EXHIBIT 10.58
LEASE AGREEMENT
BETWEEN
WILMINGTON TRUST COMPANY,
AS OWNER TRUSTEE,
LESSOR
AND
ALOHA AIRLINES, INC.,
A DELAWARE CORPORATION,
LESSEE
DATED AS OF
AUGUST 4, 1999
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ONE BOEING MODEL 737-73A AIRCRAFT
MANUFACTURER'S SERIAL NUMBER 28499
TABLE OF CONTENTS
PAGE
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ARTICLE 1. DEFINITIONS...............................................1-1
ARTICLE 2. ACCEPTANCE UNDER LEASE....................................2-1
(a) Conditions Precedent......................................2-1
(b) Time of Delivery..........................................2-3
(c) Place of Delivery.........................................2-3
(d) Test Flight; Customer Walk-Around.........................2-3
(e) Change Orders.............................................2-3
(f) Development Changes.......................................2-4
(g) Use of Aircraft by Manufacturer...........................2-4
(h) Lessor Aircraft Modifications.............................2-4
ARTICLE 3. TERM AND RENT.............................................3-1
(a) Term......................................................3-1
(b) Basic Rent................................................3-1
(c) Security Deposit..........................................3-1
(d) Supplemental Rent.........................................3-2
(e) Payments on Business Days.................................3-2
(f) Place of Payment..........................................3-2
(g) Prohibition Against Setoff, Counterclaim, Etc. ...........3-2
ARTICLE 4. REPRESENTATIONS AND WARRANTIES............................4-1
(a) Lessor's Representations and Warranties...................4-1
(b) Lessee's Representations and Warranties..................4-2
ARTICLE 5. POSSESSION AND USE........................................5-1
(a) Possession................................................5-1
(b) Lawful Operations; Use....................................5-1
(c) Maintenance...............................................5-2
(d) Registration and Insignia.................................5-3
ARTICLE 6. REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS..................6-1
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[MISSING PAGE -ii-]
(j) Insurance of Lessee's Interest...........................10-5
ARTICLE 11. MORTGAGES, LIENS, ETC....................................11-1
ARTICLE 12. RECORDATION AND FURTHER ASSURANCES.......................12-1
ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS...........................13-1
(a) Return...................................................13-1
(b) Inspection; Test Flight..................................13-1
(c) Flight Hours/Cycles/Time Requirements....................13-2
(d) General Return Requirements..............................13-11
(e) Records..................................................13-12
(f) Technical Acceptance; Ferry Flight ......................13-12
(g) Aid in Disposition.......................................13-13
ARTICLE 14. EVENTS OF DEFAULT .......................................14-1
ARTICLE 15. REMEDIES.................................................15-1
ARTICLE 16. EXCUSABLE DELAY..........................................16-1
(a) General..................................................16-1
(b) Four (4) Months' Excusable Delay.........................16-1
(c) Consequence of Termination...............................16-1
(d) Failure to Terminate.....................................16-2
(e) Damage to or Destruction of Aircraft - Delivery Delay....16-2
(f) Termination Rights Exclusive.............................16-2
ARTICLE 17. MISCELLANEOUS............................................17-1
(a) Construction and Applicable Law..........................17-1
(b) Notices..................................................17-1
(c) Lessor's Right to Perform for Lessee.....................17-2
(d) Corporate Existence; Merger..............................17-2
(e) Training and Customer Support............................17-3
(f) Subject and Subordinate..................................17-3
(g) Assignment...............................................17-4
(h) Expenses.................................................17-4
(i) Survival.................................................17-4
(j) Integration..............................................17-5
(k) Federal Bankruptcy Code..................................17-5
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(l) Counterparts..............................................17-5
(m) Execution by Telecopy.....................................17-5
Schedule "1" ...........................................................S-1
Exhibit "A" ...........................................................A-1
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LEASE AGREEMENT
This Lease Agreement, dated as of August 4, 1999, is entered into by and
between Wilmington Trust Company, a Delaware banking corporation, with a place
of business at ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ acting not in its individual capacity but solely as Owner
Trustee (herein called "Lessor"), and Aloha Airlines, Inc., a Delaware
corporation, having its principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (herein called "Lessee")
RECITALS
Lessee desires to lease from Lessor and Lessor is willing to lease to
Lessee the Aircraft described herein upon and subject to the terms and
conditions of this Lease. In consideration of the mutual promise's herein,
Lessor and Lessee agree as follows:
TERMS AND CONDITIONS
ARTICLE 1. DEFINITIONS The following terms shall have the following
meanings and shall be equally applicable to both the singular and the plural
forms of the terms defined herein:
"Approved Maintenance Performer" means any maintenance performer
approved by the FAA and commonly recognized in the industry as a reputable
maintenance performer, or any other person agreed to from time to time in
writing by Lessor, including Air New Zealand Limited, of Christchurch, New
Zealand, Aviation Management Systems, Inc. or Goodyear, each of Phoenix,
Arizona, Spar Aerospace Limited, of Alberta, Canada, and ▇.▇. ▇▇▇▇▇▇▇▇ (formerly
known as Tramco), of Everett, Washington.
"Aircraft" means the Airframe to be leased hereunder, together with each
Engine initially installed on the Airframe when delivered and leased hereunder
(or any engine substituted for any such Engine pursuant to the terms of this
Lease), whether or not any of such initial or substituted Engines may from time
to time no longer be installed on the Airframe or on any other aircraft.
"Airframe" means (i) the Boeing Model 737-73A aircraft, excluding any
Engines or other engines that may be installed on such aircraft from time to
time, to be manufactured and sold pursuant to the Purchase Agreement and leased
by Lessor to Lessee hereunder and under a Lease Supplement; and (ii) any and all
Parts, so long as the same shall be incorporated in or installed on or attached
to the Airframe or so long as title thereto shall remain vested in Lessor in
accordance with the terms of Article 6 hereof after removal from the Airframe.
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"APU" means the auxiliary power unit installed in the Airframe on the
Delivery Date (or such auxiliary power unit as may be substituted therefor after
the Delivery Date in accordance with the requirements of this Lease).
"Basic Rent" for the Aircraft means the basic rent payable for the
Aircraft pursuant to Article 3(b) hereof (as supplemented by Schedule "1"
hereto).
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banking institutions are authorized by law to be closed in
the city of Honolulu, Hawaii, in the city of New York, New York, or other city
as may be designated by Lessor from time to time pursuant to Article 3(f).
"Certificated Air Carrier" means an air carrier certificated by the
Department of Transportation under Section 41102 of Title 49 of the United
States Code, or under similar provisions of any statute enacted in lieu thereof.
"Companion Lease" means the Lease Agreement of even date herewith
between Lessor and Lessee pursuant to which Lessor has agreed to lease to Lessee
another Boeing Model 737-73A aircraft,
"Country of Registration" means the United States of America.
"Cycle" means: (i) with respect to the Airframe, one take-off and
landing of the Airframe and (ii) with respect to an Engine or other engine or
any Part or part, one take-off and landing of the Airframe or other airframe on
which such Engine or other engine or Part or part is installed.
"Delivery Date" means the date of the Lease Supplement for the Aircraft,
which date shall be the same date the Aircraft is delivered to, and accepted by,
Lessee hereunder.
"Dollars" or "$" means lawful currency of the United States of America.
"Engine" means (i) each of the two CFM International Model CFM56-7B20
engines (to be upgraded to CFM56-7B24 engines prior to or promptly following
delivery) specified by manufacturer's serial numbers in the Lease Supplement and
installed on the Airframe on the Delivery Date therefor (or an engine which may
from time to time be substituted for such an Engine pursuant to Article 9(b)
hereof), whether or not from time to time thereafter no longer installed on the
Airframe or installed on any other aircraft and (ii) any and all Parts, so long
as the same shall be incorporated in or installed on or attached to such Engine
(or engine) or so long as title thereto shall remain vested in Lessor in
accordance with the terms of Article 6 hereof after removal from such Engine (or
engine).
"Equipment" means, as the context may require, the Aircraft, Airframe
and Engines then leased hereunder.
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"Event" means an event or occurrence which, with the passing of time
and/or the giving of notice, would constitute an Event of Default.
"Event of Default" means any of the events referred to in Article 14
hereof.
"Event of Loss" with respect to any Item of Equipment means any of the
following events with respect to such Item of Equipment: (a) loss of such Item
of Equipment or the use thereof due to theft or disappearance for a period in
excess of thirty (30) days, or destruction, damage beyond economic repair or
rendition of such Item of Equipment permanently unfit for normal use for any
reason whatsoever; (b) any loss of or damage to such Item of Equipment which
results in an insurance settlement with respect thereto on the basis of a total
loss, or a constructive or compromised total loss; (c) the condemnation,
confiscation or requisition of title to or use of such Item of Equipment, other
than a requisition for use of such Item of Equipment by the Government of the
Country of Registration of the Aircraft for a period of less than sixty (60)
days; (d) as a result of any rule, regulation, order, or other action by the FAA
or other governmental body having jurisdiction, the use of such Item of
Equipment in the normal course of air transportation of persons shall have been
prohibited for a period of six consecutive months; or (e) any other deprivation
or seizure of such Item of Equipment for a period of more than sixty (60) days.
An Event of Loss to the Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the Airframe of the Aircraft.
"Excusable Delay" shall have the meaning set forth in Article 16 hereof.
"FAA" means, as the context may require or permit, the United States
Federal Aviation Administration, the Department of Transportation, the
Administrator of the Federal Aviation Administration, and any person,
governmental department, bureau, commission or agency succeeding to the
functions of any of the foregoing.
"FAR" means the United States Federal Aviation Regulations issued by the
FAA pursuant to the United States Transportation Code of 1994, as amended or
supplemented from time to time.
"Flight Hour" means: (i) with respect to the Airframe, each hour or part
thereof which elapses from the time the wheels of the Airframe leave the ground
on take-off to the time when the wheels of the Airframe touch the ground on
landing, and (ii) with respect to an Engine or other engine or any Part or part,
including the APU, each hour or part thereof which elapses from the time the
wheels of the airframe, whether or not the Airframe leased hereunder, on which
such Engine or other engine or Part or part is installed, leave the ground on
takeoff to the time when the wheels of such airframe touch the ground on
landing.
"Item of Equipment" means, as the context may require, the Aircraft,
Airframe or any Engine then leased hereunder.
"Incentive Rate" means three (3) percentage points above the prime or
base rate of interest charged by Citibank, N.A., in New York from time to time
as its prime or base
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commercial lending rate, but, if prohibited by applicable law, the maximum
contract rate permitted by applicable law.
"Landing Gear" means the landing gear (as per the Manufacturer's
definition, I.E., excluding actuating mechanisms, etc.) installed on the
Airframe on the Delivery Date (or such landing gear as may be substituted
therefor after the Delivery Date in accordance with the requirements of this
Lease).
"Lease Agreement," "this Lease," "this Agreement," "herein,"
"hereof," "hereunder" or other like words means this Lease Agreement as
the same may hereafter from time to time be supplemented, amended,
waived or modified pursuant to the applicable provisions hereof,
including, without limitation, supplementation hereof by one or more Lease
Supplements.
"Lease Supplement" means each Lease Supplement, substantially in the
form of Exhibit "A" hereto, to be entered into between Lessor and Lessee for the
purpose of leasing an Item of Equipment under and pursuant to the terms of this
Lease Agreement.
"Letter of Credit" means an irrevocable, transferable standby
letter of credit issued for the benefit of Lessor by a substantial banking
institution in Honolulu, Hawaii, Los Angeles or San Francisco, California,
or New York, New York, acceptable to Lessor, in form and substance satisfactory
to Lessor in its sole discretion.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
security interest or claim.
"Maintenance Program," as of any date of determination, means Lessee's
program of overhaul and maintenance for the Equipment, approved by the FAA and
which: (i) at all times complies in all material respects with the then latest
revision of the Manufacturer's Maintenance Planning Document and, if Lessee's
program of overhaul and maintenance is a block maintenance program, the then
latest revision of Appendix C Document No. D626A001 (or any restatement thereof)
applicable to the Aircraft as the result of the Flight Hours/Cycles ratio that
the Aircraft has been operated during the Term, (ii) incorporates the then
latest revision of the Manufacturer's Corrosion Prevention and Control Program
for aircraft of similar type as the Aircraft, and (iii) at all times complies in
all material respects with the then latest revision of the Engine manufacturer's
Engine Management Program.
"Manufacturer" means The Boeing Company, a Delaware corporation.
"Mortgage" means the mortgage agreement pursuant to which Lessor will
grant Mortgagee a mortgage interest in the Aircraft to secure repayment of the
financing obligation incurred by Lessor in connection with Lessor's purchase of
the Aircraft, as such mortgage agreement may be modified, amended or
supplemented from time to time.
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"Mortgagee" means the mortgagee under the Mortgage, and its successors
and assigns.
"Owner Participant" means Ansett Worldwide Aviation, U.S.A., a Nevada
general partnership, and its successors and assigns.
"Parts" means all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature,
including the APU and Landing Gear (but excluding whole Engines or engines), so
long as the same shall be furnished with, incorporated in, installed on, or
attached to the Aircraft, Airframe or any Engine or so long as title thereto
shall remain vested in Lessor in accordance with the terms of Article 6 hereof
after removal from the Aircraft, Airframe or such Engine.
"Participant" means Mortgagee, WTC, Owner Participant, and any other
person or entity that has or may hereafter acquire an ownership or mortgage
interest in the Aircraft, whether as owner trustee, mortgagee, indenture
trustee, owner participant, loan participant or otherwise.
"Purchase Agreement" means the Purchase Agreement No. 1909 dated as of
March 6, 1999, including Detail Specification D6-38808-7, Latest Revision, to
the extent the same relates to the sale and the purchase of the Aircraft, as
such Purchase Agreement has heretofore been, and may hereafter from time to time
be, supplemented, amended or modified.
"Rent" means Basic Rent and Supplemental Rent.
"Scheduled Aircraft Delivery" for the Aircraft means the scheduled month
of delivery for the Aircraft set forth in Article 2(b) hereof.
"Security Deposit" means the cash security or Letter of Credit deposited
with Lessor pursuant to Article 3(c) hereof.
"Stipulated Loss Value" for the Aircraft and for each Engine shall have
the meanings set forth in Schedule "1" hereto.
"Supplemental Rent" means any and all amounts, liabilities and
obligations which Lessee assumes or agrees hereunder to pay to Lessor or others,
including Stipulated Loss Value payments, but excluding Basic Rent.
"Term," in respect of an Item of Equipment, means the lease term for
which such Item of Equipment is leased hereunder pursuant to Article 3(a)
hereof.
"Trust Agreement" means the Trust Agreement dated as of August 2, 1999,
between WTC and Owner Participant, as amended or supplemented from time to time.
"WTC" means Wilmington Trust Company, a Delaware banking corporation,
and its successors and assigns.
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ARTICLE 2. ACCEPTANCE UNDER LEASE.
(a) CONDITIONS PRECEDENT. Lessor hereby agrees to lease to Lessee
hereunder, and Lessee hereby agrees to lease from Lessor hereunder, the
Aircraft, as further evidenced by the execution by Lessor and Lessee of a
Lease Supplement. Lessor's obligation to lease the Aircraft to Lessee hereunder
shall be subject to the following conditions precedent being complied with to
Lessor's satisfaction or being waived by Lessor in its discretion:
(i) PRE-DELIVERY. On or prior to the date specified below, Lessor shall
have received:
(1) within ten (10) days following the date this Lease is signed by
Lessee, a resolution of the Board of Directors of Lessee, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing or ratifying
the lease of the Aircraft hereunder and the execution, delivery and performance
of this Lease and the Lease supplement, together with an incumbency certificate
as to the person or persons authorized to execute and deliver such documents on
behalf of Lessee;
(2) on the signing of this Lease, Lessor shall have received the
Security Deposit described in Article 3(c) and Schedule "1" hereto; and
(3) on or prior to October 1, 1999, a copy of Lessee's Maintenance
Program for the Aircraft to enable Lessor to verify to its satisfaction that the
Maintenance Program complies in all material respects with the Boeing
Maintenance Planning Document and, if Lessee's maintenance program is a block
maintenance program, Appendix C No. D626AO01 Blocked Maintenance Program, latest
amendment, applicable to the Aircraft operations of Lessee (and Lessor agrees to
maintain the confidentiality of Lessee's Maintenance Program and not disclose
Lessee's Maintenance Program to any person other than Owner Participant, its
agents and representatives (who in turn shall maintain the confidentiality
thereof), or for purposes of bridging the Aircraft from Lessee's Maintenance
Program to another maintenance program).
(ii) DELIVERY. The following additional conditions shall be complied
with to Lessor's satisfaction (or be waived by Lessor) at or prior to the time
the Aircraft is ready for delivery from Lessor to Lessee hereunder or on such
earlier date as may be applicable to such condition:
(1) Lessor shall have received the following:
(A) the Lease Supplement for the Aircraft, duly authorized and
executed by Lessee and dated the Delivery Date for the Aircraft;
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(B) the first installment of Basic Rent for the Aircraft required
under Article 3(b), less the sum of $100,000 heretofore deposited by Lessee with
Lessor (which $100,000. deposit will be applied by Lessor towards the first
installment of Basic Rent);
(C) at least five (5) Business Days prior to the Delivery Date, a
certificate and an opinion signed by independent aircraft insurance brokers as
to the due compliance with the insurance provisions of Article 10 hereof;
(D) a favorable opinion of counsel for Lessee, addressed to
Lessor and dated the Delivery Date for the Aircraft, concerning the matters set
forth in clauses (i) through (vii), inclusive, of Article 4(b) hereof, and as to
such other matters as Lessor shall specify;
(E) at Lessee's expense, a favorable opinion of FAA counsel
concerning the proper filing for recordation of this Lease and the Mortgage with
the FAA to protect and perfect Lessor's and Mortgagee's interests in the
Aircraft;
(F) a copy of Lessee's air transport license and Lessee's air
carrier operating certificate, issued by the FAA, authorizing the operation of
Boeing 737-700 aircraft; and
(G) such other documents as Lessor may reasonably request.
(2) On the Delivery Date for the Aircraft the following statements
shall be true and Lessor shall have received a certificate signed by a duly
authorized officer of Lessee, dated such Delivery Date, stating that:
(A) the representations and warranties contained in Article 4(b)
hereof are true and accurate on and as of such 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);
(B) no event has occurred and is continuing, or would result from
the lease of the Aircraft, which constitutes an Event or an Event of Default;
and
(C) all necessary approvals, authorizations, consents, licenses,
certificates and orders of the FAA and any other governmental or regulatory
authority having jurisdiction with respect to the ownership, use or operation of
the Aircraft or the transactions contemplated by this Lease have been obtained,
and such approvals, authorizations, consents, licenses, certificates and orders
are in full force and effect and constitute sufficient authorization therefor.
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If Lessee fails for any reason to fulfill the conditions
contained in this Article 2 in a timely manner, other than as a result of
Lessor's failure to perform its obligations hereunder, the same shall constitute
an Event of Default under this Lease.
(b) TIME OF DELIVERY. Subject to the provisions of Article 16
hereof, the Aircraft shall be delivered to Lessee in compliance with Detail
Specification D6-38808-7, Latest Revision, and Lessee shall accept delivery of
the Aircraft hereunder upon tender of delivery of the Aircraft by Manufacturer
under the Purchase Agreement, currently scheduled during the second half of
October, 1999. Lessor shall give Lessee at least seven (7) days' advance notice
of the expected Delivery Date for the Aircraft. If, after the expiration of such
7-days' advance notice period, delivery of the Aircraft is delayed beyond such
expected Delivery Date due to Lessee's fault or responsibility, without limiting
Lessor's rights to terminate this Lease and to recover damages as the result of
Lessee's failure to take delivery of the Aircraft, Lessee shall promptly
reimburse Lessor for all costs and expenses incurred by Lessor as a result of
such delay, including but not limited to reasonable amounts for transportation,
storage, insurance, taxes, preservation or protection of the Aircraft, legal
expenses attributable to the delay, and Lessee shall also be obligated to pay
Lessor, on demand, an amount equal to the Basic Rent that would have been
payable in respect of the Aircraft hereunder if Lessee had taken delivery of the
Aircraft on such expected Delivery Date, prorated on a daily basis for each day
from and including such expected Delivery Date to the earlier of the date the
Aircraft is delivered to Lessee hereunder or the date this Lease is terminated
or canceled by Lessor as a result of Lessee's failure to take delivery of the
Aircraft in accordance with the terms and conditions of this Lease.
(c) PLACE OF DELIVERY. The Aircraft shall be delivered to Lessee
hereunder, at Lessee's expense, at an airport in or near Seattle, Washington, or
Las Vegas, Nevada, or, at Lessee's expense, at such alternate site as may be
mutually agreed upon in writing by Lessor and Lessee in an effort to minimize as
much as reasonably possible, consistent with law, any sales, use or similar tax
exposure to the parties relating to the place of delivery of the Aircraft.
