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EXHIBIT 4.22
THE RIGHTS OF LESSOR UNDER THIS SECOND AMENDED AND RESTATED AIRCRAFT LEASE
AGREEMENT [GPA 1989 BN-5] AND IN THE AIRCRAFT COVERED HEREBY WILL BE OR HAVE
BEEN ASSIGNED TO, AND ARE OR WILL BE SUBJECT TO A SECURITY INTEREST IN FAVOR OF,
THE CHASE MANHATTAN BANK, AS SUCCESSOR IN INTEREST TO MANUFACTURERS HANOVER
TRUST COMPANY, AS INDENTURE TRUSTEE UNDER A SECOND AMENDED AND RESTATED TRUST
INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-5] DATED AS OF SEPTEMBER 22, 1989,
AMENDED AND RESTATED AS OF OCTOBER 1, 1991, AND FURTHER AMENDED AND RESTATED AS
OF NOVEMBER 26, 1996. AS PROVIDED IN SECTION 21(e) HEREOF, TO THE EXTENT, IF
ANY, THAT THIS SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT CONSTITUTES
CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN
EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS AMENDED AND
RESTATED AIRCRAFT LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OF
POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL
BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE
CHASE MANHATTAN BANK, AS SUCCESSOR IN INTEREST TO MANUFACTURERS HANOVER TRUST
COMPANY, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF.
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SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
[GPA 1989 BN-5]
Dated as of September 22, 1989
Amended and Restated as of October 1, 1991
And Further Amended and Restated as of November 26, 1996
between
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as otherwise expressly provided herein,
but solely as Owner Trustee under a
Trust Agreement [GPA 1989 BN-5] dated
as of September 22, 1989, as amended
Lessor
and
AMERICA WEST AIRLINES, INC.
Lessee
One Airbus A320-231 Aircraft
Manufacturer's Serial No. 055
U.S. Registration No. N624AW
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SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
THIS SECOND AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
dated as of September 22, 1989, as amended and restated as of October 1, 1991,
and as further amended and restated as of November 26, 1996 is entered into
between WILMINGTON TRUST COMPANY, not in its individual capacity except as
otherwise expressly provided herein, but solely as Owner Trustee under a Trust
Agreement [GPA 1989 BN-5] dated as of September 22, 1989, as amended and with
its principal place of business at Rodney Square North, Wilmington, Delaware
19890 (together with its successors and permitted assigns, "Lessor"), and
AMERICA WEST AIRLINES, INC., a Delaware corporation, with its chief executive
office at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034 (together with
its successors and permitted assigns, "Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee desire to amend and, solely for
the convenience of the parties, restate in its entirety the Original Head Lease
(as hereinafter defined) as of the Restatement Date (as hereinafter defined) as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, Lessor and Lessee agree as follows:
Section 1. Definitions.
The following terms shall have the following respective
meanings for all purposes of this Lease (including the Recitals) and shall be
equally applicable to both the singular and the plural forms of the terms
defined herein:
As used herein, the terms "Assigned Sublease", "Equipment
Notes", "Excepted Payments", "Indenture Supplement", "Note Holder", "Pass
Through Trust", "Pass Through Trust Agreement", "Pass Through Trustee", "Past
Due Rate", "Principal Amount", "Refinancing Transaction", "Refunding Agreement",
"Restatement Date", "Sublease Assignment", "Trust Company", and "Trust Indenture
Estate", shall have the meanings specified in the Indenture; the terms
"Intercreditor Agreement", "Liquidity Facility", "Liquidity Provider" and
"Subordination Agent" shall have
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the meanings specified in the Intercreditor Agreement (as defined in the Pass
Through Trust Agreement); and the term "Lease Amendment No. 1" shall have the
meaning specified in the Refunding Agreement.
"Affiliate" shall mean, with respect to any specified
Person, any other Person which, directly or indirectly, owns or controls, is
controlled by or is under common control with such specified Person. Control
will be deemed to exist based on (i) ownership of 25% or more of the voting
securities of a Person or (ii) the power to direct or cause the direction of the
management and policies of a Person whether by contract or otherwise.
"Airbus Industrie" shall mean Airbus Industrie G.I.E., a
groupement d'interet economique formed under the laws of the French Republic,
and its successors and assigns.
"Aircraft" shall mean the Airframe leased hereunder and
described in Lease Supplement No. 1 (or any airframe from time to time
substituted for such Airframe pursuant to Section 11(a)(i) hereof) together with
the (i) two IAE Model V2500 Engines described in Lease Supplement No. 1 (or any
Engine substituted therefor hereunder) with respect to such Airframe, whether or
not any such initial or substituted Engines may from time to time no longer be
installed on the Airframe or may be installed on any other airframe, (ii) Parts
or components thereof, (iii) spare parts or ancillary equipment or devices
furnished therewith under this Lease (including any separate equipment described
on one or more Lease Supplements hereto), (iv) the Aircraft Records and
Documents and all other logs, manuals and records with respect to such Aircraft,
and (v) all substitutions, replacements and renewals of any and all thereof.
"Aircraft Records and Documents" shall mean the items
identified in Exhibit B hereto, all of which shall be maintained in the English
language.
"Airframe" shall mean (a) the Airbus Industrie model
A320-231 aircraft (except Engines or engines from time to time installed
thereon) described in Lease Supplement No. 1 and leased by Lessor to Lessee
hereunder, and any such model aircraft (except Engines or engines from time to
time installed thereon) which may from time to time be substituted for such
aircraft (except Engines or engines from time to time installed thereon)
pursuant to Section 11(a)(i); and (b) any and all Parts so long as the same
shall be incorporated or installed on or attached to the Airframe, or so
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long as title thereto shall remain vested in Lessor in accordance with the terms
of Section 9 hereof after removal from the Airframe (or, so long as the Foreign
Lease Agreement is in effect, Foreign Lessor in accordance with Section 8 of the
Foreign Lease Agreement); provided, however, that at such time as an aircraft
(except Engines or engines from time to time installed thereon) shall be deemed
part of the property leased hereunder in substitution for the Airframe pursuant
to the applicable provisions hereof and the replacement Airframe shall have been
subjected to the Lien of the Indenture (if the Lien of the Indenture has not
been discharged) and shall be subject to the Foreign Lease Agreement, the
replaced Airframe shall cease to be the Airframe hereunder.
"Appraisal Procedure" shall mean the following procedure
for determining the "fair market sales value" or "fair market rental value" of
the Aircraft, Airframe, an Engine or a Part. Except as provided in Section 18,
"fair market sales value" or "fair market rental value" shall mean the value
that would be obtained in an arm's-length transaction between an informed and
willing seller or lessor, as the case may be, and an informed and willing buyer
or lessee, as the case may be, both under no compulsion to sell and purchase or
to lease (and other than a lessee in possession or a used equipment scrap
dealer), as the case may be, as such value is determined by an appraisal which
assumes: (i) that such Aircraft, such Airframe, such Engine or such Part is
unencumbered by this Lease (or any sublease) or any of the other Operative
Documents or any of the Financing Documents and the terms thereof; (ii) that
such Aircraft, Airframe, Engine or Part has been maintained in all respects in
accordance with the terms of this Lease (whether or not in fact in such
condition), (iii) that such Aircraft, Airframe, Engine or Part meets the return
conditions specified in Section 16 and Exhibit E (whether or not in fact meeting
such conditions) and (iv) that Lessee has removed the Removable Parts entitled
to be removed under Section 9(b) (it being agreed that no such removal is
permitted in connection with an appraisal pursuant to Section 18) and replaced
any part which was removed from the Aircraft as a result of such Removable Part
being installed; provided, however, that costs of removal from the location of
current use and costs of sale shall not be a consideration in determining such
value except in connection with any determination of "fair market sales value"
or "fair market rental value" pursuant to Section 18; and provided, further,
that any determination of "fair market sales value" or "fair market rental
value" pursuant to Section 18 shall be on an "as is, where is" basis in its
actual condition and
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location subject to this Lease and any sublease and any and all Liens thereon
(other than a Lessor's Lien, Head Lessor's Lien or Lenders' Lien). Lessor and
Lessee shall, except for any appraisal pursuant to Section 18 in which case only
Lessor shall select such appraiser (which appraiser does not have to be
acceptable to Lessee), select an independent nationally-recognized aircraft
appraiser, mutually acceptable to each of them, who shall make the determination
as to the "fair market sales value" or "fair market rental value" of such
Aircraft, Airframe, Engine or Part for which such appraisal is to be conducted.
If Lessor and Lessee fail to agree upon a mutually acceptable appraiser within
ten (10) days, then each of Lessor and Lessee shall select an appraiser and such
determination shall be made by such appraisers (if either party shall fail to
appoint an appraiser within ten (10) days after notice from the other party of
the selection of its appraiser, then the appraisal made by the other party's
appraiser shall be determinative). If the two appraisers chosen pursuant to the
preceding sentence fail to agree upon a determination of the "fair market sales
value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part
within twenty (20) days after their appointment, then such appraisers shall
mutually choose a third appraiser within ten (10) days thereafter, provided that
if such appraisers fail to mutually choose a third appraiser within said 10-day
period, such appointment shall be made by the American Arbitration Association
(or any successor) in New York, New York, and the three appraisers so chosen
shall each make such determination. The appraisal determined by each of the
three appraisers chosen pursuant to the preceding sentence shall be averaged and
the appraisal furthest from the average of the three appraisals shall be
disregarded. The appraisal determined by each of the two remaining appraisers
shall be averaged and such average shall be the appraised "fair market sales
value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part.
Lessee shall bear all the fees and expenses of the Appraisal Procedure.
"Approved Broker" shall mean any reputable insurance
broker of recognized responsibility and standing experienced in aircraft
insurance.
"Approved Insurers" shall mean any reputable and
creditworthy insurance company of recognized responsibility and standing
experienced in aircraft insurance.
"Basic Rent" for the Aircraft shall mean the Basic Rent
specified in Exhibit C and payable throughout the Basic Term for the Aircraft
pursuant to Section 4(a)(i).
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"Basic Rent Payment Date" shall mean each day determined
in accordance with Exhibit C upon which a payment of Basic Rent becomes payable.
If a Basic Rent Payment Date shall fall on a day which is not a Business Day,
any payment due on such Basic Rent Payment Date shall be made on the next
succeeding Business Day.
"Basic Term" shall mean the period specified in Lease
Supplement No. 3.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banking institutions in New York, New York or
Hartford, Connecticut are authorized or required by Law to be closed.
"Buyer Furnished Equipment" shall mean the equipment which
was to be furnished by Braniff, Inc. or, if applicable, Original Head Lessee and
installed on the Aircraft pursuant to Clause 18 of the Purchase Agreement, and
any similar equipment furnished to Lessee.
"Certificated Air Carrier" shall mean any corporation
(except the United States Government) domiciled in the United States of America
and holding a Certificate of Convenience and Necessity issued under Section
41102(a) of the Federal Aviation Act by the Department of Transportation or any
predecessor or successor agency thereto, or, in the event such Certificates
shall no longer be issued, any corporation (except the United States Government)
domiciled in the United States of America and legally engaged in the business of
transporting for hire passengers or cargo by air predominantly to, from or
between points within the United States of America, and, in either event,
operating commercial jet aircraft, which also is a citizen of the United States
(as defined in Section 40102 of the Federal Aviation Act) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant to
chapter 447 of the Federal Aviation Act for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo so as to fall within the
purview of 11 U.S.C. Section1110 or any analogous statute.
"Civil Reserve Air Fleet Program" shall mean the Civil
Reserve Air Fleet Program administered by the United States Government and
authorized under 10 U.S.C. Section9511, et seq., as amended, or any
substantially similar or substitute program of the United States Government.
"Claims" shall have the meaning specified in Section 13.
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"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commonly Controlled Person" shall mean an entity, whether
or not incorporated, which is under common control with Lessee within the
meaning of Section 414(b) or (c) of the Code.
"Consent and Guaranty" shall mean the Amended and Restated
Consent and Guaranty of Airbus Industrie, dated as of May 1, 1985, as amended
and restated as of December 30, 1988, in the form attached to the Purchase
Agreement.
"Default" shall mean an event or condition which would
constitute an Event of Default with the lapse of time or the giving of notice or
both.
"Delivery Date" shall mean September 25, 1989, being the
date the Aircraft was delivered to and accepted by the Original Head Lessee as
Lessee hereunder for all purposes of this Lease.
"$" and "dollars" shall mean the lawful currency of the
United States of America.
"Engine" shall mean (i) each of the two IAE Model V2500
engines listed by manufacturer's serial number in Lease Supplement No. 1 and
initially installed on the Airframe covered by such Lease Supplement, whether or
not from time to time thereafter no longer installed on the Airframe or
installed on any other aircraft or airframe, and (ii) any replacement engine
which may from time to time be substituted, pursuant to Section 6(a), 11(a),
11(b) or 16(c) hereof or, so long as the Foreign Lease Agreement is in effect,
in accordance with Section 10(b) of the Foreign Lease Agreement), for any Engine
leased hereunder; together in each case with any and all Parts incorporated or
installed in or attached thereto or any and all Parts removed therefrom so long
as title thereto after removal from such Engine shall remain vested in Lessor in
accordance with the terms of Section 9 hereof (or, so long as the Foreign Lease
Agreement is in effect, Foreign Lessor in accordance with Section 8 of the
Foreign Lease Agreement). Except as otherwise set forth herein, at such time as
a replacement engine shall be so substituted and leased hereunder and the
replacement engine shall have been subjected to the Lien of the Indenture (if
the Lien of the Indenture has not been discharged), such replaced Engine shall
cease to be an Engine hereunder. The term "Engines"
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means, as of any date of determination, both Engines then leased hereunder.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, as from time to time in effect.
"Event of Default" shall have the meaning specified in any
one or more clauses in Section 17.
"Event of Loss" shall mean any of the following events
with respect to the Aircraft, Airframe or either Engine: (a) the actual or
constructive total loss of such property or the use thereof due to theft or
disappearance for a period in excess of sixty (60) consecutive days; (b)
destruction or damage of such property that renders repair uneconomic or such
property permanently unfit for normal use by Lessee (or, if a Permitted Sublease
is in effect, the Permitted Sublessee) for any reason whatsoever; (c) any loss
or disappearance of or damage to or destruction of such property which results
in an insurance settlement with respect to such property on the basis of an
actual or constructive total loss; (d) the condemnation, confiscation,
appropriation, seizure or requisition of title to any such property by any
Governmental Entity which results in the loss of title by Lessor for ten (10)
days or more but excluding requisition for use or hire which does not involve
requisition of title; (e) the condemnation, confiscation, appropriation, seizure
or requisition of the use of any such property by any Governmental Entity (other
than a requisition for use by the federal government of the United States or any
instrumentality or agency thereof bearing the full faith and credit of the
United States of America), which in any such case shall have resulted in the
loss of possession thereof by Lessee for a period in excess of the earlier of
ninety (90) consecutive days or the last day of the Term (or for such shorter
period ending on the date which is the next Business Day after the date of
receipt of an insurance settlement with respect to such property on the basis of
a total loss); (f) the requisition for use of such property by the federal
government of the United States or any agency or instrumentality thereof bearing
the full faith and credit of the United States of America, which purports to or
does continue beyond the Term; (g) as a result of any rule, regulation, order or
other action by the FAA, the Department of Transportation or any other
Governmental Entity having jurisdiction, the use of such Aircraft, Airframe or
Engine in the normal course of Lessee's (or, if a Permitted Sublease is in
effect, the Permitted Sublessee's) business of air transportation of passengers
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shall have been prohibited for a period of six (6) consecutive months, unless
Lessee (or the Permitted Sublessee), prior to the expiration of such six-month
period, shall have undertaken and shall be diligently carrying forward all steps
which are necessary or desirable to permit such normal use of such item of
equipment by Lessee (or the Permitted Sublessee), or, in any event, if such
normal use shall have been so prohibited by any such Governmental Entity for a
period of twelve (12) consecutive months or is continuing on the last day of the
Term; or (h) as otherwise provided herein. An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe which is a part of such Aircraft. An Event of Loss with
respect to an Engine shall not, absent an Event of Loss with respect to the
Airframe, be deemed an Event of Loss with respect to the Airframe.
"Excluded Property" shall have the meaning set forth in
Section 9(b) hereto.
"Expiration Date" shall mean the date specified in Lease
Supplement No. 3, on which date the Basic Term of this Lease shall expire.
"FAA" shall mean the Federal Aviation Administra- tion of
the United States Department of Transportation or any successor agency.
"FAA Bills of Sale" shall mean, collectively, (i) the Bill
of Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from
Manufacturer's Subsidiary to the Original Head Lessee, and (ii) the Bill of Sale
for the Aircraft on AC Form 8050-2, dated the Delivery Date, from the Original
Head Lessee to Foreign Lessee, and (iii) the Bill of Sale for the Aircraft dated
the Delivery Date, from Foreign Lessee to Foreign Lessor.
"Federal Aviation Act" shall mean the sections of Title 49
of the United States Code relating to aviation, as amended and in effect from
time to time, or any similar legislation of the United States of America enacted
in substitution or replacement thereof.
"Financials" shall mean Lessee's most recent fiscal
year-end audited consolidated balance sheet and statements of income and cash
flow for the period then ending, copies of which for the fiscal year ending
December 31, 1995, have been provided to Lessor prior to the date hereof.
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"Financing Documents" shall mean the Lease Agreement, each
Lease Supplement, Lease Amendment No. 1, the Trust Agreement, each Trust
Supplement, the Indenture, each Indenture Supplement, the Foreign Lease
Documents, the Refunding Agreement, the Equipment Notes issued under the
Indenture, the Intercreditor Agreement, each Liquidity Facility, each
Pass-Through Trust Agreement and each supplement thereto and any other
agreement, document or certificate delivered or entered into in accordance with
the foregoing, as amended, supplemented or otherwise modified.
"Foreign Air Carrier" shall mean any air carrier listed in
Exhibit F-1, as amended, supplemented or otherwise modified from time to time,
whose principal place of business and legal domicile at the time of entering
into the applicable sublease is located in a country listed on Exhibit F-2, as
amended, supplemented or otherwise modified from time to time, and not
prohibited by the terms of the insurance then in effect, with which the United
States has diplomatic or, such as in the case of Taiwan, similar relations, in
each case which is obligated under the applicable sublease to perform all
maintenance required by applicable foreign governmental standards made mandatory
to the Aircraft by such jurisdiction and, to the extent not inconsistent
therewith, all FAA-airworthiness directives and other requirements made
mandatory to the Aircraft by the FAA.
"Foreign Lease Agreement" shall mean the Japanese Lease
Agreement, as defined in the Indenture.
"Foreign Lease Documents" shall mean the Japanese
Financing Documents, as defined in the Indenture.
"Foreign Lease Supplement" shall mean the Japanese Lease
Supplement, as defined in the Indenture.
"Foreign Lender" shall mean the Japanese Lender, as
defined in the Indenture.
"Foreign Lessee" shall mean Air Tara Caymans II, Limited.
"Foreign Lessor" shall mean the Japanese Lessor, as
defined in the Indenture.
"GAAP" shall mean United States generally accepted
accounting principles and practices consistently applied as in effect from time
to time, which shall include the official interpretations thereof by the
Financial Accounting
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Standards Board. All accounting terms not otherwise defined herein shall have
the meanings assigned to such terms in accordance with GAAP.
"Governmental Entity" shall mean and include (i) any
national government, political subdivision thereof, or local jurisdiction
therein; (ii) any board, commission, department, division, organ,
instrumentality, court, or agency of any thereof, however constituted; and (iii)
any association, organization, or institution of which any entity described in
(i) or (ii) above is a member or to whose jurisdiction any such entity is
subject or in whose activities any such entity is a participant but only to the
extent that any entity described in clause (i), (ii) or (iii) has jurisdiction
over Lessor, Lessee, Indenture Trustee, Note Holders, the Aircraft or its
operations.
"Head Lessor's Lien" shall mean a Lessor's Lien under and
as defined in the Original Head Lease.
"IAE" shall mean IAE International Aero Engines AG, a
company organized and existing under the laws of Switzerland.
"Indemnitee" shall mean Foreign Lessor, Foreign Lessee,
Foreign Lender, Lessor (in its individual capacity and as trustee under the
Trust Agreement), the Trust Estate, Owner Participant, the Trust Indenture
Estate, Indenture Trustee (in its individual capacity and as trustee under the
Indenture), each Pass-Through Trust, each Pass-Through Trustee (in its
individual capacity and as trustee under the Pass-Through Trusts), the
Subordination Agent and each Liquidity Provider, and their respective successors
and permitted assigns, and any combination thereof and their respective
officers, directors, agents, servants, subcontractors, employees, subsidiaries,
Affiliates, shareholders and partners.
"Indenture" shall mean the Second Amended and Restated
Trust Indenture and Security Agreement [GPA 1989 BN-5] dated as of September 22,
1989, amended and restated as of October 1, 1991, and further amended and
restated as of November 26, 1996, as the same may be further amended,
supplemented or modified from time to time, between Indenture Trustee and
Lessor. The term "Indenture" shall also include the Indenture Supplements
entered into pursuant to the terms of the Indenture.
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"Indenture Trustee" shall mean the bank or trust company
serving as Indenture Trustee under the Indenture, and its successors and
assigns.
"Interest Rate" shall mean (i) with respect to the portion
of any payment of Rent that may be required by the Indenture to be paid to the
holders of any outstanding Equipment Notes issued thereunder, a per annum rate
of interest equal to the Past Due Rate applicable thereto under and as defined
in the Indenture, computed on the basis of a year of 360 days and twelve 30-day
months and (ii) with respect to any other amount, a per annum rate of interest
equal to the sum of the rate of interest publicly announced by Citibank, N.A.,
at its principal office in New York City, as its prime or similar base rate from
time to time in effect from the date the amount becomes due to the date it is
paid in full, plus 2%, computed on the basis of a year of 365 or 366 days, as
the case may be, and actual number of days elapsed.
"Law" shall mean and include (i) any statute, rule,
decree, constitution, regulation, order, judgment or other directive of any
Governmental Entity; (ii) any treaty, pact, compact or other agreement to which
any Governmental Entity is a signatory or party; (iii) any judicial or
administrative interpretations of the application of any Law described in (i) or
(ii) above; and (iv) except where expressly excluded herein, any amendment or
revision of any Law described in (i), (ii), or (iii) above.
"Lease Agreement," "this Lease Agreement," "this Lease,"
"this Agreement," "herein," "hereunder," "hereby," "hereof" or other like words
shall mean this Lease as originally executed and as amended, supplemented or
otherwise modified from time to time, including, without limitation, by one or
more Lease Supplements, as a whole and not to any particular Section or other
subdivision, and any reference to a "Section" or an "Exhibit" shall refer to a
Section or Exhibit of this Lease, as so amended, supplemented or modified,
unless expressly provided to the contrary.
"Lease Identification" shall have the meaning set forth in
Section 6(e) hereto.
"Lease Supplement" shall mean Lease Supplement No. 1,
Lease Supplement No. 2, Lease Supplement No. 3 and each subsequent Lease
Supplement entered into hereunder.
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"Lease Supplement No. 1" shall mean Lease Supplement [GPA
1989 BN-5] No. 1, dated September 25, 1989 between Lessor and Original Head
Lessee, as Lessee.
"Lease Supplement No. 2" shall mean Lease Supplement [GPA
1989 BN-5] No. 2, dated October 24, 1991 between Lessor and Original Head
Lessee, as Lessee.
"Lease Supplement No. 3" shall mean Lease Supplement [GPA
1989 BN-5] No. 3, (substantially in the form of Exhibit D-1 hereto, entered into
between Lessor and Lessee on the Restatement Date for the purpose of confirming
the leasing of the Aircraft hereunder).
"Lenders' Lien" shall mean any Lien or disposition of
title attributable to Indenture Trustee in its individual capacity (and not as
Indenture Trustee) on or in respect of (as the case may be) the Aircraft or any
other portion of the Trust Estate or the Trust Indenture Estate arising as a
result of (i) Claims (as defined herein) against Indenture Trustee in its
individual capacity (and not as Indenture Trustee) not related to its interest
in the Aircraft or the administration of the Trust Estate or the Trust Indenture
Estate pursuant to the Indenture, whether under Section 9-207(2)(e) of the
Uniform Commercial Code or otherwise, (ii) acts or omissions of Indenture
Trustee in its individual capacity (and not as Indenture Trustee) not
contemplated hereunder or under the other Operative Documents, or acts or
omissions of Indenture Trustee in its individual capacity (and not as Indenture
Trustee) which are in violation of any of the Operative Documents, or (iii)
Taxes imposed on or Claims against Indenture Trustee in its individual capacity
(and not as Indenture Trustee) which are excluded from indemnification by
Lessee, or (iv) Claims against Indenture Trustee in its individual capacity (and
not as Indenture Trustee) arising out of the voluntary or involuntary transfer
by Indenture Trustee in its individual capacity (and not as Indenture Trustee)
of all or any portion of its interest in the Aircraft, the Airframe, any Engine,
the Trust Estate, the Trust Indenture Estate or the Operative Documents (except
a Claim resulting from the exercise of remedies under and in accordance with the
Indenture or for a transfer provided for in the Operative Documents).
"Lessee" shall have the meaning set forth in the Recitals
hereto.
"Lessor" shall have the meaning set forth in the Recitals
hereto.
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"Lessor's Lien" shall mean any Lien or disposition of
title affecting the Aircraft, the Airframe, any Engine or any Part arising as a
result of (i) any claim against Lessor, Owner Participant, Trust Company or any
of their Affiliates not related to, the transactions contemplated by this Lease
or the other Operative Documents, the Financing Documents or the Purchase
Documents; (ii) any affirmative act of Lessor, Owner Participant, Trust Company
or any of their Affiliates not expressly contemplated by this Lease or the other
Operative Documents, the Financing Documents, the Foreign Lease Documents or the
Purchase Documents or not permitted without consent (which consent has not been
granted) by any party hereto or thereto or that is in violation of any term of
this Lease or the other Operative Documents, the Financing Documents or the
Purchase Documents; (iii) Taxes imposed against the Trust Estate, Trust Company,
Lessor or Owner Participant or any of their Affiliates or the consolidated group
of taxpayers of which any of them is a member which are not to be indemnified
against by Lessee under the Operative Documents, the Purchase Documents or the
Financing Documents or by Original Head Lessee under the Original Head Lease Tax
Indemnification Agreement; (iv) claims against the Trust Estate, Trust Company,
Owner Participant or Lessor or any of their Affiliates arising out of the
transfer by Lessor of all or any part of their respective interest in the
Aircraft, the Airframe, either Engine, the Trust Estate or the Operative
Documents other than any transfers or dispositions pursuant to Sections 2, 6, 9,
11, 16, 18, 19 (except Liens resulting from a transfer not permitted by such
Section) or 20 of this Lease or pursuant to Sections 10 and 11 of the Refunding
Agreement or similar types of provisions in the Foreign Lease Agreement;
provided, however, that there shall be excluded from this definition and Lessor
shall not be required to remove any Lien which would otherwise constitute a
Lessor's Lien, if it is being diligently contested in good faith so long as
neither such proceedings nor Lien involves a material danger of the sale,
forfeiture or loss of the Aircraft or adversely affects Lessee's rights under
Section 21(f); and provided, further, that Lessor's Liens shall not include the
Lien of the Indenture, Lenders' Liens, or Liens contemplated by the Foreign
Lease Documents.
"Lien" shall mean any mortgage, chattel mortgage, pledge,
lien, charge, encumbrance, lease, exercise of rights, security interest, lease
in the nature of a security interest, statutory right in rem, or claim of any
kind, including any thereof arising under any conditional sale
- 13 -
15
agreement, equipment trust agreement or title retention agreement.
"Lien of the Indenture" shall mean the Lien created by the
Indenture on the Trust Indenture Estate.
"Maintenance Program" shall mean (i) the America West
Maintenance Program approved by the FAA for America West Airbus model A320-231
aircraft in effect on the date hereof or as modified with the approval of the
FAA without affecting, or any other FAA approved maintenance program which does
not affect, the return condition standards set forth in Section 16 and Exhibit E
or (ii) if the Aircraft is subject to a Permitted Sublease to a Foreign Air
Carrier, any other maintenance program for the Aircraft which is approved by the
aviation authority of the country of registry and complies with the requirements
applicable to maintenance of the Aircraft contained in the definition of Foreign
Air Carrier. The Maintenance Program shall encompass scheduled maintenance,
condition monitored maintenance, and on-condition maintenance of the Airframe,
Engines, and components of the Aircraft, including, but not limited to,
servicing, testing, preventive maintenance, repairs, structural inspections,
structure life improvements, system checks, overhauls, approved modifications,
service bulletins, engineering orders, airworthiness directives, and corrosion
control inspections and treatments. All modifications and supplements to the
Maintenance Program shall be provided to Lessor upon its reasonable request and
Lessor shall be given reasonable access to the Maintenance Program upon its
request.
"Manufacturer" shall mean, collectively, Manufacturer's
Subsidiary, IAE, Airbus Industrie or, as the case may be, any one or more
thereof as may be applicable in any given circumstance, together in each case
with any subcontractor or supplier thereof.
"Manufacturer's Subsidiary" shall mean AVSA, S.A.R.L., a
French societe a responsabilite limitee, which as of the date hereof is owned by
Airbus Industrie.
"Maximum Foreign Use Percentage" shall have the meaning
specified in Exhibit C.
"Mortgage Convention" shall mean the Convention for the
International Recognition of Rights in Aircraft, signed (ad referendum) at
Geneva, Switzerland, on June 19, 1948, and amended from time to time, but
excluding the terms of any adhesion thereto or ratification thereof containing
- 14 -
16
reservations to which the United States of America does not accede.
"Net Worth" shall mean, with respect to any Person, such
Person's stockholders' equity minus any intangible assets.
