_______________________________________________________________
Exhibit 10.36
AIRCRAFT SUBLEASE AGREEMENT
between
INDIGO PACIFIC AB
as Sublessor
and
FRONTIER AIRLINES, INC.
as Sublessee
Dated as of December 14, 1998
_____________________________________________________________________
Aircraft Make and Model: Boeing 737-3U3
Aircraft Manufacturer's Serial Number 28734
Aircraft Registration Number: N309FL
Make and Model of Engines: CFM INTERNATIONAL CFM 56-3C1
To the extent, if any, that this Agreement constitutes chattel paper under the
Uniform Commercial Code in any jurisdiction, no security interest in this
Agreement may be created through the transfer and possession of any counterpart
other than the original counterpart of this Agreement, so identified by the
signature of Sublessor's Lender on the receipt set forth on the signature page
of such original counterpart.
TABLE OF CONTENTS
1. SUMMARY OF TRANSACTION.....................................................7
2. DEFINITIONS................................................................9
2.1 Definitions............................................................9
2.2 Construction..........................................................19
3. REPRESENTATIONS AND WARRANTIES............................................20
3.1 Sublessee's Representations and Warranties............................20
3.2 Sublessor's Representations and Warranties............................23
3.3 Survival of Representations and Warranties............................25
4. CONDITIONS PRECEDENT......................................................25
4.1 Sublessor's Conditions Precedent......................................25
4.2 Waiver................................................................27
4.3 Sublessee's Conditions Precedent......................................27
4.4 Waiver................................................................28
5. DELIVERY CONDITION AND INSPECTION OF AIRCRAFT.............................28
5.1 Sublessee Selection of Aircraft.......................................28
5.2 Conditions at Delivery................................................28
5.3 Sublessee Inspection of Aircraft at Delivery..........................28
5.4 Delivery of Aircraft to Sublessee.....................................29
5.5 Sublessee Acceptance of Aircraft......................................29
6. LEASE TERM................................................................29
6.1 Initial Lease Term....................................................29
6.2 Lease Extension Date..................................................29
6.3 Expiry Date...........................................................30
6.4 Risk..................................................................31
7. DELIVERY..................................................................31
7.1 Delivery..............................................................31
8. RENT......................................................................31
8.1 Rent Date.............................................................31
8.2 Time of Payment.......................................................32
8.3 Amount of Basic Rent..................................................32
8.4 Reserves..............................................................32
8.5 Increased Rent for Hour/Cycle Ratio...................................32
9. SECURITY DEPOSIT..........................................................32
9.1 Security Deposit......................................................32
9.2 Letter of Credit......................................................32
9.3 Sublessor's Rights....................................................32
10. MAINTENANCE RESERVES.....................................................33
10.1 Amount...............................................................33
10.2 Payments.............................................................33
10.3 Adjustment...........................................................33
10.4 Release of Maintenance Reserves......................................34
10.5 Costs in Excess of Reserves..........................................35
10.6 Reimbursement after Expiry Date......................................35
10.7 LLP Maintenance Reserve..............................................35
10.8 No Anticipated Draw-down.............................................36
11. PAYMENTS.................................................................36
11.1 Account for Sublessee Payments.......................................36
11.2 Default Interest.....................................................36
11.3 Absolute Obligations.................................................37
11.4 Application of Payments to Sublessor.................................37
11.5 Currency Indemnity...................................................37
11.6 Set-off..............................................................38
11.7 Time for Payments....................................................38
12. SUBLESSOR'S CONVENANTS...................................................38
12.1 Quiet Enjoyment......................................................38
12.2 Sublessor Obligations Following Expiry Date..........................38
13. SUBLESSEE'S COVENANTS....................................................39
13.1 Duration.............................................................39
13.2 Information..........................................................39
13.3 Sublessor visits.....................................................41
13.4 Periodic Estoppel Certificates.......................................41
13.5 Airport and Navigation Charges.......................................41
13.6 Operation of Aircraft................................................42
13.7 Areas of Operation...................................................42
13.8 Non-Prejudicial Action...............................................42
13.9 Non-Representation of Sublessor......................................42
13.10 Inspection..........................................................43
13.11 Registration........................................................43
13.12 Name Plates.........................................................44
13.13 Geneva Convention...................................................44
13.14 Merger and Shareholding.............................................44
13.15 Ownership...........................................................45
14. POSSESSION...............................................................46
14.1 No Relinquishment of Possession......................................46
14.2 Sublessee Primarily Liable...........................................49
14.3 Recognition of Rights................................................49
15. SECURITY INTERESTS.......................................................49
15.1 Title................................................................49
15.2 No Security Interests; Base of Aircraft..............................49
15.3 Notice to Sublessor..................................................50
15.4 Procure Release......................................................50
16. MAINTENANCE AND REPAIR...................................................50
16.1 General Obligations..................................................50
16.2 Specific Obligations.................................................51
17. REPLACEMENT OF PARTS.....................................................53
17.1 Replacement of Parts.................................................53
17.2 Title to Replacement Parts...........................................53
17.3 Pooling of Parts.....................................................53
17.4 Alterations..........................................................54
17.5 Removal of Parts.....................................................54
17.6 Substitution of Engine...............................................55
17.7 Temporary Removal of Parts...........................................56
18. MANUFACTURER'S WARRANTIES................................................57
18.1 Authorization........................................................57
18.2 Proceeds.............................................................58
18.3 Agreements with Manufacturers........................................58
19. DISCLAIMERS..............................................................58
19.1 As Is, where Is......................................................59
19.2 No Sublessor Liability for Losses....................................61
19.3 Exclusion............................................................61
19.4 Waiver...............................................................62
19.5 Confirmation.........................................................62
20. INDEMNITIES..............................................................62
20.1 General..............................................................62
20.2 Survival of Indemnification..........................................63
20.3 Notice to Sublessee..................................................63
21. TAXATION.................................................................63
21.1 Gross-up.............................................................63
21.2 Tax Indemnity........................................................64
21.3 Value Added Taxes....................................................65
21.4 Taxation of Indemnity Payments.......................................65
21.5 Benefit of Indemnities...............................................66
21.6 Sublessor Indemnification............................................66
21.7 Survival of Tax Indemnities..........................................66
21.8 Mitigation and Cooperation...........................................66
21.9 Furnishing Forms.....................................................66
22. INSURANCE................................................................67
22.1 Insurances...........................................................67
22.2 Requirements.........................................................67
22.3 Insurance Covenants..................................................67
22.4 Renewal of Insurances................................................69
22.5 AVN 2000.............................................................69
22.6 Failure to Insure....................................................69
22.7 Continuation of Insurances...........................................70
22.8 Application of Insurance Proceeds....................................70
22.9 Pursuit of Claims....................................................70
23. LOSS, DAMAGES AND REQUISITION............................................71
23.1 Total Loss Prior to Pre-Delivery Acceptance..........................71
23.2 Total Loss After Pre-Delivery Acceptance.............................71
23.3 Total Loss of Engines................................................72
23.4 Requisition..........................................................72
24. REDELIVERY...............................................................73
24.1 Redelivery of Aircraft; General Conditions...........................73
24.2 Final Inspection.....................................................74
24.3 Operational Ground Check; Demonstration Flight.......................74
24.4 Non-compliance.......................................................75
24.5 Acknowledgment.......................................................76
24.7 Return of the Letter of Credit.......................................76
25. EVENTS OF DEFAULT........................................................76
25.1 Events...............................................................76
25.2 Sublessor's Rights...................................................79
25.3 Default Payments.....................................................81
26. ASSIGNMENT AND TRANSFER..................................................82
26.1 By Sublessee.........................................................82
26.2 By Sublessor.........................................................82
26.3 Assignment to Lender.................................................82
26.4 Sublessor Includes Sublessor's Assignee and Sublessor's Lender.......83
27. MISCELLANEOUS PROVISIONS.................................................83
27.1 Rights Cumulative, Waivers...........................................83
27.2 Delegation...........................................................84
27.3 Expenses.............................................................84
27.4 Time of Essence......................................................84
27.5 Entire Agreement.....................................................84
27.6 Further Assurances...................................................84
27.7 Language.............................................................85
27.8 Variation............................................................85
27.9 Invalidity of any Provision..........................................85
27.10 Survival............................................................85
27.11 Reimbursement.......................................................85
27.12 Press Releases......................................................85
27.13 Power of Attorney...................................................86
27.14 Usury Laws..........................................................86
27.15 Confidentiality.....................................................86
27.16 Counterparts........................................................86
28. NOTICES..................................................................87
29. GOVERNING LAW AND JURISDICTION...........................................88
29.1 New York Law.........................................................88
29.2 Non-exclusive Jurisdiction in New York...............................88
29.3 Waiver...............................................................89
SCHEDULES
Schedule 1 Aircraft Specification 96
Schedule 2 Delivery Conditions 99
Schedule 3 Acceptance Certificate 100
Schedule 4 Sublease Supplement 102
Schedule 5 Insurance Requirements 104
Schedule 6 Return Conditions 108
Schedule 7 Return Acceptance Certificate 111
Schedule 9 Monthly Aircraft Utilization and Status Report 119
Schedule 10 Power of Attorney 121
THIS AGREEMENT is made on the 14th day of December, 1998.
BETWEEN:
(1) INDIGO PACIFIC AB, a company incorporated under the laws of Sweden
whose registered office is at Sodra Forstadsgatan 4, SE-21143
Maluno, Sweden ("Sublessor"); and
(2) FRONTIER AIRLINES, INC., a company incorporated under the laws of
Colorado whose chief executive office and principal place of
business is 12015 E. 46th Avenue, Denver, Colorado, 80239
("Sublessee").
WHEREAS:
Owner Trustee (as hereinafter defined) holds title to the Aircraft for the
benefit of Subessor (as hereinafter defined);
Owner Trustee leases the Aircraft to Sublessor;
Sublessor wishes to sublease the Aircraft (as hereinafter defined) to Sublessee
and Sublessee is willing to sublease the Aircraft from Sublessor on the terms of
this Agreement; therefore
IT IS AGREED as follows:
1. summary of transaction
The following is a summary of the lease transaction between Sublessor and
Sublessee. It is set forth for the convenience of the parties only and will not
be deemed in any way to amend, detract from or simplify the other provisions of
this Agreement.
(i) Description of the Aircraft
One Boeing 737-3U3
MSN 28734
Reg No. N309FL
(ii) Scheduled Delivery Date and Location
December 14, 1998, at Evergreen Air Center Marana,
Arizona.
(iii) Initial Lease Term
From Delivery Date to 1 May 2000.
(iv) Lease Extension Option
Sublessor has an option to extend until October 31,
2000, subject to six (6) month prior written notice.
(v) Security Deposit
US$ 100,000, payable as follows:
In cash upon signing of Letter of Intent; upon Delivery
the Security deposit will be set off against the first
month's Rent.
US$ 600,000
Irrevocable Letter of Credit to the value of
$600,000.00 provided 1 day prior to Delivery, in a form
acceptable to Sublessor.
(vi) Transaction Fee
Not applicable.
(vii) Rent During Initial Lease Term
US$ 258,000 per month, payable in advance.
(viii) Rent During Lease Extension Term
US$ 258,000 per month, payable in advance.
(ix) Reserves
Airframe Maintenance Reserve: US$ 70 per Flight Hour.
Engine Maintenance Reserve: US$ 80 per Flight Hour for
each Engine.
LLP Maintenance Reserve: US$20 per Flight Hour.
Landing Gear Maintenance Reserve: US$ 10 per Cycle.
APU Maintenance Reserve: US$6 per Flight Hour.
(x) Country of Aircraft Registration
United States of America.
(xi) Agreed Value of Aircraft
US$ 33,000,000
(xii) Damage Notification Threshold
US$ 250,000
(xiii) Sublessor's Bank Account
Proceeds Account
KBC New York
125 W 55th Street
NY 10019, New York
Accoutn Number: 21557003
SWIFT: KREDUS33 for credit to KBC Finance Ireland
quoting Indigo Proceeds Account #03/43824/77
(xiv) Indemnitees
Sublessor
Owner Trustee
Sublessor's Lender
2. DEFINITIONS
2.1 Definitions
In this Agreement the following words and expressions have the following
meanings unless the context otherwise requires:
Acceptance Certificate means a certificate substantially in the form set out in
Schedule 3;
Agreed Value means THIRTY THREE MILLION US DOLLARS (US$33,000,000);
Aircraft means the aircraft described in Schedule 1 (which term includes where
the context admits a separate reference to any or all Engines, Parts and
Aircraft Documents);
Aircraft Documents means the documents, data and records identified in Annex 1
to Schedule 3 of this Agreement and all additions, renewals, revisions and
replacements from time to time made to any of the foregoing in accordance with
this Agreement all of which shall be in the English language;
Airframe means the Aircraft, excluding the Engines and the Aircraft Documents;
Air Navigation Charges means all charges incurred with the furnishing, issue or
provision of information, directions and other facilities in connection with the
navigation or movement of the Aircraft (including the control or movement of
vehicles in any part of an airport used for the movement of aircraft);
Airport Charges means all charges incurred in connection with the landing,
parking or taking-off of aircraft at airports or for the use of, or for services
provided at, airports;
Airworthiness Directive means an airworthiness directive or other mandatory
requirement issued by the FAA or any other Aviation Authority or Government
Entity;
APU means the auxiliary power unit installed on the Aircraft on the Delivery
Date and any replacement auxiliary power unit installed in accordance with this
Agreement, title to which is transferred to Owner Trustee;
Assignment of Insurances means the assignment by Sublessee to Sublessor, or at
the request of Sublessor, to Sublessor's Lender, of all of Sublessee's rights,
title and interest in and to the Insurances with respect to the Aircraft (other
than the Insurances relating to liability) or any other form of Security
Interest in favor of Sublessor, Owner Trustee or Sublessor's Lender in and to
the Insurances with respect to the Aircraft;
Aviation Authority means all and any of the authorities, government departments,
committees or agencies which under the laws of the State of Registration shall
from time to time:
(a) have control or supervision of civil aviation in that state; or
(b) have jurisdiction over the registration, airworthiness or operation
of, or other matters relating to, the Aircraft;
Basic Rent means all amounts payable pursuant to Clause 8.3.
Business Day means any day (other than a Saturday or Sunday or holidays
scheduled by law) on which banks are open for foreign exchange business in
Dublin, London, Stockolm and New York;
"C" Check means a "C" check (a complete zonal and systems check and the
corresponding lower "A" and "B" checks or equivalent in accordance with the MPD)
in accordance with Sublessee's maintenance program approved by the Aviation
Authority that shall at least meet the requirements of the MPD;
Conditions Precedent means the conditions specified in Clause 4.1;
CPCP means corrosion protection control program;
Cycle means one take-off and landing of the Airframe or, in relation to an
Engine or Part, one take-off and landing of the airframe to which that Engine or
Part may be attached;
Damage Notification Threshold means US$250,000;
Default means any Event of Default and any event which with the passing of time
and/or giving of notice and/or making of any determination, would constitute an
Event of Default;
Default Rate means, for the relevant period, 3% above the rate of interest at
the start of that relevant period publicly quoted by The Chase Manhattan Bank
N.A. as its Prime Rate;
Delivery means delivery of the Aircraft by Sublessor to Sublessee pursuant to
Clause 7;
Delivery Date means the date on which Delivery occurs;
Delivery Location means Evergreen Air Center Marana, Arizona or such other
location as the parties may agree;
Delivery Work means the maintenance and modification work to be performed at
Sublessor's expense on the Aircraft just prior to Delivery as described in
Schedule 2 hereto;
Dollars and US$ means the lawful currency of the United States of America;
Engine means, whether or not for the time being installed on the Aircraft:
(a) each engine of the manufacture, model and serial number specified
in Schedule 1 which Sublessor elects to tender to Sublessee with
and whether or not installed on the Airframe on the Delivery Date,
such engines being described as to serial numbers on the
certificate of acceptance to be executed by Sublessee upon
Delivery; or
(b) any engine that has replaced that engine, title to which has, or
should have, passed to Owner Trustee in accordance with this
Agreement,
and in each case includes all modules and Parts from time to time belonging to
or installed in that engine but excludes any properly replaced engine title to
which has, or should have, passed to Sublessee pursuant to this Agreement;
Engine Agreed Value means six million Dollars (US$6,000,000);
Engine Performance Restoration Visit means any overhaul, refurbishment, hot
section inspection, replacement of internal life limited parts, disassembly,
assembly and testing required thereof during an engine shop visit which
requires, as a minimum, a major disassembly of an Engine and the removal and
reinstallation of internal rotating parts;
Engine Total Loss means the occurrence with respect to an Engine only, whether
or not installed on the Airframe, of any of those events described in the
definition of Total Loss;
Event of Default means any event specified in Clause 25.1;
Expiry Date means the date determined in accordance with Clause 6.3;
Extension Lease Expiry Date means October 31, 2000 or such other date as agreed
to between the parties;
Extension Lease Term means the period commencing on the day following the
Initial Lease Expiry Date and ending on the Extension Lease Expiry Date;
FAA means the Federal Aviation Administration of the United States of America
and any successor thereof;
Facility Agreement means the facility agreement entered into between Sublessor's
Lender and Sublessor in respect of the financing of Sublessor's acquisition of
the Aircraft;
FAR means the Federal Aviation Regulations set forth in Title 14 of the United
States Code of Federal Regulations, as amended, modified or replaced from time
to time;
Federal Aviation Act means 49 United States Code Subtitle VII, the former
Federal Aviation Act as amended, as further amended, modified or replaced from
time to time;
Final Inspection has the meaning given to it in Clause 24.2;
Financial Indebtedness means any indebtedness in respect of:
(a) money borrowed or raised;
(b) payments due under finance or operating leases;
(c) any guarantee or indemnity in respect of obligations of the type
referred to in paragraphs (a) or (b);
Flight Hour means each hour or part thereof (rounded up to two decimal places)
elapsing from the moment the wheels of the Aircraft leaves the ground on the
tarmac before take off until the wheels of the Aircraft next touch ground;
Geneva Convention means the Convention on the International Recognition of
Rights in Aircraft signed at Geneva, Switzerland on 19 June 1948, and amended
from time to time, but excluding the terms of any adhesion thereto or
ratification thereof containing reservations to which the State of Registration
does not accede;
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 including, for the avoidance of
doubt, the Aviation Authority; 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;
Head Lease Agreement means the aircraft lease agreement entered into between
Owner Trustee and Sublessor dated as of even date herewith which is being filed
with the FAA simultaneously herewith;
Indemnitees means Sublessor, Owner Trustee, Sublessor's Lender or any other
person identified by Sublessor prior to the Delivery Date or, with the consent
of Sublessee, after the Delivery Date to have an interest in the Transaction
Documents and their respective successors and assigns, shareholders,
subsidiaries, affiliates, partners, contractors, directors, officers, servants,
agents and employees;
Initial Lease Expiry Date means 1 May, 2000;
Initial Lease Term means the period commencing on the Delivery Date and ending
on the Initial Lease Expiry Date;
Insurances bears the meaning ascribed to it in Clause 22.1 (a);
Landing Gear means the landing gear assembly of the Aircraft, including all life
limited parts;
Lease Term means the Initial Lease Term and, if the lease is extended in
accordance with Clause 6.2, the Extension Lease Term;
Letter of Credit bears the meaning ascribed to it in Clause 9.2;
Loss means any and all loss, liability, obligation, action, claim, suits,
proceeding, judgment, penalty, fine, damages, fee, cost, disbursement and
expense and Losses shall be construed accordingly;
Maintenance Facility means, prior to Delivery, Evergreen Air Center Marana,
Arizona and, after Delivery, such FAA approved maintenance facility as the
Sublessor may approve in writing;
Maintenance Reserves means all amounts payable pursuant to Clause 10;
Manufacturer means The Boeing Company, a Delaware corporation with its principal
office in Seattle, State of Washington, U.S.A.;
Minimum Liability Coverage means US$500,000,000 on each occurrence;
Monthly Report means a report substantially in the form of Schedule 9;
Mortgage means a mortgage over the Aircraft created for the benefit of
Sublessor's Lender;
MPD mean the Maintenance Planning Data published by the Manufacturer and
applicable to the Aircraft;
Other Agreements means any other aircraft lease or sublease agreement or other
agreement from time to time entered into between Sublessor (or any partner,
subsidiary, associate or affiliate of Sublessor) and Sublessee (or any
subsidiary, associate or affiliate of Sublessee);
Owner Trustee means First Security Bank, National Association, not in its
individual capacity but solely as owner trustee pursuant to a trust agreement
dated on or about the date hereof with Indigo Pacific AB as beneficiary;
Part means, whether or not for the time being installed on the Aircraft:
(a) any component, furnishing or equipment (other than a complete
Engine) furnished with the Aircraft on the Delivery Date; and
(b) any other component, furnishing or equipment (other than a
complete Engine) title to which has, or should have, passed to
Owner Trustee pursuant to this Agreement;
but excludes any such items title to which has, or should have, passed to
Sublessee pursuant to this Agreement;
Permitted Lien means:
(a) any lien for Taxes not assessed or, if assessed, not yet due and
payable, or being contested in good faith by appropriate
proceedings;
(b) any inchoate liens of a repairer, materialman, workman, employee,
mechanic, carrier, hangar keeper or other similar lien arising in
the ordinary course of business in respect of obligations which
are not overdue or are being contested in good faith by
appropriate proceedings;
(c) liens arising out of judgments or awards with respect to which at
the time (i) an appeal proceedings for review is being contested
diligently and in good faith and (ii) a stay of execution shall
have been secured (and remains in force);
(d) any Sublessor Lien; and
(e) any Security Interest created by Sublessee with the written
consent of Sublessor,
but only if (in the case of (a), (b) and (c)) (i) adequate resources are
available for the payment of those Taxes or obligations and (ii) such
proceedings, or the continued existence of the lien, do not involve any danger
(in the reasonable opinion of Sublessor) of the sale, forfeiture or other loss
of the Aircraft or any interest therein;
Physical Redelivery Location means Long Beach Airport or such other location as
the parties may agree;
Redelivery Date means the Expiry Date or the earlier date of termination of the
leasing of the Aircraft in accordance with the terms of this Agreement;
Rent means all amounts payable pursuant to Clause 8.3;
Rent Date means the first day of each Rent Period;
Rent Period means each period ascertained in accordance with Clause 8.1;
Replacement Engine means an engine complying with Clause 17.6;
Reserves means the Airframe Maintenance Reserve, the Engine Maintenance
Reserves, the LLP Maintenance Reserve, the Landing Gear Maintenance Reserve and
the APU Maintenance Reserve as specified in Clause 10;
Return Conditions means the conditions specified in Schedule 6;
Scheduled Delivery Date means December 14, 1998, or such other date as the
parties may mutually agree and Sublessor may be able to deliver the Aircraft to
Sublessee;
Security Deposit means the amount payable pursuant to Clause 9.1 as it may be
adjusted from time to time (upwards or downwards) pursuant to Clause 9;
Security Interest means any mortgage, charge, pledge, lien, encumbrance,
assignment, hypothecation or any other agreement or arrangement conferring
security;
State of Incorporation means Colorado, United States of America;
State of Registration means in relation to the Aircraft, the United States of
America or any other state or territory in which the Aircraft is, in accordance
with the provisions hereof, registered from time to time;
Sublease Supplement means the Sublease Supplement, substantially in the form of
Schedule 4 hereto, entered into between Sublessor and Sublessee;
Sublessor's Lender means KBC Finance Ireland and the Banks (as defined in the
Facility Agreement) or any person or persons notified by Sublessor to Sublessee
under Clause 26 as providing financing to Owner Trustee in respect of the
acquisition, ownership or leasing of the Aircraft from time to time (including
any successors in title or assignees of any such persons);
Sublessor Lien means:
(a) any Security Interest from time to time created by or through
Sublessor in connection with the financing of the Aircraft;
(b) any other Security Interest in respect of the Aircraft that
results from acts of or claims against Sublessor not related to
the transactions contemplated by or permitted under this
Agreement;
(c) any Security Interest in respect of the Aircraft for Sublessor
Taxes;
(d) any Security Interest in respect of the Aircraft existing prior to
Delivery; or
(e) any Security Interest arising as a result of any act or omission
of Sublessor that constitutes a breach of this Agreement;
(f) any Security Interest that results from any indebtedness,
liability or other obligation arising by, through or under
Sublessor or any of the Indemnitees and that is not indemnified
against by Sublessee under this Agreement;
Sublessee's Maintenance Program means the maintenance program adopted by the
Sublessee for its 737-300 aircraft that shall at least meet the requirements of
the Aviation Authority in the State of Registration and of the MPD;
Sublessor Taxes means Taxes:
(a) imposed as a result of activities of Sublessor in the jurisdiction
imposing the liability unrelated to this Agreement or the
operation of the Aircraft by Sublessee;
(b) imposed on the net income, profits or gains of Sublessor; or
(c) imposed with respect to (i) any event occurring prior to the
Delivery Date or after the Expiry Date or (ii) any period
commencing and ending prior to Delivery Date or any period
commencing after the Expiry Date;
Supplemental Rent means any and all amounts, liabilities and obligations (other
than Basic Rent) which Sublessee assumes, agrees or is otherwise obligated to
pay Sublessor hereunder including Reserves, Total Loss Proceeds, payment of
Indemnity, interest or Default Interest;
Taxes means all present and future taxes, imports, levies, duties or charges,
deductions, withholdings of any nature (including without limiting the foregoing
any value added, franchise, transfer, sales, gross receipts, business, excise,
personal property, stamp, documentary, registration or other tax of whatsoever
nature) together with any assessments, fines, additions to tax or interest
thereon included and Tax and Taxation shall be construed accordingly;
Technical Redelivery Location means Sublessee's facilities in Denver Colorado or
such other location as the parties may agree;
Total Loss means with respect to the Aircraft (including for the purposes of
this definition the Airframe):
(a) the actual, constructive, compromised, arranged or agreed total
loss of the Aircraft; or
(b) the Aircraft being destroyed, damaged beyond economic repair or
permanently rendered unfit for normal use for any reason
whatsoever; or
(c) the requisition of title, confiscation, sequestration restraint,
detention, forfeiture or any compulsory acquisition or seizure or
requisition for hire (other than a requisition for hire for a
temporary period not exceeding One Hundred Twenty (120) days or by
the U.S. Government or any agency thereof) by or under the order
of any government (whether civil, military or de facto) or public
or local authorities or courts ; or
(d) the hi-jacking, theft or disappearance of the Aircraft or any
other occurrence resulting in loss of possession by Sublessee
and/or operation thereof for a period of sixty (60) consecutive
days or longer;
(e) any sale of the Aircraft in connection with a Sublessee bankruptcy
whether by an administrator, trustee or court;
(f) any other occurrence not permitted under this Agreement that
deprives Sublessee of use and possession for a period of sixty
(60) consecutive days or longer;
For the avoidance of doubt, a Total Loss of the Aircraft will be deemed to have
occurred when a Total Loss of the Airframe occurs even if there has not been a
Total Loss of an Engine or Engines;
Total Loss Date means:
(a) in the case of an actual total loss or destruction, damage beyond
repair, or being rendered permanently unfit, the date on which
such loss, destruction, damage or rendition occurs (or, if the
date of loss or destruction is not known, the date on which the
Aircraft or the relevant part thereof was last heard of);
(b) in the case of a constructive, compromised, arranged or agreed
total loss, whichever shall be the earlier of (i) the date being
sixty (60) days after the date on which notice claiming such total
loss is issued to the insurers or brokers, and (ii) the date on
which such loss is agreed or compromised by the insurers;
(c) in the case of requisition for title, sequestration, confiscation,
restraint, detention, forfeiture, compulsory acquisition or
seizure, the date on which the same takes effect;
(d) in the case of requisition for hire by a person other than the
U.S. Government or an agency thereof, the expiration of a period
of One Hundred Twenty (120) days from the date on which such
requisition commenced (or, if earlier, the date on which the
insurers make payment on the basis of a total loss);
(e) in the case of paragraph (d) in the definition of Total Loss, the
final day of the said period of sixty (60) consecutive days;
(f) in the case of paragraph (e) in the definition of Total Loss, the
date on which the Aircraft is sold; and
(g) in case of paragraph (f) above the definition of Total Loss, the
final day of the said period of sixty (60) consecutive days;
Total Loss Proceeds means the proceeds of any insurance, or any compensation or
similar payment, arising in respect of a Total Loss;
Transaction Documents means
(a) this Agreement;
(b) the Assignment of Insurances;
(c) the acknowledgement by Sublessee of the security assignment and/
or the pledge of, inter alia, this Agreement in favor of the
Sublessor's Lender and any documents duly executed pursuant to any
of the foregoing by Sublessee or Sublessor;
(d) the Sublease Supplement;
(e) the Acceptance Certificate.
