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EXHIBIT 4.27
THE RIGHTS OF LESSOR UNDER THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
[GPA 1990 AWA-14] 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,
FLEET NATIONAL BANK, AS INDENTURE TRUSTEE UNDER AN AMENDED AND RESTATED TRUST
INDENTURE AND SECURITY AGREEMENT [GPA 1990 AWA-14] DATED AS OF NOVEMBER 26,
1996. AS PROVIDED IN SECTION 21(e) HEREOF, TO THE EXTENT, IF ANY, THAT THIS
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 FLEET NATIONAL BANK, AS
INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF.
AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
[GPA 1990 AWA-14]
Dated as of September 21, 1990
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 1990 AWA-14] dated
as of September 21, 1990, as amended
Lessor
and
AMERICA WEST AIRLINES, INC.
Lessee
One Airbus A320-231 Aircraft
Manufacturer's Serial No. 092
U.S. Registration No. N635AW
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AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT
THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT dated as of
September 21, 1990 and 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 1990 AWA-14] dated as of September 21, 1990, 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").
WITNESSETH:
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 the meanings specified in the Intercreditor
Agreement (as defined in the Pass Through Trust Agreement); and the term
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"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 elect or cause the direction or election 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 long as title
thereto shall remain vested in Lessor in accordance with the terms of Section 9
hereof after removal
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from the Airframe; 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), 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 location subject to this Lease and any sublease and any and all
Liens thereon (other than a 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
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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).
"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
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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.
Section 1110 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. Section 9511, 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.
"Code" shall mean the Internal Revenue Code of 1986, as amended
and the rules and regulations promulgated thereunder.
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"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 28, 1990, 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), 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. 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" 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.
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"Event of Loss" shall mean any of the following events with
respect to the Aircraft, Airframe or either Engine: (a) loss of such property or
the use thereof due to theft or disappearance for a period in excess of sixty
(60) consecutive days, but in no event later than the last day of the Term; (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 law, 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
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
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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 Administration 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 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.
"Financing Documents" shall mean the Lease Agreement, each Lease
Supplement, the Lease Amendment No. 1, the Trust Agreement, each Trust
Supplement, the Indenture, each Indenture Supplement, 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 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
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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.
"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 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, any sublessee, 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 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
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under the Pass Through Trusts), the Subordination Agent and each Liquidity
Provider, and their respective successors and permitted assigns (and, in the
case of a permitted assign of the Owner Participant that is a partnership, the
partners of such partnership), and any combination thereof and their respective
officers, directors, agents, servants, employees, subsidiaries, Affiliates and
shareholders.
"Indenture" shall mean the Amended and Restated Trust Indenture
and Security Agreement [GPA 1990 AWA-14] dated as of September 21, 1990, and
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.
"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 360-day year 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
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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 and Lease Supplement No. 3 and each subsequent Lease Supplement
entered into hereunder.
"Lease Supplement No. 1" shall mean Lease Supplement [GPA 1990
AWA-14] No. 1 dated the Delivery Date between Lessor and Original Head Lessee,
as Lessee.
"Lease Supplement No. 2" shall mean Lease Supplement [GPA 1990
AWA-14] No. 2 dated December 31, 1991 between Lessor and Original Head Lessee,
as Lessee.
"Lease Supplement No. 3" shall mean Lease Supplement [GPA 1990
AWA-14] 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 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
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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.
"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 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 of
all or any part of their respective interest in the Aircraft, the Airframe,
either Engine, the Trust Estate, the Operative Documents or the Financing
Documents other than any transfers or dispositions pursuant to Sections 2, 6, 9,
11, 16, 18, 19 or 20 (except Liens resulting from a transfer not permitted by
such Section ) of this Lease or pursuant to Section 10 of the Refunding
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
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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 or Lenders'
Liens.
"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 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.
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15
"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
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, any sublease, the Tax Indemnification Agreement, the Financing
Documents, and any 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 1990 AWA-14], with respect to the Aircraft, dated as of September 21, 1990,
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 1990 AWA-14], dated as of
September 21, 1990, and amended and restated as of the Restatement Date, between
the Original Head Lessee and Owner Participant, as amended, supplemented or
otherwise modified from time to time.
"Original Head Lessee" shall mean GPA Leasing USA Sub I, Inc., a
Connecticut corporation.
"Original Sublease" shall mean the Initial Sublease (as defined in
the Original Head Lease) as in effect immediately prior to the Restatement Date.
- 14 -
16
"Other Leases" shall mean the Amended and Restated Aircraft Lease
Agreement [GPA 1989 BN-12] amended and restated as of the Restatement Date
between Wilmington Trust Company as Owner Trustee, Lessor, and America West
Airlines, Inc. as Lessee, the Amended and Restated Aircraft Lease Agreement [GPA
1990 AWA-13] amended and restated as of the Restatement Date between Wilmington
Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as
Lessee, the Amended and Restated Aircraft Lease Agreement [GPA 1990 AWA-15]
amended and restated as of the Restatement Date between Wilmington Trust Company
as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee, the Amended
and Restated Aircraft Lease Agreement [GPA 1990 AWA-16] amended and restated as
of the Restatement Date between Wilmington Trust Company as Owner Trustee,
Lessor, and America West Airlines, Inc. as Lessee, the Amended and Restated
Engine Lease Agreement [GPA 1991 AWA-E1] amended and restated as of the
Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and
America West Airlines, Inc. as Lessee, the Amended and Restated Engine Lease
Agreement [GPA 1991 AWA-E2] amended and restated as of the Restatement Date
between Wilmington Trust Company as Owner Trustee, Lessor and America West
Airlines, Inc. as Lessee, and the Amended and Restated Engine Lease Agreement
[GPA 1991 AWA-E3] amended and restated as of the Restatement Date between
Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines,
Inc. as Lessee, each as amended, supplemented or otherwise modified from time to
time.