"Operative Documents" shall mean this Lease, each Lease
Supplement, the Tax Indemnification Agreement, the Financing Documents, that
certain letter agreement dated as of the Restatement Date, relating to
Stipulated Loss Values with respect to this Lease, and any other agreement,
document or certificate delivered or entered into pursuant to the foregoing, as
amended, supplemented or otherwise modified.
"Original Head Lease" shall mean this Aircraft Lease
Agreement [GPA 1989 BN-5], with respect to the Aircraft, dated as of September
22, 1989, between Lessor, as lessor, and the Original Head Lessee, as lessee, as
amended, supplemented or otherwise modified and as in effect immediately prior
to the Restatement Date, as more particularly described in Annex I attached
hereto.
"Original Head Lease Tax Indemnification Agreement" shall
mean the Head Lease Tax Indemnification Agreement [GPA 1989 BN-5], dated as of
September 22, 1989, and amended and restated as of October 1, 1991, and amended
and restated as of the Restatement Date, between the Original Head Lessee and
Owner Participant, as the same may be amended, supplemented or otherwise
modified from time to time.
"Original Head Lessee" shall mean GPA Leasing USA I, Inc.,
a Connecticut corporation.
"Owner Participant" shall mean _______________
____________, a Delaware corporation, as Owner Participant under the Trust
Agreement, and its successors and permitted assigns.
"Owner Trustee" shall mean Wilmington Trust Company, as
Owner Trustee under the Trust Agreement, and its successors and assigns.
"Parent" shall mean GPA Group plc, a public limited
company organized and existing under the laws of Ireland.
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17
"Partial Assignment" shall mean the A320 Partial
Assignment, Assumption, Release and Amendment Agreement, dated as of December
30, 1988, among Parent, Braniff, Inc., and Manufacturer's Subsidiary, as
amended, supplemented or otherwise modified.
"Participation Agreement" shall mean the Participation
Agreement [GPA 1989 BN-5], dated as of September 22, 1989 and amended as of
October 1, 1991, among Original Head Lessee, Parent, Owner Participant, Owner
Trustee, Indenture Trustee and the Lenders named therein, as amended,
supplemented or otherwise modified from time to time and as in effect
immediately prior to the Restatement Date.
"Parts" shall mean all appliances, components, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature (excluding complete Engines or engines), including Buyer
Furnished Equipment, which may now or from time to time be incorporated or
installed in or attached to or were provided by the Manufacturer with the
Airframe or any Engine or so long as title thereto shall remain vested in Lessor
in accordance with the terms of Section 9 hereof after removal from such
Airframe or Engine (or so long as the Foreign Lease Agreement is in effect,
Foreign Lessor in accordance with Section 8 of the Foreign Lease Agreement).
Except as otherwise set forth herein, at such time as a replacement part shall
be substituted for a Part in accordance with Section 9 hereof, the Part so
replaced shall cease to be a Part hereunder.
"Payment Location" shall have the meaning set forth in
Exhibit C, as the same may be changed from time to time by Lessor as provided in
Section 4(c).
"Permitted Lien" shall mean any Lien referred to in
clauses (i) through (vii) of the first sentence of Section 14 hereof.
"Permitted Sublease" shall have the meaning specified in
Section 6(a)(iii)(1).
"Permitted Sublessee" shall mean a Certificated Air
Carrier or, after the Restricted Use Period, (a) any Foreign Air Carrier, (b)
the United States Government or an agency or instrumentality thereof which bears
the full faith and credit of the United States of America which has agreed (in
form and substance satisfactory to Lessor) that all of its indemnity obligations
which by the terms of this Lease
- 16 -
18
are permitted in lieu of insurance shall be enforceable by and payable to Lessor
directly or (c) any other Person approved in writing by the Owner Participant
and the Indenture Trustee, which approval shall not be unreasonably withheld.
"Person" shall mean and include any individual person,
corporation, partnership, firm, joint stock company, joint venture, trust,
estate, unincorporated organization, association, Governmental Entity, or
organization or association of which any of the above is a member or a
participant.
"Purchase Agreement" shall mean the Amended and Restated
Airbus A310/A320 Purchase Agreement, dated as of May 1, 1985, as amended and
restated as of December 30, 1988 (insofar as the same relates to Model A320
Aircraft), between Manufacturer's Subsidiary and Braniff, Inc., including the
Consent and Guaranty, together with Letter Agreements, Exhibits and Appendices
thereto, as partially assigned to Parent pursuant to the Partial Assignment, to
which Airbus Industrie, as guarantor, has consented, and as the same may from
time to time be further amended, supplemented or otherwise modified to the
extent permitted by the terms thereof.
"Purchase Documents" shall mean the Purchase Agreement,
the Partial Assignment and any other agreement, document or certificate
delivered or entered into pursuant to the foregoing, as amended, supplemented or
otherwise modified.
"Removable Part" shall have the meaning set forth in
Section 9(b).
"Renewal Rent" shall mean the rent payable pursuant to
Section 20.
"Renewal Rent Payment Date" shall mean each day determined
in accordance with Exhibit C upon which a payment of Renewal Rent becomes
payable.
"Renewal Term" shall mean the period described in Section
20 following the end of the Basic Term if Lessee shall have exercised its
renewal option in accordance with Section 20.
"Rent" shall mean Basic Rent or Renewal Rent, as the case
may be, and Supplemental Rent, collectively.
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19
"Replacement Airframe" and "Replacement Engine" shall have
the meanings specified in accordance with their description in Section 11.
"Replacement Period" shall have the meaning specified in
Section 11.
"Responsible Officer" shall mean, with respect to Lessee,
any of the Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer or Controller.
"Restricted Use Period" shall have the meaning specified
in Exhibit C.
"Return Occasion" shall mean the event that occurs when
possession of the Aircraft is to be returned from Lessee to Lessor at the end of
the Term of this Lease or upon Lessor taking possession pursuant to Section 18
or for any other reason.
"Specified Investments" shall mean (i) direct obligations
of the United States Government, the obligations of which bear the full faith
and credit of the United States; (ii) obligations fully guaranteed by the United
States; (iii) certificates of deposit issued by any commercial bank incorporated
under the laws of the United States or one of the States thereof (but not
exceeding $10,000,000 in principal amount or deposits at any given time for any
one bank) having a combined capital surplus and undivided income of at least
$750,000,000 and having a rating of "B" or better from Thompson BankWatch, Inc.;
(iv) repurchase agreements (but not exceeding $10,000,000 in principal amount or
deposits at any given time for any one bank) with any financial institution
having combined capital and fully collateralized by an obligation of the type
described in clauses (i) through (iii) as collateral pursuant to which an entity
referred to in clause (iii) above or another financial institution having a net
worth of at least $750,000,000 and having a rating of "B" or better from
Thompson BankWatch, Inc. is obligated to repurchase any such obligation not
later than ninety (90) days after the purchase of any such obligation; and (v)
money market funds which invest solely in obligations described in clause (i);
provided that if all of the above investments are unavailable, the entire
amounts to be invested may be used to purchase Federal funds from an entity
described in clause (iii) above; and provided further that no investment shall
be eligible as a "Specified Investment" unless the final maturity or date of
return of such investment is on or
- 18 -
20
before the date which is ninety (90) days from the date of purchase thereof.
"Stipulated Loss Value" shall mean as of the applicable
date during the Basic Term the amount set forth on Exhibit A hereto and,
thereafter, the amount described in Section 20 (ii) (it being understood and
agreed that the amounts set forth in Exhibit A take into account fully the
amount and application of each installment of Basic Rent or Renewal Rent on each
Stipulated Loss Value Date (other than a Stipulated Loss Value Date that is a
Basic Rent Payment Date or Renewal Rent Payment Date) so that no additional
credit of such Basic Rent or Renewal Rent is to be made in respect thereof)
except as expressly provided herein on a Basic Rent Payment Date or a Renewal
Rent Payment Date. In the event that it is necessary to determine a separate
Stipulated Loss Value for the Airframe or an Engine, such Stipulated Loss Value
shall be based on the ratio that the original cost to Lessor of the Airframe or
such Engine bears to Lessor's Cost (as set forth in the Original Head Lease) for
the Aircraft.
"Stipulated Loss Value Date" shall mean each monthly date
listed, or with respect to any Renewal Term determined as set forth on, Exhibit
A hereto.
"Supplemental Agreement" shall mean the Supplemental
Agreement dated as of September 22, 1989 between Foreign Lessor and Foreign
Lessee (as the same may be amended, modified or supplemented from time to time).
"Supplemental Rent" shall mean any and all amounts,
liabilities and obligations other than Basic Rent and Renewal Rent which Lessee
assumes or agrees to pay to Lessor or any other Indemnitee hereunder or under
any other Operative Document, including, without limitation, (i) any payment of
Stipulated Loss Value and any payment provided for in Section 11 or 18; (ii) any
payment of indemnity required by Section 10 or 13 hereof; (iii) any payment of
an amount equal to average daily Basic Rent or Renewal Rent in connection with
an extension of the Term of this Lease as a result of the need to correct any
failure of the Aircraft to satisfy the requirements of Section 16 hereof; (iv)
[Intentionally Left Blank]; (v) an amount equal to any payment due to Owner
Trustee in respect of fees or expenses as provided in Section 21(j) hereof; (vi)
an amount equal to any payment due to Indenture Trustee in respect of fees or
expenses as provided in the Indenture and/or Section 21(j) hereof; (vii)
Lessor's pro rata share of any payment due to any Pass-Through Trustee in
respect of fees or expenses
- 19 -
21
pursuant to the Pass-Through Trust Agreement; (viii) Lessor's pro rata share of
any payment due to the Subordination Agent in respect of fees, compensation,
costs or expenses pursuant to the Intercreditor Agreement and/or the Refunding
Agreement; (ix) an amount equal to the amount specified in clause (b) of the
fourth paragraph of Section 2.02 of the Indenture; and (x) to the extent
permitted by applicable Law, interest at the Interest Rate (all computations of
interest under this Lease to be made on the basis of a 360-day year, as
applicable, and twelve 30- day months) calculated: (1) on any part of any
installment of Basic Rent or Renewal Rent, as the case may be, not paid on the
due date thereof for the period for which the same shall be overdue and (2) on
any Supplemental Rent not paid when due hereunder from and including the due
date until the same shall be paid. As used herein, "Lessor's pro rata share"
means as of any date of determination a fraction the numerator of which is the
aggregate Principal Amount then outstanding of the Equipment Notes issued under
the Indenture and the denominator of which is the aggregate principal balance
then outstanding of all "Equipment Notes" issued under the Indentures (as
defined in the Intercreditor Agreement).
"Tax Indemnification Agreement" shall mean the Amended and
Restated Sublease Tax Indemnification Agreement [GPA 1989 BN-5], dated as of
September 22, 1989, as amended and restated as of October 1, 1991, and as
amended and restated as of the Restatement Date, between Original Head Lessee
and Lessee, as the same may be amended, supplemented or otherwise modified from
time to time.
"Taxes" shall mean any and all fees (including, without
limitation, license and registration fees), taxes (including, without
limitation, sales, personal property (tangible and intangible), transfer, fuel,
leasing, use, occupational, value added, excess profits, excise, gross receipts,
franchise, stamp, and income taxes), levies, imposts, withholdings, assessments,
or other taxes, duties or charges of any nature whatsoever, together with any
penalties, fines, additions to tax charges or interest thereon or computed with
reference thereto.
"Term" shall mean, collectively, the Basic Term specified
in Lease Supplement No. 3 and, if Lessee extends the Term in accordance with
Section 20, the Renewal Term, for which the Aircraft is leased hereunder
pursuant to Section 2.
- 20 -
22
"Trust Agreement" shall mean the Trust Agreement [GPA 1989
BN-5] dated as of September 22, 1989 as amended by Trust Supplement No. 1, as
further amended by Trust Supplement No. 2 and as further amended by Trust
Supplement No. 3, between Lessor, in its individual capacity, and Owner
Participant, as beneficiary, as the same may be amended, supplemented or
otherwise modified from time to time. The term "Trust Agreement" shall also
include the Trust Supplements.
"Trust Estate" shall have the meaning specified in the
Trust Agreement.
"Trust Supplements" shall mean Trust Supplement No. 1,
Trust Supplement No. 2, Trust Supplement No. 3 and each subsequent Trust
Supplement entered into thereunder and any further supplement to the Trust
Agreement.
"Trust Supplement No. 1" shall mean Trust Agreement
Supplement [GPA 1989 BN-5] No. 1 dated the Delivery Date between Lessor and
Owner Participant for the purpose of bringing the Aircraft and the Original Head
Lease into the Trust Estate.
"Trust Supplement No. 2" shall mean Trust Agreement
Supplement [GPA 1989 BN-5] No. 2 dated October 24, 1991 between Lessor and Owner
Participant.
"Trust Supplement No. 3" shall mean Trust Agreement
Supplement [GPA 1989 BN-5] No. 3 dated the Restatement Date between Lessor and
Owner Participant conforming the references in the Trust Agreement to this
Agreement.
"United States Government" shall mean the federal
government of the United States of America and any board, commission,
department, division, organ, instrumentality, court or agency thereof.
"Wet Lease" shall mean any arrangement whereby Lessee
agrees to furnish the Aircraft or the Airframe and Engine or engines installed
thereon at that time to a third party pursuant to which such Aircraft or the
Airframe and Engine or engines (i) shall be operated solely by regular employees
of Lessee (or any Permitted Sublessee) possessing all current certificates and
licenses required under the Federal Aviation Act or, if the Aircraft is not
registered under the Federal Aviation Act, all certificates and licenses
required by the laws of the jurisdiction of registry (it is understood that
cabin attendants need not be
- 21 -
23
regular employees of Lessee (or any Permitted Sublessee)) and Lessee (or any
Permitted Sublessee) otherwise maintains operational control and possession
thereof, and (ii) shall be maintained by Lessee (or any Permitted Sublessee) in
accordance with its normal maintenance practices and this Lease, and otherwise
the insurance required hereunder shall be maintained and the Aircraft shall be
used and operated in accordance with this Lease.
Section 2. Agreement to Lease. Lessor hereby agrees to
lease the Aircraft to Lessee, and Lessee hereby agrees to lease the Aircraft
from Lessor, on the terms and subject to the conditions set forth in this Lease.
Section 3. Delivery and Acceptance; Term; Rental Period.
(a) Time of Delivery. The Aircraft was delivered to
Lessee, and Lessee accepted delivery of the Aircraft, on December 22, 1989.
(b) [Intentionally Left Blank.]
(c) Acceptance of Aircraft. The Aircraft leased hereunder
was delivered to Lessee "AS IS," "WHERE IS" and SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a) AND (b)
HEREOF.
Lessee hereby agrees that it has accepted the Aircraft for
all purposes of this Lease and Lessee's acceptance of the Aircraft was
conclusive evidence that, as between Lessor and Lessee, the Aircraft was in all
respects satisfactory to Lessee and was in compliance with this Lease.
(d) Term of Lease. The Basic Term of this Lease shall
commence on the Delivery Date and shall continue until the Expiration Date;
provided, however, that the Term of this Lease may be earlier terminated
pursuant to the provisions hereof.
(e) Rental Period. Lessor and Lessee agree that the period
between each Basic Rent Payment Date shall constitute a rental period for
purposes of Section 467 of the Code.
Section 4. Rent; Minimum Payments.
(a) Rent. Lessee covenants and agrees to pay the following
as Rent hereunder:
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24
(i) Basic Rent. The Basic Rent, as set forth in Exhibit C
throughout the Basic Term hereof, in consecutive installments, in advance and
allocable to the rental period beginning on such date, as set forth on Schedule
I to Exhibit C, due and payable on each Basic Rent Payment Date; and
(ii) Supplemental Rent. Any and all Supplemental Rent,
which shall be due and payable within fifteen (15) days after demand unless
otherwise specifically provided. In the event of any failure on the part of
Lessee to pay any Supplemental Rent when due, Lessor shall have all rights,
powers and remedies provided for herein or by law or equity or otherwise in the
case of nonpayment of Basic Rent or Renewal Rent.
(b) Minimum Payments. Notwithstanding any provision in
this Lease or in any other Operative Document to the contrary, under all
circumstances and in any event, (i) the Stipulated Loss Value, together with the
payment of Supplemental Rent and all other Rent then due hereunder, as of any
time and as of the date of any payment thereof shall (both before and after
giving effect to any reductions therefrom) be in an amount at least sufficient
to pay in full as of such time or date the aggregate unpaid principal amount of
the Equipment Notes then outstanding and all accrued and unpaid interest
(assuming interest has been timely paid) thereon and (ii) Basic Rent payable on
any Basic Rent Payment Date shall at least equal the aggregate amount of
principal and interest due and payable on the Equipment Notes on such Basic Rent
Payment Date. It is agreed, however, that no installment of Basic Rent or
Stipulated Loss Value shall be increased or adjusted by reason of (A) any
attachment or diversion of Rent on account of any Lessor's Lien or Head Lessor's
Lien or any Lenders' Lien, (B) any modification of the terms of the Equipment
Notes or the other Financing Documents made without the prior written consent of
Lessee or (C) the acceleration of any Equipment Note due to the occurrence of
any "Indenture Event of Default" (as defined in the Indenture) which does not
constitute an Event of Default hereunder. It is further agreed that nothing in
this Lease or any other Operative Document shall be deemed to constitute a
guaranty of the value, utility or useful life of the Aircraft or a guaranty in
respect of interest, principal or any other amounts payable in respect of or
under the Equipment Notes.
(c) Date, Place and Method of Payment. If any date on
which a payment of Rent becomes due and payable is not a Business Day, the Rent
otherwise due on such date
- 23 -
25
shall be due and payable on the next succeeding Business Day. All Basic Rent,
Renewal Rent and Supplemental Rent payable under this Lease shall be paid by
wire transfer in immediately available currency of the United States of America,
no later than 12:00 p.m. (noon), New York City time, on the date payable
hereunder, and, so long as the Lien of the Indenture shall not have been
discharged, to or as directed by Indenture Trustee in accordance with the
payment instructions set forth in Exhibit C hereto or at such other address in
The City of New York or Hartford, Connecticut as Indenture Trustee may direct by
thirty (30) days prior written notice to Lessee, except that all Excepted
Payments, and upon discharge of the Lien of the Indenture, all payments of Rent
thereafter made hereunder, shall be paid in such immediately available funds no
later than 12:00 p.m. (noon), New York City time, on the date payable hereunder,
to Lessor or to Owner Participant, as appropriate, in accordance with the
payment instructions set forth in Exhibit C or at such other address in The City
of New York as Lessor may direct by thirty (30) days prior written notice to
Lessee.
(d) Prohibition Against Setoff, Counterclaim, Etc. This
Lease is a net lease. Lessee's obligations to pay all Rent and to perform all
other obligations hereunder are absolute and unconditional and shall not be
affected or reduced by any circumstances, including, without limitation, (i) any
setoff, counterclaim, recoupment, defense, or other right which Lessee may have
against Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any
Note Holder, any Manufacturer, any Person providing services with respect to the
Aircraft, or any other Person, for any reason whatsoever (whether in connection
with the transactions contemplated hereby or otherwise), including, without
limitation, any breach by Lessor of its representations, warranties or covenants
contained herein or in the other Operative Documents; (ii) any defect in the
title, airworthiness, eligibility for registration under the Federal Aviation
Act, condition, design, operation, or fitness for use of, or any damage to or
loss or destruction of, the Aircraft (subject to the provisions of Section
11(a)(ii) hereof), any interruption or cessation in the use of or possession
thereof by or availability to Lessee for any reason whatsoever, whether arising
out of or related to an act or omission of Lessee, Lessor, Original Head Lessee,
Owner Participant, Indenture Trustee, any Note Holder, any Manufacturer, any
Person providing services with respect to the Aircraft or any other Person;
(iii) any Liens with respect to the Aircraft; (iv) the invalidity or
unenforceability or lack of due authorization or other
- 24 -
26
infirmity of this Lease or any absence of right, power or authority of Lessor,
Original Head Lessee, Lessee or Indenture Trustee to enter into this Lease or
the Indenture, as the case may be; (v) any insolvency, bankruptcy,
reorganization, or similar proceedings by or against Lessor, Original Head
Lessee, Lessee, any Permitted Sublessee, Indenture Trustee or any Note Holder;
(vi) any Taxes or (vii) any other circumstance or happening of any nature
whatsoever, whether or not similar to any of the foregoing; it being the
expressed intention of Lessor and Lessee that all Rent payable hereunder shall
be payable in all events, unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Agreement.
Except as expressly set forth elsewhere in this Agreement,
Lessee hereby waives, to the extent permitted by applicable Law, any and all
rights which it may now have or which at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, abate, cancel, quit, reduce,
defer, suspend or surrender this Lease or the Aircraft or any obligation imposed
upon Lessee hereunder or under the other Operative Documents (including, without
limitation, payment of Rent), except in accordance with the terms hereof.
Each payment of Rent made by Lessee shall be final. Lessee
will not seek to recover all or any part of any payment of Rent for any reason
whatsoever except manifest error.
If for any reason whatsoever this Lease shall be
terminated in whole or in part by operation of Law, except as specifically
provided herein, Lessee waives all rights (if any) to any diminution in its Rent
obligations hereunder and nonetheless agrees to pay to Indenture Trustee or
Lessor as provided in Section 4(c) hereof an amount equal to each Basic Rent or
Renewal Rent, as the case may be, payment and any Supplemental Rent payment at
the time such payments would have become due and payable in accordance with the
terms hereof had this Lease not been terminated in whole or in part, and so long
as such payments are made and all other terms and conditions hereof are complied
with by Lessee, Lessor and Lessee will deem this Lease to remain in full force
and effect.
The foregoing shall not, however, be construed as a waiver
of Lessee's other rights to seek damages, specific performance, other remedies
at law or equity or any combination thereof, as against the Original Head
Lessee, Lessor, Indenture Trustee or any other Person having an
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27
interest herein through the Original Head Lessee, Lessor, Indenture Trustee or
any other Person as shall be liable therefor, on account of any failure of the
Original Head Lessee, Lessor, Indenture Trustee or any other such Person to
perform its express obligations under this Lease and the other Operative
Documents, or to enforce any judgment obtained therefor.
Section 5. Representations, Warranties and Covenants.
(a) Warranties and Disclaimer of Warranties. THE AIRCRAFT
WAS DELIVERED AND IS BEING LEASED BY LESSOR TO LESSEE "AS IS" AND "WHERE IS".
LESSEE EXPRESSLY AGREES THAT IT TOOK THE AIRCRAFT ON SUCH BASIS. LESSOR HAS NOT
AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE AIRCRAFT
UNDER THIS LEASE OR BY ONE OF ITS AFFILIATES HAVING ACQUIRED THE AIRCRAFT OR
DONE OR FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER
OR IN RELATION TO THIS LEASE, AND LESSOR HEREBY SPECIFICALLY DISCLAIMS, ANY
GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE
(EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR OR ANY PURPOSE
OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS WHETHER OR NOT
DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR AS TO ANY OTHER GUARANTY, REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT LIMITATION
ANY LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT
LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR DEALING OR
USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER
CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND
DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH GUARANTY, REPRESENTATION OR
WARRANTIES. NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY
RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, REGARDLESS OF ANY
NEGLIGENCE (OTHER THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS
NOT ATTRIBUTABLE TO ITS INTEREST IN THE AIRCRAFT) OF LESSOR OR ANY OTHER
INDEMNITEE, AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS ANY
RIGHTS OR REMEDIES, WITH RESPECT TO (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN
CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR
ANY RISKS RELATING THERETO, (iii) ANY
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28
INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR DIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (iv) THE DELIVERY, OPERATION, SERVICING,
MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES
AND REPRESENTATIONS SET FORTH IN THIS SECTION 5(a) ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO THE AIRCRAFT,
EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER
IMPLIED WARRANTIES, OR GUARANTEES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, OR ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR OR ANY USE, EXCEPT THAT: Lessor represents and warrants
that (x) on the Delivery Date, Lessor had, and on the Restatement Date Lessor
has, the right to lease the Aircraft hereunder, (y) on the Delivery Date the
Aircraft was, and on the Restatement Date the Aircraft is, free of Lessor's
Liens and Head Lessor's Liens, and (z) on the Restatement Date Lessor has such
title to the Aircraft as was transferred to it on the Delivery Date and (B)
Lessor covenants that it shall maintain such title to the Aircraft as was
transferred to it on the Delivery Date and shall not create, incur, assume or
suffer to exist any Lessor's Lien or Head Lessor's Lien on the Aircraft.
(b) Representations and Warranties of Lessor. Lessor
hereby represents and warrants, as of the Delivery Date and as of the
Restatement Date that its representations and warranties set forth in Section
9(b) of the Refunding Agreement were true when made and continue to be true and
correct.
(c) No Amendments to Financing Documents. Lessor covenants
and agrees that Lessor will not, without the prior written consent of Lessee,
amend, modify, supplement or waive any provision of any Financing Document in
such a way as to materially increase Lessee's obligations hereunder or
materially reduce Lessee's rights hereunder.
The representations, warranties and covenants of Lessor
under Sections 5(a) and 5(b) and this Section 5(c) shall survive the execution
and delivery of this Lease and the delivery of the Aircraft and the Restatement
Date.
(d) Suppliers' Warranties. So long as a Default or an
Event of Default has not occurred and is continuing and provided that the
Aircraft continues to be maintained, modified and repaired as required
hereunder, Lessor hereby assigns or, if by their terms not assignable, agrees
otherwise to make available to Lessee the right to exercise
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in Lessee's name such rights as Lessor may have or may subsequently obtain (but
without representation or warranty by or recourse to Lessor) with respect to any
product warranty, service life policy, trademark, patent or copyright
infringement indemnity, or airframe or propulsion system performance guaranty,
of Airbus Industrie, the Manufacturer's Subsidiary, IAE or any subcontractor or
vendor with respect thereto under the Purchase Agreement (except those which
were given directly to Parent, the Original Head Lessee or any of their
Affiliates and are not directly related to the operator's use of the Aircraft),
to the extent that the same may be assigned or otherwise made available to
Lessee, and Lessor agrees to exert its reasonable efforts, at Lessee's expense
and upon its request, to enforce such rights as Lessor may have with respect
thereto for the benefit of Lessee; provided, however, that upon and during the
continuance of a Default or an Event of Default, such assignment or other rights
which are otherwise made available to Lessee shall immediately and automatically
without further action be deemed cancelled and, to the extent of any remaining
interest held by Lessee, deemed reassigned to Lessor and all such rights shall
revert to Lessor automatically including all claims thereunder whether or not
perfected and all amounts payable shall be paid to and held by Lessor. In no
event, however, shall Lessee have any right to amend, supplement or otherwise
modify the Purchase Agreement (by change order or otherwise). In connection with
the foregoing, Lessee agrees to be bound by and comply with all applicable
terms, conditions and limitations of the provisions of the Purchase Agreement.
Section 6. Possession and Use.
(a) Possession.
(i) Lease, Assignment and Transfer. LESSEE WILL NOT
ASSIGN THIS LEASE OR ANY RIGHTS OR OBLIGATIONS HEREUNDER OR INTEREST HEREIN
(EXCEPT AS PROVIDED IN SECTION 8(e) BELOW) OR SUBLEASE, WET LEASE OR OTHERWISE
IN ANY MANNER TRANSFER, DELIVER OR RELINQUISH POSSESSION OR USE OF THE AIRCRAFT,
AIRFRAME OR ANY ENGINE OR INSTALL ANY ENGINE OR PERMIT ANY ENGINE TO BE
INSTALLED ON ANY AIRFRAME OTHER THAN THE AIRFRAME; provided, that, so long as no
Event of Default or Default shall have occurred and be continuing or would
result therefrom and so long as the action to be taken shall not adversely
affect Lessor's title to or other interest in, or the Lien of the Indenture on,
the Aircraft, the Airframe or either of the Engines or this Lease or the
insurance required to be maintained hereunder and Lessee is
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otherwise in full compliance with Section 12, and so long as all necessary
approvals of the FAA and any other Governmental Entity having jurisdiction have
been obtained, then Lessee, without the prior written consent of Lessor, may,
only to the extent provided below and subject to the limitations of Sections
6(a)(ii) and 6(a)(iii) below:
(1) subject any Engine to a normal interchange,
maintenance, servicing or pooling agreement or similar arrangement
with a Permitted Sublessee, in each case customary in the airline
industry of which Lessee is a part and entered into in the
ordinary course of its business; provided that no transfer of the
registration of any Engine shall be effected in connection
therewith; and provided, further, that (A) no such agreement or
arrangement contemplates, results in or requires the transfer of
title to any Engine, and (B) if Lessor's title or Foreign Lessor's
(so long as the Foreign Lease Agreement is in effect) to any
Engine shall be divested under any such agreement or arrangement,
such divestiture shall be deemed to be an Event of Loss with
respect to such Engine and not an Event of Default and Lessee
shall comply with Section 11(b) hereof in respect thereof;
(2) deliver possession of the Aircraft, the Airframe or
any Engine to the manufacturer thereof, or in accordance with the
Maintenance Program to an FAA certified repair station, for
testing, service, storage, repair, maintenance, inspection or
overhaul work on such Aircraft, Airframe or Engine or any part
thereof or for alterations or modifications in or additions to
such Aircraft, Airframe or Engine to the extent required or
permitted by the terms of Section 9 hereof;
(3) transfer possession of the Aircraft or the Airframe to
the United States of America or any instrumentality or agency
thereof pursuant to a sublease;
(4) (i) subject the Airframe to the Civil Reserve Air
Fleet Program and transfer possession of the Airframe or any
Engine to the United States Government pursuant to the Civil
Reserve Air Fleet Program, so long as Lessee shall promptly notify
Lessor upon transferring possession of the Airframe or any Engine
to the United States Government pursuant to the Civil Reserve Air
Fleet Program and provide Lessor with the name and address of the
Contracting Office
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Representative for the Military Airlift Command of the United
States Air Force to whom notices must be given; or
(ii) subject the Airframe to (a) a service contract with
the United States Government, a copy of which shall be provided to
Lessor, providing for possession to be held by the United States
Government for a period not extending beyond the end of the Term,
or (b) a requisition for use by the United States Government not
constituting an Event of Loss;
(5) install an Engine on an airframe (other than the
Airframe) owned by Lessee free and clear of all Liens except (A)
Permitted Liens and Liens which apply only to engines (other than
the 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 (B) the rights of participants under normal
interchange agreements which are customary in the airline industry
and do not contemplate, permit, result in or require the transfer
of title to the airframe or engines installed thereon;
(6) install an Engine on an airframe leased to Lessee or
owned by Lessee subject to a conditional sale or other security
agreement; provided that: (A) such airframe is free and clear of
all Liens except the rights of the parties to the lease or
conditional sale or other security agreement covering such
airframe and except Liens of the type permitted by clauses (A) and
(B) of Section 6(a)(i)(5) and the Lien of any mortgage which
provides that each Engine leased to Lessee hereby shall not become
subject to the lien thereof or to any rights of any party
thereunder other than Lessee (with respect to Lessee's rights
expressly granted hereunder), notwithstanding the installation of
such Engine on any airframe subject to the Lien of such mortgage,
unless and until Lessee shall become the owner of such Engine and
Lessor shall have no further interest therein, all pursuant to the
express terms of this Lease; and (B) there shall be in effect a
written agreement of the lessor or secured party of such airframe
(which may be contained in the lease or conditional sale or other
security agreement covering such airframe) substantially similar
in effect to the agreement of Lessor in Section 6(b) below whereby
such lessor or secured party effectively and expressly agrees that
neither it nor its successors or assigns
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will acquire or claim any right, title or interest in any Engine
by reason of such Engine being installed on such airframe at any
time while such Engine is subject to this Lease or is owned by
Lessor, and a copy of such agreement shall be provided to Lessor
upon written request;
(7) install an Engine on an airframe owned by Lessee,
leased to Lessee or purchased by Lessee subject to a conditional
sale or other security agreement under circumstances where neither
Section 6(a)(i)(5) or Section 6(a)(i)(6) is applicable; provided
that such installation shall be deemed an Event of Loss with
respect to such Engine and Lessee shall comply with Section 11(b)
hereof in respect thereof, Lessor not intending hereby to waive
any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 11(b);
(8) enter into a Wet Lease for the Aircraft or the
Airframe and engines installed thereon in the ordinary course of
Lessee's business for a period not extending beyond the Term;
provided that if Lessee (or any Permitted Sublessee) shall enter
into any Wet Lease for a period of more than one year (including
renewal options) Lessee shall provide to Lessor written notice of
such Wet Lease (such notice to be given prior to entering into
such Wet Lease, if practicable, but in any event promptly after
entering into such Wet Lease); or
(9) sublease the Aircraft or the Airframe to any Permitted
Sublessee on the terms and conditions set forth in Section
6(a)(iii) below.
