AIRCRAFT LEASE AGREEMENT
Dated as of April 16, 1999
BETWEEN
C.I.T. LEASING CORPORATION
as Lessor
AND
FRONTIER AIRLINES, INC.
as Lessee
Concerning:
One Boeing 737-300 Aircraft
With
Two CFM56-3B2 Engines
FAA Registration Number N312FL
Manufacturer's Serial Number 24569
Items marked with "*" have been omitted pursuant to a request for confidential
treatment.
AIRCRAFT LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT, dated as of April 16, 1999
(this "Lease"), between C.I.T. LEASING CORPORATION, a Delaware corporation, and
its successors and assigns ("Lessor"), and Frontier Airlines, Inc., a Colorado
corporation ("Lessee").
W I T N E S S E T H :
WHEREAS, Lessor owns one (1) Boeing 737-300 Aircraft more
particularly described on Exhibit A hereto; and
WHEREAS, Lessee desires to lease from Lessor and Lessor is
willing to lease to Lessee the Aircraft upon the terms and conditions set forth
in this Lease;
NOW, THEREFORE, in consideration of the mutual covenants
herein set forth, Lessor and Lessee hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless the context requires otherwise, the following terms
shall have the following meanings for all purposes of this Lease and such
meanings shall be equally applicable to both the singular and the plural forms
of the terms defined:
"Aeronautics Authority" shall mean, as the context requires,
the United States Department of Transportation, the FAA and/or the Administrator
of the United States Federal Aviation Administration, or any person,
governmental department, bureau, commission or agency succeeding to the
functions of any of the foregoing.
"Aircraft" shall mean the Airframe together with the Engines,
the Landing Gear, and, where applicable, shall also include the Aircraft
Documents and all Capital Improvements or parts which may be made to, installed
on or incorporated into the Aircraft, including, but not limited to, those
required pursuant to any Airworthiness Directive.
"Aircraft Documents" shall mean the items identified in
Appendix I B. to the Lease Supplement and delivered to Lessee on the Delivery
Date and all such other items which may be acquired or prepared by Lessee
relating to its use, operation and maintenance of the Aircraft during the term
of this Lease, including the Aircraft Records, all of which shall be maintained
in the English language.
"Aircraft Records" shall mean all historical maintenance
records and other records delivered with the Aircraft for maintenance
accomplished prior to the Delivery Date and current maintenance records and
other records for work accomplished subsequent to the Delivery Date including,
but not limited to, documents, manuals (revised up to and including the most
current revisions issued by the Manufacturer), data, overhaul records, log
books, original Aircraft and Engine delivery documents, Life Limited Part
traceability to "zero time since new", FAA Form 8130-3 or other FAA approved
serviceable parts tags, FAA forms, teardown reports for Time Controlled Parts
which have been overhauled or replaced during the Term, modification records,
inspection records (including NDT documentation such as x-ray and eddy current),
documentation of AD compliance, time logs showing Aircraft and Engine Flight
Hours and Cycles on any given date during the Term, and all other documentation
pertaining to the Aircraft, Engines and Parts.
"Airframe" shall mean the Boeing 737-300 aircraft (except for
the Engines) more specifically described on Exhibit A hereto and the Lease
Supplement, together with all Landing Gear, the APU, and any and all Parts
relating thereto.
"Airworthiness Directive" or "AD" shall mean any Airworthiness
Directive issued by the FAA or any Manufacturer's mandatory service bulletin and
in each case applicable to aircraft, engines or parts of the same type as the
Aircraft, the Engines or the Parts.
"APU" shall mean the auxiliary power unit installed in the
Airframe.
"Basic Rent" shall mean the rent for the Aircraft payable
throughout the Term pursuant to Section 3.1 hereof and specified on Exhibit H
hereto.
"Business Day" shall mean any day other than a Saturday,
Sunday or day on which commercial banking institutions in New York, New York and
Denver, Colorado are authorized by law to be closed.
"Capital Improvement" shall mean any permanent alteration,
modification, addition, accession, replacement or other type of improvement
which is made to the Airframe, Engines, or any Part thereof, including, but not
limited to, the addition of any Parts or avionics, the performance of
Airworthiness Directives and upgrading of Engines and aircraft flight operation
or safety technology where such improvements increase the value or operating
life of the Aircraft, Engines, or any Part thereof, and for which Lessor is
eligible to take depreciation or cost recovery deductions based on the cost of
such improvements.
"Capital Improvement AD" shall have the meaning given such
term in Section 9.3(b) hereof.
"Capital Improvement Cost Sharing Formula" shall have the
meaning given such term in Section 9.3(b) hereof.
"Checks" shall mean A-Checks, B-Checks, C-Checks and D-Checks,
or their equivalent, and all structural inspections and corrosion inspections,
which are required to be performed on the Aircraft in connection with the
Maintenance Program for the Aircraft.
"Claims" shall have the meaning given such term in Section
13.1 hereof.
"Cycle" shall mean one take-off and landing for the Aircraft.
""D" Check Airframe Reserve" shall have the meaning given such
term in Exhibit G hereto.
"Default" shall mean any event or condition which, with the
lapse of time or the giving of notice or both, would constitute an Event of
Default.
"Delivery Date" shall mean the date on which Lessee accepts
the Aircraft under the terms of this Lease, which date shall be set forth in the
Lease Supplement, or such other date as may be agreed by Lessor and Lessee.
Subject to the satisfaction of the conditions set forth in Section 2.3 hereof,
the Delivery Date for the Aircraft is presently estimated to be on or about May
10, 1999.
"Dollars" or "$" shall mean the lawful currency of the United
States of America.
"Engine Life Limited Parts Reserve" shall have the meaning
given such term of Exhibit G hereto.
"Engine Reserve" shall have the meaning given such term on
Exhibit G hereto.
"Engines" shall mean each of the two CFM56-3B2 engines
described on Exhibit A hereto and in the Lease Supplement, or any replacement of
any thereof, together with any and all Parts related thereto.
"Event of Default" shall have the meaning given such term in
Section 17.1 hereof.
"Event of Loss" shall mean, with respect to any Item of
Equipment, any of the following events: (A) the loss of such Item of Equipment
or the use thereof due to theft, disappearance, destruction, damage beyond
repair or rendition of such Item permanently unfit for normal use for any reason
whatsoever; (B) any damage to such Item which results in an insurance settlement
with respect to such Item on the basis of an actual or constructive total loss;
(C) the condemnation, confiscation or seizure of, or requisition of use or the
prohibition under any applicable Law of the use of the Aircraft for commercial
transportation of passengers for a period in excess of 60 days, or such shorter
period ending on the last day of the Term, or on the date on which an insurance
settlement on the basis of total loss shall occur, of such Item of Equipment; or
(D) the condemnation, confiscation or seizure of, or requisition of, title to
such Item of Equipment. 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
which is part of the Aircraft.
"Excusable Delay" shall mean any delay in delivery of the
Aircraft hereunder not occasioned by the fault or negligence of a party hereto
and due to or arising from any cause beyond such party's reasonable control,
including, without limitation, (i) acts of the public enemy, civil war,
insurrection or riots, or quarantine restrictions, strikes, lockouts, or labor
stoppages and/or (ii) fires, floods, explosions, earthquakes, acts of nature or
epidemics and/or (iii) delays relating to any maintenance work performed on the
Aircraft or any part thereof prior to delivery hereunder.
"Expiration Date" shall mean the last day of the Term of this
Lease or such other date on which the Term of this Lease may be terminated or
extended pursuant to the terms hereof.
"FAA" shall mean, as the context requires, the United States
Federal Aviation Administration and/or the Administrator of the United States
Federal Aviation Administration, or any person, governmental department, bureau,
commission or agency succeeding to the functions of either of the foregoing.
"Flight Hour" shall mean each hour or part thereof, measured
to two decimal places, elapsing from the moment the wheels of the Airframe leave
the ground on take-off to the moment when the wheels of the Airframe touch the
ground on landing.
"Governmental Authority" shall mean and include (a) the FAA;
(b) any national government, or political subdivision thereof or local
jurisdiction therein; (c) any board, commission, department, division, organ,
instrumentality, court, or agency of any entity described in (b) above, however
constituted; and (d) any association, organization, or institution of which any
entity described in (b) or (c) above is a member or to whose jurisdiction any
such entity is subject or in whose activities any such entity is a participant
but only (except for purposes of defining Law below) to the extent that any of
the preceding have jurisdiction over the Aircraft or its operations.
"Hereby", "herein", "hereof", "hereunder", and other like
words shall refer to this Lease as originally executed or as amended, modified
or supplemented pursuant to the applicable provisions hereof, including, without
limitation, as supplemented by the Lease Supplement.
"Indemnitee" shall mean Lessor and its affiliates, officers,
directors, successors, permitted assigns, agents, employees, officers and
servants.
"Initial Deposit" shall have the meaning given such term in
Section 3.5(a) hereof.
"Insured Value" shall mean the amount set forth on Exhibit H
hereto.
"Item of Equipment" or "Item" shall mean the Airframe, the
Landing Gear, any of the Engines, the APU or any of the Parts.
"Landing Gear" shall mean the complete strut assembly,
consisting of the inner and outer cylinders, of each main landing gear and the
nose landing gear and all associated Parts that comprise each landing gear
assembly, as listed in the Manufacturer's illustrated parts catalogue for the
Airframe, but excluding rotable parts (which include, without limitation, tires,
brakes, actuators and switches).
"Landing Gear Reserve" shall have the meaning given such term
on Exhibit G hereto.
"Law" shall mean and include (a) any statute, decree,
constitution, regulation, order, judgment or other directive of any Governmental
Authority, (b) any treaty, pact, compact or other agreement to which any
Governmental Authority is a signatory or party, (c) any judicial or
administrative interpretation or application of any Law described in (a) or (b)
above, and (d) any amendment or revision of any Law described in (a), (b) or (c)
above.
"Lease" shall mean this Aircraft Lease Agreement between
Lessor and Lessee, as the same may be amended, modified or supplemented from
time to time.
"Lease Supplement" shall mean a Lease Supplement in
substantially the form of Exhibit B hereto.
"Lessee's Actual Cost" shall mean Lessee's cost incurred in
performing an obligation under this Lease determined as follows: (i) if such
obligation is performed by a third party, then Lessee's Actual Cost shall be the
actual charges of such third party paid by Lessee (without markups or overhead
by Lessee); and (ii) if Lessee elects that such obligation be performed by
Lessee, then Lessee's Actual Cost shall be Lessee's cost for labor and
materials.
"Lien" shall mean any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or claim.
"Life Limited Part" shall mean any Item of Equipment that has
a predetermined life limit, calculated in Flight Hours, Cycles or calendar time
as determined by the Aeronautics Authority or the Manufacturer and which
requires such Item of Equipment to be discarded upon reaching such life limit.
"Maintenance Program" shall mean the FAA-approved maintenance
program for the Aircraft and Engines, as the same may be modified from time to
time pursuant to the terms hereof including scheduled maintenance, conditional
monitored maintenance and on-condition maintenance of the Airframe, Engine and
Parts of the Aircraft. Upon request by the Lessor, a copy of the Maintenance
Program shall be made available to the Lessor.
"Maintenance Reserves" shall mean the amounts to be paid by
Lessee to Lessor pursuant to the terms of Exhibit G hereto, including, where
applicable, the "D" Check Airframe Reserve, each Engine Reserve, each Engine
Life Limited Parts Reserve and the Landing Gear Reserve.
"Manufacturer" shall mean, in the case of the Airframe, Boeing
Aircraft Company, in the case of the Engines, CFM International, Inc., and in
the case of any Part, Landing Gear and APU, the manufacturer of such Part,
Landing Gear or APU.
"Operative Agreements" shall mean each of this Lease, the
Lease Supplement, the Tax Indemnity Agreement and any other agreements,
documents or certificates executed and delivered in connection with the
transactions contemplated under this Lease.
"Parts" shall mean any and all appliances, parts, instruments,
appurtenances, accessories, furnishings, seats, and other equipment of whatever
nature or any Capital Improvements (other than Engines, Landing Gear, APU and
temporary replacement parts as provided in Section 9.4 hereof), which may from
time to time be incorporated or installed in or attached to the Airframe or any
Engine or which have been removed therefrom where title remains in the Lessor.
"Past Due Rate" shall mean interest at the rate per annum
equal to 18%, subject to the maximum rate permitted by Law calculated on the
basis of a year of 360 days and actual days elapsed.
"Permitted Liens" shall mean those Liens permitted pursuant to
Section 14 hereof.
"Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other entity of
whatever nature.
"Prior Period" shall have the meaning given such term in
Paragraph (a) of Exhibit G hereto.
"Related Transactions" shall mean any and all leases and
financings between Lessor or any affiliate of Lessor, as lessor or secured
party, and Lessee or any affiliate of Lessee, as lessee or borrower.
"Rent" shall mean the Basic Rent and Supplemental Rent payable
throughout the Term for the Aircraft pursuant to Article 3 hereof.
"Rent Payment Date" shall mean the first day of each calendar
month during the Term hereof, on which day the payment of Basic Rent is due and
payable.
"Rent Period" shall mean each of the consecutive calendar
months throughout the Term, commencing on and including the first day of each
calendar month and ending on and including the last day of each calendar month;
provided that the first Rent Period shall commence on the Delivery Date and
shall end on the last day of the calendar month in which the Delivery Date
occurs.
"Security Deposit" shall have the meaning given such term in
Section 3.5(a) hereof.
"Security Letter of Credit" shall have the meaning given such
term in Section 3.5(f) hereof.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Basic Rent and Maintenance Reserves) which Lessee
assumes or agrees to pay to Lessor hereunder or under any other Operative
Agreement or in connection herewith or therewith, whether pursuant to a letter
agreement, stipulation or other agreement, including, without limitation, (a)
any payment of Insured Value, (b) any payment of indemnity required by Sections
10 and 13 hereof (but excluding Maintenance Reserves), (c) any additional
maintenance obligations, and (d) interest as permitted.
"Tax Indemnity Agreement" shall mean the Tax Indemnity
Agreement dated as of the date hereof, between Lessor and Lessee.
"Taxes" shall have the meaning given such term in Section 10.1
hereof.
"Term" shall have the meaning given such term in Section 3.3
hereof.
"Time Controlled Part" shall mean any Item of Equipment that
has a predetermined time limit or interval in accordance with the Maintenance
Program or as required by the Aeronautics Authority, which requires such Item of
Equipment to be discarded, overhauled, or recertified upon reaching such time
limit or interval.
"Transportation Act" shall mean 49 U.S.C. ss.40101 et. seq.,
as amended, as in effect on the date of this Lease, or any successor or
substitute legislation at the time in effect and applicable.
"Watch Item" shall mean any special inspection generated by
airframe or component condition with inspection intervals determined by original
equipment manufacturers that do not coincide with routine periodic inspection
intervals, Airworthiness Directives, mandatory service bulletins, service
bulletins or fleet campaign directives, where such additional inspection shall
be required at an interval of less than (i) a full C Check or (ii) 3,500 Flight
Hours, whichever is greater.
"Wet Lease" shall mean any arrangement whereby Lessee agrees
to furnish the Aircraft to a third party pursuant to which (i) Lessee's crew at
all times shall maintain full operational control of the Aircraft, (ii) the
Aircraft shall be operated solely by regular employees of Lessee possessing all
current appropriate FAA certificates and licenses (it being understood that
cabin attendants need not be regular employees of Lessee), (iii) the insurance
required under Article 12 hereof shall remain in full force and effect, (iv) the
Aircraft shall be maintained by Lessee in accordance with its normal maintenance
practices and as required by the terms of this Lease, and (v) the term of any
such Wet Lease does not extend beyond the remaining Term of this Lease.
ARTICLE 2
DELIVERY AND ACCEPTANCE
2.1. Time and Place. (a) Lessor hereby agrees to lease the
Aircraft and the Aircraft Documents to Lessee, and Lessee hereby agrees to lease
the Aircraft and the Aircraft Documents from Lessor, pursuant to and in
accordance with the terms of this Lease as supplemented by the Lease Supplement.
(b) Subject to the satisfaction of the conditions set
forth in Section 2.3 hereof and the occurrence of an Excusable Delay, Lessor
shall deliver on the Delivery Date the Aircraft, together with all Aircraft
Documents, to Lessee at Marana, Arizona. Upon such delivery and subject to all
the other terms and conditions of this Lease, Lessee shall accept the Aircraft,
together with the Aircraft Documents relating thereto, and thereupon the
Aircraft and Aircraft Documents shall be deemed subject to this Lease. Lessee
shall indicate and confirm its acceptance of the Aircraft and Aircraft Documents
by the execution and delivery to Lessor of the Lease Supplement. Lessor shall
not be obligated to deliver the Aircraft to Lessee unless the conditions set
forth in Section 2.3 hereof are satisfied on or
before May 10, 1999.
(c) Lessee acknowledges that Lessor, at Lessor's cost
has provided Lessee with an adequate test flight
of the Aircraft. A technical representative for both Lessor and Lessee shall
prepare and sign a list of discrepancies of an airworthy nature or discrepancies
from the delivery requirements of Exhibit I hereto (excluding any discrepancies
relating to any Time Controlled Part) in the Aircraft systems and components
found during such test flight which exceed maintenance manual allowable limits.
To the extent not already accomplished by Lessor, such discrepancies are to be
corrected at Lessor's expense, at Lessee's Actual Cost, with all Parts necessary
for such correction to be supplied by Lessor and approved by Lessor and all such
corrections to be performed by Lessee with Lessee providing or procuring all
labor for such purpose. Lessee agrees that it will indemnify and hold harmless
Lessor and each Indemnitee from and against all claims, demands, liabilities,
losses and judgments, including attorney's fees, costs and expenses incident
thereto, which may be suffered by, accrued against, charged to or recoverable
from Lessor and/or any Indemnitee by reason of loss of or damage to property or
by reason of injury or death, or action or inaction of Lessee or any
representative of Lessee during such test flight.
(d) Lessor's obligation to lease the Aircraft and the
Aircraft Documents hereunder to Lessee, in addition to those conditions set
forth in Section 2.3 hereof, shall be conditioned upon (i) the absence of any
Default or Event of Default hereunder on the Delivery Date, (ii) the absence of
any materially adverse change in Lessee's financial condition from the date
hereof to the Delivery Date, (iii) the absence of any Excusable Delay, and (iv)
the absence of an Event of Loss having occurred
with respect to the Aircraft.
(e) Except as specifically stated in this Lease,
including Exhibit I hereto, the Aircraft shall be delivered to Lessee "AS IS,"
"WHERE IS" and SUBJECT TO EACH AND EVERY DISCLAIMER OF WARRANTY AND
REPRESENTATION SET FORTH IN SECTION 4.1 HEREOF. Upon the tender and delivery by
the Lessor, provided the conditions precedent described in Section 2.3 have been
satisfied, Lessee shall accept delivery of the Aircraft. Upon acceptance of the
Aircraft, Lessee shall thereupon indicate and confirm acceptance of the Aircraft
by execution and delivery of the Lease Supplement which shall be dated the
Delivery Date. The execution and delivery of the Lease Supplement shall
constitute conclusive and irrebuttable proof of delivery and acceptance.
(f) In the event of an Event of Loss with respect to
the Aircraft prior to the Delivery Date, Lessor shall promptly notify Lessee in
writing. This Lease shall terminate upon receipt by Lessee of such written
notice. In the event of an Excusable Delay which prevents the delivery of the
Aircraft hereunder for more than sixty (60) days beyond the estimated Delivery
Date, at the option of Lessor or Lessee, this Lease shall terminate upon receipt
by the other party of written notice thereof from the party wishing to terminate
this Lease (provided that such Excusable Delay is beyond the control of and is
not occasioned by the fault or negligence of Lessee). All Security Deposits and
other prepayments with respect to this Lease shall be returned to Lessee upon
any such termination. Neither Lessor nor Lessee shall be liable for the failure
to deliver the Aircraft hereunder due to an Excusable Delay, provided that such
Excusable Delay is beyond the control of and is not occasioned by the fault or
negligence of such party.
2.2. A Lease Only. At all times during the Term, full legal
title to all Items of Equipment and the Aircraft Documents shall remain vested
in Lessor to the exclusion of Lessee, notwithstanding the delivery of the
Aircraft to, and the possession and use thereof, by Lessee.
2.3. Conditions to Delivery of the Aircraft. Lessor's
obligation to deliver and lease the Aircraft to Lessee hereunder shall be
subject to Lessor having received the following on or before the Delivery Date:
(1) (i) an amount equal to the first month's Basic
Rent and (ii) the Security Deposit;
(2) written evidence of appropriate corporate action
of Lessee certified by an officer of Lessee duly authorizing or
ratifying the lease of the Aircraft hereunder and the execution,
delivery and performance of this Lease, together with an incumbency
certificate as to the Person or Persons authorized to execute and
deliver said certification and the Lease on behalf of Lessee;
(3) the Lease Supplement, in substantially the same
form as Exhibit B, and the Tax Indemnity Agreement, each completed,
duly executed and delivered by Lessee, and dated and effective as of
the Delivery Date;
(4) a favorable opinion signed by Lessee's General
Counsel, dated the Delivery Date, in substantially the form annexed as
Exhibit D hereto, and including such other matters as may be reasonably
requested by Lessor or Lessor's counsel;
(5) an opinion letter, substantially in the form of
Exhibit E hereto, executed by an independent aircraft insurance broker
reasonably acceptable to Lessor, as to Lessee's compliance with the
relevant insurance provisions of this Lease and a certificate of
insurance signed by such insurance broker which evidences the relevant
insurance required by Article 12 hereof which certificate of insurance
shall include the relevant special provisions set forth on Exhibit F
hereto;
(6) a certificate signed by a duly authorized officer
of Lessee, dated the Delivery Date, to the effect that:
(A) the representations and warranties of
Lessee contained in Section 4.2 hereof, are true and correct
on and as of such date as though made on and as of such date,
and all authorizations and approvals of, giving of notice to,
and filings and recordings with, all regulatory bodies and
authorities which may be conditions to the validity or
enforceability of this Lease or Lessee's performance of the
terms hereof have been duly accomplished; and
(B) no Default or Event of Default has
occurred and is continuing or would result from the lease of
the Aircraft;
(7) evidence satisfactory to Lessor confirming that
this Lease and the Lease Supplement have been duly filed with the FAA;
(8) a favorable opinion from McAfee & Xxxx, special
FAA counsel to Lessor, addressed to Lessor , as to completion of the
due filing of this Lease, the Lease Supplement and each other agreement
or instrument anticipated to be recorded with the FAA, pursuant to the
Transportation Act and related rules and regarding such other matters
as Lessor may reasonably request;
(9) one or more Form UCC-1 Uniform Commercial Code
Financing Statements signed by Lessee, as debtor, in form and substance
acceptable to Lessor for filing in any and all recordation offices
necessary to evidence or perfect Lessor's interest in the Aircraft and
Items of Equipment;
(10) evidence reasonably satisfactory to Lessor that
Lessee has obtained such licenses, operator's certificates or other
documents from each appropriate Governmental Authority as may be
required to operate the Aircraft as an air carrier under applicable
Law, including but not limited to, approval by the FAA;
(11) if applicable, a duly executed Security Letter
of Credit, in a form satisfactory to Lessor; and
(12) such other documents or conditions or financial
information as Lessor or Lessor's counsel may reasonably request, in
form and substance satisfactory to Lessor and Lessor's counsel.
