EXHIBIT 10.60
LEASE AGREEMENT
Dated as of _________________, 1996
BETWEEN
FINOVA CAPITAL CORPORATION
(Lessor)
AND
ATLANTIC COAST AIRLINES
(Lessee)
Concerning
(N____UE )
One Jetstream Series 4100 Model 4101 Airframe
Two Allied Signal Model TPE331-14GR-802H and TPE331-14HR-802H Engines
Two XxXxxxxx Propellers
Model B5JFR36C1101-B/C-114GCA-0 and C5JFR36C1102-B/C-L114GCA-0
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") dated as of __________, 1996, by
and between FINOVA Capital Corporation, a Delaware corporation ("Lessor") and
Atlantic Coast Airlines, a California corporation ("Lessee").
WHEREAS, Lessee desires to lease from Lessor and Lessor is willing
to lease to Lessee the Aircraft described herein upon and subject to the terms
of this Lease;
NOW, THEREFORE, in consideration of the mutual promises herein,
the Lessor and the Lessee agree as follows:
ARTICLE 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:
"Acceptance Certificate" means the certificate in substantially
the form of Exhibit A hereto to be executed by Lessee on the Delivery Date.
"Aeronautics Authority" shall mean, where applicable, the
Department of Transportation, the Federal Aviation Administration and/or the
Administrator of the Federal Aviation Administration ("FAA"), or any person,
governmental department, bureau, commission or agency succeeding to the
functions of any of the foregoing.
"Affiliate" means with respect to any Person, any other person
directly or indirectly controlling, controlled by or under common control with
such Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by contract or
otherwise.
"Aircraft" means the Airframe to be delivered and leased hereunder
together with the Engines and Propellers initially installed on such Airframe
when delivered and leased hereunder or any Engine or Propeller as defined
herein, all as more particularly described and identified in the Lease
Supplements pertaining thereto.
"Airframe" means: (A) the BAe Jetstream 4100 Model 4101 aircraft
designated in a Lease Supplement (except the Engines an Propellers and engines
and propellers from time to time installed on an Airframe) leased hereunder by
the Lessor to the Lessee and having the manufacturer's serial number and the
Federal Aviation Authority registration number as set forth in such Lease
Supplement, and (B) except as otherwise provided in Sections 9.2 and 9.4
hereof, any and all Parts so long as the same shall be incorporated or
installed in or attached to an Airframe, or so long as title thereto shall
remain vested in the Lessor in accordance with the terms of Article 9 hereof,
after removal from an Airframe.
"Appraisal Procedure" shall mean the procedure specified in this
paragraph for determining an amount or value. With respect to any other
amount or value, Lessor and Lessee shall consult for the purpose of
determining such amount or value by mutual agreement. In the absence of such
agreement on or before the 30th day following the commencement of the
Appraisal Procedure, either of such parties may give written notice to the
other requesting determination of such amount or value by appraisal, and in
such event the parties shall consult for the purpose of appointing a mutually
acceptable qualified independent appraiser. If the parties are unable to
agree on a single appraiser on or before the 20th day after such notice, such
amount or value shall be determined by a panel of three independent
appraisers, one of whom shall be selected by each of Lessee and Lessor on or
before the 10th day following the expiration of such 20-day period. If one
party appoints an appraiser pursuant to the immediately preceding sentence,
and the other party fails to appoint a second appraiser within the applicable
time limit, the appraisal shall be made by the first appointed appraiser
without the appointment of any other appraiser. If a second appraiser is duly
appointed, on or before the 10th day after appointment of the second
appraiser, a third appraiser shall be selected by agreement of the first two
appraisers, or if such two appraisers are unable to agree upon a third
appraiser by such date, such appointment shall be made by the American
Arbitration Association (or its successors). Lessee shall pay all the fees
and expenses of the Appraisal Procedure. Each appraiser appointed pursuant to
the foregoing procedure shall be experienced, shall be independent of Lessee,
Lessor and the manufacturers of any material components of the Aircraft, and
shall be instructed to determine such amount or value on or before the 30th
day after the appointment of the last of such appraisers to be appointed, and
such determination shall be final, binding and conclusive upon the parties.
If three appraisers shall be appointed, the determination shall be the average
of the three appraisals rendered by the appraisers. In the event, however,
that the lowest or the highest of the three appraisals, or both, varies by
more than ten percent from the middle appraisal, the appraisal or appraisals
so varying shall be disregarded. Except as otherwise specified in the Lease,
any estimate of an amount or value determined pursuant to the Appraisal
Procedure shall take into account a reasonable estimate of inflation or
deflation.
"Base Lease Commencement Date" for the Aircraft means the date
corresponding to the Commencement Date.
"Base Term" for the Aircraft shall have the meaning set forth in
Article 3 hereof.
"Basic Rent" means the rent payable throughout the Base Term and
the Renewal Term, if any, for an Aircraft pursuant to Section 4.1 and any
other provision of this Lease which treats any payment by the Lessee as Basic
Rent.
"Business Day" means any day other than a Saturday, Sunday or day
on which commercial banking institutions in New York, New York and Washington,
D.C. are authorized by law to be closed.
"Certified Air Carrier" means any Person (except the United States
Government) domiciled in the United States of America and holding a
Certificate of Public Convenience and Necessity issued under Chapter 411 of
Title 49 of the United States Code (or an exception from such requirement
issued under Title 49 of the United States Code, Section 40109 by the
Department of Transportation or any predecessor or successor agency thereto)
and an Air Carrier Operating Certificate issued under Section 44705 of Title
49 of the United States Code by the FAA or any successor agency thereto, or,
in the event such certificates shall no longer be issued, any Person (except
the United States Government) domiciled in the United States of America and
legally engaged in the business of transporting for hire passengers or cargo
by air, to, from or between points within the United States of America, and,
in either event, operating commercial jet aircraft.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor or replacement code thereto.
"Commencement Date" shall mean the Delivery Date.
"Default" shall mean any event or condition which with the lapse
of time or the giving of notice, or both, would constitute an Event of
Default.
"Delivery Date" for the Aircraft means the date of the Lease
Supplement for such Aircraft, which date shall be the date the Aircraft is
delivered by the Lessor and accepted by the Lessee, pursuant to the provisions
of Article 2 hereof.
"Engine" means: (A) any of the engines listed by manufacturer's
serial number in a Lease Supplement and installed on the Airframe covered by
such Lease Supplement on the Delivery Date therefor whether or not from time
to time thereafter installed on the Airframe or installed on any other
airframe or any other aircraft; (B) any engine which may from time to time be
substituted, or be a replacement or addition pursuant to Article 11 or 16
hereof, for any such Engine; and (C) except as otherwise provided in Sections
9.2 and 9.4 hereof, 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 the Lessor or its assignee in accordance with the terms of
Article 9 hereof after removal from any such Engine.
"Equipment Cost" or "Lessor's Cost" for the Aircraft means the
amount so described in the Lease Supplement for such Aircraft.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"Event of Default" has the meaning specified in Article 17 hereof.
"Event of Loss" with respect to any Item of Equipment means any of
the following events with respect to such Item: (A) loss of such Item of
Equipment or the use thereof due to theft or disappearance for a period in
excess of 180 days, (B) loss of use due to destruction or damage beyond
repair; (C) any damage to such Item which results in an insurance settlement
with respect to such Item on the basis of a total loss or a constructive or
compromised total loss; (D) the condemnation, confiscation or seizure of, or
requisition of title to, or requisition of use of, such Item by (i) the
Government of the United States or any political subdivision thereof for a
period beyond the remaining Term of the Lease, or (ii) any foreign government
or any political subdivision thereof for a period of more than six months or,
if less, a period beyond the remaining Term of the Lease; or (E) as a result
of any rule, regulation, order or other action by the Aeronautics Authority,
or other governmental body having jurisdiction, the use of such Item in the
normal course of business of passenger air transportation shall have been
prohibited for a period of not less than six consecutive months unless the
Lessee, prior to the expiration of such six month period, has in good faith
commenced compliance (if such compliance is available) with such rule,
regulation, order or other action and shall be diligently performing all steps
necessary to permit normal use by Lessee, but in any event no longer than the
lesser of the remaining Term of the Lease or one (1) year. An Event of Loss
with respect to an Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the Airframe which is part of such Aircraft.
"Federal Aviation Act" shall mean Title 49 of the United States
Code (which, among other things, recodified the Federal Aviation Act of 1958,
as amended to the time of such recodification), as amended, and the rules and
regulations promulgated thereunder, as in effect on the date of this Lease,
and as modified or amended hereafter or any successor or substituted
legislation at the time in effect and applicable.
"Hourly Reserve Rate" means Xxxxxxx Engine Division of Allied
Signals then-current recommended hourly set-aside rate for the cost of major
and intermediate periodic inspections on the engines model TPE-331-14GR/HR
engine, adjustable as set forth below. If no recommended set-aside is
available, Hourly Reserve Rate shall be calculated by the sum of the estimated
costs for a major and an intermediate periodic inspection divided by the then
approved TBO. In the event that the engine is operated on an approved "on
condition" program, the Hourly Reserve Rate shall be calculated by dividing
the Lessee's fleet average cost of each comparable type of shop visit over the
previous twelve months by the Lessee's fleet average time between the shop
visits. If no such history is available, the amount shall be based on a rate
to be mutually agreed between Lessee and Lessor.
"Incentive Rate" shall be equal to the Prime Rate plus 2%, or the
maximum rate permitted by applicable law, whichever is less.
"Items of Equipment" or "Items" means any or all of the Aircraft,
the Airframe, the Engines, the Propellers and each Part, as such terms are
defined herein.
"Lease", "Lease Agreement", "This Lease Agreement", "This Lease",
"This Agreement", "herein", "hereunder", "hereby" and other like words mean
this Lease, as it may be amended, modified or supplemented pursuant to the
applicable provisions hereof, including, without limitation, supplementation
hereof by a Lease Supplement entered into pursuant to the applicable
provisions hereof.
"Lease Supplement" means a Lease Supplement, substantially in the
form of Exhibit B hereto, entered into between the Lessor and the Lessee for
the purpose of leasing the Aircraft under and pursuant to the terms of this
Lease Agreement, and any subsequent Lease Supplement entered into in
accordance with the terms hereof. Each Lease Supplement shall be deemed to
have been incorporated into this Lease Agreement to the same extent as if such
provisions were fully set forth herein.
"Lease Termination" shall mean that certain Lease Termination
Agreement dated as of the date hereof between Lessee and Seller as relating to
the Aircraft.
"Lessor's Cost" shall mean the amount set forth on Lease
Supplement No. 1.
"Lessor's Liens" shall mean the Liens referred to in clause (ii)
of Article 14 hereof.
"Lien" means any mortgage, pledge, lien, charge, encumbrance,
lease or security interest of any kind or nature whatsoever.
"Manufacturer" shall mean Jetstream Aircraft Ltd..
"Parts" means any and all appliances, parts, systems, components,
assemblies, rotables, instruments, appurtenances, accessories, furnishings,
seats and other equipment of whatever nature (other than Engines or engines or
Propellers or propellers), which (A) are from time to time incorporated or
installed in or attached to an Airframe, Engine or Propeller, or (B) having
been so installed or attached, are later removed therefrom, so long as title
thereto remains vested in Lessor in accordance with Article 9 hereof after
such removal from an Airframe, Engine or Propeller. "Part" means any one of
the Parts.
"Permitted Sublessee" means any Certified Air Carrier or United
States airframe or engine manufacturer or any entity domiciled in a country
listed on Exhibit D hereto, and in each case, consented to by Lessor (such
consent not to be unreasonably withheld or delayed, provided that Lessor
agrees that it will be unreasonable for Lessor to reject any proposed
sublessee if the creditworthiness of such proposed sublessee, as reasonably
determined by Lessor in its sole good faith discretion, is at least equivalent
to the creditworthiness of Lessee at the time that this Lease was entered
into).
"Prime Rate" means the interest rate announced by Citibank, or any
successor thereto, as its prime rate (or equivalent if "prime rate" is no
longer announced) from time to time at its principal office in New York, NY;
with each change in such rate to take effect immediately under this Lease and
any calculations performed in accordance herewith.
"Propeller" means: (A) any of the propellers listed by
manufacturer's serial number in a Lease Supplement and installed on an Engine
covered by such Lease Supplement on the Delivery Date therefor whether or not
from time to time thereafter installed on an Engine or installed on any other
engine or any other aircraft; (B) any propeller which may from time to time be
substituted, or be a replacement or addition pursuant to Article 11 or 16
hereof, for any such Propeller; and (C) except as otherwise provided in
Sections 9.2 and 9.4 hereof, 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 the Lessor or its assignee in accordance with
the terms of Article 9 hereof after removal from any such Propeller.
"Purchase Agreement" shall mean the Aircraft Purchase and Sale
Agreement (N302UE), dated as of ______________, 1996, between Seller, Trident
Turboprop (Dublin) Limited and Lessor.
"Renewal Term(s)" shall have the meaning described in Section 20.3
hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Seller" shall mean First Security Bank, N.A., as owner trustee
for the benefit of Trident Turboprop (Dublin) Limited.
"Stipulated Loss Value" for the Aircraft as of any particular date
of computation shall mean an amount determined by multiplying the Equipment
Cost for the Aircraft by the percentage specified in Exhibit C attached hereto
opposite the appropriate determination date of Stipulated Loss Value for such
date (provided, however, that the Stipulated Loss Value for an Event of Loss
which occurs after expiration of the Term of this Lease and before expiration
of the storage period provided for in Section 16(j) hereof shall be based upon
the final amount set forth in Exhibit C).
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay under this
Lease to the Lessor or others hereunder.
"Term" means the Base Term and the Renewal Terms for which an
Aircraft is leased hereunder pursuant to Article 3 hereof.
"Termination Value" for the Aircraft as of any particular date of
computation shall mean an amount determined by multiplying the Equipment Cost
for the Aircraft by the percentage specified in Exhibit C attached hereto
opposite the appropriate determination date of Termination Value for such
date.
"Wet Lease" means any arrangement whereby the Lessee (or any
Permitted Sublessee) agrees to furnish the Aircraft to any third party
pursuant to which such Aircraft (i) shall be operated solely by regular
employees of Lessee (or such Permitted Sublessee) possessing all necessary
certificates and licenses (except cabin attendants) and (ii) shall be
maintained by Lessee (or such Permitted Sublessee) in accordance with Section
6.5 of this Lease.
ARTICLE 2
DELIVERY AND ACCEPTANCE
2.1 Agreement to Lease. Lessor hereby agrees (subject to
satisfaction of the conditions hereinafter set forth) to lease to Lessee
hereunder, and Lessee hereby agrees to lease from Lessor hereunder, the
Aircraft, as evidenced by the execution by Lessor and Lessee of one or more
appropriate Lease Supplements leasing the Aircraft hereunder.
2.2 Title. At all times during the Term of this Lease, full
legal title to the Aircraft shall remain vested in Lessor (or its permitted
assignee), to the exclusion of Lessee, notwithstanding the delivery of the
Aircraft to, and the possession and use thereof by, Lessee.
2.3 Acceptance. The Lessor hereby authorizes one or more
persons designated by the Lessee, who shall be an employee or employees of the
Lessee, as the authorized representative or representatives of the Lessor, to
accept delivery of the Aircraft on behalf of Lessor from the Seller under the
Purchase Agreement. The Lessee hereby agrees that such acceptance of delivery
of an Aircraft by such authorized representative or representatives shall,
without further act, irrevocably constitute acceptance by the Lessee of such
Aircraft for all purposes of this Agreement.
2.4 Conditions Precedent. (A) Lessor's obligation to lease the
Aircraft to Lessee hereunder shall be subject to satisfaction on or before the
Commencement Date for such Aircraft of each and all of the following
conditions precedent:
(1) Lessor shall have received the following:
(a) resolutions of the Board of Directors of Lessee
or other written evidence of appropriate corporate action,
certified by the Secretary of the Lessee, duly authorizing the
lease of the Aircraft and the execution, delivery and performance
of this Lease, together with an incumbency certificate as to the
person or persons authorized to execute and deliver said documents
on behalf of Lessee;
(b) the following items with respect to the
Aircraft:
(i) a Lease Supplement, duly authorized and
executed by Lessee, covering such Aircraft, effective as of
the Commencement Date;
(ii) an Appraisal Report of Pro-Tech Advisors,
in form and scope satisfactory to Lessor;
(iii) a duly executed copy of each of the
Purchase Agreement;
(iv) a duly executed copy of the Acceptance
Receipt by Authorized Representative;
(v) a duly issued copy of the copy of FAA
Airworthiness Certification; and
(vi) a duly executed copy of each of the
Warranty Xxxx of Sale, the FAA Xxxx of Sale and the Lease
Termination.
(c) certificates signed by independent aircraft
insurance brokers as to the due compliance with the insurance
provisions of Article 12 hereof with respect to such Aircraft;
(d) a favorable opinion of counsel for Lessee, dated
the Commencement Date, to the effect that:
(i) Lessee has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of California, and has full corporate
power and authority to carry on its business in which it is
presently engaged and to perform its obligations under the
Lease, as supplemented by the Lease Supplement;
(ii) the execution and delivery of the Lease,
the Lease Supplement, the consummation by the Lessee of the
transactions therein contemplated and compliance by the
Lessee with the terms and provisions thereof do not and will
not result in the violation of the provisions of the
articles of incorporation or the code of regulations of the
Lessee as in effect on the date of such opinion; and to the
knowledge of such counsel do not and will not conflict with
or result in a breach of any terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge, or encumbrance upon, any
property or assets of the Lessee under any indenture,
mortgage, or other agreement or instrument to which the
Lessee is a party or by which it or any of its properties
are or may be bound, or any existing applicable law, rule or
regulation, or any judgment, order or decree then in effect,
of any government, governmental instrumentality or court
having jurisdiction over the Lessee or any of its activities
or properties;
(iii) the Lease and such Lease Supplement have
each been duly authorized, executed and delivered by the
Lessee, and each such instrument is a legal, valid,
enforceable and binding obligation of the Lessee, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general application
affecting the enforcement of creditors' rights and by
general principles of equity including, without limitation,
specific performance;
(iv) except for any filing or recording that
may be required under the Federal Aviation Act (and except
such other filings or recordings as such counsel shall
specify have been duly effected), no filing or recording of
any instrument or document (including the filing of any
financing statement) is necessary under the laws of the
United States or of any states other than the filing of a
financing statements) (including continuation statements) in
the States of Virginia in order for the Lease to constitute
a valid lease of record relating to the Aircraft;
(v) except as disclosed in the opinion, there
are no suits or proceedings pending or, to the knowledge of
such counsel, threatened against Lessee in any court or
before any regulatory commission, board or other
administrative governmental agency against or affecting
Lessee, which if determined adversely to Lessee may have a
material adverse effect on the financial condition or busi-
ness of Lessee;
(vi) no authorization, approval, consent,
license or order of, or registration with, or the giving of
notice to the Aeronautics Authority or any other regulatory
body or authority is required for the valid authorization,
execution, delivery and performance by the Lessee of the
Lease, including the Lease Supplement, except for any
filings or recordings with the FAA.