(ii) Certain Limitations on Transfers. With respect
to any transfer pursuant to Section 6(a)(i):
(1) the rights of any transferee that receives possession
by reason of a transfer permitted by Section 6(a) hereof (other
than the transfer of an Engine which is deemed to have been an
Event of Loss) shall be expressly subject and subordinate to all
the terms of this Lease and the Lien of the Indenture (if it has
not been discharged);
(2) Lessee's obligations hereunder and under the other
Operative Documents shall continue in full force and effect and
Lessee shall remain primarily liable hereunder for the performance
of all of the terms of
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this Lease to the same extent as if such transfer had not occurred
and no provision of this Lease shall be deemed a waiver of
Lessor's rights hereunder or under the other Operative Documents
nor discharge or diminish any of Lessee's obligations hereunder or
under the other Operative Documents;
(3) During the Restricted Use Period, no Wet Lease,
Permitted Sublease or other relinquishment of possession of the
Aircraft, the Airframe or any Engine pursuant to the terms of this
Section 6(a) shall be permitted if such Wet Lease, Permitted
Sublease or other relinquishment of possession would cause the
Aircraft, the Airframe or such Engine to be "tax-exempt use
property" within the meaning of Section 168(h) of the Code or
cease to be "Section 38 property" within the meaning of Section
48(a) of the Code (as determined after the application of Section
47(a)(7) of the Code);
(4) The term of any transfer, Wet Lease, Permitted
Sublease or other relinquishment of possession shall not extend
beyond the Basic Term or the Renewal Term (if Lessee shall have
exercised its option to renew this Lease in accordance with the
terms hereof); and
(5) No transfer, Wet Lease, Permitted Sublease or other
relinquishment of possession of the Aircraft, the Airframe or any
Engine shall in any way discharge or diminish any of Lessee's
obligations to Lessor or any other Person hereunder for which
obligations Lessee shall remain primarily liable.
(iii) Permitted Subleases. With respect to any
sublease pursuant to Sections 6(a)(i)(3) or (4) (to the extent permitted by Law)
or Section 6(a)(i)(9) above:
(1) Lessee may sublease the Aircraft or the Airframe to a
Permitted Sublessee (each of which shall constitute a "Permitted
Sublease") if (A) in any such case, the Permitted Sublessee under
such sublease is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the
date such sublease is entered into, (B) in the event that the
Permitted Sublessee under such sublease is a Foreign Air Carrier
(other than a Foreign Air Carrier principally based in Taiwan),
the United States maintains diplomatic relations with the country
in which such proposed Permitted Sublessee is principally based at
the time such sublease is entered
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34
into (or, in the case of a sublease to a proposed Permitted
Sublessee principally based in Taiwan, maintains diplomatic
relations at least as good as those in effect on the Restatement
Date) and (C) in the event that the Permitted Sublessee under such
sublease is a Foreign Air Carrier, Lessor and the Indenture
Trustee shall have received an opinion of counsel to Lessee, in
form and substance reasonably satisfactory to Owner Participant
and the Indenture Trustee, to the effect that (I) the terms of the
proposed sublease will be legal, valid, binding and (subject to
customary exceptions in foreign opinions generally) enforceable
against the proposed Permitted Sublessee in the country in which
the Permitted Sublessee is principally based, (II) there exist no
possessory rights in favor of the Permitted Sublessee under such
sublease under the laws of such Permitted Sublessee's country of
domicile that would, upon bankruptcy or insolvency of or other
default by Lessee, prevent the return or repossession of the
Aircraft in accordance with the terms of this Lease, (III) (unless
Lessee shall have agreed or is required to provide insurance
covering the risk of requisition of use of the Aircraft by the
government of the country of such Permitted Sublessee's country of
domicile) the laws of such Permitted Sublessee's country of
domicile require fair compensation by the government of such
jurisdiction payable in currency freely convertible into dollars
for the loss of use of the Aircraft in the event of the
requisition by such government of such use, (IV) the Permitted
Sublessee is either not entitled to sovereign immunity, or has
effectively waived such sovereign immunity, with respect to its
rights and obligations under the proposed sublease; (V) the laws
of such Permitted Sublessee's country of domicile would give
recognition to Lessor's title to the Aircraft, to the registry of
the Aircraft in the name of the Lessor (or Lessee, as "lessee", or
the proposed Permitted Sublessee, as "sublessee", as appropriate)
and to the Lien of the Indenture; (VI) it is not necessary under
the laws of such Permitted Sublessee's country of domicile, solely
as a consequence of such subleasing and without giving effect to
any other activity of Owner Participant, Owner Trustee or
Indenture Trustee or any Affiliate thereof, as the case may be,
for the Owner Trustee, the Owner Participant or the Indenture
Trustee to qualify to do business in such jurisdiction; and (VII)
if the Owner Participant so requests, (x) under the laws of such
Permitted Sublessee's country of domicile there is no tort
liability of the owner of an aircraft not in
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possession thereof (it being agreed that in the event this opinion
cannot be given in a form reasonably satisfactory to Owner
Participant, such opinion shall be waived if insurance reasonably
satisfactory to Owner Participant is provided to cover such risk),
and (y) such other matters as the Owner Participant reasonably
requests, provided, however, that no sublease shall extend beyond
the expiration of the Basic Term or any Renewal Term then in
effect.
The rights of any Permitted Sublessee shall be expressly
subject and subordinate to all the terms of this Lease and to the Lien of the
Indenture (if it has not been discharged), including, without limitation, the
covenants contained in Sections 6(c), 6(d) and 6(e) hereof and Lessor's rights
to repossession pursuant to Section 18 hereof and to avoid or terminate such
Permitted Sublease upon such repossession, and Lessee shall remain primarily
liable hereunder for the performance of all of the terms of this Lease to the
same extent as if such Permitted Sublease had not occurred. No Permitted
Sublease shall in any way discharge or diminish any of Lessee's obligations to
Lessor hereunder or constitute a waiver of Lessor's rights or remedies
hereunder. Any Permitted Sublease shall expressly prohibit any further
sub-sublease by the Permitted Sublessee. Lessee shall provide to the Owner
Participant and the Indenture Trustee (i) written notice of any Permitted
Sublease hereunder (such notice to be given not later than ten Business Days
prior to entering into any Permitted Sublease with a Foreign Air Carrier and, if
practicable, not later than five days prior to entering into any Permitted
Sublease with any other proposed Permitted Sublessee, but, in the case of a
Permitted Sublease with a Permitted Sublessee other than a Foreign Air Carrier,
in any event promptly after entering to any such Permitted Sublease) and (ii) a
copy of each Permitted Sublease which has a term of more than three months.
(b) Reciprocal Recognition of Rights. In the event the
lessor or secured party of any airframe leased to Lessee (or a Permitted
Sublessee) or owned by Lessee (or a Permitted Sublessee) is subject to a
conditional sale or other security agreement in accordance with Section
6(a)(i)(6) hereof, and the lease or conditional sale or other security agreement
covering such airframe also covers an engine or engines owned by the lessor
under such lease or subject to a security interest in favor of the secured party
under such conditional sale or other security agreement, Lessor hereby agrees
for the benefit of such lessor or secured party that Lessor will not acquire or
claim, as
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36
against such lessor or secured party, any right, title or interest in any such
engine as the result of such engine being installed on the Airframe at any time
while such engine is subject to such lease or conditional sale or other security
agreement and owned by such lessor or subject to a security interest in favor of
such secured party. Lessor also hereby agrees for the benefit of the mortgagee
under any mortgage complying with Section 6(a)(i)(6) hereof, relating to
installation of an Engine on an airframe leased to Lessee (or a Permitted
Sublessee), that Lessor will not acquire or claim, as against such mortgagee,
any right, title or interest in any engine subject to the lien of such mortgage
as the result of such engine being installed on the Airframe at any time while
such engine is subject to the lien of such mortgage.
(c) Lawful Insured Operations. Lessee will not permit the
Aircraft, the Airframe or any Engine to be serviced, repaired, maintained, used
or operated in violation of any Law of any Governmental Entity having
jurisdiction, or contrary to the Manufacturers' operating manuals or
instructions, or in violation of any airworthiness certificate or limitation,
license or registration issued by any such authority or any manufacturer's
specifications, service bulletins or other requirements, including, without
limitation, such of any manufacturer's requirements as may be applicable to keep
in full force and effect each material warranty, product or performance
guaranty, service life policy or the like, in each case, to the extent made
mandatory for Part 121 operators similarly situated to Lessee or the Permitted
Sublessee if the Aircraft is registered with the FAA, or the applicable laws of
any other jurisdiction in which the Aircraft may then be registered in
accordance with Section 11 of the Refunding Agreement, unless the validity
thereof is being contested in good faith and by appropriate proceedings, but
only so long as such proceedings do not involve any danger of sale, forfeiture
or loss of the Aircraft or impair the interest of Lessor therein or impair the
validity or priority of the Lien of the Indenture or result in a risk of
criminal liability of Lessor or Indenture Trustee and are not inconsistent with
any insurance required to be maintained by Lessee hereunder. In the event that
such Law or other requirement requires alteration of the Aircraft during the
Basic Term or then-current Renewal Term, Lessee shall comply therewith at its
sole expense and shall maintain the same in proper condition for operation under
such Laws and other requirements. Lessee shall not operate in any manner or
locate in any place the Aircraft, or suffer or permit the Aircraft to be
operated by a Permitted Sublessee or
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37
otherwise in any manner or located by a Permitted Sublessee or otherwise in any
place (i) unless the Aircraft is covered by insurance or United States
Government indemnity as required by the provisions hereof or (ii) contrary to
the terms of such insurance or United States Government indemnity. Lessee also
agrees not to operate or locate the Aircraft or suffer or permit the Aircraft to
be operated or located in any area excluded from coverage by any insurance
policy issued pursuant to the requirements of this Lease or in any war zone
unless insured or indemnified by the United States of America therefor, except
in the case of operation pursuant to a sublease or contract with, or as a result
of a requisition (not constituting an Event of Loss) by, the United States of
America, and then only if Lessee has obtained insurance or an indemnity (in lieu
of such insurance) from the United States of America covering such risks, in the
amounts and otherwise as required by this Lease. Lessee shall in no event permit
the Aircraft, the Airframe or any Engine to be used, operated or maintained in
Japan.
(d) Maintenance. Lessee, at its own cost and expense,
shall: (i) perform or cause to be performed all service, repair, maintenance,
overhaul, inspections, alterations, modifications, and testing (A) in accordance
with good airline industry practice and in such manner to provide complete data
and documentation necessary to substantiate certification, (B) as may be
necessary and required under, and in compliance with, applicable Law, including,
without limitation, FAA rules, regulations and other requirements, the
Maintenance Program, airworthiness directives having a compliance date during
the Term, and the service bulletins and other requirements of any manufacturer,
including, without limitation, such requirements as may be applicable to keep in
full force and effect any and all material warranties, product and performance
guaranties, service life policies, indemnities or the like, (C) except during
any period that a Permitted Sublease is in effect, in the same manner and with
the same care, including regard for the status and technical condition of the
Aircraft, as shall be the case with respect to similar aircraft and engines
owned by Lessee without discrimination and as if Lessee owned the Aircraft and
was going to use the Aircraft in continued regular customer service after the
expiration of the Term, and consistent with good industry practice, and during
any period in which a Permitted Sublease is in effect, in the same manner and
with the same care, including regard for the status and technical condition of
the Aircraft, as shall be the case with respect to similar aircraft and engines
owned by such Permitted Sublessee
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38
without discrimination and as if the Permitted Sublessee owned the Aircraft and
was going to use the Aircraft in continued regular customer service after the
expiration of the Permitted Sublease, and consistent with good industry
practice, provided, however, that in all circumstances the Aircraft shall be
maintained by Lessee (or any Permitted Sublessee) in accordance with maintenance
standards required by, or substantially equivalent to those required by, the
central civil aviation authority of the country of registry and, to the extent
not inconsistent therewith, the FAA and (D) so as to keep the Aircraft in as
good a condition as when delivered to Lessee, ordinary wear and tear excepted,
and in good operating condition; (ii) keep the Aircraft or cause the Aircraft to
be kept in such condition as is necessary to enable the airworthiness
certification of such Aircraft to be maintained in good standing at all times
under the Federal Aviation Act, or the applicable laws of any other jurisdiction
in which the Aircraft may be registered in accordance with Section 11 of the
Refunding Agreement (provided that if any grounding is fleetwide in nature and
so long as Lessee or a Permitted Sublessee is contesting in good faith such
grounding, Lessee shall not be deemed in violation of this maintenance
covenant); and (iii) maintain in English all records, logs and other materials
required by, and in a manner acceptable to, the FAA or any other Governmental
Entity having jurisdiction and as provided under the Maintenance Program and
Lessee's recordkeeping policies.
(e) Registration and Insignia. Lessee shall cause the
Aircraft at all times, at its expense, to be duly registered during the
Restricted Use Period and, subject to Section 11 of the Refunding Agreement,
thereafter under the Federal Aviation Act in the name of Lessor or any successor
or assignee, so long as (i) while the Aircraft is registered under the Federal
Aviation Act, each of the Lessor or its successors or assigns is a "citizen of
the United States" as defined in Section 40102(a)(15) of the Federal Aviation
Act and (ii) the applicable parties to the Refunding Agreement cooperate with
Lessee with respect thereto as reasonably requested by Lessee. Lessee shall not
register the Aircraft or permit the Aircraft to be registered under any laws
other than the Federal Aviation Act at any time except as provided in Section 11
of the Refunding Agreement and shall cause the Indenture to be duly recorded and
maintained of record as a duly perfected mortgage on the Aircraft and this Lease
at all times. At any time after the Restricted Use Period, Lessor, upon
compliance with all of the terms of Section 11 of the Refunding Agreement,
shall, at the request and sole expense of Lessee, cooperate with Lessee to take
all actions
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reasonably required to change the registration of the Aircraft to another
country.
Lessee agrees at its expense to place such appropriate
insignia, plates and other identification ("Lease Identification") in the
cockpit of the Aircraft and on each Engine showing title thereto and the Lien of
the Indenture as designated by Lessor and as Lessor may from time to time
reasonably request. Unless otherwise requested, upon delivery of the Aircraft,
Lessee shall fasten or cause to be fastened in the cockpit of the Airframe in a
location reasonably adjacent to and not less prominent than the airworthiness
certificate for the Aircraft, and on each Engine (if not prohibited by
applicable Law), a Lease Identification in the form set forth in Exhibit C
hereto or with any other appropriate information in any other form subsequently
designated by Lessor to Lessee. Except as provided herein, Lessee will not allow
the name of any Person to be placed on the Aircraft or either Engine as a
designation that would be reasonably interpreted as a claim of ownership or
Lien; provided, however, that Lessee may cause the Airframe and Engines to have
placed thereon the customary colors and insignia of Lessee or any Permitted
Sublessee under a Permitted Sublease.
Section 7. Inspection.
During the Term of this Lease, Lessee shall furnish to
Lessor, Owner Participant and Indenture Trustee such information concerning the
location, condition, use and operation of the Aircraft as Lessor, Owner
Participant or Indenture Trustee may reasonably request. Lessee shall permit, or
cause its Permitted Sublessee to permit, any person designated by Lessor, Owner
Participant or Indenture Trustee on reasonable prior notice at reasonable times
to visit, inspect and survey the Aircraft (including, without limitation, going
on board the Aircraft, and inspecting the Aircraft during maintenance checks
when panels and bays are open and subject to view), its condition, use, and
operation, and the records maintained in connection therewith, and to visit and
inspect the properties and to discuss the affairs, finances and accounts of
Lessee with the principal officers of Lessee, provided, that so long as Lessor
does not believe a Default or Event of Default has occurred hereunder
inspections shall be performed during regularly scheduled maintenance checks of
the Aircraft. Each such inspection or survey shall be conducted so as to not
unreasonably interfere with the business of Lessee or the maintenance or
operation of the Aircraft. Upon
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Lessor's, Owner Participant's or Indenture Trustee's request, Lessee will notify
such Person of the next scheduled maintenance check for the Airframe or any
Engine. Lessor, Owner Participant and Indenture Trustee 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. Lessor's, Owner Participant's or
Indenture Trustee's failure to object to any condition or procedure observed or
observable in the course of an inspection hereunder shall not be deemed to waive
or modify any of the terms of this Lease with respect to such condition or
procedure.
Section 8. Additional Covenants of Lessee.
Lessee covenants and agrees that:
(a) Financial Information. Lessee agrees to furnish
Lessor, until the expiration or other termination of the Term of this Lease, the
following:
(i) within sixty (60) days following the end of each
quarter of Lessee's fiscal year, except the last such quarter of such year,
commencing after the Restatement Date, a copy of Lessee's Quarterly Report on
Form 10-Q as filed with the Securities and Exchange Commission or, if Lessee no
longer files such report, an unaudited consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of the period
ended, together with the related statements of income and cash flows for such
period, and in each case certified by a Responsible Officer of Lessee as having
been prepared in accordance with GAAP and as fairly presenting the financial
condition and results of operations and changes in financial position for such
period then ended in accordance with such principles and practices (subject to
normal year-end audit adjustments);
(ii) within one hundred five (105) days after the close
of each fiscal year of Lessee, a copy of Lessee's Annual Report on Form 10-K as
filed with the Securities and Exchange Commission or, if Lessee no longer files
such reports, an audited consolidated balance sheet, income statement, and cash
flow statement of Lessee and its consolidated subsidiaries, as of the close of
such fiscal year, and in each case as certified by independent public
accountants, including their certificate and accompanying comments, as having
been prepared in accordance with GAAP and as fairly presenting the financial
condition and results of operations and changes in financial position for such
period then ended in accordance with such principles and
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41
practices, without qualification as to the scope of the audit or non-conformity
with GAAP;
(iii) promptly upon their becoming available, copies of
all reports on Form 8-K filed by Lessee under the Securities Exchange Act of
1934, as amended, and each other statement, report or circular (other than the
exhibits thereto and any registration statements on Form S-8 or its equivalent)
generally distributed to creditors or shareholders;
(iv) prior to the expiration date of each policy of
insurance required to be maintained hereunder, a certificate signed by the
Approved Broker of Lessee as to the due compliance with the insurance provisions
of Section 12 hereof with respect to the Aircraft, together with certificates of
insurance evidencing such insurance and the opinion provided for in Section
12(f);
(v) within fifteen (15) days following the end of each
calendar month throughout the Term, an Airframe and Engine status report,
substantially in the form of Exhibit K hereto, including, without limitation,
(A) a summation of hours and cycles accumulated on the Airframe and Engines by
individual serial number during such preceding calendar month and (B) the
identity of the airframe (including the "N" number and, at Lessor's request,
ownership and lien interests in respect thereof) on which each Engine was
installed as of the end of each such calendar month, and, if Lessor so requests,
the location of any such airframe. The foregoing shall not be deemed to require
reports regarding hours or cycles on any Parts;
(vi) together with each set of financial statements
referred to in clauses (i) and (ii), a certificate signed by a Responsible
Officer of Lessee, to the effect that such officer has reviewed the relevant
terms of this Lease and has made, or caused to be made under his or her
supervision, a review of the transactions and condition of Lessee during the
accounting period covered by such financial statements, and that such review has
not disclosed the existence during such accounting period, nor does such officer
have any knowledge of the existence, as at the date of such certificate, of any
condition or event which constitutes a Default or an Event of Default, or, if
such condition or event which constitutes a Default or an Event of Default
existed or exists, specifying the nature and period of existence thereof and
what action Lessee has taken or is taking or proposes to take with respect
thereto;
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(vii) as soon as practicable after becoming aware thereof,
notice of damage or destruction to the Aircraft, either Engine or any Part with
a repair or replacement cost (including labor charges) in excess of $1,000,000
or any incident required to be reported to the FAA or other Government Entity;
(viii) immediately after Lessee knows or should know of
the occurrence thereof, notice of a Default; and
(ix) promptly after Lessor's written request therefor,
notice of the time and location of upcoming C Checks, major Engine checks, major
Airframe structural checks and a description of modification of the Aircraft
required by an FAA airworthiness directive, a mandatory manufacturer service
bulletin or any other modification with a materials and labor cost in excess of
$1,000,000;
(x) together with each delivery of financial statements
pursuant to Section 8(a)(ii) above, a certificate signed by Lessee's auditors
thereon (i) briefly setting forth the scope of their examination (which shall
include a review of this Section, (ii) stating whether or not their examination
has disclosed the existence, during the fiscal year covered by such financial
statements, of any Default or Event of Default and, if their examination has
disclosed such a Default or Event of Default, specifying the nature and period
of existence thereof, and (iii) stating that they have examined the officer's
certificate delivered therewith pursuant to Section 8(a)(vi) above;
(xi) As soon as possible and in any event within thirty
(30) days after Lessee knows or has reason to know thereof, a certificate of a
Responsible Officer specifying:
(X) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan; or
(Y) the institution of proceedings or the taking or
expected taking of other action by PBGC or Lessee or any Commonly
Controlled Person to terminate, withdraw or partially withdraw
from any Plan and with respect to a multi-employer Plan, the
reorganization or insolvency of the Plan and in addition to such
notice, deliver to Lessor whichever of the following may be
applicable: (A) a certificate of a Responsible Officer setting
forth details as to such Reportable Event of the action that
Lessee or Commonly Controlled Person proposes to take with respect
thereto, together with a copy of any notice of such Reportable
Event that may be
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required to be filed with PBGC, or (B) any notice delivered by
PBGC evidencing its intent to institute such proceedings or any
notice to PBGC that such plan is to be terminated, as the case may
be; and
(xii) from time to time such other information as Lessor
may reasonably request.
(b) Maintenance of Corporate Existence. Except as provided
in Section 8(e) below, during the term of this Lease, Lessee will preserve and
maintain its corporate existence and its rights, privileges, licenses and
franchises material to Lessee's ability to perform its obligations hereunder in
each applicable jurisdiction.
(c) Maintenance of Status. Lessee is, and shall remain so
long as it shall be the Lessee under this Lease, a "citizen of the United
States" as defined in Section 40102(a)(15) of the Federal Aviation Act, and
Lessee is and shall maintain its status at all times as a Certificated Air
Carrier, including, without limitation, its status so as to fall within the
purview of 11 U.S.C. Section 1110 or any analogous statute.
(d) Payment of Taxes. Lessee will pay or cause to be paid
all Taxes imposed upon it, or upon its income or profits, or upon any property
belonging to it, on or prior to the due date thereof, including any extensions
which have been duly obtained or granted; provided, however, that Lessee shall
not be required to pay any such Taxes, the payment of which is being diligently
contested in good faith and by appropriate proceedings with appropriate reserves
so long as there is no material possibility that either failure to pay such
Taxes or such contest may result in any loss, sale, confiscation, forfeiture or
seizure of the Aircraft, the Airframe or either Engine or any criminal liability
on the part of Lessor, Indenture Trustee or any Note Holder.
(e) Consolidation, Merger, Etc. Lessee shall not liquidate
or dissolve; and Lessee shall not consolidate with or merge into or with any
other corporation or other Person, and Lessee shall not convey, transfer, lease
or otherwise dispose of all or substantially all of its property and other
assets to, or, without the prior consent of Owner Participant, acquire all or
any substantial part of the property or other assets or capital stock of (if
such acquisition is analogous in purpose or effect to a consolidation or
merger), any corporation or other Person, unless:
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(i) the Person formed by or surviving such consolidation
or merger or the Person which acquires by conveyance, transfer, lease or other
disposition all or substantially all of such property and other assets or stock
(the "Successor Entity"): (A) shall be a corporation organized and existing
under the laws of the United States of America or any State thereof or the
District of Columbia; (B) immediately after giving effect to such transaction,
shall be Lessee or shall have acquired or succeeded to all or substantially all
of such property and other assets (including, without limitation, all or
substantially all of Lessee's property and other assets) as an entirety and,
unless the Owner Participant otherwise agrees, shall have a Net Worth of not
less than Lessee's Net Worth immediately prior to such transaction; (C) shall be
a "citizen of the United States" of America as defined in Section 40102(a)(15)
of the Federal Aviation Act and a Certificated Air Carrier; and (D) shall
execute and deliver to Lessor such recordations and filings with any
Governmental Entity and such other documents as Lessor determines shall be
reasonably necessary or advisable (including, without limitation, to preserve
and protect the interests of the Lessor and the priority of the Lien of the
Indenture (if it has not been discharged)) to evidence, or in connection with,
such consolidation, merger, sale, lease, transfer or other disposition and an
agreement, in form and substance reasonably satisfactory to Lessor, which is a
legal, valid, binding and enforceable assumption by such Successor Entity of the
due and punctual performance and observance of each covenant and condition of
this Lease and the other Operative Documents to which Lessee is a party and
agreement to be bound thereby, and an officer's certificate to such effect, and
to the effect that the other requirements of this paragraph have been satisfied,
and a legal opinion from counsel to such effect and otherwise in such form and
substance reasonably satisfactory to Lessor; and
(ii) prior to and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
No such permitted disposition to a Successor Entity shall relieve or release
Lessee of or from any obligations hereunder or under the other Operative
Documents.
(f) Information. Within 60 days after the end of each
calendar year and within 60 days of a request by Lessor or Owner Participant, or
such shorter period as may be set forth in any written request by the Internal
Revenue Service for information or documents, Lessee shall furnish in
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45
writing to Lessor or Owner Participant such information and documents (or copies
thereof) regarding the Aircraft as may be reasonably requested by Lessor or
Owner Participant or the Internal Revenue Service in order to permit Lessor to
file its federal and state income tax returns (or to permit the filing of the
federal and state income tax returns of any affiliated group of corporations
filing a consolidated return of which Lessor is a member), or to maintain or
defend any claims related thereto and promptly, after reasonable notice, furnish
to Lessor or Owner Participant such information as may be reasonably requested
by Lessor or Owner Participant or the applicable Governmental Entity as may be
required to enable Lessor or Owner Participant to file any reports required to
be filed by it with any Governmental Entity because of its ownership or other
interest in the Aircraft, the Airframe or the Engines.
(g) Place of Business. At all times while this Lease is in
effect, Lessee will not, without thirty (30) days prior written notice to Lessor
and Indenture Trustee (so long as the Lien of the Indenture shall not have been
discharged), change its chief executive office (as such term is defined under
Article 9 of the Uniform Commercial Code as adopted in Arizona) or location of
its books and records, from 4000 East Sky Harbor Boulevard, Phoenix, Arizona
85034, or such subsequent location of which Lessee shall have so notified Lessor
and, if applicable, Indenture Trustee.
(h) Certain Limitations on Use. Lessee shall use the
Aircraft, Airframe or Engines only in commercial passenger operations and
related cargo operations. Unless Owner Participant otherwise agrees, during the
Restricted Use Period, Lessee shall not use the Aircraft, Airframe or Engines or
permit the Aircraft, Airframe or Engines to be used either "predominantly
outside the United States" within the meaning of Section 48(a)(2) of the Code,
or in such manner that the percentage of the income, deduction or credit
attributable to the Aircraft, Airframe or Engines for federal income tax
purposes during any taxable year of the Lessor considered to be from foreign
sources exceeds the Maximum Foreign Use Percentage. In addition, until the
expiration of the Term or termination of the Foreign Lease Agreement, Lessee
will not locate, use or permit the use of the Aircraft in, to or from Japan.
