EXECUTION COPY
SUBLEASE AGREEMENT 061
Dated as of October 26, 1999
between
CONTINENTAL MICRONESIA, INC.
Sublessor
and
HAWAIIAN AIRLINES, INC.
Sublessee
One XxXxxxxxx Xxxxxxx DC-10-30 Aircraft
N12061
TO THE EXTENT THAT THIS SUBLEASE AND ANY SUBLEASE SUPPLEMENT CONSTITUTE CHATTEL
PAPER, AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION, NO SECURITY INTEREST MAY BE CREATED IN THIS
SUBLEASE THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE
"ORIGINAL".
TABLE OF CONTENTS
Section
Page
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS..................................1
1.1. Definitions......................................................1
1.2. Accounting Terms.................................................6
ARTICLE 2. DELIVERY AND ACCEPTANCE...........................................6
2.1. Agreement to Sublease............................................6
2.2. Conditions Precedent to Sublease of Aircraft by Sublessee........6
2.3. Conditions to Sublease of Aircraft by Sublessor..................7
2.4. Aircraft Delivery Condition; Inspection..........................8
2.5. Reconfiguration and Painting Costs...............................9
2.6. Reimbursement of Costs...........................................9
ARTICLE 3. TERM AND RENT...................................................11
3.1. Term............................................................11
3.2. Basic Rent and Maintenance Reserves.............................11
3.3. Payments on Business Days.......................................12
3.4. Supplemental Rent...............................................12
3.5. Place of Payments...............................................12
3.6. No Set-Off, Counterclaim, Etc...................................13
ARTICLE 4. REPRESENTATIONS, WARRANTIES; DISCLAIMERS........................14
4.1. Of Sublessee....................................................14
4.2. Of Sublessor....................................................15
4.3. Subordination of Sublease to Head Lease.........................17
ARTICLE 5. REGISTRATION, POSSESSION, MAINTENANCE,
OPERATION.............................................................17
5.1. Registration and Insignia.......................................18
5.2. Possession......................................................18
5.3. Maintenance.....................................................19
5.4. Operations......................................................20
ARTICLE 6. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS...........................................21
6.1. Replacement of Parts............................................21
6.2. Title to Parts..................................................21
6.3. Alterations, Modifications and Additions........................22
ARTICLE 7. LOSS, DESTRUCTION, REQUISITION..................................23
7.1. Event of Loss with Respect to Airframe..........................23
7.2. Event of Loss with Respect to an Engine.........................24
7.3. Documents Required in Connection with Substitution..............24
7.4. Application of Payments from Governmental Authorities
for Requisition of Title........................................25
7.5. Requisition for Use by the Government...........................26
7.6. Application of Payments During Existence of Event of Default....26
7.7. Replacement of Engines..........................................26
ARTICLE 8. INSURANCE.......................................................27
8.1. Public Liability and Property Damage Insurance..................27
8.2. Insurance Against Loss or Damage to Aircraft....................28
8.3. Government Indemnity............................................29
8.4. Application of Insurance Proceeds...............................29
8.5. Application of Insurance Proceeds for Other Than
Event of Loss...................................................30
8.6. Application in Default..........................................30
8.7. Certificates of Insurance.......................................30
8.8. Insurance of Sublessee's Interest...............................31
ARTICLE 9. LIENS AND INDEMNITIES...........................................32
9.1. Liens...........................................................32
9.2. General Indemnity...............................................32
9.3. General Tax Indemnity...........................................34
9.4. Survival........................................................37
ARTICLE 10. INSPECTION; FINANCIAL STATEMENTS AND OTHER
INFORMATION...........................................................37
10.1. Inspection.....................................................37
10.2. Financial Statements and Other Information.....................38
ARTICLE 11. RECORDATION AND FURTHER ASSURANCES.............................38
ARTICLE 12. RETURN OF AIRCRAFT.............................................39
12.1 Return.........................................................39
12.2. Records........................................................39
12.3. Condition......................................................39
ARTICLE 13. EVENTS OF DEFAULT..............................................40
ARTICLE 14. REMEDIES.......................................................41
14.1. Default; Remedies..............................................41
14.2. No Waiver, Etc.................................................43
ARTICLE 15. MISCELLANEOUS..................................................43
15.1 Notices........................................................43
15.2. Right to Perform for Sublessee.................................43
15.3. Assignment by Sublessee........................................44
15.4. Assignment by Sublessor........................................44
15.5. Quiet Enjoyment................................................46
15.6. Investment of Funds............................................46
15.7. Maintenance of Status..........................................47
15.8. Confidentiality................................................47
15.9. Applicable Law.................................................47
Exhibit A Sublease Supplement
Schedule 1 Certain Financial Terms
SUBLEASE AGREEMENT 061, dated as of October 26, 1999, between CONTINENTAL
MICRONESIA, INC., a Delaware corporation ("Sublessor"), and HAWAIIAN AIRLINES,
INC., a Hawaii corporation ("Sublessee").
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this
Sublease and shall be equally applicable to both the singular and the plural
forms of the terms herein defined. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time. The word
"including" means "including without limitation".
"Act" means that portion of the United States Code comprising the
provisions formerly referred to as the Federal Aviation Act of 1958, as amended
from time to time.
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person.
"Aircraft" means the Airframe which is Subleased hereunder, together with
each Engine initially installed on the Airframe when delivered and Subleased
hereunder and described on the Sublease Supplement for the Airframe (or any
engine substituted for any of such Engines pursuant to Section 7.1, 7.2, 7.7 or
12.2 hereof), whether or not any of such initial or substituted Engines may from
time to time be installed on the Airframe.
"Airframe" means (a) the XxXxxxxxx Xxxxxxx Model DC-10-30 aircraft
(excluding Engines or engines from time to time installed thereon but including
quick engine change kits, which shall be deemed to be part of the Airframe)
described on the Sublease Supplement executed on the Delivery Date and Subleased
hereunder by Sublessor to Sublessee, and (b) any and all Parts so long as the
same shall be incorporated in such airframe and any and all Parts removed from
such airframe so long as title to such Parts shall remain vested in Sublessor in
accordance with the terms of Section 6.
"Basic Rent" means the rent payable for the Aircraft pursuant to Section
3.2 hereof.
"Basic Rent Payment Date" means the second day of each calendar month,
commencing on May 2, 2000 and concluding on January 2, 2002.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banking institutions are required or authorized to close in
New York, New York or Honolulu, Hawaii. Any reference herein to "days" shall
mean calendar days unless Business Days are specified.
1
"Code" means the United States Internal Revenue Code of 1986, as amended
from time to time, or any similar legislation of the United States enacted to
supersede, amend or supplement such Code.
"Continental" means Continental Airlines, Inc., a Delaware corporation,
and its successors and assigns.
"Continental Indemnitee" means Sublessor and its successors, assigns,
affiliates, directors, officers, employees, agents and servants.
"Default" means any event or condition which, with notice or lapse of time
or both, would constitute an Event of Default.
"Delivery Date" means the date of the Sublease Supplement for the
Aircraft, which date shall be the date on which the Aircraft is delivered to and
accepted by Sublessee and Subleased to Sublessee hereunder, and which date shall
be on or about April 3, 2000 (adjusted, if necessary, if the "Scheduled
Redelivery Date" (as defined in the MSA) for the Aircraft is adjusted at the
conclusion of the condition determination phase of the Aircraft's next scheduled
"C" Check due in March/April 2000) or such later date as the parties may
mutually agree.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"Engine" means (a) each of the three General Electric model CF6-50C2
engines listed by manufacturer's serial number in a Sublease Supplement
subjecting such Engine to this Sublease, whether or not from time to time
installed on such Airframe or installed on any other airframe or on any other
aircraft, (b) any engine which may from time to time be substituted for an
Engine pursuant to Section 7.1, 7.2, 7.7 or 12.2 hereof, whether or not from
time to time installed on the Airframe or any other airframe or on any other
aircraft, and (c) any and all Parts incorporated in such Engine and any and all
Parts removed from such Engine so long as title to such Parts shall remain
vested in Sublessor in accordance with the terms of Section 6; provided,
however, that the term "Engine" shall not include any Engine after this Sublease
shall have terminated with respect thereto. At such time as a replacement Engine
shall be substituted hereunder and the Engine for which the substitution is made
shall be released, such replaced Engine shall cease to be an Engine hereunder.
The term "Engines" means as of any date of determination, all Engines then
subleased hereunder.
"Equipment" means, as of any date of determination and as the context may
require, any or all of the Aircraft, Airframe and Engines subleased to the
Sublessee hereunder on such date. An "item of Equipment" means the Airframe or
any or all of the Engines, as the context may require.
"Escrow Agreement" means that certain Escrow Agreement [N68060 and N12061]
dated as of November 15, 1999 among Sublessor, Sublessee and First Security
Bank, National Association for the deposit and withdrawal of Maintenance
Reserves as contemplated by Section 3.2(c).
2
"Event of Default" is defined in Section 13.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such item of Equipment: (a)
loss of such item of Equipment due to destruction, damage beyond repair or
rendition of such item of Equipment unfit for normal use for any reason
whatsoever; (b) any loss of or damage to such item of Equipment which results in
an insurance settlement with respect to such item of Equipment on the basis of a
total loss or constructive total loss; (c) the requisition of title to or
condemnation of such item of Equipment; or (d) the theft, disappearance,
confiscation or seizure of, or requisition of use of, such item of Equipment
(other than a requisition for use by the Government or any instrumentality or
agency thereof (except a requisition that (i) is determined at the time of
requisition or at any time thereafter prior to the end of the Term to be for a
period that will continue for more than six months beyond the end of the Term or
(ii) is a requisition of any Engine or Engines, but not of the Airframe) unless
and until such item of Equipment shall have been modified or adapted in such
manner as would render reconversion of such item of Equipment for use in normal
commercial service impractical or uneconomical)) which shall have resulted in
the loss of possession of such item of Equipment by the Sublessee for 30
consecutive days, in the case of a theft or disappearance, or 90 consecutive
days, in the case of a confiscation, seizure or requisition for use, or, at the
request of the Sublessee, as the Owner in its absolute discretion may agree, up
to 180 consecutive days. 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 constitutes a part of the Aircraft.
"FAA" means the Federal Aviation Administration or any governmental
person, agency or other authority succeeding to the functions of the Federal
Aviation Administration.
"Facility Lien" means any Lien on the Aircraft or any Engine granted by a
Head Lessor or Owner in favor of a Lender.
"Government" means the federal government of the United States of America
or any instrumentality or agency thereof whose obligations are backed by the
full faith and credit of the United States of America.
"Head Lease" means (a) in the case of the Airframe, Lease Agreement No. II
dated as of August 25, 1980 between Sublessor, as lessee, and First Security
Bank, National Association, as owner trustee and lessor, and (b) in the case of
any Engine leased by Sublessor but not covered by such Lease Agreement No. II,
the lease agreement covering such Engine.
3
"Head Lessor Lien" means (i) a Facility Lien, (ii) the Liens on the
Airframe and Engines arising under the Head Leases, (iii) any Lien on the
Airframe or any Engine created by a Head Lessor or Owner or resulting from the
affirmative act of the Head Lessor or Owner that is not related to or expressly
permitted by the Sublease or consented to by Sublessee, (iv) any Lien on the
Airframe or any Engine resulting from claims against a Head Lessor or Owner not
related to the transactions contemplated by this Sublease, and (v) any Lien
resulting from Taxes imposed against a Head Lessor or Owner which are not
indemnified against by Sublessee.
"Head Lessor" means (a) in the case of the Airframe, First Security Bank,
National Association, as owner trustee and lessor under the Head Lease referred
to clause (a) of the definition of "Head Lease" or any of its successors and
assigns in such capacity, and (b) in the case of any Engine leased by Sublessor
but not covered by the Head Lease referred to in clause (a) of the definition of
"Head Lease", the lessor under the relevant Head Lease referred to in clause (b)
of the definition of "Head Lease" covering such Engine.
"Heavy Maintenance Reserves" means the monthly payments by Sublessee to be
made pursuant to Section 3.2(c).
"Indemnitee" means Sublessor, Head Lessor, Owner, Lender, their respective
successors, permitted assigns, affiliates, directors, officers, employees,
agents and servants.
"Lender" means any bank or other financial institution providing debt
financing to the Head Lessor or Owner of the Airframe or an Engine.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, security
interest or lease in the nature thereof (including any conditional sale
agreement, equipment trust agreement or other title retention agreement)
affecting the title to or any interest in property.
"MSA" means the Maintenance Services Agreement dated as of October 26,
1999 between Sublessee and Continental.
"Officer's Certificate" means a certificate signed by the Chairman, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Person providing such certificate.
"Operative Agreements" means this Agreement and each Sublease
Supplement.
"Overdue Rate" means the Prime Rate plus 150 basis points.
"Owner" means (a) with respect to the Airframe, Castle Harbour - I Limited
Liability Company, the beneficial owner of the Aircraft, and its successors and
assigns, and (b) with respect to any Engine not covered by the Head Lease
referred to in clause (a) of the definition of "Head Lease", the beneficial
owner of such Engine.
"Parts" means all appliances, parts, instruments, avionics, appurtenances,
accessories, furnishings and other equipment or components of whatever nature
(other than complete Engines or engines and other than Removable Parts and any
items leased by Sublessee from a third party other than Sublessor in accordance
with Section 6) so long as the same shall be incorporated or installed in or
attached to any item of Equipment or so long as title thereto shall remain
vested in Sublessor in accordance with Section 6 hereof after removal from such
item of Equipment.
4
"Permitted Lien" means (a) any Facility Lien, (b) the rights of others
under agreements or arrangements expressly permitted by the terms of Section 5.2
or 6.2 hereof, (c) Liens created by a Head Lessor or Owner, (d) any Lien
referred to in clauses (a) through (i) of Section 9.1 and (e) Sublessor Liens.
"Permitted Sublessor/Head Lessor Liens" is defined in Section 4.2(f).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Prime Rate" means the rate per annum announced by The Chase Manhattan
Bank, N.A. as its prime commercial lending rate at its principal office in New
York from time to time.
"Rent" means Basic Rent and Supplemental Rent.
"Securities Act" means the Securities Act of 1933, as amended.
"Stipulated Loss Value" as of any Stipulated Loss Value Date (a) for the
Aircraft means the amount designated as Aircraft Stipulated Loss Value opposite
such Stipulated Loss Value Date on Schedule 1 hereto and (b) for an Engine means
the amount designated as Engine Stipulated Loss Value opposite such Stipulated
Loss Value Date on Schedule 1 hereto.
"Stipulated Loss Value Date" means each date for which a Stipulated Loss
Value is listed on Schedule 1 hereto.
"Sublease", "this Sublease", "this Agreement", "hereby", "herein",
"hereof", "hereunder", or other like words mean this Sublease Agreement 061,
including without limitation supplementation hereof by one or more Sublease
Supplements.
"Sublease Supplement" means a supplement to this Sublease substantially in
the form attached as Exhibit A hereto, subjecting the Aircraft or other property
to this Sublease.
"Sublessor Lien" means (i) any Lien (other than a Facility Lien, a Lien
created by the Head Lessor or Owner or the Lien on the Airframe or any Engine
arising under the relevant Head Lease) created by Sublessor or resulting from
the affirmative act of the Sublessor that is not related to or expressly
permitted by the Sublease or consented to by Sublessee, (ii) any Lien resulting
from claims against Sublessor not related to transactions contemplated by this
Sublease, and (iii) any Lien resulting from Taxes imposed against an Indemnitee
which are not indemnified against by Sublessee; but does not include any Lien
resulting from Sublessor's exercise of remedies pursuant to Section 14 while an
Event of Default has occurred and is continuing.
5
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Sublessee assumes or agrees to pay to Sublessor or to or
on behalf of any Indemnitee under this Sublease directly or otherwise, including
(i) Stipulated Loss Value payments and (ii) all amounts required to be paid by
Sublessee under the indemnities contained in Article 9 hereof.