2.4. Aircraft Configuration, etc. The Aircraft shall be
delivered "as is, where is" in the configuration used by the previous operator
of the Aircraft and shall conform to the requirements set forth in Exhibit I
hereto. Lessee shall be permitted to change the interior configuration,
including replacement of interior Parts such as seats, seat covers, and
carpeting at no cost to Lessor. All requirements necessary to bridge the
Aircraft onto the Maintenance Program shall be accomplished by Lessee at the
sole cost and expense of Lessee, including without limitation, replacement of
hard time parts whether due to (x) accumulated time since last overhaul, or (y)
lack of documentation. Notwithstanding anything herein to the contrary, Lessor,
at its sole cost and expense, shall cause the Aircraft on the Delivery Date: (i)
to have windshear and TCAS installed thereon; and (ii) to have a current United
States Certificate of Airworthiness issued by the FAA.
ARTICLE 3
RENT AND TERM
3.1. Basic Rent. Lessee covenants and agrees to pay to Lessor
the Basic Rent as set forth on Exhibit H hereto throughout the Term, payable in
consecutive installments on each Rent Payment Date during the Term of this
Lease.
3.2. Maintenance Reserves and Supplemental Rent. Lessee shall
pay to Lessor the Maintenance Reserves pursuant to the terms of Section 5.7 and
Exhibit G hereof, respectively. Lessee shall pay to Lessor any and all
Supplemental Rent within five (5) Business Days after demand or, if longer, such
other relevant period as may be provided herein. In the event of any failure on
the part of Lessee to pay any Maintenance Reserves or Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise in the case of nonpayment of Basic Rent. Lessee also shall
pay to Lessor, on demand, as Supplemental Rent to the extent permitted by
applicable Law, interest at the Past Due Rate (i) on any part of any installment
of Basic Rent not paid when due for any period for which the same shall be
overdue and (ii) on any payment of Maintenance Reserves or Supplemental Rent
(excluding interest at the Past Due Rate payable under clause (i) above) not
paid when due until the same shall be paid, in each case commencing on the due
date and including such date thereof if such payment is not received by the time
specified in this Article 3.
3.3. Term. Except as otherwise provided herein, the Aircraft
shall be leased to Lessee hereunder for a term of Eighty-Four (84) months,
commencing on the Delivery Date and ending at 3:00 p.m. New York, New York time
on the day which is the seventh (7th) annual anniversary of the Delivery Date
(the "Term").
3.4. Place of Payment. Each payment of Rent, Maintenance
Reserves and the Security Deposit shall be made by Lessee to Lessor by wire
transfer of immediately available funds to The Chase Manhattan Bank, N.A., 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, for The CIT Group, Account No.
116-003855, ABA No. 000-000-000, identifying the source of such payment, not
later than 3:00 p.m. New York City time on the date due. If any payment
hereunder is due on a day which is not a Business Day, such payment shall be due
and payable on the next preceding Business Day.
3.5. Security Deposit. (a) Lessor acknowledges the receipt of
Two Hundred Ten Thousand Dollars ($210,000) (the "Initial Deposit") representing
partial payment of the amount described on Exhibit H hereto as the Security
Deposit Amount. The Initial Deposit shall be held until the Delivery Date at
which time Lessee shall provide to Lessor a security deposit (the "Security
Deposit") under this Lease in the amount of the Security Deposit Amount as set
forth on Exhibit H hereto. The Security Deposit shall be made in cash or in the
form of a Security Letter of Credit that satisfies the requirements of Section
3.5(f) hereof. The Initial Deposit shall be promptly returned by Lessor to
Lessee upon the issuance of such a Security Letter of Credit. The Security
Deposit shall be nonrefundable during the Term, and shall be held by Lessor as
security for (i) the timely and faithful performance by Lessee of all of
Lessee's obligations under this Lease (including, but not limited to, any
prepetition or postpetition obligations of Lessee in connection with any
proceeding or other action involving Lessee under any bankruptcy, insolvency or
reorganization Law of any jurisdiction and compliance with all return conditions
specified herein and on Exhibit C hereto), (ii) all payments of Rent and
Maintenance Reserves due and owing from time to time, (iii) any and all damages
incurred by Lessor which may arise as a result of the breach or rejection of the
Lease, whether or not in connection with a motion to lift stay or a motion to
assume or reject the Lease, including, without limitation, overdue interest,
costs of preservation or protection of the Aircraft and costs of repossession
and (iv) all attorney's fees incurred by Lessor in connection with any of the
above, whether or not litigation is instituted and whether incurred before or
after the filing by or against Lessee of a petition under Chapter 7 or Chapter
11 of the Bankruptcy Code.
(b) Lessee hereby grants to Lessor a s ecurity
interest in the Security Deposit and in all other sums deposited pursuant to
this Section 3.5. Lessee agrees to execute and file with the appropriate
Governmental Authorities any and all documents necessary or reasonably requested
by Lessor to evidence and perfect such security interest in favor of Lessor.
(c) Upon the occurrence of an Event of Default
hereunder, in addition to all of the other rights that Lessor may have under the
New York Uniform Commercial Code as a secured party, Lessor may use, apply or
retain all or any portion of the Security Deposit in partial payment for sums
due to Lessor by Lessee, to compensate Lessor for any sums it may in its
discretion advance as a result of a Default by Lessee, or to apply toward losses
or expenses Lessor may suffer or incur as a result of Lessee's Default
hereunder. If Lessor uses or applies all or any portion of such Security
Deposit, such application shall not be deemed a cure of any Default or Event of
Default, and Lessee shall within five (5) days after written demand therefor
deposit with Lessor in cash an amount sufficient to restore the Security Deposit
to its original sum as set forth in Exhibit H hereto and the failure of Lessee
to do so shall be a material breach of this Lease by Lessee.
(d) The Security Deposit shall be held by Lessor in a
segregated account at Fleet Bank in New York. Provided no Default or Event of
Default shall have occurred and be continuing, Lessor shall credit to the
Security Deposit interest thereon at the commercial rate of interest as is
customarily available to Lessor from time to time, as is in effect on the first
day of each calendar quarter during the Term. Such interest shall be credited on
the tenth Business Day of each calendar quarter and on the date on which the
Security Deposit is returned to Lessee. Any interest earned on the Security
Deposit shall become part of the Security Deposit and shall be held and applied
by Lessor as provided herein.
(e) Provided Lessee is not in Default under this
Lease and no Event of Default shall have occurred and be continuing, the
Security Deposit shall be returned to Lessee (i) promptly after the termination
of this Lease in the event that this Lease is terminated prior to the Delivery
Date, or (ii) within one month following the later of the Expiration Date and
Lessee's return of the Aircraft in compliance with Article 16 hereof, together
in either case with interest, if any, earned thereon.
(f) In lieu of a cash Security Deposit, Lessee may
deliver to Lessor, on or after the Delivery Date, an unconditional and
irrevocable letter of credit in a form satisfactory to Lessor, in the amount of
not less than the Security Deposit Amount set forth on Exhibit H, hereto and
issued by an issuer bank acceptable to Lessor (the "Security Letter of Credit").
The Security Letter of Credit shall remain in full force and effect during the
Term hereof and for not less than thirty (30) days following the expiration of
the Term. Lessor may draw upon all or a portion of the amount of the Security
Letter of Credit upon (i) the occurrence of an Event of Default hereunder or
(ii) in the event that the Letter of Credit has not been renewed and a
replacement letter of credit delivered to Lessor not less than thirty (30) days
prior to the expiration date of such Letter of Credit, and Lessor may use, apply
or retain all or any portion of the funds paid pursuant to the Security Letter
of Credit to the same extent as provided in the paragraph (a) above with respect
to the cash Security Deposit by delivering a certificate to the issuer stating
that a drawing by Lessor is authorized under the terms of this Lease. If Lessor
draws upon all or any portion of the Security Letter of Credit, such application
shall not be deemed a cure of the Default or Event of Default for which such
amount was applied until Lessee shall cause (within five (5) Business Days after
written demand therefor) the Security Letter of Credit to be reinstated to its
original amount or cause a replacement letter of credit to be issued in the
amount of not less than the Security Deposit amount set forth on Exhibit H
hereto, and the failure of Lessee to do so shall be a material breach of this
Lease by Lessee. For the avoidance of doubt, Lessee's reinstatement of the
Security Letter of Credit shall not cause the cure of any Default or Event of
Default which would not have been curable in full by Lessor's drawing on the
then-available stated amount of the Security Letter of Credit. After expiration
of the Term of this Lease, and provided that Lessee has been discharged of its
obligations hereunder, including but not limited to, return conditions pursuant
to Section 16 hereof and Exhibit C hereto, Lessor shall return the Security
Letter of Credit to Lessee for cancellation.
3.6 Time is of the Essence. Time and strict and punctual
performance are of the essence with respect to each provision of this Lease.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES; COVENANTS OF THE PARTIES
4.1. Lessor's Representations and Warranties. LESSOR LEASES
THE AIRCRAFT AND AIRCRAFT DOCUMENTS TO LESSEE "AS IS, WHERE IS", EXCEPT AS
OTHERWISE PROVIDED HEREIN. LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE
(WHETHER BY VIRTUE OF HAVING LEASED THE AIRCRAFT AND AIRCRAFT DOCUMENTS UNDER
THIS LEASE, OR HAVING ACQUIRED THE AIRCRAFT AND AIRCRAFT DOCUMENTS, OR HAVING
DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS
UNDER OR IN RELATION TO THIS LEASE OR OTHERWISE), AND LESSOR HEREBY SPECIFICALLY
DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE
OR LIEN STATUS (EXCEPT AS HEREIN BELOW PROVIDED), AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY, FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE
LIKE, OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT AND AIRCRAFT
DOCUMENTS, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT,
THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE,
OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED
(INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE OR DEALING
OR USAGE OF TRADE), WITH RESPECT TO THE AIRCRAFT AND AIRCRAFT DOCUMENTS; AND
LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR
RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES. LESSOR SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, WHETHER ARISING IN
CONTRACT OR TORT OUT OF ANY NEGLIGENCE OR STRICT LIABILITY OF LESSOR OR
OTHERWISE, FOR (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE, OR PART OR BY ANY
INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE
IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT
OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS OF
BUSINESS OR ANTICIPATED PROFITS OR CONSEQUENTIAL DAMAGES OR (iv) THE DELIVERY,
OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE
AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 4.1 ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER,
EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER
WARRANTIES, EXCEPT THAT: Lessor represents, warrants and covenants that it has
good title to the Aircraft and Aircraft Documents, and the right and corporate
power to lease the Aircraft (including all Items of Equipment) and Aircraft
Documents to Lessee hereunder; and, so long as Lessee keeps and performs each
and every covenant to be kept and performed by it hereunder, Lessor, or anyone
claiming by or through Lessor or claiming title to the Aircraft, any Item of
Equipment or the Aircraft Documents, shall not interfere with Lessee's quiet
enjoyment of the Aircraft and Aircraft Documents; provided, however, that Lessor
and prospective purchasers and lessees may inspect the Aircraft and Aircraft
Documents at their own expense as long as such inspection does not interfere
with Lessee's operation or maintenance of the Aircraft. During the term of this
Lease, Lessee is authorized to enforce in its own name such rights as Lessor may
have with respect to the Aircraft under any warranty (express or implied),
service policy or product agreement to the extent that the same may be assigned
or otherwise made available to Lessee and, to the extent that the same may not
be so assigned or otherwise made available to Lessee, Lessor agrees to use
reasonable efforts, at Lessee's expense, to enforce such rights as Lessor may
have with respect thereto for the benefit of Lessee; provided, however, that
upon the occurrence of a Default or an Event of Default all such rights shall
immediately and unconditionally revert to Lessor.
4.2. Representations and Warranties of the Parties. Except as
otherwise provided in this Section, each party represents and warrants to the
other, as to itself, that:
(a) (i) such party is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation, and (ii) Lessee only represents and warrants that it (A) is and
covenants that throughout the Term it will remain duly certificated as an air
carrier of passengers under the laws of the United States of America; and (B)
operates and will throughout the Term continue to operate the Aircraft in
accordance with the rules and regulations of the FAA as an air carrier holding a
certificate issued under ss. 44705 of the Transportation Act;
(b) the execution and delivery by such party of this
Lease, the Lease Supplement, and any other Operative Agreement the consummation
by such party of the transactions contemplated herein and therein and compliance
with the terms and provisions hereof and thereof are within such party's
corporate powers, do not and will not result in a violation of such party's
articles of incorporation or by-laws as currently in effect; and do not and will
not conflict with, or result in a breach of any term or provision of, or
constitute a default under, or result in the imposition of any Lien upon the
Lease or any Item of Equipment under, any indenture, mortgage, or other
agreement or instrument to which such party is a party or by which it or any of
its properties, is or may be bound, or any existing applicable law, rule or
regulation, or any judgment, order or decree, of any government, governmental
instrumentality or court having jurisdiction over such party or any of its
properties;
(c) Lessee only represents and warrants that, upon
its delivery hereunder, none of the Aircraft, Airframe, Landing Gear, Engines or
any Part thereof, shall be or become subject to any Lien except for such, if
any, as is permitted by Article 14 hereof;
(d) this Lease, the Lease Supplement and the other
Operative Agreements have each been duly authorized by such party, this Lease,
the Lease Supplement and the other Operative Agreements has been duly executed
and delivered by such party, and this Lease and the Tax Indemnity Agreement are
and the Lease Supplement will be, upon due execution and delivery thereof, a
legal, valid and binding obligation of such party, enforceable against such
party in accordance with its terms, except as such enforceability may be further
limited by bankruptcy; insolvency, reorganization and other laws of general
application affecting the enforcement of creditors' rights;
(e) Lessee only represents and warrants that Lessee
has received every consent, approval or authorization of, and has given every
notice to, each Governmental Authority having jurisdiction with respect to the
execution, delivery or performance of this Lease (including all monetary and
other obligations hereunder) that is required in order for Lessee to execute and
deliver this Lease and the other Operative Agreements and each other document to
which Lessee is a party, and to perform the transactions contemplated hereby and
thereby and each such consent, approval or authorization is valid and effective
and has not been revoked;
(f) Lessee only represents and warrants that there
are no suits or proceedings pending or, to the knowledge of Lessee, threatened
in any court or before any regulatory commission, board or other administrative
governmental agency against or affecting Lessee which will have a materially
adverse effect on the current business or financial condition of Lessee;
(g) Lessee only represents and warrants that, except
for the filing for recordation of this Lease and the Lease Supplement with the
FAA and the filing of any Uniform Commercial Code financing statements required,
and the placing on the Aircraft and on each Engine of the plates containing the
legends referred to in Section 5.6 hereof, no further filing or recording of
this Lease or of any other document and no further action, are necessary or
desirable under the Laws of any Governmental Authority in order to (i) fully
protect and establish Lessor's title to, interest in and property rights with
respect to the Aircraft and Aircraft Documents as against Lessee or any third
party claiming through Lessee and to ensure that the property rights of Lessor
therein will have priority in all respects over the claims of all creditors of
Lessee, or (ii) ensure the validity, effectiveness and enforceability of this
Lease, the Lease Supplement and the other Operative Agreements;
(h) Lessee only represents and warrants that it has
delivered to Lessor a true, complete and correct copy of the Lessee's financial
statements for the period ended March 31, 1998 together with an independent
auditor's report with respect thereto, and Lessor represents that it has
reviewed such financial statements and, assuming they are accurate, finds such
financial statements to be acceptable;
(i) Lessee only represents and warrants that there
are no withholding or other Taxes to be deducted from any payment to be made by
Lessee under this Lease;
(j) Lessee only represents and warrants that Lessee
is not in default in the performance of its material obligations for the payment
of indebtedness for borrowed money or on any other material lease obligations;
and
(k) Lessee only represents and warrants that, upon
the commencement of a Chapter 11 proceeding under the Bankruptcy Code by or
against Lessee, Lessor shall be entitled to the benefit of Title 11 U.S.C.
Section 1110 as in effect on the date hereof with respect to the Aircraft.
ARTICLE 5
POSSESSION; USE; LAWFUL INSURED OPERATIONS; MAINTENANCE;
REGISTRATION AND INSIGNIA; MAINTENANCE RESERVES
5.1. Possession. During the Term, the Items of Equipment and
the operations performed therewith shall, subject to applicable Laws of any
Governmental Authority including, but not limited to, FAA regulations, be under
the exclusive control of Lessee, subject to the rights of Lessor hereunder.
Without the prior written consent of Lessor, Lessee shall not sublease or
otherwise deliver, relinquish or transfer possession of the Aircraft, the
Airframe, the Aircraft Documents or any Item or Items of Equipment; provided,
however, that, so long as no Default or Event of Default shall have occurred and
be continuing, Lessee may, without the written consent of Lessor but subject to
the other provisions of this Lease:
(i) deliver possession of the Aircraft, the Airframe,
any Engine or any Part thereof or any Item of Equipment to the
Manufacturer thereof or an FAA-certified maintenance facility
for service, repair, modifications, alterations, maintenance
or overhaul work required by the terms hereof;
(ii) install any Engine on an airframe owned by
Lessee which airframe shall be free and clear of all Liens,
except: (A) Liens permitted hereby and those which apply only
to the engines (other than the Engines), appliances, parts,
instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe (but
not to such airframe as an entirety); or (B) mortgage Liens or
other security interests, provided, that the applicable
security documents provide that such Engine shall not become
subject to the Lien of such mortgage or security interest,
notwithstanding the installation thereof on such airframe;
(iii) install any Engine on an airframe leased to
Lessee or purchased by Lessee subject to a conditional sale or
other security agreement, provided that such airframe is free
and clear of all Liens, except: (A) the rights of the parties
to the lease or conditional sale or other security agreement
covering such airframe, or their assignees; (B) Liens of the
type permitted by clause (ii) above; and (C) such lease,
conditional sale or other security agreement effectively
provides that such Engine shall not become subject to the lien
of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe; or
(iv) enter into a Wet Lease of the Aircraft.
Lessee will not permit any Item of Equipment (other than Parts as provided
herein) to be utilized on any aircraft not within Lessee's fleet of aircraft. No
relinquishment of possession pursuant to the terms of this Section 5.1 shall in
any way discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights and remedies hereunder.
5.2. Assignment by Lessee. Lessee shall not assign any
interest in this Lease or any of its rights hereunder or in any Item of
Equipment, and any such purported assignment shall be void ab initio.
5.3. Use. Lessee shall use the Aircraft and any Item of
Equipment solely in commercial operations for which Lessee is duly authorized
and strictly in accordance with the terms of this Lease. Lessee shall not use,
or permit the use of, any Item of Equipment for any purpose for which it is not
suitable. The Aircraft shall always remain in passenger configuration. Lessee
shall comply with FAA regulations relating to the transport of restricted
articles. Lessee shall pay for and provide all electric power, oil, fuel and
lubricant consumed by and required for the operation of the Aircraft.
5.4. Lawful Insured Operations. The Aircraft shall be operated
at all times in compliance with all applicable Federal Aviation Regulations,
including, but not limited to, Part 121 thereof. Lessee will not cause or permit
the Aircraft or any Item of Equipment to be maintained, used or operated in
violation of any Law or Governmental Authority having jurisdiction or contrary
to any Manufacturer's operating manuals and instructions, or, in the case of the
Aircraft and the Engines, in violation of any airworthiness certificate or
registration relating thereto. Lessee agrees not to operate any Item of
Equipment, or suffer or permit such Item to be operated (i) unless such Item is
covered by insurance required by the terms of this Lease, (ii) contrary to the
terms of the insurance required by the provisions of Article 12 hereof or (iii)
in any area excluded from coverage by any insurance required by the terms of
Article 12 hereof.
5.5. Maintenance. (a) Lessee, at its own expense, shall cause
the Items of Equipment to be serviced, repaired, overhauled, tested and
maintained in compliance with all applicable Federal Aviation Regulations,
including, but not limited to, Part 121 thereof (i) by personnel in accordance
with FAA requirements, (ii) in accordance with the Maintenance Program and the
operations and maintenance manuals of the Manufacturers thereof (including,
without limitation, an FAA approved or Manufacturer's recommended program for
the prevention and treatment of corrosion), (iii) so as to keep such Item in as
good operating condition and appearance as when delivered to Lessee hereunder,
ordinary wear and tear excepted, (iv) so as to keep such Item in such operating
condition as may be necessary to cause the airworthiness certificate of such
Item to be maintained in good standing at all times under the applicable rules
and regulations of the Aeronautics Authority, (v) so as to keep it airworthy and
fit for scheduled commercial passenger service in the United States and each
other jurisdiction in which Lessee will operate the Aircraft, and (vi) so that
it will not discriminate against the Aircraft (as compared to other aircraft of
the same type owned or operated by Lessee) in respect of the Maintenance Program
and maintenance, other than withdrawal of the Aircraft from use and operation as
is necessary to prepare the Aircraft for return to Lessor upon the expiration or
termination of this Lease.
(b) Without limiting the foregoing, Lessee shall
cause, at its expense, all maintenance Checks to be performed on the Aircraft as
they become due, with no fleet discrimination with respect to the Aircraft. Any
damage, defects or corrosion discovered during any Check shall be permanently
repaired in accordance with the Maintenance Program and the structural repair
manual for the Aircraft at the sole expense of Lessee. Lessee shall provide
Lessor with ten (10) days prior notice of scheduled C and D Checks. Lessor shall
have the right to have representatives present during such Checks who shall
consult with Lessee's representatives as to the work being performed during such
Checks. Lessee, at its own expense, shall furnish Lessor upon return of the
Aircraft and at such times during the Term as Lessor shall reasonably request,
originals of all Aircraft Records with a certificate signed by an officer of
Lessee, affirming that all the maintenance work represented by such Aircraft
Records was performed by Lessee or a then FAA authorized repair station approved
to maintain Boeing 737-300 type aircraft and a certificate affirming that the
maintenance work represented by such records was performed in accordance with
the Maintenance Program. Lessee, at its own expense, shall also maintain (in the
English language) all Aircraft Documents and other materials required by the
FAA, or any other applicable Aeronautics Authority, including Aircraft Documents
required to be maintained in respect of each Item of Equipment, in a manner
acceptable to the FAA, or any other applicable Aeronautics Authority and
promptly furnish to Lessor upon Lessor's request such information as may be
required to enable Lessor to file any reports required to be filed with any
Governmental Authority because of Lessor's ownership of the Aircraft. All
Aircraft Documents, including Aircraft Records and documentation of maintenance
accomplished on the Airframe, Engines and Parts shall be in the English language
and shall be retained by Lessee until the Expiration Date, at which time all
Aircraft Records and Aircraft Documents shall be returned to Lessor in original
form.
(c) Lessee will not allow the Flight Hours:Cycle
ratio for the operation of the Aircraft during the Term to fall below a ratio of
2:1. To the extent the Flight Hours:Cycle ratio falls below 2:1, the applicable
rate of the Maintenance Reserves shall be adjusted in accordance with paragraph
(f) of Exhibit G hereto.
