Exhibit 10.35
EXECUTION VERSION
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ENGINE LEASE
COMMON TERMS AGREEMENT
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DATED AS OF December 18, 2001
BETWEEN
CHAUTAUQUA AIRLINES, INC.
And
GENERAL ELECTRIC CAPITAL CORPORATION
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Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. The
omitted materials have been filed separately with the Securities and Exchange
Commission.
CONTENTS
SECTION PAGE
1. INTERPRETATION..............................................................................................1
2. REPRESENTATIONS AND WARRANTIES..............................................................................2
3. CONDITIONS PRECEDENT........................................................................................3
4. COMMENCEMENT................................................................................................3
5. PAYMENTS....................................................................................................4
6. MANUFACTURER'S WARRANTIES..................................................................................17
7. LESSOR'S COVENANTS.........................................................................................18
8. LESSEE'S COVENANTS.........................................................................................20
9. INSURANCE..................................................................................................30
10. INDEMNITY...............................................................................................31
11. EVENTS OF LOSS..........................................................................................34
12. RETURN OF engines.......................................................................................36
13. DEFAULT.................................................................................................37
14. TRANSFER................................................................................................42
15. MISCELLANEOUS...........................................................................................43
16. DISCLAIMERS AND WAIVERS.................................................................................47
17. BROKERS AND OTHER THIRD PARTIES.........................................................................49
18. ILLEGALITY..............................................................................................50
schedule 1 Definitions
Schedule 2 Representations and Warranties
Schedule 3 Conditions Precedent
Schedule 4 Pre-Delivery Procedures and Delivery Condition
Schedule 5 Certificate of Acceptance
Schedule 6 Procedures and Operating Condition at Redelivery
Schedule 7 Insurance Requirements
Schedule 8(a) Form of Lessee's General Counsel's Legal Opinion
Schedule 8(b) Form of Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
Schedule 9 Events of Default
Schedule 10 Form of Lease Termination Certificate
Schedule 11 Form of Aircraft Owner/Mortgagee Acknowledgment
Schedule 12 Form of
Engine Lease Supplement
Schedule 13 Form of Letter of Credit
Schedule 14 Form of Letter of Quiet Enjoyment
ENGINE LEASE
COMMON TERMS AGREEMENT
THIS COMMON TERMS AGREEMENT (this "CTA") is made as of December 18, 2001
BETWEEN:
(1) GENERAL ELECTRIC CAPITAL CORPORATION ("GECC"); and
(2) CHAUTAUQUA AIRLINES, INC. ("Lessee").
WHEREAS:
(A) From time to time, Lessee or one of its Affiliates may wish to lease
commercial aircraft engines and related equipment from GECC or one of its
Affiliates, and GECC or one of its Affiliates may wish to lease commercial
aircraft engines and related equipment to Lessee or one of its Affiliates;
(B) Each party hereto wishes to provide in one document for certain common
terms and conditions, as hereinafter provided in this CTA, that will be
applicable, unless otherwise stated, to each such lease referred to in
Recital (A); and
(C) Each such lease transaction will be concluded only on the terms of an
agreement entitled "
Engine Lease Agreement," which together with this CTA
(which will be incorporated into and become part of such
Engine Lease
Agreement), will constitute the Lease for the applicable Engine including
such related equipment as identified therein;
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In the Lease, capitalized words and expressions are defined in SCHEDULE 1
(INTERPRETATION) or in the
Engine Lease Agreement, and the Lease shall be
construed in accordance with such SCHEDULE 1 and the
Engine Lease
Agreement.
1.2 CONSTRUCTION
(a) In the Lease, unless otherwise stated, a reference to:
(i) "Lessor," "Lessee," "GECAS," "Owner" or any other Person
includes any of their successors and permitted assignees;
(ii) plural concepts shall include the singular and vice versa;
(iii) any document (except this CTA unless Lessor and Lessee
otherwise expressly agree) shall include any changes to that
document;
(iv) a Section or a Schedule is a reference to a section of or a
schedule to this CTA;
(v) any Regulation shall include any changes to that Regulation and
any replacement for it;
(vi) an obligation of a Person refers to any obligation that Person
has under or in relation to the Lease;
(vii) "includes," "including", "include" or similar terms shall not
be construed as limiting and shall mean "including, without
limitation"; and
(viii) in the event of a conflict between the provisions of the
Engine
Lease Agreement and the provisions of this CTA, the provisions
of the
Engine Lease Agreement shall control.
(b) Headings to Sections and Schedules in the Lease are not intended to
affect their meaning.
2. REPRESENTATIONS AND WARRANTIES.
2.1 LESSEE'S REPRESENTATIONS AND WARRANTIES.
Lessee hereby makes the representations and warranties set out in
Section 1.1 of Schedule 2 (LESSEE'S REPRESENTATIONS AND WARRANTIES) as of
the date of execution of the
Engine Lease Agreement and ....as of the
Delivery Date thereunder, and Lessee understands that these statements must
be true, both when the Engine Lease Agreement is executed and on the
Delivery Date thereunder.
2.2 LESSOR'S REPRESENTATIONS AND WARRANTIES.
Lessor hereby makes the representations and warranties set out in
Section 1.2 of Schedule 2 (Lessor's Representations and Warranties) as of
the date of execution of the Engine Lease Agreement and as of the Delivery
Date thereunder, and Lessor understands that these statements must be true,
both when the Engine Lease Agreement is executed and on the Delivery Date
thereunder.
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3. CONDITIONS PRECEDENT. Lessor need not deliver and start the leasing of the
Engine under the Lease unless each of the Lessor Conditions Precedent is
satisfied or waived in writing by Lessor. Lessee need not accept and start
the leasing of the Engine under the Lease unless each of the Lessee
Conditions Precedent is satisfied or waived in writing by Lessee.
4. COMMENCEMENT
4.1 LEASING
(a) Subject to Sections 3 (CONDITIONS PRECEDENT) and 4.4 (DELAYED
DELIVERY), Lessor will lease that Engine to Lessee and Lessee will
take that Engine on lease for the Term, which shall commence on the
Delivery Date, and which shall be evidenced by Lessee's execution of
an Engine Lease Supplement for such Engine on or before the Delivery
Date. Lessor shall notify Lessee of the expected Delivery Date in the
Scheduled Delivery Month.
(b) Lessee will be responsible for all risks associated with any loss of
or damage to the Engine from the Rent Commencement Date until
possession of the Engine is returned to Lessor on the Return Occasion.
4.2 PRE-DELIVERY PROCEDURE. Lessor and Lessee will follow the Pre-Delivery
Procedure.
4.3 DELIVERY AND ACCEPTANCE. After the Pre-Delivery Procedure has been
completed and subject to Section 3 (CONDITIONS PRECEDENT):
(a) Lessor will tender delivery of the Engine to Lessee at the Delivery
Location.
(b) Lessee will accept the Engine and provide evidence of its acceptance
by signing and delivering an Engine Lease Supplement and Certificate
of Acceptance to Lessor.
Lessee's acceptance of the Engine shall be regarded as absolute,
unconditional and irrevocable. After Delivery, Lessee shall bear all risk
of loss for the Engine from any cause whatsoever.
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4.4 DELAYED DELIVERY. Lessor shall not be liable for any Losses suffered or
incurred by Lessee, arising from or in connection with any delay in
delivery or failure to deliver the Engine.
5. PAYMENTS
5.1 DEPOSIT. Lessee shall pay Lessor any Deposit.
5.2 RENTAL PERIODS. The first Rental Period will start on the Rent Commencement
Date and each subsequent Rental Period will start on the date immediately
following the last day of the previous Rental Period. Each Rental Period
will end on the date immediately before the numerically corresponding day
in the next month except as otherwise provided in the Engine Lease
Agreement, except that:
(a) if there is no numerically corresponding day in that month, it will
end on the last day of that month;
(b) if a Rental Period would otherwise extend beyond the Expiry Date, it
will end on the Expiry Date.
5.3 RENT
(a) TIME OF PAYMENT: Lessee will pay to Lessor or its order Rent in
advance on each Rent Date. Lessor must receive value for the payment
on each Rent Date. If a Rental Period begins on a day which is not a
Business Day, the Rent payable in respect of that Rental Period shall
be paid on the Business Day immediately after that day, without
interest.
(b) AMOUNT: The Rent payable during the Term shall be calculated in
accordance with SCHEDULE B of the Engine Lease Agreement.
5.4 SUPPLEMENTAL RENT
(a) AMOUNT: If, under the Engine Lease Agreement, Lessee is required to
pay Supplemental Rent, Lessee will pay that Supplemental Rent, at the
rates referred to in Section 3.1 of the Engine Lease Agreement, to
Lessor in relation to each calendar month (or part of a month) of the
Term, on the fifteenth day following the end of that calendar month
(except that the last payment of Supplemental Rent during the Term
shall be paid on the Expiry Date).
(b) ADJUSTMENT: If, under the Engine Lease Agreement, Lessee is required
to pay Supplemental Rent, the Supplemental Rent rates shall be
adjusted after the Delivery Date not more frequently than annually
(with any such adjustment having retrospective application as
appropriate to reflect the provisions of paragraphs (ii) and (iii)
below) based on the following:
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(i) ANNUAL SUPPLEMENTAL RENT ADJUSTMENT: by the Annual Supplemental
Rent Adjustment, compounded annually commencing on the first
anniversary of the Delivery Date.
(ii) HOUR TO CYCLE RATIO ADJUSTMENT: Lessor and Lessee acknowledge
that the Engine Supplemental Rent rate and the Engine LLP
Supplemental Rent rate are based upon the assumption that the
Engine will operate on an Assumed Ratio. If that assumption
proves to be incorrect at any time for any period of twelve
(12) consecutive months during the Term based upon Lessee's
actual operating experience during such twelve (12) months, and
the hour to cycle ratio differs from the Assumed Ratio by more
than ten percent (10%) during such twelve (12) month period,
(i) Lessor shall have the right, upon written notice to Lessee,
to adjust the Engine Supplemental Rent rate and the Engine LLP
Supplemental Rent rate (in the case of a decrease in the ratio
below the Assumed Ratio) and (ii) Lessor, upon written request
from Lessee, will make that adjustment (in the case of an
increase in the ratio above the Assumed Ratio). Any adjustment
shall be based on a table contained in the Engine Lease
Agreement. Actual hour to cycle ratios may fall outside the
ratios identified in that table. In that case, the actual
values shall be determined by extrapolating the closest
observed intervals in the table. If the Engine Lease Agreement
does not include a table showing the adjustment that should be
made in respect of Engine Supplemental Rent or Engine LLP
Supplemental Rent (as the case may be) for changes in the
Assumed Ratio, then no such adjustment shall be made.
(iii) ENGINE-THRUST-RATING ADJUSTMENT: Lessor and Lessee acknowledge
that any amounts of Engine Supplemental Rent payable by Lessee
are based upon the assumption that the Engines will operate at
certain assumed engine thrust ratings. If that assumption
proves to be incorrect by more than ten percent (10%) at any
time for a period of 12 consecutive months during the Term
based upon Lessee's actual operating experience during such 12
months, (i) Lessor shall have the right, upon written notice to
Lessee, to make such adjustment as Lessor determines is
necessary in its reasonable discretion to maintain the rates of
Engine Supplemental Rent at levels which accurately reflect the
costs associated with obtaining relevant maintenance services
at prevailing industry rates (in the case where the Engine
Supplemental Rent rate is adjusted upward) and (ii) Lessor,
upon written request from Lessee, will make (and notify Lessee
in writing of) such adjustment as Lessor determines is
necessary in its reasonable discretion to maintain the rates of
Engine Supplemental Rent at levels which accurately reflect the
costs associated with obtaining relevant maintenance services
at prevailing industry rates (in the case where the Engine
Supplemental Rent rate is adjusted downward).
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(iv) MATERIAL REVISION TO MAINTENANCE PROGRAM: If the Maintenance
Program is revised so as to materially affect the cost
associated with obtaining relevant maintenance services for
which a Maintenance Contribution may be payable, (i) Lessor
shall have the right, upon written notice to Lessee, to make
such adjustment as Lessor determines is necessary in its
reasonable discretion to maintain the Supplemental Rent at
levels which accurately reflect the costs associated with
obtaining relevant maintenance services at prevailing industry
rates (in the case where the Supplemental Rent rate is adjusted
upward) and (ii) Lessor, upon written request from Lessee, will
make (and notify Lessee in writing of) such adjustment as
Lessor determines is necessary in its reasonable discretion to
maintain the rates of Supplemental Rent at levels which
accurately reflect the costs associated with obtaining relevant
maintenance services at prevailing industry rates (in the case
where the Engine Supplemental Rent rate is adjusted downward).
Each notice by Lessor mentioned in paragraphs (ii), (iii) and
(iv) shall specify the revised Supplemental Rent rates and the
effective date of such revision, and Lessee shall be bound by
all such adjustments made by Lessor in its reasonable
discretion. Lessee agrees to advise Lessor, in writing,
promptly following any occurrence which would result in the
assumptions mentioned in paragraphs (ii) and (iii) above
becoming incorrect at any time during the Term.
(C) LESSOR'S PROPERTY: Lessee acknowledges and agrees that Supplemental
Rent is additional rent for the leasing of the Engine and not cash
collateral or other collateral security for Lessee's maintenance
obligations under the Lease. Once paid all Supplemental Rent is the
property of Lessor, it is not refundable to Lessee under any
circumstances whatsoever and Lessee has no interest therein
whatsoever.
5.5 PAYMENTS. All payments by Lessee to Lessor under the Lease will be made for
value on the due date (or if the due date is not a Business Day then on the
following Business Day) in Dollars and in immediately available funds by
wire transfer to the Lessor's Account.
5.6 WITHHOLDING
(a) WITHHOLDING: Lessee must not deduct any amount from any of its
payments under the Lease, for or on account of any Taxes, unless it is
required by Law to do so, in which case Lessee must:
(i) deduct the minimum amount necessary to comply with the Law;
(ii) pay Lessor an extra amount so that Lessor receives a net amount on the
relevant payment date, that is equal to the amount that it would have
received if the reduction had not been made. The amount of any such
payment to Lessor must take into account the tax treatment of that
payment to Lessor applying the principles of Section 5.10 (INDEMNITY
PAYMENTS - AFTER TAX BASIS) such that
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Lessor shall be in no worse position than it would have been if the
deduction had not applied in the first place;
(iii) pay the Tax to the relevant taxing authority according to relevant
Law; and
(iv) obtain a receipt (if one is available) from the relevant taxing
authority and give it to Lessor.
Except with respect to the application of the principles of Section 5.10,
this Section 5.6 shall not apply to any Lessor Taxes described in Section
5.8.
5.7 TAX INDEMNITY
(a) General:
(i) Except as provided in Section 5.8 (LESSOR TAXES), Lessee will
on demand pay and indemnify each Tax Indemnitee against any and
all Taxes levied or imposed against or upon or payable by such
Tax Indemnitee or Lessee and arising from, with respect to or
in connection with the transactions pursuant to the Lease,
including all Taxes relating or attributable to Lessee, the
Lease or the Engine, directly or indirectly, in connection with
the importation, exportation, registration, ownership (but only
to the extent relating to or attributable to or arising as a
result of the possession, operation, use or maintenance of the
Engine by Lessee), leasing, subleasing, purchase, delivery,
possession, use, operation, repair, maintenance, overhaul,
transportation, landing, storage, presence or redelivery of the
Engine or any part thereof or any rent, receipts, insurance
proceeds, income, indemnification payment or other amounts
arising therefrom, or the making of any Equipment Change or the
permanent replacement of any Engine provided, that as a
condition precedent to any performance by the Lessee in
connection with any indemnity, payment or other obligation
pursuant to this Section 5.7 with respect to any Person
claiming as a Tax Indemnitee which is not a signatory to this
Agreement, such Person shall expressly agree in writing with
the Lessee to be bound by all the terms of this Section and
this Agreement applicable to such Person in its capacity as a
Tax Indemnitee.
(ii) All Taxes indemnified pursuant to this Section 5.7(a) shall be
paid by Lessee directly to the appropriate taxing authority (to
the extent permitted by applicable Law) at or before the time
prescribed by applicable Law.
(iii) Any amount payable by Lessee to a Tax Indemnitee pursuant to
this Section 5.7(a) (GENERAL) shall be paid within thirty (30)
days after receipt of a written demand therefor from the
relevant Tax Indemnitee accompanied by a written statement
describing in reasonable detail the basis for such indemnity
and the computation of the amount so payable; provided that
such amount need not be
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paid prior to the later of (i) the due date for such Taxes or
(ii) in the case of amounts which are being contested by the
Lessee in good faith or by the Tax Indemnitee pursuant to
Section 5.9, the time such contest is finally resolved. Within
15 days following the Lessee's receipt of the computation of
the amount of the indemnity, the Lessee may request that an
accounting firm to be jointly selected by the Lessee and such
Tax Indemnitee determine whether such computations of the Tax
Indemnitee are correct. The computations of such accounting
firm shall be final, binding, and conclusive upon the parties
and the Lessee shall have no right to inspect the books,
records, or tax returns of the Tax Indemnitee to verify such
computation. All fees and expenses payable in connection with
such verification shall be borne by the Lessee unless such
verification discloses an error adverse to the Lessee of 5% or
more of the amount computed by the Tax Indemnitee, in which
case such fees and expenses shall be paid by the Tax
Indemnitee.
(b) SALES AND USE TAXES:
(i) Without limiting Section 5.7(a) (GENERAL) above, Lessee shall,
subject to the exclusions in Section 5.8 (LESSOR TAXES) below,
pay to Lessor (or, if permitted by applicable Law and if
requested by Lessor, Lessee shall pay to the relevant tax
authority for the account of Lessor) all sales, use, rental,
value added, goods and services and similar taxes ("SALES
TAXES") required to be paid to the tax authority of the
jurisdiction in which the Delivery Location is situated or to
the jurisdiction of the Habitual Base or the State of
Incorporation, or to the tax authority of any jurisdiction in
which the Engine may be used, operated or otherwise located
from time to time, with respect to the lease of the Engine to
Lessee, including any "supply" for Sales Tax purposes under the
Lease, unless Lessee delivers to Lessor such exemption
certificate or other document as may be required by applicable
Law to evidence Lessor's entitlement to exemption from all
Sales Taxes imposed by each such jurisdiction with respect to
the lease of the Engine.
(ii) The parties will cooperate with each other in connection with
the preparation and filing of any exemption application or
similar document that is reasonably necessary or desirable
under applicable Law to avoid the imposition of any Sales Taxes
with respect to the transactions contemplated by the Lease.
(iii) The specific obligations with respect to sales and use taxes
set forth in this Section 5.7(b) are in addition to, and are
not in substitution for, Lessee's obligation to indemnify for
sales and use taxes pursuant to Section 5.7(a) (GENERAL).
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(c) Lessee will also indemnify each Tax Indemnitee, on an After-Tax Basis,
as set forth in the Section entitled "Special Tax Indemnity" in Schedule B
of the Engine Lease Agreement, and the provisions of Section 5.9 (TAX
CONTEST AND INFORMATION) shall apply thereto.
5.8 LESSOR TAXES. Lessee is not required to indemnify a Tax Indemnitee under
Section 5.6 (WITHHOLDING), Section 5.7(a)(GENERAL), or Section 5.7(b)
(SALES AND USE TAXES) to the extent that the Tax arises because of:
(i) the willful misconduct or gross negligence of a Tax Indemnitee;
(ii) a Tax liability Lessor or Owner has which would have arisen
even if the Lease had not been entered into;
(iii) a Tax liability charged on a Tax Indemnitee's income, receipts,
profits, gains, franchise, net worth, or doing business (but
excluding any Tax that is a Sales Tax or property tax or that
is in the nature of a Sales Tax or property tax) imposed by (x)
any Government Entity in the United States or (y) any
government entity in a jurisdiction other than the United
States if such Tax would not have been imposed but for the
presence of a Tax Indemnitee in such jurisdiction or other
connection of a Tax Indemnitee with such jurisdiction unless
such presence or connection is attributable to this Lease or
the transactions contemplated herein ;
(iv) a Tax liability charged with respect to the period, or an event
occurring, after the Expiry Date, provided that the exclusion
set forth in this Section 5.8(iv) shall not apply to the extent
such Tax liability is either directly attributable to the
Lessor's exercise of remedies pursuant to Section 13.2 or is
imposed on or with respect to payments due from the Lessee
after the Expiry Date;
(v) Taxes imposed on a Tax Indemnitee or any successor, assign or
Affiliate thereof which became payable by reason of any
mortgage, pledge, financing, transfer or disposition by such
Tax Indemnitee subsequent to the Delivery Date of all or any
interest in an Engine other than (A) transfers resulting from a
loss, substitution or modification of an Engine, (B) transfers
pursuant to the Lessor's exercise of remedies in accordance
with Section 13.2, or (C) a transfer to Lessee pursuant to
Section 3.5 of the Engine Lease Agreement;
(vi) interest, penalties, fines or additions to tax to the extent
they relate to Taxes for which no indemnity would be payable by
Lessee pursuant to this Section 5.8;
(vii) Taxes imposed on a transferee of a Tax Indemnitee to the extent
that the aggregate amount of such Taxes exceeds the Taxes that
would have been imposed on the transferor in the absence of
such transfer with such determination to be made based on the
laws in effect on the date of such transfer, provided that the
exclusion in this clause (vii) shall not apply in the case of
any such sale, assignment, transfer or disposition that occurs
in connection with an Event of
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Default or in connection with a bankruptcy, insolvency or other
proceeding for the relief of debtors in which the Lessee is a
debtor;
(viii) United States withholding Taxes imposed as a result of a Tax
Indemnitee not being a U. S. Person;
(ix) Taxes that would not have been imposed but for a Lessor Lien;
or
(x) Taxes imposed by Section 4975 of the Internal Revenue Code of
1986.
Lessee will also indemnify each Tax Indemnitee, on an After-Tax Basis,
as set forth in the Section entitled "Special Tax Indemnity" in
SCHEDULE B of the Engine Lease Agreement.
5.9 TAX INFORMATION, TAX CONTEST, AND REFUND
(a) INFORMATION
(i) If Lessee is required by any applicable Law to deliver any
report or return in connection with any Taxes for which Lessee
would be obligated to indemnify Lessor or any other Tax
Indemnitee under the Lease, Lessee will complete the same and,
on request, supply a copy of the report or return to Lessor.
(ii) If any report, return or statement is required to be made by
Lessor or any other Tax Indemnitee with respect to any Tax
(other than an income tax imposed by any government entity in
the United States) for which there is an indemnity obligation
of Lessee under the Lease, Lessee will, to the extent that
Lessee has knowledge or reasonably should have knowledge
thereof, promptly notify Lessor of the requirement and:
(y) if permitted by applicable Law, make and timely file such
report, return or statement (except for any report, return
or statement that Lessor has notified Lessee that Lessor or
any other Tax Indemnitee intends to prepare and file),
prepare such return in such manner, if required, as will
show Lessor as lessor of the Engine and the ownership of
the Engine in Lessor, and provide Lessor upon request a
copy of each such report, return or statement filed by
Lessee, or
(z) if Lessee is not permitted by applicable Law to file any
such report, return or statement, Lessee will prepare and
deliver to Lessor a proposed form of such report, return or
statement within a reasonable time prior to the time such
report, return or statement is to be filed.
(iii) Lessee will provide such information and documents as Lessor
may reasonably request to enable Lessor or any other Tax
Indemnitee to comply with its tax filing, audit and litigation
obligations. Lessor or any other Tax Indemnitee will provide
such information or documents, at Lessee's expense, that Lessee
does not otherwise have as Lessee may reasonably request and
which are necessary to enable Lessee to comply with its
obligations under the Lease (including
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Sections 5.6(WITHHOLDING) and 5.7(TAX INDEMNITY) of the CTA and
SCHEDULE B of the Engine Lease Agreement).
