EXHIBIT 99.J
LEASE AGREEMENT 21722
dated August 31, 2000
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity but solely as owner
trustee f/b/o the Beneficiaries named herein
(Lessor)
- and -
AIR SLOVAKIA BWJ, Ltd., Lessee
- relating to -
Boeing Model 737-200A Aircraft
Manufacturers Serial No: 21722
FELTMAN, KARESH, MAJOR & FARBMAN,
Limited Liability Partnership
Carnegie Hall Tower
152 West 57th Street
New York, New York 10019
THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT EXECUTED BY LESSOR ON THE SIGNATURE
PAGE OF THIS LEASE AGREEMENT.
TABLE OF CONTENTS
Section Page
1. DEFINITIONS and INTERPRETATION 1
1.1 Definitions 1
1.2 Interpretation 18
2. REPRESENTATIONS and WARRANTIES 19
2.1 Lessee's Representations and Warranties 19
2.2 Lessee's Further Representations and Warranties 20
2.3 Repetition 22
2.4 Lessor's Representations and Warranties 22
2.5 Repetition 23
3. CONDITIONS PRECEDENT 23
3.1 Lessor's Documentary Conditions Precedent 23
3.2 Lessor's Other Conditions Precedent 25
3.3 Lessor's Waiver 26
3.4 Lessee's Conditions Precedent 26
3.5 Lessee's Waiver 26
4. COMMENCEMENT 27
4.1 Leasing 27
4.2 Delivery 27
4.3 Delayed Delivery 28
4.4 Acceptance and Risk 29
5. PAYMENTS 29
5.1 Security Deposits 29
5.2 Rental Periods 30
5.3 Basic Rent 30
5.4 Additional Rent 30
5.5 Pledged Moneys 31
5.6 Payments 32
5.7 Gross-up 33
5.8 Taxation 33
5.9 Value Added Tax 34
5.10 Information 34
5.11 Taxation of Indemnity Payments 35
5.12 Default Interest 35
5.13 Contest 36
5.14 Absolute 37
6. MANUFACTURER'S WARRANTIES 38
6.1 Assignment 38
6.2 Proceeds 38
6.3 Parts 38
6.4 Agreement 39
7. LESSOR'S COVENANTS and DISCLAIMERS 39
7.1 Quiet Enjoyment 39
7.2 Lessor's Post-Delivery Modifications Contribution 39
7.3 Lessor's Maintenance Contribution 40
7.4 Lessor's AD Cost Sharing Contribution 43
7.5 Registration and Filings 44
7.6 Lessor's Obligations Following Termination 45
7.7 Agreed Maintenance Performers 45
7.8 Exclusion 45
7.9 Lessee's Waiver 46
7.10 Lessee's Confirmation 46
8. LESSEE'S COVENANTS 46
8.1 Duration 46
8.2 Information 47
8.3 Operation of the Aircraft 49
8.4 Taxes and Other Charges 50
8.5 Sub-Leasing 51
8.6 Inspection 53
8.7 Protection of Title 54
8.8 General 55
8.9 Records 56
8.10 Registration and Filings 56
8.11 Maintenance and Repair 57
8.12 Removal of Engines and Parts 59
8.13 Installation of Engines and Parts 59
8.14 Non-Installed Engines and Parts 61
8.15 Pooling of Engines and Parts 62
8.16 Equipment Changes 63
8.17 Title to Engines and Parts 63
8.18 Third Parties 64
8.19 Non-Discrimination 64
9. INSURANCE 65
9.1 Insurances 65
9.2 Requirements 65
9.3 Insurance Covenants 65
9.4 Renewal of Insurances 67
9.5 Failure to Insure 67
9.6 Continuing Insurance for Indemnity 68
9.7 Application of Insurance Proceeds 68
9.8 Repossession Insurance 69
10. INDEMNITY 69
10.1 General 69
10.2 Mitigation 71
10.3 Duration 71
11. EVENTS OF LOSS 72
11.1 Total Loss Before Delivery 72
11.2 Total Loss After Delivery 72
11.3 Engine Loss 73
11.4 Requisition 74
12. RETURN OF AIRCRAFT 74
12.1 Redelivery 74
12.2 Final Checks 75
12.3 Final Inspection 76
12.4 Non-Compliance 77
12.5 Export Documentation 77
12.6 Acknowledgment 77
12.7 Maintenance Program 77
12.8 Storage 78
13. DEFAULT 79
13.1 Events 79
13.2 Rights 83
13.3 Default Payments 84
13.4 Waiver of Certain Article 2A Rights 85
14. ASSIGNMENT and TRANSFER 85
14.1 No Assignment by Lessee 85
14.2 Lessor Assignment 85
14.3 Grants of Security Interests 87
14.4 Sale and Leaseback by Lessor 89
14.5 Further Acknowledgments 89
14.6 Certain Protections for Lessee's Benefit 89
15. GOVERNING LAW AND JURISDICTION 90
15.1 Governing Law 90
15.2 Consent to Jurisdiction 90
15.3 Waiver of Jury Trial 90
15.4 Service of Process 91
16. MISCELLANEOUS 91
16.1 Waivers, Remedies Cumulative 91
16.2 Delegation 91
16.3 Appropriation 91
16.4 Currency Indemnity 92
16.5 Payment by Lessor 92
16.6 Severability 92
16.7 Remedy 93
16.8 Expenses 93
16.9 Time of Essence 93
16.10 Notices 93
16.11 Sole and Entire Agreement 95
16.12 Indemnities 95
16.13 Counterparts 95
16.14 Confidentiality 95
16.15 Waiver of Immunity 96
SCHEDULE 1 - DESCRIPTION OF LEASED PROPERTY 98
SCHEDULE 2 - OPERATING CONDITION AT DELIVERY 104
Schedule 3 - Operating Condition at Redelivery 107
Schedule 4 - Insurance Requirements 112
Schedule 5 - Post-Delivery Modifications 115
Exhibit A - Certificate of Acceptance 116
Exhibit B - Certificate of Delivery Condition 118
Exhibit C - Form of Letter of Credit 122
Exhibit D - Form of Legal Opinion 128
Exhibit E - Form of Deregistration Power of Attorney 129
Exhibit F - Form of Monthly Status REPORT 132
LEASE AGREEMENT 21722
This LEASE AGREEMENT 21722, dated August 31, 2000, is between:
(1) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association of the United States of America, having its principal place
of business at c/o Corporate Trust Department, 79 South Main Street,
Salt Lake City, Utah 84111 (in its individual capacity, the "Trust
Company"), not in its individual capacity but solely as owner trustee
pursuant to the Trust Agreement (in such owner trustee capacity,
"Lessor"), and
(2) Air Slovakia BWJ, Ltd. a company organized and existing under the laws
of the Republic of Slovakia having its principal place of business at
Pestovate l'ska 2, 820 01 Bratislava, The Slovak Republic ("Lessee"),
having Slovak identification number OM-ERA.
RECITALS:
(A) Pursuant to Trust Agreement No. III, dated as of December 30, 1991 (the
"Trust Agreement"), between the Trust Company and Beneficiaries, the
Trust Company acts as owner trustee for the benefit of the
Beneficiaries.
(B) Pursuant to the Trust Agreement, Lessor has legal ownership of the
Leased Property described in this Agreement on this date.
(C) Lessor wishes to lease the Leased Property to Lessee, and Lessee agrees
to lease the Leased Property from Lessor, upon and subject to the
covenants, terms and conditions set out in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration whose receipt and sufficiency are acknowledged, Lessor
and Lessee agree as follows:
1. DEFINITIONS and INTERPRETATION
1.1 Definitions
-----------
In this Agreement the following expressions shall, unless the context
otherwise requires, have the following respective meanings:
Actual Cost as it applies to any maintenance
work on the Aircraft, means the
actual cost of replacement parts
plus the cost of the associated
labor at Lessee's in-house labor
rates (if the work is performed by
Lessee) or at third party costs
charged to Lessee (if the work is
performed by third parties) and
shall in no event include late
charges, mark-ups, interest or other
similar amounts.
Additional Rent collectively, Airframe Additional
Rent, APU Additional Rent, Engine
Additional Rent and Landing Gear
Additional Rent.
Affiliate in relation to any Person, any other
Person controlled directly or
indirectly by that Person, any other
Person that controls directly or
indirectly that Person or any other
Person under common control with
that Person. For this purpose
"control" of any Person means
ownership of a majority of the
voting power of such Person.
Agreed Maintenance Performer Lessee or any other reputable
maintenance organization that is (i)
experienced in maintaining aircraft
and/or engines of the same type as
the Aircraft and the Engines, (ii)
duly certificated by the FAA under
FAR Part 145 and by the Aviation
Authority, and (iii) not objected to
by Lessor pursuant to Section 7.7.
Agreed Value $4,000,000.00
Aircraft the aircraft described in Part 1 of
Schedule 1 (which term includes,
where the context admits, a separate
reference to all Engines and Parts).
Aircraft Documents the documents, data and records
identified in Part 2 of Schedule 1
and all additions, renewals,
revisions and replacements from time
to time made in accordance with this
Agreement.
Airframe the Aircraft, excluding the Engines
and the Aircraft Documents.
Airframe Additional Rent as defined in Section 5.4(a).
Airframe Additional Rent Rate $80.00 per Flight Hour, as adjusted
from time to time pursuant to
Section 5.4(b).
Airframe Reimbursable Expenses as defined in Section 7.3(a)(i).
Applicable Law all applicable (i) laws, treaties
and international agreements of any
national government, (ii) laws of
any state, province, territory,
locality or other political
subdivision of a national
government, and (iii) rules,
regulations, judgments, decrees,
orders, injunctions, writs,
directives, licenses and permits of
any Government Entity or arbitration
authority.
Approved Maintenance Program the maintenance program of Lessee
approved by Lessor in writing on or
before the Delivery Date, which
shall at all times be in compliance
with the Manufacturer's MPD and the
Engine Manufacturer's MPD, as the
same may be amended from time to
time in accordance with this
Agreement.
APU (i) the auxiliary power unit listed
in Schedule 1, (ii) any and all
Parts, so long as such Parts are
incorporated in, installed on or
attached to such auxiliary power
unit or so long as title to such
Parts
is vested in Lessor in accordance
with the terms of Section 8.17(b)
after removal from such auxiliary
power unit, and (iii) insofar as the
same belong to Lessor, all
substitutions, replacements or
renewals from time to time made in
or to such auxiliary power unit or
to any of the Parts referred to in
clause (ii) above, as required or
permitted under this Agreement.
APU Additional Rent as defined in Section 5.4(a)(iv).
APU Additional Rent Rate $8.00 per Flight Hour of the
Airframe, as adjusted from time to
time pursuant to Section 5.4(b).
APU Reimbursable Expenses as defined in Section 7.3(d)(i).
Assignment any present or future assignment by
Lessor in favor of any Financing
Party of Lessor's rights under this
Agreement as security for its
obligations to a Financing Party.
Aviation Authority any and all Government Entities
that, under the laws of the State of
Registration, from time to time (i)
have control or supervision of civil
aviation; or (ii) have jurisdiction
over the registration, airworthiness
or operation of, or matters relating
to, the Aircraft.
Basic Rent all amounts payable pursuant to
Section 5.3.
Basic Rent Amount $75,000
Beneficiaries Airfund I Limited Partnership,
Airfund II Limited Partnership,
American Income Fund I-C Limited
Partnership, American Income Fund I-
D Limited Partnership and American
Income Fund I-E Limited Partnership,
each a Massachusetts limited
partnership.
Business Day a day (other than a Saturday or
Sunday) on which business of the
nature required by this Agreement is
carried out in the city in which
Lessee's office listed in Section
16.10(b) is located.
C-Check a maintenance check on the Airframe
under the Approved Maintenance
Program designated as a "C" check
and consisting of full and complete
zonal, systems and structural check
including the corresponding lower
checks ("A" and "B" or equivalent)
and any other maintenance and
inspections tasks that are a part of
such checks, all in accordance with
the Approved Maintenance Program, or
if the Approved Maintenance Program
changes and no longer refers to a
full and complete zonal, systems and
structural block "C" check, then a
check consisting of those items of
maintenance characterized by the MPD
and best industry practice as a "C"
check (or its equivalent), but in
any event not including repairs
arising as the result of operational
or maintenance mishandling or
accidental damage.
CER a complete engine refurbishment,
including with respect to any Engine
the complete visual inspection and
repair as necessary of all modules
of the Engine in an engine
repair/overhaul station, including
complete disassembly of the Engine,
complete visual inspection of the
Engine, de-blading of LLPs as
required, visual inspection of all
LLPs, verification that all snap
diameters on LLPs are within limits,
inspection of all blades for proper
chord dimensions and cracking,
repair or replacement of all blades
below minimums, inspection and
repair of stators as necessary,
blade-up of LLPs using new lock
plates, assembly
of rotors in the turbine, balance of
all rotors, and installation of
rotors in the Engine.
Certificate of Acceptance a certificate in the form attached
as Exhibit A to be completed and
executed by Lessor and Lessee at the
time of Delivery.
Certificate of Delivery Condition a certificate in the form attached
as Exhibit B to be completed and
executed by Lessor and Lessee at the
time of Delivery.
CPCP Lessee's Corrosion Prevention and
Control Program that is a part of
the Approved Maintenance Program.
Credit Agreement any loan or credit agreement between
Lessor and any Financing Party in
which the obligations of Lessor are
secured by a Security Interest in
any of the Leased Property or this
Agreement.
Cycle one take-off and landing of an
airframe.
Damage Notification Threshold $100,000.
Default any Event of Default and any event
which with the giving of notice,
lapse of time, determination of
materiality or fulfilment of other
condition or any combination of the
foregoing would constitute an Event
of Default.
Default Rate at any time and from time to time,
4.0% plus the base commercial
lending rate as announced by
Citibank, N.A., compounded monthly
and calculated on the basis of the
actual number of days elapsed and on
a 360 day year.
Delivery the delivery of the Aircraft to
Lessee in accordance with the terms
of this Agreement.
Delivery Date the date on which Delivery takes
place, which shall be the Scheduled
Delivery Date or such other date
notified by Lessor to Lessee in
accordance with the provisions of
this Agreement.
Delivery Location Tucson, Arizona.
Dollars and $ the lawful currency of the United
States of America.
Engine whether or not installed on the
Aircraft:
(a) each engine of the
manufacture, model and serial
number specified in Part 1 of
Schedule 1, title to which
shall belong to Lessor; or
(b) any engine which replaces
that engine, title to which
passes to Lessor in
accordance with Section
8.17(d);
and in each case includes all
modules and Parts from time to time
belonging to, installed in or
appurtenant to that engine.
Engine Additional Rent as defined in Section 5.4(a)(ii).
Engine Additional Rent Rate $80.00 per Flight Hour per Engine,
as adjusted from time to time
pursuant to Section 5.4(b).
Engine Loss the occurrence, with respect to an
Engine, of one of the events set
forth in clauses (a) through (d) of
the definition of "Total Loss" as if
references to the "Airframe" were to
such "Engine".
Engine Loss Date the relevant date determined in
accordance with the definition of
"Total Loss Date" as if that
definition applied to an Engine
Loss.
Engine Manufacturer the Pratt & Whitney Division of
United Technologies Corporation.
Engine Reimbursable Expenses as defined in Section 7.3(b)(i).
Engine Shop Visit a shop visit requiring disassembly
of an Engine (but excluding for this
purpose any removal, installation,
maintenance and repair of Quick
Engine Change kits) and during
which there shall be performed a hot
section restoration or repair or a
cold section restoration or repair
or a replacement of LLPs.
Equipment Change any modification, alteration,
addition to or removal from the
Aircraft during the Term.
Escrow Agent shall mean Feltman, Karesh, Major &
Farbman, Limited Liability
Partnership, in its capacity as
escrow agent pursuant to the Escrow
Agreement.
Escrow Agreement Amended and Restated Escrow
Agreement, dated as of August 17,
2000, as amended and restated as of
August 28, 2000, between Lessor,
Lessee and Escrow Agent.
Event of Default an event specified in Section 13.1.
Excusable Delay with respect to delivery of the
Aircraft, delay or non-performance
due to or arising out of acts of God
or public enemy, civil war,
insurrection or riot, fire, flood,
explosion, earthquake, serious
accident, epidemic, quarantine
restriction, import restriction, any
act of government, governmental
priority, allocation, regulation or
order affecting directly or
indirectly, the Aircraft, any
manufacturer, Lessor or any
materials or facilities, strike or
labor dispute causing cessation,
slowdown or interruption of work,
inability after due and timely
diligence to
procure equipment, data or materials
from manufacturers, suppliers, any
existing owner, seller or lessee in
a timely manner, damage, destruction
or loss, adverse weather conditions
preventing any services, inspections
or flights of the Aircraft or any
other cause to the extent that such
cause is beyond the control of
Lessor, whether above mentioned or
not and whether or not similar to
the foregoing.
Expiry Date the Scheduled Expiry Date or any
other date on which:
(a) the Aircraft has been
redelivered in accordance with
this Agreement and all
obligations of Lessee have
been satisfied; or
(b) Lessor receives the Agreed
Value following a Total Loss
and any other amounts then due
and owing in accordance with
this Agreement.
FAA the Federal Aviation Administration
of the U.S. Department of
Transportation, or any successor
Government Entity succeeding to the
functions thereof.
Financial Indebtedness any indebtedness in respect of:
(a) moneys borrowed;
(b) any liability under any
debenture, bond, note, loan
stock, acceptance credit,
documentary credit or other
security;
(c) the acquisition cost of any
asset to the extent payable
before or after the time of
acquisition or possession; or
(d) the capitalized value (determined
in accordance with accounting
practices generally accepted in the
United States of America) of
obligations under finance leases;
or
(e) any guarantee, indemnity or similar
assurance against financial loss of
any Person in respect of the above.
Financing Parties collectively (i) any Lenders, (ii) any
Mortgagee, (iii) any Additional
Mortgagee, (iv) any Person that lends
money to Lessor and for whom an
Additional Mortgagee holds a Security
Interest in the Leased Property, and (v)
the successors and permitted assigns of
such Persons.
Flight Hour each hour or part thereof (rounded up to
one decimal place) elapsing from the
moment the wheels of the Airframe leave
the ground on take off until the moment
the wheels of the Airframe next touch
the ground.
GAAP generally accepted accounting principles
as in effect from time to time and,
subject to changes in such principles
from time to time, consistently applied
in accordance with the past practices of
a Person.
Government Entity (a) any national, state or local
government, political subdivision
thereof or local jurisdiction
therein;
(b) any board, commission, department,
division, instrumentality, court,
agency or political subdivision
thereof; and
(c) any association, organization or
institution of which any of the
above is a member or to
whose jurisdiction any thereof is
subject or in whose activities any
of the above is a participant.
Habitual Base Bratislava, Slovakia, or, subject to the
prior written consent of Lessor, any
other state, province or country in
which the Aircraft is for the time being
habitually based.
Heavy Check all maintenance checks under the Agreed
Maintenance Program designated as "C"
checks or "D" checks on the date of this
Agreement (or any comparable airframe
overhaul check under the Agreed
Maintenance Program as amended in the
future), including all structural
inspections, CPCP work and other
inspections, repairs, maintenance and
other work performed during such check.
Hull Insurance Deductible $100,000.00
IATA the International Air Transport
Association.
Indemnitees Lessor, Trust Company, Beneficiary, any
Financing Party, the respective
successors and assigns of such Persons
and the shareholders, Affiliates,
partners, contractors, directors,
officers, servants, agents and employees
of such Persons.
Insurance Letter of Credit as defined in Section 9.8(d).
Insurances as defined in Section 9.1.
Landing Gear the landing gear assembly of the
Aircraft excluding the wheels and brake
units.
Landing Gear Additional Rent as defined in Section 5.4(a)(iii).
Landing Gear Additional
Rent Rate $12.00 per Flight Hour of the Airframe,
as adjusted from time to time pursuant
to Section 5.4(b).
Landing Gear Reimbursable as defined in Section 7.3(c)(i).
Expenses
Leased Property the Aircraft and the Aircraft Documents.
Lenders any financial institutions signatory to
any Credit Agreement as lenders.
Lessee Installed Part a Part installed on the Aircraft after
Delivery not in replacement for any Part
and not required under Applicable Law on
the Aircraft title to which is held by
Lessee subject to a Security Interest in
favor of an unrelated third party or
title to which is held by an unrelated
third party and such Part is leased or
conditionally sold to Lessee.
Lessor Lien (a) any Security Interest from time to
time created by or arising through
Lessor or any Financing Party in
connection with the financing or
refinancing of the Aircraft;
(b) any other Security Interest in
respect of the Aircraft that
results from acts or omissions of,
or claims against, Lessor or any
Financing Party not related to the
operation of the Aircraft or the
transactions contemplated by or
permitted under this Agreement; and
(c) Security Interests in respect of
the Aircraft for Non-Indemnified
Taxes.
LLPs life limited Parts.
Maintenance Program an Aviation Authority approved
maintenance program for the Aircraft
encompassing scheduled maintenance,
condition monitored maintenance and/or
on-condition maintenance of Airframe,
Engines and Parts, including servicing,
testing, preventative maintenance,
repairs, structural inspections, system
checks, overhauls, approved
modifications, service bulletins,
engineering orders, airworthiness
directives, corrosion control,
inspections and treatments.
Major Checks any C-Check, "C" check, multiple or
phase "C" check, "D" check or annual
heavy maintenance visit or segment
thereof suggested for commercial
aircraft of the same model as the
Aircraft by the Manufacturer (however
denominated in the Approved Maintenance
Program).
Mandatory Equipment Change an Equipment Change that is required by
or performed to comply with an
airworthiness directive of the Aviation
Authority or the FAA or a Manufacturer's
service bulletin
Manufacturer The Boeing Company, a Delaware
corporation with a place of business in
Seattle, Washington.
Minimum Liability Coverage $500,000,000.00 on each occurrence.
Mortgage any chattel mortgage or security
agreement entered into between Lessor,
as debtor, and any Mortgagee, as secured
party, whereby Lessor grants to such
Mortgagee a first priority security
interest in the Aircraft and its right,
title and interest in the Operative
Documents.
Mortgagee any mortgagee under a Mortgage.
MPD for any manufacturer, such
manufacturer's Maintenance Planning
Document.
Non-Indemnified Taxes (a) Taxes imposed as a direct result of
activities of any Tax Indemnitee in
the jurisdictions imposing the
liability unrelated to such Tax
Indemnitee's dealings with Lessee
pursuant to this Agreement or to
the transactions contemplated by
this Agreement or the operation of
the Aircraft by Lessee;
(b) Taxes imposed on the income,
profits or gains of any Tax
Indemnitee (i) by any Federal
Government Entity in the United
States of America, (ii) by any
Government Entity in the
jurisdictions where such Tax
Indemnitee is incorporated, formed
or organized or has its principal
place of business, or (iii) by any
Government Entity in any other
jurisdiction where such Tax
Indemnitee is liable for such Taxes
and such liability has or would
have arisen in the absence of the
transactions contemplated by this
Agreement;
(c) Taxes imposed with respect to any
period commencing or event
occurring before the date of this
Agreement or after the Expiry Date
and unrelated to any Tax
Indemnitee's dealings with Lessee
pursuant to this Agreement or to
the transactions contemplated by
this Agreement;
(d) Taxes imposed as a direct result of
the sale or other disposition of
the Aircraft, unless such sale or
disposition occurs as a consequence
of an Event of Default;
(e) Taxes imposed by a taxing
jurisdiction for a particular tax
period in which none of the
following is true for that tax
period: (i) the operation,
registration, location, presence or
use of the Aircraft, the Airframe,
any Engine or any Part thereof in
such jurisdiction, (ii) the place
of incorporation, commercial
domicile or other presence in such
jurisdiction of Lessee, any
sublessee or any user of or Person
in possession of the Aircraft, the
Airframe, any Engine or any Part
thereof in such jurisdiction, or
(iii) any payments made under this
Agreement and related documents
being made from such jurisdiction;
(f) Taxes to the extent caused by the
gross negligence or willful
misconduct of any Tax Indemnitee;
and
(g) Taxes to the extent caused by a
failure by any Tax Indemnitee to
furnish in a timely manner notice
or information which it is required
to furnish to Lessee by the terms
of this Agreement.
Operative Documents this Agreement, the Certificate of
Acceptance and the Certificate of
Delivery Condition.
Option Price $750,000
Part whether or not installed on the
Aircraft:
(a) any component, furnishing or
equipment (other than a complete
Engine) furnished with, installed
on or appurtenant to the Airframe
and Engines on Delivery; and
(b) any other component, furnishing or
equipment (other than a complete
Engine)
title to which has, or should have,
passed to Lessor pursuant to this
Agreement,
but excludes any such items title to
which has, or should have, passed to
Lessee pursuant to Section 8.17(c) and
any Lessee Installed Part.
Permitted Lien (a) any lien for Taxes not assessed or,
if assessed, not yet due and
payable, or being contested in good
faith by appropriate proceedings;
(b) any lien of a repairer, mechanic,
carrier, hangar keeper, unpaid
seller or other similar lien
arising in the ordinary course of
business or by operation of law in
respect of obligations which are
not overdue in accordance with
Applicable Law (or, if applicable,
generally accepted accounting
principles and practices in the
relevant jurisdiction) or are being
contested in good faith by
appropriate proceedings; and
(c) any Lessor Lien;
but only if, in the case of (a) and (b),
(i) adequate reserves have been provided
by Lessee for the payment of the Taxes
or obligations in accordance with
generally accounting principles and
practices in the relevant jurisdiction;
and (ii) such proceedings, or the
continued existence of the lien, do not
give rise to any reasonable likelihood
of the sale, forfeiture or other loss of
the Aircraft or any interest therein or
of criminal liability on the part of
Lessor or any Financing Party.
