Exhibit 10.35
LEASE AGREEMENT
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee,
as Lessor
XXXXXX FINANCIAL LEASING, INC.,
as Owner Participant
and
FRONTIER AIRLINES, INC.,
as Lessee
Relating to one (1) Boeing 737-3U3 Aircraft
Manufacturer's Serial No.: 28738
U.S. Registration No. N308FL
Dated as of November 23, 1998
This Lease Agreement has been executed in several counterparts. To the extent,
if any, that this Lease Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the original
executed counterpart containing the receipt executed by Lessor or, if Lessor has
assigned its rights to a third party in accordance with this Lease Agreement,
such third party on the signature page of this Lease Agreement.
Vedder, Price, Xxxxxxx & Kammholz
Chicago, Illinois
TABLE OF CONTENTS
Page
SECTION 1. Definitions; Construction of Terms 1
(a) General Definitions 1
(b) Construction 15
SECTION 2. Lease of Aircraft 16
(a) Agreement to Lease 16
(b) Delivery Conditions; Inspections 16
(c) Changes in Delivery Date; Limitation of
Lessor's Obligation to Deliver Aircraft 17
(d) Bridging Maintenance 18
SECTION 3. Lease Term; Rent; Payments 18
(a) Lease Term 18
(b) Basic Rent and Renewal Rent 19
(c) Supplemental Rent 19
(d) Security Deposit 19
(e) Payments in General 21
(f) No Deductions or Withholdings 22
SECTION 4. Conditions Precedent 22
(a) Delivery of Aircraft 22
(b) Delivery Conditions 22
(c) Approved Maintenance Program 22
(d) [Intentionally reserved] 23
(e) Agreements and Documents 23
(f) Delivery Date Conditions 24
(g) Registration 25
(h) Necessary Government Actions 25
(i) No Government Actions 25
(j) No Change in Law 26
SECTION 5. Representations and Warranties 26
(a) Disclaimer; Representations, Warranties and
Covenants of Lessor and Owner Participant 26
(b) Lessee's Representations and Warranties 28
SECTION 6. Certain Covenants of Lessee 31
(a) Maintenance of Corporate Existence;
Duly Qualified; Certificated Air Carrier 31
(b) Merger or Consolidation 32
(c) Reporting Requirements 32
(d) Government Approvals 33
(e) Taxes 33
(f) Place of Business 34
(g) Filings 34
(h) Approved Maintenance Program 34
SECTION 7. Return of the Aircraft 34
(a) Date and Location of Return 34
(b) Condition of Aircraft 34
(c) Final Inspection 34
(d) Operational Ground Check 35
(e) Demonstration Flight 36
(f) Technical Acceptance 36
(g) Failure to Return Aircraft 36
(h) Transition 37
SECTION 8. Liens 37
(a) No Liens 37
(b) Removal of Liens 38
(c) No Adverse Action 38
SECTION 9. Indemnities 39
(a) General Indemnity 39
(b) Exceptions to General Indemnity 39
(c) Taxes 40
(d) [Intentionally reserved] 44
(e) Scope, Survival, Etc 44
(f) Gross-Up for Taxes on Indemnity Payments 45
(g) Tax Contests 45
SECTION 10. Title; Registration; Maintenance and
Operation; Insignia 47
(a) Title to the Aircraft 47
(b) Registration 47
(c) Maintenance 48
(d) Operation 51
(e) Insignia 52
(f) Costs of Operation 53
(g) Payment of Flight Charges 53
(h) Loss or Damage 53
(i) Cost Sharing 54
SECTION 11. Possession 54
(a) Maintenance, Etc 54
(b) Installation of Engines on Other Airframes 55
(c) Pooling; Sublease. 55
(d) Transfers of Possession in General 56
SECTION 12. Replacement of Parts, Alterations,
Modifications and Additions 57
(a) Replacement of Parts 57
(b) Modifications 58
SECTION 13. Risk of Loss, Destruction, Requisition, Etc 60
(a) Risk of Loss 60
(b) Event of Loss With Respect to the Aircraft 60
(c) Event of Loss With Respect to an Engine 61
(d) Application of Payments From any Government
Entity for Requisition of Title, Etc 62
(e) Application of Payments During Existence
of Default 63
SECTION 14. Maintenance Reserves. 63
(a) Amount 63
(b) Payments 64
(c) Release of Maintenance Reserves 64
SECTION 15. Insurance 65
(a) Requirements 65
(b) Application of Proceeds of Hull Insurance 65
(c) Insurance for Indemnities;
Continuation of Liability Insurance 66
(d) Reports, Etc 66
(e) Self-Insurance 66
(f) Additional Insurance 66
(g) Application of Payments During
Existence of a Default 67
(h) Change of Practice or Insurers 67
(i) Change of Circumstance 67
(j) Negative Undertakings 68
(k) Failure to Insure 68
SECTION 16. Inspection 68
(a) Maintenance Schedule 68
(b) Reasonable Inspections 69
(c) No Duty to Inspect 69
(d) Follow-On Lease 69
(e) Absolute Right 69
SECTION 17. Assignment 69
(a) Assignment by Lessee 70
(e) Collateral Assignment 71
(g) Successors and Assigns 73
SECTION 18. Early Termination 73
SECTION 19. Events of Default 73
(a) Failure to Pay Basic Rent,
Renewal Rent or Stipulated Loss Value 74
(b) Failure to Pay Supplemental Rent 74
(c) Insurance 74
(d) Return 74
(e) Unauthorized Transfer 74
(f) Certain Covenants 74
(g) Other Covenants 74
(h) Representations and Warranties 75
(i) Authorizations 75
(j) Voluntary Bankruptcy, Etc 75
(k) Involuntary Bankruptcy, Etc 75
(l) Indebtedness 75
(m) Government Action 76
(n) Judgments 76
(o) Cross Default 76
(p) Adverse Change 76
(q) Letter of Credit. 76
SECTION 20. Remedies 76
(a) Retake Possession 77
(b) Termination or Enforcement 77
(c) Application of Funds 77
(d) Damages 78
SECTION 21. Transaction Expenses 78
SECTION 22. No Setoff, Counterclaim, Etc 78
SECTION 23. Further Assurances, Etc 81
(a) Further Assurances 81
(b) Lessor's Performance of Lessee's Obligations 81
(c) No Implied Waivers; Rights Cumulative 81
(d) Warranties 82
SECTION 24. Confidentiality 82
SECTION 25. Governing Law and Jurisdiction 83
(a) Governing Law 83
(b) Nonexclusive Jurisdiction in Illinois 83
SECTION 26. Miscellaneous 84
(a) Amendments 84
(b) Severability 84
(c) Counterparts 84
(d) Chattel Paper 84
(e) Time of the Essence 84
(f) Notices 84
(g) Entire Agreement 85
EXHIBITS AND SCHEDULES
Exhibit A Technical Acceptance Certificate
Exhibit B Basic Rent
Exhibit C Form of Lease Supplement
Exhibit D Intentionally Omitted
Exhibit E Insurance Requirements
Exhibit F Intentionally Omitted
Exhibit G Intentionally Omitted
Exhibit H Intentionally Omitted
Exhibit I Form of Aircraft Status Report
Schedule 1 Permitted Jurisdictions
Schedule 2 Delivery Conditions
Annex A Delivery Receipt
Attachment 1 Aircraft Status
Attachment 2 Aircraft Documentation
Schedule 3 Addresses and Accounts
Schedule 4 Filings and Recordings
Schedule 5 Return Conditions
Annex A Redelivery Receipt
Attachment 1 Return Documentation
Attachment 2 Aircraft Status
[Lease Agreement]
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of November 23, 1998 (this "Agreement"
or this "Lease"), is between FRONTIER AIRLINES, INC., a Colorado corporation
having its principal place of business at 00000 X. 00xx Xxxxxx, Xxxxxx, Xxxxxxxx
00000 ("Lessee") and FIRST SECURITY BANK, NATIONAL ASSOCIATION not individually,
but solely as trustee under that certain Trust Agreement dated as of November
23, 1998 between itself and Xxxxxx Financial Leasing, Inc. ("Lessor"), and
XXXXXX FINANCIAL LEASING, INC., a corporation organized under the laws of the
State of Delaware ("Owner Participant").
WITNESSETH:
WHEREAS, Lessee desires, upon the terms and conditions hereof, to lease
the Aircraft (as defined below) from Lessor, and Lessor is willing, upon the
terms and conditions hereof, to lease the Aircraft to Lessee.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions; Construction of Terms.
(a) General Definitions. The following terms shall have the
following meanings for all purposes of this Agreement:
"AD" shall mean any airworthiness directive issued by the
Aviation Authority or mandatory SB.
"Additional Parts" has the meaning specified in Section 12(b)
(ii)(z).
"Affiliate" shall mean, in relation to a Person, any other
Person directly or indirectly controlling, controlled by or under common control
with that Person.
"Aircraft" shall mean, collectively, the Airframe (including
the APU) and the Engines and, unless the context does not permit, the Aircraft
Documentation.
"Aircraft Documentation" shall mean, collectively, any and all
log books, records, manuals and other data or documents relating to the Aircraft
which are delivered to Lessee in connection with the delivery of the Aircraft
and/or set forth on Attachment 1 to Annex A to Schedule 5 hereto and such
additional log books, records, manuals and other data or documents relating to
the Aircraft which are maintained by Lessee as required by the Aviation
Authority.
"Aircraft Status Report" shall mean a report substantially in
the form of Exhibit I hereto.
"Airframe" shall mean, collectively, (i) the Airframe
Manufacturer model 737-3U3 airframe (except only Engines or engines from time to
time installed thereon), bearing the Airframe Manufacturer's serial number and
the registration xxxx specified in Lease Supplement No. 1, leased hereunder by
Lessor to Lessee and (ii) any and all Parts so long as the same shall be
incorporated or installed in or attached to such airframe, and any and all Parts
removed therefrom so long as title to such removed Parts shall remain vested in
Lessor in accordance with the terms of Section 12.
"Airframe Manufacturer" shall mean The Boeing Company, a
Delaware corporation.
"Airworthiness Certificate" shall mean a valid, current
transport category airworthiness certificate issued in respect of the Aircraft
by the Aviation Authority.
"Airframe Cycle" shall mean, with respect to the Airframe, one
takeoff and landing thereof.
"Airframe Flight Hour" shall mean each hour or part thereof
elapsing from the moment the wheels of the Airframe leave the ground on takeoff
until the wheels of the Airframe touch the ground on landing following such
flight. For purposes of all calculations under this Agreement measured in
Airframe Flight Hours, such Airframe Flight Hours (and parts thereof) shall be
rounded to the nearest minute.
"Approved Maintenance Performer" shall mean Lessee or such
other maintenance performer, if any, which shall have a repair station license
and approval by the Aviation Authority and, with respect to maintenance
performers who are to accomplish Heavy Checks, Basic Shop Visits and/or Landing
Gear Overhauls, the Lessor.
"Approved Maintenance Program" shall mean Lessee's Aviation
Authority-approved written maintenance, inspection and repair program and
schedule for Boeing Model 737-3U3 aircraft, including Lessee's current approved
maintenance schedule, and the CPCP approved by the Aviation Authority, as such
maintenance, inspection and repair program is approved by Lessor pursuant to
Section 4(c), or such other written maintenance, inspection and repair program,
if any, as Lessor and Lessee shall agree in writing.
"APU" shall mean (i) the auxiliary power unit identified by
manufacturer's serial number in Lease Supplement No. 1 and (ii) any auxiliary
power unit substituted for such auxiliary power unit in accordance with this
Agreement.
"Authorizations" shall mean each and every approval, waiver,
authorization, consent, license, certificate or order of, or registration with,
or requirement for the giving of prior notice to, or the taking of any action in
respect of, the Aviation Authority, or any other Government Entity having
jurisdiction over Lessee, the operation of the Aircraft or any transactions
contemplated hereby or by any Operative Document.
"Aviation Authority" shall mean the United States Federal
Aviation Administration, and any person, governmental department, bureau,
commission or agency succeeding to all or any of such authority's functions.
"Base Rate" shall mean the rate of interest announced from
time to time by The First National Bank of Chicago as its prime commercial
lending rate (or its equivalent successor rate if the prime commercial lending
rate is no longer used).
"Basic Lease Term" shall be the period from and including the
Delivery Date to but excluding the 40th monthly anniversary of the Rent
Commencement Date.
"Basic Rent" shall mean the rent payable during the Basic
Lease Term with respect to the Aircraft pursuant to Section 3(b)(i).
"Basic Rent Date" shall mean (i) the Rent Commencement Date
and (ii) each monthly anniversary of the Rent Commencement Date (provided that
if there is no corresponding date in a particular month, the Basic Rent Date for
such month shall be the last day of such month) occurring during the Basic Lease
Term.
"Basic Term Expiry Date" shall mean the date forty (40) months
following the Rent Commencement Date.
"Basic Shop Visit" shall mean, with respect to any Engine or
the APU, any shop visit, as defined by the Engine Manufacturer or the APU
manufacturer, as the case may be, that is based on an approved program of
condition monitoring and trend monitoring of performance deterioration that
results in an Engine or APU, as the case may be, being restored to full
performance standard.
"Basis point" shall mean 1/100 of 1%.
"Break Amount"shall mean, with respect to any termination of
the Lease prior to the Expiry Date pursuant to Section 20 hereof, an amount
equal to the sum of the present values calculated pursuant to the following
formula:
(A - B)/12 x C where:
A = The yield, as published by the Federal
Reserve System in its "Statistical Release H.15
(519), Selected Interest Rates" under the caption
"U.S. Government Securities/Treasury Constant
Maturities," for a U.S. Government Security having a
maturity on the Basic Term Expiry Date (which may be
obtained by interpolating between the yields
published for whole years), on the Delivery Date;
B = The yield, as published by the Federal
Reserve System in its "Statistical Release H.15
(519), Selected Interest Rates" under the caption
"U.S. Government Securities/Treasury Constant
Maturities," for a U.S. Government Security having a
maturity on the Basic Term Expiry Date (which may be
obtained by interpolating between the yields
published for whole years), on the date of
determination of such Break Amount; and
C = The amount of Stipulated Loss Value
which would have been outstanding on the date of
determination of such Break Amount and on the first
day of each month thereafter throughout the Basic
Lease Term had no termination of this Agreement
occurred.
The present value of each of the amounts calculated above will be obtained by
discounting each amount at the monthly equivalent of the rate obtained in clause
B above for the number of whole months from the date of termination of this
Agreement to the Basic Term Expiry Date (all percentages shall be rounded to the
nearest one hundred thousandth percent and Dollar amounts to the nearest whole
Dollar). In no event shall Break Amount be a negative number. Break Amount shall
be zero during any Renewal Term.
"Business Day" shall mean a day (other than a Saturday or
Sunday) on which banks are not required or authorized to close in Salt Lake
City, Utah or Chicago, Illinois.
"Cabin" shall mean the passenger compartment and all doors,
windows, interior panels, storage bins, lights, seats, seat covers, carpets,
lavatories, galleys, galley equipment, closets, flight attendant seats,
passenger communications and entertainment systems, emergency and miscellaneous
equipment, seat tracks and floor areas.
"Certificate of Registration" shall mean the certificate of
registration issued by the Aviation Authority in respect of the Aircraft.
"Certificated Air Carrier" means a Citizen of the United
States holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the United States Bankruptcy Code.
"Commitment Termination Date" shall mean December 31, 1998.
"CPCP" shall mean a Corrosion Prevention and Control Program
and/or Aging Aircraft Program that establishes minimum requirements for the
Aircraft, incorporating, among other things, the recommendations of the Airframe
Manufacturer and the mandatory requirements established by the Approved
Maintenance Program.
"Cycle" shall mean an Airframe Cycle or an Engine Cycle, as
indicated by the context.
""D" Check" means a "D" Check, as such term is defined in the
Approved Maintenance Program relating to the Aircraft or an equivalent check
that meets the requirements of a "7C" Check as defined in the Boeing 737
Maintenance Planning Document (MPD); or such other structural check which shall
then be the most significant maintenance check under the MPD.
"Default" shall mean any Event of Default or any condition,
circumstance, act or event which, upon the giving of notice, the passage of time
and/or the fulfillment of any other condition would constitute or give rise to
an Event of Default.
"Delivery" shall have the meaning set forth in Section 2(b).
"Delivery Conditions" shall mean the requirement for the
condition of the Aircraft on delivery, as set forth in Schedule 2.
"Delivery Date" shall mean the date, local time at the
Delivery Location, on which the Aircraft is delivered by Lessor and accepted by
Lessee pursuant to this Agreement as such date is set forth in Lease Supplement
No. 1.
"Delivery Location" shall mean the Airframe Manufacturer's
delivery facility in Seattle, Washington, or such other location, if any, as
Lessor, Owner Participant and Lessee shall agree, in writing.
"Delivery Receipt" shall have the meaning specified in Section
4(e)(iii).
"Dollars" and "US$" mean the lawful currency of the United
States of America.
"Engine" shall mean (i)(y) either of the Engine Manufacturer
Model CFM56-3C-1 engines listed by Engine Manufacturer's serial numbers in Lease
Supplement No. 1 and originally installed on the Airframe at the time of
delivery to Lessee hereunder whether or not from time to time thereafter
installed on the Airframe or installed on any other airframe and (z) any
Replacement Engine which may from time to time be substituted, pursuant to the
terms hereof, for either of such engines, and (ii) in each case, any and all
Parts incorporated or installed in or attached thereto or any and all Parts
removed therefrom so long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 12 after removal from such Engine, provided
that at such time as an engine shall be deemed part of the property leased
hereunder in substitution for an Engine, pursuant to the applicable provisions
hereof, the replaced Engine shall cease to be an Engine hereunder. The term
"Engines" shall mean, as of any date of determination, all Engines then leased
hereunder.
"Engine Cycle" shall mean, with respect to any Engine, one
takeoff and landing of the airframe (including, without limitation, the
Airframe) on which such Engine is from time to time installed.
"Engine Flight Hour" shall mean each hour or part thereof
elapsing from the moment the wheels of the airframe (including, without
limitation, the Airframe) on which such Engine is from time to time installed
leave the ground on takeoff until the wheels of such airframe touch the ground
on landing following such flight. For purposes of all calculations under this
Agreement measured in Engine Flight Hours, such Engine Flight Hours (and parts
thereof) shall be rounded to the nearest minute.
"Engine Manufacturer" shall mean CFM International, Inc.
"Event of Default" has the meaning specified in Section 19.
"Event of Loss" shall mean, with respect to the Aircraft, the
Airframe or any Engine, any of the following events, conditions or circumstances
with respect to such property:
(i) the actual or constructive loss of such property
or the use thereof due to the destruction of or damage to such
property which renders repair uneconomical or which renders
such property permanently unfit for normal use by Lessee or
Lessor;
(ii) any damage to such property or other occurrence
which results in an insurance settlement with respect to such
property on the basis of a total loss or a constructive,
compromised, arranged or agreed total loss;
(iii) the confiscation, condemnation, seizure,
forfeiture or requisition of the title to such property
(for any reason whatsoever and whether de jure or de facto),
other than as set forth in clause (v) below);
(iv) the disappearance, hijacking or theft (including
a seizure of title or use not otherwise included in this
definition) of such property for a continuous period in excess
of ten (10) days (or, if less, the remaining Lease Term); and
(v) the confiscation, condemnation or seizure of, or
requisition by any Government Entity or purported Government
Entity of use or hire of such property which shall have
resulted in the loss of possession or use of such property by
Lessee for a continuous period in excess of thirty (30) days
(or, if less, the remaining Lease Term).
An Event of Loss with respect to the Aircraft shall be deemed to have occurred
if an Event of Loss occurs with respect to the Airframe. An Event of Loss with
respect to one or more Engines without loss of the Airframe shall not be deemed
an Event of Loss with respect to the Aircraft.
"Event of Loss Date" shall mean (i) with respect to any Event
of Loss set forth in clause (i) or (ii) of the definition of "Event of Loss,"
the earliest of (x) the date of actual loss, (y) the date on which the loss is
agreed, arranged or compromised by the insurers and (z) thirty (30) days after
the date of notice to Lessee's brokers or insurers claiming the loss, (ii) with
respect to any Event of Loss set forth in clause (iii) of the definition of
Event of Loss, the date such event, condition or circumstance occurs, or (iii)
with respect to any Event of Loss set forth in clause (iv) or (v) of the
definition of Event of Loss, the earlier of (y) the date on which insurers make
payment on the basis of a total loss and (z) the expiration of the period, or
the continuation of the condition or circumstance beyond the date, described
therein.
"Expense" shall mean any liabilities, obligations, losses,
damages (including, without limitation, damages for loss of life, injury to
persons or damage to any property), penalties, fines, sanctions, claims (whether
fraudulent, groundless, false or not), actions, suits, judgments, legal
proceedings (whether civil or criminal), costs, disbursements and expenses
(including reasonable legal fees and expenses, costs of investigation and
related expenses), in each case, of every kind and nature whatsoever (including,
without limitation any liability, obligation or claim arising in contract or
tort, whether or not arising from the negligence, actual, implied or imputed,
active or passive, or absolute or strict liability of an Indemnified Party or
any other Person or under any other theory).
"Expiry Date" shall mean the Basic Term Expiry Date or, if the
Renewal Lease Term shall be entered into, the date of expiry of the Renewal
Lease Term.
"Final Inspection" shall mean the inspection of the Aircraft
by Lessor and any other Inspecting Parties during any part of the inspections,
checks, and test flights required pursuant to Sections 7(c), 7(d) and 7(e) or
otherwise performed in connection with the Return.
"Final Maintenance" shall mean prior to the return of the
Aircraft on the last day of the Lease Term, the completion of the next scheduled
heavy maintenance check ("C" Check or above and, if applicable, multiples of
such checks falling due within a "C" Check maintenance interval) in respect of
the Aircraft under the Approved Maintenance Program (which check shall
incorporate all lower-level checks and any special repair items or special
inspections (including, without limitation, all applicable AD's that are
required to be accomplished in accordance with the terms of this Lease,
mandatory SB's and CPCP items) as well as inspections that have a frequency less
than a "C" Check and all cleaning and refurbishment that would be a normal part
of the Approved Maintenance Program were the Aircraft to continue in commercial
passenger service by Lessee.
"Flight Charges" shall mean all flight charges, route
navigation charges, navigation service charges and all other fees, charges or
Taxes payable for the use of or for services provided at any airport or
otherwise payable to any airport, airport authority, navigation or flight
authority or other similar entity or for any services provided in connection
with the operation, landing or navigation of aircraft.
"Follow-On Operator" shall mean any Person acquiring title to
or the right to use the Aircraft after the end of the Lease Term (whether or not
such Person is an airline or other operator).
"Force Majeure" shall mean delay or nonperformance due to or
arising out of acts of God or public enemy, civil war, insurrection or riot,
fire, flood, explosion, earthquake, accident, epidemic, quarantine restriction,
any act of government, governmental priority, allocation, regulation or order
affecting, directly or indirectly, the Aircraft, Lessor or Lessee or any
materials or facilities, strike or labor dispute causing cessation, slowdown or
interruption of work, inability after due and timely diligence to procure
equipment, data or materials from suppliers in a timely manner, or any other
cause (including unforeseen maintenance) to the extent that such cause is beyond
the control of Lessor or Lessee whether above mentioned or not and whether or
not similar to the foregoing.
"GAAP" shall mean generally accepted accounting principles as
shall from time to time be in effect in the Lessee Jurisdiction, as such
principles may at any time or from time to time be varied by any applicable
financial accounting rules and, with respect to any Person, shall mean such
principles applied on a basis consistent with prior periods.
"Government Entity" shall mean (i) any national, state or
local government of any country, any territory or possession of any country, or
any international authority (including, without limitation, in each case, any
central bank or fiscal, tax or monetary authority), (ii) any board, commission,
department, division, instrumentality, court, agency, territory, possession or
political subdivision of any entity described in clause (i) above, however
constituted, (iii) any association, organization or institution of which any
entity described in clause (i) or (ii) above is a member or to whose
jurisdiction any thereof is subject or in whose activities any thereof is a
participant and (iv) any taxing authority of any entity described in clause (i),
(ii) or (iii) above.
"Hour" shall mean an Airframe Flight Hour or an Engine Flight
Hour, as indicated by the context.
"Indebtedness" means all obligations of Lessee that would, in
accordance with GAAP, be shown as a liability on Lessee's balance sheet, and in
any footnotes or notations thereto, including, without limitation, (i)
obligations for the repayment of monies borrowed or raised, (ii) obligations
under finance leases, hire-purchase arrangements, conditional sale agreements
and other obligations for the deferred purchase price of property, (iii)
guarantees, direct or indirect, of the obligations of any other Person,
including any such obligations secured by a Lien on any property of Lessee, (iv)
indemnity and reimbursement obligations, including any such obligations arising
to any issuer of a letter of credit or similar instrument, and (v) obligations
to purchase or otherwise acquire any indebtedness of, or to advance monies to or
on behalf of, or make any investment in any other Person.
"Indemnified Party" shall mean Lessor, in its individual and
trust capacities, Owner Participant and each Inspecting Party (but, as to an
Inspecting Party, only in connection with an inspection pursuant to Section
7(c)) and each of their respective Affiliates, and the successors and permitted
assigns of each of the foregoing and the directors, officers, corporate
stockholders, partners, employees, servants and agents of each of the foregoing.
"Inspecting Party" shall have the meaning specified in Section
7(c)(i).
"Insurance Brokers" shall mean any independent firm of
internationally recognized insurance brokers reasonably acceptable to Lessor.
"Insured Party" shall mean each Indemnified Party.
"Landing Gear" shall mean (i) each landing gear assembly of
the Aircraft identified by serial number in Lease Supplement No. 1 and (ii) any
landing gear assembly substituted for any such identified landing gear assembly
in accordance with this Agreement.
"Landing Gear Overhaul" means any full overhaul of any Landing
Gear to full manufacturer specification and operating condition, and, for the
avoidance of doubt, "full overhaul" does not mean only the replacement, repair
or overhaul of any rotable components, but includes any cleaning or replacement
of seals, any repair of brakes, wheels or tires, brake rods, struts or braces,
in each case, that occurs any more frequently than a full overhaul.
"Lease Supplement" shall mean any lease supplement entered
into in accordance with the terms hereof to this Agreement substantially in the
form of Exhibit C; "Lease Supplement No. 1" to be entered into between Lessor,
Owner Participant and Lessee on the Delivery Date for the purpose of leasing the
Aircraft under and pursuant to the terms of this Agreement.
"Lease Term" shall mean the Basic Lease Term and the Renewal
Lease Term.
"Lender" means each of (a) any person or persons as the Lessor
may from time to time advise Lessee in writing to be the person or persons
providing finance to the Lessor to assist it in purchasing, funding or
refinancing the purchase by the Lessor of the Aircraft and including, where the
context so admits or requires, any agent or trustee for any one or more of such
persons; and (b) any of the respective successors, permitted assigns or
permitted transferees of any one or more of any such persons.
"Lessee Jurisdiction" shall mean the United States.
"Lessor Lien" shall mean any Lien of any Person claiming by,
through or under Lessor or Owner Participant which arises from any act or
omission of Lessor or Owner Participant, other than any Lien created or
permitted hereby or by any other Operative Document.
"Letter of Credit" shall have the meaning specified in Section
3(d).
"Letter of Credit Bank" shall have the meaning specified in
Section 3(d)(ii).
"Letter of Credit Deposit" shall have the meaning specified in
Section 3(d)(iii).
"Lien" means any mortgage, pledge, lien, charge, encumbrance,
hypothecation, lease, sublease, seizure, exercise of rights, security interest,
judgment, writ, order or other claim or right of possession of any kind or
nature whatsoever, however and wherever created or arising and whether or not
consensual (including, without limitation, any agreement or arrangement to give
or effect any of the foregoing and any conditional sale or other title retention
agreement).
"Life Limited Component" shall mean any part or component on
the Aircraft for which the manufacturer has specified a certain life in either
calendar time, Cycles or Hours accumulated after which such part or component
must be replaced.
"Maintenance Planning Document" shall mean the Boeing 737
maintenance planning document.
"Maintenance Reserves" shall have the meaning assigned thereto
in Section 14(a).
"Major Checks" shall mean any "D" check, "C" check, multiple
"C" check (including all lower checks and all other items that are due before
the next "C" check), heavy structural inspection (or equivalent), structural
inspection or annual heavy maintenance visit or segment thereof suggested for
commercial aircraft of the same model as the Aircraft by the Airframe
Manufacturer as set out in the Approved Maintenance Program.