(B) CONTEST: If any Tax Indemnitee receives a written claim for any Tax
for which a Tax Indemnitee would be required to pay an indemnity
pursuant to Section 5.7, such Tax Indemnitee shall notify Lessee
promptly of such claim, provided that any failure to provide such
notice will not relieve Lessee of any indemnification obligation
pursuant to Section 5.7 unless such failure effectively precludes the
ability to contest such Tax. If timely requested by Lessee in writing,
Tax Indemnitee shall, at the expense of Lessee (including, without
limitation, all costs, expenses, legal and accountants' fees and
disbursements, and penalties, interest and additions to tax incurred
in contesting such claim) in good faith contest or (if permitted by
applicable Law) permit Lessee to contest such claim by (i) resisting
payment thereof if practicable and appropriate, (ii) not paying the
same except under protest if protest is necessary and proper, or (iii)
if payment is made, using reasonable efforts to obtain a refund of
such Taxes in appropriate administrative and judicial proceedings. The
Tax Indemnitee shall determine the method of any contest conducted by
the Tax Indemnitee except for any contest involving only taxes (other
than income taxes) of the Tax Indemnitee for which the Tax Indemnitee
is indemnified under this Agreement ("Severable Taxes") and (in good
faith consultation with Lessee) control the conduct thereof. Lessee
shall determine the method of any contest conducted by Lessee and any
contest involving Severable Taxes and (in good faith consultation with
the Tax Indemnitee) control the conduct thereof. Lessee shall pay in
full all payments of Rent and other amounts payable pursuant to the
Lease, without reduction for or on account of any Tax (other than
Lessor Taxes described in Section 5.8), while such contest is
continuing. A Tax Indemnitee shall not be required to contest, or to
continue to contest, a claim for Taxes under this Section 5.9 if (w)
Lessee shall have failed, upon request of the Tax Indemnitee, to
acknowledge its liability for such claims, or (x) such contest would
result in a risk of criminal penalties or a material risk of a sale,
forfeiture or loss of (including loss of use), or the imposition of a
Lien (other than a Permitted Lien) on, the Engine (unless the Lessee
posts a bond or other security reasonably acceptable in form and
substance to such Tax Indemnitee), or (y) in the case of a contest
other than a contest of Severable Taxes, Lessee shall not have
furnished an opinion of independent tax counsel selected by Tax
Indemnitee and reasonably satisfactory to Lessee, that a reasonable
basis exists for such contest, or (z) in the case of a contest other
than a contest of Severable Taxes, a Default shall be continuing
(unless Lessee shall have provided security reasonably satisfactory to
Lessor securing Lessee's performance of its obligations under this
Section 5.9). If a Tax Indemnitee contests any claim for Taxes by
making a payment and seeking a refund thereof, then Lessee shall
advance to the Tax Indemnitee, on an interest-free basis, an amount
equal to the Taxes to be paid by Tax Indemnitee in connection with the
contest and shall indemnify Lessor on an After-Tax Basis for any
adverse tax consequences to Tax Indemnitee of such interest-free
advance. Upon the final determination of any contest pursuant to this
Section 5.9 in respect of any Taxes for which Lessee shall have made
an advance to Lessor in
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accordance with the immediately preceding sentence, the amount of
Lessee's obligation shall be determined as if such advance had not
been made; any indemnity obligation of Lessee to Tax Indemnitee under
this Section 5.9 and Tax Indemnitee's obligation to repay the advance
will be satisfied first by setoff against each other, and any
difference owing by either party shall be paid within ten days after
such final determination.
(C) REFUNDS. If a Tax Indemnitee obtains a refund or reimbursement of all
or any part of any Taxes that the Lessee shall have paid for such Tax
Indemnitee or that the Lessee shall have reimbursed, advanced funds to
or indemnified such Tax Indemnitee, but not before Lessee shall have
made all payments then due to such Tax Indemnitee pursuant to Section
5.7 and any other payments then due under the Lease, such Tax
Indemnitee shall pay Lessee the amount of such refund or
reimbursement, reduced by any Taxes imposed on the Tax Indemnitee on
receipt or accrual of such refund or reimbursement and increased by
any Taxes saved by the Tax Indemnitee by reason of the deductibility
of such payment by Tax Indemnitee. If, in addition to such refund or
reimbursement, the Tax Indemnitee receives an amount of interest on
such refund or reimbursement, such Tax Indemnitee shall pay to Lessee
the portion of such interest which is fairly attributable to such
refund, reduced by any Taxes imposed on the Tax Indemnitee on receipt
or accrual of such interest and increased by any Taxes saved by reason
of the deductibility of such payment by Tax Indemnitee. Tax Indemnitee
shall not be required to make any payment to Lessee pursuant to this
Section 5.9 while an Event of Default shall have occurred and be
continuing.
5.10 INDEMNITY PAYMENTS - AFTER-TAX BASIS. The amount of any payment made under
Section 5.6 (WITHHOLDING), Section 5.7 (TAX INDEMNITY), Section
5.21(EXPENSES) or Section 10(INDEMNITY) to or for the benefit of any
Indemnitee, shall include such amount as may be necessary to hold such
Indemnitee harmless on an After-Tax Basis from all Taxes required to be
paid by such Indemnitee with respect to such payment or indemnity
(including any payments pursuant to this Section 5.10). If any Tax
Indemnitee or Indemnitee shall realize a tax benefit as a result of any
claims or Taxes paid or indemnified against by the Lessee under Section
5.6, Section 5.7, Section 5.21, or Section 10 (whether by way of deduction,
credit, allocation or apportionment of income or otherwise) to the extent
such tax benefit was not previously taken into account in computing the
amount of such payment or indemnity, but not before the Lessee shall have
made all payments then due to such Tax Indemnitee or Indemnitee under this
Agreement and the Lease, such Tax Indemnitee or Indemnitee shall pay to the
Lessee an amount that, after subtraction of any further tax savings such
Tax Indemnitee or Indemnitee realizes as a result of the payment thereof,
is equal to the amount of such tax benefit. In determining the order in
which any Tax Indemnitee utilizes withholding or other foreign taxes as a
credit against such Tax Indemnitee's United States income taxes, such Tax
Indemnitee shall be deemed to utilize (i) first, all foreign taxes other
than those described in clause (ii) below; and (ii) then, on a pro rata
basis, all foreign taxes with respect to which such Tax Indemnitee is
entitled to obtain indemnification pursuant to an indemnification provision
contained in any lease, loan agreement, or other financing document
(including this Agreement) that is similar to the indemnification provision
in Section 5.7.
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5.11 LESSOR OBLIGATIONS FOLLOWING EXPIRY DATE. Promptly after:
(a) redelivery of the Engine to Lessor in accordance with and in the
condition required by the Lease; or
(b) payment to Lessor of the Agreed Value following an Event of Loss after
the Delivery Date;
(c) exercise by Lessee of any option which may be set forth in the Lease
from time to time to purchase the Engine and payment by Lessee to
Lessor of the amount set forth in the Lease as the purchase option
price, in accordance with and within such period as may be provided in
the Lease;
or in each case such later time as Lessor is reasonably satisfied that
Lessee has irrevocably paid to Lessor all amounts which may then be due and
payable under the Lease and the Other Agreements and in each case so long
as no other Default has occurred and is continuing:
(i) Lessor will pay to Lessee the balance of the Deposit (if any);
(ii) Lessor will pay to Lessee the amount of any Rent received in
respect of any period falling after the date of redelivery of
the Engine or payment of the purchase option price in
connection with Lessee's exercise of any purchase option for an
Engine that may be set forth in the Lease or payment of the
Agreed Value, as the case may be; and
(iii) Lessor will return to Lessee or cancel any Letter of Credit.
5.12 NET LEASE
The Lease is a net lease. The Lessee's obligation to pay Rent and to
perform all of its other obligations under the Lease is absolute and
unconditional no matter what happens and no matter how fundamental or
unforeseen the event, including any of the following: (a) any right of
set-off, counterclaim, recoupment, defense or other right which either
party to the Lease may have against the other (including any right of
reimbursement) or which Lessee may have against the Manufacturer, any
manufacturer or seller of or any Person providing services with respect to
the Engine or any Part or any other Person, for any reason whatsoever; (b)
any unavailability of the Engine for any reason, including a requisition of
the Engine or any prohibition or interruption of or interference with or
other restriction against Lessee's use, operation or possession of the
Engine (whether or not the same would, but for this provision, result in
the termination of the Lease by operation of Law); (c) any lack or
invalidity of title or any other defect in title, airworthiness,
merchantability, fitness for any purpose, condition, design, or operation
of any kind or nature of the Engine for any particular use or trade, or for
registration or documentation under the Law of any relevant jurisdiction,
or (except as otherwise provided in Section 11 of this CTA) any Event of
Loss in respect of or any damage to the Engine; (d) any insolvency,
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar
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proceedings by or against Lessor, Lessee or any other Person; (e) any
invalidity or unenforceability or lack of due authorization of, or other
defect in, the Lease; (f) any Security Interests or Taxes; and/or (g) any
other cause or circumstance which but for this provision would or might
otherwise have the effect of terminating or in any way affecting any
obligation of Lessee under the Lease. Lessee acknowledges and agrees that
it has used its own judgement in selecting the Engine, and has not relied
on Lessor or on any information supplied by Lessor, that Lessor is not a
manufacturer of or dealer in engines and that Lessor has all of the rights
and benefits of a lessor under a lease to which Section 2A-407 of the UCC
applies as provided in such Section 2A-407.
Except as expressly set forth elsewhere in the Lease, Lessee hereby waives,
to the extent permitted by applicable Law, any and all right which it may
now have or which at any time hereafter may be conferred upon it, by
statute or otherwise, to terminate, ▇▇▇▇▇, cancel, quit, reduce, defer,
suspend or surrender the Lease or the Engine or any obligation imposed upon
Lessee under the Lease (including payment of Rent or Supplemental Rent).
Each payment of Rent or Supplemental Rent made by Lessee shall be final.
Lessee will not seek to recover all or any part of any payment of Rent or
Supplemental Rent for any reason whatsoever except manifest error in which
case Lessor shall make payment to Lessee promptly following receipt of
Lessee's written notice identifying such error (subject always to Section
5.20).
Nothing in this Section 5.12 will constitute a waiver by or be construed to
limit Lessee's right to institute separate legal proceedings or otherwise
independently pursue any claim against Lessor in the event of Lessor's
breach of the Lease, subject to Sections 7.1, as it relates to quiet
enjoyment, and 16.3, as it relates to claims generally, of this CTA, or to
limit Lessee's rights and remedies against any other Person.
5.13 FURTHER PROVISIONS REGARDING DEPOSIT
(a) If, under the Lease, Lessee is required to pay a Deposit, Lessee
hereby grants a security interest in the Deposit to Lessor and the
remaining provisions of this Section shall apply. Lessee agrees that
Lessor shall be entitled to commingle the Deposit with Lessor's
general or other funds, Lessor will have no obligation to pay any
interest thereon and Lessor will not hold any such funds as agent or
in trust for Lessee or in any similar fiduciary capacity. In this
regard, Lessee acknowledges and agrees that the requirements of
Section 7-101 of the NEW YORK GENERAL OBLIGATIONS LAW to the effect
that Lessor hold the Deposit in a separate, interest bearing account
do not apply.
(b) If a Special Default or an Event of Default shall have occurred and be
continuing under the Lease, in addition to all rights and remedies
accorded to Lessor elsewhere in the Lease or under Law in respect of
the Deposit, Lessor may immediately or at any time thereafter, without
prior notice to Lessee, apply all or part of the Deposit (or any
amount drawn under the Letter of Credit provided hereunder) (if
applicable) in or towards the payment or
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discharge of any matured obligation owed by Lessee or any Affiliate of
Lessee under the Lease or the Other Agreements, in such order as
Lessor sees fit, and/or exercise any of the rights of set-off
described in Section 5.20 (SET-OFF) against all or part of the Deposit
(or any amount drawn under the Letter of Credit provided hereunder)
(if applicable).
(c) If Lessor exercises the rights described in Section 5.13(b), Lessee
shall, following a demand in writing from Lessor, immediately restore
the Deposit to the level at which it stood immediately prior to such
exercise.
5.14 LETTER OF CREDIT
(a) If, under the Lease, Lessee is required or elects to provide Lessor
with a Letter of Credit, such Letter of Credit will be issued and
payable by a Pre-Approved Bank or another bank acceptable to Lessor in
its sole and absolute discretion and substantially in the form of
Schedule 13 and otherwise in form and substance acceptable to Lessor
in its sole and absolute discretion.
(b) The Letter of Credit may have a validity period or periods ending
prior to the Required LC Expiry Date, provided that (i) the Letter of
Credit shall, in each case, be renewed, extended or reissued and
delivered to Lessor not later than 30 Business Days prior to its
expiry; and (ii) a Letter of Credit shall remain in force at all times
up to the Required LC Expiry Date. Lessee acknowledges and agrees that
its failure to renew, extend or reissue the Letter of Credit when and
as provided in the foregoing sentence shall constitute an immediate
Event of Default, which shall entitle Lessor to immediately draw upon
the Letter of Credit in the full amount thereof.
(c) If at any time during the Term, Lessor determines in its sole and
absolute discretion that the current issuing or confirming bank for
the Letter of Credit is no longer an acceptable issuing or confirming
bank (whether by virtue of a material adverse change in its financial
condition, a decrease in any credit rating of its long-term unsecured
debt obligations, or for any other reason), Lessee shall within five
(5) Business Days after the date of any such notice from Lessor cause
the Letter of Credit to be replaced by a Letter of Credit issued by
another bank acceptable to Lessor in its sole and absolute discretion
and (if requested by Lessor in its sole and absolute discretion) that
such replacement Letter of Credit is confirmed by another bank
acceptable to Lessor in its sole and absolute discretion.
(d) If Lessor makes a drawing under the Letter of Credit, Lessee shall,
following a demand in writing by Lessor, immediately cause the maximum
amount available for drawing under the Letter of Credit to be restored
to the level at which it stood immediately prior to such drawing.
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5.15 GUARANTEE. If, under the Engine Lease Agreement, Lessee is required to
provide Lessor with a Guarantee, Lessee will on or prior to the Delivery
Date provide Lessor with the Guarantee.
5.16 LATE PAYMENT INTEREST. If Lessee fails to pay any amount payable under the
Lease on the due date, Lessee will pay on demand from time to time to
Lessor interest (both before and after judgement) on that amount, from the
due date to the date of payment in full by Lessee to Lessor, at the
Interest Rate. All such interest will be compounded monthly and calculated
on the basis of the actual number of days elapsed in the month, assuming a
30 day month and a 360 day year.
5.17 CURRENCY
(a) Except for Losses and expenses suffered or incurred by Lessor, which
shall be payable by Lessee to Lessor in the currency and in the amount
in which such Loss is suffered or incurred, all amounts payable to
Lessor under the Lease shall be payable in Dollars in New York and
payment in Dollars in New York is of the essence. Lessee must
indemnify Lessor against any Loss Lessor suffers if:
(i) Lessor receives an amount relating to Lessee's obligations in a
different currency from that in which payments should be made
under the Lease; or
(ii) Lessee pays a judgement or claim in a different currency from
that in which payments should be made under the Lease.
(b) Lessee waives any right to pay any amount under the Lease in a
currency which is different from the currency provided in the Lease.
Notwithstanding any such receipt, judgement or claim described in
Section 5.17(a), Lessee shall have a separate obligation to pay, and
Lessor shall have a separate claim against Lessee for, amounts to be
indemnified by Lessee under this Section 5.17.
5.18 CERTIFICATES. Except where expressly provided in the Lease, any certificate
or determination by Lessor as to any rate of interest or as to any other
amount payable under the Lease will, in the absence of manifest error, be
presumed to be correct.
5.19 APPROPRIATION. If any sum paid or recovered by Lessor in respect of the
liabilities of Lessee under the Lease is less than the amount then due,
Lessor may apply that sum to amounts due under the Lease in such
proportions and order and generally in such manner as Lessor may determine
in its sole discretion.
5.20 SET-OFF. In this Section 5.20, references to Lessee will also include
Lessee Affiliates. Lessor may, without notice, set-off any obligations owed
by Lessee under the Lease or under the Other Agreements against any
obligation Lessor or any of its Affiliates owes Lessee under the Lease or
under the Other Agreements, regardless of the place of payment or currency.
Promptly after making any such set-off, Lessor shall notify Lessee thereof,
but failure to give such notice shall not affect the effectiveness of any
such set-off. If the obligations are in different currencies,
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Lessor may convert either obligation at the market rate of exchange
available in New York. If the amount of an obligation is unknown, Lessor
may estimate the amount. Any difference between the estimated obligation
and the actual obligation will be paid by either Lessor or Lessee, as
appropriate, when the amount becomes known.
5.21 EXPENSES. Lessee will pay to Lessor on demand all reasonable expenses
(including all reasonable legal fees and expenses and the reasonable fees
and expenses of other professional advisers) that the Lessor suffers or
incurs:
(a) to deal with any amendments, extensions, consents or waivers that are
required in connection with the Lease (but excluding any expenses
incurred by Lessor or Owner in connection with any change in the
ownership or financing of the Engine or a change in the Lease that is
otherwise requested by Lessor or Owner, and in each case unrelated to
any consent, waiver or amendment requested by Lessee or any other act
or omission of Lessee) or to deal with any replacement of any Engine
or Part (except for the replacement of an Engine by or at the request
of Lessor prior to the Delivery Date);
(b) for FAA counsel and otherwise to act upon any advice and obtain
assistance to perfect the Lease in the State of Registry and the State
of Incorporation (and any other appropriate place); and
(c) in connection with the enforcement or preservation of any of Lessor's
rights under the Lease (including under Section 10) (INDEMNITY)) or in
respect of the repossession of any Engine in accordance with Section
13.2 of this CTA.
All amounts payable pursuant to this Section 5.21 will be paid in the
currency in which they are incurred by Lessor.
6. MANUFACTURER'S WARRANTIES
(a) So long as no Event of Default has occurred which is continuing,
Lessor shall make available to Lessee during the Term the benefit of
all manufacturer's warranties in relation to the repair or remedy of
any defect in the Engine (including compensation for loss of use of
the Engine, if available) to the extent that it is permitted to do so.
In furtherance of the foregoing, Lessor shall take such actions, at
Lessee's cost and expense, as Lessee may reasonably request to make
such warranties available to Lessee. Lessee will give Lessor prompt
written notice of any warranty claim which is settled with Lessee on
the basis of a cash payment.
(b) If an Event of Default has occurred and is continuing Lessor may
immediately recover from Lessee the proceeds of any warranty claims
previously paid to Lessee to the extent that such claims relate to any
defect in the Engine not fully and completely rectified by Lessee
before such Default and Lessor may:
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(i) retain for its own account any such proceeds previously paid to
Lessor which would have been remitted to Lessee under this
Section 6 in the absence of such Event of Default; and
(ii) cause any proceeds of any pending claims to be paid to Lessor,
rather than Lessee.
(c) Lessee will take all steps as are necessary at the end of the Term to
ensure that the benefit of any warranties relating to the Engine which
have not expired is vested in Lessor to the extent that such
warranties may be so assigned.
7. LESSOR'S COVENANTS
7.1 QUIET ENJOYMENT. So long as no Event of Default has occurred and is
continuing, Lessor will not interfere with Lessee's right to quiet use and
possession of the Engine during the Term. Exercise by Lessor of its rights
of inspection or other rights provided to it under the Lease in the absence
of an Event of Default shall not be considered to be a breach of the
foregoing covenant. Lessee agrees that its only right with respect to a
default by Lessor under the Lease is to make a claim against Lessor for
compensatory (but not consequential) damages resulting directly therefrom
and in any event subject to Section 16.3 (DISCLAIMER OF CONSEQUENTIAL
DAMAGES) hereof, and Lessee hereby waives any and all other rights or
remedies it may have under Section 2A-211 of the UCC or Sections 2A-508
through 2A-522 of the UCC or any other right or remedy inconsistent with
this provision.
7.2 MAINTENANCE CONTRIBUTIONS
(a) If, under the Engine Lease Agreement for the Engine, Lessee is
required to pay Supplemental Rent, then provided no Event of Default
or Special Default has occurred and is continuing, Lessor will pay as
maintenance contributions (as a separate and independent obligation
and not as a return of Supplemental Rent), subject to Section 7.2(b)
(EXCLUSIONS), the following amounts to the applicable Maintenance
Performer (it being understood and agreed, however, that no such
Maintenance Performer shall be a third-party beneficiary of this
Lease) or Lessee if Lessee has paid for the relevant work to be
performed by way of contribution to the cost of maintenance of the
Engine, within thirty (30) days after receipt by Lessor, WITHIN SIX
MONTHS AFTER COMMENCEMENT OF SUCH MAINTENANCE AND BEFORE THE EXPIRY
DATE, of an invoice and supporting documentation reasonably
satisfactory to Lessor and which is accurate, complete and legible
evidencing performance of the following work during a completed Engine
shop visit when the Engine requires off-wing tear down and/or
disassembly by the Maintenance Performer:
(i) ENGINE LIFE-LIMITED PARTS: The Engine LLP Supplemental Rent
payable by Lessee for the Engine will be designated and will be
reimbursable solely for the replacement of LLP in the Engine
and Lessor will reimburse Lessee from the
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Engine LLP Supplemental Rent for the actual out-of-pocket
materials cost (with overhead, ▇▇▇▇-up or profit factor limited
to an amount equal to the lesser of (x) [*] of the LLP
in connection with the replacement of LLP in the Engine, with
parts required for all other purposes or causes excluded,
including those causes set forth in Section 7.2(b)
(EXCLUSIONS). Reimbursement for the reasonable cost of labor
will be permitted only for the replacement of Fan Hub while on
wing with Lessor's prior written consent and otherwise in
conformance with the requirements of this Agreement.
Reimbursement, excluding exchange fees and handling, packing
and shipping charges, for the replacement cost of LLP will be
made up to the amount of the Engine LLP Supplemental Rent held
by Lessor in respect of that Engine at the time of removal of
the Engine from the Related Airframe to which it was attached
immediately prior to the replacement of LLP for which
reimbursement is sought;
(ii) ENGINE REFURBISHMENT: With respect to the Engine Refurbishment
of any Engine, the performance restoration, in accordance with
the Lease, of such Engine, or a module thereof, accomplished by
an FAR Part 145-approved agency in accordance with the
Manufacturer's work scope planning guide, including all
Manufacturer-recommended reliability SBs, alert SBs and FAA ADs
(to the extent required during such performance restoration
shop visit and due for termination within the cyclic release
period to a maximum of two years), the lesser of (A) the amount
of that invoice and (B) the amount of the Engine Supplemental
Rent held by Lessor in respect of that Engine at the time of
removal of the Engine from the Related Airframe to which it was
attached immediately prior to the restoration.
(B) EXCLUSIONS. Lessor will not pay any maintenance contributions:
(i) For repairs covered by insurance or warranty or arising as a
result of accidents or incidents (whether or not eligible for
recovery under Lessee's insurance), operational or maintenance
mishandling or AD work (except as specifically provided in
Section 7.2(a)(ii) (ENGINE REFURBISHMENT); nor
(ii) For repairs arising as a result of foreign object damage
("FOD"), the removal , installation, maintenance and repair of
QEC and/or any elective replacement (unless mutually agreed by
Lessor and Lessee) of Parts not required under the Maintenance
Program to be replaced as part of the maintenance described in
Section 7.2(a)(i) (ENGINE LIFE-LIMITED PARTS) and (ii) (ENGINE
REFURBISHMENT), as the case may be.
(C) SUPPLEMENTAL RENT ACCOUNTS. Separate accounts will be established for
performance restoration and LLP. Lessee will be entitled to draw on
the appropriate reserve account,
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during the Term and for the purpose of meeting return conditions, to
restore performance of the Engine or replace LLP to the extent that
the account is in credit. Any costs for performance restoration or
replacement of LLP in excess of the reserves paid for such work will
be the responsibility of Lessee. Any balances in the Supplemental Rent
accounts remaining at the end of the Lease Term will be retained by
Lessor; provided, however, that if an Event of Loss occurs with
respect to an Engine, upon payment to Lessor of the Agreed Value for
such Engine, and provided that no Event of Default or Special Default
has occurred and is continuing, Lessor will pay to Lessee the portion
of Supplemental Rent received by Lessor in respect of such Engine.
8. LESSEE'S COVENANTS
8.1 DURATION: Lessee shall perform and comply, or cause its Permitted
Sub-Lessee or Maintenance Performer to perform and comply, with its
undertakings and covenants in the Lease at all times during the Term and
the performance of any such undertakings and covenants by any Permitted
Sub-Lessee or Maintenance Performer shall constitute performance by the
Lessee and to the extent of such performance discharges such obligations by
the Lessee. All such undertakings and covenants shall, except where
expressly otherwise stated, be performed at the expense of Lessee.
8.2 INFORMATION
Lessee will:
(a) provide Lessor with a Technical Report for the Engine within 15 days
after the end of each calendar month throughout the Term or otherwise
provide Lessor with a Technical Report for such Engine within thirty
(30) days after Lessor's reasonable request therefor;
(b) provide Lessor with the Financial Information;
(c) upon the occurrence thereof (and in any event within seven (7) days of
such occurrence), notify Lessor of any Event of Loss and of any event
which is likely to result in an insurance claim in excess of the
Damage Notification Threshold and details of any negotiations with
insurers or insurance brokers relating to such claim;
(d) promptly after the occurrence thereof, notify Lessor of any Default;
and
(e) provide Lessor, upon request, with evidence that all Taxes and charges
that are due and payable and were incurred by Lessee in connection
with the Engine, its location and its operations, have been paid in
full (or are being contested in good faith by appropriate proceedings
in respect of which adequate reserves have been provided by Lessee and
non-payment of which does not give rise to any risk of the Engine or
any interest therein being sold, forfeited or otherwise lost or of
criminal liability on the part of Lessor or Owner);
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(f) provide Lessor with such other information concerning the location,
condition, use and operation of the Engine or such other
non-confidential information concerning the business or financial
affairs of Lessee, as Lessor may from time to time reasonably request;
and
(g) notify Lessor, promptly, of the removal of any Engine for the purpose
of Engine Refurbishment.
8.3 LAWFUL AND SAFE OPERATION. Lessee will operate the Engine for commercial
purposes from the Delivery Date until the Return Occasion from a base
within the State of Registry or from such other base outside the State of
Registry pursuant to a sub-lease or a wet-lease complying with Section
8.4(a) (SUBLEASING), provided, always that Lessee must not use or operate
the Engine or permit the Engine to be used or operated:
(a) in violation of any applicable Regulations or in a manner causing
Lessor, Owner, any Financing Party or GECAS to be in violation of any
applicable Regulations;
(b) for any purpose for which the Engine was not designed;
(c) in any circumstances or place where the Engine is not covered by the
Insurances; or
(d) for purposes of training, qualifying or re-confirming the status of
cockpit personnel except for the benefit of Lessee's cockpit
personnel, and then only if the use of the Engine for such purpose is
not disproportionate to the use for such purpose of other engine of
the same type operated by Lessee.
