EXHIBIT 10.54
EXECUTION COPY
AMENDED AND RESTATED
LEASE AGREEMENT
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as Owner Trustee,
as Lessor
and
ALOHA AIRLINES, INC.,
as Lessee
Relating to one (1) Boeing B737-2Y5 Aircraft
Manufacturer's Serial No.: 24031
U.S. Registration No. N810AL
Dated as of June 1, 2000
--------------------------------------------------------------------------------
This Amended and Restated Lease Agreement has been executed in several
counterparts. To the extent, if any, that this Amended and Restated Lease
Agreement constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Amended and Restated Lease Agreement may be created through
the transfer or possession of any counterpart other than the original executed
counterpart containing the receipt executed by Lessor or, if Lessor has
assigned its rights to a third party in accordance with this Amended and
Restated Lease Agreement, such third party on the signature page of this
Amended and Restated Lease Agreement.
--------------------------------------------------------------------------------
VEDDER, PRICE, XXXXXXX & KAMMHOLZ
CHICAGO, ILLINOIS
TABLE OF CONTENTS
PAGE
----
SECTION 1. Definitions; Construction of Terms................................ 1
(a) General Definitions ................................................. 1
(b) Construction ........................................................13
SECTION 2. Lease of Aircraft.................................................14
SECTION 3. Lease Term; Rent; Payments........................................14
(a) Lease Term ..........................................................14
(b) Basic Rent ..........................................................14
(c) Supplemental Rent ...................................................15
(d) Security Deposit ....................................................15
(e) Payments in General .................................................16
(f) No Deductions or Withholdings........................................16
SECTION 4. Conditions Precedent .............................................17
(a) Due Diligence .......................................................17
(b) Agreements and Documents ............................................17
SECTION 5. Representations and Warranties ...................................19
(a) Disclaimer; Lessor's Representations, Warranties and Covenants ......19
(b) Lessee's Representations and Warranties..............................19
SECTION 6. Certain Covenants of Lessee ......................................25
(a) Maintenance of Corporate Existence; Duly Qualified; Certificated
Air Carrier .........................................................25
(b) Merger or Consolidation .............................................25
(c) Reporting Requirements ..............................................25
(d) Government Approvals ................................................26
(e) Taxes ...............................................................27
(f) Place of Business ...................................................27
(g) Filings .............................................................27
(h) Approved Maintenance Program ........................................27
SECTION 7. Return of the Aircraft ...........................................28
(a) Date and Location of Return .........................................28
(b) Condition of Aircraft ...............................................28
(c) Final Inspection ....................................................28
(d) Operational Ground Check.............................................29
(e) Demonstration Flight ................................................29
(f) Technical Acceptance ................................................30
(g) Failure to Return Aircraft...........................................30
ii
(h) Transition ..........................................................31
(i) Security Deposit ....................................................31
SECTION 8. Liens ............................................................31
(a) No Liens.............................................................31
(b) Removal of Liens.....................................................32
(c) No Adverse Action....................................................32
SECTION 9. Indemnities ......................................................33
(a) General Indemnity ...................................................33
(b) Exceptions to General Indemnity .....................................33
(c) Taxes ...............................................................34
(d) [Intentionally reserved] ............................................41
(e) Scope, Survival, Etc ................................................41
(f) Gross-Up for Taxes on Indemnity Payments ............................42
SECTION 10. Title; Registration; Maintenance and Operation; Insignia.........43
(a) Title to the Aircraft................................................43
(b) Registration ........................................................43
(c) Maintenance .........................................................44
(d) Operation ...........................................................47
(e) Insignia ............................................................48
(f) Costs of Operation ..................................................49
(g) Payment of Flight Charges............................................49
(h) Loss or Damage ......................................................49
SECTION 11. Possession ......................................................50
(a) Maintenance, Etc ....................................................50
(b) Installation of Engines on Other Airframes ..........................50
(c) Sublease ............................................................50
(d) Transfers of Possession in General ..................................51
(e) Maintenance Reserves ................................................51
SECTION 12. Replacement of Parts, Alterations, Modifications and Additions ..52
(a) Replacement of Parts.................................................52
(b) Modifications .......................................................53
SECTION 13. Risk of Loss, Destruction, Requisition, Etc .....................55
(a) Risk of Loss.........................................................55
(b) Event of Loss With Respect to the Aircraft...........................55
(c) Event of Loss With Respect to an Engine .............................56
(d) Application of Payments From any Government Entity for Requisition
of Title, Etc .......................................................57
(e) Application of Payments During Existence of Default .................58
iii
SECTION 14. Intentionally Reserved...........................................58
SECTION 15. Insurance .......................................................58
(a) Requirements ........................................................58
(b) Application of Proceeds of Hull Insurance ...........................58
(c) Insurance for Indemnities; Continuation of Liability Insurance.......59
(d) Reports, Etc ........................................................59
(e) Self-Insurance ......................................................59
(f) Additional Insurance by Lessor ......................................60
(g) Application of Payments during Existence of a Default................60
SECTION 16. Inspection.......................................................61
(a) Maintenance Schedule.................................................61
(b) Reasonable Inspections...............................................61
(c) No Duty to Inspect ..................................................61
(d) Follow-On Lease .....................................................61
(e) Absolute Right ......................................................62
SECTION 17. Assignment ......................................................62
(a) Assignment by Lessee.................................................62
(e) Collateral Assignment................................................64
(f) Successors and Assigns...............................................64
SECTION 18. Early Termination ...............................................65
SECTION 19. Events of Default ...............................................65
(a) Failure to Pay Basic Rent ...........................................65
(b) Failure to Pay Supplemental Rent.....................................65
(c) Insurance ...........................................................65
(d) Return ..............................................................65
(e) Unauthorized Transfer ...............................................66
(f) Certain Covenants ...................................................66
(g) Other Covenants .....................................................66
(h) Representations and Warranties ......................................66
(i) Authorizations ......................................................66
(j) Voluntary Bankruptcy, Etc ...........................................66
(k) Involuntary Bankruptcy, Etc .........................................67
(1) Government Action ...................................................67
(m) Cross Default .......................................................67
(n) Change of Ownership .................................................68
(o) Letter of Credit ....................................................68
SECTION 20. Remedies ........................................................68
(a) Retake Possession ...................................................68
(b) Termination or Enforcement . ........................................69
iv
(c) Application of Funds ................................................69
(d) Damages .............................................................69
SECTION 21. Transaction Expenses ............................................70
SECTION 22. No Setoff, Counterclaim, Etc.....................................70
SECTION 23. Further Assurances, Etc .........................................72
(a) Further Assurances ..................................................72
(b) Lessor's Performance of Lessee's Obligations ........................72
(c) No Implied Waivers; Rights Cumulative................................73
(d) Warranties ..........................................................73
SECTION 25. Governing Law and Jurisdiction...................................74
(a) Governing Law .......................................................74
SECTION 26. Miscellaneous....................................................75
(a) Amendments ..........................................................75
(b) Severability ........................................................75
(c) Counterparts ........................................................75
(d) Chattel Paper .......................................................75
(e) Time of the Essence .................................................75
(f) Notices .............................................................75
(g) Entire Agreement ....................................................76
EXHIBITS AND SCHEDULES
Exhibit A Intentionally Omitted
Exhibit B Basic Rent
Exhibit C Intentionally Omitted
Exhibit D Form of Lease Supplement
Exhibit E Intentionally Omitted
Exhibit F Insurance Requirements
Exhibit G Intentionally Reserved
Exhibit H Form of Letter of Credit
Exhibit I Approved Maintenance Providers
Exhibit J Form of Opinion of Lessee Counsel
Exhibit K Form of Opinion of Lessor's Special Counsel
Exhibit L Form of Aircraft Status Report
Exhibit M Terms of Hush Kitting Financing
Exhibit N AD-Sharing
Exhibit O Potential Sublessees
v
Schedule 1 Permitted Jurisdictions
Schedule 2 Intentionally Omitted
Schedule 3 Addresses and Accounts
Schedule 4 Filings and Recordings
Schedule 5 Return Conditions
Schedule 6 Filing Requirements
vi
AMENDED AND RESTATED
LEASE AGREEMENT
THIS AMENDED AND RESTATED
LEASE AGREEMENT, dated as of June 1, 2000
(this "AGREEMENT" or this "LEASE"), amends and restates that certain
Lease
Agreement dated as of March 22, 1995 (the "Original Lease"), in each case
between Aloha Airlines, Inc., a Delaware corporation having its principal place
of business at 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000 ("LESSEE") and First
Security Bank, National Association, not individually, but solely as trustee
under that certain Trust Agreement dated as of March 22, 1995 between itself
and Fleet Business Credit Corporation (formerly known as Sanwa Business Credit
Corporation) ("Lessor").
WITNESSETH:
WHEREAS, Lessee and Lessor have entered into the Original Lease;
WHEREAS, the Original Lease was recorded with the Federal Aviation
Administration on March 31, 1995 and was assigned Conveyance No. QQ008875;
WHEREAS, the Original Lease was amended by (i) Lease Amendment No. 1
dated as of November 17, 1995, recorded January 22, 1996 as Conveyance No.
DD009376, (ii) Lease Amendment No. 2 dated as of January 12, 1996, recorded
January 23, 1996 as Conveyance No. BB23026, (iii) Amendment No. 3 to Aircraft
Lease Agreement dated March 27, 1997, recorded May 17, 1997 as Conveyance No.
UUO18757 ("Lease Amendment No. 3") and (iv) that certain letter agreement dated
March 22, 1995;
WHEREAS, Lessee and Lessor desire by this Agreement, among other
things, to (i) amend and restate the Original Lease, (ii) provide for an
extension of the term of the Original Lease and (iii) modify the return
condition requirements, all as more particularly set forth herein; and
WHEREAS, all things necessary to make this Agreement the legal, valid
and binding obligation of Lessor and Lessee, for the uses and purposes herein
set forth, in accordance with its terms, have been done and performed and have
happened;
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; CONSTRUCTION OF TERMS.
(a) GENERAL DEFINITIONS. The following terms shall have the following
meanings for all purposes of this Agreement
[Amended and Restated Lease Agreement]
"AD" shall mean any airworthiness directive or other requirement of
the Aviation Authority.
"ADDITIONAL PARTS" shall mean any or all Parts incorporated or
installed in or attached or added to he Airframe or an Engine as the result of a
Modification, which may be removed pursuant to Section 12(b)(iii).
"ADDITIONAL RENT" shall mean the rent payable during the Lease Term
with respect to the Aircraft pursuant to Section 3(g).
"AFFILIATE" shall mean, in relation to a Person, any other Person
directly or indirectly controlling, controlled by or under common control with
that Person.
"AIRCRAFT" shall mean, collectively, the Airframe (including the APU)
and the Engines and, unless the context does not permit, the Aircraft
Documentation.
"AIRCRAFT DOCUMENTATION" shall mean, collectively, any and all log,
books, records, manuals and other data or documents relating to the Aircraft
which are delivered to Lessee in connection with the delivery of the Aircraft
and/or set forth in the Original Lease and such additional log books, records,
manuals and other data or documents relating to the Aircraft which are
maintained by Lessee as required by the Aviation Authority.
"AIRFRAME" shall mean, collectively, (i) the Airframe Manufacturer
model 737-2Y5 airframe (except only Engines or engines from time to time
installed thereon), bearing the Airframe Manufacturer's serial number and the
registration xxxx specified in Lease Supplement No. 1, leased hereunder by
Lessor to Lessee and (ii) any and all Parts so long as the same shall be
incorporated or installed in or attached to such airframe, and any and all Parts
removed therefrom so long as title to such removed Parts shall remain vested in
Lessor in accordance with the terms of Section 12.
"AIRFRAME CYCLE" shall mean, with respect to the Airframe, one takeoff
and landing thereof.
"AIRFRAME FLIGHT HOUR" shall mean each hour or part thereof elapsing
from the moment the wheels of the Airframe leave the ground on takeoff until the
wheels of the Airframe touch the ground on landing following such flight. For
purposes of all calculations under this Agreement measured in Airframe Flight
Hours, such Airframe Flight Hours (and parts thereof) shall be rounded to the
nearest minute.
"AIRFRAME MANUFACTURER" shall mean The Boeing Company, a Delaware
corporation.
2
[Amended and Restated Lease Agreement]
"AIRWORTHINESS CERTIFICATE" shall mean a valid, current transport
category airworthiness certificate issued in respect of the Aircraft by the
Aviation Authority.
"APPROVED MAINTENANCE PERFORM" shall mean Lessee or such other
maintenance performer, if any, which (x) shall have a repair station license and
approval by the Aviation Authority and (y) with respect to maintenance
performers who are to accomplish Heavy Checks, Basic Shop Visits and/or Landing
Gear Overhauls, are either listed on Exhibit I hereto or are otherwise approved
by the Lessor.
"APPROVED MAINTENANCE PROGRAM" shall mean Lessee's Aviation
Authority-approved written maintenance, inspection and repair program and
schedule for Boeing Model 737-200 aircraft, including Lessee's current approved
maintenance schedule, and the CPCP approved by the Aviation Authority.
"APU" shall mean (i) the auxiliary power unit identified by
manufacturer's serial number in Lease Supplement No. 1 and (ii) any auxiliary
power unit substituted for such auxiliary power unit in accordance with this
Agreement.
"AUTHORIZATIONS" shall mean each and every approval, waiver,
authorization, consent, license, certificate or order of, or registration with,
or requirement for the giving of prior notice to, or the taking of any action in
respect of, the Aviation Authority, or any other Government Entity having
jurisdiction over Lessee, the operation of the Aircraft or any transactions
contemplated hereby or by any Operative Document.
"AVIATION AUTHORITY" shall mean the United States Federal Aviation
Administration, and any person, governmental department, bureau, commission or
agency succeeding, to all or any of such authority's functions, or such other
aviation authority as may be approved by the Lessor, such approval not to be
unreasonably withheld.
"BASE RATE" means the Prime Rate of interest published from time to
time by The Wall Street Journal, or in the event such rate is no longer
published, a reasonable equivalent as determined by the Secured Party in the
Secured Party's sole but reasonable discretion.
"BASIC RENT" shall mean the rent payable during the Lease Term with
respect to the Aircraft pursuant to Section 3(b).
"BASIC RENT DATE" shall mean each date specified on Exhibit B on which
Basic Rent is payable during the Lease Term.
"BASIC SHOP VISIT" shall mean, with respect to any Engine or the APU,
any shop visit, as defined by the Engine Manufacturer or the APU manufacturer,
as the case may be, that is based on an approved program of condition monitoring
and trend monitoring of performance
3
[Amended and Restated Lease Agreement]
deterioration that results in an Engine or APU, as the case may be, being
restored to full performance standard.
"BASIS POINT shall mean 1/100 of 1%.
"BREAK AMOUNT" shall mean, with respect to any termination of the
Lease prior to the Expiry Date, an amount equal to the loss, cost or expense
which Lessor sustains or incurs (Including, without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds utilized by Lessor to fund or finance the Aircraft and/or the
transactions contemplated hereby) in connection therewith.
"BUSINESS DAY" shall mean a day (other than a Saturday or Sunday) on
which banks are not required or authorized to close in Hawaii, Hartford,
Connecticut or Chicago, Illinois.
"CABIN" shall mean the passenger compartment and all doors, windows,
interior panels, storage bins, lights, seats, seat covers, carpets, lavatories,
galleys, galley equipment, closets, flight attendant seats, passenger
communications and entertainment systems, emergency and miscellaneous equipment,
seat tracks and floor areas.
"CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) which, in conformity with generally accepted accounting
principles, is or should be accounted for as a Capital Lease on a balance sheet.
"CASH FLOW" means, with respect to the Consolidated Group, the sum of
(a) the net income of the Consolidate Group (excluding non-recurring gains and
losses), PLUS (b) the sum of the following, to the extent deducted in
determining net income: (i) depreciation and amortization allowances, (ii)
interest expense (including payments in kind and imputed interest on Capital
Leases), and (iii) deferred taxes, and less (c) the change in the excess of
non-cash current assets over current liabilities (other than those pertaining to
unearned transportation revenue and payment of principal, interest or taxes)
calculated on a rolling four quarters basis and computed at the end of each
fiscal quarter.
"CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the United States Bankruptcy Code.
"CERTIFICATE OF REGISTRATION" shall mean the certificate of
registration issued by the Aviation Authority in respect of the Aircraft.
4
[Amended and Restated Lease Agreement]
"CONSOLIDATED GROUP" means Aloha Airgroup, Inc., a Hawaii corporation;
Aloha Airlines, Inc., a Delaware corporation and Aloha IslandAir, Inc., a
Delaware corporation.
"CPCP" shall mean a Corrosion Prevention and Control Program that
establishes minimum requirements for the Aircraft, incorporating, among other
things, the recommendations of the Airframe Manufacturer and the mandatory
requirements established by the Approved Maintenance Program.
"CYCLE" shall mean an Airframe Cycle or an Engine Cycle, as indicated
by the context.
""D" CHECK" means a "D" Check, as such term is defined in the Approved
Maintenance Program relating to the Aircraft or an equivalent check that meets
the requirements of a "7C" Check as defined in the Boeing 737 Maintenance
Planning Document (MPD); or such other structural check which shall then be the
most significant maintenance check under the MPD.
"DEBT SERVICE" means the sum of regularly scheduled principal
payments, interest payments, payments under Capital Leases and dividends
declared and payable (if permitted under the provisions of this Agreement) made
by the Lessee, or by the Lessee's parent on a consolidated basis, calculated
on a rolling, four quarters basis and computed at the end of each fiscal
quarter.
"DEFAULT" shall mean any Event of Default or any condition,
circumstance, act or event which, upon the giving of notice, the passage of time
and/or the fulfillment of any other condition would constitute or give rise to
an Event of Default.
"DELIVERY" shall have the meaning set forth in Section 2(b).
"DELIVERY CONDITIONS" shall mean the requirement for the condition of
the Aircraft on delivery, as set forth in Schedule 2.
"DELIVERY DATE" shall mean March 30, 1995.
"DELIVERY LOCATION" shall mean Malta.
"DOLLARS" and "US$" mean the lawful currency of the United States of
America.
"EFFECTIVE DATE" shall mean the date upon which this Agreement is
executed and delivered.
5
[Amended and Restated Lease Agreement]
"ENGINE" SHALL mean (i)(y) either of the Engine Manufacturer Model
JT8D-9A engines bearing manufacturer's serial numbers 665196 and 656020, whether
or not from time to time thereafter installed on the Airframe or installed on
any other airframe and (z) any Replacement Engine which may from time to time be
substituted, pursuant to the terms hereof, for either of such engines, and (ii)
in each case, any and all Parts incorporated or installed in or attached thereto
or any and all Parts removed therefrom so long, as title thereto shall remain
vested in Lessor in accordance with the terms of Section 12 after removal from
such Engine, provided that at such time as an engine shall be deemed part of the
property leased hereunder in substitution for an Engine, pursuant to the
applicable provisions hereof, the replaced Engine shall cease to be an Engine
hereunder. The term "Engines" shall mean, as of any date of determination, all
Engines then leased hereunder.
"ENGINE CYCLE" shall mean, with respect to any Engine, one takeoff and
landing of the airframe (including, without limitation, the Airframe) on which
such Engine is from time to time installed.
"ENGINE FLIGHT HOUR" shall mean each hour or part thereof elapsing
from the moment the wheels of the airframe (including, without limitation, the
Airframe) on which such Engine is from time to time installed leave the ground
on takeoff until the wheels of such airframe touch the ground on landing
following such flight. For purposes of all calculations under this Agreement
measured in Engine Flight Hours, such Engine Flight Hours (and parts thereof)
shall be rounded to the nearest minute.
"ENGINE MANUFACTURE" shall mean Xxxxx & Whitney Engines Group, a
division of United Technologies.
"EVENT OF DEFAULT" has the meaning specified in Section 19.
"EVENT OF LOSS" shall mean, with respect to the Aircraft, the Airframe
or any Engine, any of the following events, conditions or circumstances with
respect to such property:
(i) the actual or constructive loss of such property or the use
thereof due to the destruction of or damage to such property which
renders repair uneconomical or which renders such property permanently
unfit for normal use by Lessee or Lessor;
(ii) any damage to such property or other occurrence which
results in an insurance settlement with respect to such property on
the basis of a total loss or a constructive, compromised, arranged or
agreed total loss;
(iii) the confiscation, condemnation, seizure, forfeiture or
requisition of the title to such property (for any reason whatsoever
and whether de jure or de facto), other than as set forth in clause
(v) below);
6
[Amended and Restated Lease Agreement]
(iv) the disappearance, hijacking or theft (including a seizure
of title or use not otherwise included in this definition) of such
property for a continuous period in excess of thirty (30) days (or, if
less, the remaining Lease Term); and
(v) the confiscation, condemnation or seizure of, or requisition
by any Government Entity or purported Government Entity of use or hire
of such property which shall have resulted in the loss of possession
or use of such property by Lessee for a continuous period in excess of
sixty (60) days (or, if less, the remaining Lease Term).
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. An Event of Loss with
respect to one or more Engines without loss of the Airframe shall not be deemed
an Event of Loss with respect to the Aircraft.
"EVENT OF LOSS DATE" shall mean (i) with respect to any Event of Loss
set forth in clause (i) or (ii) of the definition of "Event of Loss," the
earliest of (x) the date of actual loss, (y) the date on which the loss is
agreed, arranged or compromised by the insurers and (z) thirty (30) days after
the date of notice to Lessee's brokers or insurers claiming the loss, (ii) with
respect to any Event of Loss set forth in clause (iii) of the definition of
Event of Loss, the date such event, condition or circumstance occurs, or (iii)
with respect to any Event of Loss set forth in clause (iv) or (v) of the
definition of Event of Loss, the earlier of (y) the date on which insurers make
payment on the basis of a total loss or (z) the expiration of the period, if
any, and the continuation of the condition or circumstance beyond the date,
described in the applicable clause of such definition.
"EXPENSE" shall mean any liabilities, obligations, losses, damages
(including, without limitation, damages for loss of life, injury to persons or
damage to any property), penalties, fines, sanctions, claims (whether
fraudulent, groundless, false or not), actions, suits, judgments, legal
proceedings (whether civil or criminal), costs, disbursements and expenses
(including reasonable legal fees and expenses, costs of investigation and
related expenses), in each case, of every kind and nature whatsoever (including,
without limitation any liability, obligation or claim arising in contract or
tort, whether or not arising from the negligence, actual, implied or imputed,
active or passive, or absolute or strict liability of an Indemnified Party or
any other Person or under any other theory).
"EXPIRY DATE" shall mean March 29, 2006.
"FINAL INSPECTION" shall mean the inspection of the Aircraft by Lessor
and any other Inspecting Parties during any part of the inspections, checks, and
test flights required pursuant to Sections 7(c), 7(d) and 7(e) or otherwise
performed in connection with the Return.
"FINAL MAINTENANCE" shall mean prior to the return of the Aircraft on
the last day of the Lease Term, the completion of the next scheduled heavy
maintenance check ("C" Check
7
[Amended and Restated Lease Agreement]
or above and, if applicable, multiples of such checks falling due within a "C"
Check maintenance interval) in respect of the Aircraft under the Approved
Maintenance Program (which check shall incorporate all lower-level checks and
any special repair items or special inspections (including, without limitation,
all applicable AD's that are required to be accomplished in accordance with the
terms of this Lease, Required SB's and CPCP items) as well as inspections that
have a frequency less than a "C" Check and all cleaning, and refurbishment that
would be a normal part of the Approved Maintenance Program were the Aircraft to
continue in commercial passenger service by Lessee.
"FIXED CHARGE COVERAGE RATIO" means, with respect to the Consolidated
Group, Cash Flow divided by Debt Service.
"FLIGHT CHARGES" shall mean all flight charges, route navigation
charges, navigation service charges and all other fees, charges or Taxes payable
for the use of or for services provided at any airport or otherwise payable to
any airport, airport authority, navigation or flight authority or other similar
entity or for any services provided in connection with the operation, landing or
navigation of aircraft.
"FOLLOW-ON OPERATOR" shall mean any Person acquiring title to or the
right to use the Aircraft after the end of the Lease Term (whether or not such
Person is an airline or other operator).
"FORCE MAJEURE" shall mean delay or nonperformance due to or arising
out of acts of God or public enemy, civil war, insurrection or riot, fire,
flood, explosion, earthquake, accident, epidemic, quarantine restriction, any
act of government, governmental priority, allocation, regulation or order
affecting, directly or indirectly, the Aircraft, Lessor or Lessee or any
materials or facilities, strike or labor dispute causing cessation, slowdown or
interruption of work, inability after due and timely diligence to procure
equipment, data or materials from suppliers in a timely manner, or any other
cause (including unforeseen maintenance) to the extent that such cause is beyond
the control of Lessor or Lessee whether above mentioned or not and whether or
not similar to the foregoing.
"GAAP" shall mean generally accepted accounting principles as shall
from time to time be in effect in the Lessee Jurisdiction, as such principles
may at any time or from time to time be varied by any applicable financial
accounting rules and, with respect to any Person, shall mean such principles
applied on a basis consistent with prior periods.
"GOVERNMENT ENTITY" shall mean (i) any national, state or local
government of any country, any territory or possession of any country, or any
international authority (including, without limitation, in each case, any
central bank or fiscal, tax or monetary authority), (ii) any board, commission,
department, division, instrumentality, court, agency, territory, possession or
political subdivision of any entity described in clause (i) above, however
constituted, (iii) any association, organization or institution of which any
entity described in clause (i) or (ii) above is
8
[Amended and Restated Lease Agreement]
a member or to whose jurisdiction any thereof is subject or in whose activities
any thereof is a participant and (iv) any taxing authority of any entity
described in clause (i), (ii) or (iii) above.
"HOUR" shall mean an Airframe Flight Hour or an Engine Flight Hour, as
indicated by the context.
"INDEBTEDNESS" means all obligations of Lessee that would, in
accordance with GAAP, be shown as a liability on Lessee's balance sheet, and in
any footnotes or notations thereto, including, without limitation, (i)
obligations for the repayment of monies borrowed or raised, (ii) obligations
under finance leases, hire-purchase arrangements, conditional sale agreements
and other obligations for the deferred purchase price of property, (iii)
guarantees, direct or indirect, of the obligations of any other Person,
including, any such obligations secured by a Lien on any property of Lessee,
(iv) indemnity and reimbursement obligations, including any such obligations
arising to any issuer of a letter of credit or similar instrument, and (v)
obligations to purchase or otherwise acquire any indebtedness of, or to advance
monies to or on behalf of, or make any investment in any other Person.
"INDEMNIFIED PARTY" shall mean Lessor, in its individual and trust
capacities, Owner Participant, ALL and each of their respective Affiliates, and
the successors and permitted assigns of each of the foregoing and the directors,
officers, corporate stockholders, partners, employees, servants and agents of
each of the foregoing.
"INSPECTING PARTY" shall have the meaning specified in Section
7(c)(i).
"INSURANCE BROKERS" shall mean any independent firm of internationally
recognized insurance brokers.
"INSURED PARTY" shall mean each Indemnified Party.
"LANDING CLEAR" shall mean (i) each landing gear assembly of the
Aircraft identified by serial number in Lease Supplement No. 1 and (ii) any
landing gear assembly substituted for any such identified landing gear assembly
in accordance with this Agreement.
"LEASE SUPPLEMENT" shall mean any lease supplement entered into in
accordance with the terms hereof to this Agreement substantially in the form of
Exhibit D.
"LEASE TERM" shall mean the period described in Section 3(a).
"LENDER" means each of (a) any person or persons as the Lessor may
from time to time advise Lessee in writing to be the person or persons providing
finance to the Lessor to assist it in purchasing, funding or refinancing the
purchase by the Lessor of the Aircraft and including, where the context so
admits or requires, any agent or trustee for any one or more of such persons;
9
[Amended and Restated Lease Agreement]
and (b) any of the respective successors, permitted assigns or permitted
transferees of any one or more of any such persons.
"LETTER OF CREDIT" shall mean any letter of credit issued by a U.S.
bank reasonably acceptable to Lessor delivered by Lessee to Lessor pursuant to
this Agreement as security for Lessee's performance hereunder.
"LESSEE JURISDICTION" shall mean the United States.
"LESSOR LIEN" shall mean any Lien of any Person claiming by,
through or under Lessor which arises from any act or omission of Lessor, other
than any Lien created or permitted hereby or by any other Operative Document.
"LIEN" means any mortgage, pledge, lien, charge, encumbrance,
hypothecation, lease, sublease, seizure, exercise of rights, security interest,
judgment, writ, order or other claim or right of possession of any kind or
nature whatsoever, however and wherever created or arising and whether or not
consensual (including, without limitation, any agreement or arrangement to give
or effect any of the foregoing and any conditional sale or other title retention
agreement).
"LIFE LIMITED COMPONENT" shall mean any part or component on the
Aircraft for which the manufacturer has specified a certain life in either
calendar time, Cycles or Hours accumulated after which such part or component
must be replaced.
