AIRCRAFT LEASE
AGREEMENT
Dated as of January 3, 1997
Between
AMERICAN AIRLINES, INC., as
Lessor
and
HAWAIIAN AIRLINES, INC., as
Lessee
One (1) DC10-10 Aircraft
Registration No. N160AA
Serial Number 46710
with Three GE CF6-6K Engines
This Lease Agreement has been executed in several counterparts. To the
extent, if any, that this Lease Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the
original. The counterpart to be deemed the original shall be the counterpart
that is designated on the signature pages thereof as the original counterpart
and no security interest in this Lease Agreement may be created through the
transfer of any counterpart other than such original counterpart. This is
not the original counterpart.
TABLE OF CONTENTS
Page No.
Section 1. Definitions...............................................1
Section 2. Delivery and Acceptance..................................14
(a) Time and Place...........................................14
(b) Delivery Date............................................14
Section 3. Term and Rent............................................15
(a) Term.....................................................15
(b) Basic Rent...............................................15
(c) Supplemental Rent........................................15
(d) Prohibition Against Setoff,Etc...........................15
(e) Payment to Lessor........................................16
Section 4. Disclaimer; Warranties Relating to the Aircraft;
Certain Agreements of Lessee, Representations of
Lessee...................................................16
(a) Disclaimer...............................................16
(b) Quiet Enjoyment..........................................17
(c) Waiver of Warranties.....................................17
(d) Lessee's Representations and Warranties..................18
(e) Lessor's Representations and Warranties..................20
Section 5. Return of Airframe and Engines...........................21
(a) Return of Airframe and Serviced Engines..................21
(b) Return of Other Engines..................................22
Section 6. Liens....................................................22
Section 7. Registration, Maintenance and Operation;
Possession; Insignia.....................................23
(a) Registration, Maintenance and Operation..................23
(b) Additional Maintenance Provisions........................24
(c) Territorial Restrictions on Use of Aircraft..............24
(d) Obligations Absolute.....................................24
(e) Possession...............................................25
(f) Registration and Insignia................................25
(g) Replacement of Parts.....................................25
(h) Alterations, Modifications and Additions.................26
(i) Manuals and Technical Records............................27
(j) Maintenance and Usage....................................27
Section 8. Loss, Destruction, Requisition,Etc.......................27
(a) Event of Loss to the Aircraft............................27
(b) Event of Loss to a Serviced Engine.......................28
(c) Application of Payments for Requisition of Title.........31
(d) Requisition of Use of the Airframe.......................31
i
(e) Investment of Proceeds Pending Replacement...............32
(f) Application of Payments During Default...................32
Section 9. Insurance................................................32
(a) Liability Insurance......................................32
(b) All Risk Hull Insurance..................................33
(c) War-Risk Insurance.......................................35
(d) Application of Proceeds..................................35
(e) Reports, Etc.............................................35
(f) Additional Insurance.....................................36
(g) Notice from Lessee; No Modification......................36
(h) Reinsurance..............................................36
(i) Insurance of Lessor......................................36
(j) Insurance Relating to Allocated Parts....................37
Section 10. Inspection; Financial Information........................37
(a) Inspection...............................................38
(b) Financial Information....................................39
Section 11. Lessee's Covenants.......................................39
(a) Merger...................................................39
(b) Certificated Air Carrier.................................39
Section 12. FAA Recordation and Further Assurances...................39
(a) FAA Recordation..........................................40
(b) Further Assurances.......................................40
Section 13A. Lessee Events of Default.................................40
Section 13B. Lessor Events of Default.................................42
Section 14A. Lessor Remedies..........................................43
Section 14B. Lessee Remedies..........................................45
(a) Remedies................................................45
(b) Limitation on Damages...................................45
(c) No Implied Waiver.......................................46
Section 15. Indemnification.........................................46
(a) General.................................................46
(b) Indemnification for Negligent Acts......................48
(c) Defense of Claims; Settlement...........................48
(d) Indemnification by Lessor...............................49
(e) Survival................................................49
Section 16. General Tax Indemnity...................................49
(a) Tax Indemnity...........................................49
(b) Exclusions from General Tax Indemnity...................50
(c) Calculation of General Tax Indemnity Payments...........52
(d) Payment of General Tax Indemnity........................53
(e) Verification of Calculations............................53
(f) Reports.................................................54
(g) General Tax Indemnity Contest Provisions................54
ii
(h) Compromise or Settlement................................56
(i) Refunds.................................................56
(j) Failure to Contest......................................57
(k) Interest................................................57
(l) Effect of Other Indemnities.............................57
Section 17. Miscellaneous...........................................57
(a) Construction; Governing Law.............................57
(b) Notices.................................................58
(c) Lessor's Right to Perform...............................60
(d) Confidentiality.........................................60
(e) Counterparts............................................62
(f) Grant of Security Interest by Lessor....................62
(g) Survival................................................62
(h) Assignment..............................................62
(i) Transaction Expenses....................................63
(j) Entirety................................................63
(k) Force Majeure...........................................63
(l) Independent Contractor; No Agency.......................64
(m) Certain Consents and Waivers of Lessee..................64
(n) Offset..................................................66
Section 18. True Lease..............................................66
(a) Intent of the Parties...................................66
Section 19. Enforceability in Jurisdictions........................66
Section 20. No Third-Party Beneficiaries...........................67
Section 21. Maintenance Obligations................................67
Section 22. Amendment of Long-Term Lease Agreement.................67
iii
Exhibits
Exhibit A Lease Supplement No. 1
Exhibit B Stipulated Loss Value Schedule
Exhibit C Conditions Precedent to Delivery
Exhibit D Delivery and Return Conditions
Exhibit E Supplemental Rent for Maintenance
Schedules
Schedule I Basic Rent
Schedule 4(d)(i)
Schedule 4(d)(iv)
Schedule 4(d)(v)
Schedule 4(d)(vi)
Schedule 4(d)(vii)
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AIRCRAFT LEASE AGREEMENT
This AIRCRAFT LEASE AGREEMENT, dated as of January 3,
1997, between AMERICAN AIRLINES, INC., a Delaware
corporation, with its principal place of business at
Dallas/Fort Worth International Airport, Texas 75261-9616,
and its successors and assigns ("Lessor"), and HAWAIIAN
AIRLINES, INC., a Hawaii corporation with its principal
place of business at 0000 Xxxxxxx Xxxxxx, Xxxxx X000,
Xxxxxxxx, Xxxxxx 00000 ("Lessee").
WHEREAS, Lessee desires to lease from Lessor, and
Lessor is willing to lease to Lessee, the Aircraft (as
defined below) upon the terms and conditions set forth
herein; and
WHEREAS, Lessor is certificated under FAA Regulations
Part 121 to inspect, maintain, repair and overhaul the
Aircraft with GE CF6-6K Engines; and
WHEREAS, Lessee has requested that Lessor perform
certain repair, maintenance and overhaul services with
respect to the Aircraft, other than the Lessee Assumed
Services (as defined below), at a fixed cost per flight
hour; and
WHEREAS, Lessee has further requested that Lessor
perform certain additional repair, modification, maintenance
and overhaul services on a time-and-materials basis; and
WHEREAS, Lessor desires to perform such maintenance
services for Lessee;
NOW, THEREFORE, in consideration of the mutual
covenants herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, Lessor and Lessee hereby agree as
follows:
Section 1. Definitions. Unless the context
otherwise requires, the following terms shall have the
following meanings for all purposes of this Lease Agreement
and shall be equally applicable to both the singular and the
plural forms of the terms herein defined:
"AAdvantage Agreement" means the AAdvantage-Registered
Trademark- Participating Agreement, dated as of September
12, 1994 between Lessee and Lessor, and all other
agreements, instruments, certificates and documents related
thereto or executed or delivered in connection therewith,
all as from time to time amended, supplemented or modified.
"AA Station" means HNL, LAS, LAX, SEA, SFO or TUL.
"ACARS" means the Aircraft Communications and Reporting
System currently installed on the Aircraft.
"ADs" means Airworthiness Directives issued by the FAA.
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"AD Effective Date" shall have the meaning assigned to
such term in Section 4(s) of Exhibit E.
"Additional Insured" shall have the meaning specified
in Section 9 hereof.
"Additional Services" means the engineering,
inspection, maintenance, repair and overhaul services that
are necessary or appropriate (i) to correct damage
(including replacement at Lessee's expense if Lessor
reasonably determines that the damage (other than ordinary
wear and tear) is beyond economic repair) to the Serviced
Aircraft, any Serviced Engines and/or any Rotable Parts
(including Serviced Parts removed during the delivery of
Maintenance Services other than Additional Services) that
resulted from (a) improper use, improper repairs by Persons
other than Lessor or its subcontractors, neglect (other than
by Lessor or its subcontractors), or any cause other than
ordinary wear and tear or (b) Foreign Object Damage, (ii) to
complete modifications to the Serviced Aircraft and any
Serviced Engines requested by Lessee to customize the
Serviced Aircraft in any manner that deviates from Lessor's
standard configuration (subject to the provisions of Section
4(q) of Exhibit E which require Lessee to procure and
provide certain Serviced Parts prior to their installation
on the Serviced Aircraft), (iii) to complete modifications
(including those modifications mandated by the FAA) to the
Serviced Aircraft the costs of which exceed $1,000 per
Serviced Aircraft, or (iv) to complete any inspections
mandated by the FAA that are not included in Lessor's
existing maintenance program and are not related to aging
aircraft and corrosion prevention issues, but excluding
Field Trip Maintenance Services, and On-Call Maintenance
Services.
"Affiliate" of any Person means any other Person
directly or indirectly controlling, controlled by or under
common control with such Person. For purposes of this
definition, "control" when used with respect to any
specified Person means the power to direct or cause the
direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
"Aircraft" means the Airframe delivered and leased
hereunder, together with the three Engines initially leased
hereunder with the Airframe (or any Engine substituted for
any such Engine hereunder), whether or not any of such
initial or substituted Engines may from time to time be
installed on the Airframe or may be installed on any other
airframe or on any other aircraft.
"Airframe" means (i) the XxXxxxxxx Xxxxxxx XX00-00
aircraft (except engines or Serviced Engines from time to
time installed thereon) bearing the U.S. Registration Number
N160AA and Manufacturer's Serial Number 46710 and (ii) any
and all Parts so long as the same shall be incorporated or
installed in or attached to the Airframe or so long as title
thereto shall remain vested in Lessor.
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"Allocated Parts" shall have the meaning assigned to
such term in the Long-Term Lease Agreement.
"Allocated Spare Engine" shall have the meaning
assigned to such term in Section 4(n) of Exhibit F of the
Long-Term Lease Agreement.
"American Agreements" mean the Lease Agreement, the
Long Term Agreements, the Ancillary Agreements, 151 Lease,
161 Lease, 162 Lease and the 171 Lease.
"AMRCG" means AMR Training & Consulting Group, Inc., a
Delaware corporation, and its successors and assigns.
"AMR Leasing" means AMR Aircraft Sales & Leasing
Company, a Delaware corporation, and its successors and
assigns.
"Ancillary Agreements" means that certain Manuals
Supplement, Amended and Restated Training Document and FOS
Implementation Document, each dated as of March 31, 1994,
and entered into by and between Lessor and Lessee.
"A.O.G." means aircraft on the ground.
"Applicable Law" means all applicable laws of any
Governmental Authority, including securities laws, tax laws,
tariff and trade laws, ordinances, judgments, decrees,
injunctions, writs and orders or like actions of any court,
arbitrator, judicial or quasi-judicial tribunal,
governmental agency or authority in any country and rules,
regulations, orders, interpretations, licenses and permits
of any federal, state, county, municipal, regional or other
United States or foreign governmental body, instrumentality,
agency or authority.
"APU" means auxiliary power unit.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. Section 101 et seq.), as amended from time
to time and any successor statute.
"Base Maintenance Services" means the inspection,
engineering, maintenance, repair and overhaul services of
the Serviced Aircraft, any Serviced Engines and any Serviced
Parts that are ordinarily performed at a Maintenance Base as
part of the scheduled maintenance of the Serviced Aircraft,
any Serviced Engines or any Serviced Parts to repair
ordinary wear and tear including, without limitation, all
aircraft heavy maintenance checks and phase checks, but
excluding (i) the inspection, maintenance, repair and
overhaul of Parts described in Section 4(q) of Exhibit E and
(ii) Additional Services, Field Trip Maintenance Services,
Line Maintenance Services and On-Call Maintenance Services.
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"Basic Rent" means the rent payable for the Aircraft
pursuant to Section 3(b), as the same may be adjusted
pursuant to Section 16.
"Basic Rent Payment Date" means the dates for payment
of Basic Rent described in Schedule I attached hereto.
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banking institutions
in New York City, New York, Fort Worth, Texas or Honolulu,
Hawaii are authorized or required by law, regulation or
executive order to be closed.
"Change in Control" means the acquisition by any Person
or 13D Group (other than Airline Investors Partnership, L.P.
or its Affiliates) of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of Voting
Securities after which such Person or Group owns Voting
Securities representing 30% or more of the outstanding
Voting Securities.
"Claims" means actual or threatened claims, demands and
suits.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and analogous provisions of any
successor statute.
"Confidential Information" shall have the meaning
assigned to such term in Section 17(d).
"Confidentiality Agreement" means that certain
Confidentiality Agreement dated November 8, 1993, between
AMRCG and Lessee.
"Cycle" means, with respect to the Serviced Aircraft,
one takeoff of such Serviced Aircraft and the next
subsequent landing of such Serviced Aircraft.
"Default" means any event which with the passage of
time or the giving of notice or both would become a Lessee
Event of Default.
"Defect" shall have the meaning assigned to such term
in Section 5(a) of Exhibit E.
"Deferred Purchase Certificate" has the meaning set
forth in the Indenture.
"Delivery Date" means the date on which the Aircraft is
delivered by Lessor to, and accepted by, Lessee.
"Discount Rate" means the Prime Rate.
"DOT" means the United States Department of
Transportation, or any Person, governmental department,
bureau, commission, or agency succeeding to the functions of
such department.
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"Engine" means (i) each of the three General Electric
Model CF6-6K engines listed by manufacturer's serial numbers
in Lease Supplement No. 1, whether or not from time to time
installed on the Airframe or installed on any other airframe
or on any other aircraft and (ii) any Replacement Engine
which may from time to time be substituted pursuant to
Section 8 for an Engine leased hereunder; together in each
case with any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so
long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from
such Engine. Except as otherwise set forth herein, at such
time as a Replacement Engine shall be so substituted, such
replaced Engine shall cease to be an Engine hereunder. The
term "Engines" means, as of any date of determination, all
Engines then leased hereunder.
"Event of Loss" with respect to any Item of Equipment
means any of the following events with respect to such Item
of Equipment: (i) loss of such Item of Equipment or the use
thereof due to theft, disappearance, destruction, damage
beyond repair or rendition of such Item of Equipment
permanently unfit for normal use for any reason whatsoever;
(ii) any damage to such Item of Equipment which results in
an insurance settlement with respect to such Item of
Equipment on the basis of a total loss whether actual,
constructive or arranged; (iii) the condemnation,
confiscation or seizure of, or requisition of title to such
Item of Equipment; (iv) the requisition of use of such Item
of Equipment (other than requisition for use by the
Government); (v) the requisition of use of such Item of
Equipment by the Government for any period ending after the
expiration of the Term unless Lessor elects, upon 30 days'
prior notice, not to treat such requisition as an Event of
Loss at the end of the Term; (vi) as a result of any rule,
regulation, order or other action by the FAA, DOT or other
governmental body of the United States having jurisdiction,
the use of such Item of Equipment in the normal course of
air transportation of persons shall have been prohibited for
a period of six consecutive months, unless Lessee, prior to
the expiration of such six-month period, shall have
undertaken and shall be diligently carrying forward all
steps which are necessary or desirable to permit the normal
use of such property by Lessee or, in any event, if such use
shall have been prohibited for a period of twelve
consecutive months or if such use is prohibited at the end
of the Term, unless at the end of the Term such use has then
been prohibited for less than six consecutive months, then
an Event of Loss shall not be deemed to have occurred
hereunder until the expiration of six consecutive months
during which the use of the Item of Equipment has been so
prohibited, but only so long as Lessee continues to pay
Basic Rent to the Lessor on the first day of each month, at
the rate set forth in Schedule I attached hereto and
Supplemental Rent pursuant to Exhibit E hereto, and agrees
to and does comply with all other provisions hereof; or
(vii) the operation or location of the Item of Equipment,
while under requisition for use by the Government, in any
area excluded from coverage by any insurance policy in
effect with respect to the Item of Equipment required by the
terms of Section 9, if Lessee shall not have obtained
indemnity in lieu thereof from the Government, acceptable to
Lessor; provided that if such property shall be returned to
Lessee in such a condition that Lessee can within 30 days
following the return thereof cause the Item of Equipment to
comply with the maintenance conditions set forth in Section
7 hereof, then such event shall, at the option of Lessee,
not constitute an Event of Loss. An Event of Loss with
respect to the Aircraft shall be deemed to have occurred if an
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Event of Loss occurs with respect to the Airframe. In
the case of clauses (i), (ii), (iii) and (iv), the date of
an Event of Loss shall be the date of destruction, damage,
requisition, loss, etc. to any Item of Equipment. In the
cases of clauses (v), (vi) and (vii), the date of an Event
of Loss shall be respectively (A) such 180th day or last day
of the applicable Term as the case may be, and (B) the last
day of such six month period or twelve month period, as the
case may be and (C) the first day of such operation or
location.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Expendable Parts" means (i) Serviced Parts used in the
repair and overhaul of the Serviced Airframe, any Serviced
Engines and other Rotable Parts that are assumed to have no
potential for reuse and miscellaneous materials and supplies
consumed during the repair and overhaul process, and (ii)
Serviced Parts that have some potential for repair but that
are customarily assumed to be expended.
"Expenses" means liabilities, obligations, losses,
damages, penalties, claims (including claims involving
liability in tort, strict liability or otherwise), actions,
suits, judgments, costs, expenses and disbursements
(including legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any
limitation as to amount, together with interest thereon at
the Stipulated Interest Rate from the date incurred until
reimbursed hereunder.
"FAA" means the United States Federal Aviation
Administration, or any person, governmental department,
bureau, commission or agency succeeding to the functions of
such Administration.
"Federal Aviation Act" or "Act" means the Federal
Aviation Act of 1958, as amended.
"Field Trip Maintenance Services" means, with respect
to the Serviced Aircraft, any Serviced Engine or any
Serviced Part that experiences a mechanical malfunction, the
inspection, maintenance and repair of such malfunction at
any location where Lessor does not have on-site the
necessary number of mechanics trained to work on the
particular malfunction experienced by the Serviced Aircraft,
any Serviced Engine or any Serviced Part.
"Flight Hour" means the amount of time (expressed in
hours and rounded upward to the nearest one-tenth (1/10th)
of an hour) during the flight of a Serviced Aircraft between
"wheels off" on takeoff and "wheels on" on landing.
"Foreign Object Damage" means damage to a Serviced
Engine or any component thereof caused by any object or
material ingested into the Serviced Engine that results in
the breakage or destruction of a Serviced Engine component
or a notch, non-stress related crack, cut, indentation or
other depression to the surface of a Serviced Engine
component in each case beyond specification limits of the
Lessor's maintenance program, but excluding the gradual
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erosion or smoothing of any Serviced Engine component caused
by numerous Flight Hours of operation.
"Government" means the government of the United States
of America, and any instrumentality or agency thereof.
"Governmental Authority" means any governmental
department, court, bureau, commission, agency or any other
entity, whether of the United States (including any state or
subdivision thereof) or any other country (including any
political subdivision thereof), having jurisdiction over
this Lease, the transactions contemplated hereby, or any
document related hereto or thereto or delivered in
connection herewith or therewith, the Serviced Aircraft or
the parties hereto.
"HNL" means Honolulu International Airport in Honolulu,
Hawaii.
"IATA" means International Air Transport Association.
"Indemnified Party" shall have the meaning assigned to
such term in Section 15.
"Interim Aircraft Lease Agreements" means the Interim
Aircraft Lease Agreements each dated as of December 30,
1993, May 20, 1994, August 10, 1994 or August 31, 1994
between AMR Leasing and Lessee, as the same may be amended,
modified or supplemented from time to time.
"Interim Aircraft Maintenance Agreement" means the
Interim Aircraft Maintenance Agreement dated as of December
30, 1993 between Lessor and Lessee, as the same may be
amended, modified or supplemented from time to time.
"Interim Definitive Agreements" means the Interim
Aircraft Lease Agreements, the Interim AAdvantage
Participating Carrier Agreement dated as of December 30,
1993 between Lessee and Lessor, the Interim Aircraft
Maintenance Agreement, the Interim Multihost Agreement dated
as of December 30, 1993 between Lessee and SABRE, the
Interim Flight Operating System Agreement dated as of
December 30, 1993 between Lessee and SABRE, the Interim
Equipment Master Equipment Lease Agreement dated as of
December 30, 1993 between Lessee and SABRE, the Guaranty
Agreement dated as of December 10, 1993 executed by HAL,
Inc. and West Maui Airport, Inc. in favor of Lessor, AMRCG,
AMR Leasing and SABRE and the Security Agreement dated as
of December 10, 1993 between Lessee, HAL, Inc. and West Maui
Airport, Inc. as debtors and Lessor, AMRCG, AMR Leasing and
SABRE as secured parties, and all other agreements,
instruments, certificates or documents related thereto or
executed or delivered in connection therewith, as amended or
modified from time to time.
"In-Use Aircraft" means the Airframe delivered and
leased hereunder, together with the three Serviced Engines
or engines installed from time to time thereon.
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"Issuer Insolvency" shall have the meaning assigned
thereto in Section 13A hereof.
"Item of Equipment" or "Item" means the Airframe or
each of the Serviced Engines, and for purposes of the
definition of "Event of Loss" as used in Section 8(b)(3)
hereof, shall mean each Engine.
"LAS" means XxXxxxxx International Airport in Las
Vegas, Nevada.
"LAX" means Los Angeles International Airport in Los
Angeles, California.
"Lease Agreement", "this Lease Agreement", "this
Lease", "this Agreement", "herein", "hereunder", "hereby" or
other like words mean this Lease Agreement as originally
executed or as modified, amended or supplemented pursuant to
the applicable provisions hereof, including, without
limitation, supplementation hereof by one or more Lease
Supplements entered into pursuant to the applicable
provisions hereof.
"Lease Supplement" means Lease Supplement No. 1,
substantially in the form of Exhibit A hereto to be entered
into between Lessor and Lessee for the purpose of leasing
the Aircraft under and pursuant to the terms of this Lease,
or any amendment hereto or to any other Lease Supplement
entered into subsequent to the Delivery Date.
"Lease Term" means the period from the Delivery Date of
the Aircraft until September 11, 2001, unless earlier
terminated in accordance with the provisions of this Lease.
"Lessee Assumed Services" means those maintenance
services set forth on Attachment C to Exhibit E to be
performed by Lessee at HNL during the Lease Term and any
other maintenance services that the parties mutually agree
pursuant to Section 1 of Exhibit E that Lessee will assume
and perform.
"Lessee Event of Default" shall have the meaning
specified in Section 13A hereof.
"Lessor Event of Default" shall have the meaning
specified in Section 13B hereof.
"Lessor Warranty" shall have the meaning assigned to
such term in Section 5(a) of Exhibit E.
"Lessor's Liens" means any Lien arising as a result of
(i) Claims against or affecting Lessor, not related to the
transactions contemplated by this Lease; (ii) acts or
omissions of Lessor, not related to the transactions
contemplated by this Lease, or not permitted under this
Lease; (iii) Taxes or Claims imposed against Lessor which
are not indemnified against by Lessee pursuant hereto; or
(iv) Claims against Lessor arising out of the voluntary or
involuntary transfer by Lessor (without the consent of
Lessee) of any of its interests in the Airframe, any Serviced
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Engine or any Engine, including, without
limitation, by means of granting a security interest
therein, other than a transfer of the Aircraft pursuant to
Section 8 or 14A hereof.
"Liabilities" means Claims, liabilities, losses,
judgments, damages, fines, penalties and costs, fees and
expenses of any nature incident thereto (including, without
limitation, reasonable attorneys' fees and expenses and
costs of investigation and litigation), whether arising in
tort, contract or otherwise.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or
Claim.
"Line Maintenance Services" means all customary line
maintenance services to the Serviced Aircraft, any Serviced
Engine or any Serviced Part, including scheduled inspections
and servicing of the Serviced Aircraft and related repairs,
but excluding (i) Additional Services, Base Maintenance
Services, Field Trip Maintenance Services and On-Call
Maintenance Services and (ii) Lessee Assumed Services.
"Long-Term Agreements" means the Long-Term Lease
Agreement, the 151 Lease Agreement, the 161Lease Agreement,
the 162 Lease Agreement, the 171Lease Agreement, the
AAdvantage Participating Carrier Agreement dated as of
September 12, 1994 between Lessee and Lessor, the Multihost
Agreement dated as of September 12, 1994 between Lessee and
SABRE, the Flight Operating System Agreement dated as of
September 12, 1994 between Lessee and SABRE, the Equipment
Master Lease Agreement dated as of September 12, 1994
between Lessee and SABRE, and all other agreements,
instruments, certificates and documents related thereto or
executed or delivered in connection therewith, all as
amended or modified from time to time.
"Long-Term Lease Agreement" means the Aircraft Lease
Agreement dated as of September 12, 1994 between Lessor and
Lessee, as amended, supplemented, modified and renewed from
time to time.
"Loss Payment Date" shall have the meaning set forth in
Section 8(a) hereof.
"MAGSA Rates" means the hourly rates applicable to
participants in the Mutual Assistance Ground Service
Agreement among Lessor and other participating IATA carriers
as amended from time to time, or any comparable replacement
agreement.
"Maintenance Base" shall have the meaning assigned to
such term in Section 2(a)(i) of Exhibit E.
"Maintenance Services" means Additional Services, Base
Maintenance Services, Field Trip Maintenance Services, Line
Maintenance Services and On-Call Maintenance Services but
excluding Lessee Assumed Services.
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"Maintenance Services Termination Date" shall have the
meaning set forth in Section 1 to Exhibit E hereto.
