THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT EXECUTED BY LESSOR OR, IF LESSOR HAS
ASSIGNED ITS RIGHTS TO A THIRD PARTY IN ACCORDANCE WITH THIS LEASE AGREEMENT,
SUCH THIRD PARTY ON THE SIGNATURE PAGE OF THIS LEASE AGREEMENT.
LEASE AGREEMENT
dated __ June, 2001
between
INVESTORS ASSET HOLDING CORP.,
AS OWNER TRUSTEE
(Lessor)
- and -
AEROVIAS DE MEXICO, S.A. DE C.V.
(Lessee)
___________________________________
- relating to -
Boeing/McDonnell Douglas MD-87
Manufacturer's Serial No: 49587
U.S. Registration No.: N753RA
_____________________________________
EXECUTION COPY
M73918.7
========
i
TABLE OF CONTENTS
CLAUSE PAGE
1. DEFINITIONS and INTERPRETATION 1
1.1. Definitions 1
1.2. Interpretation 12
2. REPRESENTATIONS and WARRANTIES 13
2.1. Lessee's Representations and Warranties 13
2.2. Lessee's Further Representations and Warranties 14
2.3. Repetition 15
2.4. Trustee's Representations and Warranties 15
2.5. Lessor's Representations and Warranties 16
2.6. Repetition 17
3. CONDITIONS PRECEDENT 17
3.1. Lessor's Documentary Conditions Precedent 17
3.2. Lessor's Other Conditions Precedent 18
3.3. Lessor's Waiver 19
3.4. Lessee's Conditions Precedent 19
4. COMMENCEMENT 20
4.1. Leasing 20
4.2. Delivery 20
4.3. Delivery Inspection 20
4.4. Acceptance and Risk 20
5. PAYMENTS 21
5.1. Rental Periods 21
5.2. Basic Rent 21
5.3. Extension Option 21
5.4. Payments 21
5.5. Gross-up 22
5.6. Taxation 22
5.7. Information 23
5.8. Taxation of Indemnity Payments 24
5.9. Default Interest 25
5.10. Contest 25
5.11. Verification 27
5.12. Forms 28
5.13. Absolute 28
5.14. Deposit 29
6. MANUFACTURER'S WARRANTIES 30
6.1. Assignment 30
6.2. Proceeds 30
6.3. Parts 30
6.4. Agreement 30
7. LESSOR'S COVENANTS and DISCLAIMERS 30
7.1. Quiet Enjoyment 30
7.2. Registration and Filings 30
7.3. Exclusion 30
7.4. Lessee's Waiver 30
7.5. Adverse Tax Change 30
7.6. Lessee's Confirmation 30
7.7. Lessor Contribution 30
8. LESSEE'S COVENANTS 30
8.1. Duration 30
8.2. Information 30
8.3. Lawful and Safe Operation 30
8.4. Taxes and Other Charges 30
8.5. Sub-Leasing 30
8.6. Inspection 30
8.7. Protection of Title 30
8.8. General 30
8.9. Records 30
8.10. Registration and Filings 30
8.11. Maintenance and Repair 30
8.12 Removal of Engines and Parts 30
8.13. Installation of Engines and Parts 30
8.14 Non-Installed Engines and Parts 30
8.15. Pooling of Engines and Parts 30
8.16. Equipment Changes 30
8.17. Title to Parts 30
8.18 Third Parties 30
9. INSURANCE 30
9.1. Insurances 30
9.2. Requirements 30
9.3. Insurance Covenants 30
9.4. Failure to Insure 30
9.5. Continuing Indemnity 30
9.6. Application of Insurance Proceeds 30
9.7. Additional Insurance 30
10. INDEMNITY 30
10.1. General 30
10.2. Mitigation 30
10.3. Duration 30
11. EVENTS OF LOSS 30
11.1. Total Loss 30
11.2. Requisition 30
12. RETURN OF AIRCRAFT 30
12.1. Redelivery 30
12.2. Final Checks 30
12.3 Final Inspection 30
12.4. Non-Compliance 30
12.5. Export Documentation 30
12.6. Acknowledgment 30
13. DEFAULT 30
13.1. Events 30
13.2. Rights 30
13.3. Repossession and Removal 30
13.4. Default Payments 30
14. ASSIGNMENT and TRANSFER 30
14.1. No Assignment by Lessee 30
14.2. Lessor Assignment 30
14.3. Grants of Security Interests 30
14.4. Sale and Leaseback by Lessor 30
14.5. Further Acknowledgments 30
14.6. Certain Protections for Lessee's Benefit 30
15. MISCELLANEOUS 30
15.1. Waivers; Remedies Cumulative 30
15.2. Delegation 30
15.3. Certificates 30
15.4. Appropriation 30
15.5. Currency Indemnity 30
15.6. Severability 30
15.7. Remedy 30
15.8. Expenses 30
15.9. Time of Essence 30
15.10. Notices 30
15.11. Law and Jurisdiction 30
15.12. Sole and Entire Agreement 30
15.13. Indemnities 30
15.14. Counterparts 30
15.15. Confidentiality 30
SCHEDULE 1 TERMINATION VALUE
SCHEDULE 2 DESCRIPTION OF AIRCRAFT
SCHEDULE 3 CERTIFICATE OF ACCEPTANCE
SCHEDULE 4 CONDITION AT DELIVERY
SCHEDULE 5 OPERATING CONDITION AT REDELIVERY
SCHEDULE 6 INSURANCE PROVISIONS
SCHEDULE 7 FORM OF LEGAL OPINION
SCHEDULE 8 FORM OF MONTHLY STATUS REPORT
SCHEDULE 9 BASIC RENT AND DEPOSIT
SCHEDULE 9-A FORM OF LETTER OF CREDIT
SCHEDULE 10 SUBSEQUENT INVESTMENTS
2
LEASE AGREEMENT
This LEASE AGREEMENT, dated ___ June, 2001 (this "Agreement"), is between
Investors Asset Holding Corp., a Massachusetts corporation, not in its
individual capacity but solely as owner trustee pursuant to the Trust Agreement
(the "Lessor"), and Aerovias de Mexico, S.A. de C.V., a corporation formed under
the laws of Mexico (the "Lessee").
RECITALS:
(A) The Aircraft is owned by Lessor and is subject to an Aircraft Security
Agreement [49587] dated as of June __, 2001 (the "Security Agreement"), between
Lessor, as borrower, and General Electric Capital Corporation, a New York
corporation (the "Agent"), as agent.
(B) Lessor and Lessee wish to provide for the leasing of the Aircraft to the
Lessee upon and subject to the covenants, terms and conditions set out in this
Agreement.
In consideration of the foregoing and for other good and valuable
consideration whose receipt and sufficiency Lessor and Lessee hereby
acknowledge, Lessor and Lessee agree as follows:
1. DEFINITIONS and INTERPRETATIONDEFINITIONS and INTERPRETATION
--------------------------------
1.1. DefinitionsDefinitions
-----------
In this Agreement the following expressions shall, unless the context otherwise
requires, have the following respective meanings:
AFFILIATE means, in relation to any Person, any other Person controlled directly
or indirectly by that Person, any other Person that controls directly or
indirectly that Person or any other Person under common control with that
Person. For this purpose "control" of any Person means ownership of a majority
of the voting power of the Person.
AGENT has the meaning specified in Recital A.
AGREED MAINTENANCE PERFORMER means the Lessee or any other reputable maintenance
organization that is experienced in maintaining aircraft and/or engines of the
same type as the Aircraft and the Engines, and duly certificated by the Aviation
Authority.
AGREED MAINTENANCE PROGRAM means the Lessee's current Maintenance Program (which
includes the adoption of MSG-3) as the same may be amended from time to time
with the approval of the Aviation Authority.
AGREEMENT has the meaning specified in the preamble.
AIRCRAFT means the aircraft described in Part l of Schedule 2 (which term
includes, where the context admits, a separate reference to all Engines, Parts
and Aircraft Documents).
AIRCRAFT DOCUMENTS means the documents, data and records identified in Part 2 of
Schedule 2 and all additions, renewals, revisions and replacements from time to
time made in accordance with this Agreement.
AIRFRAME means the Aircraft, excluding the Engines and the Aircraft Documents.
AMR means American Airlines, Inc.
APU means (i) the auxiliary power unit listed in Schedule 2, (ii) any and all
Parts, so long as such Parts are incorporated in, installed on or attached to
such auxiliary power unit or so long as title to such Parts is vested in the
Lessor in accordance with the terms of Clause 8.17(a) after removal from such
auxiliary power unit, and (iii) insofar as the same belong to Lessor, all
substitutions, replacements or renewals from time to time made in or to such
auxiliary power unit or to any of the Parts referred to in clause (ii) above, as
required or permitted under this Agreement.
AVIATION AUTHORITY means the FAA or, if the State of Registration ceases to be
the United States of America, the Person and/or Government Entity which, under
the laws of the State of Registration, from time to time (a) has control or
supervision of civil aviation; or (b) has jurisdiction over registration,
airworthiness or operation of the Aircraft.
BANKRUPTCY LAWS has the meaning specified in Clause 13.1.
BASIC RENT means all amounts payable pursuant to Clause 5.2.
BUSINESS DAY means a day (other than a Saturday or Sunday) on which banks are
open for business in Mexico City (D.F.), Mexico, New York, New York, and Boston,
Massachusetts.
CERTIFICATE OF ACCEPTANCE means a certificate in the form of Schedule 3 to be
completed and executed by the Lessee on Delivery.
CINTRA GROUP AIRLINE means (i) any airline, duly certificated by the aviation
authority in its jurisdiction of incorporation, owned or controlled by or under
common control with Cintra, S.A. de C.V., a Mexican corporation, or any of its
Subsidiaries or (ii) any subsidiary or Affiliate of Lessee which is duly
certified by the aviation authority in its jurisdiction of incorporation.
CLAIM has the meaning specified in Clause 10.1.
CPCP has the meaning specified in Clause 12.2.
CYCLE means one take-off and landing of an airframe.
DAMAGE NOTIFICATION THRESHOLD means $500,000.
DEFAULT means any Event of Default and any event which with the giving of
notice, lapse of time, determination of materiality or fulfillment of other
condition or any combination of the foregoing would constitute an Event of
Default.
DEFAULT RATE has the meaning specified in Clause 5.9.
DELIVERY means the delivery of the Aircraft to the Lessee in accordance with the
terms of this Agreement.
DELIVERY DATE means the date of the Acceptance Certificate.
DELIVERY LOCATION means Will Rogers World Airport, Oklahoma City, Oklahoma,
U.S.A. or any other location mutually agreed by Lessor and Lessee.
DEPOSIT means the amount, or other security, set forth or specified in Schedule
9.
DGAC means the Direccion General de Aeronautica Civil of the Secretaria de
Comunicaciones y Transportes of Mexico.
DOLLARS and $ means the lawful currency of the United States of America.
ENGINE means whether or not installed on the Aircraft:
(a) each engine of the manufacture, model and serial number specified in
Part 1 of Schedule 2, title to which shall belong to the Lessor; or
(b) any engine which replaces that engine, title to which passes to the
Lessor in accordance with Clause 8.17(a);
and in each case includes all modules and Parts from time to time belonging to,
installed in or appurtenant to that engine but excludes any engine replaced in
accordance with Clause 8.13(a) title to which has, or should have, passed to the
Lessee in accordance with Clause 8.17(c) pursuant to this Agreement.
ENGINE LOSS means the occurrence of any of the events referred to in the
definition of "Total Loss" but with the references therein to "Airframe" being
construed as references to an Engine.
ENGINE LOSS DATE means the relevant date determined in accordance with the
definition of "Total Loss Date" as if that definition applied to an Engine Loss.
ENGINE MANUFACTURER means the Pratt & Whitney Division of United Technologies
Corporation.
EVENT OF DEFAULT means an event specified in Clause 13.1.
EXPIRY DATE means the day preceding the numerically corresponding day
forty-eight (48) months after the Delivery Date, or, if the extension option has
been elected by Lessee pursuant to Clause 5.3, sixty (60) months after the
Delivery Date or if earlier the date on which:
(a) the Aircraft has been redelivered in accordance with this Agreement and
all outstanding obligations of Lessee have been satisfied; or
(b) the Lessor receives the Termination Value following a Total Loss and any
other amounts then due and owing in accordance with this Agreement.
FAA means the United States Federal Aviation Administration of the Department of
Transportation or any Person or Government Entity succeeding to the functions
thereof.
FAR means the Federal Aviation Regulations for the time being in force, issued
by the FAA pursuant to the Federal Aviation Law and published in Title 14 of the
Code of Federal Regulations.
FEDERAL AVIATION LAW means Title 49 of the United States Code, as amended, or
any successor statutory provisions and the regulations promulgated under such
provisions.
FINANCIAL INDEBTEDNESS means any indebtedness in respect of (a) moneys borrowed,
(b) any liability under any debenture, bond, note, loan stock, acceptance
credit, documentary credit or other security, (c) the acquisition cost of any
asset to the extent payable before or after the time of acquisition or
possession, (d) the capitalized value (determined in accordance with accounting
practices generally accepted in the State of Incorporation) of obligations under
finance leases, or (e) any guarantee, indemnity or similar assurance against
financial loss of any Person in respect of the above.
FLIGHT HOUR means each hour or part thereof (rounded up to two decimal places)
elapsing from the moment the wheels of an airframe leave the ground on take off
until the moment the wheels of such airframe next touch the ground.
GOVERNMENT ENTITY means (a) any national government, political subdivision
thereof or local jurisdiction therein, (b) any instrumentality, board,
commission, court, or agency of any thereof, however constituted, and (c) any
association, organization, or institution of which any of the above is a member
or to whose jurisdiction any thereof is subject or in whose activities any of
the above is a participant.
HABITUAL BASE means Mexico or, subject to the prior written consent of the
Lessor (which will not be unreasonably withheld), any other country or countries
in which the Aircraft is for the time being habitually based.
HEAD LEASE has the meaning specified in Clause 14.4.
HEAD LESSOR has the meaning specified in Clause 14.4.
IATA means the International Air Transport Association.
INDEMNITEES means Lessor, Trustee, any Lessor Lender, any Owner Participant, any
successors and permitted assigns of Lessor, Trustee or Owner Participant and
their respective shareholders, members, Affiliates, partners, contractors,
directors, managers, officers, servants, agents and employees.
LANDING GEAR means the landing gear assembly of the Aircraft excluding the
wheels and brake units.
LESSEE has the meaning specified in the preamble.
LESSOR has the meaning specified in the preamble.
LESSOR CONTRIBUTION has the meaning specified in Clause 7.7.
LESSOR LENDER means (i) Agent, and any other lender for whom the Agent acts as a
security agent under the Security Agreement and related loan documents; and (ii)
any other Person to whom Lessor or Owner Participant grants a Mortgage for the
purpose of any financing or refinancing to be accomplished by Lessor, any Owner
Participant or any Affiliate thereof, and any Person that lends money to Lessor
and for whom a Mortgagee holds a Mortgage and includes the successors and
permitted assigns of such Persons.
LESSOR LIEN means any Security Interest from time to time created by or arising
through the Lessor, any Lessor Lender, the Trustee or the Owner Participant that
results from acts or omissions of, or claims against, the Lessor, any Lessor
Lender, the Trustee or the Owner Participant not related to the operation of the
Aircraft by the Lessee during the Term or the transactions contemplated by or
permitted under this Agreement, and any Security Interest in respect of the
Aircraft for Lessor Taxes.
LESSOR TAXES means:
(a) Taxes imposed or to the extent increased as a direct result of the
incorporation, residence, presence or activities of the Lessor, Trustee, each
Lessor Lender or Owner Participant, as the case may be, in the jurisdictions
imposing the liability unrelated to the Lessor's, Trustee's, Lessor Lenders' or
Owner Participant's dealings with the Lessee pursuant to this Agreement or to
the transactions contemplated by this Agreement or the operation of the Aircraft
by the Lessee;
(b) Taxes imposed on the gross or net income, profits, receipts, capital,
franchises, excess profit or conduct of business or gains of the Lessor,
Trustee, a Lessor Lender or Owner Participant, as the case may be, (i) by any
Government Entity in the jurisdiction in which such Lessor, Trustee, Lessor
Lender or Owner Participant, as the case may be, is organized or incorporated or
in which it has its principal place of business, or (ii) by any Government
Entity in any other jurisdiction where the Lessor, Trustee, a Lessor Lender or
Owner Participant, as the case may be, is liable for such Taxes other than as a
result of the transactions contemplated by this Agreement;
(c) Taxes imposed with respect to any period commencing or event occurring
before the date of this Agreement or after the Expiry Date and unrelated to the
Lessor's, Trustee's, a Lessor Lender's or Owner Participant's, as the case may
be, dealings with the Lessee pursuant to this Agreement or to the transactions
contemplated by this Agreement during such period;
(d) Taxes imposed as a direct result of the initial sale of the Aircraft to
the Lessor or as a result of the sale or other disposition by the Lessor, the
Trustee, a Lessor Lender or the Owner Participant, as the case may be, of all or
a portion of its interest in the Aircraft or this Agreement or any interest in
the Lessor, unless such sale or disposition occurs as a consequence of the
exercise of remedies following an Event of Default;
(e) Taxes attributable to the failure of the Lessor, Trustee, a Lessor
Lender or Owner Participant, as the case may be, to provide any forms or
certificates reasonably requested by the Lessee;
(f) Taxes imposed on any Lessor's, Trustee's, a Lessor Lender's or Owner
Participant's, as the case may be, assignee (i) if such Tax would not have been
imposed on the Lessor, Trustee, Lessor Lender or Owner Participant, as the case
may be, or (ii) to the extent such Tax exceeds the Tax that would have been
imposed on the Lessor, Trustee, Lessor Lender or Owner Participant, as the case
may be;
(g) Taxes attributable to the failure of the Lessor, Trustee, a Lessor
Lender or Owner Participant, as the case may be, to comply with certification,
information or reporting requirements or to file proper, accurate and timely
reports or returns to avail itself of any applicable extensions or exemptions in
(i) their respective state of incorporation or the state of their respective
principal place of business or any other jurisdiction in which the relevant
Indemnitee would be subject to taxation with respect to its net income other
than in connection with this transaction and, or (ii) such other jurisdictions
as Lessee may advise;
(h) Taxes imposed in the nature of an intangible or similar tax upon or with
respect to the value of an interest of the Lessor, Trustee, a Lessor Lender or
Owner Participant, as the case may be, in the Aircraft, Airframe, Engine or any
Part thereof, or in the Agreement, except to the extent such Taxes arise in any
jurisdiction as a result of the use or operation of the Aircraft or the
activities of the Lessee in such taxing jurisdiction;
(i) Taxes which arise out of or are caused by (i) the breach of any
representation, warranty or covenant of such Lessor, Trustee, Lessor Lender or
Owner Participant, as the case may be, (ii) any act or omission of the Lessor,
Trustee, a Lessor Lender or Owner Participant, as the case may be, prohibited by
this Agreement, (iii) the gross negligence or willful misconduct of such Lessor,
Trustee, Lessor Lender or Owner Participant, or (iv) the existence of any Lessor
Liens; and
(j) Taxes imposed as a result of any financing or refinancing of the
Aircraft undertaken by the Lessor, Trustee, a Lessor Lender or Owner
Participant.
MAINTENANCE PROGRAM means an FAA or Aviation Authority approved maintenance
program for the Aircraft encompassing scheduled maintenance, condition monitored
maintenance and/or on-condition maintenance of Airframe, Engines and Parts,
including servicing, testing, preventative maintenance, repairs, structural
inspections, system checks, overhauls, approved modifications, service
bulletins, engineering orders, airworthiness directives, corrosion control,
inspections and treatments.
MAJOR CHECKS means each of the MSG-3 packages P-1 through P-6, inclusive, as set
out in the Agreed Maintenance Program, and any other heavy maintenance visit or
segment thereof suggested for commercial aircraft of the same model as the
Aircraft by its Manufacturer.
MANUFACTURER means (i) The Boeing Company, as successor by acquisition to
McDonnell Douglas Corporation, and (ii) prior to such acquisition, McDonnell
Douglas Corporation.
MEXICAN GAAP means generally accepted accounting principles as in effect from
time to time in Mexico and, subject to changes in such principles from time to
time, consistently applied in accordance with the past practices of a Person.
MEXICO means the United Mexican States.
MINIMUM LIABILITY COVERAGE means $750,000,000 combined single limit.
MORTGAGE has the meaning specified in Clause 14.3.
MORTGAGEE has the meaning specified in Clause 14.3.
MSG-3 means The Boeing Company's "MSG-3" Maintenance Program.
OWNER PARTICIPANT means, individually or collectively, as the case may require,
each of American Income Fund I-C, a Massachusetts limited partnership, American
Income Fund I-D, a Massachusetts limited partnership, American Income Fund I-E,
a Massachusetts limited partnership, AFG Investment Trust A, a Delaware business
trust, AFG Investment Trust B, a Delaware business trust, AFG Investment Trust
C, a Delaware business trust, and AFG Investment Trust D, a Delaware business
trust, in each case having an address c/o Equis Financial Group, 88 Broad
Street, Boston, MA 02110, Attention: Mr. James Coyne, Telefax No.:
+1-617-695-0596.
PART means, whether or not installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete Engine)
furnished with, installed on or appurtenant to the Airframe and Engines on
Delivery; and
(b) any other component, furnishing or equipment (other than a complete
Engine) title to which has, or should have, passed to the Lessor pursuant to
Clause 8.17(a),
but excludes any such items title to which has, or should have, passed to the
Lessee pursuant to Clause 8.17(c).
PERMITTED LIEN means:
(a) any Security Interest for Taxes not assessed or, if assessed, not yet
due and payable, or being contested in good faith by appropriate proceedings;
(b) any Security Interest of a repairer, mechanic, carrier, hangar keeper,
unpaid seller or other similar lien arising in the ordinary course of business
or by operation of law in respect of obligations which are not overdue in
accordance with applicable law (or, if applicable, generally accepted accounting
principles and practices in the relevant jurisdiction) or are being contested in
good faith by appropriate proceedings;
(c) any Lessor Lien;
(d) the respective rights of the Lessor and the Lessee as herein provided
(including such rights with respect to Subleases permitted hereunder);
(e) any other Security Interest with respect to which Lessee shall have
provided a bond or other security in an amount and under terms reasonably
satisfactory to Lessor (as evidenced by Lessor's prior written consent thereto);
and
(f) Security Interests arising out of any judgment or award against the
Lessee that is, within 60 days after entry, discharged, vacated or appealed,
with execution stayed pending appeal;
but only if, in the case of (a) and (b): (i) adequate reserves have been
provided by the Lessee for the payment of the Taxes or obligations in accordance
with generally accounting principles and practices in the relevant jurisdiction;
and (ii) such proceedings, or the continued existence of the Security Interest,
do not give rise to any reasonable likelihood of the sale, forfeiture or other
loss of the Aircraft or any interest therein or of criminal liability on the
Lessor or any other Indemnitee.
PERSON means any individual person, corporation, partnership, limited liability
company, firm, joint stock company, joint venture, trust, estate, unincorporated
organization, association, Government Entity or organization or association of
which any of the above is a member or a participant.
REDELIVERY CREDIT means the net amount, if any, determined to be payable by
Lessor and due to Lessee pursuant to Schedule 5 after the return of the Aircraft
and the due performance of all other obligations then due in accordance with
this Agreement.
REDELIVERY LOCATION means Mexico City International Airport, or such other
airport in the continental United States of America as may be specified by
Lessor.
RENT means collectively, all Basic Rent and all Supplemental Rent.
RENT DATE means the Delivery Date and the day after the last day of each Rental
Period during the Term.
RENTAL PERIOD means each period ascertained in accordance with Clause 5.1.
SECURITY AGREEMENT has the meaning specified in Recital A.
SECURITY INTEREST means any mortgage, charge, pledge, lien, assignment,
hypothecation, right of set-off, or any agreement or arrangement having the
effect of creating a security interest, other than a Permitted Lien.
SETTLEMENT DATE has the meaning specified in Clause 11.1.
SRM has the meaning specified in Clause 12.2.
STATE OF INCORPORATION means Mexico.
STATE OF REGISTRATION means the United States of America.
SUBSEQUENT INVESTMENT means each payment made or to be made by or on behalf of
the Lessor after the Delivery Date pursuant to Clause 7.7 or Schedule 10.
SUBSIDIARY means:
(a) in relation to any reference to financial statements, any company whose
financial statements are consolidated with the financial statements of the
Lessee in accordance with accounting principles generally accepted under
accounting standards of the State of Incorporation; and
(b) for any other purpose, an entity from time to time (i) of which another
has direct or indirect control or owns directly or indirectly more than 50% of
the voting share capital, or (ii) which is a direct or indirect subsidiary of
another under the laws of the jurisdiction of its incorporation.
SUCCESSOR has the meaning specified in Clause 8.8.
SUPPLEMENTAL RENT means all amounts, liabilities and obligations (other than
Basic Rent) which Lessee assumes or agrees to pay under this Agreement to Lessor
or any other Person, including payment of indemnities and Termination Value.
TAXES means all present and future taxes, levies, imposts, duties or charges in
the nature of taxes, whatever and wherever imposed, including customs duties,
value added taxes or similar taxes and any franchise, transfer, sales, use,
asset, business, occupation, excise, personal property, stamp, income or other
tax or duty imposed by any national or local taxing or fiscal authority or
agency, together with any penalties, additions to tax, fines or interest
thereon.
TERM means the period commencing on the Delivery Date and ending on the Expiry
Date.
TERMINATION VALUE means on any date the amount set forth for such date in
Schedule 1.
TOTAL LOSS means with respect to the Airframe:
(a) the actual, arranged or constructive total loss of the Airframe
(including any damage to the Airframe which results in an insurance settlement
on the basis of a total loss, or requisition for use or hire which results in an
insurance settlement on the basis of a total loss);
(b) the Airframe being destroyed, damaged beyond repair or permanently
rendered unfit for normal use for any reason whatsoever;
(c) the requisition of title, or other compulsory acquisition, capture,
seizure, deprivation, confiscation or detention (for a period in excess of 120
days) for any reason of the Airframe by any Government Entity (whether de jure
or de facto), but excluding requisition for use or hire not involving
requisition of title; or
(d) the hi-jacking, theft, condemnation, confiscation, seizure or
requisition for use or hire of the Airframe which deprives any Person permitted
by this Agreement to have possession and/or use of the Airframe of its
possession and/or use for more than 120 consecutive days.
