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AIRCRAFT LEASE AGREEMENT
between
KG AIRCRAFT LEASING CO., LTD.
and
WESTERN PACIFIC AIRLINES, INC.
One Boeing Model 737-3S3 Aircraft
Manufacturer's Serial Number 24060
Philippine Registration Xxxx RP-C4005 (to be changed to N957WP)
With Two CFM56 - 3B2 Engines,
Manufacturer's Serial Nos. 722139 and 723130
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TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS.................................................... 1
ARTICLE 2. ACCEPTANCE UNDER THE LEASE.................................... 10
2.1 Conditions Precedent....................................... 10
2.1.1 Lessor Conditions................................. 10
2.1.2 Other Lessor Conditions........................... 10
2.1.3 Lessee's Conditions............................... 12
2.2 Time of Delivery........................................... 13
2.3 Place of Delivery.......................................... 13
2.4 Delivery Fuel.............................................. 13
2.5 Indemnity.................................................. 14
ARTICLE 3. TERM AND RENT................................................. 14
3.1 Term....................................................... 14
3.2 Basic Rent................................................. 14
3.3 Security Deposit........................................... 15
3.4 Supplemental Rent.......................................... 16
3.5 Payments on Business Day................................... 16
3.6 Place of Payment........................................... 17
3.7 Prohibition Against Setoff, Counterclaim, etc.............. 17
ARTICLE 4. REPRESENTATIONS AND WARRANTIES................................ 18
4.1 Lessor's Representations and Warranties.................... 18
4.2 Lessee's Representations and Warranties.................... 19
4.3 Suppliers' Warranties...................................... 21
ARTICLE 5. POSSESSION AND USE............................................ 22
5.1 Possession................................................. 22
5.2 Lawful Operations; Use..................................... 23
5.3 Maintenance................................................ 24
5.4 Maintenance Payments....................................... 24
5.5 Registration and Insignia.................................. 29
ARTICLE 6. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITION.................................... 29
6.1 Replacement of Parts....................................... 30
6.2 Pooling of Engines and Parts............................... 30
6.3 Alterations, Modifications and Additions................... 31
ARTICLE 7. INSPECTION; FINANCIAL INFORMATION; RECORD..................... 34
7.1 Information and Inspection................................. 34
7.2 Financial Information...................................... 34
7.3 Reports of Aircraft Use.................................... 35
ARTICLE 8. INDEMNIFICATION BY LESSEE..................................... 35
8.1 General Indemnity.......................................... 35
8.2 General Tax Indemnity...................................... 39
ARTICLE 9. DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION................ 44
9.1 Event of Loss with Respect to the Aircraft................. 45
9.2 Event of Loss with Respect to an Engine.................... 45
9.3 Application of Payments from Governmental Authorities in
Respect of Event of Loss................................... 46
9.4 Requisition of an Airframe for Use by Government........... 47
9.5 Requisition of an Engine for Use by the Government......... 47
9.6 Application of Payments During Existence of Event or
Event of Default........................................... 48
ARTICLE 10. INSURANCE.................................................... 48
10.1 ........................................................... 48
10.9 Application of Insurance Proceeds for an Event of Loss..... 52
10.10 Application of Insurance Proceeds for Other than an
Event of Loss.............................................. 52
10.11 Application in Default..................................... 53
ARTICLE 11. MORTGAGES, LIENS, ETC......................................... 53
ARTICLE 12. RECORDATION AND FURTHER ASSURANCES............................ 54
ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS................................ 54
13.1 Return..................................................... 54
13.2 Overhaul - General......................................... 55
13.3 Engines.................................................... 55
13.4 Liens...................................................... 55
13.5 Records.................................................... 55
13.6 Redelivery Fuel............................................ 56
13.7 Indemnity.................................................. 56
ARTICLE 14. EVENTS OF DEFAULT............................................. 56
14.1 Events of Default.......................................... 56
ARTICLE 15. REMEDIES...................................................... 58
ARTICLE 16. [Intentionally Omitted]....................................... 60
ARTICLE 17. LETTER OF CREDIT.............................................. 60
ARTICLE 18. MISCELLANEOUS................................................. 61
18.1 Construction and Applicable Law............................ 61
18.2 Notices.................................................... 61
18.3 Lessor's Right to Perform for Lessee....................... 63
18.4 Corporate Existence; Merger................................ 63
18.5 Quiet Enjoyment............................................ 63
18.6 Assignment................................................. 63
18.7 Expenses................................................... 64
18.8 Survival................................................... 64
18.9 English Language........................................... 65
18.10 Jurisdiction............................................... 65
18.11 Currency................................................... 66
18.12 Integration................................................ 66
18.13 Counterparts............................................... 66
18.14 Bankruptcy - Section 1110.................................. 67
EXHIBIT "A" LEASE SUPPLEMENT NO.1 APPENDIX A Aircraft Hours and Cycles APPENDIX
B Documentation Delivery Receipt Attachment 1 Technical Records at
Delivery APPENDIX C Loose Equipment Schedule
EXHIBIT "B" FORM OF LETTER OF QUIET ENJOYMENT
EXHIBIT "C" MAINTENANCE RESERVES ADJUSTMENT FORMULA
EXHIBIT "D" ADDITIONAL DELIVERY REQUIREMENTS
EXHIBIT "E" REDELIVERY CONDITION
APPENDIX A Redelivery of Technical Documents
EXHIBIT "F" LEASE SUPPLEMENT NO. 2
APPENDIX A Aircraft Hours and Cycles
APPENDIX B Documentation Redelivery Receipt
Attachment 1 Technical Records at Delivery
EXHIBIT "G" INSURANCE REQUIREMENTS
APPENDIX A Broker's Letter of Undertaking
EXHIBIT "H" IRREVOCABLE STANDBY LETTER OF CREDIT
EXHIBIT "I" CERTAIN TERMS
AIRCRAFT LEASE AGREEMENT
This Lease Agreement, dated as of May 15, 1997, is entered into by and
between KG AIRCRAFT LEASING CO., LTD., an Irish corporation, having its
principal place of business at 0 Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxx 0,
Xxxxxxx ("KG" or the "Beneficiary"), and WESTERN PACIFIC AIRLINES, INC., a
Delaware corporation, having its principal place of business at 0000 Xxxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000 (the "Lessee").
The Beneficiary is the owner of the Aircraft referred to below which is
registered in the Philippines and for purposes of registering the Aircraft in
the United States will enter into a trust agreement with First Security Bank,
National Association or another trust company which is a "citizen of the United
States" under the Federal Aviation Act whereby such trust company will acquire
legal title to, and be the registered owner of, the Aircraft for the Term of
this Lease (such trust company, not in its individual capacity but solely as
owner trustee under the Trust Agreement is herein called "Lessor"). On or prior
to the Delivery Date, Lessor will enter into a Lease Supplement agreeing to be
bound by the terms hereof.
Lessee desires to lease from Lessor and KG is willing to cause Lessor to
lease to Lessee the Aircraft described herein upon and subject to the terms and
conditions of this Lease. In consideration of the mutual promises herein, KG and
Lessee agree as follows:
TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS
The following terms shall have the following meanings and shall be equally
applicable to both the singular and the plural forms of the terms defined
herein:
"Agreed Value" has the meaning set forth on Exhibit "I".
"Aircraft" means the Airframe leased hereunder, together with each Engine
initially installed on such Airframe when delivered and leased hereunder (or any
engine substituted for any such Engine pursuant to the terms of this Lease),
whether or not any of such initial or substituted Engines may from time to time
no longer be installed on such Airframe or on any other aircraft and, where the
context permits, shall include all Records relating to the Airframe and each
Engine and all Loose Equipment.
"Airframe" means (i) the Boeing Model 737-3S3 airframe, bearing
manufacturer's serial number 24060, excluding any Engines or other engines that
may be installed on such airframe from time to time, and leased by Lessor to
Lessee hereunder; and (ii) any and all Parts, so long as the same shall be
incorporated in or installed on or attached to such Airframe or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Article 6
hereof after removal from such Airframe.
"Approved Insurance Broker" shall mean XX Xxxxx & McLennan, or any other
reputable independent aviation insurance broker then arranging insurance for
Lessee.
"Authorized Maintenance Performer" means, with respect to any Airframe and
Engine maintenance inspections, repairs or overhauls in accordance with Lessee's
maintenance program, any individual or maintenance facility approved by the FAA
for the relevant work on Boeing 737-300 aircraft or engines such as the Engines,
(including, without limitation, Lessee if so approved), or, with the prior
written consent of Beneficiary, any other FAA approved maintenance or repair
facility.
"Basic Rent" for the Aircraft has the meaning set forth on Exhibit "I".
"Basic Term" has the meaning set forth in Article 3.1 hereof.
"Basic Term Expiration Date" has the meaning set forth in Exhibit "I".
"Beneficiary" means KG Aircraft Leasing Co., Ltd., an Irish corporation as
the beneficial owner of the Aircraft under the Trust Agreement, together with
its successors and, to the extent permitted hereunder, its assigns under the
Trust Agreement.
"Business Day" means any day other than a Saturday or a Sunday or other
than a day on which commercial banking institutions in the cities of New York
(or, in lieu thereof, another city designated by Beneficiary under Article 3.6),
Denver or London, are authorized by law to be closed.
"Cycle," with respect to the Airframe, an Engine or other engine, means
one take-off and landing of the Airframe or other airframe on which such Engine
or other engine is installed.
"Damage Notification Threshold" has the meaning set forth on Exhibit "I".
"Delivery Date" for the Aircraft means the date of the Lease Supplement
for the Aircraft, which date shall be the same date the Aircraft is delivered
to, and accepted by, Lessee hereunder.
"Dollars" or "$" means lawful currency of the United States of America.
"Eligible Claim" has the meaning specified in Article 5.4.
"Engine" means (i) each of the CFM International CFM56-3B2 engines
specified by manufacturer's serial numbers in a Lease Supplement on the Delivery
Date therefor, whether or not from time to time thereafter no longer installed
on such Airframe or installed on any other aircraft; or (ii) any engine which
may from time to time be substituted for an Engine pursuant to Article 9.2, 9.5
or 13.3 hereof; and (iii) any and all Parts, so long as the same shall be
incorporated in or installed on or attached to such Engine or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Article 6
hereof after removal from such Engine.
"Equipment" means, as the context may require, any or all of the Aircraft,
Airframe, Engines and Loose Equipment then leased hereunder. An "item of
Equipment" means, as the context may require, the Aircraft, Airframe, Engine or
Loose Equipment then leased hereunder.
"Event" means an event or occurrence which, with the passing of time
and/or the giving of notice, would constitute an Event of Default.
"Event of Default" shall have the meaning ascribed thereto in Article 14
hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any Engine shall
mean any of the following events with respect to such property: (i) the loss of
such property or of the use thereof due to the destruction of or damage to such
property which renders repairs uneconomic or which renders such property
permanently unfit for normal use by the Lessee for any reason whatsoever; (ii)
any damage to such property which results in an insurance settlement with
respect to such property on the basis of a total loss, or an actual,
constructive or compromised total loss; (iii) the theft or disappearance of such
property or the confiscation, condemnation, or seizure of, or requisition of
title to, or use of, such property by any governmental or purported governmental
authority (other than a requisition for use by the United States Government,
which in the case of any event referred to in this clause (iii) shall have
resulted in the loss of possession of such property by the Company for a period
in excess of (a) in the case of the requisition of title to such property by any
governmental or purported governmental authority, 90 consecutive days, or (b) in
any other case other than a requisition for use by the government of registry of
the Aircraft or any instrumentality or agency thereof, 180 consecutive days, or
(c) in the case of a requisition for use by the government of registry of the
Aircraft or any instrumentality or agency thereof such loss of possession shall
be for a period in excess of 365 days (iv) the "grounding" of the Aircraft for a
period of 180 days due to actions by a governmental body unless (a) the Lessee
is diligently carrying forward in a manner which does not discriminate against
the Aircraft all necessary or desirable steps to permit normal use of the
Aircraft by the Lessee and (b) the Lessee has obtained the approval of such
governmental body to operate, in the normal course of the Company's business,
one similarly grounded aircraft in its fleet within one year from the time of
"grounding," but in any event if the Aircraft has been "grounded" for a period
of one year; and (v) with respect to an Engine only, any divestiture of title to
such Engine treated as an Event of Loss pursuant to this Lease. 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.
"Expiration Date" has the meaning specified in Article 3.1.
"FAA" means the Federal Aviation Administration, the Administrator of the
Federal Aviation Administration, or any person, governmental department, bureau,
commission or agency succeeding to the functions of either of the foregoing in
the United States of America.
"Fair Rental Value" means the fair rental value of the Aircraft for the
relevant period determined by an independent aircraft appraisal expert agreed
upon by Beneficiary and Lessee, but if Beneficiary and Lessee are unable to
agree on such expert, each of them will select such an expert and the experts so
selected shall choose a third expert and the "Fair Rental Value" for such period
will be the average of the two least disparate appraisals. The cost of any such
appraisal(s) shall be borne equally by Beneficiary and Lessee.
"Federal Aviation Act" shall mean the United States Federal Aviation
Act of 1958, as amended.
"Federal Aviation Regulations" shall mean the regulations issued or
promulgated pursuant to the Federal Aviation Act from time to time.
"Flight Hour" has the meaning specified in Article 5.4.
"Government Entity" shall mean and include (i) any national government,
political subdivision thereof, or local jurisdiction therein; (ii) any
instrumentality, court, or agency of any thereof, however constituted; and (iii)
any association, organization, or institution of which any thereof is a member
or to which jurisdiction any thereof is subject or in whose activities any
thereof is a participant.
"Incentive Rate" means three percentage points above the prime rate of
interest charged by The Chase Manhattan Bank, N.A. from time to time as its
prime commercial lending rate, but, if prohibited by applicable law, the maximum
contract rate permitted by applicable law.
"Indemnitees" means Lessor and Beneficiary together in each case with
their respective shareholders, subsidiaries, directors, officers, agents,
employees, and such financial institutions as are providing financing of the
Aircraft.
"Inherent Defect" has the meaning specified in Article 5.4.
"Law" shall mean and include (i) any statute, decree, constitution,
regulation, order or any directive of any Government Entity; (ii) any treaty,
pact or other agreement to which any Government Entity is a signatory party;
(iii) any judicial or official administrative interpretation or application of
any thereof; and (iv) any amendment or revision of any thereof.
"Lease Agreement," "this Lease," "this Agreement," "herein," "hereof,"
"hereunder" or other like words means this Lease Agreement as the same may
hereafter from time to time be supplemented, amended, waived or modified
pursuant to the applicable provisions hereof, including, without limitation,
supplementation hereof by one or more Lease Supplements.
"Lease Supplement" means a document substantially in the form of Exhibit
"A" or Exhibit "F" hereto, to be entered into between Lessor and Lessee for the
purpose of adding Lessor as a party to this Agreement and/or subjecting the
Aircraft to the terms of this Lease Agreement or evidencing the expiration or
termination of this Lease Agreement and the return of the Aircraft to Lessor.
"Lessee's Interest" means that portion of the compensation paid by the
U.S. Government in connection with a requisition of the Aircraft constituting an
Event of Loss hereunder equal to the excess, if any, of (i) an amount equal to
the present value, discounted at 7% per annum of fair market rentals, determined
by independent appraisal, for the Aircraft for the balance of the Lease Term
from the date of requisition minus (ii) the present value, discounted at the
same rate, of the future rent payments due under this Agreement for the balance
of the Lease Term from the date of the requisition.
"Lessor's Tech Rep" means any person or organization designated as such by
Beneficiary to Lessee from time to time; provided that such person or
organization will not be an airline competing with Lessee, an affiliate thereof,
or an employee of either thereof or a subsequent lessee of the Aircraft or a
representative or employee thereof.
"Lessor Liens" shall mean Liens arising as a result of (i) claims against
Lessor or Beneficiary not related to the transactions contemplated by this Lease
or which violate any obligation of Lessor or Beneficiary under this Lease
Agreement; or (ii) Lessor Taxes; or (iii) the financing of the Aircraft by
Beneficiary or Lessor; or (iv) acts of Lessor or Beneficiary not contemplated
and expressly permitted under this Lease; or (v) taxes, fees and other charges
imposed against Lessor or any Indemnitee which are not indemnified against by
Lessee pursuant to Article 8.2; or (iv) claims against Lessor or Beneficiary
arising out of its transfer of all or any part of its interests in the Aircraft
or this Lease, other than a transfer pursuant to Article 9 or 15 hereof.
"Lessor Taxes" means taxes, fees and other charges:
(a) imposed as a direct result of activities of Lessor or
Beneficiary in the jurisdiction imposing the liability
unrelated to the transactions contemplated by this Agreement;
or
(b) taxes, fees and other charges imposed on Lessor or Beneficiary
by any jurisdiction or taxing authority in which Lessor or
Beneficiary, as applicable, is organized or has its principal
place of business or is otherwise subject to taxation as a
result of transactions unrelated to the transactions
contemplated hereby (I) on, based on, or measured by, the
gross or net income or gross or net receipts, including
capital gains taxes, minimum taxes from tax preferences,
alternative minimum taxes, branch profits taxes, accumulated
earnings taxes, personal holding company taxes, succession
taxes and estate taxes, and any state or local withholding
taxes on, based on or measured by gross or net income or (II)
on, or with respect to, or measured by, capital or net worth
or in the nature of a franchise tax or a tax for the privilege
of doing business (other than any such taxes, fees and other
charges in the nature of sales, use, rental, ad valorem,
license, property , value added or similar taxes)
(c) taxes, fees and other charges on, or with respect to, or
measured by, any trustee fees, commissions or compensation
received by Lessor in its capacity as owner trustee under the
Trust Agreement; or
(d) taxes, fees and other charges that are being contested as
provided in Article 8.2.
(e) imposed with respect to any period commencing or event
occurring prior to the Delivery Date or after the Expiration
Date (other than the receipt of payments due hereunder after
the Expiration Date); or
(f) imposed as a direct result of the gross negligence or wilful
misconduct of Lessor or Beneficiary;
(g) imposed as a direct result of a voluntary or involuntary sale,
transfer, assignment or disposition by Lessor or Beneficiary
of all or any part of its interest in the Aircraft or this
Agreement, except for any such sale, transfer, assignment or
other disposition which has occurred as a result of the
exercise of remedies hereunder, following the occurrence of an
Event of Default; or
(h) to the extent that same are imposed or arise as a direct
result of a Lessor Lien.
(i) taxes, fees and other charges resulting from the purchase or
other acquisition by Lessor or Beneficiary of the Aircraft,
any Engine or any Part or any interest therein; or
(j) taxes, fees and other charges imposed against a transferee or
assignee of Lessor or Beneficiary to the extent of the excess
of such taxes, fees and other charges over the amount thereof
which would have been imposed had there not been such a
transfer or assignment; or
(k) to the extent such taxes, fees or other charges (other than
U.S. income taxes described in Article 8.2(ii)) result from
any failure by Lessor or Beneficiary to file such returns,
statements or other documentation as shall be reasonably
available to Lessor or Beneficiary, as shall not subject
Lessor or Beneficiary to unreasonable cost or expense, and as
shall enable it to claim a reduced rate of tax or exemption
from tax with respect to any taxes, fees and other charges
subject to payment or reimbursement by Lessee hereunder and as
to which, in the case of returns, statements or other
documentation required by a change in applicable law or treaty
after the Delivery Date, Lessee shall have notified Lessor and
Beneficiary; or
(l) to the extent that such taxes, fees and other charges
constitute interest, fines or penalties if such interest,
fines or penalties result from the failure to file or late
filing of any tax return by Lessor or Beneficiary that is not
a result of an act or omission of Lessee or a breach of any of
Lessee's obligations under this Agreement.
"Letter of Credit" shall mean the letter of credit delivered by Lessee
pursuant to Articles 3.3 and 17 hereof, and any replacement therefor.
"Letter of Intent" means the letter of intent executed March 26 and March
28, 1997 by Beneficiary and Lessee, respectively.
"Letter of Quiet Enjoyment" means a letter of quiet enjoyment
substantially in the form attached hereto as Exhibit "B" provided to Lessee from
any transferee or assignee of Beneficiary and any holder of a security interest
in the Aircraft.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
security interest or claim.
"Loose Equipment" shall mean the equipment described as such in Appendix C
to Exhibit "A".
"Loss" has the meaning specified in Article 8.1.
"Maintenance Reserves" means the maintenance reserve payments payable by
Lessee pursuant to Article 5.4 hereof.
"Manufacturer" means The Boeing Company, in respect of the Airframe and
CFM International in respect of the Engines.
"Parts" means all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(excluding Engines or engines), so long as the same shall be incorporated in or
installed on or attached to the Airframe or any Engine or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Article 6
hereof after removal from such Airframe or Engine.
"Permitted Liens" has the meaning specified in Article 11.
"Records" means all items referred to in clauses (i), (ii) and (iii) of
Article 13.5.
"Remarketing Commencement Date" has the meaning specified in Article
8.2.
"Renewal Term" has the meaning set forth in Article 3.1 hereof.
"Rent" means Basic Rent and Supplemental Rent.
"Scheduled Aircraft Delivery" for the Aircraft means the scheduled date of
delivery for the Aircraft set forth in Article 2.2 hereof.
"Security Deposit" has the meaning specified in Article 3.3.
"Severable Equipment" means severable components or systems installed on
or affixed to the Airframe that are used to (i) provide individual
telecommunications or electronic entertainment to passengers aboard the
Aircraft, or (ii) provide capabilities to the Aircraft cockpit navigational or
computer systems in addition to those which the Aircraft had when delivered to
Lessee, if and for so long as such equipment shall be owned by, or shall be
subject to a security interest, license or other interest of, another Person
(other than any Affiliate of Lessee) in accordance with the provisions of
Article 6.4 hereof.
"Supplemental Rent" means any and all amounts, liabilities, indemnities
and obligations which Lessee assumes or agrees hereunder to pay to Lessor,
Beneficiary and/or any Indemnitee, including Maintenance Reserves, Security
Deposit and Agreed Value payments, but excluding Basic Rent.
"taxes, fees and other charges" has the meaning specified in Article
8.2.
"Term," in respect of the Aircraft, means the term for which the Aircraft
is leased hereunder pursuant to Article 3.1 hereof.
"Termination Value" means as of the Expiration Date the sum of:
(i) the excess, if any, of the present value of the remaining
monthly payments of Basic Rent during the Basic Term over the
present value of the monthly Fair Rental Value of the Aircraft
for the remainder of the Basic Term, in each case calculated
using a discount rate of 7% per annum; plus
(ii) any break funding and interest rate swap break costs actually
incurred by Beneficiary in connection with the early
termination of its financing, if any, then applicable to the
Aircraft as a result of the termination of the Lease.
"Trust Agreement" means the Trust Agreement to be entered into between
First Security Bank, National Association (or another Trust Company), and the
Beneficiary prior to the Delivery Date, as amended, modified or supplemented
from time to time.
"Wet Lease" means any arrangement whereby the Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which such Airframe and Engines or engines (i) shall be operated solely by
regular employees of the Lessee possessing all current certificates and licenses
that would be required under the Federal Aviation Act for the performance by
such employees of similar functions within the United States of America (it is
understood that cabin attendants need not be employees of the Lessee), (ii)
shall be maintained by the Lessee in accordance with its FAA-approved
maintenance program, and (iii) shall be insured by the Lessee on its policy in
accordance with the requirements of the Lease.
ARTICLE 2. ACCEPTANCE UNDER THE LEASE
2.1 CONDITIONS PRECEDENT.
Subject to and on the terms hereof, (i) Lessor hereby agrees to lease to
Lessee hereunder, and Lessee hereby agrees to lease from Lessor hereunder,
the Aircraft which shall be delivered to Lessee, such delivery to be
evidenced by the execution by Lessor and Lessee of a Lease Supplement, and
(ii) KG agrees to cause Lessor to lease the Aircraft to Lessee hereunder.
