Lessee as
Lessee hereunder for all purposes of this Lease.
"$" and "dollars" shall mean the lawful currency of the
United States of America.
"Engine" shall mean (i) each of the two IAE Model V2500
engines listed by manufacturer's serial number in Lease Supplement No. 1 and
initially installed on the Airframe covered by such Lease Supplement, whether
or not from time to time thereafter no longer installed on the Airframe or
installed on any other aircraft or airframe, and (ii) any replacement engine
which may from time to time be substituted, pursuant to Section 6(a), 11(a),
11(b) or 16(c), for any Engine leased hereunder; together in each case with any
and all Parts incorporated or installed in or attached thereto or any and all
Parts removed therefrom so long as title thereto after removal from such Engine
shall remain vested in Lessor in accordance with the terms of Section 9 hereof.
Except as otherwise set forth herein, at such time as a replacement engine shall
be so substituted and leased hereunder and the replacement Engine shall have
been subjected to the Lien of the Indenture (if the Lien of the Indenture has
not been discharged), such replaced Engine shall cease to be an Engine
hereunder. The term "Engines"
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means, as of any date of determination, both Engines then leased hereunder.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, as from time to time in effect.
"Event of Default" shall have the meaning specified in any one
or more clauses in Section 17.
"Event of Loss" shall mean any of the following events with
respect to the Aircraft, Airframe or either Engine: (a) loss of such property or
the use thereof due to theft or disappearance for a period in excess of sixty
(60) consecutive days, but in no event later than the last day of the Term; (b)
destruction or damage of such property that renders repair uneconomic or such
property permanently unfit for normal use by Lessee (or, if a Permitted Sublease
is in effect, the Permitted Sublessee) for any reason whatsoever; (c) any loss
or disappearance of or damage to or destruction of such property which results
in an insurance settlement with respect to such property on the basis of an
actual or constructive total loss; (d) the condemnation, confiscation,
appropriation, seizure or requisition of title to any such property by any
Governmental Entity which results in the loss of title by Lessor for ten (10)
days or more but excluding requisition for use or hire which does not involve
requisition of title; (e) the condemnation, confiscation, appropriation, seizure
or requisition of the use of any such property by any Governmental Entity (other
than a requisition for use by the federal government of the United States or any
instrumentality or agency thereof bearing the full faith and credit of the
United States of America), which in any such case shall have resulted in the
loss of possession thereof by Lessee for a period in excess of the earlier of
ninety (90) consecutive days or the last day of the Term (or for such shorter
period ending on the date which is the next Business Day after the date of
receipt of an insurance settlement with respect to such property on the basis of
a total loss); (f) the requisition for use of such property by the federal
government of the United States or any agency or instrumentality thereof bearing
the full faith and credit of the United States of America, which purports to or
does continue beyond the Term; (g) as a result of any law, rule, regulation,
order or other action by the FAA, the Department of Transportation or any other
Governmental Entity having jurisdiction, the use of such Aircraft, Airframe or
Engine in the normal course of Lessee's (or, if a Permitted Sublease is in
effect, the Permitted
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Sublessee's) business of air transportation of passengers shall have been
prohibited for a period of six (6) consecutive months, unless Lessee (or the
Permitted Sublessee), prior to the expiration of such six-month period, shall
have undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit such normal use of such item of equipment by
Lessee (or the Permitted Sublessee), or, in any event, if such normal use shall
have been so prohibited by any such Governmental Entity for a period of twelve
(12) consecutive months or is continuing on the last day of the Term; or (h) as
otherwise provided herein. An Event of Loss with respect to the Aircraft shall
be deemed to have occurred if an Event of Loss occurs with respect to the
Airframe which is a part of such Aircraft. An Event of Loss with respect to an
Engine shall not, absent an Event of Loss with respect to the Airframe, be
deemed an Event of Loss with respect to the Airframe.
"Excluded Property" shall have the meaning set forth in
Section 9(b) hereto.
"Expiration Date" shall mean the date specified in Lease
Supplement No. 2, on which date the Basic Term of this Lease shall expire.
"FAA" shall mean the Federal Aviation Administration of the
United States Department of Transportation or any successor agency.
"FAA Bills of Sale" shall mean, collectively, (i) the Xxxx of
Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from
Manufacturer's Subsidiary to the Original Head Lessee, and (ii) the Xxxx of Sale
for the Aircraft on AC Form 8050-2, dated the Delivery Date, from the Original
Head Lessee to Lessor.
"Federal Aviation Act" shall mean the sections of Title 49 of
the United States Code relating to aviation, as amended and in effect from time
to time, or any similar legislation of the United States of America enacted in
substitution or replacement thereof.
"Financials" shall mean Lessee's most recent fiscal year-end
audited consolidated balance sheet and statements of income and cash flow for
the period then ending, copies of which for the fiscal year ending December 31,
1995, have been provided to Lessor prior to the date hereof.
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"Financing Documents" shall mean the Lease Agreement, each
Lease Supplement, the Lease Amendment No. 1, the Trust Agreement, each Trust
Supplement, the Indenture, each Indenture Supplement, the Refunding Agreement,
the Equipment Notes issued under the Indenture, the Intercreditor Agreement,
each Liquidity Facility, each Pass Through Trust Agreement and each supplement
thereto and any certificate delivered or entered into in accordance with the
foregoing, as amended, supplemented or otherwise modified.
"Foreign Air Carrier" shall mean any air carrier listed in
Exhibit F-1, as amended, supplemented or otherwise modified from time to time,
whose principal place of business and legal domicile at the time of entering
into the applicable sublease is located in a country listed on Exhibit F-2, as
amended, supplemented or otherwise modified from time to time, and not
prohibited by the terms of the insurance then in effect, with which the United
States has diplomatic or, such as in the case of Taiwan, similar relations, in
each case which is obligated under the applicable sublease to perform all
maintenance required by applicable foreign governmental standards made mandatory
to the Aircraft by such jurisdiction and, to the extent not inconsistent
therewith, all FAA-airworthiness directives and other requirements made
mandatory to the Aircraft by the FAA.
"GAAP" shall mean United States generally accepted accounting
principles and practices consistently applied as in effect from time to time,
which shall include the official interpretations thereof by the Financial
Accounting Standards Board. All accounting terms not otherwise defined herein
shall have the meanings assigned to such terms in accordance with GAAP.
"Governmental Entity" shall mean and include (i) any national
government, political subdivision thereof, or local jurisdiction therein; (ii)
any board, commission, department, division, organ, instrumentality, court, or
agency of any thereof, however constituted; and (iii) any association,
organization, or institution of which any entity described in (i) or (ii) above
is a member or to whose jurisdiction any such entity is subject or in whose
activities any such entity is a participant but only to the extent that any
entity described in clause (i), (ii) or (iii) has jurisdiction over Lessor,
Lessee, Indenture Trustee, Note Holders, any sublessee, the Aircraft or its
operations.
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"Head Lessor's Lien" shall mean a "Lessor's Lien" under and as
defined in the Original Head Lease.
"IAE" shall mean IAE International Aero Engines AG, a company
organized and existing under the laws of Switzerland.
"Indemnitee" shall mean Lessor (in its individual capacity and
as trustee under the Trust Agreement), the Trust Estate, Owner Participant, the
Trust Indenture Estate, Indenture Trustee (in its individual capacity and as
trustee under the Indenture), each Pass Through Trust, each Pass Through Trustee
(in its individual capacity and as trustee under the Pass Through Trusts), the
Subordination Agent and each Liquidity Provider, and their respective successors
and permitted assigns (and, in the case of a permitted assign of the Owner
Participant that is a partnership, the partners of such partnership), and any
combination thereof and their respective officers, directors, agents, servants,
employees, subsidiaries, Affiliates and shareholders.
"Indenture" shall mean the Amended and Restated Trust
Indenture and Security Agreement [GPA 1989 BN-12] dated as of December 19, 1989,
and amended and restated as of November 26, 1996, as the same may be further
amended, supplemented or modified from time to time, between Indenture Trustee
and Lessor. The term "Indenture" shall also include the Indenture Supplements
entered into pursuant to the terms of the Indenture.
"Indenture Trustee" shall mean the bank or trust company
serving as Indenture Trustee under the Indenture, and its successors and
assigns.
"Interest Rate" shall mean (i) with respect to the portion of
any payment of Rent that may be required by the Indenture to be paid to the
holders of any outstanding Equipment Notes issued thereunder, a per annum rate
of interest equal to the Past Due Rate applicable thereto under and as defined
in the Indenture computed on the basis of a 360-day year and twelve 30-day
months and (ii) with respect to any other amount, a per annum rate of interest
equal to the sum of the rate of interest publicly announced by Citibank, N.A.,
at its principal office in New York City, as its prime or similar base rate from
time to time in effect from the date the amount becomes due to the date it is
paid in full, plus 2%, computed on the basis of a year of 365 or 366 days, as
the case may be, and actual number of days elapsed.
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"Law" shall mean and include (i) any statute, rule,
decree, constitution, regulation, order, judgment or other directive of any
Governmental Entity; (ii) any treaty, pact, compact or other agreement to which
any Governmental Entity is a signatory or party; (iii) any judicial or
administrative interpretations of the application of any Law described in (i) or
(ii) above; and (iv) except where expressly excluded herein, any amendment or
revision of any Law described in (i), (ii), or (iii) above.
"Lease Agreement," "this Lease Agreement," "this Lease,"
"this Agreement," "herein," "hereunder," "hereby," "hereof" or other like words
shall mean this Lease as originally executed and as amended, supplemented or
otherwise modified from time to time, including, without limitation, by one or
more Lease Supplements, as a whole and not to any particular Section or other
subdivision, and any reference to a "Section " or an "Exhibit" shall refer to a
Section or Exhibit of this Lease, as so amended, supplemented or modified,
unless expressly provided to the contrary.
"Lease Identification" shall have the meaning set forth
in Section 6(e) hereto.
"Lease Supplement" shall mean Lease Supplement No. 1,
Lease Supplement No. 2 and Lease Supplement No. 3 and each
subsequent Lease Supplement entered into hereunder.
"Lease Supplement No. 1" shall mean Lease Supplement [GPA
1989 BN-12] No. 1 dated the Delivery Date between Lessor and
Original Head Lessee, as Lessee.
"Lease Supplement No. 2" shall mean Lease Supplement [GPA
1989 BN-12] No. 2 dated as of December 31, 1991 between Lessor and
Original Head Lessee, as Lessee.
"Lease Supplement No. 3" shall mean Lease Supplement [GPA
1989 BN-12] No. 3, substantially in the form of Exhibit D-1 hereto, entered into
between Lessor and Lessee on the Restatement Date for the purpose of confirming
the leasing of the Aircraft hereunder.
"Lenders' Lien" shall mean any Lien or disposition of
title attributable to Indenture Trustee in its individual capacity (and not as
Indenture Trustee) on or in respect of (as the case may be) the Aircraft or any
other portion of the Trust Estate or the Trust Indenture Estate arising as a
result of (i) Claims against Indenture Trustee in its individual capacity (and
not as Indenture Trustee) not related to its interest in the Aircraft or the
administration of the Trust Estate or the Trust Indenture Estate pursuant to the
Indenture, whether under Section 9-
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207(2)(e) of the Uniform Commercial Code or otherwise, (ii) acts or omissions of
Indenture Trustee in its individual capacity (and not as Indenture Trustee) not
contemplated hereunder or under the other Operative Documents, or acts or
omissions of Indenture Trustee in its individual capacity (and not as Indenture
Trustee) which are in violation of any of the Operative Documents, or (iii)
Taxes imposed on or Claims against Indenture Trustee in its individual capacity
(and not as Indenture Trustee) which are excluded from indemnification by
Lessee, or (iv) Claims against Indenture Trustee in its individual capacity (and
not as Indenture Trustee) arising out of the voluntary or involuntary transfer
by Indenture Trustee in its individual capacity (and not as Indenture Trustee)
of all or any portion of its interest in the Aircraft, the Airframe, any Engine,
the Trust Estate, the Trust Indenture Estate or the Operative Documents (except
a Claim resulting from the exercise of remedies under and in accordance with the
Indenture or for a transfer provided for in the Operative Documents).
"Lessee" shall have the meaning set forth in the
Recitals hereto.
"Lessor" shall have the meaning set forth in the
Recitals hereto.
"Lessor's Lien" shall mean any Lien or disposition
of title affecting the Aircraft, the Airframe, any Engine or any Part arising as
a result of (i) any claim against Lessor, Owner Participant, Trust Company or
any of their Affiliates not related to the transactions contemplated by this
Lease or the other Operative Documents, the Financing Documents or the Purchase
Documents; (ii) any affirmative act of Lessor, Owner Participant, Trust Company
or any of their Affiliates not expressly contemplated by this Lease or the other
Operative Documents, the Financing Documents or the Purchase Documents or not
permitted without consent (which consent has not been granted) by any party
hereto or thereto or that is in violation of any term of this Lease or the other
Operative Documents, the Financing Documents or the Purchase Documents; (iii)
Taxes imposed against the Trust Estate, Trust Company, Lessor or Owner
Participant or any of their Affiliates or the consolidated group of taxpayers of
which any of them is a member which are not to be indemnified against by Lessee
under the Operative Documents, the Purchase Documents or the Financing Documents
or by Original Head Lessee under the Original Head Lease Tax Indemnification
Agreement; (iv) claims against the Trust Estate, Trust Company, Owner
Participant or Lessor or any of
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their Affiliates arising out of the transfer of all or any part of their
respective interest in the Aircraft, the Airframe, either Engine, the Trust
Estate, the Operative Documents or the Financing Documents other than any
transfers or dispositions pursuant to Sections 2, 6, 9, 11, 16, 18, 19 or 20
(except Liens resulting from a transfer not permitted by such Section ) of this
Lease or pursuant to Section 10 of the Refunding Agreement; provided, however,
that there shall be excluded from this definition and Lessor shall not be
required to remove any Lien which would otherwise constitute a Lessor's Lien, if
it is being diligently contested in good faith so long as neither such
proceedings nor Lien involves a material danger of the sale, forfeiture or loss
of the Aircraft or adversely affects Lessee's rights under Section 21(f); and
provided, further, that Lessor's Liens shall not include the Lien of the
Indenture or Lenders' Liens.
"Lien" shall mean any mortgage, chattel mortgage, pledge,
lien, charge, encumbrance, lease, exercise of rights, security interest, lease
in the nature of a security interest, statutory right in rem, or claim of any
kind, including any thereof arising under any conditional sale agreement,
equipment trust agreement or title retention agreement.
"Lien of the Indenture" shall mean the Lien created by the
Indenture on the Trust Indenture Estate.
"Maintenance Program" shall mean (i) the America West
Maintenance Program approved by the FAA for America West Airbus model A320-231
aircraft in effect on the date hereof or as modified with the approval of the
FAA without affecting, or any other FAA approved maintenance program which does
not affect, the return condition standards set forth in Section 16 and Exhibit E
or (ii) if the Aircraft is subject to a Permitted Sublease to a Foreign Air
Carrier, any other maintenance program for the Aircraft which is approved by the
aviation authority of the country of registry and complies with the requirements
applicable to maintenance of the Aircraft contained in the definition of Foreign
Air Carrier. The Maintenance Program shall encompass scheduled maintenance,
condition monitored maintenance, and on-condition maintenance of the Airframe,
Engines, and components of the Aircraft, including, but not limited to,
servicing, testing, preventive maintenance, repairs, structural inspections,
structure life improvements, system checks, overhauls, approved modifications,
service bulletins, engineering orders,
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airworthiness directives, and corrosion control inspections and treatments. All
modifications and supplements to the Maintenance Program shall be provided to
Lessor upon its reasonable request and Lessor shall be given reasonable access
to the Maintenance Program upon its request.
"Manufacturer" shall mean, collectively, Manufacturer's
Subsidiary, IAE, Airbus Industrie or, as the case may be, any one or more
thereof as may be applicable in any given circumstance, together in each case
with any subcontractor or supplier thereof.
"Manufacturer's Subsidiary" shall mean AVSA, S.A.R.L., a
French societe a responsabilite limitee, which as of the date hereof is owned by
Airbus Industrie.
"Maximum Foreign Use Percentage" shall have the meaning
specified in Exhibit C.
"Mortgage Convention" shall mean the Convention for the
International Recognition of Rights in Aircraft, signed (ad referendum) at
Geneva, Switzerland, on June 19, 1948, and amended from time to time, but
excluding the terms of any adhesion thereto or ratification thereof containing
reservations to which the United States of America does not accede.
"Net Worth" shall mean, with respect to any Person, such
Person's stockholders' equity minus any intangible assets.
"Operative Documents" shall mean this Lease, each Lease
Supplement, any sublease, the Tax Indemnification Agreement, the Financing
Documents, and any certificate delivered or entered into pursuant to the
foregoing, as amended, supplemented or otherwise modified.
"Original Head Lease" shall mean this Aircraft Lease Agreement
[GPA 1989 BN-12], with respect to the Aircraft, dated as of December 19, 1989,
between Lessor, as lessor, and the Original Head Lessee, as lessee, as amended,
supplemented or otherwise modified and as in effect immediately prior to the
Restatement Date, as more particularly described in Annex I attached hereto.
"Original Head Lease Tax Indemnification Agreement" shall mean
the Head Lease Tax Indemnification
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Agreement [GPA 1989 BN-12], dated as of December 19, 1989, and amended and
restated as of the Restatement Date, between the Original Head Lessee and Owner
Participant, as amended, supplemented or otherwise modified from time to time.
"Original Head Lessee" shall mean GPA Leasing USA Sub I, Inc.,
a Connecticut corporation.
"Original Sublease" shall mean the Initial Sublease (as
defined in the Original Head Lease) as in effect immediately prior to the
Restatement Date.
"Other Leases" shall mean the Amended and Restated Aircraft
Lease Agreement [GPA 1990 AWA-13] amended and restated as of the Restatement
Date between Wilmington Trust Company as Owner Trustee, Lessor, and America West
Airlines, Inc. as Lessee, the Amended and Restated Aircraft Lease Agreement [GPA
1990 AWA-14] amended and restated as of the Restatement Date between Wilmington
Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as
Lessee, the Amended and Restated Aircraft Lease Agreement [GPA 1990 AWA-15]
amended and restated as of the Restatement Date between Wilmington Trust Company
as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee, the Amended
and Restated Aircraft Lease Agreement [GPA 1990 AWA-16] amended and restated as
of the Restatement Date between Wilmington Trust Company as Owner Trustee,
Lessor, and America West Airlines, Inc. as Lessee, the Amended and Restated
Engine Lease Agreement [GPA 1991 AWA-E1] amended and restated as of the
Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor and
America West Airlines, Inc. as Lessee, the Amended and Restated Engine Lease
Agreement [GPA 1991 AWA-E2] amended and restated as of the Restatement Date
between Wilmington Trust Company as Owner Trustee, Lessor and America West
Airlines, Inc. as Lessee, and the Amended and Restated Engine Lease Agreement
[GPA 1991 AWA-E3] amended and restated as of the Restatement Date between
Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines,
Inc. as Lessee, each as amended, supplemented or otherwise modified from time to
time.
"Other Letters of Credit" shall mean any and all letters of
credit pursuant to Section 8(l) of the Other Leases.
"Owner Participant" shall mean ___________________________,
a Delaware corporation, as Owner Participant under the Trust Agreement, and its
successors and permitted assigns.
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"Owner Trustee" shall mean Wilmington Trust Company, as Owner
Trustee under the Trust Agreement, and its successors and assigns.
"Parent" shall mean GPA Group plc, a public limited company
organized and existing under the laws of Ireland.
"Partial Assignment" shall mean the A320 Partial Assignment,
Assumption, Release and Amendment Agreement, dated as of December 30, 1988,
among Parent, Xxxxxxx, Inc., and Manufacturer's Subsidiary, as amended,
supplemented or otherwise modified.
"Participation Agreement" shall mean the Participation
Agreement [GPA 1989 BN-12], dated as of December 19, 1989, among Original Head
Lessee, Parent, Owner Participant, Owner Trustee, Indenture Trustee and the
"Lender" named therein, as of July 29, 1993, as the same may be amended,
supplemented or otherwise modified from time to time and as in effect
immediately prior to the Restatement Date.
"Parts" shall mean all appliances, components, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature (excluding complete Engines or engines), including Buyer
Furnished Equipment, which may now or from time to time be incorporated or
installed in or attached to or were provided by the Manufacturer with the
Airframe or any Engine or so long as title thereto shall remain vested in Lessor
in accordance with the terms of Section 9 hereof after removal from such
Airframe or Engine. Except as otherwise set forth herein, at such time as a
replacement part shall be substituted for a Part in accordance with Section 9
hereof, the Part so replaced shall cease to be a Part hereunder.
"Payment Location" shall have the meaning set forth in Exhibit
C, as the same may be changed from time to time by Lessor as provided in Section
4(c).
"Permitted Lien" shall mean any Lien referred to in clauses
(i) through (vii) of the first sentence of Section 14 hereof.
"Permitted Sublease" shall have the meaning specified in
Section 6(a)(iii)(1).
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"Permitted Sublessee" shall mean a Certificated Air Carrier
or, after the Restricted Use Period, (a) any Foreign Air Carrier, (b) the United
States Government or an agency or instrumentality thereof which bears the full
faith and credit of the United States of America or (c) any other Person
approved in writing by the Owner Participant and the Indenture Trustee.
"Person" shall mean and include any individual person,
corporation, partnership, firm, joint stock company, joint venture, trust,
estate, unincorporated organization, association, Governmental Entity, or
organization or association of which any of the above is a member or a
participant.
"Purchase Agreement" shall mean the Amended and Restated
Airbus A310/A320 Purchase Agreement, dated as of May 1, 1985, as amended and
restated as of December 30, 1988 (insofar as the same relates to Model A320
Aircraft), between Manufacturer's Subsidiary and Xxxxxxx, Inc., including the
Consent and Guaranty, together with Letter Agreements, Exhibits and Appendices
thereto, as partially assigned to Parent pursuant to the Partial Assignment, to
which Airbus Industrie, as guarantor, has consented, and as the same may from
time to time be further amended, supplemented or otherwise modified to the
extent permitted by the terms thereof.
"Purchase Documents" shall mean the Purchase Agreement, the
Partial Assignment and any other agreement, document or certificate delivered or
entered into pursuant to the foregoing, as amended, supplemented or otherwise
modified.
"Removable Part" shall have the meaning set forth in Section
9(b).
"Renewal Rent" shall mean the rent payable pursuant to Section
20.
"Renewal Rent Payment Date" shall mean each day determined in
accordance with Exhibit C upon which a payment of Renewal Rent becomes payable.
If a Renewal Rent Payment Date shall fall on a day which is not a Business Day,
any payment due on such Renewal Rent Payment Date shall be made on the next
succeeding Business Day.
"Renewal Term" shall mean the period described in Section 20
following the end of the Basic Term if Lessee
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shall have exercised its renewal option in accordance with Section 20.
"Rent" shall mean Basic Rent or Renewal Rent, as the case may
be, and Supplemental Rent, collectively.
"Replacement Airframe" and "Replacement Engine" shall have the
meanings specified in accordance with their description in Section 11.
"Replacement Period" shall have the meaning specified in
Section 11.
"Responsible Officer" shall mean, with respect to Lessee, any
of the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer
or Controller.
"Restricted Use Period" shall have the meaning specified in
Exhibit C.
"Return Occasion" shall mean the event that occurs when
possession of the Aircraft is to be returned from Lessee to Lessor at the end of
the Term of this Lease or upon Lessor taking possession pursuant to Section 18
or for any other reason.
"Specified Investments" shall mean (i) direct obligations of
the United States Government, the obligations of which bear the full faith and
credit of the United States; (ii) obligations fully guaranteed by the United
States; (iii) certificates of deposit issued by any commercial bank incorporated
under the laws of the United States or one of the States thereof (but not
exceeding $10,000,000 in principal amount or deposits at any given time for any
one bank) having a combined capital surplus and undivided income of at least
$750,000,000 and having a rating of "B" or better from Xxxxxxxx BankWatch, Inc.;
(iv) repurchase agreements (but not exceeding $10,000,000 in principal amount or
deposits at any given time for any one bank) with any financial institution
having combined capital and fully collateralized by an obligation of the type
described in clauses (i) through (iii) as collateral pursuant to which an entity
referred to in clause (iii) above or another financial institution having a net
worth of at least $750,000,000 and having a rating of "B" or better from
Xxxxxxxx BankWatch, Inc. is obligated to repurchase any such obligation not
later than ninety (90) days after the purchase of any such obligation; and (v)
money market funds which invest solely in obligations
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described in clause (i); provided that if all of the above investments are
unavailable, the entire amounts to be invested may be used to purchase Federal
funds from an entity described in clause (iii) above; and provided further that
no investment shall be eligible as a "Specified Investment" unless the final
maturity or date of return of such investment is on or before the date which is
ninety (90) days from the date of purchase thereof.
"Stipulated Loss Value" shall mean as of the
applicable date during the Basic Term the amount set forth on Exhibit A hereto
and, thereafter, the amount described in Section 20 (it being understood and
agreed that the amounts set forth in Exhibit A take into account fully the
amount and application of each installment of Basic Rent or Renewal Rent on each
Stipulated Loss Value Date (other than a Stipulated Loss Value Date that is a
Basic Rent Payment Date or Renewal Rent Payment Date) so that no additional
credit of such Basic Rent or Renewal Rent is to be made in respect thereof
except as expressly provided herein on a Basic Rent Payment Date or a Renewal
Rent Payment Date). In the event that it is necessary to determine a separate
Stipulated Loss Value for the Airframe or an Engine, such Stipulated Loss Value
shall be based on the ratio that the original cost to Lessor of the Airframe or
such Engine bears to Lessor's Cost (as set forth in the Original Head Lease) for
the Aircraft.
"Stipulated Loss Value Date" shall mean each monthly date
listed, or with respect to any Renewal Term determined as set forth, on Exhibit
A hereto.
"Supplemental Rent" shall mean any and all amounts,
liabilities and obligations other than Basic Rent and Renewal Rent which Lessee
assumes or agrees to pay to Lessor or any other Indemnitee hereunder or under
any other Operative Document, including, without limitation, (i) any payment of
Stipulated Loss Value and any payment provided for in Section 11 or 18; (ii) any
payment of indemnity required by Section 10 or 13 hereof; (iii) any payment of
an amount equal to average daily Basic Rent or Renewal Rent in connection with
an extension of the Term of this Lease as a result of (a) an incipient Event of
Loss and the operation of Section 11 hereof or (b) the need to correct any
failure of the Aircraft to satisfy the requirements of Section 16 and Exhibit E
hereof; (iv) [Intentionally Left Blank]; (v) an amount equal to any payment due
to the Owner Trustee in respect of fees or expenses as provided in Section 21(j)
hereof; (vi) an amount equal to any payment due to the
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Indenture Trustee in respect of fees or expenses as provided in the Indenture
and/or Section 21(j) hereof; (vii) the Pro Rata Share of any payment due to any
Pass Through Trustee in respect of fees or expenses pursuant to the Pass Through
Trust Agreement; (viii) the Pro Rata Share of any payment due to the
Subordination Agent in respect of fees, compensation, costs or expenses pursuant
to the Intercreditor Agreement; (ix) an amount equal to the amount specified in
clause (b) of the fourth paragraph of Section 2.02 of the Indenture; and (x) to
the extent permitted by applicable Law, interest at the Interest Rate
calculated: (1) on any part of any installment of Basic Rent or Renewal Rent, or
average daily Basic Rent referred to in clause (iii) of this definition of
"Supplemental Rent", as the case may be, not paid on the due date thereof for
the period for which the same shall be overdue and (2) on any Supplemental Rent
not paid when due hereunder from and including the due date until the same shall
be paid. As used herein, "Pro Rata Share" means as of any date of determination
a fraction the numerator of which is the aggregate Principal Amount then
outstanding of the Equipment Notes issued under the Indenture and the
denominator of which is the aggregate principal balance then outstanding of all
"equipment notes" issued under the Indentures (as defined in the Intercreditor
Agreement).
"Tax Indemnification Agreement" shall mean the Amended and
Restated Sublease Tax Indemnification Agreement [GPA 1989 BN-12], dated as of
December 19, 1989, and as amended and restated as of November 26, 1996, between
Original Head Lessee and Lessee, as the same may be amended, supplemented or
otherwise modified from time to time.
"Taxes" shall mean any and all fees (including, without
limitation, license and registration fees), taxes (including, without
limitation, sales, personal property (tangible and intangible), transfer, fuel,
leasing, use, occupational, value added, excess profits, excise, gross receipts,
franchise, stamp, and income taxes), levies, imposts, withholdings, assessments,
or other taxes, duties or charges of any nature whatsoever, together with any
penalties, fines, additions to tax charges or interest thereon or computed with
reference thereto.