TOTAL LOSS DATE means:
(a) in the case of an actual total loss, the actual date on which the loss
occurs or, if such date is unknown, the day on which the Aircraft was last heard
of;
(b) in the case of any of the events described in sub-paragraph (a) of the
definition of "Total Loss" (other than an actual total loss), the earlier of (i)
30 days after the date on which notice claiming such total loss is given to the
relevant insurers, and (ii) the date on which such loss is admitted or
compromised by the insurers;
(c) in the case of any of the events described in sub-paragraph (b) of the
definition of "Total Loss", the date on which such destruction, damage or
rendering unfit occurs;
(d) in the case of any of the events described in sub-paragraph (c) of the
definition of "Total Loss", the date on which the relevant requisition of title
or other compulsory acquisition, capture, seizure, deprivation, confiscation or
detention occurs;
(e) in the case of any of the events described in sub-paragraph (d) of the
definition of "Total Loss", the expiry of the period of 120 days referred to in
such sub-paragraph (d);
and, in each case (other than an actual Total Loss), the Total Loss shall be
deemed to have occurred at noon New York City time on such date.
TRANSFER has the meaning specified in Clause 14.2.
TRANSFEREE has the meaning specified in Clause 14.2.
TRUST AGREEMENT means the Amended and Restated "IAHC/RENO AIR 1996-1 Trust"
Trust Agreement dated as of the date hereof between Trustee and the Owner
Participant as the same may be supplemented from time to time.
TRUSTEE means Investors Asset Holding Corp., not in its individual capacity but
solely as owner trustee, a Massachusetts corporation, whose chief executive
office is at 88 Broad Street, Boston, MA 02110, pursuant to a Trust Agreement,
with Owner Participant.
1.2. InterpretationInterpretation
--------------
a. In this Agreement, unless the contrary intention is stated, a reference
to:
i. each of "the Lessor", "the Lessee" or any other Person includes without
prejudice to the provisions of this Agreement any successor in title to it and
any permitted assignee;
ii. terms used herein include, as appropriate, all genders and the plural as
well as the singular;
iii. the term "including", when used in this Agreement, means "including
without limitation" and "including but not limited to" and the term "or" shall
include "and/or";
iv. any document shall include that document as amended, novated or
supplemented and all schedules thereto;
v. a law (1) includes any statute, decree, constitution, regulation, order,
judgment or directive of any Government Entity; (2) includes any treaty, pact,
compact or other agreement to which any Government Entity is a signatory or
party; (3) includes any judicial or administrative interpretation or application
thereof; and (4) is a reference to that provision as amended, substituted or
re-enacted; and
vi. a Clause or a Schedule is a reference to a clause of or a schedule to
this Agreement, including any sub-clause or sub-part of such clause or schedule.
b. The headings in this Agreement are to be ignored in construing this
Agreement.
2. REPRESENTATIONS and WARRANTIESREPRESENTATIONS and WARRANTIES
--------------------------------
2.1. Lessee's Representations and WarrantiesLessee's Representations and
------------------------------------------
Warranties
The Lessee represents and warrants to the Lessor as follows:
a. Status: The Lessee is a corporation duly organized and validly existing
------
under the laws of the State of Incorporation, has the corporate power to own its
assets and carry on its business as it is being conducted and is (or will at the
relevant time be) the holder of all necessary air transportation licenses
required in connection therewith and with the use and operation of the Aircraft.
b. Power and authority: The Lessee has the corporate power to enter into
---------------------
and perform, and has taken all necessary corporate action to authorize the entry
into, performance and delivery of, this Agreement and the transactions
contemplated by this Agreement.
c. Legal validity: This Agreement constitutes the Lessee's legal, valid and
--------------
binding obligation.
d. Non-conflict: The entry into and performance by the Lessee of, and the
------------
transactions contemplated by, this Agreement do not and will not:
i. conflict with any laws binding on the Lessee;
ii. conflict with the constitutional documents of the Lessee; or
iii. conflict with or result in default under any document which is binding
upon the Lessee or any of its assets, or result in the creation of any Security
Interest over any of its assets.
e. Authorization: All authorizations, consents and registrations required
-------------
by, and all notifications to be given by, the Lessee in connection with the
entry into, performance, validity and enforceability of, this Agreement and the
transactions contemplated by this Agreement have been (or will on or before
Delivery have been) obtained, effected or given (as appropriate) and are (or
will on their being obtained or effected be) in full force and effect, including
the authorization from the DGAC to acquire the Aircraft on lease with foreign
registration marks and to incorporate the Aircraft into Lessee's fleet;
provided, that within thirty (30) days after the Delivery Date, a Spanish
----
translation of this Agreement, together with a notarized copy of the original
English version of this Agreement, shall be filed with the DGAC.
f. No Immunity:
------------
i. The Lessee is subject to civil commercial law with respect to its
obligations under this Agreement.
ii. Neither the Lessee nor any of its assets is entitled to any right of
immunity and the entry into and performance of this Agreement by the Lessee
constitute private and commercial acts.
g. Financial Statements: the audited consolidated financial statements of
---------------------
the Lessee and its Subsidiaries most recently delivered to the Lessor:
i. have been prepared in accordance with Mexican GAAP; and
ii. fairly present the consolidated financial condition of the Lessee and
its Subsidiaries as at the date to which they were drawn up and the consolidated
results of operations of the Lessee and its Subsidiaries for the periods covered
by such statements.
2.2. Lessee's Further Representations and WarrantiesLessee's Further
---------------------------------------------------
Representations and Warranties
The Lessee further represents and warrants to the Lessor that:
a. No Default: No Default or Event of Default has occurred and is
-----------
continuing or might reasonably be expected to result from the entry into or
--
performance of this Agreement.
b. Registration:
------------
i. It is not necessary or advisable under the laws of the State of
Incorporation or the Habitual Base in order to ensure the validity,
effectiveness and enforceability of this Agreement or to establish, perfect or
protect the property rights of the Lessor and any Lessor Lender in the Aircraft,
any Engine or Part that this Agreement or any other instrument relating thereto
be filed, registered or recorded or that any other action be taken or, if any
such filings, registrations, recordings or other actions are necessary, the same
have been effected or will have been effected on or before Delivery or, as to
the filing of this Agreement, together with a Spanish translation of this
Agreement, with the DGAC, within thirty (30) days after the Delivery Date.
ii. Under the applicable laws of the State of Incorporation, the State of
Registration and the Habitual Base, the property rights of the Lessor and any
Lessor Lender in the Aircraft have been fully established, perfected and
protected and, with respect to such rights, this Agreement will have priority in
all respects over the claims of all creditors of the Lessee, with the exception
of such claims as are mandatorily preferred by law and not by virtue of any
contract.
c. Litigation: No litigation, arbitration or administrative proceedings are
----------
pending or, to the Lessee's knowledge, threatened against the Lessee which, if
adversely determined, would be reasonably likely to have a material adverse
effect upon its financial condition or business or its ability to perform its
obligations under this Agreement.
d. Pari Passu: The obligations of the Lessee under this Agreement rank at
-----------
least pari passu with all other present and future unsecured and unsubordinated
obligations (including contingent obligations) of the Lessee, with the exception
of such obligations as are mandatorily preferred by law and not by virtue of any
contract.
e. Material Adverse Change: There has been no material adverse change in
-------------------------
the consolidated financial condition of the Lessee and its Subsidiaries or the
financial condition of the Lessee since December 31, 2000.
f. Taxes: The Lessee has delivered all necessary returns and payments due
-----
to the tax authorities in the State of Incorporation, the State of Registration
and the Habitual Base other than any Taxes (i) which are being contested by the
Lessee in good faith and by appropriate proceedings, (ii) which do not involve
any material risk of the creation of a Lessor Lien on, or the sale, forfeiture,
loss or other disposition of, the Aircraft, the Airframe or any Engine or
interest therein, and (iii) where the failure to do so could not reasonably be
expected to have a material adverse effect on the business or operations of
Lessee or its ability to comply with its obligations hereunder.
2.3. RepetitionRepetition
----------
The representations and warranties contained in Clause 2.1 and Clause 2.2 will
be deemed to be repeated by the Lessee on Delivery with reference to the facts
and circumstances then existing. The representations and warranties contained
in Clause 2.1 will be deemed to be repeated by the Lessee on each Rent Date as
if made with reference to the facts and circumstances then existing.
2.4. Trustee's Representations and WarrantiesTrustee's Representations and
------------------------------------------
Warranties
The Trustee represents and warrants to the Lessee that:
a. Status: The Trustee is a corporation duly organized and validly existing
------
under the laws of the Commonwealth of Massachusetts and has full power to carry
on its business as it is now being conducted, including to act as trustee
pursuant to the Trust Agreement.
b. Power and authority: The Trustee has the power to enter into and
---------------------
perform, and has taken all necessary trust action to authorize the entry into,
performance and delivery of, the Trust Agreement and the transactions
contemplated by the Trust Agreement.
2.5. Lessor's Representations and WarrantiesLessor's Representations and
------------------------------------------
Warranties
The Lessor represents and warrants to the Lessee that:
a. Power and authority: The Lessor has the power to enter into and perform,
-------------------
and has taken all necessary trust action to authorize the entry into,
performance and delivery of, this Agreement and the transactions contemplated by
this Agreement.
b. Legal validity: This Agreement constitutes the Lessor's legal, valid and
--------------
binding obligation.
c. Non-conflict: The entry into and performance by the Lessor of, and the
------------
transactions contemplated by, this Agreement do not and will not:
i. conflict with any laws binding on the Lessor;
ii. conflict with the constitutional documents of the Lessor; or
iii. conflict with or cause a default under any document which is binding
upon the Lessor or any of its assets.
d. Authorization: So far as concerns the obligations of the Lessor, all
-------------
authorizations, consents, registrations and notifications required under the
laws of the United States of America in connection with the entry into,
performance, validity and enforceability of, and the transactions contemplated
by, this Agreement by the Lessor have been (or will on or before Delivery have
been) obtained or effected (as appropriate) and are (or will on their being
obtained or effected be) in full force and effect.
e. No Immunity:
------------
i. The Lessor is subject to civil commercial law with respect to its
obligations under this Agreement.
ii. Neither the Lessor nor any of its assets is entitled to any right of
immunity and the entry into and performance of this Agreement by the Lessor
constitute private and commercial acts.
f. Lessor Tax Status: The Lessor is a taxpayer in the United States of
-------------------
America and, upon the reasonable request of the Lessee, the Lessor will provide
the Lessee with a copy of any relevant forms, duly completed by the Lessor,
certifying that the Lessor has filed a tax return with the Internal Revenue
Service of the United States of America.
g. Right to Lease: On the Delivery Date, the Lessor shall have the right to
--------------
lease the Aircraft to the Lessee in accordance with the terms of this Agreement.
2.6. RepetitionRepetition
----------
The representations and warranties in Clauses 2.4 and 2.5 will survive the
execution of this Agreement. The representations and warranties contained in
Clauses 2.4 and 2.5 will be deemed to be repeated by the Trustee and the Lessor,
respectively, on Delivery and on each subsequent Rent Date as if made with
reference to the facts and circumstances then existing.
3. CONDITIONS PRECEDENT
---------------------
3.1. Lessor's Documentary Conditions PrecedentCONDITIONS PRECEDENT
--------------------------------------------
The Lessor's obligation to lease the Aircraft to the Lessee under this Agreement
is subject to the receipt of the following by the Lessor from the Lessee on or
before Delivery in form and substance reasonably satisfactory to the Lessor,
provided that it shall not be a condition precedent to the obligations of the
Lessor that any document be produced, or action taken, which is to be produced
or taken by it or any Person within its control:
a. Constitutional Documents and Board Approval of Lessee: a copy of the
---------------------------------------------------------
constitutional documents of the Lessee and evidence of the taking by Lessee of
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated by this
Agreement;
b. Opinion: an opinion, in the form set out in Schedule 7, in respect of
-------
the Lessee's obligations under this Agreement issued by Lessee's chief internal
legal counsel, and an opinion issued by White & Case, special New York counsel
to Lessee, in a form reasonably acceptable to Lessor;
c. Licenses: copies of the Lessee's air transport license, air operator's
--------
certificate and all other licenses, certificates and permits required by the
Lessee (including any authorization required under FAR Part 129.14) in relation
to, or in connection with, the operation of the Aircraft;
d. Certificate: a certificate of a duly authorized officer of the Lessee:
-----------
i. setting out a specimen of the signature of the officer of the Lessee
referred to in Clause 3.1(h); and
ii. certifying that each copy of a document specified in this Clause 3.1 is
correct, complete and in full force and effect;
e. Insurances: a certificate of insurance and brokers' undertakings,
----------
substantially in the form of Part 3 and Part 2, respectively, of Schedule 6;
f. Registration: evidence that all filings, registrations, recordings and
------------
other actions have been or will be taken which are necessary to ensure the
validity and effectiveness of this Agreement and to protect the respective
rights of the Lessor and any Lessor Lender in the Aircraft or any Part;
g. Process Agent: a letter from the process agent appointed by the Lessee in
-------------
this Agreement accepting such appointment together with a power of attorney
executed before a Mexican notary public, in form and substance satisfactory to
Lessor, granting powers of attorney with respect to lawsuits and collections to
such process agent;
h. Execution Power of Attorney: a copy of the general power of attorney in
-----------------------------
favor of an authorized officer of the Lessee, executed before a Mexican notary
public, granting to such officer the power, on behalf of the Lessee, to execute,
deliver and bind the Lessee to perform this Agreement and all related documents
including the Certificate of Acceptance;
i. DGAC Approvals: evidence, in form and substance reasonably satisfactory
---------------
to the Lessor, that the Lessee has obtained, or will obtain all necessary
approvals, consents or authorizations from the DGAC or any other Government
Entity in Mexico in respect of the leasing of the Aircraft by the Lessee under
this Agreement and the operation of the Aircraft by the Lessee whilst the
Aircraft is registered with the Aviation Authority;
j. General: this Agreement, completed, duly executed and delivered by Lessee
-------
and such other documents as the Lessor may reasonably request; and
k. Asset Tax Election: evidence that Lessee has elected to treat the
--------------------
Aircraft as a part of its property for purposes of the Mexican assets tax law
(Ley del Impuesto al Activo).
3.2. Lessor's Other Conditions PrecedentLessor's Other Conditions Precedent
------------------------------------
The obligation of the Lessor to deliver and lease the Aircraft under this
Agreement is also subject to the following additional conditions precedent:
a. that the representations and warranties of the Lessee under Clauses 2.1
and 2.2 are correct and would be correct if repeated on Delivery; and
b. that all payments due to the Lessor under this Agreement on or before
Delivery, including the first payment of Basic Rent, shall have been received by
the Lessor.
3.3. Lessor's WaiverLessor's Waiver
----------------
The conditions specified in Clauses 3.1 and 3.2 are for the sole benefit of the
Lessor and may be waived or deferred in whole or in part and with or without
conditions by the Lessor. Without limiting the generality of the foregoing,
Lessor hereby agrees to defer for ten (10) Business Days after the Delivery Date
the obligation of the Lessee to deliver evidence of the election of the Lessee
to treat the Aircraft as a part of its property for purposes of the Mexican
assets tax law.
3.4. Lessee's Conditions PrecedentLessee's Conditions Precedent
-------------------------------
The Lessee's obligation to accept the Aircraft on lease from the Lessor under
this Agreement is subject to the satisfaction by the Lessor of the following
conditions precedent:
a. Condition of Aircraft: the Aircraft shall be in the condition set forth
----------------------
in Schedule 4, the tests and inspections mentioned in Schedule 4 shall have been
performed to the Lessee's reasonable satisfaction and the Aircraft Documents
shall be in a condition acceptable to Lessee;
b. Certificate: the receipt by the Lessee of a certificate of a duly
-----------
authorized officer of the Lessor setting out a specimen of each signature of an
officer signing this Agreement or any document or instrument in connection
herewith;
c. Representations and Warranties: that the representations and warranties
-------------------------------
of the Trustee and Lessor under Clauses 2.4 and 2.5, respectively are correct
and would be correct if repeated on Delivery; and
d. Documents: Receipt by Lessee of the following documents, in form and
----------
substance satisfactory to Lessee:
i. this Agreement, completed, duly executed and delivered by Lessor;
ii. a pro forma invoice for the Aircraft (for customs purposes only) signed
by Lessor, as required for importation of the Aircraft into Mexico;
iii. evidence that the Aircraft has been validly registered under the laws
of the State of Registration;
iv. quiet enjoyment letters from each Lessor Lender (if any), addressed to
Lessee; and
v. certificates as to the tax residency of the Lessor and each Owner
Participant.
4. COMMENCEMENTCOMMENCEMENT
------------
4.1. LeasingLeasing
-------
The Lessor will lease the Aircraft to the Lessee and the Lessee will take the
Aircraft on lease in accordance with this Agreement for the duration of the
Term.
4.2. DeliveryDelivery
--------
The Aircraft will be delivered to, and will be accepted by, the Lessee at the
Delivery Location on the Delivery Date which shall be on or about June _, 2001
or on such other day as may be agreed, immediately following satisfaction of the
conditions precedent specified in Clauses 3.1, 3.2 and 3.4 (or their waiver or
deferral by the party entitled to grant such waiver or deferral).
4.3. Delivery InspectionDelivery Inspection
--------------------
Lessee acknowledges that the Aircraft and Aircraft Documents have been made
available for inspection by Lessee to Lessee's reasonable satisfaction prior to
the date of this Agreement. Lessee confirms that it has performed such
inspections as it deems necessary and, pursuant to such inspections and subject
to the Aircraft meeting the conditions set forth in Schedule 4 and the
satisfaction of Lessee with the Aircraft Documents, all of the Aircraft and the
Aircraft Documents are in acceptable condition for Lessee to enter into this
Agreement, to take Delivery of the Aircraft and Aircraft Documents and to lease
the Aircraft and Aircraft Documents, subject to Schedule 10(b) hereof.
4.4. Acceptance and RiskAcceptance and Risk
---------------------
a. Immediately following satisfaction of the conditions precedent specified
in Clauses 3.1, 3.2 and 3.4 (or their waiver or deferral by the party entitled
to grant such waiver or deferral), the Lessor and the Lessee shall forthwith
complete Annex 1 to the Certificate of Acceptance (specifying the maintenance
status of the Airframe, Engines, APU and Landing Gear) and the Lessee shall sign
and deliver to the Lessor the Certificate of Acceptance.
b. On and from Delivery, the Aircraft and every Part will be in every
respect at the sole risk of the Lessee, which will bear all risk of loss, theft,
damage or destruction to the Aircraft from any cause whatsoever.
c. Upon or immediately following Delivery, the Lessor shall file this Lease
and complete the registration of the ownership of the Aircraft at the FAA
Aircraft Registry, and shall provide to the Lessee a copy of the certificate of
registration and certificate of airworthiness.
d. Upon or immediately following Delivery, the Lessee shall deliver to
Lessor a copy of the required Mexican import permit (pedimento de importaci n).
5. PAYMENTSPAYMENTS
--------
5.1. Rental PeriodsRental Periods
---------------
The first Rental Period will commence on the Delivery Date and end on the day
preceding the numerically corresponding day one (1) month after the Delivery
Date. Each subsequent Rental Period will commence on the day of each month
during the Term which numerically corresponds with the Delivery Date, and will
end on the day immediately preceding the first day of the next Rental Period.
5.2. Basic RentBasic Rent
-----------
a. Time of Payment: The Lessee will pay to the Lessor or its order Basic
-----------------
Rent on the Delivery Date and in advance on each subsequent Rent Date. Payment
must be initiated adequately in advance of the Rent Date to ensure that the
Lessor receives credit for the payment on the Rent Date.
b. Amount: The Basic Rent payable on the Delivery Date and on each
------
subsequent Rent Date in respect of the immediately following Rental Period shall
--
be the amount set forth in Schedule 9.
5.3. Extension OptionPurchase Option
-----------------
Provided that no Default or Event of Default shall have occurred and be
continuing, if Lessee shall have given written notice to Lessor not less than
one hundred and eighty (l80) days prior to the original Expiry Date, which
notice shall be irrevocable, Lessee shall have the option to extend the Term of
this Agreement for an additional term of twelve (12) months. All of the terms
and conditions of this Agreement with respect to the original Term (including
the Basic Rent) shall continue in full force and effect during any such
extension of the Term.
5.4. PaymentsPayments
--------
a. All payments of Rent by the Lessee to the Lessor under this Agreement
will be made for value on the due date, for the full amount due, in Dollars and
in same day funds, settled through the New York Clearing House System or such
other funds as may for the time being be customary for the settlement in New
York City of payments in Dollars by telegraphic transfer to such account in New
York as Lessor may direct in writing, or to such other account in New York as
the Lessor may advise from time to time, provided that the location of such
other account does not subject Lessee to adverse tax consequences which would
not have existed in the absence of such change in location.
b. If any Rent or other payment would otherwise become due on a day which is
not a Business Day, it shall be due on the immediately succeeding Business Day.
5.5. Gross-upGross-up
--------
a. All payments by the Lessee under or in connection with this Agreement
will be made without offset or counterclaim, free and clear of and without
deduction or withholding for or on account of any Taxes (other than Lessor
Taxes).
b. All Taxes (other than Lessor Taxes) in respect of payments under this
Agreement shall be for the account of the Lessee.
c. If the Lessee is compelled by law to make payment to the Lessor or any
Indemnitee under or in connection with this Agreement subject to any Tax, other
than Lessor Taxes, and the Lessor or such Indemnitee does not actually receive
for its own benefit on the due date a net amount equal to the full amount
provided for under this Agreement, the Lessee will pay all necessary additional
amounts to ensure receipt by the Lessor or such Indemnitee of the full amount so
provided for.
5.6. TaxationTaxation
--------
a. The Lessee will, on written demand, pay and indemnify the Lessor,
Trustee, any Lessor Lender and Owner Participant against all Taxes levied or
imposed against or upon the Lessor, Trustee, any Lessor Lender, Owner
Participant or the Lessee and relating to or attributable to the Lessee, this
Agreement or the Aircraft directly or indirectly in connection with the
importation, exportation, registration, ownership, leasing, sub-leasing,
purchase, delivery, possession, use, operation, repair, maintenance, overhaul,
transportation, landing, storage, presence or redelivery of the Aircraft or any
part thereof or any rent, receipts, insurance proceeds, income or other amounts
arising therefrom; provided, however, that the Lessee shall have no liability
for Lessor Taxes except to the extent resulting from or increased by any Default
or the exercise of any right or remedy pursuant to Clause 13. The verification
provisions of Clause 5.11 shall be applied, upon the Lessee's request, with
respect to any indemnity payments due pursuant to this Clause 5.6.a.
b. If the Lessor, Trustee, any Lessor Lender or Owner Participant (as the
case may be) shall, in its reasonable opinion and based upon its own reasonable
interpretation of any relevant laws or regulations, realize any Tax savings (by
way of refund, deduction, credit or otherwise, including foreign tax credits and
any reduction in Taxes) in respect of any amount with respect to which the
Lessee shall have made a payment (or increased payment) pursuant to Clause 5.5
or 5.8, or shall have paid or indemnified the Lessor, Trustee, any Lessor Lender
or Owner Participant pursuant to sub-clause (a) above, and such Tax savings
shall not have been taken into account previously in calculating any indemnity
payment made by the Lessee, then the Lessor, Trustee, any Lessor Lender or Owner
Participant, as the case may be, shall, subject to the Lessee's obligations to
repay such amount to the Lessor, Trustee, any Lessor Lender or Owner
Participant, as the case may be, if the relevant Tax savings are subsequently
disallowed or canceled (including by reason of such payment), promptly pay to
the Lessee such amount as the Lessor, Trustee, any Lessor Lender or Owner
Participant, as the case may be, shall, in its reasonable opinion (supported by
a written calculation thereof setting forth in reasonable detail the basis for
determination), have concluded to be the amount of such Tax savings (together
with, in the case of a refund, any interest received thereon); provided however
that none of the Lessor, Trustee, any Lessor Lender nor Owner Participant shall
be obliged to make any payment to the Lessee pursuant to this sub-clause (b) to
the extent that the amount of any Tax savings in respect of which such payment
is to be made would exceed the aggregate amount of all prior payments made by
the Lessee to, on behalf of or as indemnification of the Lessor, Trustee, any
Lessor Lender or Owner Participant, as the case may be, under this Agreement for
Taxes less the amount of all prior payments made pursuant to this sub-clause (b)
in respect of such Tax savings, provided further, that any amount not paid to
the Lessee pursuant to the foregoing limitation shall be carried forward to
reduce pro tanto any future payments or indemnity that the Lessee may be
required to make to the Lessor, Trustee, any Lessor Lender or Owner Participant
(as the case may be) pursuant to Clause 5.5, 5.6(a) and 5.8. The Lessee
acknowledges that nothing contained in this sub-clause (b) shall interfere with
the right of the Lessor, Trustee, any Lessor Lender or Owner Participant, as the
case may be, to arrange its tax affairs in whatsoever manner it thinks fit and,
in particular, neither the Lessor, Trustee, any Lessor Lender nor Owner
Participant shall be under any obligation to claim any Tax savings in priority
to any other savings available to it; provided, however, that such Lessor,
Trustee, any Lessor Lender or Owner Participant (as the case may be) shall not
discriminate against the Lessee in its use and allocation of any credit or
savings. Notwithstanding anything to the contrary, each of the Lessor, Trustee,
any Lessor Lender or Owner Participant, as the case may be, shall in good faith
use reasonable diligence in filing its tax returns and in dealing with taxing
authorities to seek and claim any such Tax savings.
5.7. InformationInformation
-----------
If the Lessee is required by any applicable law, or by any third party, to
deliver any report or return in connection with any Taxes, the Lessee will duly
complete the same and Lessee will either make such report or return in such
manner as will show the ownership of the Aircraft in Lessor 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. If actual notice is given by any taxing authority to Lessor, Trustee, a
Lessor Lender or Owner Participant (as the case may be) that a report or return
is required to be filed in its name with respect to any Taxes that are the
responsibility of the Lessee under this Agreement, the Lessor, Trustee, such
Lessor Lender or Owner Participant shall promptly notify Lessee of such required
report or return. Lessor, Trustee, any Lessor Lender or Owner Participant (as
the case may be) agrees to respond to any reasonable request of Lessee for
information within its control with respect to the filing of any report or
return, but Lessee agrees to duly complete the same or pay any reasonable costs,
fees or other charges of independent counsel or independent accountants incurred
in connection with such request. Lessee shall have no obligation under the
preceding sentence if such Lessor, Trustee, Lessor Lender or Owner Participant
(as the case may be) has failed to furnish the Lessee with such information as
is within such Lessor's, Trustee's, Lessor Lender's or Owner Participant's
control and is necessary to file such returns.