Person any individual, corporation,
partnership, limited liability company,
limited liability partnership, joint
venture, association, joint stock
company, trust, unincorporated
organization or Government Entity.
Post-Delivery Modifications the fuselage sanding and painting, and
the installation of navigational
instrumentation not installed on the
Aircraft on the Delivery Date but
required in order to register the
Aircraft in the State of Registration,
as described more fully on Schedule 5.
Previous Operator Southwest Airlines, Inc.
Redelivery Location Bratislava Airport, Slovakia or any
other location to which Lessor and
Lessee may agree in writing.
Reimbursable Expenses collectively, Airframe Reimbursable
Expenses, APU Reimbursable Expenses,
Engine Reimbursable Expenses and Landing
Gear Reimbursable Expenses.
Rent collectively, all Basic Rent, Additional
Rent and Supplemental Rent.
Rent Date the Delivery Date and the corresponding
day of each calendar month during the
Term or, for any calendar month that
does not have a corresponding day, the
last day of such calendar month.
Rental Period each period ascertained in accordance
with Section 5.2.
Scheduled Delivery Date August 25, 2000 or such other date
mutually agreed by Lessor and Lessee.
Scheduled Expiry Date the third anniversary of the Delivery
Date.
Security Deposit shall mean the amount of $225,000.
Security Interest any mortgage, charge, pledge, lien,
assignment, hypothecation, right of
set-off, or any agreement or
arrangement having the effect of
creating a security interest.
Special Slovakian Counsel Alianciaadvokatov, Advokatska
Kancelaria, JUDr. Gerta Flasikova.
SRM the Manufacturer's structural repair
manual.
State of Incorporation Slovakia.
State of Registration Slovakia.
Subsidiary (a) in relation to any reference to
accounts, any company wholly or
partially owned by Lessee whose
accounts are consolidated with the
accounts of the Lessee in
accordance with accounting
principles generally accepted
under accounting standards of the
State of Incorporation; and
(b) for any other purpose, an entity
from time to time:
(i) of which another has direct
or indirect control or owns
directly or indirectly more
than 50% of the voting share
capital; or
(ii) which is a direct or
indirect subsidiary of
another under the laws of
the jurisdiction of its
incorporation.
Supplemental Rent all amounts, liabilities and
obligations (other than Basic Rent and
Additional Rent) that Lessee assumes or
agrees to pay under this Agreement to
Lessor or any other Person, including
payment of deposits, indemnities and
the Agreed Value.
Tax Indemnitees Lessor, Trust Company, Beneficiary, any
Financing Party and their respective
successors and assigns.
Taxes all present and future taxes, levies,
imposts, duties or charges in the
nature of taxes, whatever and wherever
imposed, including customs duties,
value added taxes or similar taxes and
any franchise, transfer, sales, use,
business, occupation, excise, personal
property, stamp or other tax or duty
imposed by any national or local taxing
or fiscal authority or agency, together
with any withholding, penalties,
additions to tax, fines or interest
thereon or with respect thereto.
Term the period commencing on the Delivery
Date and ending on the Expiry Date or
any later date pursuant to Clause 12.4.
Total Loss with respect to the Airframe:
(a) the actual, arranged or
constructive total loss of the
Airframe (including any damage to
the Airframe which results in an
insurance settlement on the basis
of a total loss, or requisition
for use or hire which results in
an insurance settlement on the
basis of a total loss);
(b) the Airframe being destroyed,
damaged beyond repair or
permanently rendered unfit for
normal use for any reason
whatsoever;
(c) the requisition of title, or
other compulsory acquisition,
capture, seizure, deprivation,
confiscation or detention for any
reason of
the Airframe by the government of
the State of Registration
(whether de jure or de facto),
but excluding requisition for use
or hire not involving requisition
of title; or
(d) the hi-jacking, theft,
condemnation, confiscation,
seizure or requisition for use or
hire of the Airframe which
deprives any Person permitted by
this Agreement to have possession
and/or use of the Airframe for
more than 60 consecutive days.
Total Loss Date (a) in the case of an actual total
loss, the actual date on which
the loss occurs or, if such date
is unknown, the day on which the
Aircraft was last heard of;
(b) in the case of any of the events
described in sub-paragraph (a) of
the definition of "Total Loss"
(other than an actual total
loss), the earlier of (i) 30 days
after the date on which notice
claiming such total loss is given
to the relevant insurers, and
(ii) the date on which such loss
is admitted or compromised by the
insurers;
(c) in the case of any of the events
described in sub-paragraph (b) of
the definition of "Total Loss",
the date on which such
destruction, damage or rendering
unfit occurs;
(d) in the case of any of the events
described in sub-paragraph (c) of
the definition of "Total Loss",
the date on which the relevant
requisition of title or other
compulsory acquisition, capture,
seizure, deprivation,
confiscation or detention occurs;
(e) in the case of any of the events
described in sub-paragraph (d) of
the definition of "Total Loss",
the expiry of the period of 60
days referred to in such sub-
paragraph (d);
and, in each case, the Total Loss shall
be deemed to have occurred at noon
Greenwich Mean Time on such date.
Trust Agreement Trust Agreement No. III, dated as of
December 30, 1991, between Trust
Company and Beneficiaries.
Voluntary Equipment Change an Equipment Change other than a
Mandatory Equipment Change.
1.2 Interpretation
--------------
(a) In this Agreement, unless the contrary intention is stated, a
reference to:
(i) each of "Lessor", "Lessee", "Financing Party" or any other
Person includes without prejudice to the provisions of
this Agreement any successor in title to it and any
permitted assignee;
(ii) words importing the plural shall include the singular and
vice versa;
(iii) the term "including", when used in this Agreement, means
"including without limitation" and "including but not
limited to";
(iv) any document shall include that document as amended,
novated or supplemented from time to time unless expressly
stated to the contrary;
(v) a law (1) includes any statute, decree, constitution,
regulation, order, judgment or directive of any Government
Entity; (2) includes any treaty, pact, compact or other
agreement to which any Government Entity is a signatory or
party; (3) includes any judicial or administrative
interpretation or application thereof; and (4) is a
reference to that provision as amended, substituted or re-
enacted; and
(b) A "Section", "Schedule" or "Exhibit" is a reference to a section
of, a schedule to or an exhibit to this Agreement.
(c) The headings in this Agreement are to be ignored in construing
this Agreement.
2. REPRESENTATIONS and WARRANTIES
------------------------------
2.1 Lessee's Representations and Warranties
---------------------------------------
Lessee represents and warrants to Lessor as follows:
(a) Status: Lessee is a company duly organized, validly existing and in
------
good standing under the laws of the State of Incorporation, has the
corporate power to own its assets and carry on its business as it is
being conducted and is (or will at the relevant time be) the holder of
all necessary air transportation licenses required in connection
therewith and with the use and operation of the Aircraft.
(b) Power and Authority: Lessee has the corporate power to enter into and
-------------------
perform, and has taken all necessary corporate action to authorize the
entry into, performance and delivery of, each of the Operative
Documents and the transactions contemplated by the Operative
Documents.
(c) Legal validity: Each of the Operative Documents constitutes Lessee's
--------------
legal, valid and binding agreement, enforceable against Lessee in
accordance with its terms.
(d) Non-conflict: The entry into and performance by Lessee of, and the
------------
transactions contemplated by, the Operative Documents do not and will
not:
(i) conflict with any Applicable Laws binding on Lessee;
(ii) conflict with the constitutional documents of Lessee; or
(iii) conflict with or result in default under any document which is
binding upon Lessee or any of its assets, or result in the
creation of any Security Interest over any of its assets, other
than Permitted Liens.
(e) Authorization: All authorizations, consents and registrations required
-------------
by, and all notifications to be given by, Lessee in connection with
the entry into,
performance, validity and enforceability of, the Operative
Documents and the transactions contemplated by the Operative
Documents have been (or will on or before Delivery have been)
obtained, effected or given (as appropriate) and are (or will on
their being obtained or effected be) in full force and effect.
(f) No Immunity:
-----------
(i) Lessee is subject to civil commercial law with respect to
its obligations under this Agreement.
(ii) Neither Lessee nor any of its assets is entitled to any
right of immunity and the entry into and performance of the
Operative Documents by Lessee constitute private and
commercial acts.
(g) Financial Statements: the audited consolidated financial
--------------------
statements of Lessee and its Subsidiaries most recently delivered
to Lessor:
(i) have been prepared in accordance with accounting principles
and practices generally accepted and consistently applied in
the State of Registration; and
(ii) fairly present the consolidated financial condition of the
Lessee and its Subsidiaries as at the date to which they
were drawn up and the consolidated results of operations of
the Lessee and its Subsidiaries for the periods covered by
such statements.
(h) Restricted Countries: Lessee does not hold a contract or other
--------------------
obligation to operate the Aircraft to or from any of the
countries that are the subject of sanctions under U.N. security
council directives.
(i) Pari Passu: The obligations of Lessee under this Agreement rank
----------
at least pari passu with all other present and future unsecured
and unsubordinated obligations (including contingent obligations)
of Lessee, with the exception of such obligations as are
mandatorily preferred by law and not by virtue of any contract.
2.2 Lessee's Further Representations and Warranties
-----------------------------------------------
Lessee further represents and warrants to Lessor that:
(a) No Default:
----------
(i) No Event of Default has occurred and is continuing or might
reasonably be expected to result from the entry into or
performance of any of the Operative Documents.
(ii) No event has occurred and is continuing that constitutes, or
with the giving of notice, lapse of time, determination of
materiality or fulfilment of any other applicable condition,
or any combination of the foregoing, might constitute, a
material default under any document that is binding on
Lessee or any assets of Lessee.
(b) Registration:
------------
(i) It is not necessary or advisable under the laws of the State
of Incorporation, the State of Registration or the Habitual
Base in order to ensure the validity, effectiveness and
enforceability of the Operative Documents or to establish,
perfect or protect the property rights of Lessor or any
Financing Party in the Leased Property that any instrument
relating thereto other than this Agreement and the
Certificate of Acceptance be filed, registered or recorded
or that any other action be taken or, if any such filings,
registrations, recordings or other actions are necessary,
the same have been effected or will have been effected on or
before Delivery.
(ii) Under all Applicable Laws, including the laws of the State
of Incorporation, the State of Registration and the Habitual
Base, the property rights of Lessor and any Financing
Parties notified to Lessee in the Leased Property have been
fully established, perfected and protected and this
Agreement will have priority in all respects over the claims
of all creditors of Lessee, with the exception of such
claims as are mandatorily preferred by law and not by virtue
of any contract.
(c) Litigation: No litigation, arbitration or administrative
----------
proceedings are pending or, to Lessee's knowledge, threatened
against Lessee which, if adversely determined, would have a
material adverse effect upon its financial condition or business
or its ability to perform its obligations under the Operative
Documents.
(d) Taxes: Lessee has delivered all necessary returns and payments
-----
due to all tax authorities having jurisdiction over Lessee,
including those in the State of Incorporation, the State of
Registration and the Habitual Base, and Lessee is not required by
law to deduct or withhold any Taxes from any payments under this
Agreement.
(e) Material Adverse Change: No material adverse change in the
-----------------------
financial condition of Lessee has occurred since the date of the
financial statements most recently provided to Lessor on or
before the Delivery Date.
(f) Information: The financial and other information furnished by
-----------
Lessee in connection with the Operative Documents does not
contain any untrue statement of material fact or omit to state
any fact the omission of which makes the statements therein, in
light of the circumstances under which they were made, materially
misleading, and does not omit to disclose any material matter.
All forecasts and opinions contained in the financial and other
information furnished by Lessee in connection with the Operative
Documents were honestly made on reasonable grounds after due and
careful inquiry by Lessee.
(g) Air Traffic Control: Lessee is not in default in the payment of
-------------------
any sums due by Lessee to any relevant air traffic control
authority in respect of all aircraft operated by Lessee.
2.3 Repetition
----------
The representations and warranties in Section 2.1 and Section 2.2 will
survive the execution of this Agreement. The representations and
warranties contained in Section 2.1 and Section 2.2 will be deemed to
be repeated by Lessee on Delivery with reference to the facts and
circumstances then existing. The representations and warranties
contained in Section 2.1 will be deemed to be repeated by Lessee on
each Basic Rent Date as if made with reference to the facts and
circumstances then existing.
2.4 Lessor's Representations and Warranties
---------------------------------------
Lessor represents and warrants to Lessee that:
(a) Status: The Trust Company is a national banking association duly
------
formed and validly existing under the federal banking laws of the
United States of America
and has the power to act as trustee pursuant to the Trust Agreement.
Lessor is a duly created trust pursuant to the Trust Agreement and has
the power to own the Leased Property and carry on the business
contemplated of Lessor under the Operative Documents.
(b) Power and Authority: Lessor has the trust power to enter into and
-------------------
perform, and has taken all necessary action to authorize the entry
into, performance and delivery of, the Operative Documents and the
transactions contemplated by the Operative Documents.
(c) Enforceability: Each of the Operative Documents constitutes Lessor's
--------------
legal, valid and binding agreement, enforceable against Lessor in
accordance with its terms.
(d) Non-conflict: The entry into and performance by Lessor of, and the
------------
transactions contemplated by, the Operative Documents do not and will
not:
(i) conflict with any Applicable Laws binding on Lessor;
(ii) conflict with the Trust Agreement; or
(iii) conflict with or result in a default under any document which is
binding upon Lessor or any of its assets.
(e) Authorization: So far as concerns the obligations of Lessor, all
-------------
authorizations, consents, registrations and notifications required in
connection with the entry into, performance, validity and
enforceability of, and the transactions contemplated by, the Operative
Documents by Lessor have been (or will on or before Delivery have
been) obtained or effected (as appropriate) and are (or will on their
being obtained or effected be) in full force and effect.
(f) No Immunity:
-----------
(i) Lessor is subject to civil commercial law with respect to its
obligations under the Operative Documents.
(ii) Neither Lessor nor any of its assets is entitled to any right of
immunity and the entry into and performance of the Operative
Documents by Lessor constitute private and commercial acts.
(g) Right to Lease: On the Delivery Date, Lessor shall have the right
--------------
to lease the Aircraft to Lessee under this Agreement.
2.5 Repetition
----------
The representations and warranties in Section 2.4 will survive the
execution of this Agreement. The representations and warranties
contained in Section 2.4 will be deemed to be repeated by Lessor on
Delivery and on each subsequent Basic Rent Date as if made with
reference to the facts and circumstances then existing.
3. CONDITIONS PRECEDENT
--------------------
3.1 Lessor's Documentary Conditions Precedent
-----------------------------------------
Lessor's obligation to lease the Leased Property to Lessee under this
Agreement is subject to the receipt of the following by Lessor from
Lessee on or before Delivery in form and substance satisfactory to
Lessor, provided, that it shall not be a condition precedent to the
obligations of Lessor that any document be produced, or action taken,
which is to be produced or taken by Lessor or any Person within its
control:
(a) Constitutional Documents: an officially verified copy of the
------------------------
constitutional documents of Lessee as amended to the Delivery
Date, together with an English translation thereof and the actual
Extract from the commercial registry of the Lessee;
(b) Resolutions: a true copy of a resolution of the board of
-----------
directors (or the equivalent) of Lessee approving the terms of,
and the transactions contemplated by, the Operative Documents to
which it is a party, resolving that it enter into the Operative
Documents to which it is a party, and authorizing a specified
individual or individuals to execute the Operative Documents to
which it is a party and, in the case of Lessee, accept delivery
of the Aircraft on its behalf;
(c) Operative Documents: a copy of each of the Operative Documents,
-------------------
duly executed and, if necessary, notarized by Lessee, and the
original chattel paper copy of this Agreement;
(d) Opinions: (i) an opinion, in the form set out in Exhibit D, in
--------
respect of Lessee's obligations under the Operative Documents
issued by independent legal counsel to Lessee acceptable to
Lessor, and (ii) an opinion from Special Slovakian Counsel to
Lessor as to such matters as Lessor may reasonably request;
(e) Approvals: evidence of the issuance of each approval, license and
---------
consent which may be required in relation to, or in connection
with, the performance by Lessee of its obligations under the
Operative Documents;
(f) Filings and Registrations: evidence that all filings,
-------------------------
registrations, recordings and other actions have been taken or
made that are necessary or advisable to ensure the validity,
effectiveness and enforceability of the Operative Documents and
to protect the property rights of Lessor in the Leased Property;
(g) Licenses: copies of Lessee's air transport license, air
--------
operator's certificate and all other licenses, certificates and
permits required by Lessee in relation to, or in connection with,
the operation of the Aircraft;
(h) Certificate: a certificate of a duly authorized officer of
-----------
Lessee:
(i) setting out a specimen of each signature of an officer of
Lessee referred to in Section 3.1(b); and
(ii) certifying that each copy of a document specified in this
Section 3.1 is correct, complete and in full force and
effect;
(i) Insurances: certificates of insurance, certificates of
----------
reinsurance, insurance brokers' undertakings, reinsurance
broker's undertakings and other evidence satisfactory to Lessor
that Lessee is taking the required steps to ensure due compliance
with the provisions of this Agreement as to insurances with
effect on and after Delivery;
(j) Registration; Filings: evidence that the Aircraft has been
---------------------
validly registered under the laws of the State of Registration
and that all filings, registrations, recordings and other actions
have been or will be taken which are necessary to ensure the
validity, effectiveness and enforceability of the Operative
Documents and to protect the rights of Lessor in the Leased
Property;
(k) Air Traffic Control: if requested by Lessor, a letter from Lessee
-------------------
addressed to Eurocontrol or any other designated air traffic
control authority pursuant to which Lessee authorizes such
authority to issue to Lessor, upon Lessor's request from time to
time, a statement of account of all sums due by Lessee to such
authority in respect of all aircraft (including the Aircraft)
operated by Lessee;
(l) Deregistration Power of Attorney: an irrevocable power of
--------------------------------
attorney in substantially the form attached as Exhibit E;
(m) Acceptance by Process Agent: a letter from the process agent
---------------------------
appointed by Lessee pursuant to Section 15.4(a) accepting its
appointment;
(n) Aviation Authority Letter: a letter from the appropriate Aviation
-------------------------
Authority confirming that, upon certification by Lessor that an
Event of Default under this Agreement has occurred and is
continuing, and a request for deregistration by Lessor, the
Aviation Authority will deregister the Aircraft and authorize the
export of the Aircraft from Slovakia;
(o) General: such other documents as Lessor may reasonably request.
-------
3.2 Lessor's Other Conditions Precedent
-----------------------------------
The obligation of Lessor to deliver and lease the Leased Property
under this Agreement is also subject to the following additional
conditions precedent:
(a) Representations and Warranties: the representations and
------------------------------
warranties of Lessee under Sections 2.1 and 2.2 are correct and
would be correct if repeated on Delivery;
(b) Payments: all payments due to Lessor under this Agreement on or
--------
before Delivery, including the Basic Rent due on the Delivery
Date from the Escrow Agent and the Security Deposit, shall have
been received by Lessor; and
(c) Repossession Insurance: Lessor shall received satisfactory
----------------------
evidence of the existence of a policy in Lessor's favor of
repossession insurance commonly known as "Political Risk"
insurance.
3.3 Lessor's Waiver
---------------
The conditions specified in Sections 3.1 and 3.2(a) and (b) are for
the sole benefit of Lessor and may be waived or deferred in whole or
in part and with or without conditions by Lessor. If any of those
conditions are not satisfied on or before Delivery and Lessor (in its
absolute discretion) nonetheless agrees to deliver the Leased Property
to Lessee, then Lessee will ensure that those conditions are fulfilled
within one month after the Delivery Date and Lessor may treat as an
Event of Default the failure of Lessee to do so.
3.4 Lessee's Conditions Precedent
-----------------------------
Lessee's obligation to accept the Leased Property on lease from Lessor
under this Agreement is subject to the satisfaction by Lessor of the
following conditions precedent:
(a) Certificate: the receipt by Lessee of a certificate of a duly
-----------
authorized officer of Lessor setting out a specimen of the
signature of each individual that executes an Operative Document
on behalf of Lessor;
(b) Representations and Warranties: the representations and
------------------------------
warranties of Lessor under Section 2.4 are correct and would be
correct if repeated on Delivery;
(c) Registration: Lessee is obligated to provide Lessor with all
------------
necessary co-operation in the registration procedure in
compliance with the Aviation Act No. 143/1998 coll, as amended by
the Republic of Slovakia and Lessee will provide evidence that
the Aircraft has been validly registered under the laws of the
State of Registration; provided, that any costs associated with
the registration of the Aircraft or this Agreement with the
Aviation Authority shall be the responsibility of the Lessee; and
(d) Delivery Condition: the Aircraft shall be in the condition set
------------------
forth on Schedule 2;
3.5 Lessee's Waiver
---------------
The conditions specified in Section 3.4 are for the sole benefit of
Lessee and may be waived or deferred in whole or in part and with or
without conditions by Lessee. If any of those conditions are not
satisfied on or before Delivery and Lessee (in its absolute
discretion) nonetheless agrees to lease the Leased Property from
Lessor, then Lessor will ensure that those conditions are fulfilled
within one month after the Delivery Date.
4. COMMENCEMENT
------------
4.1 Leasing
-------
(a) Lessor will lease the Leased Property to Lessee and Lessee will
take the Leased Property on lease in accordance with this
Agreement for the duration of the Term.
(b) Lessor and Lessee intend that this Agreement constitute a "true
lease" and a lease for all United States federal income tax
purposes.
4.2 Delivery
--------
(a) Delivery Condition: Lessor shall deliver the Leased Property "as
is, where is and with all faults", except for any items set forth
on Annex 2 to the Certificate of Delivery Condition and any other
items agreed in writing by Lessor and Lessee.
(b) Delivery Inspection: Before the Delivery Date, Lessor shall make
the Leased Property available for Lessee to conduct a ground
inspection of the Aircraft and an inspection of the Aircraft
Documents to its satisfaction (collectively, the "Ground
Inspection"). The Ground Inspection of the Aircraft shall include
the following:
(i) Lessor shall perform a videotape borescope inspection of all
accessible gas path sections of each Engine (accessible
whether by borescope port or other means), including the low
pressure and high pressure compressors and the turbine area
of such Engine, and Lessee's representatives will be
entitled to observe such borescope inspection. All items
beyond the Engine Manufacturer's maintenance manual
serviceable limits will be rectified at Lessor's sole cost
and expense.
(ii) Lessor shall perform a maximum power assurance run and
condition, acceleration and bleed valve scheduling checks
on each Engine in accordance with the Engine Manufacturer's
maintenance manual. Lessor will record and evaluate each
Engine's performance, with Lessee's representatives
entitled to be present. Each Engine shall pass such tests
without operational limitations throughout the operating
envelope in accordance with the Engine Manufacturer's
maintenance manual.
(iii) Lessor shall perform a videotape borescope inspection of
the APU, and Lessee's representatives will be entitled to
observe such borescope inspection. All items beyond the
manufacturer's recommended limits will be rectified at
Lessor's sole cost and expense.
(c) Aircraft Documents: The Aircraft will be accompanied by the
------------------
Aircraft Documents listed on Part 2 of Schedule 1. Lessor will
also provide to Lessee all historical and current maintenance
manuals, aircraft and engine technical records and data, and
other aircraft documentation in the possession of Lessor. Upon
the request of Lessee, Lessor shall use reasonable efforts to
obtain any required maintenance and technical records or
documents not in its custody.
(d) Acceptance Flight: Immediately prior to acceptance of the
-----------------
Aircraft, on the Delivery Date, Lessor shall cause an acceptance
flight of the Aircraft to be performed of up to one hour at
Lessor's cost in accordance with the test flight procedures of
the Manufacturer and Engine Manufacturer (with up to two
representatives of Lessee on-board as observers), and such
further acceptance flights as may be necessary in the event that
the first or subsequent flights do not confirm that the Aircraft
complies with the delivery conditions set forth in Schedule 2.
(e) Correction of Discrepancies: The obligation of Lessee to lease
---------------------------
the Leased Property from Lessor is subject to Lessor delivering
the Leased Property to Lessee in compliance with the conditions
set forth on Schedule 2. If Lessor corrects all material
discrepancies from the conditions set forth on Schedule 2 before
Delivery, or if Lessor and Lessee agree that Lessor will correct
or pay for their correction as set forth on Annex 2 to the
Certificate of Delivery Condition, then Lessee shall accept the
Leased Property. If, on the Scheduled Delivery Date, the Aircraft
is not, in all material respects, in the condition set forth in
Schedule 2 and Lessor and Lessee do not agree upon the correction
of such material discrepancies
within 30 days after the Scheduled Delivery Date, then Lessee may
by notice to the Lessor terminate this Agreement, in which event
neither Lessor nor Lessee shall have any further obligations
under this Agreement except as set forth in Section 7.6. If
Lessee fails to give any such termination notice within 34 days
after the Scheduled Delivery Date, Lessee shall be deemed to have
accepted the Leased Property for all purposes of this Agreement.