(2) on the Commencement Date the following statement shall be
true and Lessor shall have received a certificate satisfactory to Lessor
signed by a duly authorized officer of Lessee, dated such Commencement
Date, stating that:
(a) the representations and warranties contained in
Section 5.2 hereof are true and accurate on and as of the
Commencement Date as though made on and as of such date (except to
the extent that such representations and warranties relate solely
to an earlier date); and
(b) no Default or Event of Default has occurred and
is continuing, or would result from the lease of such Aircraft.
(3) On the Commencement Date no material adverse change shall
have occurred and be continuing in Lessee's financial condition as
compared to its financial condition as of ___________, 1996.
(4) The Delivery Date shall be no later than _____________,
1996.
(5) On the Commencement Date, each of the Lease, the Lease
Supplement, the FAA Xxxx of Sale, the FAA Aircraft Registration
Application, and the Lease Termination shall have been duly filed with
the FAA.
(6) On the Commencement Date, Precautionary State and Local UCC-
l Financing Statements shall have been delivered to Lessor to be filed
in Virginia, against the Lessee, as debtor, and Lessor, as secured
party; with file stamped copies thereof to be delivered post closing.
(7) All proceedings taken in connection with the transactions
contemplated by the Lease and all agreements, documents, instruments and
papers in connection therewith shall be in form and substance
satisfactory to Lessor and its counsel.
(B) Lessee's obligation to lease the Aircraft to Lessee hereunder
shall be subject to satisfaction on or before the Commencement Date for such
Aircraft of each and all of the following conditions precedent:
(1) Lessee shall have received the following:
(a) resolutions of the Board of Directors of Lessor
or other written evidence of appropriate corporate action,
certified by the Secretary of the Lessor, duly authorizing the
lease of the Aircraft and the execution, delivery and performance
of this Lease, together with an incumbency certificate as to the
person or persons authorized to execute and deliver said documents
on behalf of Lessor;
(b) the following items with respect to the
Aircraft:
(i) a Lease Supplement, duly authorized and
executed by Lessor, covering such Aircraft, effective as of
the Commencement Date;
(ii) a duly executed copy of each of the
Purchase Agreement, the Purchase Agreement Assignment and
the Manufacturer Consent;
(iii) a duly executed copy of the Appointment of
Authorized Representative by Lessor and the Acceptance
Receipt by Authorized Representative; and
(iv) a duly executed copy of each of the
Warranty Xxxx of Sale, the FAA Xxxx of Sale and the FAA
Aircraft Registration Application.
(2) on the Commencement Date the representations and warranties
contained in Section 5.2 hereof are true and accurate on and as of the
Commencement Date as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an
earlier date) and Lessee shall have received a certificate to that
effect satisfactory to Lessee signed by a duly authorized officer of
Lessor, dated such Commencement Date.
(3) On the Commencement Date, Trident Turboprop (Dublin) Limited
shall have received the Lessor's Cost of the Aircraft from Lessor.
(4) On the Commencement Date, each of the Lease, the Lease
Supplement, the FAA Xxxx of Sale, the FAA Aircraft Registration
Application, and the Lease Termination shall have been duly filed with
the FAA.
(5) All proceedings taken in connection with the transactions
contemplated by the Lease and all agreements, documents, instruments and
papers in connection therewith shall be in form and substance
satisfactory to Lessor and its counsel.
2.5 Recordation. Concurrently with the delivery of the Aircraft
hereunder, Lessor and Lessee will cause this Lease, and a Lease Supplement
substantially in the form of Exhibit B attached hereto, to be duly filed and
recorded with the Federal Aviation Administration at Lessee's expense.
2.6 Opinion of Counsel. On the Delivery Date for the Aircraft,
Lessee shall have provided Lessor with a favorable oral opinion of Xxxxxxxxx,
Xxxxxx & Xxxxxxxx, special counsel for Federal Aviation Administration
matters, to the effect that upon the filing for registration and recordation
of this Lease and the Lease Supplement, such Aircraft (including the Engines
and Propellers) will be free and clear of any mortgage, lease, pledge, lien,
charge or encumbrance of record except the Lease, and the Aircraft will be
owned as a matter of record solely by Lessor. Additionally, as soon as
practicable after the Delivery Date for the Aircraft, Lessee shall provide
Lessor with a favorable written opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx
confirming the oral opinion referred to above in all respects.
ARTICLE 3
TERM
The Base Term for the Aircraft shall commence on the Delivery Date
and shall end on the date set forth in the Lease Supplement.
ARTICLE 4
RENT
4.1 Basic Rent. The Lessee covenants and agrees to pay the
Lessor Basic Rent for each Aircraft throughout the Base Term at the times and
in the amounts set forth in the Lease Supplement for the Aircraft. The Basic
Rent will accrue with respect to each rental period as set forth in such Lease
Supplement. Basic Rent for any Renewal Term shall be as provided in
Section 20.3 hereof.
If any installment of Rent is due on a day other than a Business
Day, such installment shall be payable on the next succeeding Business Day.
4.2 Supplemental Rent. The Lessee also agrees to pay to the
Lessor, or at the Lessor's direction to whomsoever shall be entitled thereto,
any and all Supplemental Rent promptly as the same shall become due and owing.
The Lessee will also pay to Lessor, as Supplemental Rent, interest at the
Incentive Rate (all computations of interest under this Lease to be made on
the basis of a 365-day year) on any part of any installment of Basic Rent not
paid on the due date thereof for any period for which the same shall be
overdue and on any payment of Supplemental Rent not paid when due for the
period until the same shall be paid.
4.3 Place of Payment. All Rent payable by the Lessee to the
Lessor under this Lease shall be paid by wire transfer of immediately
available funds consisting of lawful currency of the United States of America,
in such manner that the Lessor receives the full amount of such payments on
the due dates at the location to be designated within the United States as the
Lessor may designate in writing to the Lessee.
4.4 Prohibition Against Setoff, Counterclaim, Etc. Except as
provided in Section 19.5, the Lessee's obligation to pay all Rent payable
hereunder shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation: (A) any setoff, counterclaim,
recoupment, defense or other right which the Lessee may have against the
Lessor, the manufacturers of the Aircraft or anyone else for any reason
whatsoever, (B) any defect in the title, airworthiness, condition, design,
operation or fitness for use of, or any damage to or loss or destruction of,
any Item of Equipment or any interruption or cessation in the use or
possession thereof by the Lessee for any reason whatsoever, or any loss of
eligibility for registration in the United States, (C) any insolvency,
bankruptcy, reorganization or similar proceedings by or against the Lessor or
the Lessee, (D) any breach by the Lessor of any representation, warranty or
covenant of the Lessor made herein or in connection herewith, or (E) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
4.5 Waiver of Certain Rights of the Lessee. The Lessee hereby
waives, to the extent permitted by applicable law, all rights now or hereafter
conferred upon it by statute or otherwise to terminate or surrender this Lease
or the Aircraft or any Part or to any abatement, suspension, deferment,
diminution or reduction of the Rent. Each payment of Rent shall be absolutely
final and net to the Lessor, so that this Lease will yield to the Lessor the
full amount of the installments of such Rent throughout the Term without
deduction. Nothing contained in this Section 4.5 or Section 4.4 shall prevent
Lessee from maintaining a separate action against Lessor in connection with
the breach by Lessor of any of its obligations hereunder or the exercise of
any rights which Lessee may have against Lessor.
4.6 Transaction Costs; Adjustment of Rent. If the Lessor shall
have acquired the Aircraft and leased it to the Lessee as contemplated by this
Agreement, the Lessor will pay the following expenses relating to such
transactions (collectively "Transaction Costs"): (a) the fee of Xxxxxxx &
Xxxxx, the Lessee's advisor; (b) the fees and expenses Thelen, Marrin, Xxxxxxx
& Bridges, special counsel for the Lessee, and Xxxxxxxxx, Xxxxxx & Xxxxxxxx,
special FAA counsel; (c) the fees and expenses of counsel to the Lessor, and
(d) the cost of the appraisal required by Section 2.4(A)(1)(b)(ii). The
Lessee and the Lessor agree that the Basic Rent, Stipulated Loss Value, the
Termination Value and the purchase price pursuant to Section 20.1(b) as set
forth in the Lease Supplement have been calculated on the assumption that the
Transaction Costs are 1.5% of Lessor's Cost.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 No Representations and Warranties.
(A) AS BETWEEN LESSOR AND LESSEE, THE LESSOR LEASES THE AIRCRAFT
HEREUNDER "AS-IS", "WHERE-IS" AND THE LESSOR SHALL NOT BE DEEMED TO HAVE MADE
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT INCLUDING LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT THERETO, and any risks with respect thereto
shall be assumed by the Lessee. Lessee acknowledges that, pursuant to a Lease
Agreement, dated as of May 28, 1993 between Seller and Lessee, Lessee has
prior to and up to the Delivery Date possessed and operated the Aircraft. So
long as no Event of Default has occurred and is continuing, the Lessor hereby
authorizes the Lessee to enforce in its own name such rights as the Lessor may
have with respect to any Item of Equipment under any warranty, service policy
or product agreement of the manufacturer thereof, the maintenance and overhaul
agencies of the Aircraft and the Engines, or any subcontractor or supplier or
vendor thereof to the extent that the same may be assigned or otherwise made
available to the Lessee and, to the extent that the same may not be so
assigned or otherwise made available to Lessee, Lessor agrees to exercise
reasonable diligence at Lessee's expense, to enforce such rights as Lessor may
have with respect thereto for the benefit of Lessee; provided, however, that
upon any Event of Default and receipt of notice from Lessor, all such rights
shall immediately revert to the Lessor including all claims thereunder whether
or not perfected.
(B) Notwithstanding the foregoing, Lessor represents and
warrants that on the Delivery Date for the Aircraft it will receive and hold
whatever title to such Aircraft as is conveyed to it by the Seller.
5.2 Lessee's Representations and Warranties. The Lessee
represents, warrants and covenants that:
(A) the Lessee (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, (ii)
has duly qualified and is authorized to do business and is in good standing as
a foreign corporation in each jurisdiction where failure to qualify could have
a direct material adverse effect on the business or financial condition of
Lessee, and (iii) has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations under this
Lease;
(B) the Lessee is a Certified Air Carrier, and holds all
licenses, certificates, permits and franchises from the appropriate agencies
of the United States of America and/or all other governmental authorities
having jurisdiction, necessary to authorize the Lessee to engage in air
transportation of passengers and to carry on its business as presently
conducted and to be conducted with the Aircraft;
(C) the execution, delivery and performance of this Lease
(including any Lease Supplements) have been duly authorized by all necessary
corporate action on the part of the Lessee, do not require any shareholder
approval, or approval or consent of any trustee or holders of any indebtedness
or obligations of the Lessee (except for approval or consent previously
obtained) and do not and will not contravene any law, governmental rule,
regulation or order binding on the Lessee or the articles of incorporation or
code of regulations of the Lessee or contravene the provisions of, or
constitute a default under, or result in the creation of any Lien (other than
as permitted under this Lease) upon the property of the Lessee under any
indenture, mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, contract or other agreement to which it may be a party or by
which its property may be bound;
(D) neither the execution and delivery by the Lessee of this
Lease (including any Lease Supplements), nor the consummation of any of the
transactions by the Lessee contemplated hereby requires the consent or
approval of, the giving of notice to, or the registration with, or the taking
of any other action in respect of, any Aeronautics Authority, or any other
Federal or state governmental authority or agency, including any judicial body
or any other person, entity or corporation, except for the registration and
recordation of this Lease, including any Lease Supplements, with the FAA;
(E) this Lease has been duly authorized, executed and delivered
by the Lessee and constitutes, and the Lease Supplements when entered into and
delivered will constitute, valid, enforceable and binding obligations of the
Lessee in accordance with their respective terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other laws of general
application affecting the enforcement of creditors' rights and by general
principles of equity;
(F) except as disclosed in Lessee's opinion of counsel required
by Section 2.4 (A)(4), there are no suits or proceedings pending or, to the
knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any regulatory commission, board or other administrative
governmental agency, which if determined adversely to Lessee would have a
material adverse effect on the financial condition or business of the Lessee
or the ability of the Lessee to perform its obligations under this Lease;
(G) except (A) the registration in lessor's name of the Aircraft
pursuant to the Federal Aviation Act and (B) for the filing for registration
and recordation of this Lease and the Lease Supplements with the FAA and UCC
financing statements in Virginia, no further filing or recording of this Lease
or any Lease Supplement or of any other document is necessary under the
Federal Aviation Act, or under the laws of any other jurisdiction in order to
fully protect, establish and perfect in all applicable jurisdictions in the
United States, Lessor's title to and leasehold interest in the Aircraft as
against Lessee and any third parties;
(H) for the purposes of the Federal Aviation Act, the Lessee is
a "citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act and the regulations pursuant to such Section;
(I) its chief executive office (as that term is used in Article
9 of the Uniform Commercial Code) and the place where it keeps its corporate
records concerning the Aircraft, all its interest in the Lease and related
documents, are located in Sterling, Virginia;
(J) there has been no material adverse change in the financial
condition of Lessee since ___________, 1996;
(K) no event exists which constitutes a Default or an Event of
Default on the Delivery Date; and
(L) all of the financial information contained in the Form 10Q
of Lessee's parent filed with the Securities and Exchange Commission for the
period ending ______________, 1996 is true and correct as of the date thereof.
5.3 Lessor's Representations and Warranties. The Lessor
represents and warrants that:
(A) the Lessor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and,
(ii) has the corporate power and authority to carry on its business as
presently conducted and to perform its obligations under this Lease;
(B) the execution, delivery and performance of this Lease have
been duly authorized by all necessary corporate action on the part of the
Lessor, do not require any shareholder approval, or approval or consent of any
trustee or holders of any indebtedness or obligations of the Lessor and do not
and will not contravene the certificate of incorporation or bylaws of the
Lessor or contravene the provisions of, or constitute a default under, or
result in the creation of any Lien (other than as permitted under this Lease)
upon the property of the Lessor under any indenture, mortgage, deed of trust,
conditional sales agreement, bank loan, or credit agreement, contract or other
agreement to which it may be a party or by which its property may be bound;
(C) this Lease has been duly authorized, executed and delivered
by the Lessor and constitutes, and the Lease Supplements when entered into and
delivered will constitute, valid, enforceable and binding obligations of the
Lessor in accordance with their respective terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other laws of general
application affecting the enforcement of creditors' rights;
(D) for the purposes of the Federal Aviation Act, the Lessor is
a "citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act and the regulations pursuant to such Section, and Lessor
covenants and agrees with Lessee that throughout the Term Lessor shall
continue to be a "citizen of the United States" as defined in Section
40102(a)(15) of the Federal Aviation Act;
(E) the performance by Lessor of its obligations under this
Lease, the Lease Supplement and each document relating to the Aircraft to
which it is a party, will not subject the Aircraft to any Lien under any
indenture, mortgage, contract or other instrument to which it is a party or by
which it or any of its properties is bound;
(F) Lessor shall, at its own cost and expense, promptly take
such action as may be necessary to discharge all Lessor Liens on any part of
the Aircraft, other than Liens to finance the purchase of the Aircraft which
are subordinate to the Lease;
(G) the Lessor has a tangible net worth of not less than Fifty
Million Dollars ($50,000,000); and
(H) no part of the funds to be used by the Lessor to purchase the
Aircraft constitutes assets of any Employee Benefit Plan as defined in Section
3(3) of Employee Retirement Income Security Act of 1974, as amend ("ERISA"),or
Section 4975 of the Code (other than a governmental plan within the meaning of
Section 414(d) of the Code) as such term "plan assets" is interpreted by the
Internal Revenue Service and United States Department of Labor in Regulations,
Rulings, Releases or Bulletins and by decisions of courts in cases arising
under ERISA or the Code.
ARTICLE 6
POSSESSION, USE, LAWFUL INSURED OPERATIONS,
MAINTENANCE, REGISTRATION AND INSIGNIA
6.1 Possession. The Lessee shall not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, relinquish or
transfer possession of any Item of Equipment; provided, however, that, so long
as no Event of Default shall have occurred and be continuing and so long as
the Lessee shall comply with the provisions of Article 12 hereof, the Lessee
may deliver possession of an Item of Equipment for service, repair,
maintenance or overhaul work, or for alterations or modifications in or
additions to an Item of Equipment to the extent required or not otherwise
prohibited by the terms hereof, and Lessee, without the prior written consent
of Lessor, may also:
(A) install an Engine on an airframe or a Propeller on an engine
owned by or leased to the Lessee or purchased by the Lessee subject to a
conditional sale or other security agreement, provided that such airframe or
engine is free and clear of all Liens except the rights of the parties to the
lease or conditional sale or other security agreement covering such airframe
or engine; and provided further, that the lease or conditional sale or other
security agreement covering such airframe or engine by its terms expressly
provides that neither such lessor nor secured party nor its successor or
assigns will acquire or may claim any right, title or interest in any Engine
or Propeller by reason of such Engine or Propeller being installed on such
airframe or engine at any time while such Engine or Propeller is subject to
this Lease or owned by Lessor or its permitted successors or assigns.
So long as Lessee strictly complies with the provisions of this
Section 6.1(A), Lessor agrees that it will not acquire or claim (as against
the owner, lessor, or lienholder of an airframe, engine or propeller) any
right, title or interest in such airframe or engine or propeller by reason of
an engine being installed on an Airframe or such propeller being installed on
an Engine. Nothing contained in this Section 6.1(A) shall in any way
discharge or diminish any of Lessee's obligations to Lessor or constitute a
waiver of any Lessor's rights and remedies under this Lease.