"Taxing Authority" shall have the meaning specified in Section
10(a).
"Term" shall mean, collectively, the Basic Term specified in
Lease Supplement No. 2 and, if Lessee extends
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the Term in accordance with Section 20, the Renewal Term, in either case as
extended or deemed extended as a result of the occurrence of an event described
in clause (iii) to the definition of "Supplemental Rent" in this Lease, for
which the Aircraft is leased hereunder pursuant to Section 2.
"Trust Agreement" shall mean the Trust Agreement [GPA 1989
BN-12] dated as of December 19, 1989 as amended by Trust Supplement No. 1 and as
further amended by Trust Supplement No. 2 between Lessor, in its individual
capacity, and Owner Participant, as beneficiary, as the same may be amended,
supplemented or otherwise modified from time to time. The term "Trust Agreement"
shall also include each Trust Supplement.
"Trust Estate" shall have the meaning specified in the Trust
Agreement.
"Trust Supplement" shall mean Trust Supplement No. 1 and Trust
Supplement No. 2 and each subsequent Trust Supplement entered into thereunder
and any further supplement to the Trust Agreement.
"Trust Supplement No. 1" shall mean Trust Agreement Supplement
[GPA 1989 BN-12] No. 1 dated the Delivery Date between Lessor and Owner
Participant for the purpose of bringing the Aircraft and the Original Head Lease
into the Trust Estate.
"Trust Supplement No. 2" shall mean Trust Agreement Supplement
[GPA 1989 BN-12] No. 2 dated the Restatement Date between Lessor and Owner
Participant conforming the references in the Trust Agreement to this Agreement.
"United States Government" shall mean the federal government
of the United States of America and any board, commission, department, division,
organ, instrumentality, court or agency thereof.
"Wet Lease" shall mean any arrangement whereby Lessee agrees
to furnish the Aircraft or the Airframe and Engine or engines installed thereon
at that time to a third party pursuant to which such Aircraft or the Airframe
and Engine or engines (i) shall be operated solely by regular employees of
Lessee possessing all current certificates and licenses required under the
Federal Aviation Act (it is understood that cabin attendants need not be regular
employees of Lessee) and Lessee otherwise maintains
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operational control and possession thereof, and (ii) shall be maintained by
Lessee in accordance with its normal maintenance practices and this Lease, and
otherwise the insurance required hereunder shall be maintained and the Aircraft
shall be used and operated in accordance with this Lease.
Section 2. Agreement to Lease. Lessor hereby
agrees to lease the Aircraft to Lessee, and Lessee hereby agrees to lease the
Aircraft from Lessor, on the terms and subject to the conditions set forth in
this Lease.
Section 3. Delivery and Acceptance; Term.
(a) Time of Delivery. The Aircraft was delivered
to Lessee, and Lessee accepted delivery of the Aircraft, on
December 28, 1989.
(b) [Intentionally Left Blank]
(c) Acceptance of Aircraft. The Aircraft leased
hereunder was delivered to Lessee "AS IS," "WHERE IS" and SUBJECT TO EACH AND
EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a)
AND (b) HEREOF.
Lessee hereby agrees that it has accepted the
Aircraft for all purposes of this Lease and Lessee's acceptance of the Aircraft
was conclusive evidence that, as between Lessor and Lessee, the Aircraft was in
all respects satisfactory to Lessee and was in compliance with this Lease.
(d) Term of Lease. The Basic Term of this Lease
shall commence on the Delivery Date and shall continue until the Expiration
Date; provided, however, that the Term of this Lease may be earlier terminated
pursuant to the provisions hereof.
Section 4. Rent.
(a) Rent. Lessee covenants and agrees to pay the
following as Rent hereunder:
(i) Basic Rent. The Basic Rent, as set
forth in Exhibit C throughout the Basic Term hereof, in consecutive
installments, in arrears as set forth on Schedule I attached to Exhibit C, due
and payable on each Basic Rent Payment Date to the Lessor; and
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(ii) Supplemental Rent. Any and all
Supplemental Rent, which shall be due and payable ten (10) Business Days after
demand unless otherwise specifically provided. In the event of any failure on
the part of Lessee to pay any Supplemental Rent when due, Lessor shall have all
rights, powers and remedies provided for herein or by law or equity or otherwise
in the case of nonpayment of Basic Rent or Renewal Rent. Lessee's obligation to
pay Supplemental Rent which is due and owing pursuant to the terms hereof shall
survive the expiration or termination of Lessee's obligation to pay Basic Rent
or Renewal Rent hereunder.
(b) Minimum Payments. Notwithstanding any
provision in this Lease or in any other Operative Document to the contrary,
under all circumstances and in any event, (i) the Stipulated Loss Value,
together with the payment of Supplemental Rent and all other Rent then due
hereunder, as of any time and as of the date of any payment thereof shall (both
before and after giving effect to any reductions therefrom) be in an amount at
least sufficient to pay in full as of such time or date the aggregate unpaid
principal amount of the Equipment Notes then outstanding and all accrued and
unpaid interest (assuming interest has been timely paid) thereon, and (ii) Basic
Rent payable on any Basic Rent Payment Date shall at least equal the aggregate
amount of principal and interest due and payable on the Equipment Notes on such
Basic Rent Payment Date. It is agreed, however, that no installment of Basic
Rent or Stipulated Loss Value shall be increased or adjusted by reason of (A)
any attachment or diversion of Rent on account of any Lessor's Lien or Lenders'
Lien, (B) any modification of the terms of the Equipment Notes or the other
Financing Documents made without the prior written consent of Lessee or (C) the
acceleration of any Equipment Note due to the occurrence of any "Indenture Event
of Default" (as defined in the Indenture) which does not constitute an Event of
Default hereunder. It is further agreed that nothing in this Lease or any other
Operative Document shall be deemed to constitute a guaranty of the value,
utility or useful life of the Aircraft or a guaranty in respect of interest,
principal or any other amounts payable in respect of or under the Equipment
Notes.
(c) Date, Place and Method of Payment. If any
date on which a payment of Rent becomes due and payable is not a Business Day,
the Rent otherwise due on such date shall be due and payable on the next
succeeding Business Day. All Basic Rent, Renewal Rent and Supplemental Rent
payable under this Lease shall be paid by wire transfer in
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immediately available currency of the United States of America, no later than
12:00 p.m. (noon), New York City time, on the date payable hereunder, and, so
long as the Lien of the Indenture shall not have been discharged, to or as
directed by Indenture Trustee in accordance with the payment instructions set
forth in Exhibit C hereto or at such other address in the City of New York or
Hartford, Connecticut as Indenture Trustee may direct by thirty (30) days prior
written notice to Lessee, except for all Excepted Payments. All Excepted
Payments, and, upon discharge of the Lien of the Indenture, all payments of Rent
thereafter made hereunder, shall be paid in such immediately available funds no
later than 12:00 p.m. (noon), New York City time, on the date payable hereunder,
to Lessor or to Owner Participant, as appropriate, in accordance with the
payment instructions set forth in Exhibit C or at such other address as Lessor
may direct by thirty (30) days prior written notice to Lessee.
(d) Prohibition Against Setoff, Counterclaim,
Etc. This Lease is a net lease. Lessee's obligations to pay all Rent and to
perform all other obligations hereunder are absolute and unconditional and shall
not be affected or reduced by any circumstances, including, without limitation,
(i) any setoff, counterclaim, recoupment, defense, or other right which Lessee
may have against Lessor, Original Head Lessee, Owner Participant, Indenture
Trustee, any Note Holder, any Manufacturer, any Person providing services with
respect to the Aircraft, or any other Person, for any reason whatsoever (whether
in connection with the transactions contemplated hereby or otherwise),
including, without limitation, any breach by Lessor of its representations,
warranties or covenants contained herein or in the other Operative Documents;
(ii) any defect in the title, airworthiness, eligibility for registration under
the Federal Aviation Act, condition, design, operation, or fitness for use of,
or any damage to or loss or destruction of, the Aircraft (subject to the
provisions of Section 11(a)(ii) hereof), any interruption or cessation in the
use of or possession thereof by or availability to Lessee for any reason
whatsoever, whether arising out of or related to an act or omission of Lessee,
Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any Note
Holder, any Manufacturer, any Person providing services with respect to the
Aircraft or any other Person; (iii) any Liens with respect to the Aircraft; (iv)
the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any sublease or any absence of right, power or
authority of Lessor, Original Head Lessee,
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Lessee or Indenture Trustee to enter into this Lease or the Indenture, as the
case may be; (v) any insolvency, bankruptcy, reorganization, or similar
proceedings by or against Lessor, Original Head Lessee, Lessee, any sublessee,
Indenture Trustee or any Note Holder; (vi) any Taxes or (vii) any other
circumstance or happening of any nature whatsoever, whether or not similar to
any of the foregoing; it being the expressed intention of Lessor and Lessee that
all Rent payable hereunder shall be payable in all events, unless the obligation
to pay the same shall be terminated pursuant to the express provisions of this
Agreement.
Except as expressly set forth elsewhere in this Agreement,
Lessee hereby waives, to the extent permitted by applicable Law, any and all
rights which it may now have or which at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, xxxxx, cancel, quit, reduce,
defer, suspend or surrender this Lease or the Aircraft or any obligation imposed
upon Lessee hereunder or under the other Operative Documents (including, without
limitation, payment of Rent), except in accordance with the terms hereof.
Each payment of Rent made by Lessee shall be final. Lessee
will not seek to recover all or any part of any payment of Rent for any reason
whatsoever except manifest error.
If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of Law, except as specifically provided herein,
Lessee waives all rights (if any) to any diminution in its Rent obligations
hereunder and nonetheless agrees to pay to Indenture Trustee or Lessor as
provided in Section 4(c) hereof an amount equal to each Basic Rent or Renewal
Rent, as the case may be, payment and any Supplemental Rent payment at the time
such payments would have become due and payable in accordance with the terms
hereof had this Lease not been terminated in whole or in part, and so long as
such payments are made and all other terms and conditions hereof are complied
with by Lessee, Lessor and Lessee will deem this Lease to remain in full force
and effect.
The foregoing shall not, however, be construed as a waiver of
Lessee's other rights to seek damages, specific performance, other remedies at
law or equity or any combination thereof, as against the Original Head Lessee,
Lessor, Indenture Trustee or any other Person having an interest herein through
the Original Head Lessee, Lessor,
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Indenture Trustee or any other Person as shall be liable therefor, on account of
any failure of the Original Head Lessee, Lessor, Indenture Trustee or any other
such Person to perform its express obligations under this Lease and the other
Operative Documents, or to enforce any judgment obtained therefor.
Section 5. Representations, Warranties and
Covenants.
(a) Warranties and Disclaimer of Warranties. THE
AIRCRAFT WAS DELIVERED AND IS BEING LEASED BY LESSOR TO LESSEE "AS IS" AND
"WHERE IS". LESSEE EXPRESSLY AGREES THAT IT TOOK THE AIRCRAFT ON SUCH BASIS.
LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED
THE AIRCRAFT UNDER THIS LEASE OR BY HAVING ACQUIRED THE AIRCRAFT OR DONE OR
FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN
RELATION TO THIS LEASE, AND NEITHER LESSOR NOR OWNER PARTICIPANT HAS MADE, AND
LESSOR FOR ITSELF AND OWNER PARTICIPANT, HEREBY SPECIFICALLY DISCLAIMS, ANY
GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE
(EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR OR ANY PURPOSE
OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS WHETHER OR NOT
DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR AS TO ANY OTHER GUARANTY, REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT LIMITATION
ANY LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT
LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR DEALING OR
USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER
CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND
DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH GUARANTY, REPRESENTATION OR
WARRANTIES. NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY
RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, REGARDLESS OF ANY
NEGLIGENCE (OTHER THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS
NOT ATTRIBUTABLE TO ITS INTEREST IN THE AIRCRAFT) OF LESSOR OR ANY OTHER
INDEMNITEE, AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS ANY
RIGHTS OR REMEDIES, WITH RESPECT TO (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN
CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE
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AIRCRAFT OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS
OF BUSINESS OR ANTICIPATED PROFITS OR DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OR (iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS
SET FORTH IN THIS SECTION 5(a) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO THE AIRCRAFT, EXPRESS
OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER IMPLIED
WARRANTIES, OR GUARANTEES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF
MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE
OF DEALING OR USAGE OF TRADE, OR ANY IMPLIED WARRANTY OF FITNESS FOR A
PARTICULAR OR ANY USE, EXCEPT THAT: (A) Lessor represents and warrants that (x)
on the Delivery Date Lessor had, and on the Restatement Date Lessor has, the
right to lease the Aircraft hereunder and (y) on the Delivery Date the Aircraft
was free of Head Lessor's Liens and on the Restatement Date the Aircraft is free
of Lessor's Liens and Head Lessor's Liens and (B) Lessor covenants that it shall
not create, incur, assume or suffer to exist any Lessor's Lien on the Aircraft.
(b) Representations and Warranties of Lessor.
Lessor hereby represents and warrants, as of the Restatement Date that its
representations and warranties set forth in Section 9(b) of the Refunding
Agreement were true when made and continue to be true and correct.
(c) No Amendments to Financing Documents. Lessor
covenants and agrees that Lessor will not, without the prior written consent of
Lessee, amend, modify, supplement or waive any provision of any Financing
Document in such a way as to materially increase Lessee's obligations hereunder
or materially reduce Lessee's rights hereunder.
The representations, warranties and covenants of
Lessor under Sections 5(a) and 5(b) and this Section 5(c) shall survive the
execution and delivery of this Lease and the delivery of the Aircraft and the
Restatement Date.
(d) Suppliers' Warranties. So long as a Default
or an Event of Default has not occurred and is continuing and provided that the
Aircraft continues to be maintained, modified and repaired as required
hereunder, Lessor hereby assigns or, if by their terms not assignable, agrees
otherwise to make available to Lessee the right to exercise in Lessee's name
such rights as Lessor may have or may subsequently obtain (but without
representation or warranty
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by or recourse to Lessor) with respect to any product warranty, service life
policy, trademark, patent or copyright infringement indemnity, or airframe or
propulsion system performance guaranty, of Airbus Industrie, the Manufacturer's
Subsidiary, IAE or any subcontractor or vendor with respect thereto under the
Purchase Agreement (except those which were given directly to Parent, the
Original Head Lessee or any of their Affiliates and are not directly related to
the operator's use of the Aircraft), to the extent that the same may be assigned
or otherwise made available to Lessee, and Lessor agrees to exert its reasonable
efforts, at Lessee's expense and upon its request, to enforce such rights as
Lessor may have with respect thereto for the benefit of Lessee; provided,
however, that upon and during the continuance of a Default or an Event of
Default, such assignment or other rights which are otherwise made available to
Lessee shall immediately and automatically without further action be deemed
cancelled and, to the extent of any remaining interest held by Lessee, deemed
reassigned to Lessor and all such rights shall revert to Lessor automatically
including all claims thereunder whether or not perfected and all amounts payable
shall be paid to and held by Lessor. In no event, however, shall Lessee have any
right to amend, supplement or otherwise modify the Purchase Agreement (by change
order or otherwise). In connection with the foregoing, Lessee agrees to be bound
by and comply with all applicable terms, conditions and limitations of the
provisions of the Purchase Agreement.
Section 6. Possession and Use.
(a) Possession.
(i) Lease, Assignment and Transfer. LESSEE
WILL NOT ASSIGN THIS LEASE OR ANY RIGHTS OR OBLIGATIONS HEREUNDER OR INTEREST
HEREIN (EXCEPT AS PROVIDED IN SECTION 8(e) BELOW) OR SUBLEASE, WET LEASE OR
OTHERWISE IN ANY MANNER TRANSFER, DELIVER OR RELINQUISH POSSESSION OR USE OF THE
AIRCRAFT, AIRFRAME OR ANY ENGINE OR INSTALL ANY ENGINE OR PERMIT ANY ENGINE TO
BE INSTALLED ON ANY AIRFRAME OTHER THAN THE AIRFRAME; provided, that, so long as
no Event of Default or Default shall have occurred and be continuing or would
result therefrom and so long as the action to be taken shall not adversely
affect Lessor's title to or other interest in, or the Lien of the Indenture on,
the Aircraft, the Airframe or either of the Engines or this Lease or the
insurance required to be maintained hereunder and Lessee is otherwise in full
compliance with Section 12, and so long as
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all necessary approvals of the FAA and any other Governmental Entity having
jurisdiction have been obtained, then Lessee, without the prior written consent
of Lessor, may, only to the extent provided below and subject to the limitations
of Sections 6(a)(ii) and 6(a)(iii) below:
(1) subject any Engine to a normal interchange,
maintenance, servicing or pooling agreement or similar arrangement
with a Permitted Sublessee, in each case customary in the airline
industry of which Lessee is a part and entered into in the
ordinary course of its business; provided that no transfer of the
registration of any Engine shall be effected in connection
therewith; and provided, further, that (A) no such agreement or
arrangement contemplates, results in or requires the transfer of
title to any Engine, and (B) if Lessor's title to any Engine shall
be divested under any such agreement or arrangement, such
divestiture shall be deemed to be an Event of Loss with respect to
such Engine and not an Event of Default and Lessee shall comply
with Section 11(b) hereof in respect thereof;
(2) deliver possession of the Aircraft, the Airframe or
any Engine to the manufacturer thereof, or in accordance with the
Maintenance Program to an FAA certified repair station, for
testing, service, storage, repair, maintenance, inspection or
overhaul work on such Aircraft, Airframe or Engine or any part
thereof or for alterations or modifications in or additions to
such Aircraft, Airframe or Engine to the extent required or
permitted by the terms of Section 9 hereof;
(3) transfer possession of the Aircraft or the
Airframe to the United States of America or any
instrumentality or agency thereof pursuant to a
sublease;
(4) (i) subject the Airframe to the Civil Reserve Air
Fleet Program and transfer possession of the Airframe or any
Engine to the United States Government pursuant to the Civil
Reserve Air Fleet Program, so long as Lessee shall promptly notify
Lessor upon transferring possession of the Airframe or any Engine
to the United States Government pursuant to the Civil Reserve Air
Fleet Program and provide Lessor with the name and address of the
Contracting Office Representative for the Military Airlift Command
of the
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United States Air Force to whom notices must be given; or
(ii) subject the Airframe to (a) a service contract with
the United States Government, a copy of which shall be provided to
Lessor, providing for possession to be held by the United States
Government for a period not extending beyond the end of the Term,
or (b) a requisition for use by the United States Government not
constituting an Event of Loss;
(5) install an Engine on an airframe (other than the
Airframe) owned by Lessee free and clear of all Liens except (A)
Permitted Liens and Liens which apply only to engines (other than
the Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an
entirety) and (B) the rights of participants under normal
interchange agreements which are customary in the airline industry
and do not contemplate, permit, result in or require the transfer
of title to the airframe or engines installed thereon;
(6) install an Engine on an airframe leased to Lessee or
owned by Lessee subject to a conditional sale or other security
agreement; provided that: (A) such airframe is free and clear of
all Liens except the rights of the parties to the lease or
conditional sale or other security agreement covering such
airframe and except Liens of the type permitted by clauses (A) and
(B) of Section 6(a)(i)(5) and the Lien of any mortgage which
provides that each Engine leased to Lessee hereby shall not become
subject to the Lien thereof or to any rights of any party
thereunder other than Lessee (with respect to Lessee's rights
expressly granted hereunder), notwithstanding the installation of
such Engine on any airframe subject to the Lien of such mortgage,
unless and until Lessee shall become the owner of such Engine and
Lessor shall have no further interest therein, all pursuant to the
express terms of this Lease; and (B) there shall be in effect a
written agreement of the lessor or secured party of such airframe
(which may be contained in the lease or conditional sale or other
security agreement covering such airframe) substantially similar
in effect to the agreement of Lessor in Section 6(b) below whereby
such lessor or secured party effectively and expressly agrees that
neither it nor its successors or assigns
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will acquire or claim any right, title or interest in any Engine
by reason of such Engine being installed on such airframe at any
time while such Engine is subject to this Lease or is owned by
Lessor, and a copy of such agreement shall be provided to Lessor
upon written request;
(7) install an Engine on an airframe owned by Lessee,
leased to Lessee or purchased by Lessee subject to a conditional
sale or other security agreement under circumstances where neither
Section 6(a)(i)(5) or Section 6(a)(i)(6) is applicable; provided
that such installation shall be deemed an Event of Loss with
respect to such Engine and Lessee shall comply with Section 11(b)
hereof in respect thereof, Lessor not intending hereby to waive
any right or interest it may have to or in such Engine under
applicable Law until compliance by Lessee with such Section 11(b);
(8) enter into a Wet Lease for the Aircraft or the
Airframe and engines installed thereon in the ordinary course of
Lessee's business for a period not extending beyond the Term;
provided that if Lessee shall enter into any Wet Lease for a
period of more than six months (including renewal options) Lessee
shall provide to Lessor written notice of such Wet Lease (such
notice to be given at least ten (10) Business Days prior to
entering into such Wet Lease); or
(9) sublease the Aircraft or the Airframe to any
Permitted Sublessee on the terms and conditions set
forth in Section 6(a)(iii) below.
(ii) Certain Limitations on Transfers. With
respect to any transfer pursuant to Section 6(a)(i):
(1) the rights of any transferee that receives possession
by reason of a transfer permitted by Section 6(a) hereof (other
than the transfer of an Engine which is deemed to have been an
Event of Loss) and any Wet Lease shall be expressly subject and
subordinate to all the terms of this Lease and the Lien of the
Indenture (if it has not been discharged);
(2) Lessee's obligations hereunder and under the other
Operative Documents shall continue in full force and effect and
Lessee shall remain primarily liable hereunder for the performance
of all of the terms of
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this Lease to the same extent as if such transfer had not occurred
and no provision of this Lease shall be deemed a waiver of the
Lessor's rights hereunder or under the other Operative Documents
nor discharge or diminish any of Lessee's obligations hereunder or
under the other Operative Documents;
(3) During the Restricted Use Period, no Wet Lease,
Permitted Sublease or other relinquishment of possession of the
Aircraft, the Airframe or any Engine pursuant to the terms of this
Section 6(a) shall be permitted if such Wet Lease, Permitted
Sublease or other relinquishment of possession would cause the
Aircraft, the Airframe or such Engine to be "tax-exempt use
property" within the meaning of Section 168(h) of the Code or
cease to be "Section 38 property" within the meaning of Section
48(a) of the Code (as determined after the application of Section
47(a)(7) of the Code);
(4) The term of any transfer, Wet Lease, Permitted
Sublease or other relinquishment of possession shall not extend
beyond the Basic Term or the Renewal Term (if Lessee shall have
exercised its option to renew this Lease in accordance with the
terms hereof);
(5) No transfer, Wet Lease, Permitted Sublease or other
relinquishment of possession of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of Lessee's
obligations to Lessor or any other Person hereunder for which
obligations Lessee shall remain primarily liable;
(6) The sublessee under any Permitted Sublease, in its
consent thereto, shall confirm that from and after the occurrence
and continuance of an Event of Default and, unless an Event of
Default specified in Section 17(e), (f) or (g) of this Lease has
occurred and is continuing, this Lease being deemed or declared in
default, Lessor (and, so long as the Lien of the Indenture shall
not have been discharged, Indenture Trustee) shall be entitled to
enforce directly and in its own name all representations,
warranties, indemnities, covenants and agreements under the
applicable Permitted Sublease; and
(7) Each Permitted Sublease shall (A) provide that (I) the
Aircraft or Airframe may not be operated or used other than as
provided in this Lease and shall
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be maintained and operated as required hereunder, (II) Lessor may
avoid or terminate such sublease following an Event of Default
hereunder and (III) to the extent not accomplished by an
assignment of the Permitted Sublease, upon the occurrence of an
Event of Default hereunder, Lessee's rights under such Permitted
Sublease shall automatically be deemed assigned to Lessor; and (B)
be a "net lease" in accordance with industry practice and shall be
comparable to, or more restrictive than, this Lease and under such
Permitted Sublease (except a sublease to the United States
Government or a Foreign Air Carrier after the Restricted Use
Period), Lessee as lessor under such Permitted Sublease, must be
entitled to the same benefits under 11 U.S.C. Section 1110 as
Lessor is entitled hereunder and such Permitted Sublease shall
contain provisions regarding such Section 1110 which are
substantially the same as the related provisions of this Lease. In
addition, from and after the occurrence and continuance of an
Event of Default, all rent and other amounts payable by the
Permitted Sublessee under such Permitted Sublease shall be paid
directly to Indenture Trustee and, upon discharge of the Lien of
the Indenture, to Lessor.
(iii) Permitted Subleases. With respect to any sublease
pursuant to Sections 6(a)(i)(3) or (4) (to the extent permitted by Law) or
Section 6(a)(i)(9) above:
(1) Lessee may sublease the Aircraft or the Airframe to a
Permitted Sublessee (each of which shall constitute a "Permitted
Sublease") if (A) in any such case, the Permitted Sublessee under
such sublease is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the
date such sublease is entered into, (B) in the event that the
Permitted Sublessee under such sublease is a Foreign Air Carrier
(other than a Foreign Air Carrier principally based in Taiwan),
the United States maintains diplomatic relations with the country
in which such proposed Permitted Sublessee is principally based at
the time such sublease is entered into (or, in the case of a
sublease to a proposed Permitted Sublessee principally based in
Taiwan, maintains diplomatic relations at least as good as those
in effect on the Restatement Date) and (C) in the event that the
Permitted Sublessee under such sublease is a Foreign Air Carrier,
Lessor and the Indenture Trustee shall have received an opinion of
counsel to
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Lessee, in form and substance reasonably satisfactory to Owner
Participant and the Indenture Trustee, to the effect that (I) the
terms of the proposed sublease will be legal, valid, binding and
(subject to customary exceptions in foreign opinions generally)
enforceable against the proposed Permitted Sublessee in the
country in which the Permitted Sublessee is principally based,
(II) there exist no possessory rights in favor of the Permitted
Sublessee under such sublease under the laws of such Permitted
Sublessee's country of domicile that would, upon bankruptcy or
insolvency of or other default by Lessee, prevent the return or
repossession of the Aircraft in accordance with the terms of this
Lease, (III) (unless Lessee shall have agreed or is required to
provide insurance covering the risk of requisition of use of the
Aircraft by the government of the country of such Permitted
Sublessee's country of domicile) the laws of such Permitted
Sublessee's country of domicile require fair compensation by the
government of such jurisdiction payable in currency freely
convertible into dollars for the loss of use of the Aircraft in
the event of the requisition by such government of such use, (IV)
the Permitted Sublessee is either not entitled to sovereign
immunity, or has effectively waived such sovereign immunity, with
respect to its rights and obligations under the proposed sublease;
(V) the laws of such Permitted Sublessee's country of domicile
would give recognition to Lessor's title to the Aircraft, to the
registry of the Aircraft in the name of the Lessor (or Lessee, as
"lessee", or the proposed Permitted Sublessee, as "sublessee", as
appropriate) and to the Lien of the Indenture; (VI) it is not
necessary under the laws of such Permitted Sublessee's country of
domicile, solely as a consequence of such subleasing and without
giving effect to any other activity of Owner Participant, Owner
Trustee or Indenture Trustee or any Affiliate thereof, as the case
may be, for the Owner Trustee, the Owner Participant or the
Indenture Trustee to qualify to do business in such jurisdiction
and (VII) if the Owner Participant so requests, (x) under the laws
of such Permitted Sublessee's country of domicile there is no tort
liability of the owner of an aircraft not in possession thereof
(it being agreed that in the event this opinion cannot be given in
a form reasonably satisfactory to Owner Participant, such opinion
shall be waived if insurance reasonably satisfactory to Owner
Participant is provided to cover such risk), and (y) such other
matters as the Owner Participant reasonably
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requests, provided, however, that no sublease shall extend beyond
the expiration of the Basic Term or any Renewal Term then in
effect.