"US Air Carrier" means an air carrier (a) operating under (i) a certificate of
public convenience and necessity issued under 49 U.S.C 41102(a) and of the type
referred to in U.S.C section 1110, which is in full force and effect and (ii) an
air carrier operators certificate issued pursuant to chapter 447 of the FAA for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of
cargo which is in full force and effect; and (b) qualifying as a debtor subject
to 11 U.S.C section 1110.
2.2 Construction
2.2.1 References in this Agreement to:
(i) Clauses or Schedules are, unless otherwise specified,
references to Clauses of, and Schedules to, this
Agreement;
(ii) any statutory or other legislative provision shall be
construed as including any statutory or legislative
modification or re-enactment thereof, or any provision
enacted in substitution therefor;
(iii) the Aircraft includes any part of the Aircraft, and,
where the context so admits, any of the Aircraft
Documents, and references to any part of the Aircraft
include any part of any Engine;
(iv) the word person or persons or to words importing
persons include individuals, partnerships, limited
liability companies, corporations, government agencies,
committees, departments, authorities and other bodies,
corporate or unincorporated, whether having distinct
legal personality or not;
(v) Sublessor or Sublessee include any assignee or
successor in title to the Sublessor or the Sublessee
respectively (subject to the provisions of Clause 26);
(vi) any agreement or instrument shall include such
agreement or instrument as it may from time to time be
amended, supplemented or substituted;
(vii) an agreement shall also include a concession, contract,
deed, franchise, license, treaty or undertaking (in
each case, whether oral or written);
(viii) the assets of any person shall be construed as a
reference to the whole or any part of its business,
undertaking, property, assets and revenues (including
any right to receive revenues);
(ix) law includes common or customary law and any
constitution, decree, judgement, legislation, order,
ordinance, regulation, statute, treaty or other
legislative measure in any jurisdiction or any present
or future directive, regulation, request or requirement
in each case, whether or not having the force of law
but, if not having the force of law, the compliance
with which is in accordance with the general practice
of persons to whom the directive, regulation, request
or requirement is addressed;
(x) month are references to a period starting on one day in
a calendar month and ending on the day preceding the
numerically corresponding day in the next calendar
month (and references to months shall be construed
accordingly) save that, where any such period would
otherwise end on a non-Business Day, it shall end on
the next preceding Business Day.
(xi) any statute or other legislative provision or
regulation shall be read to include any statutory or
legislative or administrative modification or
re-enactment thereof, or any substitution therefor;
(xii) the words "including" or "include" are used herein
without limitation to mean by way of example;
(xiii) the words "Agreement", "hereof", "herein" and
"hereinafter" refer to this entire Agreement; and
(xiv) the word "or" is used inclusively to mean "and/or".
2.2.2 Headings are for ease of reference only.
2.2.3 Where the context so admits, words importing the singular number
only shall include the plural and vice versa, and words importing
neuter gender shall include the masculine or feminine gender.
3. REPRESENTATIONS AND WARRANTIES
3.1 Sublessee's Representations and Warranties
Sublessee represents and warrants to Sublessor as of execution of this Agreement
and each other Transaction Document and as of the Delivery Date (unless, in each
case such representation and warranty is expressly applicable on and as of
another date or dates):
(a) Corporate Status: Sublessee is a corporation
duly incorporated, validly existing and in
good standing under the laws of the State of
Incorporation and has the corporate power and
authority to carry on its business as
presently conducted and to perform its
obligations hereunder.
(b) Government Approvals. No authorization,
approval, consent, license or order of, or
registration with, or the giving of notice to
the Aviation Authority or any other Government
Entity is required for the valid
authorization, execution, delivery and
performance by Sublessee of the Transaction
Documents or to make the Transaction Documents
admissible in evidence in the State of
Incorporation except as will have been duly
effected as of the Delivery Date.
(c) Binding. Sublessee's Board of Directors has
authorized Sublessee to enter into the
Transaction Documents and perform its
obligations under the Transaction Documents.
This Agreement and the other Transaction
Documents have been duly executed and
delivered by Sublessee and represent the
valid, enforceable and binding obligations of
Sublessee except as enforceability may be
limited by bankruptcy, insolvency,
reorganization or other laws of general
application affecting the enforcement of
creditors' rights. When executed by Sublessee
at Delivery, the same will apply to the
Acceptance Certificate.
(d) No Breach. The execution and delivery of the
Transaction Documents, the consummation by
Sublessee of the transactions contemplated
herein and by the other Transaction Documents
and compliance by Sublessee with the terms and
provisions hereof do not and will not
contravene any law applicable to Sublessee, or
result in any breach of or constitute any
default under or result in the creation of an
Security Interest upon any property of
Sublessee, pursuant to any indenture,
mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or
other agreement or instrument to which
Sublessee is a party or by which Sublessee or
its properties or assets may be bound or
affected. When executed by Sublessee at
Delivery, the same will apply to the
Acceptance Certificate.
(e) Filings. Except for the filing or recording of
this Agreement with the FAA and the filing of
a UCC-1 at the location of Sublessee's
executive offices, no other filing or
recording of any instrument or document
(including the filing of any financial
statement) is advisable under the laws of the
State of Colorado to evidence the interests of
Owner Trustee, Sublessor's Lender and
Sublessor in the Aircraft or any Transaction
Document.
(f) Licenses. Sublessee holds, all licenses,
certificates and permits (including a US
airworthiness certificate, registration
certificate and radio licence) from all
applicable Government Entities for the conduct
of its business as a certificated air carrier
and performance of its obligations under the
Transaction Documents, including but not
limited to a current certificate of public
convenience and necessity and a current
operating certificate for the operation of
Boeing 737-300 aircraft.
(g) No Suits. There are no suits, arbitrations or
other proceedings pending or threatened
against Sublessee before any court or
administrative agency against or affecting
Sublessee that, if adversely determined, would
have a material adverse effect on the
financial condition or business of Sublessee
or its ability to perform its obligations
under this Agreement or any other Transaction
Document.
(h) General Obligations. The obligations of
Sublessee under this Agreement are direct,
general and unconditional obligations of
Sublessee and rank or will rank at least pari
passu with all other present and future
unsecured and unsubordinated obligations
(including contingent obligations) of
Sublessee, with the exception of such
obligations as are mandatorily preferred by
law.
(i) Tax Returns. All necessary returns have been
delivered by Sublessee to all relevant
taxation authorities in the jurisdiction of
its incorporation and Sublessee is not in
default in the payment of any taxes due and
payable.
(j) No Material Adverse Effect. Sublessee is not
in default under any agreement to which it is
a party or by which it may be bound that would
have a material adverse effect on its
business, assets or condition and no material
litigation or administrative proceedings
before any Government Entity is presently
pending or to the knowledge of Sublessee
threatened against it or its assets that would
have a material adverse effect on the
business, assets or condition (financial or
otherwise) of Sublessee.
(k) No Default under this Sublease. At the time of
execution of this Agreement , no Default has
occurred and is continuing and the balance
sheet and other financial statements for
Sublessee for the year ended March 31, 1998
were prepared in accordance with accounting
principles generally accepted and consistently
applied in the State of Incorporation.
(l) No Winding Up. No meeting has been convened or
other action taken for winding up or
dissolution, or for the appointment of any
receiver or similar officer, in relation to
Sublessee or any of its assets.
(m) Continuation of Business. Sublessee will
continue to operate substantially the same
business as it is presently engaged in, will
preserve its corporate existence, conduct its
business in an orderly and efficient manner,
satisfy its debts and obligations as they fall
due and keep and maintain all of its assets
and properties in good working order and
condition.
(n) No immunity: in any proceedings taken in the
State of Incorporation in relation to the
Transaction Documents it would not be entitled
to claim for itself or any of its assets any
immunity from suit, execution, attachment or
other legal process.
(o) Information: all information furnished by or
on behalf of the Sublessee in connection with
all transactions contemplated by the
Transaction Documents is complete, true and
correct in all material respects and all
relevant facts concerning the business and
affairs of the Sublessee have been disclosed
to the Sublessor.
(p) Status: Sublessee is a US Air Carrier and a
"citizen of the United States as defined in
49 U.S.C Section 40102. Sublessee shall
operate the Aircraft under Part 121 of the
FAR and shall at all times remain a duly
certified US Air Carrier;
(q) Principal Place of Business: Sublessee's
principal place of business and chief
executive office as such terms are used in
Article 9 of the Uniform Commercial Code are
located at 12015 E. 46th Avenue, Denver,
Colorado, 80239;
(r) Flight Records: Sublessee's flight records are
located at 12015 E. 46th Avenue, Denver,
Colorado, 80239;
3.2 Sublessor's Representations and Warranties
Sublessor represents and warrants to Sublessee as of the Delivery Date that:
(a) Title to Aircraft. Sublessor warrants that
title to the Aircraft will be vested in Owner
Trustee and the Aircraft shall be free and
clear of any and all Security Interests except
for the Security Interests of Owner Trustee
and Sublessor under the Head Lease Agreement
and of Sublessor's Lender.
(b) Organizational Status. Sublessor is a company
created and validly existing under the laws of
Sweden and has the organizational power and
authority to carry on its business as
presently conducted and to perform its
obligations under this Agreement and each
other Transaction Document to which it is
party.
(c) Trust Agreement. The Trust Agreement dated as
of even date herewith, 1998, by and between
Owner Trustee and Sublessor (the "Trust
Agreement"), has been duly authorized, validly
executed and delivered on the part of
Sublessor, is legally binding upon the
Sublessor, and creates a legally enforceable
trust (as hereinafter referred to as the
"Trust"). Owner Trustee, in its capacity as
Trustee of the Trust, has legal power and
authority to take legal title to the Aircraft
and has legal authority and is qualified as
the holder of legal title to the Aircraft to
register the Aircraft in accordance with the
terms of the Federal Aviation Act.
(d) Government Approvals. No authorization,
approval, consent, license or order of, or
registration with, or the giving of notice to
any Government Entity is required for the
valid authorization, execution, delivery and
performance by Sublessor of this Agreement,
except as will have been duly effected as of
the Delivery Date.
(e) Binding. This Agreement and the other
Transaction Documents to which it is a party
have been duly executed and delivered by
Sublessor and represent the valid, enforceable
and binding obligations of Sublessor except as
enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of
general application affecting the enforcement
of creditors' rights.
(f) No Breach. The execution and delivery of the
Transaction Documents, the consummation by
Sublessor of the transactions contemplated
herein and compliance by Sublessor with the
terms and provisions hereof do not and will
not contravene any law applicable to
Sublessor, or result in any breach of or
constitute any default under or result in the
creation of any Security Interest upon any
property of Sublessor, pursuant to any
indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan
or credit agreement, corporate charter, by-law
or other agreement or instrument to which
Sublessor is a party or by which Sublessor or
its properties or assets may be bound or
affected.
Sublessor has no permanent establishment of business in the United States as
defined by or interpreted pursuant to the Convention between the Government of
New Zealand and the Government of the United States of America for Avoidance of
Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on
Income.
3.3 Survival of Representations and Warranties
All of the foregoing representations and warranties shall survive the execution
and delivery of this Sublease and the Delivery of the Aircraft.
4. CONDITIONS PRECEDENT
4.1 Sublessor's Conditions Precedent
Sublessor's obligation to deliver and Sublease the Aircraft to Sublessee under
this Agreement is subject to satisfaction of each of the following conditions:
4.1.1 receipt by Sublessor from Sublessee on or prior to the Delivery
Date of the following, each in form and substance reasonably
satisfactory to Sublessor:
(i) Constitutional Documents. Copies of the Sublessees
articles of incorporation and Bylaws, certified as
true, complete and up-to-date by an officer of
Sublessee.
(ii) Resolutions. A copy, duly certified as a true copy by
an officer of Sublessee of a board resolution of
Sublessee approving the execution, delivery and
performance of the Transaction Documents and naming the
person or persons authorized to sign the Transaction
Documents on behalf of Sublessee and authorized to sign
on behalf of Sublessee any documents to be delivered by
Sublessee pursuant hereto or contemporaneously
herewith;
(iii) Specimen signatures. A certificate of an officer of
Sublessee setting out the names and signatures of the
persons authorized to sign on behalf of Sublessee the
Transaction Documents and any documents to be delivered
by Sublessee pursuant hereto contemporaneously
herewith;
(iv) Consents. Evidence that all governmental or other
consents, licenses, approvals and authorizations
required for the execution, delivery and performance by
Sublessee of the Transaction Documents have been
obtained or made and are in full force and effect
including, without limitation, a FAA certificate of
airworthiness, FAA certificate of registration in the
State of Registration and a radio licence;
(v) Accounts. The balance sheet and other financial
statements of Sublessee for the year ended March 31
1998;
(vi) Licences. Copies of Sublessee's Certificate of Public
Convenience and Necessity and operating certificate
covering its operation of 737-300 aircraft issued by
the US Department of Transportation and FAA,
respectively;
(vii) Transaction Documents. Originals of the Transaction
Documents (duly executed by all parties other than
Sublessor);
(viii) Insurances. A certificate from the Insurer's confirming
that the Insurances are in place together with an
insurance broker's letter of undertaking (in a form
acceptable to Owner Trustee, Sublessor's Lender and
Sublessor) addressed to Owner Trustee, Sublessor's
Lender and Sublessor;
(ix) Opinions. Legal opinions from:
(a) Counsel to Sublessee addressed to Owner
Trustee, Sublessor's Lender and Sublessor
confirming the representations (except for
3.1(d)) made by Sublessee hereunder in a form
and substance acceptable to Owner Trustee,
Sublessor's Lender and Sublessor;
(b) Special FAA counsel to Sublessee addressed to
Owner Trustee, Sublessor's Lender and
Sublessor confirming that this Sublease and
other appropriate documents including
Sublessor's Lender's mortgage have been filed
with the FAA;
(x) Security Deposit and Rent. Receipt by Sublessor of the
Security Deposit to the extent set forth in Clause 9,
the first monthly instalment of Rent and the Letter of
Credit;
(xi) Others. Any other documents, approvals, consents,
certificates that Sublessor may reasonably require;
(a) the representations and warranties of
Sublessee under Clause 3.1 shall be correct
and would be correct if repeated on Delivery;
and
(b) no Default shall have occurred and be
continuing.
4.2 Waiver
The Sublessor's Conditions Precedent are for the sole benefit of Sublessor and
may be waived or deferred by Sublessor in whole or in part and with or without
conditions. If any of the Conditions Precedent are not satisfied on the Delivery
Date and Sublessor (in its absolute discretion) nonetheless agrees to deliver
the Aircraft to Sublessee, Sublessee shall ensure that such Conditions Precedent
are fulfilled within 15 days after the Delivery Date, and Sublessor may treat
the failure of Sublessee to do so as an Event of Default.
4.3 Sublessee's Conditions Precedent
Sublessee's obligation to accept and Sublease the Aircraft from Sublessor under
this Agreement is subject to satisfaction of each of the following conditions:
4.3.1 The Aircraft is substantially and materially in the condition set
forth in Schedule 2.
4.3.2 The receipt by Sublessee from Sublessor on or prior to the
Delivery Date of the following, each in form and substance
reasonably satisfactory to Sublessee:
(i) Evidence of Authority. Certified copies of evidence of
appropriate action approving the execution, delivery
and performance of the Transaction Documents by
Sublessor and of the person or persons authorized to
sign the Transaction Documents on behalf of Sublessor
or any other documents to be delivered to Sublessee by
Sublessor;
(ii) Specimen signatures. A certificate of an officer of
Sublessor setting out the names and signatures of the
persons authorized to sign on behalf of Sublessor the
Transaction Documents and any documents to be delivered
by Sublessor pursuant hereto contemporaneously
herewith;
(iii) Transaction Documents. Originals of the following
documents (duly executed by Sublessor):
(a) this Agreement; and
(b) The Sublease Supplement.
(iv) the representations and warranties of Sublessor under
Clause 3.2 shall be correct and would be correct if
repeated on Delivery; and
(v) no Default by Sublessor shall have occurred and be
continuing.
4.4 Waiver
The Sublessee's Conditions precedent are for the sole benefit of Sublessee and
may be waived or deferred by Sublessee in whole or in part and with or without
conditions.
5. DELIVERY CONDITION AND INSPECTION OF AIRCRAFT
5.1 Sublessee Selection of Aircraft
IN ADDITION TO THE DISCLAIMER AT CLAUSE 19, SUBLESSEE REPRESENTS AND WARRANTS TO
SUBLESSOR THAT SUBLESSEE HAS USED ITS OWN JUDGMENT IN SELECTING THE AIRCRAFT AND
HAS DONE SO BASED ON ITS SIZE, DESIGN AND TYPE. SUBLESSEE ACKNOWLEDGES THAT
SUBLESSOR IS NOT A MANUFACTURER OF THE AIRCRAFT NOR A DEALER IN THE AIRCRAFT.
5.2 Conditions at Delivery
In addition to the disclaimer at Clause 19, Sublessor has advised Sublessee that
at Delivery the Aircraft will be substantially and materially in the condition
set forth in Schedule 2 provided that this confirmation expires as at Delivery.
5.3 Sublessee Inspection of Aircraft at Delivery
Sublessee will have the right to perform such ground inspection of the Aircraft
as it deems appropriate. After completion of the ground inspection, if the
Aircraft is acceptable to Sublessee ("Preliminary Acceptance") (subject to the
results of the acceptance flight), Sublessee will technically accept the
Aircraft (subject to the results of the acceptance flight) and will provide
insurance coverage for the Aircraft, including the acceptance flight. Sublessee
may, subject to having technically accepted the Aircraft and having provided for
insurance coverage reasonably acceptable to Sublessor, have up to two observers
on board the Aircraft during Air New Zealand Limited's acceptance flight from
Manufacturer with respect to the Aircraft. Sublessee acknowledges that, as
between it and Sublessor, in accepting the Aircraft it is relying on its own
inspection and knowledge of the Aircraft in determining whether it meets the
requirements of this Agreement.
5.4 Delivery of Aircraft to Sublessee
Subject to Sublessee having performed all of the conditions precedent to
Delivery or waiver by the Sublessor set forth herein, Sublessor will deliver the
Aircraft to Sublessee at the Delivery Location. Provided that the Aircraft is in
the condition required by Clause 5.2 hereof, upon the tender of the Aircraft by
Sublessor to Sublessee, Sublessee will accept the Aircraft and the date of
tender by Sublessor to Sublessee will be deemed to be the Delivery Date for all
purposes under this Agreement, including, but not limited to, the commencement
of Sublessee's obligation to pay Rent hereunder. Sublessee shall execute and
deliver the Acceptance Certificate to Sublessor
5.5 Sublessee Acceptance of Aircraft
So long as the Aircraft is in the condition, specified in Clause 5.2 hereof,
Sublessee will accept the Aircraft when tendered for delivery by Sublessor. If
Sublessee fails to (i) comply with the conditions contained in Clauses 4.1 so as
to allow Delivery to take place upon tender or (ii) take delivery of the
Aircraft when properly tendered for Delivery by Sublessor in the condition
required hereunder, Sublessee will indemnify Sublessor for all reasonable costs
and expenses incurred by Sublessor as a result thereof including (but without
limitation) any payments that Sublessor or affiliates or related companies to
Sublessor become obliged to make to any third party to put the Aircraft in the
condition set forth in Schedule 2.
5.6 Post Delivery Obligations
Promptly following Delivery the Sublessor and Sublessee shall remove any
components or parts on the Aircraft at Delivery which Sublessor and Sublessee
agree to be surplus. In addition, Sublessee acknowledges that Sublessor intends
to replace certain parts and components on the Aircraft. If requested by
Sublessor Sublessee will on reasonable notice and at reasonable times make the
Aircraft available to Sublessor, at the expense of Sublessor, to enable
Sublessor to make such replacements.
6. LEASE TERM
6.1 Initial Lease Term
Sublessor shall Sublease the Aircraft to Sublessee and Sublessee shall take the
Aircraft on Sublease in accordance with this Agreement for the duration of the
Initial Lease Term and, subject to Clause 6.2, the Extension Lease Term.
6.2 Lease Extension Date
6.2.1 Sublessor shall have the option to extend the Initial Lease Term
under this Agreement for the period of the Extension Lease Term.
6.2.2 In order to exercise the option set out in Clause 6.2.1, Sublessor
must give written notice to Sublessee not less than six (6) months
prior to the Initial Lease Expiry Date.
6.3 Expiry Date
The Expiry Date shall be the Initial Lease Expiry Date or where Sublessor has
served notice under Clause 6.2.2, the Extension Lease Expiry Date subject to the
following provisions:
(a) If Sublessor, acting in accordance with Clause
4.2, notifies Sublessee that it is terminating
this Agreement, Sublessee shall immediately
redeliver the Aircraft in accordance with
Clause 24 and the Expiry Date shall be the
date upon which the Aircraft is redelivered
and Sublessee has complied with its
obligations hereunder;
(b) If Sublessor, acting in accordance with Clause
25.2, terminates the leasing of the Aircraft
to Sublessee under this Agreement, Sublessee
shall immediately redeliver the Aircraft in
accordance with Clause 24 and the Expiry Date
shall be the date upon which the Aircraft is
redelivered and Sublessee has complied with
all its obligations hereunder;
(c) If the Aircraft or Airframe suffers a Total
Loss, the Expiry Date shall be the date on
which Sublessee pays to Sublessor the Agreed
Value and all other sums due from Sublessee to
Sublessor hereunder.
(d) If Clause 24.4 becomes applicable, the Expiry
Date shall be the date when any non-compliance
referred to in Clause 24.4 has been fully
rectified and Sublessor shall have accepted
redelivery of the Aircraft and Sublessee shall
have complied with all its obligations
hereunder;
(e) Under any circumstances, the Expiry Date shall
be the date upon which the Aircraft is
redelivered in accordance with Clause 24 and
the Return Acceptance Receipt executed and
delivered in accordance with that clause; and
For the avoidance of doubt in respect of Clauses 6.3(a), (b), (d) and (e) the
obligations of Lessee in respect of payment of Rent and all other obligations
shall continue to be payable in respect of those days prior to the redelivery to
Sublessor of the Aircraft in the Return Conditions, and in respect of Clause
6.3(c) such obligations shall continue until payment of the Total Loss Proceeds.
The obligations of Sublessee set forth in Clauses 13.17, 20, 21, 25 (b), (f) or
(g) and any other obligations of Sublessee that were due to have been performed
but have not been fully performed prior to the termination of the Agreement
pursuant to this Clause 6.3, will survive the Expiry Date.
6.4 Risk
6.4.1 Throughout the Lease Term and until redelivery of the Aircraft in
accordance with Clause 24, Sublessee shall bear all risks of loss,
theft, damage, confiscation and destruction of or to the Aircraft
and every part thereof.
6.4.2 If the Aircraft is lost, stolen, confiscated, damaged, destroyed
or otherwise rendered unfit and unavailable for use, Sublessor
shall not be liable to repair the same or supply any equipment in
substitution therefor unless caused by the intentional act or
gross negligence of Sublessor, its employees or agents.