(d) No Time Controlled Part shall be removed from the
Aircraft unless (i) such Time Controlled Part must be removed and replaced in
accordance with the Maintenance Program or (ii) such Time Controlled Part is
re-installed on the Aircraft within a reasonable period of time based on
Lessee's schedule but in any event not to exceed 72 hours after such removal.
Any Time Controlled Part which is removed in accordance with the Lessee's
Maintenance Program shall be replaced with a part of the same manufacture and an
equivalent or later part number equal to the replaced Part and be completely
interchangeable as to the form, fit and function and shall be airworthy.
5.6. Registration and Insignia. Upon delivery of the Aircraft,
Lessee agrees to place the following lease identification in the cockpit in a
prominent location and to place such lease identification on each Engine on a
metal plate and in a prominent location near such Engine's data plate: "Leased
from C.I.T. Leasing Corporation, as owner and Lessor." Lessee agrees to make
such changes to such lease identification as Lessor may reasonably request from
time to time. Lessee shall not take or permit any action inconsistent with the
continued registration of the Aircraft in Lessor's name under the Transportation
Act. Lessee shall not remove, or cause or permit the removal of, any plate, disc
or other similar device affixed to the Airframe or any Engine indicating
Lessor's ownership thereof. If any of the same shall come to be removed, Lessee
shall promptly affix a replacement therefor, at its own expense, it being
understood that such identification should be maintained (A) in the cockpit of
the Airframe, in a prominent location adjacent to the airworthiness certificate
for the Aircraft, and (B) on each Engine, in a prominent location near such
Engine's data plate. Lessee shall not allow the name of any other Person,
association or corporation to be placed on the Airframe or any Engine as a
designation that might be interpreted as a claim of ownership or of any interest
therein; provided, however, that Lessee may cause the Airframe to be lettered or
otherwise marked in an appropriate manner for convenience of identification of
the interest of Lessee therein.
5.7. Maintenance Reserves. Lessee agrees to pay to Lessor
Maintenance Reserves with respect to the Aircraft during the Term in accordance
with Exhibit G hereto. All Maintenance Reserves shall be applied in accordance
with the applicable provisions of Exhibit G hereto. No interest shall accrue
with respect to Maintenance Reserves.
5.8. Application of Reserves Upon Aircraft Return. Any amounts
remaining in the "D" Check Airframe Reserve, Engine Reserves, the Engine Life
Limited Parts Reserves, Landing Gear Reserve, and any other Maintenance Reserve
established from time to time hereunder after application of the monies held in
any such Maintenance Reserve in accordance with Exhibit G hereto upon the return
of the Aircraft pursuant to Section 16 hereof shall be retained by Lessor.
5.9. Concerning Reserves. (a) At the time Lessee pays amounts
into the "D" Check Airframe Reserve, the Engine Reserves, the Engine Life
Limited Parts Reserves, the Landing Gear Reserve, and any other Maintenance
Reserve established from time to time, as the case may be, Lessee shall provide
to Lessor a certificate as to the computation of each such payment, duly
executed on behalf of Lessee by the records manager or other duly authorized
employee of Lessee, certifying the number of Airframe Flight Hours and Cycles
for the Aircraft during the Prior Period, the number of Engine Cycles and Engine
Flight Hours for each Engine during the Prior Period, and the number of Flight
Hours and Cycles for each Landing Gear during the Prior Period, as the case may
be. From time to time, Lessor shall have the right, during normal business hours
at its own expense, on reasonable prior notice to Lessee, to cause its agents to
review the appropriate records of Lessee to determine the accuracy of such
certificates. In the event a discrepancy is determined as a result of such
review, Lessor shall notify Lessee in writing thereof and Lessee shall make up
any deficiency in its payments to Lessor within five (5) Business Days of such
notice.
(b) Pursuant to the New York Uniform Commercial Code,
Lessee hereby grants to Lessor a possessory security interest in the "D" Check
Airframe Reserve, each Engine Reserve, such Engine Parts Reserve the Landing
Gear Reserve and any other Maintenance Reserve established from time to time
hereunder as security for all obligations of Lessee under this Lease, including,
without limitation, the obligations of Lessee to maintain and return the
Aircraft, Airframe, Engines and each Item of Equipment in the condition required
by this Lease. Lessee agrees to execute and file, at Lessee's expense, with the
appropriate Governmental Authorities any and all documents necessary or
reasonably requested by Lessor to evidence and perfect such security interest in
favor of Lessor. Upon and following an Event of Default, and in addition to all
other rights Lessor may have under this Lease and as a secured party under the
New York Uniform Commercial Code, Lessor may (but shall not be obligated to)
use, apply or retain all or any portion of the "D" Check Airframe Reserve, the
Engine Reserves, the Engine Life Limited Parts Reserves, the Landing Gear
Reserve, and any other Maintenance Reserve established from time to time
hereunder as follows: (i) first, to compensate Lessor for any sums it may in its
discretion advance to perform any of Lessee's obligations to maintain and return
the Aircraft, Airframe, Engines, Landing Gear and Aircraft Documents in the
condition required under this Lease; and (ii) the balance in the "D" Check
Airframe Reserve, the Engine Reserves, the Engine Life Limited Parts Reserves,
the Landing Gear Reserve, and any other Maintenance Reserve established from
time to time hereunder, if any, to apply toward losses, damages or expenses that
Lessor may suffer or incur as a result of Lessee's failure to perform any other
obligation under this Lease. In the event Lessor uses, applies or retains all or
any portion of the "D" Check Airframe Reserve, the Engine Reserves, the Engine
Life Limited Parts Reserves, the Landing Gear Reserve, and any other Maintenance
Reserve as stated above, then Lessee shall immediately reimburse each such
Reserve for all amounts used, applied or retained by Lessor.
(c) Lessee acknowledges that it has no property
interest in any Maintenance Reserve and agrees that
Maintenance Reserves shall not be deemed property of Lessee.
(d) Lessee shall not assign, hypothecate or otherwise
transfer its residual interest, if any, in
Maintenance Reserves.
ARTICLE 6
INSPECTION; FINANCIAL AND AIRCRAFT INFORMATION
6.1. Inspection. During the Term, Lessee shall furnish to
Lessor such information concerning the location, condition, maintenance, use and
operation of the Items of Equipment and Aircraft Documents as Lessor may
reasonably request including, without limitation, a copy of the Maintenance
Program of Lessee and a copy of the related FAA approved operation
specifications. Lessee shall permit any Person (including prospective purchasers
or lessees of the Aircraft) designated in writing by Lessor, at Lessor's
expense, to (i) visit and inspect the Items of Equipment, the Aircraft
Documents, the portions of the Maintenance Program relating to the maintenance
status of the Aircraft, the condition, use and operation of the Items of
Equipment and the Aircraft Records maintained in connection therewith and, at
Lessor's expense, to make copies of such Aircraft Records as Lessor may
designate and (ii) inspect the Aircraft for corrosion, including, if necessary,
removal of floor boards to facilitate such inspection. Lessor shall have no duty
to make any such inspection and shall not incur any liability or obligation by
reason of not making any such inspection. Any inspection shall occur at a
reasonable time, provided that such inspection does not interfere with Lessee's
operating commitments.
6.2. Financial Information. (a) Lessee agrees that it will
maintain its financial statements in a manner which fairly presents its
financial condition and that the results of its operations and changes in its
financial position will be accounted for in accordance with generally accepted
accounting principles consistently applied.
(b) Lessee agrees to furnish to Lessor during the Term (i)
within forty-five (45) days after each fiscal quarter of Lessee, copies of the
balance sheet, profit and loss statement, retained earnings statements, income
statements, and cash flow statement of Lessee for such fiscal quarter, certified
as true and correct by the Chief Financial Officer of Lessee, and (ii) from time
to time such other information as Lessor may reasonably request.
(c) Lessee agrees to furnish to Lessor during the Term (i)
within ninety (90) days after the end of the fiscal year, copies of the balance
sheet, profit and loss statement, retained earnings statements, income
statements, and cash flow statement of Lessee for such fiscal year, certified as
true and correct by the Chief Financial Officer of Lessee, (ii) comparative
figures for the previous fiscal year and (iii) from time to time such other
information as Lessor may reasonably request.
(d) Lessee agrees to provide all other information reasonably
requested by Lessor with respect to the financial condition, operations,
business and property of Lessee or any of its Affiliates.
6.3. Aircraft Information. During the Term, Lessee agrees to
furnish or cause to be furnished to Lessor the following information, in
writing, with respect to the Aircraft: (i) on a monthly basis, within ten (10)
days following the last day of each Rent Period a monthly utilization report
with respect to the Aircraft, Engines, Landing Gear, APU and Parts reflecting
the Flight Hours and Cycles of operation thereof, (ii) within twenty-four (24)
hours of the occurrence or detection thereof, any accident or incident
information with respect to the Airframe or any of the Engines in circumstances
where the resulting damage to the Aircraft from such accident or incident to the
Airframe or any of the Engines exceeds $100,000.00, (iii) promptly upon the
request of Lessor, the status of any claims for damages (whether with respect to
any Airframe or Engine or any other Item of Equipment, or against Lessor or
Lessee) arising out of the use, operation, lease, sublease, sub-sublease or
condition of the Airframe, Engines or any other Item of Equipment and/or the
amount of taxes paid with respect thereto, (iv) upon request, those portions of
the Maintenance Program relating to the maintenance status of the Aircraft, and
(v) from time to time such other information as Lessor may reasonably request,
including information concerning the location, condition, use and operation of
the Aircraft and the Engines.
6.4 Other Information. Lessee agrees that it will furnish to
Lessor:
(a) immediately upon the occurrence of a Default or an Event
of Default, a written notice specifying the nature of the Default or Event of
Default and what action Lessee is taking or proposes to take with respect
thereto;
(b) such other information as Lessor may reasonably request
concerning Lessee, the Airframe, Engines or any other Item of Equipment in order
to enable Lessor to determine whether the covenants, terms, and provisions of
this Lease and the other Operative Agreements have been complied with including,
without limitation, such information requested by Lessor as may be required to
enable Lessor to file any reports required to be filed with any Governmental
Authority as a result of Lessor's interest in any Item of Equipment; and
(c) prompt written notice of the issuance by any court or any
regulatory authority of any injunction, order or decision prohibiting or having
the effect of prohibiting, restraining or limiting any of the transactions
contemplated by this Lease or the other Operative Agreements, or the institution
of any litigation or other proceedings seeking any such injunction, order or
other restraint.
ARTICLE 7
COVENANTS
7.1. Lessee's Covenants. Lessee covenants and agrees that,
during the Term:
(a) Lessee will preserve and maintain (i) its
corporate existence, and (ii) all of its rights, privileges and
franchises in every jurisdiction in which the character of the property
owned or the nature of the business transacted by it makes licensing or
qualification necessary.
(b) Lessee will pay or cause to be paid all Taxes,
assessments and governmental charges or levies imposed upon it or upon
its income and profits, or upon any property belonging to it, prior to
the date on which penalties attach thereto and all lawful claims,
which, if not paid, might become a Lien or charge upon the property of
Lessee; provided, however, that Lessee shall not be required to pay any
such Tax, assessment, charge, levy or claim the payment of which is
being contested in good faith and by appropriate proceedings with
adequate reserves. Lessee shall not permit the sale, forfeiture or loss
of any Item of Equipment or interest therein in the course of or as a
result of any such proceedings.
(c) Lessee will operate the Aircraft and will remain
duly qualified to operate the Aircraft under applicable Law.
(d) Lessee undertakes to maintain in full force and
effect all governmental consents, licenses, authorizations, approvals,
declarations, filings and registrations obtained or effected in
connection with this Lease and every document or instrument
contemplated hereby and to take all such additional action as may be
proper or advisable in connection herewith or therewith. Lessee further
undertakes to obtain or effect any new or additional governmental
consents, licenses, authorizations, approvals, declarations, filings or
registrations as may become necessary for the performance of any of the
terms and conditions of this Lease or any other document or instrument
contemplated hereby.
(e) Lessee shall not consolidate or merge with or
into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets in one transaction or a series of
transactions to, any Person unless:
(i) the corporation formed by or surviving
any such consolidation or merger (if other than Lessee), or to
which such sale, lease, conveyance or other disposition shall
have been made, assumes in writing all of the obligations of
Lessee under this Lease;
(ii) immediately after the transaction no
Default or Event of Default exists;
(iii) the corporation formed by or surviving
any such consolidation or merger, or to which such sale,
lease, conveyance or other disposition shall have been made,
shall have a Consolidated Net Worth (immediately after the
transaction) equal to or greater than the Consolidated Net
Worth of Lessee immediately preceding the transaction.
"Consolidated Net Worth" means the consolidated equity of the
common stockholders of Lessee and its consolidated
subsidiaries determined on a consolidated basis in accordance
with generally accepted accounting principles set forth in the
opinions and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the
accounting profession; and
(iv) the Person formed by or surviving any
such consolidation or merger (if other than Lessee), or to
which such sale, lease, conveyance or other disposition shall
have been made, (x) is a corporation organized and existing
under the laws of the United States of America, any state
thereof or the District of Columbia, (y) shall, upon
completion of such consolidation or merger, be an air carrier
holding a certificate issued under ss. 44705 of the
Transportation Act and (z) shall be a "citizen of the United
States" as defined in such Act.
ARTICLE 8
NO SET-OFF, COUNTERCLAIM, ETC.
8.1. No Set-off, Counterclaim, etc. This Lease is a net lease.
Lessee's obligation to pay all Rent and Maintenance Reserves payable hereunder
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which Lessee may have against Lessor or any
other Person for any reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions), including, without
limitation, any breach by Lessor of its warranties, agreements or covenants
contained herein, (ii) any defect in the title, registration, airworthiness,
condition, design, operation, or fitness for use of, or any damage to or loss or
destruction of, the Aircraft, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever, (iii) any Liens with
respect to the Aircraft, (iv) any bankruptcy, insolvency, reorganization, (v)
any Taxes, or (vi) any other circumstance, happening, or event whatsoever,
whether or not unforeseen or similar to any of the foregoing. Lessee hereby
waives, to the extent permitted by applicable Law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease except in
accordance with the express terms hereof. Without limiting any of Lessee's
rights under the next sentence, each payment of Rent or Maintenance Reserves
made by Lessee to Lessor shall be final and Lessee will not seek to recover any
part of such payment from Lessor for any reason whatsoever except manifest
error. Nothing in this Section shall be construed to prevent Lessee, after
complying with this Article 8, from pursuing any claim it may have against
Lessor or any other Person in such court of law or otherwise as Lessee may deem
appropriate.
ARTICLE 9
REPLACEMENT OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
9.1. Replacement of Parts. Lessee, at its own cost and
expense, shall promptly replace all Parts which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition, in
the ordinary course of maintenance, service, repair, overhaul or testing, Lessee
may remove any Part, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use;
provided that Lessee shall replace such Part as promptly as practicable and
available. All replacement Parts (a) shall be free and clear of all Liens,
except those permitted under Article 14 hereof, (b) shall be in as good
operating condition as, and shall have a value, utility and maintenance status
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 (c)
shall have documentation certifying compliance with all applicable FAA
regulations, including, without limitation, (i) FAA Form 8130-3 or other FAA
approved serviceable tags indicating time since overhaul, and overhaul or repair
by an FAA certified repair station, (ii) overhaul records, (iii) documentation
of modification status and compliance with applicable Airworthiness Directives,
and (iv) any other appropriate documentation.
9.2. Title to Replaced and Replacement Parts. All Parts
removed from the Airframe and any of the Engines shall remain the property of
Lessor and subject to this Lease, 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 an Engine and which meet the requirements for
replacement Parts specified in Section 9.1 above, at which time title to such
replaced Part shall automatically vest in Lessee. Immediately upon any
replacement Part becoming incorporated, installed or attached to any Item of
Equipment, such replacement Part shall become the property of Lessor and shall
become subject to the terms of this Lease.
9.3. Alterations, Modifications and Additions. (a) General.
Except as required below or by Section 5.5 hereof, Lessee shall not make any
permanent alteration, modification or addition to the Airframe (including, but
not limited to, galleys, lavatories or avionics) or any of the Engines without
the prior written consent of Lessor.
Lessee will make such alterations, modifications and additions
to the Airframe, the Engines and the Parts as may be required from time to time
to meet the applicable mandatory service bulletins of the Manufacturer and to
comply with Airworthiness Directives which require inspection or terminating
action during the Term, and to comply with all regulations of the FAA which
require compliance during the Term.
(b) Airworthiness Directives.
(i) For the purpose of this Lease, Lessor and Lessee
agree that the accomplishment of terminating action for any AD which
requires mandatory terminating action during the Term, shall be deemed
to be a Capital Improvement (a "Capital Improvement AD") with respect
to the Aircraft. In the event Lessee elects to terminate any AD that
does not require terminating action during the Term, Lessee shall be
solely responsible for the cost of terminating such AD.
(ii) Notwithstanding the foregoing paragraph (i)
(except with respect to the second sentence thereof), in connection
with the accomplishment of any Capital Improvement AD during the Term,
Lessee shall be solely responsible for the first $150,000 of the cost
of terminating each such Capital Improvement AD. With respect to
terminating any Capital Improvement AD, for which the cost of such
terminating action is in excess of $150,000, (x) Lessee shall be
responsible for paying an amount equal to the first $150,000 plus an
amount determined using the Capital Improvement Cost Sharing Formula
(hereinafter defined) for any amount in excess of $150,000 and (y)
Lessor shall be responsible for an amount equal to the balance thereof
as a Capital Improvement to the Aircraft.
Any amount in excess of the first $150,000 to terminate each
such Capital Improvement AD shall be shared by Lessee and Lessor as set
forth below using the following formula (the "Capital Improvement Cost
Sharing Formula"):
LC = AMT x (84 - NME)
----------------
84
Where
LC = Lessee's share of the cost in excess of $150,000
AMT = Amount in excess of $150,000 to terminate AD
NME = Number of months Lease has been in effect
The cost of accomplishing any Capital Improvement AD, shall
consist of Lessee's Actual Cost of labor and materials to accomplish
each such Capital Improvement AD and shall be determined exclusive of
all other costs incurred during any refurbishment or other work
accomplished during the same maintenance visit. If Lessee performs the
accomplishment of any Capital Improvement AD at its facility with its
employees, then the cost of accomplishing such Capital Improvement AD
shall be calculated at Lessee's Actual Cost of labor and material
without xxxx-up.
Lessee shall be solely responsible for (x) the cost of
accomplishing all AD's for which there is no terminating action, or for
which the accomplishment of such terminating action is optional during
the Term and (y) for the first $150,000 of the cost to terminate each
Capital Improvement AD during the Term.
With respect to any Capital Improvement AD for which Lessor's
cost shall exceed $150,000 using the Capital Improvement Cost Sharing
Formula, Lessor shall have the option to (x) instruct Lessee to pay the
cost of such Capital Improvement AD up to and including $150,000 (which
Lessee shall pay), and to utilize the Capital Improvement Cost Sharing
formula for the cost of such Capital Improvement AD for the excess
amount, or (y) in circumstances where Lessor's cost would exceed
$200,000, instruct Lessee not to accomplish such Capital Improvement AD
and terminate this Lease on the mandatory compliance date of the
Capital Improvement AD with no further liability to Lessor under this
Lease, provided, that Lessee shall be obligated to (x) pay Lessor all
Rent due up to the date of such termination and (y) return the Aircraft
in compliance with Section 16 except to the extent any noncompliance
with Section 16 relates to such Capital Improvement AD. Notwithstanding
the preceding sentence, in the event Lessor instructs Lessee not to
accomplish such Capital Improvement AD, Lessee may elect to accomplish
such Capital Improvement AD at its sole cost and expense, and continue
this Lease in effect, with no further liability to Lessor with respect
to such Capital Improvement AD accomplishment.
(iii) In the case of accomplishment of a Capital
Improvement AD with respect to an Engine, APU or Landing Gear during a
shop visit for such Engine, APU or Landing Gear, the cost of each such
Capital Improvement AD shall be determined exclusive of all other costs
incurred during any refurbishment or other work accomplished during the
same shop visit.
(iv) With respect to any Capital Improvement AD
relating to an Engine (an "Engine Capital Improvement AD") where the
accomplishment of such Engine Capital Improvement AD by Lessee is the
sole cause for removal of such Engine, the cost in excess of $150,000
to accomplish such Engine Capital Improvement AD shall be subject to
the provisions of paragraph (b) (ii) above. Notwithstanding anything to
the contrary in this Lease, the cost of performing such Engine Capital
Improvement AD shall only consist of the cost of disassembly,
accomplishment of such mandatory terminating action as required by such
AD, reassembly, and test cell run. All costs associated with all other
work accomplished on such Engine during such shop visit such as
removal, transportation, refurbishment, and reinstallation shall be
paid for by Lessee.
(v) For the purpose of determining applicability of
the AD Cost Sharing Formula in regard to any Aging Aircraft AD
requiring terminating action, all service bulletins listed in such
Aging Aircraft AD shall be cumulatively considered to be a single
Capital Improvement AD with respect to cost to accomplish required
terminating action.
9.4. Title to Parts. Subject to the provisions hereof, title
to all Parts incorporated or installed in or attached or added to each Item of
Equipment as the result of any alteration, modification or addition shall,
without further act, vest in Lessor and become subject to this Lease; provided,
however, that so long as no Default or Event of Default shall have occurred and
be continuing, at any time during the Term, Lessee may remove any such Part from
an Item of Equipment; provided that (A) such Part is in addition to and not in
replacement of or in substitution for, any Part originally incorporated or
installed in or attached to such Item at the time of delivery thereof hereunder
or any Part in replacement of, or substitution for, any such original Part, (B)
such Part is not required to be incorporated or installed in or attached or
added to such Item by the FAA, or any other Governmental Authority or pursuant
to the terms hereof, and (C) such Part can be removed from such Item without
diminishing or impairing the value, utility or airworthiness which such Item
would have had at such time had such alteration, modification or addition not
occurred. Upon the removal by Lessee of any such Part as above provided, the
area from which such Part was removed shall be restored to the better of (i) the
condition such area was in immediately prior to the installation of such Part,
or (ii) the condition such area is required to be in under the terms set forth
in this Lease and title thereto shall, without further act, vest in Lessee, and
such Part shall no longer be deemed a Part hereunder. Any Part not removed by
Lessee as above provided prior to the return of the respective Item of Equipment
to Lessor hereunder shall become the property of Lessor.