5.8. Taxation of Indemnity PaymentsTaxation of Indemnity Payments
---------------------------------
a. Subject to the provisions of Clauses 5.10 and 5.11 hereof, if and to the
extent that any sums payable to the Lessor, Trustee, any Lessor Lender or Owner
Participant, as the case may be, by the Lessee under this Agreement by way of
indemnity are insufficient, by reason of any Taxes payable in respect of those
sums, for the Lessor, Trustee, any Lessor Lender or Owner Participant, as the
case may be, to discharge the corresponding liability to the relevant third
party (including any taxation authority), or to reimburse the Lessor, Trustee,
any Lessor Lender or Owner Participant, as the case may be, for the cost
incurred by it to a third party (including any taxation authority) the Lessee
will, upon the written request for payment of such amount, pay to the Lessor,
Trustee, any Lessor Lender or Owner Participant, as the case may be, such sum as
will, after the tax liability has been fully satisfied, leave the Lessor,
Trustee, any Lessor Lender or Owner Participant, as the case may be, with the
same amount as it would have been entitled to receive in the absence of that
liability, together with interest on the amount of the deficit at the Default
Rate in respect of the period commencing on the date on which the payment of
taxation is finally due or, if later, ten (10) days after the date on which the
Lessor, Trustee, Lessor Lender or Owner Participant, as the case may be,
notified the Lessee in writing of the deficit and made payment therefor, until
payment by the Lessee (both before and after judgment).
b. Subject to the provisions of Clauses 5.10 and 5.11 hereof, if and to the
extent that any sums constituting (directly or indirectly) an indemnity to the
Lessor, Trustee, any Lessor Lender or Owner Participant, as the case may be, but
paid by the Lessee to any Person other than the Lessor, Trustee, any Lessor
Lender or Owner Participant, as the case may be, are treated as taxable in the
hands of the Lessor, Trustee, any Lessor Lender or Owner Participant, as the
case may be, the Lessee will, upon the written request for payment of such
amount, pay to the Lessor, Trustee, any Lessor Lender or Owner Participant, as
the case may be, such sum as will, after the tax liability has been fully
satisfied, indemnify the Lessor, Trustee, any Lessor Lender or Owner
Participant, as the case may be, to the same extent as it would have been
indemnified in the absence of such liability, together with interest on the
amount payable by Lessee under this sub-clause at the Default Rate in respect of
the period commencing on the date on which the payment of taxation is finally
due or, if later, ten (10) days after the date on which the Lessor, Trustee, any
Lessor Lender or Owner Participant, as the case may be, notified the Lessee in
writing of its liability for Taxes with respect to indemnity amounts treated as
taxable in the hands of the Lessor, Trustee, any Lessor Lender or Owner
Participant, as the case may be, until payment by the Lessee (both before and
after judgment).
5.9. Default InterestDefault Interest
-----------------
If the Lessee fails to pay any amount payable under this Agreement on the due
date, the Lessee will pay on demand from time to time to the Lessor or any
Indemnitee, interest (both before and after judgment) on the amount, from the
due date to the day of payment in full by the Lessee to the Lessor or
Indemnitee, at a per annum rate equal to the lower of (i) the base rate or prime
rate for commercial loans as announced from time to time by The Chase Manhattan
Bank, N.A. at its principal lending office in New York, New York, plus 3.0% per
annum (the "Default Rate"), or (ii) the maximum lawful per annum rate for
commercial loans. In addition, should Lessee's failure to pay extend past the
time period set forth in Section 13.1, Lessee shall pay one hundred fifty
Dollars (US$150.00) per each unpaid invoice. All such interest will be
calculated on the basis of the actual number of days elapsed and on a 365 day
year.
5.10. ContestContest
-------
If a written claim is made against the Lessor, Trustee, a Lessor Lender or Owner
Participant for any Taxes for which the Lessee is responsible under this
Agreement or if the Lessor, Trustee, a Lessor Lender or Owner Participant claims
any indemnity hereunder, such Lessor, Trustee, Lessor Lender or Owner
Participant shall promptly notify the Lessee in writing within 30 days of its
receipt of any written claim or knowledge of any indemnity claim and shall
provide the Lessee such information regarding such claim as the Lessee may
reasonably request. If the Lessee disputes the payment of any Taxes payable by
the Lessor, Trustee, a Lessor Lender or Owner Participant, as the case may be,
for which the Lessee is responsible under this Agreement or the payment of any
indemnity claimed hereunder, the Lessor, Trustee, Lessor Lender or Owner
Participant, as the case may be, will take such action as the Lessee may
reasonably request, at the Lessee's expense, in good faith diligently to contest
the validity, applicability or amount of such Taxes by (i) resisting payment
thereof to the extent permitted by applicable law, (ii) not paying the same
except under protest, if protest is necessary and proper, (iii) if payment is
made, using reasonable efforts to obtain a refund thereof in appropriate
administrative or judicial proceedings, and (iv) considering in good faith any
other reasonable action as the Lessee may reasonably request, but will not be
obliged to take any such action:
a. which the Lessor, Trustee, Lessor Lender or Owner Participant, as the
case may be, considers, in its reasonable judgment, may materially prejudice it;
b. unless the Lessee shall have provided such Person with an opinion of
counsel, reasonably acceptable to such Person, that a reasonable basis exists
for such contest, which the Lessor, Trustee, Lessor Lender or Owner Participant,
as the case may be, considers does not have a reasonable prospect of success;
c. for which the Lessee has not made adequate provision to the reasonable
satisfaction of the Lessor, Trustee, Lessor Lender or Owner Participant, as the
case may be, in respect of the expense concerned; or
d. if such action gives rise to any material likelihood of the Aircraft or
any interest therein being sold, forfeited or otherwise lost or of criminal
liability on the part of the Lessor, Trustee, Lessor Lender or Owner
Participant, as the case may be.
In the event of a contest of any Taxes hereunder, the Lessor, Trustee, Lessor
Lender or Owner Participant (as the case may be) shall keep the Lessee informed
as to the progress of the contest and provide the Lessee with copies of
correspondence and other documents received by such Lessor, Trustee, Lessor
Lender or Owner Participant (as the case may be) from the taxing authority,
consult with the Lessee if requested by the Lessee, make available for review
and comment to the Lessee any written documents or materials relating to the
contest that such Lessor, Trustee, Lessor Lender or Owner Participant (as the
case may be) proposes to submit to the taxing authority, forward copies of all
material submissions made in such contest, consider in good faith any request
concerning the conduct of any such contest and without waiving its right to be
indemnified hereunder with respect to such claim shall not settle any such claim
or contest pursuant to this provision without the written consent of the Lessee.
Any contest required pursuant to the preceding sentence shall, at the option of
such Lessor, Trustee, Lessor Lender or Owner Participant (as the case may be) be
conducted by such Lessor, Trustee, Lessor Lender or Owner Participant (as the
case may be) or the Lessee in the name of the Lessee or such Lessor, Trustee,
Lessor Lender or Owner Participant; provided however that if a claim with
respect to a Tax for which the Lessee has agreed to indemnify the Lessor,
Trustee, Lessor Lender or Owner Participant (as the case may be) can be
contested separately from the contest of any other Tax of such Lessor, Trustee,
Lessor Lender or Owner Participant and in the name of the Lessee, and the
separation of the contest of such Tax does not prejudice such Lessor, Trustee,
Lessor Lender or Owner Participant in any way, then such Lessor, Trustee, Lessor
Lender or Owner Participant shall permit the Lessee, at the Lessee's sole cost
and expense, to contest such claim in the Lessee's name.
If the Lessor, Trustee, Lessor Lender or Owner Participant (as the case may be)
shall obtain a refund or credit of all or any part of any Taxes paid by the
Lessee, such Lessor, Trustee, Lessor Lender or Owner Participant shall pay to
the Lessee the amount of such refund or credit (taking into account any Tax
savings resulting therefrom), net of expenses not already paid or reimbursed by
the Lessee, and any interest fairly attributable thereto plus an amount equal to
the Tax savings realized by such Lessor, Trustee, Lessor Lender or Owner
Participant as a result of any payment to the Lessee pursuant to this sentence.
The Lessee shall not be required to make payment to the Lessor, Trustee, a
Lessor Lender or Owner Participant on any indemnification claim being diligently
contested pursuant to this Clause 5.10 or in the verification process set forth
in Clause 5.11 hereof unless (and only to the extent) the Lessor, Trustee or
Owner Participant has been required to make any payment of taxes giving rise to
such indemnification claim.
5.11. VerificationVerification
------------
The Lessor, Trustee, a Lessor Lender or Owner Participant, as the case may be,
shall provide the Lessee, upon the Lessee's request, with a written statement
setting forth in reasonable detail the computation of the amount of any payment
or increased payment to be made by the Lessee pursuant to Clause 5.5 and 5.8, or
any indemnity by the Lessee pursuant to Clause 5.6(a), or any Tax savings in
respect of which a payment is to be made to the Lessee pursuant to Clause
5.6(b). At the Lessee's request, the amount of any such payments or indemnities
by the Lessee or payment by the Lessor, Trustee, a Lessor Lender or Owner
Participant (as the case may be) to the Lessee pursuant to this Agreement shall
be verified by the independent, internationally recognized accounting firm of
the Lessor, Trustee, Lessor Lender or the Owner Participant, as they shall
elect, or (if not) by another firm of accountants mutually acceptable to such
Lessor, Trustee, Lessor Lender or Owner Participant and the Lessee, who shall be
asked to verify, after consulting with the Lessor, Trustee, Lessor Lender or
Owner Participant (as the case may be), whether such Lessor's, Trustee's, Lessor
Lender's or Owner Participant's computations are correct and to report its
conclusions to both the Lessee and such Lessor, Trustee, Lessor Lender or Owner
Participant. The Lessor, Trustee, Lessor Lender or Owner Participant (as the
case may be) and the Lessee hereby agree to provide the accountants with all
information and materials as shall be reasonably necessary or desirable in
connection herewith. The fees and disbursements of such accounting firm shall
be paid by the Lessee unless such verification shall result in an adjustment in
the Lessee's favor greater than or equal to the greater of (i) five percent (5%)
of the total amount verified, or (ii) the fee charged by such accounting firm,
in which case such fee shall be paid by such Lessor, Trustee, Lessor Lender or
Owner Participant. Any information provided to such accountants by the Lessee
or the Lessor, Trustee, Lessor Lender or Owner Participant (as the case may be)
shall be and remain the exclusive property of the Lessee or such Lessor,
Trustee, Lessor Lender or Owner Participant and shall be deemed by the parties
to be (and the accountants will confirm in writing that they will treat such
information as) the private, proprietary and confidential property of such
Lessee, or Lessor, Trustee, Lessor Lender or Owner Participant, as the case may
be, and no person other than the Lessee or the Lessor, Trustee, Lessor Lender or
Owner Participant (as the case may be) and the accountants shall be entitled
thereto, and all such materials shall be returned to the Lessee or the Lessor,
Trustee, Lessor Lender or Owner Participant, as the case may be. Such
accounting firm shall be requested to make its determination within thirty (30)
days. In the event such accounting firm shall determine that such computations
are incorrect, then such firm shall determine what it believes to be the correct
computations. The computations of the accounting firm shall be final, binding
and conclusive upon the Lessee and the Lessor, Trustee, Lessor Lender or Owner
Participant (as the case may be) absent manifest error, and the Lessee shall
have no right to inspect the books, records, tax returns or other documents of
or relating to such Lessor, Trustee, Lessor Lender or Owner Participant to
verify such computations or for any other purpose. If for any reason Lessee
makes any payment with respect to Taxes imposed on Lessor, Trustee, a Lessor
Lender or Owner Participant in respect of the transactions contemplated hereby,
which Taxes are not the responsibility of Lessee under Section 5.5, 5.6 or 5.8,
then the applicable Lessor, Trustee, Lessor Lender or Owner Participant shall
pay to Lessee within ten (10) days of Lessee's demand therefor an amount equal
to the amount paid by Lessee with respect to such Taxes, provided, however, that
no such demand shall be honored unless made within thirty (30) days after the
date of such payment, provided, further, that any such payment made after the
ten (10) day period described above shall include interest on the amount due at
the Default Rate for all periods after such ten (10) day period. If Lessor,
Trustee, a Lessor Lender or Owner Participant shall obtain a refund of all or
any part of such taxes paid by Lessee, such Lessor, Trustee, Lessor Lender or
Owner Participant shall promptly pay to Lessee the amount of such refund less
the amount of any taxes payable by such Lessor, Trustee, Lessor Lender or Owner
Participant in respect of the receipt of such refund.
5.12. FormsForms
-----
Each of Lessor, Trustee, any Lessor Lender or Owner Participant agrees to
furnish from time to time to the Lessee or to such other person as the Lessee
may designate such duly executed and properly completed forms, including but not
limited to Internal Revenue Service Form 6166 completed annually, that such
Lessor, Trustee, any Lessor Lender or Owner Participant is legally able to
deliver and as may be necessary in order to claim any reduction of, or exemption
from any Tax which the Lessee may be required to indemnify against hereunder.
5.13. AbsoluteAbsolute
--------
The Lessee's obligations under this Agreement are absolute and unconditional
irrespective of any contingency whatever including (but not limited to):
a. any right of offset, counterclaim, recoupment, defense or other right
which either party to this Agreement may have against the other;
b. any unavailability of the Aircraft for any reason, including a
requisition of the Aircraft or any prohibition or interruption of, interference
with or other restriction against the Lessee's use, operation or possession of
the Aircraft;
c. any lack or invalidity of title or any other defect in title,
airworthiness, merchantability, fitness for any purpose, condition, design or
operation of any kind or nature of the Aircraft for any particular use or trade,
or for registration or documentation under the laws of any relevant
jurisdiction, or any Total Loss in respect of or any damage to the Aircraft;
d. any insolvency, bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceedings by or against the Lessor
or the Lessee;
e. any invalidity, unenforceability or lack of due authorization of, or
other defect in, this Agreement; or
f. any other cause which, but for this provision, would or might otherwise
have the effect of terminating or in any way affecting any obligation of the
Lessee under this Agreement.
provided, however, that this Clause 5.13 shall be without prejudice to the
Lessee's right to claim damages and/or other relief from the courts in the event
of any breach by the Lessor of its obligations under this Agreement, or in the
event that, as a result of any lack or invalidity of title to the Aircraft on
the part of the Lessor, the Lessee is deprived of its possession of the
Aircraft.
5.14. Deposit
-------
The Lessor (or one or more Lessor Lenders) shall retain the Deposit during the
Term as additional security for Lessee's obligations under this Agreement. On
the Delivery Date, the Deposit, together with any interest earned thereon shall
constitute a security deposit under this Lease, shall be non-refundable during
the Term of this Lease, and shall be held by Lessor (or one or more Lessor
Lenders) in an interest bearing account (which may be a general account and need
not be segregated) as security for the timely and faithful performance by Lessee
of all of Lessee's obligations under this Lease. If Lessee fails to pay Rent
hereunder or to pay any other sums due or to or to perform any of the other
terms and provisions of this Lease or an Event of Default has otherwise occurred
and is continuing hereunder, Lessor may use, apply, draw upon or retain all or
any portion of the Deposit in partial payment for sums due to Lessor by Lessee,
to compensate Lessor for any sums it may in its reasonable discretion advance as
a result of an Event of Default, or to apply toward losses or expenses Lessor
may suffer or incur as a result of the occurrence of an Event of Default
hereunder. If Lessor uses, draws upon or applies all or any portion of the
Deposit, such application shall not be deemed a cure of any Default or Event of
Default, and Lessee shall within five (5) Business Days after written demand
therefor deposit with Lessor cash or other collateral acceptable to Lessor in an
amount sufficient to restore the Deposit to its original level as set forth in
Schedule 9 hereto, and the failure of Lessee to do so shall be a material breach
of this Lease by Lessee. Provided no Default has occurred and is continuing
under this Lease, the Deposit shall be returned to Lessee, together with
interest (net of any reasonable fees, commissions and other expenses incurred in
connection with investment of the Deposit), if any, earned thereon, within five
(5) Business Days following the Expiry Date, or, if later, the date Lessee's
obligations relating to the return of the Aircraft have been fully performed.
6. MANUFACTURER'S WARRANTIESMANUFACTURER'S WARRANTIES
--------------------------
6.1. AssignmentAssignment
----------
Notwithstanding this Agreement, the Lessor will remain entitled to the benefit
of each warranty, express or implied, and any unexpired customer and/or product
support given or provided in respect of the Aircraft, any Engine or Part by any
manufacturer, vendor, maintenance performer, subcontractor or supplier. Unless
an Event of Default shall have occurred and be continuing, the Lessor hereby
authorizes the Lessee to pursue any claim thereunder in relation to defects
affecting the Aircraft, any Engine or Part and the Lessee agrees diligently to
pursue any material claim which arises at its own cost. The Lessee will notify
the Lessor promptly upon becoming aware of any such claim. The Lessor will
provide such assistance to the Lessee in making a claim under any such
warranties or customer and/or product support as the Lessee may reasonably
request, and, if requested by the Lessee and at the Lessee's expense, will
pursue a claim in its own name where the relevant manufacturer, vendor,
maintenance performer, subcontractor or supplier has refused to acknowledge the
Lessee's right to pursue that claim.
6.2. ProceedsProceeds
--------
All proceeds of any such claim as is referred to in Clause 6.1 which exceed the
Damage Notification Threshold will be paid directly to the Lessor, but to the
extent that such claim relates:
a. to defects affecting the Aircraft which have been rectified; or
b. to compensation for loss of use of the Aircraft, an Engine or any Part
during the Term; or
c. to costs incurred by the Lessee in pursuing such claim (whether or not
proceeds of such claim are payable to the Lessee); or
d. to any proceeds in an amount less than the Damage Notification Threshold;
and provided no Default shall have occurred and be continuing, such proceeds
shall be paid directly to the Lessee.
6.3. PartsParts
-----
Except to the extent the Lessor otherwise agrees in a particular case, the
Lessee will assure that all engines, components, furnishings or equipment
provided by the manufacturer, vendor, maintenance performer, subcontractor or
supplier as a permanent replacement for a defective Engine or Part pursuant to
the terms of any warranty or customer and/or product support arrangement comply
with Clause 8.13(a), are installed on the Aircraft promptly and that title to
any such engine or part vests in the Lessor in accordance with this Agreement.
On installation those items will be deemed to be a Engine or Part, as
applicable.
6.4. AgreementAgreement
---------
To the extent any warranties or customer and/or product support relating to the
Aircraft are made available under an agreement between any manufacturer, vendor,
maintenance performer, subcontractor or supplier and the Lessee, this Clause 6
is subject to that agreement. Lessee shall take all such steps as are necessary
and requested by the Lessor at the end of the Term to ensure the benefit of any
of those assignable warranties or assignable customer and/or product support
which have not expired are vested in the Lessor.
7. LESSOR'S COVENANTS and DISCLAIMERSLESSOR'S COVENANTS and DISCLAIMERS
-------------------------------------
7.1. Quiet EnjoymentQuiet Enjoyment
----------------
Provided no Event of Default shall have occurred and be continuing, neither the
Lessor nor any Person claiming lawfully by, through or on account of the Lessor
will interfere with the quiet use, possession and enjoyment of the Aircraft by
the Lessee.
7.2. Registration and FilingsRegistration and Filings
--------------------------
The Lessor shall, at the Lessor's cost:
a. not do or suffer to be done anything which might reasonably be expected
to adversely affect the registration of the Aircraft with the Aviation
Authority; and
b. do all acts and things (including making any filing or registration with
the Aviation Authority or any other Government Entity) as may be required
following any change in the ownership of the Aircraft.
7.3. ExclusionExclusion
---------
THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS" AND LESSEE AGREES AND
ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY STATED IN THIS AGREEMENT, LESSOR WILL
HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND WILL NOT BE DEEMED TO
HAVE MADE OR GIVEN, ANY CONDITIONS, WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING:
a. THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR ANY USE OR
PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE AIRCRAFT OR ANY PART; OR
b. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT
ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED (BUT EXCLUDING ANY SUCH
OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT WHICH ARISES FROM LESSOR'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT); OR
c. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE
TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY, OR FOR ANY
OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
7.4. Lessee's WaiverLessee's Waiver
----------------
EXCEPT FOR THE LESSOR'S PERFORMANCE OF EACH COVENANT AND AGREEMENT OF LESSOR
EXPRESSLY SET FORTH IN THIS AGREEMENT (INCLUDING ITS COVENANT OF QUIET
ENJOYMENT), LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS
RIGHTS IN RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND
WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OR
PERFORMANCE OF THE AIRCRAFT OR THIS AGREEMENT, INCLUDING ANY RIGHTS ARISING OUT
OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LESSOR.
7.5. Adverse Tax Change2Adverse Tax Change
--------------------
If as a result of any change in, or amendment to, the laws (or any regulations
or rulings promulgated thereunder) of Mexico or of any political subdivision or
taxing authority thereof or therein affecting taxation, or any change in
official position regarding application or interpretation of such laws
(including a holding of a court of competent jurisdiction), which change or
amendment becomes effective after Delivery, the Lessee determines, based upon
the opinion of independent tax counsel or an independent accounting firm of
recognized standing in Mexico, that it has or will become obligated to pay Taxes
in excess of those payable on the date hereof due to the jurisdiction of
incorporation, domicile or principal place of business of the Lessor, the
Trustee or the Owner Participant, the Lessor, the Trustee or the Owner
Participant, as the case may be, shall, if requested by the Lessee, use
reasonable efforts to assign or otherwise transfer its rights and interests in
and to the Aircraft and this Agreement to an Affiliate in a jurisdiction that is
not affected by such event; provided that such assignment or transfer can be
made upon terms such that the Lessor, Trustee or Owner Participant, as the case
may be, suffers no economic, legal or regulatory disadvantage. The Lessee shall
pay all costs and expenses incurred by the Lessor in connection with any such
assignment or transfer.
7.6. Lessee's ConfirmationLessee's Confirmation
----------------------
LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.3 AND 7.4
AND ACKNOWLEDGES THAT BASIC RENT AND OTHER AMOUNTS HAVE BEEN CALCULATED
NOTWITHSTANDING ITS PROVISIONS.
7.7. Lessor ContributionConfirmation
--------------------
Provided that no Default has occurred and is continuing, the Lessor shall, at
the Lessor's sole cost, make each Subsequent Investment as required in
accordance with Schedule 10. The notification and verification provisions of
Clause 5.11 shall apply, mutatis mutandi, to any amounts Lessee claims to be due
from Lessor pursuant to this Clause 7.7 or Schedule 10; provided, however, that
in place of a firm of accountants any disputes not resolved by the parties shall
be determined by such other arbitrator(s) as the Lessor and Lessee shall agree
upon, or if the parties cannot so agree, such arbitrator as shall be appointed
in accordance with the International Arbitration Rules of the American
Arbitration Association.
8. LESSEE'S COVENANTSLESSEE'S COVENANTS
-------------------
8.1. DurationDuration
--------
The undertakings in this Clause 8 and in Clause 12 will:
a. except as otherwise stated, be performed at the expense of the Lessee;
and
b. remain in force until redelivery of the Aircraft to the Lessor in
accordance with this Agreement and thereafter to the extent of any accrued
rights of the Lessor in relation to those undertakings.
8.2. InformationInformation
-----------
The Lessee shall:
a. notify the Lessor forthwith of the occurrence of any Event of Default;
b. furnish to the Lessor:
i. within 60 days after the last day of the first three fiscal quarters of
each fiscal year of the Lessee, unaudited quarterly financial statements of the
Lessee prepared for such quarter, including a balance sheet as of the last day
of such quarter and statements of income and retained earnings and statements of
cash flow for such fiscal quarter, all in reasonable detail (subject to year-end
audit adjustments) and prepared in accordance with Mexican GAAP;
ii. as soon as available but not in any event later than 120 days after the
last day of each fiscal year of the Lessee, audited consolidated financial
statements of the Lessee prepared for such year, including a consolidated
balance sheet of the Lessee and its Subsidiaries as of the last day of such year
and consolidated statements of income and retained earnings and consolidated
statements of cash flow for such fiscal year and on a comparative basis figures
for the immediately preceding fiscal year, all in reasonable detail, each
prepared in accordance with Mexican GAAP and certified by Coopers & Lybrand or
another firm of internationally recognized independent certified public
accountants as fairly presenting the financial position and the results of
operations of Lessee and its Subsidiaries at the end of and for such fiscal year
and as having been prepared in accordance with Mexican GAAP;
iii. at the same time as it is issued to the creditors of the Lessee, a copy
of each notice or circular issued to the Lessee's creditors as a group; and
iv. on request from time to time such other information regarding the Lessee
and its business and affairs as the Lessor may reasonably request;
c. on request, inform the Lessor as to the current serial numbers of the
Engines and any engine installed on the Airframe;
d. promptly furnish to the Lessor all information which the Lessor from time
to time reasonably requests regarding the Aircraft, any Engine or any Part and
its use, location and condition, including the hours available on the Aircraft
and any Engine until the next scheduled check, inspection, overhaul or shop
visit, as the case may be;
e. on request, furnish to the Lessor evidence reasonably satisfactory to the
Lessor that all Taxes and charges incurred by the Lessee with respect to the
Aircraft have been paid and discharged in full;
f. provide the Lessor, within 15 days following the end of each Rental
Period, with a monthly report on the Aircraft in the form set out in Schedule 8;
g. give the Lessor annual written notice of the time and location of all
Major Checks during the succeeding 12-month period;
h. promptly notify the Lessor of:
i. any loss, theft, damage or destruction to the Airframe, any Engine or any
Part, or any modification to the Aircraft if the potential cost may reasonably
be expected to exceed the Damage Notification Threshold;
ii. any claim or other occurrence likely to give rise to a claim under the
Insurances (but, in the case of hull claims only, in excess of the Damage
Notification Threshold) and details of any negotiations with the insurance
brokers over any such claim; and
iii. any litigation, arbitration or administrative proceedings that are
pending or, to the Lessee's knowledge, threatened against the Lessee which, if
adversely determined, would have a material adverse effect upon its financial
condition or business or its ability to perform its obligations under this
Agreement.
All reports delivered to the Lessor, Trustee or Owner Participant pursuant to
this Clause 8.2 shall be in English.