(B) subject any Engine to normal interchange or pooling
agreements or arrangements, in each case customary in the airline industry and
entered into by the Lessee in the ordinary course of its business with any
Certified Air Carrier provided that (1) no such agreement or arrangement
contemplates or requires the transfer of title to any Engine, and (2) if the
Lessor's title to any such Engine shall be divested under any such agreement
or arrangement, such divestiture shall be deemed to be an Event of Loss with
respect to such Engine and the Lessee, concurrently with such divestiture,
shall comply with Article 11 in respect thereof; provided, that the rights of
any transferee who receives possession by reason of a transfer permitted by
this Section 6.1 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be subject and subordinate to all the terms of this
Lease, including, without limitation, the restrictions on the use of an
Aircraft contained in Section 6.3 and the Lessor's right to terminate this
Lease upon an Event of Default and to obtain possession of the Engine without
regard to any such agreement, lease or sublease, and the Lessee shall remain
primarily liable hereunder for the performance of all of the terms of this
Lease to the same extent as if such transfer had not occurred. No interchange
agreement or other relinquishment of possession of any Engine shall in any way
discharge or diminish any of the Lessee's obligations to the Lessor hereunder.
(C) subject (or permit any sublessee to subject) the Airframe,
or any Engine or Propeller to the Civil Reserve Air Fleet Program and transfer
possession of such Airframe, Engine or Propeller to the United States of
America or any instrumentality or agency thereof pursuant to the Civil Reserve
Air Fleet Program, so long as Lessee shall promptly notify Lessor upon
transferring possession of the Airframe or any Engine or any Propeller to the
United States of America or any agency or instrumentality thereof pursuant to
such program and provide Lessor with the name and address of the Contracting
Office Representative for the Military Aircraft Command of the United States
Air Force to whom notice must be given in the event Lessor desires to give
notice as provided in Article 18 hereof.
(D) enter into a Wet Lease for the Aircraft with any third
party.
(E) enter into any sublease with any Permitted Sublessee which
is not then subject to bankruptcy, reorganization or insolvency proceedings;
provided, however, that any sublease entered into pursuant to this clause (E)
shall (i) not extend beyond the expiration date of the Base Term or any
Renewal Term, if any, hereunder; (ii) if to a Permitted Sublessee which is a
foreign air carrier, not commence on or before December 31, 2003; (iii) shall
contain express provisions that it is subject and subordinate to the terms of
this Lease and may be terminated by the Lessor upon an Event of Default
hereunder; (iv) if to a sublessee which is a foreign government or political
subdivision thereof, provide for sublessee to waive sovereign immunity, (v)
provide for maintenance of the Aircraft in accordance with an FAA or
manufacturer's approved maintenance program, (vi) if applicable, require all
necessary filings and recordings in any foreign jurisdiction necessary to
protect and preserve the title and interest of Lessor in and to the Aircraft
and Lease; (vii) prohibit any further subleasing by the sublessee without the
prior written consent of Lessor; (viii) If such Permitted Sublessee is a
foreign air carrier, the United States maintains diplomatic relations with the
country in which such proposed Permitted Sublessee is principally based at the
time such sublease is entered into and (ix) in the event that such Permitted
Sublessee is a foreign air carrier, Lessor shall have received an opinion of
counsel to Lessee to the effect that (I) the terms of the proposed sublease
will be legal, valid, binding and (subject to customary exceptions in foreign
opinions generally) enforceable against the proposed Permitted Sublessee in
the country in which the proposed Permitted Sublessee is principally based,
(II) there exist no possessory rights in favor of the Permitted Sublessee
under such Sublease under the laws of such Permitted Sublessee's country of
domicile that would, upon bankruptcy or insolvency of or other default by
Lessee and assuming at such time such Permitted Sublessee is not insolvent or
bankrupt, prevent the return or repossession of the Aircraft in accordance
with the terms of this Lease, (III) the laws of such Permitted Sublessee's
country of domicile require fair compensation by the government of such
jurisdiction payable in currency freely convertible into Dollars for the loss
of use of the Aircraft in the event of the requisition by such government of
such use, and (IV) the laws of such Permitted Sublessee's country of domicile
would give recognition to Lessor's title to the Aircraft, to the registry of
the Aircraft in the name of the Lessor (or Lessee, as "lessee", or the
proposed Sublessee, as "sublessee", as appropriate). Prior to the
commencement of any such Sublease, Lessee shall deliver to Lessor a certified
copy off the executed Sublease and a certificate of an independent insurance
broker to the effect that the insurance required to be maintained by Section
12 will be in full force and effect on the commencement of such sublease.
Upon the request of Lessor for any sublease in excess of three (3) years,
Lessee shall assign its rights in and to such sublease to Lessor as security
pursuant to an assignment in form and substance satisfactory to Lessor and
Lessee. No sublease permitted hereunder shall be deemed to relieve Lessee of
any duties or obligations under this Lease except as otherwise specifically
agreed to by Lessor.
6.2 Assignment by Lessee. Unless the Lessee first obtains
Lessor's prior written consent, this Lease and all or any part of Lessee's
rights hereunder or in any Item of Equipment shall not be assigned by Lessee
to any person, firm or corporation, and any such purported assignment,
sublease or conveyance shall be void ab initio except as permitted by Section
6.1 hereof.
6.3 Use. Lessee shall not use or permit the use of the Aircraft
for any purpose for which the Aircraft is not designed or otherwise reasonably
suitable.
6.4 Lawful Insured Operations. Lessee will not permit the
Aircraft or any Item to be maintained, used or operated in violation in any
material respect of any applicable law, treaty, statute, rule, regulation or
order of any government or governmental authority having jurisdiction
(domestic or foreign), or contrary in any material respect to any
manufacturer's operating manuals, instructions, and airworthiness directives,
or in violation of any applicable airworthiness certificate, license or
registration relating to the Aircraft or Engines issued by any such authority.
In the event that any such laws, rules, regulations or orders require
alteration of any Item of Equipment, Lessee shall conform thereto at its sole
expense and shall maintain the Item of Equipment in proper condition for
operation under such laws and rules. Lessee agrees not to operate any
Aircraft or suffer such Aircraft to be operated, (A) unless such Aircraft is
covered by insurance as required by the provisions of Article 12 hereof, (B)
contrary to the terms of such insurance as required by the provisions of
Article 12 hereof, or (C) in any area of the world (i) where there are ongoing
hostilities or (ii) where the United States has terminated diplomatic
relations due to the outbreak of hostilities or (iii) where Lessor and Lessee
agree threatened hostilities exist; provided, however, the failure of Lessee
to comply with the provisions of this sentence shall not result in an Event of
Default hereunder where such failure is attributable to extraordinary
circumstances involving hijacking, medical emergency, equipment malfunction,
weather conditions, navigational errors or similar acts.
6.5 Maintenance. The Lessee, at its own cost and expense shall:
(i) service, repair, maintain and overhaul, test or cause the same to be done
to the Aircraft (A) so as to keep such Aircraft in as good an operating
condition and appearance as when delivered to the Lessee hereunder, ordinary
wear and tear excepted, (B) so as to keep such Aircraft in compliance with all
maintenance manuals initially furnished with the Aircraft, as amended by
applicable subsequent amendments or supplements to such manuals issued by the
manufacturer from time to time, and the Lessee's FAA approved maintenance
program all so-called "mandatory" service bulletins and comparable notices
issued or supplied by or available through the manufacturer of such Aircraft,
(C) so as to keep such Aircraft in such operating condition as may be
necessary to enable the airworthiness certification of such Aircraft to be
maintained in good standing at all times under the applicable rules and
regulations of the Aeronautics Authority, and (D) in the same general manner
and with the same degree of care exhibited by the Lessee with respect to the
same type of Aircraft maintained by Lessee; (ii) maintain all records, logs
and other materials required by the Aeronautics Authority to be maintained in
respect of such Aircraft, and (iii) promptly furnish to the Lessor upon the
Lessor's request such information as may be required to enable the Lessor to
file any reports required to be filed with any governmental authority because
of the Lessor's interest in the Aircraft.
6.6 Registration and Insignia. (a) The Lessee shall cause the
Aircraft to be registered in the name of Lessor on the Delivery Date and shall
not take any act or fail to perform any act which would cause such
registration not to remain in effect at all times during the Term of this
Lease; provided, however, that on or after the seventh anniversary of the
Delivery Date, the Aircraft may be registered in a country of registry listed
on Exhibit D hereto (or such other country as the Lessor approves) so long as
the following conditions are met: (i) the United States maintains normal
diplomatic relations with the country of registry of the Aircraft; and (ii)
the Lessor shall have received favorable opinions (subject to customary
exceptions) from counsel of recognized reputation qualified in the laws of the
relevant jurisdiction to the effect that: (A) the Lessor's ownership interest
in the Aircraft shall be recognized under the laws of such jurisdiction,
(B) the obligations of Lessee, and the rights and remedies of the Lessor,
under the Lease shall remain valid, binding and (subject to customary
bankruptcy and equitable remedies exceptions and to other exceptions customary
in foreign opinions generally) enforceable under the laws of such jurisdiction
(or the laws of the jurisdiction to which the laws of such jurisdiction would
refer as the applicable governing law), (C) after giving effect to such change
in registration, Lessor's right, title and interest in and to the Aircraft and
the Lease shall continue and all filing, recording or other action necessary
to protect the same shall have been accomplished, (D) it is not necessary,
solely as a consequence of such change in registration and without giving
effect to any other activity of the Lessor (or any Affiliate thereof), for the
Lessor to qualify to do business in such jurisdiction, (E) there is no tort
liability on passive lessor's of an aircraft not in possession thereof under
the laws of such jurisdiction (it being agreed that, in the event such latter
opinion cannot be given in a form satisfactory to the Lessor, such opinion
shall be waived if insurance reasonably satisfactory to the Lessor is provided
to cover such risk), and (F) (unless Lessee shall have agreed to provide
insurance covering the risk of requisition of use of such Aircraft by the
government of such jurisdiction so long as such Aircraft is registered under
the laws of such jurisdiction) the laws of such jurisdiction require fair
compensation by the government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use of such Aircraft in the event of
the requisition by such government of such use. In addition, as a condition
precedent to any such change in registration, Lessee shall furnish to the
Lessor an Officer's Certificate to the effect that the insurance required by
Section 12 of the Lease shall be in full force and effect at the time of such
change in registration after giving effect to such change in registration and
that the new country of registry imposes aircraft maintenance standards are
materially differently from those of the United States, France, Germany,
Japan, the Netherlands or the United Kingdom. Lessee shall pay all costs,
expense, fees recording and registration taxes, including the reasonable fees
and expenses of counsel to Lessor, and other charges in connection with any
such change in registration.
(b) On the Commencement Date (or as soon as practical
thereafter), the Lessee, at its own expense, shall permanently affix in the
cockpit of each Aircraft in a location reasonably adjacent to and not less
prominent than the airworthiness certificate for the Aircraft, and on each
Engine in a prominent location, a plate bearing the following legend:
"Title to this Aircraft [Engine] is owned by
FINOVA Capital Corporation,
Lessor"
Without the written consent of Lessor, the Lessee will not allow the name of
any other person, association or corporation to be placed on the Airframe or
any Engine as a designation that might be interpreted as a claim of ownership
or of any interest therein; provided, however, that the Lessee may cause the
Airframe to be lettered or otherwise marked in a customary manner for
convenience of identification of the interest of the Lessee therein, including
but not limited to the customary logo of the Lessee.
6.7 Records. Throughout the Term, Lessee shall keep accurate,
complete and current records (complying with the requirements of the
Aeronautics Authority and with good commercial airline practice) of all
maintenance carried out with respect to an Aircraft and shall permit Lessor or
any authorized representative of Lessor to examine such records at Lessor's
expense at any reasonable time.
ARTICLE 7
INSPECTION; FINANCIAL INFORMATION
7.1 Inspection. Lessee shall provide the following information
at Lessor's written request which may be made once each calendar quarter (as
set forth on the form attached hereto as Exhibit F) and at any time following
the occurrence of an Event of Default and so long as the same is continuing:
(i) if any Engine or Propeller is not attached to the Aircraft,
to provide Lessor with, to the best of its knowledge, the current
location of such Engine or Propeller (in the event that an Engine or
Propeller is attached to another aircraft, Lessee shall provide Lessor
with information identifying such aircraft, and if such aircraft is
subject to a lease, Lessee shall inform Lessor of the name and address
of the lessor thereunder and the term of such lease and such other
information as is reasonably requested by Lessor regarding the location
of such Engine or Propeller)
(ii) the total number of hours and cycles with respect to the
Engines, Propellers and Airframe,
(iii) the number of Flight Hours remaining on the Airframe until
the next scheduled Heavy Check;
(iv) the number of cycles remaining with respect to each Engine
and Propeller prior to the next scheduled removal for maintenance of
such Engine or Propeller;
(v) the terms on which any Heavy Check or "C" Check is scheduled
with respect to the Airframe and on which any shop visit is scheduled
with respect to any Engine and Propeller; and
(vi) whether the FAA has during the period following the last
report hereunder conducted an inspection of Lessee's facilities and
records under the National Aviation Safety Inspection Program ("NASIP")
or any successor program administered by the FAA or any other agency
having jurisdiction over Lessee's aircraft operations and, if such NASIP
inspection occurred during such period, a report on the results thereof.
The Lessor may reasonably request, and the Lessee shall permit any person
designated by the Lessor in writing, at the Lessor's expense, to visit and
inspect any Aircraft, its condition, use and operation and the records
maintained in connection therewith and to make copies of such records at the
Lessor's expense, any such inspection to occur only during regularly scheduled
maintenance shop visits (unless an Event of Default exists) not more than once
each year during the Term (unless an Event of Default exists), and so long as
such inspection does not interfere with Lessee's operation and maintenance of
the Aircraft. Any such inspection shall be limited to a visual walk around
inspection including boarding the Aircraft but shall not include opening any
panels, bays or similar inspections. The Lessor shall have no duty to make
any such inspection and shall not incur any liability or obligation by reason
of not making any such inspection.
7.2 Financial Information. The Lessee also agrees to furnish
the Lessor during the Term:
(A) within sixty (60) days after the end of the first three
calendar quarters of each of its fiscal years, and within 120 days after the
close of each of its fiscal years, consolidated financial statements of
Lessee's parent and its subsidiaries (unless the Lessee is not the sole
subsidiary of its parent, in which case financial statements of Lessee shall
be provided), consisting of a balance sheet, an income statement and such
other statements as may be reasonably required by Lessor prepared as of the
close of the period ended, in each case certified by its chief financial
officer or controller as having been prepared in accordance with generally
accepted accounting principles, consistently applied, and as complete and
correct, and in the case of annual financial statements, its independent
auditors who must be of recognized national standing;
(B) together with each set of annual financial statements and
reports referred to in clause (A) above, a certificate of the Lessee, signed
by an authorized officer of the Lessee, to the effect that the signer has
made, or caused to be made under his supervision, a review of the financial
condition of the Lessee during the accounting period covering such financial
statement, and that such review has not disclosed the existence nor, after due
inquiry, does the signer have any knowledge of the existence as of the date of
such certificate, of any condition or event which constitutes a Default or an
Event of Default, or, if such condition or event existed or exists, specifying
the nature and period of existence thereof and what action the Lessee has
taken or is taking or proposes to take with respect thereto; and
(C) from time to time, such other information as the Lessor may
reasonably request.
ARTICLE 8
LESSEE'S COVENANTS
The Lessee covenants and agrees that, during the Term hereof:
8.1 Maintenance of Corporate Existence. The Lessee will
preserve and maintain (a) its corporate existence except as otherwise
permitted by Section 8.4, and (b) all of its material rights, privileges and
franchises in every jurisdiction in which the character of the property owned
or the nature of the business transacted by it from time to time makes
licensing or qualification necessary where failure to qualify could materially
adversely affect Lessee's ability to perform hereunder or operate the
Aircraft.
8.2 Notice of Litigation, Etc. If not otherwise communicated
pursuant to Section 7.2, the Lessee will promptly give to the Lessor a notice
in writing of any proceeding before any governmental agency which would, if
determined adversely to Lessee, materially adversely affect the Lessee's
ability to perform under this Lease or any related documents.
8.3 Payment of Taxes. The Lessee will pay or cause to be paid
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income and profits, or upon any property belonging to it, prior to
the date on which penalties attach thereto and all lawful claims, which, if
not paid, might become a Lien or charge upon the property of the Lessee;
provided, however, that the Lessee shall not be required to pay any such tax,
assessment, charge, levy or claim the payment of which is being contested in
good faith and by appropriate proceedings, but only so long as such
proceedings do not involve any material risk of the sale, forfeiture or loss
of an Aircraft or any Item or interest therein; provided further, that the
Lessee will pay or cause to be paid all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of proceedings to foreclose
any Lien which attaches as security therefor.
8.4 Consolidation, Merger or Sale. Lessee will not merge or
consolidate with or into any other corporation or entity or sell, lease, or
otherwise dispose of all or substantially all of its properties unless (i) the
successor or survivor assumes in writing pursuant to an agreement in form and
substance satisfactory to Lessor the obligations of Lessee hereunder; (ii) the
tangible net worth of the successor or survivor is, under generally accepted
accounting principles, equal to or greater than 75% of the tangible net worth
of the Lessee as of _________, 1996, and (iii) no Event of Default shall have
occurred and be continuing; (iv) such successor or survivor is a corporation
incorporated under the laws of a state of the United States and shall be a
Certified Air Carrier; (v) such successor or survivor makes such recordings
and filings, and takes such other action with respect to this Lease, as shall
be necessary or advisable in the reasonable opinion of Lessor to protect the
interest of Lessor in the Aircraft and the Lease, and (vi) such successor or
survivor cause to be delivered to the Lessor such legal opinions (which may be
from in-house counsel) as it may reasonably request in connection with the
matters specified in the preceding clauses (i), (iv) and (v). Upon any
consolidation or merger in accordance with this Section, the successor
corporation, if any, shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Lease with the same
effect as if such successor corporation had been named as Lessee herein. Upon
satisfaction of the foregoing conditions in connection with any such merger or
such sale, lease or other disposition of all or substantially all of the
properties of Lessee, the Lessee shall be released from its liability in
respect of this Lease.
ARTICLE 9
REPLACEMENT OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
9.1 Replacement of Parts. The Lessee, at its own cost and
expense, will promptly replace all Parts which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use for any reason whatsoever. In addition,
in the ordinary course of maintenance, service, repair, overhaul or testing,
the Lessee may remove any Parts, whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that the Lessee shall replace such Parts as promptly
as practicable except Parts deemed obsolete by Lessee which shall not exceed,
during the Term, One Hundred Thousand Dollars ($100,000) in aggregate original
cost ("Obsolete Parts"). All replacement Parts shall be free and clear of all
Liens and shall be in as good an operating condition as, and shall have a
value and utility at least equal to, the Parts replaced, assuming such
replaced Parts were in the condition and repair required to be maintained by
the terms hereof.