(d) TEST FLIGHT; CUSTOMER WALK-AROUND. Lessee shall have the
right to participate in the test flight(s) and customer walk-around for the
Aircraft contemplated by the Purchase Agreement, and Lessor shall give Lessee as
much advance notice thereof as is practicable in order for Lessee to be able to
participate in such flight(s) and customer walkaround.
(e) CHANGE ORDERS. Subject to the terms of the Purchase
Agreement, the Detail Specification may, by mutual agreement between Lessee and
Lessor, be amended from time to time by change order or other written agreement,
which shall set forth in detail the particular changes to design, performance,
weight, balance, Scheduled Aircraft Delivery and Rent for the Aircraft and the
other provisions of this Agreement. Such change orders and other written
agreements shall be signed on behalf of Lessee and Lessor by their respective
duly authorized representatives.
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(f) DEVELOPMENT CHANGES. The Detail Specification also may be
revised by Manufacturer without Lessee's consent to incorporate development
changes if such changes do not affect Lessor's cost, or adversely affect the
Scheduled Aircraft Delivery, guaranteed weight or guaranteed performance of the
Aircraft or interchangeability or replaceability requirements under the
Detail Specification. Development changes are changes deemed necessary to
correct defects, improve the Aircraft, prevent delay, or insure compliance with
the Purchase Agreement. Lessor shall notify Lessee of all changes made in the
Detail Specification pursuant to this Article 2(f) by furnishing to Lessee
revised pages for the Detail Specification.
(g) USE OF AIRCRAFT BY MANUFACTURER. Lessee agrees that
Manufacturer may use the Aircraft to be leased hereunder for flight tests prior
to delivery if such flight tests are permitted under the Purchase Agreement.
Lessee shall accept delivery of the Aircraft used for ffight tests in
accordance with this Article 2(g) without any reduction in the Rent for
depreciation or wear and tear resulting therefrom.
(h) LESSOR AIRCRAFT MODIFICATIONS. Prior to the Delivery Date, if
consistent with Manufacturer's and vendor lead-time constraints, but otherwise
as promptly following the Delivery Date as is consistent with modification
facility and vendor lead-time constraints, Lessor shall cause the Detail
Specification for the Aircraft to be amended at Lessor's cost to: (i) increase
the thrust of the Engines to 24,000 lbs., (ii) increase the MTOW to 154,500
lbs., and (iii) configure the cabin interior to a two-class layout of 12 first
class seats and 112 economy class seats. Lessor shall be responsible for
coordinating the completion and certification of the modifications referred to
in clauses (i), (ii) and (iii), above. Lessee shall be entitled to have a
representative present during the course of the performance of such
modifications by such modification facility, and Lessee shall be entitled to
review the maintenance contract in respect thereof (but shall not have any
right to require modifications or additions thereto). The maintenance contract
shall include warranties that will be assigned to Lessee.
Promptly following the date this Lease is signed by Lessee,
Lessor will purchase a slimline (or a half G2) galley for installation by Lessee
at Lessor's expense (but charged to Lessor at Lessee's cost, i.e., no overhead
or profit) upon delivery by the manufacturer thereof. The estimated time for
delivery is seven months, but Lessor shall work with the manufacturer of the
galley in an effort to improve such delivery time. Lessor also agrees to
purchase a drop down LCD video system for installation by Lessee at Lessor's
expense (but charged to Lessor at Lessee's cost, i.e., no overhead or profit)
upon delivery by the manufacturer thereof. The estimated time for delivery is
ten months, but Lessor shall work with the manufacturer of the video system in
an effort to improve such delivery time. Further, Lessor will cause the
Manufacturer or the modification facility that configures the interior seating
referred to in the preceding paragraph to install wiring and other necessary
provisions for the video system during the interior modification, to the extent
reasonably practicable. Lessor shall be responsible for coordinating the
completion and certification of the galley and video system installation.
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Lessee shall be entitled to an abatement of Basic Rent, prorated
on a daily basis, but not to exceed an aggregate of fifteen (15) days, for each
full day that the Aircraft cannot be operated by Lessee solely as the result of
the required grounding of the Aircraft to incorporate the modifications referred
to in this Article 2(h). Lessee agrees to use its best efforts to minimize such
downtime by performing the modifications in a continuous and efficient manner.
All Parts removed from the Aircraft in connection with the
foregoing modifications as well as the parts and equipment required to perform
such modifications shall at all times be and remain the property of Lessor, and
Lessee shall make such Parts and equipment available to Lessor for disposition
by Lessor.
Except as specifically provided above, the Aircraft is delivered
to Lessee hereunder "AS-IS, WHERE-IS."
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ARTICLE 3. TERM AND RENT.
(a) TERM. Except as otherwise provided herein, the Aircraft shall be
leased to Lessee hereunder for a Term of ten (10) years, commencing on the
Delivery Date for the Aircraft.
(b) BASIC RENT. Lessee shall pay Lessor Basic Rent for the Aircraft
throughout the Term in 120 consecutive monthly in advance payments, due and
payable commencing on the Delivery Date for the Aircraft and on the like date in
each calendar month thereafter to and including the 120th calendar month, or if
such month has no such date, on the last Business Day of such month. The amount
of each monthly Basic Rent payment payable for the Aircraft throughout the Term
shall be as specified in paragraph 2 of Schedule "I" hereto.
(c) SECURITY DEPOSIT. On the date this Lease is signed by Lessor and
Lessee, Lessee shall provide Lessor with the cash or letter of Credit Security
Deposit specified in paragraph 3. of Schedule "1" hereto to be held by Lessor as
security for performance of all Lessee's obligations hereunder and under the
Companion Lease. Lessee agrees to maintain the Security Deposit with Lessor for
the original amount thereof until all Lessee's obligations hereunder shall have
been fully performed. Lessor may commingle the cash Security Deposit with its
general funds.
In the event Lessee fails to take delivery of the Aircraft as provided
herein or if any other Event of Default occurs and is continuing or shall result
in the termination or cancellation of this Lease by Lessor, in addition to any
other rights or remedies Lessor may have hereunder or under the Companion Lease,
Lessor shall be entitled, at its option, to draw on the Letter of Credit, if
any, for the full amount thereof or for any portion thereof as Lessor shall
elect, and apply all or any proceeds thereof, or, as the case may be, all or any
portion of the cash Security Deposit towards any or all amounts due under this
Lease or the Companion Lease, whether such amounts due constitute Basic Rent
payments hereunder or thereunder, damages for breach of this Lease or the
Companion Lease, or other Rent payments hereunder or thereunder. If at the time
the Letter of Credit, if any, is drawn upon Lessor shall not have finally
determined the full amount to become payable hereunder and under the Companion
Lease (including without limitation, the extent of its damages hereunder or the
damages under the Companion Lease), Lessor shall be entitled to retain the
unapplied portion of the cash Security Deposit or the unapplied proceeds of the
Letter of Credit, as the case may be, until such time as such final
determination has been made and full and final payment thereof has been received
(and Lessor agrees to use reasonable efforts to make prompt determination of the
full amount payable hereunder and under the Companion Lease).
Upon full performance by Lessee of all its obligations hereunder, and
provided no Event or Event of Default shall have occurred and be continuing,
Lessor shall promptly return the Security Deposit to Lessee.
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(d) SUPPLEMENTAL RENT. Lessee also agrees to pay to Lessor, or to
whomsoever Lessor shall direct in writing, any and all Supplemental Rent
promptly as the same shall become due and owing, and in the event of any failure
on the part of Lessee to pay any Supplemental Rent, Lessor shall have all the
rights, powers and remedies provided for herein, by law or otherwise, as in the
case of non-payment of Basic Rent. Lessee will also pay to Lessor, as
Supplemental Rent, on demand, interest at the Incentive Rate on any part of any
Basic Rent not paid when due and on any other payment of Supplemental Rent not
paid when due or demanded by Lessor in accordance with the terms hereof for the
period for which the same shall become due until the same shall be paid. Such
interest will accrue on a day to day basis.
(e) PAYMENTS ON BUSINESS DAYS. If any date on which a payment of Rent
becomes due and payable is not a Business Day, the Rent payment otherwise due
and payable on such date shall be due and payable on the immediately succeeding
Business Day.
(f) PLACE OF PAYMENT. All Rent shall be payable in Dollars, in
immediately available funds, not later than 11:00 a.m., New York City time,
on the due date thereof, at the office of Citibank, N.A., 21st Floor, Zone 1,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ABA No. ▇▇-▇▇▇▇▇▇▇ (CHIPS ID
0008), for credit to the account of Ansett Worldwide Aviation, U.S.A.,
Account No. ▇▇▇▇▇▇▇▇, or at such other location or account as Lessor shall
from time to time designate in writing. Rent payments payable hereunder
shall be deemed to have been paid only at the time actually credited to
Lessor's account referred to above. All interest and other payments
payable hereunder that are pro-rated on an annualized or other periodic
basis shall be calculated on the basis of a year consisting of 360 days and
twelve 30 day months.
(g) PROHIBITION AGAINST SETOFF, COUNTERCLAIM, ETC. Lessee's obligation
to pay Rent hereunder shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation: (i) any setoff,
counterclaim, recoupment, defense or other right which Lessee may have against
Lessor, Manufacturer, any Participant or any other person for any reason
whatsoever, (ii) any defect in the title, airworthiness, condition, design,
operation, or fitness for any particular purpose or for use, or any damage to or
loss or destruction, of the Aircraft, or any interruption or cessation in the
use or possession thereof by Lessee for any reason whatsoever, (iii) any
insolvency, bankruptcy, reorganization or similar proceedings by or against
Lessor, Lessee, Manufacturer, any Participant or other person, or (iv) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
Lessee hereby waives, to the extent permitted by applicable law, any
and all rights which it may now have or which may at any time hereafter be
conferred upon it by statute or otherwise to terminate, cancel, quit, or
surrender this Lease or the Aircraft or to reject or revoke acceptance of the
Aircraft, or to any abatement, suspension, deferment or reduction of Rent or the
performance of any other obligations, except in accordance with the express
terms hereof.
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For the avoidance of doubt, nothing in this Article 3(g) shall be
construed Io prevent Lessee from commencing legal proceedings against Lessor to
recover damages from Lessor for the breach by Lessor of any of its obligations
under this Lease.
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES
(a) LESSOR'S REPRESENTATIONS AND WARRANTIES. THE AIRCRAFT IS DELIVERED
AND LEASED HEREUNDER "AS-IS, WHERE-IS" AND NEITHER LESSOR NOR ANY PARTICIPANT
NOR ANY OF THEIR RESPECTIVE OFFICERS DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY GUARANTY,
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, CONFORMITY TO THE PROVISIONS OF THE PURCHASE AGREEMENT
DESCRIPTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR
PURPOSE OF ANY ITEM OF EQUIPMENT OR ANY PART THEREOF, OR ANY MODIFICATION MADE
PURSUANT To ARTICLE 2(h) HEREOF, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE EQUIPMENT OR ANY PART THEREOF OR AS TO ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE
EQUIPMENT OR ANY PART THEREOF, OR ANY. MODIFICATION MADE PURSUANT TO ARTICLE
2(h) HEREOF, AND LESSEE HEREBY WAIVES ALL WARRANTIES9, GUARANTEES, RIGHTS AND
REMEDIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY OBLIGATION OR
LIABILITY OF LESSOR OR ANY PARTICIPANT WITH RESPECT TO ANY IMPLIED WARRANTY OF
MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE
OF DEALING, USAGE OF TRADE, ANY IMPLIED WARRANTY OF FITNESS AND ANY DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE, OR NOT ARISING FROM
THE NEGLIGENCE BUT, AS TO LESSOR OR A PARTICIPANT, EXCLUDING GROSS NEGLIGENCE
AND WILLFUL MISCONDUCT OF LESSOR OR SUCH PARTICIPANT, AS THE CASE MAY BE, AND
ANY RISKS WITH RESPECT THERETO ARE HEREBY ASSUMED BY LESSEE, except that Lessor
represents to Lessee that:
(i) Lessor has full power, authority and legal right to enter into and
perform its obligations under this Lease.
(ii) This Lease has been duly authorized by all necessary action on
the part-of Lessor.
(iii) Neither the execution and delivery by Lessor of this Lease nor
the performance by Lessor of any of the transactions contemplated hereby require
the consent, approval, order or authorization of, or registration with, or the
giving of notice to, the FAA or any other domestic or foreign governmental
authority.
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(iv) This Lease has been duly executed and delivered by Lessor and
constitutes, and the Lease Supplement when executed and delivered by Lessor will
constitute, legal, valid and binding obligations of Lessor, enforceable in
accordance with their terms.
Provided no Event or Event of Default has occurred and is continuing,
Lessor agrees to assign or otherwise make available to Lessee, without
representation, warranty or recourse of any kind, express or implied, such
rights as Lessor may have with respect to the Equipment under any warranty,
service policy or product support plan of Manufacturer or any subcontractor,
vendor or supplier of any Equipment, or part thereof, to the extent the same
legally may be assigned or otherwise made available to Lessee.
THE WARRANTIES OF LESSOR SET FORTH IN THIS ARTICLE 4 ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER WARRANTIES OF LESSOR OR ANY PARTICIPANT, INCLUDING FITNESS
FOR USE OR FOR A PARTICULAR PURPOSE AND MERCHANTABILITY, WRITTEN OR ORAL,
EXPRESS OR IMPLIED.
(b) LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and
warrants that:
(i) Lessee is a corporation duly organized and existing in good
standing under the laws of Delaware, has full power, authority and legal right
to own its properties and to carry on its business as presently conducted and
to perform its obligations under this Lease, is a Certificated Air Carrier duly
authorized to act as such pursuant to the laws of the Country of Registration,
holds all licenses, certificates and permits from all governmental authorities
necessary for the conduct of its business, and is duly qualified to do business
as a corporation in good standing in each jurisdiction in which the failure to
be so qualified would have a materially adverse effect on Lessee or on its
ability to perform its obligations hereunder.
(ii) This Lease has been duly authorized by all necessary action on
the part of Lessee, does not require any approval of stockholders of Lessee, and
neither the execution and delivery hereof nor the consummation of the
transactions contemplated hereby nor compliance by Lessee with any of the terms
and provisions hereof does or will violate any provision of the articles of
incorporation or by-laws of Lessee or any law, rule, regulation, judgment, order
or decree of any government or governmental instrumentality or court having
jurisdiction over Lessee or any of its activities or properties, or does or will
result in any breach of, or constitute any default under, or result in the
creation of any Lien upon any property of Lessee under, any indenture, mortgage,
deed of trust, conditional sale contract, loan or credit agreement, or other
agreement or instrument to which Lessee is a party or by which Lessee or its
properties may be bound or affected.
(iii) Neither the execution and delivery by Lessee of this Lease
nor the performance by Lessee of any of the transactions contemplated hereby
require the consent, approval, order or authorization of, or registration with,
or the giving of notice to, the FAA or any other domestic or foreign
governmental authority, except for the approvals, authorizations
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and consents that have heretofore been obtained, true and complete copies of
which have been delivered to Lessor.
(iv) This Lease has. been duly executed and delivered by Lessee and
constitutes, and the Lease Supplement when executed and delivered by Lessee will
constitute, legal, valid and binding obligations of Lessee, enforceable in
accordance with their terms.
(v) Except for the registration of the Aircraft in the name of
Lessor and the filing for recordation of this Lease, the Lease Supplement and
the Mortgage with the FAA, no other registration and no further filing or
recording of this Lease, the Mortgage or any other instrument or document is
necessary or advisable under the laws of the Country of Registration or any
other jurisdiction in order to: (1) establish the priority, legality, validity
or enforceability of the obligations of Lessee under this Lease, or (2) fully
protect, establish and perfect Lessor's title to and interest in the Aircraft or
Lessor's rights and interests hereunder (including with respect to the Security
Deposit) as against Lessee and any third parties in any jurisdiction.
(vi) There are no suits or proceedings pending or, to the knowledge
of Lessee threatened in any court or before any regulatory commission, board
or other administrative governmental agency against or affecting Lessee which
may have a materially adverse effect on the financial condition or business of
Lessee except those described in writing to Lessor prior to the date hereof.
(vii) Lessee is a Certificated Air Carrier within the meaning of
Section 41102 of Title 49 of the United States Code and an air carrier holding
an air carrier operating certificate issued by the United States Secretary of
Transportation pursuant to chapter 447 of Title 49 of the United States Code,
and Lessor is entitled to the benefits and protections of Section 1110 of the
Bankruptcy Code (11 U.S.C. Section 1110) in respect of the Aircraft leased to
Lessee under this Lease.
(viii) Lessee has filed or caused to be filed all tax returns which
are required to be filed and has paid or caused to be paid all taxes shown to be
due or payable on said returns and on any assessment received by Lessee, to the
extent that such taxes have become due and payable.
(ix) The consolidated and consolidating financial statements
reflecting Lessee's balance sheet and statements of income and retained earnings
for the three fiscal years ended December 31, 1998 (copies of which have been
furnished to Lessor) are complete and correct and fairly set forth Lessee's
financial condition as of such dates and the results of its operations for such
periods, and since December 31, 1998, there has been no material adverse change
in such condition or operations.
(x) Lessee has My disclosed to Lessor all facts which Lessee knows
are material for disclosure to Lessor in the context of this Lease and the
transactions contemplated hereby, and Lessee knows of no facts which would
render any prior information furnished by or on behalf of Lessee to Lessor
inaccurate or misleading.
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ARTICLE 5. POSSESSION AND USE.
(a) POSSESSION. Subject to the right of Lessee to deliver possession of
any Item of Equipment to the manufacturer thereof for testing or other similar
purposes or to any organization for service, repair, maintenance or overhaul
work on such Item of Equipment or any part thereof or for alterations or
modifications in or additions to such Item of Equipment to the extent required
or permitted by the terms of Article 6 hereof, LESSEE SHALL NOT SUBLEASE, ASSIGN
OR OTHERWISE TRANSFER OR RELINQUISH POSSESSION OR CONTROL OF ANY ITEM OF
EQUIPMENT, OR ANY PART THEREOF, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR,
which consent will not be unreasonably withheld (provided that if Lessee seeks
consent from Lessor for a proposed sublease, Lessee shall be responsible
(whether or not Lessor consents to the proposed sublease) for all expenses,
including attorneys' fees, incurred by Lessor in connection with assessing or
implementing the proposed sublease, and any such sublease shall be and be
expressly made subject and subordinate to this Lease and the Mortgage and all
Lessor's rights and remedies hereunder and Mortgagee's rights under the
Mortgage).
(b) LAWFUL OPERATIONS; USE. Lessee will not permit any Item of
Equipment to be maintained, used or operated in violation of any law, rule,
regulation, airworthiness directive or order of any government or governmental
authority having jurisdiction (domestic or foreign, including, without
limitation, any United States law, rule or regulation governing United States
manufactured or owned aircraft), or in violation of any airworthiness
certificate, license or registration relating to any Item of Equipment issued by
any such authority. In the event that any such law, rule, regulation,
airworthiness directive, order, certificate, license or registration requires
addition to or modification or alteration of the Equipment, Lessee shall conform
therewith at its expense and shall maintain the same in proper condition for
operation under such laws, rules, regulations, airworthiness directives, orders,
certificates, licenses or registrations. Lessee will not cause or permit any
Equipment to be flown or transported to any airport or country if so doing would
cause Lessor or any United States owner of such Equipment to be in violation of
United States laws, rules, regulations or decrees. Without limiting the
foregoing, Lessee shall use the Equipment solely in its commercial operations
for which it is duly licensed.
Lessee shall ensure that the Aircraft is at all times operated by, and
under control of, qualified and duly licensed pilots employed by Lessee, with
proper ratings; provided, however, qualified pilots that are contracted to
Lessee, but are not employees of Lessee, may conduct ferry flights and
maintenance test flights of the Aircraft. Lessee agrees not to cause or permit
any person under any circumstance to cause the Aircraft or any Engine to be (i)
operated or used for any purpose for which such Item of Equipment was not
designed and reasonably suited, or (ii) operated or used at any time for any
illegal purpose or in any illegal manner.
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Lessee further agrees that it will not use or permit the use of the
Aircraft for tile carriage of: (i) whole animals, living or dead, except in the
cargo compartments according to I.A.T.A. regulations, and except domestic pet
animals carried in a suitable container to prevent the escape of any liquid and
to ensure the welfare of tile animal; (ii) acids, toxic chemicals, other
corrosive materials, explosives, nuclear fuels, nuclear wastes, or any nuclear
assemblies or components, except as permitted for cargo under the "Restriction
of Goods" schedule issued by I.A.T.A. from time to time and provided that all
the requirements for packaging or otherwise contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could reasonably be
expected to cause damage to the Aircraft and which would not be adequately
covered by the insurances maintained in accordance with Article 10 hereof; or
(iv) any illegal item or substance.