ARTICLE 10
TAX INDEMNITY
10.1. Scope. Lessee agrees that, except as otherwise provided
below, all payments by Lessee in connection with the transactions contemplated
by this Lease, the Lease Supplement and the other Operative Agreements shall be
free of all withholdings of any nature whatsoever (including, without
limitation, withholding taxes, monetary transfer fees, or similar taxes and
charges), and in the event any withholding is required, except as otherwise
provided below, Lessee shall pay the same together with such additional amount
as is required so that each such payment shall be, under any circumstances and
in any event, in the amount as set forth or referred to herein. Lessee shall pay
and hold each Indemnitee harmless from liability for any and all sales, use,
business, gross or net income, personal property, license, documentation,
transfer, fuel, leasing, occupational, value added, excess profits, excise,
gross or net receipts, franchise, stamp, environmental and other taxes, levies,
imposts, withholding taxes, charges, fees, assessments or duties of any nature,
together with any penalties, fines, charges, additions to tax or interest
thereon imposed by any taxing authority whether domestic or foreign
(collectively, "Taxes") imposed during the Term against or in respect of Lessor,
any Indemnitee or any Item of Equipment, by any Federal, state or local
government or taxing authority in the United States of America, or by any
foreign country or any taxing authority or governmental subdivision thereof,
upon or with respect to, based upon or measured by any Item of Equipment or
interest therein, or upon the purchase, ownership, delivery, leasing,
possession, use, operation (including, but not limited to, landings and
take-offs), return or other disposition thereof, or upon the rentals, receipts
or earnings arising therefrom (including, without limitation, the Rent or the
Maintenance Reserves) or otherwise with respect to or in connection with the
transactions contemplated by this Lease, the Lease Supplement and the other
Operative Agreements; and any out-of-pocket costs and expenses attributable to
any of the foregoing incurred by any Indemnitee; provided, however, that Lessee
shall have no such obligation with respect to (i) Taxes (other than sales, use,
rental, value added and similar taxes) imposed by the Federal Government of the
United States of America upon or with respect to, based on or measured by, the
gross or net income of any Indemnitee including any minimum tax, surtax or
similar tax, (ii) Taxes which are based upon or measured by the net income,
capital, net worth, franchise, or similar conduct of business taxes which are
imposed on any Indemnitee by any state or local taxing authority in the United
States of America, the Federal Government of the United States of America, or
any foreign jurisdiction where such Indemnitee is organized or doing business
(other than as a result of the transactions contemplated by this Agreement),
(iii) Taxes imposed as a result of a transfer or other disposition by Lessor of
the Aircraft or any Part thereof or interest therein, or any interest in the
Rent or the Maintenance Reserves or any part thereof, unless such sale,
transfer, mortgage, pledge or disposition occurs by reason of the exercise of
Lessor's remedies under this Lease after the occurrence of a Default or an Event
of Default, (iv) Taxes imposed as a direct and primary result of Lessor's or any
Indemnitee's gross negligence or willful misconduct, (v) Taxes which accrue or
arise prior to the Delivery Date or subsequent to the Expiration Date and return
of the Aircraft to Lessor pursuant to Section 16 hereof, and (vi) Taxes
attributable to payments or distributions from Lessor to any Indemnitee.
10.2. Report. In case of any report or return to be made with
respect to any obligation of Lessee under this Article 10 or arising out of this
Article 10, Lessee will either (i) make such report or return in such manner as
will show the ownership in Lessor of each Item of Equipment, and send a copy of
such report or return to the relevant Indemnitee or (ii) notify the relevant
Indemnitee of such requirement and make such report or return in such manner as
shall be satisfactory to such Indemnitee. Lessee shall, at its own expense, duly
file all required reports and returns respecting all Taxes paid or indemnified
against by Lessee pursuant to Section 10.1 to the extent Lessee is permitted to
do so; provided, however, that if the same must be filed by an Indemnitee,
Lessee will advise such Indemnitee of the necessity of filing the same and, in
sufficient time before the same are due, furnish such Indemnitee with a
completed copy thereof and funds in the amount required to be submitted,
together with any additional information and records relating thereto as such
Indemnitee may reasonably request. Lessee shall hold such Indemnitee harmless
from and against any liabilities, obligations, losses, damages, penalties,
claims, actions, suits and costs arising out of any insufficiency or inaccuracy
in any information in such report or return filed or supplied by Lessee. Lessee
shall make available to each Indemnitee such information and records as are
maintained by Lessee regarding the location, operation or use of the Aircraft.
If any Indemnitee reasonably requests additional information relating to any
Item of Equipment or the operation, use or location thereof, Lessee shall make
available such other information and records as it maintains in the ordinary
course of business.
10.3. After-Tax Nature of Indemnity.
(a) Lessee further agrees that, with respect to any
indemnity payment under this Lease, including, but not limited to, this Article
10 and Article 13 hereof, such indemnity payment shall include any amount
necessary to hold each Indemnitee harmless on an after-tax basis from all Taxes
required to be paid by such Indemnitee with respect to such indemnity payment
under the Laws of any Federal, state or local government or taxing authority in
the United States of America, or under the Laws of any taxing authority or
governmental subdivision of a foreign country.
(b) For purposes of this Section 10.3, calculations
made on an after-tax basis shall be made assuming the maximum statutory rates
applicable to the recipient for the relevant year, after taking into account
deductions attributable to the imposition of other taxes (such as state and
local taxes), which would similarly be calculated on the basis of the maximum
statutory rates for which such deduction was available for the applicable year.
10.4. Payment of Taxes and Indemnities. Lessee shall, to the
extent permissible, pay all Taxes directly and shall reimburse each Indemnitee
for all Taxes paid or payable by such Indemnitee within ten (10) days of receipt
of written notice that reimbursement for such amount is due. Lessee shall pay
all indemnities and other amounts due hereunder within ten (10) days of receipt
of written notice that such indemnity or other amount is due.
10.5. Contest. If a written claim is made against any
Indemnitee for any Taxes for which Lessee is responsible under Section 10.1
hereof, such Indemnitee shall promptly notify Lessee. Without prejudice to any
other rights Lessee may have in connection therewith (including, without
limitation, any claim for damages for a failure to give notice specified in the
preceding sentence), the failure to provide such notice shall not affect
Lessee's obligations hereunder to such Indemnitee unless such failure shall
preclude the contest of such claim. If reasonably requested by Lessee in writing
within 30 days after such notification, and upon determination that the amount
of the claim exceeds $25,000 and that the action to be taken will not, in the
sole opinion of Lessor, result in any material danger of the sale, forfeiture or
loss of, or the creation of any Lien on the Aircraft or any interest therein (or
in the event of such material danger of such sale, forfeiture, loss or Lien,
Lessee shall have failed to obtain a bond satisfactory to such Indemnitee in
such Indemnitee's sole discretion), such Indemnitee shall, upon receipt of an
indemnity reasonably satisfactory to it at the sole expense of Lessee (including
without limitation, all reasonable costs, expenses, losses, legal and
accountant's fees and disbursements, penalties and interest), in good faith
contest the validity, applicability or amount of such Taxes by, in such
Indemnitee's sole discretion, (i) resisting payment thereof, (ii) not paying the
same except under protest, if protest is necessary and proper, and (iii) if
payment is made, using reasonable efforts to obtain a refund thereof in
appropriate administrative or judicial proceedings; provided, however, that such
Indemnitee shall not be required to take any action to contest a claim unless
(w) Lessee provides an opinion of tax counsel of nationally recognized standing
selected by Lessee and reasonably satisfactory to such Indemnitee, to the effect
that there is a reasonable basis under the standard set forth in ABA Formal
Opinion 85-352 or any applicable successor thereto in law and fact for
contesting such proposed adjustment, which opinion shall be obtained at Lessee's
sole cost and expense, (x) in the event that the subject matter of the contest
is of a continuing nature and has previously been decided adversely pursuant to
the contest provisions of this Section 10.5 by the highest court to which an
appeal was taken, there has been a change in the law (including, without
limitation, amendments to statutes or regulations, administrative rulings and
court decisions) after such claim shall have been so previously decided and such
Indemnitee shall have received an opinion of independent tax counsel selected by
such Indemnitee, which opinion shall be obtained at Lessee's sole expense, to
the effect that, as a result of such change it is (at least) as likely as not
that the position which such Indemnitee or Lessee, as the case may be, will
assert in any contest of such Tax would prevail, (y) prior to the commencement
of any contest, Lessee shall have delivered to such Indemnitee a written
acknowledgment of its obligation to fully indemnify such Indemnitee to the
extent the contest is not successful and (z) in no event shall such Indemnitee
be required to appeal an adverse judicial determination to the United States
Supreme Court. Any contest required pursuant to the preceding sentence shall, at
the option of such Indemnitee, be conducted by such Indemnitee or Lessee in the
name of Lessee or such Indemnitee. If any contest involves payment of the Tax in
question, Lessee shall either make such payment directly to the appropriate
authority or advance to such Indemnitee sufficient funds (on an interest-free
basis) to make such payment. Lessee agrees to give such Indemnitee reasonable
notice of any contest prior to the commencement thereof.
If an Indemnitee shall obtain an actual refund or credit of all or any part of
any Taxes paid by Lessee, such Indemnitee shall pay to Lessee the amount of such
refund or credit (taking into account any tax savings resulting therefrom), net
of any expenses incurred by such Indemnitee and not already paid or reimbursed
by Lessee, and any interest fairly attributable thereto plus an amount equal to
the Tax savings realized by such Indemnitee as a result of any payment to Lessee
pursuant to this paragraph; provided, however, that such amount shall not be
payable before Lessee shall have made all payments and indemnities to such
Indemnitee then due under this Lease; and, provided, further, however, that the
aggregate amount of all payments with respect to any Taxes made by such
Indemnitee pursuant to this sentence shall not exceed the aggregate amount of
all payments made by Lessee to such Indemnitee pursuant to this Article 10 with
respect to such Taxes.
Notwithstanding anything to the contrary herein, if a Default or Event of
Default shall have occurred and be continuing, Lessee shall not be entitled, and
Lessor shall not be obligated, to commence or to continue any contest hereunder.
Lessee shall not be deemed to be in default under any of the indemnification
provisions of this Article 10 while it or an Indemnitee diligently prosecutes
such contest pursuant to this Section 10.5.
Nothing contained in this Section 10.5 shall require any Indemnitee to contest
or permit Lessee to contest a claim which it would otherwise be required to
contest pursuant to this Section 10.5 if such Indemnitee shall waive payment by
Lessee of any amount that might otherwise be payable by Lessee under Section
10.1 by way of indemnity in respect of such claim.
10.6. Lessor. The term "Lessor" for purposes of this Article
10 shall include the affiliated group of corporations and each member thereof
(within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended) of which Lessor is or shall become a member if such group shall file a
consolidated United States federal income tax return.
10.7. Survival. The provisions of this Article 10 shall
survive the expiration or termination of this Lease.
ARTICLE 11
EVENTS OF LOSS
11.1. With Respect to the Aircraft. Upon the occurrence of an
Event of Loss with respect to the Aircraft, Lessee shall forthwith (and in any
event within two (2) Business Days after such occurrence) give Lessor written
notice of such Event of Loss, and Lessor and Lessee shall proceed diligently and
cooperate fully with each other in the recovery of any and all proceeds of
insurance applicable thereto. Unless Lessor elects to offer a Replacement
Aircraft pursuant to (and as defined in) Section 11.4 hereof, upon the earlier
of the date (a) which is 90 days after the occurrence of such an Event of Loss
or (b) on which insurance proceeds are received with respect to such Event of
Loss, Lessee shall pay to Lessor the Insured Value of the Aircraft. At such time
as Lessor shall have received the Insured Value for such Aircraft, Lessor shall
transfer to Lessee all of Lessor's right, title and interest, "as is, where is,"
without recourse or warranty, express or implied, in and to (i) the Aircraft,
(ii) all claims for damage to the Aircraft, if any, against third persons
arising from the Event of Loss (unless any insurance carrier requires that such
claims be assigned to it), (iii) the Maintenance Reserves, and (iv) all rights
to any insurance claims and proceeds under all insurance, except liability
insurance, maintained by Lessee hereunder, all without representation, recourse
or warranty of any kind whatsoever. Upon the payment of the Insured Value, all
Basic Rent (if any), Supplemental Rent and Maintenance Reserves then due and
owing, Lessee's obligation to pay such amount shall cease, and this Lease shall
terminate. Lessee shall be entitled to receive all insurance proceeds from
policies maintained by Lessee applicable to the Aircraft over and above the
Insured Value, if any, as compensation for the loss of Lessee's leasehold
interest in the Aircraft.
11.2. With Respect to an Engine. 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 Aircraft, Lessee shall
forthwith (and in any event within two (2) Business Days after such occurrence)
give Lessor written notice thereof and Lessee shall replace such Engine as soon
as reasonably possible, but in any event, before the end of the Term by duly
conveying to Lessor, free and clear of all Liens, title to another CFM56-3B2
engine of the same or an improved model acceptable to Lessor and suitable for
installation and use on the Airframe, which engine shall have a value, utility
and maintenance status at least equal to, and be in as good operating condition
as, the Engine with respect to which such Event of Loss shall have occurred
(considering in the aggregate, but not limited to, all life-limited engine
components and time since last heavy maintenance and/or time since last hot
section refurbishments), assuming such Engine was of the value and utility and
in the condition and repair as required by the terms hereof immediately prior to
the occurrence of such Event of Loss, and subject to an inspection by Lessor of
such replacement engine and related historical records. Upon acceptance by
Lessor in its sole discretion, such replacement engine and historical records
shall be deemed an "Engine" and "Aircraft Records," respectively, as defined
herein for all purposes hereunder. Lessee agrees to take such action and execute
and deliver such documents, including, but not limited to (a) cause a warranty
xxxx of sale, duly executed by the Seller of such Replacement Engine, to be
delivered to Lessor, (b) cause a Lease Supplement subjecting such Replacement
Engine to this Lease, duly executed by Lessee, to be delivered to Lessor for
execution and, upon such execution, to be filed for recordation with the FAA
pursuant to the Transportation Act, (c) furnish Lessor with evidence of
compliance with the insurance provisions of Section 11 with respect to the
Replacement Engine, (d) furnish Lessor with a certificate or certification of a
qualified independent aircraft appraiser reasonably satisfactory to Lessor
certifying that the Replacement Engine has a value and utility (and, provided
that no Event of Default is occurring or continuing without regard to hours and
cycles until overhaul) at least equal to the Engine so replaced (assuming the
Engine to be replaced was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Event of Loss), (e) furnish
Lessor with an officer's certificate signed by an officer of Lessee certifying
that, upon consummation of such replacement, no Event of Default will exist
hereunder, and (f) a xxxx of sale, supplement hereto and legal opinions, as
Lessor may reasonably request in order that any such replacement Engine shall be
duly and properly titled in the name of Lessor and leased hereunder to the same
extent as any Engine replaced thereby. Upon such replacement, Lessor shall
transfer to Lessee all of Lessor's right, title and interest, "as is, where is,"
without recourse or warranty, express or implied, in and to (i) such Engine,
(ii) all claims for damage to such Engine, if any, against third persons arising
from the Event of Loss (unless any insurance carrier requires that such claims
be assigned to it), and (iii) all rights to any insurance claims and proceeds
under all insurance, except liability insurance, maintained by Lessee hereunder,
all without representation, recourse or warranty of any kind whatsoever.
Maintenance Reserves maintained by Lessor with respect to such Engine shall be
allocated to the Engine Reserve and Engine Life Limited Parts Reserve maintained
with respect to the Replacement Engine.
11.3. Application of Payments from Governmental Authorities.
Payments received by Lessor or Lessee from any Governmental Authority or entity
with respect to an Event of Loss resulting from the condemnation, confiscation
or seizure of, or requisition of title to the Aircraft, the Airframe or an
Engine, shall be retained by Lessor, if received by Lessor, or promptly paid
over to Lessor, if received by Lessee, up to the Insured Value (plus any amounts
of Rent and Maintenance Reserves then due and owing). At such time as Lessor has
received such amounts in full, Lessor shall promptly remit the excess, if any,
of such payments to Lessee. Payments received by Lessor or Lessee from any
Governmental Authority or entity with respect to a requisition of use during the
Term of the Aircraft, the Airframe or an Engine shall be allocated promptly
between Lessor and Lessee such that Lessor shall enjoy such portion thereof as
relates to periods other than the Term and Lessee shall (provided no Default or
Event of Default has occurred and is continuing hereunder) promptly enjoy such
portion thereof as relates to the Term or any portion of the Term, provided
Lessee continues to pay Rent to Lessor as required by the terms hereof.
11.4. Application of Payments During Existence of Event of
Default. Any amount referred to in this Section 11 which is payable or
creditable to or retainable by Lessee shall not be paid or credited to or
retained by Lessee if, at the time of such payment, credit or retention, an
Event of Default shall have occurred and be continuing hereunder but shall be
paid to and held by Lessor as security for the obligations of Lessee under this
Lease and, if Lessor declares this Lease to be in default pursuant to Section 18
hereof, applied against Lessee's obligations hereunder as and when due and at
such time as there shall not be continuing any such Event of Default, such
amount shall be paid to Lessee to the extent no previously applied in accordance
with the terms hereof.
11.5. Replacement Aircraft.
(a) Lessor may, at i ts option, offer to lease to
Lessee, as a replacement for an Airframe and Engines with respect to which an
Event of Loss has occurred, a Boeing 737-300 airframe (the "Replacement
Airframe") and two engines of the same make and model as such Engines (or other
engines of the same or another manufacturer suitable for installation and use on
the Replacement Airframe; the "Replacement Engines" and, together with the
Replacement Airframe, the "Replacement Aircraft"). Such Replacement Aircraft
shall be in passenger configuration, duly certified as an airworthy aircraft by
the FAA and in good operating condition, but in any event in at least as good
operating condition and repair as the Aircraft immediately prior to the
occurrence of such Event of Loss, having a useful life and utility comparable to
that of the Aircraft to be replaced immediately prior to the occurrence of such
Event of Loss, and otherwise satisfactory to Lessee. Lessee shall take such
action as Lessor may reasonably request to facilitate the lease of the
Replacement Aircraft to Lessee hereunder.
(b) For all purposes hereof, the Replacement Airframe
and each Replacement Engine shall be deemed part of the property leased
hereunder. The Replacement Airframe shall be deemed an "Airframe" as defined
herein, each Replacement Engine shall be deemed an "Engine" as defined herein;
and the Replacement Airframe and each Replacement Engine shall be deemed part of
such Aircraft to the same extent as was the Airframe or Engine, as the case may
be, replaced thereby. Any Engine not installed on the Airframe when such Event
of Loss occurred shall continue to be the property of Lessor and leased
hereunder as part of such Aircraft. Lessee's acceptance of a Replacement
Aircraft shall not result in any change in Basic Rent or Insured Value.
ARTICLE 12
INSURANCE
12.1. Public Liability and Property Damage Liability
Insurance. Lessee, at its own expense, shall maintain in effect comprehensive
third party aircraft liability insurance against bodily injury and property
damage losses arising from ground, flight and taxiing exposures, including, but
not limited to, passenger legal liability, cargo liability, contractual
liability and products liability insurance, during the Term in an amount not
less than $500,000,000 for any one occurrence with respect to the Aircraft and
Items of Equipment. Such policy shall include war and allied risks in accordance
with standard market practice (currently "The Extended Coverage Endorsement-AVN
52C"). Any such liability insurance shall not be subject to a deductible. All
such policies shall be maintained in effect with insurers and/or reinsurers of
recognized reputation and responsibility, satisfactory to Lessor. Any policies
of insurance carried in accordance with this Section 12.1 and any policies taken
out in substitution or replacement for any of such policies shall: (1) name
Lessor and its successors and assigns, and their respective directors, officers
and employees as additional insureds (the "Additional Insureds"); (2) provide
that in respect of the respective interests of the Additional Insureds, such
policies of insurance shall insure the Additional Insureds regardless of any
breach or violation of any warranty, declarations or conditions contained in
such policies by Lessee or any other Person; (3) provide that if the insurers
cancel such insurance for any reason whatever, or the same is allowed to lapse
for nonpayment of premium, or if there is any material change in policy terms
and conditions, such cancellation, lapse or change shall not be effective until
thirty (30) days after receipt by Lessor of telecopied written notice from such
insurers of such cancellation, lapse or change (and with respect to war risk
insurance, seven (7) days or such shorter period as shall be customary on the
London market for such insurance in such area of the world, or ten (10) days in
the event of nonpayment of premium); (4) provide that the Additional Insureds
shall have no responsibility for any premiums, commissions, warranties or
representations in connection with such insurance; (5) waive any rights of
setoff, counterclaim or deduction, whether by attachment or otherwise, and all
rights of subrogation against the Additional Insureds and their successors,
assigns, agents, officers, employees and servants; and (6) provide that all
payments shall be made in Dollars. Each liability policy shall (i) be primary
without right of contribution from any other insurance which is carried by the
Additional Insureds and (ii) expressly provide that all of the provisions
thereof, except the limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured, without, however, increasing
the aggregate limit of liability for the coverage or permitting claims
recoverable under the hull policy to be recoverable as liability claims, and
(iii) to the extent of any reinsurance, include a cut-through provision
permitting Lessor to file claims and to obtain payment directly from the
reinsurers.
12.2. Insurance Against Loss or Damage to the Aircraft.
(a) Lessee, at its own expense, shall maintain in
effect with insurers of recognized reputation and responsibility satisfactory to
Lessor: (A) all-risk ground and flight aircraft hull insurance covering the
Aircraft (including taxiing exposures); (B) all-risk coverage with respect to
any Engines, Parts or Landing Gear while removed from the Aircraft insured for
their replacement cost; and (C) war risk and hijacking (including
political/non-political hijacking) and acts of terrorism coverages, if operating
outside the Continental United States or Canada, including, but not limited to,
coverage against the additional exposures of confiscation, expropriations,
nationalization or seizure, including the government of registry (if other than
the United States), including a "50/50 clause" between the all-risk hull and war
risk coverages. War risk coverage shall include loss of and/or damage to the
Aircraft caused by: (i) war, invasion, acts of foreign enemies, hostilities
(whether war be declared or not), civil war, rebellion, revolution,
insurrection, martial law, military law, military or usurped power or attempts
at usurpation of power; (ii) strikes, riots, civil commotions or labor
disturbances; (iii) any act of one or more Persons, whether or not agents of a
sovereign power, for political or terrorist purposes, and whether the loss or
damage resulting therefrom is accidental or intentional; (iv) any malicious act
or act of sabotage; (v) confiscation, nationalization, seizure, restraint,
detention, appropriation, expropriation, requisition of title or use, by or
under the order of any government (whether civil, military or de facto) or
public or local authority, including by the government of registry (if other
than the United States); and (vi) hijacking or any unlawful seizure or wrongful
exercise of control of the Aircraft or crew in flight (including any attempt at
such seizure or control) made by any Person or Persons on board the Aircraft
acting without the consent of Lessee.
(b) All such insurance shall be in full force and
effect on a worldwide basis, subject to such territorial exclusions as exist
under Lessee's War Risks and Allied Perils Insurance, shall be payable in
Dollars in the United States and shall be in the amount of not less than the
Insured Value set forth on Exhibit H on an agreed value basis. Any hull
insurance carried in accordance with this Section 12.2 shall not contain any
provision for self-insured amounts or a deductible, provided that such insurance
may be subject to a deductible which does not exceed $250,000 per occurrence.