Any Permitted Sublease shall expressly provide that the rights
of any Permitted Sublessee shall be expressly subject and subordinate to all the
terms of this Lease and to the Lien of the Indenture (if it has not been
discharged), including, without limitation, the covenants contained in Sections
6(c), 6(d) and 6(e) hereof and Lessor's rights to repossession pursuant to
Section 18 hereof and to avoid or terminate such Permitted Sublease upon such
repossession, and Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease to the same extent as if such
Permitted Sublease had not occurred. No Permitted Sublease shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder or under
the other Operative Documents or constitute a waiver of Lessor's rights or
remedies hereunder or under the other Operative Documents, and such rights shall
continue as if such Permitted Sublease had not occurred. Any Permitted Sublease
shall expressly prohibit any further sub-sublease or assignment or any other
similar transfer of the Aircraft, Airframe or any Engine or rights thereto by
the Permitted Sublessee. Lessee shall provide to the Owner Participant and the
Indenture Trustee (i) written notice of any Permitted Sublease hereunder (such
notice to be given not later than ten Business Days prior to entering into any
Permitted Sublease with any proposed Permitted Sublessee), and (ii) a copy of
each Permitted Sublease together with an assignment, as security for Lessee's
obligations hereunder, of such Permitted Sublease, and if Lessor or the
Indenture Trustee so requests, a consent thereto from such Permitted Sublessee,
substantially in the form of Exhibit F-3 hereto, within ten (10) Business Days
following the effective date of such Permitted Sublease.
(b) Reciprocal Recognition of Rights. In the
event the lessor or secured party of any airframe leased to Lessee (or a
Permitted Sublessee) or owned by Lessee (or a Permitted Sublessee) is subject to
a conditional sale or other security agreement in accordance with Section
6(a)(i)(6) hereof, and the lease or conditional sale or other security agreement
covering such airframe also covers an engine or engines owned by the lessor
under such lease or subject to a security interest in favor of the secured party
under such conditional sale or other security agreement, Lessor hereby agrees
for the benefit of such lessor or secured party that Lessor will not acquire or
claim, as
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against such lessor or secured party, any right, title or interest in any such
engine as the result of such engine being installed on the Airframe at any time
while such engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor or subject to a security interest in favor of
such secured party. Lessor also hereby agrees for the benefit of the mortgagee
under any mortgage complying with Section 6(a)(i)(6) hereof, relating to
installation of an Engine on an airframe leased to Lessee (or a Permitted
Sublessee), that Lessor will not acquire or claim, as against such mortgagee,
any right, title or interest in any engine subject to the lien of such mortgage
as the result of such engine being installed on the Airframe at any time while
such engine is subject to the lien of such mortgage.
(c) Lawful Insured Operations. Lessee will not
permit the Aircraft, the Airframe or any Engine to be serviced, repaired,
maintained, used or operated in violation of any Law of any Governmental Entity
having jurisdiction, or contrary to the Manufacturers' operating manuals or
instructions, or in violation of any airworthiness certificate or limitation,
license or registration issued by any such authority or any manufacturer's
specifications, service bulletins or other requirements, including, without
limitation, any manufacturer's requirements as may be applicable to keep in full
force and effect each material warranty, product or performance guaranty,
service life policy or the like, in each case, to the extent made mandatory for
Part 121 operators similarly situated to Lessee or the Permitted Sublessee if
the Aircraft is registered with the FAA, or the applicable laws of any other
jurisdiction in which the Aircraft may then be registered in accordance with
Section 11 of the Refunding Agreement, unless the validity thereof is being
contested in good faith and by appropriate proceedings, but only so long as such
proceedings do not involve any danger of sale, forfeiture or loss of the
Aircraft or impair the interest of Lessor therein or impair the validity or
priority of the Lien of the Indenture or result in a risk of criminal liability
of Lessor, Owner Participant or Indenture Trustee and are not inconsistent with
any insurance required to be maintained by Lessee hereunder. In the event that
such Law or other requirement requires alteration of the Aircraft during the
Basic Term or the then-current Renewal Term, Lessee shall comply therewith at
its sole expense and shall maintain the same in proper condition for operation
under such Laws and other requirements. Lessee shall not operate in any manner
or locate in any place the Aircraft, or suffer
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or permit the Aircraft to be operated by a Permitted Sublessee or otherwise in
any manner or located by a Permitted Sublessee or otherwise in any place (i)
unless the Aircraft is covered by insurance or United States Government
indemnity as required by the provisions hereof or (ii) contrary to the terms of
such insurance or United States Government indemnity. Lessee also agrees not to
operate or locate the Aircraft or suffer or permit the Aircraft to be operated
or located in any area excluded from coverage by any insurance policy issued
pursuant to the requirements of this Lease or in any war zone unless insured or
indemnified by the United States of America therefor, except in the case of
operation pursuant to a sublease or contract with, or as a result of a
requisition (not constituting an Event of Loss) by, the United States of
America, and then only if Lessee has obtained insurance or an indemnity (in lieu
of such insurance) from the United States of America covering such risks, in the
amounts and otherwise as required by this Lease.
(d) Maintenance. Lessee, at its own cost and
expense, shall: (i) perform or cause to be performed all service, repair,
maintenance, overhaul, inspections, alterations, modifications, and testing (A)
in accordance with good airline industry practice and in such manner to provide
complete data and documentation necessary to substantiate certification, (B) as
may be necessary and required under, and in compliance with, applicable Law,
including, without limitation, FAA rules, regulations and other requirements,
any other applicable rules, regulations and requirements by any other applicable
Governmental Entity, the Maintenance Program, airworthiness directives having a
compliance date during the Term, and the service bulletins and other
requirements of any manufacturer, including, without limitation, such
requirements as may be applicable to keep in full force and effect any and all
material warranties, product and performance guaranties, service life policies,
indemnities or the like, (C) except during any period that a Permitted Sublease
is in effect, in the same manner and with the same care, including regard for
the status and technical condition of the Aircraft, as shall be the case with
respect to similar aircraft and engines owned by Lessee without discrimination
and as if Lessee owned the Aircraft and was going to use the Aircraft in
continued regular customer service after the expiration of the Term, and
consistent with good industry practice, and during any period in which a
Permitted Sublease is in effect, in the same manner and with the same care,
including regard for the status and technical condition of the
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Aircraft, as shall be the case with respect to similar aircraft and engines
owned by such Permitted Sublessee without discrimination and as if the Permitted
Sublessee owned the Aircraft and was going to use the Aircraft in continued
regular customer service after the expiration of the Permitted Sublease, and
consistent with good industry practice, provided, however, that in all
circumstances the Aircraft shall be maintained by Lessee (or any Permitted
Sublessee) in accordance with maintenance standards required by, or
substantially equivalent to those required by the central civil aviation
authority of the country of registry, and, to the extent not inconsistent
therewith, the FAA and (D) so as to keep the Aircraft in as good a condition as
when delivered to Lessee, ordinary wear and tear excepted, and in good operating
condition; (ii) keep the Aircraft or cause the Aircraft to be kept in such
condition as is necessary to enable the airworthiness certification of such
Aircraft to be maintained in good standing at all times under the Federal
Aviation Act and any other applicable law, or the applicable laws of any other
jurisdiction in which the Aircraft may be registered in accordance with Section
11 of the Refunding Agreement (provided that if any grounding is fleetwide in
nature and so long as Lessee or a Permitted Sublessee is contesting in good
faith such grounding, Lessee shall not be deemed in violation of this
maintenance covenant); and (iii) maintain in English all records, logs and other
materials required by, and in a manner acceptable to, the FAA or any other
Governmental Entity having jurisdiction and as provided under the Maintenance
Program and Lessee's recordkeeping policies.
(e) Registration and Insignia. Lessee shall
cause the Aircraft at all times, at its expense, to be duly registered during
the Restricted Use Period and, subject to Section 11 of the Refunding Agreement,
thereafter under the Federal Aviation Act in the name of Lessor or any successor
or assignee, so long as (i) while the Aircraft is registered under the Federal
Aviation Act, each of the Lessor or its successors or assigns is a "citizen of
the United States" as defined in Section 40102(a)(15) of the Federal Aviation
Act and (ii) the applicable parties to the Refunding Agreement cooperate with
Lessee with respect thereto as reasonably requested by Lessee. Lessee shall not
register the Aircraft or permit the Aircraft to be registered under any Laws
other than the Federal Aviation Act at any time except as provided in Section 11
of the Refunding Agreement and shall cause the Indenture to be duly recorded and
maintained of record as a duly perfected mortgage on the Aircraft and this Lease
at all times. At any time after the Restricted Use Period,
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Lessor, upon compliance with all of the terms of Section 11 of the Refunding
Agreement, shall, at the request and sole expense of Lessee, cooperate with
Lessee to take all actions reasonably required to change the registration of the
Aircraft to another country.
Lessee agrees at its expense to place such appropriate
insignia, plates and other identification ("Lease Identification") in the
cockpit of the Aircraft and on each Engine showing title thereto and the Lien of
the Indenture as designated by Lessor and as Lessor may from time to time
reasonably request. Unless otherwise requested, upon delivery of the Aircraft,
Lessee shall fasten or cause to be fastened in the cockpit of the Airframe in a
location reasonably adjacent to and not less prominent than the airworthiness
certificate for the Aircraft, and on each Engine (if not prohibited by
applicable Law), a Lease Identification in the form set forth in Exhibit C
hereto or with any other appropriate information in any other form subsequently
designated by Lessor to Lessee. Except as provided herein, Lessee will not allow
the name of any Person to be placed on the Aircraft or either Engine as a
designation that would be reasonably interpreted as a claim of ownership or
Lien; provided, however, that Lessee may cause the Airframe and Engines to have
placed thereon the customary colors and insignia of Lessee or any Permitted
Sublessee under a Permitted Sublease.
Section 7. Inspection.
During the Term of this Lease, Lessee shall furnish to Lessor,
Owner Participant and Indenture Trustee such information concerning the
location, condition, use and operation of the Aircraft as Lessor, Owner
Participant or Indenture Trustee may reasonably request. Lessee shall permit, or
cause any sublessee to permit, any person designated by Lessor, Owner
Participant or Indenture Trustee on reasonable prior notice at reasonable times
to visit, inspect and survey the Aircraft (including, without limitation, a
visual "walk around" inspection which may include going on board the Aircraft,
and inspecting the Aircraft during maintenance checks when panels and bays are
open and subject to view), its condition, use, and operation, and the records
maintained in connection therewith, and to visit and inspect the properties and
to discuss the affairs, finances and accounts of Lessee with the principal
officers of Lessee, provided, that so long as no Default or Event of Default has
occurred hereunder
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inspections shall be endeavored to be performed during regularly scheduled
maintenance checks of the Aircraft. Each such inspection or survey shall be
conducted so as to not unreasonably interfere with the business of Lessee or the
maintenance or operation of the Aircraft. Upon Lessor's, Owner Participant's or
Indenture Trustee's request, Lessee will notify such Person of the next
scheduled maintenance check for the Airframe or any Engine. Lessor, Owner
Participant and Indenture Trustee shall have no duty to make any such inspection
and shall not incur any liability or obligation by reason of not making any such
inspection. Lessor's, Owner Participant's or Indenture Trustee's failure to
object to any condition or procedure observed or observable in the course of an
inspection hereunder shall not be deemed to waive or modify any of the terms of
this Lease with respect to such condition or procedure.
Section 8. Additional Covenants of Lessee.
Lessee covenants and agrees that:
(a) Financial Information. Lessee agrees to
furnish Lessor, until the expiration or other termination of the Term of this
Lease, the following:
(i) within sixty (60) days following the end
of each quarter of Lessee's fiscal year, except the last such quarter of such
year, commencing after the Restatement Date, a copy of Lessee's Quarterly Report
on Form 10-Q as filed with the Securities and Exchange Commission or, if Lessee
no longer files such report, an unaudited consolidated balance sheet of Lessee
and its consolidated subsidiaries prepared by it as of the close of the period
ended, together with the related statements of income and cash flows for such
period, and in each case certified by a Responsible Officer of Lessee as having
been prepared in accordance with GAAP and as fairly presenting the financial
condition and results of operations and changes in financial position for such
period then ended in accordance with such principles and practices (subject to
normal year-end audit adjustments);
(ii) within one hundred five (105) days after
the close of each fiscal year of Lessee, a copy of Lessee's Annual Report on
Form 10-K as filed with the Securities and Exchange Commission or, if Lessee no
longer files such reports, an audited consolidated balance sheet, income
statement, and cash flow statement of Lessee and its
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consolidated subsidiaries, as of the close of such fiscal year, and in each case
as certified by independent public accountants, including their certificate and
accompanying comments, as having been prepared in accordance with GAAP and as
fairly presenting the financial condition and results of operations and changes
in financial position for such period then ended in accordance with such
principles and practices, without qualification as to the scope of the audit or
non-conformity with GAAP;
(iii) promptly upon their becoming available, copies of all
reports on Form 8-K filed by Lessee under the Securities Exchange Act of 1934,
as amended, and each other statement, report or circular (other than the
exhibits thereto and any registration statements on Form S-8 or its equivalent)
generally distributed to creditors or shareholders;
(iv) prior to the expiration date of each policy of insurance
required to be maintained hereunder, a certificate signed by the Approved Broker
of Lessee as to the due compliance with the insurance provisions of Section 12
hereof with respect to the Aircraft, together with certificates of insurance
evidencing such insurance and the opinion provided for in Section 12(f);
(v) together with each set of financial statements referred to
in clauses (i) and (ii), a certificate signed by a Responsible Officer of
Lessee, to the effect that such officer has reviewed the relevant terms of this
Lease and has made, or caused to be made under his or her supervision, a review
of the transactions and condition of Lessee during the accounting period covered
by such financial statements, and that such review has not disclosed the
existence during such accounting period, nor does such officer have any
knowledge of the existence, as at the date of such certificate, of any condition
or event which constitutes a Default or an Event of Default, or, if such
condition or event which constitutes a Default or an Event of Default existed or
exists, specifying the nature and period of existence thereof and what action
Lessee has taken or is taking or proposes to take with respect thereto;
(vi) as soon as practicable after becoming aware thereof,
notice of damage or destruction to the Aircraft, either Engine or any Part with
a repair or replacement cost (including labor charges) in excess of $1,000,000;
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(vii) immediately after Lessee knows or should know of the
occurrence thereof, notice of a Default; and
(viii) from time to time such other information as Lessor may
reasonably request.
(b) Maintenance of Corporate Existence. Except as provided in
Section 8(e) below, during the term of this Lease, Lessee will preserve and
maintain its corporate existence and its rights, privileges, licenses and
franchises material to Lessee's ability to perform its obligations hereunder in
each applicable jurisdiction.
(c) Maintenance of Status. Lessee is, and shall remain so long
as it shall be the Lessee under this Lease, a "citizen of the United States" as
defined in Section 40102(a)(15) of the Federal Aviation Act, and Lessee is and
shall maintain its status at all times as a Certificated Air Carrier, including,
without limitation, its status so as to fall within the purview of 11 U.S.C.
Section 1110 or any analogous statute.
(d) Payment of Taxes. Lessee will pay or cause to be paid all
Taxes imposed upon it, or upon its income or profits, or upon any property
belonging to it, on or prior to the due date thereof, including any extensions
which have been duly obtained or granted; provided, however, that Lessee shall
not be required to pay any such Taxes, the payment of which is being diligently
contested in good faith and by appropriate proceedings with appropriate reserves
so long as there is no material possibility that either failure to pay such
Taxes or such contest may result in any loss, sale, confiscation, forfeiture or
seizure of the Aircraft, the Airframe or either Engine or any criminal liability
on the part of Lessor, Indenture Trustee or any Note Holder.
(e) Consolidation, Merger, Etc. Lessee shall not liquidate or
dissolve; and Lessee shall not consolidate with or merge into or with any other
corporation or other Person, and Lessee shall not convey, transfer, lease or
otherwise dispose of all or substantially all of its property and other assets
(in one or a series of transactions) to any corporation or other Person, unless:
(i) the Person formed by or surviving such consolidation or
merger or the Person which acquires by conveyance, transfer, lease or other
disposition all or substantially all of such property and other assets or stock
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(the "Successor Entity"): (A) shall be a corporation organized and existing
under the Laws of the United States of America or any State thereof or the
District of Columbia; (B) immediately after giving effect to such transaction,
shall be Lessee or shall have acquired or succeeded to all or substantially all
of such property and other assets (including, without limitation, all or
substantially all of Lessee's property and other assets) as an entirety and,
unless the Owner Participant otherwise agrees, shall have a Net Worth of not
less than Lessee's Net Worth immediately prior to such transaction; (C) shall be
a "citizen of the United States" of America as defined in Section 40102(a)(15)
of the Federal Aviation Act and a Certificated Air Carrier; and (D) shall
execute and deliver to Lessor and Indenture Trustee such recordations and
filings with any Governmental Entity and such other documents as Lessor
determines shall be reasonably necessary or advisable (including, without
limitation, to preserve and protect the interests of the Lessor and the priority
of the Lien of the Indenture (if it has not been discharged)) to evidence, or in
connection with, such consolidation, merger, sale, lease, transfer or other
disposition and an agreement, in form and substance reasonably satisfactory to
Lessor, which is a legal, valid, binding and enforceable assumption by such
Successor Entity of the due and punctual performance and observance of each
covenant and condition of this Lease and the other Operative Documents to which
Lessee is a party and agreement to be bound thereby, and an officer's
certificate to such effect, and to the effect that the other requirements of
this paragraph have been satisfied, and a legal opinion from counsel to such
effect and otherwise in such form and substance reasonably satisfactory to
Lessor; and
(ii) prior to and immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing.
No such permitted disposition to a Successor Entity shall relieve or release
Lessee of or from any obligations hereunder or under the other Operative
Documents.
(f) Information. Within 60 days after the end of
each calendar year and within 60 days of a request by Lessor or Owner
Participant, or such shorter period as may be set forth in any written request
by the Internal Revenue Service for information or documents, Lessee shall
furnish in writing to Lessor or Owner Participant such information and documents
(or copies thereof) regarding the Aircraft as may be reasonably requested by
Lessor or Owner Participant or
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the Internal Revenue Service in order to permit Lessor to file its Federal and
state income tax returns (or to permit the filing of the Federal and state
income tax returns of any affiliated group of corporations filing a consolidated
return of which Lessor is a member), or to maintain or defend any claims related
thereto and promptly, after reasonable notice, furnish to Lessor or Owner
Participant such information as may be reasonably requested by Lessor or Owner
Participant or the applicable Governmental Entity as may be required to enable
Lessor or Owner Participant to file any reports required to be filed by it with
any Governmental Entity because of its ownership or other interest in the
Aircraft, the Airframe or the Engines.
(g) Place of Business. At all times while this
Lease is in effect, Lessee will not, without thirty (30) days prior written
notice to Lessor and Indenture Trustee (so long as the Lien of the Indenture
shall not have been discharged), change its chief executive office (as such term
is defined under Article 9 of the Uniform Commercial Code as adopted in Arizona)
or location of its books and records, from 0000 Xxxx Xxx Xxxxxx Xxxxxxxxx,
Xxxxxxx, Xxxxxxx 00000, or such subsequent location of which Lessee shall have
so notified Lessor and, if applicable, Indenture Trustee.
(h) Certain Limitations on Use. Lessee shall use
the Aircraft, Airframe or Engines only in commercial passenger operations and
related cargo operations. Unless Owner Participant otherwise agrees, during the
Restricted Use Period, Lessee shall not use the Aircraft, Airframe or Engines or
permit the Aircraft, Airframe or Engines to be used either "predominantly
outside the United States" within the meaning of Section 48(a)(2) of the Code,
or in such manner that the percentage of the income, deduction or credit
attributable to the Aircraft, Airframe or Engines for federal income tax
purposes during any taxable year of the Lessor considered to be from foreign
sources exceeds the Maximum Foreign Use Percentage. Unless the Owner Participant
otherwise agrees, prior to permitting the Aircraft to be operated in any member
state of the European Union or other European country, Lessee shall deliver to
Lessor (i) a representation and warranty to the effect that Lessee (or any
Permitted Sublessee) has no knowledge of any dispute with Eurocontrol or other
relevant air traffic control authority over delinquent charges payable by it and
(ii) a letter from Lessee (or any Permitted Sublessee) addressed to Eurocontrol
or other relevant air traffic control authority pursuant to which Lessee (or
such Permitted Sublessee) authorizes the addressee to issue to
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Lessor, upon Lessor's request from time to time, a statement of account of all
sums due by Lessee (or such Permitted Sublessee) to the authority in respect of
all aircraft (including, without limitation,the Aircraft) operated by Lessee (or
such Permitted Sublessee).
(i) Section 1110. Lessee acknowledges that
Lessor would not have entered into this amended and restated Lease unless it had
available to it the benefits of a lessor under Section 1110 of Title 11 of the
United States Code. Lessee covenants and agrees with Lessor that to better
ensure the availability of such benefits, Lessee shall support any motion,
petition or application filed by Lessor with any bankruptcy court having
jurisdiction over Lessee, whereby Lessor seeks recovery of possession of the
Aircraft under said Section 1110 and shall not in any way oppose such action by
Lessor unless Lessee shall have complied with the requirements of said Section
1110 to be fulfilled in order to entitle Lessee to continued use and possession
of the Aircraft hereunder. The acknowledgement, covenant and agreement contained
in this Section 8(i) shall continue in full force and effect and survive the
expiration or other termination of this Lease and are expressly made for the
benefit of and shall be enforceable by the Lessor, the Owner Participant and, if
the Lien of the Indenture has not been discharged, the Indenture Trustee.
(j) Permits and Licenses. Lessee shall make or
obtain, and maintain in full force and effect, each and every consent, license,
approval, notice, registration, filing or other action with any Governmental
Entity necessary or advisable in connection with the operation or use of the
Aircraft, the Airframe, any Engine or Part or the execution, delivery or
performance of this Lease or the enforcement thereof against Lessee.
(k) Security Opinion; Annual Certificate.
(i) During such times that the Aircraft is registered under the Federal Aviation
Act, Lessee shall furnish to Lessor and to Indenture Trustee:
(1) (X) prior to the expiration of the time period
covered by the opinion of counsel rendered on the
Restatement Date, any opinion of counsel rendered
pursuant to Section 11(C) of the Refunding
Agreement, and any opinion of counsel rendered
pursuant to this Section 8(k)(i) and (Y) upon any
change in Law that would render the opinion of
counsel rendered
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on the Restatement Date or such immediately
preceding opinion of counsel inaccurate, an
opinion of counsel with respect to Lessee and
the FAA reasonably satisfactory to each
addressee of such opinion (which counsel may
be internal legal counsel of Lessee and FAA
counsel) stating, in the opinion of such
counsel, that such action has been taken with
respect to the recording, filing, rerecording and
refiling of (i) the appropriate Operative
Documents and any supplements and amendments
thereto and (ii) such other appropriate
documents, as is necessary to maintain the
perfection of Lessor's title to and/or interest
in and Indenture Trustee's security interest in
the Aircraft and the Operative Documents for such
period of time as reflects the then-current
applicable Law, reciting the details of such
actions; or
(2) at any time that an opinion is not required
pursuant to Section 8(k)(i)(1), annually, a
certificate reasonably satisfactory to each
recipient thereof signed by a Responsible Officer
of Lessee certifying that no such action is
necessary to maintain the perfection of such
title and/or interest and security interest.
(ii) During such times that the Aircraft is
registered under any Laws other than the Federal Aviation Act, Lessee shall
furnish to Lessor and to Indenture Trustee annually (but in any case, (X) prior
to the expiration of the time period covered by any opinion of counsel rendered
pursuant to Section 11(C) of the Refunding Agreement, and any opinion of counsel
rendered pursuant to this Section 8(k)(ii) and (Y) promptly upon any change in
Law that would render such immediately preceding opinion of counsel inaccurate),
an opinion of counsel reasonably satisfactory to each addressee of such opinion
stating, in the opinion of such counsel, that such action has been taken with
respect to the recording, filing, re-recording and refiling of (i) the
appropriate Operative Documents and any supplements and amendments thereto and
(ii) such other appropriate documents, as is necessary to maintain the
perfection of Owner Trustee's title to and/or interest in and Indenture
Trustee's security interest in the Aircraft and the Operative Documents for such
period of time as reflects the
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then-current applicable Law, reciting the details of such actions.
(l) Letter of Credit. As security for the
obligations to Lessor, Lessee shall provide to Lessor, as named beneficiary
thereof, one or more irrevocable standby letters of credit, in form and
substance acceptable to Lessor in its sole and absolute discretion (the "Letter
of Credit"), including, without limitation, as to renewal provisions, with a
face amount available for drawdown at all times equal to the amount set forth on
Exhibit C (the "Face Amount"), which Letter of Credit shall:
(i) provide that the full amount thereof
shall be available for drawdown thereunder and payable in New York, New York, on
demand at any time, if a Default under Section 17(e), (f) or (g) or an Event of
Default has occurred, which amount may be applied, retained or utilized as
provided in the penultimate paragraph of this Section 8(l).
(ii) be maintained in full force and effect
at all times until ninety-one (91) days after the Expiration Date with a
commercial bank acceptable to Lessor, in its sole and absolute discretion,
having a long-term unsecured debt rating of "A" or better by Standard & Poor's
Rating Group (if the issuing bank's credit rating is lower than such rating,
Lessee shall replace such Letter of Credit issuer within five Business Days of
any such reduction in rating with a commercial bank meeting such rating
requirement), provided, that a Letter of Credit set forth in Exhibit D-2 issued
by The Industrial Bank of Japan, Limited, will be acceptable to Lessor for so
long as The Industrial Bank of Japan, Limited maintains a long term unsecured
debt rating at least equal to its rating on the date hereof;
(iii) be expressly designated as transferrable
and assignable; and
(iv) permit partial drawings. If the Letter
of Credit is still in effect at the end of the Term or the Lessor is holding
proceeds of the Letter of Credit that were retained and not applied as provided
herein, then Lessor shall return the Letter of Credit to Lessee or terminate it,
and/or return any retained and unapplied proceeds, ninety-one (91) days
following the date of such expiration or other termination of this Lease so long
as no Default or Event of Default has occurred or is continuing hereunder or
under any Other Lease, upon payment in full of all amounts then due and owing to
Owner Trustee and Owner Participant under the Operative Documents.
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If an Event of Default has occurred or is continuing under
this Lease or an Event of Default has occurred or is continuing under any Other
Lease (as therein defined), in addition to any other rights and remedies Lessor
may have hereunder, under any Other Lease, any sublease and any and all other
remedies available at Law (including, without limitation, the Uniform Commercial
Code as adopted in New York) or equity and upon exercising its rights under the
Letter of Credit and any Other Letters of Credit, Lessor shall be entitled, in
each case as it may elect in its sole and absolute discretion, to (i) hold any
amounts drawn under the Letter of Credit or Other Letters of Credit as security
for Lessee's obligations under this Lease or the Other Leases, (ii) retain any
amounts drawn under the Letter of Credit or Other Letters of Credit for its own
account and apply (including, without limitation, by way of set off against)
such drawn amounts as it may elect (it being understood that amounts not so
applied will be held as security for Lessee's obligations under this Lease and
the Other Leases) to remedy any breach by Lessee of this Lease or any other
Operative Documents or Other Leases or (iii) recompense Lessor, Owner
Participant or any of their respective Affiliates for any loss, damage, cost or
expense or other Claim due or owing hereunder or under the Other Leases;
provided, however, that in the case of any drawing in respect of any claim for
the payment of Rent, Lessee's right to apply the same to such claim shall be
limited to amounts which would (absent such Event of Default) be distributable
under the Indenture at the time such payment is made to Lessor, Owner
Participant or any of their respective Affiliates (and shall not include any
amounts distributable to Indenture Trustee in its individual capacity or to the
Note Holders); provided further, however, that neither the amount so applied at
any one time nor the aggregate amount so applied at different times shall reduce
the amount of any installment or payment of Rent (whether upon the termination
of the Lease or otherwise) payable by Lessee to an amount insufficient to pay in
full the amounts required to be paid on account of the principal of and any
interest on the Equipment Notes or otherwise owing to a Note Holder. Lessee
shall not be entitled to any refund or credit with respect to any amounts so
applied. Any amount retained shall be considered the property of Lessor and
Lessor may commingle such amount with its general funds and Lessee, further,
hereby absolutely and irrevocably disclaims, to the maximum extent permitted by
applicable Law, any interest therein. Lessee shall not be entitled to any
interest or other earnings on such retained amount and such amount shall not be
refundable.
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On application of all or any portion of the amounts drawn
under the Letter of Credit or any Other Letters of Credit in accordance with
this Section 8(l), or the Other Leases, Lessee shall on demand reinstate the
amount of the Letter of Credit or Other Letters of Credit, as the case may be,
to its or their full Face Amount or provide to Lessor one or more additional
Letters of Credit meeting the requirements of this Section 8(l), so that the
Letter of Credit and each of the Other Letters of Credit at all times equals the
original Face Amount provided for herein. During such times as Lessor shall
elect to hold all or part of the proceeds of the Letter of Credit or Other
Letters of Credit as security for Lessee's obligations to Lessor under the Lease
and the Other Leases, Lessee shall not be obligated to reinstate the amount of
the Letter of Credit or Letters of Credit, as the case may be, in respect of the
proceeds so held.