"MAINTENANCE PLANNING DOCUMENT" or "MPD" shall mean the Boeing 737
maintenance planning document.
"MAJOR CHECKS" shall mean any "D" check, "C" check, multiple "C" check
(including all lower checks and all other items that are due before the next "C"
check), heavy structural inspection (or equivalent), structural inspection or
annual heavy maintenance visit or segment thereof for commercial aircraft of the
same model as the Aircraft as set out in the Approved Maintenance Program.
"MAJOR MODIFICATIONS" includes, but shall not be limited to: (i)
changes that alter the fundamental nature of the Aircraft as a passenger and
cargo carrying aircraft or Cabin modifications that materially change the
interior layout of the Aircraft (excluding changes to the seats or galleys),
(ii) changes to the Aircraft structure or performance of the Aircraft, (iii)
changes that adversely affect interchangeability or replaceability of Parts,
(iv) substitution of different types of equipment or accessories which are not
equivalent in cost, value, remaining useful life and/or operational capability
to the equipment or accessories being replaced, (v) changes that invalidate or
impair any warranty with respect to the Aircraft or any Engine or Part, (vi)
changes that adversely affect the eligibility of the Aircraft to obtain an
Airworthiness Certificate from the Aviation Authority or (vii) any changes that
result in a variation from the original type certificate for the Aircraft, but
shall exclude changes pursuant to ADs and SBs
10
[Amended and Restated Lease Agreement]
provided by the Airframe Manufacturer which have Aviation Authority approval,
all Required Modifications and changes which are estimated to cost less than
100,000 Dollars.
"MODIFICATION" shall mean any modification, addition, alteration,
removal or other change, including, without limitation, ADs and SBs, to the
Airframe, any Engine or any Part.
"OPERATIVE DOCUMENTS" shall mean this Agreement, each Lease Supplement
and any other document, agreement or instrument to which Lessee is a party, or
to which it consents in writing, or which is delivered by or on behalf of Lessee
and which is entered into or delivered in connection with any of the foregoing
or with any of the transactions contemplated by the foregoing.
"OWNER PARTICIPANT" means Fleet Business Credit Corporation, formerly
known as Sanwa Business Credit Corporation, a Delaware corporation.
"OWNER TRUSTEE" means First Security Bank, National Association, in
its capacity as trustee under the Trust Agreement.
"PARTS" shall mean any and all appliances, parts, components, modules,
communications equipment, computers, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (including the APU, the
Landing Gear but excluding complete Engines or engines) which may from time to
time be incorporated or installed in or attached to the Airframe or any Engine,
so long, as title thereto shall remain vested in Lessor, in accordance with the
terms hereof.
"PAST DUE RATE" shall mean a rate per annum equal to 3% over the Base
Rate.
"PERMITTED JURISDICTION" shall mean any country listed in Schedule 1.
"PERMITTED LIEN" shall mean any Lien referred to in clauses (i)
through (vi) of Section 8(a).
"PERSON" shall mean any individual, corporation, trust, partnership,
unincorporated association, joint venture, association, joint-stock company,
government or Government Entity.
"RELATED INDEMNITEE" shall mean, with respect to any Indemnified
Party, any Affiliate, successor, assign, director, officer, corporate
stockholder, partner, employee, servant or agent of such Indemnified Party.
"RENT" shall mean, collectively, Basic Rent and Supplemental Rent.
11
[Amended and Restated Lease Agreement]
"REPLACEMENT ENGINE" shall mean an Engine Manufacturer model JT8D-9A
engine (or an improved model having a modification status, value and utility at
least equal to such an Engine Manufacturer model JT8D-9A engine) (including,
without limitation, all warranty rights with respect to such engine) suitable
for installation and use on the Airframe without impairing the value or utility
of the Aircraft, and which has a value and utility at least equal to the Engine
it is replacing (assuming such Engine was in the modification status, condition
and repair required by the terms hereof immediately prior to being replaced) and
which has been maintained, serviced, repaired and overhauled in substantially
the same manner as is required under this Agreement as to "Engines", title to
which shall have been conveyed to Lessor pursuant to the terms hereof, together
with all Parts relating to such Engine so long as the same shall be incorporated
or installed in or attached to such Engine leased hereunder, and any and all
Parts removed therefrom so long as title to such removed Parts shall remain
vested in Lessor in accordance with the terms hereof
"REQUIRED MODIFICATIONS" has the meaning specified in Section
10(c)(ii)(B).
"REQUIRED SBs" shall mean all alert SBs and any other SBs which have
been accomplished on 50% of Lessee's fleet prior to the Return Date.
"RETURN" shall mean the return of the Aircraft by Lessee to Lessor at
the Return Location in the condition and manner required by Section 7 and the
other provisions of this Agreement and the other Operative Documents, as
evidenced by the execution by Lessor, and the delivery to Lessee, of the Return
Receipt referred to in Section 7(f).
"RETURN DATE" shall mean the date upon which the Aircraft is returned
to Lessor pursuant to and in accordance with Section 7 hereof.
"RETURN LOCATION" shall mean such location in the western United
States, western Canada or Mexico as may be designated by Lessor, or such other
location as shall be mutually agreed between Lessor and Lessee.
"RETURN RECEIPT" shall have the meaning specified in Section 7(f).
"SB" shall mean any service bulletin as issued by the Airframe
Manufacturer, Engine Manufacturer or the manufacturer of any appliances or
Parts.
"SECURITY DEPOSIT" shall have the meaning specified in Section
3(d)(i).
"SHOPVISIT" shall mean, with respect to an Engine, scheduled
maintenance of such Engine which requires the Engine to be removed from the
airframe to which it is attached (or, if the Engine is not attached to an
airframe, scheduled maintenance that would require such removal if the Engine
were so attached).
12
[Amended and Restated Lease Agreement]
"STATE OF REGISTRATION" shall mean the United States.
"STIPULATED LOSS VALUE" shall mean US$8,000,000.
"SUPPLEMENTAL RENT" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes, agrees or otherwise
becomes liable to pay to Lessor, any Indemnified Party or any other Person
hereunder or under any of the other Operative Documents, including, without
limitation, payments of or in respect of the Stipulated Loss Value, Expenses,
Taxes, Break Amount or other amounts payable under any indemnities.
"SURETY BOND" shall have the meaning specified in Section 3(d)(i).
"TAXES" shall mean any and all present or future fees (including,
without limitation, license, documentation and registration fees), taxes
(including, without limitation, income, receipts, sales, rental, use, turnover,
value-added, property (tangible or intangible), excise, franchise, capital,
user, transfer, doing business and stamp taxes or duties), licenses, levies,
imposts, duties, recording charges or fees, or other charges, assessments,
deductions or withholdings of any nature whatsoever, together with any
assessments, penalties, late payment charges, notary charges, fines, additions
to tax or other similar liabilities with respect to any of the foregoing and
interest on any of the foregoing.
"TAX INDEMNITEE" shall mean Lessor, in its individual and trust
capacities, Owner Participant, each of their respective Affiliates, any
successor or permitted assign of either of the foregoing and the directors,
officers, employees, servants and agents of each of the foregoing.
"TIME CONTROLLED COMPONENT" shall mean any component that Lessee
monitors with an interval pursuant to which action is taken to inspect, replace
and/or overhaul such component and that is limited by Airframe Cycles, Airframe
Flight Hours and/or calendar time.
"TRUST AGREEMENT" means that certain Trust Agreement dated as of March
22, 1995 between Owner Participant and Owner Trustee.
(b) CONSTRUCTION.
(i) In this Agreement, unless the contrary intention is stated, a
reference to:
(u) Each of "Lessor," "Lessee" or any other Person includes,
without prejudice to the provisions of this Agreement, any
successor in interest to it and any permitted assignee and, in
the case of any Government Entity, any Government Entity
succeeding to all or any of its functions;
(v) Words importing the plural include the singular and vice
versa;
13
[Amended and Restated Lease Agreement]
(w) Any document or any law includes that document or that
law, as the case may be, as amended, modified or supplemented
from time to time in accordance with its terms, and any document
entered into or any law enacted or promulgated, as the case may
be, in substitution or replacement therefor;
(x) A "Law" (1) includes any statute, decree, constitution,
regulation, decision, finding, order, rule, judgment or directive
of any Government Entity, (2) includes any treaty, pact, compact
or other agreement to which any Government Entity is a signatory
or party, (3) includes any judicial or administrative
interpretation or application thereof, and (4) is a reference to
any of the foregoing as amended, substituted, reissued or
reenacted;
(y) The words "this Lease," "this Agreement," "hereby,"
"herein," "hereto," "hereof" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a
whole including, without limitation, the Schedules and Exhibits,
and all Annexes thereto, and not to any particular provisions of
this Agreement; and
(z) A Section or an Exhibit or a Schedule is a reference to a
section of, or an exhibit or schedule to, this Agreement.
(ii) Headings used in this Agreement are for convenience only and
shall not in any way affect the construction of, or be taken into
consideration in the interpretation of, this Agreement.
SECTION 2. LEASE OF AIRCRAFT.
Lessor and Lessee acknowledge that Lessor delivered, and Lessee took
delivery of, the Aircraft on March 30, 1995 at the Delivery Location pursuant
to and in accordance with Article 3 of the Original Lease.
SECTION 3. LEASE TERM; RENT; PAYMENTS.
(a) LEASE TERM. The term of this Lease (the "Lease Term") commenced on
the Delivery Date and, unless this Agreement is terminated earlier pursuant to
the provisions hereof, shall end on the Expiry Date.
(b) BASIC RENT. During the Lease Term, from and including the Delivery
Date to, but not including, the Effective Date, Lessee paid Basic Rent in
accordance with Section 5.3 of the Original Lease. From and including the
Effective Date, Lessee shall pay rent for the Aircraft in advance on each Basic
Rent Date occurring on and after the Effective Date during the remaining Lease
Term in advance in immediately available Dollars, in the amounts and on the
14
[Amended and Restated Lease Agreement]
dates set forth in Exhibit B hereto. Each payment of Basic Rent includes the
Additional Rent specified in Section 3(g) below.
(c) SUPPLEMENTAL RENT. Lessee shall pay, or cause to be paid, promptly
to Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent constituting or in respect of the Stipulated Loss Value, Break Amount and
all other amounts of Supplemental Rent when and as the same shall become due and
owing. In the event of any failure on the part of Lessee to pay any Supplemental
Rent when due, Lessor and each other Indemnified Party shall have all rights,
powers and remedies provided for herein or in any other Operative Document, or
at law or in equity or otherwise, in the case of nonpayment of Basic Rent.
Lessee also shall pay to Lessor, or to whomsoever shall be entitled thereto, on
demand, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Past Due Rate on any part of any installment of Basic Rent not
paid when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent (to the extent permitted by applicable law) not
paid when due for the period until the same shall be paid.
(d) SECURITY DEPOSIT
(i) Lessee has delivered to Lessor a security deposit consisting of a
$150,000 cash portion (the "Cash Deposit") and a $150,000 surety bond (the
"Surety Bond") (collectively with the Cash Deposit, the "Security Deposit"). The
Cash Deposit may be commingled with Lessor's general funds and any interest
earned thereon will be for Lessor's Account. $25,000 of the Cash Deposit is
completely and absolutely non-refundable (the "Non-Refundable Deposit") and, if
otherwise unused by Lessor upon termination of this Lease, shall be retained by
Lessor.
(ii) The Security Deposit shall be held by Lessor during the Lease
Term as security for the full and punctual performance of all of Lessee's
obligations to Lessor under this Agreement including, without limitation,
satisfaction of the requirements of the condition of the Aircraft at the end of
the Lease Term as set forth in Section 7. Lessee acknowledges that Lessor may
commingle the Security Deposit with its general funds. Lessee hereby grants to
Lessor a security interest by way of first priority perfected security interest
in its interest, if any, in the Security Deposit and the proceeds thereof and
hereby grants to Lessor any and all of Lessee's right, title and interest
therein, if any, as security for Lessee's obligations hereunder. No interest
shall accrue in favor of Lessee in respect of the Security Deposit held by
Lessor. At the end of the Lease Term, upon performance by Lessee, satisfactory
to Lessor, of all of Lessee's obligations hereunder (other than potential
contingent obligations (of which Lessor has no knowledge) under the indemnity
provisions of this Agreement), Lessor shall promptly refund any remaining
Security Deposit to Lessee. Lessor's obligations in respect, of the return of
the Security Deposit shall be that of a debtor of Lessee, not as a trustee or
other fiduciary.
(iii) If a Default shall have occurred and be continuing, Lessor may,
but shall not be obliged to, apply the Security Deposit in whole or in part for
the payment of any Rent, indemnities, legal fees and other expenses, insurance
and other casualty payments and any other
15
[Amended and Restated Lease Agreement]
amount owing from time to time by Lessee under this Agreement, for the payment
of any loss or damage suffered by Lessor as a result of any Default or utilize
the Security Deposit in whole or in part to perform any of Lessee's obligations
under this Agreement or to otherwise remedy any circumstance giving rise to a
Default, including the redelivery condition of the Aircraft, without prejudice
to any other remedy of Lessor (it being understood that an application of the
Security Deposit shall not constitute a cure of any Default unless and until
Lessee shall have complied with the following sentence). In any such event
Lessee shall, on demand, restore the full amount of the Security Deposit by
payment to Lessor of an amount in immediately available Dollars equal to the
amount by which the balance of the Security Deposit has been reduced under this
clause (iii).
(iv) Surety Bond shall provide for payments to be made thereunder at
sight, in dollars, and for drawings to be made (by advice, confirmation or
otherwise) in Honolulu, Hawaii. In the event that the long-term unsecured
debt rating of the issuing entity is reduced to a level below A- (as rated by
Standard & Poor's) or if the Lessor shall have received a Non-renewal Notice
(a "Substitution Event"), Lessor shall have the right to draw down the entire
amount of the Surety Bond, if Lessee shall not, within ten days of the
occurrence of such Substitution Event, have caused such Surety Bond to be
replaced with a substitute Surety Bond issued by an issuing entity reasonably
acceptable to Lessor which complies with the required minimum rating
specified above.
(e) PAYMENTS IN GENERAL.
(i) All payments of Rent shall be made directly by Lessee in Dollars
by wire transfer of immediately available funds on the date for payment to the
account for Lessor specified in column (2) of Schedule 3, or to such account as
Lessor shall otherwise direct by notice to Lessee.
(ii) If the due date for any payment of Basic Rent, Break Amount or
Stipulated Loss Value is not a Business Day, then, unless otherwise provided
herein, such payment shall be made on the Business Day next succeeding such due
date with the same force and effect as if made on such due date and without
adjustment in the amount due.
(iii) All amounts of interest or amounts calculated by reference to
interest payable under any of the provisions of this Agreement shall be
calculated on the basis of the actual number of days elapsed and a 365-day or
366-day year, as applicable.
(f) NO DEDUCTIONS OR WITHHOLDINGS. All payments by Lessee under this
Agreement or any other Operative Document to Lessor or any other Indemnified
Party, including payments in respect of Basic Rent, Supplemental Rent, interest,
fees, indemnities or any other item, shall be made in full without any
counterclaim, delay, deduction or withholding of any kind or nature whatsoever
(including, without limitation, in respect of any setoff, counterclaim, Taxes,
insurance charges, monetary transfer fees or any costs and expenses arising in
connection with
16
[Amended and Restated Lease Agreement]
the use and operation of the Aircraft) but excluding deduction or withholding
required by law with respect to Taxes for which Lessee is not required to
indemnify Lessor or a Tax Indemnitee under Section 9(c).
(g) Lessee shall repay to Lessor the Engine Reserve Claim (as defined
in Lease Amendment No. 3) by paying monthly installments (the "Additional Rent")
sufficient to repay the Engine Reserve Claim in full during the Lease Term. The
Additional Rent shall be considered part of the Basic Rent. Upon the Effective
Date, Lessor shall have no further claim under Lease Amendment No. 3.
SECTION 4. CONDITIONS PRECEDENT. This Agreement shall be effective as
of the Effective Date, but shall be subject to the fulfillment to the
satisfaction of Lessor and Lessee of the following conditions precedent:
(a) DUE DILIGENCE. Lessor shall have completed, in a manner
satisfactory to it, its due diligence review with respect to the Lessee's
financial condition and statements, including review of the legal and regulatory
framework applicable to this transaction, including, without limitation,
resolution to the reasonable satisfaction of Lessor of all legal and tax related
matters.
(b) AGREEMENTS AND DOCUMENTS. The following documents, agreements,
instruments or certificates shall have been duly authorized, executed and
delivered by the respective party or parties thereto, shall each be satisfactory
in form and substance to Lessor and Lessee and shall be in full force and effect
and in the English language and executed counterparts shall have been delivered
to Lessor and/or to its respective counsel:
(i) this Agreement; and
(ii) (y) a Certificate of Insurance in the form of Exhibit F and which
otherwise complies with the requirements of Section 15 and (z) a Broker's
Letter in the form of Exhibit G from the Insurance Brokers and which
otherwise complies with the requirements of Section 15, together with such
other evidence as Lessor shall request as to the due compliance by Lessee
with Section 15;
(iii) an opinion of Char, Sakamoto, Ishii, Xxx & Xxxxx, special
counsel to Lessee in the form of Exhibit K and covering such other matters
as Lessor may reasonably request;
(iv) copies of documents where available evidencing the issuance of
each Authorization that may be required in connection with the remittance
to Lessor and any other intended recipient of any amount payable under this
Agreement, or any other Operative Document, the performance by Lessee of
any of its respective obligations hereunder or thereunder;
17
[Amended and Restated Lease Agreement]
(v) certificate signed by a duly authorized officer of Lessee:
(u) certifying the incumbency, and the accuracy of the
signatures, of the Person or Persons authorized to execute and deliver
the Operative Documents on behalf of Lessee;
(v) stating that Lessee's representations and warranties
contained in this Agreement and each other Operative Document are and
shall be true and correct on and as of the Effective Date as though
made on and as of such date (unless made as of a specified date, in
which case such representations and warranties shall be true and
correct as of such specified date); and
(w) stating that no Default or Event of Default has occurred and
is continuing or will result from the lease of the Aircraft under this
Agreement;
(viii) such other documents, agreements, certificates and evidence
with respect to the Aircraft, Lessee, any Persons acting for Lessee or
otherwise as Lessor may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement, the taking
of all proceedings (corporate or otherwise) in connection therewith or
compliance with all the conditions set forth in this Section 4;
(ix) Lessee shall have paid in full (or delivered) (x) the first
installment of Basic Rent due on the Effective Date and (y) the Security
Deposit;
(x) all representations and warranties of Lessee hereunder and under
the other Operative Documents shall be true and correct on and as of the
Effective Date as though made on and as of such date (unless made as of a
specified date, in which case such representations and warranties shall be
true and correct as of such specified date);
(xi) Lessee shall have performed, complied with and observed all its
obligations, covenants and agreements set forth herein and in each other
Operative Document which it is required to perform, comply with or observe
prior to or on the Effective Date;
(xii) no Default, Event of Default or Event of Loss, or event,
condition or circumstance that would with the giving of notice or passage
of time or both become or give rise to an Event of Loss, shall have
occurred;
(xiii) NECESSARY GOVERNMENT ACTIONS. All appropriate action required
to have been taken prior to the Effective Date by the Aviation Authority or
any governmental or political agency, subdivision or instrumentality of the
United States in connection with the transactions contemplated hereby shall
have been taken, and all orders, permits, licenses, waivers,
authorizations, exemptions and approvals of such
18
[Amended and Restated Lease Agreement]
entities required to be in effect on the Effective Date in connection
with the transactions contemplated hereby shall have been issued, and all
such orders, permits, licenses, waivers, authorizations, exemptions and
approvals shall be in full force and effect on the date hereof and on the
Effective Date (no such orders, permits, licenses, waivers, authorizations,
exemptions and approvals shall be issued on a temporary basis pending
further review by the entity requiring such to be in effect).
(xiv) NO GOVERNMENT ACTIONS. No action or proceeding, shall have been
instituted nor shall governmental action be threatened before any United
States or foreign court or governmental agency, nor shall any order,
judgment or decree have been issued or proposed to be issued by any United
States or foreign court or governmental agency at the time of the Effective
Date to set aside, restrain, enjoin or prevent the completion and
consummation of this Lease or the transactions contemplated hereby and
thereby.
(xv) NO CHANGE IN LAW. No change shall have occurred after the date of
execution and delivery of this Lease in applicable law or regulations
thereunder or interpretations thereof by appropriate regulatory authorities
which, in the reasonable opinion of Lessor, would make it a violation of a
law or regulations for Lessor to execute, deliver and perform its
obligations hereunder or under any other Operative Document to which it is
a party.
(xvi) all representations and warranties of Lessor hereunder and under
the other Operative Documents shall be true and correct on and as of the
Effective Date as though made on and as of such date (unless made as of a
specified date, in which case such representations and warranties shall be
true and correct as of such specified date); and
(xvii) Lessor shall have performed, complied with and observed all its
obligations, covenants and agreements set forth herein and in each other
Operative Document which it is required to perform, comply with or observe
prior to or on the Effective Date.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) DISCLAIMER; LESSOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
(i) THE AIRCRAFT HAS BEEN DELIVERED UNDER THIS LEASE "AS IS, WHERE
IS" AND LESSEE AGREES, ACKNOWLEDGES AND ACCEPTS THAT, NEITHER LESSOR NOR
ANY OTHER INDEMNIFIED PARTY MAKES ANY WARRANTY OR REPRESENTATION WHATSOEVER
CONCERNING THE AIRCRAFT OR OTHERWISE. LESSEE, FOR THE BENEFIT OF LESSOR AND
EACH INDEMNIFIED PARTY, HEREBY WAIVES, RELEASES AND RENOUNCES ALL
WARRANTIES, REPRESENTATIONS AND OTHER INDEMNITIES,
19
[Amended and Restated Lease Agreement]
OBLIGATIONS AND LIABILITIES OF LESSOR AND ANY OTHER INDEMNIFIED PARTY
AND ANY RIGHTS, CLAIMS AND REMEDIES OF LESSEE, EXPRESS OR IMPLIED, ARISING
BY LAW OR OTHERWISE, IN EACH CASE, WITH RESPECT TO ANY NONCONFORMANCE OR
DEFECT IN THE AIRCRAFT, ANY PART THEREOF OR ANY OTHER THING DELIVERED,
LEASED, CHARTERED OR TRANSFERRED UNDER THIS LEASE, OR OTHERWISE INCLUDING,
WITHOUT LIMITATION:
(A) ANY WARRANTY AS TO THE AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION OF, OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN, OR ANY
DEFECT IN, THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA, ANY
AIRCRAFT DOCUMENTATION OR ANY OTHER THING DELIVERED, SOLD OR TRANSFERRED
HEREUNDER;
(B) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE;
(C) ANY EXPRESS OR IMPLIED WARRANTY AS TO TITLE;
(D) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE;
(E) ANY OBLIGATION OR LIABILITY WITH RESPECT TO ANY ACTUAL OR ALLEGED
PATENT OR OTHER INTELLECTUAL PROPERTY INFRINGEMENT;
(F) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
OR NOT IN STRICT OR ABSOLUTE LIABILITY OR ARISING FROM THE NEGLIGENCE OF
LESSOR OR ANY INDEMNIFIED PARTY, ACTUAL OR IMPUTED, ACTIVE OR PASSIVE; AND
(G) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OR
DAMAGE TO THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA OR ANY
OTHER THING, FOR ANY LOSS OF USE, REVENUE OR PROFIT OR FOR ANY OTHER
DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
(ii) DELIVERY BY LESSEE TO LESSOR OF LEASE SUPPLEMENT NO. 1 WILL
BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE (BUT WITHOUT
PREJUDICE TO ANY CLAIMS LESSOR OR LESSEE MAY HAVE AGAINST THE AIRFRAME
MANUFACTURER, ENGINE MANUFACTURER OR ANY VENDOR WITH RESPECT TO THE
AIRCRAFT) THAT LESSEE HAS EXAMINED AND INSPECTED THE
20
[Amended and Restated Lease Agreement]
AIRCRAFT, THAT THE AIRCRAFT AND THE AIRCRAFT DOCUMENTATION ARE
SATISFACTORY TO LESSEE AND THAT LESSEE HAS IRREVOCABLY AND
UNCONDITIONALLY ACCEPTED THE AIRCRAFT FOR LEASE HEREUNDER WITHOUT ANY
RESERVATIONS WHATSOEVER.
(iii) Lessor represents and warrants that (i) on the Delivery
Date and throughout the Lease Term, so long as no Event of Default
shall have occurred and be continuing, except as may be expressly
provided in this Agreement or in any other Operative Document to which
Lessee is a party or consents, Lessor shall not take or cause to be
taken any action inconsistent with Lessee's right of quiet enjoyment
of, or otherwise in any way interfere with or interrupt, the
continuing use, operation and possession of the Aircraft, the Airframe
or any Engine by Lessee or any permitted sublessee or assignee thereof
and (ii) Lessor and Owner Participant are organized under the laws of
the United States, or a state thereof, and the trust created by the
Trust Agreement is a grantor trust for federal income tax purposes.
Lessor agrees, for the benefit of Lessee and any mortgagee or
holder of any other security interest in any engine (other than an
Engine) or any Lessee Installed Part, any lessor of any engine (other
than an Engine) or Lessee Installed Part and any mortgagee or
conditional vendor of any engine (other than an Engine) or Lessee
Installed Part subject to a conditional sale agreement or any other
security agreement, that no right, title to or interest in any such
engine or Lessee Installed Part shall be exercised or asserted by the
Lessor and the Lessor acknowledges and confirms that it will not
acquire any right, title or interest to or in any such engine or
Lessee Installed Part as a result of its installation on the Aircraft.
No engine, part or Lessee Installed Part shall be installed on
the Airframe or any Engine unless either (i) Lessee owns such item of
equipment free and clear of all Liens other than Permitted Liens or
(ii) the mortgagee, owner, lessor, conditional vendor or other
lienholder in respect of such item of equipment has agreed that it
shall not acquire, exercise or assert any interest over the Aircraft,
the Airframe, any Engine or any Part.
Lessee may install TCAS, a windshear detection system, seats and
galleys, which shall upon installation become part of the Airframe and
shall remain on the Aircraft upon expiration of this Agreement.
Such TCAS, windshear detection system, seats and galleys are not
considered Additional Parts.
(b) LESSEE'S REPRESENTATIONS AND WARRANTIES. In order to induce Lessor
to enter into this Agreement, Lessee hereby represents and warrants to Lessor as
of the date hereof and as
21
[Amended and Restated Lease Agreement]
of the Effective Date (unless, in each case, such representation and warranty
is expressly applicable on and as of another date or dates) that:
(i) ORGANIZATION, QUALIFICATION, ETC. Lessee (w) is a company
incorporated under the laws of the State of Delaware, (x) holds all
Authorizations necessary to authorize Lessee to engage in air transport and
to carry on scheduled passenger and cargo service in each case as presently
conducted, (y) has the corporate power and authority to own or hold under
lease its properties wherever located or used and to enter into and perform
its obligations under each Operative Document to which it is a party, (z)
is duly qualified and authorized to do business, and is in good standing,
in each jurisdiction in which the nature of its business makes such
qualification necessary, except where the absence of such qualification
would not materially adversely affect its ability to perform its
obligations under the Operative Documents and (aa) is a Certificated Air
Carrier.
(ii) CORPORATE AUTHORITY. The execution, delivery and performance by
Lessee of this Agreement and each other Operative Document to which Lessee
is a party have been duly authorized by all necessary corporate action on
the part of Lessee, do not require any stockholder or shareholder approval,
or approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee, except such as have been duly obtained or, by the
Effective Date, will have been duly obtained, and copies of which shall
have been delivered to Lessor on or before the Effective Date.
(iii) GOVERNMENT APPROVALS. Neither the execution and delivery by
Lessee of this Agreement or any other Operative Document to which Lessee is
a party nor the performance by Lessee of its obligations hereunder or
thereunder (including, without limitation, Lessee's payment of Rent in
Dollars to Lessor or any other Indemnified Party) requires any
Authorization (including, without limitation, any import, customs, foreign
exchange or other licenses or permits), except for (y) Authorizations that
have been duly obtained and are in fall force and effect, and copies of
which shall have been delivered to Lessor on or before the Effective Date,
and (z) any normal periodic and other reporting requirements under the
applicable rules and regulations of the Aviation Authority (but only to the
extent required to be observed or performed after the Effective Date).