"Major Modifications" includes, but shall not be limited to:
(i) changes that alter the fundamental nature of the Aircraft as a passenger and
cargo carrying aircraft or Cabin modifications that materially change the
interior layout of the Aircraft, (ii) changes to the Aircraft structure or
performance of the Aircraft, (iii) changes that adversely affect
interchangeability or replaceability of Parts, (iv) substitution of different
types of equipment or accessories which are not equivalent in cost, value,
remaining useful life and/or operational capability to the equipment or
accessories being replaced, (v) changes that invalidate or impair any warranty
with respect to the Aircraft or any Engine or Part, (vi) changes that adversely
affect the eligibility of the Aircraft to obtain an Airworthiness Certificate
from the Aviation Authority or (vii) any changes that result in a variation from
the original type certificate for the Aircraft, but shall exclude changes
pursuant to ADs and SBs provided by the Airframe Manufacturer which have
Aviation Authority approval and all Required Modifications.
"Modification" shall mean any modification, addition,
alteration, removal or other change, including, without limitation, ADs and SBs,
to the Airframe, any Engine or any Part.
"Operative Documents" shall mean this Agreement, each Lease
Supplement, the Trust Agreement and any other document, agreement or instrument
to which Lessee is a party, or to which it consents in writing, or which is
delivered by or on behalf of Lessee and which is entered into or delivered in
connection with any of the foregoing or with any of the transactions
contemplated by the foregoing.
"Parts" shall mean any and all appliances, parts, components,
modules, communications equipment, computers, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (including the
APU, the Landing Gear but excluding complete Engines or engines) which may from
time to time be incorporated or installed in or attached to the Airframe or any
Engine, so long as title thereto shall remain vested in Lessor, in accordance
with the terms hereof.
"Past Due Rate" shall mean a rate per annum equal to 5% over
the Base Rate.
"Permitted Jurisdiction" shall mean any country listed in
Schedule 1.
"Permitted Lien" shall mean any Lien referred to in clauses
(i) through (vi) of Section 8(a).
"Person" shall mean any individual, corporation, trust,
partnership, unincorporated association, joint venture, association, joint-stock
company, government or Government Entity.
"Proposal Letter" shall mean the Letter Agreement between
Lessee and Owner Participant dated October 23, 1998.
"Purchase Agreement" shall mean the Purchase Agreement Number
2198 between Xxxxxx Financial, Inc and the Airframe Manufacturer dated September
16, 1998.
"Reconfiguration" shall mean configure to 136 coach passenger
seats with flotation type seat bottom cushions and provide LOPA and
certification for interior reconfiguration; rearrange cabin emergency equipment;
paint aircraft exterior to conform to Frontier provided drawings; replace
existing Allied Signal wheels and brakes with Xxxxxxxx; convert fuel related
systems to U.S. standards; reprogram the Electronic Flight Instrument System
(EFIS), Electronic Horizontal Situation Indicator (EHSI), Flight Management
System (FMS), and the Ground Proximity Warning System (GPWS); perform Boeing
Service Bulletin ###-##-#### to operate CFM56-3C1 engines at 20,000 pounds
thrust; deactivate ACARS; deactivate the HF communications system; reprogram the
SelCal decoder; deactivate the passenger video and audio entertainment systems;
deactivate the prerecorded passenger announcement system; replace control wheel
switches with switches that are spring loaded to the OFF position; load the
Frontier provided FMS Navigational Data Base; and such other reconfiguration
items as may be agreed upon in advance by Lessor.
"Renewal Rent" shall mean the rent payable for the Aircraft
during the Renewal Lease Term, if any, determined pursuant to Section 3(b)(ii).
"Renewal Rent Date" shall mean with respect to the Renewal
Lease Term, if any, (i) the Basic Term Expiry Date, and (ii) each monthly
anniversary of the Rent Commencement Date (provided that if there is no
corresponding date in a particular month, the Renewal Rent Date for such month
shall be the last day of such month) occurring during the Renewal Lease Term.
"Renewal Lease Term" shall mean the period, if any, for which
the leasing of the Aircraft hereunder has been renewed pursuant to Section
3(a)(ii).
"Rent" shall mean, collectively, Basic Rent, Renewal Rent and
Supplemental Rent.
"Rent Commencement Date" shall mean the later of (i) December
15, 1998 and (ii) the date of completion of the Reconfiguration, provided that
this clause (ii) shall not extend beyond the fifteenth (15th) day following the
Delivery Date.
"Replacement Engine" shall mean an Engine Manufacturer model
CFM56-3C-1 engine (or an improved model having a modification status, value and
utility at least equal to such an Engine Manufacturer model CFM56-3C-1 engine)
(including, without limitation, all warranty rights with respect to such engine)
suitable for installation and use on the Airframe without impairing the value or
utility of the Aircraft, and with neither Engine Flight Hours nor Engine Cycles
since the last Basic Shop Visit greater than the Engine Flight Hours or Engine
Cycles of the Engine it is replacing (and with an equal or greater life
remaining on each Life Limited Component), and which has a value and utility at
least equal to the Engine it is replacing (assuming such Engine was in the
modification status, condition and repair required by the terms hereof
immediately prior to being replaced) and which has been maintained, serviced,
repaired and overhauled in substantially the same manner as is required under
this Agreement as to "Engines" and without discrimination in any way, title to
which shall have been conveyed to Lessor pursuant to the terms hereof, together
with all Parts relating to such Engine so long as the same shall be incorporated
or installed in or attached to such Engine leased hereunder, and any and all
Parts removed therefrom so long as title to such removed Parts shall remain
vested in Lessor in accordance with the terms hereof.
"Required Modifications" has the meaning specified in Section
10(c)(ii)(B).
"Return" shall mean the return of the Aircraft by Lessee to
Lessor at the Return Location in the condition and manner required by Section 7
and the other provisions of this Agreement and the other Operative Documents, as
evidenced by the execution by Lessor, and the delivery to Lessee, of the Return
Receipt referred to in Section 7(f).
"Return Date" shall mean the date upon which the Aircraft is
returned to Lessor pursuant to and in accordance with Section 7 hereof.
"Return Location" shall mean such location in the United
States as may be designated by Lessor, or such other location as shall be
mutually agreed between Lessor and Lessee.
"Return Receipt" shall have the meaning specified in Section 7
(f).
"SB" shall mean any service bulletin or service letter as
issued by the Airframe Manufacturer, Engine Manufacturer or the manufacturer of
any appliances or Parts.
"Scheduled Delivery Date" shall mean November 23, 1998 (local
time at the Delivery Location), or if such date is not a Business Day, the next
succeeding Business Day (such date to be extended in the event of a delay in the
delivery of the Aircraft as a result of additional work being performed on the
Aircraft at the request of Lessee), provided that if the conditions precedent of
Lessor contained in Section 4 hereof are not met, or waived by Lessor, on such
date, (i) Lessor and Lessee shall cooperate and, as applicable, use reasonable
efforts to satisfy such conditions precedent as soon as practicable after such
date and (ii) the next Business Day on which such conditions precedent are met,
or waived by Lessor, shall be the Scheduled Delivery Date.
"Security Deposit" shall have the meaning specified in Section
3(d).
"State of Registration" shall mean the United States.
"Stated Amount" shall have the meaning specified in Section 3
(d)(ii).
"Stipulated Deductible Amount" shall mean US$250,000.
"Stipulated Loss Value" shall mean US$36,000,000.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Basic Rent and Renewal Rent) which Lessee assumes,
agrees or otherwise becomes liable to pay to Lessor, Owner Participant, any
Indemnified Party or any other Person hereunder or under any of the other
Operative Documents, including, without limitation, payments of or in respect of
the Stipulated Loss Value, Expenses, Maintenance Reserves, Taxes, Break Amount
or other amounts payable under any indemnities.
"Taxes" shall mean any and all present or future fees
(including, without limitation, license, documentation and registration fees),
taxes (including, without limitation, income, receipts, sales, rental, use,
turnover, value-added, property (tangible or intangible), excise, franchise,
capital, user, transfer, doing business and stamp taxes or duties), licenses,
levies, imposts, duties, recording charges or fees, or other charges,
assessments, deductions or withholdings of any nature whatsoever, together with
any assessments, penalties, late payment charges, notary charges, fines,
additions to tax or other similar liabilities with respect to any of the
foregoing and interest on any of the foregoing.
"Tax Indemnitee" shall mean Lessor, Owner Participant, any
Affiliate of Owner Participant, any successor or permitted assign of any of the
foregoing or any Affiliate that is a member of a group that files a consolidated
or combined tax return that includes Owner Participant, and the directors,
officers, employees, servants and agents of each of the foregoing.
"Technical Acceptance Certificate" shall have the meaning
specified in Section 2(b)(ii).
"Time Controlled Component" shall mean any component that
Lessee monitors with an interval pursuant to which action is taken to inspect,
replace and/or overhaul such component and that is limited by Airframe Cycles,
Airframe Flight Hours and/or calendar time.
"Trust Agreement" means that certain Trust Agreement dated as
of November 23, 1998 between Owner Participant and Owner Trustee.
"U.S. Money Center Bank" shall mean U.S. Bank Corporation or
such other bank as shall be acceptable to Owner Participant in its sole
discretion.
"Wet Lease" shall mean any arrangement whereby the Lessee
agrees to furnish the Aircraft to a third party and pursuant to which the
Aircraft shall be (i) operated solely by regular employees of the Lessee
possessing all current certificates and licenses required by the Aviation
Authority and applicable laws and (ii) maintained by the Lessee in accordance
with its normal maintenance practices and the terms of this Lease.
(b) Construction.
(i) In this Agreement, unless the contrary intention is
stated, a reference to:
(u) Each of "Lessor," "Lessee," "Owner
Participant" or any other Person includes, without prejudice
to the provisions of this Agreement, any successor in interest
to it and any permitted assignee and, in the case of any
Government Entity, any Government Entity succeeding to all or
any of its functions;
(v) Words importing the plural include the
singular and vice versa;
(w) Any document or any law includes that
document or that law, as the case may be, as amended, modified
or supplemented from time to time in accordance with its
terms, and any document entered into or any law enacted or
promulgated, as the case may be, in substitution or
replacement therefor;
(x) A "Law" (1) includes any statute,
decree, constitution, regulation, decision, finding, order,
rule, judgment or directive of any Government Entity, (2)
includes any treaty, pact, compact or other agreement to which
any Government Entity is a signatory or party, (3) includes
any judicial or administrative interpretation or application
thereof, and (4) is a reference to any of the foregoing as
amended, substituted, reissued or reenacted;
(y) The words "this Lease," "this
Agreement," "hereby," "herein," "hereto," "hereof" and
"hereunder" and words of similar import when used in this
Agreement refer to this Agreement as a whole including,
without limitation, the Schedules and Exhibits, and all
Annexes thereto, and not to any particular provisions of this
Agreement; and
(z) A Section or an Exhibit or a Schedule is
a reference to a section of, or an exhibit or schedule to,
this Agreement.
(ii) Headings used in this Agreement are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in the interpretation of, this Agreement.
SECTION 2. Lease of Aircraft.
(a) Agreement to Lease. Subject to satisfaction of the
conditions set forth in Section 4 and to the provisions of this Section 2,
Lessor hereby agrees to deliver the Aircraft to Lessee at the Delivery Location
and to lease the Aircraft to Lessee, and Lessee hereby agrees to accept the
Aircraft at the Delivery Location and to lease the Aircraft from Lessor, on the
Scheduled Delivery Date, in each case in the condition specified in Schedule 2,
but otherwise in an "as is, where is" condition, pursuant to the terms and
conditions of this Agreement and the other Operative Documents, the commencement
of such leasing to be evidenced by the execution by Lessor, Owner Participant
and Lessee of Lease Supplement No. 1. Lessee hereby agrees that its execution of
Lease Supplement No. 1 shall, without further act, constitute unconditional and
irrevocable acceptance by Lessee of the Aircraft for all purposes of this
Agreement.
(b) Delivery Conditions; Inspections.
(i) Owner Participant shall use reasonable best efforts to
procure that the Airframe Manufacturer complies with its obligations with regard
to delivery of the Aircraft (the "Delivery") pursuant to the Purchase Agreement.
Lessee shall be entitled to participate in the inspection and test flight
relating to the redelivery of the Aircraft from the Airframe Manufacturer which
inspection shall take place at the Delivery Location. Lessee shall be entitled
to have one representative on board as observer of any test flight. Lessee's
participation in the inspection and test flight under the Purchase Agreement
shall satisfy Lessor's obligations to provide Lessee with reasonable opportunity
to verify that the Aircraft meets the Delivery Conditions.
(ii) Upon completion of the inspection and test flight
referred to above, Lessee agrees to execute and deliver to Lessor a technical
acceptance certificate (the "Technical Acceptance Certificate") substantially in
the form attached hereto as Exhibit A. Upon execution of the Technical
Acceptance Certificate, Lessee shall be deemed to have found the Aircraft to be
in acceptable condition for delivery hereunder (and shall not be permitted to
refuse to accept delivery of the Aircraft on the Delivery Date on that basis)
except to the extent damage or loss to the Aircraft or any Part thereof occurs
during the period following execution of the Technical Acceptance Certificate
and prior to the Delivery Date (unless Lessor has repaired any such damage or
loss prior to the Delivery Date).
(iii) Lessor, Owner Participant and Lessee shall cooperate
such that the inspection and delivery procedures shall minimize the tax impact
to such parties under Section 9(c) hereof.
(c) Changes in Delivery Date; Limitation of Lessor's
Obligation to Deliver Aircraft.
(i) Lessee acknowledges and agrees that Lessor's ability to
perform its obligations to deliver the Aircraft in the condition, at the time,
at the location and otherwise as specified in this Agreement is dependent upon,
among other things, delivery of the Aircraft under, and at the time, at the
location and otherwise in accordance with, the Purchase Agreement. Lessee also
acknowledges and agrees that Lessor may delay in the delivery of, or fail to
deliver, the Aircraft for reasons of Force Majeure (including, without
limitation, a failure by the Airframe Manufacturer to perform its obligations
regarding delivery pursuant to the Purchase Agreement).
(ii) Lessor shall use reasonable efforts to give advance
written notice to Lessee of any change in the Scheduled Delivery Date.
(iii) Accordingly, if, owing to (y) any delay in the delivery
of, or failure to deliver, the Aircraft to Lessee due to a delay in the delivery
of the Aircraft to Lessor pursuant to the terms of the Purchase Agreement and/or
(z) reasons of Force Majeure, Lessor shall delay in the delivery of the Aircraft
under this Agreement beyond the calendar date specified in the definition of
"Scheduled Delivery Date," then Lessee shall accept delivery of the Aircraft on
the first Business Day after such date on which Lessor has possession of the
Aircraft at the Delivery Location; provided, however, that if delivery of the
Aircraft under this Agreement is delayed beyond the Commitment Termination Date,
then either party hereto may, by written notice to the other, terminate this
Agreement and each other Operative Document, whereupon neither Lessor nor Lessee
shall have any further obligation to the other hereunder or thereunder, except
that Lessor shall be obligated to return the Security Deposit paid (or
delivered) by Lessee prior to such termination. In the event of any such delay
or any eventual termination of this Agreement, Lessor shall not be responsible
for any losses, including loss of profit, costs or Expenses arising therefrom
suffered or incurred by Lessee.
(d) Bridging Maintenance. Following delivery of the Aircraft
to Lessee, Lessee, except as explicitly set forth in Schedule 2 hereto, shall be
solely responsible for:
(i) causing the Aircraft to be listed on Lessee's Operating
Specifications; and
(ii) subject to the following sentence, performing, or causing
to be performed, all bridging maintenance work necessary to allow Lessee to
operate the Aircraft in regularly scheduled revenue passenger service.
Lessee may, following delivery of the Aircraft, arrange for the Reconfiguration.
Upon completion of the Reconfiguration and submission to Owner Participant of an
invoice therefor setting out in reasonable detail the applicable costs related
thereto, Owner Participant shall remit to the Lessee an amount equal to the
lesser of the actual cost of the Reconfiguration and US$300,000. The actual cost
of the Reconfiguration, to the extent in excess of US$300,000, shall be the sole
responsibility of the Lessee.
SECTION 3. Lease Term; Rent; Payments.
(a) Lease Term.
(i) The Basic Lease Term shall commence on the Delivery Date
and, unless this Agreement is terminated earlier pursuant to the provisions
hereof, shall end on the Basic Term Expiry Date.
(ii) Renewal Lease Term. Lessee shall have the option to
extend the Lease Term beyond the Basic Term Expiry Date for one (1) additional
term consisting of twelve (12) months (the "Renewal Lease Term"). The Renewal
Lease Term shall commence on the Basic Term Expiry Date and end on the date
twelve (12) months following the commencement of the Renewal Lease Term;
provided that if the last day of the Renewal Lease Term shall not be a Business
Day, then the Renewal Lease Term shall expire on the next preceding Business
Day. Such option may be exercised only by delivery of irrevocable written notice
to Lessor at least one hundred eighty (180) days prior to the expiration of the
Basic Lease Term. The Renewal Lease Term shall be governed by the terms of this
Agreement. As a condition precedent to Lessee's right to elect to extend the
Lease Term, no Event of Default may be occurring at the time of such notice or
such extension. Exercise of Lessee's option to extend the Lease Term pursuant to
this Section 3(a)(ii) shall not prejudice the rights of Lessor arising upon the
occurrence of a Default or an Event of Default, including, without limitation,
the right of Lessor, upon the occurrence of an Event of Default, to terminate
this Lease at any time after such occurrence.
(b) Basic Rent and Renewal Rent.
(i) Basic Rent. During the Basic Lease Term, from and
including the Rent Commencement Date, Lessee shall pay rent for the Aircraft in
advance on each Basic Rent Date during the Basic Lease Term in advance in
immediately available Dollars, in forty (40) consecutive monthly payments, in
the amount set forth in Exhibit B hereto.
(ii) Renewal Rent. Lessee shall pay rent for the Aircraft on
each Renewal Rent Date during the Renewal Lease Term in advance in immediately
available Dollars and in the amount set forth in Exhibit B hereto.
(c) Supplemental Rent. Lessee shall pay, or cause to be paid,
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting or in respect of the Stipulated Loss Value, Break
Amount and all other amounts of Supplemental Rent when and as the same shall
become due and owing. In the event of any failure on the part of Lessee to pay
any Supplemental Rent when due, Lessor and each other Indemnified Party shall
have all rights, powers and remedies provided for herein or in any other
Operative Document, or at law or in equity or otherwise, in the case of
nonpayment of Basic Rent or Renewal Rent. Lessee also shall pay to Lessor, or to
whomsoever shall be entitled thereto, on demand, as Supplemental Rent, to the
extent permitted by applicable law, interest at the Past Due Rate on any part of
any installment of Basic Rent or Renewal Rent not paid when due for any period
for which the same shall be overdue and on any payment of Supplemental Rent (to
the extent permitted by applicable law) not paid when due for the period until
the same shall be paid.
(d) Security Deposit.
(i) Initial Deposit. In connection with the execution of the
Proposal Letter, Lessee delivered to the Owner Participant an initial security
deposit in the amount of US$260,000 (the "Initial Security Deposit"). The
Initial Security Deposit shall be and remain the property of the Owner
Participant unless the Delivery Date fails to occur due for reasons other than a
default by Lessee, in which case the Initial Security Deposit shall be returned
to Lessee.
(ii) In connection with the Delivery, and as a condition
thereto, Lessee shall deliver to the Owner Participant an additional security
deposit in the amount of US$260,000 (the "Additional Security Deposit", and
together with the Initial Security Deposit, the "Security Deposit"). So long as
no Default shall have occurred and is continuing, Lessee may, in exchange for
the Security Deposit, cause an irrevocable letter of credit in form and
substance satisfactory to the Lessor (the "Letter of Credit") issued by a U.S.
Money Center Bank (the "Letter of Credit Bank") to be issued in favor of Owner
Participant (or its designee) in an amount equal to Five Hundred Twenty Thousand
Dollars (US$520,000) (the "Stated Amount") on the following terms and
conditions:
(A) Drawings under any Letter of Credit may be made by
Owner Participant (or its designee) in part or in
full upon the occurrence of any of the following
(each, a "Drawing Event"):
(1) if Lessor or Owner Participant receives a
notice from the Letter of Credit Bank that
it will not renew such Letter of Credit, and
Lessee fails to provide Owner Participant
(or its designee) with a substitute Letter
of Credit in the Stated Amount by the 10th
Business Day preceding the day on which the
existing Letter of Credit is to expire; or
(2) if an Event of Default shall have occurred
and be continuing.
(B) Thirty (30) days after the Expiry Date, and provided
Lessee shall have satisfied all of its obligations
hereunder (other than potential contingent
obligations (of which Lessor and Owner Participant
has no knowledge) under the indemnity provisions of
this Agreement), Owner Participant shall take any and
all actions which Lessee may reasonably request to
terminate and return to Lessee any outstanding Letter
of Credit.
(iii) If at any time Owner Participant (or its designee) makes
a drawing on the Letter of Credit in excess of the amount then owing to Lessor
and Owner Participant hereunder, such excess amount shall be treated as a
deposit held by Lessor and Owner Participant as security for Lessee's
obligations hereunder (such excess amount being referred to herein as the
"Letter of Credit Deposit"). In the event of the occurrence of the foregoing,
Lessee may obtain a replacement Letter of Credit in an amount equal to the
Letter of Credit Deposit. If Lessee obtains such a replacement Letter of Credit
and provided that no Default has occurred and is continuing, Owner Participant
(or its designee) shall return the Letter of Credit Deposit (net of any amount
of the Letter of Credit Deposit applied by Owner Participant as provided
pursuant to Section 3(d)(vi)) to Lessee.
(iv) At any time during the term while a Letter of Credit
shall remain outstanding and provided that no Default has occurred and is
continuing Lessee shall have the option of providing Owner Participant with a
Security Deposit in the Stated Amount and Owner Participant (or its designee)
will promptly thereafter terminate and return to Lessee the outstanding Letter
of Credit.
(v) Each of the Security Deposit and the Letter of Credit
Deposit (collectively, the "Deposit") shall be held by the Owner Participant (or
its designee) during the Lease Term as security for the full and punctual
performance of all of Lessee's obligations under this Agreement including,
without limitation, satisfaction of the requirements of the condition of the
Aircraft at the end of the Lease Term as set forth in Section 7. Lessee
acknowledges that the Owner Participant (or its designee) may commingle the
Deposit with its general funds. Lessee hereby grants to the Owner Participant or
its designee, as applicable, a security interest by way of first priority
perfected security interest in its interest, if any, in the Deposit and the
proceeds thereof and hereby grants to the Owner Participant or its designee, as
applicable, any and all of Lessee's right, title and interest therein, if any,
as security for Lessee's obligations hereunder. No interest shall accrue in
favor of Lessee in respect of the Deposit held by the Owner Participant or its
designee, as applicable. At the end of the Lease Term, upon performance by
Lessee, satisfactory to the Owner Participant of all of Lessee's obligations
hereunder (other than potential contingent obligations (of which Lessor has no
knowledge) under the indemnity provisions of this Agreement), the Owner
Participant or its designee, as applicable, shall refund any remaining Security
Deposit to Lessee. The Owner Participant's obligations in respect of the return
of the Security Deposit shall be that of a debtor of Lessee, not as a trustee or
other fiduciary.
(vi) If a Default shall have occurred and be continuing, the
Owner Participant or its designee, as applicable, may, but shall not be obliged
to, apply the Deposit and any amount drawn under the Letter of Credit in whole
or in part for the payment of any Rent, indemnities, legal fees and other
expenses, insurance and other casualty payments and any other amount owing from
time to time by Lessee under this Agreement, for the payment of any loss or
damage suffered by Lessor or Owner Participant as a result of any Default or
utilize the Security Deposit and any amount drawn under the Letter of Credit in
whole or in part to perform any of Lessee's obligations under this Agreement or
to otherwise remedy any circumstance giving rise to a Default, including the
redelivery condition of the Aircraft, without prejudice to any other remedy of
Lessor or Owner Participant (it being understood that an application of the
Security Deposit and any amount drawn under the Letter of Credit shall not
constitute a cure of any Default unless and until Lessee shall have complied
with the following sentence). In any such event Lessee shall, on demand, restore
the full amount of the Security Deposit by payment to the Owner Participant of
an amount in immediately available Dollars equal to the amount by which the
balance of the Security Deposit has been reduced under this clause (iv) or, if
applicable, increase the amount available to be drawn under the Letter of Credit
to the Stated Amount.
(e) Payments in General.
(i) All payments of Rent shall be made directly by Lessee in
Dollars by wire transfer of immediately available funds on the date for payment
to the account for Lessor specified in column (2) of Schedule 3, or to such
account as Lessor shall otherwise direct by notice to Lessee.
(ii) If the due date for any payment of Basic Rent, Renewal
Rent, Break Amount or Stipulated Loss Value is not a Business Day, then, unless
otherwise provided herein, such payment shall be made on the Business Day next
preceding such due date with the same force and effect as if made on such due
date and without adjustment in the amount due.
(iii) All amounts of interest or amounts calculated by
reference to interest payable under any of the provisions of this Agreement
shall be calculated on the basis of the actual number of days elapsed and a
360-day year.
(f) No Deductions or Withholdings. All payments by Lessee
under this Agreement or any other Operative Document to Lessor or any other
Indemnified Party, including payments in respect of Basic Rent, Renewal Rent,
Supplemental Rent, interest, fees, indemnities or any other item, shall be made
in full without any counterclaim, delay, deduction or withholding of any kind or
nature whatsoever (including, without limitation, in respect of any setoff,
counterclaim, Taxes, insurance charges, monetary transfer fees or any costs and
expenses arising in connection with the use and operation of the Aircraft).
SECTION 4. Conditions Precedent. The obligations of Owner Participant
to enter into the transactions contemplated hereby and of Lessor to lease the
Aircraft to Lessee are subject to the fulfillment to the satisfaction of Lessor
and Owner Participant, and Lessee shall (with respect to such conditions
precedent as are within Lessee's reasonable control) procure such fulfillment,
on or prior to the Delivery Date (or, if another date is specified below, on or
prior to such date) of the following conditions precedent:
(a) Delivery of Aircraft. The Airframe Manufacturer shall have
performed all of its obligations under the Purchase Agreement with respect to
the delivery of the Aircraft.
(b) Delivery Conditions. Prior to the Scheduled Delivery Date,
the Aircraft shall have met all of the Delivery Conditions set forth on Schedule
2 hereto.
(c) Approved Maintenance Program. Prior to the Scheduled
Delivery Date, Lessee shall have provided to Lessor and Owner Participant a
summary of the Approved Maintenance Program and such information reasonably
requested by Lessor or Owner Participant regarding the proposed Approved
Maintenance Program, in each case, for the Aircraft (including, without
limitation, evidence that the Aviation Authority has approved the Approved
Maintenance Program and such minimum equipment list), and Owner Participant
shall have reviewed and approved such Approved Maintenance Program.
(d) [Intentionally reserved].