Each Engine, after removal, shall be insured for not less than $3,500,000.00 on
an "agreed value basis" under a ground risks policy reasonably acceptable to
Lessor. Any policies carried in accordance with this Section 12.2 shall: (1) be
primary without right of contribution from any other insurance which is carried
by Lessor with respect to the Aircraft; (2) provide that if such insurance is
canceled for any reason whatever, or the same is allowed to lapse for
non-payment of premium or if there is any material change in policy terms and
conditions, such cancellation, lapse or change shall not be effective until
thirty (30) days after issuance to Lessor of written notice from such insurers
of such cancellation, lapse or change (and, with respect to war risk insurance,
such shorter period as shall be customary on the London market for such
insurance in such area of the world); (3) provide that partial losses of less
than $250,000.00 shall be adjusted by and payable to Lessee (so long as no
Default shall have occurred and be continuing hereunder), but that in the event
of a greater loss the entire insurance shall be adjusted by Lessee and Lessor
and payable to Lessor as sole loss payee; (4) provide that in respect of the
respective interest of the Additional Insureds in such policies the insurance
shall insure the Additional Insureds regardless of any breach or violation of
any warranties, declarations or conditions contained in such policies by Lessee
or any other Person; (5) waive any rights of set off, counterclaim or deduction,
whether by attachment or otherwise, and all rights of subrogation against the
Additional Insureds and their successors, assigns, agents, officers, employees
and servants; (6) provide that the Additional Insureds shall have no liability
for any premiums, commission, warranties or representations in connection with
such insurance; and (7) name Lessor as sole loss payee for the account of all
interests.
(c) Lessor is not under any duty or obligation to
verify the existence or adequacy of any insurance.
(d) Lessee may obtain additional hull insurance on
the Aircraft, over and above the Insured Value
hereunder, provided that it does not adversely affect the coverage required to
be maintained hereunder.
12.3. Application of Proceeds in an Event of Loss of the
Aircraft. All insurance payments received from policies maintained by Lessee as
the result of the occurrence of an Event of Loss shall be applied as provided in
Section 12.2(b)(3).
12.4. Application of Proceeds in the Absence of an Event of
Loss. As between Lessor and Lessee, insurance payments with respect to any
property damage to any Item of Equipment not constituting an Event of Loss with
respect thereto will be applied in payment of repairs or for replacement
property in accordance with the terms of Articles 5 and 9 hereof, if not already
paid by Lessee (or to reimburse Lessee for such repairs or replacements already
paid by Lessee), and any balance remaining after compliance with such Articles
with respect to such loss shall be paid to Lessee or as otherwise directed by
Lessee. Any amount which is payable to Lessee under this Article 12 shall not be
paid to Lessee if at the time of such payment a Default or an Event of Default
shall have occurred and be continuing, but shall be held by Lessor as security
for the obligations of Lessee under this Lease and the other Operative
Agreements to which it is a party and such amount shall be paid to Lessee at
such time as there no longer exists any Default or Event of Default.
12.5. Reports, etc. Lessee's insurance broker shall be
required to advise Lessor in writing promptly of any default in the payment of
any premium and of any other act or omission on the part of Lessee which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft. Not less than two (2) days prior to the Delivery Date, and thereafter
at least fifteen (15) days prior to each renewal or replacement by Lessee of the
insurance required hereby, Lessee will furnish to Lessor one or more original
certificates each executed and delivered by an insurance broker appointed by
Lessee and approved by Lessor, which together shall describe in reasonable
detail insurance carried on the Aircraft and shall certify that the insurance
then maintained on the Aircraft complies with the terms of this Lease. Lessee
will cause each such approved insurance broker to agree to advise Lessor in
writing at least thirty (30) days (seven (7) days or such lesser period as may
from time to time be applicable in the case of any war risk and allied perils
coverage) prior to the non-renewal or cancellation by the underwriters for any
reason (including, without limitation, failure to pay the premium therefor) of
any such insurance or as soon as possible in respect of "non-renewal" or
automatic termination for war risk. Not less than fifteen (15) days before the
expiration or termination date of any insurance required hereunder, Lessee will
provide (or cause to be provided to) Lessor with written confirmation from
Lessee's insurance brokers certifying that renewal certificates of insurance
evidencing the renewal or replacement of such insurance pursuant to the
provisions of Article 12 hereof will be issued on or prior to the termination
date of the prior certificate of insurance coverage. Within seven (7) days after
such renewal, Lessee will furnish (or cause to be furnished) to Lessor a
certificate of such insurance coverage from such insurance broker.
12.6. Lessor's Additional Insurance. Lessor, at its option and
at its sole expense, may obtain insurance with respect to the Aircraft;
provided, that no such insurance shall have the effect of suspending, impairing,
defeating, invalidating or rendering unenforceable or reducing, in whole or in
part, the coverage of or the proceeds payable under any insurance required to be
provided and maintained by Lessee pursuant to this Article 12. Lessee shall have
no right to any proceeds of any insurance policies maintained by Lessor.
12.7. Lessee's Additional Insurance. Lessee, at its option and
at its sole expense, may obtain additional insurance with respect to the
Aircraft provided that no such insurance shall have the effect of suspending,
impairing, defeating, invalidating or rendering unenforceable or reducing, in
whole or in part, the coverage of or the proceeds payable under any insurance
required to be provided and maintained pursuant to this Article 12. Lessor shall
have no right to any proceeds of any additional insurance policies maintained by
Lessee.
12.8. Insurance Against Year 2000 Risks and Liability. Any
policies of insurance required pursuant to Section 12.1 hereof (Public Liability
and Property Damage Liability Insurance) and Section 12.2 hereof (Insurance
Against Loss or Damage to the Aircraft), consistent with industry practice and
the renewal of Lessee's current insurance policies, shall within forty-five (45)
days after the date hereof include endorsement coverage for Year 2000 risks and
liability (currently "The Date Recognition Limited Coverage Endorsement - AVN
2001/2002" or its equivalent), which shall have been obtained by Lessee by
truthful, accurate, and complete response to insurer and/or reinsurer inquiry,
including, but not limited to that required by the then current "Aerospace Date
Recognition Conformity Questionnaire" or any similar questionnaires from such
insurer and/or reinsurer.
ARTICLE 13
GENERAL INDEMNIFICATION
13.1. Scope. Lessee agrees to indemnify, reimburse and hold
harmless each Indemnitee from and against any and all claims, damages, losses,
liabilities, demands, suits, judgments, causes of action, legal proceedings,
whether civil or criminal, penalties, fines and other sanctions, and any
reasonable attorney's fees and other reasonable costs and expenses in connection
herewith or therewith, including any of the foregoing arising or imposed with or
without Lessor's fault or negligence (whether passive or active) or under the
doctrine of strict liability (any and all of which are hereafter referred to as
"Claims") which in any way may result from, pertain to or arise in any manner
out of (a) the Aircraft or this Lease, or the breach of any representation,
warranty or covenant made by Lessee hereunder, or (b) the condition,
manufacture, purchase as a result of the exercise of remedies under this Lease,
lease, acceptance under this Lease, rejection under this Lease, possession under
this Lease, return under this Lease, disposition or use, or operation of the
Aircraft either in the air or on the ground, or (c) any defect in the Aircraft
(whether or not discovered or discoverable by Lessee or Lessor) arising from the
material or any articles used therein or from the design, testing, or use
thereof or from any maintenance, service, repair, overhaul, or testing of the
Aircraft, whether or not the Aircraft is in the possession of Lessee, and
regardless of where the Aircraft may then be located, or (d) the Operative
Agreements and any other transaction, approval, or document contemplated by this
Lease or given or entered into in connection herewith; provided, however, that
Lessee shall not indemnify any Indemnitee for any Claims set forth in Section
13.5 hereof. Upon payment in full to any party indemnified hereunder of any
indemnities contained in this Article 13 by Lessee, Lessee shall be subrogated
to all rights and remedies which such indemnified party has or may have against
Manufacturers of the relevant Item of Equipment or any other Person. If any
Indemnitee or Lessee has knowledge of any Claim for which Lessee is obligated to
indemnify under this Article 13, it shall give prompt written notice thereof to
Lessee or such Indemnitee, as the case may be, but failure to give such notice
shall not relieve Lessee of its obligations hereunder and no payment by Lessee
to any Indemnitee pursuant to this Article 13 shall be deemed to constitute a
waiver or release of any right or remedy which Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice.
13.2. Lessee's Release. Lessee hereby waives, and releases
each Indemnitee from, any Claims (whether existing now or hereafter arising) for
or on account of or arising or in any way connected with injury to or death of
personnel of Lessee or loss or damage to property of Lessee or the loss of use
of any property which may result from or arise in any manner out of or in
relation to the ownership, leasing, condition, use or operation of the Aircraft,
either in the air or on the ground, or which may be caused by any defect in the
Aircraft from the material or any article used therein or from the design or
testing thereof, or use thereof, or from any maintenance, service, repair,
overhaul or testing of the Aircraft regardless of when such defect may be
discovered, whether or not the Aircraft is at the time in the possession of
Lessee, and regardless of the location of the Aircraft at any such time.
13.3. Repayment. If an Indemnitee shall obtain a repayment of
any Indemnified Amount previously paid to it by Lessee, such Indemnitee shall,
so long as there exists no Default or Event of Default, promptly pay to Lessee
the amount of such repayment, together with the amount of any interest received
by such Indemnitee on account of such repayment.
13.4. Timing of Payment. Subject to the provisions of Sections
13.3 and 13.5 hereof, Lessee shall pay directly to each Indemnitee all amounts
due under this Article 13 within five (5) Business Days of the receipt of
written notice by Lessee from such Indemnitee that such payment is due.
13.5. Exclusion. Notwithstanding the foregoing provisions of
this Article 13, Lessee shall not be obligated to make any payment by way of
indemnity in respect of any Claim against an Indemnitee which (i) results from
or arises out of the willful misconduct or gross negligence of such Indemnitee,
(ii) arises out of the period before the Delivery Date or after the Expiration
Date and the return of the Aircraft in accordance with the provisions hereof
(but, in each case, not arising simultaneously therewith), and (iii) Taxes and
other amounts which are indemnified pursuant to Article 10 hereof.
13.6. After-Tax Nature of Indemnity. Lessee agrees that, with
respect to any payment or indemnity hereunder, such payment or indemnity shall
include any amount necessary to hold the Indemnitee harmless on an after-tax
basis from all Taxes (as defined in Article 10 hereof) required to be paid by
such Indemnitee with respect to such payment or indemnity under the Laws of any
Federal, state or local government or taxing authority in the United States of
America, or under the Laws of any taxing authority or governmental subdivision
of a foreign country. For purposes of this Section 13.6, calculations made on an
after-tax basis shall be made assuming the maximum statutory rates applicable to
the recipient for the relevant year, after taking into account deductions
attributable to the imposition of other taxes (such as state and local taxes),
which would similarly be calculated on the basis of the maximum statutory rates
for which such deduction was available for the applicable year.
13.7. Survival. The indemnities contained in this Article 13
shall continue in full force and effect notwithstanding the expiration or
termination of this Lease and are expressly made for the benefit of and shall be
enforceable by each Indemnitee.
ARTICLE 14
LIENS
14.1. Permitted Liens. Lessee shall not, directly or
indirectly create, incur, assume or suffer to exist any Lien on or with respect
to this Lease, any Item of Equipment or any interest therein, except (i) the
respective rights of Lessor and Lessee as herein provided, (ii) Liens which
result from Lessor's own acts or from claims against Lessor not to be paid or
indemnified against by Lessee hereunder, (iii) Liens for Taxes not yet due or
being contested in accordance with Article 10 hereof and so long as adequate
reserves are maintained with respect to such Liens, and (iv) inchoate
materialmen's, mechanics', xxxxxxx'x, repairmen's, employees' or other like
Liens arising in the ordinary course of business and for amounts the payment of
which is either not yet delinquent or is being contested in good faith by
appropriate proceedings. Lessee shall not be permitted to contest any Lien if
such contest gives rise to a danger of the sale, forfeiture or loss of any Item
of Equipment or any interest therein in the course of or as a result of any such
proceedings. Lessee shall promptly, at its own expense, take such action as may
be necessary to duly discharge any such Lien not excepted above if the same
shall arise at any time with respect to any Item of Equipment.
14.2. Engine Liens. Notwithstanding anything in this Lease to
the contrary, Lessor hereby agrees for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any engine leased to or purchased
by Lessee which is subject to a lease, conditional sale agreement, trust
indenture or other security agreement that Lessor will not acquire or claim, as
against such lessor, conditional seller, indenture trustee or secured party, any
right, title or interest in any engine as the result of any such engine being
installed on the Airframe at any time while such engine is subject to such
lease, conditional sale agreement, trust indenture or other security agreement
and owned by such lessor or conditional seller or subject to a trust indenture
or security interest in favor of such indenture trustee or secured party. No
Engine shall be installed on any airframe unless the lease, conditional sale
agreement, trust indenture or other security agreement applicable to such
airframe contains a similar acknowledgment on the part of the lessor,
conditional seller, indenture trustee or secured party thereunder with respect
to the Engines.
ARTICLE 15
FAA RECORDATION AND FURTHER ASSURANCES
15.1. FAA Recordation.
(a) Lessor shall, at its own expense, cause this Lease
and the Lease Supplement to be kept, filed and recorded in the offices of the
FAA. Lessee shall, at its own expense, cause any and all additional instruments
which shall be executed pursuant to the terms hereof to be kept, filed and
recorded in the offices of the FAA so far as permitted by applicable Law or
regulations. Neither Lessee nor Lessor shall file or record with the FAA any
exhibit hereto which specifically states that it will be omitted from the copy
of this Lease to be filed and recorded with the FAA.
(b) If at any time subsequent to the initial recordation of
title under this Lease, any filing or recording is reasonably necessary to
protect the interest of Lessor, Lessee, at the cost and expense of the party
requesting such action, shall cause this Lease, any financing statements with
respect hereto, and any and all additional instruments which shall be executed
pursuant to the terms hereof, to be kept, filed and recorded and to be
reexecuted, refiled and re-recorded in the appropriate office or offices
pursuant to applicable Laws, to perfect, protect and preserve the rights and
interests of Lessor hereunder and in the Aircraft or any Item of Equipment. At
the reasonable request of Lessor, Lessee shall furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of each such filing or refiling
and recordation or re-recordation. Lessee will cooperate with making any such
filing or providing any such opinion which is to be accomplished or furnished in
order to protect the interests of Lessor, in each case at Lessor's cost and
expense.
15.2. Further Assurances. Each party hereto shall, at its
respective expense, promptly and duly execute and deliver to the other party
such further documents and promptly take such further action not inconsistent
with the terms hereof as the other party may from time to time reasonably
request in order to more effectively carry out the intent and purpose of this
Lease or to perfect and protect the rights of Lessee and Lessor and, with
respect to Lessor, remedies created or intended to be created hereunder.
ARTICLE 16
RETURN OF ITEMS AND RECORDS
16.1. Time and Place. On the Expiration Date and unless the
Aircraft has suffered an Event of Loss, Lessee, at its own expense, shall return
the Aircraft with all Items of Equipment and the "Loose Equipment" as specified
in the Lease Supplement relating to the Aircraft, Exhibit C and Schedule I to
Exhibit B hereto by delivering the same forthwith, to Lessor at such location
within the continental United States, as Lessor may request. At the time of
return, the Airframe shall have installed thereon the two Engines and shall be
in the same interior appointments and configuration as it was in on the Delivery
Date with respect thereto, unless modified with Lessor's approval, as set forth
in Section 2.4, or otherwise.
16.2. Condition. Notwithstanding anything to the contrary
herein, Lessee shall return the Aircraft to Lessor in such condition that the
Aircraft shall comply with the conditions set forth on Exhibit C hereto. Lessor
shall be given ample time and opportunity to inspect the Aircraft, the Aircraft
Documents and any other relevant information to insure that the Aircraft has
been returned in compliance with the conditions set forth in Exhibit C hereto
and shall be entitled to take a two (2) hour acceptance test flight prior to
redelivery of the Aircraft at Lessee's sole cost and expense.
16.3. Corrections and Subsequent Corrections. In the event
that the Aircraft or any Engine fails upon the return thereof hereunder to
conform to any return condition requirement imposed by this Lease and
particularly Section 16.2 and Exhibit C hereof, and without prejudice to the
right of Lessee to claim that the Aircraft did comply with such return condition
requirement, Lessee shall, at the sole option of Lessor, either (i) continue the
Lease in effect, including the obligation to pay Basic Rent hereunder, until
such time as Lessee brings the Aircraft up to the condition required by Section
16.2 hereof, or (ii) return the Aircraft to Lessor and thereafter reimburse
Lessor for all costs reasonably incurred by Lessor to have any such
nonconformance corrected, at such time as Lessor may deem appropriate at
commercial rates then charged by the Person selected by Lessor to perform such
correction. Any direct expense incurred by Lessor for such correction shall
become Supplemental Rent payable by Lessee within thirty (30) days following the
submission of a written statement by Lessor to Lessee, identifying the Items
corrected and setting forth the expense of such correction. Lessee's obligations
to pay such Supplemental Rent shall survive the expiration or termination of
this Lease.
16.4. Fuel. Upon the return of the Aircraft, Lessor shall
measure the quantity of fuel on board the Aircraft. The Aircraft shall be
returned with the same amount of fuel on board the Aircraft as on the Delivery
Date as set forth on the Lease Supplement. If the quantity of fuel measured is
less than the amount of fuel on board the Aircraft on the Delivery Date, Lessee
shall reimburse Lessor for the cost of refueling the Aircraft to the same
quantity as was on board the Aircraft on the Delivery Date.
16.5. Legal Status Upon Return. At the time of the return of
the Aircraft, the Aircraft shall be: (i) free and clear of all Liens, (ii) duly
certified as an airworthy aircraft by the FAA with a current and valid
airworthiness certificate applicable to the Aircraft, (iii) equipped and in full
airworthy condition for operation according to all applicable FAA standards
(including compliance with the requirements of FAR Part 121 in effect on the
Delivery Date) required to allow the Aircraft to be operated for commercial
transportation of passengers under applicable rules and regulations of the FAA,
(iv) duly registered in the name of Lessor with the FAA, (v) in full compliance
with the Maintenance Program, (vi) in full compliance with all applicable
federal aviation regulations and all FAA Airworthiness Directives which by their
terms require compliance on or before the Expiration Date and (vii) in
compliance with the requirements of FAA Stage III regulations, without waiver or
performance restriction.
ARTICLE 17
EVENTS OF DEFAULT
17.1. Lessee's Defaults. Any one or more of the following
events shall constitute an "Event of Default":
(a) Lessee shall fail to make any payment of Rent or
payments required pursuant to Sections 5.7 and Exhibit G hereof when due
hereunder and such failure shall continue for three (3) Business Days; or
(b) Lessee shall fail to procure and maintain any
insurance required by Article 12 hereof or shall operate the Aircraft outside
the scope of the insurance coverage maintained with respect to the Aircraft or
the Aircraft shall be operated by an entity other than Lessee; or
(c) Lessee shall fail to comply with Section 3.5
hereunder relating to the Security Deposit or the letter of credit issued
pursuant thereto shall have been withdrawn or shall expire and such letter of
credit shall not have been replaced within five (5) Business Days; or
(d) Lessee shall fail to accept delivery of the
Aircraft pursuant to Section 2.1 hereunder; or
(e) Lessee shall fail to comply with Section 14
hereunder relating to Permitted Liens; or
(f) Lessee shall fail to perform or observe in any
material respect any of the covenants, conditions or agreements performed or
observed by it under Article 5 (except payments required pursuant to Section 5.7
and Exhibit G hereof) or 16 hereof and such failure shall continue for a period
in excess of ten (10) Business Days after written notice thereof is given by
Lessor to Lessee of such failure; or
(g) Lessee shall fail to perform or observe in any
material respect any other of the covenants, conditions, or agreements to be
performed or observed by it hereunder and such failure shall continue for a
period in excess of thirty (30) days after written notice thereof is given by
Lessor to Lessee of such failure; or
(h) Any representation or warranty made by Lessee
herein, in any other Operative Agreement or in any document or certificate
furnished to Lessor in connection herewith or pursuant hereto shall prove to
have been incorrect in any material respect when made; or
(i) Lessee voluntarily suspends substantially all of
its airline operations or the franchises, concessions, permits, rights or
privileges required for the conduct of the business and operations of Lessee are
revoked, canceled or otherwise terminated, or if the operation specifications of
the Lessee are surrendered to the FAA or otherwise withdrawn or suspended, or
Lessee ceases to be an air carrier holding a certificate issued under ss. 44705
of the Transportation Act, or as a result of any of the foregoing the
preponderant business activity of Lessee shall cease to be that of a passenger
carrier; or
(j) (i) Lessee shall commence any case, proceeding or
other action (A) under any existing or future Law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Lessee shall make a general assignment for
the benefit of its creditors, or (ii) there shall be commenced against Lessee
any case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded for a period
of sixty (60) days, or (iii) there shall be commenced against Lessee any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within sixty (60) days from the entry thereof, or (iv) Lessee shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above,
or (v) Lessee shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(k) Lessee shall default in the payment of any
obligation for the payment of borrowed money, for the deferred purchase price of
property or for the payment of rent or hire under any lease of aircraft which
has an aggregate principal amount or lease payment of Five Hundred Thousand
Dollars ($500,000) or more (determined in the case of borrowed money by the
amount outstanding under the agreement pursuant to which such borrowed money was
borrowed, in the case of a deferred purchase price by the remaining balance, and
in the case of a lease by the present discounted value of the remaining rent or
hire payable thereunder (ignoring any fair market renewal option not yet
exercised)) when the same becomes due if the effect of such nonpayment is to
cause or allow an acceleration of such indebtedness, and such default in payment
shall continue for a period of thirty (30) days; or Lessee shall default in the
performance of any other term, agreement or condition contained in any material
agreement or instrument under or by which any such obligation is created,
evidenced or secured, if such default results in the acceleration of such
obligation; or
(l) A final judgment for the payment of money not
covered by insurance in excess of Two Hundred Fifty Thousand ($250,000), or
final judgments for the payment of money not covered by insurance in excess of
One Million Dollars ($1,000,000) in the aggregate, shall be rendered against
Lessee and the same shall remain undischarged for a period of ninety (90) days
during which (i) execution thereof shall not be effectively stayed by agreement
of the parties involved, or stayed by court order or the pendency of an appeal
or (ii) execution thereof shall not be adequately bonded or (iii) attachments or
other Liens, except for security interests permitted hereunder, shall be
asserted against Lessee's interest in the Aircraft or this Lease; or
(m) Lessee shall default in the performance or
observance of any covenant, term or condition contained in any Related
Transaction and (i) shall not have caused such default to be cured within any
applicable grace period provided by the applicable documents, and (ii) the
effect of such default is to cause (after notice or lapse of time or both), or
to permit the lessor or secured party under such Related Transaction to
terminate such Related Transaction; or
(n) Lessee shall fail to provide in any material
respect the information to be provided by it pursuant to Section 6.3 hereof and
such failure shall continue for a period in excess of three (3) days after
written notice thereof is given by Lessor to Lessee of such failure; or
(o) Lessee shall at any time fail to maintain the
Items of Equipment in an airworthy condition, not promptly take an action
necessary to, or shall not promptly correct any discrepancy which renders the
Aircraft or any Item of Equipment unairworthy, or the certificate of
airworthiness with respect to the Aircraft shall have expired or shall have been
withdrawn; or
(p) This Lease shall cease to be or shall be asserted
by Lessee not to be, valid and binding on and enforceable against Lessee or
shall cease to be in full force and effect for any reason as a result of any
action or inaction of Lessee or Lessee shall have repudiated its obligations
hereunder.