(c) MAINTENANCE. Lessee, at its own cost and expense, shall: (i)
service, repair, maintain, modify, overhaul and test, or cause the same to be
done to, each Item of Equipment leased hereunder (A) so as to keep such Item of
Equipment in the same condition and appearance as when delivered to Lessee
hereunder (after giving effect to the modifications referred to in Article 2(h)
hereof), ordinary wear and tear from normal flight operations excepted, and in
good operating condition, (B) so as to keep the Aircraft in the condition as may
be necessary to permit the airworthiness certificate for the Aircraft to be
maintained under the United States Transportation Code of 1994, as amended, and
to be operated under FAR Part 121, and (C) in strict compliance with Lessee's
Maintenance Program, a true and complete copy of which has heretofore been or
will promptly be delivered by Lessee to Lessor (and Lessee agrees not to
materially modify or otherwise vary or permit the same to be done to such
Maintenance Program unless required by law or unless otherwise agreed to by
Lessor); (ii) maintain all records, logs and other materials required by the FAA
to be maintained with respect to such Equipment; and (iii) promptly furnish to
Lessor such information as may be requested by Lessor in writing to enable
Lessor or any Participant to file any reports required to be filed by Lessor or
such Participant with any governmental authority because of Lessor's or such
Participant's interest in the Equipment. Lessee shall ensure that its
Maintenance Program at all times complies in all material respects with the then
latest revision of the Boeing Maintenance Planning Document and, if Lessee's
Maintenance Program is a block maintenance program, the then latest revision of
Appendix C Document No. D626AO01 (or restatement thereof) applicable to the
Aircraft as the result of the Flight Hours/Cycles ratio that the Aircraft has
been operated during the Term and with the then latest revision of the Engine
manufacturer's Engine Management Program. All deficiencies revealed by any
inspection of the Equipment by Lessee, Lessor or any of Lessee's maintenance
providers shall be promptly corrected by proper cleaning, sealing, repairing,
replacement, overhaul, modification and adjustment, and Lessee shall ensure that
only FAA-approved parts and materials are installed or used on the Aircraft.
If the Aircraft, any Engine or any Part is out of revenue service
(except for the active performance of maintenance, repair or overhaul
procedures), the Aircraft, such Engine or such Part shall be properly and safely
stored in accordance with accepted industry and manufacturer specifications and
procedures. Lessee shall notify Lessor promptly of all details relating to any
loss, damage or destruction to the Aircraft, or any part thereof, that
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affects the airworthiness of the Aircraft, and any loss, theft, damage or
destruction to the Aircraft, or any part thereof, exceeding the sum of
$100,000.
Without limiting any of the foregoing, Lessee will maintain and use,
and cause the Equipment to be maintained and used, in the same manner and with
the same care as used by Lessee with respect to similar equipment owned or
operated by Lessee. Further, Lessee agrees that it will not nor will it permit
anyone to discriminate against the Equipment (as compared to other equipment of
the same type owned or operated by Lessee) with respect to its use, operation or
maintenance in contemplation of the expiration or termination of this Lease
Agreement, other than the withdrawal of the Equipment from use and operation as
is necessary to prepare the Equipment for return to Lessor upon such expiration
or termination. To that end, without limitation, Lessee agrees to incorporate
in the Aircraft all Manufacturer, Engine manufacturer and other vendor
optional/recommended service bulletins that Lessee schedules, within the Term,
to incorporate in at least one-third (1/3) of Lessee's fleet of similar
aircraft. For the avoidance of doubt, Boeing 737-200 aircraft will not be
considered aircraft similar to the Aircraft.
Lessee agrees that it will not discriminate against the Engines with
respect to performance restoration build standards, and that it will not remove
any Engine or Part from the Aircraft prior to expiration of the Term to avoid
overhaul, refurbishment, replacement, etc., thereof in connection with the
return of the Aircraft (and such Engine or Part) at the end of the Term.
(d) REGISTRATION AND INSIGNIA. Lessee agrees that it will, on behalf of
Lessor and at Lessee's expense, forthwith upon delivery of the Aircraft, cause
the Aircraft to be duly registered, and at all times thereafter to remain duly
registered, in accordance with Title 49 of the United States Code, as amended.
Lessor agrees that Lessor or any other person who owns the Aircraft from time to
time will be a "citizen of the United States" within the meaning of Title 49 of
the United States Code, as amended (or shall otherwise be qualified to register
the Aircraft without restricting Lessee's operational use of the Aircraft), so
that the Lessee will be able to comply with the requirements of this Article
5(d).
Upon delivery of the Aircraft, unless Lessor otherwise directs, Lessee
shall fasten or cause to be fastened and maintained in the cockpit of the
Aircraft adjacent to the airworthiness certificate for the Aircraft and on each
Engine, in a prominent location, metal nameplates satisfactory to Lessor bearing
the name of Lessor, as owner, and Mortgagee, as mortgagee, of the Aircraft.
Except as above provided, Lessee will not allow the name of any person, firm or
corporation to be placed on the Airframe or any Engine as a designation that
might be interpreted as a Lien thereon; provided, however, Lessee may cause the
Airframe or any Engine to be lettered in an appropriate manner for convenience
of identification of the interest of Lessee therein.
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ARTICLE 6. REPLACEMENT AND, POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS.
(a) REPLACEMENT OF PARTS. Lessee, at its own cost and expense, will
promptly replace all Parts which may from time to time become unserviceable,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition, in
the ordinary course of maintenance, service, repair, overhaul or testing, Lessee
may at its own cost and expense remove any Parts, whether or not unserviceable,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that Lessee shall replace such
Parts as promptly as practicable and in any event within sixty (60) days after
removal. All replacement parts shall be free and clear of all Liens and shall be
in as good operating condition as, and shall have a value, utility, modification
status and useful life at least equal to, the Parts replaced, assuming such
replaced Parts were in the condition and repair and had the value, utility,
modification status and useful life required to be maintained by the terms
hereof Additionally, all replacement parts shall have a current valid
"serviceable tag" of the manufacturer or maintenance repair facility providing
such parts to Lessee, identifying the manufacturer, vendor, part number, make,
model and serial number, as well as the accumulated hours or cycles and whether
such parts are new, serviceable or overhauled. No replacement part shall have
less hours and cycles remaining thereon until refurbishment or replacement than
the Part to be replaced. Lessee may temporarily replace any Part that has become
unserviceable, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use with a part that does not meet the
requirements of this paragraph if a complying part cannot be obtained within the
available ground time of the Aircraft, provided the original Part is
re-installed or the non-complying part is removed and replaced by a complying
part as soon as practicable and in any event within 60 days or, if earlier, on
the expiration or earlier termination of the Term. Except as provided in the
preceding sentence, Lessee shall ensure that no part that is a life-limited part
shall be installed on the Airframe or any Engine after the Delivery Date unless
such part is new or Lessee complete certified, back-to-birth records.
All Parts at any time removed from the Aircraft, Airframe or any Engine
shall remain the property of Lessor, no matter where located, until such time as
such Parts shall be replaced by parts which have been paid for by Lessee and
incorporated or installed in or attached to the Aircraft, Airframe or such
Engine in compliance with the requirements for replacement parts specified
herein. Immediately upon any replacement part becoming incorporated or installed
in or attached to the Aircraft, Airframe or an Engine as above provided, without
further act: (i) title to such replacement part shall thereupon vest in Lessor,
(ii) such replacement part shall become subject to this Lease and be deemed part
of the Aircraft, Airframe or such Engine, as the case may be, for all purposes
hereof to the same extent as the Part originally incorporated or installed in or
attached to the Aircraft, Airframe or such Engine, and (iii) title to the
removed Part shall thereupon vest in Lessee, free and
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clear of all rights of Lessor and the Participants (and persons lawfully
claiming through Lessor or the Participants), and shall no longer be deemed a
Part hereunder.
(b) POOLING OF PARTS. Any Part removed from the Airframe or an Engine
as provided in paragraph (a) of this Article may be subjected by Lessee to a
normal pooling arrangement customary in the airline industry entered into in
the ordinary course of Lessee's business with an air carrier approved by Lessor,
provided the part replacing such removed Part shall be incorporated or installed
in or attached to the Airframe or such Engine in accordance with paragraph (a)
of this Article as promptly as possible after the removal of such removed Part.
In addition, any replacement part when incorporated or installed in or attached
to the Airframe or any Engine in accordance with paragraph (a) of this Article
may be owned by an air carrier approved by Lessor subject to such a normal
pooling arrangement, provided Lessee, at its expense, as promptly thereafter as
possible either (i) causes title to such replacement part to vest in Lessor in
accordance with paragraph (a) of this Article by Lessee acquiring title thereto
for the benefit of, and transferring such title to, Lessor free and clear of all
Liens, or (ii) replaces such replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further replacement part owned by
Lessee free and clear of all Liens and causing title to such further
replacement part to vest in Lessor in accordance with paragraph (a) of this
Article.
(c) ALTERATIONS, MODIFICATIONS AND ADDITIONS. Lessee, at its own
expense, shall make such alterations and modifications in and additions to the
Equipment, and shall perform all alert service bulletins and service bulletins
that are mandated by airworthiness directives (and all service bulletins which
are required to be performed to maintain the warranties for the Equipment) as
may be issued from time to time, to meet the requirements of the Manufacturer,
the Engine manufacturer and the other vendors in respect of the Equipment and
the standards and airworthiness directives of the FAA or other governmental
authority having jurisdiction.
In addition, Lessee, at its own expense, may from time to time make
such alterations and modifications in and additions to each Item of Equipment as
Lessee may deem desirable in the proper conduct of its business, provided that
no such alteration, modification or addition: (i) materially and adversely
alters the specification, structure or performance of the Aircraft, (ii)
adversely affects the interchangeability or replaceability of Parts, (iii)
invalidates any warranties applicable to the Aircraft, or (iv) in any other way
diminishes the value, utility or useful life of any Item of Equipment or impairs
the condition or airworthiness thereof below the value, utility, useful life,
condition and airworthiness thereof immediately prior to such alteration,
modification or addition, assuming such Item of Equipment was then of the value,
utility and useful life and in the condition and airworthiness required to be
maintained by the terms of this Lease.
Title to all Parts incorporated or installed in or attached or added to
any Item of Equipment as the result of any alteration, modification or addition
shall, without further act, vest in Lessor; provided, however, that so long as
no Event or Event of Default shall have occurred and be continuing, at any time
during the Term, Lessee may remove any
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Part from such Item of Equipment, provided that (i) 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 of Equipment at the time
of the delivery thereof hereunder (after giving effect to the modifications
referred to in Article 2(h) hereof) or any Part in replacement of, or
substitution for, any such Part, (ii) such Part is not required to be
incorporated or installed in or attached or added to such Item of Equipment
pursuant to the terms of Article 5(b) or 5(c) hereof or the first sentence of
this paragraph (c), and (iii) such Part can be removed from such Item of
Equipment without causing any material damage thereto and without diminishing or
impairing the value, utility, useful life, condition or airworthiness which such
Item of Equipment would have had at such time had such alteration, modification
or addition not occurred. Upon the removal by Lessee of any such Part as above
provided, title thereto shall, without further act, vest in Lessee and such Part
shall no longer be deemed a Part hereunder. Any Part not removed by Lessee as
above provided prior to the return of the Item of Equipment to Lessor hereunder
shall remain the property of Lessor. In addition to the foregoing, if Lessee
makes an alteration, modification or addition to an Item of Equipment in
accordance with the second paragraph of this Article 6(c) (an "Original
Modification"), Lessee, at its own expense, may from time to time during the
Term, so long as no Event or Event of Default shall have occurred and be
continuing, remove such Original Modification and restore such Item of Equipment
to its condition that it would have been in if such Original Modification had
not been made, provided that (i) after such restoration, such Item of
Equipment shall be in compliance with the requirements of Article 5(b) and
Article 5(c) and the first sentence of this paragraph, (ii) such restoration
shall comply with the requirements of subparagraphs (ii) and (iii) of the second
paragraph of this Article 6(c), and (iii) such restoration is performed without
causing any material damage to the Equipment and without diminishing or
impairing the value, utility, useful life, condition or airworthiness which the
Equipment would have had if the Original Modification had not been made.
In any event, neither Lessor nor any Participant shall bear any
liability or cost for any alteration, modification, addition, or for any
grounding or suspension of certification of any Item of Equipment or for loss of
revenue.
(d) TRANSFER OF ENGINES WITHIN LESSEE'S FLEET. So long as no Event or
Event of Default shall have occurred and be continuing, Lessee may install an
Engine on an airframe leased to Lessee or owned by Lessee subject to a security
agreement or mortgage or purchased by Lessee subject to a conditional sale
agreement, provided that (i) such airframe is (and only for so long as it
continues to be) free and clear of all Liens, except the rights of the parties
to the lease, security agreement, mortgage or conditional sale agreement
covering such airframe, (ii) prior to such installation, Lessor shall have
received from the lessor, secured party, mortgagee or conditional seller of such
airframe a written agreement (which may be the lease, security agreement,
mortgage or conditional sale agreement covering such airframe), in form and
substance reasonably satisfactory to Lessor, whereby such lessor, secured party,
mortgagee or conditional seller expressly agrees that neither it/they nor
its/their successors or assigns will acquire or claim any right, title or
interest in any Engine by reason of such Engine being installed on such airframe
at any time while such Engine is subject to this Lease or is owned by Lessor,
and (iii) Lessee maintains insurance in respect of the Engine while it is
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installed on such airframe for the agreed value specified in paragraph 1 of
Schedule "1" hereto and otherwise on terms acceptable to Lessor in its
reasonable discretion.
Lessor hereby agrees for the benefit of any lessor of any engine leased
to Lessee or any secured party or mortgagee of an engine owned by Lessee subject
to a security interest or mortgage granted by Lessee or any conditional seller
of an engine purchased by Lessee subject to a conditional sale agreement that
neither Lessor nor its successors or assignees will acquire or claim, as against
such lessor, secured party, mortgagee or conditional vendor, or its assignee,
any right, title or interest in any engine owned by such lessor under such lease
or subject to a security interest, mortgage or conditional sale interest in
favor of such secured party, mortgagee or conditional seller under such
security agreement, mortgage or conditional sale agreement as the result of such
engine being installed on the Airframe at any time while such engine is subject
to such lease, security interest, mortgage or conditional sale agreement.
Nothing in this Article 6(d) shall diminish or otherwise affect any of
Lessee's obligations otherwise required to be performed or observed by it under
this Lease.
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ARTICLE 7. INSPECTION; FINANCIAL INFORMATION; RECORDS.
(a) INFORMATION AND INSPECTION. During the Term of this Lease, Lessee
shall furnish to Lessor such additional information concerning the location,
condition, use and operation of each Item of Equipment as Lessor may reasonably
request in writing, and Lessee shall permit any person designated by Lessor in
writing, at Lessor's expense, to inspect each Item of Equipment, its condition,
use, and operation and the records maintained in connection therewith, and to
visit and inspect the facilities and to discuss the business affairs and
finances of Lessee with the principal officers of Lessee, to the extent the same
relate to Lessee's ability to perform its obligations hereunder, all at such
reasonable times and as often as Lessor may reasonably request; provided,
however, if an Event of Default has occurred and is continuing or as a result of
such inspection Lessor becomes aware that an Event or Event of Default has
occurred and is continuing then Lessee shall reimburse Lessor for all costs and
expenses incurred in conducting such inspection. Any inspection of the Aircraft
shall be a visual walkaround inspection that may include going on-board the
Aircraft, but shall not include opening any panels, bays or the like (except at
a time during a scheduled maintenance visit in which such panels, bays or the
like are scheduled to be opened). Lessee shall also provide Lessor with at least
thirty (30) days' prior written notice of the date on which the Airframe shall
undergo any major check (i.e., any "C" check or above). Neither Lessor nor any
Participant shall have any duty to make any such inspection and shall not incur
any liability or obligation by reason of not making such inspection.
(b) FINANCIAL AND OTHER INFORMATION. Lessee also agrees to furnish
Lessor with the following during the Term of this Lease:
(i) within sixty (60) days after the end of each quarter-fiscal
year of Lessee ending after the date of this Lease, the consolidated and
consolidating financial statements reflecting the balance sheet of Lessee,
prepared by it as of the close of the period ended, together with statements of
income and retained earnings of Lessee for such period;
(ii) within one hundred twenty (120) days after the end of each
fiscal year of Lessee, the consolidated and consolidating financial statements
reflecting the balance sheet and statements of income and retained earnings of
Lessee, as of the close of such fiscal year, setting forth in comparative form
the figures for the previous fiscal year, as prepared and certified by
independent public accountants, including their certificate and accompanying
comments;
(iii) together with the financial statements referred to in clause
(ii), a certificate signed by a principal officer of Lessee, to the effect that
such officer has reviewed the relevant terms of this Lease and has made, or
caused to be made under his supervision, a review of the transactions and
condition of Lessee during the accounting period covered by such financial
statements, and that such review has not disclosed the existence during such
accounting period, nor does such officer have any knowledge of the existence, as
at the date of
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such certificate, of any condition or event which constitutes an Event or an
Event of Default, or, if such condition or event which constitutes an Event or
an Event of Default existed or exists, specifying the nature and period of
existence thereof and what action Lessee has taken or is taking or proposes to
take with respect thereto; and
(iv) such other data and information as Lessor may from time to
time reasonably request in writing.
(c) REPORTS OF AIRCRAFT USE. Within fifteen (15) days following the
end of each calendar month throughout the Term, Lessee shall: (i) notify
Lessor of the number of Flight Hours and Cycles which have been accumulated on
the Airframe, each Engine, the Landing Gear and the APU, respectively, during
the preceding calendar month, and (ii) provide Lessor with details of: (A)
replacement of Engine, APU and Landing Gear (and the reason for such changes),
(B) major repairs, modifications, alterations and additions to an Item of
Equipment, and (C) service bulletins and airworthiness directives applicable to
and accomplished with respect to any Item of Equipment, in each case with
respect to such preceding calendar month.
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ARTICLE 8. INDEMNIFICATION BY LESSEE.
(a) GENERAL INDEMNITY. Lessee agrees to pay, and on demand to indemnify
and hold harmless, Lessor and each Participant, and their respective officers,
directors, employees, servants, agents, shareholders, affiliates, successors,
assigns and transferees (individually, an "Indemnitee"), 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, including, without
limitation, liability arising under any applicable environment, noise or
pollution control statute, rule or regulation), demands, suits, judgments,
causes of action and all legal proceedings, whether civil or criminal,
penalties, fines and other sanctions, and any costs and expenses incurred in
connection therewith, including attorney's fees, which may directly or
indirectly result from, relate to or arise out of the Purchase Agreement
(excluding, for the avoidance of doubt, claims by Manufacturer: (i) for a breach
of the Purchase Agreement prior to the delivery of the Aircraft thereunder,
(ii) based on provisions of the Purchase Agreement that have been redacted from
the copy of the Purchase Agreement provided to Lessee, and (iii) for payment of
the purchase price of the Aircraft) or this Lease or the condition, ownership,
manufacture, purchase, test flight, inspection, delivery, nondelivery,
acceptance, nonacceptance, rejection, import, export, registration, lease,
sublease, possession, control, storage, return, transportation, disposition, use
or operation of any Item of Equipment (except as to an Indemnitee for claims
that are the result of the gross negligence or willful misconduct of such
Indemnitee), or which may be caused by any malfunction or defect in any Item of
Equipment, latent or otherwise, arising from the material or any article used
therein or from the design, testing or use thereof or from any maintenance,
service, repair, overhaul, improvement, modification or alteration thereof,
including any modification made pursuant to Article 2(h) hereof, regardless of
when such defect shall be discovered, whether or not such Item of Equipment is
at the time in the possession of Lessee and wherever located.
Without limiting Lessee's liability under this Article 8(a), Lessee
hereby agrees to indemnify, reimburse and hold the Indemnitees harmless from any
and all liability, claims, demands, costs, charges and expenses, including
royalty payments and counsel fees, in any manner, whether directly or
indirectly, imposed upon or accruing against an Indemnitee because of the
manufacture, use or operation of any Item of Equipment or any design, article or
material therein or relating thereto, whether because of infringement of patent
or any other right. At Lessor's request, Lessee shall assume and conduct
promptly and diligently, at its sole cost and expense, the entire defense of
the Indemnitees against any such claim, and any claim, demand, suit or action
for which an Indemnitee as a buyer is required to assume liability, whether for
patent infringement or otherwise, under the Purchase Agreement.