2.1.1 LESSOR CONDITIONS. Lessor's and KG's obligation to lease the
Aircraft hereunder shall be subject to satisfaction or waiver
of the following conditions precedent. On or prior to the
Delivery Date (except for (i) below), Lessor and KG shall have
received:
i. on the date of execution hereof, a resolution of the Board of
Directors of Lessee, certified by the Secretary or an
authorized officer of Lessee, duly authorizing the lease of
the Aircraft hereunder and the execution, delivery and
performance of this Lease, together with an incumbency
certificate as to the person or persons authorized to execute
and deliver such documents on behalf of Lessee;
ii. copies of the certificate of incorporation and by-laws of
Lessee, a good standing certificate, and copies of all
consents, authorizations and approvals of any governmental
agency or authority which are required in connection with the
execution, delivery and performance of the Lease by Lessee ;
iii. Uniform Commercial Code financing statements for filing in the
State of Colorado reasonably satisfactory to KG and duly
executed by Lessee; and
iv. a letter from the process agent appointed by Lessee hereunder
accepting such appointment.
2.1.2 OTHER LESSOR CONDITIONS. With respect to the Aircraft to be
leased hereunder, the following additional conditions shall be
waived or complied with at or prior to the time the Aircraft
is ready for delivery from Lessor to Lessee hereunder or on
such earlier date as may be applicable to such condition:
i. Lessor and KG shall have received the following on or before
the Delivery Date for the Aircraft:
A. a copy of Lessee's maintenance program for the
Aircraft;
B. a certificate signed by an Approved Insurance Broker
as to the due compliance with the insurance
provisions of Article 10 hereof with respect to the
Aircraft;
C. the Security Deposit described in Article 3.3;
D. a favorable opinion or opinions of counsel for Lessee,
addressed to Lessor and Beneficiary and dated the
Delivery Date for the Aircraft, concerning the matters
set forth in clauses (i) through (v), inclusive, and
clause (viii) of Article 4.2 hereof, and as to such
other matters as KG shall reasonably specify;
E. a favorable opinion of United States counsel to KG as to
such matters as KG may reasonably request;
F. a favorable opinion of Xxxxx, Xxxxx & Xxxxxx, special
FAA counsel concerning the proper registration of, and
recordation of Lessor's interest in the Aircraft;
G. such other documents as Lessor or KG may reasonably
request.
ii. Since March 31, 1997 there shall not have been any material
adverse change in Lessee's financial condition, and on the
Delivery Date for the Aircraft the following statements shall
be true, and Lessor and KG shall have received a certificate
signed by a duly authorized officer of Lessee, dated such
Delivery Date, stating that:
A. the representations and warranties contained in Article
4.2 hereof are true and accurate on and as of such date
as though made on and as of such date (except to the
extent that such representations and warranties relate
to an earlier date);
B. no event has occurred and is continuing, or would result
from the lease of the Aircraft, which constitutes an
Event or an Event of Default; and
C. all necessary approvals, authorizations, consents,
licenses, certificates and orders of the FAA and any
other governmental or regulatory authority having
jurisdiction with respect to the ownership, use or
operation of such Aircraft or the transactions
contemplated by this Lease and required by the terms
hereof to be obtained by Lessee have been obtained, and
such approvals, authorizations, consents, licenses,
certificates and orders are in full force and effect and
constitute sufficient authorization therefor.
2.1.3 LESSEE'S CONDITIONS.
Lessee's obligation to Lease the Aircraft shall be subject to satisfaction
or waiver of the following conditions precedent:
i. DELIVERY CONDITION. The Aircraft shall be delivered to Lessee
registered in Lessor's name in the United States with a valid
standard certificate of airworthiness issued by the FAA, with
all systems functioning in accordance with the Manufacturer's
recommendations. Lessee shall have received at least 48 hours
prior written notice of the proposed Delivery Date. In
addition, the Aircraft shall comply with the delivery
conditions defined in Exhibit "D" to this Lease. Except as so
specified in this section and/or in Exhibit"D", the Aircraft
shall be delivered to Lessee AS IS, WHERE IS, and upon
acceptance by Lessee shall be without representation or
warranty (except as to title) and subject to the exclusions
from warranties set forth in Article 4.1.
ii. OTHER CONDITIONS. The conditions set forth in Article
2.1.1(i), (ii) and (iv) and in Article 2.1.2(i)(F) and (G) and
in Article 2.1.2(ii)(A) and (C), in each case with respect to
Lessor and Beneficiary, mutatis mutandis, shall have been met.
In addition, Lessee shall have received from Beneficiary a
certificate, dated as of the Delivery Date, confirming that
the representation and warranty of Beneficiary set forth in
Article 8.2 of the Lease is true and accurate.
2.2 TIME OF DELIVERY.
Subject to the provisions of the next paragraph and satisfaction or waiver
of the conditions set forth in Article 2.1, the Aircraft shall be
delivered to Lessee, and Lessee shall accept delivery of the Aircraft on
or about November 25, 1997 (the "Scheduled Aircraft Delivery") or such
earlier or later date agreed mutually in writing by Beneficiary and
Lessee. Beneficiary shall give Lessee at least 48 hours prior written
notice of the proposed delivery of the Aircraft. The pre-delivery and
delivery procedures are described in Exhibit "D" hereto. Lessee's
acceptance of delivery of the Aircraft shall be evidenced by the execution
by Lessee and Lessor of a Lease Supplement substantially in the form of
Exhibit "A" hereto.
If KG expects to be unable to cause Lessor to tender delivery of the
Aircraft to Lessee on the Scheduled Aircraft Delivery date, KG shall
notify Lessee as soon as practicable prior thereto. If Lessor shall not
have tendered the Aircraft for delivery to Lessee by December 25, 1997 for
any reason other than the failure of Lessee to fulfill its obligations
hereunder, Lessee shall have the right, by written notice to KG, to
terminate this Lease, and KG shall thereupon return the Security Deposit
theretofore paid to Lessee, including interest thereon at the rate paid by
KG's bank on such deposit. If Lessor tenders delivery of the Aircraft to
Lessee on the Scheduled Aircraft Delivery Date, or prior to December 25,
1997 if there is a delay, and Lessee refuses to accept delivery for any
reason other than the failure of Lessee's conditions precedent contained
in Article 2.1.3 to have been met, KG may terminate this Lease and apply
the Security Deposit theretofore paid, including interest thereon at the
rate paid by KG's bank on such deposit against any actual damages suffered
by it as a result of Lessee's breach. In any suit by Lessee or KG for
breach of the obligation to take or deliver the Aircraft, as the case may
be, such party's damages shall be limited to its actual damages suffered,
and both Lessee and KG waive the right to claim consequential or similar
damages.
2.3 PLACE OF DELIVERY.
The Aircraft shall be delivered to Lessee hereunder, at KG's option, at XX
Xxxxxxxx/Tramco in Everett, Washington, or Colorado Springs, Colorado or
at such alternate site as may be agreed between Lessee and KG.
2.4 DELIVERY FUEL.
Fuel in the tanks of the Aircraft at delivery shall be recorded in the
Lease Supplement.
2.5 INDEMNITY.
i. The Lessee shall indemnify and hold harmless the Indemnitees
from and against any and all liabilities, damages, losses
(including costs and expenses incidental thereto) arising by
reason of death or injury to any observer or any employee of
the Lessee, arising out of, or in any way connected with any
demonstration flight and inspection of the Aircraft conducted
pursuant to Exhibit "D" hereto.
ii. The Lessor shall indemnify and hold harmless Lessee and its
shareholders, affiliates, directors, officers, agents and
employees from and against any and all liabilities, damages,
losses (including costs and expenses incidental thereto)
arising by reason of death or injury to any observer or any
employee of the Lessor or any Indemnitee, arising out of, or
in any way connected with any demonstration flight and
inspection of the Aircraft conducted pursuant to Exhibit "D"
hereto.
ARTICLE 3. TERM AND RENT
3.1 TERM.
The Aircraft shall be leased to Lessee hereunder for (i) a term commencing
on the Delivery Date for the Aircraft and ending on the Basic Term
Expiration Date (the "Basic Term"), and (ii) at Lessee's option, for an
additional period of up to two (2) years (the "Renewal Term"), unless, in
each case, earlier terminated as herein provided. If Lessee desires to
exercise its option to extend the Term of this Lease for the Renewal Term,
it shall give Beneficiary irrevocable written notice of such election not
less than 180 days prior to the last day of the Basic Term specifying the
length of the Renewal Term. The Renewal Term shall commence at the end of
the Basic Term and shall continue to the date specified in such notice. If
the Lessee exercises its option to extend the Term, the parties shall
execute a Lease Supplement evidencing the extension of the Term prior to
the end of the Basic Term. The date on which the Term of this Lease
expires or earlier terminates is herein called the "Expiration Date".
3.2 BASIC RENT.
Lessee shall pay to Beneficiary Basic Rent for the Aircraft monthly, in
advance, on the Delivery Date and on the same day as the Delivery Date in
each month thereafter during the Basic Term (or, if there is no such day
in such month, on the last day of such month), and monthly in advance on
the first day of the Renewal Term, if any, and on the same day of each
month thereafter during the Renewal Term.
3.3 SECURITY DEPOSIT.
Beneficiary has received from Lessee the sum of $[ ]* ([ ]* dollars) (the
"Signing Deposit") in cash pursuant to the terms of the Letter of Intent.
The Lessee shall pay to Beneficiary upon execution hereof $[ ]* (the
"Second Deposit").
In addition, Lessee shall pay to Beneficiary (i) $[ ] * on September 1,
1997 (the "Third Deposit") and (ii) on the Delivery Date, $[ ]* (the
"Fourth Deposit").
The Signing Deposit, the Second Deposit, Third Deposit and Fourth Deposit
aggregating $[ ]* are collectively referred to as the "Security Deposit".
Any cash portion of the Security Deposit shall be held by the Beneficiary
in a separate interest bearing account until such time as it is applied to
Lessee's obligations as herein provided or returned to Lessee. On or
before the tenth day after the Delivery Date, Lessee shall provide a
letter of credit in accordance with Article 17 for the Security Deposit;
provided that if such Letter of Credit is provided on the Delivery Date,
the Fourth Deposit shall not be payable by Lessee in cash. Upon the
receipt of such letter of credit, Beneficiary shall reimburse to Lessee
the Security Deposit, including interest thereon at the rate paid on such
deposit by Beneficiary's bank.
In the event that the Aircraft is not delivered to Lessee hereunder due to
the fault of Lessee, Beneficiary shall have the right to apply the
Security Deposit, including interest earned thereon, against any actual
damages suffered by it as a result of Lessee's breach. In the event that
the Aircraft is delivered to Lessee hereunder, the Security Deposit shall
be held by the Beneficiary as security for the timely and faithful
performance by Lessee of all of Lessee's obligations under this Lease, and
Lessee hereby grants Beneficiary a security interest in all sums deposited
under this Article 3.3. Lessee agrees to execute and file with the
appropriate governmental entities any and all documents necessary and
reasonably requested by Lessor to evidence and perfect such security
assignment in favor of Beneficiary. If an Event of Default shall have
occurred which is continuing in addition to all other rights Lessor and
Beneficiary shall have under the New York Uniform Commercial Code as a
secured party, Beneficiary may, but shall not be obligated to, use, apply,
set-off or retain all or any portion of the Security Deposit in payment
for sums due by Lessee, to compensate Lessor or Beneficiary for any sums
advanced as a result of an Event of Default by Lessee or to apply toward
any losses or expenses Lessor or Beneficiary actually incurs as a result
of such Event of Default. If Beneficiary uses or applies all or any
portion of such Security Deposit as provided above, such application shall
not be deemed a cure of any Events of Default, and Lessee shall within
five (5) days after written demand therefor deposit with Beneficiary in
cash an amount sufficient to restore the Security Deposit to the aggregate
amount of such Security Deposit prior to Beneficiary's use or application
and Lessee's doing so shall be deemed a cure of any such Event of Default
but the failure of Lessee to do so shall be a material breach of this
Lease by Lessee. Provided that an Event of Default shall not have occurred
and then be continuing and provided that Lessee shall have paid all
amounts owing hereunder, any cash portion of the Security Deposit,
including interest earned thereon, and any Letter of Credit shall be
returned to Lessee at the end of the Term and Lessee's return of the
Aircraft in compliance with Article 13 hereof; provided that if the Letter
of Credit or any cash portion of the Security Deposit is not returned to
Lessee because an Event of Default shall have occurred and then be
continuing or any amount owed by Lessee shall then be unpaid, such Letter
of Credit or cash portion of the Security Deposit, in each case, to the
extent not applied hereunder shall be returned to Lessee at such time as,
in the case of an Event of Default, such Event of Default is no longer
continuing or Lessee's obligations under Article 15 have been satisfied in
full, as the case may be, or, in the case of an unpaid amount owed by
Lessee, such unpaid amount has been satisfied in full.
3.4 SUPPLEMENTAL RENT.
Lessee also agrees to pay to Beneficiary, or the Person entitled thereto
hereunder, any and all Supplemental Rent as the same shall become due and
owing. Lessee will also pay to Beneficiary (or to the Person entitled
thereto), as Supplemental Rent, on demand, interest at the Incentive Rate
on any part of any Basic Rent not paid when due and on any other payment
of Supplemental Rent not paid when due in accordance with the terms hereof
for the period for which the same shall become due until the same shall be
paid.
3.5 PAYMENTS ON BUSINESS DAY.
If any date on which a payment of Rent becomes due and payable is not a
Business Day, the Rent payment otherwise due and payable on such date
shall be due and payable on the next Business Day (without interest being
payable as a result of such delay) unless such Business Day falls in the
next calendar month, in which case such amount shall be due on the
preceding Business Day.
3.6 PLACE OF PAYMENT.
Notwithstanding any other provision hereof, all payments of Rent (other
than indemnity payments in favor of a Person other than Beneficiary)
hereunder shall be payable in Dollars, in immediately available funds, to
the Beneficiary's account at:
The Bank of Tokyo-Mitsubishi, Ltd., New York
Chips UID: 076 886 ABA No. 026 009632
A/C The Bank of Tokyo-Mitsubishi, Ltd.,
London Branch
00-00 Xxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxxx
Tel: 00 000 000 0000
Fax: 00 000 000 0000
F/O KG Aircraft Leasing Co., Ltd.
Number 245662 Current Account
or at such other location in the United States as Beneficiary
shall from time to time designate in writing.
3.7 PROHIBITION AGAINST SETOFF, COUNTERCLAIM, ETC.
Lessee's obligation to pay Basic Rent and Security Deposit hereunder shall
be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation: (i) any setoff,
counterclaim, recoupment, defense or other right which Lessee may have
against Lessor, Manufacturer, Beneficiary, or any other person for any
reason whatsoever, (ii) any defect in the title, (iii) any defect in the
airworthiness, condition, design, operation, or fitness for use, or any
damage to or loss or destruction, of the Equipment, or any interruption or
cessation in the use or possession thereof by Lessee for any reason
whatsoever, (iv) any insolvency, bankruptcy, reorganization or similar
proceedings by or against Lessee, or (v) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing and
Lessee hereby waives, to the extent permitted by applicable law, any and
all rights which it may now have or which may at any time hereafter be
conferred upon it by statute or otherwise to terminate, cancel, quit or
surrender this Lease or the Equipment, or to any abatement, suspension,
deferment or reduction of Rent, except in each case, with respect to any
period in which Lessee's use of the Aircraft is adversely affected by
Lessor's breach of the covenant set forth in Article 18.5 hereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
4.1 LESSOR'S REPRESENTATIONS AND WARRANTIES.
THE EQUIPMENT, ONCE ACCEPTED BY LESSEE HEREUNDER, IS LEASED HEREUNDER
"AS-IS", EXCEPT FOR DISCREPANCIES (IF ANY) IDENTIFIED IN LEASE SUPPLEMENT
NO. 1 WHICH LESSOR IS OBLIGED TO REMEDY AFTER ACCEPTANCE AND,
NOTWITHSTANDING THE DELIVERY CONDITION REQUIRED HEREBY, ONCE ACCEPTED BY
LESSEE THE PARTIES CONFIRM THAT (A) THE AIRCRAFT, THE AIRFRAME AND EACH
ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE, (B) LESSOR IS NOT A MANUFACTURER OF PROPERTY OF SUCH
KIND, AND (C) LESSOR AND BENEFICIARY HAVE NOT MADE, NOR SHALL BE DEEMED TO
HAVE MADE, AND LESSOR AND BENEFICIARY WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR ANY PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO
THE AIRCRAFT OR ANY PARTY THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION
OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT
OR ANY PART THEREOF; provided, however, Lessor warrants that on the
Delivery Date, (i) the Lessor shall have whatever interest in and to the
Aircraft that was conveyed to it by the Beneficiary; (ii) the Aircraft
shall be free of Lessor Liens attributable to it in its individual
capacity; and (iii) it is a "citizen of the United States" as defined in
Section 40102 of Title 49 of the United States Code. Beneficiary warrants
that on or prior to the Delivery Date, Beneficiary shall have caused good
title to the Aircraft to be transferred to Lessor free and clear of all
Liens other than any Lien permitted under clause (i) of Article 11 hereof.
THE REPRESENTATIONS AND WARRANTIES OF LESSOR AND BENEFICIARY SET FORTH IN
THIS ARTICLE 4 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND
WARRANTIES OF LESSOR AND BENEFICIARY WITH RESPECT TO THE EQUIPMENT,
INCLUDING FITNESS FOR USE AND MERCHANTABILITY, WHETHER WRITTEN OR ORAL,
EXPRESS OR IMPLIED.
Beneficiary represents and warrants that:
(i) Beneficiary is a limited liability company incorporated and
existing under the laws of Ireland and has the power and
authority to enter into and to perform its obligations under
this Agreement;
(ii) this Agreement has been duly authorized by all necessary
corporate action on the part of Beneficiary, has been duly
executed and delivered by Beneficiary and constitutes the
valid, legal and binding obligation of Beneficiary enforceable
in accordance with its terms except as may be limited by
applicable bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally and except as equitable
remedies such as specific performance may be in the discretion
of the courts;
(iii) the execution and delivery by Beneficiary of this Agreement,
and performance of any of the transactions by Beneficiary
contemplated hereby, have received and Beneficiary has
complied with, every necessary consent, approval, order, or
authorization of, or registration with, or the giving of prior
notice to, any Government Entity in Ireland having
jurisdiction with respect to the execution and delivery of
this Agreement or the validity and enforceability hereof or
the satisfaction of all monetary and other obligations of
Beneficiary hereunder; and
(iv) the provisions of Article 18.1 and 18.10 concerning applicable
law and jurisdiction are valid and binding on Beneficiary
under the laws of Ireland and no provision of this Agreement
is prohibited, unlawful or unenforceable under any such laws.
4.2 LESSEE'S REPRESENTATIONS AND WARRANTIES.
Lessee represents and warrants that:
i. Lessee is a corporation duly organized and existing in good
standing under the laws of the State of Delaware, has full
power, authority and legal right to own its properties and to
carry on its business as presently conducted and to perform
its obligations under this Lease; holds all licenses,
certificates and permits from governmental authorities
necessary for the performance of its obligations hereunder and
is a "citizen of the United States" (as defined in section
40102 of the Federal Aviation Act) holding an air carrier
operating certificate issued by the Secretary of
Transportation pursuant to chapter 447 of the Federal Aviation
Act for aircraft capable of carrying ten or more individuals
or 6,000 pounds or more of cargo.
ii. This Lease has been duly authorized by all necessary action on
the part of Lessee, does not require any approval of
shareholders of Lessee, and neither the execution and delivery
hereof nor the consummation of the transactions contemplated
hereby nor compliance by Lessee with any of the terms and
provisions hereof do or will violate any provision of the
articles of incorporation or by-laws of Lessee or any law,
rule, regulation, judgment, order or decree of any government
or governmental instrumentality or court having jurisdiction
over Lessee or any of its activities or properties, or do or
will result in any breach of, or constitute any default under,
or result in the creation of any Lien upon any property of
Lessee under, any indenture, mortgage, deed of trust,
conditional sale contract, loan or credit agreement, or other
agreement or instrument to which Lessee is a party or by which
Lessee or its properties may be bound (other than this Lease
Agreement).
iii. Except for the registration of the Aircraft and the filing of
this Lease Agreement with the FAA and the filing of the
financing statements referred to in Article 2.1.1(iii) hereof,
neither the execution and delivery by Lessee of this Lease nor
the performance by Lessee of any of the transactions
contemplated hereby require the consent, approval, order or
authorization of, or registration with, or the giving of
notice to, the FAA, or any other domestic or foreign
governmental authority.
iv. This Lease has been duly executed and delivered by Lessee and
constitutes, and each Lease Supplement when executed and
delivered by Lessee will constitute, legal, valid and binding
obligations of Lessee, enforceable in accordance with their
terms except as such enforceability may be affected by
bankruptcy, insolvency, reorganization or other laws of
general application affecting creditors' or lessors' rights
and except for general principles of equity.
v. There are no suits or proceedings pending or, to the knowledge
of Lessee, threatened in any court or before any regulatory
commission, board or other administrative governmental agency
against Lessee which may reasonably be expected to have a
materially adverse effect on the financial condition of
Lessee.
vi. Lessee has filed or caused to be filed all tax returns which
are required to be filed and has paid or caused to be paid all
taxes shown to be due or payable on said returns and on any
assessment received by Lessee, to the extent that such taxes
have become due and payable.
vii. The balance sheet of Lessee as of December 31, 1996 and the
statements of income and retained earnings of the Lessee for
the three fiscal years then ended and the balance sheet of
Lessee as of March 31, 1997 (copies of each of which have been
furnished to Beneficiary), are complete and correct and fairly
set forth Lessee's financial condition as of such dates and
the results of its operations for such periods, and since
March 31, 1997, there has been no materially adverse change in
such condition or operations.
viii. The provisions of Articles 18.1 and 18.10 concerning
applicable law and jurisdiction are valid and binding on
Lessee.
ix. Lessee's maintenance program for the Aircraft complies with
all FAA requirements.
x. The principal place of business and chief executive office of
the Lessee is the address set forth at the beginning of this
Lease.
4.3 SUPPLIERS' WARRANTIES.
Lessor hereby assigns to Lessee any and all warranties, representations,
services, policies and product support plans of Manufacturer or any
subcontractor, vendor or supplier of any Equipment or part hereof. Lessor
authorizes Lessee, to the extent it may legally do so, to enforce in its
own name such rights, claims and interests as Lessor or Beneficiary may
have under any warranty, representation, service policy or product support
plan of Manufacturer or any subcontractor, vendor or supplier of any
Equipment, or part thereof, and to retain any benefit resulting therefrom
to the extent the same relates to Lessee's interests in the Equipment
under this Lease and is not compensation in respect of work performed on
the Aircraft prior to the Delivery Date; provided, however,
notwithstanding anything herein to the contrary, if at any time an Event
of Default shall have occurred and be continuing: (i) at Beneficiary's
option, the authorization hereby given to Lessee may be suspended until
such time as no Event of Default which has occurred is then continuing or
terminated when the Lease is terminated and Beneficiary shall be entitled
to assert and enforce such rights, claims and interests, whether as
substitute party plaintiff or otherwise, and Lessee shall cooperate with
Beneficiary to enforce such rights, claims and interests and (ii) whether
or not Beneficiary exercises its option under clause (i) above,
Beneficiary shall be entitled to receive all proceeds resulting from any
such assertion or enforcement or rights, claims or interests and, after
deducting from the proceeds thereof all costs and expenses, including
attorneys' fees that have been incurred by Beneficiary in connection
therewith, Beneficiary may hold the remaining proceeds until Lessee shall
have cured, or Beneficiary in writing shall have waived, all Events of
Default, or at Beneficiary's option, if there is in existence an Event of
Default, apply all or any such remaining proceeds to the payment of any
obligation of Lessee at the time due hereunder and the balance, if any,
shall be payable to Lessee when Lessee shall have cured, or Beneficiary
shall have waived, all Events of Default. The assignment and authorization
hereby given as to the Equipment shall be effective so long, and only so
long, as such Equipment shall be subject to this Lease; provided, that
Lessee may pursue claims after the end of the Term against maintenance
providers subject to the same conditions set forth above in this Article
4.3; and provided further that the assignment and authorization shall be
permanent and free of all conditions with respect to any item of Equipment
which ceases to be subject to this Lease Agreement as the result of
replacement or substitution in accordance with the terms hereof.
