CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
ENGINE LEASE AGREEMENT
DATED September 11, 1997
AMONG
RRPF ENGINE LEASING LIMITED
and
MIDWAY AIRLINES CORPORATION
Rolls-Xxxxx Xxx 650-15 Spare Engine
Manufacturer's Serial Number [* *]
INDEX
Clause Page
No. Heading No.
--------------------------------------------------------------------------------
1. DEFINITIONS.................................................. 1
2. REPRESENTATIONS AND WARRANTIES............................... 8
3. CONDITIONS PRECEDENT......................................... 10
4. LEASE, AND LEASE PERIOD AND PURCHASE OPTION.................. 12
5. DELIVERY..................................................... 13
6. EXCLUSION CLAUSE............................................. 15
7. MANUFACTURER'S WARRANTIES.................................... 16
8. PAYMENTS..................................................... 17
9. GENERAL TAX INDEMNITY........................................ 20
10. LESSOR'S SECURITY INTERESTS; QUIET ENJOYMENT................. 25
11. CORPORATE UNDERTAKINGS....................................... 25
12. OPERATIONAL UNDERTAKINGS..................................... 26
13. INSURANCE.................................................... 36
14. TOTAL LOSS................................................... 42
15. REQUISITION FOR HIRE......................................... 44
16. INDEMNITY.................................................... 45
17. TERMINATION BY LESSOR........................................ 47
18. TERMINATION PAYMENTS......................................... 50
19. REDELIVERY................................................... 51
20. MISCELLANEOUS................................................ 53
i
SCHEDULE 1 THE ENGINE................................................... 57
SCHEDULE 2A FORM OF LEGAL OPINION OF XXXXXXXXXX & XXXXXXXX,
SPECIAL COUNSEL TO LESSEE.................................... 58
SCHEDULE 2B FORM OF LEGAL OPINION OF LESSEE'S LEGAL DEPARTMENT........... 62
SCHEDULE 2C FORM OF LEGAL OPINION OF DAUGHERTY, FOWLER , SPECIAL
AND PEREGRIN, COUNSEL TO LESSEE.............................. 64
SCHEDULE 3 ACCEPTANCE CERTIFICATE....................................... 66
SCHEDULE 4 TERMS OF SALE................................................ 67
SCHEDULE 5 ASSUMED RENT AND RENTAL ADJUSTMENT FACTOR.................... 68
SCHEDULE 6 STIPULATED LOSS VALUE........................................ 69
SIGNATORIES .............................................................. 71
ii
ENGINE LEASE AGREEMENT
LEASE AGREEMENT made on the September 11, 1997, among RRPF ENGINE LEASING
LIMITED whose registered office is at 00 Xxxxxxxxxx Xxxx, Xxxxxx XX0X 0XX
("Lessor"); and MIDWAY AIRLINES CORPORATION whose office is at 000 X. Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, XX 00000 XXX ("Lessee").
WHEREBY IT IS AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement:
"Acceptance Certificate" means the Acceptance Certificate in the
form set out in Schedule 3 which is to be signed by the Lessee in
accordance with Clause 5.1 (Delivery);
"Agent" means such institution or institutions as may from time to
time advise the Lessee;
"Aircraft" means the aircraft upon which the Engine or any Part is
installed from time to time;
"Approved Air Operator" means an air operator of good repute
approved in writing by Lessor, such approval not to be unreasonably
withheld;
"Approved Broker" "Approved Underwriter" each have the meaning set
out in Clause 13.1 (Insurance Definitions);
"Assumed LIBOR" means [***] per annum;
"Assumed Rent" means the amount set forth on Schedule 5.1 or 5.2, as
the case may be, as Assumed Rent, as adjusted on the Delivery Date
in accordance with the provisions of Schedule 5;
"Aviation Authority" means the Aviation Authority of the State of
Registration and all authorities, government departments, committees
or agencies which under the laws of the State of Registration may
from time to time:
(a) have control or supervision of civil aviation in the State of
Registration; or
(b) have jurisdiction over the registration, airworthiness or
operation of, or other matters relating to, the Engine;
"Banks" means such financial institutions which from time to time
may finance the Engine for Lessor and/or for whose benefit security
over, or rights relating to, the Engine and/or this Agreement may be
granted by Lessor or at Lessor's request;
"Base List Price" means the list price for the Engine quoted by the
Engine Manufacturer, as escalated by the Engine Manufacturer to the
Delivery Date
1
"Borrowings" means:
(a) moneys borrowed or raised and interest thereon;
(b) any liability for rentals, interest, termination sums or other
payments under finance leases and operating leases;
(c) any liability under any debenture, note or other security or
under acceptance credit facilities; or
(d) any liability in respect of an installment payment due in
connection with the conditional sale or credit sale agreement
for the acquisition cost of assets to the extent payable after
the time of acquisition or possession thereof by the party
liable;
"Business Day", when used in relation to LIBOR, means any day, other
than a Saturday or Sunday, on which commercial banks in London are
open for business and quoting rates for Dollar deposits, and
otherwise means a day, other than a Saturday or Sunday on which
business of the kind contemplated by this Agreement is carried on in
England and the State of Registration or, where used in relation to
a payment, which is also a day on which banks are open for business
in the place of payment;
"Compulsory Acquisition" includes requisition of the Engine for
title, other compulsory acquisition of the Engine (otherwise than by
requisition for use or hire not involving requisition of title and
not otherwise a Total Loss), condemnation, seizure, capture,
nationalization, appropriation, expropriation, detention,
deprivation or confiscation for any reason of the Engine by any
governmental authority (whether civil, military or de facto);
"CRAF" has the meaning given that term in Clause 12.12(a)
(Subleasing and Repairs);
"Cycle" means one take-off and landing by the Aircraft to which the
Engine is attached;
"Damage Notification Threshold" means US$250,000;
"Default Rate" means the rate of interest referred to in Clause 8.6
(Default Interest);
"Delivery" means the tendering for delivery of the Engine by Lessor
to the Lessee under this Agreement.
"Delivery Date" means the date on which delivery takes place;
"Deposit" means the amount set out in Clause 8.1;
"Dollars" and "$" means the lawful currency of the United States of
America;
"Engine" means
(a) Rolls-Royce plc model Tay 650-15 Spare Engine, having
manufacturers' serial number as notified by the Engine
Manufacturer
2
to Lessor and Lessee and specified in the Acceptance
Certificate to be delivered by Lessee pursuant to Clause
5.1(b), as more particularly described in Schedule 1 hereto
together with all Parts installed thereon at Delivery and
includes, where the context admits, the Technical Documents
and the transportation stand; and
(b) all substituted, renewed and replacement parts at any time
installed thereon,
"Engine Management Programme" means the latest issue of the
Management Programme for the Tay 650-15 Spare Engine agreed between
the Engine Manufacturer and Lessee and all service bulletins issued
by the Engine Manufacturer with a compliance category of 2A or
higher;
"Engine Manufacturer" means Rolls-Royce plc;
"Engine Manual" means the latest issue by the Engine Manufacturer of
the Tay 650-15 Engine Manual
"Excluded Withholdings" means any Tax collectible by means of a
withholding to the extent that such Taxes would not have been
imposed on Lessee but for the failure of any Tax Indemnitee to
comply with any of the provisions of this Agreement;
"FAA" means the Federal Aviation Administration of the United States
of America and any successor thereof;
"Flight Hour" means each hour or part thereof elapsing from the
moment the Aircraft takes off to the moment it touches down;
"Force Majeure" means delay due to or arising out of acts of God or
public enemy, war, civil war, insurrection or riot, fire, flood,
explosion, earthquake, act of government, governmental priority or
regulation affecting directly or indirectly the Engine and/or the
Aircraft, or Lessor or any facilities or labor dispute causing
cessation, slowdown or interruption of work, inability after best
endeavors to procure equipment, data or materials from suppliers, or
any other cause to the extent that such cause is beyond the control
of Lessor;
"Indemnitee" means each of Lessor and its permitted assigns, the
Security Trustee, the Agent, each of the Banks, and each of their
respective affiliates, directors, officers, agents, servants and
employees (but excluding, in any event the Engine Manufacturer and
any vendor, subcontractor or supplier thereof with respect to claims
made against them in such capacity);
"Indemnifiable Taxes" has the meaning set out in Clause 9 (General
Tax Indemnity);
"Insurances" means all contracts and policies of insurance which are
from time to time required to be taken out or effected in respect of
the Engine pursuant to Clause 13 (Insurance);
"Insurers" has the meaning set out in Clause 13.1 (Insurance
Definitions);
"Lease Period" means the period from the Delivery Date, until the
Term Date or the date of any earlier termination pursuant to this
Agreement;
3
"Lessor's Security Interest" means any Security Interest created by
or attributable to the Lessor, the Security Trustee, the Agent
and/or the Banks other than the rights of Lessor under this
Agreement;
"Liability Insurances" has the meaning set out in Clause 13.1
(Insurance Definitions);
"LIBOR" means the number which is the arithmetic mean (rounded
upward, if necessary, to the nearest 1/16 of one per cent.) of the
rates of interest per annum appearing on the Reuters Screen "LIBO"
page at or about 11.00 a.m. (London time) on the Quotation Date for
the offering by leading banks in the London interbank market of
Dollar deposits on the second Business Day following such day for a
period of six months;
"Loss Proceeds" has the meaning set out in Clause 14.1 (Total Loss
Definitions);
"Maintenance Manual" means the latest issue of the Fokker 100
Aircraft Maintenance Manual;
"Maintenance Programme" means a maintenance programme for the Engine
approved by the Aviation Authority;
"Part" means (except as otherwise provided herein):
(a) any of the parts installed on the Engine at Delivery;
(b) any part with which the Lessee replaces a Part pursuant to
this Agreement and which becomes or should have become the
property of Lessor;
(c) any part, wherever located, which has been removed from the
Engine but which has not been replaced by a part which becomes
the property of Lessor in accordance with the provisions of
this Agreement; and
(d) any part installed on the Engine pursuant to Clause 12.16
(Modifications), but excluding any replacement parts;
"Permitted Lien" means:
(a) any Security Interest for Taxes either not assessed or, if
assessed, not yet due and payable or being contested in good
faith by appropriate proceedings; or
(b) any Security Interest of a materialman, mechanic, worker,
employee, repairer, carrier, hangar keeper or other similar
Security Interest arising in the ordinary course of business
or by operation of law in respect of any obligation which is
being contested in good faith by appropriate proceedings.
provided that (in the case of both (a) and (b)):
(i) adequate reserves have been provided by the Lessee for
the
4
payment of such Taxes and obligations, and
(ii) such proceedings, or the continued existence of such
Security Interest is held, or any interest in such
asset, being sold, forfeited or otherwise lost; or
(c) any Lessor's Security Interest; and
(d) the rights of the parties under this Agreement and the right
of others to the extent permitted under this Agreement.
"Potential Termination Event" means any event which, with the giving
of notice or lapse of time, determination of materiality or
fulfillment of any other condition, might constitute a Termination
Event;
"Property Damage" has the meaning set out in Clause 13.1 (Insurance
Definitions);
"Purchase Option" means the option set out in Clause 4.2
"Quotation Date" means the day two (2) Business Days before each
Rental Adjustment Date;
"Rent" means all amounts payable under Clause 8.2 (Payments);
"Rent Date" means the 11th day of each calendar month following the
Delivery Date during the Lease Period;
"Rental Adjustment Date" has the meaning set out in Clause 8.2(b)
(Rental Adjustment);
"Required Amount" has the meaning set out in Clause 13.1 (Insurance
Definitions);
"Required Liability Amount" has the meaning set out in Clause 13.1
(Insurance Definitions);
"Scheduled Delivery Date" means 15 February 1998;
"Security Interest" includes any mortgage, charge, pledge,
encumbrance, lien, right of set-off, assignment, hypothecation,
title retention, preferential right or trust arrangement or other
security interest or arrangement or agreement the effect of which is
the creation of security howsoever created or arising;
"Security Trustee" means such institution or institutions as Lessor
shall from time to time advise Lessee;
"State of Registration" means the United States of America or if the
Engine is sub-leased under Clause 12.12 such other country in which
registration of the Aircraft has been effected;
"Stipulated Loss Value" means the amount stated in Schedule 6
opposite the Rent Date specified;
5
"Sub-lessee" means any sub-lessee permitted under Clause 12.12
(Subleasing and Repairs);
"Subsidiary" means an entity from time to time of which the Lessee
owns directly or indirectly more than 50 per cent of the voting
share capital or similar right of ownership;
"Tax Indemnitee" means Lessor and its permitted assigns, the
Security Trustee, the Agent, each of the Banks, and each of their
respective affiliates, directors, officers, agents, servants and
employees (but excluding, in any event the Engine Manufacturer and
any vendor, subcontractor or supplier thereof with respect to Taxes
imposed upon them in such capacity);
"Taxes" includes all present and future income, turnover, sales,
value added, license, registration, stamp, documentary and other
taxes, levies, duties, imposts, deductions, fees, charges,
compulsory loans and withholdings of whatever nature together with
interest thereon and penalties and additions to tax with respect
thereto, if any, and any payments made on or in respect thereof and
"Taxation" will be construed accordingly;
"Taxing Authority" means any federal, state or local government or
other taxing authority in the United States, any foreign government
or any political subdivision or taxing authority thereof, any
international taxing authority or any territory or possession of the
United States or any taxing authority thereof;
"Technical Documents" means all manuals, logs, technical records,
technical data and other materials and documents (whether kept or to
be kept in compliance with any regulation of the Aviation Authority,
Maintenance Programme or otherwise), whether in documentary form or
not relating to the Engine or any Part including, without
limitation, the following:
(i) all mandatory orders or directives compliance records;
(ii) all service bulletin compliance records, module cards and
details of the time since new, cycles since new, time since
overhaul, cycles since overhaul records in respect of each
module;
(iii) log book;
(iv) performance data in accordance with the specifications set out
in the latest issue of the Aircraft maintenance manual; and
(v) all manufacturer's concessions including Rolls-Royce Technical
Variances.
"Term Date" means, the day immediately preceding the numerically
corresponding date falling 7 years after the Delivery Date;
"Termination Event" means any event listed in Clause 17.1
(Termination Events);
"Termination Sum" means such amount as is due from the Lessee to
Lessor
6
in accordance with the terms of Clause 18.1 (Termination Payments
due on termination of Lease Period);
"Total Loss" has the meaning set out in Clause 14.1 (Total Loss
Definitions);
"Total Loss Date" has the meaning set out in Clause 14.1 (Total Loss
Definitions);
"Total Loss Payment Date" has the meaning set out in Clause 14.1
(Total Loss Definitions);
"U.S.-U.K. Treaty" means The Convention Between the Government of
the United States of America and the Government of the United
Kingdom of Great Britain and Northern Ireland for the Avoidance of
Double Taxation and Prevention of Fiscal Evasion With Respect to
Taxes on Income and Capital Gains, dated March 25, 1980;
1.2 unless the context otherwise indicates, any reference in this
Agreement to:
"part" means, in respect of the Engine, any module, any component,
instrument, accessory, reverser, nacelle, equipment or other item or
equipment of any kind whether similar to any of the foregoing or
not;
a "person" includes any person, firm, company, corporation,
government, state or agency of a state or any association or
partnership (whether or not having separate legal existence) of two
or more of the foregoing;
a "regulation", includes any present or future directive, regulation
request, requirement or voluntary credit restraint programme but,
if not having the force of law, the compliance with which is in
accordance with the general practice of persons to whom it is
addressed;
any "agreement", "license" or other instrument includes any
agreement, license or other instrument as varied, novated or
replaced from time to time (but without prejudice to any
restrictions on such variation, novation or replacement);
reference to a party hereunder or other person also includes a
reference to its predecessors in interest and its successors and
permitted assigns;
a Clause or Schedule is a reference to a clause of or a schedule to
this Agreement; and
a word importing the singular number includes the plural and vice
versa.
each of the "Agent", "Bank", "Banks" or "Security Trustee" (or any
combination of the foregoing) at any time after Lessor has advised
Lessee that there is no such relevant institution or institutions,
will be construed as being references to "Lessor" until such time as
Lessor may, in accordance with this Agreement, advise Lessee to the
contrary.
1.3 Headings in this Agreement are for ease of reference only and will
not affect the interpretation of this Agreement.
7
8
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. The Lessee represents and warrants
to the Lessor that:
(a) Status. The Lessee is a corporation duly organized and validly
existing under the laws of the State of Delaware, possessing
perpetual corporate existence and the capacity to xxx or be
sued in its own name and the Lessee has the power to own its
property and assets and carry on its business as it is now
being conducted and is the holder of all certificates,
licenses and permissions required for the use and operation of
the Engine and/or the Aircraft;
(b) Power and authority. The Lessee has the power to enter into
and perform and has taken all necessary action to authorize
the entry into, performance and delivery of this Agreement and
the transactions contemplated by this Agreement;
(c) Legal validity. This Agreement constitutes legal, valid and
binding obligations of the Lessee enforceable in accordance
with its terms and would be so treated in the courts of the
State of Registration, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar
laws affecting the rights of creditors generally and general
principles of equity;
(d) Non-conflict with laws. The entry into and performance of this
Agreement and the transactions contemplated by this Agreement
do not and will not conflict with:
(i) any law or regulation or any official or judicial order;
or
(ii) the certificate of incorporation or bylaws of the
Lessee; or
(iii) any agreement or document to which the Lessee is a party
or which is binding upon the Lessee or any of its
respective assets, nor result in the creation or
imposition of any Security Interest on its assets
pursuant to the provisions of any such agreement or
document to which it is a party;
(e) Consents. All authorizations, consents, registrations,
notifications and other matters, official or otherwise,
required in connection with the entry into or performance of
this Agreement by Lessee have been obtained or effected and
are in full force and effect to the extent required to be in
full force and effect;
(f) Litigation. No litigation, arbitration or administrative
proceedings are current or pending or, to the knowledge of the
Lessee, threatened in writing, to an officer of Lessee, which
if adversely determined are likely to have a material adverse
effect on the general financial condition of the Lessee or its
ability to perform its obligations under this Agreement;
(g) Taxes. Lessee has filed or caused to be filed all material tax
returns, reports and statements that are required to be filed
and has paid or
9
caused to be paid or is paying all taxes shown to be due and
payable by such returns, reports or statements and any tax
assessments received by Lessee to the extent that such taxes
have become due and payable (except to the extent being
contested in good faith and for the payment of which adequate
reserves have been provided).