Section 9. Replacement of Parts; Alterations, Modifications
and Additions.
(a) Replacement of Parts. Lessee, at its own
cost and expense, will promptly replace, or cause to be replaced, all Parts
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair, overhaul or testing, Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) may at its own cost and expense remove any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use, provided that Lessee (or, if a
Permitted Sublease is in effect, a Permitted Sublessee) shall replace at its own
cost and expense such Parts as promptly as possible. All replacement Parts shall
be free and clear of all Liens (except for pooling arrangements to the extent
permitted by paragraph (c) of this Section and Permitted Liens), be in at least
the equivalent or better modification status and service bulletin accomplishment
status, be fully interchangeable as to form, fit and function and shall be in as
good operating condition as, and have a value, remaining useful life and utility
at least equal to, the Parts replaced (assuming such replaced parts were in the
condition and repair in which they were required to be maintained by the terms
hereof).
All Parts which are at any time removed from the Aircraft
shall remain the property of Lessor, subject to the
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Lien of the Indenture if it has not been discharged, and subject to this Lease
no matter where located until such time as such Parts shall be replaced by parts
which have been incorporated or installed in or attached to the Aircraft and
which meet the requirements for replacement Parts specified above. Immediately
upon any replacement Part becoming incorporated or installed in or attached to
the Aircraft as above provided, or as provided in Section 9(c), without further
act, (i) title to the removed Part shall thereupon vest in Lessee free and clear
of all rights of Lessor, Indenture Trustee, Owner Participant and Note Holders
and shall no longer be deemed a Part hereunder, (ii) title to such replacement
Part shall thereupon vest in Lessor and become subject to the Lien of the
Indenture if it has not been discharged, and (iii) such replacement Part shall
become subject to the Lien of the Indenture (if it has not been discharged) and
this Lease and be deemed a Part for all purposes hereof to the same extent as
the Part which it has replaced.
(b) Alterations, Modifications and Additions.
Lessee, at its own cost and expense, shall make or cause to be made such
alterations and modifications in and additions to the Airframe and each Engine
to the extent made mandatory for Lessee (or a sublessee) in respect of the
Aircraft, Engines or Parts from time to time to meet the applicable standards of
the FAA or under any Law of any Governmental Entity having jurisdiction or
issued by the manufacturer of the Airframe, Engines or Parts. In addition, so
long as no Default or Event of Default has occurred and is continuing, Lessee
(or, if a Permitted Sublease is in effect, a Permitted Sublessee), at its own
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and either Engine as Lessee (or, if a Permitted
Sublease is in effect, a Permitted Sublessee) may deem desirable in the proper
conduct of its business, provided, no such alteration, modification or addition
diminishes the value, remaining useful life or utility, or impairs the condition
or airworthiness, of the Airframe, either Engine or any Part below that
immediately prior to such alteration, modification or addition assuming that the
Airframe, Engines and Parts were then of the value, utility and remaining useful
life and in the condition and airworthiness required by the terms of this Lease.
Except as otherwise provided herein, title to all Parts incorporated or
installed in or attached or added to the Aircraft as the result of such
alteration, modification or addition, shall immediately vest in Lessor and
become subject to the Lien of the Indenture (if it has not been
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discharged) and this Lease, without the necessity for any further act of
transfer, document or notice. Notwithstanding the foregoing sentence of this
Section 9(b), Lessor agrees that so long as no Default or Event of Default shall
have occurred and be continuing Lessee (or, if a Permitted Sublease is in
effect, a Permitted Sublessee) may, at such time during the Term for the
Aircraft, remove any Part of such Aircraft, provided, that (i) such Part is in
addition to, and not in replacement or substitution for, any Part originally
incorporated or installed in or attached to, or delivered with, the Aircraft on
the Delivery Date or any Part in replacement of, or substitution for, any such
originally incorporated, installed, attached or delivered Part, (ii) such Part
is not required to be incorporated or installed in or attached or added to the
Aircraft pursuant to the terms of Section 6 or this Section 9 or to maintain the
insurance required by Section 12 and (iii) such Part can be removed from the
Aircraft without causing any material damage thereto and without diminishing or
impairing the value, utility, remaining useful life, condition or airworthiness
which the Aircraft would have had at such time had such alteration, modification
or addition not occurred. Upon the removal by Lessee of any such Part as
provided in the preceding sentence, title thereto shall, without further act,
vest in Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee)
and such Part shall no longer be deemed part of the Aircraft (such a part is
herein called a "Removable Part"). Any Part not removed by Lessee as above
provided prior to the return of the Aircraft to Lessor hereunder, whether
pursuant to Section 16, Section 18 or otherwise, shall remain the property of
Lessor.
If any Removable Part is (i) owned by any third party and
leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee), (ii) sold to Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) subject to a conditional sale contract or other security
interest or (iii) leased to Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) pursuant to a lease which is subject to a security interest
in favor of any third party, then Lessor will not acquire or claim, as against
such lessor, conditional vendor or secured party, any right, title or interest
in any such Removable Part as the result of such Removable Part being installed
on the Aircraft; provided, however, that (A) Lessor's inability to so acquire or
claim is subject to the express condition that such lessor, conditional vendor,
or secured party shall have agreed in writing (which agreement may be contained
in the lease, conditional sale agreement or security agreement) not
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to acquire or claim, as against Lessor, any right, title or interest in the
Aircraft, or any Part other than its interest in such Removable Part by reason
of such Removable Part being installed thereon, and (B) any Removable Part not
removed by Lessee upon the termination or expiration of this Lease, at such
time, shall become the property of Lessor and be subject to this Lease, and
provided, further, that (1) if removal of any such Part shall affect the
operation of the Aircraft in any way whatsoever, Lessee shall replace such Part
with an owned Part of the same value, utility and remaining useful life and (2)
Lessee shall repair any unsightly area of the Aircraft as a result of such
removal and make all other repairs which are advisable and result from such
removal.
In the event Lessee (or, if a Permitted Sublease is in effect,
a Permitted Sublessee) replaces a Part which is not required to be replaced
under Section 9(a) or 9(b) hereof, Lessee (or, if a Permitted Sublease is in
effect, a Permitted Sublessee) may remove the replacement Part so long as it
reinstalls the original Part and such original Part is free and clear of all
Liens, other than Permitted Liens, is in at least the same modification status
and service bulletin accomplishment status, is fully interchangeable as to form,
fit and function, has been overhauled, repaired and inspected by an agency
acceptable to the FAA or other Governmental Entity having jurisdiction, and is
in as good operating condition as, and has a utility, remaining useful life and
a value at least equal to that of such Part when it was removed from the
Aircraft.
Notwithstanding any other provision hereof, and without
limiting the foregoing, Lessee (or, if a Permitted Sublease is in effect,
Permitted Sublessee) may install in the Aircraft audio visual, entertainment or
telephonic equipment (including seats with such equipment installed therein)
(any or all of which are hereafter referred to as "Excluded Property") in the
ordinary course of business, and Lessor shall not claim or acquire title thereto
and the rights of the owners thereof therein shall not constitute a default
hereunder; provided that (i) any such Excluded Property shall be removed prior
to the date of a Return Occasion without causing any damage to the Aircraft and
without diminishing or impairing the value, utility, remaining useful life or
condition which the Aircraft would have had at such time had such Excluded
Property not been installed, (ii) any equipment or seats which such Excluded
Property replaces shall be properly stored with the interests of Lessor and, if
the Lien of the Indenture is in
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effect, the Indenture Trustee, duly noted thereon and acknowledged by any
applicable bailee or warehouse, and properly reinstalled on the Aircraft prior
to the date of a Return Occasion, and (iii) Lessee (or such Permitted Sublessee)
shall make all repairs which are required as a result of such removal and/or
reinstallation.
In no event shall Lessor bear any liability or cost for any
alteration, modification, or addition, or for any grounding or suspension of
certification of the Aircraft, or for any loss of revenue arising therefrom.
(c) Pooling. Any Part removed from the Airframe
or either Engine as provided in Section 9(a) may so long as no Default or Event
of Default shall have occurred and be continuing or would result therefrom be
subjected by Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) to a normal pooling arrangement customary in the airline industry of
which Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee)
is a part entered into in the ordinary course of Lessee's or such Permitted
Sublessee's business, provided the Part replacing such removed Part shall be
incorporated or installed in or attached to the Aircraft in accordance with
Section 9(a) as promptly as possible, and in any event within sixty (60) days,
after the removal of such removed Part. In addition, any Replacement Part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 9(a) may be owned by another Person subject to such a
normal pooling agreement; provided, however, that Lessee (or, if a Permitted
Sublease is in effect, a Permitted Sublessee), at its own expense, as promptly
thereafter as possible, and in any event within sixty (60) days, either (i)
causes title to such replacement Part to vest with Lessor in accordance with
Section 9(a) (and to be subjected to the Lien of the Indenture if it has not
been discharged) by Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) acquiring title thereto for the benefit of and transferring
title to Lessor free and clear of all Liens except Permitted Liens, whereupon
such replacement Part shall become subject to this Lease and the Lien of the
Indenture (if in effect) without the necessity for any further act, document or
notice, or (ii) replaces such replacement Part by incorporating or installing in
or attaching to the Aircraft a further replacement Part owned by Lessee (or, if
a Permitted Sublease is in effect, a Permitted Sublessee) free and clear of all
Liens other than Permitted Liens and by causing title to such further
replacement Part to vest in Lessor as above provided and to
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be subjected to the Lien of the Indenture if it has not been discharged,
whereupon such replacement Part shall become subject to this Lease and the Lien
of the Indenture (if in effect) without the necessity for any further act,
document or notice.
Section 10. General Tax Indemnity.
(a) Indemnity. Lessee agrees that each payment
of Basic Rent hereunder shall be free and clear of, and without deduction for,
any and all withholdings on account of Taxes of any nature whatsoever, whether
or not an exclusion pursuant to Section 10(b) applies, except as required by
law. If any such deduction or withholding of Taxes is required with respect to
such payments of Basic Rent, Lessee shall pay an additional amount of Basic Rent
such that the net amount actually received by Lessor, after such deduction or
withholding, will be equal to all such amounts that would be received by Lessor
if no such deduction or withholding had been required, but only to the extent
necessary to ensure that the holders of the outstanding Equipment Notes receive
such amount as may be required by the Indenture. If Lessee pays any amount to
Lessor (or to any taxing authority for the account of Lessor) as a result of the
application of the preceding sentence with respect to any withholding Tax which
is an excluded tax in respect of Lessor pursuant to Section 10(b), then Lessor
(or, in the case of Taxes imposed on the Owner Trustee, the Owner Participant to
the extent such Tax would give rise to a Lessor's Lien for which the Owner
Participant would be liable) shall reimburse Lessee for such withholding Tax
within 30 days of written notice accompanied by evidence of payment for such
withholding Taxes (exclusive of interest, penalties and additions to Tax) paid
by Lessee provided that in any circumstance in which the Lessor is required to
reimburse the Lessee for any such withholding Taxes and the Lessee has not
received such reimbursement from Lessor or the Owner Participant, then to the
extent of such shortfall and so long as no Lease Event of Default has occurred
and is continuing, Lessee shall be entitled to obtain reimbursement from Lessor
by reducing the succeeding payments of Rent payable to Lessor (other than any
portion of Rent that may be required by the Indenture to be paid to the holders
of any outstanding Equipment Notes issued thereunder) until the aggregate amount
of reduction is equal to the sum of the amount of such shortfall and interest on
that amount at the Interest Rate from the date reimbursement is required to be
made until the date of such reduction in Rent. Except as provided in Section
10(b), and taking into
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account any payments received by Lessor pursuant to the second sentence of this
Section 10(a), Lessee agrees to pay, and to indemnify and hold each Indemnitee
harmless from, any and all Taxes, howsoever levied or imposed, whether levied or
imposed upon or with respect to or asserted against any Indemnitee, Lessee, the
Aircraft, the Airframe, any Engine or any Part thereof or interest therein, or
otherwise, with respect to any period beginning, or events or circumstances
occurring, on or after the Restatement Date, by any federal, state or local
government or taxing authority in the United States of America or by any foreign
government or any taxing authority or governmental subdivision of a foreign
country or of a territory or possession of the United States (each such
governmental subdivision or taxing authority referred to as a Taxing
Authority"):
(i) upon or with respect to, based upon or
measured by (A) the Aircraft, the Airframe, any Engine or any Part
thereof, or interest therein, (B) the manufacture, purchase,
ownership, delivery, leasing, acceptance, rejection, assigning,
possession, use, operation, location, settlement of any insurance
claim, sale, mortgaging, pledging, financing, subleasing, rental,
retirement, abandonment, registration, reregistration,
deregistration, preparation, installation, modification, repair,
maintenance, replacement, transportation, storage, transfer of
title, return or other disposition of the Aircraft, the Airframe,
any Engine or any Part thereof or interest therein; or (C) the
rentals, receipts, income or earnings arising therefrom (including
without limitation the Rent), or
(ii) upon or with respect to the Operative
Documents (including the Equipment Notes), any interest in any
thereof, or any future amendment, supplement, waiver or consent
thereto requested by Lessee with respect to any thereof, or the
execution, delivery, or performance of any thereof, or the
acquisition or subsequent transfer thereof or the issuance of the
Equipment Notes or any other document executed and delivered in
connection with the consummation or confirmation of the
transactions contemplated by the Operative Documents or any
Indemnitee's interest in any of the foregoing, or the execution,
amendment, supplement, issuance, reissuance, refinancing or
delivery of any of the foregoing, or
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(iii) the Trust Indenture Estate or the property,
or the income or other proceeds received with respect to the
property, held by the Indenture Trustee under the Indenture, or
(iv) the payment of the principal of, or interest
or premium on, or other amounts payable with respect to the
Equipment Notes, whether as originally issued or pursuant to any
modification or reissuance, or
(v) otherwise with respect to or in
connection with the transactions contemplated by the
Operative Documents.
(b) Exclusions. The following Taxes shall not be
subject to indemnification under subsection (a) of this
Section 10:
(i) In the case of any Indemnitee, Taxes imposed
on, based on, or measured by, the gross or net income of such
Indemnitee or Taxes in lieu thereof (including minimum taxes,
withholding taxes and taxes on or measured by any item of tax
preference) imposed by the federal government of the United States
of America (other than taxes in the nature of sales or use taxes,
license taxes, or property taxes),
(ii) In the case of any Indemnitee, Taxes imposed
on, based on, or measured by the gross or net income, receipts,
capital, or net worth, franchises, excess profits or conduct of
business of such Indemnitee (including minimum taxes, withholding
taxes and taxes on or measured by any items of tax preference),
imposed by any state, local or foreign government or taxing
authority (other than Taxes in the nature of sales Taxes, use
Taxes, license Taxes or property Taxes, and Covered Income Taxes
described in subsection (c) of this Section 10),
(iii) In the case of any Indemnitee, Taxes which
arise out of or are caused by any gross negligence or willful
misconduct of such Indemnitee,
(iv) In the case of any Indemnitee, any Taxes
imposed as a result of a voluntary or involuntary bankruptcy of
such Indemnitee or any sale, transfer of title, transfer or other
disposition by such Indemnitee or a related Indemnitee (for such
purpose, Owner
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Trustee and Owner Participant are related Indemnitees with respect
to each other) of the Aircraft, the Airframe, any Engine or any
Part thereof or interest therein, or any interest in the Rent or
part thereof or any interest in the Operative Documents or part
thereof, unless such sale, transfer or disposition occurs in
connection with (A) an Event of Default and the exercise by any
Indemnitee of its remedies under this Lease or the Indenture, as
the case may be or (B) the substitution, pooling or interchange of
the Aircraft, the Airframe, any Engine or any Part pursuant to the
terms hereof; provided, however, that in all cases Owner
Participant and Owner Trustee shall consider in good faith such
request as Lessee shall make concerning the appropriate
jurisdiction in which such sale, transfer or disposition shall be
made,
(v) In the case of any Indemnitee, Taxes imposed
on a transferee of such Indemnitee of any interest in the
Aircraft, the Airframe, any Engine or any Part or any interest in
the Operative Documents to the extent the amount of any such Taxes
exceeds the amount of such Taxes that would have been imposed had
there not been any such transfer, unless such transfer results
from action by or on behalf of such Indemnitee taken in connection
with any Event of Default that has occurred and is continuing or
upon the request of the Lessee,
(vi) Any interest, penalties, fines and additions
to tax imposed on an Indemnitee (other than Taxes that are due and
payable with a return when properly filed) resulting from such
Indemnitee's failure to file returns that are timely and proper,
provided such failure was not attributable to such Indemnitee
contesting any claim in accordance with this Section 10(b) or to a
failure by Lessee to satisfy its obligations related to such
return,
(vii) With respect to an Indemnitee other than
the Indenture Trustee or the Trust Indenture Estate, Taxes which
arise out of or are caused by (i) any act or omission or material
misrepresentation of any Indemnitee where such act or omission is
not permitted by the Financing Documents or the Operative
Documents, or (ii) a failure by an Indemnitee to fulfill its
contest obligations, and, in the case of the Indenture Trustee and
the Trust Indenture Estate, Taxes imposed as a result of a breach
of such
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Indemnitee's representations, warranties, or covenants contained
in Sections 9(a), 12 or 16 of the Refunding Agreement in any
material respect, or from a failure by such Indemnitee to fulfill
its contest obligations,
(viii) So long as no Event of Default shall have
occurred and be continuing, Taxes attributable to the Aircraft
related to acts or events occurring after the later of the
termination of the Lease and the redelivery of the Aircraft,
(ix) In the case of each Pass-Through Trust, each
Pass-Through Trustee (in its individual capacity and as trustee
under the Pass-Through Trusts), the Subordination Agent and each
Liquidity Provider, United States withholding taxes imposed as a
result of the place of organization or other status of a holder of
an interest in a Pass-Through Trust, or
(x) In the case of the Indenture Trustee, each
Pass-Through Trust, each Pass-Through Trustee (in its individual
capacity), the Subordination Agent and each Liquidity Provider,
Taxes imposed with respect to the Equipment Notes as a result of
activities of such Indemnitee unrelated to the transactions
contemplated by the Operative Documents.
(c) Covered Income Tax. For purposes of clause
(ii) of subsection (b) of this Section 10, a Covered Income
Tax includes:
(i) in the case of an Indemnitee other than the
Indenture Trustee or the Trust Indenture Estate, any Tax imposed
on, based on or measured by gross or net income, receipts, capital
or net worth, franchises, excess profits or conduct of business
(other than taxes which are in the nature of sales or use taxes,
license taxes or property taxes) imposed on an Indemnitee (A) by
any state or local Taxing Authority other than Taxes imposed by
any such state or local jurisdiction in which the Indemnitee has
its principal place of business or is subject to such Tax as a
result of business transactions or other presence unrelated to the
transactions contemplated by the Financing Documents or the
Operative Documents, unless such Taxes are imposed by such
jurisdiction solely as a result of (x) the operation of the
Aircraft in such jurisdiction or (y) the transactions contemplated
by the Operative Documents, to the extent such taxes are directly
attributable to such operation of the Aircraft or to such
transactions, and (B) by any foreign jurisdiction which are
imposed as a result of Lessee's or
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sublessee's activities in such foreign jurisdiction in connection
with the transactions contemplated by the Financing Documents or
the Operative Documents, provided, however, a Covered Income Tax
also includes the incremental amount of franchise taxes, taxes on
doing business, capital stock taxes or taxes on, based on or
measured by gross or net income of the original Owner Participant
attributable to the Lease (excluding, however, any taxes that
would be excluded under any provision other than clauses (i) and
(ii) of subsection (b) of this Section 10) which are imposed by
the "Home State" of a sublessee (the Home State of a sublessee
being the jurisdiction in which such sublessee maintains its
principal operations and maintenance center), or in the absence of
a Permitted Sublessee, the jurisdiction where the Aircraft is
stored, but only to the extent such incremental taxes result from
activities of Lessee or Permitted Sublessee under the Lease in or
with respect to the Home State or the jurisdiction where the
Aircraft is stored, and taking into account in calculating such
incremental taxes all state tax benefits and savings in the Home
State resulting from activities of Lessee or Permitted Sublessee
under the Lease, disregarding for such purpose any actual or
constructive changes in ownership of the original Owner
Participant, provided, however, that Owner Participant and Lessee
agree to negotiate, in good faith, a cap to Lessee's liability for
indemnity payments attributable to taxes incurred in sublessee's
Home State with respect to each Permitted Sublessee;
(ii) in the case of the Indenture Trustee or the
Trust Indenture Estate, any Tax based on or measured by gross or
net income, receipts, capital or net worth, franchises, excess
profits or conduct of business (including minimum taxes,
withholding taxes, and taxes on or measured by any item of tax
preference) imposed on such Indemnitee by a Taxing Authority in or
of any foreign jurisdiction or a territory or possession of the
United States, other than any such Tax which would not have been
imposed in the absence of such Indemnitee's (including for
purposes of this definition, all entities with which such
Indemnitee is combined, integrated, or consolidated in such Taxing
Authority's jurisdiction) engaging in business, maintaining an
office or other place of business or otherwise being located in
such jurisdiction other than merely by reason of such Indemnitee's
participation in
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the transactions contemplated by the Operative Documents; and
(iii) in the case of the Indenture Trustee, or
the Trust Indenture Estate, a tax imposed by any Taxing Authority
other than the Federal government of the United States of America
based on, or measured by gross income or receipts (including
minimum taxes, withholding taxes, and taxes on or measured by any
item of tax preference), to the extent such Tax is attributable to
the operation of registration of the Aircraft in such jurisdiction
or to the transactions contemplated by the Operative Documents or
is the result of the activities of Lessee, sublessee, or any
Affiliate of either thereof in such jurisdiction, including
residence.
(d) Reports and Returns. In case any report or
return is required to be made by Lessee with respect to any Taxes which are
subject to indemnification by Lessee under this Section 10, Lessee will either
make such report or return in such manner as will show the ownership of the
Aircraft in Owner Trustee or the interest of Owner Participant or its permitted
assigns and send a copy of such report or return to the Owner Participant or
Owner Trustee or will notify the Owner Participant or Owner Trustee of such
requirement and make such report or return in such manner as shall be reasonably
satisfactory to Owner Participant or Owner Trustee. If actual notice is given by
any taxing authority to an Indemnitee that a report or return is required to be
filed with respect to any such Taxes, the Indemnitee shall promptly notify
Lessee of such required report or return and Lessee shall either file such
report or return in the manner prescribed in the preceding sentence, or shall
use its best efforts to cause such report or return to be filed by the
appropriate entity. Each Indemnitee agrees to respond to any reasonable request
of Lessee for information not within Lessee's control and within the control of
and reasonably available to such Indemnitee with respect to the filing of any
such report or return, but Lessee agrees to pay any reasonable costs, fees,
disbursements or other charges of independent counsel or independent accountants
incurred in connection with such request.
(e) After-Tax Basis. Lessee further agrees that,
with respect to any payment or indemnity under this Section 10 and under Section
13 hereof, such payment or indemnity shall include the net amount necessary to
hold the recipient
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of the payment or indemnity harmless on an after-tax basis from all Taxes
required to be paid or credited by such recipient with respect to such payment
or indemnity under the laws of any Taxing Authority; provided, however, that in
the case of Taxes imposed on the Owner Participant, such Taxes shall be
calculated on the basis of the assumption that Owner Participant shall be
subject to the highest federal corporate income tax rate applicable to Owner
Participant in the year of payment and the highest corporate income tax rate in
the jurisdiction in which Owner Participant files a consolidated state income
tax return (currently Virginia).
(f) Tax Benefit. If, by reason of any payment
made to or for the account of an Indemnitee by Lessee pursuant to this Section
10 or Section 13 hereof, such Indemnitee subsequently actually realizes a tax
deduction or credit (including foreign tax credit and any reduction in Taxes)
not previously taken into account in computing the amount of such payment, such
Indemnitee shall promptly pay to Lessee, but only if there shall then be no
Lease Event of Default and if Lessee shall have made all payments then due and
owing to such Indemnitee under the Operative Documents, an amount equal to the
sum of (i) the actual reduction in Taxes, if any, realized by such Indemnitee
which is attributable to such deduction or credit and (ii) the reduction
calculated on the same basis as the gross up in Section 10(e) hereof in Taxes
realized by such Indemnitee as a result of any payment made by such Indemnitee
pursuant to this sentence; provided, however, that such Indemnitee shall not be
obligated to make any payment pursuant to this Section 10 or Section 13 hereof
to the extent that the amount calculated pursuant to (i) above would exceed (A)
the amount of all prior payments by Lessee to such Indemnitee, pursuant to this
Section 10 or Section 13 hereof, net of any amount paid in respect of Taxes
required to be paid by such Indemnitee in respect of the receipt or accrual of
such amounts received by such Indemnitee from Lessee, less (B) the portion of
all prior payments computed pursuant to (i) above by such Indemnitee to Lessee
hereunder.
(g) Payment. If a claim is made against any
Indemnitee for any Taxes which may be subject to indemnification by Lessee
hereunder and if such Indemnitee has notice thereof, such Indemnitee shall
promptly notify Lessee; provided that the failure to provide such notice shall
not release Lessee from any of its obligations hereunder except to the extent
Lessee's right to contest such claim is precluded thereby. Any amount payable as
an
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indemnity to any Indemnitee or any amount payable to Lessee pursuant to this
Section 10 is to be paid to such party directly, in immediately available funds,
within thirty (30) days after receipt of a written demand therefor from such
Indemnitee or Lessee, as the case may be, except in the case of a payment to an
Indemnitee to the extent that such Taxes are being contested in good faith
pursuant to this Section 10, in which event the payment of such indemnity shall
be made by the due date for the payment of any Taxes that are the subject of
such contest taking into account all extensions of the due date that are
available as a result of the contest. In the event an Indemnitee makes a tax
payment with respect to any such Taxes (other than with funds advanced to such
Indemnitee on an interest-free basis by Lessee pursuant to this Section 10),
Lessee shall reimburse the amount of such payment and also shall pay to the
Indemnitee interest on the amount of such payment by such Indemnitee at the
Interest Rate from the date of any such payment by such Indemnitee to the date
of such reimbursement by Lessee to the Indemnitee hereunder. In the event an
amount is payable to Lessee under this Section 10, the Indemnitee owing such
amount shall pay interest on such amount at the Interest Rate from the date of
receipt by such Indemnitee of any amount giving rise to such obligation to pay
Lessee until the date of payment to Lessee.
(h) Contest. In the event that an Indemnitee
receives a written notice of a claim which, if sustained, would require the
payment of an indemnity by Lessee pursuant to this Section 10, such Indemnitee
shall promptly notify Lessee of such claim and, if requested by Lessee in
writing, shall, at Lessee's sole expense, in good faith contest or shall permit
Lessee, if desired by Lessee and such contest may be conducted in whole or in
part separately in the name of Lessee without involving Taxes of such Indemnitee
not indemnified hereunder, to contest in the name of Lessee and/or the
Indemnitee, the validity, applicability or amount of such Taxes by (x) resisting
payment thereof if practicable, (y) not paying the same except under protest, if
protest is necessary and proper, and (z) if payments be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings; provided, however, the Lessee shall not be permitted to contest in
the name of such Indemnitee if such contest involves Taxes imposed against such
Indemnitee that are unrelated to the transactions contemplated by the Financing
Documents or the Operative Documents or Taxes based on or measured by the gross
or net income of the Indemnitee, and provided, that if the Indemnitee determines
in good faith
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that there is a material possibility of a material adverse impact upon the
Indemnitee with respect to such contest, such Indemnitee may retain or reassert
control of any contest that Lessee would otherwise be permitted to contest;
provided, further, that the Indemnitee shall not be required to undertake or
allow in its name or on its behalf any contest unless the following conditions
are satisfied:
(i) Lessee shall have (a) furnished
Indemnitee with a written opinion of tax counsel selected by
Indemnitee and reasonably acceptable to Lessee to the effect that
a reasonable basis (as defined in ABA Opinion 85-352) exists to
contest such claim (which opinion shall be obtained at Lessee's
sole cost and expense), provided however, that in the event the
subject matter of the contest is of a continuing nature and has
previously been decided adversely pursuant to the contest
provisions of this Section 10, there has been a change in the law
(including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after
such claim shall have been so previously decided and such
Indemnitee shall have received an opinion of tax counsel, to the
effect that, as a result of such change other than a change in
statutory law, it is more likely than not that the position which
the Indemnitee or the Lessee, as the case may be, had asserted in
such previous contest would prevail and, in the case of statutory
changes-in-law, it is as likely as not that the position will
prevail, and (b) agreed to pay Indemnitee for all reasonable costs
and expenses which Indemnitee may incur in contesting such claim
(including without limitation, payment on demand of all
out-of-pocket costs, expenses, additions to tax because of
underpayment of estimated taxes, losses, legal and accounting and
investigatory fees and disbursements, penalties, and interests),
(ii) a threshold amount of $50,000 for any
individual claim is at issue,
(iii) there is no substantial risk or danger
of the sale, loss or forfeiture of the Aircraft,
(iv) Lessee shall have admitted its liability
to indemnify Owner Participant for such claim or set
forth in writing why it is not so liable,
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(v) if such contest is to be initiated by the
payment of, and the claiming of a refund for, such Taxes, the
Lessee shall have advanced to such Indemnitee sufficient funds (on
an interest free basis) to make such payments,
(vi) no claim shall be appealed to the U.S.