ARTICLE 5. POSSESSION AND USE
5.1 POSSESSION.
Subject to the right of Lessee to deliver possession of any item of
Equipment to the Manufacturer thereof for testing or other similar
purposes or to any Authorized Maintenance Performer for service, repair,
maintenance or overhaul work on such item of Equipment or any part thereof
or for alterations or modifications in or additions to such item of
Equipment to the extent required or permitted by the terms of Articles 5
and 6 hereof or to any member of a pooling arrangement as provided in
Article 6.2, Lessee shall not sublease, assign or otherwise transfer
possession of any item of Equipment, or any part thereof, leased hereunder
without the prior written consent of Beneficiary which consent will not be
unreasonably withheld, but may be subject to such conditions as it
reasonably deems necessary to protect its interests and the interests of
Lessor; PROVIDED that a Wet Lease of 90 days or less (including all stated
renewals) may be entered into without Beneficiary's consent so long as
such Wet Lease is expressly subject and subordinate to this Lease and
Lessee provides a copy thereof to Beneficiary upon commencement thereof.
This Lease and all or any part of Lessee's rights hereunder shall not be
assigned or otherwise in any way transferred or hypothecated by Lessee
without the prior written consent of Lessor, and any purported assignment,
transfer or hypothecation without the prior written consent of Lessor
shall constitute an Event of Default hereunder and be void.
Lessor agrees for the benefit of Lessee and for the benefit of any other
holder of a security interest in any engine owned by Lessee, any lessor of
any engine leased to Lessee and any conditional vendor of any engine
purchased by Lessee subject to a conditional sale agreement or any other
security agreement, that no interest shall be created hereunder in any
engines so owned, leased or purchased and that neither Lessor nor its
successors or assigns will acquire or claim as against Lessee or any such
mortgagee, lessor or conditional vendor or other holder of a security
interest or any successor or assignee of any thereof, any right, title, or
interest in such engine as a result of such engine being installed on the
Airframe; PROVIDED that such agreement of Lessor shall not be for the
benefit of any lessor or secured party of an airframe leased to Lessee or
purchased by Lessee subject to a conditional sale or other security
agreement or for the benefit of any mortgagee or any other holder of a
security interest in an airframe owned by Lessee on which Lessee then
proposes to install an Engine, unless such lessor, conditional vendor,
other secured party or mortgagee party has effectively agreed (which
agreement may be contained in such lease, conditional sale or other
security agreement or mortgage) that neither it nor its successors or
assigns will acquire, as against Lessor or Beneficiary any right, title or
interest in an Engine as a result of such Engine being installed on such
airframe.
5.2 LAWFUL OPERATIONS; USE.
Lessee will not permit any item of Equipment to be maintained, used or
operated in violation of any law, rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign), or in violation of any airworthiness certificate, license or
registration relating to any item of Equipment issued by any such
authority, unless (a) Lessee could not reasonably have known of such
violation in advance or prevented it through commercially reasonable
efforts or (b) the validity thereof is being contested in good faith and
by appropriate proceedings, but only so long as, (i) such proceedings do
not involve the likelihood of the sale, forfeiture or loss of any item of
Equipment or interest therein, and (ii) such violation will not subject
Lessor or Beneficiary to any criminal liability. Lessee shall base and use
the Equipment solely in its commercial airline operations, and shall not
use or permit the use of any item of Equipment for any purpose for which
such item of Equipment is not designed and reasonably suitable.
5.3 MAINTENANCE.
Lessee, at its own cost and expense shall, subject to Articles 5.4 and
6.3: (i) cause an Authorized Maintenance Performer to service, repair,
maintain, overhaul and test each item of Equipment leased hereunder (A) so
as to keep such item of Equipment in the same condition as when delivered
to Lessee hereunder (except as otherwise permitted hereunder), ordinary
wear and tear excepted, and in good operating condition, (B) so as to keep
the Aircraft in the condition as may be necessary to enable the
airworthiness certification of such Aircraft by the FAA to be maintained
in good standing (except for periods when such airworthiness certificate
is not in effect due to the performance of maintenance or overhaul of the
Equipment and periods when the airworthiness certificates of 737-300
aircraft in general are withdrawn or suspended by the FAA) and (C) in
strict compliance with Lessee's overhaul and maintenance program approved
by the FAA (ii) comply with all airworthiness directives issued by the FAA
prior to the Expiration Date having a mandatory compliance date prior to
12 months after the Expiration Date; (iii) maintain all records, logs and
other materials required by the FAA to be maintained with respect to such
Equipment; (iv) promptly furnish to Lessor such information as may be
required to enable Lessor and/or Beneficiary to file any reports required
to be filed by Lessor and/or Beneficiary with any governmental authority
because of Lessor's ownership of the Equipment.
5.4 MAINTENANCE PAYMENTS.
i. DEFINITIONS.
In this Article 5.4, the following expressions shall have the
meanings respectively ascribed thereto:
ELIGIBLE CLAIM means a claim submitted by the Lessee for
payment or reimbursement of the costs
incurred (including labor, parts and
materials) in performing or causing to be
performed in relation to the Aircraft in
accordance with such maintenance program any
or all of the maintenance processes referred
to in Article 5.4 (iii) (a) and (b);provided
that, subject to the provisions of Article
5.4(vi)(d) hereof, the amount payable or
reimbursable hereunder with respect to an
Eligible Claim shall not include those costs
attributable to the repair of foreign object
or other accidental damage to the Aircraft
or any Engine, negligent or other improper
maintenance, repair, modification,
alteration, use or operation of the Aircraft
or any Engine, or an Inherent Defect or any
cost which is reimbursable from insurance or
warranty claims.
FLIGHT HOUR means with respect to the Airframe, each
hour or part thereof (measured to one
decimal place) which elapses from takeoff to
touchdown and with respect to each Engine,
each hour or part thereof (measured to one
decimal place) which elapses from takeoff to
touchdown (whether such Engine is installed
on the Airframe or another airframe), in
each case as recorded in the relevant
aircraft log book or the applicable
technical records for the item of Equipment.
HOURLY RATE means the hourly rate payable by way of
maintenance reserve in respect of each
complete Flight Hour (pro rata for part
thereof) for the Airframe and each Engine.
INHERENT DEFECT means any defect in the Aircraft or
any part thereof arising out of a fault or
error in the design, manufacture or
construction thereof.
ii. MAINTENANCE RESERVE PAYMENTS.
The Lessee shall pay Maintenance Reserves to the Beneficiary
throughout the Term of this Lease for the period commencing on
the Delivery Date, monthly in arrears on the 15th day of each
month, each payment to be made in respect of the previous
calendar month based on a utilization report to be furnished
by Lessee on the 15th day of each month; provided always that
the final payment shall be made on the date on which the Term
expires in respect of that part of the calendar month ending
on that date. Each payment shall be calculated by multiplying
the applicable Hourly Rate or per Cycle rate by the number of
Flight Hours or Cycles, as the case may be, flown by the
Airframe or each Engine, as applicable, as evidenced by the
relevant aircraft log book for the relevant period.
iii. MAINTENANCE RESERVE ACCOUNTS.
Beneficiary shall maintain for its own purposes one account in
respect of each of the following maintenance processes:
(a) the Airframe heavy maintenance (C-7) or equivalent check (but
excluding rotable repairs) and landing gear overhauls; and
(b) two such accounts for each Engine (which expression shall, for
this purpose, not extend to any rotable components or Engine
components forming part of a quick engine change ("QEC")
assembly, nose cowl and thrust reverser) one for off-wing
scheduled maintenance and the accomplishment of comparable
work performed during unscheduled shop visits, and the other
for Engine life limited part ("LLP") replacement, but
excluding, in each case, QEC repair, foreign object damage,
operational misuse and Lessee's negligence.
Auxiliary power unit maintenance is not covered by the
Maintenance Reserves. The five Maintenance Reserve accounts
are to be maintained by the Beneficiary for its own
administrative convenience. Maintenance Reserves shall accrue
interest at the rate offered by Beneficiary's bank for one
month deposits from time to time. Interest accrued on
Maintenance Reserves shall be credited monthly and available
for the payment of Eligible Claims. The amount available for
the payment of Eligible Claims shall be the amount paid by
Lessee with respect to the relevant Maintenance Reserve
account plus interest accrued thereon.
iv. RATES.
The Hourly Rate and per Cycle rate payable shall be as set forth on
Exhibit "I" hereto:
v. ADJUSTMENT OF HOURLY RATES.
The Hourly Rates for Engine off-wing scheduled maintenance are
computed on the basis of 1.7 Flight Hours per Aircraft Cycle. On
each anniversary of the Delivery Date during the Term, the total
Engine Flight Hours for each Engine recorded in respect of the
previous twelve months shall be compared with the Cycles flown for
such Engine and, the Hourly Rate for such Engine applicable with
respect to Maintenance Reserve payments due from Lessee after such
adjustment and prior to the next annual adjustment shall be as
provided in Exhibit C hereof for such recomputed ratio of Flight
Hours to Cycles.
vi. APPLICATION OF MAINTENANCE RESERVES.
(a) Beneficiary's obligation to reimburse Lessee for any Eligible
Claims referred to in Article 5.4 (i)/(iii) is subject to the
conditions that: (i) before any work with respect to such
Eligible Claim is performed, Lessee shall notify Beneficiary
of the proposed date of the check or shop visit and the work
to be performed (to the extent then known to Lessee); and (ii)
following completion of the work with respect to such Eligible
Claim, the Lessee shall present to Lessor's Tech Rep all
worksheets, invoices, vouchers and/or receipts with respect
thereto which are reasonably necessary to establish the amount
of such Eligible Claim;
(b) Within 20 days after Lessor's Tech Rep receives such
documentation, Beneficiary will pay the amount of the Eligible
Claim to Lessee by making a drawdown against the amount in the
applicable Maintenance Reserve account. In the event that the
amount of such Eligible Claim exceeds the amount available for
reimbursement thereof pursuant to the terms hereof, the Lessee
shall be responsible for the payment of such excess.
The cost of replacement of LLPs at the first scheduled shop
visit for each Engine after the Delivery Date shall be
allocated as follows: (i) Beneficiary's share of the cost of
any LLP shall be an amount equal to the cost of the LLPs
replaced during such shop visit times a fraction the numerator
of which is the number of Cycles accumulated on the LLP prior
to the Delivery Date and the denominator is the number of
Cycles accumulated on the LLP since it was installed in such
Engine and (ii) the Lessee's share shall be the cost of the
LLP minus the Beneficiary's share. The Lessee may draw down
from respective LLP accounts of the Maintenance Reserves for
its share of the cost of such first scheduled shop visit, but
if the Lessee's share of such cost exceeds the amount in such
account Lessee will pay the difference. Beneficiary will pay
its share at the time Lessee draws from the Maintenance
Reserves.
Notwithstanding anything else to the contrary contained in
this Lease, in no event shall the Beneficiary be obligated to
pay any amounts with respect to Eligible Claims (whether out
of the applicable reserve account or otherwise) so long as an
Event under Article 14.1(a) or an Event of Default shall have
occurred and be continuing.
(c) Any repair or overhaul work that is performed by Lessee shall
be billed at Lessee's actual, fully-burdened labor cost (not
to exceed 130% of direct cost) and without any xxxx-up in the
cost of materials. If work is done by a company affiliated
with Lessee, charges made by such affiliate shall be
reasonable market rates for such maintenance work.
(d) For the avoidance of doubt, Maintenance Reserves in respect of
the Engines may be used for (i) the cost of a repair or
overhaul of an Engine which would otherwise be reimbursable
from the Maintenance Reserves and which is undertaken at the
same time as other remedial work which is excluded from
reimbursement (for example repair of a foreign object damage)
subject to the requirements of Article 5.4(vi)(a), and (ii) to
pay for the cost of bringing any Engine into compliance with
the return conditions hereof.
(e) NEITHER LESSOR NOR BENEFICIARY SHALL HAVE ANY DUTY TO LESSEE
TO DETERMINE WHETHER ANY ITEM OF EQUIPMENT IS REQUIRED TO BE
OVERHAULED OR MAINTAINED, OR TO OBSERVE OR INSPECT THE
OVERHAUL OR MAINTENANCE OF ANY ITEM OF EQUIPMENT, AND NEITHER
LESSOR NOR BENEFICIARY SHALL INCUR ANY LIABILITY OR OBLIGATION
TO LESSEE BY REASON OF THE FAILURE OF ANY EQUIPMENT TO BE
PROPERLY OVERHAULED OR MAINTAINED AFTER THE DELIVERY DATE OR
BY REASON OF LESSOR'S OR BENEFICIARY'S ELECTION TO OBSERVE OR
INSPECT OR NOT TO OBSERVE OR INSPECT ANY OVERHAUL OR
MAINTENANCE OF ANY ITEM OF EQUIPMENT.
vii. Lessee acknowledges that the Maintenance Reserve payments for
an item of Equipment shall become the unencumbered property of
Beneficiary upon payment thereof by Lessee, free of any claims
or rights thereto by Lessee and any Maintenance Reserves
remaining at the end of the Term shall belong to Beneficiary
provided that, if an Event of Loss occurs with respect to the
Aircraft or the Airframe, any Maintenance Reserves then
remaining shall be paid to Lessee upon satisfaction of
Lessee's obligation under Article 10 to pay, or cause to be
paid, the Agreed Value and all other amounts then due
hereunder, to Beneficiary. To the extent Maintenance Reserve
payments are used to pay for the cost of any overhaul or
maintenance contemplated in this Article 5.4, any recoveries
from Manufacturer or any subcontractor, vendor or supplier in
respect thereof shall be for the exclusive benefit of
Beneficiary.
On the 15th day of each month, Lessee shall notify Beneficiary
and Lessor's Tech Rep of the number of Flight Hours and Cycles
which have been accumulated on the Airframe and the number of
Flight Hours and Cycles that have been accumulated on each
Engine during the preceding calendar month, and Lessee shall
provide Beneficiary and Lessor's Tech Rep with such supporting
information and documentation as Beneficiary or Lessor's Tech
Rep may from time to time reasonably request.
5.5 REGISTRATION AND INSIGNIA.
Lessee agrees that it will at all times at Beneficiary's expense cooperate
with Lessor and Beneficiary in maintaining the U.S. registration of the
Aircraft. Upon delivery of the Aircraft, Lessee shall fasten or cause to
be fastened and maintained in the cockpit of the Aircraft adjacent to the
airworthiness certificate for the Aircraft and on each Engine, in a
prominent location, metal nameplates at least three inches by five inches
bearing the following legend:
"First Security Bank, National Association
Owner Trustee and Lessor"
Except as above provided, Lessee will not allow the name of any person,
firm or corporation to be placed on the Airframe or any Engine as a
designation that might be interpreted as a claim of ownership or to a Lien
thereon; provided, however, Lessee may cause the Airframe to be painted
with its name and in its livery during the Term hereof.
ARTICLE 6. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS; MODIFICATIONS AND
ADDITION
6.1 REPLACEMENT OF PARTS.
Lessee, at its own cost and expense (but subject to Article 5.4 and 6.3
hereof), will replace as promptly as practicable all Parts which may from
time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use.
All replacement Parts shall be free and clear of all Liens other than
Permitted Liens and shall 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.
All 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 owned or paid for by Lessee (or provided
by a Manufacturer or service provider pursuant to a warranty, service
contract or similar agreement) and incorporated or installed in or
attached to such Airframe or Engine in compliance with the requirements
for replacement Parts specified above. Immediately upon any such
replacement Part becoming incorporated or installed in or attached to the
Airframe or an Engine as above provided, without further act: (i) title to
such replacement Part shall thereupon vest in Lessor, (ii) such
replacement Part shall become subject to this Lease and be deemed part of
such Airframe or Engine, as the case may be, for all purposes hereof to
the same extent as the Part originally incorporated or installed in or
attached to such Airframe or Engine, and (iii) title to the removed Part
shall thereupon vest in Lessee, free and clear of all Lessor Liens and all
rights of Lessor and Beneficiary, and shall no longer be deemed a Part
hereunder.
6.2 POOLING OF ENGINES AND PARTS.
(i) The Lessee may subject the Engines to normal interchange or pooling
agreements with the Manufacturer or responsible scheduled commercial air
carriers customary in the airline industry and entered into by Lessee in
the ordinary course of business so long as (a) such Engine is required to
be returned to Lessee within two (2) months, (b) no transfer of title to
the Engine occurs (or if such transfer of title occurs it will be treated
as an Event of Loss), (c) the other terms of this Lease continue to be
observed with respect to the Engines and (d) Lessee continues to be fully
responsible to Lessor for the performance of all obligations hereunder
relating to such Engines
(ii) Any Part removed from the Airframe or an Engine as provided in
Article 6.1 may be subjected by Lessee to a normal pooling arrangement
customary in the airline industry entered into in the ordinary course of
Lessee's business, provided the part replacing such removed Part shall be
incorporated or installed in or attached to the Airframe or Engine in
accordance with Article 6.1 as promptly as possible after the removal of
such removed Part. In addition, any replacement part when incorporated or
installed in or attached to the Airframe or any Engine in accordance with
Article 6.1 may be owned by an air carrier subject to such a normal
pooling arrangement, provided Lessee, at its expense, as promptly
thereafter as possible either (a) causes title to such replacement part to
vest in Lessor in accordance with Article 6.1 by Lessee acquiring title
thereto for the benefit of, and transferring such title to, Lessor free
and clear of all Liens other than Permitted Liens, or (b) replaces such
replacement part by incorporating or installing in or attaching to the
Airframe or Engine a further replacement part owned by Lessee free and
clear of all Liens other than Permitted Liens, and causing title to such
further replacement part to vest in Lessor in accordance with Article 6.1
6.3 ALTERATIONS, MODIFICATIONS AND ADDITIONS.
Subject only to the last paragraph of this Article 6.3, Lessee, at its own
expense, shall make such alterations and modifications in and additions to
the Equipment as may be required from time to time by the FAA or other
governmental authority having jurisdiction, unless the validity thereof is
being contested in good faith and by appropriate proceedings (but only so
long as (i) such proceedings do not involve the likelihood of sale,
forfeiture or loss of any Equipment, or any interest therein and (ii) such
proceedings do not subject Lessor or Beneficiary to any criminal
liability).
In addition, Lessee, at its own expense, may from time to time make such
alterations and modifications in and additions to each item of Equipment
as Lessee may deem desirable in the proper conduct of its business,
provided that no such alteration, modification or addition diminishes the
value or utility of such item of Equipment or impairs the condition or
airworthiness thereof below the value, utility, condition and
airworthiness thereof immediately prior to such alteration, modification
or addition, assuming such item of Equipment was then of the value and
utility and in the condition and airworthiness required to be maintained
by the terms of this Lease; provided further that no such alteration,
modification, or addition with an estimated cost in excess of $[ ]* shall
be made (other than an alteration, modification, or addition required to
be made pursuant to the first sentence of this Article 6.3 or as provided
in Article 6.4) without the prior written consent of Beneficiary. Any
permitted modification shall be made in accordance with, and in compliance
with, FAA-approved modification documentation, any FAA certification
issues shall have been addressed to Lessor's Tech Rep's reasonable
satisfaction, and copies of all such documentation will be supplied to
Lessor's Tech Rep. Title to all Parts incorporated or installed in or
attached or added to any item of Equipment as the result of such
alteration, modification or addition shall, without further act, vest in
Lessor; provided, however, that so long as no Event under Article 14.1(a)
or Event of Default shall have occurred and be continuing, at any time
during the Term in effect for an item of Equipment, Lessee may remove any
Part from such item of Equipment, provided that (i) such Part is in
addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such item of
Equipment at the time of the delivery thereof hereunder or any Part in
replacement of, or substitution for, any such Part, (ii) such Part is not
required to be incorporated or installed in or attached or added to such
item of Equipment pursuant to the terms of the first sentence of this
Article 6.3, and (iii) such Part can be removed from such item of
Equipment without causing any material damage thereto and without
diminishing or impairing the value, utility, condition or airworthiness
which such item of Equipment would have had at such time had such
alteration, modification or addition not occurred. Upon the removal by
Lessee of any such Part as provided above, title thereto shall, without
further act, vest in Lessee free of Lessor Liens and all rights of Lessor
and Beneficiary and such Part shall no longer be deemed a Part hereunder.
Any Part not removed by Lessee as above provided prior to the return of
the item of Equipment to Lessor hereunder shall remain the property of
Lessor.
Neither Lessor nor Beneficiary shall bear any liability or cost for any
alteration, modification, addition, or for any grounding or suspension of
certification of any item of Equipment or for loss of revenue; provided
always, however, that in the event that the cost (material and labor) of
(i) compliance with any airworthiness directive ("AD") issued by the FAA
during the Term which requires terminating action during the Term, or
within twelve months after the Expiration Date or (ii) compliance with any
regulatory requirement necessary for the Aircraft to meet FAR Part 121,
exceeds $[ ]*, Lessee shall pay the first $[ ]* and the excess will be
shared between Lessee and Beneficiary as follows. The Beneficiary's share
shall be calculated by application of the following formula:
[1 - (N - M)/(300 - (X + M))] x (C - $[ ]*)
where,
"N" equals 120;
"M" equals the number of whole months of the Term that have
elapsed as of the date of actual compliance with such AD or
regulatory change;
"X" equals the number of whole months from the date of
manufacture of the Aircraft to the Delivery Date; and
"C" equals the cost of compliance with such AD or regulatory
change.
The Lessee's share will be the balance. If during any calendar year Lessee
is required to comply with more than ten (10) ADs and/or regulatory
changes, and the cost to Lessee of such compliance exceeds $[ ]* in such
calendar year, then Beneficiary will contribute to the eleventh (11th) and
any subsequent AD or regulatory change during such calendar year in
accordance with the above formula without deducting $[ ]* from "C."
Lessee shall give Beneficiary prior written notice of any such AD or FAR before
commencing any alteration, modification or addition of the Aircraft with respect
thereto. Any work that is performed by Lessee with respect to any such AD or FAR
shall be billed at Lessee's actual fully burdened labor cost (which shall not
exceed 130% of direct cost) and without any xxxx-up in the cost of materials.
Lessee shall provide to Lessor's Tech Rep all original invoices, work sheets and
or receipts reasonably necessary to establish costs for which reimbursement is
sought, and Beneficiary shall reimburse Lessee for its share of any eligible
costs within 20 days of receipt of such documentation.
6.4 CERTAIN MATTERS REGARDING SEVERABLE EQUIPMENT.
Lessee may at any time and from time to time, so long as no Event under
Article 14.1(a) or Event of Default has occurred and is continuing,
install on the Airframe, subject to the requirements of the second
paragraph of Article 6.3 above, Severable Equipment that is (i) owned by
another Person and leased to Lessee, (ii) sold to Lessee by another Person
subject to a conditional sale contract or other retained security
interest, (iii) leased to Lessee pursuant to a lease which is subject to a
security interest in favor of another Person or (iv) installed on the
Aircraft subject to a license granted to Lessee by another Person, and in
any such case (A) Lessor will not acquire or claim, as against any such
other Person, any right, title or interest in any such Severable Equipment
solely as a result of its installation on the Airframe, (B) Lessee shall
notify such Person of Lessor's and Beneficiary's respective interest in
the Aircraft, and (C) Lessee shall procure that, and such Person shall
confirm in writing to Lessor that, upon the occurrence of any default
under the applicable lease, conditional sale agreement, security agreement
or license, such Person shall not be entitled to detain the Aircraft or
repossess such Severable Equipment unless it shall, in connection with
such repossession, restore the Aircraft to the condition it would have
been in had the installation of such Severable Equipment not occurred.
ARTICLE 7. INSPECTION; FINANCIAL INFORMATION; RECORD
7.1 INFORMATION AND INSPECTION.
During the Term of this Lease, Lessee shall furnish to Lessor and
Beneficiary such additional information concerning the location,
condition, modification status, compliance with the maintenance program,
installed equipment, use and operation of each item of Equipment as Lessor
or Beneficiary may reasonably request, and Lessee shall permit any person
designated by Lessor or Beneficiary in writing (other than a person who is
not eligible to be designated as Lessor's Tech Rep unless such person is
inspecting the Aircraft in connection with Beneficiary's remarketing
efforts during the final year of the Lease or during the continued
existence of an Event of Default), at Beneficiary's expense (or if an
Event under 14.1(a) or an Event of Default has occurred and is continuing,
at Lessee's expense), to inspect each item of Equipment, its condition,
use, and operation and the Records maintained in connection therewith, and
to meet with the principal officers of Lessee, all at such reasonable
times and as often as Lessor or Beneficiary may reasonably request so that
such inspections and meetings do not unreasonably interfere with the
operation or maintenance of the Aircraft or the conduct of the business of
Lessee. Any such inspection of the Aircraft shall be a visual walk-around
inspection which shall not include opening any panels, bays or the like or
any disassembly or removal of components which are not then opened,
disassembled or removed in the course of Lessee's maintenance of the
Aircraft at the time of such inspection. Lessor and Beneficiary shall have
no duty to make any such inspection and shall not incur any liability or
obligation by reason of not making such inspection.