Notwithstanding anything to the contrary contained in this Article
8(a), the indemnification provided for in this Article 8(a) shall only apply to
events or circumstances which either (i) occur prior to the expiration or sooner
termination of this Lease and return of the Aircraft pursuant to the terms
hereof, regardless of when asserted, or (ii) are caused by or
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attributable to acts or omissions of Lessee, or any of its officers, directors,
employees, servants, agents, contractors or affiliates.
(b) GENERAL TAX INDEMNITY. Lessee agrees that each payment of Rent
shall be free of all withholdings and deductions for or on account of taxes,
duties and any other charges of any nature whatsoever, present or future, unless
Lessee is required by operation of law or otherwise to withhold or deduct
amounts for or on account of any of the same, in which event, Lessee will pay
such additional amounts as Rent as will result in the receipt by Lessor on the
due date for payment thereof of the sums which would otherwise have been
receivable on such date had there been no such withholding or deduction. All
such withholdings and deductions shall be promptly paid by Lessee to the
relevant taxing authority and Lessee shall promptly furnish Lessor with evidence
of each such payment. The preceding portion of this paragraph shall not apply to
taxes, fees and other charges with respect to which Lessee is not obligated to
indemnify any Indemnitee pursuant to the remaining portion of this paragraph.
In addition, and not by way of limiting the foregoing, Lessee agrees to pay, and
on written demand to indemnify and hold harmless the Indemnitees from, all
license, recording and registration fees and all sales, use, personal property,
stamp, documentary, customs, excise, income, consumption, value added and other
taxes, levies, imposts, duties, assessments, charges and withholdings of any
nature whatsoever, together with any penalties, fines, additions and interest
thereon (collectively, "taxes, fees and other charges") imposed against an
Indemnitee, Lessee or any Item of Equipment or any part thereof by any
government or governmental subdivision or taxing authority (domestic or
foreign), upon or with respect to any Item of Equipment or any part thereof or
upon or with respect to the purchase, ownership, acceptance, delivery,
registration, leasing, subleasing, possession, use, operation, departure,
landing, maintenance, repair, modification, location, importation, exportation,
sale, return, storage or other disposition thereof, or upon or with respect to
the rentals, receipts or earnings arising therefrom or received with respect
thereto, or upon or with respect to this Lease or the Purchase Agreement
(excluding, however, any taxes (i) based on or measured by Lessor's net income,
gross receipts, capital, or excess profits which are payable by Lessor to (A)
the United States federal government, or (B) any state or local government or
other taxing jurisdiction in the United States other than Hawaii (provided,
however, Lessee shall be liable for such taxes if such taxes are taxes that
would not have been imposed but for the use, operation, registration or location
of any Item of Equipment within the jurisdiction of such taxing authority), or
(C) any other jurisdiction solely as the result of business or transactions
unrelated to this Lease, E.G., such taxes resulting solely from events or
circumstances other than the use, operation, registration or location of any
Item of Equipment or part thereof, or the location, activities or residency of
Lessee in such jurisdiction), unless, but only so long as, such taxes, fees and
other charges are being contested by Lessee or at Lessee's expense in good faith
and by appropriate proceedings, so long as, in Lessor's reasonable judgment,
such proceedings do not involve any danger of the sale, forfeiture or loss of
any Item of Equipment, or any interest therein.
If a claim is made against an Indemnitee or Lessee for any taxes, fees
and other charges for which Lessee is obligated to indemnify an Indemnitee, or
if notice is received by an Indemnitee or Lessee from a taxing authority that
such a claim is going to be
8-2
made, such Indemnitee or Lessee, as the case may be, shall promptly notify the
other. If requested by Lessee in writing within thirty (30) days after such
notification, Lessor shall or shall cause such Indemnitee, upon receipt of
indemnity reasonably satisfactory to it and at the expense of Lessee (including
without limitation, all costs, expenses, losses, legal and accounting fees and
disbursements, penalties and interest) in good faith to contest the validity,
applicability or amount of such taxes, fees and other charges in the forum
selected by such Indemnitee by (A) resisting payment thereof if practicable, or
(B) if payment is made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings; PROVIDED, HOWEVER, Lessor
shall not be required to take or to cause any Indemnitee to take any action to
contest a claim unless (1) Lessee provides Lessor, together with such written
request, with an opinion of independent tax counsel reasonably satisfactory to
Lessor both as to counsel and substance, to the effect that there is a
meritorious basis for such contest, (2) such action to be taken will not result
in the risk of an imposition of criminal penalties or, in Lessor's reasonable
judgment, any risk of any sale, forfeiture or loss of, or creation of any Lien
on any Equipment, or any interest therein, (3) no Event or Event of Default
shall have occurred and be continuing, (4) if such Indemnitee shall pay such tax
and seek a refund, Lessee has advanced the amount of such tax to such
Indemnitee with respect to such advance, (5) the amount of the taxes at issue
exceeds $15,000, and (6) Lessee shall have provided such Indemnitee with a
written acknowledgment of liability if and to the extent that the contest is not
successful. Upon written request of Lessee but subject to compliance with the
foregoing provisions of this paragraph, such Indemnitee shall allow Lessee to
prosecute such tax contest in its name (or, if possible, in the name of Lessee)
by granting an appropriate power of attorney or other authorization and such
other action as is reasonably necessary (and Lessee shall also reimburse such
Indemnitee for the costs and expenses, including reasonable attorneys fees,
incurred in connection with its monitoring such tax contest by Lessee), or, upon
written request of Lessee and at Lessee's expense, such Indemnitee shall consult
with Lessee regarding the tax contest and shall follow the reasonable directions
of Lessee as to the prosecution of the tax contest. If an Indemnitee shall
obtain a refund of all or any part of such taxes, fees and other charges paid by
Lessee, Lessor shall cause such Indemnitee to pay Lessee the amount of such
refund, after deducting all costs and expenses that were incurred by such
Indemnitee in connection therewith; provided that such amount shall not be
payable before such time as Lessee shall have made all payments and indemnities
then due hereunder. If in addition to such refund an amount representing
interest on the amount of such refund or an amount representing expenses or
attorneys fees is received, Lessee shall be paid such expenses, attorneys fees
and that proportion of such interest which is fairly attributable to taxes, fees
and other charges paid by Lessee prior to the receipt of such refund; provided,
however, that no amount shall be payable under this or the preceding sentence
during any period in which an Event or an Event of Default has occurred and is
continuing. In case any report or return is required to be made with respect to
any obligation of Lessee under or arising out of this Article 8(b), Lessee will
either make such report or return in such manner as will show the interests of
Lessor and the Participants in the Aircraft and send a copy of such report or
return to Lessor, or will notify Lessor of such requirement and make such report
or return in such manner as shall be reasonably satisfactory to Lessor. Upon
written request by Lessee and at Lessee's expense, Lessor and each Indemnitee
shall furnish to Lessee such information and documentation as is reasonably
necessary for Lessee to assess or
8-3
prosecute a tax contest, or to make a report or return, as described above,
provided, however, neither Lessor nor any Indemnitee shall be required to
provide Lessee with information that Lessor or such Indemnitee, in its sole and
absolute discretion, determines is confidential tax return information.
Notwithstanding the foregoing, Lessee shall have no obligation to
Lessor or any Indemnitee for any of the following:
(A) Taxes, fees or other charges arising out of any voluntary
transfer (including a transfer by way of security but excluding a transfer
following an Event of Loss or pursuant to the exercise of remedies in connection
with an Event of Default) or disposition (including a disposition by way of
security but excluding a disposition following an Event of Loss or pursuant to
the exercise of remedies in connection with an Event of Default);
(B) Taxes, fees or other charges attributable to any period after
the expiration of the Term and return of possession of the Airframe, the Engines
and the Parts to Lessor or its designee in compliance with the terms of this
Lease;
(C) Taxes, fees or other charges caused solely by a breach by an
Indemnitee of any of such Indemnitee's obligations in this Article 8(b);
(D) Taxes, fees or other charges caused solely by the gross
negligence or willful misconduct of such Indemnitee; or
(E) Taxes, fees or other charges based on or measured by the value
or principal amount of any loan or promissory note (or security therefor)
entered into by Lessor or an Indemnitee or anyone claiming an interest in the
Aircraft or any portion thereof through Lessor or an Indemnitee (other than
Lessee).
(c) AFTER-TAX NATURE OF INDEMNITY. Lessee further agrees that any
payment of indemnity made under this Lease by Lessee shall include any amount
necessary to hold the Indemnitees harmless on an after-tax basis from all taxes,
fees and other charges required to be paid with respect to such payment of
indemnity under the laws of any domestic or foreign governmental or taxing
authority, agency or subdivision. If an Indemnitee realizes a tax benefit
resulting from any item for which it has been indemnified by Lessee (whether
such tax benefit results from a deduction, credit, allocation or otherwise),
such Indemnitee shall promptly after realization pay to Lessee an amount equal
to the net value to such Indemnitee of such tax benefit (such payments not to
exceed in the aggregate the amount of the related indemnity paid by Lessee), but
not before Lessee shall have made all payments or provided all indemnities to
such Indemnitee required pursuant to this Article 8. If such Indemnitee loses
such tax benefit subsequent to any payment to Lessee with respect thereto,
Lessee shall indemnify such Indemnitee with respect to such loss pursuant to
this Article 8. If requested by Lessee, such Indemnitee shall provide, in
reasonable detail, a written explanation of the calculation upon which it based
its determination of the amount of the tax benefit; provided, however, such
Indemnitee shall not be required to provide Lessee with information that such
Indemnitee, in its sole and absolute discretion, determines is confidential Tax
return
8-4
information, provided that Lessee may require that an Indemnitee furnish all
relevant Information to a nationally recognized firm of certified public
accountants selected by such Indemnitee (which shall keep such information
confidential) to verify the accuracy of such Indemnitee's calculation, and the
determination of such firm of certified public accountants shall be binding on
such Indemnitee and Lessee as to the amount which Indemnitee is obligated to
pay to Lessee on account of the subject tax benefit. Lessee shall be responsible
for the fees and expenses of the firm of certified public accountants unless the
review discloses an error made by such Indemnitee exceeding the greater of
$15,000 or 10% of the amount of the subject tax benefit, as the case may be,
determined by such Indemnitee, in which case such Indemnitee shall pay such firm
of certified public accountants' fees and expenses.
(d) SURVIVAL OF INDEMNITIES. All of the obligations of Lessee under
this Article 8 shall continue in full force and effect notwithstanding the
expiration or sooner termination of this Lease and are expressly made for the
benefit of, and shall be enforceable by, the Indemnitees and their successors
and assigns.
(e) PERFORMANCE BY INDEMNITEES. For purposes of this Article 8, Lessor
shall cause all Indemnitees to perform their obligations as set forth in this
Article 8.
8-5
ARTICLE 9. DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION.
(a) EVENT OF LOSS WITH RESPECT TO AIRCRAFT. From the Delivery Date of
the Aircraft until the return thereof to Lessor in compliance with the
requirements of Article 13 hereof, Lessee shall bear all risks of loss or damage
to the Aircraft, no matter how occasioned and from every source or cause
whatsoever. Upon the occurrence of an Event of Loss with respect to the Airframe
or the Airframe and any Engines or engines then installed thereon, Lessee shall
give Lessor prompt written notice thereof and shall pay or cause to be paid to
Lessor within thirty (30) days of such Event of Loss all Basic Rent payments
payable for the Aircraft (and all other accrued and unpaid Rent) through the
date of such payment, together with the Stipulated Loss Value of the Aircraft.
At such time as Lessor has received the foregoing sums: (A) the obligation of
Lessee to pay Basic Rent hereunder shall terminate, (B) the Term for the
Aircraft shall end, and (C) Lessor will transfer or cause to be transferred to
Lessee (or to the relevant insurers, as the case may be), without
representation, recourse or warranty of any kind, express or implied (except a
warranty that the Aircraft is free of Liens other than Liens which Lessee is
required to discharge hereunder, or defects in title resulting from Lessor's or
any Participant's acts), all of Lessor's and each Participant's right, title and
interest, if any, in and to the Aircraft.
(b) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon the occurrence of an
Event of Loss with respect to an Engine not then installed on the Airframe, or
in the Event of Loss with respect to an Engine installed on the Airframe but not
involving an Event of Loss with respect to the Airframe, Lessee shall give
Lessor prompt written notice thereof and Lessee shall, as promptly as possible
and in any event within seventy-five (75) days after the occurrence of such
Event of Loss, duly convey to Lessor, as a replacement for the Engine with
respect to which such Event of Loss occurred, title to another CFM International
Model CFM56-7B24 engine owned by Lessee free and clear of all Liens and having a
value, utility, modification status and useful life at least equal to, and being
in as good operating condition (including the incorporation of all
airworthiness directives and service bulletins in such engine) as, the Engine
with respect to which such Event of Loss occurred, assuming such Engine was of
the value, utility, modification status and useful life and in the condition and
repair required by the terms hereof immediately prior to the occurrence of such
Event of Loss; and in such case, Lessee, at its own expense, will promptly (i)
furnish Lessor with a ▇▇▇▇ of sale, in form and substance satisfactory to
Lessor, for such replacement engine, (ii) execute a supplement hereto in form
and substance satisfactory to Lessor subjecting such replacement engine to this
Lease and cause the same to be duly recorded pursuant to the laws of the
Country of Registration, (iii) furnish Lessor with evidence of Lessee's title to
such replacement engine (including, if requested, an opinion of Lessee's
counsel) and of compliance with the insurance provisions of Article 10 hereof
with respect to such replacement engine as Lessor may reasonably request, and
(iv) take such other Action as Lessor may reasonably request in order and
properly vested in Lessor and leased
9-1
hereunder to the same extent as the Engine replaced thereby. Upon full
compliance by Lessee with the terms of this paragraph (b), Lessor will transfer
to Lessee (or to the relevant insurers, as the case may be), without
representation, recourse or warranty of any kind, express or implied (except a
warranty that such Engine is free of Liens, other than Liens which Lessee is
required to discharge hereunder, or defects in title resulting from Lessor's or
the Participants' acts), all of Lessor's and the Participants' right, title and
interest, if any, in and to the Engine with respect to which such Event of Loss
occurred and, for all purposes hereof, such replacement engine shall be deemed
an "Engine" as defined herein. No Event of Loss with respect to an Engine shall,
except as otherwise expressly provided in this Article 9, result in any
reduction in Basic Rent.
(c) APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES IN RESPECT OF
EVENT OF LOSS. Any payments (other than insurance proceeds, the application of
which is provided for in Article 10 hereof) received at any time by Lessor or
Lessee from any governmental authority or other person with respect to an Event
of Loss with respect to any Item of Equipment will be applied as follows:
(i) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and the Engines or engines installed on
the Airframe, after reimbursement to Lessor for all costs and expenses,
including attorneys fees, incurred in connection with such Event of Loss, so
much of such payment as shall not exceed the amounts due under paragraph (a) of
this Article 9 shall be applied in reduction of Lessee's obligation to pay such
amounts, if not already paid by Lessee, or, if already paid by Lessee, shall be
applied to reimburse Lessee for its payment of such amounts, and the balance, if
any, of such payment remaining thereafter will be paid over to or retained by
Lessor; and
(ii) if such payments are received with respect to an Engine under
circumstances contemplated by paragraph (b) of this Article 9, so much of such
payments remaining after reimbursement to Lessor for all costs and expenses,
including attorneys fees, incurred in connection with such Event of Loss shall
be paid over to, or retained by, Lessee, provided that Lessee shall have fully
performed or concurrently therewith will fully perform the terms of Article
9(b).
(d) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OR EVENT OF
DEFAULT. Any amount referred to in clause (i) or (ii) of paragraph (c) of this
Article which is payable to Lessee shall not be paid to Lessee or, if such
amount has been previously paid to Lessee, shall not be retained by Lessee, if
at the time of such payment an Event or an Event of Default shall have occurred
and be continuing. In such event, all such amounts shall be paid to and held by
Lessor as security for the performance by Lessee of its obligations hereunder
or, at Lessor's option, applied by Lessor toward payment of any of such
obligations of Lessee at the time due hereunder as Lessor may elect. At such
time as Lessee shall have cured all Events and Events of Default, all such
amounts at the time held by Lessor in excess of the amounts, if any, which
Lessor shall have elected to apply as above provided shall be paid to Lessee.
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ARTICLE 10. INSURANCE.
(a) LIABILITY AND PROPERTY DAMAGE INSURANCE. Lessee will carry and
maintain in effect with respect to the Aircraft, at its own expense, with
insurers of recognized responsibility and substantial financial capacity
acceptable to Lessor in its reasonable discretion, comprehensive aircraft third
party, passenger, baggage, cargo, products, mail and airline general third party
legal liability insurance, including war and allied perils, in amounts which are
not less than and of the types usually carried by companies engaged in the same
or similar business, similarly situated with Lessee, and owning or operating
similar aircraft and engines and which covers risks of the kind customarily
insured against by such companies, including, without limitation, bodily injury
and property damage of whatever nature; provided, however, in no event shall
such amounts of insurance coverage be less than a combined single limit of
liability of $600,000,000 for any one occurrence and in the aggregate for
products liability (or such higher amounts as Lessor may from time to time
reasonably require). In no event shall Lessee discriminate against the Aircraft
in respect of the amount or other aspects of liability insurance for the
Aircraft as compared to the amount or other aspects of liability insurance for
other similar aircraft in Lessee's fleet.
(b) INSURANCE AGAINST LOSS OR DAMAGE TO AIRCRAFT. From the Delivery
Date of an Item of Equipment until the return thereof to Lessor in compliance
with the requirements of Article 13 hereof, Lessee shall bear all risks of loss
or damage to such Item of Equipment, no matter how occasioned and from every
source 'or cause whatsoever. Lessee shall carry and maintain in effect, at its
own expense, with insurers of recognized responsibility and substantial
financial capacity acceptable to Lessor in its reasonable discretion, all-risk
ground, flight, taxiing and ingestion aircraft hull insurance on an agreed value
basis covering the Aircraft, and all-risk insurance on an agreed value basis
with respect to the Engines while not installed in the Aircraft and on a full
replacement cost basis with respect to Parts while not installed in the
Aircraft, in each case which is of the type and in substantially the amounts
usually carried by companies engaged in the same or similar business and
similarly situated with Lessee, and shall include war risk insurance (which
shall not be restricted to physical loss or damage to the aircraft hull)
covering the perils of:
(i) war, invasion, acts of foreign enemies, hostilities (whether
war be declared or not), civil war, rebellion, revolution, insurrection, martial
law, military or usurped power, or attempts at usurpation of power;
(ii) strikes, riots, civil commotions or labor disturbances;
(iii) any act of one or more persons, whether or not agents of a
sovereign power, for political or terrorist purposes and whether the loss or
damage resulting therefrom is accidental or intentional;
(iv) any malicious act or act of sabotage;
10-1
(v) confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition for title or use by or under the order of any
government (whether civil, military or de facto) and/or public or local
authority including the government of the Country of Registration; and
(vi) hijacking or any unlawful seizure or wrongful exercise of
control of the Aircraft or crew in flight (including any attempt at such seizure
or control) made by any person or persons on board the Aircraft acting without
the consent of Lessee;
PROVIDED, HOWEVER, that all hull insurance required by this paragraph (b) shall
at all times while the Aircraft is subject to this Lease be for an amount not
less than the Stipulated Loss Value from time to time computed for the Aircraft.
Lessee may self-insure, by means of a deductible or similar clause, the aircraft
hull risk required to be insured against pursuant to this paragraph (b),
provided that the amount of such self-insurance shall not exceed the lesser of
$500,000 for any one occurrence or the lowest amount of
self-insurance/deductible applying to any aircraft in Lessee's fleet. All of the
foregoing insurance policies required under tins paragraph (b) shall provide
that any loss which: (i) is less than $500,000 may be adjusted with Lessee and
paid to Lessee, provided that if Lessor or Mortgagee shall have notified
Lessee's insurance brokers that an Event or Event of Default exists hereunder,
such payment shall be made to Lessor or Mortgagee, whoever has provided such
notice, and such payment shall be held by such party pursuant to the terms of
this Lease, (ii) exceeds $500,000 but is less than $3,000,000 shall be adjusted
with Lessor and Lessee and shall be payable to the order of Lessor in Dollars,
and (iii) exceeds $3,000,000 shall be adjusted with Lessor and Lessee and shall
be payable in Dollars to Mortgagee (or is Mortgagee has given notice to the
insurers of the termination of the Mortgage, to Lessor).