8.4 SUBLEASING; POSSESSION.
AT NO TIME PRIOR TO THE RETURN OCCASION WILL LESSEE SUB-LEASE OR OTHERWISE
GIVE POSSESSION OR CONTROL OF THE ENGINE TO, OR OTHERWISE PERMIT THE ENGINE
TO BE IN THE POSSESSION OR CONTROL OF, ANY OTHER PERSON EXCEPT:
(a) to a sub-lessee of the Engine to which Lessor consents in writing
which consent shall not be unreasonably withheld or delayed (a
"PERMITTED SUB-LESSEE"), pursuant to a sub-lease to which Lessor
consents in writing which consent shall not be unreasonably withheld
or delayed (a "PERMITTED SUB-LEASE"), and provided that no Default
shall have occurred and be continuing at the commencement of such
sub-lease; or
(b) as permitted under Section 8.11 (REMOVAL OF ENGINES AND PARTS); or
(c) so long as no Default shall have occurred and be continuing, and all
approvals, consents or authorizations required from the Air Authority
in connection with any such delivery, transfer or relinquishment of
possession have been obtained and remain in full force and effect:
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(i) the Lessee may, without the prior consent of the Lessor, enter
into a charter or wet lease or other similar arrangement of no
more than six (6) months' duration (or such longer period as
Lessor may give prior written consent to, such consent not to
be unreasonably withheld) under which the Lessee or a Permitted
Sub-Lessee has operational control of the Engine and the
Related Airframe on which such Engine is installed in the
course of the Lessee's business (which shall not be considered
a transfer of possession hereunder), provided that the Lessee's
obligations under the Lease or such Permitted Sub-Lessee's
obligations under the relevant Permitted Sub-Lease shall
continue in full force and effect notwithstanding any such
charter or wet lease or other similar arrangement; or
(ii) the Lessee or a Permitted Sub-Lessee may, without the prior
consent of the Lessor, deliver possession of the Engine or any
Part to the manufacturer or maintenance facility thereof or to
any organization for testing, service, repair, maintenance,
overhaul work or other similar purposes or for alterations or
modifications or additions required or permitted by the terms
of the Lease.
8.5 INSPECTION
(a) Lessee will permit Lessor's, Owner's and the Financing Parties'
Representatives to inspect the Engine at any time. Unless a Default
has occurred and is continuing, any such Person will give Lessee
reasonable notice of inspection and will ensure that it does not
result in a disruption to the maintenance or scheduled operation of
such Engine. Lessee shall comply with the reasonable requests of
Lessor's, Owner's and the Financing Parties' Representative
representatives during the course of an inspection.
(b) The cost of conducting an inspection shall be borne by Lessor, Owner
or the Financing Parties, as the case may be, unless, (i) an Event of
Default has occurred and is continuing or (ii) if as a result of that
inspection, Lessee is found to be in default of its obligations under
the Lease, in which case the cost shall be borne by Lessee.
(c) No liability or obligation will be incurred by Lessor, Owner,
Financing Parties' Representative or the Financing Parties, as the
case may be, by reason of non-exercise by any of them of the
inspection rights referred to in this Section 8.5.
8.6 OWNERSHIP; PROPERTY INTERESTS; RELATED MATTERS
(a) Lessee will:
(i) fix and maintain Nameplates containing the Nameplate
Inscription in a prominent position on each Engine;
(ii) in any circumstance where such interests are relevant, take all
reasonable steps to make sure that all relevant Persons know
about the interests of Owner, Lessor and Financing Parties'
Representative in the Engine; and
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(iii) pay all navigation charges, air traffic control charges,
landing charges or other amounts of any nature imposed by any
Government Entity with respect to Lessee, each Related
Airframe, each Engine and/or the Lease except to the extent
that, in the reasonable opinion of Lessor, such payment is
being contested in good faith by appropriate proceedings in
respect of which adequate reserves have been provided by Lessee
and non-payment of which does not give rise to any material
likelihood of the Engine or any interest therein being sold,
forfeited or otherwise lost or of criminal liability on the
part of Lessor or Owner.
(b) Lessee will not:
(i) represent that it is the owner of the Engine or that it has an
economic interest (equivalent to ownership) in the Engine for
Tax treatment or other purposes;
(ii) take any action or fail to take any action, other than action
required under the Lease (including under Section 7.1) (QUIET
ENJOYMENT) to be taken by Lessor, Affiliates of Lessor, Owner
or a Financing Party, if such action or omission could result
in a forfeiture or seizure of the Engine or otherwise similarly
put Owner's and/or Lessor's and/or Financing Parties'
Representative's rights or interests at risk;
(iii) represent to others that Owner, Lessor or Financing Parties'
Representative is associated with or responsible for the
business activities and/or flight operations of Lessee;
(iv) allow the Engine or Owner's, Lessor's or Financing Parties'
Representative's interest in it or the Lease to become or
remain subject to any Security Interest (other than a Permitted
Lien); or
(v) allow the name of any Person (other than Lessor or any
Financing Party) to be placed on the Engine as a designation
that could reasonably be interpreted as a claim of ownership or
as a Security Interest.
(c) Lessee shall not and shall procure that any other Person claiming by
or through Lessee does not challenge the existence, validity,
enforceability or priority of the Lease or the rights of Lessor as
lessor or of Owner as owner in respect of the Engine or Financing
Parties' Representative as holder of a first priority Security
Interest in the Engine and the Lease
8.7 GENERAL
(a) Lessee will:
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(i) maintain its business as a commercial airline, will preserve
its corporate existence (other than as permitted in Section 8.7
(vi) below), will maintain all rights, privileges, licenses and
franchises material thereto or material to performing its
obligations under the Lease, and will procure that any consent,
authorization, license, certificate or approval of or
registration with or declaration to any Government Entity
required to be obtained or maintained by Lessee in connection
with the Lease and/or the operation of the Engine (including
any airline license or air transport license including
authority to operate the Engine under Part 121 of the FARs, a
Certificate of Convenience and Necessity issued under the Act
and an air carrier operating certificate issued under the Act)
is not modified in a materially prejudicial manner and is not
withheld, revoked, suspended, cancelled, withdrawn, terminated
or not renewed and does not otherwise cease to be in full
force;
(ii) not operate, maintain, insure or deal with, or keep records
with respect to, the Engine in a manner which discriminates
against the Engine adversely insofar as Lessor's and Owner's
interests are concerned, when compared with the manner in which
Lessee operates, maintains, insures or deals with, or keep
records with respect to, similar engines or parts in Lessee's
fleet;
(iii) not change the "location" (as such term is used in Section
9-307 of the UCC) of the Lessee from its State of Incorporation
or the location of its chief executive office from that
described in the heading of the Engine Lease Agreement or
otherwise be located (as defined in Section 9-307 of the UCC)
at any place in the United States other than the location
described the heading of the Engine Lease Agreement, except
upon 30 days prior written notice thereof to Lessor;
(iv) remain a Certificated Air Carrier and maintain its status so as
to fall within the purview of Section 1110 of Title 11 of the
U.S.C. or any analogous statute;
(v) remain a "citizen of the United States" as defined in Section
40102(a)(15)(c) of Title 49 of the U.S.C.;
(vi) not consolidate with or merge into or with any other
corporation or other Person, and not convey, transfer, lease or
otherwise dispose of all or substantially all of its property
and other assets to any corporation or other Person, unless the
Person surviving such consolidation or merger or the Person
which acquires by conveyance, transfer, lease or other
disposition of all or substantially all of such property or
other assets (the "Successor Entity"): (A) is a Certificated
Air Carrier, and (B) if not the Lessee, executes a duly
authorized, legal, valid, binding and enforceable agreement
assuming the Lessee's obligations hereunder and delivers such
instrument to Lessor; provided that no such merger,
consolidation, conveyance, transfer, lease or other disposition
shall be permitted
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if an Event of Default shall have occurred and be continuing or
if immediately after giving effect to such consolidation,
merger, conveyance, transfer, lease or other disposition, an
Event of Default shall occur as a result thereof. Upon any
consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of Lessee and the
satisfaction of the conditions specified in this Section
8.7(a)(vi), the successor corporation formed by such
consolidation or into which the Lessee is merged or the Person
to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every
right and power of, the Lessee under this Agreement and the
Lease and each other document contemplated hereby and thereby
to which the Lessee is a party with the same effect as if such
successor corporation had been named as the Lessee herein and
therein. No such consolidation or merger, or sale, conveyance,
transfer or lease of all or substantially all of the assets of
the Lessee as an entirety shall have the effect of releasing
the Lessee or any successor corporation which shall theretofore
have become the Lessee hereunder in the manner prescribed in
this Section 8.7(a)(vi) from its liability hereunder or under
the Lease, and nothing contained herein shall permit any lease,
sublease, or other arrangement for the use, operation or
possession of the Engine except in compliance with the
applicable provisions of this Agreement and the Lease.
(vii) act as both the importer and exporter of record and shall, at
its expense, obtain and maintain all certificates, licenses,
permits, approvals and other governmental authorizations from
time to time required for the use and operation of the Engine
or which may be necessary to import, export or transport the
Engine from the Delivery Location and to the Redelivery
Location.
8.8 RECORDS. Lessee will keep all Engine Documents:
(a) in English;
(b) according to prudent standard international practice airline practice;
and
(c) so they meet the all applicable requirements of the Air Authority
(including at minimum all FAA requirements, including specifically FAR
91.417 or the equivalent Air Authority's requirement) and the
Maintenance Program.
8.9 PROTECTION. Lessee will:
(a) so long as the Engine remains installed on a Related Airframe, take
all actions reasonably requested by Lessor that are within Lessee's
control to keep such Related Airframe registered with the Air
Authority; and
(b) make any and all filings required to be made with the Air Authority
registry that are within its control and take all other actions within
its control that are necessary or advisable to reflect on the Air
Authority registry or as otherwise appropriate under
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applicable Law any change in the ownership of the Engine, or in the
interests of Lessor, Owner or the Financing Parties' Representative in
the Lease or the Engine, any modification to the Engine (such as the
permanent replacement of the Engine in accordance with the Lease) or
as a result of any change in applicable Regulations. Lessor will bear
any costs incurred as a consequence of a transfer by Lessor, Owner or
the Financing Parties' Representative of the interests of Lessor,
Owner or the Financing Parties' Representative in the Lease or the
Engine or a change in the identity of Lessor, Owner or the Financing
Parties' Representative (in each case, unrelated to the replacement of
any Engine or Part or a Default), and Lessee will bear any other costs
incurred in complying with this Section 8.9, including in connection
with the replacement of any Engine.
8.10 MAINTENANCE AND REPAIR. Lessee will maintain, overhaul and repair the
Engine (or arrange for the Engine to be maintained, overhauled and
repaired, through the Maintenance Performer), so that:
(a) the Engine is kept in as good operating condition and repair as the
condition of the Engine as at Delivery and after giving effect to any
post-Delivery modifications, repairs or maintenance paid for or
otherwise provided by or on behalf of Lessor, except for ordinary wear
and tear, for purposes of any Engine, ordinary wear and tear does not
include FOD, damage from accident, neglect and improper use, operation
and handling;
(b) so long as the Engine remains installed on a Related Airframe, the
Lessee has a current certificate of airworthiness (issued by the Air
Authority in the appropriate public transport category) for such
Related Airframe, except when aircraft of the same type, model or
series as such Related Airframe (powered by engines of the same type
as those with which the Related Airframe shall be equipped at the time
of grounding) registered in the same country have been grounded by the
Air Authority, provided, however, that if the certificate of
airworthiness of such Related Airframe shall be withdrawn, then so
long as the Lessee (or a Permitted Sub-Lessee) is taking or causing to
be taken all necessary action to promptly (but in no event more than
10 days from such withdrawal) correct the condition which caused such
withdrawal and provided further that the Insurance for the Engine is
not adversely affected by such withdrawal, no Event of Default shall
arise from such withdrawal;
(c) the Engine complies with (i) all applicable Regulations including the
standard stipulated by FAR Part 121 Subpart L (or its JAA equivalent)
and any other rules and regulations of the FAA (or JAA) and in at
least the same manner and with at least the same care, including
record keeping, maintenance scheduling, modification status and
technical condition, as is the case with respect to similar engines
owned or otherwise operated by Lessee and as if Lessee were to retain
and continue operating the Engine in its fleet after the Expiry Date,
including all maintenance to the Engine or any Part required to
maintain all warranties, performance guaranties or service life
policies in full force and effect; and
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(ii) the requirements of all ADs and SBs designated by the State of
Design or State of Registry as "mandatory," and to be carried out
before the Return Occasion or within the AD Compliance Period; and
(d) all maintenance is carried out according to the Maintenance Program in
at least the same manner and with at least the same care, including
Line Maintenance, maintenance scheduling, modification status and
technical condition, as is the case with respect to similar engines
owned or otherwise operated by Lessee.
8.11 REMOVAL OF PARTS
(A) GENERAL: Lessee must replace, at its sole expense, in accordance with
Section 8.11(b) (PERMANENT REPLACEMENT) within sixty (60) days thereof
or such longer period as Lessor may consent to, such consent not to be
unreasonably withheld, any Part which is permanently removed from the
Engine, provided, however, that any Engine which has suffered an Event
of Loss shall be subject to Section 11.1 (EVENTS OF LOSS). Any Part
which otherwise is lost, stolen, destroyed, seized, obsolete,
confiscated, damaged beyond repair or permanently rendered unfit for
any reason, must be replaced in accordance with Section 8.11(b). Any
Engine may be installed on an aircraft Lessee owns or leases in
accordance with Section 8.11(c) (OTHER EQUIPMENT). Lessee shall obtain
from the lessor of any Related Airframe and from any holder of a
Security Interest in any Related Airframe an Owner/Mortgagee
Acknowledgement prior to the installation of such Engine on any
Related Airframe; provided, however, that in the case of a lease or
Security Interest, Lessee shall not be required to obtain the
Owner/Mortgagee Acknowledgement if the applicable lease or security
interest agreement covering the airframe on which an Engine is
installed contains an agreement that such Person will not seek to
acquire, claim or exercise as against Lessor any rights, title or
interest with respect to such Engine as a result of such Engine being
installed on such Airframe.
(B) PERMANENT REPLACEMENT: If Lessee permanently replaces a Part, subject
to any additional terms and conditions in the Lease:
(i) the replacement part must be in good operating condition, be
made by the same manufacturer as the Part it is replacing, have
a value and utility the same or better than the Part it is
replacing, have as much useful life available until the next
scheduled maintenance procedure, be of the same or a more
advanced make and model and of the same interchangeable
modification status as the Part it is replacing;
(ii) the replacement part must have become and remain, until
replaced in accordance with this Section 8.11, the property of
Owner free from Security Interests (other than Permitted
Liens), and subject to the applicable Financing Documents;
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(iii) Lessee must have full traceability details of the source and
maintenance records of the replacement part and in the case of
serialized rotable parts, also have a complete service history
acceptable to the FAA; and
(iv) comply with the reasonable requirements of the Financing
Documents in connection with any such replacement (provided
that the terms of the Financing Documents will not be
inconsistent with Lessor's covenants under the Lease) including
to provide such legal opinions and other documents as may be
reasonably required under the Financing Documents.
(C) OTHER ENGINE: An Engine may be installed on an aircraft which Lessee
owns or leases if:
(i) no Event of Default has occurred and is continuing;
(ii) Lessee has operational control over the Engine;
(iii) Owner keeps the ownership of the Engine; and
(iv) the Engine does not become subject to a Security Interest and
the Related Airframe is not subject to any Security Interest
except a Permitted Lien or a lease or Security Interest
described in Section 8.11(a) (GENERAL) above.
(D) TEMPORARY REPLACEMENT: Lessee may install any part on the Engine as a
temporary replacement if:
(i) no Event of Default has occurred and is continuing;
(ii) there is not available a part complying with the requirements of the
Lease for a replacement part;
(iii) it would result in an unreasonable disruption of the operation of the
Engine or the business of Lessee to have the Engine grounded until
such time as a part complying with the requirements of the Lease for a
replacement part becomes available for installation;
(iv) as soon as practicable after a part is installed on the Engine, but
before the earlier of ninety (90) days after such temporary
replacement or the Expiry Date, Lessee removes that part and replaces
it with the original Part (or by a part which complies with Section
8.11(b) (PERMANENT REPLACEMENT)); and
(v) the Insurance for the Engine is not adversely affected.
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(E) POOLING/INTERCHANGE: Lessee shall not subject any Engine or Part to
any pooling, interchange, lease or similar arrangement unless Lessee
obtains Lessor's prior written consent thereto, which consent shall
not be unreasonably withheld.
8.12 EQUIPMENT CHANGES. Lessee will not make any modification or addition to the
Engine (each an "Equipment Change"), except for an Equipment Change which:
(i) is expressly permitted or required by the Lease; or
(ii) (w) is approved by the Manufacturer or (x) has a cost
(including labor) of less than the Modification Approval Amount
or (y) has the prior written approval of Lessor, and (z) in any
case, does not diminish the condition, utility, airworthiness
or value of the Engine.
So long as no Event of Default has occurred and is continuing, Lessee may
remove or reverse any Equipment Change provided that the Equipment Change
is not required pursuant to the terms of the Lease or to maintain the
Insurance and removal or reversal does not diminish the value, utility,
airworthiness or condition of the Engine assuming that such Equipment
Change was not made and that the Engine is maintained in accordance with
the Lease. Furthermore, Lessor may require Lessee to remove or reverse any
Equipment Change other than an Equipment Change that is approved by the
Manufacturer and does not diminish the condition, utility, airworthiness or
value of the Engine on the Expiry Date and to restore the Engine to its
condition prior to that Equipment Change. Any Equipment Change not so
removed or reversed remains the property of Lessor or Owner, as the case
may be, at the Expiry Date.
8.13 TITLE TO REPLACEMENT PARTS. Title to any Part that is installed on the
Engine shall, except in the case of a temporary replacement of a Part, vest
in Owner solely by virtue of its attachment to the Engine and it shall then
be subject to the Lease and, if applicable, the Financing Documents, as if
it were attached to the Engine at Delivery. If so requested by Lessor,
Lessee will provide a properly executed ▇▇▇▇ of sale or similar instrument
to evidence the vesting of good and marketable title, free and clear of any
Security Interest (except Lessor Liens), to any such replaced part in Owner
and all documents required under the Financing Documents. After Lessor has
determined that Lessee has permanently replaced any Part in accordance with
Section 8.11(b) (REMOVAL OF PARTS) and this Section 8.13, all of Lessor's
or Owner's rights in the Part that has been replaced shall vest in Lessee
without further act, without recourse or warranty (except as to the absence
of Lessor's Liens), on an AS IS, WHERE IS basis, and will at Lessee's
expense provide or will procure that Owner provides a ▇▇▇▇ of sale or
similar instrument as Lessee may reasonably request to evidence such
transfer. Lessee shall indemnify, on an After-Tax Basis, Lessor, Owner and
each other Tax Indemnitee for all fees, expenses and Taxes reasonably
incurred by Lessor, Owner or any other Tax Indemnitee in connection with
any such transfer, except for Lessor Taxes.
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8.14 OFF-WING STORAGE. If the Engine is not installed on any airframe for a
continuous period in excess of 30 days, Lessee will store the Engine, at
Lessee's sole cost, in accordance with the recommendations of Manufacturer
and the FAA and the requirements of the Air Authority.
9. INSURANCE
9.1 INSURANCE. Lessee will maintain the Insurance in full force during the
Term, and thereafter as expressly required in the Lease, which Insurance
shall be with insurers of nationally or internationally recognized
responsibility and shall be of the type and covering risks of the kind
customarily insured against in the industry for comparable operators,
operating similar aircraft and engines in similar situations as Lessee and
shall comply with the requirements set forth in Schedule 7 (INSURANCE
REQUIREMENTS).
9.2 INSURANCE UNDERTAKINGS AND INFORMATION: Lessee will:
(a) comply with the terms and conditions of each policy of any Insurance
and not do, consent or agree to any act or omission which:
(i) invalidates or may invalidate any Insurance; or
(ii) renders or may render void or voidable the whole or any part of
any Insurance;
(b) not take out without the prior written approval of Lessor any
insurance or reinsurance in respect of the Engine which adversely and
materially affects the Insurance required to be maintained hereunder;
and
(c) on or prior to each Delivery Date and on or prior to the cancellation,
lapse or expiration of the insurance policies required hereunder,
provide to Lessor copies of certificates of insurance and broker's
letters of undertaking in a form reasonably acceptable to Lessor,
detailing the coverage and confirming compliance with the specified
insurance requirements of the Lease and, in the case of broker's
letters of undertaking, opining that the Insurance complies with the
requirements of the Lease on or before each renewal date.
9.3 FAILURE TO INSURE. If Lessee fails to maintain any of the Insurance in
compliance with the Lease:
(a) each of the Indemnitees will be entitled but not bound (without
prejudice to any other rights of Lessor under the Lease) to pay the
premiums due or to effect and maintain Insurance in compliance with
the Lease or otherwise remedy Lessee's failure in such manner
(including, without limitation to effect and maintain an "owner's
interest" policy) as it considers reasonably appropriate. Any sums so
expended by it will become immediately due and payable by Lessee on
demand by Lessor together with interest thereon at the Interest Rate,
from the date of expenditure by it up to the date of reimbursement by
Lessee; and
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(b) Lessor at any time while such failure is continuing may require the
Engine to remain at any airport, or such other location where such
Engine is then located, or to proceed to and remain at any airport, or
such other location designated by Lessor until the failure is remedied
to its reasonable satisfaction.
9.4 CONTINUING INDEMNITY. Lessee shall effect and maintain Insurance after the
Expiry Date with respect to its liability under Section 10 (INDEMNITY) for
two years, and such insurance shall name each Indemnitee as an additional
insured.
10. INDEMNITY
(a) Except as provided in Section 10(b) below, Lessee agrees to assume
liability for and to indemnify each of the Indemnitees against and
agrees to pay on demand any and all Losses which an Indemnitee may at
any time suffer or incur at any time, whether directly or indirectly,
arising out of, related to or in any way connected with:
(i) the ownership, maintenance, overhaul, service, repair,
delivery, possession, transfer of ownership or possession,
import, export, registration, control, storage, modification,
leasing, insurance, inspection, testing, design, sub-leasing,
use, condition, redelivery or other matters relating to any
Engine any Part or any Related Airframe (regardless of whether
in the air or on the ground, and regardless of whether such
Losses are based on strict liability in tort, any act or
omission, including the negligence, of any Indemnitee, or
otherwise); or
(ii) any breach by the Lessee of any of its obligations under the
Lease, or with respect to any Engine, for any breach by Lessee
of its obligations under any agreement for a Related Airframe;
or
(iii) the design, testing or use of or any article or material in,
any Engine or any Part or its use or operation, including any
defect in design and regardless of whether it is discoverable,
and any infringement of patent, copyright, trademark, design or
other proprietary right claimed by any Person or a breach of
any obligation of confidentiality claimed to be owed to any
Person.
For the avoidance of doubt, the reference to "ownership" in
clause (i) shall not require Lessee to indemnify Lessor in
respect of (y) any defect in Lessor's or Owner's title to the
Engine or (z) any decline in residual value of the Engine or
any part thereof except to the extent attributable to a breach
by Lessee of any of its obligations under the Lease.
(b) Lessee is not required to indemnify any particular Indemnitee
(provided that Lessor and its Subsidiaries and Affiliates and its and
their officers, directors and employees shall be treated as a single
Indemnitee) under this Section, to the extent a particular Loss is:
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(i) caused by the wilful misconduct of that Indemnitee or gross
negligence of that Indemnitee, other than gross negligence
imputed to that Indemnitee by reason of its interest in the
Engine or the Lease;
(ii) caused by Lessor's breach of the Lease;
(iii) related to any Taxes or loss of a Tax benefit (but without
prejudice to any Indemnitee's rights under any other provision
of this Lease relating to Taxes);
(iv) caused by an event which occurs before the commencement of the
Term (except where the Loss is suffered during the Term as a
result of a pre-Delivery defect in or otherwise arises out of
or relates to or is any way connected with the manufacture,
design, maintenance, repair, rebuilding, overhaul or
modification of the Engine);
(v) caused by an event which occurs after the redelivery of the
Engine to Lessor in compliance with the Lease and is not
attributable to any act, omission, event or circumstance
occurring prior to such redelivery;
(vi) caused as a result of any sale, assignment, financing,
securitization, transfer or other disposition (whether
voluntary or involuntary) by such Indemnitee of the Engine or
any interest therein that is not a replacement thereof under
the Lease or is otherwise not contemplated under or required by
the Lease, and unless such sale, assignment, financing,
securitization, transfer or other disposition has resulted from
or occurred following an Event of Default;
(vii) consists of normal administrative costs and expenses of such
Indemnitee (but excluding any such costs or expenses resulting
from the occurrence of any Default); or
(viii) consists of costs or expenses for which such Indemnitee has
expressly agreed to be responsible under any provision of the
Lease.