Unless the Owner Participant otherwise agrees, prior to permitting the Aircraft
to be operated in any member state of the European Union or other European
country, Lessee shall deliver to Lessor (i) a representation and warranty to the
effect that Lessee (or any Permitted Sublessee) has no knowledge of any dispute
with Eurocontrol or other relevant air traffic
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46
control authority over delinquent charges payable by it and (ii) a letter from
Lessee (or any Permitted Sublessee) addressed to Eurocontrol or other relevant
air traffic control authority pursuant to which Lessee (or such Permitted
Sublessee) authorizes the addressee to issue to Lessor, upon Lessor's request
from time to time, a statement of account of all sums due by Lessee (or such
Permitted Sublessee) to the authority in respect of all aircraft (including,
without limitation,the Aircraft) operated by Lessee (or such Permitted
Sublessee).
(i) Section 1110. Lessee acknowledges that Lessor would
not have entered into this Second Amended and Restated Aircraft Lease Agreement
unless it had available to it the benefits of a Lessor under Section 1110 of
Title 11 of the United States Code. Lessee covenants and agrees with Lessor that
to better ensure the availability of such benefits, Lessee shall support any
motion, petition or application filed by Lessor with any bankruptcy court having
jurisdiction over Lessee, whereby Lessor seeks recovery of possession of the
Aircraft under said Section 1110 and shall not in any way oppose such action by
Lessor unless Lessee shall have complied with the requirements of said Section
1110 to be fulfilled in order to entitle Lessee to continued use and possession
of the Aircraft hereunder.
(j) Permits and Licenses. Lessee shall make or obtain, and
maintain in full force and effect, each and every consent, license, approval,
notice, registration, filing or other action with any Governmental Entity
necessary or advisable in connection with the operation or use of the Aircraft,
the Airframe, any Engine or Part or the execution, delivery or performance of
this Lease and the Operative Documents to which it is a party by Lessee or the
enforcement thereof against Lessee.
(k) Security Opinion; Annual Certificate. (i) During such
times that the Aircraft is registered under the Federal Aviation Act, Lessee
shall furnish to Lessor and to Indenture Trustee:
(1) (X) prior to the expiration of the time period
covered by the opinion of counsel rendered on the Restatement Date, any
opinion of counsel rendered pursuant to Section 11(C) of the Refunding
Agreement, and any opinion of counsel rendered pursuant to this Section
8(k)(i) and (Y) upon any change in Law that would render the opinion of
counsel rendered on the Restatement Date or such immediately preceding
opinion of counsel inaccurate, an opinion of counsel with
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47
respect to Lessee and the FAA reasonably satisfactory to each
addressee of such opinion (which counsel may be internal legal
counsel of Lessee and FAA counsel) stating, in the opinion of such
counsel, that such action has been taken with respect to the
recording, filing, re-recording and refiling of (i) the
appropriate Operative Documents and any supplements and amendments
thereto and (ii) such other appropriate documents, as is necessary
to maintain the perfection of Owner Trustee's title to and/or
interest in and Indenture Trustee's security interest in the
Aircraft and the Operative Documents for such period of time as
reflects the then-current applicable Law, reciting the details of
such actions; or
(2) at any time that an opinion is not required
pursuant to Section 8(k)(i)(1), annually, a certificate reasonably
satisfactory to each recipient thereof signed by a Responsible
Officer of Lessee certifying that no such action is necessary to
maintain the perfection of such title and/or interest and security
interest.
(ii) During such times that the Aircraft is registered
under any Laws other than the Federal Aviation Act, Lessee shall furnish to
Lessor and to Indenture Trustee annually (but in any case, (X) prior to the
expiration of the time period covered by any opinion of counsel rendered
pursuant to Section 11(C) of the Refunding Agreement and any opinion of counsel
rendered pursuant to this Section 8(k)(ii) and (Y) promptly upon any change in
Law that would render such immediately preceding opinion of counsel inaccurate),
an opinion of counsel reasonably satisfactory to each addressee of such opinion
stating, in the opinion of such counsel, that such action has been taken with
respect to the recording, filing, re-recording and refiling of (i) the
appropriate Operative Documents and any supplements and amendments thereto and
(ii) such other appropriate documents, as is necessary to maintain the
perfection of Owner Trustee's title to and/or interest in and Indenture
Trustee's security interest in the Aircraft and the Operative Documents for such
period of time as reflects the then-current applicable Law, reciting the details
of such actions.
(iii) Whether the Aircraft is registered under the Federal
Aviation Act or under any Laws other than the Federal Aviation Act, Lessee shall
furnish to Lessor annually a certificate (reasonably satisfactory to Lessor)
signed by a Responsible Officer of the Lessee certifying
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48
that Lessee is in compliance with the provisions of the penultimate paragraph of
Section 9(b) regarding Excluded Property and any equipment or seats which such
Excluded Property replaces.
(l) Letter of Credit. (X) As security for its obligations
to Lessor, Lessee shall provide to Lessor, as named beneficiary thereof, one or
more irrevocable standby letters of credit, in form and substance acceptable to
Lessor in its sole and absolute discretion (the "Letter of Credit"), including,
without limitation, as to renewal provisions, with a face amount available for
drawdown at all times equal to the amount set forth on Exhibit C (the "Face
Amount"), which Letter of Credit shall:
(i) provide that the full amount thereof shall be
available for drawdown thereunder and payable in New York, New York, on first
demand by Lessor at any time, if accompanied by its statement (i) that a Default
under Section 17(e), (f) or (g) or an Event of Default has occurred or (ii) that
the letter of credit will expire within twenty (20) days from the date of
demand, which amount may be applied, retained or utilized as provided in clause
(Y);
(ii) be maintained in full force and effect at all times
until ninety-one (91) days after the end of the Term with a commercial bank
acceptable to Lessor, in its sole and absolute discretion, having a long-term
unsecured debt rating of "A" or better by Standard & Poor's Rating Group (if the
issuing bank's credit rating is lower than such rating, Lessee shall replace
such Letter of Credit issuer within five (5) Business Days of any such reduction
in rating with a commercial bank meeting such rating requirement), provided,
that a Letter of Credit in the form set forth in Exhibit D-2 issued by The
Industrial Bank of Japan, Limited will be acceptable to Lessor for so long as
The Industrial Bank of Japan, Limited maintains a long-term unsecured debt
rating at least equal to its rating on the date hereof;
(iii) be expressly designated as transferable and
assignable; and
(iv) permit partial drawings. If the Letter of Credit is
still in effect at the end of the Term, then Lessor shall return the Letter of
Credit to Lessee or terminate it.
(Y) If an Event of Default has occurred and is
continuing, in addition to any other rights or
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49
remedies Lessor may have hereunder, Lessor shall be entitled, in
each case as it may elect in its sole and absolute discretion, to
draw on the Letter of Credit and, with respect to amounts so
drawn, hold same as security for Lessee's obligations under this
Lease, retain same for its own account and apply (including,
without limitation, by way of set off against) same, or such
amounts thereof as it may elect (it being understood that amounts
not so applied will be held as security for Lessee's obligations
under this Lease), to remedy any breach by Lessee of this Lease
and the other Operative Documents or to recompense Lessor for any
loss, damage, cost or expense or other Claim due or owing
hereunder; provided, however, that in the case of any drawing in
respect of any claim for payment of Rent, Lessee's right to apply
the same to such claim shall be limited to amounts ("Equity
Amounts") which would (absent an Event of Default) be
distributable under the Indenture at the time such payment is made
to Lessor, Owner Participant or any of their respective Affiliates
(and shall not include any amounts distributable to Indenture
Trustee in its individual capacity or to the Note Holders). If
Lessor draws on the Letter of Credit because the Letter of Credit
will expire within twenty (20) days from the date of demand, then
Lessor may elect in its sole and absolute discretion to apply such
amounts in satisfaction of any Equity Amounts which would have
been or would become distributable under the Indenture to Lessor
or Owner Participant if Lessee were fully to perform its
obligations under the Lease on a timely basis in the inverse order
of which such obligations would be distributable; and provided
further, that the amount of Lessee's obligations in respect of
Equity Amounts that shall be satisfied by such application shall
equal (i) that amount from the proceeds of the Letter of Credit
which this Lessor elects to apply (the "Applied Amount") in
satisfaction of Lessee's obligations in respect of Equity Amounts
(such obligations to be satisfied by application of the Applied
Amount being referred to as the "Satisfied Obligations") plus (ii)
an amount equal to interest at the Applicable Rate on the Applied
Amount from the date of application of the Applied Amount to the
date on which the Satisfied Obligations otherwise would have been
due (with "Applicable Rate" meaning a per annum rate of interest
computed on the basis of a year of 365 or 366 days, as the case
may be, and actual number of days elapsed equal to the rate for
U.S. Treasury bills with a maturity that most closely corresponds
to the remaining
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Term, it being agreed that in no event shall the Applicable Rate
exceed the lowest Debt Rate (as defined in the Indenture) provided
in any Equipment Note). Lessee shall not be obligated to reinstate
the amount of the Letter of Credit to the extent proceeds thereof
are applied in satisfaction of Lessee's obligations in the manner
provided in the immediately preceding proviso. If (a) the Lessor
shall hold any proceeds of the Letter of Credit as security for
Lessee's obligations to Lessor a Letter of Credit with a face
amount available for drawdown in an amount equal to the amount of
the proceeds so held by Lessor and otherwise meeting the
requirements of this Section 8(1), Lessor shall pay such proceeds
to Lessee for Lessee's own account.
(m) ERISA. Lessee will not, nor will it permit any of its
subsidiaries to, (a) terminate, within the meaning of Title IV of ERISA, any
Plan so as to result in any material liability to the PBGC, (b) engage in any
"prohibited transaction" (as defined in Section 4975 of the Code) involving any
Plan that would result in material liability for an excise tax or civil penalty
in connection therewith, (c) incur or suffer to exist any material "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived,
involving any Plan, or (d) allow or suffer to exist any event or condition with
respect to ERISA, which would be likely to have a material adverse effect on
Lessee's condition (financial or otherwise), business, operations or prospects
or on Lessor's interests, rights or remedies.
Section 9. Replacement of Parts; Alterations,
Modifications and Additions.
(a) Replacement of Parts. Lessee, at its own cost and
expense, will promptly replace, or cause to be replaced, all Parts which may
from time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance, service, repair,
overhaul or testing, Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) may at its own cost and expense remove any Parts, whether
or not worn out, lost, stolen, destroyed, seized,
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51
confiscated, damaged beyond repair or permanently rendered unfit for use,
provided that Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) shall replace at its own cost and expense such Parts as promptly as
possible. All replacement Parts shall be free and clear of all Liens (except for
pooling arrangements to the extent permitted by paragraph (c) of this Section
and Permitted Liens), be in at least the equivalent or better modification
status and service bulletin accomplishment status, be fully interchangeable as
to form, fit and function and shall be in as good operating condition as, and
have a value, remaining useful life and utility at least equal to, the Parts
replaced (assuming such replaced parts were in the condition and repair in which
they were required to be maintained by the terms hereof).
All Parts which are at any time removed from the Aircraft
shall remain the property of Lessor (provided that, so long as the Foreign Lease
Agreement is in effect, title to such Parts shall remain with Foreign Lessor),
subject to the Lien of the Indenture if it has not been discharged, and subject
to this Lease no matter where located until such time as such Parts shall be
replaced by parts which have been incorporated or installed in or attached to
the Aircraft and which meet the requirements for replacement Parts specified
above. Immediately upon any replacement Part becoming incorporated or installed
in or attached to the Aircraft as above provided, or as provided in Section
9(c), without further act, (i) title to the removed Part shall thereupon vest in
Lessee free and clear of all rights of Lessor, Indenture Trustee, Owner
Participant and Note Holders and shall no longer be deemed a Part hereunder,
(ii) title to such replacement Part shall thereupon vest in Lessor (or, so long
as the Foreign Lease Agreement is in effect, Foreign Lessor) and become subject
to the Lien of the Indenture if it has not been discharged, and (iii) such
replacement Part shall become subject to the Lien of the Indenture (if it has
not been discharged) and this Lease and be deemed a Part for all purposes hereof
to the same extent as the Part which it has replaced.
(b) Alterations, Modifications and Additions. Lessee, at
its own cost and expense, shall make or cause to be made such alterations and
modifications in and additions to the Airframe and each Engine to the extent
made mandatory for Lessee in respect of the Aircraft, Engines or Parts from time
to time to meet the applicable standards of the FAA or under any Law of any
Governmental Entity having jurisdiction or issued by the manufacturer of the
Airframe, Engines or Parts. In addition, so long as no Default or Event of
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52
Default has occurred and is continuing, Lessee (or, if a Permitted Sublease is
in effect, a Permitted Sublessee), at its own expense, may from time to time
make such alterations and modifications in and additions to the Airframe and
either Engine as Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) may deem desirable in the proper conduct of its business, provided,
no such alteration, modification or addition diminishes the value, remaining
useful life or utility, or impairs the condition or airworthiness, of the
Airframe, either Engine or any Part below that immediately prior to such
alteration, modification or addition assuming that the Airframe, Engines and
Parts were then of the value, utility and remaining useful life and in the
condition and airworthiness required by the terms of this Lease. Except as
otherwise provided herein, title to all Parts incorporated or installed in or
attached or added to the Aircraft as the result of such alteration, modification
or addition, shall immediately vest in Lessor (or, so long as the Foreign Lease
Agreement is in effect, Foreign Lessor) and become subject to the Lien of the
Indenture (if it has not been discharged) and this Lease, without the necessity
for any further act of transfer, document or notice. Notwithstanding the
foregoing sentence of this Section 9(b), Lessor agrees that so long as no
Default or Event of Default shall have occurred and be continuing Lessee (or, if
a Permitted Sublease is in effect, a Permitted Sublessee) may, at such time
during the Term for the Aircraft, remove any Part of such Aircraft, provided,
that (i) such Part is in addition to, and not in replacement or substitution
for, any Part originally incorporated or installed in or attached to, or
delivered with, the Aircraft on the Delivery Date or any Part in replacement of,
or substitution for, any such originally incorporated, installed, attached or
delivered Part, (ii) such Part is not required to be incorporated or installed
in or attached or added to the Aircraft pursuant to the terms of Section 6 or
this Section 9 or to maintain the insurance required by Section 12 and (iii)
such Part can be removed from the Aircraft without causing any material damage
thereto and without diminishing or impairing the value, utility, remaining
useful life, condition or airworthiness which the Aircraft would have had at
such time had such alteration, modification or addition not occurred. Upon the
removal by Lessee of any such Part as provided in the preceding sentence, title
thereto shall, without further act, vest in Lessee (or, if a Permitted Sublease
is in effect, a Permitted Sublessee) and such Part shall no longer be deemed
part of the Aircraft (such a part is herein called a "Removable Part"). Any Part
not removed by Lessee as above provided prior to the return of the Aircraft to
Lessor
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53
hereunder, whether pursuant to Section 16, Section 18 or otherwise, shall remain
the property of Lessor (provided that, so long as the Foreign Lease Agreement is
in effect, title to such Parts shall remain with Foreign Lessor).
If any Removable Part is (i) owned by any third party and
leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee), (ii) sold to Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) subject to a conditional sale contract or other security
interest or (iii) leased to Lessee (or, if a Permitted Sublease is in effect, a
Permitted Sublessee) pursuant to a lease which is subject to a security interest
in favor of any third party, then Lessor will not acquire or claim, as against
such lessor, conditional vendor or secured party, any right, title or interest
in any such Removable Part as the result of such Removable Part being installed
on the Aircraft; provided, however, that (A) Lessor's inability to so acquire or
claim is subject to the express condition that such lessor, conditional vendor,
or secured party shall have agreed in writing (which agreement may be contained
in the lease, conditional sale agreement or security agreement) not to acquire
or claim, as against Lessor, any right, title or interest in the Aircraft, or
any Part other than its interest in such Removable Part by reason of such
Removable Part being installed thereon, and (B) any Removable Part not removed
by Lessee upon the termination or expiration of this Lease, at such time, shall
become the property of Lessor or Foreign Lessor, as the case may be, and be
subject to this Lease, and provided, further, that (1) if removal of any such
Part shall affect the operation of the Aircraft in any way whatsoever, Lessee
shall replace such Part with an owned Part of the same value, utility and
remaining useful life and (2) Lessee shall repair any unsightly area of the
Aircraft as a result of such removal and make all other repairs which are
advisable and result from such removal.
In the event Lessee (or, if a Permitted Sublease is in
effect, a Permitted Sublessee) replaces a Part which is not required to be
replaced under Section 9(a) or 9(b) hereof, Lessee (or, if a Permitted Sublease
is in effect, a Permitted Sublessee) may remove the replacement Part so long as
it reinstalls the original Part and such original Part is free and clear of all
Liens, other than Permitted Liens, is in at least the same modification status
and service bulletin accomplishment status, is fully interchangeable as to form,
fit and function, has been overhauled, repaired and inspected by an agency
acceptable to the FAA or other Governmental Entity having jurisdiction, and is
in as good operating condition as, and has a utility, remaining useful
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54
life and a value at least equal to that of such Part when it was removed from
the Aircraft.
Notwithstanding any other provision hereof, and without
limiting the foregoing, Lessee (or, if a Permitted Sublease is in effect,
Permitted Sublessee) may install in the Aircraft audio visual, entertainment or
telephonic equipment (including seats with such equipment installed therein)
(any or all of which are hereafter referred to as "Excluded Property") in the
ordinary course of business, and Lessor shall not claim or acquire title thereto
and the rights of the owners thereof therein shall not constitute a default
hereunder; provided that (i) any such Excluded Property shall be removed prior
to the date of a Return Occasion without causing any damage to the Aircraft and
without diminishing or impairing the value, utility, remaining useful life or
condition which the Aircraft would have had at such time had such Excluded
Property not been installed, (ii) any equipment or seats which such Excluded
Property replaces shall be properly stored with the interests of Lessor and, if
the Lien of the Indenture is in effect, the Indenture Trustee, duly noted
thereon and acknowledged by any applicable bailee or warehouse, and properly
reinstalled on the Aircraft prior to the date of a Return Occasion, and (iii)
Lessee (or such Permitted Sublessee) shall make all repairs which are required
as a result of such removal and/or reinstallation.
In no event shall Lessor bear any liability or cost for
any alteration, modification, or addition, or for any grounding or suspension of
certification of the Aircraft, or for any loss of revenue arising therefrom.
(c) Pooling. Any Part removed from the Airframe or either
Engine as provided in Section 9(a) may so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom be subjected by
Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) to a
normal pooling arrangement customary in the airline industry of which Lessee
(or, if a Permitted Sublease is in effect, a Permitted Sublessee) is a part
entered into in the ordinary course of Lessee's or such Permitted Sublessee's
business, provided the Part replacing such removed Part shall be incorporated or
installed in or attached to the Aircraft in accordance with Section 9(a) as
promptly as possible, and in any event within sixty (60) days, after the removal
of such removed Part. In addition, any Replacement Part when incorporated or
installed in or attached to the Airframe or any Engine in accordance with
Section 9(a) may be owned by another Person subject to such
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a normal pooling agreement; provided, however, that Lessee (or, if a Permitted
Sublease is in effect, a Permitted Sublessee), at its own expense, as promptly
thereafter as possible, and in any event within sixty (60) days, either (i)
causes title to such replacement Part to vest with Lessor (or, so long as the
Foreign Lease Agreement is in effect, Foreign Lessor) in accordance with Section
9(a) (and to be subjected to the Lien of the Indenture if it has not been
discharged) by Lessee (or, if a Permitted Sublease is in effect, a Permitted
Sublessee) acquiring title thereto for the benefit of Lessor (or, so long as the
Foreign Lease Agreement is in effect, Foreign Lessor) free and clear of all
Liens except Permitted Liens, whereupon such replacement Part shall become
subject to this Lease and the Lien of the Indenture (if in effect) without the
necessity for any further act, document or notice, or (ii) replaces such
replacement Part by incorporating or installing in or attaching to the Aircraft
a further replacement Part owned by Lessee (or, if a Permitted Sublease is in
effect, a Permitted Sublessee) free and clear of all Liens other than Permitted
Liens and by causing title to such further replacement Part to vest in Lessor
(or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) as
above provided and to be subjected to the Lien of the Indenture if it has not
been discharged, whereupon such replacement Part shall become subject to this
Lease and the Lien of the Indenture (if in effect) without the necessity for any
further act, document or notice.
Section 10. General Tax Indemnity.
(a) Indemnity. Lessee agrees that each payment of Basic
Rent hereunder shall be free and clear of, and without deduction for, any and
all withholdings on account of Taxes of any nature whatsoever, whether or not an
exclusion pursuant to Section 10(b) applies, except as required by law. If any
such deduction or withholding of Taxes is required with respect to such payments
of Basic Rent, Lessee shall pay an additional amount of Basic Rent such that the
net amount actually received by Lessor, after such deduction or withholding,
will be equal to all such amounts that would be received by Lessor if no such
deduction or withholding had been required, but only to the extent necessary to
ensure that the holders of the outstanding Equipment Notes receive such amount
as may be required by the Indenture provided that this limitation on the
gross-up shall be without derogation to Lessor's right to be indemnified
pursuant to the remainder of this Section 10. If Lessee pays any amount to
Lessor (or to any taxing authority for the account of Lessor) as a result of the
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application of the preceding sentence with respect to any withholding Tax which
is an excluded tax in respect of Lessor pursuant to Section 10(b), then Lessor
(or, in the case of Taxes imposed on the Owner Trustee, the Owner Participant to
the extent such Tax would give rise to a Lessor's Lien for which the Owner
Participant would be liable) shall reimburse Lessee for such withholding Tax
within 30 days of written notice accompanied by evidence of payment for such
withholding Taxes (exclusive of interest, penalties and additions to Tax) paid
by Lessee; provided that in any circumstance in which the Lessor is required to
reimburse the Lessee for any such withholding Taxes and the Lessee has not
received such reimbursement from Lessor or the Owner Participant, then to the
extent of such shortfall and so long as no Lease Event of Default has occurred
and is continuing, Lessee shall be entitled to obtain reimbursement from Lessor
by reducing the succeeding payments of Rent payable to Lessor (other than any
portion of Rent that may be required by the Indenture to be paid to the holders
of any outstanding Equipment Notes issued thereunder) until the aggregate amount
of reduction is equal to the sum of the amount of such shortfall and interest on
that amount at the Interest Rate from the date reimbursement is required to be
made until the date of such reduction in Rent. Except as provided in Section
10(b), and taking into account any payments received by Lessor pursuant to the
second sentence of this Section 10(a), Lessee agrees to pay, and to indemnify
and hold each Indemnitee harmless from, any and all Taxes, howsoever levied or
imposed, whether levied or imposed upon or with respect to or asserted against
any Indemnitee, Lessee, the Aircraft, the Airframe, any Engine or any Part
thereof or interest therein, or otherwise, by any Federal, state or local
government or taxing authority in the United States of America or by any foreign
government or any taxing authority or governmental subdivision of a foreign
country or of a territory or possession of the United States (each such
governmental subdivision or taxing authority referred to as a "Taxing
Authority"):
(i) upon or with respect to, based upon or measured by (A) the
Aircraft, the Airframe, any Engine or any Part thereof, or interest
therein, (B) the manufacture, purchase, ownership, delivery, leasing,
acceptance, rejection, assigning, possession, use, operation, location,
settlement of any insurance claim, sale, mortgaging, pledging,
financing, subleasing, rental, retirement, abandonment, registration,
re-registration, preparation, installation, modification, repair,
maintenance, replacement, transportation, storage, transfer of title,
return or other disposition
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of the Aircraft, the Airframe, any Engine or any Part thereof or
interest therein; or (C) the rentals, receipts, income or earnings
arising therefrom (including without limitation the Rent), or
(ii) upon or with respect to the Operative Documents
(including the Equipment Notes), any interest in any thereof, or any
future amendment, supplement, waiver or consent thereto requested by
Lessee with respect to any thereof, or the execution, delivery, or
performance of any thereof, or the acquisition or subsequent transfer
thereof or the issuance of the Equipment Notes or any other document
executed and delivered in connection with the consummation or
confirmation of the transactions contemplated by the Operative
Documents or any Indemnitee's interest in any of the foregoing, or the
execution, amendment, supplement, issuance, reissuance, refinancing or
delivery of any of the foregoing, or
(iii) the Trust Indenture Estate or the property, or the
income or other proceeds received with respect to the property, held by
the Indenture Trustee under the Indenture, or
(iv) the payment of the principal of, or interest or premium
on, or other amounts payable with respect to the Equipment Notes,
whether as originally issued or pursuant to any refinancing,
modification or reissuance or any other obligation evidencing any new
loan, or
(v) otherwise with respect to or in connection with the
transactions contemplated by the Operative Documents.
(b) Exclusions. The following Taxes shall not be subject to
indemnification under subsection (a) of this Section 10:
(i) In the case of any Indemnitee, any Taxes imposed by the
Federal government of the United States of America upon or with respect
to, based on or measured by, the gross or net income, receipts,
capital, or net worth, franchises, excess profits or conduct of
business of such Indemnitee (other than Taxes included in the
calculation of an after-tax payment, or Taxes in the nature of sales or
use Taxes, license Taxes, value-added Taxes or property Taxes),
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(ii) In the case of any Indemnitee, Taxes on, based on, or
measured by the gross or net income, receipts, capital, or net worth,
franchises, excess profits or conduct of business of such Indemnitee
(including minimum taxes, withholding taxes and taxes on or measured by
any items of tax preference), imposed by any foreign, state or local
government or taxing authority (other than Taxes included in the
calculation of an after-tax payment, Taxes in the nature of sales
Taxes, use Taxes, property Taxes, value-added Taxes or rental Taxes,
and Covered Income Taxes described in subsection (c) of this Section
10),
(iii) In the case of any Indemnitee, Taxes which are the
direct result of gross negligence or willful misconduct of such
Indemnitee,
(iv) In the case of any Indemnitee, any Taxes imposed as a
result of a voluntary or involuntary bankruptcy of such Indemnitee
(other than, in the case of Owner Trustee, as a result of the
occurrence of an Event of Default) or any voluntary sale, transfer of
title, transfer or other disposition by such Indemnitee or a related
Indemnitee (for such purpose, Owner Trustee and Owner Participant are
related Indemnitees with respect to each other) of the Aircraft, the
Airframe, any Engine or any Part thereof or interest therein, or any
interest in the Rent or part thereof or any interest in the Operative
Documents or part thereof, unless such sale, transfer or disposition
occurs in connection with (x) the transactions contemplated or effected
by the Refunding Agreement and the amendments to the Lease occurring in
connection therewith, (y) an Event of Default and the exercise by any
Indemnitee of its remedies under the Lease or the Indenture, as the
case may be, and (z) the substitution, pooling or interchange of the
Aircraft, the Airframe, any Engine or any Part pursuant to the terms of
the Lease; provided, however, that in all cases Owner Participant and
Owner Trustee shall consider in good faith such request as Lessee shall
make concerning the appropriate jurisdiction in which such sale,
transfer or disposition shall be made,
(v) In the case of any Indemnitee, Taxes imposed as a result
of a transferee of such Indemnitee of any interest in the Aircraft, the
Airframe, any Engine or any Part or any interest in the Operative
Documents being a foreign entity or not having its principal office in
the United States,
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(vi) Any interest, penalties, fines and additions to tax
imposed on an Indemnitee (other than Taxes that are due and payable
with a return when properly filed) resulting from such Indemnitee's
failure to file returns that are timely and proper, provided such
failure was not attributable to such Indemnitee contesting any claim in
accordance with this Section 10 or to a failure by Lessee to satisfy
its obligations related to such return,
(vii) Taxes imposed on an Indemnitee as a result of a breach
of its representations, warranties or covenants contained in Sections
9(a), 9(b)(11), 9(c), 9(d), 9(e), 10, 12, or 16 of the Refunding
Agreement or Section 21(f) of this Agreement in any material respect or
from a failure by an Indemnitee to fulfill its contest obligations,
(viii) So long as no Event of Default shall have occurred and
be continuing, Taxes attributable to the Aircraft related to acts or
events occurring after the later of the termination of the Lease and
the redelivery of the Aircraft,
(ix) In the case of the Indenture Trustee, each Pass-Through
Trust, each Pass-Through Trustee (in its individual capacity), the
Subordination Agent and each Liquidity Provider, Taxes imposed with
respect to the Equipment Notes as a result of activities of such
Indemnitee unrelated to the transactions contemplated by the Operative
Documents, and
(x) In the case of each Pass-Through Trust, each Pass-
Through Trustee (in its individual capacity and as trustee under the
Pass-Through Trusts, the Subordination Agent and each Liquidity
Provider, United States withholding taxes imposed as a result of the
place of organization or other status of a holder of an interest in a
Pass-Through Trust.
Notwithstanding anything to the contrary contained in this
Section 10, the provisions of this Section 10(b) shall not apply to, and Lessee
shall hold each Indemnitee harmless against, and indemnify each Indemnitee on an
after-tax basis (as provided under Section 10(e)) for, any Taxes imposed by any
Taxing Authority with respect to any period beginning, or events or
circumstances occurring, on or after the Restatement Date, in connection with or
relating to the transactions undertaken pursuant to the Japanese Financing
Documents (and any other documents or
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agreements relating thereto unless such documents or agreements are or relate
solely to Operative Documents other than the Japanese Financing Documents)
including, without limitation, sales Taxes, value-added Taxes and any Taxes
required to be withheld and paid over to the United States Federal government
pursuant to Subtitle A of the 1986 Code or any successor provisions with respect
to any amounts paid or deemed to be paid to the Japanese Lessor by any
Indemnitee pursuant to the Japanese Financing Documents, but excluding any net
income taxes payable to the United States Federal government or any state or
local Taxing Authority as a consequence of a determination that the Lease is not
a true lease for Federal income tax purposes.