(h) Pari Passu. The obligations of the Lessee under this Agreement
rank at least pari passu with all other present and will rank
at least pari passu with all future unsecured and
unsubordinated obligations (including contingent obligations)
of the Lessee with the exception of such obligations as are
mandatorily preferred by law and not by contract;
(i) No immunity.
(i) The Lessee is subject to civil and commercial law with
respect to its obligations under this Agreement;
(ii) neither the Lessee nor any of its assets enjoys any
right of immunity from set-off, suit or execution in
respect of its obligations under this Agreement;
(j) Stamp duties. No stamp or registration duty or similar taxes
or charges are payable in the State of Registration in respect
of this Agreement;
(k) Accounts. Its audited consolidated financial statements for
the financial year ending 31 December 1996 supplied to Lessor
prior to the Delivery Date fairly present, in accordance with
United States generally accepted accounting principles
("GAAP") the financial condition and results of operations of
Lessee and its consolidated subsidiaries as of such date and
for the year then ended and there has been no material adverse
change in its financial condition since such date; and
(l) Termination Events. No Termination Event or Potential
Termination Event has occurred and is continuing.
2.2 Repetition. The representations and warranties set out in
sub-clauses (a), (b), (c), (d), (e), (h), (i) and (l) of Clause 2.1
above will survive the execution of this Agreement and Delivery and
will be deemed to be repeated on each Rent Date during the Lease
Period, with reference to the facts and circumstances then
subsisting, as if made at each such time.
2.3 Lessor's Warranties. Lessor represents and warrants to the Lessee
that:
(a Status. Lessor is a company duly incorporated and validly
existing under the laws of England, possessing the capacity to
xxx or be sued in its own name and Lessor has the power to own
its property and assets and carry on its business as it is now
being conducted;
(b) Power and authority. Lessor has the power to enter into and
perform and has taken all necessary action to authorize its
entry into and performance of this Agreement and the
transactions contemplated by this Agreement;
10
(c) Legal validity. This Agreement constitutes legal, valid and
binding obligations of Lessor, subject to bankruptcy,
insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights of creditors generally and
general principles of equity;
(d) Non-conflict with laws. So far as concerns Lessor, the entry
into and performance of this Agreement and the transactions
contemplated by this Agreement do not and will not conflict
with:
(i) any law or regulation or any official or judicial order;
or
(ii) the constitutional documents of Lessor;
(e) Consents. All authorizations, consents, registrations,
notifications and other matters, official or otherwise,
required in connection with the entry into or performance of
this Agreement by Lessor have been obtained or effected and
are in full force and effect to the extent required to be in
full force and effect.
3. CONDITIONS PRECEDENT
3.1 Documentary Conditions Precedent. The obligation of Lessor to
deliver the Engine to Lessee under Clause 5 of this Agreement is
subject to the condition that Lessor has received all of the
following:
(a) no later than three (3) Business Days prior to the Scheduled
Delivery Date:
(i) Certificate of Incorporation and By-laws a copy of the
Certificate of Incorporation and By-laws of the Lessee,
certified by the Secretary of Lessee;
(ii) Authorizations a copy of all corporate authorizations
and resolutions required for the execution, delivery and
performance of this Agreement by Lessee, including
resolutions of the Board of Directors of Lessee, or a
committee thereof, certified by the Secretary of Lessee,
authorizing the lease by the Lessee of the Engine
hereunder and authorising a specified person to execute
this Agreement;
(iii) Consents a copy of all other authorizations, approvals,
consents, licenses and registrations in form and
substance reasonably satisfactory to Lessor necessary in
connection with the execution, performance and delivery
by, and validity and enforceability against, the Lessee
of this Agreement (including but without prejudice to
the generality of the foregoing, any necessary export
and/or import licenses in respect of the Engine) or in
the case of registrations which will only be available
on Delivery evidence that the same will have been
obtained on Delivery;
(iv) Process Agent Acceptance a letter from the process agent
referred to in Clause 20.17, irrevocably accepting
11
appointment as the same on behalf of Lessee;
(v) Fees and Duties evidence that all registration fees,
customs duties and other taxes, fees, duties and charges
payable to the governmental authorities and agencies in
the State of Registration with respect to the Engine
have been paid in full (or if the same are not yet
payable that arrangements satisfactory to Lessor have
been made for the payment thereof by the Lessee);
(vi) Insurances a copy of a certificate or certificates
evidencing the Insurances to be maintained pursuant to
Clause 13 (Insurances) and a broker's undertaking in
respect of such certificate(s) in form and substance
reasonably satisfactory to Lessor;
(vii) Maintenance Programme a copy of the current Maintenance
Programme;
(viii) Air Operator's Certificate and Air Transport Licence a
certified copy of the current Air Operator's Certificate
and Air Transport Licence issued by the Aviation
Authority to the Lessee with respect to aircraft of the
type to which the Engine will be attached;
(ix) Legal Opinion legal opinions from Fulbright & Xxxxxxxx,
LLP and the Lessee's General Counsel and Xxxxxxxxx,
Xxxxxx & Xxxxxxxx substantially to the effect set out in
Schedules 2A, 2B and 2C; and
(x) Accounts The Lessee's management accounts for the year
to 31 December 1997 indicating a minimum operating
income of [***] and a minimum cash (for the
purposes of this sub-clause cash shall be deemed to
include certificates of deposit provided that the Lessee
is not restricted from accessing and withdrawing the
cash represented by such certificates of deposit in any
way other than the payment of certain fees of the
issuer) balance of [***] and an additional
minimum cash equivalents balance of [***] (for
the purposes of this sub-clause, cash equivalents shall
be deemed to include pre-delivery payments made in
respect of aircraft) together with the latest available
audited accounts of the Lessee;
(b) prior to Delivery:
(i) a closing certificate signed by an authorized officer of
Lessee confirming that the representations and
warranties of Lessee are true and correct in all
material aspects on and as of the Delivery Date;
(ii) evidence that a precautionary Uniform Commercial Code
financing statement or statements describing the Engine
and this Agreement shall have been executed and
delivered by the Lessee, as lessee, and that such
financing statement or
12
statements shall have been duly filed with the Secretary
of State of the State of North Carolina; and
(iii) evidence that this Agreement shall have been duly filed
for recording with the FAA.
3.2 General Conditions Precedent. The obligation of Lessor to deliver
the Engine to Lessee under Clause 5 of this Agreement are subject to
the further conditions precedent that:
(a) on the Delivery Date no Termination Event or Potential
Termination Event has occurred and is continuing or might
result from the leasing of the Engine; and
(b) Lessee shall have paid the Deposit pursuant to Clause 8.1(a).
3.3 Conditions to Lessee's Obligations. The obligation of Lessee to
accept delivery of the Engine under this Agreement is subject to the
conditions precedent that on or prior to the Delivery Date, the
Lessee has received:
(a) a certificate signed by an authorized officer of Lessor
confirming that the representations and warranties of Lessor
are true and correct in all material respects on and as of the
Delivery Date;
(b) a JAA Form 1; and
(c) evidence that the Engine has successfully passed a test cell
run showing the Engine to be within Engine Manual limits and
to be in accordance with the requirements of FAR Part 34.
3.4 [***]
4. LEASE, LEASE PERIOD AND PURCHASE
4.1 Lease and Lease Period. Lessor will lease to the Lessee, and the
Lessee will lease from Lessor, the Engine on the terms of this
Agreement during the Lease Period.
4.2 Purchase.
(a) Subject to paragraph (b) below, the Lessee will have the
option to purchase the Engine on the Term Date for US$1 (the
"Purchase Price") on the terms and conditions set out in
Schedule 4 ("Purchase Option").
(b) The Purchase Option is conditional on the following matters:
(i) the leasing of the Engine to the Lessee under this
Agreement
13
will not have terminated for any reason prior to the
Term Date (and the Lessee agrees that the Purchase
Option will be immediately cancelled, upon such
termination); and
(ii) the Lessee will have complied in full with all its
accrued monetary obligations under this Agreement,
except that Lessor will waive compliance by the Lessee
of its obligations pursuant to Clause 19.2 (Redelivery
Condition).
(c) If the conditions precedent in (b) above:
(i) have either been satisfied or waived in writing by
Lessor, Lessee and Lessor will complete the sale and
purchase of the Engine on the Term Date on the terms set
forth in Schedule 4; or
(ii) have not either been satisfied or waived in writing by
Lessor by the Term Date (as the case may be) (or such
later date as is agreed), the Purchase Option will be
immediately cancelled.
(d) The Lessee agrees to discharge when due, at no expense to
Lessor, all applicable Taxes (other than Lessor Taxes) payable
in connection with the sale and purchase of the Engine to
Lessee under this Agreement pursuant to the Purchase Option,
Clause 14.3 or Clause 18.1(c).
4.3 Termination by Lessee.
Lessee may terminate this Agreement and obtain title to the Engine,
in accordance with Clause 4.2 above, effective on any Rent Date
during the Lease Period upon not less than 30 days prior written
notice to Lessor, provided that upon such effective date Lessee pays
to Lessor such sum or sums (by way of agreed compensation for loss
of bargain and not as a penalty) as will equal the aggregate of:
(a) all out of pocket costs and expenses incurred by Lessor for
de-registering its interest in the Engine and/or the filing of
releases of Lessor's Security Interests in the Engine;
(b) all amounts of Rent and other sums due and payable to Lessor
at the date of such termination by Lessee under this
Agreement, together with interest thereon as provided herein;
and
(c) a sum equal to the Stipulated Loss Value as of the Rent Date
upon which such termination becomes effective, together with
an amount equal to the instalment of Rent which, but for such
termination, would be due on such date.
For the purposes of this Clause 4.3 where the "Term Date" is
referred to in Clause 4.2 above it shall mean the Rent Date on which
this Agreement is due to be terminated by Lessee.
5. DELIVERY
5.1 Delivery.
(a) Delivery will take place at Rolls-Royce, Derby, England or at
such
14
other location in the United Kingdom as may be agreed between
Lessor and the Lessee.
(b) On tender of the Engine by Lessor for Delivery pursuant to
this Agreement and the satisfaction or written waiver of the
conditions precedent set out in Clause 3.3, the Lessee will
procure that an authorized officer will execute and deliver to
Lessor the Acceptance Certificate which will, inter alia,
without the necessity for any further action being taken,
constitute:
(i) delivery and irrevocable acceptance by the Lessee of the
Engine for lease hereunder without any qualification or
reservation and further; and
(ii) as between the parties hereto, the Lessee's confirmation
that the Engine is in good working order and repair
without defect or inherent vice in condition, design,
operation or fitness for use.
(c) As between the parties hereto, after Delivery the Engine will
be in every respect at the sole risk of the Lessee, who will
bear all risk of loss, theft, damage or destruction to the
Engine from any cause whatsoever.
5.2 Inspection.
(a) The Lessee may at its own cost and risk inspect the Engine
prior to the Delivery Date at the Delivery Location.
(b) If the Lessee notifies Lessor of any defect or non-conformity
with Schedule 1 forthwith following the inspection of the
Engine, then except to the extent otherwise agreed, Lessor
shall procure the rectification of the defect or
non-conformity at Lessor's cost and, without any other
liability accruing to Lessor (which the Lessee expressly
acknowledges), Delivery will be postponed until notification
by Lessor to the Lessee of the rectification.
5.3 Lessor's Late Delivery. If:
(a) Delivery has not occurred prior to the 90th day after the
Scheduled Delivery Date by reason of Force Majeure; or
(b) any of the conditions precedent set out in Clause 3.3 have not
been fulfilled by the 90th day following the Scheduled
Delivery Date for any reason whatsoever; or
(c) Lessor fails to satisfy the terms of Clause 5.2(b) within 90
days of the Lessee providing the Lessor with written notice of
the defect,
then Lessee will be entitled, by notice given in writing to the
Lessor not later than 60 days following the expiration of any of the
time periods set forth in clauses (a), (b) or (c) above, as the case
may be, to cancel this Agreement without any liability accruing to
any party other than the Lessor's obligation to refund the Deposit
to the Lessee.
15
5.4 Lessee's Failure to Accept Delivery, Satisfy Conditions Precedent.
(a) If, due to the Lessee's failure to satisfy any of the
Conditions Precedent set out in Clause 3.1 or 3.2 or the
Lessee's failure to execute and deliver to Lessor an
Acceptance Certificate in accordance with Clause 5.1(b),
delivery has not occurred by the Scheduled Delivery Date and
where Lessor has notified Lessee that it is immediately able
to tender the Engine to Lessee for delivery in accordance with
this Agreement but for such reason, Lessee will pay to Lessor
a non refundable commitment fee equal to an installment of
Rent (such installment as adjusted in accordance with Clause
8.2(b)), in consideration for the Lessor continuing to make
the Engine available for lease to Lessee, for each 30 day
period (or part thereof, on the basis that the commitment fee
accrues on a daily basis) after the Scheduled Delivery Date
that Delivery does not occur. It is agreed that any such
commitment fee paid by Lessee is a reasonable pre-estimate of
loss and not a penalty and will be in full and final
settlement of any claims Lessor may have in respect of the
period to which such commitment fee relates. Nothing in this
Clause will be construed as limiting Lessor's right to make
the election referred to in Clause 5.4(b) below.
(b) If, due to the Lessee's failure to satisfy any of the
Conditions Precedent set out in Clause 3.1 or 3.2 or the
Lessee's failure to execute and deliver to Lessor an
Acceptance Certificate in accordance with Clause 5.1(b),
delivery has not occurred within 90 days of the Lessor
notifying the Lessee that it is immediately able to tender the
Engine for delivery in accordance with this Agreement, Lessor
may cancel the Agreement without any liability accruing to any
party.
6. EXCLUSION CLAUSE
6.1 Exclusion of Liability. The Lessee ACKNOWLEDGES AND AGREES THAT:
(a) the Engine is to be leased on an "AS IS, WHERE IS" basis as at
the Delivery Date;
(b) SAVE AS EXPRESSLY STATED IN THIS AGREEMENT, LESSOR HAS NOT
MADE NOR SHALL BE DEEMED TO MAKE AND THERE SHALL BE HEREBY
EXPRESSLY EXCLUDED ANY REPRESENTATION OR WARRANTY OR COVENANT
OR CONDITION, EXPRESS OR IMPLIED, AS TO TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, QUALITY, PURPOSE, MERCHANTABILITY,
DURABILITY, OPERATION OR FITNESS FOR USE OR OPERATION OF THE
ENGINE OR ANY PART OR AS TO THE ELIGIBILITY OR SUITABILITY FOR
ANY PARTICULAR USE OR OPERATION OR ANY OTHER REPRESENTATION OR
WARRANTY OR COVENANT OR CONDITION OF ANY KIND WHETHER SIMILAR
TO ANY OF THE FOREGOING OR NOT, EXPRESS OR IMPLIED, WITH
RESPECT TO THE ENGINE OR ANY PART;
(c) Delivery of the Engine to the Lessee under this Agreement will
be
16
conclusive proof, as between Lessor and the Lessee that the
Engine is at that time in good working order and repair and
without defect or inherent vice in condition, design,
operation or fitness for use, whether or not discoverable by
the Lessee as of the Delivery Date, and free and clear of all
Lessor's Security Interests, and in every way satisfactory to
the Lessee.
6.2 Waiver.
(a) THE LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR, ALL
ITS RIGHTS IN RESPECT OF ANY WARRANTY OR CONDITION EXPRESS OR
IMPLIED (AND WHETHER STATUTORY OR OTHERWISE) ON THE PART OF
LESSOR WHENEVER THE SAME MIGHT ARISE AT ANY TIME, IN RESPECT
OF THE CONDITION OF THE ENGINE OR ANY PART OR ARISING OUT OF
THE OPERATION OR PERFORMANCE OF THE ENGINE OR ANY PART.
(b) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE
FOREGOING, NEITHER THE LEASE OF THIS ENGINE HEREUNDER NOR THE
SALE THEREOF PURSUANT TO CLAUSE 4.2 (PURCHASE OPTION) WILL
EXPOSE LESSOR TO ANY LIABILITY TO LESSEE WHATEVER AND
HOWSOEVER ARISING IN RESPECT OF THE INJURY, DEATH, LOSS,
DAMAGE OR DELAY OF OR TO THE ENGINE OR ANY PERSON (WHICH
EXPRESSION INCLUDES, WITHOUT PREJUDICE TO THE GENERALITY
THEREOF, STATES, GOVERNMENTS, MUNICIPALITIES AND LOCAL
AUTHORITIES) OR PROPERTY WHATEVER EXCEPT THAT TO THE EXTENT
THAT LESSOR MAY BE PRECLUDED BY STATUTE OR OTHER RULE OF LAW
FROM EXCLUDING OR LIMITING ITS LIABILITY FOR DEATH OR INJURY
TO ANY PERSON LESSOR SHALL REMAIN LIABLE TO SUCH PERSON FOR
SUCH DEATH OR INJURY BUT SHALL BE FULLY INDEMNIFIED IN RESPECT
OF SUCH LIABILITY BY THE LESSEE.