"Taxes" is defined in Section 9.3(a).
"Term" means the term for which the Aircraft is subleased beginning on the
date on which the Aircraft is delivered to Sublessee hereunder and continuing
until January 2, 2002; provided that if the Sublessee fails to return the
Aircraft to Sublessor on the anticipated last day of the Term in the condition
required hereunder, the Term shall be extended until the Aircraft is so
returned.
"Transfer" means, with respect to any Person, to transfer, by xxxx of sale
or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine or Part, as the case may be, to another Person
on an "as is, where is" basis, free and clear of any Lien or Sublessor Lien but
otherwise without recourse, representation or warranty, express or implied,
including an express disclaimer of warranties, representations and guarantees in
a manner comparable to that set forth in Section 4.2(h).
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in conformity with generally accepted accounting
principles applied on a consistent basis, and all financial data required to be
submitted pursuant to this Sublease shall be prepared in conformity with such
principles except as otherwise provided herein.
ARTICLE 2.
DELIVERY AND ACCEPTANCE
2.1. Agreement to Sublease. Subject to satisfaction of the applicable
conditions contained in Section 2.3 below, Sublessor hereby agrees to tender
delivery of the Aircraft on the Delivery Date and simultaneously to sublease to
Sublessee hereunder, and subject to satisfaction of the applicable conditions
contained in Section 2.2 below, Sublessee hereby agrees to accept such delivery
and to Sublease from Sublessor hereunder the Aircraft. By execution and delivery
of the Sublease Supplement regarding the Aircraft, (i) Sublessor and Sublessee
shall each confirm the satisfaction of the conditions contained in Section 2.3
and 2.2, respectively, below and (ii) Sublessee shall confirm to Sublessor that
Sublessee has irrevocably accepted the Aircraft for all purposes hereof.
Sublessee shall inspect the Aircraft on or prior to the Delivery Date and will
become knowledgeable as to its operating condition.
2.2. Conditions Precedent to Sublease of Aircraft by Sublessee.
Sublessee's obligation to Sublease the Aircraft under the Sublease shall be
subject to the following having been complied with to the satisfaction of or
waived by Sublessee on or before the Delivery Date, each document, instrument or
opinion referred to below to be reasonably satisfactory in form and substance to
Sublessee:
6
2.2.1 Authorization, Execution and Delivery of Documents. The Sublessor
shall have duly authorized, executed and delivered the Operative Agreements and
the Escrow Agreement and Continental shall have duly authorized, executed and
delivered the MSA and all such agreements shall be in full force and effect on
the Delivery Date.
2.2.2 Opinions of Counsel. Sublessee shall have received a favorable
opinion of counsel to Sublessor as to the matters referred to in Sections 2.2.1,
4.2(a), 4.2(b) and the first clause of 4.2(c) hereof and the opinion of special
FAA counsel referred to in Section 2.3.6 below.
2.2.3 Representations and Warranties. The representations and warranties
of Sublessor contained in Section 4.2 hereof shall be true and correct on and as
of the Delivery Date as though made on and as of the Delivery Date (except to
the extent that such representations and warranties relate solely to an earlier
date in which case such representation or warranties shall be true and correct
as of such earlier date).
2.2.4 No Loss or Destruction of the Aircraft. Neither the Airframe nor any
Engine shall have suffered an Event of Loss.
2.2.5 Delivery Condition of Aircraft. Sublessor shall have complied with,
and satisfied, the covenants set forth in Section 2.4 hereof, Sublessee shall
have completed its inspection and acceptance flight of the Aircraft as provided
in Section 2.4 and the Aircraft shall have met the requirements of the delivery
condition set forth in Section 2.4 or Sublessor and Sublessee shall have entered
into an agreement to address any failure to satisfy any of the foregoing.
2.2.6 Liens. Sublessor shall have delivered a certificate from an officer
of Sublessor stating that there is no Sublessor Lien or, to Sublessor's
knowledge, Head Lessor Lien on the Aircraft other than any Permitted
Sublessor/Head Lessor Liens.
2.2.7 Filing. On such Delivery Date, the Sublease and the Sublease
Supplement for the Aircraft shall have been duly filed with the FAA pursuant to
the Act.
2.2.8 All Necessary Approvals. All necessary approvals for the
transactions set forth in this Sublease have been obtained, including without
limitation, the final approvals of Head Lessor and Owner.
2.3. Conditions to Sublease of Aircraft by Sublessor. The obligation of
Sublessor to sublease the Aircraft to Sublessee on the Delivery Date is subject
to the following conditions having been complied with to the satisfaction of or
waived by Sublessor on or before the Delivery Date (each document, instrument,
certificate or opinion referred to below to be reasonably satisfactory in form
and substance to Sublessor):
7
2.3.1 Authorization, Execution and Delivery of Documents. The Operative
Agreements, the MSA and the Escrow Agreement shall have been duly authorized,
executed and delivered by Sublessee and shall be in full force and effect on the
Delivery Date.
2.3.2 Representations and Warranties Correct; Event of Default. After
giving effect to the Sublease of the Aircraft pursuant to this Agreement, the
representations and warranties of Sublessee contained in Section 4.1 hereof
shall be true and correct on and as of the Delivery Date as if such
representations had been made on and as of the Delivery Date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties shall be correct on and as of
such earlier date), and (ii) no Event of Default shall have occurred and be
continuing.
2.3.3 Insurance Certificates. Sublessor shall have received a broker's
report and insurance certificates signed by Sublessee's regularly retained
independent aircraft insurance broker or brokers evidencing Sublessee's due
compliance with the insurance provisions of the Sublease.
2.3.4 Filing. On such Delivery Date, the Sublease and the Sublease
Supplement for the Aircraft shall have been duly filed with the FAA pursuant to
the Act.
2.3.5 Opinion of Counsel for Sublessee. Sublessor shall have received a
favorable opinion from counsel to Sublessee as to the matters referred to in
Sections 2.3.1, 4.1(a), 4.1(b) and 4.1(d).
2.3.6 Opinion of Oklahoma City Counsel. Sublessor and Sublessee shall have
received a favorable written opinion or opinions addressed to them from Xxxxx,
Xxxxx & Xxxxxx, special counsel in Oklahoma City, the cost of which shall be
borne equally by Sublessor and Sublessee.
2.3.7 No Loss or Destruction of the Aircraft. Neither the Airframe nor any
Engine shall have suffered an Event of Loss.
2.3.8 Adoption by Sublessee of Continental's Maintenance Program.
Sublessee shall have adopted Continental's "Maintenance Program" with respect to
the Airframe (as such term is defined in the MSA), as contemplated by Article
3.G of the MSA.
2.4. Aircraft Delivery Condition; Inspection. Sublessor covenants
that prior to the Delivery Date,
(a) heavy maintenance of the Aircraft have been recently completed in
compliance with the maintenance program of Continental and all requirements for
immediate operation under Federal Aviation Regulation 121;
8
(b) Sublessee or its representatives will be entitled to complete a
standard ground and test flight inspection of the Aircraft including log books
and records and shall not be required to accept the Aircraft unless the
condition of the Aircraft is reasonably satisfactory;
(c) the Aircraft will be equipped with a 28 first class and 254 coach
seating configuration and painted with Sublessee's tail and fuselage logo
against Continental's existing white and xxxx paint scheme, unless mutually
agreed to otherwise;
(d) Sublessor will provide one shipset of galley equipment (in addition to
the extra shipset of galley equipment that was delivered to Sublessee on
November 15, 1999), 12 cargo compartment partial load latches (4 forward and 8
aft) part number AWJ7019-501, 8 cargo compartment partial load latches (all
forward) part number 000-00000-0 and 26 LD3 containers; and
(e) Sublessor will make reasonable best efforts to obtain a letter,
satisfactory to Sublessee, from the Head Lessor and Owner of the Airframe
agreeing not to disturb Sublessee's possession and use of the Aircraft unless an
Event of Default occurs hereunder.
For the avoidance of doubt, the standard ground inspection referred to in clause
(b) above shall not include borescoping the Engines or auxiliary power unit or
the opening of any access panels.
2.5. Reconfiguration and Painting Costs. The start-up costs associated
with the reconfiguration and painting of the Aircraft as detailed in Schedule 1
shall be for the account of Sublessee and shall be paid within 30 days after
receipt by Sublessee of an invoice for such start-up costs.
2.6. Reimbursement of Costs. (a) If the transactions set forth in this
Sublease do not occur or the Aircraft is not otherwise delivered pursuant hereto
- in either case due to the failure of Sublessor to obtain the final approvals
set forth in Section 2.2.8, then (1) Sublessor shall reimburse Sublessee for the
reasonable actual costs and expenses associated with the documentation of such
transactions, including without limitation, attorneys' fees and the costs of
preparation and review of documents, (2) this Sublease shall terminate and (3)
neither party shall have any further obligation to the other party hereunder.
(b) If the transactions set forth in this Sublease do not occur because
Sublessee and Sublessor disagree as to whether the Aircraft meets the delivery
conditions set forth in Section 2.4(a) and (b), each party acting reasonably,
then (1) each party shall bear its own actual costs and expenses associated with
the documentation of such transactions, including without limitation, attorneys'
fees and the costs of preparation and review of documents, (2) Sublessee shall
reimburse Sublessor (or Continental under the MSA) for the start-up costs
referenced in Section 2.5, (3) this Sublease shall terminate and (4) neither
party shall have any further obligation to the other party hereunder.
9
ARTICLE 3.
TERM AND RENT
3.1. Term. Unless otherwise earlier terminated pursuant to the provisions
hereof, the Term shall commence on the Delivery Date thereof and shall continue
until the end of the Term.
3.2. Basic Rent and Maintenance Reserves. (a) Sublessee hereby agrees to
pay to Sublessor Basic Rent in arrears throughout the Term in monthly
installments on each Basic Rent Payment Date with each such installment of Basic
Rent being in an amount equal to the sum of the amounts designated as Monthly
Aircraft Basic Rent on Schedule 1 ("Aircraft Basic Rent") and Monthly
Entertainment System Basic Rent on Schedule 1 hereto; provided, however, that
the first installment of Basic Rent payable on May 2, 2000 shall be pro-rated.
(b) Notwithstanding the foregoing, if Sublessee fails to return the
Aircraft to Sublessor on or before the anticipated last day of the Term (i.e.,
January 2, 2002) in the condition required hereunder, Aircraft Basic Rent shall
accrue thereafter until the Aircraft is so returned at a monthly amount equal to
the amount designated as monthly "Holdover Basic Rent" on Schedule 1 hereto and
Entertainment System Basic Rent shall also continue to accrue thereafter until
the Aircraft is so returned at the regular monthly rate; provided, however, that
notwithstanding the foregoing, (1) Aircraft Basic Rent shall accrue at the
regular monthly Aircraft Basic Rent amount and not at the Holdover Basic Rent
amount for up to five days after January 2, 2002 for so long as (W) the
redelivery location designated by Sublessor pursuant to Article 12 is not Los
Angeles International Airport, (X) Sublessee is unable to return the Aircraft as
a result of conditions or events that are not within Sublessee's control or
power to avoid or prevent, (Y) Sublessee has ceased commercial operation of the
Aircraft and (Z) Sublessee makes diligent efforts to return the Aircraft, and
(2) no Basic Rent shall accrue whatsoever if Sublessee's failure to return the
Aircraft on the date set forth herein is a result of the failure of Continental
to perform under the MSA. If the conditions or events mentioned in clause (1)(X)
of the preceding sentence continue to prevent Sublessee from returning the
Aircraft on January 8, 2002, beginning on that date and continuing until the
Aircraft is returned in the condition required hereunder, Aircraft Basic Rent
shall accrue at a monthly amount equal to the amount designated as monthly
"Holdover Basic Rent" on Schedule 1 hereto.
(c) Not later than the fifth day of each calendar month after the
commencement of the Term, Sublessee shall deliver to Sublessor a report showing
the flight hours flown by the Aircraft for the preceding calendar month and
shall make payment in respect of the Maintenance Reserves in an amount equal to
the sum of the number of flight hours for the Aircraft for such month multiplied
by the applicable amount set forth on Schedule 1 hereto opposite the caption
"Heavy Maintenance Reserve"; provided that the number of flight hours used in
computing the amount of Heavy Maintenance Reserves for the first four months of
the Term, shall not be less than 220 flight hours. Such payment shall be made to
an interest-bearing account controlled jointly by Sublessor and Sublessee and
identified in the Escrow Agreement. The Heavy Maintenance Reserves shall be used
to pay for heavy maintenance work on the Aircraft for the C Check due on the
Aircraft in April 2001. Any fees, costs and expenses payable under the Escrow
Agreement shall be deducted from interest earned on the Heavy Maintenance
Reserves.
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Following completion of such heavy maintenance work, Sublessor and
Sublessee shall execute a joint instruction under the Escrow Agreement releasing
from the escrowed Heavy Maintenance Reserves an amount sufficient to pay for
such heavy maintenance work to Continental or as Continental directs so long as
the MSA is in effect or, if the MSA is not then in effect, to the facility
performing the heavy maintenance work (the "Maintenance Facility") and in either
case in accordance with any applicable requirements regarding time and manner of
payment of the heavy maintenance provider performing such work. If the amount of
Heavy Maintenance Reserves released is not sufficient to pay for the cost of
such work, within five days of receipt of an invoice for such deficiency,
Sublessee shall make payment to Continental or as Continental directs if the MSA
is in effect or, if the MSA is not then in effect, to the Maintenance Facility
in an amount equal to any such deficiency.
Upon completion of the last regularly scheduled heavy maintenance visit
(i.e., "C" Check) prior to the end of the Term and payment of all amounts due
with respect thereto, Sublessee shall have no further obligation to make any
additional Heavy Maintenance Reserve payments hereunder, and the parties shall
execute a joint instruction under the Escrow Agreement to the escrow agent
thereunder releasing any remaining balance in the escrow account to Sublessee.
3.3. Payments on Business Days. If any date on which a payment of Rent
becomes due and payable is not a Business Day, then such payment need not be
made on such scheduled date but may be made on the next Business Day with the
same force and effect as if made on such scheduled date, and (provided such
payment is made on the next Business Day) no interest shall accrue on the amount
of such payment from and after such scheduled date.
3.4. Supplemental Rent. Sublessee also agrees to pay to Sublessor, or to
the Person entitled thereto, any and all Supplemental Rent with respect to
Stipulated Loss Value promptly as the same shall become due and owing and all
other amounts of Supplemental Rent that become due and payable hereunder within
ten Business Days after demand, and Sublessee will also pay to Sublessor, or to
whomsoever shall be entitled thereto as Supplemental Rent, to the extent
permitted by applicable law, interest at the Overdue Rate on any part of any
installment of Basic Rent or Supplemental Rent not paid when due for any period
from and including the date on which the same was due to but excluding the date
of payment in full.
3.5. Place of Payments. Payments of Basic Rent and Supplemental Rent
(other than Heavy Maintenance Reserve payments, which shall be paid to the
account identified in the Escrow Agreement) shall be paid in funds of the United
States of America which shall be immediately available not later than 1:00 P.M.
Houston time, at the place of receipt, on the date due by wire transfer to the
account of Sublessor, at The Chase Manhattan Bank, ABA 000-000-00, Account No.
___________, Ref: Aircraft 061 Sublease, or to such other financial institution
located in the continental United States as directed by Sublessor in writing to
Sublessee at least three Business Days prior to the due date of such payment.