4.3 Delayed Delivery
----------------
If, as a result of the occurrence of damage to the Aircraft not
constituting a Total Loss or any Excusable Delay, Lessor delays in the
delivery of, or fails to deliver, the Aircraft under this Agreement on
the Scheduled Delivery Date, and so long as such failure does not
result from the gross negligence or wilful misconduct of Lessor, then
in any such case:
(a) Lessor will not be responsible for any losses, including loss of
profit, costs or expenses arising from or in connection with the
delay or failure suffered or incurred by Lessee; and
(b) if the Aircraft is not in the condition provided in Section
4.2(e) within 30 days after the Scheduled Delivery Date, either
Lessor or Lessee may terminate this Agreement upon giving five
Business Days prior written notice to the other, in which event
neither Lessor nor Lessee shall have any further obligations
under this Agreement except as set forth in Section 7.6.
4.4 Acceptance and Risk
-------------------
(a) The Leased Property will be delivered to, and will be accepted
by, Lessee at the Delivery Location on the Delivery Date
immediately following satisfaction of the conditions precedent
specified in Sections 3.1, 3.2 and 3.4 (or their waiver or
deferral by the party entitled to grant such waiver or deferral).
(b) Immediately following satisfaction of the conditions precedent
specified in Sections 3.1, 3.2 and 3.4 (or their waiver or
deferral by the party entitled to grant such waiver or deferral),
Lessee and Lessor shall forthwith complete Annex 1 to the
Certificate of Delivery Condition (specifying the maintenance
status of the Airframe, Engines, APU and Landing Gear) and Lessor
and Lessee shall sign and deliver to each other the Certificate
of Acceptance and the Certificate of Delivery
Condition. Delivery of the signed Certificate of Acceptance to Lessor
shall constitute deemed delivery of the Aircraft to Lessee.
(c) On and from Delivery, the Leased Property will be in every respect at
the sole risk of Lessee, which will bear all risk of loss, theft,
damage or destruction to the Leased Property from any cause
whatsoever.
(d) Concurrently with Delivery, Lessor shall cause this Agreement and the
Certificate of Acceptance to be registered with the Aviation
Authority.
5. PAYMENTS
--------
5.1 Security Deposits
-----------------
(a) Security Deposit: Prior to the execution of this Agreement, Lessee has
---------------------
deposited with Lessor the amount of $75,000, and upon execution of this
Agreement, Lessee shall pay to Lessor in immediately available funds the
additional amount of $150,000. Said sums shall constitute the Security
Deposit hereunder and shall he held and applied by Lessor as provided in
this Agreement.
(b) Application of Security Deposit: If an Event of Default occurs and for
------------------------------------
as long as it continues, Lessor may (but shall not be obliged to) apply all
or any part of the Security Deposit against or towards satisfaction of any
sums due and payable or that subsequently become due and payable to Lessor
under this Agreement or to compensate Lessor for any sums which it may, in
its discretion, at any time advance or expend as a result of any such Event
of Default. Notwithstanding any such use or application by Lessor, Lessee
shall remain in default under this Agreement until the full amount owed by
Lessee, including interest accrued thereon pursuant to Section 5.12, shall
have been paid to Lessor. If Lessor uses or applies all or any portion of
the amount available under the Security Deposit, Lessee shall immediately,
on demand of Lessor made from time to time, pay to Lessor an amount in cash
equal to the amount so used or applied pursuant to this Section 5.1(b) so
that the total amount held by Lessor in accordance with Section 5.1(a)
shall at all times equal the full amount of the Security Deposit.
5.2 Rental Periods
--------------
The first Rental Period will commence on the Delivery Date and each
subsequent Rental Period will commence on the date succeeding the last day
of the previous Rental Period. Each Rental Period will end on the date
immediately preceding the next succeeding Rent Date, except that if a
Rental Period would otherwise overrun the Expiry Date, it will end on the
Expiry Date.
5.3 Basic Rent
----------
(a) Time of Payment: For each Rental Period during the Term, Lessee
---------------
shall pay to Lessor or its order Basic Rent in advance on each
Basic Rent Date. Payment must be initiated adequately in advance of
the Basic Rent Date to ensure that Lessor receives credit for the
payment on the Basic Rent Date.
(b) Amount: The Basic Rent payable in respect of each Rental Period
------
will be the Basic Rent Amount.
5.4 Additional Rent
---------------
(a) Amount: Subject to the proviso to Section 7.3(e)(iii), Lessee will
------
pay to Lessor Additional Rent in relation to each Rental Period (or
portion thereof) during the Term on the 10th day following the end
of that Rental Period (but not later than the Expiry Date) and
within ten days following the Delivery Date in relation to the
acceptance flight referenced in Section 4.2(d) and any ferry flight
from the Delivery Location as follows:
(i) in respect of the Airframe, Lessee shall pay the Airframe
Additional Rent Rate for each Flight Hour flown by the Airframe
during that Rental Period ("Airframe Additional Rent");
(ii) in respect of each Engine, Lessee shall pay the Engine
Additional Rent Rate for each Flight Hour operated by each
Engine during that Rental Period ("Engine Additional Rent");
(iii) in respect of the Landing Gear, Lessee shall pay the Landing
Gear Additional Rent Rate for each Flight Hour flown by the
Airframe during that Rental Period ("Landing Gear Additional
Rent"); and
(iv) in respect of the APU, Lessee shall pay the APU Additional Rent
Rate for each Flight Hour flown by the Airframe during that
Rental Period ("APU Additional Rent");
(b) Adjustment: Lessor or Lessee may adjust the amount of Additional Rent
----------
after the Delivery Date by notice to Lessee not more frequently than
annually based on the following:
(i) by reference to increases in the Consumer Price Index as
released by the Bureau of Labor Statistics, United States
Department of Labor since the date of this Agreement;
(ii) by reference to Manufacturer's and Engine Manufacturer's
recommendations, industry experience, any change in the
operational environment of the Aircraft that materially affects
the cost of maintaining the Aircraft and any change in the
Flight Hour to Cycle ratio of the operation of the Aircraft (it
being understood that the Additional Rent is based on the
assumption that the operation of the Aircraft during the Term
will, on average, be not less than one Flight Hour for each
Cycle); and
(iii) by reference to the Actual Costs experienced by Lessee in the
maintenance of the Aircraft under this Agreement.
5.5 Pledged Moneys:
--------------
(a) Lessor and Lessee intend that the Additional Rent are amounts paid by
Lessee to Lessor in consideration for the use of the Leased Property
by Lessee and the satisfaction of Lessor's obligations under the
Operative Documents and that, when paid, the Additional Rent is
irrevocably and unconditionally the property of Lessor.
(b) Notwithstanding the intent of Lessor and Lessee stated in Section
5.5(a), if and to the extent that the Additional Rent, or any part
thereof, under any Applicable Law or otherwise, is determined to be
security deposits or otherwise the property of
Lessee, or if it is so determined the Additional Rent is a debt owed
to Lessee or that Lessee shall have any interest in the Additional
Rent, then Lessee and Lessor agree that Sections 5.5(b)(i) and (ii)
below shall apply to the Additional Rent as well as to the Security
Deposit (collectively, the "Pledged Moneys"):
(i) To the fullest extent permitted by law and by way of continuing
security, Lessee grants a Security Interest in the Pledged Moneys
and all rights of Lessee to payment thereof, the debt represented
thereby and all interest thereon and/or any and all interest of
Lessee therein to Lessor by way of first priority Security
Interest as security for Lessee's obligations and liability under
the Operative Documents (the "Secured Liabilities"). Except as
expressly permitted under this Agreement, Lessee will not be
entitled to payment of the Pledged Moneys. Lessee will not
assign, transfer or otherwise dispose of all or part of its
rights or interest in the Pledged Moneys and Lessee agrees that
it will enter into any additional documents and instruments
necessary or reasonably requested by Lessor to evidence, create
or perfect Lessor's rights to the Pledged Moneys.
(ii) If Lessee fails to comply with any provision of this Agreement or
any Event of Default has occurred and is continuing, Lessor may
immediately or at any time thereafter, without prior notice to
Lessee:
(1) offset all or any part of Secured Liabilities against the
liabilities of Lessor in respect of the Pledged Moneys; or
(2) apply or appropriate the Pledged Moneys in or towards the
payment or discharge of Secured Liabilities in such order as
Lessor sees fit.
5.6 Payments
--------
(a) All payments of Rent by Lessee to Lessor under this Agreement will be
made for value on the due date, for the full amount due, in Dollars
and in same day funds, settled through the New York Clearing House
System or such other funds as may for the time being be customary for
the settlement in New York City of payments in Dollars by telegraphic
transfer to the following account of Lessor:
Fleet Bank, N.A.
New York, New York
ABA No. 021-200-339
Account No. 9403-530699
Account Name: EFG Rent Escrow
Reference: N57SW
or to such other account in North America or the European Union as
Lessor may direct by at least five Business Days prior written notice.
(b) If any Rent or other payment would otherwise become due on a day which
is not a Business Day, it shall be due on the immediately succeeding
Business Day.
5.7 Gross-up
--------
(a) All payments by Lessee under or in connection with this Agreement will
be made without offset or counterclaim, free and clear of and without
deduction or withholding, except to the extent required by Slovak law,
for or on account of any Taxes (other than Non-Indemnified Taxes that
Lessee is compelled by law to deduct or withhold). Lessee acknowledges
hereby to pay all amounts due hereunder grossed up accordingly in
order that Lessor or the Financing Parties receive the full amount of
Rent or other payments then due hereunder.
(b) All Taxes (other than Non-Indemnified Taxes) in respect of payments
under this Agreement shall be for the account of Lessee.
(c) If Lessee is compelled by law to make payment to an Indemnitee under
or in connection with this Agreement subject to any Tax and such
Indemnitee does not actually receive for its own benefit on the due
date a net amount equal to the full amount provided for under this
Agreement (other than Non-Indemnified Taxes that Lessee is compelled
by law to deduct or withhold), Lessee will pay all necessary
additional amounts to ensure receipt by such Indemnitee of the full
amount (other than Non-Indemnified Taxes that Lessee is compelled by
law to deduct or withhold) provided for under this Agreement.
5.8 Taxation
--------
(a) Lessee will on demand pay and indemnify each Tax Indemnitee against
all Taxes (other than Non-Indemnified Taxes) levied or imposed against
or upon such Tax Indemnitee or Lessee and relating to or attributable
to Lessee, the Operative Documents or the Leased Property directly or
indirectly in connection with the importation, exportation,
registration, ownership, leasing, subleasing, purchase, delivery,
possession, use, operation, repair, maintenance, overhaul,
transportation, landing, storage, presence or redelivery of the
Aircraft or any part thereof or any rent, receipts, insurance
proceeds, income or other amounts arising therefrom.
(b) If any Tax Indemnitee shall, based upon its own reasonable
interpretation of any relevant laws or regulations, realize any Tax
savings (by way of refund, deduction, credit or otherwise) in respect
of any amount with respect to which Lessee shall have made a payment
(or increased payment) pursuant to Section 5.7, 5.9 or 5.11 or shall
have indemnified such Tax Indemnitee pursuant to Section 5.8(a), or in
respect of the occurrence or transaction which gave rise to such
payment or indemnification, and such Tax savings shall not have been
taken into account previously in calculating any indemnity payment
made by Lessee, then such Tax Indemnitee shall, to the extent that it
can do so without prejudice to the retention of the relevant savings
and subject to Lessee's obligations to repay such amount to such Tax
Indemnitee if the relevant savings are subsequently disallowed or
canceled, pay to Lessee such amount as such Tax Indemnitee shall in
its opinion have concluded to be the amount of such Tax savings
(together with, in the case of a refund, any interest received
thereon); provided, that such Tax Indemnitee shall not be obliged to
make any payment to Lessee pursuant to this Section 5.8(b) to the
extent that the amount of any Tax savings in respect of which such
payment is to be made would exceed the aggregate amount of all prior
payments made by Lessee to, on behalf of or as indemnification of such
Tax Indemnitee under this Agreement for Taxes less the amount of all
prior payments made pursuant to this Section 5.8(b) in respect of such
Tax savings. Lessee acknowledges that nothing contained in this
Section 5.8(b) shall interfere with the right of any Tax Indemnitee to
arrange its tax affairs in whatsoever proper manner it thinks fit (or
give Lessee any right to investigate, or impose any obligation on any
Tax Indemnitee to disclose, the same) and, in particular, no Tax
Indemnitee shall be under any obligation to claim any Tax savings in
priority to any other savings
available to it; provided, that subject to the foregoing Lessor shall
use reasonable good faith diligence to realize Tax savings as
described above.
5.9 Value Added Tax
---------------
(a) For purposes of this Section 5.9, "VAT" means value added tax and any
goods and services, sales or turnover tax, imposition or levy of a
similar nature, and "supply" includes anything on or in respect of
which VAT is chargeable.
(b) Lessee shall pay each Tax Indemnitee or the relevant taxing authority,
as the case may be, the amount of any VAT chargeable in respect of any
supply for VAT purposes under this Agreement.
(c) Each amount stated as payable by Lessee under this Agreement is
exclusive of VAT (if any), and if VAT is payable in respect of any
amount payable by Lessee under this Agreement, Lessee shall pay all
such VAT and shall indemnify each Tax Indemnitee against any claims
for the same, and where appropriate Lessee shall increase the payments
that would otherwise be required to be made under this Agreement so
that such Tax Indemnitee is left in the same position as it would have
been had no VAT been payable. Lessee shall provide evidence to Lessor,
if available, in respect of payment of any VAT paid by Lessee with
respect to this Agreement.
5.10 Information
-----------
If Lessee is required by any Applicable Law, or by any third party, to
deliver any report or return in connection with any Taxes, then Lessee will
duly complete the same and, in particular, will not state therein that any
Person other than Lessee is responsible for the use and operation of the
Aircraft and for the Taxes (other than Non-Indemnified Taxes) arising
therefrom, and Lessee will, on request, supply a copy of the report or
return to any Tax Indemnitee. If Lessee requires any information or
cooperation from any Tax Indemnitee in order to satisfy its obligations as
set forth above, such Tax Indemnitee shall promptly furnish such
information or cooperation as Lessee may reasonably request in writing. If
actual notice is given by any taxing authority to Lessor that a report or
return is required to be filed with respect to any Taxes (other than Non-
Indemnified Taxes), Lessor shall promptly notify Lessee of such required
report or return.
5.11 Taxation of Indemnity Payments
------------------------------
(a) If and to the extent that any sums payable to any Tax Indemnitee by
Lessee under this Agreement by way of indemnity are insufficient, by
reason of any Taxes payable in respect of those sums, for such Tax
Indemnitee to discharge the corresponding liability to the relevant
third party (including any taxation authority), or to reimburse such
Tax Indemnitee for the cost incurred by it to a third party (including
any taxation authority), Lessee will pay to such Tax Indemnitee such
sum as will, after the tax liability has been fully satisfied, leave
such Tax Indemnitee with the same amount as it would have been
entitled to receive in the absence of that liability, together with
interest on the amount of the deficit at the Default Rate in respect
of the period commencing on the date on which the payment of taxation
is finally due until payment by Lessee (both before and after
judgment).
(b) If and to the extent that any sums constituting (directly or
indirectly) an indemnity to any Tax Indemnitee but paid by Lessee to
any Person other than such Tax Indemnitee are treated as taxable in
the hands of such Tax Indemnitee, then Lessee will pay to such Tax
Indemnitee such sum as will, after the tax liability has been fully
satisfied, indemnify such Tax Indemnitee to the same extent as it
would have been indemnified in the absence of such liability, together
with interest on the amount payable by Lessee under this Section
5.11(b) at the Default Rate in respect of the period commencing on the
date on which the payment of taxation is finally due until payment by
Lessee (both before and after judgment).
5.12 Default Interest
----------------
If Lessee fails to pay any amount payable under this Agreement on the due
date, Lessee will pay on demand from time to time to any Tax Indemnitee
interest (both before and after judgment) at the Default Rate on such
amount from the due date to the day of payment in full by Lessee to such
Tax Indemnitee. All such interest shall be compounded monthly and
calculated on the basis of the actual number of days elapsed assuming a
year of 360 days.
5.13 Contest
-------
If written claim is made against any Tax Indemnitee for or with respect to
any Taxes (other than Non-Indemnified Taxes), such Tax Indemnitee shall
promptly notify Lessee. If reasonably requested by Lessee in writing within
30 days after such notification, such Tax Indemnitee shall, upon receipt of
indemnity satisfactory to such Tax Indemnitee and at the expense of Lessee
(including all costs, expenses, losses, legal and accountants' fees and
disbursements, penalties and interest), in good faith contest or to the
extent permissible by law allow Lessee to contest in Lessee's or such Tax
Indemnitee's name the validity, applicability or amount of such Taxes by
either (i) resisting payment thereof if practicable and permitted by
Applicable Law, or (ii) if payment is made, using reasonable efforts to
obtain a refund thereof in appropriate administrative and judicial
proceedings, and in the contest of any such claim by any Tax Indemnitee,
such Tax Indemnitee shall apprize Lessee of all material developments with
respect to such contest, shall forward copies of all material submissions
made in such contest and shall materially comply in good faith with any
reasonable request concerning the conduct of any such contest; provided,
that no Tax Indemnitee will be obliged to take any such action:
(a) that such Tax Indemnitee considers, in its reasonable discretion, may
prejudice it; or
(b) that such Tax Indemnitee reasonably considers does not have a
reasonable prospect of success; or
(c) for which Lessee has not made adequate provision to the reasonable
satisfaction of such Tax Indemnitee in respect of the expense
concerned; or
(d) that gives rise to any material likelihood of the Aircraft or any
interest of any Tax Indemnitee in the Aircraft being sold, forfeited
or otherwise lost, or of criminal liability on the part of any Tax
Indemnitee.
If any Tax Indemnitee, in accordance with the foregoing, determines to pay
such Taxes and seek a refund, Lessee will either pay such Taxes on such Tax
Indemnitee's behalf and pay such Tax Indemnitee any amount due with respect
to such payment or will promptly reimburse such Tax Indemnitee for such
Taxes. If any Tax Indemnitee shall obtain a refund of all or any part of
such Taxes paid by Lessee, such Tax Indemnitee shall pay Lessee the amount
of such refund; provided, that such amount shall not be payable before
such time as Lessee shall have made all payments or indemnities to any Tax
Indemnitee then due with respect to Taxes and so long as no Default has
occurred and is continuing. If in addition to such refund any Tax
Indemnitee shall receive an amount representing interest, attorneys fees
or any other amount with respect to such refund, Lessee shall be paid that
proportion of such interest, attorneys fees or any other amount which is
fairly attributable to the Taxes paid by Lessee prior to the receipt of
such refund. No Tax Indemnitee shall enter into a settlement or other
compromise with respect to, or otherwise concede, any claim by a taxing
authority on account of Taxes being contested by Lessee pursuant to this
Section 5.13 without the written consent of Lessee, which consent shall
not be unreasonably withheld, unless such Tax Indemnitee waives its right
to be indemnified by Lessee with respect to such claim (but not with
respect to any future claims).
5.14 Absolute
--------
Lessee's obligations under this Agreement are absolute and unconditional
irrespective of any contingency whatever including (but not limited to):
(a) any right of offset, counterclaim, recoupment, defense or other right
which either party to this Agreement may have against the other;
(b) any unavailability of the Aircraft for any reason, including a
requisition of the Aircraft or any prohibition or interruption of,
interference with or other restriction against Lessee's use, operation
or possession of the Aircraft; provided, however, to the extent the
foregoing constitutes a Total Loss hereunder, the Lessee's obligations
shall be as set forth in Section 11.2 hereof;
(c) any lack or invalidity of title or any other defect in title,
airworthiness, merchantability, fitness for any purpose, condition,
design or operation of any kind or nature of the Aircraft for any
particular use or trade, or for registration or documentation under
the laws of any relevant jurisdiction, or any Total Loss in respect of
or any damage to the Aircraft; provided, however, in the event of a
Total Loss the Lessee's obligations shall be as set forth in
Section 11.2 hereof;
(d) any insolvency, bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar proceedings by or against
Lessor or Lessee;
(e) any invalidity, unenforceability or lack of due authorization of, or
other defect in, this Agreement; or
(f) any other cause which, but for this provision, would or might
otherwise have the effect of terminating or in any way affecting any
obligation of Lessee under this Agreement;
provided always, however, that this Section 5.14 shall be without prejudice
to Lessee's right to claim damages and other relief from the courts in the
event of any breach by Lessor of its obligations under this Agreement, or
in the event that, as a result of any lack or invalidity of title to the
Aircraft on the part of Lessor, Lessee is deprived of its possession of the
Aircraft.
6. MANUFACTURER'S WARRANTIES
6.1 Assignment
----------
Notwithstanding this Agreement and subject to the rights of any Mortgagee
pursuant to a Mortgage or Assignment, Lessor will remain entitled to the
benefit of each warranty, express or implied, and any unexpired customer
and/or product support given or provided in respect of the Aircraft, any
Engine or Part by any manufacturer, vendor, maintenance performer,
subcontractor or supplier. Unless an Event of Default shall have occurred
and be continuing, Lessor hereby authorizes Lessee to pursue any claim
thereunder in relation to defects affecting the Aircraft, any Engine or
Part, and Lessee agrees diligently to pursue any such claim which arises at
its own cost. Lessee will notify Lessor promptly upon becoming aware of any
such claim. Lessor will provide such assistance to Lessee in making a claim
under any such warranties or customer and/or product support as Lessee may
reasonably request, and, if requested by Lessee and at Lessee's expense,
will pursue a claim in its own name where the relevant manufacturer,
vendor, maintenance performer, subcontractor or supplier has refused to
acknowledge Lessee's right to pursue that claim.
6.2 Proceeds
--------
Unless an Event of Default shall have occurred and be continuing, all
proceeds of any such claim as is referred to in Section 6.1 and which
exceed $100,000 will be paid directly to Lessor at the account set forth in
Section 5.6(a), but if and to the extent that such claim relates:
(a) to defects affecting the Aircraft which Lessee has rectified; or
(b) to compensation for loss of use of the Aircraft, an Engine or any Part
during the Term; or
(c) to costs incurred by Lessee in pursuing such claim (whether or not
proceeds of such claim are payable to Lessee);
and provided no Default shall have occurred and be continuing, the proceeds
will be promptly paid to Lessee by Lessor but, in the case of (a), only on
receipt of evidence reasonably satisfactory to Lessor that Lessee has
rectified the relevant defect.
6.3 Parts
-----
Except to the extent Lessor otherwise agrees in a particular case, Lessee
will procure that all engines, components, furnishings or equipment
provided by the manufacturer, vendor, maintenance performer, subcontractor
or supplier as a replacement for a defective Engine or Part pursuant to the
terms of any warranty or customer and/or product support arrangement comply
with Section 8.13(a), are installed on the Aircraft promptly and that title
thereto vests in Lessor in accordance with Section 8.17(a). On installation
those items will be deemed to be an Engine or Part, as applicable.
6.4 Agreement
---------
To the extent any warranties or customer and/or product support relating to
the Aircraft are made available under an agreement between any
manufacturer, vendor, maintenance performer, subcontractor or supplier and
Lessee, this Section 6 is subject to that agreement. However, Lessee will:
(a) pay the proceeds of any claim thereunder that exceed $100,000 to
Lessor at the account set forth in Section 5.6(a) to be applied
pursuant to Section 6.2 and, pending such payment, will hold the claim
and the proceeds on trust for Lessor; and
(b) take all such steps as are necessary and requested by Lessor at the
end of the Term to ensure the benefit of any of those warranties or
customer and/or product support which have not expired are vested in
Lessor (but subject to the rights of any Mortgagee under any
Mortgage).
7. LESSOR'S COVENANTS and DISCLAIMERS
----------------------------------
7.1 Quiet Enjoyment
Provided no Event of Default shall have occurred and be continuing, none of
Lessor, its successors and assigns, any Financing Party or any Person
claiming by, through or on account of any of such parties will interfere
with the quiet use, possession and enjoyment of the Aircraft by Lessee.
7.2 Lessor's Post-Delivery Modifications Contribution
(a) Lessor shall contribute to Lessee a portion of the Actual Cost of the
Post-Delivery Modifications (whether performed before or after
Delivery) as follows:
(i) Lessor shall pay to Lessee the lesser of $40,000 and the Actual
Cost of having the Airframe fuselage sanded and painted in the
Lessee's livery; and
(ii) Lessor shall pay to Lessee the lesser of $40,000 and the Actual
Cost of installing the navigational equipment listed on Schedule
5.
(b) The Post-Delivery Modifications shall be performed by an Agreed
Maintenance Provider, and Lessee's workscope shall be reviewed and
approved in writing by the Lessor. Upon completion of the Post-
Delivery Modifications, Lessee shall submit to Lessor an invoice and
documentation reasonably satisfactory to Lessor evidencing the
completion of such work and the Actual Costs incurred by Lessee. In
connection with any invoice submitted to Lessor pursuant to this
Section 7.2(b), Lessor shall be entitled, before payment, to request
any supporting documentation reasonably necessary and available to
confirm the scope, completion and Actual Cost of the Post-Delivery
Modification work.
(c) Provided no Default has occurred and is continuing, upon the
completion of the Post-Delivery Modifications on the Aircraft, Lessor
shall pay its portion of the Actual Costs of the work as set forth in
Section 7.2(a) within 30 days after submission by Lessee to Lessor of
an invoice and supporting documentation in accordance with Section
7.2(b). Notwithstanding the foregoing sentence, Lessor shall not be
liable to pay any amounts to Lessee for the Actual Cost of
Post-Delivery Modifications in respect of any invoice submitted to
Lessor more than six months after the Delivery Date.