7.2 FINANCIAL INFORMATION.
Lessee also agrees to furnish Lessor and Beneficiary with the following
during the Term of this Lease;
i. within one hundred twenty (120) days after the end of each
fiscal year of Lessee (or such longer period of time as agreed
by Lessor and Lessee), a balance sheet and statements of
income and retained earnings of Lessee, as of the close of
such fiscal year, setting forth in comparative form the
figures for the previous fiscal year, as certified by
independent public accountants, including their certificate
and accompanying comments;
ii. promptly upon their becoming available, copies of all regular
and periodic reports filed by Lessee with the Securities and
Exchange Commission and the principal securities exchange on
which the common stock of Lessee is listed; and
iii. such other information concerning Lessee as Beneficiary may
from time to time reasonably request.
7.3 REPORTS OF AIRCRAFT USE.
Without limiting Lessee's other obligations under this Lease, Lessee shall
also provide in a timely manner Beneficiary with details of: (i)
replacement of Engines, auxiliary power unit, avionics, undercarriage and
control surface changes (and the reason for such changes), (ii) major
repairs in excess of the Damage Notification Threshold, modifications,
alterations and additions to an item of Equipment, (iii) service bulletins
and airworthiness directives applicable to and accomplished with respect
to any item of Equipment, (iv) copies of any repair or modification
drawings and approvals or data covering any unique or non-standard
modifications to an item of Equipment, in each case with respect to such
preceding calendar month; and (v) within 30 days of the end of each
calendar year of the Term copies of Lessee's work papers prepared to
apportion Lessee's usage of the Aircraft among the various states. In the
case of (i), (ii), (iii) and (iv), the data shall be provided on a monthly
basis.
ARTICLE 8. INDEMNIFICATION BY LESSEE.
8.1 GENERAL INDEMNITY.
Lessee agrees to pay, and on demand to indemnify and hold harmless,
Lessor, Beneficiary and their respective successors, assigns, agents and
servants, from and against any and all claims, damages, losses,
liabilities (including, but not limited to, any claim or liability for
strict liability in tort or otherwise, including, without limitation,
liability arising under any applicable environment, noise or pollution
control statute, rule or regulation), demands, suits, judgments, causes of
action and all legal proceedings, whether civil or criminal, penalties,
fines and other sanctions, and any costs and expenses incurred in
connection therewith, including attorney's fees, which may result from,
relate to or arise out of the condition, lease, sub-lease, possession, use
or operation of any item of Equipment, or which may be caused by any
defect in any item of Equipment, latent or otherwise, arising from the
material or any article used therein or from the design, testing or use
thereof or from any maintenance, service, repair, overhaul or testing
thereof, (any such basis for an indemnity set forth above being referred
to herein as a "Loss"); provided, however, that in all cases referred to
in this Article 8.1, excluding any Loss to the extent that such Loss (i)
is the subject matter of another indemnity provision of this Lease
Agreement or consists of a cost or expense imposed on Lessor or
Beneficiary by the terms hereof or is incurred by Lessor or Beneficiary in
performing its obligations to Lessee hereunder, (ii) arises as a result of
the wilful misconduct or gross negligence of any Indemnitee, (iii) arises
as a result of Lessor Taxes or a Lessor Lien or any breach by any
Indemnitee of its representations or obligations hereunder, (iv) is caused
by acts, omissions or events which occur following the return of
possession of the Aircraft to Lessor or its designee at a time when no
Event or Default shall have occurred and then be continuing, (v) consists
of costs, fees or expenses related to the negotiation preparation or
execution of the Letter of Intent or the Lease Agreement, (vi) consists of
costs, fees or expenses arising out of the acquisition or transfer by
Lessor or any Indemnitee of any interest in the Aircraft or this Lease
Agreement except any such transfer in connection with the exercise of
remedies hereunder in accordance with the terms of Article 15 hereof after
the occurrence of an Event of Default or as a result of a replacement of a
Part or an Engine pursuant to Article 6.1 or 9.2 hereof, (vii) arises out
of or results from acts of any Indemnitee prior to the Delivery Date,
(viii) is one with respect to which the Indemnitee has a right to
participate in a proceeding with respect to such Loss, if such Indemnitee
refuses to implead, to the extent reasonable and practicable, any party
whom Lessee believes is ultimately responsible with respect to such Losses
or to assert, to the extent reasonable and practicable, any cross-Losses
Lessee deems appropriate where it in not possible for Lessee to assert
such rights itself, (ix) relates to the performance by any Indemnitee of
its obligations under this Lease Agreement or arising out of any default
under any financing of any item of Equipment that is not an Event of
Default hereunder, (x) arises, out of any change in any agreement related
to the financing of the Aircraft, any Engine or any Part thereof, unless
Lessee has expressly agreed to undertake such obligations, and/or (xi)
relates to the costs, fees and any other out-of-pocket expenses incurred
in connection with the establishment, maintenance or restructuring of the
financing or refinancing of the Aircraft or any Indemnitee's interest in
the trust estate established under the Trust Agreement or the creation or
maintenance of such trust estate or to any action or dispute between the
parties to any agreement with respect to the financing of any Item of
Equipment not resulting from the occurrence and continuance of an Event of
Default hereunder.
Notwithstanding anything to the contrary contained in this Article 8.1,
the indemnification provided for herein shall not include indemnification
of any person in such person's capacity as designer, manufacturer of or
maintenance performer for the Aircraft, any Engine or any Part.
The following shall apply to all claims for indemnity under this Article
8.1: an Indemnitee shall promptly notify Lessee of any claim as to which
indemnification is sought upon obtaining actual knowledge thereof;
provided that the failure to provide such notice shall not release Lessee
from any of its obligations to indemnity hereunder or from any other
obligation that the Lessee may have to such Indemnitee at law or in equity
(provided that Lessee's obligations to indemnify hereunder shall in no
event be increased due to such a failure to provide notice and no payment
by Lessee to such Indemnitee shall be deemed to constitute a waiver or
release of any right or remedy which Lessee may have against such
Indemnitee for any damages as a result of such failure to provide notice).
Subject to the rights of insurers under policies of insurance maintained
by Lessee, Lessee shall investigate, and provided no Event under Article
14.1(a), (b), (f) or (g) of the Lease or Event of Default under the Lease
shall have occurred and be continuing, at its sole cost and expense,
defend or compromise (other than with respect to a compromise of a
non-monetary claim the compromise of which shall adversely affect such
Indemnitee,) any claim for which indemnification is sought under this
Article 8.1, and the Indemnitee shall cooperate, at Lessee's expense, with
all reasonable requests of Lessee in connection therewith; provided that
if such an Event or Event of Default has occurred and is continuing, the
applicable Indemnitee shall in good faith contest such claim at the
request and expense of Lessee; and provided further that such proceedings
do not involve the likelihood of loss or forfeiture of title to the
Aircraft (unless Lessee shall have posted a bond or other security
reasonably satisfactory to such Indemnitee in respect of such risk) or any
material risk of any civil or criminal penalty being assessed against any
Indemnified Person. Where Lessee or the insurers under a policy of
insurance maintained by Lessee undertake the defense of an Indemnitee with
respect to a claim, no additional legal fees or expenses of such
Indemnitee in connection with the defense of such claim shall be
indemnified hereunder unless such fees or expenses were incurred at the
written request of Lessee or such insurers; provided, however, that if in
the written opinion of counsel to such Indemnitee a potential material, or
an actual, conflict of interest exists where is it advisable for such
Indemnitee to be represented by separate counsel, then the reasonable fees
and expenses of such separate counsel shall be borne by Lessee. Subject to
the requirements of any policy of insurance, an Indemnitee may participate
at its own expense in any judicial proceeding controlled by Lessee
pursuant to the preceding provisions; provided that such party's
participation does not, in the opinion of the independent counsel
appointed by Lessee or its insurers to conduct such proceedings, interfere
with such control (except in the case specified in the proviso to the
third sentence of this paragraph; and such participation shall not
constitute a waiver of the indemnification provided in this Article 8.1.
Notwithstanding anything to the contrary contained herein, Lessee shall
not under any circumstances be liable for the fees and expenses of more
than one counsel for all Indemnitee except in the case specified in the
proviso to the third sentence of this paragraph.
No Indemnitee shall enter into a settlement or other compromise or consent
to a judgment with respect to any Loss without the prior written consent
of Lessee, which consent shall not be unreasonably withheld or delayed,
unless such Indemnitee waives its rights with respect to such Losses under
this Article 8.1; provided that the payment of an amount to which a Loss
relates when legally compelled to do so by a Government Entity of
competent jurisdiction after which a request for a refund of such amount
is diligently pursued by appropriate procedures in accordance with the
terms of this Article 8.1 will not be considered a settlement, compromise
or consent to judgment requiring Lessee's prior consent or resulting in a
waiver of such Indemnitee's rights of indemnification with respect to such
amount. Except as otherwise provided in the immediately preceding
sentence, the entering into any such settlement or compromise or consent
without Lessee's prior written consent shall constitute a waiver by such
Indemnitee of all its rights of indemnification hereunder in respect of
such matter.
To the extent that a claim indemnified by Lessee under Article 8.1 is in
fact paid in full by Lessee and/or an insurer under a policy of insurance
maintained by Lessee, Lessee and/or such insurer, as the case may be,
shall be subrogated to rights and remedies of the Indemnitee on whose
behalf such claim was paid (other than rights of such Indemnitee under
insurance policies maintained at its own expense) with respect to the
transaction or event giving rise to such claim. So long as no Event under
Article 14.1(a), (b), (f) or (g) or Event of Default under the Lease shall
have occurred and be continuing, should an Indemnitee receive any payment
from any person other than Lessee or its insurers and except for payments
received under insurance policies maintained by an Indemnitee at its own
expense, in whole or in part, with respect to any claim already paid by
Lessee or its insurers hereunder, such Indemnitee shall promptly pay the
amount so received (but not an amount in excess of the amount Lessee or
any of its insurers has paid in respect of such claim) over to Lessee.
Notwithstanding anything to the contrary contained in this Article 8.1,
the indemnification provided for in this Article 8.1 shall only apply to
matters which occur or fail to occur subsequent to the acceptance of the
Aircraft hereunder and prior to the Expiration Date and return of the
Equipment pursuant to the terms hereof. The indemnities contained in this
Article 8.1 shall expire and be of no further force and effect with
respect to any claim or other circumstance set forth in the first
paragraph of this Article 8.1 notice of which shall not have been given to
Lessee in writing (referring expressly to this Article 8.1) on or prior to
the second anniversary of the Expiration Date.
8.2 GENERAL TAX INDEMNITY.
(i) Beneficiary represents and warrants that, on the date hereof it is,
and on the day prior to the Delivery Date it will be, eligible for a
withholding rate of zero under the double taxation treaty then in
effect between the United States and Ireland, and that payments of
Rent may be made directly to it without withholding on account of US
income taxes by Lessee.
(ii) Lessee agrees that, if as the result of a change in the U.S.-Irish
Tax Treaty occurring after the Delivery Date ("Irish Treaty Change")
withholding of U.S. income tax is required with respect to any
payment of Rent hereunder, each payment of Rent due after the
effective date of such change shall be free of all withholdings and
deductions for or on account of taxes, duties and any other charges
of any nature whatsoever, present or future, unless Lessee is
required by operation of law or otherwise to withhold or deduct
amounts for or on account of any of the same, in which event, Lessee
will pay such additional amounts as will result in the receipt by
Beneficiary on the due date for payment thereof of the sums which
would otherwise have been receivable on such date had there been no
such withholding or deduction; Lessor and Beneficiary shall file and
provide to Lessee such returns, statements or other documentation as
shall enable it to claim any reduced rate of tax withholding and any
exemption from tax withholding with respect to any taxes, fees or
other charges to which the terms of Article 8.2 hereof apply, in
each case, to the extent properly available under applicable law or
any applicable treaty without subjecting Lessor or Beneficiary to
any unreasonable cost or expense. If and to the extent that Lessor
and Beneficiary fail to file or provide any such return, statement
or other documentation (as to which, in the case of any such item
required by a change in applicable law or treaty after the Delivery
Date, Lessee has notified them) and as a result thereof either (i)
tax withholding is required at a rate which is higher than that
which would have been applicable had such return, statement or other
documentation been filed or provided or (ii) tax withholding is
required which would not have been required had such return,
statement or other documentation been filed or provided, Lessee's
obligation to make the increased payment otherwise required by this
paragraph of Article 8.2(ii) hereof shall be limited to the amount
which would have been required if Lessor or Beneficiary had filed or
provided such return, statement or other documentation.
If, as a result of any change in applicable statutory or any
applicable tax law or treaties which has an effective date after the
Delivery Date, including, without limitation, an Irish Treaty
Change, any withholding or deduction is required to be made by
Lessee (or Lessor as withholding agent) and/or taxes, fees and other
charges indemnified by Lessee pursuant to this Article 8.2 are
imposed in an amount which increases the cost to Lessee of making
Basic Rent payments hereunder by more than ten (10) percent in any
calendar year, the parties will in good faith negotiate for 60 days
following written notice from Lessee a method of restructuring the
transaction in order to avoid the withholding, deduction, taxes,
fees or other charges (during which period Lessee shall make all
payments in the full amount required hereby) and if no solution can
be found in such period which is acceptable to the parties, then
Beneficiary will begin remarketing the Aircraft on such 60th day
(the "Remarketing Commencement Date"). For the period starting on
the Remarketing Commencement Date, and ending on the earlier of (i)
the date of sale or commencement of a new lease for the Aircraft,
and (ii) twelve months from the Remarketing Commencement Date, this
Lease will continue (unless terminated by Lessor as provided below),
Lessee will continue to pay Basic Rent (including any gross-up
required by this Article 8.2(11)), and Beneficiary will remarket the
Aircraft. During such period, Lessor may require Lessee to return
the Aircraft upon thirty days' prior written notice and, on the date
the Aircraft is returned, it shall meet the return conditions
required herein this Lease Agreement shall terminate and Lessee
shall pay the Termination Value to Beneficiary.
(iii) If such a change of law or treaty described in the preceding
paragraph occurs and has an effective date prior to the Delivery
Date such that Beneficiary's representation above would be incorrect
in any material respect on the Delivery Date, the parties will in
good faith attempt to restructure the transaction to avoid any such
tax withholding and if no solution can be found by the Scheduled
Delivery Date, which is acceptable to the parties, Beneficiary may
terminate this Lease and will return the amounts paid in respect of
the Security Deposit, plus interest thereon at the rate paid on such
deposit by Beneficiary's bank.
In addition, and not by way of limiting the foregoing, Lessee agrees to
pay and to indemnify and hold harmless Lessor and Beneficiary from, all
license fees and all taxes, levies, imposts, duties, assessments, charges
and withholdings of any nature whatsoever, together with any penalties,
additions to tax, fines and interest thereon (collectively, "taxes, fees
and other charges") imposed against the Lessor, Beneficiary, Lessee or any
item of Equipment or any part thereof by any Federal, state, or local
government or governmental subdivision or taxing authority in the United
States of America or any possession or territory thereof, or by any other
country or international taxing authority, or by any subdivision or taxing
authority of any of the foregoing upon or with respect to the Equipment or
any part thereof, or interest therein, or upon the manufacture, financing,
servicing, maintenance, warranty, repair, replacement, insuring,
improvement, transfer of title, purchase, erection, installation, testing,
acceptance or rejection, ownership, delivery, non-delivery, lease,
sublease, rental, acquisition, registration, rebuilding, abandonment,
transportation, storage, possession, use, operation, condition, sale,
return or other disposition thereof, or upon the rentals, receipts or
earnings arising therefrom, or with respect to any contract relating to
the manufacture, construction, acquisition or delivery of the Equipment or
otherwise with respect to the transactions contemplated by this Agreement.
Notwithstanding the foregoing, the indemnity provided for in this Article
8.2 does not extend to any Lessor Taxes or to any withholding of US income
taxes except to the extent provided in Article 8.2(ii) hereof.
If a claim is made against Lessor or Beneficiary for any taxes, fees and
other charges for which Lessor or Beneficiary intends to seek
indemnification hereunder, Lessor or Beneficiary shall promptly notify
Lessee. If requested by Lessee in writing, Lessor or Beneficiary shall, in
good faith contest or, at Lessee's request if permitted by applicable law,
permit Lessee to contest (and in such case, provide all reasonable
cooperation to Lessee) the validity, applicability or amount of such
taxes, fees and other charges by (A) resisting payment thereof if
practicable, (B) paying the same under protest, if protest is necessary
and proper, or (C) if payment be made, using reasonable efforts to obtain
a refund thereof, in appropriate administrative and judicial proceedings
including appeals other than to the Supreme Court. Notwithstanding
anything to the contrary herein, in no event shall Lessor and Beneficiary
be required or Lessee permitted to contest the imposition of any taxes,
fees or other charges asserted against Lessor or Beneficiary for which
Lessee is obligated pursuant to this Section 8.2 unless (i) on demand from
time to time, Lessee pays any and all expenses incurred by Lessor and/or
Beneficiary reasonably allocable to such contest (including, without
limitation, all costs, expenses, losses, legal and accounting fees and
disbursements), (ii) no Event under Article 14.1(a) or Event of Default
shall have occurred and be continuing, (iii) the action to be taken will
not result in the likelihood of sale, forfeiture or loss of, or the
creation of any lien on the Equipment or any interest therein (except if
Lessee shall have adequately bonded such lien or otherwise made provision
to protect the interests of Lessor and Beneficiary in a manner reasonably
satisfactory to Lessor and Beneficiary or result in any criminal
penalties, and (iv) Lessee shall have delivered to Lessor and Beneficiary,
at Lessee's sole expense, an opinion of independent tax counsel selected
by Lessee and reasonably acceptable to the indemnified party to the effect
that a reasonable basis for such contest exists. If any such contest
involves payment of the taxes, fees and other charges in question, Lessee
shall either make such payment directly to the appropriate authority or
furnish to Lessor and Beneficiary sufficient funds on an interest-free and
after-tax basis to make such payment. Lessor or Beneficiary, as the case
may be, shall consult with Lessee in good faith regarding the means of
contesting such claim and shall keep Lessee reasonably informed regarding
the progress of such contest. If Lessor or Beneficiary shall obtain a
refund of or be entitled to a credit against other liability for all or
any part of such taxes, fees and other charges paid by Lessee, Lessor or
Beneficiary as the case may be shall pay Lessee the amount of such refund
(or credit), after deducting all costs and expenses that were incurred by
Lessor or Beneficiary in connection therewith; provided, however, that
such amount shall in no event be payable before such time as Lessee shall
have made all payments and indemnities then due to Lessor or Beneficiary
under this Agreement; provided further, however, that the aggregate amount
of all payments pursuant to this sentence by Lessor or Beneficiary with
respect to any taxes, fees and other charges shall not exceed the
aggregate amount of all payments made by Lessee pursuant to this Section
8.2 with respect to such taxes, fees and other charges. If in addition to
such refund (or credit) Lessor or Beneficiary shall receive an amount
representing interest on the amount of such refund (or credit), or would
have received interest but for an offsetting liability for taxes, fees and
other charges not indemnified by Lessee hereunder, Lessee shall promptly
be paid that portion of such interest (or such interest that would have
been received) that is fairly attributable to any tax, fees and other
charges paid or reimbursed by Lessee prior to the receipt of such refund
for the period from Lessee's payment or reimbursement to the payment to
Lessee of such refund, reduced by the amount of any Federal, state or
local income taxes payable by the Indemnified Party by reason of the
receipt or accrual of such interest and increased by the amount of any tax
benefits resulting from such payment to Lessee; provided, however, that no
amount shall be payable under this or the preceding sentence during any
period in which an Event of Default has occurred and is continuing. If
Lessor or Beneficiary receives an award of attorney's fees in a contest
for which Lessee has paid an allocable portion of the contest expenses,
Lessor or Beneficiary, as applicable, shall pay to Lessee the same
proportion of the amount of such award as the amount of attorney's fees
paid or reimbursed by Lessee bears to the total amount of the attorney's
fees actually incurred by Lessor or Beneficiary, as applicable, in
conducting such contest. In case any report or return is required to be
made with respect to any obligation of Lessee under or arising out of this
Article 8.2, Lessee will either make such report or return in such manner
as will show the ownership of Lessor in the Aircraft and send a copy of
such report or return to Lessor, or will notify Lessor of such requirement
and make such report or return in such manner as shall be reasonably
satisfactory to Lessor. Lessor shall provide to Lessee such information
within its possession or control as is necessary to enable Lessee to
properly make such return or report.
If Lessor or Beneficiary shall release, waive, compromise or settle, or
fail to pursue any required contest of any claim which may be
indemnifiable by Lessee pursuant to this Article 8.2 without the written
permission of Lessee, Lessee's obligation to indemnify Lessor or
Beneficiary with respect to such claim (and all directly related claims
and claims based on the outcome of such claim) shall terminate, and Lessor
or Beneficiary, as applicable, shall repay to Lessee any amount previously
paid or advanced with respect to such claim, plus interest at the rate
that would have been payable by the relevant taxing authority with respect
to a refund of such taxes, fees and other charges. Notwithstanding the
foregoing, Lessor and Beneficiary will not be required to contest the
imposition of any taxes, fees and other charges and shall be permitted to
settle or compromise any claim without Lessee's consent if such Lessor or
Beneficiary, as applicable, (I) shall waive its right to indemnity under
this Article 8.2 with respect to such taxes, fees and other charges (and
any directly related claim and any claim the outcome of which is
determined based upon the outcome of such claim) and (II) shall pay to
Lessee any amount previously paid or advanced by Lessee pursuant to this
Article 8.2 with respect to such Tax, plus interest at the rate that would
have been payable by the relevant taxing authority with respect to a
refund of such taxes, fees and other charges.
Lessee further agrees that any payment or indemnity made under Article 8.1
or this Article 8.2 by Lessee shall include any amount necessary to hold
Lessor and Beneficiary harmless on an after-tax basis (after giving effect
to all deductions, credits and other tax benefits available to the
recipient of such indemnity payments with respect to the matter
indemnified under Article 8.1 or with respect to the payments of the
taxes, fees and other charges indemnified under Article 8.2) from all
taxes, fees and other charges required to be paid by Lessor or Beneficiary
with respect to such payment or indemnity under the laws of any domestic
or foreign governmental or taxing authority, agency or subdivision.
At Lessee's request, the computation of any amount owed by Lessee or any
amount owed to Lessee by an Indemnitee pursuant to Article 8.1 hereof or
by Lessor or Beneficiary pursuant to this Article 8.2 shall be verified
and certified by an independent public accounting firm selected by Lessee
and reasonably satisfactory to the applicable Indemnitee, Lessor or
Beneficiary, as the case may be. Such verification shall be binding on
both Lessee and such Indemnitee, Lessor and Beneficiary. The costs of such
verification (including the fee of such public accounting firm) shall be
borne by Lessee unless such verification shall result in an adjustment in
Lessee's favor of 10% or more of the net present value of the payment as
computed by such Indemnitee, Lessor or Beneficiary, as applicable. Such
Indemnitee, Lessor or Beneficiary, as applicable, shall provide to such
public accounting firm on a confidential basis all information reasonably
necessary for such verification.
All of the rights and obligations of Lessee under this Article 8.2 shall
continue in full force and effect to the extent provided herein
notwithstanding the expiration or sooner termination of this Lease and
such obligations are expressly made for the benefit of, and shall be
enforceable by, Lessor and Beneficiary and their respective successors.
and assigns.