(e) Agreements and Documents. The following documents,
agreements, instruments or certificates shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall each be
satisfactory in form and substance to Lessor and Owner Participant and shall be
in full force and effect and in the English language and executed counterparts
shall have been delivered to Lessor and Owner Participant and/or to their
respective counsel:
(i) this Agreement;
(ii) Lease Supplement No. 1 covering the delivery and
acceptance of the Aircraft and dated the Delivery Date;
(iii) (y) a Technical Acceptance Certificate and an Aircraft
Status Report (as of the Delivery Date) and (z) a delivery receipt (the
"Delivery Receipt") in the form of Annex A to Schedule 2;
(iv) (y) a Certificate of Insurance in form and substance
satisfactory to Lessor and Owner Participant and which otherwise
complies with the requirements of Section 15 and (z) a Broker's Letter
in form and substance reasonably satisfactory to Owner Participant from
the Insurance Brokers and which otherwise complies with the
requirements of Section 15, together with such other evidence as Lessor
shall request as to the due compliance by Lessee with Section 15;
(v) (w) an opinion of Ray, Xxxxxxx & Xxxxxxx, special counsel
to the Owner Trustee, (x) an opinion of Xxxxxx X. Xxxx, in-house
counsel to Lessee in form and substance reasonably satisfactory to
Owner Participant, (y) an opinion of Daugherty, Fowler, Perigrin &
Xxxxxx, special FAA counsel, in form and substance reasonably
satisfactory to Lessor and Owner Participant, and in each case covering
such other matters as Lessor or Owner Participant may reasonably
request;
(vi) copies of documents where available evidencing the
issuance of each Authorization that may be required in connection with
the remittance to Lessor and any other intended recipient of any amount
payable under this Agreement, or any other Operative Document and the
performance by Lessee of any of its respective obligations hereunder or
thereunder;
(vii) certified copies of Lessee's Certificate of
Incorporation, bylaws and any other organizational documents plus any
subsequent amendments thereto;
(viii) copies of resolutions of the Board of Directors of
Lessee or other written evidence of appropriate corporate action, duly
authorizing or ratifying the lease of the Aircraft hereunder, and the
execution, delivery and performance of this Agreement and the other
Operative Documents, certified by a duly authorized officer of Lessee,
in the case of any such resolutions, to have been passed at a duly
convened and constituted meeting, and in each case to be true,
accurate, complete, unamended and in full force and effect as of the
Delivery Date;
(ix) certificate signed by a duly authorized officer of
Lessee:
(u) certifying the incumbency, and the
accuracy of the signatures, of the Person or Persons
authorized to execute and deliver the Operative Documents on
behalf of Lessee;
(v) stating that Lessee's representations
and warranties contained in this Agreement and each other
Operative Document are and shall be true and correct on and as
of the Delivery Date as though made on and as of such date
(unless made as of a specified date, in which case such
representations and warranties shall be true and correct as of
such specified date);
(w) stating that no Default or Event of
Default has occurred and is continuing or will result from the
lease of the Aircraft under this Agreement; and
(x) such other documents, agreements, certificates and
evidence with respect to the Aircraft, Lessee, any Persons acting for
Lessee or otherwise as Lessor or Owner Participant may reasonably
request in connection with the consummation of the transactions
contemplated by this Agreement or the other Operative Documents, the
taking of all proceedings (corporate or otherwise) in connection
therewith or compliance with all the conditions set forth in this
Section 4.
(f) Delivery Date Conditions. Each of the following shall be
true on the Delivery Date:
(i) Lessee shall have paid in full (x) the first
installment of Basic Rent and (y) the Security Deposit;
(ii) all representations and warranties of Lessee
hereunder and under the other Operative Documents shall be true and
correct on and as of the Delivery Date as though made on and as of such
date (unless made as of a specified date, in which case such
representations and warranties shall be true and correct as of such
specified date);
(iii) Lessee shall have performed, complied with and
observed all its obligations, covenants and agreements set forth herein
and in each other Operative Document which it is required to perform,
comply with or observe prior to or on the Delivery Date;
(iv) no Default, Event of Default or Event of Loss,
or event, condition or circumstance that would with the giving of
notice or passage of time or both become or give rise to an Event of
Loss, shall have occurred;
(v) (y) no material adverse change has occurred in
the financial condition or prospects of Lessee from that set forth in
its unaudited consolidated financial statements dated September 30,
1998 and (z) nothing has occurred between September 30, 1998 and the
Delivery Date which could materially and adversely affect the ability
of Lessee to carry on its business or to perform its obligations under
any Operative Document to which it is or will be a party; and
(vi) Owner Participant shall have received a copy of
Lessee's consolidated financial statements referenced in Section
5(b)(x) hereof.
(g) Registration. The Aircraft shall be registered with the
Aviation Authority in the name of Lessor.
(h) Necessary Government Actions. All appropriate action
required to have been taken prior to the Delivery Date by the Aviation Authority
or any governmental or political agency, subdivision or instrumentality of the
United States in connection with the transactions contemplated hereby shall have
been taken, and all orders, permits, licenses, waivers, authorizations,
exemptions and approvals of such entities required to be in effect on the
Delivery Date in connection with the transactions contemplated hereby shall have
been issued, and all such orders, permits, licenses, waivers, authorizations,
exemptions and approvals shall be in full force and effect on the date hereof
and on the Delivery Date (no such orders, permits, licenses, waivers,
authorizations, exemptions and approvals shall be issued on a temporary basis
pending further review by the entity requiring such to be in effect).
(i) No Government Actions. No action or proceeding shall have
been instituted nor shall governmental action be threatened before any United
States or foreign court or governmental agency, nor shall any order, judgment or
decree have been issued or proposed to be issued by any United States or foreign
court or governmental agency at the time of the Delivery Date to set aside,
restrain, enjoin or prevent the completion and consummation of this Lease or the
transactions contemplated hereby and thereby.
(j) No Change in Law. No change shall have occurred after the
date of execution and delivery of this Lease in applicable law or regulations
thereunder or interpretations thereof by appropriate regulatory authorities
which, in the reasonable opinion of Lessor or Owner Participant, would make it a
violation of a law or regulations for Lessor or Owner Participant to execute,
deliver and perform its obligations hereunder or under any other Operative
Document to which it is a party.
The conditions precedent specified in this Section 4 are for the sole benefit of
Lessor and Owner Participant and may be waived or deferred in whole or in part
and with or without condition by Lessor and Owner Participant. If any of such
conditions is not satisfied or waived in writing by Lessor on and as of the
Delivery Date and Lessor, nonetheless delivers the Aircraft to Lessee hereunder,
Lessee hereby covenants and agrees to satisfy, or cause the satisfaction of,
such outstanding conditions within thirty days after the Delivery Date.
SECTION 5. Representations and Warranties.
(a) Disclaimer; Representations, Warranties and Covenants of
Lessor and Owner Participant.
(i) EXCEPT AS SPECIFICALLY SET FORTH IN ANY OF THE
OPERATIVE DOCUMENTS, THE AIRCRAFT SHALL BE DELIVERED UNDER THIS LEASE
"AS IS, WHERE IS" AND LESSEE AGREES, ACKNOWLEDGES AND ACCEPTS THAT,
NEITHER LESSOR NOR ANY OTHER INDEMNIFIED PARTY MAKES ANY WARRANTY OR
REPRESENTATION WHATSOEVER CONCERNING THE AIRCRAFT OR OTHERWISE. LESSEE,
FOR THE BENEFIT OF LESSOR AND EACH INDEMNIFIED PARTY, HEREBY WAIVES,
RELEASES AND RENOUNCES ALL WARRANTIES, REPRESENTATIONS AND OTHER
INDEMNITIES, OBLIGATIONS AND LIABILITIES OF LESSOR AND ANY OTHER
INDEMNIFIED PARTY AND ANY RIGHTS, CLAIMS AND REMEDIES OF LESSEE,
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, IN EACH CASE, WITH
RESPECT TO ANY NONCONFORMANCE OR DEFECT IN THE AIRCRAFT, ANY PART
THEREOF OR ANY OTHER THING DELIVERED, LEASED, CHARTERED OR TRANSFERRED
UNDER THIS LEASE, OR OTHERWISE INCLUDING, WITHOUT LIMITATION:
(A) ANY WARRANTY AS TO THE AIRWORTHINESS, VALUE, CONDITION,
DESIGN, OPERATION OF, OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN,
OR ANY DEFECT IN, THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY
DATA, ANY AIRCRAFT DOCUMENTATION OR ANY OTHER THING DELIVERED, SOLD OR
TRANSFERRED HEREUNDER;
(B) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE
FOR A PARTICULAR PURPOSE;
(C) ANY EXPRESS OR IMPLIED WARRANTY AS TO TITLE;
(D) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE;
(E) ANY OBLIGATION OR LIABILITY WITH RESPECT TO ANY ACTUAL OR
ALLEGED PATENT OR OTHER INTELLECTUAL PROPERTY INFRINGEMENT;
(F) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
WHETHER OR NOT IN STRICT OR ABSOLUTE LIABILITY OR ARISING FROM THE
NEGLIGENCE OF LESSOR OR ANY INDEMNIFIED PARTY, ACTUAL OR IMPUTED,
ACTIVE OR PASSIVE; AND
(G) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS
OR DAMAGE TO THE AIRCRAFT, THE AIRFRAME, ANY ENGINE, ANY PART, ANY DATA
OR ANY OTHER THING, FOR ANY LOSS OF USE, REVENUE OR PROFIT OR FOR ANY
OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
(ii) DELIVERY BY LESSEE TO LESSOR OF LEASE SUPPLEMENT
NO. 1 WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE
(BUT WITHOUT PREJUDICE TO ANY CLAIMS LESSOR OR LESSEE MAY HAVE
AGAINST THE AIRFRAME MANUFACTURER, ENGINE MANUFACTURER OR ANY
VENDOR WITH RESPECT TO THE AIRCRAFT) THAT LESSEE HAS EXAMINED
AND INSPECTED THE AIRCRAFT, THAT THE AIRCRAFT AND THE AIRCRAFT
DOCUMENTATION ARE SATISFACTORY TO LESSEE AND THAT LESSEE HAS
IRREVOCABLY AND UNCONDITIONALLY ACCEPTED THE AIRCRAFT FOR
LEASE HEREUNDER WITHOUT ANY RESERVATIONS WHATSOEVER.
(iii) Each of Lessor and the Owner Participant
represents and warrants that on the Delivery Date and
throughout the Lease Term, so long as no Event of Default
shall have occurred and be continuing, except as may be
expressly provided in this Agreement or in any other Operative
Document to which Lessee is a party or consents, it shall not
take or cause to be taken any action inconsistent with
Lessee's right of quiet enjoyment of, or otherwise in any way
interfere with or interrupt, the continuing use, operation and
possession of the Aircraft, the Airframe or any Engine by
Lessee.
(iv) Each of Lessor and the Owner Participant hereby
agrees for the benefit of each lessor of any airframe leased
to Lessee and each seller of an airframe purchased by Lessee
subject to a conditional sale or other security agreement that
it will not acquire or claim, as against such lessor or
seller, any right, title or interest in any engine covered by
any such lease or conditional sale and owned by such lessor or
seller, which engine is attached to the Airframe, provided
that such agreement of Lessor and the Owner Participant shall
not be for the benefit of any lessor or seller of any airframe
leased to Lessee or purchased by Lessee subject to a
conditional sale, unless such lessor or seller has expressly
agreed (which agreement may be contained in such lease or
conditional sale agreement) that neither it nor its successors
or assigns will acquire, as against Lessor or Owner
Participant, any right, title or interest in an Engine as a
result of such Engine's being installed on such airframe.
(b) Lessee's Representations and Warranties. In order to
induce Lessor and Owner Participant to enter into this Lease and to lease the
Aircraft, Lessee hereby represents and warrants to Lessor and Owner Participant
as of the date hereof and as of the Delivery Date (unless, in each case, such
representation and warranty is expressly applicable on and as of another date or
dates) that:
(i) Organization, Qualification, Etc. Lessee (w) is a
corporation duly incorporated under the laws of the State of Colorado,
(w) holds all Authorizations necessary to authorize Lessee to engage in
air transport and to carry on scheduled passenger and cargo service in
each case as presently conducted, (x) has the corporate power and
authority to own or hold under lease its properties wherever located or
used and to enter into and perform its obligations under each Operative
Document to which it is a party, (y) is duly qualified and authorized
to do business, and is in good standing, in each jurisdiction in which
the nature of its business makes such qualification necessary, except
where the absence of such qualification would not materially adversely
affect its ability to perform its obligations under the Operative
Documents and (z) is a Certificated Air Carrier.
(ii) Corporate Authority. The execution, delivery and
performance by Lessee of this Agreement, Lease Supplement No. 1 and
each other Operative Document to which Lessee is a party have been duly
authorized by all necessary corporate action on the part of Lessee, do
not require any stockholder or shareholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of
Lessee, except such as have been duly obtained or, by the Delivery
Date, will have been duly obtained, and copies of which shall have been
delivered to Lessor and Owner Participant on or before the Delivery
Date.
(iii) Government Approvals. Neither the execution and
delivery by Lessee of this Agreement, Lease Supplement No. 1 or any
other Operative Document to which Lessee is a party nor the performance
by Lessee of its obligations hereunder or thereunder requires any
Authorization, except for (y) Authorizations that have been duly
obtained and are in full force and effect, and copies of which shall
have been delivered to Lessor and Owner Participant on or before the
Delivery Date, and (z) any normal periodic and other reporting
requirements under the applicable rules and regulations of the Aviation
Authority (but only to the extent required to be observed or performed
after the Delivery Date).
(iv) No Breach. Neither the execution and delivery of
this Agreement, Lease Supplement No. 1 or any other Operative Document
by Lessee nor the consummation by Lessee of the transactions
contemplated hereby or thereby nor compliance by Lessee with any of the
terms or provisions hereof or thereof will (x) violate any of the
provisions of the organizational or charter documents or bylaws of
Lessee, (y) conflict with or contravene, or result in the creation,
perfection or enforcement of any lien under, any law applicable to or
binding upon the Aircraft, Lessee or any property of Lessee or (z)
conflict with or result in any breach of any of the terms or provisions
of, or constitute any default under, or result in or require the
creation of any Lien upon any property of Lessee under, any indenture,
mortgage, deed of trust, conditional sales contract, note, loan, credit
agreement or other agreement or instrument to which Lessee is a party
or by which Lessee or its properties or assets may be bound or
affected.
(v) Legal, Valid and Binding Agreements. This Lease,
Lease Supplement No. 1 and each other Operative Document to which
Lessee is a party, in each case, as and when entered into, have been,
or will be, duly executed and delivered by Lessee and constitute, or
will constitute, legal, valid, binding and enforceable obligations of
Lessee.
(vi) Litigation. There are no pending or threatened
actions or proceedings before any court or administrative agency (y) in
respect of this Agreement or any other Operative Document or the
Aircraft or the performance by Lessee of its obligations hereunder or
under any other Operative Document or (z) which would, if adversely
determined, materially adversely affect the ability of Lessee to
perform its obligations under the Operative Documents.
(vii) Filing. Except for the registration of the
Aircraft with the FAA and the filings or recordings described in
Schedule 4, no further action, including the filing or recording of any
instrument or document is necessary or advisable under the laws of the
State of Registration or the Lessee Jurisdiction (x) in order for this
Agreement to constitute a valid and perfected lease of record relating
to the Aircraft, (y) to authorize or permit Lessee to perform its
obligations under each Operative Document (including, without
limitation, Lessee's obligation to pay Rent) or (z) fully to protect,
establish, perfect and preserve Lessor's title to, and Lessor's rights
and interests in, the Aircraft as against Lessee and any other Person.
(viii) No Withholding. Lessee will not be required to
deduct from any Rent payment made or to be made hereunder any
withholding or other Tax under the laws of the State of Registration,
the Lessee Jurisdiction or any other jurisdiction, either (y) on or by
virtue of the execution or delivery by Lessee of this Agreement or any
other Operative Document or (z) on or by virtue of the performance by
Lessee of this Agreement or any other Operative Document, including,
without limitation, payment of Rent or any other amount made, or to be
made, by Lessee pursuant to this Agreement or any other Operative
Document.
(ix) No Default or Event of Default. There has not
occurred any event which is presently continuing and which would
constitute a Default or Event of Default under this Agreement or any of
the other Operative Documents.
(x) Financial Condition. The statements of financial
position of Lessee as of March 31, 1998 and September 30, 1998 and the
related statements of earnings and cash flows of Lessee for the fiscal
year and six (6) months then ended, fairly present the financial
condition of Lessee as at such dates and the results of operations and
cash flow of Lessee for the periods ended on such dates, in accordance
with generally accepted accounting principles consistently applied
(except as may be stated in the notes thereto), and, subject in the
case of the March 31, 1998 statements, to normal year-end audit
adjustments, since March 31, 1998, there has been no material adverse
change in such condition or operations, except as disclosed in press
releases issued by Lessee.
(xi) Taxes. Lessee has paid or caused to be paid all
Taxes when due and payable or has made adequate provision by way of
security for all Taxes payable by Lessee (except to the extent being
contested in good faith and by appropriate proceedings, and for the
payment of which adequate reserves have been provided, so long as such
contest does not involve a material danger of the sale, forfeiture,
confiscation, seizure or loss of the Aircraft, any Engine or Part
thereof). No Taxes (including, without limitation, any stamp or
value-added taxes), levies, imposts, duties or similar charges may be
imposed by the government of the Lessee Jurisdiction, or any Government
Entity or political or taxing subdivision therein, upon or with respect
to the execution or delivery of this Agreement or any other Operative
Document or the delivery of the Aircraft hereunder.
(xii) No Material Adverse Change. Since September 30,
1998 no event has occurred or state of affairs exists that has or may
have a material adverse effect on (i) the ability of Lessee to carry on
its business or to perform its obligations under any Operative Document
to which it is or will be a party or (ii) the rights or interests of
Lessor under any Operative Document to which it is or will be a party.
(xiii) Pari Passu. The obligations of Lessee under
this Agreement and the other Operative Documents are direct, general
and unconditional obligations of Lessee and rank at least pari passu
with all other present and future unsecured and unsubordinated
obligations (including contingent obligations) of Lessee with the
exception of such obligations as are mandatorily preferred by law and
not by virtue of any contract.
(xiv) Section 1110. Lessor is entitled to the
protection of Section 1110 of Chapter 11 of Title 11 of the United
States Code in connection with its right to take possession of the
Aircraft, Airframe and Engines in the event of a case under such
Chapter 11 in which Lessee is a debtor.
The rights and remedies of Lessor or Owner Participant in relation to
any misrepresentation or breach of warranty on the part of Lessee shall not be
prejudiced by any investigation by or on behalf of Lessor or Owner Participant
into the affairs of Lessee, by the performance of this Agreement or by any other
act or thing which may be done or omitted to be done by Lessor or Owner
Participant and which would or might, but for this provision, prejudice such
rights and remedies.
SECTION 6. Certain Covenants of Lessee. Lessee covenants and agrees
with Lessor and Owner Participant at Lessee's sole cost and expense, as follows:
(a) Maintenance of Corporate Existence; Duly Qualified;
Certificated Air Carrier. Subject to Section 6(b), at all times during the Lease
Term, Lessee shall (i) exist as a company incorporated under the laws of the
State of Colorado, (ii) hold all Authorizations necessary to authorize Lessee to
engage in air transport and to carry on passenger and cargo service in each case
as presently conducted by Lessee, (iii) have the corporate power and authority
to own or hold under lease its properties wherever located or used and to enter
into and perform its obligations under each Operative Document to which it is a
party, (iv) be duly qualified and authorized to do business, and be in good
standing, in each jurisdiction in which the nature of its business makes such
qualification necessary, except where the absence of such qualification would
not materially or adversely affect its ability to perform its obligations under
the Operative Documents and (v) at all times be a Certificated Air Carrier.
(b) Merger or Consolidation. Lessee shall preserve its
corporate existence, and will not merge or consolidate with any person unless
the successor person resulting from such merger or consolidation (the
"Successor"):
(i) is the Lessee or a corporation incorporated in
the State of Colorado or another State of the United States;
(ii) shall have a net worth immediately after such
merger or consolidation of not less than the Lessee's net worth
immediately prior thereto;
(iii) shall be authorized under applicable law to
perform the Lessee's obligations under this Lease to the same extent as
the Lessee;
(iv) shall deliver to the Lessor and Owner
Participant an agreement in form and substance reasonably satisfactory
to the Lessor Owner Participant containing an assumption by the
Successor of the Lessee's representations and warranties under this
Lease, together with the due and punctual performance of all the
Lessee's obligations under this Lease; and
(v) shall deliver to the Lessor and Owner Participant
an opinion of counsel reasonably satisfactory in form and substance to
the Lessor and Owner Participant to the effect that the agreement
referred to in sub-clause (iii) above constitutes the Successor's
legal, valid, binding and enforceable obligations.
(c) Reporting Requirements. The Lessee shall furnish to the
Lessor and Owner Participant:
(i) within 45 days after the last day of the first
three fiscal quarters of each fiscal year of Lessee, unaudited
consolidated quarterly financial statements of the Lessee prepared for
such quarter as of the last day of such quarter and statements of
income and retained earnings for such fiscal quarter and on a
comparative basis figures for the corresponding period of the
immediately preceding fiscal year, all in reasonable detail, each such
statement to be certified in a certificate of Lessee's chief financial
officer or chief accounting officer as fairly presenting the financial
position and the results of operations of the Lessee as at its date and
for such quarter (subject to year-end audit adjustments) and as having
been prepared in accordance with GAAP;
(ii) as soon as available but not in any event later
than 90 days after the last day of each fiscal year of Lessee, audited
financial statements of the Lessee prepared for such year, including a
balance sheet of Lessee of the last day of such year, statements of
income and retained earnings of Lessee for such fiscal year, a balance
sheet of the Lessee as of the last day of such year and statements of
income and retained earnings of the Lessee for such fiscal year and in
all cases on a comparative basis figures for the immediately preceding
fiscal year, all in reasonable detail, each prepared in accordance with
GAAP and certified without qualification by KPMG Peat Marwik or another
firm of independent certified public accountants as fairly presenting
the financial position and the results of operations of Lessee at the
end of and for such fiscal year and as having been prepared in
accordance with GAAP;
(iii) in lieu of the financial statements referred to
in sub-clauses (i) and (ii) above, any Quarterly Reports on Form 10-Q
and Annual Report on Form 10-K for the respective periods filed by
Lessee pursuant to and in accordance with the Securities Exchange Act
of 1934, as amended;
(iv) concurrently with the financial statements
furnished pursuant to Clauses 6(c)(i) and (ii) above, an officer's
certificate signed by the chief financial officer or chief accounting
officer of Lessee certifying to the best knowledge after due inquiry of
such officer that no Default occurred during the period covered by such
financial statements and no Default exists on the date of such
officer's certificate or, if a Default occurred or exists, stating that
fact and specifying the nature and period of existence of such Default
and the actions Lessee took or proposes to take with respect to such
Default; and
(v) on request from time to time such other
information regarding the Lessee and its business and affairs as the
Lessor or the Lender may reasonably request.
(d) Government Approvals. Lessee shall maintain, or cause to
be maintained, in full force and effect all Authorizations obtained or effected
in connection with this Agreement and every document or instrument contemplated
hereby as are required to be maintained and shall take all such additional
action as may be necessary or advisable in connection therewith. Lessee further
undertakes to obtain or effect any new or additional Authorizations as may
become necessary for the performance of any of the terms and conditions hereof
or any other document or instrument contemplated hereby.
(e) Taxes. Lessee shall file or cause to be filed all tax
returns which are required to be filed and shall pay or cause to be paid all
Taxes when due and payable (except to the extent being contested in good faith
and by appropriate proceedings, and for the payment of which adequate reserves
have been provided but only as long as such proceedings do not involve any
material danger of the sale, forfeiture, confiscation, seizure or loss of the
Aircraft or any interest therein).
(f) Place of Business. Lessee shall provide to Lessor written
notice of any change in its principal place of business as set forth in Schedule
3 within 30 days thereafter.
(g) Filings. Lessee shall promptly take all such action,
including the filing or recording of any instrument or document as may, from
time to time, be necessary or advisable under the laws of the State of
Registration and the Lessee Jurisdiction (x) in order for this Agreement to
constitute a valid and perfected lease of record relating to the Aircraft, (y)
to authorize or permit Lessee to perform its obligations under each Operative
Document (including, without limitation, its obligation to pay Rent) or (z) to
fully protect, establish, perfect and preserve Lessor's title to, and Lessor's
rights and interests in, the Aircraft as against Lessee, and any other Persons.
For the avoidance of doubt, the cost of all filings and related notarizations,
required by this Agreement or any other Operative Document shall be borne by
Lessee.
(h) Approved Maintenance Program. Lessee shall not make any
substantive changes to the Approved Maintenance Program unless Owner Participant
shall have reviewed and approved such substantive changes to the Approved
Maintenance Program which Lessee proposes to make during the Lease Term,
provided that (ii) Owner Participant's approval/disapproval of such substantive
changes shall be reasonable and consistent with industry standards.
SECTION 7. Return of the Aircraft.
(a) Date and Location of Return. Upon any expiration or
termination of the Lease Term, subject only to Section 13(b)(ii)(x), Lessee, at
its own risk, cost and expense, shall return the Aircraft, including the
Airframe, the Engines, all Parts thereof and the Aircraft Documentation to
Lessor or its designee in accordance with the provisions of this Agreement and
shall perform the elements of the Final Inspection as required hereby, all prior
to the end of the Lease Term (the "Return"). Not later than the end of the Lease
Term, the Aircraft shall be returned to Lessor or its designee at the Return
Location.
(b) Condition of Aircraft. At Return, Lessee shall, at its
sole risk, cost and expense, procure that the Aircraft is free and clear of all
Liens (other than Lessor Liens) and that the Aircraft complies in all respects
with the conditions and requirements set forth in Schedule 5.
(c) Final Inspection.
(i) No less than 60 days prior to commencement of the
Return, Lessee shall provide Lessor with written notice of the date
(which shall be not less than fifteen (15) days prior to the Expiry
Date) of, and a reasonably complete plan for the content of, the Final
Maintenance and shall give Lessor further written notice of the date
of, and any changes to the plan for, the Final Maintenance. During the
entire period of such Final Maintenance, the Aircraft, including the
Aircraft Documentation, shall be made available to Lessor and/or
Lessor's agents, representatives and designees (each, an "Inspecting
Party") for ground inspection by the Inspecting Parties at the Return
Location. So long as no Event of Default has occurred and is
continuing, no such inspection shall unreasonably interfere in the
business operations of Lessee except to the extent such interference is
reasonably necessary to enable an Inspecting Party to exercise its
rights set forth in this Section 7(c)(i).
Lessee shall make available to the Inspecting Parties such
documentation regarding the condition, use, maintenance, operation and
history of the Aircraft during the Lease Term as Lessor may reasonably
request. During the Final Inspection, any Inspecting Party shall have
the right to reasonably request that additional panels or areas be
opened in order to allow further inspection by any Inspecting Party.
Lessee shall remove the Aircraft from service and open the areas of the
Aircraft as required to perform the Final Maintenance and the other
inspections and checks as contemplated in this Section 7 and Schedule 5
that are reasonably requested by Lessor in accordance with the terms
hereof and otherwise permit Lessor to determine, and assist Lessor in
determining that the Aircraft, including the Aircraft Documentation, is
in the condition required herein.
(ii) Promptly after such inspections, except as
otherwise agreed in writing by Lessor and Lessee, any discrepancies
from the Aircraft return condition requirements set forth in this
Section 7, and any discrepancies that must be corrected in order to
comply with the Approved Maintenance Program, which shall include
clearing of all deferred maintenance items, shall be corrected by
Lessee at its cost prior to the operational ground check described in
Section 7(d).
(d) Operational Ground Check.
(i) In connection with the Return (and following the
inspection referred to in Section 7(c)), Lessee shall conduct an
operational ground check of the Aircraft in accordance with the
procedures set forth in the Airframe Manufacturer's maintenance manual,
for the purpose of demonstrating to the reasonable satisfaction of
Lessor the operation of all Aircraft systems that can be verified on
the ground, including, if required by Lessor and at Lessee's cost, a
full fuel tank leak check, audible ignition check (both systems), pitot
and static systems check and hydraulic system internal leak check.
(ii) Promptly after the operational ground check,
except as otherwise agreed in writing by Lessor and Lessee, any
discrepancies from the Aircraft return condition requirements set forth
in this Section 7, and any discrepancies that must be corrected in
order to comply with the Approved Maintenance Program and the Airframe
Manufacturer's maintenance manual criteria, shall be corrected by
Lessee at its cost prior to the demonstration flight described in
Section 7(e).
(e) Demonstration Flight.
(i) Immediately following the operational ground
check pursuant to Section 7(d), but prior to Lessor's technical
acceptance of the Aircraft, Lessee shall, using its own pilots and at
its own cost, carry out for the Inspecting Parties a demonstration
flight in the Aircraft in accordance with Lessee's specifications and
the Lessee's Aviation Authority-approved flight manual to demonstrate
the proper functioning of Aircraft systems and components, as requested
by Lessor within limits and/or guidelines established by the relevant
manufacturers and the Aviation Authority. Such flight shall continue
for the duration necessary to perform such check flight procedures, but
for a period not exceeding two (2) hours. Lessor shall be allowed at
least two representatives on-board as observers during such flight and
Lessee shall comply with all reasonable requests made by such
representatives during such flight.
(ii) Except as otherwise agreed in writing by the
Lessor and Lessee, promptly following such demonstration flight, any
deficiencies from the Aircraft return condition requirements set forth
in this Section 7 and Schedule 5, and any discrepancies that must be
corrected in order to comply with the Approved Maintenance Program and
the Airframe Manufacturer's maintenance manual and to achieve the
proper functioning of the Aircraft systems and components, shall be
corrected by Lessee at its cost prior to Return.