(iv) NO BREACH. Neither the execution and delivery of this Agreement
or any other Operative Document by Lessee nor the consummation by Lessee of
the transactions contemplated hereby or thereby nor compliance by Lessee
with any of the terms or provisions hereof or thereof will (x) violate any
of the provisions of the organizational or charter documents or bylaws of
Lessee, (y) conflict with or contravene, or result in the creation,
perfection or enforcement of any lien under, any law applicable to or
binding upon the Aircraft, Lessee or any property of Lessee or (z) conflict
with or result in any breach of any of the terms or provisions of, or
constitute any default under, or result in or require the creation of any
Lien upon any property of Lessee under, any
22
[Amended and Restated Lease Agreement]
indenture, mortgage, deed of trust, conditional sales contract, note,
loan, credit agreement or other agreement or instrument to which Lessee is
a party or by which Lessee or its properties or assets may be bound or
affected.
(v) LEGAL, VALID AND BINDING AGREEMENTS. This Lease and each other
Operative Document to which Lessee is a party, in each case, as and when
entered into, have been, or will be, duly executed and delivered by Lessee
and constitute, or will constitute, legal, valid, binding and
enforceable obligations of Lessee.
(vi) LITIGATION. There are no pending or threatened actions or
proceedings before any court or administrative agency (y) in respect of
this Agreement or any other Operative Document or the Aircraft or the
performance by Lessee of its obligations hereunder or under any other
Operative Document or (z) which would, if adversely determined, materially
adversely affect the ability of Lessee to perform its obligations under the
Operative Documents.
(vii) FILING. Except for the registration of the Aircraft with the FAA
and the filings or recordings described in Schedule 4, no further action,
including the filing or recording of any instrument or document
(including the filing of any Uniform Commercial Code financing statement)
is necessary or advisable under the laws of the State of Registration or
the Lessee Jurisdiction (x) in order for this Agreement to constitute a
valid and perfected lease of record relating to the Aircraft, (y) to
authorize or permit Lessee to perform its obligations under each Operative
Document (including, without limitation, Lessee's obligation to pay Rent)
or (z) fully to protect, establish, perfect and preserve Lessor's title to,
and Lessor's rights and interests in, the Aircraft as against Lessee and
any other Person.
(viii) NO WITHHOLDING. Lessee will not be required to deduct from any
Rent payment made or to be made hereunder any withholding or other Tax
under the laws of the State of Registration, the Lessee Jurisdiction or any
other jurisdiction, either (y) on or by virtue of the execution or delivery
by Lessee of this Agreement or any other Operative Document or (z) on or by
virtue of the performance by Lessee of this Agreement or any other
Operative Document, including, without limitation, payment of Rent or any
other amount made, or to be made, by Lessee pursuant to this Agreement or
any other Operative Document.
(ix) NO DEFAULT OR EVENT OF DEFAULT. There has not occurred any event
which is presently continuing and which would constitute a Default or
Event of Default under this Agreement or any of the other Operative
Documents.
(x) FINANCIAL CONDITION. The statements of financial position of
Lessee as of December 31, 1999 and the related statements of earnings and
cash flows of Lessee for the year then ended, fairly present the financial
condition of Lessee as at such date and
23
[Amended and Restated Lease Agreement]
the results of operations and cash flow of Lessee for the period ended
on such date, in accordance with generally accepted accounting principles
consistently applied (except as may be stated in the notes thereto), and,
since December 31, 1999, there has been no material adverse change in such
condition or operations, except as disclosed in press releases issued by
Lessee.
(xi) TAXES. Lessee has paid or caused to be paid all Taxes when due
and payable or has made adequate provision by way of security for all Taxes
payable by Lessee (except to the extent being contested in good faith and
by appropriate proceedings, and for the payment of which adequate reserves
have been provided, so long as such contest does not involve a material
danger of the sale, forfeiture, confiscation, seizure or loss of the
Aircraft, any Engine or Part thereof). No Taxes (including, without
limitation, any stamp or value-added taxes), levies, imposts, duties or
similar charges may be imposed by the government of the Lessee
Jurisdiction, or any Government Entity or political or taxing subdivision
therein, upon or with respect to the execution or delivery of this
Agreement or any other Operative Document or the delivery of the Aircraft
hereunder.
(xii) NO MATERIAL ADVERSE CHANGE. No event has occurred or state of
affairs exists that has or may have a material adverse effect on (i) the
ability of Lessee to carry on its business or to perform its obligations
under any Operative Document to which it is or will be a party or (ii) the
rights or interests of Lessor under any Operative Document to which it is
or will be a party.
(xiii) PARI PASSU. The obligations of Lessee under this Agreement and
the other Operative Documents are direct, general and unconditional
obligations of Lessee and rank at least pari passu with all other present
and future unsecured and unsubordinated obligations (including contingent
obligations) of Lessee with the exception of such obligations as are
mandatorily preferred by law and not by virtue of any contract.
(xiv) SECTION 1110. Lessor is entitled to the protection of Section
1110 of Chapter 11 of Title 11 of the United States Code in connection with
its right to take possession of the Aircraft, Airframe and Engines in the
event of a case under such Chapter 11 in which Lessee is a debtor.
The rights and remedies of Lessor in relation to any
misrepresentation or breach of warranty on the part of Lessee shall not be
prejudiced by any investigation by or on behalf of Lessor into the affairs of
Lessee, by the performance of this Agreement or by any other act or thing
which may be done or omitted to be done by Lessor and which would or might,
but for this provision, prejudice such rights and remedies.
24
[Amended and Restated Lease Agreement]
SECTION 6. CERTAIN COVENANTS OF LESSEE. Lessee covenants and agrees with
Lessor at Lessee's sole cost and expense, as follows:
(a) MAINTENANCE OF CORPORATE EXISTENCE- DULY QUALIFIED; CERTIFICATED
AIR CARRIER. Subject to Section 6(b), at all times during the Lease Term,
Lessee shall (i) exist as a company incorporated under the laws of the State of
Delaware, (ii) hold all Authorizations necessary to authorize Lessee to engage
in air transport and to carry on passenger and cargo service in each case as
presently conducted by Lessee, (iii) have the corporate power and authority to
own or hold under lease its properties wherever located or used and to enter
into and perform its obligations under each Operative Document to which it is a
party, (iv) be duly qualified and authorized to do business, and be in good
standing, in each jurisdiction in which the nature of its business makes such
qualification necessary, except where the absence of such qualification would
not materially or adversely affect its ability to perform its obligations under
the Operative Documents and (v) at all times be a Certificated Air Carrier.
(b) MERGER OR CONSOLIDATION. Lessee shall preserve its corporate
existence, and will not merge or consolidate with any person unless the
successor person resulting from such merger or consolidation (the "Successor"):
(i) is the Lessee or an entity incorporated or organized in the
State of Delaware or another State of the United States;
(ii) shall have a net worth immediately after such merger or
consolidation of not less than the Lessee's net worth immediately prior
thereto;
(iii) shall be authorized under applicable law to perform the
Lessee's obligations under this Lease to the same extent as the Lessee;
(iv) shall deliver to the Lessor an agreement in form and
substance reasonably satisfactory to the Lessor containing an
assumption by the Successor of the Lessee's representations and
warranties under this Lease, together with the due and punctual
performance of all the Lessee's obligations under this Lease; and
(v) shall deliver to the Lessor an opinion of counsel reasonably
satisfactory in form and substance to the Lessor to the effect that
the agreement referred to in sub-clause (iii) above constitutes the
Successor's legal, valid, binding and enforceable obligations.
(c) REPORTING REQUIREMENTS. The Lessee shall furnish to the Lessor and
the Lender:
(i) within 60 days after the last day of the first three fiscal
quarters of each fiscal year of Aloha Airgroup, Inc., unaudited
consolidated quarterly financial statements
25
[Amended and Restated Lease Agreement]
of the Aloha Airgroup, Inc. prepared for such quarter as of the
last day of such quarter and statements of income and retained earnings
for such fiscal quarter and on a comparative basis figures for the
corresponding period of the immediately preceding fiscal year, all in
reasonable detail, each such statement to be certified in a certificate
of Aloha Airgroup, Inc.'s chief financial officer or chief accounting
officer as fairly presenting the financial position and the results of
operations of Aloha Airgroup, Inc. as at its date and for such quarter
(subject to year-end audit adjustments) and as having been prepared in
accordance with GAAP;
(ii) as soon as available but not in any event later than 120 days
after the last day of each fiscal year of Aloha Airgroup, Inc., audited
financial statements of the Aloha Airgroup, Inc. prepared for such
year, including a balance sheet of Aloha Airgroup, Inc. of the last day
of such year, statements of income and retained earnings of Aloha
Airgroup, Inc. for such fiscal year, a balance sheet of Aloha Airgroup,
Inc. as of the last day of such year and statements of income and
retained earnings of Aloha Airgroup, Inc. for such fiscal year and in
all cases on a comparative basis figures for the immediately preceding
fiscal year, all in reasonable detail, each prepared in accordance with
GAAP and certified without qualification by Coopers & Xxxxxxx or
another of the largest national firms of independent certified public
accountants as fairly presenting the financial position and the results
of operations of Aloha Airgroup, Inc. at the end of and for such fiscal
year and as having been prepared in accordance with GAAP;
(iii) concurrently with the financial statements furnished
pursuant to Clauses 6(c)(1) and (ii) above, an officer's certificate
signed by the chief financial officer or chief accounting, officer of
Lessee certifying to the best knowledge after due inquiry of such
officer that no Default occurred during the period covered by such
financial statements and no Default exists on the date of such
officer's certificate or, if a Default occurred or exists, stating that
fact and specifying the nature and period of existence of such Default
and the actions Lessee took or proposes to take with respect to such
Default;
(iv) at the same time as it is issued to the creditors of the
lessee, a copy of each notice or circular issued to the Lessee's
creditors as a group;
(v) on request from time to time such other information regarding
the Lessee and its business and affairs as the Lessor or the Lender may
reasonably request; and
(vi) all such other reports as are noted in Schedule 6.
(d) GOVERNMENT APPROVALS. Lessee shall maintain, or cause to be
maintained, in full force and effect all Authorizations obtained or effected in
connection with this Agreement and every document or instrument contemplated
hereby as are required to be maintained and
26
[Amended and Restated Lease Agreement]
shall take all such additional action as may be necessary or advisable in
connection therewith. Lessee further undertakes to obtain or effect any new or
additional Authorizations as may become necessary for the performance of any of
the terms and conditions hereof or any other document or instrument
contemplated hereby.
(e) TAXES. Lessee shall file or cause to be filed all tax returns
which are required to be filed and shall pay or cause to be paid all Taxes when
due and payable (except to the extent being contested in good faith and by
appropriate proceedings, and for the payment of which adequate reserves have
been provided but only as long as such proceedings do not involve any material
danger of the sale, forfeiture, confiscation, seizure or loss of the Aircraft or
any interest therein).
(f) PLACE OF BUSINESS. Lessee shall provide to Lessor written notice
of any change in its principal place of business as set forth in Schedule 3
within 30 days thereafter.
(g) FILINGS. Lessee shall promptly take all such action, including the
filing or recording of any instrument or document as may, from time to time, be
necessary or advisable under the laws of the State of Registration, the Lessee
Jurisdiction or any jurisdiction in which the Aircraft is or will be operated
(x) in order for this Agreement to constitute a valid and perfected lease of
record relating to the Aircraft, (y) to authorize or permit Lessee to perform
its obligations under each Operative Document (including, without limitation,
its obligation to pay Rent) or (z) to fully protect, establish, perfect and
preserve Lessor's title to, and Lessor's rights and interests in, the Aircraft
as against Lessee, and any other Persons, excluding any third party claims
arising prior to Delivery, Lessor Liens and Liens granted by Lessor to Lessor's
lenders. For the avoidance of doubt, the cost of all filings and related
notarizations, required by this Agreement or any other Operative Document shall
be borne by Lessee.
(h) APPROVED MAINTENANCE PROGRAM. Lessee shall not make any
substantive changes to the Approved Maintenance Program unless Lessor shall have
reviewed and approved such substantive changes to the Approved Maintenance
Program which Lessee proposes to make during the Lease Term, provided that (i)
substantive changes shall mean changes specifically related to the intervals
between maintenance actions or replacements, and (ii) Lessor's
approval/disapproval of such substantive changes shall be reasonable and
consistent with industry standards. Written notice, as specified in Section
23(f), of a proposed substantive change to the Approved Maintenance Program may
be given by Lessee independently or as part of a quarterly report delivered
pursuant to Section 10(d)(vii) hereof. If Lessor has not notified Lessee that
Lessor is unwilling to approve a proposed substantive change within ten (10)
Business Days of Lessor's receipt of written notice thereof, Lessor shall be
deemed to have approved of such change.
27
[Amended and Restated Lease Agreement]
SECTION 7. RETURN OF THE AIRCRAFT.
(a) DATE AND LOCATION OF RETURN. Upon any expiration or termination of
the Lease Term, subject only to Section 13(b)(ii)(x), Lessee, at its own risk,
cost and expense, shall return the Aircraft, including the Airframe, the
Engines, all Parts thereof and the Aircraft Documentation to Lessor or its
designee in accordance with the provisions of this Agreement and Lessee and
Lessor shall perform the elements of the Final Inspection as required hereby,
all prior to the end of the Lease Term (the "Return"). Not later than the end of
the Lease Term, the Aircraft shall be returned to Lessor or its designee at the
Return Location.
(b) CONDITION OF AIRCRAFT. At Return, Lessee shall, at its sole risk,
cost and expense, procure that the Aircraft is free and clear of all Liens
(other than liens which existed prior to Delivery of the Aircraft to Lessee,
Lessor Liens and Liens granted by Lessor to Lessor's lenders) and that the
Aircraft complies in all respects with the conditions and requirements set forth
in Schedule 5.
(c) FINAL INSPECTION.
(1) No less than 30 days prior to commencement of the Return,
Lessee shall provide Lessor with written notice of the date (which
shall be not less than fifteen (15) days prior to the Expiry Date) of,
and a reasonably complete plan for the content of, the Final
Maintenance and shall give Lessor further written notice of the date
of, and any changes to the plan for, the Final Maintenance. During the
entire period of such Final Maintenance, the Aircraft, shall be made
available to Lessor and/or Lessor's agents, representatives and
designees (each, an "Inspecting Party") for ground inspection by the
Inspecting Parties at the location of Final Maintenance. The Aircraft
Documentation shall be made available for review at the then current
operator's principal place of business. So long as no Event of Default
has occurred and is continuing, no such inspection shall unreasonably
interfere in the business operations of Lessee except to the extent
such interference is reasonably necessary to enable an Inspecting Party
to exercise its rights set forth in this Section 7(c)(i).
Lessee shall make available to the Inspecting Parties such
documentation regarding the condition, use, maintenance, operation and
history of the Aircraft during the Lease Term as Lessor may reasonably
request. During the Final Inspection, any Inspecting Party shall have
the right to reasonably request that additional panels or areas be
opened in order to allow further inspection by any Inspecting Party so
long as either (i) such panels are ordinarily opened during "C" Checks
or (ii) there are indications of damage found by Lessor during its
inspection that reasonably warrant opening such panels. Lessee shall
remove the Aircraft from service and open the areas of the Aircraft as
required to perform the Final Maintenance and the other inspections and
checks as contemplated in this Section 7 and Schedule 5 that are
reasonably requested by Lessor in accordance with the terms hereof and
otherwise permit Lessor to determine, and assist
28
[Amended and Restated Lease Agreement]
Lessor in determining that the Aircraft, including the Aircraft
Documentation, is in the condition required herein.
(ii) Promptly after such inspections, except as otherwise agreed
in writing by Lessor and Lessee, any discrepancies from the Aircraft
return condition requirements set forth in this Section 7, and any
discrepancies that must be corrected in order to comply with the
Approved Maintenance Program, which shall include clearing of all
deferred maintenance items, shall be corrected by Lessee at its cost
prior to the operational ground check described in Section 7(d).
(d) OPERATIONAL GROUND CHECK.
(i) In connection with the Return (and following, the inspection
referred to in Section 7(c)), Lessee shall conduct an operational
ground check of the Aircraft in accordance with the procedures set
forth in the Airframe Manufacturer's maintenance manual, for the
purpose of demonstrating to the reasonable satisfaction of Lessor the
operation of all Aircraft systems that can be verified on the ground,
including, if required by Lessor and at Lessee's cost, a full fuel tank
visual leak check, audible ignition check (both systems), pitot and
static systems check and hydraulic system external visual leak check.
(ii) Promptly after the operational ground check, except as
otherwise agreed in writing by Lessor and Lessee, any discrepancies
from the Aircraft return condition requirements set forth in this
Section 7, and any discrepancies that must be corrected in order to
comply with the Approved Maintenance Program and the Airframe
Manufacturer's maintenance manual criteria, shall be corrected by
Lessee at its cost prior to the demonstration flight described in
Section 7(e).
(e) DEMONSTRATION FLIGHT.
(i) Immediately following the operational ground check pursuant to
Section 7(d), but prior to Lessor's technical acceptance of the
Aircraft, Lessee shall, using, its own pilots and at its own cost,
carry out for the Inspecting Parties a demonstration flight in the
Aircraft in accordance with Lessee's specifications and the Lessee's
Aviation Authority-approved flight manual to demonstrate the proper
functioning of Aircraft systems and components, as requested by Lessor
within limits and/or guidelines established by the relevant
manufacturers and the Aviation Authority. Such flight shall continue
for the duration necessary to perform such check flight procedures, but
for a period not exceeding two (2) hours. Lessor shall be allowed at
least two representatives on-board as observers during such flight and
Lessee shall comply with all reasonable requests made by such
representatives during such flight.
29
[Amended and Restated Lease Agreement]
(ii) Except as otherwise agreed in writing by the Lessor and
Lessee, promptly following such demonstration flight, any deficiencies
from the Aircraft return condition requirements set forth in this
Section 7 and Schedule 5, and any discrepancies that must be corrected
in order to comply with the Approved Maintenance Program and the
Airframe Manufacturer's maintenance manual and to achieve the proper
functioning of the Aircraft systems and components, shall be corrected
by Lessee at its cost prior to Return.
(iii) Lessor shall defend, indemnify and hold harmless Lessee from
and against all claims, liabilities, damages, losses and judgments,
which may be asserted against, suffered by, charged to or recoverable
from Lessee by reason of injury to or death of any Person or
Persons, or loss of or damage to any property, including, the Aircraft,
arising out of or in any way connected with such ground inspection,
operational ground check and test flights except to the extent
occasioned in whole or in part by the fault or negligence of Lessee or
such Person or Persons.
(f) TECHNICAL ACCEPTANCE. Upon satisfactory completion of the Final
Inspection and, unless otherwise agreed in writing by Lessor and Lessee,
satisfactory correction of any discrepancies or deficiencies required to be
corrected by Lessee prior to Return, Lessor shall execute and deliver to Lessee,
a delivery receipt in the form of Annex A to Schedule 5 (the "Return Receipt")
which shall, for all purposes hereof, constitute complete, irrevocable and
absolute evidence of Lessor's technical acceptance of the Aircraft, except as
validly noted in such Return Receipt. To the extent technical acceptance occurs
prior to Return, Lessee shall remain liable for the performance of all of its
payments and other obligations hereunder, and for any damage to or loss of the
Aircraft occurring between the date thereof and Return (it being understood and
agreed that Lessee shall maintain insurance as required by Section 15 to and
including such date).
(g) FAILURE TO RETURN AIRCRAFT. If Lessee shall, due to reasons of
Force Majeure or for any other reason whatsoever, fail to return the Aircraft at
the time or in the condition specified herein or return of the Aircraft is not
accepted by Lessor because of Lessee's failure to meet the requirements of this
Section 7 and Schedule 5, the obligations of Lessee provided in this Agreement
and each other Operative Document to which Lessee is a party (including the
obligation to pay Rent, on a per them basis based upon a pro rata application of
125% of the monthly Rent in force, during the last month of the Lease Term)
shall continue in effect with respect to the Aircraft, and the Lease Term shall
be deemed to be extended until Return of the Aircraft to Lessor; provided that,
this Section 7(g) (i) shall not be construed as permitting or authorizing Lessee
to fail to meet, or consenting to or waiving any failure by Lessee to perform,
Lessee's obligation to return the Aircraft in accordance with the requirements
of this Agreement and (11) shall not apply if Lessee's failure to return in a
timely fashion is due to (x) a reasonable good faith dispute between Lessee and
Lessor as to the meanin of one or more provisions of this Lease Agreement, (y)
Lessor's failure to diligently and responsibly cooperate to accomplish
30
[Amended and Restated Lease Agreement]
Return of the Aircraft in a timely fashion or (z) Lessee's cooperation under
Section 7(h)(iv) or (v) hereof.
(h) TRANSITION. Lessee acknowledges that Lessor intends to lease or
sell the Aircraft to another Person at the end of the Lease Term. In order to
facilitate such lease or sale of the Aircraft, Lessee agrees to cooperate with
Lessor and to otherwise assist Lessor, at Lessor's cost, in such matters by, for
example:
(i) allowing reasonable inspections of the Aircraft by the
Follow-On Operator (without interrupting any commercial operation of
the Aircraft);
(ii) using reasonable endeavors to schedule the Return of the
Aircraft and the Final Inspection in a manner that will allow for a
simultaneous delivery of the Aircraft to the Follow-On Operator;
(iii) assisting with exporting the Aircraft from the State of
Registration and arranging for the notice of deregistration of the
Aircraft to be sent to the aviation authority in the country where the
Aircraft will be registered by the Follow-On Operator;
(iv) assisting; with the transition of the Aircraft from the
Approved Maintenance Program to the maintenance program of the
Follow-On Operator by providing access to the relevant technical data;
and
(v) performing or procuring the maintenance or modifications to
the Aircraft as reasonably requested by Lessor, at Lessor's cost.
(i) SECURITY DEPOSIT. Following expiration of this Lease and return of
the Aircraft to Lessor, and subject to no Defaults outstanding hereunder, the
Security Deposit (except for the Non-Refundable Deposit) will be promptly
returned to Lessee subject to Lessor's satisfaction with Lessee's compliance
with this Section 7.
(j) REPLACEMENT ENGINES. Prior to commencement of the return
procedures under this Section 7, Lessee may replace one or both Engines then
subject to this Lease with Replacement Engines; provided that such replacement
shall not alter Lessee's obligations with respect to the Return Conditions set
forth in Schedule 5.
SECTION 8. Liens.
(a) NO LIENS. Lessee will not directly or indirectly create, incur,
assume or suffer to exist, or agree to create or assume, any Lien on or with
respect to the Aircraft, any Engine or any Part or in this Agreement, or in any
right, title or interest in any of the foregoing, except:
31
[Amended and Restated Lease Agreement]
(i) the rights of Lessor provided in this Agreement;
(ii) the rights of others under agreements or arrangements to the
extent permitted by the terms of Section 11;
(iii) Lessor Liens, Liens arising a prior to filing of this Lease
with the Aviation Authority;
(iv) Liens for Taxes of Lessee arising in the ordinary course of
business either not yet due or being contested in good faith by
appropriate proceedings (and for the payment of which adequate reserves
have been provided) so long as such contest does not involve any
material danger of the sale, forfeiture, seizure or loss of the
Airframe, any Engine or any Part or any interest therein;
(v) materialmen's, mechanics', workmen's, repairmen's, employees'
or other like Liens arising by operation of law in the ordinary course
of Lessee's business (including those arising under maintenance
agreements entered into in the ordinary course of business) securing
obligations that are not yet due or are being contested in good faith
by appropriate proceedings (and for the payment of which adequate
reserves have been provided) so long as such contest does not involve
any material xxxxxxx of the sale, forfeiture, seizure or loss of the
Airframe, any Engine or any Part or any interest therein; and
(vi) Liens, other than Liens for Taxes, in respect only of
Lessee's interest as Lessee under this Agreement and arising out of any
judgment or award against Lessee (and for the payment of which adequate
reserves have been provided), but only if the judgment secured shall
have been discharged, vacated, reversed or execution thereof stayed
pending a good faith appeal or shall have been discharged, vacated or
reversed upon expiration of such stay.
(b) REMOVAL OF LIENS. Lessee will promptly, at its own expense, take,
or cause to be taken, such actions as may be necessary duly to discharge any
Lien not excepted under Section 8(a) that may at any time arise, exist or be
levied upon the Aircraft, any Engine, any Part or in this Agreement, or in any
right, title or interest in any of the foregoing, and Lessee shall indemnify and
hold harmless Lessor and each other Indemnified Party from any Expenses arising
therefrom.
(c) NO ADVERSE ACTION. Without limiting the foregoing or any other
provision of this Agreement or any other Operative Document, Lessee will not do
or permit to be done anything which may expose the Aircraft or any part thereof
to penalty, forfeiture, seizure, arrest, impoundment, detention, confiscation,
taking in execution, attachment, appropriation or destruction, nor abandon the
Aircraft or any Part.
32
[Amended and Restated Lease Agreement]
SECTION 9. INDEMNITIES.
(a) GENERAL INDEMNITY. Subject only to the exceptions set forth in
Section 9(b), Lessee hereby assumes liability for and hereby agrees to indemnify
Lessor and each other Indemnified Party against, and agrees to protect, save and
keep harmless each thereof from, any and all Expenses of whatsoever kind and
nature from time to time imposed on, incurred by or asserted against any
Indemnified Party in any way relating to or arising out of.
(i) the Operative Documents, any of the transactions contemplated
thereby or the enforcement of any of the terms thereof, including,
without limitation, the enforcement of this Section 9;
(ii) the Aircraft, the Airframe, any Engine or engine or Part or
any other thing delivered under this Agreement;
(iii) the acceptance, delivery, lease, sublease, charter,
subcharter, registration, deregistration, reregistration, possession,
repossession, use, presence, operation, condition, storage (unless
otherwise expressly provided herein), installation, testing,
modification, alteration, maintenance, repair, release, return,
transportation, transfer, exportation, importation, abandonment or
other disposition of the Aircraft, the Airframe, any Engine or engine
or Part or any other thing delivered under this Agreement (including,
without limitation, any claim for patent, trademark or copyright
infringement in respect of any Part of the Aircraft which was not
delivered to Lessee hereunder, any liability for any injury to or death
of any Person or loss of or damage to any property, latent or other
defects, whether or not discoverable and whether or not any of the
foregoing shall arise as a result of the action or inaction of Lessee
or any other Person); and
(iv) any breach or noncompliance by Lessee with any covenant,
term, agreement, condition, undertaking or obligation under this
Agreement or under any other Operative Document or agreement entered
into or furnished by Lessee in connection herewith or therewith, or the
falsity or inaccuracy of any representation or warranty of Lessee set
forth herein or therein, or the occurrence of any other Default,
including, without limitation, any Expenses incurred, assumed or
suffered by Lessor or any other Indemnified Party as a consequence of
Lessee's failure to Return the Aircraft in accordance with this
Agreement on any date specified or required herein.
(b) EXCEPTIONS TO GENERAL INDEMNITY. The indemnity provided for in
Section 9(a) will not extend to any of the following Expenses of any Indemnified
Party:
(i) Expenses caused by the gross negligence or willful misconduct
of such Indemnified Party or a Related Indemnitee (other than
negligence imputed to such
33
[Amended and Restated Lease Agreement]
Indemnified Party or Related Indemnitee by reason of its interest
in the Aircraft solely and by virtue of law);
(ii) Expenses caused by a breach by such Indemnified Party or a
Related Indemnitee of any covenant or inaccuracy or falsity of a
representation or warranty made by such Indemnified Party or a Related
Indemnitee in this Agreement or the documents and agreements delivered
by such party to Lessee on or prior to the Delivery Date;
(iii) Expenses that are Taxes (it being agreed that Lessee's sole
responsibility for Taxes is as set out in Section 9(c) hereof);
(iv) Expenses attributable to the period (x) prior to the Delivery
Date and (y) after the return of possession of the Airframe, the
Engines and the Parts to Lessor or its designee pursuant to and in
accordance with the terms of this Lease (other than pursuant to Section
20 hereof, in which case (and other than with respect to Taxes)
Lessee's liability under this Section 9(b) shall survive for so long as
Lessor shall be entitled to exercise remedies under such Section 20);
(v) Expenses caused by any voluntary transfer or disposition
(other than any transfer pursuant to any exercise of remedies in
connection with an Event of Default, pooling arrangement or Event of
Loss) by Lessor of its interest in the Aircraft, Airframe or Engines;
or
(vi) Expenses to the extent covered by such Indemnified Party's
worker's compensation insurance.
(c) TAXES.
(i) LESSEE LIABILITY. Except as provided in Section 9(c)(ii),
Lessee shall pay or cause to be paid when due, and shall indemnify and
hold harmless each Tax Indemnitee for, from and against, any and all
Taxes howsoever imposed or levied on or asserted against, from time to
time, any Tax Indemnitee, Lessee, the Aircraft, Airframe or any Engine
or any Parts or any interest therein by any Government Entity on, with
respect to, based on or measured by:
(A) the acceptance, delivery, redelivery, transport,
registration, reregistration, deregistration, possession,
operation, location, use, presence, condition, alteration by or on
behalf of Lessee, maintenance, repair, return, storage (unless
otherwise expressly provided herein), repossession, disposition,
abandonment, installation, storage, charter, leasing, subleasing,
modification, transfer by or on behalf of Lessee, importation,
exportation or other disposition of, or the imposition of any
34
[Amended and Restated Lease Agreement]
Lien on, the Aircraft, Airframe or any Engine or any Part or
interest therein (or the incurrence of any liability to refund or
pay over any amount as the result of any such Lien);.