7. DELIVERY
7.1 Delivery
Sublessor will deliver the Aircraft to Sublessee at the Delivery Location on or
about the Scheduled Delivery Date and Sublessee will accept Delivery on that
Date. Sublessor will notify Sublessee from time to time and in a timely manner
of any changes to the Scheduled Delivery Date. Sublessee and Sublessor expressly
acknowledge that Delivery of the Aircraft to Sublessee is subject to and
conditioned upon delivery of the Aircraft by Manufacturer. Sublessor will not be
liable for any loss or expense, or any loss of profit, arising from any delay or
failure in Delivery to Sublessee unless such delay or failure arises as a direct
consequence of the gross negligence or wilful default of Sublessor, and in no
event will Sublessor be liable for any delay or failure that is caused by any
failure, breach or delay on the part of the Manufacturer. If a delay, not caused
by Sublessors or Sublessees breach of this Agreement, causes Delivery to be
delayed beyond thirty (30) days after the Scheduled Delivery Date this Agreement
shall, at the option of either party hereto, terminate and in such event,
neither party will have any further obligation or liability under this
Agreement, except that Sublessor will repay to Sublessee the amount of Security
Deposit paid under this Agreement. So long as the Aircraft is in the condition
specified in clause 5.2 hereof, Sublessee acknowledges its obligations to take
Delivery on the Scheduled Delivery Date notwithstanding that pre-Delivery
modifications requested by Sublessee are not complete on the Scheduled Delivery
Date.
8. RENT
8.1 Rent Date
The first Rent payment date shall be one (1) day prior to the Delivery Date, and
each subsequent Rent payment date shall be on the monthly anniversary of the
Delivery Date.
8.2 Time of Payment
Sublessee shall pay Rent to Sublessor or to its order in advance on each Rent
Date. Sublessee shall initiate payment adequately in advance of each Rent Date
to ensure that Sublessor receives credit for the payment on such Rent Date. If a
Rent Date is a day which is not a Business Day, the Rent payable in respect of
that Rent Period shall be paid on the Business Day immediately preceding the
Rent Date. Each payment will be in accordance with clause 11.1 and accompanied
by the annotation "[ ] Rent for month of [ ]".
8.3 Amount of Basic Rent
The Basic Rent payable on each Rent Date shall be the amount determined in
accordance with Schedule 8.
8.4 Reserves
Sublessee will pay to Sublessor as Supplemental Rent, based on Sublessee's use
of the Aircraft during the Lease Term, Reserves in accordance with Clause 10.
9. SECURITY DEPOSIT
9.1 Security Deposit
Sublessee has paid to Sublessor a cash Security Deposit in the amount of
$100,000 which amount shall be credited to the Basic Rent payable on the first
Rent payment date.
9.2 Letter of Credit
The Sublessee shall provide the Sublessor with an additional security deposit in
the form of an irrevocable, assignable standby letter of credit in favor of the
Sublessor in the amount set forth in Schedule 8 in form and substance reasonably
acceptable to Sublessor issued by a major commercial bank reasonably acceptable
to Sublessor (the "Letter of Credit") on or prior to the Delivery Date. The
Letter of Credit will serve as security for the performance by Sublessee of its
obligations under this Agreement or the Other Agreements.
9.3 Sublessor's Rights
9.3.1 If an Event of Default shall have occurred and be continuing, in
addition to all rights and remedies accorded to Sublessor
elsewhere in this Agreement or under applicable law in respect of
the or Letter of Credit Sublessor may immediately, or at any time
thereafter, without prior notice to Sublessee, apply all or part
of the Letter of Credit in or towards the payment or discharge of
any matured obligation owed by Sublessee under the Transaction
Documents or the Other Agreements, in such order as Sublessor sees
fit, and/or exercise any of the rights of set-off described in
Clause 11.6 against all or part of the Security Deposit or Letter
of Credit.
9.3.2 If Sublessor exercises the rights described in Clause 9.3.1,
Sublessee shall, following a demand in writing from Sublessor,
immediately restore the Letter of Credit to the level at which it
stood immediately prior to such exercise.
9.3.3 Sublessee acknowledges that Sublessor may commingle all or any
part of the Reserves with its general funds and that no interest
shall accrue in favor of Sublessee in respect of the Letter of
Credit or the Reserves (except as provided herein).
9.3.4 Sublessor's obligations in respect of return of the Maintenance
Reserves and Letter of Credit shall be those of debtor and not
those of a trustee or other fiduciary.
10. Maintenance reserves
10.1 Amount
Sublessee shall during the Lease Term pay Reserves to Sublessor in respect of
(i) the Airframe, in the amount set forth in Schedule 8 for each Flight Hour
operated by the Aircraft during the Lease Term ("Airframe Maintenance Reserve")
and (ii) each of the Engines, in the amount set forth in Schedule 8 per Engine
for each Flight Hour operated by such Engine ("Engine Maintenance Reserves") and
(iii) the Engine Life Limited Parts ("LLP's"), in the amount set forth in
Schedule 8 for each Flight Hour operated by each of the Engines ("LLP
Maintenance Reserve") and (iv) the Landing Gears, in the amount set forth in
Schedule 8 for each Cycle operated by the Aircraft ("Landing Gear Maintenance
Reserve") and (v) the APU, in the amount set forth in Schedule 8 for each Flight
Hour ("APU Maintenance Reserve").
10.2 Payments
Sublessee shall pay the Reserves in respect of each calendar month during which
Reserves accrue on the tenth (10) day immediately following the end of that
calendar month on the basis of the information contained in the applicable
Monthly Report. Each payment will be made in accordance with clause 11 and
accompanied by the annotation "[ ] Maintenance Reserve Payment for month of [
]".
10.3 Adjustment
The amount payable by Sublessee to the Reserves shall be subject to escalation
on each anniversary of this Agreement in respect of the increase, if any, in the
costs for which the Reserves are maintained. The parties shall agree upon such
reasonable escalation to apply for each payment to the Reserves that becomes
payable thereafter. Such escalation shall not exceed the increase in the Boeing
Index and the other relevant manufacturer's index.
10.4 Release of Maintenance Reserves
10.4.1 Sublessor will reimburse Sublessee from the actual Airframe
Maintenance Reserves paid by Sublessee, provided that no Default
has occurred and is continuing, for the actual cost of the
structural inspection portion of completed scheduled checks as
described in the MPD and the rectification of any structural
deficiencies resulting from such inspection whenever such
inspections and rectification work is performed (provided that
such inspection and rectification extends the available life of
the Aircraft). Work performed for all other causes is excluded
from such reimbursement, including the charges set forth in
Section 10.4.5 below.
10.4.2 Sublessor will reimburse Sublessee provided that no Default has
occurred and is continuing from the Engine Maintenance Reserves
and LLP Maintenance Reserves for the actual cost of completed
Engine Performance Restoration Visits and LLP Replacements to the
extent the work performed during such Engine Performance
Restoration Visit and LLP Replacements consisted of the
replacement of life/time limited components resulting in
performance restoration, with work performed for all other causes
excluded, including those causes set forth in Clause 10.4.5 below.
Reimbursement will be made up to the amount in the Engine
Maintenance Reserve and LLP Maintenance Reserve applicable to such
Engine.
10.4.3 Sublessor will reimburse Sublessee provided that no Default has
occurred and is continuing from the Landing Gear Maintenance
Reserves for the actual cost associated with the completed Landing
Gear overhauls, with work performed for all other causes excluded,
including those causes set forth in Clause 10.4.5. Reimbursement
will be made up to the amount in the Landing Gear Maintenance
Reserve at the time for the Landing Gear Overhaul.
10.4.4 Sublessor will reimburse Sublessee provided that no Default has
occurred and is continuing from the APU Maintenance Reserves for
the actual cost associated with the completed APU performance
restoration, with work performed for all other causes excluded,
including those causes set forth in Clause 10.4.5. Reimbursement
will be made up to the amount in the APU Maintenance Reserve at
the time for the APU performance restoration.
10.4.5 Each of the following causes shall be excluded from this Clause
10.4: accomplishment of Airworthiness Directives and FAR's,
accident, faulty maintenance or installation, incident, improper
operations, abuse, neglect, misuse, optional parts replacement
(where such replacement does not increase operational life) or
work covered by manufacturer's service bulletins or which is
reimbursed by a claim under manufacturer's warranties or by
insurance (with deductibles being treated as reimbursable by
insurance for this exclusion).
For the avoidance of doubt, Sublessee has no right to payment of
any amount from the Reserves not paid in cash by Sublessee and,
subject to Clause 26.1, any remaining balances of the Reserves on
the Expiry Date, after application of the foregoing provisions,
shall be retained by Sublessor as its sole property unless
otherwise set out in Clause 10.7.
10.5 Costs in Excess of Reserves
Sublessee will be responsible for payment of all costs in excess of the amounts
reimbursed hereunder. If on any occasion the balance in the relevant Reserve is
insufficient to satisfy a claim for reimbursement in respect of the Airframe, an
Engine, the Landing Gears or the APU, as the case may be, the shortfall may not
be carried forward or made the subject of any further claim for reimbursement.
10.6 Reimbursement after Expiry Date
Sublessee may not submit any invoice for reimbursement from the Reserves after
the Expiry Date unless on or prior to such date Sublessee has notified Sublessor
in writing that such outstanding invoice will be submitted after the Expiry Date
and the anticipated amount of such invoice. So long as Sublessee has provided
such notice to Sublessor, Sublessee may then submit such outstanding invoice at
any time within three (3) months after the Expiry Date; provided, however, if
Sublessee contests any such invoice and provides Sublessor with notice of such
contest and periodic updates of the progress of such contest, the time for
submitting an invoice shall be extended until the resolution of such contest.
10.7 Engine LLP Maintenance Reserve
Upon redelivery of the Aircraft by Sublessee in accordance with the terms of
this Agreement and subject to Sublessee having complied with its obligations
hereunder the parties hereto shall make a financial settlement in respect of
amounts paid by Sublessee to the Engine LLP Maintenance Reserve in accordance
with the following:
(i) Sublessee shall be debited an amount equal to (a) the
actual number of Flight Hours consumed in respect of
each of the LLP's during the Lease Term divided by (b)
the approved life and flight hours of each relevant
LLPand multiplied by (c) the current cost of LLP
replacement as published by the Engine Manufacturer and
totalled for all the LLPs in each Engine; and
(ii) Sublessee shall be credited an amount equal to the
total amount remaining in the Engine LLP Maintenance
Reserve.
Any positive difference between (i) and (ii) shall be due and payable by
Sublessee to Sublessor and any negative difference shall be due and payable by
Sublessor to Sublessee.
10.8 No Anticipated Draw-down
Without prejudice to Sublessee's reimbursement rights under this clause 10,
based on the age of the Aircraft, the fact the Aircraft will not have operated
at Delivery and on the length of the Lease Term, it is not anticipated that
Sublessor will be obliged to reimburse Sublessee from any of the Reserves.
11. Payments
11.1 Account for Sublessee Payments
All payments (except in respect of Maintenance Reserves) by Sublessee to
Sublessor under this Agreement will be made for value on the due date in dollars
and in same day funds to:
KBC New York
125 W 55th Street
NY 10019, New York
Accoutn Number: 21557003
SWIFT: KREDUS33 for credit to KBC Finance Ireland
quoting Indigo Proceeds Account #03/43824/77
All payments in respect of Maintenance Reserves shall be made for value on the
due date in dollars and the same day funds to:
KBC New York
125 W 55th Street
NY 10019, New York
Account Number: 21557003
SWIFT: KREDUS33 for credit to KBC Finance Ireland
quoting reference Indigo Maintenance Account
#03/43832/81
or to such other account as Sublessor may from time to time notify to Sublessee
in writing.
11.2 Default Interest
If Sublessee fails to pay any amount payable under this Agreement on the due
date, Sublessee shall pay to Sublessor on demand from time to time interest both
before and after judgment on that amount, from the due date or, in the case of
amounts expressed to be payable on demand, from the date of receipt of such
demand to the date of payment in full by Sublessee to Sublessor, at the Default
Rate (subject to applicable law). All such interest will be compounded weekly
and calculated on the basis of the actual number of days elapsed and a 360 day
year. Interest payable pursuant to this Clause 11.2 that is unpaid at the end of
such period thereafter shall itself bear interest, to the extent legally
permissible, at the rate provided in this Clause 11.2.
11.3 Absolute Obligations
Sublessee's obligations to make payments under this Agreement are absolute and
unconditional, irrespective of any contingency or circumstance whatsoever,
including:
11.3.1 any right of set-off, counterclaim, recoupment, reimbursement,
defense or other right which Sublessor or Sublessee may have
against the other or against any other person;
11.3.2 any unavailability of the Aircraft for any reason, including, but
not limited to, requisition of the Aircraft or any prohibition or
interruption of or interference with or other restriction against
Sublessee's use, operation or possession of the Aircraft;
11.3.3 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;
11.3.4 any insolvency, bankruptcy, reorganisation, arrangement,
readjustment of debt, dissolution, liquidation or similar
proceedings by or against Sublessor or Sublessee or any other
person;
11.3.5 any invalidity, illegality, unenforceability or lack of due
authorization of, or other defect in, this Agreement; and
11.3.6 any other cause or circumstance that, but for this provision,
would or might otherwise have the effect of terminating or in any
way affecting any obligation of Sublessee under this Agreement.
11.4 Application of Payments to Sublessor
If any sum paid to Sublessor or recovered by Sublessor in respect of the
liabilities of Sublessee under this Agreement is less than the amount then due,
Sublessor may apply that sum to amounts due under this Agreement in such
proportions and order and generally in such manner as Sublessor may determine.
11.5 Currency Indemnity
If, under any applicable law, whether as a result of judgement against Sublessee
or the liquidation of Sublessee or for any other reason, any payment under or in
connection with this Agreement is made or is recovered in a currency ("other
currency") other than United States dollars, the currency ("contractual
currency") in which it is payable pursuant to this Agreement then, to the extent
that the payment (when converted into the contractual currency at the rate of
exchange on such date or, in the case of a liquidation, the latest date for the
determination of liabilities permitted by the applicable law) falls short of the
amount payable under this Agreement, Sublessee shall, as a separate and
independent obligation, fully indemnify Sublessor against the amount of the
shortfall. For the purposes of this sub-Clause "rate of exchange" means the rate
at which the Sublessor is able on the relevant date to purchase the contractual
currency in London or any other place Sublessor may reasonably choose with the
other currency.
11.6 Set-off
Sublessor may set off any matured obligation owed by Sublessee under the
Transaction Documents or any Other Agreement against any obligation, whether or
not matured, owed by Sublessor to Sublessee.
11.7 Time for Payments
If any payment due under this Agreement other than a payment of Rent would
otherwise be due on a day that is not a Business Day, it shall be due on the
next preceding Business Day.
12. Sublessor's Convenants
12.1 Quiet Enjoyment
Provided no Default has occurred and is continuing, Sublessor shall not, and no
one claiming by or through the acts or omissions of Sublessor or Owner Trustee
shall, interfere with the quiet use, possession and enjoyment of the Aircraft by
Sublessee during the Lease Term.
12.2 Sublessor Obligations Following Expiry Date
Within five (5) Business Days after:
12.2.1 redelivery of the Aircraft to Sublessor (or, if applicable, the
Owner Trustee) in accordance with and in the condition required by
this Agreement; or
12.2.2 payment received by Sublessor of the Agreed Value following a
Total Loss after the Delivery Date;
or in each case such later time as Sublessor is reasonably satisfied Sublessee
has irrevocably paid to Sublessor all amounts that may then be outstanding or
become payable under the Transaction Documents and the Other Agreements,
Sublessor shall (provided that no Default has occurred and is continuing) pay or
deliver to Sublessee, as the case may be:
(i) an amount equal to the balance of the Security Deposit,
if any, paid by Sublessee under this Agreement and then
held by Sublessor;
(ii) the amount of any Rent received in respect of any
period falling after the date of redelivery of the
Aircraft or payment of the Agreed Value, as the case
may be; provided, however, if there is a dispute
between Sublessor and Sublessee as to the amount due to
Sublessee, Sublessor shall nevertheless pay to
Sublessee such amount as in Sublessor's reasonable
judgement is not in dispute or is in excess of the
amount Sublessor claims is due; and
(iii) the Letter of Credit.
13. Sublessee's covenants
13.1 Duration
Sublessee shall perform and comply with its undertakings and covenants in this
Agreement and the other Transaction Documents at all times during the Lease
Term. All such undertakings and covenants shall, except where expressly
otherwise stated, be performed at the expense of Sublessee.
13.2 Information
Sublessee shall:
13.2.1 notify Sublessor forthwith of the occurrence of a Default or an
Event of Default and the steps it is taking to cure such Default
or Event of Default;
13.2.2 furnish to Sublessor:
(i) as soon as available, but not in any event later than
ninety (90) days after the last day of each financial
year of Sublessee, its audited consolidated balance
sheet as of such day and its audited consolidated
profit and loss statement for the year ending on such
day prepared in accordance with generally accepted
accounting principles in the State of Incorporation;
(ii) as soon as available, but not in any event later than
forty-five (45) days after the last day of each quarter
of Sublessee, its unaudited consolidated balance sheet
as of such day and its unaudited consolidated profit
and loss statement for the quarter ending on such day
prepared in accordance with generally accepted
accounting principles in the State of Incorporation;
(iii) such information as may reasonably be requested by
Sublessor to fulfil its Tax filing or other information
reporting requirements with respect to the transactions
contemplated by this Agreement;
(iv) within ten (10) days following the term of each month a
Monthly Report in the form of Schedule 9, detailed
technical reports following completion of each "C"
Check and other information reasonably requested by
Sublessor concerning the location, condition, use and
operation of the Aircraft; and
(v) such other information and documents regarding
Sublessee's business and financial condition as
Sublessor may from time to time reasonably request;
13.2.3 promptly notify Sublessor of any loss, theft, damage or
destruction to the Aircraft, any Engine or any Part if the cost of
the repair or replacement thereof may exceed the Damage
Notification Threshold, or any modification to the Aircraft if the
potential cost of repair or of such modification may exceed the
Damage Notification Threshold.
13.2.4 promptly notify Sublessor in writing of any suit, arbitration or
proceeding before any court, administrative agency or Government
Entity which, if adversely determined, would materially adversely
affect Sublessee's financial condition, affairs, operations or its
ability to perform under this Agreement.
13.2.5 promptly notify Sublessor in the event Sublessee is made aware of
or determines that any computer application (including those of
its suppliers, customers and vendors) that is material to the
business and operation of Sublessee will not be Year 2000
Compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a materially
adverse effect.
13.2.6 promptly notify Sublessor in writing of any Total Loss to the
Aircraft or any damage caused to the Aircraft that is expected to
be in excess of the Damage Notification Threshold and the amount
of the deductible under the Insurance or equivalent in any
currency.
13.2.7 promptly notify Sublessor in writing of any loss, arrest,
hijacking, confiscation, seizure, requisitioning, impounding,
taking in execution, or forfeiture of the Aircraft or any Engine
or any major part thereof.
13.2.8 promptly notify Sublessor in writing of any substantial injury or
damage to a third party causes by, or in connection with, the
Aircraft which is expected to give rise to any loss or liability
on the part of the Sublessor or to a loss or liability in excess
of the Damage Notification Threshold.
13.2.9 as soon as available provide Sublessor with a copy of any
Engineering Order in respect of the Aircraft together with any
documentary supplements to such Engineering Order.
13.2.10 promptly notify Sublessor in writing of any other event in respect
of the Aircraft which in the reasonable opinion of the Sublessee
might reasonably be expected to involve the Sublessor in any loss
or liability.
13.3 Sublessor visits
Sublessor may visit, upon reasonable notice, Sublessee's premises to discuss
Sublessee's general affairs and finances with Sublessee's principal officers.
13.4 Periodic Estoppel Certificates
Sublessee will, within ten (10) Business Days after receipt of written notice
from Sublessor (which will not occur more often than four (4) times in any
calendar year), execute, acknowledge and deliver to Sublessor a written
statement as to each of the following:
13.4.1 certifying that this Agreement is unmodified and in full force and
effect (or, if modified, stating the nature of such modification
and certifying that this Agreement, as so modified, is in full
force and effect) and the date to which the Rent and other charges
are paid in advance, if any.
13.4.2 acknowledging that there are not, to Sublessee's knowledge, any
uncured defaults on the part of Sublessor hereunder, or specifying
such defaults if there are any claimed by Sublessee.
13.4.3 acknowledging that Sublessee has no claims against Sublessor by
reason of the condition of the Aircraft as of the Delivery Date or
arising subsequent thereto to the date of such statement.
If Sublessee does not deliver such statement within such timeframe, the
statements set forth in this Clause 13.4 will be deemed correct and binding upon
Sublessee.
13.5 Airport and Navigation Charges
Sublessee will promptly pay and discharge when due all landing fees and other
similar Airport Charges imposed by the authorities of any airport from or to
which the Aircraft may operate and any charges (including without limitation,
all Air Navigation Charges) imposed by virtue of any regulations made by any
relevant authority or any other charges in respect of air navigation incurred,
in each case in respect of all aircraft of which it is the operator. Sublessee
will ensure that all such charges are paid on a regular basis and that invoices
are received (and, if not received, are specifically requested) by it from the
relevant authorities no more than three (3) months after the event to which the
charges relate.
13.6 Operation of Aircraft
Sublessee shall not maintain, use or operate the Aircraft in violation of any
law or any mandatory rule, regulation or order of any Government Entity having
jurisdiction in any country, state, province or other political subdivision in
or over which the Aircraft is flown or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued by the
Aviation Authority or any similar authority or any jurisdiction in or over which
the Aircraft is flown. If any such law, rule, regulation or order requires
alteration of the Aircraft, Sublessee shall conform or procure conformance
thereto at its own expense and maintain or procure maintenance of the Aircraft
in proper operating condition under such laws, rules, regulations and orders;
provided that Sublessee may in good faith contest, or procure the contest of,
the validity or application of any such law, rule, regulation or order in any
reasonable manner that does not adversely affect Sublessor or its interest in
the Aircraft. In particular, Sublessee will ensure that the Aircraft at all
times during the Lease Term is operated by duly qualified pilots and aircrew
employees, and is not used to transport contraband or illegal narcotics or
hazardous or perilous cargo (other than pursuant to applicable FAA and carrier
regulations). The Aircraft may be used or operated in flight crew conversion,
training for Sublessee's own employees and for experimental flights; provided,
however, prior to any such flights Sublessee shall notify Sublessor and shall
deliver to Sublessor evidence that insurance coverage is in effect for such
flights. At all times the Aircraft will be operated in passenger configuration.
13.7 Areas of Operation
Sublessee shall not operate or locate the Airframe or any Engine or Part or
suffer the Airframe or any Engine or Part to be operated or located, (i) in any
area or for carriage of any goods excluded from coverage by any insurance
required by the terms of this Agreement, (ii) in any recognized or threatened
area of hostilities unless fully covered by war risk insurance; or (iii) outside
the United States of America, Mexico or Canada.
13.8 Non-Prejudicial Action
Sublessee shall not do anything that, or omit to do anything the omission of
which, prejudices any right Sublessor may have against either the Manufacturer
or against the manufacturer or supplier of any part of the Aircraft in respect
of the Aircraft or any part thereof.
13.9 Non-Representation of Sublessor
Sublessee shall not at any time represent Sublessor Owner Trustee or Sublessor's
Lender as carrying goods or passengers in the Aircraft or as being in any way
connected or associated with any operation or carriage (whether for hire or
reward or gratuitously) being undertaken by Sublessee or as having any
operational interest in or responsibility for the Aircraft.
13.10 Inspection
Sublessor and its agents (including Sublessor's Lender) may at all reasonable
times on reasonable notice inspect, or appoint an inspector on its behalf to
inspect, the Aircraft or any part thereof, provided that if no Default or Event
of Default has occurred and is continuing Sublessee shall not be obliged
hereunder to permit, or procure permission for, any such inspection that would
result in an unreasonable disruption of the operation of the Aircraft or the
operation of the business of Sublessee as an airline. Sublessee agrees to
reimburse the out-of-pocket expenses of Sublessor for such inspector incurred in
making any such inspection when such inspection shows that the Aircraft is not
materially in the condition required by the terms of this Agreement provided
that Sublessee shall in all cases pay or reimburse Sublessor for the costs of
such inspection or survey if Sublessor is required by law or change of law to
make an inspection or survey. Sublessor shall have no duty to make any such
inspection and shall not incur any liability or obligation by reason of not
making any such inspection. Sublessee shall provide Sublessor with such
information regarding the present and anticipated location and regarding the
condition of the Aircraft as Sublessor may reasonably require. For the purposes
mentioned in this Clause 13.10 and subject to the limitations herein contained,
Sublessor and any inspector may gain access to the Aircraft, including the
Aircraft Documents. Sublessee shall forthwith effect such repairs to the
Aircraft as such inspection may reasonably show are required for the terms of
this Agreement to be complied with but if it fails to do so after receipt of
notice requiring it to do so from Sublessor, Sublessor may at the cost and
expense of Sublessee, itself arrange for such repairs to be carried out.
Sublessee shall on demand reimburse the costs and expenses incurred by Sublessor
in effecting such repairs.
13.11 Registration
Sublessee shall at its own expense:
13.11.1 provide that the Aircraft and the interests of the parties set out
below is duly registered, recorded or filed with the Aviation
Authority (to the extent that the Aviation Authority permits
registration in that manner) as follows:
(i) Owner Trustee as owner;
(ii) the first priority security interest of Sublessor's
Lender;
(iii) Sublessor's interest, by filing the Sublease
Supplement;
and maintain or provide the maintenance of such registration throughout the
Lease Term. Sublessee shall further provide that the interests of any successors
and assigns to the parties referred to in this paragraph will be filed and
recorded with the FAA and that such recordation will be maintained in the same
manner as required herein. Sublessee will not take any action or omit to take
any action that will invalidate any such registration or recordation. Sublessee
shall not change the State of Registration without Sublessor's prior written
consent.
13.11.2 provide that at all times during the Lease Term, the Aircraft
possesses a valid current FAA Certificate of Airworthiness (or if
the Aircraft is registered with an Aviation Authority other than
the FAA, the equivalent for the time being of such a certificate),
and all such other certificates, licenses, permits and
authorizations as are from time to time required for the use and
operation of the Aircraft for the public transport of passengers
or cargo from any Government Entity having jurisdiction in any
country, state, province or other political subdivision in or over
which the Aircraft is flown including without limitation any
Aviation Authority. Sublessee shall, prior to the Delivery Date,
provide Sublessor with certified true copies of its current
Certificate of Public Convenience and Necessity and its Operating
Certificate, the latter of which shall include reference to the
Aircraft.