(f) Technical Acceptance. Upon satisfactory completion of the
Final Inspection and, unless otherwise agreed in writing by Lessor and Lessee,
satisfactory correction of any discrepancies or deficiencies required to be
corrected by Lessee prior to Return, Lessor shall execute and deliver to Lessee,
a delivery receipt in the form of Annex A to Schedule 5 (the "Return Receipt")
which shall, for all purposes hereof, constitute complete, irrevocable and
absolute evidence of Lessor's technical acceptance of the Aircraft, except as
validly noted in such Return Receipt. To the extent technical acceptance occurs
prior to Return, Lessee shall remain liable for the performance of all of its
payments and other obligations hereunder, and for any damage to or loss of the
Aircraft occurring between the date thereof and Return (it being understood and
agreed that Lessee shall maintain insurance as required by Section 15 to and
including such date).
(g) Failure to Return Aircraft. If Lessee shall, due to
reasons of Force Majeure or for any other reason whatsoever, fail to return the
Aircraft at the time or in the condition specified herein or return of the
Aircraft is not accepted by Lessor because of Lessee's failure to meet the
requirements of this Section 7 and Schedule 5, the obligations of Lessee
provided in this Agreement and each other Operative Document to which Lessee is
a party (including the obligation to pay Rent, on a per diem basis based upon a
pro rata application of 125% of the monthly Rent in force during the last month
of the Lease Term) shall continue in effect with respect to the Aircraft, and
the Lease Term shall be deemed to be extended until Return of the Aircraft to
Lessor; provided that, this Section 7(g) shall not be construed as permitting or
authorizing Lessee to fail to meet, or consenting to or waiving any failure by
Lessee to perform, Lessee's obligation to return the Aircraft in accordance with
the requirements of this Agreement.
(h) Transition. Lessee acknowledges that Lessor intends to
lease or sell the Aircraft to another Person at the end of the Lease Term. In
order to facilitate such lease or sale of the Aircraft, Lessee agrees to
cooperate with Lessor and to otherwise assist Lessor in such matters by, for
example:
(i) allowing reasonable inspections of the Aircraft
by the Follow-On Operator (without interrupting any commercial
operation of the Aircraft);
(ii) using reasonable endeavors to schedule the
Return of the Aircraft and the Final Inspection in a manner
that will allow for a simultaneous delivery of the Aircraft to
the Follow-On Operator;
(iii) assisting with exporting the Aircraft from the
State of Registration and arranging for the notice of
deregistration of the Aircraft to be sent to the aviation
authority in the country where the Aircraft will be registered
by the Follow-On Operator;
(iv) assisting with the transition of the Aircraft
from the Approved Maintenance Program to the maintenance
program of the Follow-On Operator by providing access to the
relevant technical data; and
(v) performing or procuring the maintenance or
modifications to the Aircraft as may be agreed by Lessor and
Lessee, at Lessor's cost.
SECTION 8. Liens.
(a) No Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist, or agree to create or assume, any Lien on or
with respect to the Aircraft, any Engine or any Part or in this Agreement, or in
any right, title or interest in any of the foregoing, except:
(i) the rights of Lessor and Owner Participant
provided in the Operative Documents;
(ii) the rights of others under agreements or
arrangements to the extent permitted by the terms of Section 11;
(iii) Lessor Liens;
(iv) Liens for Taxes of Lessee arising in the
ordinary course of business either not yet due or being contested in
good faith by appropriate proceedings (and for the payment of which
adequate reserves have been provided) so long as such contest does not
involve any material danger of the sale, forfeiture, seizure or loss of
the Airframe, any Engine or any Part or any interest therein;
(v) materialmen's, mechanics', workmen's,
repairmen's, employees' or other like Liens arising by operation of law
in the ordinary course of Lessee's business (including those arising
under maintenance agreements entered into in the ordinary course of
business) securing obligations that are not yet due or are being
contested in good faith by appropriate proceedings (and for the payment
of which adequate reserves have been provided) so long as such contest
does not involve any material danger of the sale, forfeiture, seizure
or loss of the Airframe, any Engine or any Part or any interest
therein; and
(vi) Liens, other than Liens for Taxes, in respect
only of Lessee's interest as Lessee under this Agreement and arising
out of any judgment or award against Lessee (and for the payment of
which adequate reserves have been provided), but only if the judgment
secured shall have been discharged, vacated, reversed or execution
thereof stayed pending a good faith appeal or shall have been
discharged, vacated or reversed upon expiration of such stay.
(b) Removal of Liens. Lessee will promptly, at its own
expense, take, or cause to be taken, such actions as may be necessary duly to
discharge any Lien not excepted under Section 8(a) that may at any time arise,
exist or be levied upon the Aircraft, any Engine, any Part or in this Agreement,
or in any right, title or interest in any of the foregoing, and Lessee shall
indemnify and hold harmless Lessor, Owner Participant and each other Indemnified
Party from any Expenses arising therefrom.
(c) No Adverse Action. Without limiting the foregoing or any
other provision of this Agreement or any other Operative Document, Lessee will
not do or permit to be done anything which may expose the Aircraft or any part
thereof to penalty, forfeiture, seizure, arrest, impoundment, detention,
confiscation, taking in execution, attachment, appropriation or destruction, nor
abandon the Aircraft or any Part.
SECTION 9. Indemnities.
(a) General Indemnity. Subject only to the exceptions set
forth in Section 9(b), Lessee hereby assumes liability for and hereby agrees to
indemnify Lessor, Owner Participant and each other Indemnified Party against,
and agrees to protect, save and keep harmless each thereof from, any and all
Expenses of whatsoever kind and nature from time to time imposed on, incurred by
or asserted against any Indemnified Party in any way relating to or arising out
of:
(i) the Operative Documents, any of the transactions
contemplated thereby or the enforcement of any of the terms
thereof, including, without limitation, the enforcement of
this Section 9;
(ii) the Aircraft, the Airframe, any Engine or engine
or Part or any other thing delivered under this Agreement;
(iii) the acceptance, delivery, lease, sublease,
charter, subcharter, registration, deregistration,
reregistration, possession, repossession, use, presence,
operation, condition, storage (unless otherwise expressly
provided herein), installation, testing, modification,
alteration, maintenance, repair, release, return,
transportation, transfer, exportation, importation,
abandonment or other disposition of the Aircraft, the
Airframe, any Engine or engine or Part or any other thing
delivered under this Agreement (including, without limitation,
any claim for patent, trademark or copyright infringement in
respect of any Part of the Aircraft which was not delivered to
Lessee hereunder, any liability for any injury to or death of
any Person or loss of or damage to any property, latent or
other defects, whether or not discoverable and whether or not
any of the foregoing shall arise as a result of the action or
inaction of Lessee or any other Person); and
(iv) any breach or noncompliance by Lessee with any
covenant, term, agreement, condition, undertaking or
obligation under this Agreement or under any other Operative
Document or agreement entered into or furnished by Lessee in
connection herewith or therewith, or the falsity or inaccuracy
in any material respect of any representation or warranty of
Lessee set forth herein or therein, or the occurrence of any
other Default, including, without limitation, any Expenses
incurred, assumed or suffered by Lessor or any other
Indemnified Party as a consequence of Lessee's failure to
Return the Aircraft in accordance with this Agreement on any
date specified or required herein.
(b) Exceptions to General Indemnity. The indemnity provided
for in Section 9(a) will not extend to any of the following Expenses of any
Indemnified Party:
(i) Expenses caused solely by the gross negligence or
willful misconduct of such Indemnified Party (other than
negligence imputed to such Indemnified Party by reason of its
interest in the Aircraft solely and by virtue of law);
(ii) Expenses caused solely by a breach by such
Indemnified Party of any covenant or inaccuracy or falsity of
a representation or warranty made by such Indemnified Party in
this Agreement or the documents and agreements delivered by
such party to Lessee on or prior to the Delivery Date;
(iii) Expenses that are Taxes (it being agreed that
Lessee's sole responsibility for Taxes is as set out in
Section 9(c) hereof);
(iv) Expenses attributable solely to the period (x)
prior to the Delivery Date and (y) after the return of
possession of the Airframe, the Engines and the Parts to
Lessor or its designee pursuant to and in accordance with the
terms of this Lease (other than pursuant to Section 20 hereof,
in which case (and other than with respect to Taxes) Lessee's
liability under this Section 9(b) shall survive for so long as
Lessor shall be entitled to exercise remedies under such
Section 20); and
(v) Expenses caused solely by any voluntary transfer
or disposition (other than any transfer pursuant to any
exercise of remedies in connection with an Event of Default,
pooling arrangement or Event of Loss) by Lessor of its
interest in the Aircraft, Airframe or Engines.
(c) Taxes.
(i) Lessee Liability. Except as provided in Section
9(c)(ii), Lessee shall pay or cause to be paid when due, and
shall indemnify and hold harmless each Tax Indemnitee for,
from and against, any and all Taxes howsoever imposed or
levied on or asserted against, from time to time, any Tax
Indemnitee, Lessee, the Aircraft, Airframe or any Engine or
any Parts or any interest therein by any Government Entity on,
with respect to, based on or measured by:
(A) the acceptance, delivery, redelivery,
transport, registration, reregistration,
deregistration, possession, operation, location, use,
presence, condition, alteration by or on behalf of
Lessee, maintenance, repair, return, storage (unless
otherwise expressly provided herein), repossession,
disposition, abandonment, installation, storage,
charter, leasing, subleasing, modification, transfer
by or on behalf of Lessee, importation, exportation
or other disposition of, or the imposition of any
Lien on, the Aircraft, Airframe or any Engine or any
Part or interest therein (or the incurrence of any
liability to refund or pay over any amount as the
result of any such Lien);
(B) the rentals or receipts from the
Aircraft, Airframe or any Engine or Parts thereof or
interest therein;
(C) the Aircraft, Airframe or any Engine or
any Parts thereof or interest therein (including,
without limitation, title or a security interest
therein), this Lease, any other Operative Document or
any data or any other thing delivered or to be
delivered under the Operative Documents; or
(D) otherwise with respect to or in
connection with the execution, delivery, enforcement,
amendment or supplement to the Operative Documents or
the transactions contemplated by the Operative
Documents.
(ii) Exclusions From Lessee's Liability. The provisions of Section 9
(c)(i) shall not apply to:
(A) Taxes imposed on the income, profits or
gains of a Tax Indemnitee by any Government Entity;
provided, however, that the exclusion contained in
this clause (A) shall not apply to any Taxes imposed
by any Government Entity if and to the extent that
such Tax results from (i) the use, operation,
presence or registration of the Aircraft, the
Airframe, any Engine or any Part in the jurisdiction
imposing the Tax; or (ii) the situs of organization,
any place of business or any activity of Lessee or
any other Person having use, possession or custody of
the Aircraft, the Airframe, any Engine or any Part in
the jurisdiction imposing the Tax; or (iii) any
payment (actual or constructive) by or on behalf of
Lessee; provided, further, however, notwithstanding
anything to the contrary contained in this clause
(A), a gross withholding tax shall not be excluded by
this clause (A) unless due to the activities of the
Tax Indemnitee or an Affiliate thereof unrelated to
the transactions contemplated by this Lease Agreement
or the negotiation thereof;
(B) Sales, use or similar transfer Taxes
imposed on a Tax Indemnitee upon any voluntary
transfer (including a transfer by way of security but
excluding a transfer pursuant to the exercise of
remedies in connection with an Event of Default, a
Modification, a pooling arrangement or an Event of
Loss) or disposition (including a disposition by way
of security but excluding a disposition pursuant to
any exercise of remedies in connection with an Event
of Default) by such Tax Indemnitee of any equitable
or legal interest in the Aircraft, Airframe, any
Engine or any Part or this Agreement to any Person;
(C) Taxes attributable solely to any period
(a) prior to the Delivery Date; or (b) after the
return of possession of the Airframe, the Engines and
the Parts to Lessor or its designee pursuant to the
terms of this Lease (other than pursuant to Section
20 hereof, in which case Lessee's liability under
this Section 9(c) shall survive for so long as Lessor
shall be entitled to exercise remedies under such
Section 20); provided, however, that the exclusions
set forth in this subparagraph (C) shall not apply to
Taxes to the extent such Taxes relate to events
occurring or matters arising prior to or
simultaneously with such return of possession;
(D) Taxes caused solely by a breach by such
Tax Indemnitee of any covenant or inaccuracy or
falsity of any representation or warranty made by
such Tax Indemnitee in this Agreement or the
documents and agreements delivered by such Tax
Indemnitee to Lessee pursuant to this Agreement; and
(E) Taxes caused solely by the gross
negligence or wilful misconduct of any Tax
Indemnitee.
(iii) No Reduction for Withholding, Etc. Notwithstanding anything that
may be contained herein, all payments by Lessee under this Agreement or any
other Operative Document, whether in respect of Rent, interest, fees or any
other item, shall be made in full without any deduction or withholding (whether
in respect of setoff, counterclaim, duties, Taxes, charges, wages or otherwise
whatsoever), unless the withholding or deduction is required by law, in which
event Lessee shall:
(A) forthwith pay the recipient such
additional amount so that the net amount received by
such recipient after the deduction or withholding
will equal the full amount which would have been
received by it had no such deduction or withholding
been made;
(B) pay to the relevant taxing authorities
within the period for payment permitted by applicable
law the full amount of the deduction or withholding
(including, but without prejudice to the generality
of the foregoing, the full amount of any deduction or
withholding from any additional amount paid pursuant
to this clause (iii)); and
(C) furnish to Lessor, within the period for
payment permitted by applicable law, an official
receipt of the relevant taxation or other authorities
involved for all amounts deducted or withheld as
aforesaid or, if no such receipt is issued, a
certificate of deduction or equivalent evidence
thereof.
(iv) Reports. Lessee will provide, promptly upon request, such
information as may be reasonably requested by a Tax Indemnitee or
required to enable a Tax Indemnitee to timely and properly fulfill its
tax filing requirements with respect to the transactions contemplated
by the Operative Documents, including, without limitation, those
requirements that relate to Taxes based on or measured by the total
time the Aircraft is located in a particular place irrespective of
whether the Aircraft is there for revenue, maintenance or storage
purposes. If any report, return or statement is required to be filed
with respect to any Tax which is subject to indemnification under this
Section 9(c), Lessee shall timely file the same (except for any such
report, return or statement which such Tax Indemnitee intends to file
itself (and so notifies Lessee in writing)); provided, however, that
Lessee shall have no obligation under this sentence to the extent such
Tax Indemnitee, after receipt of Lessee's written request, shall have
failed to furnish Lessee with such information (including instructions)
as is peculiarly within such Tax Indemnitee's control and which is
necessary to file such report, return or statement. Lessee shall either
file such report, return or statement and send a copy of such report,
return or statement to the Tax Indemnitee or, where Lessee is not
permitted to file such report, return or statement, it shall notify
such Tax Indemnitee of such requirement and prepare and deliver such
report, return or statement to such Tax Indemnitee in a manner
satisfactory to such Tax Indemnitee no later than 30 Business Days
prior to the time such report, return or statement is to be filed.
Lessee shall not have any right to examine the tax returns or books of
any Tax Indemnitee. Lessee agrees to use reasonable endeavors to obtain
official receipts indicating the payment by it of all foreign income
and withholding Taxes that are subject to indemnification under this
Section 9 and shall promptly deliver to the relevant Tax Indemnitee
each such receipt obtained by Lessee. Notwithstanding the foregoing,
nothing in this Section 9(c)(iv) shall (x) require Lessor or Lessee to
divulge to the other any information which Lessor or Lessee, as the
case may be, considers confidential, provided, however, that Lessor and
Lessee, as the case may be, shall be so required if required by
applicable law or reasonably related to a matter indemnified hereunder;
or (y) prevent Lessor or Lessee from arranging its tax affairs in such
manner as it sees fit, unless to do so would increase the obligations
of the other under this Agreement.
(v) Payment. Lessee shall pay any Tax for which it is liable
pursuant to this Section 9(c) in immediately available funds directly
to the appropriate Government Entity or, upon written demand of the Tax
Indemnitee, to such Tax Indemnitee, but in no event shall such payment
be required more than five (5) Business Days prior to the date such Tax
is due. Any such demand for payment from a Tax Indemnitee shall
specify, in reasonable detail, the calculation of the amount of the
payment and the facts upon which the right to payment is based and
shall be verified upon the request and at the expense of Lessee by a
nationally recognized firm of independent accountants for such Tax
Indemnitee. Each Tax Indemnitee shall promptly forward to Lessee any
notice, xxxx or advice in the nature of a notice or xxxx received by it
concerning any Tax; provided, however, failure to provide any such
notice or xxxx shall not relieve Lessee of its obligations hereunder.
As soon as practical after each payment of any Tax by Lessee directly
to any Government Entity, Lessee shall furnish the appropriate Tax
Indemnitee with the original or a certified copy of a receipt for
Lessee's payment of such Tax or such other evidence of payment of such
Tax as is reasonably acceptable to such Tax Indemnitee. Lessee shall
also furnish promptly upon request such data as any Tax Indemnitee may
reasonably require to enable such Tax Indemnitee to comply with the
requirements of any Government Entity.
(d) [Intentionally reserved].
(e) Scope, Survival, Etc.
(i) Lessee shall be obligated under this Section 9 as a
primary obligor irrespective of whether an Indemnified Party or Tax
Indemnitee shall also be indemnified, guaranteed or insured with
respect to the same matter under any of the Operative Documents or
otherwise by any other Person, and such Indemnified Party may proceed
directly against Lessee under this Section 9 without first resorting to
any such other rights of indemnification, guarantee or insurance.
(ii) All indemnities, obligations, adjustments and payments
provided for in this Section 9 shall survive and remain in full force
and effect, notwithstanding the expiration or termination of the Lease
Term or of this Agreement or any other Operative Documents and the
payment in full of all sums payable under the Operative Documents. The
obligations of Lessee in respect of all such indemnities, obligations,
adjustments and payments are expressly made for the benefit of, and
shall be enforceable by, the Indemnified Party or Tax Indemnitee
entitled thereto, without declaring this Agreement to be in default or
taking other action under this Agreement.
(iii) Lessee acknowledges that the Indemnified Parties or Tax
Indemnitees, or any of them, may authorize Lessor, by notice in writing
to Lessor and Lessee, to make claims and demands under any indemnity
hereunder or under any other Operative Document on behalf of such
Indemnified Parties or Tax Indemnitees, and Lessee shall be obligated
to make all payments pursuant to any such indemnity to Lessor, to the
extent claimed by Lessor on behalf of such Indemnified Parties or Tax
Indemnitees (it being understood that Lessee is entitled to
conclusively rely upon the instructions of Lessor with respect to the
payment of amounts owing to any Indemnified Party or Tax Indemnitee
under the indemnities).
(iv) Each Indemnified Party and Lessee will give prompt
written notice one to the other of any liability of which such party
has knowledge for which Lessee is, or may be, liable under Section
9(a), provided that failure to give such notice will not prejudice or
otherwise affect any of the rights of the Indemnified Parties under
this Section 9.
(f) Gross-Up for Taxes on Indemnity Payments. If and to the
extent any sums payable to an Indemnified Party or Tax Indemnitee under this
Section 9 are subject to any Taxes (including any payments made pursuant to this
Section 9(f)), Lessee shall pay to such Indemnified Party or Tax Indemnitee such
sum as will, after the obligation in respect of such Taxes has been fully
satisfied with respect to all sums payable by Lessee under this Section 9, leave
the Indemnified Party or Tax Indemnitee with the same amount as it would have
been entitled to receive in the absence of the imposition of any such obligation
in respect of such Taxes.
(g) Tax Contests. If any taxing authority proposes to impose a
Tax for which Lessee would be required to make an indemnity payment to a Tax
Indemnitee under this Section 9, such Tax Indemnitee shall if requested by
Lessee in writing in a timely fashion, contest (or permit Lessee, if requested
by Lessee and if the Tax Indemnitee consents, which consent shall not be
unreasonably withheld or delayed (such consent shall not be deemed to be
unreasonably withheld or delayed in the case of any Tax contest involving claims
for other Taxes asserted against such Tax Indemnitee for which Lessee has no
responsibility hereunder and which cannot be severed for the purposes of such
contest)) the validity, applicability or amount of such Tax at Lessee's sole
cost and expense by:
(i) resisting payment thereof, if practicable;
(ii) not paying the same except under protest, if protest
shall be necessary and proper;
(iii) if payment shall be made using reasonable efforts to
obtain a refund thereof in appropriate administrative proceedings; and
(iv) considering in good faith such other action as is
reasonably requested by the Lessee from time to time; provided,
however, that (x) in the case of Taxes that are required by law to be
contested in the Tax Indemnitee's name in proceedings that involve both
Taxes for which such Tax Indemnitee is indemnified hereunder and other
Taxes and which cannot, as a matter of law, be severed or otherwise
contested separately such Tax Indemnitee may in its sole discretion
select the forum for such contest and determine whether or not to pay
such Tax in connection with the contest and shall control the conduct
of such proceedings (although such Tax Indemnitee shall keep Lessee
reasonably informed of the status of such proceedings and shall consult
in good faith with Lessee and its counsel concerning the conduct of
such proceedings); and (y) no contest shall be required or permitted
unless: (A) such Tax Indemnitee shall have received from Lessee (I) an
indemnity reasonably satisfactory to Lessor for any liability, expense
or loss resulting from such contest; and (II) an opinion of independent
tax counsel selected by Lessee and reasonably satisfactory to such Tax
Indemnitee, furnished at Lessee's expense, to the effect that a
reasonable basis exists for contesting such claim (or, in the case of
an appeal of a judicial decision, that a meritorious basis exists for
such appeal); (B) no Event of Default shall have occurred and be
continuing; (C) such Tax Indemnitee shall have reasonably determined
that the contest will not create a material risk of a sale, forfeiture
or loss of, or creation of any Lien (other than a Permitted Lien but
not including a Lien of the kind described in clause (iv) of Section
8(a)) on, the Aircraft, or any portion thereof or interest therein
unless Lessee shall have provided a bond or other security for such
risk reasonably adequate to Lessor; and (z) in the case of any Taxes
not described in subclause (x) and subject to the requirement of
subclause (y), Lessee may conduct such contest in the forum and in the
manner Lessee deems appropriate (although Lessee shall keep such Tax
Indemnitee informed of the status of such proceedings and shall consult
in good faith with such Tax Indemnitee and its counsel concerning the
conduct of such proceedings).
If a Tax Indemnitee contests any claim for Taxes by making a payment
and seeking a refund thereof, then Lessee shall advance to such Tax Indemnitee,
on an interest-free basis, an amount equal to such Taxes (including any
penalties, additions to tax, fines and interest paid by such Indemnitee in
connection with the contest) and shall hold such Tax Indemnitee harmless, on a
net after-tax basis, against any adverse tax consequences of the receipt or
payment of such advance. In the event a Tax Indemnitee shall recover any Taxes
or other amounts advanced to it by Lessee pursuant to the preceding sentence,
such Tax Indemnitee shall promptly refund to Lessee the amount recovered plus
any interest received thereon. Notwithstanding the foregoing, the Tax Indemnitee
may waive in writing its rights to indemnification hereunder with respect to any
claim for any Tax and refrain from contesting, or continuing the contesting of,
such claim, in which event Lessee shall have no liability to Lessor hereunder
with respect to such claim. In addition, if a Tax Indemnitee shall agree to a
settlement of any contest under this Section 9 without the prior written consent
of Lessee (which shall not be unreasonably withheld or delayed), then such Tax
Indemnitee shall be deemed to have waived its rights to the indemnities provided
for in this Section 9 with respect to the Tax liability accepted in such
settlement. Lessee shall not be deemed to be in default under the
indemnification provisions of this Section 9 so long as it or a Tax Indemnitee
shall conduct a contest in accordance with the provisions of this Section 9(g).
SECTION 10. Title; Registration; Maintenance and Operation; Insignia.
(a) Title to the Aircraft.
(i) Lessee acknowledges that title to the Aircraft
shall at all times be and remain solely and exclusively vested
in Lessor and that this Agreement and the other Operative
Documents constitute an agreement to lease the Aircraft from
Lessor to Lessee and, accordingly, Lessee shall have no right,
title or interest in the Aircraft except the right to use the
Aircraft as provided herein.
(ii) Lessee will not at any time represent or hold
out Lessor, Owner Participant or any other Indemnified Party
as carrying goods or passengers on the Aircraft or as being in
any way connected or associated with any operation of the
Aircraft or attempt, or hold itself out as having any power,
to sell, charge, lease or otherwise dispose of or encumber the
Aircraft, the Engines or any Part, nor create, incur or suffer
to exist any Lien over the Aircraft, the Engines or any Part.
On all occasions when the ownership of the Aircraft or any
part of it is relevant, Lessee will make clear to third
parties that title to the same is held by Lessor.
(b) Registration.
(i) Upon Delivery of the Aircraft pursuant to Section
2, Lessee shall, at its own cost and expense, procure that the
Aircraft will be duly registered with the Aviation Authority
in the name of Lessor on the register (except that Lessor and
Owner Participant shall be responsible for ensuring that the
Trust Agreement and all other documents necessary for filing
with the Aviation Authority to effect registration in the
Lessor's name are in due form for filing with the Aviation
Authority), and thereafter shall maintain, or procure the
maintenance of, such registration throughout the Lease Term
and shall promptly deliver to Lessor a certified copy of the
Certificate of Registration when issued by the Aviation
Authority and at all times during the Lease Term, Lessee shall
neither cause nor permit the Aircraft to be registered under
the laws of any other jurisdiction.
(ii) Upon the Delivery Date of the Aircraft pursuant
to Section 2, Lessee shall, at its own cost and expense,
procure that, if required by applicable regulations, any
Operative Document as is required (including, without
limitation, this Lease and Lease Supplement No. 1) shall be
filed for recording with the Aviation Authority, and shall
promptly (and in any event within five (5) days) after such
registration deliver evidence of such registration to Lessor.
Lessee shall, at its own cost and expense, cause such
recordation to be maintained in good standing at all times
during the Lease Term.
(iii) Lessee will take, or cause to be taken, such
action with respect to the recording, filing, rerecording and
refiling of this Agreement or other documents or instruments
(including, without limitation, Uniform Commercial Code
financing statements) as necessary or advisable in order to
establish, protect, preserve and perfect, as against Lessee
and any third party, Lessor's interest in the Aircraft and
this Agreement and each other Operative Document and shall
furnish to Lessor timely notice of the necessity of such
action, together with such documents and instruments, in
execution form, and such other information as may be necessary
or advisable to take such action. Lessee shall cooperate fully
with Lessor and Owner Participant, if, notwithstanding the
foregoing, Lessor or Owner Participant notifies Lessee that
Lessor or Owner Participant wishes to take any of the
foregoing actions, in lieu of Lessee taking any of the
foregoing actions.
(iv) Without limiting the effect of the foregoing,
Lessee shall also do or cause to be done at its own expense
any and all acts and things which may be required under the
terms of any agreement, treaty, convention, pact or by any
practice, custom or understanding involving any jurisdiction
in which Lessee may operate, and any and all acts and things
which Lessor or Owner Participant may reasonably request, to
establish, perfect, preserve and protect the respective rights
of Lessor in the Aircraft and in this Agreement and each other
Operative Document.
(v) Lessee shall procure that, at all times during
the Lease Term, the Aircraft possesses a current, legal and
valid Airworthiness Certificate, and all such other
certificates, licenses, permits and authorizations as are from
time to time required for the use and operation of the
Aircraft for the public transport of passengers or cargo by
any Government Entity having jurisdiction in any country,
state, province or other political subdivision in or over
which the Aircraft is flown, including, without limitation,
any aviation authority.