"Other Letters of Credit" shall mean any and all letters of credit
pursuant to Section 8(l) of the Other Leases.
"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.
"Partial Assignment" shall mean the A320 Partial Assignment,
Assumption, Release and Amendment Agreement, dated as of December 30, 1988,
among Parent, Braniff, Inc.,
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17
and Manufacturer's Subsidiary, as amended, supplemented or otherwise modified.
"Participation Agreement" shall mean the Participation Agreement
[GPA 1990 AWA-14], dated as of September 21, 1990, among Original Head Lessee,
Parent, Owner Participant, Owner Trustee, Indenture Trustee and the "Lender"
named therein, as amended by the Letter Agreement dated as of July 29, 1993, as
the same may be further 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. 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 or (c) any other Person
approved in writing by the Owner Participant and the Indenture Trustee.
"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
- 16 -
18
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.
If a Renewal Rent Payment Date shall fall on a day which is not a Business Day,
any payment due on such Renewal Rent Payment Date shall be made on the next
succeeding Business Day.
"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.
"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.
- 17 -
19
"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 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 (it being understood and agreed that the
amounts set forth in Exhibit A take into account fully the amount
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20
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 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 (a) an incipient Event of
Loss and the operation of Section 11 hereof or (b) the need to correct any
failure of the Aircraft to satisfy the requirements of Section 16 and Exhibit E
hereof; (iv) [Intentionally Left Blank]; (v) an amount equal to any payment due
to the Owner Trustee in respect of fees or expenses as provided in Section 21(j)
hereof; (vi) an amount equal to any payment due to the Indenture Trustee in
respect of fees or expenses as provided in the Indenture and/or Section 21(j)
hereof; (vii) the Pro Rata Share of any payment due to any Pass Through Trustee
in respect of fees or expenses pursuant to the Pass Through Trust Agreement;
(viii) the Pro Rata Share of any payment due to the Subordination Agent in
respect of fees, compensation, costs or expenses pursuant to the Intercreditor
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 calculated: (1) on
any part of any installment of Basic Rent or Renewal Rent, or average daily
Basic Rent referred to in clause (iii) of this definition of "Supplemental
Rent", as the case may be, not paid on the due
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21
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, "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 1990 AWA-14], dated as of
September 21, 1990, and as amended and restated as of November 26, 1996, 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.
"Taxing Authority" shall have the meaning specified in Section
10(a).
"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, in either case as extended or deemed extended as a result of
the occurrence of an event described in clause (iii) to the definition of
"Supplemental Rent" in this Lease, for which the Aircraft is leased hereunder
pursuant to Section 2.
"Trust Agreement" shall mean the Trust Agreement [GPA 1990 AWA-14]
dated as of September 21, 1990 as amended by Trust Supplement No. 1, and as
further amended by Trust Supplement No. 2, 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 each Trust Supplement.
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22
"Trust Estate" shall have the meaning specified in the Trust
Agreement.
"Trust Supplement" shall mean Trust Supplement No. 1 and Trust
Supplement No. 2 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 1990 AWA-14] 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 1990 AWA-14] No. 2 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
possessing all current certificates and licenses required under the Federal
Aviation Act (it is understood that cabin attendants need not be regular
employees of Lessee) and Lessee otherwise maintains operational control and
possession thereof, and (ii) shall be maintained by Lessee 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.
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23
Section 3. Delivery and Acceptance; Term.
(a) Time of Delivery. The Aircraft was delivered to Lessee, and
Lessee accepted delivery of the Aircraft, on September 28, 1990.
(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.
Section 4. Rent.
(a) Rent. Lessee covenants and agrees to pay the following as Rent
hereunder:
(i) Basic Rent. The Basic Rent, as set forth in Exhibit C
throughout the Basic Term hereof, in consecutive installments, in arrears as set
forth on Schedule I attached to Exhibit C, due and payable on each Basic Rent
Payment Date to the Lessor; and
(ii) Supplemental Rent. Any and all Supplemental Rent, which shall
be due and payable ten (10) Business 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. Lessee's obligation to pay
Supplemental Rent which is due and owing pursuant to the terms hereof shall
survive the expiration or termination of Lessee's obligation to pay Basic Rent
or Renewal Rent hereunder.
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24
(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 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 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
for all Excepted Payments. 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
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25
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 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 infirmity of this Lease
or any sublease 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
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
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26
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 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
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27
THE AIRCRAFT UNDER THIS LEASE OR BY 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 NEITHER LESSOR NOR OWNER PARTICIPANT HAS MADE, AND
LESSOR FOR ITSELF AND OWNER PARTICIPANT, 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 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: (A) Lessor represents and warrants that (x)
on the Delivery Date Lessor had, and on the Restatement Date Lessor has, the
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28
right to lease the Aircraft hereunder and (y) on the Delivery Date the Aircraft
was free of Head Lessor's Liens and on the Restatement Date the Aircraft is free
of Lessor's Liens and Head Lessor's Liens and (B) Lessor covenants that it shall
not create, incur, assume or suffer to exist any Lessor's Lien on the Aircraft.