13.12 Name Plates
On the Delivery Date or as soon thereafter as is reasonably practicable,
Sublessee shall affix and thereafter maintain, or procure the affixation and
maintenance of, in a prominent position in the cockpit of the Aircraft and on
each Engine a fireproof metal nameplate bearing a legible inscription in a form
reasonably required by Sublessor, denoting the name of (i) First Security Bank,
National Association as Owner Trustee; (ii) Indigo Pacific, AB. as Sublessor of
the Aircraft; and (iii) Sublessor's Lender as mortgagee and stating the Aircraft
type, manufacturer's serial number and current registration letters of the
Aircraft. Except as above provided Sublessee will not allow the name of any
person to be placed on the Airframe or on any Engine as a designation that
constitutes a claim of ownership or a claim of any Security Interest; provided
that nothing herein contained shall prohibit Sublessee (or any person to which
possession of the Airframe or any Engine is delivered or transferred in
accordance with Clauses 14 and 15) from placing its customary colors and
insignia on the Airframe.
13.13 Geneva Convention
Whenever the State of Registration is a signatory state that has ratified the
Geneva Convention, Sublessee shall, at its own cost, do any and all things
necessary in the State of Registration to perfect recognition of the interests
of Owner Trustee and Sublessor's Lender to the Aircraft by every other signatory
state that has ratified such Convention.
13.14 Merger and Shareholding
Sublessee will not sell its business to or operate its business in any other
corporate form or entity (the new entity) unless (a) such new entity is solvent
and duly organised and existing under the Law of the State of Incorporation or
any state of the United States of America and the new entity has executed and
delivered to Sublessor an agreement in form and substance acceptable to
Sublessor assuming the due and punctual performance and observance of each of
the terms of this Agreement and the other Transaction Documents, and (b)
immediately after such sale or the giving effect to such operation as that new
entity, the tangible net worth of such new entity is equal to or greater than
that of Sublessee and the creditworthiness of such new entity does not, in
Sublessor's reasonable opinion, adversely affect the ability of such new entity
to perform its obligations under this Agreement and the other Transaction
Documents or any Other Agreements and (c) the new entity is a US Air Carrier
authorised to transport passengers in common carriage. Sublessee will give
Sublessor prior written notice of any such proposed sale or change in operation
together with a request of Sublessors approval. Sublessee shall reimburse
Sublessor within ten (10) days of Sublessor's invoice for all reasonable
out-of-pocket expenses incurred by Sublessor as a result of such proposed merger
whether or not Sublessor approves and whether or not it actually occurs.
13.15 Ownership
Sublessee shall not hold itself out as owner of the Aircraft and, on all
occasions when the ownership of the Aircraft or any part of it is relevant, will
make clear to third parties that title to the same is held by Owner Trustee
subject to the Mortgage in favour of Sublessor's Lender.
13.16 Maintenance of Principal Business Place
Sublessee shall maintain its principal place of business and chief executive
office and the office where it keeps its business and financial records and
files concerning the Transaction Documents at the location specified in the
opening paragraph hereof. Sublessee shall hold and preserve such records and
files concerning the Transaction Documents and shall permit representatives of
Sublessor at any time during normal business hours to inspect and make abstracts
from such records and files. Sublessee shall give Sublessor at least 30 days'
prior written notice of any change in Sublessee's principal place of business
and chief executive office, and shall co-operate with Sublessor in executing and
delivering all such documents as Sublessor may reasonably request which are
required or desirable as a result of such change of principal place of business
of Sublessee.
13.17 Maintenance of Flight Records
Sublessee shall maintain flight records pertaining to the Aircraft required to
be maintained pursuant to section 47.9(e) of the FAR at the address given in
Clause 3.1(t) hereof and shall hold and preserve such records at such address
and permit inspection of such records by the FAA, the Sublessor, the Owner
Trustee and Sublessor's Lender. Sublessor shall give Sublessee at least 30 days
prior written notice of change in location of the flight records of the
Aircraft.
13.18 Substitution of Aircraft
Sublessee and Sublessor shall use reasonable endeavours to agree within 90 days
of the date of this Agreement the basis whereby Sublessor may substitute a
737-200 aircraft for the Aircraft.
13.19 UCC Finance Statement.
Sublessee undertakes to file, within 2 Business Days of the date of this
Agreement, a UCC-1 financing statement with the Colorado Division of
Corporations and Commercial Code executed by Sublessee for precautionary
purposes under Section 9-408 of the UCC.
14. Possession
14.1 No Relinquishment of Possession
Sublessee shall not sub-lease or otherwise deliver, transfer or relinquish
possession of the Airframe or any Engine or install any Engine or permit any
Engine to be installed, on any airframe other than the Airframe, provided that,
(i) so long as no Default shall have occurred and be continuing, (ii) Sublessee
continues to be fully responsible to Sublessor for all its obligations hereunder
and (iii) Sublessee in advance, obtains written acknowledgement(s) of
Sublessor's Lender's Security Interest in the Airframe and/or any Engines from
any person who will be in possession of the Airframe and/or any Engine in the
form and substance requested by Sublessor, Sublessee may;
14.1.1 subject any Engine to normal interchange or pooling agreements or
arrangements in each case customary in the airline industry and
entered into by Sublessee in the ordinary course of its business
with a commercial air operator which is approved by Sublessor in
writing and on terms and conditions that Sublessor has approved
(such approval not to be unreasonably withheld) (any such
commercial air operator being hereinafter called a Permitted Air
Carrier) provided THAT the terms of this Agreement shall be
observed and if either:
(i) Owner Trustee's title to the Engine shall be divested
under the terms of any such agreement or arrangement,
or
(ii) any Permitted Air Carrier shall have possession of any
such Engine under any such agreement or arrangement for
more than ninety (90) days,
Sublessee shall forthwith substitute, or procure the substitution
of, a Replacement Engine therefor in accordance with and which
satisfies the conditions of Clause 17.6;
14.1.2 deliver possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or to
any organisation for service, repair, maintenance or overhaul work
on the Airframe or such Engine or any part thereof or for
alterations or modifications in or additions to the Airframe or
such Engine to the extent required or permitted by the terms of
Clauses 17.4 and 17.5;
14.1.3 install an Engine on an airframe owned by Sublessee and operated
by and under the operating control of flight crew engaged by
Sublessee which is free and clear of all Security Interests,
except (i) Permitted Liens, (ii) Security Interests that apply
only to the engines (other than Engines), appliances, parts,
instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe but not to
the airframe as an entirety and (iii) the rights of Permitted Air
Carriers under normal interchange agreements which are customary
in the airline industry and do not contemplate, permit or require
the transfer of title to the airframe or engines installed
thereon;
14.1.4 install an Engine on an airframe operated by Sublessee that is
owned by or leased or subleased to Sublessee and/or subject to any
security agreement, provided that (i) such airframe is free and
clear of all Security Interests except the rights of the parties
to any security agreement covering such airframe and except
Permitted Liens and any Security Interests or rights of the type
permitted by sub-paragraphs (ii) and (iii) of Clause 14.1.3 and
(ii) Sublessee shall have obtained from the Sublessor or secured
party, as relevant, of such airframe a written agreement, which
may be in the Sublease agreement or security agreement in respect
of such airframe, in form and substance satisfactory to Sublessor
(it being understood that an agreement from such Sublessor or
secured party to substantially the same effect as the agreement of
Sublessor set forth in the final sentence of Clause 14.3 shall be
deemed to be satisfactory to Sublessor), whereby such Sublessor or
secured party expressly agrees that neither it nor its successors
or assignees will acquire or claim any right, title or interest in
any Engine by reason of such Engine being installed on such
airframe at any time while such Engine is subject to this
Agreement;
14.1.5 install an Engine on an airframe owned by Sublessee, leased or
subleased to Sublessee, or purchased by Sublessee, subject to any
security agreement under circumstances where neither Clause 14.1.1
nor 14.1.2 can be fulfilled in the circumstances, provided that it
would otherwise have resulted in an unreasonable disruption of the
operation of the Aircraft or the business of the Sublessee and in
such event Sublessee shall, as promptly as possible and in any
event within fifteen (15) days substitute a Replacement Engine
therefor in accordance with Clause 17.6 and which satisfies the
conditions specified in Clause 17.6;
14.1.6 sub-lease the Aircraft or Airframe to any person provided that the
Aircraft or Airframe is operated by, and remains throughout the
term of such sub-lease under the operational control of, flight
crew engaged by Sublessee, and provided further that:
(i) no Default has occurred and is continuing;
(ii) any such sublease will not result in any change in the
State of Registration;
(iii) the length of any such sublease does not extend beyond
twelve months (including any renewals);
(iv) the sub-Sublessee shall acknowledge that its rights are
subordinate to Sublessor's rights under this Agreement
and the rights Sublessor's Lender under any finance
document or security document entered into by Owner
Trustee or Sublessor in relation to the Aircraft;
(v) the conditions in clause 14.1.7 are satisfied in
respect of that sub-lease;
14.1.7 sublease the Aircraft or Airframe to any wholly-owned subsidiary
of Sublessee on terms that the Aircraft or Airframe is not
operated by, and does not remain under the operational control of,
flight crew engaged by Sublessee provided that the following
conditions are satisfied in relation to any such sublease
hereunder:
(i) no Default has occurred and is continuing;
(ii) the sub-lease shall acknowledge that its rights are
subordinated to the rights of Sublessor, Owner Trustee
and Sublessor's Lender under any finance or security
document entered into between Sublessor and/or Owner
Trustee and Sublessor's Lender in relation to the
Aircraft.
(iii) the proposed sub-Sublessee and the proposed form of the
sublease is approved by Sublessor and Sublessor's
Lender in writing, including any proposed right to
sub-sub-lease the Aircraft which must be approved by
Sublessor and Sublessor's Lender at its absolute
discretion;
(iv) the sublease shall terminate on or before termination
of this Agreement and the terms and conditions of the
sublease are not inconsistent with those contained in
this Agreement or any finance or security document
entered into between Sublessor and/or Owner Trustee
and/or Sublessor's Lender and the sub-Sublessee shall
acknowledge that its rights are subordinate to
Sublessor's rights under this Agreement (provided that
the sublease shall not permit further sub-leasing);
(v) the Insurances are in full force and effect in
accordance with the terms of this Agreement and, if the
sub-Sublessee is to maintain such insurances during the
term of such sub-lease, it shall have furnished to
Sublessor all such documents, evidence and information
relating to such insurances which Sublessee is required
to furnish or cause to be provided to Sublessor under
this Agreement;
(v) if the Aviation Authority for the duration of the
sublease is to be other than the FAA, Sublessor and
Sublessor's Lender approves the change of registration
and Sublessor receives (x) an opinion of counsel in the
State of Registration in form and substance reasonably
satisfactory to Sublessor and the Sublessor's Lender
which opinion must, at least, address the satisfactory
recognition of Owner Trustee's ownership of, and
Sublessor's Lender's Security Interest in the Aircraft
and (y) evidence that all actions recommended in such
opinion have been or will be duly taken;
(vi) the proposed Sublessee is a US Air Carrier authorised
to transport passengers in common carriage.
No less than three (3) Business Days after the
execution of any sub-lease entered into by Sublessee
under Clause 14.1.6 or Clause 14.1.7 Sublessee shall
provide Sublessor with a copy of such executed
sub-lease.
14.2 Sublessee Primarily Liable
Notwithstanding anything contained in Clause 14.1, Sublessee shall remain
primarily liable hereunder for the performance of all of the terms of this
Agreement to the same extent as if such sublease or transfer had not occurred.
No interchange agreement, sublease or other relinquishment of possession of the
Airframe or any Engine permitted by this Clause 14 shall in any way discharge or
diminish any of Sublessee's obligations hereunder.
14.3 Recognition of Rights
If Sublessee shall have obtained from the sublessor or secured party of any
engine subleased to Sublessee or owned by Sublessee subject to any Security
Interest, a written agreement complying with the terms of sub-paragraph (ii) of
Clause 14.1.4, Sublessor hereby agrees for the benefit of such sublessor or
secured party that Sublessor shall not acquire or claim, as against such
sublessor or secured party, any right, title or interest in any such engine as a
result of such engine being installed on the Airframe at any time while such
engine is subject to such sublease or security agreement and owned by such
sublessor or subject to a Security Interest in favour of such secured party and
Sublessor shall, at the request of Sublessee, confirm such agreement in writing
for any such sublessor or secured party.
15. Security interests
15.1 Title
Sublessee shall not do, or permit to be done, any act which might reasonably be
expected to jeopardise the interest of Owner Trustee, Sublessor or Sublessor's
Lender. Sublessee shall make clear to all third parties that legal title to the
Aircraft is owned by Owner Trustee, subject tothe Mortgage or the relevant title
holder advised by Sublessor.
15.2 No Security Interests; Base of Aircraft
Sublessee shall not create, incur or permit to subsist over the Aircraft or any
part thereof any Security Interest other than Permitted Liens.
15.3 Notice to Sublessor
Sublessee shall notify Sublessor:
(i) as and when it becomes aware of the same, of any
Security Interest (x) (excluding Permitted Liens)
arising over the Aircraft or any Engine or other major
part thereof or (y) (in the case of all Security
Interests including Permitted Liens) exercised over the
Aircraft or any Engine or other major part thereof or
(z) of any arrest or detention or purported or
attempted arrest or detention of the Aircraft; and
(ii) promptly on request of Sublessor of the location of the
Airframe and each Engine including an Engine that is
not for the time being installed on the Airframe.
15.4 Procure Release
Sublessee shall as soon as possible and in any event within five (5) Business
Days of becoming aware of the same procure the release of any Security Interest
(other than Permitted Liens) arising over the Aircraft or any part thereof and
procure the release of the Aircraft from any arrest or detention to which it is
subject.
16. Maintenance and repair
16.1 General Obligations
16.1.1 Sublessee shall at its own expense at all times during the Lease
Term:
(a) maintain, service, repair, overhaul and test
the Aircraft and all Parts thereon and
equipment thereon and Parts and equipment
therein (whether or not such Parts and
equipment are the property of Sublessor), or
procure the same, in accordance with the
applicable requirements of the Aviation
Authority and the Insurances and comply with
all Airworthiness Directives and alert service
bulletins issued by the Manufacturer (unless
to do so would be in breach of the Aviation
Authority's requirements, in which case the
Aviation Authority's requirements shall
prevail) and the MPD so as to keep the
Aircraft in good operating condition, ordinary
wear and tear excepted, and in accordance with
sound international aviation industry practice
and in such condition as may be necessary to
enable (i) the airworthiness certification of
the Aircraft with the Aviation Authority to be
maintained in good standing at all times
during the Lease Term (ii) the issuance of a
standard certificate of airworthiness for
transport category aircraft issued by the
Aviation Authority in accordance FAR Part 21
and, (iii) the Aircraft to be placed on the
operations specifications of a U.S. airline in
accordance with Part 121 of the FARs.
(b) maintain, service, repair, overhaul and test
the Aircraft, in the same manner and with the
same care as used by Sublessee with respect to
similar aircraft and engines operated by
Sublessee and without in any way adversely
discriminating against the Aircraft;
(c) maintain, or procure the maintenance of, the
Aircraft Documents including technical records
and any other records, logs and other
materials required by the FAA to be maintained
in respect of the Aircraft in the English
language and permit Sublessor or its agent to
examine such records, logs and other materials
at any reasonable time upon reasonable notice.
16.1.2 The maintenance programme and performer shall be approved by the
Sublessor with such approval not to be unreasonably withheld.
16.2 Specific Obligations
Without limiting Clause 16.1, Sublessee agrees that the performance by Sublessee
of such maintenance and repairs will include but will not be limited to each of
the following specific items:
(i) performance in accordance with the Maintenance Program
of all routine and non-routine maintenance work;
(ii) incorporation in the Aircraft of all applicable
Airworthiness Directives or equivalent, all alert
service bulletins of Manufacturer, Engine manufacturer
and other vendors or manufacturers of Parts
incorporated on the Aircraft and any service bulletins
which must be performed in order to maintain the
warranties on the Aircraft, Engines and Parts;
(iii) incorporation in the Aircraft of all other service
bulletins of Manufacturer, the Engine Manufacturer and
other vendors which Sublessee schedules to adopt within
the Lease Term for the major part of its Boeing
aircraft fleet. It is the intent of the parties that
the Aircraft will not be discriminated from the rest of
Sublessee's fleet in service bulletin compliance
(including method of compliance) or other maintenance
matters. Sublessee will not discriminate against the
Engines with respect to Overhaul build standards and
life limited part replacements;
(iv) incorporation into the Maintenance Program for the
Aircraft of a corrosion prevention and control program
as recommended by Manufacturer, the Aviation Authority
and the FAA and the correction of any discrepancies in
accordance with the recommendations of Manufacturer and
the Structural Repair Manual. In addition, all
inspected areas will be properly treated with corrosion
inhibitor as recommended by Manufacturer;
(v) incorporation into the Maintenance Program of an
anti-fungus/biological growth and contamination
prevention, control and treatment program of all fuel
tanks in accordance with Manufacturer's approved
procedures;
(vi) providing without delay written summaries of all
sampling programs and amendments thereof involving or
affecting the Aircraft;
(vii) maintaining in English and keeping in an up-to-date
status all relevant records and historical documents;
(viii) maintaining historical records, in English, for
condition-monitored, hard time and life limited Parts
(including tags from the manufacturer of such Part or a
repair facility which evidence that such Part is new or
overhauled and establish authenticity, total time in
service and time since overhaul for such Part), the
hours and cycles the Aircraft and Engines operate and
all maintenance and repairs performed on the Aircraft;
(ix) properly documenting all repairs, modifications and
alterations and the addition, removal or replacement of
equipment, systems or components in accordance with the
rules and regulations of the Aviation Authority and
reflecting such items in the Aircraft Documentation. In
addition, all repairs, to the Aircraft will be
accomplished in accordance with Manufacturer's
Structural Repair Manual, where possible, or approved
data from the Manufacturer accepted by the Aviation
Authority;
(x) ensuring that Overhauls are accomplished utilising
maintenance and quality control procedures approved by
the Aviation Authority and that the repair agency
provides a complete record of all work performed during
the course of such Overhaul and certifies that such
Overhaul was accomplished, that the equipment is
airworthy and released for return to service and that
the Overhaul was in conformity with the original type
design.
17. replacement of parts
17.1 Replacement of Parts
Sublessee shall, at its own expense, promptly replace, or procure the
replacement of, all Parts that become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond economical repair or permanently rendered unfit for
use for any reason whatsoever, except as otherwise provided in Clause 17.4 or
17.5. In addition, Sublessee may at its own cost and expense, remove, or permit
the removal of any Parts including Engines , whether or not worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use, provided that Sublessee shall, except as otherwise
provided in Clause 17.7, at its own cost and expense, immediately replace, or
procure the replacement of, such Parts. Title to all replacement Parts shall be
vested in Owner Trustee, subject to the Mortgage free and clear of all Security
Interests except Permitted Liens and shall, except as otherwise provided in
Clause 17.7, be in as good operating condition as, and shall have a value, age,
configuration and utility at least equal to, the Parts replaced, assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof, and shall have a current "serviceable tag" of the manufacturer or
maintenance facility providing such items to Sublessee.
17.2 Title to Replacement Parts
All Parts at any time removed from the Airframe or any Engine shall remain the
property of Owner Trustee and subject to the terms of this Agreement, no matter
where located, until such time as such Parts shall be replaced by parts that
have been incorporated or installed in or attached or added to the Airframe or
Engine and which meet the requirements for replacement parts specified above.
Immediately upon any replacement part becoming incorporated or installed in or
attached or added to the Airframe or any Engine as above provided, without
further act, (a) title to the replaced Part shall thereupon vest in Sublessee,
free and clear of all rights of Owner Trustee, shall cease to be subject to this
Agreement and shall no longer be deemed a Part hereunder and (b) title to such
replacement part shall pass to Owner Trustee, subject to the Mortgage free and
clear of all Security Interests except Permitted Liens and such replacement part
shall become subject to this Sublease Agreement and be deemed part of the
Airframe or Engine for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached or added to such Airframe or
Engine and shall become a Part hereunder.
17.3 Pooling of Parts
Any Part removed from the Airframe or any Engine as provided in Clause 17.1 or
17.2 may be subjected to a normal pooling arrangement customary in the airline
industry entered into in the ordinary course of Sublessee's business, provided
that the part replacing such removed Part shall be incorporated or installed in
or attached to the Airframe or such Engine in accordance with Clause 17.1 and
17.2 as soon as practicable after the removal of such removed Part. Without
prejudice to the generality of the foregoing sentence, any replacement part when
incorporated or installed in or attached to the Airframe or any Engine may be
owned by a third person subject to such a normal pooling arrangement, provided
that Sublessee, at its own expense, as promptly thereafter as possible, either
(a) causes title to such replacement part to vest in Owner Trustee in accordance
with Clause 17.1 and 17.2 free and clear of all Security Interests except
Permitted Liens, or (b) replaces or procures the replacement of such replacement
part by the incorporation or installation in or attachment to such Airframe or
Engine of a further replacement part (which meets the requirements of this
clause 17) free and clear of all Security Interests except Permitted Liens and
by causing title to such further replacement part to vest in the Owner Trustee
subject to the Mortgage in accordance with Clause 17.1 and 17.2 and such further
replacement part shall forthwith be deemed part of the Airframe or Engine to the
same extent as the Part originally incorporated or installed in or attached to
the Airframe or such Engine and shall become a Part hereunder.
17.4 Alterations
Sublessee shall at its own expense, make, or procure the making of, such
alterations and modifications in and additions to the Airframe and Engines as
may be required from time to time to meet the standards of the Aviation
Authority or any Government Entity having jurisdiction in any country, state,
county or other political subdivision in or over which the Aircraft is flown or
the FAA and any mandatory service bulletins of the Manufacturer. In addition,
Sublessee may, at its own expense, from time to time, make, or procure the
making of, such alterations and modifications in and additions including the
making of any improvements to the Airframe or any Engine as Sublessee may deem
desirable in the proper conduct of its business, including, removal of Parts
(for purposes of this Clause, "Obsolete Parts") which Sublessee deems obsolete
or no longer suitable or appropriate for use in the Airframe or such Engine,
provided that no such alteration, modification, addition or removal shall cost
over US$ 200,000, or alter the fundamental nature of the Aircraft as a passenger
carrying aircraft, or change its original type design or configuration, or
materially diminish the value or utility of the Airframe or any such Engine, or
impair the condition or airworthiness thereof, below the value, utility,
condition and airworthiness thereof immediately prior to such alteration,
modification, addition or removal assuming such Airframe or Engine was then in
the condition and repair required to be maintained by the terms of this
Agreement. Title to all Parts incorporated or installed in or attached or added
to the Airframe or any such Engine as the result of such alteration,
modification or addition shall be vested in Owner Trustee, subject to the
Mortgage and shall forthwith be deemed part of the Airframe or such Engine.
Neither Owner Trustee, Sublessor's Lender nor Sublessor shall be required under
any circumstances to pay directly for any alteration, modification or addition
to the Aircraft or to reimburse Sublessee for the cost thereof. Any other
alterations other than those permitted according to Clause 17.5 require
Sublessors prior written consent, which consent shall not be unreasonably
withheld or delayed.
17.5 Removal of Parts
Notwithstanding the foregoing, so long as no Default shall have occurred and be
continuing, Sublessee may remove, or permit the removal of, at any time during
the Lease Term, any Part, provided that (a) such Part is in addition to, and not
in replacement of or substitution for, any Part originally incorporated or
installed in or attached to the Airframe or any Engine at the time of delivery
thereof to Sublessee or in replacement of, or substitution for, any such Part,
(b) such Part is not required to be incorporated or installed in or attached or
added to the Airframe or such Engine pursuant to the terms of Clause 17.4 or
17.5, and (c) such Part can be removed from the Airframe or such Engine without
causing damage to the Airframe or such Engine or if it causes any such damage is
to be repaired and promptly thereafter is repaired and without diminishing or
impairing the value, utility, condition or airworthiness required to be
maintained by the terms of this Agreement that the Airframe or such Engine would
have had at such time had such alteration, modification or addition not occurred
assuming it was in the condition and repair required to be maintained under this
Agreement. Upon the removal of any Part as provided in the immediately preceding
sentence and the removal of any Obsolete Part, title thereto shall, without
further act, vest in Sublessee, free and clear of all rights of Owner Trustee,
Sublessor's Lender and Sublessor and such Part shall no longer be deemed part of
the Airframe or Engine from which it was removed. Any Part not so removed shall
remain the property of Owner Trustee subject to the Mortgage.
17.6 Substitution of Engine
In addition to its rights under Clause 14, Sublessee shall have the right at its
option at any time, on at least thirty (30) days' prior written notice to Owner
Trustee, Sublessor's Lender and Sublessor, to substitute or procure the
substitution of a CFM INTERNATIONAL CFM 56-3C1 engine or an engine of an
improved model suitable for installation and use on the Airframe for any such
Engine not then installed or held for use on the Airframe. Any such engine that
is substituted in accordance with the provisions of this Clause 17.6 and that
complies with the requirements of this Clause 17.6 being a "Replacement Engine"
provided that title to the Replacement Engine shall be vested in Owner Trustee,
subject to the Mortgage free and clear of all Security Interests, other than
Permitted Liens, and the Replacement Engine shall have a value and utility and
maintenance status, including time since last Engine Performance Restoration
Visit, at least equal to the replaced Engine and time since new no greater than
the replaced Engine as reasonably determined by Sublessor, assuming that such
Engine was in the condition and repair required to be maintained by the terms of
this Agreement and Sublessee shall deliver such documents including a bill of
sale, Sublease Supplement, and opinion of counsel as to title and recordation
with the FAA, as Sublessor may reasonably request to evidence the foregoing. In
such event, immediately upon the effectiveness of such substitution on the date
set forth in such notice and without further act:
(a) title to the replaced Engine shall thereupon
vest in Sublessee free and clear of all rights
of Owner Trustee, Sublessor's Lender and
Sublessor, and the replaced Engine shall cease
to be subject to this Agreement and shall no
longer be deemed an Engine hereunder; and
(b) title to such Replacement Engine shall vest in
Owner Trustee subject to the Mortgage free and
clear of all Security Interests except
Permitted Liens and such Replacement Engine
shall become subject to this Agreement and an
Engine hereunder and be deemed part of the
Aircraft for all purposes hereof.