(c) Maintenance. Lessee, at its own cost and expense, shall,
at all times during the Lease Term and until the Aircraft is returned in the
condition and manner required by this Agreement:
(i) maintain, service, repair, test, inspect and
overhaul, or cause to be maintained, serviced, repaired,
tested, inspected and overhauled, the Aircraft in accordance
with the Approved Maintenance Program (which shall not be
amended in any material respect without Lessor's prior written
consent, which consent shall not be unreasonably withheld),
the structural repair manual and the rules and regulations of
the Aviation Authority, including, without limitation, FAR
Part 121, and the regulations promulgated by the Aviation
Authority thereunder, and, except to the extent in conflict
with the rules and regulations of the Aviation Authority, as
well as standard commercial airline practice, (x) so as to
keep the Aircraft in as good condition (operating and
otherwise) as when delivered on the Delivery Date, ordinary
wear and tear excepted, and in at least the same manner and
with at least substantially the same care and diligence as
other aircraft owned or operated by Lessee, (y) so as to keep
the Aircraft free of, or so as to promptly correct, physical
damage to the Airframe, any Engine or any Part which may have
resulted from foreign object damage, from damage caused by
ramp equipment, ramp personnel, operational mishandling,
Lessee staff or passengers or from other means or sources and
(z) so as to keep the Aircraft in such condition as may be
necessary to enable the applicable airworthiness certification
for the Aircraft to be maintained in good standing at all
times under applicable law;
(ii) without limiting Lessee's obligations under
Section 10(c)(i), agree that such maintenance and repairs will
include, but will not be limited to, each of the following
specific items:
(A) to perform in accordance with recognized
standards of prudent air carriers and the Approved
Maintenance Program, and all applicable rules and
regulations of the Aviation Authority, and, except to
the extent in conflict with the rules and regulations
of the Aviation Authority, all routine and nonroutine
maintenance work, including, without limitation, line
maintenance to be done upon the Aircraft;
(B) without prejudice to the provisions of
Section 7, to comply with all applicable ADs that are
issued during the Lease Term and are due for
compliance on such basis at any time during the Lease
Term and within 180 days after the end of the Lease
Term ("Required Modifications");
(C) to incorporate and retain in the
Approved Maintenance Program for the Aircraft an
applicable CPCP, and to carry out such work as may be
required to comply therewith, including periodic
inspection, testing and corrosion inhibiting
treatment to or of fuel tanks, periodic inspection,
cleanup and resealing under galleys and lavatories,
the cleaning and treating of all mild and moderate
corrosion and the correcting of all severe and
exfoliated corrosion, and the application of
corrosion inhibition compounds to all areas of the
Aircraft recommended by the Airframe Manufacturer
that are manufactured from aluminum or other metals,
in accordance with the recommendations of the
Airframe Manufacturer, the CPCP, the Airframe
Manufacturer structural repair manual and the
Approved Maintenance Program;
(D) to effect any required repair to the
Airframe or any Engine, and any Parts installed
therein or thereon, only (w) by an Aviation
Authority-approved repair station, (x) by Aviation
Authority-licensed mechanics and (y) in accordance
with Lessee's Approved Maintenance Program, the
Airframe Manufacturer's structural repair manual, the
Airframe Manufacturer's component repair manual,
Engine Manufacturer's repair manuals and the other
repair and overhaul manuals related to the Aircraft
or any Part thereof, in each case, as approved by the
Aviation Authority, and (z) the relevant, if any,
engineering change orders (which shall be initiated
in accordance with procedures approved by the
Aviation Authority);
(E) to maintain, in the English language,
the Aircraft Documentation and to keep the Aircraft
Documentation current and up to date (with all
documents and records unique to the Aircraft to be
maintained unique to the Aircraft, which Aircraft
Documentation shall (i) conform with the laws of any
Government Entity having jurisdiction over the
Aircraft and with normal practices of commercial air
carriers, (ii) disclose the location of any Engine
not installed on the Airframe, (iii) accurately
record the amount of time consumed and/or the cycles
of use (as appropriate) by each operation of the
Airframe, each Engine and all Parts and all work
performed thereon, (iv) accurately maintain complete
back-to-birth records of all Life Limited Components,
and (v) be made available for review by Lessor, Owner
Participant or their respective designees on
reasonable notice in order to facilitate Lessor's or
Owner Participant's ability periodically to inspect
the Aircraft and monitor the maintenance of the
Aircraft);
(F) to make available for review upon
request by Lessor or Owner Participant or their
respective designees copies of any written
communications with the Aviation Authority, Airframe
Manufacturer, Engine Manufacturer or other vendors
with respect to incidents, defects or malfunctions of
the Aircraft;
(G) to diligently correct any and all
deficiencies revealed by any inspection of Lessor or
Owner Participant by proper cleaning, sealing,
repair, replacement, overhaul and adjustment as
required pursuant to the Approved Maintenance
Program;
(H) to ensure that only an Approved
Maintenance Performer services, maintains, overhauls,
repairs or performs any Modifications on or to the
Aircraft or any installed engine or part;
(I) all parts or materials installed or used
on the Aircraft shall have a current valid Aviation
Authority "serviceable tag" of the manufacturer or
maintenance facility providing such item to Lessee;
and
(J) notwithstanding anything to the contrary
contained herein, to maintain any engine which is not
an Engine but which is installed on the Airframe as
if it were an Engine;
(iii) furnish or cause to be furnished to Lessor and
Owner Participant as soon as reasonably practicable and at no
cost to Lessee such information as may be required to enable
Lessor and Owner Participant to file on a timely basis any
reports required to be filed by Lessor or Owner Participant
with any Government Entity because of Lessor's or Owner
Participant's rights, title and interests in and to the
Aircraft or under this Agreement or any other Operative
Document.
(d) Operation.
(i) Lessee shall not maintain, use, service, repair,
overhaul or operate the Aircraft (or permit maintenance, use,
service, overhaul or operation of the Aircraft) in violation
of any law of any Government Entity having jurisdiction, in
violation of any manufacturer's operating manuals,
recommendations or instructions or in violation of any
airworthiness certificate, license or registration relating to
the Aircraft issued by any such Government Entity.
(ii) Lessee shall not operate the Aircraft or permit
the Aircraft to be operated (y) outside of the Permitted
Jurisdictions or (z) on routes other than those approved by
the government of the State of Registration.
(iii) Lessee shall not knowingly employ, suffer or
cause the Aircraft to be used for the carriage of (w)
livestock, (x) acids, toxic chemicals or other corrosive
materials, unless the same are appropriately packaged in
compliance with applicable law, (y) explosives, nuclear fuels
or wastes, (z) illegal drugs, controlled substances or the
like or any other goods, materials or items of cargo which are
prohibited by law or which could reasonably be expected or
anticipated to cause damage to the Aircraft.
(iv) Lessee will not use, or permit the use of, the
Aircraft for testing or for training, qualifying or
reconfirming the status of flight crew members other than
employees of Lessee, and then only if the use of the Aircraft
for such purpose is not disproportionate to the use for such
purpose of other Airframe Manufacturer model 737 aircraft
owned or operated by Lessee.
(v) Notwithstanding anything herein to the contrary,
Lessee shall not install, and shall not permit the
installation of, any Engine on any airframe that is not an
Airframe Manufacturer model 737-3U3 airframe, except solely to
the extent the Aviation Authority has approved the use of
engines of the same model and manufacturer as such Engine on
any Airframe Manufacturer model 737-3U3 airframe, such
airframe.
(vi) Lessee shall provide Lessor on the tenth day of
each calendar month during the Lease Term with a completed and
duly executed Aircraft Status Report substantially in the form
of Exhibit I.
(e) Insignia. Lessee shall affix and maintain in respect of
the Airframe and each Engine a fireproof identification plate of a reasonable
size, in the location specified below, that contains the following legends or
any other legend requested from time to time by Lessor in writing:
Location:
(i) in the case of the Airframe, in the upper sill of
the left-hand forward entry door, adjacent to the Airframe
Manufacturer's plate and
(ii) in the case of each Engine, in a clearly visible
place in close proximity to the manufacturer's plate.
Legend:
(y) in the case of the Airframe, "THIS AIRCRAFT IS
OWNED BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER
TRUSTEE, AND IS HELD UNDER LEASE BY FRONTIER AIRLINES, INC.,",
and
(z) in the case of each Engine, "THIS ENGINE IS OWNED
BY FIRST SECURITY BANK,NATIONAL ASSOCIATION, AS OWNER TRUSTEE,
AND IS HELD UNDER LEASE BY FRONTIER AIRLINES, INC.".
Lessee shall promptly replace any such nameplate that becomes illegible, lost,
damaged or destroyed for any reason.
(f) Costs of Operation. Lessee shall pay all costs incurred in
the operation of the Aircraft for profit or otherwise, including, without
limitation, the costs and expenses of flight crews, cabin personnel, fuel, oil,
lubricants, maintenance, insurance, landing fees, navigation fees, airport
charges, passenger service and any and all other expenses or claims of any kind
or nature (including, without limitation, any and all Taxes) directly or
indirectly incurred or imposed in connection with or related to the use,
movement, operation, maintenance, repair, storage or location of the Aircraft
during the Lease Term.
(g) Payment of Flight Charges. Without limiting the effect of
Section 8, Lessee shall pay during the Lease Term promptly upon the same
becoming due and payable all Flight Charges payable by Lessee during the Lease
Term whether in respect of the Aircraft or any other aircraft of Lessee and
which involve any risk of the imposition of a Lien on the Aircraft or the
confiscation or detention thereof (unless such Flight Charges are being
contested in good faith by appropriate proceedings) and shall indemnify and hold
Lessor, Owner Participant and any other Indemnified Party harmless in respect of
the same, which indemnity shall continue in full force and effect
notwithstanding the termination or expiration of the Lease Term or Return of the
Aircraft.
(h) Loss or Damage.
(i) Without limiting the other provisions of this
Section 10, if the Aircraft or any part thereof suffers loss
or damage not constituting an Event of Loss of the Aircraft or
the Airframe or any Engine (in respect of which, for the
avoidance of doubt, Section 13 shall apply), Lessee shall
promptly correct and repair such loss or damage, including the
repair or replacement of all damaged or lost Parts at its own
expense in accordance with this Agreement in order that the
Aircraft is placed in an airworthy condition and in
substantially the same condition as it was prior to such loss
or damage. Any insurance payments with respect to loss or
damage not constituting an Event of Loss of the Aircraft or
the Airframe shall be paid in accordance with the provisions
of Section 15 and applied in payment for repairs to or for
replacement of the property suffering the loss or damage.
(ii) Lessee shall notify Lessor forthwith of any such
loss or damage to the Aircraft for which the cost of
correction or repairs may exceed the Damage Notice Threshold
and shall provide an explanation or proposal for carrying out
the correction or repair. If after its receipt of such
proposal, Lessor does not agree with Lessee's proposal, Lessor
shall promptly notify Lessee of such disagreement. Lessee and
Lessor shall then consult with the Airframe Manufacturer,
Engine Manufacturer or other relevant manufacturer, and Lessee
and Lessor agree to accept as conclusive, and be bound by,
such Person's directions or recommendations as to the manner
in which to carry out such repairs.
(i) Cost Sharing. The Lessor shall, if the cost to Lessee of
performing an inspection resulting in modification or terminating action with
regard to any AD or causing such inspection resulting in modification or
terminating action being performed with regard to such AD, exceeds $100,000 in
respect of any individual item of the same, provided no Default or Event of
Default has occurred and is continuing, on receipt by Lessor of evidence of
payment for and completion of the relevant work, reimburse Lessee with an amount
equal to the solution to the following formula:-
P=Cx(N-R)/N
where "N" equals the Lease Term in months;
"R" represents the remainder of the Lease Term in months after
completion of the modification/terminating action;
"C" equals the cost of the modification/terminating action in excess of
$100,000; and
"P" equals the Lessor's share of any cost.
SECTION 11. Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, Airframe or an Engine or any Part, or
install an Engine, or permit any such Engine to be installed, on an airframe
other than the Airframe, provided that so long as (1) no Event of Default shall
have occurred and be continuing, (2) the action to be taken shall not adversely
affect, or be of a nature that could reasonably be expected to adversely affect,
Lessor's rights, title and interests in and to the Aircraft or Airframe, or any
Engine or Part, or under this Agreement or any other Operative Document
(including, without limitation, any impairment of title to or the registration
with the then Aviation Authority of, the Aircraft), (3) all applicable
approvals, if any, of the Aviation Authority and any other Government Entity
having jurisdiction shall have been obtained, and (4) the insurance provisions
of Section 15 hereof shall have been complied with, then, at the cost and
expense of Lessee:
(a) Maintenance, Etc. Without the prior consent of Lessor,
Lessee may deliver possession of the Airframe or an Engine or any Part to the
manufacturer thereof, to any Approved Maintenance Performer or to any other
Aviation Authority-approved company acceptable to Lessor for testing, service,
repair, maintenance or overhaul work on the Airframe or Engine or any Part or
for alterations or modifications in or additions to such Airframe or Engine or
Part to the extent required or permitted by the terms of Section 12(b).
(b) Installation of Engines on Other Airframes. Without the
prior consent of Lessor, Lessee may install an Engine on any Airframe
Manufacturer model 737 airframe (other than the Airframe) operated by Lessee so
long as no Person will acquire or claim any right, title or interest in any
Engine by reason of such Engine's being installed on such airframe at any time
while such Engine is owned by Lessor.
(c) Pooling; Sublease.
Lessee will not, without the prior written consent of Lessor,
sublease or otherwise in any manner deliver, transfer or relinquish possession
of the Aircraft, the Airframe or any Engine or install any Engine, or permit any
Engine to be installed, on any airframe other than as permitted under Section
11(b); provided, however, subject to the provisions of this Section 11(c) that
if and for so long as (y) no Default or Event of Default shall have occurred and
be continuing, and (z) all approvals, consents or authorizations required in
connection with any such delivery, transfer or relinquishment of possession by
the Aviation Authority have been obtained and remain in full force and effect,
then Lessee may, without such prior written consent:
(i) Subject any Engine to normal interchange agreements or
pooling agreements or arrangements, in each case customary in the
commercial airline industry and entered into in writing by Lessee in
the ordinary course of business and with any solvent United States air
carrier; provided, however, that no such agreement or arrangements
shall require, contemplate or result in any transfer of Lessor's title
to such Engine. If, notwithstanding the foregoing, Lessor's title to
any such Engine is divested under any such agreement or arrangement,
then such Engine shall be deemed to have suffered an Event of Loss as
of the date of such divestiture, with the effect that Lessee shall be
required to replace such Engine with a Replacement Engine meeting the
requirements of, and in accordance with, Section 13(c).
(ii) With respect to the Aircraft, enter into a Wet Lease with
any United States air carrier, but only if:
(A) Lessee shall provide 30 days advance written
notice to Lessor;
(B) At the time that Lessee enters into such Wet
Lease, no such air carrier shall be insolvent or subject to
any bankruptcy, insolvency, liquidation, reorganization,
dissolution or similar proceeding, or any similar non-ordinary
course transaction, shall be seeking any reorganization or any
readjustment of its debts, or shall have substantially all of
its property in the possession of any liquidator, trustee,
receiver or similar person; and
(C) Any such Wet Lease shall be for a period not in
excess of 6 months and not extending beyond the date which is
one year prior to the end of the Lease Term, and shall be
expressly subject to and subordinate to all the terms of this
Agreement and to the rights, powers and remedies of Lessor
hereunder, including, without limitation, Lessor's rights
under Section 20 to repossess the Aircraft, Airframe and
Engines and to terminate such Wet Lease, upon the occurrence
of an Event of Default.
(iii) Notwithstanding anything to the contrary in this Section
11(c):
(A) Lessee shall remain primarily liable hereunder
for the performance of all the terms of this Lease to the same
extent as if such transfer had not occurred and no transfer of
possession of the Aircraft, the Airframe, any Engine, any
Part, or any Aircraft Documentation shall in any way discharge
or diminish any of Lessee's obligations to Lessor hereunder or
under any Operative Document; and
(B) Lessee shall ensure that no delivery, transfer or
relinquishment permitted under this Section 11(c) shall affect
the United States registration of the Aircraft.
(d) Transfers of Possession in General. The rights of any
Person who receives possession by reason of a transfer or sublease permitted by
this Section 11 shall be effectively and expressly subject and subordinate to
all the terms of this Lease, including, without limitation, the covenants
contained in Section 10, this Section 11 and Section 15 and the rights of Lessor
to repossession pursuant to Section 20 and to avoid transfer upon such
possession. No sublease, relinquishment or transfer of possession of the
Aircraft or Airframe, or any Engine or Part, shall in any way release, discharge
or otherwise limit or diminish any of Lessee's obligations to Lessor (it being
agreed that notwithstanding any such transfer or relinquishment of possession,
Lessee shall continue to be primarily liable and responsible for performance of
all of its obligations under this Agreement and each other Operative Document),
or constitute a waiver of Lessor's rights or remedies hereunder or affect the
registration of the Aircraft with the Aviation Authority. Notwithstanding any
other provision of this Agreement or any other Operative Document, any sublease,
relinquishment or transfer of possession must (x) be consistent with the terms
of this Agreement and the other Operative Documents, and (y) not adversely
affect the rights, title or interests of Lessor in or to the Aircraft or
Airframe, or any Engine or Part, or under this Agreement or any other Operative
Document, and (z) not result in any increases in Taxes to the Lessor which are
not indemnifiable hereunder, or otherwise adversely affect applicable tax
benefits available to Lessor.
SECTION 12. Replacement of Parts, Alterations, Modifications and
Additions.
(a) Replacement of Parts.
(i) Lessee, at its own expense, will replace or cause
to be replaced as soon as reasonably practicable and in
accordance with applicable manufacturer maintenance manual
limits (and in any event within thirty (30) days of removal
or, if earlier, on the date the Lease Term expires or
terminates) all Parts which may from time to time become worn
out, obsolete, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use
for any reason whatsoever, except as otherwise provided in
Section 12(b) with respect to Additional Parts.
(ii) All Parts incorporated or installed in or
attached or added to the Airframe or any Engine shall (x) be
free and clear of all Liens (except for Permitted Liens), (y)
except with respect to Additional Parts, be in as good
operating condition as, and shall have a value and utility at
least equal to, the Parts replaced, assuming such replaced
Parts were in the condition and repair required to be
maintained by the terms hereof and (z) have a current valid
Aviation Authority "serviceable tag" of the manufacturer or
maintenance facility providing such items to Lessee
identifying the manufacturer, vendor, part number, make, model
and serial number, date and hours and/or cycles and, if such a
tag is issuable with respect to the Parts, indicating that
such Parts are new, serviceable or overhauled. Lessee may
substitute for any Part a part that does not meet the
requirements of the foregoing sentence if a complying Part
cannot be procured or installed within the available ground
time of the Aircraft, provided that the original Part is
reinstalled or the noncomplying part is removed and replaced
by a complying Part, in each case as soon as reasonably
practicable (and in any event within thirty (30) days of
removal or, if earlier, on the date the Lease Term expires or
terminates).
(iii) Immediately upon any Part's becoming
incorporated in, installed on or attached to the Airframe or
any Engine, as above provided, without further act (x) title
to such Part shall thereupon vest in Lessor, free and clear of
all Liens (other than Permitted Liens), (y) such Part shall
become subject to this Agreement and be deemed part of such
Airframe or such Engine for all purposes hereof, and (z) title
to any replaced Part shall thereupon vest in Lessee, free and
clear of all Lessor Liens and shall no longer be deemed a Part
hereunder. All Parts (other than Additional Parts) at any time
removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time
as such Parts shall be replaced by Parts which have been
incorporated or installed in or attached to the Airframe or
any Engine and which meet the requirements set forth in clause
(iii) above. Upon any removal of Additional Parts, title
thereto shall, without further act, vest in Lessee, and such
Additional Part shall no longer be deemed a Part hereunder.
(iv) Notwithstanding any other provision hereof, no
Part that is a life limited part shall be installed on the
Aircraft or any Engine, including, without limitation, a
Replacement Engine, after the Delivery Date unless such Part
is new or Lessee has complete certified, back-to-birth records
for such part. (b) Modifications.
(i) Lessee, at its own expense, will make, or cause
to be made, such Modifications to the Airframe and Engines as
may be required from time to time to meet the applicable
standards of the Aviation Authority, provided that except as
otherwise provided with respect to Required Modifications in
Section 10(c)(ii)(B), Lessee may, in good faith, contest the
validity or application of any law, rule, regulation or order
in any manner which does not involve any risk of the sale,
forfeiture or loss of the Aircraft or, in the reasonable
judgment of Lessor, materially adversely affect Lessor or
involve any risk of civil or criminal liability on Lessor or
any Indemnified Party.
(ii) Lessee, at its own expense, may from time to
time add further parts or accessories and make such
Modifications to the Airframe or any Engine as Lessee may deem
desirable in the proper conduct of its business, provided
that:
(y) other than the Reconfiguration, Lessee
shall not, without Lessor's prior written consent,
make any Major Modifications, including, without
limitation, modifications as to the type or
manufacture of the avionics and Cabin modifications
which change the interior layout, to the Aircraft (it
being agreed that Lessee shall, if requested by
Lessor, provide advance copies of regulatory
approvals and all designs, plans, diagrams, drawings
and data used by Lessee in accomplishing such Major
Modifications); provided that any such Major
Modifications that are performed shall be approved by
the Aviation Authority (as evidenced by the issuance
of a supplemental type certificate or similar data
acceptable to the Aviation Authority and Lessor); and
(z) no such Modification shall reduce the
remaining useful life of the Airframe or such Engine
or diminish the value or utility of the Airframe or
such Engine or impair the condition, airworthiness or
marketability thereof below the remaining useful
life, value, utility, condition, marketability or
airworthiness thereof immediately prior to such
Modification, assuming the Airframe or such Engine
was then of the remaining useful life, value and
utility and in the condition and airworthiness
required to be maintained by the terms of this
Agreement. Title to all Parts incorporated or
installed in or attached or added to the Airframe or
an Engine as the result of such Modification (the
"Additional Parts") shall, without further act, vest
in Lessor, and Lessee hereby relinquishes all right,
title and interest thereto. Any Part installed as
part of the Reconfiguration shall not constitute an
Additional Part.
(iii) Except as provided in Sections 2(d) and 10(i)
hereof, neither Lessor nor Owner Participant shall be required
under any circumstances to pay directly or indirectly for any
Modifications. Notwithstanding the foregoing, Lessee may, at
any time during the Lease Term, so long as no Event of Default
shall have occurred and be continuing, remove or suffer to be
removed any such Additional Part, provided that such
Additional Part (x) is in addition to, and not in replacement
of or substitution for, any Part originally incorporated or
installed in or attached to the Airframe or any Engine at the
time of delivery thereof or any Part in replacement of or
substitution for any such Part, (y) is not required to be
incorporated or installed in or attached or added to the
Airframe or any Engine pursuant to the terms of this Section
12 and (z) can be removed from the Airframe or such Engine
without damaging the Airframe or such Engine or diminishing or
impairing the value, utility, condition or airworthiness which
the Airframe or such Engine would have had at such time had
such Modification not occurred, assuming the Airframe or such
Engine was then of the fair market value and utility and in
the condition and airworthiness required to be maintained by
the terms of this Agreement.
(iv) Upon expiration or termination of the Lease Term
and the written request of Lessor at least ten (10) Business
Days prior to such expiration or termination, Lessee shall, at
its own expense, remove or cause to be removed any Additional
Part. Upon the removal by Lessee of any Additional Part as
provided above, title thereto shall, without further act, vest
in Lessee, and such Additional Part shall no longer be deemed
part of the Airframe or Engine from which it was removed. Any
Additional Part not removed by Lessee as above provided prior
to the return of the Airframe or Engine to Lessor hereunder
shall remain the property of Lessor.
(v) Notwithstanding anything to the contrary
contained herein, Lessee shall not, without Lessor's prior
written consent, remove any Modification which is required by
the Aviation Authority.
SECTION 13. Risk of Loss, Destruction, Requisition, Etc.
(a) Risk of Loss. Throughout the Lease Term and until the
Return shall have been effected in accordance with the terms of this Agreement,
Lessee shall bear all risk of loss, damage, theft or destruction of, or any
other Event of Loss with respect to, the Aircraft or to the Airframe, any Engine
or any Part.
(b) Event of Loss With Respect to the Aircraft.
(i) Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and Engines and/or
engines then installed thereon, Lessee shall forthwith (and,
in any event, within three (3) days after such occurrence)
give Lessor written notice of such Event of Loss. By the
earlier of (y) sixty (60) days following the Event of Loss
Date or (z) the date on which the applicable insurance
proceeds are received by the loss payee, Lessee shall pay or
cause to be paid to Lessor in immediately available funds the
Stipulated Loss Value of the Aircraft together with all other
amounts then due and owing by Lessee hereunder.
(ii) Until the date on which the Stipulated Loss
Value and the other amounts referred to in clause (b)(i) above
are paid in full, Lessee shall be obligated to pay all Basic
Rent or Renewal Rent, as applicable, as scheduled and shall
continue to perform all of its other obligations under the
Operative Documents, except to the extent rendered impossible
by the occurrence of such Event of Loss or rendered, in the
opinion of Lessor, unnecessary. If the Stipulated Loss Value
referred to in clause (b)(i) above is paid on a date other
than a Basic Rent Date or Renewal Rent Date, Lessor shall
refund or cause to be refunded to Lessee any paid but
unaccrued Basic Rent or Renewal Rent, as applicable. Upon
receipt of the full amount of the Stipulated Loss Value and
the other amounts referred to in clause (b)(i) above by Lessor
pursuant to this Section 13(b), and if Lessee has paid all
other amounts then due and payable by Lessee under this
Agreement and the other Operative Documents, then (x) Lessor
shall, upon the joint written request of Lessee and each
insurer or their appointed representatives which contributed
to the payment of the Stipulated Loss Value, transfer to the
Person designated in such request all of Lessor's right, title
and interest in the Aircraft without recourse or warranty
(except as to absence of Lessor Liens) and subject to the
disclaimer set forth in Section 5(a), and (y) Lessee shall be
relieved of its obligations under Section 7.
(c) Event of Loss With Respect to an Engine.
(i) Upon the occurrence of an Event of Loss with
respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe,
Lessee shall promptly (and, in any event, within three (3)
days after such occurrence) give Lessor written notice thereof
and shall, as soon as reasonably practicable and, in any
event, within forty-five (45) days after the occurrence of
such Event of Loss (or, if earlier the date of expiration or
termination of the Lease Term) and upon five days' prior
written notice, convey or cause to be conveyed to Lessor, as
replacement for the Engine with respect to which such Event of
Loss occurred, title to a Replacement Engine, free and clear
of all Liens (other than Permitted Liens) and having an
equivalent or greater value, condition, utility,
airworthiness, remaining useful life as, and being in as good
operating condition as, the Engine with respect to which such
Event of Loss occurred, assuming such replaced Engine was in
the condition and repair required to be maintained by the
terms of this Agreement. For all purposes hereof, each such
Replacement Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an
"Engine."
(ii) Prior to or at the time of any conveyance of a
Replacement Engine, Lessee, at its own expense, shall (t)
furnish Lessor with a full warranty (as to title) xxxx of
sale, in form and substance satisfactory to Lessor, conveying
to Lessor such Replacement Engine, (u) cause supplements to be
executed which shall subject such Replacement Engine to this
Agreement, (v) cause the filing of such instruments as are
necessary or advisable to establish, perfect and protect the
interest of Lessor in any such Engine (including, without
limitation, cause a Lease Supplement, in form and substance
satisfactory to Lessor, to be duly executed by Lessee) (w)
furnish Lessor with such evidence of the transfer of title to
such Replacement Engine to Lessor as Lessor may reasonably
request, including, without limitation, that such Replacement
Engine is free and clear of all Liens, except Permitted Liens,
such evidence to include, without limitation, an opinion of
Lessee's counsel addressed to Lessor, and opining that such
title has been so conveyed and that such Replacement Engine
has been duly subjected to this Agreement (such opinion to be
in form and substance, and from counsel, satisfactory to
Lessor), (x) furnish Lessor with such evidence of compliance
with the provisions of Sections 10(e), 12(a)(iv) and 15 with
respect to such Replacement Engine as Lessor may reasonably
request, (y) furnish Lessor with a certificate signed by an
officer of Lessee certifying that, upon consummation of such
replacement, no Event of Default will exist hereunder and (z)
furnish Lessor with an appraisal satisfactory to Lessor which
shall establish, and a certificate of an aircraft engineer
(who may be an employee of Lessee) certifying, that such
Replacement Engine has a value, condition, utility,
airworthiness and remaining useful life at least equal to, and
is in as good operating condition as, the Engine so replaced,
assuming such Engine was in the condition and repair required
by the terms of this Agreement immediately prior to the
occurrence of such Event of Loss.
(iii) Upon compliance by Lessee with the requirements
of this Section 13(c), if no Event of Default shall have
occurred or be continuing, Lessor shall, upon the joint
written request of Lessee and each insurer which contributed
to the payment of any insurance proceeds with respect to the
lost Engine, transfer to the Person designated in such request
all of Lessor's right, title and interest in such Engine
without recourse or warranty (except as to absence of Lessor
Liens) and subject to the disclaimer set forth in Section
5(a), and such Engine shall thereupon cease to be an Engine
leased hereunder.