8.3. Lawful and Safe OperationLawful and Safe Operation
----------------------------
The Lessee shall:
a. comply with the law for the time being in force in any country or
jurisdiction in which the Aircraft is being operated which is applicable to the
Aircraft or the use and operation of the Aircraft;
b. not use the Aircraft in any manner contrary to any requirement of the
Aviation Authority or the DGAC or the manufacturers of the Aircraft, any Engine
or any Part or any rule or regulation of the Aviation Authority or the DGAC or
for any purpose for which the Aircraft is not designed or reasonably suitable;
provided, that, after providing the Lessor with a certificate of its President,
Director of Finance or chief internal legal counsel stating all relevant facts
with respect thereto, the Lessee may, in good faith and by appropriate
procedures, contest the validity or application of any such requirement, rule or
regulation in any reasonable manner which does not materially adversely affect
the Lessor, or any of its interests in or to the Aircraft or this Agreement;
c. ensure that the crew and engineers employed by it in connection with the
operation and maintenance of the Aircraft have the qualifications and hold the
licenses required by the Aviation Authority (or the DGAC, if applicable) and
applicable law;
d. use the Aircraft solely in commercial or other operations for which the
Lessee is duly authorized by the Aviation Authority, the DGAC and applicable
law;
e. not knowingly use the Aircraft (or use it when the Lessee ought
reasonably to have known that it was being so used) for the carriage of:
i. whole animals, living or dead, except in the cargo compartments according
to IATA regulations, and except domestic pet animals carried in a suitable
container to prevent the escape of any liquid and to ensure the welfare of the
animal;
ii. acids, toxic chemicals, other corrosive materials, explosives, nuclear
fuels, nuclear wastes or any nuclear assemblies or components, except as
permitted for cargo aircraft under the "Restriction of Goods" schedule issued by
IATA 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; or
iv. any illegal item or substance;
f. not utilize the Aircraft for purposes of training, qualifying or
re-confirming the status of cockpit personnel except for the benefit of the
Lessee's cockpit personnel, and then only if the use of the Aircraft for such
purpose is not disproportionate to the use for such purpose of other aircraft of
the same type operated by the Lessee;
g. not cause or permit the Aircraft to proceed to, or remain at, any
location which is for the time being the subject of a prohibition order (or any
similar order or directive) by:
i. any Government Entity of the State of Registration or the Habitual Base;
or
ii. any Government Entity of the country in which such location is situated;
or
iii. any Government Entity having jurisdiction over the Aircraft;
provided, however, that the failure of the Lessee to comply with the provisions
of this sentence shall not give rise to a Default or an Event of Default
hereunder where such failure is attributable to a hijacking, medical emergency,
equipment malfunction, weather condition, navigational error or other isolated
extraordinary event (not within the Lessee's control) and the Lessee is
diligently proceeding to rectify such failure as soon as is reasonably
practicable; and
h. obtain and maintain in full force all certificates, licenses, permits and
authorizations required for the use and operation of the Aircraft for the time
being, and for the making of payments required by, and the compliance by the
Lessee with its other obligations under, this Agreement.
8.4. Taxes and Other ChargesTaxes and Other Charges
--------------------------
Subject to Clauses 5.6(b), 5.10 and 5.11, the Lessee will promptly pay:
a. all license and registration fees, Taxes (other than Lessor Taxes) and
other amounts of any nature imposed by any Government Entity that are imposed on
the Lessee or for which the Lessee is responsible under this Agreement with
respect to the Aircraft, including the ownership, delivery, leasing, possession,
use, operation, return, sale or other disposition of the Aircraft (where such
sale or other disposition arises as a consequence of an Event of Default); and
b. all rent, fees, charges, Taxes (other than Lessor Taxes) imposed on the
Lessee and other amounts in respect of any premises where the Aircraft or any
Part thereof is located from time to time during the Term;
except to the extent that such payment is being contested in good faith by
appropriate proceedings in respect of which adequate resources have been
provided by the Lessee and non-payment of which does not give rise to any
material likelihood of the Aircraft or any interest therein being sold,
forfeited or otherwise lost or of criminal liability on the part of the Lessor.
8.5. Sub-LeasingSub-Leasing
-----------
a. Lessee will not, without the prior written consent of Lessor (except as
set forth in clause (b) below), sub-lease or part with possession of the
Aircraft, the Engines or any Part except that Lessee may part with possession
(i) with respect to the Aircraft, the Engines or any Part to the relevant
manufacturers for testing or similar purposes or to an Agreed Maintenance
Performer for service, repair, maintenance or overhaul work, or alterations,
modifications or additions to the extent required or permitted by this
Agreement, and (ii) with respect to an Engine or Part, as expressly permitted by
this Agreement. For the avoidance of doubt, Lessee shall be entitled to enter
into "wet lease" or charter arrangements with the Aircraft for short-term
periods that, including all renewals, do not exceed six months so long as
possession and operational control of the Aircraft remains with the Lessee at
all times.
b. Lessee may sub-lease (a "Sub-Lease") the Aircraft to a Cintra Group
Airline, incorporated in the State of Registration or the State of
Incorporation, without the prior consent of the Lessor if the following
conditions are fulfilled:
i. no Event of Default shall have occurred and be continuing;
ii. notwithstanding such Sub-Lease, Lessee shall remain primarily
responsible to Lessor hereunder and the Sub-Lease, by its terms, shall be
expressly subject and subordinate in all respects to this Agreement;
iii. the Sub-Lease shall include clauses identical to or having the same
substantive effect as Clauses 2.1 (except that the State of Incorporation may be
the state of incorporation of the relevant sublessee), 8, 9, 13, 15.12 and
Schedule 6 of this Agreement save that a Sub-Lease may impose additional or more
stringent obligations on, or give fewer rights to, any Sub-Lessee than are
imposed on Lessee under such provisions of this Agreement and that the term of
the Sub-Lease shall not be capable of extending beyond the Expiry Date;
iv. the rights, title and interests of Lessor and the Indemnitees in and to
the Aircraft and this Agreement shall be duly evidenced and protected to the
reasonable satisfaction of Lessor and such Indemnitee (including as to the
making of all necessary filings and registrations);
v. Lessee and the Sub-Lessee shall have executed and delivered to Lessor a
security assignment in respect of the Sub-Lease together with an acknowledgment
of such assignment, and, if requested by Lessor or any Lessor Lender, Lessee and
the Sub-Lessee shall have executed and delivered to Lessor and any mortgagee an
acknowledgment of any assignment by Lessor of such security agreement to such
mortgagee, each such document to be in a form reasonably acceptable to the
Lessor;
vi. the Sub-Lessee shall be a reputable air carrier and shall hold all
necessary consents, licenses, permits and authorizations required under the
applicable law of the state of incorporation or establishment of such carrier
for the public transport of passengers and cargo, and shall not be subject to
any event of the types described in Clause 13.1(g), (h) or (i) as of the
commencement of the Sub-Lease;
vii. the Aircraft shall not be re-registered outside the State of
Registration without the prior written consent of Lessor which shall not be
unreasonably withheld. Lessor shall be entitled to withhold such consent if the
suggested jurisdiction of re-registration is a jurisdiction which Lessor or any
Lessor Lender reasonably determines to be unacceptable in terms of political or
judicial risk;
viii. at least five Business Days prior to the execution by Lessee of any
Sub-Lease, Lessee will provide Lessor with a copy of the draft Sub-Lease in
order for Lessor to satisfy itself that the conditions set out in this Clause as
to form of the Sub-Lease are fulfilled. Prior to delivery of the Aircraft under
any Sub-Lease, Lessee will provide Lessor with an original counterpart of the
Sub-Lease duly executed by Lessee and Sub-Lessee;
ix. Lessee shall be responsible for all reasonable costs incurred by Lessor
in connection with the Sub-Lease;
x. the Sub-Lease shall provide that no further subleases of the Aircraft by
the Sub-Lessee shall be permitted; and
xi. Lessee shall give written notice to Lessor of any Sub-Lease at least ten
(10) days prior to the date on which such Sub-Lease is to be executed (which
notice shall include the identity of any proposed change in the State of
Registration and the Habitual Base of the Aircraft and, if then determined, the
term and the delivery date of the proposed sublease).
c. In circumstances where the conditions set out in (b) above are not
fulfilled in relation to any Sub-Lease, the consent of Lessor to such Sub-Lease
shall be required.
8.6. InspectionInspection
----------
a. The Lessor and any Person designated by the Lessor may, at any reasonable
time and upon prior written notice (except in the event of a Default in which
case no notice is required), visit, inspect and survey the Aircraft, any Engine
or any Part for the purpose of verifying compliance by the Lessee with its
obligations under this Agreement as to the maintenance, use or operation of the
Aircraft; provided, that such inspection shall not unreasonably interfere with
the operation of the Aircraft or the conduct of the Lessee's business.
b. The Lessor shall bear its own costs and expenses in connection with any
such visit, inspection or survey unless the visit, inspection or survey
discloses that the Lessee is in breach of its material obligations under this
Agreement, in which case such costs and expenses, if reasonable, shall be paid
by the Lessee on demand.
c. The Lessor shall:
i. have no duty to make, or liability arising out of, any such visit,
inspection or survey; and
ii. so long as no Event of Default has occurred and is continuing, not
exercise such right other than on reasonable notice and so as not to disrupt
unreasonably the maintenance or operation of the Aircraft.
8.7. Protection of TitleProtection of Title
---------------------
The Lessee shall:
a. not do or knowingly permit to be done or omit or knowingly permit to be
omitted to be done any act or thing which might reasonably be expected to
jeopardize the respective rights, title and interest of the Lessor as owner of
the Aircraft and lessor under this Agreement, the right, title and interest of
any mortgagee of the Aircraft and assignee of this Agreement or the validity,
enforceability or priority of any Mortgage;
b. on all occasions when the ownership of the Aircraft, any Engine or any
Part is relevant, make clear to third parties that title is held by the Lessor
and is subject to any Mortgage;
c. not at any time:
i. represent or hold out the Lessor as carrying goods or passengers on the
Aircraft or as being in any way connected or associated with any operation or
carriage (whether for hire or reward or gratuitously) which may be undertaken by
the Lessee; or
ii. pledge the credit of the Lessor;
d. ensure that there is always affixed, and not removed or in any way
obscured, a fireproof plate (having dimensions of not less than 6 in. x 4 in.)
in a location reasonably adjacent to, and not less prominent than, the
airworthiness certificate for the Aircraft and in a reasonably prominent
position on each Engine stating:
"This Aircraft/Engine is leased to Aerovias de Mexico, S.A. de C.V. Owner:
-----
Investors Asset Holding Corp., not in its Individual
Capacity but Solely as Owner Trustee
Mortgagee: General Electric Capital Corporation as Agent, Lender and Secured
---------
Party"
---
and Lessee agrees to make such changes to such lease identification plates as
Lessor may reasonably request from time to time, at the expense of Lessor.
e. not create or permit to exist any Security Interest upon the Aircraft,
any Engine or any Part;
f. not do or permit to be done anything which may reasonably be expected to
expose the Aircraft, any Engine or any Part to penalty, forfeiture, impounding,
detention, appropriation, damage or destruction and, without prejudice to the
foregoing, if any such penalty, forfeiture, impounding, detention,
appropriation, damage or destruction occurs, give the Lessor notice and use its
best efforts to procure the immediate release of the Aircraft, such Engine or
such Part, as the case may be;
g. not abandon the Aircraft, the Engine or any Part;
h. pay or discharge or cause to be paid or discharged when due and payable
or make adequate provision by way of security or otherwise for all debts,
damages, claims and liabilities of Lessee, any Affiliate thereof or any other
party acting by or through Lessee which have given or might reasonably be
expected to give rise to a Security Interest over or affecting the Aircraft, any
Engine or any Part;
i. not attempt, or hold itself out as having any power, to sell, lease or
otherwise dispose of the Aircraft, any Engine or any Part other than as
expressly permitted by this Agreement; and
j. do or cause to be done, at its sole cost and expense, any and all acts
and things which are required under the terms of any applicable law (other than
Federal Aviation Law) involving any jurisdiction in which Lessee operates, or
any and all acts and things which the Lessor or any Lessor Lender may reasonably
request, to perfect and preserve Lessor's ownership rights regarding and any
Lessor Lender's security interest in and to the Aircraft within any such
jurisdiction.
8.8. GeneralGeneral
-------
The Lessee will:
a. not make any substantial change in the nature of the business in which it
is engaged if such change, in the reasonable opinion of the Lessor, might
reasonably be expected to have a material adverse effect on the Lessee's
performance of its obligations under this Agreement;
b. preserve its corporate existence, and will not merge or consolidate with
any Person unless the successor Person resulting from such merger or
consolidation (the "Successor"):
i. is the Lessee or an Affiliate incorporated in the State of Incorporation
or the State of Registration;
ii. shall have a net worth immediately after such merger or consolidation of
not less than the Lessee's net worth immediately prior thereto;
iii. shall be authorized under applicable law to perform the Lessee's
obligations under this Agreement and any assignment or assumption relating
thereto to the same extent as the Lessee;
iv. shall deliver to the Lessor an agreement, in form and substance
reasonably satisfactory to the Lessor, containing an assumption by the Successor
of the Lessee's representations and warranties under this Agreement (with such
changes and qualifications as are appropriate), together with the due and
punctual performance of all the Lessee's obligations under this Agreement; and
v. shall deliver to the Lessor an opinion of counsel reasonably satisfactory
in form and substance to the Lessor to the effect that the agreements referred
to in sub-clauses (iii) and (iv) above constitute the Successor's legal, valid
and binding obligations; and
c. other than pursuant to a Sub-Lease permitted under Section 8.5 hereof,
ensure that no change will occur in the Habitual Base of the Aircraft without
the prior written consent of the Lessor.
8.9. RecordsRecords
-------
The Lessee shall procure that accurate, complete and current records of all
flights made by, and all maintenance carried out on, the Aircraft (including, in
relation to each Engine and Part subsequently installed, before the
installation) are kept in English (to the extent required for FAR Part 129
operators and otherwise by applicable law), and shall keep the records in such
manner as the Aviation Authority may from time to time require and ensure that
they comply with the requirements of the manufacturers of the Aircraft, any
Engine or any Part. The records will form part of the Aircraft Documents.
8.10. Registration and FilingsRegistration and Filings
--------------------------
The Lessee shall:
a. not do or suffer to be done anything that might reasonably be expected to
adversely affect the registration of the Aircraft with the Aviation Authority or
any filing necessary with the DGAC (to the extent that such is the Lessee's, and
not the Lessor's, obligation under applicable law), or the title or interest of
Lessor and the security interest of any Lessor Lender in the Aircraft and this
Agreement;
b. do all acts and things (including making any filing or registration with
the Aviation Authority, the DGAC or any other Government Entity) and executing
and delivering all documents (including any amendment of this Agreement) as may
be reasonably required by the Lessor:
i. following any change or proposed change in the ownership or financing of
the Aircraft (but, in each case, at the Lessor's cost); or
ii. following any modification of the Aircraft, any Engine or any Part or
the permanent replacement of any Engine or Part in accordance with this
Agreement, so as to ensure that the rights of the Lessor under this Agreement
apply with the same effect as before; or
iii. to establish, maintain, preserve, perfect and protect the rights of the
Lessor under this Agreement; and
c. within thirty (30) days after the Delivery Date, cause a notarized copy
of this Agreement, together with certified Spanish translation of this
Agreement, to be filed with the DGAC and deliver a certified copy of such filing
to the Lessor.
8.11. Maintenance and RepairMaintenance and Repair
------------------------
The Lessee shall:
a. keep the Aircraft airworthy in all respects and in good repair and
condition;
b. not make any material change to the Agreed Maintenance Program without
the approval of the Aviation Authority, and not change the intervals between
Major Checks of the Airframe without the consent of Lessor, not to be
unreasonably withheld;
c. maintain the Aircraft in accordance with the Agreed Maintenance Program
through Agreed Maintenance Performers and perform (at the respective intervals
provided in and to the extent required by the Agreed Maintenance Program) all
Major Checks;
d. maintain the Aircraft in accordance with FAA Part 129 and any other rules
and regulations of the Aviation Authority as are applicable to passenger
category aircraft of the same type as the Aircraft operated by non-United States
air carriers; provided, that after providing the Lessor with a certificate of
its President, Director of Finance or chief internal legal counsel stating all
relevant facts with respect thereto, Lessee may, in good faith and by
appropriate procedures, contest the validity or application of any such rule or
regulation in any reasonable manner which does not materially adversely affect
the Lessor, or any of its interests in or to the Aircraft or this Agreement;
e. comply with all mandatory inspection and modification requirements,
airworthiness directives and similar requirements applicable to the Aircraft,
any Engine or Part having a compliance date during the Term and that are
required by the Aviation Authority; provided, that after providing the Lessor
with a certificate of its President, Director of Finance or chief internal legal
counsel stating all relevant facts with respect thereto, Lessee may, in good
faith and by appropriate procedures, contest the validity or application of any
such requirements or airworthiness directives in any reasonable manner which
does not materially adversely affect the Lessor, or any of its interests in or
to the Aircraft or this Agreement;
f. comply with all mandatory service bulletins issued by any manufacturer of
the Aircraft, Engines or Parts and comply with all other service bulletins
issued by any such manufacturer if and to the extent that the Lessee generally
complies with such other service bulletins in relation to the other leased or
owned Boeing/McDonnell Douglas MD-87 aircraft in its fleet;
g. comply with all applicable laws and the regulations of the Aviation
Authority and any other aviation authorities with jurisdiction over the Lessee
or the Aircraft, any Engine or Part, and comply with all requirements of the
Manufacturer, the Engine Manufacturer and the manufacturers of Parts, that
relate to the maintenance, condition, use or operation of the Aircraft or
require any modification or alteration to the Aircraft, any Engine or Part;
provided, that after providing the Lessor with a certificate of its President,
Director of Finance or chief internal legal counsel stating all relevant facts
with respect thereto, the Lessee may, in good faith and by appropriate
procedures, contest the validity or application of any such regulations or
requirements in any reasonable manner which does not materially adversely affect
the Lessor, or any of its interests in or to the Aircraft or this Agreement;
h. maintain in good standing a current Certificate of Airworthiness for the
Aircraft issued by the Aviation Authority except when the Aircraft is undergoing
maintenance, modification or repair required or permitted by this Agreement, and
from time to time provide to the Lessor a copy on request;
i. maintain the Engines with respect to overhaul build standards and disc
replacements at a level which is not materially inferior to the level applied by
the Lessee in relation to other engines of the same type as the Engines in its
fleet;
j. maintain the Engines and the APU in an "on condition" program in
accordance with the Approved Maintenance Program;
k. subject to Clause 11.1(c), procure promptly the replacement of any Engine
or Part which has become time, cycle or calendar expired, lost, stolen, seized,
confiscated, destroyed, damaged beyond repair, unserviceable or permanently
rendered unfit for use, with an engine or part complying with the conditions set
out in Clause 8.13(a); and
l. maintain, protect and preserve the Aircraft in a manner consistent with
Lessee's practices applied to similar equipment owned by Lessee or leased from
other lessors, without in any way materially favoring or disfavoring the
Aircraft relative to such other equipment.
8.12 Removal of Engines and PartsRemoval of Engines and Parts
--------------------------------
The Lessee will ensure that no Engine or Part installed on the Aircraft is at
any time removed from the Aircraft other than:
a. if replaced as expressly permitted by this Agreement; or
b. if the removal is of an obsolete item and is in accordance with the
Agreed Maintenance Program; or
c. pursuant to, and in accordance with, Clause 8.15;
d. pursuant to, and in accordance with, Schedule 5, Clause 2(b); or
e. i. during the course of maintaining, servicing, repairing,
overhauling or testing that Engine or the Aircraft, as the case may be; or
ii. as part of a normal engine or part rotation program; or
iii. for the purpose of making such modifications to the Engine or the
Aircraft, as the case may be, as are permitted under this Agreement,
and then in each case only if it is reinstalled or replaced by an engine or part
complying with Clause 8.13(a) as soon as practicable and in any event no later
than the Expiry Date.
8.13. Installation of Engines and PartsInstallation of Engines and Parts
-------------------------------------
a. The Lessee will ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
i. in the case of an engine, it is an engine of the same model as, or an
improved or advanced version of, the Engine it replaces (provided, in the case
of an improved or advanced version, it can be installed and operated on the
Airframe without modification of the Airframe or the engine, whether or not the
other installed Engine is also such an improved or advanced version) and it has
attached to it a current "serviceable tag" issued by the manufacturer or
supplier indicating that the engine is new, serviceable or overhauled, and the
Lessee shall retain all such tags to the extent required under applicable law;
ii. in the case of a part, it is in as good operating condition, is of the
same or a more advanced make and model and is of the same interchangeable
modification status as the replaced Part and has attached to it a current
"serviceable tag" issued by the manufacturer or supplier indicating that the
part is new, serviceable or overhauled, and the Lessee shall retain all such
tags to the extent required under applicable law; provided, that the replacement
of parts will not, in the aggregate, result in the material diminution in the
value or utility of the Aircraft;
iii. in the case of a part, it has become and remains the property of the
Lessor free from Security Interests and on installation on the Aircraft will,
without further act, be subject to this Agreement; and
iv. in each case, the Lessee has full details as to its source and
maintenance records as required by the Aviation Authority for Part 129
operators.
b. If no Event of Default has occurred which is continuing, the Lessee will
be entitled to install any engine or part on the Aircraft by way of replacement
notwithstanding Clause 8.13(a) if:
i. there is not available to the Lessee at the time and in the place that
engine or part is required to be installed on the Aircraft a replacement engine
or part complying with the requirements of Clause 8.13(a);
ii. it would result in an unreasonable disruption of the operation of the
Aircraft or the business of the Lessee to ground the Aircraft until an engine or
part complying with Clause 8.13(a) becomes available for installation on the
Aircraft; and
iii. as soon as practicable after installation of the same on the Aircraft
but, in any event, no later than the Expiry Date, the Lessee removes any such
engine or part and replaces it with the Engine or Part replaced by it or by an
engine or part complying with Clause 8.13(a).
c. The Lessor agrees, for the benefit of the Lessee and any mortgagee or
holder of any other Security Interest in any engine or part (other than an
Engine or Part) owned by the Lessee, any lessor of any engine or part (other
than an Engine or Part leased to the Lessee) and any conditional vendor of any
engine or part (other than an Engine or Part purchased by the Lessee subject to
a conditional sale agreement or any other security agreement), that no right,
title to or interest in any such engine or part shall be exercised or asserted
by the Lessor and the Lessor acknowledges and confirms that it will not acquire
any right, title or interest to or in any such engine or part as a result of its
installation on the Airframe.
8.14 Non-Installed Engines and PartsNon-Installed Engines and Parts
----------------------------------
a. The Lessee shall ensure that any Engine or Part which is not installed on
the Airframe (or any other airframe as permitted by this Agreement) is, except
as expressly permitted by this Agreement, properly and safely stored and kept
free from Security Interests.
b. Notwithstanding sub-clause (a), the Lessee shall be permitted, if no
Event of Default has occurred and is continuing, to install any Engine on an
airframe and any Part on an airframe or engine:
i. owned and operated by the Lessee free from Security Interests; or
ii. operated by the Lessee and either (1) leased or hired to the Lessee
pursuant to a lease or conditional sale agreement on terms whereby the Lessee
has full operational control of that aircraft or engine, or (2) owned by the
Lessee and subject to a mortgage, a lease, conditional sale agreement or other
agreement that constitutes a Security Interest vested in or held by any other
Person, provided that:
(A) the terms of any such lease, conditional sale agreement or Security
Interest will not have the effect of prejudicing the title and interest of the
Lessor or any mortgagee in and to that Engine or Part; and
(B) the lessor under such lease, the seller under such conditional sale
agreement or the secured party of any Security Interest, as the case may be, has
confirmed and acknowledged in writing (which confirmation and acknowledgment may
be contained in the lease, conditional sale agreement or document creating the
Security Interest) to the Lessor, in form and substance reasonably satisfactory
to the Lessor, that it will recognize the rights, title and interest of the
Lessor and any mortgagee to and in that Engine or Part and that it will not
acquire any rights of ownership whatever in relation thereto.
8.15. Pooling of Engines and PartsPooling of Engines and Parts
--------------------------------
The Lessee will not enter into nor permit any pooling agreement or arrangement
in respect of an Engine or Part without the prior written consent of the Lessor,
such consent not to be unreasonably withheld in any case where an Engine or Part
is leased, let on hire or otherwise made available by the Lessee (on terms
conferring no more than a contractual right in personam against the Lessee and
not a right in rem against such Engine or Part) pursuant to a pooling agreement
to which the Lessee is a party and:
a. the other parties to which are reputable, solvent commercial air carriers
or the manufacturers or suppliers of the Engine or Part (or other reputable,
solvent organizations whose business includes the administration of and
participation in such pooling agreements or arrangements); and
b. which does not contemplate the transfer of title to the pooled Engine or
Part; and
c. either provides that the Lessor (or any mortgagee designated by Lessor)
will be sole loss payee in respect of any loss or damage to the Engine or Part,
or provides for Lessor to acquire title to a substitute engine or part
satisfying the conditions set out in Clause 8.13(a) if the Engine or Part is
destroyed.
8.16. Equipment ChangesEquipment Changes
------------------
a. The Lessee will not make any modification or addition to the Aircraft
(each an "Equipment Change"), except for an Equipment Change that:
i. is expressly permitted or required by any other provision of this
Agreement, or
ii. the Lessee may deem desirable in the proper conduct of its business,
provided that no such Equipment Change impairs the condition or airworthiness of
the Aircraft, or diminishes the value, useful life or utility of the Airframe,
Engine or Part, or
iii. has the prior written approval of the Lessor, or
iv. is made in order to conform the configuration of the Aircraft to
Lessee's standard configuration for MD-87 aircraft.
b. So long as no Event of Default has occurred and is continuing, the Lessee
may remove any Equipment Change if it can be removed from the Aircraft without
diminishing or impairing the value, utility, condition or airworthiness of the
Aircraft as compared to its value, utility, condition or airworthiness
immediately prior to the Equipment Change assuming the Aircraft was in the
condition required by this Agreement prior to the Equipment Change.
8.17. Title to PartsTitle to Parts
----------------
a. Subject to Clause 8.13(c), title to all parts installed on the Aircraft,
whether by way of replacement as the result of an Equipment Change or otherwise
(except those installed pursuant to Clause 8.13(b) or Clause 8.15) will on
installation, without further act, vest in the Lessor subject to this Agreement
free and clear of all Security Interests. The Lessee will at its own expense
take all such steps and execute, and procure the execution of, all such
instruments that are necessary to ensure that title so passes to the Lessor
according to all applicable laws. At any time when requested by the Lessor, the
Lessee will provide evidence to the Lessor's reasonable satisfaction (including
the provision, if required, to the Lessor of a legal opinion of Lessee's chief
internal counsel) that title has so passed to the Lessor.
b. Except as referred to in Clause 8.16(b), any Engine or Part at any time
removed from the Aircraft will remain the property of the Lessor until a
replacement has been made in accordance with this Agreement and until title to
that replacement has passed, according to applicable laws, to the Lessor subject
to this Agreement free of all Security Interests, whereupon title to the Engine
or Part will, provided no Event of Default has occurred and is continuing, pass
to the Lessee.