11
3.6. No Set-Off, Counterclaim, Etc. Subject to the provisions set forth
below in this Section 3.6, this Sublease is a net Sublease, and Sublessee's
obligation to pay all Rent payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance, including without limitation:
(a) any setoff, counterclaim, recoupment, defense or other right
(including right of reimbursement) which Sublessee may have against Sublessor or
any other Person for any reason whatsoever;
(b) any defect in the title, airworthiness, condition, design, operation
or fitness for use of, or any damage to or loss or destruction of, the Aircraft,
Airframe or any Engine, or any interruption or cessation in the use or
possession thereof by Sublessee for any reason whatsoever;
(c) any insolvency, bankruptcy, reorganization or similar proceedings by
or against Sublessee;
(d) any restriction, prevention or curtailment of or interference with any
use of the Aircraft or part thereof;
(e) any invalidity or unenforceability or disaffirmance of this Sublease
or any provision hereof or any of the other Operative Agreements or any
provision thereof, in each case whether against or by Sublessee or otherwise; or
(f) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
If for any reason whatsoever this Sublease shall be terminated in whole or
in part by operation of law or otherwise (other than as a result of any act or
failure to act by the Sublessor) except as specifically provided herein, if and
to the extent that the Sublessee retains the use and possession of the Aircraft
on substantially the same terms as those provided in this Sublease, Sublessee
nonetheless agrees to pay to the Sublessor an amount equal to each Rent payment
at the time such payment would have become due in accordance with the terms
hereof had this Sublease not been terminated in whole or in part.
Notwithstanding any provision of this Section 3.6 to the contrary, (a)
Sublessee reserves such rights as it may have under applicable law with respect
to the breach by Sublessor of the covenant set forth in Section 15.5 hereof; (b)
if Sublessor becomes subject to a bankruptcy proceeding and Sublessor's trustee
in bankruptcy rejects this Sublease, Sublessee shall return the Aircraft to
Sublessor in compliance with all the terms and provisions of this Sublease which
are applicable to the return of the Aircraft on the last day of the Term and,
upon such return and performance of such terms and conditions, this Sublease and
Sublessee's obligation to pay any Rent hereunder shall terminate; and (c)
nothing contained in this Section 3.6 shall be construed as a waiver of
Sublessee's right to seek, or its entitlement to, damages, specific performance,
separate recovery of any payment of Rent made by Sublessee which is not due and
payable in accordance with the terms of this Sublease, other remedies at law or
equity and any combination thereof, as against Sublessor or any other Person as
shall be liable therefor, on account of any failure of Sublessor or any other
such Person to perform its obligations under this Sublease (including, but not
limited to, breach of Section 15.5 hereof) or on account of any act or omission
of Sublessor or any other such Person or to enforce any judgment therefor.
12
ARTICLE 4.
REPRESENTATIONS, WARRANTIES; DISCLAIMERS
4.1. Of Sublessee. Sublessee hereby makes the following representations,
warranties and covenants to Sublessor:
(a) Organization, Etc. Sublessee is a corporation duly organized and
validly existing in good standing under the laws of the State of Hawaii and has
the corporate power and authority to perform its obligations under the Operative
Agreements to which it is a party.
(b) Authorization, Etc. The Operative Agreements to which it is a
party have been duly authorized by all necessary corporate action on the part of
Sublessee, do not require any approval of the stockholder of Sublessee (or if
such approval is required, such approval has been obtained), and neither the
execution and delivery hereof nor the consummation of the transactions
contemplated hereby nor compliance by Sublessee with any of the terms and
provisions hereof will contravene its Certificate of Incorporation or By-Laws or
any law or governmental rule or regulation (as in effect on the date this
representation is made) applicable to Sublessee or result in any breach of, or
constitute any default under, or result in the creation of any Lien (other than
Permitted Liens) upon any property of Sublessee under any material indenture,
mortgage or other agreement to which Sublessee is a party or by which Sublessee
or its properties or assets may be bound.
(c) Consents. Sublessee has received or has complied with every
necessary consent, approval, order, or authorization of, or registration with,
or the giving of prior notice to, any federal or state governmental authority
having jurisdiction over Sublessee required to be received or complied with on
or prior to the Delivery Date to the extent required for the Sublessee to
execute and deliver the Operative Agreements to which it is a party currently in
effect and to perform any of the transactions contemplated hereby and thereby.
13
(d) Enforceability, Etc. The Operative Agreements to which it is a
party have been (or, upon execution thereof by Sublessee, will be) duly executed
and delivered by Sublessee, and the Operative Agreements to which it is a party
will, upon execution and delivery by the other party or parties thereto,
constitute (or, upon execution thereof by Sublessee, shall constitute) legal,
valid, and binding obligations of Sublessee, enforceable in accordance with
their respective terms except as enforcement thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws and
general principles of equity.
(e) No Liens. On the Delivery Date, the Aircraft shall be free and
clear of all Liens (other than Permitted Liens) attributable to Sublessee.
(f) No Defaults. No Event of Default or event which, with the giving
of notice or lapse of time or both, would become such Event of Default has
occurred and is continuing.
4.2. Of Sublessor. Sublessor hereby makes the following
representations, warranties and covenants to Sublessee:
(a) Organization, Etc. Sublessor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to enter into and perform
its obligations under the Operative Agreements.
(b) Authorization, Etc. The Operative Agreements have been duly
authorized, executed and delivered by Sublessor, do not require any approval of
its stockholders or consent of any trustee or holder of any of its indebtedness
or other obligations for borrowed money or any instrument or agreement with
respect thereto and assuming the due authorization, execution, and delivery by
the other parties thereto constitute legal, valid and binding obligations of
Sublessor enforceable against it in accordance with their respective terms
except as enforcement thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws and general principles of
equity.
(c) No Violation. Neither the execution, delivery or performance by
Sublessor of the Operative Agreements nor the consummation of any of the
transactions by Sublessor contemplated thereby contravenes any law, regulation,
order or judgment applicable to or binding on Sublessor, or any provision of the
charter or by-laws (each as amended to date) of Sublessor or will result in the
creation of a Lien on any part of the Aircraft under, or will result in a breach
of, or constitute a default under, or contravene any provisions of, any
contract, agreement or instrument to which Sublessor is a party or by which it
or its properties are bound, except for the Liens of the Operative Agreements.
(d) No Consents or Approvals. Neither the execution, delivery or
performance by Sublessor of the Operative Agreements nor the consummation by
Sublessor of any of the transactions contemplated thereby requires the consent
or approval of, the giving of notice to, the registration with, the recording or
filing of any documents with, or the taking of any other action in respect of,
any Federal, state or local governmental commission, authority, agency or body
except for the filings and recordings of this Sublease and the Sublease
Supplement with the FAA and filings, if any, made pursuant to any routine
recording or regulatory requirements applicable to Sublessor.
14
(e) U.S. Citizenship. As of the date hereof to Sublessor's
knowledge, each of the Owner and Head Lessor of the Airframe is a "citizen of
the United States," as defined in Section 40102(a)(15) of the Act. If either the
Owner or Head Lessor of the Airframe is not now or ceases to be a "citizen of
the United States" within the meaning of the foregoing definition, Sublessor
agrees to take appropriate measures under the Head Lease with respect to the
Airframe to prevent deregistration of the Airframe under the Act or limitation
on use or operation of the Aircraft.
(f) Sublessor's Liens. There is no Lien on the Aircraft attributable
to Sublessor or to Sublessor's knowledge, Head Lessor or Owner except for (i)
Liens of the type identified in clauses (a), (b), (f), (g) and (h) of Section
9.1 hereof, (ii) Liens in favor of a Person who has provided, or prior to the
Delivery Date will provide, to Sublessee a letter of quiet enjoyment in form and
substance reasonably satisfactory to Sublessee and (iii) with respect to Engines
only, Liens in favor of a Head Lessor, Owner or Lender so long as such Person
does not interfere with Sublessee's possession and use of such Engine
(collectively, "Permitted Sublessor/Head Lessor Liens"). Sublessor shall, at its
own cost and expense, promptly take such action as may be necessary to discharge
duly any Head Lessor Lien or Sublessor Lien on the Airframe or any part thereof
other than a Permitted Sublessor/Head Lessor Lien. In addition, if any Head
Lessor, Owner or Lender holding a Lien on an Engine shall interfere with
Sublessee's use and possession of such Engine, Sublessor shall (a) provide
Sublessee with a replacement engine for use on the Airframe, (b) induce such
Head Lessor, Owner or Lender to enter into an engine exchange or (c) take other
appropriate steps to cure such interference. Sublessor will indemnify and hold
harmless the Sublessee from and against any loss, cost or expense (including
legal fees and expenses incurred by Sublessee) as a result of the imposition or
enforcement against the Aircraft, or any part thereof, of any Sublessor Lien or
Head Lessor Lien.
(g) No Transfer. Sublessor shall not transfer any interest in the
Aircraft or the Sublease except in compliance with Section 15.4.
(h) Disclaimers. SUBJECT TO SATISFACTION OF THE CONDITIONS SET FORTH
IN SECTION 2 HEREOF, SUBLESSOR SUBLEASES AND SUBLESSEE EXPRESSLY AGREES TO TAKE
THE AIRCRAFT "AS IS". EXCEPT AS SET FORTH IN SECTION 4.2(f) HEREOF SUBLESSOR
MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE NO -- AND SUBLESSEE HEREBY
EXPRESSLY DISCLAIMS ANY-- REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
THE TITLE, AIRWORTHINESS, VALUE, CONDITION, COMPLIANCE WITH SPECIFICATIONS,
DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF
THE AIRCRAFT, OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, OR ANY PART THEREOF, IT BEING
UNDERSTOOD THAT SUBLESSOR SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH
RESPECT TO ANY OF THE FOREGOING MATTERS AND THAT ALL RISKS OF ANY NATURE
INCIDENT THERETO ARE TO BE BORNE BY SUBLESSEE.
15
Sublessor agrees to and does hereby authorize Sublessee to exercise for
the account of Sublessor such rights as Sublessor may have under any warranty,
express or implied, with respect to the Aircraft made by the manufacturer of the
Airframe, Engines or any Part thereof, any subcontractor or supplier thereof, or
any other seller thereof, and Sublessor agrees to exert its diligent efforts, at
Sublessee's expense, to enforce such rights as Sublessor may have with respect
thereto for the benefit of Sublessee; provided, however, that upon an Event of
Default and termination of this Sublease all such rights shall immediately
revert to Sublessor.
4.3. Subordination of Sublease to Head Lease. SUBLESSEE ACKNOWLEDGES THAT
THIS SUBLEASE IS SUBJECT AND SUBORDINATE TO ALL THE TERMS OF THE HEAD LEASE
COVERING THE AIRFRAME, INCLUDING WITHOUT LIMITATION THE RIGHTS OF THE HEAD
LESSOR OF THE AIRFRAME TO REPOSSESSION PURSUANT TO ARTICLE 14 OF THE HEAD LEASE.
WITHOUT LIMITING THE FOREGOING, THE HEAD LESSOR OF THE AIRFRAME MAY AVOID OR
TERMINATE THIS SUBLEASE FOLLOWING AN EVENT OF DEFAULT UNDER SUCH HEAD LEASE. IF
THE HEAD LESSOR OF THE AIRFRAME DECLARES SUCH HEAD LEASE TO BE IN DEFAULT
PURSUANT TO ARTICLE 14 THEREOF, THE SUBLESSOR'S RIGHTS UNDER THIS SUBLEASE SHALL
AUTOMATICALLY BE DEEMED ASSIGNED AS SECURITY TO THE HEAD LESSOR OF THE AIRFRAME.
If as a result of an event of default under, or termination of, the Head
Lease covering the Airframe, the rights of Sublessee under this Sublease are
terminated, and no Event of Default by Sublessee under this Sublease has
occurred and is continuing, then such event of default under, or termination of,
such Head Lease shall be a breach by Sublessor under this Sublease that will
entitle Sublessee to all rights and remedies in respect of such default under
all applicable laws. In addition, Sublessor agrees to indemnify Sublessee from
and against any and all losses, costs and liabilities incurred by Sublessee
resulting therefrom.
ARTICLE 5.
REGISTRATION, POSSESSION, MAINTENANCE, OPERATION
16
5.1. Registration and Insignia. (a) Sublessee acknowledges that title to
the Airframe shall remain vested in the Head Lessor of the Airframe and title to
each Engine shall remain vested in the Head Lessor or Owner of such Engine
during the Term. Sublessee shall, at its own expense, maintain the registration
of the Aircraft with the FAA to reflect the interest of Head Lessor of the
Airframe as owner. Sublessee shall reasonably cooperate with Sublessor, to the
extent Sublessee's cooperation is required, in connection with causing any
documents evidencing any Lender's interest in the Aircraft pursuant to any
Facility Lien to be filed with the FAA. Sublessee agrees to take no action which
would result in the Airframe failing to remain duly registered in the name of
Head Lessor of the Airframe with the FAA under the Act (it being understood that
Sublessee shall not be required to comply with this covenant to the extent that
the Head Lessor or Owner of the Airframe fails to comply with its covenants in
the Head Lease covering the Airframe and related documents to maintain its
citizenship or takes any other action which precludes or prevents such
registration from being maintained and makes such compliance by Sublessee
impossible).
(a) Nameplate. If permitted under applicable law or governmental regulation and
to the extent provided by Sublessor, Sublessee agrees to maintain in the cockpit
of the Airframe and on each Engine the nameplates or stencils or other
appropriate markings currently installed on the Airframe and Engines and any
substitute nameplate or stencils that may be provided by Sublessor or reasonably
requested by Sublessor to be obtained by Sublessee (such nameplate or other
markings to be replaced, if necessary, with a nameplate or other markings
reflecting the name of any successor Head Lessor or the addition of the name of
a Lender or the name of the Sublessor within a reasonable period of time after
notice by Sublessor).
5.2. Possession. (a) Shipping, Testing and Repair. Except as expressly
provided herein, Sublessee will not sell, sub-sublease or otherwise deliver,
transfer or relinquish possession of the Aircraft, the Airframe or any Engine or
install any Engine, or permit any Engine to be installed, on any airframe other
than the Airframe; provided, however, that, so long as no Event of Default has
occurred and is continuing, Sublessee may, without such consent, deliver
possession of the Aircraft, Airframe or any Engine, or Part thereof, (i) to any
Person for the purpose of shipping or (ii) to the manufacturer thereof or to any
other organization for testing, service, repair, maintenance or overhaul work or
similar purposes or for required or permitted alterations or modifications in or
additions to the Aircraft, Airframe or any Engine.
With respect to any transaction pursuant to the preceding paragraph of
this Section 5.2(a), Sublessee shall remain primarily liable hereunder for the
performance of all the terms of this Sublease to the same extent as if such
contract or transfer had not occurred.
(b) Limitations on Transfers of Possession Imposed by the Head Leases.
Sublessee acknowledges that the Head Leases specifically prohibit any sublessee
of the Aircraft (including the Sublessee) from transferring possession of or any
other rights to the Aircraft or any Engine to any other Person except as
permitted by Section 5.2(a).
17
Without limiting the foregoing, Sublessee agrees that it will not do any
of the following without the prior written consent of Sublessor and the relevant
Head Lessor:
(1) United States Government. Transfer possession of the Aircraft,
Airframe or any Engine to the Government pursuant to a contract or to the
Civil Reserve Air Fleet Program or any similar or substitute programs;
(2) Installation of Engines. Install an Engine on an airframe owned by
Sublessee; or
(3) Installation of Engines on Other Airframes. Install an Engine on an
airframe leased to, or purchased by, Sublessee subject to a lease, conditional
sale, trust indenture or other security agreement.
(c) Recognition of Rights. Sublessor hereby agrees for the benefit of
each lessor, conditional seller, indenture trustee or secured party of any
engine leased to or purchased by Sublessee subject to a lease, conditional sale,
trust indenture or other security agreement that Sublessor will not acquire or
claim, as against such lessor, conditional seller, indenture trustee or secured
party, any right, title or interest in any engine as the result of such engine
being installed on the Airframe at any time while such engine is subject to such
lease, conditional sale, trust indenture or other security agreement and owned
by such lessor or conditional seller or subject to a trust indenture or security
interest in favor of such indenture trustee or secured party.