(B) the rentals or receipts from the Aircraft, Airframe or
any Engine or Parts thereof or interest therein;
(C) the Aircraft, Airframe or any Engine or any Parts thereof
or interest therein (including, without limitation, title or a
security interest therein), this Lease, any other Operative
Document or any data or any other thing delivered or to be
delivered under the Operative Documents; or
(D) otherwise with respect to or in connection with the
execution, delivery, enforcement, amendment or supplement to the
Operative Documents or the transactions contemplated by the
Operative Documents.
(ii) EXCLUSIONS FROM LESSEE'S LIABILITY. The provisions of Section
9(c)(i) shall not apply to:
(A) Taxes on the income, profits or gains of a Tax Indemnitee
by any Government Entity or Taxes in the nature of a value-added
tax or consumption tax to the extent such value-added tax or
consumption tax is enacted by a Government Entity as a substitute
for or replacement of a Tax on income, profits or gains income as
a revenue source for that Government Entity; PROVIDED, HOWEVER,
that the exclusion contained in this clause (A) shall not apply to
any Taxes imposed by any Government Entity (other than the United
States, a United States federal entity, or a Government Entity
with jurisdiction over the place of a Tax Indemnitee's principle
place of business or residence or place of organization; except in
the case of a United Stated federal withholding tax on gross
income ("U.S. Withholding Tax"), U.S. Withholding Tax imposed
solely as a result of (A) the enactment after the date of
execution and delivery of this Agreement of an amendment to the
Internal Revenue Code (as in effect on the Delivery Date), (B)
ratification after the Delivery Date of any protocol or other
amendment to any United States income tax convention in effect on
the Delivery Date or (C) the ratification after the Delivery Date
of any new United States income tax convention if and to the
extent that such Tax results (i.e., to the extent that such Tax
would not have been imposed but for the existence of one or more
of the following, factors) from (i) the use, operation, presence
or registration of the Aircraft, the Airframe, any Engine or any
Part within the taxing jurisdiction of that Government Entity; or
(ii) the situs of organization, any place of business or any
35
[Amended and Restated Lease Agreement]
activity of Lessee or any other Person having use, possession
or custody of the Aircraft, the Airframe, any Engine or any Part
within the taxing jurisdiction of that Government Entity; or (iii)
any payment (actual or constructive) by or on behalf of Lessee
from the taxing jurisdiction of that Government Entity; PROVIDED,
FURTHER, however, if the Delivery Location is in Malaysia,
Lessee will not be responsible for any taxes, duties, charges or
fees levied by any Malaysian taxing authority or if the Delivery
Location is in New Zealand, Lessee will not be responsible for any
taxes, duties, charges or fees levied by any New Zealand taxing
authority;
(B) Sales, use or similar transfer Taxes imposed on a Tax
Indemnitee upon any voluntary transfer (including a transfer by
way of security but excluding a transfer pursuant to the exercise
of remedies in connection with an Event of Default, a
Modification, a pooling arrangement or an Event of Loss) or
disposition (including a disposition by way of security but
excluding a disposition pursuant to any exercise of remedies in
connection with an Event of Default; provided, however, that
Lessor shall in connection with an Event of Default comply with
any reasonable request as Lessee shall make concerning the
appropriate jurisdiction in which such disposition shall be made
unless Lessor reasonably determines in cooperation with any Tax
Indemnitee (and advises Lessee) that such compliance with Lessee's
request would generate an adverse consequence to Lessor or such
Tax Indemnitee) by such Tax Indemnitee of any equitable or legal
interest in the Aircraft, Airframe, any Engine or any Part or this
Agreement to any Person;
(C) Taxes attributable solely to any period (a) prior to the
Delivery Date; or (b) after the return of possession of the
Airframe, the Engines and the Parts to Lessor or its designee
pursuant to the terms of this Lease (other than pursuant to
Section 20 hereof, in which case Lessee's liability under this
Section 9(c) shall survive for so long, as Lessor shall be
entitled to exercise remedies under such Section 20); provided,
however, that the exclusions set forth in this subparagraph (C)
shall not apply to Taxes to the extent such Taxes relate to events
occurring or matters arising prior to or simultaneously with such
return of possession;
(D) Taxes caused solely by a breach by such Tax Indemnitee of
any covenant or inaccuracy or falsity of any representation or
warranty made by such Tax Indemnitee in this Agreement or the
documents and agreements delivered by such Tax Indemnitee to
Lessee pursuant to this Agreement;
36
(Amended and Restated Lease Agreement]
(E) Taxes caused solely by the gross negligence or wilful
misconduct of any Tax Indemnitee; and
(F) Taxes based on or measured by the value or principal
amount of any loan or promissory note (or security therefore)
entered into by Lessor or a Tax Indemnitee or anyone claiming an
interest in the Aircraft or any portion thereof through Lessor or
a Tax Indemnitee.
(iii) NO REDUCTION FOR WITHHOLDING, ETC. Notwithstanding anything
that may be contained herein, all payments by Lessee under this
Agreement or any other Operative Document, whether in respect of Rent,
interest, fees or any other item, shall be made in full without any
deduction or withholding (whether in respect of setoff, counterclaim,
duties, Taxes, charges, wages or otherwise whatsoever), unless:
(A) the withholding or deduction is with respect to Taxes for
which Lessee is not required under Section 9(c) to indemnify
Lessor or any Tax Indemnitee, or
(B) the withholding or deduction is required by law, in which
event Lessee shall:
(1) forthwith pay the recipient such additional amount
so that the net amount received by such recipient after the
deduction or withholding will equal the full amount which
would have been received by it had no such deduction or
withholding been made;
(2) pay to the relevant taxing authorities within the
period for payment permitted by applicable law the full
amount of the deduction or withholding (including, but
without prejudice to the generality of the foregoing, the
full amount of any deduction or withholding from any
additional amount paid pursuant to this clause (iii)); and
(3) furnish to Lessor, within the period for payment
permitted by applicable law, an official receipt of the
relevant taxation or other authorities involved for all
amounts deducted or withheld as aforesaid or, if no such
receipt is issued, a certificate of deduction or equivalent
evidence thereof.
(iv) REPORTS. Lessee will provide, promptly upon request, such
information as may be reasonably requested by a Tax Indemnitee or
required to enable a Tax Indemnitee to timely and properly fulfill its
tax filing requirements with respect to the transactions
37
[Amended and Restated Lease Agreement]
contemplated by the Operative Documents, including, without
limitation, those requirements that relate to Taxes based on or
measured by the total time the Aircraft is located in a particular
place irrespective of whether the Aircraft is there for revenue,
maintenance or storage purposes. If any report, return or statement is
required to be filed with respect to any Tax which is subject to
indemnification under this Section 9(c), Lessee shall timely file the
same (except for any such report, return or statement which such Tax
Indemnitee intends to file itself (and so notifies Lessee in writing)
or for income tax returns or any other return, report or statement
which the Tax Indemnitee is required by law to file in its own name);
PROVIDED, HOWEVER, that Lessee shall have no obligation under this
sentence to the extent such Tax Indemnitee, after receipt of Lessee's
written request, shall have failed to furnish Lessee with such
information (including instructions) as is peculiarly within such Tax
Indemnitee's control and which is necessary to file such report, return
or statement and provided, further, that Lessee shall have no
obligation under this Section 9(c) with respect to any Taxes in the
nature of penalties, additions to tax or interest or expenses which
could have been avoided if such Tax Indemnitee had not failed to so
furnish Lessee with such information. Lessee shall either file such
report, return or statement and send a copy of such report, return or
statement to the Tax Indemnitee or, where Lessee is not permitted to
file such report, return or statement, it shall notify such Tax
Indemnitee of such requirement and prepare and deliver such report,
return or statement to such Tax Indemnitee in a manner satisfactory to
such Tax Indemnitee no later than 30 Business Days prior to the time
such report, return or statement is to be filed. Lessee shall not have
any right to examine the tax returns or books of any Tax Indemnitee.
Lessee agrees to use reasonable endeavors to obtain official receipts
indicating the payment by it of all foreign income and withholding
Taxes that are subject to indemnification under this Section 9 and
shall promptly deliver to the relevant Tax Indemnitee each such receipt
obtained by Lessee. If actual notice is given by any Government Entity
to a Tax Indemnitee that a report or return is required to be filed
with respect to any Taxes with respect to which Lessee has an
indemnification obligation under this Section 9(c), Lessor shall cause
that Tax Indemnitee to promptly notify Lessee of such required report
or return. Further, Lessor agrees to cause each Tax Indemnitee to
respond to any reasonable request of Lessee for information within the
control of such Tax Indemnitee with respect to the filing of any such
report or return. Notwithstanding the foregoing, nothing in this
Section 9(c)(iv) shall (x) require Lessor or Lessee to divulge to the
other any information which Lessor or Lessee, as the case may be,
considers confidential, PROVIDED, HOWEVER, that Lessor and Lessee, as
the case may be, shall be so required if required by applicable law or
reasonably related to a matter indemnified hereunder; or (y) prevent
Lessor or Lessee from arranging its tax affairs in such manner as it
sees fit, unless to do so would increase the obligations of the other
under this Agreement.
(v) PAYMENT. Lessee shall pay any Tax for which it is liable
pursuant to this Section 9(c) in immediately available funds directly
to the appropriate Government Entity or, upon written demand of the Tax
Indemnitee, to such Tax Indemnitee, but in no event
38
[Amended and Restated Lease Agreement]
shall such payment be required more than five (5) Business Days
prior to the date such Tax is due. Any such demand for payment from a
Tax Indemnitee shall specify, in reasonable detail, the calculation of
the amount of the payment and the facts upon which the right to payment
is based and shall be verified upon the request and at the expense of
Lessee by a nationally recognized firm of independent accountants for
such Tax Indemnitee. Each Tax Indemnitee shall promptly forward to
Lessee any notice, xxxx or advice in the nature of a notice or xxxx
received by it concerning any Tax; provided, however, failure to
provide any such notice or xxxx shall not relieve Lessee of its
obligations hereunder. As soon as practical after each payment of any
Tax by Lessee directly to any Government Entity, Lessee shall furnish
the appropriate ate Tax Indemnitee with the original or a certified
copy of a receipt for Lessee's payment of such Tax or such other
evidence of payment of such Tax as is reasonably acceptable to such Tax
Indemnitee. Lessee shall also furnish promptly upon request such data
as any Tax Indemnitee may reasonably require to enable such Tax
Indemnitee to comply with the requirements of any Government Entity.
(vi) CONTESTS. If claim is made against a Tax Indemnitee for any
Tax with respect to which Lessee has an obligation under this Section
9(c), Lessor shall cause Tax Indemnitee to promptly notify the Lessee;
provided, however, that the failure to so notify Lessee shall not
diminish Lessee's obligations to indemnify under this Section 9(c). If
reasonably requested by the Lessee in writing and provided no Event of
Default shall have occurred and is continuing, Lessor, at the sole
expense of the Lessee, shall itself (or shall cause such Tax Indemnitee
to) in good faith and diligently contest (and not settle without
Lessee's written consent) or shall (or shall cause such Tax Indemnitee
to) permit the Lessee, if desired by the Lessee, to contest in the name
of the Lessee the validity, applicability or amount of such Tax. Lessor
shall cause such Tax Indemnitee to contest, or shall permit the Lessee
to contest by (a) resisting payment thereof if practicable, (b) not
paying the same except under protest with funds advanced by Lessee on
an interest-free basis, if protest is necessary and proper, and (c) if
payments be made, using reasonable efforts to obtain a refund thereof
in appropriate administrative and judicial proceedings; provided,
however, that, in each such instance, the Lessor and such Tax
Indemnitee shall not be required to undertake any contest or permit the
Lessee to contest unless:
(A) Lessee shall have provided Lessor and the Tax Indemnitee
with an opinion of legal counsel reasonably acceptable to Lessor
and the Tax Indemnitee to the effect that a reasonable basis
exists to contest such claim (provided, however, that no such
opinion shall be necessary in order to contest such claim in
meetings with auditors, revenue agents, or in other informal
meetings with staff members of the applicable tax authority) and,
prior to the commencement of any appeal of an adverse judicial
decision, with an opinion of such legal counsel to the effect that
a reasonable basis exists to appeal such adverse judicial decision
(which opinions shall be obtained at Lessee's sole cost and
expense);
39
[Amended and Restated Lease Agreement]
(B) such proceedings, in the sole reasonable discretion of
Lessor and the Tax Indemnitee, do not involve any material risk or
danger of the sale, forfeiture or loss of the Aircraft or any part
thereof or interest therein or the imposition of criminal
penalties or sanctions against Lessor or such Tax Indemnitee or
the creation of any Lien other than a Lien for Taxes not yet due
or being, contested in good faith by appropriate proceedings, and
for payment of which such reserves if any, as are required to be
provided under generally accepted accounting principles have been
made unless Lessee has provided to the Tax Indemnitee a bond or
other security reasonably satisfactory to the Tax Indemnitee
(provided that in the case of criminal penalties or sanctions such
bond or other security shall be satisfactory to the Tax Indemnitee
in its sole discretion) to protect against such risk or danger;
(C) in the event that the subject matter of the contest is of
a continuing nature and has previously been decided adversely
pursuant to the contest provisions of this Section 9(c) by the
highest court to which an appeal could be taken (other than the
U.S. Supreme Court), there has been a change in the law
(including, without limitation, amendments to statutes or
regulations, administrative rulings and court decisions) after
such claim shall have been so previously decided and the Tax
Indemnitee shall have received an opinion of independent tax
counsel selected by the Lessee and reasonably acceptable to the
Tax Indemnitee, which opinion shall be obtained at the Lessee's
sole expense, to the effect that, as a result of such change, it
is more likely than not that the position which the Tax Indemnitee
or the Lessee, as the case may be, had asserted in such previous
contest would prevail.
(D) no Event of Default shall have occurred and be
continuing,
(E) prior to the commencement of any contest undertaken by
the Lessee or any contest undertaken by any Tax Indemnitee, the
Lessee shall have delivered to such Tax Indemnitee a written
acknowledgment of its obligation to indemnify fully Lessor and
such Tax Indemnitee to the extent that the contest is not
successful;
(F) if such contest is to be initiated by the payment of, and
the claiming of a refund for, such Tax, Lessee shall have advanced
to the Tax Indemnitee sufficient funds (on an interest-free basis)
to make such payments, provided, however, that Lessee shall
indemnify such Tax Indemnitee for any adverse tax consequences
resulting from such advance.
Lessee shall not be deemed to be in default under any of the above
indemnification provisions of this Section 9(c) so long as Lessee shall
diligently prosecute a contest in conformity with the requirements of
this Section 9(c)(vi), or in the case where the Lessor or a Tax
Indemnitee shall be prosecuting such contest pursuant to
40
[Amended and Restated Lease Agreement]
this Section 9(c)(vi), Lessee has fulfilled all of its obligations
under this Section 9(c)(vi) with respect to such contest.
Notwithstanding the foregoing, if a claim is made against a Tax
Indemnitee which, if successful, would result in a Tax under
circumstances which would require the Lessee to indemnify such Tax
Indemnitee, such Tax Indemnitee shall be released from its
responsibility to contest such claim, or part thereof, if it agrees in
writing with Lessee not to seek indemnification from Lessee in respect
of the claim, or such part thereof to be contested. In the event a Tax
Indemnitee fails diligently to contest, or refuses to permit the Lessee
to contest, a claim or part thereof which such Tax Indemnitee has the
obligation to contest or to permit Lessee to contest under this Section
9(c), then Lessee shall not be obligated to indemnify such Tax
Indemnitee for such claim or such part thereof and such Tax Indemnitee
shall refund to Lessee any amounts paid or advanced by Lessee in
connection with such Tax that were the subject of such claim (plus
interest from the date payment is due at the rate established for
refunds by the authority imposing such Tax); provided, however, that
this sentence shall not apply where a Tax Indemnitee permits the Lessee
to contest and the Lessee falls to diligently contest.
(vii) Refunds. If a Tax Indemnitee shall obtain a refund of all or
any part of Taxes paid by Lessee, Lessor shall cause such Tax
Indemnitee to pay the Lessee the amount of such refund less the amount
of any Taxes payable by such Tax Indemnitee in respect of the receipt
of such refund; provided that such amount shall not be payable (x)
before such time as the Lessee shall have made all payments or
indemnities then due to Lessor under the Lease, or (y) while any Event
of Default is outstanding and continues unremedied. If in addition to
such refund, such Tax Indemnitee shall receive an amount representing
attorneys fees, interest or other amount with respect to such refund,
the Lessee shall be paid that proportion of such amounts which is
fairly attributable to Taxes paid by the Lessee prior to the receipt of
such refund.
(viii) Tax Savings. If as a result of the payment or accrual of
Taxes paid or indemnified by the Lessee a Tax Indemnitee shall realize
and recognize any savings with respect to Taxes, such Lessor shall
cause such Tax Indemnitee to, and such tax Indemnitee shall, promptly
notify the Lessee that it has realized and recognized such savings and
pay to the Lessee within thirty (30) days of the realization of such
savings an amount equal to (i) the net reduction in Taxes realized and
recognized by such Tax Indemnitee and (ii) the amount of any further
net reduction in taxes realized and recognized under such tax laws as a
result of payments pursuant to this sentence; provided, however, that
the aggregate amount of all sums payable pursuant to this claim (viii)
shall not exceed the aggregate amount of all prior or payments made by
Lessee pursuant to this Section 9(c).
(d) [INTENTIONALLY RESERVED].
(e) SCOPE, SURVIVAL, ETC.
41
[Amended and Restated Lease Agreement]
(i) Lessee shall be obligated under this Section 9 as a primary
obligor irrespective of whether an Indemnified Party or Tax Indemnitee
shall also be indemnified, guaranteed or insured with respect to the
same matter under any of the Operative Documents or otherwise by any
other Person, and such Indemnified Party may proceed directly against
Lessee under this Section 9 without first resorting to any such other
rights of indemnification, guarantee or insurance.
(ii) All indemnities, obligations, adjustments and payments
provided for in this Section 9 shall survive and remain in full force
and effect, notwithstanding the expiration or termination of the Lease
Term or of this Agreement or any other Operative Documents and the
payment in full of all sums payable under the Operative Documents. The
obligations of Lessee in respect to all such indemnities, obligations,
adjustments and payments are expressly made for the benefit of, and
shall be enforceable by, the Indemnified Party or Tax Indemnitee
entitled thereto, without declaring this Agreement to be in default or
taking other action under this Agreement.
(iii) Lessee acknowledges that the Indemnified Parties or Tax
Indemnitees, or any of them, may authorize Lessor, by notice in writing
to Lessor and Lessee, to make claims and demands under any indemnity
hereunder or under any other Operative Document on behalf of such
Indemnified Parties or Tax Indemnitees, and Lessee shall be obligated
to make all payments pursuant to any such indemnity to Lessor, to the
extent claimed by Lessor on behalf of such Indemnified Parties or Tax
Indemnitees (it being understood that Lessee is entitled to
conclusively rely upon the instructions of Lessor with respect to the
payment of amounts owing, to any Indemnified Party or Tax Indemnitee
under the indemnities).
(iv) Each Indemnified Party and Lessee will give prompt written
notice one to the other of any liability of which such party has
knowledge for which Lessee is, or may be, liable under Section 9(a),
provided that failure to give such notice will not prejudice or
otherwise affect any of the rights of the Indemnified Parties under
this Section 9.
(f) GROSS-UP FOR TAXES ON INDEMNITY PAYMENTS. If and to the extent any
sums payable to an Indemnified Party or Tax Indemnitee under this Section 9 are
subject to any Taxes (including any payments made pursuant to this Section
9(f)), Lessee shall pay to such Indemnified Party or Tax Indemnitee such sum as
will, after the obligation in respect of such Taxes has been fully satisfied
with respect to all sums payable by Lessee under this Section 9, leave the
Indemnified Party or Tax Indemnitee with the same amount as it would have been
entitled to receive in the absence of the imposition of any such obligation in
respect of such Taxes.
42
[Amended and Restated Lease Agreement]
SECTION 10. TITLE; REGISTRATION; MAINTENANCE AND OPERATION; INSIGNIA.
(a) TITLE TO THE AIRCRAFT.
(i) Lessee acknowledges that title to the Aircraft shall at all
times be and remain solely and exclusively vested in Lessor and that
this Agreement and the other Operative Documents constitute an
agreement to lease the Aircraft from Lessor to Lessee and, accordingly,
Lessee shall have no right, title or interest in the Aircraft except
the right to use the Aircraft as provided herein.
(ii) Lessee will not at any time represent or hold out Lessor or
any Indemnified Party as carrying goods or passengers on the Aircraft
or as being in any way connected or associated with any operation of
the Aircraft or attempt, or hold itself out as having any power, to
sell, charge, lease or otherwise dispose of or encumber the Aircraft,
the Engines or any Part, nor create, incur or suffer to exist any Lien
over the Aircraft, the Engines or any Part. On all occasions when the
ownership of the Aircraft or any part of it is relevant, Lessee will
make clear to third parties that title to the same is held by Lessor.
(b) REGISTRATION.
(i) Upon Delivery of the Aircraft, Lessee shall, at its own cost
and expense, procure that the Aircraft will be duly registered with the
Aviation Authority in the name of Lessor on the register (except that
Lessor and Owner Participant shall be responsible for ensuring that the
Trust Agreement, and all other documents necessary for filing with the
Aviation Authority to effect registration of the Aircraft in Lessor's
name, are in due form for filing with the Aviation Authority), and
thereafter shall maintain, or procure the maintenance of, such
registration throughout the Lease Term and shall promptly deliver to
Lessor a certified copy of the Certificate of Registration when issued
by the Aviation Authority and at all times during the Lease Term,
Lessee shall neither cause nor permit the Aircraft to be registered
under the laws of any other jurisdiction.
(i) Upon the Delivery Date of the Aircraft, Lessee shall, at its
own cost and expense, procure that, if required by applicable
regulations, any Operative Document as is required (including, without
limitation, the Original Lease and the Trust Agreement) shall be filed
for recording with the Aviation Authority, and shall promptly (and in
any event within five (5) days) after such registration deliver
evidence of such registration to Lessor. Lessee shall, at its own cost
and expense, cause such recordation to be maintained in good standing
at all times during the Lease Term. Upon the Effective Date, Lessee and
Lessor shall procure that this Agreement shall be filed for recording
with the Aviation Authority.
43
[Amended and Restated Lease Agreement]
(iii) Lessee will take, or cause to be taken, such action with
respect to the recording, filing, rerecording and refiling of this
Agreement or other documents or instruments (including, without
limitation, Uniform Commercial Code financing statements) as necessary
or advisable in order to establish, protect, preserve and perfect, as
against Lessee and any third party (excluding Lessor Liens, Liens
arising prior to Delivery of the Aircraft to Lessee and Liens granted
by Lessor to Lessor's lenders), Lessor's interest in the Aircraft and
this Agreement and each other Operative Document and shall furnish to
Lessor timely notice of the necessity of such action, together with
such documents and instruments, in execution form, and such other
information as may be necessary or advisable to take such action.
Lessee shall cooperate fully with Lessor, if, notwithstanding the
foregoing, Lessor notifies Lessee that Lessor wishes to take any of the
foregoing actions, in lieu of Lessee taking any of the foregoing
actions.
(iv) Without limiting the effect of the foregoing, Lessee shall
also do or cause to be done at its own expense any and all acts and
things which may be required under the terms of any agreement, treaty,
convention, pact or by any practice, custom or understanding involving
any jurisdiction in which Lessee may operate, and any and all acts and
things which Lessor may reasonably request, to establish, perfect,
preserve and protect the respective rights of Lessor in the Aircraft
and in this Agreement and each other Operative Document (excluding
Lessor Liens, Liens arising prior to Delivery of the Aircraft to Lessee
and Liens granted by Lessor to Lessor's lenders).
(v) Lessee shall procure that, at all times during the Lease Term,
the Aircraft possesses a current, legal and valid Airworthiness
Certificate, and all such other certificates, licenses, permits and
authorizations as are from time to time required for the use and
operation of the Aircraft for the public transport of passengers or
cargo by any Government Entity having jurisdiction in any country,
state, province or other political subdivision in or over which the
Aircraft is flown, including, without limitation, any aviation
authority.
(c) MAINTENANCE. Lessee, at its own cost and expense, shall,
at all times during the Lease Term and until the Aircraft is returned in the
condition and manner required by this Agreement:
(i) maintain, service, repair, test, inspect and overhaul, or
cause to be maintained, serviced, repaired, tested, inspected and
overhauled, the Aircraft in accordance with the Approved Maintenance
Program, the structural repair manual and the rules and regulations of
the Aviation Authority, including, without limitation, FAR Part 121,
subject to the special exemptions permitted Lessee regarding compliance
with Airport Noise and Capacity Act of 1990, as amended, and the
regulations promulgated by the Aviation Authority thereunder, (x) so as
to
44
[Amended and Restated Lease Agreement]
keep the Aircraft in as good condition (operating and otherwise)
as when delivered on the Delivery Date, ordinary wear and tear
excepted, and in at least the same manner and with at least
substantially the same care and diligence as other aircraft owned or
operated by Lessee (provided, however, that the foregoing shall not be
deemed to expand or otherwise alter Lessee's obligations pursuant to
the express requirements of any maintenance, repair, modification or
return provision hereunder), (y) so as to keep the Aircraft free of, or
so as to promptly correct, physical damage to the Airframe, any Engine
or any Part which may have resulted from foreign object damage, from
damage caused by ramp equipment, ramp personnel, operational
mishandling, Lessee staff or passengers or from other means or sources
and (z) so as to keep the Aircraft in such condition as may be
necessary to enable the applicable airworthiness certification for the
Aircraft to be maintained in good standing at all times under
applicable law;
(ii) without limiting Lessee's obligations under Section 10(c)(i),
agree that such maintenance and repairs will include, but will
not be limited to, each of the following specific items:
(A) to perform in accordance with the Approved Maintenance
Program, and all applicable rules and regulations of the Aviation
Authority, and, except to the extent in conflict with. the rules
and regulations of the Aviation Authority, all routine and
nonroutine maintenance work, including, without limitation, line
maintenance to be done upon the Aircraft;
(B) without prejudice to the provisions of Section 7, but
subject to the terms of Exhibit N, to comply with all applicable
ADs and all Required SBs that are due for compliance on such basis
at any time during the Lease Tenn and within 90 days after the end
of the Lease Term ("Required Modifications");
(C) to incorporate and retain in the Approved Maintenance
Program for the Aircraft an applicable CPCP, and to carry out such
work as may be required to comply therewith, including periodic
inspection, testing and corrosion inhibiting treatment to or of
fuel tanks, periodic inspection, cleanup and resealing under
galleys and lavatories, the cleaning and treating of all mild and
moderate corrosion and the correcting of all severe and exfoliated
corrosion, and the application of corrosion inhibition compounds
to all areas of the Aircraft recommended by the Airframe
Manufacturer that are manufactured from aluminum or other metals,
in accordance with the recommendations of the Airframe
Manufacturer, the CPCP, the Airframe Manufacturer structural
repair manual and the Approved Maintenance Program;
45
[Amended and Restated Lease Agreement]
(D) to effect any required repair to the Airframe or any
Engine, and any Parts installed therein or thereon, only (w) by
an Aviation Authority-approved repair station, (x) by Aviation
Authority-licensed mechanics and (y) in accordance with Lessee's
Approved Maintenance Program, the Airframe Manufacturer's
structural repair manual, the Airframe Manufacturer's component
repair manual, Engine Manufacturer's repair manuals and the other
repair and overhaul manuals related to the Aircraft or any Part
thereof, in each case, as approved by the Aviation Authority, and
(z) the relevant, if any, engineering change orders (which shall
be approved by the Aviation Authority);
(E) to maintain, in the English language, the Aircraft
Documentation and to keep the Aircraft Documentation current and
up to date (with all documents and records unique to the Aircraft
to be maintained unique to the Aircraft, which Aircraft
Documentation shall (i) conform with the laws of any Government
Entity having jurisdiction over the Aircraft, (ii) accurately
record the amount of time consumed and/or the cycles of use (as
appropriate) by each operation of the Airframe, each Engine and
all Parts and all work performed thereon, and (ill) accurately
maintain complete back-to-birth records (as defined by HBAW 92-04
Current FAA Policy Regarding Aircraft Records, Order 8300.10,
excluding, to the extent applicable, any records with respect to
the period prior to Delivery which were not delivered to Lessee)
of all Life Limited Components, made available for review by
Lessor or Lessor's designees on reasonable notice in order to
facilitate Lessor's ability periodically to inspect the Aircraft
and monitor the maintenance of the Aircraft); provided, that
Lessee shall not be responsible for defects in the Aircraft
Documentation that exist and are documented in writing, signed by
Lessor on the Delivery Date;
(F) to make available for review by Lessor or Lessor's
designees copies of any written communications with the Aviation
Authority, Airframe Manufacturer, Engine Manufacturer or other
vendors with respect to incidents, defects or malfunctions of the
Aircraft;
(G) to diligently correct any and all deficiencies revealed
by any inspection of Lessor by proper cleaning, sealing, repair,
replacement, overhaul and adjustment as required pursuant to the
Approved Maintenance Program;
(H) to ensure that only an Approved Maintenance Performer
services, maintains, overhauls, repairs or performs any
Modifications on or to the Aircraft or any installed engine or
part;
46
[Amended and Restated Lease Agreement]
(I) all parts or materials installed or used on the Aircraft
shall have a current valid Aviation Authority "serviceable tag" of
the manufacturer or maintenance facility providing such item to
Lessee; and
(J) notwithstanding anything to the contrary contained
herein, to maintain any engine which is not an Engine but which
is installed on the Airframe as if it were an Engine;
(iii) furnish or cause to be furnished to Lessor as soon as
reasonably practicable and at no cost to Lessee such information as may
be required to enable Lessor to file on a timely basis any reports
required to be filed by Lessor with any Government Entity because of
Lessor's rights, title and interests in and to the Aircraft or under
this Agreement or any other Operative Document; and
(iv) notwithstanding anything contained herein to the contrary,
provided there is no Default existing and no Credit Event has occurred
and is then continuing, if Lessee is required by law to meet Stage III
noise requirements, then, with at least nine months' written notice
from Lessee, Lessor will finance a portion of the cost of purchasing
one (1) ship-set of hushkits to be installed on the Aircraft, in
accordance with the parameters set forth in Exhibit M.