8.18 Third PartiesThird Parties
--------------
The Lessee shall ensure that no Person having possession of the Aircraft during
the Term (other than the Lessor or any party acting through or on behalf of
Lessor) will act in any manner inconsistent with the Lessee's obligations under
this Agreement and that all such Persons shall comply with those obligations as
if references to "Lessee" included a separate reference to those Persons.
9. INSURANCEINSURANCE
---------
9.1. InsurancesInsurances
----------
The Lessee will maintain in full force and effect during the Term insurances in
respect of the Aircraft in form and substance reasonably satisfactory to the
Lessor (the "Insurances" which expression includes, where the context so admits,
any relevant re-insurances). The Insurances will be effected either:
a. on a direct basis with insurers of recognized standing who normally
participate in aviation insurances in the leading international insurance
markets and led by reputable underwriters reasonably satisfactory to the Lessor;
or
b. with a single insurer or group of insurers reasonably satisfactory to the
Lessor who does not retain the risk, but effects substantial reinsurance in the
leading international insurance markets and through brokers and underwriters
each of recognized standing and reasonably acceptable to the Lessor for a
percentage reasonably acceptable to the Lessor of all risks insured (the
"Reinsurances"),
and the Lessor acknowledges and confirms that the current deductibles and
exclusions, together with the existing brokers and insurers in respect of the
insurances maintained by Lessee on the date of this Agreement are acceptable to
it.
9.2. RequirementsRequirements
------------
The Lessor's current requirements as to Insurances are as specified in this
Clause and in Part 1 of Schedule 6. The Lessor may from time to time stipulate
such other requirements for the Insurances as the Lessor reasonably considers
necessary to ensure that the scope and level of cover is maintained in
accordance with the then prevailing industry practice in relation to aircraft of
the same type as the Aircraft and in relation to operators of similar standing
to the Lessee. In the event that the Lessor proposes any such stipulation, it
shall notify the Lessee accordingly and the Lessor and/or its brokers will then
consult in good faith with the Lessee and the Lessee's brokers with regard to
such proposed stipulation. If, following the consultation, the Lessor and the
Lessee are satisfied that the stipulation should be made, the Lessee shall then
comply with the stipulated requirements. If, however, the Lessor and the Lessee
do not agree regarding the proposed stipulation, the Lessor and the Lessee (and
their respective brokers) shall agree upon and name a third broker, to determine
whether the proposed stipulation is required in order to ensure that the scope
and level of cover is maintained in accordance with the then prevailing industry
practice in relation to aircraft of the same type and in relation to operators
of similar standing to the Lessee. The party whose position is not accepted by
the third broker shall pay all costs and expenses of such broker in connection
with the making of its determination.
9.3. Insurance CovenantsInsurance Covenants
--------------------
The Lessee shall:
a. ensure that all legal requirements as to insurance of the Aircraft, any
Engine or any Part that may from time to time be imposed by the laws of the
State of Registration or any jurisdiction to, from or over which the Aircraft
may be flown, in so far as they affect or concern the operation of the Aircraft,
are complied with and, in particular, those requirements compliance with which
is necessary to ensure that:
i. the Aircraft does not become subject to detention or forfeiture;
ii. the Insurances remain valid and in full force and effect; and
iii. the interests of the Indemnitees in the Insurances and the Aircraft or
any Part are not thereby prejudiced;
b. not use, cause or permit the Aircraft, any Engine or any Part to be used
for any purpose or in any manner not covered by the Insurances or outside any
geographical limit imposed by the Insurances;
c. comply with the terms and conditions of each policy of the Insurances and
not do, consent or agree to any act or omission that:
i. invalidates or may reasonably be expected to invalidate the Insurances;
ii. renders or may reasonably be expected to render void or voidable the
whole or any part of any of the Insurances; or
iii. brings any particular liability within the scope of an exclusion,
exception or sub-limit to the Insurances;
d. not take out without the prior written approval of the Lessor any
insurance or reinsurance in respect of the Aircraft other than those required or
permitted under this Agreement unless relating solely to hull total loss,
business interruption, engine break-down, profit commission and deductible risk;
e. commence renewal procedures at least 30 days prior to the expiration of
any of the Insurances and provide to the Lessor:
i. if requested by the Lessor, a written status report of renewal
negotiations 14 days prior to each expiration date;
ii. telefaxed confirmation of completion of renewal prior to each expiration
date; and
iii. certificates of insurance (and where appropriate certificates of
reinsurance), and broker's (and any reinsurance brokers') letter of undertaking
substantially in the form set out in Parts 2 and 3 of Schedule 6, detailing the
coverage and confirming the insurers' (and any reinsurers') agreement to the
specified insurance requirements of this Agreement within seven days after each
renewal date;
f. provide to the Lessor copies of those documents evidencing the Insurances
which the Lessor may reasonably request (but not including information regarding
premiums);
g. on request, provide to the Lessor evidence that the Insurance premiums
have been paid;
h. not make any modification or alteration to the Insurances material and
adverse to the interests of any of the Indemnitees;
i. be responsible for any deductible under the Insurances; and
j. provide any other insurance and reinsurance related information, or
assistance, in respect of the Insurances as the Lessor may reasonably request
(but not including copies of the insurance policies (unless a dispute as to
coverage arises) or information regarding premiums).
9.4. Failure to InsureFailure to Insure
-------------------
If the Lessee fails to maintain the Insurances in compliance with this
Agreement, or to provide Lessor with the evidence thereof required under Clause
9, each of the Indemnitees will be entitled but not obligated (without prejudice
to any other rights of the Lessor under this Agreement):
a. to pay the premiums due or to effect and maintain insurances satisfactory
to it or otherwise remedy the Lessee's failure in such manner (including to
effect and maintain an "owner's interest" policy) as it considers appropriate.
Any sums so expended by it will become immediately due and payable by the Lessee
to the Lessor on demand (and Lessor will endeavor to make such demand promptly
following the incurring of such expenditure), together with interest thereon at
the Default Rate from the date of expenditure by it up to the date of
reimbursement by the Lessee (before and after any judgment); and
b. at any time while such failure is continuing to require the Aircraft to
remain at any airport or to proceed to and remain at any airport designated by
it until the failure is remedied to its reasonable satisfaction.
9.5. Continuing IndemnityContinuing Indemnity
---------------------
The Lessor may require the Lessee to effect and to maintain insurance after the
Expiry Date with respect to its liability under the indemnities in Clause 10 for
such period as the Lessor may reasonably require (but in any event not more than
the lesser of two years or until the next Major Check which "zero times" the
Aircraft under MSG-3) providing for each Indemnitee to be named as additional
insured. The Lessee's obligation under this Clause 9.6 shall not be affected by
the Lessee ceasing to be lessee of the Aircraft or any of the Indemnitees
ceasing to have any interest in respect of the Aircraft. Such insurance shall
be maintained at the cost of Lessee until the Aircraft has been returned and
Lessee has performed its obligations relating to such return under this
Agreement and, thereafter, at the cost of Lessor.
9.6. Application of Insurance ProceedsApplication of Insurance Proceeds
------------------------------------
As between the Lessor and the Lessee:
a. All insurance payments received as the result of a Total Loss or an
Engine Loss occurring during the Term will be paid to the Lessor (or any
mortgagee designated by Lessor), and the Lessor shall promptly pay the balance
of those amounts to the Lessee after deduction of all amounts then due and
payable by the Lessee to the Lessor under this Agreement, including under Clause
11.1(b) and Clause 11.1(c).
b. All insurance proceeds in respect of any damage or loss to the Aircraft,
any Engine or any Part occurring during the Term not constituting a Total Loss
and in excess of the Damage Notification Threshold will be paid to the Lessor
(or any mortgagee designated by Lessor) and applied in payment (or to reimburse
the Lessee) for repairs or replacement property upon the Lessor being reasonably
satisfied that the repairs or replacement have been effected in accordance with
this Agreement. The insurer may pay insurance proceeds in amounts below the
Damage Notification Threshold directly to the Lessee. Any balance remaining
shall be paid to or retained by the Lessee.
c. All insurance proceeds in respect of third party liability will, except
to the extent paid by the insurers to the relevant third party, be paid to the
Lessor to be paid directly in satisfaction of the relevant liability or promptly
to the Lessee in reimbursement of any payment so made.
d. Notwithstanding Clauses 9.6(a), (b) and (c), if at the time of the
payment of any such insurance proceeds a Default has occurred and is continuing
all such proceeds will be paid to or retained by the Lessor (or any mortgagee
designated by Lessor) to be applied toward payment of any amounts then due and
payable by the Lessee in such order as the Lessor sees fit or as the Lessor may
elect. In the event that the Lessee remedies any such Default to the reasonable
satisfaction of the Lessor, the Lessor shall procure that all such insurance
proceeds then held by the Lessor in excess of the amounts (if any) applied by
the Lessor (or any mortgagee designated by Lessor) in accordance with this
sub-clause (d) shall be paid promptly to the Lessee.
9.7. Additional InsuranceAdditional Insurance
---------------------
The Lessee agrees to procure any additional Insurances as at any time requested
by the Lessor and Lessor agrees to reimburse the Lessee for the cost of, and all
reasonable expenses incurred in obtaining, any such additional Insurances.
10. INDEMNITYINDEMNITY
---------
10.1. GeneralGeneral
-------
The Lessee shall defend, indemnify and hold harmless the Indemnitees from and
against any and all claims, proceedings, losses, liabilities, suits, judgments,
costs, expenses, penalties or fines (each a "Claim") regardless of when the same
is made or incurred, whether during or after the Term (but not before):
a. that may at any time be suffered or incurred directly or indirectly as a
result of or connected with possession, delivery, performance, management,
registration, control, maintenance, condition, service, repair, overhaul,
leasing, sub-leasing, use, operation or return of the Aircraft, any Engine or
Part (either in the air or on the ground) whether or not the Claim may be
attributable to any defect in the Aircraft, any Engine or any Part or to its
design, testing, use or otherwise, and regardless of when the same arises or
whether it arises out of or is attributable to any act or omission, negligent or
otherwise, of any Indemnitee;
b. that arise out of any act or omission that invalidates or that renders
voidable any of the Insurances;
c. that may at any time be suffered or incurred as a consequence of any
design, article or material in the Aircraft, any Engine or any Part or its
operation or use constituting an infringement of patent, copyright, trademark,
design or other proprietary right or a breach of any obligation of
confidentiality owed to any Person,
but excluding any Claim to the extent that:
i. it arises as a result of the willful misconduct or gross negligence of
such Indemnitee;
ii. it arises as a result of a breach by the Lessor of its express
obligations under this Agreement or as a result of a representation or warranty
given by the Lessor in this Agreement not being true and correct at the date
when, or when deemed to have been, given or made;
iii. it constitutes a Lessor Tax or Lessor Lien;
iv. it represents a Tax or loss of tax benefits (the Lessee's liabilities
for which, to the extent thereof, are set out in Clauses 5.5, 5.6 and 5.8);
v. it constitutes a cost or expense that is required to be borne by the
Lessor in accordance with any other provision of this Agreement;
vi. it results from any voluntary disposition by the Lessor of all or any
part of its rights, title or interest in or to the Aircraft or under this
Agreement, unless such disposition occurs as a consequence of an Event of
Default; or
vii. it is attributable to an event occurring after the Term unless the
Claim results from or arises out of an act or omission by the Lessee, or any
circumstance existing, during the Term.
10.2. MitigationMitigation
----------
a. The Lessor agrees that it shall, as soon as reasonably practicable after
it becomes aware of any circumstances that would, or would reasonably be
expected to, become the subject of a claim for indemnification pursuant to
Clause 10.1, notify the Lessee in writing accordingly. The Lessor (and any
other Indemnitee seeking indemnification, as the case may be) and the Lessee
shall then consult with one another in good faith in order to determine what
action (if any) may reasonably be taken to avoid or mitigate such Claim. The
Lessee shall have the right to take all reasonable action (on behalf and, if
necessary, in the name of the Lessor or such other Indemnitee) in order to
resist, defend or settle (provided such settlement is accompanied by payment in
full and requires no admissions or covenants by Lessor) any claims by third
parties giving rise to such Claim, provided always that the Lessee shall not be
entitled to take any such action unless adequate provision, reasonably
satisfactory to the Lessor and such other Indemnitee, shall have been made in
respect of the third party claim and the costs thereof. The Lessee or, if the
Lessee's insurers have confirmed that the Claim is covered by Lessee's
Insurances, the Lessee's insurers shall be entitled to select any counsel to
represent it or them, the Lessor and such other Indemnitee in connection with
any such action, subject in the case of Lessee to the approval of the Lessor and
such other Indemnitee (such approval not to be unreasonably withheld) and any
action taken by the Lessee shall be on a full indemnity basis in respect of the
Lessor and such other Indemnitee.
b. Any sums paid by the Lessee to the Lessor or any Indemnitee in respect of
any Claim pursuant to Clause 10.1 shall be paid subject to the condition that,
in the event that the Lessor or such Indemnitee is subsequently reimbursed in
respect of that Claim by any other Person, the Lessor or such Indemnitee shall,
provided no Default shall have occurred and be continuing, promptly pay to the
Lessee an amount equal to the sum paid to it by the Lessee, including any
interest on such amount to the extent attributable thereto and received by the
Lessor or such Indemnitee, less any Tax payable by the Lessor or such Indemnitee
in respect of such reimbursement.
c. Upon the making of any indemnity payment pursuant to Clause 10.1, the
Lessee, without any further action, shall be subrogated to any claims the Lessor
may have relating thereto to the extent of such payment. The Lessor agrees to
give such further assurances or agreements and to cooperate with the Lessee to
permit the Lessee to pursue such claims, if any, to the extent reasonably
requested by the Lessee and at the Lessee's sole cost and expense.
d. In the event that the Lessee shall have paid an amount to the Lessor
pursuant to Clause 10.1, and the Lessor subsequently shall be reimbursed in
respect of such indemnified amount from any other person, the Lessor shall
promptly (but not before the Lessee shall have made all payments then due to the
Lessor under this Agreement) pay to the Lessee an amount equal to the amount of
such reimbursement.
10.3. Duration02Duration
--------
The indemnities contained in this Agreement will survive and continue in full
force after the Expiry Date.
11. EVENTS OF LOSSEVENTS OF LOSS
----------------
11.1. Total LossTotal Loss
-----------
a. Pre-delivery: If a Total Loss occurs prior to Delivery, this Agreement
------------
will immediately terminate and, except as expressly stated in this Agreement,
neither party will have any further obligation or liability under this Agreement
except that the Lessor will return to the Lessee the Deposit and any other
amounts paid by the Lessee to the Lessor with respect to the Aircraft prior to
Delivery.
b. Post-delivery: If a Total Loss occurs after Delivery, the Lessee will
-------------
pay to the Lessor (or any mortgagee designated by Lessor), no later than 90 days
after the Total Loss Date (the "Settlement Date"), the Termination Value on the
Settlement Date, less any portion of Basic Rent previously paid by the Lessee
and corresponding to periods after the date of such payment, unless the Aircraft
is restored to the Lessor or the Lessee within that period (or, in the case of a
Total Loss coming within paragraph (c) of the definition of Total Loss and
involving the loss of the Lessor's title to the Aircraft, if both the Aircraft
and the Lessor's title thereto are restored to the Lessor or, in the case of the
Aircraft, to the Lessee). The receipt by the Lessor (or any mortgagee
designated by Lessor) of the insurance proceeds in respect of the Total Loss on
or prior to the Settlement Date shall discharge the Lessee from its obligation
to pay the Termination Value to the Lessor pursuant to this sub-clause (b),
provided such proceeds are not less than an amount equal to the Termination
Value less an amount equal to the portion of any Basic Rent previously paid by
the Lessee and corresponding to periods after the date of such payment. In the
event that the insurance proceeds are paid initially to the Lessee and not to
the Lessor, they may be retained by the Lessee if the Lessee shall have paid the
Termination Value, less an amount equal to the portion of any Basic Rent
previously paid by the Lessee and corresponding to periods after the date of
such payment, to the Lessor; otherwise, the Lessee shall pay the Termination
Value, less an amount equal to the portion of any Basic Rent previously paid by
the Lessee and corresponding to periods after the date of such payment, to the
Lessor within two (2) Business Days following receipt by the Lessee of such
proceeds. In the event that the Lessee pays the Termination Value, less an
amount equal to the portion of any Basic Rent previously paid by the Lessee and
corresponding to periods after the date of such payment, to the Lessor in
accordance with this sub-clause (b), the Lessor shall promptly assign to the
Lessee its rights under the Insurances to receive the insurance proceeds in
respect of the Total Loss to the extent that such proceeds shall not have been
paid to the Lessee. Subject to the rights of any insurers and reinsurers or
other third parties, upon irrevocable payment in full to the Lessor of that
amount and all other amounts then due and payable to the Lessor under this
Agreement, the Lessor shall, without recourse or warranty (except as to the
absence of Lessor Liens and as to good and marketable title), and without
further act, be deemed to have transferred to the Lessee all of the Lessor's
rights to any Engines or Parts not installed when the Total Loss occurred, all
on an "as-is, where is" basis, and shall, at the Lessee's expense, execute and
deliver such bills of sale and other documents and instruments as the Lessee may
reasonably request to evidence (on the public record or otherwise) the transfer
and the vesting of the Lessor's rights in such Engines and Parts in the Lessee,
free and clear of all rights of the Lessor and any Lessor Liens.
c. Engine Loss: Upon the occurrence of an Engine Loss (including, for the
------------
avoidance of doubt, at a time when the Engine is not installed on the Airframe)
in circumstances in which there has not also occurred a Total Loss, the Lessee
shall give the Lessor written notice promptly upon becoming aware of the same
and shall (unless the Lessor has received the insurance proceeds relating to
such Engine Loss), within 90 days after the Engine Loss Date, convey or cause to
be conveyed to the Lessor, as replacement for such Engine, title to a
replacement engine that is in the same or better operating condition, has as
many or more Flight Hours and Cycles available until the next scheduled checks,
inspections, overhauls and shop visits and has the same or greater value and
utility as the lost Engine and that complies with the conditions set out in
Clause 8.13(a). The Lessee will at its own expense take all such steps and
execute, and procure the execution of, all such instruments that are necessary
to ensure that title to the replacement engine passes to the Lessor according to
all applicable laws, and if requested by the Lessor, will provide evidence to
the Lessor's reasonable satisfaction (including the provision, if required, to
the Lessor of a legal opinion of counsel to Lessee reasonably satisfactory to
Lessor) that title has so passed to the Lessor, whereupon the leasing of the
replaced Engine the subject of the Engine Loss shall cease and title to such
replaced Engine shall (subject to any salvage rights of insurers) vest in the
Lessee pursuant to Clause 8.17(c). If the Lessor subsequently receives any
insurance proceeds relating to such Engine Loss, the Lessor shall promptly remit
such proceeds to the Lessee. No Engine Loss with respect to any Engine that is
replaced in accordance with the provisions of this Clause 11.1(c) shall result
in any increase or decrease in Basic Rent or the Termination Value.
11.2. RequisitionRequisition
-----------
During any requisition for use or hire of the Aircraft, any Engine or Part that
does not constitute a Total Loss:
a. the Basic Rent and Supplemental Rent payable under this Agreement will
not be suspended or abated either in whole or in part, and the Lessee will not
be released from any of its other obligations under this Agreement (other than
operational obligations with which the Lessee is unable to comply solely by
virtue of the requisition); and
b. so long as no Event of Default has occurred and is continuing, the Lessee
will be entitled to any compensation payable by the requisitioning authority in
respect of the Term. The Lessee will, as soon as practicable after the end of
any such requisition, cause the Aircraft to be put into the condition required
by this Agreement. The Lessor will be entitled to all compensation payable by
the requisitioning authority in respect of any change in the structure, state or
condition of the Aircraft arising during the period of requisition, and the
Lessor will apply such compensation in reimbursing the Lessee for the cost of
complying with its obligations under this Agreement in respect of any such
change, but so that, if any Event of Default has occurred and is continuing, the
Lessor may apply the compensation in or towards settlement of any amounts owing
by the Lessee under this Agreement. The Lessor shall hold all such sums.
12. RETURN OF AIRCRAFTRETURN OF AIRCRAFT
--------------------
12.1. RedeliveryRedelivery
----------
On the Expiry Date or termination of the leasing of the Aircraft under this
Agreement, the Lessee shall, unless a Total Loss has occurred, at its expense,
redeliver the Aircraft and Aircraft Documents to the Lessor at the Redelivery
Location in a condition complying with this Clause 12 and Schedule 5, free and
clear of all Security Interests (other than Lessor Liens); provided, however,
that if Lessor designates an alternate Redelivery Location in the continental
United States of America then the Lessor shall reimburse the Lessee for the cost
of a ferry flight from Mexico City International Airport (or such closer
location at which Lessee has then placed the Aircraft) to such alternate
Redelivery Location, provided, however, that if such cost is in excess of
$15,000.00 any excess shall not be reimbursed and shall be borne by the Lessee.
12.2. Final ChecksFinal Checks
-------------
Immediately prior to return of the Aircraft, Lessee shall perform the following:
a. Lessee shall perform (or have performed by an Agreed Maintenance
Performer) a "C" check or its equivalent, the work, if any, required to be
performed within thirty (30) days thereafter in accordance with the heavy work
cards, the corresponding lower checks ("A" and "B" or equivalent) and any other
maintenance and inspections tasks that are a part thereof, all in accordance
with the Agreed Maintenance Program. At return, the Airframe will have zero
Flight Hours since such "C" check or its equivalent and any such heavy
maintenance work, except for the acceptance flights and the ferry flight to the
Redelivery Location. Lessee will also weigh the Aircraft. Lessee shall also
perform during such check any other work reasonably requested by Lessor (and not
otherwise required under this Agreement) so long as such work does not prevent
Lessee from returning the Aircraft on the Expiry Date, and Lessor shall
reimburse Lessee for the cost of such work based on its third-party labor rates.
The Lessor shall indemnify and hold harmless the Lessee from and against any and
all costs and expenses incurred by the Lessee in the event the performance of
such additional work causes a delay in the return of the Aircraft.
b. Lessee shall perform (or have performed by an Agreed Maintenance
Performer) an internal and external corrosion inspection in accordance with the
manufacturer's corrosion prevention and control program ("CPCP") specified for
the model type and correct any discrepancies in accordance with the
recommendations of the manufacturer and the manufacturer's structural repair
manual ("SRM"). In addition, all inspected areas will be properly treated with
corrosion inhibitor as recommended by the manufacturer.
c. With respect to the Engines:
i. Lessee shall perform a videotape borescope inspection of the low pressure
and high pressure compressors and the turbine area of the Engines. All items
beyond the applicable Engine manufacturer's maintenance manual limits will be
rectified at Lessee's sole cost and expense. No Engine will be "on watch" for
any reason requiring special or out of sequence inspection.
ii. In accordance with the applicable manufacturer's maintenance manual,
Lessee shall perform a maximum power assurance run and condition, acceleration
and bleed valve scheduling checks on the Engines, and Lessee will record and
evaluate the Engine performance with Lessor and/or its representative entitled
to be present. The performance and all operating parameters of each Engine will
be within the limits specified in the Engine manufacturer's maintenance manual.
iii. If the Engine historical and technical records and the condition trend
monitoring data of any Engine or the APU indicate an abnormal acceleration (as
determined with reference to the applicable maintenance manual) in the rate of
deterioration in the performance of such Engine or APU, Lessee shall correct
such conditions causing the accelerated rate of deterioration.
d. Lessee shall remove its logo and exterior markings.
12.3 Final InspectionFinal Inspection
-----------------
a. At least 45 days before the redelivery of the Aircraft, the Lessee will
make available to the Lessor at its maintenance base (i) the Aircraft Documents,
(ii) a current and complete copy of the Agreed Maintenance Program, (iii) a copy
of all Engine and APU trend monitoring data, (iv) a written summary of all
sampling programs involving or affecting the Aircraft, and (v) a copy of all
other documentation and data reasonably requested by Lessor and required to be
maintained by FAR Part 129 operators for review and inspection in order to
prepare for the Final Inspection of the Aircraft and in order to facilitate the
Aircraft's integration into any subsequent operator's fleet. The Lessor agrees
that it will not disclose the contents of the Agreed Maintenance Program to any
Person except to the extent necessary to monitor the Lessee's compliance with
this Agreement and/or to bridge the maintenance program for the Aircraft from
the Agreed Maintenance Program to another program after the Expiry Date.
b. During the 30 days immediately prior to redelivery of the Aircraft, the
Lessee will make the Aircraft available to the Lessor at the Lessee's
maintenance base for inspection (the "Final Inspection") in order to verify that
the condition of the Aircraft complies with this Agreement.
c. At the request of Lessor, Lessee shall perform "bridging" maintenance
procedures for the purpose of standardizing the Aircraft to the maintenance
program of any subsequent operator of the Aircraft; provided, however, that
Lessor shall pay to Lessee all costs and expenses incurred by the Lessee
relating to the "bridging" procedures and the performance of such bridging
procedures shall not materially disrupt Lessee's business or operations. The
Lessor shall indemnify and hold harmless the Lessee from and against any and all
costs and expenses incurred by the Lessee in the event the performance of such
"bridging" causes a delay in the return of the Aircraft.
d. The Lessor shall also be entitled, as part of the Final Inspection, to
require the Lessee to perform an acceptance flight of up to two hours (which
Lessee may perform as part of the ferry flight to the Redelivery Location, if
any) at the Lessee's cost (with up to three of the Lessor's representatives as
on-board observers) and such further acceptance flights as may be necessary in
the event that the first or subsequent flights do not confirm that the Aircraft
complies with the requirements of this Agreement. The Lessee's pilots shall be
in control of such acceptance flights at all times.
12.4. Non-ComplianceNon-Compliance
--------------
To the extent that, on the Expiry Date, the condition of the Aircraft does not
comply with this Agreement, the Lessee shall at the option of the Lessor:
a. immediately rectify the non-compliance and, to the extent the
non-compliance extends beyond the Expiry Date due to acts or omissions of the
Lessee, the Term will be automatically extended until the non-compliance has
been rectified; or
b. redeliver the Aircraft to the Lessor and indemnify the Lessor, and
provide security reasonably acceptable to the Lessor for that indemnity, against
the cost of putting the Aircraft into the condition required by this Agreement.