(c) Notwithstanding anything to the contrary contained herein,
nothing contained in this Agreement shall constitute or be
deemed or construed to:
(i) be a waiver by Lessee of any rights, remedies or claims
it may have against Engine Manufacturer or any vendor,
subcontractor or supplier thereof; or
(ii) create any rights, waivers, immunities or indemnities in
favor of Engine Manufacturer or any vendor,
subcontractor or supplier thereof.
7. MANUFACTURER'S WARRANTIES
7.1 Assignment. Lessor hereby assigns to Lessee any and all warranties
and rights relating to the Engine, to the extent that such rights
are assignable, as against the Engine Manufacturer or any vendor,
subcontractor or supplier thereof, whether arising under any
agreements with the Engine Manufacturer, by operation of law or
otherwise and related to the Engine,
17
but not any other engine.
7.2 Reassignment. In the event that the Purchase Option is not exercised
pursuant to Clause 4.2, the benefit of any warranty or right
assigned by Lessor to Lessee pursuant to Clause 7.1 will be
re-assigned automatically to Lessor at the end of the Lease Period.
The Lessee's rights under such warranties, including Lessee's claims
and rights to payments there under, will revert to Lessor except to
the extent arising prior to the expiration of the Lease Period.
Lessee will, at its own expense, do all such things and execute such
documents as may be required for this purpose.
7.3 Proceeds.
(a) Except as provided in 7.2 and 7.3(b), all proceeds of any
claim arising under warranties or other matters referred to in
7.1 will be paid over to Lessee promptly following receipt by
any other person, including Lessor.
(b) If and to the extent that a claim in Clause 7.3(a) relates to
defects affecting the Engine the proceeds referred to in
Clause 7.3(a) will be paid to Lessee by Lessor, or retained by
Lessee (as the case may be) provided that such payment shall
not be made so long as a Termination Event has occurred and is
continuing, and shall not be made until Lessor's receipt of
evidence reasonably satisfactory to Lessor that the Lessee has
rectified, in all material respects, the relevant defect.
7.4 Warranty Claims
Lessee may pursue any valid claims it may have against the Engine
Manufacturer and others under any and all warranties with respect to
the Engine and will provide notice of the same to Lessor.
7.5 Replacement Parts
Except to the extent Lessor otherwise agrees in a particular case,
the Lessee will procure that all components or equipment provided by
the manufacturer, vendor, subcontractor or supplier in replacement
of a defective Part pursuant to the terms of any warranty will be
installed promptly by the Lessee and on installation will be deemed
to be a Part as applicable and that title to the above will pass to
Lessor on installation.
8. PAYMENTS
8.1 Deposit
(a) Lessee will pay to Lessor on the date of this Agreement by way
of deposit $50,000 ("Deposit") receipt of which is hereby
acknowledged.
(b) The Deposit is for Lessor's complete and unrestricted use and
any interest earned on such Deposit will be for the Lessor's
account.
(c) Upon the Delivery Date the $50,000, and all interest earned
thereon calculated at a rate of LIBOR less 1%, shall cease to
be a deposit and
18
shall form part of the first installment of Rent payable
pursuant to Clause 8.2(a)(i).
8.2 Obligation to pay Rent.
(a) The Lessee will pay to Lessor:
(i) on the Delivery Date, the first installment of Rent in
advance equal to the Assumed Rent, as adjusted in
accordance with Clause 8.2(b) together with either
[***] of the Base List Price or [***] of the Base List
Price if Clause 3.4 applies less [***] and the interest
earned thereon pursuant to Clause 8.1 above; and
(ii) throughout the Lease Period an installment of Rent in
advance on each Rent Date equal to the Assumed Rent, as
adjusted in accordance with Clause 8.2(b).
(b) Rental Adjustment. On the Delivery Date, on the 11th day of
either the month of February or August (which ever falls just
after the Delivery Date), and on the 11th day of each
successive 6 calendar monthly period during the Lease Period
thereafter (each a "Rental Adjustment Date") the Assumed Rent
shall be adjusted in accordance with the provisions of
Schedule 5.1 or 5.2 as may be appropriate, (such adjustment
shall be upwards if such product is positive, or downwards if
such product is negative, as the case may be) by the following
amount:
[***]
For the purposes of the above formula:
A = Assumed Rent adjusted in accordance with Schedule 5 to
reflect the actual Base List Price
R = Rental Adjustment Factors adjusted in accordance with
Schedule 5 to reflect the actual Base List Price
(c) Notice. Lessor will notify the Lessee not later than the
Quotation Date of the amount of Rent payable from the next
Rental Adjustment Date. Any determination of such adjustment
to the Assumed Rent is, in the absence of manifest error,
prima facie evidence of the matters to which it relates.
8.3 Obligations Absolute.
(a) The Lessee's obligations to make payments pursuant to Clause
8.2(a) will be absolute during the Lease Period irrespective
of any contingency whatsoever, including (but not limited to):
(i) any set-off, counterclaim, recoupment, defence or other
right which any party hereto may have against any other;
(ii) any unavailability or interruption of use of the Engine,
for any reason, including (but not limited to), its
requisition, any
19
prohibition or other restriction against its use,
operation or possession, or any other interference with
its use, operation or possession;
(iii) any lack or invalidity of title or any other defect in
the title, airworthiness, condition, design, operation
or fitness for use or purpose of the Engine, any embargo
on or the ineligibility of the Engine for any particular
use or trade;
(iv) any lack or invalidity of or any other defect in any
related documentation or the registration of any related
documentation or the Engine under the laws of any
country;
(v) the Total Loss of or any damage to the Engine;
(vi) any failure, breach or delay on the part of any party
hereto however fundamental whether with or without fault
on its part, in performing or complying with any of the
terms or covenants hereunder;
(vii) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or
similar proceedings by or against Lessor or the Lessee;
(viii) any invalidity or unenforceability or lack of due
authorization of or other defect in this Agreement or
any other of the documents involved in the transaction
of which this Agreement forms part;
(ix) any other cause which but for this provision would or
might have the effect of terminating, frustrating or in
any way affecting any obligation of the Lessee
hereunder, it being the declared intention of the
parties that the provisions of this Clause and the
obligations of the Lessee to make the payments pursuant
to Clause 8.1(a) and Termination Sum and any other
amounts provided hereunder will survive any frustration
and that save as expressly provided in this Agreement no
moneys payable hereunder by the Lessee to Lessor will in
any event or circumstances be repayable to the Lessee.
(b) Nothing set forth in this Section 8.3 shall be construed to
prohibit Lessee from separately pursuing any claim that it may
have from time to time against Lessor or any other person or
entity.
8.4 Funds, Place and Currency. All payments of Rent, interest and other
moneys under this Agreement (of any kind whatsoever) will be in
immediately available funds and will be paid in Dollars to such
account in the continental United States and in such manner as
Lessor may direct.
8.5 Non Business Days. If any day for the payment of Rent or any amount
payable under this Agreement is not a Business Day the due date for
payment of the same will be the next succeeding Business Day.
20
8.6 Default Interest.
(a) The Lessee will pay interest on sums not paid on the due date
under this Agreement over the period from the due date until
the date of actual payment (as well after as before judgment)
at a rate per annum equal to the Default LIBOR plus 3 per
cent. ("Default Rate"); for the purposes of this Clause
8.6(a), "Default LIBOR" means the number which is the
arithmetic mean (rounded upward to the nearest 1/16 of one per
cent.) of the rates of interest per annum appearing on the
Reuters Screen "LIBO" page at or about 11.00 a.m. (London
time) on the relevant date for the offering by leading banks
in the London interbank market of Dollar deposits on such date
for a period of one week.
(b) Interest under this Clause 8.6 will be calculated on the basis
of a 365 day year and for the actual number of days elapsed
and will be compounded monthly and will be payable on demand
from time to time.
8.7 Taxes.
(a) All payments by the Lessee under or in connection with this
Agreement will be made without set-off or counter-claim, free
and clear of and without deduction or withholding for or on
account of any Taxes, except Excluded Withholdings.
(b) All Indemnifiable Taxes in respect of this Agreement and
payments hereunder, will be for the account of and will be
paid by the Lessee for its own account prior to the date on
which penalties attach thereto.
(c) All Taxes required by law to be deducted or withheld by the
Lessee from any amounts paid or payable under this Agreement
shall be paid by the Lessee prior to the date on which
penalties attach thereto and the Lessee shall, within 15 days
of the payment being made, deliver to the Lessor evidence
satisfactory to it (including all relevant tax receipts) that
the payment has been duly remitted to, and received by, the
appropriate authority.
8.8 Appropriations.
(a) In the case of a partial payment, Lessor may appropriate the
payment towards such of the obligations of the Lessee under
this Agreement, which are then due, as Lessor may decide.
(b) Any such appropriation will override any appropriation made by
the Lessee.
9.1 GENERAL TAX INDEMNITY
9.1 Taxes Covered. Except as expressly otherwise provided in Clause 9.2
and Clause 8.7, the Lessee shall indemnify, defend, and hold
harmless each Tax Indemnitee from any and all Taxes, howsoever
imposed, assessed or collected by any taxing jurisdiction upon, with
respect to, in connection with, or based upon or measured by, in
whole or in part:
21
(i) this Agreement
(ii) the Engine or any Part thereof or any interest in the Engine
or any Part thereof;
(iii) the receipts, earnings or other amounts arising from the
Engine or this Agreement; and
(iv) the purchase, acceptance, delivery, possession, use,
operation, presence, storage, registration, deregistration,
modification, maintenance, repair, overhaul, testing, leasing,
subleasing, return, sale or other disposition of the Engine or
any Part thereof, or interests therein.
As used in this Agreement, "Indemnifiable Taxes" shall mean any
Taxes for which the Lessee has agreed to provide any indemnity
pursuant to this Clause 9.1 except to the extent expressly excluded
or expressly limited anywhere in Clause 8.7 or Clause 9.2.
9.2 Exclusions. The indemnity for Taxes provided in Clause 9.1 above
shall not extend to any of the following:
(a) Taxes on, based on, or measured by, net income (including
minimum taxes and any taxes measured by items of tax
preference) or that are franchise taxes, taxes on doing
business or taxes measured by capital or the net worth of the
Tax Indemnitee (any of the above "Income Taxes") that are
imposed by a Taxing Authority except any withholding tax
imposed by a Taxing Authority if:
(i) Lessor qualifies at all relevant times during the Lease
Period as "residents of the United Kingdom" for purposes
of the U.S.-U.K Treaty as in effect of the date hereof;
(ii) such tax is imposed for a reason other than Lessor's
maintenance of a permanent establishment in the United
States; and
(iii) such tax is imposed as a result of a change in
applicable law after the Delivery Date;
(b) Income Taxes that are imposed by any taxing authority other
than the United Kingdom or the United States (a "Foreign
Taxing Jurisdiction") except any Income Taxes imposed on a Tax
Indemnitee by a Foreign Taxing Jurisdiction if and to the
extent that such Taxes would not have been imposed but for:
(i) the operation or presence in such jurisdiction of the
Engine and/or (ii) the presence of the Lessee in, or the
Lessee making payments under this Agreement from, such
jurisdiction;
(c) Taxes to the extent such Taxes would not have been imposed but
for transfer (other than any transfer that occurs as a result
of an Event of Default that has occurred and its continuing or
as a result of the substitution, replacement, modification or
improvement of the Engine or any Part or any transfer of the
Engine to Lessee pursuant
22
to the terms of this Agreement) by any Tax Indemnitee, of all
or any portion of its interest in the Engine;
(d) Taxes imposed on a Tax Indemnitee to the extent that such
Taxes would not have been imposed but for the failure of any
Tax Indemnitee to comply with requirements (including
reporting, information and documentation) of the jurisdiction
imposing such Taxes, if (i) such compliance is required by
statute or regulation as a precondition to relief or exemption
from such Taxes, (ii) Lessee has provided such Tax Indemnitee
with a timely request to comply with such requirements and has
provided such information as the Tax Indemnitee may require to
comply with such requirements, (iii) such Tax Indemnitee was
eligible and reasonably able to comply with such requirements
and (iv) there is no material adverse consequence to the Tax
Indemnitee of such compliance which is not satisfactorily
indemnified by the Lessee;
(e) imposed with respect to any period after the earlier of:
(i) the expiration or earlier termination of the Lease
Period and, if required pursuant to the terms of this
Agreement, the return of possession of the Engine to
Lessor and the satisfaction of all of Lessee's
obligations under this Agreement (but, in the case of
the time period after termination or expiration of the
Lease Period and before such satisfaction, Lessee will
have liability only with respect to Taxes imposed in
connection with the satisfaction of or failure to
satisfy such obligations); or
(ii) the discharge in full of all Lessee's obligations under
this Agreement
unless, (I) such Taxes relate to events, obligations or other
matters arising or occurring prior to or coincidental with
such expiration, return or payment, as the case may be, or
(II) a Termination Event shall have occurred and be
continuing;
(f) Any documentary, stamp or similar tax imposed by the United
Kingdom.
9.3 Procedure.
(a) Time of Payment. Any amount payable to a Tax Indemnitee
pursuant to Clause 8.7 or 9.1 shall be paid within thirty (30)
days after receipt by Lessee of a written demand therefor from
such Tax Indemnitee describing in reasonable detail the basis
for such indemnity and the computation of the amount so
payable.
(b) Verification. Within 15 days following Lessee's receipt of the
computation of the amount due, Lessee may (at it's own cost)
request that an accounting firm selected jointly by such Tax
Indemnity and Lessee verify whether the computation of the Tax
Indemnitee are correct. Such verification shall be binding.
23
9.4 Contest.
(a) Notice of Claim. If a written claim is made against a Tax Indemnitee
for Taxes with respect to which the Lessee is or may be liable for
payment or indemnity hereunder (a "Claim"), such Tax Indemnitee
shall give the Lessee written notice of such Claim within 60 days
after its receipt and shall furnish Lessee with any reasonable
requests for information it receives with respect to such Claim. The
failure of a Tax Indemnitee to provide such notice shall not affect
the Lessee's obligations hereunder except to the extent that such
failure adversely affects the ability of the Tax Indemnitee or
Lessee to contest such Claim successfully.
(b) Manner of Contest. Notwithstanding Clause 9.3 above, if the Lessee
requests in writing within 30 days of the date of the notification
pursuant to Clause 9.4(a) above and provided that such Claim would
(if sustained) not have a material adverse effect on the Tax
Indemnitee's business of financial affairs, the Tax Indemnitee
shall, at Lessee's sole expense, contest the Claim in the name of
the Tax Indemnitee, or if permitted by law and so requested by the
Lessee, permit the Lessee to contest in the name of the Lessee, the
validity, applicability or amount of such Claim by:
(i) resisting payment thereof, if practical;
(ii) not paying the same, except under protest; or
(iii) if payment is to be made, using diligent efforts to obtain a
refund thereof in appropriate administrative or judicial
proceedings.
(c) Conditions Precedent. A Tax Indemnitee shall not be required to take
any administrative or judicial action with respect to a Claim unless
prior thereto:
(i) the Lessee shall have agreed in writing to pay such Tax
Indemnitee on demand all reasonable out-of-pocket expenses
which such Tax Indemnitee may incur in connection with
contesting such Claim and acknowledged, in writing, the
Lessee's liability hereunder;
(ii) if such contest shall involve the payment of the Claim, Lessee
shall advance the amount thereof (to the extent indemnified
hereunder) plus interest, penalties, and additions to tax with
respect thereto that are required to be paid prior to the
commencement of such contest on an interest-free after-Tax
basis to such Tax Indemnitee.
(iii) the action to be taken will not, in the reasonable opinion of
the Tax Indemnitee, result in a material risk of a sale,
forfeiture, loss of or the creation of any lien on the Engine
except if the Lessee shall have adequately bonded any lien
that results from such risks or otherwise made adequate
provision reasonably satisfactory to such Tax Indemnitee nor
subject the Tax Indemnitee to criminal prosecution; and
(iv) no Termination Event or Potential Termination Event shall have
occurred and be continuing, unless Lessee has provided
security for its obligations hereunder by advancing to such
Tax Indemnitee,
24
before proceeding or continuing with such contest, the amount
of the Tax being contested plus any interest and penalties and
an amount estimated in good faith by such Tax Indemnitee for
expenses and Lessor shall be receiving all amounts of Rent in
full when due, without reduction by reason of such Tax; and
(v) the Tax Indemnitee shall have received a legal opinion (at the
expense of the Lessee) from counsel reasonably satisfactory to
such Tax Indemnitee indicating that a reasonable basis for
such contest exists.
(d) Settlement and Waiver. Notwithstanding the foregoing provisions of
this Clause 9.4, if at any time a Tax Indemnitee waives its right of
indemnification under this Clause 9 in respect of a Claim or if,
after having received payment of indemnification from Lessee
hereunder in respect of such Claim, a Tax Indemnitee tenders such
payment to Lessee, then the Lessee shall not be entitled to contest,
or to continue to contest, any such Claim.
9.5 Refunds or Credits. If a Tax Indemnitee shall receive a refund of
any Taxes as to which Lessee has made payment or indemnity, or shall
actually receive a reduction of any Tax (other than an Indemnifiable
Tax) then otherwise payable by it (either as a result of a credit or
a deduction) by reason of the payment by Lessee of any Tax or
indemnity pursuant to this Agreement, such Tax Indemnitee shall pay
to the Lessee an amount which, after addition of any further tax
savings such Tax Indemnitee realizes as a result of the payment
thereof, shall be equal to the net tax benefit to such Tax
Indemnitee of such refund or reduction provided that such payment to
Lessee shall not exceed the amounts paid by Lessee under this
Agreement with respect to such taxes (including costs, fees, etc.)
and provided further that such Tax Indemnitee is not thereby placed
in a worse position than it was prior to Lessee's payment of the
withholding.