Lessee hereby acknowledges that the occurrence of any one of
the foregoing Events of Default would represent a material default in the
performance of its obligations under this Lease.
ARTICLE 18
RIGHTS AND REMEDIES
18.1. Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option and without notice to Lessee, declare this Lease to be in default
and at any time thereafter, Lessor may exercise one or more of the following
remedies as Lessor, in its sole discretion, shall elect, to the extent available
and permitted by, and subject to compliance with any mandatory requirements of,
applicable Law then in effect:
(a) Demand that Lessee, and Lessee shall upon the
written demand of Lessor and at Lessee's expense, immediately return the
Aircraft to Lessor in the manner specified in such notice, in which event such
return shall not be delayed for purposes of complying with the return conditions
specified in Section 16 hereof (none of which conditions shall be deemed to
affect Lessor's right to possession of the Aircraft) or delay for any other
reason. Notwithstanding the foregoing, at Lessor's option, Lessee shall be
required thereafter to take such actions as would be required by the provisions
of this Lease if the Aircraft were being returned at the end of the Term hereof
and Lessor agrees to cooperate with Lessee's required actions. In addition,
Lessor, at its option and to the extent permitted by applicable Law, may enter
upon the premises where all or any part of the Aircraft is located and take
immediate possession of and, at Lessor's sole option, remove the same (and/or
any engine which is not an Engine but which is installed on the Airframe,
subject to the rights of the owner, lessor or secured party thereof) by summary
proceedings or otherwise, all without liability accruing to Lessor for or by
reason of such entry or taking of possession whether for the restoration of
damage to property, or otherwise, caused by such entry or taking, except damages
caused by gross negligence or willful misconduct. Notwithstanding anything
herein to the contrary, Lessor may institute any proceeding at law or equity.
(b) Sell at private or public sale, as Lessor may
determine, or hold, use, operate or lease to others the Aircraft and the
Aircraft Documents as Lessor in its sole discretion may determine, all free and
clear of any rights of Lessee. At any public sale of the Aircraft, Aircraft
Documents, Airframe, Engine or any Part, Lessor may bid for and purchase such
property.
(c) Whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph (a) or
paragraph (b) of this Section 18.1, Lessor, by fifteen (15) days written notice
to Lessee specifying a payment date, may demand that Lessee pay to Lessor, and
Lessee shall pay to Lessor, on the payment date reasonably specified in such
notice, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of the Basic Rent due for the period commencing after the date specified
for payment in such notice), any unpaid Rent or Maintenance Reserves for the
Aircraft (prorated in the case of Basic Rent on a daily basis) to and including
the payment date specified in such notice, plus the amount, if any, by which the
aggregate Basic Rent for the remainder of the Term, discounted periodically
(equal to installment frequency) to present worth at the interest rate of four
percent (4%) per annum, exceeds the fair market rental value (determined
pursuant to the Appraisal Procedure, as defined below) of the Aircraft for the
remainder of the Term, after discounting such fair market rental value
periodically (equal to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of four percent (4%) per
annum; provided, however, that if prior to issuance of such written notice by
Lessor to Lessee, Lessor leases the Aircraft to a third party for the remainder
of the Term, for an amount which exceeds such fair market rental value as so
determined then such amount shall be utilized in lieu of such fair market value
in making the foregoing calculation with respect to the Aircraft.
For purposes of this Section 18.1(c), "Appraisal Procedure" shall mean the
following procedure for determining the "fair market rental value" of the
Aircraft. "Fair market rental value" shall mean the value determined by an
appraisal completed on an "as is" and "where is" basis. Lessor shall select an
internationally recognized independent aircraft appraiser, such as Avitas,
Avmark or B.K. Associates, who shall make a determination of fair market rental
value. The fees and expenses of the appraiser shall be paid by Lessee.
(d) In the event that Lessor, pursuant to Section
18.1(b) above, shall have relet the Aircraft under a lease which extends at
least to the date upon which the Term would have expired but for Lessee's
default, Lessor, in lieu of exercising its rights under Section 18.1(c) above
with respect to the Aircraft, may, if it shall so elect, demand that Lessee pay
Lessor, and Lessee shall pay Lessor, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent for the Aircraft due after the
time of reletting) any unpaid Rent and Maintenance Reserves for the Aircraft due
up to the date of reletting, plus the amount, if any, by which the aggregate
Basic Rent would have become due over the Term, discounted periodically (equal
to installment frequency) to present worth as of the date of reletting at the
interest rate of four percent (4%) per annum, exceeds the aggregate basic rental
payments to become due under the reletting from the date of such reletting to
the date upon which the Term for the Aircraft would have expired but for
Lessee's default, discounted periodically (equal to installment frequency) to
present worth as of the date of the reletting at the interest rate of four
percent (4%) per annum.
(e) Proceed by appropriate court action or actions
either at law or in equity, to enforce performance by Lessee of the applicable
covenants of this Lease and to recover damages for the breach thereof and to
rescind this Lease.
(f) Terminate this Lease by written notice, which
notice shall be effective upon dispatch, and repossess the Aircraft and Aircraft
Documents.
(g) Keep and set-off all amounts paid as the "D"
Check Airframe Reserve, the Engine Reserves, the Engine Life Limited Parts
Reserves, the Landing Gear Reserve and any other amounts held by Lessor
hereunder, or under any other Operative Agreement, all as liquidated damages and
not as a penalty.
18.2. Further Rights. In addition to the foregoing, Lessee
shall be liable during or after the exercise of any of the aforementioned
remedies for any and all accrued and unpaid Rent and Maintenance Reserves,
together with interest on such unpaid amounts at the Past Due Rate, and for all
reasonable legal fees and other costs and expenses incurred by reason of the
occurrence of any Event of Default (whether or not litigation is commenced) or
the exercise of Lessor's remedies with respect thereto, including all costs and
expenses incurred in connection with the return of any Item of Equipment in
accordance with the terms of Article 16 hereof or in placing such Item in the
condition and with airworthiness certificates as required by said Article,
subject to the provisions of Section 16.3.
18.3. Remedies Cumulative. No remedy referred to in this
Article 18 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity; and the exercise or beginning of exercise by Lessor of any
one or more of such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies. No express or implied
waiver by Lessor of any Event of Default shall in any way be, or be construed to
be, a waiver of any future or subsequent Event of Default.
18.4. Concerning Remedies.
(a) In effecting any repossession of the Aircraft,
the Aircraft Documents, the Airframe, an Engine or a Part, Lessor and its
representatives and agents, to the extent permitted by Law, shall: (i) have the
right to enter upon any premises where it reasonably believes the Aircraft, the
Aircraft Documents, the Airframe, an Engine or any Part to be located; (ii) not
be liable, in conversion or otherwise, for the taking of any personal property
of Lessee which is in or attached to the Aircraft, the Airframe, an Engine or
any Part which is repossessed; provided, however, that Lessor shall return to
Lessee all personal property of Lessee or any third party which was on the
Aircraft at the time Lessor repossessed the Aircraft; (iii) not be liable or
responsible, in any manner, for any inadvertent damage or injury to any of
Lessee's property in repossessing and holding the Aircraft, the Airframe, an
Engine or any Part, except for that caused by or in connection with Lessor's
gross negligence or willful acts; (iv) have the right to maintain possession of
and dispose of the Aircraft, the Aircraft Documents, the Airframe, an Engine or
any Part on any premises owned by Lessee or under Lessee's control; and (v) have
the right to obtain a key to any premises at which the Aircraft, the Aircraft
Documents, the Airframe, an Engine or any Part may be located from the landlord
or owner thereof.
(b) If reasonably required by Lessor, Lessee, at its
sole expense, shall assemble and make the Aircraft, the Airframe, each Engine or
any Part available at a place designated by Lessor in accordance with Article 16
hereof. Lessee hereby agrees that, in the event of the return to or repossession
by Lessor of the Aircraft, the Aircraft Documents, the Airframe, an Engine or
any Part, any rights in any warranty (express or implied) heretofore assigned to
Lessee or otherwise held by Lessee shall without further act, notice or writing
be assigned or reassigned to Lessor, if assignable. Lessee shall be liable to
Lessor for all reasonable expenses, disbursements, costs and fees incurred in
(i) repossessing, storing, preserving, shipping, maintaining, repairing and
refurbishing the Aircraft, the Airframe, an Engine or any Part to the condition
required by Article 16 hereof, and (ii) preparing the Aircraft, the Airframe, an
Engine or any Part for sale or lease, advertising the sale or lease of the
Aircraft, the Airframe, an Engine or any Part and selling or releasing the
Aircraft, the Airframe, an Engine or any Part. Lessor is hereby authorized and
instructed, at its option, to make reasonable expenditures which Lessor
considers advisable to repair and restore the Aircraft, the Airframe, an Engine
or any Part to the condition required by Article 16 hereof, all at Lessee's sole
expense.
(c) If Lessor is required to give prior notice to
Lessee of any of the foregoing acts, Lessee hereby covenants and agrees that a
notice sent to it by Lessor in writing in the manner set forth in Section 19.2
hereof, at least ten (10) days before the date of any such act shall be deemed
to be reasonable notice of such act.
ARTICLE 19
MISCELLANEOUS
19.1. Construction, Applicable Law; Jurisdiction.
(a) Any provision of this Lease which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The parties to this
Lease shall use their best efforts to substitute for such void provision a
valid, legal and enforceable provision which will approach as closely as
possible the intention of such void provision. To the extent permitted by Law,
Lessee hereby waives any provisions of Law which renders any provisions hereof
prohibited or unenforceable in any respect. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to Lessee
any right, title or interest in the Aircraft or any Engine or Part except as a
lessee only. No term or provision of this Lease may be changed, waived,
discharged or terminated orally, but only by a written instrument signed by the
party against which the enforcement of the change, waiver, discharge or
termination is sought. The headings and captions in this Lease are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof. Whenever required by the context hereof, the singular shall
include the plural and vice versa. Reference to this Lease shall mean this Lease
as amended or supplemented from time to time.
(b) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES.
(c) Lessee hereby irrevocably consents that any legal
action or proceeding against it or any of its assets with respect to this Lease
may be brought in any jurisdiction where Lessee or any of its assets may be
found, or in any court of the State of New York or any Federal Court of the
United States of America located in New York, New York, United States of
America, or both, as Lessor may elect, and by execution and delivery of this
Lease, 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. Lessee irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified airmail, postage prepaid, to Lessee at its address set forth in
Section 19.2 hereof. The foregoing, however, shall not limit the right of Lessor
to serve process in any other manner permitted by Law or to bring any legal
action or proceeding or to obtain execution of judgment in any jurisdiction.
Lessee further agrees that final judgment against Lessee in any action or
proceeding in connection with this Lease shall be conclusive and may be enforced
in any other jurisdiction within or outside the United States of America by suit
on the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and the amount of Lessee's indebtedness. Lessee hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
Lessee may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Lease brought in the State of New
York, and hereby further irrevocably waives any claim that any such suit, action
or proceeding brought in the State of New York has been brought in an
inconvenient forum.
19.2. Notices. All notices provided for herein shall be in
writing and shall be deemed to have been given when delivered personally, when
telexed or telecopied, when deposited with an overnight courier service, or, if
deposited in the United States mail, when received, addressed as follows:
If to Lessee: Frontier Airlines, Inc.
00000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
Attn: Director, Aircraft Management
Telecopy No. (000) 000-0000
With a copy to the General Counsel
Telecopy No. (000) 000-0000
If to Lessor: C.I.T. Leasing Corporation
c/o The CIT Group/Capital
Finance, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx Xxxxxx
Vice President
Telecopy No. (000) 000-0000
With a copy to the General Counsel
Telecopy No. (000) 000-0000
or to such other address as any party may designate for itself by written notice
to the other party.
19.3. Lessor's Right to Perform. If Lessee fails to perform
any of its obligations hereunder, Lessor may (but shall not be obligated to)
discharge such obligation, and the amount of the expenses of Lessor incurred in
connection with such discharge shall be payable by Lessee upon demand, together
with interest at the Past Due Rate from the date such expenses were incurred.
19.4. Counterparts. This Lease may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. To the extent,
if any, that this Lease 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 may be created through the transfer or
possession of any counterpart other than the counterpart which has been marked
"Original" on the signature page thereof. All counterparts other than the
"Original" shall be marked "Duplicate" or "Duplicate Original."
19.5. Assignment by Lessor. Lessor, at Lessor's expense, shall
have the absolute right to transfer or assign to any Person, firm, corporation
or other entity any or all of Lessor's rights, obligations, benefits and
interests under this Lease, including, without limitation, the right to receive
Rent and Maintenance Reserves or any other payment due under this Lease, the
right to transfer or assign title to any Item of Equipment or to transfer or
assign the right to purchase any Item of Equipment and the right to make all
waivers and agreements, to give all notices, consents and releases, to take all
action upon the occurrence of any Event of Default, or to do any and all other
things which Lessor is or may become entitled to do under this Lease; provided,
however, that Lessee acknowledges that, if Lessor should sell or transfer to a
third party all of Lessor's interest under this Lease and in the Items of
Equipment, Lessor shall thereupon be relieved of all of its obligations
hereunder and Lessor's transferee shall succeed to all of Lessor's rights,
interests and obligations under this Lease as though Lessor's transferee had
been the initial lessor hereunder; provided, however, that, in the event of a
transfer or assignment of a security interest in any Item of Equipment, Lessor
shall remain liable hereunder. Any assignment, pledge or other conveyance, for
security or otherwise, of this Lease by Lessor shall be subject to Lessee's
rights under this Lease and shall not be effective unless and until Lessee shall
have been given notice of such assignment identifying the assignee or transferee
hereof and Lessee shall have received confirmation in writing, reasonably
acceptable to Lessee, that such transferee accepts all responsibilities of
Lessor under this Lease, including but not limited to, confirmation of Lessee's
right to quiet enjoyment of the Aircraft as set forth in Section 19.11 hereof.
Any assignment by Lessor shall be made subject to the assignee's agreement to
maintain all Maintenance Reserves in one or more escrow accounts unless
otherwise expressly agreed by Lessee. The agreements, covenants, obligations and
liabilities contained herein, including, but not limited to, all obligations to
pay Rent and Maintenance Reserves and indemnify an Indemnitee are made for the
benefit of each Indemnitee and their respective successors and assigns.
19.6. Survival. The representations, warranties, covenants,
agreements and indemnities of Lessee set forth in this Lease, and Lessee's
obligations hereunder, shall survive the Expiration Date to the extent required
for full performance and satisfaction thereof.
19.7. Entire Agreement. This Lease (including all Exhibits
hereto), each Lease Supplement executed pursuant hereto and the other Operative
Agreements constitute the entire agreement between Lessor and Lessee regarding
the Aircraft and there are no other prior or contemporaneous written or oral
understandings between Lessor and Lessee with regard to the subject matter
hereof and thereof.
19.8. Successors and Assigns. This Lease shall be binding on
and shall inure to the benefit of Lessee, Lessor and their respective successors
and permitted assigns.
19.9. Brokers. Lessee and Lessor each agree to indemnify and
hold each other harmless from and against any and all claims, suits, damages,
costs and expenses (including, but not limited to, reasonable attorneys' fees)
asserted by any agent, broker or other third party for any commission or
compensation of any nature whatsoever based upon the lease of the Aircraft;
provided, however, that Lessee or Lessor, as the case may be, shall be solely
responsible for all claims, suits, damages, costs and expenses asserted by any
agent, broker or other third party for any commission or compensation of any
nature whatsoever, where such agent, broker or third party was retained by
Lessee or Lessor, as the case may be.
19.10. Transaction Costs. Whether or not the transactions
contemplated hereby are consummated, each party hereto agrees to pay its own
costs and expenses incurred in connection with the preparation, execution and
delivery of this Lease and any other documents delivered in connection herewith,
including without limitation the fees, expenses and disbursements of legal
counsel to such party. In addition, Lessor agrees to pay the attorneys' fees,
expenses, and disbursements of the counsel identified in Section 2.3(8). Each of
Lessor and Lessee agrees to pay the reasonable costs and expenses of the other
party incurred in connection with the entering into or giving or withholding of
any future waiver, supplement or amendment or other action with respect to the
Lease or any other document delivered in connection therewith that it may
request, except that from and after (i) the occurrence and continuation of an
Event of Default, or (ii) the filing by or against Lessee of a petition under
Chapter 7 or Chapter 11 of the United States Bankruptcy Code or any other
circumstances described in Section 17.1(j) hereof, all of such costs shall be
borne by Lessee irrespective of whether such costs are incurred after the
commencement or inception of any such filing or the occurrence of any other
circumstance described in Section 17.1(j) hereof and whether or not litigation
is commenced with respect thereto.
19.11. Quiet Enjoyment. Lessor covenants that so long as an
Event of Default shall not have occurred and be continuing, Lessee shall quietly
enjoy the Aircraft and all rents, revenues, profits and income thereto, without
interference by Lessor or by any Person lawfully claiming by or through Lessor;
provided, however that Lessor and prospective purchasers and lessees may inspect
the Aircraft and Aircraft Documents at their own expense as long as such
inspection does not unreasonably interfere with Lessee's operation or
maintenance of the Aircraft.
19.12. Time Is of the Essence. Time and strict and punctual
performance are of the essence with respect to each provision of this Lease.
19.13. Confidentiality. Lessee and Lessor agree to and shall
keep confidential this Lease and the terms hereof, all Aircraft Documents and
other data or materials relating to the Aircraft supplied to Lessee by Lessor,
or at the request of Lessor, hereunder and will not disclose, transfer or
otherwise impart any such information to any other Person, except (i) as may be
required by Law or pursuant to any litigation, (ii) to its affiliates, permitted
assigns, officers, executives, employees and agents, (iii) to its financial,
accounting or legal advisors who are under a duty to or agree to hold such
information confidential, or (iv) with respect to any information which is
generally available to the public at the time of disclosure.
19.14. DISCLAIMER OF CONSEQUENTIAL DAMAGES. LESSEE AND LESSOR
EACH AGREE THAT IT SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND
WAIVES ANY RIGHT THAT IT MAY OTHERWISE HAVE TO RECOVER, CONSEQUENTIAL DAMAGES AS
A RESULT OF ANY BREACH OR ALLEGED BREACH BY LESSOR OR LESSEE, AS THE CASE MAY
BE, OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF LESSOR OR LESSEE,
AS THE CASE MAY BE, CONTAINED IN THIS LEASE.
19.15. Tax Treatment. Lessor and Lessee acknowledge that this
Lease is to be treated as a lease for Federal income tax purposes.
19.16 Waiver of Jury Trial. LESSEE AND LESSOR HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS LEASE OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
19.17. Dating. Although this Lease is dated for convenience
and for the purpose of reference as of the date first set forth above, this
Lease shall be effective on the latest date of execution by the parties hereto.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease to be duly executed by their authorized officers as of the date first
above written.
C.I.T. LEASING CORPORATION,
Lessor
By:______________________________
Title:___________________________
FRONTIER AIRLINES, INC.,
Lessee
By:______________________________
Title:
EXHIBIT A
to
AIRCRAFT LEASE AGREEMENT
DESCRIPTION OF AIRCRAFT AND ENGINES
1. One Boeing 737-3L9 Aircraft bearing FAA Registration Number N312FL and
Manufacturer's serial number 24569, together with two (2) CFM56-3B2
engines, bearing Manufacturer's serial numbers 725373 and 724422,
respectively.
B-3
EXHIBIT B
to
AIRCRAFT LEASE AGREEMENT
FORM OF LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT dated _________ __, 1999 (this "Lease
Supplement"), between C.I.T. LEASING CORPORATION, as Lessor ("Lessor"), and
FRONTIER AIRLINES, INC., as Lessee ("Lessee").
W I T N E S S E T H :
WHEREAS, Lessor and Lessee have heretofore entered into that
certain Aircraft Lease Agreement, dated as of April 16, 1999 (the "Lease"),
which provides for the execution and delivery of a Lease Supplement in
substantially the form hereof for the purpose of leasing the Items of Equipment
in accordance with the terms thereof;
NOW, THEREFORE, in consideration of the premises, and pursuant
to Article 2 of the Lease, Lessor and Lessee hereby agree as follows:
1. All capitalized terms used herein which are defined in the
Lease shall have, for all purposes hereof, the respective meanings given them in
the Lease.
2. Lessor hereby delivers and leases to Lessee, and Lessee
hereby accepts and leases from Lessor under the Lease, as hereby supplemented,
the Items of Equipment as follows:
A. Aircraft: One (1) Boeing 737-3L9 Aircraft
consisting of the following:
(i) Airframe Registration No. N312FL
Manufacturer's Serial No. 24569
(ii) Engines: Two (2) CFM56-3B2 engines
(each of which engines has 750 or
more rated takeoff horsepower or the
equivalent thereof), installed on
said Airframe, bearing,
respectively, the following
Manufacturer's Serial Nos.:
Engine Manufacturer's
Position Serial No.
1 725373
2 724422
(iii) Other Equipment and Manuals:
Such other Equipment (if any) and
Manuals as are described in Appendix I hereto.
B. Maintenance Status:
(i) Airframe:
Total Airframe Hours: 22,040
Total Airframe Cycles: 21,111
(ii) Engines:
Position 1
Manufacturer's Serial No.: 725373
1. Total Hours: 19,423
2. Total Cycles: 18,767
Position 2
Manufacturer's Serial No.: 724422
1. Total Hours: 17,117
2. Total Cycles: 17,113
Lessee confirms that the Items of Equipment have been examined
by its duly appointed and authorized representatives and the Aircraft Documents
conform to the information set forth above.
3. The Delivery Date of the Items of Equipment is the date of
this Lease Supplement, as set forth in the opening paragraph hereof, and the
Items of Equipment are hereby delivered and accepted on such date at _____ a.m.
____________________ Time at __________________.
4. The term "Insured Value" for the Aircraft shall be as set
forth on Exhibit H to the Lease.
5. The amount of fuel on board the Aircraft at the time of
delivery is _____________________.
6. Lessee hereby confirms to Lessor that (i) the Aircraft and
each Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 5.6 of the Lease, (ii) Lessee has accepted
the Aircraft for all purposes hereof and of the Lease, (iii) Lessee has
inspected the Aircraft and the Aircraft satisfies all of the delivery conditions
set forth in the Lease (including, without limitation, those set forth on
Exhibit I to the Lease), (iv) the information set forth herein and on Appendix 1
hereto pertaining to the Aircraft are correct as of the date hereof, and (v)
this Lease Supplement has been duly executed and delivered by Lessee.
7. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
8. This Lease Supplement may be executed in any number of
counterparts, each of which counterparts, except as otherwise provided in
Section 19.4 of the Lease, shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and the same Lease
Supplement.
9. THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO
CONFLICT OF LAW PRINCIPLES.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Supplement to be duly executed by their authorized officers on the date
first above written.