(d) OPERATION.
(i) Lessee shall not maintain, use, service, repair, overhaul or
operate the Aircraft (or permit maintenance, use, service, overhaul or
operation of the Aircraft) in violation of any law of any Government
Entity having jurisdiction, in violation of any manufacturer's
operating manuals, recommendations or instructions or in violation of
any airworthiness certificate, license or registration relating to the
Aircraft issued by any such Government Entity.
(ii) Lessee shall not operate the Aircraft or permit the Aircraft
to be operated (y) outside of the Permitted Jurisdictions or (z) on
routes other than those approved by the government of the State of
Registration.
(iii) Lessee shall not knowingly employ, suffer or cause the
Aircraft to be used for the carriage of (w) livestock, (x) acids, toxic
chemicals or other corrosive materials, unless the same are
appropriately packaged in compliance with applicable law, (y)
explosives, nuclear fuels or wastes, (z) illegal drugs, controlled
substances or the like or any other goods, materials or items of cargo
which are prohibited by law or which could reasonably be expected or
anticipated to cause damage to the Aircraft.
47
[Amended and Restated Lease Agreement]
(iv) Lessee will not use, or permit the use of, the Aircraft for
testing or for training, qualifying or reconfirming the status of
flight crew members other than employees of Lessee, and then only if
the use of the Aircraft for such purpose is not disproportionate to the
use for such purpose of other Airframe Manufacturer model 737 aircraft
owned or operated by Lessee.
(v) Notwithstanding anything herein to the contrary, Lessee shall
not install, and shall not permit the installation of, any Engine on
any airframe that is not an Airframe Manufacturer model 737-200ADV
airframe, except solely to the extent the Aviation Authority has
approved the use of engines of the same model and manufacturer as such
Engine on any Airframe Manufacturer model 737-200 airframe, or, to the
extent permitted by Section 10(d)(viii) below, 727 airframe.
(vi) Lessee shall comply with the requirements of Section 15(l) of
this Agreement.
(vii) Lessee shall provide Lessor (a) on the tenth day of each of
January, April, July, October during the Lease Term with a completed
and duly executed Aircraft Status Report for the preceding three month
period substantially in the form of Exhibit L and (b) all other reports
set forth in Schedule 6.
(viii) Lessee may install an Engine on an Airframe Manufacturer
model 727 airframe, in accordance with the foregoing provisions, so
long as the projected utilization of such airframe shall be not less
than 2 1/2 Airframe Flight Hours per Airframe Cycle.
(e) INSIGNIA. Lessee shall affix and maintain in respect of
the Airframe and each Engine a fireproof identification plate of a reasonable
size, in the location specified below, that contains the following legends or
any other legend requested from time to time by Lessor in writing:
Location: (i) in the case of the Airframe, in the upper sill of the
left-hand forward entry door, adjacent to the Airframe
Manufacturer's plate and (ii) in the case of each Engine, in a
clearly visible place in close proximity to the manufacturer's
plate.
Legend: (y) in the case of the Airframe, "THIS AIRCRAFT IS OWNED BY
FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, AND
IS HELD UNDER LEASE BY ALOHA AIRLINES, INC.", and
(z) in the case of each Engine, "THIS ENGINE IS OWNED BY FIRST
SECURITY BANK, NATIONAL ASSOCIATION, AS
48
[Amended and Restated Lease Agreement]
OWNER TRUSTEE, AND IS HELD UNDER LEASE BY ALOHA AIRLINES, INC."
Lessee shall promptly replace any such nameplate that becomes illegible, lost,
damaged or destroyed for any reason.
(f) COSTS OF OPERATION. Lessee shall pay all costs incurred in the
operation of the Aircraft for profit or otherwise, including, without
limitation, the costs and expenses of flight crews, cabin personnel, fuel, oil,
lubricants, maintenance, insurance, landing fees, navigation fees, airport
charges, passenger service and any and all other expenses or claims of any kind
or nature (including, without limitation, any and all Taxes) directly or
indirectly incurred or imposed in connection with or related to the use,
movement, operation, maintenance, repair, storage or location of the Aircraft
during the Lease Term.
(g) PAYMENT OF FLIGHT CHARGES. Without limiting the effect of Section 8,
Lessee shall pay during the Lease Term promptly upon the same becoming due and
payable all Flight Charges payable by Lessee during the Lease Term whether in
respect of the Aircraft or any other aircraft of Lessee and which involve any
risk of the imposition of a Lien on the Aircraft or the confiscation or
detention thereof (unless such Flight Charges are being contested in good faith
by appropriate proceedings) and shall indemnify and hold Lessor and any other
Indemnified Party harmless in respect of the same, which indemnity shall
continue in full force and effect notwithstanding the termination or expiration
of the Lease Term or Return of the Aircraft.
(h) LOSS OR DAMAGE.
(i) Without limiting the other provisions of this Section 10, if
the Aircraft or any part thereof suffers loss or damage not
constituting an Event of Loss of the Aircraft or the Airframe or any
Engine (in respect of which, for the avoidance of doubt, Section 13
shall apply), Lessee shall promptly correct and repair such loss or
damage, including the repair or replacement of all damaged or lost
Parts at its own expense in accordance with this Agreement in order
that the Aircraft is placed in an airworthy condition and in
substantially the same condition as it was prior to such loss or
damage. Any insurance payments with respect to loss or damage not
constituting an Event of Loss of the Aircraft or the Airframe shall be
paid in accordance with the provisions of Section 15 and applied in
payment for repairs to or for replacement of the property suffering the
loss or damage.
(ii) Lessee shall notify Lessor forthwith of any such loss or
damage to the Aircraft for which the cost of correction or repairs may
exceed $500,000 and shall provide an explanation or proposal for
carrying out the correction or repair. If after its receipt of such
proposal, Lessor does not agree with Lessee's proposal, Lessor shall
promptly notify Lessee of such disagreement. Lessee and Lessor shall
then consult with the Airframe Manufacturer, Engine Manufacturer or
other
49
[Amended and Restated Lease Agreement]
relevant manufacturer, and Lessee and Lessor agree to accept as
conclusive, and be bound by, such Person's directions or
recommendations as to the manner in which to carry out such repairs;
provided, that, in the event more than one direction or recommendation
is provided, Lessee in its sole discretion may choose the direction or
recommendation it shall follow.
SECTION 11. POSSESSION. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, Airframe or an Engine or any Part, or
install an Engine, or permit any such Engine to be installed, on an airframe
other than the Airframe, provided that so long as (1) no Event of Default shall
have occurred and be continuing, (2) the action to be taken shall not adversely
affect, or be of a nature that could reasonably be expected to adversely
affect, Lessor's rights, title and interests in and to the Aircraft or
Airframe, or any Engine or Part, or under this Agreement or any other Operative
Document (including, without limitation, any impairment of title to or the
registration with the then Aviation Authority of, the Aircraft), (3) all
applicable approvals, if any, of the Aviation Authority and any other
Government Entity having jurisdiction shall have been obtained, and (4) the
insurance provisions of Section 15 hereof shall have been complied with, then,
at the cost and expense of Lessee:
(a) MAINTENANCE, ETC. Without the prior consent of Lessor, Lessee may
deliver possession of the Airframe or an Engine or any Part to the manufacturer
thereof, to any Approved Maintenance Performer or to any other Aviation
Authority-approved company acceptable to Lessor for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any Part or for
alterations or modifications in or additions to such Airframe or Engine or Part
to the extent required or permitted by the terms of Section 12(b).
(b) INSTALLATION OF ENGINES ON OTHER AIRFRAMES. Without the prior
consent of Lessor, Lessee may install an Engine on any Airframe Manufacturer
model 737 or, subject to Section 10(d)(vii) hereof, 727 airframe (other than the
Airframe) operated by Lessee so long as no Person will acquire or claim any
right, title or interest in any Engine by reason of such Engine's being
installed on such airframe at any time while such Engine is owned by Lessor.
(c) SUBLEASE. Lessee will not sublease the Aircraft or any Engine, or
assign its rights or obligations under the Lease, without the prior written
consent of Lessor, such consent not to be unreasonably withheld. Lessee shall
pay Lessor's reasonable expenses relating to review of Lessee's request to
sublease regardless of whether such sublease is approved. Notwithstanding the
foregoing, in the event of any sublease permitted as described above, (i) Lessee
shall remain primarily liable for the payment and performance of all the terms,
conditions and provisions of this Lease and (ii) any permitted sublease will be
expressly subject and subordinate to this Lease and shall not extend beyond the
lease term with respect to the applicable Aircraft. Subject to Exhibit 0, any
subleasing proposals submitted to Lessor will be subject to a processing fee of
Five Thousand U.S. Dollars (US$ 5,000), payable on demand (whether the sublease
is approved or not). In addition, Lessee will indemnify Lessor on demand
50
[Amended and Restated Lease Agreement]
for all reasonable out-of-pocket expenses (including legal fees) incurred in
connection with its assessment of the proposal or its implementation.
(d) TRANSFERS OF POSSESSION IN GENERAL. The rights of any Person who
receives possession by reason of a transfer or sublease permitted by this
Section 11 shall be effectively and expressly subject and subordinate to all
the terms of this Lease, including, without limitation, the covenants contained
in Section 10, this Section 11 and Section 15 and the rights of Lessor to
repossession pursuant to Section 20 and to avoid transfer upon such possession.
No sublease, relinquishment or transfer of possession of the Aircraft or
Airframe, or any Engine or Part, shall in any way release, discharge or
otherwise limit or diminish any of Lessee's obligations to Lessor (it being
agreed that notwithstanding any such transfer or relinquishment of possession,
Lessee shall continue to be primarily liable and responsible for performance of
all of its obligations under this Agreement and each other Operative Document),
or constitute a waiver of Lessor's rights or remedies hereunder or affect the
registration of the Aircraft with the Aviation Authority. Notwithstanding any
other provision of this Agreement or any other Operative Document, any sublease,
relinquishment or transfer of possession must (x) be consistent with the terms
of this Agreement and the other Operative Documents, and (y) not adversely
affect the rights, title or interests of Lessor in or to the Aircraft or
Airframe, or any Engine or Part, or under this Agreement or any other Operative
Document, and (z) not result in any increases in Taxes to the Lessor which are
not indemnifiable hereunder, or otherwise adversely affect applicable tax
benefits available to Lessor.
(e) MAINTENANCE RESERVES. In the event Lessee falls to meet a minimum
Fixed Charge Coverage Ratio of 1.05 to 1 (the "Financial Requirement") (such
failure a "Credit Event"), Lessee shall increase the initial Security Deposit
by the amount calculated pursuant to this Section (in no event shall such amount
be less than USD two hundred fifty-seven thousand five hundred ($257,500),
plus an adjustment for the Aircraft's then current condition and the standard
the Aircraft would have to meet to be in half-time condition) (the "Adjustment
Amount") as security that Lessee shall perform its obligations as stipulated
herein. The Adjustment Amount shall be calculated based on the maintenance
status of each Engine on the date of the occurrence of the applicable Credit
Event and shall be recalculated for any Replacement Engine which is provided
after the occurrence and during the continuance of such (or a subsequent) Credit
Event. The Adjustment Amount shall equal the sum of (I) $51,500 in respect of
the Airframe (the "Airframe Adjustment") plus (II) $77.25 per Engine per Engine
Cycle or Engine Flight Hour, whichever is more limiting, for which such Engine
is below "half-time," which shall be calculated as Lessee's then current time
between engine overhauls (ESV2s) (based on an average over the last three (3)
years), and converting such time to an equivalent amount of Engine Cycles or
Engine Flight Hours, as applicable, based on Lessee's then current utilization
(based on an average over the last three (3) years); provided, however, if the
Aircraft is in a block D Check structural inspection program at the time of the
occurrence of the applicable Credit Event, then the Airframe Adjustment shall
equal $77.25 per Aircraft Flight Hour or Airframe Cycle, whichever is more
limiting, for which the Airframe is below "half time" to its next scheduled "D"
Check. The Security Deposit may be reduced following the occurrence
51
[Amended and Restated Lease Agreement]
of a Credit Event, if either (i) Lessee demonstrates renewed compliance with the
Financial Requirements (in which case the Security Deposit shall be reduced to
USD three hundred thousand ($300,000)) or (ii) the physical condition of an
Engine or, if the Aircraft is on a block D Check structural inspection program,
the Airframe has been restored (in which case the Security Deposit shall be
reduced as follows). In the event that Lessee at its sole cost and expense (A)
restores the physical condition of an Engine to the condition required by
Schedule 5 hereto the Adjustment Amount portion of the Security Deposit
applicable to such Engine shall be subtracted from the Security Deposit;
provided, that, if the condition of such Engine deteriorates below "half-time"
during the continuance of the applicable Credit Event, Lessee again shall
increase the Security Deposit by the original Adjustment Amount calculated for
such Engine and (B) if the Aircraft is on a block D Check structural inspection
program, performs a D Check on the Airframe, the Airframe Adjustment shall be
subtracted from the Security Deposit; provided, that, if the condition of the
Airframe deteriorates below "half time" during the continuance of the applicable
Credit Event, Lessee shall increase the Security Deposit by the original
Airframe Adjustment.
SECTION 12. REPLACEMENT OF PARTS, ALTERATIONS, MODIFICATIONS AND ADDITIONS.
(a) REPLACEMENT OF PARTS.
(i) Lessee, at its own expense, will replace or cause to be
replaced as soon as reasonably practicable and in accordance with
applicable manufacturer maintenance manual limits (and in any event
within thirty (30) days of removal or, if earlier, on the date the
Lease Term expires or terminates) all Parts which may from time to time
become unserviceable, obsolete, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for
use for any reason whatsoever, except as otherwise provided in Section
12(b) with respect to Additional Parts.
(ii) Subject to Section 5(a)(iv), all Parts incorporated or
installed in or attached or added to the Airframe or any Engine shall
(x) be free and clear of all Liens (except for Permitted Liens), (y)
except with respect to additional parts, be in as good operating
condition as, and shall have a value and utility at least equal to, the
Parts replaced, assuming such replaced Parts were in the condition and
repair required to be maintained by the terms hereof and (z) have a
current valid Aviation Authority "serviceable tag" of the manufacturer
or maintenance facility providing such items to Lessee identifying the
manufacturer, vendor, part number, make, model and serial number, date
and hours and/or cycles and, if such a tag is issuable with respect to
the Parts, indicating that such Parts are new, serviceable or
overhauled. Lessee may substitute for any Part a part that does not
meet the requirements of the foregoing sentence if a complying Part
cannot be procured or installed within the available ground time of the
Aircraft, provided that the original Part is reinstalled or the
noncomplying part is removed and replaced by a
52
[Amended and Restated Lease Agreement]
complying Part, in each case as soon as reasonably practicable
(and in any event within thirty (30) days of removal or, if earlier, on
the date the Lease Term expires or terminates).
(iii) Immediately upon any Part's becoming incorporated in,
installed on or attached to the Airframe or any Engine, as above
provided, without further act (x) title to such Part shall thereupon
vest in Lessor, free and clear of all Liens (other than Permitted
Liens), (y) such Part shall become subject to this Agreement and be
deemed part of such Airframe or such Engine for all purposes hereof,
and (z) title to any replaced Part shall thereupon vest in Lessee, free
and clear of all Lessor Liens, Liens arising prior to Delivery of the
Aircraft to Lessee and Liens granted by Lessor to Lessor's lenders and
shall no longer be deemed a Part hereunder. All Parts (other than
Additional Parts) at any time removed from the Airframe or any Engine
shall remain the property of Lessor, no matter where located, until
such time as such Parts shall be replaced by Parts which have been
incorporated or installed in or attached to the Airframe or any Engine
and which meet the requirements set forth in clause (iii) above. Upon
any removal of Additional Parts, title thereto shall, without further
act, vest in Lessee, and such Additional Part shall no longer be deemed
a Part hereunder.
(iv) Notwithstanding any other provision hereof, no Part that is a
life limited part shall be installed on the Aircraft or any Engine,
including, without limitation, a Replacement Engine, after the Delivery
Date unless such Part is new or Lessee has complete certified,
back-to-birth records for such part.
(b) MODIFICATIONS.
(i) Except as otherwise provided with respect to Required
Modifications in Section 10(c)(ii)(B), Lessee, at its own expense,
will make, or cause to be made, such Modifications to the Airframe and
Engines as may be required from time to time to meet the applicable
standards of the Aviation Authority, provided that Lessee may, in good
faith, contest the validity or application of any law, rule, regulation
or order in any manner which does not involve any risk of the sale,
forfeiture or loss of the Aircraft or, in the reasonable judgment of
Lessor, materially adversely affect Lessor or involve any risk of civil
or criminal liability on Lessor or any Indemnified Party.
(ii) Lessee, at its own expense, may from time to time add further
parts or accessories and make such Modifications to the Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, provided that:
(y) Lessee shall not, without Lessor's prior written
consent, make any Major Modifications costing in excess of
$100,000, including,
53
[Amended and Restated Lease Agreement]
without limitation, modifications as to the type or
manufacture of the avionics and Cabin modifications which change
the interior layout, to the Aircraft (it being agreed that Lessee
shall, if requested by Lessor, provide advance copies of
regulatory approvals and all designs, plans, diagrams, drawings
and data used by Lessee in accomplishing such Major
Modifications); provided that any such Major Modifications that
are performed shall be approved by the Aviation Authority (as
evidenced by the issuance of a supplemental type certificate or
similar data acceptable to the Aviation Authority and Lessor);
and
(z) no such Modification shall reduce the remaining useful
life of the Airframe or such Engine or diminish the value or
utility of the Airframe or such Engine or impair the condition,
airworthiness or marketability thereof below the remaining useful
life, value, utility, condition, marketability or airworthiness
thereof immediately prior to such Modification, assuming the
Airframe or such Engine was then of the remaining useful life,
value and utility and in the condition and airworthiness required
to be maintained by the terms of this Agreement. Title to all
Additional Parts shall, without further act, vest in Lessor, and
Lessee hereby relinquishes all right, title and interest thereto.
(iii) Lessor shall not be required under any circumstances to pay
directly or indirectly for any Modifications. Notwithstanding the
foregoing, Lessee may, at any time during the Lease Term, so long as no
Event of Default shall have occurred and be continuing, remove or suffer
to be removed any such Modification (other than a Required
Modification), provided that such Modification (x) in the case of an
Additional Part, either (1) such Additional Part or Parts being removed
is in addition to, and not in replacement of or substitution for, any
Part originally incorporated or installed in or attached to the Airframe
or any Engine at the time of delivery thereof or any Part in replacement
of or substitution for any such Part or (2) concurrently with the
removal of such Additional Part or Parts, Lessee reinstalls the Part or
Parts (or replacements thereof) installed on the Aircraft upon delivery
thereof to Lessee, (y) is not required to be incorporated or installed
in or attached or added to the Airframe or any Engine pursuant to the
terms of this Section 12 and (z) can be removed from the Airframe or
such Engine without damaging the Airframe or such Engine or diminishing
or impairing the value, utility, condition or airworthiness which the
Airframe or such Engine would have had at such time had such
Modification not occurred, assuming the Airframe or such Engine was then
of the fair market value and utility and in the condition and
airworthiness required to be maintained by the terms of this Agreement.
54
[Amended and Restated Lease Agreement]
(iv) Upon expiration or termination of the Lease Term and the
written request of Lessor at least forty-five (45) days prior to such
expiration or termination, Lessee shall, at its own expense, remove or
cause to be removed any Additional Part. Upon the removal by Lessee of
any Additional Part as provided above, title thereto shall, without
further act, vest in Lessee free and clear of Lessor Liens, Liens
arising prior to Delivery of the Aircraft to Lessee and Liens granted by
Lessor to Lessor's lenders, and such Additional Part shall no longer be
deemed part of the Airframe or Engine from which it was removed. Any
Additional Part not removed by Lessee as above provided prior to the
return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.
(v) Notwithstanding anything to the contrary contained herein,
Lessee shall not, without Lessor's prior written consent, remove any
Modification which is required by the Aviation Authority.
SECTION 13. RISK OF LOSS, DESTRUCTION, REQUISITION, ETC.
(a) RISK OF LOSS. Throughout the Lease Term and until the Return shall
have been effected in accordance with the terms of this Agreement, Lessee shall
bear all risk of loss, damage, theft or destruction of, or any other Event of
Loss with respect to, the Aircraft or to the Airframe, any Engine or any Part.
(b) EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.
(i) Upon the occurrence of an Event of Loss with respect to the
Airframe or the Airframe and Engines and/or engines then installed
thereon, Lessee shall forthwith (and, in any event, within three (3)
days after such occurrence) give Lessor written notice of such Event of
Loss. By the earlier of (y) sixty (60) days following the Event of Loss
Date or (z) the date on which the applicable insurance proceeds are
received by the loss payee, Lessee shall pay or cause to be paid to
Lessor in immediately available funds the Stipulated Loss Value of the
Aircraft together with all other amounts then due and owing by Lessee
hereunder.
(ii) Until the date on which the Stipulated Loss Value and the
other amounts referred to in clause (b)(i) above are paid in full,
Lessee shall be obligated to pay all Basic Rent as scheduled and shall
continue to perform all of its other obligations under the Operative
Documents, except to the extent rendered impossible by the occurrence of
such Event of Loss or rendered, in the opinion of Lessor, unnecessary.
If the Stipulated Loss Value referred to in clause (b)(i) above is paid
on a date other than a Basic Rent Date, Lessor shall refund or cause to
be refunded to Lessee any paid but unaccrued Basic Rent. Upon receipt of
the full amount of the Stipulated Loss Value and the other amounts
referred to in clause (b)(i) above by Lessor pursuant to this Section
13(b), and if Lessee has paid all other amounts then due and payable by
Lessee under this Agreement and
55
[Amended and Restated Lease Agreement]
the other Operative Documents, then (x) Lessor shall, upon the
joint written request of Lessee and each insurer or their appointed
representatives which contributed to the payment of the Stipulated Loss
Value, transfer to the Person designated in such request all of Lessor's
right, title and interest in the Aircraft without recourse or warranty
(except as to absence of Lessor Liens, Liens existing prior to
Delivery of the Aircraft to Lessee and Liens granted by Lessor to
Lessor's lenders) and subject to the disclaimer set forth in Section
5(a), and (y) Lessee shall be relieved of its obligations under
Section 7.
(c) EVENT OF LOSS WITH RESPECT TO AN ENGINE.
(i) 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, Lessee shall promptly (and, in any
event, within seven (7) days after such occurrence) give Lessor written
notice thereof and shall, as soon as reasonably practicable and, in any
event, within ninety (90) days after the occurrence of such Event of
Loss (or, if earlier the date of expiration or termination of the Lease
Term) and upon five days' prior written notice, convey or cause to be
conveyed to Lessor, as replacement for the Engine with respect to which
such Event of Loss occurred, title to a Replacement Engine, free and
clear of all Liens (other than Permitted Liens) and having an equivalent
or greater value, condition, utility, airworthiness, remaining useful
life as, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such replaced
Engine was in the condition and repair required to be maintained by the
terms of this Agreement. For all purposes hereof, each such Replacement
Engine shall, after such conveyance, be deemed part of the property
leased hereunder, and shall be deemed an "Engine."
(ii) Prior to or at the time of any conveyance of a Replacement
Engine, Lessee, at its own expense, shall (t) furnish Lessor with a full
warranty (as to title) xxxx of sale, in form and substance satisfactory
to Lessor, conveying to Lessor such Replacement Engine, (u) cause
supplements to be executed which shall subject such Replacement Engine
to this Agreement, (v) cause the filing of such instruments as are
necessary or advisable to establish, perfect and protect the interest of
Lessor in any such Engine (including, without limitation, cause a Lease
Supplement, in form and substance satisfactory to Lessor, to be duly
executed by Lessee) (w) furnish Lessor with such evidence of the
transfer of title to such Replacement Engine to Lessor as Lessor may
reasonably request, including, without limitation, that such Replacement
Engine is free and clear of all Liens of record with the Aviation
Authority, except Permitted Liens, such evidence to include, without
limitation, an opinion of Lessee's counsel addressed to Lessor, and
opining that such title has been so conveyed and that such Replacement
Engine has been duly subjected to this Agreement (such opinion to be in
form and substance, and from counsel, satisfactory to Lessor), (x)
furnish Lessor with such
56
(Amended and Restated Lease Agreement]
evidence of compliance with the provisions of Sections 10(e),
12(a)(v) and 15 with respect to such Replacement Engine as Lessor may
reasonably request and, (y) furnish Lessor with a certificate signed by
an officer of Lessee certifying that, upon consummation of such
replacement, no Event of Default will exist hereunder and certifying
that such Replacement Engine has a value, condition, utility,
airworthiness and remaining useful life at least equal to, and is in as
good operating condition as, the Engine so replaced, assuming such
Engine was in the condition and repair required by the terms of this
Agreement immediately prior to the occurrence of such Event of Loss.
(iii) Upon compliance by Lessee with the requirements of this
Section 13(c), if no Event of Default shall have occurred or be
continuing, Lessor shall, upon the joint written request of Lessee and
each insurer which contributed to the payment of any insurance proceeds
with respect to the lost Engine, transfer to the Person designated in
such request all of Lessor's right, title and interest in such Engine
without recourse or warranty (except as to absence of Lessor Liens,
Liens arising prior to Delivery of the Aircraft to Lessee and Liens
granted by Lessor to Lessor's lenders) and subject to the disclaimer set
forth in Section 5(a), and such Engine shall thereupon cease to be an
Engine leased hereunder.
(iv) No Event of Loss with respect to an Engine shall result in
any reduction in Basic Rent.
(d) APPLICATION OF PAYMENTS FROM ANY GOVERNMENT ENTITY FOR REQUISITION
OF TITLE, ETC. Any payments (other than insurance proceeds the application of
which is provided for in Section 15) received at any time by Lessor or by Lessee
from any Government Entity or other Person with respect to an Event of Loss will
be applied as follows:
(i) if payments are received with respect to the Airframe (or the
Airframe and an Engine or engines then installed thereon), after
reimbursement of Lessor for reasonable costs and expenses, so much of
such payments remaining as shall not exceed the Stipulated Loss Value
required to be paid by Lessee pursuant to Section 13(b) shall, unless a
Default or any Event of Default shall have occurred and be continuing,
be applied in reduction of Lessee's obligation to pay such Stipulated
Loss Value and such other amounts of Rent, if not already paid by
Lessee, or, if already paid by Lessee, shall be applied to reimburse
Lessee for its payment of such Stipulated Loss Value, and the balance,
if any, of such payments shall be distributed to or retained by Lessee
or
(ii) if such payments are received with respect to an Engine under
circumstances contemplated by Section 13(c), then so much of such
payments remaining after reimbursement of Lessor for reasonable costs
and expenses; up to an amount equal to Lessee's actual cost of replacing
such Engine in accordance with Section 13(c), shall, unless a Default or
Event of Default shall have occurred
57
[Amended and Restated Lease Agreement]
and be continuing, be paid over to, or retained by, Lessee if Lessee
shall have fully performed, or concurrently therewith will perform, the
terms of Section 13(c) with respect to the Event of Loss for which such
payments are made, and the balance, if any, of such payments shall be
distributed to or retained by Lessee.