(b) Representations and Warranties of Lessor. Lessor hereby
represents and warrants, 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 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
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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 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
to any Engine shall be divested under any such agreement or
arrangement, such divestiture
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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
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
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31
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 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);
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(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
shall enter into any Wet Lease for a period of more than six months
(including renewal options) Lessee shall provide to Lessor written
notice of such Wet Lease (such notice to be given at least ten (10)
Business Days prior to 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)
and any Wet Lease 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 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 the
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);
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(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);
(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;
(6) The sublessee under any Permitted Sublease, in its consent
thereto, shall confirm that from and after the occurrence and
continuance of an Event of Default and, unless an Event of Default
specified in Section 17(e), (f) or (g) of this Lease has occurred and
is continuing, this Lease being deemed or declared in default, Lessor
(and, so long as the Lien of the Indenture shall not have been
discharged, Indenture Trustee) shall be entitled to enforce directly
and in its own name all representations, warranties, indemnities,
covenants and agreements under the applicable Permitted Sublease; and
(7) Each Permitted Sublease shall (A) provide that (I) the
Aircraft or Airframe may not be operated or used other than as provided
in this Lease and shall be maintained and operated as required
hereunder, (II) Lessor may avoid or terminate such sublease following
an Event of Default hereunder and (III) to the extent not accomplished
by an assignment of the Permitted Sublease, upon the occurrence of an
Event of Default hereunder, Lessee's rights under such Permitted
Sublease shall automatically be deemed assigned to Lessor; and (B) be a
"net lease" in accordance with industry practice and shall be
comparable to, or more restrictive than, this Lease and under such
Permitted Sublease (except a sublease to the United States Government
or a Foreign Air Carrier after the Restricted Use Period), Lessee as
lessor under such Permitted Sublease, must be entitled to the same
benefits under 11 U.S.C. Section 1110 as Lessor is entitled hereunder
and such Permitted Sublease shall contain provisions regarding such
Section 1110 which are substantially the same as the related provisions
of this Lease. In addition, from and after the occurrence and
continuance of an Event of Default, all rent and other amounts
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34
payable by the Permitted Sublessee under such Permitted Sublease shall
be paid directly to Indenture Trustee and, upon discharge of the Lien
of the Indenture, to Lessor.
(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
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
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35
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 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.
Any Permitted Sublease shall expressly provide that 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 under
the other Operative Documents or constitute a waiver of Lessor's rights or
remedies hereunder or under the other Operative Documents, and such rights shall
continue as if such Permitted Sublease had not occurred. Any Permitted Sublease
shall expressly prohibit
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36
any further sub-sublease or assignment or any other similar transfer of the
Aircraft, Airframe or any Engine or rights thereto 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
any proposed Permitted Sublessee), and (ii) a copy of each Permitted Sublease
together with an assignment, as security for Lessee's obligations hereunder, of
such Permitted Sublease, and if Lessor or the Indenture Trustee so requests, a
consent thereto from such Permitted Sublessee, substantially in the form of
Exhibit F-3 hereto, within ten (10) Business Days following the effective date
of such Permitted Sublease.
(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 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
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37
issued by any such authority or any manufacturer's specifications, service
bulletins or other requirements, including, without limitation, 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, Owner Participant 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 the 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 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.
(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
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38
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, any other
applicable rules, regulations and requirements by any other applicable
Governmental Entity, 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 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 and any other applicable
law, 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
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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 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
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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 any 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, a
visual "walk around" inspection which may include 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 no Default or Event of Default has
occurred hereunder inspections shall be endeavored to 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 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:
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(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 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);
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(v) 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;
(vi) 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;
(vii) immediately after Lessee knows or should know of the
occurrence thereof, notice of a Default;
and
(viii) 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
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43
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
(in one or a series of transactions) to any corporation or other Person, unless:
(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 and Indenture Trustee 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,
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44
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 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
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45
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. 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 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 amended and restated Lease 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. The
acknowledgement, covenant and agreement contained in this Section 8(i) shall
continue in full force and effect and survive the expiration or other
termination of this Lease and are expressly made for the benefit of and shall be
enforceable by the Lessor, the Owner Participant and, if the Lien of the
Indenture has not been discharged, the Indenture Trustee.
(j) Permits and Licenses. Lessee shall make or obtain, and
maintain in full force and effect, each and every consent, license, approval,
notice, registration,
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46
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 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 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, rerecording 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 Lessor'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
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47
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.
(l) Letter of Credit. As security for the 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 demand at any
time, if a Default under Section 17(e), (f) or (g) or an Event of Default has
occurred, which amount may be applied, retained or utilized as provided in the
penultimate paragraph of this Section 8(l).
(ii) be maintained in full force and effect at all times
until ninety-one (91) days after the Expiration Date 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 Business Days of any such reduction in
rating with a commercial bank meeting such rating requirement), provided, that a
Letter of Credit 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
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48
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 transferrable and
assignable; and
(iv) permit partial drawings. If the Letter of Credit is
still in effect at the end of the Term or the Lessor is holding proceeds of the
Letter of Credit that were retained and not applied as provided herein, then
Lessor shall return the Letter of Credit to Lessee or terminate it, and/or
return any retained and unapplied proceeds, ninety-one (91) days following the
date of such expiration or other termination of this Lease so long as no Default
or Event of Default has occurred or is continuing hereunder or under any Other
Lease, upon payment in full of all amounts then due and owing to Owner Trustee
and Owner Participant under the Operative Documents.