ARTICLE 9. DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION
9.1 EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.
Upon the occurrence of an Event of Loss with respect to the Airframe or
the Airframe and any Engines or engines then installed thereon, Lessee
shall give Lessor and Beneficiary prompt written notice thereof (and in
any event within two Business Days) and shall pay or cause to be paid to
Beneficiary on the 90th day after such Event of Loss (or earlier if the
insurance or other proceeds have been paid earlier): (i) the Agreed Value
in respect of the Aircraft, and (ii) all other Rent, other than amounts
paid pursuant to Clause (i), then due and payable hereunder. At such time
as Beneficiary has received the sum of (i), and (ii) above: (A) the
obligation of Lessee to pay Basic Rent hereunder with respect to such
Aircraft shall terminate and (B) the Term for the Aircraft shall end and
(C) Lessor shall transfer full legal and beneficial title to the Aircraft
to Lessee (or, if applicable, to Lessee's insurers) free of all rights of
Beneficiary and all Lessor's Liens. An Event of Loss with respect to the
Airframe shall be deemed to constitute an Event of Loss with respect to
the Aircraft.
9.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE.
Upon the occurrence of an Event of Loss with respect to an Engine not then
installed on the Airframe, or in the Event of Loss with respect to an
Engine installed on the Airframe but not involving an Event of Loss with
respect to such Airframe, Lessee shall give Lessor and Beneficiary prompt
written notice thereof (and in any event within five Business Days) and
Lessee shall, as promptly as possible and in any event within 120 days
after the occurrence of such Event of Loss, duly convey to Lessor, as a
replacement for the Engine with respect to which such Event of Loss
occurred, title to another CFM56-3B2 engine owned by Lessee free and clear
of all Liens and having, unless Beneficiary otherwise agrees, a value and
utility at least equal to, and being in as good operating condition as,
the Engine with respect to which such Event of Loss occurred, assuming
such Engine was of the value and utility and in the condition and repair
required by the terms hereof immediately prior to the occurrence of such
Event of Loss. Lessee shall demonstrate to Lessor's Tech Rep's reasonable
satisfaction the value and utility of any substitute engine by providing
all necessary information and data in respect of such engine as Lessor's
Tech Rep shall reasonably request. In such case, Lessee, at its own
expense, will promptly (i) furnish Lessor with a xxxx of sale, in form and
substance satisfactory to Lessor and Beneficiary, for such replacement
engine, (ii) execute a supplement hereto in form and substance reasonably
satisfactory to Lessor and Beneficiary subjecting such replacement engine
to this Lease, (iii) furnish Lessor and Beneficiary with evidence of
Lessee's title to such replacement engine (including, if requested, an
opinion of Lessee's counsel) and of compliance with the insurance
provisions of Article 10 hereof with respect to such replacement engine as
Lessor and Beneficiary may reasonably request, and (iv) take such other
action as Lessor and Beneficiary may reasonably request in order that
title to such replacement engine be duly and properly vested in Lessor and
leased hereunder to the same extent as the Engine replaced thereby. Upon
full compliance by Lessee with the terms of this Article 9.2, Lessor will
transfer to Lessee, without representation, recourse or warranty of any
kind, express or implied (except a warranty that such Engine is free of
Lessor Liens, other than Liens which Lessee is required to discharge
hereunder, and all rights of Beneficiary and defects in title resulting
from Lessor's acts), all of Lessor's right, title and interest, if any, in
and to the Engine with respect to which such Event of Loss occurred and,
for all purposes hereof, such replacement engine shall be deemed an
Engine. No Event of Loss with respect to an Engine shall result in any
reduction in Basic Rent.
9.3 APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES IN RESPECT OF
EVENT OF LOSS.
Any payments (other than insurance proceeds, the application of which is
provided for in Article 10 hereof) received at any time by Lessor,
Beneficiary or Lessee from any governmental authority or other person with
respect to an Event of Loss with respect to any item of Equipment will be
applied as follows:
i. if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and the Engines or
engines installed on such Airframe, after reimbursement of
Lessor and Beneficiary for its reasonable out-of-pocket costs
and expenses if any, so much of such payment as shall not
exceed the amounts due under Article 9 shall be applied in
reduction of Lessee's obligation to pay such amounts, if not
already paid by Lessee, or, if already paid by Lessee, shall
be applied to reimburse Lessee for its payment of such
amounts, and the balance, if any, of such payment remaining
thereafter to the extent not exceeding Lessee's Interest shall
be paid to Lessee, and the balance, if any, of such payment
remaining thereafter will be paid over to or retained by
Beneficiary; and
ii. if such payments are received with respect to an Engine under
circumstances contemplated Article 9.2, so much of such
payments remaining after reimbursement of Beneficiary for its
reasonable out-of-pocket costs and expenses, if any, shall be
paid over to, or retained by, Lessee, provided that Lessee
shall have fully performed or concurrently therewith will
fully perform the terms of Article 9.2.
9.4 REQUISITION OF AN AIRFRAME FOR USE BY GOVERNMENT.
In the event of the requisition for use by the Government of the United
States of America ("Government") of the Airframe and the Engines or
engines installed thereon during the Term therefor, Lessee shall promptly
notify Lessor and Beneficiary of such requisition and all of Lessee's
obligations under this Lease Agreement with respect to such items of
Equipment shall continue to the same extent as if such requisition had not
occurred (except to the extent that compliance with such obligations by
Lessee is not possible as the result of such requisition); PROVIDED,
HOWEVER, that if such items of Equipment are not returned to the Lessor
prior to the end of the Term therefor, the Term shall automatically be
extended until such requisition for use ceases (subject to the next
PROVISO) and such Equipment is returned to Lessor in compliance with the
provisions of Article 13 as soon as reasonably practicable after its
return by the Government, and, during such extended Term, Lessee shall
continue to perform all obligations under this Lease as if such
requisition for use had not occurred (except to the extent that compliance
with such obligations by Lessee is not possible as the result of such
requisition); PROVIDED FURTHER, HOWEVER, if such Equipment is not returned
to Lessor prior to the first anniversary of the extended Term contemplated
by this Article 9.4 in full compliance with Article 13, at Beneficiary's
sole option such Equipment shall be deemed to have been subjected to an
Event of Loss as of such anniversary date and Lessee shall, on such date,
pay to Beneficiary the Agreed Value. Lessee shall be entitled to all
compensation payable by the Government with respect to such requisition
and, to the extent received by Lessor or Beneficiary, shall be paid over
to Lessee on receipt.
9.5 REQUISITION OF AN ENGINE FOR USE BY THE GOVERNMENT.
In the event of the requisition for use by the Government of any Engine
without the requisition for use of the Airframe, if and when such
requisition exceeds 180 consecutive days, Lessee will replace such Engine
hereunder by complying with the terms of Article 9.2 to the same extent as
if an Event of Loss had occurred with respect to such Engine, and any
payments received by Beneficiary or Lessee from the Government with
respect to such requisition shall be paid over to, or retained by, Lessee.
9.6 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OR EVENT OF DEFAULT.
Any amount referred to in clause (i) or (ii) of Article 9.3 or in Article
9.4 or 9.5 which is payable to Lessee shall not be paid to Lessee or, if
such amount has been previously paid to Lessee, shall not be retained by
Lessee, if at the time of such payment an Event described in Article
14.1(a) or Event of Default shall have occurred and be continuing. In such
event, all such amounts shall be paid to and held by Beneficiary as
security for the performance by Lessee of its obligations hereunder or, at
Beneficiary's option, applied by Beneficiary toward payment of any of such
obligations of Lessee at the time due hereunder as Beneficiary may elect.
At such time as Lessee shall have cured all such Events and Events of
Default, all such amounts at the time held by Beneficiary in excess of the
amounts, if any, which Beneficiary shall have elected to apply as above
provided shall be paid to Lessee.
ARTICLE 10. INSURANCE
10.1 From the Delivery Date and at all times during the Term and thereafter, to
the extent provided in Article 10.7, Lessee shall be responsible for
effecting and maintaining or causing to be effected and maintained, in
full force and effect, insurance in respect of the Aircraft in form
comparable to that maintained by other similarly-situated United States
airlines (the "Insurance" which expression shall where the context so
admits include any relevant re-insurance(s) obtained in respect thereof)
through the Approved Insurance Broker. The Insurance will be effected
either (1) on a direct basis with insurers of recognized standing who
normally participate in aviation insurance in the London, United States,
European or Japanese aviation insurance markets (collectively, together
with such other aviation insurance market(s) as Beneficiary may approve,
such approval not to be unreasonably withheld or delayed, "World Aviation
Insurance Markets") (such insurers to be led in any case by reputable
underwriter(s) who regularly participate in World Aviation Insurance
Markets) or (2) with such an insurer who will effect reinsurance of such
primary insurance, in whole or in part, in World Aviation Insurance
Markets. In the latter case, Lessee shall procure that the Approved
Insurance Broker maintains in full force and effect reinsurances with
reinsurers in the World Aviation Insurance Markets and through brokers
each of recognized standing who regularly deal in such insurance markets
for that percentage of the risks insured not retained on a direct basis
(the "Reinsurance").
10.2 The requirements at the date of this Agreement as to required Insurance
are as specified in this Article 10 and in Exhibit "G". The Beneficiary
acting reasonably and in consultation with Lessee shall be entitled from
time to time to stipulate other reasonable insurance requirements (other
than those prescribed in this Article 10 or Exhibit "G") to reflect
changes in insurance practice relating to the method in which insurable
risks are covered in World Aviation Insurance Markets, which other
insurance requirements shall be in accordance with normal practice of
organizations operating similar aircraft in similar circumstances;
provided, however, that any such further requirements shall be of the type
generally available in such markets at commercially reasonably rates.
10.3 If at any time due to changes in World Aviation Insurance Market practice
or custom, it becomes or will become commercially impracticable for Lessee
to comply with its obligations under this Article 10 or in Exhibit "G"
then the Lessee shall forthwith notify the Beneficiary and as soon as
practicable thereafter Beneficiary and Lessee shall in good faith consult
as to what changes, if any, might be made to the terms and conditions of
the insurance required hereunder in order to take account of the changes
in World Aviation Insurance Market practice or custom and as to what
amendments, if any, should be made to the provisions of this Article 10 or
Exhibit "G" provided no amendment to the insurances required by this
Article 10 and Exhibit "G" shall be effective unless and until consented
to by Beneficiary.
10.4 [Intentionally Omitted]
10.5 Lessee shall:-
(a) ensure that all legal requirements as to insurance of the Aircraft
or any Part thereof which may from time to time be imposed by the
United States or any state to, from or over which the Aircraft shall
be flown, in so far as they affect or concern the operation of the
Aircraft, are complied with and in particular those requirements
compliance with which is necessary to ensure that (a) the Aircraft
is not in danger of detention or forfeiture, (b) the Insurance
remain valid and in full force and effect, and (c) the interests of
the Indemnities in the Insurance and the Aircraft or any part
thereof are not thereby prejudiced;
(b) not use, cause or permit the Aircraft to be used for any purpose or
in any manner not covered by the Insurance or outside any
geographical limit imposed by such Insurance or for any purpose or
in any manner which is contrary to applicable Law. Lessee shall
comply and procure compliance, with the terms and conditions of each
and every policy of the Insurance and shall not do, consent or agree
to any act or omission which invalidates or may invalidate or
renders unenforceable or may render unenforceable the whole or any
part of any such Insurance;
(c) ensure that no insurance or reinsurance in respect of the Aircraft
other than those required under this Article 10 and Exhibit "G" are
taken out if such other insurance or reinsurances would prejudice
Lessor's or Beneficiary's rights with respect to the Insurance.
Lessor and Beneficiary agree that subject to the foregoing, Lessee
may maintain hull and other insurance in relation to the Aircraft,
Engines or Parts thereof. Insurance proceeds arising out of such
insurance shall be paid to Lessee;
(d) ensure that the renewal negotiation is commenced prior to expiration
of any of the Insurance. If requested by Beneficiary in writing, a
written status report shall be given to the Lessor and Beneficiary
seven (7) Business Days prior to expiry date. Facsimile confirmation
of completion of renewal shall be provided by the Lessee to the
Lessor and the Beneficiary at least two (2) Business Days before
such expiry. Certificates of insurance (and where appropriate
Certificates of reinsurance), in the English language, detailing the
coverage and confirming the insurers' (or as the case may be, the
reinsurers') agreement to the specified insurance requirements of
this Lease must be provided to Lessor and Beneficiary at delivery
and within seven days after each renewal date;
(e) if requested by Beneficiary, provide or procure the provision to
Lessor or Beneficiary of copies of documents evidencing the
Insurance upon request if there is a denial of coverage; provided
always that Lessor and Beneficiary shall not disclose the contents
of actual insurance policies to third parties other than (i) its
professional advisors, (ii) as may be required by applicable law,
and (iii) when required to settle a dispute over coverage but, in
any such event, shall take such actions in good faith as may
reasonably be requested by Lessee to protect the confidentiality of
such documents;
(f) on request, provide or procure the provision to Lessor and
Beneficiary of evidence of premium payment;
(g) promptly notify Beneficiary of any occurrence (i) with respect to
which Lessee believes the cost of repairs to the Airframe, Engines
or any Part will exceed, or (ii) which is likely to give rise to a
claim in excess of, the Damage Notification Threshold for Hull
claims and US$[ ]* for claims arising under the legal liability
insurance;
(h) not make or cause to be made any modification or alteration to the
Insurance which is adverse and material to any of the Indemnities,
nor do or leave undone anything which reasonably would be expected
to invalidate the insurance coverage;
(i) be responsible for any deductible/excluded loss under the Insurance;
(j) subject to the limitations of 10.5(e), provide and cause Lessee's
insurance broker to provide any other insurance and reinsurance
related information, or assistance, as Beneficiary may reasonably
request;
(k) reimburse Lessor and/or the Beneficiary for any premiums (together
with interest thereon at the Incentive Rate from the date of payment
until the date of reimbursement) paid by any of them pursuant to
Article 10.6.
10.6 If at any time Lessee fails to maintain the Insurance (without prejudice
to any other rights which Lessor may have acquired under this Agreement by
reason of such failure), Lessor and the Beneficiary shall, after such
advance notice to and consultation (if possible) with Lessee as shall be
reasonable under the circumstances, be entitled
(a) to pay the premiums due or, in the event Lessor or Beneficiary is
not allowed to pay such premiums, with notice to Lessee to effect
and maintain similar insurance satisfactory to it. Such sums so as
shall have been so expended by it shall, upon written demand, become
immediately due and payable by Lessee together with interest thereon
at the Incentive Rate, from the date of expenditure by it up to the
date of reimbursement by Lessee;
(b) at any time while such failure is continuing to require the Aircraft
to remain at any airport or (as the case may be) to proceed to and
remain at any airport designated by it until such failure is
remedied to its reasonable satisfaction.
10.7 Beneficiary shall be entitled, after the expiry or termination of the
leasing of the Aircraft, to require Lessee at Lessee's expense to maintain
legal liability insurance under Lessee's fleet policies in the amount
required immediately prior to the expiry or termination of the leasing of
the Aircraft insofar as the same relates to the Aircraft for two (2) years
after the end of the Term such insurance to provide for each of the
Indemnities to be named as additional insured thereunder to the extent of
its interest under the said indemnities, and the obligation of Lessee to
effect the same shall not be affected by Lessee ceasing to be lessee of
the Aircraft and/or any of the Indemnities ceasing to have any interest
in, or in respect of, the Aircraft.
10.8 Notwithstanding any other provision of this Lease, Lessor and Beneficiary
agree to accept, in lieu of the insurance required hereunder,
indemnification from, or insurance provided by the government of the
United States (or any agency or instrumentality thereof the obligations of
which (including this indemnity) are supported by the full faith and
credit of the government of the United States), against the risks required
to be insured pursuant to this Article 10 and in an amount which, when
added to the amount of any such insurance maintained by Lessee, shall be
at least equal to the amounts which Lessee would otherwise be required to
maintain hereunder. Such indemnity or written evidence of such insurance
shall be provided to Lessor and Beneficiary at least three Business Days
prior to the date on which such insurance would become effective as to the
Aircraft.
10.9 APPLICATION OF INSURANCE PROCEEDS FOR AN EVENT OF LOSS.
It is agreed that insurance payments which arise from any policy of
insurance carried by Lessee and received as the result of the occurrence
of an Event of Loss shall be applied as follows:
(i) if such payments are received with respect to an Event of Loss
relating to the Airframe and Engines or engines installed on the Airframe,
so much of such payments as shall not exceed the amounts due under Article
9.1 hereof shall be paid to Beneficiary for immediate application towards
sums owed by Lessee, and the balance to Lessee; and
(ii) if such payments are received with respect to an Event of Loss
relating to an Engine under circumstances contemplated by Article 9.2
hereof, such payment shall be paid over to Lessee, provided that Lessee
shall have fully performed or, concurrently therewith, fully performs the
terms of Article 9.2 hereof.
10.10 APPLICATION OF INSURANCE PROCEEDS FOR OTHER THAN AN EVENT OF LOSS.
Except as otherwise provided in Exhibit G hereto, the insurance payments
for any property damage loss to the Airframe or any Engine not
constituting an Event of Loss, or to any Part, may be held by Beneficiary
until Lessee furnishes Beneficiary with satisfactory evidence that the
repairs or replacement property Lessee is required to perform or obtain in
accordance with the terms of Article 5 and 6 of this Lease have been made
or an agreement with the Manufacturer or other third person or entity
reasonably satisfactory to Beneficiary has been entered into for the
replacement of such damaged item or the completion of the repairs by
Lessee. In any event, whether repairs are made by Lessee or a third party,
Insurance payments will be applied and made available by Beneficiary upon
reasonable request by Lessee in periodic progress payments as work is
accomplished and/or replacement effected. Upon receipt of such evidence of
repair or replacement or contract, Beneficiary shall pay Lessee, if the
repairs have been completed, or to the Manufacturer or such other repairer
for such repairs, the amount of the insurance payment received with
respect to such loss. Any balance of insurance proceeds remaining after
such payments and completion of such repairs, shall be paid over to
Lessee.
10.11 APPLICATION IN DEFAULT.
Any amount referred to in Article 10.9 or Article 10.10 which is otherwise
payable to Lessee shall not be paid to Lessee, or, if it has been
previously paid to Lessee, shall be delivered by Lessee to Beneficiary, if
at the time of such payment, an Event under Article 14.1(a) or an Event of
Default shall have occurred and be continuing. In either case, all such
amounts shall be held by Beneficiary as security for the obligations of
Lessee or, at the option of Beneficiary, applied by Beneficiary toward
payment of any of Lessee's obligations at the time due hereunder. At such
time as there shall not be continuing any such Event or Event of Default,
all such amounts at the time held by Beneficiary in excess of the amount,
if any, which Beneficiary has elected for application as provided above
shall be paid to Lessee.
ARTICLE 11. MORTGAGES, LIENS, ETC.
Lessee shall not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to any item of Equipment, any part thereof,
title thereto or any interest therein, except: (i) the respective rights of
Lessor and Lessee as herein provided and the rights of any financier under any
mortgage granted by Lessor to such financier at the request of Beneficiary, (ii)
Lessor Liens, (iii) Liens for taxes, fees and other charges (other than Lessor
Taxes) either not yet due or being contested in good faith by appropriate
proceedings, but only so long as such proceedings do not involve the likelihood
of the sale, forfeiture or loss of any item of Equipment, or interest therein,
and (iv) inchoate materialmen's, mechanics', workmen's, repairmen's, employees
or other like liens arising in the ordinary course of business and for amounts
the payment of which is either not delinquent or is being contested in good
faith by appropriate proceedings, but only so long as such proceedings do not
involve the likelihood of the sale, forfeiture or loss of any item of Equipment,
or any interest therein (such Liens described in clauses (i) through (iv) above
being referred to herein as "Permitted Liens"). Lessee shall promptly, at its
own expense, take such action as may be necessary to duly discharge any Lien not
excepted above if the same shall arise at any time with respect to any Equipment
leased hereunder.
If any Lien (other than in favor of the Beneficiary) is created by Lessor
or Beneficiary on the Aircraft or this Lease securing indebtedness, the Lessee
shall cooperate with Beneficiary, at Beneficiary's expense, in perfecting the
rights of the financier and the Beneficiary shall cause the lender before such
Lien is effected to provide a Letter of Quiet Enjoyment to Lessee.
ARTICLE 12. RECORDATION AND FURTHER ASSURANCES
Lessor, Beneficiary and Lessee will promptly and duly execute and deliver
to Lessor or Beneficiary or Lessee, as applicable, such further documents and
assurances and take such further action as Lessor, Beneficiary or Lessee may
from time to time reasonably request in order to more effectively carry out the
intent and purpose of this Lease and to establish and protect the rights and
remedies created or intended to be created hereunder, including, without
limitation, if requested by Lessor or Beneficiary, at the expense of Lessee, the
execution and delivery of supplements or amendments hereto, in recordable form,
subjecting to this Lease any replacement engine and the recording or filing of
counterparts thereof, or of financing statements with respect thereto for filing
in the state in which the principal office of Lessee is located. Lessee will
consent to the assignment of this Lease to a financier if requested to do so by
Beneficiary and will cooperate in amending the insurances to cover any such
assignee as an additional assured; provided that no such assignment shall
diminish the rights and privileges of Lessee hereunder or increase Lessee's
obligations hereunder.
ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS
13.1 RETURN.
Except as otherwise provided herein, at the expiration of the Term for the
Equipment or upon the sooner termination of this Lease, Lessee, at its own
expense, shall return the Equipment to Lessor by delivering the same to
Lessor at Lessee's facilities in Colorado Springs, Colorado or at those of
the Authorized Maintenance Performer performing the redelivery "C" check.
Lessee will, at Beneficiary's request, ferry the Aircraft from the
redelivery location to any other location within the 48 contiguous United
States of America, as may be designated by Beneficiary, at Beneficiary's
expense. The Aircraft, at the time of return to Lessor, shall be fully
equipped with Engines or other CFM56-3B2 engines owned by Lessee (and
complying with Article 13.3) properly installed thereon. In addition, on
redelivery the Aircraft shall comply in all respects with the Redelivery
Conditions stated in Exhibit "E" to this Lease.
13.2 OVERHAUL - GENERAL.
Immediately prior to such return of the Aircraft, Lessee shall have caused
a "C" check, to have been performed to the Airframe, at Lessee's cost, in
accordance with Exhibit "E" hereto.
13.3 ENGINES.
In the event any engine not owned by Lessor shall be delivered with the
Airframe, such engine shall be free and clear of Liens, of the same model
(or an improved version) and Manufacturer as the replaced Engine, suitable
for use on such Airframe and shall have a value and utility at least equal
to, and be in substantially the same or better condition (and shall have a
comparable core value in the LLP stack) as, the Engine that should have
been returned, assuming such Engine which should have been returned was in
the condition and repair as required by the terms hereof immediately prior
to such required return; and Lessee will, at its own expense and
concurrently with such delivery, furnish Lessor with a xxxx of sale, in
form and substance reasonably satisfactory to Lessor and Beneficiary, for
each such engine and with evidence of Lessee's title to such engine
(including, if requested, an opinion of Lessee's counsel) and shall take
such other action as Lessor or Beneficiary may reasonably request in order
that title to such engine shall be duly and properly vested in Lessor.
Upon full compliance with this Article 13.3 and passage of title to such
engine to Lessor, such engine shall be an Engine for all purposes of this
Lease and Lessor will transfer to Lessee all Lessor's right, title and
interest in an Engine constituting part of the Aircraft so returned but
not installed on such Aircraft at the time of such return, without any
representation, warranty or recourse of any kind whatsoever, express or
implied, except a warranty that such Engine is free and clear of Lessor
Liens, defects in title resulting from Lessor's acts, and all rights of
Beneficiary.
13.4 LIENS.
At redelivery, Lessee shall warrant to Lessor that no Liens (other than
Lessor Liens) exist at that time on the Equipment and that Lessee is
current on its payments to relevant authorities and/or suppliers for
landing, handling, fuel navigation and other charges accrued by the
Equipment during the Term of the Lease.
13.5 RECORDS.
Upon the return of the Equipment, Lessee shall deliver to Lessor (i) all
logs, manuals, certificates, data and inspection, modification,
maintenance and overhaul records required to be maintained with respect
thereto under applicable rules and regulations of the FAA or other
governmental authority having jurisdiction, (ii) all logs, manuals and
catalogs included with the Equipment on the Delivery Date therefor, and
(iii) all logs, manuals, certificates, data and inspection, modification,
maintenance and overhaul records that are required to be maintained with
respect thereto under the rules and regulations of the FAA; provided that
Lessee will not in any event be required to provide any logs,
certificates, data or records of any type with respect to the use,
operation, repair, maintenance or overhaul of the Equipment prior to the
Delivery Date which were not provided to Lessee at the time of Lessee's
acceptance of the Aircraft hereunder.