9.6 Forms and Reports.
(a) Lessee Filings. While this Agreement is in effect, Lessee may
prepare and file all property tax returns with respect to the
Engine which the Lessee is permitted to file under applicable
law.
(b) Other Filings. If so requested by Lessee, at Lessee's sole
expense, the Lessor will file all property tax returns with
respect to the Engine which the Lessee is not permitted to
file, in form reasonably satisfactory to Lessee.
(c) Withholding Taxes. Lessor will provide to Lessee on the date
hereof and, upon request of Lessee within 60 days prior
thereto, every three years thereafter a Form 1001 (or its
successor) stating that it is eligible for the benefits of the
US.-U.K Treaty with respect to payments under this Agreement.
(d) Lessee will provide such information as may be requested by a
Tax Indemnitee to enable such Tax Indemnitee to fulfill its
tax filing requirements with respect to the transactions
contemplated hereby.
25
10. LESSOR'S SECURITY INTERESTS; QUIET ENJOYMENT
10.1 Lessor will not directly or indirectly create, incur, assume or
suffer to exist any Lessor's Security Interest on the Engine or any
part or Lessor's interest therein, except the Security Interest
which may from time to time exist in favor of the Security Trustee;
it being agreed by Lessor that the Security Trustee will have
delivered to Lessee a letter of quiet enjoyment from the Security
Trustee in form and substance reasonably satisfactory to Lessee on
or prior to the date that any such Security Interest in favor of the
Security Trustee is created.
10.2 Lessor will not (nor shall it permit any person or entity claiming
through or under Lessor to) interfere with the quiet use, possession
and enjoyment of the Engine by the Lessee (or any Sub-lessee) but
the exercise by Lessor of its rights under this Agreement after the
occurrence and during the continuance of a Termination Event will
not constitute such an interference.
11. CORPORATE UNDERTAKINGS
11.1 Duration. The undertakings in this Clause will remain in force
during the Lease Period.
11.2 Information. The Lessee will furnish to Lessor:
(i) as soon as practicable (and in any event within 90 days after
the close of each of its financial years) the audited
consolidated accounts of the Lessee and its consolidated
Subsidiaries for that year (a copy of Lessee's Annual Report
on Form 10-K filed with the SEC shall be deemed to satisfy the
requirements of this sub-clause (i));
(ii) as soon as practicable (and in any event within 60 days of the
end of the first six months of each financial year) the
unaudited consolidated accounts of the Lessee and its
consolidated Subsidiaries for that six months (a copy of
Lessee's Quarterly Report on Form 10-Q filed with the SEC
shall be deemed to satisfy the requirements of this sub-clause
(ii));
(iii) promptly, all notices or other documents dispatched by the
Lessee to the Lessee's creditors as a whole (or any class
thereof);
(iv) promptly such further information (the disclosure of which is
not prohibited by law) in the possession or control of the
Lessee or any or its Subsidiaries regarding the financial
condition and operations of the Lessee or any of its
Subsidiaries as the Lessor may reasonably request (unless
Lessee reasonably deems the same to be commercially sensitive
or confidential).
(v) details of all material litigation, material arbitration or
material administrative proceedings which affect the Lessee or
any of its Subsidiaries as soon as the same are instituted.
All accounts required by (i) and (ii) above will be prepared in
accordance with GAAP consistently applied (or if not consistently
applied accompanied by details of the inconsistencies) and will
fairly represent the
26
consolidated financial position of the Lessee and its consolidated
Subsidiaries.
11.3 Notification of Termination Events or Potential Termination Events.
The Lessee will notify Lessor in writing of any Termination Event or
any Potential Termination Event forthwith upon the occurrence
thereof.
11.4 Consents. The Lessee will obtain and promptly renew from time to
time, and will promptly furnish certified copies to Lessor of, all
such authorizations, approvals, consents, licenses, registrations
and exemptions as may be required under any applicable law or
regulation to enable Lessee to perform its obligations under this
Agreement or required for the validity or enforceability of this
Agreement against Lessee and the Lessee will comply with the terms
of the same.
12. OPERATIONAL UNDERTAKINGS
12.1 Duration. The undertakings in this Clause will remain in force and
effect during the Lease Period (unless the Engine is a Total Loss in
which case such undertakings will remain in force up to and
including the date upon which Lessor beneficially receives payment
of the Loss Proceeds).
12.2 Information. The Lessee will:
(a) as soon as reasonably possible after becoming aware thereof
notify Lessor with full details of the occurrence of any
accident, casualty or other event involving the Engine which:
(i) has caused or resulted in or may cause or result in the
Engine being or becoming a Total Loss; or
(ii) will or is likely to involve an amount in excess of the
Damage Notification Threshold; or
(iii) must be notified to the Aviation Authority.
(b) (i) as soon as reasonably possible after provide Lessor,
upon its written request, with such information
regarding the location, operation, maintenance, physical
state and condition of the Engine and any or all of the
Parts as Lessor may from time to time reasonably
require;
(ii) promptly after becoming aware thereof, give notice to
Lessor if a valid certificate of airworthiness issued by
the Aviation Authority in respect of the Engine ceases
to be in effect;
(iii) provide to Lessor upon its written request all such
information as Lessor may reasonably require regarding
the employment and engagements of the Engine and any or
all of the Parts, including copies of all contracts
relating thereto which concern it or them.
(iv) prior to the installation of the Engine on any Aircraft,
the Lessee undertakes to notify Lessor in writing
stating the owner of the Aircraft concerned and the
Security Interest, if any, to which the
27
Aircraft is subject and such notice shall give such
further or other details in respect of the Aircraft as
Lessor may request; and for so long as the Engine is so
installed the Lessee shall continue to supply Lessor
with such information as Lessor may require at intervals
of 30 days; and
(c) as soon as reasonably possible following Lessor's request
deliver to Lessor copies or computer print-outs of all the
records, logs, manuals, technical data and other materials and
documents including the Technical Documents relating to the
Engine which are from time to time kept or maintained by the
Lessee in relation thereto pursuant to Clause 12.19 (Technical
Documents);
(d) promptly upon becoming aware thereof give notice to Lessor of:
(i) any dispute which exists between it or any Sub-lessee or
charterer and the Aviation Authority or any other
governmental agency or regulatory body in relation to
the Engine and any Part; and
(ii) any incident or maintenance issue involving the Engine
or any Part about which the Lessee must by law or
regulation notify the Aviation Authority.
12.3 Inspection.
(a) The Lessee will permit Lessor or its agent, at all times
reasonably determined by Lessee and upon reasonable notice
from Lessor, except in the case of emergency, to enter upon
any land or premises where the Engine or Part is situated or
upon any Aircraft to inspect or survey the condition of the
Engine or any Part (including all Technical Documents and all
technical reports or recordings made in connection with any
borescope inspection performed by Lessee);
(b) The cost of such inspections and surveys will be paid by the
Lessor, unless such inspection reveals that Lessee is not in
material compliance with the terms of this Agreement, in which
case, such cost will be paid by Lessee.
(c) Lessor will have no duty to make any such inspection and will
not incur any liability or obligation by reason of making or
not making such inspection.
12.4 Lawful and Safe Operation. The Lessee will:
(a) not use or operate the Aircraft, the Engine or any Part:
(i) in violation of any applicable law or regulation or in
violation of any applicable airworthiness certificate,
license or registration or mandatory requirement issued
by or on behalf of the Aviation Authority or any other
country or authority which may for the time being be
applicable to the Aircraft or the Lessee; or
28
(ii) in the case of the Engine and any Parts, for any purpose
for which it is not designed or reasonably suited, or
outside the tolerances and limitations for which it was
designed and Lessee will ensure that the Engine is
operated in accordance with the Technical Documents and
any regulation of the Aviation Authority; or
(iii) so as to cause or permit the Aircraft, Engine or any
Part to be employed in any manner or to be located or
operated in any country which would render it liable to
confiscation, forfeiture, seizure or destruction
except, in the case of both (i) and (ii), for immaterial or
non-recurring violations with respect to which prompt
corrective measures are taken upon Lessee's discovery thereof;
(b) not cause or permit the Engine or any Part or the Aircraft to
be located in or operated:
(i) in any area excluded from coverage by insurance required
by Clause 13, except in the case of a requisition by the
State of Registration or any agency or instrumentality
thereof where Lessee obtains an indemnity in lieu of
insurance from such State of Registration, agency or
instrumentality; or
(ii) in any recognized or threatened area of hostilities
unless fully covered by war-risk insurance required by
Clause 13.
(c) ensure that neither the Engine nor any Part nor the Aircraft
is employed at any time in carrying goods which are illegal,
illicit, prohibited or contraband in any country in which it
is located or operated from time to time.
12.5 Manufacturers' and Suppliers' Warranties. The Lessee will not do or
omit to doing anything which may prejudice any right which Lessor
may have in respect of the Engine or any Part against the
manufacturer or supplier of the same.
12.6 Holding Out. The Lessee will not at any time represent or hold out
Lessor, the Security Trustee or the Agent (and will use its best
endeavors to procure that none of Lessor, the Security Trustee or
the Agent is at any time represented or held out by any Sub-lessee)
as being in any way connected or associated with any operation of
the Aircraft, the Engine or any Part or any operation of carriage
undertaken by the Lessee or any Sub-lessee or as in any other way
having any interest in the Engine except as owner or mortgagee or
lessor.
12.7 Title, Registration, Certification and Consents.
(a) Title to the Engine will remain vested in Lessor during the
Lease Period.
(b) Except as otherwise expressly provided herein, title to each
Part wherever located will remain vested in Lessor until
replaced by a
29
part which fulfills the requirements for replacements of
Clause 12.14 (Obligation to Replace) and has become the
property of Lessor free from all Security Interests (except
Permitted Liens).
(c) The Lessee will ensure that, unless otherwise permitted
hereby, the Aircraft is registered in the national register of
civil aircraft in the State of Registration and the Lessee
will not do and will use all reasonable endeavours to procure
that no third party does any act or thing which might
prejudice or cancel such registrations.
(d) The Lessee will at all times maintain in full force and effect
and, if necessary, will procure that any operator of the
Engine will at all times maintain in full force and effect all
necessary certificates, licenses, permits and authorizations
("Licenses") required by applicable laws and regulations for
the use and operation of the Aircraft and/or Engine,
including, without limitation, a Certificate of Airworthiness
in the public transport (passenger) category issued by the
Aviation Authority in respect of the Engine and/or the
Aircraft. Notwithstanding the foregoing sentence, where the
Aviation Authority has withdrawn any such Certificate of
Airworthiness in respect of all aircraft of the same model as
the Aircraft, Lessee will comply with all directions of the
Aviation Authority imposed upon it in relation to such
withdrawal.
12.8 Disposal of and Security Interest over the Engine.
The Lessee shall not attempt or hold itself out as having any power
to sell, charge, lease or otherwise encumber or dispose of the
Engine (save as provided in Clause 12.12 (Sub-Leasing and Repairs),
nor create, incur or suffer to exist any Security Interest or
possessory claim over the Engine or any Part (other than Permitted
Liens).
12.9 Prevention of Arrest and Discharge of Security Interests.
(a) The Lessee shall not do, and will use its best endeavours to
prevent, any act which could reasonably be expected to result
in the Engine, any Part or the Aircraft, being arrested,
confiscated, seized, taken in execution, impounded, forfeited,
subjected to distress, detained in exercise or purported
exercise of any possessory lien or other claim or otherwise
taken from the possession of the Lessee.
(b) If the Engine becomes subject to arrest, confiscation,
seizure, taking, impounding, forfeiture, subjection, or
detention occurs and unless arising by, through or under
Lessor, the Lessee will give the Lessor immediate notice
thereof, and will, at the Lessee's expense take prompt steps
to secure the release of the Engine, any Part concerned or the
Aircraft, and the Lessee will be responsible for discharging
promptly each and every liability in connection with any such
process, claim or lien without regard to whether or not the
Lessee is in possession of the Engine, Part or Aircraft.
12.10 No pledging of credit. The Lessee will not pledge the credit of
Lessor, the Security Trustee, the Agent or any Bank for any
maintenance, service, repairs, overhauls of, modifications to,
changes or alterations in the Engine, any Part or the Aircraft or
for any other purpose whatsoever.
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12.11 Protection of rights in the Engine.
(a) The Lessee will not do or permit to be done any act or thing
which might reasonably be expected to jeopardise the title,
rights and interest of Lessor, the Security Trustee, the Agent
or the Banks in the Engine or any Part and/or omit to carry
out any act which might prevent that title and those rights
and interest from being jeopardised.
(b) Without prejudice to the generality of the foregoing, the
Lessee will at its own cost and expense, do all acts and
things which Lessor may require to preserve the title, rights
and interest of Lessor to and in the Engine and each Part and,
in particular, but without limitation, in the event of any
law, regulations or treaties being made or becoming operative
in the State of Registration relating to recognition of rights
in engines and which may apply to the Engine, the Lessee will,
at no cost to Lessor, promptly do and join with Lessor in
doing all such acts or things as may be necessary to perfect
recognition of the title, rights and interest of Lessor, the
Security Trustee in respect of the Engine.
12.12 Subleasing and Repairs.
(a) The Lessee shall:
(i) not sub-lease, charter or otherwise deliver, transfer or
relinquish possession of the Engine except in the
following circumstances:
(1) Repairs and Modifications where the Engine is
delivered to the Engine Manufacturer or to any
other person for testing, overhaul, service,
repair or maintenance work to be carried out upon
it or for modification, alterations or changes
permitted under this Agreement to be carried out
thereon (it being understood that delivery may be
accomplished by qualified common carrier);
(2) Sub-leases where the Engine is sub-leased in
compliance with clause 12.12(b);
(3) CRAF where possession of the Engine is transferred
to the United States government pursuant to the
Civil Reserve Air Fleet Program established
pursuant to 10 U.S.C. ss. 9511-13 or any similar
or substitute program ("CRAF"), provided that
Lessee has given Lessor prompt written notice of
such transfer;
(4) Installation where the Engine is installed on an
airframe owned by or conditionally sold or leased
to Lessee or any Sub-lessee, provided that (A)
Lessee shall have provided to Lessor, prior to
installation of the Engine, relevant extracts from
any lease, conditional sales agreement, mortgage
or any other agreement pursuant to which the
airframe is owned, conditionally sold, mortgaged
or leased to Lessee or
31
any Sub-lessee certified by an authorized officer
of Lessee, whereby the lessor, seller, mortgagee
or other party holding an interest in the airframe
as the case may be, agrees for the benefit of
Lessor that neither it nor its successors or
assigns will acquire or claim any right, title or
interest in, or lien on, the Engine by reason of
the Engine being installed on such airframe or (B)
if Lessee or such Sub-lessee fails prior to
installation of the Engine to provide such
extracts thereof to Lessor, the Engine will be
deemed to have suffered a Total Loss as of the
date of such installation; and
(5) Transfer to U.S. Government where possession of
the Engine is transferred to the United States
government pursuant to a sub-lease that complies
with clauses (b)(i), (ii) and (iii) below and
where the Sub-lessee's obligations are in effect
guaranteed or supported by the full faith and
credit of the United States of America.
(ii) ensure that no Part is removed from the Engine except
where the Part has become unserviceable, worn out, lost,
destroyed, damaged beyond reasonable repair or otherwise
unfit for use or which, in accordance with the Engine
Management Programme or the Engine Manual (as the case
may be) has become time expired or which requires
repair, overhaul, modification or testing if the Lessee
is to fulfill its obligations under Clause 12.13
(Maintenance) and 12.14 (Obligation to replace or repair
etc.) or which has been confiscated but only in each
case if it is promptly replaced by a part complying with
Clause 12.14 (Obligation to replace and repair etc.)
(b) The Lessee will not (and will procure that any Sub-Lessee does
not) sub-lease the Engine pursuant to sub-paragraph (a)(i)(2)
above unless the sub-lease is in form and substance reasonably
acceptable to Lessor or:
(i) Consistency of Terms the terms and conditions of the
sub-lease are, taking account of the term of the
sub-lease and other prevailing circumstances, consistent
with those contained in this Agreement (provided that
the sub-lease will not permit further sub-leasing) and,
without limiting the generality of the foregoing, the
term of the sub-lease (including any option of the
Sub-lessee to renew or extend such term) is so expressed
that it cannot exceed the Lease Period;
(ii) Subordination of Sub-Lease the sub-lease is expressly
subject and subordinate to this Agreement and the
interests of the Sub-lessee are subject and subordinate
to the interests of Lessor, in particular but without
limitation the sub-leasing of the Engine thereunder will
not prevent or prejudice the
32
due performance by the Lessee of its obligations in
respect of the return of the Engine to Lessor pursuant
to Clause 19 (Re-Delivery);
(iii) Protection of Lessor's interest in the Engine the Lessee
demonstrates to Lessor's reasonable satisfaction, if
required to do so, that the priority, validity and
enforceability of Lessor's rights, title and interest in
the Engine or any Part will not be adversely affected by
the sub-lease and that all reasonable steps have been
taken to ensure the continued priority, validity and
enforceability of such right, title and interest
including recording such sub-lease as necessary or
appropriate in the State of Registration to evidence and
protect Lessor's interest;
(iv) Insurances the Insurances are in full force and effect
in accordance with the terms of Clause 13 (Insurance)
and, if the Sub-lessee is to maintain the Insurances
during the term of the sub-lease, the Lessee will have
furnished and from time to time will furnish to Lessor
all such documents, evidence and information relating to
such Insurances which the Lessee is required to furnish
or cause to be provided under this Agreement and which
Lessor may reasonably require in order to confirm that
the Insurances are being so maintained by such
Sub-lessee and are in full force and effect; and
(v) English Law the sub-lease is governed by English Law;
(vi) Good Repute the Sub-lessee is an Approved Air Operator.