7.3 Lessor's Maintenance Contribution
---------------------------------
(a) Airframe Reimbursable Expenses:
(i) In connection with the performance by Lessee of a Heavy Check on
the Airframe during the Term of this Lease, Lessee's Actual Costs
incurred in completing, with respect to the Airframe, all routine
Heavy Check tasks shall constitute "Airframe Reimbursable
Expenses".
(ii) Before the performance of a Heavy Check on the Airframe, Lessee
shall present written evidence satisfactory to Lessor as to the
workscope to be performed and the payment installments to be made
to any independent Agreed Maintenance Performer that will be
performing such workscope. Upon the accomplishment of a Heavy
Check on the Airframe, Lessee shall present written evidence
satisfactory to Lessor as to the completion of such Heavy Check
and the amount of the Airframe Reimbursable Expenses for approval
by Lessor. Upon receipt of such written evidence, and provided
there then exists no Default, Lessor shall pay to the Agreed
Maintenance Performer performing such work if directed by Lessee
and as required under Lessee's agreement with such independent
repair facility, or to Lessee, an amount equal to the lesser of
(i) the Airframe Reimbursable Expenses for such Heavy Check or
(ii) an amount equal to (1) all Airframe Additional Rent
previously paid by Lessee under this Lease, minus (2) all
previous payments by Lessor under this Section 7.3(a).
(b) Engine Reimbursable Expenses:
----------------------------
(i) In connection with the accomplishment of any CER for any Engine
during the Term requiring an Engine Shop Repair, including any
premature removal of an Engine due to accelerated performance
deterioration revealed by Lessee's trend monitoring data and
replacement of LLPs during any such Engine Shop Visit, Lessee's
Actual Cost incurred in completing such CER shall constitute
"Engine Reimbursable Expenses".
(ii) Before the performance of a CER on an Engine, Lessee shall
present written evidence satisfactory to Lessor as to the
workscope to be performed and the payment installments to be made
to any independent Agreed Maintenance Performer that will perform
such CER. Upon accomplishment of a CER on an Engine, Lessee shall
present written evidence to Lessor as to the completion of such
CER and the amount of Engine Reimbursable Expenses for approval
by Lessor. Upon receipt of such written evidence, and provided
there then exists no Default, Lessor shall pay to the independent
Agreed Maintenance Performer that performed the CER, if directed
by Lessee and as required under Lessee's agreement with such
independent repair facility, or to Lessee, an amount equal to the
lesser of (i) the Engine Reimbursable Expenses for such CER or
(ii) an amount equal to (1) all Engine Additional Rent previously
paid by Lessee for such Engine pursuant to this Lease, minus
(2) all previous payments for such Engine by Lessor under this
Section 7.3(b).
(c) Landing Gear Reimbursable Expenses:
----------------------------------
(i) In connection with the performance by Lessee of an overhaul of
the Landing Gear in accordance with the Agreed Maintenance
Program, Lessee's Actual Cost incurred in completing such
overhaul shall constitute "Landing Gear Reimbursable Expenses".
(ii) Before the performance of an overhaul of the Landing Gear, Lessee
shall present written evidence satisfactory to Lessor as to the
workscope to be performed and the payment installments to be made
to any independent Agreed Maintenance Performer that will perform
such overhaul. Upon accomplishment of an overhaul of the Landing
Gear, Lessee shall present written evidence satisfactory to
Lessor as to the completion of such overhaul and the amount of
Landing Gear Reimbursable Expenses for approval by Lessor. Upon
receipt of such written evidence, and provided there then exists
no Default, Lessor shall pay to the independent Agreed
Maintenance Performer that performed such overhaul, if directed
by Lessee and as required under Lessee's agreement with such
independent repair facility, or to Lessee, an amount equal to the
lesser of (i) the Landing Gear Reimbursable Expenses for such
overhaul or (ii) an amount equal to (1) all Landing Gear
Additional Rent previously paid by Lessee
pursuant to this Lease, minus (2) all previous payments by Lessor
under this Section 7.3(c).
(d) APU Reimbursable Expenses:
--------------------------
(i) In connection with the performance by Lessee of an overhaul of
the APU in accordance with the Agreed Maintenance Program,
Lessee's Actual Cost incurred in completing such overhaul shall
constitute "APU Reimbursable Expenses".
(ii) Before the performance of an overhaul of the APU, Lessee shall
present written evidence satisfactory to Lessor as to the
workscope to be performed and the payment installments to be made
to any independent Agreed Maintenance Performer that will perform
such overhaul. Upon accomplishment of an overhaul, Lessee shall
present written evidence satisfactory to Lessor as to the
completion of such overhaul and the amount of APU Reimbursable
Expenses for approval by Lessor. Upon receipt of such written
evidence, and provided there then exists no Default, Lessor shall
pay to the independent Agreed Maintenance Performer that
performed such overhaul, if directed by Lessee and as required
under Lessee's agreement with such independent repair facility,
or to Lessee, an amount equal to the lesser of (i) the APU
Reimbursable Expenses of such overhaul or (ii) an amount equal to
(1) all APU Additional Rent previously paid by Lessee pursuant to
this Lease, minus (2) all previous payments by Lessor under this
Section 7.3(d).
(e) Additional Provisions:
---------------------
(i) Notwithstanding the provisions of Sections 7.3(a) through (d),
Reimbursable Expenses shall not include the cost of (1) any
replacements or repairs caused by foreign object damage ("FOD")
or internal object damage ("IOD"), (2) any replacements or
repairs caused by accident, faulty maintenance or installation,
any incident, improper operations, abuse, neglect, misuse or
elective parts replacement (except to the extent ordinarily
accomplished during such maintenance or overhaul), (3) any
modifications not required by the Aviation Authority or this
Agreement, (4) any interior reconfiguration, (5) the
accomplishment of non-repetitive airworthiness directives or
manufacturer's service bulletins,
(6) maintenance work that is reimbursable by a claim under the
manufacturer's warranties or by insurance (but including
deductibles for purposes of this provision), or (7) any overhaul
of time controlled components accomplished during a Heavy Check,
CER or overhaul except such as are part of the routine tasks
included at such Heavy Check, CER or overhaul.
(ii) Notwithstanding anything to the contrary contained in this
Section 7.3, any such maintenance and the extent and nature of
such maintenance to be performed shall be conducted at an Agreed
Maintenance Performer. Lessor shall be entitled to have
representatives present during the performance of such
maintenance to oversee and approve all aspects of such
performance, including the workscope thereof. Lessor shall be
notified by Lessee prior to the commencement of any maintenance
work described in this Section 7.3, including as to the Agreed
Maintenance Performer and for Lessor's reasonable approval of the
workscope.
(iii) Lessee acknowledges that Lessee is required to pay the full cost
of and to perform (or cause to be performed) any Heavy Check,
Engine Shop Visit, overhaul or other maintenance required by the
Agreed Maintenance Program, whether or not Lessor is required to
make any payments pursuant to this Section 7.3, and any costs
incurred by Lessee in performing any such Heavy Check, Engine
Shop Visit, overhaul or other maintenance required by the Agreed
Maintenance Program shall be for Lessee's account solely;
provided, that if Lessor's contribution pursuant to Section
7.3(a) through (d) above is ever less than the Reimbursable
Expenses incurred by Lessee with respect to the Airframe, any
Engine, the Landing Gear or the APU, then Lessee's obligation
under Section 5.4 to make payments of Additional Rent with
respect to the Airframe, such Engine, the Landing Gear or the
APU, respectively, shall be suspended until an equivalent amount
to such shortfall has been retained by Lessee.
7.4 Lessor's AD Cost Sharing Contribution
-------------------------------------
(a) Provided no Default has occurred and is continuing, upon the
performance by Lessee of "Qualifying AD Work" (as hereinafter defined)
relating to any single airworthiness directive issued by the Aviation
Authority after the Delivery Date and requiring terminating action
during the Term, Lessor will pay to Lessee, by way of contribution to
the cost of the maintenance of the Aircraft, an amount equal to the
product of (i) the amount by which the Actual Cost of the Qualifying
AD Work exceeds $75,000 (ii) multiplied by a fraction the numerator of
which is 96 minus the number of whole calendar months remaining in the
Term from the date of completion of such Qualifying AD Work to the
Scheduled Expiry Date and the denominator of which is 96.
(b) "Qualifying AD Work" means maintenance work performed on the Aircraft
solely in order to comply fully with airworthiness directives and
service bulletins issued by the Aviation Authority (whether or not
such airworthiness directives or service bulletins were issued before
or after the Delivery Date) on a terminating action basis, and
excluding work performed for any other purpose, such as compliance
with airworthiness directives by means of repetitive inspections,
recording compliance work in the Aircraft Documents and all other
maintenance work.
(c) Lessor will be obligated to pay any amount specified in Section 7.4(a)
within 30 days after submission by Lessee to Lessor of an invoice and
supporting documentation reasonably satisfactory to Lessor evidencing
the performance of Qualifying AD Work for an airworthiness directive.
(d) Before performing (or causing to be performed) any Qualifying AD Work,
if Lessee estimates in good faith that Lessor's contribution pursuant
to Section 7.4(a) together with all previous contributions by Lessor
pursuant to Section 7.4(a) would be more than $1,000,000, then Lessee
shall give written notice to Lessor of its planned performance of such
Qualifying AD Work and Lessor shall, within 10 Business Days of
receiving such notice from Lessee, either (A) notify Lessee of
Lessor's election to contribute its portion of such Qualifying AD
Work, in which event the leasing of the Leased Property pursuant to
this Agreement will continue, Lessee shall perform such Qualifying AD
Work and Lessor shall make any contribution required pursuant to
Section 7.4(a), or (B) notify Lessee of Lessor's election not to
contribute to such Qualifying AD Work. In the event that Lessor
elects not to contribute to such Qualifying AD Work, Lessee may, by
written notice given to Lessor within 10 Business Days, elect to
either (1) advance the Scheduled Expiry Date to a date not earlier
than one month before such Qualifying AD Work is required to be
performed, or (2) perform (or cause to be performed) such Qualifying
AD Work, in which event Lessor shall not be required to make the
contribution set forth in Section 7.4(a). Any failure by Lessor to
notify Lessee within 10 Business Days pursuant to this Section 7.4(d)
shall be deemed to be an election by Lessor to make its contribution
pursuant to Section 7.4(a). Any failure by Lessee to notify Lessor
within 10 Business Days pursuant to this Section 7.4(d) shall be
deemed to be an election by Lessee not to advance the Scheduled Expiry
Date and to perform the Qualifying AD Work without contribution from
Lessor. If Lessee elects to advance the Scheduled Expiry Date, Lessee
shall return the Leased Property on such Scheduled Expiry Date in the
condition required by Section 12 and Schedule 4 and otherwise in
accordance with all provisions of this Agreement.
7.5 Registration and Filings
------------------------
Lessor shall, at Lessee's cost:
(a) maintain the registration of the Aircraft with the Aviation Authority
reflecting (so far as permitted by Applicable Law) the respective
interests of Lessor, any Mortgagee and Lessee and not do or suffer to
be done anything which might reasonably be expected to adversely
affect that registration; and
(b) do all acts and things (including making any filing or registration
with the Aviation Authority or any other Government Entity) as may be
required following any change in the ownership or financing of the
Aircraft.
7.6 Lessor's Obligations Following Termination
------------------------------------------
So long as no Default has occurred and is continuing, within five Business
Days of:
(a) termination of this Agreement before Delivery pursuant to Section
4.2(e) or 4.3; or
(b) redelivery of the Aircraft to Lessor in accordance with and in the
condition required by this Agreement; or
(c) receipt by Lessor of the Agreed Value following a Total Loss and all
other amounts due under Section 10.1(a);
or in any such case at such later time as Lessee has irrevocably paid to
Lessor all amounts which are then outstanding under this Agreement, Lessor
shall pay to Lessee any amounts remaining of the Security Deposit, and
deliver to Lessee the Insurance Letter of Credit.
7.7 Agreed Maintenance Performers
-----------------------------
Lessor may object to and may exclude any maintenance organization (other
than Lessee) being included as an "Agreed Maintenance Performer" for a
valid business reason. Lessor shall furnish to Lessee in writing from time
to time a list of all maintenance organizations excluded from the
definition of "Agreed Maintenance Performer" pursuant to the preceding
sentence, which list may be amended by Lessor from time to time. Lessor and
Lessee shall consult in good faith regarding any organizations on such list
from time to time at the request of either party.
7.8 Exclusion
---------
THE AIRCRAFT IS ACCEPTED BY LESSEE "AS IS, WHERE IS WITH ALL FAULTS" AND
LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY STATED IN THIS
AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT
AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN, ANY CONDITIONS, WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT,
INCLUDING:
(a) THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR
(b) ANY USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE AIRCRAFT OR
ANY PART; OR
(c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR
NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED (BUT EXCLUDING
ANY SUCH OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY IN TORT WHICH ARISES FROM LESSOR'S GROSS
NEGLIGENCE OR WILFUL MISCONDUCT); OR
(d) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD
PARTY, OR FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES.
7.9 Lessee's Waiver
---------------
LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR, ALL ITS RIGHTS IN
RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER
ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OR PERFORMANCE OF
THE AIRCRAFT OR THIS AGREEMENT EXCEPT AS IS OTHERWISE EXPRESSLY STATED IN
THIS AGREEMENT.
7.10 Lessee's Confirmation
---------------------
LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF SECTIONS 7.8
AND 7.9 AND ACKNOWLEDGES THAT BASIC RENT, ADDITIONAL RENT AND ALL OTHER
AMOUNTS PAYABLE BY LESSEE UNDER THIS AGREEMENT HAVE BEEN CALCULATED
NOTWITHSTANDING ITS PROVISIONS.
8. LESSEE'S COVENANTS
------------------
8.1 Duration
The undertakings in this Section 8 and in Section 12 will:
(a) except as otherwise stated, be performed at the expense of Lessee; and
(b) remain in force until redelivery of the Aircraft to Lessor in
accordance with this Agreement and thereafter to the extent of any
accrued rights of Lessor in relation to those undertakings.
8.2 Information
-----------
Lessee shall:
(a) furnish to Lessor, with a copy to any Mortgagee:
(i) within 60 days after the last day of the first three fiscal
quarters of each fiscal year of the Lessee, unaudited
consolidated quarterly financial statements of the Lessee
prepared for such quarter, including a consolidated balance sheet
of the Lessee and its Subsidiaries as of the last day of such
quarter and consolidated statements of income and retained
earnings for such fiscal quarter and for the year to date and, on
a comparative basis, figures for the corresponding periods of the
immediately preceding fiscal year, all in reasonable detail, each
such statement to be certified in a certificate of Lessee's chief
financial officer or chief accounting officer as fairly
presenting the financial position and the results of operations
of the Lessee as at its date and for such quarter (subject to
year-end audit adjustments) and as having been prepared in
accordance with GAAP;
(ii) as soon as available but not in any event later than 90 days
after the last day of each fiscal year of the Lessee, audited
consolidated financial statements of the Lessee prepared for such
year, including a consolidated balance sheet of the Lessee and
its Subsidiaries as of the last day of such year, consolidated
statements of income and retained earnings of the Lessee and its
Subsidiaries for such fiscal year, a consolidating balance sheet
of Lessee and its Subsidiaries as of the last day of such year
and consolidating statements of income and retained earnings of
Lessee and its Subsidiaries for such fiscal year and in all cases
on a comparative basis figures for the immediately preceding
fiscal year, all in reasonable detail, each prepared in
accordance with GAAP and certified without qualification by [Name
of Lessee's Auditors] or another of the largest international
firms of independent certified public accountants as fairly
presenting the financial position and the results of operations
of Lessee and its Subsidiaries at the end of and for such fiscal
year and as having been prepared in accordance with GAAP;
(iii) in lieu of delivering to Lessor and any Mortgagee the financial
statements referred to in Sections 8.2(a)(i) and (ii) above,
Lessee may cause such financial statements to be publicly
available on the internet within the time periods set forth in
Sections 8.2(a)(i) and (ii) above at a location identified to
Lessor and any Mortgagee in writing;
(iv) concurrently with the financial statements furnished pursuant to
Sections 8.2(a)(i) and (ii) above, an officer's certificate
signed by the chief financial officer or chief accounting officer
of Lessee certifying to the best knowledge after due inquiry of
such officer that no Default occurred during the period covered
by such financial statements and no Default exists on the date of
such officer's certificate or, if a Default occurred or exists,
stating that fact and specifying the nature and period of
existence of such Default and the actions Lessee took or proposes
to take with respect to such Default;
(v) at the same time as it is issued to the creditors of Lessee, a
copy of each notice or circular issued to Lessee's creditors as a
group; and
(vi) on request from time to time such other information regarding
Lessee and its business and affairs as Lessor or any Mortgagee
may reasonably request;
(b) on request, inform Lessor as to the current location of the Airframe
and Engines, the serial number and owner of any engine installed on
the Airframe and the serial number, registration mark and owner of any
airframe on which an Engine is installed;
(c) promptly furnish to Lessor all information that Lessor from time to
time reasonably requests regarding the Aircraft, any Engine or any
Part and its use, location and condition, including the hours
available on the Aircraft and any Engine until the next scheduled
check, inspection, overhaul or shop visit, as the case may be;
(d) on request, furnish to Lessor evidence reasonably satisfactory to
Lessor that all Taxes and charges incurred by Lessee with respect to
the Aircraft have been paid and discharged in full;
(e) provide to Lessor, within 10 days following the end of each Rental
Period during the Term, a monthly report on the Aircraft in the form
set out in Exhibit F or such other form as Lessee may select providing
substantially the same information;
(f) promptly notify Lessor and any Mortgagee of:
(i) any Total Loss, any Engine Loss, any theft of the Airframe or
any Engine, any damage to the Aircraft if the potential cost of
repair may reasonably be expected to exceed the Damage
Notification Threshold or any modification to the Aircraft if
the potential cost may reasonably be expected to exceed the
Damage Notification Threshold;
(ii) any claim or other occurrence likely to give rise to a claim
under the Insurances (but, in the case of hull claims only, in
excess of the Damage Notification Threshold) and details of any
negotiations with the insurance brokers over any such claim; and
(iii) any litigation, arbitration or administrative proceedings that
are pending or, to Lessee's knowledge, threatened against Lessee
which, if adversely determined, would have a material adverse
effect upon its financial condition or business or its ability
to perform its obligations under this Agreement.
8.3 Operation of the Aircraft
-------------------------
Lessee shall:
(a) comply with all Applicable Law for the time being in force in any
country or jurisdiction in which the Aircraft is being operated which
is applicable to the Aircraft or the use and operation of the
Aircraft;
(b) not use the Aircraft in any manner contrary to any recommendation of
the Aviation Authority, the Manufacturer, the Engine Manufacturer or
the manufacturer of any Part or any rule or regulation of the Aviation
Authority or for any purpose for which the Aircraft is not designed or
reasonably suitable;
(c) ensure that the crew and engineers employed by it in connection with
the operation and maintenance of the Aircraft have the qualifications
and hold the licenses required by the Aviation Authority and
Applicable Law;
(d) use the Aircraft solely in commercial or other operations for which
Lessee is duly authorized by the Aviation Authority and Applicable
Law;
(e) not knowingly use the Aircraft (or use it when Lessee ought reasonably
to have known that it was being so used) for the carriage of:
(i) whole animals, living or dead, except in the cargo compartments
according to IATA regulations, and except domestic pet animals
carried in a suitable container to prevent the escape of any
liquid and to ensure the welfare of the animal;
(ii) acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes or any nuclear assemblies or
components, except as permitted for cargo aircraft under the
"Restriction of Goods" schedule issued by IATA from time to time
and provided that all the requirements for packaging or
otherwise contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could
reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the Insurances; or
(iv) any illegal item or substance;
(f) not utilize the Aircraft for purposes of training, qualifying or re-
confirming the status of cockpit personnel except for the benefit of
Lessee's cockpit personnel, and then only if the use of the Aircraft
for such purpose is not disproportionate to the use for such purpose
of other aircraft of the same type operated by Lessee;
(g) not (other than for bona fide safety reasons) cause or permit the
Aircraft to proceed to, or remain at, any location which is for the
time being the subject of a prohibition order (or any similar order or
directive) by:
(i) any Government Entity of the State of Registration or the
Habitual Base; or
(ii) any Government Entity of the country in which such location is
situated; or
(iii) any Government Entity having jurisdiction over Lessor, any
Financing Party or the Aircraft;
(h) obtain and maintain in full force all certificates, licenses, permits
and authorizations required for the use and operation of the Aircraft
for the time being, and for the making of payments required by, and
the compliance by Lessee with its other obligations under, this
Agreement;
(i) not change the location of the Habitual Base of the Aircraft without
the prior written consent of Lessor; and
(j) not operate the Aircraft to, from or in any country that is the
subject of sanctions under United Nations Security Council directives.
8.4 Taxes and Other Charges
-----------------------
As between Lessor and Lessee, Lessee shall be responsible for all fees,
expenses, charges and other costs related to the use, operation and
maintenance of the Leased Property, and shall promptly pay:
(a) all license and registration fees, Taxes (other than Non-Indemnified
Taxes) and other amounts of any nature imposed by any Government
Entity that are imposed on Lessee or for which Lessee is responsible
under this Agreement with respect to the Aircraft, including the
purchase, ownership, delivery, leasing, possession, use, operation,
return, sale or other disposition of the Aircraft;
(b) all rent, fees, charges, Taxes (other than Non-Indemnified Taxes)
imposed on Lessee and other amounts in respect of any premises where
the Aircraft or any Part thereof is located from time to time during
the Term; and
(c) all sums due by Lessee to each relevant airport authority and air
traffic control authority in respect of any aircraft (including
without limitation the Aircraft) operated by Lessee before such sums
become overdue and in default,
except to the extent that such payment is being contested in good faith by
appropriate proceedings in accordance with Section 5.13.
8.5 Sub-Leasing
-----------
Lessee will not sub-lease or otherwise part with possession of the
Aircraft, the Engines or any Part except that Lessee may part with
possession:
(a) with respect to the Aircraft, the Engines or any Part, to the relevant
manufacturers for testing or similar purposes or to an Agreed
Maintenance Performer for service, repair, maintenance or overhaul
work or for alterations, modifications or additions to the extent
required or permitted by this Agreement;
(b) with respect to an Engine or Part, as expressly permitted by this
Agreement;
(c) with respect to the Aircraft or an Engine, pursuant to an ACMI
(aircraft crew, maintenance and insurance) lease or charter of the
Aircraft in which operational control of the Aircraft remains with
Lessee at all times, provided the Aircraft remains registered with the
Aviation Authority;
(d) with respect to the Aircraft, pursuant to a code-sharing arrangement
so long as operational control of the Aircraft remains with Lessee at
all times.
(e) with respect to the Aircraft or an Engine, and only with the prior
written consent of Lessor and any Mortgagee (which consent may be
withheld in either Lessor's or such Mortgagee's sole and arbitrary
discretion), pursuant to a sublease to a certificated air carrier
under the following conditions:
(i) no Default shall have occurred and be continuing;
(ii) notwithstanding such sublease, Lessee shall remain primarily
responsible to Lessor hereunder and the sublease, by its terms,
shall be expressly subject and subordinate in all respect to
this Agreement;
(iii) the sublease shall include sections identical to or having the
same substantive effect as Sections 2.1, 2.2, 5, 7.8, 7.9, 8, 9,
10, 13 and 15 and Schedule 4 of this Agreement, except that a
sublease may impose additional or more stringent obligations on,
or give fewer rights to, any
sublessee than are imposed on Lessee under the
provisions of this Agreement and that the term of the
sublease shall not be capable of extending beyond the
Expiry Date;
(iv) the rights, title and interests of Lessor and the
Financing Parties in and to the Leased Property and
this Agreement shall be duly evidenced and protected
to the satisfaction of Lessor and such Financing
Parties (including as to the making of all necessary
filings and registrations) and such interests shall
not, in Lessor's reasonable opinion, be prejudiced by
the sublease;
(v) Lessee shall have executed and delivered to Lessor a
security agreement granting to Lessor, and assigned
to any Mortgagee, a Security Interest in all of
Lessee's right, title and interest in the sublease
agreement, and the sublessee shall have executed and
delivered to Lessor an acknowledgment of such
security agreement, each such document to be in such
form as Lessor and such Mortgagee shall reasonably
require;
(vi) the sublessee shall be a reputable air carrier,
experienced in operating aircraft of the same type as
the Aircraft, shall hold all necessary consents,
licenses, permits and authorizations required under
the applicable law of the state of incorporation or
establishment of such carrier for the public
transport of passengers and cargo, and shall not be
subject to any event of the types described in
Sections 13.1(g), (h) or (i) as of the commencement
of the sublease;
(vii) the Aircraft shall not be based or re-registered
outside the Habitual Base or the State of
Registration if either Lessor or any Mortgagee
determines, in its sole and absolute discretion, that
the foreign jurisdiction is unacceptable in terms of
political or judicial risk;
(viii) Lessee shall give written notice to Lessor and the
Financing Parties of any proposed sublease at least
30 days prior to the date on which it is proposed
that such sublease be executed (which notice shall
include the identity of any proposed change in the
State of Registration and, if then determined, the
term and the delivery date of the proposed sublease),
and within a reasonable period prior to the execution
by Lessee of any sublease, Lessee will provide Lessor
and the Financing Parties with a copy of the draft
sublease in order for Lessor and the Financing Parties to satisfy
themselves that the conditions set out in this Section 8.5(d) as
to the form of the sublease are fulfilled;
(ix) prior to delivery of the Aircraft to the sublessee under any
sublease, Lessee shall deliver to Lessor an original counterpart
of the sublease duly executed by Lessee and sublessee, and shall
provide Lessor with the equivalent of the conditions precedent
set forth in Section 3.1 and 3.2 applicable to such sublessee;
(x) Lessee shall be responsible for all reasonable costs incurred by
Lessor and any Financing Party in connection with the sublease;
and
(xi) the sublease shall provide that no further subleases of the
Aircraft by the sublessee shall be permitted.