(iv) No Event of Loss with respect to an Engine shall
result in any reduction in Basic Rent or Renewal Rent.
(d) Application of Payments From any Government Entity for
Requisition of Title, Etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 15) received at any time by
Lessor or by Lessee from any Government Entity or other Person with respect to
an Event of Loss will be applied as follows:
(i) if payments are received with respect to the
Airframe (or the Airframe and an Engine or engines then
installed thereon), after reimbursement of Lessor for
reasonable costs and expenses, so much of such payments
remaining as shall not exceed the Stipulated Loss Value
required to be paid by Lessee pursuant to Section 13(b) shall,
unless a Default or any Event of Default shall have occurred
and be continuing, be applied in reduction of Lessee's
obligation to pay such Stipulated Loss Value and such other
amounts of Rent, if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its
payment of such Stipulated Loss Value, and the balance, if
any, of such payments shall be distributed to or retained by
Lessor or
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 13(c), then
so much of such payments remaining after reimbursement of
Lessor for reasonable costs and expenses; up to an amount
equal to Lessee's actual cost of replacing such Engine in
accordance with Section 13(c), shall, unless a Default or
Event of Default shall have occurred and be continuing, be
paid over to, or retained by, Lessee if Lessee shall have
fully performed, or concurrently therewith will perform, the
terms of Section 13(c) with respect to the Event of Loss for
which such payments are made, and the balance, if any, of such
payments shall be distributed to or retained by Lessor.
(e) Application of Payments During Existence of Default. Any
amount referred to in this Section 13 which is payable to or retainable by
Lessee shall not be paid to or retained by Lessee if at the time of such payment
or retention a Default or any Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Lessor, as security for the
obligations of Lessee under this Agreement to be held and applied pursuant to
Section 20 and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not applied in
accordance with the preceding sentence.
SECTION 14. Maintenance Reserves.
(a) Amount. Lessee shall pay the following Maintenance
Reserves to Owner Participant during the Lease Term:
(i) in respect of the Airframe, US$70 for each
Airframe Flight Hour operated by the Aircraft to xxxxx 0X, 0X, 0X and
7C Checks of the Aircraft during the Lease Term ("Airframe Maintenance
Reserves");
(ii) in respect of each Engine, US$57 for each Engine
Flight Hour and US$52 for each Engine Cycle, in each case operated by
that Engine to cover such Engine's Basic Shop Visits during the Lease
Term (each, "Engine Maintenance Reserves");
(iii) in respect of the APU, US$15 for each Airframe
Flight Hour operated by the Aircraft to cover APU Basic Shop Visits
during the Lease Term ("APU Maintenance Reserves"); and
(iv) in respect of the Landing Gear, US$6 for each
Airframe Flight Hour operated by the Aircraft to cover the Landing Gear
Overhaul during the Lease Term ("Landing Gear Maintenance Reserves").
The Airframe Maintenance Reserves, the Engine Maintenance Reserves, the APU
Maintenance Reserves and the Landing Gear Maintenance Reserves are referred to
collectively herein as the "Maintenance Reserves." It is understood and agreed
that Owner Participant may conduct an annual review of the Dollar amounts set
forth in this Section 14. Upon each anniversary of the Delivery Date, Owner
Participant and Lessee agree to negotiate in good faith any adjustments to the
Dollar amounts set forth in this Section 14 (as may have been previously
adjusted pursuant to this sentence) as may be necessary or appropriate to
reflect changes in Airframe Manufacturer or Engine Manufacturer recommendations,
industry overhead cost experience or such other factors as may be relevant for
the purposes of establishing appropriate reserve payments. Without agreement to
a change in the Dollar amounts as aforesaid, no adjustment will be made thereto.
(b) Payments. Lessee shall pay the Maintenance Reserves in
respect of each calendar month during which Maintenance Reserves accrue on the
tenth day of the subsequent calendar month beginning on the tenth day of the
calendar month following the Delivery Date and ending on the tenth day of the
calendar month in which the Expiry Date occurs. A final payment of the
Maintenance Reserves shall be made on the Expiry Date in respect of the
operation of the Aircraft during the final month of the Lease Term. Owner
Participant shall keep notional running accounts in respect of the Airframe,
each Engine, the APU and the Landing Gear to which shall be credited all amounts
in respect thereof received under Section 14(a) and debited all sums paid in
respect thereof by Owner Participant to, or on behalf of, Lessee under Section
14(c).
(c) Release of Maintenance Reserves. If Lessee submits to
Owner Participant, within six months after the commencement of such maintenance
work and before the Expiry Date, an invoice and supporting documentation
evidencing performance (in reasonable detail) of the following work by or on
behalf of Lessee, Owner Participant shall, provided that (i) no reimbursement
shall be made in respect of replacement, repair or overhaul caused by foreign
object damage, operational or other mishandling, faulty maintenance or any
accidental cause or in respect of any cost which is reimbursable by insurance,
and (ii) no Default or Event of Default is continuing, release to Lessee the
following amounts from the respective Maintenance Reserves:
(i) Airframe Checks: with respect to a scheduled 2C,
4C, 6C or 7C Check of the Airframe, the lesser of (i) the amount of
such invoice and (ii) the balance of Airframe Maintenance Reserves held
by Owner Participant at the time of payment.
(ii) Engine Refurbishment: with respect to any Engine
Basic Shop Visit, the lesser of (i) the amount of such invoice and (ii)
the balance of Engine Maintenance Reserves held by Owner Participant in
respect of such Engine at the time of payment;
(iii) APU and Landing Gear: with respect to any
scheduled APU Basic Shop Visit or Landing Gear Overhaul, the lesser of
(i) the amount of such invoice and (ii) the balance of APU Maintenance
Reserves or Landing Gear Maintenance Reserves, as applicable, held by
the Owner Participant at the time of payment.
For the avoidance of doubt, Lessee has no right to payment of any amount from
the Maintenance Reserves except as expressly provided in this clause 14(c), and
any remaining balances of the Maintenance Reserves following the Expiry Date,
after application of the foregoing provisions, shall be retained by Owner
Participant as its sole property. Subject to its rights and obligations
hereunder, Lessee will not assign, transfer or otherwise dispose of its rights
or interest in the Maintenance Reserves. To the extent any maintenance expenses
exceed the amount available in the applicable Maintenance Reserves account, such
expenses shall be for the account of the Lessee and the shortfall, if any, shall
not be carried forward or made the subject of any further claim for
reimbursement. Lessee acknowledges that Owner Participant may commingle the
Maintenance Reserves with its general funds and no interest shall accrue in
favor of Lessee in respect of Maintenance Reserves held by Owner Participant
SECTION 15. Insurance.
(a) Requirements. At all times during the Lease Term, and
until the Aircraft is returned to Lessor in the condition and manner required by
this Agreement, Lessee shall maintain or cause to be maintained with respect to
the Aircraft, at its own expense, insurance in compliance with the Insurance
Requirements of Exhibit E hereto.
(b) Application of Proceeds of Hull Insurance. As between
Lessor and Lessee, it is agreed that all proceeds of insurance maintained in
compliance with this Section 15 (except Section 15(f)) and received as the
result of the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the
Airframe (or the Airframe and the Engines or engines installed
thereon), so much of such payments remaining, after
reimbursement of Lessor for reasonable costs and expenses, as
shall not exceed the Stipulated Loss Value and the other
amounts payable under Section 13(b) shall be applied in
reduction of Lessee's obligation to pay such Stipulated Loss
Value and the other amounts payable under Section 13(b), if
not already paid by Lessee, or, if already paid by Lessee,
shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value, and the balance, if any, of such
payments remaining thereafter shall be paid over to, or
retained by, Lessee; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 13(c),
so much of such payments remaining, after reimbursement of
Lessor and Owner Participant for reasonable costs and
expenses, shall be paid over to, or retained by, Lessee,
provided that Lessee shall have fully performed or,
concurrently therewith, will fully perform the terms of
Section 13(c) with respect to the Event of Loss for which such
payments are made.
As between Lessor and Lessee, the insurance payments with
respect to any property damage loss not constituting an Event of Loss with
respect to the Airframe or an Engine will be applied in payment (or to reimburse
Lessee) for repairs or for replacement property in accordance with the terms of
Sections 10 and 12, if not already paid for by Lessee, and any balance remaining
after compliance with such sections with respect to such loss shall be paid to
Lessee.
(c) Insurance for Indemnities; Continuation of Liability
Insurance. The insurance referred to in Section 15(a) shall in each case include
and insure (to the extent of the risks covered by the policies) the indemnity
provisions of Section 9. For a period of twenty-four months after the last day
of the Lease Term, or, if earlier, the next C-Check of the Aircraft, and at
Lessee's cost, Lessee shall continue to name each Indemnified Party as an
additional insured under Lessee's comprehensive airline and war-risk liability
insurance described in Exhibit E to the extent of its interest under the
indemnities referred to in the preceding sentence.
(d) Reports, Etc. Lessee shall furnish, or cause to be
furnished, to Lessor and Owner Participant (i) on or before the Delivery Date
and not later than each renewal date of any insurance, and otherwise upon
reasonable request, a Certificate of Insurance in the same form as the
Certificate of Insurance delivered on the Delivery Date and a report, signed by
"Insurance Brokers," substantially in the form of Exhibit F, and (ii) on the
Delivery Date and no later than five (5) days prior to the date of expiration of
any insurance policy referenced in a previously delivered certificate of
insurance and a report of the Insurance Broker.
(e) Self-Insurance. Lessee may not self-insure the risks
required to be insured against pursuant to this Section 15, provided that Lessee
may self-insure the risks required to be insured against pursuant to Exhibit E
(except total loss) by way of deductible, premium adjustment or similar
provisions, in such amounts as are customarily self-insured with respect to
aircraft of the same type and used in the same manner as the Aircraft by major
international air carriers, but in no event in an amount greater than the
Stipulated Deductible Amount per aircraft per occurrence.
(f) Additional Insurance. Lessee acknowledges that each of
Lessor and Owner Participant has an insurable interest in the Aircraft. Each of
Lessor and Owner Participant shall have the right to obtain insurance in its own
name with respect to such insurable interest. Lessee will render each of Lessor
and Owner Participant all reasonable assistance requested by Lessor or Owner
Participant, as the case may be, in order that Lessor or Owner Participant, as
the case may be, may adequately protect such insurable interest. Lessee agrees
that the maximum amounts payable to it or to others for its account or to be
applied in discharge of its obligations by any underwriter or carrier of
insurance maintained by Lessee upon the occurrence of an Event of Loss with
respect to the Aircraft shall be limited to the Stipulated Loss Value unless the
maintenance of any such insurance in an amount in excess of such Stipulated Loss
Value in respect of Lessee's insurable interest in the Aircraft does not
prejudice Lessor's or any Insured Party's interests under the insurances
otherwise required by this Section 15, or prevent Lessor from obtaining such
insurances as it requires, in which event nothing herein shall prevent Lessee
from effecting such additional insurance for its account.
(g) Application of Payments During Existence of a Default. Any
amount referred to in this Section 15 which is payable to or retainable by
Lessee shall not be paid to or retained by Lessee if at the time of such payment
or retention a Default or any Event of Default shall have occurred and be
continuing, but shall be held by or paid over to Lessor as security for the
obligations of Lessee under this Agreement and, if any such Default or Event of
Default shall have occurred and be continuing, applied against Lessee's
obligations hereunder as and when due. At such time as there shall not be
continuing any such Default or Event of Default, such amount shall be paid to
Lessee to the extent not applied in accordance with the preceding sentence.
(h) Change of Practice or Insurers. In the event that there is
a material change in the generally accepted aviation insurance practice and
custom with regard to the insurance of aircraft or any material change with
respect to the insurance of aircraft based or operated in any jurisdiction in
which the Aircraft may then be based or operated (whether relating to all or any
of the types of insurance required to be effected under this Section 15), such
that Lessor or Owner Participant, on the basis of advice received from an
independent insurance advisor of international reputation (selected by Lessor or
Owner Participant and acceptable to Lessee), shall be of the reasonable opinion
that the insurance required pursuant to this Section 15 is insufficient to
protect the respective interests of Lessor, Owner Participant and/or any other
Insured Parties (bearing in mind the nature and route of operation of the
Aircraft), the insurance requirements set forth in this Section 15 shall be
amended, effective upon notice by Lessor or Owner Participant to Lessee, so as
to include such additional or varied requirements as Lessor or Owner Participant
(upon the advice of such advisor) may reasonably consider appropriate in order
to ensure that the insurance as so varied shall provide comparable protection to
Lessor, Owner Participant and the other Insured Parties to that which it would
have done if such change had not occurred. In addition, if at any time Lessor or
Owner Participant reasonably determines that any insurer or reinsurer providing
any of the insurances required under this Section 15 is, or could reasonably be
expected to be, unable to meet its obligations as they fall due or may fall due,
Lessor or Owner Participant shall so notify Lessee, and Lessee and Lessor or
Owner Participant, as the case may be, shall negotiate in good faith the
selection of an alternative insurer or reinsurer, as the case may be, which is
reasonably acceptable to Lessor or Owner Participant, and Lessee shall promptly
after such selection arrange for insurance with such insurer or reinsurer.
(i) Change of Circumstance. If any change in circumstance has
occurred and is continuing at any time and such change materially adversely
affects the insurance of the Aircraft or Airframe, then Lessee shall, as soon as
reasonably practicable, make such amendments, supplements or replacements to the
insurance coverage in place with respect to the Aircraft as Lessor or Owner
Participant may reasonably request in light of such change in circumstances.
(j) Negative Undertakings. Lessee shall not (i) act or fail to
act, or cause, permit or suffer an act or failure to act, whereby any insurance
required by this Section 15 would or might reasonably be expected to be limited
or rendered in whole or in part invalid, unenforceable or otherwise not in full
force and effect (including any limitation resulting from inaccuracy of any
representation or warranty of Lessee, or any illegal use of the Aircraft), and
(ii) without limiting the foregoing, use, operate, employ or locate the
Aircraft, Airframe, any Engine or any Part, or cause, permit or suffer the
Aircraft, Airframe, any Engine or any Part to be used, operated, employed or
located, in any place or in any manner or for any purpose (x) in any area
excluded from coverage, or in any manner for any purpose that is not covered, by
any insurance policy in effect or required by the terms of this Agreement to be
maintained by Lessee or (y) that might reasonably be expected to be excluded
from coverage under, or to invalidate or in any way limit (including any
limitation with respect to coverage of the specified insured perils, events or
circumstances) any such insurance policy.
(k) Failure to Insure. If at any time Lessee fails to maintain
insurance in compliance with this Section 15, each of Lessor and Owner
Participant shall be entitled but not bound to do any of the following (without
prejudice to any other rights which it may have under this Agreement by reason
of such failure):
(i) to pay any premiums due or effect or maintain
such insurance or otherwise remedy such failure in such manner
as Lessor or Owner Participant, as the case may be, considers
appropriate (and Lessee shall upon demand reimburse Lessor or
Owner Participant, as the case may be, in full for any amount
so expended in that connection) and/or
(ii) at any time while such failure is continuing,
require the Aircraft to remain at any airport or, as the case
may be, upon provision by Lessor or Owner Participant, as the
case may be, of insurance coverage satisfactory to Lessee,
proceed to and remain at any airport designated by Lessor or
Owner Participant, as the case may be, until such failure is
remedied to Lessor's and Owner Participant's satisfaction.
SECTION 16. Inspection.
(a) Maintenance Schedule. During the Lease Term, Lessee shall
furnish Lessor with such information concerning the location, condition, use and
operation of the Aircraft as Lessor may reasonably request. Lessee shall provide
Lessor with maintenance schedules relating to the Aircraft upon delivery of the
Aircraft and from time to time as such schedules are adjusted or updated. Lessee
shall give Lessor reasonable prior notice of the date of, and any change in the
date of, any Major Checks, in order to enable Lessor or Owner Participant, or
their respective agents, representatives or designees, to inspect the Aircraft,
including, without limitation, the Aircraft Documentation (should Lessor or
Owner Participant choose to do so), at the time and place any such Major Checks
occur and to make a reasonable number of photocopies of any Aircraft
Documentation.
(b) Reasonable Inspections. At all reasonable times, Lessor,
Owner Participant or their respective authorized representatives may inspect the
Airframe and Engines and inspect and make copies (at such Person's expense, or
if such inspection is made in connection with or following a Default or an Event
of Default, at Lessee's expense) of the books and records of Lessee relating to
the Airframe and Engines and the maintenance of the Airframe and Engines
(including, without limitation, any Aircraft Documentation, the Approved
Maintenance Program, and also including any airworthiness directive and service
bulletin compliance records, component life status reports, and the then-current
aircraft configuration), and if such inspection is made at the time of any
maintenance operation, such Persons may inspect behind any panels, bays or other
apertures which have already been opened in the course of such maintenance
operation, provided that, so long as no Default or Event of Default has occurred
and is continuing, no exercise of such inspection right shall interfere with the
normal operation of the Aircraft by Lessee.
(c) No Duty to Inspect. Neither Lessor nor Owner Participant
shall have any duty to make any such inspection nor shall Lessor or Owner
Participant incur any liability or obligation by reason of making or not making
any such inspection.
(d) Follow-On Lease. Upon request by Lessor, Lessee shall from
time to time during the Lease Term make the Aircraft, including, without
limitation, the Aircraft Documentation, available for inspection and/or a
reasonable amount of photocopying to Lessor's designated representatives or
technical teams evaluating the Aircraft for use after the end of the Lease Term.
Lessor agrees to give Lessee at least five (5) Business Days' advance notice of
any such inspection and to coordinate such inspections with Lessee so as not to
unreasonably interfere with Lessee's operation or maintenance or with its
personnel.
(e) Absolute Right. The right of Lessor and Owner Participant
and their respective designated representatives to inspect the Aircraft and
Aircraft Documentation in accordance with this Section 16 during the Lease Term
shall be absolute.
SECTION 17. Assignment.
(a) Assignment by Lessee. Lessee shall not assign, convey or
otherwise transfer (each, an "assignment") any of its rights, title or interests
in and to the Aircraft or this Agreement without the prior written consent of
Lessor.
(b) The Lessor may sell, assign or transfer all or any of its
rights under this Agreement and in the Aircraft (a "Transfer") and the Lessor
will, other than in the case of an assignment for security purposes, have no
further obligation under this Agreement following a Transfer but,
notwithstanding any Transfer, will remain entitled to the benefit of each
indemnity under this Agreement. In connection with any Transfer, the following
conditions shall apply:
(i) Lessor shall give Lessee written notice of such
Transfer at least 10 Business Days before the date of such Transfer,
specifying the name and address of the proposed purchaser, assignee or
transferee (the "Transferee");
(ii) the Transfer will not adversely affect the
Lessee's rights and interests in the Aircraft and/or this Agreement,
not subject the Lessee, on the date of such transfer, to any Tax,
claim, liability or any other obligation or expense to which it would
not have been subject had such assignment or transfer not taken place;
(iii) the Transferee will be a Citizen of the United
States and have full corporate power and authority to enter into and
perform the transactions contemplated by this Agreement on the part of
"Lessor";
(iv) on the Transfer date the Lessor and the
Transferee shall enter into an agreement or agreements in which the
Transferee confirms that it shall be deemed a party to this Agreement
and agrees to be bound by all the terms of, and to under take all of
the obligations of, the Lessor contained in this Agreement; and
(v) such Transfer shall not violate any applicable
law.
(c) Upon any Transfer, the Transferee shall be deemed Lessor
for all purposes of this Agreement, each reference in this Agreement to the
"Lessor" shall thereafter be deemed for all purposes to refer to the Transferee,
and the transferor shall be relieved of all obligations of the "Lessor" under
this Agreement arising after the time of such Transfer except to the extent
attributable to acts or events occurring prior to the time of such Transfer.
(d) Upon compliance by Lessor and a Transferee with the terms
and conditions of Clause 17(b), Lessee shall at the time of Transfer, at the
specific written request of Lessor and with Lessor paying all of Lessee's
out-of-pocket costs and expenses:
(i) execute and deliver to Lessor and to such
Transferee an agreement, in form and substance satisfactory to Lessor,
Lessee and such Transferee, dated the date of such transfer, consenting
to such transfer, agreeing to pay all or such portion of the Basic Rent
and other payments under this Agreement to such Transferee or its
designee as such Transferee shall direct, and agreeing that such
Transferee shall be entitled to rely on all representations and
warranties made by Lessee in this Agreement or in any certificate or
document furnished by Lessee in connection with this Agreement as
though such Transferee was the original "Lessor";
(ii) execute and deliver to Lessor or such
Transferee, as the case may be, precautionary Uniform Commercial Code
financing statements or amendments reflecting the interests of such
Transferee in the Aircraft and this Agreement;
(iii) deliver to Lessor and to such Transferee a
certificate, signed by a duly authorized officer or Lessee, dated the
date of such transfer, to the effect that no Event of Default has
occurred and is continuing or, if one is then continuing, describing
such Event of Default;
(iv) cause to be delivered to Lessor and such
Transferee certificates of insurance and broker's letter of undertaking
substantially in the form delivered on the Delivery Date, detailing the
coverage and confirming the insurers' agreement to the specified
insurance requirements of this Agreement and listing the Lessor and
Transferee as additional insureds and the Transferee as sole loss
payee;
(v) deliver to Lessor and such Transferee information
on the location of the Airframe and Engines at all times requested by
Lessor in order to permit the Transfer to take place at a time and on a
date so as to eliminate or minimize any Taxes applicable to the
Transfer; and
(vi) such other documents as Lessor or such
Transferee may reasonably request, so long as such documents do not
adversely affect the rights or obligations of Lessee under this Lease
or otherwise adversely effect Lessee.
(e) Collateral Assignment. Notwithstanding any of the
foregoing, it is understood and agreed that Lessor may, without the prior
written consent of Lessee but with prior notice to the Lessee, mortgage or
pledge and/or assign all or any portion of its right, title and interest in and
to this Agreement, the Aircraft or any Rent due hereunder to any Lender. Lessee
shall acknowledge in writing any such mortgage, pledge or assignment by an
acknowledgment in a form reasonably satisfactory to the Lessee. Upon notice to
the Lessee from any Lender under any such mortgage, pledge or assignment, such
Lender may require that all Rent shall be paid directly to such Lender and/or
that the Aircraft be returned to such Lender, but, in the case of the return of
the Aircraft, only upon completion or termination of this Agreement. Any
acknowledgment from the Lessee shall include, without limitation, an agreement
of the Lessee that:
(i) upon such mortgage, pledge or assignment, all rights
of the Lessor hereunder (including without
limitation, all rights to be named as loss payee and
an additional insured under any policies of insurance
maintained pursuant to Section 15 hereof, all rights
to receive monies, reports, certificates and any
other information pursuant to the terms of this
Agreement and all rights to indemnification) shall,
to the extent provided for in the mortgage, pledge or
assignment, be exercisable by such Lender, and such
Lender shall be deemed an Indemnified Party and a Tax
Indemnitee for all purposes of this Agreement;
(ii) the rights of such Lender shall not be subject to any
defense, counterclaim, or set-off that the Lessee may
have or assert against Lessor;
(iii) such Lender shall not be liable for any of Lessor's
obligations hereunder;
(iv) subject to the terms of the mortgage, pledge or
assignment, such Lender may require that all Rent be
paid directly to such party (or its designee), and
Lessee agrees that upon receipt of such notice,
Lessee shall pay directly to such Lender all Rent due
or to become due hereunder; and
(v) Lessee shall comply, at the Lessor's expense, with
all reasonable requests of Lessor and such Lender in
connection with any such mortgage, pledge or
assignment including, without limitation, the
execution of all consents and amendments in a form
reasonably acceptable to Lessee and the making of any
and all registrations and filings.
Lessee agrees, from and after any such mortgage, pledge or assignment, to pay,
as Supplemental Rent, any indemnity obligations which Lessor shall be obligated
to pay under any related loan documentation which constitute breakage costs (to
the extent arising in connection with an Event of Default hereunder), increased
costs or withholding taxes, in each case to the extent such indemnities were, at
the time of their grant to such Lender similar to indemnities granted to other
similar lenders in the debt markets generally (by execution of the
acknowledgment the Lessee agrees to be bound to reimburse Lessor for such
indemnities).
(f) The Owner Participant may sell, assign or transfer all or
any of its rights under this Agreement and in the Aircraft (an "OP Transfer")
and the Owner Participant will have no further obligation under this Agreement
following an OP Transfer (except with regard to a breach by Lessor of this
subpart (f)) but, notwithstanding any OP Transfer, will remain entitled to the
benefit of each indemnity under this Agreement. In connection with any OP
Transfer, the following conditions shall apply:
(i) Owner Participant shall give Lessee written
notice of such OP Transfer at least 3 Business Days before the date of
such OP Transfer, specifying the name and address of the proposed
purchaser, assignee or transferee (the "OP Transferee");
(ii) the OP Transfer will not adversely affect the
Lessee's rights and interests in the Aircraft and/or this Agreement,
nor subject the Lessee to any Tax, claim, liability or any other
obligation or expense to which it would not have been subject had such
assignment or transfer not taken place;
(iii) the OP Transferee will be a Citizen of the
United States (including, for purposes hereof, through compliance with
14 C.F.R. ss. 47.7(c)(3)) and have full corporate power and authority
to enter into and perform the transactions contemplated by this
Agreement on the part of "Owner Participant"; and
(iv) on the OP Transfer date, the Lessor and the OP
Transferee shall enter into an agreement or agreements in which the OP
Transferee confirms that it shall be deemed a party to this Agreement
and agrees to be bound by all the terms of, and to under take all of
the obligations of, the Owner Participant contained in this Agreement.
Upon any OP Transfer, the OP Transferee shall be deemed Owner Participant for
all purposes to refer to the OP Transferee, and the transferor shall be relieved
of all obligations of the "Owner Participant" under this Agreement arising after
the time of such OP Transfer, except to the extent attributable to acts or
events occurring prior to the time of such OP Transfer.
(g) Successors and Assigns. Subject to the foregoing, the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of Lessor, Owner Participant, Lessee and their respective successors and
permitted assigns.
SECTION 18. Early Termination. Lessee may not terminate the Lease
prior to the Expiry Date.
SECTION 19. Events of Default. Lessor, Owner Participant and Lessee
agree that it is a fundamental term and condition of this Agreement that none of
the following events shall occur during the Lease Term and that the occurrence
of any of the following events shall constitute a repudiatory breach of this
Agreement and an "Event of Default" (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any Government Entity):
(a) Failure to Pay Basic Rent, Renewal Rent or Stipulated Loss
Value. Lessee shall have failed to make any payment of Basic Rent, Renewal Rent
or Stipulated Loss Value in accordance with this Agreement and the other
Operative Documents when the same shall have become due and payable and such
failure shall continue for three (3) Business Days from such due date.
(b) Failure to Pay Supplemental Rent. Lessee shall have failed
to make any payment of Supplemental Rent (other than as specified in paragraph
(a) above) in accordance with this Agreement or the other Operative Documents
when the same shall have become due and such failure shall continue for five (5)
Business Days from such due date.
(c) Insurance.
(i) Lessee shall have failed to carry and maintain,
or cause to be carried and maintained, on or with respect to
the Aircraft, any insurance required to be maintained in
accordance with the provisions of Section 15; or
(ii) The Aircraft shall be operated at a time when
any insurance required under Section 15 shall not be in
effect.
(d) Return. Lessee shall have failed to return the Aircraft at
the end of the Lease Term pursuant to the provisions of, and in the condition
required by, Section 7.
(e) Unauthorized Transfer. There shall be any unauthorized
transfer of possession of the Aircraft, Airframe or any Engine by Lessee.
(f) Certain Covenants. Lessee shall have failed to comply with
its obligations under Section 6(a), 6(b), 10(a), 10(b), 10(d)(ii) or 11.
(g) Other Covenants. Lessee shall have failed to comply with,
observe or perform, and shall fail to cause to be complied with, observed and
performed, any of its covenants, agreements or obligations hereunder or under
any other Operative Document, except to the extent provided above in this
Section 19, and such failure shall continue for 30 days after the earlier of (i)
the date of written notice thereof to Lessee or (ii) the date Lessee, assuming
exercise of reasonable diligence, should have known of such failure.
(h) Representations and Warranties. Any representation or
warranty made by Lessee herein or in any other Operative Document shall have
proven to have been incorrect, inaccurate or untrue in any material respect as
of the time made.