(ix) a Lessor Lien or attributable to a Lessor Lien;
(x) in the case of the Lessor, a Loss relating to, resulting from,
arising out of or in connection with a "prohibited transaction"
within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Internal Revenue Code of 1986
resulting from the direct or indirect use of assets or any
ERISA Plan to acquire or hold Lessor's interest in the Engine
or in the case of any transferee of the Lessor, to purchase the
Engine from the Lessor;
(c) If any Indemnitee becomes aware of a Loss which may give rise to an
indemnity obligation on the part of Lessee under Section 10(a), such
Indemnitee shall promptly
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notify Lessee thereof, and, if so requested by Lessee, the relevant
Indemnitee shall consult with Lessee to consider what action may
properly be taken to defend or otherwise resist or mitigate the Loss.
Following such consultation, and subject to the prior written approval
of the relevant Indemnitee (such approval not to be unreasonably
withheld), Lessee or its insurers shall be entitled to take such
action as the relevant Indemnitee has approved to mitigate or defend
such Loss in the name of the relevant Indemnitee, provided that:
(i) no such action may be taken by Lessee unless the Loss is
insured or other adequate provision in respect of the Loss and
any associated costs or expenses has been made by Lessee to the
reasonable satisfaction of the relevant Indemnitee (having
regard to the nature and amount of Loss);
(ii) Lessee shall indemnify the relevant Indemnitee in full on
demand in respect of any fees, costs or expenses suffered or
incurred by the relevant Indemnitee as a result of such Loss,
or in connection with any action taken by Lessee as aforesaid;
(iii) no Indemnitee shall be prohibited by the foregoing provision
from settling or paying any Loss immediately if it is under a
legal obligation to do so;
(iv) the relevant Indemnitee shall be entitled to terminate any
mitigating or Loss defending actions or to prohibit
participation by Lessee in the defense of a Loss if the
relevant Indemnitee reasonably considers that its reputation
may be damaged or its business interests adversely affected by
continuing any such mitigation or defending actions or if the
Indemnitee reasonably considers that the defense of such Loss
should be conducted by it and its own advisers; and
(v) failure by any Indemnitee to comply with any of the foregoing
provisions of this Section 10(c) shall not prejudice or
discharge any of the indemnity obligation of Lessee pursuant to
Section 10(a) above.
(d) Insured Claims. Notwithstanding any other provision of Section 10 to
the contrary, in the case of any Loss indemnified by the Lessee
hereunder which is covered by a policy of insurance maintained by the
Lessee pursuant to Section 9 hereof or otherwise, it shall be a
condition of such indemnity with respect to any particular Indemnitee
that such Indemnitee shall cooperate with the insurers in the exercise
of their rights to investigate, defend or compromise such Loss as may
be required to retain the benefits of such insurance with respect to
such Loss.
(e) Subrogation. To the extent that a Loss indemnified by the Lessee under
Section 10 is in fact paid in full by the Lessee and/or an insurer
under a policy of insurance maintained by the Lessee, the Lessee
and/or such insurer as the case may be shall be subrogated to the
extent of such payment to the rights and remedies of the Indemnitee on
whose behalf
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such Loss was paid with respect to the transaction or event giving
rise to such Loss (other than the rights and remedies in respect of
insurance policies maintained by such Indemnitee). Should an
Indemnitee receive any refund, in whole or in part, with respect to
any Loss paid in full by the Lessee and/or such Insurer hereunder, it
shall promptly pay over the amount refunded (but not an amount in
excess of the amount Lessee and/or such insurer has paid to such
Indemnitee in respect of such Loss) to the Lessee unless an Event of
Default shall have occurred and be continuing, in which case, provided
that Lessee shall have paid such Indemnitee all amounts required under
Section 10, such amounts shall be paid over to Lessor to hold as
security for Lessee's obligations under the Lease or, if requested by
Lessee, applied to satisfy such obligations.
(f) Non-Parties. If an Indemnitee is not a party to the Lease, Lessee may
require the Indemnitee to agree in writing, in a form reasonably
acceptable to Lessee, to the terms of this Section 10 prior to making
any payment to such Indemnitee hereunder.
11. EVENTS OF LOSS
11.1 EVENTS OF LOSS
(a) If an Event of Loss occurs prior to Delivery of the Engine, the Lease
will immediately terminate and except as expressly stated in the Lease
neither party will have any further obligation other than pursuant to
Section 5.21 (EXPENSES) and Section 3 of SCHEDULE 4 (PRE-DELIVERY
PROCEDURES AND DELIVERY CONDITION REQUIREMENTS), except that Lessor
will return any Deposit to Lessee and return to Lessee or cancel any
Letter of Credit.
(b) If an Event of Loss occurs after Delivery, Lessee shall pay or cause
to be paid the Agreed Value to Lessor on or prior to the earlier of
(i) ninety (90) days after the occurrence of the Event of Loss and
(ii) the date of receipt of insurance proceeds in respect of that
Event of Loss.
(c) Subject to the rights of any insurers and reinsurers or other third
party, upon irrevocable payment in full to Lessor of the Agreed Value
and all other amounts which are then due or will thereupon become due
to Lessor under the Lease, and if Lessee requests such transfer,
Lessor will, or will procure that Owner will, without recourse or
warranty (except as to the absence of Lessor's Liens) transfer to
Lessee or will procure that Owner transfers to Lessee legal and
beneficial title, subject to no Lessor's Liens (but otherwise without
warranty), to the Engine, on an AS IS, WHERE IS basis, and will at
Lessee's expense, execute and deliver or will procure that Owner
executes and delivers such bills of sale and other documents and
instruments as Lessee may reasonably request to evidence (on the
public record or otherwise) such transfer, free and clear of all
rights of Lessor and Lessor Liens. Lessee shall indemnify, on an
After-Tax Basis, Lessor and Owner and each other Tax Indemnitee for
all fees, expenses and Taxes incurred by Lessor, Owner or any other
Tax Indemnitee in connection with any such transfer, except for Lessor
Taxes.
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11.2 REQUISITION. During any requisition for use or hire of any Engine which
does not constitute an Event of Loss:
(a) the Rent and other charges payable under the Lease will not be
suspended or abated either in whole or in part, and Lessee will not be
released from any of its other obligations (other than operational
obligations with which Lessee is unable to comply solely by virtue of
the requisition); and
(b) so long as no Event of Default or Special Default has occurred and is
continuing, Lessee will be entitled to any compensation paid by the
requisitioning authority in respect of such authority's use of the
Engine during the Term. Lessee will, as soon as practicable after the
end of any such requisition, cause the Engine to be put into the
condition required by the Lease. Lessor will be entitled to all
compensation payable by the requisitioning authority in respect of any
change in the structure, state or condition of the Engine arising
during the period of requisition, and Lessor will apply such
compensation in reimbursing Lessee for the cost of complying with its
obligations under the Lease in respect of any such change, but, if any
Default has occurred and is continuing, Lessor may apply the
compensation in or towards settlement of any amounts owing by Lessee
under the Lease and/or under any Other Agreement.
11.3 NON-INSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS. As between
the Lessor and the Lessee, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of which
is provided for in this Section 11 or elsewhere in the Lease, as the case
may be, or payments in respect of damage to the business or property of the
Lessee) with respect to the Engine received at any time by the Lessor or by
the Lessee from any Government Entity or other Person will be applied as
follows:
(a) so much of such payments as shall not exceed the amounts required to
be paid by the Lessee pursuant to Section 11.1(b) hereof shall be
applied in reduction of the Lessee's obligation to pay such amounts,
to the extent not already paid by the Lessee, and, after such amounts
required to be paid to the Lessor pursuant to Section 11.1(b) above
shall be paid in full, shall be applied to reimburse the Lessee for
such amounts up to the full amount thereof, and
(b) the balance, if any, of such payment remaining thereafter shall be
applied to reimburse the Lessee and the Lessor for their reasonable
costs (including reasonable attorney's fees), if any, of procuring
such payments, and
(c) the balance remaining, if any, shall then be distributed between the
Lessor and the Lessee as their interests may appear.
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12. RETURN OF ENGINES
12.1 RETURN. On the Expiry Date or redelivery of the Engine pursuant to Section
13.2 (RIGHTS AND REMEDIES) or termination of the leasing of the Engine
under the Lease, Lessee will, unless an Event of Loss has occurred or
Lessee shall have purchased the Engine pursuant to any purchase option set
forth in the Lease, redeliver the Engine and the Engine Documents at
Lessee's expense to Lessor at the Redelivery Location, in accordance with
the procedures and in compliance with the conditions set forth in Schedule
6 (PROCEDURES AND OPERATING CONDITION AT REDELIVERY), free and clear of all
Security Interests (other than Lessor Liens) and in a condition qualifying
for and having a valid and fully effective FAA Form 8130-3.
12.2 NON-COMPLIANCE. If at the time of Final Inspection Lessee has not fully
complied with any of its obligations under the Lease (including SCHEDULE 6
(PROCEDURES AND OPERATING CONDITION AT REDELIVERY)), or Lessee fails to
make the Engine available to Lessor on a timely basis for inspection and
redelivery pursuant to Section 12.1 (RETURN) and such SCHEDULE 6 (whether
such failure is due to any act or omission of Lessee or any other
circumstance whatsoever), the Term shall be extended until the time when
the Engine has been redelivered to Lessor in full compliance with the
Lease, for the sole purpose of enabling such non-compliance or failure to
be promptly rectified, and during such extension period:
(a) Lessee shall not use the Engine in flight operations except those
related directly to the redelivery of the Engine to Lessor or the
performance of Lessee's obligations in connection therewith;
(b) all Lessee's obligations and covenants under the Lease will remain in
full force until Lessee so redelivers the Engine; and
(c) Lessee shall pay Rent to Lessor at a rate per month equal [*],
calculated on a per diem basis; provided, however, that Lessee shall
not be responsible for Lessor's failure to accept return of the Engine
and the Engine Documents in accordance with the requirements hereof in
a timely manner or for any Rent with respect to periods after Lessee
has tendered the Engine and the Engine Documents for return in
accordance with the Lease, provided, however that if Lessor's
inspection of the Engine and the Engine Documents, which inspection
shall be conducted in good faith and timely manner, reveals any
discrepancy from the condition required by the provisions of this
Section 12 and Schedule 6 hereof, Lessee shall continue to pay
Rent in accordance with Section 12.2(c) until the Engine and the
Engine Documents are returned to the Lessor in accordance with the
Lease.
Any such extension shall not prejudice Lessor's right to treat such
non-compliance or failure as an Event of Default at any time, and to
enforce such rights and remedies as may be available to Lessor in respect
thereof under the terms of the Lease or applicable Law. Without limiting
the generality of the foregoing, Lessee's Rent obligation under paragraph
(c) above shall be without
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prejudice to Lessor's rights to terminate the letting of the Engine and to
recovery of damages pursuant to Section 13.2 (RIGHTS AND REMEDIES).
Lessor may elect (either on first tender of the Engine by Lessee or at any
time during the said extension period) to accept redelivery of the Engine
notwithstanding non-compliance with Section 12.1 or SCHEDULE 6, in which
case Lessee will indemnify Lessor on an After-Tax Basis, and provide cash
to Lessor (in an amount agreed to between Lessor and Lessee) as security
for that indemnity, in respect of the cost to Lessor of putting the Engine
into the condition required by the Lease.
12.3 REDELIVERY. Upon redelivery Lessee will provide to Lessor, upon reasonable
advance notice by Lessor made prior to the Expiry Date, and at Lessor's
expense, all documents necessary to export the Engine from the United
States (including a valid and subsisting export license and export
certificate of airworthiness for the Engine, if applicable).
12.4 ACKNOWLEDGEMENT. Provided Lessee has complied with its obligations under
this Section 12 and SCHEDULE 6 (PROCEDURES AND OPERATING CONDITION AT
REDELIVERY), of the Lease, following redelivery of the Engine by Lessee to
Lessor at the Redelivery Location, Lessor will deliver to Lessee an
acknowledgement confirming that Lessee has redelivered the Engine to Lessor
in accordance with the Lease which acknowledgement shall be without
prejudice to Lessor's accrued and continuing rights under the Lease or any
Other Agreement.
13. DEFAULT
13.1 EVENTS. The occurrence of any of the Events of Default will constitute a
repudiation (but not a termination) of the Lease by Lessee (whether the
occurrence of any such Event of Default is voluntary or involuntary or
occurs by operation of Law or pursuant to or in compliance with any
judgement, decree or order of any court or any order, rule or regulation of
any Government Entity).
13.2 RIGHTS AND REMEDIES. If an Event of Default occurs, Lessor may at its
option (and without prejudice to any of its other rights under the Lease),
at any time thereafter (without notice to Lessee except as required under
applicable Law):
(a) accept such repudiation and by notice to Lessee and with immediate
effect cancel the leasing of the Engine (but without prejudice to the
continuing obligations of Lessee under the Lease), whereupon all
rights of possession and use of Lessee under the Lease shall cease;
and/or
(b) proceed by appropriate court action or actions to enforce performance
of the Lease including the payment of all Rent and all other amounts
payable to Lessor or any Indemnitee pursuant to the terms of the
Lease; and/or
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(c) proceed by appropriate court action or actions to recover damages for
the breach of the Lease which shall include:
(i) all Rent and other amounts which are or become due and payable
hereunder prior to the earlier to occur of the date Lessor
sells or re-leases the Engine or receives payment of the amount
calculated pursuant to clause (ii) below;
(ii) an amount equal to the aggregate Rent for the remainder of the
Term (determined without reference to any right of Lessor to
cancel the leasing of the Engine, whether or not such right is
exercised), discounted periodically (equal to installment
frequency) to present worth at the Discount Rate to the date of
payment by Lessee to Lessor, less the applicable amount set
forth below:
A. in the event that Lessor has re-leased the Engine on terms
(other than rental payment terms) which, taken as a whole,
Lessor reasonably regards as being substantially similar to
the terms of the Lease, an amount equal to the aggregate
basic rental payments to become due under such re-lease for
the period coinciding with the remainder of the Term
(determined without reference to any right of Lessor to
cancel the leasing of the Engine, whether or not such right
is exercised), discounted periodically (equal to instalment
frequency) to present worth at the Discount Rate to the
date of payment by Lessee; or
B. in the event that Lessor has not re-leased the Engine or
has sold the Engine or has re-leased the Engine on terms
(other than rental payment terms) which, taken as a whole,
Lessor does not reasonably regard as being substantially
similar to the terms of the Lease, an amount equal to the
fair market rental value (determined pursuant to the
Appraisal Procedure) of the Engine for the period
commencing with the date that Lessor reasonably anticipates
that the Engine could be re-leased at such rental rate and
ending with the date that the Term was scheduled to expire
(determined without reference to any right of Lessor to
cancel the leasing of the Engine, whether or not such right
is exercised), discounted periodically (equal to instalment
frequency) to present worth at the Discount Rate to the
date of payment by Lessee.
(iii) all costs and other incidental damages associated with Lessor's
exercise of its remedies hereunder or otherwise incurred by
Lessor as a result of an Event of Default, including
repossession costs, legal fees, Engine storage, maintenance and
insurance costs, Engine re-lease or sale costs (including, in
the case of a re-lease, any costs incurred to transition the
Engine to the next operator's maintenance program) and Lessor's
internal costs and expenses (including the cost of personnel
time calculated based upon the compensation paid to the
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individuals involved on an annual basis and a general Lessor
overhead allocation), all such costs and incidental damages
being referred to herein collectively as "ENFORCEMENT AND
REMARKETING COSTS";
(iv) any loss, premium, penalty or expense which may be incurred in
repaying funds raised to finance the Engine or in unwinding any
financial instrument relating in whole or in part to Lessor's
financing of the Engine, all such amounts being referred to
herein collectively as "UNWIND EXPENSES";
(v) any loss, cost, expense or liability, or damage to Lessor's
residual interest in the Engine, sustained by Lessor due to
Lessee's failure to maintain the Engine in accordance with the
terms of this Agreement or Lessee's failure to redeliver the
Engine in the condition required by this Agreement, including
any consequential loss of revenues or profits, all such amounts
being referred to herein collectively as "ENGINE CONDITION
DAMAGES"; and
(vi) such additional amount, if any, as may be necessary to place
Lessor in the same economic position, on an After-Tax Basis, as
Lessor would have been in if Lessee had timely performed each
of its obligations under this Agreement; and/or
(d) either:
(i) enter upon the premises where all or any part of the Engine is
located and take immediate possession of and, at Lessor's sole
option, remove the Engine, all without liability accruing to
Lessor for or by reason of such entry or taking of possession
whether for the restoration of damage to property, conversion
or otherwise, caused by such entry or taking, except damages
caused by gross negligence or willful misconduct; or
(ii) by delivering notice to Lessee, require Lessee to redeliver the
Engine to Lessor at the Redelivery Location (or such other
location as Lessor may require) on the date specified in such
notice and in all respects in the condition required by the
Lease upon the Return Occasion (it being understood that Lessee
shall not delay any such return for the purpose of placing the
Engine in such condition, but shall nevertheless be liable to
Lessor for the failure of the Engine to be in such condition);
and/or
(e) sell at private or public sale, as Lessor may determine, or hold, use,
operate or lease to others the Engine as Lessor in its sole discretion
may determine, all free and clear of any rights of Lessee; and/or
(f) by written notice to Lessee specifying a payment date (which shall be
a date not earlier than five (5) Business Days following the date of
such notice), Lessor may demand that Lessee pay to Lessor, and Lessee
shall pay to Lessor on the payment date specified in
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such notice (in lieu of the Rent due for the period commencing after
the date specified for payment in such notice) the sum of the
following amounts:
(i) all Rent and other amounts which are due and payable hereunder
prior to the payment date specified by Lessor;
(ii) an amount [*] (determined without reference to any right of
Lessor to cancel the leasing of the Engine, whether or not such
right is exercised), [*] specified by Lessee to Lessor, less
the applicable amount set forth below:
A. in the event that Lessor has re-leased the Engine on terms
(other than rental payment terms) which, taken as a whole,
Lessor reasonably regards as being substantially similar to
the terms of the Lease, an amount equal to the aggregate
basic rental payments to become due under such re-lease for
the period coinciding with the remainder of the Term
(determined without reference to any right of Lessor to
cancel the leasing of the Engine, whether or not such right
is exercised), discounted periodically (equal to instalment
frequency) to present worth at the Discount Rate to the
date of payment by Lessee; or
B. in the event that Lessor has not re-leased the Engine or
has sold the Engine or has re-leased the Engine on terms
(other than rental payment terms) which, taken as a whole,
Lessor does not reasonably regard as being substantially
similar to the terms of the Lease, an amount equal to the
fair market rental value (determined pursuant to the
Appraisal Procedure) of the Engine for the period
commencing with the date that Lessor reasonably anticipates
that the Engine could be re-leased at such rental rate and
ending with the date that the Term was scheduled to expire
(determined without reference to any right of Lessor to
cancel the leasing of the Engine, whether or not such right
is exercised), discounted periodically (equal to
installment frequency) to present worth at the Discount
Rate to the date of payment by Lessee;
(iii) an amount equal to Lessor's reasonably anticipated Enforcement
and Remarketing Costs, Unwind Expenses and Engine Condition
Damages; and
(iv) such [*]
(v) it being understood that, to the extent that any of the
foregoing amounts represents an estimate by Lessor of losses,
damages, costs or expenses which
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--------------
* Confidential
Lessor expects to incur, (y) Lessor shall adjust the amount
thereof as needed to reflect the actual amount of such losses,
damages, costs or expenses incurred by Lessor when
substantially all of such amounts become known to Lessor, but
Lessee shall nevertheless be obligated to pay the amount
demanded by Lessor (subject to such subsequent adjustment), and
(z) notwithstanding the amount specified in such demand, Lessor
shall be entitled to claim such other (and greater) amount in
any action against Lessee hereunder; and/or
(g) draw upon the Deposit or the Letter of Credit and apply such amounts
to any amounts owing to Lessor hereunder and/or make demand against
any Guarantor for any or all of the foregoing.
In addition to the foregoing, Lessor shall be entitled to exercise such
other rights and remedies as may be available under applicable Law and
Lessee shall be liable on an After-Tax Basis for, and shall pay Lessor on
demand: (i) interest on all unpaid amounts at the Interest Rate, from the
due date until the date of payment in full; (ii) all reasonable legal fees
and other reasonable costs and expenses incurred by Lessor by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies
with respect thereto; and (iii) all reasonable expenses, disbursements,
costs and fees incurred in (A) repossessing, storing, preserving, shipping,
maintaining, repairing and refurbishing the Engine or any Part to the
condition required by Section 12 (RETURN OF ENGINES) hereof and (B)
preparing the Engine or Part for sale or lease, advertising the sale or
lease of the Engine or Part and selling or releasing the Engine or Part.
Lessor is hereby authorized, but shall have no obligation, to make any
expenditures which Lessor, in its sole discretion, considers advisable to
repair and restore the Engine or Part to the condition required by such
Section 12 hereof (it being understood that Lessee shall be liable for all
such expenditures).
Lessee hereby agrees that, in the event of the return to or repossession by
Lessor of the Engine or Part, any rights in any warranty (express or
implied) previously assigned to Lessee or otherwise held by Lessee shall
without further act, notice or writing be assigned or reassigned to Lessor,
if assignable.
No remedy referred to in this Section 13 is intended to be exclusive, but,
to the extent permissible under the Lease or under applicable Law, each
shall be cumulative and in addition to any other remedy referred to above
or otherwise available to Lessor at Law or in equity; and the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies; provided, however, that nothing in this Section 13
shall be construed to permit Lessor to obtain a duplicate recovery of any
element of damages to which Lessor is entitled. No express or implied
waiver by Lessor of any Default or Event of Default shall in any way be, or
be construed to be, a waiver of any future or subsequent Default or Event
of Default.
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13.3 POWER OF ATTORNEY: Lessee hereby appoints Lessor as the attorney-in-fact of
Lessee, with full authority in the place and stead of Lessee and in the
name of Lessee or otherwise, for the purpose of carrying out the provisions
of the Lease and taking any action and executing any instrument that Lessor
may deem necessary or advisable to accomplish the purposes hereof;
provided, however, that Lessor may only take action or execute instruments
under this Section 13 after an Event of Default has occurred and is
continuing. Lessee hereby declares that the foregoing powers are granted
for valuable consideration, constitute powers granted as security for the
performance of the obligations of Lessee hereunder and are coupled with an
interest and shall be irrevocable. Without limiting the generality of the
foregoing or any other rights of Lessor under the Lease, upon the
occurrence and during the continuation of an Event of Default, Lessor shall
have the sole and exclusive right and power to (i) settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to or
pertaining to the Engine, or the Lease and (ii) make proof of loss, appear
in and prosecute any action arising from any policy or policies of
insurance maintained pursuant to the Lease, and settle, adjust or
compromise any claims for loss, damage or destruction under, or take any
other action in respect of, any such policy or policies.
13.4 SALE OR RE-LEASE. If an Event of Default occurs, Lessor may sell or
re-lease or otherwise deal with the Engine at such time and in such manner
and on such terms as Lessor considers appropriate in its absolute
discretion, free and clear of any interest of Lessee, as if the Lease had
never been entered into. Lessor shall have no duty or obligation to sell
the Engine, and Lessor shall be obligated to attempt to re-lease the Engine
only to the extent, if any, that it is required to do so under Article 2A
of the UCC, and Lessee hereby disclaims any right to compel Lessor to sell
or otherwise re-lease the Engine.
13.5 REMOVAL OF LEASE FROM FAA Registry. If an Event of Default occurs, Lessee
will at the request of Lessor immediately take all steps necessary to
enable the Engine to be redelivered to Lessor in accordance with and free
and clear of the Lease and Lessee hereby irrevocably and by way of security
for its obligations under the Lease appoints (which appointment is coupled
with an interest) Lessor as its attorney-in-fact to execute and deliver any
documentation and to do any act or thing not prohibited by Law required in
connection with the foregoing during the continuance of an Event of
Default. Without limiting the foregoing, Lessor may file with the FAA the
Lease Termination provided to Lessor under the Lease.
14. TRANSFER
14.1 LESSEE. LESSEE WILL NOT ASSIGN, DELEGATE OR OTHERWISE TRANSFER
(VOLUNTARILY, INVOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE) ANY OF ITS
RIGHTS OR OBLIGATIONS UNDER THE LEASE (INCLUDING THE ENGINE LEASE AGREEMENT
OR THIS CTA), OR CREATE OR PERMIT TO EXIST ANY SECURITY INTEREST OVER ANY
OF ITS RIGHTS UNDER THE LEASE (INCLUDING THE ENGINE LEASE AGREEMENT OR THIS
CTA), AND ANY ATTEMPT TO DO SO SHALL BE NULL AND VOID. The foregoing shall
not be construed to prohibit a Permitted Sub-Lease.
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14.2 LESSOR. Lessor may, without the consent of Lessee, sell, assign, transfer
or grant to any Person (other than an airline that is a competitor of
Lessee), all of Lessor's rights, obligations, title or interest in any
Engine, and the Lease and Rent in respect thereof. Such Person shall
execute and deliver to Lessee an agreement assuming the Lessor's
obligations under the Lease of such Engine, whereupon such Person shall
become the "Lessor" for all purposes of this Lease, including the rights of
assignment pursuant to this Section 14.2. Lessor may, without the consent
of Lessee, assign all of its interest in any Engine and the Lease and Rent
in respect thereof for security to a Financing Party (other than an airline
that is a competitor of Lessee) pursuant to Financing Documents, provided
that such Financing Party shall execute and deliver to Lessee a letter of
quiet enjoyment in the form attached hereto as Schedule 14. Lessee agrees
to execute acknowledgments and other documents that may be reasonably
requested by Lessor or any such Person or Financing Party (an "Assignee").