(c) REQUIREMENTS IN INSURANCE POLICIES. All insurance policies carried
in accordance with paragraph (a) or (b) of this Article 10 and all policies
taken out in substitution or replacement for any such policies, shall (i) be
subject to Lessor's approval, (ii) include a waiver of any rights of
subrogation, set-off, counterclaim or other deduction, whether by attachment or
otherwise as against Lessor and each Participant, and their respective
successors and assigns (hereafter collectively referred to as the "Additional
Insureds"), and the Indemnitees (as defined in Article 8(a)), (iii) name the
Additional Insureds, and in respect of the insurance carried in accordance with
Article 10(a), the Additional Insureds and the Indemnitees as additional
insureds, as their respective interests appear (but without imposing upon any
such Additional Insured or Indemnitee any obligation imposed upon the insured,
including, without limitation, the liability to pay the premium for such
policies), (iv) provide that in respect of the interests of the Additional
Insureds and Indemnitees in such policies, the insurance shall not be impaired
or invalidated by any action or omission of Lessee or any other person (other
than action of such Additional Insured), and shall insure the Additional
Insureds and Indemnitees, as their respective interests appear, regardless of
any breach or violation by Lessee or any other person (other than such
Additional Insured) of any warranties, declarations or conditions contained in
such policies, (v) provide that if such insurance is canceled or terminated for
any reason whatsoever or is changed in any material respect in relation to the
interests of an Additional Insured or if such insurance is allowed to lapse for
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nonpayment of premium, such cancellation, termination, change or lapse shall not
be effective as to such Additional Insured for thirty (30) days (seven (7) days,
or such lesser period as is customarily available in accordance with industry
practice, in the case of any war risk and allied perils coverage) after receipt
by such Additional Insured of written notice by such insurers of such
cancellation, termination, change or lapse, (vi) in the event Lessee maintains
separate policies to cover all risk aircraft hull and war risk and related
perils insurances, all such policies shall include a 50/50 provisional claims
settlement arrangement in the event of dispute over which policy covers the
loss, (vii) be primary without right of contribution from any other insurance
carried by any Additional Insured or Indemnitee with respect to its interest as
such in the Aircraft, (viii) be in an amount sufficient to prevent Lessee and
any Additional Insured from becoming a co-insurer, (ix) provide for worldwide
geographical coverage, except for exclusions of geographical areas reasonably
acceptable to Lessor, (x) provide satisfactory coverage against the risks
associated with electronic date recognition problems, in the form ▇▇ ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ and AVN2002, or equivalent, substitute or replacement in respect thereof
in accordance with then current market practice (and Lessee shall make and
comply with the warranties, representations, and undertakings required to be
given in connection with obtaining/maintaining such clauses in accordance with
then current market practice, and (xi) comply to the extent necessary with the
insurance requirements set forth in the Manufacturer's product support and
customer training agreements. Each liability insurance policy carried in
accordance with section (a) of this Article shall contain a cross-liability
endorsement so that each insured, Additional Insured and Indemnitee shall be
protected from claims by each other insured, Additional Insured or Indemnitee,
and a severability of interest provision which shall expressly provide that all
of the provisions thereof shall operate in the same manner as if there were a
separate policy covering each insured, Additional Insured and Indemnitee;
provided, however, such policies shall not operate to increase the insurers'
limit of liability. Lessee shall cause its insurers to agree that the indemnity
and hold harmless provisions of Article 8(a) are insured as a contractual
assumption of liability by Lessee's insurers, but only to the extent of the
risks covered by the policy of insurance.
(d) UNINSURED OPERATIONS. Lessee shall not operate or locate any Item
of Equipment, or suffer the same to be operated or located, in any recognized or
threatened area of hostilities or in any area or on any route excluded from
coverage by any insurance contemplated by this Article 10. Lessee shall not
operate any Item of Equipment, or suffer the same to be operated, in any manner
or for any purpose which is not covered by the insurance which Lessee is
required to carry and maintain pursuant to this Article 10.
(e) APPLICATION OF INSURANCE PROCEEDS FOR EVENT OF LOSS. All insurance
payments received as the result of the occurrence of an Event of Loss (other
than an Event of Loss described in Article 9(c), above) with respect to an Item
of Equipment, or any part thereof, will be applied as follows:
(i) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and Engines installed on the Airframe,
so much of such payments remaining after reimbursement to Lessor for all costs
and expenses including attorneys fees incurred in connection with such Event of
Loss as shall not exceed the amounts
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due under paragraph (a) of Article 9 shall be applied in reduction of Lessee's
obligation to pay such amounts, if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its payment of such
amounts, and the balance, if any, of such payment remaining thereafter will be
paid over to or retained by, Lessee; or
(ii) if such payments are received with respect to an Engine under
the circumstances contemplated by Article 9(b), so much of such payments
remaining after reimbursement to Lessor for all costs and expenses including
attorneys fees incurred in connection with such Event of Loss shall be paid over
to, or retained by, Lessee, provided that Lessee shall have fully performed
or, concurrently therewith, will fully perform the terms of Article 9(b).
(f) APPLICATION OF INSURANCE PROCEEDS FOR OTHER THAN EVENT OF LOSS. The
insurance proceeds of any damage to the Airframe or any Engine, or part thereof,
not constituting an Event of Loss will be applied in payment (or to reimburse
Lessee) for repairs or for replacement property in accordance with the terms of
Articles 5 and 6 hereof, and any balance remaining after compliance with such
Articles with respect to such loss shall be paid to, or retained by, Lessee.
(g) APPLICATION IN DEFAULT. Any amount referred to in clause (i) or
(ii) of paragraph (e) or in paragraph (f) of this Article 10 which is payable to
Lessee shall not be paid to Lessee or, if it has been previously paid directly
to Lessee, shall not be retained by Lessee, if at the time of such payment an
Event or an Event of Default shall have occurred and be continuing. In such
event, all such amounts shall be paid to and held by Lessor as security for the
performance by Lessee of its obligations hereunder or, at Lessor's option,
applied by Lessor toward payment of any such obligations of Lessee at the time
due hereunder as Lessor may elect. At such time as Lessee shall have cured all
Events and Events of Default, all such amounts at the time held by Lessor in
excess of the amounts, if any, which Lessor shall have elected to apply as above
provided shall be paid to Lessee.
(h) REPORTS, CERTIFICATES, ETC. At least five (5) Business Days prior
to the Delivery Date of the Aircraft and concurrently with the renewal of each
insurance policy (but in no event less frequently than once each calendar year),
Lessee will furnish to Lessor and each Additional Insured a certificate signed
by a firm of independent aircraft insurance brokers of recognized standing and
responsibility in the international aviation insurance industry, appointed by
Lessee and acceptable to Lessor, describing in reasonable detail the insurance
then carried and maintained on the Equipment and certifying that the insurance
then carried and maintained on the Aircraft and Engines complies with the terms
hereof. Lessee will advise and will cause such firm to agree to advise Lessor
and each Additional Insured in writing promptly of any default in the payment of
any premium and of any other act or omission on the part of Lessee or otherwise
of which it or they have knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine.
Lessee will also advise and will also cause such firm to agree to advise Lessor
and each Additional Insured in writing of the termination date of any insurance
carried and maintained on the Aircraft or any Engine pursuant to this Article at
least thirty (30) days
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(seven (7) days, or such lesser period as is customarily available in
accordance with industry practice, in the case of any war risk and allied
perils coverage) prior to such termination date. Upon request by Lessor, Lessee
will deliver to Lessor a true and complete copy of all policies of insurance.
carried by Lessee in accordance with the requirements of this Article 10. In the
event that Lessee shall fail to maintain insurance as herein provided, Lessor
may at its option obtain such insurance and, in such event, Lessee shall, upon
demand, reimburse Lessor, as Supplemental Rent, for the cost thereof.
(i) INSURANCE - GENERAL. If at any time Lessor determines that Lessor's
approval of any insurer should be revoked in the interests of the Additional
Insureds as the result of such insurer no longer being of recognized
responsibility and substantial financial capacity acceptable to Lessor in its
reasonable discretion, or if Lessor determines that Lessor's approval of any
insurance should be revoked in the interests of the Additional Insureds as the
result of a change in market practice, Lessor agrees to consult with Lessee and
Lessee's insurance brokers regarding revocation of such approval. If, following
such consultation, Lessor determines that revocation is required, Lessee will
promptly arrange or procure the arrangement of alternative cover satisfactory
to Lessor. Lessee shall, on request, provide Lessor with satisfactory evidence
that the premiums in respect of the insurance required hereby have been paid.
Lessee shall not make, or permit to be made, any modification to or alteration
of the insurance coverage required hereby adverse to the interests of any of the
Additional Insureds or Indemnitees. Lessee shall be responsible for any
deductible in respect of the insurances required hereby. Lessee shall provide
any other insurance/reinsurancer-related information or assistance in respect of
the insurances required hereby, as Lessor may reasonably request. Lessee shall
at its own expense maintain insurance following the expiration or sooner
cancellation or termination of the Term in respect of Lessee's indemnity and
hold harmless obligations set forth in Article 8(a) hereof, for such period as
Lessor may reasonably require (but in any event not more than two (2) years)
naming each Indemnitee (as defined in Article 8) as an additional insured.
Lessee's obligation under the preceding sentence shall not be affected by Lessee
ceasing to be the lessee of the Aircraft or by any of the Indemnitees (as
defined in Article 8) ceasing to have an interest in respect of the Aircraft.
(j) INSURANCE OF LESSEE'S INTEREST. Nothing contained in this Lease
shall prevent Lessee from carrying insurance against Events of Loss with respect
to the Equipment in excess of that required hereunder, and nothing herein shall
prevent any Additional Insured, at its own expense, from carrying additional
insurance against Events of Loss with respect to the Equipment; PROVIDED,
HOWEVER, (i) Lessee shall not procure insurance or permit Lessee to be named
assured in any insurance with respect to any Item of Equipment which could
prejudice any Additional Insured's rights under the insurance required hereunder
or any right of recovery under any such insurance, and (ii) in the event there
is a limitation on the aggregate amount of insurance which may be carried or
collected by any or all parties in respect of any Equipment, Lessee's right to
carry and collect insurance on such Equipment in excess of that required
hereunder shall be subordinate to and shall not in any way prejudice the right
of any Additional Insured to carry and collect insurance on such Equipment in
excess of such amounts.
10-5
ARTICLE 11. MORTGAGES, LIENS, ETC. Lessee shall not directly or
indirectly create, incur, assume or suffer to exist any Lien on or with respect
to any Item of Equipment, any part thereof, title thereto or any interest
therein, except: (i) the respective rights of Lessor, the Participants and
Lessee as herein provided, (ii) Liens which result from Claims against Lessor
that are not to be paid or indemnified against by Lessee hereunder, (iii) Liens
for taxes either not yet due or being contested in good faith by appropriate
proceedings, but only so long as, in Lessor's judgment, such proceedings do not
involve any danger of the sale, forfeiture or loss of any Item of Equipment, or
interest therein, and (iv) materialmen's, mechanics', workmen's, repairmen's,
airport charges, employees' or other like liens arising by operation of law
in the ordinary course of business and for amounts the payment of which is
either not delinquent or is being contested in good faith by appropriate
proceedings, but only so long as, in Lessor's judgment, such proceedings do
not involve any danger of the sale, forfeiture or loss of any Item of Equipment,
or any interest therein.
11-1
ARTICLE 12. RECORDATION AND FURTHER ASSURANCES. Lessee shall, at its
own cost and expense, cause this Lease, the Lease Supplement, the Mortgage and
any and all additional instruments which shall be executed pursuant to the terms
hereof, so far as permitted by applicable law or regulation, to be kept, filed,
registered and recorded at all times in the appropriate offices pursuant to the
laws of the Country of Registration, and in such other places, whether within or
outside the Country of Registration, as Lessor may reasonably request to perfect
and preserve Lessor's and any Participants title to and interests in the
Equipment and rights hereunder (including its rights to the Security Deposit),
and Lessee shall on request furnish to Lessor an opinion of counsel satisfactory
to Lessor or other evidence satisfactory to Lessor of each such filing,
recordation and registration.
Without limiting the foregoing, Lessee shall do or cause to be done, at
its own 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 at Geneva, Switzerland, on June 18, 1948, to perfect and
preserve the tide and interests of Lessor and each Participant in and to the
Equipment within the jurisdiction of any signatory State which has ratified such
Convention and in the territories thereof in which Lessee may operate the
Equipment, and 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 involving any State in which Lessee may operate, and any and all
acts and things which Lessor may reasonably request, to perfect and preserve the
rights of Lessor and each Participant in the Equipment and hereunder.
In addition, Lessee will promptly and duly execute and deliver to
Lessor such further documents and assurances and take such further action as
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 Lessor
hereunder.
12-1
ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS.
(a) RETURN. Except as otherwise provided herein, at the expiration of
the Term for the Aircraft or upon the sooner cancellation or termination of
this Lease, Lessee, at its own expense, shall return the Aircraft and related
documentation and records to Lessor by delivering the same to Lessor at an
airport in the western part of the United States as may be designated by
Lessor in full compliance with all Lessee's obligations hereunder. The
Aircraft, at the time of return to Lessor, shall be fully equipped with two
Engines properly installed thereon. On return of the Aircraft to Lessor, but
in no event more than thirty (30) days thereafter, Lessor or Lessee, as the
case may be, shall reimburse the other for the cost of the fuel contained in
the fuel tanks of the Aircraft on return to Lessor, to the extent such fuel
is less than (which will result in payment by Lessee) or exceeds (which will
result in payment by Lessor) the amount of fuel contained in the fuel tanks
of the Aircraft on the Delivery Date.
(b) INSPECTION; TEST FLIGHT. Lessor shall have the right, within sixty
(60) days prior to the expiration date of the Term for the Aircraft, to
inspect the Aircraft and its records, including all maintenance, pilots and
aircraft systems functional check reports, to determine whether the Aircraft
and its records will be in compliance with the requirements for return at the
expiration of the Term, including confirmation of the full serviceability
status of each component of the Aircraft. Lessee shall make such personnel
available to Lessor for such inspection of the Aircraft and its records as
Lessor may reasonably require. Lessor's right of inspection shall include:
(i) the right to a complete and thorough inspection of all documents and
records maintained for the Equipment by or for Lessee (including the Engine
performance monitoring data), which Lessee shall make available to Lessor's
representatives and designees in one location, (ii) the right to conduct a
full systems functional and operational check, and (iii) the right to have up
to four of its representatives or designees participate as direct observers
in a test flight of the Aircraft of at least ninety (90) minutes in duration
(the cost of which shall be borne by Lessee) conducted by Lessee in
accordance with Manufacturer's standard flight operation check flight
procedures to demonstrate the airworthiness of the Aircraft and the proper
functioning of all systems and components within limits. All discrepancies
and deficiencies from the return conditions provided herein shall be
corrected by Lessee at its expense. If an additional test flight is required
after correction of discrepancies discovered on the initial test flight or
during the inspections, Lessee shall provide such additional test flight.
Lessor's right of inspection shall not include the right to open any panels
or bays that are not required to be opened in connection with the maintenance
that is required to be performed on the Aircraft pursuant to this Article 13,
unless Lessor has reasonable cause to believe that a defect likely exists
behind the closed panel or bay.
If: (x) repairs or other work items are required to cause the Aircraft
to comply with the return requirements provided herein, or (y) Lessor,
through no fault of its own, has not been allowed a full and thorough right
to inspect the Aircraft and its records prior to the end of the Term as
contemplated herein, or (z) Lessee for any other reason fails to
13-1
return the Aircraft and its records to Lessor at the time or place and in the
condition required hereunder, Lessee shall forthwith take such action as may
be necessary to remedy such non-compliance to enable Lessee to return the
Aircraft and its records to Lessor in accordance with the requirements
hereof. Without waiving any other rights or remedies Lessor may have as a
result thereof, Lessee shall pay Lessor one and one-half (1-1/2) the monthly
Basic Rent for the Aircraft, prorated on a daily basis, payable weekly in
arrears, for each day following the expiration of the Term for the Aircraft
until Lessor has been allowed and has completed a full and thorough right to
inspect the Aircraft and its records prior to the end of the Term as
contemplated herein and the Aircraft is returned to Lessor in the condition
and with the supporting documentation required hereunder at the time of
return to Lessor. During the period required for Lessee to comply with the
requirements of this paragraph, Lessee shall not operate the Aircraft (other
than for maintenance, repair or return purposes) and all of Lessee's other
obligations hereunder shall remain in full force and effect. Nothing in this
paragraph shall be interpreted to give Lessee the right to retain the
Aircraft after the end of the Term.
(c) FLIGHT HOURS/CYCLES/TIME REQUIREMENTS. At the time of return of the
Aircraft to Lessor:
(i) The Airframe shall be fresh out of its next sequential block
"6C" systems, zonal and structural check (all as described in the latest
revision of the Boeing Maintenance Planning Document and the latest revision
of Appendix C No. D626AOOl (or restatement thereof) applicable to the
Aircraft as the result of the hour/cycle ratio that the Aircraft has been
operated during the Term) or equivalent block-type maintenance check,
including all corresponding lower level checks (I.E , "A" and lower "C"
checks), and corrosion prevention and control and aging aircraft inspections,
if any, and all other known inspections and routine and non-routine tasks due
at such time, all with full fault rectification and interior refurbishment
and all without taking into account any sampling programs (collectively
referred to hereafter as the "6C Maintenance"). If Lessee's Maintenance
Program permits such 6C Maintenance to be performed in phases, Lessee shall
perform all phases of such 6C Maintenance immediately prior to return of the
Aircraft to Lessor in order to align such maintenance of the Aircraft with
the Boeing Maintenance Planning Document and the latest revision of Appendix
C No. D626AO01 (or restatement thereof) to the same extent as if Lessee's
Maintenance Program did not permit such maintenance to be performed in
phases. During such 6C Maintenance, Lessee shall also perform any other work
reasonably requested by Lessor and not otherwise required hereunder (provided
such other work does not increase the ground time required for Lessee to
prepare the Aircraft for return to Lessor as required hereby, or, if it does
increase the downtime, Lessor and Lessee shall have agreed to a Basic Rent
abatement for such additional ground time), and Lessor will reimburse Lessee
for the cost of such work (including labor and materials), billed at Lessee's
most preferred customer's rates. Lessee shall give Lessor at least thirty
(30) days prior notice of the date on which such 6C Maintenance is to be
performed.
If the Airframe is not fresh from such 6C Maintenance at the time of
return to Lessor, subject to the requirements of the next succeeding
paragraph of this clause (i), Lessee shall pay Lessor a Dollar amount
determined by multiplying the then current
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cost of such 6C Maintenance for the Airframe as quoted by an FAA-approved
overhaul facility selected by Lessee and reasonably acceptable to Lessor
(provided that if Lessor and Lessee cannot agree on the FAA-approved overhaul
facility, each shall select an FAA-approved overhaul facility and the
quotations of the two facilities shall be averaged) by (b) a fraction of
which (x) the numerator shall be the number of Flight Hours, Cycles or
calendar time (whichever is limiting) accumulated on the Airframe since the
Delivery Date or its last complete block "6C" check (or the final phase of
the phased "6C" check), as the case may be, and (y) the denominator shall be
the total number of Flight Hours, Cycles or calendar time (whichever is
limiting) between block "6C" checks for the Airframe (determined by reference
to the latest revision of the Boeing Maintenance Planning Document and the
latest revision of Appendix C No. D626AOOI (or restatement thereof)
applicable to the Aircraft as the result of the Flight Hours/Cycles ratio
that the Aircraft has been operated during the Term);
Notwithstanding anything to the contrary in the preceding paragraph,
at the time of return of the Aircraft:
(A) the Airframe shall be fresh out of its next sequential
block "C" check or equivalent block-type maintenance, and the
corresponding lower level checks, and all other inspections and tasks,
including corrosion prevention and control and aging aircraft
inspections, if any, and all structural/systems/zonal inspections and
out-of-sequence inspections due at that tune, and all routine and
non-routine tasks shall have been performed, all with full fault
rectification, sufficient to clear the Aircraft for operation until its
next scheduled "C" check, all in accordance with the then latest
revision of the Boeing Maintenance Planning Document and the latest
revision of Appendix C No. D626AO01 (or restatement thereof) applicable
to the Aircraft as the result of the hour/cycle ratio that the Aircraft
has been operated during the Term), and all without taking into account
any sampling programs. If Lessee's Maintenance Program permits such "C"
check to be performed in phases, all phases of such maintenance check
shall be performed immediately prior to return of the Aircraft to
Lessor in order to align such maintenance of the Aircraft with the then
latest revision of the Boeing Maintenance Planning Document and the
latest revision of Appendix C No. D626AO01 (or restatement thereof) to
the same extent as if Lessee's Maintenance Program did not permit such
maintenance check to be performed in phases. During such "C" check,
Lessee shall also perform any other work reasonably requested by Lessor
and not otherwise required hereunder (provided such other work does not
increase the ground time required for Lessee to prepare the Aircraft for
return to Lessor as required hereby, or, if it does increase the
downtime, Lessor and Lessee shall have agreed to a Basic Rent abatement
for such additional ground time), and Lessor will reimburse Lessee for
the cost of such work (including labor and materials), billed at
Lessee's most preferred customer's rates. Lessee shall give Lessor at
least thirty (30) days prior notice of the date on which such "C" check
is to be performed; and
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(B) the Airframe shall have at least 4,000 Flight Hours/Cycles
or sixteen (16) months, whichever is limiting, remaining to its next 6C
Maintenance.