(i) Authorizations. Lessee shall no longer possess the
Authorizations required hereunder or under any other Operative Document or
material for the conduct of its business as a commercial passenger air carrier
in the Lessee Jurisdiction or for the performance of its obligations hereunder
or under any other Operative Document, or any such Authorizations are revoked,
canceled, adversely modified or otherwise terminated, or the continued use and
exercise thereof is prevented.
(j) Voluntary Bankruptcy, Etc. Lessee shall have (i) commenced
any proceeding or filed any petition seeking relief under any applicable
bankruptcy, insolvency, liquidation, examination, administration, receivership
or other similar law, (ii) consented to or acquiesced in the institution of, or
failed to contravene in a timely and appropriate manner, any such proceeding or
the filing of any such petition, (iii) applied for or consented to the
appointment of a receiver, examiner, trustee, custodian, sequestrator or similar
official for itself or for a substantial part of its property or assets, (iv)
filed an answer admitting the material allegations of a petition filed against
it in any such proceeding, (v) proposed or entered into any composition or other
arrangement, or made a general assignment, for the benefit of creditors or
declared a moratorium on the payment of indebtedness, (vi) become insolvent or
suspended payments on, become unable to, admitted in writing its inability to or
failed generally to pay, any material portion of its debts as they become due,
(vii) sought its own liquidation, reorganization, dissolution or winding up,
(viii) suspended payment procedures or (ix) taken any corporate action for the
purpose of effecting any of the foregoing.
(k) Involuntary Bankruptcy, Etc. A proceeding shall have been
commenced or a petition shall have been filed, in either case, without the
consent or application of Lessee, seeking (i) relief in respect of Lessee or of
a substantial part of its property or assets under any applicable bankruptcy,
insolvency, liquidation, examination, administration, receivership or similar
law, (ii) the appointment of a receiver, examiner, trustee, custodian,
sequestrator or similar official for Lessee or for a substantial part of its
property or assets or (iii) the liquidation, reorganization, dissolution or
winding up of Lessee; and such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the foregoing
shall be issued and shall not immediately be stayed.
(l) Indebtedness. Lessee shall have failed to pay any amount
in respect of any Indebtedness, or any interest or premium thereon, when due
(whether by a scheduled maturity, required prepayment, acceleration, demand or
otherwise), or Lessee shall fail to perform or to comply with any other
covenant, agreement or condition contained in any agreement or instrument
relating to such Indebtedness, and such failure to pay or to perform or to
comply shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness, if, as a result of
any such failure, the maturity of such Indebtedness is capable of being
accelerated and if the aggregate outstanding amount of all such Indebtedness
exceeds, in the aggregate together with any other Indebtedness in respect of
which Lessee has failed to make any payment or in respect of which Lessee has
otherwise failed to perform or comply, US$500,000 (or the equivalent thereof).
(m) Government Action. The franchises, concessions, permits,
rights or privileges required for the conduct of the business or operations of
Lessee shall have been revoked, canceled or otherwise terminated or the free and
continued use or exercise thereof curtailed, prevented or modified in a manner
that materially adversely affects Lessee's ability to perform its obligations
under any Operative Document.
(n) Judgments. One or more judgments are rendered against
Lessee that either (i) imposes or impose on Lessee at any given point in time an
obligation or obligations for the payment of money in excess of US$500,000 (or
the equivalent thereof) in the aggregate or (ii) grants or grant to any Person
equitable relief of any nature that could, if enforced, have a material adverse
effect on Lessee's ability to perform any of its obligations under any Operative
Document and, in the case of any such judgment or judgments, the same shall
remain undischarged for a period of thirty (30) days or more, during which time
execution of such judgment or judgments shall not be effectively stayed nor
adequate bonding fully covering such judgment or judgments exist.
(o) Cross Default. Any lease, conditional sale, installment
sale or forward purchase agreement of the Lessee in respect of an aircraft is
terminated as a consequence of an event of default or termination event (however
described).
(p) Adverse Change. Any event or series of events occurs
which, in the reasonable opinion of the Lessor or Owner Participant, causes a
material adverse effect on the financial condition or operations of the Lessee
and its Affiliates or on the ability of the Lessee to comply with its
obligations under this Agreement.
(q) Letter of Credit. Any Letter of Credit ceases to be in
full force and effect or is repudiated or canceled by the Letter of Credit Bank
and Lessee shall have failed to provide a substitute Letter of Credit or
Security Deposit as required by Section 3(d) hereof.
SECTION 20. Remedies. Upon the occurrence of any Event of Default and
so long as the same shall be continuing, Lessor shall have the right, effective
upon notice to Lessee, to terminate this Agreement and all of Lessee's rights
hereunder; and at any time thereafter Lessor may do all or any of the following,
at its option and in its sole discretion (in addition to such other rights and
remedies which Lessor may have under applicable law):
(a) Retake Possession. Upon the written demand of Lessor and
at Lessee's expense, cause Lessee to return promptly, and Lessee shall return
promptly, the Airframe and Engines or such part of the Aircraft as Lessor may so
demand to Lessor or its order in the manner and condition required by, and
otherwise in accordance with, all the provisions of, Section 7 as if such
Airframe and Engines were being returned at the expiration of the Lease Term, or
Lessor, acting in its individual capacity or as attorney for Lessee, at its
option, may enter upon the premises where the Airframe or an Engine is located
and take immediate possession of and remove the same (together with any engine
which is not an Engine but which is installed on the Airframe, subject to all
the rights of the owner, lessor, lienor or secured party of such engine, and
such engine shall be held for the account of any such owner, lessor, lienor or
secured party or, if owned by Lessee, may, at the option of Lessor, be exchanged
with Lessee for an Engine in accordance with the provisions of Section 7(b)) by
summary proceedings or otherwise, and Lessee waives any right it may have under
applicable law to a hearing prior to repossession of the Aircraft, Airframe or
any Engine or Part, all without liability accruing to Lessor for or by reason of
such entry or taking of possession or removing whether for the restoration of
damage to property caused by such action or otherwise.
(b) Termination or Enforcement. Rescind this Agreement,
terminate this Agreement and/or exercise any other right or remedy which may be
available to it under applicable law or proceed by appropriate court action to
enforce the terms hereof and/or exercise any other power, right or remedy which
may be available to Lessor hereunder or under applicable law. Without limiting
the generality of the foregoing, Lessor shall have the right, without need of
any consent, authorization or action of Lessee, to cause the Aircraft to be
deregistered by the Aviation Authority, and to be made ready for export and to
be exported out of the Lessee Jurisdiction, and to cause all rights of Lessee in
respect of the Aircraft and this Lease under or in connection with or resulting
from the registration of the Aircraft with the Aviation Authority or otherwise
under or in connection with or resulting from any law in the Lessee
Jurisdiction, to be terminated and extinguished. In furtherance of the
foregoing, Lessor shall be entitled and empowered to act in the name and in the
place of Lessee with respect to the Aircraft as may be necessary or desirable,
in Lessor's sole discretion, including, without limitation, with respect to the
execution of documents and instruments, to effect such deregistration,
exportation, termination and extinguishment.
(c) Application of Funds. Without limiting any other provision
of this Agreement or of any other Operative Document, Lessor shall have the
right to withhold or set off against all amounts otherwise payable to Lessee
hereunder, all as security for Lessee's obligations and liabilities under this
Agreement and the other Operative Documents, and to use and apply in whole or in
part any or all of such amounts and setoffs to and against such obligations and
liabilities of Lessee (in whatever order and according to whatever priority
Lessor may choose), and any such use, application or setoff shall be absolute,
final and irrevocable.
(d) Damages. In addition to Lessor's rights under Section 9,
Lessor may recover from Lessee, and Lessee shall on demand pay, damages to equal
the sum of:
(i) all accrued and unpaid Rent payable hereunder in
respect of any period prior to Return of the Aircraft to
Lessor in the condition and otherwise in the manner required
under Section 7 together with Break Amount, if any;
(ii) all Expenses incurred by Lessor, Owner
Participant and any other Indemnified Party in connection with
such Event of Default or the exercise of Lessor's remedies
with respect thereto, including, without limitation, all costs
and expenses incurred in connection with recovering possession
of the Airframe or any Engine or in placing such Airframe or
Engine in the configuration, condition and airworthiness
required by Section 7 and all lost Rent payments during such
recovery and reconditioning;
(iii) all incidental and consequential damages
incurred by Lessor, Owner Participant and any other
Indemnified Party in connection with such Event of Default,
including, without limitation, all losses (including, without
limitation, reasonable lost profits) suffered by Lessor
because of Lessor's inability to place the Aircraft on lease
with another lessee on terms as favorable to Lessor as this
Agreement or because whatever use, if any, to which Lessor is
able to put the Aircraft upon its return to Lessor, or the
amount received by Lessor upon a sale or other disposal of the
Aircraft, is not as profitable to Lessor as leasing the
Aircraft in accordance with the terms of this Agreement would
have been, including, without limitation, in each case, lost
Rent payments during any remarketing period; and
(iv) all reasonable and actual legal fees and other
reasonable costs and Expenses incurred by Lessor, Owner
Participant and any other Indemnified Party by reason of the
occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto.
SECTION 21. Transaction Expenses. Except as expressly otherwise
provided herein, each of Lessor, Owner Participant and Lessee agrees that it
shall be responsible for any and all fees and expenses it incurs in connection
with the negotiation, preparation, execution and delivery of this Agreement and
any other documents or instruments relating to the transaction contemplated
hereby, including, without limitation, legal fees, expenses and disbursements.
SECTION 22. No Setoff, Counterclaim, Etc. This Agreement is a net lease
and Lessee's obligation to pay Rent under this Agreement and each other
Operative Document to which it is a party is and shall be absolute and
unconditional and shall not be abated, suspended, diminished, reduced, delayed,
discontinued or otherwise affected by any condition, circumstance, act or event
of any kind whatsoever, including, without limitation, any of the following:
(i) any right of setoff, deduction, counterclaim, recoupment,
defense, suspension, deferment or other right (including any right of
reimbursement) which Lessee may have against Lessor, Owner Participant,
Airframe Manufacturer, Engine Manufacturer, any Insured Party, any
Inspecting Party, any Indemnified Party or any other Person for any
reason whatsoever, including any claim Lessee may have for the
foregoing, any present or future law to the contrary notwithstanding;
(ii) the unavailability, interruption or cessation in use of
the Aircraft for any reason, including (A) any requisition thereof or
any restriction, prohibition or curtailment of, interference with, or
other restriction against, Lessee's use, operation or possession of the
Aircraft (whether by law, any Government Entity or other Person or
otherwise) and (B) any damage to or loss or destruction (including an
Event of Loss except as otherwise expressly provided in Section 13(b))
of or to the Aircraft and (C) the removal of the Aircraft from service
to correct deficiencies described in Section 2 or to permit the Final
Inspection or Return of the Aircraft;
(iii) any defect in the title, airworthiness, merchantability,
fitness for any purpose, condition, design, specification or operation
of any kind or nature of the Aircraft, or the ineligibility of the
Aircraft for any particular use or trade or for registration or
documentation under the laws of any jurisdiction;
(iv) any amendment or modification of or supplement to any of
the Operative Documents, any agreements relating to any thereof or any
other instrument or agreement applicable to the Aircraft, the Airframe
or any Engine, or any assignment or transfer of any thereof, or any
furnishing or acceptance of any additional security, or any failure or
inability to perfect any security;
(v) any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership,
administration or similar proceedings by or against Lessee, Lessor,
Owner Participant, any Indemnified Party or any other Person;
(vi) the invalidity, unenforceability or impossibility of
performance of this Agreement, any other Operative Document or any of
the terms hereof or thereof, the lack of power or authority of Lessee
to enter into this Agreement or any other Operative Document, or any
other defect in this Agreement or any other Operative Document;
(vii) any breach by Lessor, Owner Participant, any Indemnified
Party or any other Person of any representation, warranty or covenant,
express or implied, made or alleged to be made to Lessee;
(viii) any right, claim, xxxx, action or suit whatsoever by or
against or on the part of Lessee, including, without limitation,
whether arising out of legal action or otherwise, at law or in equity,
whether affirmative, negative or defensive in nature for or on account
of the legality, validity, enforceability or otherwise arising as a
result of (x) this Agreement or any other Operative Document or any of
the terms or conditions hereof or thereof, (y) any express or implied
warranty or (z) any contract, agreement or transaction between Lessee
and Lessor or any other Person, whether direct or indirect, written or
oral;
(ix) any waiver, consent, change, extension, indulgence or any
action or inaction under or in respect of any such instrument or
agreement or any exercise or nonexercise of any right, remedy, power or
privilege in respect of any such instrument or agreement or this
Agreement or any other Operative Document;
(x) any transfer of any interest in this Agreement or in the
Aircraft by Lessor or any Indemnified Party or any change of ownership
of Lessor, Owner Participant or any Indemnified Party; or
(xi) any other circumstance, happening or event whatsoever,
whether or not similar to the foregoing, which but for this provision
would or might have the effect of terminating or in any other way
affecting any obligation of Lessee hereunder, it being the express
intention of Lessor, Owner Participant and Lessee that all Rent and
other amounts payable by Lessee hereunder or under any other Operative
Document shall be payable in all events, unless the obligation to pay
the same shall be terminated pursuant to the express provisions of this
Agreement.
Lessee hereby waives, to the extent permitted by applicable law, any
and all rights which it may have or which at any time hereafter may be conferred
upon Lessee, by law or otherwise, to terminate, cancel, quit or surrender this
Agreement or any other Operative Document, or to xxxxx, suspend, defer, reduce
or otherwise fail to comply in full with any obligation imposed upon Lessee
hereunder or thereunder or in relation hereto, except termination of this
Agreement in accordance with the express provisions hereof. Each Rent payment
made by Lessee shall be final, and Lessee shall not seek to recover all or any
part of any such payment for any reason whatsoever.
Nothing in this Section 22 shall be construed to limit Lessee's rights
and remedies in the event of Lessor's or Owner Participant's breach of its
representation and warranty of quiet enjoyment as set forth in Section 5(a)(iii)
or to limit Lessee's rights and remedies to pursue any claims it may have
against Lessor, Owner Participant or any other Person.
SECTION 23. Further Assurances, Etc.
(a) Further Assurances. Without limiting the other obligations
and liabilities of Lessee under this Agreement and the other Operative
Documents, Lessee agrees to promptly and duly execute and deliver to Lessor or
Owner Participant such further documents and assurances and take such further
action as Lessor or Owner Participant may from time to time reasonably request
in order to effectively carry out the intent and purpose of this Agreement and
the other Operative Documents and to establish, perfect and protect the rights
and remedies created or intended to be created in favor of Lessor or any other
Person hereunder and thereunder, including, without limitation, (x) any
explanations, clarifications or translations (into English) requested by Lessor
or Owner Participant relating to the information required to be provided by
Lessee under Section 6(c), and (y) the execution and delivery of supplements or
amendments hereto, in recordable form, rendering subject to this Agreement any
Replacement Engine and the recording or filing of counterparts hereof or thereof
or of other appropriate materials, in accordance with the laws of such
jurisdictions as Lessor or Owner Participant may from time to time reasonably
deem advisable.
(b) Lessor's Performance of Lessee's Obligations. If Lessee
fails to make any payment of Rent or fails to perform or comply with any
agreement, covenant or obligation contained herein or in any other Operative
Document, Lessor or Owner Participant shall have the right, but not the
obligation, at its election and without waiver of any of its rights or remedies
against Lessee, to perform or comply with such covenant, agreement or obligation
and/or pay such amount, and the amount of such payment and any Expenses incurred
by Lessor or Owner Participant in connection with such payment or the
performance of or compliance with such agreement, covenant or obligation, as the
case may be, together with interest at the Past Due Rate, shall be payable by
Lessee to Lessor, or Owner Participant, as the case may be, upon demand as
Supplemental Rent. The taking of any action by Lessor or Owner Participant
pursuant to this Section 23(b) shall not constitute a waiver or release of any
obligation of Lessee hereunder nor a waiver of any Default which may arise out
of Lessee's nonperformance of such obligation, nor an election or waiver by
Lessor of any right or remedy available to Lessor under or in relation to this
Agreement.
(c) No Implied Waivers; Rights Cumulative.
(i) No failure on the part of Lessor to exercise and
no delay in exercising any right, power, remedy or privilege
under any Operative Document or provided by statute or at law
or in equity or otherwise shall impair, prejudice or
constitute a waiver of any such right, power, remedy or
privilege or be construed as a waiver of any Event of Default
or as an acquiescence thereto, nor shall any single or partial
exercise of any such right, power, remedy or privilege impair,
prejudice or preclude any other or further exercise thereof or
the exercise of any other right, power, remedy or privilege.
No acceptance of partial payment or performance shall, whether
or not expressly stated, be or be deemed to be a waiver of any
Event of Default then existing or a waiver or release of full
payment and performance. No notice to or demand on Lessee
shall in any case entitle Lessee to any other or further
notice or demand in other or similar circumstances or
constitute a waiver of the right of Lessor to any other or
further action in any circumstances without notice or demand.
(ii) Nothing contained in any Operative Document
shall be construed to limit in any way any right, power,
remedy or privilege of Lessor hereunder or under any Operative
Document or now or hereafter existing at law or in equity.
Each and every right, power, remedy and privilege of Lessor
under the Operative Documents (x) shall be in addition to and
not in limitation of, or in substitution for, any other right,
power, remedy or privilege under any Operative Document or at
law or in equity, (y) may be exercised from time to time or
simultaneously and as often and in such order as may be deemed
expedient by Lessor and (z) shall be cumulative and not
mutually exclusive, and the exercise of one shall not be
deemed a waiver of the right to exercise any other.
(iii) Lessee hereby agrees and acknowledges that
nothing contained herein or in any Operative Document shall be
construed to require in any way, Lessor to take any action,
upon a Default by Lessee of this Agreement, or a breach by
Lessee of any provision of any Operative Document, to limit
the damages suffered by Lessor as a result of any such Default
or breach as the case may be.
(d) Warranties. Lessor agrees that it will assign to Lessee,
for the duration of the Lease Term so long as no Event of Default shall have
occurred and be continuing, the benefit of any assignable warranties (including,
without limitation, any repair warranties on any Engines or Parts) from the
Airframe Manufacturer, Engine Manufacturer or manufacturer or supplier of any
Part for which Lessor has an interest (but only to the extent of such interest).
SECTION 24. Confidentiality. Each of Lessee, Owner Participant and
Lessor shall keep this Agreement and each other Operative Document, and all
terms and provisions hereof and thereof, confidential and shall not disclose, or
cause to be disclosed, the same to any Person, without the prior written consent
of the other, except (a) to prospective and permitted transferees of Lessor's,
Owner Participant's or Lessee's interests or their respective counsel or special
counsel, certified public accountants, independent insurance brokers or other
agents, (b) in connection with any administration or enforcement of any
provisions of this Agreement or any other Operative Document by Lessor, Owner
Participant or Lessee, (c) to its Affiliates, (d) to its advisors, insurance
brokers and accountants, or (e) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation, including
insurance regulatory bodies, banking examiners and other government officials;
provided, however, that any and all disclosures of all or any part of such
documents and provisions which are permitted by this Section 24 shall be made
only to the extent necessary to meet the specific requirements or needs of the
Persons to whom such disclosures are hereby permitted.
SECTION 25. Governing Law and Jurisdiction.
(a) Governing Law. THIS AGREEMENT AND EACH OTHER OPERATIVE
DOCUMENT, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, SHALL IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS. THIS LEASE IS BEING DELIVERED IN THE STATE OF ILLINOIS.
(b) Nonexclusive Jurisdiction in Illinois. Lessee hereby
irrevocably consents that any legal action or proceeding against it or any of
its assets arising out of or relating to this Agreement or any other Operative
Document may be brought in any jurisdiction where it or any of its assets may be
found and in the courts of the State of Illinois and U.S. Federal Courts for the
Northern District of Illinois and by execution and delivery of this Agreement
Lessee hereby irrevocably submits to and accepts with regard to any such action
or proceeding, for itself and in respect of its assets, generally and
unconditionally, the jurisdiction of the aforesaid courts and irrevocably agrees
to be bound by any judgment rendered thereby. Nothing herein shall prevent any
party from bringing any legal action or proceeding or obtaining execution of
judgment in any other appropriate jurisdiction. Lessee, Owner Participant and
Lessor further agree that a final judgment in any action or proceeding arising
out of or relating to this Agreement or any other Operative Document shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the fact and the amount of the indebtedness or liability therein described,
or in any other manner provided by law. Each of Lessee, Owner Participant and
Lessor hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Operative Document brought in any court in Illinois, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any court in Illinois has been brought in an inconvenient forum. LESSEE, OWNER
PARTICIPANT AND LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT.
SECTION 26. Miscellaneous.
(a) Amendments. No provision of this Agreement or any other
Operative Document may be amended, changed, waived or discharged orally, but
only by an instrument in writing specifying the provision intended to be
amended, changed, waived or discharged and signed by each party hereto or
thereto; and no provision of this Agreement or any other Operative Document
shall be varied, contradicted or explained by any oral agreement, course of
dealing or performance or other matter not specifically set forth in an
agreement in writing and signed by each party hereto or thereto.
(b) Severability. If any provision hereof or of any Operative
Document should be held invalid, illegal or unenforceable in any respect in any
jurisdiction, then, to the extent permitted by law (i) all other provisions
hereof or thereof shall remain in full force and effect in such jurisdiction and
(ii) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.
(c) Counterparts. This Agreement, any Operative Document and
any amendments, waivers, consents or supplements hereto or thereto may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, and all of which counterparts, taken together, shall
constitute one and the same instrument.
(d) Chattel Paper. To the extent, if any, that this Agreement
constitutes chattel paper (as defined in the Uniform Commercial Code in effect
from time to time in any applicable jurisdiction) no security interest in this
Agreement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by Lessor on the signature
page thereof.
(e) Time of the Essence. Subject to the periods of grace
referred to in Section 19, time shall be of the essence as regards the
performance by Lessee of its obligations under this Agreement and each other
Operative Document.
(f) Notices. All notices, requests and other communications to
Lessee, Lessor, Owner Participant or any other Person hereunder or under any
other Operative Document shall be in writing (for this purpose, "writing"
includes telecopy or similar electronic transmissions), shall refer specifically
to this Agreement or such other Operative Document, as the case may be, and
shall be personally delivered or sent by telecopy or other similar electronic
facsimile transmission, or sent by overnight courier service (e.g., Federal
Express), in each case to the respective address and telecopy number, if any,
specified in Schedule 3 or such other address or telecopy number as such Person
may hereafter specify by notice to the other party or to the parties hereto.
Each such notice, request or other communication shall be effective when
received or, if by telecopier or other similar electronic transmission, when
"confirmed" by the sending telecopy or similar machine and written evidence of
such confirmation is produced by such machine, provided that any such notice by
telecopy so "confirmed" after 6:00 p.m., for the recipient, shall be effective
on the next succeeding local Business Day.
(g) Entire Agreement. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof, and
supersedes all previous proposals, agreements, understandings, negotiations and
other written and oral communications in relation hereto. The parties
acknowledge that there have been no representations, warranties, promises,
guarantees or agreements, express or implied, except as set forth herein.
(h) True Lease. Lessee, Owner Participant and Lessor agree
that this Lease is to be treated as a true operating lease for federal income
tax purposes, that Lessor is the owner of the Aircraft for federal income tax
purposes and all other purposes and that the interest of Lessee in the Aircraft
is that of a lessee only.
IN WITNESS WHEREOF, Lessee, Owner Participant and Lessor have caused
this Agreement to be executed by their respective officers as of the day and
year first above written.
XXXXXX FINANCIAL LEASING, INC.,
Owner Participant
By:
Title:
FRONTIER AIRLINES, INC.,
Lessee
By:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual
capacity, but solely as Owner Trustee,
Lessor
By:
Title:
RECEIPT OF THIS ORIGINAL COUNTERPART OF THE FOREGOING LEASE AGREEMENT
IS HEREBY ACKNOWLEDGED ON THIS _____ DAY OF _______________, 1998.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee, Lessor
By:
Title:
Exhibit A to
Lease Agreement
TECHNICAL ACCEPTANCE CERTIFICATE
Lessee hereby acknowledges to Lessor, in accordance with the terms and
conditions of the Lease Agreement, dated as of November 23, 1998 (the "Lease"),
between First Security Bank, National Association, not in its individual
capacity, but solely as Owner Trustee, Xxxxxx Financial Leasing, Inc. and
FRONTIER AIRLINES, INC., that the following Aircraft meets the delivery
conditions specified in the Lease and that we accept the condition of the
Aircraft for all purposes of the Lease (subject to the provisions of Section
2(b)(ii) of the Lease).
Aircraft:
Registration Xxxx: N308FL
Manufacturer's Serial Number: 28738
with two installed CFM56-3C-1 engines, Engine Manufacturer's Serial Numbers:
Position 1: 858766
Position 2: 858767
IN WITNESS WHEREOF, Lessor, Owner Participant and Lessee have each
caused this receipt to be duly executed on the above date.
XXXXXX FINANCIAL LEASING, INC.
as Owner Participant
By:
Title:
FRONTIER AIRLINES, INC.,
as Lessee
By:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual
capacity, but solely as Owner Trustee,
as Lessor
By:
Title:
Exhibit C to
Lease Agreement
(MSN 28738)
FORM OF LEASE SUPPLEMENT NO. [___]
THIS LEASE SUPPLEMENT NO.[___], dated [___________], (this "Lease
Supplement"), is entered into between FRONTIER AIRLINES, INC., a Colorado
corporation having its principal place of business at 00000 X. 00xx Xxxxxx,
Xxxxxx, Xxxxxxxx 00000 ("Lessee"), FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely as Owner Trustee ("Lessor"), and
XXXXXX FINANCIAL LEASING, INC., ("Owner Participant").
WITNESSETH:
WHEREAS, Lessor, Owner Participant and Lessee have heretofore entered
into that certain Lease Agreement dated as of November __, 1998 (the "Lease"),
which provides for the execution and delivery from time to time of Lease
Supplements (this and all other capitalized terms used but not defined herein
shall have the respective meanings, and shall be interpreted and construed in
the manner set forth or incorporated by reference in Section 1 of the Lease)
substantially in the form hereof for the purpose of leasing the Aircraft under
the Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof; [and]
1WHEREAS, the Lease relates to the airframe and engines described
below, and a counterpart of the Lease is attached to and made a part of this
Lease Supplement; [and]
This Lease Supplement No. [___] has been executed in several
counterparts. To the extent, if any, that this Lease Supplement No.[___]
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Lease Supplement No.[___] may be created through the transfer or possession of
any counterpart other than the original executed counterpart containing the
receipt therefor executed by Lessor or, if Lessor has assigned its rights to any
Person in accordance with the Lease Agreement, such Person on the signature page
thereof.
2The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, attached and made a party of Lease Supplement No. 1
dated ________________, to the Lease Agreement, has been recorded by the Federal
Aviation Administration on ________________, as one document and assigned
Conveyance No.
----------------.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration the adequacy of receipt of which is hereby
acknowledged, and pursuant to Section [2] [13(c)] [__] of the Lease, Lessor and
Lessee hereby agree as follows:
3[1. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease as hereby supplemented, the
Boeing Model 737-3U3 aircraft (the "Aircraft"), which consists of the following
components:
(a) Airframe: U.S. Registration No. N308FL; Manufacturer's Serial Number
28738
(b) Two CFM International, Inc. CFM56-3C-1 Engines, initially installed on
such airframe at delivery to Lessee, bearing Engine Manufacturer's
Serial Numbers 858766 and 858767 (each of which Engines has 750 or more
rated takeoff horsepower); and
(c) Xxxxxxx XX CP85-129 APU bearing Manufacturer's Serial Number P-200.
2. The "Delivery Date" for all purposes of the Lease is the date set
forth in the opening paragraph of this Lease Supplement.
3. The Lease Term shall commence on the Delivery Date.
4. Lessee hereby confirms its agreement to pay Rent throughout the
Lease Term in the amounts, to the Persons and otherwise in accordance with the
provisions of Section 3 of the Lease and in accordance with the other provisions
of the Lease and the other Operative Documents.
5. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease and the other Operative
Documents.
1. The following-described property has been installed on and made a part of
the Aircraft and is the property of Lessor and is hereby made subject to the
Lease:
[Describe property]
[6.][2.] A number of counterparts of this Lease Supplement have been
executed, each of which shall be deemed an original and all of which together
shall constitute but one and the same agreement. To the extent, if any, that
this Lease Supplement constitutes chattel paper (as defined in the Uniform
Commercial Code) no security interest in this Lease Supplement may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by Lessor or, if Lessor has assigned its rights to
any Person in accordance with the Lease, such Person on the signature page
thereof.