(c) The rights of any Sub-lessee will be subject and subordinate
to the ownership interest of the Lessor, and to all terms of
this Agreement and the Lessee shall notwithstanding any
sub-lease remain liable to Lessor in respect of all the
Lessee's obligations, undertakings and liabilities hereunder
to the same extent as if such sub-lease had not occurred.
(d) The Lessee agrees that Lessor may require that all rent and
other sums payable and all rights under such sub-lease be
assigned to Lessor as collateral security for the obligation
of Lessee hereunder, provided that so long as no Termination
Event or Potential Termination Event has occurred and is
continuing, Lessee may retain all rent and other sums (or
Lessor shall pay over same to Lessee promptly following its
receipt thereof) and may exercise all rights in respect
thereof).
(e) Any "wet lease" of the Aircraft to which the Engine is
installed shall not violate this Clause 12.12, provided that
Lessee retains operational control of the Aircraft thereunder.
12.13 Maintenance. The Lessee will at its own expense at all times during
the Lease Period procure that the Engine and all the Parts is/are
operated, maintained, serviced, repaired, overhauled, inspected,
tested and modified by personnel properly qualified by the Aviation
Authority so as to:
33
(a) be in accordance with the Maintenance Programme and the Engine
Maintenance Programme;
(b) keep the Engine and the Parts in as good an operating
condition as at Delivery, (ordinary wear and tear excepted) so
that, in any event, its/their condition would comply with the
requirements for a valid Certificate of Airworthiness for the
Aircraft issued by the Aviation Authority;
(c) comply with all maintenance, service, repair, overhaul,
inspection and testing regulations, directives and
instructions that are made mandatory by the Aviation Authority
and the Engine Manufacturer and all other similar requirements
that are applicable to the Engine and any of the Parts and all
of the same will be due in accordance with the applicable
manuals and bulletins published by the relevant manufacturer;
(d) comply with all applicable laws and regulations of the State
of Registration and any other country or territory to, from,
in or over which the Aircraft may be operated or in which the
Aircraft may be operated or in which the Engine or any Part be
located from time to time except for immaterial or
non-recurring violations with respect to which prompt
corrective measures are taken upon the Lessee's discovery
thereof; and
(e) remedy any defect shown to be required by any inspection or
survey carried out under Clause 12.3 (Inspection) so as to
ensure that the Engine is placed in the condition required by
this Clause 12.13;
12.14 Obligation to Replace.
(a) Lessee will promptly replace (or cause to be replaced) any
Part which has become unserviceable, worn out, lost,
destroyed, damaged beyond reasonable repair or otherwise unfit
for use, time expired, or which requires repair, overhaul,
modification, repetitive inspections or testing, if the Lessee
is to fulfill its obligations under Clause 12.14
(Maintenance), or which has been confiscated, with an item of
the same make and model or an improved or advanced version
thereof, and having the same or greater value and utility to
the Part replaced assuming such replaced Part were in the
condition and repair required to be maintained by the terms
hereof.
(b) Lessee will procure that all replacements made under paragraph
(a) above will become the property of the Lessor free of all
Security Interests (except Permitted Liens) on or before
installation on the Engine.
(c) The Lessee will not without the prior written consent of the
Lessor:
(i) transfer or relinquish possession, custody or control of
any Part; or
(ii) install any Part in any engine unless such engine is
owned by the Lessor unless the relevant Part has been
replaced by a part
34
which fulfills the requirements of sub-paragraph (a) and
(b) above.
(d) All Parts removed from the Engine will remain the property of
the Lessor no matter where located until such time as they are
replaced in accordance with Clauses 12.14(a) and (b).
12.15 Transportation and Storage of non-installed Engine and Parts. Lessee
will ensure that the Engine or any Part which is not installed on
the Aircraft or in the Engine, as the case may be, is properly and
safely transported or stored in accordance with the Maintenance
Manual and kept free from Security Interests (other than Permitted
Liens).
12.16 Modifications. The Lessee may carry out such additions to the
Engine, with the approval of the Aviation Authority and in the case
of a modification with the prior approval of Lessor, as the Lessee
considers desirable in the conduct of its business, provided that no
such addition materially or adversely alters the specifications or
structure of the Engine, impairs the performance, utility or
condition of the Engine, is contrary to the Engine Manufacturer's
specifications, prejudices the Insurances or recovery thereunder,
adversely affects the ability to replace or interchange parts, or is
made with parts which cannot be removed without impairing the
condition or airworthiness of the Engine or materially diminishing
the value or altering the specification or structuring of the
Engine.
12.17 Notices of Title.
(a) Form of Notice The Lessee will maintain an engraved fire-proof
notice of title on the Engine of reasonable size and shape
containing the following words:
"This Engine is owned by RRPF Engine Leasing Limited."
The parties agree that the placard appearing on the Engine at
Delivery will be deemed to satisfy this Clause 12.17 if it is
so maintained throughout the Lease Period.
(b) Concealment of Notices The Lessee will ensure that the notice
referred to in paragraph (a) above is legible and not covered,
painted over or otherwise concealed.
(c) Other names or notices
The Lessee will procure that except for:
(i) the notice of title referred to in this Clause 12.17;
and
(ii) the colours and insignia of the Lessee or the Engine
Manufacturer,
the name of no other person will be placed anywhere on the
Engine or any Part in such a way as might reasonably be
supposed to indicate that that person owns or has an interest
in the Engine or that Part
35
12.18 Technical Documents
(a) The Lessee will maintain accurate, complete and current
records (including performance related information and trend
monitoring data from time to time required by the Engine
Management Programme) of all flights by the Aircraft and of
all maintenance, modifications and repairs carried out to the
Engine and any Part, and will maintain all other records, logs
and documents which are required to be maintained in respect
of the Engine by the Aviation Authority.
(b) The records so kept will conform with the requirements from
time to time in force of the Aviation Authority.
(c) The records so kept will be part of the Technical Documents
and will be the property of Lessor and at the end of the Lease
Period the Lessee will (if so required) by any purchaser in
accordance with normal practice) deliver the same to Lessor.
Lessee will be entitled to make a copy of the same.
(d) Each Technical Document will be in English (or accompanied by
an English translation certified as accurate by an authorised
officer of the Lessee.)
12.19 Non-Discrimination
In complying with the provisions of this Clause 12 the Lessee will not
discriminate against the Engine or any Part in favour of any other engines
or parts of the same type which are in the possession of and/or which are
used by the Lessee.
12.20 Replacement of Part
Lessee may install any part upon the Engine not meeting the terms of
Clause 12.14 above, where it would result in an unreasonable disruption of
the operation of an Aircraft and/or the business of Lessee to ground an
Aircraft until a part meeting the terms of Clause 12.14 above becomes
available for installation on the Aircraft provided:
(i) the owner and/or lessor as owner and lessor of that part and the
mortgagee, as mortgagee of the part, has agreed in writing for the
benefit of Lessor (not specifically, but generally as a lessor of
the Engine to Lessee) that it will not acquire or claim, as against
Lessor, any right, title or interest in the Engine as a result of
such part being installed on the Engine at any time while the Engine
is subject to this Lease; and
(ii) as soon as reasonably possible after installation of the part on the
Engine, Lessee removes any such part and replaces it with the Part
replaced by it or by a part complying with the terms of Clause
12.14.
If the part meets the terms of this Clause 12.20, Lessor agrees that
neither this Lease nor any Lessor Security Interest will prejudice the
interests of the owner, lessor or mortgagee of such part.
36
12.21 Removal of Part
Lessee may remove any Part from the Engine for installation on an
engine of the same make and model number owned or leased by Lessee
when there is not then available to Lessee at the time and in the
place a part identical to the Part for installation on such engine
and it would result in an unreasonable disruption of the operation
of an aircraft and/or the business of Lessee to ground an aircraft
until such a part becomes available for installation on such engine;
provided, however, the owner or lessor of such engine or the
aircraft upon which such engine is installed has agreed in the
relevant lease or similar document that the installation of such
Part on such engine or aircraft will not, upon such installation,
become the property of such lessor or subject to any Security
Interest and provided further that the Lessee remove such part from
such engine and re-install it upon the Engine as soon as reasonably
possible.
13. INSURANCE
13.1 Insurance definitions. In this Agreement:
(a) "Approved Broker" means a nationally recognized insurance
broker designated by Lessee;
(b) "Approved Underwriter" means an insurer of internationally
recognized reputation and responsibility with substantial
capacity for insurance underwriting;
(c) "Hull Insurances" means the Insurances required by the terms
of Clauses 13.3(b) and (c);
(d) "Insurers" means the underwriters or insurance companies with
whom any of the Insurances is effected;
(e) "Liability Insurances" means the insurances required by the
terms of Clause 13.3(d).
(f) "Property Damage" includes injury to, destruction of, or the
loss of use of property;
(g) "Required Amount" means [***]
(h) "Required Liability Amount" means $350,000,000; and
(g) "Spare Engine Insurance" means the Insurances required by the
terms of Clause 133(a).
13.2 Scope of Insurances. On or before Delivery and throughout the Lease
Period and in the case of any products (completed operations)
liability insurance for an additional period of two years after the
termination of the Lease Period for whatever reason (except that
Lessee's obligation with respect to products (completed operations)
liability insurance during such additional period shall be only to
have each Indemnitee named as an additional insured under whatever
products liability insurance it then maintains), the Lessee will, at
its expense, take out and at all times maintain
37
in fun force and effect insurances through Approved Brokers with
Approved Underwriters in the names of Lessor and Lessee as their
interests may appear against
(a) loss or damage to the Engine; and
(b) any liability for:
(i) injury (including bodily injury and personal injury) to
passengers and third parties;
(ii) damage (including Property Damage) to baggage, cargo,
mail, public and private property (whether owned by
cargo consignors or third parties); and
(iii) any other claims customarily insured against under
comprehensive airline legal liability insurance.
13.3 Types of Policy. Without prejudice to the generality of sub-clause
13.2 (a) above, the Lessee will effect and maintain or will procure
that there is effected and maintained:
(a) At all times when the Engine is not insured as part of the
Aircraft under Clause 13.3(b) and (c) spare engines all risks
insurance (including war and allied perils to the extent
commonly available and customarily carried by major U.S.
commercial air carriers) covering all risks of physical loss
or damage howsoever occasioned in respect of the Engine or any
Parts (whether installed on the Engine or, for the time being,
removed from the Engine), in an amount not less than the
Required Amount on an agreed value basis, whether or not the
Engine or any Part is running or being worked upon at the time
of such physical loss or damage;
(b) at all times when the Engine is installed on an Aircraft, an
aviation hull all risks cover on the Engine for its use on the
Aircraft for an amount in addition to the agreed value of the
Aircraft which will cover the Engine for not less than the
Required Amount on an agreed value basis; and
(c) at all times when the Engine is installed on an Aircraft if
Lessee (or any Sub-lessee) shall at any time operate or
propose to operate such Aircraft in any area of recognized or
threatened hostilities, or if war-risk, hijacking or allied
perils insurance is maintained by Lessee (or such Sub-lessee)
with respect to other aircraft owned or operated by Lessee (or
such Sub-lessee) on the same routes or in such areas, or if
such Aircraft is operated outside the United States or Canada,
war-risk, hijacking and related perils insurance of
substantially the same type carried by major United States
commercial air carriers operating the same or comparable
models of aircraft on similar routes or in such areas and in
no event in an amount less than (x) the Required Liability
Amount with respect to liability coverage and (y) the values
stated in Clause 13.3(b) with respect to hull coverage, and
such insurance shall, to the extent available, cover the
perils of (i) war, invasion acts of foreign enemies,
hostilities (whether war be declared or not), civil war,
rebellion, revolution, insurrection,
38
martial law, military or usurped power or attempts at
usurpation of power; (ii) strikes, riots, civil commotion or
labor disturbances; (iii) any act of one or more persons,
whether or not agents of a sovereign power, for political or
terrorist purposes and whether the loss or damage resulting
therefrom is accidental or intentional; (iv) any malicious act
or act of sabotage; (v) confiscation, nationalization,
seizure, restraint, detention, appropriation, requisition for
tide or use by or under the order of any government (whether
civil, military or de facto) or public or local authority; and
(vi) hijacking or any unlawful seizure or wrongful exercise of
control of such Aircraft or the Engine or of crew in flight
(including any attempt at such seizure or control) made by any
person or persons on board such Aircraft acting without the
consent of Lessee (or such Sub-lessee); and
(d) comprehensive airline legal liability including general third
party legal liability cover being coverage including but not
limited to bodily injury, personal injury and Property Damage
for passengers and third parties and also including products
liability for not less than the Required Liability Amount
covering each Indemnitee. In addition the cover shall include,
to the extent commonly available and customarily carried by
major U.S. commercial air carriers, all claims for risks
excluded by the War Hijacking and Other Perils Exclusion
Clause AVN48B (or any equivalent clause).
13.4 General Provisions of all Insurances. Lessee will procure that each
insurance policy specified in Clause 13.3:
(a) covers at least such risks as are customarily insured against
in the airline business under such policy;
(b) is in accordance with sound United States domestic airline
practice;
(c) waives any rights the Insurers may have to set-off or
counterclaim against or reduce any insurance proceeds due and
payable to the Lessor (or, is applicable, the Security
Trustee) as loss payee other than unpaid premiums in respect
of the Engine;
(d) contains a provision waiving any and all rights of subrogation
the Insurers have or may acquire against any Indemnitee and a
provision requiring the Insurers not to exercise rights of
subrogation against any third party without the consent of the
Indemnitees, such consent not to be unreasonably withheld;
(e) contains a provision whereby such policy in respect of any
Indemnitee will not be invalidated by any act or omission
(including misrepresentation and non-disclosure) of any other
person or party which results in a breach of any term,
condition or warranty of such policy provided that the
Indemnitee so protected has not caused contributed to or
knowingly condoned the said act or omission;
(f) contains a provision requiring the Insurers to provide the
Agent and Lessor with a written notice of any cancellation of
such insurance or any material modification of such insurance
and that such cancella-
39
tion or modification will not be effective as to the interest
and/or benefits of any Indemnitee for 30 days (but 7 days or
such lesser period as may be customarily available as respects
war risks insurance) after the written notice of such
cancellation or modification is received by the Agent and the
Lessor as the case may be; and
(g) operates on a world wide basis, subject to war exclusions.
13.5 Provisions of Spares Insurance and Hull Insurance Lessee will
procure that each insurance policy specified in Clause 13.3(a), (b)
and (c):
(a) notes the interest of the Lessor (and, if notified by Lessor
names the Security Trustee, the Agent and the Banks) as
additional insureds without obligation to pay, but with the
right to pay, premiums and premium installments;
(b) contains an endorsement naming the Lessor (or, if notified, by
Lessor, Security Trustee) as sole loss payee for the Required
Amount of the Engine, if the amount payable by the Insurers
upon any claim is less than $250,000, the Lessee will be loss
payee unless and until the Agent notifies the Approved Broker
or the Insurers that a Termination Event has occurred and is
continuing;
(c) provides in the event of separate insurances being arranged to
cover the "All-Risk" hull insurance and the "War-Risk" and
related insurance, that the underwriters subscribing to such
insurances agree to a 50/50 claims funding arrangement in the
event of any dispute as to which insurance is applicable; and
(d) provides for deductibles which are not in excess of the
standard in the airline industry available to major United
States commercial air carriers.
13.6 Provisions of Liability Insurances. Lessee will procure that
insurance policy specified in Clause 13.3(d):
(i) names each of the Indemnitees as additional insured without
obligation to pay, but with the right to pay, premiums and
premium installments thereunder;
(ii) contains a severability of interests clause which provides
that the policy or policies will operate in all respects (save
only for the limit of liability) as if a separate policy had
been issued to each insured thereunder;
(iii) is primary without right to contribution from any other
insurance; and
(iv) has deductibles in respect of passengers' baggage and in
respect of cargo, not in excess of standard deductibles in the
airline industry available to major United States airlines.
40
13.7 Insurance Covenants. During the Lease Period the Lessee will:
(a) not without the prior consent of the Lessor consent or agree
to any act or omission which renders any of the Insurances
invalid, void, voidable or unenforceable;
(b) not cause or permit the Engine or the Aircraft to be used for
any purpose or in any manner inconsistent with the provisions
of any warranties, express or implied, outside the
geographical limits of or otherwise outside the cover provided
by, any Insurance or to be used or kept for any purpose or, in
the case of the Aircraft, to carry any cargo in any manner or
in any place not permitted by any Insurances or in either case
in any manner contrary to applicable law;
(c) comply with the terms of each Insurance and duly pay all
premiums, calls, contributions or other sums of money from
time to time payable in respect of the Insurances;
(d) on request of Lessor in advance of any renewal date, procure
that the Approved Brokers will promptly confirm in writing to
the Agent and the Lessor as and when the renewal of all the
Insurances is effected, and in any case, no later than the
relevant renewal date;
(e) forthwith upon (and in any event no later than 5 days after)
the effecting of any Insurances, produce certificates
evidencing and describing in reasonable detail those
Insurances;
(f) if it receives payment of any moneys in respect of Insurances
and the Engine save as provided in this Agreement, forthwith
pay over the appropriate amount, if any, to the Lessor and
until paid over such moneys will be held in trust for the
Lessor by the Lessee;
(g) procure that the Approved Brokers will furnish the Agent and
the Lessor with a letter or letters of undertaking and a
certificate or certificates of insurance in such form as may
from time to time be reasonably required by the Lessor in
accordance with market practice for aircraft and jet engine
financings for major United States airlines; and
(g) comply with all legal requirements as to insurance of the
Aircraft and the Engine which may be imposed by the laws of
the State of Registration or any state to, from or over which
the Aircraft shall be flown insofar as they affect or concern
the operation of the Aircraft and in particular those
requirements compliance with which is necessary to ensure that
(i) the Aircraft or Engine is not in danger of detention or
forfeiture; (ii) the Insurances remain valid and in full force
and effect and (iii) the interests of the Indemnitees in the
Insurances and the Engine or any Part thereof are not thereby
materially prejudiced.