13.6 REDELIVERY FUEL.
Fuel in the tanks of the Aircraft at re-delivery shall be recorded in
Appendix A to Lease Supplement No. 2. At redelivery of the Aircraft, if
there is more or less fuel in the tanks than at delivery, Lessee (if less)
or Beneficiary (if more) will pay for the difference at the price of fuel
at the re-delivery location.
13.7 INDEMNITY.
The Lessee shall indemnify and hold harmless the Indemnitees from and
against any and all liabilities, damages and losses (including costs and
expenses incidental thereto) arising by reason of death or injury to any
observer or employee of the Lessee, arising out of, or in any way
connected with the demonstration flight and inspection of the Aircraft
conducted pursuant to Exhibit "E" hereto or the ferry flight set forth in
Article 13.1.
The Lessor shall indemnify and hold harmless the Lessee from and against
any and all liabilities, damages and losses (including costs and expenses
incidental thereto) arising by reason of death or injury to any observer
or employee of the Lessor or any Indemnitee arising out of, or in any way
connected with the demonstration flight and inspection of the Aircraft
conducted pursuant to Exhibit "E" hereto or the ferry flight set forth in
Article 13.1.
ARTICLE 14. EVENTS OF DEFAULT
14.1 EVENTS OF DEFAULT.
Each of the following events shall constitute an Event of Default (whether
any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule, regulation of
any administrative or governmental body):
(a) if Lessee fails to pay any Rent payable under this Lease (including,
without limitation, Maintenance Reserves or any portion of the
Security Deposit) to the Beneficiary in the currency in which such
sum is due within 5 days after the due date for payment thereof or
if such amount is payable on demand, within 15 days after demand
therefor; or
(b) if insurances on or with respect to the Equipment are not maintained
in accordance with the provisions of Article 10; or Lessee shall
operate the Aircraft outside of the scope of the insurance coverage
maintained with respect to the Aircraft; or
(c) if the Lessee defaults in the due performance and observance of any
of its obligations under the Lease (other than as set forth in
Article 14.1 (a) and (b)) and such default is not remedied within
thirty (30) days of notice from the Lessor to the Lessee requiring
such remedy or, if any such default is not capable by due diligence
of being cured or remedied within said thirty (30) days, such
default is not cured or remedied within sixty (60) days after such
notice by Lessor to Lessee; or
(d) if any representation, warranty or statement made or deemed to be
made by the Lessee to the Lessor and Beneficiary in this Lease in
any certificate, statement or opinion delivered by it hereunder or
thereunder or in connection herewith or therewith is incorrect,
inaccurate or misleading in any material respect when made or deemed
to be made or repeated; or
(e) if all, or substantially all, of the Lessee's air transport licenses
are revoked, or if its commercial passenger operating certificate is
revoked, canceled or otherwise terminated; or
(f) if a liquidator for the winding up of the Lessee shall be appointed,
or an encumbrancer shall take possession or a receiver shall be
appointed of the whole or substantially all of the property or
assets of the Lessee or the Lessee applies for, or consents to, the
appointment of any receiver or similar official for it or
substantially all of its property or assets, or an administrative
receiver is appointed of all or substantially all of the Lessee's
property or assets or any similar or analogous event shall occur in
relation to the Lessee in any relevant jurisdiction including the
United States; or
(g) if Lessee files a voluntary petition in bankruptcy or a voluntary
petition seeking reorganization in a proceeding under any bankruptcy
laws (as now or hereafter in effect); or an answer admitting the
material allegations of a petition filed against Lessee in any such
proceeding, or a petition against Lessee in a proceeding under the
bankruptcy, insolvency or other similar Laws (as now or hereafter in
effect) of any governmental entity is filed and is not withdrawn or
dismissed within ninety (90) days thereafter; or
(h) if the Lessee shall stop payments on its aircraft financing or
leasing obligations generally or shall cease to carry on its
business or shall be unable to pay its debts as they become due; or
(i) if the Security Deposit shall be attached or rendered unavailable to
the Beneficiary or the Beneficiary shall be ordered by a court of
competent jurisdiction to repay or return the Security Deposit prior
to the end of the Term or the Letter of Credit shall not be renewed
or replaced prior to the third Business Date prior to its expiry
date unless (i) Lessee shall have made a cash deposit with
Beneficiary of $[ ]* or (ii) Beneficiary shall have drawn under the
Letter of Credit, on or prior to such expiry date.
ARTICLE 15. REMEDIES
Upon the occurrence of any Event of Default under the provisions of
Article 14.1 (f) or (g), all of Lessee's rights hereunder in and to the
Equipment shall automatically terminate. Upon the occurrence of any Event of
Default under any other provision of Article 14, and at any time thereafter so
long as the same shall be continuing, Lessor may, at its option, declare this
Lease to be in default and at any time thereafter, Lessor may, in addition to
any other remedies provided herein or by applicable law, exercise one or more of
the following remedies with respect to the Equipment or any part thereof, as
Lessor in its sole discretion shall elect:
(a) Demand that Lessee, and Lessee shall upon the written demand of Lessor and
at Lessee's expense, return promptly to Lessor the Equipment as Lessor may
specify in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Article 13 hereof (including,
without limitation, the return of all Records) as if the Equipment were
being returned at the end of the Term therefor; or Lessor, at its option,
may enter upon the premises where all or any part of the Equipment 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 of the rights of the owner, lessor, lienor or
secured party of such engine, provided, however, that such Airframe with
an engine (which is not an Engine) installed thereon may be flown to a
location within the continental United States, 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 terms of Article 13 hereof) by
summary proceedings or otherwise, all without liability accruing to Lessor
for or by reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise;
(b) Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph (a) above, Lessor, by
written notice to Lessee specifying a payment date, may demand that Lessee
pay to Beneficiary, and Lessee shall pay to Beneficiary, on the payment
date specified in such notice, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent for the Equipment due for
the period commencing after the date specified for payment in such
notice), any accrued but unpaid Basic Rent for such Aircraft due to and
including the payment date specified in such notice, plus an amount equal
to the excess of (i) the aggregate unpaid Basic Rent for the Equipment
which would otherwise have accrued over the remainder of the Term therefor
but for the Event of Default, discounted monthly to present value as of
the payment date specified in such notice at 7% per annum over (ii) the
Fair Rental Value of the Aircraft for the remainder of the Term discounted
to present value at the same rate. The amounts specified in such notice
shall continue to bear interest at the Incentive Rate from the payment
date specified in said notice until payment is made;
(c) In the event Lessor shall have relet the Equipment, Lessor, in lieu of
exercising its rights under paragraph (b) above with respect to the
Equipment may, if it shall so elect, demand that Lessee pay Beneficiary
and Lessee shall pay Beneficiary, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent for the Equipment
due for the period commencing after the date of reletting) any accrued but
unpaid Basic Rent for the Equipment due up to and including the date of
reletting or sale plus the excess of: (i) the aggregate unpaid Basic Rent
for the Equipment which would otherwise have become due over the Term
therefor discounted monthly to present value as of the date of reletting
at 7% per annum over (ii) the aggregate basic rental payments to become
due under the reletting from the date of such reletting to the date upon
which the Term would have expired but for Lessee's default, discounted
monthly to present value as of the date of the reletting at 7% per annum;
(d) Proceed by appropriate court action or actions to enforce performance by
Lessee of the applicable covenants of this Lease and to recover damages
for the breach hereof;
(e) Terminate this Lease as to any or all items of Equipment, which
termination shall be effective immediately upon Lessor having given notice
of termination to Lessee, whereupon Lessee's right to possess and use such
items of Equipment shall immediately cease.
Except as otherwise specifically provided above, Lessee shall also be liable for
all unpaid Rent due hereunder before, during or after the exercise of any of the
foregoing remedies with respect thereto, including all technical and remarketing
expenses, legal fees and other costs and expenses incurred by Lessor and/or
Beneficiary by reason of the occurrence of any Event of Default or the exercise
of Lessor's remedies with respect thereto and all costs and expenses incurred in
connection with the return of the Aircraft in accordance with the terms of
Article 13 hereof, or in placing such Aircraft in the condition and
airworthiness as required by such Article.
Except as otherwise expressly provided above, no remedy referred to in this
Article is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity; and the exercise or beginning of exercise by Lessor of any
one or more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies. No express or implied
waiver by Lessor of any Event or Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent Event or Event of Default.
ARTICLE 16. [Intentionally Omitted]
ARTICLE 17. LETTER OF CREDIT
As required by Section 3.3, Lessee shall deliver to Beneficiary as the
Security Deposit an irrevocable standby Letter of Credit ("L/C") in the amount
of $[ ]*. Such L/C shall be substantially in the form of Exhibit H hereto and
otherwise in form and substance and from a bank satisfactory to Beneficiary and
shall provide, among other things, that the L/C is irrevocable until 90 days
after the end of the Term, the L/C may be drawn upon by Beneficiary upon
presentation to the issuing bank of a certificate of Beneficiary stating that an
Event of Default has occurred and is continuing under the Lease. Lessee agrees
that in an Event of Default, Beneficiary may, at its option, immediately draw
under such L/C and apply the same towards any or all amounts due under this
Lease, whether such amounts due constitute Basic Rent payments, damages for
breach of this Lease or other Rent payments, all in Beneficiary's sole
discretion. Partial drawings will be permitted. If the L/C expires prior to the
date set forth above, Beneficiary may draw the L/C in full if Lessee has not
caused it to be renewed prior to the third Business Date prior to its expiry
date.
ARTICLE 18. MISCELLANEOUS
18.1 CONSTRUCTION AND APPLICABLE LAW.
Any provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
such provisions hereof, and any such prohibition or enforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law,
Lessee hereby waives any provision of law which renders any provision
hereof prohibited or unenforceable in any respect. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom the
enforcement of the change, waiver, discharge or termination is sought.
This Lease shall constitute an agreement of lease, and nothing herein
shall be construed as conveying to Lessee any right, title or interest in
the Aircraft or Engine except as a lessee only. The captions in this Lease
are for convenience of reference only and shall not define or limit any of
the terms or provisions hereof. This Lease shall in all respects be
governed by, and construed in accordance with, the laws of the State of
New York, United States of America, including all matters of construction,
validity and performance, without regard to the conflict of laws rules
thereof.
18.2 NOTICES.
All notices, demands and other communications required under the terms
hereof shall be in writing, and any such notice shall be deemed given when
received (if personally delivered) or, if sent by recognized international
courier, three Business Days after being sent, prepaid, addressed to the
appropriate party at its address set forth below, or at such other place
as such party may from time to time hereafter designate to such other
parties in writing:
If to Lessee:
Western Pacific Airlines, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Lessor:
First Security Bank, National Association
00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Corporate Trust Department
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to Beneficiary:
KG Aircraft Leasing Co., Ltd.
0 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx
Xxxxxx 0, Xxxxxxx
Attention: Managing Director
Telephone: 000-0-000-0000
Telecopy: 353-1-475-7378
and with a copy to:
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: C. Xxxxxx Xxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
All such notices, demands and other communications may also be given by
telefax. In such event, such notice, demand or communication shall be
deemed given on the Business Day following actual transmission to the
recipient party of the telefax. Changes in the addresses for notices
hereunder may be made by written notice to the other parties mentioned
above.
18.3 LESSOR'S RIGHT TO PERFORM FOR LESSEE.
If Lessee fails to make any payment of Supplemental Rent required to be
made by it hereunder or fails to perform or comply with any of its
agreements contained herein in each case, beyond any applicable grace
period, Lessor or Beneficiary may itself, after such prior consultation
with Lessee as shall be reasonable under the circumstances, make such
payment or perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable expenses of Lessor and/or
Beneficiary incurred in connection with such payment or the performance of
or compliance with such agreement, as the case may be, together with
interest thereon at the Incentive Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
18.4 CORPORATE EXISTENCE; MERGER.
Lessee will preserve and maintain its corporate existence and all its
rights, privileges and franchises in every jurisdiction in which the
character of its property or the nature of its business makes licensing or
qualification necessary. Lessee will not merge or consolidate with or into
any person or entity or sell, lease or otherwise dispose of all or
substantially all of its properties, unless the surviving corporation
expressly assumes in a manner reasonably satisfactory to Beneficiary all
of Lessee's obligations hereunder.
18.5 QUIET ENJOYMENT.
Lessor covenants that as long as no Event of Default has occurred and is
continuing, neither Lessor nor any person claiming by, through or under
Lessor shall interfere during the Lease Term with the use, possession and
quiet enjoyment of the Aircraft by the Lessee or the exercise by Lessee of
its rights and privileges hereunder.
18.6 ASSIGNMENT.
Except as specifically set forth in Article 5.1, this Lease and all or any
part of Lessee's rights and obligations hereunder shall not be assigned or
transferred by Lessee without Lessor's prior written consent, and any
purported assignment or transfer shall be void. Subject to the foregoing,
this Lease shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto, including but not
limited to any corporation into which Lessee may merge, or which may
succeed to all or substantially all of the assets of Lessee, and such
corporation shall expressly assume the liability created hereunder.
Lessor's and Beneficiary's interest in this Lease Agreement and in the
Aircraft and in the trust created under the Trust Agreement are assignable
and alienable by Lessor and Beneficiary in whole but not in part upon
receipt of Lessee's consent (which will not be required if an Event of
Default has occurred and is continuing) which will not be unreasonably
withheld or delayed, and upon such assignment Lessor and Beneficiary shall
be discharged from all further obligations hereunder in respect of such
interest or Equipment assigned and the assignee or transferee shall
succeed to all of Lessor's and Beneficiary's rights, interests and
obligations in respect thereof as though such assignee or transferee had
been the initial owner or lessor, as the case may be, in respect thereof.
Lessee shall at Beneficiary's expense comply with all reasonable requests
of Lessor and/or Beneficiary, their successors and assigns in respect of
the assignment so long as Lessee's obligations hereunder are not increased
and Lessee's rights and privileges are not reduced thereby (including, if
requested, execution of a lease agreement on terms substantially identical
to this Lease Agreement substituting the name of such successor or
assignee for Lessor and/or Beneficiary). For the avoidance of doubt, the
foregoing shall not (i) restrict Lessor's and Beneficiary's right to
finance the Aircraft and create a security interest therein and in the
Lease without Lessee's consent, or (ii) change Lessee's obligation to
cooperate as and to the extent provided in Article 11.
18.7 EXPENSES.
Each party shall bear its own expenses in connection with entering into
this Lease except that Beneficiary shall be responsible for Lessor's costs
and expenses and Lessee and Beneficiary will split FAA counsel's fees and
expenses evenly. The prevailing party in any action or proceeding between
Lessor, Beneficiary and/or Lessee to enforce the terms of this Lease shall
be entitled to recover from the other party all its costs and expenses,
including reasonable attorneys' fees incurred by such prevailing party in
such action or proceeding.
18.8 SURVIVAL.
The representations, warranties, indemnities and agreements of the parties
provided for in this Lease, and each party's obligations under any and all
provisions hereof, shall survive the delivery of the Aircraft and the
expiration or other termination of this Lease and are expressly made for
the benefit of, and shall be enforceable by the applicable party and their
respective successors and assigns.
18.9 ENGLISH LANGUAGE.
All Records shall be kept and maintained in the English language with
respect to entries made therein pertaining to the operation, repair,
maintenance or overhaul of the Equipment during the Lease Term. All other
information, notices, communications, opinions, reports, records, and the
like required to be given, kept or maintained by Lessee or to be delivered
to Lessor hereunder, if not in the English language, shall be accompanied
by an English translation; provided, however, that the English version of
all such information, notices, communications, opinions, reports, and
records and other documents, including this Lease, shall govern in the
event of any conflict with the non-English version thereof.
18.10 JURISDICTION.
The Lessor, Beneficiary and Lessee each irrevocably agrees that any state
or Federal Court in the State of New York shall have jurisdiction to hear
and determine any suit, action or proceeding, and to settle any disputes,
which may arise out of or in connection with this Agreement and, for such
purposes, irrevocably submits to the jurisdiction of such courts. The
Lessor, Beneficiary and Lessee each (i) irrevocably waives any objection
which it might now or hereafter have to the courts referred to in the
above provisions of this Article being nominated as the forum to hear and
determine any suit, action or proceeding, and to settle any disputes,
which may arise out of or in connection with this Agreement and agrees not
to claim that any such court is not a convenient or appropriate forum and
(ii) KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTIES
HERETO OR THERETO.
The submission to the jurisdiction of the courts referred to in the above
provisions of this Article shall not (and shall not be construed so as to)
limit the right of the Lessor, Lessee or Beneficiary to take proceedings
against the Lessee, Lessor or Beneficiary, as applicable, in any other
court of competent jurisdiction nor shall the taking of proceedings in any
one or more jurisdictions preclude the taking of proceedings in any other
jurisdiction, whether concurrently or not.
Lessee, Lessor and Beneficiary, each hereby appoints CT Corporation
System, New York, N.Y., as its agent for service of process relating to
any proceedings before the New York courts in connection with this
Agreement and agrees to maintain a process agent in New York throughout
the Term. Lessee agrees to service of process by mail to its address set
forth herein.
18.11 CURRENCY.
If for the purpose of obtaining judgment in any court in any country it
becomes necessary to convert the amount due under this Lease into the
currency of such country, then the conversion shall be at the rate of
exchange prevailing on the day on which the court judgment is given. For
this purpose, "rate of exchange" means the rate at which Lessor,
Beneficiary or Lessee, as applicable, is able on the relevant date to
purchase Dollars with such currency in such country. In the event that
there is a change in the rate of exchange prevailing between the day on
which the judgment is given and the date of payment of the amount due,
Lessee, Lessor or Beneficiary, as applicable, shall pay such additional
amount as may be necessary to ensure that the amount paid on such date is
the amount in the currency of such country which, when converted at the
rate of exchange prevailing on the date of payment, is the amount then due
under this Lease in Dollars. Any amount due from Lessee under this Article
18.11 shall be due as a separate debt and shall not be affected by
judgment being obtained for any other sums due under or in respect of this
Lease.
18.12 INTEGRATION.
This Lease Agreement incorporates and supersedes all prior agreements and
understandings between the parties hereto including the Letter of Intent.
This Agreement may not be amended, waived or modified orally, but only in
a written supplement hereto signed by the parties hereto.
18.13 COUNTERPARTS.
This Lease may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
To the extent that this Agreement constitutes chattel paper under the
Uniform Commercial Code of any relevant jurisdiction, no security interest
in this Agreement may be perfected except by possession of the counterpart
marked "ORIGINAL" and containing the executed receipt on the signature
page hereof. Any other counterpart of this Agreement shall constitute a
duplicate but shall not be the chattel paper counterpart.
18.14 BANKRUPTCY - SECTION 1110
It is the intention of the parties that the provisions of 11 U.S.C.
Section 1110 or any analogous section of the Federal bankruptcy laws, as
amended from time to time, shall be applicable to the interests of the
Lessor and Beneficiary in the Aircraft and to any right of the Lessor and
Beneficiary to take possession of the Aircraft in compliance with this
Agreement. This Agreement is intended to be a lease for Federal income tax
purposes.
IN WITNESS WHEREOF, Lessor, Beneficiary and Lessee and have each caused
this Lease to be duly executed by their authorized officers or representatives
as of the day and year first above written.
WESTERN PACIFIC AIRLINES, INC.
By:___________________________
Title:________________________
KG AIRCRAFT LEASING CO., LTD.
By:___________________________
Title:________________________
Receipt of the chattel paper counterpart marked "ORIGINAL" is hereby
acknowledged.
KG AIRCRAFT LEASING CO., LTD.
By:___________________________
Title:________________________
EXHIBIT "A"
LEASE SUPPLEMENT NO.1
THIS LEASE SUPPLEMENT NO. 1, dated _______________, 1997, between FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except as
set forth herein but as Trustee for and on behalf of KG Aircraft Leasing Co.,
Ltd., pursuant to Trust Agreement dated , 1997 (the "Lessor"), KG AIRCRAFT
LEASING CO., LTD., an Irish limited liability company ("KG") and Western Pacific
Airlines, Inc., a Delaware corporation (the "Lessee").
KG and Lessee have heretofore entered into a Lease Agreement dated as of
May , 1997, (herein the "Lease Agreement" and the terms defined therein being
herein used with the same meaning), which Lease Agreement provides for the
execution and delivery from time to time of Lease Supplements, under the Lease
Agreement.
KG and Lessee, by their execution hereof agree that First Security Bank,
National Association will be the Lessor under the Lease Agreement and Lessor
agrees to be bound by the terms thereof.
The Lease Agreement relates to the Airframe and Engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the relevant authorities as one
document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts and
leases from Lessor, under the Lease Agreement, the following described
Boeing Model 737-353 airframe:
(i) Airframe: U.S. Registration: N957WP;
Manufacturer's Serial No. 24060; and
(ii) Engines: Two CFM International CFM56-3B2 engines bearing
respectively manufacturer's serial numbers
722139 and 723130
2. The Delivery Date of the Aircraft is the date of this Lease Supplement set
forth in the opening paragraph hereof.
3. The Term for the Aircraft shall commence on the date hereof.
4. Lessee's duly appointed and authorized technical experts have inspected
the Aircraft and Lessee accepts the Aircraft for all purposes of the Lease
Agreement, [subject to rectification of any discrepancies detected during
the Test Flight and set forth on the list attached hereto].
5. Lessee hereby confirms its agreement to pay Lessor Rent and any other
amounts with respect to the Aircraft throughout the Term therefor in
accordance with the terms of the Lease Agreement.
6. Lessee hereby confirms to Lessor that the Airframe and Engines have been
duly marked as showing Lessor's title thereto in accordance with the terms
of the Lease Agreement.
7. The Aircraft is insured in accordance with the terms of Lease.
8. No Event of Default is subsisting and the representations and warranties
contained in Article 4.2 of the Lease are, by reference to the facts and
circumstances existing today, true and accurate in all respects.
9. To the best of Lessee's knowledge and belief, the Lessee has no right of
set-off, deduction, withholding or counterclaim against the Lessor
whatsoever as of the date hereof except with respect to the discrepancies,
if any, set forth on the list attached hereto.
10. All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference into the Lease Agreement to the same extent as
if fully set forth therein. Appendices A, B and C to this Lease Supplement
and any attachments thereto are to be read together and form part of this
Lease Supplement.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers or representatives
as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, in its individual capacity but solely
as Owner Trustee under the Trust Agreement dated , 1997.
By: _______________________
Title: ____________________
WESTERN PACIFIC AIRLINES, INC.
By:_______________________
Title:____________________
KG AIRCRAFT LEASING CO., LTD.
By: _______________________
Title: ____________________
APPENDIX A
Aircraft Hours and Cycles
as of , 19___
U.S. Registration Xxxx: N957WP Serial Number 24060
A. AIRFRAME
Aircraft Total Time (Hours) _______
Aircraft Total Landings (Cycles) _______
Lessee Service Check - Time to next Check _______
Lessee 'A' Check - Time to next Check _______
Lessee 'C' Check - Time to next Check _______
B. CFM International CFM56-3B2 Engine
Serial Hours/Cycles
Position Number TCSN TTSN TTSV/TCSV to Next Limit
1
2
C. Auxiliary Power Unit
Serial Total Hours/Cycles
Number Hour/Cycles TTSV TTSOH to Next Limit
D. Landing Gear
Hours Cycles
Nos. Hours/Cycles Remaining Remaining
NLG
Rt Main Gear
Lt Main Gear
E. Fuel Remaining in Tanks
-----
Key:
TCSN: Total Cycles Since New
TTSN: Total Time Since New
TTSV/TCSV: Total Time Since Shop Visit/Total Cycles Since Shop Visit
TTSOH: Total Time Since Last Overhaul
APPENDIX B
DOCUMENTATION DELIVERY RECEIPT
Western Pacific Airlines, Inc. (the "Lessee"), and First Security Bank,
N.A., as Owner Trustee (the "Lessor") hereby confirm the delivery by the Lessor
and receipt by the Lessee of the Technical Records as described on the
Attachment 1 hereto and a part hereof, on __________________, 19__, in ________,
at _________ time.