8.6 Inspection
----------
(a) Lessor, any Financing Party and any Person designated by Lessor or any
Financing Party may at any time on reasonable notice to Lessee (except
while a Default has occurred and is continuing when no notice shall be
required), visit, inspect and survey the Aircraft, any Engine or any
Part and the Aircraft Documents and any other records relating to the
Aircraft, and for the purpose of such inspection, Lessor, a Financing
Party or their respective designees may, subject to any applicable
Aviation Authority regulation, travel on the flight deck as observer.
Lessor, any Financing Party or any designee shall not be restricted
during such inspection from opening any panels, bays or doors on the
Aircraft or from inspecting any part of the Aircraft, provided that no
such inspection shall unreasonably disrupt the normal commercial use
of the Aircraft by Lessee.
(b) Lessee shall have no responsibility for the costs and expenses of
Lessor and any Financing Party in connection with any such visit,
inspection or survey unless the visit, inspection or survey discloses
that Lessee is in breach of its material obligations under this
Agreement, in which case such costs and expenses shall be paid by
Lessee on demand.
(c) Lessor shall:
(i) have no duty to make, or liability arising out of, any such
visit, inspection or survey; and
(ii) so long as no Default has occurred and is continuing, not
exercise such right other than on reasonable notice and so as not
to disrupt unreasonably the maintenance or operation of the
Aircraft.
8.7 Protection of Title
-------------------
Lessee shall:
(a) not do or knowingly permit to be done or omit or knowingly permit to
be omitted to be done any act or thing which might reasonably be
expected to jeopardize the respective rights, title and interest of
any Mortgagee as mortgagee of the Aircraft and assignee of this
Agreement or Lessor as owner of the Aircraft and lessor under this
Agreement or the validity, enforceability or priority of any Mortgage,
any Additional Mortgage or any Assignment;
(b) on all occasions when the ownership of the Aircraft, any Engine or any
Part is relevant, make clear to third parties that title is held by
Lessor and is subject to any Mortgage;
(c) not at any time:
(i) represent or hold out Lessor or any Financing Party as carrying
goods or passengers on the Aircraft or as being in any way
connected or associated with any operation or carriage (whether
for hire or reward or gratuitously) which may be undertaken by
Lessee; or
(ii) pledge the credit of Lessor or any Financing Party;
(d) ensure that there is always affixed, and not removed or in any way
obscured, a fireproof plate (having dimensions of not less than 6 in.
x 4 in.) in a reasonably prominent position on the Aircraft and on
each Engine stating:
"This [Aircraft/Engine] is owned by First Security Bank,
National Association, not in its individual capacity but
solely as owner trustee, and is leased to Air Slovakia BWJ,
Ltd. It may not be operated by any other person without the
prior written consent of First Security Bank, National
Association, as owner trustee."
(e) not create or permit to exist any Security Interest upon the Aircraft,
any Engine or any Part, except Permitted Liens;
(f) not do or permit to be done anything which may reasonably be expected
to expose the Aircraft, any Engine or any Part to penalty, forfeiture,
impounding, detention, appropriation, damage or destruction and,
without prejudice to the foregoing, if any such penalty, forfeiture,
impounding, detention, appropriation, damage or destruction occurs,
give Lessor notice and use its best efforts to procure the immediate
release of the Aircraft, such Engine or such Part, as the case may be;
(g) not abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and discharged when due and
payable or make adequate provision by way of security or otherwise for
all debts, damages, claims and liabilities which have given or might
reasonably be expected to give rise to a Security Interest over or
affecting the Aircraft, any Engine or any Part; and
(i) not attempt, or hold itself out as having any power, to sell, lease or
otherwise dispose of the Aircraft, any Engine or any Part other than
as expressly permitted by this Agreement.
8.8 General
-------
Lessee will:
(a) not make any substantial change in the nature of the business in which
it is engaged if such change, in the reasonable opinion of Lessor,
might reasonably be expected to have a material adverse effect on
Lessee's performance of its obligations under this Agreement;
(b) preserve its corporate existence, and will not merge or consolidate
with any Person unless the successor Person resulting from such merger
or consolidation (the "Successor")
(i) is a Person incorporated, formed or organized under the laws of
the State of Registration;
(ii) shall have a net worth immediately after such merger or
consolidation of not less than Lessee's net worth immediately
prior thereto;
(iii) shall be authorized under Applicable Law to perform Lessee's
obligations under this Agreement to the same extent as Lessee;
(iv) shall deliver to Lessor an agreement in form and substance
reasonably satisfactory to Lessor containing an assumption by
the Successor of Lessee's representations and warranties under
this Agreement, together with the due and punctual performance
of all of Lessee's obligations under this Agreement; and
(v) shall deliver to Lessor an opinion of counsel reasonably
satisfactory in form and substance to Lessor covering the
Operative Documents and the agreement referred to in Section
8.8(b)(iv) above and substantially in the form of the legal
opinion set forth in Exhibit D.
8.9 Records
-------
Lessee shall procure that accurate, complete and current records of all
flights made by, and all maintenance, repairs, replacements, removals,
modifications, alterations and additions carried out on or made to, the
Aircraft (including, in relation to each Engine or Part subsequently
installed, before its installation) are kept in English, and shall keep the
records in such manner as the Aviation Authority and the FAA may from time
to time require. All Airframe and Engine LLPs shall have documentation
substantiating traceability "back-to-birth" to confirm current, accumulated
Flight Hours and Cycles. The records will form part of the Aircraft
Documents.
8.10 Registration and Filings
------------------------
Lessee shall at its cost:
(a) maintain the registration of the Aircraft with the Aviation Authority
reflecting (so far as permitted by Applicable Law) the respective
interests of the Lessor and any Mortgagee and not do or suffer to be
done anything which might reasonably be expected to adversely affect
that registration; and
(b) do all acts and things (including making any filing or registration
with the Aviation Authority or any other Government Entity) and
executing and delivering all documents (including any amendment of
this Agreement) as may be required by the Lessor:
(i) following any change or proposed change in the ownership or
financing of the Aircraft or in the manner of securing the
Lessor's obligations to the Lenders;
(ii) following any modification of the Aircraft, any Engine or any
Part or the permanent replacement of any Engine or Part in
accordance with this Agreement, so as to ensure that the
respective rights of the Lessor and any Mortgagee under this
Agreement apply with the same effect as before; or
(iii) to establish, maintain, preserve, perfect and protect the
respective rights of Lessor and any Mortgagee under this
Agreement and under any Mortgage.
8.11 Maintenance and Repair
----------------------
Lessee shall at its sole cost and expense (except only as expressly set
forth in section 7.3 hereof):
(a) keep the Aircraft airworthy in all respects and in good repair and
condition, and all maintenance will be carried out to a standard
acceptable to Lessor;
(b) advise Lessor in writing of all material changes to the Approved
Maintenance Program, and shall not (i) change the intervals between
Major Checks under the Approved Maintenance Program without the
written consent of Lessor, or (ii)
change the Approved Maintenance Program in any other material respect
without the written consent of Lessor unless recommended by the
Manufacturer or mandated by the Aviation Authority;
(c) incorporate in the Approved Maintenance Program (i) a CPCP as
recommended by the Manufacturer, (ii) an aging aircraft program as
recommended by the Manufacturer, and SID program approved by the
Manufacturer, and (iv) an anti-fungus and anti-biological growth and
contamination prevention, control and treatment program for all fuel
tanks in accordance with the Manufacturer's approved procedures;
(d) maintain the Aircraft in accordance with the Approved Maintenance
Program through Agreed Maintenance Performers and perform (at the
respective intervals provided in the Approved Maintenance Program) all
Major Checks, and at least 20 days before performing any Major Check
Lessee will consult with Lessor as to the workscope for such Major
Check;
(e) maintain the Aircraft in accordance with all rules and regulations of
the Aviation Authority as are applicable to passenger aircraft of the
same type as the Aircraft, and maintain the Aircraft so as to comply
at all times with the type certificate specification and data sheets
for the Aircraft;
(f) comply with all mandatory inspection and modification requirements,
airworthiness directives and similar requirements applicable to the
Aircraft, any Engine or Part having a compliance date on or before the
Expiry Date and that are required by the Aviation Authority and the
FAA;
(g) comply with all alert service bulletins issued by any manufacturer of
the Aircraft, Engines or Parts, and comply (including scheduling
compliance work and then performing such work on schedule) with all
other service bulletins issued by any such manufacturer;
(h) comply with all Applicable Laws and the regulations of the Aviation
Authority and any other aviation authorities with jurisdiction over
Lessee or the Aircraft, any Engine or Part that relate to the
maintenance, condition, use or operation of the Aircraft or require
any modification or alteration to the Aircraft, any Engine or Part;
(i) maintain in good standing a certificate of airworthiness for the
Aircraft in the appropriate category for the nature of the operations
of the Aircraft issued by the Aviation Authority except when the
Aircraft is undergoing maintenance, modification or repair required or
permitted by this Agreement, and from time to time Lessee shall
provide to Lessor a copy on request;
(j) if required by the Aviation Authority, maintain a current
certification as to maintenance issued by or on behalf of the Aviation
Authority in respect of the Aircraft and shall from time to time
provide to Lessor a copy on request;
(k) maintain the Engines with respect to overhaul build standards and disc
replacements at a level which is consistent with the level required by
the Engine Manufacturer;
(l) maintain the Engines and the APU in an "on condition" program as set
forth in the respective manufacturer's maintenance manual;
(m) subject to Section 11.3, procure promptly the replacement of any
Engine or Part which has become time, cycle or calendar expired, lost,
stolen, seized, confiscated, destroyed, damaged beyond repair,
unserviceable or permanently rendered unfit for use, with an engine or
part complying with the conditions set out in Section 8.13(a);
(n) accomplish all repairs, modifications and alterations in accordance
with the SRM or, if the repair, modification or alteration is outside
the scope of the SRM, as recommended in writing by the applicable
manufacturer and approved by the Aviation Authority;
(o) provide Lessor with a written summary of all sampling programs
involving or affecting the Aircraft; and
(p) ensure that overhauls are accomplished using maintenance and quality
control procedures approved by the Aviation Authority, and that each
Agreed Maintenance Performer provides a complete record of all work
performed during the course of such overhaul was accomplished in
accordance with Aviation Authority and FAA requirements.
8.12 Removal of Engines and Parts
----------------------------
Lessee will ensure that no Engine or Part installed on the Aircraft is at
any time removed from the Aircraft other than:
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with the
Approved Maintenance Program; or
(c) pursuant to, and in accordance with, Section 8.15; or
(d) during the course of maintaining, servicing, repairing, overhauling or
testing that Engine or the Aircraft, as the case may be; or
(i) as part of a normal engine or part rotation program; or
(ii) for the purpose of making such modifications to the Engine or the
Aircraft, as the case may be, as are permitted under this
Agreement,
and then in each case only if it is reinstalled or replaced by an
engine or part complying with Section 8.13(a) as soon as practicable
and in any event no later than the Expiry Date.
8.13 Installation of Engines and Parts
---------------------------------
(a) Lessee will ensure that, except as permitted by this Agreement, no
engine or part is installed on the Aircraft unless:
(i) in the case of an engine, it is an engine of the same model as,
or an improved or advanced version of the Engine it replaces
(provided, in the case of an improved or advanced version, it can
be installed and operated on the Airframe without modification of
the Airframe or the engine, whether or not the other installed
Engine is also such an improved or advanced version), and is in
the same or better operating condition, has substantially similar
hours available until the next scheduled checks, inspections,
overhauls and shop visits, has the same or greater value and
utility as the replaced Engine and has attached to it a current
"serviceable tag" issued by the Engine Manufacturer or approved
vendor indicating that the engine is new, serviceable or
overhauled, and Lessee shall retain all such tags and all
installed LLP's shall have documentation substantiating
traceability "back-to-birth";
(ii) in the case of a part, it is in as good operating condition, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits, is of the same or
a more advanced make and model, is of the same interchangeable
modification status as the replaced Part and has attached to it a
current "serviceable tag" issued by the manufacturer or approved
vendor indicating that the part is new, serviceable or
overhauled, and Lessee shall retain all such tags;
(iii) in the case of a part, it has become and remains the property of
Lessor free from Security Interests and on installation on the
Aircraft will, without further act, be subject to this Agreement
and to the Security Interest created by any Mortgage, in which
case title to the removed part shall automatically become vested
in Lessee without further action or warranty on the part of
Lessor except that such Part shall be free of Lessor Liens; and
(iv) in each case, Lessee will provide full details as to its source
and maintenance records.
(b) If no Default has occurred and is continuing, Lessee will be entitled
to install any engine or part on the Aircraft by way of replacement
notwithstanding Section 8.13(a) if:
(i) there is not available to Lessee at the time and in the place
that engine or part is required to be installed on the Aircraft a
replacement engine or part complying with the requirements of
Section 8.13(a);
(ii) it would result in an unreasonable disruption of the operation of
the Aircraft or the business of Lessee to ground the Aircraft
until an engine or part complying with Section 8.13(a) becomes
available for installation on the Aircraft; and
(iii) as soon as practicable after installation of the same on the
Aircraft but, in any event, no later than the earlier of (1) 60
days after such installation and (2) the Expiry Date, Lessee
removes any such engine or part and replaces it with the Engine
or Part replaced by it or by an engine or part complying with
Section 8.13(a).
(c) If no Default has occurred which is continuing, Lessee will be
entitled to install Lessee Installed Parts on the Airframe by way of
replacement notwithstanding Section 8.13(a)(iii) so long as:
(i) the terms of any lease, conditional sale agreement or security
agreement, as the case may be, covering such Lessee Installed
Part will not have the effect of prejudicing the title and
interest of Lessor in and to the Aircraft (including its Engines
and Parts) or the interest of any Mortgagee in respect thereof
under any Mortgage;
(ii) the secured party, lessor or conditional vendor, as the case may
be, of such Lessee Installed Part has confirmed and acknowledged
in writing (which confirmation and acknowledgment may be
contained in the lease, conditional sale agreement or security
agreement covering such Lessee Installed Part) to Lessor that it
will recognize the respective rights, title and interest of
Lessor and any Mortgagee in and to the Aircraft (including its
Engines and Parts) and that it will not seek to exercise any
rights whatever in relation thereto; and
(iii) before the Expiry Date Lessee removes any such Lessee Installed
Part and replaces it with the Part replaced by it or by another
part, in either case complying with Section 8.13(a).
8.14 Non-Installed Engines and Parts
(a) Lessee shall ensure that any Engine or Part which is not installed on
the Airframe (or any other airframe as permitted by this Agreement)
is, except as expressly permitted by this Agreement, properly and
safely stored and kept free from Security Interests (other than
Permitted Liens), with insurance thereon complying with the
requirements of this Agreement.
(b) Lessee shall notify Lessor whenever an Engine is removed from the
Aircraft and, from time to time, upon request procure that any Person
to whom possession of an Engine is given acknowledges in writing to
Lessor, in form and substance satisfactory to Lessor, that such Person
will respect the interests of Lessor and any Mortgagee in such Engine
and will not seek to exercise any rights whatsoever in relation to
such Engine.
(c) Notwithstanding Section 8.14(a), Lessee shall be permitted, if no
Default has occurred and is continuing, to install any Engine on an
airframe and any Part on an airframe or engine:
(i) owned and operated by Lessee free from Security Interests, other
than Permitted Liens;
(ii) leased or hired to Lessee pursuant to a lease or conditional
sale agreement on a long-term basis and on terms whereby Lessee
has full operational control of that aircraft or engine; or
(iii) acquired or financed by Lessee and operated by Lessee on terms
that ownership of that aircraft or engine, as the case may be,
pursuant to a lease, conditional sale agreement or Security
Interest is vested in or held by any other Person;
provided that in the case of (ii) and (iii):
(1) the terms of any such lease, conditional sale agreement or
Security Interest will not have the effect of prejudicing the
title and interest of Lessor in and to that Engine or Part or the
interest of any Mortgagee in respect thereof under any Mortgage;
and
(2) the lessor under such lease, the seller under such conditional
sale agreement or the secured party of such Security Interest, as
the case may be, has confirmed and acknowledged in writing (which
such confirmation and acknowledgment may be contained in the
lease,
conditional sale agreement or document creating the Security
Interest covering that Engine or Part) to Lessor, in form and
substance satisfactory to Lessor, that it will recognize the
respective rights, title and interest of Lessor and any Mortgagee
to and in that Engine or Part and that it will not seek to
exercise any rights whatever in relation thereto.
8.15 Pooling of Engines and Parts
----------------------------
Lessee will not enter into nor permit any pooling agreement or arrangement
in respect of an Engine or Part without the prior written consent of
Lessor, such consent not to be unreasonably withheld in any case where an
Engine or Part is leased, let on hire or otherwise made available by Lessee
(on terms conferring no more than a contractual right in personam against
Lessee and not a right in rem against such Engine or Part) pursuant to a
pooling agreement to which Lessee is a party and:
(a) the other parties to which are reputable, solvent commercial air
carriers or the manufacturers or suppliers of the Engine or Part (or
other reputable, solvent organizations whose business includes the
administration of and participation in such pooling agreements or
arrangements); and
(b) which does not contemplate the transfer of title to the pooled Engine
or Part; and
(c) either provides that Lessor (or any Mortgagee designated by Lessor)
will be sole loss payee in respect of any loss or damage to the Engine
or Part, or provides for Lessor to acquire title to a substitute
engine or part satisfying the conditions set out in Section 8.13(a) if
the Engine or Part is destroyed.
8.16 Equipment Changes
-----------------
(a) Lessee will not make any Voluntary Equipment Change expected to cost
over $250,000 or that deviates from the Aircraft's original type
design or configuration without the prior written consent of Lessor,
which consent shall not be unreasonably withheld.
(b) Lessor may review Lessee's proposed designs, plans, engineering
drawings and diagrams, and flight and maintenance manual revisions for
any proposed
Equipment Change. If requested by Lessor, Lessee will furnish Lessor
(at Lessee's expense) with such documents in final form and any other
documents required by Applicable Law as a result of an Equipment
Change. All Equipment Changes made to the Aircraft will be properly
documented in the Aircraft Documents and be fully approved by the
Aviation Authority.
(c) Lessor shall not make any Voluntary Equipment Change that has the
effect of diminishing or impairing the value, utility, condition or
airworthiness of the Aircraft.
(d) All permanent or structural Equipment Changes and all Mandatory
Equipment Changes will, upon installation, become a part of the
Aircraft and the property of Lessor. All temporary and non-structural
Voluntary Equipment Changes will remain the property of Lessee and, at
Lessor's request, will be removed from the Aircraft before return of
the Aircraft to Lessor and the Aircraft will be restored to its
condition prior to that Equipment Change; provided, that Lessee may
not remove a Voluntary Equipment Change without Lessor's consent
during the continuation of a Default.
8.17 Title to Engines and Parts
--------------------------
(a) Title to all Parts installed on the Aircraft, whether by way of
replacement, as the result of an Equipment Change or otherwise (except
those installed pursuant to Section 8.13(b) or Section 8.15) will on
installation, without further act, vest in Lessor subject to this
Agreement free and clear of all Security Interests. Lessee will at its
own expense take all such steps and execute, and procure the execution
of, all such instruments that are necessary to ensure that title so
passes to Lessor and is subject to the Security Interest created by
any Mortgage according to all Applicable Laws. At any time when
requested by Lessor, Lessee will provide evidence to Lessor's
reasonable satisfaction (including the provision, if required, to
Lessor of one of more legal opinions) that title has so passed to
Lessor and is subject to the Security Interest created by any
Mortgage.
(b) Any Engine at any time removed from the Aircraft will remain the
property of Lessor until a replacement has been made in accordance
with this Agreement and title to that replacement has passed,
according to Applicable Laws, to Lessor subject to this Agreement free
of all Security Interests, whereupon title to the removed Engine will,
provided no Default has occurred and is continuing, pass to
Lessee free of Lessor Liens. Except as referred to in Section 8.17(a),
any Part at any time removed from the Aircraft will remain the
property of Lessor until a replacement has been made in accordance
with this Agreement and until title to that replacement has passed,
according to Section 8.17(a) and Applicable Laws, to Lessor subject to
this Agreement free of all Security Interests, whereupon title to the
removed Part will, provided no Default has occurred and is continuing,
pass to Lessee free of Lessor Liens.
8.18 Third Parties
-------------
Lessee shall procure that no Person having possession of the Aircraft
during the Term will act in any manner inconsistent with Lessee's
obligations under this Agreement and that all such Persons shall comply
with those obligations as if references to "Lessee" included a separate
reference to those Persons.
8.19 Non-Discrimination
------------------
(a) Lessee shall not discriminate against the Aircraft in its use,
maintenance or operation of the Aircraft compared to similar aircraft
owned or operated by Lessee, and Lessee shall service, repair,
maintain and overhaul the Aircraft so as to keep the Aircraft
maintained in the same manner and with the same care as used by Lessee
with similar aircraft owned or operated by Lessee.
(b) Subject to a sublease permitted pursuant to Section 8.5, Lessee shall
continue to use the Aircraft in its regular commercial passenger
operations until delivery to the Return Location immediately prior to
the Final Inspection.
(c) Lessee further agrees that normal progressive maintenance will
continue to be performed on the Aircraft throughout the Term, and no
unusual maintenance procedures or cessation of maintenance shall occur
during the one year period prior to the Expiry Date.
9. INSURANCE
---------
9.1 Insurances
----------
Lessee will maintain in full force and effect during the Term insurances in
respect of the Aircraft in form and substance reasonably satisfactory to
Lessor (the "Insurances") through such brokers and having such deductibles
and being subject to such exclusions as are usual and customary in the
worldwide aviation insurance marketplace for major international air
carriers operating similar equipment. The Insurances will be effected
either:
(a) on a direct basis with insurers of internationally recognized standing
who normally participate in the London, French or U.S. markets and who
are satisfactory to Lessor, and led by reputable underwriters approved
by Lessor and any Mortgagee, or
(b) with a single insurer or group of insurers approved by Lessor and any
Mortgagee who does not retain the risk, but effects substantial
reinsurance in the leading international insurance markets and through
reinsurance brokers of recognized standing and acceptable to Lessor
and any Mortgagee for a percentage acceptable to Lessor and any
Mortgagee of all risks insured,
and Lessor acknowledges and confirms that the current deductibles and
exclusions, together with the existing brokers and insurers, in respect of
the insurances and reinsurances maintained by Lessee on the date of this
Agreement are acceptable to it.
9.2 Requirements
------------
Lessor's current requirements as to Insurances are as specified in this
Section 9 and in Schedule 4. Except for the amount of the Agreed Value, the
Minimum Liability Coverage and the deductible under Lessee's hull and war
risk insurance policies, Lessor may from time to time stipulate such other
requirements for the Insurances as Lessor reasonably considers necessary to
ensure that the scope and level of cover is maintained in accordance with
the then prevailing industry practice in relation to aircraft of the same
type as the Aircraft and in relation to operators of similar standing to
Lessee. In the event that it proposes any such stipulation, Lessor shall
notify Lessee accordingly and Lessor and/or its brokers will then consult
in good faith with Lessee and Lessee's brokers (as for the time being
approved by Lessor) with regard to such proposed stipulation. If, following
the consultation, Lessor is satisfied that the stipulation should be made,
Lessee shall then comply with the stipulated requirements.
9.3 Insurance Covenants
-------------------
Lessee shall:
(a) ensure that all legal requirements as to insurance of the Aircraft,
any Engine or any Part that may from time to time be imposed by the
laws of the State of Registration or any jurisdiction to, from or over
which the Aircraft may be flown, in so far as they affect or concern
the operation of the Aircraft, are complied with and, in particular,
those requirements compliance with which is necessary to ensure that:
(i) the Aircraft does not become subject to detention or forfeiture;
(ii) the Insurances remain valid and in full force and effect; and
(iii) the interests of the Indemnitees in the Insurances and the
Aircraft or any Part are not thereby prejudiced;
(b) not use, cause or permit the Aircraft, any Engine or any Part to be
used for any purpose or in any manner not covered by the Insurances or
outside any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each policy of the Insurances
and not do, consent or agree to any act or omission that:
(i) invalidates or may reasonably be expected to invalidate the
Insurances;
(ii) renders or may reasonably be expected to render void or voidable
the whole or any part of any of the Insurances; or
(iii) brings any particular liability within the scope of an exclusion
or exception to the Insurances;
(d) not take out without the prior written approval of Lessor any
insurance in respect of the Aircraft other than those of the type
required under this Agreement unless relating solely to hull total
loss, business interruption, engine break-down, profit commission and
deductible risk;
(e) provide to Lessor and any Mortgagee copies of those documents
evidencing the Insurances which Lessor and any Mortgagee may
reasonably request;
(f) on request, provide to Lessor and any Mortgagee evidence that the
Insurance premiums have been paid;
(g) not make any modification or alteration to the Insurances material and
adverse to the interests of any of the Indemnitees;
(h) be responsible for any deductible under the Insurances; and
(i) provide any other insurance related information, or assistance, in
respect of the Insurances as Lessor may reasonably request.