(c) Covered Income Tax. For purposes of clause (ii) of
subsection (b) of this Section 10, a Covered Income Tax includes:
(i) any Tax based on or measured by gross or net
income, capital or net worth, franchises, excess profits or conduct of
business imposed on an Indemnitee by a Taxing Authority in or of any
foreign jurisdiction or a territory or possession of the United States,
other than any such Tax which would not have been imposed in the
absence of such Indemnitee's (including for purposes of this
definition, all entities with which such Indemnitee is combined,
integrated, or consolidated in such Taxing Authority's jurisdiction)
engaging in business, maintaining an office or other place of business
or otherwise being located in such jurisdiction (other than merely by
reason of such Indemnitee's participation in the transactions
contemplated by the Operative Documents); and
(ii) a Tax imposed by any Taxing Authority other
than the Federal government of the United States of America based on,
or measured by gross income or receipts, to the extent such Tax is
attributable to the operation or registration of the Aircraft in such
jurisdiction or to the transactions contemplated by the Operative
Documents or is the result of the activities of Lessee or any Affiliate
of either thereof in such jurisdiction, including residence.
(d) Reports and Returns. In case any report or return is
required to be made by Lessee with respect to any Taxes which are subject to
indemnification by Lessee under this Section 10, Lessee will either make such
report or return in such manner as will show the ownership of the Aircraft in
Owner Trustee or the interest of Owner
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Participant or its permitted assigns and send a copy of such report or return to
Owner Trustee and Owner Participant or will notify Owner Trustee or Owner
Participant of such requirement and make such report or return in such manner as
shall be reasonably satisfactory to Owner Participant or Owner Trustee. If
actual notice is given by any taxing authority to an Indemnitee that a report or
return is required to be filed with respect to any such Taxes, the Indemnitee
shall promptly notify Lessee of such required report or return and Lessee shall
either file such report or return in the manner prescribed in the preceding
sentence, or shall use its best efforts to cause such report or return to be
filed by the appropriate entity. Each Indemnitee agrees to respond to any
reasonable request of Lessee for information not within Lessee's control and
within the control of and reasonably available to such Indemnitee with respect
to the filing of any such report or return, but Lessee agrees to pay any
reasonable costs, fees, disbursements or other charges of independent counsel or
independent accountants incurred in connection with such request.
(e) After-Tax Basis. Lessee further agrees that, with
respect to any payment or indemnity under this Section 10 and under Section 13
hereof, such payment or indemnity shall include the net amount necessary to hold
the recipient of the payment or indemnity harmless on an after-tax basis from
all Taxes required to be paid or credited by such recipient with respect to such
payment or indemnity under the laws of any Taxing Authority; provided, however,
that in the case of federal income taxes imposed on Owner Participant, such
Taxes shall be calculated on the basis of the assumption that Owner Participant
shall be subject to the highest federal corporate income tax rate applicable to
Owner Participant in the year of payment.
(f) Tax Benefit. If, by reason of any payment made to or
for the account of an Indemnitee by Lessee pursuant to this Section 10 or
Section 13 hereof, such Indemnitee subsequently actually realizes a tax
deduction or credit (including foreign tax credit and any reduction in Taxes)
not previously taken into account in computing the amount of such payment, such
Indemnitee shall promptly pay to Lessee, but only if there shall then be no
Lease Event of Default and if Lessee shall have made all payments then due and
owing to such Indemnitee under the Operative Documents, an amount equal to the
sum of (A) the actual reduction in Taxes, if any, realized by such Indemnitee
which is attributable to such deduction or credit and (B) the actual reduction
in Taxes realized by such Indemnitee as a result
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of any payment made by such Indemnitee pursuant to this sentence; provided,
however, that such Indemnitee shall not be obligated to make any payment
pursuant to this Section 10 or Section 13 hereof to the extent that the amount
calculated pursuant to (A) above would exceed (x) the amount of all prior
payments by Lessee to such Indemnitee, pursuant to this Section 10 or Section 13
hereof, net of any amount paid in respect of Taxes required to be paid by such
Indemnitee in respect of the receipt or accrual of such amounts received by such
Indemnitee from Lessee, less (y) the portion of all prior payments computed
pursuant to (A) above by such Indemnitee to Lessee hereunder.
(g) Payment. If a claim is made against any Indemnitee for
any Taxes which may be subject to indemnification by Lessee hereunder and if
such Indemnitee has notice thereof, such Indemnitee shall promptly notify
Lessee; provided that the failure to provide such notice shall not release
Lessee from any of its obligations hereunder except to the extent Lessee's right
to contest such claim is precluded thereby. Any amount payable as an indemnity
to any Indemnitee or any amount payable to Lessee pursuant to this Section 10 is
to be paid to such party directly, in immediately available funds, within thirty
(30) days after receipt of a written demand therefor from such Indemnitee or
Lessee, as the case may be, except in the case of a payment to an Indemnitee to
the extent that such Taxes are being contested in good faith pursuant to this
Section 10, in which event the payment of such indemnity shall be made by the
due date for the payment of any Taxes that are the subject of such contest
taking into account all extensions of the due date that are available as a
result of the contest. In the event an Indemnitee makes a tax payment with
respect to any such Taxes (other than with funds advanced to such Indemnitee on
an interest-free basis by Lessee pursuant to this Section 10), Lessee shall
reimburse the amount of such payment and also shall pay to the Indemnitee
interest on the amount of such payment by such Indemnitee at the Interest Rate
from the date of any such payment by such Indemnitee to the date of such
reimbursement by Lessee to the Indemnitee hereunder. In the event an amount is
payable to Lessee under this Section 10, the Indemnitee owing such amount shall
pay interest on such amount at the Interest Rate from the date of receipt by
such Indemnitee of any amount giving rise to such obligation to pay Lessee until
the date of payment to Lessee.
(h) Contest. If reasonably requested by Lessee in writing,
an Indemnitee shall upon receipt of an indemnity reasonably satisfactory to it
and at the sole expense of
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Lessee (including, without limitation, payment on demand of all out-of-pocket
costs, expenses, additions to tax because of underpayments of estimated Taxes,
losses, legal and accounting and investigatory fees and disbursements,
penalties, and interest) in good faith contest or shall permit Lessee, if
desired by Lessee and such contest may be conducted in the name of Lessee
without involving Taxes of such Indemnitee not indemnified hereunder, to contest
in the name of Lessee and/or the Indemnitee, the validity, applicability or
amount of such Taxes by (x) resisting payment thereof if practicable, (y) not
paying the same except under protest, if protest is necessary and proper, and
(z) if payments be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings; provided, however, that, in
each such instance, such proceedings do not involve any substantial risk or
danger of the sale, forfeiture or loss of the Aircraft, and provided further
that the Indemnitee shall have the right to forego administrative proceedings
with respect to the claim and contest the claim in an appropriate court of its
choosing and provided further that the Indemnitee shall not be required to
undertake or allow in its name or on its behalf any contest unless the following
conditions are satisfied:
(i) no Event of Default has occurred and is continuing,
(ii) the amount of such Taxes shall be at least $50,000,
(iii) in the event an administrative proceeding is to be
appealed in a judicial proceeding, as for the first level of judicial
proceeding, Lessee shall have provided the Indemnitee with an opinion
of legal counsel selected by the Indemnitee and reasonably acceptable
to Lessee ("Tax Counsel") to the effect that a reasonable basis exists
to contest such claim (which opinion shall be obtained at Lessee's sole
cost and expense),
(iv) if such contest is to be initiated by the payment of, and
the claiming of a refund for, such Taxes, Lessee shall have advanced or
caused to be advanced to such Indemnitee sufficient funds (on an
interest-free basis) to make such payments and shall have agreed to
indemnify such Indemnitee against any adverse tax consequences of such
advance, and
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(v) in the event a judicial decision is to be
appealed, the amount of such Taxes is at least $150,000 and
the Indemnitee shall have received an opinion of Tax Counsel
(which opinion shall be obtained at Lessee's sole expense) to
the effect that it is more likely than not that the Indemnitee
will prevail, and in the event that the subject matter of the
contest is of a continuing nature and has previously been
decided adversely pursuant to the contest provisions of this
Section 10, there has been a change in the law (including,
without limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such claim
shall have been so previously decided and such Indemnitee
shall have received an opinion of Tax Counsel, which opinion
shall be obtained at Lessee's sole expense, to the effect
that, as a result of such change other than a change in
statutory law, it is more likely than not that the position
which such Indemnitee or Lessee, as the case may be, had
asserted in such previous contest would prevail and, in the
case of a statutory change in law, it is as likely as not that
the position will prevail.
(i) Refund. If any Indemnitee shall obtain a refund of all
or any part of any Taxes paid by Lessee or from an advance by Lessee, such
Indemnitee shall pay Lessee the amount of such refund together with any interest
paid thereon attributable to the Taxes paid or advanced by Lessee less the
amount of any Taxes payable by such Indemnitee in respect of the receipt of such
refund and interest after giving credit to Lessee for any savings by such
Indemnitee in respect to any such Taxes by reason of deductions, credits,
allocations or allowances in respect of the payment of any such Taxes; provided
that such amount shall not be payable before such time as Lessee shall have made
all payments or indemnities then due to the Lessor and the Indemnitee under the
Lease and all other Operative Documents, and provided further that no amount
shall be payable during any period in which an Event of Default under the Lease
has occurred and is continuing unremedied unless this Lease has terminated and
Lessee has paid all amounts due the Lessor thereunder.
(j) Diligence. Lessee shall not be deemed to be in default
under any of the above indemnification provisions of this Section 10 so long as
Lessee or the Indemnitee shall diligently prosecute such contest in accordance
with the provisions of this Section 10. Notwithstanding the foregoing, if a
claim is made against any Indemnitee for any Taxes which, if successful, would
result in the imposition
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of Taxes under circumstances which would require Lessee to indemnify such
Indemnitee, the Indemnitee shall be released from its responsibility to contest
such claim, or part thereof, if it agrees in writing not to seek indemnification
from Lessee in respect of the claim, or such part thereof to be contested. In
the event an Indemnitee fails to contest, or refuses to permit Lessee to
contest, a claim or part thereof which the Indemnitee has the obligation to
contest or to permit Lessee to contest under this Section 10, then Lessee shall
not be obligated to indemnify the Indemnitee for such claim or such part
thereof.
(k) Affiliated Group. In the event that the Indemnitee is
a member of an affiliated group (within the meaning of Section 1504(a) of the
Code) which files a consolidated Federal income tax return, the term
"Indemnitee" shall mean and include such affiliated group.
Section 11. Loss, Damage and Requisition.
(a) Event of Loss with Respect to the Airframe. Subject to
the other provisions of this Section 11, upon an Event of Loss with respect to
the Airframe or the Airframe and any Engines then installed thereon, Lessee
shall forthwith (and, in any event, within five (5) Business Days after such
occurrence) give Lessor written notice of such occurrence and within thirty (30)
days after such occurrence give Lessor written notice of its election, subject
to the terms hereof and of the Indenture, to perform one of the following two
options (it being agreed that if Lessee shall not have given Lessor notice of
such election within thirty (30) days after such occurrence, Lessee shall be
deemed to have elected to perform the option set forth in the following clause
(ii)), provided, that Lessee shall not have the right to select the option set
forth in clause (i) if a Default or an Event of Default shall have occurred and
be continuing at the time of such election or at the time of replacement or if
the Foreign Lease Agreement does not permit such replacement or requires the
payment of additional amounts thereunder (unless Lessee in its election pays
such amount due as a result thereof under the Foreign Lease Agreement):
(i) within one hundred twenty (120) days (the "Replacement
Period") after the date of the Event of Loss (but in no event later than the
last day of the Term) Lessee shall convey, or cause to be conveyed to Lessor as
provided in Section 11(c) hereof, to be subjected to the Lien of the Indenture
if it has not been discharged, and to be leased by Lessee hereunder in
replacement of the Airframe and such
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Engines then installed thereon, title to (or, so long as the Foreign Lease
Agreement is in effect, beneficial ownership of) a replacement Airframe
(together with the same number of replacement Engines as the Engines), such
replacement Airframe and Engines (A) to be free and clear of all Liens (it being
understood that, upon such conveyance, such replacement Airframe and replacement
Engines may be subject to Permitted Liens), (B) to have a value, utility and
remaining useful life, determined in accordance with the Appraisal Procedure as
provided in Section 11(c) hereof, at least equal to, and to be in at least as
good operating condition as, the Airframe and the Engines, if any, so replaced
(assuming the Airframe and the Engines were maintained in accordance with the
requirements of this Agreement, whether or not they are in fact so maintained),
and (C) to be a like Airbus A320-231 model aircraft with equivalent or better
modification status and, in the case of Engines, in compliance with Section
11(b); provided that if Lessee shall not perform its obligation to effect such
replacement under this clause by the end of the Replacement Period, Lessee shall
then be deemed to have elected to comply, and shall comply, with the provisions
of clause (ii) of this Section 11(a); provided, further, that the payment
specified therein shall be deemed to have become due and payable on the
Stipulated Loss Value Date occurring on or immediately preceding the last day of
the Replacement Period. Upon compliance with the foregoing, Lessor will, subject
to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS," without
recourse, representation or warranty (except a warranty that such Airframe and
Engines are free and clear of Lessor's Liens and Head Lessor's Liens and any
Lien arising out of the Foreign Lease Agreement), all of Lessor's right, title
and interest, if any, in and to the Airframe and the Engines suffering the Event
of Loss as well as all of Lessor's right, title and interest in and to any
Engine constituting part of the Aircraft and replaced as provided above but not
installed thereon at the time of the Event of Loss. For all purposes hereof, a
replacement Airframe shall be deemed part of the property leased hereunder and
shall be deemed the "Airframe" as defined herein. No Event of Loss resulting in
replacement of the Airframe or Engines under this Section 11(a)(i) shall result
in any reduction of Rent.
(ii) On a Stipulated Loss Value Date on or before one
hundred twenty (120) days after the date of the Event of Loss or, if earlier,
with respect to insurance proceeds, on the date on which insurance proceeds with
respect to the Event of Loss are received by the loss payee (but in no event
later than the last day of the Term) Lessee
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shall pay to Lessor in immediately available funds the sum of (A) the Stipulated
Loss Value of the Aircraft as shown on Exhibit A for such Stipulated Loss Value
Date, plus all Basic Rent or Renewal Rent, as the case may be, payable on each
Basic Rent Payment Date or Renewal Rent Payment Date, respectively, prior to the
date of payment of such Stipulated Loss Value which has not been paid when due,
plus, if such Stipulated Loss Value Date is also a Basic Rent Payment Date or a
Renewal Rent Payment Date, the amount of Basic Rent or Renewal Rent, as the case
may be, payable by Lessee on such Stipulated Loss Value Date, and (B) all
Supplemental Rent payable, whereupon (1) the obligation of Lessee to pay Basic
Rent or Renewal Rent, as the case may be, hereunder with respect to the Aircraft
for any period commencing after the date on which such Stipulated Loss Value is
paid shall terminate; provided that Lessee shall remain liable for, and shall
pay on or before the date the Stipulated Loss Value and Supplemental Rent are
paid, all payments of Basic Rent or Renewal Rent, as the case may be, for the
Aircraft due on or before the date of such payment of Stipulated Loss Value and
Supplemental Rent, (2) the Term shall terminate with respect to such Aircraft,
and (3) Lessor will, subject to the rights of any insurers, transfer to Lessee,
"AS IS, WHERE IS," without recourse, representation or warranty (except a
warranty that such Airframe and Engines are free and clear of Lessor's Liens,
Head Lessor's Liens and Liens arising out of the Foreign Lease Agreement), all
of Lessor's right, title and interest, if any, in and to the Airframe and
Engines suffering the Event of Loss, as well as all of Lessor's right, title and
interest, if any, in and to any Engine constituting part of the Aircraft but not
installed thereon at the time of the Event of Loss.
(b) Event of Loss with Respect to an Engine. Upon an Event
of Loss with respect to an Engine only, Lessee shall give Lessor prompt written
notice thereof and shall, at its own cost and expense, within sixty (60) days
after such occurrence (but in no event later than the last day of the Term), pay
all amounts due under the Foreign Lease Agreement as a result thereof and convey
or cause to be conveyed to Lessor as replacement for the Engine suffering an
Event of Loss, title to (or so long as the Foreign Lease Agreement is in effect,
beneficial ownership of) another IAE Model V2500 engine of like model and
equivalent or better modification status or, at Lessee's option, an IAE engine
of an improved model, in each such case which has a value, remaining useful life
and utility determined in accordance with the Appraisal Procedure at least equal
to such Engine and is suitable for installation and use on the Airframe without
diminishing the value, remaining useful life or
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utility of such Airframe, free of all Liens (it being understood that, upon such
conveyance, such replacement Engine may be subject to Permitted Liens) and being
in as good operating condition as (including no greater number of cycles or
hours than) the Engine being replaced assuming the Engine being replaced was
serviceable and otherwise in the condition and repair required by the terms
hereof immediately prior to the Event of Loss. Prior to or at the time of any
such conveyance, Lessee, at its own cost and expense, will (i) furnish Lessor
(or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) with a
full warranty bill of sale, in form and substance reasonably satisfactory to
Lessor and Indenture Trustee, as applicable, with respect to such replacement
Engine; (ii) cause supplements, in form and substance reasonably satisfactory to
Lessor and Indenture Trustee (if the Lien of the Indenture has not been
discharged), subjecting such replacement Engine to this Lease, the Indenture (if
in effect), the Foreign Lease Agreement (if then in effect) and the Trust
Agreement (if in effect), to be duly executed by Lessee, if applicable, and duly
filed for recordation pursuant to the Federal Aviation Act; (iii) furnish Lessor
and Indenture Trustee (if the Lien of the Indenture has not been discharged)
with such evidence of title to or, so long as the Foreign Lease Agreement is in
effect, beneficial ownership of such Replacement Engine and of compliance with
the insurance provisions of Section 12 hereof with respect to such Replacement
Engine as Lessor or Indenture Trustee (if the Lien of the Indenture has not been
discharged) may reasonably request; (iv) furnish Owner Participant, Lessor and
Indenture Trustee (if the Lien of the Indenture has not been discharged) with an
opinion of Lessee's counsel addressed to such parties and to Lessor to the
effect that title to or, so long as the Foreign Lease Agreement is in effect,
beneficial ownership of such Replacement Engine has been duly conveyed to Lessor
free and clear of all Liens (except Permitted Liens), and is duly leased
hereunder and under the Foreign Lease Agreement (if in effect), and subject to
the Lien of the Indenture (if it has not been discharged), the instruments
subjecting such Replacement Engine to the Lien of the Indenture and the Lease,
and subjecting to any relevant Assigned Sublease and Sublease Agreement, as the
case may be, have been duly filed for recordation pursuant to the Federal
Aviation Act or any other law then applicable to the registration of the
Aircraft, and no further action, filing or recording of any document is
necessary in order to establish and perfect, in the United States and, if the
Aircraft is registered outside the United States, in the jurisdiction of
registration, the legal title to such Replacement Engine and the Lien of the
Indenture on such Replacement Engine; (v) furnish a
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certificate signed by a Responsible Officer of Lessee certifying that, upon
consummation of such replacement, no Default or Event of Default will exist
hereunder; (vi) furnish such documents and evidence with respect to Lessee,
Lessor or Indenture Trustee (if the Lien of the Indenture has not been
discharged), as such parties or their respective counsel may reasonably request
in order to establish the consummation of the transactions contemplated by this
Section 11(b), the taking of all corporate proceedings in connection therewith
and compliance with the conditions set forth in this Section 11(b), in each case
in form and substance satisfactory to such party; (vii) furnish such Uniform
Commercial Code financing statements covering the Replacement Engine as may be
requested by Lessor or Indenture Trustee (if the Lien of the Indentures has not
been discharged); (viii) furnish Owner Participant, at Lessee's election; (x) an
opinion of tax counsel mutually satisfactory to Owner Participant and Lessee and
which opinion is reasonably satisfactory to Owner Participant to the effect that
such replacement will have no adverse tax consequences to Lessor and Owner
Participant or (y) an indemnity for any adverse tax consequences to Lessor and
Owner Participant; (ix) furnish the appraisal referred to above; and (x) furnish
Owner Trustee and Indenture Trustee with the opinion of counsel to Lessee
specified in Section 5.06(a)(5)(i) of the Indenture. Upon full compliance by
Lessee with the terms of this Section 11(b), Lessor will, subject to the rights
of any insurers, transfer to Lessee, "AS IS, WHERE IS" without recourse,
representation or warranty (except a warranty that such Engine is free and clear
of Lessor's Liens and any Lien arising out of the Foreign Lease Documents), all
of Lessor's right, title and interest, if any, in the Engine which suffered the
Event of Loss. For all purposes hereof, each such Replacement Engine shall be
deemed an "Engine" as defined herein and shall be deemed part of the same
Aircraft as was the Engine replaced thereof. No Event of Loss covered by this
Section 11(b) shall result in any reduction in Rent.
(c) Conveyance of Replacement Airframe. Prior to or at the
time of any conveyance of a replacement Airframe pursuant to Section 11(a)
above, Lessee, at its own cost and expense, will furnish Lessor with the
following documents which shall have been duly authorized, executed and
delivered by the respective parties thereto and shall be in full force and
effect on said date: (i) a full warranty bill of sale, in form and substance
satisfactory to Owner Participant and Indenture Trustee (if the Lien of the
Indenture has not been discharged), and an AC Form 8050-2 Bill of Sale (or such
other form of bill of sale as may be
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approved by the FAA on said date), executed by the owner thereof, in favor of
Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor)
and, cause supplements, reasonably satisfactory to Owner Participant and
Indenture Trustee (if the Lien of the Indenture has not been discharged), to
this Lease, the Foreign Lease Agreement (if then in effect), the Indenture (if
then in effect) and the Trust Agreement (if then in effect), with respect to
such replacement Airframe and to be duly filed for recordation pursuant to the
Federal Aviation Act or other applicable Governmental Entity; (ii) the
certificate specified in Section 12(f) hereof demonstrating compliance with the
insurance requirements of Section 12 with respect to the replacement Airframe
and Engines; (iii) an opinion (addressed to Indenture Trustee, Lessor, and Owner
Participant) of Lessee's counsel (and such other evidence of title as Owner
Participant or Indenture Trustee (if the Lien of the Indenture has not been
discharged) may reasonably request) to the effect that, upon such conveyance,
Lessor will acquire good title to, or, so long as the Foreign Lease Agreement is
in effect, beneficial ownership of, such replacement Airframe free and clear of
all Liens (it being understood that, upon such conveyance, such replacement
Airframe may be subject to Permitted Liens), that such replacement Airframe will
be leased hereunder and under the Foreign Lease Agreement (if then in effect) to
the same extent as the Airframe replaced thereby and will be subject to the Lien
of the Indenture (if it has not been discharged), the instruments subjecting
such Replacement Airframe and Replacement Engine to the Lien of the Indenture
and the Lease, and subjecting to any relevant Assigned Sublease and Sublease
Assignment, as the case may be, have been duly filed for recordation pursuant to
the Federal Aviation Act or any other law then applicable to the registration of
the Aircraft, and no further action, filing or recording of any document is
necessary in order to establish and perfect, in the United States and, if the
Aircraft is registered outside the United States, in the jurisdiction of
registration, the legal title to such Replacement Airframe and Replacement
Engine and the Lien of the Indenture on such Replacement Airframe and
Replacement Engine; and that Lessor and Indenture Trustee, as the assignee of
Lessor, is entitled to the benefits of Section 1110 of Title 11 of the United
States Code with respect to such replacement airframe and engines to the same
extent as with respect to the Airframe and Engines then installed thereon prior
to such replacement; (iv) a certificate signed by a Responsible Officer of
Lessee certifying that, upon consummation of such replacement, no Default or
Event of Default will exist hereunder; (v) such documents and
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evidence with respect to Lessee, Owner Participant or Indenture Trustee (if the
Lien of the Indenture has not been discharged), as such parties or their
respective counsel may reasonably request in order to establish the consummation
of the transactions contemplated by this Section 11(c), the taking of all
corporate proceedings in connection therewith and compliance with the conditions
set forth in this Section 11(c), in each case in form and substance satisfactory
to each such party, including evidence that the Aircraft of which the
replacement Airframe is a part has been duly certificated by the FAA as to type
and airworthiness in accordance with the terms of this Lease and application for
registration of such replacement Airframe in the name of Lessor has been duly
made with the FAA or other applicable Governmental Entity and Lessee has
temporary or permanent authority to operate the replacement Airframe; (vi)
furnish such Uniform Commercial Code financing statements covering the
replacement Airframe as may be requested by Lessor or Indenture Trustee; (vii)
furnish Owner Participant with an opinion of tax counsel mutually satisfactory
to Owner Participant and Lessee and which opinion is reasonably satisfactory to
Owner Participant to the effect that such replacement will have no adverse tax
consequences to Lessor and Owner Participant; (viii) an appraisal prepared in
accordance with the Appraisal Procedure which confirms that the replacement
Airframe and any replacement Engine has a value, utility and remaining useful
life at least equal to that of the Airframe and Engines which suffered the Event
of Loss assuming that the same were maintained in accordance with the
requirements of this Lease whether or not they are in fact so maintained; and
(ix) furnish Owner Trustee and Indenture Trustee with the opinion of counsel to
Lessee specified in Section 5.06(a)(5)(i) of the Indenture. Upon full compliance
by Lessee with the terms of this Section 11(c), Lessor will, subject to the
rights of any insurers, transfer to Lessee "AS IS, WHERE IS," without recourse,
representation or warranty (except a warranty that such Airframe is free and
clear of Lessor's Liens, Head Lessor's Liens and any Lien arising out the
Foreign Lease Documents), all of Lessor's right, title and interest in and to
the Aircraft which suffered the Event of Loss. No Event of Loss with respect to
the Aircraft under the circumstances contemplated by the terms of this Section
11(c) shall result in any reduction in Rent.
For all purposes of this Lease, each such replacement
Aircraft (together with any Engines constituting part of the Aircraft being
replaced as to which an Event of Loss has not occurred) shall be deemed part of
the property
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leased hereunder and shall be deemed the "Aircraft" as defined herein.
(d) Application of Proceeds and Payments. Any payments
received at any time by Lessor or by Lessee from any insurer with respect to an
Event of Loss shall be applied in the manner specified in Sections 12(c) and (e)
hereof. Subject to Section 11(f) below, any payments (other than insurance
proceeds) received at any time by Lessor or Lessee from any Governmental Entity
or other Person with respect to an Event of Loss will be applied as follows
(after reimbursement of Lessor, Indenture Trustee and Owner Participant for
their reasonable out-of-pocket costs and expenses):
(i) unless clause (ii) below is applicable, so much of
such payments as shall not exceed the Stipulated Loss Value required to be paid
by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to Lessor in
reduction of Lessee's obligation to pay such Stipulated Loss Value if not
already paid by Lessee, or, if already paid by Lessee, shall (unless a Default
or an Event of Default shall have occurred and be continuing) be applied by
Lessor to reimburse Lessee for its payment of such Stipulated Loss Value and the
balance, if any, of such payment remaining thereafter shall be paid over to, or
retained by, Lessor; or
(ii) if such payments are received as a result of an
Event of Loss with respect to the Airframe or an Engine which is being replaced
pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall be
paid over to, or retained by, Lessee if Lessee shall have fully performed or,
concurrently therewith fully performs, the terms of Sections 11(a)(i) and (c) or
Section 11(b) hereof, as the case may be, and of Section 15 hereof with respect
to the Event of Loss for which such payments are made and if no Default or Event
of Default shall have occurred and be continuing.
(e) Requisition for Use by Government with Respect to the
Aircraft. Subject to Section 11(f) below, in the event of the requisition for
use by a Governmental Entity of the Aircraft, the Airframe or an Engine (other
than a requisition constituting an Event of Loss), Lessee shall promptly notify
Lessor and Indenture Trustee (if the Lien of the Indenture has not been
discharged) thereof and all of Lessee's obligations under this Lease with
respect to such Airframe or Engine shall continue to the same extent as if such
requisition had not occurred. All payments received by Lessor or Lessee from the
Governmental Entity for the use of
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such Airframe or Engine during the Term shall be paid over to, or retained by,
Lessee if no Default or Event of Default shall have occurred and be continuing;
and all other payments received by Lessor or Lessee from the Governmental Entity
shall be paid over to, or retained by, Lessor. If the Airframe and such Engines
or engines are not returned by the end of the Term, an Event of Loss shall be
deemed to have occurred on the last day of the Term and, on the last day of the
Term, Lessee shall either pay to Lessor the amount provided herein for an Event
of Loss to the Airframe and such Engines or engines on such date or provide a
replacement Aircraft and Engine on such date in the condition provided for in
Section 16. In the event of the requisition for use by the Governmental Entity
of any Engine without the requisition for use of the Airframe, Lessee will
replace such Engine hereunder by complying with the terms of Section 11(b) to
the same extent as if an Event of Loss had occurred with respect to such Engine,
and thereafter any payments received by Lessor or Lessee from the Governmental
Entity with respect to such requisition shall be paid over to, or retained by,
Lessee.
(f) Application in Default. Any amount referred to in
clause (i) or (ii) of Section 11(d) or Section 11(e) which is otherwise payable
to Lessee shall not be paid to Lessee, or, if it has been previously paid to or
retained by Lessee, shall be paid by Lessee to Lessor, if at the time of such
payment or retention a Default or an Event of Default shall have occurred and be
continuing. In such case, all such amounts shall be paid to and held by
Indenture Trustee so long as the Lien of the Indenture shall not have been
discharged and thereafter by Lessor as security for the obligations of Lessee,
or, at the option of Lessor or the Indenture Trustee, as the case may be,
applied by Lessor or the Indenture Trustee, as the case may be, toward payment
of any of Lessee's obligations at the time due hereunder, as Lessor or the
Indenture Trustee, as the case may be, may elect, including, without limitation,
by reason of this Lease being declared or deemed in default. At such time as
there shall not be continuing any such Event of Default or Default, all such
amounts at the time held by Lessor or Indenture Trustee in excess of the amount,
if any, which Lessor or Indenture Trustee has elected for application as
provided above, shall be paid to Lessee.