13.8 Application of insurance proceeds.
(a) Any proceeds of Hull Insurances and Spares Insurances in
respect of the Engine will be applied as follows:
41
(i) In the case of a Total Loss, so much of such payments as
shall be required to fulfill Lessee's obligation under
Section 14.2 shall be paid as provided therein and the
balance, if any, of such payment remaining thereafter
shall be paid to Lessee.
(ii) In the case of damage not constituting a Total Loss,
such payment shall be applied in payment (or to
reimburse Lessee) for repairs or for replacement
property in accordance with the terms of this Lease, if
not already paid for by Lessee, and any balance
remaining after compliance therewith with respect to
such loss shall be paid to Lessee provided that, prior
to the repair of the Engine, Lessor may, but shall have
no obligation to, disburse insurance proceeds held by it
to Lessee.
(b) Any amount referred to in sub-Clause (a) above which is
payable or creditable to or retainable by Lessee shall not be
paid or credited to or retained by Lessee if, at the time of
such payment, credit or retention, a Termination Event or
Potential Termination Event shall have occurred and be
continuing hereunder but shall be paid to and held by Lessor
as security for the obligations of Lessee under this Lease and
applied against Lessee's obligations hereunder as and when
due, and at such time as there shall not be continuing any
such Termination Event or Potential Termination Event, such
amount shall be paid to Lessee to the extent not previously
applied in accordance with the terms hereof.
13.9 Additional Insurances. Nothing herein shall limit or prohibit Lessee
from maintaining additional insurance provided that no such
insurance may be maintained that would limit or prejudice the
coverage of any Insurance required to be maintained by Lessee
hereunder.
13.10 Power of Lessor to Ground Aircraft and to Insure. If the Lessee
fails to effect or maintain in full force and effect in accordance
with the provisions of this Clause 13 any of the Insurances required
to be effected by the Lessee hereunder, or if the Lessee operates
the Engine in a manner outside the scope of the Insurances: (1) the
Lessor may by written notice to the Lessee require the Lessee to
ground the Aircraft and/or cease to operate it in such manner;
and/or (2) the Lessor, the Agent or the Security Trustee will be
entitled (but not bound):
(a) to pay any premiums or to effect any such Insurances which the
Lessee has so far failed to effect or otherwise to remedy such
failure in such manner as Lessor or the Security Trustee
considers appropriate or to effect any additional insurances
which the Agent or the Security Trustee may consider necessary
to protect the interests of the Indemnitees under this
Agreement and in the Engine and any amount expended by Lessor
or the Agent or the Security Trustee in effecting such
Insurances or such additional insurances will be repayable by
the Lessee to Lessor together with interest thereon at the
Default Rate from the date of such expenditure to the date of
payment thereof by the Lessee (both before and after any
relevant judgment); and/or
42
(b) to require the Aircraft or the Engine to remain at any airport
or (as the case may be) to proceed to and remain at any
airport designated by Lessor until such failure is remedied to
the satisfaction of Lessor.
13.11 Currency. All insurances and reinsurances effected pursuant to this
Clause 13 and all premiums in respect thereof shall be payable in
dollars.
13.12 Indemnification by Government in Lieu of Insurance. During any
period that the Engine shall have been requisitioned for use by, or
possession of the Engine shall have been transferred to, the United
States government, Lessor agrees to accept, in lieu of insurance
against any risk with respect to the Engine described in Clause 13,
indemnification from, or insurance provided by, the United States
government against such risk in any amount that, when added to the
amount of insurance, if any, against such risk that Lessee (or any
Sub-lessee) may continue to maintain, in accordance with this Clause
13, during the period of such requisition or transfer, shall be at
least equal to the amount of insurance against such risk otherwise
required by this Clause 13. Any such indemnification or insurance
provided by the United States government shall provide protection no
less favorable to the Lessor, after taking into account any
insurance the Lessee or any Sub-lessee may continue to maintain,
than insurance coverage that would comply with the terms of this
Clause 13. Lessee shall promptly furnish to Lessor any information,
documentation or certificates relating to such indemnity or
insurance as Lessor shall reasonably request.
14. TOTAL LOSS
14.1 Total Loss Definitions. In this Agreement
(a) "Total Loss" means:
(i) the actual, constructive, arranged, agreed or
compromised total loss of the Engine (including any
damage to the Engine which results in an insurance
settlement on the basis of total loss); or
(ii) the destruction to, or the damage beyond repair to or
the rendering permanently unfit for normal use for any
reason whatsoever of the Engine; or
(iii) the Compulsory Acquisition of the Engine; or the
requisition for use or hire of the Engine by any
governmental authority other than the United States
government for a period exceeding 60 days; or
(iv) the hi-jacking of the Aircraft, the theft or
disappearance of the Engine, resulting in loss of
possession by the Lessee for a period exceeding 30 days;
or
(v) an event described in Clause 12.12(a)(i)(5);
(b) "Total Loss Date" means the earlier of the date upon which
Loss Proceeds not less than the Required Amount have been
received by Lessor or the Security Trustee with respect to a
Total Loss and:
43
(i) in the case of an actual total loss or destruction,
damage beyond repair, or being rendered permanently
unfit, noon (London time) on the date on which such
loss, destruction, damage or rendition occurs (or, if
the date of loss or destruction is not known, the date
on which the Engine or the Aircraft upon which the
Engine has been installed was last heard of);
(ii) in the case of a constructive, arranged, agreed or
compromised total loss, whichever will be the earlier of
(1) the date on which notice claiming such total loss is
issued to the Insurers or Approved Brokers, and (2) the
date on which such loss is agreed or compromised by the
Insurers;
(iii) in the case of Compulsory Acquisition or requisition for
use or hire, the expiration of the said period of 60
days (or, if earlier, the date on which the Insurers
make payment on the basis of a total loss);
(iv) in the case of hi-jacking of an Aircraft upon which the
Engine has been installed, theft or disappearance, the
final day of the said period of 30 days; or
(v) in the case of an event described in Clause
12.12(a)(i)(5), the date on which such event has
occurred;
(c) "Total Loss Payment Date" has the meaning set out in Clause
14.2;
(d) "Loss Proceeds" means the proceeds of any insurance or any
compensation for requisition or similar payment and in respect
of a Total Loss, less any expenses incidental to the
collection thereof.
14.2 Payment on Total Loss. If the Engine becomes a Total Loss during the
Lease Period, the Lease Period will terminate on the Total Loss Date
(but without prejudice to the continuing obligations of the Lessee
in respect of payments and indemnities and otherwise) and the Lessee
will upon the earlier of the following dates ("Total Loss Payment
Date"):
(a) the date on which the Loss Proceeds are received by the Lessor
or Security Trustee, as the case may be; or
(b) 30 days after the Total Loss Date,
pay or procure the payment to Lessor of an amount equal to all
amounts of Rent and any other sums due to Lessor as of the Total
Loss Payment Date and all amounts of Rent that would have fallen due
after the Total Loss Payment Date and during the Lease Period but
for termination as aforesaid (assuming Rent accrued on a daily basis
hereunder and that each installment of Rent is calculated at the
amount prevailing for the Rent Period immediately prior to the Total
Loss Date) less the amount of the Loss Proceeds actually
beneficially received by Lessor or the Security Trustee, as the case
may be, as at that date and less a discount on such sum for early
settlement at a rate equal to LIBOR plus 0.86%.
44
14.3 Proceeds. Upon the receipt of the Loss Proceeds by the Lessor or the
Security Trustee, as the case may be, (i) Lessor shall promptly pay
(or procure that the Security Trustee pays) to Lessee the amount, if
any, that the Loss Proceeds exceeds any amount remaining to be paid
to Lessor by Lessee pursuant to Clause 14.2, or (ii) if the Lessee
has already paid to Lessor the amounts required by Clause 14.2,
Lessor will promptly pay to the Lessee the amount of the Loss
Proceeds. Promptly after the date that Lessor or the Security
Trustee, as the case may be, has received the amounts required by
Clause 14.2, Lessor will sell the Engine to Lessee in accordance
with the terms set out in Schedule 4
14.4 Claim. Each of Lessor and the Lessee will, upon the request of the
other, promptly execute such documents as may be required to enable
the other to abandon the Engine to the Insurers and/or claim a
constructive total loss and will give all possible assistance in
pursuing the said claim.
14.5 Continuation of Payment of Rent. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding
termination of the Lease Period pursuant to Clause 14.2 (Payment on
Total Loss), if the Engine becomes a Total Loss the Lessee will
continue to pay to Lessor amounts equal to the Rent payable under
Clause 8.1 (Obligation to pay Rent) at the times therein mentioned
until payment of the amounts payable under Clause 14.2 (Payment on
Total Loss) in full as if the Lessee had continued to have the use
of the Engine until such payment.
14.5 Surviving Parts. If a Total Loss of the Engine occurs where any Part
or Parts (in this Clause 14.5 "Surviving Parts") have not become a
Total Loss, Lessor will, subject to any rights of the Insurers, at
the request of the Lessee, but subject always to any applicable
rights of salvage, if all amounts due and payable to Lessor under
this Agreement have been paid, transfer title to those Surviving
Parts to the Lessee, free and clear of all Lessor's Security
Interest.
15. REQUISITION FOR HIRE
Notwithstanding any other terms of this Agreement and to the exclusion of
any implication to contrary effect it is agreed that:
(a) if the Engine or the Aircraft is requisitioned for hire by any
governmental or other competent authority during the Lease Period
then, unless and until such requisition results in the Engine
becoming a Total Loss and the Lessee has paid in full all amounts
due under Clause 14.2 (Payment on Total Loss), this Agreement will
(subject to the provisions of Clause 17 germination by Lessor))
continue in full force and effect for the remainder of the Lease
Period subject however to the following provisions that:
(i) the Lessee will be entitled to all requisition hire paid to
Lessor or to the Lessee by such governmental or other
competent authority on account of such requisition provided
that it has paid in full the amount referred to above;
(ii) Lessor will, provided the Lessee has paid all amounts then due
and payable to Lessor and no Termination Event or Potential
Termination Event has occurred, pay any such hire to the
Lessee immediately upon receipt;
45
(iii) Lessor will be entitled to all compensation payable in respect
of any change in the structure or condition of the Engine
arising during the period of requisition for hire. Lessor
will, provided the Lessee has paid all amounts then due and
payable to Lessor and no Termination Event or Potential
Termination Event has occurred, apply such compensation in
reimbursing the Lessee for the cost of complying with its
obligations under sub-Clause (iii) above;
(b) if the Engine is under requisition for hire at the Term Date:
(i) this Agreement will (unless otherwise agreed between the
parties hereto) nevertheless be terminated at such end but
without prejudice to the accrued rights of the parties and the
Lessee's obligations in respect of payment and indemnities and
Lessor will be entitled to receive and retain any requisition
hire payable in respect of the period from the expiry of the
Lease period;
(ii) the Lessee will, if it is prevented by reason of the
requisition for hire from redelivering the Engine in
accordance with Clause 19 (Redelivery), be relieved from its
obligation so to do but will consult with Lessor as to the
most convenient method of enabling Lessor to obtain redelivery
of the Engine when the Engine is released from such
requisition.
except that, if Lessee at the Term Date has complied with its
obligations hereunder, Lessor will sell the Engine to the Lessee on
the terms set out in Schedule 4.
16. INDEMNITY
16.1 Indemnity. Subject to the terms of Clause 16.2 below, the Lessee
hereby undertakes and assumes liability for and hereby agrees
(whether or not Delivery occurs) to keep each Indemnitee fully
indemnified at all times (whether during or after the Lease Period)
from and against
(a) any and all losses, liabilities, actions, suits, demands,
claims, proceedings, penalties, fines, damages, judgments and
other sanctions including, but without limitation, in respect
of the bodily injury or personal injury to any person or
Property Damage to or loss of the property of any person or
any loss of any other nature suffered by any person (but
excluding consequential, incidental or special damages and
loss of anticipated profits),
(b) any and all out-of-pocket costs, expenses and disbursements
(including without limitation out-of-pocket legal fees and
expenses and costs of investigations and inspections and the
removal of obstructions) and any costs incurred by any
Indemnitee in the exercise by or of any of its rights and
powers following a Termination Event (but excluding, in any
event, any overhead expenses or salaries),
of whatsoever kind and nature which may be imposed on, suffered by,
incurred by, or asserted at any time (whether before, during or
after the Lease Period) against any Indemnitee (collectively,
"Expenses"), the Engine
46
or any Part as a result of or in any way connected with or arising
directly or indirectly from:
(v) this Agreement;
(w) any act or omission which invalidates any of the Insurances
(except to the extent any such invalidation arises from an act
or omission of any Indemnitee);
(x) the design, manufacture, testing, maintenance, repair,
performance, transportation, refurbishment, condition,
service, overhaul, modification, change, alteration, loss,
damage, removal or storage, purchase, ownership, delivery,
non-delivery, import, export, possession, use, operation,
management, control, charging, registration, non-registration,
leasing, of the Engine, the Technical Documents or any Part or
any part installed on the Engine or in any Part (either in the
air or on the ground and whether or not attributable to a
defect in the Engine or any Part thereof or to the design
testing or use thereof or otherwise);
(y) the retaking of possession of the Engine or any Part and
entering upon any premises and the detention of and entry upon
any aircraft for this purpose following a Termination Event.
16.2 Exceptions. Notwithstanding anything contained in Clause 16.1,
Lessee shall not be required to keep any Indemnitee fully
indemnified pursuant to Clause 16.1 with respect to any one or more
of the following:
(a) For any Taxes or loss of Tax benefits or increase in Tax
liability, whether or not covered by Clause 9, or an Expense
the cost of which such Indemnitee has agreed in writing to
bear notwithstanding the provisions hereof;
(b) For any Expense to the extent caused by acts or events
occurring prior to the Delivery of the Engine to Lessee
(unless caused by Lessee during its inspection of the Engine)
or after (but not attributable to acts, events or conditions
occurring or existing prior to) the earlier of the expiration
of the Lease Period or the Lessor's repossession of the
Engine;
(c) For any Expense resulting from, or that would not have been
imposed but for, any Lessor's Security Interest;
(d) For any Expense directly or indirectly attributable to any
transfer (voluntary or involuntary) by or on behalf of Lessor
or any other Indemnitee of any interest in the Engine (except
pursuant to Clause 17) or this Agreement or
(e) For any Expense directly or indirectly attributable to the
gross negligence or willful misconduct of, or the breach of
any representation, warranty or covenants by, or any default
by, any Indemnitee (or their respective directors, officers,
agents, servants or employees acting on behalf of such
Indemnitee).
16.3 Gross-Up. The Lessee agrees that if it is required to make any
payment of
47
any kind to any person pursuant to this Clause 16 the Lessee will
make such payment by paying to such person a sum which, after taking
into account all Taxes required to be paid by such person in respect
of the receipt of such payment under the law of any Taxing Authority
(net of any savings in Taxes realized by such person as a result of
the event giving rise to such payment) will be equal to the amount
of such payment required to be made to such person. If any person
receiving a payment from the Lessee pursuant to this Clause 16
realizes a savings in Taxes as a result of the event giving rise to
such payment, and such savings have not taken into account pursuant
to the preceding sentence, such person shall pay to the Lessee an
amount equal to such savings in Taxes plus any additional Tax
savings realized as a result of payment to Lessee pursuant to this
sentence.
17. TERMINATION BY LESSOR
17.1 Termination Events. The parties hereby agree that if any of the
following events occur, it will constitute a "Termination Event
under this Agreement:
(a) Breach by Lessee
(i) the Lessee fails to pay within two (2) Business Day of
the due date any amount payable by it under this
Agreement; or
(ii) any representation or warranty in this Agreement made by
Lessee was on the date hereof untrue in any respect; or
(iii) the Lessee fails to comply with any other provision of
this Agreement applicable to Lessee and (except in the
case of paragraph (c) below or clause (i) above or any
failure which is not capable of being cured) such
failure is not remedied for a period in excess 15
Business Days; or
(b) Insurance
(i) Insurance is not maintained in accordance with the
provisions of this Agreement; or
(ii) the Engine or the Aircraft is operated at a time when
the Insurances are not in effect;
(c) [***]
(d) Consents any authorization, approval, consent of licence or
registration required by the Lessee to be obtained and renewed
by the Lessee to act
48
as an air carrier or to operate the Engine and the Aircraft is
adversely modified, withheld, revoked, suspended, withdrawn,
not renewed or cancelled (an "Authorization Default") and such
Authorization Default has a material adverse effect on the
Lessee's ability to perform its obligations hereunder or
materially affects the interest of the Lessor in the Engine;
or
(e) Insolvency the Lessee, or any Subsidiary is deemed for the
purposes of any relevant law to be unable to pay its debts, or
the Lessee or any Subsidiary becomes unable to pay its debts
as they fall due or the value of its assets falls to less than
the amount of its current liabilities, or the Lessee or any
Subsidiary otherwise becomes insolvent, or the Lessee or any
Subsidiary suspends making payments (whether of principal or
interest) with respect to all or any class of its debts or
announces an intention to do so; or
(f) Administration an application for an administration order in
relation to the Lessee or any Subsidiary is presented to the
court by the Lessee or any Subsidiary or its respective
directors, the supervisor of a voluntary arrangement relating
to the Lessee or any Subsidiary, as the case may be, or any
other enactment, or such an order is made on the application
of a creditor or creditors of the Lessee or any Subsidiary as
the case may be or any meeting of the Lessee, or any
Subsidiary is convened for the purpose of considering any
resolution to present an application for such an order; or
(g) Scheme of Arrangements etc. any formal steps are taken with a
view to proposing (under any enactment or otherwise) any kind
of composition, scheme of arrangement, compromise or
arrangement involving the Lessee or any Subsidiary and its
respective creditors generally (or any class of them); or
(h) Appointment of Administrative Receiver any administrative or
other receiver or any manager of the Lessee or any Subsidiary
or any of its respective property is appointed or the
directors of the Lessee or any Subsidiary requests any person
to appoint such a receiver or manager; or
(i) Winding Up any meeting of the Lessee or any Subsidiary is
convened for the purpose of considering any resolution for (or
to petition for) its winding up, the Lessee or any Subsidiary
passes such a resolution, or the Lessee or any Subsidiary or
any other person (except its creditors) presents any petition
for the Lessee's or any Subsidiary's winding up, or an order
for the Lessee's or any Subsidiary's winding up is made on the
petition of any of its creditors; or
(j) Steps taken with a view to dissolution any steps are taken
with a view to the dissolution of the Lessee or any
Subsidiary; or
(k) Corresponding events in other jurisdictions there occurs, in
relation to the Lessee or any Subsidiary, in any country or
territory in which it carries on business or to the
jurisdiction of whose courts it or any of its property is
subject any event which appears to Lessor to be analogous in
that country or territory to any of those mentioned in
paragraphs (f) to (k) inclusive above or the Lessee or any
Subsidiary otherwise
49
becomes subject, in any such country or territory, to any law
relating to insolvency, bankruptcy or liquidation and in each
case the same has a material adverse effect on the Lessee's
ability to perform its obligations hereunder; or
(l) Cessation of Business the Lessee ceases or threatens to cease
to carry on all or a substantial part of the business
conducted by it at the date hereof; or
(m) Illegality it becomes impossible or unlawful or contrary to
any regulation for the Lessee to fulfill any of the material
terms of this Agreement or for Lessor to exercise any material
right or power vested in it under this Agreement.