(e) APPLICATION OF PAYMENTS DURING, EXISTENCE OF DEFAULT. Any amount
referred to in this Section 13 which is payable to or retainable by Lessee
shall not be paid to or retained by Lessee if at the time of such payment or
retention a Default or any Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Lessor, as security for the
obligations of Lessee under this Agreement to be held and applied pursuant to
Section 20 and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing, any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not applied in
accordance with the preceding sentence.
SECTION 14. INTENTIONALLY RESERVED.
SECTION 15. INSURANCE.
(a) REQUIREMENTS. At all times during the Lease Term, and until the
Aircraft is returned to Lessor in the condition and manner required by this
Agreement, Lessee shall maintain or cause to be maintained with respect to the
Aircraft, at its own expense, insurance in compliance with the Insurance
Requirements of Exhibit F hereto.
(b) APPLICATION OF PROCEEDS OF HULL INSURANCE. As between Lessor and
Lessee, it is agreed that all proceeds of insurance maintained in compliance
with this Section 15 (except Section 15(f)) and received as the result of the
occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the Airframe (or
the Airframe and the Engines or engines installed thereon), so much of
such payments remaining, after reimbursement of Lessor for reasonable
costs and expenses, as shall not exceed the Stipulated Loss Value and
the other amounts payable under Section 13(b) shall be applied in
reduction of Lessee's obligation to pay such Stipulated Loss Value and
the other amounts payable under Section 13(b), if not already paid by
Lessee, or, if already paid by Lessee, shall be applied to reimburse
Lessee for its payment of such Stipulated Loss Value, and the balance,
if any, of such payments remaining thereafter shall be paid over to, or
retained by, Lessee; and
(y) if such payments are received with respect to an Engine under
the circumstances contemplated by Section 13(c), so much of such
payments remaining, after reimbursement of Lessor for reasonable costs
and expenses, shall be paid over to, or retained by, Lessee, provided
that Lessee shall have fully
58
[Amended and Restated Lease Agreement]
performed or, concurrently therewith, will fully perform the terms
of Section 13(c) with respect to the Event of Loss for which such
payments are made.
As between Lessor and Lessee, the insurance payments with respect to any
property damage loss not constituting an Event of Loss with respect to the
Airframe or an Engine will be applied in payment (or to reimburse Lessee) for
repairs or for replacement property in accordance with the terms of Sections 10
and 12, if not already paid for by Lessee, and any balance remaining, after
compliance with such sections with respect to such loss shall be paid to Lessee.
(c) INSURANCE FOR INDEMNITIES; CONTINUATION OF LIABILITY INSURANCE. The
insurance referred to in Section 15(a) shall in each case include and insure (to
the extent of the risks covered by the policies) the indemnity provisions of
Section 9. For a period of twenty-four months after the last day of the Lease
Term, or, if earlier, the next C-Check of the Aircraft, and at Lessee's cost,
Lessee shall continue to name each Indemnified Party as an additional insured
under Lessee's comprehensive airline and war-risk liability insurance described
in Exhibit F to the extent of its interest under the indemnities referred to in
the preceding sentence.
(d) REPORTS, ETC. Lessee shall furnish, or cause to be furnished, to
Lessor (x) on or before the Delivery Date and not later than each renewal date
of any insurance, and otherwise upon reasonable request, a Certificate of
Insurance and a report, signed by the Insurance Broker, stating that (i) it is
the Lessee's insurance broker; (ii) in the opinion of such firm (x) such
insurance complies with the terms hereof and (y) such insurance together with
any self-insurance permitted hereby are in such amounts and cover such perils
and are placed with insurers of recognized reputation and responsibility in the
worldwide aviation insurance marketplace so that the protection afforded thereby
is not less than that which would customarily be maintained for aircraft of a
similar character by corporations engaged in the same or similar business,
similarly situated with Lessee; (iii) such Insurance Broker shall advise Lessor
in writing of any act or omission on the part of Lessee of which the Insurance
Broker has knowledge and which has been confirmed by the insurers as
invalidating or rendering unenforceable, in whole or in part, any insurance on
the Aircraft and advise in writing at least 30 days (7 days in the case of war
risk and allied perils coverage) prior to the cancellation (but not scheduled
expiration if renewed prior thereto) or material adverse change to any insurance
maintained pursuant to this Section 15 and Exhibit F; and (iv) Lessee is current
on the payment of all insurance premiums; and (v) on the Delivery Date and no
later than five (5) days prior to the date of expiration of any insurance policy
referenced in a previously delivered certificate of insurance and a report of
the Insurance Broker. The reports required by this Section 15(d) are part of the
reporting requirements set forth in Schedule 6.
(e) SELF-INSURANCE. Lessee may not self-insure the risks required to be
insured against pursuant to this Section 15, provided that Lessee may
self-insure the risks required to be insured against pursuant to Exhibit F
(except total loss) by way of deductible, premium adjustment or similar
provisions, in such amounts as are customarily self-insured with respect to
59
[Amended and Restated Lease Agreement]
aircraft of the same type and used in the same manner as the Aircraft by major
international air carriers, but in no event in an amount greater than the
$500,000 per aircraft per occurrence.
(f) ADDITIONAL INSURANCE BY LESSOR. Lessee acknowledges that Lessor has
an insurable interest in the Aircraft. Lessor shall have the right to obtain
insurance in its own name with respect to such insurable interest. Lessee will
render Lessor all reasonable assistance requested by Lessor in order that Lessor
may adequately protect such insurable interest. Lessee agrees that the maximum
amounts payable to it or to others for its account or to be applied in discharge
of its obligations by any underwriter or carrier of insurance maintained by
Lessee upon the occurrence of an Event of Loss with respect to the Aircraft
shall be limited to the Stipulated Loss Value unless the maintenance of any such
insurance in an amount in excess of such Stipulated Loss Value in respect of
Lessee's insurable interest in the Aircraft does not prejudice Lessor's or any
Insured Party's interests under the insurances otherwise required by this
Section 15, or prevent Lessor from obtaining such insurances as it requires, in
which event nothing herein shall prevent Lessee from effecting such additional
insurance for its account.
(g) APPLICATION OF PAYMENTS DURING EXISTENCE OF A DEFAULT. Any amount
referred to in this Section 15 which is payable to or retainable by Lessee shall
not be paid to or retained by Lessee if at the time of such payment or retention
a Default or any Event of Default shall have occurred and be continuing, but
shall be held by or paid over to Lessor as security for the obligations of
Lessee under this Agreement and, if any such Default or Event of Default shall
have occurred and be continuing, applied against Lessee's obligations hereunder
as and when due. At such time as there shall not be continuing any such Default
or Event of Default, such amount shall be paid to Lessee to the extent not
applied in accordance with the preceding sentence.
(j) NEGATIVE UNDERTAKINGS. Lessee shall not (1) act or fail to act, or
cause, permit or suffer an act or failure to act, whereby any insurance required
by this Section 15 would or might reasonably be expected to be limited or
rendered in whole or in part invalid, unenforceable or otherwise not in full
force and effect (including any limitation resulting from inaccuracy of any
representation or warranty of Lessee, or any illegal use of the Aircraft), and
(ii) without limiting the foregoing, use, operate, employ or locate the
Aircraft, Airframe, any Engine or any Part, or cause, permit or suffer the
Aircraft, Airframe, any Engine or any Part to be used, operated, employed or
located, in any place or in any manner or for any purpose (x) in any area
excluded from coverage, or in any manner for any purpose that is not covered, by
any insurance policy in effect or required by the terms of this Agreement to be
maintained by Lessee or (y) that might reasonably be expected to be excluded
from coverage under, or to invalidate or in any way limit (including any
limitation with respect to coverage of the specified insured perils, events or
circumstances) any such insurance policy.
(k) FAILURE TO INSURE. If at any time Lessee fails to maintain insurance
in compliance with this Section 15, Lessor shall be entitled but not bound to do
any of the following (without prejudice to any other rights which it may have
under this Agreement by reason of such failure):
60
[Amended and Restated Lease Agreement]
(i) to pay any premiums due or effect or maintain such insurance or
otherwise remedy such failure in such manner as Lessor considers
appropriate (and Lessee shall upon demand reimburse Lessor in full for
any amount so expended in that connection) and/or
(ii) at any time while such failure is continuing, require the Aircraft to
remain at any airport or, as the case may be, upon provision by Lessor
of insurance coverage satisfactory to Lessee, proceed to and remain at
any airport designated by Lessor, until such failure is remedied to
Lessor's satisfaction.
SECTION 16. INSPECTION.
(a) MAINTENANCE SCHEDULE. During the Lease Term, Lessee shall furnish
Lessor with such information concerning the location, condition, use and
operation of the Aircraft as Lessor may reasonably request. Lessee shall provide
Lessor with maintenance schedules relating to the Aircraft upon delivery of the
Aircraft and from time to time as such schedules are adjusted or updated. Lessee
shall give Lessor reasonable prior notice of the date of, and any change in the
date of, any Major Checks, in order to enable Lessor, or its agents,
representatives or designees, to inspect the Aircraft, including, without
limitation, the Aircraft Documentation (should Lessor choose to do so), at the
time and place any such Major Checks occur and to make a reasonable number of
photocopies of any Aircraft Documentation. Lessee's obligations under the second
and third sentences of this Section 16(a) can be satisfied through Lessee's
provision of the quarterly reports pursuant to Section 10(d)(vii) hereof.
(b) REASONABLE INSPECTIONS. At all reasonable times, Lessor or its
authorized representatives may inspect the Airframe and Engines and inspect and
make copies (at such Person's expense, or if such inspection is made in
connection with or following a Default or an Event of Default, at Lessee's
expense) of the books and records of Lessee relating to the Airframe and Engines
and the maintenance of the Airframe and Engines (including, without limitation,
any Aircraft Documentation and also including any airworthiness directive and
service bulletin compliance records, component life status reports, and the
then-current aircraft configuration), and if such inspection is made at the time
of any maintenance operation, such Persons may inspect behind any panels, bays
or other apertures which have already been opened in the course of such
maintenance operation, provided that, so long, as no Default or Event of Default
has occurred and is continuing, no exercise of such inspection right shall
interfere with the normal operation of the Aircraft by Lessee.
(c) NO DUTY TO INSPECT. Lessor shall not have any duty to make any such
inspection nor shall Lessor incur any liability or obligation by reason of
making or not making any such inspection.
(d) FOLLOW-ON LEASE. Upon request by Lessor, Lessee shall from time to
time during the Lease Term make the Aircraft, including, without limitation, the
Aircraft Documentation, available for inspection and/or a reasonable amount of
photocopying to Lessor's
61
[Amended and Restated Lease Agreement]
designated representatives or technical teams evaluating the Aircraft for use
after the end of the Lease Tenn. Lessor agrees to give Lessee at least five (5)
Business Days' advance notice of any such inspection and to coordinate such
inspections with Lessee so as not to unreasonably interfere with Lessee's
operation or maintenance or with its personnel.
(e) ABSOLUTE RIGHT. The right of Lessor and its designated
representatives to inspect the Aircraft and Aircraft Documentation in accordance
with this Section 16 during the Lease Term shall be absolute.
SECTION 17. ASSIGNMENT.
(a) ASSIGNMENT BY LESSEE. Lessee shall not assign, convey or otherwise
transfer (each, an "assignment") any of its rights, title or interests in and to
the Aircraft or this Agreement without the prior written consent of Lessor.
(b) The Lessor may sell, assign or transfer all or any of its rights
under this Agreement and in the Aircraft (a "Transfer") and the Lessor will,
other than in the case of an assignment for security purposes, have no further
obligation under this Agreement following a Transfer (except with regard to a
breach by Lessor of this subpart (b) and subject to subpart (c) of this Section)
but, notwithstanding any Transfer, will remain entitled to the benefit of each
indemnity under this Agreement. In connection with any Transfer, the following
conditions shall apply:
(i) Lessor shall give Lessee written notice of such Transfer at
least 10 Business Days before the date of such Transfer, specifying the
name and address of the proposed purchaser, assignee or transferee (the
"Transferee");
(ii) the Transfer will not adversely affect the Lessee's rights
and interests in the Aircraft and/or this Agreement, nor subject the
Lessee to any Tax, claim, liability or any other obligation to which it
would not have been subject had such assignment or transfer not taken
place;
(iii) the Transferee will be a Citizen of the United States and
have full corporate power and authority to enter into and perform the
transactions contemplated by this Agreement on the part of "Lessor";
(iv) on the Transfer date the Lessor and the Transferee shall
enter into an agreement or agreements in which the Transferee confirms
that it shall be deemed a party to this Agreement and agrees to be bound
by all the terms of, and to under take all of the obligations of, the
Lessor contained in this Agreement; and
(v) such Transfer shall not violate any applicable law including
the Federal Aviation Law, the Federal Aviation Regulations and the
Securities Act of 1933, as amended.
62
[Amended and Restated Lease Agreement]
(c) Upon any Transfer, the Transferee shall be deemed Lessor for all
purposes of this Agreement, each reference in this Agreement to the "Lessor"
shall thereafter be deemed for all purposes to refer to the Transferee, and the
transferor shall be relieved of all obligations of the "Lessor" under this
Agreement arising after the time of such Transfer except to the extent
attributable to acts or events occurring, prior to the time of such Transfer.
(d) Upon compliance by Lessor and a Transferee with the terms and
conditions of Clause 17(b), except during the continuance of an Event of
Default, Lessee shall at the time of Transfer, at the specific written request
of Lessor and with Lessor paying, all of Lessee's out-of-pocket costs and
expenses:
(i) execute and deliver to Lessor and to such Transferee an
agreement, in form and substance satisfactory to Lessor, Lessee and such
Transferee, dated the date of such transfer, consenting, to such
transfer, agreeing to pay all or such portion of the Basic Rent and
other payments under this Agreement to such Transferee or its designee
as such Transferee shall direct, and agreeing that such Transferee shall
be entitled to rely on all representations and warranties made by Lessee
in this Agreement or in any certificate or document furnished by Lessee
in connection with this Agreement as though such Transferee was the
original "Lessor";
(ii) execute and deliver to Lessor or such Transferee, as the case
may be, precautionary Uniform Commercial Code financing statements or
amendments reflecting the interests of such Transferee in the Aircraft
and this Agreement;
(iii) deliver to Lessor and to such Transferee a certificate,
signed by a duly authorized officer or Lessee, dated the date of such
transfer, to the effect that no Event of Default has occurred and is
continuing, or, if one is then continuing, describing such Event of
Default;
(iv) cause to be delivered to Lessor and such Transferee
certificates of insurance and broker's letter of undertaking
substantially in the form set out in Exhibits F and G, detailing the
coverage and confirming the insurers' agreement to the specified
insurance requirements of this Agreement and listing the Lessor and
Transferee as additional insureds and the Transferee as sole loss payee,
in accordance with the terms of Exhibit F;
(v) deliver to Lessor and such Transferee information on the
location of the Airframe and Engines at all times requested by Lessor in
order to permit the Transfer to take place at a time and on a date so
as to eliminate or minimize any Taxes applicable to the Transfer; and
(vi) such other documents as Lessor or such Transferee may
reasonably request, so long as such documents do not adversely affect
the rights or obligations of Lessee under this Lease or otherwise
adversely effect Lessee.
63
[Amended and Restated Lease Agreement]
(e) COLLATERAL ASSIGNMENT. Notwithstanding any of the foregoing, it is
understood and agreed that Lessor may, without the prior written consent of
Lessee but with prior notice to the Lessee, mortgage or pledge and/or assign
all or any portion of its right, title and interest in and to this Agreement,
the Aircraft or any Rent due hereunder to any Lender. Lessee shall acknowledge
in writing any such mortgage, pledge or assignment by an acknowledgment in a
form reasonably satisfactory to the Lessee. Upon notice to the Lessee from any
Lender under any such mortgage, pledge or assignment, such Lender may require
that all Rent shall be paid directly to such Lender and/or that the Aircraft be
returned to such Lender, but, in the case of the return of the Aircraft, only
upon completion or termination of this Agreement. Any acknowledgment from the
Lessee shall include, without limitation, an agreement of the Lessee that:
(i) upon such mortgage, pledge or assignment, all rights of the Lessor
hereunder (including without limitation, all rights to be named as
loss payee, in accordance with the terms of Exhibit F, and an
additional insured under any policies of insurance maintained
pursuant to Section 15 hereof, all rights to receive monies,
reports, certificates and any other information pursuant to the
terms of this Agreement and all rights to indemnification) shall,
to the extent provided for in the mortgage, pledge or assignment,
be exercisable by such Lender, and such Lender shall be deemed an
Indemnified Party and a Tax Indemnitee for all purposes of this
Agreement;
(ii) the rights of such Lender shall not be subject to any defense,
counterclaim, or set-off that the Lessee may have or assert against
Lessor;
(iii) such Lender shall not be liable for any of Lessor's obligations
hereunder;
(iv) subject to the terms of the mortgage, pledge or assignment, such
Lender may require that all Rent be paid directly to such party (or
its designee), and Lessee agrees that upon receipt of such notice,
Lessee shall pay directly to such Lender all Rent due or to become
due hereunder; and
(v) Lessee shall comply, at the Lessor's expense, with all reasonable
requests of Lessor and such Lender in connection with any such
mortgage, pledge or assignment including, without limitation, the
execution of all consents and amendments in a form reasonably
acceptable to Lessee and the making of any and all registrations
and filings.
(f) SUCCESSORS AND ASSIGNS. Subject to the foregoing, the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
Lessor, Lessee and their respective successors and permitted assigns.
64
[Amended and Restated Lease Agreement]
SECTION 18. EARLY TERMINATION. So long as no Default or Event of Default
shall then have occurred and be continuing, on any Basic Rent Date occuring on
or after September 1, 2003, Lessee may, with at least ninety (90) days prior
written notice to Lessor, elect to terminate this Lease, effective on the Basic
Rent Date specified in such notice (the "Termination Date"). On the Termination
Date, Lessee shall (i) return the Aircraft to Lessor pursuant to Section 7
hereof, (ii) pay to Lessor all rent due and owing to Lessor through such
Termination Date, and (iii) pay to Lessor as an early termination fee the
remaining payments of Basic Rent due after the Termination Date, discounted to
the Termination Date using, a discount rate of 8% per annum. Upon Lessee's
compliance with clauses (i) and (ii), Lessor shall execute all documents
provided by Lessee to effect termination of this Lease, effective as of the
Termination Date. If Lessee falls to comply with clauses (i), (ii) and (iii)
above, then this Lease shall continue in full force and effect as if Lessee had
not yet given a notice of its election to terminate this Lease.
SECTION 19. EVENTS OF DEFAULT. Lessor and Lessee agree that it is a
fundamental term and condition of this Agreement that none of the following
events shall occur during the Lease Term and that the occurrence of any of the
following events shall constitute a repudiatory breach of this Agreement and an
"Event of Default" (whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any Judgment, decree or order of any court or any order, rule or regulation
of any Government Entity):
(a) FAILURE TO PAY BASIC RENT. Lessee shall have failed to make any
payment of Basic Rent, Stipulated Loss Value or Early Termination Fee in
accordance with this Agreement and the other Operative Documents when the same
shall have become due and payable and such failure shall continue for five (5)
Business Days from such due date.
(b) FAILURE TO PAY SUPPLEMENTAL RENT. Lessee shall have failed to make
any payment of Supplemental Rent (other than as specified in paragraph (a)
above) in accordance with this Agreement or the other Operative Documents when
the same shall have become due and such failure shall continue for ten (10)
Business Days from such due date.
(c) INSURANCE.
(i) Lessee shall have failed to carry and maintain, or cause to be
carried and maintained, on or with respect to the Aircraft, any
insurance required to be maintained in accordance with the provisions of
Section 15;
(ii) The Aircraft shall be operated at a time when any insurance
requiredunder Section 15 shall not be in effect.
(d) RETURN. Lessee shall have failed to return the Aircraft at the end
of the Lease Term pursuant to the provisions of, and in the condition required
by, Section 7.
65
[Amended and Restated Lease Agreement]
(e) UNAUTHORIZED TRANSFER. There shall be any unauthorized transfer of
possession of the Aircraft, Airframe or any Engine by Lessee.
(f) CERTAIN COVENANTS. Lessee shall have failed to comply with its
obligations under Section 6(a), 6(b), 10(a)(i), 10(b), 10(d)(ii) or 11 (except,
with respect to 11(a) and 11(d), for which Section 19(g) shall apply and 11(b),
for which Lessee shall have 5 Business Days to cure the relevant failure after
the earlier of (i) the date of written notice thereof to Lessee or (ii) the date
Lessee obtains actual knowledge of such failure).
(g) OTHER COVENANTS. Lessee shall have failed to comply with, observe or
perform, and shall fail to cause to be complied with, observed and performed,
any of its covenants, agreements or obligations hereunder or under any other
Operative Document, except to the extent provided above in this Section 19, and
such failure shall continue for 30 days after the earlier of (i) the date of
written notice thereof to Lessee or (ii) the date Lessee obtains actual
knowledge of such failure; provided, if Lessee has not cured such failure with
such 30-day period and such failure can be cured with further reasonable
diligence, Lessee, so long as it is proceeding diligently to cure such failure,
shall have an additional 30-day period to cure such failure at the expiration of
the initial 30-day period.
(h) REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
by Lessee herein or in any other Operative Document shall have proven to have
been incorrect, inaccurate or untrue in any material respect as of the time
made.
(i) AUTHORIZATIONS. Lessee shall no longer possess the Authorizations
required hereunder or under any other Operative Document or otherwise required
for the conduct of its business as a commercial passenger and cargo air carrier
in the Lessee Jurisdiction or for the performance of its obligations hereunder
or under any other Operative Document, or any such Authorizations are revoked,
canceled, adversely modified or otherwise terminated, or the continued use and
exercise thereof is prevented.
(j) VOLUNTARY BANKRUPTCY, ETC. Lessee shall have (i) commenced any
proceeding or filed any petition seeking relief under any applicable bankruptcy,
insolvency, liquidation, examination, administration, receivership or other
similar law, (ii) consented to or acquiesced in the institution of, or failed to
contravene in a timely and appropriate manner, any such proceeding or the filing
of any such petition, (iii) applied for or consented to the appointment of a
receiver, examiner, trustee, custodian, sequestrator or similar official for
itself or for a substantial part of its property or assets, (iv) filed an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) proposed or entered into any composition or other arrangement,
or made a general assignment, for the benefit of creditors or declared a
moratorium on the payment of indebtedness, (vi) become insolvent or suspended
payments on, become unable to, admitted in writing its inability to or failed
generally to pay, any material portion of its debts as they become due, (vii)
sought its own liquidation, reorganization, dissolution or winding up (other
than for the purposes of a reorganization previously approved by Lessor),
66
[Amended and Restated Lease Agreement]
(viii) suspended payment procedures or (ix) taken any corporate action for the
purpose of effecting any of the foregoing
(k) INVOLUNTARY BANKRUPTCY, ETC. A proceeding shall have been commenced
or a petition shall have been filed, in either case, without the consent or
application of Lessee, seeking (i) relief in respect of Lessee or of a
substantial part of its property or assets under any applicable bankruptcy,
insolvency, liquidation, examination, administration, receivership or similar
law, (ii) the appointment of a receiver, examiner, trustee, custodian,
sequestrator or similar official for Lessee or for a substantial part of its
property or assets or (iii) the liquidation, reorganization, dissolution or
winding up of Lessee; and such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the foregoing
shall be issued and shall not immediately be stayed.
(l) GOVERNMENT ACTION. The franchises, concessions, permits, rights or
privileges required for the conduct of the business or operations of Lessee
shall have been revoked, canceled or otherwise terminated or the free and
continued use or exercise thereof curtailed, prevented or modified in a manner
that materially adversely affects Lessee's ability to perform its obligations
under any Operative Document.
(m) CROSS DEFAULT:
(i) any Indebtedness of the Lessee or any of its Affiliates that
exceeds $5,000,000 is not paid when due and any applicable
grace period shall have expired;
(ii) the security for any such Indebtedness is enforced; or
(iii) any lease, conditional sale, installment sale or forward
purchase agreement of the Lessee or any of its Affiliates in
respect of an aircraft is terminated as a consequence of an
event of default or termination event (however described);
provided always, in any such case, it shall not constitute an
Event of Default under this Agreement if, in connection
with Lessee's working lines of credit and related letters of
credit facilities:
(1) the non-payment, acceleration, termination or event in
question is being contested by the Lessee in good faith and
on reasonable grounds and any declaration of default,
termination of agreement or enforcement of security has been
stayed by a court of competent jurisdiction; or
(2) the non-payment, acceleration, termination or event in
question is being discussed by the Lessee with the creditors
of such facilities
67
[Amended and Restated Lease Agreement]
in good faith and on reasonable grounds and there has been
no declaration of default, termination of agreement or
enforcement of security.
(n) CHANGE OF OWNERSHIP. Any single person acquires, or group of persons
acquire, control, directly or indirectly, of twenty-five percent (25%) or more
of Lessee's then outstanding voting stock (including by virtue of control of
twenty-five percent (25%) or more of Lessee's direct or indirect parent's then
outstanding voting stock) without the previous consent in writing of the Lessor
(which consent shall not be withheld unless the Lessor is of the reasonable
opinion that such acquisition of control will have a materially adverse effect
on the Lessee's ability to perform its obligations under this Agreement or the
Lessor's rights, title and interest in and to the Aircraft or under this
Agreement), not including, (i) persons that are currently in control of Lessee,
(ii) spouses of such persons, (iii) any lineal ancestor or descendant of such
persons, (iv) any spouse of any person covered by clause (iii), or (v) a
partnership or trust set up for the benefit of persons identified in clauses (i)
through (iv).
(o) LETTER OF CREDIT OR SURETY BOND. The Letter of Credit or Surety Bond
shall be repudiated by the issuing entity or shall become ineffective, the
Lessee shall fail to replace the Letter of Credit or Surety Bond pursuant to
Section 3(d)(v) following the occurrence of a Substitution Event (as defined in
said Section 3(d)(v) or, following, any occurrence of an event entitling Lessor
to draw on the Letter of Credit or Surety Bond, Lessor shall be prohibited by
law from drawing on the Letter of Credit or Surety Bond when Lessor is otherwise
entitled to make such a drawing and, within five (5) Business Days after notice
of any of the foregoing by Lessor, Lessee does not replace the Letter of Credit
or Surety Bond with a new Letter of Credit or Surety Bond meeting the
requirements of Section 3(d)(v).
SECTION 20. REMEDIES. Upon the occurrence of any Event of Default and so
long as the same shall be continuing, Lessor shall have the right, effective
upon notice to Lessee, to terminate this Agreement and all of Lessee's rights
hereunder; and at any time thereafter Lessor may do all or any of the following,
at its option and in its sole discretion (in addition to such other rights and
remedies which Lessor may have under applicable law):
(a) RETAKE POSSESSION. Upon the written demand of Lessor and at Lessee's
expense, cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe and Engines or such part of the Aircraft as Lessor may so demand to
Lessor or its order in the manner and condition required by, and otherwise in
accordance with, all the provisions of, Section 7 as if such Airframe and
Engines were being returned at the expiration of the Lease Term, or Lessor,
acting, in its individual capacity or as attorney for Lessee, at its option,
may enter upon the premises where the Airframe or an Engine is located and take
immediate possession of and remove the same (together with any engine which is
not an Engine but which is installed on the Airframe, subject to all the rights
of the owner, lessor, lienor or secured party of such engine, and such engine
shall be held for the account of any such owner, lessor, lienor or secured
party or, if owned by Lessee, may, at the option of Lessor, be exchanged with
Lessee for an Engine in accordance with the provisions of Section 7(b)) by
summary proceedings or other-wise, and
68
[Amended and Restated Lease Agreement]
Lessee waives any right it may have under applicable law to a hearing prior to
repossession of the Aircraft, Airframe or any Engine or Part, all without
liability accruing to Lessor for or by reason of such entry or taking of
possession or removing whether for the restoration of damage to property caused
by such action or otherwise. Lessee acknowledges and agrees that its obligation
to return the Aircraft in those instances is incontrovertible without prejudice
to its right to dispute any amounts, damages, interests or other amounts claimed
by Lessor upon termination of this Agreement and as such this Agreement will be
incontrovertible written evidence of such obligation of Lessee to return the
Aircraft which Lessor will be entitled to enforce via injunctive orders.