WESTERN PACIFIC AIRLINES, INC. FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Owner Trustee
By ________________________ By _______________________
Its _______________________ Its ______________________
ATTACHMENT 1
TECHNICAL RECORDS AT DELIVERY
MANUALS LISTING
(ALL HARDCOPY UNLESS NOTED)
The Aircraft will be re-delivered with the same number of copies of the
documents listed below as were delivered to Lessee at delivery.
1. AD's and SB compliance records (Airframe and Engines) - information must
include method of compliance, date of accomplishment and signature of
person accomplishing work.
2. Engine Records - record of last (major inspection) overhaul, disc part
numbers, cycle/hour limits.
3. Records of life limited parts, life limited parts history since new (both
Engine and Airframe) and hours/cycles used.
4. Complete record of last Airframe ("D" check or equivalent) overhaul
information must include both routine and non-routine data.
5. Landing gear overhaul records (including shop report).
6. Copies of engineering orders relating to repairs/modifications of the
Airframe, components or systems.
7. If applicable, stress analysis and material certification date relating to
major interior modifications, i.e., galley installations, overhead and bin
enclosures if no STC available.
8. Ground proximity warning system-certification details and installation
information, including part numbers of major components.
9. Time control records - engine TSO, TSEHM, TSHSI and similar data on
time-controlled components under operator's approved program.
10. Approved flight manual, IPC, maintenance manual, wiring manuals, galley
manuals and passenger seat manuals.
11. Record of last weighing.
12. Copy of current weight and balance (loading system) for passenger and
cargo loading.
13. Aircraft weight and balance manual (MFG's).
14. Approved Interior arrangement drawing.
15. Records of last "A" check "B" check and "C" check.
16. Log book pages (1 year).
17. Letter certifying Aircraft status relating to accident or incidents.
18. Avionics equipment list (must include flight data recorder information).
19. Flight data recorder calibration sheet, if applicable.
20. Last calibration information on altimeters, airspeed indicators and ATC
transponder test, including date of accomplishment.
21. Operators current maintenance program document, if permitted.
22. Part 36 compliance information.
23. List of approved overhaul agencies, if permitted.
24. Record of last APU overhaul.
25. Records of last overhaul of hard time limited component as controlled by
operator's maintenance program.
26. List of all emergency equipment with part numbers.
27. Aircraft Maintenance Manual - Microfilm.
28. Illustrated parts Catalogue - Microfilm.
29. Wiring Diagram Manual - Microfilm.
30. System Schematics Manual - Hard copy.
31. Structural Repair Manual - Microfilm.
32. Bite Manual - Hard Copy.
33. Boeing Service Letters - Microfilm.
34. Boeing Service Letters Index - Microfilm.
35. Boeing Service Bulletins - Microfilm.
36. Boeing Service Bulletins Index - Microfilm.
37. Boeing Service Activities Report - Hard Copy.
38. Component Maintenance/OVHL Manual - Microfilm.
39. Illustrated Parts Catalogue - Hard Copy.
40. Dispatch Deviation Procedures
41. Power Plant Build-up Manual.
42. Aircraft Operations Manual.
43. Quick Reference Handbook - Hardcopy, if available.
APPENDIX C
LOOSE EQUIPMENT SCHEDULE
EQUIPMENT
1. 4 Emergency Flashlights, DME Corp
2. XXX, X/X 00000, XX Corp.
3. XXX, X/X 0000, XX Corp.
4. Xxxxx 5500 Oxygen bottle
5. Xxxxx 5500 Oxygen bottle
6. Xxxxx 5500 Oxygen bottle
7. Xxxxx 5500 Oxygen bottle
8. ACR Electronics EM-1 Megaphone (2)
9. General Halon 1211 Fire Extinguisher
10. General Halon 1211 Fire Extinguisher
11. Kidde Liquid Fire Extinguisher
12. Zee First Aid Kits (2)
DOCUMENTS
1. Boeing 737-300 Quick Reference Handbook
2. CFM 56 Performance Card
3. 737 Exterior Inspection Card
4. 737 Adjusted Weight Tables Card
5. Pilots Rider Reference Card
6. 737 Operations Manual Volumes 1, 2, 3
7. 737 Airplane Flight Manual Xxxxxxx 0, 0, 0, 0
0. XXX S/N 02703
EXHIBIT "B"
FORM OF LETTER OF QUIET ENJOYMENT
From: _______________________ (the "undersigned")
To: WESTERN PACIFIC AIRLINES, INC. (the "Lessee")
In Re: One Boeing 737-300 Aircraft Manufacturer's Serial Number 24060
(the "Aircraft")/Aircraft Lease Agreement (the "Lease") dated
____________, 1997 between KG Aircraft Leasing Co., Ltd. (the
"Lessor") and the Lessee
Dear Sirs:
1. In consideration of $10 and other good and valuable consideration received
from Lessee and/or Lessor the receipt of which is hereby acknowledged, we
confirm to you that we will not interfere with the quiet possession and use of
the Aircraft by the Lessee or the exercise by the Lessee of its rights and
privileges under the Lease throughout the term of the Lease, but subject to the
terms of the Lease so long as no Event of Default (as defined in the Lease) has
occurred and is continuing.
2. The foregoing undertaking is not to be construed as restricting the rights of
the undersigned to dispose of its interest in the Aircraft to such persons and
on such terms as it considers appropriate. However, if the undersigned exercises
such rights during the term of the Lease and provided that at or prior to the
time of such disposal the Lessor has not issued a termination notice with
respect to an Event of Default (as defined in the Lease) which has occurred and
is continuing at the time such notice was issued, the undersigned will (subject
to any requirements or restrictions imposed by applicable law) dispose of the
Aircraft expressly subject to the Lease and on terms that the purchaser issues a
written undertaking to you in form and substance satisfactory to you that it
will not interfere with your quiet possession and use of the Aircraft throughout
the remaining term of the Lease, so long as no Event of Default (as defined in
the Lease) has occurred and is continuing.
3. The undersigned hereby represents to Lessee that (i) it is a company
incorporated and validly existing under the laws of [ ] and has the corporate
power to enter into and perform its obligations under this letter of quiet
enjoyment and to own its assets and carry on its business as it is now being
conducted and (ii) this letter of quiet enjoyment is the legal, valid and
binding obligation of the undersigned.
4. This Letter of Quiet Enjoyment shall be governed by, and construed in
accordance with, the internal laws of the State of New York.
Please countersign this letter to confirm your agreement to the arrangements
contained herein.
[Lessor and Beneficiary]
For and on behalf of
[ ]
Agreed and accepted:
For and on behalf of WESTERN PACIFIC AIRLINES, INC.
EXHIBIT "C"
MAINTENANCE RESERVES ADJUSTMENT FORMULA
Flight Hour/ Rates
Cycle Ratio
2.5 - 2.59 $[ ]*
2.4 - 2.49 [ ]*
2.3 - 2.39 [ ]*
2.2 - 2.29 [ ]*
2.1 - 2.19 [ ]*
2.0 - 2.09 [ ]*
1.9 - 1.99 [ ]*
1.8 - 1.89 [ ]*
1.61 - 1.79 [ ]*
1.51 - 1.6[ ]*
1.41 - 1.5[ ]*
1.31 - 1.4[ ]*
1.21 - 1.3[ ]*
1.11 - 1.2[ ]*
1.01 - 1.1[ ]*
.91 - 1.0[ ]*
EXHIBIT "D"
ADDITIONAL DELIVERY REQUIREMENTS
In addition to the delivery conditions defined in Article 2.1.3(i) of this
Agreement, the following additional conditions shall apply on delivery of the
Aircraft to Lessee at Beneficiary's cost:
1. The Aircraft will be in 142 seat all economy configuration (or as
otherwise agreed by Lessee);
2. The Aircraft will be painted in Philippine Airlines ("PAL") livery;
3. The Aircraft shall be in condition to meet the minimum conditions required
to operate the Aircraft under FAR Part 121; provided that Lessee's
FAA-approved maintenance personnel shall be in attendance at Lessee's
expense for the entire "C" check in Manila so that they can sign off the
work cards;
4. The Aircraft shall be in good operating condition airworthy and with all
systems operational and within manufacturers' manual limits, irrespective
of deviations or variations authorized by the Minimum Equipment List (XXX)
or Configuration Deviation List (CDL);
5. The Aircraft shall have been cleaned externally within the last two weeks
and have had its interior deep cleaned immediately prior to delivery in
accordance with Lessee's deep clean specification and in conformance with
major airline standards. The seat covers shall be in good condition;
6. The Aircraft shall comply with the Manufacturer's specification, as
revised from time to time by the incorporation of certain airworthiness
directives, service bulletins and modifications which enhance the
Aircraft's operational capability;
7. The Aircraft shall have had accomplished thereon on a terminating action
basis and be in compliance with all outstanding mandatory orders,
directives, FARs and instructions affecting the Aircraft as issued by the
FAA or the Manufacturer which have a compliance deadline prior to the
first anniversary of the Delivery Date.
8. All damage to the Aircraft which is not within the applicable limits shall
have been permanently repaired and certified in accordance with the
requirements of the FAA and the Manufacturer. External repairs will, where
applicable, be flushed or otherwise permanently repaired and certified in
accordance with the requirements of the FAA and the Manufacturer;
9. Lessor shall provide one full set of all technical documents in English
relating to the Aircraft as listed on the Attachment to Appendix B to the
form of Lease Supplement No. 1 attached hereto as Exhibit "A", including
copies of all engineering orders, complete records of AD and Service
Bulletin compliance and copies of manufacturer's manuals relating to the
Airframe, Engines, interior configurations, components and APU, all in
compliance with FAA regulations. All records necessary for Lessee to
comply with its obligations under the Lease and to operate the Aircraft
under FAR Part 121 shall be delivered to Lessee at the same time as the
Aircraft and shall be in English;
The Records shall be delivered with the Aircraft, except that
documentation relating to the pre-delivery "C" Check shall be delivered as
soon as practicable but in any event, within 15 days from the date the
Aircraft is delivered to Lessee. At the time of delivery of the Records
for the Aircraft to Lessee, Lessee and Lessor shall execute an aircraft
documentation return receipt (the "Aircraft Documentation Delivery
Receipt") in the form attached as Appendix B to Lease Supplement No. 1;
10. Cleaning and treating of minor or moderate corrosion and correction of all
severe or exfoliated corrosion deferred by the prior operator or found by
the Lessee during the Lessee's ground inspection shall be accomplished by
the Beneficiary in accordance with FAA approved data prior to delivery;
11. The Aircraft shall have all deferred maintenance items and pilot log book
reports rectified on a terminating action basis;
12. The Aircraft shall be capable of certificated, full rated performance
without limitations throughout the entire operating envelope as defined in
the Airplane Flight Manual. Performance compliance will be demonstrated at
the time of the pre-delivery test flight and/or by inspection and testing
of the powerplants (engines, nacelles and accessories) in accordance with
the Engine Maintenance Manual, at Lessee's option;
13. The Aircraft (including the Records and other related documents to be
delivered therewith in accordance with Appendix B hereto) shall be made
available to Lessee for ground inspection by Lessee at the delivery
location. Records will be made available to Lessee at least 15 days prior
the date of delivery. Such inspection shall commence as soon as
Beneficiary begins its performance of the pre-delivery check referred to
below. The areas of the Aircraft required to perform the checks described
in these delivery conditions, shall be opened and Beneficiary shall allow
Lessee to accomplish its inspection in order to determine that the
Aircraft (including the Records) is in the condition required herein.
During such checks, Lessee personnel shall not have the right to request
that adjacent additional panels or areas be opened to allow further
inspection. Beneficiary, at its own expense, shall promptly correct all
deficiencies affecting airworthiness and any discrepancies from the
condition required by the provisions of this Lease which are observed
during such inspection and are communicated in writing by Lessee to
Beneficiary. All repairs shall be classified as permanent;
14. The Aircraft shall be test flown by PAL for approximately two hours,
during which Lessee's and Beneficiary's representatives shall be on board,
in Manila and then, following correction of any defects identified during
such test flight, ferried by PAL to the Delivery Location. Up to three (3)
of the Lessee's representatives (or more if consented to by PAL and
Beneficiary) may participate in such test flight as observers. The test
flight shall be flown using Boeing's standard operational test flight
procedures. Upon completion of the test flight, the representatives of
Lessee and Beneficiary shall agree in writing upon any discrepancies in
such Aircraft required to be corrected by Beneficiary in order to comply
with the provisions of this Lease and Beneficiary shall, or shall cause
PAL, to promptly correct any such discrepancies. Lessee may be on board
for the ferry flight, but not for the purpose of discovering additional
defects. There will be no additional test flight following any work done
at the Delivery Location and prior to acceptance of the Aircraft; provided
that the Aircraft will be flown at the Delivery Location by PAL or
Beneficiary to the extent required to prove that any defect discovered on
the ferry flight by Beneficiary which requires proving has been corrected.
All flights pursuant to this clause above shall be made at Beneficiary's
(or PAL's) expense, except that Lessee shall provide its observers at
Lessee's expense;
15. The condition of the Airframe upon delivery shall be as follows:
a. The Airframe shall have accomplished, in accordance with the
Manufacturer's Maintenance Planning Document, immediately prior to
the test flight in Manila a "C" Check. All routine and non-routine
maintenance items will be corrected during the "C" Check and no
carry-over items will exist at delivery;
b. the installed main landing gear and nose landing gear shall be in
good operating condition and shall have at least half-time remaining
prior to removal from the Aircraft for overhaul or sampling;
16. The condition of installed systems upon delivery shall be as follows:
a. CONTROLLED COMPONENTS
Aircraft and engine hour and/or cycle controlled components at time
of delivery to Lessee shall have remaining as a minimum, 3,000
Flight Hours and/or 1200 Cycles, whichever is applicable until the
next scheduled removal for overhaul, test, inspection or
disassembly. All components controlled on a calendar basis shall
have remaining, as a minimum, twelve (12) months before scheduled
removal for testing, inspection or overhaul. Such hour/cycle or
calendar controlled components are defined as those components for
which hours and/or cycles and/or calendar times are controlled under
the maintenance program. However, if a component or part has a life,
overhaul or check interval limit that is less than the above stated
hours, cycles or calendar time limit requirement, such component or
part shall have as a minimum 90 per cent of the interval remaining
to removal for replacement or overhaul. Beneficiary will not install
life-limited or rotable components on the Aircraft for the purpose
of depleting the value of the Aircraft;
b. CONDITION OF MONITORED COMPONENTS
Aircraft and engine systems, components or parts maintained "on
condition" or condition monitored shall be within the relevant
manufacturer's specified or recommended limits with no adverse
trends;
17. Each of the Engines and each module and part thereof at time of delivery
to Lessee shall be in good operating condition and shall meet the
following requirements:
a. TIME SINCE REFURBISHMENT
Each Engine shall have remaining no less than three thousand (3,000)
Flight Hours to its next scheduled shop visit pursuant to the
manufacturer's engine management program policy recommendation, and
shall not meet the delivery condition if any Engine has remaining
less than such Flight Hours;
b. LIFE LIMITED PARTS
Life limited parts shall have remaining at least 3,000 Cycles until
next scheduled removal for replacement of life limited parts;
c. BOROSCOPE INSPECTION
Both the hot and cold sections of the Engines and APU shall be
boroscoped in accordance with Manufacturer's recommendations at
Beneficiary's expense at delivery, and Beneficiary will correct all
discrepancies that exceed Manufacturer's maintenance manual
limitations at its expense. Beneficiary shall provide Lessee with a
written report and video tape of such boroscope and Lessee will be
entitled to be present at any such boroscope. Beneficiary shall
conduct a maximum power assurance run on each Engine to ensure that
each Engine has an EGT temperature margin of 21 degrees or higher.
Satisfactory evidence shall be provided to Lessee reflecting the
correction of any discrepancies found during such inspection;
d. TREND MONITORING
All Engine parameters shall be within the Manufacturer's Engine
Maintenance Program limits with no adverse trends. If the Aircraft
engine historical and maintenance records and/or trend monitoring
data indicate a rate of acceleration in performance deterioration or
oil consumption of any Engine and/or the Auxiliary Power Unit (APU)
which is higher than normal, Beneficiary shall, prior to delivery,
correct or cause to be corrected such conditions to meet normal
manufacturer's tolerances;
18. The condition of the Auxiliary Power Unit upon return shall be as follows:
The installed APU at the time of delivery to Lessee shall be in good
operating condition, shall have remaining at least one half of the
interval time remaining before the next scheduled hot section inspection;
19. Upon completion of the ferry flight from Manila and after Beneficiary has
corrected the discrepancies as required to comply with all of the delivery
conditions set forth in this Schedule, the Aircraft condition shall be
technically accepted by Lessee's representatives at the delivery location
by the execution of a technical acceptance certificate in the form of
Lease Supplement No. 1.
20. The Aircraft shall have installed all optional no charge vendors, and
manufacturers' service bulletin kits theretofore received by previous
operator for the Aircraft and to the extent received but not installed,
such kits shall be furnished free of charge to Lessee (and properly packed
and loaded on the Aircraft as cargo at delivery);
21. At a minimum, and without limitation of any more stringent requirements
set forth herein, the Aircraft and all Aircraft records shall be at least
in condition upon delivery as Lessee would be required to return the
Aircraft and Aircraft records upon redelivery and Lessee shall have all
such rights with respect to noncompliance as Lessor would have upon return
of the Aircraft and Aircraft records.
EXHIBIT "E"
REDELIVERY CONDITION
The condition of the Aircraft on redelivery shall be as follows:
1. The Aircraft shall be in good operating condition airworthy and with all
systems operational and within manufacturers' manual limits, irrespective
of deviations or variations authorized by the Minimum Equipment List (XXX)
or Configuration Deviation List (CDL);
2. The Aircraft shall have been cleaned externally within the last two weeks
and have had its interior deep cleaned immediately prior to redelivery in
accordance with Lessee's deep clean specification and in conformance with
major airline standards. The seat covers shall be in good condition;
3. The Aircraft shall comply with the Manufacturer's specification at the
original delivery date, as revised from time to time by the incorporation
of certain airworthiness directives, service bulletins and modifications
which enhance the Aircraft's operational capability. The Aircraft shall be
in the same configuration and condition as it was in when delivered to
Lessee by Lessor under this Lease, excepting only ordinary wear and tear,
replacements and local modifications, substitute parts and equipment of
equal or enhanced value as may have been properly made by Lessee pursuant
to this Lease and as specifically otherwise set forth herein;
4. The Aircraft shall have had accomplished thereon and be in compliance with
all outstanding mandatory orders, directives, FARs and instructions
affecting the Aircraft as issued by the FAA which have a known compliance
deadline during the Term. In the event that Lessee has obtained a waiver
or deviation from the FAA from having to comply with any such mandatory
orders, directives, FARs and instructions, Lessee shall, irrespective of
such waiver or deviation, comply with all such mandatory orders,
directives and instructions covered by such waiver or deviation prior to
return of the Aircraft to Lessor on a terminating action basis under the
directive, order, FARs or instruction. The airworthiness directives
required by Article 5.3 shall also have been accomplished;
5. The Aircraft shall have an Export Certificate of Airworthiness issued by
the FAA to the country of Beneficiary's choice or, if Beneficiary desires
to keep the Aircraft on the same register, a current Certificate of
Airworthiness under FAR Part 121;
6. Lessee shall, at Beneficiary's expense, take all action reasonably
requested to assist Lessor and Beneficiary, to accomplish immediate
deregistration and export of the Aircraft from the United States,
including signing a lease termination certificate for recording at the
FAA;
7. All damage to the Aircraft which is not within the applicable limits shall
have been permanently repaired and certified in accordance with the
requirements of the FAA and the Manufacturer. External repairs will, where
applicable, be flushed or otherwise permanently repaired to such standard.
8. The Aircraft shall have installed all optional no charge vendors' and
manufacturers' service bulletin kits theretofore received by Lessee for
the Aircraft and to the extent received but not installed, such kits shall
be furnished free of charge to Beneficiary (and properly packed and loaded
on the Aircraft as cargo at redelivery);
9. Lessee shall provide one full set of all technical documents relating to
the Aircraft as listed under "Technical Documentation" in Appendix A
hereto and Lease Supplement No. 2, including copies of all engineering
orders, complete records of AD and Service Bulletin compliance and copies
of manufacturer's manuals relating to the Airframe, Engines, interior
configurations, components and APU, all in compliance with FAA
regulations;
The Records shall be redelivered with the Aircraft, except that
documentation relating to the "C" Check shall be returned as soon as
practicable but in any event, within 15 days from the date the Aircraft is
returned to Lessor. At the time of return of the Records for the Aircraft
to Lessor, Lessee and Lessor shall execute an aircraft documentation
return receipt (the "Aircraft Documentation Return Receipt") in the form
attached as Appendix B to Lease Supplement No. 2;
In the event Lessor's Tech Rep requires copies of any of the Records prior
to the return of the Aircraft to Lessor in order for Lessor to plan or
accomplish modifications, recertification, sale, lease or other
disposition of or utilization of the Aircraft upon such return, Lessee
shall, as soon as practicable upon receipt of each such Lessor request,
provide one advance copy of such Records as requested by Lessor's Tech
Rep, at Beneficiary's expense;
10. Prior to redelivery the Lessee shall either rubdown or strip (as
appropriate in the reasonable opinion of Beneficiary) and paint the
Aircraft in an all-white color scheme; the method of painting and
selection of paint shop shall be agreed upon with the Beneficiary. For
this purpose, a qualified representative of the Beneficiary may be present
during the painting operation. After painting, the Lessee shall balance
all control surfaces, if appropriate, in accordance with the Boeing
Maintenance Manual or Structural Repair Manual;
11. Name plates shall be removed from Airframe and Engines, if requested by
Beneficiary;
12. Up to the date of redelivery of the Aircraft the Lessee's approved
maintenance program shall include a corrosion program based on the
corrosion prevention, treatment and correction criteria established by
Boeing as set forth in the corrosion prevention and control document
("CPCP") and the Structural Repair Manual. Cleaning and treating of minor
or moderate corrosion and correction of all severe or exfoliated corrosion
deferred by the Lessee or found by the Beneficiary during the
Beneficiary's ground inspection shall be accomplished by the Lessee in
accordance with FAA approved data prior to redelivery;
13. The Aircraft shall have all deferred maintenance items and pilot log book
reports rectified on a terminating action basis;
14. The Aircraft shall be capable of certificated, full rated performance
without limitations throughout the entire operating envelope as defined in
the Airplane Flight Manual. Performance compliance will be demonstrated at
the time of the redelivery test flight and/or by inspection and testing of
the powerplants (engines, nacelles and accessories) in accordance with the
Engine Maintenance Manual, at Beneficiary's option;
15. The Aircraft (including the Records and other related documents to be
returned therewith in accordance with Appendix B hereto) shall be made
available to Beneficiary for ground inspection by Beneficiary at the
Redelivery Location. The Records will be made available to Lessor's Tech
Rep at least 15 days prior the date of redelivery. Such inspection shall
commence as soon as Lessee begins its performance of the Redelivery Check
referred to in Article 19(a) hereunder. Lessee shall remove the Aircraft
from commercial service and open the areas of the Aircraft as required to
perform the checks described in these return conditions, and shall allow
Beneficiary to accomplish its inspection in order to determine that the
Aircraft (including the Records) is in the condition required herein.
During such checks, Beneficiary personnel shall not have the right to
request that adjacent additional panels or areas be opened to allow
further inspection. Lessee, at its own expense, shall promptly correct all
deficiencies affecting airworthiness and any discrepancies from the
condition required by the provisions of this Lease which are observed
during such inspection and are communicated in writing by Beneficiary to
Lessee. All repairs shall be classified as permanent;
16. The Aircraft shall be test flown by Lessee, using qualified flight test
personnel, for not more than one hundred twenty (120) minutes in the
vicinity of the redelivery location for the purpose of demonstrating to
Beneficiary the satisfactory operation of the Aircraft and its equipment.
During such test flight command, care, custody and control of the Aircraft
shall at all times remain with Lessee. Up to three (3) of the
Beneficiary's representatives (or more if consented to by Lessee) may
participate in such flight as observers. Beneficiary's designated pilot
shall occupy either the pilot's or co-pilot's seat during such operational
test flight. Such flight shall be flown using Boeing's standard
operational test flight procedures. Upon completion of such operational
flight testing the representatives of Lessee and Beneficiary participating
in such testing shall agree in writing upon any discrepancies in such
Aircraft required to be corrected by Lessee in order to comply with the
provisions of this Lease and Lessee shall promptly correct any such
discrepancies.