"Manual" means the Standard Practice Manual mutually
prepared by Lessor and Lessee for administration of this
Agreement, a true and correct copy of which has been
provided to Lessor and Lessee, together with any amendments
made thereto from time to time by a party hereto with the
consent of the other party hereto (which consent shall not
be unreasonably withheld).
"Manufacturer" means, collectively, the respective
manufacturers of the Airframe, each Engine and each Serviced
Engine.
"Monthly Minimum Maintenance Amount" shall have the
meaning set forth in Section 3(f)(i) of Exhibit E hereto.
"NTF" means, with respect to the Serviced Aircraft, any
Serviced Engine or any Serviced Part upon which an
inspection has been performed to determine the existence of
a suspected malfunction, that the results of such inspection
indicated there was "no trouble found."
"On-Call Field Stations" means (i) LAS, LAX, SEA and
SFO and any other station requested by Lessee and agreed to
in writing by Lessor, and in each case, at which, pursuant
to Section 1 of Exhibit E, Lessee has elected to perform,
and is performing, Line Maintenance Services at such
location and (ii) HNL.
"On-Call Maintenance Services" means, with respect to
the Serviced Aircraft, any Serviced Engine or any Serviced
Part that experiences a mechanical malfunction, the
inspection, maintenance and repair of such malfunction at
the request of Lessee at any of the On-Call Field Stations
but excluding Field Trip Maintenance Services.
"151 Lease" or "151 Lease Agreement" means the Aircraft
Lease Agreement, dated as of December 15, 1995 between
Lessee and Lessor, and all other agreements, instruments,
certificates and documents related thereto or executed or
delivered in connection therewith, all as from time to time
amended, supplemented or modified.
"161 Lease" or "161 Lease Agreement" means the Aircraft
Lease Agreement, dated as of December 30, 1995 between
Lessee and Lessor, and all other agreements, instruments,
certificates and documents related thereto or executed or
delivered in connection therewith, all as from time to time
amended, supplemented or modified.
"162 Lease" or "162 Lease Agreement" means the Aircraft
Lease Agreement, dated as of November 6, 1996 between Lessee
and Lessor, and all other agreements, instruments,
certificates and documents related thereto or executed or
delivered in connection therewith, all as from time to time
amended, supplemented or modified.
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"171 Lease" or "171 Lease Agreement" means the Aircraft
Lease Agreement, dated as of May 15, 1996 between Lessee and
Lessor, and all other agreements, instruments, certificates
and documents related thereto or executed or delivered in
connection therewith, all as from time to time amended,
supplemented or modified.
"Outside Services" shall have the meaning assigned to
such term in Section 4(f) of Exhibit E.
"Parts" means (i) any and all appliances, parts,
instruments, appurtenances, accessories, furnishings, seats
and other equipment of whatever nature (other than complete
engines or Serviced Engines), which may from time to time be
incorporated or installed in or attached to the Airframe or
any Serviced Engine, or having been so installed in or
attached, are later removed therefrom, so long as title
thereto remains vested in Lessor, and (ii) all Allocated
Parts (other than the Allocated Spare Engine).
"Permitted Liens" means Liens referred to in clauses
(i) through (vii) of Section 6.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or other form of
entity or any government or any agency or political
subdivision thereof.
"Phased-Out Parts" means Serviced Parts of a type
formerly utilized during the Lease Term by Lessor but
discontinued with respect to Lessor's fleet of DC10-10
Aircraft that Lessee has properly elected without
contravening Section 4 of Exhibit E to continue to utilize
on the Serviced Aircraft.
"Pooling Agreement" means the Pooling Agreement dated
the date hereof between Lessor and Lessee, as amended,
supplemented and modified from time to time.
"Prime Rate" means the per annum rate announced by The
Chase Manhattan Bank, N.A. from time to time as its prime
rate in New York, New York.
"Rent" means Basic Rent and Supplemental Rent,
collectively.
"Replacement Engine" means a GE CF6-6K engine (or an
engine of the same or another manufacturer of a comparable
or an improved model and suitable for installation and use
on the Airframe) which shall have been leased hereunder
pursuant to Section 8, together with all Parts relating to
such engine.
"Return Aircraft" means upon the return of the Aircraft
to Lessor hereunder pursuant to Section 5, 8, or 14A hereof,
the Airframe constituting part of the Aircraft and the
engines or Serviced Engines attached thereto.
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"Rotable Parts" means Serviced Parts that customarily
have a potential for reuse through inspection, repair,
overhaul or calibration.
"SABRE" means SABRE Decision Technologies, a division
of The SABRE Group, Inc. (formerly known as AMR Information
Services, Inc.).
"SEA" means the Seattle/Tacoma International Airport in
Seattle, Washington.
"Serviced Aircraft" means the Aircraft.
"Serviced Airframe" means (i) the Serviced Aircraft
(except Serviced Engines) and (ii) any and all Serviced
Parts (except Serviced Parts that comprise a Serviced
Engine) so long as the same shall be incorporated or
installed in, or attached to, such Serviced Aircraft.
"Serviced Engines" means (i) each Engine, so long as
Lessee has not delivered possession of any such Engine to
Lessor pursuant to the Pooling Agreement; (ii) each of the
GE CF6-6K engines delivered to Lessee by Lessor pursuant to
the Pooling Agreement so long as such engines have not been
redelivered by Lessee to Lessor under the Pooling Agreement,
provided that, for the purposes of Exhibit E attached
hereto, an engine delivered by Lessee to Lessor thereunder
shall remain a Serviced Engine until all Maintenance
Services have been completed thereon; and (iii) the
Allocated Spare Engine; and (iv) for purposes of Exhibit E
only, GE CF6-6K engines in transit between Lessor and Lessee
pursuant to Sections 3(d), 3(i) and 4(d)(iii) of Exhibit E.
"Serviced Part" means any Serviced Aircraft component,
including any APU, landing gear, part, equipment, accessory,
instrument, avionics or system and miscellaneous materials
and supplies consumed during operation or inspection,
maintenance, repair and overhaul services.
"SFO" means the San Francisco International Airport in
San Francisco, California.
"Stipulated Interest Rate" means the rate of ten
percent (10%) per annum.
"Stipulated Loss Value" payable with respect to an
Event of Loss for the Airframe and its Serviced Engines
shall mean, as of any date of determination, the amounts set
forth in Exhibit B hereto.
"Supplemental Rent" means all amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes or
agrees to pay hereunder to Lessor or others, including,
without limitation, all Monthly Supplemental Rent Payments
and all other amounts, liabilities and obligations of Lessee
to Lessor set forth in Exhibit E attached hereto.
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"Taxes" means any and all fees (including license,
documentation and registration fees), taxes (including
income, gross receipts, preferences, sales, use, turnover,
value added, property (tangible and intangible), excise and
stamp taxes), licenses, levies, imposts, duties, charges,
surcharges, assessments or withholdings of any nature
whatsoever, together with any and all penalties, fines,
additions to tax and interest thereon in each case imposed
by a Taxing Authority.
"Taxing Authority" means any Federal, state or local
government or other taxing authority in the United States or
any political subdivision or territory or possession
thereof, any international authority and any taxing
authority of any other government or political subdivision
or territory or possession thereof.
"Term" means the period for which the Aircraft is
leased pursuant to Section 3(a) hereof and Section 3 of the
Lease Supplement.
"13D Group" means any partnership, limited partnership,
syndicate or other "group" (as such term is used in
Section 13(d)(3) of the Exchange Act).
"TUL" means Tulsa International Airport in Tulsa,
Oklahoma.
"Turn Time" means, with respect to any particular
Maintenance Services, the period of time ordinarily required
by Lessor, exerting its reasonable efforts, to complete such
Maintenance Services in accordance with its customary
practices and procedures or such specified period of time
agreed to in writing by Lessor and Lessee for the
performance of any particular Maintenance Services.
"Voting Securities" means any securities of Lessee
entitled to vote generally in the election of directors, or
securities convertible into or exercisable or exchangeable
for such securities.
"Warranty Claim" means a written notice delivered to
Lessor by Lessee of a Defect in Maintenance Services
performed by Lessor, which Defect is claimed to be within
the scope of the warranty provided by Lessor in Section 5(a)
of Exhibit E, such notice specifying in detail the nature of
the Defect.
"Warranty Period" means, with respect to the Serviced
Aircraft, any Serviced Engine or any Serviced Part upon
which Maintenance Services were performed, that period of
time commencing upon redelivery to Lessee of such Serviced
Aircraft, Serviced Engine or Serviced Part after performance
of Maintenance Services thereon and expiring on the first to
occur of the following: (i) the expiration of one hundred
twenty (120) days after redelivery of such Serviced
Aircraft, Serviced Engine or Serviced Part to Lessee, or
(ii) the completion of four hundred (400) Flight Hours of
operation of such Serviced Aircraft, Serviced Engine or
Serviced Part after redelivery to Lessee.
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"Weekly Supplemental Rent Payment" shall have the
meaning assigned to such term in Section 3(f) of Exhibit E.
"Weekly Supplemental Rent Payment Date" shall have the
meaning assigned to such term in Section 3(f) of Exhibit E.
Rules of Interpretation. The following rules of
interpretation apply to this Lease Agreement:
(1) "or" is not exclusive and "include" and "including"
are not limiting; (2) "hereby", "herein", "hereof",
"hereunder", "this Lease", "this Agreement", "Lease
Agreement", or other like words refer to this Aircraft Lease
Agreement; (3) a reference to any agreement or other
contract includes permitted supplements and amendments; (4)
a reference to a law includes any amendment or modification
to such law and any rules or regulations issued thereunder
or any law enacted in substitution or replacement therefore;
(5) a reference to a Person includes its permitted
successors and assigns; (6) a reference herein to an
Article, Section, Exhibit or Schedule is to the relevant
Article, Section, Exhibit or Schedule of this Lease
Agreement; (7) any right may be exercised at any time and
from time to time; (8) all obligations are continuing
obligations; (9) time shall be of the essence in the
performance of all payment obligations; (10) the heading of
the Articles, Sections, Exhibits, Schedules and subsections
are for the convenience of reference only and shall not
affect the meaning of this Lease Agreement; and (11) no term
or provision herein may be changed, waived, discharged or
terminated orally, but only by written instrument signed by
the party against which the enforcement of the change,
waiver, discharge or termination is sought.
Section 2. Delivery and Acceptance.
(a) Time and Place. Lessor hereby agrees (subject to
satisfaction of the conditions set forth in Exhibit C
attached hereto) to lease to Lessee hereunder and Lessee
hereby agrees to lease from Lessor hereunder, on the
Delivery Date, the Aircraft, as evidenced by the execution
by Lessor and Lessee of Lease Supplement No. 1 hereunder.
Delivery of the Aircraft by Lessor and acceptance thereof by
Lessee shall occur at LAX, or such other location agreed on
by Lessor and Lessee.
(b) Delivery Date. The Delivery Date for the Aircraft
shall occur on or about January 3, 1997.
Lessor shall deliver the In-Use Aircraft in the
condition set forth in Exhibit D attached hereto, provided
that such delivery and fulfillment of delivery conditions
shall, subject to the execution and delivery of Lease
Supplement No. 1 (and satisfaction of the conditions set
forth in Exhibit C attached hereto), be deemed to have been
met. Lessor shall use its reasonable efforts to deliver the
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In-Use Aircraft on the Delivery Date, but if Lessor is
unable to deliver the In-Use Aircraft on the Delivery Date,
it shall deliver the In-Use Aircraft to Lessee as soon
thereafter as possible without any penalty, charge or
damages for late delivery.
Section 3. Term and Rent.
(a) Term. Except as otherwise provided herein
(including, without limitation, pursuant to the definition
of Event of Loss), the Term for the Aircraft shall commence
on the Delivery Date and end on September 11, 2001.
Notwithstanding the foregoing, Lessor shall have the right
to terminate this Lease by written notice to Lessee upon the
occurrence of a Change in Control and the relevant Term for
each Aircraft shall end on the date specified in such notice
.
(b) Basic Rent. Lessee hereby agrees to pay Lessor
Basic Rent for the Aircraft throughout the Term, in advance
in the amounts set forth in Schedule I, on each Basic Rent
Payment Date, commencing on the Delivery Date.
(c) Supplemental Rent. Lessee also agrees to pay to
Lessor, or to whosoever shall be entitled thereto, any and
all Supplemental Rent promptly as the same shall become due
and owing, including on each Monthly Supplemental Rent
Payment Date (as defined in Exhibit E attached hereto) (or
on demand if no due date is specified), and in the event of
any failure on the part of Lessee to pay any Supplemental
Rent, Lessor shall have all rights, powers and remedies
provided for herein or by law or in equity or otherwise in
the case of nonpayment of Basic Rent. In addition, Lessee
shall pay, on demand, as Supplemental Rent, to the extent
permitted by applicable law, an amount equal to interest at
the Stipulated Interest Rate on any part of any installment
of Basic Rent not paid when due for any period for which the
same shall be overdue and on any payment of Supplemental
Rent not paid when due or demanded, as the case may be, for
the period until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of
Lessee with respect to Supplemental Rent. All Supplemental
Rent to be paid pursuant to this Section 3(c) shall be
payable in the type of funds and in the manner set forth in
Section 3(e).
(d) Prohibition Against Setoff, Etc. Except as set
forth in Section 4(c)(i)(D) of Exhibit E attached hereto,
this Lease is a net lease and Lessee's obligation to pay
Rent hereunder shall be absolute and unconditional and shall
not be affected by any circumstance including (i) any claim
which Lessee may have against Lessor or anyone else for any
reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions),
including any breach by Lessor or any of its Affiliates, of
any of its warranties, agreements or covenants contained
herein or in any of the Long-Term Agreements or any of the
documents related hereto or thereto or performance, or
nonperformance by Lessor of any of its duties or obligations
to Lessee set forth in Exhibit E attached hereto, (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 Airframe, any Serviced Engine
or any Engine, or any interruption or cessation in or
including any such interruption, cessation or prohibition of the use or
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possession thereof by Lessee for any reason
whatsoever, resulting from the act of any Governmental
Authority; and (iii) any other circumstance, happening or
event whatsoever, whether or not foreseen or similar to the
foregoing; provided that Lessee's obligations to pay Basic
Rent and Supplemental Rent shall cease with respect to the
Aircraft, except with respect to Rent accrued at such time
upon (i) redelivery of the Aircraft by Lessee to Lessor in
accordance with the provisions of Sections 5 hereof; and/or
(ii) repossession of the Aircraft by Lessor pursuant to
Section 14A hereof, but subject to Lessee's payments of sums
specified under said Section 14A; and/or (iii) with respect
to any Item of Equipment, payment by or on behalf of Lessee
to Lessor in full of the Stipulated Loss Value and other
sums specified in Section 8 hereof to be paid by Lessee
pursuant to an Event of Loss with respect to such Item of
Equipment. Lessee hereby waives, and hereby agrees to waive
at any future time at the request of Lessor, to the extent
now or then 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. Each payment of Rent made by
Lessee to Lessor shall be final as to Lessor and Lessee.
Lessee shall not seek to recover all or any part of any such
payment of Rent from Lessor for any reason whatsoever except
manifest error. The parties agree that nothing contained in
this Section 3(d) shall affect or limit any right of Lessee
to collect damages for the breach of any covenant or
representation by Lessor hereunder, including Section 4
hereto or Exhibit E hereto or by any Affiliate of Lessor
under any Long-Term Agreement. Lessee shall pay all costs
and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary or structural or nonstructural, in
connection with the delivery, use, operation, maintenance,
return, and repair and reconstruction of the Airframe and
each Serviced Engine by Lessee, including the costs and
expenses particularly set forth in this Lease, except as may
be otherwise expressly set forth in the other documents
related hereto.
(e) Payment to Lessor. All Rent shall be paid by
Lessee to Lessor by wire transfer of immediately available
funds in U. S. Dollars, to such account as Lessor shall
designate to Lessee in writing. Such funds shall be
available to Lessor not later than 3:00 p.m., New York City
time on the date of payment. Whenever any payment of Rent
is due on a day other than a Business Day, such payment
shall be made on the next preceding Business Day. All Rent
to be paid by Lessee hereunder shall be paid in full without
any deduction or withholding with respect to Taxes of any
nature imposed by any Taxing Authority unless Lessee is
prohibited by Applicable Law from doing so, in which event
Lessee shall comply with Section 16 below.
Section 4. Disclaimer; Warranties Relating to the
Aircraft; Certain Agreements of Lessee,
Representations of Lessee.
(a) Disclaimer. LESSOR LEASES AND LESSEE TAKES THE
AIRCRAFT "AS-IS, WHERE-IS", AND LESSOR DOES NOT MAKE NOR
SHALL BE DEEMED TO HAVE MADE, AND EXPRESSLY DISCLAIMS, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
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PARTICULAR PURPOSE OF ANY ITEM OF EQUIPMENT OR ENGINE OR AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS
BASED ON STRICT LIABILITY IN TORT, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP IN ANY ITEM OF EQUIPMENT OR
ENGINE OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR
WARRANTY WHATSOEVER WITH RESPECT THERETO, except for the
representations of Lessor set forth in Section 4(e) below,
and that Lessor represents that (i) it has good title to the
Aircraft free of Lessor's Liens and the lawful right to
lease the Aircraft to Lessee in accordance with the terms
hereof, (ii) Lessor has the lawful right to lease the
Airframe to Lessee in accordance with the terms hereof, and
(iii) that Lessor is a citizen of the United States of
America as defined in Section 40102(a)(15) (former 101(16))
of the Act. LESSOR SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY TO LESSEE OR ANY OTHER PERSON WITH RESPECT TO (I)
ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY ANY ITEM OF EQUIPMENT OR ENGINE OR
BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR
BY ANY OTHER CIRCUMSTANCES IN CONNECTION THEREWITH; (II) THE
USE, OPERATION OR PERFORMANCE OF ANY ITEM OF EQUIPMENT OR
ENGINE OR ANY RISKS RELATING THERETO; (III) ANY INTERRUPTION
OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES; OR (IV) THE
DELIVERY HEREUNDER, OPERATION, SERVICING, MAINTENANCE,
REPAIR OR IMPROVEMENT OF ANY ITEM OF EQUIPMENT EXCEPT AS
EXPRESSLY PROVIDED IN THE PROVISIONS OF EXHIBIT E HERETO
RELATING TO THE SERVICING, MAINTENANCE, REPAIR OR
IMPROVEMENT OF ANY SERVICED ENGINE OR SERVICED AIRCRAFT;
PROVIDED THAT NOTHING CONTAINED IN THIS SECTION 4(a) SHALL
IN ANY WAY LIMIT THE RIGHTS OF LESSEE AGAINST ANY AFFILIATE
OF LESSOR UNDER ANY LONG-TERM AGREEMENT.
(b) Quiet Enjoyment. Notwithstanding any other term
or provision of this Agreement, Lessor covenants that, so
long as no Lessee Event of Default shall have occurred and
be continuing, it shall not take any action contrary to
Lessee's rights under this Lease, or otherwise through its
own actions or inactions in any way interfere with the quiet
enjoyment of the use and possession of the Aircraft, the
Airframe or any Serviced Engines by Lessee; provided that no
performance or failure by Lessor to perform its obligations
under Exhibit E hereto shall be deemed a breach of this
Section 4(b).
(c) Waiver of Warranties. LESSEE HEREBY WAIVES,
RELEASES AND RENOUNCES THE BENEFIT OF ANY AND ALL
CONDITIONS, WARRANTIES OR REPRESENTATIONS ON THE PART OF
LESSOR WHICH ARE EXPRESSED OR WOULD OR MIGHT BE IMPLIED IN
THIS AGREEMENT WHETHER BY LAW OR OTHERWISE AND RELATING IN
ANY WAY TO THE STATE, CONDITION OR AIRWORTHINESS OF AN ITEM
OF EQUIPMENT OR ENGINE. LESSEE ACKNOWLEDGES THAT THE
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PROVISIONS OF SECTIONS 4(a) AND 4(b) HAVE BEEN THE SUBJECT
OF FULL DISCUSSION AND NEGOTIATION BETWEEN LESSEE AND LESSOR
AND THAT THE BASIC RENT AND ALL OTHER AGREEMENTS OF LESSEE
AND LESSOR CONTAINED IN THIS AGREEMENT WERE ARRIVED AT IN
CONSIDERATION OF THE PROVISIONS OF SECTIONS 4(a) AND 4(b)
SPECIFICALLY INCLUDING THE DISCLAIMER BY LESSOR SET FORTH IN
SECTION 4(a) AND THE WAIVER, RELEASE AND RENUNCIATION BY
LESSEE SET FORTH IN THIS SECTION 4(c).
(d) Lessee's Representations and Warranties. To
induce Lessor to enter into this Lease Agreement, and any
documents contemplated hereby, Lessee makes the following
representations and warranties, each of which shall survive
the execution and delivery of this Lease Agreement and the
Delivery Date:
(i) Lessee is a corporation duly incorporated under
the laws of the Territory of Hawaii and is validly existing
in good standing under the laws of the State of Hawaii and
has its chief executive office in Honolulu, Hawaii. Except
as set forth on Schedule 4(d)(i) hereto Lessee has all
requisite corporate power and authority to carry on its
business as now conducted, and to execute, deliver and
perform its obligations under this Lease and each Lease
Supplement. Lessee is a duly certificated "air carrier"
under Section 41102 (former Section 401) and Section 44705
(former Section 604) of the Federal Aviation Act and
possesses all necessary licenses or permits required by any
Governmental Authority having jurisdiction over Lessee or
the Aircraft to permit Lessee to engage in air
transportation and to perform and comply with its
obligations under this Lease, and is duly qualified to do
business as a foreign corporation, and is in good standing,
in each jurisdiction in which its failure to so qualify
would adversely and materially affect it or its ability to
carry out its obligations under this Lease;
(ii) this Lease has been duly authorized by all
necessary corporate action on the part of Lessee, does not
require any approval of stockholders of Lessee (or if such
approval is required, such approval has been obtained), and
the execution and delivery hereof, and/or the consummation
of the transactions contemplated hereby, and/or compliance
by Lessee with any of the terms and provisions hereof, do
not contravene any provisions of the Articles of
Incorporation or By-laws of Lessee, or result in any breach
of, or constitute any default under, or result in the
creation of any Lien upon any assets or property of Lessee
under, any (A) indenture, mortgage, lease, chattel mortgage,
deed of trust, conditional sales contract, bank loan, credit
agreement or other material agreement or instrument to which
Lessee is a party or by which Lessee or its properties may
be bound or affected other than the Lien under this Lease
and Permitted Liens, or (B) Applicable Law;
(iii) the execution and delivery by Lessee of this
Lease, and the performance by Lessee of any of the
transactions contemplated hereby do not require the consent
or approval of, or registration with, or the giving or prior
notice to any Person, including any federal, state or
foreign governmental authority or entity having appropriate
jurisdiction, except (A) any such consent, approval, notice
registration, notice or action that has been obtained or as would not
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affect the validity, enforceability or binding
nature of this Lease, and (B) routine reporting requirements
of the Securities and Exchange Commission, the FAA, the DOT
or other Governmental Authorities after the Delivery Date;
(iv) this Lease has been duly executed and delivered by
Lessee, and this Lease, together with Lease Supplement No. 1
when executed and delivered by Lessee, will constitute
legal, valid and binding obligations of Lessee, fully
enforceable, except as set forth on Schedule 4(d)(iv), in
accordance with their respective terms;
(v) except as set forth on Schedule 4(d)(v), there are
no pending or, to the knowledge of Lessee, threatened
investigations, suits or proceedings against it or affecting
it or its properties or operations, that, if determined
adversely, would materially adversely affect it, the
consummation of the transactions described in, or the
performance of its obligations under, this Lease Agreement
or affect the right, title or interest of Lessor in the
Aircraft;
(vi) except as set forth on Schedule 4(d)(vi), Lessee
is not in violation of, or in default under, any law,
ordinance, order, regulation or authorization of any
Governmental Authority or any permit or certificate issued
or granted by any Governmental Authority, that could have a
material adverse effect on the business or condition
(financial or otherwise) of Lessee;
(vii) except as set forth in Schedule 4(d)(vii),
Lessee is not in default, and no condition exists that with
notice or lapse of time or both would constitute a default,
under any mortgage, deed of trust, indenture, or other
instrument or agreement to which it is a party, or by which
it or any of its properties or assets may be bound, that
would have a material adverse effect on any of the actions
described in, or on its ability to perform its obligations
under, this Lease, and it is not in breach of any Applicable
Law that would have a material adverse effect on it, or any
of the actions described in, or on its ability to perform
its obligations under, this Lease;
(viii) except for the filing for recordation of this
Lease, and Lease Supplement No. 1, and the placing on the
Aircraft and on each Engine of the plates containing the
legends referred to in Section 7(f) hereof, no further
filing or recording of this Lease or of any other document
(including any financing statement under Article 9 of the
Uniform Commercial Code) and no further action is necessary
or advisable, under the laws of the United States of America
or the State of Hawaii, in order to fully protect and
establish Lessor's title to, and interest in, the Aircraft
and the Engines as against Lessee or any third parties;
(ix) the financial and written information furnished by
Lessee in connection with this Agreement, and the
transactions contemplated hereby does not contain any untrue
statement of a material fact or omit to state a material
fact;
(x) No Default or Lessee Event of Default has occurred
and is continuing hereunder;
(xi) Lessee has assets in excess of $5,000,000.00
according to its most recent financial statement prepared in
accordance with generally accepted accounting principles and
is not a
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"consumer" as that term is defined in Section 17.45
of the Texas Deceptive Trade Practices-Consumer Protection
Act;
(xii) Lessee is not a consumer as defined by Hawaii
Revised Statutes Section 480-1 (1992 Supp.), and therefore
has no right to bring an action or pursue damages based upon
unfair or deceptive acts or practices under that Section;
(xiii) Lessee is an air carrier under 14 C.F.R. Part
121; and
(xiv) Lessor shall be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to its
rights of repossession of the Aircraft, any Engines, any
appliances or spare parts, each as defined in such Section
1110 of the Bankruptcy Code, pursuant to Section 14A hereof.