(ii) The Landing Gear shall be fresh from overhaul or shall be new
(i.e. no Flight Hours/Cycles/calendar time accumulated thereon, whichever is
limiting).
Notwithstanding the preceding paragraph, if the Landing Gear is not
returned fresh from overhaul or new, at the time the Aircraft is returned to
Lessor, subject to the requirements of the last sentence of this paragraph,
Lessee shall pay Lessor a Dollar amount computed by multiplying: (A) the then
current estimated cost of overhaul of the Landing Gear as quoted by an
FAA-approved overhaul facility selected by Lessor and reasonably satisfactory
to Lessee, by (B) a fraction the numerator of which shall be the number of
Flight Hours/Cycles/calendar time (whichever is limiting) accumulated on the
Landing Gear since new or since its last overhaul and the denominator shall
be the total number of Flight Hours/Cycles/calendar time (whichever is
limiting) allowable between overhauls (determined by reference to the latest
revision of the Boeing Maintenance Planning Document). In any event, on
return of the Aircraft the Landing Gear shall have at least 4,000 Flight
Hours/Cycles or sixteen (16) months (whichever is limiting) remaining until
its next scheduled overhaul (determined by reference to the latest revision
of the Boeing Maintenance Planning Document).
(iii) Each "hard time/life limited" component of the Aircraft,
including life-limited Parts of the Engines, the APU and the Landing Gear
(but excluding components referred to in clause (iv), below, and excluding
the Landing Gear as a whole) shall be fresh from overhaul or shall be new
(i.e., no Flight Hours/Cycles/calendar time accumulated thereon, whichever is
limiting).
Notwithstanding the preceding paragraph, if any "hard time/life
limited" component, including life-limited Parts of the Engines, the APU and
the Landing Gear (but excluding components referred to in clause (iv), below,
and excluding the Landing Gear as a whole) is not returned fresh from
overhaul or new, at the time the Aircraft is returned to Lessor, subject to
the requirements of the last sentence of this paragraph, Lessee shall pay
Lessor a Dollar amount computed by multiplying: (A) the then current
estimated cost of overhaul or purchase and replacement of such component, as
quoted by an FAA-approved overhaul facility selected by Lessor and reasonably
satisfactory to Lessee, by (B) a fraction the numerator of which shall
be the number of Flight Hours/Cycles/calendar time (whichever is limiting)
accumulated on each "hard time/life limited" component, as the case may be,
since new or since its last overhaul and the denominator shall be the
total number of Flight Hours/Cycles/calendar time (whichever is limiting)
allowable between overhauls (determined by reference to the latest revision
of the Boeing Maintenance Planning Document). In any event, on return of the
Aircraft each "hard time/life limited" component of the Aircraft, including
Life-limited Parts of the Engines, the APU and the Landing Gear (but
excluding the components referred to in clause (iv), below, and excluding the
Landing Gear as a whole) shall have at least 4,000 Flight Hours/Cycles or
sixteen (16) months (whichever is
13-4
limiting) remaining until its next scheduled overhaul (determined by
reference to the latest revision of the Boeing Maintenance Planning
Document). For the avoidance of doubt, Lessor does not intend to receive
double payment for any item for which compensation if paid pursuant, to this
Article 13(c). Therefore, the provisions of this Article 13(c) shall be
construed so that if appropriate payment in respect of a Part is paid
pursuant to one clause of this Article 13(c), an equivalent payment in
respect of such Part shall not be payable pursuant to any other clause of
this Article 13(c).
(iv) Each component of the Aircraft which has a hard time/life limit
(i.e., hours/cycles/calendar time) to overhaul interval/shop visit
interval/replacement of less than 4,000 Flight Hours/Cycles or sixteen (16)
months (whichever is limiting) shall have 100% of its Flight
Hours/Cycles/calendar time remaining until next overhaul interval, shop visit
interval or replacement (determined by reference to the latest revision of
the Boeing Maintenance Planning Document).
(v) Each Engine and the APU shall be fresh out of its heavy
maintenance shop visit requiring teardown/disassembly and resulting in full
performance restoration. If an Engine or the APU is not fresh out of its
heavy maintenance shop visit requiring teardown/disassembly and resulting in
full performance restoration on return to Lessor, subject to the requirements
of the next succeeding paragraph of this clause (v), on return of the
Aircraft to Lessor Lessee shall pay Lessor a Dollar amount computed by
multiplying: (A) the then current estimated cost of such heavy maintenance
shop visit requiring teardown/disassembly and resulting in full performance
restoration for such Engine or the APU, as the case may be, as quoted by an
FAA-approved overhaul facility selected by Lessee and reasonably satisfactory
to Lessor (provided that if Lessor and Lessee cannot agree on the
FAA-approved overhaul facility, each shall select an FAA-approved overhaul
facility and the quotations of the two facilities shall be averaged), by (B)
a fraction the numerator of which shall be the number of Flight
Hours/Cycles/calendar time (whichever is limiting) accumulated on such Engine
or the APU since new or since its last heavy maintenance shop visit requiring
teardown/disassembly and resulting in full performance restoration (whichever
is later), and the denominator shall be the total number of Flight
Hours/Cycles/calendar time (whichever is limiting) allowable between heavy
maintenance shop visits requiring teardown/disassembly and resulting in full
performance restoration. The industry mean time between removals for engines
and auxiliary power units of similar age, characteristics and maintenance
histories as such Engines and the APU, determined by Lessor from records
maintained by the manufacturer of such equipment on the basis of the average
of the industry mean time between removals over the immediately preceding two
(2) years, shall be used to determine the number of Flight
Hours/Cycles/calendar time allowable between heavy maintenance shop visits
requiring teardown/disassembly and resulting in full performance
restoration. The industry mean time between removals for engines and
auxiliary power units does not include removals solely for foreign object
damage or customer convenience.
Notwithstanding anything to the contrary in the preceding paragraph,
on return of the Aircraft, each Engine and the APU shall have at least 3,000
Flight Hours/Cycles or one (1) year (whichever is limiting) remaining to the
industry mean time
13-5
between removals for engines and auxiliary power units of similar age,
characteristics and maintenance histories as such Engines and the APU,
determined from records maintained by the manufacturer of such equipment on
the basis of the average of the industry mean time between removals over the
immediately preceding two (2) years.
(vi) Each major component of the Aircraft which is "on condition" or
"condition monitored" (other than such components referred to in clause
(vii), below) shall be fresh out of its heavy maintenance shop visit. If any
such major component is not fresh out of its heavy maintenance shop visit on
return to Lessor, subject to the requirements of the next succeeding
paragraph of this clause (vi), on return of the Aircraft to Lessor Lessee
shall pay Lessor a Dollar amount computed by multiplying: (A) the then
current estimated cost of such heavy maintenance shop visit for such
component, as quoted by an FAA-approved overhaul facility selected by Lessor
and reasonably satisfactory to Lessee, by (B) a fraction the numerator of
which shall be the number of Flight Hours/Cycles/calendar time (whichever is
limiting) accumulated on such component since new or since its last heavy
maintenance shop visit (whichever is later), and the denominator shall be
the total number of Flight Hours/Cycles/calendar time (whichever is limiting)
allowable between heavy maintenance shop visits. The average industry mean
time between failures over the, immediately preceding twelve months for
components of similar age, characteristics and maintenance histories, as
determined by Lessor from records maintained by Manufacturer, shall be used
to determine the number of Flight Hours/Cycles/calendar time allowable
between heavy maintenance shop visits.
Notwithstanding anything to the contrary in the preceding
paragraph, on return of the Aircraft, each major component of the Aircraft
which is "on condition" or "condition monitored" (other than such components
referred to in clause (vii), below) shall have at least 4,000 Flight
Hours/Cycles or sixteen (16) months (whichever is limiting) remaining to the
industry mean time between failures for components of similar age,
characteristics and maintenance histories, determined on the basis of the
average of the industry mean time between failures over the immediately
preceding twelve months from records maintained by Manufacturer.
(vii) Each "on condition" or "condition monitored" major component
of the Aircraft which has an industry mean time between failures of less than
4,000 Flight Hours/Cycles or sixteen (16) Months (Whichever is limiting),
determined on the basis of the average of the industry mean time between
failures over the immediately preceding twelve months, shall have 100% of its
Flight Hours, Cycles or calendar time, whichever is limiting, remaining to
the industry mean time between failures for such component, determined on the
basis of the average of the industry mean time between failures over the
immediately preceding twelve months from records maintained by Manufacturer.
(viii) Except as otherwise required above, each component of the
Aircraft which has a calendar limit to removal and replacement or
refurbishment shall have at least one year remaining to operate until removal
and replacement or refurbishment (determined by reference to the latest
revision of the Boeing Maintenance Planning
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Document), and each component of the Aircraft which has a calendar limit to
removal and replacement or refurbishment of less than one year (determined by
reference to the latest revision of the Boeing Maintenance Planning Document)
shall have 100% of its calendar time remaining until next removal and
replacement or refurbishment.
All of the foregoing overhauls, checks, maintenance and visits shall
have been performed by an Approved Maintenance Performer and be in compliance
with Lessee's Maintenance Program (except to the extent otherwise specified
above). Lessee shall not be entitled to any adjustment or to be reimbursed or
in any way compensated if the Airframe, any Engine or any Parts are returned
in a better condition than as required under this Article 13.
(d) GENERAL RETURN REQUIREMENTS. The Airframe, Engines and Parts shall
have been maintained, serviced and repaired throughout the Term in accordance
with (i) all the requirements of this Lease, (ii) Lessee's Maintenance
Program, and (iii) the rules, and regulations of the FAA, and shall be in
compliance with the following:
(1) AIRWORTHINESS CERTIFICATE; REGISTRATION. The Aircraft when
returned to Lessor shall have a currently effective airworthiness certificate
(and, if required by Lessor, an airworthiness certificate for export to such
location as may be designated by Lessor) issued by the FAA, and shall be in
such condition and shall have such supporting documentation as required to
maintain the airworthiness certificate from the FAA for FAR Part 121
passenger operations with no restrictions and an FAA certificate of
registration. The Aircraft will be equipped for operation in accordance with
FAR Part 121 passenger operations.
(2) GENERAL CONDITION. Each Item of Equipment shall be in the same
condition as when delivered to Lessee, ordinary wear and tear from normal
flight operations (subject to the obligations set forth in Article 5(c) and
alterations and modifications properly made by Lessee as permitted or
required under this Lease) excepted, shall be in good operating condition,
and shall be free and clear of all Liens, except Liens which result from acts
of Lessor or of a Participant which are not indemnified against hereunder.
The Aircraft shall be clean, internally and externally, and serviceable by
commercial passenger airline operating standards, and shall have installed
thereon and furnished therewith all Engines, Parts and equipment installed
thereon or furnished therewith (including all cabin passenger service and
loose equipment) at the commencement of the Term (after giving effect to the
modifications referred to in Article 2(h) hereof) or replacements therefor
(as herein authorized) and additions and improvements thereto made in
accordance with the provisions of this Lease. No Part will have a total time
since new in hours, cycles or calendar time greater than 110% of the total
time since new in hours, cycles or calendar time of the Airframe.
The Aircraft shall be capable of certificated, full-rated
performance without limitation throughout the entire operating envelope, as
defined in the Aircraft flight manual, and performance compliance will be
demonstrated at the time of the technical acceptance flight test and by
on-wing static inspection and testing of the powerplants in accordance with
the Engine maintenance manual.
13-7
The Engines shall not be on "watch" for any reason requiring any
special or out-of-sequence inspection and shall comply with the operations
specification of Lessee and the Engine manufacturer (or, if such requirements
differ, whichever is the more limiting), without waiver, carryover,
deferment, restriction or exception. If the historical and technical records
and/or trend monitoring data indicate an acceleration in the rate of
deterioration in the performance of an Engine or the APU which is higher than
normal as per the recommendations of the manufacturer of such Engine or APU,
Lessee shall, prior to return, correct such conditions that are determined to
be causing such accelerated rate of deterioration or that otherwise exceed
Lessee's or the manufacturer's maintenance manual tolerances.
Without limiting any of the foregoing, on return the Aircraft
shall comply with the following:
(i) FUSELAGE, WINDOWS AND DOORS: The fuselage shall be free of
major dents and abrasions which are out of Manufacturer's manual limits, scab
patches which are temporary or out of Manufacturer's manual limits, and loose
or pulled rivets (reasonable wear and tear from normal flight operations
excepted); windows shall be free of delamination, distortion and blemishes
out of Manufacturer's manual limits and shall be properly sealed and free of
crazing (reasonable wear and tear from normal flight operations excepted);
and doors shall be free-moving, correctly rigged, and fitted with serviceable
seals; and all external placards and markings shall be installed and legible;
(ii) WINGS AND EMPENNAGE: All leading edges shall be free from
damage out of Manufacturer's manual limits; all control surfaces shall be
waxed and polished and all unpainted cowlings and fairings shall be polished;
and all wings, empennage and fuel tanks shall be free of fuel leaks; all
flight controls shall be properly balanced, and all external placards and
markings shall be installed and legible;
(iii) INTERIOR: The interior of the Aircraft shall be
deepcleaned; carpets, galleys, lavatories, ceiling, side walls, overhead,
passenger service units, bag racks and bulkhead panels shall be serviceable,
secure, clean and free of cracks and reasonably stain-free (provided the
cosmetic appearance is reasonably acceptable to Lessor); all seats shall be
fully serviceable, in good condition and repainted as necessary; all signs
and decals shall be clean and legible; and all calendar-lifed emergency
equipment shall have a minimum of one year's life remaining; all carpets,
cushions and seat covers shall be in original pattern and color (unless
Lessor shall have agreed otherwise with Lessee in writing) and in good
condition and clean and the seats shall conform to FAA fire-resistance and
crash-worthiness regulations; and all placards and markings shall be
installed and legible; all galley areas shall not have any detectable cracks
or corrosion, shall meet safety and health standards, shall present a good
appearance and shall be free of food and; all galley floors shall be sealed
and reasonably stain-free (provided the cosmetic appearance is reasonably
acceptable to Lessor), shall have an effective non-skid coating and shall
meet safety and health standards; all galley structures, galley inserts and
galley carts will be clean and sealed, and shall not have any detectable
leaks, cracks or other defects and shall be fully serviceable.
13-8
(iv) COCKPIT: All placards and markings shall be clean, secure,
and legible, all fairing panels shall be free of cracks and shall be
reasonably stain-free (provided the cosmetic appearance is reasonably
acceptable to Lessor), and shall be clean, secure, and repainted as
necessary; all floor coverings shall be clean and effectively secured and
sealed; all seat covers shall be in good condition and clean and shall
conform to FAA fire resistance regulations; and all seats shall be fully
serviceable and in good condition;
(v) CARGO COMPARTMENTS: All panels and nets shall be in good
condition; all cargo-restraint and moving mechanisms shall be serviceable;
and all compartments shall meet then current FAA fire regulations; all doors
shall be rigged and functioning properly; and the compartments shall be
clean;
(vi) LANDING GEAR AND WHEEL ▇▇▇▇▇: The Landing Gear and all
wheel ▇▇▇▇▇ shall be clean, free of leaks, and repaired as necessary; and,
all placards and markings shall be clean, secure, and legible;
(vii) LAVATORIES: All lavatory areas shall be clean and
reasonably free of cracks and free of detectable corrosion, meet safety and
health standards, present a good appearance and shall be free of abnormal
contamination; all lavatory floors and floor coverings shall be in good
condition and clean, shall be sealed and reasonably stain-free (provided the
cosmetic appearance is reasonably acceptable to Lessor), and shall have an
effective non-skid coating; mirrors shall be free of cracks and delamination
and free of noticeable and unsightly scratches; all doors and latches shall
be properly fitted and fully functional; lavatory systems shall be clean,
free of leaks, detectable cracks and other defects and shall be properly
sealed and fully functional; and
(viii) TIRES AND BRAKES: All tires and brakes shall be fully
serviceable and have a minimum of 75% wear-life remaining. No tire shall have
more than two recaps.
(3) MODIFICATIONS. At Lessor's request, Lessee shall, at Lessee's
expense, remove any or all alterations or modifications in or additions to
any Item of Equipment accomplished during the Term not required to be
incorporated or installed in or attached to such Item of Equipment to
obtain an airworthiness certificate and registration from the FAA,
including the modifications contemplated by Article 2(h) hereof, and Lessee
shall, at Lessee's expense, restore such Item of Equipment to the value,
utility, condition and airworthiness thereof which would have existed had
such alterations, modifications or additions not been made (provided that
Lessor shall provide Lessee with the necessary Parts that were returned by
Lessee to Lessor pursuant to Article 2(h), to enable Lessee to make such
restoration). Without limiting any other obligations of Lessee under this
Lease, all modifications made to the Aircraft during the Term shall be in
accordance with FAA-approved data.
(4) REPAIRS. All repairs performed since the Delivery Date and that
exist on the Equipment at return shall be permanent in accordance with the
Manufacturer's Structural Repair Manual, provided that if such Structural
Repair Manual authorizes as
13-9
permanent a non-flush structural patch repair or a flush-type structural
patch repair, or does not cover such repair, such repair shall be a
flush-type permanent repair. All repairs shall be in accordance with Lessee's
Maintenance Program and conform to the Manufacturer's Structural Repair
Manual or the Engine manufacturer's approved manual, as the case may be,
and shall be provided with approval by the FAA if so required. Any repair
not covered by the Manufacturer's Structural Repair Manual or the Engine
manufacturer's approved manual, as the case may be, shall be in accordance
with FAA-approved data and shall be approved by Manufacturer or the Engine
manufacturer, as the case may be.
(5) TERMINATING ACTION. Lessee shall perform all deferred and
carryover maintenance items and clear all pilot discrepancies with respect to
the Aircraft on a terminating action basis. All airworthiness directives
issued during the Term by the FAA, all changes required by any amendments or
changes to the FAR's during the Term, and all alert service bulletins or
service bulletins that are mandated by airworthiness directives issued during
the Term by a manufacturer or vendor applicable to the Equipment having a
date for compliance that falls on or prior to twelve (12) months or 3,000
Flight Hours or Cycles, as the case may be, after the expiration of the Term
(or return of the Aircraft, if later) shall be accomplished in compliance
with the issuing entity's specific instructions without regard to any
alternate means of compliance, waiver or operator exemptions delaying
compliance. Without limiting the foregoing, any airworthiness directives,
FAR's or manufacturer's or vendor's alert service bulletins or service
bulletins that are mandated by airworthiness directives issued during the
Term which allow temporary compliance by inspection or other action (other
than by terminating action) but require terminating compliance on or prior to
twelve (12) months or 3,000 Flight Hours or Cycles, as the case may be, after
the expiration of the Term (or return of the Aircraft, if later) shall have
such terminating compliance complete prior to return, and all
manufacturer's and vendor's service bulletins issued during the Term which
are rendered mandatory by the Manufacturer's then current ETOPS Compliance
Configuration and Maintenance Procedures Guide and which require a repetitive
inspection, modification or terminating compliance on or prior to twelve (12)
months or 3,000 Flight Hours or Cycles, as the case may be, after the
expiration of the Term (or return of the Aircraft, if later) shall have such
inspection, modification or terminating compliance completed at the highest
level of compliance possible prior to return. Without limiting the foregoing,
the Aircraft shall be in full compliance with the Manufacturer's then current
ETOPS Compliance Configuration and Maintenance Procedures Document for 120
(or, if applicable, 180) minutes ETOPS operation. The Aircraft shall also be
in compliance with the Manufacturer's SSI, SSID, Corrosion Prevention and
Control and Aging Aircraft Programs, and shall comply with United States and
ICAO (to the extent applicable to aircraft operated in the United States)
noise and environmental regulations.
(6) BORESCOPE INSPECTION, ETC. Lessor shall have the right at
Lessee's expense to carry out a full video borescope inspection of the gas
path of the hot and cold sections of each Engine and the APU and undertake a
full operational check (power assurance run) of each Engine and the APU
system. Lessee shall provide evidence satisfactory to Lessor reflecting the
correction at Lessee's expense of any watch items or unserviceable or
13-10
reject conditions or defects or discrepancies found not to be in compliance with
manufacturer's maintenance manual limits during such inspections and checks.