9.2 Title to Replaced Parts. All Obsolete Parts owned and
leased by the Lessor hereunder at any time removed from any Item of Equipment,
except Obsolete Parts shall remain the property of the Lessor and subject to
this Lease, no matter where located, until such time as such Parts shall be
replaced by Parts which have been incorporated or installed in or attached to
such Item and which meet the requirements for replacement Parts specified
above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to an Item as above provided, without further act,
(A) title to the replaced Part shall thereupon vest in the Lessee, free and
clear of all rights of the Lessor and shall no longer be deemed a Part
hereunder; (B) title to such replacement Part shall thereupon vest in the
Lessor; and (C) such replacement Part shall become subject to this Lease and
be deemed part of such Item for all purposes hereof to the same extent as the
Parts originally incorporated or installed in or attached to such Item.
9.3 Alterations, Modifications and Additions. The Lessee, at
its own expense, shall make alterations and modifications in and additions to
an Item of Equipment as may be required from time to time under any law, rule,
directive, bulletin, regulation or order of the Aeronautics Authority, or
other governmental authority having jurisdiction or issued by the manufacturer
of such Item of Equipment. In addition, the Lessee, at its own expense, may
from time to time make such alterations and modifications in and additions to
each Item as the Lessee may deem desirable in the proper conduct of its
business, provided that no such alteration, modification or addition
diminishes the value, utility or remaining useful life, airworthiness and
condition of such Item below the value, utility or remaining useful life,
airworthiness and condition thereof immediately prior to such alteration,
modification or addition, assuming that such Item is in the condition required
hereunder.
9.4 Title to Parts. Subject to the provisions hereof, title to
all Parts incorporated or installed in or attached or added to any Item as the
result of any alteration, modification or addition made as contemplated in
Section 9.3 hereof shall, without further act, vest in Lessor.
Notwithstanding the foregoing, Lessee may remove such Part; provided, that (A)
such Part is in addition to, and not in replacement of or in substitution for,
any Part originally incorporated or installed in or attached to such Item at
the time of delivery thereof hereunder or any Part in replacement of, or
substitution for, any such original Part; (B) such Part is not required to be
incorporated or installed in or attached or added to such Item pursuant to the
terms of section 6.5 hereof or the first sentence of Section 9.3; and (C) such
Part can be removed from such Item without diminishing or impairing the value,
utility or airworthiness which such Item would have had at such time had such
alteration, modification or addition not occurred. Upon removal by Lessee,
Title to such Part shall vest in Lessee. Any Part not removed by the Lessee
as above provided prior to the return of the Item to the Lessor hereunder
shall remain the property of the Lessor, without further act.
9.5 No Liability for Alteration, Modification or Addition;
Grounding. In no event shall the Lessor bear any liability or cost whatsoever
for (A) any alteration, modification, addition, or (B) any grounding of an
Aircraft, or (C) suspension of certification of an Aircraft, or (D) for loss
of revenue suffered by the Lessee for any reason whatsoever.
ARTICLE 10
GENERAL TAX INDEMNITY
10.1 (A) Indemnity. Lessee agrees to pay and, on written demand,
to indemnify, protect, save and hold Lessor and its successors and permitted
assigns harmless from all license and registration fees, sales and use taxes,
personal property taxes and any and all other taxes, levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever together with
any penalties, additions to tax, fines or interest thereon (collectively,
"Taxes") upon or in connection with or relating to (A) the construction,
financing, refinancing, purchase, acquisition, acceptance, rejection,
delivery, nondelivery, transport, ownership, registration, reregistration,
insuring, assembly, possession, repossession, operation, location, use,
control, conditions, maintenance, repair, sale, return, abandonment,
installation, storage, redelivery, replacement, manufacture, leasing,
subleasing, modification, rebuilding, importation, transfer of title, transfer
of registration, exportation or other application or disposition of the
Aircraft, the Airframe, any Engine, any Propeller or any Part thereof or
interest therein, (B) the rentals, receipts or earnings from the Aircraft, the
Airframe, any Engine, any Propeller or any Part, (C) any amount paid or
payable pursuant to this Lease or any document related thereto, (D) the
Aircraft, the Airframe, any Engine, any Propeller or any Part, (E) this Lease,
and any other documents contemplated hereby or thereby and amendments and
supplements hereto and thereto or the execution, delivery or performance of
any thereof or the issuance, acquisition, modification, holding or subsequent
transfer thereof, or (F) otherwise with respect to or in connection with the
transactions contemplated by this Lease; by (i) any Federal, state or local
government or taxing authority in the United States or (ii) by any taxing
authority or governmental subdivision of a foreign country or international
organization ("Foreign Tax Jurisdiction") to the extent such Taxes are imposed
as a result of the activities in the Foreign Tax Jurisdiction of the Lessee or
any person who acquires from the Lessee, directly or indirectly, possession or
control or right to use the Aircraft or any part thereof (an "Aircraft User").
Lessor agrees to consult with Lessee prior to the payment by Lessor of any
Taxes (other than Taxes excluded from this indemnity under Section 10.1(b))
imposed by any United States or Foreign Tax Jurisdiction, subject to Lessee's
right to contest, as set forth in Section 10.3 hereof. In addition, and
without limiting the foregoing, Lessee shall hold harmless and indemnify
Lessor against any trade sanctions, tariffs or other taxes which may be
imposed on the importation of any Aircraft into the United States.
(B) Limitation on Indemnity. Notwithstanding the provisions of
paragraph (a) of this Section 10. 1, Lessee shall have no obligation
thereunder as to (x) Taxes based on or measured by the net income of Lessor
imposed by the United States of America or by any of its state or local taxing
authorities or by any Foreign Tax Jurisdiction; provided, however, Lessee
shall be liable for Taxes based on or measured by Lessor's net income if, but
only if, (a) such taxes are in lieu of Taxes on an Aircraft which the Lessee
would otherwise be required to pay hereunder, or (b) are taxes on net income
which are imposed as a result of the use or operation of the Aircraft by the
Lessee or an Aircraft User within the jurisdiction of such taxing authority
but only to the extent the amount of such net income taxes exceed the amount
of net income taxes that would have been imposed by such taxing authority had
the Aircraft not been operated or used within the jurisdiction of such taxing
authority after giving credit for any savings in respect to any Taxes by
reasons of deductions, credits or allowances with respect to the payment or
accrual of the amount indemnified against hereunder; (y) Taxes imposed with
respect to any period after the later of the applicable dates of (1) return of
possession of the Aircraft to Lessor or the placement of the Aircraft in
storage at the request of Lessor, (2) the termination of the Lease Term, or
(3) the discharge in full of the Lessee's obligation to pay the Termination
Value or the Stipulated Loss Value and all other amounts due, if any, under
Section 11 or 20.2, as the case may be, provided that the exclusion set forth
in this clause (y) shall not apply to Taxes to the extent such Taxes relate to
events occurring or matters arising prior to or simultaneously with the
applicable date, or (z) Taxes which become payable as a result of a sale,
assignment, transfer or other disposition (whether voluntary or involuntary)
by Lessor of all or any portion of its interest in the Aircraft or any part
thereof or the Lease or rights created thereunder other than as a result of
the substitution, modification or improvement of the Aircraft or any part
thereof or a disposition which occurs as the result of the exercise of
remedies for a Lease Event Default, any disposition which occurs during the
continuance of a Lease Event of Default or a purchase of the Aircraft pursuant
to the Lease; provided, that, notwithstanding the foregoing but subject to
Section 21 hereof, Lessee shall not be obligated to indemnify Lessor with
respect to net income taxes imposed within the United States as the result of
a sale, assignment, transfer or other disposition by Lessor or any Taxes
imposed as a result of the status of Lessor as other than a resident of the
United States for tax purposes. If an indemnification payment is made under
Article 21 hereof, the same event giving rise to such payment shall not also
result in an indemnification payment under this Article 10 for the taxes
indemnified in Article 21. Notwithstanding the above, Lessee shall have no
obligation to indemnify Lessor for any Taxes imposed as a result of events
occurring after the expiration or other termination of this Lease or return of
physical possession to Lessor.
10.2 After-Tax Nature of Indemnity. The Lessee further agrees
that, with respect to any payment or indemnity hereunder, such payment or
indemnity shall include any amount necessary to hold Lessor harmless on an
after-tax basis (at a rate for Lessor's applicable tax bracket (as reasonably
determined by the Lessor)) from all taxes required to be paid by Lessor with
respect to such payment or indemnity under the laws of any Federal, state or
local government or taxing authority in the United States, or under the laws
of any Foreign Tax Jurisdiction; provided that, if Lessor realizes a tax
benefit by reason of such payment or indemnity (whether such tax benefit shall
be by means of a depreciation deduction or otherwise), Lessor shall pay the
Lessee an amount equal to the net value to Lessor of such tax benefit when,
as, if and to the extent realized (such payments not to exceed in the
aggregate the amount of the related indemnity paid by Lessee), but not before
the Lessee shall have made all payments or indemnities to Lessor required
pursuant to this Article 10; provided further, however, that if Lessor loses
such tax benefit subsequent to any payment to the Lessee with respect thereto,
the Lessee shall indemnify Lessor with respect to such loss pursuant to the
provisions of this Article 10. Lessor shall in good faith use reasonable
diligence in filing its tax returns and in dealing with taxing authorities to
seek and claim any such tax benefit.
10.3 Contest. If written claim is made against Lessor for any
Taxes referred to in this Article 10, Lessor shall promptly notify the Lessee
(it being understood and agreed that failure to provide such notice shall not
adversely affect or otherwise prejudice any Lessor's right to indemnity under
this Article 10 except to the extent such failure has a materially adverse
effect on the ability to contest such claim). If reasonably requested by the
Lessee in writing within 30 days after such notification, Lessor shall upon
receipt of indemnity satisfactory to it and at the expense of the Lessee
(including, without limitation, all costs, expenses, losses, legal and
accountants' fees and disbursements, penalties and interest) in good faith
contest the validity, applicability or amount of such Taxes by either (i)
resisting payment thereof if practicable, or (ii) if payment is made, using
reasonable efforts to obtain a refund thereof in appropriate administrative
and judicial proceedings and will take such action in contesting any claim as
Lessee shall request from time to time; provided, however, that the Lessor
shall not be required to take any action to contest a claim unless Lessee
provides with such written request an opinion of independent counsel,
satisfactory both as to counsel and substance, to the effect that there is a
reasonable basis for such contest. If Lessor determines to pay such Taxes and
seek a refund, Lessee will either pay such Taxes on Lessor's behalf or will
promptly indemnify Lessor for such Taxes pursuant to Sections 10.1 and 10.2.
If Lessor shall obtain a refund of all or any part of such Taxes paid by the
Lessee, Lessor shall pay the Lessee the amount of such refund; provided that
such amount shall not be payable before such time as the Lessee shall have
made all payments of indemnities to Lessor then due under this Article 10. If
in addition to such refund Lessor shall receive an amount representing
interest on the amount of such refund, the Lessee shall be paid that
proportion of such interest which is fairly attributable to the Taxes paid by
the Lessee prior to the receipt of such refund. In case any report or return
is required to be made with respect to any obligation of the Lessee under this
Article 10 or arising out of this Article 10, the Lessee will promptly notify
Lessor of such requirement and will inform Lessor whether Lessee (i) will file
such report or return in such manner as will show the ownership in Lessor of
each Item of Equipment and send a copy of such report or return to the Lessor
or (ii) will make such report or return for filing by Lessor in such manner as
shall be satisfactory to the Lessor. In the event of a contest of any Taxes
hereunder, the Lessor shall apprise the Lessee of all material developments
with respect to such contest, shall forward copies of all material submissions
made in such contest, shall take such action concerning the conduct of any
such contest as Lessee shall request from time to time and shall not settle or
concede any such contest without the prior written consent of the Lessee.
10.4 Survival. The indemnification provided herein shall survive
the assignment, expiration or other termination of this Lease for indemnities
resulting or arising in any manner from or in connection with acts or
omissions occurring prior to or concurrent with such expiration or other
termination.
ARTICLE 11
DAMAGE, DESTRUCTION, REQUISITION OR CONDEMNATION
11.1 Event of Loss with Respect to an Airframe or an Airframe and
the Engines and Propellers Installed Thereon. Upon the occurrence of an Event
of Loss with respect to an Airframe or to an Airframe and the Engines and
Propellers then installed on such Airframe, the Lessee shall forthwith (and in
any event within 7 days after such occurrence) give the Lessor written notice
of such Event of Loss. The Lessee shall either (x) within one hundred twenty
days after the Event of Loss, convey or cause to be conveyed to Lessor as a
replacement for the Airframe or the Airframe and Engines and Propellers with
respect to which such Event of Loss occurred, title to another airframe or
airframe, engines and propellers of the same make and model as the Airframe or
Airframe, Engines and Propellers or an equivalent or an improved model free
and clear of all Liens (other than Liens excepted from Article 14 hereof in
clause (ii), clause (iii) (solely as to taxes not yet due) and clause (iv)
(but only to the extent such payment therein described is not yet
delinquent)), and having a value and utility and remaining useful life at
least equal to that of the Airframe or Airframe, Engines and Propellers with
respect to which such Event of Loss occurred (assuming such Airframe, or
Airframe, Engine and Propellers were, immediately prior to such Event of Loss,
in the condition and repair required hereunder), or (y) pay or cause to be
paid to the Lessor in immediately available funds on the earlier to occur of
(i) fifteen days after the date Lessee receives insurance proceeds from such
Event of Loss or (ii) one hundred twenty days after the Event of Loss (A) an
amount equal to the Stipulated Loss Value in respect of such Aircraft
determined as of the next immediately succeeding monthly anniversary date of
the Delivery Date following such payment date, and (B) all Rent due prior, and
all arrears rent due on or prior to such payment date; provided, however, that
payment of the Stipulated Loss Value shall be made within thirty days if the
Event of Loss occurs after the expiration of the Term of this Lease and before
termination of the storage period provided for in Section 16(j) hereof. At
such time as the Lessor has received the sum of (A) and (B) above, the
obligation of the Lessee to pay all Rent hereunder with respect to such
Aircraft shall terminate, and the Lessor shall transfer to the Lessee all the
Lessor's right, title, and interest, as-is, where-is, without recourse or
warranty, express or implied, except as to the absence of Liens described in
Article 14(ii), in and to (1) such Airframe, Engines and Propellers, (2) all
claims for damage to such Items, if any, against third persons arising from
the Event of Loss (unless any insurance carrier requires that such claims be
assigned to it), and (3) all rights to any insurance claims under all
insurance maintained by the Lessee hereunder except liability insurance,
without representation, recourse or warranty of any kind whatsoever except as
herein provided.
At the time Lessee exercises its right to replace the Airframe as
contemplated by this Section 11.1, in addition to the requirements set forth
above Lessee will, at its expense:
(A) furnish Lessor with a full warranty (as to title) Xxxx of
Sale (in form and substance reasonably satisfactory to Lessor) and FAA Xxxx of
Sale duly conveying to Lessor the replacement airframe and any replacement
engine(s), and replacement propellers, together with such other evidence of
title as Lessor reasonably requests;
(B) delivery to Lessor of an executed Lease Supplement
subjecting such replacement airframe and any replacement engine(s) and
replacement propellers to this Lease, duly executed by Lessee, and, upon
execution by the parties thereto, cause that Lease Supplement together with an
FAA Xxxx of Sale and an application for aircraft registration (on AC form
8050-1), each such document covering the replacement airframe and replacement
engine(s) and replacement propellers, if any, to be duly filed for recordation
wit the FAA;
(C) furnish Lessor with such evidence of compliance with the
insurance provisions of Section 12 with respect to such replacement airframe,
replacement engine and replacement propellers, as Lessor shall reasonably
request;
(D) cause a financing statement or statements with respect to
such substituted property to be filed in such place or places as are deemed
necessary or desirable by Lessor to perfect its interest therein and herein;
(E) furnish Lessor with an opinion of counsel reasonably
satisfactory to Lessor to the effect that title to such replacement aircraft
has been duly conveyed to Lessor free and clear of all Liens (other than Liens
excepted from Article 14 hereof, in clause (ii), clause (iii) (solely as to
taxes not yet due) and clause (iv) (but only to the extent such payment
therein described is not yet delinquent)) and, with respect to replacement of
the Airframe only, that Lessor will be entitled to the benefits of Section
1110 of the U.S. Bankruptcy Code with respect to the replacement aircraft;
(F) furnish to Lessor and take such other action as Lessor may
reasonably request in order that title to such replacement airframe and/or
replacement engines and/or replacement propellers is duly and properly vested
in Lessor, leased hereunder to the same extent as the Airframe and Engines, if
any, and Propellers, if any, being replaced thereby; and
(G) furnish to Lessor a certificate from a firm of independent
aircraft appraisers satisfactory to Lessor confirming that the fair market
value of the replacement airframe is not less than the then fair market value
of the Airframe (assuming such Airframe was in the condition and repair
required to be maintained under this Lease).
Promptly after the registration of any such replacement aircraft
and the recordation of a Lease Supplement covering any such replacement
airframe and any replacement engine(s) and replacement propeller(s) pursuant
to the Federal Aviation Act, Lessee, at its expenses, will cause to be
delivered to Lessor, an opinion of counsel reasonably satisfactory to Lessor
as to the due registration of the replacement aircraft and the due recordation
of such Lease Supplement pursuant to the Federal Aviation Act, and to the
further effect that the substituted property will be leased hereunder to the
same extent as the property replaced thereby.
For all purposes hereof, the property so substituted shall after
such transfer be deemed part of the property leased hereunder and shall be
deemed an "Aircraft", or "Airframe", and "Engine", and "Propeller", as the
case may be, as defined herein. No Event of Loss with respect to the Airframe
or the Airframe and the Engines and the Propellers or engines and propellers
then installed thereon for which substitution has been elected pursuant to
Section 11.1 hereof shall result in any reduction in Basic Rent.