(e) Lessor's Representations and Warranties. To
induce Lessee to enter into this Lease Agreement, Lessor
makes the following representations and warranties each of
which shall survive the execution and delivery of this Lease
Agreement and the Delivery Date:
(i) the execution and delivery by Lessor of this
Agreement have been duly authorized by all necessary
corporate action on the part of Lessor, do not require any
approval of stockholders of Lessor (or if such approval is
required, such approval has been obtained), and the
execution and delivery hereof, and/or the consummation by
Lessor of the transactions contemplated hereby, and/or
compliance by Lessor with any of the terms and provisions
hereof, do not contravene any provisions of the Certificate
of Incorporation or By-laws of Lessor, or result in any
breach of, or constitute any default under, or result in the
creation of any Lien upon any assets or property of Lessor
under, any (A) indenture, mortgage, lease, chattel mortgage,
deed of trust, conditional sales contract, bank loan, credit
agreement or other material agreement or instrument to which
Lessor is a party or by which Lessor or its properties may
be bound or materially affected, which breach or default
would have a material adverse effect on its ability to
perform the transactions contemplated by this Agreement, or
(B) any Applicable Law binding on Lessor, which breach or
default would have a material adverse effect on its ability
to perform the transactions contemplated by this Agreement;
(ii) the execution and delivery by Lessor of this
Agreement and the performance by Lessor of its obligations
under this Agreement do not require the consent or approval
of, or registration with, or the giving of prior notice to,
any Person including any federal, state or foreign
Governmental Authority or entity having appropriate
jurisdiction, except (A) any such consent, approval, notice
registration, notice or action that has been obtained or as
would not affect the validity, enforceability or binding
nature of this Agreement, and (B) routine reporting
requirements of the Securities and Exchange Commission, the
FAA, the DOT or other Governmental Authorities after the
Effective Date;
-20-
(iii) this Agreement has been duly executed and
delivered by Lessor and, assuming due authorization,
execution and delivery by Lessee, constitutes the legal,
valid and binding obligation of Lessor, fully enforceable
against Lessor in accordance with its terms;
(iv) Lessor is not in default, and no condition exists
that with notice or lapse of time or both would constitute a
default, under any material mortgage, deed of trust,
indenture, or other instrument or agreement to which it is a
party, or by which it or any of its properties or assets may
be bound, that would have a material adverse effect on its
ability to perform its obligations under this Agreement;
(v) there are no pending or, to the knowledge of
Lessor, threatened investigations, suits or proceedings
against it or affecting it or its properties or operations,
that, if determined adversely, would materially adversely
affect the consummation by Lessor of the transactions
described in, or the performance of its obligations under,
this Agreement;
(vi) Lessor is not in violation of, or in default
under, any Applicable Law, of any Governmental Authority or
any permit or certificate issued or granted by any
Governmental Authority, that would have a material adverse
effect on its ability to perform its obligations under this
Agreement;
(vii) Lessor is certificated under 14 C.F.R.
Part 121 to perform Maintenance Services; and(viii)Lessor
has the right to transfer possession and use of the Serviced
Engines to Lessee.
Section 5. Return of Airframe and Engines.
(a) Return of Airframe and Serviced Engines. Upon the
termination of this Lease at the end of the Term or pursuant
to Sections 8 or 14A hereof, Lessee shall return the Return
Aircraft by delivering the same, at its own expense, to
Tulsa, Oklahoma (TUL), Marana, Arizona (MZJ), Amarillo,
Texas (AMA), Dallas/Fort Worth International Airport (DFW),
or Los Angeles International Airport (LAX) at Lessor's sole
option. Upon the expiration of the Term or pursuant to
Sections 8 or 14A, as the case may be, Lessee shall make the
redelivered Return Aircraft available for inspection by
Lessor and its representatives and designees. At the time
of the return of the Return Aircraft:
(i) the Return Aircraft shall be in compliance with
the Return Conditions as set forth in Exhibit D;
(ii) the Return Aircraft shall be in compliance with
Lessee's FAA-approved maintenance program;
(iii) each Item of Equipment and Engine shall be
free and clear of all Liens (except Lessor's Liens);
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(iv) the Return Aircraft shall be in the same passenger
configuration as when delivered to Lessee, and each Item of
Equipment shall be in as good an operating condition as when
delivered to the Lessee on the Delivery Date, ordinary wear
and tear excepted;
(v) Upon the return of the Airframe, either at the end
of the Term, pursuant to Section 8 hereof or pursuant to
Section 14A, (i) Lessee shall have no obligation with
respect to the amount of fuel or oil contained in the
Airframe and all fuel or oil remaining on board the Airframe
shall be the property of Lessor without charge and (ii)
Lessee shall deliver or cause to be delivered to Lessor all
logs, manuals and data, and inspection, modification and
overhaul records required to be maintained with respect
thereto under applicable rules and regulations of the FAA;
(vi)Subject to the availability of storage space, upon the
termination of the Lease as to the Aircraft, upon request of
Lessor, Lessee shall provide Lessor with storage facilities
for such Return Aircraft for a period not exceeding ninety
(90) days in accordance with the applicable manufacturer's
recommendations for storage and FAA regulations and shall
arrange for insurance and maintenance (performance of such
maintenance subject to the availability of Lessee's
employees) for such Return Aircraft during such storage
period. The Lessor shall pay Lessee's direct costs for such
storage, maintenance and insurance without xxxx-up;
and(vii)Any Serviced Engines returned by Lessee on any
Return Aircraft are deemed to be Engines for the purpose of
compliance with Return Conditions.
So long as Lessor is maintaining the Aircraft pursuant
to Exhibit E attached hereto, the Return Conditions set
forth in Exhibit D (other than Sections 2F(a) and (b), 2k,
2M(2), (4) and (5) and 2P thereof and the obligation to
return all documents required for return set forth in
Exhibit D and the obligation to return the Aircraft clean)
shall be deemed to be satisfied with respect to the
Aircraft.
(b) Return of Other Engines. In the event that any
engine that is not a Serviced Engine shall be installed on
the Airframe returned, such engine shall be an engine
suitable to be a Replacement Engine hereunder. Upon return
of the Aircraft, Lessee shall duly convey to Lessor good
title to any such engine, free and clear of all Liens and,
upon such conveyance, Lessee will furnish Lessor with a full
warranty xxxx of sale, in form and substance reasonably
satisfactory to it, with respect to such engine and take
such other action as may be reasonably requested in order
that title to such engine may be duly and properly vested in
Lessor to the same extent as the Engine replaced thereby.
Upon conveyance of good title to such engine to Lessor, and
upon full compliance by Lessee with its obligations
hereunder, at Lessee's expenses, Lessor will transfer to
Lessee all rights, title and interest originally conveyed to
Lessor in an Engine constituting part of the Aircraft but
not installed on the Airframe at the time of the return of
the Airframe "as-is, where-is", free and clear of any
Lessor's Liens but otherwise without recourse or warranty,
express or implied to Lessee.
Section 6. Liens. Lessee shall not directly or
indirectly create, incur, assume or suffer to exist any Lien
on or with respect to the Airframe or any Engine or any
Serviced Engine or any Parts, title thereto or any interest
therein or in this Lease except (i) the respective rights of
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Lessor and Lessee as herein provided, (ii) the rights of
others under agreements or arrangements to the extent
expressly permitted by the terms of Sections 7(e) and 7(h),
(iii) Lessor's Liens, (iv) Liens for Taxes either not yet
due or being contested in good faith (and the payment of
which has been bonded to the satisfaction of Lessor) by
appropriate proceedings so long as such proceedings do not
involve any danger of the sale, forfeiture or loss of the
Airframe or any Engine or any Serviced Engine or interest
therein, (v) materialmen's, mechanics', workmen's,
repairmen's, employees' or other like liens arising in the
ordinary course of business for amounts the payment of which
is either not yet delinquent or is being contested in good
faith (and the payment of which has been bonded to the
satisfaction of Lessor) by appropriate proceedings so long
as such proceedings do not involve any danger of the sale,
forfeiture or loss of the Airframe or any Engine or any
Serviced Engine or interest therein, (vi) liens arising out
of judgments or awards against Lessee with respect to which
at the time an appeal or proceeding for review is being
prosecuted in good faith and with respect to which there
shall have been secured a stay of execution pending such
appeal or proceeding for review, and (vii) the Pooling
Agreement. Lessee shall promptly, at its own expense, take
such action as may be necessary duly to discharge (by
bonding or otherwise) any such Lien not excepted above if
the same shall arise at any time.
Section 7. Registration, Maintenance and Operation;
Possession; Insignia.
(a) Registration, Maintenance and Operation. Lessee,
at its own cost and expense, shall:
(i) maintain, service, repair, overhaul and test or
cause to be maintained, serviced, repaired, overhauled and
tested each Item of Equipment in accordance with Lessee's
FAA approved maintenance program, so as to keep each Item of
Equipment (A) in at least as good an operating condition as
when delivered, ordinary wear and tear excepted, and within
the acceptable limits of performance provided in the
Manufacturer's manuals, (B) in conformity with any
Manufacturer's operating manual, instructions and service
bulletins and all mandatory service bulletins and such other
non-mandatory Manufacturer's service bulletins reasonably
requested by Lessor and by the Manufacturer, (C) in
conformity with all AD's that are required to be performed
with respect to any Item of Equipment during the Lease Term,
(D) in conformity with the requirements of any other
Governmental Authority having jurisdiction over the Item of
Equipment, (E) in such condition that the Airframe and each
Serviced Engine will comply with the FAA type certificate
(as in effect from time to time) issued to the Manufacturer
of the Airframe or such Serviced Engine and in compliance
with a maintenance program approved by the FAA so long as
such maintenance program conforms to the maintenance program
(as in effect from time to time) established by the
applicable FAA-approved maintenance review board report for
airframes and engines of the same type, and (F) in such
condition as may be necessary to enable the airworthiness
certification of the In-Use Aircraft to be maintained in
good standing at all times (and, in the case of any Engine
when it is not installed on the Airframe, so as to keep such
Engine serviceable at all times except when such Engine is
awaiting overhaul, maintenance, repair, inspection or
servicing in the normal course
-23-
of Lessee's FAA-approved or
compatible maintenance program) under the rules and
regulations of the FAA. All maintenance on the Airframe and
Serviced Engines shall be performed by Lessee in accordance
with the standards set forth above. Lessee shall promptly
notify Lessor of any material change in the maintenance
program in respect of the In-Use Aircraft from that in
effect on the Delivery Date;
(ii) not permit the Airframe, any Serviced Engine, or
any Part to be maintained, serviced, repaired, overhauled,
tested, used or operated in violation of any Applicable Law
of any Governmental Authority having jurisdiction or in
violation of any airworthiness certificate, license or
registration relating to the Airframe, any Serviced Engine
or any Part issued by any such Governmental Authority. In
the event that any such Applicable Law requires alteration
of the Airframe, any Serviced Engine, or any Part, Lessee
will conform thereto or obtain conformance therewith at no
expense to Lessor and will maintain the Airframe, such
Serviced Engine or such Part in proper operating condition
under such Applicable Laws;
(iii) maintain or cause to be maintained all
records, logs and other materials required by the FAA or
other applicable Governmental Authority to be maintained in
respect of the In-Use Aircraft; and(iv)promptly furnish to
Lessor such information as may be required to enable Lessor
to file any reports required to be filed by Lessor with any
Governmental Authority because of Lessor's ownership of the
Aircraft.
(b) Additional Maintenance Provisions. Lessee
covenants and agrees that it shall use, operate, maintain,
service, repair, overhaul and test or cause to be used,
operated, maintained, serviced, repaired, overhauled and
tested, the Airframe, each Serviced Engine and any Part in
at least as good manner and with at least as much care as
used by Lessee with respect to other airframes, engines and
parts of the same type or utility owned, leased or operated
by Lessee and that it will not discriminate against the
Airframe, any Serviced Engine or any Part (as compared to
other airframes, engines or parts of the same type or
utility owned, leased or operated by Lessee) in the use,
operation, maintenance, service, repair, overhaul or testing
of the Airframe, each Serviced Engine or any Part.
(c) Territorial Restrictions on Use of Aircraft.
Lessee agrees not to operate or locate any Item of
Equipment, or suffer such Item to be operated, (A) unless
such Item is covered by insurance as required by the
provisions of Section 9, (B) contrary to the terms of the
insurance required by the provisions of Section 9 of this
Lease, (C) in any war zone or recognized or threatened area
of hostilities unless covered to Lessor's satisfaction by
war risk insurance, (D) to or from any airport which is at
such time the subject of a prohibition order of any
Governmental Authority of the United States or of any
international authority or treaty organization of which the
United States is a member, or (E) to or from any airport
that the aircraft leased by Lessee from Lessor pursuant to
the Long-Term Lease are not operated to or from.
(d) Obligations Absolute. Nothing herein, including
Exhibit E hereto, shall be deemed to affect Lessee's
obligations pursuant to this Section 7 or to impose on
Lessor the
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obligation to pay for or be responsible for the
payment of any maintenance, repair or overhaul. It is
understood and agreed that Lessee shall be responsible for
all of its obligations under this Section 7 hereof,
regardless of the performance or non-performance by Lessor
of its obligations described in Exhibit E hereto; provided
that nothing contained in this Lease shall prohibit Lessee
from maintaining a separate action against Lessor for any
default by Lessor of its obligations described on Exhibit E
attached hereto. So long as Lessor is required to maintain
the Aircraft pursuant to Exhibit E hereto, the maintenance
requirements of this Section 7 shall be deemed to have been
satisfied to the extent such maintenance has been provided
by Lessor pursuant to Exhibit E hereto.
(e) Possession. Except for the delivery of the
Airframe or any Serviced Engine to Lessor pursuant to
Exhibit E hereto or delivery of any Serviced Engines
pursuant to the Pooling Agreement, Lessee shall not sublease
or otherwise in any manner deliver, transfer or relinquish
possession of the Airframe, and shall not, without the prior
written consent of Lessor, sublease or otherwise in any
manner deliver, transfer or relinquish possession of any
Serviced Engine or install any Serviced Engine, or permit
any Serviced Engine to be installed, on any airframe other
than the Airframe.
(f) Registration and Insignia. Lessee shall maintain
in the cockpit of the Airframe adjacent to the airworthiness
certificate therein the metal nameplate bearing the Lessor's
name, as owner and lessor. Lessee shall affix as promptly
as practicable after the Delivery Date and thereafter to
maintain on each Engine a metal nameplate bearing the
inscription "AMERICAN AIRLINES, INC., OWNER AND LESSOR".
Lessee may place its customary colors and insignia on the
Airframe or Engines so long as no polished portion of the
In-Use Aircraft is painted. The placement of and colors or
insignia on the In-Use Aircraft shall be performed by
Lessor. Provided that Lessor shall (i) remain a citizen of
the United States of America as defined in Section
40102(a)(15) (former 101(16)) of the Act and (ii) cooperate
with the Lessee, Lessee shall maintain continued
registration of the Airframe in Lessor's name under the Act.
Except as set forth in Section 7(h) below, no additional
modifications may be made to the Aircraft or any Serviced
Engines without the prior written consent of Lessor.
(g) Replacement of Parts. Subject to the provisions
of Exhibit E hereof, Lessee at its own cost and expense,
shall promptly replace (or cause to be replaced) all Parts
which may from time to time be incorporated or installed in
or attached to the Airframe or any Serviced Engine and 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, except as otherwise provided in Section 8. In
addition, Lessee may, at its own cost and expense, remove or
cause to be removed in the ordinary course of maintenance,
service, repair, overhaul or testing, any Parts, whether or
not worn out, lost, stolen, destroyed, seized, confiscated,
damages beyond repair or permanently rendered unfit for use;
provided that Lessee, except as otherwise provided in
Section 8, will, at its own cost and expense, replace such
Parts as promptly as possible. All replacement Parts shall
be free and clear of all Liens (except for Permitted Liens),
and shall be in as good operating condition as, and shall
have a value and
-25-
utility at least equal to, the Parts
replaced, assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any
Serviced Engine shall remain the property of Lessor, no
matter where located. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the
Airframe or any Serviced Engine as above provided, without
further act, (i) title to the replacement Part shall
thereupon vest in Lessor free and clear of all Liens
(except for Permitted Liens); and (iii) such replacement
Part shall become subject to this Lease and be deemed part
of the Airframe or such Serviced Engine for all purposes to
the same extent as the Parts originally incorporated or
installed in or attached to the Airframe or such Serviced
Engine. Any Parts replaced or supplied by Lessor pursuant
to Exhibit E attached hereto shall be deemed to satisfy the
conditions of this Section.
(h) Alterations, Modifications and Additions. Subject
to the provisions of Section 7(a) hereof, and, in addition,
so long as Lessor is maintaining the Aircraft pursuant to
Exhibit E attached hereto, in compliance with Exhibit E
attached hereto, Lessee, at its own expense, will make (or
cause to be made) such alterations and modifications in and
additions to the Airframe and the Serviced Engines as may be
required from time to time to meet the standards of the FAA
or other Governmental Authority having jurisdiction. In
addition and subject to the terms of Exhibit E hereto,
Lessee, at its own expense, may from time to time make (or
cause to be made) such alterations and modifications in and
additions to the Airframe or any Serviced Engine as Lessee
may deem desirable in the proper conduct of its business,
including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use
in the Airframe or any Serviced Engine, provided that (i) no
such alteration, modification, addition or removal shall
diminish the fair market value, utility or remaining useful
life of the Airframe or such Serviced Engine, or impair the
condition or airworthiness thereof below the value, utility,
condition and airworthiness thereof immediately prior to
such alteration, modification, addition or removal assuming
the Airframe or such Serviced Engine was then of the value
and utility and in the condition and airworthiness required
to be maintained by the terms of this Lease; and (ii) no
structural modification shall be made without the prior
written consent of Lessor. Title to all Parts incorporated
or installed in or attached or added to the Airframe or any
Serviced Engine as the result of such alteration,
modification or addition shall, without further act, vest in
Lessor. Notwithstanding the foregoing sentence of this
Section 7(h), so long as no Default or Lessee Event of
Default shall have occurred and be continuing, Lessee may,
at any time during the Term, remove any Part, provided that
(i) such Part is in addition to, and not in replacement of
or substitution for, (x) any Part originally incorporated or
installed in or attached to the Airframe or any Serviced
Engine at the time of delivery thereof hereunder, or (y) any
Part in replacement of or substitution for any such Part,
(ii) such Part is not required to be incorporated or
installed in or attached or added to the Airframe or any
Serviced Engine pursuant to the terms of this Section 7(h),
and (iii) such Part can be removed from the Airframe or such
Serviced Engine without causing material damage to the
Airframe or such Serviced Engine and without diminishing or
impairing the value, utility, condition or airworthiness
required to be maintained by the terms of this Lease which
the Airframe or such Serviced Engine would have had at such
time had such alteration, modification or addition not
occurred.
-26-
Upon the removal by Lessee of any Part as
provided in the immediately preceding sentence, title
thereto shall, without further act, vest in Lessee and such
Part shall no longer be deemed part of the Airframe or such
Serviced Engine from which it was removed. Any Part not
removed by Lessee as provided in such sentence prior to the
return of the Airframe or such Serviced Engine to Lessor
hereunder shall remain the property of Lessor.
(i) Manuals and Technical Records.
Lessee undertakes that:
(1) Throughout the Lease Term, Lessee shall keep, or
cause to be kept, accurate, complete and current records of
all flights made by the Aircraft and each Serviced Engine
and of all maintenance and repairs carried out to the
Airframe and each Serviced Engine and shall allow the Lessor
or its agents to examine and make reasonable copies of the
records at any reasonable time upon giving reasonable notice
to Lessee.
(2) The records so kept shall conform with Lessee's
approved maintenance program.
(3) The records so kept shall be part of the manuals
and technical records and shall be the property of Lessor
and that at the end of the relevant Lease Term or upon the
repossession or redelivery of the Aircraft, Lessee shall
deliver the relevant records to the Lessor, provided that
Lessee shall be entitled to take and retain copies thereof.
(4) The Lessee shall provide to the Lessor or its
authorized representative each month a status report
containing engine and airframe utilization in hours and
cycles, and other information which Lessor may reasonably
request.
(5) All original records shall be maintained in their
original paper form and shall be the property of the Lessor
upon lease termination.
(j) Maintenance and Usage. Except as otherwise
expressly provided herein, throughout the Lease Term, Lessor
and Lessee each agrees to perform its obligations, duties
and liabilities set forth in Exhibit E attached hereto.
Section 8. Loss, Destruction, Requisition, Etc.
(a) Event of Loss to the Aircraft. Upon the
occurrence of an Event of Loss with respect to the In-Use
Aircraft Lessee shall (i) forthwith (and in any event within
five days after such occurrence) give to Lessor written
notice of such Event of Loss and (ii) comply with Section
8(a)(1):
(1) Payment of Stipulated Loss Value and Rent. On or
before the Business Day before the earlier of (i) the 60th
day following the date of the occurrence of such Event of Loss
-27-
with respect to the In-Use Aircraft; or (ii) five days
following the receipt of insurance proceeds with respect to
such occurrence (the "Loss Payment Date"), Lessee shall pay
to Lessor, in the manner and in funds of the type specified
in Section 3(e), an amount equal to the sum of (i) the
Stipulated Loss Value for the In-Use Aircraft calculated as
of the Basic Rent Payment Date next following the Event of
Loss (or if the date of such Event of Loss is a Basic Rent
Payment Date, as of such Basic Rent Payment Date (the "Loss
Computation Date")) less any payment of Basic Rent paid by
Lessee after the date of such Event of Loss and on or prior
to the Loss Payment Date, (ii) any installment of Basic Rent
due and owing prior to the Loss Payment Date, (iii) all
Supplemental Rent then due and owing for the Aircraft on the
Loss Payment Date, and (iv) interest on the amounts
described in clause (i) and (ii) hereof from the Loss
Computation Date to the Loss Payment Date at the Prime Rate.
(2) Termination Upon Payment of Stipulated Loss Value.
Upon payment in full of the amounts required pursuant to
Section 8(a)(1), (i) Lessee's obligation to pay Basic Rent
hereunder with respect to the Aircraft for any period
commencing after the Loss Payment Date shall terminate (but
Lessee shall remain liable for all payments of Rent,
including Basic Rent and Supplemental Rent, including,
without limitation, the Supplemental Rent pursuant to
Exhibit E hereto, for the Aircraft, due through and
including the date of such payment), (ii) the Term for the
Aircraft shall end, and (iii) Lessor shall (subject to the
rights of any insurer) transfer to Lessee all of Lessor's
right, title and interest in the Airframe and the Serviced
Engines, if any, which were subject to the Event of Loss
"as-is, where-as", free and clear of Lessor's Liens, but
otherwise without recourse or warranty, express or implied.
(b) Event of Loss to a Serviced Engine.
(1) Event of Loss. Upon the occurrence of an Event of
Loss with respect to a Serviced Engine not then installed on
the Airframe, or upon the occurrence of an Event of Loss
with respect to a Serviced Engine installed on the Airframe
but not involving an Event of Loss with respect to the
Airframe, Lessee shall give Lessor prompt written notice
thereof and shall: (i) within sixty (60) days after the
occurrence of such Event of Loss, convey or cause to be
conveyed to Lessor, as replacement for the Serviced Engine
with respect to which such Event of Loss occurred, title to
a replacement Serviced Engine free and clear of Liens (other
than Permitted Liens) or (ii) if mutually agreed between
Lessor and Lessee, Lessee shall in lieu of replacing such
Serviced Engine pursuant to this Section 8(b)(1), pay or
cause to be paid to Lessor hereunder, within ten (10) days
after such agreement, the Stipulated Loss Value for such
Serviced Engine, computed as of the Basic Rent Payment Date
next following the date of such Event of Loss.
(2) Conditions, Lessee's Obligations. Lessee's right
to replace contemplated by Section 8(b)(1) shall be subject
to the fulfillment, in addition to the requirements
contained in Section 9(b), of the conditions precedent set
forth below:
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(i) No Default or Lessee Event of Default shall be
continuing on the replacement date;
(ii) Lessee will promptly (all writings referred to
below to be reasonably satisfactory in form and substance to
Lessor):
(a) furnish Lessor a xxxx of sale duly conveying to
Lessor such replacement Serviced Engine, together with such
evidence of title as Lessor may reasonably request;
(b) if the replaced Serviced Engine is an Engine
hereunder, 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 duly filed for recordation with the FAA;
(c) furnish Lessor with such evidence of compliance
with the insurance provisions of Section 9 with respect to
such replacement Serviced Engine as Lessor may reasonably
request;
(d) furnish Lessor with a certificate or certification
of a qualified aircraft engineer reasonably satisfactory to
Lessor certifying that such replacement Serviced Engine has
a value, utility and remaining useful life at least equal to
the Serviced Engine so replaced (assuming such Serviced
Engine was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Event of
Loss), provided that in addition to such certificate or
certification, Lessor shall have the right to inspect such
replacement Serviced Engine and shall be reasonably
satisfied that it has a value, utility and remaining useful
life at least equal to the Serviced Engine so replaced
(assuming such Serviced Engine was in the condition and
repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss); and
(e) On or before such replacement date, Lessee shall
(i) furnish Lessor with an opinion of independent counsel
reasonably satisfactory to Lessor, that Lessor will suffer
no adverse tax consequences as a result of such replacement
or (ii) have agreed to pay to Lessor as an indemnity such
amount or amounts as may be necessary to hold harmless, on
an after-tax basis, Lessor against any and all adverse tax
consequences as may result from such replacement and shall
have provided to Lessor satisfactory assurances regarding
Lessee's ability to pay such indemnity; and(f)take such
other actions and furnish such other certificates and
documents as Lessor may reasonably request in order that
such replacement Serviced Engine be duly and properly titled
in Lessor and leased hereunder to the same extent as the
Serviced Engine replaced thereby.
(3) Event of Loss to an Engine, Not a Serviced Engine.