Supreme Court,
(vii) no appeal of a trial court decision shall
be undertaken unless Lessee at its sole cost and expense shall
have furnished Indemnitee with a written opinion of tax counsel
selected by Indemnitee and reasonably acceptable to Lessee to the
effect that Indemnitee is more likely than not to prevail in such
appeal, and
(viii) no Event of Default has occurred and is
continuing.
(i) Refund. If any Indemnitee shall obtain a
refund of all or any part of any Taxes paid by Lessee or from an advance by
Lessee, such Indemnitee shall pay Lessee the amount of such refund together with
any interest paid thereon attributable to the Taxes paid or advanced by Lessee
less the amount of any Taxes payable by such Indemnitee in respect of the
receipt of such refund and interest after giving credit to Lessee for any
savings by such Indemnitee in respect to any such Taxes by reason of deductions,
credits, allocations or allowances in respect of the payment of any such Taxes;
provided that such amount shall not be payable before such time as Lessee shall
have made all payments or indemnities then due to the Lessor and the Indemnitee
under the Lease and all other Operative Documents, and provided further that no
amount shall be payable during any period in which an Event of Default under the
Lease has occurred and is continuing unremedied unless this Lease has terminated
and Lessee has paid all amounts due the Lessor thereunder.
(j) Diligence. Lessee shall not be deemed to be
in default under any of the above indemnification provisions of this Section 10
so long as Lessee or the Indemnitee shall diligently prosecute such contest in
accordance with the provisions of this Section 10. Notwithstanding the
foregoing, if a claim is made against any Indemnitee for any Taxes which, if
successful, would result in the imposition of Taxes under circumstances which
would require Lessee to indemnify such Indemnitee, the Indemnitee shall be
released
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from its responsibility to contest such claim or part thereof, if it agrees in
writing not to seek indemnification from Lessee in respect of the claim, or such
part thereof to be contested. In the event an Indemnitee fails to contest, or
refuses to permit Lessee to contest, a claim or part thereof which the
Indemnitee has the obligation to contest or to permit Lessee to contest under
this Section 10, then Lessee shall not be obligated to indemnify the Indemnitee
for such claim or such part thereof.
(k) Affiliated Group. In the event that the Indemnitee is a
member of an affiliated group (within the meaning of Section 1504(a) of the
Code) which files a consolidated Federal income tax return, the term
"Indemnitee" shall mean and include any member of such affiliated group.
(l) Verification. At Lessee's request, the amount of any
indemnity payment by Lessee pursuant to this Section 10 or any payment by an
Indemnitee to Lessee pursuant to this Section 10 shall be verified and certified
by an independent public accounting firm selected by such Indemnitee and
reasonably satisfactory to Lessee. In order to enable such accountants to verify
the indemnity amount, such Indemnitee shall provide to the accountants (for
their own confidential use) information reasonably necessary for such
verification to which Lessor has access; provided, however, such information
shall not be disclosed to Lessee or any person other than such accountants. The
fee of such firm shall be payable by Lessee unless such verification shall
result in an adjustment in Lessee's favor exceeding 10% of the amount of the
indemnity payment.
(m) Survival. All of the obligations and rights of Lessee and
Lessor under this Section 10 with respect to the Aircraft, the Airframe, the
Engines or any Part thereof shall survive the assignment, or expiration or other
termination, of the Lease with respect to the Aircraft for a period of six (6)
years from the occurrence of such assignment, or expiration or termination,
except that such obligations shall survive the expiration of such six (6) year
period with respect to any claim asserted prior to the expiration of such six
(6) year period but in either case only to the extent such obligation or claim
relates to events which occurred or conditions which existed during the Term.
Such obligations are expressly undertaken by Lessee for the benefit of, and
shall be enforceable by, Lessor. The provisions of this Section 10(m) are
subject to the exclusions of Section 10(b)(viii).
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Section 11. Loss, Damage and Requisition.
(a) Event of Loss with Respect to the Airframe.
Subject to the other provisions of this Section 11, upon an Event of Loss with
respect to the Airframe or the Airframe and any Engines then installed thereon,
Lessee shall forthwith (and, in any event, within five (5) Business Days after
such occurrence) give Lessor written notice of such occurrence and within thirty
(30) days after such occurrence give Lessor written notice of its election,
subject to the terms hereof and of the Indenture, to perform one of the
following two options (it being agreed that if Lessee shall not have given
Lessor notice of such election within thirty (30) days after such occurrence,
Lessee shall be deemed to have elected to perform the option set forth in the
following clause (ii)), provided, that Lessee shall not have the right to select
the option set forth in clause (i) if a Default or an Event of Default shall
have occurred and be continuing at the time of such election or at the time of
replacement:
(i) within one hundred twenty (120) days
(the "Replacement Period") after the date of the Event of Loss (but in no event
later than the last day of the Term) Lessee shall convey, or cause to be
conveyed to Lessor as provided in Section 11(c) hereof, to be subjected to the
Lien of the Indenture if it has not been discharged, and to be leased by Lessee
hereunder in replacement of the Airframe and such Engines then installed
thereon, title to a replacement Airframe (together with the same number of
replacement Engines as the Engines), such replacement Airframe and Engines (A)
to be free and clear of all Liens (it being understood that, upon such
conveyance, such replacement Airframe and replacement Engines may be subject to
Permitted Liens), (B) to have a value, utility and remaining useful life,
determined in accordance with the Appraisal Procedure as provided in Section
11(c) hereof, at least equal to, and to be in at least as good operating
condition as, the Airframe and the Engines, if any, so replaced (assuming the
Airframe and the Engines were maintained in accordance with the requirements of
this Agreement, whether or not they are in fact so maintained), and (C) to be a
like Airbus A320-231 model aircraft with equivalent or better modification
status delivered by the Manufacturer not earlier than June 30, 1988 and, in the
case of Engines, in compliance with Section 11(b); provided that if Lessee shall
not perform its obligation to effect such replacement under this clause by the
end of the Replacement Period, Lessee shall then be deemed to have elected to
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comply, and shall comply, with the provisions of clause (ii) of this Section
11(a); provided, further, that the payment specified therein shall be deemed to
have become due and payable on the Stipulated Loss Value Date occurring on or
immediately preceding the last day of the Replacement Period. Upon compliance
with the foregoing, Lessor will, subject to the rights of any insurers, transfer
to Lessee, "AS IS, WHERE IS," without recourse, representation or warranty
(except a warranty that such Airframe and Engines are free and clear of Lessor's
Liens), all of Lessor's right, title and interest, if any, in and to the
Airframe and the Engines suffering the Event of Loss as well as all of Lessor's
right, title and interest in and to any Engine constituting part of the Aircraft
and replaced as provided above but not installed thereon at the time of the
Event of Loss. For all purposes hereof, a replacement Airframe shall be deemed
part of the property leased hereunder and shall be deemed the "Airframe" as
defined herein. No Event of Loss resulting in replacement of the Airframe or
Engines under this Section 11(a)(i) shall result in any reduction of Rent.
(ii) On a Stipulated Loss Value Date on or
before one hundred twenty (120) days after the date of the Event of Loss (or, if
earlier, with respect to insurance proceeds, on the date on which insurance
proceeds with respect to the Event of Loss are received by the loss payee)
Lessee shall pay to Lessor in immediately available funds the sum of (A) the
Stipulated Loss Value of the Aircraft as shown on Exhibit A for such Stipulated
Loss Value Date, plus all Basic Rent or Renewal Rent, as the case may be,
payable on each Basic Rent Payment Date or Renewal Rent Payment Date,
respectively, prior to the date of payment of such Stipulated Loss Value which
has not been paid when due, plus, if such Stipulated Loss Value Date is also a
Basic Rent Payment Date or a Renewal Rent Payment Date, the amount of Basic Rent
or Renewal Rent, as the case may be, payable by Lessee on such Stipulated Loss
Value Date, or, if such Stipulated Loss Value Date occurs after the last day of
the Term, plus an amount equal to the average daily Basic Rent or Renewal Rent,
as the case may be, in effect on the last day of the Term, for each day from and
including the last day of the Term to and excluding such Stipulated Loss Value
Date, and (B) all Supplemental Rent payable, whereupon (1) the obligation of
Lessee to pay Basic Rent or Renewal Rent, as the case may be, hereunder with
respect to the Aircraft for any period commencing after the date on which such
Stipulated Loss Value is paid shall terminate; provided that Lessee shall remain
liable for, and shall pay on or before the date the Stipulated Loss Value and
Supplemental Rent are
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paid, all payments of Basic Rent or Renewal Rent, as the case may be, for the
Aircraft due on or before the date of such payment of Stipulated Loss Value and
Supplemental Rent, (2) the Term shall terminate with respect to such Aircraft,
and (3) Lessor will, subject to the rights of any insurers, transfer to Lessee,
"AS IS, WHERE IS," without recourse, representation or warranty (except a
warranty that such Airframe and Engines are free and clear of Lessor's Liens),
all of Lessor's right, title and interest, if any, in and to the Airframe and
Engines suffering the Event of Loss, as well as all of Lessor's right, title and
interest, if any, in and to any Engine constituting part of the Aircraft but not
installed thereon at the time of the Event of Loss.
(b) Event of Loss with Respect to an Engine. Upon an Event of
Loss with respect to an Engine only, Lessee shall give Lessor prompt written
notice thereof and shall, at its own cost and expense, within sixty (60) days
after such occurrence convey or cause to be conveyed to Lessor as replacement
for the Engine suffering an Event of Loss, title to another IAE Model V2500
engine of like model and equivalent or better modification status or, at
Lessee's option, an IAE engine of an improved model, in each such case which has
a value, remaining useful life and utility determined in accordance with the
Appraisal Procedure at least equal to such Engine and is suitable for
installation and use on the Airframe without diminishing the value, remaining
useful life or utility of such Airframe, free of all Liens (it being understood
that, upon such conveyance, such replacement Engine may be subject to Permitted
Liens) and being in as good operating condition as (including no greater number
of cycles or hours than) the Engine being replaced assuming the Engine being
replaced was serviceable and otherwise in the condition and repair required by
the terms hereof immediately prior to the Event of Loss. Prior to or at the time
of any such conveyance, Lessee, at its own cost and expense, will (i) furnish
Lessor with a full warranty xxxx of sale, in form and substance reasonably
satisfactory to Owner Participant and Indenture Trustee, as applicable, with
respect to such replacement Engine; (ii) cause supplements, in form and
substance reasonably satisfactory to Owner Participant and Indenture Trustee (if
the Lien of the Indenture has not been discharged), subjecting such replacement
Engine to this Lease, the Indenture (if in effect) and the Trust Agreement (if
in effect), to be duly executed by Lessee, if applicable, and duly filed for
recordation pursuant to the Federal Aviation Act; (iii) furnish Lessor and
Indenture Trustee (if the Lien of the Indenture has not been discharged) with
such evidence
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of title to such Replacement Engine and of compliance with the insurance
provisions of Section 12 hereof with respect to such Replacement Engine as Owner
Participant or Indenture Trustee (if the Lien of the Indenture has not been
discharged) may reasonably request; (iv) furnish Owner Participant and Indenture
Trustee (if the Lien of the Indenture has not been discharged) with an opinion
of Lessee's counsel addressed to such parties and to Lessor to the effect that
title to such Replacement Engine has been duly conveyed to Lessor free and clear
of all Liens (except Permitted Liens), and is duly leased hereunder and subject
to the Lien of the Indenture (if it has not been discharged), the instruments
subjecting such Replacement Engine to the Lien of the Indenture and the Lease,
and subjecting to any relevant Assigned Sublease and Sublease Agreement, as the
case may be, have been duly filed for recordation pursuant to the Federal
Aviation Act or any other law then applicable to the registration of the
Aircraft, and no further action, filing or recording of any document is
necessary in order to establish and perfect, in the United States and, if the
Aircraft is registered outside the United States, in the jurisdiction of
registration, the legal title to such Replacement Engine and the Lien of the
Indenture on such Replacement Engine; (v) furnish a certificate signed by a
Responsible Officer of Lessee certifying that, upon consummation of such
replacement, no Default or Event of Default will exist hereunder; (vi) furnish
such documents and evidence with respect to Lessee, Owner Participant or
Indenture Trustee (if the Lien of the Indenture has not been discharged), as
such parties or their respective counsel may reasonably request in order to
establish the consummation of the transactions contemplated by this Section
11(b), the taking of all corporate proceedings in connection therewith and
compliance with the conditions set forth in this Section 11(b), in each case in
form and substance satisfactory to such party; (vii) furnish such Uniform
Commercial Code financing statements covering the Replacement Engine as may be
requested by Lessor or Indenture Trustee (if the Lien of the Indentures has not
been discharged); (viii) furnish Owner Participant with an opinion of tax
counsel mutually satisfactory to Owner Participant and Lessee and which opinion
is reasonably satisfactory to Owner Participant to the effect that such
replacement will have no adverse tax consequences to Lessor and Owner
Participant; (ix) furnish the appraisal referred to above; and (x) furnish Owner
Trustee and Indenture Trustee with the opinion of counsel to Lessee specified in
Section 5.06(a) (5) (i) of the Indenture. Upon full compliance by Lessee with
the terms of this Section 11(b),
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Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS,
WHERE IS" without recourse, representation or warranty (except a warranty that
such Engine is free and clear of Lessor's Liens), all of Lessor's right, title
and interest, if any, in the Engine which suffered the Event of Loss. For all
purposes hereof, each such Replacement Engine shall be deemed an "Engine" as
defined herein and shall be deemed part of the same Aircraft as was the Engine
replaced thereof. No Event of Loss covered by this Section 11(b) shall result in
any reduction in Rent.
(c) Conveyance of Replacement Airframe. Prior to
or at the time of any conveyance of a replacement Airframe pursuant to Section
11(a) above, Lessee, at its own cost and expense, will furnish Lessor with the
following documents which shall have been duly authorized, executed and
delivered by the respective parties thereto and shall be in full force and
effect on said date: (i) a full warranty xxxx of sale, in form and substance
satisfactory to Owner Participant and Indenture Trustee (if the Lien of the
Indenture has not been discharged), and an AC Form 8050-2 Xxxx of Sale (or such
other form of xxxx of sale as may be approved by the FAA on said date), executed
by the owner thereof, in favor of Lessor and, cause supplements, reasonably
satisfactory to Owner Participant and Indenture Trustee (if the Lien of the
Indenture has not been discharged), to this Lease, the Indenture (if then in
effect) and the Trust Agreement (if then in effect), with respect to such
replacement Airframe and to be duly filed for recordation pursuant to the
Federal Aviation Act or other applicable Governmental Entity; (ii) the
certificate specified in Section 12(f) hereof demonstrating compliance with the
insurance requirements of Section 12 with respect to the replacement Airframe
and Engines; (iii) an opinion (addressed to Indenture Trustee, Lessor, and Owner
Participant) of Lessee's counsel (and such other evidence of title as Owner
Participant or Indenture Trustee (if the Lien of the Indenture has not been
discharged) may reasonably request) to the effect that, upon such conveyance,
Lessor will acquire good title to such replacement Airframe free and clear of
all Liens (it being understood that, upon such conveyance, such replacement
Airframe may be subject to Permitted Liens), that such replacement Airframe will
be leased hereunder to the same extent as the Airframe replaced thereby and will
be subject to the Lien of the Indenture (if it has not been discharged), the
instruments subjecting such Replacement Airframe and Replacement Engine to the
Lien of the Indenture and the Lease, and subjecting to any relevant
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Assigned Sublease and Sublease Assignment, as the case may be, have been duly
filed for recordation pursuant to the Federal Aviation Act or any other law then
applicable to the registration of the Aircraft, and no further action, filing or
recording of any document is necessary in order to establish and perfect, in the
United States and, if the Aircraft is registered outside the United States, in
the jurisdiction of registration, the legal title to such Replacement Airframe
and Replacement Engine and the Lien of the Indenture on such Replacement
Airframe and Replacement Engine; and that Lessor, and Indenture Trustee as
assignee of Lessor, is entitled to the benefits of Section 1110 of Title 11 of
the United States Code with respect to such replacement airframe and engines to
the same extent as with respect to the Airframe and Engines then installed
thereon prior to such replacement; (iv) a certificate signed by a Responsible
Officer of Lessee certifying that, upon consummation of such replacement, no
Default or Event of Default will exist hereunder; (v) such documents and
evidence with respect to Lessee, Owner Participant or Indenture Trustee (if the
Lien of the Indenture has not been discharged), as such parties or their
respective counsel may reasonably request in order to establish the consummation
of the transactions contemplated by this Section 11(c), the taking of all
corporate proceedings in connection therewith and compliance with the conditions
set forth in this Section 11(c), in each case in form and substance satisfactory
to each such party, including evidence that the Aircraft of which the
replacement Airframe is a part has been duly certificated by the FAA as to type
and airworthiness in accordance with the terms of this Lease and application for
registration of such replacement Airframe in the name of Lessor has been duly
made with the FAA or other applicable Governmental Entity and Lessee has
temporary or permanent authority to operate the replacement Airframe; (vi)
furnish such Uniform Commercial Code financing statements covering the
replacement Airframe as may be reasonably requested by Lessor or Indenture
Trustee; (vii) furnish Owner Participant with an opinion of tax counsel mutually
satisfactory to Owner Participant and Lessee and which opinion is reasonably
satisfactory to Owner Participant to the effect that such replacement will have
no adverse tax consequences to Lessor and Owner Participant; (viii) an appraisal
prepared in accordance with the Appraisal Procedure which confirms that the
replacement Airframe and any replacement Engine has a value, utility and
remaining useful life at least equal to that of the Airframe and Engines which
suffered the Event of Loss assuming that the same were maintained in accordance
with the requirements of this Lease whether or not they are
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in fact so maintained; and (ix) furnish Owner Trustee and Indenture Trustee with
the opinion of counsel to Lessee specified in Section 5.06(a)(5)(i) of the
Indenture. Upon full compliance by Lessee with the terms of this Section 11(c),
Lessor will, subject to the rights of any insurers, transfer to Lessee "AS IS,
WHERE IS," without recourse, representation or warranty (except a warranty that
such Airframe is free and clear of Lessor's Liens), all of Lessor's right, title
and interest in and to the Aircraft which suffered the Event of Loss. No Event
of Loss with respect to the Aircraft under the circumstances contemplated by the
terms of this Section 11(c) shall result in any reduction in Rent.
For all purposes of this Lease, each such replacement Aircraft
(together with any Engines constituting part of the Aircraft being replaced as
to which an Event of Loss has not occurred) shall be deemed part of the property
leased hereunder and shall be deemed the "Aircraft" as defined herein.
(d) Application of Proceeds and Payments. Any payments
received at any time by Lessor or by Lessee from any insurer (including a
Governmental Entity providing an indemnity in lieu thereof) with respect to an
Event of Loss shall be applied in the manner specified in Sections 12(c) and (e)
hereof. Subject to Section 11(f) below, any payments (other than insurance or
such indemnity proceeds) received at any time by Lessor or Lessee from any
Governmental Entity or other Person with respect to an Event of Loss will be
applied as follows (after reimbursement of Lessor, Indenture Trustee and Owner
Participant for their reasonable out-of-pocket costs and expenses):
(i) unless clause (ii) below is applicable,
so much of such payments as shall not exceed the Stipulated Loss Value and other
payments required to be paid by Lessee pursuant to Section 11(a)(ii) of this
Lease shall be paid to Lessor in reduction of Lessee's obligation to pay such
Stipulated Loss Value and other payments, if not already paid by Lessee, or, if
already paid by Lessee, shall (unless a Default or an Event of Default shall
have occurred and be continuing) be applied by Lessor to reimburse Lessee for
its payment of such Stipulated Loss Value and other payments and the balance, if
any, of such payment remaining thereafter shall be paid over to, or retained by,
Lessor; or
(ii) if such payments are received as a
result of an Event of Loss with respect to the Airframe or
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an Engine which is being replaced pursuant to Section 11(a)(i) or Section 11(b)
hereof, all such payments shall be paid over to, or retained by, Lessee if
Lessee shall have fully performed or, concurrently therewith fully performs, the
terms of Sections 11(a)(i) and (c) or Section 11(b) hereof, as the case may be,
and of Section 15 hereof with respect to the Event of Loss for which such
payments are made and if no Default or Event of Default shall have occurred and
be continuing.
(e) Requisition for Use by Government with Respect to the
Aircraft. Subject to Section 11(f) below, in the event of the requisition for
use by a Governmental Entity of the Aircraft, the Airframe or an Engine (other
than a requisition constituting an Event of Loss), Lessee shall promptly notify
Lessor and Indenture Trustee (if the Lien of the Indenture has not been
discharged) thereof and all of Lessee's obligations under this Lease with
respect to such Airframe or Engine shall continue to the same extent as if such
requisition had not occurred. All payments received by Lessor or Lessee from the
Governmental Entity for the use of such Airframe or Engine during the Term shall
be paid over to, or retained by, Lessee if no Default or Event of Default shall
have occurred and be continuing; and all other payments received by Lessor or
Lessee from the Governmental Entity shall be paid over to, or retained by,
Lessor. If the Airframe and such Engines or engines are not returned by the end
of the Term, an Event of Loss shall be deemed to have occurred on the last day
of the Term and, on the last day of the Term, Lessee shall either pay to Lessor
the amount provided herein for an Event of Loss to the Airframe and such Engines
or engines on such date or provide a replacement Aircraft and Engine on such
date in the condition provided for in Section 16 and Exhibit E. In the event of
the requisition for use by the Governmental Entity of any Engine without the
requisition for use of the Airframe, Lessee will replace such Engine hereunder
by complying with the terms of Section 11(b) to the same extent as if an Event
of Loss had occurred with respect to such Engine, and thereafter any payments
received by Lessor or Lessee from the Governmental Entity with respect to such
requisition shall be paid over to, or retained by, Lessee.
(f) Application in Default. Any amount referred to in clause
(i) or (ii) of Section 11(d) or Section 11(e) which is otherwise payable to
Lessee shall not be paid to Lessee, or, if it has been previously paid to or
retained by Lessee, shall be paid by Lessee to Lessor, if at the time of such
payment or retention a Default or an Event of Default
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shall have occurred and be continuing. In such case, all such amounts shall be
paid to and held by Indenture Trustee so long as the Lien of the Indenture shall
not have been discharged and thereafter by Lessor as security for the
obligations of Lessee, or, at the option of Lessor or the Indenture Trustee, as
the case may be, applied by Lessor or the Indenture Trustee, as the case may be,
toward payment of any of Lessee's obligations at the time due hereunder, as
Lessor or the Indenture Trustee, as the case may be, may elect, including,
without limitation, by reason of this Lease being declared or deemed in default.
At such time as there shall not be continuing any such Event of Default or
Default, all such amounts at the time held by Lessor or Indenture Trustee in
excess of the amount, if any, which Lessor or Indenture Trustee has elected for
application as provided above, shall be paid to Lessee.
Section 12. Insurance.
(a) Public Liability and Property Damage Insurance. Lessee
will carry and maintain in effect, or cause to be carried and maintained in
effect, at its own cost and expense, with Approved Insurers, comprehensive
aircraft and general public liability insurance (including, without limitation,
contractual liability, liability war risk and passenger legal liability
products, completed operation liability covering maintenance of aircraft, but
excluding manufacturer's product liability insurance), and property damage
insurance with respect to the Aircraft, in an amount not less than three hundred
fifty million dollars ($350,000,000), combined single limit, per occurrence or
such higher amount, and of such type and terms, as are customarily carried by
prudent Certificated Air Carriers, similarly situated to Lessee, operating
aircraft of similar size and engines and as hereinafter provided. Each and any
policy of insurance carried in accordance with this Section 12(a), and each and
any policy obtained in substitution or replacement for any of such policies, (i)
shall designate Lessor (in both its individual and trustee capacity), Owner
Participant, Indenture Trustee (in both its individual and trustee capacity) and
the other Indemnitees and their respective permitted assigns, as additional
insureds as their interests may appear (but without imposing upon any such
Person any obligation imposed upon the insured, including, without limitation,
the liability to pay any premiums for any such policies), (ii) shall expressly
provide that, in respect of the interests of Lessor, Owner Participant,
Indenture Trustee and the other Indemnitees and their respective permitted
assigns, in such policies, the
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insurance shall not be invalidated as to an insured or additional insured by any
act or omission of Lessee or any other insured or additional insured and shall
insure Lessor, Owner Participant, Indenture Trustee and the other Indemnitees
and their respective permitted assigns, regardless as to any insured or
additional insured of any breach or violation by Lessee or any other insured or
additional insured of any warranty, declaration or condition contained in such
policies, (iii) shall provide that if such insurance is cancelled for any reason
whatsoever, or is changed in any adverse way with respect to the interests of
Lessor, Owner Participant, Indenture Trustee and the other Indemnitees or if
such insurance is allowed to lapse for non-payment of premium, such
cancellation, change or lapse shall not be effective as to Lessor, Owner
Participant, Indenture Trustee and the other Indemnitees, and their respective
permitted assigns, until thirty (30) days, in each instance (seven (7) days or
such lesser period of time as is the insurance industry standard for war/allied
perils coverage), after notice to Lessor, Owner Participant and Indenture
Trustee from such insurer or insurers, of such prospective cancellation, change
or lapse, (iv) shall include coverage for any country in or over which the
Aircraft is located or operated, and (v) shall provide that, as against Lessor,
Owner Participant, Indenture Trustee and the other Indemnitees, and their
respective permitted assigns, each insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waives any rights it may have to be subrogated to any right of any insured
against Lessor, Owner Participant, Indenture Trustee, or the other Indemnitees,
or their respective permitted assigns, with respect to the Aircraft. Each
liability policy shall be primary without right of contribution from any other
insurance which may be carried by Lessor, Owner Participant, Indenture Trustee
or the other Indemnitees, or their respective permitted assigns, and shall
expressly provide that all of the provisions thereof shall operate in the same
manner as if there were a separate policy covering each insured, provided, that
such policies shall not operate to increase the insurer's limit of liability.
Lessee shall cause its insurers to agree that the indemnity and hold harmless
provisions of Section 13 are insured as a contractual assumption of liability by
Lessee's insurers, subject to the terms, coverage, conditions, limitations and
exclusions of the policy of insurance. Without limiting the foregoing, the type
and amount of the insurance carried by Lessee hereunder shall be no less in
amount and no less comprehensive or favorable to Lessor, Owner Participant,
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Indenture Trustee and the other Indemnitees then that carried by Lessee with
respect to other A320-231 aircraft or similar-size aircraft owned or leased by
Lessee.
(b) Insurance Against Loss or Damage. Lessee, at
its own expense, will maintain in effect, or cause to be carried and maintained
in effect, with Approved Insurers "all-risk" ground and flight aircraft hull
insurance (which shall include, but not be limited to, hijacking, a
disappearance clause and coverage against strikes, riots, commotions or labor
disturbances, air piracy, malicious acts or acts of sabotage and unlawful
seizure or wrongful exercise of control of the Aircraft in flight by a person on
board such Aircraft acting without the consent of Lessee) covering the Aircraft,
and "all-risk" coverage including transit insurance with respect to Engines and
Parts while not installed on such Aircraft or an aircraft, which in each case
considering all policy terms, limitations and exclusions is of the type, terms
and amount customarily maintained by prudent Certificated Air Carriers similarly
situated to Lessee and operating similar size aircraft and engines and as
hereinafter provided. Lessee shall also maintain, or cause to be maintained, war
risk and allied perils hull insurance reasonably acceptable to Lessor with
Approved Insurers. In addition, at least ten (10) Business Days (or, in the case
of an emergency, at least two (2) Business Days) prior to permitting the
Aircraft, Airframe or Engines to be operated or located outside of the United
States of America, other than in Canada or Mexico, Lessee shall notify Lessor
thereof. If Owner Participant or Indenture Trustee reasonably requests at any
time and if such insurance is then customarily being obtained by or for Persons
leasing or financing similarly-sized aircraft operating on similar routes to
operators located in the jurisdiction of Lessee's or, if a Permitted Sublease is
in effect, the Permitted Sublessee's jurisdiction of domicile, Lessee shall pay
or reimburse Lessor for political risk, repossession, expropriation,
confiscation and similar insurance as Lessor may arrange or cause to be
arranged; provided that Indenture Trustee shall not be obligated to request such
insurance and shall not be liable for any failure to request such insurance.