During any extension of the Term pursuant to sub-clause (a), this Agreement will
remain in full force and effect, including the obligation to pay rent (which
Lessee shall pay at the rate of $4,271.00 per day weekly in arrears); provided,
however, that Lessee shall not operate, or permit others to operate, the
Aircraft after the Expiry Date except for acceptance flights pursuant to Clause
12.2 and a ferry flight to the Redelivery Location.
c. The Lessor may require the Lessee to remove any Equipment Change that
would diminish or impair the value, utility, condition or airworthiness of the
Aircraft and to restore the Aircraft to its condition prior to that Equipment
Change.
12.5. Export DocumentationExport Documentation
---------------------
Upon redelivery and upon request by the Lessor, the Lessee shall provide to the
Lessor all documents necessary to export the Aircraft from the State of
Incorporation (including a valid and subsisting export license for the Aircraft,
if any).
12.6. AcknowledgmentAcknowledgment
--------------
Provided the Lessee has complied with its obligations under this Agreement, upon
redelivery of the Aircraft by the Lessee to the Lessor at the Redelivery
Location, the Lessor will deliver to the Lessee a written acknowledgment
confirming that the Lessor is satisfied that the Aircraft is in the condition
required by this Agreement and has been redelivered to the Lessor in accordance
with this Agreement. Within one (1) Business Day of the delivery of such
acknowledgment the Lessor shall return the balance, if any, of the Deposit to
Lessee, plus accrued interest (if the Deposit was in cash) in accordance with
Clause 5.14, and shall send the letter of credit to the applicable bank for
cancellation.
13. DEFAULTDEFAULT
-------
13.1. EventsEvents
------
Each of the following events will constitute an Event of Default and a
repudiation of this Agreement by the Lessee:
a. Non-payment: the Lessee fails to pay any amount of Basic Rent and such
-----------
failure continues for three Business Days after written notice from Lessor, or
Lessee fails to pay any amount of Termination Value when due, or, after the
Lessor gives written notice to the Lessee that Supplemental Rent is due, fails
to make any payment of Supplemental Rent in accordance with the terms of this
Agreement and such failure continues for 15 days; or
b. Insurance: the Lessee fails to comply with any provision of clause 9 or
---------
any insurance required to be maintained under this Agreement is canceled or
terminated; or
c. Breach: the Lessee fails to comply with any other provision of this
------
Agreement and the failure continues for 30 days after written notice from the
Lessor to the Lessee, provided however, that, if such failure cannot reasonably
be remedied within such 30 day period and the Lessee is diligently undertaking
all necessary remedial action, the 30 day period shall be extended once for a
further 30 days; or
d. Representation: any representation or warranty made by the Lessee in
--------------
this Agreement or in any document or certificate furnished to the Lessor
pursuant to or in connection with this Agreement is or proves to have been
incorrect in any material respect when made and the Lessee's ability to comply
with its obligations under this Agreement, and/or the Lessor's or any mortgagee
's rights, title and interest to and in the Aircraft and/or under this
Agreement, are thereby materially and adversely affected and, if the effect of
such misrepresentation is curable, shall not have been cured within thirty days
after the Lessee's receipt of written notice thereof from the Lessor; or
e. Cross Default:
--------------
i. any Financial Indebtedness of the Lessee that exceeds $7,500,000 is not
paid when due and any applicable grace period shall have expired;
ii. the security for any such Financial Indebtedness is enforced; or
iii. any material lease, conditional sale, installment sale or forward
purchase agreement of the Lessee in respect of an aircraft is terminated as a
consequence of an event of default or termination event (however described);
provided always, in any such case, it shall not constitute an Event of Default
under this Agreement:
i. if the relevant Financial Indebtedness constitutes non-recourse borrowing
or financing; or
ii. if the non-payment, acceleration, termination or event in question is
being contested by the Lessee in good faith and on reasonable grounds and any
termination of agreement or enforcement of security through judicial process has
been stayed by a court of competent jurisdiction; or
f. Approvals: any consent, authorization, license, certificate or approval
---------
of or registration with or declaration to any Government Entity in connection
with this Agreement, including:
i. any authorization required by the Lessee of, or in connection with, the
execution, delivery, validity, enforceability or admissibility in evidence of
this Agreement or the performance by the Lessee of its obligations under this
Agreement; or
ii. any airline license, air transport license, franchise, concession,
permit, certificate, right or privilege required by the Lessee for the conduct
of its business,
is modified, withheld, revoked, suspended, canceled, withdrawn, terminated or
not renewed, or otherwise ceases to be in full force and is not reissued,
reinstated or renewed within 30 days, provided however that any such
modification, withholding, revocation, suspension, cancellation, withdrawal,
termination or non-renewal shall only constitute an Event of Default if it has a
material adverse effect on the Lessee's ability to perform its obligations under
this Agreement or the Lessor's rights, title and interest to and in the Aircraft
or under this Agreement; or
g. Insolvency:
----------
i. the Lessee is, or is deemed for the purposes of any relevant law to be,
unable to pay its debts as they fall due or to be insolvent, or admits in
writing its inability to pay its debts as they fall due (disregarding for that
purpose any assumed, and not actual acceleration of such debts made solely for
the purpose of complying with applicable accounting rules); or
ii. the Lessee suspends making payments on all or any class of its debts or
a moratorium is declared in respect of any of its indebtedness; or
h. Bankruptcy and Similar Proceedings:
-------------------------------------
i. Lessee shall consent to the appointment of a receiver, trustee or
liquidator for itself or for a substantial part of its property and such
appointment has a material adverse effect on the Lessee's ability to perform its
obligations under this Agreement; or
ii. Lessee shall file a voluntary petition in bankruptcy or a voluntary
petition or answer seeking reorganization in a proceeding under any laws dealing
with bankruptcy, concurso mercantil, insolvency, moratorium or creditors' rights
generally (any or all of which are hereinafter referred to as "Bankruptcy Laws")
or an answer admitting the material allegations of a petition filed against
Lessee in any such proceeding, or Lessee shall by voluntary petition answer or
consent to or seek relief under the provisions of any Bankruptcy Laws; or
iii. any order, judgment or decree is entered by a court of competent
jurisdiction appointing a receiver, trustee or liquidator of Lessee or a
substantial part of its property and such appointment will have a material
adverse effect on the Lessee's ability to perform its obligations under this
Agreement, or ordering a substantial part of Lessee's property to be sequestered
and such sequestering will have a material adverse effect on the Lessee's
ability to perform its obligations under this Agreement, and such actions are
instituted or done with the consent of Lessee or, if instituted by another
Person, the order, judgment or decree is not dismissed, remedied or
relinquished within 60 days; or
iv. a petition against Lessee in a proceeding under any Bankruptcy Laws
shall be filed and shall not be withdrawn or dismissed within 60 days
thereafter, or if, under the provisions of any Bankruptcy Laws that 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
assumption of jurisdiction, custody or control will have a material adverse
effect on the Lessee's ability to perform its obligations under this Agreement
and such jurisdiction, custody or control remains in force unrelinquished,
unstayed or unterminated for a period of 60 days; or
v. the Lessee enters into a concurso mercantil, composition, assignment or
arrangement with any creditors of, or the reorganization, rehabilitation,
administration, liquidation, or dissolution of, the Lessee; or
i. Unlawful: it becomes unlawful for the Lessee to perform any of its
--------
material obligations under this Agreement or this Agreement becomes wholly or
partly invalid or unenforceable, provided that any such partial invalidity or
unenforceability shall only constitute an Event of Default if it has a material
adverse effect on the Lessee's ability to perform its obligations under this
Agreement or the Lessor's rights, title and interest in and to the Aircraft or
under this Agreement; or
j. Suspension of Business: the Lessee suspends or ceases to carry on a
------------------------
substantial part of its business and such suspension or cessation of business
will have a material adverse effect on the Lessee's ability to perform its
obligations under this Agreement; or
k. Disposal: the Lessee disposes of a substantial part of its assets and
--------
the disposal of such assets will have a material adverse effect on the Lessee's
ability to perform its obligations under this Agreement, whether by one or a
series of transactions, related or not, other than pursuant to a merger or
consolidation as referred to in, and subject to, Clause 8.8(b) or for the
purpose of any other reorganization or amalgamation the terms of which have
received the previous consent in writing of the Lessor; or
l. Rights: the existence, validity, enforceability or priority of the
------
rights of the Lessor as owner and lessor in respect of the Aircraft is
challenged by the Lessee or any other Person lawfully claiming by or through the
Lessee; or
m. Change of Ownership: any single Person or group of Persons acquire
---------------------
control, directly or indirectly, of the Lessee where such acquisition of control
will have a materially adverse effect on the Lessee's ability to perform its
obligations under this Agreement or the Lessor's rights, title and interest in
and to the Aircraft or under this Agreement).
13.2. RightsRights
------
If an Event of Default occurs, and for as long as it shall continue, the Lessor
may at its option (and without prejudice to any of its other rights under this
Agreement):
a. treat such event as a repudiation by the Lessee of its obligations under
this Agreement and by notice to the Lessee with immediate effect terminate the
leasing of the Aircraft (but without prejudice to the continuing obligations of
the Lessee under this Agreement), whereupon all rights of the Lessee under this
Agreement shall cease; and/or
b. proceed by appropriate court action or actions to enforce performance of
this Agreement or to recover damages for the breach of this Agreement; and/or
c. either:
i. take possession of the Aircraft, for which purpose the Lessor may enter
any premises belonging to, occupied by or under the control of the Lessee (for
which purpose the Lessee hereby grants to the Lessor an irrevocable license to
the extent permitted by applicable law) where the Aircraft may be located, or
cause the Aircraft to be redelivered to the Lessor at the Redelivery Location;
or
ii. by serving notice, require the Lessee to redeliver the Aircraft to the
Lessor at the Redelivery Location.
13.3. Repossession and RemovalRepossession and Removal
--------------------------
If an Event of Default occurs, and for as long as it shall continue, the Lessor
may sell or otherwise deal with the Aircraft as if this Agreement had never been
made and the Lessee will, at the request of the Lessor, take all steps necessary
to return the Aircraft to Lessor, including if requested by Lessor to export the
Aircraft from the country where the Aircraft is for the time being situated, and
any other steps necessary to enable the Aircraft to be redelivered to the Lessor
in accordance with this Agreement.
13.4. Default PaymentsDefault Payments
-----------------
If an Event of Default occurs, the Lessee will indemnify the Lessor on demand
against any loss, damage, expense, cost or liability which the Lessor may
sustain or incur directly or indirectly as a result, including:
a. all unpaid Basic Rent and Supplemental Rent to and including the date the
Aircraft is returned to Lessor (the "Return Date") then due and unpaid;
b. if the Aircraft is re-leased, the amount, if any, by which the present
value of the remaining Basic Rent due under this Lease, discounted at the rate
of 9.5% per annum to the Return Date ("PV Lease Rent"), exceeds the present
value of the periodic rent due under such re-lease commencing on the Return Date
and continuing for the period that is co-extensive with the unexpired term of
this Lease or such lesser period if the term of such re-lease is shorter than
such unexpired term, discounted to present value at the rate of 9.5% per annum
to the Return Date;
c. if the Aircraft is not re-leased or is sold, the amount, if any, by which
the PV Lease Rent exceeds the present value of the fair market rent value for
the Aircraft as of the Return Date, discounted to present value at the rate of
9.5% per annum to the Return Date; for purposes hereof, the "fair market rent
value" of the Aircraft shall be as specified in an appraisal by a recognized
independent aircraft appraiser selected by Lessor and carried out pursuant to
prevailing industry standards for such appraisals;
d. any amount of principal, interest, fees or other sums whatsoever paid or
payable on account of funds borrowed in order to carry any amount unpaid by the
Lessee;
e. any loss, premium, penalty or expense that may be incurred in repaying
funds raised to finance the Aircraft or in unwinding any swap, forward interest
rate agreement or other financial instrument relating in whole or in part to the
Lessor's financing of the Aircraft; and
f. any loss, cost, expense or liability sustained or incurred by Lessor
owing to Lessee's failure to redeliver the Aircraft on the date, at the place
and in the condition required by this Agreement.
For the avoidance of doubt, the provisions of Clause 5.9 will apply to any sums
payable by the Lessee pursuant to this Clause 13.4.
14. ASSIGNMENT and TRANSFERASSIGNMENT and TRANSFER
-------------------------
14.1. No Assignment by LesseeNo Assignment by Lessee
--------------------------
The Lessee will not assign or create or permit to exist any Security Interest
over any of its rights under this Agreement, except as expressly permitted
hereunder, including under Clause 8.5 hereof.
14.2. Lessor AssignmentLessor Assignment
------------------
The Lessor may sell, assign or transfer all or any of its rights under this
Agreement and in the Aircraft (a "Transfer") and the Lessor will, other than in
the case of an assignment for security purposes, have no further obligation
under this Agreement following a Transfer but, notwithstanding any Transfer,
will remain entitled to the benefit of each indemnity under this Agreement.
a. In connection with any Transfer, the following conditions shall apply:
i. Lessor shall give Lessee written notice of such Transfer at least ten
Business Days before the date of such Transfer, specifying the name and address
of the proposed purchaser, assignee or transferee (the "Transferee");
ii. the Transfer will not adversely affect the Lessee's rights and interests
in the Aircraft and/or this Agreement, nor subject the Lessee to any Tax or
Claim or any other obligation or liability to which it would not have been
subject had such assignment or transfer not taken place;
iii. the Transferee will have full corporate power and authority to enter
into and perform the transactions contemplated by this Agreement on the part of
"Lessor";
iv. on the Transfer date the Lessor and the Transferee shall enter into an
agreement or agreements in which the Transferee confirms that it shall be deemed
a party to this Agreement and agrees to be bound by all the terms of, and to
undertake all of the obligations of, the Lessor contained in this Agreement;
v. either (x) the Transferee shall be a financial institution, a corporation
or a partnership having experience in aircraft leasing and with a net worth of
U.S. $10,000,000 (United States Dollars Ten Million) and shall not be an entity
operating or having a bona fide intent to operate on the same routes as the
Lessee; or (y) the Lessee has given its prior written consent to such assignment
(which consent shall not be unreasonably withheld or delayed);
vi. in connection with such assignment, the Aircraft may be registered in
the jurisdiction where it is registered prior to such assignment under the
relevant laws and rules and regulations of such jurisdiction; and
vii. the Lessor shall pay all reasonable, out-of-pocket costs and expenses
(including, without limitation, reasonable legal fees and registration costs)
imposed on or incurred by the Lessee as a result of the entering into of such
assignment.
b. Upon any Transfer, the Transferee shall be deemed Lessor for all purposes
of this Agreement, each reference in this Agreement to the "Lessor" shall
thereafter be deemed for all purposes to refer to the Transferee, and the
transferor shall be relieved of all obligations of the "Lessor" under this
Agreement arising after the time of such Transfer except to the extent
attributable to acts or events occurring prior to the time of such Transfer.
c. Upon compliance by Lessor and a Transferee with the terms and conditions
of Clause 14.2(a), Lessee shall at the time of Transfer, at the specific written
request and at the sole cost and expense of Lessor:
i. execute and deliver to Lessor and to such Transferee an agreement, in
form and substance satisfactory to Lessor, Lessee and such Transferee, dated the
date of such transfer, consenting to such transfer, agreeing to pay all or
such portion of the Basic Rent and other payments under this Agreement to such
Transferee or its designee as such Transferee shall direct, and agreeing that
such Transferee shall be entitled to rely on all representations and warranties
made by Lessee in this Agreement or in any certificate or document furnished by
Lessee in connection with this Agreement as though such Transferee was the
original "Lessor";
ii. deliver to Lessor and to such Transferee a certificate, signed by a duly
authorized officer or Lessee, dated the date of such transfer, to the effect
that no Event of Default has occurred and is continuing or, if one is then
continuing, describing such Event of Default;
iii. cause to be delivered to Lessor and such Transferee certificates of
insurance (and where appropriate certificates of reinsurance) and broker's (and
any reinsurance brokers') letter of undertaking substantially in the form set
out in Parts 2 and 3 of Schedule 6, detailing the coverage and confirming the
insurers' (and any reinsurers') agreement to the specified insurance
requirements of this Agreement and listing the Lessor and Transferee as
additional insureds and the Transferee as sole loss payee (subject to other
direction by the Lessor);
iv. deliver to Lessor and to such Transferee an opinion of Lessee's chief
internal counsel to the effect that such Transferee may rely on the opinion
delivered by such counsel or its predecessor counsel in connection with this
Agreement on the Delivery Date with the same force and effect as if such
Transferee was an original addressee of such opinion when given;
v. deliver to Lessor and such Transferee information on the location of the
Airframe and Engines at all times requested by Lessor in order to permit the
Transfer to take place at a time and on a date so as to eliminate or minimize
any Taxes applicable to the Transfer; and
vi. such other documents as Lessor or such Transferee may reasonable
request, so long as such documents do not adversely affect the rights or
obligations of Lessee under this Agreement or otherwise adversely affect Lessee.
14.3. Grants of Security InterestsGrants of Security Interests
-------------------------------
The Lessor shall be entitled at any time after Delivery to grant a security
interest in the Aircraft or its right, title and interest in this Agreement
(each, a "Mortgage") in favor of any Person (each, a "Mortgagee"). In the case
of any such grant by Lessor of a Mortgage to a Mortgagee in all or any portion
of Lessor's rights, title and interest in and to the Aircraft and this
Agreement, Lessee shall promptly, at the specific written request and at the
sole cost and expense of Lessor:
a. execute and delivery to Lessor and to such Mortgagee an agreement, in
form and substance satisfactory to Lessor, such Mortgagee and Lessee, dated the
date of the grant of such Mortgage, (i) consenting to such Mortgage and to any
assignment of Lessor's rights, title and interest in and to this Agreement to
such Mortgagee for security purposes, (ii) if requested in writing by Lessor,
agreeing that Lessee will pay the Basic Rent and other payments under this
Agreement to such Mortgagee, and (iii) agreeing that such Mortgagee shall be
entitled to rely on all representations and warranties made by Lessee in this
Agreement or in any certificate or document furnished by Lessee in connection
with this Agreement as though such Mortgagee was originally the "Lessor";
b. execute and deliver to Lessor and such Mortgagee such agreements as the
Lessor may reasonably require for the purposes of effecting all necessary
amendments to this Agreement (including Clauses 8, 9 and 10 and Schedule 6);
c. deliver to Lessor and such Mortgagee a certificate, signed by a duly
authorized officer of Lessee, dated the date of the grant of the Mortgage, to
the effect that no Event of Default has occurred and is continuing or, if one is
then continuing, describing such Event of Default;
d. cause to be delivered to Lessor and such Mortgagee certificates of
insurance (and where appropriate certificates of reinsurance) and broker's (and
any reinsurance brokers') letter of undertaking substantially in the form set
out in Parts 2 and 3 of Schedule 6, detailing the coverage and confirming the
insurers' (and any reinsurers') agreement to the specified insurance
requirements of this Agreement, adding such Mortgagee as an additional insured
and, if requested by Lessor, listing such Mortgagee as sole loss payee;
e. deliver to Lessor and such Mortgagee an opinion of Lessee's chief
internal counsel to the effect that such Mortgagee may rely on the opinion
delivered by such counsel or its predecessor counsel in connection with this
Agreement on the Delivery Date with the same force and effect as if such
Mortgagee was an original addressee of such opinion when given; and
f. such other documents as Lessor or such Mortgagee may reasonably request
so long as such documents do not adversely affect the rights or obligations of
Lessee under this Agreement or otherwise adversely affect Lessee.
14.4. Sale and Leaseback by LessorSale and Leaseback by Lessor
--------------------------------
In addition to the Transfers and grants of Security Interests permitted by
Clauses 14.2 and 14.3, Lessor shall be entitled to transfer its right, title and
interests in and to the Aircraft to any Person and lease the Aircraft from such
Person (a "Head Lessor"), and in such event Lessor shall retain its rights and
obligations as the "Lessor" under this Agreement. In the event of such a sale
and lease-back by Lessor, (a) the Lessor shall be entitled to assign its rights
in this Agreement to such Head Lessor as security for its obligations under the
lease from the Head Lessor (the "Head Lease"), (b) the Head Lessor shall be
entitled to grant a Mortgage covering the Aircraft and this Agreement, (c) at
the sole cost and expense of Lessor, Lessee shall execute and deliver to Lessor,
such Head Lessor and such Mortgagee, as appropriate, the documents specified in
Clauses 14.2(c)(i) through (vi) and Clauses 14.3(a) through (f) above, and
Lessee shall cooperate with Lessor to make such other changes to this Agreement,
such as including such Head Lessor and such Mortgagee as additional insureds and
"Indemnitees", as Lessor may reasonably request so long as such changes do not
adversely affect the rights or obligations of Lessee under this Agreement or
otherwise adversely affect Lessee.
14.5. Further AcknowledgmentsFurther Acknowledgments
------------------------
Lessee further acknowledges that any Transferee or Mortgagee shall in turn have
the rights of, and be subject to the conditions to, transfer and grants of
Security Interests set forth above in this Clause 14.
14.6. Certain Protections for Lessee's BenefitCertain Protections for
--------------------------------------------
Lessee's Benefit
The rights of Lessee under this Agreement shall be superior to the rights of any
Mortgagee or Head Lessor, and the Lessor shall require each Mortgagee and Head
Lessor to agree in writing with the Lessee that such Mortgagee's and Head
Lessor's rights in and to the Aircraft shall be subject to the terms of this
Agreement, including to the Lessee's rights to the quiet use, possession and
enjoyment provisions contained in this Agreement. Prior to or at closing of any
financing arrangement pertaining to the Aircraft, the Lessee shall be entitled
to receive from each Lessor Lender a letter of quiet enjoyment in form and
substance reasonably satisfactory to the Lessee. Except as expressly set forth
in this Agreement, no Mortgage or Head Lease shall increase the
responsibilities, obligations or liabilities (including with respect to Taxes)
of the Lessee or deprive the Lessee of any of its rights or privileges under
this Agreement (including the right to register the Aircraft in the State of
Registration). The Lessor's obligations to perform the terms and conditions of
this Agreement shall remain in full force and effect notwithstanding the
creation of any Mortgage or Head Lease. Lessor shall not create any Mortgage or
enter into any Head Lease that violates the terms of this Clause 14.6.
15. MISCELLANEOUSMISCELLANEOUS
-------------
15.1. Waivers; Remedies CumulativeWaivers; Remedies Cumulative
------------------------------
The rights of either party under this Agreement:
a. may be exercised as often as necessary;
b. are cumulative and not exclusive of that party's rights under any law;
and
c. may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver of that
right.
15.2. DelegationDelegation
----------
The Lessor may delegate to any Person or Persons all or any of the trusts,
powers or discretions vested in it by this Agreement and any such delegation may
be made upon such terms and conditions and subject to such regulations
(including power to sub-delegate) as the Lessor in its absolute discretion
thinks fit; provided, that any such delegation shall be subject to the
conditions set forth in Clause 14.2(a).
15.3. CertificatesCertificates
------------
Except where expressly provided in this Agreement, any certificate or
determination by the Lessor as to any rate of interest or as to any other amount
payable under this Agreement will, in the absence of manifest error, be
conclusive and binding on the Lessee.
15.4. AppropriationAppropriation
-------------
If any sum paid or recovered in respect of the liabilities of the Lessee under
this Agreement is less than the amount then due, the Lessor may apply that sum
to amounts due under this Agreement in such proportions and order and generally
in such manner as the Lessor may determine.
15.5. Currency Indemnity2Currency Indemnity
-------------------
a. If the Lessor receives an amount in respect of the Lessee's liability
under this Agreement or if such liability is converted into a claim, proof,
judgment or order in a currency other than United States Dollars (the "contract
currency") in which the amount is expressed to be payable under this Agreement:
i. the Lessee will indemnify the Lessor, as an independent obligation,
against any loss arising out of or as a result of such conversion;
ii. if the amount received by the Lessor, when converted into the contract
currency (at the market rate at which the Lessor is able on the relevant date to
purchase the contract currency in New York City with that other currency) is
less than the amount owed in the contract currency, the Lessee will, forthwith
on demand, pay to the Lessor an amount in the contract currency equal to the
deficit; and
iii. the Lessee will pay to the Lessor on demand any exchange costs and
Taxes (other than Lessor Taxes) payable in connection with the conversion.
b. The Lessee waives, to the extent permitted by applicable law, any right
it may have in any jurisdiction to pay any amount under this Agreement in a
currency other than that in which it is expressed to be payable.
15.6. SeverabilitySeverability
------------
If a provision of this Agreement is or becomes illegal, invalid or unenforceable
in any jurisdiction, that will not affect:
a. the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
b. the legality, validity or enforceability in any other jurisdiction of
that or any other provision of this Agreement.
15.7. RemedyRemedy
------
If the Lessee fails to comply with any provision of this Agreement, the Lessor
may, without being in any way obliged to do so or responsible for so doing and
without prejudice to the ability of the Lessor to treat the non-compliance as a
Default, effect compliance on behalf of the Lessee, whereupon the Lessee shall
become liable to pay immediately any sums expended by the Lessor together with
all costs and expenses (including reasonable legal costs) necessarily incurred
in connection therewith.
15.8. ExpensesExpenses
--------
Each party shall bear its own expenses incurred or payable in connection with
the negotiation, preparation and execution of this Agreement, and shall share
the fees and expenses of special FAA counsel retained by Lessor and Lessee.
15.9. Time of EssenceTime of Essence
-----------------
The time stipulated in this Agreement for all payments payable by the Lessee to
the Lessor and for the performance of the Lessee's other obligations under this
Agreement will be of the essence of this Agreement (subject always to any
applicable grace period).
15.10. NoticesNotices
-------
a. All notices and other communications given under or in connection with
this Agreement shall be in writing (including telefax) and in English, and shall
be deemed to have been received as follows:
i. If sent by telefax, at the time of receipt by the sender of a
transmission report indicating that all pages of the telefax transmission were
properly transmitted (unless the recipient notifies the sender promptly, or if
received after 5:30 p.m. local time, by no later than 10:00 a.m. local time the
following Business Day, that the transmission was incomplete or illegible, in
which case the telefax shall be deemed to have been received at the time of
receipt by the sender of a further clear transmission report on re-transmitting
the telefax), provided the relevant telefax transmission (or retransmission, as
the case may be) was transmitted to the receiver between 9:00 a.m. and 5:30 p.m.
local time. If it was transmitted later, then it shall be deemed to have been
received at 9:00 a.m. local time on the succeeding Business Day.
ii. In any other case, when delivered to the address specified in Clause
15.10(b).
b. All such notices, requests, demands and other communications shall be
sent:
if to the Lessor, to it at:: Investors Asset Holding Corp.