Upon the occurrence of an Event of Loss to an Engine which
is not a Serviced Engine, Lessor shall give Lessee prompt
written notice thereof and shall within sixty (60) days
after the occurrence of such Event of Loss, lease hereunder
to Lessee a Replacement Engine with respect to such Engine
to which such Event of Loss occurred, free and clear of
Liens (other than Permitted Liens). Lessor shall
-29-
furnish Lessee with a certificate or certification of a qualified
aircraft engineer reasonably satisfactory to Lessee
certifying that such Replacement Engine has a value, utility
and remaining useful life at least equal to the Engine so
replaced, provided that in addition to such certificate or
certification, Lessee shall have the right to inspect such
Replacement Engine and shall be reasonably satisfied that it
has a value, utility and remaining useful life at least
equal to the Engine so replaced (assuming such Engine was in
the condition and repair required by the terms hereof
immediately prior to the occurrence of such Event of Loss).
(4) Conditions, Lessor's Obligations. Lessor's
obligation to replace contemplated by Section 8(b)(3) shall
be subject to the fulfillment of the conditions precedent
that Lessee and Lessor will promptly:
(i) cause a Lease Supplement, subjecting such
Replacement Engine to this Lease, duly executed by Lessee
and Lessor, to be delivered to Lessor for execution and,
upon such execution, to be duly filed for recordation with
the FAA; and
(ii) take such other actions and furnish such other
certificates and documents as Lessor may reasonably request
in order that such Replacement Engine be duly and properly
titled in Lessor and leased hereunder to the same extent as
the Engine replaced thereby;
provided that Lessor shall have no obligation to deliver
possession of a Replacement Engine to Lessee so long as a
Default or Lessee Event of Default has occurred and is
continuing hereunder.
(5) Recordation and Opinions. Promptly after the
recordation of the Lease Supplement covering any such
Replacement Engine pursuant to the Federal Aviation Act (or
in case the Aircraft was at the time of the Event of Loss
subject to registration under the laws of a country other
than the United States, pursuant to the laws of such
country), Lessee shall cause to be delivered to Lessor an
opinion of counsel reasonably satisfactory to Lessor as to
the due recordation of such Lease Supplement pursuant to the
Act (or such other laws).
(6) Conveyance; Replacement Engine. Upon compliance
by Lessee with the terms of this Section 8(b), Lessor will
(subject to the rights of any insurer) transfer (other than
in the case of the replacement of an Engine which was not
upon the occurrence of the Event of Loss, a Serviced Engine)
to Lessee all of Lessor's right, title and interest as of
the delivery date of such replacement Serviced Engine in the
replaced Serviced Engine, "as-is, where-is", free and clear
of Lessor's Liens but otherwise without recourse or
warranty, express, implied or otherwise.
(7) No Reduction of Basic Rent. No Event of Loss with
respect to a Serviced Engine or an Engine under the
circumstance contemplated by this Section 8(b) shall result
in any reduction of Basic Rent. Upon the payment by Lessee
to Lessor of the Stipulated Loss Value of any Serviced
Engine, Lessor, shall provide Lessee with a replacement
Serviced Engine.(8)If
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Lessor furnishes the replacement
Serviced Engine, then the conditions set forth in Sections
8(b)(2)(ii)(a) and (d) shall be deemed to be fulfilled.
(c) Application of Payments for Requisition of Title.
Any payments (other than insurance proceeds the application
of which is provided for in Section 9) received at any time
by Lessor, Lessee or from any Governmental Authority or
other Person with respect to any Event of Loss, other than
a requisition for use by the Government not constituting an
Event of Loss, will be applied as follows:
(1) Replacement of Serviced Engine. If such payments
are received as a result of an Event of Loss to a Serviced
Engine under circumstances contemplated by Section 8(b), and
the Serviced Engine is replaced, so much of such payments
remaining after reimbursement of Lessor for reasonable costs
and expenses, if any, theretofore incurred by Lessor related
to such replacement shall be paid over to, or retained by,
Lessee, provided that Lessee shall have fully performed, or
concurrently therewith will perform, the terms of Section
8(b) with respect to the Event of Loss for which such
payments are made.
(2) Loss of Airframe. If such payments are received
as a result of an Event of Loss to the Airframe or the
Airframe or Serviced Engines then installed thereon, so much
of such payments as shall not exceed the amounts payable
pursuant to 8(a)(1) shall be applied to pay such amounts (or
reimburse Lessee for its payment of such amounts), and the
balance, if any, of such payment remaining thereafter shall,
first, to the extent of the value of Lessee's interest in
such payment, be paid over to Lessee, and, second, the
remainder, if any, shall be retained by Lessor. For
purposes of this clause (2), the value of Lessee's interest
in a payment shall be the amount of the Basic Rent due in
regard to the leasing of the Aircraft for the remainder of
the applicable Term.
(d) Requisition of Use of the Airframe. In the event
of the requisition for use of the Airframe or any Serviced
Engines installed on the Airframe during the Term not
constituting an Event of Loss including without limitation,
pursuant to CRAF, Lessee shall promptly notify Lessor of
such requisition and all of Lessee's obligations under this
Lease shall continue to the same extent as if such
requisition had not occurred, except to the extent that any
failure or delay in Lessee's performance or observance of
such obligations (other than obligations for the payment of
Rent) is caused by such requisition. Unless Lessor elects
to treat such requisition as an Event of Loss, Lessee shall
be obligated to return the Airframe and such Serviced
Engines to Lessor pursuant to, and in all other respects in
compliance with the provisions of, Section 5 promptly at the
later of the end of the Term or, if Lessor consents, the
date of such return by any such Governmental Authority. All
payments received by Lessor or Lessee from any Governmental
Authority for the use of the Airframe and Serviced Engines
during the Term (so long as no Lessee Event of Default shall
have occurred and be continuing) shall be paid over to, or
retained by, Lessee; and all payments received by Lessor or
Lessee from the Government for the use of the Airframe and
such Serviced Engines after the Term (or so long as a
default or a Lessee Event of Default shall have occurred and
be continuing) shall be paid over to, or
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retained by, Lessor, unless such requisition for use by any Governmental
Authority is treated as an Event of Loss in which case all such payments
shall be applied in accordance with Section 8(c)(2).
(e) Investment of Proceeds Pending Replacement. If an
Event of Loss shall occur with respect to a Serviced Engine
and the provisions of Section 8(b) apply, or Lessor
receives any insurance proceeds pending completion of
repairs by Lessee to the Airframe or a Serviced Engine,
Lessor shall, if requested by Lessee and if no Lessee Event
of Default shall have occurred and be continuing, use its
reasonable efforts to invest, at the request, direction and
risk of Lessee, any payments received theretofore or
thereafter with respect to the Airframe or such Serviced
Engine from any insurer under insurance required to be
maintained hereunder or from Lessee or from any Governmental
Authority or other person with respect to the applicable
Event of Loss or otherwise. Any such investments shall be in
obligations of the United States or obligations guaranteed
as to principal and interest by the Government or
certificates of deposit issued in the United States by a
commercial bank or banks each having a combined capital,
surplus, and undivided profits of at least $250,000,000, in
each case having a stated maturity not later than one year
from the date of the acquisition thereof by Lessor. Lessee
will pay to Lessor on demand the amount of any loss incurred
in connection with any such investment. All profits and
losses on such investments and any taxes in respect thereof
shall be for the account of Lessee. In order to make the
payments to Lessee provided for in Section 8 or 9 hereof,
Lessor is authorized to sell any obligations purchased as
aforesaid; and Lessor shall not be required to make such
payments to Lessee until Lessor shall have had a reasonable
time to sell such obligations and to obtain the sale
proceeds therefrom.
(f) Application of Payments During Default. Any
amount for requisition of title or requisition of use of any
Item of Equipment referred to in this Section 8 which is
payable to or retainable by Lessee shall not be paid to or
retained by Lessee if at the time of such payment or
retention a Default or a Lessee Event of Default shall have
occurred and be continuing, but shall be held by or paid to
Lessor and applied against the obligations of Lessee under
this Lease, and at such time as there shall not be
continuing any such Default or Lessee Event of Default, such
amount shall be paid to Lessee to the extent not previously
applied in accordance with this sentence.
Section 9. Insurance.
(a) Liability Insurance. During the Lease Term and
during the next three years thereafter, Lessee shall
maintain (or cause to be maintained) at no expense to Lessor
the following insurance, on a worldwide basis with no
territorial restrictions, except as may be specifically
consented to from time to time by Lessor, such consent not
to be unreasonably withheld, with insurers of recognized
responsibility approved by Lessor through nationally
recognized aviation insurance brokers: comprehensive
aviation liability insurance (including third party legal
liability, public liability, passenger legal liability,
personal injury liability, passenger's baggage and personal
effects (checked and unchecked) liability, cargo legal
liability,
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mail legal liability, premises liability,
products/completed operations, hangarkeepers (ground and
in-flight) liability and war risks liability (Lloyd's of
London Clause AV.52 or its equivalent), insurance of the
indemnification obligations set forth in Section 15 hereof,
and property damage liability insurance with respect to the
In-Use Aircraft in an amount not less than that carried by
Lessee on similar equipment owned or leased by Lessee,
provided that such liability insurance shall in no event be
less than $500,000,000 for any one accident, or series of
accidents arising out of any one event. Lessee shall not
self-insure with respect to any public liability coverage
with the exception of baggage, cargo and mail liabilities.
Any policies of insurance carried in accordance with this
Section 9(a) and any policies taken out in substitution or
replacement for any of such policies shall: (1) name Lessor
and its Affiliates and directors, officers, employees,
servants and agents as an additional insured (each such
Person an "Additional Insured"), as their respective
interests may appear; (2) provide that in respect of the
interest of each Additional Insured in such policies, the
insurance shall not be invalidated by any action or inaction
of Lessee or any other insured, and shall insure each
Additional Insured regardless of any breach or violation of
any warranty, declaration or condition contained in such
policies by Lessee; (3) provide that if the insurers cancel
such insurance for any reason whatever, or if there is any
substantial change in policy terms and conditions or
coverage, such cancellation, lapse or change shall not be
effective as to any Additional Insured until thirty days
(seven days, or such other period as may from time to time
be customarily obtainable in the industry, in the case of
war risk and allied perils coverage) after receipt by such
Additional Insured of written notice from such insurers of
such cancellation, lapse or change; and (4) provide that no
Additional Insured shall have any obligation or liability
for premiums, commissions, assessments or calls in
connection with such insurance. Each liability policy shall
(i) be primary without right of contribution from any other
insurance which is carried by any Additional Insured, (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 any Additional
Insured, and (iii) waive any right of the insurers to any
subrogation, set-off or counterclaim or any other deduction,
whether by attachment or otherwise, in respect of any
liability of any Additional Insured or Lessee to the extent
of any moneys due to such Additional Insureds. In the case
of the requisition for use of the In-Use Aircraft or any
Serviced Engine by the Government, a valid agreement by the
Government to indemnify Lessee in a manner satisfactory to
Lessor against any of the risks which Lessee is required
hereunder to insure against in an amount at least equal to
the amount of insurance required to be maintained for the
Aircraft under this Section 9 from time to time shall, to
the extent such indemnity from the Government complies with
the requirements set forth in Section 7(g) hereof, be
considered adequate insurance to the extent of the risks and
in the amounts that are the subject of any such agreement to
indemnify.
(b) All Risk Hull Insurance. During the relevant
Term, Lessee shall maintain (or cause to be maintained) at
no expense to Lessor the following insurance, on a worldwide
basis with no territorial restrictions with insurers of
recognized responsibility (A) all-risks (ground, taxing,
flight and ingestion) hull insurance covering the In-Use
Aircraft; and (B) all risks (including transit) Aviation
Spare Parts (including Engine and Equipment) Insurance and
(C) at all times that any In-Use Aircraft or any Serviced
Engine is not covered by the insurance
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described in Section
9(c), coverage against the perils of (i) strikes, riots,
civil commotions or labor disturbances, (ii) any vandalism,
malicious act or act of sabotage, and (iii) hijacking, or
any unlawful seizure or wrongful exercise of control of the
In-Use Aircraft or crew in flight made by any person or
persons on board the In-Use Aircraft without the consent of
the insured other than hijacking committed by persons
engaged in a program of irregular warfare for terrorist
purposes, in each case to the extent insured by the standard
"buy-back" provisions to the Airline War Exclusion Clause
(AV48B) or its equivalent. Such insurance shall be for an
Agreed Value basis which shall be in an amount not less than
the Stipulated Loss Value. With the consent of Lessor,
which will not be unreasonably withheld, Lessee may
self-insure only by way of standard market deductibles, the
risks required to be insured against pursuant to the
preceding two sentences in such amounts as are acceptable to
Lessor in its sole discretion. Any policies carried in
accordance with this Section 9(b) covering the In-Use
Aircraft and any policies taken out in substitution or
replacement for any such policies shall (1) name Lessor as
loss payee as its interests may appear; (2) provide that the
entire amount of any loss shall be paid to Lessor or its
order; (3) provide that if such insurance is canceled for
any reason whatsoever, or any substantial change is made in
policy terms, conditions or coverage, or the same is allowed
to lapse for non-payment of premium, such cancellation,
change or lapse shall not be effective as to Lessor until
thirty days (seven days or such other period as may from
time to time be customarily obtainable in the industry, in
the case of war risk and allied perils coverage), after
receipt by Lessor of written notice from such insurers of
such cancellation or lapse or change in policy terms,
conditions or coverage; (4) provide that losses shall be
adjusted with Lessor; (5) provide that in respect of Lessor,
such insurance shall not be invalidated by any action or
inaction of Lessee or any other insured and shall insure
such parties regardless of any breach contained in such
policies by Lessee or any other insured; (6) be primary
without right of contribution from any other insurance which
is carried by Lessor with respect to its interest in the
In-Use Aircraft; (7) waive any right of subrogation of the
insurers against Lessor; (8) waive any right of the insurers
to set-off or counterclaim or any other deduction, whether
by attachment or otherwise, in respect of any liability of
Lessor or Lessee to the extent of any moneys due to Lessor;
and (9) provide that Lessor shall have no obligation or
liability for premiums, commissions, assessments or calls in
connection with such insurance. If the insurance required
to be carried pursuant to Sections 9(b) and 9(c) is effected
under separate policies, the insurers shall agree that if a
disagreement arises as to whether a claim is covered by the
all-risk insurance or the war-risk insurance, the insurers
will settle such claims on the basis of a 50-50 claim
funding arrangement. In the case of the requisition for use
of the In-Use Aircraft or any Serviced Engine by the
Government, a valid agreement by the Government,
satisfactory to Lessor, to indemnify Lessee against any of
the risks which Lessee is required hereunder to insure
against in an amount at least equal to the amount of
insurance required to be maintained for the In-Use Aircraft
under this Section 9 from time to time shall, to the extent
such indemnity from the Government complies with the
requirements set forth in Section 7(g) hereof, be considered
adequate insurance to the extent of the risks and in the
amounts that are the subject of any such agreement to
indemnify.
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(c) War-Risk Insurance. During the Lease Term, Lessee
shall maintain (or cause to be maintained), at no expense to
Lessor War-Risk and Allied Perils Aviation Hull (including
Spare Parts, Engines and Equipment) Insurance on an Agreed
Value basis, which shall be not less than the Stipulated
Loss Value. Such policy shall (i) insure against those
perils excluded under Lessee's All Risks Hull and Spares
policy(ies) by virtue of Lloyd's of London Exclusion Clause
AVN.48B ("War, Hijacking and Other Perils Exclusion Clause")
or its equivalent (other than paragraph (b) thereof relating
to nuclear perils), (ii) provide for payment in U.S.
Dollars, (iii) contain a 50/50 clause in accordance with
Lloyd's of London Aviation Clause AVS.103 or its equivalent,
(iv) be endorsed to include coverage for confiscation,
requisition, nationalization, seizure, restraint, detention,
appropriation, requisition of title or for use by any
Governmental Authority (except for the government of
registry) of the In-Use Aircraft, (v) provide coverage on a
worldwide basis (subject only to such geographical limits as
may be imposed by the hull, war and allied perils insurance)
and (vi) be endorsed to include provisions identical to
those contained in clauses (1), (2), (3), (4), (5), (6),
(7), (8), and (9) of Section 9(b).
(d) Application of Proceeds. Provided no Lessee Event
of Default shall have occurred and be continuing, all
insurance payments received under policies required to be
maintained by Lessee pursuant to Section 9 as the result of
the occurrence of an Event of Loss shall be applied in
accordance with Section 8(c)(1) or Section 8(c)(2).
Insurance payments relating to any property damage or loss
to the In-Use Aircraft or any Serviced Engine not
constituting an Event of Loss with respect thereto will be
applied in payment for repairs or for replacement property
in accordance with the terms of Section 8(c) hereof, if not
already paid for by Lessee, and any balance remaining after
compliance with such Sections with respect to such loss
shall be paid to Lessee. Any amount representing proceeds
of insurance required to be maintained by Lessee hereunder
which is payable to or retainable by Lessee shall not be
paid to or retained by Lessee if at the time of such payment
a Default or a Lessee Event of Default shall have occurred
and be continuing, but shall be held by or paid to Lessor as
security for the obligations of Lessee under this Lease and
such amount (to the extent not previously applied against
such obligations) shall be paid to Lessee at such time as
there no longer exists any Default or Lessee Event of
Default.
(e) Reports, Etc. On or before the Delivery Date
(except, with respect to the insurance required by Section
9(j), prior to the date hereof), and no less than five (5)
Business Days prior to the expiration of any insurance
required pursuant to this Section 9, Lessee shall furnish to
Lessor (i) appropriate certification by each insurer or its
authorized signatories and (ii) a report signed by a firm of
independent insurance brokers, then retained by Lessee,
attaching certificates evidencing the insurance and
reinsurance then carried and maintained with respect to the
In-Use Aircraft and Allocated Parts and stating that in the
opinion of such firm the insurance then carried and
maintained with respect to the In-Use Aircraft and Serviced
Engines or Parts complies with the terms hereof. Lessee
will cause such firm to advise Lessor in writing promptly of
any material default in the payment of any premium and of
any other act or omission on the part of Lessee of which
they have knowledge which might invalidate or render
unenforceable, in whole or in part, any insurance on the
In-Use Aircraft or any Serviced
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Engine or Parts. Lessee
also shall cause such firm to advise Lessor in writing at
least thirty (30) days (seven (7) days, or such other period
as may from time to time be customarily obtainable in the
industry, in the case of war risk and allied perils
coverage), prior to the expiration or termination of any
insurance policy carried or maintained with respect to the
In-Use Aircraft or any Serviced Engine any Parts pursuant to
this Section 9.
(f) Additional Insurance. Lessee at its option and at
its sole cost and expense may obtain insurance with respect
to its interest in the In-Use Aircraft, provided that such
insurance does not prevent Lessee from obtaining the
insurance required by this Section 9; and provided further,
that such additional insurance does not prevent Lessor from
obtaining insurance for its own account with respect to the
In-Use Aircraft in excess of Stipulated Loss Value. No such
insurance shall be subject to this Section 9. Lessor may
carry for its own account at its sole cost and expense
insurance with respect to its interest in the In-Use
Aircraft but in no event shall such insurance prevent Lessee
from carrying insurance required by this Section 9 or
adversely affect the cost thereof.
(g) Notice from Lessee; No Modification. Lessee shall
forthwith notify Lessor of any event which may give rise to
a claim under the insurance required pursuant to this
Section 9.
(h) Reinsurance. In the event of any reinsurance of
the risks set forth in Section 9(b) the following clause
shall be incorporated into such reinsurance policies:
"Reinsurers hereby agree that notwithstanding the
insolvency, liquidation, bankruptcy, dissolution of or
similar proceedings affecting Insurers in respect of a total
loss or other claim whereas provided by the Lease such claim
will be paid to the person or persons named as loss payee
under the primary insurance and that Reinsurers shall in
lieu of payment to the Insured, its successors in interest
and assigns, pay to the person named as loss payee under the
primary insurance that portion of any loss due for which
the reinsurers would otherwise be liable to pay the Insurers
(subject to proof of loss), it being understood and agreed
that any such payment by the Reinsurers shall (to the extent
of such payment) fully discharge and release the Reinsurers
from any and all further liability in connection therewith,
subject to such clause not contravening any law of the
government of registration."
(i) Insurance of Lessor. Lessor agrees to maintain
throughout the Lease Term Hangarkeeper's Legal Liability
Insurance that, in accordance with the terms and conditions
of the policy, covers the Serviced Aircraft during periods
in which the Serviced Aircraft is within custody and control
of Lessor for an amount not less than the Stipulated Loss
Value.
(j) Insurance Relating to Allocated Parts. During the
Term, Lessee shall maintain (or cause to be maintained) at
no expense to Lessor the following insurance with respect to
the Allocated Parts with insurers of recognized
responsibility satisfactory to Lessor: (A) All Risks
Property Insurance and (B) coverage against the perils of
(i) strikes, riots, civil commotions or labor disturbances
or (ii) vandalism, malicious acts or acts of sabotage. Such
insurance shall
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be for an aggregate amount of no less than
$1,600,000. With the written consent of Lessor, Lessee may
self-insure, only by way of deductibles, the risks required
to be insured against pursuant to the preceding two
sentences in such amounts as are acceptable to Lessor in its
sole discretion. Any policies carried in accordance with
this Section 9(j) covering the Allocated Parts and any
policies taken out in substitution or replacement for any
such policies shall (1) name Lessor as sole loss payee;
(2) provide that the entire amount of any loss shall be paid
to Lessor or its order; (3) provide that if such insurance
is canceled for any reason whatsoever, or any substantial
adverse change is made in policy terms, conditions or
coverage, or the same is allowed to lapse for non-payment of
premium, such cancellation, change or lapse shall not be
effective as to Lessor until thirty (30) days after receipt
by Lessor of written notice from such insurers of such
cancellation or lapse or change in policy terms, conditions
or coverage; (4) provide that losses shall be adjusted with
Lessor; (5) provide that in respect of Lessor, such
insurance shall not be invalidated by any action or inaction
of Lessee or any other insured and shall insure such parties
regardless of any breach contained in such policies by
Lessee or any other insured; (6) waive any right of
subrogation of the insurers against Lessor; (7) waive any
right of the insurers to set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in
respect of any liability of Lessor or Lessee to the extent
of any moneys due to Lessor; and (8) provide that Lessor
shall not have any obligation or liability for premiums,
commissions, assessments or calls in connection with such
insurance. Lessee shall bear the risk of loss to the extent
of any deficiency in any effective insurance coverage with
respect to loss or damage to all or any portion of the
Allocated Parts.
Section 10. Inspection; Financial Information.
(a) Inspection. During the Lease Term, Lessee shall
furnish to Lessor such information concerning the location,
condition, use and operation of the In-Use Aircraft as such
party may reasonably request. Lessee shall permit any
person designated in writing by Lessor, at such Lessor's
expense, to visit and inspect (at any reasonable time,
provided that such inspection shall not unreasonably
interfere in any material respect with Lessee's business
operations or operation or maintenance of the In-Use
Aircraft) the In-Use Aircraft and the records maintained in
connection therewith and, at such designating party's
expense, to make copies of such records as such party may
reasonably designate. Lessor shall not have any duty to
make any such inspection and shall not incur any liability
or obligation by reason of making or not making any such
inspection. Any such inspection of the In-Use Aircraft
shall be a visual, walk-around inspection which may include
going on board the In-Use Aircraft and shall not include
opening any panels, bays, or the like, provided that any
such designee of Lessor shall be entitled to be present
during any maintenance check of the In-Use Aircraft at which
any panels, bays or the like may be opened and shall have
the right to inspect such items during such maintenance
check. Upon written request from Lessor, Lessee shall
provide such requesting party with the anticipated dates of
any scheduled major maintenance checks (including any "C",
heavy "C" or "D" check) occurring within the six-month
period following such request.
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(b) Financial Information. Lessee also agrees to
furnish to Lessor during the Lease Term:
(1) as soon as possible and in any event within ten
(10) days after the occurrence of a Default or Lessee Event
of Default, a certificate of Lessee, signed by a vice
president of Lessee, setting forth in detail the nature of
such Default or Lessee Event of Default and the action which
the Lessee proposes to take with respect thereto;
(2) from time to time, such information as Lessor may
reasonably request with respect to the operations of Lessee
in order to determine whether the covenants, terms and
provisions of this Lease have been complied with by Lessee;
(3) 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
Items of Equipment;
(4) as soon as available, quarterly and year-end
unaudited Reports of Financial and Operating Statistics for
Large Certified Air Carriers (U.S. Department of
Transportation Form 41 Schedule A);
(5) as soon as available, and in any event within
sixty (60) days after the end of each of the first three
fiscal quarters, an unaudited balance sheet of the Lessee
and its consolidated subsidiaries, as of the end of such
quarter and related unaudited statements of income and
retained earnings of the Lessee and its consolidated
subsidiaries, setting forth in each case in comparative form
the corresponding figures for the corresponding period of
the preceding fiscal year;
(6) as soon as available, and in any event within
120 days after the end of each fiscal year of Lessee, a
financial report for the Lessee for such year, including
therein a balance sheet of Lessee as of the end of such
fiscal year and related statements of income and retained
earnings and changes in financial position of the Lessee for
such fiscal year, setting forth in each case in comparative
form corresponding figures for the preceding fiscal year,
all in reasonable detail and as certified by the Lessee's
public accountants, including their certificate and
accompanying comments;
(7) promptly upon their becoming available, one copy
of each financial statement, report, notice or proxy
statement sent by Lessee to stockholders generally and of
each regular or periodic report, registration statement or
prospectus filed by Lessee with any securities exchange or
the Securities and Exchange Commission or any successor
agency, and of any order issued by any Governmental
Authority in any proceeding in which Lessee is a party;
and(8)from time to time, such statistical information
concerning the In-Use Aircraft as Lessor may reasonably
request to enable Lessor to evaluate, calculate and/or
report any Taxes.
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Section 11. Lessee's Covenants.