9.4 Renewal of Insurances
---------------------
Lessee shall commence renewal procedures at least 30 days prior to the
expiration of any of the Insurances and provide to Lessor and any
Mortgagee:
(a) if requested by Lessor, a written status report of renewal
negotiations 14 days prior to each expiration date;
(b) telefaxed confirmation of completion of renewal prior to each
expiration date; and
(c) a certificate of insurance and broker's letter of undertaking
substantially in the form delivered to Lessor on the Delivery Date,
detailing the coverage and confirming the insurers agreement to the
specified insurance requirements of this Agreement within seven days
after each renewal date;
9.5 Failure to Insure
-----------------
If Lessee fails to maintain the Insurances in compliance with this
Agreement:
(a) Lessee shall immediately ground the Aircraft and shall keep it
grounded until such time as the Insurances shall again be in full
force and effect.
(b) Lessee shall immediately notify Lessor and any Mortgagee of the non-
compliance of the Insurances with the requirements of this Agreement,
and Lessee shall provide Lessor with full details of all steps that
Lessee is taking or proposes to take in order to remedy such non-
compliance.
(c) Each of the Indemnitees will be entitled but not obligated (without
prejudice to any other rights of Lessor under this Agreement):
(i) to pay the premiums due or to effect and maintain insurances
satisfactory to it or otherwise remedy Lessee's failure in such
manner (including to effect and maintain an "owner's interest"
policy) as it considers appropriate, and any sums so expended by
it will become immediately due and payable by Lessee to Lessor on
demand (such demand being made as soon as reasonably practicable
following the incurring of such expenditure), together with
interest thereon at the Default Rate from the date of expenditure
by it up to the date of reimbursement by Lessee (before and after
any judgment); and
(ii) at any time while such failure is continuing to require the
Aircraft to remain at any airport or to proceed to and remain at
any airport designated by it until the failure is remedied to its
reasonable satisfaction.
9.6 Continuing Insurance for Indemnity
---------------------------------
(a) Lessor may require Lessee to effect and to maintain insurance after
the Expiry Date with respect to its liability under the indemnities in
Section 10 for such period as Lessor may reasonably require (but in
any event not more than three years) providing for each Indemnitee to
be named as an additional insured.
(b) Lessee's obligation under this Section 9.6 shall not be affected by
Lessee ceasing to be lessee of the Aircraft or any of the Indemnitees
ceasing to have any interest in respect of the Aircraft, and upon a
Transfer pursuant to Section 14.2, Lessee shall continue to name the
Indemnitees as additional insureds under the Insurance policies
covered by Section 1(d) of Schedule 4 for three years after the
Transfer date.
9.7 Application of Insurance Proceeds
---------------------------------
As between Lessor and Lessee:
(a) All insurance payments, up to the Agreed Value, received as the result
of a Total Loss occurring during the Term will be paid solely to
Lessor (unless or until Lessor notifies Lessee that said payments
should be made to a Mortgagee).
(b) All insurance proceeds in respect of any damage or loss to the
Aircraft, any Engine or any Part occurring during the Term not
constituting a Total Loss and involving insurance proceeds in excess
of the Damage Notification Threshold will be paid solely to Lessor
(unless or until Lessor notifies Lessee that said payments should be
made to a Mortgagee) and applied in payment (or to reimburse Lessee)
for repairs or replacement property upon Lessor and any Mortgagee
being reasonably satisfied that the repairs or replacement have been
effected in accordance with this Agreement. Insurance proceeds in
amounts less than the Damage Notification Threshold may be paid by the
insurer directly to Lessee. Any balance remaining after payment for
the repairs or replacement of the damage shall be paid to or may be
retained by Lessee.
(c) All insurance proceeds in respect of third party liability will be
paid to the relevant third party.
(d) Notwithstanding Sections 9.7(a) and (b), if at the time of the payment
of any such insurance proceeds a Default has occurred and is
continuing, all such proceeds will be paid to or retained by Lessor
(unless or until Lessor notifies Lessee that said payments should be
made to a Mortgagee) to be applied toward payment of any amounts that
may be or become payable by Lessee in such order and at any time as
Lessor sees fit or as Lessor may elect. In the event that Lessee
remedies any such Default to the reasonable satisfaction of Lessor,
then Lessor shall procure that all such insurance proceeds then held
by Lessor or any Mortgagee, as the case may be, in excess of the
amounts (if any) applied by Lessor or any Mortgagee, as the case may
be, in accordance with this Section 9.7(d) shall be paid promptly to
Lessee.
9.8 Repossession Insurance
(a) Lessor may maintain in effect throughout the Term, aircraft
repossession/political risk insurance underwritten by Lloyd's or such
other insurers ("Repossession Insurance") as shall be acceptable to
Lessor and in an agreed amount acceptable to Lessor, naming Lessor or
its designee as the sole loss payee thereunder. Lessee shall be
required to pay, and shall indemnify and hold Lessor harmless from,
all premiums and other costs and expenses of or associated with such
repossession/political risk insurance.
(b) If Lessee or Lessor is unable to obtain the Repossession Insurance,
Lessee may deliver to Lessor an unconditional and irrevocable stand-by
letter of credit in substantially the form attached as Exhibit C and
otherwise acceptable to Lessor in an amount equal to not less than 12
months Basic Rent payments (the "Insurance Letter of Credit") and
issued or confirmed by a bank located in New York, New York U.S.A.
acceptable to Lessor. The Insurance Letter of Credit shall remain in
full force and effect during the Term. Lessor may draw upon all or a
portion of the amount of the Insurance Letter of Credit upon the
occurrence of an Event of Default, and may use, apply or retain all or
any portion of the funds paid pursuant to the Insurance Letter of
Credit. After expiration of the Term, and provided that Lessee has
been discharged of all its obligations under this Agreement, Lessor
shall return the Insurance Letter of Credit to Lessee for
cancellation.
10. INDEMNITY
---------
10.1 General
-------
Lessee shall defend, indemnify and hold harmless the Indemnitees from and
against any and all claims, proceedings, losses, liabilities, suits,
judgments, costs, expenses, penalties or fines (each a "Claim") regardless
of when the same is made or incurred, whether during or after the Term (but
not before):
(a) that may at any time be suffered or incurred directly or indirectly as
a result of or connected with possession, delivery, performance,
management, registration, control, maintenance, condition, service,
repair, overhaul, leasing, subleasing, use, operation or return of the
Aircraft, any Engine or Part (either in the air or on the ground)
whether or not the Claim may be attributable to any defect in the
Aircraft, any Engine or any Part or to its design, testing, use or
otherwise, and regardless of when the same arises or whether it arises
out of or is attributable to any act or omission, negligent or
otherwise, of any Indemnitee;
(b) that arise out of any act or omission that invalidates or that renders
voidable any of the Insurances;
(c) that may at any time be suffered or incurred as a consequence of any
design, article or material in the Aircraft, any Engine or any Part or
its operation or use constituting an infringement of patent,
copyright, trademark, design or other proprietary right or a breach of
any obligation of confidentiality owed to any Person,
but excluding any Claim to the extent that:
(1) it arises directly as a result of the wilful misconduct or gross
negligence of an Indemnitee;
(2) it arises directly as a result of a breach by Lessor of its
express obligations under this Agreement or as a result of a
representation or warranty given by Lessor in this Agreement not
being true and correct at the date when, or when deemed to have
been, given or made;
(3) it constitutes a Non-Indemnified Tax or Lessor Lien;
(4) it represents a Tax or loss of tax benefits (Lessee's liabilities
for which, to the extent thereof, are set out in Sections 5.7,
5.8, 5.9 and 5.11);
(5) it constitutes a cost or expense that is required to be borne by
Lessor in accordance with another provision of this Agreement;
(6) it results from any disposition not caused by Lessee of all or
any part of Lessor's rights, title or interest in or to the
Aircraft or under this Agreement, unless such disposition occurs
as a consequence of an Event of Default;
(7) it is attributable to an event occurring after the Term unless
the Claim results from or arises out of an act or omission by
Lessee, or any circumstance existing, during the Term;
(8) it is brought after the Term and relates to a claimed patent
infringement by the Manufacturer; or
(9) it arises out of actions taken by the Lessor not permitted by the
terms of the Lease.
10.2 Mitigation
----------
(a) Lessor agrees that it shall, as soon as reasonably practicable after
it becomes aware of any circumstances that would, or would reasonably
be expected to, become the subject of a claim for indemnification
pursuant to Section 10.1, notify Lessee in writing accordingly. Lessor
(and any other Indemnitee seeking indemnification, as the case may be)
and Lessee shall then consult with one another in good faith in order
to determine what action (if any) may reasonably be taken to avoid or
mitigate such Claim. Lessee shall have the right to take all
reasonable action (on behalf and, if necessary, in the name of Lessor
or such other Indemnitee) in order to resist, defend or settle
(provided such settlement is accompanied by payment) any claims by
third parties giving rise to such Claim, provided always that Lessee
shall not be entitled to take any such action unless adequate
provision, reasonably satisfactory to Lessor and such other
Indemnitee, shall have been made in respect of the third party claim
and the costs thereof. Lessee or, if the Claim is covered by Lessee's
Insurances, Lessee's insurers shall be entitled to select any counsel
to represent it or them, Lessor and such other Indemnitee in
connection with any such action, subject in the case of Lessee to the
approval of Lessor and such other Indemnitee (such approval not to be
unreasonably withheld) and any action taken by Lessee shall be on a
full indemnity basis in respect of Lessor and such other Indemnitee.
(b) Any sums paid by Lessee to Lessor or any Indemnitee in respect of any
Claim pursuant to Section 10.1 shall be paid subject to the condition
that, in the event that Lessor or such Indemnitee is subsequently
reimbursed in respect of that Claim by any other Person, Lessor or
such Indemnitee shall, provided no Default shall have occurred and be
continuing, promptly pay to Lessee an amount equal to the sum paid to
it by Lessee, including any interest on such amount to the extent
attributable thereto and received by Lessor or such Indemnitee, less
any Tax payable by Lessor or such Indemnitee in respect of such
reimbursement.
10.3 Duration
--------
The indemnities contained in this Agreement will survive and continue in
full force after the Expiry Date.
11. EVENTS OF LOSS
--------------
11.1 Total Loss Before Delivery
--------------------------
If a Total Loss occurs before Delivery, this Agreement will immediately
terminate and neither party will have any further obligation or liability
under this Agreement except as set forth in Section 7.6.
11.2 Total Loss After Delivery
-------------------------
(a) If a Total Loss occurs after Delivery, Lessee will pay the Agreed
Value to Lessor (or any Mortgagee designated by Lessor) on the earlier
of:
(i) the date of receipt of the insurance proceeds payable as a result
of the Total Loss, or
(ii) the 30th day after the Total Loss Date (the "Settlement Date"),
in either case unless the Aircraft is restored to Lessor or Lessee
within that period (or, in the case of a Total Loss coming within
paragraph (c) of the definition of Total Loss and involving the loss
of Lessor's title to the Aircraft, if both the Aircraft and Lessor's
title thereto are restored to Lessor or, in the case of the Aircraft,
to Lessee).
(b) The receipt by Lessor or any Mortgagee (on behalf of Lessor) of the
insurance proceeds in respect of the Total Loss on or prior to the
Settlement Date shall discharge Lessee from its obligation to pay the
Agreed Value to Lessor pursuant to this Section 11.2, provided such
proceeds are not less than the Agreed Value. In the event that the
insurance proceeds are paid initially to Lessee and not to Lessor or
any Mortgagee, they may be retained by Lessee if Lessee shall have
paid the Agreed Value to Lessor or any Mortgagee (on behalf of
Lessor); otherwise Lessee shall pay the Agreed Value to Lessor or any
Mortgagee (on behalf of Lessor) not later than the next Business Day
following receipt by Lessee of such proceeds. In the event that Lessee
pays the Agreed Value to Lessor or any Mortgagee (on behalf of Lessor)
in accordance with this Section 11.2, Lessor shall promptly assign to
Lessee its rights under the Insurances to receive the insurance
proceeds in respect of the Total Loss to the extent that such proceeds
shall not have been paid to Lessee.
(c) Subject to the rights of any insurers or other third parties, upon
irrevocable payment in full to Lessor or any Mortgagee (on behalf of
Lessor) of the Agreed Value and all other amounts that may be or
become payable to Lessor under this Agreement, Lessor shall:
(i) without recourse or warranty (except as to the absence of Lessor
Liens), and without further act, be deemed to have transferred to
Lessee all of Lessor's rights to any Engines or Parts not
installed when the Total Loss occurred, all on an "as-is where
is" basis, and shall, at Lessee's expense, execute and deliver
such bills of sale and other documents and instruments as Lessee
may reasonably request to evidence (on the public record or
otherwise) the transfer and the vesting of Lessor's rights in
such Engines and Parts in Lessee, free and clear of all rights of
Lessor and any Lessor Liens; and
(ii) pay to Lessee, as a rebate of prepaid Basic Rent, an amount equal
to the product of (1) one month's Basic Rent multiplied by (2) a
fraction the numerator of which is the number of days remaining
in the then current Rental Period and the denominator of which is
the number of days in the then current Rental Period.
11.3 Engine Loss
-----------
(a) Upon the occurrence of an Engine Loss (including, for the avoidance of
doubt, at a time when the Engine is not installed on the Airframe) in
circumstances in which there has not also occurred a Total Loss,
Lessee shall give Lessor and any Mortgagee written notice promptly
upon becoming aware of the same and shall, within 60 days after the
Engine Loss Date, convey or cause to be conveyed to Lessor, as
replacement for such Engine, title to a replacement engine that is in
the same or better operating condition, has the same or greater value
and utility as the lost Engine and that complies with the conditions
set out in Section 8.13(a).
(b) Lessee will at its own expense take all such steps and execute, and
procure the execution of, a full warranty bill of sale covering such
replacement engine, a supplement to this Agreement adding such
replacement engine to the Leased
Property and all such other agreements and instruments that are
necessary to ensure that title to such Engine passes to Lessor and is
subject to the Security Interest created by any Mortgage and such
replacement engine becomes an "Engine", all according to Applicable
Laws. At any time when requested by Lessor, Lessee will provide
evidence to Lessor's reasonable satisfaction (including the provision,
if required, to Lessor of one of more legal opinions) that title has
so passed to Lessor and is subject to the Security Interest created by
any Mortgage.
(c) Upon compliance with the foregoing title transfer provisions, the
leasing of the replaced Engine that suffered the Engine Loss shall
cease and title to such replaced Engine shall (subject to any salvage
rights of insurers) vest in Lessee free of Lessor Liens. If Lessor or
any Mortgagee subsequently receives any insurance proceeds relating to
such Engine Loss, Lessor shall promptly remit such proceeds or cause
such proceeds to be remitted to Lessee.
(d) No Engine Loss with respect to any Engine that is replaced in
accordance with the provisions of this Section 11.3 shall result in
any increase or decrease in Basic Rent, Additional Rent or the Agreed
Value.
11.4 Requisition
During any requisition for use or hire of the Aircraft, any Engine or Part
that does not constitute a Total Loss:
(a) the Basic Rent, Additional Rent and Supplemental Rent payable under
this Agreement will not be suspended or abated either in whole or in
part, and Lessee will not be released from any of its other
obligations under this Agreement (other than operational obligations
with which Lessee is unable to comply solely by virtue of the
requisition);
(b) so long as no Default has occurred and is continuing, Lessee will be
entitled to any compensation payable by the requisitioning authority
in respect of the Term;
(c) Lessee will, as soon as practicable after the end of any such
requisition (with the Term being extended if and to the extent that
the period of requisition continues beyond the Scheduled Expiry Date),
cause the Aircraft to be put into the condition required by this
Agreement; and
(d) Lessor will be entitled to all compensation payable by the
requisitioning authority in respect of any change in the structure,
state or condition of the Aircraft arising during the period of
requisition, and Lessor will apply such compensation in reimbursing
Lessee for the cost of complying with its obligations under this
Agreement in respect of any such change; provided, that, if any
Default has occurred and is continuing, Lessor may apply the
compensation in or towards settlement of any amounts owing by Lessee
under this Agreement.
12. RETURN OF AIRCRAFT
------------------
12.1 Redelivery
----------
On the Expiry Date or termination of the leasing of the Aircraft under this
Agreement, Lessee shall, unless a Total Loss has occurred, at its expense,
redeliver the Aircraft and Aircraft Documents to Lessor at the Redelivery
Location in a condition complying with this Section 12 and Schedule 3, free
and clear of all Security Interests and Permitted Liens (other than Lessor
Liens). Upon the request Lessor, Lessee shall ferry the Aircraft to a
location other than the Redelivery Location. Lessor shall pay the costs of,
and bear the risk of loss to the Aircraft during, such ferry flight.
12.2 Final Checks
------------
Immediately prior to return of the Aircraft, Lessee shall perform the
following:
(a) Lessee shall perform (or have performed by an Agreed Maintenance
Performer) a C-Check. At return, the Airframe will have zero Flight
Hours since such C-Check, except for the acceptance flights and the
ferry flight to the Redelivery Location. Lessee will also weigh the
Aircraft. Any discrepancies revealed during such inspection will be
corrected in accordance with the Manufacturer's maintenance and repair
manuals. Lessee shall also perform or cause to be performed during
such check, to the extent it is able, any other work reasonably
required by Lessor (and not otherwise required under this Agreement)
so long as such work does not prevent Lessee from returning the
Aircraft on the Expiry Date, and Lessor shall reimburse Lessee for the
Actual Cost of such work.
(b) Lessee shall perform (or have performed by an Agreed Maintenance
Performer) an internal and external corrosion inspection in accordance
with the CPCP, and correct any discrepancies in accordance with the
recommendations of the
Manufacturer and the SRM. In addition, all inspected areas will be
properly treated with corrosion inhibitor as recommended by
Manufacturer.
(c) If Lessee performed any structural inspections or tasks on a sampling
basis but did not perform such inspections on the Aircraft, such work
shall also be performed on the Aircraft.
(d) Lessee shall perform a videotape borescope inspection of all
accessible gas path sections of each Engine (accessible whether by
borescope port or other means), including the low pressure and high
pressure compressors and the turbine area of such Engine. All items
beyond the Engine Manufacturer's maintenance manual serviceable limits
will be rectified at Lessee's sole cost and expense. No Engine will be
"on watch" for any reason requiring special or out of sequence
inspection.
(e) In accordance with the Engine Manufacturer's maintenance manual,
Lessee shall perform a maximum power assurance run and condition,
acceleration and bleed valve scheduling checks on each Engine. Lessee
will record and evaluate each Engine's performance, with Lessor and/or
its representatives entitled to be present. Each Engine shall pass
such tests without operational limitations throughout the operating
envelope in accordance with the Engine Manufacturer's maintenance
manual.
(f) Lessee shall perform a power assurance run and a videotape borescope
inspection of the APU, and all items beyond the manufacturer's
recommended limits will be rectified at Lessee's sole cost and
expense.
(g) If any historical and technical records, condition trend monitoring
data, power assurance runs or borescope inspection indicate an
abnormal acceleration in the rate of performance deterioration or oil
consumption in any Engine or the APU, Lessee shall correct such
conditions causing the accelerated rate of deterioration or oil
consumption.
(h) Lessee shall notify Lessor at least 30 days prior to commencing the
final checks and tests required pursuant to this Section 12.2 and
Lessor and the Financing Parties or their respective representatives
may inspect the Aircraft during any such examination or test.
12.3 Final Inspection
----------------
(a) At least 10 days prior to redelivery of the Aircraft, Lessee will make
the Aircraft available to representatives of Lessor and the Financing
Parties for inspection ("Final Inspection") in order to verify that
the condition of the Aircraft complies with this Agreement. The Final
Inspection will be long enough to permit the representatives of Lessor
and the Financing Parties to inspect, at their own cost, the Aircraft
Documents, the Aircraft and any uninstalled Parts and Engines. The
representatives of Lessor and the Financing Parties shall attend and
conduct the Final Inspection diligently and, without limiting their
right to conduct the full Final Inspection permitted by this
Agreement, will cooperate with Lessee in order to complete the Final
Inspection as soon as reasonably practical.
(b) Lessor and the Financing Parties shall also be entitled, as part of
the Final Inspection, to require Lessee to perform an acceptance
flight of up to one hour at Lessee's cost (with up to two
representatives of Lessor and the Financing Parties on-board as
observers) and such further acceptance flights as may be necessary in
the event that the first or subsequent flights do not confirm that the
Aircraft complies with the redelivery requirements of this Agreement.
(c) At the request of Lessor, Lessee shall perform "bridging" maintenance
procedures for the purpose of standardizing the Aircraft to the
maintenance program of any subsequent operator of the Aircraft;
provided, that Lessor shall pay to Lessee the Actual Cost of all
"bridging" procedures that are in excess of or not in lieu of the
final checks and maintenance work to be performed pursuant to Section
12.2 and Schedule 3.
12.4 Non-Compliance
--------------
To the extent that, at the time of Final Inspection, the condition of the
Aircraft does not comply with this Agreement, Lessee shall, at the option
of Lessor:
(a) immediately rectify the non-compliance and, to the extent the non-
compliance extends beyond the Expiry Date, the Term will be
automatically extended until the non-compliance has been rectified; or
(b) redeliver the Aircraft to Lessor and indemnify Lessor, and provide
security reasonably acceptable to Lessor for that indemnity, against
the cost of putting the Aircraft into the condition required by this
Agreement.
During any extension of the Term pursuant to Section 12.4(a), this
Agreement will remain in full force and effect, including the obligation to
pay lease rental (which Lessee shall pay on a per diem basis weekly in
advance in an amount equal to one-fourth of the Basic Rent Amount);
provided, however, that Lessee shall not operate, or permit others to
operate, the Aircraft after the Expiry Date except for acceptance flights
pursuant to Section 12.2 and a ferry flight to the Redelivery Location.
12.5 Export Documentation
--------------------
Upon redelivery and upon request by Lessor, Lessee shall (a) provide to
Lessor all documents necessary to export the Aircraft from the State of
Registration (including a valid and subsisting export license for the
Aircraft), and (b) provide any documents requested by Lessor in connection
with, and otherwise cooperate with, the deregistration of the Aircraft by
the Aviation Authority, including causing the Aviation Authority to issue
an Export Certificate of Airworthiness to a country specified by Lessor.
12.6 Acknowledgment
--------------
Provided Lessee has complied with its obligations under this Agreement,
following redelivery of the Aircraft by Lessee to Lessor at the Redelivery
Location, Lessor will deliver to Lessee an acknowledgment confirming that
Lessor is satisfied that the Aircraft is in the condition required by this
Agreement and has been redelivered to Lessor in accordance with this
Agreement.
12.7 Maintenance Program
-------------------
(a) During the 20 day period preceding the Scheduled Expiry Date and upon
Lessor's request, Lessee will provide Lessor or its agent reasonable
access to the Approved Maintenance Program and the Aircraft Documents
in order to facilitate the Aircraft's integration into any subsequent
operator's fleet. Lessor agrees that it will not disclose the contents
of the Approved Maintenance Program to any Person except to the extent
necessary to monitor Lessee's compliance with this Agreement and/or to
bridge the maintenance program for the Aircraft from the Approved
Maintenance Program to another program after the Expiry Date.
(b) Concurrent with providing the Aircraft Documents for Lessor's review,
Lessee shall provide to Lessor a written summary of all sampling
programs involving or affecting the Aircraft.
12.8 Storage
-------
(a) If Lessor so requests, and subject to the availability of the
requisite space, Lessee shall park and store the Aircraft at a secure
storage area, which may be at the Redelivery Location or at any other
suitable facility of Lessee selected by Lessee, wherever located (the
"Storage Location"), on behalf of Lessor for a period not exceeding 30
days from the Expiry Date. During that period the Aircraft shall be at
Lessee's risk (save as to any loss or damage caused by Lessor's wilful
misconduct or gross negligence), and Lessee shall maintain and store
the Aircraft in accordance with the respective manufacturer's
maintenance planning document and shall insure the Aircraft in
accordance with a "ground risk only" policy usual and customary in the
worldwide aviation insurance marketplace. All storage, maintenance and
insurance costs shall be borne by Lessee.
(b) If Lessor so requests, and subject to the availability of the
requisite space, Lessee shall continue to park and store the Aircraft
at the Storage Location on behalf of Lessor for a further period not
exceeding 60 days. During that further period the Aircraft shall be at
Lessor's risk (save as to any loss or damage caused by Lessee's wilful
misconduct or gross negligence), but Lessee shall continue to
maintain, store and insure the Aircraft in accordance with this
Section 12.8. All reasonable storage, maintenance and insurance costs
incurred by Lessee (excluding any profit element accruing to Lessee)
during such further period shall be reimbursed by Lessor promptly upon
presentation of supporting invoices and/or receipts.