17.7 Temporary Removal of Parts
Sublessee shall be entitled, so long as no Default shall have occurred which has
not been remedied or waived to the reasonable satisfaction of Sublessor, to
substitute, replace or renew any Part with a part that does not satisfy the
requirements of Clause 17.1 or 17.2 provided that:
(a) there shall not have been available to
Sublessee, at the time and in the place that
such substitute or replacement part was
required to be installed on the Airframe or
Engines a substitute or replacement part
complying with the requirements of Clause 17.1
and 17.2;
(b) it would have resulted in an unreasonable
disruption of the operation of the Aircraft or
the business of Sublessee as an airline to
have grounded the Aircraft until such time as
a substitute or replacement part complying
with the requirements of Clause 17.1 and 17.2
became available for installation in or on the
Aircraft;
(c) Sublessee shall have notified Sublessor prior
to or, in the case of an extreme urgency as
soon as possible after, the making of such
substitution, replacement or renewal of any
material Part;
(d) as soon as possible after installation of the
same in or on the Airframe or Engine (and in
any event no later than fifteen (15) days
thereafter) Sublessee shall remove any such
part not complying with the requirements of
Clause 17.1 and 17.2 and replace or substitute
the same with a Part complying with such
requirements.
17.8 If any replacement Part is incapable of becoming the property of
the Sublessor free of all Security Interests (other than Permitted
Liens) as required by clause 17 the part which is has replaced
shall, unless the Sublessor shall otherwise agree in writing be
kept and maintained by the Sublessee until the last day of the
Lease Term and replaced on the Aircraft in working order before
the Aircraft is re-delivered to the Sublessor on the termination
or expiry of the hiring of the Aircraft hereunder.
17.9 Re-delivery
Notwithstanding any term hereof, unless Sublessor consents in
writing, the Aircraft when re-delivered shall contain the Engines
and Parts installed on the Aircraft at Delivery.
18. manufacturer's warranties
18.1 Authorization
(a) With effect from Delivery, Sublessor
authorizes Sublessee to exercise such rights
as Sublessor may have in relation to any
warranty with respect to the Aircraft, any
Engine or any Part made by any manufacturer,
vendor, subcontractor, maintenance facility,
including the maintenance facility that
performed the Delivery Work, or supplier
subject to Sublessee notifying Sublessor in
writing of any warranty claim of a material
nature and keeping Sublessor continuously
informed of the development of such warranty
claim. To the extent that the same may not be
exercised by Sublessee, Sublessor agree to,
at the sole cost and expense of Sublessee,
enforce such rights as Sublessor may have with
respect thereto for the benefit of Sublessee.
Sublessor shall also have the right, rather
than enforcing or making such claim on behalf
of Sublessee under such warranties, to appoint
Sublessee as its agent for such purpose, and
in such instance, Sublessee agrees to accept
such appointment and make such claims and
enforce such warranties at its sole cost and
expense. This authorization shall cease on the
Expiry Date. Sublessee shall not be entitled
to exercise its authorisation hereunder, while
a Default is continuing (during which time all
such rights shall revert to Sublessor and
Sublessor hereby agrees to exercise and
enforce such rights during such period).
(b) Sublessee shall give Sublessor prompt written
notice of any warranty claim that is settled
with Sublessee on the basis of a total or
partial cash payment. Any cash payments shall
be applied to remedy the defect subject to
such warranty claim unless Sublessor otherwise
consents in writing. Any cash payments to
Sublessee in respect of warranty claims that
(either with Sublessor's written consent or
because the defect can not be remedied) are
not applied to the repair or remedy of defects
in the Aircraft or to compensate Sublessee for
the costs incurred for any such repair or
remedy, and which are not in respect of
compensation for loss of use of the Aircraft,
an Engine or Part during the Lease Term due to
a defect covered by such warranty, shall be
for Sublessor's account.
18.2 Proceeds
So long as no Default has occurred and is continuing, Sublessor agrees subject
to Clause 18.1(b) to co-operate with Sublessee to cause any proceeds from any
rights assigned by Sublessor to Sublessee under Clause 18.1 to be paid directly
to Sublessee, and, if any such proceeds are nonetheless paid to Sublessor,
Sublessor agrees to remit promptly such proceeds to Sublessee. However, while a
Default is continuing, Sublessor may immediately:
(a) retain for its own account any such proceeds
previously paid to Sublessor which would have
been remitted to Sublessee under this Clause
18.2 in the absence of such Default or Event
of Default; and
(b) cause any proceeds of any pending claims to be
paid to Sublessor, rather than to Sublessee.
Once the Default is cured, Sublessor shall reimburse Sublessee to the extent
that it would have been obliged to under this Clause 18.2 had no such Default
occurred.
18.3 Agreements with Manufacturers
To the extent that any warranties relating to the Aircraft are made available
under an agreement between any manufacturer, vendor, subcontractor or supplier
and Sublessee, Sublessee will:
(a) apply the proceeds of any claim under such
agreement in accordance with Clause 18.2; and
(b) take all such steps as are necessary at the
end of the Lease Term to ensure that the
benefit of any of those warranties that have
not expired is vested in Sublessor.
18.4 Operation Contrary to Warranties
Sublessee shall not operate the Aircraft contrary to the terms of any warranty
referred to in Clause 18.1(a) (provided that Sublessor advises Sublessee of the
terms of such warranty).
19. Disclaimers
SUBLESSOR AND SUBLESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND CONFIRMATIONS
SET FORTH IN CLAUSES 19.1 THROUGH 19.5 BELOW SHALL APPLY AT ALL TIMES DURING THE
LEASE TERM WITH EFFECT FROM SUBLESSEE'S ACCEPTANCE OF THE AIRCRAFT BY EXECUTION
OF THE CERTIFICATE OF ACCEPTANCE, WHICH SHALL BE CONCLUSIVE EVIDENCE THAT
SUBLESSEE HAS FULLY INSPECTED THE AIRCRAFT AND EVERY PART THEREOF AND THAT THE
AIRCRAFT, THE ENGINES, THE PARTS AND THE AIRCRAFT DOCUMENTS ARE IN ALL RESPECTS
ACCEPTABLE TO SUBLESSEE (SAVE AS EXPRESSLY NOTED ON THE ACCEPTANCE CERTIFICATE)
AND ARE IN SUITABLE CONDITION FOR DELIVERY TO AND ACCEPTANCE BY SUBLESSEE.
19.1 As Is, where Is
AS BETWEEN SUBLESSOR AND SUBLESSEE:
(a) PRIOR TO DELIVERY HEREUNDER, SUBLESSEE HAD THE
OPPORTUNITY TO INSPECT THE AIRCRAFT,
ACCORDINGLY, SUBLESSEE UNCONDITIONALLY
ACKNOWLEDGES AND AGREES THAT EXCEPT AS
SPECIFICALLY SET FORTH IN ANY OF THE
TRANSACTION DOCUMENTS NEITHER OWNER TRUSTEE,
SUBLESSOR'S LENDER, OR SUBLESSOR, NOR ANY OF
THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES AND/OR REPRESENTATIVES HAVE MADE OR
WILL BE DEEMED TO HAVE MADE ANY TERM,
CONDITION, REPRESENTATION, WARRANTY OR
COVENANT EXPRESSED OR IMPLIED (WHETHER
STATUTORY OR OTHERWISE) AS TO (i) THE
CAPACITY, AGE, AIRWORTHINESS, VALUE, QUALITY,
DURABILITY, DESCRIPTION, CONDITION (WHETHER OF
THE AIRCRAFT, ANY ENGINE, ANY PART THEREOF OR
THE AIRCRAFT DOCUMENTATION), DESIGN,
WORKMANSHIP, MATERIALS, INCLUDING DELIVERY
WORK AS DEFINED IN SCHEDULE 2, MANUFACTURE,
CONSTRUCTION, OPERATION, DESCRIPTION, STATE,
MERCHANTABILITY, PERFORMANCE, FITNESS FOR ANY
PARTICULAR USE OR PURPOSE (INCLUDING THE
ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR
USE THE AIRCRAFT DOCUMENTATION IN ANY OR ALL
JURISDICTIONS) OR SUITABILITY OF THE AIRCRAFT
OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, KNOWN OR UNKNOWN, APPARENT OR
CONCEALED, EXTERIOR OR INTERIOR, (ii) THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL
PROPERTY RIGHTS, OR (iii) ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, ALL OF WHICH ARE HEREBY
EXPRESSLY EXCLUDED AND EXTINGUISHED.
(b) Waiver of Warranty of Description.
EXCEPT AS SPECIFICALLY OTHERWISE SET FORTH IN
ANY OF THE TRANSACTION DOCUMENTS, SUBLESSEE
HEREBY AGREES THAT ITS ACCEPTANCE OF THE
AIRCRAFT AT DELIVERY AND ITS EXECUTION AND
DELIVERY OF THE ACCEPTANCE CERTIFICATE WILL
RE-AFFIRM AND INDEPENDENTLY CONSTITUTE ITS
WAIVER OF THE WARRANTY OF DESCRIPTION AND ANY
CLAIMS IT MAY HAVE, AND OF ANY RIGHT TO MAKE
ANY CLAIM AGAINST OWNER TRUSTEE, SUBLESSOR'S
LENDER, OR SUBLESSOR BASED UPON THE FAILURE OF
THE AIRCRAFT TO CONFORM WITH SUCH DESCRIPTION
OR ANY AIRCRAFT SPECIFICATIONS AND ITS
AGREEMENT NOT TO LOOK TO OWNER TRUSTEE,
SUBLESSOR'S LENDER, OR SUBLESSOR FOR DAMAGES
OR RELIEF ARISING OUT OF THE FAILURE OF THE
AIRCRAFT TO CONFORM TO SUCH DESCRIPTIONS OR
SPECIFICATIONS, NOTWITHSTANDING ANY ASSURANCES
FROM SUBLESSOR, THE DIFFICULTY OF DISCOVERING
ANY DEFECT OR ITS ASSUMPTION THAT ANY
NONCONFORMITY WOULD BE CURED.
(c) With All Faults. Sublessee agrees that it is
leasing the Aircraft "AS IS, WHERE IS AND WITH
ALL FAULTS".
(d) Sublessee Waiver. Except as specifically
permitted in any of the Transaction Documents,
sublessee hereby waives as between itself and
Owner Trustee and Sublessor and agrees not to
seek to establish or enforce any rights and
remedies, express or implied (whether
statutory or otherwise) against Owner Trustee,
Sublessor or the Aircraft relating to any of'
the matters mentioned in Clause 19.1 and the
leasing thereof by Sublessor to Sublessee.
(e) Sublessee Examination of Aircraft. DELIVERY BY
SUBLESSEE TO SUBLESSOR OF THE ACCEPTANCE
CERTIFICATE IS CONCLUSIVE PROOF AS BETWEEN
SUBLESSOR AND SUBLESSEE THAT SUBLESSEE'S
TECHNICAL EXPERTS HAD EXAMINED AND
INVESTIGATED THE AIRCRAFT, ENGINES AND EACH
PART THEREOF AND DETERMINED THAT (1) EACH WAS
AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR
AND (II) THE AIRCRAFT, ENGINES, EACH PART
THEREOF AND THE AIRCRAFT DOCUMENTATION WERE
WITHOUT DEFECT (WHETHER OR NOT DISCOVERABLE AT
DELIVERY) AND IN EVERY WAY SATISFACTORY TO
SUBLESSEE.
19.2 No Sublessor Liability for Losses
Sublessee agrees that Sublessor will not be liable to Sublessee, any
sub-Sublessee or any Person, whether in contract or tort or otherwise and
however arising, for any unavailability, loss of use or service, cost, loss
(consequential or otherwise), liability, damage or delay of or to or in
connection with the Aircraft, any Person or property whatsoever, whether on
board the Aircraft or elsewhere and irrespective of whether such occurrences
arise from any act or omission or the active or passive negligence of Sublessor
or Owner Trustee or their agents or representatives excepting only Sublessor's
or Owner Trustee or their respective agents or representatives gross negligence
or wilful misconduct.
19.3 Exclusion
Neither Owner Trustee, Sublessor's Lender or Sublessor shall have any obligation
or liability whatsoever to Sublessee, any sub-Sublessee or any other person
whether arising in contract, in tort or otherwise and whether arising by
reference to negligence or strict liability of Sublessor, Owner Trustee or
Sublessor's Lender or otherwise for:
(a) any liability, loss or damage (consequential
or otherwise) caused or alleged to be caused
directly or indirectly by the Aircraft or any
Engine or by any inadequacy thereof or
deficiency or defect therein or by any other
circumstance in connection therewith;
(b) the use, operation or performance of the
Aircraft or any risks relating thereto;
(c) any interruption of service, loss of business
or anticipated profits or any other direct,
indirect or consequential loss or damage; or
(d) the delivery, operation, servicing,
maintenance, repair, improvement or
replacement of the Aircraft, any Engine or any
Part except as otherwise expressly provided
under this Agreement.
19.4 Waiver
Except as may be specifically permitted by any of the Transaction Documents
sublessee hereby waives, as between itself and Owner Trustee, Sublessor's Lender
and Sublessor, all its rights in respect of any warranty or representation,
express or implied, on the part of Owner Trustee, Sublessor's Lender or
Sublessor and all claims against Owner Trustee, Sublessor's Lender or Sublessor
howsoever and whenever arising at any time in respect of or out of the matters
referred to in Clause 19.1 and waives its rights under Section 2A-517 of the New
York Uniform Commercial Code.
19.5 Confirmation
Sublessee confirms that the foregoing provisions of this Clause 19 and the
following provisions in Clause 20 have been taken into account by both parties
in negotiating the rent and other amounts payable under this Agreement.
20. indemnities
20.1 General
Sublessee agrees to defend, indemnify and hold harmless on an after Tax basis
each of the Indemnitees on demand from and against any and all Losses arising
from events occurring during the Lease Term:
20.1.1 that may at any time be suffered or incurred directly or
indirectly as a result of or in connection with the possession,
delivery, performance, management, ownership, registration,
import, control, maintenance, condition, service, repair,
overhaul, leasing, subleasing, deregistration, export,
manufacture, storage, transportation, design, testing,
replacement, use, operation or redelivery of the Aircraft, any
Engine or Part (either in the air or on the ground) whether or no
such Losses may be attributable to any defect in the Aircraft, any
Engine or any Part or to its design, testing or use or otherwise,
and regardless of when the same arises (but excluding any injuries
or claims which arise prior to Predelivery Acceptance) or whether
it arises out of or is attributable to any act or omission,
negligent (active or passive) or otherwise, of any Indemnitee
(including without limitation claims for death, personal injury,
property damage, other loss or harm to any person and claims
relating to any Laws, including without limitation environmental
control, noise and pollution laws rules or regulations);
20.1.2 that may at any time be suffered or incurred as a consequence of
any breach of the Transaction Documents by the Sublessee or by
misrepresentation of or breach of warranty by Sublessee;
20.1.3 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 by Sublessee, or anyone acting by or through Sublessee,
of any obligation of confidentiality owed to any person in respect
of any of the matters referred to in this Clause 20.1.3,
but excluding any Loss in relation to a particular Indemnitee to
the extent that such Loss:
(i) arises as a direct result of the gross negligence or
wilful misconduct of such Indemnitee; or
(ii) arises as a direct result of Sublessor Taxes, a
Sublessor Lien or a wilful breach by Sublessor of its
obligations under any of the Transaction Documents; or
(iii) constitutes a Tax or liability for Taxes;
20.2 Survival of Indemnification
Notwithstanding anything in this Agreement to the contrary, the provisions of
Clause 20.1 shall survive the Expiry Date for one (1) year and continue in full
force and effect notwithstanding any breach by Sublessor or Sublessee of the
terms of this Agreement, the termination of the Sublease of the Aircraft to
Sublessee under this Agreement or the repudiation by Sublessor or Sublessee of
this Agreement.
20.3 Notice to Sublessee
Sublessor shall promptly after obtaining actual knowledge thereof notify the
Sublessee of any claim as to which indemnification is sought; provided that a
failure to so notify will not diminish or relieve Sublessee of any obligations
hereunder, unless such failure materially adversely affects Sublessees defense
of such claim and directly results in a material increase in liability of the
Sublessee in respect of such claim or prevents it from materially reducing
liability therefor, in which case the Sublessee shall not be required to
indemnify such Indemnitee for the amount by which such liability was increased
or not reduced.
21. taxation
21.1 Gross-up
21.1.1 All payments by Sublessee under or in connection with this
Agreement shall be made without set-off or counterclaim, free and
clear of and without deduction for or on account of all Taxes,
except Sublessor Taxes, unless Sublessee is required by law to
make any such deduction or withholding;
21.1.2 If any Taxes, except Sublessor Taxes, are required to be deducted
or withheld from any amount payable hereunder, Sublessee shall pay
to Sublessor by way of supplemental Rent such additional amounts,
in the same currency as such payment as may be necessary in order
that the amount of such payment received by Sublessor on the date
of such payment, after deduction or withholding for all such
Taxes, will be equal to the amount that Sublessor would have
received if such Taxes had not been deducted or withheld.
21.1.3 If any payment is made by Sublessee under Clause 21.1.2 and
Sublessor in good faith determines that it is entitled to receive
a credit against, or relief or remission for, or repayment of, any
Tax paid or payable by Sublessor in respect of or calculated with
reference to the deduction or withholding giving rise to such
payment, Sublessor shall, to the extent that it can do so without
prejudice to the retention of the amount of such credit, relief,
remission or repayment and without leaving Sublessor in any worse
net after tax position than that in which it would have been had
such deduction or withholding not been required to be made,
promptly pay to Sublessee such amount as Sublessor shall
reasonably have determined to be attributable to the relevant
deduction or withholding.
21.2 Tax Indemnity
21.2.1 Sublessee shall indemnify Sublessor on demand against all Taxes
(other than Sublessor Taxes) levied or imposed against or upon
Sublessor or Sublessee or the Aircraft directly or indirectly in
connection with the importation, exportation, registration,
ownership, leasing, sub-leasing, purchase, delivery, sale,
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 except to the
extent that such liability for such Taxes:
(i) arises as a result of a Sublessor Lien; or
(ii) is directly attributable to Sublessors gross negligence
or wilful misconduct; or
(iii) relates to any deduction or withholding on any payment
to be made to Sublessor that is covered by Clause 21.1;
or
(iv) imposed as a direct result of the, sale, transfer or
assignment or other disposition of the Aircraft or this
Agreement by Sublessor, or by any party claiming by or
through Sublessor and except (i) any sale, transfer,
assignment or other disposition that is made solely as
a result of the occurrence of an Event of Default or
Total Loss of the Aircraft or any part thereof or
interest therein and (ii) any Taxes imposed by the
State of Registration.
21.2.2 If Sublessor becomes aware of any claim against Sublessor for any
Loss that Sublessee is required to pay or indemnify against
pursuant to this Clause 21.2, Sublessor shall as soon as is
reasonably practicable notify Sublessee in writing of such claim.
If requested in writing by Sublessee that it wishes Sublessor to
contest such claim, Sublessor will consult with Sublessee with a
view to determining whether there are grounds for contesting such
claim. Sublessor will consider in good faith any representation
made by Sublessee in this respect. Sublessor shall not be under
any obligation to bring any proceedings in respect of any such
claim in any court of law or other relevant forum except that
Sublessor shall bring such proceedings in the event that tax
counsel reasonably acceptable to Sublessor in the relevant
jurisdiction provides Sublessor with a legal opinion to the effect
that there are legitimate grounds for contesting such claim. Any
costs and expenses of any such contest shall be fully indemnified
by Sublessee. Further Sublessor shall be under no obligation to
take any action in respect of any claim unless it shall previously
have been provided with security in an amount equal to the amount
of such claim and reasonable costs and otherwise satisfactory in
its absolute discretion for any such costs. Any amount payable
under this Clause 21.2 shall be paid to or on behalf of Sublessor
or, if so directed by Sublessor, directly to the relevant taxing
authority, promptly after receipt by Sublessee of a written demand
therefor.
21.3 Value Added Taxes
The Rent and other amounts payable by Sublessee under this Agreement are
exclusive of any value added tax, turnover tax or similar tax or duty. If a
value added tax or any similar tax or duty is payable in any jurisdiction in
respect of any Rent or other amounts as aforesaid, Sublessee will pay all such
tax or duty and indemnify Sublessor against any claims for the same and any
related claims, losses or liabilities.
21.4 Taxation of Indemnity Payments
21.4.1 Notwithstanding any other provision of this Agreement, if and to
the extent that any sums payable to any Indemnitee by Sublessee
under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for such
Indemnitee to discharge the corresponding liability to the
relevant third party (including any taxation authority), or to
reimburse such Indemnitee for the cost incurred by it to a third
party (including any taxation authority) Sublessee shall pay to
such Indemnitee such sum as will after the tax liability has been
fully satisfied leave that Indemnitee with the same amount as it
would have been entitled to receive in the absence of that
liability.
21.4.2 If and to the extent that any sums constituting (directly or
indirectly) an indemnity to an Indemnitee but paid by Sublessee to
any person other than such Indemnitee are treated as taxable in
the hands of such Indemnitee, Sublessee shall pay to such
Indemnitee such sum as will, after the tax liability has been
fully satisfied, indemnify such Indemnitee to the same extent as
it would have been indemnified in the absence of such liability.
21.5 Benefit of Indemnities
All rights expressed to be granted to each Indemnitee (other than Sublessor)
under this Agreement are given to Sublessor on behalf of that Indemnitee.
21.6 Sublessor Indemnification
Without prejudice to Clause 21.5, Sublessor shall be entitled (but not obliged)
to indemnify Indemnitees (other than Sublessor) on terms equivalent to the
indemnities given by Sublessee under this Agreement and the obligations of
Sublessee to Sublessor shall extend to reimbursement of Sublessor of any amount
properly paid by Sublessor to such other Indemnitee provided always that nothing
in this Clause 21.6 shall operate to increase the obligations or liabilities of
Sublessee.
21.7 Survival of Tax Indemnities
Notwithstanding anything in this Agreement to the contrary, the provisions of
Clause 20 shall survive the Expiry Date and continue in full force and effect
notwithstanding any breach by Sublessor or Sublessee of the terms of this
Agreement, the termination of the Sublease of the Aircraft to Sublessee under
this Agreement or the repudiation by Sublessor or Sublessee of this Agreement.
21.8 Mitigation and Cooperation
In any case where Sublessee would be obliged to bear Taxes or make additional
payment on account of Taxes pursuant to the provisions of this Agreement as a
result of any change in applicable laws or regulations or practice, Sublessor
shall at the written request of Sublessee, without limiting, reducing or
otherwise qualifying the rights of the Sublessor and the Security Interest of
Sublessor's Lender, consult with Sublessee in good faith as to such steps which
Sublessor and Sublessee can mutually accept and agree upon in order to mitigate
or avoid the effects of such circumstances. In case Sublessor and Sublessee can
not agree within a period of thirty (30) days after Sublessee has made a written
request, Sublessor shall not have any further obligation towards Sublessee.
21.9 Furnishing Forms
Sublessor agrees to furnish, and to procure that any other Indemnitee furnishes
to Sublessee, or to such other person as Sublessee may designate, at Sublessees
sole cost and expense, such duly executed and properly completed forms as such
Indemnitee may be permitted and legally able to deliver and as may be necessary
or appropriate in order to claim any reduction of, or exemption from any Tax
which Sublessee may be required to indemnify against hereunder, unless such
Indemnitee reasonably determines that furnishing such forms may have an adverse
effect on either the business, tax status, tax liability or operations of such
Indemnitee.
22. insurance
22.1 Insurances
22.1.1 Sublessee shall, at its own expense, maintain in full force during
the Lease Term insurances in respect of the Aircraft that, subject
to this Clause 22, comply with the requirements set out in
Schedule 5 (the "Insurances").
22.1.2 The Insurances shall be effected through brokers of international
standing and repute in the London or New York aviation insurance
markets and which are approved by Sublessor's Lender.
22.1.3 The Insurance shall be effected either:
(i) on a direct basis with insurers of recognised standing
who normally participate in aviation insurances in the
leading international insurance markets and led by
reputable underwriter(s) approved by Sublessor and
Sublessor's Lender; or
(ii) with a single insurer or group of insurers approved by
Sublessor or Sublessor's Lender who does not fully
retain the risk but effects substantial reinsurance
with reinsurers in the leading international insurance
markets and through brokers each of recognised standing
and acceptable to the Sublessor and Sublessor's Lender
for a percentage acceptable to the Sublessor and
Sublessor's Lender of all risks insured (the
Reinsurances);
22.2 Requirements
The current requirements of Sublessor and Sublessor's Lender as to the
Insurances are as specified in this Clause 22 and in Schedule 5. Sublessor and
Sublessor's Lender may from time to time stipulate other requirements for the
Insurances so that (a) the scope and level of cover are maintained in line with
best industry practice; and (b) the interests of the Sublessor and Sublessor's
Lender continue to be fully protected and Sublessee will procure that such
changes are effected.