11.2 Event of Loss with Respect to an Engine or Propeller. Upon
the occurrence of an Event of Loss with respect to an Engine or Propeller not
then installed on an Airframe or Engine, or an Event of Loss with respect to
an Engine or Propeller installed on an Airframe not involving an Event of Loss
with respect to the Airframe, the Lessee shall give the Lessor prompt written
notice thereof and the Lessee shall replace such Engine or Propeller as soon
as practicable after the occurrence of such Event of Loss by duly conveying to
the Lessor as a replacement for said Engine or Propeller, title to another
engine or propeller of the same make and of the same or an improved model and
suitable for installation and use on the Airframe or Engine, which engine or
propeller shall be free and clear of all Liens, and shall have a value and
utility at least equal to, and be in as good an operating condition as, the
Engine or Propeller with respect to which such Event of Loss occurred (without
regard to hours or cycles remaining until maintenance checks), assuming such
replaced Engine or Propeller was of the value and utility and remaining useful
life and in the condition and repair as required by the terms hereof
immediately prior to the occurrence of such Event of Loss. Such replacement
engine or propeller, after approval and acceptance by the Lessor, shall be
deemed an Engine or Propeller as defined herein, for all purposes hereunder.
The Lessee agrees to take such action as the Lessor may reasonably request to
ensure that any such replacement Engine or Propeller shall be duly and
properly titled in the name of Lessor and leased hereunder to the same extent
as any Engine or Propeller replaced thereby. Prior to or at the time of any
such conveyance, the Lessee, at its own expense, will promptly (i) furnish the
Lessor with a warranty xxxx of sale, in form and substance satisfactory to the
Lessor, with respect to such replacement Engine or Propeller, (ii) cause a
supplement hereto, in form and substance satisfactory to the Lessor,
subjecting such replacement Engine or Propeller to this Lease, to be duly
executed by the Lessee, and recorded pursuant to the Federal Aviation Act, and
(iii) furnish the Lessor with such evidence of compliance with the insurance
provisions of Article 12 hereof with respect to such replacement Engine or
Propeller as the Lessor may reasonably request. Upon full compliance with
this Section 11.2, the Lessor shall transfer to the Lessee all the Lessor's
right, title and interest, as-is, where-is, without recourse or warranty,
express or implied, except for a warranty as to the absence of Liens described
in Article 14 (ii) on such Engine or Propeller, in and to (1) the Engine or
Propeller with respect to which such Event of Loss occurred, (2) all claims
for damage to such Engine or Propeller, if any, against third persons arising
from the Event of Loss (unless any insurance carrier requires that such claims
be assigned to it), and (3) all rights to any insurance claims under all
insurance maintained by the Lessee hereunder except liability insurance. No
Event of Loss with respect to such Engine or Propeller under the circumstances
contemplated by the terms of this Section 11.2 shall result in any reduction
in Rent or in the Lessee's obligation to pay Basic Rent hereunder.
11.3 Application of Payments from Governmental Authorities for
Requisition of Title. Any payments (other than insurance proceeds the
application of which is provided for in Article 12 hereof) received at any
time by the Lessor or the Lessee from any governmental authority or other
entity with respect to an Event of Loss resulting from the condemnation,
confiscation, or seizure or requisition of title to or use of an Aircraft,
Airframe, Engines or Propellers, will be applied as follows:
(A) If such payments are received with respect to an Event of Loss
relating to an Airframe and installed Engines or Propellers, (i) unless the
same are replaced pursuant to Section 11.1(x), only so much of such payments
as shall not exceed the amounts due under Section 11.1(A) and (B) shall be
applied in reduction of the Lessee's obligation to pay such amounts, if not
already paid by the Lessee, or if already paid by the Lessee, shall be applied
to reimburse the Lessee for its payment of such amounts, and the balance, if
any, of such payments remaining thereafter will be paid over to or retained by
the Lessee or (ii) if such property is replaced pursuant to Section 11.1(x),
such payments shall be paid over to, or retained by, Lessee, at such time as
Lessee shall have replaced such property in accordance with the provisions of
Section 11.1(x); and
(B) If such payments are received with respect to an Engine or
Propeller under the circumstances described in Section 11.2, all such payments
shall be paid over to the Lessee, at such time as the Lessee shall have
replaced such Engine or Propeller in accordance with the provisions of said
Section 11.2.
Any amount referred to in clause (A) or (B) above which is payable to
Lessee shall not be paid to the Lessee if at the time of such payment an Event
of Default shall have occurred and be continuing, but shall be held by the
Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as there no longer exists any
Event of Default.
ARTICLE 12
INSURANCE
12.1 Public Liability and Property Damage Liability Insurance.
The Lessee will carry, at its own expense, comprehensive airline liability
insurance, passenger legal liability insurance, property damage liability
insurance, and public liability insurance during the Term hereof in an amount
not less than $200,000,000 combined single limit, with respect to each
Aircraft. Such liability insurance policy shall not contain a provision for
deductible or self-insurance amounts. In any event all such policies shall be
(A) in amounts which are not less than the public liability and property
damage insurance applicable to similar aircraft and engines which may at any
time during the Term hereof comprise the Lessee's fleet on which the Lessee
carries insurance; and (B) maintained in effect with insurers of recognized
reputation and responsibility. Any policies of insurance carried in
accordance with this Section 12.1 and any policies taken out in substitution
or replacement of any of such policies: (1) shall name the Lessor as owner and
as additional insured (but without imposing upon Lessor, any obligations
imposed on the insured, including without limitation the liability to pay
premiums); (2) shall provide that in respect of the interest of the Lessor,
such policies of insurance shall not be invalidated by any action or inaction
of the Lessee and shall insure Lessor, regardless of any breach or violation
of any warranty, declarations or conditions contained in such policies by the
Lessee; and (3) shall provide that if the insurers cancel such insurance for
any reason whatever, or the same is allowed to lapse for nonpayment of
premium, or if there is any material change in policy terms or conditions,
such cancellation, lapse or change shall not be effective for thirty (30) days
after receipt by the Lessor of written notice by such insurers to the Lessor
of such cancellation, lapse or change (other than war risk insurance, in which
case seven days' notice shall be given) . Each liability policy (i) shall be
primary without right of contribution from any insurance which is carried by
the Lessor (ii) shall expressly provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner as if there
were a separate policy covering each insured, (iii) shall waive any rights of
set-off, counterclaim or other deduction against each insured, and (iv) shall
waive any rights of subrogation the insurers have or may acquire against
Lessor. The Lessee shall arrange for evidence of appropriate coverage as to
each Aircraft and as to the satisfaction of the requirements set forth above
in this Section 12.1 to be furnished to the reasonable satisfaction of Lessor
on or before the Delivery Date for the Aircraft.
12.2 Insurance Against Loss or Damage to the Aircraft. The
Lessee shall maintain in effect, at its own expense, with insurers of
recognized reputation and responsibility and reasonably satisfactory to the
Lessor: (A) all-risk ground, taxiing and flight aircraft hull insurance
covering the Aircraft; (B) all risk spare parts and engines coverage
(including transit) with respect to any Engines, Propellers or Parts while
removed from an Aircraft while such items are not installed on the Aircraft
and are not insured by the Aircraft hull and risk insurance; (C) limited war
risk perils covering hijacking (air piracy), and (D) at the reasonable request
of Lessor, war risk and governmental confiscation and expropriation and
related insurance, but only to the extent (i) such insurance is maintained by
Lessee with respect to other aircraft operated by Lessee on the same routes as
the Aircraft, or (ii) the custom in the United States airline industry is to
carry such insurance with respect to aircraft operated on the same routes as
the Aircraft.
All such insurance shall be in full force and effect throughout
any geographical areas at any time traversed by the Aircraft, shall be payable
in dollars in the United States and shall during the Term hereof be for an
amount not less than the Stipulated Loss Value for such Aircraft. Any hull
insurance carried in accordance with this Section 12.2 may contain a provision
for a deductible or self-insurance which complies with industry standards.
Any policies carried in accordance with this Section 12.2 covering the
Aircraft and any policies taken out in substitution or replacement for any
such policies: (1) shall name the Lessor as owner and as loss payee (but
without imposing on Lessor any obligations imposed upon the insured, including
without limitation the liability to pay premiums); (2) shall provide that if
such insurance is canceled or materially changed for any reason whatever, or
the same is allowed to lapse for non-payment of premium, such cancellation,
change or lapse shall not be effective as to the Lessor for thirty (30) days
after receipt by the Lessor of written notice by such insurers of such
cancellation or lapse or material change in policy terms and conditions (other
than war risk insurance, in which case seven days' notice shall be given); (3)
shall provide that losses shall be adjusted with the Lessor and Lessee as
their interests may appear and be payable to Lessor in the event of any damage
or loss, for any one occurrence, in excess of $1,000,000 (without
consideration of any deductible); (4) shall provide that in respect of the
interest of the Lessor in such policies the insurance shall not be invalidated
by any action or inaction of the Lessee or any other person and shall insure
the Lessor regardless of any breach or violation of any warranties,
declarations or conditions contained in such policies by the Lessee or any
other person; (5) shall waive any right of set-off, counterclaim or other
deduction against each insured; (6) shall be primary without right of
contribution from any insurance which is carried by the Lessor, and; (7) shall
waive any and all rights of subrogation which the insurers have or may acquire
against Lessor. The Lessee shall arrange for evidence of appropriate coverage
for each Aircraft and to the satisfaction of the requirements set forth above
to be given to the Lessor on or before the Delivery Date for each Aircraft by
its insurance broker.
12.3 Application of Proceeds in an Event of Loss. Except as
limited by clause (C) hereof, it is agreed that all insurance payments
received as the result of the occurrence of an Event of Loss with respect to
an Airframe and installed Engines or any Engine will be applied as follows:
(A) So much of such payments as shall not exceed the amount required
to be paid by the Lessee pursuant to Section 11.1 shall be applied in
reduction of the Lessee's obligation to pay such amount if not already paid by
the Lessee or, if already paid by the Lessee, shall immediately be applied to
reimburse the Lessee for its payment of such amount, and the balance, if any,
of such payment remaining thereafter will be paid over to, or retained by, the
Lessee; and
(B) If such payments are received with respect to an Engine under the
circumstances contemplated by Section 11.2, such payments shall immediately be
paid over to, or retained by, the Lessee, provided that the Lessee shall have
fully performed the terms of Section 11.2 with respect to the Event of Loss
for which such payments are made.
(C) Any amount referred to in clause (A) or (B) above which is payable
to Lessee shall not be paid to the Lessee if at the time of such payment an
Event of Default shall have occurred and be continuing, but shall be held by
the Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as there no longer exists any
Event of Default.
12.4 Application of Proceeds in the Absence of an Event of Loss.
As between Lessor and Lessee, the insurance payments of any property damage
loss to an Airframe or any 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 Articles 6 and 9, if not already paid
for by the Lessee (or to reimburse the Lessee for such repairs or replacements
already paid for by the Lessee), and any balance remaining after compliance
with such Articles with respect to such loss shall immediately be paid to the
Lessee. Any amount referred to in the preceding sentence which is payable to
Lessee shall not be paid to the Lessee if at the time of such payment an Event
of Default shall have occurred and be continuing, but shall be held by the
Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as an Event of Default no longer
exists.
12.5 Reports, etc. On the Delivery Date for each Aircraft and
upon each renewal of the insurance coverages (but not less frequently than
annually), the Lessee shall furnish to the Lessor a certificate from the
Lessee's insurance broker describing in reasonable detail the insurance then
carried and maintained on the Aircraft including a listing of the special
provisions required by Sections 12.1 and 12.2, and a statement certifying that
such insurance complies with the terms hereof. The Lessee will advise the
Lessor in writing promptly of any default in the payment of any premium and of
any other act or omission on the part of the Lessee which might invalidate or
render unenforceable, in whole or in part, any insurance on an Aircraft. In
the event that the Lessee shall fail to maintain insurance as herein provided,
the Lessor may at its sole option provide such insurance and, in such event,
the Lessee shall thereupon reimburse the Lessor as Supplemental Rent for the
cost thereof; provided, however, that no exercise by the Lessor of said option
shall affect the provisions of this Lease, including the provisions that
failure by the Lessee to maintain the prescribed insurance shall constitute an
Event of Default.
12.6 Endorsements. All policies of insurance required by this
Lease shall be in conformance with the provisions of this Article 12.
12.7 Lessor's Additional Insurance. The Lessor may at its option
and at its sole expense carry insurance covering its interest in the Aircraft,
in addition to that required to be provided and maintained by the Lessee
pursuant to this Article 12, provided that no such insurance shall have the
effect of suspending, impairing, defeating, invalidating or rendering
unenforceable or reducing, in whole or part, the coverage of or the proceeds
payable under any insurance now or hereafter maintained by the Lessee.
ARTICLE 13
INDEMNITIES
13.1 General Indemnification. The Lessee agrees to assume
liability for, and does hereby indemnify, protect, save and keep harmless the
Lessor and its successors, assigns, agents and servants (the "Indemnitees")
from and against any and all claims, damages, losses, liabilities (including,
but not limited to, any claim or liability for strict liability in tort or
otherwise imposed including, without limitation, liability arising under any
applicable environment or noise or pollution control statute, rule or
regulation), obligations, demands, suits, penalties, judgments or causes of
action and all legal proceedings, whether civil or criminal, penalties, fines
and other sanctions, and any costs and expenses in connection therewith
including, without limitation, legal fees and expenses of whatever kind and
nature (whether or not also indemnified against by any other person under any
other document), which may result from or grow or arise in any manner out of
this Lease, or the condition, ownership, manufacture, construction, design
(including, without limitation, latent and other defects whether or not
discoverable by Lessee or Lessor and any claim for patent, trademark or
copyright infringement), acceptance, rejection, delivery, lease, maintenance,
overhaul, testing, possession, return, disposition, use or operation (in each
and every case) of the Aircraft or any Item of Equipment either in the air or
on the ground (except claims (i) attributable to (A) any representation or
warranty by such Indemnitee in this Lease being incorrect in any material
respect, or (B) the failure by such Indemnitee to perform or observe any
agreement, covenant or condition in this Lease, or (C) the willful misconduct
or the gross negligence of such Indemnitee (other than gross negligence
imputed to such Indemnitee solely by reason of its interest in the Aircraft),
or (D) with respect to the Lessor, a disposition (voluntary or involuntary) by
the Lessor of all or any part of its interest in the Airframe or any Engine or
Propeller (other than as contemplated by the Lease), (ii) attributable to acts
or events occurring after the expiration or other termination of the Term
(unless Lessee has failed to return the Aircraft, and then until return of the
Aircraft hereunder), (iii) for taxes (whether or not indemnified by the Lessee
under Sections 10.1(a) or 21.2 hereof), or (iv) attributable to amendments to
the documents not requested or consented to by Lessee, or arising from the
material or any article used therein or from the design, testing or use
thereof or from any maintenance, service, repair, overhaul or testing of any
Aircraft or any Item regardless of when such defect shall be discovered,
whether or not such Aircraft or any Item is at the time in the possession of
the Lessee and whether it is in the United States of America or any other
country. The indemnities contained in this Section shall continue in full
force and effect notwithstanding the assignment, expiration or other
termination of this Lease for indemnities resulting or arising in any manner
from or in connection with acts, omissions or events occurring prior to or
concurrent with such expiration or other termination, or during any holdover
by the Lessee contrary to the terms of this Lease.
13.2 Lessee Waiver. The Lessee hereby waives and releases any
claim now or hereafter existing against the Lessor and its successors or
assigns, agents and servants on account of any and all claims, demands, suits,
judgments or causes of action for or on account of or arising or in any way
connected with injury to or death of personnel of the Lessee or loss or damage
to property of the Lessee or the loss of use of any property which may result
from or grow or arise in any manner out of the condition, use or operation of
the Aircraft or any Item, either in the air or on the ground during the Term
hereof, or which may be caused during the Term hereof by any defect (whether
latent or patent) in the Aircraft or any Item from the material or any article
used therein or from the design, testing or use thereof or from any
maintenance, service, repair, overhaul or testing of the Aircraft or any Item
regardless of when such defect shall be discovered, whether or not such
Aircraft or any Item is at the time in the possession of the Lessee and
whether it is in the United States of America or any other country (except
claims resulting from the gross negligence or willful misconduct of Lessor or
its successor or assigns).
13.3 Payments; Subrogation. The Lessee further agrees that, with
respect to any payment or indemnity hereunder, such payment or indemnity shall
include any amount necessary to hold the recipient of the indemnity harmless
on an after-tax basis from all taxes required to be paid (or which would have
been required to be paid by Lessor with respect to such payment or indemnity
had Lessor had sufficient gross income within the meaning of section 61 of the
Code actually to pay tax at the highest marginal rate) by such recipient with
respect to such payment or indemnity under the laws of any Federal, state or
local government or taxing authority in the United States, or under the laws
of any taxing authority or governmental subdivision of a foreign country in
which Lessee operates; provided that, if any recipient of a payment or
indemnity realizes a tax benefit by, reason of such payment or indemnity
(whether such tax benefit shall be by means of a depreciation deduction or
otherwise), such recipient shall pay the Lessee an amount equal to the sum of
such tax benefit plus any tax benefit realized as the result of any payment
made pursuant to this proviso, when, as, if and to the extent realized; but
not before the Lessee shall have made all payments or indemnities to such
recipient with respect to such loss pursuant to the provisions of this Article
13. Each such recipient 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.
Lessee shall be subrogated to Lessor's rights in any matter with
respect to which Lessee has actually reimbursed Lessor for amounts expended by
it or has actually paid such amounts directly pursuant to Section 13.1.
In case any action, suit or proceeding is brought against Lessor
in connection with any claim indemnified against hereunder, Lessor will,
promptly after receipt of notice of the commencement of such action, suit or
proceeding, notify Lessee thereof, enclosing a copy of all papers served upon
Lessor; provided that the failure to provide such notice shall not release
Lessee from any of its obligations to indemnify hereunder except to the extent
that Lessee is prejudiced as a result of the failure to given such notice in a
timely fashion. Lessee may, and upon Lessor's request will, at Lessee's
expense, resist and defend such action, suit or proceeding, or cause the same
to be resisted or defended by counsel selected by Lessee and reasonably
satisfactory to Lessor and in the event of any failure by Lessee to do so,
Lessee shall pay all costs and expenses (including, without limitation,
attorney's fees and expenses) incurred by Lessor in connection with such
action, suit or proceeding. So long as Lessee has acknowledged in writing its
responsibility for such claim hereunder (unless such claim is covered by the
exceptions set forth in Section 13.1, except that such acknowledgment does not
apply if the decision of a court or arbitrator provides that Lessee is not
liable hereunder), Lessee shall have the right (A) in any judicial or
administrative proceeding that involves solely a claim for one or more claim,
to assume responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for one or more claim and other
claims related or unrelated to the transactions contemplated by, to assume
responsibility for and control of such claim to the extent that the same may
be and is severed from such other claims (and such Indemnitee shall use its
reasonable efforts to obtain such severance), and (C) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to
the control of such Indemnitee and to be allowed, at Lessee's sole expense, to
participate therein. The Indemnitee may participate at its own expense and
with its own counsel in any judicial preceding controlled by Lessee pursuant
to the preceding provisions. Notwithstanding any of the foregoing, Lessee
shall not be entitled to assume responsibility for and control of any such
judicial or administrative proceedings if any Event of Default shall have
occurred and be continuing or if such proceedings will involve a material risk
of the sale, forfeiture or loss of, or the creation of any Lien (other than a
Permitted Lien) on the Aircraft unless Lessee shall have posted a bond or
other security reasonably satisfactory to the relevant Indemnities in respect
to such risk.