Section 12. Insurance.
(a) Public Liability and Property Damage Insurance. Lessee
will carry and maintain in effect, or cause to be carried and maintained in
effect, at its own
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cost and expense, with Approved Insurers, comprehensive aircraft and general
public liability insurance (including, without limitation, contractual
liability, liability war risk and passenger legal liability but excluding
manufacturer's product liability insurance), and property damage insurance with
respect to the Aircraft, in an amount not less than three hundred fifty million
dollars ($350,000,000), combined single limit, per occurrence or such higher
amount, and of such type and terms, as are customarily carried by prudent
Certificated Air Carriers, similarly situated to Lessee, operating aircraft of
similar size and engines and as hereinafter provided. Each and any policy of
insurance carried in accordance with this Section 12(a), and each and any policy
obtained in substitution or replacement for any of such policies, (i) shall
designate Lessor (in both its individual and trustee capacity), Owner
Participant, Indenture Trustee (in both its individual and trustee capacity)
Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and
their respective permitted assigns, as additional insureds as their interests
may appear (but without imposing upon any such Person any obligation imposed
upon the insured, including, without limitation, the liability to pay any
premiums for any such policies), (ii) shall expressly provide that, in respect
of the interests of Lessor, Owner Participant, Indenture Trustee, Foreign
Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and their
respective permitted assigns, in such policies, the insurance shall not be
invalidated as to an insured by any act or omission of Lessee or any other
insured and shall insure Lessor, Owner Participant, Indenture Trustee and the
other Indemnitees and their respective permitted assigns, regardless as to any
insured of any breach or violation by Lessee or any other insured of any
warranty, declaration or condition contained in such policies, (iii) shall
provide that if such insurance is cancelled for any reason whatsoever, or is
changed in any adverse way with respect to the interests of Lessor, Owner
Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender
and the other Indemnitees or if such insurance is allowed to lapse for
non-payment of premium, such cancellation, change or lapse shall not be
effective as to Lessor, Owner Participant, Indenture Trustee, Foreign Lessor,
Foreign Lessee, Foreign Lender and the other Indemnitees, and their respective
permitted assigns, until thirty (30) days, in each instance (seven (7) days or
such lesser period of time as is customarily available at the time in the case
of any war risk and allied perils coverage), after notice to Lessor, Owner
Participant, Indenture Trustee from such insurer or insurers, of such
prospective cancellation, change or lapse provided, however, that if any
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such notice period is not reasonably obtainable, such policies shall provide for
as long a period of prior notice as shall then be reasonably obtainable, (iv)
shall include coverage for any country in or over which the Aircraft is located
or operated, and (v) shall provide that, as against Lessor, Owner Participant,
Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other
Indemnitees, and their respective permitted assigns, each insurer shall waive
any rights of set-off, counterclaim or any other deduction, whether by
attachment or otherwise, and waives any rights it may have to be subrogated to
any right of any insured against Lessor, Owner Participant, Indenture Trustee,
Foreign Lessor, Foreign Lessee, Foreign Lender or the other Indemnitees, or
their respective permitted assigns, with respect to the Aircraft. Each liability
policy shall be primary without right of contribution from any other insurance
which may be carried by Lessor, Owner Participant, Indenture Trustee, Foreign
Lessor, Foreign Lessee, Foreign Lender or the other Indemnitees, or their
respective permitted assigns, and shall expressly provide that all of the
provisions thereof shall operate in the same manner as if there were a separate
policy covering each insured, provided, that such policies shall not operate to
increase the insurer's limit of liability. Lessee shall cause its insurers to
agree that the indemnity and hold harmless provisions of Section 13 are insured
as a contractual assumption of liability by Lessee's insurers, subject to the
terms, coverage, conditions, limitations and exclusions of the policy of
insurance. Without limiting the foregoing, the type and amount of the insurance
carried by Lessee hereunder shall be no less in amount and no less comprehensive
or favorable to Lessor, Owner Participant, Indenture Trustee and the other
Indemnitees then that carried by Lessee with respect to other A320-231 aircraft
or similar-size aircraft owned or leased by Lessee.
(b) Insurance Against Loss or Damage. Lessee, at its own
expense, will maintain in effect, or cause to be carried and maintained in
effect, with Approved Insurers "all-risk" ground and flight aircraft hull
insurance (which shall include, but not be limited to, hijacking, a
disappearance clause and coverage against strikes, riots, commotions or labor
disturbances, air piracy, malicious acts or acts of sabotage and unlawful
seizure or wrongful exercise of control of the Aircraft in flight by a person on
board such Aircraft acting without the consent of Lessee) covering the Aircraft,
and "all-risk" coverage including transit insurance with respect to Engines and
Parts while not installed on such Aircraft or an aircraft, which in each case
considering all policy terms, limitations and
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exclusions is of the type, terms and amount customarily maintained by prudent
Certificated Air Carriers similarly situated to Lessee and operating similar
size aircraft and engines and as hereinafter provided. Lessee shall also
maintain, or cause to be maintained, war risk and allied perils hull insurance
reasonably acceptable to Lessor with Approved Insurers if the Aircraft, Airframe
or Engines are operated on routes or kept in locations outside of the United
States of America. In addition, at least ten (10) Business Days (or, in the case
of an emergency, at least two (2) Business Days) prior to permitting the
Aircraft, Airframe or Engines to be operated or located outside of the United
States of America, other than in Canada or Mexico, Lessee shall notify Lessor
thereof. If Owner Participant or Indenture Trustee reasonably requests at any
time and if such insurance is then customarily being obtained by or for Persons
leasing or financing similarly-sized aircraft operating on similar routes to
operators located in the jurisdiction of Lessee's or, if a Permitted Sublease is
in effect, the Permitted Sublessee's jurisdiction of domicile, Lessee shall pay
or reimburse Lessor for political risk, repossession, expropriation,
confiscation and similar insurance as Lessor may arrange or cause to be
arranged. Anything herein to the contrary notwithstanding, at all times while
the Aircraft is subject to this Lease, the insurance required by this Section
12(b) shall be for an amount on an "agreed value" basis not less than the
Stipulated Loss Value from time to time determined for the Aircraft. Without
limiting the foregoing, the type and amount of insurance carried by Lessee
hereunder shall be no less comprehensive or favorable to Lessor, Owner
Participant, Indenture Trustee and the other Indemnitees than that carried by
Lessee with respect to similar-size aircraft owned or leased by Lessee.
Each and any policy of insurance obtained and maintained
pursuant to this Section 12(b), and each and any policy obtained in substitution
or replacement for any such policies, (i) shall designate Lessor as owner of the
Aircraft, shall designate, so long as the Lien of the Indenture has not been
discharged, Indenture Trustee and, thereafter, Lessor, as sole loss payee, as
provided below and shall designate Lessor, Owner Participant, Indenture Trustee
(in both its individual capacity and its trustee capacity) and the other
Indemnitees and their respective permitted assigns as additional insureds, as
their respective interests may appear (but without imposing upon Lessor, Owner
Participant, Indenture Trustee and their respective permitted assigns, any
obligation imposed upon the insured, including, without limitation, the
liability to
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pay any premiums for any such policies), (ii) shall expressly provide that, in
respect of the interests of such an additional insured and its permitted
assigns, in such policies, the insurance shall not be invalidated as to an
insured by any act or omission of Lessee or any other additional insured, and
shall insure each such additional insured and its permitted assigns, regardless
of any breach or violation of any warranty, declaration or condition contained
in such policies by the Lessee or another additional insured, (iii) shall
provide that if such insurance is cancelled for any reason whatsoever, or is
changed in any adverse way with respect to the interests of Lessor, Owner
Participant, Indenture Trustee and to the other Indemnitees and their respective
permitted assigns, or if such insurance is allowed to lapse, such cancellation,
change or lapse shall not be effective as to Lessor, Owner Participant,
Indenture Trustee, the other Indemnitees or their respective permitted assigns,
until thirty (30) days (seven (7) days or such lesser period of time as is
customarily available at the time in the case of any war risks or allied perils
coverage) after written notice to Lessor, Owner Participant and Indenture
Trustee from such insurer or insurers, as the case may be, of such prospective
cancellation, change or lapse provided, however, that if any such notice period
is not reasonably obtainable, such policies shall provide for as long a period
of prior notice as shall then be reasonably obtainable, (iv) shall include
coverage for any country in or over which the Aircraft may at any time be
located or operated, (v) shall provide that, as against Lessor, Owner
Participant, Indenture Trustee, Foreign Lessor, the other Indemnitees and their
respective permitted assigns, each insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waives any rights it may have to be subrogated to any right of any insured
against Lessor, Owner Participant, Indenture Trustee, Foreign Lessor, and the
other Indemnitees and their respective permitted assigns, with respect to the
Aircraft, (vi) shall provide that in the event of any damage or loss which is an
Event of Loss hereunder and which results in a payment, such payment shall be
payable directly to Indenture Trustee as sole loss payee, so long as the Lien of
the Indenture shall not have been discharged and thereafter to Lessor, as sole
loss payee, and (vii) shall provide that in the event of any damage or loss
which is not an Event of Loss hereunder and which results in a payment, such
payment shall be payable directly to Indenture Trustee, as sole loss payee for
the account of all interests, so long as the Lien of the Indenture shall not
have been discharged and thereafter to Lessor, as sole loss payee for the
account of all interests.
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The insurance required under this Section 12(b) may incorporate deductible
amounts which shall not exceed one million dollars ($1,000,000).
Each of Lessor, Owner Participant and Foreign Lessor shall
have the right to carry additional and separate excess or contingent insurance
for its own benefit at its own expense, without, however, thereby limiting
Lessee's obligations under this Section 12, and Lessee shall not carry any such
insurance if it would conflict with or adversely affect other insurance carried
by Lessor, Foreign Lessor, or Owner Participant. Lessee shall have the right to
carry insurance in excess of the amounts required hereunder and the proceeds of
such excess insurance shall be payable to Lessee, provided, however, that such
insurance does not conflict with or adversely affect the insurance required
hereunder or any excess or contingent insurance carried by Lessor, Foreign
Lessor, or Owner Participant. Lessee shall give Lessor reasonable prior written
notice of any insurance to be carried by Lessee in addition to that required to
be carried by Lessee as provided herein.
(c) Application of Insurance Proceeds for an Event of
Loss. It is agreed that insurance payments which arise from insurance required
to be carried by Lessee pursuant to this Section 12 and received as the result
of the occurrence of an Event of Loss shall be applied as follows (after
reimbursement of Lessor, Owner Participant, Indenture Trustee and Foreign Lessor
for their reasonable out-of-pocket costs and expenses):
(i) unless clause (ii) below is applicable, so much of
such payments as shall not exceed the Stipulated Loss Value required to be paid
by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to Indenture
Trustee so long as the Lien of the Indenture has not been discharged and
thereafter to Lessor in reduction of Lessee's obligation to pay such Stipulated
Loss Value if not already paid by Lessee, or, if already paid by Lessee, shall
(unless a Default or an Event of Default shall have occurred and be continuing)
be applied by Indenture Trustee or Lessor, as the case may be, to reimburse
Lessee for its payment of such Stipulated Loss Value and the balance, if any, of
such payment remaining thereafter shall be paid over to, or retained by, Lessor;
or
(ii) if such payments are received as a result of an
Event of Loss with respect to the Airframe or an Engine which is being replaced
pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall be
paid
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over by the Indenture Trustee or Lessor, as the case may be, to, or retained by,
Lessee if Lessee shall have fully performed or, concurrently therewith fully
performs, the terms of Section 11(a)(i) and (c) or Section 11(b) hereof, as the
case may be, and of Section 15 hereof with respect to the Event of Loss for
which such payments are made and if no Default or Event of Default shall have
occurred and be continuing.
In the event that separate policies are maintained to
cover "all-risk" ground and flight aircraft, hull and war risks and allied
perils insurance, Lessee shall include a 50/50 provisional claims settlement
clause as contained in the policies of insurance maintained by Lessee with
respect to all other aircraft in Lessee's fleet, and a copy of the 50/50
provisional claims settlement clause in effect on the Restatement Date shall be
attached to the insurance certificate issued on the Restatement Date.
(d) Application of Insurance Proceeds for Other than an
Event of Loss. The insurance payments of any property damage loss to the
Airframe or any Engine not constituting an Event of Loss with respect thereto
will be applied in payment for the actual costs of repairs or for replacement
property which Lessee has incurred in accordance with the terms of Section 9, 11
or 12(c) of this Lease against such documentation evidencing payment by Lessee
as Lessor may reasonably request to reimburse Lessee for such repairs or
replacements already paid for by Lessee, and any balance remaining after
compliance with such Sections with respect to such loss shall be paid to Lessor.
Lessee shall be entitled to receive from the insurer any insurance proceeds not
in excess of five hundred thousand dollars ($500,000) as soon as such funds are
paid and shall promptly receive such additional insurance proceeds from the loss
payee upon invoices for repair work in progress, replacement parts which are
ordered or for work completed as provided above in this Section 12(d). Any
amount referred to in this Section 12(d) which is payable to Lessee shall not be
paid to Lessee if at the time of such payment any Default or Event of Default
shall have occurred and be continuing, but shall be held by Lessor as security
for the obligations of Lessee under this Lease or applied as provided in Section
12(e).
(e) Application in Default. Any amount referred to in
clause (ii) of Section 12(c) or Section 12(d) which is otherwise payable to
Lessee shall not be paid to Lessee, or if it has been previously paid to or
retained by Lessee, shall be paid by Lessee to Indenture Trustee, so long as the
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Lien of the Indenture shall not have been discharged, and thereafter to Lessor,
if at the time of such payment or retention a Default or an Event of Default
shall have occurred and be continuing. In such case, all such amounts shall be
paid to and held by Indenture Trustee so long as the Lien of the Indenture shall
not have been discharged, and thereafter held by Lessor as security for the
obligations of Lessee, or, at the option of Indenture Trustee or Lessor, applied
by Indenture Trustee or Lessor toward payment of any of Lessee's obligations at
the time due hereunder, including, without limitation, by reason of this Lease
being declared or deemed declared in default, as Indenture Trustee or Lessor may
elect. At such time as there shall not be continuing any such Event of Default
or Default, all such amounts at the time held by Indenture Trustee or Lessor in
excess of the amount, if any, which Indenture Trustee or Lessor has elected for
application as provided above, shall be paid to Lessee.
(f) Certificates. On or before the Delivery Date, and
thereafter on any renewal by the Lessee of the insurance required hereby (but in
no event less than once in every twelve (12) month period), Lessee will furnish
to Lessor and Indenture Trustee a certificate executed and delivered by an
Approved Insurer or the Approved Broker, describing in reasonable detail, and in
accordance with customary practice, insurance carried on the Aircraft and Lessee
shall also furnish an opinion or report by the Approved Insurer or the Approved
Broker certifying that the insurance then maintained on the Aircraft complies
with the terms of this Lease. Lessee will cause the Approved Broker to agree to
advise Lessor, Owner Participant and Indenture Trustee in writing at least
thirty (30) days (seven (7) days or such lesser period of time as is customarily
available at the time in the case of any war risk and allied perils coverage)
prior to the expiration, non-renewal, termination or cancellation for any reason
(including, without limitation, failure to pay premium therefor) or material
modification of any such insurance; provided, however, that if any such notice
period is not reasonably obtainable, such Approved Broker shall provide for as
long a period of prior notice as shall then be reasonably obtainable.
In the event Lessee shall fail to maintain insurance as
herein provided, Lessor, Owner Participant or Indenture Trustee at their
respective options, may provide such insurance and, in such event, Lessee shall,
upon demand, reimburse Lessor, as Supplemental Rent, or any other such other
Person who may have provided such insurance, for the cost thereof.
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(g) Reinsurance. Lessee (or, if a Permitted Sublease is in
effect, the Permitted Sublessee) may carry primary insurance outside of the
aviation insurance markets in New York, London or Paris if the relevant primary
insurer shall have obtained reinsurance and such reinsurance will (i) be on the
same terms as the original insurance and will include the provisions required by
this Agreement, (ii) provide in case of any bankruptcy, insolvency, liquidation,
dissolution or similar proceedings of or affecting the original insurer that the
reinsurers' liability will be to make such payment as would have fallen due
under the relevant policy of reinsurance if the original insurer had
(immediately before such bankruptcy, insolvency, liquidation, dissolution or
similar proceedings) discharged its obligations in full under the original
insurance policies in respect of which the then relevant policy of reinsurance
has been effected; and (iii) contain a "cut-through" clause in the following
form (or otherwise, satisfactory to Owner Participant): "The Reinsurers and the
Reinsured hereby mutually agree that in the event of any claim arising under the
reinsurances in respect of a total loss or other claim where as provided by the
Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-5] dated as of
October 1, 1991 as amended and restated as of November 26, 1996 and made between
Wilmington Trust Company, as Owner Trustee, and America West Airlines, Inc. such
claim is to be paid to the person named as sole loss payee under the primary
insurances, the Reinsurers will in lieu of payment to the original insured, its
successors in interest and assigns pay to the person named as sole loss payee
under the primary insurances effected by the original insured that portion of
any loss due for which the Reinsurers would otherwise be liable to pay the
original insurer (subject to proof of loss), it being understood and agreed that
any such payment by the Reinsurers will (to the extent of such payment) fully
discharge and release the Reinsurers from any and all further liability in
connection therewith."
(h) Storage. During any period that the Aircraft is in
storage or otherwise grounded, Lessee may carry or cause to be carried, in lieu
of the insurance required by Sections 12(a) and (b) above, insurance otherwise
conforming with the provisions of said Sections 12(a) and (b) except that the
scope of the risk and the type of insurance, and the amount of the insurance in
the case of the insurance described in Section 12(a) above (but not the amount
of insurance to be carried under Section 12(b) above), shall be the same as from
time to time applicable to similar size passenger aircraft that comprise
Lessee's fleet in similar storage or grounding, and in any event (including,
without
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limitation, at any time when there shall be in existence a Permitted Sublease),
the same as from time to time customarily carried by similarly-situated, prudent
Certificated Air Carriers for passenger aircraft of similar size as the Aircraft
in similar storage or grounding.
(i) Amounts Held. So long as no Default or Event of
Default has occurred and is continuing, any amount held by Lessor or Indenture
Trustee, as the case may be, until application by Lessor or Indenture Trustee,
as the case may be, pursuant to this Section 12 shall be invested as provided in
Section 21(h) hereof.
(j) After the Term. Lessee shall continue to maintain at
its expense the insurance described in Section 12(a) for three years after the
expiration or termination of the Basic Term or Renewal Term, if Lessee has
elected to renew the Lease in accordance with Section 20, covering each
Indemnitee as its interest may appear and specifically insuring the indemnity
contained in Section 13 to the extent of the coverage of such policy.
(k) Governmental Indemnity. In lieu of certain of the
insurance described in Section 12 above, Lessee may provide a United States
governmental indemnity, to the extent and subject to the terms and conditions
specified in Section 6(c).
Section 13. General Indemnity.
Lessee hereby agrees to indemnify, reimburse, defend and
hold harmless each Indemnitee on an after-tax basis, as provided in Section
10(e), within fifteen (15) days after demand from and against any and all
claims, damages (whether direct, indirect, incidental, special or
consequential), losses, charges, fees, liabilities, obligations, demands, suits,
judgments, actions and other legal proceedings (whether civil or criminal),
penalties, fines, other sanctions, and any reasonable costs and expenses, in
connection herewith, including, without limitation, reasonable attorney's fees
and expenses of whatever kind or nature (any and all of which are hereafter
referred to as "Claims") imposed on, or asserted by or against, or suffered or
incurred by, any Indemnitee from (and including) and after the Restatement Date,
including, without limitation, injury, death or property damage of passengers,
shippers and others, environmental control, noise and pollution regulations,
which in any way may result from, pertain to, or arise in any manner out of, or
are in any manner related to (1) the Operative Documents, the
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Purchase Documents or the Financing Documents, or any of the transactions
contemplated thereby; (2) the Aircraft, the Airframe, any Engine or any engine
used in connection with the Airframe or any Part thereof, including, but not
limited to, (A) the importation, exportation, condition, manufacture, design,
purchase, ownership, registration, reregistration, deregistration (other than
any deregistration caused by the failure of the registered owner of the
Aircraft to be a "citizen of the United States" as defined under the Federal
Aviation Act and the regulations thereunder or to file the documentation
necessary to continue FAA registration of the Aircraft), delivery, non-
delivery, assignment, leasing, subleasing, sub-subleasing, acceptance,
rejection, possession, repossession, return, financing, Liens (excluding
Lessor's Liens, Head Lessor's Liens and Lenders' Liens, but including the Lien
of the Indenture), use, performance, modification, maintenance, overhaul,
operation, pooling, interchange, repair, testing, sale, return or other
disposition or application of the Aircraft, the Airframe, any Engine, any engine
used in connection with the Airframe or any Part (including, but not limited to,
latent and other defects whether or not discoverable by Lessee or Lessor, Claims
related to any actual or alleged violation of Law, loss or damage to any
property of passengers, shippers or otherwise or any Claim related to patent,
copyright, trademark or other infringement) either in the air or on the ground,
and, including, without limitation, any interest therein of an Indemnitee or
imposition of a Lien thereon (excluding Lessor's Liens, Head Lessor's Liens and
Lenders' Liens but including the Lien of the Indenture), or the rentals,
receipts or earnings therefrom (including, without limitation, the Rent and any
other amounts paid or payable with respect thereto); or (B) any defect in the
Aircraft, the Airframe, any Engine, any engine used in connection with the
Airframe or any Part thereof arising from the material or any article used
therein, whether from the design, testing or use thereof from any maintenance,
service, repair, overhaul or testing of such Aircraft, Airframe, Engine, engine
or Part, or otherwise regardless of when such defect shall be discovered,
whether or not such Aircraft, Airframe, Engine, engine or Part is at the time in
the possession of Lessee, and regardless of where such Aircraft, Airframe,
Engine, engine or Part may then be located; or (3) the breach of any
representation, warranty or covenant made by Lessee hereunder or under any of
the other Operative Documents or any Default or Event of Default; provided,
however, that the indemnity provided for in this Section 13 shall not apply to
any portion of a Claim of an Indemnitee to the extent it results from: (i) the
gross negligence or
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willful misconduct of such Indemnitee or any of its directors, officers,
employees, servants or agents (except any such gross negligence or willful
misconduct as may be attributed to an Indemnitee due to its interest in the
Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document
or any Financing Document), (ii) the material breach of any express
representation, warranty or covenant made by such Indemnitee herein or in any
other Operative Document, or the Financing Documents (not resulting from a
breach by Lessee of any of its representations, warranties or covenants in the
Operative Documents or in the Financing Documents), (iii) any Taxes, whether or
not Lessee is required to indemnify such Taxes under Section 10 hereof or the
Tax Indemnification Agreement (it being understood that Section 10 hereof and
the Tax Indemnification Agreement exclusively provide for Lessee's liability
with respect to Taxes), (iv) any Claim which relates solely to events which
occurred prior to (but excluding) the Restatement Date (other than Claims
related to the condition, manufacture or design of the Aircraft) and any Claim
concerning payment for or the ownership of Buyer Furnished Equipment, (v) an
underlying act which occurs after the Aircraft has been returned to Lessor in
accordance with the terms hereof and the Term of this Lease has been terminated
or has expired and the return is not related to an Event of Default, (vi) as to
such Indemnitee, an underlying act which occurs after a disposition or other
transfer (voluntary or involuntary) by such Indemnitee of all or any part of its
interest in the Aircraft, the Airframe, any Engine, or any Part, or in the
Financing Documents, the Purchase Documents or the Operative Documents, except
as contemplated under or pursuant to the Operative Documents, the Financing
Documents or the Purchase Documents and except as resulting from the exercise of
its remedies during the period while an Event of Default has occurred and is
continuing and prior to the time such Indemnitee has received payment of all
amounts owing to it hereunder and except any Claim which is alleged or does
relate to the period prior to such disposition or (vii) the authorization or
giving or withholding of any future amendments, supplements, waivers or consents
with respect to any of the Financing Documents, the Purchase Documents or the
Operative Documents, which amendments, supplements, waivers or consents were not
requested by Lessee or are not required to give effect to the provisions of the
Operative Documents, the Financing Documents or the Purchase Documents
(provided, however, in no event will Lessee be liable for any Claims resulting
from, pertaining to or arising from or related to Lessor's granting or creating
a Lessor's Lien or the granting or creation of a Head Lessor's Lien or an
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Original Head Lessee's Lien). Upon full payment of the indemnities herein,
Lessee shall be subrogated to all rights and remedies which such Indemnitee may
have against any third party against whom such Indemnitee has the right to
assert a Claim which arises under any action described in this Section 13
(except Claims under such Indemnitee's own insurance policies or under the
indemnification provisions of any of the Financing Documents).
Without limiting Lessee's liability under this Section 13,
Lessee hereby waives and releases any Claim now or hereafter existing against
any Indemnitee, on account of any Claims for or on account of or arising or in
any way connected with injury to or death of personnel of Lessee or loss or
damage to property of Lessee or the loss of use of any property which may result
from or arise in any manner out of or in relation to the importation,
exportation, ownership, purchase, registration, reregistration, deregistration
(except as to Owner Participant or Lessor as and to the extent such Indemnitee
is responsible under the Refunding Agreement for Claims related to such
deregistration), delivery, non-delivery, assignment, leasing, subleasing,
manufacture, acceptance, rejection, possession, return, financing, performance,
modification, maintenance, condition, use, operation, pooling, interchange,
repair, testing, sale, return or other disposition of the Aircraft, the
Airframe, any Engine or any engine used in connection with the Airframe or any
Part thereof, either in the air or on the ground, or which may be caused by any
defect in such Aircraft, Airframe, Engine, engine or Part from the material or
any article used therein or from the design or testing thereof, or use thereof
or from any maintenance, service, repair, overhaul, or testing of such Aircraft,
Airframe, Engine, engine or Part, claims for infringement, loss of or injury to
any person, loss of or damage to any property or environmental damage,
regardless of when such defect may be discovered, whether or not such Aircraft,
Airframe, Engine, engine or Part is at the time in the possession of Lessee, and
regardless of the location of such Aircraft at any such time except to the
extent that such Claim results from (i) the gross negligence or willful
misconduct of such Indemnitee (except any such gross negligence or willful
misconduct as may be attributed to an Indemnitee due to its interest in the
Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document
or any Financing Document), (ii) the material breach of any of its express
representations, warranties or covenants hereunder, under any other Operative
Document or Financing Document (not resulting from a breach by Lessee of any of
its representations, warranties or covenants in the
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Operative Documents or in the Financing Documents), (iii) any Taxes, whether or
not Lessee is required to indemnify such Taxes under Section 10 hereof or the
Tax Indemnification Agreement (it being understood that Section 10 hereof and
the Tax Indemnification Agreement exclusively provide for Lessee's liability
with respect to Taxes), (iv) any Claim which relates solely to events which
occurred prior to (but excluding) the Restatement Date (other than Claims
related to the condition, manufacture or design of the Aircraft) and any Claim
concerning payment for or the ownership of Buyer Furnished Equipment, (v) an
underlying act which occurs after the Aircraft has been returned to Lessor in
accordance with the terms hereof and the Term of this Lease has been terminated
or has expired and the return is not related to an Event of Default, (vi) as to
such Indemnitee, an underlying act which occurs after a disposition or other
transfer (voluntary or involuntary) by such Indemnitee of all or any part of its
interest in the Aircraft, the Airframe, any Engine, or any Part, or in the
Financing Documents, the Purchase Documents or the Operative Documents, except
as contemplated under or pursuant to the Operative Documents, the Financing
Documents or the Purchase Documents and except as resulting from the exercise of
its remedies during the period while an Event of Default has occurred and is
continuing and prior to the time such Indemnitee has received payment of all
amounts owing to it hereunder and except any Claim which is alleged or does
relate to the period prior to such disposition, (vii) the authorization or
giving or withholding of any future amendments, supplements, waivers or consents
with respect to any of the Financing Documents, the Purchase Documents or the
Operative Documents, which amendments, supplements, waivers or consents were not
requested by Lessee or are not required to give effect to the provisions of the
Operative Documents the Financing Documents or the Purchase Documents or (viii)
a Lessor's Lien, a Head Lessor's Lien or a Lenders' Lien attributable to such
Indemnitee.
Each Indemnitee shall, at Lessee's sole cost and expense
and with Lessee's cooperation, be entitled to conduct the defense of any Claim
against it; provided, however, that Lessee shall, at the request of any
Indemnitee and so long as no Event of Default has occurred and is continuing,
assume and conduct promptly and diligently, at its sole cost and expense, the
defense of such Indemnitee against any Claim of a third party with counsel
reasonably acceptable to such Indemnitee; and provided, further, however, that
Lessee shall have the right as well as the obligation to assume such defense to
the extent required under the terms of the applicable insurance policies so long
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as no Default or Event of Default has occurred and is continuing. In the event
Lessee shall so assume the defense of any Claim, such Indemnitee shall cooperate
with Lessee in defending such Claim, but any expenses incurred by such
Indemnitee in connection therewith shall either be paid by Lessee to such
Indemnitee in advance, or reasonable security shall be provided by Lessee to
such Indemnitee for such payments. Neither Lessee nor an Indemnitee shall enter
into a settlement or other compromise with respect to any Claim which Lessee or
such Indemnitee is defending hereunder in excess of $100,000 without the prior
written consent of the other, which consent shall not be unreasonably withheld.
Each Indemnitee agrees to give Lessee prompt notice of any
Claims by a third party hereunder following such Indemnitee's actual knowledge
of such Claims by third parties, but the failure of such Indemnitee to give the
notice required by this Section 13 shall not constitute a release by Lessor or
such Indemnitee of, or reduce, any of the obligations or liabilities of Lessee
to such Indemnitee in respect of any such Claim or otherwise affect the
obligations or liabilities of Lessee to any Indemnitee in respect of any such
Claim, except to the extent that Lessee's ability to control the defense thereof
where Lessee has the right to control the defense thereof is materially
prejudiced as a result solely of such failure of such Indemnitee to give such
notice.