Each Assignee will have and may enforce all of the rights and benefits of
Lessor transferred to it, including without limitation the rights to
indemnification by Lessee and the right to be named as additional insured
and loss payee with respect to the insurance policies maintained by Lessee
pursuant to the Lease; provided, however, that a Financing Party shall only
be entitled to exercise the rights of Lessor to the exclusion of Lessor and
upon delivery of a notice to Lessee that Lessor is in default under the
relevant Financing Documents. Lessor shall reimburse Lessee for all
reasonable out of pocket costs and expenses incurred by Lessee in
connection with any assignment or transfer under this Section 14.2. Any
sale, assignment, transfer or other disposition pursuant to this Section
14.2 shall not increase the obligations of Lessee under the Lease.
Notwithstanding any such assignment or transfer, Lessor, Owner, Financing
Parties' Representative and each other Indemnitee shall continue to be
entitled to indemnification under Section 10 (INDEMNITY), and shall
continue to be named as an additional insured under all Insurances referred
to in Section 9 (INSURANCE) for a period of not less than two years after
such transfer.
14.3 SUCCESSORS AND ASSIGNS. The terms and provisions of this Lease shall be
binding upon and inure to the benefit of Lessor, Lessee and their
respective successors and permitted assigns.
15. MISCELLANEOUS
15.1 SURVIVAL. Lessee's obligations under any provision of the Lease providing
for an obligation on the part of Lessee to indemnify Lessor or any other
Indemnitee shall survive the expiration or any termination of the Lease and
continue in full force and effect.
15.2 WAIVERS, REMEDIES CUMULATIVE. The rights of Lessor under the Lease may be
exercised as often as necessary, are cumulative and not exclusive of its
rights under any Law; and may be waived only in writing and specifically.
Delay by Lessor in exercising, or non-exercise of, any such right will not
constitute a waiver of that right.
15.3 DELEGATION. Lessor may delegate to any Person all or any of the rights,
powers or discretions vested in it by the Lease, and any such delegation
may be made upon such terms and conditions and subject to such regulations
(including power to sub-delegate) as Lessor in its absolute
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discretion thinks fit. Lessor will notify Lessee of any such delegation
prior to Lessee being required to treat the Person to whom such delegation
is made as being entitled to exercise the relevant right, power or
discretion of Lessor, no such delegation will have the effect of modifying
Lessor's obligations hereunder and Lessee shall be entitled to rely on the
actions of the Person to whom such delegation is made to the same extent as
if such Person were the Lessor hereunder.
15.4 SEVERABILITY. If a provision of the Lease is or becomes illegal, invalid or
unenforceable in any jurisdiction, that will not affect the legality,
validity or enforceability in that jurisdiction of any other provision of
the Lease or the legality, validity or enforceability in any other
jurisdiction of that or any other provision of the Lease.
15.5 REMEDY. If Lessee fails to comply with any provision of the Lease, Lessor
may, without being in any way obliged to do so or responsible for so doing
and without prejudice to the ability of Lessor to treat such non-compliance
as a Default, effect compliance on behalf of Lessee, whereupon Lessee shall
become liable to pay upon demand any sums expended by Lessor together with
all costs and expenses (including reasonable legal fees and expenses) in
connection with the non-compliance.
15.6 TIME OF ESSENCE. The time stipulated in the Lease for all payments payable
by Lessee and the prompt, punctual performance of Lessee's other
obligations under the Lease are of the essence of the Lease.
15.7 NOTICES. All notices under, or in connection with, the Lease will, unless
otherwise stated, be given in writing by means of a recognized overnight
courier service or facsimile. Any such notice is deemed effectively to be
given when received by the recipient (or if receipt is refused by the
intended recipient, when so refused).
All notices shall be directed to the Lessee, Lessor or any other party to
the Lessee to respective addresses and facsimile numbers set forth in the
Engine Lease Agreement or such other addresses and facsimile number as any
such party may designate pursuant to this Section 15.7.
15.8 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL
(a) THE PARTIES HERETO AGREE THAT THE LEASE IN ALL RESPECTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF
CALIFORNIA, UNITED STATES, AS APPLIED TO CONTRACTS TO BE PERFORMED
WHOLLY WITHIN THE STATE OF
CALIFORNIA THE PARTIES AGREE THAT THE LEASE
WAS EXECUTED AND DELIVERED IN THE STATE OF
CALIFORNIA.
(b) Each party agrees for the benefit of the other party that the United
States District Court for the Northern District of
California and any
California state court sitting in the City of San Francisco,
California, are to have non-exclusive jurisdiction to settle any
disputes
-44-
arising out of or relating to the Lease and submits itself and its
property to the non-exclusive jurisdiction of the foregoing courts
with respect to such disputes.
(c) Without prejudice to any other mode of service, Lessee:
(i) appoints Corporation Service Company, d/b/a CSC-Lawyers
Incorporating Service, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Phone: (▇▇▇) ▇▇▇-▇▇▇▇ or (▇▇▇) ▇▇▇-▇▇▇▇,
Fax: (▇▇▇) ▇▇▇-▇▇▇▇, as its agent for service of process
relating to any proceedings before the
California courts in
connection with the Lease and agrees to maintain the process
agent in
California notified to Lessor;
(ii) agrees that failure by a process agent to notify Lessee of the
process shall not invalidate the proceedings concerned;
(iii) consents to the service of process relating to any such
proceedings by prepaid mailing of a copy of the process to
Lessee's agent at the address identified in paragraph (i) or by
prepaid, certified or registered mail of a copy of the process
to Lessee set forth in Section 15.7.
(d) Without prejudice to any mode of service, Lessor:
(i) appoints C.T. Corporation System, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, as its agent for service of
process relating to any proceedings before the
California or
federal courts in connection with the Leases and agrees to
maintain the process agent in
California notified to Lessor;
(ii) agrees that failure by a process agent to notify Lessor of the
process shall not invalidate the proceedings concerned; and
(iii) consents to the service of process relating to any such
proceedings by prepaid mailing of a copy of the process to
Lessor's agent at the address identified in paragraph (i) or by
prepaid, certified or registered mail, of a copy of the process
to Lessor at the address set forth in Section 15.7.
(e) Each of Lessor and Lessee:
(i) waives to the fullest extent permitted by Law any objection
which it may now or hereafter have to the courts referred to in
Section 15.8(b) above on grounds of inconvenient forum or
otherwise as regards proceedings in connection with the Lease;
(ii) waives to the fullest extent permitted by Law any objection
which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to
the Lease brought in the courts referred to in Section 15.8(b);
and
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(iii) agrees that a judgement or order of any court referred to in
Section 15.8(b) in connection with the Lease is conclusive and
binding on it and may be enforced against it in the courts of
any other jurisdiction.
(f) Nothing in this Section 15.8 limits the right of either party to bring
proceedings against the other in connection with the Lease in any
other court of competent jurisdiction or concurrently in more than one
jurisdiction.
(g) Each of Lessee and Lessor irrevocably and unconditionally:
(i) agrees that if the other brings legal proceedings against it or
its assets in relation to the Lease no sovereign or other
immunity from such legal proceedings (which will be deemed to
include suit, court jurisdiction, attachment prior to
judgement, attachment in aid of execution of a judgement, other
attachment, the obtaining of judgement, execution of a
judgement or other enforcement or legal process or remedy) will
be claimed by or on behalf of itself or with respect to its
assets; and
(ii) waives any such right of immunity which it or its assets now
has or may in the future acquire and agrees that the foregoing
waiver shall have the fullest extent permitted under the
Foreign Sovereign Immunities Act of 1976 of the United States
and is intended to be irrevocable for the purposes of such Act.
(h) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF LESSEE AND LESSOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A
JURY TRIAL IN RESPECT OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THE LEASE OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
LESSOR/LESSEE RELATIONSHIP BEING ESTABLISHED, including, without
limitation, contract claims, tort claims, breach of duty claims and
other common law and statutory claims. Each of Lessor and Lessee
represents and warrants that each has reviewed and voluntarily waives
its jury trial rights following consultation with its legal counsel.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THIS WAIVER IS IRREVOCABLE,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THE LEASE. In the event of litigation,
this Section may be filed as a written consent to a trial by the
court.
15.9 SOLE AND ENTIRE AGREEMENT; TRUE LEASE; SECTION 1110
(a) ENTIRE AGREEMENT: The Lease is the sole and entire agreement between
Lessor and Lessee in relation to the leasing of the Engine, and
supersedes all previous agreements in relation to that leasing. Any
amendments to the Lease must be made in writing and signed on behalf
of Lessor and Lessee.
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(b) TRUE LEASE: The parties intend and agree that the Lease:
(i) constitutes a "true lease", and not a "security interest" as
defined in Section 1-201(37) of the UCC;
(ii) constitutes a "true lease" for United States Federal income tax
purposes; and
(iii) confers only a leasehold interest on Lessee in and to the
Engine on and subject to the terms of the Lease, and no
ownership or other interest with respect to the Engine is
provided to Lessee under the Lease.
Lessee shall not file a tax return that is inconsistent with the
provisions of this Section 15.9(b).
(C) SECTION 1110: Lessee acknowledges that Lessor would not have entered
into the Lease unless it had available to it the benefits of a lessor
under Section 1110. It is the intention of the parties that the Lessor
shall be entitled to the benefits of Section 1110 with respect to the
right to repossess the Engines and Parts as provided herein, and in
any circumstances where more than one construction of the terms and
conditions of the Lease is possible, a construction which would
preserve such benefits, shall control over any construction which
would not preserve such benefits or would render them doubtful.
15.10 INDEMNITEES. Subject to Section 10(f) hereof, all rights expressed to be
granted to each Indemnitee (other than Lessor) under the Lease are given
to Lessor on behalf of that Indemnitee, and each Indemnitee is an express
third party beneficiary thereof.
15.11 COUNTERPARTS. The Lease may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. To the extent, if any, that the
Lease constitutes chattel paper (as such term is defined in the UCC or
similar legislation), no security interest in the Lease may be created
through the transfer or possession of any counterpart other than the
original counterpart, which shall be identified as the counterpart
designated as the "original" on the signature page of the Engine Lease
Agreement by Financing Parties' Representative, Owner or Lessor, as the
case may be.
15.12 LANGUAGE. All notices to be given under the Lease will be in English. All
documents delivered to Lessor pursuant to the Lease (including any
documents to be delivered pursuant to the Conditions Precedent) will be in
English.
16. DISCLAIMERS AND WAIVERS
LESSOR AND LESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND CONFIRMATIONS SET
FORTH IN SECTIONS 16.1 TO 16.4 BELOW SHALL APPLY AT ALL TIMES DURING THE
TERM. LESSEE'S ACCEPTANCE OF THE ENGINE IN ACCORDANCE WITH SECTION 4.3
(DELIVERY AND ACCEPTANCE) SHALL BE CONCLUSIVE EVIDENCE THAT LESSEE HAS
FULLY INSPECTED THE ENGINE AND
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EVERY PART THEREOF AND THAT THE ENGINE, THE PARTS AND THE ENGINE DOCUMENTS
ARE TECHNICALLY ACCEPTABLE TO LESSEE AND SATISFY THE DELIVERY CONDITION
REQUIREMENTS AND ARE IN SUITABLE CONDITION FOR DELIVERY TO AND ACCEPTANCE
BY LESSEE.
16.1 DISCLAIMER. THE ENGINE IS LEASED AND DELIVERED UNDER THE LEASE "AS IS,
WHERE IS," AND LESSEE AGREES AND ACKNOWLEDGES THAT:
(a) LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND
WILL NOT BE DEEMED TO HAVE ACCEPTED, MADE OR GIVEN (WHETHER BY VIRTUE
OF HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED
TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THE LEASE OR OTHERWISE),
ANY GUARANTEES, COVENANTS, WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, WITH RESPECT TO, THE ENGINE OR ANY PART OR ANY SERVICES
PROVIDED BY LESSOR UNDER THE LEASE, INCLUDING (BUT NOT LIMITED TO) THE
TITLE (EXCEPT AS AND TO THE EXTENT EXPRESSLY PROVIDED IN SECTION 7.1
(QUIET ENJOYMENT)), DESCRIPTION, AIRWORTHINESS, COMPLIANCE WITH
SPECIFICATIONS, OPERATION, MERCHANTABILITY, QUALITY, FREEDOM FROM
INFRINGEMENT OF PATENT, COPYRIGHT, TRADEMARK OR OTHER PROPRIETARY
RIGHTS, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, VALUE, DURABILITY,
DATE PROCESSING, CONDITION, OR DESIGN, OR AS TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP, THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER MATTER WHATSOEVER,
EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A
COURSE OF PERFORMANCE OR DEALING OR USAGE OF TRADE) WITH RESPECT TO
THE ENGINE OR ANY PART OR ANY SERVICES PROVIDED BY LESSOR UNDER THE
LEASE; AND
(b) LESSOR SHALL NOT HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER TO LESSEE
(WHETHER ARISING IN CONTRACT OR IN TORT, AND WHETHER ARISING BY
REFERENCE TO NEGLIGENCE, MISREPRESENTATION OR STRICT LIABILITY OF
LESSOR OR OTHERWISE) FOR:
(i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY THE ENGINE OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER
CIRCUMSTANCE IN CONNECTION THEREWITH (EXCEPT FOR DIRECT DAMAGES
DUE TO LESSOR'S BREACH AS AND TO THE EXTENT EXPRESSLY PROVIDED
IN SECTION 7.1 (QUIET ENJOYMENT) HEREOF);
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(ii) THE USE, OPERATION OR PERFORMANCE OF THE ENGINE OR ANY RISKS
RELATING THERETO;
(iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED
PROFITS OR ANY OTHER DIRECT (EXCEPT FOR DIRECT DAMAGES DUE TO
LESSOR'S BREACH AS PROVIDED IN SECTION 7.1), INDIRECT OR
CONSEQUENTIAL LOSS OR DAMAGE; OR
(iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
IMPROVEMENT OR REPLACEMENT OF THE ENGINE OR ANY PART.
16.2 WAIVER. LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR, ALL ITS RIGHTS
IN RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND
WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF ANY OF THE MATTERS
REFERRED TO IN SECTION 16.1.
16.3 DISCLAIMER OF CONSEQUENTIAL DAMAGES. LESSEE AGREES THAT IT SHALL NOT BE
ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES ANY RIGHT THAT IT MAY
OTHERWISE HAVE TO RECOVER, FOR INTERRUPTION OF SERVICE, LOSS OF BUSINESS,
LOST PROFITS OR REVENUES OR CONSEQUENTIAL DAMAGES (AS DEFINED IN SECTION
2A-520 OF THE UCC OR OTHERWISE) AS A RESULT OF ANY BREACH OR ALLEGED BREACH
BY LESSOR OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF LESSOR
CONTAINED IN THE LEASE (INCLUDING A BREACH BY LESSOR UNDER SECTION 7.1).
16.4 CONFIRMATION. LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF
THIS SECTION 16 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS PAYABLE UNDER
THE LEASE HAVE BEEN CALCULATED BASED ON ITS PROVISIONS.
17. BROKERS AND OTHER THIRD PARTIES
17.1 NO BROKERS. Each of the parties hereby represents and warrants to the other
that it has not paid, agreed to pay or caused to be paid directly or
indirectly in any form, any commission, percentage, contingent fee,
brokerage or other similar payments of any kind, in connection with the
establishment or operation of the Lease, to any Person (other than fees
payable to legal advisers or portfolio services).
17.2 INDEMNITY. Each party agrees to indemnify and hold the other harmless from
and against any and all claims, suits, damages, costs and expenses
(including, reasonable legal fees and expenses) asserted by any agent,
broker or other third party for any commission or compensation of any
nature whatsoever based upon the Lease or the Engine, if such claim, suit,
damage, cost or
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expense arises out of any breach by the indemnifying party, its employees
or agents of Section 17.1.
18. ILLEGALITY
If at any time during the Term it is or becomes unlawful for Lessee to perform
any of its obligations under this Agreement, or this Agreement is or becomes
wholly or partly invalid or unenforceable which event, in the judgment of
Lessor, materially and adversely affects the rights of Lessor hereunder, then,
notwithstanding anything contained in Section 15.4 to the contrary, Lessor may
by notice in writing to Lessee (i) request execution of an amendment of this
Agreement in accordance with applicable Law promptly, but in any event no later
than 30 days after such event has occurred, if such amendment, in the reasonable
judgment of Lessor, shall protect and preserve the interests of Lessor under
this Lease, with such amendment to be completed at the sole cost and expense of
Lessee or (ii) terminate the leasing of the Engines under this Lease, whereupon
(x) Lessee shall promptly comply with Section 12, (y) Lessee will indemnify
Lessor on demand against any Losses which Lessor may sustain or incur directly
or indirectly as a result of such unlawfulness, invalidity or unenforceability
and such termination, including (but not limited to) the amounts set forth in
Sections 13.2(c)(i)-(vi), and (z) the provisions of Sections 13.4 shall apply as
if each reference therein to an Event of Default were a reference to the
occurrence of such unlawfulness, invalidity or unenforceability and to such
termination.
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IN WITNESS WHEREOF the parties hereto have duly executed and delivered this
Common Terms Agreement on the date shown at the beginning of the document.
CHAUTAUQUA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: Vice President
---------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇
--------------------------------
Title: Vice President
--------------------------------
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SCHEDULE 1
DEFINITIONS
The following words and expressions have the respective meanings set forth
below:
ACT means the FEDERAL AVIATION ACT OF 1958, as amended, and as recodified in
Title 49 U.S.C. pursuant to Public Law 103-272, or any similar legislation of
the United States enacted in substitution or replacement thereof.
AD or AD/CN means an airworthiness directive or equivalent issued by the State
of Design or the State of Registry.
AFFILIATE means as to any Person, any other Person that, directly or indirectly,
is in control of, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 50% or more of the securities having
ordinary voting power for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
AFTER-TAX BASIS means in the case of any amount payable on an "After-Tax Basis"
to or for the benefit of any Person (including any amount payable pursuant to
this definition), after deduction of the net amount of all Taxes (taking into
account any related credit or deductions) required to be paid by such Person
with respect to the receipt or accrual by it of such amount (and assuming that
such Person is subject to (i) United States federal income tax at the highest
marginal statutory rate imposed on corporations in the highest taxable income
bracket for the relevant period, (ii) United States state and local income
taxes, and (iii) income taxes (if any) imposed by countries outside the United
States at, in the case of (ii) and (iii), the actual rates imposed on such
Person, that Person receives the required amount.
AIR AUTHORITY means as of any time of determination, the FAA or other
governmental airworthiness authority having jurisdiction over the Related
Airframe and the Engine under the laws of the country in which such Related
Airframe is then registered.
APPRAISAL PROCEDURE means the following procedure for determining the "fair
market rental value" of the Engine: (a) Lessor shall select an independent
engine appraiser in its sole and absolute discretion who shall make a
determination of "fair market rental value" of the Engine; and (b) the fees and
expenses of the appraiser shall be paid by Lessee. "Fair market rental value"
shall mean the value determined by an appraisal completed on an "as-is" and
"where-is" basis.
BUSINESS DAY means any day other than a Saturday, Sunday or other day on which
banking institutions in New York, New York and Indianapolis, Indiana are
authorized or required by Law to be closed.
CERTIFICATE OF ACCEPTANCE means a certificate of acceptance in the form of
SCHEDULE 5 (CERTIFICATE OF ACCEPTANCE).
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CERTIFICATED AIR CARRIER means any Person holding an "air carrier operating
certificate" issued under Chapter 447 (or any successor provision) of the
Transportation Code for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo.
CITIZEN OF THE UNITED STATES means a "citizen of the United States" within the
meaning of Section 40102(a)(15) (or any successor provision) of the
Transportation Code, or any analogous part of any successor or substituted
legislation or regulation at the time in effect.
CSN means Engine Cycles since new.
CSO means Engine Cycles since overhaul.
CTA has the meaning given in the heading of this Agreement.
DEFAULT means any Event of Default or any event or circumstance which, with the
giving of notice and/or lapse of time would constitute an Event of Default.
DELIVERY means delivery of the Engine by Lessor to Lessee under the Lease.
DELIVERY DATE means the date on which Delivery occurs.
DOLLARS AND $ means the lawful currency of the United States.
EMM means the Manufacturer's Engine Maintenance Manual.
ENGINE means each Engine as defined in one or more Engine Lease Agreements,
including any engine stand and any other equipment related to any Engine as
described in and subject to that Engine Lease Agreement and in each case
includes all modules and Parts from time to time belonging to or installed in
that Engine but excludes any properly replaced Part, title to which has passed
to Lessee pursuant to the Lease.
ENGINE CYCLE means operation of an Engine on a Related Airframe from and
including a take-off to and including the landing of that Related Airframe.
ENGINE DOCUMENTS means the documents, data and records identified in the list
attached to the Certificate of Acceptance, and any other documents and records
required in connection with Lessee's obligations under Section 8.8 (RECORDS),
and all additions, renewals, revisions and replacements from time to time made
to any of the foregoing in accordance with the Lease.
ENGINE FLIGHT HOUR means each hour or part thereof an Engine is operated,
elapsing from the moment the wheels of a Related Airframe on which such Engine
is installed leave the ground until the wheels of such Related Airframe next
touch the ground.
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ENGINE LEASE AGREEMENT means the Master Engine Lease Agreement and any
subsequent Engine Lease Agreement, entered, or to be entered into, between
Lessor and Lessee with respect to one or more Engines and any related equipment
as further described therein.
ENGINE LEASE SUPPLEMENT means each Engine Lease Supplement, substantially in the
form of Schedule 12 hereto.
ENGINE REFURBISHMENT means, with respect to any Engine, the complete visual
inspection and repair as necessary in accordance with the shop manual of the
combustion section of an Engine in an engine repair/overhaul station, including,
(without limitation) complete unstacking of the high pressure turbine and low
pressure turbine (including both high and low compressors); complete visual
inspection, de-blading of discs as required; visual inspections of all discs;
verification that all snap diameters on discs are within limits; inspection of
all blades for proper chord dimensions and cracking; repair or replacement of
all blades below minimums; inspection and repair of stators as necessary;
blade-up of discs using new lock plates; assembly of rotors in the turbine;
balance of all rotors; and installation of rotors in the Engine.
EQUIPMENT CHANGE has the meaning given in Section 8.12 (EQUIPMENT CHANGE).
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as amended.
ERISA PLAN means, individually or collectively, an employee benefit plan, as
defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or any
applicable regulation thereunder or a plan or individual retirement account
which is subject to Section 4975(c) of the Internal Revenue Code.
EVENT OF DEFAULT means any event or condition specified in SCHEDULE 9 (EVENTS OF
DEFAULT).
EVENT OF LOSS means any of the following events with respect to any Engine:
(a) the actual or constructive, compromised, arranged or agreed total loss
of the Engine; or
(b) the Engine being destroyed, damaged beyond reasonable economic repair
(which for this purpose shall mean that the cost of such repair is
greater than 75% of the replacement cost of such Engine) or
permanently rendered unfit for normal use for any reason whatsoever;
or
(c) any theft, hijacking or disappearance of the Engine for a period more
than 45 days or more or, if earlier, for a period that extends until
the end of the Term; or
(d) the Engine being condemned, confiscated or requisitioned for title, or
title to the Engine being otherwise compulsorily acquired by the
government of the State of Registry or any other Government Entity; or
(f) the Engine being confiscated, detained, seized, condemned or
requisitioned for use or hire by any Government Entity other than the
United States Government for the lesser of (i) a period of more than
30 days (or 180 days in the case of requisition for use or hire by
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the government of the United States Government) or (ii) a period equal
to or exceeding the remaining balance of the Term; or
(h) as a result of any rule, regulation, order or other action by the FAA
the use of the Engine by Lessee or any Permitted Sub-Lessee shall have
been prohibited for a period of twelve (12) consecutive months or, if
earlier, for a period that extends until the end of the Term.
EXPIRY DATE means the Scheduled Expiry Date or, if earlier (i) the date when
Lessor acting in accordance with the provisions of the Lease, terminates the
leasing of the Engine to Lessee under the Lease, or (ii) subject to the
provisions of Section 11.1 (EVENTS OF LOSS) and 11.2 (REQUISITION), the date
when Lessor receives the Agreed Value together with any other amounts then due
and unpaid under the Lease following an Event of Loss; provided, that if the
Term is extended pursuant to Section 12.2 (NON-COMPLIANCE), the Expiry Date
shall be extended to the date to which the Term is extended pursuant to Section
12.2.
FAA means the Federal Aviation Administration of the United States and any
successor thereof.
FAR means the FEDERAL AVIATION REGULATIONS set forth in Title 14 of the U.S.C.
of Federal Regulations, as amended and modified from time to time.
FAR PART 121 means Part 121 of the FAR, as amended or modified from time to
time.
FAR PART 145 means Part 145 of the FAR, as amended or modified from time to
time.