ARTICLE 14
LIENS
The Lessee shall not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to any Aircraft or title
thereto or any interest therein, or in this Lease, except (i) the respective
rights of the Lessor and the Lessee as herein provided; (ii) Liens which
result from the Lessor's own acts or from claims against the Lessor not to be
paid or indemnified against by the Lessee hereunder; (iii) Liens for taxes
either not yet due or being contested in accordance with Article 10 hereof;
and (iv) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of business and
for amounts the payment of which is either not yet delinquent or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings so long as such proceedings do not
involve any danger of sale, forfeiture or loss of any Aircraft or any interest
therein. The Lessee shall promptly, at its own expense, take such action as
may be necessary to duly discharge any such Lien not excepted above if the
same shall arise at any time with respect to an Aircraft leased hereunder.
ARTICLE 15
RECORDATION AND FURTHER ASSURANCES
15.1 Recordation. The Lessee shall, at its expense, cause this
Lease, all Exhibits hereto, the Lease Supplements and any and all additional
instruments which shall be executed pursuant to the terms hereof (other than
as may be required as a result of a voluntary act by Lessor not required by an
act or in connection with a default by Lessee) so far as permitted by
applicable law or regulations, to be kept, filed and recorded and to be re-
executed, refiled, and re-recorded at all times in the office of the
Aeronautics Authority, pursuant to the Federal Aviation Act, and in such other
places or with such other governmental authorities as the Lessor may
reasonably request to perfect and preserve the Lessor's rights hereunder.
15.2 Foreign Filings. Without limiting the foregoing, the Lessee
shall do or cause to be done, at the Lessee's cost and expense, any and all
acts and things which may be required under the terms of the Convention for
the International Recognition of Rights in Aircraft, signed (ad referendum) at
Geneva, Switzerland, on June 19, 1948, to perfect and preserve the Lessor's
interest in and to the Aircraft within the jurisdiction of any signatory State
which has ratified said Convention and in the territory of which the Lessee
may operate the Aircraft as the Lessor may reasonably request. The Lessee
shall also do or cause to be done, at its own expense, any and all acts and
things which may be required under the terms of any other agreement, treaty,
convention, pact or by any practice, custom, or understanding recognized as
having wide application or control involving any jurisdiction in which the
Lessee may operate, or any and all other acts and things which the Lessor may
reasonably request and which are necessary, to perfect and preserve the rights
of the Lessor hereunder, in and to any Aircraft within any such jurisdiction.
15.3 Further Assurances. In addition, the Lessee will promptly
and duly execute and deliver to the Lessor such further documents and
assurances and take such further action as the Lessor may from time to time
reasonably request in order to more effectively carry out the intent and
purpose of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of the Lessor hereunder, including,
without limitation, if requested by the Lessor, at the expense of the Lessee,
the execution and delivery of supplements or amendments hereto, in recordable
form, subjecting to this Lease any 'replacement or substituted engine and the
recording or filing of counterparts hereof, or of financing statements with
respect hereto, in accordance with the laws of such jurisdictions as the
Lessor may reasonably deem advisable.
ARTICLE 16
RETURN OF AIRCRAFT AND RECORDS
At the expiration of the Term, or upon the termination of this
Lease pursuant to Section 18, Lessee, at its own expense, shall, except as
otherwise provided in Section 18 hereof, return the Aircraft in accordance
with the terms and provisions set forth on Exhibit E attached hereto.
ARTICLE 17
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether
such events 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 administrative or
governmental body):
(a) Lessee fails to make any payment of Basic Rent within ten
(10) Business Days of when due or fails to make any payment of
Supplemental Rent to the Lessor when due, and such failure to pay
Supplemental Rent continues for a period of fifteen (15) Business Days
after Lessor gives written notice to Lessee that Supplemental Rent is
due; or
(b) Lessee fails to procure property or liability insurance,
such insurance shall lapse or Lessee shall operate the Aircraft without
the insurance coverage required pursuant to Article 12 hereof, provided
that any failure to cover a lapse of such insurance shall not constitute
an Event of Default so long as the Aircraft is not flown during the
period of such lapse and insurance coverage remains in effect while the
Aircraft is grounded; or
(c) Lessee fails to perform or observe in any material respect
any other of the covenants, conditions, or agreements to be performed or
observed by it hereunder and such failure continues for a period of
thirty (30) days after written notice thereof from the Lessor to the
Lessee; provided, however, that if such failure is curable in Lessee's
reasonable judgment, Lessee shall have undertaken to cure any such
failure and, notwithstanding the reasonable diligence of Lessee in
attempting to cure such failure, such failure is not cured within said
thirty (30) day period but is curable with future due diligence, there
shall exist no Event of Default under this Article 17 for such further
time not to exceed 180 days as may reasonably be required to effect such
cure, so long as Lessee is proceeding with due diligence to cure such
failure; or
(d) Any representation or warranty made by the Lessee herein or
in any material document or certificate furnished the Lessor in
connection herewith or pursuant hereto proves to be incorrect in any
material respect and shall remain material and uncured at the time
discovered, and shall not have been cured or the adverse effect
eliminated within 30 days after receipt by Lessee of written notice,
provided such representation or warranty may be cured or the adverse
effect eliminated; or
(e) Lessee consents to the appointment of a receiver, trustee or
liquidator of itself or of a substantial part of its property, or Lessee
admits in writing its inability to pay its debts generally as they
become due, or makes a general assignment for the benefit of creditors,
or Lessee files a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect) or an answer admitting
the material allegations of a petition filed against the Lessee in any
such proceeding, or Lessee by voluntary petition, answer or consent
seeks relief under the provisions of any other now existing 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
(f) An order, judgment or decree is entered in any proceedings
by any court of competent jurisdiction appointing, with or without the
consent of the Lessee, a receiver, trustee or liquidator of the Lessee
or of any substantial part of its property, or any substantial part of
the property of the Lessee is sequestered, and any such order, judgment
or decree of appointment or sequestration remains in force undismissed,
unstayed or unvacated for a period of sixty (60) days after the date of
entry thereof; or
(g) A petition against the Lessee in a proceeding under the
bankruptcy laws or other insolvency laws (as now or hereafter in effect)
is filed, and any decree or order adjudging the Lessee a bankrupt or
insolvent in such proceeding remains in force undismissed or 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 or the
proceeding 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 the Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Lessee
or of any substantial part of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed or
unterminated for a period of sixty (60) days; or
(h) an "Event of Default" shall have occurred under, and as
defined in, any other aircraft lease agreement between the Lessee and
the Lessor (or an affiliate of the Lessor).
ARTICLE 18
REMEDIES
18.1 Remedies. Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, the Lessor
may, at its option, declare this Lease to be in default and at any time
thereafter, so long as the Lessee shall not have remedied all outstanding
Events of Default, the Lessor may exercise one or more of the following
remedies with respect to all or any part of any Aircraft, Airframe, Engine or
Propeller as the Lessor, in its sole discretion, shall elect, to the extent
available and permitted by applicable law then in effect:
(1) Terminate this Lease and demand that the Lessee, and the
Lessee shall upon the written demand of the Lessor and at the Lessee's
expense, forthwith return the Aircraft and all Items of Equipment to the
Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Article 16 hereof as if such
Aircraft were being returned at the end of the Term; or the Lessor, at
its option and to the extent permitted by applicable law, may enter upon
the premises where any Airframe, any Engine or Propeller or any Item of
Equipment is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing
to the 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.
(2) Sell or cause to be sold any Airframe, any Engine, Propeller
or any Item of Equipment at public or private sale, as the Lessor may
determine, or otherwise dispose of, hold, use, operate or lease to
others the Aircraft or any Item of Equipment as the Lessor in its
discretion may determine, all free and clear of any rights of the
Lessee.
(3) Whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Section 18.1(1)
or 18.1(2) above with respect to the Aircraft or any Item, the Lessor,
by written notice to the Lessee specifying a payment date not earlier
than ten (10) days from such written notice, may demand that the Lessee
pay to the Lessor and the Lessee shall pay to the 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 Item 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 whichever of the
following amounts the Lessor, in its sole discretion, shall specify in
such notice: (A) an amount equal to the excess, if any, of the present
worth of the aggregate unpaid Rent due under this Lease for such
Aircraft discounted at the rate of eight percent (8%) per annum to the
date specified in said notice over the aggregate fair market rental
value (computed as hereafter in this Article provided) of such Aircraft
for the remainder of the Term for such Aircraft after discounting such
fair market rental value to present worth as of the payment date
specified in such notice at the rate of eight percent (8%) per annum; or
(B) an amount equal to the excess, if any, of the Stipulated Loss Value
for such Aircraft computed as of the date specified for payment in such
notice over the fair market sales value (computed as hereafter in this
Article provided) as of the date specified in the notice, or (C) an
amount equal to the excess, if any, of the Stipulated Loss Value for the
Aircraft computed as of the date specified for payment in such notice
over the fair market rental value (computed as hereafter provided in
this Article) of the Aircraft for the remainder of the Term after
discounting such fair market rental value to present value as of the
payment date specified in such notice at the rate of eight percent (8%)
per annum. The amount specified in said notice shall bear interest at
the Incentive Rate from the payment date specified in said notice until
receipt of payment by the Lessor.
(4) In the event the Lessor, pursuant to Section 18.1(2) above,
shall have sold or caused to have sold, any Aircraft, the Lessor in lieu
of exercising its rights under Section 18.1(3) above with respect to
such Aircraft, may, if it shall so elect, demand that the Lessee pay the
Lessor and the Lessee shall pay to the Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for
such Aircraft due after such sale occurs), any unpaid Basic Rent for
such aircraft due for periods up to the time of sale plus the amount by
which the Stipulated Loss Value of such Item computed as of the date of
such sale exceeds the net proceeds of such sale, together with interest
at the Incentive Rate on the sum of such excess and such unpaid Rent
from date of sale to the date such payment is received by the Lessor.
(5) Proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessee of the applicable
covenants of this Lease and to recover damages for the breach thereof,
or to rescind this Lease as to any Aircraft.
(6) In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before or
during the exercise of any of the foregoing remedies and for all legal
fees and other costs and expenses incurred by reason of the occurrence
of any Event of Default or the exercise of the Lessor's remedies with
respect thereto, including without limitation all costs and expenses
incurred in connection with the return of any Aircraft in accordance
with the terms of Article 16 hereof or in placing such Aircraft in the
condition and with airworthiness certificates as required by said
Article.
(7) For the purpose of Section 18.1(3) above, the "fair market
rental value" or the "fair market sales value" of any Aircraft shall be
as specified in an appraisal by a nationally recognized independent
aircraft appraiser, chosen by the Lessor, who shall determine such
value(s) on the basis of the lesser of the actual location and condition
of the Aircraft or the location and condition required upon the return
thereof pursuant to this Lease. At any sale of any Aircraft pursuant to
this Article 18, Lessor, or any assignee, successor or affiliate of
Lessor, may bid for and purchase such property.
18.2 Cumulative; Waiver. Except as otherwise expressly provided
above, no remedy referred to in this Article is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to above
or otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies. No express or implied waiver by the Lessor of any Event
of Default shall in any way be, or be construed to be, a waiver of any future
or further Event of Default.
18.3 Bankruptcy. Notwithstanding any provision herein or
elsewhere contained to the contrary, it is understood and agreed among the
parties hereto that the transactions contemplated by this Lease are expressly
intended to be, shall be and should be construed so as to be, entitled to the
full benefits of 11 U.S.C. Section 1110, as amended from time to time, and any
successor provision thereto.
ARTICLE 19
MISCELLANEOUS
19.1 Construction and Applicable 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. No term or
provision of this Lease may be changed, waived, discharged or terminated
orally, but only by a written instrument signed by the party against which the
enforcement of the change, waiver, discharge or termination is sought. This
Lease shall constitute an agreement of lease, and nothing herein shall be
construed as conveying to the Lessee any right, title or interest in any Item
of Equipment except as a lessee only. 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 is being delivered in the State of Virginia
and shall in all respects be governed by, and construed in accordance with,
the laws of the State of New York, including all matters of construction,
validity and performance. This Lease shall be effective for all purposes as
of the date first above written.
19.2 Notices. All notices provided for herein shall be in
writing and shall be deemed to have been given (unless otherwise required by
the specific provisions hereof in respect of any matter) when delivered
personally or after being deposited in the United States mail, certified
(return receipt requested), postage prepaid, or sent by telecopier, or by
prepaid courier service addressed as follows:
If to the Lessee Atlantic Coast Airlines
Xxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Chief Financial Officer
If to the Lessor: FINOVA Capital Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Ms. Xxxxxx Xxxx
or to any party at such other address as the party may designate by notice
duly given in accordance with this Section.
19.3 Lessor's Right to Perform for Lessee. If the Lessee fails
to make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein or in related
documents, the Lessor may itself make such payment or perform or comply with
such agreement, and the amount of such payment and the amount of the
reasonable expenses of the Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Incentive Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand.
19.4 Counterparts. This Lease may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19.5 Quiet Enjoyment. The Lessor covenants that as long as, the
Lessee keeps and performs each and every covenant and agreement to be
performed or observed by it hereunder, the Lessee shall quietly enjoy the
Aircraft without hindrance or disturbance by the Lessor or by any other person
lawfully claiming the Aircraft through the Lessor.
19.6 Legal Fees and Other Expenses. It is understood and agreed
that in any litigated action, proceeding, controversy or dispute of any kind
whatever in connection with the enforcement of rights under this Lease, the
prevailing party shall be entitled to recover its expenses, including
reasonable attorneys' fees, from the other party.
19.7 Assignment by Lessor. (a) Lessee acknowledges and agrees
that Lessor shall have the absolute right to transfer or assign to any person,
firm, corporation or other entity any or all of Lessor's rights, obligations,
benefits and interests under this Lease provided that such assignee or
transferee (i) is a "citizen of the United States" as defined in Section
40102(a)(15) of the Federal Aviation Act and the regulations pursuant to such
Section, (ii) has a net worth of at least $50,000,000, (iii) assumes the
obligations of the Lessor hereunder and under any related documents pursuant
to an agreement in form and substance satisfactory to Lessee, and (iv) is not,
without the consent of Lessee, an air taxi operator or carrier or other
operator of aircraft, or an Affiliate of any of the foregoing, including,
without limitation, the right to receive Rent or any other payment due under
this Lease, the right to transfer or assign title to any Aircraft or to
transfer or assign the right to purchase any Aircraft and the right to make
all waivers and agreements, to give all notices, consents and releases, to
take all action upon the occurrence of an Event of Default, or to do any and
all other things which Lessor is or may become entitled to do under this
Lease. Lessee acknowledges that, if Lessor should sell or transfer to a third
party all of Lessor's rights and obligations under this Lease and in the
Aircraft, Lessor shall thereupon be relieved of all of its obligations
hereunder and Lessor's transferee (and, if the transferee is a trust, the
beneficial owners of such trust) shall succeed to all of Lessor's rights,
interests and obligations under this Lease as though Lessor's transferee had
been the initial lessor hereunder.
(b) Without limiting the generality of paragraph (a), Lessee
acknowledges and agrees that the terms and conditions of this Lease have been
agreed to by Lessor in anticipation of its being able to assign its rights
unto and interests in this Lease and its rights in the Aircraft and/or its
being able to grant a security interest in all or any of its rights and
interest under this Lease and in the Aircraft to one or more lenders, to an
agent or trustee representing such lenders, or to any other party having an
interest in any Aircraft or participation in the transaction which is the
subject of this Lease, any or all of which may rely on and shall be entitled
to the benefit of the provisions of this Section 19.7(b). Lessee shall, upon
the written instruction of Lessor and compliance with Section 19.7(b) : (a)
recognize any such assignment, (b) accept the directions or demands of such
assignee in place of those of Lessor, (c) surrender any leased property only
to such assignee, (d) pay all Rent payable hereunder and do any and all things
required of Lessee hereunder, and not terminate this Lease, notwithstanding
any default by Lessor or the existence of any other liability or obligation of
any kind or character on the part of Lessor to Lessee whether or not arising
hereunder, (e) so long as Lessor remains obligated hereunder, not require any
assignee of this Lease to perform any duty, covenant or condition required to
be performed by Lessor under the terms of this Lease, all rights of Lessee in
any such connection aforesaid being hereby waived as to any and all such
assignees, and (f) execute any documents which Lessor may reasonably request
in order to effectuate the foregoing.
19.8 Survival. The representations; warranties, indemnities and
agreements of the Lessee provided for in this Lease, and the Lessee's
obligations under any and all provisions thereof, shall survive the expiration
or other termination of this Lease to the extent required for full performance
and satisfaction hereof.
19.9 Successors and Assigns. This Lease shall be binding on and
shall inure to the benefit of Lessee, Lessee's permitted successors and
assigns, Lessor and Lessor's permitted successors and assigns.
ARTICLE 20
RENEWAL AND PURCHASE OPTIONS; VOLUNTARY TERMINATION
20.1 Purchase Option. Provided that no Event of Default shall
have occurred and be continuing, the Lessee shall have the options,
exercisable in either case upon not less than 60 days prior written notice to
the Lessor, to purchase the Aircraft, on an "as-is, where-is" basis without
representation or warranty except a warranty as to the absence of Liens
described in Article 14(ii), on the date set forth in the Lease Supplement
(assuming that all payments of Basic Rent have been made except any payments
of Basic Rent in advance) for the Aircraft for a price equal to (i) the amount
set forth in the Lease Supplement therefor, plus (ii) all Supplemental Rent
due and payable on or before such date (including any applicable taxes
excluding taxes based on or measured by Lessor's net income), plus (iii) all
unpaid Basic Rent due and payable on or before such date (other than advance
Basic Rent payable on such date).