12.9 In lieu of returning the Aircraft, Lessee may purchase the Aircraft
for the Option Price by giving notice to Lessor not less than 180 days prior to
the Scheduled Expiry Date of Lessee's intent to purchase the Aircraft. Said
notice shall be irrevocable once given. If Lessee shall have given such notice,
then on the Scheduled Expiry Date: (i) Lessee shall (subject to the provisions
of the last sentence of this Section 12.9) pay the Option Price to Lessor by
wire transfer of immediately available US Dollars to the account specified in
Section 5.6 of this Agreement, and (ii) upon receipt of the Option Price, Lessor
shall convey title to the Aircraft to Lessee or Lessee's designee free of Lessor
Liens by executing and delivering to Lessee a bill of sale for the Aircraft. The
Aircraft shall be transferred without warranty (except as to title being
free of Lessor Liens), "as is, where is, with all faults." In addition, Lessor
shall execute such other documents including a certificate terminating this
Agreement as Lessee may reasonably request, provided such documents are prepared
at Lessee's sole cost and expense and are satisfactory in all respects to
Lessor. If Lessee purchases the Aircraft in accordance with the foregoing
provisions, and if no Default shall have occurred and be then continuing, Lessor
shall retain and apply the balance then in Lessor's possession on account of
Additional Rent and the amount of the Security Deposit as a credit against the
Option Price.
13. DEFAULT
-------
13.1 Events
------
Each of the following events will constitute an Event of Default and a
repudiation of this Agreement by Lessee:
(a) Non-payment: Lessee (i) fails to pay the Agreed Value and all
-----------
other amounts required under Section 11.2 on the Settlement Date, (ii)
fails to make any payment of Basic Rent or Additional Rent within two
Business Days after the date on which such payment is due, or (iii)
fails to pay any other amount payable by it under this Agreement
within five Business Days after written notice from Lessor that such
amounts are due; or
(b) Material Covenants: Lessee (i) fails to maintain in full force and
------------------
effect any insurance required to be maintained under Section 9, or (ii)
transfers possession of the Airframe or any Engine to another Person other than
as permitted by this Agreement; or
(c) Breach: Lessee fails to comply with any other provision of this
------
Agreement and, if such failure is, in the reasonable opinion of Lessor, capable
of remedy, the failure continues for 30 days after notice from Lessor to Lessee,
provided, that if such failure cannot reasonably be remedied within such 30 day
period and Lessee is diligently undertaking all necessary remedial action, the
30 day period shall be extended for a further 15 days; or
(d) Representation: any representation or warranty made (or deemed to be
--------------
repeated) by Lessee in this Agreement or in any document or certificate
furnished to Lessor pursuant to or in connection with this Agreement is or
proves to have been incorrect in any material respect when made or deemed to be
repeated and Lessee's ability to comply with its obligations under
this Agreement, and/or Lessor's or any Mortgagee's rights, title and interest to
and in the Aircraft and/or under this Agreement, are thereby materially and
adversely affected; or
(e) Cross Default:
-------------
(i) any Financial Indebtedness of Lessee or any of its Affiliates
that exceeds $500,000 is not paid when due and any applicable
grace period shall have expired;
(ii) the security for any Financial Indebtedness is enforced;
(iii) any lease, conditional sale, installment sale or forward
purchase agreement of Lessee or any of its Affiliates in respect
of an aircraft is terminated as a consequence of an event of
default or termination event (however described); or
(iv) an event of default (however described) occurs under any lease,
conditional sale, installment sale or forward purchase agreement
between Lessor or any of its Affiliates and Lessee or any of its
Affiliates;
provided always, in any such case, it shall not constitute an Event of
Default under this Agreement:
(1) if the relevant Financial Indebtedness constitutes non-
recourse borrowing or financing; or
(2) if the non-payment, acceleration, termination or event in
question is being contested by Lessee in good faith and on
reasonable grounds and any declaration of default,
termination of agreement or enforcement of security has been
stayed by a court of competent jurisdiction; or
(f) Approvals: any consent, authorization, license, certificate or
---------
approval of or registration with or declaration to any Government
Entity in connection with this Agreement, including:
(i) any authorization required by Lessee of, or in connection with,
the execution, delivery, validity, enforceability or
admissibility in evidence of
this Agreement or the performance by Lessee of its obligations
under this Agreement; or
(ii) any airline license, air transport license, franchise,
concession, permit, certificate, right or privilege required by
Lessee for the conduct of its business,
is modified, withheld, revoked, suspended, canceled, withdrawn,
terminated or not renewed, or otherwise ceases to be in full force and
is not reissued, reinstated or renewed within 30 days, provided
however that any such modification, withholding, revocation,
suspension, cancellation, withdrawal, termination or non-renewal shall
only constitute an Event of Default if it has a material adverse
effect on Lessee's ability to perform its obligations under the
Operative Documents or on Lessor's rights, title and interest to and
in the Aircraft or under this Agreement; or
(g) Insolvency:
----------
(i) Lessee or any of its Affiliates is, or is deemed for the purposes
of any relevant law to be, unable to pay its debts as they fall
due or to be insolvent, or admits inability to pay its debts as
they fall due; or
(ii) Lessee or any of its Affiliates suspends making payments on all
or any class of its debts or announces an intention to do so, or
a moratorium is declared in respect of any of its indebtedness;
or
(h) Bankruptcy and Similar Proceedings
----------------------------------
(i) Lessee shall consent to the appointment of a receiver, trustee
or liquidator for itself or for a substantial part of its
property; or
(ii) Lessee shall admit in writing its inability to pay its debts
generally as they become due, or Lessee shall make a general
assignment for the benefit of creditors; or
(iii) Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or answer seeking reorganization in a
proceeding under any laws dealing with bankruptcy, insolvency,
moratorium or creditors' rights generally (any
or all of which are hereinafter referred to as "Bankruptcy
Laws"), or an answer admitting the material allegations of a
petition filed against Lessee in any such proceeding, or Lessee
shall by voluntary petition or answer consent to or fail to
oppose the seeking of relief under the provisions of any
Bankruptcy Laws; or
(iv) any order, judgment or decree is entered by a court of competent
jurisdiction appointing a receiver, trustee or liquidator of
Lessee or a substantial part of its property, or ordering a
substantial part of Lessee's property to be sequestered, is
instituted or done with the consent of Lessee or, if instituted
by another Person, the order, judgment or decree is not
dismissed, remedied or relinquished within 30 days; or
(v) a petition against Lessee in a proceeding under any Bankruptcy
Laws shall be filed and shall not be withdrawn or dismissed
within 30 days thereafter, or if, under the provisions of any
Bankruptcy Laws that may apply to Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of
Lessee or of any substantial part of its property; or
(vi) any step (including petition, proposal or convening a meeting) is
taken with a view to a composition, assignment or arrangement
with any creditors of, or the reorganization, rehabilitation,
administration, liquidation, or dissolution of, Lessee or any of
its Affiliates or any other insolvency proceedings involving
Lessee or any of its Affiliates; or
(i) Other Jurisdiction: there occurs in relation to Lessee or any of its
------------------
Affiliates any event anywhere which, in the reasonable opinion of
Lessor, corresponds with any of those mentioned in Section 13.1(h); or
(j) Suspension of Business: Lessee or any of its Affiliates suspends or
----------------------
ceases to carry on all or a substantial part of its business; or
(k) Disposal: Lessee or any of its Affiliates disposes or threatens to
--------
dispose of all or a material part of its assets, whether by one or a
series of transactions, related or not, other than pursuant to a
merger or consolidation as referred to in, and subject to, Section
8.8(b) or for the purpose of any other reorganization or amalgamation
the terms of which have received the previous consent in writing of
Lessor; or
(l) Rights: the existence, validity, enforceability or priority of the
------
rights of Lessor as owner and lessor in respect of the Aircraft or the
rights of any Mortgagee as mortgagee of the Aircraft and assignee of
this Agreement are challenged by Lessee or any other Person claiming
by or through Lessee; or
(m) Change of Ownership: any single Person or group of Persons acquire
-------------------
control, directly or indirectly, of Lessee without the previous
consent in writing of Lessor (which consent shall not be withheld
unless Lessor is of the reasonable opinion that such acquisition of
control will have a materially adverse effect on Lessee's ability to
perform its obligations under this Agreement or Lessor's rights, title
and interest in and to the Aircraft or under this Agreement), not
including (i) individuals or other Persons that are currently in
control of Lessee, (ii) spouses of any such individuals, (iii) any
lineal ancestor or descendant of any such individual, (iv) any spouse
of any individual covered by clause (iii), or (v) a partnership or
trust set up for the benefit of individuals identified in clauses (i)
through (iv); or
(n) Delivery: Lessee fails to accept delivery of the Aircraft when validly
--------
tendered pursuant to this Agreement by Lessor (provided that Lessor
shall have satisfied the conditions precedent set out in Section 3.4);
(o) Adverse Change: any event or series of events occurs which, in the
--------------
reasonable opinion of Lessor, could be expected to have a material
adverse effect on the financial condition or operations of Lessee and
its Affiliates or on the ability of Lessee to comply with its
obligations under this Agreement; or
13.2 Rights
------
If an Event of Default occurs, and for as long as it shall continue, Lessor
may at its option (and without prejudice to any of its other rights under
this Agreement or that may arise by operation of Applicable Law), at any
time thereafter:
(a) accept such repudiation by Lessee of its obligations under this
Agreement and by notice to Lessee with immediate effect terminate the
leasing of the Aircraft (but without prejudice to the continuing
obligations of Lessee under this Agreement), whereupon all rights of
Lessee under this Agreement shall cease; and/or
(b) proceed by appropriate court action or actions to enforce performance
of this Agreement or to recover damages for the breach of this
Agreement; and/or
(c) either:
(i) take possession of the Aircraft, for which purpose Lessor may
enter any premises belonging to, occupied by or under the control
of Lessee (for which purpose Lessee hereby grants to Lessor an
irrevocable license to the extent permitted by Applicable Law)
where the Aircraft may be located, or cause the Aircraft to be
redelivered to Lessor at the Redelivery Location (or such other
location as Lessor may require), and Lessor is hereby irrevocably
authorized and empowered, to the extent permitted by Applicable
Law, to direct pilots of Lessee or other pilots to fly the
Aircraft to that airport and will have all the powers and
authorizations necessary for taking such action; or
(ii) by serving notice, require Lessee to redeliver the Aircraft to
Lessor at the Redelivery Location (or such other location as
Lessor may require) in the condition required by Section 12 and
Schedule 3.
(d) If an Event of Default occurs, Lessor may sell, lease or otherwise
deal with the Leased Property in such manner as Lessor in its absolute
discretion considers appropriate.
(e) If an Event of Default occurs, Lessee shall at the request of Lessor
take all steps necessary to deregister the Aircraft from the aircraft
registry of the State of Registration and export the Aircraft from the
country where the Aircraft is for the time being registered or
situated and any other steps necessary to enable the Aircraft to be
redelivered to Lessor in accordance with this Agreement. Lessee hereby
irrevocably and by way of security for its obligations under this
Agreement authorizes and empowers Lessor as its attorney-in-fact and
agent (such agency being coupled with an interest), in Lessor's own
name or in the name of Lessee, to execute and deliver any
documentation and to do any act or thing required in connection with
the foregoing.
13.3 Default Payments
----------------
If an Event of Default occurs, Lessee will indemnify and pay to Lessor on
demand against any loss (including loss of profit), damage, expense, cost
or liability that Lessor may sustain or incur directly or indirectly as a
result, including:
(a) all unpaid Basic Rent, Additional Rent and Supplemental Rent then due
and unpaid;
(b) any loss of profit (calculated on an after-tax basis) suffered by
Lessor because of Lessor's inability to place the Aircraft on lease
with another Lessee on terms as favorable to Lessor as this Agreement
or because whatever use, if any, to which Lessor is able to put the
Aircraft upon its return to Lessor, or the funds arising upon a sale
or other disposal of the Aircraft, is not as profitable (calculated on
an after-tax basis) to Lessor as this Agreement would have been but
for such Event of Default;
(c) in the event that the Aircraft is sold prior to Lessor entering into a
replacement lease, the amount (if any) by which (i) the aggregate of
(1) the net sale proceeds (calculated by deducting the costs of sale
together with the cost of preparing the Aircraft for sale and the
repayment of any outstanding indebtedness in relation to the financing
of the Aircraft) plus (2) the present value of the anticipated after-
tax net income to be derived from such net sale proceeds up to the
Scheduled Expiry Date, discounted on a monthly basis using 9.5% per
annum as the discount rate, are less than (ii) the aggregate of
(1) the anticipated net sale proceeds (computed on the same basis as
the net sale proceeds referred to in (i)(1) above), assuming that the
Aircraft would have been sold as soon as reasonably practicable
following the Scheduled Expiry Date plus (2) the present value of the
income that would have been derived from the future Basic Rent payable
until the Scheduled Expiry Date, discounted on a monthly basis using
9.5% per annum as the discount rate;
(d) any amount of principal, interest, fees or other sums whatsoever paid
or payable on account of funds borrowed in order to carry any amount
unpaid by Lessee;
(e) any loss, premium, penalty or expense that may be incurred in repaying
funds raised to finance the Aircraft or in unwinding any swap, forward
interest rate
agreement or other financial instrument relating in whole or in part
to Lessor's financing of the Aircraft; and
(f) any loss, cost, expense or liability sustained or incurred by Lessor
owing to Lessee's failure to redeliver the Aircraft on the date, at
the place and in the condition required by this Agreement.
13.4 Waiver of Certain Article 2A Rights
-----------------------------------
To the fullest extent permitted by Applicable Law, each of Lessor and
Lessee hereby agree that no rights or remedies referred to in Article 2A of
the Uniform Commercial Code shall be conferred upon either Lessor or Lessee
unless otherwise expressly granted in this Agreement.
14. ASSIGNMENT and TRANSFER
-----------------------
14.1 No Assignment by Lessee
-----------------------
Lessee will not assign any of its right, title, interests, duties,
obligations or liabilities in, to or under this Agreement, or create or
permit to exist any Security Interest (other than Permitted Liens) over any
of its rights under this Agreement, and any such purported assignment or
grant of a Security Interest shall be void ab initio and of no force or
effect. Without limiting the foregoing, if any assignment prohibited under
the foregoing sentence shall be valid by operation of any non-waivable
provision of Applicable Law, Lessee shall nevertheless remain fully liable
for the payment and performance of all of Lessee's obligations to be paid
and performed hereunder as fully and to the same extent as if such
assignment had not been effected, without prejudice to the obligations of
such assignee.
14.2 Lessor Assignment
-----------------
Lessor may sell, assign (for purposes of this Section 14.2, not including
an assignment for security purposes) or transfer all or any of its rights
under this Agreement and in the Leased Property (a "Transfer") and Lessor
will have no further obligation under this Agreement following a Transfer
but, notwithstanding any Transfer, will remain entitled to the benefit of
each indemnity under this Agreement.
(a) In connection with any Transfer, the following conditions shall apply:
(i) Lessor shall give Lessee written notice of such Transfer at least 10
Business Days before the date of such Transfer, specifying the name
and address of the proposed purchaser, assignee or transferee (the
"Transferee");
(ii) the Transferee will be a Person reasonably experienced in aircraft
leasing (or the Transferee's rights and powers under this Agreement
shall be exercised or serviced on its behalf pursuant to an
appropriate management or servicing agreement by a Person having such
experience);
(iii) the Transferee will have full corporate power and authority to enter
into and perform the transactions contemplated by this Agreement on
the part of "Lessor";
(iv) on the Transfer date Lessor and the Transferee shall enter into an
agreement or agreements in which the Transferee confirms that it
shall be deemed a party to this Agreement and agrees to be bound by
all the terms of, and to undertake all of the obligations of, Lessor
contained in this Agreement;
(v) such Transfer shall not violate any Applicable Law; and
(vi) the Transferee shall provide to Lessee an opinion of its regular
independent counsel as to the matters set forth in Section
14.2(a)(iii) and as to the legality, validity, binding effect and
enforceability of the agreement or agreements between Lessor and
Transferee referred to in Section 14.2(a)(iv).
(b) Upon any Transfer, the Transferee shall be deemed Lessor for all purposes
of this Agreement, each reference in this Agreement to "Lessor" shall
thereafter be deemed for all purposes to refer to the Transferee, and the
transferor shall be relieved of all obligations of "Lessor" under this
Agreement arising after the time of such Transfer except to the extent
attributable to acts or events occurring prior to the time of such
Transfer.
(c) Upon compliance by Lessor and a Transferee with the terms and conditions of
Section 14.2(a), Lessee shall at the time of Transfer, at the specific
written request
of Lessor and with Lessor paying all of Lessee's reasonable out-of-
pocket costs and expenses:
(i) execute and deliver to Lessor and to such Transferee an
agreement, in form and substance satisfactory to Lessor, Lessee
and such Transferee, dated the date of such transfer, consenting
to such transfer, agreeing to pay all or such portion of the
Basic Rent, Additional Rent and other payments under this
Agreement to such Transferee or its designee as such Transferee
shall direct, and agreeing that such Transferee shall be
entitled to rely on all representations and warranties made by
Lessee in the Operative Documents or in any certificate or
document furnished by Lessee in connection with the Operative
Documents as though such Transferee was the original "Lessor";
(ii) execute and deliver to Lessor or such Transferee, as
appropriate, precautionary Uniform Commercial Code financing
statements or amendments reflecting the interests of such
Transferee in the Aircraft and this Agreement;
(iii) deliver to Lessor and to such Transferee a certificate, signed
by a duly authorized officer or Lessee, dated the date of such
transfer, to the effect that no Event of Default has occurred
and is continuing or, if one is then continuing, describing such
Event of Default;
(iv) cause to be delivered to Lessor and such Transferee certificates
of insurance and broker's letter of undertaking substantially in
the form delivered to Lessor on the Delivery Date, detailing the
coverage and confirming the insurers' agreement to the specified
insurance requirements of this Agreement and listing Lessor and
Transferee as additional insureds and the Transferee as sole
loss payee (subject to other direction by any Mortgagee);
(v) deliver to Lessor and to such Transferee an opinion of Lessee's
counsel (which may be Lessee's General Counsel), addressed to
Lessor and such Transferee to the effect that the agreement
referred to in Section 14.2(c)(i) has been duly authorized and
executed by Lessee and constitutes the legal, valid and binding
obligation of Lessee, enforceable against Lessee in accordance
with its terms (subject to customary exceptions), and to the
effect that such Transferee may rely on the opinion delivered by
such counsel or its predecessor counsel in connection with this
Agreement on the Delivery Date with the same force and effect as
if such Transferee was an original addressee of such opinion
when given;
(vi) deliver to Lessor and such Transferee information on the
location of the Airframe and Engines at all times requested by
Lessor in order to permit the Transfer to take place at a time
and on a date so as to eliminate or minimize any Taxes
applicable to the Transfer; and
(vii) such other documents as Lessor or such Transferee may reasonable
request.
14.3 Grants of Security Interests
----------------------------
Lessor shall be entitled at any time after Delivery to grant a security
interest in the Leased Property or its right, title and interest in this
Agreement (each, an "Additional Mortgage") in favor of any Person (each, an
"Additional Mortgagee"). Any Additional Mortgage may be a successor
mortgage to the Security Interest granted to any Mortgagee, or may be in
addition to any Mortgagee's Security Interest and previous Additional
Mortgages and with a priority senior, equal or subordinate to any
Mortgagee's Security Interest and previous Additional Mortgages as such
Mortgagee and previous Additional Mortgagees may permit. In the case of any
such grant by Lessor of an Additional Mortgage to an Additional Mortgagee
in all or any portion of Lessor's rights, title and interest in and to the
Aircraft and this Agreement, Lessee shall promptly, at the specific written
request of Lessor and with Lessor paying all of Lessee's reasonable out-of-
pocket costs and expenses:
(a) execute and delivery to Lessor and to such Additional Mortgagee an
agreement in form and substance satisfactory to Lessor, such
Additional Mortgagee and Lessee, dated the date of the grant of such
Additional Mortgage, (i) consenting to such Additional Mortgage and to
any assignment of Lessor's rights, title and interest in and to this
Agreement to such Additional Mortgagee for security purposes, (ii) if
requested by Lessor and consented to by the previous payee, agreeing
that Lessee will pay the Basic Rent and other payments under this
Agreement to such Additional Mortgagee, and (iii) agreeing that such
Additional Mortgagee shall be entitled to rely on all representations
and warranties made by Lessee in this Agreement or in any certificate
or document furnished by Lessee in connection
with this Agreement Documents as though such Additional Mortgagee was
originally the "Mortgagee";
(b) execute and deliver to Lessor and such Additional Mortgagee such
agreements as Lessor may reasonably require for the purposes of
effecting all necessary amendments to this Agreement;
(c) execute and deliver to Lessor or such Additional Mortgagee, as the
case may be, precautionary Uniform Commercial Code financing
statements or amendments reflecting the assignment of Lessor's
interests in the Operative Documents to such Additional Mortgagee;
(d) deliver to Lessor and such Additional Mortgagee a certificate, signed
by a duly authorized officer of Lessee, dated the date of the grant of
the Additional Mortgage, to the effect that no Event of Default has
occurred and is continuing or, if one is then continuing, describing
such Event of Default;
(e) cause to be delivered to Lessor and such Additional Mortgagee
certificates of insurance and broker's letter of undertaking
substantially in the form delivered to Lessor on the Delivery Date,
detailing the coverage and confirming the insurers' agreement to the
specified insurance requirements of this Agreement, adding such
Additional Mortgagee as an additional insured and, if requested by
Lessor and consented to by the previous loss payee, listing such
Additional Mortgagee as sole loss payee;
(f) deliver to Lessor and such Additional Mortgagee an opinion of Lessee's
counsel (which may be Lessee's General Counsel), addressed to Lessor
and such Additional Mortgagee (i) to the effect that the agreements
referred to in sub-clauses (a) and (b) have been duly authorized and
executed by Lessee and constitute the legal, valid and binding
obligations of Lessee, enforceable against Lessee in accordance with
their terms (subject to customary exceptions), and (ii) to the effect
that such Additional Mortgagee may rely on the opinion delivered by
such counsel or its predecessor counsel in connection with this
Agreement on the Delivery Date with the same force and effect as if
such Additional Mortgagee was an original addressee of such opinion
when given; and
(g) such other documents as Lessor or such Additional Mortgagee may
reasonably request.
14.4 Sale and Leaseback by Lessor
----------------------------
In addition to the Transfers and grants of Security Interests permitted by
Sections 14.2 and 14.3, Lessor shall be entitled to transfer its right,
title and interests in and to the Leased Property to any Person and lease
the Aircraft from such Person (a "Head Lessor"), and in such event Lessor
shall retain its rights and obligations as "Lessor" under this Agreement.
In the event of such a sale and lease-back by Lessor, (a) the Head Lessor
shall meet the requirements for a "Transferee" as defined in Section
14.2(a)(ii) above, (b) Lessor shall be entitled to assign its rights in
this Agreement to such Head Lessor as security for its obligations under
the head lease, (c) the Head Lessor shall be entitled to grant to one or
more purchase money lenders, or to an indenture trustee on behalf of such
lenders, an Additional Mortgage covering the Leased Property and the
Operative Documents, (d) Lessee shall execute and deliver to Lessor, such
Head Lessor, such Additional Mortgagee and any trustees on their behalf, as
appropriate, the documents specified in Sections 14.2(c)(i) through (vii)
and Sections 14.3(a) through (g) above, and Lessee shall cooperate with
Lessor to make such other changes to this Agreement, such as including such
Head Lessor, such Additional Mortgagee and the trustees on their behalf as
additional insureds and "Indemnitees", as Lessor may reasonably request so
long as such changes do not adversely affect the rights or obligations of
Lessee under this Agreement or otherwise adversely affect Lessee and with
Lessor paying all of Lessee's reasonable out-of-pocket costs and expenses.
14.5 Further Acknowledgments
-----------------------
Lessee further acknowledges that any Transferee or Additional Mortgagee
shall in turn have the rights of, and be subject to the conditions to,
transfer and grants of Security Interests set forth above in this Section
14.
14.6 Certain Protections for Lessee's Benefit
----------------------------------------
The rights of Lessee under this Agreement shall be superior to the rights
of any Additional Mortgagee or Head Lessor, and Lessor shall require each
Additional Mortgagee and Head Lessor to agree in writing with Lessee that
such Additional Mortgagee's and Head Lessor's rights in and to the Leased
Property shall be subject to the terms of this Agreement, including to
Lessee's rights to the quiet use, possession and enjoyment provisions
contained in this Agreement. Lessor's obligations to perform the terms and
conditions of this Agreement shall remain in full force and effect
notwithstanding the creation of any Additional Mortgage or Head Lease.
Lessor shall not create any Additional Mortgage or enter into any Head
Lease that violates the terms of this Section 14.6.
15. GOVERNING LAW AND JURISDICTION
15.1 Governing Law
-------------
THIS AGREEMENT SHALL, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
ENTERED INTO IN THE STATE OF NEW YORK BY RESIDENTS OF SUCH STATE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
15.2 Consent to Jurisdiction
-----------------------
The Lessee and the Lessor each hereby irrevocably consents that any legal
action or proceeding against it or any of its assets arising out of or
relating to this Lease shall be brought in the United States District Court
for the Southern District of New York or the Supreme Court for the State of
New York, County of New York, and any appellate court thereto (the "Agreed
Courts"), and by execution and delivery of this Lease each of the Lessor
and the Lessee hereby irrevocably submits to and accepts with regard to any
such action or proceeding, for itself and in respect of its assets,
generally and unconditionally, the exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby.