88 Broad Street
Boston, MA 02110
Attention: James Coyne
Telefax No.: +1-617-695-0596
with a copy to: Sigma Aircraft Management LLC
232 East 50th Street
New York, NY 10022
Attention: Jan Melgaard, President
Telefax No: +1-212-752-9801
if to the Lessee, to it at: Paseo de la Reforma 445, Piso 10
Mexico City
Mexico D.F. 06500
Attention: Director of Finance
Telefax No.: +011-552-133-4606
or to such other address or telefax number as shall have been notified by one
party to the other in the manner set out in this Clause 15.10.
15.11. Law and JurisdictionLaw and Jurisdiction
----------------------
a. THIS AGREEMENT SHALL, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
ENTERED INTO IN THE STATE OF NEW YORK BY RESIDENTS OF SUCH STATE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). The United Nations Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement.
b. The Lessor and the Lessee hereby irrevocably agree to submit to the
jurisdiction of the United States District Court for the Southern District of
New York and the Supreme Court of the State of New York located in the Borough
of Manhattan, County of New York (the "Agreed Courts") in the event of any
claims or disputes arising under this Agreement. Such submission to
jurisdiction shall not be construed so as to limit the right of either party to
take proceedings against the other in whatsoever jurisdiction shall to it seem
fit nor shall the taking of proceedings in any one or more jurisdictions
preclude the taking of proceedings in any other jurisdiction, whether
concurrently or not. Final judgment against Lessor or Lessee in any such suit
shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or as otherwise permitted by applicable law, a certified or true copy
of which shall be conclusive evidence of the facts and of the amount of any
indebtedness or liability of Lessor or Lessee. Each of Lessor and Lessee hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue in any suit, action or proceeding brought in any Agreed Court,
and irrevocably waives any claim that any such suit, action or proceeding
brought in any Agreed Court has been brought in an inconvenient forum.
c. THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT.
d. Without prejudice to any other mode of service, the Lessee (i) appoints
CT Corporation System, 1633 Broadway, New York, New York 10019, as its agent for
service of process relating to any proceedings before the Federal and State
courts of New York in connection with this Agreement and agrees to maintain a
process agent in New York City, and (ii) agrees that any failure by the process
agent to notify the Lessee of the process shall not invalidate the proceedings
concerned.
15.12. Sole and Entire AgreementSole and Entire Agreement
----------------------------
This Agreement, and a Delivery and Discrepancy Procedures Agreement of even date
herewith, are the sole and entire agreements between the Lessor and the Lessee
in relation to the leasing of the Aircraft, and supersede all previous
agreements in relation to that leasing. The terms and conditions of this
Agreement can only be varied by an instrument in writing executed by both
parties or by their duly authorized representatives.
15.13. IndemnitiesIndemnities
-----------
All rights expressed to be granted to each Indemnitee under this Agreement are
given to the Lessor as agent for and on behalf of that Indemnitee.
15.14. CounterpartsCounterparts
------------
This Agreement may be executed, manually or by telefacsimile signatures, in
counterparts each of which will constitute one and the same document.
15.15. ConfidentialityConfidentiality
---------------
Neither the Lessor nor the Lessee shall, without the other's prior written
consent, communicate or disclose the terms of this Agreement or any information
or documents furnished pursuant to this Agreement (except to the extent that the
same are within the public domain) to any third party (other than any
prospective Transferee, Mortgagee or Head Lessor, the respective external legal
advisers, auditors, insurance brokers or underwriters of Lessor, Lessee and such
parties, the Manufacturer and the Engine Manufacturer); provided however that
disclosure will be permitted, to the extent required:
a. pursuant to an order of any court of competent jurisdiction; or
b. pursuant to any procedure for discovery of documents in any proceedings
before any such court; or
c. pursuant to any law or regulation having the force of law; or
d. pursuant to a lawful requirement of any authority with whose requirements
the disclosing party is legally obliged to comply; or
e. in order to perfect any assignment of any assignable warranties.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement on
the date shown at the beginning of this Agreement.
INVESTORS ASSET HOLDING CORP., not in its individual capacity except as set
forth in this Agreement but as owner trustee pursuant to the Trust Agreement
By:_________________________________
Name:
Title:
AEROVIAS de MEXICO, S.A. de C.V.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
This is the "Original Executed Counterpart" of this Lease Agreement
received this ___ day of June, 2001 by the undersigned.
[ ]
By:_________________________________
Name:
Title:
-1-
SCHEDULE 1 -- TERMINATION VALUESCHEDULE 1 -- TERMINATION VALUE; TERMINATION FEE
(Termination Value)
The Termination Value shall be $13,000,000 but shall reduce by $900,000 on each
anniversary of the Delivery Date.
-2-
SCHEDULE 2 -- DESCRIPTION OF AIRCRAFTSCHEDULE 2 -- DESCRIPTION OF AIRCRAFT
Part 1
(Aircraft Specifications)
Manufacturer: Boeing/McDonnell Douglas
Model: MD-87
Manufacturer's Serial No: 49587
U.S. Registration No.: N753RA
Configuration: 12F and 100Y
Engine Type: Pratt & Whitney JT8D-219
Engine Serial Numbers: 708147 and 708177
Part 2
(Aircraft Documents)
1. *Aircraft Maintenance Manual Rev 71 dated 02/01/01 4 each tapes
2. *Illustrated Parts Catalog (IPC) Rev 276 dated 02/01/01 5 each tapes
3. *Wiring Diagram Rev 70 dated 02/01/01 2 each tapes
4. LAMMS 1 each book
5. SRM/NDT Manual Rev 84 dated 03/15/01 2 each tapes
6. Wiring Diagram-wire list 1 each tape
7. Wiring Diagram Hook Up Chart 1 each tape
8. Component Maintenance Manual Rev 35 dated 02/01/01 2 each tape
9. Engine Manuals (P&W) Rev 74 dated 11/05/00 4 each tapes
10. Engine IPC (P&W) Rev 72 dated 11/15/00 1 each tape
11. Standard Practices (P&W) Rev 108 dated 12/01/00 1 each tape
12. *Aircraft Flight Manual dated 02/00 1 each book
a. operating procedures
b. system description
c. JT8D performance
NOTE *(manuals/books given to Lessee and sent to Mexico City)
-2-
SCHEDULE 3 -- CERTIFICATE OF ACCEPTANCE3 -- CERTIFICATE OF ACCEPTANCE
This Certificate of Acceptance is delivered on the date set forth in
paragraph 1 below by Aerovias de Mexico, S.A. de C.V. (the "Lessee") to
Investors Asset Holding Corp., not in its individual capacity except as set
forth in this Agreement but as owner trustee pursuant to the Trust Agreement
(the "Lessor") pursuant to the Lease Agreement, dated __ June, 2001, between the
Lessor and the Lessee (the "Agreement"). Capitalized terms used but not defined
in this Certificate of Acceptance shall have the meaning given to such terms in
the Agreement.
1. Details of Acceptance. The Lessee hereby confirms to the Lessor that the
---------------------
Lessee has at [ ] a.m/p.m. local time on this _____ day of June, 2001, at
Oklahoma City, Oklahoma, U.S.A., accepted the following, in accordance with the
provisions of the Agreement and the Annex attached hereto:
(a) Airframe: Boeing/McDonnell Douglas MD-87 airframe, Manufacturer's
Serial 49587, U.S. Registration No. N753RA;
(b) Engines: two Pratt & Whitney JT8D-219 Engines, bearing Manufacturer's
Serial Nos. 708147 and 708177, each of which has 750 or more rated takeoff
horsepower;
(c) All Parts installed on, attached to or appurtenant to the Airframe and
Engines; and
(d) Aircraft Documents as specified in Schedule 2 - Part 2 of the Agreement.
2. Lessee's Confirmation. The Lessee confirms to the Lessor that as at the
----------------------
time indicated above, being the time of Delivery:
(a) the Lessee's representations and warranties contained in Clauses 2.1 and
2.2 (other than Clause 2.2(c)) of the Agreement are hereby repeated;
(b) the Aircraft is insured as required by the Agreement; and
(c) the Aircraft and Aircraft Documents have been made available for
inspection by Lessee to Lessee's satisfaction prior to this date, Lessee has
performed such inspections as it deems necessary and, pursuant to such
inspections, all of the Aircraft and the Aircraft Documents are in acceptable
condition for Lessee to enter into this Certificate of Acceptance, to take
Delivery of the Aircraft and Aircraft Documents and to lease the Aircraft and
Aircraft Documents pursuant to the Agreement.
3. Lessor's Confirmation. The Lessor confirms to the Lessee that, as at the
---------------------
time indicated above, being the time of Delivery, the Lessor's representations
and warranties contained in Clause 2.4 of the Agreement are hereby repeated.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate on the date
shown at the beginning of this Agreement.
INVESTORS ASSET HOLDING CORP.,
as Owner Trustee
By:_____________________________________
Name:
Title:
AEROVIAS de MEXICO, S.A. de C.V.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
-2-
ANNEX 1
MAINTENANCE STATUS AT DELIVERY
DATE: June __ , 2001
AIRFRAME TIME:
Total Flight Hours [ ]
Total Cycles [ ]
AIRFRAME LIMITS:
Type of Check:
Check Interval:
Time Since Last Check:
ENGINE DATA:
Position No. 1 No. 2
Type JT8D-219 JT8D-219
Serial Number 708147 708177
Total Flight Hours: [ ][ ]
Total Cycles: [ ][ ]
Flight Hours Since Last Shop Visit: [ ][ ]
Cycles Since Last Shop Visit: [ ][ ]
Flight Hours to Next Hard Limit: [ ][ ]
Cycles to Next Hard Limit: [ ][ ]
Time Since Last Engine Refurbishment [ ][ ]
APU:
Type: [ ]
Serial Number: [ ]
Total Flight Hours: [ ]
Total Cycles: [ ]
Flight Hours Since Last HSI Inspection: [ ]
Cycles Since Last HSI Inspection: [ ]
Flight Hours Remaining on Turbine and Compressor LLPs: [ ]
Cycles Remaining on Turbine and Compressor LLPs: [ ]
LANDING GEAR LIMITS:
Position: Nose Left Right
Overhaul Interval:
Time Since Overhaul:
Time to Next Overhaul:
-5-
SCHEDULE 4 -- CONDITION AT DELIVERYSCHEDULE 4 -- CONDITION AT DELIVERY
On the Delivery Date, the Aircraft shall be delivered by Lessor to Lessee in
accordance with the procedures and, in any event, in the condition set out
below:
1.1 FINAL INSPECTION
Immediately prior to the Delivery Date for the Aircraft, Lessor will make the
Aircraft available to Lessee for inspection ("Final Inspection") in order to
verify that the condition of the Aircraft complies with this Agreement. The
Final Inspection will include, and be long enough to permit Lessee to:
(a) inspect the Aircraft Manuals and Technical Records;
(b) inspect the Aircraft and uninstalled Parts; and
(c) inspect the Engines, including without limitation a complete video
borescope inspection and a maximum power assurance run of each Engine and APU.
Following the Final Inspection and the Lessee's acceptance of the Aircraft in
accordance with the Agreement, the Lessee shall conduct a ferry flight of the
Aircraft to Mexico City International Airport during which discrepancies shall
be noted for the first and the last hour of the flight (collectively the
"Observation Period"). All amounts reasonably incurred by Lessee for parts (but
not for labor expense) necessary to correct discrepancies from the delivery
conditions specified in this Exhibit 4 which are noted during the Observation
Period and relate solely to the operation of the Aircraft (and not to records or
issues which would otherwise be corrected during a periodical "C" check) shall
be reimbursed by Lessor in accordance with, and subject to the limitations set
forth in, Schedule 10(b).
1.2 GENERAL CONDITION
The Aircraft shall:
(a) be equipped with 2 Pratt & Whitney JT8D-219 Engines, one of which will
have a minimum of 6,400 Cycles remaining and the other with a minimum of 3,100
Cycles remaining to removal of the most life limited part or scheduled repair
visit under the previous operator's maintenance program;
(b) have an MTOW of 140,000 lbs;
(c) be equipped with both ACAS and FMS;
(d) be delivered with all records in the English language satisfactory to
the Aviation Authority, including, but not limited to traceability to birth on
life limited parts and hard time components;
(e) have a valid U.S. certificate of airworthiness under FAR Part 121 and be
registered in the United States;
(f) be due a C Check in accordance with the previous operator's approved
maintenance program.
1.3 LANDING GEAR
The landing gears shall be in the following condition:
NLG: July 27, 1995 - last overhaul
Less than 16,400 hours since last overhaul
Less than 12,700 cycles since last overhaul
MLG: October 15, 1998 - last overhaul
Less than 6,800 hours since last overhaul
Less than 5,800 cycles since last overhaul
1.4 ADDITIONAL DELIVERY CONDITIONS
The Aircraft shall additionally be delivered by Lessor to Lessee in accordance
with the following procedures and in the following condition:
(a) the Aircraft shall have a valid U.S. Certificate of Airworthiness;
(b) the Aircraft shall be in good operating condition and airworthy in
accordance with the previous operator's Maintenance Program applicable to the
Aircraft and the Manufacturer's structural repair manual. Except as provided
otherwise in this Annex I, all of the Aircraft equipment, components, and
systems shall be functioning in accordance with the previous operator's
Maintenance Program;
(c) the Aircraft shall be delivered in the 12F and 100Y passenger cabin
configuration, and all spare seats provided by the previous operator shall be
delivered to Lessee;
(d) no special or unique Manufacturer, Engine manufacturer or FAA inspection
or check requirements, which are specific to the Aircraft or Engines (as opposed
to all aircraft or engines of their types) will exist with respect to the
Airframe, Engines and Aircraft equipment, components and systems;
(e) Lessor will provide Lessee with a list of all Airworthiness Directives
and other instructions of the FAA applicable to the Aircraft, which were issued
prior to the Delivery Date (either by means of repetitive inspections,
modifications or terminating action) and which have not been complied with prior
to the Delivery Date. Lessor will also provide Lessee with the material, parts
or components necessary to accomplish such Airworthiness Directives at the next
"C" Check immediately following delivery of the Aircraft to Lessee;
(f) Lessor will provide Lessee with a list of all Manufacturer's Corrosion
Prevention and Control Program (CPCP) task cards to be accomplished at the next
"C" Check in accordance with the previous operator's Maintenance Program
immediately prior to delivery of the Aircraft to Lessee;
(g) all no-charge vendor and Manufacturer's service bulletin kits for the
Aircraft received by Lessor from the previous operator but not installed thereon
will be on board the Aircraft as cargo, and, at Lessee's request, any other
service bulletin kit which the previous operator paid for will also be delivered
to Lessee on board of the Aircraft, but Lessee will reimburse the previous
operator for its actual out-of-pocket costs for such kit;
(h) the Aircraft will be free of any system-related leaks and any damage
resulting therefrom. All repairs will have been performed on a permanent basis
in accordance with the applicable manufacturer's instructions;
(i) if any waivers, alternate means of compliance (unless there exists no
permanent terminating action repair and such alternate means of compliance is
transferable to other operators of the Aircraft), dispensations, extensions or
carry-overs with respect to Airworthiness Directives or operating or maintenance
requirements are granted by the FAA or permitted by the previous operator's
Maintenance Program, Lessor will cause the previous operator at its sole cost
and expense to nonetheless perform such Airworthiness Directives and other
operating or maintenance requirements on a terminating action basis as if such
waivers, alternate means of compliance, dispensations or extensions did not
exist, provided, however, if such waivers, alternate means of compliance,
-------- -------
dispensations or extensions are generally available to operators of MD-87
aircraft, Lessor shall not be required to cause the previous operator to
terminate such Airworthiness Directives and/or other operating or maintenance
requirements but shall be required to cause the previous operator to perform
such maintenance and inspections as it is performing on its MD-87 fleet on a
non-discriminatory basis;
(j) at Lessee's request, Lessor will provide Lessee with a written summary
of all sampling programs involving or affecting the Aircraft;
(k) prior to Delivery, Lessor shall cause the previous operator to paint
over or otherwise remove from the Aircraft its logos, trade names and trade
dress, in accordance with the previous operator's Maintenance Program;
(l) at the time of Delivery of the Aircraft, the Aircraft shall:
(i) have installed the full complement of Engines, which Engines shall be
Pratt & Whitney JT8D-219 Engines, and Parts and other equipment, accessories and
loose equipment as would remain installed in such Aircraft and shall be in a
condition suitable for operation in commercial service; and
(ii) comply with the Manufacturer's and Engine Manufacturer's original
specifications therefor and/or supported by relevant documentation approved by
the Manufacturer and Engine Manufacturer, as the case may be;
(m) the Aircraft shall meet the requirements of FAR Part 36, Appendix C,
Stage 3 noise regulations without the need to obtain a waiver or exemption
therefrom;
(n) Lessee may, at its sole cost and expense, immediately prior to return of
the Aircraft to Lessor by the previous operator, perform a borescope inspection
of the Engines (hot and cold sections) and the APU. Lessor shall cause all
items beyond the applicable Engine Manufacturer's or APU manufacturer's, as the
case may be, maintenance manual limits to be rectified at the previous
operator's sole cost and expense. No Engine will be "on watch" for any reason
requiring special or out of sequence inspection;
(o) in accordance with the applicable maintenance manual, Lessor shall cause
the previous operator to accomplish a maximum power assurance run and condition,
acceleration and bleed valve scheduling checks on the Engines. Lessor shall
cause the previous operator to record and evaluate the Engine performance, with
Lessor, Lessee and/or their respective representative entitled to be present.
The performance and all operating parameters of each Engine will be within the
limits specified in the Manufacturer's maintenance manual. For the avoidance of
doubt, such maximum power assurance run shall be a ground run at the redelivery
location prior to the redelivery of the Aircraft to Lessor by the previous
operator;
(p) the APU shall be in serviceable condition having completed a hot section
inspection no later than April 17, 2001;
(q) Lessor shall provide to Lessee a list of all components or Parts of the
Aircraft which have a hard time limit to overhaul and of all life-limited
components or Parts, and Lessor and Lessee will determine if any hard time limit
and life-limited components or Parts will have less than twelve (12) months or
2,000 Cycles remaining to operate pursuant to the previous operator's
Maintenance Program. In the event any of the hard time limit or life-limited
components or Parts will have less than the limits established in the previous
sentence, Lessee will replace such non-compliant components and Parts at the "C"
Check immediately after delivery of the Aircraft with compliant components and
Parts which Lessor shall supply, at its sole cost and expense (including cost of
the components and Parts and shipment to the Lessee, but explicitly excluding
any labor cost), and Lessee shall immediately return the exchanged,
non-compliant components and Parts to the previous operator at its Reno, Nevada,
location, at Lessor's sole cost and expense;
(r) Lessor shall provide to Lessee a list of all components or Parts of the
Aircraft which have a calendar limit, and Lessor and Lessee will determine if
each such calendar limit component or Part will have remaining to operate
pursuant to the previous operator's Maintenance Program at least one (1) year
from the Delivery Date, except that emergency equipment will have remaining to
operate at least six (6) months from the Delivery Date. In the event any of the
calendar limit components or Parts will have less than the limits established in
the previous sentence, Lessee will replace such non-compliant components and
Parts at the next "C" Check immediately after delivery of the Aircraft with
compliant components and Parts which Lessor shall supply, at its sole cost and
expense (including cost of the components and Parts and shipment to the Lessee,
but explicitly excluding any labor cost), and Lessee shall immediately return
the exchanged, non-compliant components and Parts to the previous operator at
its Reno, Nevada, location, at Lessor's sole cost and expense;
(s) the Aircraft fluid reservoirs (including oil, oxygen, hydraulic and
water) will be serviced to full and the waste tank serviced in accordance with
Manufacturer's instructions;
(t) all technical records and manuals shall be up to date, in form
reasonably acceptable to Lessee and with no deferred maintenance items
outstanding under the previous operator's Maintenance Program, unless normally
deferred until the next heavy maintenance visit under the previous operator's
Maintenance Program. All technical records shall be in English;
(u) the Aircraft shall be equipped with TCAS and windshear alert system; and
(v) fuselage repairs shall be terminated and mapped in accordance with RAP
requirements.
-5-
SCHEDULE 5 -- OPERATING CONDITION AT REDELIVERYSCHEDULE 5 -- OPERATING CONDITION
AT REDELIVERY
On the Expiry Date the Aircraft, subject to fair wear and tear generally,
will be in the condition set out below.
1. General Condition
The Aircraft will:
(a) be clean by international airline standards;
(b) have installed the full complement of engines and other material
equipment, parts and accessories and loose equipment required under the Agreed
Maintenance Program and installed in the other Boeing/McDonnell Douglas MD-87
aircraft operated by Lessee (together with any additions and improvements
thereto, or replacements thereof, effected pursuant to and in accordance with
this Agreement) and be in a condition suitable for immediate operation in
commercial service;
(c) be airworthy, conform to type design and be in a condition for safe
operation with all equipment, components and systems operating in accordance
with their intended use and within limits established by the manufacturer and
approved by the Aviation Authority, and all pilot discrepancies and deferred
maintenance items cleared on a terminating action basis;
(d) have a U.S. Standard Transport Category Certificate of Airworthiness
issued by the FAA in accordance with FAR Part 129 (or if required by the Lessor,
be eligible for a valid export certificate of airworthiness with respect to the
Aircraft issued by the Aviation Authority) and unconditionally meet all FAA
requirements for immediate operations under FAR Part 129;
(e) comply with the manufacturer's original specification to the extent that
it so complied on the date of this Agreement and subject to any alterations made
pursuant to and in accordance with this Agreement after such date;
(f) have undergone, immediately prior to redelivery, the MSG-3 equivalent of
a "C" Check in accordance with the Agreed Maintenance Program so that all
Airframe inspections falling due within the next 3,000 hours, 3,000 cycles or
twelve months (whichever is applicable and most limiting) of operation in
accordance with the Agreed Maintenance Program have been accomplished;
(g) if the Flight Hours of the Airframe remaining until the scheduled
completion of the Major Checks (collectively, a "Complete Heavy Work Package")
on the Expiry Date are:
(i) less than on the Delivery Date, then the Lessee shall pay to the Lessor
an amount equal to the product of (a) the number of Flight Hours remaining until
the scheduled completion of a Complete Heavy Work Package as of the Expiry Date
that are less than the number of Flight Hours that were remaining until the
scheduled completion of a Complete Heavy Work Package as of the Delivery Date
(b) multiplied by US$50.00, provided, however, that no payment shall be due from
-------- -------
Lessee under this clause (g)(i) if, immediately preceding the redelivery of the
Aircraft, the Lessee has performed a Complete Heavy Work Package;
(ii) more than on the Delivery Date, then the Lessor shall pay to the Lessee
an amount equal to the product of (a) the number of Flight Hours remaining until
the scheduled completion of a Complete Heavy Work Package as of the Expiry Date
that are more than the number of Flight Hours that were remaining until the
scheduled completion of a Complete Heavy Work Package as of the Delivery Date
(b) multiplied by US$50.00;
For the avoidance of doubt, any amounts due to the Lessor pursuant to this
clause (g) may be set off against any amounts due to Lessee pursuant to
paragraphs (b) or (d) of Schedule 10 and a payment made for the net amount due;
(h) have complied with all airworthiness directives and mandatory orders
affecting that model of Aircraft issued by the Aviation Authority (and, if
different, the FAA) that are required terminating action during the Term;
(i) no special or unique manufacturer inspection or check requirements
specific to the Aircraft will exist unless there is no terminating action
available from any source;
(j) have installed all applicable vendor's and manufacturer's service
bulletin kits received free of charge by the Lessee that are appropriate for the
Aircraft and, to the extent not installed, those kits which have been received
with respect to this Aircraft will be furnished free of charge to the Lessor;
(k) be free of any system-related leaks which are outside maintenance manual
limitations;
(l) all fluid reservoirs (including fuel, oil, oxygen, hydraulic and water)
will be full, and the waste tank serviced in accordance with the manufacturer's
instructions;
(m) if required under the Approved Maintenance Program, all fuel tanks will
have recently undergone an anti-fungus/biological growth contamination
laboratory evaluation, and any excessive levels of contamination corrected;
(n) have an FAA-approved aging aircraft program in operation and up-to-date;
and
(o) have all signs and decals clean, secure and legible.
2. Engines
(a) Each engine installed on the Aircraft shall be an Engine and (if not the
engine installed at Delivery) shall, to the extent not previously provided to
the Lessor, be accompanied by all documentation the Lessor may require to
evidence that title thereto is properly vested in the Lessor in accordance with
this Agreement and will have at least 3,000 Cycles remaining until the next
scheduled removal for engine heavy maintenance under the Agreed Maintenance
Program or removal of the most life limited part or known scheduled repair visit
under the Manufacturer's maintenance program.
(b) On the Expiry Date, the condition of each Engine shall be compared with
its condition on the Delivery Date. Then:
(i) Engines:
(aa) to the extent that, on the Expiry Date, there are more Cycles
since the last off-wing engine (turbine, not section and compressor) full
restoration based on an ESV2 under the manufacturer's maintenance program (an
"Engine Refurbishment") as when compared with the condition of such Engines
since the last Engine Refurbishment as of the Delivery Date, Lessee shall pay
compensation to Lessor in an amount equal to US$80.00 multiplied by the number
-------------
of Cycles in the difference; or
(bb) to the extent that, on the Expiry Date, there are less Cycles
since the last Engine Refurbishment as when compared with the condition of such
Engines since the last Engine Refurbishment as of the Delivery Date, Lessor
shall pay compensation to Lessee in an amount equal to US$80.00 multiplied by
the number of Cycles in the difference; and
(ii) Life Limited Parts:
Payment for Engine life limited part ("LLP") replacements shall be adjusted on
redelivery for the pro-rata value of any LLP changes accomplished during the
Term based on the then current Pratt & Whitney catalogue prices in accordance
with the following:
(aa) to the extent that, on the Expiry Date, there are more Cycles flown on
any LLP as compared with the condition of such LLP on the Delivery Date, then
Lessee shall pay compensation to Lessor in an amount equal to the relevant LLP
cycle cost (defined for 2000 in Schedule 7 and as amended over time by
manufacturer's price list and which in the aggregate for 2000 is US$38.00 per
Cycle) multiplied by the number of Cycles in the difference; or
--------------
(bb) to the extent that, on the Expiry Date, there are less Cycles flown on
any LLP as compared with the condition of such LLP on the Delivery Date, then
Lessor shall pay compensation to Lessee in an amount equal to the relevant LLP
cycle cost (defined as per (aa) above) multiplied by the number of Cycles in the
-------------
difference.