An Indemnitee or Lessee shall supply the other with such
information requested by the other as is reasonably necessary or advisable for
the other to control the defense of a Claim to the extent permitted by this
Section.
Nothing in this Section shall be construed as a guaranty
by Lessee of payments due pursuant to any indebtedness incurred with respect to
the purchase of the Aircraft or of the residual value of the Aircraft.
Notwithstanding anything herein or in any other Operative
Document to the contrary, with respect to any Claim for which any Indemnitee is
entitled to indemnification under more than one provision of this Lease or any
other Operative Document, such Indemnitee shall be entitled to recovery for such
Claim only pursuant to one such provision as it may select in its sole
discretion (and, for the avoidance of doubt, such Indemnitee shall not be
entitled to any double recovery for the same Claim).
The indemnities contained in this Section 13 shall
continue in full force and effect notwithstanding the
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expiration or other termination of this Lease and are expressly made for the
benefit of and shall be enforceable by each Indemnitee.
Section 14. Liens.
Lessee shall not directly or indirectly create, incur,
assume, or suffer to exist any Lien on or with respect to the Aircraft, the
Airframe, any Engine or any Part thereof, title thereto, or any interest of
Lessor therein or in this Lease, except (i) the respective rights of Lessor,
Lessee, Owner Participant, Indenture Trustee, Foreign Lessor and any other
Indemnitee as herein provided or provided under the other Operative Documents or
the Financing Documents; (ii) Lessor's Liens, Head Lessor's Liens and (iii)
Liens for Taxes either not yet due or being diligently contested in good faith
by appropriate proceedings in accordance with Section 10 and so long as adequate
reserves are maintained with respect to such Liens and only so long as neither
such proceedings nor such Liens involve any material danger of the sale,
forfeiture or loss of any of the Aircraft, the Airframe or any Engine, or any
interest of Lessor, Foreign Lessor or Indenture Trustee therein or any risk of
criminal liability of Lessor, Foreign Lessor or Indenture Trustee; (iv) inchoate
materialmen's, mechanics', workmen's, repairmen's employees', or other like
inchoate Liens arising in the ordinary course of business for sums not overdue
by more than 45 days or being diligently contested in good faith and only so
long as neither such proceedings nor any such Liens involve any material danger
of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any
Engine, or any interest of Lessor or Indenture Trustee therein; (v) the rights
of other Persons to the extent expressly permitted by the provisions of Section
6(a), 9(c) or 19; (vi) Liens arising out of any judgment or award against Lessee
(or any Permitted Sublessee) unless the judgment or award shall not, within
thirty (30) days after the entry thereof, have been discharged, vacated,
reversed, or execution thereof stayed pending appeal or shall not have been
discharged, vacated or reversed within thirty (30) days after the expiration of
such stay and only so long as such Liens shall not involve any material danger
of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any
Engine, or any interest of Lessor, Foreign Lessor or Indenture Trustee therein
and provided that the execution of such judgment or award or an attachment
relating thereto shall not have occurred within such thirty (30) day period;
and, (vii) any other Lien with respect to which Lessee (or a Permitted
Sublessee) shall have provided a bond adequate in the reasonable opinion of
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Indenture Trustee (if the Lien of the Indenture has not been discharged) and
Owner Participant. Lessee shall promptly, at its own expense, take or cause to
be taken such action as may be necessary to duly discharge any Lien (except for
the Liens referred to in clauses (i) through (vii) of this Section 14) directly
or indirectly created, incurred, assumed, or suffered to exist by Lessee if the
same shall arise at any time.
Section 15. Protection of Title and Further Assurances.
Forthwith upon the execution and delivery of this Lease,
the Indenture, the Trust Agreement, the Lease Supplement, Indenture Supplement
and Trust Supplement, and any other supplement from time to time required by the
terms hereof, Lessee will cause this Lease, the Indenture, the Trust Agreement,
the Lease Supplement, Indenture Supplement, the Trust Supplement and such other
supplements to be duly filed and recorded, and maintained of record, in
accordance with the applicable laws of the government of registry of the
Aircraft. If any filing or recording is reasonably necessary to protect the
interests of Lessor, Foreign Lessor or Indenture Trustee, Lessee shall, at its
own cost and expense (except it shall be at Lessor's expense if in connection
with a change in ownership of the Aircraft or any other transfer or assignment
by Lessor other than as contemplated hereunder or under the Financing Documents
or in connection with an Event of Default) and upon request by Lessor or Foreign
Lessor, cause any financing statements and any and all additional instruments
and other documents, so far as permitted by applicable Law, to be kept, filed,
and recorded and to be re-executed, refiled and re-recorded at all times in the
appropriate office pursuant or in relation to any applicable Laws of any
Governmental Entity, to protect and preserve the rights and interests of Lessor,
Foreign Lessor or Indenture Trustee hereunder, under the Indenture and in the
Aircraft, and Lessee shall furnish to Lessor, Foreign Lessor and Indenture
Trustee, evidence, reasonably satisfactory to Lessor and Indenture Trustee, of
each such filing or refiling and recordation and re-recordation.
Without limiting the foregoing, Lessee shall do or cause
to be done, at Lessee's cost and expense (except it shall be at Lessor's expense
if in connection with a change in ownership of the Aircraft or any other
transfer or assignment by Lessor other than as contemplated hereunder or under
the Financing Documents or in connection with an Event of Default), any and all
acts and things within its control
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which may be required under the terms of the Mortgage Convention to protect and
preserve the title of Lessor, the Lien of the Indenture, this Lease, and the
interests of Lessor and Indenture Trustee within the jurisdiction of any
signatory which has ratified the Mortgage Convention in such jurisdiction and in
the territories thereof in which Lessee, any Permitted Sublessee or any wet
sublessee may operate the Aircraft, as Lessor may reasonably request. Lessee
shall also do or cause to be done, at its own expense (except it shall be at
Lessor's expense if in connection with a change in the ownership of the Aircraft
or any other transfer or assignment by Lessor other than as contemplated
hereunder or under the Financing Documents or in connection with an Event of
Default), any and all acts and things which may be required under the terms of
any other Law involving any jurisdiction in which Lessee, any Permitted
Sublessee or any wet lessee may operate the Aircraft, which Lessor may
reasonably request, to protect and preserve the title of the Lessor, this Lease,
the Indenture and Lessor's, Foreign Lessor's and Indenture Trustee's interest in
the Aircraft and under any of the Operative Documents or Financing Documents
within any such jurisdiction.
In addition, at Lessee's expense, Lessee will promptly and
duly execute and deliver to Lessor or Indenture Trustee, as applicable, such
further documents and assurances and take such further actions as Owner
Participant or Indenture Trustee may from time to time reasonably request in
order to more effectively carry out the intent and purpose of this Lease and the
other Operative Documents and the Financing Documents and to protect the rights
and remedies created or intended to be created in favor of Lessor, Foreign
Lessor or Indenture Trustee hereunder and the other Operative Documents and the
Financing Documents including, without limitation, if reasonably requested by
Owner Participant or Indenture Trustee, at the expense of Lessee (except it
shall be at Lessor's expense if in connection with a change in the ownership of
the Aircraft or any other transfer or assignment by Lessor, Foreign Lessor or
Indenture Trustee other than as contemplated hereunder or under the Financing
Documents or in connection with an Event of Default), the execution and delivery
of supplements or amendments hereto in recordable form, subjecting to this
Lease, the Indenture, the Foreign Lease Documents and the other Financing
Documents, any replacement Aircraft or Engine and the recording or filing of
counterparts thereof in accordance with the laws of any appropriate
jurisdiction.
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Lessee's obligations under this Section 15 are subject to
the reasonable cooperation of the applicable parties.
Section 16. Return of Aircraft and Records.
(a) Return. On any Return Occasion, Lessee, at its own
expense and risk, shall return the Aircraft to Lessor (or any Person designated
by Lessor) in at least the condition specified in this Section and Exhibit E
hereto at any Lessee system location in the continental United States selected
by Lessor, as Lessor may elect, or such other location as Lessor and Lessee may
agree, fully equipped with all required Engines, or other engines owned by
Lessee (which shall thereupon become Engines as hereinafter provided) meeting
the conditions specified in this Section and Exhibit E, duly installed thereon
by delivering the same to the Lessor at such location. Lessee shall comply with
Section 11(b) and this Section 16 with respect to any engines installed on the
Aircraft returned to Lessor hereunder and meeting the conditions described
herein which were not originally installed on the Aircraft.
(b) Status Upon Return. Upon any Return Occasion
hereunder, the Aircraft shall be: (i) free and clear of all Liens, except for
the Lien of the Indenture, Head Lessor's Liens, Original Head Lessee's Liens,
Lessor's Liens, Lenders' Liens and Liens arising out of the Foreign Lease
Agreement, (ii) duly certified as an airworthy aircraft by the FAA under Part
121 of the regulations promulgated under the Federal Aviation Act and with a
current and valid Airworthiness Certificate installed on the Aircraft, unless
such certificate shall have been suspended or revoked as a result of the
suspension or revocation of the registration of the Aircraft under the Federal
Aviation Act due to the ineligibility of the Aircraft to be registered in the
name of Lessor under the Federal Aviation Act (whether by means of a voting
trust agreement or otherwise) in which case the Aircraft shall nevertheless meet
all conditions for such certification and for the issuance of such certificate;
(iii) in full airworthy condition for over water and EROPS operation according
to the FAA standards required to allow the Aircraft to be operated under, and in
full compliance with, such Airworthiness Certificate and Part 121 of the
regulations promulgated under the Federal Aviation Act for such operation, such
compliance to be by means of such mechanical repairs or modifications or such
inspections as may be required thereby, but not by operational restrictions, by
logbook entries or other method of acceptance of such restrictions; (iv) in full
compliance
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with Lessee's Maintenance Program; (v) to the extent the owner of the Aircraft
is a "citizen of the United States" within the meaning of Section 40102(a)(15)
of the Federal Aviation Act and reasonably cooperative with Lessee at Lessee's
expense with respect to effecting such registration, duly registered in the name
of the Lessor or other then owner of the Aircraft under the Federal Aviation
Act; (vi) in full compliance with the maintenance and operation provisions of
this Lease and all FAA airworthiness directives, mandatory service bulletins and
equivalent requirements which by their terms require compliance on or before the
last day of the Term (without regard to any deferral, waiver, deviation or
exemption granted by the FAA specifically to Lessee delaying such compliance);
(vii) in good and airworthy operating condition, and in the same condition
(including, without limitation, in a passenger configuration suitable for
passenger revenue service) as when delivered to Lessee hereunder, ordinary wear
and tear excepted, with no open or outstanding deferred maintenance items,
scheduled or unscheduled, with all systems and components fully serviceable and
operational and with no placards restricting operation or use, and (viii) with
all remaining warranties, indemnities, policies and guarantees referred to in
Section 5(d) made available to Lessor in a manner and by documents in form and
substance reasonably satisfactory to Lessor.
(c) Engines. In the event any engine not owned by Lessor
shall be installed on the Aircraft on any Return Occasion, without limiting
Lessee's obligations under the Tax Indemnification Agreement, such engine shall
be of the same model and equivalent modification status as the Engines or, at
Lessee's option, an IAE engine of an improved model suitable for installation
and use on the Airframe without diminishing the value, remaining useful life or
utility of such Airframe, in each such case having a value, remaining useful
life and utility at least equal to (as determined in accordance with the
Appraisal Procedure), and be in an operating condition as good as the Engines,
assuming the Engines were in the condition and repair as required by the terms
hereof immediately prior to such termination and shall conform to the return
condition requirements set forth in this Section 16 and Exhibit E, and Lessee,
at its own expense and concurrently with such delivery, shall cause such engine
to become an Engine by complying with Section 11(b) hereof. Lessee's obligation
to comply with the terms of this Section 16(c) shall be conditioned on Lessor's
transferring to Lessee all of Lessor's right, title and interest in and to any
Engine not installed on the Aircraft at the Return Occasion "AS IS, WHERE IS,"
without any
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representation, warranty or recourse of any kind whatsoever, express or implied,
except a warranty that such Engine is free and clear of Lessor's Liens, Liens
arising out of the Foreign Lease Agreement and Head Lessor's Liens.
(d) Records and Documents. Upon the return of the
Aircraft, Lessee shall deliver to Lessor (i) all logs, manuals and data, and
inspection, modification, overhaul and other records, related to the Aircraft,
including, without limitation, those required to be maintained with respect
thereto under applicable rules and regulations of the FAA, together with a
detailed description of the Maintenance Program then applied to the Aircraft and
shall provide Lessor and its designees access to the Maintenance Program which
is sufficient for a Person to maintain the Aircraft under an FAA approved
maintenance program after the Term or to transition maintenance to another
program, including, without limitation, another registry, or, in the event an
Event of Default shall have occurred, to continue to maintain the Aircraft under
the Maintenance Program, in each case as Lessor may reasonably request, and all
documentation with respect to the Aircraft set forth on Exhibit B or otherwise
delivered to Lessee at delivery thereof, and (ii) all records necessary or
required by the FAA to certify and place the Aircraft on an FAA or other
country's, as the case may be, approved maintenance program. All of the
foregoing shall, at Lessee's expense, be up-to-date and in the latest revision
status as of the last day of the Term, including, without limitation, all
software and other electronically-held materials which have been supplied by or
on behalf of Manufacturer, Manufacturer's Subsidiary or Original Head Lessee,
which must be updated to the latest revision status as of the last day of the
Term within such software base and all data therein or pertaining thereto shall
be deemed property of Lessor and shall be delivered to Lessor. If hard, i.e.,
non-computerized, copies of English language maintenance records are not
available, then Lessee shall cause the appropriate action to be taken with the
pertinent regulatory agencies to ensure that Lessor and the FAA are provided
with all requested necessary and proper guarantees of methods of compliance,
component overhaul and management, scheduling, quality control, serial number
verification, etc. These records shall be all inclusive to the Aircraft,
Airframe, Engines, components, rotables, and assemblies and, as a minimum,
extend to include all activities associated with each of the last completed
maintenance checks, repairs, scheduled inspections and functional tests, and
overhauls performed under Lessee's Maintenance Program. All components and
assemblies identified with safe life limits shall be identified with their
service histories,
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accumulated cycles or flight hours as applicable and remaining service lives on
a separate listing. All components and assemblies which are identified on the
maintenance records by part numbers and serial numbers other than the
manufacturer's shall be provided with interchange or cross reference listing
necessary to establish complete traceability. All documentation, flight, and
maintenance records as specified by United States Federal Aviation Regulations
91.173, 91.174, and each paragraph of regulation 121.380 which normally
accompany the transfer of an aircraft which has been operating in regulated
commercial air service, shall be delivered to Lessor with the Aircraft. Any
documents or records required to be delivered hereunder shall be in English.
(e) Condition of Aircraft. Upon any Return Occasion, (i)
Lessee shall return such Aircraft to Lessor in such condition that the Aircraft
shall also comply with each and every condition and requirement set forth
elsewhere in this Lease, including Exhibit E hereto and (ii) shall provide that
each oil tank on the Aircraft shall be full and the fuel tanks shall contain as
much fuel as such tanks contained at the time the Aircraft was accepted by
Lessee.
(f) Final Inspection. Upon any Return Occasion, Lessee
shall make the Aircraft available to Lessor at the location where the "block 'C'
Check" (or equivalent level designated check or checks) required hereunder to be
performed immediately prior to redelivery is to be performed for detailed
inspection of the documents referred to in paragraph (d) above and the Airframe,
Engines and Parts structure and parts, at Lessee's expense (excluding
compensation to representatives of Lessor), in order to verify that the
condition of such Aircraft complies with the requirements set forth above (such
inspection being hereinafter referred to as the "Final Inspection"). The Final
Inspection shall be combined with such "block 'C' Check" (or equivalent level
check or checks) and may include such other items as reasonably requested by
Lessor. Lessee shall give Lessor not less than thirty (30) days prior written
notice of the commencement date of such Final Inspection. The period allowed for
the Final Inspection shall be the same period during which such "block 'C'
Check" is being performed and shall have such duration as to permit the opening
of any areas of the Aircraft which are necessary or advisable to satisfy Lessor
as to compliance with the requirements of this Section 16 and Exhibit E. The
Final Inspection shall commence on the date so noticed which shall be on or
before the expiration of the Term with respect to the Aircraft and shall
continue on consecutive days until
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all activity required above to be conducted has been concluded. To the extent
that any portion of the Final Inspection extends beyond the expiration of the
Term, unless Lessor has terminated the Lease pursuant to Section 18(f) hereof,
the Term with respect to the Aircraft undergoing the Final Inspection shall be
deemed to have been automatically extended, and all obligations (including,
without limitation, the obligation to pay Rent hereunder) continued, on a daily
basis until the Final Inspection shall have been concluded; provided, however,
that Lessee shall not be required to pay Rent with respect to the Aircraft
during the period of extension to the extent that Lessor is responsible for the
delay in completion of the Final Inspection. All storage expenses attributable
to any Term extension pursuant to the preceding sentence shall be payable by
Lessee, except that Lessee shall not be liable for any storage expenses which
are incurred after the sixtieth (60th) day after the Term to the extent that
storage continues thereafter due to Lessor's delay in completion of the Final
Inspection.
(g) Aircraft Records and Documents. In order to enable
Lessor to prepare for the Final Inspection of the Aircraft pursuant to
Subsection 16(f) above, Lessee agrees to make available to Lessor at a
maintenance base of Lessee with adequate facilities for short-term maintenance,
where the Final Inspection is to occur, not later than ten (10) days prior to
the commencement of such Final Inspection, the Aircraft Records and Documents
listed in Exhibit B hereto, together with such other documentation (including,
without limitation, original airworthiness directive compliance documents and
other work documents) regarding the condition, use, maintenance, or operation as
Lessor may reasonably request or require to substantiate the status of the
Aircraft.
(h) Corrections and Subsequent Corrections. To the extent
that the Aircraft or any Engine fails upon a Return Occasion to conform to any
requirement imposed by this Lease Lessor may, at its option, (i) continue the
Lease in effect in the manner provided for in Section 16(f) above with regard to
automatic extension until such time as such Aircraft is brought up to the
condition required by this Section 16, including Exhibit E, or (ii) accept the
return of such Aircraft and thereafter have any such nonconformance corrected,
at such time as Lessor may deem appropriate but not to commence later than
ninety (90) days following the return of such Aircraft, at commercial rates then
charged by the Person selected by Lessor to perform such correction. The Letter
of Credit shall not be released and any costs and expenses (including, materials
and labor) incurred by Lessor
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for such correction shall be indemnified by Lessee in favor of Lessor (and prior
to the end of the Term, Lessee shall make adequate provision to Lessor's
satisfaction in respect of such indemnity) and shall become Supplemental Rent
payable by Lessee within ten (10) days following the submission of a written
statement by Lessor to Lessee, identifying the items corrected and setting forth
the expense of such correction. Lessee's obligations to pay such Supplemental
Rent shall survive the Expiration Date or other termination of this Lease.
(i) Functional Flight Check. Immediately prior to the
expiration of the Term, Lessor will be permitted to conduct a non-commercial
functional flight check flight of no more than two (2) hours duration in
accordance with the Manufacturer's functional flight check procedures at
Lessee's expense to demonstrate the airworthiness of the Aircraft and proper
functioning of all systems and components. A qualified pilot and up to five (5)
other representatives selected by Lessor may take part in such flight to verify
compliance of the Aircraft with the requirements of this Lease, provided, that
Lessor shall be responsible for the charges of such qualified pilot and
representatives. Lessee may combine the functional flight check provided in this
Section 16(i) with the delivery flight specified in Section 16(a) and such
functional flight check shall include the landing. Any discrepancy or
malfunction detected during any functional flight check (including a functional
flight check combined with a delivery flight) shall be corrected, at Lessee's
expense, and prior to the expiration of the Term. To the extent that any actions
to correct any such discrepancy or malfunction extend beyond the Term, the
provisions of the first sentence of Section 16(h) shall apply. All storage
expenses attributable to any Term extension pursuant to the preceding sentence
shall be payable by Lessee.
(j) Export Certificate of Airworthiness. Lessee shall, at
Lessee's expense, take such action as Lessor may reasonably request to assist
Lessor in obtaining any required documents in relation to the export of the
Aircraft from the United States (including, without limitation, a valid and
subsisting export certificate of airworthiness with respect to the Aircraft and
export license) and in relation to the deregistration of the Aircraft.
(k) Service Bulletin and Modification Kits. Lessee shall
deliver to Lessor, at no cost to Lessor, all service bulletin kits furnished
without charge by the manufacturer for installation on the Aircraft which have
not
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been so installed together with appropriate instructions for installation. In
the event such uninstalled kits were purchased or manufactured by Lessee, then
Lessor shall be advised of such kits by Lessee and have a right of first refusal
to purchase such kits at Lessee's cost for a period of ninety (90) days after
return.
(l) Storage Upon Return. Upon any Return Occasion, Lessee
shall, at Lessor's request and at Lessee's risk and expense, in addition to
other storage referred to above, arrange for the parking, storage and insurance
of the Aircraft for a period not exceeding sixty (60) days at such reasonable
location as Lessor requests where Lessee has or can arrange for storage. Lessee
shall pay or cause to be paid all costs and expenses for such parking, storage
and insurance.
(m) Resale/Release Cooperation. During the last twelve
(12) months of the Term, with reasonable notice and at reasonable times, Lessee
will cooperate, and cause any Permitted Sublessee to cooperate, in all
reasonable respects, with the efforts of Lessor to sell or lease the Aircraft
after the end of the Term, by permitting prospective purchasers or lessees,
except to the extent prohibited by applicable Law, to inspect the Aircraft and
the records relating thereto to the extent it does not unreasonably interfere
with the operation or maintenance of the Aircraft or the conduct of Lessee's
business.
Section 17. Events of Default.
Any one or more of the following occurrences or events
shall constitute an Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of Law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any other Governmental Entity):
(a) Lessee shall fail to make (i) any payment of Basic
Rent, Renewal Rent or Stipulated Loss Value to Lessor within three (3) Business
Days after the date on which such payment is due, or (ii) any other payment of
Supplemental Rent due hereunder within ten Business Days after the date on which
such payment is due and Lessee has received written demand therefor by the party
entitled thereto (provided that any failure of Lessee to pay to Lessor or the
Owner Participant when due any Excepted Payments (as defined in the Indenture)
shall not constitute an Event of Default unless notice is given by the Owner
Participant to Lessee
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and the Indenture Trustee that such failure shall constitute an Event of
Default); or
(b) Lessee shall fail to obtain and maintain in full force
and effect any insurance required under the provisions of Section 12 hereof or
shall operate the Aircraft outside of the scope or in violation of the terms of
the insurance or United States Government indemnity coverage required to be
maintained with respect to such Aircraft; or
(c) Any representation or warranty made by Lessee in the
Operative Documents (other than the Trust Agreement, each Trust Supplement, the
Indenture, each Indenture Supplement, the Equipment Notes, the Intercreditor
Agreement, each Liquidity Facility, the Underwriting Agreement and the Tax
Indemnification Agreement) or in any certificate furnished by Lessee in
connection therewith is incorrect at the time made in any material respect and
such incorrectness shall not have been cured within thirty (30) days after the
receipt by Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(d) Lessee shall fail to perform or observe any covenant,
condition, or agreement to be performed or observed by it pursuant to this Lease
or any other Operative Document (other than the Trust Agreement, each Trust
Supplement, the Indenture, each Indenture Supplement, the Equipment Notes, the
Intercreditor Agreement, each Liquidity Facility, the Underwriting Agreement,
and the Tax Indemnification Agreement), and such failure shall continue uncured
for thirty (30) days after written notice thereof is given by Lessor or
Indenture Trustee to Lessee; provided, however, that if Lessee shall have
undertaken to cure any such failure which arises under the first or second
sentence of Section 6(c), or Section 6(d), as such provisions of Section 6
relate to maintenance, service, repair or overhaul, or Section 9, and
notwithstanding the diligence of Lessee in attempting to cure such failure, such
failure is not cured within said thirty (30) day period but is curable with
future due diligence, there shall exist no Event of Default under this Section
17 so long as Lessee is proceeding with due diligence to cure such failure and
such failure is remedied not later than one hundred eighty (180) days after
receipt by Lessee of such written notice; or
(e) Lessee consents to the appointment of a custodian,
receiver, trustee or liquidator of itself or all or any material part of
Lessee's property or Lessee's
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consolidated property, or Lessee admits in writing its inability to, or is
unable to, or does not, pay its debts generally as they come due, or makes a
general assignment for the benefit of creditors, or Lessee files a voluntary
petition in bankruptcy or a voluntary petition seeking reorganization in a
proceeding under any bankruptcy or insolvency Laws (as now or hereafter in
effect), or an answer admitting the material allegations of a petition filed
against Lessee in any such proceeding, or Lessee by voluntary petition, answer
or consent seeks relief under the provisions of any other bankruptcy, insolvency
or other similar Law providing for the reorganization or winding-up of
corporations, or provides for an agreement, composition, extension or adjustment
with its creditors, or any corporate action (including, without limitation, any
board of directors or shareholder action) is taken by Lessee in furtherance of
any of the foregoing, whether or not the same is fully effected or accomplished;
or
(f) An order, judgment or decree is entered by any court
appointing, without the consent of Lessee, a custodian, receiver, trustee or
liquidator of Lessee, or of all or any material part of Lessee's property, or
Lessee's consolidated property, or all or any material part of Lessee's property
or Lessee's consolidated property is sequestered, and any such order, judgment
or decree of appointment or sequestration remains in effect, undismissed,
unstayed or unvacated for a period of sixty (60) days after the date of entry
thereof or at any time an order for relief is granted; or
(g) An involuntary petition against Lessee in a proceeding
under the Federal bankruptcy laws or other insolvency Laws (as now or hereafter
in effect) is filed and is not withdrawn or dismissed within sixty (60) days
thereafter or at any time an order for relief is granted in such proceeding, or
if, under the provisions of any Law providing for reorganization or winding-up
of corporations which may apply to Lessee, any court of competent jurisdiction
assumes jurisdiction over, or custody or control of, Lessee or of all or any
material part of Lessee's property, or Lessee's consolidated property and such
jurisdiction, custody or control remains in effect, unrelinquished, unstayed or
unterminated for a period of sixty (60) days or at any time an order for relief
is granted in such proceeding; or
(h) Lessee's cessation of business as a commercial
passenger Certificated Air Carrier or, except in either case in connection with
a labor dispute, announcement thereof or
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Lessee's suspension of its business as a commercial passenger Certificated Air
Carrier, or for any reason the preponderant business activity of Lessee shall
cease to be that of a commercial passenger Certificated Air Carrier; or
(i) Lessee's loss or suspension of its United States air
carrier license or certificate under Part 121 of the Federal Aviation
Regulations or certificate under Section 41102(a) of the Federal Aviation Act;
or
(j) if the existence, validity, enforceability or priority
of the rights or interests of Lessor under this Lease, or the rights or
ownership of Lessor of the Aircraft under this Lease in respect of the Aircraft
or the rights or interests of Note Holders under the Indenture are challenged by
Lessee or any Person claiming by, through or on behalf of Lessee unless Lessee
demonstrates that such a claim was not rightfully made by, through or on behalf
of Lessee.
Section 18. Remedies.
Upon the occurrence of any Event of Default and at any
time thereafter so long as the same shall be continuing, Lessor may, at its
option, declare by written notice to Lessee this Lease to be in default,
provided, however, that this Lease shall be deemed to be declared in default
automatically without the necessity of such written declaration upon the
occurrence of any Event of Default described in paragraph (e), (f) or (g) of
Section 17 hereof; and at any time thereafter, so long as any outstanding Event
of Default shall not have been remedied, Lessor may do one or more of the
following with respect to all or any part of the Airframe and any or all of the
Engines as Lessor in its sole discretion shall elect, to the extent permitted
by, and subject to compliance with any mandatory requirements of, applicable Law
then in effect:
(a) Demand that Lessee, and Lessee shall upon the written
demand of Lessor and at Lessee's expense, immediately return the Aircraft to
Lessor in the manner specified in such notice, in which event such return shall
not be delayed for the purposes of complying with the return conditions
specified in Section 16 and Exhibit E hereof (none of which conditions shall be
deemed to affect Lessor's possession of the Aircraft) or delayed for any other
reason; provided, however, that Lessee shall remain and be liable to Lessor for
amounts provided for herein or other damages resulting from the Aircraft or any
Engine not being in the condition required by Section 16 and Exhibit E.
Notwithstanding the foregoing, at Lessor's option, Lessee
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shall be required thereafter to take such actions as would be required by the
provisions of this Lease if such Aircraft were being returned at the end of the
Term hereof with respect to such Aircraft. In addition, Lessor, at its option
and to the extent permitted by applicable Law, may enter upon the premises where
all or any part of the Aircraft is located to take immediate possession of and,
at Lessor's option, remove the same (and/or any engine which is not an Engine
but which is installed on the Airframe, subject to the rights of the owner,
lessor or secured party thereof) by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or taking of
possession whether for the restoration of damage to property, or otherwise,
caused by such entry or taking, except direct damages to the extent caused by
Lessor's gross negligence or willful misconduct.
(b) Sell or cause to be sold, the Aircraft or any part
thereof, or Lessor's interest therein, at private or public sale, as Lessor in
its sole discretion may determine, or otherwise dispose of, hold, use, operate,
or lease to others, or keep idle the Aircraft, as Lessor in its sole discretion
may determine, all free and clear of any rights of Lessee or any Permitted
Sublessee and except as hereinafter set forth in this Section 18. Lessor may be
the purchaser at any such sale.