All flights pursuant to the clause above shall be made at Lessee's expense
and Lessee shall pay for or reimburse Beneficiary for any costs incurred
by Beneficiary associated with such flights including, but not limited to,
costs for fuel, oil, airport fees, insurance, take-off/landing fees,
airway communication fees and ground handling fees, except that
Beneficiary shall provide its observers at Beneficiary's expense;
17. The condition of the Airframe upon return shall be as follows:
a. The Airframe shall have accomplished, in accordance with the
Lessee's approved maintenance program (or if Beneficiary so
requires, in accordance with the Manufacturer's Maintenance Planning
Document), immediately after removal from service and prior to
return to Lessor, a "C" Check or, if Lessee's terminology for checks
or its approved maintenance program has changed during the Term,
Lessee's equivalent of the complete applicable C check. All routine
and non-routine maintenance items will be corrected during the "C"
check and no carry-over items will exist upon re-delivery;
b. the installed main landing gear and nose landing gear shall be in
good operating condition and shall have at least half-time remaining
prior to the next scheduled removal from the Aircraft for overhaul
or sampling;
18. The condition of installed systems upon return shall be as follows:
a. CONTROLLED COMPONENTS
Aircraft and engine hour and/or cycle controlled components at time
of redelivery to Lessor shall have remaining as a minimum, 3,000
Flight Hours and/or 1200 Cycles, whichever is applicable until the
next scheduled removal for overhaul, test, inspection or
disassembly. All components controlled on a calendar basis shall
have remaining, as a minimum, twelve (12) months before scheduled
removal for testing, inspection or overhaul. Such hour/cycle or
calendar controlled components are defined as those components for
which hours and/or cycles and/or calendar times are controlled under
the Maintenance Program. However, if a component or part has a life,
overhaul or check interval limit that is less than the above stated
hours, cycles or calendar time limit requirement, such component or
part shall have as a minimum 90 per cent of the interval remaining
to removal for replacement or overhaul. Lessee will not install
life-limited or rotable components on the Aircraft for the purpose
of depleting the value of this Aircraft.
b. CONDITION OF MONITORED COMPONENTS
Aircraft and engine systems, components or parts maintained "on
condition" or condition monitored shall be within the relevant
manufacturer's specified or recommended limits with no adverse
trends. Each component, at all times during the Lease, shall have
been maintained and monitored in accordance with the requirements of
the FAA.
19. Each of the Engines and each module and part thereof at time of redelivery
to Lessor shall be in good operating condition and shall meet the
following requirements:
a. TIME SINCE REFURBISHMENT
Each Engine shall have remaining no less than three thousand (3,000)
Flight Hours to its next scheduled shop visit pursuant to the
manufacturer's engine management program policy recommendation, and
shall not meet the return condition if any Engine has remaining less
than such Flight Hours ;
b. LIFE LIMITED PARTS
Life limited parts shall have remaining at least 3,000 Cycles until
next scheduled removal for replacement of life limited parts.
c. BOROSCOPE INSPECTION
Both the hot and cold sections of the Engines and APU shall be
boroscoped in accordance with Lessee's Approved Maintenance Program
and manufacturer's recommendations at Lessee's expense at
redelivery, and Lessee will correct all discrepancies that exceed
Manufacturer's maintenance manual limitations at its expense. Lessee
shall provide Beneficiary with a written report and video tape of
such boroscope and Lessor's Tech Rep will be entitled to be present
at any such boroscope. Lessee shall conduct a maximum power
assurance run on each Engine to ensure that each Engine has an EGT
temperature margin of 21 degrees or higher. Satisfactory evidence
shall be provided to Beneficiary reflecting the correction of any
discrepancies found during such inspection;
d. TREND MONITORING
The Engines shall have been maintained and monitored for condition
in accordance with Lessee's approved Engine Maintenance Program
(EMP); all Engine parameters shall be within the Manufacturer's and
Lessee's EMP limits with no adverse trends, determined through the
provision by Lessee of the last 20 monitoring reports or as agreed
mutually by Lessee and Beneficiary;
If the Aircraft engine historical and maintenance records and/or
trend monitoring data indicate a rate of acceleration in performance
deterioration or oil consumption of any Engine and/or the Auxiliary
Power Unit (APU) which is higher than normal, Lessee shall, prior to
return, correct or cause to be corrected such conditions to meet
normal manufacturer's tolerances;
20. The condition of the Auxiliary Power Unit upon return shall be as follows:
The installed APU at the time of return to Lessor shall be in good
operating condition, shall have no more than 1,000 Flight Hours since its
last overhaul, at the time of return. If the Flight Hours on the APU are
more or less than the Flight Hours accumulated on the APU since overhaul
at delivery as set forth in Lease Supplement No. 1 (the "Baseline"), there
will be a financial adjustment payable by Lessee or Beneficiary in respect
of the Flight Hours above or below the Baseline, and the relevant party
shall pay to the other the pro rata portion of the cost of an APU overhaul
based on the cost of the last APU overhaul prior to re-delivery (the
"Cost") determined by multiplying the Cost by a fraction, the numerator of
which is the number of Flight Hours on the APU more or less than the
Baseline, and the denominator of which is the Flight Hours between
overhauls of the APU;
21. At redelivery, if requested by Lessor, Lessee shall return the Aircraft's
interior (seats, lavs and galleys) to its Delivery Date configuration
unless Beneficiary has previously agreed to accept a revised configuration
on return. If Beneficiary has agreed to accept such a revised
configuration on return equipment the removed interior items shall become
the property of Lessee and the replacement items the property of Lessor.
22. To the extent that, at the time of redelivery, the condition of the
Aircraft and records does not comply with the provisions hereof, the
Lessee at its own expense shall cause such rectification to be carried out
as soon as possible. In the event that such rectification extends beyond
the end of the Term and provided that unless and until such rectification
is effected the Beneficiary would not be able immediately to put the
Aircraft into commercial operation in the required redelivery
configuration, the Term shall, at the option of the Beneficiary, be
extended and the provisions of this Agreement shall remain in force until
such rectification has been accomplished; provided, HOWEVER, that the
Beneficiary shall have the right, after the end of the Term, to take
possession of the Aircraft and demand compensation for costs reasonably
incurred by the Beneficiary in connection with such repossession and
ensuring compliance with these return conditions.
23. Upon completion of the operational test flight pursuant to Article 18
hereto and after Lessee has corrected the discrepancies as required to
comply with all of the redelivery conditions set forth in this Schedule,
the Aircraft condition shall be technically accepted by Beneficiary's
representatives at the redelivery location by the execution of a technical
acceptance certificate in the form of Lease Supplement No. 2.
APPENDIX A
REDELIVERY OF TECHNICAL DOCUMENTS
1. Original copy of U.S. Export Certificate of Airworthiness or standard
Certificate of Airworthiness as requested by Lessor.
2. AD's and SB compliance records (Airframe and Engines) - information must
include method of compliance, date of accomplishment and signature of
person accomplishing work.
3. Engine Records - record of last (major inspection) overhaul, disc part
numbers, cycle/hour limits.
4. Records of life limited parts, life limited parts history since new (both
Engine and Airframe) and hours/cycles used.
5. Complete record of last Airframe ("D" check or equivalent) overhaul
information must include both routine and non-routine data.
6. Landing gear overhaul records (including shop report).
7. Copies of engineering orders relating to repairs/modifications of the
Airframe, components or systems.
8. If applicable, stress analysis and material certification date relating to
major interior modifications, i.e., galley installations, overhead and bin
enclosures if no STC available.
9. Ground proximity warning system-certification details and installation
information, including part numbers of major components.
10. Time control records - engine TSO, TSEHM, TSHSI and similar data on
time-controlled components under operator's approved program.
11. Approved flight manual, IPC, maintenance manual, wiring manuals, galley
manuals and passenger seat manuals.
12. Record of last weighing.
13. Copy of current weight and balance (loading system) for passenger and
cargo loading.
14. Aircraft weight and balance manual (MFG's).
15. Approved Interior arrangement drawing.
16. Records of last "A" check and "C" check.
17. Log book pages (1 year).
18. Letter certifying Aircraft status relating to accident or incidents.
19. Avionics equipment list (must include flight data recorder information).
20. Flight data recorder calibration sheet, if applicable.
21. Last calibration information on altimeters, airspeed indicators and ATC
transponder test, including date of accomplishment.
22. Operators current maintenance program document, if permitted.
23. Part 36 compliance information.
24. List of approved overhaul agencies, if permitted.
25. Record of last APU overhaul.
26. Records of last overhaul of hard time limited component as controlled by
operator's maintenance program.
27. List of all emergency equipment with part numbers.
28. Aircraft Maintenance Manual - Microfilm.
29. Illustrated parts Catalogue - Microfilm.
30. Wiring Diagram Manual - Microfilm.
31. System Schematics Manual - Hard copy.
32. Structural Repair Manual - Microfilm.
33. Bite Manual - Hard Copy.
34. Boeing Service Letters - Microfilm.
35. Boeing Service Letters Index - Microfilm.
36. Boeing Service Bulletins - Microfilm.
37. Boeing Service Bulletins Index - Microfilm.
38. Boeing Service Activities Report - Hard Copy.
39. Component Maintenance/OVHL Manual - Microfilm.
40. Illustrated Parts Catalogue - Hard Copy.
41. Dispatch Deviation Procedures
42. Power Plant Build-up Manual.
43. Aircraft Operations Manual.
44. Quick Reference Handbook - Hardcopy, if available.
45. FAA form 337 or equivalent, covering major mods, to airframe, components,
engines.
EXHIBIT "F"
LEASE SUPPLEMENT NO. 2
THIS LEASE SUPPLEMENT NO. 2, dated _______________, 199___, between FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except asset
forth herein but as Trustee for and on behalf of KG Aircraft Leasing Co., Ltd.,
pursuant to Trust Agreement, dated , 1997 (the "Lessor"), and Western Pacific
Airlines, Inc., a Delaware corporation (the "Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement dated as
of April , 1997 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery from time to time of Lease Supplements, under the Lease
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee hereby delivers to Lessor, and Lessor hereby accepts from Lessee,
under the Lease Agreement, the following described Boeing 737-353 aircraft
and engines:
(i) Airframe: Registration: N957WP;
Manufacturer's Serial No. 24060; and
(ii) Engines: Two CFM56-3B2 engines bearing,
respectively manufacturer's serial numbers 722139
and 723130
2. The redelivery date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof.
3. The Term for the Aircraft shall terminate on the date hereof.
4. Lessor's duly appointed and authorized technical experts have inspected
the Aircraft to ensure that the Aircraft conforms to the redelivery
conditions in Article 13 and Exhibit E of the Lease Agreement and Lessor
accepts the Aircraft for all purposes of the Lease Agreement.
5. Lessee and Lessor each hereby confirms its agreement to pay to the other
any amounts with respect to the Aircraft that may have become due during
the Term in accordance with the terms of the Lease Agreement and that such
payments will be made no later than 10 days after the date of this Lease
Supplement No. 2.
6. All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference into the Lease Agreement to the same extent as
if fully set forth therein. Appendices A and B to this Lease Supplement
and any attachments thereto are to be read together and form part of this
Lease Supplement.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers or representatives
as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL WESTERN PACIFIC AIRLINES, INC.
ASSOCIATION, in its individual
capacity but solely as Owner
Trustee under the Trust
Agreement dated
, 1997.
By: _______________________ By:_______________________
Title: ____________________ Title:____________________
KG AIRCRAFT LEASING CO., LTD.
By: _______________________
Title: ____________________
APPENDIX A
Aircraft Hours and Cycles
as of , 19___
Registration Xxxx: N Serial Number 24060
A. AIRFRAME
Aircraft Total Time (Hours) _______
Aircraft Total Landings (Cycles) _______
Lessee Service Check - Time to next Check _______
Lessee 'A' Check - Time to next Check _______
Lessee 'C' Check - Time to next Check _______
B. CFM56-3B2 engines
Serial Hours/Cycles
Position Number TCSN TTSN TTSV/TCSV to Next Limit
1
2
C. AUXILIARY POWER UNIT
Serial Total Hours/Cycles
Number Hour/Cycles TTSV TTSOH to Next Limit
-----
D. LANDING GEAR
Hours Cycles
Nos. Hours/Cycles Remaining Remaining
NLG
Rt Main Gear
Lt Main Gear
E. FUEL REMAINING IN TANKS
-----
Key:
TCSN: Total Cycles Since New
TTSN: Total Time Since New
TTSV/TCSV: Total Time Since Shop Visit/Total Cycles Since Shop Visit
TTSOH: Total Time Since Last Overhaul
APPENDIX B
DOCUMENTATION REDELIVERY RECEIPT
Western Pacific Airlines, Inc. (the "Lessee"), and First Security Bank,
N.A., as Owner Trustee (the "Lessor") hereby confirm the delivery by the Lessee
and receipt by the Lessor of the Technical Records pertaining to Boeing 737-300
Serial 24060 as described on Attachment 1 hereto and a part hereof, on
_______________, 19___, in ________________________, at _____ time.
FIRST SECURITY BANK, NATIONAL WESTERN PACIFIC AIRLINES, INC.
ASSOCIATION, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement dated , 1997.
By: _______________________ By:___________________________
Title: ____________________ Title:________________________
ATTACHMENT 1
TECHNICAL RECORDS AT REDELIVERY
MANUALS LISTING
EXHIBIT "G"
INSURANCE REQUIREMENTS
The Insurance required to be maintained shall be as follows:
(a) HULL ALL RISKS of Loss or Damage whilst flying and on the ground with
respect to the Aircraft for the Agreed Value and with a deductible not
exceeding US$750,000, or such other amount agreed by Lessee and
Beneficiary from time to time other than in the case of a total loss,
arranged total loss and total losses arising from War and Allied Perils.
(b) HULL WAR AND ALLIED PERILS, being such risks excluded from the Hull All
Risks Policy (mentioned in (a) above) by the terms of the War, Hijacking
and Perils Exclusion Clause AVN 48B. Such insurance shall, if and to the
extent available to Lessee as an addback to the Hull War and Allied Perils
coverage at no extra expense, include confiscation and requisition under
any order of any Government Entity of or within the United States for the
Agreed Value but in no event shall the Lessee be required to cover the
risks excluded by paragraph (b) of AVN 48B or its equivalent.
(c) ALL RISKS (INCLUDING WAR AND ALLIED RISKS) property insurance on all
Engines and Parts when not installed on the Aircraft on an "agreed value"
basis, in respect of the Engines, and on a repair or replace basis, in
respect of any Parts.
(d) AIRCRAFT THIRD PARTY, LIABILITY, 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)
$350,000,000 (three hundred fifty million Dollars), combined single limit
any one occurrence. War and Allied Risks are also to be covered under this
Policy to the extent such insurance is customarily available in World
Aviation Insurance Markets for this type policy.
(e) All required hull and spares insurance (as specified in paragraphs (a),
(b), and (c) above), so far as it relates to the Aircraft shall:-
(i) name Lessor, the Beneficiary their respective successors and
assigns as additional assureds for their respective rights and
interests in the Aircraft, warranted, each as to itself only,
no operational interest;
(ii) provide that (a) any loss which results in a payment on the
basis of a total loss, constructive total loss or arranged
total loss shall be settled with the Beneficiary and shall
name the Beneficiary as sole loss payee up to but not in
excess of Agreed Value, (b) any loss that does not exceed U.S.
$750,000 will be settled with and paid to the Lessee unless
and until the Beneficiary has notified the insurer that an
Event of Default has occurred and is continuing in which event
the loss payee shall be the Beneficiary and (c) any loss which
exceeds the policy deductible of U.S. $750,000 up to but not
in excess of Agreed Value but is less than a total loss shall
name the Beneficiary as sole loss payee for amounts up to the
Agreed Value. Insurance proceeds in excess of Agreed Value
shall be settled with and payable to Lessee.
(iii) provide that, in relation to the interests of each of the
additional assureds, the Insurance (A) shall not be
invalidated by any act or omission by Lessee or any other
person other than the respective additional assured seeking
protection provided that the additional assured so protected
has not caused, contributed to or knowingly condoned the said
act or omission and (B) shall insure the interests of each of
the additional assureds regardless of any breach or violation
by Lessee of any warranty, declaration or condition contained
in such insurance;
(iv) if separate Hull "All Risks" and "War Risks" insurance are
arranged, include a 50/50 provision in accordance with market
practice (AVS. 103 is the current market language);
(v) confirm that the insurers are not entitled to replace the
Aircraft in the event of an insured Event of Loss.
(f) All required liability insurance shall (it being understood that
endorsement of AVN 67B to the policy shall satisfy the following
requirements):
(i) include Lessor and the Beneficiary and their respective
successors and assigns and their respective shareholders,
subsidiaries, directors, officers, agents and employees as
additional assureds for their respective rights and interests,
warranted, each as to itself only, no operational interest;
(ii) provide that, in relation to the interests of each of the
additional assureds, its directors, officers, employees,
agents and Indemnities, the liability insurance shall not be
invalidated by any act or omission by Lessee, the Lessor, the
Beneficiary or any other person other than the respective
additional insured seeking indemnity provided that the
additional insured seeking indemnity has not caused,
contributed to or knowingly condoned the said act or omission,
and shall insure the interests of each of the additional
assureds, its directors, officers, servants, agents and
employees regardless of any breach or violation by Lessee, of
any warranty, declaration or condition contained in such
insurance;
(iii) include a Severability of Interest Clause which provides that
the insurance shall operate to give each assured the same
protection as if there was a separate policy issued to each
assured but shall not increase the overall limit of coverage
afforded;
(iv) 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
Lessor, the Beneficiary, or Lessee have the benefit so as to
reduce the amount payable on behalf of the additional assureds
under such policies.
(g) All insurance (as specified in paragraphs (a), (b), (c) and (d) above),
shall (it being understood that endorsement of AVN 67B to the policy shall
satisfy the requirements of clauses (iii) - (v) below):-
(i) be in accordance with normal industry practice of
organizations operating a similar aircraft in similar
circumstances;
(ii) provide cover denominated in U.S. dollars;
(iii) acknowledge the insurer is aware of this Lease and that the
Aircraft is owned by Lessor and Beneficiary and leased to
Lessee;
(iv) provide that the insurers shall waive any rights of recourse
and/or subrogation against Lessor and the Beneficiary, (and
additionally, in respect of liability insurance, their
respective directors, officers, employees and agents);
(v) provide that Lessor and the Beneficiary and in respect of
liability insurance, their respective directors, officers,
employees, agents and Indemnities 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 waive any right of set-off or
counter-claim in respect of any premium due against the
respective interests of such parties (and in the case of the
liability insurance their respective directors, officers,
employees, agents and indemnities);
(vi) provide that, if such insurance is canceled for any reason
whatever, or any material change is made in the coverage which
adversely affects the interest of the additional insureds or
if such insurance is allowed to lapse for non-payment of
premium, such cancellation, change or lapse shall not be
effective as to the additional assureds for thirty (30) days
(but seven (7) days, or such lesser period as may from time to
time be available in accordance with policy conditions, in the
case of any war risk and allied perils coverage) after written
notice of such cancellation, change or lapse shall have been
sent to broker who shall upon receipt pass on such notice to
the Beneficiary and Lessor at the following address:
Notice will not however be given in respect of the natural
expiry of the policy or of any non-renewal of the policy;
(vii) if reinsurance is a requirement in accordance with the terms
of Article 10.1, such reinsurance shall (i) be on the same
terms as the original insurance (and shall include the
provisions of this appendix), (ii) provide in case of any
bankruptcy, insolvency,liquidation, dissolution or similar
proceedings of or affecting the original insurer that the
reinsurers' liability shall be to make such payments as would
have fallen due under the relevant policy of reinsurance if
the original insurer had (immediately before such bankruptcy,
insolvency, liquidation, dissolution or similar proceedings)
discharged its obligations in full under the original
insurance policies in respect of which the then relevant
policy of reinsurance has been effected; and (iii) contain a
"cut-through" clause in the following form (or otherwise
satisfactory to Beneficiary):
"The Reinsurers and the Reassured hereby agree that in the
event of any valid claim arising hereunder within the original
policy coverage limitations and conditions, and written notice
of such claim being given to the Reinsurers by the original
Assured and/or any Additional Assured, then Reinsurers shall
in lieu of payment to the Reassured, its successor in interest
and assigns pay that portion of any loss due to the Additional
Assureds for which Reinsurers would otherwise be liable to pay
the Reassured, it being understood and agreed that any such
payment by Reinsurers directly to said Additional Assureds
shall fully discharge and release the Reinsurers from any and
all further liability in connection therewith. For the purpose
of this Reinsurance the above clause shall only apply in
respect of the interest of Additional Assureds under the
original policy. It is mutually agreed that the rights
conferred upon Additional Assureds and Reinsurers by the above
clause form an integral part of the policy. Agreement to the
above shall be subject to Reinsurers reserving their rights to
set off against any claim payable under this clause, any
outstanding premiums applicable to the Aircraft the subject of
the Lease Agreement. Such set off shall be first applied to
any financial interest of Lessee in the Aircraft involved. Any
payment due under this clause shall not contravene any law,
statute or decree of the United States.
In the case of liquidation, bankruptcy, dissolution or similar
proceedings of or affecting the Reinsured, the Reinsurers'
liability shall be to make such payments hereunder as would
have fallen due if the Reinsured had (immediately before such
liquidation, bankruptcy, dissolution or similar proceeding)
discharged its obligations in full under the Policies in
respect to which the Reinsurance Policies were effected.
(viii) contain a provision entitling Beneficiary or any insured
party to initiate a claim under any policy in the event of the
wrongful refusal or failure of Lessee to do so;
EXHIBIT "H"
Irrevocable Standby Letter of Credit No. ____
KG Aircraft Leasing Co., Ltd.
0 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx
Xxxxxx 0, Xxxxxxx
RE: WESTERN PACIFIC AIRLINES, INC. (THE "ACCOUNT PARTY")
Dear Sirs:
1. We hereby establish our Irrevocable Standby Letter of Credit No.
____ in your favor for the account of the Account Party in the aggregate of
U.S.$470,000 (the "Credit Limit") available by sight draft at our New York
office in an amount not exceeding the Credit Limit accompanied by a certificate
signed by an officer of your Company confirming that an event of default has
occurred and is continuing under the Lease Agreement between First Security
Bank, National Association, not in its individual capacity but solely as Trustee
pursuant to the Trust Agreement dated as of , 1997, and Western Pacific
Airlines, Inc. relating to one Xxxxxx 000-000 xxxxxxxx, XXX 00000.
2. Partial drawings are permitted.
3. We confirm to you that all drafts drawn under and in compliance
with the terms of this credit will be duly honored on the delivery of documents
as specified in paragraph 1 above if presented on or before the expiration date.
4. This Letter of Credit expires on .
5. This Letter of Credit is subject to the Uniform Customs and
Practices for Documentary Credits, 1993 Revision, International Chamber of
Commerce Publication No. 500 (the "Uniform Customs"). This Letter of Credit
shall be deemed to be made under the laws of the State of New York, including
Article 5 of the Uniform Commercial Code, and shall, as to matters not governed
by the Uniform Customs, be governed by the laws of the State of New York.
Very truly yours,
[Name of bank]
Letter of Credit Department
By:___________________________
Name:
Title:
EXHIBIT "I"
CERTAIN TERMS
"Agreed Value" means, with respect to the Aircraft, $25,000,000 on the
Delivery Date and shall decline on the same day as the Delivery Date in each
third month following such date (or, if there is no such day in such month, on
the last day of such month) by $250,000 to a minimum of $15,000,000 at the
Expiration Date of the Basic term and by $250,000 each quarter during any
Renewal Term.
"Basic Rent" means $235,000.
"Basic Term Expiration" means the tenth (10th) anniversary of the
Delivery Date.
"Damage Notification Threshold" means $1,000,000.
Maintenance Reserve rates for Article 5.4(iv) are:
(a) For the Airframe, $65 per Airframe Flight Hour;
(b) For each Engine, $70 per Engine Flight Hour for off-wing scheduled
maintenance; and
(c) For each Engine, $55 per Engine Cycle for LLP replacement.