If an Event of Default has occurred or is continuing under this
Lease or an Event of Default has occurred or is continuing under any Other Lease
(as therein defined), in addition to any other rights and remedies Lessor may
have hereunder, under any Other Lease, any sublease and any and all other
remedies available at Law (including, without limitation, the Uniform Commercial
Code as adopted in New York) or equity and upon exercising its rights under the
Letter of Credit and any Other Letters of Credit, Lessor shall be entitled, in
each case as it may elect in its sole and absolute discretion, to (i) hold any
amounts drawn under the Letter of Credit or Other Letters of Credit as security
for Lessee's obligations under this Lease or the Other Leases, (ii) retain any
amounts drawn under the Letter of Credit or Other Letters of Credit for its own
account and apply (including, without limitation, by way of set off against)
such drawn amounts as it may elect (it being understood that amounts not so
applied will be held as security for Lessee's obligations under this Lease and
the Other Leases) to remedy any breach by Lessee of this Lease or any other
Operative Documents or Other Leases or (iii) recompense Lessor, Owner
Participant or any of their respective Affiliates for any loss, damage, cost or
expense or other Claim due or owing hereunder or under the Other Leases;
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 which would (absent such 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);
provided further, however, that neither the amount so applied at any one time
nor the aggregate amount
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49
so applied at different times shall reduce the amount of any installment or
payment of Rent (whether upon the termination of the Lease or otherwise) payable
by Lessee to an amount insufficient to pay in full the amounts required to be
paid on account of the principal of and any interest on the Equipment Notes or
otherwise owing to a Note Holder. Lessee shall not be entitled to any refund or
credit with respect to any amounts so applied. Any amount retained shall be
considered the property of Lessor and Lessor may commingle such amount with its
general funds and Lessee, further, hereby absolutely and irrevocably disclaims,
to the maximum extent permitted by applicable Law, any interest therein. Lessee
shall not be entitled to any interest or other earnings on such retained amount
and such amount shall not be refundable.
On application of all or any portion of the amounts drawn under
the Letter of Credit or any Other Letters of Credit in accordance with this
Section 8(l) or the Other Leases, Lessee shall on demand reinstate the amount of
the Letter of Credit or Other Letters of Credit, as the case may be, to its or
their full Face Amount or provide to Lessor one or more additional Letters of
Credit meeting the requirements of this Section 8(l), so that the Letter of
Credit and each of the Other Letters of Credit at all times equals the original
Face Amount provided for herein. During such times as Lessor shall elect to hold
all or part of the proceeds of the Letter of Credit or Other Letters of Credit
as security for Lessee's obligations to Lessor under the Lease and the Other
Leases, Lessee shall not be obligated to reinstate the amount of the Letter of
Credit or Letters of Credit, as the case may be, in respect of the proceeds so
held.
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, 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
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50
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, 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 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 (or a sublessee) 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 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)
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51
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 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 hereunder, whether
pursuant to Section 16, Section 18 or otherwise, shall remain the property of
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)
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52
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 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 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
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53
"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 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 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
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54
of and transferring title to 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 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. If Lessee pays any amount to Lessor (or to
any taxing authority for the account of Lessor) as a result of the 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
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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, with
respect to any period beginning, or events or circumstances occurring, on or
after the Restatement Date, 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, deregistration, preparation, installation,
modification, repair, maintenance, replacement, transportation,
storage, transfer of title, return or other disposition 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
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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 modification or
reissuance, 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, Taxes imposed on, based
on, or measured by, the gross or net income of such Indemnitee or Taxes
in lieu thereof (including minimum taxes, withholding taxes and taxes
on or measured by any item of tax preference) imposed by the federal
government of the United States of America (other than taxes in the
nature of sales or use taxes, license taxes, or property taxes),
(ii) In the case of any Indemnitee, Taxes imposed 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 state, local
or foreign government or taxing authority (other than Taxes in the
nature of sales Taxes, use Taxes, license Taxes or property Taxes, and
Covered Income Taxes described in subsection (c) of this Section 10),
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(iii) In the case of any Indemnitee, Taxes which arise out of
or are caused by any 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 or
any 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 (A) an Event of
Default and the exercise by any Indemnitee of its remedies under this
Lease or the Indenture, as the case may be or (B) the substitution,
pooling or interchange of the Aircraft, the Airframe, any Engine or any
Part pursuant to the terms hereof; 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 on 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 to the extent the amount of any such Taxes exceeds the amount
of such Taxes that would have been imposed had there not been any such
transfer, unless such transfer results from action by or on behalf of
such Indemnitee taken in connection with any Event of Default that has
occurred and is continuing or upon the request of the Lessee,
(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(b) or to a failure by Lessee to satisfy
its obligations related to such return,
(vii) With respect to an Indemnitee other than the Indenture
Trustee or the Trust Indenture
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Estate, Taxes which arise out of or are caused by (i) any act or
omission or material misrepresentation of any Indemnitee where such act
or omission is not permitted by the Financing Documents or the
Operative Documents, or (ii) a failure by an Indemnitee to fulfill its
contest obligations, and, in the case of the Indenture Trustee and the
Trust Indenture Estate, Taxes imposed as a result of a breach of such
Indemnitee's representations, warranties, or covenants contained in
Sections 9(a), 12 or 16 of the Refunding Agreement in any material
respect, or from a failure by such 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, or
(ix) 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, or
(x) 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.