(b) TERMINATION OR ENFORCEMENT. Rescind this Agreement, terminate this
Agreement and/or exercise any other right or remedy which may be available to it
under applicable law or proceed by appropriate court action to enforce the terms
hereof and/or exercise any other power, right or remedy which may be available
to Lessor hereunder or under applicable law. Without limiting the generality of
the foregoing, Lessor shall have the right, without need of any consent,
authorization or action of Lessee, to cause the Aircraft to be deregistered by
the Aviation Authority, and to be made ready for export and to be exported out
of the Lessee Jurisdiction, and to cause all nights of Lessee in respect of the
Aircraft and this Lease under or in connection with or resulting from the
registration of the Aircraft with the Aviation Authority or otherwise under or
in connection with or resulting from any law in the Lessee Jurisdiction, to be
terminated and extinguished. In furtherance of the foregoing, Lessor shall be
entitled and empowered to act in the name and in the place of Lessee with
respect to the Aircraft as may be necessary or desirable, in Lessor's sole
discretion, including, without limitation, with respect to the execution of
documents and instruments, to effect such deregistration, exportation,
termination and extinguishment.
(c) APPLICATION OF FUNDS. Without limiting any other provision of this
Agreement or of any other Operative Document, Lessor shall have the right to
withhold or set off against all amounts otherwise payable to Lessee hereunder,
all as security for Lessee's obligations and liabilities under this Agreement
and the other Operative Documents, and to use and apply in whole or in part any
or all of such amounts and setoffs to and against such obligations and
liabilities of Lessee (in whatever order and according to whatever priority
Lessor may choose), and any such use, application or setoff shall be absolute,
final and irrevocable.
(d) DAMAGES. In addition to Lessor's rights under Section 9, Lessor may
recover from Lessee, and Lessee shall on demand pay, damages to equal the sum
of:
(i) all accrued and unpaid Rent payable hereunder in respect of
any period prior to Return of the Aircraft to Lessor in the condition
and otherwise in the manner required under Section 7 together with Break
Amount, if any;
(ii) all Expenses incurred by Lessor and any other Indemnified
Party in connection with such Event of Default or the exercise of
Lessor's remedies with respect thereto, including, without limitation,
all costs and expenses incurred in
69
[Amended and Restated Lease Agreement]
connection with recovering possession of the Airframe or any
Engine or in placing such Airframe or Engine in the configuration,
condition and airworthiness required by Section 7 and all lost Rent
payments during such recovery and reconditioning;
(iii) all incidental and consequential damages incurred by Lessor
and any other Indemnified Party in connection with such Event of
Default, including, without limitation, all losses (including, without
limitation, reasonable lost profits) suffered by Lessor because of
Lessor's inability to place the Aircraft on lease with another lessee on
terms as favorable to Lessor as this Agreement or because whatever use,
if any, to which Lessor is able to put the Aircraft upon its return to
Lessor, or the amount received by Lessor upon a sale or other disposal
of the Aircraft, is not as profitable to Lessor as leasing the Aircraft
in accordance with the terms of this Agreement would have been,
including, without limitation, in each case, lost Rent payments during
any remarketing period; and
(iv) all reasonable and actual legal fees and other reasonable
costs and Expenses incurred by Lessor and any other Indemnified Party by
reason of the occurrence of any Event of Default or the exercise of
Lessor's remedies with respect thereto.
SECTION 21. TRANSACTION EXPENSES. Except as expressly otherwise
provided herein, each of Lessor and Lessee agrees that it shall be responsible
for any and all fees and expenses it incurs in connection with the negotiation,
preparation, execution and delivery of this Agreement and any other documents
or instruments relating to the transaction contemplated hereby, including,
without limitation, legal fees, expenses and disbursements.
SECTION 22. NO SETOFF, COUNTERCLAIM, ETC. This Agreement is a net lease and
Lessee's obligation to pay Rent under this Agreement and each other Operative
Document to which it is a party is and shall be absolute and unconditional
and shall not be abated, suspended, diminished, reduced, delayed,
discontinued or otherwise affected by any condition, circumstance, act or
event of any kind whatsoever, including, without limitation, any of the
following:
(i) any right of setoff, deduction, counterclaim, recoupment,
defense, suspension, deferment or other right (including any right of
reimbursement) which Lessee may have against Lessor, Airframe
Manufacturer, Engine Manufacturer, any Insured Party, any Inspecting
Party, any Indemnified Party or any other Person for any reason
whatsoever, including any claim Lessee may have for the foregoing, any
present or future law to the contrary notwithstanding;
(ii) the unavailability, interruption or cessation in use of the
Aircraft for any reason, including (A) any requisition thereof or any
restriction, prohibition or curtailment of, interference with, or other
restriction against, Lessee's use, operation or possession of the
Aircraft (whether by law, any Government Entity or other Person or
otherwise) and
70
[Amended and Restated Lease Agreement]
(B) any damage to or loss or destruction (including an Event of
Loss except as otherwise expressly provided in Section 13(b)) of or to
the Aircraft and (C) the removal of the Aircraft from service to correct
deficiencies described in Section 2 or to permit the Final Inspection or
Return of the Aircraft;
(iii) any defect in the title, airworthiness, merchantability,
fitness for any purpose, condition, design, specification or operation
of any kind or nature of the Aircraft, or the ineligibility of the
Aircraft for any particular use or trade or for registration or
documentation under the laws of any jurisdiction;
(iv) any amendment or modification of or supplement to any of the
Operative Documents, any agreements relating to any thereof or any other
instrument or agreement applicable to the Aircraft, the Airframe or any
Engine, or any assignment or transfer of any thereof, or any furnishing
or acceptance of any additional security, or any failure or inability to
perfect any security;
(v) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership,
administration or similar proceedings by or against Lessee, Lessor, any
Indemnified Party or any other Person;
(vi) the invalidity, unenforceability or impossibility of
performance of this Agreement, any other Operative Document or any of
the terms hereof or thereof, the lack of power or authority of Lessee to
enter into this Agreement or any other Operative Document, or any other
defect in this Agreement or any other Operative Document;
(vii) any breach by Lessor, any Indemnified Party or any other
Person of any representation, warranty or covenant, express or implied,
made or alleged to be made to Lessee;
(viii) any right, claim, xxxx, action or suit whatsoever by or
against or on the part of Lessee, including, without limitation, whether
arising out of legal action or otherwise, at law or in equity, whether
affirmative, negative or defensive in nature for or on account of the
legality, validity, enforceability or otherwise arising as a result of
(x) this Agreement or any other Operative Document or any of the terms
or conditions hereof or thereof, (y) any express of implied warranty or
(z) any contract, agreement or transaction between Lessee and Lessor or
any other Person, whether direct or indirect, written or oral;
(ix) any waiver, consent, change, extension, indulgence or any
action or inaction under or in respect of any such instrument or
agreement or any exercise or nonexercise of any right, remedy, power or
privilege in respect of any such instrument or agreement or this
Agreement or any other Operative Document;
(x) any transfer of any interest in this Agreement or in the
Aircraft by Lessor or any Indemnified Party or any change of ownership
of Lessor or any Indemnified Party; or
71
[Amended and Restated Lease Agreement]
(xi) any other circumstance, happening or event whatsoever,
whether or not similar to the foregoing, which but for this provision
would or might have the effect of terminating or in any other way
affecting any obligation of Lessee hereunder, it being the express
intention of Lessor and Lessee that all Rent and other amounts payable
by Lessee hereunder or under any other Operative Document shall be
payable in all events, unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Agreement.
Lessee hereby waives, to the extent permitted by applicable law, any and
all rights which it may have or which at any time hereafter may be conferred
upon Lessee, by law or otherwise, to terminate, cancel, quit or surrender this
Agreement or any other Operative Document, or to xxxxx, suspend, defer, reduce
or otherwise fall to comply in full with any obligation imposed upon Lessee
hereunder or thereunder or in relation hereto, except termination of this
Agreement in accordance with the express provisions hereof Each Rent payment
made by Lessee shall be final, and Lessee shall not seek to recover all or any
part of any such payment for any reason whatsoever. The foregoing provisions of
this Section 22 shall in no event limit Lessee's ability to seek recovery by
independent legal action against Lessor with respect to any breach by Lessor of
its obligations under this Lease.
SECTION 23. FURTHER ASSURANCES, ETC.
(a) FURTHER ASSURANCES. Without limiting the other obligations and
liabilities of Lessee under this Agreement and the other Operative Documents,
Lessee agrees to promptly and duly execute and deliver to Lessor such further
documents and assurances and take such further action as Lessor may from time to
time reasonably request in order to effectively carry out the intent and purpose
of this Agreement and the other Operative Documents and to establish, perfect
and protect the rights and remedies created or intended to be created in favor
of Lessor or any other Person hereunder and thereunder, including,, without
limitation, (x) any explanations, clarifications or translations (into English)
requested by Lessor relating to the information required to be provided by
Lessee under Section 6(c), and (y) the execution and delivery of supplements or
amendments hereto, in recordable form, rendering subject to this Agreement any
Replacement Engine and the recording or filing of counterparts hereof or thereof
or of other appropriate materials, in accordance with the laws of such
jurisdictions as Lessor may from time to time reasonably deem advisable.
(b) LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to
make any payment of Rent or falls to perform or comply with any agreement,
covenant or obligation contained herein or in any other Operative Document,
Lessor shall have the right, but not the obligation, at its election and without
waiver of any of its rights or remedies against Lessee, to perform or comply
with such covenant, agreement or obligation and/or pay such amount, and the
amount of such payment and any Expenses incurred by Lessor in connection with
such payment or the performance of or compliance with such agreement, covenant
or obligation, as the case may be, together with interest at the Past Due Rate,
shall be payable by Lessee to Lessor upon demand as Supplemental Rent. The
taking of any action by Lessor pursuant to this Section 23(b)
72
[Amended and Restated Lease Agreement]
shall not constitute a waiver or release of any obligation of Lessee hereunder
nor a waiver of any Default which may arise out of Lessee's nonperformance of
such obligation, nor an election or waiver by Lessor of any right or remedy
available to Lessor under or in relation to this Agreement.
(c) NO IMPLIED WAIVERS; RIGHTS CUMULATIVE.
(i) No failure on the part of Lessor to exercise and no delay in
exercising any right, power, remedy or privilege under any Operative
Document or provided by statute or at law or in equity or otherwise
shall impair, prejudice or constitute a waiver of any such right, power,
remedy or privilege or be construed as a waiver of any Event of Default
or as an acquiescence thereto, nor shall any single or partial exercise
of any such right, power, remedy or privilege impair, prejudice or
preclude any other or further exercise thereof or the exercise of any
other right, power, remedy or privilege. No acceptance of partial
payment or performance shall, whether or not expressly stated, be or be
deemed to be a waiver of any Event of Default then existing or a waiver
or release of full payment and performance. No notice to or demand on
Lessee shall in any case entitle Lessee to any other or further notice
or demand in other or similar circumstances or constitute a waiver of
the right of Lessor to any other or further action in any circumstances
without notice or demand.
(ii) Nothing contained in any Operative Document shall be
construed to limit in any way any right, power, remedy or privilege of
Lessor hereunder or under any Operative Document or now or hereafter
existing at law or in equity. Each and every right, power, remedy and
privilege of Lessor under the Operative Documents (x) shall be in
addition to and not in limitation of, or in substitution for, any other
right, power, remedy or privilege under any Operative Document or at law
or in equity, (y) may be exercised from time to time or simultaneously
and as often and in such order as may be deemed expedient by Lessor and
(z) shall be cumulative and not mutually exclusive, and the exercise of
one shall not be deemed a waiver of the right to exercise any other.
(iii) Lessee hereby agrees and acknowledges that nothing
contained herein or in any Operative Document shall be construed to
require in any way, Lessor to take any action, upon a Default by
Lessee of this Agreement, or a breach by Lessee of any provision of
any Operative Document, to limit the damages suffered by Lessor as a
result of any such Default or breach as the case may be.
(d) WARRANTIES. Lessor agrees that it will assign to Lessee, for the
duration of the Lease Term so long as no Event of Default shall have occurred
and be continuing, the benefit of any assignable warranties (including, without
limitation, any repair warranties on any Engines or Parts) from the Airframe
Manufacturer, Engine Manufacturer or manufacturer or supplier of any Part for
which Lessor has an interest (but only to the extent of such interest).
73
[Amended and Restated Lease Agreement]
SECTION 24. CONFIDENTIALITY. Each of Lessee and Lessor shall keep this
Agreement and each other Operative Document, and all terms and provisions
hereof and thereof, confidential and shall not disclose, or cause to be
disclosed, the same to any Person, without the prior written consent of the
other, except (a) to prospective and permitted transferees of Lessor's or
Lessee's interests or their respective counsel or special counsel, certified
public accountants, independent insurance brokers or other agents, (b) in
connection with any administration or enforcement of any provisions of this
Agreement or any other Operative Document by Lessor or Lessee, (c) to its
Affiliates, (d) to its advisors, insurance brokers and accountants, (e) to
creditors of either Lessee or Lessor, (f) to prospective purchasers of stock
of Lessee or Aloha Airgroup, Inc., or (a) as may be required by any statute,
court or administrative order or decree or governmental ruling or regulation,
including insurance regulatory bodies, banking examiners and other government
officials; provided, however, that any and all disclosures of all or any part
of such documents and provisions which are permitted by this Section 24 shall
be made only to the extent necessary to meet the specific requirements or
needs of the Persons to whom such disclosures are hereby permitted.
SECTION 25. GOVERNING LAW AND JURISDICTION.
(a) GOVERNING LAW. THIS AGREEMENT AND EACH OTHER OPERATIVE DOCUMENT,
UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, SHALL IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
(b) NONEXCLUSIVE JURISDICTION IN NEW YORK. Each of Lessor and Lessee
hereby irrevocably consents that any legal action or proceeding against it or
any of its assets arising out of or relating to this Agreement or any other
Operative Document may be brought in any jurisdiction where it or any of its
assets may be found and in the courts of the State of New York and U.S. Federal
Courts for the Southern District of New York and by execution and delivery of
this Agreement each of Lessor and Lessee hereby irrevocably submits to and
accepts with regard to any such action or proceeding, for itself and in respect
of its assets, generally and unconditionally, the jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby.
Nothing herein shall prevent any party from bringing any legal action or
proceeding or obtaining execution of judgment in any other appropriate
jurisdiction. Lessee and Lessor further agree that a final judgment in any
action or proceeding arising out of or relating to this Agreement or any other
Operative Document shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment, a certified or exemplified copy of which
shall be conclusive evidence of the fact and the amount of the indebtedness or
liability therein described, or in any other manner provided by law. Each of
Lessee and Lessor hereby irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Operative Document brought in any court in New York, and hereby
further irrevocably waives any claim that any such suit, action or proceeding
brought in any court in New York has been brought in an inconvenient forum.
Lessee shall maintain the process
74
[Amended and Restated Lease Agreement]
agent specified for it in Section 25(c), or such other Person located within
New York as may be acceptable to Lessor, as its agent for service of process in
New York during the Lease Term, at Lessee's sole cost and expense. LESSEE AND
LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT.
SECTION 26. MISCELLANEOUS.
(a) AMENDMENTS. No provision of this Agreement or any other Operative
Document may be amended, changed, waived or discharged orally, but only by an
instrument in writing specifying the provision intended to be amended, changed,
waived or discharged and signed by each party hereto or thereto; and no
provision of this Agreement or any other Operative Document shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or other matter not specifically set forth in an agreement in
writing and signed by each party hereto or thereto.
(b) SEVERABILITY. If any provision hereof or of any Operative Document
should be held invalid, illegal or unenforceable in any respect in any
jurisdiction, then, to the extent permitted by law (i) all other provisions
hereof or thereof shall remain in full force and effect in such jurisdiction and
(ii) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.
(c) COUNTERPARTS. This Agreement, any Operative Document and any
amendments, waivers, consents or supplements hereto or thereto may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original, and all of which counterparts, taken together, shall constitute
one and the same instrument.
(d) CHATTEL PAPER. To the extent, if any, that this Agreement
constitutes chattel paper (as defined in the Uniform Commercial Code in effect
from time to time in any applicable jurisdiction) no security interest in this
Agreement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by Lessor on the signature
page thereof
(e) TIME OF THE ESSENCE. Subject to the periods of grace referred to in
Section 19, time shall be of the essence as regards the performance by Lessee of
its obligations under this Agreement and each other Operative Document.
(f) NOTICES. All notices, requests and other communications to Lessee,
Lessor or any other Person hereunder or under any other Operative Document shall
be in writing (for this purpose, "writing" includes telecopy or similar
electronic transmissions), shall refer specifically to this Agreement or such
other Operative Document, as the case may be, and shall be personally delivered
or sent by telecopy or other similar electronic facsimile transmission, or sent
by
75
[Amended and Restated Lease Agreement]
overnight courier service (e.g., Federal Express), in each case to the
respective address and telecopy number, if any, specified in Schedule 3 or such
other address or telecopy number as such Person may hereafter specify by notice
to the other party or to the parties hereto. Each such notice, request or other
communication shall be effective when received or, if by telecopier or other
similar electronic transmission, when "confirmed" by the sending, telecopy or
similar machine and written evidence of such confirmation is produced by such
machine, provided that any such notice by telecopy so "confirmed" after 6:00
p.m., for the recipient, shall be effective on the next succeeding local
Business Day.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof, and supersedes all
previous proposals, agreements, understandings, negotiations and other written
and oral communications in relation hereto. The parties acknowledge that there
have been no representations, warranties, promises, guarantees or agreements,
express or implied, except as set forth herein.
(h) TRUE LEASE. Lessee and Lessor agree that this Lease is to be treated
as a true operating lease for federal income tax purposes, that Lessor is the
owner of the Aircraft for federal income tax purposes and all other purposes and
that the interest of Lessee in the Aircraft is that of a lessee only.
* * *
76
[Amended and Restated Lease Agreement]
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their respective officers as of the day and year first above
written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee,
Lessor
By: [ILLEGIBLE]
------------------------------
Title: VICE PRESIDENT
---------------------------
ALOHA AIRLINES, INC.,
Lessee
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
77
[Amended and Restated Lease Agreement]
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their respective officers as of the day and year first above
written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee,
Lessor
By:
-------------------------------
Title:
----------------------------
ALOHA AIRLINES, INC.,
Lessee
By: [ILLEGIBLE]
-------------------------------
EXECUTIVE VICE PRESIDENT AND
Title: CHIEF FINANCIAL OFFICER
----------------------------
By: [ILLEGIBLE]
-------------------------------
VICE PRESIDENT
Title: PLANNING & DEVELOPMENT
----------------------------
77
[Amended and Restated Lease Agreement]
Exhibit A to
Amended and Restated
Lease Agreement
(MSN 24031)
[INTENTIONTALLY OMITTED]
A-1
[Amended and Restated Lease Agreement]
EXHIBIT B
[One page of confidential information has been omitted and filed
separately with the Commission]
B-1
[Amended and Restated Lease Agreement]
Exhibit C to
Amended and Restated
Lease Agreement
(MSN 24031)
[INTENTIONALLY OMITTED]
C-1
[Amended and Restated Lease Agreement]
Exhibit D to
Amended and Restated
Lease Agreement
(MSN 24031)
FORM OF LEASE SUPPLEMENT NO. [___]
THIS LEASE SUPPLEMENT NO. [___], dated [_________________], (this "LEASE
SUPPLEMENT"), is entered into between Aloha Airlines, Inc., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx 00000 ("LESSEE") and First Security Bank, National
Association, not individually but solely as trustee under that certain Trust
Agreement dated as of March 22, 1995 between itself and Fleet Business Credit
Corporation, formerly known as Sanwa Business Credit Corporation ("LESSOR").
WITNESSETH:
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Amended and Restated Lease Agreement dated as of March 31, 2000 (the
"LEASE"), which provides for the execution and delivery from time to time of
Lease Supplements (this and all other capitalized terms used but not defined
herein shall have the respective meanings, and shall be interpreted and
construed in the manner set forth or incorporated by reference in Section I
of the Lease) substantially in the form hereof for the purpose of leasing the
Aircraft under the Lease as and when delivered by Lessor to Lessee in
accordance with the terms thereof; [and]
This Lease Supplement No. [___] has been executed in several
counterparts. To the extent, if any, that this Lease Supplement No. [___]
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in
this Lease Supplement No. [___] may be created through the transfer or
possession of any counterpart other than the original executed counterpart
containing the receipt therefor executed by Lessor or, if Lessor has assigned
its rights to any Person in accordance with the Lease Agreement, such Person
on the signature page thereof.
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, attached and made a party of Lease Supplement No. 1
dated ________________, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on ________________, as one document and
assigned Conveyance No. ________________.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the adequacy of receipt of which is hereby
acknowledged, and pursuant to Section [13(c)] [___] of the Lease, Lessor and
Lessee hereby agree as follows:
D-1
[Amended and Restated Lease Agreement]
1. The following-described property has been installed on and made a part
of the Aircraft and is the property of Lessor and is hereby made subject to
the Lease:
[Describe property]
2. A number of counterparts of this Lease Supplement have been executed,
each of which shall be deemed an original and all of which together shall
constitute but one and the same agreement. To the extent, if any, that this
Lease Supplement constitutes chattel paper (as defined in the Uniform
Commercial Code) no security interest in this Lease Supplement may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by Lessor or, if Lessor has assigned its rights
to any Person in accordance with the Lease, such Person on the signature page
thereof
3. All of the provisions of the Lease are hereby incorporated by
reference in this Lease Supplement on and as of the date of this Lease
Supplement, to the same extent as if full set forth herein.
4. THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
D-2
[Amended and Restated Lease Agreement]
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
No. [___] to be duly executed on and as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee, Lessor
By: ______________________________
Title: ___________________________
ALOHA AIRLINES, INC., as Lessee
By: ______________________________
Title: ___________________________
By: ______________________________
Title: ___________________________
[THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.]
[RECEIPT OF THIS ORIGINAL COUNTERPART OF THE FOREGOING LEASE SUPPLEMENT
NO. [___] IS HEREBY ACKNOWLEDGED ON THIS ___ DAY OF ________________, 2000.]
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee, Lessor
By: ______________________________
Title: ___________________________
D-3
[Amended and Restated Lease Agreement]
Exhibit E to
Amended and Restated
Lease Agreement
(MSN 24031)
[INTENTIONALLY OMITTED]
E-1
[Amended and Restated Lease Agreement]
Exhibit F to
Amended and Restated
Lease Agreement
(MSN 24031)
INSURANCE REQUIREMENTS
(a) At all times during the Lease Term, and until the Aircraft is
returned to Lessor in the condition and manner required by this Agreement,
Lessee shall maintain or cause to be maintained with respect to the Aircraft,
at its own expense, comprehensive airline liability (including, without
limitation, third-party and passenger, bodily injury, property damage,
product liability, cargo, mail, baggage (checked and unchecked), premises and
hangar keepers' liability) insurance (exclusive of the Airframe and/or Engine
Manufacturer's product liability insurance), (i) in an amount not less than
the greater of (y) the amounts of comprehensive airline liability insurance
from time to time applicable to aircraft owned or leased and operated by
Lessee of the same type as the Aircraft and (z) $350,000,000, (ii) of the
type and covering the same risks usually carried by air carriers owning or
operating similar aircraft and engines and covering risks of the kind
customarily insured against by such air carriers, (iii) with insurers of
recognized reputation and responsibility reasonably acceptable to Lessor and
(iv) that names each Indemnified Party as an additional insured and otherwise
complies with the requirements set forth in, and is consistent with the
issuance of a valid certificate of insurance and a report of the Insurance
Broker.
(b) INSURANCE AGAINST EXPENSE OR DAMAGE TO THE AIRCRAFT. At all times
during the Lease Term, and until the Aircraft is returned to Lessor in the
condition and manner required by this Agreement, Lessee shall maintain or
cause to be maintained, with respect to the Aircraft, at its own expense,
all-risk aircraft hull insurance covering the Aircraft, all-risk property
damage insurance covering Engines and Parts while temporarily removed from
the Aircraft and all-risk spares insurance (i) for an agreed value not less
than the Stipulated Loss Value for the Aircraft in respect of all-risk hull
insurance, (ii) for the full replacement value, in respect of all-risk
property damage insurance, (iii) of the type and covering the same risks
usually carried by air carriers owning or operating similar aircraft and
engines and covering risks of the kind customarily insured against by such
air carriers, (IV) confirming that the insurers shall not be entitled to
replace the Aircraft of Airframe upon the occurrence of an Event of Loss with
respect thereto, (v) with insurers of recognized reputation and
responsibility reasonably acceptable to Lessor and (vi) that, except with
respect to partial losses of less than $500,000, names Lessor as the sole
loss payee up to the Stipulated Loss Value and otherwise complies with the
requirements set forth in and is consistent with the requirements of Section
15 of the Lease and this Exhibit F and otherwise in form and substance
reasonably satisfactory to Lessor. Lessee agrees that it will not settle any
claim with respect to the insurances provided hereunder without the consent
of Lessor (which consent shall not be unreasonably withheld); provided that,
so long as no Event of Default shall have occurred and be continuing, such
consent shall not be required in respect of claims which do not exceed
$500,000.
F-1
[Amended and Restated Lease Agreement]
(c) WAR-RISK, HIJACKING AND RELATED PERILS INSURANCE. At all times during
the Lease Term, and until the Aircraft is returned to Lessor in the condition
and manner required by this Agreement, and, for liability coverage, Lessee
shall maintain or cause to be maintained, with respect to the Aircraft, at
its own expense, worldwide (subject to standard insurance market geographical
limits) coverage of war-risk, hijacking and related perils insurance of the
type and in substantially the amounts carried by air carriers operating the
same or comparable models of aircraft in such areas (i) in no event in an
amount less than (x) $350,000,000 with respect to liability coverage and (y)
the Stipulated Loss Value with respect to hull coverage and (z) full
replacement value with respect to property damage coverage, (ii) in any
event, covering the perils of (u) war, invasion, acts of foreign enemies,
hostilities (whether war be declared or not), civil war, rebellion,
revolution, insurrection, martial law, military or usurped power or attempts
at usurpation of power, (v) strikes, riots, civil commotions or labor
disturbances, (w) any act of one or more Persons, whether or not agents of a
sovereign power, for political or terrorist purposes and whether the loss or
damage resulting therefrom is accidental or intentional, (x) any malicious
act or act of sabotage, (y) confiscation, nationalization, seizure,
restraint, detention, appropriation, requisition for title or use by or under
the order of any government (other than the government of the State of
Registration) (whether civil, military or de facto) or public or local
authority, and (z) hijacking, or any unlawful seizure or wrongful exercise of
control of any aircraft or crew in flight (including any attempt at such
seizure or control) made by any Person or Persons on board any aircraft
acting without the consent of the insured (including if committed by Persons
engaged in a program of irregular warfare for terrorist purposes), (iii) with
insurers of recognized reputation and responsibility reasonably acceptable to
Lessor and (iv) except with respect to partial losses of less than $500,000
that names each Indemnified Party as an additional insured with respect to
liability insurance and, for hull coverage only, names Lessor or its designee
as the sole loss payee up to the Stipulated Loss Value and otherwise complies
with the requirements set forth in, and is consistent with the requirements
of Section 15 of the lease and this Exhibit F. Lessee agrees that it will not
settle any claim with respect to the insurances provided hereunder without
the consent of Lessor (which consent shall not be unreasonably withheld);
provided that, so long as no Event of Default shall have occurred and be
continuing, such consent shall not be required in respect of claims which do
not exceed $500,000.
(d) Comprehensive airline liability, aircraft third party, contractual
liability (as per endorsement), property damage, passenger, baggage, cargo
and mail and airline general third party (including products) legal liability
for a Combined Single Limit (Bodily Injury/Property Damage) of an amount not
less than U.S. $350,000,000 for the time being any one occurrence. War and
Allied Risks are also to be covered under this Policy to the same extent as
set forth above.