FINAL INSPECTION has the meaning given in Section 1.1 of SCHEDULE 6 (PROCEDURES
AND OPERATING CONDITION AT REDELIVERY).
FINANCIAL INDEBTEDNESS means any indebtedness in respect of:
(a) moneys borrowed or raised;
(b) any liability under any debenture, bond, note, loan stock, acceptance,
documentary credit or other security;
(c) the acquisition cost of any asset to the extent payable before or
after the time of acquisition or possession (exclusive of trade
payables); or
(d) any lease agreement; or
(e) any guarantee, indemnity or similar assurance against financial loss
of any person in respect of the above.
FINANCIAL INFORMATION means:
(a) as soon as available but not in any event later than 60 days after the
last day of each of the first three fiscal quarters of Lessee, the
unaudited consolidated financial statements of Lessee (consisting of a
balance sheet and statements of operations and of retained
1-4
earnings and cash flows) prepared for the most recent previous fiscal
quarter certified by a qualified financial officer of Lessee as being
true and correct and fairly presenting its financial condition and
results of operation in accordance with GAAP (subject to year-end
adjustments); and
(b) as soon as available but not in any event later than 120 days after
the last day of each fiscal year of Lessee, the audited combined
financial statements of Lessee (consisting of a balance sheet and
statements of operations and of retained earnings and cash flows),
prepared for the fiscal year then most recently ended certified by the
independent auditors of Lessee in accordance with GAAP.
FINANCING DOCUMENTS means any mortgage, lease assignment, loan agreement,
conditional sale agreement, head lease or any other documents entered into by
Lessor or Owner with any Financing Party in connection with Lessor's or Owner's
financing of the Engine.
FINANCING PARTY means the Person or Persons from time to time notified by Lessor
to Lessee as providing finance to Lessor in respect of its acquisition,
ownership or leasing of the Engine, whether by way of a head lease, loan or
otherwise.
FINANCING PARTIES' REPRESENTATIVE means any one or more Financing Parties from
time to time notified to Lessee as being the Financing Parties' Representative.
FINANCING STATEMENTS means UCC Financing Statements in respect of the Lease and
the Engines leased thereunder prepared in a form acceptable for filing with the
applicable Government Entities in the state of Lessee's State of Incorporation
and such other jurisdictions as Lessor shall reasonably require.
FOD means foreign object damage.
GAAP means generally accepted accounting principles in the United States.
GE CAPITAL or GECC means General Electric Capital Corporation.
GECAS means either or both of GE Capital Aviation Services, Limited and GE
Capital Aviation Services, Inc.
GOVERNMENT ENTITY means (a) a national government, political subdivision
thereof, or local jurisdiction therein; (b) any instrumentality, board,
commission, court, or agency of any of the above, however constituted; and (c)
any association, organization, or institution to whose jurisdiction any of the
above is subject.
GUARANTEE means, if applicable, a guarantee in form and substance acceptable to
Lessor in its sole and absolute discretion, and references to the Guaranty
include any replacement or re-issued guaranty.
HABITUAL BASE means the location of the Engine's primary base of operation, as
specified in the Engine Lease Agreement.
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IFSD means in-flight service difficulty.
INSURANCE means the insurance in respect of the Engine in form satisfactory to
Lessor and as required by Lessor, and includes any insurance and reinsurance
required by Section 9 (INSURANCE) and SCHEDULE 7 (INSURANCE REQUIREMENTS).
LAW means and includes (a) any statute, decree, constitution, regulation, order,
judgement or other directive of any Government Entity; (b) any treaty, pact,
compact or other agreement to which any Government Entity is a signatory or
party; (c) any judicial or administrative interpretation or application of any
Law described in (a) or (b) above; and (d) any amendment or revision of any Law
described in (a), (b) or (c) above.
LEASE means the Master Engine Lease Agreement, dated as of December 18, 2001,
between Aviation Financial Services Inc. and Lessee (of which this CTA forms
part), any other Engine Lease Agreement for an Engine (of which this CTA forms a
part), any schedules or documents executed pursuant to the Schedules hereto or
pursuant to the Engine Lease Agreement, any Engine Lease Supplement to the
Lease, and any side letters related to the Lease.
LEASE TERMINATION means a Certificate of Lease Termination, substantially in the
form of Schedule 10 (FORM OF LEASE TERMINATION CERTIFICATE).
LESSEE CONDITIONS PRECEDENT means the conditions specified in Part B of SCHEDULE
3 (CONDITIONS PRECEDENT).
LESSOR means the Person named as Lessor in the applicable Engine Lease
Agreement.
LESSOR CONDITIONS PRECEDENT means the conditions specified in Part A of SCHEDULE
3 (CONDITIONS PRECEDENT).
LESSOR LIEN means (i) any Security Interest whatsoever from time to time created
by Lessor or Owner in connection with the financing of the Engine, including the
Financing Documents, (ii) any other Security Interest in the Engine which
results from acts or omissions of or claims against Lessor or Owner (or any
Person claiming through Lessor or Owner) that do not relate to the transactions
contemplated by the Lease and is not attributable to Lessee or Lessee's use or
possession of the Engine or any Related Aircraft, (iii) Taxes or Losses imposed
against the Lessor which are not required to be indemnified against by the
Lessee pursuant to any of the terms of the Lease, or (iv) claims against the
Lessor arising from the transfer by the Lessor of its interests in the Engine
other than a transfer of the Engine or any part hereof pursuant to Section 3.5
of the Engine Lease Agreement and Sections 8.11(a), 8.11(c), 8.11(d), 8.12, 11
and 13.2 of this CTA;
LESSOR TAXES means Taxes for which Lessee is not obligated to indemnify Lessor
and/or Owner and/or a Financing Party as provided in Section 5.8 (LESSOR TAXES).
1-6
LETTER OF CREDIT means any letter of credit for an Engine issued in relation to
the Lease pursuant to Section 5.14 (LETTER OF CREDIT) and any replacement or
renewal of that letter of credit.
LINE MAINTENANCE means with respect to any Engine, routine scheduled line
maintenance of any Engine, including without limitation, preventive maintenance
tests, system checks and related necessary work as recommended by Manufacturer
or required by the Air Authority.
LLP means life limited Parts.
LOSSES means any and all out-of-pocket cost, expense (including any and all
reasonable legal fees and expenses and the reasonable fees and expenses of other
professional advisers), claims, proceedings, losses, liabilities, obligations,
damages (whether direct, indirect, special, incidental or consequential), suits,
judgements, fees, penalties or fines (whether criminal or civil) of any kind or
nature whatsoever, including any of the foregoing arising or imposed with or
without any Indemnitee's fault or negligence, whether passive or active or under
the doctrine of strict liability.
MAINTENANCE CONTRIBUTIONS means, as and if applicable, all amounts payable by
Lessor pursuant to Section 7.2 (MAINTENANCE CONTRIBUTIONS).
MAINTENANCE PERFORMER means any Authorized Facility (as defined in the Fleet
Hour Agreement), Manufacturer or such other Person as is approved by the Air
Authority to perform maintenance and/or modification services on commercial
aircraft engines, which Person shall be agreed by Lessee and Lessor to have
recognized standing and experience, and suitable facilities and equipment to
perform such services on aircraft engines of the same or improved model as the
Engines.
MAINTENANCE PROGRAM means an FAA approved maintenance program for the Engine in
accordance with the Manufacturer's specifications, planning documents,
maintenance manuals and documents and encompassing scheduled maintenance,
condition-monitored maintenance, and/or on-condition maintenance of Engines and
Parts, including servicing, testing, preventive maintenance, repairs, structural
inspections, system checks, overhauls, approved modifications, SBs, engineering
orders, ADs, corrosion control, inspections and treatments.
MANUFACTURER means the manufacturer of each Engine or any separate item of
Equipment as identified in Schedule A to each Engine Lease Agreement.
MODIFICATION APPROVAL AMOUNT means $50,000.
MMPD means Manufacturer's Maintenance Planning Document.
NAMEPLATE INSCRIPTION means the inscription to be included on the Nameplates as
reasonably requested by Lessor from time to time.
NAMEPLATES means the fireproof plates to be installed on the Engine in
accordance with Section 8.6(a)(i).
1-7
OTHER AGREEMENTS means any aircraft, engine or spare parts related lease or
financing agreement (including an aircraft, engine or spare parts related loan,
hire purchase, conditional sale, credit sale or security agreement) from time to
time entered into between Lessor (or any Affiliate of Lessor), on the one hand,
and Lessee (or any Affiliate of Lessee), on the other hand.
OWNER/MORTGAGEE ACKNOWLEDGEMENT means an executed acknowledgement substantially
in the form of SCHEDULE 11 (AIRCRAFT OWNER/MORTGAGEE ACKNOWLEDGEMENT).
PART means, whether or not installed on any Engine:
(a) any component, module, furnishing or equipment (other than a complete
Engine or engine) incorporated or installed in or attached to or
furnished with the Engine on the Delivery Date or thereafter if paid
for or otherwise provided by or on behalf of Lessor; and
(b) any other component, furnishing or equipment (other than a complete
Engine or engine), with effect from the time when title thereto has
passed to Owner pursuant to the Lease;
(c) but excludes any such items title to which has passed to Lessee
pursuant to the Lease.
PART 121 OR FAR PART 121 means Part 121 of the FAR, as amended or modified from
time to time.
PERMITTED LIEN means:
(a) any lien for Taxes not assessed or, if assessed, not yet due and
payable, or being diligently contested in good faith by appropriate
proceedings;
(b) any lien of a repairer, mechanic, hangar-keeper or other similar lien
arising in the ordinary course of business by operation of Law in
respect of obligations which are not overdue or are being diligently
contested in good faith by appropriate proceedings;
(c) any Lessor Lien;
(d) rights of others under any sub-lease or arrangements to the extent
expressly permitted under Section 8.4 (SUBLEASING) and Section 8.11(e)
(PARTS POOLING);
(e) respective rights of the parties to the Lease as provided in the
Lease; and
(f) salvage and similar rights of insurers under policies of insurance
maintained with respect to the Engine;
but only if (in the case of a contested lien in both (a) and (b)) (i) adequate
reserves have been provided by Lessee for the payment of such Taxes or
obligations; and (ii) such proceedings, or the continued existence of the lien,
do not give rise in the sole judgement of Lessor to any non-deminimis risk of
the sale,
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forfeiture or other loss of the Engine or any interest therein or of criminal
liability on the part of Lessor or Owner.
PERMITTED SUB-LEASE means any sub-lease of the Engine to a Permitted Sub-Lessee
to which Lessor has consented as provided for in Section 8.4(a) (SUBLEASING).
PERMITTED SUB-LESSEE means any sub-lessee of the Engine to which Lessor has
consented as provided in Section 8.4(a) (SUBLEASING).
PERSON means any individual person, any form of corporate or business
association, trust, Government Entity, or organization or association of which
any of the above is a member or a participant.
PRE-DELIVERY PROCEDURE means the procedure leading to Delivery as specified in
SCHEDULE 4 (PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION REQUIREMENTS).
QEC MEANS quick engine change kits as specified in the Engine Lease Agreement.
REGULATIONS means any Law or regulation, official directive or recommendation,
mandatory requirement, or contractual undertaking, or airworthiness requirements
or limitations issued by a Governmental Entity, which applies to Lessee or the
Engine and any Law or regulation, official directive or recommendation or
mandatory requirement issued by a Governmental Entity which applies to Lessor,
Owner, Financing Parties' Representative or GECAS.
RELATED AIRFRAME means with respect to any Engine, the airframe on which such
Engine is, or is to be, installed, as identified in the Engine Lease Agreement
or otherwise, but such airframe shall be a Related Airframe only so long as the
Engine is so installed thereon, being installed thereon or being removed
therefrom.
RENTAL PERIOD means each period ascertained in accordance with Section 5.2
(RENTAL PERIODS).
RENT DATE means the first day of each Rental Period.
REQUIRED LC EXPIRY DATE means the date being sixty-one (61) days after the
Expiry Date.
RETURN OCCASION means the date on which the Engine is redelivered to Lessor in
accordance with Section 12 (RETURN OF ENGINES).
SB means service bulletin.
SCHEDULED DELIVERY DATE is defined in the Engine Lease Agreement or, if no such
date is defined therein, the date notified to Lessee by Lessor pursuant to
Section 4.1(a).
SECTION 1110 means 11 U.S.C. Section 1110 or any successor or analogous section
of the federal bankruptcy law in effect from time to time.
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SECURITY INTEREST means any mortgage, chattel mortgage, security interest,
charge, pledge, lien, conditional sale agreement, title retention agreement,
equipment trust agreement, encumbrance, assignment, hypothecation, right of
detention, right of set-off or any other agreement or arrangement having the
effect of conferring security.
SPECIAL DEFAULT means the occurrence of any Default or Event of Default referred
to in Clauses (a), (f) or (m) of Schedule 9 of this Agreement.
STATE OF DESIGN means the state having jurisdiction over the Person responsible
for the type design of the Engine or Part.
STATE OF INCORPORATION means the state of organization of the applicable Person
as identified in the heading of the Engine Lease Agreement.
STATE OF REGISTRY means the state of registry of any Related Airframe.
SUBSIDIARY means:
(a) in relation to any reference to financial statements, any Person whose
financial statements are consolidated with the accounts of Lessee in
accordance with GAAP; and
(b) for any other purpose, an entity from time to time of which another
has direct or indirect control or owns directly or indirectly more
than 50 percent of the voting share capital or similar equity
interests.
SUPPLEMENTAL RENT means, as and if applicable, all amounts payable under the
Lease in respect of each of Engine Supplemental Rent and Engine LLP Supplemental
Rent.
TAXES means any and all present and future taxes, duties, withholdings, levies,
assessments, imposts, fees and other governmental charges of all kinds
(including any value added or similar tax and any stamp, documentary, license,
registration or similar fees or tax) imposed by a Government Entity, together
with any penalties, fines, surcharges and interest thereon and any additions
thereto.
TECHNICAL REPORT means a monthly report of the Engine Flight Hours and Engine
Cycles operated by the each Engine in respect of each calendar month in the form
reasonably required by Lessor.
TERM means the period commencing on the Delivery Date and ending on the Expiry
Date.
TRANSPORTATION CODE means Title 49 of the U.S.C. subtitle VII, as amended and in
effect on the date of the Lease or as subsequently amended, or any successor or
substituted legislation at the time in effect and applicable, and the
regulations promulgated pursuant thereto.
TSN means time (Engine Flight Hours) since new.
TSO means time (Engine Flight Hours) since overhaul.
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UCC means the Uniform Commercial Code as in effect in the State of New York.
UNITED STATES means the United States of America.
UNITED STATES GOVERNMENT means the United States of America or an agency or
instrumentality thereof the obligations of which bear the full faith and credit
of the United States of America.
U.S.C. means the UNITED STATES CODE.
The terms AD COMPLIANCE PERIOD, AGREED VALUE, ANNUAL SUPPLEMENTAL RENT
ADJUSTMENT, ASSUMED RATIO, DAMAGE NOTIFICATION THRESHOLD, DEDUCTIBLE AMOUNT,
DELIVERY CONDITION REQUIREMENTS, DELIVERY LOCATION, DEPOSIT, DISCOUNT RATE,
ENGINE CYCLES RESTRICTION, ENGINE FLIGHT HOURS RESTRICTION, ENGINE LLP
SUPPLEMENTAL RENT, ENGINE SUPPLEMENTAL RENT, FLEET HOUR AGREEMENT, FHA
ASSIGNMENT AGREEMENT, GUARANTOR, INDEMNITEE, INTEREST RATE, LESSEE, LESSOR,
LESSOR'S ACCOUNT, LRU, MANUFACTURER, MINIMUM COMPONENT CALENDAR LIFE, MINIMUM
ENGINE CYCLES, MINIMUM ENGINE FLIGHT HOURS, MINIMUM LIABILITY COVERAGE, OWNER,
PRE-APPROVED BANK, PURCHASE AGREEMENT, REDELIVERY LOCATION, RENT, RENT
COMMENCEMENT DATE, SCHEDULED DELIVERY MONTH, SCHEDULED EXPIRY DATE, SPARES
DEDUCTIBLE AMOUNT, and TAX INDEMNITEE are all defined in the Engine Lease
Agreement.
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SCHEDULE 2
REPRESENTATIONS AND WARRANTIES
1.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee's representations and warranties to Lessor as of the date of execution of
the Lease and the Delivery Date are as follows:
(a) STATUS: It is duly organized, validly existing and in good standing in
its State of Incorporation.
(b) NON-CONFLICT: Execution, delivery and performance of the Lease do not
contravene or breach any Regulation applicable to Lessee.
(c) POWER AND AUTHORITY: It has all corporate and other power and
authority to execute, deliver and perform the Lease, and the Lease has
been duly authorized, executed and delivered by Lessee.
(d) LEGAL VALIDITY: The Lease is its legal, valid and binding obligation,
enforceable against Lessee in accordance with its terms.
(e) NO EVENT OF DEFAULT: No Event of Default has occurred and is
continuing or would occur because of Delivery.
(f) LITIGATION: Except as disclosed by Lessee to Lessor prior to the date
of the execution of the Lease and the Delivery Date, it is not
involved in any litigation or other dispute which may reasonably be
expected to materially and adversely affect its financial condition or
its ability to perform its obligations under the Lease.
(g) FINANCIAL INFORMATION: Its audited financial statements most recently
delivered to Lessor:
(i) have been prepared in accordance with GAAP; and
(ii) are true and correct and present fairly the financial condition
and results of operations of Lessee as at the date thereof and
for the period then ending.
(h) FULL DISCLOSURE: Neither the audited financial statements referred to
in paragraph (g) nor any other financial, operational or credit
related information provided to Lessor by Lessee for the purposes of
the Lease contains as of the date thereof any untrue statement of a
material fact or omits to state any material fact necessary in order
to make the statements therein not misleading in the light of the
circumstances under which they were made.
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(i) LOCATION: Lessee's chief executive office (as that term is defined in
Article 9 of the UCC) is located at the address set forth in the
heading of the Engine Lease Agreement; the "location" (as such term is
used in Section 9-307 of the UCC) of the Lessee is its State of
Incorporation and the records of the Lessee concerning the Engine are
maintained at such chief executive office or at the Habitual Base of
the Engine.
(j) CERTIFICATED AIR CARRIER: Lessee is a Certificated Air Carrier and
Lessor, as lessor of the Engine to Lessee, is entitled to the benefits
of Section 1110 of Title 11 of the U.S.C. with respect to the Engine
and any Part.
(k) CITIZEN OF THE UNITED STATES: Lessee is a "Citizen of the United
States".
(l) ERISA: Lessee has not established and does not maintain or contribute
to any employee plan that is covered by Title IV of ERISA.
1.2 LESSOR'S REPRESENTATIONS AND WARRANTIES
Lessor's representations and warranties to Lessee as of the date of execution of
the Lease and the Delivery Date are as follows:
(a) STATUS: It is duly organized, validly existing and in good standing in
its State of Incorporation.
(b) NON-CONFLICT: Execution, delivery and performance of the Lease do not
contravene or breach any Law applicable to Lessor.
(c) POWER AND AUTHORITY: It has all corporate and other power and
authority to execute, deliver and perform the Lease, and the Lease has
been duly authorized, executed and delivered by Lessor.
(d) LEGAL VALIDITY: The Lease is its legal, valid and binding obligation,
enforceable against Lessor in accordance with its terms.
(e) OWNERSHIP: At Delivery, Lessor will possess such interest in the
Engine as will entitle it to lease the Engine to Lessee and perform
its obligations in accordance with this Lease.
(f) LITIGATION: Except as disclosed by Lessor to Lessee prior to the date
of the execution of the Lease and the Delivery Date, it is not
involved in any litigation or other dispute which may reasonably be
expected to materially and adversely affect its financial condition or
its ability to perform its obligations under the Lease.
(g) ERISA: The funds to be used by the Lessor to acquire its interests in
any Engine do not constitute assets (within the meaning of ERISA and
any applicable rules and regulations) of an ERISA plan.
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(h) CITIZEN OF THE UNITED STATES: Lessor is a Citizen of the United
States.
(i) LIENS: There are no Lessor Liens on the Engine other than any Lessor
Lien consisting of the interest of an Owner or Financing Parties'
Representative, or both, which Owner or Financing Parties'
Representative has furnished to Lessee, or at Delivery shall furnish
to Lessee, a letter of quiet enjoyment in the form of Schedule 14
hereto.
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SCHEDULE 3
CONDITIONS PRECEDENT
PART A - LESSOR CONDITIONS PRECEDENT
The conditions precedent to Lessor's obligation to deliver and to commence the
leasing of the Engine are as follows. All documents delivered to Lessor pursuant
to this SCHEDULE 3 will be in English:
1.1 PRELIMINARY CONDITIONS
Lessor will receive from Lessee, not later than two Business Days prior to the
Scheduled Delivery Date, each of the following, satisfactory in form and
substance to Lessor:
(a) OPINION(S): a signed original (or facsimile transmission thereof) of
the opinion(s) substantially conforming to SCHEDULE 8(a) that will be
issued on the Delivery Date by Lessee's General Counsel and SCHEDULE
8(b) that will be issued on the Delivery Date by Fulbright & ▇▇▇▇▇▇▇▇
L.L.P.;
(b) APPROVALS: evidence of the issue of each approval, license and
consent, if any, which is required in relation to, or in connection
with the performance by Lessee of any of its obligations under the
Lease;
(c) LICENSES: copies of Lessee's air transport license, air carrier
operating certificate, air operator's certificates, including
authority to operate the Engine under FAR Part 121, and a Certificate
of Public Convenience and Necessity issued under Section 40102 of
Title 49 of U.S.C. or, if outside the United States, the equivalent of
such certificates and a Certificate of Airworthiness and Registration
for each Related Airframe;
(d) TITLE: copies of the historical bills of sale for the Engine
establishing valid title thereto;
(e) UCC: Financing Statement with respect to the Lease and the Engine in a
form reasonably acceptable to Lessor shall have been prepared by
Lessee to be filed in each jurisdiction reasonably requested by
Lessor;
(f) LETTER OF CREDIT (if applicable): the form of the Letter of Credit;
and
(g) GENERAL: such other documents as Lessor may reasonably request.
1.2 FINAL CONDITIONS
(a) FINAL DOCUMENTS: Lessor shall receive on or before the Delivery Date
each of the following:
(i) CERTIFICATE OF ACCEPTANCE AND ENGINE LEASE SUPPLEMENT: each of
the Certificate of Acceptance, and Lease Supplement, dated and
fully completed, and
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executed by Lessee, and, in the case of the Lease Supplement,
filed (together with the CTA) for recording at the FAA;
(ii) OPINIONS: a signed original (or facsimile transmission thereof)
of each of the opinions referred to in Section 1.1(a) of this
SCHEDULE 3, dated the Delivery Date;
(iii) PAYMENTS: all sums due to Lessor under the Lease on or before
the Delivery Date, including the first payment of Rent and, if
applicable, the balance of the Deposit;
(iv) INSURANCE: certificates of insurance, an opinion and
undertaking from Lessee's insurance broker and other evidence
reasonably satisfactory to Lessor that Lessee is taking the
required steps to ensure due compliance with the provisions of
the Agreement as to Insurance with effect on and after the
Delivery Date;
(v) FINANCIAL INFORMATION: the latest Financial Information of
Lessee requested by Lessor;
(vi) LETTER OF CREDIT (if applicable): the Letter of Credit;
(vii) GUARANTEE (if applicable): the Guarantee, duly executed and
delivered by the Guarantor, and an opinion of legal counsel
acceptable to Lessor in respect of the Guarantee in form and
substance acceptable to Lessor and its legal counsel;
(viii) LESSEE'S MAINTENANCE PROGRAM: such information and documents
relating to the Lessee's Maintenance Program as Lessor may
reasonably request in a timely manner prior to Delivery;
(ix) FILINGS: evidence that on the Delivery Date all UCC and FAA
filings, registrations, recordings and other actions have been
or will be taken which are necessary or advisable to ensure the
validity, effectiveness and enforceability of the Lease and to
protect the interests of Owner and, if applicable, the
Financing Parties in the Engine or any Part and in the Lease;
(x) FAA OPINION: evidence that there will be issued an opinion of
Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇, a Professional
Corporation, special FAA counsel, with regard to FAA
registration matters in a form reasonably acceptable to Lessor
as to the due filing for recordation of the Lease and, if
applicable, the Financing Documents, (the costs for which shall
be paid by Lessee);
(xi) CERTIFICATE OF LEASE TERMINATION: a certificate of lease
termination executed by a duly authorized officer of Lessee
substantially in the form of Schedule 11 acknowledging that the
Lease is no longer in effect with respect to the Engine, which
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certificate Lessor will hold in escrow to be filed at the FAA
upon the expiration or other termination of the Lease;
(xii) ACKNOWLEDGEMENT AND AGREEMENT RE ASSIGNMENT (if applicable): an
acknowledgement of and certain agreements with respect to the
assignment by Lessor of this Lease to Owner and Financing
Parties' Representative in the form previously provided to
Lessee or as Owner or Financing Parties' Representative may
otherwise reasonably request; and
(xiii) GENERAL: such other documents as Lessor may reasonably request;
(b) REPRESENTATIONS/WARRANTIES: the representations and warranties of
Lessee in SCHEDULE 2 (REPRESENTATIONS AND WARRANTIES) shall be true
and correct in all material respects, and would be true and correct in
all material respects if repeated on Delivery; and
(c) NO DEFAULT: no Default shall have occurred and be continuing on
Delivery or could reasonably be expected to result from the leasing of
the Engine to Lessee under the Lease.