(c) Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) or
paragraph (b) above, Lessor, by written notice to Lessee specifying a payment
date which shall be a Stipulated Loss Value Date may demand that Lessee pay to
Lessor, and Lessee shall pay to Lessor, on the Stipulated Loss Value Date
specified in such notice, as liquidated damages for loss of bargain and not as a
penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due for
the period commencing after the Stipulated Loss Value Date specified for payment
in such notice), any unpaid Rent for the Aircraft to and including the
Stipulated Loss Value Date specified in such notice, plus whichever of the
following amounts as Lessor may specify, in its sole and absolute discretion, in
such notice: (i) an amount equal to the excess, if any, of the sum of the
Stipulated Loss Value for the Aircraft computed as of the date specified in such
notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent Payment
Date, an amount equal to the Basic Rent or Renewal Rent, as the case may be, due
on such date, over the fair market sale value of the Aircraft as of the date
specified in such notice or (ii) an amount equal to the excess, if any, of the
sum of the Stipulated Loss Value for
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the Aircraft computed as of the date specified in such notice plus, if such date
is a Basic Rent Payment Date or Renewal Rent Payment Date, an amount equal to
the Basic Rent or the Renewal Rent, as the case may be, due on such date, over
the fair market rental value of the Aircraft for the remainder of the Term as of
the date specified in such notice.
(d) In the event Lessor, pursuant to paragraph (b) above,
shall have sold the Aircraft, or its interest therein, Lessor, in lieu of
exercising its rights under paragraph (c) above, may, if it shall so elect,
demand that Lessee pay Lessor, and Lessee shall pay to Lessor on such demand, as
liquidated damages for loss of bargain and not as a penalty (in lieu of the
Basic Rent or Renewal Rent, as the case may be, due for the period commencing
after the Stipulated Loss Value Date immediately prior to the date such sale
occurs), any unpaid Rent for such Aircraft due to and including the date of
sale, plus the amount by which the Stipulated Loss Value of such Aircraft,
computed as of such Stipulated Loss Value Date, exceeds the net proceeds of such
sale (after deducting all costs of such sale).
(e) In the event that Lessor, pursuant to paragraph (b)
above, shall have relet the Aircraft under a long term lease, Lessor, in lieu of
exercising its rights under paragraph (c) above with respect to such Aircraft,
may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay
Lessor on such demand, as liquidated damages for loss of bargain and not as a
penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, for such
Aircraft due after the time of reletting) any unpaid Rent for such Aircraft due
up to the date of reletting, plus the amount, if any, by which the aggregate
Basic Rent or Renewal Rent, as the case may be, for such Aircraft, which would
otherwise have become due over the Basic Term or Renewal Term, as the case may
be, discounted periodically (equal to installment frequency) to present worth as
of the date of reletting at the rate of 8.50% per annum, exceeds the aggregate
basic rental payments to become due under the reletting from the date of such
reletting to the date upon which the Term for such Aircraft would have expired
but for Lessee's default, discounted periodically (equal to installment
frequency) to present worth as of the date of the reletting at the rate of 8.50%
per annum.
(f) Cancel, rescind and/or terminate this Lease by written
notice to Lessee which cancellation, rescission and/or termination shall be
effective upon dispatch, whereupon Lessee's right to possess and use the
Aircraft
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shall immediately cease, however, Lessee shall be and remain liable for damages
and losses suffered by Lessor and all other amounts payable by Lessee hereunder.
(g) Proceed by appropriate court action or actions, either
at law or in equity, to enforce any other remedy or right Lessor may have
hereunder, under the other Operative Documents, at law or in equity, including,
without limitation, proceed by court order to enforce performance by Lessee of
the applicable covenants of this Lease or to recover damages for the breach
thereof.
In addition to the foregoing, Lessee shall be liable
(without duplication of the remedies above and of Lessee's obligations under
Section 10 and Section 13 hereof and subject to the exclusions set forth
therein) for any and all unpaid Rent before, during or after the exercise of any
of the above mentioned remedies (including without limitation interest on unpaid
amounts with respect to all amounts not paid when due, including, without
limitation, any amounts payable pursuant to the foregoing provisions of this
Section 18), and, except as specified above until satisfaction of all of
Lessee's obligations to Lessor hereunder and for all legal fees and other costs
and expenses incurred by any Indemnitee by reason of the occurrence of any Event
of Default or the exercise of an Indemnitee's remedies with respect thereto,
including all costs and expenses incurred in connection with the return of the
Aircraft in accordance with the terms of Section 16 and Exhibit E hereof or in
placing the Aircraft in the condition and with airworthiness certification as
required by such Section and such Exhibit and costs and expenses related to the
Lease, the Refunding Agreement, the Indenture, the Pass-Through Trust
Agreements, the Intercreditor Agreement or each Liquidity Facility. All
liquidated damages payable pursuant to the foregoing shall bear interest, which
shall be payable on the date the payment of such liquidated damages is due at a
rate equal to the Interest Rate from and including the date due to and excluding
the date actually paid.
In effecting any repossession, Lessor, its representatives
and agents, to the extent permitted by applicable Law, (i) shall have the right
to enter upon any premises where it reasonably believes the Aircraft, the
Airframe, an Engine or Part to be located, (ii) shall not be liable, in
conversion or otherwise, for the taking of any personal property of Lessee which
is in or attached to the Aircraft, the Airframe, an Engine or Part which is
repossessed, (iii) shall not be liable or responsible, in
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any manner, for any damage or injury to any of Lessee's property in repossessing
and holding the Aircraft, the Airframe, an Engine or Part, except for direct
damages caused by Lessor's gross negligence or willful misconduct, and (iv)
shall have the right to maintain possession of and dispose of the Aircraft, the
Airframe, an Engine or Part on any premises owned by Lessee or under Lessee's
control.
If requested by Lessor, Lessee shall, at its sole expense,
assemble and make the Aircraft, the Airframe, an Engine or Part available at a
place designated by Lessor in accordance with Section 16 and Exhibit E hereof.
Lessee hereby agrees that, in the event of the return to or repossession by
Lessor of the Aircraft, the Airframe, an Engine or Part, or otherwise upon the
occurrence of an Event of Default, any rights in any warranty (express or
implied), service life policy, infringement indemnity, performance guaranty or
the like heretofore made available to Lessee or otherwise held by Lessee shall
without further act, notice or writing be deemed automatically cancelled and
shall be enforceable solely by and for the benefit of, and assigned to, Lessor.
Lessee shall be liable to Lessor (without duplication) for all expenses,
disbursements, costs and fees incurred in (i) repossessing, storing, preserving,
shipping, maintaining, repairing and refurbishing the Aircraft, the Airframe, an
Engine or Part to the condition required by Section 16 and Exhibit E hereof and
(ii) preparing the Aircraft, the Airframe, an Engine or Part for sale or lease,
advertising the sale or lease of the Aircraft, the Airframe, an Engine or Part
and selling or releasing the Aircraft, the airframe, an Engine or Part. Lessor
is hereby authorized and instructed, at its option, to make expenditures which
Lessor considers advisable to repair and restore the Aircraft, the Airframe, an
Engine or Part to the condition required by Section 16 and Exhibit E hereof, all
at Lessee's sole expense.
For the purpose of this Section 18, the "fair market
rental value" or the "fair market sales value" of the Aircraft, Airframe, an
Engine or Part shall be determined pursuant to the Appraisal Procedure.
At any sale of the Aircraft, the Airframe, an Engine or
Part pursuant to this Section, Owner Participant may bid for and purchase such
property and Lessee agrees that the amounts paid therefor shall be used in the
computations contemplated herein and Lessee shall remain liable for any
deficiency.
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No remedy referred to in this Section is intended to be
exclusive, but, to the extent permitted by Law, each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Lessor
at law or in equity; and, to the extent permitted by Law, the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all of such
other remedies. No waiver by Lessor of any Event of Default shall in any way be,
or be construed to be, a waiver of the same Event of Default in the future or
any other prior or future Event of Default. To the extent permitted by Law,
Lessee hereby waives any right it may have to require Lessor to mitigate damages
in connection with the remedies described in Sections 18(c), (d) or (e) above.
Lessee hereby irrevocably appoints Lessor as Lessee's
attorney-in-fact (which appointment is coupled with an interest) to execute all
documents deemed necessary to release, terminate and void Lessee's interest in
the Aircraft leased hereunder or otherwise to more effectively carry out
Lessor's rights and remedies and to file said documents for recordation with the
FAA, under the Uniform Commercial Code, and with any other appropriate
Governmental Entity, and otherwise act in Lessee's name and place with respect
to the Aircraft, provided that an Event of Default has occurred and is
continuing and this Lease has been declared or deemed to be in default.
Section 19. Alienation.
(a) Lessor Assignments. In addition, and subject, to the
transactions contemplated by Section 19(b), Lessor shall not assign or transfer
any interest of Lessor in this Lease and/or the Aircraft and/or the proceeds
hereof to any Person except as provided herein, in the Trust Agreement, in the
Indenture and in the Refunding Agreement.
Any such assignment shall be subject to the condition that
the transferee shall agree not to disturb the quiet enjoyment by Lessee of the
Aircraft as and to the extent so agreed by Lessor in Section 21(f).
(b) Security for Obligations. In order to secure the
Equipment Notes, Lessor has created, by the Indenture, a security interest in
the Trust Indenture Estate, including, without limitation, this Lease and all
Rent and other sums payable hereunder, except as provided in the Indenture and
subject in each case to Liens permitted hereunder. The Indenture provides, among
other things for the assignment by
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Lessor to Indenture Trustee of its right, title and interest in, to and under
this Lease, to the extent set forth in the Indenture, for the creation of a
first-mortgage lien on and perfected security interest in all of Lessor's right,
title and interest in and to the Aircraft in favor of Indenture Trustee. Lessee
hereby consents to such assignment and to the creation of such mortgage and
security interest and acknowledges receipt of copies of the Trust Agreement and
the Indenture, it being understood that such consent shall not affect any
requirement or the absence of any requirement for any consent under any other
circumstances. Until the Lien of the Indenture has been discharged, Lessee will
furnish to Indenture Trustee counterparts of all notices and other writings of
any kind required to be delivered hereunder by Lessee to Lessor. Until the Lien
of the Indenture has been discharged, (a) Lessee shall make all payments of
Rent, Stipulated Loss Value and all other amounts payable hereunder (other than
Excepted Payments) to or as directed by Indenture Trustee as provided in
Sections 4(c) and 4(d), and (b) Indenture Trustee shall be entitled to exercise
the rights of Lessor (but not Owner Participant) herein as and to the extent
provided herein or in the Indenture and any express reference to Indenture
Trustee in any Section of this Lease shall not give rise to any implication that
Indenture Trustee may not exercise the rights of Lessor in any other Section of
this Lease as and to the extent provided in the Indenture.
The provisions of this Lease and the Refunding Agreement
which require or permit action by, the payment of monies to, the consent or
approval of, the furnishing of any instrument or information to, or the
performance of any other obligation to, Indenture Trustee, shall not be
effective, and the Sections hereof containing such provisions shall be read as
though there were no such requirements or provisions and all moneys otherwise
payable to Indenture Trustee hereunder shall be paid to Lessor, after Lessee
shall have received from Indenture Trustee notice of discharge of the Lien of
the Indenture.
Any payment or performance by Lessee to or as directed by
Indenture Trustee shall constitute payment or performance of such obligation to
Lessor by Lessee under this Lease.
Any payment or performance of an obligation of Lessee
under this Lease by a Permitted Sublessee shall constitute payment or
performance of such obligation by Lessee.
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Section 20. Renewal Option.
Lessee may renew this Lease as provided in the following
clause (i) and subject to the following clause (ii):
(i) Exercise of Renewal Option. Provided that
this Lease has not been previously terminated and that no Default or Event of
Default shall have occurred and be continuing at the time of the giving of
irrevocable notice hereinafter referred to in this clause (i) or at the time of
the commencement of the Renewal Term, Lessee, at its option, may renew this
Lease for one Renewal Term consisting of a period equal to five years. The right
to renew this Lease for such Renewal Term pursuant to this clause (i) shall be
exercised upon irrevocable notice from Lessee received by Lessor of Lessee's
election to so renew this Lease not less than twelve (12) months and not more
than twenty-four (24) months prior to the last day of the Basic Term. The
Renewal Rent for the Renewal Term shall be the "fair market rental value" of the
Aircraft for such Renewal Term (the "renewal fair market rental value") as
determined in accordance with the Appraisal Procedure. For purposes of this
paragraph (i), the Appraisal Procedure shall be initiated by Lessee no earlier
than nine (9) months prior to the end of the Basic Term. If Lessee shall fail to
exercise its option to extend the term of this Lease for the Renewal Term in
accordance with the provisions of this paragraph, all of Lessee's rights to
extend the Term for such Renewal Term shall expire. Lessee shall pay all
reasonable costs and expenses, including, without limitation, reasonable legal
fees and expenses, incurred by Lessor, Owner Participant and the Indenture
Trustee in connection with the exercise of such option.
(ii) Provisions Applicable During Renewal Term. All
provisions of this Lease, including, without limitation, as to Rent and
Stipulated Loss Value (which shall be, with appropriate adjustments, an amount
equal to the greater of 120% of the "fair market sales value" of the Aircraft as
of the first day of the Renewal Term as determined pursuant to the Appraisal
Procedure or the amount set forth on Exhibit A as of the end of the Basic Term),
shall remain in effect and be applicable during such Renewal Term, except that
Lessee shall pay to Lessor, semi-annually in advance as Renewal Rent on each
Renewal Rent Payment Date, the amount for such Renewal Term as determined in
accordance with clause (i) of this Section 20.
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Section 21. Miscellaneous.
(a) Severability, Amendment, and Construction. Any
provision of this Lease which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by Law, Lessee hereby waives any provision of Law which
renders any provision hereof prohibited or unenforceable in any respect. No term
or provision of this Lease may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing expressed to be a supplement or
amendment to, or waiver or termination of this Lease signed by an officer of the
party against which the enforcement of the change, waiver, discharge, or
termination is sought. This Lease shall constitute an agreement of lease, and
nothing herein shall be construed as conveying to Lessee any right, title, or
interest in the Aircraft or any Engine or Part except as a lessee only. Without
limiting the foregoing, the parties hereto agree to treat this Agreement as a
lease for United States federal income tax purposes and Lessee will not file a
tax return which is inconsistent with the foregoing and nothing contained herein
shall be construed as an election by Lessor to treat Lessee as having acquired
the Aircraft for the purpose of the investment credit allowed by Section 38 of
the 1954 Code or any similar or successor statute. The headings in this Lease
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof.
(b) GOVERNING LAW. THIS LEASE HAS BEEN EXECUTED AND
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE, WITHOUT
REGARD TO PROVISIONS GOVERNING CONFLICTS OF LAW WHICH MIGHT LEAD TO THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(c) Notices. All notices required or permitted under the
terms and provisions hereof shall be in writing and shall be sent to Lessor or
Lessee at their respective addresses set forth in Exhibit C hereto (or such
other addresses as the parties may designate from time to time in writing).
Until such time as the Lien of the Indenture is discharged, all notices, reports
or other documents provided
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to Lessor or Lessee shall be provided concurrently to Indenture Trustee at such
address as Indenture Trustee may designate from time to time. All notices
hereunder shall become effective when received.
(d) Lessor's Right to Perform for Lessee. If Lessee fails
to make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any covenant, agreement, or obligation contained herein,
Lessor shall have the right but not the obligation to make such payment or
conform or comply with such agreement, covenant, or obligation, and the amount
of such payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance thereof or compliance therewith,
together with interest thereon at the Interest Rate, shall be payable by Lessee
to Lessor (as Supplemental Rent) upon demand. The taking of any such action by
Lessor pursuant to this Section 21(d) shall not constitute a waiver or release
of any obligation of Lessee under this Lease, nor a waiver of any Event of
Default which may arise out of Lessee's nonperformance of such obligation, nor
an election or waiver by Lessor or any remedy or right available to Lessor under
or in relation to this Lease.
(e) Counterparts. To the extent, if any, that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by or on behalf of Indenture Trustee on
the signature page thereof. Subject to the preceding sentence, this Lease may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
(f) Quiet Enjoyment. Lessor covenants that, so long as no
Event of Default shall have occurred and be continuing and this Lease has not
been declared or deemed to be in default, Lessor shall not take or cause to be
taken any action to interfere with the right of Lessee to the possession, use,
operation and quiet enjoyment of and other rights with respect to the Aircraft
hereunder, and all rents, revenues, profits and income therefrom, in accordance
with the terms of this Lease without interference from Lessor or any Person
lawfully claiming by or through it and without interference from any Person
making a Claim concerning payment for or the ownership of Buyer Furnished
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110
Equipment with respect to the Aircraft, provided, that the foregoing shall not
be deemed to have modified the obligations of Lessee pursuant to Section 4(d)
hereof, which obligations remain absolute and unconditional.
(g) Brokers. Lessee and Lessor agree that, except as
provided in the Refunding Agreement, there has been no third party as agent
involved in this Lease and each indemnifies the other from liability for fees,
commissions, or other claims made upon the other due to any such claim.
(h) Investment of Funds. Any monies which are held by
Lessor or Indenture Trustee and are payable to Lessee shall, unless a Default or
an Event of Default shall have occurred and be continuing, be invested as
provided below until paid to Lessee or applied by Lessor or Indenture Trustee to
the extent provided herein. Until paid to Lessee or applied as provided herein
or in the Indenture such monies shall be invested by Lessor or Indenture Trustee
from time to time at the expense of Lessee in Specified Investments, as directed
by Lessee in accordance with the provisions of Section 3.07 of the Indenture if
the Lien of the Indenture shall not have been discharged and thereafter as
provided below. There shall be promptly (but not more frequently than monthly)
remitted to Lessee any gain (including interest received) realized as the result
of any such investment (net of any fees, commissions and other reasonable
expenses, if any, incurred in connection with such investment) unless a Default
or an Event of Default shall have occurred and be continuing. Lessee will
promptly pay to Lessor or Indenture Trustee, as the case may be, and hold Lessor
or Indenture Trustee harmless from, on demand, the amount of any loss realized
as the result of any such investment (together with any Taxes, fees, commission
and other reasonable expenses, if any, incurred in connection with such
investment).
(i) Entire Agreement; Amendment. This Lease (including the
Exhibits hereto), any related letter agreements and the other Operative
Documents, the Financing Documents and the Purchase Documents (including the
Exhibits thereto) and all closing documents delivered in connection with any of
the foregoing embody the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof. This Lease may be changed,
waived, discharged, amended, revised or terminated only by an instrument in
writing signed by the party against which enforcement is sought.
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(j) Expenses. Without limiting Section 13 or 18, Lessee
agrees within fifteen (15) days after demand to pay or reimburse Lessor for all
reasonable out-of-pocket costs and expenses (including, without limitation,
legal and other professional fees and expenses) incurred or payable by Lessor in
connection with or related to (i) the fees and expenses of Owner Trustee and
Indenture Trustee, (ii) to the extent requested by or relating to acts or
omissions of Lessee or as otherwise provided herein or to give effect to the
provisions hereof, or the other Operative Documents, the Financing Documents or
the Purchase Documents, any future amendments, supplements or other
modifications thereof, or waivers or consents thereunder, and (iii) any Default
or Event of Default or the enforcement of any of Lessor's rights, remedies or
privileges hereunder or at law or in equity, but not Lessor's legal fees and
expenses in connection with the negotiation and execution of this Lease or the
other Operative Documents.
(k) Federal Bankruptcy Code. In the event Section 1110 of
Title 11 of the United States Code is amended, or if it is repealed and another
statute is enacted in lieu thereof, Lessor and Lessee agree to amend this Lease
and take such other action not inconsistent with this Lease as Lessor reasonably
deems necessary so as to afford to Lessor the rights and benefits as such
amended or substituted statute confers upon owners and lessors of aircraft
similarly situated to Lessor.
(l) U.S. Registration Number. At Lessee's request, Lessor
shall use its best efforts to have the Aircraft registered under the United
States Registration Number designated by Lessee.
(m) Submission to Jurisdiction; Service of Process; Waiver
of Forum Non Conveniens; Waiver of Jury Trial. Lessee hereby irrevocably agrees
that any suit, action or proceeding related to this Lease or any of the other
Operative Documents to which it is a party or the subject matter hereof or
thereof or of any of the transactions contemplated hereby and thereby may be
instituted in, and submits for itself and its property to the non-exclusive
jurisdiction of, (i) the courts of the State of New York in New York County and
(ii) the United States District Court for the Southern District of New York.
Lessee represents and warrants that it is not currently entitled to, and agrees
that to the extent that Lessee hereinafter may acquire, any immunity (including,
without limitation, sovereign immunity) from jurisdiction of any court or from
any legal process, Lessee hereby, to the
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extent permitted by Law, waives such immunity, and agrees not to assert, by way
of motion, as a defense, or otherwise, in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of the above--
named courts that it is immune from any legal process (whether through service
or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper, or that this Lease or any of the other
Operative Documents or the subject matter hereof or thereof or any of the
transactions contemplated hereby and thereby may not be enforced in or by such
courts. Lessee hereby generally consents to service of process by registered
mail, return receipt requested, addressed to it at its address set forth in
Exhibit C, or at such other office of Lessee as from time to time may be
designated by Lessee in writing to Lessor or Lessee, Foreign Lessor, Owner
Participant and Indenture Trustee. Lessee hereby agrees that its submission to
jurisdiction and its designation of service of process by mail set forth above
is made for the express benefit of Lessor, Foreign Lessor, Owner Participant,
Indenture Trustee, each Note Holder and their successors and assigns. EACH OF
LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THE OPERATIVE DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE LESSOR/LESSEE
RELATIONSHIP BEING ESTABLISHED, including, without limitation, contract claims,
tort claims, breach of duty claims and other common law and statutory claims.
Lessor and Lessee represent and warrant that each has reviewed this waiver with
its legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with such legal counsel. THIS WAIVER IS
IRREVOCABLE, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THE OPERATIVE DOCUMENTS. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
(n) Limitation on Recourse. The parties hereto agree that
all statements, representations, covenants and agreements made by Lessor (when
made in its capacity as such and not in its individual capacity) contained in
this Agreement, unless expressly otherwise stated, are made and intended only
for the purpose of binding the Trust Estate and establishing the existence of
rights and remedies that can be exercised and enforced against the Trust Estate.
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Therefore, no recourse shall be had with respect to anything contained in this
Agreement (except for any express provisions that Lessor is responsible for in
its individual capacity), against Lessor in its individual capacity or against
any institution or person that becomes a successor trustee or co-trustee or any
officer, director, trustee, servant or direct or indirect parent or controlling
Person or Persons of any of them; provided that (i) this Section 21(n) shall not
be construed to prohibit any action or proceeding against any party hereto for
its own willful misconduct or grossly negligent conduct for which it would
otherwise be liable and (ii) nothing contained in this Section 21(n) shall be
construed to limit the exercise and enforcement in accordance with the terms of
this Agreement or such other agreements of rights and remedies against the Trust
Estate. The foregoing provisions of this Section 21(n) shall survive the
termination of this Agreement and the other Operative Documents.
(o) Successor Trustee. Lessee agrees that in the case of
the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all
purposes hereof without the necessity of any consent or approval by Lessee
(subject to Section 14(d) of the Refunding Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor Owner Trustees pursuant to the
Trust Agreement, but such right may be exercised repeatedly as long as this
Lease shall be in effect.
(p) Article 2-A of the UCC. The parties hereto agree that
the Original Head Lease as amended and restated by this Second Amended and
Restated Aircraft Lease Agreement [GPA 1989 BN-5] (and as otherwise extended,
amended, modified, renewed or supplemented) shall be governed by Article 2-A of
the Uniform Commercial Code of New York.
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IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to
due authority, have each caused this Lease to be executed by their duly
authorized officers as of the day and year first above written.
Lessor:
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
otherwise expressly provided herein,
but solely as Owner Trustee
By:__________________________
Title:
Lessee:
AMERICA WEST AIRLINES, INC.
By:___________________________
Title:
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TABLE OF CONTENTS
Page
Section 1. Definitions..................................................... 1
Section 2. Agreement to Lease.............................................. 21
Section 3. Delivery and Acceptance; Term;
Rental Period................................................... 22
(a) Time of Delivery..................................................... 22
(b) [Intentionally Left Blank.].......................................... 22
(c) Acceptance of Aircraft............................................... 22
(d) Term of Lease........................................................ 22
(e) Rental Period........................................................ 22
Section 4. Rent; Minimum Payments.......................................... 22
(a) Rent................................................................. 22
(b) Minimum Payments..................................................... 23
(c) Date, Place and Method of Payment.................................... 23
(d) Prohibition Against Setoff, Counterclaim, Etc........................ 24
Section 5. Representations, Warranties and Covenants....................... 25
(a) Warranties and Disclaimer of Warranties.............................. 25
(b) Representations and Warranties of Lessor............................. 27
(c) No Amendments to Financing Documents................................. 27
(d) Suppliers' Warranties................................................ 27
Section 6. Possession and Use.............................................. 28
(a) Possession........................................................... 28
(b) Reciprocal Recognition of Rights..................................... 34
(c) Lawful Insured Operations............................................ 35
(d) Maintenance.......................................................... 36
(e) Registration and Insignia............................................ 37
Section 7. Inspection...................................................... 38
Section 8. Additional Covenants of Lessee.................................. 39
(a) Financial Information................................................ 39
(b) Maintenance of Corporate Existence................................... 41
(c) Maintenance of Status................................................ 42
(d) Payment of Taxes..................................................... 42
(e) Consolidation, Merger, Etc........................................... 42
(f) Information.......................................................... 43
(g) Place of Business.................................................... 44
(h) Certain Limitations on Use........................................... 44
(i) Section 1110......................................................... 45
(j) Permits and Licenses................................................. 45
(k) Security Opinion; Annual Certificate................................. 45
(l) Letter of Credit..................................................... 46
(m) ERISA................................................................ 48
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Page
Section 9. Replacement of Parts; Alterations,
Modifications and Additions.................................... 49
(a) Replacement of Parts................................................. 49
(b) Alterations, Modifications and Additions............................. 50
(c) Pooling.............................................................. 53
Section 10. General Tax Indemnification.................................... 53
(a) Indemnity............................................................ 53
(b) Exclusions........................................................... 56
(c) Covered Income Tax................................................... 58
(d) Reports and Returns.................................................. 59
(e) After-Tax Basis...................................................... 59
(f) Tax Benefit.......................................................... 60
(g) Payment.............................................................. 60
(h) Contest.............................................................. 61
(i) Refund............................................................... 62
(j) Diligence............................................................ 63
(k) Affiliated Group..................................................... 63
Section 11. Loss, Damage and Requisition................................... 63
(a) Event of Loss with Respect to the Airframe........................... 63
(b) Event of Loss with Respect to an Engine.............................. 66
(c) Conveyance of Replacement Airframe................................... 68
(d) Application of Proceeds and Payments................................. 70
(e) Requisition for Use by Government with
Respect to the Aircraft.............................................. 71
(f) Application in Default............................................... 71
Section 12. Insurance...................................................... 72
(a) Public Liability and Property Damage Insurance. ..................... 72
(b) Insurance Against Loss or Damage..................................... 74
(c) Application of Insurance Proceeds for an
Event of Loss........................................................ 76
(d) Application of Insurance Proceeds for Other
than an Event of Loss................................................ 77
(e) Application in Default............................................... 78
(f) Certificates......................................................... 78
(g) Reinsurance.......................................................... 79
(h) Storage.............................................................. 80
(i) Amounts Held......................................................... 80
(j) After the Term....................................................... 80
(k) Governmental Indemnity............................................... 80
Section 13. General Indemnity.............................................. 81
Section 14. Liens.......................................................... 86
Section 15. Protection of Title and Further Assurances..................... 87
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Page
Section 16. Return of Aircraft and Records............................... 89
(a) Return............................................................. 89
(b) Status Upon Return................................................. 90
(c) Engines............................................................ 91
(d) Records and Documents.............................................. 91
(e) Condition of Aircraft.............................................. 92
(f) Final Inspection................................................... 93
(g) Aircraft Records and Documents..................................... 93
(h) Corrections and Subsequent Corrections............................. 94
(i) Functional Flight Check............................................ 94
(j) Export Certificate of Airworthiness................................ 95
(k) Service Bulletin and Modification Kits............................. 95
(l) Storage Upon Return................................................ 95
(m) Resale/Release Cooperation......................................... 95
Section 17. Events of Default............................................ 96
Section 18. Remedies..................................................... 98
Section 19. Alienation................................................... 104
(a) Lessor Assignments................................................. 104
(b) Security for Obligations........................................... 104
Section 20. Renewal Option............................................... 105
Section 21. Miscellaneous................................................ 106
(a) Severability, Amendment, and Construction.......................... 106
(b) Governing Law...................................................... 107
(c) Notices............................................................ 107
(d) Lessor's Right to Perform for Lessee............................... 107
(e) Counterparts....................................................... 108
(f) Quiet Enjoyment.................................................... 108
(g) Brokers............................................................ 108
(h) Investment of Funds................................................ 108
(i) Entire Agreement; Amendment........................................ 109
(j) Expenses........................................................... 109
(k) Federal Bankruptcy Code............................................ 109
(l) U.S. Registration Number........................................... 110
(m) Submission to Jurisdiction; Service of Process;
Waiver of Forum Non Conveniens; Waiver of Jury
Trial.............................................................. 110
(n) Limitation on Recourse............................................. 111
(o) Successor Trustee.................................................. 111
(p) Article 2-A of the UCC............................................. 112
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118
ANNEXES
Annex I - Description of Original Head Lease
EXHIBITS
Exhibit A - Stipulated Loss Values
Exhibit B - Aircraft Records and Documents
Exhibit C - Definitions and Values
Exhibit D1 - Lease Supplement No. 3
Exhibit D2 - Letter of Credit
Exhibit E - Return Condition Requirements
Exhibit F-1 - Foreign Air Carriers
Exhibit F-2 - Permitted Foreign Sublessee Domiciles
Exhibit F-3 - Assignment of Permitted Sublease
iv