[7.][3.] All of the provisions of the Lease are hereby incorporated by
reference in this Lease Supplement on and as of the date of this Lease
Supplement, to the same extent as if fully set forth herein.
[8.][4.] THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
No. [____] to be duly executed on and as of the day and year first above
written.
XXXXXX FINANCIAL LEASING, INC.,
as Owner Participant
By:
Title:
FRONTIER AIRLINES, INC.,
as Lessee
By:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee,
as Lessor
By:
Title:
[THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.]
[RECEIPT OF THIS ORIGINAL COUNTERPART OF THE FOREGOING LEASE SUPPLEMENT
NO. [___] IS HEREBY ACKNOWLEDGED ON THIS ___ DAY OF _______________, 199_.]
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee, Lessor
By:
Title:
Exhibit E to
Lease Agreement
(MSN 28738)
INSURANCE REQUIREMENTS
(a) At all times during the Lease Term, and until the Aircraft
is returned to Lessor in the condition and manner required by this Agreement,
Lessee shall maintain or cause to be maintained with respect to the Aircraft, at
its own expense, comprehensive airline liability (including, without limitation,
third-party and passenger, bodily injury, property damage, product liability,
cargo, mail, baggage (checked and unchecked), premises and hangar keepers'
liability) insurance (exclusive of the Airframe Manufacturer's product liability
insurance), (i) in an amount not less than the greater of (y) the amounts of
comprehensive airline liability insurance from time to time applicable to
aircraft owned or leased and operated by Lessee of the same type as the Aircraft
and (z) $400,000,000, provided that if Lessor, on the basis of advice received
from an independent insurance advisor of international reputation, believes that
such limit should be revised upwards based on amounts then customary in the
industry generally, it shall be replaced by such higher limit (if any) as such
advisor may consider appropriate in the light of circumstances prevailing in the
commercial airline industry at that time, (ii) of the type and covering the same
risks usually carried by air carriers owning or operating similar aircraft and
engines and covering risks of the kind customarily insured against by such air
carriers, (iii) with insurers of recognized reputation and responsibility
reasonably acceptable to Lessor and (iv) that names each Indemnified Party as an
additional insured and otherwise complies with the requirements set forth in,
and is consistent with the issuance of a valid certificate of insurance and a
report of the Insurance Broker.
(b) Insurance Against Expense or Damage to the Aircraft. At
all times during the Lease Term, and until the Aircraft is returned to Lessor in
the condition and manner required by this Agreement, Lessee shall maintain or
cause to be maintained, with respect to the Aircraft, at its own expense,
all-risk aircraft hull insurance covering the Aircraft, all-risk property damage
insurance covering Engines and Parts while temporarily removed from the Aircraft
and all-risk spares insurance (i) for an agreed value not less than the
Stipulated Loss Value for the Aircraft in respect of all-risk hull insurance,
(ii) for the full replacement value, in respect of all-risk property damage
insurance, (iii) of the type and covering the same risks usually carried by air
carriers owning or operating similar aircraft and engines and covering risks of
the kind customarily insured against by such air carriers, (iv) confirming that
the insurers shall not be entitled to replace the Aircraft or Airframe upon the
occurrence of an Event of Loss with respect thereto, (v) with insurers of
recognized reputation and responsibility reasonably acceptable to Lessor and
(vi) that names Lessor as the sole loss payee and otherwise complies with the
requirements set forth in, and is consistent with the issuance of a valid
certificate of insurance in form and substance reasonably satisfactory to
Lessor. Lessee agrees that it will not adjust or settle any claim with respect
to the insurances provided hereunder without the consent of Lessor (which
consent shall not be unreasonably withheld); provided that, so long as no Event
of Default shall have occurred and be continuing, such consent shall not be
required in respect of claims which do not exceed the Stipulated Deductible
Amount.
(c) War-Risk, Hijacking and Related Perils Insurance. At all
times during the Lease Term, and until the Aircraft is returned to Lessor in the
condition and manner required by this Agreement, and, for liability coverage,
Lessee shall maintain or cause to be maintained, with respect to the Aircraft,
at its own expense, worldwide (subject to standard insurance market geographical
limits) coverage of war-risk, hijacking and related perils insurance of the type
and in substantially the amounts carried by air carriers operating the same or
comparable models of aircraft in such areas (i) in no event in an amount less
than (x) $400,000,000 with respect to liability coverage and (y) the Stipulated
Loss Value with respect to hull coverage and (z) full replacement value with
respect to property damage coverage, (ii) in any event, covering the perils of
(u) war, invasion, acts of foreign enemies, hostilities (whether war be declared
or not), civil war, rebellion, revolution, insurrection, martial law, military
or usurped power or attempts at usurpation of power, (v) strikes, riots, civil
commotions or labor disturbances, (w) any act of one or more Persons, whether or
not agents of a sovereign power, for political or terrorist purposes and whether
the loss or damage resulting therefrom is accidental or intentional, (x) any
malicious act or act of sabotage, (y) confiscation, nationalization, seizure,
restraint, detention, appropriation, requisition for title or use by or under
the order of any government (other than the government of the State of
Registration) (whether civil, military or de facto) or public or local
authority, and (z) hijacking, or any unlawful seizure or wrongful exercise of
control of any aircraft or crew in flight (including any attempt at such seizure
or control) made by any Person or Persons on board any aircraft acting without
the consent of the insured (including if committed by Persons engaged in a
program of irregular warfare for terrorist purposes), (iii) with insurers of
recognized reputation and responsibility reasonably acceptable to Lessor and
(iv) that names each Indemnified Party as an additional insured with respect to
liability insurance and, for hull coverage only, names Lessor or its designee as
the sole loss payee and otherwise complies with the requirements set forth in,
and is consistent with the issuance of a valid certificate of insurance and a
report of the Insurance Broker. Lessee agrees that it will not adjust or settle
any claim with respect to the insurances provided hereunder without the consent
of Lessor (which consent shall not be unreasonably withheld); provided that, so
long as no Event of Default shall have occurred and be continuing, such consent
shall not be required in respect of claims which do not exceed the Stipulated
Deductible Amount.
(d) COMPREHENSIVE AIRLINE LIABILITY, AIRCRAFT THIRD PARTY,
CONTRACTUAL LIABILITY (as per endorsement), PROPERTY DAMAGE, PASSENGER, BAGGAGE,
CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL
LIABILITY for a Combined Single Limit (Bodily Injury/Property Damage) of an
amount not less than U.S. $400,000,000 for the time being any one occurrence.
War and Allied Risks are also to be covered under this Policy to the same extent
as set forth above.
(e) All required insurance (as specified in paragraphs (a),
(b), (c) and (d) above), shall:-
(i) in the case of the insurance required by paragraph
(a), name each Indemnified Party as additional
assureds for their respective rights and interests,
warranted, each as to itself only, no operational
interest;
(ii) in the case of the insurance required by paragraph
(b), provide that any loss shall be settled with the
Lessee and shall for amounts in excess of the
Stipulated Deductible Amount be payable in Dollars to
the Lessor as Loss Payee;
(iii) in the case of the insurance required by paragraph
(a), include a Severability of Interest Clause which
provides that the insurance shall operate to give
each assured the same protection as if there were a
separate policy issued to each assured;
(iv) in the case of the insurance required by paragraph
(a), contain a provision confirming that the policy
is primary without right of contribution and the
liability of the insurers shall not be affected by
any other insurance of which any Indemnified Party or
Lessee have the benefit so as to reduce the amount
payable to the Additional Insureds under such
policies;
(v) in the case of the insurance required by paragraph
(b), contain a 50/50% clause per AVS 103 or its
equivalent;
(vi) shall provide that in respect of the respective
interests of each Indemnified Party in such policies
the insurance shall not be invalidated or impaired by
any action or inaction of Lessee or any other
Indemnified Party and shall insure the respective
interests of each Indemnified Party, as they appear,
regardless of any breach or violation of any
warranty, declaration or condition contained in such
policies by Lessee or by any other Person;
(vii) be in accordance with normal industry practice of
organizations operating similar aircraft in similar
circumstances;
(viii) provide coverage denominated in Dollars;
(ix) acknowledge the insurer is aware of the Lease and
that the Aircraft is owned by Lessor;
(x) provide that the insurers shall hold harmless and
waive any rights of recourse and/or subrogation
against each Indemnified Party;
(xi) provide that an Indemnified Party shall have no
obligation or responsibility for the payment of any
premiums due (but reserve the right to pay the same
should any of them elect so to do) and that the
insurers will not exercise any right of set-off or
counter-claim in respect of any premium due against
the respective interests of an Indemnified Party;
(xii) provide that the Insurances shall continue unaltered
for the benefit of each Indemnified Party for at
least thirty (30) days after written notice by
registered mail or telex of any cancellation,
changes, event of non-payment of premium or
installment thereof shall have been sent to Lessor,
except in the case of war risks for which seven (7)
days will be given, or in the case of war between the
five great powers or nuclear peril for which
termination is automatic;
(xiii) in the case of the insurance required by paragraph
(a), accept and insure the indemnity provisions of
the Lease (Section 15(c)) to the extent of the risks
covered by the policies; and
(xiv) contain an initial term of at least twelve (12)
months and it (or any replacement policy) shall at
all times have a remaining term of at least one (1)
month in regard to all required insurance.
Exhibit I to
Lease Agreement
(MSN 28738)
FORM OF AIRCRAFT STATUS REPORT
REPORT FOR THE CALENDAR MONTH ENDED _______________,
Aircraft Type: B737-3U3 Actual Registration: _______
Lessor: First Security Bank, National Manufacturer Serial Number: 28738
Association, not in its individual
capacity but solely as Owner Trustee
AIRFRAME During Period Since New Since C/D
Flight Hours: ______ ______ ______
Cycles: ______ ______ ______
ORIGINAL ENGINES
Position 1 Position 2
Serial Number of Original Engine: ______ ______
Location of Original Engine: ______ ______
Flight Hours Since New: ______ ______
Cycles Since New: ______ ______
Flight Hours During Period: ______ ______
Cycles During Period: ______ ______
Flight Hours Since Last Shop Visit: ______ ______
Cycles Since Last Shop Visit: ______ ______
Engine Cycle Limit: ______ ______
Cycles Remaining for Limit: ______ ______
Serial Number of Engine Installed: ______ ______
LANDING GEAR
During Period Since New Since Overhaul
Landing Gear Cycles: ______ _______ _______
ORIGINAL APU
Serial Number of Original APU: ______
Location of Original APU: ______
Flight Hours During Period: ______
Flight Cycles During Period: ______
Flight Hours Since Last Shop Visit: ______
Cycles Since Last Shop Visit: ______
Serial Number of APU Installed: ______
TECHNICAL ACTIVITY
Engine/APU Removals (if any):______
Off On
Serial Number: ______ ______
Date: ______ ______
Flight Hours Since New: ______ ______
Flight Cycles Since New: ______ ______
Reason:
LESSEE WILL DESCRIBE ANY MAJOR REPAIRS, MAJOR MODIFICATIONS, INCIDENTS OR
ACCIDENTS TO AIRCRAFT DURING PERIOD WITHIN THIRTY DAYS FOLLOWING THE PERIOD
We certify that the above information is true, correct and complete as of the
date hereof, _________, 19__.
FRONTIER AIRLINES, INC.
By:
Title:
Schedule 1 to
Lease Agreement
(MSN 28738)
PERMITTED JURISDICTIONS
Anywhere in the world, other than (1) those areas excluded pursuant to Section
15(l) of the Lease Agreement, (2) Afghanistan, Chad, Ethiopia, Iran, Iraq,
Lebanon, Libya, Mali, Niger, Nigeria, Pakistan, Somalia, Sudan, Syria, Yemen
(North and South), Yugoslavia (as was) and Zaire and (3) any other jurisdiction
that shall become subject to a U.S. or United Nations sanction or prohibition.
Schedule 2 to
Lease Agreement
(MSN 28738)
DELIVERY CONDITIONS
The Aircraft will be delivered in the condition required by the
Purchase Agreement.
Annex A to Schedule 2
(Delivery Conditions)
DELIVERY RECEIPT
Lessee hereby accepts and acknowledges receipt from Lessor, in
accordance with the terms and conditions of the Lease Agreement (MSN 28738),
dated as of November 23, 1998 (the "Lease"), between FIRST SECURITY BANK,
NATIONAL ASSOCIATION, not in its individual capacity but solely as Owner
Trustee, XXXXXX FINANCIAL LEASING, INC.
and FRONTIER AIRLINES, INC. of one (1) Boeing Model B737-3U3.
Aircraft:
Manufacturer: The Boeing Company
Model: 737-3U3
Registration No.: N308FL
U.S. Manufacturer's Serial Number: 28738
with two installed CFM56-3C-1 engines, Engine Manufacturer's Serial Numbers:
Position 1: 858766
Position 2: 858767
in [place] on [Date], at /a.m.//p.m./
IN WITNESS WHEREOF, Lessor, Owner Participant and Lessee have each
caused this receipt to be duly executed on the above date.
XXXXXX FINANCIAL LEASING, INC.,
as Owner Participant
By:
Title:
FRONTIER AIRLINES, INC.,
as Lessee
By:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner Trustee,
as Lessor
By:
Title:
Schedule 3 to
Lease Agreement
(MSN 28738)
ADDRESSES AND ACCOUNTS
(1) (2)
Addresses Accounts: As advised by Lessee
Lessee from time to time
FRONTIER AIRLINES, INC.
00000 X. 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000 Account No: As advised by Lessee
Telephone: (000) 000-0000 from time to time
Principal place of business:
00000 X. 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
(1) (2)
Addresses Accounts
Lessor
FIRST SECURITY BANK, NATIONAL ASSOCIATION First Security Bank, N.A.
00 Xxxxx Xxxx Xxxxxx XXX No. 000-0000-00
Xxxx Xxxx Xxxx, Xxxx 00000 Acct No. 051-0922115
Attn: Corporate Trust Department
Fax No.: 000-000-0000
Tel No.: 000-000-0000
Owner Participant
Xxxxxx Financial Leasing, Inc.
000 Xxxx Xxxxxx Xxxxxx Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000 ABA No. 000000000
Attn: Managing Director-Aircraft Finance
Division
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
with a copy to:
Xxxxxx Financial, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Legal Services Division
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
with a further copy to:
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Schedule 4 to
Lease Agreement
(MSN 28738)
FILINGS AND RECORDINGS
Document Authority
Lease FAA
Lease Supplement No. 1 FAA
Application for Aircraft Registration FAA
UCC-1 Financing Statements Secretary of State of Colorado
Schedule 5 to
Lease Agreement
(MSN 28738)
RETURN CONDITIONS
The Aircraft shall be returned in at least as good of operating condition,
ordinary wear and tear excepted, as on the Delivery Date, with all items of
equipment, Engines, APU's, systems and appliances fully functional and operating
in accordance with manufacturer specifications. At the time of return, the
Aircraft shall conform to the following standards:
A. The Aircraft shall be returned free and clear of all Liens (other than
Lessor Liens) and rights of third parties under pooling, exchange,
overhaul, repair or other similar agreements and arrangements.
B. The Aircraft shall not have been discriminated against whether by
reason of its leased status or otherwise in maintenance, use, operation
or in any other manner whatsoever, including, without limitation, as to
the type of maintenance program applicable to the Aircraft, any Engine
or as to compliance with Airworthiness Directives.
C. The Airframe shall have at least 3,500 hours or 12 months, whichever is
more limiting, remaining until the next scheduled inspection.
D. The Aircraft shall be returned fresh from the next due "C" Check.
During the accomplishment of the "C" Check, Lessee shall comply with
Lessor's reasonable requests, subject to availability of manpower and
materials, to accomplish work which is beyond the scope of that
required by the Return Conditions, provided that (i) the magnitude of
the work is not so large as to reasonably be expected to disrupt
Lessee's operation, (ii) Lessor provides at least 45 days advance
written notice for any significant maintenance or modification tasks,
(iii) work will be requested early enough to allow for the ordering and
delivery of any required parts, and (iv) Lessee's cost for such
additional work is reimbursed by Lessor at Lessee's reasonable cost.
If the requested work delays the return of the Aircraft beyond its
Expiry Date, the Lease shall continue to be in effect. Provided Lessee
is making all reasonable efforts to complete the work prior to return,
Lessee shall owe no additional rent for the delay period.
E Any deviations from Boeing MPD tasks shall be brought into compliance
with the MPD prior to return.
F. The Aircraft shall be returned with a valid and current Transport
Category Airworthiness Certificate issued by the Aviation Authority,
suitable for operation under 14 C.F.R. Part 121 of the FAA Regulations.
The Aircraft, Engine and Parts as well as their records shall meet all
regulatory requirements for continued airworthiness in compliance with
all Aviation Authority requirements.
G. The Aircraft shall have all temporary repairs replaced by permanent
repairs per the manufacturer's repair manual. The fuselage, wings and
empennage shall be free of significant dents, abrasions and loose or
pulled rivets.
H. There shall be no evidence of untreated, improperly treated or
noticeable corrosion. All CPCP inspections will be current and up to
date, in accordance with manufacturer specifications and Aviation
Authority requirements.
I. The Aircraft shall be in compliance with all Aviation Authority
requirements for operation as a transport category aircraft including
all Aviation Authority issued airworthiness directives ("AD's") and
manufacturer alert service bulletins that are issued prior to the
Expiry Date and are applicable to the Aircraft, without special
deferment, exemption or alternate means of compliance, with
terminating action accomplished for all AD's and manufacturer alert
service bulletins which require that the terminating action be
accomplished prior to one hundred eighty days after the Expiry Date.
The Aircraft shall conform to its Type Certificate Data Sheet. All
major modifications and repairs accomplished on the Aircraft shall
have been performed in accordance with FAA approved data that is to be
redelivered with the Aircraft Documentation. Any deficiencies with
respect to Aviation Authority requirements shall be corrected prior to
the return of the Aircraft at Lessee's cost.
J. There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, routine or non-routine, against the Aircraft.
K. The Aircraft shall be clean, cosmetically acceptable, all compartments
reasonably free of foreign objects, accumulated dirt, grime, grease and
liquids, and be prepared for immediate placement into commercial
service. Any deterioration of paint or other protective coatings due to
leakage, impact damage or other presence of foreign materials or
liquids shall be repaired and replaced per manufacturer specifications.
L. Each Engine shall be returned in serviceable condition with maintenance
records that are satisfactory to Lessor.
M. Each Engine shall be returned with not more than 5,000 hours since its
last major shop visit and shall have at least 5,000 cycles remaining
until next scheduled shop visit based upon disk life limits or other
hard-time requirements. For purposes hereof, "major shop visit" shall
mean a full performance restoration in which all modules are inspected
and/or repaired and overhauled.
N. Each Engine shall pass power assurance performance tests without
operational limitations in accordance with the manufacturer's
maintenance manual. The Aircraft and its Engine's shall be capable of
certificated full rated performance without limitations throughout the
entire operating envelope as defined by the Aviation Authority approved
Aircraft Flight Manual.
O. Each Engine shall pass a complete video borescope inspection, conducted
by Lessor at Lessee's cost, of all accessible Engine sections
(accessible whether by borescope port or other means) in accordance
with manufacturer specifications. If any Engine fails to pass a
borescope inspection, Lessee must correct each found defect at its sole
expense. In the event Lessee shall cause any Engine to be removed from
any Aircraft to accomplish repairs by the above, Lessee shall bear all
costs associated with the installation and lease of a loaner engine and
reinstallation of the respective Engine.
P. No Engine shall be on engineering watch or on a reduced interval
inspection of any nature that could lead to premature removal of the
Engine. If Engine historical records, engine power assurance runs,
borescope inspection or trend monitoring data indicate a level of
performance deterioration or oil consumption, or acceleration in
performance deterioration or oil consumption, which based on Lessee's
specifications and/or experience, would require shop maintenance to be
performed prior to 5000 engine flying hours (assuming a l.5 hour to
cycle utilization) after return, Lessee shall correct or cause to be
corrected, such conditions as necessary to rectify all Engine
performance parameters in accordance with manufacturer specifications.
In the event Lessee shall cause any Engine to be removed from the
Aircraft to accomplish repairs by the above, Lessee shall bear all
costs associated with the installation and lease of a loaner engine
and reinstallation of the respective Engine.
Q. All Landing Gear shall have not less than 24 months or 25% of their
normal overhaul interval (whichever is greater) remaining before next
scheduled overhaul or replacement in accordance with Lessee's
maintenance program.
R. The APU shall have not more than 1,500 hours since its last hot section
inspection and shall be returned in serviceable condition.
S. The components that are controlled by calendar time, flight hours or
flight cycles shall be returned in serviceable condition. Each such
component shall have a minimum of 12 months, 3500 hours and 1200
cycles remaining until next scheduled overhaul, repair or replacement.
Controlled parts which have a scheduled maintenance interval of less
than 12 months, 3500 hours and 1200 cycles shall have the full
scheduled maintenance interval remaining until next scheduled
maintenance. All such components shall be supported by maintenance
records which satisfy all Aviation Authority requirements (including
records of last overhaul for those items requiring to be overhauled
per Lessee's maintenance program and/or per the Boeing MPD).
T. Complete and current maintenance records, as specified in Attachment 1
to Annex A, which comply with all Aviation Authority requirements
shall be returned with the Aircraft. Maintenance records required to
be maintained by the Aviation Authority shall be in the English
language and include complete documentation for all airworthiness
directives, life limited parts (including back-to-birth records for
all internal Engine life limited parts) and major repairs and
alterations in accordance with Aviation Authority requirements. For
each AD that is applicable to the Aircraft, the records shall include
the current status of the Aircraft, the date of compliance, and the
method of compliance with appropriate supporting documentation. Any
deficiencies with Aviation Authority requirements are to be corrected
prior to return of the Aircraft at Lessee's cost.
U. Any manufacturer no-charge service bulletin parts which Lessee has
received but not installed for the Aircraft shall be returned to Lessor
with the Aircraft.
V. All windows shall be free of delamination, blemishes, and crazing that
is beyond maintenance manual limits.
W. All doors shall be free moving, correctly rigged and fitted with
serviceable seals.
X. All ceiling, sidewall and bulkhead panels shall be clean and free from
significant or unserviceable damage. All seats shall be serviceable and
in good overall condition in accordance with international air carrier
standards.
Y. All flight control surfaces and wing leading edges shall be free from
damage that is beyond serviceable limits.
Z. All cargo compartment floor, sidewall and ceiling panels shall be in
serviceable condition in accordance with Boeing maintenance manual
limits.
AA. The entire fuselage, vertical stabilizer including wing to body
fairings, engine cowls and wheel well doors shall be prepared for
painting by sanding or stripping as needed (including stripping any
areas which have more than one layer of paint) and repainted in a paint
scheme as selected by Lessor.
Annex A to Schedule 5
(Return Conditions)
Delivery Receipt
Lessor hereby accepts and acknowledges receipt from Lessee, in
accordance with the terms and conditions of the Lease Agreement dated as of
November __, 1998 (the "Lease"), between First Security Bank, National
Association, not in its individual capacity, but solely as Owner Trustee, Xxxxxx
Financial Leasing, Inc. and Frontier Airlines, Inc. of one (1) Boeing Model
737-3U3.
Aircraft:
Manufacturer: The Boeing Company
Model: 737-3U3
Registration Xxxx: N308FL
Manufacturer's Serial Number: 28738
with two installed General Electric CFM56-3C-1 engines, Engine Manufacturer's
Serial Numbers:
Position 1: 858766
Position 2: 858767
together with the Aircraft Documentation described in Attachment 1 hereto and
with the operating times and cycles as accumulated on the Aircraft up to the
time of redelivery as described in Attachment 2 hereto, in [place] on [Date], at
/a.m.//p.m./
IN WITNESS WHEREOF, Lessor and Lessee have each caused this receipt to
be duly executed on the above date.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee,
as Lessor
By:
Title:
FRONTIER AIRLINES, INC.,
as Lessee
By:
Title:
Attachment 1
to Annex A to Schedule 5
(Return Conditions)
Aircraft Documentation
A. Certificates
1. Certificate of Airworthiness
2. Noise Certificate
3. Radio License Certificate
4. Export Statement of Airworthiness (on delivery only)
5. Original Export Certificate of Airworthiness from FAA delivered in
connection with original delivery of Aircraft from Boeing
6. Certificate of Sanitary Construction of Galleys
B. Aircraft Status Records
1. Technical Log Books
2. Airframe Maintenance Status Report
3. Manufacturer's Service Bulletin Status Report
4. Airworthiness Directive Compliance Report
(terminated and repetitive)
5. Local Modification Status Report List
6. Last Weighing Report
7. Last Compass Swing
C. Aircraft Maintenance Records
1. Test Flight Reports
2. All Boeing "C" Checks and last lower level maintenance check
3. WorkCards for each C-Check multiple (or segment)
4. Modification records including accomplishing documents
5. CPCP compliance report
6. Aging Aircraft compliance report
D. Aircraft History Records
1. Aircraft Structural Repair History (if applicable)
2. Service Difficulty Report (if applicable)
3. Accident or Incident Report (if applicable)
4. Damage Chart
E. Engine Records
1. Log Books
2. Last overhaul and repair documents for each module
3. Airworthiness Directive Compliance Report
(terminated and repetitive)
4. Manufacturer's Service Bulletin Status Report
5. Engine Disk Sheet
6. Engine Data Submittal Sheet
7. Condition Monitoring Status Report
F. APU Records
1. Log Book
2. Last overhaul and repair documents
3. Manufacturer's Service Bulletin Status Report
G. Component Records (including components installed on Engines and APU)
1. Time Monitored Component Status Report with installed part
numbers, serial numbers, remaining hours and cycles (if
applicable)
2. Serviceability tags or back-up documentation for components
replaced since delivery from Boeing
3. Serialized latest shop records on the JAR Form 1, as applicable,
including all serviceable tags, release to service, and repair
orders detailing maintenance checks, inspections, tests, repairs,
replacements, restorations, overhauls, modifications and
refurbishments
H. Manuals
1. Airplane Flight Manual
2. Quick Reference Handbook
3. Aircraft Operating Manual
4. Weight and Balance Manual Supplement
5. Wiring Diagram Manual (microfilm)
6. Illustrated Parts Catalog (microfilm)
7. Aircraft Maintenance Manual (microfilm)
8. CFMI Illustrated Parts Catalog
9. Systems Schematic Manual
10. Minimum Equipment List
I. Miscellaneous Technical Documents
1. Maintenance Program Specifications/Requirements/Schedule
2. Interior Configuration Drawings
3. Loose Equipment Inventory List
Attachment 2
to Annex A to Schedule 5
(Return Conditions)
Aircraft Status
Aircraft Type: 737-3U3
Manufacturer Serial/Registration Number: 28738 / [REG#]
AIRFRAME
During Since
Period New
Airframe Flight Hours:
Airframe Cycles:
ENGINES
Position 1 Position 2
Serial Number of Original Engine*:
Present Location of Original Engine*:
Engine Flight Hours Since New:
Cycles Since New:
Engine Flight Hours Performed
During Period:
Engine Cycles Flown During Period:
Date of Last Basic Shop Visit:
Engine Flight Hours Since
Last Basic Shop Visit:
Engine Cycles Flown Since
Last Basic Shop Visit:
Serial Number of Installed Engine:
* or Replacement Engine, if applicable
LANDING GEAR During Since
Period New
Main
Main
Nose
APU
Serial Number of APU:
Present Location of APU:
Serial Number of Installed APU:
During Since
Period New
APU Flight Hours (Original APU):
APU Cycles (Original APU):
Date of Last Basic Shop Visit:
APU Flight Hours Since
Last Basic Shop Visit:
APU Cycles Since Last Basic Shop Visit:
TECHNICAL ACTIVITY
Engine Removals (if any)
APU
Serial Number:
Date:
Hours:
Cycles:
REASON
MAINTENANCE CHECKS COMPLETED
Number Date Hours Cycles
-A Check
S-A Check
- "C" Check
S - "C" Check
SI Check
NEXT CHECKS DUE
Number (E) Date (E)Hours (E) Cycles (E)
- "C" Check*
S - "C" Check*
SI Check
AD's AND SB's INCORPORATED INCLUDED IN RETURN RECORDS
EXHIBIT B
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT B TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