(a) Merger. Lessee shall not consolidate with or
merge into any other corporation, or convey, transfer or
lease all or substantially all of its assets to any Person,
unless (i) the corporation formed by such consolidation or
into which Lessee is merged or the Person who acquires by
conveyance, transfer or lease all or substantially all of
the assets of Lessee (the "Successor"): (A) remains entitled
to the benefits of Section 1110 of the Bankruptcy Code with
respect to this Lease; and (B) shall execute and deliver to
Lessor an agreement containing an assumption by such
Successor of the due and punctual performance and observance
of each covenant and condition of this Lease Agreement to be
performed or observed by Lessee; (ii) immediately after
giving effect to such transaction, no Default or Lessee
Event of Default shall have occurred and be continuing
hereunder; (iii) Lessee shall have delivered to Lessor, an
officer's certificate and an opinion of independent counsel,
each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement described in
clause (i) above comply with this Section 11(a) and that all
conditions precedent herein provided for relating to such
transaction have been complied with (except that such
opinion need not cover the matters referred to in clause
(ii) above and may rely, as to factual matters, on an
officer's certificate of Lessee) and, in the case of such
opinion, that such assumption agreement has been duly
authorized, executed and delivered by the Successor,
constitutes its legal, valid and binding obligation and is
enforceable against such Successor in accordance with its
terms, that Lessor shall continue to be entitled to the
benefits and protections set forth in Section 1110 of the
Bankruptcy Code; and (iv) Lessor shall not suffer any
adverse tax consequences as a result of such consolidation,
merger or transfer which is not indemnified by Lessee in
accordance with the terms hereof or against which Lessor is
otherwise indemnified in form and substance reasonably
satisfactory to Lessor.
Upon any consolidation or merger, or any conveyance,
transfer or lease of all or substantially all of the assets
of Lessee as an entirety in accordance with this Section
11(a), the Successor shall succeed to, be substituted for,
and may exercise every right and power of, and shall assume
every obligation and liability of, Lessee under this Lease
Agreement with the same effect as if the Successor had been
named as Lessee herein and therein. No such consolidation
or merger or conveyance, transfer or lease of all or
substantially all of the assets of Lessee shall have the
effect of releasing Lessee or any Successor which shall
theretofore have become such in the manner prescribed in
this Section 11(a) from its liability hereunder. Nothing
contained herein shall permit any lease, sublease or other
arrangement for the use, operation or possession of the
In-Use Aircraft or Engines except in compliance with the
applicable provisions of this Lease.
(b) Certificated Air Carrier. Lessee will continue to
be a certificated air carrier authorized to engage in
scheduled air transportation under the Federal Aviation Act.
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Section 12. FAA Recordation and Further Assurances.
(a) FAA Recordation. Lessee shall cause this Lease,
all Lease Supplements and any and all additional instruments
which shall be executed pursuant to the terms hereof so far
as permitted by Applicable Laws or regulations, to be duly
kept, filed and recorded, and maintained of record, in
accordance with the applicable law of the government of
registry of the Aircraft, which shall be in the office of
the FAA. The cost of all such action shall be borne by
Lessor.
(b) Further Assurances. Each party hereto shall, at
its 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 more effectively to carry out the intent and purpose
of this Lease or to perfect and protect the rights and, with
respect to Lessor, remedies created or intended to be
created hereunder.
Section 13A. Lessee Events of Default. The following
events shall constitute Lessee Events of Default (each a
"Lessee Event of Default") (whether any such event shall be
voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority) and each such
Lessee Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have
been remedied or waived by Lessor in writing:
(a) Lessee shall fail to make any payment of Basic
Rent or Supplemental Rent due pursuant to Exhibit E hereto,
as and when due or shall fail to make any other payment of
Supplemental Rent within five (5) Business Days after
delivery to Lessee of notice from Lessor that the amount
shall have become due hereunder; or
(b) Lessee shall fail to procure, carry and maintain
any insurance required by Section 9 hereof; provided that in
the case of insurance with respect to which cancellation,
change or lapse for nonpayment of premium shall not be
effective as to Lessor for 30 days (five days in the case of
any war risk and allied perils coverage, or if shorter, such
other period as may be customary in the industry for such
notice of cancellation) after receipt of notice by Lessor of
such cancellation, change or lapse, no such failure to carry
and maintain insurance shall constitute a Lessee Event of
Default hereunder until the earlier of (i) the date such
insurance is no longer in effect as to Lessor, or (ii) the
date such failure shall have continued unremedied for a
period of 20 days (five days in the case of any war risk and
allied perils coverage, or if shorter, such other period as
may be customary in the industry for such notice of
cancellation) after receipt by Lessor of the notice of
cancellation, change or lapse; or
(c) Lessee shall fail to perform or observe, breach or
be in default under Sections 5, 7(c), 10(c), or 11 hereof;
or
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(d) Lessee shall fail to perform or observe, breach or
be in default under any other covenant, condition or
agreement to be performed or observed by it hereunder and
such failure shall continue unremedied for a period of
thirty (30) Business Days after written notice thereof by
Lessor; or
(e) any material representation or warranty made by
Lessee herein or in any document or certificate furnished by
Lessee in connection herewith or pursuant hereto shall prove
to have been incorrect in any material respect when made; or
(f) Lessee shall fail to pay any sums which are or
become due and owing under any Interim Aircraft Lease
Agreement, the Interim Aircraft Maintenance Agreement, the
Long-Term Lease Agreement, the July Lease Agreement or the
November Lease Agreement or shall fail to perform under any
indemnification obligations contained in any Interim
Aircraft Lease Agreement, the Long-Term Lease Agreement, the
151 Lease Agreement, the 161 Lease Agreement, the 162 Lease
Agreement, the 171 Lease Agreement or the Interim Aircraft
Maintenance Agreement; or
(g) Reserved; or
(h) all or substantially all of Lessee's airline
operations are suspended for more than two days; or
(i) Lessee shall consent to the appointment of a
custodian, receiver, trustee or liquidator (or other similar
official) of itself or of a substantial part of its
property, or Lessee shall be unable to pay its debts
generally as they become due, or shall make a general
assignment for the benefit of creditors, or Lessee shall
file a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding
under any bankruptcy law (as now or hereafter in effect) or
an answer admitting the material allegations of a petition
filed against Lessee in any such proceeding, or Lessee by
voluntary petition, answer or consent shall seek relief as
debtor under the provisions of any other present or future
bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or providing
for an agreement, composition, extension or adjustment with
its creditors or Lessee shall take any corporate action to
authorize any of the foregoing; or
(j) a petition against Lessee in a proceeding under
any bankruptcy or other insolvency law (as now or hereafter
in effect) shall be filed, and any decree or order adjudging
Lessee a bankrupt or insolvent in such proceeding shall
remain in force undismissed and unstayed for a period of
sixty (60) days after such adjudication or, in case the
approval of such petition by a court of competent
jurisdiction is required, the petition as filed or amended
shall be approved by such a court as properly filed and such
approval shall not be withdrawn and the proceeding shall not
be dismissed within sixty (60) days thereafter, or if, under
the provisions of any law providing for reorganization or
winding-up of corporations which may apply to Lessee, any
court of competent jurisdiction shall enter an order or
decree assuming custody or control of
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Lessee or of any substantial part of its property and such custody or control
remains in force unrelinquished, unstayed and unterminated
for a period of thirty (30) days; or
(k) obligations of Lessee for the payment of borrowed
money shall not be paid when the same become due after the
expiration of any applicable grace period, if the effect of
such default is to cause obligations in excess of
$20,000,000 to be accelerated or otherwise declared to be
due and unpaid prior to their stated maturity.
Section 13B. Lessor Events of Default. The following
events shall constitute Lessor Events of Default (each a
"Lessor Event of Default") (whether any such event shall be
voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority) and each such
Lessor Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have
been remedied, or waived by Lessee in writing:
(a) Lessor shall fail to procure, carry and maintain
any insurance required by Section 9(i) to be carried and
maintained by Lessor;
(b) Lessor shall fail to perform or observe, breach or
be in default under any other covenant, condition or
agreement to be performed or observed by Lessor hereunder
and such failure shall continue unremedied for a period of
thirty (30) Business Days after written notice thereof by
the Lessee; provided the existence of any Defect shall not
constitute a Lessor Event of Default so long as Lessor
promptly commences and diligently complies with its warranty
obligations under Section 5 of Exhibit E;
(c) Any material representation or warranty made by
Lessor herein or in any document or certificate furnished by
Lessor in connection herewith or pursuant hereto shall prove
to have been incorrect in any material respect when made;
(d) Lessor shall consent to the appointment of a
custodian, receiver, trustee or liquidator (or other similar
official) of itself or of a substantial part of its
property, or Lessor shall be unable to pay its debts
generally as they become due, or shall make a general
assignment for the benefit of creditors, or Lessor shall
file a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding
under any bankruptcy law (as now or hereafter in effect) or
an answer admitting the material allegations of a petition
filed against Lessor in any such proceeding, or such party
by voluntary petition, answer or consent shall seek relief
as debtor under the provisions of any other present or
future bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or providing
for an agreement, composition, extension or adjustment with
its creditors or Lessor shall take any corporate action to
authorize any of the foregoing; or
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(e) A petition against Lessor in a proceeding under
any bankruptcy or other insolvency law (as now or hereafter
in effect) shall be filed, and any decree or order adjudging
Lessor a bankrupt or insolvent in such proceeding shall
remain in force undismissed and unstayed for a period of
sixty (60) days after such adjudication or, in case the
approval of such petition by a court of competent
jurisdiction is required, the petition as filed or amended
shall be approved by such a court as properly filed and such
approval shall not be withdrawn and the proceeding shall not
be dismissed within sixty (60) days thereafter, or if, under
the provisions of any law providing for reorganization or
winding-up of corporations which may apply to Lessor, any
court of competent jurisdiction shall enter an order or
decree assuming custody or control of such party or of any
substantial part of its property and such custody or control
remains in full force unrelinquished, unstayed and
unterminated for a period of thirty (30) days.
Section 14A. Lessor Remedies. Upon the occurrence of
any Lessee Event of Default and at any time thereafter so
long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default by a written
notice to Lessee and Lessor may concurrently therewith or at
any time thereafter, as part of the same or a separate
written notice, declare this Lease to be terminated, and
immediately proceed to do any one or more of the following
as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory
requirements of, applicable law then in effect; provided
that upon the occurrence of any Lessee Event of Default
described in Section 13A(i) or (j) above, this Lease
Agreement shall automatically be in default, and Lessor may
elect to do any of the following, without prior notice to
Lessee:
(a) Lessor may terminate this Lease;
(b) Lessor may cause Lessee, upon the written demand
of Lessor and at Lessee's expense, to return promptly, and
Lessee shall return promptly the In-Use Aircraft and any
Serviced Engines, as Lessor may so demand to Lessor or its
order in the manner and condition required by, and otherwise
in accordance with all the provisions of, Section 5, as if
the Airframe and Engines were being returned at the end of
the Term, or Lessor, at its option, may enter upon the
premises where the Airframe or Engine is located and take
immediate possession of and remove the same (together with
any engine or any part which is not an Engine but which is
installed on an Airframe, subject to all of the rights of
any owner, lessor, lienor or secured party of such engine or
the Airframe; it being agreed that such engine or airframe,
as the case may be, shall be held for the account of any
such owner, lessor, lienor or secured party, or, if such
engine is owned by Lessee, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the
provisions of Section 8(b)) without the necessity for first
instituting proceedings, or by summary proceedings or
otherwise, all without liability accruing to Lessor for or
by reason of such entry or taking of possession, whether for
the restoration of damage to property caused by such taking
or otherwise;
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(c) Lessor may 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;
(d) Lessor, to the extent permitted by applicable law,
may with or without taking possession thereof, sell any
Airframe or Engine at public or private sale, as Lessor may
determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle all or the Airframe or Engine
as Lessor, in its sole discretion, may determine, all free
and clear of any rights of Lessee except as hereinafter set
forth in this Section 14A and without any duty to account to
Lessee with respect to such action or inaction or for any
proceeds with respect thereto;
(e) whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights
specified above with respect to all or the Airframe or
Engine, Lessor, by written notice to Lessee specifying a
payment ten (10) days from such written notice, may demand
that the Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Rent for the Aircraft due for
periods commencing on or after the date specified for
payment in such notice), any unpaid Basic Rent for the
Aircraft due for periods prior to the payment date specified
in such notice plus an amount equal to the excess, if any,
of the present worth of the aggregate unpaid Basic Rent due
under this Lease for the Airframe or Engine, discounted
quarterly at the Discount Rate, over the fair market rental
value therefore, discounted in like manner;
(f) in the event Lessor, pursuant to paragraph (d)
above, shall have sold all or any Airframe or Engine,
Lessor, in lieu of exercising its rights under paragraph
(e) above with respect to the Airframe or such Engine or
part thereof, may, if it shall so elect, demand that Lessee
pay to Lessor, and Lessee shall pay to Lessor, on the date
of such sale as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the installments of Basic Rent
for the Aircraft due after the Basic Rent Payment Date
preceding such date of sale) any unpaid Basic Rent with
respect to the Aircraft due prior to such date plus the
amount of any deficiency between the net proceeds of such
sale (after deduction of all reasonable costs of sale) and
the Stipulated Loss Value of the Aircraft, computed as of
the Basic Rent Payment Date on or immediately succeeding the
date of such sale together with interest, if any, on the
amount of such deficiency, at the Stipulated Interest Rate,
from the date of such sale to the date of actual payment of
such amount;
(g) [Intentionally Left Blank]
(h) Lessor may rescind this Lease as to any or all
Airframe and any or all Engines, or may exercise any other
right or remedy which may be available to it under
applicable law;
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(i) Lessee shall be liable for any and all unpaid Rent
and for all legal fees and other costs and expenses incurred
by reason of the occurrence of any Lessee Event of Default
or the exercise of Lessor's remedies with respect thereto,
including all costs or expenses incurred in connection with
the return of any Item of Equipment in accordance with the
terms of Section 5 hereof or in placing such Item of
Equipment in the condition and with airworthiness
certificates as required by Section 5; and
(j) No remedy referred to in this Section 14A 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 or its Affiliates at law or in
equity, and the 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
under either this Lease or any other agreement between
Lessor or its Affiliates and Lessee. No express or implied
waiver by Lessor of any Lessee Event of Default shall in any
way be, or be construed to be a waiver of any future or
further Lessee Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any and all rights to
notice and to a judicial hearing with respect to the
repossession of any Item of Equipment by Lessor upon the
occurrence of a Lessee Event of Default.
Section 14B. Lessee Remedies.
(a) Remedies. Upon the occurrence of a Lessor Event
of Default and at any time thereafter so long as the same
shall be continuing, Lessee may, at its option, declare a
default by a written notice to Lessor; provided that
Lessee's remedies shall in all respects be limited as set
forth in Section 5(b) and 5(g) of Exhibit E and this Section
14B. At any time after delivery of such written notice to
Lessor, so long as Lessor shall not have remedied all
outstanding Lessor Events of Default Lessee may proceed
pursuant to Section 6 of Exhibit E to enforce performance by
Lessor of its covenants and obligations under Exhibit E to
this Agreement and to recover damages for the breach
thereof, but only to the extent permitted under Section
14B(b) and Section 5(b) and 5(g) of Exhibit E. Subject to
Section 5(b) and 5(g) of Exhibit E and Section 14B(b),
Lessor shall be liable for any and all unpaid amounts due
from it hereunder and for all legal fees and other costs and
expenses incurred by reason of the occurrence of any Lessor
Event of Default or the exercise of Lessee's remedies with
respect thereto.
(b) Limitation on Damages. WITHOUT LIMITING THE
PROVISIONS OF SECTION 4 OF THIS AGREEMENT AND
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY,
LESSOR SHALL HAVE NO OBLIGATION OR LIABILITY WHETHER ARISING
IN CONTRACT (INCLUDING WARRANTY), TORT (INCLUDING ACTIVE,
PASSIVE OR IMPUTED NEGLIGENCE OR GROSS NEGLIGENCE) OR STRICT
LIABILITY OR OTHERWISE FOR LOSS OF USE, REVENUE OR PROFIT OR
FOR ANY OTHER SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES WITH RESPECT TO ANY BREACH OF THIS AGREEMENT OR THE
PROCEDURES SET FORTH IN THE MANUAL (OR ANY MANUAL REFERENCED
THEREIN) OR ANY NONCONFORMANCE OR DEFECT IN
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ANY SERVICE OR WORKMANSHIP OR ANY SERVICED PART OR OTHER MATERIAL,
COMPONENT, ACCESSORY, EQUIPMENT OR PRODUCT PROVIDED OR
DELIVERED PURSUANT TO THIS AGREEMENT. FURTHERMORE, LESSOR'S
LIABILITY FOR DAMAGES, IF ANY, ARISING AS A RESULT OF ANY
BREACH OF, OR DEFAULT BY LESSOR UNDER, THIS AGREEMENT
(INCLUDING ANY BREACH OF WARRANTY) SHALL IN NO EVENT EXCEED
LESSEE'S DIRECT, ACTUAL AND REASONABLE DAMAGES (AFTER TAKING
INTO ACCOUNT AMOUNTS THAT WOULD HAVE BEEN PAID TO LESSOR AS
SUPPLEMENTAL RENT BUT FOR SUCH BREACH OR DEFAULT) SUFFERED
BY LESSEE TO OBTAIN SUBSTITUTE COMPARABLE MAINTENANCE
SERVICES FOR THE AIRCRAFT FOR THE REMAINDER OF THE LEASE
TERM AFTER THE DATE OF SUCH BREACH OR DEFAULT.
(c) No Implied Waiver. No express or implied waiver
by Lessee of any Lessor Event of Default shall in any way
be, or be construed to be a waiver of any future or further
Lessor Event of Default.
Section 15. INDEMNIFICATION.
(a) General. LESSEE DOES HEREBY ASSUME LIABILITY FOR,
AND DOES HEREBY INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS
LESSOR AND ANY AFFILIATE OF LESSOR AND THEIR RESPECTIVE
SUCCESSORS, PERMITTED ASSIGNS, SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS AND SERVANTS (EACH THEREOF, WITH
ITS RESPECTIVE AFFILIATES, SUCCESSORS, PERMITTED ASSIGNS,
AGENTS AND SERVANTS REFERRED TO HEREIN AS AN "INDEMNIFIED
PARTY") FROM AND AGAINST, AND ON WRITTEN DEMAND TO PAY, OR
TO REIMBURSE EACH INDEMNIFIED PARTY FOR THE PAYMENT OF, AS
THE CASE MAY BE, ANY AND ALL EXPENSES OR LIABILITIES IMPOSED
ON, CHARGED TO, RECOVERED FROM, INCURRED BY OR ASSERTED
AGAINST ANY INDEMNIFIED PARTY AS A RESULT OF ANY CLAIM BY A
PERSON (OTHER THAN LESSEE UNDER SECTION 5(a) OF EXHIBIT E
AND 14B HEREOF) RELATING TO OR ARISING OUT OF, OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE INTERIM AIRCRAFT LEASE
AGREEMENTS, THE INTERIM AIRCRAFT MAINTENANCE AGREEMENT, THE
POOLING AGREEMENT, THE MANUAL (OR ANY OTHER LESSOR MANUAL
REFERENCED THEREIN) OR ANY MAINTENANCE SERVICES, OUTSIDE
SERVICES, SERVICED ENGINES OR SERVICED PARTS PROVIDED
HEREUNDER, OR ANY FAILURE BY LESSEE OR LESSOR TO PERFORM
HEREUNDER, INCLUDING CLAIMS FOR INJURY TO OR DEATH OF
PERSONS (INCLUDING ANY EMPLOYEES OR AGENTS OF LESSEE WHO
ENTER LESSOR'S PREMISES PURSUANT TO SECTION 4(g) OF
EXHIBIT E AND ALL INVITEES, GUESTS, PASSENGERS, SHIPPERS,
EMPLOYEES AND AGENTS OF LESSEE), AND DAMAGE TO OR
DESTRUCTION OF PROPERTY (INCLUDING PROPERTY OF LESSEE AND OF
ITS INVITEES, GUESTS, PASSENGERS, EMPLOYEES AND AGENTS AND
PROPERTY OF EACH INDEMNIFIED PARTY). THE FOREGOING INDEMNITY
OBLIGATIONS SHALL
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INCLUDE THE OBLIGATION OF LESSEE TO
INDEMNIFY EACH INDEMNIFIED PARTY FROM AND AGAINST, AND ON
WRITTEN DEMAND TO PAY, OR TO REIMBURSE EACH INDEMNIFIED
PARTY FOR THE PAYMENT OF, AS THE CASE MAY BE, ANY AND ALL
EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY
INDEMNIFIED PARTY RELATING TO OR ARISING OUT OF (i) ANY
ACTION OR INACTION OF LESSEE; (ii) THE MANUFACTURE OF THE
AIRFRAME AND SERVICED ENGINES (INCLUDING LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE, AND PATENT, TRADEMARK
OR COPYRIGHT INFRINGEMENT); (iii) THE OWNERSHIP OF THE
AIRCRAFT AND, EXCEPT AS PROVIDED IN SECTION 15(d) BELOW,
SERVICED ENGINES, DURING THE TERM OF THIS LEASE; (iv) THE
DELIVERY, NONDELIVERY, REDELIVERY, LEASE, REGISTRATION,
ASSIGNMENT, TRANSFER, POSSESSION, USE, OPERATION, CONDITION,
SALE OR RETURN OR OTHER DISPOSITION OF THE AIRFRAME AND
SERVICED ENGINES AND PARTS BY LESSEE (INCLUDING INJURY,
DEATH OR PROPERTY DAMAGE SUFFERED BY PASSENGERS, SHIPPERS OR
OTHERS), AND ENVIRONMENTAL CONTROL, NOISE AND POLLUTION
REGULATIONS; (v) THE CONDITION UPON RETURN OF THE AIRFRAME
AND SERVICED ENGINES AND PARTS, TO THE EXTENT SUCH CONDITION
DOES NOT COMPLY WITH SECTION 5 HEREOF OR (vi) (WITHOUT
LIMITING ANY OF THE FOREGOING) ANY BREACH BY LESSEE OF,
NONCOMPLIANCE BY LESSEE WITH, OR MISREPRESENTATION BY LESSEE
MADE OR DEEMED MADE IN, UNDER OR IN CONNECTION WITH, THIS
LEASE OR ANY OTHER DOCUMENT REQUIRED TO BE DELIVERED
PURSUANT HERETO, OR ANY WARRANTY, CERTIFICATE OR AGREEMENT
MADE OR DELIVERED IN, UNDER OR IN CONNECTION HEREWITH OR
THEREWITH. THE FOREGOING INDEMNITY OBLIGATIONS OF LESSEE
SHALL NOT INCLUDE THE OBLIGATION TO INDEMNIFY (i) EMPLOYEES
OF LESSOR AND ITS AFFILIATES WHO SUFFER A CLAIM RESULTING
FROM THE ACTS (INCLUDING FAILURE TO ACT) OF AN EMPLOYEE OF
LESSOR AND ITS AFFILIATES OR OF ANY SUBCONTRACTOR TO LESSOR
AND ITS AFFILIATES OR (ii) SUBCONTRACTORS TO LESSOR AND ITS
AFFILIATES WHO SUFFER A CLAIM RESULTING FROM THE ACTS
(INCLUDING FAILURE TO ACT) OF AN EMPLOYEE OF LESSOR AND ITS
AFFILIATES OR OF ANY SUBCONTRACTOR TO LESSOR AND ITS
AFFILIATES. LESSEE ALSO SHALL NOT BE REQUIRED TO INDEMNIFY
ANY INDEMNIFIED PARTY FOR (i) LIABILITIES RESULTING FROM
ACTS (INCLUDING FAILURE TO ACT) OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY, (ii) DAMAGE TO
OR DESTRUCTION OF PROPERTY OF AN INDEMNIFIED PARTY, WHILE
WITHIN SUCH INDEMNIFIED PARTY'S SOLE CARE, CUSTODY AND
CONTROL, TO THE EXTENT RESULTING FROM THE ACTS (INCLUDING
FAILURE TO ACT) OF AN EMPLOYEE OF LESSOR AND ITS AFFILIATES
OR OF ANY SUBCONTRACTOR TO LESSOR AND ITS AFFILIATES, (iii)
ACTS, OMISSIONS OR EVENTS THAT OCCUR AFTER FULL AND FINAL
COMPLIANCE BY LESSEE WITH THE TERMS OF THIS LEASE OR AFTER
AN AIRCRAFT, ANY SERVICED ENGINE OR AN ENGINE WHICH IS NOT A
SERVICED ENGINE OR PART HAS BEEN RETURNED TO LESSOR PURSUANT
TO THE TERMS
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HEREOF, OR THE POOLING AGREEMENT AS SUCH ACTS,
OMISSIONS OR EVENTS RELATE TO SUCH RETURNED AIRCRAFT, ANY
SERVICED ENGINE, OR AN ENGINE WHICH IS NOT A SERVICED ENGINE
OR PART AFTER ITS RETURN; OR (iv) ANY TAX EXCEPT TO THE
EXTENT AND AS SET FORTH IN SECTION 16 HEREOF AND SECTION
3(h) OF EXHIBIT E.
(b) Indemnification for Negligent Acts. WITHOUT
LIMITING SECTION 15(a), LESSOR AND LESSEE EXPRESSLY INTEND
THAT LESSEE SHALL HOLD HARMLESS, DEFEND AND INDEMNIFY EACH
INDEMNIFIED PARTY AGAINST CLAIMS (OTHER THAN CLAIMS THAT ARE
EXPRESSLY EXCEPTED IN SECTION 15(a)) THAT ARISE AS A RESULT
OF THE NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED) OF
LESSOR OR ANY OTHER INDEMNIFIED PARTY AND AS A RESULT OF THE
JOINT OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
IMPUTED) OF LESSOR, ANY OTHER INDEMNIFIED PARTY AND LESSEE.
(c) Defense of Claims; Settlement. IF ANY INDEMNIFIED
PARTY SHALL HAVE KNOWLEDGE OF ANY CLAIM OR LIABILITY
REQUIRED TO BE INDEMNIFIED AGAINST UNDER THIS SECTION 15,
SUCH INDEMNIFIED PARTY SHALL GIVE REASONABLY PROMPT WRITTEN
NOTICE THEREOF TO LESSEE AFTER BECOMING AWARE OF SUCH CLAIM,
BUT THE FAILURE OF SUCH INDEMNIFIED PARTY SO TO NOTIFY
LESSEE SHALL NOT RELIEVE LESSEE FROM ANY LIABILITY THAT IT
WOULD OTHERWISE HAVE TO SUCH INDEMNIFIED PARTY HEREUNDER
EXCEPT TO THE EXTENT, AND ONLY TO THE EXTENT, THAT LESSEE
DEMONSTRATES THAT THE DEFENSE OF SUCH CLAIM OR LIABILITY IS
PREJUDICED THEREBY. LESSEE AND LESSEE'S INSURERS SHALL HAVE
THE RIGHT, AT THEIR SOLE COST AND EXPENSE, TO INVESTIGATE,
DEFEND OR, EXCEPT AS LIMITED HEREINAFTER, COMPROMISE ANY
CLAIM FOR WHICH INDEMNIFICATION IS SOUGHT UNDER THIS SECTION
15 UPON ACKNOWLEDGMENT BY LESSEE OR SUCH INSURER OF ITS
LIABILITIES TO EACH INDEMNIFIED PARTY IN RESPECT THEREOF.