(c) Covered Income Tax. For purposes of clause (ii) of subsection
(b) of this Section 10, a Covered Income Tax includes:
(i) in the case of an Indemnitee other than the Indenture
Trustee or the Trust Indenture Estate, any Tax imposed on, based on or
measured by gross or net income, receipts, capital or net worth,
franchises, excess profits or conduct of business (other than taxes
which are in the nature of sales or use taxes, license taxes or
property taxes) imposed on an Indemnitee (A) by any state or local
Taxing Authority other than Taxes imposed by any such state or local
jurisdiction in which the Indemnitee has its principal place of
business or is subject to such Tax as a result of business transactions
or other presence unrelated to the transactions contemplated by the
Financing
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Documents or the Operative Documents, unless such Taxes are imposed by such
jurisdiction solely as a result of (x) the operation of the Aircraft in such
jurisdiction or (y) the transactions contemplated by the Operative Documents, to
the extent such taxes are directly attributable to such operation of the
Aircraft or to such transactions, and (B) by any foreign jurisdiction which are
imposed as a result of Lessee's or sublessee's activities in such foreign
jurisdiction in connection with the transactions contemplated by the Financing
Documents or the Operative Documents, provided, however, a Covered Income Tax
also includes the incremental amount of franchise taxes, taxes on doing
business, capital stock taxes or taxes on, based on or measured by gross or net
income of the original Owner Participant attributable to the Lease (excluding,
however, any taxes that would be excluded under any provision other than clauses
(i) and (ii) of subsection (b) of this Section 10) which are imposed by the
"Home State" of a sublessee (the Home State of a sublessee being the
jurisdiction in which such sublessee maintains its principal operations and
maintenance center), or in the absence of a Permitted Sublessee, the
jurisdiction where the Aircraft is stored, but only to the extent such
incremental taxes result from activities of Lessee or Permitted Sublessee under
the Lease in or with respect to the Home State or the jurisdiction where the
Aircraft is stored, and taking into account in calculating such incremental
taxes all state tax benefits and savings in the Home State resulting from
activities of Lessee or Permitted Sublessee under the Lease, disregarding for
such purpose any actual or constructive changes in ownership of the original
Owner Participant, provided, however, that Owner Participant and Lessee agree to
negotiate, in good faith, a cap to Lessee's liability for indemnity payments
attributable to taxes incurred in sublessee's Home State with respect to each
Permitted Sublessee; and
(ii) in the case of the Indenture Trustee or the Trust Indenture
Estate, any Tax based on or measured by gross or net income, receipts, capital
or net worth, franchises, excess profits or conduct of business (including
minimum taxes, withholding taxes, and taxes on or measured by any item of tax
preference) imposed on such 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
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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.
(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 Participant or its permitted assigns and
send a copy of such report or return to the Owner Participant or Owner Trustee
or will notify the Owner Participant or Owner Trustee 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 Taxes imposed on the 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
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Participant in the year of payment and the highest corporate income tax rate in
the jurisdiction in which Owner Participant files a consolidated state income
tax return (currently Virginia).
(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 (i) the actual reduction in Taxes, if any, realized by such Indemnitee
which is attributable to such deduction or credit and (ii) the reduction
calculated on the same basis as the gross up in Section 10(e) hereof in Taxes
realized by such Indemnitee as a result 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 (i) above would exceed (A)
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 (B) the portion of
all prior payments computed pursuant to (i) 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
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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. In the event that an Indemnitee receives a
written notice of a claim which, if sustained, would require the payment of an
indemnity by Lessee pursuant to this Section 10, such Indemnitee shall promptly
notify Lessee of such claim and, if requested by Lessee in writing, shall, at
Lessee's sole expense, in good faith contest or shall permit Lessee, if desired
by Lessee and such contest may be conducted in whole or in part separately 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, the Lessee shall not be permitted to contest in the name of
such Indemnitee if such contest involves Taxes imposed against such Indemnitee
that are unrelated to the transactions contemplated by the Financing Documents
or the Operative Documents or Taxes based on or measured by the gross or net
income of the Indemnitee, and provided, that if the Indemnitee determines in
good faith that there is a material possibility of a material adverse impact
upon the Indemnitee with respect to such contest, such Indemnitee may retain or
reassert control of any contest that Lessee would otherwise be permitted to
contest; 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) Lessee shall have (a) furnished Indemnitee with a
written opinion of tax counsel
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selected by Indemnitee and reasonably acceptable to Lessee to the
effect that a reasonable basis (as defined in ABA Opinion 85-352)
exists to contest such claim (which opinion shall be obtained at
Lessee's sole cost and expense), provided however, that in the
event 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, 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
the Indemnitee or the Lessee, as the case may be, had asserted in
such previous contest would prevail and, in the case of statutory
changes-in-law, it is as likely as not that the position will
prevail, and (b) agreed to pay Indemnitee for all reasonable costs
and expenses which Indemnitee may incur in contesting such claim
(including without limitation, payment on demand of all
out-of-pocket costs, expenses, additions to tax because of
underpayment of estimated taxes, losses, legal and accounting and
investigatory fees and disbursements, penalties, and interests),
(ii) a threshold amount of $50,000 for any individual
claim is at issue,
(iii) there is no substantial risk or danger of the
sale, loss or forfeiture of the Aircraft,
(iv) Lessee shall have admitted its liability to
indemnify Owner Participant for such claim or set forth in writing
why it is not so liable,
(v) if such contest is to be initiated by the payment
of, and the claiming of a refund for, such Taxes, the Lessee shall
have advanced to such Indemnitee sufficient funds (on an interest
free basis) to make such payments,
(vi) no claim shall be appealed to the U.S. Supreme
Court,
(vii) no appeal of a trial court decision shall be
undertaken unless Lessee at its sole cost and expense shall have
furnished Indemnitee with a written
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opinion of tax counsel selected by Indemnitee and reasonably
acceptable to Lessee to the effect that Indemnitee is more likely
than not to prevail in such appeal, and
(viii) no Event of Default has occurred and is
continuing.
(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 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
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consolidated Federal income tax return, the term "Indemnitee" shall mean and
include any member of such affiliated group.
(l) Verification. At Lessee's request, the amount of any
indemnity payment by Lessee pursuant to this Section 10 or any payment by an
Indemnitee to Lessee pursuant to this Section 10 shall be verified and certified
by an independent public accounting firm selected by such Indemnitee and
reasonably satisfactory to Lessee. In order to enable such accountants to verify
the indemnity amount, such Indemnitee shall provide to the accountants (for
their own confidential use) information reasonably necessary for such
verification to which Lessor has access; provided, however, such information
shall not be disclosed to Lessee or any person other than such accountants. The
fee of such firm shall be payable by Lessee unless such verification shall
result in an adjustment in Lessee's favor exceeding 10% of the amount of the
indemnity payment.