Anything herein to the contrary notwithstanding, at all times while the Aircraft
is subject to this Lease, the insurance required by this Section 12(b) shall be
for an amount on an "agreed value" basis not less than the Stipulated Loss Value
from time to time determined for the Aircraft. Without limiting the foregoing,
the type and amount of insurance carried by Lessee hereunder shall be no less
comprehensive or favorable
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to Lessor, Owner Participant, Indenture Trustee and the other Indemnitees than
that carried by Lessee with respect to similar-size aircraft owned or leased by
Lessee.
Each and any policy of insurance obtained and
maintained pursuant to this Section 12(b), and each and any policy obtained in
substitution or replacement for any such policies, (i) shall designate Lessor as
owner of the Aircraft, shall designate, so long as the Lien of the Indenture has
not been discharged, Indenture Trustee and, thereafter, Lessor, as sole loss
payee, as provided below and shall designate Lessor, Owner Participant,
Indenture Trustee (in both its individual capacity and its trustee capacity) and
the other Indemnitees and their respective permitted assigns as additional
insureds, as their respective interests may appear (but without imposing upon
Lessor, Owner Participant, Indenture Trustee and their respective permitted
assigns, any obligation imposed upon the insured, including, without limitation,
the liability to pay any premiums for any such policies), (ii) shall expressly
provide that, in respect of the interests of such an additional insured and its
permitted assigns, in such policies, the insurance shall not be invalidated as
to an insured by any act or omission of Lessee or any other additional insured,
and shall insure each such additional insured and its permitted assigns,
regardless of any breach or violation of any warranty, declaration or condition
contained in such policies by the Lessee or another additional insured, (iii)
shall provide that if such insurance is cancelled for any reason whatsoever, or
is changed in any adverse way with respect to the interests of Lessor, Owner
Participant, Indenture Trustee and to the other Indemnitees and their respective
permitted assigns, or if such insurance is allowed to lapse, such cancellation,
change or lapse shall not be effective as to Lessor, Owner Participant,
Indenture Trustee, the other Indemnitees or their respective permitted assigns,
until thirty (30) days (seven (7) days or such lesser period of time as is the
insurance industry standard for war/allied perils coverage) after written notice
to Lessor, Owner Participant and Indenture Trustee from such insurer or
insurers, as the case may be, of such prospective cancellation, change or lapse,
(iv) shall include coverage for any country in or over which the Aircraft may at
any time be located or operated, (v) shall provide that, as against Lessor,
Owner Participant, Indenture Trustee the other Indemnitees and their respective
permitted assigns, each insurer shall waive any rights of set-off, counterclaim
or any other deduction, whether by attachment or otherwise, and waives any
rights it
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may have to be subrogated to any right of any insured against Lessor, Owner
Participant, Indenture Trustee and the other Indemnitees and their respective
permitted assigns, with respect to the Aircraft, (vi) shall provide that in the
event of any damage or loss which is an Event of Loss hereunder and which
results in a payment, such payment shall be payable directly to Indenture
Trustee as sole loss payee, so long as the Lien of the Indenture shall not have
been discharged and thereafter to Lessor, as sole loss payee, and (vii) shall
provide that in the event of any damage or loss which is not an Event of Loss
hereunder and which results in a payment, such payment shall be payable directly
to Indenture Trustee, as sole loss payee for the account of all interests, so
long as the Lien of the Indenture shall not have been discharged and thereafter
to Lessor, as sole loss payee for the account of all interests. The insurance
required under this Section 12(b) may incorporate deductible amounts which shall
not exceed one million dollars ($1,000,000).
Each of Lessor and Owner Participant shall have the right to
carry additional and separate excess or contingent insurance for its own benefit
at its own expense, without, however, thereby limiting Lessee's obligations
under this Section 12, and Lessee shall not carry any such insurance if it would
conflict with or adversely affect other insurance carried by Lessor or Owner
Participant. Lessee shall have the right to carry insurance in excess of the
amounts required hereunder and the proceeds of such excess insurance shall be
payable to Lessee, provided, however, that such insurance does not conflict with
or adversely affect the insurance required hereunder or any excess or contingent
insurance carried by Lessor or Owner Participant. Lessee shall give Lessor
reasonable prior written notice of any insurance to be carried by Lessee in
addition to that required to be carried by Lessee as provided herein.
In the event that separate policies are maintained to cover
"all-risk" ground and flight aircraft, hull and war risks and allied perils
insurance, Lessee shall include a 50/50 provisional claims settlement clause as
contained in the policies of insurance maintained by Lessee with respect to all
other aircraft in Lessee's fleet, and a copy of the 50/50 provisional claims
settlement clause in effect on the Restatement Date shall be attached to the
insurance certificate issued on the Restatement Date.
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(c) Application of Insurance Proceeds for an
Event of Loss. It is agreed that insurance payments which arise from insurance
required to be carried by Lessee pursuant to this Section 12 and received as the
result of the occurrence of an Event of Loss shall be applied as follows (after
reimbursement of Lessor, Owner Participant and Indenture Trustee for their
reasonable out-of-pocket costs and expenses):
(i) unless clause (ii) below is applicable,
so much of such payments as shall not exceed the Stipulated Loss Value and other
payments required to be paid by Lessee pursuant to Section 11(a)(ii) of this
Lease shall be paid to Indenture Trustee so long as the Lien of the Indenture
has not been discharged and thereafter to Lessor in reduction of Lessee's
obligation to pay such Stipulated Loss Value and any other payments if not
already paid by Lessee, or, if already paid by Lessee, shall (unless a Default
or an Event of Default shall have occurred and be continuing) be applied by
Indenture Trustee or Lessor, as the case may be, to reimburse Lessee for its
payment of such Stipulated Loss Value and other payments and the balance, if
any, of such payment remaining thereafter shall be paid over to, or retained by,
Lessor; or
(ii) if such payments are received as a
result of an Event of Loss with respect to the Airframe or an Engine which is
being replaced pursuant to Section 11(a)(i) or Section 11(b) hereof, all such
payments shall be paid over by the Indenture Trustee or Lessor, as the case may
be, to, or retained by, Lessee if Lessee shall have fully performed or,
concurrently therewith fully performs, the terms of Section 11(a)(i) and (c) or
Section 11(b) hereof, as the case may be, and of Section 15 hereof with respect
to the Event of Loss for which such payments are made and if no Default or Event
of Default shall have occurred and be continuing.
(d) Application of Insurance Proceeds for Other
than an Event of Loss. The insurance payments of any property damage loss to the
Airframe or any Engine not constituting an Event of Loss with respect thereto
will be applied in payment for the actual costs of repairs or for replacement
property which Lessee has incurred in accordance with the terms of Section 9, 11
or 12(c) of this Lease against such documentation evidencing payment by Lessee
as Lessor may reasonably request to reimburse Lessee for such repairs or
replacements already paid for by Lessee, and any balance remaining after
compliance with such Sections with
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respect to such loss shall be paid to Lessor. Lessee shall be entitled to
receive from the insurer any insurance proceeds not in excess of five hundred
thousand dollars ($500,000) as soon as such funds are paid and shall promptly
receive such additional insurance proceeds from the loss payee upon invoices for
repair work in progress, replacement parts which are ordered or for work
completed as provided above in this Section 12(d). Any amount referred to in
this Section 12(d) which is payable to Lessee shall not be paid to Lessee if at
the time of such payment any Default or Event of Default shall have occurred and
be continuing, but shall be held by Lessor as security for the obligations of
Lessee under this Lease or applied as provided in Section 12(e).
(e) Application in Default. Any amount referred
to in clause (ii) of Section 12(c) or Section 12(d) which is otherwise payable
to Lessee shall not be paid to Lessee, or if it has been previously paid to or
retained by Lessee, shall be paid by Lessee to Indenture Trustee, so long as the
Lien of the Indenture shall not have been discharged, and thereafter to Lessor,
if at the time of such payment or retention a Default or an Event of Default
shall have occurred and be continuing. In such case, all such amounts shall be
paid to and held by Indenture Trustee, so long as the Lien of the Indenture
shall not have been discharged, and thereafter held by Lessor as security for
the obligations of Lessee, or, at the option of Indenture Trustee or Lessor,
applied by Indenture Trustee or Lessor toward payment of any of Lessee's
obligations at the time due hereunder, including, without limitation, by reason
of this Lease being declared or deemed declared in default, as Indenture Trustee
or Lessor may elect. At such time as there shall not be continuing any such
Event of Default or Default, all such amounts at the time held by Indenture
Trustee or Lessor in excess of the amount, if any, which Indenture Trustee or
Lessor has elected for application as provided above, shall be paid to Lessee.
(f) Certificates. On or before the Delivery
Date, and thereafter on any renewal by the Lessee of the insurance required
hereby (but in no event less than once in every twelve (12) month period),
Lessee will furnish to Lessor and Indenture Trustee a certificate executed and
delivered by an Approved Insurer or the Approved Broker, describing in
reasonable detail, and in accordance with customary practice, insurance carried
on the Aircraft and Lessee shall also furnish an opinion or report by the
Approved Insurer or the Approved Broker certifying that the
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insurance then maintained on the Aircraft complies with the terms of this Lease.
Lessee will cause the Approved Broker to agree to advise Lessor, Owner
Participant and Indenture Trustee in writing at least thirty (30) days (seven
(7) days or such lesser period of time as is the insurance industry standard for
war/allied perils coverage) prior to the expiration, non-renewal, termination or
cancellation for any reason (including, without limitation, failure to pay
premium therefor) or material modification of any such insurance.
In the event Lessee shall fail to maintain insurance as herein
provided, Lessor, Owner Participant or Indenture Trustee at their respective
options, may provide such insurance and, in such event, Lessee shall, upon
demand, reimburse Lessor, as Supplemental Rent, or any other such other Person
who may have provided such insurance, for the cost thereof.
(g) Reinsurance. Lessee (or if a Permitted Sublease is in
effect, the Permitted Sublessee) may carry primary insurance outside of the
aviation insurance markets in New York, London or Paris if the relevant primary
insurer shall have obtained reinsurance and such reinsurance (i) is on the same
terms as the original insurance and includes the provisions required by this
Agreement; (ii) provides in case of any bankruptcy, insolvency, liquidation,
dissolution or similar proceedings of or affecting the original insurer that the
reinsurers' liability will be to make such payment as would have fallen due
under the relevant policy of reinsurance if the original insurer had
(immediately before such bankruptcy, insolvency, liquidation, dissolution or
similar proceedings) discharged its obligations in full under the original
insurance policies in respect of which the then relevant policy of reinsurance
has been effected; and (iii) contains a "cut-through" clause in the following
form (or otherwise, satisfactory to Owner Participant): "The Reinsurers and the
Reinsured hereby mutually agree that in the event of any claim arising under the
reinsurances in respect of a total loss or other claim where as provided by the
Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-12] dated as of
November 26, 1996 and made between Wilmington Trust Company, as Owner Trustee,
and America West Airlines, Inc. such claim is to be paid to the person named as
sole loss payee under the primary insurances, the Reinsurers will in lieu of
payment to the original insured, its successors in interest and assigns pay to
the person named as sole loss payee under the primary insurances effected by the
original insured that portion of any loss
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due for which the Reinsurers would otherwise be liable to pay the original
insurer (subject to proof of loss), it being understood and agreed that any such
payment by the Reinsurers will (to the extent of such payment) fully discharge
and release the Reinsurers from any and all further liability in connection
therewith."
(h) Storage. During any period that the Aircraft
is in storage or otherwise grounded, Lessee may carry or cause to be carried, in
lieu of the insurance required by Sections 12(a) and (b) above, insurance
otherwise conforming with the provisions of said Sections 12(a) and (b) except
that the scope of the risk and the type of insurance, and the amount of the
insurance in the case of the insurance described in Section 12(a) above (but not
the amount of insurance to be carried under Section 12(b) above), shall be the
same as from time to time applicable to similar size passenger aircraft that
comprise Lessee's fleet in similar storage or grounding, and in any event
(including, without limitation, at any time when there shall be in existence a
Permitted Sublease), the same as from time to time customarily carried by
similarly-situated, prudent Certificated Air Carriers for passenger aircraft of
similar size as the Aircraft in similar storage or grounding.
(i) Amounts Held. So long as no Default or Event
of Default has occurred and is continuing, any amount held by Lessor or
Indenture Trustee, as the case may be, until application by Lessor or Indenture
Trustee, as the case may be, pursuant to this Section 12 shall be invested as
provided in Section 21(h) hereof.
(j) After the Term. Lessee shall continue to
maintain at its expense the insurance described in Section 12(a) for three years
after the expiration or termination of the Basic Term or Renewal Term, if Lessee
has elected to renew the Lease in accordance with Section 20, covering each
Indemnitee as its interest may appear and specifically insuring the indemnity
contained in Section 13 to the extent of the coverage of such policy.
(k) Governmental Indemnity. In lieu of certain
of the insurance described in Section 12 above, Lessee may provide a United
States governmental indemnity, to the extent and subject to the terms and
conditions specified in Section 6(c).
Section 13. General Indemnity.
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Lessee hereby agrees to indemnify, reimburse, defend and hold
harmless each Indemnitee on a net after-tax basis, as provided in Section 10(e),
within fifteen (15) days after demand from and against any and all claims
(whether or not based on strict liability), damages (whether direct, indirect,
incidental, special or consequential), losses, charges, fees, liabilities,
obligations, demands, suits, judgments, actions and other legal proceedings
(whether civil or criminal), penalties, fines, other sanctions, and any
reasonable costs and expenses, in connection herewith, including, without
limitation, costs and expenses set forth in Section 21(j) hereof and reasonable
attorney's fees and expenses of whatever kind or nature (any and all of which
are hereafter referred to as "Claims") imposed on, or asserted by or against, or
suffered or incurred by, any Indemnitee, from (and including) the Restatement
Date, including, without limitation, injury, death or property damage of
passengers, shippers and others, environmental control, noise and pollution
regulations, which in any way may result from, pertain to, or arise in any
manner out of, or are in any manner related to (1) the Operative Documents, the
Purchase Documents or the Financing Documents, or any of the transactions
contemplated thereby; (2) the Aircraft, the Airframe, any Engine or any engine
used in connection with the Airframe or any Part thereof, including, but not
limited to, (A) the importation, exportation, condition, manufacture, design,
purchase, ownership, registration, reregistration, deregistration (other than
any deregistration caused by the failure of the registered owner of the Aircraft
to be a "citizen of the United States" as defined under the Federal Aviation Act
and the regulations thereunder or to file the documentation necessary to
continue FAA registration of the Aircraft), delivery, nondelivery, assignment,
leasing, subleasing, sub-subleasing, acceptance, rejection, possession,
repossession, control, return, financing, Liens (excluding Lessor's Liens, Head
Lessor's Liens and Lenders' Liens, but including the Lien of the Indenture),
use, performance, modification, maintenance, overhaul, operation, pooling,
interchange, repair, testing, sale, return or other disposition or application
of the Aircraft, the Airframe, any Engine, any engine used in connection with
the Airframe or any Part (including, but not limited to, latent and other
defects whether or not discoverable by Lessee or Lessor, Claims related to any
actual or alleged violation of Law, loss or damage to any property of
passengers, shippers or otherwise or any Claim related to patent, copyright,
trademark or other infringement) either in the air or on the ground, and,
including, without limitation, any interest
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therein of an Indemnitee or imposition of a Lien thereon (excluding Lessor's
Liens, Head Lessor's Liens and Lenders' Liens but including the Lien of the
Indenture), or the rentals, receipts or earnings therefrom (including, without
limitation, the Rent and any other amounts paid or payable with respect
thereto); or (B) any defect in the Aircraft, the Airframe, any Engine, any
engine used in connection with the Airframe or any Part thereof arising from the
material or any article used therein, whether from the design, testing or use
thereof from any maintenance, service, repair, overhaul or testing of such
Aircraft, Airframe, Engine, engine or Part, or otherwise regardless of when such
defect shall be discovered, whether or not such Aircraft, Airframe, Engine,
engine or Part is at the time in the possession of Lessee, and regardless of
where such Aircraft, Airframe, Engine, engine or Part may then be located; or
(3) the breach of any representation, warranty or covenant made by Lessee
hereunder or under any of the other Operative Documents or any Default or Event
of Default; provided, however, that the indemnity provided for in this Section
13 shall not apply to any portion of a Claim of an Indemnitee to the extent it
results from: (i) the gross negligence or willful misconduct of such Indemnitee
or any of its directors, officers, employees, servants or agents (except any
such gross negligence or willful misconduct as may be attributed to an
Indemnitee due to its interest in the Aircraft, the Airframe, an Engine, any
Operative Document, any Purchase Document or any Financing Document), (ii) the
material breach of any express representation, warranty or covenant made by such
Indemnitee herein or in any other Operative Document, or the Financing Documents
(not resulting from a breach by Lessee of any of its representations, warranties
or covenants in the Operative Documents or in the Financing Documents), (iii)
any Taxes, whether or not Lessee is required to indemnify such Taxes under
Section 10 hereof or the Tax Indemnification Agreement (it being understood that
Section 10 hereof and the Tax Indemnification Agreement exclusively provide for
Lessee's liability with respect to Taxes), (iv) any Claim which relates solely
to events which occurred prior to (but excluding) the Restatement Date (other
than Claims related to the condition, manufacture or design of the Aircraft) and
any Claim concerning payment for or the ownership of Buyer Furnished Equipment,
(v) an underlying act which occurs after the Aircraft has been returned to
Lessor in accordance with the terms hereof and the Term of this Lease has been
terminated or has expired and the return is not related to an Event of Default,
(vi) as to such Indemnitee, an underlying act which occurs after a disposition
or other transfer (voluntary or involuntary) by such Indemnitee of all or any
part of its interest in the
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Aircraft, the Airframe, any Engine, or any Part, or in the Financing Documents,
the Purchase Documents or the Operative Documents, except as contemplated under
or pursuant to the Operative Documents, the Financing Documents or the Purchase
Documents and except as resulting from the exercise of its remedies during the
period while an Event of Default has occurred and is continuing and prior to the
time such Indemnitee has received payment of all amounts owing to it hereunder
or thereunder and except any Claim which is alleged or does relate to the period
prior to such disposition or (vii) the authorization or giving or withholding of
any future amendments, supplements, waivers or consents with respect to any of
the Financing Documents, the Purchase Documents or the Operative Documents,
which amendments, supplements, waivers or consents were not requested by Lessee
or are not required to give effect to the provisions of the Operative Documents,
the Financing Documents or the Purchase Documents (provided, however, in no
event will Lessee be liable for any Claims resulting from, pertaining to or
arising from or related to Lessor's granting or creating a Lessor's Lien or the
granting or creation of a Head Lessor's Lien). Upon full payment of the
indemnities herein, Lessee shall be subrogated to all rights and remedies which
such Indemnitee may have against any third party against whom such Indemnitee
has the right to assert a Claim which arises under any action described in this
Section 13 (except Claims under such Indemnitee's own insurance policies or
under the indemnification provisions of any of the Financing Documents).
Without limiting Lessee's liability under this Section 13,
Lessee hereby waives and releases any Claim now or hereafter existing against
any Indemnitee, on account of any Claims for or on account of or arising or in
any way connected with injury to or death of personnel of Lessee or loss or
damage to property of Lessee or the loss of use of any property which may result
from or arise in any manner out of or in relation to the importation,
exportation, ownership, purchase, registration, reregistration, deregistration
(except as to Owner Participant or Lessor as and to the extent such Indemnitee
is responsible under the Refunding Agreement for Claims related to such
deregistration), delivery, non-delivery, assignment, leasing, subleasing,
manufacture, acceptance, rejection, possession, return, financing, performance,
modification, maintenance, condition, use, operation, pooling, interchange,
repair, testing, sale, return or other disposition of the Aircraft, the
Airframe, any Engine or any engine used in connection with the Airframe or any
Part
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thereof, either in the air or on the ground, or which may be caused by any
defect in such Aircraft, Airframe, Engine, engine or Part from the material or
any article used therein or from the design or testing thereof, or use thereof
or from any maintenance, service, repair, overhaul, or testing of such Aircraft,
Airframe, Engine, engine or Part, claims for infringement, loss of or injury to
any person, loss of or damage to any property or environmental damage,
regardless of when such defect may be discovered, whether or not such Aircraft,
Airframe, Engine, engine or Part is at the time in the possession of Lessee, and
regardless of the location of such Aircraft at any such time except to the
extent that such Claim results from (i) the gross negligence or willful
misconduct of such Indemnitee (except any such gross negligence or willful
misconduct as may be attributed to an Indemnitee due to its interest in the
Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document
or any Financing Document), (ii) the material breach of any of its express
representations, warranties or covenants hereunder, under any other Operative
Document or Financing Document (not resulting from a breach by Lessee of any of
its representations, warranties or covenants in the Operative Documents or in
the Financing Documents), (iii) any Taxes, whether or not Lessee is required to
indemnify such Taxes under Section 10 hereof or the Tax Indemnification
Agreement (it being understood that Section 10 hereof and the Tax
Indemnification Agreement exclusively provide for Lessee's liability with
respect to Taxes), (iv) any Claim which relates solely to events which occurred
prior to but excluding the Restatement Date (other than Claims related to the
condition, manufacture or design of the Aircraft) and any Claim concerning
payment for or the ownership of Buyer Furnished Equipment, (v) an underlying act
which occurs after the Aircraft has been returned to Lessor in accordance with
the terms hereof and the Term of this Lease has been terminated or has expired
and the return is not related to an Event of Default, (vi) an underlying act
which occurs after a disposition or other transfer (voluntary or involuntary) by
such Indemnitee of all or any part of its interest in the Aircraft, the
Airframe, any Engine, or any Part, or in the Financing Documents, the Purchase
Documents or the Operative Documents (except as contemplated under or pursuant
to the Operative Documents, the Financing Documents or the Purchase Documents
and except as resulting from the exercise of its remedies during the period
while an Event of Default has occurred and is continuing and prior to the time
such Indemnitee has received payment of all amounts owing to it hereunder and
except any Claim which is alleged or does relate to the
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period prior to such disposition), (vii) the authorization or giving or
withholding of any future amendments, supplements, waivers or consents with
respect to any of the Financing Documents, the Purchase Documents or the
Operative Documents, which amendments, supplements, waivers or consents were not
requested by Lessee or are not required to give effect to the provisions of the
Operative Documents, the Financing Documents or the Purchase Documents or (viii)
a Lessor's Lien, a Head Lessor's Lien or a Lenders' Lien attributable to such
Indemnitee.
Each Indemnitee shall, at Lessee's sole cost and expense and
with Lessee's cooperation, be entitled to conduct the defense of any Claim
against it; provided, however, that Lessee shall, at the request of any
Indemnitee and so long as no Event of Default has occurred and is continuing,
assume and conduct promptly and diligently, at its sole cost and expense, the
defense of such Indemnitee against any Claim of a third party with counsel
reasonably acceptable to such Indemnitee; and provided, further, however, that
Lessee shall have the right as well as the obligation to assume such defense to
the extent required under the terms of the applicable insurance policies so long
as no Default or Event of Default has occurred and is continuing. In the event
Lessee shall so assume the defense of any Claim, such Indemnitee shall cooperate
with Lessee in defending such Claim, but any expenses incurred by such
Indemnitee in connection therewith shall either be paid by Lessee to such
Indemnitee in advance, or reasonable security shall be provided by Lessee to
such Indemnitee for such payments. Neither Lessee nor an Indemnitee shall enter
into a settlement or other compromise with respect to any Claim which Lessee or
such Indemnitee is defending hereunder in excess of $100,000 without the prior
written consent of the other, which consent shall not be unreasonably withheld.
Each Indemnitee agrees to give Lessee prompt notice of any
Claims by a third party hereunder following such Indemnitee's actual knowledge
of such Claims by third parties, but the failure of such Indemnitee to give the
notice required by this Section 13 shall not constitute a release by Lessor or
such Indemnitee of, or reduce, any of the obligations or liabilities of Lessee
to such Indemnitee in respect of any such Claim or otherwise affect the
obligations or liabilities of Lessee to any Indemnitee in respect of any such
Claim, except to the extent that Lessee's ability to control the defense thereof
where Lessee has the right to control the defense thereof is materially
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prejudiced as a result solely of such failure of such Indemnitee to give such
notice.
An Indemnitee or Lessee shall supply the other with such
information requested by the other as is reasonably necessary or advisable for
the other to control the defense of a Claim to the extent permitted by this
Section.
Nothing in this Section shall be construed as a guaranty by
Lessee of payments due pursuant to any indebtedness incurred with respect to the
purchase of the Aircraft or of the residual value of the Aircraft.
Notwithstanding anything herein or in any other Operative
Document to the contrary, with respect to any Claim for which any Indemnitee is
entitled to indemnification under more than one provision of this Lease or any
other Operative Document, such Indemnitee shall be entitled to recovery for such
Claim only pursuant to one such provision as it may select in its sole
discretion (and, for the avoidance of doubt, such Indemnitee shall not be
entitled to any double recovery for the same Claim).
The indemnities contained in this Section 13 shall continue in
full force and effect notwithstanding the expiration or other termination of
this Lease or any of the other Operative Documents and are expressly made for
the benefit of and shall be enforceable by each Indemnitee.
Section 14. Liens.
Lessee shall not directly or indirectly create, incur, assume,
or suffer to exist any Lien on or with respect to the Aircraft, the Airframe,
any Engine or any Part thereof, title thereto, or any interest of Lessor therein
or in this Lease, except (i) the respective rights of Lessor, Lessee, Owner
Participant, Indenture Trustee and any other Indemnitee as herein provided or
provided under the other Operative Documents or the Financing Documents; (ii)
Head Lessor's Liens, Lessor's Liens and Lenders' Liens; (iii) Liens for Taxes
either not yet due or being diligently contested in good faith by appropriate
proceedings in accordance with Section 10 and so long as adequate reserves are
maintained with respect to such Liens and only so long as neither such
proceedings nor such Liens involve any material danger of the sale, forfeiture
or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any
interest of Lessor or Indenture Trustee therein or any risk of criminal
liability of Lessor or Indenture Trustee; (iv)
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inchoate materialmen's, mechanics', workmen's, repairmen's employees', or other
like inchoate Liens arising in the ordinary course of business for sums not
overdue by more than 45 days or being diligently contested in good faith and
only so long as neither such proceedings nor any such Liens involve any material
danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or
any Engine or any Part, or any interest of Lessor or Indenture Trustee therein;
(v) the rights of other Persons to the extent expressly permitted by the
provisions of Section 6(a), 9(c) or 19; (vi) Liens arising out of any judgment
or award against Lessee (or any Permitted Sublessee) unless the judgment or
award shall not, within thirty (30) days after the entry thereof, have been
discharged, vacated, reversed, or execution thereof stayed pending appeal or
shall not have been discharged, vacated or reversed within thirty (30) days
after the expiration of such stay and only so long as such Liens shall not
involve any material danger of the sale, forfeiture or loss of any of the
Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor or
Indenture Trustee therein and provided that the execution of such judgment or
award or an attachment relating thereto shall not have occurred within such
thirty (30) day period; and, (vii) any other Lien with respect to which Lessee
(or a Permitted Sublessee) shall have provided a bond adequate in the reasonable
opinion of Indenture Trustee (if the Lien of the Indenture has not been
discharged) and Owner Participant. Lessee shall promptly, at its own expense,
take or cause to be taken such action as may be necessary to duly discharge any
Lien (except for the Liens referred to in clauses (i) through (vii) of this
Section 14) directly or indirectly created, incurred, assumed, or suffered to
exist by Lessee if the same shall arise at any time.
Section 15. Protection of Title and Further
Assurances.