22.3 Insurance Covenants
Sublessee shall:
22.3.1 ensure that all requirements as to insurance of the Aircraft, any
Engine or any Part which may from time to time be imposed by the
laws of the State of Registration or any state 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;
22.3.2 comply with the terms and conditions of each policy of the
Insurances and not do, consent or agree to any act or omission
which:
(i) invalidates or may invalidate the Insurances; or
(ii) renders or may render void or voidable the whole or any
part of any of the Insurances; or
(iii) brings any particular insured liability within the
scope of an exclusion or exception to the Insurances;
22.3.3 not make any modification or alteration to the Insurances material
and adverse to the interests of any of the Indemnitees;
22.3.4 be responsible for any deductible under the Insurances;
22.3.5 provide any other information and assistance in respect of the
Insurances that Sublessor may from time to time reasonably require
including, for the avoidance of doubt, lists of the underwriters
and the exposures of each of those underwriters which may carry
the Insurances from time to time;
22.3.6 not create any Security Interests over the Insurances except
pursuant to the Assignment of Insurances;
22.3.7 not use or keep or permit the Aircraft or any part thereof to be
used or kept for any purpose, in any manner or in any place not
covered by the required policies;
22.3.8 not cause or permit the Aircraft or any part thereof to be
employed in any place or in any manner or for any purpose
inconsistent with the terms or outside the cover provided by any
required policy;
22.3.9 not knowingly effect or authorise the placement of insurance
covering the same subject matter as that covered by the Insurances
(except on a contingent or other secondary basis); and
22.3.10 furnish to the Sublessor:
(i) on the date hereof and thereafter within seven (7) days
after each renewal date of each policy a certificate or
certificates signed by the insurers or the insurance
broker providing evidence of insurance coverage
pursuant to this Agreement;
(ii) on request, confirmation of payment by, or at the
direction of the Sublessor of each sum payable under
or in connection with any required policy;
(iii) on request, such evidence as the Sublessor may require
of the Sublessee's compliance with its obligations
under this Agreement; and
(iv) any notice received from the insurers or the
insurance brokers (within three Business Days of
receipt) relating to or in connection with any
cancellation of the Insurances or any material
alteration of the Insurances.
22.4 Renewal of Insurances
Sublessee shall commence renewal procedures at least thirty (30) days prior to
expiry of any of the Insurances, and provide to Sublessor:
22.4.1 confirmation of completion of renewal at least 15 days prior to
each expiry date of any of the Insurances;
22.4.2 certificates of insurance and a brokers' letter of undertaking in
a form acceptable to Sublessor and in English, detailing the
coverage and confirming the insurers' agreement to the specified
insurance requirements of this Agreement within seven (7) days
after each renewal date; and
22.4.3 any other information as Sublessor may reasonable request be
provided by the insurance broker at least fifteen (15) days before
such expiry;
22.5 AVN 2000
22.6 Failure to Insure
If Sublessee fails to maintain the Insurances in compliance with this Agreement,
Sublessee shall:
22.6.1 forthwith ground or cause to be grounded the Aircraft and shall
keep or procure that the Aircraft be kept grounded until such time
as all the Insurances shall again be in full force and effect; and
22.6.2 immediately notify Sublessor of the non-compliance of the
Insurances and provide Sublessor with full details of any steps
which Sublessee is taking or proposes to take, in order to remedy
such non-compliance;
and each of the Indemnitees will be entitled but not bound, without prejudice to
any other rights of Sublessor under this Agreement:
(i) to pay the premiums due or to effect and maintain
insurances satisfactory to Sublessor and substantially
the same as the Insurances required hereunder or
otherwise remedy Sublessee's failure in such manner,
including to effect and maintain an "owner's interest"
policy, as Sublessor considers appropriate. Any sums so
expended by Sublessor will become immediately due and
payable by Sublessee to Sublessor together with
interest thereon at the Default Rate, from the date of
expenditure by Sublessor up to the date of
reimbursement by Sublessee; and
(ii) 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 Sublessor until
the failure is remedied to Sublessor's satisfaction.
22.7 Continuation of Insurances
Sublessee agrees to effect and maintain at Sublessee's cost airline general
third party liability insurances in the form required by this Agreement for two
(2) years after the Expiry Date whether or not Sublessee or Sublessor continues
to have any interest in the Aircraft.
22.8 Application of Insurance Proceeds
As between Sublessor and Sublessee:
22.8.1 all insurance payments received as the result of a Total Loss
occurring during the Lease Term will be paid to Sublessor or to
Sublessor's Lender pursuant to the terms of any security given by
Owner Trustee;
22.8.2 all insurance proceeds of any damage or loss to the Aircraft, any
Engine or any Part occurring during the Lease Term not
constituting a Total Loss and in excess of the Damage Notification
Threshold will be paid to Sublessor and applied in payment (or to
reimburse Sublessee) for repairs or replacement property, upon
Sublessor being satisfied that the repairs or replacement have
been effected in accordance with this Agreement; and
22.8.3 notwithstanding clause 22.8.1 and 22.8.2 above, 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 Sublessor to be applied toward payment of any amounts which may
be or become payable by Sublessee in such order as Sublessor sees
fit or as Sublessor may elect.
22.9 Pursuit of Claims
The parties shall cooperate in the pursuit of any claims under the Insurances.
In pursuing any such claims, the parties shall take account of each others
interests but, if there is any material disagreement between the parties in
respect of how any such claim shall be pursued, the interests of Sublessor shall
be paramount.
23. loss, damages and requisition
23.1 Total Loss Prior to Pre-Delivery Acceptance
If a Total Loss occurs prior to Pre-Delivery Acceptance of the Aircraft to
Sublessee, this Agreement shall immediately terminate, and except as expressly
stated in this Agreement neither party will have any further obligation or
liability under this Agreement, except that Sublessor will repay to Sublessee
the amount of Security Deposit paid under this Agreement.
23.2 Total Loss After Pre-Delivery Acceptance
23.2.1 If a Total Loss occurs after Pre-Delivery Acceptance of the
Aircraft to Sublessee, Sublessee shall pay the Sublessor on or
prior to the earlier of:
(i) Sixty (60) days after the Total Loss Date; and
(ii) the date of receipt of insurance proceeds in respect of
that Total Loss,
the aggregate of (x) the Agreed Value and (y) Rent to the date of payment.
23.2.2 Subject to the rights of any insurers or other third parties,
including Sublessor's Lender upon irrevocable payment in full to
Sublessor of the Agreed Value and all other amounts which may be
or become payable to Sublessor under this Agreement, Sublessor
shall direct Owner Trustee to transfer to Sublessee all of Owner
Trustee's and Sublessor's rights (if any) to (x) the Airframe or
any Engines and Parts whether or not installed when the Total Loss
occurred, on an as-is where-is basis and without recourse or
warranty (save as to freedom from Sublessor Liens), and Sublessor
shall procure the execution and delivery of such bills of sale and
other instruments as Sublessee may reasonably request to evidence
such transfer, free and clear of all rights of Owner Trustee and
Sublessor and (y) any other rights in respect of the Aircraft or
any part thereof or any further requisition or insurance proceeds
in respect thereof. Sublessee shall indemnify Owner Trustee and
Sublessor for all fees, expenses and Taxes incurred by Sublessor
in connection with any such transfer.
23.2.3 If a Total Loss of the Aircraft or the Airframe occurs during the
Lease Term, Rent shall continue until the date of payment of the
Agreed Value and all other amounts due under the Sublease and upon
payment of the Agreed Value and all other sums due under this
Agreement, the leasing of the Aircraft shall immediately
terminate, but without prejudice to the continuing obligations of
the Sublessee (as to indemnity or otherwise) under this Agreement;
and Sublessor and, if not already recovered, Sublessee shall
proceed diligently and co-operate fully with each other in the
recovery of the Total Loss Proceeds.
23.3 Total Loss of Engines
23.3.1 Upon an Engine Total Loss of any Engine not installed on the
Aircraft, or an Engine Total Loss of an Engine installed on the
Airframe not involving a Total Loss of the Airframe (in either
case, a "Destroyed Engine"), Sublessee shall give Sublessor prompt
written notice thereof and Sublessee shall replace the Destroyed
Engine as soon as reasonably possible by procuring that Owner
Trustee acquires, at Sublessee's expense, title to another engine
complying with the requirements of Clause 17.6. Such Replacement
Engine shall upon acquisition by the Sublessor be an Engine as
defined herein;
23.3.2 Sublessee agrees to take such action as Sublessor may reasonably
request in order that any such Replacement Engine shall be the
property of Owner Trustee, and subleased hereunder on the same
terms as the Destroyed Engine. Sublessee's obligation to pay Rent
shall continue in full force and effect, but an amount equal to
the Total Loss Proceeds received by Sublessor or, as the case may
be, Sublessor's Lenders with respect to the Destroyed Engine, less
any cost, expenses, Taxes or duties incurred in connection with
the collection thereof, shall, subject to Sublessor's right to
deduct therefrom any amounts then due and payable by the Sublessee
under this Agreement, be paid to Sublessee;
23.3.3 Immediately upon the effectiveness of such substitution, and
without further act, title to the replaced Engine shall thereupon
vest in Sublessee, in an as-is, where-is condition, free and clear
of all rights and Security Interests of Owner Trustee, Sublessor's
Lender and Sublessor and shall no longer be deemed an Engine
hereunder.
23.4 Requisition
23.4.1 During any requisition for use or hire of the Aircraft, any Engine
or Part that does not constitute a Total Loss:
(i) the Rent and other amounts payable under this Agreement
will not be suspended or abated either in whole or in
part, and Sublessee will not be released from any of
its other obligations under the Agreement (other than
operational obligations with which Sublessee is unable
to comply solely by virtue of the requisition);
(ii) so long as no Default or Event of Default has occurred
and is continuing, Sublessee shall be entitled to any
hire paid by the requisitioning authority in respect of
the Lease Term;
(iii) Sublessee shall, as soon as practicable after the end
of any such requisition, cause the Aircraft to be put
into the condition required by this Agreement.
23.4.2 If the Aircraft is under requisition for hire at the Expiry Date
the leasing of the Aircraft under this Agreement shall continue
until the earlier of (x) when the Aircraft becomes a Total Loss
and Sublessor receives the Agreed Value together with any other
amounts then due and unpaid under this Agreement and (y) when the
Aircraft is returned prior to becoming a Total Loss, and Sublessee
satisfies the Return Conditions PROVIDED THAT:
(i) the obligations of Sublessee including in respect of
payment of Rent, including Reserves, shall continue in
full force and effect until the leasing ends except
that during the continuation of the requisition for
hire while it does not constitute a Total Loss,
Sublessee shall be released from those of its
obligations that it is prevented from performing as a
result of the requisition of the Aircraft;
(ii) unless a Total Loss has occurred (in which case Clause
23.2 shall apply), Sublessee shall be obliged to
redeliver the Aircraft to Sublessor in accordance with
Clause 24;
(iii) provided no Default or Event of Default is continuing
Sublessee shall be entitled to receive and retain any
requisition payments made in respect of the Aircraft.
(iv) Sublessee shall indemnify Sublessor for any Losses
which Sublessor suffers (Sublessor undertakes to use
its reasonable best efforts to mitigate such Losses) as
a result of Sublessee returning the Aircraft to
Sublessor after the Expiry Date.
24. redelivery
24.1 Redelivery of Aircraft; General Conditions
On the Redelivery Date, Sublessee shall unless a Total Loss has occurred
redeliver the Aircraft and the Aircraft Documents to Sublessor at Sublessee's
expense at the Redelivery Location. If the Aircraft has been damaged and is
being repaired in a timely manner, then the term of the Sublease will be
extended and Sublessee's obligations under this Agreement shall continue in full
force and effect and during the course of such repair and, so long as no Default
or Event of Default shall have occurred and be continuing, the Sublessor will
make insurance proceeds available to accomplish such repairs as provided in
Clause 23. When the repairs are completed, the Aircraft shall be redelivered to
Sublessor. At the time of the redelivery of the Aircraft:
24.1.1 the Aircraft shall be free and clear of all Security Interests
other than Sublessor Liens;
24.1.2 all maintenance to the Aircraft due for performance on or before
the Expiry Date shall have been completed in accordance with this
Agreement;
24.1.3 the Aircraft shall be in compliance with the Return Conditions;
24.1.4 the Aircraft shall comply with such other reasonable requirements
to which Sublessor and Sublessee have agreed and that Sublessor
has agreed to pay for; provided, however, that if compliance with
Sublessor's request is the sole cause of a delay in the return of
the Aircraft beyond the Expiry Date, then Rent shall abate for the
period of such delay solely attributable to Sublessee's compliance
with Sublessor's request;
24.1.5 any service bulletin kits which are allocated to the Aircraft at
no charge by the Manufacturer and not delivered to Sublessor as at
the Expiry Date will be shipped to a location specified by
Sublessor at Sublessee's cost.
For the avoidance of doubt, Sublessee will not be responsible for any inaccuracy
or incompleteness in the Aircraft Documents that pertains to any period
preceding Delivery, provided always that the foregoing shall not in any way be
construed as waiver by Sublessor of Sublessees obligations to keep, maintain and
update Aircraft Records during the Lease Term in accordance with the other
provisions of this Agreement.
24.2 Final Inspection
Immediately prior to redelivery of the Aircraft, Sublessee shall make the
Aircraft available to Sublessor for inspection (Final Inspection) at the
Technical Redelivery Location in order to verify that the condition of the
Aircraft complies with the Return Conditions. The Final Inspection shall be long
enough to permit Sublessor to:
(i) inspect the Aircraft Documents;
(ii) inspect the Aircraft and uninstalled Parts;
(iii) inspect the Engines, including without limitation (i) a
video boroscope inspection of (A) the low pressure and
high pressure compressors and (B) turbine area and (ii)
engine condition runs.
24.3 Operational Ground Check; Demonstration Flight
24.3.1 Promptly after completion of any corrections required under Clause
24.2, Sublessee shall conduct an operations ground check in
accordance with the applicable Return Conditions and with
Sublessee's maintenance manual criteria for the purpose of
demonstrating to Sublessor the satisfactory operation of the
systems that are normally ground checked by Sublessee, including a
full fuel tank leak stand test, hydraulic internal leak check and
pitot static systems check. Sublessee shall promptly correct any
discrepancies required to be corrected in order to comply with the
maintenance manual criteria or the provisions of this Agreement.
24.3.2 The Aircraft shall have at least a two hour demonstration flight
performed by and at the expense of Sublessee (with Sublessor's
representatives as on-board observers) using the manufacturer's
acceptance test flight procedure or any other procedure used by
Sublessee and acceptable to Sublessor in its reasonable
discretion.
24.3.3 Sublessee shall repair all discrepancies discovered during the
final inspection and demonstration flight, which exceed
maintenance manual allowable limits, and shall correct all
discrepancies in the Aircraft Documents.
24.3.4 When Sublessee has complied with the provisions of Clause 24.3.3
Sublessee shall deliver the Aircraft at the Physical Redelivery
Location.
24.4 Non-compliance
To the extent that, at the time of Final Inspection, the condition of the
Aircraft does not comply with this Agreement (except Clause 24.1.4), Sublessee
shall at Sublessor's option:
24.4.1 immediately rectify the non-compliance and to the extent the
non-compliance extends beyond the Redelivery Date, the Lease Term
will be automatically extended until the non-compliance has been
rectified and Sublessee shall be required to pay Rent to Sublessor
during that period at the rate equal to two (2) times the daily
Rent (Rent per month divided by 30) per day payable monthly or, if
earlier, on the date on which the non-compliance is rectified and
the return of the Aircraft is accepted by Sublessor; or
24.4.2 redeliver the Aircraft to Sublessor and indemnify Sublessor, and
provide cash to Sublessor in an amount reasonably satisfactory to
Sublessor as security for that indemnity, against the cost of
putting the Aircraft into the condition required by this
Agreement.
Sublessor's option in Clause 24.4 is not available to Sublessor provided that
(i) Sublessee has notified Sublessor of its intent to rectify the non-compliance
prior to the Expiry Date and (ii) Sublessee will in the reasonable opinion of
Sublessor be able to rectify such non-compliance on or before Expiry Date.
For the avoidance of doubt, Sublessor shall not be entitled to exercise its
option under this Clause 24.4 and Sublessee shall suffer no loss or penalty to
the extent that the Aircraft does not, on Final Inspection, comply with Clause
24.1.4 but is otherwise in compliance with the Return Conditions.
24.5 Acknowledgment
Provided Sublessee has complied with its obligations under this Agreement,
following redelivery of the Aircraft by Sublessee to Sublessor at the Redelivery
Location, the parties shall execute an acknowledgement confirming that Sublessee
has redelivered the Aircraft to Sublessor in accordance with this Agreement
substantially in the form of Schedule 6.
24.6 Return of the Letter of Credit
Upon compliance by Sublessee with all its obligations under this Agreement
(including reconciliation of all maintenance reserves and any carried over
deficiency at re-delivery) and the execution of the acknowledgement set out in
Clause 24.5, Sublessor shall return to Sublessee the Letter of Credit.
25. events of default
25.1 Events
Each of the following events will constitute an Event of Default and a material
breach of this Agreement:
(a) Non-payment: Sublessee fails to pay any amount
payable by it under the Transaction Documents
or Other Agreements in the currency in which
such sum fell due in respect of payments of
Rent or Maintenance Reserves, within three (3)
Business Days of the due date for payment
thereof and, in respect of any other payments,
within five (5) Business Days of the date of
receipt of written notice for payment thereof;
(b) Insurance: insurance cover on or with respect
to the Aircraft for the benefit of Sublessor
(and any additional insured) is not maintained
in accordance with the provisions of this
Agreement or the Aircraft is operated outside
the scope of such insurance coverage; or
(c) Delivery: Sublessee fails to take Delivery of
the Aircraft when obligated to do so under the
terms of this Agreement; or
(d) Redelivery: Sublessee fails to return the
Aircraft to Sublessor on the Redelivery Date
in accordance with Clause 24; or
(e) Breach: Sublessee defaults in the due
performance and observance of any other
obligations contained in the Transaction
Documents and such default is not remedied
within twenty (20) days of becoming aware of
such default; or
(f) Representation: any representation, warranty
or statement made or deemed to be made by
Sublessee in the Transaction Documents or in
any certificate, statement or opinion
delivered by it hereunder or in connection
herewith is incorrect, inaccurate or
misleading in any respect which is material
when made or deemed to be made or if the
effects or consequences of such incorrect,
inaccurate or misleading representation,
warranty or statement are capable of cure and
Sublessee fails to cure such effects or
consequences within twenty (20) days after
becoming aware of such default; or
(g) Approvals: any governmental or other consent,
license or authorization required by law for
the validity or legality of the Transaction
Documents or the performance hereof or thereof
(other than any such which may be required to
be obtained by Sublessor) is withdrawn or
ceases, for any reason, to be in full force
and effect or is not renewed or obtained when
required and such withdrawal, cessation,
non-renewal or non-obtaining in the opinion of
Sublessor may prejudice the rights of
Sublessor under this Agreement or in the
reasonable opinion of Sublessor may have a
material adverse effect on Sublessees
obligation to perform its obligations under
this Agreement; or
(h) Registration:
(i) the registration of the Aircraft is
cancelled other than as a result of
an act or omission of Sublessor or
another Indemnitee including the
Owner Trustee and Sublessor or an
affiliate of the Owner Trustee and
Sublessor; or
(ii) Sublessee ceases to be a US Air
Carrier authorised to transport
passengers in common carriage; or
(iii) the Aircraft ceases to be "based
and primarily used in the United
States" within the meaning of 14
Code of Federal Regulations 47.9.
(i) Possession: Sublessee abandons the Aircraft or
the Engines, or Sublessee or any Permitted Air
Carrier no longer has unencumbered control
(other than Permitted Liens) or possession of
the Aircraft or Engines, except as otherwise
permitted by this Agreement; or
(j) Discontinuation: Sublessee threatens to or
temporarily or permanently discontinues
business or sells or otherwise disposes of all
or substantially all of its assets; or
(k) Adverse change: A material adverse change
occurs in the financial condition of Sublessee
which in the reasonable opinion of Sublessor
may have a material negative impact on
Sublessees ability to perform its obligations
hereunder; or
(l) Cross Default: any Financial Indebtedness of
Sublessee (in an aggregate amount in excess of
US$1,000,000 or its equivalent in other
currencies) becomes due and payable, or may be
declared due and payable, prior to its stated
maturity by reason of default by Sublessee
(having regard to any applicable grace period)
or any such Financial Indebtedness is not paid
on the due date for payment thereof (as
extended by any applicable grace period); or
(m) Insolvency: Sublessee is declared bankrupt or
becomes insolvent or is unable to pay its
debts as and when the same fall due or
declares a moratorium on the payment of its
indebtedness or makes an assignment for the
benefit of creditors generally or is subject
to bankruptcy, liquidation, debt negotiations
or any analogous proceedings; or
(n) Proceedings: Any proceedings, resolutions,
filings or other steps are instituted or
threatened with respect to the Sublessee or a
substantial part of Sublessees property
relating to the bankruptcy, liquidation,
reorganisation or protection from creditors of
Sublessee. If instituted by Sublessee or done
by the Sublessee, the same will be an
immediate Event of Default. If instituted by
another Person, the same will be an Event of
Default if not dismissed, remedied or
relinquished within twenty (20) days; or
(o) Judgments: Any order, judgement or decree is
entered by any court of competent jurisdiction
appointing a receiver, trustee or liquidator
of Sublessee or a substantial part of its
property or if a substantial part of its
property is to be sequestered. If instituted
by Sublessee or done by the Sublessee, the
same will be an immediate Event of Default. If
instituted by another Person, the same will be
an Event of Default if not dismissed, remedied
or relinquished within twenty (20) days; or
(p) Air Navigation Charges: Any competent
authority has unpaid Air Navigation Charges
due from Sublessee (unless such charges are
being contested in good faith and by
appropriate proceedings and such proceedings
do not involve any danger of the detention,
interference with the use or operation, sale,
forfeiture or loss of the Aircraft) and such
charges remain outstanding of a period of ten
(10) days from the due date thereof; provided
that such 10 day grace period will not apply
if there is a danger of detention,
interference with the use or operation, sale,
forfeiture or loss of the Aircraft; or
(q) Airport Charges: any airport has unpaid
Airport Charges due from Sublessee (unless
such charges are being contested in good faith
and by appropriate proceedings and such
proceedings do not involve any danger of the
detention, interference with the use or
operation, sale, forfeiture or loss of the
Aircraft) and such charges remain outstanding
for a period of ten (10) days from the due
date thereof; provided that such 10 day grace
period will not apply if there is a danger of
detention, interference with the use or
operation, sale, forfeiture or loss of the
Aircraft; or
(r) Other Default: an Event of Default is
continuing unremedied under any Other
Agreement between Sublessee and Sublessor or
another lessor or sublessor that either (i)
shares the same general partner or controlling
shareholder with Sublessor or (ii) whose
beneficiary shares the same general partner or
controlling shareholder with Sublessor.
25.2 Sublessor's Rights
25.2.1 If an Event of Default occurs, without prejudice, and in all cases
addition to any other rights of Sublessor under this Agreement or
under applicable law (to the extent permitted by and subject to
compliance with any mandatory requirement, of law):
(i) in the case of a default under Clause 25.1(m) or (o),
without the need for notice or demand, this Agreement
will automatically terminate together with any and all
other rights of Sublessee with respect to the Aircraft
but without prejudice to the continuing obligations of
Sublessee under this Agreement, whereupon all rights of
Sublessee under this Agreement shall cease; or
(ii) in all other cases Sublessor may at any time thereafter:
(aa) by notice to Sublessee and with immediate
effect terminate the leasing of the Aircraft
and any and all other rights of Sublessee
with respect to the Aircraft but without
prejudice to the continuing obligations of
Sublessee under this Agreement, whereupon all
rights of Sublessee under this Agreement
shall cease; or
(bb) proceed by appropriate court action or
actions to enforce performance of this
Agreement or to recover damages for the
breach of this Agreement provided that
damages recoverable under UCC 2-A sections
527 through 530 and 532 shall be recoverable
in the case of any Event of Default
hereunder; or
(cc) for Sublessees account do anything that may
reasonably be required to cure any default
and recover from Sublessee all reasonable
costs, including reasonable legal fees and
expenses incurred in doing so and interest
thereon at the Default Rate; or
(dd) either:
(A) at its option, may enter upon the
premises where the Airframe or any
or all Engines are located or
believed to be located and take
immediate possession of and remove
such Airframe or Engines without
the necessity for first instituting
proceedings, or by summary
proceedings or otherwise, and
Sublessee shall comply therewith,
all without liability to Sublessor
for or by reason of such entry or
taking possession, whether for the
restoration or damage to property
caused by such taking or otherwise;
(B) by serving notice require Sublessee
to redeliver the Aircraft to
Sublessor at the Redelivery
Location or such other location as
Sublessor may require.
(ee) Whether or not Subessor shall have exercised,
or shall thereafter at any time exercise, any
of its rights under clause 25.2.1(dd) above
with respect to all or any part of the
Aircraft, Sublessor, by written notice to
Sublessee specifying a payment date not
earlier than ten (10) days from the date of
such notice, may demand that the Sublessee
pay to Sublessor, and Sublessee shall pay
Sublessor, on the payment date specified in
such notice as liquidated damages and not as
a penalty (in lieu of the instalments of Rent
due for periods commencing on or after the
payment date in such notice), any unpaid
instalments of Rent due for periods prior to
the period commencing with the payment date
specified in such notice plus the present
value of the remaining instalments of Rent
during the Initial Lease Term and Extension
Lease Term, if any (together, the "Term")
using in each case a discount rate of the
amount of interest then paid on U.S. Treasury
Bills of similar maturity. In addition,
Sublessee shall be liable for the amounts set
forth in Clause 25.3(ii) and (iii).
25.2.2 If an Event of Default occurs, Sublessor may sell or re-lease or
otherwise deal with the Aircraft at such time and in such manner
as Sublessor considers appropriate in a commercially reasonable
manner, free and clear of any interest of Sublessee as if this
Agreement had never been entered into and as if Sublessee had
never made any payments hereunder. While an Event of Default is
continuing, Sublessee will not operate the Aircraft without the
consent of Sublessor.
25.3 Default Payments
Sublessee shall be liable for:
(i) any and all unpaid Rent due hereunder before or after
any termination hereof;
(ii) any and all unpaid Supplemental Rent due hereunder
before or after any termination hereof;
(iii) all costs and expenses (including reasonable attorney's
fees and disbursements) incurred by Sublessor in
connection with or as a result of any Event of Default
or exercise of remedies hereunder, including, but not
limited to, (i) all costs and expenses incurred in
connection with recovering possession of the Aircraft
and in carrying out any works or modifications required
to place the Aircraft in the condition specified in
Clause 24.1 and remarketing the Aircraft, (ii) interest
at the Default Rate on any amount not paid when due
under this Agreement and (iii) an amount sufficient to
fully compensate Sublessor for any loss or damage to
Sublessor's residual interest in the Aircraft. All
costs and expenses referred to in the preceding
sentence shall be payable by Sublessee upon demand by
the Sublessor unless otherwise specified in this
Agreement. All such obligations shall survive any
termination of this Agreement or the leasing of the
Aircraft or any portion thereof hereunder.