(d) PURCHASE AGREEMENT: if Lessor is to acquire any Engine from Lessee,
then Lessor or an affiliate of Lessor and Lessee shall have executed
the Purchase Agreement with respect to such Engine, no default or
breach of the Purchase Agreement by Lessee shall have occurred and be
continuing and Lessor has accepted delivery of the Engine in
accordance with the terms and conditions of the Purchase Agreement;
(e) MATERIAL ADVERSE CHANGE: there shall have been no material adverse
change in the financial condition or operations of Lessee or in the
ability of Lessee to comply with its obligations under the Lease since
(1) September 30, 2001 with respect to the initial Delivery of Engines
hereunder, or (2) the date of the most recent Financial Information
furnished to Lessor hereunder, in the case of each Delivery following
the initial Delivery of Engines hereunder; and
(f) GENERAL: such other documents as Lessor may reasonably request in a
timely manner prior to Delivery.
PART B - LESSEE CONDITIONS PRECEDENT
The conditions precedent to Lessee's obligation to accept and to commence the
leasing of the Engine are as follows. All documents delivered to Lessee pursuant
to this SCHEDULE 3 will be in English.
(a) FINAL DOCUMENTS: Lessee shall receive on or before the Delivery Date
for the Engine each of the following:
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(i) ENGINE LEASE AGREEMENT: the applicable Engine Lease Agreement,
dated and executed by Lessor and filed (together with the CTA)
for recording at the FAA; and
(ii) ACKNOWLEDGEMENT RE QUIET ENJOYMENT: if Lessee is required to
deliver an acknowledgement of or agreement with respect to the
assignment by Lessor of the Lease to Owner or Financing
Parties' Representative, a letter of quiet enjoyment in the
form of Schedule 14 hereto;
(iii) FAA OPINION: evidence that there will be issued an opinion of
Daugherty, Fowler, Peregrin & ▇▇▇▇▇▇, a Professional
Corporation, special FAA counsel, with regard to FAA
registration matters in a form reasonably acceptable to Lessor
as to the due filing for recordation of the Lease and, if
applicable, the Financing Documents, (the costs for which shall
be paid by Lessee);
(b) REPRESENTATIONS/WARRANTIES: the representations and warranties of
Lessor in SECTION 1.2 OF SCHEDULE 2 (LESSOR'S REPRESENTATIONS AND
WARRANTIES) shall be true and correct in all material respects, and
would be true and correct in all material respects if repeated on
Delivery Date; and
(c) DELIVERY CONDITION REQUIREMENTS: tender by Lessor of delivery of the
Engine in compliance with the Delivery Condition Requirements.
(d) PURCHASE AGREEMENT: if Lessor is to acquire any Engine from Lessee,
then Lessor or an affiliate of Lessor and Lessee shall have executed
the Purchase Agreement with respect to such Engine, no default or
breach of the Purchase Agreement by Lessor shall have occurred and be
continuing and Lessor has accepted delivery of the Engine in
accordance with the terms and conditions of the Purchase Agreement;
(e) GENERAL: such other documents as Lessee may reasonably request in a
timely manner prior to Delivery.
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SCHEDULE 4
PRE-DELIVERY PROCEDURES
AND
DELIVERY CONDITION REQUIREMENTS
1. LICENSES
(a) It is the responsibility of Lessee to obtain all licenses, permits or
approvals necessary to export or transport the Engine from the
Delivery Location.
(b) Lessor will provide Lessee with any required data and information
relating to the Engine or Lessor as are reasonably available to Lessor
for the purposes of obtaining any such licenses, permits or approvals.
2. INSPECTION
(a) Subject to any applicable lease agreement or purchase agreement,
Lessee may inspect the Engine (including a test cell or power
assurance run) to ensure that the Engine fulfils the Delivery
Condition Requirements.
(b) If Lessee's inspection of the Engine shows that the Engine does not
fulfil the Delivery Condition Requirements, Lessor will correct any
defects and make the Engine available for re-inspection by Lessee
provided that, in Lessor's reasonable opinion, it is not impracticable
or prohibitively expensive to correct the defect.
(c) If Lessor notifies Lessee that it does not intend to correct the
defect, either party may terminate the Lease.
If the Engine has been purchased from Lessee (or one of its Affiliates) by
Owner and immediately leased back by Lessor to Lessee, the provisions of
this Section 2 shall not apply to the leasing of the Engine.
3. INDEMNITY
Lessee is responsible for and will indemnify each Indemnitee against all
Losses arising from death or injury to any observer, representative or any
employee of Lessee in connection with the inspection of the Engine whether
or not such Losses arise out of or are attributable to any act or omission,
negligent or otherwise, of any Indemnitee.
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SCHEDULE 5
CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered, on the date set out below by
[LESSEE]("LESSEE"), to [Name of Lessor] ("LESSOR"), pursuant to the Common Terms
Agreement, dated ___________, between Lessor and Lessee and the Engine Lease
Agreement, dated ___________, between Lessor and Lessee incorporation the terms
of the Common Terms Agreement (the "AGREEMENT"). The capitalized terms used in
this Certificate shall have the meaning given to such terms in the Agreement.
1. DETAILS OF ACCEPTANCE
Lessee hereby confirms to Lessor that Lessee has at [ ] o'clock on this _____
day of __________, ______, at ________, accepted delivery of the following:
(a) [ ] Engine:
Manufacturer's Serial Number: ______________
(b) Engine Document Check List: as attached hereto
(c) QEC Check List: as attached hereto.
(d) LRU Check List: as attached hereto.
(e) Other Accessories Check List: as attached hereto.
(f) Engine stand/Engine cover: as attached hereto.
(g) Data Plate certification: as attached hereto.
2. HOURS AND CYCLES DATA (AS OF DELIVERY DATE)
ENGINE:
Number of Engine Flight Hours since new: _______________ hours
Number of Engine Flight Hours since last refurbishment: ________________
hours
Number of Engine Flight Cycles since new: _______________cycles
Number of Engine Flight Cycles since last refurbishment: _______________
cycles
Disk Sheet:
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Hot Section Inspection:
Interval: ___________________________
Time Since (S/N __________) : ______________
Time Remaining to First Restriction:
Hours: _____________ Restriction: _____________
Cycles: _____________ Restriction: _____________
Average Cycles in LLP (see attached Schedule): _______________
3. ACCEPTANCE:
Lessee hereby confirms that the Engine, engine stand, QEC, Parts and Engine
Documents described in this Certificate of Acceptance have been received;
(ii) the Engine has been duly marked with the Nameplate in accordance with
the terms of Section 8.6(a)(i) of the Lease; (iii) the Engine is insured as
required by the Lease; (iv) the representations and warranties of Lessee
referred to in Section 2.1 (LESSEE'S REPRESENTATIONS AND WARRANTIES) of
Schedule 2 of the Lease are hereby repeated with effect as of the date
first above written (or, to the extent that any such representation and
warranty expressly relates to an earlier date, true and correct as of such
earlier date); (v) having inspected the Engine, Lessee acknowledges that
the Engine satisfies all conditions required for Lessee's acceptance of
delivery as set forth in the Lease; and (vi) the execution and delivery of
this Certificate signifies absolute and irrevocable acceptance by Lessee of
the Engine for all purposes hereof and of the Lease.
IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
representative, executed this Certificate of Acceptance on the date in paragraph
1 above.
LESSEE: LESSOR:
By: By:
--------------------------- ---------------------------
Title: Title:
--------------------------- ---------------------------
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SCHEDULE 6
PROCEDURES AND OPERATING CONDITION AT REDELIVERY
(ENGINES)
On the Return Occasion of the Engine, subject to ordinary wear and tear of a
kind and to an extent consistent with similar engines engaged in commercial
airline operations, will be redelivered to Lessor by Lessee in accordance with
the procedures and in any event in the condition set out below.
1.1 FINAL INSPECTION
Immediately prior to the Return Occasion, Lessee will make the Engine available
to Lessor for inspection ("FINAL INSPECTION") in order to verify that the
condition of the Engine complies with the Lease. The Final Inspection will
include, and be long enough (and Lessor will reasonably endeavor to complete
such Final Inspection within 30 days) to permit Lessor, in good faith, to:
(a) inspect the Engine Documents;
(b) observe a test cell run if the Engine has undergone a shop visit
immediately prior to redelivery, or an engine maximum power assurance
run, in accordance with the EMM, at Lessee's cost;
(c) following the test cell run or the engine maximum power assurance run,
inspect the Engine and the uninstalled Parts, including a complete
video borescope inspection of all stages of (A) the low pressure and
high pressure compressors (performed by cold section video borescope)
and (B) the high pressure turbine and low pressure turbine modules
(performed by hot section video borescope).
Furthermore, Lessee acknowledges that the next operator of the Engine will need
to inspect the Engine and the Engine Documents prior to redelivery and Lessee
hereby agrees to cooperate with Lessor and/or such next operator in order to
coordinate and grant access for inspections and/or meetings as reasonably
necessary.
Lessor shall be responsible for and shall indemnify Lessee against all Losses
arising from the death or injury to any observer or any employee of Lessor in
connection with the inspection of the Engine under this Clause 1.1 whether or
not such Losses arise out of or are attributable to any act or omission,
negligent or otherwise of Lessee.
1.2 GENERAL CONDITION
The Engine will:
(a) be in at least as good operating and physical condition, excluding
normal wear and tear, as when delivered to Lessee by Lessor, subject
to ordinary operating wear and tear and changes and alterations
properly made by Lessee as permitted under, and otherwise in
accordance with, the Lease. The Engine will have been maintained to at
least the same standard and modification status as other similar
engines within Lessee's fleet. The Engine will be free of any
concessions, technical variances, repairs or modifications not
approved
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by Manufacturer, maintenance deferrals, carry-overs, extensions or any
on-watch items requiring a special, reduced period or out of sequence
inspection or maintenance;
(b) be fully serviceable as evidenced by Lessee's Air Authority
serviceability tag in accordance with the Maintenance Program and an
FAA Form 8130-3 or JAA Form One;
(c) be in such condition as to permit the immediate use in commercial
airline service under the current regulations of the FAA or Air
Authority (including FAA shop release documentation if reasonably
requested by Lessor);
(d) have complete back to birth records available for all LLP and
components;
(e) have engine trend monitoring data evidencing no adverse trends or rate
of deterioration or operating abnormality which would require
corrective action or a shop visit in advance of next scheduled shop
visit;
(f) have a non-incident statement signed by Lessee;
(g) be operating within the limits established by Manufacturer;
(h) be in compliance with the FAA and Air Authority's ADs and mandatory
SBs the compliance with which is required on or before the date Lessor
accepts redelivery or completion within the AD Compliance period,
accompanied by records showing the method and date of compliance and
compliance documents showing accomplishment with no variance,
extension, carry-overs or deferrals. Any airworthiness directives of
the Air Authority or FAA which must be completed on a terminating
action basis by the Lessee on other engines of the same type in its
fleet will be performed on a terminating action basis by Lessee at
Lessee's cost;
(i) have installed the full complement of equipment, parts, accessories,
furnishings and loose equipment, as when originally delivered to
Lessee and as normally installed in the Engine for continued regular
service, and will be in the same external configuration as when
originally delivered to Lessee except for Engine changes permitted or
required by the Lease;
(j) have no open, deferred, continued, carry over or placarded log book
items; and
(k) have the Nameplate as at Delivery or as changed due to engine
enhancements or changes.
1.3 COMPONENTS
(a) Each Engine Flight Hour and Engine Cycle controlled Hard Time Component
shall have not less than the Minimum Hard Time Component Flight Hours and
the Minimum Hard Time Component Cycles of life remaining to the next
expected Engine Refurbishment based on the Manufacturer's mean time between
removals for such Engine and shall be supported by appropriate
certification documentation indicating TSN, CSN, TSO and CSO such as JAA
Form One or FAA Form 8130-1; for this purpose "HARD TIME COMPONENT" means
any component which has a limited on-wing life in accordance with the
Maintenance Program and which can have life fully restored through
appropriate maintenance;
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(b) Each calendar-limited component including safety equipment will have not
less than its Minimum Component Calendar Life remaining to the next
scheduled removal in accordance with the Maintenance Program;
(c) Each "on-condition" and "condition-monitored" component will be
serviceable;
If the Engine will not meet these conditions without a shop visit in the six
months preceding termination of the Lease, Lessee will consult with Lessor prior
to committing the Engine to the shop and Lessor will re-evaluate the requirement
for maximum time since shop visit based on the then current circumstances. All
components (excluding LLP) shall have a minimum of fifty percent (50%) life
remaining (Engine Flight Hours, Engine Cycles or months whichever is applicable
and most limiting). Average total time since new on installed components and
Parts in the aggregate shall have no more than one hundred ten percent (110%) of
the total time on the Engine.
1.4 ENGINES:
Each Engine will:
(a) have not less than the Minimum Engine Flight Hours life remaining to
the next expected removal and each of the LLPs shall have not less
than the Engine Cycles Restriction release life remaining. The
expected life remaining will be determined by the inspection and
checks accomplished by Lessor in accordance with the Lease;
(b) be free of all Security Interests, other than Security Interests
granted by Lessor;
(c) have undergone the inspections as set forth in Section 1.1(b) and (c)
herein. If any inspection procedure identifies any Engine defect(s)
that causes the Engine to be unserviceable, Lessee will immediately
notify Lessor in writing, correct such defect(s) at Lessee's cost and
provide evidence satisfactory to Lessor that defects have been
corrected in accordance with the EMM and the Maintenance Program;
(d) be prepared for shipment for long-term storage in accordance with
Manufacturer's recommendations;
(e) be zero time since the last complete hot and cold section video
borescope inspection in accordance with Manufacturer's and the Related
Airframe manufacturer's maintenance manual and will be in compliance
with requirements of the EMM, Lessee's operations specifications, and
the requirements and recommendations of the Air Authority;
(f) together with installed components, not be subject to any reduced
frequency inspections in comparison to the Related Airframe
manufacturer's maintenance manual limits;
(g) immediately prior to redelivery, will have the required EGT Margin. In
addition, the EGT Margin shall be sufficient, and the Engine shall
otherwise be in a condition, to permit the operation of the Engine for
at least the Minimum Engine Flight Hours until its next expected
Engine Refurbishment. The Engine shall have performance
characteristics consistent with engines of a similar manufacturer,
made, model, thrust, age and time since performance restoration and,
if (i) fresh from an Engine Refurbishment, be zero time since a full
parameter test cell run which will demonstrate, including at full
take-off power, performance characteristics consistent with Lessee's
approved Related Airframe operating requirements, or (ii) the Engine
has been removed from an aircraft immediately prior to redelivery,
will
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have performed an on-wing maximum power assurance run demonstrating
maximum permitted power take-off performance as per Lessee's Related
Airframe operating requirement. In all cases, the engine condition
monitoring (ECM) data will be available for Lessor's review, will
cover periods of installation sufficient to have initialized a
baseline on the trend plot and will exhibit no abnormal trends or
acceleration in the deterioration of the performance of the Engine;
(h) Lessee will bear all costs of packaging, including the provision of an
engine shipping stand, transportation, including the return of the
engine stand to Lessee (if applicable), insurance duties, taxes and
other costs associated with the return of the Engine, Delivered Duty
Paid (INCOTERMS 2000) to the Redelivery Location. Any vehicles and
trailers used for shipment of the Engine shall be air ride equipped.
On a given shipment, such vehicle shall be dedicated to the Engine
belonging solely to Lessor; except, that (i) the Engine or other
related equipment may be off-loaded at the Redelivery Location without
disturbing any of the additional items included in such shipment; and
(ii) Lessee shall not handle or reposition any of the additional items
included in such shipment on such vehicle;
(i) have no defect which places less than the Minimum Engine Flight Hours
and the Engine Cycles Restriction of remaining life, each including in
respect of LLPs, pursuant to Manufacturer's or Air Authority's
requirements until removal.
1.5 ENGINE DOCUMENTS:
The Engine Documents will:
(a) be delivered by Lessee to Lessor, together with the records generated
by Lessee and records maintained or obtained, or required to be
maintained or obtained, under the applicable rules and regulations of
the Air Authority or any other applicable Law. With respect to any
Part installed by Lessee during the Term and not removed prior to
Redelivery, the records returned to Lessor will include: (i) part
number, description and serial number (if Part is serialized); (ii)
historical record, including but not limited to (A) serviceability
status at installation, (B) for a time-controlled Part, total time and
cycles, time and cycles since overhaul as may be applicable, and total
time and cycles of the Engine at the time of Part installation, and
(C) for an LLP, "back-to-birth" documentation tracing usage of the
Part since new. The Engine Documents will be accurate and complete and
satisfy all other requirements so as to permit immediate use of the
Engine under the rules and regulations of the Air Authority. At
minimum, the Engine Documents shall include the following:
1. Certified statement as to Engine Flight Hours and Engine Cycles
since overhaul on each Engine module.
2. Engine Log Book (as applicable to Lessee's records keeping
system).
3. Engine Master Record (record of installation and removal and
accumulated Engine Flight Hours and Engine Cycles).
4. Accessory status (including description, part number, serial
number, date and time installed, and current time since
overhaul).
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5. Record of last overhaul (FAA Form 8130-3 or JAA Form One) for
each of the accessory rotables requiring overhaul on a time
specified basis.
6. Repair, overhaul and inspection records for each shop visit
since and including the last overhaul of each module.
7. Documents demonstrating installation and full traceability to
new for each LLP.
8. Engine condition monitoring report.
9. Most recent engine borescope (if videotaped, include copy of
video).
10. Most recent fuel, oil sampling, magnetic chip detector and
vibration survey results (as available).
11. Most recent on-wing ground performance run.
12. Last certified test cell run if the Engine has undergone a shop
visit immediately prior to redelivery.
13. Manufacturer delivery documents.
14. Engine oil used.
15. Any incidents during operation since last shop visit with
action taken (e.g. IFSD/FOD/oil loss, etc.).
(b) Summary Records. Lessee shall cause each of the following Engine Documents
to be complete including any update required to reflect work performed in
preparation for return to Lessor. Each summary report shall be certified by
signature of Lessee's Director of Quality Assurance or Director of Quality
Control as being a complete and accurate description of Engine status at
return to Lessor.
1. AD/CN Applicability and Compliance Status. Listings will
include all AD/CNs issued by the Air Authority against the
model and series of each item and will clearly identify any
exemptions, waivers or alternate means of compliance granted by
the Air Authority to the operator. In addition to other
pertinent data, the documents shall include Manufacturer's
SB(s) reference, AD/CN and SB revision numbers, method of
compliance, date and time (Engine Flight Hours and Engine
Cycles) of accomplishment, status (terminated, repetitive,
open), and next due.
2. Manufacturer SB Compliance Summary. Summary will clearly
identify whether an SB was completed in full, in part or in
variance to manufacturer data and shall detail which portions
were accomplished or the nature of any variance.
3. List of Lessee Modifications Incorporated (EO's, EA's, FCD's,
etc.). In addition to other pertinent data, this document shall
include operator document reference, description, date and time
of accomplishment.
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4. LLP Status Reports. In addition to other pertinent information,
this document shall include description, location, manufacturer
part number, manufacturer serial number, total time (Engine
Flight Hours and Engine Cycles), life limit and time remaining.
5. Check/Inspection History (record of scheduled checks
accomplished during the Term including date and time
accomplished).
6. Complete Status Summary for each special maintenance,
modification or inspection program (corrosion prevention and
control, supplemental inspection, aging engine, etc.) in effect
at time of return.
7. Time-Controlled Components (TCC) Status Report. This shall
address status of each TCC installed in the Engine. The list of
TTCs shall be that listed in the MMPD plus those listed in the
Maintenance Program. In addition to other pertinent
information, this document shall include description, location,
manufacturer part number, manufacturer serial number, date and
Engine time at installation, current time since overhaul
(Engine Flight Hours and Engine Cycles), limit, and time
remaining.
8. List of currently installed Parts. In addition to other
pertinent information, this document shall include description,
location, manufacturer part number, manufacturer serial number,
date installed and aircraft time at installation.
(c) The Engine Documents shall include the following AD/CNs, SBs and
Modifications:
1. AD/CN Accomplishment Records for all AD/CNs accomplished
including task cards, engineering orders, drawings, shop cards,
etc., as necessary to establish method of compliance, quality
control acceptance, and approval authority. Records shall be
returned in dedicated AD/CN files segregated by Engine and
Parts and shall be in AD/CN number order. Records for AD/CNs
requiring repetitive accomplishment of identical action may be
restricted to initial and most recent accomplishment.
2. SB Accomplishment Records for all SBs accomplished on the
Engine and Parts including task cards, engineering orders,
drawings, shop cards, etc., as necessary to establish method of
compliance, quality control acceptance, and approval authority.
Records shall be returned in dedicated SB files segregated by
the Engine and Parts and shall be in SB number order. Records
for SBs requiring repetitive accomplishment of identical action
may be restricted to initial and most recent accomplishment.
SBs carried out to satisfy AD requirements shall be returned
with AD records and need not be duplicated in SB files.
3. Modification Accomplishment Records for all modifications
accomplished on the Engine and Parts including task cards,
engineering orders, drawings, shop cards, etc., as necessary to
establish method of compliance, quality control acceptance and
approval authority. Records shall be returned in dedicated
modification files segregated by Engine and Parts and shall be
organized in a fashion that allows documents for a particular
modification to be located quickly and efficiently.
Modifications carried out to satisfy AD/CN requirements shall
be returned with AD/CN records and need not be duplicated in
modification files.
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(d) The Engine Documents shall include the following Quality Assurance
Statements:
1. Statement of total Engine Flight Hours and total Engine Cycles
on the Engine at Engine transfer.
2. Automated Record System procedures and Security Control (as
applicable to Lessee's records keeping system).
3. List of Repair Stations used by Lessee including Part 145
Certification and Letter to Repair Stations authorizing release
of records to Lessor upon request.
4. Report detailing Incidents or Accidents (if none, signed
statement to that effect).
(e) The Engine Documents shall include a list of all records and documentation
transferred with the Engine.
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SCHEDULE 7
INSURANCE REQUIREMENTS
1.1 TYPES OF INSURANCE
The Insurances required to be maintained are as follows:
(a) HULL ALL RISKS of loss or damage while flying, taxiing and on the
ground with respect to the Engine on an agreed value basis for the
Agreed Value and with a deductible not exceeding the Deductible Amount
or such other amount agreed by Lessor from time to time; provided
that, neither the Lessee nor any Permitted Sub-Lessee shall be
required to maintain all-risk flight hull insurance with respect to
any period in which the Engine is on the ground and properly stored;
(b) HULL WAR RISKS AND ALLIED PERILS in accordance with the London form
LSW555B or its equivalent form reasonably acceptable to Lessor (or an
agreement of the United States Government to insure against or
indemnify for substantially the same risks), from time to time, with
respect to the Engine, (I) in an amount not less than the Agreed Value
for such Engine, and (II) maintained with independent insurers of
internationally recognized reputation and responsibility.
(c) ALL RISKS Coverage (including war and allied risk and spares insurance
except when on the ground or in transit other than by air as is
customarily available) property insurance on all Engines and Parts
when not installed on any aircraft, including engine test and running
risks, on the basis of their fair market replacement value; provided,
however, that Lessee shall carry all risk spares insurance with
respect to all Engines subject to the Lease, which insurance shall
include intransit coverage, covering any damage which may occur while
such Engine is in Lessee's care, custody and control, but not then
attached to an aircraft, in a minimum amount not less than the Agreed
Value for such Engine, with a deductible not exceeding the Spares
Deductible Amount or such other amount agreed by Lessor from time to
time; and
(d) COMPREHENSIVE AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER,
BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING
PRODUCTS) LEGAL LIABILITY. Coverage for a combined single limit
(bodily injury/property damage) of an amount not less than the Minimum
Liability Coverage for the time being for any one occurrence (but in
respect of products and personal injury liability, this limit may be
an aggregate limit for any and all losses occurring during the
currency of the policy). War and Allied Risks are also to be covered
under the policy to the extent usual and customary from the leading
international insurance markets for comparable operators operating
similar engines in similar circumstances. In addition, without
limitation of the requirements of the preceding sentence (and
notwithstanding anything to the contrary contained in the preceding
sentence), the Lessee shall in all events maintain in effect, at all
times during the Term, war risk and allied perils liability insurance
in accordance with the London
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form AVN52C (as in effect on September 1, 2001) or its equivalent form
reasonably acceptable to Lessor (or an agreement of the United States
Government to insure against or indemnify for substantially the same
risks), from time to time, with respect to the Engine, (I) in an
amount not less than the greater of (x) the amount of war risk and
allied perils liability insurance from time to time applicable to
similar aircraft owned or operated by the Lessee and (y) $350,000,000
per occurrence, and (II) maintained with independent insurers of
internationally recognized reputation and responsibility.