20.2 Voluntary Termination.
(A) So long as no Event of Default exists, Lessee shall have the
right at its option, on at least one hundred eighty (180) days prior written
notice to Lessor, to terminate this Lease with respect to the Aircraft on any
rent payment date (the "Termination Date") on or after the seventh anniversary
of the Delivery Date during the Base Term; provided such Airframe and the
Engines or engines then installed on such Airframe and the Propellers or
propellers then attached to such Engine or engines shall have become obsolete
or surplus with respect to Lessee's requirement. During the period from the
giving of such notice (which notice shall identify the Aircraft and specify
the effective date of termination and the reasons for termination) until the
effective date of termination, Lessee, as agent for Lessor shall use its best
efforts to obtain bona fide bids for the purchase of the Aircraft. Lessee
shall certify to Lessor in writing the terms and amount of each bona fide bid
received by Lessee and the name and address of the Person (who shall not be
Lessee or any Person acting for or affiliated with Lessee) submitting such
bid. Lessor may also independently obtain bids for such purchase and certify
them to Lessee as provided in the next preceding sentence. On or before the
effective date of termination, Lessee will provide Lessor with a copy of
resolutions of Lessee's Board of Directors stating that such Airframe and
Engines or engines and Propellers or propellers are obsolete or surplus to
Lessee's requirements, as the case may be. On or before the effective date of
termination, Lessee shall deliver such Airframe and Engines or engines and
Propellers or propellers to Lessor, and duly transfer title to Lessor of any
such engines or propellers not owned by Lessor. on the effective date of
termination (or such earlier date as may be agreed to in writing by Lessor and
Lessee) Lessor shall sell such Airframe, Engines or engines, and Propellers or
propellers for cash to whosoever shall have submitted the highest bid prior to
such date. The total sales price realized at such sale shall be retained by
Lessor and, in addition, on or before the date of such sale Lessee shall pay
to Lessor the sum of (A) the amount, if any, by which (i) the Termination
Value for the Aircraft computed as of the date of payment, exceeds (ii) the
sales price of the Aircraft sold by Lessor less all expenses incurred by
Lessor, in connection with such sale, (B) any amounts of unpaid Basic Rent for
the Aircraft, except any payments of Basic Rent due on such date and payable
in advance and (C) all other amounts whether Rent or otherwise owing by Lessee
to Lessor hereunder. Upon such payment Lessor will transfer to Lessee,
without recourse or warranty, except as to the absence of Liens specified in
Article 14(ii) of this Lease, all of Lessor's right, title and interest in and
to any Engines or Propellers constituting part of the Aircraft which were not
sold with the Aircraft. Lessee's obligations under this Lease shall continue
until Lessee shall have satisfied all of its obligations under this Section.
If no sale shall have occurred on the effective date of termination, or within
one year after receipt of the notice of termination, this Lease shall continue
in full force and effect as to such Aircraft. Lessor shall be under no duty
to solicit bids, to inquire into the efforts of Lessee to obtain bids or
otherwise take action in connection with any such sale other than to transfer
to the purchaser named in the highest bid certified by Lessee to Lessor,
against payment therefor, without recourse or warranty (except as to the
absence of Liens specified in Article 14(ii) of this Lease), all Lessor's
right, title and interest in and to such Aircraft. Lessee shall have the
right to revoke the notice of termination delivered in accordance with this
Section 20.2(A) at any time prior to 15 days prior to the Termination Date
except following delivery of the notice to Lessee under Section 20.2(B)
hereof.
(B) Notwithstanding Section 20.2(B), Lessor may elect to retain
title to the Aircraft. If Lessor so elects, Lessor may, at any time within 30
days after it shall have received such termination notice from Lessee, give
written notice to Lessee that Lessor elects irrevocably to terminate the Lease
with respect to such Aircraft on the effective date specified in the notice
previously given by Lessee, and Lessee shall have no further obligations under
this Section 20.2. Effective on Lessee's full payment of all amounts of Rent
due and payable, except any payments of Basic Rent due on such date and
payable in advance, this Lease shall terminate with respect to such Aircraft
(provided that this Lease shall continue as to the Aircraft unless such
amounts are paid in full). If this Lease shall so terminate, Lessee shall
deliver the Aircraft to or at the direction of Lessor in the same manner as if
delivery were made to Lessor pursuant to Article 16 hereof, and shall duly
transfer to Lessor title to any such engines installed on the Airframe and to
any such propellers attached to such Engines on such termination date now
owned by Lessor.
20.3 Renewal Option. At the expiration of the Base Term of this
Lease or then effective Renewal Term, as applicable, for the Aircraft, so long
as no Event of Default shall have occurred and be continuing, Lessee shall
have the option, exercisable upon not less than 120 days prior written notice
to Lessor, to renew this Lease for the Aircraft for four (4) additional terms
of one year (the "Renewal Term") each from the expiration of such Base Term or
then effective Renewal Term, as applicable, as specified in such notice on the
same terms and conditions as the Base Term, other than the payment of the then
fair market rental value, as determined by the mutual written agreement of
Lessee and Lessor or, in the absence of such agreement, the Appraisal
Procedure, ("Renewal Rent") as Basic Rent during such Renewal Term. If at any
time Lessee fails to exercise the option to renew for an additional one year
period, Lessee shall return the Aircraft to Lessor pursuant to the terms of
Article 16 hereof at the end of the current one year period. "Stipulated Loss
Value" and "Termination Value" during any Renewal Term for the Aircraft shall
be the fair market value of the Aircraft on the date of determination, as
determined by the mutual written agreement of Lessee and Lessor or, in the
absence of such agreement, the Appraisal Procedure.
ARTICLE 21
CHARACTERIZATION AS LEASE AND TAX INDEMNITY
It is the intent of the parties that this Lease be a true lease
and that Lessor shall at all times be considered the owner of the Aircraft for
purposes of all federal, state and local income or franchise taxes measured by
net income, and that this Lease conveys no right, title or interest in the
Aircraft to Lessee, except as lessee. Lessee represents, warrants and
covenants that neither it nor any person controlled by it, in control of it,
or under common control with it, directly or indirectly, will at any time take
any action or file any return or other document inconsistent with the
foregoing and that each of such persons will file such returns, take such
actions and execute such documents as may be reasonable and necessary to
facilitate accomplishment of the intent hereof.
21.1 Tax Assumptions. The Lessor and the Lessee acknowledge that
this Lease has been entered into on the assumption that (i) for Federal income
tax purposes the Lease will be treated as a "true lease", (ii) for Federal
income tax purposes Lessor will depreciate Lessor's Cost as modified
accelerated cost recovery deductions under Section 168(b) of the Code
commencing on the Delivery Date, with respect to each Aircraft as "seven-year
property", (iii) the United States federal income tax rate applicable to
Lessor will be 35%, (iv) the Lessor will compute its taxable income under the
accrual method of accounting, (v) Lessor will have sufficient taxable income
to utilize the depreciation deductions, (vi) the Lessor will not be subject to
the Alternative Minimum Tax, and (vii) the Aircraft will be placed in service
on or before the Commencement Date. Such tax assumptions are hereinafter
referred to as the "Tax Benefits".
21.2 Tax Representations. Lessee represents and warrants to
Lessor that (i) on the Delivery Date, the Aircraft will not require
improvements, modifications or additions in - order to be rendered complete
for its intended use by Lessee, (ii) the Aircraft will not be used by a "tax
exempt entity" as defined in Section 168(h)(2) of the Code, and (iii) prior to
the end of the taxable year of Lessor that includes the eighth anniversary of
the Delivery Date, the Aircraft will not be used predominantly outside the
U.S. within the meaning of Section 168(g)(1)(A) of the Code.
21.3 Tax Indemnity. If for any taxable year of Lessor during
which the Lease is in effect as a result of (i) any act or omission by or on
behalf of the Lessee or an Affiliate of Lessee or any person who acquires from
the Lessee, directly or indirectly, possession or control or the right to use
the Aircraft (other than any act or omission that is required by this
Agreement), or (ii) the inaccuracy of any representation by the Lessee set
forth in Section 21.2 herein Lessor shall lose (upon audit, by being unable to
claim, through recapture, or by not receiving the benefit of, or otherwise)
all or any portion of any of the Tax Benefits, the Lessee shall pay to Lessor
an amount which, after deduction of all taxes required to be paid (as computed
using the Assumed Effective Tax Rate as hereinafter defined) by Lessor in
respect of the receipt of such sum under the laws of any Federal, state or
local government or taxing authority in the United States (after giving credit
for any savings in respect to any such taxes by reason of deductions, credits
or allowances in respect of the payment or accrual of the amount indemnified
against), shall be equal to the sum of any additional Federal, state or local
income taxes payable by Lessor as a result of the loss of such Tax Benefits
(as computed using the Assumed Effective Tax Rate as hereinafter defined),
plus the amount of any interest, additions to tax (including, without
limitation, an addition to tax by reason of any underpayments of any estimated
taxes), fines or penalties which are payable by Lessor in connection with the
loss of such Tax Benefits, provided that the Lessee shall not be required to
make any of the foregoing indemnity payments to the extent the loss of the Tax
Benefits is the result of (a) a determination that the Lease does not
constitute a "true lease" for Federal, state or local income tax purposes
except as a result of an act or omission of Lessee or inaccuracy in any of the
representations of Lessee contained in Section 21.2, (b) any event whereby
Lessee is required by the terms of the Lease to pay, and shall have paid in
full, the Stipulated Loss Value for the Aircraft with respect to which the
loss of Tax Benefits arose; (c) Lessor's voluntary or involuntary transfer of
legal title to all or any part of the interest in such Aircraft, unless such
transfer occurs by reason of exercise of Lessor's remedies under the Lease
upon an Event of Default; (d) the failure of Lessor to have sufficient gross
income against which to apply any Tax Benefit which may be taken as a
deduction; (e) the failure of Lessor to claim any Tax Benefit in its income
tax returns for the appropriate year (unless supported by an opinion of
counsel to the effect that there is no reasonable basis to make such claim) or
to follow proper procedure in claiming any Tax Benefit in such tax returns for
such year; (f) the failure of Lessor to take timely action in contesting a
claim made by any taxing authority with respect to the disallowance of any Tax
Benefits in accordance with Section 21.4 hereof if such failure shall preclude
the right of Lessor to contest such claim and if such failure was not caused
by Lessee's failure to request action by the Lessor after receipt of notice
from the Lessor or to otherwise comply with the obligations under the contest
provisions of this Section; (g) any act (whether voluntary or involuntary),
omission or misrepresentation of Lessor other than any action or omission
contemplated in the Lease Agreement or any related agreements or otherwise
taken by Lessor in the exercise of any remedies or the enforcement of any
rights against Lessee under any of such agreements; (h) as a result of any
changes, modifications or additions to the Code or Regulations promulgated
thereunder, which are adopted, enacted or become effective at any time
subsequent to the Delivery Date; (i) the applicability of Section 467 of the
Code; (j) a change in the nature of the business of Lessor; (k) a short
taxable year of Lessor or application of the Mid Quarter Convention within the
meaning of Section 168(a)(4)(C) of the Code; or (1) application of the
Alternative Minimum Tax to Lessor.
In calculating the amount of any indemnity payable to Lessor
pursuant to Section 21.3, it shall be assumed all ordinary income of Lessor
attributable to payments hereunder is subject to tax at a combined Federal,
state and local income tax rate of 38.38% (the "Assumed Effective Tax Rate").
Except as otherwise provided in the immediately following
paragraph, the liability of the Lessee to make any indemnity payments
hereunder shall become fixed at the later of (i) a Final Determination, as
defined below, and (ii) the time the Lessor makes payment of the tax
attributable to the portion of the Tax Benefits lost, or if the Lessor is not
required to make payment of tax with respect to the portion of the Tax
Benefits lost, the date on which the Lessor files its tax return for the
taxable year in which such loss occurs, and shall be due and payable within 15
days after receipt by Lessee of written notice from Lessor as to the
determination of such liability. Lessee shall pay interest at the Incentive
Rate on any indemnity payment not made when due.
If, as a direct result of a loss of Tax Benefits to Lessor for
which Lessee has paid an indemnity under this paragraph, the aggregate
federal, state and local income tax thereafter paid by the Lessor for any
taxable year shall be less than the amount of such taxes which would have been
payable by the Lessor had such loss of Tax Benefits not occurred, then the
Lessor shall pay to the Lessee the amount of such difference in taxes plus any
additional Tax Benefits realized by the Lessor with respect to taxes imposed
under the laws of any federal, state or local government or other taxing
authority; provided, however, that the Lessor shall have no obligation to make
any such payment to the Lessee if an Event of Default has occurred and is
continuing.
If any indemnity payment is made by Lessee under Section 21.3, the
Lessor shall not report such amounts as taxable income on its federal income
tax returns, provided Lessee shall have secured an opinion of counsel
(together with case law, revenue rulings and other support for such opinion)
directed to Lessor and acceptable to Lessor stating that a substantial basis
exists for such treatment, and Lessee shall hold Lessor harmless from any
claims or penalties made or imposed on Lessor arising out of such reporting
position with respect to such amounts (subject to Section 10.3 and 21.4
hereof).
21.4 Contest.
(A) In the event a claim shall be made by the Internal Revenue
Service which, if successful, would result in a loss for which Lessee would
have liability to Lessor pursuant to this Article 21 of the Lease, Lessor
hereby agrees to contest such claim, provided, that: (i) within thirty (30)
days after notice by Lessor to the Lessee of such claim, the Lessee shall have
requested that such claim be contested; (ii) Lessor at its sole option, may
forego any and all administrative appeals, proceedings, hearings and
conferences with the relevant taxing authority in respect to such claim and
may, at its sole option, either pay the tax claimed and xxx for a refund in
the appropriate forum selected by Lessor or contest such claim in the
appropriate forum selected by Lessor; (iii) within thirty (30) days after
notice by Lessor to Lessee of such claim, the Lessee shall have furnished
Lessor with an opinion of independent tax counsel chosen by the Lessee and
acceptable to Lessor, both as to counsel and substance, to the effect that
there is a reasonable basis to contest the claim; (iv) the Lessee shall
reimburse Lessor on demand, for all costs, expenses and liability which Lessor
may incur in contesting such claim, and to pay all reasonable costs and
expenses which Lessor may incur in contesting claim; (v) the Lessor shall not
be obligated to contest any claim unless the amount of such claim exceeds
Twenty Five Thousand Dollars ($25,000); and (vi) the Lessor shall not be
obligated to contest any claim if an Event of Default has occurred and is
continuing.
In the event that at any time Lessor shall pay the tax claimed and
then seek a refund, the Lessee shall pay to Lessor (as a "prior payment") the
amount of such tax and interest, additions to tax and penalties thereon, if
any, but not in excess of the amount which the Lessee would be obligated to
pay in respect of the related loss under this Article of the Lease. Upon
Final Determination of the liabilities of Lessor, or the receipt of a refund
by Lessor, Lessor shall offset the amount of such prior payment against the
full amount due, if any, pursuant to the provisions of this Article and either
(i) the Lessee shall pay to Lessor within 30 days after notice thereof, any
excess of such full amount due, if any, over such prior payment, or (ii)
Lessor shall repay to the Lessee within 30 days after the later of a receipt
of such refund or notice of such Final Determination, any excess of such prior
payment over such full amount due. Any interest received by Lessor in connec-
tion with any refund which is allocable to the indemnified taxes paid by
Lessor in respect of which the Lessee had made a prior payment shall be for
the account of the Lessee.
(B) In the case of any such claim, Lessor agrees to notify the
Lessee promptly in writing of such claim, agrees not to make payment of the
tax or other liability claimed for at least thirty (30) days after the giving
of such notice (unless specifically required to do so at an earlier date by
the Internal Revenue Service), and agrees to cooperate with the Lessee in good
faith in order that such claim may be contested effectively. The Lessee and
its counsel shall maintain confidentiality with respect to all such
information insofar as is possible, consistent with the conduct of a contest
hereunder.
(C) Lessor shall not enter into a settlement or other compromise
with respect to, or otherwise concede, any claim without the written consent
of Lessee, which consent shall not be unreasonably withheld, unless Lessor
waives its right to be indemnified with respect to such claim (but not with
respect to any future claims) under this Article of the Lease. Lessee shall
not be considered to have unreasonably withheld such consent if such consent
shall be withheld as a result of Lessee's reasonable evaluation of the merits
of the basis for contesting such claim and Lessee shall not be required to
consider any issue or dispute not directly related to such claim.
(D) If Lessee requests Lessor to contest a claim and otherwise
complies with its obligations under this Section 21.4, it shall have no
obligation to pay any indemnity under this Article of the Lease resulting from
such claim (except pursuant to Section 21.4(A)(iv) or a prior payment) until a
Final Determination occurs regarding the liability of Lessor in respect of the
claim. Lessee's obligation to pay the indemnity shall become fixed upon such
Final Determination and unless otherwise provided in this Section 21.4 shall
be payable within 30 days after receipt by Lessee of written notice from
Lessor as to the occurrence of a Final Determination. In all other cases, the
liability of Lessee shall become fixed and payable as provided in Section 21.3
of the Lease.
(E) For purposes of this Section 21.4, "Final Determination"
shall mean a decision of a court of original jurisdiction with respect to such
claim, (provided that the time for filing an appeal of such decision has
expired) or other disposition of such claim in the manner contemplated herein.
Lessor shall not be required to contest any claim after receipt of an adverse
Final Determination unless Lessor shall have received an opinion of
independent tax counsel, chosen by Lessee and acceptable to Lessor, stating
that it is more likely than not that a further contest will be successful.
21.5 [RESERVED].
21.6 Survival. The indemnification provided herein shall survive
the assignment, expiration or other termination of this Lease.
21.7 Consolidated Return. For purposes of this Article 21, the
term "Lessor" shall mean and include the affiliated group of corporations and
each member thereof, within the meaning of Section 1504 of the Code, of which
Lessor is a member, if such group is filing a consolidated United States
Federal income tax return, and it shall also mean any consolidated or combined
group of corporations of which Lessor is a member which is treated as such for
state franchise tax purposes.
21.8 Lessee Reporting Requirements. Lessee agrees promptly to
provide Lessor with sufficient information as is requested by Lessor and is
reasonably necessary to allow Lessor properly to file any return or report
required in connection with this Lease. Lessor and Lessee agree that neither
they, nor any of their Affiliates, will file any federal, and to the extent
permitted by law, state and local income tax return which is inconsistent with
the provisions of this Article 21.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused
this Lease to be duly executed by their authorized officers as of the day and
year first above written.