(e) All required insurance (as specified in paragraphs (a), (b), (c) and
(d) above),
shall:
(i) in the case of the insurance required by paragraph (a), name each
Indemnified Party as additional assureds for their respective rights
and interests, warranted, each as to itself only, no operational
interest;
F-2
[Amended and Restated Lease Agreement]
(ii) in the case of the insurance required by paragraph (b), provide that
any loss shall be settled with the Lessee and shall for amounts in
excess of $500,000 up to the Stipulated Loss Value be payable in
Dollars to the Lessor as Loss Payee; provided, that, all amounts up
to the Stipulated Loss Value shall be payable to Lessor in the case
of a total loss;
(iii) in the case of the insurance required by paragraph (a), include a
Severability of Interest Clause which provides that the insurance
shall operate to give each assured the same protection as if there
were a separate policy issued to each assured;
(iv) in the case of the insurance required by paragraph (a), contain a
provision confirming that the policy is primary without right of
contribution and the liability of the insurers shall not be affected
by any other insurance of which any Indemnified Party or Lessee have
the benefit so as to reduce the amount payable to the Additional
Insureds under such policies;
(v) in the case of the insurance required by paragraph (b), contain a
50/50% clause per AVS 103 or its equivalent,
(vi) shall provide that in respect of the respective interests of each
Indemnified Party in such policies the insurance shall not be
invalidated or impaired by any action or inaction of Lessee or any
other Indemnified Party and shall insure the respective interests of
each Indemnified Party, as they appear, regardless of any breach or
violation of any warranty, declaration or condition contained in such
policies by Lessee or by any other Person;
(vii) be in accordance with normal industry practice of organizations
operating similar aircraft in similar circumstances;
(viii) provide coverage denominated in Dollars;
(ix) acknowledge the insurer is aware of the Lease and that the Aircraft
is owned by Lessor;
(x) provide that the insurers shall hold harmless and waive any rights of
recourse and/or subrogation against each Indemnified Party;
(xi) provide that an Indemnified Party shall have no obligation or
responsibility for the payment of any premiums due (but reserve the
right to pay the same should any of them elect so to do) and that the
insurers will not exercise any right of set-off or counter-claim in
respect of any premium due against the respective interests of an
Indemnified Party;
F-3
[Amended and Restated Lease Agreement]
(xii) provide that the Insurances shall continue unaltered for the benefit
of each Indemnified Party for at least thirty (30) days after
written notice by registered mail or telex of any cancellation,
changes, event of nonpayment of premium or installment thereof shall
have been sent to Lessor, except in the case of war risks for which
seven (7) days will be given, or in the case of war between the five
great powers or nuclear peril for which termination is automatic;
(xiii) in the case of the insurance required by paragraph (a), accept and
insure the indemnity provisions of the Lease (Section 15(c)) to the
extent of the risks covered by the policies; and
(xiv) contain an initial term of at least twelve (12) months and it (or any
replacement policy) shall at all times have a remaining term of at
least one (1) month in regard to all required insurance.
F-4
[Amended and Restated Lease Agreement]
Exhibit G to
Amended and Restated
Lease Agreement
(MSN 24031)
[INTENTIONALLY RESERVED]
G-1
[Amended and Restated Lease Agreement]
Exhibit H to
Amended and Restated
Lease Agreement
(MSN 24031)
[INTENTIONALLY OMITTED]
H-1
[Amended and Restated Lease. Agreement]
Exhibit I to
Amended and Restated
Lease Agreement
(MSN 24031)
Approved Maintenance Performers
Air New Zealand
Engineering Services
Christchurch, New Zealand
Dalfort Corporation
0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Tramco
00000 00xx Xxxxxx Xxxx
Xxxxxxx, XX 00000
The Xxx Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Xxxxx Aviation
P.D. Xxx 0000
Xxxxxxxx, Xxxxxxx, Xxxxxx X0X0X0
I-1
[Amended and Restated Lease Agreement]
Exhibit to
Amended and Restated
Lease Agreement
(MSN 24031)
FORM OF OPINION OF LESSEE COUNSEL
[To be provided]
J-1
[Amended and Restated Lease Agreement]
Exhibit K to
Amended and Restated
Lease Agreement
(MSN 24031)
FORM OF OPINION OF LESSOR'S SPECIAL COUNSEL
[To be provided]
K-1
[Amended and Restated Lease Agreement]
Exhibit L to
Amended and Restated
Lease Agreement
(MSN 24031)
FORM OF AIRCRAFT STATUS REPORT
REPORT FOR THE CALENDAR MONTH ENDED _________________,
Aircraft Type: 737-200 Actual Registration:
Lessor: BANK, not in its individual Manufacturer Serial Number: 24031
capacity, but solely as Owner
Trustee
AIRFRAME DURING PERIOD SINCE NEW SINCE C/D
-------- ------------- --------- ---------
Flight Hours: _________ _________ _________
Cycles: _________ _________ _________
ORIGINAL ENGINES
POSITION 1 POSITION 2
---------- ----------
Serial Number of Original Engine: ________ ________
Location of Original Engine: ________ ________
Flight Hours Since New: ________ ________
Cycles Since New: ________ ________
Flight Hours During Period:
Cycles During Period: ________ ________
Flight Hours Since Last Shop Visit: ________ ________
Cycles Since Last Shop Visit: ________ ________
Engine Cycle Limit: ________ ________
Cycles Remaining for Limit: ________ ________
Serial Number of Engine Installed: ________ ________
LANDING GEAR
DURING PERIOD SINCE NEW SINCE OVERHAUL
------------- --------- --------------
Landing Gear Cycles: _________ _________ _________
ORIGINAL APU
Serial Number of Original APU: ________
Location of Original APU: ________
Flight Hours During Period: ________
L-1
[Amended and Restated Lease Agreement]
Flight Cycles During Period: ________
Flight Hours Since Last Shop Visit: ________
Cycles Since Last Shop Visit: ________
Serial Number of APU Installed: ________
TECHNICAL ACTIVITY
Engine/APU Removals (if any): __________
OFF ON
--- --
Serial Number: ______ _____
Date: ______ _____
Flight Hours Since New: ______ _____
Flight Cycles Since New: ______ _____
Reason: ______________________________________________________________________
______________________________________________________________________________
DESCRIBE ANY REPAIRS, MODIFICATIONS, INCIDENTS OR ACCIDENTS TO AIRCRAFT
DURING PERIOD
We certify that the above information is true, correct and complete as of the
date hereof, __________________, 2000.
ALOHA AIRLINES, INC.
By: ______________________________
Title: ___________________________
By: ______________________________
Title: ___________________________
L-2
[Amended and Restated Lease Agreement]
Exhibit M to
Amended and Restated
Lease Agreement
(MSN 24031)
TERMS OF HUSH KITTING FINANCING
If Lessee is required by Law to meet Stage III noise compliance, then
with at least nine (9) months prior written notice from Lessee, Lessor will
fund the provisioning of such Stage III compliant hush-kits to be installed
on the Aircraft during, the Lease Term. If less than thirty-six (36) months
are remaining on the Lease Term at the time of the hush-kit installation,
then Lessee will extend the Lease Term, in increments of not less than one
(1) year, as required to ensure that there are at least thirty-six (36)
months remaining on the Lease Term at the time the hush-kits are installed on
the Aircraft. In addition, Lessee will pay additional Rent for the Aircraft
based on 1.6 percent per month of Lessor's invoiced costs for provisioning of
the hush-kits commencing at the time such cost is incurred by Lessor. For
example, if Lessor's invoiced costs for the hush-kits is Two Million U.S.
Dollars (US$2,000,000), then the monthly Rent will increase by US$2,000,000
times 1.6 percent which is equal to Thirty-two Thousand U.S. Dollars
(US$32,000) per month Rent increase (US$2,000,000 x 1.6% = US$32,000).
M-1
[Amended and Restated Lease Agreement]
Exhibit N to
Amended and Restated
Lease Agreement
(MSN 24031)
Notwithstanding, anything in the Lease to the contrary, in the event an
airworthiness directive is issued by the Aviation Authority and is complied
with by terminating action at any time after the fifth (5th) anniversary date
of the commencement of the Lease Term:
(a) Lessee shall be responsible for the cost of complying (parts and
labour) with such AD up to an amount of Fifty Thousand and No/100 U.S.
Dollars ($50,000.00 USD) per airworthiness directive.
(b) Lessee shall also be responsible for the cost of complying (parts and
labour) in excess of Fifty Thousand and No/100 U.S. Dollars ($50,000.00 USD)
per airworthiness directive in accordance with the following formula:
(c minus 50,000) x (m divided by 150)
where c equals the cost of complying (parts and labour) and m equals the
number of months remaining in the Lease Term.
(c) Lessor will reimburse Lessee for the balance of the cost of complying
(parts and labour) with that airworthiness directive.
(d) If Lessee is not obliged by the terms of the Lease or the
requirements of the Aviation Authority to comply with the airworthiness
directive during the term of the Lease, Lessor will have to agree upon the
compliance of the directive in order to be responsible to reimburse Lessee
any cost of complying hereunder.
Notwithstanding the above, (i) Lessee shall as concerns airworthiness
directives which require compliance within one (1) year after Termination, be
responsible for the costs set out in (a) above up to an amount of TWENTY-FIVE
THOUSAND AND NO/100 U.S. DOLLARS ($25,000.00 USD) per airworthiness directive
and the formula set out in (b) above be adjusted accordingly and (ii) in the
case of any airworthiness directive costing $250,000 or more, Lessee, prior
to complying with such airworthiness directive, shall notify Lessor of such
airworthiness directive, which shall describe the means of compliance and the
cost thereof and upon receipt of such notification Lessee and Lessor shall
discuss a mutually satisfactory means of addressing such airworthiness
directive, whether by terminating action, alternative mean of compliance,
requests for extensions and/or waivers from the FAA, termination of the Lease
or other alternatives.
N-1
[Amended and Restated Lease Agreement]
Exhibit O to
Amended and Restated
Lease Agreement
(MSN 24031)
Lessee shall not be obliged to pay the proposal fee set out in 11 (c) of
the Lease provided the proposed Sublessee is any of the following airlines
(or its successor in interest):
Alaska America West Austrian
Delta Southwest British Midland
United Aer Lingus China Airlines
Air France Air-Inter Japan Airlines
Ansett Alitalia Korean Airlines
Braathens British Airways Martinair
Canadian Airlines Cathay Pacific Sabena
International
Condor Japan Asia Air-ways Swissair
Japan Air System Royal Dutch Airlines
Lufthansa Singapore Airlines
Qantas Air Canada
Scandinavian Airlines System Air New Zealand
Thai Airways International All Nippon Airways
O-1
[Amended and Restated Lease Agreement]
Schedule 1 to
Amended and Restated
Lease Agreement
(MSN 24031)
PERMITTED JURISDICTIONS
Anywhere in the world, other than (1) those areas excluded pursuant to Section
15(l) of the Lease Agreement, (2) Afghanistan, Chad, Ethiopia, Iran, Iraq,
Lebanon, Libya, Mali, Niger, Nigeria, Pakistan, Somalia, Sudan, Syria, Yemen
(North and South), Yugoslavia (as was) and Zaire and (3) any other jurisdiction
that shall become subject to a U.S. or United Nations sanction or prohibition.
Sch. 1-1
[Amended and Restated Lease Agreement]
Schedule 2 to
Amended and Restated
Lease Agreement
(MSN 24031)
[INTENTIONALLY OMITTED]
Sch. 2-1
[Amended and Restated Lease Agreement]
Schedule 3 to
Amended and Restated
Lease Agreement
(MSN 24031)
ADDRESSES AND ACCOUNTS
LESSEE
Aloha Airlines, Inc. Acct. No.: 01-063820
P.O. Box 30028 First Hawaiian Bank
Xxxxxxxx, Xxxxxx 00000 X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Senior Vice President Finance ABA No.: 000000000
Chief Financial Officer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Sch. 3-1
[Amended and Restated Lease Agreement]
LESSOR
First Security Bank, National Association
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Corporate Trust Dept.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Account No.: 9370015315
Fleet National Bank
000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
ABA No.: 000000000
Reference: Aloha Airlines (N810AL)
03-210-71461-0000103
with a copy to:
Fleet Business Credit Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Aircraft Finance Division
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 00-0-0000
Sch. 3-2
[Amended and Restated Lease Agreement]
Schedule 4 to
Amended and Restated
Lease Agreement
(MSN 24031)
FILINGS AND RECORDINGS
DOCUMENT AUTHORITY
-------- ---------
Lease FAA
Lease Supplement No. 1 FAA
Application for Aircraft Registration FAA
UCC-1 Financing Statement Hawaii Secretary of State
Amended and Restated Lease FAA
Sch. 4-1
[Amended and Restated Lease Agreement]
Schedule 5 to
Amended and Restated
Lease Agreement
(MSN 24031)
RETURN CONDITIONS
The Aircraft shall be returned by Lessee to Lessor with all items of
equipment, Engines, APU's, systems and appliances fully functional and
operating in accordance with manufacturer specifications. At the time of
Return (the "Return Date"), the Aircraft shall conform to the following
standards:
A. The Aircraft shall be delivered in AS-IS, WHERE-IS condition and shall
have completed its C Check and shall,
(i) in the event that immediately prior to Return, the Aircraft is
being operated on an Approved Maintenance Program that has
incorporated a block D Check, the Aircraft shall have at least
3,500 Airframe Flight Hours, 4,500 Airframe Cycles and/or one
calendar year remaining to performance of the next block D
Check pursuant to such Approved Maintenance Program; and
(ii) in the event that immediately prior to Return, the Aircraft is
being operated on an Approved Maintenance Program that has
incorporated a phased program combining structural inspection
required work cards with CPCP required work cards ("Integrated
Program"), the Aircraft shall be delivered as-is with respect
to its next scheduled "D" Check and fresh from its last C
Check.
B. Any materially adverse deviations from Boeing MPD tasks shall be brought
into compliance with the MPD prior to delivery.
C. The Aircraft shall be delivered with a valid and current Transport
Category Airworthiness Certificate issued by the Aviation Authority. The
Aircraft shall be accompanied by its respective complete documentation,
manuals and records (in the English language; provided, however, Lessee
shall not be required to translate documentation, manuals and records
which were delivered by Lessor in a language other than English), as set
forth on Attachment 2 hereto, and shall have been maintained in
accordance with FAR Part 121 or its equivalent.
D. The Aircraft shall have all temporary repairs replaced by permanent
repairs or with continued repetitive inspections per the manufacturer's
repair manual. The Aircraft shall be free of significant dents, abrasions
and loose or pulled rivets which are not acceptable to OEM maintenance,
overall manuals including OEM/FAA bulletins and notices.
Sch. 5-1
[Amended and Restated Lease Agreement]
E. There shall be no evidence of untreated, improperly treated or noticeable
corrosion. All CPCP inspections will be current and up to date, in
accordance with manufacturer specifications and Aviation Authority
requirements. Lessor will ensure that the current operator will open
areas of the Aircraft that are either (i) ordinarily opened during "C"
Checks or (ii) reasonably requested by lessor based on indicia of damage
otherwise found or revealed during Lessor's inspection.
F. The Aircraft shall be in compliance with all Aviation Authority
requirements for operation as a transport category aircraft including all
Aviation Authority airworthiness directives ("AD's") and SBs that are
issued prior to the Return Date and are applicable to the Aircraft,
without special deferment, exemption or Alternate Means of Compliance
(AMOC), with terminating action accomplished for all AD's and Required
SBs which require that the terminating action be accomplished on or prior
to the Return Date. The Aircraft shall conform to its Type Certificate
Data Sheet. All major modifications and repairs accomplished on the
Aircraft shall have been performed in accordance with Aviation Authority
approved data that is to be redelivered with the Aircraft Records.
G. There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, routine or non-routine, against the Aircraft.
Minor non-airworthiness cabin defects shall be mutually considered and
accepted.
H. The Aircraft shall be clean, cosmetically acceptable, all compartments
reasonably free of foreign objects, accumulated dirt, grime, grease and
liquids, and be prepared for immediate placement into commercial service.
Any deterioration of paint or other protective coatings due to leakage,
impact damage or other presence of foreign materials or liquids shall be
repaired and replaced per manufacturer specifications.
I. Each Engine shall be delivered in serviceable condition with maintenance
records that meet all Aviation Authority requirements.
J. Each Engine and each Life Limited Component on each Engine shall have at
least 4,500 Airframe Cycles remaining until next scheduled inspection,
overhaul or Shopvisit based upon disk life limits or other hard-time
requirements per Aviation Authority approved list.
K. Each Engine shall pass power assurance performance tests without
operational limitations in accordance with the manufacturer's maintenance
manual. The Aircraft and its Engine's shall be capable of certificated
full rated performance without limitations throughout the entire
operating envelope as defined by the Aviation Authority approved Aircraft
Flight Manual.
L. Each Engine shall pass a complete video borescope inspection, conducted
by Lessor or its designee, of all accessible Engine sections (accessible
whether by borescope port or other
Sch. 5-2
[Amended and Restated Lease Agreement]
means) in accordance with manufacturer specifications which borescope can
inspect the C6, C7, C13 and T1 stages, the TI blades and the burner cans.
M. No Engine shall be on engineering watch or on a reduced interval
inspection of any nature that could lead to premature removal of the
Engine. If Engine historical records, engine power assurance runs,
borescope inspection or trend monitoring data indicate a level of
performance deterioration or oil consumption, or acceleration in
performance deterioration or oil consumption, which based on Lessee's or
manufacturer's specifications would require shop maintenance to be
performed prior to return, Lessee shall correct or cause to be corrected,
such conditions as necessary to rectify all Engine performance parameters
in accordance with manufacturer specifications. In addition, no Engine,
based on Lessee's or, if appropriate Lessee data is unavailable, industry
mean time to first Shopvisit and mean time between Shopvisits would
require shop maintenance to be performed prior to return.
N. All Landing Gear, at a minimum, shall have not less than 3,500 hours
remaining before next scheduled overhaul.
Landing Gear components will have "back-to-birth" documentation per FAA
requirements and Lessee shall replace certain un-serialized parts that are
hard timed in the Lessee's maintenance program.
O. The installed APU will be serviceable with no individual part having less
than three thousand five hundred (3,500) hours to the next scheduled
removal. If the auxiliary power unit is maintained on a hard-time basis
the unit will have no less than three thousand five hundred (3,500) hours
to the next scheduled overhaul (excluding, hours consumed on the
acceptance flight). At the reasonable request of Lessor, Lessee shall
perform a borescope inspection thereon.
P. The Components that are controlled by calendar time, Airframe Flight
Hours or Airframe Cycles shall be delivered "as is, where is" and in
serviceable condition. All such Components shall be supported by
maintenance records which satisfy all Aviation Authority requirements
(including records of last overhaul for those items requiring to be
overhauled per Lessee's maintenance program and/or per the Boeing MPD).
Q. Complete and current maintenance records (to be specified during the
drafting of final documents) which comply with all Aviation Authority
requirements shall be delivered with the Aircraft. Maintenance records
required to be maintained by the Aviation Authority shall be in the
English language and include complete documentation for all airworthiness
directives, life limited parts (including back-to-birth records for all
internal engine life limited parts) and major repairs and alterations in
accordance with Aviation Authority requirements. For each AD that is
applicable to the Aircraft, the records shall include the current status
of the Aircraft, the date of compliance, and the method of compliance
with appropriate supporting documentation. Any deficiencies with Aviation
Sch. 5-3
[Amended and Restated Lease Agreement]
Authority requirements are to be corrected prior to delivery of the
Aircraft at Lessee's cost.
R. Any manufacturer no-charge service bulletin parts which Lessee has
received but not installed for the Aircraft shall be delivered to
Purchaser with the Aircraft.
S. All windows shall be free of delamination, blemishes, and crazing that is
beyond maintenance manual limits.
T. All doors shall be free moving, correctly rigged and fitted with
serviceable seals.
U. All ceiling, sidewall and bulkhead panels shall be clean and free from
significant or unserviceable damage. All seats shall be serviceable and
in fair overall condition.
V. All flight control surfaces and wing leading edges shall be free from
damage that is beyond serviceable limits.
W. All cargo compartment floor, sidewall and ceiling panels shall be in
serviceable condition in accordance with Boeing maintenance manual limits.
X. The entire fuselage, vertical stabilizer including wing to body fairings,
Engine cowls and wheel well doors shall have any identifying marks or
designators removed or painted-out in a manner consistent with commercial
airline standards.
Z. Except as otherwise expressly herein provided all components or Parts of
the Aircraft which have a hard time (hour/cycle) limit to overhaul
pursuant to the MPD and the Maintenance Program shall have at least three
thousand five hundred (3,500) hours and four thousand five hundred
(4,500) cycles (whichever is applicable) remaining to operate until its
next scheduled overhaul pursuant to the MPD and the Maintenance Program.
AA. Except as otherwise expressly herein provided, all life limited
components or Parts of the Aircraft shall have at least three thousand
five hundred (3,500) hours and four thousand five hundred (4,500) cycles
(whichever is applicable) remaining to operate until the expiry of the
Part's life pursuant to the Maintenance Program, however, components and
Parts with an approved life shorter than said limits will have one
hundred percent (100%) of its total approved life remaining pursuant to
the MPD and the Maintenance Program.
BB. Except as otherwise expressly herein provided each component or Part
which has a calendar limit (including emergency equipment) will have
remaining to operate at least (i) one (1) year from the date of return of
the Aircraft to Lessor or (ii) one hundred percent (100%) of its total
approved life, whichever is less, pursuant to the MPD and the Maintenance
Program.
Sch. 5-4
[Amended and Restated Lease Agreement]
Schedule 6 to
Amended and Restated
Lease Agreement
(MSN 24031)
REPORTING REQUIREMENTS
Aircraft Status Report: Lessee shall provide to Lessor quarterly on the tenth
of each January, April, July and October, an Aircraft Status Report for the
preceeding three month period, pursuant to the terms set forth in Section
10(d).
Audited Financial Statements of the Aloha Airgroup, Inc.: Lessee shall provide
Lessor as soon as available but not more than 120 days after the last day of
each fiscal year, Audited Financial Statements of Aloha Airgroup, Inc.,
including balance sheets, pursuant to the terms set forth in Section 6(c)(ii).
Certificate of Insurance and Report: Lessee shall furnish Lessor on or before
the Delivery Date and not later than each renewal date of any insurance, a
Certificate of Insurance and a report, signed by the Insurance Broker, pursuant
to the terms set forth in Section 15(d).
Notice to Creditors: Lessee shall provide Lessor a copy of each notice or
circular issued to the Lessee's creditors as a group, pursuant to the terms
set forth in Section 6(c)(v).
Officer's Certificate of Lessee: Lessee shall provide to Lessor concurrently
with the financial statements furnished pursuant to Clauses 6(c)(i) and (ii),
an officer's certificate stating that no Default exists or has occurred in
accordance with the terms set forth in Section 6(c)(iv).
Unaudited consolidated quarterly financial statements of the Aloha Airgroup,
Inc.: Lessee shall provide to Lessor within 60 days after the last day of the
first three fiscal quarters of each fiscal year of Aloha Airgroup Inc.,
unaudited consolidated quarterly financial statements and statements of income
and retained earnings for such quarter pursuant to the terms set forth in
Section 6(c)(i).
Written Communications: Lessee shall make available for review by Lessor, or
Lessor's designees copies of any written communications with the Aviation
Authority, Airframe Manufacturer, Engine Manufacturer or other vendors with
respect to incidents, defects or malfunctions of the Aircraft, pursuant to the
terms set forth in Section 10(c)(ii)(F).
Sch. 6-1
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated Aug. 7, 2000, (this "LEASE SUPPLEMENT"),
is entered into between Aloha Airlines, Inc., a Delaware corporation having its
principal place of business at 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000
("LESSEE") and First Security Bank, National Association, not individually but
solely as trustee under that certain Trust Agreement dated as of March 22, 1995
between itself and Fleet Business Credit Corporation, formerly known as Sanwa
Business Credit Corporation ("LESSOR").
WITNESSETH:
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Amended and Restated Lease Agreement dated as of June 1, 2000 (the "LEASE"),
which provides for the execution and execution and delivery from time to time of
Lease Supplements (this and all other capitalized terms used but not defined
herein shall have the respective meanings, and shall be interpreted and
construed in the manner set forth or incorporated by reference in Section 1 of
the Lease) substantially in the form hereof for the purpose of leasing the
Aircraft under the Lease as and when delivered by Lessor to Lessee in accordance
with the terms thereof; and
This Lease Supplement No. 1 has been executed in several counterparts.
To the extent, if any, that this Lease Supplement No. 1 constitutes chattel
paper (as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction), no security interest in this Lease Supplement
No. 1 may be created through the transfer or possession of any counterpart
other than the original executed counterpart containing the receipt therefor
executed by Lessor or, if Lessor has assigned its rights to any Person in
accordance with the Lease Agreement, such Person on the signature page
thereof.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the adequacy of receipt of which is hereby
acknowledged, Lessor and Lessee hereby agree as follows:
1. The following-described property has been installed on and made a part
of the Aircraft and is the property of Lessor and is hereby made subject to the
Lease:
(i) Airframe: One Boeing B737-2Y5 Aircraft, U.S. Registration No. N810AL
and manufacturer's serial no. 24031; and
(ii) Engines: two (2) Xxxxx & Xxxxxxx JT8D-9A engines bearing,
respectively, manufacturer's serial nos. 665196 and 656020 (each of which
engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).
2. A number of counterparts of this Lease Supplement have been executed,
each of
which shall be deemed an original and all of which together shall constitute but
one and the same agreement. To the extent, if any, that this Lease Supplement
constitutes chattel paper (as defined in the Uniform Commercial Code) no
security interest in this Lease Supplement may be created through the transfer
or possession of any counterpart other than the original executed counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by Lessor or, if Lessor has assigned its rights to any Person in
accordance with the Lease, such Person on the signature page thereof.
3. All of the provisions of the Lease are hereby incorporated by reference
in this Lease Supplement on and as of the date of this Lease Supplement, to the
same extent as if fully set forth herein.
4. THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
2
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement No.
1 to be duly executed on and as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee,
Lessor
By: /s/ [ILLEGIBLE]
-------------------------------
Title: Vice President
-------------------------------
ALOHA AIRLINES, INC., as Lessee
By:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Title:
-------------------------------
3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
No. 1 to be duly executed on and as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee,
Lessor
By:
-------------------------------
Title:
-------------------------------
ALOHA AIRLINES, INC., as Lessee
By: /s/ XXXXXX X. XXXXXXXXX
-------------------------------
Title: EXECUTIVE VICE PRESIDENT AND
-------------------------------
CHIEF FINANCIAL OFFICER
-------------------------------
By: /s/ XXXXX X. XXXX
-------------------------------
Title: VICE PRESIDENT PLANNING &
-------------------------------
DEVELOPMENT
-------------------------------
3
FIRST AMENDMENT TO AMENDED AND
RESTATED LEASE AGREEMENT
This First Amendment to Amended and Restated Lease Agreement (the
"Amendment") between Xxxxx Fargo Bank Northwest, N.A. (formerly known as First
Security Bank, National Association, and First Security Bank of Utah, National
Association) as Owner Trustee, lessor ("Lessor") and Aloha Airlines, Inc. as
lessee ("Lessee").
W I T N E S S E T H
WHEREAS, Lessee and Lessor entered into a Lease Agreement dated as of
March 22, 1995 (the "Original Lease"); and
WHEREAS, the Original Lease, as amended, was amended and restated by the
Amended and Restated Lease Agreement dated June 1, 2000 (the "Amended and
Restated Lease"); and
WHEREAS, the Original Lease, as amended and restated by the Amended and
Restated Lease, is more fully described on the attached Appendix and shall be
collectively defined as the "Lease"; and
WHEREAS, Lessor and Lessee desire to amend the Lease effective as of
NOVEMBER 09, 2001; and
WHEREAS, capitalized terms used and not defined herein shall have the
meanings attributed thereto in the Lease.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
Section 1. AMENDMENT TO LEASE. The Lease is hereby amended as follows:
a. The definition of "Stipulated Loss Value" shall be deleted and the
following shall be subsituted in lieu thereof:
"Stipulated Loss Value" shall mean the value as described on Exhibit A
attached hereto.
b. Exhibit B to the Lease shall be deleted and replaced with Exhibit B
attached hereto.
c. The following is added as Section 27 (g) to the Lease;
"Lessee will use best efforts to utilize Owner Participant and
owner participant's affiliates for the furnishing of Lessee's
maintenance needs including purchases of products, services
and exchanges (including but not limited to components, landing gear,
engines, etc.)."
Section 2. RATIFICATION; REFERENCES TO LEASE. Except as amended hereby, the
Lease continues and shall remain in full force and effect in all respects from
and after the date of this Amendment. Each and every reference in the Lease to
"this Lease", "this Agreement", "herein", "hereof", or similar words and phrases
referring to the Lease or any word or phrase referring to a section or provision
of the Lease is deemed for all purposes to be a reference to the Lease or such
section or provision as amended by this Amendment.
Section 3. GOVERNING LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES.
Section 4. SEPARATE COUNTERPARTS. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 5. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK
2
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officer duly authorized, as of the day and year
first above written.
XXXXX FARGO BANK NORTHWES, N.A.,
NOT INDIVIDUALLY, BUT SOLELY AS OWNER TRUSTEE
By: /s/ Xxx X. Xxxxx
---------------------------------
Name: Xxx X. Xxxxx
-------------------------------
Title: Vice President
------------------------------
ALOHA AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxx X. Xxxx
--------------------------------- ---------------------------------
Name: XXXXXX X. XXXXXXXXX Name: XXXXX X. XXXX
------------------------------- -------------------------------
EXECUTIVE VICE PRESIDENT AND SENIOR VICE PRESIDENT
Title: CHIEF FINANCIAL OFFICER Title: PLANNING & BUSINESS DEVELOPMENT
------------------------------ ------------------------------
3
APPENDIX
[One paragraph of confidential information has been omitted and filed
separately with the Commission]
4
EXHIBIT A
STIPULATED LOSS VALUE
[One paragraph of confidential information has been omitted and filed
separately with the Commission]
5
EXHIBIT B
Basic Rent
[One page of confidential information has been omitted and filed
separately with the Commission]
6