LESSEE SHALL ASSUME ALL RESPONSIBILITY FOR ANY CLAIM COVERED
BY THE FOREGOING INDEMNITY, AND THE INDEMNIFIED PARTY SHALL
PROVIDE REASONABLE ASSISTANCE AND COOPERATION DURING THE
DEFENSE OR SETTLEMENT OF THE CLAIM. EXCEPT AS LIMITED
HEREAFTER, LESSEE SHALL HAVE COMPLETE CONTROL OF THE DEFENSE
OR SETTLEMENT OF SUCH CLAIM OR COMPROMISE THEREOF; PROVIDED
THAT COUNSEL SELECTED BY LESSEE SHALL BE REASONABLY
ACCEPTABLE TO THE INDEMNIFIED PARTY. NO COMPROMISE OR
SETTLEMENT OF ANY CLAIM MAY BE EFFECTED BY LESSEE WITHOUT
THE INDEMNIFIED PARTY'S CONSENT, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD; PROVIDED, NO CONSENT SHALL BE
REQUIRED IF (i) THERE IS NO FINDING OR ADMISSION OF ANY
VIOLATION OF ANY LAW BY THE INDEMNIFIED PARTY OR ANY
VIOLATION OF THE RIGHTS OF ANY PERSON BY THE INDEMNIFIED
PARTY, (ii) THERE IS NO EFFECT ON ANY CLAIM THAT MAY BE MADE
BY THE INDEMNIFIED PARTY, AND (iii) THE RELIEF
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PROVIDED IS THE SOLE RESPONSIBILITY OF LESSEE. EACH INDEMNIFIED PARTY
SHALL HAVE THE RIGHT, BUT NOT THE DUTY, AT ITS OWN EXPENSE,
TO PARTICIPATE IN THE DEFENSE AND/OR SETTLEMENT OF ANY CLAIM
WITH COUNSEL OF ITS OWN CHOOSING WITHOUT RELIEVING LESSEE OF
ANY OBLIGATIONS HEREUNDER. LESSEE AND ITS COUNSEL SHALL
COOPERATE WITH THE INDEMNIFIED PARTY'S COUNSEL AND SHALL
SUPPLY THE INDEMNIFIED PARTY WITH SUCH INFORMATION
REASONABLY REQUESTED BY THE INDEMNIFIED PARTY AS IS
NECESSARY OR ADVISABLE FOR THE INDEMNIFIED PARTY TO
PARTICIPATE IN ANY PROCEEDING TO THE EXTENT PERMITTED BY
THIS SECTION 15, BUT CONTROL OF THE MATTER SHALL REMAIN WITH
LESSEE.
ANY PAYMENT OR INDEMNITY PURSUANT TO THIS SECTION 15
SHALL INCLUDE THE AMOUNT, IF ANY, NECESSARY TO HOLD THE
INDEMNIFIED PARTY HARMLESS ON AN AFTER-TAX BASIS (TAKING
INTO ACCOUNT ANY CURRENT TAX BENEFITS TO WHICH ANY SUCH
INDEMNIFIED PARTY IS ENTITLED) AS A RESULT OF THE MATTER
INDEMNIFIED AGAINST UNDER THIS SECTION 15 FROM ALL TAXES
REQUIRED TO BE WITHHELD BY LESSEE OR PAID BY SUCH
INDEMNIFIED PARTY AS A RESULT OF SUCH PAYMENT OR INDEMNITY
UNDER THE LAWS OF ANY FEDERAL, STATE OR LOCAL GOVERNMENT OR
TAXING AUTHORITY IN THE UNITED STATES OR ANY TERRITORY,
COMMONWEALTH OR POSSESSION OF THE UNITED STATES OR BY ANY
FOREIGN GOVERNMENT OR ANY POLITICAL SUBDIVISION OR TAXING
AUTHORITY THEREOF.
(d) Indemnification by Lessor. IF A PERSON WHICH HAS
A LIEN ON ANY SERVICED ENGINE TAKES POSSESSION OF OR
INTERFERES WITH LESSEE'S QUIET ENJOYMENT OR USE OF A
SERVICED ENGINE, LESSOR SHALL INDEMNIFY AND HOLD HARMLESS
LESSEE FROM ANY AND ALL COSTS, LIABILITIES AND DAMAGES
INCURRED BY LESSEE RELATING TO OR ARISING THEREFROM.
(e) Survival. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS SECTION 15 SHALL SURVIVE ANY TRANSFER OF
TITLE OR POSSESSION OF THE SERVICED AIRCRAFT, ANY SERVICED
ENGINE OR ANY SERVICED PART, ANY TERMINATION OR EXPIRATION
OF THIS AGREEMENT OR ANY IMPOSSIBILITY OF PERFORMANCE OF
THIS AGREEMENT OR FRUSTRATION OF PURPOSE OF THIS AGREEMENT.
Section 16. General Tax Indemnity.
(a) Tax Indemnity.
(i) Except as provided in Section 16(b), Lessee agrees
that each payment of Rent and any other amounts payable to
Lessor (with any affiliate of Lessor and their respective
successors, permitted assigns, shareholders, directors,
officers, employees, agents and servants referred to
-49-
herein as a "Tax Indemnified Party") by Lessee under this Lease
shall be paid in full without any deduction or withholding
with respect to Taxes of any nature whatsoever imposed by
the United States or any other Taxing Authority unless
Lessee is prohibited by Applicable Law from doing so, in
which event Lessee shall (a) ensure that the deduction or
withholding does not exceed the minimum amount legally
required; (b) immediately pay to Lessor or any other Person
entitled to receive such payment an additional amount (as
Supplemental Rent) in such amount, net of any Taxes
thereon, and at such time as shall result in the net amount
actually received by Lessor or such other Person being,
after all deductions or withholdings, equal to the full
amount which would have been received by Lessor or such
other Person had such deduction or withholding not been made
and shall be free of expense to the Lessor or such other
Person for collection or other charges; (c) pay to the
relevant Taxing Authority within the period for payment
permitted by Applicable Law the full amount of all
deductions or withholdings; and (d) upon the request of
Lessor or such other Person furnish to Lessor or such other
Person, as the case may be, within the period for payment
permitted by Applicable Law, an official receipt of the
relevant Taxing Authority for all amounts deducted or
withheld as aforesaid; and
(ii) Except as provided in Section 16(b) hereof, Lessee
shall pay, protect, save, and on written demand shall
indemnify and hold harmless on an after-tax basis each Tax
Indemnified Party from and against any and all Taxes imposed
against any Tax Indemnified Party, Lessee or the Serviced
Aircraft by any Taxing Authority in connection with or
relating to (A) the construction, financing, refinancing,
purchase, acquisition, acceptance, rejection, delivery,
nondelivery, transport, ownership, registration,
reregistration, assembly, possession, repossession,
operation, location, use, condition, maintenance, repair,
sale, return, abandonment, preparation, installation,
storage, redelivery, manufacture, leasing, subleasing,
modification, rebuilding, importation, reimportation,
transfer of title, transfer of registration, exportation,
reexportation or other application or disposition of, or the
imposition of any Lien (or the incurrence of any liability
to refund or pay over any amount as the result of any Lien)
on, the Serviced Aircraft, the Serviced Airframe, and any
Serviced Engine or any Serviced Part or interest therein,
(B) payments of Basic Rent or Supplemental Rent or the
receipts or earnings arising therefrom or received with
respect to the Serviced Aircraft, the Serviced Airframe, any
Serviced Engine or any Serviced Part or interest therein,
(C) the Serviced Aircraft, any Serviced Airframe, any
Serviced Engine or any Serviced Part or interest therein,
(D) otherwise with respect to or in connection with the
transactions contemplated by this Lease, and (E) any
out-of-pocket penalties, late payment fees, interest, costs
and expenses fairly attributed to any of the foregoing
incurred by any Tax Indemnified Party.
(b) Exclusions from General Tax Indemnity. The
provisions of subsection 16(a) shall not apply to a Tax
Indemnified Party in the case of:
(i) Taxes that are imposed on or measured by the net
income, excess profits, receipts (other than any excise or
gross receipts tax imposed by the State of Hawaii),
franchises, capital or conduct of business of such Tax
Indemnified Party, other than any such taxes which are
imposed in lieu of any sales, use or value added taxes;
-50-
(ii) any other Taxes based on, or measured by, the net income of such
Tax Indemnified Party (other than (x) Taxes which are, or are in the nature
of, sales, use or rental taxes or (y) Taxes imposed by any Taxing Authority
(other than a taxing authority for the jurisdiction in which such Tax
Indemnified Party is doing business) as a result of a nexus between the
jurisdiction of the Taxing Authority and any Item of Equipment or any Part or
any part or the activities in the jurisdiction of the Taxing Authority of
Lessee, any sublessee or any other user of the Aircraft (other than such Tax
Indemnified Party or any Affiliate thereof) or any Affiliate of any of the
foregoing);
(iii) Taxes that are imposed as a result of (y) any voluntary sale,
assignment, transfer or other disposition by such Tax Indemnified Party of
any interest of such Tax Indemnified Party in the Aircraft, the Airframe, any
Serviced Engine, any Part, or any interest therein, unless such sale,
assignment, transfer or disposition results from (1) action taken by or on
behalf of such Tax Indemnified Party as provided in or permitted by this
Lease in connection with or by reason of any Lessee Event of Default that has
occurred and is continuing or any exercise by the Lessor of any of its
remedies in connection with any such Lessee Event of Default as provided in
or permitted by the Lease, or (2) any replacement or substitution by the
Lessee of any Engine or any Part; or (z) any involuntary transfer of any of
the foregoing interests in connection with any bankruptcy or other proceeding
for the relief of debtors in which such Tax Indemnified Party is the debtor
or any foreclosure by a creditor of such Tax Indemnified Party;
(iv) Taxes in the nature of penalties, additions to tax, interest or
fines resulting directly from the negligence of the Tax Indemnified Party in
connection with the preparation or filing of any tax return unless such Tax
Indemnified Party files any tax return in a manner requested by Lessee,
required to be filed by such Tax Indemnified Party without regard to the
transactions contemplated by this Lease, the payment of any taxes shown
thereon or the conduct of any proceeding in respect thereof, except to the
extent attributable to the failure of Lessee to perform its obligations or to
otherwise perform its duties and responsibilities pursuant to this Lease,
including, without limitation, the obligation to make payments hereunder;
(v) so long as no Lessee Default or Event of Default shall be
continuing, Taxes imposed with respect to any period after (i) the expiration
of the Term and the return of the Aircraft to the Lessor in accordance with
Section 5 of this Lease or (ii) the earlier discharge in full of Lessee's
obligation to pay the Stipulated Loss Value and all other amounts due under
this Lease; provided, however, that this exception shall not apply to Taxes
(x) relating to events occurring or matters arising upon or prior to such
expiration and return or discharge, or (y) imposed on or with respect to any
payments due after such expiration and return or discharge until after such
payments have been made;
(vi) Taxes to the extent of the excess of such Taxes over the amount of
such Taxes which would have been imposed and indemnified against had there
not been a sale, assignment, transfer or other disposition (whether voluntary
or, if resulting from bankruptcy, foreclosure (other than foreclosure
resulting from a Lessee Event of Default) or similar proceedings in which
51
such Tax Indemnified Party is the debtor, involuntary) by a Tax Indemnified
Party of any interest of such Tax Indemnified Party in the Aircraft, the
Airframe, any Serviced Engine, or any Part, unless such transfer results from
action taken by or on behalf of such Tax Indemnified Party after a Lessee
Event of Default has occurred and while it is continuing or any exercise by
the Lessor of any of its remedies in connection with any such Lessee Event of
Default;
(vii) Taxes arising out of or caused by any willful misconduct or gross
negligence of such Tax Indemnified Party;
(viii) with respect to any Tax Indemnified Party, any Tax that results
solely from such Tax Indemnified Party or a related Tax Indemnified Party
engaging in transactions other than those contemplated by this Lease or any
Long-Term Agreement, or those in which such Tax Indemnified Party is
currently engaged;
(ix) sales tax incurred by Lessor in connection with the maintenance of
the Serviced Aircraft pursuant to Attachment A to Exhibit E hereto, other
than any such tax, whether in the form of a sales tax, gross receipts tax or
other functional equivalent of a sales tax imposed by the State of Hawaii;
(x) any Tax to the extent such Tax would not have been imposed if a Tax
Indemnified Party or a related Tax Indemnified Party had not engaged in
activities in the jurisdiction imposing such Tax which activities are
unrelated to the transactions contemplated by the this Lease or the other
Long Term Agreements, but only to the extent such Tax would not have been
payable in the absence of such unrelated activities; or
(xi) any failure of a Tax Indemnified Party to comply with (I)
certification, information, documentation, reporting or other similar
requirements concerning the nationality, residence, identity or connection
with the jurisdiction imposing such Tax, if such compliance is required by
statute or by regulation of the jurisdiction imposing such Tax as a
precondition to relief or exemption from such Tax; or (II) any other
certification, information, documentation, reporting or other similar
requirements under the Tax laws or regulations of the jurisdiction imposing
such Tax that would establish entitlement to otherwise applicable relief or
exemption from such Tax; provided, however, that the exclusion set forth in
this subsection 16(a)(x) shall not apply if (v) such failure to comply was
due to a failure of the Lessee to provide such Tax Indemnified Party with the
information required to be supplied by the Lessee in order for such Tax
Indemnified Party to comply with such requirement or due to a failure of the
Lessee to notify such Tax Indemnified Party of such requirement and such Tax
Indemnified Party was not otherwise aware of such requirement; or (w) such
failure to comply was done upon the advice, concurrence and/or direction or
with the knowledge of the Lessee.
52
(c) Calculation of General Tax Indemnity Payments.
(i) Lessee agrees that, with respect to any payment or indemnity to a
Tax Indemnified Party under Section 16 hereof, the Lessee's indemnity
obligations shall include the payment of an amount necessary to hold such Tax
Indemnified Party harmless on an after-tax basis from all Taxes required to
be paid by such Tax Indemnified Party with respect to such payment or
indemnity (including any payments made pursuant to this subsection 16(c)
under the laws of any Taxing Authority.
(ii) If any Tax Indemnified Party shall realize a current tax benefit as
a result of any Taxes paid or indemnified against by the Lessee under this
Section 16 (except to the extent previously taken into account in computing
the indemnity paid with respect to such Taxes), such Tax Indemnified Party
shall, so long as no Lessee Event of Default shall have occurred and be
continuing and no payment is due and owing by Lessee under this Lease or any
Long-Term Agreement, pay to the Lessee an amount which, after subtraction of
any further tax savings such Tax Indemnified Party realizes as a result of
the payment thereof, is equal to the amount of such current tax benefit, but
only after the Lessee shall have made all payments then due and owing to such
Tax Indemnified Party pursuant to this Lease and the Long-Term Agreements;
provided that any subsequent loss of any tax benefit paid to the Lessee
hereunder shall be treated as a Tax subject to indemnification in accordance
with subsection 16(a) (without regard to any exclusions set forth in
subsection 16(b) or the provisions of subsection 16(g); and provided further,
that such Tax Indemnified Party shall not be obligated to make any payment
pursuant to this subsection 16(c) to the extent that the amount of such
payment would exceed (x) the amount of all prior payments by Lessee to such
Tax Indemnified Party pursuant to this subsection 16(c), less (y) the amount
of all prior payments by such Tax Indemnified Party to Lessee hereunder.
Each such Tax Indemnified Party shall in good faith use reasonable efforts in
filing its tax returns and in dealing with taxing authorities to seek and
claim any such tax benefit.
(d) Payment of General Tax Indemnity. Unless otherwise requested by a
Tax Indemnified Party, or unless the Tax is being contested in accordance
with the provisions of subsections 16(g) hereof, the Lessee shall pay when
due any Tax for which it is liable pursuant to this Section 16 directly to
the appropriate Taxing Authority, or, upon written demand, shall reimburse a
Tax Indemnified Party for the payment of any such Tax made by such Tax
Indemnified Party. Within thirty (30) days after the date of each payment by
the Lessee of any Tax referred to in the preceding sentence, the Lessee shall
upon request furnish such Tax Indemnified Party the original or a copy of the
receipt for the Lessee's payment of such Tax or such other evidence of
payment of such Tax as is reasonably acceptable to such Tax Indemnified
Party. The Lessee shall also cause to be furnished, promptly upon request,
such data as such Tax Indemnified Party reasonably may require that are
within the reasonable control or possession of Lessee and are not otherwise
reasonably obtainable by such Tax Indemnified Party to enable such Tax
Indemnified Party to comply with the requirements of any Taxing Authority in
respect of any Tax referred to in subsection 16(a) hereof.
53
(e) Verification of Calculations. At the request of Lessee, the
accuracy of any calculation of the amount or amounts payable to a Taxing
Authority or a Tax Indemnified Party pursuant to this Section 16 shall be
verified by independent public accountants selected by such Tax Indemnified
Party and reasonably satisfactory to Lessee, and such verification shall be
binding on both the Tax Indemnified Party and Lessee. In order, and to the
extent necessary, to enable such independent accountants to verify such
amounts, such Tax Indemnified Party shall provide to such independent
accountants (for their confidential use and not to be disclosed to Lessee or
any other person) all information reasonably necessary for such verification.
Such verification shall be at the expense of Lessee.
(f) Reports. If any report, return or statement is required to be
filed with respect to any Tax which is subject to indemnification under this
Section 16, the Lessee shall timely file the same, except for any such
report, return or statement which a Tax Indemnified Party has notified the
Lessee that it intends to file. The Lessee shall either file such report,
return or statement so as to show the ownership of the Aircraft in the Lessor
and send a copy of such report, return or statement to such Tax Indemnified
Party or, where the Lessee is not so permitted to file in the name of such
Tax Indemnified Party, shall notify such Tax Indemnified Party of such
requirements and cooperate reasonably with such Tax Indemnified Party with
respect thereto.
(g) General Tax Indemnity Contest Provisions.
(i) Notice. If a Tax Indemnified Party receives a written notice
regarding the imposition of a Tax, or if at the conclusion of any audit by
any Taxing Authority there is a proposed adjustment regarding any Tax which
if agreed to by such Tax Indemnified Party would result in the imposition of
a Tax for which such Tax Indemnified Party would seek indemnification from
the Lessee in an amount equal to or in excess of $25,000 pursuant to this
Section 16, such Tax Indemnified Party shall within the lesser of: (A)
thirty (30) days after receipt of such written notice by a responsible
officer of such Tax Indemnified Party or promptly after the conclusion of
such audit; or (B) not less than ten (10) days prior to the expiration of the
statutory period to respond, so notify the Lessee in writing; provided,
however, that the failure so to notify the Lessee shall not diminish the
Lessee's obligations hereunder, except in the event that Lessee's rights to
contest such tax shall have been precluded by such failure, and after such
contest, Lessor would not have been liable for such taxes and except for any
interest or penalties related to any late or missed payment dates.
(ii) Contest Provisions. If requested by the Lessee in writing, a Tax
Indemnified Party shall in good faith contest in the name of such Tax
Indemnified Party or, if requested by the Lessee and if such contest does not
in such Tax Indemnified Party's reasonable discretion involve or potentially
involve taxes imposed on such Tax Indemnified Party that are not indemnified
against hereunder, to contest in the name of the Lessee (or permit the
Lessee, if requested by the Lessee, to contest in the name of the Lessee or
the Tax Indemnified Party) the validity, applicability and amount of the
imposition of any Tax or any proposed adjustment that
54
would give rise to the proposed imposition of any Tax by (a) resisting
payment thereof, if such Tax Indemnified Party in its sole and reasonable
discretion shall determine such course of action to be appropriate, (b) not
paying the same except under protest, if protest is necessary and proper, or
(c) if payment shall be made, using reasonable efforts to obtain a refund
thereof in appropriate administrative and judicial proceedings; provided,
however, that (u) such Tax Indemnified Party shall not be required to contest
such imposition or proposed adjustment if the aggregate amount of an
indemnity on an after-tax basis, would be less than $25,000, (v) no Lessee
Event of Default has occurred and is continuing, (w) such Tax Indemnified
Party has been provided with an opinion of independent tax counsel selected
by such Tax Indemnified Party and reasonably acceptable to the Lessee (the
cost of which shall be borne by the Lessee) to the effect that a reasonable
basis in law or in fact exists that such Tax Indemnified Party will prevail
in such contest, (x) such Tax Indemnified Party, at its sole option, may at
any time forego any and all administrative appeals, proceedings, hearings and
conferences with any Taxing Authority and, in lieu thereof, continue to
contest the claim in any permissible judicial forum selected by such Tax
Indemnified Party, (y) Lessee shall have agreed to pay such Tax Indemnified
Party (or, in the case of item (iii) below, lend to such Tax Indemnified
Party on an interest-free basis (and in such case pay any additional amount
as shall be required to hold such Tax Indemnified Party harmless on a net
after-tax basis from any adverse tax consequences attributable to the loan),
on demand, all reasonable out-of-pocket costs and expenses which such Tax
Indemnified Party incurs in connection with and reasonably allocable to
contesting such imposition or adjustment, including, without limitation, (i)
all legal, accountants' and investigatory fees and disbursements, (ii) the
amount of any interest, penalties or additions to tax (to the date such
payment is made) payable as a result of contesting such adjustment, and (iii)
if such contest is to be initiated by the payment of, and the claiming of a
refund for, the amount of such imposition or adjustment, funds sufficient to
make such payment of, and the claiming of a refund for, the amount of such
imposition or adjustment, funds sufficient to make such payment (and in the
event such contest is finally determined adversely, the amount of such loan
shall be applied against the Lessee's obligation to indemnify such Tax
Indemnified Party for the Tax which was the subject of such contest), and (z)
such proceedings do not involve any risk (other than a remote risk) of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Serviced Engine
or any Part or interest therein or, if there is such a risk, Lessee has
provided to such Tax Indemnified Party a bond in form and substance
reasonably satisfactory to such Tax Indemnified Party in an amount sufficient
to protect such Tax Indemnified Party from any detriment that would be
suffered by the Lessor as a result of such sale, forfeiture, or loss or has
otherwise protected such Tax Indemnified Party in a manner acceptable to such
Tax Indemnified Party and there is no risk or the imposition of criminal
penalties. Such Tax Indemnified Party will consult with Lessee regarding any
contest and will consider in good faith any suggestions made by Lessee with
respect to the most favorable forum for, and the conduct of, such contest;
provided, however, that, unless such Tax Indemnified Party elects to permit
Lessee to conduct such contest, such contest shall be controlled by such Tax
Indemnified Party and conducted by independent counsel selected by such Tax
Indemnified Party or by "in-house" counsel of such Tax Indemnified Party and
reasonably acceptable to Lessee. In the event that such Tax Indemnified
Party elects to permit the Lessee to conduct such contest, the independent
55
counsel selected by the Lessee to conduct such contest shall be reasonably
satisfactory to such Tax Indemnified Party. If requested by the Lessee in
writing, such Tax Indemnified Party will appeal (or, if desired by such Tax
Indemnified Party, permit the Lessee to appeal) any adverse judicial
determination, provided that, as a condition to the commencement of the
appeal of such adverse judicial determination, (a) such Tax Indemnified Party
shall receive, at the Lessee's expense, an opinion of independent counsel,
selected by such Tax Indemnified Party and reasonably satisfactory to Lessee,
to the effect that a more likely than not probability of success exists for
such appeal and (b) Lessee shall have acknowledged its liability to such
Indemnified Party for an indemnity payment as a result of such tax claim if
such Tax Indemnified Party shall not prevail in the contest; provided,
however, that such Tax Indemnified Party shall not be required to appeal any
adverse judicial determination to the United States Supreme Court.
Notwithstanding anything contained in this subsection 16(g) to the
contrary, no Tax Indemnified Party shall be required to contest any claim if
the subject matter thereof shall be of a continuing nature and shall have
previously been decided pursuant to the contest provisions of this subsection
16(g) (including a contest pursuant to the contest provisions hereof in which
the Tax Indemnified Party may be required to contest such a claim if there
shall have been a change in the law (including, without limitation,
amendments to statutes or regulations, administrative ruling and court
decisions)) or Lessee shall have provided new facts after such claim shall
have been so previously decided, and such Tax Indemnified Party shall have
received an opinion of independent tax counsel selected by such Tax
Indemnified Party and approved by the Lessee (the cost of which shall be
borne by the Lessee) to the effect that, as a result of such change or new
facts, it is more likely than not that the position which such Tax
Indemnified Party or the Lessee, as the case may be, had asserted in such
previous contest, would prevail; provided that the provisions of this
paragraph shall not require an Tax Indemnified Party to file an amended tax
return or refund claim for any prior taxable period.
(h) Compromise or Settlement. A Tax Indemnified Party shall have the
right to settle or compromise a contest if such Tax Indemnified Party has
provided Lessee a reasonable opportunity to review a copy of that portion of
the settlement or compromise proposal which relates to the Tax for which such
Tax Indemnified Party is seeking indemnification hereunder, provided that, if
(i) such Tax Indemnified Party fails to provide the Lessee such a reasonable
opportunity to review such portion of such proposal or (ii) after such
reasonable opportunity to review such proposal the Lessee in writing
reasonably withholds its consent to all or part of such settlement or
compromise proposal, the Lessee shall not be obligated to indemnify such Tax
Indemnified Party hereunder to the extent of the amount attributable to the
Tax to which such settlement or compromise relates as to which the Lessee has
reasonably withheld its consent. If such Tax Indemnified Party effects a
settlement or compromise of such contest without giving notice to the Lessee
or, notwithstanding that the Lessee has reasonably withheld its consent
thereto, such Tax Indemnified Party shall repay to the Lessee such amounts
theretofore advanced by the Lessee pursuant to clause (y)(iii) of subsection
16(g)(i) hereof as relate to such claim, to the extent the Lessee has
reasonably withheld its consent to the settlement or compromise thereof.