(m) Survival. All of the obligations and rights of Lessee
and Lessor under this Section 10 with respect to the Aircraft, the Airframe, the
Engines or any Part thereof shall survive the assignment, or expiration or other
termination, of the Lease with respect to the Aircraft for a period of six (6)
years from the occurrence of such assignment, or expiration or termination,
except that such obligations shall survive the expiration of such six (6) year
period with respect to any claim asserted prior to the expiration of such six
(6) year period but in either case only to the extent such obligation or claim
relates to events which occurred or conditions which existed during the Term.
Such obligations are expressly undertaken by Lessee for the benefit of, and
shall be enforceable by, Lessor. The provisions of this Section 10(m) are
subject to the exclusions of Section 10(b)(viii).
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
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(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:
(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 Engines then installed thereon, title to 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 delivered by the Manufacturer not
earlier than June 30, 1988 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), 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
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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) Lessee 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, or, if such Stipulated
Loss Value Date occurs after the last day of the Term, plus an amount equal to
the average daily Basic Rent or Renewal Rent, as the case may be, in effect on
the last day of the Term, for each day from and including the last day of the
Term to and excluding 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), 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.
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(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 convey or cause to be conveyed to Lessor as replacement
for the Engine suffering an Event of Loss, title to 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 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 with a full warranty bill of sale, in form and substance reasonably
satisfactory to Owner Participant and Indenture Trustee, as applicable, with
respect to such replacement Engine; (ii) cause supplements, in form and
substance reasonably satisfactory to Owner Participant 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) 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 such Replacement Engine and of compliance with the
insurance provisions of Section 12 hereof with respect to such Replacement
Engine as Owner Participant or Indenture Trustee (if the Lien of the Indenture
has not been discharged) may reasonably request; (iv) furnish Owner Participant
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 such Replacement Engine has been duly conveyed to
Lessor free and clear of all Liens (except Permitted Liens), and is duly leased
hereunder 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
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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 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, 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(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 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; (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), 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
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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
approved by the FAA on said date), executed by the owner thereof, in favor of
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 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 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 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 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
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consummation of such replacement, no Default or Event of Default will exist
hereunder; (v) such documents and 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 reasonably
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), 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 (including a
Governmental Entity providing an indemnity in lieu thereof) 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 or
such indemnity 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 and other payments
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 and other payments, 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 other payments 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
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if such requisition had not occurred. All payments received by Lessor or Lessee
from the Governmental Entity for the use of 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 and
Exhibit E. 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.
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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 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
products, completed operation liability covering maintenance of aircraft, 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) 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 and the other Indemnitees and their respective permitted
assigns, in such policies, the insurance shall not be invalidated as to an
insured or additional insured by any act or omission of Lessee or any other
insured or additional insured and shall insure Lessor, Owner Participant,
Indenture Trustee and the other Indemnitees and their respective permitted
assigns, regardless as to any insured or additional insured of any breach or
violation by Lessee or any other insured or additional 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 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 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
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as is the insurance industry standard for war/allied perils coverage), after
notice to Lessor, Owner Participant and Indenture Trustee from such insurer or
insurers, of such prospective cancellation, change or lapse, (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 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, 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 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 exclusions is of the type, terms
and amount customarily
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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. 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; provided that Indenture Trustee
shall not be obligated to request such insurance and shall not be liable for any
failure to request such insurance. 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 pay any premiums for any such policies), (ii) shall
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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 the insurance industry standard for war/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, (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 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 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. The insurance required under this Section 12(b) may
incorporate deductible amounts which shall not exceed one million dollars
($1,000,000).
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Each of Lessor and Owner Participant 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
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 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.
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.
(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 and Indenture Trustee 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 and other payments
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 and any other payments 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 other payments 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 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,
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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.
(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
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
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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 the
insurance industry standard for war/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.
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.
(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 (i) is
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on the same terms as the original insurance and includes the provisions required
by this Agreement; (ii) provides 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) contains 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 1990 AWA-14] dated 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 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.
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(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 a net after-tax basis, as provided in Section
10(e), within fifteen (15) days after demand from and against any and all claims
(whether or not based on strict liability), 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, costs and expenses set forth in Section 21(j) hereof and 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) 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
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
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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, nondelivery, assignment, leasing,
subleasing, sub-subleasing, acceptance, rejection, possession, repossession,
control, 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 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,
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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 or thereunder 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).
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
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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 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
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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) 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
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
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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 expiration or other termination of
this Lease or any of the other Operative Documents and are expressly made for
the benefit of and shall be enforceable by each Indemnitee.
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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 and any other Indemnitee as herein
provided or provided under the other Operative Documents or the Financing
Documents; (ii) Head Lessor's Liens, Lessor's Liens and Lenders' Liens; (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
Part, or any interest of Lessor or Indenture Trustee therein or any risk of
criminal liability of 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
Part, 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 Part, or any interest of 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 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
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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, 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,
Lease Supplement, Indenture Supplement, 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 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, 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 or Indenture Trustee
hereunder, under the Indenture and in the Aircraft, and Lessee shall furnish to
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 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
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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 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 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 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 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.
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
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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, Lessor's Liens and Lenders' Liens, (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 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
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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 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.
(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
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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, 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.
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(e) Condition of Aircraft. Upon any Return Occasion, 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.