Forthwith upon the execution and delivery of this
Lease, the Indenture, the Trust Agreement, Lease Supplement, Indenture
Supplement and Trust Supplement, and any other supplement from time to time
required by the terms hereof, Lessee will cause this Lease, the Indenture, the
Trust Agreement, Lease Supplement, Indenture Supplement, Trust Supplement and
such other supplements to be duly filed and recorded, and maintained of record,
in accordance with the applicable laws of the government of registry of the
Aircraft. If any filing or recording is reasonably necessary to protect the
interests of Lessor or Indenture Trustee, Lessee shall, at its own cost and
expense (except
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it shall be at Lessor's expense if in connection with a change in ownership of
the Aircraft or any other transfer or assignment by Lessor other than as
contemplated hereunder or under the Financing Documents or in connection with an
Event of Default) and upon request by Lessor, cause any financing statements and
any and all additional instruments and other documents, so far as permitted by
applicable Law, to be kept, filed, and recorded and to be re-executed, refiled
and re-recorded at all times in the appropriate office pursuant or in relation
to any applicable Laws of any Governmental Entity, to protect and preserve the
rights and interests of Lessor or Indenture Trustee hereunder, under the
Indenture and in the Aircraft, and Lessee shall furnish to Lessor and Indenture
Trustee, evidence, reasonably satisfactory to Lessor and Indenture Trustee, of
each such filing or refiling and recordation and re-recordation.
Without limiting the foregoing, Lessee shall do or
cause to be done, at Lessee's cost and expense (except it shall be at Lessor's
expense if in connection with a change in ownership of the Aircraft or any other
transfer or assignment by Lessor other than as contemplated hereunder or under
the Financing Documents or in connection with an Event of Default), any and all
acts and things within its control which may be required under the terms of the
Mortgage Convention to protect and preserve the title of Lessor, the Lien of the
Indenture, this Lease, and the interests of Lessor and Indenture Trustee within
the jurisdiction of any signatory which has ratified the Mortgage Convention in
such jurisdiction and in the territories thereof in which Lessee, any Permitted
Sublessee or any wet sublessee may operate the Aircraft, as Lessor may
reasonably request. Lessee shall also do or cause to be done, at its own expense
(except it shall be at Lessor's expense if in connection with a change in the
ownership of the Aircraft or any other transfer or assignment by Lessor other
than as contemplated hereunder or under the Financing Documents or in connection
with an Event of Default), any and all acts and things which may be required
under the terms of any other Law involving any jurisdiction in which Lessee, any
Permitted Sublessee or any wet lessee may operate the Aircraft, which Lessor may
reasonably request, to protect and preserve the title of the Lessor, this Lease,
the Indenture and Lessor's and Indenture Trustee's interest in the Aircraft and
under any of the Operative Documents or Financing Documents within any such
jurisdiction.
In addition, at Lessee's expense, Lessee will promptly and
duly execute and deliver to Lessor or Indenture
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Trustee, as applicable, such further documents and assurances and take such
further actions as Owner Participant or Indenture Trustee may from time to time
reasonably request in order to more effectively carry out the intent and purpose
of this Lease and the other Operative Documents and the Financing Documents and
to protect the rights and remedies created or intended to be created in favor of
Lessor or Indenture Trustee hereunder and the other Operative Documents and the
Financing Documents including, without limitation, if reasonably requested by
Owner Participant or Indenture Trustee, at the expense of Lessee (except it
shall be at Lessor's expense if in connection with a change in the ownership of
the Aircraft or any other transfer or assignment by Lessor or Indenture Trustee
other than as contemplated hereunder or under the Financing Documents or in
connection with an Event of Default), the execution and delivery of supplements
or amendments hereto in recordable form, subjecting to this Lease, the Indenture
and the other Financing Documents, any replacement Aircraft or Engine and the
recording or filing of counterparts thereof in accordance with the laws of any
appropriate jurisdiction.
Section 16. Return of Aircraft and Records.
(a) Return. On any Return Occasion, Lessee, at
its own expense and risk, shall return the Aircraft to Lessor (or any Person
designated by Lessor) in at least the condition specified in this Section and
Exhibit E hereto at any Lessee system location in the continental United States
selected by Lessor, as Lessor may elect, or such other location as Lessor and
Lessee may agree, fully equipped with all required Engines, or other engines
owned by Lessee (which shall thereupon become Engines as hereinafter provided)
meeting the conditions specified in this Section and Exhibit E, duly installed
thereon by delivering the same to the Lessor at such location. Lessee shall
comply with Section 11(b) and this Section 16 with respect to any engines
installed on the Aircraft returned to Lessor hereunder and meeting the
conditions described herein which were not originally installed on the Aircraft.
(b) Status Upon Return. Upon any Return Occasion
hereunder, the Aircraft shall be: (i) free and clear of all Liens, except for
the Lien of the Indenture, Head Lessor's Liens, Lessor's Liens and Lenders'
Liens, (ii) duly certified as an airworthy aircraft by the FAA under Part 121 of
the regulations promulgated under the Federal Aviation Act and with a current
and valid Airworthiness Certificate
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installed on the Aircraft, unless such certificate shall have been suspended or
revoked as a result of the suspension or revocation of the registration of the
Aircraft under the Federal Aviation Act due to the ineligibility of the Aircraft
to be registered in the name of Lessor under the Federal Aviation Act (whether
by means of a voting trust agreement or otherwise) in which case the Aircraft
shall nevertheless meet all conditions for such certification and for the
issuance of such certificate; (iii) in full airworthy condition for over water
and EROPS operation according to the FAA standards required to allow the
Aircraft to be operated under, and in full compliance with, such Airworthiness
Certificate and Part 121 of the regulations promulgated under the Federal
Aviation Act for such operation, such compliance to be by means of such
mechanical repairs or modifications or such inspections as may be required
thereby, but not by operational restrictions, by logbook entries or other method
of acceptance of such restrictions; (iv) in full compliance with Lessee's
Maintenance Program; (v) to the extent the owner of the Aircraft is a "citizen
of the United States" within the meaning of Section 40102(a)(15) of the Federal
Aviation Act and reasonably cooperative with Lessee at Lessee's expense with
respect to effecting such registration, duly registered in the name of the
Lessor or other then owner of the Aircraft under the Federal Aviation Act; (vi)
in full compliance with the maintenance and operation provisions of this Lease
and all FAA airworthiness directives, mandatory service bulletins and equivalent
requirements which by their terms require compliance on or before the last day
of the Term (without regard to any deferral, waiver, deviation or exemption
granted by the FAA specifically to Lessee delaying such compliance); (vii) in
good and airworthy operating condition, and in the same condition (including,
without limitation, in a passenger configuration suitable for passenger revenue
service) as when delivered to Lessee hereunder, ordinary wear and tear excepted,
with no open or outstanding deferred maintenance items, scheduled or
unscheduled, with all systems and components fully serviceable and operational
and with no placards restricting operation or use, and (viii) with all remaining
warranties, indemnities, policies and guarantees referred to in Section 5(d)
made available to Lessor in a manner and by documents in form and substance
reasonably satisfactory to Lessor.
(c) Engines. In the event any engine not owned by Lessor shall
be installed on the Aircraft on any Return Occasion, without limiting Lessee's
obligations under the
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Tax Indemnification Agreement, such engine shall be of the same model and
equivalent modification status as the Engines or, at Lessee's option, an IAE
engine of an improved model suitable for installation and use on the Airframe
without diminishing the value, remaining useful life or utility of such
Airframe, in each such case having a value, remaining useful life and utility at
least equal to (as determined in accordance with the Appraisal Procedure), and
be in an operating condition as good as the Engines, assuming the Engines were
in the condition and repair as required by the terms hereof immediately prior to
such termination and shall conform to the return condition requirements set
forth in this Section 16 and Exhibit E, and Lessee, at its own expense and
concurrently with such delivery, shall cause such engine to become an Engine by
complying with Section 11(b) hereof. Lessee's obligation to comply with the
terms of this Section 16(c) shall be conditioned on Lessor's transferring to
Lessee all of Lessor's right, title and interest in and to any Engine not
installed on the Aircraft at the Return Occasion "AS IS, WHERE IS," without any
representation, warranty or recourse of any kind whatsoever, express or implied,
except a warranty that such Engine is free and clear of Lessor's Liens.
(d) Records and Documents. Upon the return of
the Aircraft, Lessee shall deliver to Lessor (i) all logs, manuals and data, and
inspection, modification, overhaul and other records, related to the Aircraft,
including, without limitation, those required to be maintained with respect
thereto under applicable rules and regulations of the FAA, together with a
detailed description of the Maintenance Program then applied to the Aircraft and
shall provide Lessor and its designees access to the Maintenance Program which
is sufficient for a Person to maintain the Aircraft under an FAA approved
maintenance program after the Term or to transition maintenance to another
program, including, without limitation, another registry, or, in the event an
Event of Default shall have occurred, to continue to maintain the Aircraft under
the Maintenance Program, in each case as Lessor may reasonably request, and all
documentation with respect to the Aircraft set forth on Exhibit B or otherwise
delivered to Lessee at delivery thereof, and (ii) all records necessary or
required by the FAA to certify and place the Aircraft on an FAA or other
country's, as the case may be, approved maintenance program. All of the
foregoing shall, at Lessee's expense, be up-to-date and in the latest revision
status as of the last day of the Term, including, without limitation, all
software and other electronically-held materials which have been supplied by or
on behalf of
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Manufacturer, Manufacturer's Subsidiary or Original Head Lessee, which must be
updated to the latest revision status as of the last day of the Term within such
software base and all data therein or pertaining thereto shall be deemed
property of Lessor and shall be delivered to Lessor. If hard, i.e.,
non-computerized, copies of English language maintenance records are not
available, then Lessee shall cause the appropriate action to be taken with the
pertinent regulatory agencies to ensure that Lessor and the FAA are provided
with all requested necessary and proper guarantees of methods of compliance,
component overhaul and management, scheduling, quality control, serial number
verification, etc. These records shall be all inclusive to the Aircraft,
Airframe, Engines, components, rotables, and assemblies and, as a minimum,
extend to include all activities associated with each of the last completed
maintenance checks, repairs, scheduled inspections and functional tests, and
overhauls performed under Lessee's Maintenance Program. All components and
assemblies identified with safe life limits shall be identified with their
service histories, accumulated cycles or flight hours as applicable and
remaining service lives on a separate listing. All components and assemblies
which are identified on the maintenance records by part numbers and serial
numbers other than the manufacturer's shall be provided with interchange or
cross reference listing necessary to establish complete traceability. All
documentation, flight, and maintenance records as specified by United States
Federal Aviation Regulations 91.173, 91.174, and each paragraph of regulation
121.380 which normally accompany the transfer of an aircraft which has been
operating in regulated commercial air service, shall be delivered to Lessor with
the Aircraft. Any documents or records required to be delivered hereunder shall
be in English.
(e) Condition of Aircraft. Upon any Return
Occasion, Lessee shall return such Aircraft to Lessor in such condition that the
Aircraft shall also comply with each and every condition and requirement set
forth elsewhere in this Lease, including Exhibit E hereto.
(f) Final Inspection. Upon any Return Occasion,
Lessee shall make the Aircraft available to Lessor at the location where the
"block 'C' Check" (or equivalent level designated check or checks) required
hereunder to be performed immediately prior to redelivery is to be performed for
detailed inspection of the documents referred to in paragraph (d) above and the
Airframe, Engines and Parts structure and parts, at Lessee's expense (excluding
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compensation to representatives of Lessor), in order to verify that the
condition of such Aircraft complies with the requirements set forth above (such
inspection being hereinafter referred to as the "Final Inspection"). The Final
Inspection shall be combined with such "block 'C' Check" (or equivalent level
check or checks) and may include such other items as reasonably requested by
Lessor. Lessee shall give Lessor not less than thirty (30) days prior written
notice of the commencement date of such Final Inspection. The period allowed for
the Final Inspection shall be the same period during which such "block 'C'
Check" is being performed and shall have such duration as to permit the opening
of any areas of the Aircraft which are necessary or advisable to satisfy Lessor
as to compliance with the requirements of this Section 16 and Exhibit E. The
Final Inspection shall commence on the date so noticed which shall be on or
before the expiration of the Term with respect to the Aircraft and shall
continue on consecutive days until all activity required above to be conducted
has been concluded. To the extent that any portion of the Final Inspection
extends beyond the expiration of the Term, unless Lessor has terminated the
Lease pursuant to Section 18(g) hereof, the Term with respect to the Aircraft
undergoing the Final Inspection shall be deemed to have been automatically
extended, and all obligations hereunder continued, on a daily basis until the
Final Inspection shall have been concluded and Lessee shall pay Rent during any
such extension in an amount equal to the average daily Basic Rent or Renewal
Rent, as the case may be, paid in respect of the last year of the Basic Term or
Renewal Term, as the case may be (and Stipulated Loss Value during such
extension shall equal the Stipulated Loss Value on the last day of the Basic
Term or Renewal Term, as the case may be); provided, however, that Lessee shall
not be required to pay Rent with respect to the Aircraft during the period of
extension to the extent that Lessor is responsible for the delay in completion
of the Final Inspection. All storage expenses attributable to any Term extension
pursuant to the preceding sentence shall be payable by Lessee, except that
Lessee shall not be liable for any storage expenses which are incurred after the
sixtieth (60th) day after the Term to the extent that storage continues
thereafter due to Lessor's delay in completion of the Final Inspection.
(g) Aircraft Records and Documents. In order to
enable Lessor to prepare for the Final Inspection of the Aircraft pursuant to
Subsection 16(f) above, Lessee agrees to make available to Lessor at a
maintenance base of Lessee with adequate facilities for short-term maintenance,
where
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the Final Inspection is to occur, not later than ten (10) days prior to the
commencement of such Final Inspection, the Aircraft Records and Documents listed
in Exhibit B hereto, together with such other documentation (including, without
limitation, original airworthiness directive compliance documents and other work
documents) regarding the condition, use, maintenance, or operation as Lessor may
reasonably request or require to substantiate the status of the Aircraft.
(h) Corrections and Subsequent Corrections. To
the extent that the Aircraft or any Engine fails upon a Return Occasion to
conform to any requirement imposed by this Lease Lessor may, at its option, (i)
continue the Lease in effect in the manner provided for in Section 16(f) above
with regard to automatic extension until such time as such Aircraft is brought
up to the condition required by this Section 16, including Exhibit E, or (ii)
accept the return of such Aircraft and thereafter have any such nonconformance
corrected, at such time as Lessor may deem appropriate but not to commence later
than ninety (90) days following the return of such Aircraft, at commercial rates
then charged by the Person selected by Lessor to perform such correction.
Lessee's obligations to pay such Supplemental Rent shall survive the Expiration
Date or other termination of this Lease. Nothing set forth in this paragraph
shall constitute a limitation on Lessor's or Owner Participant's ability to
recover from Lessee any damages, expenses or losses pursuant to Sections 13 or
18 hereof suffered as a result of Lessee's failure to effect the return of the
Aircraft at the time, in the place and in the condition as specified in this
Section 16 and Exhibit E hereto.
(i) Functional Flight Check. Immediately prior
to the expiration of the Term, Lessor will be permitted to conduct a
non-commercial functional flight check flight of no more than two (2) hours
duration in accordance with the Manufacturer's functional flight check
procedures at Lessee's expense to demonstrate the airworthiness of the Aircraft
and proper functioning of all systems and components. A qualified pilot and up
to five (5) other representatives selected by Lessor may take part in such
flight to verify compliance of the Aircraft with the requirements of this Lease,
provided, that Lessor shall be responsible for the charges of such qualified
pilot and representatives. Lessee may combine the functional flight check
provided in this Section 16(i) with the delivery flight specified in Section
16(a) and such functional flight check shall include the landing. Any
discrepancy or
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malfunction detected during any functional flight check (including a functional
flight check combined with a delivery flight) shall be corrected, at Lessee's
expense, and prior to the expiration of the Term. To the extent that any actions
to correct any such discrepancy or malfunction extend beyond the Term, the
provisions of the first sentence of Section 16(h) shall apply. All storage
expenses attributable to any Term extension pursuant to the preceding sentence
shall be payable by Lessee.
(j) Export Certificate of Airworthiness. Lessee
shall, at Lessee's expense, take such action as Lessor may reasonably request to
assist Lessor in obtaining any required documents in relation to the export of
the Aircraft from the United States (including, without limitation, a valid and
subsisting export certificate of airworthiness with respect to the Aircraft and
export license) and in relation to the deregistration of the Aircraft.
(k) Service Bulletin and Modification Kits.
Lessee shall deliver to Lessor, at no cost to Lessor, all service bulletin kits
furnished without charge by the manufacturer for installation on the Aircraft
which have not been so installed together with appropriate instructions for
installation. In the event such uninstalled kits were purchased or manufactured
by Lessee, then Lessor shall be advised of such kits by Lessee and have a right
of first refusal to purchase such kits at Lessee's cost for a period of ninety
(90) days after return.
(l) Storage Upon Return. Upon any Return Occasion,
Lessee shall, at Lessor's request and at Lessee's risk and expense, in addition
to other storage referred to above, arrange for the parking, storage and
insurance of the Aircraft for a period not exceeding sixty (60) days at such
reasonable location as Lessor requests where Lessee has or can arrange for
storage. Lessee shall pay or cause to be paid all costs and expenses for such
parking, storage and insurance.
(m) Resale/Release Cooperation. During the last
twelve (12) months of the Term, with reasonable notice and at reasonable times,
Lessee will cooperate, and cause any Permitted Sublessee to cooperate, in all
reasonable respects, with the efforts of Lessor to sell or lease the Aircraft
after the end of the Term, by permitting prospective purchasers or lessees,
except to the extent prohibited by applicable Law, to inspect the Aircraft and
the records relating thereto to the extent it does not
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unreasonably interfere with the operation or maintenance of the Aircraft or the
conduct of Lessee's business.
Section 17. Events of Default.
Any one or more of the following occurrences or events shall
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of Law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any other Governmental Entity):
(a) Lessee shall fail to make (i) any payment of Basic Rent,
Renewal Rent or Stipulated Loss Value to Lessor within three (3) Business Days
after the date on which such payment is due, or (ii) any other payment of
Supplemental Rent due hereunder within ten Business Days after the date on which
such payment is due and Lessee has received written demand therefor by the party
entitled thereto; provided that any failure of Lessee to pay to Lessor or the
Owner Participant when due any Excepted Payments (as defined in the Indenture)
shall not constitute an Event of Default unless Lessor or Owner Participant
delivers notice to Lessee; or
(b) Lessee shall fail to obtain and maintain in full force and
effect any insurance required under the provisions of Section 12 hereof or shall
operate the Aircraft outside of the scope or in violation of the terms of the
insurance or United States Government indemnity coverage required to be
maintained with respect to such Aircraft; or
(c) Any representation or warranty made by Lessee herein or in
the Refunding Agreement or in any certificate furnished by Lessee in connection
herewith or therewith is or was incorrect at the time made in any material
respect and such incorrectness shall not have been cured within thirty (30) days
after the receipt by Lessee of a written notice from Lessor or the Indenture
Trustee advising Lessee of the existence of such incorrectness; or
(d) Lessee shall fail to perform or observe any covenant,
condition, or agreement to be performed or observed by it pursuant to this Lease
or the Refunding Agreement, and such failure shall continue uncured for thirty
(30) days after written notice thereof is given by Lessor or Indenture Trustee
to Lessee; provided, however,
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that if Lessee shall have undertaken to cure any such failure which arises under
the first or second sentence of Section 6(c) or Section 6(d), as such provisions
of Section 6 relate to maintenance, service, repair or overhaul, or Section 9,
and notwithstanding the diligence of Lessee in attempting to cure such failure,
such failure is not cured within said thirty (30) day period but is curable with
future due diligence, there shall exist no Event of Default under this Section
17 so long as Lessee is proceeding with due diligence to cure such failure and
such failure is remedied not later than one hundred eighty (180) days after
receipt by Lessee of such written notice; or
(e) Lessee consents to the appointment of a
custodian, receiver, trustee or liquidator of itself or all or any material part
of Lessee's property or Lessee's consolidated property, or Lessee admits in
writing its inability to, or is unable to, or does not, pay its debts generally
as they come due, or makes a general assignment for the benefit of creditors, or
Lessee files a voluntary petition in bankruptcy or a voluntary petition seeking
reorganization in a proceeding under any bankruptcy or insolvency Laws (as now
or hereafter in effect), or an answer admitting the material allegations of a
petition filed against Lessee in any such proceeding, or Lessee by voluntary
petition, answer or consent seeks relief under the provisions of any other
bankruptcy, insolvency or other similar Law providing for the reorganization or
winding-up of corporations, or provides for an agreement, composition, extension
or adjustment with its creditors, or any corporate action (including, without
limitation, any board of directors or shareholder action) is taken by Lessee in
furtherance of any of the foregoing, whether or not the same is fully effected
or accomplished; or
(f) An order, judgment or decree is entered by
any court appointing, without the consent of Lessee, a custodian, receiver,
trustee or liquidator of Lessee, or of all or any material part of Lessee's
property, or Lessee's consolidated property, or all or any material part of
Lessee's property or Lessee's consolidated property is sequestered, and any such
order, judgment or decree of appointment or sequestration remains in effect,
undismissed, unstayed or unvacated for a period of ninety (90) days after the
date of entry thereof or at any time an order for relief is granted; or
(g) An involuntary petition against Lessee in a
proceeding under the Federal bankruptcy laws or other
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insolvency Laws (as now or hereafter in effect) is filed and is not withdrawn or
dismissed within ninety (90) days thereafter or at any time an order for relief
is granted in such proceeding, or if, under the provisions of any Law providing
for reorganization or winding-up of corporations which may apply to Lessee, any
court of competent jurisdiction assumes jurisdiction over, or custody or control
of, Lessee or of all or any material part of Lessee's property, or Lessee's
consolidated property and such jurisdiction, custody or control remains in
effect, unrelinquished, unstayed or unterminated for a period of ninety (90)
days or at any time an order for relief is granted in such proceeding; or
(h) Lessee's cessation of business as a commercial passenger
Certificated Air Carrier or, except in either case in connection with a labor
dispute, announcement thereof or Lessee's suspension of its business as a
commercial passenger Certificated Air Carrier, or for any reason the
preponderant business activity of Lessee shall cease to be that of a commercial
passenger Certificated Air Carrier; or
(i) Lessee's loss or suspension of its United States air
carrier license or certificate under Part 121 of the Federal Aviation
Regulations or certificate under Section 41102(a) of the Federal Aviation Act.
Section 18. Remedies.
Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare by written notice to Lessee this Lease to be in default,
provided, however, that this Lease shall be deemed to be declared in default
automatically without the necessity of such written declaration upon the
occurrence of any Event of Default described in paragraph (e), (f) or (g) of
Section 17 hereof; and at any time thereafter, so long as any outstanding Event
of Default shall not have been remedied, Lessor may do one or more of the
following with respect to all or any part of the Airframe and any or all of the
Engines as Lessor in its sole discretion shall elect, to the extent permitted
by, and subject to compliance with any mandatory requirements of, applicable Law
then in effect:
(a) Demand that Lessee, and Lessee shall upon the written
demand of Lessor and at Lessee's cost and expense, immediately return, and the
Lessee hereby agrees that it
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shall return promptly all or such part of, the Aircraft to Lessor in the manner
specified in such notice, in which event such return shall not be delayed for
the purposes of complying with the return conditions specified in Section 16 and
Exhibit E hereof (none of which conditions shall be deemed to affect Lessor's
possession of the Aircraft) or delayed for any other reason; provided, however,
that Lessee shall remain and be liable to Lessor for amounts provided for herein
or other damages resulting from the Aircraft or any Engine not being in the
condition required by Section 16 and Exhibit E. Notwithstanding the foregoing,
at Lessor's option, Lessee shall be required thereafter to take such actions as
would be required by the provisions of this Lease if such Aircraft were being
returned at the end of the Term hereof with respect to such Aircraft. In
addition, Lessor or Lessor's agent, at its option and to the extent permitted by
applicable Law, may but shall not be obligated to enter upon the premises where
all or any part of the Aircraft, Airframe and/or Engines are located to take
immediate possession of and, at Lessor's option, remove the same (and/or any
engine which is not an Engine but which is installed on the Airframe, subject to
the rights of the owner, lessor or secured party thereof) by summary proceedings
or otherwise, all without liability accruing to Lessor or Lessor's agent for or
by reason of such entry or taking of possession or removal whether for the
restoration of damage to property, or otherwise, caused by such entry or taking,
except direct damages to the extent caused by Lessor's gross negligence or
willful misconduct.
(b) With or without taking possession thereof,
sell or cause to be sold, the Aircraft, Airframe or Engine or any part thereof,
or Lessor's interest therein, at private or public sale, as Lessor in its sole
discretion may determine, or otherwise dispose of, hold, use, operate, or lease
to others, or keep idle the Aircraft, Airframe or Engine, as Lessor in its sole
discretion may determine, all free and clear of any rights of Lessee or any
Permitted Sublessee and except as hereinafter set forth in this Section 18.
Lessor may be the purchaser at any such sale.
(c) Whether or not Lessor shall have exercised,
or shall thereafter at any time exercise, any of its rights under paragraph (a)
or paragraph (b) above, Lessor, by written notice to Lessee specifying a payment
date which shall be a Stipulated Loss Value Date may demand that Lessee pay to
Lessor, and Lessee shall pay to Lessor, on the Stipulated Loss Value Date
specified in such notice, as liquidated damages for loss of bargain and not as a
penalty
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(in lieu of the Basic Rent or Renewal Rent, as the case may be, due for the
period commencing after the Stipulated Loss Value Date specified for payment in
such notice), any unpaid Rent for the Aircraft to and including the Stipulated
Loss Value Date specified in such notice, plus whichever of the following
amounts as Lessor may specify, in its sole and absolute discretion, in such
notice: (i) an amount equal to the excess, if any, of the sum of the Stipulated
Loss Value for the Aircraft, Airframe or Engine computed as of the date
specified in such notice plus, if such date is a Basic Rent Payment Date or a
Renewal Rent Payment Date, an amount equal to the Basic Rent or Renewal Rent, as
the case may be, due on such date, over the fair market sale value of the
Aircraft, Airframe or Engine as of the date specified in such notice or (ii) an
amount equal to the excess, if any, of the sum of the Stipulated Loss Value for
the Aircraft, Airframe or Engine computed as of the date specified in such
notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent Payment
Date, an amount equal to the Basic Rent or Renewal Rent, as the case may be, due
on such date, over the fair market rental value of the Aircraft for the
remainder of the Term as of the date specified in such notice.
(d) In the event Lessor, pursuant to paragraph
(b) above, shall have sold the Aircraft, Airframe or Engine or its interest
therein, Lessor, in lieu of exercising its rights under paragraph (c) above,
may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay
to Lessor on such demand, as liquidated damages for loss of bargain and not as a
penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due for
the period commencing after the Stipulated Loss Value Date immediately prior to
the date such sale occurs), any unpaid Rent due to and including the date of
sale, plus the amount by which the Stipulated Loss Value of such Aircraft,
Airframe or Engine, computed as of such Stipulated Loss Value Date, exceeds the
net proceeds of such sale (after deducting all costs of such sale).
(e) In lieu of exercising its rights under
paragraph (b), (c) or (d) above, by notice to Lessee, Lessor may require Lessee
to pay, on the next Stipulated Loss Value Date, to Lessor, and Lessee hereby
agrees that it will so pay to Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the
case may be, payable in advance for the period on and after the Stipulated Loss
Value Date), any unpaid Basic Rent or Renewal Rent, as the case may be, for such
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Aircraft due and unpaid for any period prior to and including, and any Basic
Rent or Renewal Rent payable on, the Stipulated Loss Value Date, plus, an amount
equal to the Stipulated Loss Value for the Aircraft computed as of such
Stipulated Loss Value Date; and upon such payment of liquidated damages and the
payment of all other Rent then due hereunder and the discharge of the Lien of
the Indenture pursuant to Section 10.01 thereof, Lessor shall, at Lessee's
expense, transfer, without recourse or warranty (except as to the absence of
Lessor's Liens and the Lien of the Indenture), all right, title and interest of
Lessor in and to the Aircraft to Lessee or as it may direct and Lessor shall, at
Lessee's expense, execute and deliver such documents evidencing such transfer
and take such further action as Lessee shall reasonably request.
(f) In the event that Lessor, pursuant to
paragraph (b) above, shall have relet the Aircraft, Airframe or Engine under a
long term lease, Lessor, in lieu of exercising its rights under paragraph (c)
above with respect to such Aircraft, Airframe or Engine, may, if it shall so
elect, demand that Lessee pay Lessor, and Lessee shall pay Lessor on such
demand, as liquidated damages for loss of bargain and not as a penalty (in lieu
of the Basic Rent or Renewal Rent, as the case may be, for such Aircraft due
after the time of reletting) any unpaid Rent for such Aircraft due up to the
date of reletting, plus the amount, if any, by which the aggregate Basic Rent or
Renewal Rent, as the case may be, for such Aircraft which would otherwise have
become due over the Basic Term or Renewal Term, as the case may be, discounted
periodically (equal to installment frequency) to present worth as of the date of
reletting at the rate of 8.50% per annum, exceeds the aggregate basic rental
payments to become due under the reletting from the date of such reletting to
the date upon which the Term for such Aircraft, Airframe or Engine would have
expired but for Lessee's default, discounted periodically (equal to installment
frequency) to present worth as of the date of the reletting at the rate of 8.50%
per annum.