During any period that the Engine is in storage, the Lessee may, so
long as the Lessee takes reasonable measures to protect the Engine,
modify the insurance required by this Clause 1.1(d) to modify the
amounts of public liability and property damage insurance, the scope
of the risks covered and the type of insurance, in all circumstances
to conform to such insurance as is customary in the United States
airlines industry for regional air carriers similarly situated with
the Lessee in respect of similar engines which are grounded, not in
operation and stored, provided that in all instances, the amounts of
coverage and scope of risk covered and the type of insurance shall be
at a minimum no less favorable than the insurance as from time to time
applicable to engines owned or leased by Lessee on the ground, not in
operation and stored.
1.2 TERMS OF HULL AND SPARES INSURANCE
All required hull and spares insurance, so far as it relates to the Engine,
will:
(a) ADDITIONAL INSUREDS: name the Lessor, its successors and permitted
assigns as additional insureds for its respective rights and interests
(without imposing on any such Person any obligation imposed on the
insured, including the liability to pay any calls, commissions or
premiums);
(b) LOSS PAYEE: name the Lessor as loss payee;
(c) 50/50 PROVISION: if separate Hull "all risks" and "war risks"
insurances are arranged, include a 50/50 provision in accordance with
market practice (Lloyd's Aviation Underwriter's Association Standard
Policy Form AVS. 103 is the current London market language);
(d) NO OPTION TO REPLACE: confirm that the insurers are not entitled to
replace the Engine in the event of an insured Event of Loss.
1.3 TERMS OF LIABILITY INSURANCE
All required liability insurances will:
(a) ADDITIONAL INSUREDS: include each Indemnitee, as an additional insured
for its respective rights and interests, warranted, each as to itself
only (except each Affiliate of an Indemnitee shall be considered the
same as the Indemnitee for this purpose only), no
7-2
operational interest (without imposing on any such Person any
obligation imposed on the insured, including the liability to pay any
calls, commissions or premiums);
(b) SEVERABILITY: include a severability of interests clause which
provides that the insurance, except for the limit of liability, will
operate to give each insured the same protection as if there was a
separate policy issued to each insured; and
(c) PRIMARY POLICY: contain a provision confirming that the policy is
primary without right of contribution and the liability of the
insurers will not be affected by any other insurance of which Lessor,
each Indemnitee or Lessee have the benefit so as to reduce the amount
payable to the additional insureds under such policies.
1.4 TERMS OF ALL INSURANCES
All Insurances will:
(a) LESSEE PRACTICE: be at least of the type usually carried by the Lessee
with respect to similar equipment in its fleet covering risks of the
kind customarily insured against by the Lessee;
(b) DOLLARS: provide cover denominated in Dollars;
(c) WORLDWIDE: operate on a worldwide basis subject to such territorial
limitations and exclusions may be reasonably acceptable to Lessor;
(d) BREACH OF WARRANTY: provide that, in relation to the interests of each
of the Indemnitees, the Insurances will not be invalidated by any act
or omission by Lessee, or any other person other than the respective
Indemnitees (or its Affiliates) seeking protection and shall insure
the interests of each of the Indemnitees regardless of any breach or
violation by Lessee, or any other person other than the respective
Indemnitees (or its Affiliates) seeking protection of any warranty,
declaration or condition, contained in such Insurances;
(e) SUBROGATION: provide that the insurers will hold harmless and waive
any rights of recourse or subrogation against the additional insureds;
(f) PREMIUMS: provide that the additional insureds will have no obligation
or responsibility for the payment of any premiums due (but reserve the
right to pay the same should any of them elect so to do) and that the
insurers will not exercise any right of set-off, counter-claim or
other deduction, by attachment or otherwise, in respect of any premium
due against the respective interests of the additional insureds other
than outstanding premiums relating to the any Engine or Part the
subject of the relevant claim;
(g) CANCELLATION/CHANGE: provide that the Insurances will continue
unaltered for the benefit of the additional insureds for at least 30
days after written notice by registered mail or telex of any
cancellation, lapse or change has been sent by insurer(s) to Lessor,
or where
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an insurance broker is appointed to the insurance broker who shall
promptly send on such notice to Lessor, except in the case of war
risks for which 7 days (or such lesser period as is or may be
customarily available in respect of war risks or allied perils) will
be given, or in the case of war between the 5 great powers or nuclear
peril for which termination is automatic;
(h) INITIATING CLAIMS: contain a provision entitling any Indemnitee to
initiate a claim under any policy in the event of the refusal or
failure of Lessee to do so; and
(j) INDEMNITIES: accept and insure the indemnity provisions of the Lease
to the extent of the risks covered by the policies.
1.5 DEDUCTIBLES
Lessee shall be responsible for any and all deductibles under the Insurances
(other than those in respect of insurance maintained by Lessor or any other
Indemnitee pursuant to Clause 1.8 of this Schedule).
1.6 APPLICATION OF INSURANCE PROCEEDS
The Insurances will be endorsed to provide for payment of proceeds as follows:
(a) EVENT OF LOSS: all insurance payments received as the result of an
Event of Loss with respect to an Engine occurring during the Term will
be paid to Lessor as loss payee, and Lessor will pay or cause to be
paid any remaining balance of those amounts to Lessee after deduction
of all amounts which may be then due and payable by Lessee to Lessor
under the Lease (including under Section 11.1(b) of the CTA);
(b) EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds of any
property, damage or loss to any Engine or any Part occurring during
the Term not constituting an Event of Loss and in excess of the Damage
Notification Threshold will be paid to Lessor as loss payee, for
payment to or at the direction of Lessee upon performance by Lessee of
its repair or replacement obligations in accordance with the Lease;
(c) BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in amounts
below the Damage Notification Threshold shall be paid by the insurer
directly to Lessee;
(d) LIABILITY PROCEEDS: all insurance proceeds in respect of third party
liability will be paid by the insurers to the relevant third party in
satisfaction of the relevant liability or to Lessee and/or Lessor in
reimbursement of any payment so made;
(e) DEFAULT: notwithstanding any of the foregoing paragraphs, if at the
time of the payment of any such insurance proceeds an Event of Default
or Special Default has occurred and is continuing, all such proceeds
will be paid to Lessor, Owner or Financing Parties' Representative, as
the case may be, or retained to be applied toward payment of any
amounts which may be or become payable by Lessee in such order as
Lessor or Owner, as the case may be, may elect until such time as no
Event of Default or Special Default is
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continuing and then applied as described above; and to the extent that
insurance proceeds are paid to Lessee, Lessee agrees to hold such proceeds
in trust and comply with the foregoing provisions and apply or pay over
such proceeds as so required.
1.7 UNITED STATES GOVERNMENTAL INDEMNITY
Notwithstanding any provisions contained in Section 9 of the CTA or this
Schedule to the contrary, Lessor agrees to accept in lieu of insurance required
hereunder indemnification or insurance from the United States Government against
such risks and in such amounts and on such terms such that when added to the
Insurance maintained by Lessee (or Permitted Sub-Lessee), Lessee (or Permitted
Sub-Lessee) complies with the requirements of Section 9 and this Schedule,
PROVIDED that on or prior to the date of such agreement, the Lessee (or
Permitted Sub-Lessee) shall provide an officer's certificate of the Lessee (or
Permitted Sub-Lessee) certifying that any such insurance or indemnity provides
protection no less favorable than insurance coverage that would comply with
Section 9 and this Schedule.
1.8 INSURANCE FOR OWN ACCOUNT
Nothing in Section 9 of the CTA or this Schedule shall prohibit the Lessor, any
other Indemnitee or the Lessee from obtaining insurance with respect to the
Engine for its own account (including, without limitation, in the case of the
Lessee, hull insurance under the same policies maintained pursuant to Section 9
of the CTA and this Schedule in amounts in excess of those required to be
maintained pursuant to Section 9 of the CTA and this Schedule) and any proceeds
payable thereunder shall be payable as provided in the insurance policy relating
thereto, provided that no such insurance may be obtained which would limit or
otherwise adversely affect the availability of coverage or payment of any
insurance required to be obtained or maintained pursuant to Section 9 of the CTA
and this Schedule, it being understood that all salvage rights to the Engine
shall remain with the Lessee's insurers at all times.
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SCHEDULE 9
EVENTS OF DEFAULT
Each of the following events or conditions constitutes an Event of Default:
(a) NON-PAYMENT: Lessee fails to make (i) any payment of Rent,
Supplemental Rent, or Agreed Value when due and such failure shall
continue for a period of 3 Business Days or (ii) any payments that
become due and payable hereunder (other than payments of Rent,
Supplemental Rent and Agreed Value) within 10 days after receipt by
the Lessee of a written demand therefor from the Lessor; or
(b) INSURANCE: Lessee fails to comply with any provision of Section 9 or
Schedule 7 or any insurance required to be maintained under the Lease
is cancelled or terminated, or a notice of cancellation is given and
the same is not cured within 3 Business Days prior to such
cancellation becoming effective so as to ensure continued compliance
by Lessee with the insurance requirements of this Agreement; or
(c) BREACH: Lessee fails to comply with any other provision of the Lease
not referenced in this Schedule 9, and shall continue unremedied for a
period of 15 days after delivery of notice of such failure from the
Lessor to the Lessee, unless such failure is curable and does not pose
any material risk of loss of title to the Engine by Lessor or Owner or
loss of possession of the Engine by Lessee, and the Lessee shall,
after the delivery of such notice, be diligently proceeding to correct
such failure and shall in fact correct such failure 45 days after
delivery of such notice; or
(d) REPRESENTATION: any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to the Lease or in any document or
certificate or statement delivered pursuant to the Lease is or proves
to have been incorrect in any material respect when made or deemed to
be repeated and shall remain material at the time in question and
shall not be remedied within 10 days after notice thereof has been
given to the Lessee by the Lessor, unless such incorrectness is
curable and Lessee shall, after delivery of such notice, be diligently
proceeding to correct such failure and shall in fact correct such
failure 45 days after the delivery of such notice; or
(e) CROSS-DEFAULT: Lessee shall receive notice of default or exercise of
remedies with respect to the payment or performance of any Financial
Indebtedness of Lessee and any such default or exercise of remedies
results in an acceleration of such Financial Indebtedness; provided,
however, that the aggregate amount of any such Financial Indebtedness
is in excess of $5,000,000 (determined in the case of borrowed money
by the amount outstanding under the agreement pursuant to which such
borrowed money was borrowed, in the case of a deferred purchase price
by the remaining balance and in the case of a lease by the present
value of the remaining rent payable thereunder); or
9-1
(f) BANKRUPTCY, ETC:
(i) Lessee consents to the appointment of a custodian, receiver, trustee
or liquidator of itself or all or a substantial part of its property
or its consolidated property, or Lessee admits in writing its
inability to, or is unable to, or does not, pay its debts generally as
they come due, or makes a general assignment for the benefit of
creditors, or Lessee files a voluntary petition in bankruptcy or
voluntary petition seeking reorganization in a proceeding under any
bankruptcy or insolvency laws (as now or hereafter in effect), or an
answer admitting the material allegations of a petition filed against
Lessee in any such proceeding, or Lessee by voluntary petition, answer
or consent seeks relief under the provisions of any other bankruptcy,
insolvency or other similar law providing for the reorganization or
winding-up of debtors, or provides for an agreement, composition,
extension or adjustment with its creditors, or any board of directors
or shareholder action is taken by Lessee in furtherance of any of the
foregoing, whether or not the same is fully effected or accomplished;
or
(ii) An order, judgement or decree is entered by any court
appointing, without the consent of Lessee, a custodian,
receiver, trustee or liquidator of or sequestering any
substantial part of Lessee's property, and any such order,
judgement or decree of appointment or sequestration remains in
effect, undismissed, unstayed or unvacated for a period of 90
days after the date of entry thereof or at any time an order
for relief is granted; or
(iii) An involuntary petition against Lessee or other proceeding
under the United States Federal Bankruptcy laws or other
insolvency laws (as now or hereafter in effect) is filed and is
not withdrawn or dismissed within 90 days thereafter or at any
time an order for relief is granted in such proceeding, or if,
under the provisions of any law providing for reorganisation or
winding-up of debtors which may apply to Lessee, any court of
competent jurisdiction assumes jurisdiction over, or custody or
control of, Lessee or of all or any substantial part of
Lessee's property, and such jurisdiction, custody or control
remains in effect, unrelinquished, unstayed or unterminated for
a period of 90 days or at any time an order for relief is
granted in such proceeding; or
(g) SUSPENSION OF BUSINESS: Lessee suspends for a period exceeding 5 days
or ceases or takes substantive steps to cease to carry on all or a
substantial part of its business as a Certificated Air Carrier (other
than as a result of a labor dispute with Lessee's employees or
mandatory action by a Government Entity that applies to all
Certificated Air Carriers operating aircraft similar to the Lessee);
or
(i) CHANGE OF CONTROL: any single Person or group of Persons acquire
control of Lessee in violation of the terms and conditions of Section
8.7(vi); provided, however, if Lessee fails to perform or observe any
of the provisions of Section 8.7(vi) which are contained in that
certain Letter Agreement dated the date hereof between Lessee and
Aviation
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Financial Services Inc., as lessor, no Event of Default shall arise
under this paragraph (i) until such failure continues unremedied for a
period of 30 days after delivery of notice of such failure from Lessor
or Lessee, unless such failure is curable and Lessee shall, after the
delivery of such notice, be diligently proceeding to correct such
failure and shall in fact correct such failure 120 days after delivery
of such notice; or
(j) DELIVERY: Lessee fails to comply with its obligation under Section 4
to accept delivery of the Engine or Lessee fails to comply with any of
its obligations under Schedule A of the Engine Lease Agreement;
provided, however, that no Event of Default shall arise under this
paragraph (j) if Lessee satisfies its obligations under Section 4.3(b)
hereof; or
(k) LETTER OF CREDIT:
(i) the issuer of the Letter of Credit (if any) fails to make any
payment under that Letter of Credit when due; or
(ii) any such Letter of Credit is not in full force or, for any
reason ceases to constitute the legal, valid and binding
obligation of the issuer; or
(iii) any of the events listed in paragraph (f) above applies to such
issuer (references in those sub-paragraphs to Lessee being
deemed to be to the issuer); or
(iv) where applicable, any Letter of Credit is not renewed, extended
or reissued within the time, or replaced when, required by
Section 5.14;
and each reference in this paragraph (k) to "the issuer" shall
include a reference to any confirming bank for the Letter of
Credit.
(l) REDELIVERY: Lessee fails to return the Engine to Lessor on the Expiry
Date in accordance with Section 12, unless Lessee is diligently
proceeding to correct any deficiencies in the condition of the Engine
and cures all such deficiencies within 60 days after the Expiry Date;
or
(m) LITIGATION: a judgement for the payment of money not covered by
insurance in excess of $5,000,000.00 (or the equivalent thereof in
other currencies) shall be rendered against Lessee and the same shall
remain undischarged for a period of 30 days, unless during such
period, execution of such judgement shall have been effectively stayed
by agreement of the parties involved or by court order or such
judgement shall have been adequately bonded; or
(n) GUARANTEE:
(i) any representation or warranty made by Guarantor (if
applicable) is or proves to have been incorrect in any material
respect when made or deemed to be repeated or Guarantor (if
applicable) fails to make any payment or comply with any other
obligation under the Guarantee when due; or
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(ii) the Guarantor (if applicable) repudiates, revokes or claims
that it has no further obligations under the Guarantee or the
Guarantee ceases to be in full force or, for any reason, ceases
to be the legal, valid and binding obligation of Guarantor (if
applicable); or
(iii) any of the events listed in paragraph (f) or (g) above occurs
in respect of Guarantor (if applicable) (and for purposes of
this paragraph(s), references in those paragraphs to Lessee
shall be deemed to be references to Guarantor); or
(o) TRANSFER/LESSEE REQUIREMENTS: Lessee makes or permits any assignment
or transfer of the Lease, or any interest herein, or of the right to
possession of the Engine or any Part, or any obligations under the
Lease, or Lessee subleases the Engine, in any case except as expressly
permitted in the Lease;
(p) ENGINE LOSS: Lessee fails to timely comply with its obligations under
Section 11.1(b) with respect to an Event of Loss; or
(q) RELATED AIRFRAME DEFAULT: A default shall have occurred and be
continuing under any lease or financing arrangement for any Related
Airframe, and as a result there is a material risk that title to the
Engine could be lost by Lessor or possession of the Engine could be
lost by Lessee.
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SCHEDULE 10
FORM OF LEASE TERMINATION CERTIFICATE
The undersigned hereby certify that the Master Engine Lease Agreement dated as
of _________, ____ between the undersigned Lessor and undersigned Lessee, and as
further described in the Appendix attached hereto, has terminated in respect of
the Engines identified on Exhibit A hereto (except as described in Section 15.1
of the CTA attached thereto) and such aircraft engines are no longer subject to
the terms thereof. This certificate may be executed in one or more counterparts
each of which when taken together shall constitute one and the same instrument.
DATED this __________ day of ____________________, __________
LESSOR LESSEE
[ INSERT LESSOR'S NAME ] [ INSERT LESSEE'S NAME ]
By: By:
---------------------------- ------------------------------
Title: Title:
-------------------------- ----------------------------
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SCHEDULE 11
GE Engine Leasing,
GE Capital Aviation Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: GE Engine Leasing General Counsel
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Gentlemen/Ladies:
The undersigned is the owner and lessor to [INSERT NAME OF LESSEE] of the
[INSERT MAKE AND MODEL OF AIRFRAME] airframe bearing manufacturer's serial
number ___________ (the "AIRFRAME").
Alternate first sentence: The undersigned
holds a security interest in the [INSERT MAKE AND MODEL OF AIRFRAME] airframe
bearing manufacturer's serial number ____________ (the "AIRFRAME"), operated by
[INSERT NAME OF LESSEE].
We understand that you will lease to [INSERT NAME OF LESSEE] the [INSERT MAKE
AND MODEL OF ENGINE] aircraft engine bearing manufacturer's serial number
____________ (the "ENGINE"), which may be installed on the Airframe.
We hereby agree that we shall recognize your rights and interests in, and
the rights and interests of [INSERT NAME OF HEAD LESSOR/FINANCING PARTY, IF ANY
(THE "THIRD PARTY")] in the Engine installed on the Airframe and,
notwithstanding any contrary provisions of applicable laws, our rights and
benefits under which are hereby waived to the extent in conflict with this
letter, we shall not claim, as against you or the Third Party, any right, title
or interest in the Engine as a result of the Engine being installed on the
Airframe.
This letter shall be governed by and construed in accordance with the laws
of the State of New York, USA.
[INSERT NAME OF LESSOR/SECURITY HOLDER]
By:
--------------------
Title:
------------------
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SCHEDULE 12
FORM OF ENGINE LEASE SUPPLEMENT
ENGINE LEASE SUPPLEMENT NO. __, dated ___________, ______, between AVIATION
FINANCIAL SERVICES INC., a corporation organized under the laws of
______________ ("Lessor"), and CHAUTAUQUA AIRLINES, INC., a corporation
organized under the laws of the State of New York ("Lessee").
Lessor and Lessee have previously entered into that certain Engine Lease
Agreement dated as of December __, 2001, including the CTA as defined therein
(collectively, herein referred to as the "Lease" and the defined terms therein
being hereinafter used with the same meaning). The Lease provides for the
execution and delivery from time to time of an Engine Lease Supplement
substantially in the form hereof for the purpose of leasing the engine described
below under the Lease as and when delivered by Lessor to Lessee in accordance
with the terms thereof.
The Lease and this Engine Lease Supplement relate to the Engines and Parts
as more precisely described below and in the Certificate of Acceptance. A
counterpart of the Lease is attached hereto and this Engine Lease Supplement and
the Agreement shall form one document.
In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts, acknowledges receipt of possession and leases from Lessor under
the Lease, that certain AE3007A1P aircraft Engine (which Engine has 750 or more
rated takeoff horsepower or the equivalent of such horsepower) described in the
Annex hereto, together with the Engine Documents described in the Lease (the
"Delivered Engine").
2. The Delivery Date of the Delivered Engine is the date of this Engine Lease
Supplement set forth in the opening paragraph hereof.
3. The Term for the Delivered Engine shall commence on the Delivery Date and
shall end on the Expiry Date, which shall be _____________[insert date].
4. The amount of Rent for the Delivered Engine is set forth in Schedule B to
the Engine Lease Agreement.
5. Lessee hereby confirms to Lessor that (i) the Delivered Engine have been
duly marked in accordance with the terms of Section 8.6(a)(i) of the CTA, (ii)
the Engine is insured as required by the Lease, (iii) the representations and
warranties of Lessee referred to in Section 2.1 of the CTA are hereby repeated
with effect as of the date first above written, (iv) having inspected the
Delivered Engine, Lessee acknowledges that the Delivered Engine satisfies all
conditions required for Lessee's acceptance of delivery as set forth in the
Lease or as otherwise expressly set forth in the Certificate of Technical
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Acceptance, and (v) the execution and delivery of this Engine Lease Supplement
signifies absolute and irrevocable acceptance by Lessee of the Delivered Engine
for all purposes hereof and of the Lease.
6. All of the terms and provisions of the Lease are hereby incorporated by
reference in this Engine Lease Supplement to the same extent as if fully set
forth herein.
7. This Engine Lease Supplement may be executed in any number of counterparts;
each of such counterparts, shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and the same Engine
Lease Supplement.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Engine Lease
Supplement No. __ to be duly executed as of the day and year first above
written.
LESSOR, LESSEE,
[INSERT LESSORS NAME] [INSERT LESSEE'S NAME]
By: By:
----------------------------- -----------------------------
`Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
13-2
ANNEX
DESCRIPTION OF ENGINE
Manufacturer Manufacturer's Model Manufacturer's
Serial No.
--------------------------------------------------------------------------------
Rolls Royce AE 3007A1P CAE 311
Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of
such horsepower.
13-3
SCHEDULE 13
FORM OF LETTER OF CREDIT
IRREVOCABLE STANDBY LETTER OF CREDIT
BENEFICIARY:
[Name of Lessor]
Attention: ______________
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
This Letter of Credit is provided in connection with the leasing of [engine
type and serial no.], by [Name of Lessor] to Chautauqua Airlines, Inc. This
letter of credit however creates primary obligations on us and is
independent of the lease.
At the request of Chautauqua Airlines, Inc. ("CUSTOMER") for account of same,
we hereby establish this irrevocable Letter of Credit to authorise you to
draw on _____ _____ an amount or amounts not exceeding in aggregate USD
_____ ( _____ United States Dollars) upon receipt by us of the following
demand certificate from [Name of Lessor] ("BENEFICIARY"):
"The undersigned is an authorised signatory of [Name of Lessor] ("BENEFICIARY").
Beneficiary hereby draws upon your irrevocable Letter of Credit dated _____
_____ . Beneficiary hereby instructs you to transfer US$ _____ ( _____
United States Dollars) to [INSERT APPROPRIATE BANK DETAILS], immediately,
with telex confirmation to us of such payment."
We hereby agree with you that drawings drawn under and in compliance with the
terms of this Letter of Credit received on or prior to _____ _____ will be
duly honoured upon receipt by us of such a demand certificate. Partial
drawings are permitted.
If a drawing by you hereunder does not, in any instance, conform to the
provisions of this Letter of Credit, we shall give you prompt notice that
the purported drawing was not effected in accordance with such provisions,
stating the reasons therefor, and that we are holding any documents
presented in connection therewith at your disposal or are returning the
same to you, as we may elect.
This Letter of Credit is transferable and constitutes an obligation to make
payment against documents. Except to the extent the express provisions
hereof conflict, this Letter of Credit is issued subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision) International
Chamber of Commerce Publication No. 500 ("UNIFORM CUSTOMS").
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As to matters not expressly governed by the Uniform Customs this Letter of
Credit is governed by and shall be construed in accordance with the laws of
the state of California, United States and any disputes arising out of or
in connection with this Letter of Credit shall be resolved before the
United States District Court for the Northern District of California and
any California state court sitting in the City of San Francisco,
California.
13-2
Signed.
---------------------- ----------------------
Authorised Signature Authorised Signature
13-3
SCHEDULE 14
FORM OF LETTER OF QUIET ENJOYMENT
From:_________("[Owner]/[Financing Party]")
To: Chautauqua Airlines, Inc. ("Lessee")
[Date]
Dear Sirs,
RE: Rolls Royce _____________ Aircraft Engine Manufacturer's Serial Number
_______ (the "Engine")
Engine Lease Agreement dated [ ] as amended, supplemented or modified from
time to time (the "Lease") between ___________ ("Lessor") and the Lessee.
1. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Lease.
2. In consideration of your entering into the Engine Lease Agreement dated [ ]
and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, we confirm to you that so long as no Event
of Default has occurred and is continuing under the Lease,
[Owner]/[Financing Party] will not interfere with Lessee's right to quiet
use and possession of the Engine during the Term.
3. The foregoing undertaking is not to be construed as restricting any rights
of [Owner]/[Financing Party] to dispose of the Engine to such persons and
on such terms as [Owner]/[Financing Party] considers appropriate, subject
to the Lease.
14-1
4. The rights conferred by this letter are granted only to the Lessee and do
not extend to any assignee or sub-lessee of the Lessee.
5. This letter shall be governed by and construed in accordance with the laws
of California.
14-2
Please countersign this letter in order to confirm your agreement to the
arrangements contained herein.
[[Owner]/[Financing Party]]
By:
--------------------
Name:
Title:
Accepted and Agreed this ___ day of ____, 20___
for and on behalf of
Chautauqua Airlines, Inc.
By:
--------------------
Name:
Title:
14-3
14-4