(7) KITS. Lessee shall have ordered during the Term all no-charge
kits for the Aircraft offered by Manufacturer, the Engine manufacturer and
other vendors, and, if not incorporated in the Aircraft at the time of return
hereunder (unless required to do so by the terms hereof), Lessee shall return
such kits to Lessor with the Aircraft. Lessor shall be provided with all
modification kits and other such items that are on order for the Aircraft.
(8) LEAKS, ETC. The Airframe and Engines so returned shall be free
of fuel leaks, and the fuel system of the Aircraft, including the Engines,
shall have been tested and free of bacteriological, fungus and other
contamination and corrosion and shall show no indication of breakdown. The
hydraulic and oil systems of the Aircraft, including the Engines, shall have
been tested and free of contamination and corrosion and shall show no
indication of breakdown. Lessee shall provide copies of the results of
laboratory tests of all such systems to Lessor and of full bacteriological
and fungus tests of all fuel tanks performed no more than thirty (30) days
prior to return of the Aircraft. Any bacteriological, fungus or other
contamination or corrosion revealed thereby shall be corrected or treated to
Lessor's satisfaction prior to return.
(9) PAINTING. Lessee shall remove all special markings of Lessee,
and shall strip the paint from the Aircraft and repaint the Aircraft in a
livery specified by Lessor after application of corrosion protection and
performance of other procedures, in accordance with industry practice, with
control surfaces balanced and other procedures performed in accordance with
Manufacturer's maintenance procedures, all at Lessee's expense. Lessee shall
also weigh the Aircraft.
(10) NOISE CREDITS. Any and all noise credits, base level rights or
any other types of rights which accrue with respect to the Aircraft shall be
deemed to be transferred to and to have accrued to the benefit of Lessor upon
the expiration or sooner cancellation or termination of this Lease for any
reason.
(e) RECORDS. Upon the return of the Aircraft, (i) the Airframe, Engines
and all Parts shall be documented with work orders, vendor serviceable tags,
etc. to have been maintained, repaired and overhauled by FAA certified repair
stations or by those approved by the FAA through reciprocal agreements and in
a manner so that such equipment is approved by the FAA for use on United
States registered and certificated aircraft, and (ii) Lessee shall deliver
to Lessor (A) all logs, manuals, certificates, data and inspection,
modification, maintenance and overhaul records, amended to their latest
amendment revision available generally, required to be maintained with
respect thereto under applicable rules and regulations of the FAA or other
governmental authority having jurisdiction, and (B) all logs, manuals and
catalogs included with the Aircraft on the Delivery Date therefor or supplied
during the Term hereof, amended to their latest amendment revision available
generally.
If non-computerized copies of maintenance records are not available,
then Lessee shall take action with the pertinent regulatory agencies to
insure that Lessor and
13-11
the FAA are provided with all requested necessary and proper guarantees of
methods of compliance, component overhaul and management, scheduling, quality
control, serial number verification, etc.
The head of Lessee's Quality Control Department shall certify in
writing that the data and information contained in all documentation and
records returned to Lessor is true and correct. For any computerized
records, the head of Lessee's Quality Control Department shall sign or
initial each computer page.
All Parts identified with safe-life limits shall be identified with
their back to birth service histories, accumulated Cycles or Flight Hours, as
applicable, and remaining service lives on a separate listing. All Parts
which are identified in the maintenance records by part numbers and serial
numbers, other than the manufacturer's shall be provided with interchange or
cross reference listing necessary to establish complete traceability.
In the event of missing, incomplete or noncompliant records, Lessee
shall at its expense reaccomplish the tasks necessary to produce such records
in accordance with its Maintenance Program prior to return of the Equipment
to Lessor. Without limiting any of the foregoing, all overhaul and repair
procedures shall as to quality and documentation be such as to enable
immediate transfer to a new operator under FAR Part 121. At the time of
return of the Aircraft to Lessor hereunder, Lessee shall also provide Lessor
with evidence satisfactory to Lessor that Lessee has fully paid and
discharged all navigation charges, airport landing fees and the like which
have resulted in or could give rise to a Lien on the Aircraft or any part
thereof if the same remains unpaid.
(f) TECHNICAL ACCEPTANCE; FERRY FLIGHT. Upon completion of the
inspection of the Aircraft and records by Lessor and, unless otherwise agreed
in writing by Lessor and Lessee, correction of any discrepancies or
deficiencies required to be corrected by Lessee prior to redelivery to
Lessor, Lessor shall execute and deliver to Lessee, a technical acceptance
certificate which shall constitute Lessor's technical acceptance of the
Aircraft, except as noted in such technical acceptance certificate.
Notwithstanding the execution and delivery of such technical acceptance
certificate by Lessor, all Lessee's obligations hereunder shall continue in
full force and effect until actual return of the Aircraft to and final
acceptance of the Aircraft by Lessor at the location specified in Article
13(a), in full compliance with all Lessee's obligations hereunder, to the
same extent as if such technical acceptance certificate had not been executed
by Lessor (it being understood, without limitation, that Lessee shall (i)
bear the full risk of damage and loss to the Aircraft and shall promptly
repair or cause to be repaired any damage to the Aircraft which may occur
prior to completion of ferry flight referred to below, and (ii) maintain
insurance in respect of the Aircraft as required by Article 10 hereof to and
including the time of redelivery of the Aircraft to Lessor); provided,
however, Lessee shall not be responsible to correct any discrepancies or
deficiencies that existed at the time of the final inspection of the Aircraft
referred to above but were not raised until completion of the ferry flight of
the Aircraft referred to below if such discrepancies or deficiencies could
have been noted on completion of the final inspection of the Aircraft (ie.,
the foregoing shall not relieve Lessee from its responsibility to correct
discrepancies or
13-12
deficiencies discovered as the result of the ferry flight of the Aircraft).
Upon technical acceptance of the Aircraft by Lessor, Lessee shall promptly
ferry the Aircraft at Lessee's cost to the redelivery location referred to in
Article 13(a) hereof. Lessor shall have the right (subject to compliance with
the requirements or approval of the FAA) for up to five (5) representatives
or designees to travel on the Aircraft on such ferry flight.
(g) AID IN DISPOSITION. Lessee agrees that during the last 180 days of
the Term it win cooperate in all reasonable respects with the efforts of
Lessor to lease or sell the Aircraft, including, without limitation,
permitting potential lessees or purchasers to inspect the Aircraft and the
records relating thereto, provided that the same shall not interfere with
Lessee's use of the Aircraft or require Lessee to incur out-of-pocket
expenses for which it is not reimbursed.
13-13
ARTICLE 14. EVENTS OF DEFAULT. The following events shall constitute
Events of Default (whether any such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) Lessee shall fail to make any payment of Rent as and when due, and
such failure shall continue for a period of at least three (3) consecutive
days;
(b) Lessee shall fail to carry and maintain insurance in accordance with
the provisions of Article 10 hereof,
(c) Lessee shall fail to perform or observe any term, condition or
agreement to be performed or observed by it under Article 3(c) (as
supplemented in Schedule "1" hereto), Article 5(a), 5(b), or 5(d), Article
10(d), Article 12 or Article 13;
(d) Lessee shall fail to perform or observe any other term, condition,
covenant or agreement to be performed or observed by it hereunder or under
any other agreement between Lessor and Lessee and such failure shall continue
unremedied for a period of thirty (30) days after actual knowledge thereof by
Lessee;
(e) Any representation or warranty made by Lessee herein or in any
document or certificate furnished Lessor in connection herewith or pursuant
hereto shall prove to be false or misleading in any material respect;
(f) Any obligation of Lessee for the payment or guarantee of payment of
borrowed money or the deferred purchase price of property or for the payment
or guarantee of payment of rent under any lease of aircraft shall not be paid
when due, whether by acceleration or otherwise, and such default in payment
shall continue beyond any applicable grace period or extension thereof, and
the other party to any such agreement has commenced to exercise any of its
remedies under such agreement;
(g) Lessee shall consent to the appointment of a receiver, custodian,
administrator, trustee, liquidator or any similar official of itself or of a
substantial part of its property, or Lessee shall become insolvent or fail to
pay or admit in writing its inability to pay its debts generally as they come
due, or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition for an order for relief pursuant to
Section 301 of Title 11 of the United States Code, or any superseding
statute, as amended from time to time, or 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 Lessee for an
order for relief or in any such proceeding, or Lessee shall by voluntary
petition, answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law
14-1
providing for the reorganization, liquidation or winding-up of corporations,
or providing for an arrangement, composition, extension or adjustment with
its creditors;
(h) An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
custodian, administrator, trustee, liquidator or similar official of Lessee
or of any substantial part of its property, or any substantial part of the
property of Lessee shall be sequestered, and any such order, judgment or
decree of appointment or sequestration shall remain in force undismissed,
unstayed or unvacated for a period of thirty (30) days after the date of
entry thereof;
(i) A petition against Lessee for an order for relief pursuant to
Section 303 of Title 11 of the United States Code, or any superseding
statute, as amended from time to time or an order for any proceeding under
any bankruptcy laws or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within thirty (30)
days thereafter, or, under the provisions of any law providing for
reorganization, liquidation or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction shall assume jurisdiction,
custody or control of Lessee or of any substantial part of its property and
such jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of thirty (30) days;
(j) Final judgment for the payment of money in excess of $500,000 (or
its equivalent) shall be rendered against Lessee and the same shall remain
unpaid, unstayed or undischarged for a period of thirty (30) days;
(k) Lessee's certificated operations shall be suspended, or Lessee shall
cease to be a certificated Air Carrier, or the franchises, concessions,
permits, certificates, licenses (including, without limitation, its air
operator certificate or air transport license), rights or privileges required
for the conduct of Lessee's airline operations are revoked, canceled,
suspended, not renewed or otherwise terminated; or
(l) An "Event of Default" under, and as such term is defined in, the
Companion Lease shall have occurred and be continuing.
14-2
ARTICLE 15. REMEDIES. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, Lessor may, at
its option, declare this Lease to be in default and Lessor may, in addition
to any other remedies provided herein or by applicable law, exercise one or
more of the following remedies with respect to the Aircraft, or any part
thereof, as Lessor in its sole discretion shall elect:
(a) Demand that Lessee, and Lessee shall upon the written demand of
Lessor and at Lessee's expense, return promptly to Lessor the Aircraft in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Article 13 hereof as if the Aircraft were being returned at
the end of the Term therefor; or Lessor, at its option, may enter upon the
premises where all or any part of the Aircraft or any Engine is located and
take immediate possession of and remove the same (together with any engine
which is not an Engine but which is installed on the Airframe and any other
property in the Aircraft subject to all of the rights of the owner, lessor,
lienor or secured party of such engine or other property, provided, however,
that the Airframe with an engine (which is not an Engine) installed thereon
or any property therein may be flown to a location within Europe or the
United States, and such engine or other property shall be held for the
account of any such owner, lessor, lienor or secured party or, in the case of
an engine owned by Lessee free of Liens, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the terms of Article
13 hereof) by summary proceedings or otherwise, all without liability
accruing to Lessor for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise;
(b) Sell the Aircraft, or part thereof, at public or private sale, or
otherwise dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, or part thereof, as Lessor in its sole discretion may determine,
all free and clear of any rights of Lessee and without any duty to account to
Lessee with respect to such action or inaction or for any proceeds with
respect thereto, except to the extent required by paragraph (c) below in the
event Lessor exercises its rights under such paragraph;
(c) In the event Lessor, pursuant to paragraph (b), above, shall have
relet the Aircraft or shall have sold the Aircraft, Lessor, in lieu of
exercising its rights under paragraph (d), below (but without limiting any of
its other rights hereunder or under law), may, if it shall so elect, demand
that Lessee pay Lessor and Lessee shall pay Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for the
Aircraft due for the period commencing as of the commencement of the term of
the reletting or the date of sale, as the case may be) any accrued but unpaid
Basic Rent for the Aircraft due up to and including the date of the
commencement of the term of the reletting or the date of sale plus the excess
of: (i) in the case of a reletting, the aggregate unpaid Basic Rent for the
Aircraft which would otherwise have become due hereunder over the Term but
for the Event of Default, discounted monthly to present value as of the date
of the commencement of the term of the reletting at 6% per annum, over the
aggregate basic rental payments to become due
15-1
under the reletting from the date of the commencement of the term of the
reletting to the date upon which the Term for the Aircraft would have expired
but for Lessee's default, discounted monthly to present value as of the date
of the commencement of the term of the reletting at 6% per annum, or (ii) in
the case of a sale, the Stipulated Loss Value for the Aircraft, computed as
of the Basic Rent payment date immediately preceding the date of sale, over
the net cash proceeds of such sale. The amounts specified in this paragraph
shall continue to bear interest at the Incentive Rate from the date of the
commencement of the term of the reletting or the date of sale, as the case
may be, until payment is made;
(d) if Lessor shall have obtained possession of the Aircraft as
contemplated in paragraph (a), above, but shall not have relet or sold the
Aircraft as contemplated by paragraph (c), above, Lessor shall have the right
(but without limiting any of its other rights hereunder or under law), by
written notice to Lessee specifying a payment date, to demand that Lessee pay
to Lessor, and Lessee shall pay to Lessor, on the payment date specified in
such notice, all accrued but unpaid Basic Rent for the Aircraft due to and
including the payment date specified in such notice, plus the aggregate
unpaid Basic Rent for the Aircraft which would otherwise have accrued over
the remainder of the Term but for the Event of Default, discounted monthly
to present value as of the payment date specified in such notice at 6% per
annum. The amounts referred to in this paragraph shall continue to bear
interest at the Incentive Rate from the payment date specified in said notice
until payment is made;
(e) Proceed by appropriate court action or actions to enforce
performance by Lessee of the applicable covenants of this Lease and to
recover damages for the breach hereof;
(f) Cancel this Lease, which cancellation shall be effective
immediately upon Lessor having given notice of cancellation to Lessee,
whereupon Lessee's right to possess and use the Equipment shall immediately
cease, but such cancellation shall not relieve Lessee of any of its
obligations hereunder which accrued prior to the time of cancellation nor
shall such cancellation be deemed a release or a waiver of Lessee's
obligations for the unperformed balance of this Lease or Lessee's obligation
to compensate Lessor for all damages suffered by Lessor as a result of
Lessee's breach of this Lease, including, without limitation, damages
described in clauses (c), (d) or (e), above;
(g) Recover from Lessee any losses, premiums, fees, costs or expense
that are paid or incurred by Lessor in connection with the repayment of funds
obtained to finance or otherwise acquire the Aircraft, if any, or in
connection with the borrowing of funds to refinance the Aircraft, if any.
Except as otherwise specifically provided above, Lessee shall also be
liable for all unpaid Rent due hereunder before, during or after 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 any of Lessor's rights or remedies with respect thereto,
including all costs and expenses incurred in connection with the repossession
or return of the Aircraft in accordance with the terms of Article 13 hereof,
in placing the
15-2
ARTICLE 16. EXCUSABLE DELAY.
(a) GENERAL. Lessor shall not be responsible for nor be deemed to be in
default under this Agreement on account of any delay in delivery of the Aircraft
or other performance hereunder due to any of the following causes: acts of God;
war, warlike-operations, insurrections or riots; fires; floods or explosions;
serious accidents; epidemics or quarantine restrictions; any act of government,
governmental priorities, allocation regulations or orders affecting materials,
facilities or completed aircraft; strikes or labor troubles causing cessation,
slow-down or interruption of work; delay in transportation; delay or default by
Manufacturer under the Purchase Agreement or any manufacturer or vendor in
respect of the modifications referred to in Article 2(h) hereof; or inability
after due and timely diligence to procure materials, accessories, equipment or
parts; or due to any other cause to the extent it is beyond Lessor's control or
not occasioned by Lessor's fault or negligence. Delays resulting from any of the
foregoing causes are referred to herein as "Excusable Delays." Lessor shall
promptly notify Lessee of any delay or anticipated delay in delivery of the
Aircraft.
(b) FOUR (4) MONTHS' EXCUSABLE DELAY.
(i) TERMINATION FOR ACTUAL DELAY. If, due to Excusable Delays,
delivery of the Aircraft is delayed for a period of more than four (4) months
after the end of the calendar month in which delivery is otherwise required
hereunder in accordance with the Scheduled Aircraft Delivery, either Lessor or
Lessee may terminate this Lease by giving written notice to that effect to the
other within ten (10) days after the expiration of such four month-period.
(ii) TERMINATION FOR ANTICIPATED DELAY. If the Manufacturer
concludes based on its appraisal of the facts, that due to Excusable Delays,
delivery of the Aircraft will be delayed for a period of more than four (4)
months after the Scheduled Aircraft Delivery, and as a result thereof in good
faith and in accordance with its normal scheduling procedures, Manufacturer
internally reschedules delivery of the Aircraft to a date reflecting such delay
and notifies Lessor thereof, Lessor shall notify Lessee in writing of such delay
and rescheduling, in which event either Lessor or Lessee may terminate this
Agreement by giving written notice to that effect to the other within ten (10)
days after receipt by Lessee of such notice of anticipated delay.
(c) CONSEQUENCE OF TERMINATION. Termination under Article 16(b) shall
terminate and discharge all obligations and liabilities of Lessee and Lessor
hereunder and all undelivered items and services to be furnished hereunder which
are related thereto, and Lessor shall promptly return the Security Deposit and
$100,000 payment theretofore paid by Lessee to Lessor, except that, if Lessee
and not Lessor terminates this Lease pursuant to this Article 16, Lessor shall
reduce the payment to Lessee and/or, as the case may be, be entitled to draw on
the Letter of Credit (and for this purpose an Event of Default shall be deemed
to exist hereunder so that Lessor may certify the existence of an Event of
Default hereunder) for the
16-1
amount necessary to compensate Lessor for the value of any training or other
goods or services received by Lessee in connection with this Lease and the cost
of any modifications to the Aircraft or equipment or other items purchased by
Lessor at the request of Lessee in connection with this Lease.
(d) FAILURE TO TERMINATE. If, following notice of an anticipated delay
under Article 16(b)(ii), this Lease is not terminated in accordance with the
provisions of such Article, then the Scheduled Aircraft Delivery for the
Aircraft otherwise required hereunder shall be extended by a period equal to the
resulting delay.
(e) DAMAGE TO OR DESTRUCTION OF AIRCRAFT - DELIVERY DELAY. In the event
that prior to delivery the Aircraft is, due to any cause, lost, destroyed or
damaged beyond repair (and this Agreement has not been terminated in accordance
with this Article 16), or is damaged to the extent that it cannot be repaired to
new condition by replacement parts and delivered in accordance with the
Scheduled Aircraft Delivery, the time reasonably required to furnish a
replacement for the Aircraft or to accomplish such repairs shall be deemed an
Excusable Delay.
(f) TERMINATION RIGHTS EXCLUSIVE. The termination rights of Lessee set
forth in this Article 16 are in substitution for any other rights of termination
or contract lapse which Lessee might have arising by operation of law by virtue
of delays in performance for which Lessor is not deemed to be in default or to
have breached its duties hereunder.
16-2
ARTICLE 17. MISCELLANEOUS.
(a) 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 such provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, Lessee hereby waives any provision of
law which renders any provision hereof prohibited or unenforceable in any
respect. No term or provision of this Lease may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against whom 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 Lessee any right, title or interest in the
Aircraft or any Engine 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 shall in all respects be governed by, and
construed in accordance with, the internal laws of the State of California,
United States of America (without regard to any conflict of laws rule that might
result in the application of the laws of any other jurisdiction), including all
matters of construction, validity and performance.
(b) NOTICES. All notices, demands and other communications required or
permitted under the terms hereof shall be in writing (which shall include telex
and telecopy), and shall be deemed given or received: (i) if sent by registered
or certified mail, on the third Business Day after deposit in the national mail
service of the country from which it is sent, postage prepaid, return receipt
requested, (ii) if sent by any other means of physical delivery, E.G., hand
delivery or courier service, when delivered to the appropriate address provided
below, (iii) if sent by telecopier, when transmitted to the appropriate
telecopier number provided below and the sender's telecopy machine produces a
confirmation report confirming that such transmission has been sent. All such
notices, demands and other communications shall be addressed and/or telecopied
to the appropriate party at its address and/or telecopier number set forth
below, or at such other address or telecopier number as such party may from time
to time hereafter designate to such other parties in writing:
If to Lessee: Aloha Airlines, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President - Finance & Planning
& Chief Financial Officer
17-1
If to Lessor: Wilmington Trust Company, Owner Trustee
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
With a copy to: Ansett Worldwide Aviation, U.S.A.
c/o Kummer, Kaempfer, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
and to: Ansett Worldwide Aviation, U.S.A.
c/o Ansett Worldwide Aviation Services
TNT Plaza, Tower ▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Attention: Chief Executive Officer
Lessor's telefax number is (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to (61-2)
9699-1349. Lessee's telefax number is (▇▇▇) ▇▇▇-▇▇▇▇.
(c) LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make any
payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, 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 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 Lessee upon demand.