Expect as otherwise expressly provided above, no remedy referred
to in this Clause 25 is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy referred to
above or otherwise available to Sublessor at law or in equity. The
exercise or beginning of exercise by Sublessor of any one or more
of such remedies shall not preclude the simultaneous or later
exercise by Sublessor of any or all such other remedies. No
express or implied waiver by Sublessor of any Event of Default
hereunder shall in any way be, or be construed to be, a waiver of
any future or subsequent Event of Default.
26. assignment and transfer
26.1 By Sublessee
No assignment, novation, transfer, mortgage or other change may be made by
Sublessee in any of its rights with respect to the Aircraft, Engine, or Parts or
this Agreement.
26.2 By Sublessor
Subject to Sublessees rights pursuant to this Agreement, Sublessor may at its
expense and at any time and without Sublessees consent sell, assign or transfer
its rights and interest hereunder to a third party, ("Sublessors's Assignee"),
provided that such sale, transfer, or assignment shall not increase Sublessees
obligations. Sublessor will cooperate with Sublessee to ensure minimum practical
disturbance or cost in connection with such assignment or transfer of rights and
interest hereunder and Sublessor shall reimburse Sublessee for any expense
incurred by Sublessee in connection with such assignment or transfer. Sublessee
agrees to cooperate in good faith with Sublessor in such sale, assignment or
transfer and provide Sublessor and Sublessor's Assignee with such reasonable
assistance as Sublessor may require, including but not limited to assisting in
any of Sublessor's and Sublessors Assignee's efforts to minimize or eliminate
any Taxes related to such assignment or transfer. For a period of two (2) years
after any such sale or assignment and at Sublessee's cost, Sublessee will
continue to name Owner Trustee, Sublessor and Sublessor's Lender as additional
insureds in accordance with the insurance requirements set out in Clause 22.
26.3 Assignment to Lender
26.3.1 Subject to Sublessee's rights under this Agreement, Owner Trustee
may at any time grant Security Interests over the Aircraft and the
benefit of this Agreement and any other agreement related to the
Aircraft to any Sublessor's Lender as security for Owner Trustee's
obligations to such Sublessor's Lender, provided by doing so the
obligations of Sublessee under this Agreement shall not materially
increase. Owner Trustee's rights to grant any such Security
Interests shall be subject only to receipt by Sublessee of an
acknowledgement, in form and substance reasonably satisfactory to
Sublessee, from or on behalf of Sublessor's Lender relating to
quiet enjoyment and other related rights.
26.3.2 On Sublessor's request, Sublessee will execute all such documents
as Owner Trustee or Sublessor's Lender may reasonably require
(including an Estoppel Certificate) to confirm Sublessee's
obligations under this Agreement and for the purpose of perfecting
and ensuring and maintaining the perfection of any Security
Interest granted by Owner Trustee over the Aircraft or this
Agreement and obtain Sublessee's confirmation that no Event of
Default is outstanding. Sublessee, at Sublessors expense, will
provide all other reasonable assistance and cooperation to
Sublessor, Owner Trustee or Sublessor's Lender in connection with
any of the matters referred to in this Clause 26 or the perfection
and maintenance of any related Security Interest, the making of
any necessary changes to the Insurances, the making of any
necessary filings and registrations in the State of Incorporation
or the provision of any appropriate counsel's opinions in relation
to Sublessee's obligations. Except with respect to the initial
documentation and filings to be done in connection with this
Agreement or at the time of Delivery of the Aircraft hereunder,
Sublessor will reimburse Sublessee for its reasonable
out-of-pocket costs including reasonable legal fees and expenses
in reviewing documents required by Sublessor or Sublessor's Lender
26.3.3 Sublessor will obtain for the benefit of Sublessee an
acknowledgement from any Sublessors Assignee or Sublessor's
Lender that, so long as no Default has occurred and is continuing
hereunder, such Person will not interfere with Sublessees
quiet, peaceful use and enjoyment of the Aircraft.
26.4 Sublessor Includes Sublessor's Assignee and Sublessor's Lender
Wherever the term "Sublessor" is used in this Agreement in relation to any of
the provisions relating to registration, title, disclaimer, indemnity and
insurance contained in Clauses 12, 20, and 22 respectively, the term "Sublessor"
will be deemed to include Sublessors Assignee and Sublessor's Lender, if
applicable.
27. miscellaneous provisions
27.1 Rights Cumulative, Waivers
The rights of Sublessor under this Agreement are cumulative, may be exercised as
often as Sublessor considers appropriate and are in addition to Sublessor's
rights under the general law. The rights of Sublessor against Sublessee or in
relation to the Aircraft, whether arising under this Agreement or the general
law, shall not be capable of being waived or varied otherwise than by an express
waiver or variation in writing; and in particular any failure to exercise or any
delay in exercising any of such rights shall not operate as a waiver or
variation of that or any other such right; any defective or partial exercise of
any of such rights shall not preclude any other or further exercise of that or
any other such right; and no act or course of conduct or negotiation on
Sublessor's part or on its behalf shall in any way preclude it from exercising
any such right or constitute a suspension or any variation of any such right.
27.2 Delegation
Sublessor may delegate to any person or persons all or any of its rights, 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 Sublessor in its absolute discretion thinks fit.
27.3 Expenses
27.3.1 So long as the Aircraft is tendered for Delivery to Sublessee
pursuant to this Agreement, Sublessee shall pay to Sublessor on
demand:
(i) all reasonable expenses including legal, professional,
and out-of-pocket expenses incurred or payable by
Sublessor in connection with any amendment to or
extension of or other documentation requested by
Sublessee in connection with, or the granting of any
waiver or consent under this Agreement or the
monitoring of compliance by Sublessee with this
Agreement, but in the case of such monitoring of
compliance, only if upon such monitoring Sublessee is
found to be in Default under this Agreement; and
(ii) all expenses including legal and other costs payable or
incurred by Sublessor following a Default in connection
with the enforcement of or preservation of any of
Sublessor's rights under this Agreement, or in respect
of the repossession of the Aircraft.
All expenses payable pursuant to this Clause 27.3 shall be paid in the currency
in which they are incurred by Sublessor.
27.4 Time of Essence
The time stipulated in this Agreement for all payments by Sublessee to Sublessor
and for the prompt performance of Sublessee's other obligations under this
Agreement will be of the essence for this Agreement.
27.5 Entire Agreement
The Transaction Documents are the sole and entire agreements between Sublessor
and Sublessee in relation to the leasing of the Aircraft, and supersede all
previous agreements in relation to that leasing.
27.6 Further Assurances
The parties shall take such action as Sublessor and Sublessee reasonably
consider to be in furtherance of the commercial intent of the parties under the
Transaction Documents including, without limitation, such action as may be
required properly to transfer title to engines and parts as contemplated in this
Agreement in compliance with the laws of the lex situs of the relevant engine or
part at the relevant time.
27.7 Language
All notices to be given under this Agreement will be in English. All documents
delivered to Sublessor pursuant to this Agreement will be in English or, if not
in English, will be accompanied by a certified English translation. If there is
any inconsistency between the English version of this Agreement and any version
in any other language, the English version will prevail.
27.8 Variation
The provisions of this Agreement shall not be varied or amended otherwise than
by an instrument in writing executed by or on behalf of Sublessor and Sublessee.
27.9 Invalidity of any Provision
If any provision of this Agreement becomes invalid, illegal or unenforceable in
any respect under any law, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired.
27.10 Survival
All indemnities and other obligations of Sublessee which arise or are
attributable to circumstances occurring during the Lease Term shall survive, and
remain in full force and effect, notwithstanding the expiration or other
termination of this Agreement or the leasing of the Aircraft hereunder.
27.11 Reimbursement
If Sublessee defaults in the performance of any of its obligations under this
Agreement that can be rectified by the spending of money, Sublessor shall be
entitled (but not obliged) to expend money to rectify such matter and Sublessee
shall reimburse Sublessor on demand the money so expended. Any expenditure by
Sublessor pursuant to this Clause 27.11 shall not prejudice the rights of
Sublessor in respect of any Default or Event of Default.
27.12 Press Releases
The parties will give copies to one another, in advance if possible, of all
news, articles and other releases provided to the public media regarding this
Agreement or the Aircraft.
27.13 Power of Attorney
Sublessee hereby irrevocably appoints Sublessor as its attorney for the purpose
of putting into effect the intent of this Sublease following an Event of
Default, including without limitation, the return, repossession, deregistration
and exportation of the Aircraft. To evidence this appointment, Sublessee has
executed the Power of Attorney in the form of Schedule 10. Sublessee will take
all steps required under the laws of the State of Registration to provide such
power of attorney to Sublessor.
27.14 Usury Laws
The parties intend to contract in strict compliance with the usury laws of the
State of New York and, to the extent applicable, the United States.
Notwithstanding anything to the contrary in the Transaction Documents, Sublessee
will not be obligated to pay Default Interest or other interest in excess of the
maximum non-usurious interest rate, as in effect from time to time, which may by
applicable law be charged, contracted for, reserved, received or collected by
Sublessor in connection with the Transaction Documents.
27.15 Confidentiality
The Transaction Documents and all non-public information obtained by either
party about the other are confidential and are between Sublessor and Sublessee
only and the commercial terms and other material provisions of this Sublease
will not be disclosed by a party to third parties (other than to such party's
auditors, lenders and legal advisors) without the prior written consent of the
other party except in connection with enforcement of rights hereunder. If
disclosure is required as a result of applicable law, Sublessee and Sublessor
will cooperate with one another to obtain confidential treatment as to the
commercial terms and other material provisions of this Sublease; provided,
however, if they are unable to obtain such confidential treatment and disclosure
is required by applicable law, then such disclosure may be made in accordance
with such law.
27.16 Counterparts
This Agreement may be executed in any number of identical counterparts, each of
which will be deemed to be an original, and all of which together will be deemed
to be one and the same instrument when each party has signed and delivered one
such counterpart to the other party. Delivery of an executed counterpart of this
Agreement by telefacsimile will be deemed effective as delivery of an originally
executed counterpart. Any party delivering an executed counterpart of this
Agreement by telefacsimile will also deliver an originally executed counterpart;
provided, however, the failure of any party to deliver an originally executed
counterpart of this Agreement will not affect the validity or effectiveness of
this Agreement.
27.17 Bankruptcy
It is the intention of the parties that the Sublessor shall be entitled to the
benefits of 11 U.S.C 1110 with respect to the right to repossess the Airframe,
Engines and Parts as provided herein, and in any circumstances where more than
one construction of the terms and conditions of this Agreement is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time,
it is hereby expressly agreed and provided that, notwithstanding any other
provisions of the Federal bankruptcy laws, as amended from time to time , any
right of the Sublessor to take possession of the Aircraft in compliance with the
provisions of this Agreement shall not be affected by the provisions of 11 U.S.C
362 or 363, as amended from time to time, or any analogous provisions of any
superseding statute or any power of the bankruptcy court to enjoin such taking
of possession. This Agreement is a true lease and not one intended as security.
28. notices
Any notice or other communication under or in connection with this Agreement
shall be in writing and shall be delivered personally, by reputable overnight
courier or express service or by post or facsimile transmission to the
respective addresses or facsimile numbers given below or such other address or
facsimile number as the recipient may have notified to the sender in writing.
Proof of posting or despatch shall be deemed to be proof of receipt. Notice
shall be deemed received:
(i) in the case of a letter, on the fifth Business Day after
posting; and
(ii) in the case of a facsimile, on the Business Day
immediately following the date of despatch or
transmission.
In the case of a notice sent by expedited delivery, notice will be deemed
received on the date of delivery set forth in the records of the person which
accomplished the delivery. If any notice is sent by more than one of the above
listed methods, notice will be deemed received on the earliest possible date in
accordance with the above provisions. Notices will be addressed as follows:
Sublessor: Indigo Pacific AB.
Address: Sodra Forstudsgatan
SE-21143 Maluno
Sweden
Attention: Legal Department
Telephone: 46406603001
Facsimile: 4640302350
Sublessee: FRONTIER AIRLINES, INC.
Address: 12015 E. 46th Avenue
Denver, Colorado 80239
Attention: General Counsel
Facsimile: (303) 371 9669
29. governing law and jurisdiction
29.1 New York Law
THIS SUBLEASE WILL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE BUT EXCLUDING SECTION 7-101 OF THE GENERAL OBLIGATIONS
LAW (NOTWITHSTANDING THE CONFLICT LAWS OF THE STATE OF NEW YORK).
29.2 NON-EXCLUSIVE JURISDICTION IN NEW YORK
EACH OF SUBLESSOR AND SUBLESSEE (A) IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK CITY
COUNTY, AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK FOR THE PURPOSES OF ANY SUIT, ACTION, OR OTHER PROCEEDING ARISING OUT OF
THIS AGREEMENT OR THE TRANSACTION DOCUMENTS OR THE SUBJECT MATTER HEREOF OR
THEREOF OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY THE OTHER
PARTY OR ITS SUCCESSOR OR ASSIGN AND (B) TO THE EXTENT PERMITTED BY APPLICABLE
LAW, IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE
OR OTHERWISE ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVENAMED COURTS; THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE IS IMPROPER OR THAT THIS AGREEMENT OR THE OTHER
TRANSACTION DOCUMENTS OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE
ENFORCED IN OR BY SUCH COURT. NOTHING HEREIN CONTAINED SHALL PREVENT EITHER
PARTY FROM BRINGING SUIT IN ANY OTHER APPROPRIATE JURISDICTION.
29.3 SERVICE OF PROCESS
WITH RESPECT TO ACTIONS, SUITS AND PROCEEDINGS BROUGHT IN THE COURTS NAMED IN
29.2, EACH OF SUBLESSOR AND SUBLESSEE HEREBY WAIVES PERSONAL SERVICE OF PROCESS
AND AGREES THAT SERVICE OR PROCESS MAY BE MADE UPON IT BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT THE ADDRESSED SPECIFIED IN CLASUE
28 AND THAT SUCH SERVICE SHALL BE DEEMED COMPLETED ON THE FIFTH BUSINESS DAY
AFTER SERVICE IS DEPOSITED IN THE MAIL. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVICE PROCESS IN ANY OTHER MANNER PROVIDED BY APPLICABLE LAW OR ACCORDANCE
WITH THE HAGUE CONVENTION IF APPLICABLE.
29.4 WAIVER
SUBLESSEE AND SUBLESSOR HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY.
SIGNATURE PAGE
IN WITNESS whereof the parties hereto have executed this Agreement on the date
shown at the beginning of this Agreement.
SIGNED on behalf of INDIGO PACIFIC AB
By: ___________________________
Name: ___________________________
Title: ___________________________
SIGNED on behalf of FRONTIER AIRLINES, INC.
By: ___________________________
Name: ___________________________
Title: ___________________________
Receipt of the "original" counterpart of this Agreement is hereby acknowledged.
SCHEDULE 1
AIRCRAFT SPECIFICATION
Model Boeing 737-3U3
Serial Number 28734
Current Registration N309FL
Line Number 2974
Date of Manufacture December 1997
Engines CFM INTERNATIONAL MODEL CFM 56-3C1,
ENGINE SERIAL NUMBERS 858670 AND
858673
APU Garrett GTCP85-129K
Present Operator N/A
WEIGHTS Lbs
Max Taxi Weight 140,000
Max Take Off Weight 139,500
Max Landing Weight 116,600
Max Zero Fuel Weight 109,600
Basic Empty Weight 69,721
Max Fuel capacity 5,311 US Gallons
INTERIOR CONFIGURATION
Seating 136 Y Burus Airest 2000
Galleys G1, G2, G4B WEBER
Lavatories Three
1 Forward, 2 Aft
NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
FURNISHING & EQUIPMENT LIST
DESCRIPTION MANUFACTURER MODEL OR PART NUMBER QTY
Flight Control Computer Honeywell 10-62038 2
AFDS Controller Honeywell 10-62038-239 1
Yaw Damper System Honeywell 10-60447 1
Autothrottle Computer Smiths Industries 10-62017 1
VHF Com TRX Collins 822-0693-004 3
VHF Comm. Cntrl Panel Collins 622-6831-022 3
PA Amplifier Collins 346D-2B 1
Boarding Music System Matsushita RD-AX7351 1
Selcal decoder Team SC2253AD01 1
CVR Fairchild A 100A 1
HF Communication Collins 622-5272-001 2
ACARS Management Unit Allied Signal 965-0728-003 1
Video Monitors 14" Transcom Various 9
Video Tape Reproducer VHS Transcom 743-0238-001 1
Control Distr Monitor Unit Transcom 743-0313-005 1
Cabin Info Video I/face unit Sony Transcom 700-1388-001 1
Audio Tape Reproducer Matsushita RD-AX7002-01 1
Audio System - PES Matsushita Various
Digital Flight Recorder Allied Signal 980-4700-001 1
DFDAU Allied Signal 967-0202-001 1
Electric Altimeter Smiths 10-61826-8 1
Digital Air Data Computer Smiths 10-62153-1 2
EHSI Colour Collins S242T404-611 2
EADI Colour Collins S242T404-511 2
EFIS Control Panel Collins 622-8001-001 2
IRU Honeywell S242T101-112 2
GPWS Allied Signal S220T102 1
VHF Nav Collins 822-0761-001 2
ATC Transponder Allied Signal 066-01127-1301 2
DME Collins 622-4540-122 2
NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
FURNISHING & EQUIPMENT LIST
ADF Collins 777-1492-005 2
Marker Collins 522-2996-011 1
FMC Smiths 10-62225-002 1
Radio Altimeter Thompson 9599-607-14931 2
WX-Radar Allied Signal 066-50008-0102 1
TCAS Processor Allied Signal 066-50000-1508 1
EFIS Symbol Generator Collins 622-8000-101 2
Wheels/Brakes Allied Signal MW 10-61819-28
NW 10-61063-22
SCHEDULE 2
DELIVERY CONDITIONS
The Aircraft will be delivered "AS IS, WHERE IS" at Delivery Location and with a
valid and effective Certificate of Airworthiness in the Standard Category.
The following agreed Delivery Work shall have been performed:
1. Configuration: The Aircraft will be delivered with a standard
class 136 passenger configuration with seats to be procured by
Sublessee.
2. Paint: The existing markings will be removed and the Aircraft will
be delivered in a Frontier paint scheme, using the currently
existing base white color and Frontier provided tail decal.
3. TCAS: Installed, as agreed to between Air New Zealand and the Manufacturer.
SCHEDULE 3
ACCEPTANCE CERTIFICATE
This Acceptance Certificate is delivered, on the date set out below by FRONTIER
AIRLINES, INC. (Sublessee), to INDIGO PACIFIC AB (Sublessor), pursuant to the
Aircraft Sublease Agreement dated November [ ], 1998 between Sublessor and
Sublessee (the Sublease). Capitalized terms used in this Certificate shall have
the meanings given to such terms in the Sublease.
1. Sublessee has this [ ] day of [ ] (Time: [ ]) at [ ]
received from Sublessor possession of:
(a) one (1) Boeing 737-3U3 Aircraft, bearing manufacturer's serial
number 28734, registration mark[ ] together with two (2) CFM
INTERNATIONAL CFM 56-3C1 engines bearing manufacturer's serial
numbers [ ] and [ ], all Parts attached thereto and thereon in an
airworthy condition; and
(b) all Aircraft Documents as listed in the Document Receipt attached hereto.
2. The Airframe, Engines and Parts had the following Flight Hours/Cycles at
delivery:
(a) Airframe:
Total hours Total landings Flight Hours/ Cycles Flight Hours/ Cycles
since last "C" Check since last "A" Check
[ ] [ ] [ ] Flight Hour [ ] Flight Hour
[ ] Cycles [ ]Cycles
(b) Engines:
Position Serial No. Total Total Cycles Flight Hours/ Flight Hours/
Flight Cycles since Cycles since
Hours last shop visit last Engine
Performance
Restoration
Visit
[ ] [ ] [ ] [ ] [ ] Flight [ ] Flight
Hours Hours
[ ] Cycles [ ] Cycles
Position Serial No. Total Total Cycles Flight Hours/ Flight Hours/
Flight Cycles since Cycles since
Hours last shop visit last Engine
Performance
Restoration
Visit
[ ] [ ] [ ] [ ] [ ] Flight [ ] Flight
Hours Hours
[ ] Cycles [ ] Cycles
Time Remaining to next life limited part removal
Flight Hours Cycles
MSN [ ] [ ] [ ]
MSN [ ] [ ] [ ]
(c) APU:
MSN Total Flight Hours Flight Hours/ Cycles Flight Hours/Cycles
remaining until next HSI remaining on turbine
inspection and compressor life
limited parts
[ ] [ ] [ ] [ ]
(d) Landing Gears:
Position Serial No. Total Flight Flight Hours/ Cycles Flight Hours/
Hours/Cycles since last overhaul Cycles to next
sched. Removal
Nose [ ] [ ] Flight Hours [ ] Flight Hours [ ] Flight Hours
[ ] Cycles [ ] Cycles [ ] Cycles
Right Main [ ] [ ] Flight Hours [ ] Flight Hours [ ] Flight Hours
[ ] Cycles [ ] Cycles [ ] Cycles
Left Main [ ] [ ] Flight Hours [ ] Flight Hours [ ] Flight Hours
[ ] Cycles [ ] Cycles [ ] Cycles
(e) Status of components or Parts with time/Cycle and calendar limits (see
attached sheet);
(f) Fuel on board at Delivery: [ ] kilos ([ ] gallons)
3. Other technical information regarding the Aircraft and its
components and any damage thereto are correctly set forth on the
Aircraft report and damage chart attached hereto.
4. Place of Acceptance:
5. Sublessee confirms to Sublessor that as at the time indicated
above, being the Delivery Date:
(a) the representations and warranties contained in Article 2 of the
Sublease are hereby repeated;
(b) the Aircraft is insured as required by the Lease; and
(c) Sublessee's authorised technical experts have inspected the
Aircraft and the Aircraft Documents to ensure the Aircraft and the
Aircraft Documents conform to Sublessee's requirements. The
Aircraft and the Aircraft Documents are in accordance with the
specifications of the Lease and satisfactory in all respects.
6. This Acceptance Certificate is executed and delivered by the
parties in [ ].
IN WITNESS WHEREOF, the parties hereto have caused this Acceptance Receipt to be
executed in their respective corporate names by their duly authorised
representatives as of the day and year first above written.
INDIGO PACIFIC AB
By:
- ----------------------------------
FRONTIER, INC
By:
- ----------------------------------
SCHEDULE 4
SUBLEASE SUPPLEMENT
SUBLEASE SUPPLEMENT NO. ______ dated November ___, 1998, between Indigo Pacific
AB ("Sublessor") and FRONTIER AIRLINES, INC. ("Sublessee").
Sublessor and Sublessee have previously entered into that certain Aircraft
Sublease Agreement dated as of November [ ], 1998 (herein called the "Sublease"
and the defined terms therein being hereinafter used with the same meaning). The
Sublease provides for the execution and delivery from time to time of a Sublease
Supplement substantially in the form hereof for the purpose of leasing the
aircraft described below under the Sublease as and when delivered by Sublessor
to Sublessee in accordance with the terms thereof.
The Sublease relates to the Aircraft, Parts and Engines as more precisely
described below. A counterpart of the Sublease is attached hereto and this
Sublease Supplement and the Sublease shall form one document.
In consideration of the premises and other good and sufficient consideration,
Sublessor and Sublessee hereby agree as follows:
1. Sublessor hereby delivers and subleases to Sublessee under the
Sublease and Sublessee hereby accepts and subleases from Sublessor
under the Sublease, that certain used Boeing Model 737-3U3
Aircraft bearing FAA Registration Mark N309FL, including the
Airframe bearing manufacturers serial number 28734 and the two (2)
CFM INTERNATIONAL CFM 56-3C1 Engines bearing manufacturer's serial
numbers 858670 and 858673 (each of which Engines has in excess of
750 rated takeoff horsepower or the equivalent of such horsepower)
described in Schedule 1 herewith ("Delivered Aircraft").
2. The Delivery Date of the Delivered Aircraft is the date of this
Sublease Supplement set forth in the opening paragraph hereof.
3. The Lease Term for the Aircraft shall commence on the Delivery
Date and shall end on the Expiry Date.
4. The amount of Rent for the Delivered Aircraft is set forth in the
Sublease and is payable as provided in the Sublease.
5. Sublessee hereby confirms to Sublessor that (i) the Aircraft and
each Engine installed thereon or belonging thereto have been duly
marked in accordance with the terms of Clause 13.12 of the
Sublease, (ii) Sublessee has accepted the Aircraft for all
purposes hereof and of the Sublease, and (iii) Sublessee has
inspected the Aircraft and the Aircraft satisfies the conditions
set forth in the Sublease.
6. All of the terms and provisions of the Sublease are hereby
incorporated by reference in this Sublease Supplement to the same
extent as if fully set forth herein.
7. This Sublease Supplement may be executed in any number of
counterparts, each of such counterparts, except as provided in
Clause ___ of the Sublease, shall for all purposes be deemed to be
an original; and all such counterparts shall together constitute
but one and the same Sublease Supplement.
8. This Lease Supplement has been delivered in New York.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease Supplement
No. __ to the Sublease to be duly executed as of the day and year first above
written.
SUBLESSOR,
INDIGO PACIFIC AB
By:
Title:
SUBLESSEE,
FRONTIER AIRLINES, INC.