FINOVA CAPITAL CORPORATION, as Lessor
By:
Name:
Title:
ATLANTIC COAST AIRLINES, as Lessee
By:
Name:
Title:
EXHIBIT B
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated _____________, 1996, between
FINOVA Capital Corporation ("Lessor") and Atlantic Coast Airlines ("Lessee");
W I T N E S S E T H
WHEREAS, Lessor and Lessee have heretofore entered into that
certain Lease Agreement dated as of _____________, 1996 (herein called the
"Lease" and the terms defined therein being herein used with the same
meaning), which Lease provides for the execution and delivery from time to
time of Lease Supplements each substantially in the form hereof for the
purpose of leasing the Aircraft under the Lease as and when delivered by the
Lessor to the Lessee in accordance with the terms thereof;
NOW, THEREFORE, in consideration of the premises and other good
and sufficient consideration, and pursuant to Article 2 of the Lease, the
Lessor and the Lessee hereby agree as follows:
1. The Lessor hereby delivers and leases to the Lessee, and the
Lessee hereby accepts and leases from the Lessor, under the Lease Agreement,
as herein supplemented, the following:
(i) Airframe: One Jetstream Aircraft Limited Jetstream Series
4100, model 4101 aircraft bearing FAA Registration Xxxx
N____UE and manufacturer's serial no. _____;
(ii) Engines: Two Allied Signal model TPE331-14GR-802H and
TPE331-14HR-802H engines bearing manufacturer's serial nos.
______ (Port) and ________ (Starboard), respectively (each
of which Engines has 750 or more rated takeoff horsepower or
the equivalent); and
(iii) Propellers: Two XxXxxxxx model B5JFR36C1101-B/C-114GCA-0
and C5JFR36C1102-B/C-L114GCA-0 propellers bearing
manufacturer's serial nos. _________ (Port) and _________
(Starboard), respectively (each of which Propellers is
capable of absorbing 750 or more rated takeoff shaft
horsepower or the equivalent).
All the foregoing is hereinafter referred to as the "Delivered
Aircraft."
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessor's Cost for the Delivered Aircraft (including
Airframe, Engines, and Propellers) is as set forth on Schedule A attached
hereto.
4. The purchase price pursuant to Section 20.1 of the Lease is
$____________ and the date on which the Lessee may purchase the Aircraft
pursuant to Section 20.1 of the Lease is as set forth on Schedule A attached
hereto.
5. The Base Term for the Delivered Aircraft shall commence on
the Base Lease Commencement Date therefor and shall conclude on June 30, 2007.
6. The Lessee hereby confirms its agreement to pay the Lessor
Basic Rent and Supplemental Rent for the Delivered Aircraft, throughout the
Term therefor in accordance with the Lease. Basic Rent shall be payable on
the dates and in the amounts set forth in Schedule A hereto. The Basic Rent
for the Delivered Aircraft shall be payable in quarterly installments for the
Base Term, payable in advance.
All payments of Rent under the Lease shall be paid to Lessor by
wire transfer of immediately available funds on or before the due dates there
for to the account of Citibank, New York, NY, ABA No.: 000-000-000, Acct. No.:
4068-0522, Acct. Name: FINOVA, Ref.: ZQX34419ZQX.
7. The Lessee hereby confirms to the Lessor that it will, as
soon as practicable, xxxx the Delivered Aircraft as showing all interests
thereto in accordance with the terms of the Lease and that the Lessee has
accepted the Delivered Aircraft for all purposes hereof and of the Lease,
including its being airworthy, in accordance with specifications, in good
working order and repair and without defect in title, condition, design,
operation or fitness for use, whether or not discoverable by Lessee on the
date hereof, and free and clear of all Liens, except for those contemplated by
the Lease, provided, however, that nothing contained herein or in the Lease
shall in any way diminish or otherwise affect any right the Lessee or the
Lessor may have with respect to the Delivered Aircraft against the
manufacturer thereof, or any subcontractor or supplier of the manufacturer
thereof.
8. This Lease Supplement shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York, including
all matters of construction, validity and performance.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers as of the day and
year first above written.
FINOVA CAPITAL CORPORATION, as Lessor
By:
Name:
Title:
ATLANTIC COAST AIRLINES, as Lessee
By:
Name:
Title:
EXHIBIT D
SCHEDULE OF PERMITTED COUNTRIES
Any airframe or engine manufacturer or foreign air carrier domiciled in
the United Kingdom, Canada, Australia, New Zealand, Austria, Belgium, Denmark,
Finland, France, Germany, Iceland, Ireland, Luxembourg, The Netherlands,
Norway, Sweden and Switzerland.
EXHIBIT E
RETURN PROVISIONS
16.1 Return. At the expiration of the Term for the Aircraft or
upon the termination of this Lease pursuant to Article 18, the Lessee, at its
own expense, shall return the Aircraft by delivering the same forthwith to the
Lessor at such airport within the Lessee's then existing route system as may
be designated in writing by the Lessor. At the time of such return, the
Airframe shall have installed thereon two Engines, or the make and same or
improved model engines owned by the Lessee suitable for installation and use
on the Airframe. The Aircraft, upon redelivery pursuant hereto, (i) shall be
free and clear of all Liens, other than this Lease and Liens described in
Article 14(ii), (ii) shall be in the same operating condition, ordinary wear
and tear excepted, as when originally delivered to Lessee under the Lease
Agreement, dated as of _______________ between Seller and Lessee, and (iii)
shall satisfy all the following conditions:
(1) Certification.
The Aircraft shall have a valid Certificate of Airworthiness issued by
the U.S. FAA and shall be in compliance with the requirements of the Airframe,
Engine and Propeller manufacturers' approved maintenance programs or the
Lessee's FAA approved maintenance program for Airframe, Engine, Propeller and
Parts, and shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 135 or Part 121 if at the time of return Lessee is
conducting operations under such Part, and shall be in compliance with all
applicable noise, corrosion, environmental and aging aircraft requirements.
Lessee agrees that it shall not discriminate against the Aircraft with respect
to the use and operation thereof in order to avoid or reduce compliance by
Lessee with this Section 16.1(1), except any reduced use or operation
reasonably necessary during the last 6 months of the Term to comply with the
provisions of this Article 16.
(2) Overhaul and Repair.
The Airframe, all Parts, Engines and Propellers shall be documented to
have been repaired or overhauled by certified repair stations acceptable to
the Aeronautics Authority and in such a manner so that such Airframe, Parts,
Engines and Propellers are approved by the Aeronautics Authority for use in
the United States.
All overhaul and repair procedures shall be further verified to meet all
U.S. FAA requirements for quality and documentation necessary for operation
within the continental limits of the United States under Federal Aviation
Regulation Part 135 or Part 121 if at the time of return Lessee is conducting
operations under such Part.
(3) Repairs.
The Lessee shall ensure that all major repairs performed since the
Delivery Date and which still are in existence on the Aircraft has been
approved by or are immediately eligible to receive U.S. FAA approval, if so
required. All such repairs shall be accompanied by all data and documentation
necessary to substantiate their certification, approval and methods of
compliance, as required.
(4) Modifications.
All modifications performed since the Delivery Date which deviate from
the certified configuration and which are still in existence on the Aircraft
shall have U.S. FAA approval or certification if required. All such
modifications shall be accompanied by complete data and documentation
necessary to substantiate their certification and approval and methods of
compliance.
(5) Airworthiness Directives.
All U.S. FAA Airworthiness Directives and amendments or changes to the
Federal Aviation regulations applicable to the Aircraft, Engines, or Parts
requiring terminating compliance prior to the end of the Term shall have been
accomplished in compliance with the issuing agency's specific instructions.
(6) Records.
All records necessary and required by the U.S. FAA to certify and place
the Aircraft on an FAA approved maintenance program shall be delivered with
the Aircraft in English. If hard, non-computerized, copies of maintenance
records are not available, then the Lessee shall take action with pertinent
regulatory agencies to ensure that the Lessor and the U.S. FAA are provided
with all requested guarantees of methods of compliance, component overhaul and
management, scheduling, quality control, serial number verification, etc.
These records shall be all inclusive to the Airframe, Engines, Propellers and
Parts, and as a minimum, extend to include all activities associated with each
of the last completed maintenance checks, repairs, scheduled inspections and
functional tests, and overhauls performed to the Lessee is approved
maintenance programs.
All Parts identified with safe life limits shall be identified with
their service histories, accumulated cycles or flight hours as applicable and
remaining service lives on a separate listings.
All documentation, flight, and maintenance records as specified by the
applicable sections of U.S. Federal Aviation Regulations Part 135 or Part 121
if at the time of return Lessee is conducting operations under such Part,
which normally accompany the transfer of an aircraft which has been operating
in regulated commercial air service, shall be delivered to the Lessor with
each Aircraft.
In the event that any records are missing, incomplete, or unacceptable
in accordance with FAA standards, the Lessee shall re-accomplish the tasks
necessary to produce such records in accordance with its approved maintenance
programs prior to delivery of the Aircraft.
All documentation and records shall be made available in English to the
Lessor for review at a central location a minimum of fifteen Business Days
prior to the required date of Aircraft delivery to the Lessor.
(7) Scheduled Maintenance - Airframe.
The Lessee will be responsible for ensuring that the Airframe meets the
following conditions:
C Checks: The Airframe shall have completed the next due phase of the
system/power plant/zonal C Check per the Lessee's
approved maintenance program within twenty (20) days
prior to redelivery.
Structure
Program: The Airframe shall not have accumulated more than one-half
(1/2) time until the next scheduled structural
program-inspection C Check.
In the event that this check is performed in phases in conjunction
with the system/ power plant/zonal C check, the
current phase shall be performed with the required
return condition C Check phase.
Airworthiness
Limitations: All airworthiness limitations checks which are due
before the next phase check shall be accomplished. In
the event that these checks are performed in phases in
conjunction with the system/power plant/zonal C check,
the current phase shall be performed with the required
return condition C Check phase.
(8) Scheduled Maintenance - Engines; Propellers and Components.
For the purpose of this Section, time remaining, with respect to any
Engine, shall mean the number of hours remaining before it shall be necessary
to conduct an Engine overhaul or CAM, as applicable.
In the event the Lessee's FAA-approved maintenance program is not based
on engine condition trend monitoring or an on-condition maintenance program or
a comparable program, each Engine shall have not less than one-half (1/2) time
remaining until overhaul or CAM, based on the manufacturer's recommended fixed
maintenance schedule TBO for aircraft operating in commercial service at the
time of return and not less than one-half (1/2) time remaining until the next
scheduled Hot Section Inspection (HSI). In the event the Lessee's FAA-
approved maintenance program is based on engine condition trend monitoring or
an on-condition maintenance program or a comparable program, all time limited
or life limited components of an Engine on average shall have not less than
one-half (1/2) time remaining (provided that no individual component shall
have less than one-quarter (1/4) time remaining). Any overhaul CAM and HSI
accomplished preceding the time of return shall be conducted in accordance
with the manufacturer's overhaul specification or CAM. If, according to the
Lessee's FAA approved engine maintenance program, CAM's and HSI's are based on
engine condition trend monitoring or an on-condition maintenance program in
accordance with the engine manufacturer's trend monitoring program, each
engine shall have satisfactorily completed, immediately prior to return, a
borescope inspection in accordance with the trend monitoring program and
Lessee shall provide or cause to be provided all trend data for each Engine.
No trend shall be evidenced where "action should be taken as soon as possible"
in order to prevent serious engine deterioration resulting in high cost
component replacement or serious engine damage. Lessee is responsible for any
corrective action required as indicated by the trend monitoring program.
All Propellers on average shall have not less than one-half (1/2) time
remaining until overhaul (provided that no individual Propellers shall have
less than one-quarter (1/4) time remaining until overhaul), based on the
manufacturer's approved maintenance program.
All components of each undercarriage on average shall have not less than
one-half (1/2) time remaining until overhaul or life limited, as applicable
(provided that no individual component shall have less than one-quarter (1/4)
time remaining until overhaul or life limited, as applicable), based on the
manufacturer's recommended time between overhaul and calendar life.
All other time controlled components on average shall have not less than
one-half (1/2) time remaining (provided that no individual time controlled
component shall have less than one-quarter (1/4) time remaining), based on the
Lessee's approved maintenance program.
(9) Deferred Maintenance.
There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, against the Aircraft including those identified in
pre-delivery inspections or test flights.
(10) Pre-Return Inspections.
The Lessor shall be permitted to perform a maximum of two physical
inspections of the Aircraft inclusive of test flights. One inspection will be
performed immediately prior to return. The inspection shall include, but not
be limited to, ground evaluation and system functional tests including engine
runs if deemed necessary by the Lessor. The Lessee shall provide a qualified
technician to assist the Lessor in the performance of the inspection.
(11) Acceptance Flight.
The Lessee shall provide for acceptance flights as necessary to
demonstrate the airworthiness of the Aircraft and the proper functioning of
all systems and components in accordance with the manufacturer's flight
functional procedures. The Lessee shall permit the Lessor's representatives
on board during any flight tests as direct observers of the functional tests.
(12) Manuals.
All manuals incorporating the latest revisions necessary for the
operation, maintenance and support of the Aircraft shall be delivered with the
Aircraft. These shall include but not be limited to: overhaul manuals,
illustrated parts catalog (IPC), wiring diagrams, FAA approved flight manual
(AFM), flight crew operating manual (FCOM), and weight and balance manual.
(13) General Appearance.
The Aircraft shall be clean, cosmetically acceptable consistent with
ordinary wear and tear, interior complete and prepared to be placed into U.S.
scheduled revenue airline operations.
16.2 Equivalency Charge. In the event that any of the Engines
does not meet the conditions set forth in Clause 8 of Section 16.1 above,
Lessee shall pay Lessor an amount equal to 100% of the sum of (i) for each
Engine, the product of the manufacturer's then current estimated cost of the
next scheduled hot section inspection (including in such estimated cost all
required replacements of life-limited parts), multiplied by a fraction, the
numerator of which shall be the remainder (zero (0) if negative) of (x) the
actual number of hours of operation since the previous hot section inspection,
minus (y) 50% of the total operating hours allowable between hot section
inspections, and the denominator of which shall be the total operating hours
allowable between hot section inspections, and (ii) for each Engine, 100% of
the product of the manufacturer's then current estimated cost of the next
scheduled major overhaul (including in such estimated cost all required
replacements of life-limited parts), multiplied by a fraction, the numerator
of which shall be the remainder (zero (0) if negative) of (x) the actual
number of hours of operation since the previous major overhaul, minus (y) 50%
of the total operating hours allowable between major overhauls, and the
denominator of which shall be the total operating hours allowable between
major overhauls (provided, however, that if the cost for an overhaul used in
this clause (ii) includes the cost of a hot section inspection, only the
amount in clause (ii) and not the amount in clause (i) shall be due). All
prorated inspection and/or overhaul charges, if any, shall be payable as
Supplemental Rent and shall be due upon presentation to Lessee of an invoice
setting forth in reasonable detail the calculation of such amounts due.
In the event that Lessee does not meet the conditions in 16.1,
paragraph 7 with respect to the Airframe, Lessee shall pay Lessor the product
of: the then current estimated cost of the next scheduled structural program
inspection C Check (including in such estimated cost, all required replacement
of life limited parts) multiplied by the fraction wherein the numerator shall
be the remainder (zero (0) if negative) of (x) the actual number of respective
operating hours of operation since the previous structural program inspection
C Check, minus (y) 50% of the respective total operating hours of operation
allowable between such inspections, and the denominator shall be the
respective total operating hours of operation allowable between such
inspections. All prorated inspection and/or overhaul charges, if any, shall
be payable as Supplemental Rent and shall be due upon presentation to Lessee
of an invoice setting forth in reasonable detail the calculation of such
amounts due including the names of all sources used for the required cost
estimates. (Unless both Lessor and Lessee agree to alternative source(s), the
manufacturer of the Airframe shall be used as the sources for all cost
estimates).
16.3 [RESERVED].
16.4 Engines and Propellers. In the event any engine or
propeller not owned by the Lessor shall be returned with the Airframe, such
engine or propeller shall be of the same or improved model as the Engines and
Propellers and suitable for installation and use on the Airframe, and be in as
good an operating condition as, such Engines and Propellers, assuming such
Engines and Propellers were in the condition and repair as required by the
terms hereof immediately prior to such termination, and the Lessee will, at
its own expense and concurrently with such return, furnish the Lessor with a
xxxx of sale, in form and substance satisfactory to the Lessor, with respect
to each such engine or propeller together with evidence of the Lessee's title
to such engine or propeller (including, if requested, an opinion of the
Lessee's counsel) and shall take such other action as the Lessor may
reasonably request in order that such engine or propeller shall be duly and
properly titled in the name of Lessor, and upon passage of title to such
engine or propeller to the Lessor, such engine or propeller shall be deemed to
be an Engine or Propeller for all purposes of this Lease. Upon full
compliance with the terms of this Section, the Lessor will transfer to the
Lessee the Lessor's interest in any Engine or Propeller replaced by an engine
or propeller pursuant to the preceding sentence without any representation,
warranty or recourse of any kind whatsoever, express or implied other than a
warranty of no Liens of the type described in Article 14 (ii) .
16.5 Storage. Upon any expiration or termination of this Lease
for the Aircraft, at the written request of the Lessor, the Lessee will assist
the Lessor in arranging outdoor storage for the Aircraft at the airport where
the Aircraft is returned for a period not exceeding 60 days at the cost of the
Lessor. The Lessee will maintain in effect during such storage period
insurance covering the Aircraft pursuant to Section 12.2 hereof to the extent
such insurance is available at reasonable commercial rates and in amounts and
against such risks as would be customarily carried in similar circumstances by
a reasonably prudent lessor, with such insurance being paid for by Lessor.
Lessee shall be responsible, at Lessor's expense, for preparing the Aircraft
for storage, maintenance during the storage period and for returning the
Aircraft to service upon the request of Lessor.
16.6 Special Markings. Upon the termination or expiration of
this Lease for an Aircraft, the Lessee shall, at its cost, remove from the
exterior of the Aircraft all insignias. This provision will not require the
Lessee to strip or repaint the Aircraft, but shall require that Lessee cause
areas where insignias have been removed to be refinished to match adjacent
areas.
16.7 Survival. The obligations of the Lessee to comply with the
terms of this Article 16 shall survive the expiration or other termination of
this Lease.
D-18
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