(g) Cancel, rescind and/or terminate this Lease
by written notice to Lessee which cancellation, rescission and/or termination
shall be effective upon dispatch, whereupon Lessee's right to possess and use
the Aircraft, Airframe or Engine shall immediately cease, however, Lessee shall
be and remain liable for damages and losses suffered by Lessor and all other
amounts payable by Lessee hereunder.
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(h) Lessor may exercise any other right or remedy
which may be available to it under applicable laws, or may proceed by
appropriate court action or actions, either at law or in equity, to enforce any
other remedy or right Lessor may have hereunder, under the other Operative
Documents, at law or in equity, including, without limitation, proceed by court
order to enforce performance by Lessee of the applicable covenants of this Lease
or to recover damages for the breach thereof.
In addition to the foregoing, Lessee shall be
liable (without duplication of the remedies above and of Lessee's obligations
under Section 10 and Section 13 hereof and subject to the exclusions set forth
therein) for any and all unpaid Rent before, during or after the exercise of any
of the above mentioned remedies (including without limitation interest on unpaid
amounts with respect to all amounts not paid when due, including, without
limitation, any amounts payable pursuant to the foregoing provisions of this
Section 18), and, except as specified above, until satisfaction of all of
Lessee's obligations to Lessor hereunder and for all legal fees and other costs
and expenses incurred by any Indemnitee by reason of the occurrence of any Event
of Default or the exercise of an Indemnitee's remedies with respect thereto,
including all costs and expenses incurred in connection with the return of the
Aircraft in accordance with the terms of Section 16 and Exhibit E hereof or in
placing the Aircraft, Airframe or Engine in the condition and with airworthiness
certification as required by such Section and such Exhibit and costs and
expenses related to the Lease, the Refunding Agreement, the Indenture, the Pass
Through Trust Agreements, the Intercreditor Agreement or each Liquidity
Facility. All liquidated damages payable pursuant to the foregoing shall bear
interest, which shall be payable on the date the payment of such liquidated
damages is due at a rate equal to the Interest Rate from and including the date
due to and excluding the date actually paid.
In effecting any repossession, Lessor, its
representatives and agents, to the extent permitted by applicable Law, (i) shall
have the right to enter upon any premises where it reasonably believes the
Aircraft, the Airframe, an Engine or Part to be located, (ii) shall not be
liable, in conversion or otherwise, for the taking of any personal property of
Lessee which is in or attached to the Aircraft, the Airframe, an Engine or Part
which is repossessed, (iii) shall not be liable or responsible, in any manner,
for any damage or injury to any of Lessee's
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property in repossessing and holding the Aircraft, the Airframe, an Engine or
Part except for direct damages caused by Lessor's gross negligence or willful
misconduct and (iv) shall have the right to maintain possession of and dispose
of the Aircraft, the Airframe, an Engine or Part on any premises owned by Lessee
or under Lessee's control.
If requested by Lessor, Lessee shall, at its sole
expense, assemble and make the Aircraft, the Airframe, an Engine or Part
available at a place designated by Lessor in accordance with Section 16 and
Exhibit E hereof. Lessee hereby agrees that, in the event of the return to or
repossession by Lessor of the Aircraft, the Airframe, an Engine or Part, or
otherwise upon the occurrence of an Event of Default, any rights in any warranty
(express or implied), service life policy, infringement indemnity, performance
guaranty or the like heretofore made available to Lessee or otherwise held by
Lessee shall without further act, notice or writing be deemed automatically
cancelled and shall be enforceable solely by and for the benefit of, and
assigned to, Lessor. Lessee shall be liable to Lessor (without duplication) for
all expenses, disbursements, costs and fees incurred in (i) repossessing,
storing, preserving, shipping, maintaining, repairing and refurbishing the
Aircraft, the Airframe, an Engine or Part to the condition required by Section
16 and Exhibit E hereof and (ii) preparing the Aircraft, the Airframe, an Engine
or Part for sale or lease, advertising the sale or lease of the Aircraft, the
Airframe, an Engine or Part and selling or releasing the Aircraft, the Airframe,
an Engine or Part. Lessor is hereby authorized and instructed, at its option, to
make expenditures which Lessor considers advisable to repair and restore the
Aircraft, the Airframe, an Engine or Part to the condition required by Section
16 and Exhibit E hereof, all at Lessee's sole expense.
For the purpose of this Section 18, the "fair
market rental value" or the "fair market sales value" of the Aircraft, Airframe,
an Engine or Part shall be determined pursuant to the Appraisal Procedure.
At any sale of the Aircraft, the Airframe, an
Engine or Part pursuant to this Section , Owner Participant may bid for and
purchase such property and Lessee agrees that the amounts paid therefor shall be
used in the computations contemplated herein and Lessee shall remain liable for
any deficiency.
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No remedy referred to in this Section is intended
to be exclusive, but, to the extent permitted by Law, each shall be cumulative
and in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity; and, to the extent permitted by Law, the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all of such
other remedies. No waiver by Lessor of any Event of Default shall in any way be,
or be construed to be, a waiver of the same Event of Default in the future or
any other prior or future Event of Default. To the extent permitted by Law,
Lessee hereby waives any right it may have to require Lessor to mitigate damages
in connection with the remedies described in Sections 18(c), (d), (e) or (f)
above.
Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact (which appointment is coupled with an interest) to
execute all documents deemed necessary to release, terminate and void Lessee's
interest in the Aircraft leased hereunder or otherwise to more effectively carry
out Lessor's rights and remedies and to file said documents for recordation with
the FAA, under the Uniform Commercial Code, and with any other appropriate
Governmental Entity, and otherwise act in Lessee's name and place with respect
to the Aircraft, provided that an Event of Default has occurred and is
continuing and this Lease has been declared or deemed to be in default.
The provisions of this Section 18 shall continue
in full force and effect and survive the expiration or other termination of this
Lease and are expressly made for the benefit of and shall be enforceable by
Lessor, Owner Participant and, if the Lien of the Indenture has not been
discharged, Indenture Trustee.
Section 19. Security for Obligations. In order
to secure the Equipment Notes, Lessor has created, by the Indenture, a security
interest in the Trust Indenture Estate, including, without limitation, this
Lease and all Rent and other sums payable hereunder, except as provided in the
Indenture and subject in each case to Liens permitted hereunder. The Indenture
provides, among other things for the assignment by Lessor to Indenture Trustee
of its right, title and interest in, to and under this Lease, to the extent set
forth in the Indenture, for the creation of a first-mortgage lien on and
perfected security interest in all of Lessor's right, title and interest in and
to the Aircraft in favor of Indenture Trustee. Lessee hereby
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consents to such assignment and to the creation of such mortgage and security
interest and acknowledges receipt of copies of the Trust Agreement and the
Indenture, it being understood that such consent shall not affect any
requirement or the absence of any requirement for any consent under any other
circumstances. Until the Lien of the Indenture has been discharged, Lessee will
furnish to Indenture Trustee counterparts of all notices and other writings of
any kind required to be delivered hereunder by Lessee to Lessor. Until the Lien
of the Indenture has been discharged, (a) Lessee shall make all payments of
Rent, Stipulated Loss Value and all other amounts payable hereunder (other than
Excepted Payments) to or as directed by Indenture Trustee as provided in
Sections 4(c) and 4(d), and (b) Indenture Trustee shall be entitled to exercise
the rights of Lessor (but not Owner Participant) (other than Expected Rights)
herein as and to the extent provided herein or in the Indenture and any express
reference to Indenture Trustee in any Section of this Lease shall not give rise
to any implication that Indenture Trustee may not exercise the rights of Lessor
in any other Section of this Lease as and to the extent provided in the
Indenture.
The provisions of this Lease and the Refunding Agreement which
require or permit action by, the payment of monies to, the consent or approval
of, the furnishing of any instrument or information to, or the performance of
any other obligation to, Indenture Trustee, shall not be effective, and the
Sections hereof containing such provisions shall be read as though there were no
such requirements or provisions and all moneys otherwise payable to Indenture
Trustee hereunder shall be paid to Lessor, after Lessee shall have received from
Indenture Trustee notice of discharge of the Lien of the Indenture.
Any payment or performance by Lessee to or as directed by
Indenture Trustee shall constitute payment or performance of such obligation to
Lessor by Lessee under this Lease.
Any payment or performance of an obligation of Lessee under
this Lease by a Permitted Sublessee shall constitute payment or performance of
such obligation by Lessee.
Section 20. Renewal Option. Lessee may renew this Lease as
provided in the following clause (i) and subject to the following clause (ii):
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(i) Exercise of Renewal Option. Provided that
this Lease has not been previously terminated and that no Default
or Event of Default shall have occurred and be continuing at the
time of the giving of irrevocable notice hereinafter referred to
in this clause (i) or at the time of the commencement of the
Renewal Term, Lessee, at its option, may renew this Lease for one
Renewal Term consisting of a period equal to five years. The right
to renew this Lease for such Renewal Term pursuant to this clause
(i) shall be exercised upon irrevocable notice from Lessee
received by Lessor of Lessee's election to so renew this Lease not
less than twelve (12) months and not more than twenty-four (24)
months prior to the last day of the Basic Term. The Renewal Rent
for the Renewal Term shall be the "fair market rental value" of
the Aircraft for such Renewal Term (the "renewal fair market
rental value") as determined in accordance with the Appraisal
Procedure. For purposes of this paragraph (i), the Appraisal
Procedure shall be initiated by Lessee no earlier than nine (9)
months prior to the end of the Basic Term. If Lessee shall fail to
exercise its option to extend the term of this Lease for the
Renewal Term in accordance with the provisions of this paragraph,
all of Lessee's rights to extend the Term for such Renewal Term
shall expire. Lessee shall pay all reasonable costs and expenses,
including, without limitation, reasonable legal fees and expenses,
incurred by Lessor, Owner Participant and the Indenture Trustee in
connection with the exercise of such option.
(ii) Provisions Applicable During Renewal Term.
All provisions of this Lease, including, without limitation, as to
Rent and Stipulated Loss Value (which shall be, with appropriate
adjustments, in no event less than the greater of 120% of the
"fair market sales value" of the Aircraft as of the first day of
the Renewal Term as determined pursuant to the Appraisal Procedure
or the amount set forth on Exhibit A as of the end of the Basic
Term), shall remain in effect and be applicable during such
Renewal Term, except that Lessee shall pay to the Lessor,
semi-annually in arrears as Renewal Rent on each Renewal Rent
Payment Date, the amount for such Renewal Term as determined in
accordance with clause (i) of this Section 20.
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Section 21. Miscellaneous.
(a) Severability, Amendment, and Construction. Any provision
of this Lease which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by Law, each of Lessor and Lessee hereby waives any provision of Law
which renders any provision hereof prohibited or unenforceable in any respect.
No term or provision of this Lease may be changed, waived, discharged, or
terminated orally, but only by an instrument in writing expressed to be a
supplement or amendment to, or waiver or termination of this Lease signed by an
officer of the party against which the enforcement of the change, waiver,
discharge, or termination is sought. This Lease shall constitute an agreement of
lease, and nothing herein shall be construed as conveying to Lessee any right,
title, or interest in the Aircraft or any Engine or Part except as a lessee
only. Without limiting the foregoing, the parties hereto agree to treat this
Agreement as a lease for United States federal income tax purposes and Lessee
will not file a tax return which is inconsistent with the foregoing and nothing
contained herein shall be construed as an election by Lessor to treat Lessee as
having acquired the Aircraft for the purpose of the investment credit allowed by
Section 38 of the 1954 Code or any similar or successor statute. The headings in
this Lease are for convenience of reference only and shall not define or limit
any of the terms or provisions hereof.
(b) GOVERNING LAW. THIS LEASE HAS BEEN EXECUTED AND DELIVERED
IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE WITHOUT REGARD
TO PROVISIONS GOVERNING CONFLICTS OF LAW WHICH MIGHT LEAD TO THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
(c) Notices. All notices and instructions between Lessor and
Lessee required or permitted under the terms and provisions hereof shall be in
writing and shall be sent to Lessor or Lessee at their respective addresses set
forth in Exhibit C hereto (or such other addresses as the parties may designate
from time to time in writing). All
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notices, reports or other documents provided to Lessor or Lessee shall be
provided concurrently to Indenture Trustee (until such time as the Lien of the
Indenture is discharged) and to Owner Participant, at such address as Owner
Participant and Indenture Trustee, respectively, may designate from time to
time. All notices and instructions hereunder shall become effective when
received.
(d) Lessor's Right to Perform for Lessee. If
Lessee fails to make any payment of Rent required to be made by it hereunder or
fails to perform or comply with any covenant, agreement, or obligation contained
herein, Lessor shall have the right but not the obligation to make such payment
or conform or comply with such agreement, covenant, or obligation, and the
amount of such payment and the amount of the reasonable expenses of Lessor
incurred in connection with such payment or the performance thereof or
compliance therewith, together with interest thereon at the Interest Rate, shall
be payable by Lessee to Lessor (as Supplemental Rent) upon demand. The taking of
any such action by Lessor pursuant to this Section 21(d) shall not constitute a
waiver or release of any obligation of Lessee under this Lease, nor a waiver of
any Event of Default which may arise out of Lessee's nonperformance of such
obligation, nor an election or waiver by Lessor or any remedy or right available
to Lessor under or in relation to this Lease.
(e) Counterparts. To the extent, if any, that
this Lease constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Lease may be created through the transfer or possession of any
counterpart other than the original counterpart, which shall be identified as
the counterpart containing the receipt therefor executed by or on behalf of
Indenture Trustee on the signature page thereof. Subject to the preceding
sentence, this Lease may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(f) Quiet Enjoyment. Lessor covenants that, so
long as no Event of Default shall have occurred and be continuing and this Lease
has not been declared or deemed to be in default, Lessor shall not take or cause
to be taken any action to interfere with the right of Lessee to the possession,
use, operation and quiet enjoyment of and other rights with respect to the
Aircraft hereunder, and all rents, revenues, profits and income therefrom, in
accordance
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with the terms of this Lease without interference from Lessor or any Person
lawfully claiming by or through it, provided that Lessor and Owner Participant
shall not be liable for any such interference by Indenture Trustee, Pass Through
Trustee, Note Holder or any other Person lawfully claiming by or through them,
and provided further, that the foregoing shall not be deemed to have modified
the obligations of Lessee pursuant to Section 4(d) hereof, which obligations
remain absolute and unconditional.
(g) Brokers. Lessee and Lessor agree that,
except as provided in the Refunding Agreement, there has been no third party as
agent involved in this Lease and each indemnifies the other from liability for
fees, commissions, or other claims made upon the other due to any such claim.
(h) Investment of Funds. Any monies which are
held by Lessor or Indenture Trustee and are payable to Lessee shall, unless a
Default or an Event of Default shall have occurred and be continuing, be
invested as provided below until paid to Lessee or applied by Lessor or
Indenture Trustee to the extent provided herein. Until paid to Lessee or applied
as provided herein or in the Indenture such monies shall be invested by Lessor
or Indenture Trustee from time to time at the expense of Lessee in Specified
Investments, as directed by Lessee in accordance with the provisions of Section
3.07 of the Indenture if the Lien of the Indenture shall not have been
discharged and thereafter as provided below. There shall be promptly (but not
more frequently than monthly) remitted to Lessee any gain (including interest
received) realized as the result of any such investment (net of any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment) unless a Default or an Event of Default shall have occurred and
be continuing. Lessee will promptly pay to Lessor or Indenture Trustee, as the
case may be, and hold Lessor or Indenture Trustee harmless from, on demand, the
amount of any loss realized as the result of any such investment (together with
any Taxes, fees, commission and other reasonable expenses, if any, incurred in
connection with such investment).
(i) Entire Agreement; Amendment. This Lease
(including the Exhibits hereto), any related letter agreements and the other
Operative Documents, the Financing Documents and the Purchase Documents
(including the Exhibits thereto) and all closing documents delivered in
connection with any of the foregoing embody the entire agreement and
understanding among the parties hereto with respect to the
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subject matter hereof. This Lease may be changed, waived, discharged, amended,
revised or terminated only by an instrument in writing signed by the party
against which enforcement is sought.
(j) Expenses. Without limiting Section 13 or 18, Lessee agrees
within fifteen (15) days after demand to pay or reimburse Lessor for all
reasonable out-of-pocket costs and expenses (including, without limitation,
legal and other professional fees and expenses) incurred or payable by Lessor in
connection with or related to (i) the fees and expenses of Owner Trustee and
Indenture Trustee, (ii) to the extent requested by or relating to acts or
omissions of Lessee or as otherwise provided herein or to give effect to the
provisions hereof, or the other Operative Documents, the Financing Documents or
the Purchase Documents, any future amendments, supplements or other
modifications hereof or thereof, or waivers or consents hereunder or thereunder,
and (iii) any Default or Event of Default or the enforcement of any of Lessor's
rights, remedies or privileges hereunder or at law or in equity, but not
Lessor's legal fees and expenses in connection with the negotiation and
execution of this Lease or the Financing Documents.
(k) Federal Bankruptcy Code. In the event Section 1110 of
Title 11 of the United States Code is amended, or if it is repealed and another
statute is enacted in lieu thereof, Lessor and Lessee agree to amend this Lease
and take such other action not inconsistent with this Lease as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of aircraft
similarly situated to Lessor.
(l) U.S. Registration Number. At Lessee's request, Lessor
shall use its best efforts to have the Aircraft registered under the United
States Registration Number designated by Lessee.
(m) Submission to Jurisdiction; Service of Process; Waiver of
Forum Non Conveniens; Waiver of Jury Trial. Each of Lessee and Lessor hereby
irrevocably agrees that any suit, action or proceeding related to this Lease or
any of the other Operative Documents to which it is a party or the subject
matter hereof or thereof or any of the transactions contemplated hereby and
thereby may be instituted in, and submits for itself and its property to the
non-exclusive jurisdiction of, (i) the courts of the State of New York in New
York County and (ii) the United
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Xxxxxx Xxxxxxxx Xxxxx for the Southern District of New York. Each of Lessee and
Lessor represents and warrants that it is not currently entitled to, and agrees
that to the extent that Lessee or Lessor hereinafter may acquire, any immunity
(including, without limitation, sovereign immunity) from jurisdiction of any
court or from any legal process, it hereby, to the extent permitted by Law,
waives such immunity, and agrees not to assert, by way of motion, as a defense,
or otherwise, in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of the above-named courts that it is
immune from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper, or that this Lease or any of the other Operative
Documents or the subject matter hereof or thereof or any of the transactions
contemplated hereby and thereby may not be enforced in or by such courts. Each
of Lessee and Lessor hereby generally consents to service of process by
registered mail, return receipt requested, addressed to it at its address set
forth in Exhibit C, or at such other office of Lessee or Lessor as from time to
time may be designated by Lessee or Lessor (as applicable) in writing to Lessee
or Lessor (as applicable), Owner Participant and Indenture Trustee. Each of
Lessee and Lessor hereby agrees that its submission to jurisdiction and its
designation of service of process by mail set forth above is made for the
express benefit of Lessor, Lessee, Owner Participant, Indenture Trustee, each
Note Holder and their successors and assigns (as applicable). Final (after all
appeals) judgment (the enforcement of which has not been stayed) against either
Lessee or Lessor obtained in any suit originally brought in the court of the
State of New York in New York County or in the United States District of New
York shall be conclusive, and, to the extent permitted by applicable Law, may be
enforced in other jurisdictions by suit on the judgment, a certified or true
copy of which shall be conclusive evidence of the fact and of the amount of any
indebtedness or liability of Lessee therein described; provided that the
plaintiff at its option may bring suit, or institute other judicial proceedings,
against Lessee or Lessor, as the case may be, or any of their assets in the
courts of any country or place where such Person or such assets may be found.
EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THE OPERATIVE DOCUMENTS OR ANY DEALINGS
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BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED
THEREBY OR THE LESSOR/LESSEE RELATIONSHIP BEING ESTABLISHED, including, without
limitation, contract claims, tort claims, breach of duty claims and other common
law and statutory claims. Lessor and Lessee represent and warrant that each has
reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with such legal
counsel. THIS WAIVER IS IRREVOCABLE, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE OPERATIVE
DOCUMENTS. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
(n) Limitation on Recourse. The parties hereto
agree that all statements, representations, covenants and agreements made by
Lessor (when made in its capacity as such and not in its individual capacity)
contained in this Agreement, unless expressly otherwise stated, are made and
intended only for the purpose of binding the Trust Estate and establishing the
existence of rights and remedies that can be exercised and enforced against the
Trust Estate. Therefore, no recourse shall be had with respect to anything
contained in this Agreement (except for any express provisions that Lessor is
responsible for in its individual capacity), against Lessor in its individual
capacity or against any institution or person that becomes a successor trustee
or co-trustee or any officer, director, trustee, servant or direct or indirect
parent or controlling Person or Persons of any of them; provided that (i) this
Section 21(n) shall not be construed to prohibit any action or proceeding
against any party hereto for its own willful misconduct or grossly negligent
conduct for which it would otherwise be liable and (ii) nothing contained in
this Section 21(n) shall be construed to limit the exercise and enforcement in
accordance with the terms of this Agreement or such other agreements of rights
and remedies against the Trust Estate. The foregoing provisions of this Section
21(n) shall survive the termination of this Agreement and the other Operative
Documents.
(o) Successor Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee, succeed to all the rights, powers and title of
Lessor hereunder and shall be deemed to be Lessor and the owner of the Aircraft
for all purposes hereof without the
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necessity of any consent or approval by Lessee (subject to Section 14(d) of the
Refunding Agreement) and without in any way altering the terms of this Lease or
Lessee's obligations hereunder. One such appointment and designation of a
successor Owner Trustee shall not exhaust the right to appoint and designate
further successor Owner Trustees pursuant to the Trust Agreement, but such right
may be exercised repeatedly as long as this Lease shall be in effect.
(p) Article 2-A of the UCC. The parties hereto
agree that the Original Head Lease, as amended and restated by this Amended and
Restated Aircraft Lease Agreement [GPA 1989 BN-12] (and as otherwise extended,
amended, modified, renewed or supplemented), shall be governed by Article 2-A of
the Uniform Commercial Code of New York.
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IN WITNESS WHEREOF, Lessor and Lessee, each
pursuant to due authority, have each caused this Lease to be executed by its
duly authorized officer as of the day and year first above written.
Lessor:
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
otherwise expressly provided herein,
but solely as Owner Trustee
By:__________________________
Title:
Lessee:
AMERICA WEST AIRLINES, INC.
By:___________________________
Title:
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TABLE OF CONTENTS
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Section 1. Definitions..................................................... 1
Section 2. Agreement to Lease.............................................. 21
Section 3. Delivery and Acceptance; Term................................... 22
(a) Time of Delivery................................................ 22
(b) ................................................................ 22
[Intentionally Left Blank]
(c) Acceptance of Aircraft.......................................... 22
(d) Term of Lease................................................... 22
Section 4. Rent............................................................ 22
(a) Rent............................................................ 22
(b) Minimum Payments................................................ 23
(c) Date, Place and Method of Payment............................... 23
(d) Prohibition Against Setoff,
Counterclaim, Etc............................................... 24
Section 5. Representations, Warranties and Covenants....................... 26
(a) Warranties and Disclaimer of Warranties......................... 26
(b) Representations and Warranties of
Lessor.......................................................... 27
(c) No Amendments to Financing Documents............................ 27
(d) Suppliers' Warranties........................................... 27
Section 6. Possession and Use.............................................. 28
(a) Possession...................................................... 28
(b) Reciprocal Recognition of Rights................................ 35
(c) Lawful Insured Operations....................................... 36
(d) Maintenance..................................................... 37
(e) Registration and Insignia....................................... 38
Section 7. Inspection...................................................... 39
Section 8. Additional Covenants of Lessee.................................. 40
(a) Financial Information........................................... 40
(b) Maintenance of Corporate Existence.............................. 42
(c) Maintenance of Status........................................... 42
(d) Payment of Taxes................................................ 42
(e) Consolidation, Merger, Etc...................................... 42
(f) Information..................................................... 43
(g) Place of Business............................................... 44
(h) Certain Limitations on Use...................................... 44
(i) Section 1110.................................................... 45
(j) Permits and Licenses............................................ 45
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(k) Security Opinion; Annual Certificate........................... 45
(l) Letter of Credit............................................... 46
Section 9. Replacement of Parts; Alterations, Modifications and
Additions...................................................... 49
(a) Replacement of Parts........................................... 49
(b) Alterations, Modifications and Additions....................... 50
(c) Pooling........................................................ 52
Section 10. General Tax Indemnity.......................................... 53
(a) Indemnity...................................................... 53
(b) Exclusions..................................................... 55
(c) Covered Income Tax............................................. 57
(d) Reports and Returns............................................ 59
(e) After-Tax Basis................................................ 59
(f) Tax Benefit.................................................... 60
(g) Payment........................................................ 60
(h) Contest........................................................ 61
(i) Refund......................................................... 63
(j) Diligence...................................................... 63
(k) Affiliated Group............................................... 63
(l) Verification................................................... 64
(m) Survival....................................................... 64
Section 11. Loss, Damage and Requisition................................... 64
(a) Event of Loss with Respect to the Airframe..................... 64
(b) Event of Loss with Respect to an Engine........................ 67
(c) Conveyance of Replacement Airframe............................. 68
(d) Application of Proceeds and Payments........................... 70
(e) Requisition for Use by Government with Respect to the
Aircraft....................................................... 71
(f) Application in Default......................................... 72
Section 12. Insurance...................................................... 72
(a) Public Liability and Property Damage Insurance................. 72
(b) Insurance Against Loss or Damage............................... 74
(c) Application of Insurance Proceeds for an Event of Loss......... 77
(d) Application of Insurance Proceeds for Other than an Event of
Loss........................................................... 77
(e) Application in Default......................................... 78
(f) Certificates................................................... 78
(g) Reinsurance.................................................... 79
(h) Storage........................................................ 80
(i) Amounts Held................................................... 80
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(j) After the Term................................................. 80
(k) Governmental Indemnity......................................... 80
Section 13. General Indemnity.............................................. 81
Section 14. Liens.......................................................... 86
Section 15. Protection of Title and Further Assurances..................... 87
Section 16. Return of Aircraft and Records................................. 89
(a) Return......................................................... 89
(b) Status Upon Return............................................. 90
(c) Engines........................................................ 91
(d) Records and Documents.......................................... 91
(e) Condition of Aircraft.......................................... 92
(f) Final Inspection............................................... 93
(g) Aircraft Records and Documents................................. 94
(h) Corrections and Subsequent Corrections......................... 94
(i) Functional Flight Check........................................ 94
(j) Export Certificate of Airworthiness............................ 95
(k) Service Bulletin and Modification Kits......................... 95
(l) Storage Upon Return............................................ 95
(m) Resale/Release Cooperation..................................... 96
Section 17. Events of Default.............................................. 96
Section 18. Remedies....................................................... 98
Section 19. Security for Obligations....................................... 104
Section 20. Renewal Option................................................. 106
Section 21. Miscellaneous........ ......................................... 107
(a) Severability, Amendment, and Construction...................... 107
(b) GOVERNING LAW.................................................. 107
(c) Notices........................................................ 108
(d) Lessor's Right to Perform for Lessee........................... 108
(e) Counterparts................................................... 108
(f) Quiet Enjoyment................................................ 108
(g) Brokers........................................................ 109
(h) Investment of Funds............................................ 109
(i) Entire Agreement; Amendment.................................... 110
(j) Expenses....................................................... 110
(k) Federal Bankruptcy Code........................................ 110
(l) U.S. Registration Number....................................... 110
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(m) Submission to Jurisdiction; Service of
Process; Waiver of Forum Non
Conveniens; Waiver of Jury Trial......................110
(n) Limitation on Recourse................................112
(o) Successor Trustee.....................................113
(p) Article 2-A of the UCC................................113
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122
ANNEXES
Annex I - Description of Original Head Lease
EXHIBITS
Exhibit A - Stipulated Loss Values
Exhibit B - Aircraft Records and Documents
Exhibit C - Definitions and Values
Exhibit D-1 - Lease Supplement No. 3
Exhibit D-2 - Letter of Credit
Exhibit E - Return Condition Requirements
Exhibit F-1 - Foreign Air Carriers
Exhibit F-2 - Permitted Foreign Sublessee Domiciles
Exhibit F-3 - Assignment of Permitted Sublessee
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