(n) State of Registration and Place of Incorporation any
circumstances occur or are threatened in relation to the State
of Registration or the place of incorporation of the Lessee
which in the opinion of Lessor may imperil the interests of
Lessor under this Agreement unless other arrangements
satisfactory to Lessor are made to remove such imperilment
17.2 Lessor's rights following a Termination Event. If a Termination
Event has occurred, Lessor may at its option (and without prejudice
to any of its other rights under this Agreement), at any time
thereafter:
(a) by notice to the Lessee and with immediate effect terminate
the Lease Period (without prejudice to any of its rights and
the continuing obligations of the Lessee under this
Agreement); and/or
(b) proceed by appropriate court action to enforce performance of
this Agreement and/or to recover damages for the breach of
this Agreement; and/or
(c) take possession of the Engine and/or detain the Aircraft or
any Part for the purposes of taking the steps necessary to
remove the Engine therefrom, for which purpose Lessor may
enter any premises belonging to or in the occupation of or
under the control of Lessee where the Engine or Aircraft may
be located and Lessor is hereby irrevocably by way of security
for the Lessee's obligations under this Agreement appointed
attorney for the Lessee in causing the redelivery of the
Engine and will have all the powers and authorizations
necessary for taking that action; and/or
(d) sell or cause to be sold the Engine at public or private sale,
as the Lessor may determine, free of any rights of the Lessee.
17.3 Limitations under CRAF. Notwithstanding the provisions of Clause 17,
during any period that the Engine is subject to CRAF in accordance
with the provisions hereof and in the possession of the U.S.
Government, Lessor shall not, as a result of any Termination Event,
exercise its remedies hereunder in such manner as to limit Lessee's
control under this Lease (or any Sub-lessee's control under any
Sub-lease) of the Aircraft, Airframe or such Engine, unless at least
30 days' (or such other period as may then be applicable under CRAF)
written notice of default hereunder shall have been given by Lessor
by registered or certified mail to Lessee (and any
50
Sub-lessee) with a copy to the Contracting Officer Representative or
Representatives for the Military Airlift Command of the United
States Air Force to whom notices must be given under the contract
governing Lessee's (or any Sub-lessee's) participation in CRAF with
respect to the Aircraft, Airframe or any Engine.
17.4 Total Loss. Notwithstanding the provisions of Clause 17.1, any event
of condition that constitutes a Total Loss shall not constitute a
Termination Event.
18. TERMINATION PAYMENTS
18.1 Termination Payments due on termination of Lease Period.
(a) Upon termination of the Lease Period in accordance with Clause
17 (Termination by Lessor) the Lessee will pay to Lessor such
sum or sum's (by way of agreed compensation for loss of
bargain and not as a penalty) as will equal the aggregate of:
(i) all costs and expenses incurred by Lessor arising out of
such termination including but without limitation any
amounts incurred in recovering possession of the Engine
or any Part;
(ii) all amounts of Rent and other sums due and payable to
Lessor at the date of such termination under this
Agreement, together with interest thereon as provided
herein; and
(iii) whether or not the Lessor shall have exercised its right
to repossess or sell the Engine, or shall thereafter at
any time exercise such right, a sum equal to the excess,
if any, of the Stipulated Loss Value as of the Rent Date
immediately preceding the date of such Termination Event
over the net proceeds, if any, received by Lessor from
the sale of the Engine and any Parts.
(b) Upon termination of the Lease Period in accordance with Clause
14 (Total Loss) the Lessee will pay to Lessor all amounts of
Rent and other sums due to Lessor as at the date on which Rent
ceases to accrue in accordance with Clause 14.
(c) In the event that after a Termination Event and Lessor's
termination of this Agreement or its repossession of the
Engine, Lessee has paid to Lessor in full all amounts payable
under Clause 18.1(a) to it hereunder, Lessor shall sell the
Engine to Lessee in accordance with the terms of Schedule 4,
but for the purposes of this Clause 18.1(c) only references
made to the "Term Date" in Schedule 4 shall mean the date upon
which Lessee has paid to Lessor in full all amounts payable
under Clause 18.1(a).
18.2 Cost of Effecting Compliance. If the Lessee fails to comply with any
of its obligations under this Agreement, Lessor may, without being
in any way obliged so to do, or responsible for so doing, and
without prejudice to the ability of Lessor to treat non compliance
as a Termination Event, effect compliance on the Lessee's behalf and
if Lessor incurs any expenditure in effecting such compliance,
Lessor will be entitled (without prejudice to
51
Clause 18.1 (Termination Payments)) to recover such expenditure from
the Lessee together with interest thereon at the Default Rate from
the date upon which such expenditure was incurred by Lessor until
the date of reimbursement thereof by the Lessee (both before and
after any relevant judgment).
19. REDELIVERY
19.1 Method of Redelivery. Except in the event of a Total Loss of the
Engine or purchase of the Engine by Lessee pursuant to this
Agreement, the Lessee will on the termination of the Lease Period
howsoever caused, if requested so to do by Lessor, redeliver the
Engine to Lessor free of all Security Interests (other than any
Lessor's Security Interests) and Lessor will accept such redelivery
at Rolls-Xxxxx Xxxxx, England or such other location as may be
mutually agreed between the parties or, in the event of a
termination of this Agreement by Lessor pursuant to Clause 17
(Termination by Lessor), at such location in the United States of
America or in the United Kingdom as Lessor may require.
19.2 Redelivery Condition
The Lessee will at the Lessee's expense redeliver the Engine in a
condition so as to demonstrate that the Lessee has in all respects
complied with its obligations under Clause 12.13 and 12.14 as to
maintenance, repair and general upkeep of the Engine and in
particular:
(a) General Conditions
The Engine will:-
(i) have been maintained and repaired in accordance with the
Maintenance Programme and the Engine Management
Programme, and shall be certified by Lessee as being
serviceable in accordance with FAA requirements;
(ii) have all of its equipment, components and systems
functioning in accordance with their intended use;
(iii) shall be in compliance with all applicable mandatory
airworthiness directives applicable to the Engine as
issued by the FAA and all mandatory manufacturer's
service bulletins applicable to the Engine with a due
date for compliance on or before the Term Date, provided
that the necessary service bulletin and are available to
the Lessee prior to the Term Date;
(iv) have had accomplished on it all outstanding deferred
maintenance items. All replacement Parts shall have been
installed on the Engine in accordance with Clause 12.12
(Obligation to Repair); and
(v) have, and be in compliance with, a valid serviceable tag
issued by a party authorized by the Aviation Authority.
52
(b) Condition of Controlled Components
(i) Engine Cycle controlled components (Group A parts) at
the date of redelivery shall have remaining as a minimum
3000 Cycles of the declared life quoted in the latest
issue of the time limits manual issued by the Engine
Manufacturer.
(ii) Any components controlled by Flight Hours shall have as
a minimum 4,000 Flight Hours remaining before scheduled
removal for refurbishment, test, disassembly or
replacement.
(iii) All components controlled on a calendar basis shall have
remaining at least 12 months before scheduled removal
for refurbishment, test, disassembly or replacement.
(c) Condition of the Engine At the time of redelivery of the
Engine each module or non modular component fitted to the
Engine shall have at least 50% of Soft Time life remaining
until refurbishment would be required by Soft Time limitation
if a shop visit was to occur. In addition, the Engine shall
have had a borescope inspection immediately prior to
redelivery and Lessee shall have rectified all defects
revealed by such inspection that are beyond the limits set out
in the relevant manual; and the Engine shall be capable of
certificated, full-rated performance without limitations
throughout the entire operating envelope as defined in the
relevant Airplane Flight Manual.
(d) Technical Documents
At the date of redelivery the Lessee shall deliver to Lessor a
copy of the Technical Documents (including current revisions
thereto) which shall, for the purposes of this Clause,
include:
(i) the last Shop Visit Work Package for each module and any
documents/records that are pertinent to the Engine,
including the life limited parts status list and the
historical records substantiating the life limited parts
current status "back to birth" records; and
(ii) a statement of the stage which has been reached in the
Maintenance Programme.
The information described in the Technical Documents shall be
provided to Lessor in the form and manner in which the Lessee
maintains such information, and shall include data peculiar to
the Engine. All Technical Documents provided to Lessor at the
date of redelivery shall be listed and described by the
Lessee's title or description. All Technical Documents
provided to Lessor shall be in good condition, readable and
capable of being reproduced using standard reproduction
processes, complete, up to date and accurate as to content.
Further, the Lessee shall provide to Lessor, if requested by
Lessor such advance copies of any of the Technical Documents
as Lessor may reasonably desire or require in order to plan or
accomplish recertification, modification, sale, lease or
otherwise dispose of or utilise
53
the Engine upon receipt of the Engine by Lessor.
19.3 Non-compliance
If the condition of the Engine does not comply with this Agreement
at the time of redelivery, Lessee will at its option either:
(a) immediately rectify the non-compliance and the Lease Period
will be automatically extended and this Agreement will remain
in force until the non-compliance has been rectified; or
(b) redeliver the Engine to Lessor and indemnify Lessor, and
promptly pay to Lessor such amount as Lessor must pay for
putting the Engine into the condition required by this
Agreement.
20. MISCELLANEOUS
20.1 Transferability. Lessor covenants and agrees for the benefit of the
Lessee as follows:
(a) Lessee agrees that Lessor will be entitled at any time to
transfer title to the Engine subject to and with the benefit
of this Agreement to any other person, provided that any such
transferee shall not be entitled to any greater rights under
this Agreement than those enjoyed by Lessor prior to any such
transfer and that any out of pocket costs incurred by the
Lessee in preparation or execution of any waivers, discharges,
amendments or other documents which the Lessee may reasonably
be required to enter into in respect of such transfer of title
or the grant of any security interest over the Engine and the
benefit of this Agreement shall be borne by the Lessor.
(b) No assignment or transfer may be made by the Lessee of all or
any of its rights in respect of the Engine or this Agreement
without the prior written consent of Lessor.
20.2 Further Assurance. The Lessee agrees from time to time, and at the
Lessee's expense, to do and perform such other and further acts and
execute and deliver any and all such other instruments as may be
required by law or reasonably requested by Lessor to establish,
maintain and protect the rights and remedies of Lessor and to carry
out and effect the intent and purpose of this Agreement.
20.3 Expenses
The Lessee will reimburse Lessor:
(a) for all charges and expenses incurred in the registration of
the Agreement and all waivers, discharges, amendments and
other documents in connection therewith (including the fees
and expenses of legal advisers and any value added tax
thereon); and
(b) for all charges and expenses incurred by Lessor in
contemplation of or in connection with the enforcement of or
preservation of any rights under the Agreement (including the
fees and expenses of legal advisers
54
and any value added tax thereon).
20.4 Stamp duties
The Lessee will pay or procure the payment when due of all present
and future registration fees, stamp duties, documentary taxes and
other imposts in relation to the Agreement and keep Lessor
indemnified against any failure or delay in paying the same.
20.5 Accounts
The accounts kept by Lessor will constitute prima fade evidence of
the amounts owing to Lessor under this Agreement.
20.6 Notices.
(a) All notices under this Agreement will be given to the intended
recipient at the address or facsimile number set out on the
execution page of this Agreement (or such other address, or
facsimile number as either party may specify to the other in
writing from time to time).
(b) Any communication from one party to the others under this
Agreement will be effective:
(i) if by letter, when delivered, and
(ii) if by facsimile, when full transmission has been
separately confirmed by telephone by the transmitting
party.
20.7 Set-off
Lessor may set off any matured obligation owed by the Lessee under
this Agreement against any obligation (whether or not matured) owed
by Lessor to the Lessee, regardless of the place of payment or
currency. If the obligations are in different currencies, Lessor may
convert either obligation at the market rate of exchange available
in London for the purpose of the set-off. If an obligation is
unascertained or unliquidated, Lessor may in good faith estimate
that obligation and set off in respect of the estimate, subject to
the relevant party accounting to the other when the obligation is
ascertained or liquidated. Lessor will not be obliged to pay any
amounts to the Lessee under this Agreement so long as any sums which
are then due from the Lessee under this Agreement remain unpaid and
any such amounts which would otherwise be due will fall due only if
and when the Lessee paid all such sums except to the extent Lessor
otherwise agrees or sets off such amounts against such payment
pursuant to the foregoing.
20.8 Currency indemnity
The Lessee will indemnify Lessor against losses (including losses
flowing from fluctuations in rates of exchange) to Lessor as a
result of payment in any currency other than that payable or as a
result of any order, proof or claim being expressed or payable under
this Agreement in a different currency.
55
20.9 Waiver, remedies cumulative.
(a) No delay on the part of Lessee or Lessor in exercising any of
its rights, powers or privileges under this Agreement will
operate as a waiver thereof nor will any single or partial
exercise of any right, power or privilege preclude any other
or further exercise thereof, or the exercise of any other
right power or privilege.
(b) The rights and remedies herein and therein provided are
cumulative and not exclusive of any rights or remedies
provided by law.
20.10 Time of Essence
The time stipulated in this Agreement for all payments payable by
the Lessee (subject to any periods of grace in respect thereof
pursuant to Clause 17 (Termination by Lessor)) and for the
performance of the Lessee's other obligations under this Agreement
will be of the essence of this Agreement.
20.11 Indemnitee
All rights expressed to be granted to each Indemnitee under this
Agreement (other than Lessor) are given to Lessor on behalf of the
Indemnitee.
20.12 Severability of Provisions. If any provision of this Agreement is
prohibited or unenforceable in any jurisdiction, such prohibition or
unenforceability will not invalidate the remaining provisions hereof
or affect the validity or enforceability of such provisions in any
other jurisdiction.
20.13 No Third Party Beneficiary. Except as expressly provided in Clause 9
with respect to Tax Indemnitees and Clause 16 with respect to
Indemnitees, and except as expressly provided herein with respect to
the Security Trustee, no person or entity (other than Lessor and
Lessee and their respective successor and permitted assigns) shall
have any right or interest in this Agreement
20.14 Counterparts. This Agreement may be executed in any number of
counterparts and all of such counterparts taken together will be
deemed to constitute one and the same instrument.
20.15 Determination. The determination or expiry of this Agreement will
not affect the right of Lessor or Lessee to recover damages for any
antecedent breach of this Agreement or to recover any sum otherwise
due to such party under the terms of this Agreement and will be
without prejudice to any right or action of Lessor or Lessee.
20.16 Governing law. This Agreement will be governed by and construed in
accordance with the laws of England.
20.17 Forum.
(a) For the benefit of Lessor only, the Lessee irrevocably submits
to the jurisdiction of the English courts and in relation to
this Agreement
56
irrevocably appoints Law Debenture Corporate Services Limited
whose registered office is at Xxxxxxx Xxxxx, 00 Xxxxxxx
Xxxxxx, Xxxxxx, XX0X 0XX as its agent to accept service in
relation to such English courts and agrees that service on
such agent will be deemed due service for the purposes of
proceedings in such courts without prejudice to any other mode
of service.
(b) Such submission to the English courts will be non-exclusive,
except to the extent that such non-exclusivity prejudices such
submission.
20.18 Amendments. The Lease Agreement may only be amended by a written
instrument executed by each of Lessee and Lessor.
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first above written.
57
SCHEDULE 1 THE ENGINE
Engine Manufacturer: Rolls-Royce plc
Model: Tay 650-15 Dressed Spare Engine as defined in contract
specification 3004-S Issue 1, as amended, including
transportation stand.
Serial Number [* *]
58
SCHEDULE 2A
Form of Legal Opinion of Xxxxxxxxxx & Xxxxxxxx, LLP
Special Counsel to Lessee
_______, 199_
To: RRPF Engine Leasing Limited
00 Xxxxxxxxxx Xxxx
Xxxxxx
XX0X 0XX
Xxxxxxx
Lease of Rolls Royce Model Tay 650-15 Spare Engine
with Manufacturer's Serial Number [ ]
Gentlemen:
We have been requested by Midway Airlines Corporation, a Delaware corporation
(the "Company"), to act as special counsel with respect to, and to render this
opinion letter in connection with, the transactions contemplated by the Engine
Lease Agreement dated as of ___________, 1997 (the "Lease Agreement") among RRPF
Engine Leasing Limited ("Lessor") and the Company. Capitalized terms used herein
and not otherwise defined herein have the respective meanings given those terms
in the Lease Agreement.