(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 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(g) hereof, the Term with respect to the Aircraft
undergoing the Final Inspection shall be deemed to have been automatically
extended, and all obligations hereunder continued, on a daily basis until the
Final Inspection shall have been concluded and Lessee shall pay Rent during any
such extension in an amount equal to the average daily Basic Rent or Renewal
Rent, as the case may be, paid in respect of the last year of the Basic Term or
Renewal Term, as the case may be (and Stipulated Loss Value during such
extension shall equal the Stipulated Loss Value on the last day of the Basic
Term or Renewal Term, as the case may be); 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
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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. Lessee's
obligations to pay such Supplemental Rent shall survive the Expiration Date or
other termination of this Lease. Nothing set forth in this paragraph shall
constitute a limitation on Lessor's or Owner Participant's ability to recover
from Lessee any damages, expenses or losses pursuant to Sections 13 or 18 hereof
suffered as a result of Lessee's failure to effect the return of the Aircraft at
the time, in the place and in the condition as specified in this Section 16 and
Exhibit E hereto.
(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
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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 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
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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 Lessor or Owner Participant
delivers notice to Lessee; 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 herein or
in the Refunding Agreement or in any certificate furnished by Lessee in
connection herewith or therewith is or was incorrect at the time made in any
material respect
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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 the Refunding 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 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
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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 ninety (90) 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 ninety (90) 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 ninety (90) 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 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.
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
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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 cost and expense, immediately return, and the
Lessee hereby agrees that it shall return promptly all or such part of, 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 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 or Lessor's agent, at its
option and to the extent permitted by applicable Law, may but shall not be
obligated to enter upon the premises where all or any part of the Aircraft,
Airframe and/or Engines are 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 or Lessor's agent for or by reason of such entry or
taking of possession or removal 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) With or without taking possession thereof, sell or
cause to be sold, the Aircraft, Airframe or Engine 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, Airframe or Engine, 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.
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(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, Airframe or Engine 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, Airframe or Engine 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
the Aircraft, Airframe or Engine 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 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, Airframe or Engine 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 due to and including the date of sale, plus
the amount by which the Stipulated Loss Value of such Aircraft, Airframe or
Engine, computed as of such Stipulated Loss Value Date, exceeds the net proceeds
of such sale (after deducting all costs of such sale).
(e) In lieu of exercising its rights under paragraph (b),
(c) or (d) above, by notice to Lessee, Lessor
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may require Lessee to pay, on the next Stipulated Loss Value Date, to Lessor,
and Lessee hereby agrees that it will so pay to Lessor, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal
Rent, as the case may be, payable in advance for the period on and after the
Stipulated Loss Value Date), any unpaid Basic Rent or Renewal Rent, as the case
may be, for such Aircraft due and unpaid for any period prior to and including,
and any Basic Rent or Renewal Rent payable on, the Stipulated Loss Value Date,
plus, an amount equal to the Stipulated Loss Value for the Aircraft computed as
of such Stipulated Loss Value Date; and upon such payment of liquidated damages
and the payment of all other Rent then due hereunder and the discharge of the
Lien of the Indenture pursuant to Section 10.01 thereof, Lessor shall, at
Lessee's expense, transfer, without recourse or warranty (except as to the
absence of Lessor's Liens and the Lien of the Indenture), all right, title and
interest of Lessor in and to the Aircraft to Lessee or as it may direct and
Lessor shall, at Lessee's expense, execute and deliver such documents evidencing
such transfer and take such further action as Lessee shall reasonably request.
(f) In the event that Lessor, pursuant to paragraph (b)
above, shall have relet the Aircraft, Airframe or Engine under a long term
lease, Lessor, in lieu of exercising its rights under paragraph (c) above with
respect to such Aircraft, Airframe or Engine, 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, Airframe or Engine 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.
(g) Cancel, rescind and/or terminate this Lease by written
notice to Lessee which cancellation, rescission and/or termination shall be
effective upon dispatch,
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whereupon Lessee's right to possess and use the Aircraft, Airframe or Engine
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.
(h) Lessor may exercise any other right or remedy which may
be available to it under applicable laws, or may 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, Airframe or Engine 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
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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 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
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computations contemplated herein and Lessee shall remain liable for any
deficiency.
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), (e) or (f)
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.
The provisions of this Section 18 shall continue in full
force and effect and survive the expiration or other termination of this Lease
and are expressly made for the benefit of and shall be enforceable by Lessor,
Owner Participant and, if the Lien of the Indenture has not been discharged,
Indenture Trustee.
Section 19. 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 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
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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) (other
than Expected Rights) 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.
Section 20. Renewal Option. Lessee may renew this Lease as
provided in the following clause (i) and subject to the following clause (ii):
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(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, in no event less than 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 the Lessor,
semi-annually in arrears 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.
Section 21. Miscellaneous.
(a) Severability, Amendment, and Construction. Any
provision of this Lease which is prohibited or
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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, each of Lessor and 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 and instructions between Lessor
and Lessee 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). All notices, reports or other documents
provided to Lessor or Lessee shall be provided concurrently to Indenture Trustee
(until such time as the Lien of the Indenture is discharged) and to Owner
Participant, at such address as Owner Participant and Indenture Trustee,
respectively, may
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designate from time to time. All notices and instructions 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, provided that Lessor and Owner Participant
shall not be liable for any such interference by Indenture Trustee, Pass Through
Trustee, Note Holder or any other Person lawfully claiming by or through them,
and provided further, that the
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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.