56
(i) Refunds. If any Tax Indemnified Party shall obtain a refund of all
or any part of any Taxes that the Lessee shall have paid for such Tax
Indemnified Party or for which the Lessee shall have reimbursed such Tax
Indemnified Party, such Tax Indemnified Party shall, so long as no Default or
Lessee Event of Default shall have occurred and be continuing and no payment
is due and owing by the Lessee under this Agreement or any Long-Term
Agreement, pay to the Lessee an amount which is equal to the sum of the
amount of such refund, plus any interest received attributable thereto net of
any net taxes payable by such Tax Indemnified Party with respect to the
receipt or accrual of such interest and the payment thereof to the Lessee,
but only after the Lessee shall have made all payments then due and owing to
such Tax Indemnified Party pursuant to this Section 16; provided, however,
that any subsequent loss of any refund paid to the Lessee hereunder shall be
treated as a Tax subject to indemnification in accordance with this Section
16 (without regard to any exclusions set forth in subsection 16(b) or the
provisions of subsection 16(g)).
(j) Failure to Contest. Notwithstanding anything to the contrary
contained in this subsection 16(g), a Tax Indemnified Party may at any time
decline to take any further action with respect to a proposed adjustment or
the imposition of a Tax; provided that if the Lessee has properly requested
such action pursuant to, and is otherwise entitled to require any action to
be taken by a Tax Indemnified Party pursuant to the provisions of subsection
16(g), and such Tax Indemnified Party has failed to contest, or permit the
Lessee to contest, such proposed adjustment or the imposition of such Tax,
such Tax Indemnified Party shall be deemed to have waived its right to any
Indemnity payment that would otherwise be payable by the Lessee pursuant to
this Section 16 in respect of such adjustment or the imposition of such Tax.
In such event, such Tax Indemnified Party shall reimburse the Lessee for all
amounts previously advanced by the Lessee to such Tax Indemnified Party with
respect to such proposed adjustment pursuant to clause (y)(iii) of subsection
16(g) hereof. If a Tax Indemnified Party fails to contest or to permit a
contest hereunder, such Tax Indemnified Party will not be required to pay
over the Lessee any amount representing tax benefits described in subsection
16(c)(B) hereof which result from the payment of Taxes as to which such Tax
Indemnified Party has been deemed to have waived its right to any indemnity
payment hereunder.
(k) Interest. To the extent permitted by applicable law, interest at
the Stipulated Interest Rate shall be paid, on demand, on any amount not paid
when due, pursuant to Section 16 until the same shall be paid. Such interest
shall be paid in the same manner as the unpaid amount in respect of which
such interest is due.
(l) Effect of Other Indemnities. The Lessee's obligations under the
indemnities provided for in this Agreement and the Long-Term Agreements shall
be those of a primary obligor whether or not the Person indemnified shall
also be indemnified with respect to the same matter under the terms of this
Agreement, any Lease or any Long-Term Agreement or any other document or
instrument, and the Person seeking indemnification from the Lessee pursuant
to any provisions of this Agreement may proceed directly against the Lessee
without first seeking to enforce any other right of indemnification.
57
Section 17. Miscellaneous
(a) Construction; Governing Law. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by Applicable Law, the parties hereby waive any
provision of law which renders any provisions hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by written
instrument signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought; and, in compliance with Section
2A-208(b) of the Texas Business and Commerce Code requiring a separate
signature of this provision, Lessee has signed in the space provided below.
Any consent or approval specified herein of a party hereto may be withheld
entirely in such party's discretion unless it is herein expressly provided
that such consent may not be unreasonably withheld.
No waiver of a breach of any provision of this Lease Agreement by either
party shall constitute a waiver of any subsequent breach of the same or any
other provision hereof, and no waiver shall be effective unless in writing.
HAWAIIAN AIRLINES, INC.
By:
-------------------------------------
Xxxxxxxx X. Xxxxx,
Vice President-Finance, Treasurer
and Assistant Corporate Secretary
By:
---------------------------------------
Xxx X. Xxxxx,
Vice President, General Counsel
and Corporate Secretary
The captions in this Lease are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof. THIS LEASE SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS (EXCLUDING THE CONFLICT OF LAW PROVISIONS THERETO),
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
58
(b) Notices. All notices, offers, acceptances, approvals, waivers,
requests, demands and other communications hereunder or under any instrument,
certificate or other instrument delivered in connection with the transactions
described herein shall be in writing, shall be addressed as provided below
and shall be considered as properly given (a) if delivered in person, (b) if
sent by overnight delivery service (including, without limitation, Federal
Express, UPS, Xxxxx, Purolator, DHL, Air Borne, and other similar overnight
delivery services), (c) if sent by telecopier (upon receipt by the sender
thereof of evidence that a clean transmission of such telecopy was made to
the recipient thereof) and, in such case, dispatching a copy of such notice
by the methods described in clause (a) or (b) above. All notices shall be
effective upon delivery; provided that if any notice is tendered to an
addressee, such notice shall be effective upon tender. For the purposes of
notice the addresses of the parties shall be as set forth below; provided
that any party shall have the right to change its address for notice
hereunder to any other location by giving thirty (30) days' notice to the
other parties in the manner set forth hereinabove. The initial addresses of
the parties hereto are as follows:
If to Lessor: American Airlines, Inc.
0000 Xxxx Xxxxxx Xxxxxxxxx
XX 5566
Xxxx Xxxxx, Xxxxx 00000
Attention: Vice President Corporate
Development and Treasurer
Telecopier: (000) 000-0000
Telephone: (000) 000-0000; and
American Airlines, Inc. Maintenance & Engineering Center
0000 X. Xxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Attention: Senior Vice President,
Maintenance and Engineering
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
With copies to: American Airlines, Inc.
0000 Xxxx Xxxxxx Xxxxxxxxx
XX 5675
Ft. Xxxxx, Xxxxx 00000
Attention: Corporate Secretary
Telecopier: (000) 000-0000
Telephone: (000) 000-0000; and
Xxxxxx and Xxxxx, L.L.P.
000 Xxxx Xxxxxx
0000 XxxxxxxXxxx Xxxxx
Xxxxxx, Xxxxx 00000-0000
59
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000 000-0000
Telephone: (000) 000-0000
If to Lessee: Hawaiian Airlines, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx X000
Xxxxxxxx, Xxxxxx 00000
Attention: Vice President-Finance
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
With copies to: Hawaiian Airlines, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx X000
Xxxxxxxx, Xxxxxx 00000
Attention: Vice President-General Counsel
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
(c) 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 deemed Supplemental Rent, payable by
Lessee upon demand together with interest thereon at the Stipulated Interest
Rate to but excluding the date of payment. Lessor shall use its best efforts
to give Lessee prior notice of Lessor's intention to discharge any such
obligation.
(d) Confidentiality.
(i) Confidential Information. For purposes of this Agreement,
confidential information shall mean any and all (i) trade secrets, (ii)
confidential or other proprietary information of a party or its Affiliates
concerning past, present or future research, development, business activities
or affairs, finances, properties, methods of operation, processes and
systems, (iii) customer lists, and (iv) other customer information, whether
oral, written or contained in any magnetic, electronic or other media;
provided that in order for a party's information to be considered
confidential hereunder such information, if non-oral, must be marked by such
party as confidential; and provided further that oral information must be
specified as confidential at the time of disclosure (collectively,
"Confidential Information"). Notwithstanding the foregoing, the parties
expressly acknowledge and agree that the terms and conditions of this
Agreement set forth in Exhibit E of this Agreement constitute Confidential
Information. The party which receives Confidential Information from the
other party agrees to maintain such information in secrecy at all times,
using the same degree of care with respect to such Confidential Information
as it uses in protecting its own proprietary information, trade secrets and
similar items; provided
60
that Confidential Information may be used in an action by one party to this
Agreement against the other if subject to the conditions set forth in (ii)
below. Information of either party which would otherwise be considered
Confidential Information shall not be considered Confidential Information if
such information is in the public domain, or is placed in the public domain
through no violation of this Agreement, or is lawfully obtained from another
source free of restriction.
(ii) Use of Confidential Information. Except to the extent expressly
permitted in Section 4(l) of Exhibit E, neither party shall sell, transfer,
publish, disclose, display or otherwise make available the Confidential
Information of the other party to any third party (and third parties shall be
deemed also to include Affiliates of the party so restricted which are not
parents or subsidiaries), except as may be required by Applicable Law in
which case the party from whom disclosure is sought shall promptly notify the
other party. To the extent that the other party objects to disclosure of
such Confidential Information, the party from which disclosure is sought
shall (i) use reasonable and lawful efforts to resist making any disclosure
of such Confidential Information, (ii) use reasonable and lawful efforts to
limit the amount of such Confidential Information to be disclosed, and
(iii) use all reasonable efforts to obtain a protective order or other
appropriate relief to minimize the further dissemination of any Confidential
Information to be disclosed. In addition, neither party shall disclose the
Confidential Information of the other party to any employee or agent except
on a need-to-know basis. Each party shall use reasonable efforts to inform
all such employees and agents that the Confidential Information of the other
party is subject to this non-disclosure obligation. Furthermore, neither
party shall use the Confidential Information of the other party for any
purpose other than as expressly provided in this Agreement.
(iii) Termination. Upon termination of this Agreement for any cause or
reason, each party shall, within ninety (90) days of such termination, either
deliver to the other party or destroy all of such other party's Confidential
Information (including all copies thereof, other than copies of this
Agreement) at the option of the other party then in its possession and shall
purge any copies thereof encoded or stored on magnetic or other electronic
media or processors; provided that neither Lessee nor Lessor shall be
required to purge or destroy any Confidential Information that is reasonably
necessary in connection with the resolution of any disputes which may have
arisen pursuant to the terms of this Agreement.
(iv) No Adequate Remedy. Each party acknowledges and agrees that the
other party will have no adequate remedy at law if there is a breach or
threatened breach of this Section 17(d) and, accordingly, that the other
party shall be entitled to an injunction against such breach. Nothing herein
shall be construed as a waiver of any other legal or equitable remedies that
may be available to either party if the other party breaches this Section
17(d).
(v) Survival. The restrictions of this Section 17(d) shall survive for
a period of eight (8) years after the termination or expiration of this
Agreement.
61
(vi) Affiliates. The Affiliates of Lessor and Lessee shall comply in
all respects with the restrictions of this Section 17(d) and Lessor and
Lessee, respectively, shall in all respects be responsible for their
compliance.
(vii) Other Confidentiality Agreements. The provisions of this
Section 17(d) are in addition to, and shall not be deemed to affect the terms
and provisions of, the Confidentiality Agreement. To the extent the terms
hereof may be deemed to be inconsistent with the terms of the Confidentiality
Agreement or such Confidentiality Agreement shall be silent, this Agreement
shall control with respect to this Agreement and any Confidential Information
relating hereto. Upon the written consent of Lessor, which consent shall not
be unreasonably withheld, Lessee may provide this Agreement to third party
lenders or investors of Lessee; provided that the party receiving this
Agreement shall, prior to obtaining it, enter into a confidentiality
agreement with Lessee for the benefit of Lessor in substantially the form of
this Section 17(d).
(e) Counterparts. This Lease and the Lease Supplement No. 1 may be
executed in several counterparts, each of which shall be deemed an original,
and all such counterparts shall constitute one and the same instrument. To
the extent 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 marked as the
"Original" and containing the receipt therefore executed by the applicable
secured party on the signature page thereof.
(f) Grant of Security Interest by Lessor. In compliance with the terms
of this Section, Lessor may grant a security interest in this Lease as
collateral for a loan provided Lessor notifies Lessee at least ten (10)
Business Days before granting such security interest. The rights of Lessee
under this Lease shall be superior in all respects to the rights of any such
lender and Lessor shall require any such lender to agree in writing in form
and substance reasonably satisfactory to Lessee that such lender's rights in
and to the Aircraft and under the Lease shall be subject and subordinate to
the terms of this Lease to receive all such performance from Lessor as may
from time to time be required by the terms hereof. Lessee agrees to
reasonably cooperate with Lessor in connection with Lessor's efforts to grant
such security interest and to provide, at Lessor's cost and expense, such
documents and certificates in connection therewith as Lessor may reasonably
request, provided, that anything in this Section 17(f) to the contrary
notwithstanding, the consummation of any such loan shall not increase the
actual or potential responsibilities or liabilities of the Lessee or deprive
Lessee of any of its rights or privileges under the Long-Term Agreements.
(g) Survival. Except as otherwise expressly set forth herein or in the
Long-Term Agreements, the representations, warranties and covenants set forth
in this Agreement, and the obligations hereunder, shall survive any transfer
of title or possession of the Serviced Aircraft, any Serviced Engines or any
Serviced Part, any termination or expiration of this Agreement or any
impossibility of performance of this Agreement or frustration of purpose of
this Agreement.
62
(h) Assignment. SUBJECT TO THE TERMS HEREOF, THIS AGREEMENT SHALL BIND
AND BENEFIT LESSOR, LESSEE, AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED
ASSIGNS. LESSOR MAY ASSIGN ANY OR ALL OF ITS RIGHTS AND/OR DELEGATE ANY OR
ALL OF ITS OBLIGATIONS HEREUNDER TO ANY AFFILIATE OF LESSOR; PROVIDED THAT
LESSOR SHALL NOT ASSIGN ANY OR ALL OF ITS RIGHTS AND/OR DELEGATE ANY OR ALL
OF ITS OBLIGATIONS UNDER EXHIBIT E OR ANY RELATED PROVISIONS OF THIS
AGREEMENT TO ANY AFFILIATE THAT IS NOT CERTIFICATED BY THE FAA TO PERFORM
MAINTENANCE SERVICES. SUBJECT TO THE PROVISIONS OF SECTION 4(f) OF EXHIBIT
E, LESSOR MAY SUBCONTRACT CERTAIN SPECIFIC TYPES OF MAINTENANCE SERVICES
CONSTITUTING LESS THAN ALL OR SUBSTANTIALLY ALL OF THE MAINTENANCE SERVICES
TO BE PERFORMED HEREUNDER, AND, IN CONNECTION THEREWITH, ASSIGN CERTAIN OF
ITS RIGHTS AND DELEGATE CERTAIN OF ITS OBLIGATIONS UNDER EXHIBIT E AND ANY
RELATED PROVISIONS OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, LESSOR MAY ASSIGN ALL OR SUBSTANTIALLY ALL OF ITS
RIGHTS AND/OR DELEGATE ALL OR SUBSTANTIALLY ALL OF ITS OBLIGATIONS UNDER
EXHIBIT E AND ANY RELATED PROVISIONS OF THIS AGREEMENT TO ANY PERSON
CERTIFICATED BY THE FAA TO PERFORM MAINTENANCE SERVICES SUBJECT ONLY TO
SECTION 3(f)(ii)(C) OF EXHIBIT E. LESSEE MAY NOT (EITHER VOLUNTARILY OR
INVOLUNTARILY) ASSIGN ANY OF ITS RIGHTS OR DELEGATE ANY OF ITS OBLIGATIONS
HEREUNDER.
(i) Transaction Expenses. Lessee agrees to pay the reasonable
out-of-pocket costs and expenses incurred by Lessor in connection with the
preparation, execution and delivery of any amendments, modifications or
waivers requested by Lessee or resulting from any requests of Lessee under
this Agreement. Except as specifically set forth herein, each of Lessor and
Lessee shall be responsible for their own legal and out-of-pocket expenses
arising from the transactions contemplated herein.
(j) Entirety. This Lease Agreement, the Lease Supplements, the
Confidentiality Agreement and the Letter of Credit embody the entire
agreement between the parties hereto and thereto concerning the subject
hereof and thereof and such agreements terminate and supersede all prior or
contemporaneous agreements, discussions, undertakings, and understandings,
whether written or oral, express or implied, between the parties hereto and
thereto concerning the subject hereof and thereof.
(k) Force Majeure. Lessor shall not be liable to Lessee for a failure
or delay in the performance of any obligation or agreement contained herein,
if such failure or delay arises from any cause beyond Lessor's reasonable
control, including any act, omission, or breach of this Lease Agreement by
Lessee, acts of God, action or regulation of any Governmental Authority,
fire, the elements, flood, earthquakes, explosions, accidents, mechanical or
electrical failures, acts of the public enemy, war, civil disturbance,
rebellion, insurrection, work stoppage, strikes
63
(including any mechanic, flight attendant or pilot strike), labor dispute or
difference with workers, regardless of whether or not Lessor (or its
Affiliate) is capable of settling such labor problem, or any other cause,
whether similar or dissimilar, beyond Lessor's reasonable control; provided,
however, that, notwithstanding the foregoing, with respect to Maintenance
Services and related obligations as provided in Exhibit E hereto, the
provisions of Section 4(c)(i) of Exhibit E shall apply.
(l) Independent Contractor; No Agency.
Nothing in this Agreement is intended or shall be construed to create or
establish any agency, partnership, or joint venture or fiduciary relationship
between the parties and neither Lessee nor any of its Affiliates has any
authority to act for or to incur any obligations on behalf of or in the name
of Lessor or any of its Affiliates and neither Lessor nor any of its
Affiliates has any authority to act for or to incur any obligations on behalf
of or in the name of Lessee or any of its Affiliates by virtue of this
Agreement. The parties hereto acknowledge and agree that nothing contained
herein creates any fiduciary duties between the parties or their respective
Affiliates.
(m) Certain Consents and Waivers of Lessee.
(i) Jurisdiction. Except as set forth in Section 6 of Exhibit E hereto,
(a) Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of: (i) the United States District Court for the Northern
District of Texas, and of the courts of the State of Texas in Tarrant County,
and (ii) to the United States District Court for the District of Hawaii
(other than the Court), and of the courts of the State of Hawaii in Honolulu
County, for the purposes of any suit, action or other proceeding arising out
of this Lease Agreement or the subject matter hereof brought by any other
party, and (iii) any federal, state or foreign court of competent
jurisdiction where the In-Use Aircraft may be located from time to time for
the purpose of Lessor exercising any rights and remedies under this Lease
Agreement, including, without limitation, repossession of the In-Use
Aircraft. Lessor and Lessee each agrees that neither of them will bring any
suit, action or other proceeding arising out of this Lease Agreement, the
subject matter herein, or any of the transactions described herein, in any
jurisdiction other than the jurisdictions described above.
(b) To the extent permitted by applicable law, each party hereby waives
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such suit, action or proceeding, any claim (i) that it is not personally
subject to the jurisdiction of the above-named courts, (ii) that the suit,
action or proceeding is brought in an inconvenient forum, (iii) that it is
immune from any legal process with respect to itself or its property, (iv)
that the venue of the suit, action or proceeding is improper, or (v) that
this Lease Agreement or the subject matter hereof may not be enforced in or
by such courts;
64
(c) Lessee agrees to designate CT Corporation in Texas as its agent for
service of process in Texas, and Lessor agrees to designate CT Corporation in
Hawaii as its agent for service of process in Hawaii. Lessor and Lessee each
agrees that submission to jurisdiction and designation of an agent for
service of process set forth above is made solely for the express benefit of
the other party and is effective solely for purposes of this Lease Agreement;
(d) Final judgment against a party in any suit in any court of
competent jurisdiction shall be conclusive, and may be enforced in other
jurisdictions, to the extent permitted by Applicable Law, by suit on the
judgment, a certified and true copy of which, to the extent permitted by
Applicable Law, shall be conclusive evidence of the fact and the amount of
any indebtedness or liability of the party therein described; and
(e) To the extent that any party or any of its property is or becomes
entitled at any time to any immunity on the grounds of sovereignty or
otherwise, from any legal action, suit or proceeding, from setoff or
counterclaim, from the jurisdiction of any competent court, from service of
process, from attachment prior to judgment, from attachment in aid of
execution, or from jurisdiction, that party for itself and its property does
hereby irrevocably and unconditionally waive, and agrees not to plead or
claim any such immunity with respect to its obligations, liabilities or any
other matter arising hereof. Such agreement shall be irrevocable and not
subject to withdrawal in any and all jurisdictions including under the
Foreign Sovereign Immunities Act of 1976 of the United States of America.
(ii) WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS LEASE AGREEMENT OR ANY
MATTER RELATED HERETO.
(iii) OTHER WAIVERS. LESSEE AGREES AND ACKNOWLEDGES THAT UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT UNDER THIS LEASE AGREEMENT, LESSOR SHALL
SUFFER IRREPARABLE HARM FOR WHICH MONEY DAMAGES WILL NOT BE ADEQUATE OR
CANNOT BE READILY ASCERTAINED. IN FURTHERANCE THEREOF, LESSEE AGREES THAT IT
WILL TAKE NO ACTION TO HINDER, DELAY OR INTERFERE WITH ANY ACTIONS TAKEN BY
LESSOR IN CONNECTION WITH THE REPOSSESSION OF THE IN-USE AIRCRAFT.
SPECIFICALLY, LESSEE WILL NOT TAKE ANY ACTION WHICH WOULD REQUIRE THE LESSOR
TO BREACH THE PEACE IN CONNECTION WITH REPOSSESSION OF THE IN-USE AIRCRAFT.
LESSEE CONSENTS TO THE ISSUANCE OF ANY ORDER OF ANY COURT OF COMPETENT
JURISDICTION ENABLING LESSOR TO REPOSSESS THE IN-USE AIRCRAFT, FOLLOWING THE
OCCURRENCE OF ANY EVENT OF DEFAULT, WITHOUT THE NECESSITY OF LESSOR POSTING
OR ISSUING ANY BOND. IN ADDITION, LESSEE AGREES THAT UPON THE OCCURRENCE OF
ANY EVENT OF DEFAULT DESCRIBED IN SECTIONS 13A(I) OR (J) OF THE LEASE
AGREEMENT, LESSEE SHALL NOT TAKE ADVANTAGE OF ANY PERIODS SPECIFIED IN
SECTIONS 365 OR 1110 OF THE
65
BANKRUPTCY CODE DURING WHICH IT MIGHT RETAIN POSSESSION OF THE IN-USE
AIRCRAFT OR THE PROVISIONS OF THE AUTOMATIC STAY SET FORTH IN SECTION 362 OF
THE BANKRUPTCY CODE, AND, WITHOUT LIMITING OTHER REMEDIES AVAILABLE TO
LESSOR, SHALL EITHER IMMEDIATELY UPON THE FILING OF ANY BANKRUPTCY PETITION
TURN OVER THE IN-SERVICE AIRCRAFT TO LESSOR OR PAY ALL AMOUNTS THEN DUE AND
OWING HEREUNDER AND THEREAFTER ACCRUING UNDER THIS LEASE AGREEMENT. IN THE
EVENT THAT AN ORDER IS ISSUED GIVING LESSOR POSSESSION OF ANY IN-USE
AIRCRAFT, LESSEE HEREBY WAIVES ANY RIGHT IT MAY HAVE TO RETURN OF POSSESSION
OF SUCH AIRCRAFT, AND COVENANTS THAT IT WILL NOT SEEK ANY ORDER PERMITTING IT
TO RETAIN OR REPOSSESS SUCH AIRCRAFT, BY POSTING A BOND OR OTHERWISE. IN THE
EVENT THAT ANY COURT DECLINES TO ISSUE AN ORDER PERMITTING LESSOR TO
REPOSSESS ANY IN-USE AIRCRAFT UNLESS LESSOR POSTS OR ISSUES A BOND, OR LESSOR
ELECTS NOT TO REQUEST THAT THE REQUIREMENT FOR SUCH A BOND BE WAIVED, LESSEE
HEREBY AGREES THAT (IF LESSOR SO ELECTS) THE AMOUNT OF SUCH BOND SHALL NOT BE
REQUIRED TO EXCEED ONE YEAR'S BASIC RENT FOR SUCH AIRCRAFT.
(n) Offset. Until all Deferred Basic Rent is paid under the Long-Term
Lease Agreement (provided that on the date all Deferred Basic Rent is paid
thereunder, all other Rent then due and payable thereunder and hereunder has
also been paid; such date being the "Setoff Release Date") Lessor, AMRCG,
SABRE and AMS shall each have the right to setoff and recoup any sums payable
to Lessee against any sums payable by Lessee to Lessor, AMRCG, SABRE or AMS
pursuant to this Lease Agreement, the other Long-Term Agreements or
otherwise. Until the Setoff Release Date Lessor shall also have the right to
setoff and recoup any amounts payable by Lessee to Lessor, AMRCG, SABRE or
AMS pursuant to this Lease Agreement, or the other Long-Term Agreements by
drawing upon any letter of credit or withdrawing any portion or all of the
Deposit (which may constitute all or a portion of the Letter of Credit).
Nothing set forth in this Subsection 17(n) or Subsection 17(n) of the
Long-Term Lease Agreement, the July Lease Agreement or the November Lease
Agreement shall otherwise limit Lessor's right to draw upon or withdraw from
the Letter of Credit to the extent otherwise set forth herein or in any
Long-Term Agreement.
Section 18. True Lease
(a) Intent of the Parties. It is the intent of the parties to this
lease that it will be a true lease and not a "finance lease" as defined in
Section 168(f) of the Internal Revenue Code of 1954, as amended and in effect
prior to the Tax Reform Act of 1986 (P.L. 99-154) or a "conditional sale" as
defined in 49 U.S.C. Section 40102(a)(18) (former 1301) and that the Lessor
shall at all times be considered to be the owner of the Aircraft which is the
subject of this Lease for the purposes of 49 U.S.C. Section 44103 (former
1401) and for all Federal, state,
66
city and local income taxes or for franchise taxes measured by net income and
that this Lease conveys to the Lessee no right, title or interest in the
Aircraft except as a lessee.
Section 19. Enforceability in Jurisdictions. 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.
Section 20. No Third-Party Beneficiaries. Except for rights and
benefits conferred on certain of Lessor's Affiliates as set forth in this
Lease Agreement, all rights, remedies, and obligations of the parties
hereunder shall accrue or apply solely to the parties hereto or their
permitted successors or assigns and there is no intent to benefit any third
parties.