5.3. Maintenance. At its own cost and expense, Sublessee shall enter into
the MSA prior to delivery of the Aircraft. If for whatever reason Sublessee
terminates the MSA, from and after the date of such termination, at its own cost
and expense, Sublessee shall:
(a) perform maintenance, service, repair and testing of the Aircraft,
Airframe and each Engine in accordance with an FAA-approved maintenance program
for the Aircraft, Airframe and Engines, so as to keep the Aircraft, the Airframe
and each Engine and each part thereof in good operating condition in conformity
with any manufacturer's operating manual, instructions or service bulletins and
in accordance with Sublessee's standard practices for similar Equipment
(including without limitation Sublessee's maintenance program for such
Equipment, as from time to time in effect and approved to the extent required by
law by the FAA), which practices shall at all times be at or above the standard
of the industry for maintenance of similar Equipment; and in the case of the
Aircraft, without prejudice to Sublessee's right to receive contribution to the
cost of compliance in accordance with Section 6.3 hereof, in such condition as
may be necessary to enable the airworthiness certificate of the Aircraft to be
maintained under the applicable rules and regulations of the FAA; provided that
if the Aircraft is not registered under the Act pursuant to Section 5.1 hereof,
the Aircraft shall nevertheless at all times be maintained in the condition
necessary to enable the Sublessor or Sublessee to obtain an airworthiness
certificate for the Aircraft under the Act;
(b) maintain all records, logs and other materials required by the FAA to
be maintained in respect of each item of Equipment;
18
(c) promptly furnish to Sublessor such information as may be required to
enable the Head Lessor to file any reports required to be filed by it with any
governmental authority because of Head Lessor's ownership of the Equipment; and
(d) not discriminate against the Aircraft (as compared to other aircraft
of the same type owned or operated by Sublessee) in contemplation of the
expiration or termination of the Sublease with respect to the maintenance of the
Aircraft, other than withdrawal of the Aircraft from use and operation as is
necessary to prepare the Aircraft for return to Sublessor upon such expiration
or termination.
5.4. Operations. (a) Sublessee shall not maintain, service, repair, test,
use or operate any item of Equipment in violation of any law or any rule,
regulation or order of any government or governmental authority having
jurisdiction (domestic or foreign) over the Aircraft, or in violation of any
airworthiness certificate, license or registration relating to any item of
Equipment issued by any such authority or in violation of or conflict with any
applicable maintenance or operations manual or manufacturer's guidelines or
inconsistent with prudent commercial airline standards, unless Sublessee is
contesting in good faith the validity or application of any such law, rule,
regulation, order, certificate, license or registration by appropriate
proceedings in any reasonable manner which does not create a material risk of
sale, loss or forfeiture of any Equipment or any interest therein or result in
the grounding of the Aircraft. If any such law, rule, regulation or order
requires alteration of any item of Equipment, unless the validity thereof is
being contested in good faith and by appropriate proceedings in any reasonable
manner which does not create a material risk of sale, loss or forfeiture of any
Equipment or any interest therein, the Sublessee will, subject to its rights
under Sections 6.3 and 7.7 hereof, conform thereto or obtain conformance thereto
at no expense to Sublessor and will maintain such item of Equipment in proper
operating condition under such laws, rules, regulations and orders.
(b) Sublessee agrees not to operate, use or locate the Aircraft, the
Airframe or any Engine, or permit the Aircraft, the Airframe or any Engine to be
operated, used or located (i) in any area excluded from coverage by the
insurance required by the terms of Section 8, or (ii) in any war zone or in any
recognized or, in Sublessee's reasonable judgment, threatened area of
hostilities unless fully covered by war risk insurance satisfying the terms of
Section 8, or unless the Aircraft, the Airframe or such Engine is operated or
used under contract with the Government under which contract the Government
assumes liability in an amount not less than the amount of insurance and
providing coverage as full and complete as otherwise required by Section 8 for
any damage, loss, destruction or failure to return possession of the Aircraft,
the Airframe or such Engine at the end of the term of such contract or for
injury to persons or damage to property of others.
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ARTICLE 6.
REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
6.1. Replacement of Parts. Except as otherwise provided herein and if for
whatever reason Sublessee terminates the MSA, from and after the date of such
termination, Sublessee, at its own cost and expense, will promptly replace (or
cause to be replaced) all Parts which may from time to time be incorporated in
the Aircraft, Airframe or any Engine and 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,
Sublessee may, at its own cost and expense, remove (or cause to be removed under
the MSA) in the ordinary course of maintenance, service, repair, overhaul or
testing any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use;
provided, however, that Sublessee, except as otherwise provided herein, at its
own cost and expense, will, replace (or cause to be replaced) such Parts as
promptly as practicable with equivalent Parts of the same make, model and part
number or an improved make, model or part number and made by the same
manufacturer and in accordance with Continental's maintenance policies and
procedures. All replacement Parts shall be free and clear of all Liens (except
for pooling arrangements permitted by Section 6.2 hereof) and shall be in good
operating condition and have a value and utility not less than the value and
utility of the Parts replaced (assuming such replaced Parts were in the
condition required hereunder). Subject to Section 6.3 hereof, all Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the property
of relevant Head Lessor or Owner of such Airframe or Engine, no matter where
located, until such time as such Parts shall be replaced by Parts which have
been incorporated in the Aircraft, Airframe or such Engine and which meet the
requirements for replacement Parts specified above. Except as provided in
Section 6.2 hereof, immediately upon any replacement Part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further act,
(i) title to the replaced Part shall thereupon vest in Sublessee free and clear
of all Sublessor Liens and all rights of Sublessor and all Head Lessor Liens and
all rights of Head Lessor and Owner, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement Part shall thereupon
vest in the Head Lessor of the Airframe (in the case of replacement Parts
incorporated in the Airframe) or Head Lessor or Owner of the relevant Engine (in
the case of replacement Parts incorporated in such Engine) (subject only to
Permitted Liens), and (iii) such replacement Part shall become subject to this
Sublease and be deemed part of the Aircraft, Airframe or such Engine for all
purposes hereof to the same extent as the Parts originally incorporated in such
Aircraft, Airframe or Engine.
6.2. Title to Parts. Any replacement Part when incorporated in an item of
Equipment in accordance with Section 6.1 hereof may be owned by a third party
subject to a normal pooling arrangement, so long as Sublessee as promptly
thereafter as reasonably possible either (i) causes title to such replacement
Part to vest in the relevant Head Lessor or Owner in accordance with Section
6.1, free and clear of all Liens, or (ii) replaces (or causes to be replaced)
such replacement Part by incorporating in the Aircraft, Airframe or such Engine
a further replacement Part owned by Sublessee free and clear of all Liens
(except Permitted Liens) and by causing title to such further replacement Part
to vest in the relevant Head Lessor or Owner in accordance with Section 6.1.
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6.3. Alterations, Modifications and Additions. Sublessee shall make (or
cause to be made under the MSA or otherwise) such alterations and modifications
in and additions to the Equipment at its expense as may be required from time to
time to meet all applicable standards of the FAA or other governmental authority
having jurisdiction, unless the validity or application thereof is being
contested in good faith by appropriate proceedings (but only so long as such
proceedings do not involve any material risk of sale, forfeiture or loss of any
of the Equipment or any interest therein). If any mandatory modification work is
required, Sublessee shall pay for the first $________ of the actual cost for any
one such mandatory modification and the first $________ of the actual cost for
multiple such mandatory modifications. If the actual cost of such mandatory
modification (that is, without markup) exceeds $________ for any one such
mandatory modification and $________ for multiple such mandatory modifications,
then Sublessor shall reimburse Sublessee for a portion of such excess cost in an
amount equal to the excess of such cost over $________ (in the case of a single
mandatory modification) or $________ (in the case of multiple such mandatory
modifications) multiplied by a fraction, the numerator of which is the number of
months then remaining in the Term of this Sublease and the denominator of which
is 84. The Sublessor shall reimburse Sublessee for the balance of such excess
cost to Sublessee promptly following completion of such mandatory modification,
provided that no Event of Default has occurred and is continuing.
In addition, Sublessee, at its own cost and expense, may from time to time
request that Continental make under the MSA such alterations and modifications
in and additions to any item of Equipment as Sublessee may deem desirable in the
proper conduct of its business; provided, however, that no such alteration,
modification or addition shall diminish, in Sublessor's reasonable
determination, the value or utility of such item of Equipment below the value,
utility and airworthiness thereof immediately prior to such alteration,
modification or addition, assuming such item of Equipment was then in the
condition and airworthiness required to be maintained by the terms of this
Sublease. Except as otherwise provided herein, title to all Parts (other than
Removable Parts (as defined below)) incorporated in an item of Equipment as the
result of such alteration, modification or addition shall, without further act,
vest in the Head Lessor and become subject to this Sublease. Notwithstanding the
foregoing sentence of this Section 6.3, so long as no Event of Default shall
have occurred and be continuing, Sublessee may request that Continental under
the MSA remove any Part (such Part being referred to herein as a "Removable
Part") at any time during the Term if (i) such Part is in addition to, and not
in replacement of or substitution for, any Part originally incorporated in the
Aircraft, Airframe or such Engine at the time of delivery thereof hereunder,
(ii) such Part is not required, in Sublessor's determination, to be incorporated
or installed in or attached or added to such item of Equipment pursuant to the
terms of Section 5.3 or 5.4 hereof or the first sentence of this Section 6.3 and
(iii) such Part can be removed from such item of Equipment without diminishing
or impairing, in Sublessor's determination, the value, utility or airworthiness
which such item of Equipment would have had at such time had such alteration,
modification or addition not occurred. Removable Parts may be subleased from
third parties other than Sublessor. Upon the removal by Sublessee (or by
Continental under the MSA) of any Part as above provided, title thereto shall,
without further act, vest in Sublessee and such Part shall no longer be deemed
part of the Aircraft, Airframe or such Engine from which it was removed. Any
Part not removed as above provided prior to the return of such item of Equipment
to Sublessor hereunder shall remain the property of Head Lessor provided that
Sublessor may require Sublessee, in connection with the return of the Aircraft
pursuant to Section 12 hereof, to remove any Removable Part from the Aircraft
and to restore the Aircraft to its condition prior to the addition of such
Removable Part. Sublessor shall not bear any liability for any alteration,
modification or addition or for any grounding or suspension of certification of
any item of Equipment or for loss of revenue.
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ARTICLE 7.
LOSS, DESTRUCTION, REQUISITION
7.1. Event of Loss with Respect to Airframe. Upon the occurrence of an
Event of Loss with respect to the Airframe or the Airframe and one or more
Engines, Sublessee shall give Sublessor prompt (and in any event within 14 days
after such occurrence) written notice of such Event of Loss and within the time
period prescribed below shall make payment to the Sublessor for the items of
Equipment subject to such Event of Loss as provided below.
Not later than the earlier to occur of (i) the 60th day following the date
of the occurrence of such Event of Loss, or (ii) the second Business Day
following the receipt of insurance proceeds with respect to such occurrence,
Sublessee shall pay to Sublessor (or to such other party as Sublessor directs),
in the manner and in funds of the type specified in Section 3.3, (A) the
Stipulated Loss Value for the Aircraft as of the Stipulated Loss Value Date
immediately preceding such Event of Loss, unless such Event of Loss occurred on
a Stipulated Loss Value Date, in which case Stipulated Loss Value shall be
computed as of such date, and (B) any other Rent (including Basic Rent) which is
due and payable through and including the date of payment (excluding the payment
of or Basic Rent due on the date of payment).
At such time as Sublessor shall have received the sum of the amounts
specified above, together with all other amounts then due and payable hereunder,
(A) the obligation of Sublessee to pay Basic Rent hereunder with respect to the
Aircraft for any period commencing after the date of payment of such amounts
shall terminate, (B) the Term for the Aircraft shall end, and (C) Sublessor will
use its best efforts to cause Head Lessor to Transfer the Aircraft to Sublessee,
subject to the rights of any insurer.
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Unless and until Sublessee pays the amounts required pursuant to Section
7.1(a), no Event of Loss with respect to an Airframe under the circumstances
contemplated by the terms of this Section 7.1 shall result in any reduction of
Basic Rent.
7.2. Event of Loss with Respect to an Engine. (a) Upon the occurrence of
an Event of Loss with respect to an Engine under circumstances in which there
has not occurred an Event of Loss with respect to the Airframe, Sublessee shall
give Sublessor prompt written notice (and in any event within 10 days after such
occurrence) thereof and shall, as promptly as possible and in any event, within
120 days after the occurrence of such Event of Loss either, at the option of
Sublessor, (1) convey or cause to be conveyed to the relevant Head Lessor or
Owner of such Engine, as replacement for the Engine with respect to which such
Event of Loss occurred, title to another General Electric model CF6-50C2 engine,
which engine shall be free and clear of all Liens, other than Permitted Liens
referred to in clauses (a), (c), (d) and (e) of the definition thereof, and
having a value and utility (taking into consideration such Engine's life-limited
parts and time since heavy maintenance on each of such Engine's modules) at the
time of substitution at least equal to, and being in as good operating condition
as, the Engine with respect to which such Event of Loss occurred, assuming such
Engine was in the condition and repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss, or (2) pay the Stipulated Loss
Value for such Engine to Sublessor.
(b) Upon full compliance by Sublessee with the terms of Sections 7.2(a)
and 7.3 hereof and if no Event of Default shall have occurred and be continuing,
the Sublessor shall use its best efforts to cause the Head Lessor or Owner of
the Engine that was subject to such Event of Loss to Transfer such Engine to the
Sublessee or as the Sublessee shall direct, subject to the rights of any
insurer. Upon such Transfer, such Engine subject to such Event of Loss shall
cease to be an "Engine" hereunder.
No Event of Loss with respect to an Engine under the circumstances
contemplated by the terms of this Section 7.2 shall result in any reduction of
Basic Rent.
7.3. Documents Required in Connection with Substitution. Prior to or at
the time of any substitution for any Engine pursuant to Section 7.2(a) hereof,
Sublessee will promptly, at its sole cost and expense:
(i) provide Sublessor with a full warranty xxxx of sale in form and
substance satisfactory to the relevant Head Lessor or Owner for such
replacement Engine duly conveying title to such item to such Head Lessor
or Owner, and take such other action as such Head Lessor or Owner may
reasonably request in order that title to such replacement Engine shall be
duly vested in such Head Lessor or Owner;
(ii) cause a Sublease Supplement, in form and substance reasonably
satisfactory to Sublessor, subjecting such replacement Engine to this
Sublease, duly executed by Sublessee, to be delivered to Sublessor for
execution and, upon such execution, to be filed for recordation with the
FAA pursuant to the Act;
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(iii) provide Sublessor with evidence of compliance with the
insurance provisions of Article 8 hereof with respect to such replacement
Engine as Sublessor or the relevant Head Lessor or Owner may reasonably
request;
(iv) provide Sublessor with an officer's certificate signed by an
officer of Sublessee certifying that, upon consummation of such
replacement, no Event of Default will exist hereunder;
(v) promptly upon the recordation of the Sublease Supplement
covering such replacement Engine pursuant to the Act, Sublessee, at its
sole cost and expense will cause to be delivered to Sublessor and Lender
an opinion of counsel satisfactory to Sublessor as to the due recordation
of such Sublease Supplement and, so long as the Facility Lien exists and
assuming that Sublessor and Lender have taken all necessary action to
perfect the Facility Lien with respect to the replacement Engine, as to
the existence of Liens on the replacement Engine to the same effect as the
opinion of FAA counsel delivered in connection with the original
recordation of the Sublease; and
(vi) furnish such other certificates and opinions as Sublessor and
the relevant Head Lessor and Owner may deem reasonably necessary or
appropriate, in form, scope and substance satisfactory to each of them.