(d) CORPORATE EXISTENCE; MERGER. Lessee will preserve and maintain its
corporate existence and all its rights, privileges and franchises in every
jurisdiction in which the character of its property or the nature of its
business makes licensing or qualification necessary. Lessee will not or sell,
lease or otherwise dispose of all or substantially all of its properties nor
will it merge with or consolidate with or into or be acquired by any other
corporation or entity, unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged (the "Successor"): (a) shall be organized and existing under
the laws of the United States of America or any State thereof or the District of
Columbia, (b) shall be a Certificated Air Carrier, (c) shall execute and deliver
to Lessor an agreement in form and substance reasonably satisfactory to Lessor
containing an assumption by the Successor of each covenant and condition of this
Lease, (d) immediately after giving effect to such transaction, shall have at
least the tangible net worth and credit worthiness that Lessee had immediately
prior to giving effect to such transaction, and (e) shall make such filings and
recordings,
17-2
including any filing or recording with the FAA, as shall be necessary or
desirable to evidence such consolidation or merger with the Successor; or merger
with the Successor;
(ii) Immediately prior to and after giving effect to such
transaction, no Event or Event of Default shall have occurred and be continuing,
and the ability of the Successor (or Lessee if Lessee is the Successor) to
perform its obligations under this Lease shall not be adversely affected by such
transaction; and
(iii) the Successor (or Lessee if Lessee is the Successor) shall
have delivered to Lessee an officer's certificate and an opinion of counsel
satisfactory to Lessor, each stating that such consolidation or merger and the
assumption agreement described above comply with this Article and that the
agreements entered into to effect such consolidation or merger and such
assumption agreement are legal, valid and binding obligations of the Successor
(or Lessee if Lessee is the Successor), enforceable in accordance with their
respective terms.
(e) TRAINING AND CUSTOMER SUPPORT. Pursuant to Customer Support
Document to the Purchase Agreement, a copy of which has heretofore been
provided by Lessor to Lessee, Manufacturer has agreed to provide certain
training, support services and technical data and documents. Provided no Event
or Event of Default has occurred and is continuing hereunder, Lessor agrees to
assign to Lessee the training, support services, data, documents and other
rights available under such Customer Support Document in respect of the
Aircraft. Lessor shall not have any liability or responsibility for the adequacy
of such training; support services or technical data and documents or for
Manufacturer's performance or nonperformance in respect thereof, all of which
is, as to Lessor, without recourse, representation or warranty, express or
implied. Lessee hereby agrees to be bound by all the provisions of the Customer
Support Document.
(f) SUBJECT AND SUBORDINATE. THIS LEASE AND LESSEE'S RIGHTS HEREUNDER
AND IN THE AIRCRAFT ARE SUBJECT AND SUBORDINATE TO ALL THE TERMS OF THE
MORTGAGE, INCLUDING, WITHOUT LIMITATION MORTGAGEE'S RIGHT TO TAKE IMMEDIATE
POSSESSION OF THE AIRCRAFT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT UNDER THE
MORTGAGE. Without limiting the foregoing, solely as between Lessor and Lessee,
Lessor covenants that if, and so long as, no Event of Default shall have
occurred and be continuing, Lessor shall not (and Lessor shall not provide a
basis for Mortgagee or any other person lawfully claiming through Lessor or
Mortgagee to) disturb Lessee's quiet enjoyment of the Aircraft hereunder. If
Lessor breaches the foregoing covenant or if Mortgagee improperly repossesses,
seizes or attaches the Aircraft, Lessee acknowledges and agrees that Lessee's
sole right and remedy shall be the right to seek to recover resulting damages
from Lessor, but Lessee shall have no right to recover any damages from or
otherwise ▇▇▇ Mortgagee in connection therewith or otherwise to retain
possession or use of the Aircraft in contravention of the rights, interests,
benefits or remedies of Mortgagee.
17-3
(g) ASSIGNMENT. THIS LEASE AND ALL OR ANY PART OF LESSEE'S RIGHTS
HEREUNDER, INCLUDING, WITHOUT LIMITATION, ITS RIGHTS IN RESPECT OF THE
SECURITY DEPOSIT AND TO THE RETURN THEREOF, SHALL NOT BE ASSIGNED, NOVATED,
HYPOTHECATED OR OTHERWISE TRANSFERRED BY LESSEE WITHOUT LESSOR'S PRIOR
WRITTEN CONSENT, AND ANY PURPORTED ASSIGNMENT, NOVATION, HYPOTHECATION OR
TRANSFER SHALL BE VOID. Subject to theforegoing, this Lease shall inure
to the benefit of and be binding upon the respective successors and assigns
of the parties hereto. Lessor's interest in this Lease Agreement and in
the Aircraft are freely saleable, novateable and assignable by Lessor in
whole or in part without restriction, and upon such sale, novation or
assignment (unless the assignment is solely for collateral security
purposes), Lessor shall be discharged from all further obligations
hereunder in respect of such interest or Equipment sold or assigned and
Lessor's assignee or transferee shall succeed to all of Lessor's rights,
interests and obligations in respect thereof as though such assignee or
transferee had been the initial owner or lessor, as the. case may be, in
respect thereof Lessor may also assign for collateral security purposes or
otherwise mortgage its fixed or contingent rights to receive money hereunder
or its interests in this Lease or in the Aircraft, in whole or in part.
Lessee shall comply with all reasonable requests of Lessor, its successors,
transferees and - assigns in respect of the sale, assignment, novation,
hypothecation or other transfer (including, if requested, execution of a
consent thereto, reaffirming its representations, warranties and
obligations hereunder in favor of such assignee, successor or transferee
or execution of a lease agreement on terms substantially identical to this
Lease Agreement substituting the name of such transferee, successor or
assignee for Lessor, and in either case providing the assignee, successor
or transferee with an insurance certificate and broker's report, addressed
to such assignee, successor or transferee, in compliance with the
requirements of Article 10 hereof). No such sale, assignment, novation or
other transfer by Lessor shall materially expand the obligations
of Lessee hereunder. Notwithstanding any such sale, assignment, novation
or other transfer, Lessor and the Participants shall continue to be
Indemnitees pursuant to Article 8(a) and shall continue to be named as
additional insureds on all liability policies carried by Lessee pursuant
to Article 10 hereof. Without limiting any of the foregoing, Lessor may,
and at Lessor's request Lessee shall, take any action reasonably required
for the purpose of causing the Aircraft to be subjected to an equipment
trust, conditional sale, leveraged lease or other arrangement for the
financing by Lessor or Lessor's transferee or assignee of the Aircraft.
(h) EXPENSES. The prevailing party in any action or proceeding between
Lessor and Lessee to enforce the terms of this Lease shall be entitled to
recover from the other party all its costs and expenses, including reasonable
attorneys' fees incurred by such prevailing party in such action or proceeding.
In addition, Lessee shall also reimburse Lessor for all out-of-pocket costs and
expenses, including reasonable attorneys fees, incurred by Lessor in connection
with any approvals, consents, waivers, modifications or amendments hereto
requested by Lessee.
(i) SURVIVAL. The representations, warranties and indemnities of Lessee
in this Lease shall survive the delivery of the Aircraft and the expiration or
other termination of
17-4
this lease and are expressly made for the benefit of, and shall be enforceable
by Lessor and its successors and assigns.
(j) INTEGRATION. This Lease Agreement contains the entire
agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior written and oral agreements and
understandings between the parties hereto with respect to the subject matter
hereof.
(k) FEDERAL BANKRUPTCY CODE. In accordance with Section 1110 of Title
11 of the United States Bankruptcy Code, or any superseding statute, as amended
from time to time, Lessee hereby agrees that the title of Lessor to the Aircraft
and Engines and any right of Lessor to take possession of the Aircraft and
Engines in compliance with the provisions of this Lease shall not be affected by
the provisions of Section 105, 362, 363 or any other Section of Title 11, as
amended and in effect from time to time. In the event Section 1110 is amended,
or if it is repealed and another statute is enacted in lieu thereof, Lessor and
Lessee agree to amend this Lease and take such other action as Lessor deems
necessary so as to afford to Lessor the rights and benefits as such amended or
substituted statute confers upon owners and lessors of aircraft.
(l) 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.
(m) EXECUTION BY TELECOPY. Delivery by Lessor or Lessee to the other by
telecopy of an executed counterpart of this Lease or of any other document
executed pursuant hereto shall be deemed as effective as delivery of an
originally executed counterpart thereof. Such party shall promptly deliver to
the other party an originally executed counterpart thereof, but the failure of
such party to deliver an executed counterpart shall not affect the validity or
effectiveness of this Lease or such other document.
17-5
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed by their authorized officers or representatives as of the day
and year first above written.
LESSOR:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
WITNESS: By: [ILLEGIBLE]
----------------------------------
Title: AVP
------------------------------
[ILLEGIBLE]
---------------------------------
LESSEE:
ALOHA AIRLINES, INC.
WITNESS: By: [ILLEGIBLE]
----------------------------------
Title: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
------------------------------
---------------------------------
WITNESS: By: [ILLEGIBLE]
----------------------------------
Title: VICE PRESIDENT PLANNING
& DEVELOPMENT
------------------------------
---------------------------------
17-6
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed by their authorized officers or representatives as of the day and
year first above written.
LESSOR:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
WITNESS: By: [ILLEGIBLE]
----------------------------------
Title:
------------------------------
---------------------------------
LESSEE:
ALOHA AIRLINES, INC.
WITNESS: By: [ILLEGIBLE]
----------------------------------
Title: PRESIDENT & CHIEF
EXECUTIVE OFFICER
------------------------------
[ILLEGIBLE]
---------------------------------
WITNESS: By: [ILLEGIBLE]
----------------------------------
Title: VICE PRESIDENT PLANNING
& DEVELOPMENT
------------------------------
[ILLEGIBLE]
---------------------------------
17-6
SCHEDULE "1"
This is Schedule "1" to the Lease Agreement between Wilmington Trust
Company, a Delaware banking corporation, acting not in its individual
capacity but solely as Owner Trustee (herein called "Lessor"), and Aloha
Airlines, Inc. ("Lessee"), for the lease of a Boeing ▇▇▇▇▇ ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇.
[This Schedule has been omitted as confidential information and filed
separately with the Commission]
S-1
Exhibit "A"
LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT, dated _________, 1999, between Wilmington
Trust Company, a Delaware banking corporation, acting not in its individual
capacity but solely as Owner Trustee (herein called "Lessor"), and Aloha
Airlines, Inc. (the "Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of August 4, 1999 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery of a Lease Supplement, substantially in the form hereof
for the purpose of leasing a specific Aircraft under the Lease Agreement as and
when delivered by Lessor to Lessee in accordance with the terms thereof.
The Lease Agreement relates to the Airframe and Engines described
below, and a counterpart of the Lease Agreement is attached hereto and made a
part hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the Federal Aviation
Administration as one document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
(1) Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease Agreement, the following
described Boeing Model 737-73A aircraft and engines (hereafter, the "Delivered
Equipment"):
(i) Airframe: Identification Number ________; Manufacturer's
Serial No. ______; and
(ii) Engines: Two CFM International Model CFM56-7B20 engines
(to be upgraded to CFM56-7B24 engines prior to or promptly following
delivery) bearing, respectively, manufacturer's serial numbers _________ and
_______ (each of which engines has 750 or more rated takeoff horsepower or
the equivalent of such horsepower).
(2) The Delivery Date of the Delivered Equipment is the date of this
Lease supplement set forth in the opening paragraph hereof.
(3) The Term for the Delivered Equipment shall commence on the
Delivery Date therefor and shall end on ________________ 2009.
(4) Lessee hereby confirms its agreement to pay Lessor Rent with
respect to the Delivered Equipment throughout the Term therefor in accordance
with the terms of the Lease Agreement.
A-1
(5) The fuel in the fuel tanks of the Aircraft on the Delivery Date is
_________.
(6) Lessee hereby confirms to Lessor that the Airframe and
Engines described above have been duly marked as showing Lessor's title
thereto and Mortgagee interest therein in accordance with the terms of the
Lease Agreement and that Lessee mortgage has accepted the Delivered
Equipment for all purposes of the Lease Agreement, including its being
airworthy, in accordance with specifications, in good working order and
repair and without defect or inherent vice in title, condition, design,
operation or fitness for use, whether or not discoverable by Lessee as of the
date hereof, and free. and clear of all Liens; provided, however, that
nothing contained herein or in the Lease Agreement shall in any way
diminish or otherwise affect any right Lessee or Lessor may have with
respect to the Delivered Equipment as against Manufacturer or any other
person, whether under the Purchase Agreement or otherwise.
(7) All of the terms and provisions of this Lease Supplement are
hereby incorporated by reference into the Lease Agreement to the same
extent as if fully set forth therein.
(8) This. Lease Supplement shall in all respects be governed by, and
construed in accordance with, the laws of the State of California including all
matters of construction, validity and performance.
A-2
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
to be duly executed by their authorized officers or agents as of the date and
year first above written.
LESSOR:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
WITNESS: By:
----------------------------------
Title:
------------------------------
---------------------------------
LESSEE:
ALOHA AIRLINES, INC.
WITNESS: By:
----------------------------------
Title:
------------------------------
---------------------------------
WITNESS: By:
----------------------------------
Title:
------------------------------
---------------------------------
A-3
LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT, dated October 18, 1999, between Wilmington Trust
Company, a Delaware banking corporation, acting not in its individual capacity
but solely as Owner Trustee (herein called "Lessor"), and Aloha Airlines, Inc.
(the "Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of August 4, 1999 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery of a Lease Supplement, substantially in the form hereof
for the purpose of leasing a specific Aircraft under the Lease Agreement as and
when delivered by Lessor to Lessee in accordance with the terms thereof.
The Lease Agreement relates to the Airframe and Engines described
below, and a counterpart of the Lease Agreement is attached hereto and made a
part hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the Federal Aviation
Administration as one document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
(1) Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease Agreement, the following
described Boeing Model 737-73A aircraft and engines (hereafter, the "Delivered
Equipment"):
(i) Airframe: U.S. Registration Number N738AL; Manufacturer's
Serial No. 28499; and
(ii) Engines: Two CFM International Model CFM56-7B24 engines
bearing, respectively, manufacturer's serial numbers 874938 and 874945 (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).
(2) The Delivery Date of the Delivered Equipment is the date of this
Lease Supplement set forth in the opening paragraph hereof.
(3) The Term for the Delivered Equipment shall commence on the Delivery
Date therefor and shall end on October 17, 2009.
(4) Lessee hereby confirms its agreement to pay Lessor Rent with
respect to the Delivered Equipment throughout the Term therefor in accordance
with the terms of the Lease Agreement.
(5) The fuel in the fuel tanks of the Aircraft on the Delivery Date is
5,700 lbs.
(6) The Lease Agreement is amended and supplemented in the following
respects:
(i) The "Mortgage" referred to in Article 1 is more specifically
defined as the Mortgage Agreement dated October 1999 between Lessor and
Mortgagee;
(ii) The "Mortgagee" referred to in Article 1 is more specifically
defined as Citibank International Plc, and its successors, transferees and
assigns; and
(iii) Citibank International Plc and Citibank, N.A. are lenders in
connection with the Mortgage and are therefore included in the definition of
"Participants" in Article 1.
(7) Lessee hereby confirm to Lessor that the Airframe and Engines
described above have been duly marked as showing Lessor's title thereto and
Mortgagee's mortgage interest therein in accordance with the terms of the Lease
Agreement and that Lessee has accepted the Delivered Equipment for all purposes
of the Lease Agreement, including its being airworthy, in accordance with
specifications, in good working order and repair and without defect or inherent
vice in title, condition, design, operation or fitness for use, whether or not
discoverable by Lessee as of the date hereof, and free and clear of all Liens;
provided, however, that nothing contained herein or in the Lease Agreement shall
in any way diminish or otherwise affect any right Lessee or Lessor may have with
respect to the Delivered Equipment as against Manufacturer or any other person,
whether under the Purchase Agreement or otherwise.
(8) All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference into the Lease Agreement to the same extent as if
fully set forth therein.
(9) This Lease Supplement 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.
(9) This Lease Supplement shall in all respects be governed by, and
construed in accordance with, the laws of the State of California including all
matters of construction, validity and performance.
2
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
to be duly executed by their authorized officers or agents as of the date and
year first above written.
LESSOR:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
WITNESS: By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Title: Financial Services Officer
------------------------------
[ILLEGIBLE]
---------------------------------
LESSEE:
ALOHA AIRLINES, INC.
WITNESS: By:
----------------------------------
Title:
------------------------------
---------------------------------
WITNESS: By:
----------------------------------
Title:
------------------------------
---------------------------------
3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed by their authorized officers or agents as
of the date and year first above written.
LESSOR:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
WITNESS: By:
----------------------------------
Title:
------------------------------
---------------------------------
LESSEE:
ALOHA AIRLINES, INC.
WITNESS: By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Title: SR. VICE PRESIDENT FINANCE &
PLANNING AND CFO
------------------------------
[ILLEGIBLE]
---------------------------------
WITNESS: By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: VICE PRESIDENT
PLANNING & DEVELOPMENT
------------------------------
[ILLEGIBLE]
---------------------------------
3
(CERTIFIED COPY TO BE RETURNED)
RECORDED
Federal Aviation Administration
Date 1-24-02 Time am 8:28
-------------- ----------
Conveyance Number QQ024259
-----------------
By /s/ ▇. ▇▇▇▇▇▇
---------------------
AMENDMENT NO. 1
TO LEASE AGREEMENT
This Amendment No. 1 to Lease Agreement ("Amendment No. 1"), dated as of
November 29, 2001, is entered into by and between Wilmington Trust Company not
in its individual capacity but solely as Owner Trustee (herein called "Lessor"),
and Aloha Airlines, Inc., a Delaware corporation (herein called "Lessee").
RECITALS
A. Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of August 4, 1999*, as supplemented to the date hereof (collectively referred
to as the "Lease"), pursuant to which Lessor has leased to Lessee one Boeing
Model 737-73A aircraft bearing manufacturer's serial number 28499 and United
States Registration Marks N738AL, equipped with two CFM 56-7B24 engines
bearing, respectively, manufacturer's serial numbers 874938 and 874945.
▇. ▇▇▇▇▇▇ and Lessee wish to amend certain terms of the Lease and to extend
the Term of the Lease all on the terms and conditions set forth below.
C. Capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Lease and reference to
"Articles" herein shall be construed to refer to Articles of the Lease.
TERMS AND CONDITIONS
Therefore, in consideration of the premises, and for good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Article 3(a) of the Lease is hereby amended and restated in its entirety
as follows:
"(a) TERM. Except as otherwise provided herein, the Aircraft shall be
leased to Lessee hereunder for a Term that commences on the Delivery Date
and ends on October 17, 2010."
2. Schedule 1 to the Lease Agreement shall be amended in accordance
with the Amendment to Schedule 1 attached hereto.
* as more particularly described in Annex I attached hereto (the "Lease"),
3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.
4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof" or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.
5. This Amendment No. 1 may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By: /s/ [ILLEGIBLE]
----------------------------------------
Title: AVP
----------------------------------------
ALOHA AIRLINES, INC.
By:
----------------------------------------
Title:
----------------------------------------
By:
----------------------------------------
Title:
----------------------------------------
2
3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.
4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof" or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.
5. This Amendment No. 1 may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By:
----------------------------------------
Title:
----------------------------------------
ALOHA AIRLINES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Title: EXECUTIVE VICE PRESIDENT & CFO
----------------------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
Title: SENIOR VICE PRESIDENT PLANNING
AND BUSINESS DEVELOPMENT
----------------------------------------
Annex I
to Amendment No. 1 to Lease Agreement
DESCRIPTION OF LEASE
Lease Agreement dated as of August 4, 1999 between Wilmington Trust
Company, as owner trustee under Amended and Restated Trust Agreement dated as of
September 29, 1999, as lessor, and Aloha Airlines, Inc., as lessee, which was
recorded by the Federal Aviation Administration on November 8, 1999 and assigned
Conveyance No. HH023936, as supplemented by the following described instrument:
Date of FAA FAA
Instrument Instrument Recording Date Conveyance No.
---------- ---------- -------------- --------------
Lease Supplement 10/18/99 11/08/99 HH023936
AMENDMENTS TO SCHEDULE "1"
This Amendment to Schedule 1 of the Lease Agreement between Wilmington Trust
Company as Owner Trustee ("Lessor") and Aloha Airlines Inc. ("Lessee") has been
intentionally omitted from the FAA filing counterpart as containing confidential
financial information but Lessor and Lessee agree that this Schedule forms a
part of and is incorporated into the Lease as if fully set forth therein.
Lessor and Lessee agree as follows:
[These provisions have been omitted as confidential information and filed
separately with the Commission]
3