Section 21. Maintenance Obligations. Lessee and Lessor agree that
notwithstanding the provisions of the Long-Term Lease Agreement, including
Exhibit F thereto, which by its terms relates to the provision of maintenance
services by Lessor of all DC10-10 aircraft leased by Lessor to Lessee, that
the terms of this Lease Agreement shall govern the maintenance of the
Aircraft. The Long-Term Lease Agreement, including Exhibit F thereto shall
continue in full force and effect as to all other Serviced Aircraft (as
defined in the Long-Term Lease Agreement) other than the aircraft which is
subject to the November Lease Agreement, which shall remain subject to the
maintenance provisions set forth in Exhibit E to the November Lease
Agreement, the aircraft which is subject to the July Lease Agreement, which
shall remain subject to the maintenance provisions set forth in Exhibit E to
the July Lease Agreement and the aircraft which is subject to the December
Lease Agreement, which shall remain subject to the maintenance provisions set
forth in Exhibit E of the December Lease Agreement.
Section 22. Amendment of Long-Term Lease Agreement. Lessor and Lessee
agree that the occurrence of any Lessee Event of Default hereunder shall
constitute a "Lessee Event of Default" under the Long-Term Lease Agreement,
the 151 Lease Agreement, the 161 Lease Agreement, the 162 Amendment and the
171 Lease Agreement.
[Next following page is the signature page.]
67
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
Lessor:
AMERICAN AIRLINES, INC.
By:
___________________________________
Xxxxxxx X. Xxxxxxx
Vice President - Corporate
Development and Treasurer
Lessee:
HAWAIIAN AIRLINES, INC.
By:
___________________________________
Xxxxxxxx X. Xxxxx,
Vice President-Finance, Treasurer
and Assistant Corporate Secretary
By:
___________________________________
Xxx X. Xxxxx,
Vice President, General Counsel
and Corporate Secretary
68
EXHIBIT A TO LEASE AGREEMENT
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated , 1997, between AMERICAN
AIRLINES, INC., a Delaware corporation ("Lessor"), and HAWAIIAN AIRLINES,
INC., a Hawaii corporation ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have heretofore entered into the Aircraft
Lease Agreement dated as of January, 3, 1997 (the "Lease Agreement", defined
terms used herein are as therein defined), which provides in Section 2 for
the execution of a Lease Supplement substantially in the form hereof for the
purpose of leasing the Aircraft under the Lease Agreement on its Delivery
Date in accordance with the terms hereof; and
WHEREAS, the Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached to and
made a part of this Lease Supplement, and this Lease Supplement, together
with such attachment, is being filed for recordation on the date hereof with
the FAA as one document;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to Section 2 of the Lease Agreement, the Lessor
and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease Agreement as hereby
supplemented, the XxXxxxxxx Xxxxxxx XX00-00 aircraft (the "Aircraft") which
consists of the following components (which may or may not be attached to
each other at the moment of acceptance hereunder):
(i) airframe: U.S. registration number N160AA; manufacturer's serial
no. 46710; and
(ii) three General Electric CF6-6K engines bearing manufacturer's
serial nos. 451210, 451392and 451262 (each of which engines has 750 or
more rated takeoff horsepower or the equivalent of such horsepower).
2. The Term for the Aircraft commences on the date of this Lease
Supplement.
3. The Term shall commence on the date hereof and shall end on
September 11, 2001, unless earlier terminated in accordance with the
provisions of the Lease Agreement.
4. Lessee hereby confirms its agreement to pay to Lessor Basic Rent
for the Aircraft throughout the Term in accordance with Section 3 of the
Lease Agreement and to pay Supplemental Rent pursuant to Exhibit E attached
to the Lease.
5. All of the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement on and as of the date of
this Lease Supplement to the same extent as if fully set forth herein.
6. 6.This Lease Supplement is being delivered in the State of Texas
and shall in all respects be governed by, and construed in accordance with,
the laws of the State of Texas, including all matters of construction,
validity and performance.
7. This Lease Supplement may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument. To the
extent that this Lease Supplement constitutes chattel paper, as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest in this Lease Supplement may be created
through the transfer or possession of any counterpart other than the
counterpart marked as the "Original".
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
to be duly executed and delivered as of the date and year first above written.
AMERICAN AIRLINES, INC.
By: ___________________________________
Xxxxxxx X. Xxxxxxx
Vice President --Corporate
Development and Treasurer
HAWAIIAN AIRLINES, INC.
By: ___________________________________
Xxxxxxxx X. Xxxxx,
Vice President-Finance, Treasurer
and Assistant Corporate Secretary
By: ___________________________________
Xxx X. Xxxxx,
Vice President, General Counsel
and Corporate Secretary
-2-
EXHIBIT B
This Exhibit B has been intentionally omitted for recording purposes, as
the parties deem the information contained therein to be confidential
financial information.
EXHIBIT C
CONDITIONS PRECEDENT TO DELIVERY
1. The Aircraft shall have been tendered for delivery to Lessee in the
condition required by the Lease at LAX or such other location as Lessor and
Lessee may have agreed to in writing.
2. On the Delivery Date, the representations and warranties of Lessor
set forth in the Lease Agreement shall be true and accurate as if made on
such date.
3. This Lease and Lease Supplement No. 1 shall have been executed and
delivered to Lessor for filing for information with the FAA in Oklahoma City,
Oklahoma.
4. The receipt by Lessor from Lessee not later than two (2) days prior
to the Delivery Date of the following, dated as of such Delivery Date, all of
which shall be satisfactory in form and substance to Lessor:
(a) copies of the articles of incorporation and
by-laws of Lessee, certified to be true and up to
date copies by a duly authorized officer thereof;
(b) copies of resolutions of the board of directors of
Lessee authorizing Lessee to enter into and
perform the Lease Agreement and the transactions
contemplated hereby, certified to be true and up
to date copies by a duly authorized officer of
Lessee;
(c) a closing certificate and an incumbency
certificate of a duly authorized officers of
Lessee setting out the names and signatures of the
person or persons authorized to sign the Lease
Agreement;
(d) Opinion of in-house counsel to Lessee in form and
substance reasonably satisfactory to Lessor, and
the opinion of independent counsel confirming the
applicability of the protections of Section 1110
of the Bankruptcy Code to the Lease Agreement;
(e) certificate acceptable in form and substance to
Lessor evidencing the insurance required by
Section 9 of the Lease Agreement;
(f) receipt by Lessor of the first installment of
Basic Rent pursuant to Section 3 of the Lease
Agreement and Supplemental Rent pursuant to
Exhibit E to the Lease Agreement and payment of
all amounts then due under any Long-Term
Agreement; and
(g) Execution and delivery by Lessee of any financing
statements required by Lessor.
5. Execution by Lessee of the Lease Termination relating to this Lease
Agreement.
6. The Final Order (as defined in the Long-Term Lease Agreement)
confirming the Plan shall be and remain in full force and effect.
7. The Long-Term Agreements are in full force and effect.
8. No Default or Lessee Event of Default shall have occurred and be
continuing and no "Event of Default" or "Termination Event" shall have
occurred and be continuing under the Interim Definitive Agreements or
Long-Term Agreements; provided however, that the effectiveness of this Lease
Agreement shall not be deemed to be a waiver by either party to this Lease
Agreement or any of the Interim Definitive Agreements of any claims (whether
or not disclosed) such party may have against the other party under the
Interim Definitive Agreements or the Long Term Agreements.
-2-
EXHIBIT D
TO LEASE AGREEMENT
DELIVERY AND RETURN CONDITIONS
The following conditions shall apply to the In-Use Aircraft upon
delivery of the In-Use Aircraft by Lessor to Lessee and upon return of each
Return Aircraft to the Lessor by the Lessee pursuant to this Agreement.
CONDITION OF IN-USE AIRCRAFT UPON DELIVERY AND
RETURN AIRCRAFT UPON RETURN
Lessor and Lessee agree that Lessor shall deliver the In-Use Aircraft
and Lessee shall return the Return Aircraft to the Lessor in compliance with
all of the following provisions:
1. Inspection of "on-condition" and "condition monitored" components
will have been accomplished when due and all such items shall be serviceable.
2. It is the intent of the parties that the Return Aircraft at the
termination of the Lease shall be to conform to that of the standards of
international air transportation, with the interior and exterior in good
repair and appearance, without significant corrosion, or structural
maintenance work deferred, and with all Airworthiness Directives in full
compliance. It is further the intent of the Lease that the Return Aircraft
and its Serviced Engines will be readily transferable to the registration of
another carrier without having to undergo significant repairs, refurbishment
or modification being required on the Return Aircraft. At the time of such
return, the Return Aircraft shall comply with the following conditions:
A. Upon delivery to Lessee, the In-Use Aircraft shall
comply with Lessor's FAA-approved maintenance program.
Upon return to Lessor, the Return Aircraft shall comply
with Lessee's FAA-approved maintenance program.
B. All deferred maintenance items and all
deficiencies or discrepancies which by their nature are
outside Lessor's (upon delivery) and Lessee's (upon
return) maintenance manual limits for unrestricted
operation found prior to or during the predelivery or
return inspection or final inspection or demonstration
delivery flight(s) shall be corrected by repair in
accordance with the approved Lessor's (upon delivery)
and Lessee's (upon return) maintenance manual. Except
upon the delivery of the In-Use Aircraft, any
maintenance items, deficiencies or discrepancies which
are approved for Lessor's (upon delivery) and Lessee's
(upon return) maintenance manual limits for
unrestricted operation which may be deferred, may at
the discretion of Lessor (upon delivery) and Lessee
(upon return) be deferred until the next C check.
C. In addition, the fuel, hydraulic, pneumatic, water
and waste systems leaks on the In-Use Aircraft shall be
within the limits allowable pursuant to Lessor's (upon
delivery) maintenance manual. The fuel, hydraulic,
pneumatic, water and waste system leaks on the Return
Aircraft shall be within the limits allowable pursuant
to Lessee's (upon return) maintenance manual. This is
to be demonstrated by filling all tanks and reservoirs
to capacity for performance of a functional and leak
check of all related systems. The cost of such checks
shall be borne by Lessor (upon delivery) and the Lessee
(upon return).
D. The Aircraft on delivery by Lessor and Return by
Lessee and all parts installed shall have all necessary
FAA-approved service tags or equivalent Lessor (upon
delivery) and Lessee (upon return) documents approved
by the Lessor's (upon delivery) and Lessee's (upon
return) maintenance program.
E. In the event Lessor is no longer maintaining the
Aircraft, upon return, Lessee shall provide the life
history of all life limited parts, as well as airframe
and engine records, carried forward from the life
histories thereof furnished to Lessee by Lessor.
F. Engines
a. Engine borescope inspections of compressor, burner
and turbine sections of each installed engine shall be
conducted in accordance with Lessor's engine borescope
inspection cards #4930-1, 4930-2 and 4930-3 (or any
such replacement card therefor). Each card shall have
attached thereto findings and comments along with
visual records (photographic or video data). Inspected
engines shall meet the requirements of Lessor's
maintenance manual (upon delivery) and Lessee's
maintenance manual (upon return). Borescope inspection
findings that result in inspection intervals being
reduced to less than 400 hours will be corrected by
engine replacement and/or repair prior to delivery of
the In-Use Aircraft by Lessor and the return of the
Return Aircraft by Lessee.
Borescope inspections shall have been completed by
Lessor/Lessee or its authorized representative, at
Lessee's expense prior to re-delivery. In the event
the APU fails to meet the pneumatic or electrical load
requirements, the APU shall be changed.
b. Each installed engine will be subject to
completion of a power assurance run and review of
engine trend analysis with all engine parameters being
within limits in accordance with the appropriate
manufacturer's engine manual. Engine ground runs for
the Aircraft prior to re-delivery shall be conducted in
accordance with Lessor's engine ground run-up card
number DR71-95-18 (or any such replacement card
therefor). Engine Exhaust Gas Temperature ("EGT")
shall not exceed a maximum of 925 DEG C during ground runs
to max power. In the event EGT exceeds 925 DEG C and
adjustments cannot be accomplished with the engine
installed within eight working hours to reduce EGT
below 925 DEG C at max power, the engine installed shall be
rejected and a Replacement Engine installed.
-2-
c. No re-delivered aircraft shall have an installed
engine which shall be on "watch" and each such engine
shall comply with the operations specification of
Lessee without waiver or exceptions.
In the event Lessor is no longer maintaining the In-Use
Aircraft, the expense of complying with this paragraph
F shall be at Lessee's sole expense. In the event
Lessor is maintaining the In-Use Aircraft pursuant to
Exhibit F hereto, the cost of any repairs or
replacements required by this paragraph F shall be
borne by the parties in accordance with the other terms
of Exhibit F as if such repairs and replacements were
made in the normal course of the term of the Lease
Agreement, except to the extent specifically set forth
in this Exhibit X.
X. Xxxxxx shall (upon delivery) and Lessee shall
(upon return) provide the then current weight and
balance report in the delivery configuration as
required by the FARs provided to Lessor and/or Lessee.
H. All required placards per Lessor's/Lessee's
maintenance and operations specifications must be
current, in place and in English and legible.
I. Fuselage:
(1) Dents, corrosion and abrasions, or any loose,
pulled or missing rivets shall be within the limits of
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual. External patches shall be of a
type consistent with industry standards and approved by
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual. Each repair shall have proper
documentation of structural repair manual reference
and/or engineering repair drawings or documentation as
applicable.
(2) Windows shall be serviceable in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual. Visibility through windows will
comply with industry standards.
(3) Doors shall be free moving, correctly rigged and
be fitted with serviceable seals, in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual limits.
(4) Exterior logos will be removed pursuant to Exhibit
F hereto, by stripping the present logo, and repainting
to blend with existing exterior paint in accordance
with Lessor's (upon delivery) and Lessee's (upon
return) standard maintenance manual practices.
(5) Unpainted metal surfaces shall be clean and
buffed.
-3-
J. Wings and Empennage
(1) All leading edges shall be serviceable in
accordance with Lessor's (upon delivery) and Lessee's
(upon return) maintenance manual limits. Any repairs
to leading edges shall be in accordance with Lessor's
(upon delivery) and Lessee's (upon return) maintenance
manuals.
(2) All control surfaces shall be clean by airline
standards and free of delamination in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual.
(3) Unpainted cowlings and fairings shall be buffed
and clean by airline standards and tightly fitted in
accordance with Lessor's (upon delivery) and Lessee's
(upon return) maintenance manual limits.
(4) Fuel leaks in the wings shall be within the limits
allowed by Lessor's (upon delivery) and Lessee's (upon
return) FAA-approved maintenance program. Except upon
the delivery of any In-Use Aircraft, temporary fuel
leak repairs will be within the limits allowed, by
Lessor's (upon delivery) and Lessee's (upon return)
FAA-approved maintenance program. Permanent repairs
may be deferred until the next C check.
(5) Fuel tanks shall be free from contaminates, as
evidenced by sumping the tanks externally.
K. Interior
(1) The In-Use Aircraft shall be delivered in the
standard Lessee's interior configuration, including,
but not limited to seats, seat covers and belts. Upon
return, the Return Aircraft shall be delivered with
Lessee's carpet, flooring, drapes, tapestries and hard
decor as last operated in revenue service by Lessee,
all of which items shall become the property of Lessor
and may be subsequently used by Lessor in its sole
discretion. Upon return, all logos and markings of
Lessee shall be carefully and tastefully removed.
Except as otherwise provided herein, Lessor may retain
other severable items that do not add to the value of
the Return Aircraft and that are not required to be
installed in the Aircraft by the FAA. Unless otherwise
agreed in writing, Lessee shall deliver the Return
Aircraft with Lessor's seat covers installed in the
In-Use Aircraft.
(2) Ceilings, sidewalls and bulkhead panels shall be
clean and free of major cracks and stains by normal
airline standards.
-4-
(3) All carpets and seat covers shall be in good
condition, normal wear and tear excepted, clean and
stain-free by normal standards and shall meet current
FAA fire retardant regulations.
(4) All seats shall be serviceable in accordance with
maintenance manual limits in good condition, normal
wear and tear excepted and repainted as reasonably
required.
(5) All signs and decals shall be in English, clean
and properly fitted to the seat by normal industry
standards.
(6) All emergency equipment which is limited by
calendar life shall have a minimum of one year's useful
life remaining.
(7) Aircraft galleys delivered in the In-Use Aircraft
hereunder and the Return Aircraft shall include all
necessary inserts, ovens, coffee makers and trash
containers as required for normal passenger revenue
flights.
(8) Floor panels shall be in good condition free of
soft spots and delamination. If field repairs are
installed, permanent repairs may be deferred to the
next C check.
(9) The aircraft interior shall be thoroughly cleaned
to the standards acceptable for passenger revenue
flights.
L. Cockpit
(1) All placard and decals shall be in English, clean,
secure and legible.
(2) All fairing panels shall be free of major stains
and major cracks and shall be clean.
(3) Floor coverings shall be clean and effectively
sealed as required by Lessor's (upon delivery) and
Lessee's (upon return) maintenance program.
(4) Seat covers shall be in good condition, free of
major tears and major stains, normal wear and tear
excepted, and shall conform to existing fire-blocking
regulations.
(5) Seats shall be fully serviceable, in good
condition, normal wear and tear excepted, and repainted
as reasonably required.
-5-
M. Cargo Compartments
(1) All panels shall be in serviceable condition,
normal wear and tear excepted. All repairs to floor,
ceilings or side walls shall be in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manuals. Except, if approved field repairs
are installed, permanent repairs may be deferred to the
next C Check.
(2) Upon return of the Return Aircraft, one ship set
of serviceable cargo containers shall be included.*
(3) All cargo loading functions shall be tested under
load conditions by utilizing one fully loaded cargo
container.
(4) Upon the return of the Return Aircraft, one ship
set of catering modules shall be included.*
(5) One ship set of onboard ovens/coffee makers shall
be included.*
N. Landing Gear and Wheel Xxxxx
(1) Shall be clean, free from leaks and in good
repair, normal wear and tear excepted.
(2) All decals shall be in English, clean, secure and
legible.
(3) Upon return of the Return Aircraft brakes will be
in good condition. No brake will have less than one
half (1.950) inch of wear remaining on wear indicator
with the brake hydraulic system fully pressurized.
O. No structural repairs including corrosion, skin
replacement, crack propagation or SSI programs shall be
overdue on the Return Aircraft at time of redelivery, or be
in a deferred status.
P.
(1) reserved
(2) Lessee shall make the In-Use Aircraft available to
Lessor on or before the anticipated Delivery Date for
an operational test flight. Up to five persons
designated by Lessor may participate in such flight as
observers. Such test flight shall be conducted at
Lessee's expense and, unless mutually agreed by Lessee
and Lessor, shall not exceed two hours. The test
flight shall be conducted by Lessee using Lessee's
standard flight test procedures. Lessee shall
demonstrate such additional
-6-
aircraft functions as may reasonably requested by Lessor's
observers. Lessor shall identify to the Lessee in writing any
claim of any discrepancy between the required condition of the
Return Aircraft and the Return Aircraft's actual condition.
In the event Lessor is no longer maintaining the
Aircraft, the expense of correcting any discrepancy
shall be at Lessee's sole expense. In the event Lessor
is maintaining the Aircraft pursuant to Exhibit F
hereto, the cost of correcting any discrepancy required
by this paragraph P(2) shall be borne by the parties in
accordance with the other terms of Exhibit F as if such
actions were taken in the normal course of the Term.
Q. Upon return to Lessor the In-Use Aircraft shall be in compliance
with Stage III Noise Regulations.
R. Any FAA-mandated corrosion control program will be current as
specified by the manufacturer's corrosion control document or approved
Lessee's corrosion control program.
S. The Return Aircraft shall be in compliance with all mandatory
environmental, noise, air pollution and other standards prescribed by the
respective regulatory authorities.
* Lessee shall be responsible for removing such Items of Equipment for the
In-Use Aircraft returned to Lessor.
Pre-Delivery and Return Inspection and Acceptance Flight Ground Inspection
--------------------------------------------------------------------------
The In-Use Aircraft shall be made available to Lessee on or before
delivery and the Return Aircraft shall be made available to Lessor on or
before return of the Return Aircraft, for ground inspection(s) at either
Tulsa, Oklahoma Airport or another Airport satisfactory to Lessor on or
before the due date for delivery or return, as the case may be, in order that
Lessee or Lessor, as the case may be, may reasonably satisfy itself that the
Aircraft is in the condition required under this Agreement. The manuals and
technical records shall be made available to Lessee or Lessor, as the case
may be, for inspection during such period prior to delivery thereof as Lessee
reasonably requires or during such period prior to return thereof as Lessor
reasonably requires. Such inspections shall be conducted in coordination
with Lessee's and Lessor's respective personnel and Lessee or Lessor, as the
case may be, shall be allowed reasonable access to the Aircraft, as the case
may be, to verify compliance with the conditions set forth in this Agreement.
Lessee or Lessor, as the case may be, shall immediately state orally and
confirm in writing within one (1) business day of the relevant inspection to
Lessee or Lessor, as the case may be, each claim of discrepancy. To
facilitate such inspection Lessor or Lessee, as the case may be, will provide
reasonable office
-7-
accommodation at or near the inspection site (equipped with a telephone and
having access to a photocopier, telecopier and word processing facilities)
provided, however, that Lessee or Lessor, as the case may be, shall indemnify
Lessor or Lessee, as the case may be, for all out-of-pocket costs so incurred
by Lessee or Lessor.
Documents Required for Return
-----------------------------
Listed below are the Lessor's documents or Lessee's equivalent documents
that will be required upon delivery of the In-Use Aircraft by Lessor and the
return of the Return Aircraft by Lessee. All documents shall be valid at
time of return and shall incorporate the most recent revisions issued by the
document's controlling regulatory agency:
1. Standard Airworthiness Certificate
2. Certificate of Sanitary Construction
3. A copy of Maintenance Check Manual
4. Airworthiness Directive Compliance Status including Repetitive and
Method of Compliance
5. Status of Time Controlled and Life Limited Parts; Status of
Airframe, Engines, Auxiliary Power Unit and Land Gear
6. Report covering any Minor Accidents or Repairs on the Aircraft with
Supporting Documentation
7. A review of the Aircraft Log Books
8. FAR Compliance Status including Method of Compliance
9. Alteration/Repair/Modification Records
10. Service Bulletin Status List
11. AOL/Service Letter Status List
12. Supplemental type Certificates issued for Aircraft and Equipment as
held by operator
13. List of Open Items
14. Weight and Balance Records
-8-
The following Lessor's manuals or Lessee's equivalent manuals shall be
furnished in hard copy or reproducible film or in the then current form in
which it is used by Lessor (upon delivery) and Lessee (upon return). Unless
otherwise indicated, one copy of each of the following manuals or equivalents
will be provided to Lessee or Lessor, as the case may be. Additional copies
will be or have been provided pursuant to that certain Manuals Supplement
between Lessor and Lessee, the Interim Aircraft Lease Agreements, the Interim
Aircraft Maintenance Agreement or pursuant to the provisions hereof and all
copies of each of the following shall be returned. All manuals will be valid
at time of return and shall include the most recent revisions issued by the
documents controlling regulatory agency.
1. FAA Approved Flight Manual
2. Flight Crew Operational Manual
3. Performance Manual
4. Airframe Maintenance Manual
5. Airframe Illustrated Parts Catalog
6. Airframe Structures Repair Manual
7. Wiring Diagram Manual
8. Engine Maintenance Manual
9. Engine Illustrated Parts Manual
10. Weight and Balance Records
11. Minimum Equipment List
12. Part Number Conversation List - Operator to Manufacturer P/N
13. Red Book for each microfilm library
NOTE: All documents and manuals must be in English.
Return of Other Engines. In the event that any engine not owned or leased by
Lessor shall be installed on an Airframe (upon return), such engine shall be
an engine suitable to be a Replacement Engine hereunder. Upon return of the
Return Aircraft, Lessee shall duly convey to Lessor good title to any such
engine, free and clear of all Liens and, upon such conveyance, Lessee will
furnish Lessor with a full warranty xxxx of sale, in form and
-9-
substance reasonably satisfactory to Lessor, with respect to such engine and
take such other action as may be reasonably requested in order that title to
such engine may be duly and properly vested in Lessor to the same extent as
the Engine replaced thereby. Upon conveyance by Lessee of good title to such
engine to Lessor, and upon full compliance by Lessee with its obligations
hereunder, at Lessee's expense, Lessor will transfer to Lessee all rights,
title and interest originally conveyed to Lessor in an Engine constituting
part of any Aircraft but not installed on the Airframe at the time of the
return of the Airframe "as-is, where-is", free and clear of Lessor's Liens
but otherwise without recourse or warranty, express or implied to Lessee.
-10-
EXHIBIT D-1
ADDITIONAL RETURN CONDITIONS
At the time of return, the Return Aircraft shall be returned to Lessor
as follows:
(i) All time controlled and life limited components of the
Serviced Engines shall have at least the same number of hours and
cycles (as appropriate) remaining until the applicable limit of
hours and cycles as set forth in Lessee's or manufacturer's
Maintenance Manual as existed at the Delivery Date.
(ii) All time controlled and life-limited components, the
landing gear, and other Items of Equipment shall have at least the
same number of hours, cycles or days (as appropriate) remaining
until the applicable limit of hours, cycles and days as set forth
in Lessee's or manufacturer's Maintenance Manual as existed at the
Delivery Date.
(iii) The Airframe shall have at least the same number of flight hours
remaining to the next "C-check" (based on a 7200 hours "C-check"
interval) as existed at the Delivery Date.
(iv) Immediately prior to return of the Return Aircraft to Lessor, the
Aircraft shall have received a "B-check" and shall have fewer than
four (4) flights and ten (10) flight hours since such "B-check"
(based on a 400 hour "B-check" interval) as existed at the Delivery
Date.
EXHIBIT E
This Exhibit E has been intentionally omitted for recording purposes, as
the parties deem the information contained therein to be confidential
financial information.
-2-
SCHEDULE I
This Schedule I has been intentionally omitted for recording purposes,
as the parties deem the information contained therein to be confidential
financial information.
SCHEDULE 4(d)(i)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
SCHEDULE 4(d)(iv)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
SCHEDULE 4(d)(v)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
SCHEDULE 4(d)(vi)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
SCHEDULE 4(d)(vii)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