7.4. Application of Payments from Governmental Authorities for Requisition
of Title. Any payments (other than insurance proceeds the application of which
is provided for in Article 8 hereof) received at any time by Sublessor or
Sublessee from any governmental authority or other Person with respect to any
Event of Loss resulting from the condemnation, confiscation, theft or seizure
of, or requisition of title to or use of any item of Equipment will be applied
as follows:
(a) If such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and the Engines or engines
installed on the Airframe, so much of such payments as shall not exceed
Stipulated Loss Value shall be applied in reduction of Sublessee's
obligation to pay such Stipulated Loss Value and other amounts required to
be paid by Sublessee hereunder, if not already paid by Sublessee, or, if
already paid by Sublessee, shall so long as no Event of Default shall have
occurred and be continuing, be applied to reimburse Sublessee for its
payment of such Stipulated Loss Value and other amounts; and the balance,
if any, of such payment remaining thereafter will be paid over to, or
retained by, Sublessee.
(b) If such payments are received with respect to an Engine under
circumstances contemplated by Section 7.2 hereof, such payments shall be
paid over to, or retained by, Sublessee, provided Sublessee shall have
fully performed or, concurrently therewith, will fully perform the terms
of Section 7.2(a) with respect to the Event of Loss for which such
payments are made.
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7.5. Requisition for Use by the Government. In the event of the
requisition for use or transfer of possession to the Government of any item of
Equipment not constituting an Event of Loss during the Term, Sublessee shall
promptly notify Sublessor of such requisition and, unless such requisition shall
constitute an Event of Loss (in which case the Sublessee shall comply with
Section 7.1 or 7.2 hereof, as the case may be), all of Sublessee's obligations
under this Sublease with respect to the Airframe and the Engines shall continue
to the same extent as if such requisition had not occurred. If the Airframe and
Engines or engines installed thereon are not returned by the Government prior to
the end of the Term, Sublessee shall be obligated to return such item of
Equipment to Sublessor pursuant to, and in all other respects in compliance with
the provisions of, Article 12 hereof, promptly upon its return by the
Government, and upon compliance therewith by Sublessee, the Sublessor shall (to
the extent that it is lawfully able to do so) assign to the Sublessee all of the
Sublessor's rights against the Government with respect to the condition and
fitness of such item of Equipment, including all repair obligations of the
Government upon return by it of the item of Equipment at the expiration of the
period of requisition for use. All payments received by Sublessor or Sublessee
from the Government that are allocable to use of such item of Equipment during
the Term shall be paid over to, or retained by, Sublessee; and all other
payments received by Sublessor or Sublessee from the Government for the use of
the Airframe and Engines or engines after January 2, 2002 shall be paid over to,
or retained by, Sublessor.
7.6. Application of Payments During Existence of Event of Default. Any
amount referred to in Section 7.4(a), 7.4(b) or 7.5 hereof which is payable or
creditable to or retainable by Sublessee shall not be paid or credited to or
retained by Sublessee if, at the time of such payment, credit or retention, an
Event of Default shall have occurred and be continuing hereunder but shall be
paid to and held by Sublessor as security for the obligations of Sublessee under
this Sublease and, if Sublessor declares this Sublease to be in default pursuant
to Section 14 hereof, applied against Sublessee's obligations hereunder as and
when due and at such time as there shall not be continuing any such Default,
such amount shall be paid to Sublessee to the extent not previously applied in
accordance the terms hereof.
7.7. Replacement of Engines. Upon not less than 35 days' prior written
notice to Sublessor, Sublessee may, subject to Sublessor's prior written consent
(which may be given or withheld in its sole discretion), replace any Engine
subleased hereunder with another engine (the "replacement Engine") of the same
or improved make and model as the Engine which is to be replaced and which has a
value and utility (taking into account such Engine's life-limited parts and time
since heavy maintenance on each of such Engine's modules) at least equivalent
to, and in as good operating condition as, such replaced Engine assuming such
replaced Engine was in the condition and repair required by the terms of this
Sublease. Such replacement Engine shall be deemed to be an "Engine" and
Sublessor and Sublessee shall comply with the provisions of Section 7.2(a) and
7.3 with regard to the replacement Engine and the Engine so replaced.
25
ARTICLE 8.
INSURANCE
8.1. Public Liability and Property Damage Insurance. Sublessee shall at
all times procure and maintain at is own expense policies of public liability
insurance (including, without limiting the generality of the foregoing,
passenger legal liability insurance) and property damage insurance (exclusive of
manufacturer's product liability insurance), including, without limiting the
generality of the foregoing, aircraft liability, aircraft passenger liability,
contractual liability and cargo and baggage liability and property damage
liability, with respect to the Aircraft, Airframe and Engines (a) in amounts
which are not less than the public liability and property damage liability
insurance applicable to similar aircraft and engines which comprise Sublessee's
fleet; (b) of the types usually carried by United States commercial air carriers
and in no event less than the limit of liability set forth on Schedule 1 hereto
and (c) which is maintained in effect with insurers of recognized responsibility
and reasonably acceptable to Sublessor. With respect to the insurance described
in this clause, Sublessee may self-insure by way of deductible, franchise or
similar provision in such insurance policies, the risk required to be insured
against pursuant to the first sentence in this Section 8.1. The amount of such
self-insurance shall not exceed $_________ for any one occurrence.
All such policies of insurance carried in accordance with this Section 8.1
shall (A) name Head Lessor of the Airframe as owner of the Airframe and
Sublessor and each Owner and Lender (if any) as additional named insureds (the
"Additional Insureds"), as their respective interests may appear (but without
imposing upon any such parties any obligation imposed upon the insured,
including the liability to pay the premiums for such policies, (B) provide that
in respect of the interests of Sublessor and each Head Lessor, Owner and Lender
(if any) in such policies, the insurance shall not be invalidated by any action
or inaction of Sublessee and shall insure the Additional Insureds as their
interests may appear regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by Sublessee, (C) provide
that if such insurance is to be cancelled for any reason whatever, or any
material change is to be made in the coverage which materially adversely affects
the interests of the Additional Insureds or if such insurance may be allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall not be
effective as to the Additional Insureds for 30 days (ten days in the case of
cancellation for non-payment and seven days or such shorter period as may be
generally available in case of any war risk and allied perils coverage) after
written notice is given to the Additional Insureds from such insurers of such
cancellation, change or lapse, (D) be effective with respect to both domestic
and international operation, (E) provide that the insurers shall waive any right
to any setoff, recoupment or counterclaim or any other deduction, by attachment
or otherwise, (F) provide that all the provisions thereof, except the limits of
the liability of the insurer under such policy, shall operate in the same manner
as if there were a separate policy covering each insured, (G) provide that the
Additional Insureds shall not be liable for any insurance premium, (H) be
primary and without right of contribution from other insurance which may provide
coverage to the Additional Insureds and (I) expressly provide that the insurers
shall waive any rights of subrogation against the Additional Insureds.
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8.2. Insurance Against Loss or Damage to Aircraft. At its own expense,
Sublessee shall maintain in effect with insurers of recognized responsibility
and reasonably acceptable to Sublessor all-risk aircraft hull insurance
(including flight, taxiing and ingestion coverage) covering the Aircraft and all
risk insurance on the Engines and Parts while removed from the Aircraft
including war-risk insurance if the Aircraft, the Airframe or any Engine is
being operated (i) in any recognized or, in Sublessee's reasonable judgment,
threatened area of hostilities, or (ii) on international routes and war risk
insurance is customarily maintained by other U.S. air carriers operating on such
routes, which war risk insurance shall be of the type and form, and in an amount
not less than that, carried by Sublessee on similar equipment owned or Subleased
by Sublessee and is in an amount not less than the Stipulated Loss Value. If
such war-risk insurance is not so available from private insurers, the Sublessee
shall maintain such war risk insurance to the extent available from the United
States Government or any agency thereof. With respect to the insurance described
in this clause, Sublessee may self-insure, by means of a deductible, franchise
or similar provision in such insurance policies, the risk required to be insured
against pursuant to the first sentence of this Section 8.2 in accordance with
the then current airline industry practice and in an amount not exceeding that
which is maintained by Sublessee in accordance with its fleet-wide practice;
provided that the amount of such self-insurance with respect to the Aircraft
shall not exceed $________ for any one occurrence.
Any policies maintained in accordance with this Section 8.2 shall
(a) name the Head Lessor of the Airframe (or, if the Head Lessor of the
Airframe so directs, Lender) as loss payee,
(b) without prejudice to Sublessee's rights under Section 8.4 and 8.8
hereof, provide that payment for any loss in excess of $________ shall be
payable to the Head Lessor of the Airframe (or, if the Head Lessor of the
Airframe so directs, to the Lender), except in the case of a loss with respect
to an Engine installed on an airframe other than the Airframe, in which case the
Sublessee shall arrange for any payment of insurance proceeds in respect of such
loss to be held for the account of the Head Lessor of the Airframe (or if the
Head Lessor of the Airframe so directs, the Lender) whether such payment is made
to the Sublessee or any third party,
(c) provide that in respect of the respective interests of the Additional
Insureds in such policies, the insurance shall not be invalidated by any action
or inaction of the Sublessee or any other Person insured thereby (other than
action or inaction of such Additional Insured, as the case may be), and shall
insure the Additional Insureds as their interests may appear, regardless of any
breach or violation by the Sublessee or any other Person insured thereby (other
than such Additional Insured) of any warranties, declarations or conditions
contained in such policies,
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(d) provide that if such insurance is to be cancelled for any reason
whatever, or any material change is to be made in the coverage which adversely
affects the interest of Sublessor or Lender, if any, if such insurance may be
allowed to lapse for non-payment of premium, such cancellation, change or lapse
shall not be effective as to Sublessor or any Head Lessor, Owner or Lender, if
any, for 30 days (ten days in the case of cancellation for non-payment and seven
days or such shorter period as may be generally available in case of any war
risk and allied perils coverage) after written notice is received by such Person
from such insurers of such cancellation, change or lapse;
(e) provide that the insurers shall waive any rights of subrogation
against Sublessor and each Head Lessor, Owner and Lender, if any;
(f) provide that the insurers shall waive any right to any set-off,
recoupment or counterclaim or any other deduction, by attachment or otherwise;
(g) provide that none of Sublessor, any Head Lessor, Owner or Lender, if
any, shall be liable for any insurance premium; and
(h) be effective with respect to both domestic and international
operation.
8.3. Government Indemnity. Notwithstanding any other provision of this
Sublease requiring Sublessee to maintain insurance (but without otherwise
affecting any obligations of the Sublessee, or any rights of Persons other than
the Sublessee, under this Article 8), Sublessor agrees to accept, in lieu of
insurance against any risk with respect to the Aircraft, indemnification from
the Government against such risks and in an amount which, when added to the
amount of insurance against such risk maintained by Sublessee (including
permitted self-insurance) with respect to the Aircraft, shall be at least equal
to the amount of insurance against such risk otherwise required by this Article
8.
8.4. Application of Insurance Proceeds. As between Sublessor and
Sublessee, it is agreed that all insurance payments received as the result of
the occurrence of an Event of Loss with respect to an item of Equipment will be
applied as follows:
(a) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and one or more Engines or
engines installed on the Airframe, so much of such payments as shall
not exceed the amounts due under Section 7.1 hereof shall be applied
in reduction of Sublessee's obligation to pay such amounts, if not
already paid by the Sublessee, or, if already paid by Sublessee, shall
be applied to reimburse the Sublessee for its payments of such
amounts, and the balance, if any, of such payments remaining
thereafter will be paid over to, or retained by, the Sublessee; and
28
(b) if such payments are received with respect to an Engine under the
circumstances contemplated by Section 7.2 hereof, such payments shall
be paid over to, or retained by the Sublessee, provided that the
Sublessee shall have fully performed or, concurrently therewith, will
fully perform under Section 7.2(a) hereof.
8.5. Application of Insurance Proceeds for Other Than Event of Loss. As
between Sublessor and Sublessee, the insurance proceeds of any property damage
loss to any Equipment not constituting an Event of Loss will be applied in
payment (or to reimburse the Sublessee) for repairs or for replacement property
in accordance with the terms of Articles 5 and 6 hereof, and any balance
remaining after compliance with such Articles with respect to such loss shall be
paid to, or retained by, the Sublessee if the Sublessor shall have received from
the Sublessee prior to making any such payment to the Sublessee an Officer's
Certificate of the Sublessee certifying that the property so damaged has been
repaired in full and that the costs of such repair (which costs shall be
specified in such certificate) have been paid in full. If such repairs are made
pursuant to contracts requiring progress payments or if such repairs are made by
the Sublessee, such insurance proceeds shall be paid over to the Sublessee from
time to time upon appropriate certification by the Sublessee.
8.6. Application in Default. Any amount referred to in Sections 8.4(a) or
(b) or 8.5 hereof which is payable to the Sublessee shall not be paid to the
Sublessee or, if it has been previously paid to the Sublessee, shall not be
retained by the Sublessee, if at the time of such payment (a) in the case of
Section 8.4 hereof, a Default or an Event of Default shall have occurred and be
continuing or (b) in the case of Section 8.5 hereof, an Event of Default or a
Default which after lapse of time would constitute an Event of Default of the
character referred to in paragraph (a), (b) or (c) of Article 13 hereof shall
have occurred and be continuing. In such event, all such amounts shall be paid
to and held by the Sublessor as security for the obligations of the Sublessee to
make payments hereunder. At such time as there shall not be continuing any
Default or Event of Default or, in the case of payments pursuant to Section 8.5
hereof, any Event of Default or Default of the character referred to above, all
such amounts at the time held by the Sublessor in excess of the amount, if any,
which the Sublessor shall have elected to apply as above provided shall be paid
to the Sublessee.
8.7. Certificates of Insurance. Sublessee agrees to furnish the Sublessor
on the Delivery Date and on or prior to the date of renewal of the insurance
required hereunder during the Term an insurance certificate and report signed by
a firm of independent aircraft insurance brokers reasonably acceptable to
Sublessor and the Head Lessor of the Airframe certifying that, in the opinion of
such broker, the insurance then carried and maintained on each item of Equipment
complies with the terms hereof. Such insurance certificate and report shall
provide that (i) the broker will advise Sublessor and each Head Lessor, Owner
and Lender, if any, in writing promptly of any default in the payment of any
premium and (ii) no insurance provided pursuant to this Article 8 shall expire
or terminate prior to thirty (30) days (ten days in the case of cancellation for
non-payment or, with respect to war risk and allied perils insurance, seven (7)
days or such shorter period as may be generally available) after written notice
has been issued to Sublessor and each Head Lessor, Owner and Lender, if any.
Upon the transfer by any Head Lessor, Owner or Lender, if any, of its interests
in the Aircraft or any Engine, Sublessee will cooperate in obtaining new
certificates naming the transferee of such interest.
29
8.8. Insurance of Sublessee's Interest. (a) Nothing contained herein shall
prevent Sublessee from carrying at its own expense additional insurance in
excess of that required hereunder, and notwithstanding anything to the contrary
contained elsewhere in this Sublease, any and all proceeds of such additional
insurance shall be payable solely to Sublessee or the appropriate third party
liability claimant, as the case may be. Nothing in this Article 8 shall be
construed to prohibit the Sublessor or any Head Lessor or Owner from insuring
the Aircraft, any Engine or its interest therein, but the insurance so
maintained by the Sublessor or such Head Lessor or Owner shall not provide for
or result in a reduction of the coverage or the amounts payable under any of the
insurance required to be maintained by Sublessee by this Article 8.
(b) If Sublessee shall fail to maintain or cause to be maintained
insurance as herein provided, Sublessor may at its option (but shall not be
obligated to) provide such insurance and in such event, Sublessee shall, upon
demand, reimburse such Person for the cost thereof.
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ARTICLE 9.