Lessor shall consent to the workscope for the last Engine shop visit in
order to avoid a situation where, on redelivery of the Aircraft, the Engines
would have a materially greater remaining life until overhaul than they had at
the Delivery Date. Upon any default by Lessor of its obligation to pay any
compensation due to Lessee pursuant to Clause 2(b)(i)(bb) or Clause 2(b)(ii)(bb)
of this Schedule 5, Lessee shall have the right, at its expense, to remove from
the Aircraft the Engine or Engines (each such Engine so removed, a "Replaced
Engine") giving rise to such payment obligation and to replace such Replaced
Engine with an engine that complies with Clause 8.13(a) of the Agreement and
this Schedule 5 (a
"Replacement Engine") in order to avoid or reduce the amount of the compensation
due to Lessee hereunder. Upon any such removal and replacement of a Replaced
Engine, Lessee shall convey or cause to be conveyed to Lessor title to the
Replacement Engine, free and clear of all Security Interests other than
Permitted Liens. Prior to or at the time of any such conveyance, Lessee shall
(i) furnish Lessor with a bill of sale with respect to the Replacement Engine
and (ii) take such other action and furnish such other certificates and
documents as Lessor may reasonably require in order to ensure that the
Replacement Engine is duly and properly conveyed to Lessor. Upon full
compliance with this Clause 2(b), title to each Replaced Engine shall pass to
Lessee in accordance with Section 8.17(b) of the Agreement;
(c) have no defect that reduces the Cycles of remaining life pursuant
to manufacturer's or airworthiness requirements until overhaul to less than
3,000; and
(d) be in a condition that can operate at maximum rated take-off power at
sea level at a temperature of 26C.
3. Fuselage, Windows and Doors
(a) the fuselage will be free of major dents and abrasions that exceed the
prescribed parameters under the SRM and shall be free of scab patches which are
temporary or out of maintenance manual limits and loose, pulled or missing
rivets (normal wear and tear excepted);
(b) the windows will not contain any de-lamination, blemishes or crazing
that exceed the prescribed parameters under the Manufacturer's maintenance
manual and will be properly sealed (normal wear and tear excepted); and
(c) the doors will be free moving, correctly rigged and fitted with
serviceable seals.
4. Wings and Empennage
(a) leading edges will not contain any damage that exceeds the prescribed
parameters under the SRM;
(b) control surfaces will be properly polished;
(c) unpainted cowlings and fairings will be polished to the same standard as
on Lessee's other MD-80 aircraft; and
(d) wings will be free of fuel leaks.
5. Interior
(a) the interior will be fully serviceable;
(b) emergency equipment having a calendar life will have a minimum of 1 year
or 100% of its total approved life remaining, whichever is less; and
(c) curtains, carpets, seat covers and seat cushions will be clean and free
from material stains and worn out (threadbare) areas and will conform to FAR
fire resistance regulations as applicable to an FAR Part 129 operator.
6. Cockpit
(a) fairing panels shall be substantially free of stains and cracks, clean,
secure and repainted as necessary;
(b) floor coverings will be clean and effectively sealed;
(c) seat covers will be in good condition, clean and substantially free of
stains and will conform to FAR fire resistance regulations as applicable to an
FAR Part 129 operator; and
(d) seats will be serviceable and in good condition.
7. Cargo Compartments
(a) panels will be in good condition;
(b) nets will be in good condition; and
(c) the compartments will comply with FAR fire resistance and containment
regulations as applicable to an FAR Part 129 operator.
8. Landing Gear
(a) The installed main and nose landing gear components and their associated
actuators and parts will have a minimum of eighteen (18) months calendar life,
4,500 hours and 3,000 Cycles remaining to the next scheduled overhaul or shop
visit under the manufacturer's maintenance program.
(b) If any Landing Gear:
1) has fewer Cycles remaining until the next scheduled removal for overhaul
under the Agreed Maintenance Program than it had on the Delivery Date, then the
Lessee shall pay to the Lessor an amount equal to the product of (i) such
difference, multiplied by (ii) US$12.00 per Cycle; and
2) has a greater number of Cycles remaining until the next scheduled removal
for overhaul under the Agreed Maintenance Program than it had on the Delivery
Date, then the Lessor shall pay to the Lessee an amount equal to the product of
(i) such difference, multiplied by (ii) US$12.00 per Cycle.
(c) The tires and brakes will have at least half-life remaining until next
removal.
(d) The landing gear and wheel wells will be clean, free of leaks and
repaired as necessary.
10. APU
(a) The APU shall be serviceable in accordance with the Approved Maintenance
Program parameters;
(b) The APU will have not less than half-time remaining to the next shop
visit based upon the AMR reliability program and the APU manufacturer's MTBR
statistics; and
(c) If the APU:
(i) has fewer Flight Hours remaining until the next scheduled removal for
overhaul under the Agreed Maintenance Program than it had on the Delivery Date,
then the Lessee shall pay to the Lessor an amount equal to the product of (i)
such difference, multiplied by (ii) US$9.00 per Flight Hour; and
(ii) has a greater number of Flight Hours remaining until the next scheduled
removal for overhaul under the Agreed Maintenance Program than it had on the
Delivery Date, then the Lessor shall pay to the Lessee an amount equal to the
product of (i) such difference, multiplied by (ii) US$9.00 per Flight Hour.
11. Corrosion
(a) The Aircraft will be in compliance with the CPCP and will have been
inspected and treated with respect to corrosion as required by the CPCP; and
(b) Fuel tanks will be free from contamination and corrosion which exceed
the allowable limits contained in the Approved Maintenance Program and a tank
treatment program will be in operation and up-to-date if required under the
Approved Maintenance Program.
12. Net Payment on Return
(a) Any amounts due to amounts due to the Lessor pursuant to this Schedule 5
may be may be set off against any amounts due to Lessee pursuant to paragraphs
(b) or (d) of Schedule 10 and a payment made for the net amount due.
13. Fuel
Upon redelivery of the Aircraft to Lessor, an adjustment will be made in respect
of fuel on board the Aircraft on the Delivery Date and on the Expiry Date at the
price then prevailing at the Redelivery Location.
-2-
SCHEDULE 6 -- INSURANCE PROVISIONSSCHEDULE 6 -- INSURANCE PROVISIONS
Part 1
(Insurance Requirements)
1. The Insurances required to be maintained are as follows:
(a) HULL "ALL RISKS" of Loss or Damage while flying and on the ground with
respect to the Aircraft for the Termination Value and with a deductible not
exceeding $250,000 (such deductible being protected by separate insurance to pay
up to $200,000 in excess of the first $50,000 thereof, subject to any aggregate
limit stipulated in such insurance).
(b) HULL WAR AND ALLIED PERILS, covering those risks excluded from the Hull
"All Risks" Policy to the extent such coverage is available from the leading
international insurance markets, including confiscation and requisition by the
State of Registration, for the Termination Value;
(c) "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK except
when on the ground or in transit other than by air or sea) on all Engines and
Parts when not installed on the Aircraft (to the extent not covered under the
Aircraft hull insurances described in paragraphs (a) and (b) above), including
Engine test and running risks, in an amount equal to replacement value in the
case of the Engines;
(d) AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER, BAGGAGE,
CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL
LIABILITY for a combined single limit (Bodily Injury/Property Damage) of an
amount not less than the Minimum Liability Coverage for the time being in
respect of any one occurrence (but, in respect of products liability, this limit
may be an aggregate limit for any and all losses occurring during the currency
of the policy; War and Allied Risks are also to be covered under the Policy to
the extent available from the leading international insurance markets.
2. All required hull and spares insurance (specified in (1)(a), (b) and (c)
above), so far as it relates to the Aircraft, will:
(a) include the Indemnitees as additional insureds (warranted no operational
interest);
(b) provide that any loss will be settled jointly with the Lessor and the
Lessee, and any claim that becomes payable on the basis of a Total Loss shall be
paid in Dollars to the Lessor as sole loss payee, with any other claim being
payable as may be necessary for the repair of the damage to which it relates;
(c) if separate Hull "All Risks" and "War Risks" insurances are arranged,
include a 50/50 provision in the terms of Lloyd's endorsement AVS103; and
(d) confirm that the Insurers are not entitled to replace the Aircraft in
the event of a Total Loss.
3. All required liability insurances (specified in (1)(d) above) will:
(a) include the Indemnitees as additional insureds for their respective
rights and interests, warranted (each as to itself only) no operational
interest; but the coverage provided will not include claims arising out of their
legal liability as manufacturer, repairer or servicing agent;
(b) include a severability of interest clause;
(c) contain a provision confirming that the policy is primary without right
of contribution and that the liability of the insurers will not be affected by
any other insurance of which the Lessor or the Lessee have the benefit; and
(d) accept and insure the indemnity provisions of this Agreement to the
extent of the risks covered by the relevant policy or policies.
4. All Insurances will:
(a) be in accordance with normal industry practice of Persons operating
similar aircraft in similar circumstances;
(b) operate on a worldwide basis subject to such limitations and exclusions
as may be notified to the Lessor;
(c) acknowledge that the insurers are aware that the Aircraft is owned by
the Lessor and is subject to this Agreement;
(d) provide that, in relation to the interests of each of the additional
insureds, the Insurances will not be invalidated by any act or omission of any
other Person which results in a breach of any terms conditions or warranty of
the policies; provided, that the additional assured so protected has not caused,
contributed to or knowingly condoned such act or omission;
(e) provide all terms of Lloyd's endorsement AVN 67B including a statement
that the Insurers will waive any rights of recourse and/or subrogation against
the additional insureds, subject to and in accordance with Clause 3.4 of such
endorsement;
(f) provide that the additional insureds will have no obligation or
responsibility for the payment of any premiums (but reserve the right to pay the
same should any of them elect to do so) and that the Insurers will waive any
right of offset or counterclaim against the respective additional insureds other
than for outstanding premiums in respect of the Aircraft, any Engine or Part;
(g) provide that, except in the case of any provision for cancellation or
automatic termination specified in the policies or endorsements thereof, the
Insurance can only be canceled or materially altered in a manner adverse to the
additional insureds by giving at least 30 days' written notice to the Lessor,
except in the case of war risks (or radioactive contamination), for which seven
days' written notice (or such lesser period as is or may be customarily
available in respect thereof) will be given; and
(h) contain a provision entitling the Lessor to initiate a claim under any
policy, if so desired.
5. All Reinsurances will:
(a) be on the same terms as the Insurances and will include the provisions
of this Schedule;
(b) provide that, notwithstanding any bankruptcy, insolvency, liquidation,
dissolution or similar proceedings of or affecting the reinsured, the
reinsurers' liability will be to make such payment as would have fallen due
under the relevant policy of reinsurance if the reinsured had (immediately
before such bankruptcy, insolvency, liquidation, dissolution or similar
proceedings) discharged its obligations in full under the original insurance
policies in respect of which the then relevant policy of reinsurance has been
effected; and
(c) contain a "cut-through" clause in the following form (or such other form
as is reasonably satisfactory to the Lessor), subject to the provisions of such
clause not contravening any law of the State of Incorporation:
"The Reinsurers and the Reinsured hereby agree that, in the event of any claim
arising under the Reinsurances in respect of a total loss or other claim where,
as provided by the Lease Agreement, dated June __, 2001 and made between
Investors Asset Holding Corp., as Owner Trustee, and Aerovias de Mexico, S.A. de
C.V., such claim is to be paid to the person named as sole loss payee under the
primary insurances, the Reinsurers will, in lieu of payment to the Reinsured,
its successors in interest and assigns, pay to the person named as sole loss
payee under the primary insurances effected by the Reinsured that portion of any
loss for which the Reinsurers would otherwise be liable to pay the Reinsured
(subject to proof of loss), it being understood and agreed that any such payment
by the Reinsurers will (to the extent of such payment) fully discharge and
release the Reinsurers from any and all further liability in connection
therewith".
PART 2
(Form of Broker's Undertaking)
[Separately delivered by Lessee's Broker]
PART 3
(Form of Insurance Certificate)
[Separately delivered by Lessee's Broker]
80
--
SCHEDULE 7 -- FORM OF LEGAL OPINIONSCHEDULE 7 -- FORM OF LEGAL OPINION
[Separately delivered by Lessee's counsel]
-2-
SCHEDULE 8 -- FORM OF MONTHLY STATUS REPORTSCHEDULE 8 -- FORM
OF MONTHLY STATUS REPORT
AIRCRAFT TYPE REG. MARK SERIAL NO. MONTH ENDING
Boeing/McDonnell
Douglas MD-87 N753RA 49587
1. AIRCRAFT UTILIZATION:
(a) Airframe Total Flight Hours
(b) Airframe Total Cycles
(c) Airframe Flight Hours for Month
(d) Airframe Flight Cycles for Month
2. POWERPLANT STATUS: No.1 No.2
(a) Serial Nos. of Delivered Engines 708147 708177
(b) Serial Nos. of Replacement Engines
(if applicable)
(c) Serial Nos. of Installed Engines
(if different from (a) or (b) above)
(d) Current Location of Delivered or
Replacement Engines (as applicable)
(if not installed on Airframe)
(e) Total Time Since New of Delivered
or Replacement Engines (as applicable)
(f) Total Cycles Since New of Delivered
or Replacement Engines (as applicable)
(g) Total Flight Hours for the Month for
each Delivered or Replacement Engine
(as applicable)
(h) Total Cycles for the Month for each
Delivered or Replacement Engine
(as applicable)
3. APU STATUS:
(a) Serial No. of Delivered APU
(b) Serial No. of Replacement APU
(if applicable)
(c) Serial No. of Installed APU
(if different from (a) or (b) above)
(d) Current Location of Delivered or
Replacement APU (as applicable)
(if not installed on Airframe)
(e) Total Time Since New of Delivered
or Replacement APU (as applicable)
(f) Total Cycles Since New of Delivered
or Replacement APU (as applicable)
(g) Total Hours for the Month for
Delivered or Replacement APU
(as applicable)
(h) Total Cycles for the Month for
Delivered or Replacement APU
(as applicable)
4. ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:
(a) Routine Checks (A and above) performed during Month:
(b) Airworthiness Directives complied with during Month:
(c) Service Bulletins complied with during Month:
5. AIRCRAFT DAMAGE OR ENGINE CHANGES:
Details of any repairs carried out to the Aircraft beyond SRM limits and Engine
changes, giving reasons for repair or change:
6. UPCOMING MAINTENANCE CHECKS
(a) Maintenance Checks (C segment and above) scheduled or expected to be
performed on the Airframe during the next 12 months:
(b) Scheduled shop visits or heavy maintenance visits scheduled or expected
to be performed on the Engines during the next 12 months:
(c) Overhauls, or replacements scheduled or expected to be performed on the
APU or Landing Gear during the next 12 months:
Date: ___________, 20__ CERTIFIED FOR AND ON BEHALF OF AEROVIAS DE
MEXICO, S.A. DE C.V.
By:_______________________________
Name:
Title:
-2-
SCHEDULE 9 -- BASIC RENT AND DEPOSIT8 -- FORM OF
MONTHLY STATUS REPORT
A. BASIC RENT: U.S.$130,000 in respect of the Term, in immediately
-----------
available funds.
----
B. DEPOSIT: (i) the amount of U.S.$130,000 previously paid by Lessee
-------
to Lessor pursuant to the terms of a Letter of Intent, dated April 27, 2001,
between the Lessor and the Lessee, or (ii) any letter of credit or other
security which Lessee, Lessor and any Lessor Lender agree shall be substituted
for such amount and which Lessee has delivered to Lessor (or, at Lessor's
written direction, to one or more Lessor Lenders).
C. LETTERS OF CREDIT: Any letter of credit ("LOC") provided by Lessee as
-------------------
the Deposit hereunder, or any part thereof, shall be issued or confirmed by a
U.S. bank, be in substantially in the form of Schedule 9-A hereto and be subject
to the following provisions:
(a) Any LOC shall be delivered to such address as Lessor shall specify and
shall be maintained for the benefit of Lessor or its designee including any
Lessor Lender. Lessee or the issuer of the LOC shall (i) renew or cause the
renewal of each outstanding Letter of Credit on a timely basis as provided in
the relevant LOC, (ii) if the bank that issued an outstanding LOC has indicated
its intent not to renew such LOC, provide either a substitute LOC or other
acceptable Deposit, in each case at least twenty (20) Business Days prior to the
expiration of the outstanding LOC, and (iii) if a bank issuing a LOC shall fail
to honor Lessor's properly documented request to draw on an outstanding LOC,
provide for the benefit of Lessor and its designees either a substitute LOC that
is issued by a bank acceptable to Lessor or other acceptable Deposit, in each
case within two (2) Business Days after such refusal.
(b) Upon the occurrence of an LOC Default, Lessee agrees to deliver to Lessor
(or any applicable Lessor Lender) either a substitute LOC or other acceptable
Deposit, in each case on or before the second Business Day after the occurrence
thereof. "LOC Default" shall mean with respect to an outstanding LOC, the
------------
occurrence of any of the following events: (i) the issuer of such LOC shall
fail to maintain an unsecured credit rating of at least "AA" by Standard &
Poor's Ratings Services or "___" by Moody's Investor Service, Inc.; (ii) the
issuer of the LOC shall fail to comply with or perform its obligations under
such LOC if such failure shall be continuing after the lapse of any applicable
grace period; (iii) the issuer of such LOC shall disaffirm, disclaim, repudiate
or reject, in whole or in part, or challenge the validity of, such LOC; (iv)
such LOC shall expire or terminate, or shall fail or cease to be in full force
and effect at any time during the term of this Agreement; or (v) any of the
events of the type specified in Clauses 13.1(g) or (h) of this Agreement shall
occur with respect to the issuer of such LOC.
(c) (i) A LOC shall provide that Lessor or its designee may draw upon the LOC
in an amount that is equal to all amounts that are due and owing from Lessee but
have not been paid to Lessor within the time allowed for such payments under
this Agreement. A LOC shall provide that a drawing may be made on the LOC upon
submission to the bank issuing the LOC of one or more certificates of Lessor in
accordance with the specific requirements of the LOC.
(ii) Upon or at any time after the occurrence of an Event of Default under this
Agreement, Lessor or its designee may draw on the entire, undrawn portion of any
outstanding LOC upon submission to the bank issuing such LOC of one or more
certificates in accordance with the specific requirements of the LOC. Cash
proceeds received from drawing upon the LOC shall be deemed a cash Deposit until
applied in accordance with this Agreement. Notwithstanding Lessor's receipt of
cash under the LOC, Lessee shall remain liable to Lessor for any failure to
maintain a sufficient Deposit in accordance with the terms of this Agreement.
In addition, Lessee shall remain liable for any amounts owing to Lessor and
remaining unpaid after the application of the amounts so drawn by Lessor.
-2-
SCHEDULE 9-A
[FORM OF] IRREVOCABLE TRANSFERABLE STANDBY LETTER OF CREDIT
Date Of Issuance:
[Name of Lessor/designated Lessor Lender]
[Address]
Re: Credit No. _______________
We hereby establish our Irrevocable Transferable Standby Letter of Credit
in your favor for the account of Aerovias de Mexico, S.A. de C.V. (the "Account
Party"), for the aggregate amount not exceeding ____________ United States
Dollars ($_______), available to you at sight upon demand at our counters at
(Location) on or before the expiration hereof against presentation to us of the
------
following statement, dated and signed by a representative of the beneficiary:
"The amounts of US$________ is due to Investors Asset Holding Corp., as
owner trustee, and is unpaid pursuant to the Lease Agreement, dated June __,
2001, between Investors Asset Holding Corp., as lessor, and the Account Party,
as lessee, as the same may have been amended (the "Agreement")."
The amount which may be drawn by you under this Letter of Credit shall be
automatically reduced by the amount of any drawings paid through the Issuing
Bank referencing this Letter of Credit No. ____. Partial drawings are permitted
hereunder.
This Letter of Credit shall expire ________________ (____) days from the
date of issuance, but shall automatically extend without amendment for
additional _____________ (_____)-day periods from such expiration date and from
subsequent expiration dates, if you, as beneficiary, and the Account Party have
not received due notice of our intention not to renew ninety (90) days prior to
any such expiration date.
We hereby agree with you that documents drawn under and in compliance with
the terms of this Letter of Credit shall be duly honored upon presentation as
specified.
This Letter of Credit shall be governed by the Uniform Customs and Practice
for Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500 (the "UCP"), except to the extent that the terms hereof are
inconsistent with the provisions of the UCP, including but not limited to
Articles 13(b) and 17 of the UCP, in which case the terms of this Letter of
Credit shall govern.
In the event of an Act of God, riot, civil commotion, insurrection, war or
any other cause beyond our control that interrupts our business (collectively,
an "Interruption Event") and causes the place for presentation of this Letter of
Credit to be closed for business on the last day for presentation, the expiry
date of this Letter of Credit will be automatically extended without amendment
to a date thirty (30) calendar days after the place for presentation reopens for
business.
This Letter of Credit is transferable, and we hereby consent to such
transfer, but otherwise may not be amended, changed or modified without the
express written consent of the beneficiary, the Issuing Bank and the Account
Party.
[BANK SIGNATURE]
-3-
SCHEDULE 10 -- SUBSEQUENT INVESTMENTS
In accordance with Clause 7.7, the Lessor shall make each applicable Subsequent
Investment, as follows:
(a) reimburse the Lessee, within five (5) Business Days after the Delivery
Date and against Lessee's invoice therefor, for four hundred thousand dollars
($400,000.00) in respect of the "C" Check to be completed by Lessee after the
Delivery Date;
(b) reimburse the Lessee, within ten (10) Business Days after Lessor's
receipt of Lessee's itemized invoice, for all amounts reasonably incurred by
Lessee for parts (but not for labor expense) necessary to correct discrepancies
from the delivery conditions specified in Exhibit 4 which are noted during the
Observation Period of the ferry flight of the Aircraft from the Delivery
Location to Mexico City International Airport and relate solely to the operation
of the Aircraft (and not to records or issues which would otherwise be corrected
during a periodical "C" check); provided, however, that the Lessor's liability
with respect to the Lessor Contribution shall not exceed two hundred fifty
thousand dollars ($250,000.00) and any excess shall be the sole responsibility
of the Lessee;
(c) reimburse the Lessee, within ten (10) Business Days after Lessor's
receipt of Lessee's itemized invoice, for sixty five percent (65%) of all
amounts reasonably incurred by Lessee for parts and labor expense for any
modifications made promptly following Delivery (the "Lessor Contribution");
provided, however, that the Lessor's liability with respect to the Lessor
Contribution shall not exceed eight hundred thousand dollars ($800,000.00) and
any excess shall be the sole responsibility of the Lessee;
(d) if the Lessee shall have caused compliance with the insulation
airworthiness directive issued by the FAA on May 25, 2000 (the "Insulation AD")
to have been duly effected during the Term, or, if the Lessee shall have
exercised the extension option pursuant to Clause 5.3, during the extension of
the Term, reimburse the Lessee, within ten (10) Business Days after Lessor's
receipt of Lessee's invoice together with any supporting documentation
reasonably requested by Lessor (which invoice and supporting documentation shall
in no event be tendered or delivered to the Lessor for payment prior to the date
which is eighteen (18) months after the Delivery Date), for the sum of (i) one
hundred percent (100%) of its cost with no markups for parts and labor expense
for performance of the Insulation AD, and (ii) sixty six percent (66%) of the
Basic Rent for the month of the Term during which the Insulation AD is
completed; provided, however, that the Lessor's liability with respect to the
cost of the Insulation AD shall not exceed three hundred thousand dollars
($300,000.00) (exclusive or any rent abatement or reimbursement), and any excess
shall be the sole responsibility of the Lessee;
(e) if (i) the Aircraft shall be subject to any mandatory manufacturer's
service bulletin or FAA airworthiness directive (other that the Insulation AD)
which requires compliance during the Term, (ii) the Lessee shall have caused
compliance with such service bulletin or airworthiness directive to have been
duly effected, and (iii) the Lessee's parts and labor expense for performance of
such service bulletin or airworthiness directive shall have exceeded fifty
thousand dollars ($50,000.00), reimburse the Lessee, within ten (10) Business
---------------------
Days after Lessor's receipt of Lessee's invoice together with any supporting
documentation reasonably requested by Lessor, for the prorated value of the
remaining useful life of the resulting improvement determined as follows. The
first fifty thousand dollars ($50,000.00) of such expense for each service
bulletin or airworthiness directive shall be the sole responsibility of the
Lessee. Any excess shall be prorated, with the Lessee's liability being
determined by multiplying the excess by the quotient resulting from the
following formula:
R
- -------------
120 - (Term - R)
(with R equal to the number of months remaining in the Term after the completion
of all conditions for such reimbursement) and with the balance being the pro
rata amount due from the Lessor; and
(f) upon the return of the Aircraft and the due performance of all other
obligations due in connection with such return in accordance with this
Agreement, pay to the Lessee, within ten (10) Business Days after Lessor's
receipt of Lessee's invoice together with any supporting documentation
reasonably requested by Lessor, one hundred percent (100%) of any Redelivery
Credit; provided, however, that the Lessor shall have no liability with respect
to any Redelivery Credit relating to the Engines except to the extent either (i)
such liability has been generated as a result of regularly scheduled or
otherwise required maintenance work performed on any Engine under the Agreed
Maintenance Program, or (ii) Lessor (and if so required, any Lessor Lender) has
consented in writing (with such consent not to be unreasonably withheld or
delayed) the work scope of any heavy maintenance performed on the Engines (and
any other or excess maintenance shall not be eligible for any such credit).
Lessee agrees that such consent may properly be refused if in the non-consenting
party's sole judgment it appears that the probable result would be that on
return of the Aircraft the Engines would have a materially greater remaining
life until overhaul than they had on the Delivery Date.
Lessee shall give prompt notice to Lessor of any mandatory service bulletin or
airworthiness directive for which Lessor is reasonably expected to have any
liability pursuant to this Schedule 10 or Clause 7.7. Additionally, in the
event that the Lessor's aggregate liability under this Agreement with respect to
mandatory service bulletins and airworthiness directives is reasonably expected
to exceed one million dollars ($1,000,000.00), Lessee shall give Lessor prompt
notice thereof and Lessor shall thereafter have the option to terminate the Term
on not less than one hundred eighty (180) days' notice to Lessee; provided,
however, that Lessor shall have no such termination option if Lessee agrees in
such notice to bear all costs relating to such service bulletins and
airworthiness directives from and after the point at which Lessor's aggregate
liability under this Agreement with respect to service bulletins and
airworthiness directives is equal to one million dollars ($1,000,000.00).
Any amounts due to Lessee pursuant to paragraphs (d) or (f) of this Schedule 10
may be set off against any amounts due to the Lessor pursuant to Schedule 5 and
a payment made for the net amount due.