C.I.T. LEASING CORPORATION,
Lessor
By:_________________________________
Title:______________________________
FRONTIER AIRLINES, INC.,
Lessee
By:_________________________________
Title:______________________________
APPENDIX I
TO
LEASE SUPPLEMENT
A. AVIONICS INVENTORY1
MAJOR AVIONICS EQUIPMENT QTY P/N MODEL
Marker Receiver 1 522-2996-018 5124
Dual VHF Nav Receiver 2 822-0761-001 51RV-4B
Transceiver Rad Alt 2 622-3890-021 860F-4
Tape Reproducer 0 XXXX 0000-X0
XXXXXX Decoder 1 N1401C
Transceiver Weather Radar 1 622-132-106
GPW Computer 1 965-0648-004
DME Transceiver 2 622-2921-006 860E-5
ATC Transponder 2 622-7878-201 TPR720
ADF Receiver 2 777-1492-005 51Y-7
Flight Manage Comp 1 168925-06-001 U5-OE
HF Transceiver 1 622-5377-001 D5722
VHF Transceiver 2 622-5219-004 VHF 700
Cockpit Voice Recorder 1 93A100-80
Flight Data Recorder 1 980-4100DXUN
Flight Data Acquisition Unit 1 ED41A210
APPENDIX I
TO
LEASE SUPPLEMENT
B. MANUALS INCLUDED WITH AIRCRAFT2
APPENDIX I
TO
LEASE SUPPLEMENT
C. LOOSE EQUIPMENT3
Item Description Quantity
APPENDIX I
TO
LEASE SUPPLEMENT
D. COMPONENTS MAINTAINED ON HARD TIME4
Part Time Remaining
No. Nomenclature Interval To Overhaul
EXHIBIT C
to
AIRCRAFT LEASE AGREEMENT
RETURN CONDITION REQUIREMENTS
In addition to the requirements set forth in Article 16 of the
Lease, on or before the Expiration Date, or earlier termination of the Lease,
Lessee, at Lessee's expense, shall return the Aircraft to Lessor, at any airport
in the continental United States as selected by Lessor, and in compliance with
all of the following provisions:
GENERAL
(1) The Aircraft shall be airworthy and have therefore been
maintained and operated in accordance with Articles 5 and 9 of the Lease with
the same care and consideration for the technical condition of the Aircraft as
if it were to have been kept in continued regular service by Lessee.
(2) The Aircraft exterior shall be washed and the interior
shall be clean. The cockpit shall be clean with paint and placards in good
condition.
(3) The Aircraft shall have installed the full complement of
Engines (as used herein the term "Engines" includes engines for which title will
be transferred to Lessor pursuant to Article 11 of the Lease) and other Items of
Equipment as would remain installed on the Aircraft were Lessee to continue
operating the same in continued regular passenger service, each such Item
functioning in accordance with its intended use.
(4) The Aircraft shall comply with the Manufacturer's original
FAA approved type certificate specifications, as revised up to the Expiration
Date, together with any modifications installed in accordance with supplemental
type certificates approved by the FAA and acceptable to Lessor.
(5) The Aircraft, Engines, Landing Gear, APU, and Parts
(appliances) shall comply with all applicable FARs and Airworthiness Directives
affecting such model aircraft, engines, landing gears, auxiliary power units,
and parts (appliances) which by their terms require compliance on or before the
Expiration Date, notwithstanding any waiver, deviation or time extension
obtained by Lessee from the FAA or otherwise. Any alternate method of compliance
obtained by Lessee to comply with any AD shall have been approved by the FAA
without restriction or limitation, and shall be acceptable to the FAA for use by
any other operator of the Aircraft.
(6) The Aircraft shall have a current and effective FAA
certificate of airworthiness and shall comply with all FAR requirements for
passenger operation as a transport category commercial aircraft in accordance
with all applicable FARs, including without limitation FAR Part 121.
(7) Cockpit windows shall have no crazing or delamination that
exceed maintenance manual allowable limits, and passenger compartment windows
shall have no crazing . All equipment and furnishings in the interior of the
Aircraft which are defective, damaged, or excessively worn shall be repaired or
replaced by Lessee.
(8) The Aircraft shall have no leakage of fuel, oil, hydraulic
fluid, or water.
(9) The Aircraft and Engines shall be in compliance with all
Manufacturer's service bulletins issued at the time of return, to the same
extent that Lessee has accomplished such service bulletins on similar model
aircraft and engines of the same manufacture in Lessee's fleet, without
discrimination.
(10) The Aircraft (including each Engine, Landing Gear, APU,
and Part) shall not have any open, deferred or placarded maintenance items or
Watch Items, nor shall they have any Flight Hour, Cycle, or calendar time
extensions, waivers, or non-transferable alternate methods of compliance.
(11) At the end of the Term, upon the request of Lessor,
Lessee shall obtain an Export Certificate of Airworthiness for the Aircraft for
export to such country as designated by Lessor. Lessor shall be responsible for
the cost of modifying the Aircraft to comply with the import requirements of
such other country.
(12) Prior to the Expiration Date, all repairs accomplished
during the Term of a temporary or interim nature, including repairs using blind
fasteners (except to the extent that the use of blind fasteners is considered a
permanent repair in accordance with the Manufacturer's structural repair manual
for the Aircraft) and those requiring repetitive inspections or future
upgrading, shall be upgraded to a permanent repair and all external doublers
(scab patches) installed during the Term (except to the extent that installation
of a doubler is the only approved repair or where a flush repair is not
practical due to inaccessibility of the area), shall be replaced with flush
repairs, all in accordance with the applicable Manufacturer's maintenance
manual, structural repair manual, or other FAA approved data.
(13) Lessee shall deliver to Lessor, at no cost to lessor, all
service bulletin kits furnished without charge by a Manufacturer for
installation on the Aircraft which have not been so installed together with
appropriate instructions for installation provided with such kits. In the event
such installation kits were purchased or manufactured by Lessee, Lessor shall
have the exclusive right to purchase such kits at Lessee's Actual Cost for a
period of one hundred eighty (180) days after return of the Aircraft and the
non-exclusive right to purchase such kits thereafter.
AIRFRAME
(1) Lessee shall provide documentation evidencing full
compliance with the Manufacturer's recommended corrosion prevention and control
program ("CPCP"), or such other corrosion prevention and control program
approved by the FAA for the Aircraft.
(2) The Aircraft shall be returned fresh from Lessee's next
due "C" Check pursuant to Lessee's Maintenance Program which shall include all
structural inspection requirements which would require accomplishment within
3,500 Flight Hours or Cycles, or within 15 calendar months after the Expiration
Date, and with all discrepancies permanently repaired. The "C" Check shall
include all lesser Checks. Lessee shall give Lessor not less than ten (10) days
prior written notice of the commencement date of such "C" Check. During the
performance of such "C" Check, Lessor shall be entitled to have representatives
present in order to verify that such "C" Check complies with the requirements
set forth herein.
(3) The time remaining to the next scheduled Airframe block
overhaul ("D" Check, or an equivalent Check in the event the Maintenance Program
uses different terminology) shall not be less than fifty percent (50%) of the
allowable time (Flight Hours, Cycles, and calendar time) between such scheduled
block overhauls.
(4) Each of the Time Controlled Parts (excluding those which
are internal Engine Parts and internal Landing Gear Parts (as delineated in the
Boeing 737-300 MPD) but including any Life Limited Parts) on (i) the Aircraft,
(ii) the Engines and (iii) the Landing Gear, shall have remaining the same
amount of time (whether Flight Hours, Cycles or calendar time) with respect to
its next regularly scheduled overhaul, restriction, or other required
maintenance, as was remaining on the Delivery Date. In the event any of the Time
Controlled Parts fail to meet the requirements set out in the preceding
sentence, either Lessee or Lessor shall pay to the other party a financial
adjustment for any such Time Controlled Part as determined by the following
formula:
FA = TRD -- TRR x CO
TBO
Where
FA = Financial adjustment to be paid
pursuant to this Section. The
financial adjustment shall be paid
by Lessee to Lessor if the value for
FA is determined to be positive in
accordance with the formula set out
above. The value of the financial
adjustment shall be paid by Lessor
to Lessee if the value for FA is
determined to be negative in
accordance with the formula set out
above.
TRD = Time remaining at the Delivery
Date to the next regularly scheduled
overhaul, restriction, or other
required maintenance, for the
applicable Time Controlled Part.
TRR = Time remaining at the date of
return of the Equipment to the next
regularly scheduled overhaul,
restriction, or other required
maintenance, for the applicable Time
Controlled Part.
TBO = Average time between regularly
scheduled overhauls, restrictions,
or other required maintenance for
the applicable Time Controlled Part.
CO = Average cost of the overhaul,
restriction, or other required
maintenance for the applicable Time
Controlled Part.
INTERIOR
(1) The Aircraft, shall be in the same configuration
(including, but not limited to, interior seating configuration, galleys and
lavatories) as when such Aircraft was originally delivered to Lessee hereunder,
unless otherwise consented to by Lessor, in its sole discretion.
ENGINES AND APU
(1) Immediately prior to the return of the Aircraft, which
shall be after the redelivery flight for the Aircraft, Lessee shall accomplish a
complete hot and cold section borescope inspection of each Engine and the APU,
to be performed at Lessee's expense by Lessee's representative or an agency of
Lessee's choosing, in accordance with the Manufacturer's maintenance manual. All
defects discovered as a result of such inspections, which exceed the maintenance
manual allowable limits for an installed engine or APU, as applicable, shall be
corrected at Lessee's expense. Any defect that requires reinspection prior to
the next full "C" Check or 3,500 Flight Hours, whichever is greater, shall be
considered a Watch Item and shall be corrected at Lessee's expense.
(2) Each Engine shall have (i) a minimum of 3,000 Cycles
remaining to its next scheduled removal, and (ii) a maximum of 3,000 Flight
Hours accumulated since its most recent Engine restoration shop visit. The
average of the life remaining for all of the Life Limited Parts in each Engine
shall not be less than 50% of the average of the total allowable life for such
Engine Life Limited Parts, provided, however, that no individual Life Limited
Part shall have less than 3,000 Cycles remaining to its respective life limit.
(3) Each Engine shall be capable of developing full rated
take-off power at the critical maximum outside air temperature without exceeding
the maximum limits for all parameters (temperature, fuel flow, rotor speed,
etc.) as per the Manufacturer's specifications. A full take-off power engine
run-up shall be performed in the presence of Lessor's representatives
immediately prior to the return of the Aircraft, in accordance with the
performance test in the maintenance manual, or other comparable test (as agreed
to by Lessor), using temperature corrected charts. Each Engine shall have a
minimum of 20(degree) EGT margin and the test results shall not exceed the
corrected limits in the charts for any parameter.
(4) The APU of the Aircraft shall be in serviceable condition.
INSPECTION
(1) On, or immediately prior to the Expiration Date, Lessee
shall perform a redelivery check flight of the Aircraft of not more than two (2)
hours duration with Lessor's representatives on board, who will determine which
systems shall be operated. All discrepancies found during such check flight
which exceed maintenance manual allowable limits shall be corrected by Lessee at
Lessee's expense. Lessee shall be responsible for all expenses associated with
such flight and shall furnish the necessary crews and fuel.
(2) Lessor shall inspect the Aircraft and Aircraft Documents
(the "Final Inspection") prior to the Expiration Date. The Final Inspection will
occur during the "C" Check required pursuant to this Exhibit C and shall include
the opening or removal of panels as reasonably required by Lessor, and access to
all compartments and bays. All discrepancies discovered during such Final
Inspection which exceed maintenance manual allowable limits shall be permanently
repaired by Lessee. Lessor shall be given the opportunity to conduct all
activity necessary to verify that the Aircraft complies with the requirements
set forth herein. The Final Inspection of the Aircraft Documents shall commence
on a date as mutually agreed by Lessor and Lessee. To the extent that any
repairs to the Aircraft, or correction of discrepancies found in the Aircraft
Documents, extend beyond the Expiration Date, the Term shall be deemed to have
been automatically extended, and the obligation to pay Rent hereunder continued
on a daily basis until the Final Inspection and repairs or corrections have been
satisfactorily concluded.
(3) All Aircraft Documents and other current and historical
records delivered with the Aircraft on the Delivery Date, and all other Aircraft
Documents acquired or prepared by Lessee during the Term shall be returned with
the Aircraft. Notwithstanding anything to the contrary herein, (i) to the extent
any maintenance tasks have been repeated, Lessee shall only be required to
retain, and include in the Aircraft Documents to be returned to Lessor at the
Expiration Date, the most recent Aircraft Records with respect to each such
repetitive task and (ii) to the extent log books document maintenance performed
on the Aircraft, such log books shall be required to be retained (and included
in the Aircraft Documents to be returned to Lessor at the Expiration Date) for a
period of twelve (12) months, or the time period required by the Aeronautics
Authority, whichever is greater. All discrepancies found in the Aircraft
Documents shall be corrected, and any missing Aircraft Documents shall be
reconstructed by Lessee at Lessee's sole cost and expense prior to the return of
the Aircraft. All Aircraft Documents shall be in the English language. In the
event any Aircraft Documents are not provided to Lessor or are not in the
English language, on the Expiration Date, the Aircraft shall be deemed not to
meet the return conditions and the Term shall be deemed to have been
automatically extended, and the obligation to pay Rent hereunder continued on a
daily basis until the final inspection and corrections have been satisfactorily
concluded.
(4) All Aircraft and Engine systems (including galleys,
passenger and cargo compartments) shall be fully operational for their intended
functions. Lessor shall operationally check all systems prior to the return of
the Aircraft and all defects found shall be permanently repaired by Lessee, at
Lessee's expense prior to return of the Aircraft.
(5) In the event the Aircraft has been maintained on a
maintenance program other than an FAA approved maintenance program, Lessee, at
Lessee's expense, shall cause the Aircraft to be bridged onto an FAA approved
maintenance program, or onto the Manufacturer's recommended maintenance program
in accordance with the Maintenance Planning Data Document (MPD), or its
equivalent.
EXHIBIT D
to
AIRCRAFT LEASE AGREEMENT
LESSEE'S COUNSEL OPINION
[Letterhead of Lessee's Counsel]
[Date of Delivery Date]
C.I.T. Leasing Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Aircraft Lease Agreement dated as of April 16, 1999 between C.I.T.
Leasing Corporation, as Lessor, and Frontier Airlines, Inc., as Lessee,
Relating to the Lease of One Boeing 737-300 Aircraft, Manufacturer's
Serial No. 24569 and U.S. Registration No. N312FL
Dear Sirs:
I act as General Counsel for Frontier Airlines, Inc., a
corporation duly organized and validly existing under the laws of the State of
Colorado. I have reviewed the Aircraft Lease Agreement dated as of April 16,
1999 (the "Lease") between Lessee and C.I.T. Leasing Corporation (the "Lessor").
Except as otherwise defined herein, the terms used herein shall have the
meanings set forth in the Lease.
You have requested that I render an opinion in connection with
the transactions governed by the Lease. I have examined originals or copies,
certified or otherwise identified to my satisfaction of such documents,
corporate records and other instruments as I have deemed necessary or advisable
and have relied upon such representations of officers and employees of the
Lessee as I have considered reasonable, prudent and advisable for the purpose of
rendering this opinion. I have assumed the genuineness of all signatures and the
authenticity of all documents submitted to me as originals and the conformity to
original documents of all documents submitted to me as copies or facsimiles.
Based upon the foregoing, I am of the opinion that:
1. The Lessee is a corporation duly organized and validly
existing in good standing under the laws of the State of Colorado, is duly
qualified to hold property and to transact business as a company and is duly
qualified to carry on business in each jurisdiction in which it conducts
business and has full power and authority to carry on its business as presently
conducted, to hold property under lease and to enter into and to perform its
obligations under the Lease, as supplemented by the Lease Supplement, and each
other document related thereto to which the Lessee is a party. The Lessee is a
"Certificated Air Carrier" within the meaning used by the Transportation Act, as
amended, operating pursuant to a certificate issued under such Act.
2. The execution, delivery and performance by the Lessee of
the Lease and Lease Supplement have been duly authorized by all necessary
corporate action on the part of the Lessee, do not and will not require any
approval of the shareholders of the Lessee or consent of any trustee or holder
of any indebtedness or obligation of the Lessee, and the execution and delivery
of the Lease and Lease Supplement, the consummation of the transactions
contemplated therein, and compliance by the Lessee with the terms and provisions
thereof, do not contravene any Law applicable to the Lessee, or result in the
breach of, or constitute any default under, or result in the creation of any
lien, charge or encumbrance upon any property of the Lessee under any credit
agreement or instrument, corporate charter or bylaw or other agreement to which
the Lessee is a party or by which the Lessee or its properties or assets are
bound or affected. The Lease and Lease Supplement have been duly executed and
delivered by the Lessee.
3. The Lessee has received every consent, approval or
authorization of, and has given every notice to, each Governmental Authority
having jurisdiction with respect to the execution, delivery and performance of
the Lease, the Lease Supplement and the other Operative Agreement (including all
monetary and other obligations thereunder), that is required for the Lessee to
execute and deliver the Lease, the Lease Supplement and the other Operative
Agreements and to perform the transactions covered thereby to be performed on or
prior to the Delivery Date.
4. The Lease, the Lease Supplement and the other Operative
Agreements have been duly executed and delivered by the Lessee and constitutes
the legal, valid and binding agreement of the Lessee enforceable against the
Lessee in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally, as well as
awards by courts of relief in lieu of the remedy of specific performance of
contractual provisions and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
as a court having jurisdiction may impose and by laws which may affect some of
such remedies but which do not make the available remedies inadequate for the
substantial realization of the benefits provided therein.
5. There are no actions, suits or proceedings pending or, to
my knowledge, threatened against or affecting the Lessee in any court or before
any governmental commission, arbitrator, board or authority which, if determined
adversely to the Lessee, could have a material adverse effect on the current
business or financial condition of the Lessee or on the ability of the Lessee to
perform its obligations under the Lease and the other Operative Agreements to
which it is a party.
6. The Lessee is not in default under any indenture, mortgage
or loan agreement of which I have knowledge and to which the Lessee is now a
party or by which it is bound nor is the Lessee in default under any other
agreement or instrument of a material nature of which I have knowledge and to
which the Lessee is now a party or by which it is bound; nor to my knowledge is
the Lessee in violation of any law, order, injunction, decree, rule or
regulation applicable to the Lessee of any court or administrative body, which
violation could materially and adversely affect the business, property or
assets, operations or condition, financial or otherwise, of the Lessee; and no
event has occurred and is continuing which, under the provisions of any such
indenture, mortgage or loan agreement, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder.
7. Except for the filing of the Lease and the Lease Supplement
for recordation with the FAA, the placing on the Aircraft and on each Engine of
the plates containing the legends referred to in Section 5.6 of the Lease and
the filing of a UCC-1 with the Colorado Secretary of State, no further filing,
recording or notarization of the Lease or of any other document, and no further
action is necessary or advisable, under the laws of any Governmental Authority
in order to (a) fully establish and protect Lessor's title to, interest in and
property right with respect to the Aircraft and each Engine as against the
Lessee or any third party and to ensure that the property rights of Lessor
therein will have priority in all respects over the claims of all creditors of
the Lessee, and (b) ensure the validity, effectiveness and enforceability of the
Lease. Lessor is entitled to the benefit of Section 1110 of the Bankruptcy Code
as in effect on the date hereof.
I do not purport to be an expert on and do not purport to be
generally familiar with or qualified to express legal opinions based on any law
other than the laws of Colorado and the Federal laws of the United States of
America, accordingly, I express no legal opinion herein based upon the laws of
any other state. However, for the purposes of this opinion, I have assumed that
the laws of the State of New York are identical to those of the State of
Colorado.
Yours very truly,
EXHIBIT E
to
AIRCRAFT LEASE AGREEMENT
[LETTERHEAD OF APPROVED INSURANCE BROKER]
[Date of Delivery Date]
C.I.T. Leasing Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Insurance Coverage for One Boeing 737-3L9 Aircraft under
Aircraft Lease Agreement dated as of ________ __, 1999 between
C.I.T. Leasing Corporation and Frontier Airlines, Inc. having
Manufacturer's Serial No. 24569 and U.S. Registration
No. N312FL
Gentlemen:
This report is delivered to you pursuant to the provisions of
Section 2.3(5) of the Aircraft Lease Agreement dated as of _______ __, 1999 (the
"Lease") between C.I.T. Leasing Corporation (the "Lessor") and Frontier
Airlines, Inc. (the "Lessee"). We are the firm of independent aircraft insurance
brokers (the "Approved Insurance Broker") who have been appointed by Lessee to
deliver this report pursuant to Section 2.3(5) of the Lease and we understand
that Lessor has not objected to such appointment. Except as otherwise defined
herein, the terms used herein shall have the meanings set forth in the Lease.
We have reviewed the Lease and particularly Article 12 and
Exhibit E thereof. We are also fully familiar with the Certificate of Insurance
dated _________________, 1999 issued to you by the Approved Insurers as well as
the policies of insurance evidenced thereby. We have attached such Certificate
of Insurance setting forth the coverage applying to the Aircraft.
In our opinion the insurance policies carried on the Aircraft
described in our Certificate of Insurance dated _____________________, 1999 are
subject to terms and conditions which are normal for the market and comply in
all material respects with Article 12 and Exhibit E of the Lease.
We agree to advise Lessor in writing promptly of any default
in the payment of any premium and any other act or omission on the part of
Lessee of which we have knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance required under the Lease on
the Aircraft, and we further agree to advise you in writing at least thirty (30)
days (seven (7) days or such lesser period as from time to time may be
applicable in the case of war risk and allied perils insurance) prior to any
lapse, termination or cancellation of any such insurance or as soon as possible
in respect of non-renewal or automatic termination for War Risk.
Very truly yours,
[APPROVED INSURANCE BROKER]
By:_____________________________
Title:____________________________
EXHIBIT F
to
AIRCRAFT LEASE AGREEMENT
SPECIAL PROVISIONS TO CERTIFICATE OF INSURANCE
The "special provisions" section of the Insurance Certificate
shall provide as follows:
1. In accordance with the Aircraft Lease Agreement dated as of
April __, 1999 (the "Lease") between Lessor and Lessee, it is agreed to include
Lessor and its successors and assigns, and their respective directors, officers
and employees as additional insureds (the "Additional Insureds"), designate
Lessor as owner of the Aircraft, and designate Lessor as loss payee (but without
imposing upon the Additional Insureds any obligation imposed upon Lessee,
including, without limitation, the liability to pay any premiums).
2. It is agreed that in respect of the interests of the
Additional Insureds, in the insurance coverage provided hereby, such insurance
coverage shall not be invalidated by any action or inaction of Lessee, and shall
insure the Additional Insureds, regardless of any breach or violation of any
warranty, declaration or condition contained in such insurance coverage by
Lessee or any other Person.
3. It is agreed that if the insurance coverage provided hereby
is canceled for any reason whatsoever, or is adversely changed in any way with
respect to the interests of the Additional Insureds, or if such insurance is
allowed to lapse for nonpayment of premium, such cancellation, adverse change or
lapse shall not be effective as to the Additional Insureds, for thirty (30) days
(and, with respect to war risk insurance, seven (7) days or such shorter period
as shall be customary on the London market for such insurance in such area of
the world, or ten (10) days in the event of nonpayment of premium) after receipt
by Lessor of written notice of such prospective cancellation, change or lapse.
4. It is agreed that, as against the Additional Insureds, the
Insurers waive any rights of setoff, counterclaim or any other deduction,
whether by attachment or otherwise, and agree to waive rights of subrogation
against the Additional Insureds.