LIENS AND INDEMNITIES
9.1. Liens. Sublessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Aircraft, the
Airframe or any Engine, title thereto or any interest therein except: (a) the
respective rights of the parties to the Operative Agreements; (b) the rights of
others under agreements or arrangements to the extent expressly permitted by the
terms of the Operative Agreements; (c) Sublessor Liens; (d) Head Lessor Liens;
(e) Facility Liens; (f) liens for taxes, assessments or other governmental
charges either not yet due or being contested in good faith by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture or loss of the Aircraft, the Airframe or any Engine; (g)
materialmen's, mechanics', workers', repairers', employees' or other like Liens
for amounts the payment of which is either not yet delinquent for more than 60
days or is being contested in good faith by appropriate proceedings so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Aircraft, the Airframe or any Engine; (h) Liens arising out of any
judgment or award unless the judgment secured shall not, within 60 days after
entry thereof, have been discharged or vacated or execution thereof stayed
pending appeal or shall not have been discharged, vacated or reversed within 60
days after the execution of such stay and provided such Lien presents no
material risk of the forfeiture or loss of the Aircraft, Airframe or any Engine
or of Sublessor's interest therein, and (i) any other Lien with respect to which
Sublessee shall have provided security in form and amount adequate in the
reasonable judgment of Sublessor. Sublessee will promptly take (or cause to be
taken) such action at its own expense as may be necessary duly to discharge any
such Lien not excepted above if the same shall arise at any time.
9.2. General Indemnity. (a) Sublessee hereby agrees to assume liability
for and to indemnify, protect, save and keep harmless the Sublessor and each
Head Lessor, Owner and Lender (if any) and their respective successors,
permitted assigns, affiliates, directors, officers, employees, agents and
servants (in this Section 9.2 and in Section 9.3 hereof, collectively, the
"Indemnitees") from and against any and all liabilities (including liability in
tort, absolute or otherwise), obligations, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements of whatsoever kind and nature
(including reasonable legal fees and expenses) (any and all "Claims"), imposed
on, incurred by or asserted against any Indemnitee (whether or not also
indemnified against by any other Person under any other document) in any way
relating to or arising out of (i) this Lease or (ii) the delivery, sublease,
possession, use, operation, condition, return or other disposition of any item
of Equipment, to the extent incurred or arising out of events occurring at any
time after delivery of the Aircraft to Sublessor hereunder and prior to return
of the Aircraft to Sublessor hereunder in full compliance by the Sublessee with
all of the terms of this Sublease with respect thereto (including latent and
other defects, whether or not discoverable by any Indemnitee or the Sublessee,
and any claim for patent, trademark or copyright infringement); provided,
however, that the Sublessee shall not be required (A) to indemnify Sublessor in
respect of any amounts which Sublessor has specifically agreed to pay hereunder,
(B) to indemnify any Owner or any of its Affiliates against loss, liability or
expense incurred by any such Affiliate as a result of any claim against any such
Affiliate in its capacity as manufacturer of the Engines and components thereof
including claims for patent, trademark or copyright infringement, (C) to pay any
cost, expense or disbursement (including legal fees and expenses) in connection
with the entering into or withholding any future amendments, supplements,
waivers or consents with respect to this Sublease or under any Head Lease other
than such as have been requested by Sublessee, (D) to indemnify any Indemnitee
for loss, liability or expense resulting from the willful misconduct or gross
negligence of such Indemnitee or its successors, assigns, affiliates, agents or
servants or, in the case of any Owner, any owner trustee acting for such Owner
or, in the case of any such owner trustee, the relevant Owner, (E) to indemnify
any Indemnitee for any loss, liability or expense which any of them may incur as
the result of any failure or refusal of any of them to perform or observe any
agreement, covenant or condition contained in any Operative Document, or (G) to
indemnify any Indemnitee for any loss, liability or expense which any of them
may incur as the result of any Head Lessor Lien or Sublessor Lien; provided
further that Sublessee does not under this Section 9.2 assume liability for, or
indemnify, protect, save and keep harmless, any Indemnitee from or against or in
respect of any liabilities, obligations, losses, damages, penalties, claims,
actions or suits in any way relating to or arising out of any Taxes, as defined
in Section 9.3.
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Upon payment in full of any indemnities contained in this Section 9.2 by
the Sublessee, it shall be subrogated to any rights of the Indemnitee in respect
of the matter against which indemnity has been given, but any amount recovered
by the Sublessee as a result of such subrogation shall, unless all amounts then
due to such Indemnitee from the Sublessee have been paid, be held in trust by
the Sublessee for and shall, to the extent of any such amount then due, be paid
promptly after demand to, such Indemnitee. If any Indemnitee shall have
knowledge of any claim or liability hereby indemnified against, it shall give
prompt written notice hereof to the Sublessee and each other interested party,
but the failure to do so shall not relieve Sublessee from any liability which it
may have to such Indemnitee or any other Indemnitee except to the extent that
the Sublessee shall demonstrate that such liability was materially increased as
a result of such failure.
If the Sublessee is required to make payment under this Section 9.2, the
Sublessee shall pay the Indemnitee any amount which, after deduction of all
taxes required to be paid by such Indemnitee in respect of the receipt thereof
under the laws of the United States or of any foreign country or any political
subdivision of either (after giving credit for any savings in respect of any
taxes by reason of deductions, credits or allowances in respect of the payment
of the expense indemnified against) shall be equal to the amount of such
payment.
(b) Contest. With respect to any Claim imposed on, incurred by, or
asserted against one or more Continental Indemnitees but not imposed on,
incurred by or asserted against any other Indemnitees, Sublessee shall be
entitled, at its sole cost and expense, acting through counsel reasonably
acceptable to the respective Continental Indemnitee, (i) in any judicial or
administrative proceeding that involves solely one or more such Claims, to
assume responsibility for and control thereof, (ii) in any judicial or
administrative proceeding involving one or more such Claims and other claims
related or unrelated to the transactions contemplated by this Sublease, to
assume responsibility for and control of such Claims to the extent that the same
may be and is severed from such other claims (and such Continental Indemnitee
shall use its best efforts to obtain such severance), and (iii) in any other
case involving such Claim, to be consulted by such Continental Indemnitee with
respect to judicial proceedings subject to the control of such Continental
Indemnitee. Notwithstanding any of the foregoing to the contrary, Sublessee
shall not be entitled to assume responsibility for and control of any such
judicial or administrative proceedings involving such a Claim (A) while an Event
of Default under the Sublease shall have occurred and be continuing, (B) if such
proceedings will involve any material risk of the sale, forfeiture or loss of,
or the creation of any Lien (other than a Permitted Lien) on the Aircraft, any
item of Equipment, this Sublease or any part thereof unless Sublessee shall have
protected Sublessor against such risk in a manner acceptable to Sublessor, (C)
such Claims involved relate in any way to the business of any Indemnitee other
than the transactions contemplated by this Sublease, (D) such Claims, in the
opinion of independent counsel for such Continental Indemnitee reasonably
satisfactory to Sublessee, have a reasonable possibility of otherwise
compromising or jeopardizing any substantial interests of such Indemnitee, or
(E) promptly following the request of a Continental Indemnitee, Sublessee shall
not have furnished such Continental Indemnitee with an opinion of independent
counsel reasonably satisfactory to such Continental Indemnitee to the effect
that there exists a meritorious basis for contesting such Claims. The
Continental Indemnitee may participate with its own counsel, at its own expense,
in any judicial proceeding controlled by Sublessee pursuant to the preceding
provisions. The Continental Indemnitee shall supply Sublessee with such
information reasonably requested by Sublessee as is necessary or advisable for
Sublessee to control or participate in any proceeding to the extent permitted by
this Section 9.2(b). Such Continental Indemnitee shall not enter into a
settlement or other compromise with respect to any such Claims without the prior
written consent of Sublessee, which consent shall not be unreasonably withheld
or delayed, unless such Continental Indemnitee waives its right to be
indemnified with respect to such Claims under this Section 9.2.
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9.3. General Tax Indemnity. (a) Sublessee agrees to pay and to indemnify
and hold each Indemnitee (as defined in Section 9.2 hereof) harmless from all
license, documentation, recording and registration fees, taxes, levies, imposts,
duties, assessments, fees, charges and withholdings of any nature whatsoever,
together with any penalties, fines, additions to tax or interest thereon,
howsoever imposed, whether levied or imposed upon an Indemnitee or otherwise, by
any Federal state or local government or governmental subdivision or taxing
authority in the United States or by any foreign country or foreign taxing
authority or territory or possession of the United States or any subdivision or
taxing authority of any of the foregoing, upon or with respect to (i) the
Equipment or any part thereof, (ii) the ownership, delivery, subleasing,
possession, use, operation, storage, sale, transfer of title, return, or other
disposition of the Equipment, (iii) the rentals, receipts or earnings arising
from this Sublease, (iv) the execution, delivery or performance of the Operative
Agreements, (v) any payment made pursuant to any such agreement or document or
(vi) the property or the income or other proceeds received with respect to
property held by the Sublessor hereunder (all such license, documentation,
recording and registration fees, taxes, levies, imposts, duties, assessments,
fees, charges, withholdings, penalties, fines, additions to tax and interest
imposed as aforesaid being hereinafter in this Section 9.3 called "Taxes").
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(b) Exclusions. Sublessee shall have no obligation to indemnify an
Indemnitee under this Section 9.3 for
(i) any Taxes to the extent contested by the Sublessee in good faith
in accordance with the provisions of paragraph (c) below;
(ii) any Taxes imposed as a result of a sale, transfer, assignment
or other disposition, whether prior to, during or after the Term, with
respect to any item of Equipment, by an Indemnitee of any interest in such
item of Equipment, the trust created by the trust agreement between any
Head Lessor and Owner (the "Owner Trust"), this Sublease or any Head Lease
unless such sale, transfer, assignment or other disposition is made as the
result of the exercise of remedies after an Event of Default pursuant to
Article 14 hereof, but in no event shall the Sublessee be liable for any
Taxes on, based on, or measured by or related to any income or gain
realized upon any such disposition;
(iii) any Taxes imposed with respect of an item of Equipment for any
period (A) prior to the delivery of such item of Equipment by Sublessor to
Sublessee pursuant to this Sublease or (B) after the redelivery of such
item of Equipment to Sublessor or its designee or (C) after the expiration
of the Term with respect thereto;
(iv) any Taxes imposed on or for the account of any Lender;
(v) any Taxes on, based on or measured by, the net income of an
Indemnitee and any Taxes enacted by any jurisdiction after the date of
this Sublease which are, in effect, a substitute for or in lieu of any
such Taxes and any Taxes, however denominated, based on or measured by,
value added, except any such Taxes to the extent imposed on the receipt of
a payment under this Section 9.3;
(vi) any Taxes to the extent that such Taxes would not have been
imposed had there not been a transfer by an original Indemnitee of an
interest in an item of Equipment, the Owner Trust, this Sublease, or any
Head Lease or, if such Taxes would have been imposed on or with respect to
such original Indemnitee, such original Indemnitee would not have been
entitled to indemnification with respect to such Taxes;
(vii) any Taxes consisting of penalties, fines or interest imposed
as a result of the failure of an Indemnitee to file any return or pay any
amount when due, unless the Sublessee was responsible for such filing or
payment;
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(viii) any Taxes included in the original cost to any Head Lessor of
acquiring the Aircraft or any Engine;
(ix) any Taxes to the extent such Taxes would not have been imposed
had the Owner Trust and the Head Lessor of the Airframe been resident in
the State of Utah; and
(x) any Taxes imposed with respect to any fees or compensation
received by Sublessor.
(c) Contest. If a claim is made against an Indemnitee for any Taxes
indemnified against under this Section 9.3, such Indemnitee will, within 10 days
after such Indemnitee is aware of such claim, notify the Sublessee in writing of
such claim, but the failure to do so will not relieve the Sublessee from any
liability which it may have to such Indemnitee if, notwithstanding such failure,
the Sublessee's ability to contest such claim under this paragraph (c) is not
adversely affected. If requested by the Sublessee in writing, the Indemnitee
shall permit the Sublessee to contest such claim at Sublessee's expense, upon
receipt of an indemnity undertaking from Sublessee reasonably satisfactory to
the Indemnitee for such Taxes and for all costs, expenses, legal and
accountants' fees and disbursements, penalties, fines, additions to tax and
interest resulting from such contest. Sublessee may contest such claim, in the
name of the Sublessee or such Indemnitee, to the extent permitted by law, by (i)
seeking administrative review of the claim, (ii) resisting payment thereof if
possible, (iii) not paying the same except under protest, if protest is
necessary and proper, (iv) if payment is made, using reasonable efforts to
obtain a refund thereof in appropriate administrative or judicial proceedings,
or both and (v) taking any other reasonable action appropriate to contest the
claim.
(d) Reports. In case any report or return is required to be made with
respect to any obligation of the Sublessee under this Section 9.3 and unless an
Indemnitee shall notify the Sublessee that it intends to make such report or
return, the Sublessee either shall make such report or return in such manner as
will show, if appropriate, the interest of the Sublessor, Head Lessor and Owner
in the Aircraft or other item of Equipment, or shall promptly notify such
Indemnitee, Sublessor, Head Lessor and Owner of such requirement and shall make
such report or return in such manner as shall be reasonably satisfactory to such
Indemnitee, the Sublessor, Head Lessor and Owner. All costs and expenses
(including legal and accountants' fees) of preparing any such return or report
shall be borne by the Sublessee. If an Indemnitee has notified the Sublessee
pursuant to this subsection that it intends to make any report or return, the
Indemnitee shall give the Sublessee written notice prior to either filing any
return, statement or report with respect to any Taxes for which indemnification
would be payable by the Sublessee under this Section 9.3 or paying any such
Taxes and shall send a copy of such report or return to the Sublessee at least
10 days prior to the date on which such report or return is due to be filed or
payment is to be made.
(e) Repayments. If an Indemnitee obtains a refund of any Taxes with
respect to which the Sublessee has paid an indemnity under this Section 9.3 or a
reduction in any Taxes as a result of the payment or incurrence of any Tax for
which the Sublessee has paid an indemnity under this Section 9.3, the Indemnitee
shall pay to the Sublessee the amount of such refund or reduction, including any
interest received thereon, plus any net reduction of Taxes imposed on such
Indemnitee resulting from the payment to the Sublessee under this subsection. An
Indemnitee is not required to make any payments to the Sublessee under this
subsection to the extent that such payments would exceed the aggregate payments
by the Sublessee to such Indemnitee under this Section 9.3.
35
(f) Payments. The Sublessee agrees to pay any amount it is required to pay
under this Section 9.3 promptly after the Indemnitee requests the payment in
writing, but the Sublessee is not required to make any payment before the
Indemnitee has paid the Taxes in respect of which the Sublessee's payment is to
be made. If the Sublessee is required to indemnify any Person for Taxes under
this Section 9.3, the Sublessee shall pay to such Person an amount which, after
deduction of all Taxes required to be paid by such Person in respect of the
receipt of such amount under the laws of the United States or of any foreign
country or any political subdivision of either (after giving credit for any
savings in respect of any such Taxes by reason of deductions, credits or
allowances in respect of the payment of the expenses indemnified against), shall
be equal to the amount of the indemnification required. Each Indemnitee agrees
to pay the Sublessee any amount it is required to pay the Sublessee under this
Section 9.3 promptly after the Indemnitee receives a refund with respect to such
Taxes or realizes a reduction in Taxes giving rise to an obligation to make such
payment. Any demand for payment to the Sublessee and any payment to the
Sublessee shall be accompanied by a written statement describing in reasonable
detail the computation of the payment. If the Sublessee requests, the statement
will be verified, at the Sublessee's expense, by independent public accountants
of recognized standing selected by the Indemnitee submitting the statement.
(g) Agreement of Indemnitee. If an Indemnitee is not a party to this
Sublease, the Sublessee may require the Indemnitee to agree to the terms of this
Section 9.3 prior to making any payment to the Indemnitee under this Section
9.3.
9.4. Survival. All indemnities and agreements contained in Sections 9.2
and 9.3 will survive any investigation or inspection made by or on behalf of any
Indemnitee or the Sublessee and the expiration or other termination of this
Sublease, in whole or in part for a period of five (5) years.