In connection with this opinion letter we have examined, among other things,
originals or copies certified or otherwise identified to our satisfaction of the
Lease Agreement. We have also examined and relied upon such other documents and
such other corporate records, certificates and other statements and
representations of governmental officials and corporate officers and other
representatives of the Company as we have deemed necessary or appropriate for
the purposes of this opinion. The opinions expressed herein are subject to the
following exceptions, assumptions, qualifications and limitations:
(a) The opinions set forth below are limited to the laws of the State of
New York, the federal laws of the United States of America and the
General Corporation Law of the State of Delaware, except that we
express no opinion with respect to (i) the laws, regulations or
ordinances of any county, town or municipality or governmental
subdivision or agency thereof, (ii) state securities or blue sky
laws or federal securities laws, including the Securities Act of
1933, as amended (the "Securities Act") and the Investment Company
Act of 1940, as amended, (iii) any federal or state tax, antitrust
or fraudulent transfer or conveyance laws, (iv) the Employee
Retirement Income Security Act of 1974, as amended, or (v) except as
expressly provided in paragraph 4 below, Subtitle VII of Title 49 of
the United States Code (the "Aviation Act"), or any other laws,
rules or regulations governing, regulating or relating to the
acquisition, ownership, registration, use or sale of an aircraft
airframe or aircraft
59
engine or to the particular nature of the equipment to be subject to
the Lease Agreement.
(b) The opinion set forth in paragraph 3 below is subject to (i)
limitations on enforceability arising from applicable bankruptcy,
insolvency, reorganization, moratorium, receivership, fraudulent
conveyance, fraudulent transfer, preferential transfer and similar
laws relating to or affecting the rights and remedies of creditors
or lessors generally and the effect of general principles of equity,
including, without limitation, laches and estoppel as equitable
defenses and concepts of materiality, reasonableness, good faith and
fair dealing (regardless of whether such enforceability is
considered or applied in a proceeding in equity or at law) and
considerations of impracticability or impossibility of performance,
and defenses based upon unconscionability of otherwise enforceable
obligations in the context of the factual circumstances under which
enforcement thereof is sought and (ii) the qualification that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. In addition, certain remedial and procedural provisions of
the Lease Agreement are or may be unenforceable in whole or in part
but the inclusion of such provisions does not affect the validity
thereof and does not, in our opinion, make the remedies provided
therein, or otherwise available under applicable law, inadequate for
the practical realization of the substantive benefits purported to
be provided thereby, except for the economic consequences resulting
from any delay imposed by, or any procedure required by, applicable
laws, rules, regulations and by constitutional requirements. We
express no opinion as to any provision contained in the Lease
Agreement (a) providing for indemnification or exculpation of any
Person for such Person's gross negligence, wilful misconduct
recklessness or unlawful conduct or in respect of liabilities under
the Securities Act (b) late payment charges or an increase in
interest rate upon delinquency in payment or the occurrence of a
default or other specified event but only to the extent such
provision is deemed to constitute a penalty or liquidated damages
provision, (c) as such provision relates to the subject matter
jurisdiction of federal courts or the waiver of inconvenient forum
with respect to proceedings in federal courts, (d) that purports to
establish (or may be construed to establish) evidentiary standards
or (e) providing for the waiver of any statutory right or any
broadly or vaguely stated rights or unknown future rights, or any
waiver which is against public policy considerations. Under certain
circumstances the requirement that the provisions of the Lease
Agreement may be modified or waived only in writing or only in a
specific instance and provisions to the effect that failure or delay
in exercising any right, remedy, power and/or privilege will not
impair or waive such right, remedy, power and/or privilege may be
unenforceable to the extent that an oral agreement has been effected
or a course of dealing has occurred modifying such provisions. A
court may modify or limit contractual agreements regarding
attorneys' fees.
(c) To the extent that our opinions expressed herein involve conclusions
as to the matters set forth in the opinion dated the date hereof of
Xxxxx & Xxxxxxx being delivered to you on the date hereof, we have
assumed,
60
without independent investigation, the correctness of the matters
set forth in such opinion.
(d) We have assumed the due authorization, and, except as to the
Company, execution and delivery, of the Lease Agreement by each of
the parties thereto, that Lessor has the power and authority to
execute, deliver and perform the Lease Agreement and has obtained or
made all necessary consents, approvals, filings and registrations in
connection therewith (except any required under New York law by the
Company), and that such execution, delivery and performance does not
violate either of its charters, by-laws or similar instruments.
(e) We have assumed that all signatures on documents examined by us are
genuine, that all persons signing such documents have legal
capacity, that all documents submitted to us as originals are
authentic and that all documents submitted to us as copies or
specimens conform with the originals, which facts we have not
independently verified.
(f) We express no opinion as to (i) any provision in the Lease Agreement
that is contrary to Section 9-311, or Part 5 of Article 9, of the
Uniform Commercial Code as in effect in the state of New York (the
"UCC"), or (ii) whether or not the Lease constitutes a "security
interest" within the meaning of Section 1-201(37) of the UCC.
(g) We have not made any examination of, and express no opinion with
respect to (and to the extent relevant have assumed the accuracy and
sufficiency of), (i) descriptions of, the legal or beneficial
ownership of, or the title or condition of title to, the Engine or
any other property covered by the Lease Agreement, (ii) the
existence, creation, validity or attachment of any security interest
thereon, (iii) the perfection of any security interest thereon and
(iv) the priority or enforcement of any security interest thereon.
(h) In giving an opinion regarding the valid existence and good standing
of the Company, we have relied solely upon certificates of public
officials.
(i) The opinions expressed herein are given as of the date hereof. We
assume no obligation to advise you of any facts or circumstances
that may come to our attention, or any changes in law that may occur
after the date hereof, which may affect the opinion expressed
herein.
(j) With respect to this opinion given in paragraph 5 below, we have
assumed that the Company is an "air carrier" as defined in the
Aviation Act holding an air carrier operating certificate issued by
the Secretary of Transportation pursuant to the Aviation Act.
Based on and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
2. The Company has all necessary corporate power to execute,
deliver and perform its obligations under the Lease Agreement
61
and the execution, delivery and performance by the Company of
the Lease Agreement have been duly authorized by all necessary
corporate action on the part of the Company. Neither the
execution nor delivery of the Lease Agreement by the Company
nor the consummation of the transactions contemplated thereby
will result in any violation of (A) its Restated Certificate
of Incorporation or By-laws or (B) subject to paragraph (a)
above any law, governmental rule or regulation known to us to
be applicable to, or binding on, the Company, or requires the
approval of the stockholders of the Company.
3. The Lease Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding obligation
of the Company and is enforceable against the Company in
accordance with its terms.
4. Except for (i) the filing and recordation in accordance with
the Aviation Act as amended ("the Act") of the Lease Agreement
and assuming that at the time of such filing no other
unrecorded document relating to the Engine has been filed
pursuant to the Aviation Act and (ii) the filing of Financing
Statements referred to in Clause 3.1(b)(iii) of the Lease
Agreement and the filing of periodic continuation statements
with respect thereto, no approval, authorization or other
action by or filing with any governmental authority is
required for the execution and delivery by the Company of the
Lease Agreement and for the consummation of the transactions
contemplated thereby to occur on the Delivery Date.
5. So long as the Company continues to be an "air carrier" as
defined in the Aviation Act holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant
to the Aviation Act, upon consummation of the transactions
contemplated by the Lease Agreement to occur on the Delivery
Date, the Lessor, as lessor under the Lease, will be entitled
to the benefits of Section 1110 of Title 11 of the United
States Code with respect to the Engine in connection with any
case commenced by or against the Company under Chapter 11 of
Title 11 of the United States Code.
This opinion is being delivered pursuant to Clause 3.1(a)(xi) of the Lease
Agreement. This opinion may be relied upon by you (and any permitted Transferee
under Clause 20.1(a) of the Lease Agreement) in connection with the matters set
forth herein and, without our prior written consent may not be relied upon for
any other purpose and may not be furnished to any other Person for any purpose.
Very truly yours,
XXXXXXXXXX & XXXXXXXX L.L.P.
By:
----------------------------
62
SCHEDULE 2B
Form of Legal Opinion of Lessee's Legal Department
_________, 199_
To Each of the Addressees Listed in
Schedule I Attached hereto:
Lease of Rolls Royce Model Tay 650-15 Spare Engine
with Manufacturer's Serial Number
Gentlemen:
This Opinion Letter is being delivered by Midway Airlines Corporation, a
Delaware corporation ("Lessee"), by its General Counsel in his capacity as an
officer of the Lessee in connection with the transactions contemplated by the
Engine Lease Agreement dated as of __________, 199_ (the "Lease Agreement")
among RRPF Engine Leasing Limited ("Lessor") and the Lessee. All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings given those terms in the Lease Agreement. This Opinion Letter is being
furnished to you pursuant to Clause 3.1(a)(vi) of the Lease Agreement.
In giving the following Opinions, the undersigned has reviewed the Lease
Agreement and has relied upon originals, or copies certified or otherwise
identified to his satisfaction, of such records, documents, certificates and
other instruments as in his judgment are necessary or appropriate to enable him
to render the Opinions expressed below.
Based on the foregoing, and subject to the assumptions and limitations contained
herein, the undersigned is of the opinion that:
(_) Lessee is an "air carrier" within the meaning of the Federal
Aviation Act operating under a "certificate of convenience and
necessity" issued under Section 401 or 418 of such Act, is a
"citizen of the United States" as such term is defined in Section
101(16) of such Act and holds all authority, necessary licenses and
certificates under such Act and the rules and regulations
promulgated thereunder necessary for the conduct of its business and
to perform its obligations under the Lease Agreement.
(_) The execution, delivery and performance by Lessee of the Lease
Agreement do not to the undersigned's knowledge, breach or result in
a default under any indenture, mortgage, deed of trust, credit
agreement, conditional sale contract or other loan agreement to
which Lessee is a party or by which Lessee or its property may be
bound.
(_) There are no pending or, to the best of the undersigned's knowledge,
threatened actions, suits or proceedings before any court or
administrative agency or arbitrator against or involving Lessee that
question the validity of the Lease Agreement or that would have been
required to have been disclosed in the Lessee's most recently filed
Form 10-K Annual Report, if
63
pending or threatened on the date of such filing, except such as are
therein disclosed.
This Opinion Letter is furnished to you for the purposes indicated above, and
may not be relied upon by any other Person or for any other purpose without our
written consent. This opinion may be relied upon by you (and any permitted
Transferee under Clause 20.1(a) of the Lease Agreement) in connection with the
matters set forth herein and, without our prior written consent may not be
relied upon for any other purpose and may not be furnished to any other Person
for any purpose.
Very truly yours,
Midway Airlines Corporation Legal
Department
SCHEDULE I
RRPF Engine Leasing Limited
00 Xxxxxxxxxx Xxxx
Xxxxxx XX0X 0XX
England
64
SCHEDULE 2C
Form of Legal Opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx,
Special Counsel to Lessee
__________, 199_
To Each of the Addressees Listed in
Schedule I Attached hereto:
Rolls-Royce Model Tay 650-15 Spare Engine
with Manufacturer's Serial Number [ ] (the "Engine")
Ladies and Gentlemen:
This letter confirms that we filed for recordation with the Federal Aviation
Administration (the "FAA") today at _____ P.M., C.D.T., the Engine Lease
Agreement dated _____________, 199_ (the "Lease"), among RRPF Engine Leasing
Limited ("Lessor") and [ ] ("Lessee"). Capitalized terms used herein without
definition shall have the meanings set forth in the Lease.
Based upon our examination of the Lease and of such records of the FAA as we
deemed necessary to render this opinion and as were made available to us by the
FAA, it is our opinion that:
(a) the Lease is in due form for recordation by and has been duly filed
for recordation with the FAA pursuant to and in accordance with the
provisions of the Federal Aviation Act of 1958, as amended;
(b) the Engine is free and clear of any liens, security interests or
encumbrances of record with the FAA other than such as are created
by the Lease; and
(c) the rights of the Lessor and the Lessee under the Lease with respect
to the Engine are perfected.
No opinion is herein expressed as to laws other than the federal laws of the
United States. Since our examination was limited to records maintained by the
FAA Aircraft Registry, our opinion does not cover liens which are perfected
without the filing of notice thereof with the FAA, such as federal tax liens,
liens arising under Section 1368(a) of Title 29 of the United States Code and
possessory artisans' liens. In rendering this opinion, we were subject to the
accuracy of FAA personnel in the filing, indexing and recording of instruments
filed with the FAA and in the search for encumbrance cross-reference index cards
for the Engine.
Very truly yours,
---------------------------
For the Firm
65
SCHEDULE I
RRPF Engine Leasing Limited
00 Xxxxxxxxxx Xxxx
Xxxxxx XX0X 0XX
Xxxxxxx
[ ]
66
SCHEDULE 3
ACCEPTANCE CERTIFICATE
To: RRPF Engine Leasing Limited
00 Xxxxxxxxxx Xxxx
Xxxxxx XX0X 0XX
Reference is made to the Engine Lease Agreement dated [* *], 199[**] ("Lease")
between RRPF Engine Leasing Limited and Midway Airlines Corporation ("Lessee")
regarding one Rolls Xxxxx Xxx 650-15 Spare Engine as defined in contract
specification 3004-S Issue I with Engine Manufacturer's Serial Number [* *]
together with Transportation Stand ("Engine").
The Lessee hereby certifies that
1. On [* *], 199[**] at [* *][* *] time the Lessee accepted delivery of the
Engine and that pursuant to the terms of the Lease the Lessee confirms
that the Engine is and will henceforward be subject to all the terms and
conditions contained in the Lease.
2. The Lessee confirms that having made an inspection of the Engine pursuant
to Clause 5.2(a) of the Lease by its duly authorised technical experts,
the Engine is on the date hereof in good working order and repair without
defects or inherent vice in condition, design, operation or fitness for
use and that it conforms to the Lessee's requirement.
3. The representations and warranties of the Lessee contained in the Lease
are true and accurate in all material respects on and as of the date of
this Certificate.
4. No Termination Event or Potential Termination Event (as defined in the
Lease) has occurred and is continuing at the date of this Certificate or
is likely to result from any circumstances of which we are unaware.
5. The Lessee confirms that the placard referred to in Clause 12.17 of the
Lease has been affixed to the Engine.
6. The Lessee hereby confirms that all the parts listed in the contract
specification referred to in Schedule 1 of the Lease were installed on the
Engine at delivery.
SIGNED the 199[**]
For and on behalf of
MIDWAY AIRLINES CORPORATION
67
SCHEDULE 4
TERMS OF SALE
The terms and conditions applicable to a sale and purchase of the Engine
pursuant to this Agreement are as follows:
1. Sale. Save as provided below, Lessor will sell (free and clear of all
Lessor's Security Interests) to the Lessee and the Lessee will purchase
from Lessor the Engine for the Purchase Price at such location as may be
agreed, in an "as is where is" condition on the Term Date. On completion
of the sale of the Engine Lessor shall sign and deliver to Lessee a xxxx
of sale with warranty of title and Lessee shall sign and deliver to Lessor
an acceptance certificate, in each case in a form reasonably acceptable to
the parties.
2. Exclusion of Liability and Waiver. Lessee expressly agrees and
acknowledges that Lessor has not made nor shall be deemed to make and
there shall be hereby expressly excluded any representation or warranty or
covenant or condition express or implied, as to the airworthiness, value,
condition, design, quality, purpose, merchantability, durability,
operation or fitness for use or operation of the Engine or any part or as
to the eligibility or suitability for any particular use or operation or
any other representation or warranty or covenant or condition of any kind
whether similar to any of the foregoing or not express or implied, with
respect to the Engine or any part, except that Lessor shall represent and
Warrant that it has conveyed to Lessee good title to the Engine, free and
clear of all Lessor's Security Interests.
Delivery of the acceptance certificate to Lessor will be conclusive proof,
as between Lessor and the Lessee, that the Engine is at that time in good
working order and repair and without defect or inherent vice in condition,
design, operation or fitness for use, whether or not discoverable by the
Lessee as of the Term Date.
3. Waiver. The Lessee confirms that, as except as provided in paragraph 2
above, the waiver contained in Clause 6.2 of the Agreement shall survive
the termination of the Agreement
4. Delivery. The sale of the Engine will not impose on Lessor any obligation
to transport the Engine to the agreed delivery location.
5. Registration. Lessor shall at the Lessee's expense execute and deliver to
Lessee such certificates, documents, and/or other items as may be
necessary to fully record Lessee's ownership of the Engine and/or to
release or terminate any interest of Lessor or any Indemnitee in the
Engine.
68
SCHEDULE 5
[***]
69
SCHEDULE 6
[***]
70
SIGNATORIES
SIGNED by }
for and on behalf of RRPF ENGINE } /s/ [ILLEGIBLE]
LEASING LIMITED }
Address: 00 Xxxxxxxxxx Xxxx
Xxxxxx XX0X 0XX
Facsimile No: (071) 233 1915
Attention: the Secretary
SIGNED by }
for and on behalf of MIDWAY AIRLINES CORPORATION } /s/ XX Xxxxxx
Address: 000 X. Xxxxxx Xxxxxx Xxxxx 0000, Xxxxxx, XX 00000
Facsimile No: 00 919 956 7568
Attention: Senior Vice President and General Counsel
XXXXXXXX X. XXXXXX
SENIOR VICE PRESIDENT
GENERAL COUNSEL
71