5. The coverage provided hereunder is primary without right of
contribution from any other insurance which may be carried by the Additional
Insureds and, with respect to liabilities coverage, shall operate as if it were
a separate policy for each insured, without, however increasing the aggregate
limit of liability for the coverage or permitting claims recoverable under the
hull policy to be recoverable as liability claims. It is agreed that the
Additional Insureds have a right to carry insurance in excess of the amounts,
provided such additional insurance does not reduce or otherwise affect the
coverage or amounts of insurance required to be covered by Lessee under Article
12 of the Lease.
6. A 50/50 clause is in effect between the all risk hull and
war risk coverages.
7. To the extent of any reinsurance, the insurance coverage
provided hereunder includes a cut-through provision permitting the Additional
Insureds to file claims and to obtain payment directly from the reinsures.
The "coverage" section of the Insurance Certificate shall
include the following description:
Description of War Risk Coverage:
Loss of and/or damage to each Aircraft caused by:
1. 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;
2. Strikes, riots, civil commotions or labor disturbances;
3. 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;
4. Any malicious act or act of sabotage;
5. Confiscation, nationalization, seizure, restraint, detention,
appropriation, expropriation, requisition of title or use, by
or under the order of any government (whether civil, military
or de facto) or public or local authority, including by the
government of registry (if other than the United States);
6. Hijacking or any unlawful seizure or wrongful exercise of
control of the Aircraft or crew in flight (including any
attempt at such seizure or control) made by any person or
persons on board the Aircraft acting without the consent of
Lessee.
[This Exhibit to be Omitted
from FAA Filing Copy]
EXHIBIT G
to
AIRCRAFT LEASE AGREEMENT
MAINTENANCE RESERVES
Lessee agrees to pay to Lessor Maintenance Reserves in the aggregate amount
of * per Flight Hour and * per Cycle, payable on a monthly basis, allocated as
follows (which "D" Check Airframe Reserve, Engine Reserves, Landing Gear Reserve
and Engine Life Limited Parts Reserves, will not be pooled or commingled):
(a) Airframe Reserve. Lessee agrees to pay Lessor within ten (10) days
following the last day of each Rent Period (the "Prior Period" provided that, at
the end of the first Rent Period, the Prior Period shall mean the Delivery Date
up to the last day of the first Rent Period) during the Term an amount equal to
* times the number of Flight Hours of operation of the Airframe (excluding, for
purposes of this paragraph (a), Landing Gear and the APU) for such Prior Period
(hereinafter referred to as the ""D" Check Airframe Reserve"). In the event that
Lessee is obligated to perform a "D" Check (or its equivalent structural
inspection) on the Airframe during the Term of this Lease, the "D" Check
Airframe Reserve shall be used to cover Lessee's Actual Costs incurred in
completing with respect to the Airframe, all routine and non-routine "D" Check
tasks (or its equivalent) but shall not be used to cover modifications, interior
reconfiguration, the accomplishment of service bulletins, the accomplishment of
Airworthiness Directives, any deferred maintenance items and any repair of Time
Controlled Parts accomplished during the "D" Check (or its equivalent structural
inspection) (for purposes of this paragraph (a), costs and expenses for which
the Lessee will be reimbursed hereunder are referred to as ""D" Check Airframe
Reimbursable Expenses"). In connection with the performance of any part of such
"D" Check (or its equivalent structural inspection), Lessee shall present
written evidence satisfactory to Lessor as to the workscope to be performed and
payment installments relating to the performance thereof in connection with such
"D" Check (or its equivalent structural inspection) and the amount of such "D"
Check Airframe Reimbursable Expenses for approval by Lessor. Upon receipt of
such written evidence (which shall include evidence of payment by Lessee for
such "D" Check Airframe Reimbursable Expenses claimed by Lessee), and provided
there then exists no Default or Event of Default, Lessor shall reimburse Lessee
by paying to the Maintenance Provider from the "D" Check Airframe Reserve, an
amount equal to the lesser of (i) the amount of such "D" Check Airframe
Reimbursable Expenses or (ii) the amounts then held in the "D" Check Airframe
Reserve. If such portion of the cost of the "D" Check for the Airframe to be
paid out of the "D" Check Airframe Reserve exceeds the balance in the "D" Check
Airframe Reserve, Lessee will be required to pay such excess amount.
(b) Engine Reserves. Lessee agrees to pay to Lessor within ten (10) days
following the last day of each Rent Period (the "Prior Period" provided that, at
the end of the first Rent Period, the Prior Period shall mean the Delivery Date
up to the last day of the first Rent Period) during the Term an amount equal to
* times the number of Flight Hours of operation during such Prior Period for
each Engine (each, an "Engine Reserve" and collectively, the "Engine Reserves").
A separate Engine Reserve shall be established and maintained with respect to
each Engine. Upon the accomplishment of any Heavy Engine Maintenance (as
hereinafter defined) accomplished during a Covered Engine Shop Visit (as
hereinafter defined) for any Engine during the Term, then the Engine Reserve
with respect to such Engine shall be used to reimburse Lessee, or pay at
Lessee's direction, for Lessee's Actual Cost incurred in completing such
maintenance (for purposes of this paragraph (b), Lessee's Actual Cost so
incurred is referred to as "Engine Reimbursable Expenses"). As used herein,
"Heavy Engine Maintenance" shall be defined as any overhaul, refurbishment, hot
section inspection, replacement of internal time-limited parts, disassembly,
assembly and testing required thereof for each such engine, but excluding
shipping and freight charges, engine removal and installation charges,
accomplishment of Airworthiness Directives and Aeronautics Authority
requirements, and replacement, repair or overhaul of external engine parts. As
used herein, "Covered Engine Shop Visit" shall be defined as a shop visit
requiring a major disassembly of an engine and the removal and reinstallation of
internal rotating parts where such shop visit was not the result of foreign
object damage ("F.O.D."), ingestion, accident, faulty maintenance or
installation, incident, improper operations, abuse, neglect, misuse, elective
parts replacement, Airworthiness Directive compliance, Aeronautics Authority
regulation compliance or covered by Manufacturer's service bulletins or which is
reimbursable by a claim under the Manufacturer's warranties or by insurance
(with deductibles being treated as reimbursable by insurance for this
exclusion). Upon the accomplishment of any such Heavy Engine Maintenance during
a Covered Engine Shop Visit, Lessee shall present written evidence satisfactory
to Lessor as to the completion of such Heavy Engine Maintenance to such Engine
and the costs associated therewith for approval by Lessor. Such Heavy Engine
Maintenance shall include a Build Standard (as hereinafter defined) to be
mutually agreed upon by Lessor and Lessee. As used herein, "Build Standard"
shall be defined as a reassembly of an Engine using parts that will allow a
minimum number of Flight Hours and Cycles of operation until the next scheduled
removal. Upon receipt of such written evidence (which shall include evidence of
payment by Lessee for such Engine Reimbursable Expenses claimed by Lessee), and
provided there then exists no Default or Event of Default, Lessor shall
reimburse Lessee, or pay to such other Person as may be directed by Lessee, an
amount equal to the lesser of (i) the amount of the Engine Reimbursable Expenses
with respect to such Engine or (ii) the amount then held in the Engine Reserve
established for such Engine. Lessee acknowledges that the amounts held with
respect to an Engine in an Engine Reserve may be applied only with respect to
such Engine. If the cost of any Heavy Engine Maintenance accomplished during a
Covered Engine Shop Visit for an Engine exceeds the balance in the Engine
Reserve established for such Engine, Lessee will be required to pay such excess
amount for such Engine.
(c) Landing Gear Reserve. Lessee agrees to pay to Lessor within ten (10)
days following the last day of each Rent Period (the "Prior Period" provided
that, at the end of the first Rent Period, the Prior Period shall mean the
Delivery Date up to the last day of the first Rent Period) during the Term an
amount equal to * times the number of Flight Hours of operation of the Airframe
during such Prior Period for all Landing Gear on the Aircraft (the "Landing Gear
Reserve"). In the event Lessee is obligated to perform an overhaul of any
Landing Gear in accordance with the Maintenance Program for the Aircraft
(excluding overhaul because of accident, incident, abuse, misuse or elective
parts replacement) then the Landing Gear Reserve shall be used to reimburse
Lessee, or pay at Lessee's direction for Lessee's Actual Cost incurred in
completing such overhaul (for purposes of this paragraph (c), Lessee's Actual
Cost so incurred is referred to as "Landing Gear Reimbursable Expenses"). Upon
accomplishment of any such overhaul, Lessee shall present written evidence
satisfactory to Lessor as to the completion of such overhaul and the costs
associated therewith for approval by Lessor. Upon receipt of such written
evidence (which shall include evidence of payment by Lessee for such Landing
Gear Reimbursable Expenses claimed by Lessee), and provided there then exists no
Default or Event of Default, Lessor shall disburse from the Landing Gear Reserve
with respect to such Landing Gear as the Lessee shall direct an amount equal to
the lesser of (i) the amount of the Landing Gear Reimbursable Expenses or (ii)
the amount then held in the Landing Gear Reserve with respect to the Landing
Gear. Lessee shall be solely responsible for the costs of an overhaul of the
Landing Gear in excess of any balance in the Landing Gear Reserve.
(d) Engine Life Limited Parts Reserves. Lessee agrees to pay to Lessor
within ten (10) days following the last day of each Rent Period (the "Prior
Period," provided that, at the end of the first Rent Period, the Prior Period
shall mean the Delivery Date up to the last day of the first Rent Period) during
the Term an amount equal to * times the number of Cycles of operation during
such Prior Period for each Engine (each, an "Engine Life Limited Parts Reserve"
and collectively, the "Engine Life Limited Parts Reserves"). A separate Engine
Life Limited Parts Reserve shall be established and maintained with respect to
each Engine. Upon the replacement of any Engine Life Limited Part in any Engine
during a Term, the Engine Life Limited Parts Reserve with respect to such Engine
shall be used to reimburse Lessee, or pay at Lessee's direction for Lessee's
Actual Cost incurred to purchase such Engine Life Limited Part (for purposes of
this paragraph (d), Lessee's Actual Cost so incurred is referred to as "Engine
Life Limited Parts Reimbursable Expenses"), provided, however, Lessee shall not
use such Engine Life Limited Parts Reserve to reimburse Lessee for the cost of
any other expenses associated with the replacement of such Engine Life Limited
Part, including the cost of shipping and freight charges, engine disassembly,
reassembly, and testing required thereof, engine removal and installation
charges, accomplishment of Airworthiness Directives and Federal Aviation
Regulation requirements, and replacement, repair or overhaul of external engine
parts or if due to foreign object damage ("FOD"), ingestion, accident, faulty
maintenance or installation, incident, improper operations, abuse, neglect,
misuse, elective parts replacement or covered by Manufacturer's service
bulletins or which is reimbursable by a claim under the Manufacturer's service
bulletins or which is reimbursable by a claim under the Manufacturer's
warranties or by insurance (with deductibles being treated as reimbursable by
insurance for this exclusion).
Upon the purchase and installation into an Engine of any such Engine Life
Limited Part, Lessee shall present written evidence satisfactory to Lessor as to
the purchase and installation of such Engine Life Limited Part for approval by
Lessor. Upon receipt of such written evidence, and provided there then exists no
Default or Event of Default, Lessor shall reimburse Lessee, or pay to such other
Person as may be directed by Lessee, an amount equal to the lesser of (i) the
amount of the Engine Life Limited Parts Reimbursable Expenses with respect to
such Engine or (ii) the amount then held in the Engine Life Limited Part Reserve
established for such Engine. Lessee acknowledges that the amounts held with
respect to an Engine in any given Engine Life Limited Part Reserve may be
applied only with respect to such Engine. If the cost of any Engine Life Limited
Part purchased for an Engine exceeds the balance in the Engine Life Limited Part
Reserve established for such Engine, Lessee will be required to pay such excess
amount for such Engine.
(e) It is intended by Lessor and Lessee that maintenance on the Aircraft
will be performed by the Maintenance Provider pursuant to the Maintenance
Program. Notwithstanding anything to the contrary contained in this Exhibit G,
any maintenance on the Aircraft and the extent and nature of such maintenance to
be performed shall be conducted by the Lessee or at a FAA approved facility
reasonably acceptable to Lessor and Lessor shall be entitled to have
representatives present during the performance of such maintenance to oversee
such performance. With respect to the Engines only, if the Maintenance Provider
provides maintenance thereon, Lessor shall not be responsible for any delay by
such Maintenance Provider in the performance of such maintenance. If, however,
Lessor requires another maintenance provider selected by Lessor to provide
maintenance with respect to an Engine, and if engine maintenance provided by
such third party is delayed for more than 90 days, then Lessor will provide to
Lessee a substitute engine until redelivery to Lessee of the Engine being
serviced.
(f) Notwithstanding anything to the contrary herein, the Maintenance
Reserves set forth herein are based on maintenance costs relating thereto based
on an assumed Flight Hour:Cycle ratio of 2:1. To the extent the actual Flight
Hour:Cycle ratio falls below 2:1 then the applicable rate of the Maintenance
Reserves will be increased by Lessor (no more frequently than annually) in
correlation with the reduced Flight Hour:Cycle ratio.
(g) Notwithstanding anything to the contrary contained in this Exhibit G,
Lessor may, at any time, request in writing an adjustment of any Maintenance
Reserve if, in the reasonable opinion of Lessor, the actual maintenance cost
(determined as of the six month period prior to such notice unless otherwise
agreed by Lessor and Lessee) of any of the Items for which Maintenance Reserves
are established or any such items with respect to other aircraft owned or leased
by Lessee exceed the amount in the Maintenance Reserve for such Item. Lessor
agrees to consult with Lessee regarding any such proposed increase. In the event
that Lessor and Lessee are unable to agree on an appropriate increase in
Maintenance Reserves within thirty (30) days after the date of such request,
Lessor shall have the right to terminate this Lease effective as of the last day
of the then-current Rent Period, unless otherwise agreed by Lessor and Lessee;
provided, however, that Lessor may adjust upward, but not downward, any
Maintenance Reserve if Lessee changes its Maintenance Program in such a manner
as would require an increase in such Maintenance Reserve to meet revised
Maintenance Program standards.
[This Exhibit to be Omitted
from FAA Filing Copy]
EXHIBIT H
to
AIRCRAFT LEASE AGREEMENT
CERTAIN PRICING TERMS
(a) Lessee shall pay * to Lessor as rental for the Aircraft
("Basic Rent") for each Rent Period in advance on each Rent
Payment Date
.
(b) The Security Deposit Amount shall equal *
(c) The Insured Value shall equal *
I-2
EXHIBIT I
to
AIRCRAFT LEASE AGREEMENT
DELIVERY CONDITIONS
On the Delivery Date, the Aircraft shall be delivered to
Lessee in "as-is, where-is" condition and shall conform to the following
requirements:
(1) The Aircraft shall have a valid FAA registration number
and duly registered with the FAA in the name of Lessor.
(2) The Aircraft, Engines, Landing Gear, APU, and Parts
(appliances) shall comply with all applicable Airworthiness Directives affecting
such model aircraft, engines, landing gears, auxiliary power units, and parts
(appliances) which by their terms require compliance on or before the Delivery
Date, notwithstanding any waiver, deviation or time extension obtained by Lessor
from the FAA or otherwise.
(3) The Aircraft shall have a current and effective FAA
certificate of airworthiness and shall comply with all FAR requirements for
passenger operation as a transport category commercial aircraft in accordance
with all applicable FARs, including without limitation, FAR Part 121, except to
the extent such requirements relate to bridging the Aircraft onto Lessee's
Maintenance Program.
(4) The Aircraft shall be in full compliance with the
Manufacturer's recommended corrosion prevention and control program ("CPCP"), or
such other corrosion prevention and control program approved by the FAA for the
Aircraft, and with all structural inspection ("SI") items current.
(5) To the extent not already accomplished by Lessor, all
discrepancies found and listed by Lessor's and Lessee's technical
representatives, as a result of the test flight described in Section 2.1(c) of
the Lease, shall be corrected by Lessee at Lessor's expense, pursuant to Section
2.1(c) of the Lease.
(6) Immediately prior to the delivery of the Aircraft, Lessor
shall accomplish a complete hot and cold section borescope inspection of each
Engine and the APU, to be performed at Lessor's expense by Lessor's
representative or an agency of Lessor's choosing, in accordance with the
Manufacturer's maintenance manual. All defects discovered as a result of such
inspections, which exceed the maintenance manual allowable limits for an
installed Engine or APU, as applicable, shall be corrected at Lessor's expense.
Any defect that requires reinspection prior to the next full "C" Check or 3,500
Flight Hours, whichever is greater, shall be considered a Watch Item and shall
be corrected at Lessor's expense.
(7) The Aircraft shall be equipped with fully functional TCAS
and windshear equipment.
(8) All Aircraft Documents and other current and historical
records shall be delivered with the Aircraft including, without limitation, time
logs showing Aircraft and Engine Flight Hours and Cycles on any given date,
documents, manuals (revised up to and including the most current revisions
issued by the Manufacturer), data, overhaul records, log books, original
Aircraft and Engine delivery documents, FAA forms, modification records,
inspection records (including NDT documentation such as x-xxx, xxxx current,
etc.), and all other documentation pertaining to the Aircraft, Engines and Parts
as of the Delivery Date.
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS................................................... 1
ARTICLE 2 DELIVERY AND ACCEPTANCE....................................... 7
2.1. Time and Place....................................... 7
2.2. A Lease Only......................................... 9
2.3. Conditions to Delivery of the Aircraft............... 9
2.4. Aircraft Configuration, etc.......................... 10
ARTICLE 3 RENT AND TERM................................................. 11
3.1. Basic Rent........................................... 11
3.2. Maintenance Reserves and Supplemental Rent........... 11
3.3. Term................................................. 11
3.4. Place of Payment..................................... 11
3.5. Security Deposit..................................... 11
3.6 Time is of the Essence............................... 13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES; COVENANTS OF THE PARTIES...... 13
4.1. Lessor's Representations and Warranties.............. 13
4.2. Representations and Warranties of the Parties........ 15
ARTICLE 5 POSSESSION; USE; LAWFUL INSURED OPERATIONS; MAINTENANCE;
REGISTRATION AND INSIGNIA; MAINTENANCE RESERVES............... 16
5.1. Possession........................................... 16
5.2. Assignment by Lessee................................. 17
5.3. Use.................................................. 17
5.4. Lawful Insured Operations............................ 18
5.5. Maintenance.......................................... 18
5.6. Registration and Insignia............................ 19
5.7. Maintenance Reserves................................. 20
5.8. Application of Reserves Upon Aircraft Return......... 20
5.9. Concerning Reserves.................................. 20
ARTICLE 6 INSPECTION; FINANCIAL AND AIRCRAFT INFORMATION................ 21
6.1. Inspection........................................... 21
6.2. Financial Information................................ 21
6.3. Aircraft Information................................. 22
6.4 Other Information.................................... 22
ARTICLE 7 COVENANTS..................................................... 23
7.1. Lessee's Covenants................................... 23
ARTICLE 8 NO SET-OFF, COUNTERCLAIM, ETC................................. 24
8.1. No Set-off, Counterclaim, etc........................ 24
ARTICLE 9 REPLACEMENT OF PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS..................................................... 25
9.1. Replacement of Parts................................. 25
9.2. Title to Replaced and Replacement Parts.............. 25
9.3. Alterations, Modifications and Additions............. 25
9.4. Title to Parts....................................... 28
ARTICLE 10 TAX INDEMNITY................................................. 28
10.1. Scope................................................ 28
10.2. Report............................................... 29
10.3. After-Tax Nature of Indemnity........................ 30
10.4. Payment of Taxes and Indemnities..................... 30
10.5. Contest.............................................. 30
10.6. Lessor............................................... 32
10.7. Survival............................................. 32
ARTICLE 11 EVENTS OF LOSS................................................ 32
11.1. With Respect to the Aircraft......................... 32
11.2. With Respect to an Engine............................ 32
11.3. Application of Payments from Governmental
Authorities.......................................... 33
11.4. Application of Payments During Existence of Event
of Default........................................... 34
11.5. Replacement Aircraft................................. 34
ARTICLE 12 INSURANCE..................................................... 34
12.1. Public Liability and Property Damage Liability
Insurance............................................ 34
12.2. Insurance Against Loss or Damage to the Aircraft..... 35
12.3. Application of Proceeds in an Event of Loss of
Aircraft............................................. 36
12.4. Application of Proceeds in the Absence of an
Event of Loss........................................ 37
12.5. Reports, etc......................................... 37
12.6. Lessor's Additional Insurance........................ 37
12.7. Lessee's Additional Insurance........................ 38
12.8. Insurance Against Year 2000 Risks and Liability...... 38
ARTICLE 13 GENERAL INDEMNIFICATION....................................... 38
13.1. Scope................................................ 38
13.2. Lessee's Release..................................... 39
13.3. Repayment............................................ 39
13.4. Timing of Payment.................................... 39
13.5. Exclusion............................................ 39
13.6. After-Tax Nature of Indemnity........................ 39
13.7. Survival............................................. 40
ARTICLE 14 LIENS......................................................... 40
14.1. Permitted Liens...................................... 40
14.2. Engine Liens......................................... 40
ARTICLE 15 FAA RECORDATION AND FURTHER ASSURANCES........................ 41
15.1. FAA Recordation...................................... 41
15.2. Further Assurances................................... 41
ARTICLE 16 RETURN OF ITEMS AND RECORDS................................... 41
16.1. Time and Place....................................... 41
16.2. Condition............................................ 42
16.3. Corrections and Subsequent Corrections............... 42
16.4. Fuel................................................. 42
16.5. Legal Status Upon Return............................. 42
ARTICLE 17 EVENTS OF DEFAULT............................................. 43
17.1. Lessee's Defaults.................................... 43
ARTICLE 18 RIGHTS AND REMEDIES........................................... 45
18.1. Remedies............................................. 45
18.2. Further Rights....................................... 47
18.3. Remedies Cumulative.................................. 48
18.4. Concerning Remedies.................................. 48
ARTICLE 19 MISCELLANEOUS................................................. 49
19.1. Construction, Applicable Law; Jurisdiction........... 49
19.2. Notices.............................................. 50
19.3. Lessor's Right to Perform............................ 50
19.4. Counterparts......................................... 50
19.5. Assignment by Lessor................................. 51
19.6. Survival............................................. 51
19.7. Entire Agreement..................................... 51
19.8. Successors and Assigns............................... 52
19.9. Brokers.............................................. 52
19.10. Transaction Costs.................................... 52
19.11. Quiet Enjoyment...................................... 52
19.12. Time Is of the Essence............................... 52
19.13. Confidentiality...................................... 52
19.14. DISCLAIMER OF CONSEQUENTIAL DAMAGES.................. 53
19.15. Tax Treatment........................................ 53
19.17. Dating............................................... 53
Exhibits
Exhibit A Description of Aircraft and Engines
Exhibit B Form of Lease Supplement
Exhibit C Return Condition Requirements
Exhibit D Lessee's Counsel Opinion
Exhibit E Letter of Insurance Broker
Exhibit F Special Provisions to Certificate of Insurance
Exhibit G Maintenance Reserves
Exhibit H Certain Pricing Terms
Exhibit I Delivery Conditions