ARTICLE 10.
INSPECTION; FINANCIAL
STATEMENTS AND OTHER INFORMATION
10.1. Inspection. At reasonable times during the Term of this Sublease,
Sublessee shall provide to Sublessor and each Head Lessor and Owner such
information concerning the location, condition, use and operation of the
Equipment as they may reasonably request. Additionally, Sublessee shall permit
(a) Sublessor, each Owner and any of their authorized representatives at such
Person's expense to visit and inspect any item of Equipment, its condition, use
and operation and any records in Sublessee's possession maintained in connection
therewith (except to the extent prohibited by applicable national security
regulations of the Government), and (b) Sublessor and any of its representatives
to discuss the finances and accounts of the Sublessee in relation to the
performance of its obligations hereunder, with the financial officers of the
Sublessee; provided that such visits, inspections and discussions do not
interfere with the operations of the Sublessee and are scheduled at the
reasonable request of the Sublessor and the Owner at times mutually convenient
to such Person and the Sublessee. The Sublessee hereby agrees to make all
reasonable efforts to arrange for such visits, inspections and discussions at
times convenient for such Person. Neither the Sublessor or any Owner shall have
any duty to make any such inspection nor shall any of them incur any liability
or obligation by reason of not making any such inspection nor waive or be deemed
to waive any rights hereunder or under any other Operative Agreement. Sublessor
shall not have any obligation to third parties or to any Person to ensure that
Sublessee maintains the Aircraft or causes the Aircraft to be maintained in an
airworthy condition or otherwise in accordance with the terms hereof.
36
10.2. Financial Statements and Other Information. (a) Within 60 days after
the end of each of the first three fiscal quarters and 120 days after the end of
each fiscal year, Sublessee shall deliver to Sublessor (1) a certificate signed
by Sublessee's principal financial officer stating that, to the best of his
knowledge, there did not exist at any time during such period a Default or Event
of Default or, if such principal financial officer shall have obtained knowledge
of any Default or Event of Default, specifying the nature and period of
existence thereof and what action the Sublessee has taken, is taking or proposes
to take with respect thereto, and (2) if requested by Sublessor or the Owner of
the Airframe, a copy of the Sublessee's quarterly report on Form 10-Q or Annual
Report on Form 10-K, as the case may be, filed with the Securities and Exchange
Commission or, if Sublessee does not file such periodic reports, equivalent
financial information.
(b) at any time or times and for such period of time as requested by
Sublessor, such further information and data with respect to Sublessee as the
Sublessor (or Owner through Sublessor) from time to time may reasonably request;
and
(c) promptly after any principal officer of the Sublessee having
managerial responsibilities obtains knowledge of the occurrence of any Event of
Default hereunder, an Officer's Certificate of Sublessee specifying the nature
and period of existence of such Event of Default and what action, if any, the
Sublessee has taken, is taking or proposes to take with respect thereto.
ARTICLE 11.
RECORDATION AND FURTHER ASSURANCES
37
Forthwith upon the execution and delivery of each Sublease Supplement, the
Sublessee will cause such Sublease Supplement to be duly filed and recorded in
accordance with the Act. In addition, Sublessee will promptly and duly execute
and deliver to Sublessor such further documents and assurances and take such
further action as the Sublessor may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this Sublease and
to establish and protect the rights and remedies created or intended to be
created in favor of the Sublessor hereunder. The Sublessee's obligations under
Article 11 shall be limited to action to be taken in the United States of
America, unless the Aircraft is registered under the laws of a country other
than the United States of America, in which case this Article 11 shall apply to
action to be taken as well in the country in which such Aircraft is registered
or such other applicable jurisdiction.
ARTICLE 12.
RETURN OF AIRCRAFT.
12.1 Return. Except as otherwise provided herein, at the expiration of the
Term or upon the earlier termination of this Sublease, Sublessee, at its own
risk and expense, shall return the Aircraft to the Sublessor by delivering the
same to the Sublessor at any location in the continental United States of
America designated by Sublessor. At the time of return to the Sublessor, the
Aircraft shall be fully equipped with three Engines or other engines owned by
the Sublessee (and complying with Section 7.8 hereof) properly installed thereon
and all other Parts and items of Equipment that were installed on or delivered
with the Aircraft on the Delivery Date or delivered separately to Sublessee
prior to the Delivery Date (including the two shipsets of galley equipment (one
of which was delivered to Sublessee on November 15, 1999), 26 LD3 cargo
containers, 12 cargo compartment partial load latches (4 forward and 8 aft) part
number AWJ7019-501, 8 cargo compartment partial load latches (all forward) part
number 225-46787-1), except for Parts replaced or removed in accordance with
Sections 6.1 or 6.3.
12.2. Records. Upon the return of the Aircraft, Sublessee shall deliver to
Sublessor (a) all logs, manuals, certificates, data and inspection, modification
and overhaul records required to be maintained with respect thereto under
applicable rules and regulations of the FAA in Sublessee's possession and any
other governmental authority having jurisdiction, and (b) and logs, manuals and
catalogs included with each item of Equipment on the Delivery Date thereof.
12.3. Condition. Except as otherwise provided in Section 6.3 hereof, the
Aircraft when returned to Sublessor shall be in the same configuration as when
the Aircraft was originally delivered to Sublessee hereunder, shall be clean by
commercial airlines standards, shall be airworthy and shall have a currently
effective FAA certificate of airworthiness and shall be registered in the name
of the Head Lessor in accordance with the Act and each item of Equipment
returned to Sublessor shall (a) be in the condition required under Article 5
hereof and shall have been maintained pursuant to Section 5.3 hereof throughout
the Term as if the Sublessee were the owner and operator thereof and as if the
Term were not then ending, (b) be free and clear of any Liens (other than Liens
of the character referred to clauses (a), (c), (d) and (e) of the definition of
Permitted Liens), (c) shall be in as good a condition as when delivered,
ordinary wear and tear excepted and (d) shall be in a condition for immediate
operation under Federal Aviation Regulation 121. Sublessor shall have the right
to conduct a ground inspection of the Aircraft to determine compliance with this
Article 12. Each fuel tank and oil tank of the returned Aircraft shall contain
not less than the quantity of fuel as was contained in such tanks when delivered
to Sublessee on the Delivery Date, and, in the case of any differences in such
quantities, an appropriate adjustment will be made by payment therefor at the
then current market price at the place of delivery of fuel.
38
ARTICLE 13.
EVENTS OF DEFAULT
The following events shall constitute Events 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 administrative or
governmental body):
(a) Sublessee shall fail to make any payment of Basic Rent when due
and such payment shall be overdue for a period of 5 days; or
(b) Sublessee shall fail to make any payment of Supplemental Rent or
any payment due to Continental under the MSA, in each case after the same shall
have become due, and such payment shall be overdue for a period of 10 days; or
(c) Sublessee shall fail to carry and maintain insurance on or with
respect to the Equipment in compliance with the provisions of Article 8 hereof;
or
(d) Sublessee shall fail to perform or observe any other covenant or
agreement to be performed or observed by it hereunder or under any other
Operative Agreement and such failure shall continue unremedied for a period of
30 days after written notice thereof by Sublessor to Sublessee; provided,
however, that if such failure cannot be remedied within such 30-day period and
Sublessee shall be diligently proceeding to correct such failure as Sublessor
deem appropriate and necessary to remedy such failure, such period shall be
extended for up to an additional 30 days; or
(e) Any representation or warranty made by Sublessee herein or in
any other Operative Document or in any document or certificate provided by
Sublessee pursuant hereto or thereto shall prove to have been false or
misleading in any material respect, and such condition shall remain material and
continue unremedied for a period of 30 days after written notice thereof by
Sublessor to Sublessee; or
39
(f) The entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Sublessee in an involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law
(collectively, "Bankruptcy Laws"), or appointing a receiver, liquidator,
assignee custodian, trustee, sequestrator (or similar official) of Sublessee or
for all or substantially all of its property, or ordering the winding-up or
liquidation of its affairs, or the commencement of an involuntary case under any
Bankruptcy Laws against Sublessee and the continuance of any such decree or
order or involuntary case unstayed and in effect for a period of 60 consecutive
days; or
(g) The commencement by Sublessee of a voluntary case under any
Bankruptcy Laws, or any other proceeding seeking liquidation, reorganization or
other relief with respect to itself under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it, or shall
consent to any such relief or to the appointment of or taking possession by any
such official or agency in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall take any corporate action to authorize any of the foregoing; or
(h) Failure to return Aircraft to Sublessor on or before January 2,
2002 in compliance with the terms hereof; provided, however, that failure to
return the Aircraft on the date set forth herein will not be an Event of Default
for five (5) days after such date if Sublessee has ceased commercial operation
of the Aircraft and makes diligent effort to return the Aircraft and failure to
return the Aircraft on the date set forth herein will not be an Event of Default
(without limitation as to time of delay) if such failure is a result of the
failure of Continental to perform the MSA.
ARTICLE 14.
REMEDIES
14.1. Default; Remedies. Upon the occurrence of an Event of Default
and at any time thereafter so long as the same shall be continuing, Sublessor
may, at its option, declare this Sublease to be in default, and may exercise one
or more of the following remedies as Sublessor 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) Sublessor may cause Sublessee, upon written demand by Sublessor and at
Sublessee's expense, to return promptly, and Sublessee shall return promptly,
all or any part of the Aircraft, Airframe or Engines as Sublessor may so demand
to Sublessee at such location on Sublessee's route system selected by Sublessor
in the manner and condition required by, and otherwise in accordance with all
the provisions of, Section 12 as if the Aircraft, Airframe or Engines were being
returned at the end of the Term; or Sublessor, at its option, may enter upon any
premises where all or any part of the Aircraft, Airframe, Engines, or Part
thereof, is located or reasonably believed to be located and take immediate
possession of and remove the same without the necessity for first instituting
proceedings or by summary proceedings or other method under applicable law all
without liability accruing to Sublessor for or by reason of such entering and
taking of possession (except liability resulting from the willful misconduct or
gross negligence of Sublessor or its agents); or
40
(b) Sublessor may sell all or any part of the Aircraft, Airframe or any
Engine, or Part thereof, at public or private sale, at such times and places, to
such Persons as Sublessor may determine, or otherwise dispose of, hold, use,
operate or Sublease to others the Aircraft, Airframe or any Engine, or Part
thereof, as Sublessor, in its sole discretion, may determine, all free and clear
of any rights of Sublessee and without any duty to account to Sublessee with
respect to such action or inaction or for any proceeds with respect thereto
(except in connection with the calculation of liquidated damages as provided
below); or
(c) Whether or not Sublessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above,
Sublessor, by written notice to Sublessee specifying a payment date not earlier
than ten days from the date of such notice, may cause Sublessee to pay to
Sublessor, and Sublessee shall pay to Sublessor, on the payment date specified
in such notice, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent for the Aircraft, Airframe, Engine or Part thereof
due for the periods commencing after the date specified for payment in such
notice), any unpaid Basic Rent due for periods prior to and including the period
ending with the Basic Rent Payment Date immediately preceding the date specified
in such notice plus an amount equal to the excess, if any, of the present value
of the remaining payments of Basic Rent during the Term over the present value
of the fair market rental value of the Aircraft, Airframe, Engine or Part
thereof, for the remainder of such Term, using in each case a discount rate
equal to the Prime Rate as of the date specified for payment in such notice; or
(d) Sublessor may rescind this Sublease as to all or any part of the
Aircraft, Airframe and Engines, or Part thereof, or may exercise any other right
or remedy which may be available to it under the Uniform Commercial Code whether
or not in effect in the jurisdiction in which enforcement is sought or other
applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof.
For the purpose of this Section 14, the "fair market rental value" of the
Aircraft shall be as specified in an appraisal by BK Associates or Aircraft
Information Services, Inc., as selected by Sublessor or, if neither appraiser is
available, another nationally recognized independent aircraft appraiser chosen
by Sublessor, who shall determine such value on the basis of the actual location
and condition of the Aircraft.
41
In addition to the foregoing remedies, Sublessee shall be liable for any
and all Supplemental Rent due hereunder before or after termination hereof,
except as otherwise expressly provided above, for all legal fees and other costs
and expenses of Sublessor incurred by reason of the occurrence of an Event of
Default and the exercise of Sublessor's remedies with respect thereto including
all costs and expenses incurred in connection with the return of the Airframe or
any Engine in accordance with the terms of Article 12 hereof or any appraisal of
the Aircraft. At any sale of the Airframe or any Engine, Sublessor may bid for
and purchase such property.
14.2. No Waiver, Etc No remedy referred to in this Section 14 is intended
to be exclusive, but each shall be cumulative and in addition to any other
remedy referred to above or otherwise available to Sublessor at law or in
equity; and the exercise or beginning of exercise by Sublessor of any one or
more of such remedies shall not preclude the simultaneous or later exercise by
Sublessor of any or all of such other remedies. No express or implied waiver by
Sublessor of any Event of Default shall in any way be, or be construed to be, a
waiver of any earlier or subsequent Event of Default.
ARTICLE 15.
MISCELLANEOUS.
15.1 Notices. All notices required under the terms and provisions hereof
shall be in writing and shall be given by certified mail, overnight courier,
telecopy, telex, teletype or any other customary means of written communication,
addressed:
If to Sublessor, at 0000 Xxxxx Xxxxxx, 00xx Xxxxx - XXXXX, Xxxxxxx,
Xxxxx 00000, Attention: Vice President - Fleet Management or at such other
address as Sublessee shall from time to time designate in writing;
If to Sublessee, at Honolulu International Airport, X.X. Xxx
00000, Xxxxxxxx, Xxxxxx 00000-0000, Attention: VP - Finance, copy to General
Counsel, or at such other address as Sublessor shall from time to time
designate in writing;
15.2. Right to Perform for Sublessee. If Sublessee fails to make any
payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Sublessor may
(but shall not be obligated to) make such payment or perform or comply with such
agreement, and the amount of such payment and the reasonable cost of such
performance or compliance, together with interest thereon at the Overdue Rate,
shall be deemed Supplemental Rent, payable by Sublessee upon demand.
42
15.3. Assignment by Sublessee. Except as expressly permitted in the
following sentence, Sublessee will not assign any of its rights under this
Sublease without the prior written consent of Sublessor and Head Lessor. On ten
days' written notice to Sublessor, Sublessee may consolidate with or merge into
any other corporation provided that the following conditions are met:
(a) the corporation formed by such consolidation or into which Sublessee
is merged shall be a corporation organized under the laws of the
United States of America or any State thereof or the District of
Columbia, shall be a citizen of the United States within the meaning
of the Act, shall be a United States certificated air carrier holding
one or more certificates of public convenience and necessity and shall
execute and deliver to Sublessor and Head Lessor an agreement
containing an assumption by such successor corporation of the due and
punctual performance of each covenant and condition contained in this
Sublease and the other Operative Agreements,
(b) immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing and
(c) Sublessee shall have delivered to Sublessor an Officer's Certificate
of Sublessee stating that such transaction complies with the
requirements of this Section 15.3.
15.4. Assignment by Sublessor. Sublessor shall not sell, assign, convey or
otherwise transfer its interest in the Operative Agreements (whether by sale,
merger or otherwise) except on the conditions set forth in this Section 15.4.
Sublessor may transfer its right, title and interest in the Operative Agreements
to (1) Continental, (2) the Head Lessor or (3) the Owner.