By:
Title:
SCHEDULE 5
INSURANCE REQUIREMENTS
1.1 Types of Insurance
The Insurances required to be maintained are as follows:
(a) an All Risks Hull Insurance Policy on the Aircraft on an agreed
value basis in an amount not less than the Agreed Value with
insurers not entitled to replace the Aircraft in the event of an
insured Total Loss and All Risk Hull Insurance Policy on each
Engine when not installed no the Aircraft on an agreed value basis
not less than the Engine Agreed Value;
(b) insurance covering all risks of physical loss or damage howsoever
occasioned in respect of engines, spare parts and equipment
forming part of the Aircraft but which for the time being are
removed from the Aircraft, and are not insured by the Aircraft's
hull and war risk insurance in an agreed value of not less than
their replacement cost;
(c) a War Risks Insurance Policy on the Aircraft covering all of those
risks which are currently enumerated in Lloyds Form AVN.48B War,
Hi-jacking and Other Perils Exclusion Clause (Aviation), other
than paragraph (b) thereof to the fullest extent possible and any
additional risks which may hereafter be included therein or in any
form succeeding to any of its functions on an agreed value basis
in any amount not less than the Agreed Value;
(d) Liability Insurance, being Aircraft Third Party Legal Liability,
Passenger, Contractual Legal Liability, Baggage Legal Liability,
Cargo and Mail Legal Liability and Airline General Third Party
Legal Liability including war and allied perils to the fullest
extent available for a combined single limit of liability bodily
injury/property damage of not less than the Minimum Liability
Coverage any one accident provided that if the Sublessor on the
basis of advice received from an independent insurance adviser
believe that such limit should be revised upwards, it shall be
replaced by such higher limit as may be appropriate in the light
of circumstances prevailing in the international airline industry
at the time and provided further that the Sublessor shall not be
obliged by this Clause to effect and maintain insurance in respect
of any inability to recover from any manufacturer of the Airframe,
Engines or any Part, losses and liabilities incurred as a result
of negligent manufacture.
1.2 Terms of Hull and Spares Insurance
All required hull and spares insurance, so far as it relates to the Aircraft,
will:
(a) Settlement of Losses: provided that any loss will be payable in
Dollars to Sublessor's Lender, if none, to Sublessor or at the
request of Sublessor to Sublessor's Lender. In respect of any
other claim, the relevant policy shall provide that settlement
(net of any relevant policy deductible) shall be made with such
parties as may be necessary to repair the Aircraft or as otherwise
agreed after consultation between the Sublessor's Lender, the
Owner Trustee, the Sublessor and the Sublessee. The relevant
policy shall provide that such payments shall only be made
provided the same are in compliance with all applicable laws and
regulations;
(b) 50/50 Provision: if separate hull "all risks" and "war risks"
insurances are arranged, include a 50/50 provision in accordance
with market practice AVS. 103A is the current market language;
(c) Deductibles: provide for deductibles in respect of the Aircraft
All Risks Hull Insurance Policy or War Risks Insurance Policy of
no more than US$250,000 or such other limit as the parties may
from time to time agree.
(d) Customary Risks: cover at least such risks as are customarily
insured against in the airline industry for an amount not less
that the Agreed Value;
(e) Sound Practice: be in accordance with sound international airline
practice.
1.3 Terms of Liability Insurance
All required liability insurances will:
(a) cover at least such risks as are customarily insured against in
the airline industry and names the additional assured as
additional named insured for their respective rights and interest;
(b) be in form and substance in accordance with sound international
airline practice (having regard to the type of aircraft or engines
involved);
(c) provide that upon payment of any loss or claim by the insurers
in accordance with the endorsement relating to the relevant policy
naming the additional assured as additional assureds, the insurers
shall to the extent and in respect of such payment be thereupon
subrogated to all legal and equitable rights of the additional
assured indemnified under such endorsement relating to the
Insurances (but not against any additional assured) and further
provides that the insurers shall not exercise such rights without
the consent of those additional assured such consent not to be
unreasonably withheld and at the expense of the insurers such
additional assured shall do all things reasonably necessary to
assist the insurers to exercise the said rights;
(d) provide that except in respect of any provision for automatic
termination or cancellation specified in the policy or any
endorsement thereof, cover for the interests added by the
endorsement relating to the relevant policy may only be cancelled
or materially altered in a manner adverse to the additional
assured by the giving of not less than thirty (30) days (but seven
(7) days or such lesser period as may be customarily available in
respect of War risks) notice in writing to the insurance brokers
and that notice shall be deemed to commence from the date such
notice is given by the insurers and that such notice will not be
given at the normal expiry date of the policy or any endorsement;
(e) is primary without right of contribution from any other insurance
which may be available to the additional assured;
(f) subject to the provisions naming the additional assured as
additional assured, operates in all respects as if a separate
policy had been issued covering each additonal assured;
(g) provides that none of the additional assured shall be responsible
for any premiums in respect thereof, and that the insurers shall
waive any right of set-off or counterclaim against the additional
assured (except in respect of any outstanding premiums in respect
of the Aircraft);
(h) provides that the insurance thereunder shall not be invalidated by
any act or omission, including misrepresentation and
non-disclosure, of any other person which results in breach of any
term, condition or warranty of the relevant policy provided that
the additional assured so protected has not caused or contributed
to or knowingly condoned the said act or omission;
(i) has a deductible in respect of passenger baggage and cargo of an
amount which, at any time, is customary in the international
aviation market at that time for Boeing 737-300 aircraft in each
case in respect of any one claim;
(j) contains a provision insuring (to the extent of the risks covered
by the policy) the indemnity provisions of security document
entered into in favour of the Sublessor's Lender; and
(k) specifically refers to any security document entered into in
favour of the Sublessor's Lender or any loan agreement,
1.4 Terms of All Insurances
All Insurances will:
(a) Dollars: provide cover denominated in dollars;
(b) Worldwide: operate on a worldwide basis subject to such
limitations and exclusions as the parties and the insurance market
may agree;
(c) Acknowledgment: acknowledge the insurer is aware and has seen a
copy of this Agreement, that the Aircraft is owned by Owner
Trustee for the benefit of and the existence of any financing or
security documents to which Sublessor's Lenders may be party;
(d) Breach of Warranty: provide that, in relation to the interests of
each of the additional assureds, the Insurances will not be
invalidated by any act or omission, including misrepresentation
and non-disclosure, by Sublessee, or any other person provided
that such additional assureds regardless of any breach or
violation by Sublessee, or any other person other than the
respective additional assured seeking protection of any warranty,
declaration or condition, contained in such Insurances has not
caused or contributed to or knowingly condoned the said act or
omission;
(e) Subrogation: provide that upon payment of any loss or claim by the
insurers in accordance with the endorsement relating to the
relevant policy naming the additional assured as additional
assureds, the insurers shall to the extent and in respect of such
payment be thereupon subrogated to all legal and equitable rights
of the additional assured indemnified under such endorsement
relating to the Insurances (but not against any additional
assured) and further provides that the insurers shall not exercise
such rights without the consent of those additional assured such
consent not to be unreasonably withheld and at the expense of the
insurers such additional assured shall do all things reasonably
necessary to assist the insurers to exercise the said rights;
(f) Premiums: provide that the additional assureds will have no
obligation or responsibility for the payment of any premiums due
but reserve the right to pay the same should any of them elect so
to do and that the insurers will not exercise any right of set-off
or counter-claim in respect of any premium due against the
respective interests of the additional assureds other than
outstanding premiums relating to the Aircraft, any Engine or Part
the subject of the relevant claim;
(g) Cancellation/Change: provide that the Insurances will continue
unaltered for the benefit of the additional assureds for at least
thirty (30) days after written notice by registered mail or telex
of any cancellation, change, event of non-payment of premium or
instalment thereof has been sent to Sublessor, except in the case
of war risks for which 7 days or such lesser period as is or may
be customarily available in respect of war risks or allied perils
will be given and that notice shall be deemed to commence from the
date such notice is given by the insurers and that such notice
will not be given at the normal expiry date of the policy or any
endorsement; and
(h) Indemnities: accept and insure the indemnity provisions of this
Agreement to the extent of the risks covered by the policies (it
being understood that certain matters listed in Clause 20.1.1:
registration, import, overhaul, deregistration, export,
manufacture, design and testing and (c) are not covered).
(i) Endorsement: contains an endorsement naming:
(i) the Sublessor's Lender as loss payee in the case of a Total
Loss;
(ii) the Sublessor's Lender as loss payee in the case where the
amount payable by the insurers upon any claim other than in
respect of Total Loss is greater than US$5,000,000; and
(iii) the Sublessor as loss payee in the case where the amount
payable by the Insurers upon any claim other than in
respect of a Total Loss is less than US$5,000,000 unless
and until the Sublessor's Lender notifies the insurance
brokers or the insurers that an Event of Default has
occurred, in which event the loss payee shall be the
Sublessor's Lender;
(j) specifically refers to each loan agreement or charge between the
Owner Trustee and/or the Sublessor and/or any Sublessor's Lender.
1.5 Deductibles
Sublessee shall be responsible for any and all deductibles under the Insurances.
1.6 AVN 67B
Notwithstanding the foregoing, if Sublessee provides insurance certificates in
compliance with AVN 67B it shall be regarded as having satisfied those of the
insurance provisions set out above that are covered by that endorsement.
1.7 AVN 2000 (or similar)
If AVN 2000 or similar "Date Recognition Exclusion Clause" applies in respect of
the Insurances then:
(a) the Insurance certificate shall state that this is the case; and
(b) the Insurances must provide for AVN 2001 (aircraft exposures) and
AVN 2002 (non-aircraft exposures) or similar "Date Recognition
Limited Coverage Clauses" and the insurance certificates must
state that this is the case.
SCHEDULE 6
RETURN CONDITIONS
On the Redelivery Date, the Aircraft, the Aircraft Documents and all other
documents listed in Annex 1 to Schedule 7 will be redelivered to Sublessor by
Sublessee in accordance with the procedures and in the condition set out below:
1. the Aircraft shall be returned with a current FAA standard
Certificate of Airworthiness and shall meet the requirements of
the FAA under Part 121 of the Federal Aviation Regulations or with
a FAA Certificate of Airworthiness, if requested by Sublessor;
2. the appearance of the Aircraft shall be clean and cosmetically
acceptable by domestic commercial airline standards that will
allow immediate placement into commercial passenger service. All
passenger windows will be free of crazing;
3. the Aircraft shall have installed the full complement of Engines
and other equipment, parts, components, accessories and loose
equipment as required by the Agreement to be installed on the
Aircraft at Delivery (by serial number), unless agree otherwise by
Sublessor in writing, each such item functioning in accordance
with manufacturers' specifications and the aircraft maintenance
manual provided the passengers seats shall be removed and shall
remain the sole property of the Sublessee;
4. the Aircraft shall have been maintained in accordance with Clauses
16 and 17 of the Agreement with the same care and consideration
for the technical condition of the Aircraft as if it were to have
been kept in continued regular service by Sublessee. The Aircraft
will be returned either:
(a) fresh from the next due C-Check at a FAA approved
repair station.; or
(b) "as is where is" with an appropriate payment of
US$35.00 per hour for each flight hour flown since
the last most recent C-Check.
5. there shall be no open, outstanding or deferred maintenance items,
scheduled or unscheduled, routine or non-routine, against the
Aircraft with no evidence of untreated or noticeable corrosion;
6. all major modifications and repairs to the Aircraft will have been
accomplished in accordance with current FAA approved data or the
Manufacturer's Structural Repair Manual ("SRM" and have been
properly documented);
7. each landing gear assembly of the Aircraft will be the same as of
Delivery unless otherwise agreed between Sublessee and Sublessor;
8. the Engines will not have been discriminated against, whether by
reason of it being Subleased by Sublessee or otherwise, during any
shop visit with respect to Sublessee's disk replacement and
performance restoration policies for CFM INTERNATIONAL CFM 56-3C1
engines it owns or operates;
9. each engine will be in good working condition with no acceleration
in performance deterioration based on the engine trend monitoring
data and will pass complete borescope inspections and power
assurance runs;
10. the auxiliary power unit (APU) shall be in serviceable condition
and meet the same conditions as were met at Delivery (as evidenced
by the Acceptance Certificate);
11. Sublessee shall return the Aircraft with the paint restored to
original and all logos and markings removed either painted in grey
or white or (as Sublessor's option) without any change from
Sublessee's livery with the intent that Sublessor repaints the
Aircraft, in either case at the sole cost and expense of
Sublessee;
12. the Aircraft shall be free and clear of all Security Interests
(other than Sublessor Liens) and shall have no components or parts
installed which are loaned, borrowed or are subject to rights of
third parties under pooling, exchange, overhaul, repair or other
similar arrangements;
13. the Aircraft shall be duly registered with the FAA;
14. neither the Aircraft nor any Engine or Part shall have been
discriminated against whether by reason of it being Subleased by
Sublessee or otherwise in maintenance, operation, use or in any
other manner whatsoever, including, without limitation as to the
type of maintenance program applicable to the Aircraft, any Engine
or as to compliance with Airworthiness Directives;
15. the Aircraft will be in full compliance with all Airworthiness
Directives (AD) issued prior to the Expiry Date and applicable to
the Aircraft including operation under FAR Part 121 and which
require terminating action or modification by a date (or date
based upon projected Flight Hours or Cycles based on average
utilization of the Aircraft by Sublessee during the Sublease
Period) on or before twelve (12) months after the Expiry Date;
16. any FAA AD's applicable to the Aircraft (including, but not
limited to, ageing aircraft and corrosion prevention and control
program type) which allow sampling of tasks to be accomplished on
other aircraft shall have 100% accomplishment of tasks on the
Aircraft, as specified in the relevant FAA AD;
17. the Aircraft will be returned with one (1) complete shipset of
Sublessee's galley equipment (containers, waste bins, trolleys and
beverage containers);
18. all Manufacturer's free of charge service bulletin kits delivered
to Sublessee for the Aircraft will be on board;
19. all Aircraft Documents, and other current and historical records
acquired, delivered to or prepared by Sublessee, shall be returned
with the Aircraft including, without limitation, time logs showing
Aircraft and Engine Flight Hours and Cycles on any given date,
documents, manuals (revised up to and including the most current
revisions issued by the manufacturer), data, overhaul records,
time controlled part traceability to overhaul and "zero time since
new" for time controlled parts that have life limits as determined
by the manufacturer, the FAA, log books, original Aircraft and
Engine delivery documents, serviceable parts tags (including
teardown reports for time controlled parts that have been
overhauled during the Sublease Period), the FAA forms,
modification records, inspection records (including NDT
documentation such as x-ray, eddy current, etc.), and all other
documentation pertaining to the Aircraft, Engines and Parts. All
records discrepancies shall be corrected, and any missing records
shall be reconstructed, by Sublessee at Sublessee's sole cost and
expense prior to the return of the Aircraft. Records for major
alterations (or modifications) shall include FAA approved data,
such as supplemental type certificates (STC's), technical standar
orders (TSO's) and service bulletin documentation;
SCHEDULE 7
RETURN ACCEPTANCE CERTIFICATE
1. FRONTIER AIRLINES, INC. (Sublessee) and INDIGO PACIFIC AB
(Sublessor) have entered into an Aircraft Sublease Agreement dated
November [ ], 1998 (Sublease). Unless otherwise defined,
capitalised terms used herein will have the meanings set forth in
the Sublease.
2. Sublessor has this [ ] day of [ ] (Time: [ ]) at [ ]
received from Sublessee possession of:
(a) one (1) Boeing 737-3U3 Aircraft, bearing manufacturer's serial
number 28734, registration mark[ ] together with two (2) CFM
INTERNATIONAL CFM 56-3C1 engines bearing manufacturer's serial
numbers 85716 and 85717, all Parts attached thereto and thereon in
an airworthy condition; and
(b) all Aircraft Documents as listed in the Document Receipt attached hereto.
3. The Airframe, Engines and Parts had the following Flight Hours/Cycles at
return:
(a) Airframe:
Total hour Total landings Flight Hours/ Cycles Flight Hours/ Cycles
since last "C" Check since last "A" Check
[ ] [ ] [ ] Flight Hour [ ] Flight Hour
[ ] Cycles [ ] Cycles
(b) Engines:
Position Serial Total Total Flight Hours/ Flight Hours/
No. Flight Cycles Cycles since Cycles since
Hours last shop visit last Engine
Performance
Restoration
Visit
[ ] [ ] [ ] [ ] [ ] Flight [ ] Flight
Hours Hours
[ ] Cycles [ ] Cycles
Position Serial Total Total Flight Hours/ Flight Hours/
No. Flight Cycles Cycles since Cycles since
Hours last shop visit last Engine
Performance
Restoration
Visit
[ ] [ ] [ ] [ ] [ ] Flight [ ] Flight
Hours Hours
[ ] Cycles [ ] Cycles
Time Remaining to next life limited part removal
Flight Hours Cycles
MSN [ ] [ ] [ ]
MSN [ ] [ ] [ ]
(c) APU:
MSN Total Flight Flight Hours/ Cycles Flight Hours/Cycles
Hours remaining until next HSI remaining on turbine
inspection and compressor life
limited parts
[ ] [ ] [ ] [ ]
(d) Landing Gears:
Position Serial Total Flight Flight Hours/ Cycles Flight Hours/
No. Hours/Cycles since last overhaul Cycles to next
sched. Removal
Nose [ ] [ ] Flight [ ] Flight [ ] Flight
Hours Hours Hours
[ ] Cycles [ ] Cycles [ ] Cycles
Right Main [ ] [ ] Flight [ ] Flight [ ] Flight
Hours Hours Hours
[ ] Cycles [ ] Cycles [ ] Cycles
Left Main [ ] [ ] Flight [ ] Flight [ ] Flight
Hours Hours Hours
[ ] Cycles [ ] Cycles [ ] Cycles
(e) Status of components or Parts with time/Cycle and calendar limits (see
attached sheet);
(f) Fuel on board at return: [ ] kilos ([ ] gallons)
4. Other technical information regarding the Aircraft and its
components including damage are correctly set forth on the
Aircraft report and damage chart attached hereto.
5. The above specified Aircraft, Engines and documents are hereby
accepted by Sublessor subject to:
(a) the provisions of the Sublease; and
(b) correction by Sublessee of the discrepancies specified in Annexure
2 hereto (which correction Sublessee hereby undertakes to perform
as soon as reasonably possible).
6. Subject to Paragraph 7, the leasing of the Aircraft by Sublessor
to Sublessee pursuant to the Sublease is hereby terminated without
prejudice to Sublessee's continuing obligations under the Sublease
including, without limitation, Clauses 19 and 20.
7. Sublessee represents and warrants that during the term of the
Sublease all maintenance and repairs to the Airframe and Engines
were performed in accordance with the requirements contained in
the Sublease. Sublessee further confirms that all of its
obligations under the Sublease whether accruing prior to the date
hereof or which survive the termination of the Sublease by their
terms and accrue after the date hereof, will remain in full force
and effect until all such obligations have been satisfactorily
completed. Sublessee represented that the documents delivered and
listed in Annexure 1 are true and accurate.
8. This Return Acceptance Certificate is executed and delivered by
the parties in [ ].
IN WITNESS WHEREOF, the parties hereto have caused this Return Acceptance
Receipt to be executed in their respective corporate names by their duly
authorised representatives as of the day and year first above written.
INDIGO PACIFIC AB
By:
Title:
FRONTIER AIRLINES, INC.
By:
Title:
ATTACHMENTS:
1. Aircraft Documents
2. List of Discrepancies
Annexure 1
Aircraft Documents
The (a) manuals and (b) Aircraft Documents set forth below are to be returned
with the Aircraft in a current, up-to-date and correct status.
List
Quantity Required
1. Specific List of all Records and Documents transferred with the
equipment
2. Cross Reference List; Operator/Manufacturer Part Number and Serial
Number
Documents
Quantity Required
1. Aircraft Description and Status Summary in the form of Schedule 1 to
the Sublease Agreement.
2. Emergency Equipment Installation Drawings
3. Aircraft Readiness log (revised to Expiry Date)
4. FAA approved Airplane Flight Manual (AFM)
5. Manufacturer's Flight Crew Operating Manual
6. Weight and Balance Control and Loading Manual; last weighing
7. Minimum Equipment List (MEL)
8. MEL Procedures Manual
9. Maintenance Manual (Manufacturer and Sublessee) (Tape)
10. Wiring Diagram Manual
11. System Schematics
12. Fault Isolation Manuals
13. Non-Destructive Test (NDT) Manual (if Sublessee unique)
14. Structural Repair Manual (SRM)
15. Illustrated Parts Catalog (IPC) (Manufacturer and Sublessee)
16. A copy of galley drawings and galley manuals
17. Scheduled Maintenance Program
18. Maintenance Requirement Items List
19. Ageing Aircraft Programmes:
(a) Ageing Aircraft Service Action Requirements;
(b) Corrosion Prevention and Control;
(c) Supplemental Inspection Program (SID);
(d) Ageing Aircraft Repair Assessment Program;
(e) Ageing Aircraft Maintenance Planning
(f) Aircraft Detail Specification
Records
Quantity Required
1. Current Component Inventory List (updated to the date of Redelivery)
-----------------------------------
2. Service Bulletin (SB) Accomplishment List
3. Record of last Compass Swing
4. List of Oils and Fluids
5. Aircraft/Cockpit Log Books (current and file copies)
6. Engine Log Books
7. Auxiliary Power Unit (APU) Log Book
8. All applicable Modification Records
9. All applicable Forms 337's, Major Repair and Alteration
10. All applicable Major and Minor Repair Records
11. Airworthiness Directive (AD) Compliance Summary
12. All applicable Airworthiness Directive Records and Documentation
13. Quality Control Statements:
(a) List of Supporting FAR 145 Repair Stations;
(b) Accidents and Incidents Statements;
(c) Assistance, as required, in acquiring outstanding records;
14. Time Controlled Component List, history and status
15. Life Limited Part (LLP) List, history and status
16. Maintenance Check Status and Summary
17. Total Time and Cycle Justification
18. All other applicable Maintenance Records including:
(a) All records including the most recent of all Aircraft checks (service
checks, A Checks, B Checks, C Checks, D Checks, etc);
(b) All Engine and APU shop repair/overhaul records including the most
recent restoration of each engine module and last overhaul and HSI for
the APU;
(c) All Landing Gear overhaul records including the most recent overhaul of
each Landing Gear.
Certificates
Quantity Required
1. Current Airworthiness Certificate
2. Current Noise Certificate
3. Current Registration
4. Current Radio License
5. Supplemental Type Certificates and back up data
Confirmation
1. At Sublessor's request, confirmation that the Aircraft has been deregistered.
Receipt of the foregoing documents, except as noted, is hereby acknowledged.
Annexure 2
Discrepancies
SCHEDULE 9
MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT
To: INDIGO PACIFIC AB
From: FRONTIER
Aircraft type: Boeing 737-300
Registration:
Serial number: Month of:
- --------------------------------------------------------------------------------
Aircraft Total Time Since New Flight Hours:
- --------------------------------------------------------------------------------
Aircraft Total Cycles Since New Cycles:
- --------------------------------------------------------------------------------
Airframe Flight Hours Flown During Month Flight Hours:
- --------------------------------------------------------------------------------
Airframe Cycles/Landing During Month Cycles:
- --------------------------------------------------------------------------------
Time Remaining to C7 Check
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Engine Serial Number: Engine Serial Number
Original Position: Original Position:
- --------------------------------------------------------------------------------
Actual Location: Actual Location:
- --------------------------------------------------------------------------------
Total Time Since New Total Time Since New
- --------------------------------------------------------------------------------
Total Cycles Since New Total Cycles Since New
- --------------------------------------------------------------------------------
Flight Hours Flown During Month Flight Hours Flown During Month
- --------------------------------------------------------------------------------
Cycles During Month Cycles During Month
- --------------------------------------------------------------------------------
Time since last Borescope Time since last Borescope
- --------------------------------------------------------------------------------
Time remaining until next Borescope
- --------------------------------------------------------------------------------
Time remaining until next Borescope
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Landing Gear: TSN CSN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RH Main
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LH Main
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nose
- --------------------------------------------------------------------------------
Note: If an Engine is removed or installed on another Aircraft (subject to the
provisions of the Agreement) it must be reported monthly on this form.
Any service bulletins, Airworthiness Directives, engineering modifications or
changes: .......................................................................
................................................................................
- --------------------------------------------------------------------------------
Hours/Cycles Flown x US$ Per Flight = Reserve payment
During Month Hour/Cycle
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Airframe Hrs. x $70.00 =
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Original Engine Serial Hrs x =
Number:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Original Engine Serial Hrs. x =
Number:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Engines: Hrs. x $80,00 =
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LLP Hrs. x $20,00 =
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Landing Gear Cycles: x $10,00 =
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APU Hrs. x $6,00 =
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
SCHEDULE 10
POWER OF ATTORNEY
The undersigned, [ ] (the Sublessee) refers to the Aircraft Lease Agreement
dated as of [ ], as amended and supplemented from time to time (the Lease)
between, among others [ ] (the Sublessor) and the Company with respect to one
(1) Aircraft bearing manufacturer's serial number [ ] and registration mark [ ]
(the Aircraft).
In consideration of the sum of US$ 1 paid by the Sublessor to the Sublessee (the
receipt and sufficiency of which is hereby acknowledged). The Sublessee
irrevocably appoints each of the Sublessor and [ ] (severally each an Attorney)
its true and lawful attorney to execute and to do an perform upon its behalf and
in its name or otherwise to deliver any documents, instruments or certificates
with such amendments thereto (if any) which may be required to obtain
deregistration of the Aircraft from the register of aircraft maintained by the
Federal Aviation Administration of the United States of America and the export
of the Aircraft from the [ ] upon the lawful termination of the Lease of the
Aircraft.
AND generally to do any and all such acts and things and to execute under seal
or hand (as appropriate) and deliver any and all documents under seal or under
hand (as appropriate) as may be requested or required for such deregistration
and export.
AND the Sublessee hereby undertakes from time to time and at all times to
indemnify the Attorney against all costs, claims, expenses and liabilities
howsoever incurred by all such Attorney in connection herewith and further
undertakes to ratify and confirm whatsoever the Attorney shall lawfully do or
cause to be done in or by virtue of this Power of Attorney.
AND for the better doing, performing and executing of the matters and things
aforesaid the Sublessee hereby further grants unto the Attorney full power and
authority to substitute and appoint in its place one or more attorney or
attorneys to exercise for them as attorney or attorneys of the Sublessee any or
all the powers and authorities hereby conferred and to revoke any such
appointments from time to time and to substitute or appoint any other or others
in the place of such attorney or attorneys as each attorney shall from time to
time think fit.
This Power of Attorney shall be subject to, governed by and construed in
accordance with the laws of the State of New York.