(j) Expenses. Without limiting Section 13 or 18, Lessee
agrees within fifteen (15) days after demand to pay
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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 hereof or thereof, or waivers or consents
hereunder or 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 Financing 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. Each of Lessee and Lessor 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 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. Each of Lessee and Lessor represents and warrants that it is not
currently entitled to, and agrees that to the extent that Lessee or Lessor
hereinafter may acquire, any immunity (including, without limitation, sovereign
immunity) from jurisdiction of any court or from any legal process, it hereby,
to the extent permitted by Law, waives such immunity, and agrees not to assert,
by way of motion, as a
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112
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. Each
of Lessee and Lessor 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 or Lessor as from time to
time may be designated by Lessee or Lessor (as applicable) in writing to Lessee
or Lessor (as applicable), Owner Participant and Indenture Trustee. Each of
Lessee and Lessor 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, Lessee, Owner Participant, Indenture Trustee, each
Note Holder and their successors and assigns (as applicable). Final (after all
appeals) judgment (the enforcement of which has not been stayed) against either
Lessee or Lessor obtained in any suit originally brought in the court of the
State of New York in New York County or in the United States District of New
York shall be conclusive, and, to the extent permitted by applicable Law, may be
enforced in other jurisdictions by suit on the judgment, a certified or true
copy of which shall be conclusive evidence of the fact and of the amount of any
indebtedness or liability of Lessee therein described; provided that the
plaintiff at its option may bring suit, or institute other judicial proceedings,
against Lessee or Lessor, as the case may be, or any of their assets in the
courts of any country or place where such Person or such assets may be found.
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
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113
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.
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.
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(p) Article 2-A of the UCC. The parties hereto agree that
the Original Head Lease, as amended and restated by this Amended and Restated
Aircraft Lease Agreement [GPA 1990 AWA-14] (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 its duly authorized
officer 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
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Section 1. Definitions ................................................ 1
Section 2. Agreement to Lease ......................................... 21
Section 3. Delivery and Acceptance; Term .............................. 22
(a) Time of Delivery .......................................... 22
(b) [Intentionally Left Blank.] ............................... 22
(c) Acceptance of Aircraft .................................... 22
(d) Term of Lease ............................................. 22
Section 4. Rent ....................................................... 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 .......................... 35
(c) Lawful Insured Operations ................................. 35
(d) Maintenance ............................................... 36
(e) Registration and Insignia ................................. 38
Section 7. Inspection ................................................. 39
Section 8. Additional Covenants of Lessee ............................. 39
(a) Financial Information ..................................... 39
(b) Maintenance of Corporate Existence ........................ 41
(c) Maintenance of Status ..................................... 41
(d) Payment of Taxes .......................................... 41
(e) Consolidation, Merger, Etc ................................ 42
(f) Information ............................................... 43
(g) Place of Business ......................................... 43
(h) Certain Limitations on Use ................................ 43
(i) Section 1110 .............................................. 44
(j) Permits and Licenses ...................................... 44
(k) Security Opinion; Annual Certificate ...................... 45
(l) Letter of Credit .......................................... 46
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Page
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Section 9. Replacement of Parts; Alterations,
Modifications and Additions .................................... 48
(a) Replacement of Parts ..................................... 48
(b) Alterations, Modifications and Additions ................. 49
(c) Pooling .................................................. 52
Section 10. General Tax Indemnity ..................................... 53
(a) ......................................................... 53
(b) Exclusions .............................................. 55
(c) Covered Income Tax ...................................... 57
(d) Reports and Returns ..................................... 59
(e) After-Tax Basis ......................................... 59
(f) Tax Benefit ............................................. 60
(g) Payment ................................................. 60
(h) Contest ................................................. 61
(i) Refund .................................................. 63
(j) Diligence ............................................... 63
(k) Affiliated Group ........................................ 63
(l) Verification ............................................ 64
(m) Survival ................................................ 64
Section 11. Loss, Damage and Requisition .............................. 64
(a) Event of Loss with Respect to the Airframe .............. 64
(b) Event of Loss with Respect to an Engine ................. 67
(c) Conveyance of Replacement Airframe ...................... 68
(d) Application of Proceeds and Payments .................... 71
(e) Requisition for Use by Government with
Respect to the Aircraft ................................. 71
(f) Application in Default .................................. 72
Section 12. Insurance ................................................. 73
(a) Public Liability and Property Damage
Insurance ............................................... 73
(b) Insurance Against Loss or Damage ........................ 74
(c) Application of Insurance Proceeds for an
Event of Loss ........................................... 77
(d) Application of Insurance Proceeds for Other
than an Event of Loss ................................... 78
(e) Application in Default .................................. 78
(f) Certificates ............................................ 79
(g) Reinsurance ............................................. 79
(h) Storage ................................................. 80
(i) Amounts Held ............................................ 81
(j) After the Term .......................................... 81
(k) Governmental Indemnity .................................. 81
Section 13. General Indemnity ......................................... 81
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118
Section 14. Liens .................................................... 87
Section 15. Protection of Title and Further Assurances ............... 88
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 .................................... 93
(f) Final Inspection ......................................... 93
(g) Aircraft Records and Documents ........................... 94
(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 ............................... 96
Section 17. Events of Default ........................................ 96
Section 18. Remedies ................................................. 98
Section 19. 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 ..................... 108
(e) Counterparts ............................................. 108
(f) Quiet Enjoyment .......................................... 108
(g) Brokers .................................................. 109
(h) Investment of Funds ...................................... 109
(i) Entire Agreement; Amendment .............................. 109
(j) Expenses ................................................. 109
(k) Federal Bankruptcy Code .................................. 110
(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 ................................... 112
(o) Successor Trustee ........................................ 112
(p) Article 2-A of the UCC ................................... 113
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119
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 D-1 - Lease Supplement No. 3
Exhibit D-2 - 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 Sublessee
iv