In addition, Sublessor may transfer its right, title and interest in and
to the Operative Agreements to another Person (for the purposes of this Section
15.4, the "Transferee"), subject to the conditions that:
(a) The Transferee shall have full power and authority and legal right to
execute and deliver and to perform its assumed obligations under this Agreement
and the other Operative Agreements and shall provide reasonably satisfactory
evidence of such power and authority to Sublessee;
(b) The Transferee shall enter into one or more legal, valid, binding and
enforceable agreements (and, if such Transferee is not an Affiliate or
wholly-owned subsidiary of Sublessor, accompanied by an opinion of counsel
reasonably satisfactory to Sublessee addressed to Sublessee to the effect that
such agreement or agreements are legal, binding and enforceable in accordance
with its or their terms with such exceptions and qualification as are permitted
in the comparable opinion delivered on the Delivery Date), pursuant to which
such Transferee agrees to be bound by all the terms of, and to undertake all of
the obligations arising after such transfer of, the transferring Sublessor
contained in the Operative Agreements and in which it makes representations and
warranties comparable to those contained in Section 4.2;
43
(c) Any such transfer shall not violate the Act or result in a "prohibited
transaction" within the meaning of ERISA; and
(d) The Transferee shall be either (i) a United States bank, insurance
company or other financial institution with a capital and surplus of at least
$10,000,000, or a wholly-owned subsidiary of such a bank, insurance company or
other financial institution, or (ii) a corporation which has a net worth of at
least $10,000,000 (or is a wholly-owned subsidiary of such a corporation), and,
as of the date of such transfer, is an entity experienced in participating as an
equity investor in equipment leasing transactions having similar magnitude to
this transaction; provided, that if the Transferee does not itself have a
capital and surplus or a net worth of at least $10,000,000, the transferring
Sublessor shall continue to be liable for (or if the parent of such Transferee
meets such net worth test, such parent shall enter into a legal, valid, binding
and enforceable agreement, in form and substance reasonably satisfactory to
Sublessee, effective to confirm that such parent shall be liable for) all the
obligations of Sublessor hereunder assumed by the Transferee; and provided
further that if the Transferee is a partnership, each partner (including each
limited partner, if any) shall be a "citizen of the United States" within the
meaning of Section 101(16) of the Act or a "Resident Alien" within the meaning
of the Act and shall not be a tax exempt organization or entity, governmental
unit or foreign person or entity within the meaning of Section 48(a)(4),
48(a)(5) or 168(h)(2) of the Code;
Sublessor shall give written notice to Sublessee at least 10 days prior to
such transfer, specifying the name and address of the proposed Transferee, and
the facts necessary to determine whether or not the requirements for a transfer,
as set forth herein, are satisfied. Upon any such transfer, the Transferee shall
be deemed the "Sublessor" to the extent appropriate for purposes hereof, and the
transferring Sublessor shall be released from its obligations under the
Operative Agreements arising after such transfer to the extent, but only to the
extent, that such obligations have been assumed by the Transferee.
Any fees, charges and expenses, including the reasonable legal fees,
charges and expenses, incurred by Sublessor or Sublessee in connection with the
transfer by Sublessor of any interest in the Aircraft or the Operative
Agreements, or by the Transferee in any such case, will be paid for by the
Sublessor making such transfer and in no case will the Sublessee be responsible
for any such fees, charges or expenses. Without limiting the generality of any
of the foregoing, Sublessor will reimburse Sublessee for its reasonable
out-of-pocket costs in reviewing documents required by Sublessor, Lender or the
Transferee in connection with any such transfer by Sublessor.
Sublessor also agrees to reimburse Sublessee for up to $________ of its
actual, out-of-pocket fees, charges and expenses, including the reasonable legal
fees, charges and expenses, incurred by Sublessee in connection with the
transfer by Owner or Head Lessor of any interest in the Aircraft or the
Operative Agreements.
44
Notwithstanding anything herein to the contrary, Sublessee shall not be
obligated to take any action in connection with any transfer, assignment, pledge
or other conveyance, for security or otherwise, by Sublessor of its interest in
any of the Operative Agreements or any item of Equipment if such transfer,
assignment, pledge or other conveyance materially adversely affects the rights
or obligations of Sublessee under the Operative Agreements or otherwise
materially adversely affects Sublessee. The agreements, covenants, obligations
and liabilities contained in this Sublease including, but not limited to, all
obligations to pay Rent and indemnify each Indemnitee are made for the benefit
of each Indemnitee and their respective successors and assigns; provided,
however, that no transfer, assignment, pledge, or other conveyance shall
increase the aggregate financial exposure under the indemnity obligations of
Sublessee under this Sublease as compared to what such obligations would have
been had such transfer, assignment, pledge or other conveyance not occurred.
Sublessee acknowledges that Head Lessors and Owners have the rights under
the relevant Head Lease and related agreements to transfer and finance their
interests in the Aircraft and the Head Lease subject to certain restrictions
contained therein. In the event of any such transfer or assignment by the Head
Lessor or Owner of the Airframe, Sublessor shall use commercially reasonable
efforts to (a) procure a letter, satisfactory to Sublessee, from the transferee
or assignee agreeing not to disturb Sublessee's possession and use of the
Aircraft unless an Event of Default occurs hereunder and (b) ensure the
continued United States registration of the Aircraft under the Act without
limitation on use or operation and without disrupting Sublessee's continuous
operation of the Aircraft.
The terms and provisions of this Sublease shall be binding upon and inure
to the benefit of Sublessor and Sublessee and their respective permitted
successors and assigns.
15.5. Quiet Enjoyment. So long as no Event of Default shall have occurred
and be continuing, Sublessor covenants that neither it, Owner, Head Lessor nor
any person claiming lawfully through any of them shall interfere with any right
of Sublessee peaceably and quietly without hindrance or molestation to hold,
possess and use, during the Term and in accordance with the terms hereof, the
Aircraft, Airframe and Engines.
15.6. Investment of Funds. Any amounts required to be paid to, or retained
by Sublessor on behalf of, Sublessee that are not then required to be paid to
Sublessee pursuant to this Sublease (including any security or commitment
deposit, if applicable), shall, until paid to Sublessee as provided in this
Sublease, be invested by Sublessor at the direction of Sublessee and at the
expense and risk of Sublessee in the following securities (which shall mature
within 180 days of the date of purchase thereof): (a) direct obligations of the
Government; (b) obligations fully guaranteed by the Government; (c) open market
commercial paper issued by any corporation rated P-1 or P-2 by Xxxxx'x Investors
Service Inc. or A-1 or A-2 by Standards & Poor's Corporation; or (d)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with First Security Bank, National Association or any bank,
trust company or national banking association incorporated or doing business
under the laws of the United States of America or any state thereof having a
combined capital and surplus of at least $150,000,000. There shall be promptly
remitted to Sublessee any gain (including interest received) realized as the
result of any such investment (net of any fees, commissions, taxes and other
expenses, if any, incurred in connection with such investment) unless an Event
of Default shall have occurred and be continuing. Sublessee will promptly pay to
Sublessor, on demand, the amount of any loss realized as the result of any such
investment (together with any fees, commissions and other expenses (including
any taxes), if any, incurred in connection with such investment).
45
15.7. Maintenance of Status. To the extent provided thereby (or to the
fullest extent it may lawfully so agree, whether or not provided thereby),
Sublessee hereby agrees that any right of Sublessor to take possession of such
Aircraft or Engines in compliance with the provisions of this Sublease and in
accordance with Section 1110 of Title 11 of the United States Code or any
similar provision of any superseding statute, as amended from time to time,
shall not be affected by the provisions of Sections 362 or 363 or said Title, or
other analogous part of any superseding statute, as amended from time to time,
and accordingly, it is the intention of the parties hereto that this Sublease be
afforded the benefits of said Section 1110.
15.8. Confidentiality. Sublessee and Sublessor agree to keep this
Agreement, including Schedule 1 hereto, confidential and shall not disclose or
cause to be disclosed the same to any Person, except (i) to prospective
permitted transferees of any such party's interests or to any prospective Lender
or their respective counsel or other agents who agree to hold such information
confidential, (ii) to any such party's counsel or special counsel, insurance
brokers, auditors or other agents, Affiliates, advisors or investors who agree
to hold such information confidential, (iii) as may be required by any statute,
court or administrative order, ruling or regulation or applicable law, (iv) the
Head Lessor and Owner and (v) such other Persons as are reasonably deemed
necessary by the disclosing party in order to protect the interests of such
party for the purpose of enforcing such documents by such party.
15.9. Applicable Law. All representations, warranties and indemnities of
Sublessee and Sublessor provided for in this Sublease and in the other Operative
Agreements shall survive the execution and delivery of this Sublease. Any
provision of this Sublease 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. No term or provision of this Sublease may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which the enforcement of the change, waiver,
discharge or termination is sought. This Sublease shall constitute an agreement
of Sublease, and nothing herein shall be construed as conveying to Sublessee any
right, title or interest in or to the Aircraft, Airframe or Engines except as a
Sublessee only. The section and paragraph headings in this Sublease, the table
of contents and the cover (other than the chattel paper language contained
thereon) are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof and all references herein
to numbered sections, unless otherwise indicated, are to sections of this
Sublease. THIS SUBLEASE HAS BEEN, AND EACH SUBLEASE SUPPLEMENT AND AMENDMENT
HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY RESIDENTS THEREOF AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. This Sublease and each Sublease
Supplement and amendment hereto may be executed in several counterparts, each of
which shall be deemed an original, and all such counterparts shall constitute
one and the same instrument. This Sublease shall be a net Sublease and, except
as specifically provided herein, Sublessee shall be responsible during the Term
for all costs incurred in the operation, use, maintenance and possession of the
Aircraft by Sublessee. Each party hereto agrees to execute such further
documents and make any filings as may be reasonably necessary to protect the
rights of the parties hereunder.
46
IN WITNESS WHEREOF, Sublessor and Sublessee have each caused this Sublease
to be duly executed and delivered as of the day and year first above written.
HAWAIIAN AIRLINES, INC.
By:_________________________
Title:
By:_________________________
Title:
CONTINENTAL MICRONESIA, INC.
By:_________________________
Title:
47
EXHIBIT A
TO SUBLEASE AGREEMENT
SUBLEASE SUPPLEMENT NO.
THIS SUBLEASE SUPPLEMENT NO. , dated _______, _____ between HAWAIIAN
AIRLINES, INC., a Hawaii corporation ("Sublessee"), and CONTINENTAL
MICRONESIA, INC., a Delaware corporation ("Sublessor").
Sublessor and Sublessee have heretofore entered into that certain Sublease
Agreement 061, dated as of _____, 1999 (as at any time amended, modified or
supplemented, herein called the "Sublease" and the terms defined therein being
herein used with the same meanings), which Sublease provides for the execution
of Sublease Supplements substantially in the form hereof for the purpose of
leasing an Aircraft under the Sublease as and when delivered by Sublessor to
Sublessee in accordance with the terms thereof. [The Sublease relates, among
other matters, to the Airframe and Engines described below, and this Sublease
Supplement is attached to a counterpart of the Sublease for purposes of filing
and recordation with the FAA pursuant to the Act.] [The Sublease relates to the
Airframe [and] [Engines] described below, and a counterpart of the Sublease,
attached to and made a part of Sublease Supplement No. 1, dated ______, ______,
to the Sublease, has been recorded by the FAA on _____, _______ as one document
and assigned Conveyance No. __].
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Sublease, Sublessor
and Sublessee hereby agree as follows:
-----------
This Sublease Supplement has been executed in several counterparts. No
security interest in Sublessor's right, title and interest in and to this
Sublease Supplement may be created through the transfer or possession of any
counterpart other than the original counterpart. [This is not the original
counterpart.]
1. Sublessor hereby delivers and subleases to Sublessee, and Sublessee
hereby accepts and subleases from Sublessor, under the Sublease, as herein
supplemented:
[The following described XxXxxxxxx Xxxxxxx model DC-10-30 Aircraft (the
"Delivered Aircraft") which Delivered Aircraft as of the date hereof consists of
the following:
Airframe: U.S. Registration Number _______; Manufacturer's Serial No.
____; and
Engines: General Electric model CF6-50C2 engines bearing manufacturer's
serial numbers as follows:
Position 1: ____
Position 2: ____
Position 3: ____
Each of the Engines described above has 750 or more rated takeoff horsepower or
the equivalent of such horsepower.
2. The Delivery Date of the [Delivered Aircraft] [Engine] is the date of
this Sublease Supplement set forth in the opening paragraph hereof. [The
Aircraft was delivered with ______ gallons of fuel.]
3. Sublessee hereby confirms to Sublessor that Sublessee has accepted the
[Delivered Aircraft] [Engine] for all purposes hereof and of the Sublease.
4. THIS SUBLEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY
RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease
Supplement to be duly executed and delivered as of the date and year first above
written.
HAWAIIAN AIRLINES, INC.
By:_________________________
Title:
By:_________________________
Title:
CONTINENTAL MICRONESIA, INC.
By:_________________________
Title:
SCHEDULE 1
To Sublease Agreement 061
Certain Financial Terms
Monthly Aircraft Basic Rent $________ initially, and subject to
adjustment, as provided in the last sentence of
this paragraph. Sublessor and Sublessee
acknowledge and agree that this Agreement and
the MSA have been entered into as part of a
single transaction, and that this Agreement and
the MSA should be regarded as a single
agreement for purposes of assumption or
rejection under Section 365 of the U.S.
Bankruptcy Code. If the MSA terminates for any
reason (including, without limitation, due to
default by either party or rejection in a
bankruptcy proceeding) while this Agreement
remains in effect and Continental fails to make
payment to Sublessee of the monthly maintenance
credit thereunder, Sublessor and Sublessee
agree that the amount of Basic Rent payable
hereunder shall be automatically reduced by the
amount of such unpaid monthly maintenance
credit without further act by either party.
Monthly Entertainment
System Basic Rent $________
Holdover Basic Rent $_______
Limits of Liability: $________
Heavy Maintenance Reserve: $______ per flight hour prior to the C
Check currently scheduled for April 2001 and
$____ per flight hour after such C Check
Aircraft Per Engine
Stipulated Loss Stipulated Stipulated
Value Date Loss Value Loss Value
2 Apr - 00 $__________ $__________
2 Jul - 00 __________ __________
2 Oct - 00 __________ __________
2 Jan - 01 __________ __________
2 Apr - 01 __________ __________
2 Jul - 01 __________ __________
2 Oct - 01 __________ __________
2 Jan - 02 __________ __________
One Time Start up Costs
Reconfiguration of Aircraft $__________
Painting of Aircraft with Hawaiin Logo at cost
SCHEDULE 1
To Sublease Agreement 061
Certain Financial Terms
Monthly Aircraft Basic Rent $ *** initially, and subject to
adjustment, as provided in the last sentence of
this paragraph. Sublessor and Sublessee
acknowledge and agree that this Agreement and
the MSA have been entered into as part of a
single transaction, and that this Agreement and
the MSA should be regarded as a single
agreement for purposes of assumption or
rejection under Section 365 of the U.S.
Bankruptcy Code. If the MSA terminates for any
reason (including, without limitation, due to
default by either party or rejection in a
bankruptcy proceeding) while this Agreement
remains in effect and Continental fails to make
payment to Sublessee of the monthly maintenance
credit thereunder, Sublessor and Sublessee
agree that the amount of Basic Rent payable
hereunder shall be automatically reduced by the
amount of such unpaid monthly maintenance
credit without further act by either party.
Monthly Entertainment
System Basic Rent $***
Holdover Basic Rent $***
Limits of Liability: $***
Heavy Maintenance Reserve: $*** per flight hour prior to the C Check
currently scheduled for April 2001 and
$*** per flight hour after such C Check
*** Omitted from the version of this document filed with the Federal
Aviation Administration as containing confidential financial
information.
Aircraft Per Engine
Stipulated Loss Stipulated Stipulated
Value Date Loss Value Loss Value
2 Apr - 00 $*** $***
2 Jul - 00
2 Oct - 00
2 Jan - 01
2 Apr- 01
2 Jul - 01
2 Oct - 01
2 Jan - 02
One Time Start up Costs
Reconfiguration of Aircraft $***
Painting of Aircraft with Hawaiin Logo at cost
*** Omitted from the version of this document filed with the Federal
Aviation Administration as containing confidential financial
information.