Nothing herein shall prevent any party from bringing any legal action or
proceeding against the Aircraft in rem or to obtain execution of judgment
in any other appropriate jurisdiction. The Lessee and the Lessor further
agree that a final judgment in any action or proceeding in an Agreed Court
arising out of or relating to this Lease shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the fact and the amount of the indebtedness or
liability therein described, or in any other manner provided by Law. Each
of Lessee and Lessor hereby irrevocably waives, to the fullest extent
permitted by Law, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Lease brought in an Agreed Court, and hereby further
irrevocably waives any claim that any such suit, action or proceeding in
such court has been brought in an inconvenient forum.
15.3 Waiver of Jury Trial
--------------------
LESSEE AND LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
15.4 Service of Process
------------------
(a) Without prejudice to any other mode of service, Lessee (i) appoints
LEXIS Document Services, 125 Park Avenue, 23/rd/ Floor, New York, New
York 10017 as its agent for service of process relating to any
proceedings before the Agreed Courts in connection with this Agreement
and agrees to maintain the process agent in New York, New York
notified to Lessee, and (ii) agrees that failure by a process agent to
notify Lessor of the process shall not invalidate the proceedings
concerned.
(b) Without prejudice to any other mode of service, each of Lessor and
Lessee consents to the service of process relating to any proceedings
involving, directly or indirectly, any matter arising out of or
relating to this Agreement by U.S. Postal Service registered mail
(prepaid, return receipt requested) of a copy of the process to
Lessee's address identified in Section 16.10(b).
16. MISCELLANEOUS
-------------
16.1 Waivers, Remedies Cumulative
----------------------------
The rights of Lessor or Lessee under this Agreement may be exercised as
often as necessary, are cumulative and not exclusive of that party's rights
under any law and may be waived only in writing and specifically. Delay in
exercising or non-exercise of any such right is not a waiver of that right.
16.2 Delegation
----------
Lessor or any Financing Party may delegate to any Person or Persons all or
any of the trusts, powers or discretions vested in it by this Agreement and
any such delegation may be made upon such terms and conditions and subject
to such regulations (including power to sub-delegate) as Lessor or such
Financing Party, respectively, in its absolute discretion thinks fit.
16.3 Appropriation
-------------
If any sum paid or recovered in respect of the liabilities of Lessee under
this Agreement is less than the amount then due, Lessor may apply that sum
to amounts due under this Agreement in such proportions and order and
generally in such manner as Lessor may determine.
16.4 Currency Indemnity
------------------
(a) If Lessor receives an amount in respect of the Lessee's liability
under this Agreement or if such liability is converted into a claim,
proof, judgment or order in a currency other than the currency (the
"contractual currency") in which the amount is expressed to be payable
under this Agreement:
(i) Lessee will indemnify Lessor, as an independent obligation,
against any loss arising out of or as a result of such
conversion;
(ii) if the amount received by Lessor, when converted into the
contractual currency (at the market rate at which Lessor is able
on the relevant date to purchase the contractual currency in New
York City with that other currency) is less than the amount owed
in the contractual currency, Lessee will, forthwith on demand,
pay to Lessor an amount in the contractual currency equal to the
deficit; and
(iii) Lessee will pay to Lessor on demand any exchange costs and Taxes
payable in connection with the conversion.
(b) Lessee waives, to the extent permitted by Applicable Law, any right it
may have in any jurisdiction to pay any amount under this Agreement in
a currency other than that in which it is expressed to be payable.
16.5 Payment by Lessor
-----------------
Lessor will not be obliged to pay any amounts to Lessee under this
Agreement so long as any sums which are then due from Lessee under this
Agreement remain unpaid and any such amounts which would otherwise be due
will fall due only if and when Lessee has paid all such sums.
16.6 Severability
If a provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, that will not affect:
(a) the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
(b) the legality, validity or enforceability in any other jurisdiction of
that or any other provision of this Agreement.
16.7 Remedy
------
If Lessee fails to comply with any provision of this Agreement, Lessor may,
without being in any way obliged to do so or responsible for so doing and
without prejudice to the ability of Lessor to treat the non-compliance as a
Default, effect compliance on behalf of Lessee, whereupon Lessee shall
become liable to pay immediately any sums expended by Lessor together with
all costs and expenses (including reasonable legal costs) necessarily
incurred in connection therewith.
16.8 Expenses
--------
(a) Lessor and Lessee shall each bear their respective expenses (including
legal, professional and out-of-pocket expenses) incurred or payable in
connection with the negotiation, preparation and execution of this
Agreement.
(b) Lessee shall pay to Lessor on demand all expenses (including legal,
professional and out-of-pocket expenses) incurred or payable by Lessor
in connection with the granting of any waiver or consent under this
Agreement.
(c) Lessee will pay to Lessor on demand all expenses (including legal,
survey and other costs) payable or incurred by Lessor in contemplation
of, or otherwise in connection with, the enforcement of or
preservation of any of Lessor's rights under this Agreement, or in
respect of the repossession of the Aircraft.
(d) Lessor will pay to Lessee on demand all expenses (including legal
costs) payable or incurred by Lessee in contemplation of, or otherwise
in connection with, the enforcement of or preservation of any of
Lessee's rights under this Agreement.
16.9 Time of Essence
---------------
The time stipulated in this Agreement for all payments payable by Lessee
to Lessor and for the performance of Lessee's other obligations under this
Agreement that are due on a specified or determinable date will be of the
essence of this Agreement (subject always to any applicable grace period).
16.10 Notices
(a) All notices and other communications given under or in connection
with this Agreement shall be in writing (including telefax) and shall
be deemed to have been received as follows:
(i) If sent by telefax, at the time of receipt by the sender of a
transmission report indicating that all pages of the telefax
transmission were properly transmitted (unless the recipient
notifies the sender promptly, or if received after 5:30 p.m.
local time, by no later than 10:00 a.m. local time the following
Business Day, that the transmission was incomplete or illegible,
in which case the telefax shall be deemed to have been received
at the time of receipt by the sender of a further clear
transmission report on retransmitting the telefax), provided the
relevant telefax transmission (or retransmission, as the case
may be) was transmitted to the receiver between 9:00 a.m. and
5:30 p.m. local time. If it was transmitted later, then it shall
be deemed to have been received at 9:00 a.m. local time on the
succeeding Business Day.
(ii) In any other case, when delivered to the address specified in
clause 16.10(b).
(b) All such notices, requests, demands and other communications shall be
sent:
(i) to Lessor at: 79 South Main Street,
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telephone: +1-801-246-5826
Telefax: +1-801-246-5053
copied to Beneficiary at: 88 Broad Street
Boston, Massachusetts 02110
Attention: Operations Department
Telephone: +1-617-854-5862
Telefax: +1-617-695-0596
with an additional copy to: Sigma Aircraft Management LLC
232 East 50th Street
New York, New York 10022
Attention: Mr. Anders Hebrand
Telephone: +1-212-752-9800
Telefax: +1-212-752-9801
(ii) to Lessee at: Air Slovakia BWJ, Ltd.
Letisko M.R. Stefanika
Ivanska cesta
P.O. Box 2
82001
Bratislava
Attention: Jan Janok
Telephone: +421-7-4342-2742
Telefax: +421-7-4342-2742
or to such other address or telefax number as shall have been notified by
one party to the other in the manner set out in this Section 16.10.
16.11 Sole and Entire Agreement
-------------------------
This Agreement is the sole and entire agreement between Lessor and Lessee
in relation to the leasing of the Aircraft, and supersedes all previous
agreements in relation to that leasing. The terms and conditions of this
Agreement can only be varied by an instrument in writing executed by both
parties or by their duly authorized representatives.
16.12 Indemnities
-----------
All rights expressed to be granted to each Indemnitee under this Agreement
(other than any Financing Party) are given to Lessor as agent for and on
behalf of that Indemnitee.
16.13 Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original and, when taken together, all of which shall
constitute one and the same Agreement.
16.14 Confidentiality
---------------
Neither Lessor nor Lessee shall, without the other's prior written
consent, communicate or disclose the terms of this Agreement or any
information or documents furnished pursuant to this Agreement (except to
the extent that the same are within the public domain) to any third party
(other than any Financing Party, any prospective Transferee, any material
investor in Lessee or creditor in Lessee, Additional Mortgagees or Head
Lessors, the respective external legal advisers, auditors, insurance
brokers or underwriters of Lessor, Lessee and such parties, and the
Manufacturer and Engine Manufacturer); provided, that disclosure will be
permitted, to the extent required:
(a) pursuant to an order of any court of competent jurisdiction; or
(b) pursuant to any procedure for discovery of documents in any
proceedings before any such court; or
(c) pursuant to any law or regulation having the force of law; or
(d) pursuant to a lawful requirement of any authority with whose
requirements the disclosing party is legally obliged to comply; or
(e) in order to perfect any assignment of any assignable warranties.
16.15 Waiver of Immunity. To the extent that any party may in any jurisdiction
------------------
claim for itself or its assets immunity from suit, execution, attachment
(whether in aid of execution before judgment or otherwise) or other legal
process and to the extent that in any such jurisdiction there may be attributed
to itself or its assets such immunity (whether or not claimed), that party
hereby irrevocably agrees not to claim and hereby irrevocably waives such
immunity to the full extent permitted by the laws of such jurisdiction.
[signature page follows]
IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 21722 on
the date shown at the beginning of this Agreement.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as owner trustee
By:________________________________
Name:
Title:
AIR SLOVAKIA BWJ, LTD.
By:________________________________
Name:
Title:
[First Security Bank, National Association, in its capacity as owner
trustee, hereby acknowledges receipt of this Original Executed Counterpart of
Lease Agreement 21722 in New York, New York on this ____ day of August 2000.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as owner trustee
By:________________________________
Name:
Title]/1/
_________________________
/1/ This text will only appear on one counterpart of Lease Agreement 21722.
Schedule 1 -- Description of Leased Property
Part 1 -- Aircraft Specification
IDENTIFICATION:
Aircraft Model: Boeing Model 737-200A
Current U.S. Registration Mark: N57SW
Serial Number: 21722
Date of Manufacture: April 12, 1979
WEIGHT DATA:
Maximum Gross Taxi Weight: 116,000 lbs.
Maximum Gross Takeoff Weight: 115,500 lbs.
Maximum Landing Weight: 103,000 lbs.
Maximum Zero Fuel Weight: 95,000 lbs.
Empty Weight: 64,736 lbs.
Payload: 30,264 lbs.
Fuel Capacity: 5,461 U.S. gallons
AIRFRAME AND INTERIOR EQUIPMENT:
Galleys: two Locations: one forward; one aft
Lavatories: two Locations: one forward; one aft
Passenger Seats: 122 Types: all economy
ENGINES:
Manufacturer: Pratt & Whitney
Position No.1 No.2
Model: JT8D-9A JT8D-9A
Serial Numbers: 707430 665325
APU:
Manufacturer: Allied Signal Corporation
Model: GTCP85-129C
Serial Number: P-40107
LANDING GEAR:
- ------------
Position: Nose Left Main Right Main
---- ---------
Manufacturer: Boeing Boeing Boeing
Model: 65-73762-2 65-73761-87 65-73761-88
Serial Number: R9138P883 MC01011P544 MC01012P544
MAJOR AVIONICS EQUIPMENT:
Nomenclature Manufacturer Model/Part Number
- ----------------------------------------------------------------------------------------
Digital Air Data Computer Honeywell HG480-B13
Mach Trim Coupler Sperry 2590650-901
Landing Gear Accessory Boeing 65-52811-115
Cabin Temperature Controller Garrett 548376-6
Cabin Pressure Controller Hamilton Standard 763810-1
Component Overheat Unit Boeing 65-52808-7
Engine Accessory Unit Boeing 65-73606-34
Air Condition Relay Unit Boeing 65-52810-25
Misc. Solid State Switch Unit Boeing 65-52806-110
Audio Accessory Unit Boeing 65-52804-79
Yaw Damper Coupler Sperry 4030952-902
Flap/Slat Position Switch Accessory Boeing 65-52807-66
Flight Instrument Accessory Unit Boeing 65-52805-122
Nav/ILS Receiver No. 1 - 3 King 066-1060-48
Monitor Comparator Warning Collins 522-3949-002
APU Control Unit Boeing 65-52801-31
Fire Detection Unit Boeing 65-52809-15
Battery Charger ELDEC 2-301-3
Static Inverter Bendix 39B168-1-B
Steering Computer No. 1 & 2 Collins 622-2500-001
Anti-Skid Control Crane 42-265
Pitch Control Channel Sperry 2588810-903
Roll Control Channel Sperry 2588812-902
Auto Pilot Accessory Unit Boeing 65-52812-52
Instrument Amplifier No. 1 & 2 Collins 522-3120-004
Compass System Rack No. 1 & 2 Sperry 614937-101
Power Supply, TR1, TR2 & TR3 OECO Corp. 080-20325-01
VHF Comm No. 1 King KTR9100A
Passenger Address Collins 622-4096-001
ATC Mode S Transponder No. 1 & 2 Bendix/King 066-01127-1301
DME No. 1 & 2 King KDM7000B
Window Heat Controller No. 1 - 4 Koito Manufacturing 83000-0560
Directional Gyro No. 1 & 2 Sperry 2588302-4
Vertical Gyro No. 1 - 3 Sperry 2587335-11
TCAS Processor Bendix/King 066-50000-0108
ADF Receiver King KDF8000
GPWS Mark VII/Windshear Computer Sundstrand 965-0876-001
Weather Radar Bendix RTA4B066-50008-04
Cockpit Voice Recorder Fairchild 93-A100-80
Digital Flight Data Recorder Sundstrand 980-4100-GXUS
Marker Beacon Receiver Collins 522-2996-000
Part 2 -- Aircraft Documents
BOX #1 of 4
-----------
1. Certificates
2. Delivery Documents
3. Regulatory Correspondence
4. A/C Spec Sheet
5. Interior Specs
6. Last Test Flight
7. Accident History
8. Airframe Modification Data
9. Service Bulletin Modification Data
10. FAR/FAR Modification Data
11. Weight and Balance
12. Last Daily / Preflight
13. A/C Time/Cycles Report
14. Maintenance Program/Bridge
15. Items on Continued Inspection
16. Gear Records
17. APU Records
18. Engine Records
19. Components
20. AD Report, Aging A/C, CPCP
BOX #2 of 4
-----------
MAINTENANCE RECORDS MICROFILM:
1. April -- June 1979
2. July -- December 1979
3. January -- June 1980
4. July -- December 1980
5. January -- June 1981
6. July -- December 1981
7. January -- June 1982
8. July -- December 1982
9. January -- June 1983
10. July -- December 1983
11. January -- June 1984
12. July -- December 1984
13. January -- June 1985
14. July -- December 1985
15. January -- June 1986
16. July -- December 1986
17. January -- April 1987
18. May -- August 1987
19. September -- December 1987
20. January -- April 1988
21. May -- August 1988
22. September -- December 1988
23. January -- April 1989
24. May -- August 1989
25. September -- December 1989
26. January -- April 1990
27. May -- August 1990
28. September -- December 1990
29. January -- April 1991
30. May -- August 1991
31. September -- December 1991
32. January -- April 1992
33. May -- August 1992
34. September -- December 1992
35. 1/2 D check 6/13/92
36. January -- April 1993
37. May -- August 1993
38. September -- December 1992
39. January -- April 1994
40. May -- August 1994
41. September -- December 1994
42. January -- April 1995
43. N/57 Tramco 10-87 Book 1-5
44. N/57 Tramco 10-87 Book 6-9
45. Lap Joint Inspection
46. May -- August 1995
47. Special Visit Dalfort 11-15-95
48. September -- December 1995
49. January -- April 1996
50. Tramco D check 5/4/96 -- 6/8/96 Books 1 thru 7
51. Tramco D check 5/4/96 -- 6/8/96 Books 6 thru 9
52. Tramco D check 5/4/96 -- 6/8/96 Non-routine work cards
53. May -- August 1996
54. Daily Packages September -- December 1996
55. Daily Packages January -- April 1997
56. May -- August 1997
57. September -- December 1997
58. January -- April 1998 & Spec Visit 3/25/98
59. May -- August 1998
60. September -- December 1998 Document Spliced at end of roll
61. January -- April 1999
62. May -- August 1999
INSTALLED PART TAGS BY ATA CHAPTERS:
21-29 31-36 38,49 52-57 71-75 77-80
BOX #3 of 4
-----------
APU GTCP85-129C S/N P-40107 records
Engine No. 1 JT8D-9A S/N 707430
General Electric Shop Visit Records WO UR1941 (2 CD's)
Engine Video Borescope -- Hot Section
Engine No. 2 JT8D-9A S/N 665323
General Electric Shop Visit Records WO UR1479 (3 CD's)
Engine Video Borescope -- Hot Section
Engine Part Tags
Aircraft Log Pages September 1999 thru December 1999
Deferred Maintenance Logs October 1999 thru December 1999
Wiring Diagram Manual (2 CD's)
Structural Repair Manual (1 CD)
Maintenance Manual/IPC (1 CD)
Pinpoint Software 1 CD (software for manuals)
Section Page
- ------- ----
BOX #4 of 4
-----------
Southwest C Check December 1999
"B" and C4 Check Nov. 10, 1999
Service Checks November 1999
Service Checks October 1999
Service Checks September 1999
Southwest C1 - C4 Routine Cards
Schedule 2 - Operating Condition at Delivery
On the Delivery Date the Aircraft will be in the condition set out below:
1. General Condition
-----------------
The Aircraft will:
(a) be clean by major international airline standards;
(b) be airworthy, conform to type design and be in a condition for safe
operation with all equipment, components and systems operating in
accordance with their intended use and within limits established by
the manufacturer and approved by the FAA, and all pilot discrepancies
and deferred maintenance items cleared on a terminating action basis;
(c) have a valid export certificate of airworthiness with respect to the
Aircraft issued by the FAA;
(d) have zero flight Hours (except for test and acceptance flights) since
undergoing a block "C" Check in accordance with the Previous
Operator's maintenance program before the Scheduled Delivery Date;
(e) have had accomplished all outstanding airworthiness directives and
mandatory orders affecting that model of Aircraft issued by the FAA
that are due before the Delivery Date on a terminating action basis;
(f) have no special or unique manufacturer inspection or check
requirements specific to the Aircraft that exist unless there is no
terminating action available from any source;
(g) be free of any system-related leaks;
(h) have all fluid reservoirs (including fuel, oil, oxygen, hydraulic and
water) full, and the waste tank serviced in accordance with the
manufacturer's instructions;
(i) have all signs and decals clean, secure and legible; and
(j) be in a 122 all economy seating configuration.
2. Engines
-------
(a) Each Engine shall have at least 3,000 Cycles remaining until the next
scheduled CER or LLP replacement under the Previous Operator's
maintenance program.
(b) No Engine shall be "on engineering watch", on a reduced interval
inspection or otherwise have any defect that reduces the Flight Hours
or Cycles (whichever is more limiting) of remaining life pursuant to
Engine Manufacturer's or airworthiness requirements until overhaul to
less than 3,000.
3. Fuselage, Windows and Doors
---------------------------
(a) The fuselage will not contain any dents, corrosion or abrasions that
exceed the prescribed parameters under the SRM and shall be free of
scab patches and loose, pulled or missing rivets.
(b) The windows will not contain any delamination, blemishes or crazing
that exceed the prescribed parameters under the Manufacturer's
maintenance manual and will be properly sealed.
(c) The doors will be free moving, correctly rigged and fitted with
serviceable seals.
4. Wings and Empennage
-------------------
(a) The leading edges will not contain any damage that exceeds the
prescribed parameters under the SRM.
(b) All unpainted cowlings and fairings will be polished.
(c) All wings will be free of fuel leaks.
5. Interior
--------
(a) The interior will be fully serviceable.
(b) All curtains, carpets, seat covers and seat cushions will be clean and
free from stains and worn out (threadbare) areas and will conform to
FAR fire resistance regulations as applicable to an FAR Part 121
operator.
6. Cockpit
-------
(a) All fairing panels shall be free of stains and cracks, clean, secure
and repainted as necessary.
(b) All floor coverings will be clean and effectively sealed.
(c) All seat covers will be in good condition, clean and free of stains
and will conform to FAR fire resistance regulations as applicable to
an FAR Part 121 operator.
(d) All seats will be serviceable, in good condition and repainted as
necessary.
7. Cargo Compartments
------------------
(a) All panels will be in good condition and effectively sealed.
(b) All nets will be in good condition.
(c) The cargo compartments will comply with FAR fire resistance and
containment regulations as applicable to an FAR Part 121 operator.
8. Landing Gear
------------
(a) The landing gear and wheel wells will be clean, free of leaks and
repaired as necessary.
9. APU
---
(a) The APU shall be serviceable in accordance with the MPD.
Schedule 3 - Operating Condition at Redelivery
On the Expiry Date the Aircraft, subject to fair wear and tear generally, will
be in the condition set out below:
1. General Condition
-----------------
The Aircraft will:
(a) be clean by major international airline standards;
(b) have installed the full complement of engines and other
equipment, parts and accessories and loose equipment required
under the Approved Maintenance Program and usually installed in
the other aircraft of the same model operated by Lessee (together
with any additions and improvements thereto, or replacements
thereof, effected pursuant to and in accordance with this
Agreement) and be in a condition suitable for immediate operation
in commercial service;
(c) be airworthy, conform to type design and be in a condition for
safe operation with all equipment, components and systems
operating in accordance with their intended use and within limits
established by the manufacturer and approved by the Aviation
Authority, and all pilot discrepancies and deferred maintenance
items cleared on a terminating action basis;
(d) have a standard passenger transport category Certificate of
Airworthiness issued by the Aviation Authority in accordance with
the Aviation Law or, if requested by Lessor, a valid export
certificate of airworthiness with respect to the Aircraft issued
by the Aviation Authority for a country designated by Lessor, be
eligible for the issuance of a standard certificate of
airworthiness issued by the FAA (passenger transport category)
and meet all requirements for immediate, unrestricted commercial
passenger operations promulgated by the Aviation Authority and
the FAA other than Stage 3 or higher noise regulations.
(e) comply with the manufacturer's original specification to the
extent that it so complied on the Delivery Date and subject to
any alterations made pursuant to and in accordance with this
Agreement after such date;
(f) have undergone, immediately prior to redelivery, a C-Check in
accordance with Section 12.2(a) so that all Airframe inspections
falling due within the next following 3,000 Flight Hours or
Cycles of operation or 12 months (whichever shall be the most
limiting) in accordance with the Approved Maintenance Program
have been accomplished;
(g) have had accomplished all outstanding airworthiness directives
and mandatory orders affecting that model of Aircraft issued by
the Aviation Authority and the FAA, and all mandatory service
bulletins issued by the Manufacturer or Engine Manufacturer, that
are due during the Term on a terminating action basis;
airworthiness directives and mandatory orders that do not have a
terminating action will be accomplished at the highest level of
inspection or modification permitted;
(h) no special or unique manufacturer inspection or check
requirements specific to the Aircraft will exist unless there is
no terminating action available from any source;
(i) have installed all applicable vendor's and manufacturer's service
bulletin kits received free of charge by Lessee that are
appropriate for the Aircraft and, to the extent not installed,
those kits retained by Lessee will be furnished free of charge to
Lessor;
(j) be free of any system-related leaks;
(k) all fluid reservoirs (including fuel, oil, oxygen, hydraulic and
water) will be full, and the waste tank serviced in accordance
with the manufacturer's instructions;
(l) all fuel tanks will have recently undergone an anti-
fungus/biological growth contamination laboratory evaluation, and
any excessive levels of contamination corrected;
(m) have all signs and decals clean, secure and legible; and
(n) shall be stripped of Lessee's livery, sanded and either painted
white or painted in the livery of the next operator, as
identified by Lessor (for this purpose, Lessor shall furnish the
next operator's paint scheme and logo pounce pattern and shall
pay Lessee for any incremental cost in connection with the next
operator's livery), in either case in accordance with the SRM and
the paint manufacturer's instructions and avoiding any overspray
on other surfaces.
2. Parts
-----
(a) Each life limited or hard time controlled Part, excluding Engine
Parts, shall have not less than 12 months, 3,000 Flight Hours and
3,000 Cycles remaining to the next scheduled removal in
accordance with the Approved Maintenance Program;
(b) Each calendar limited Part (including hard time controlled Parts
with calendar limits but excluding Engine Parts) will have at
least 12 months remaining to its next scheduled removal or
overhaul in accordance with the Approved Maintenance Program; and
(c) Each "on-condition" and "condition monitored" Part will be
serviceable in accordance with the Aviation Authority prescribed
parameters.
3. Engines
-------
(a) Each engine installed on the Aircraft shall be an Engine and (if
not the engine installed at Delivery) shall, to the extent not
previously provided to Lessor, be accompanied by all
documentation Lessor may require to evidence that title thereto
is properly vested in Lessor in accordance with Section 8.17.
(b) Each Engine shall have at least 3,000 Cycles remaining until the
next scheduled CER or LLP replacement under the Approved
Maintenance Program;
(c) No Engine shall be "on engineering watch", on a reduced interval
inspection or otherwise have any defect that reduces the Flight
Hours or
Cycles (whichever is more limiting) of remaining life pursuant to
Engine Manufacturer's or airworthiness requirements until
overhaul to less than 3,000; and
(d) Each Engine shall be in a condition that can operate at maximum
rated take-off power at sea level with an E.G.T. margin of 15
(degrees)C.
4. Fuselage, Windows and Doors
---------------------------
(a) The fuselage will not contain any dents, corrosion or abrasions
that exceed the prescribed parameters under the SRM and shall be
free of scab patches and loose, pulled or missing rivets.
(b) The windows will not contain any delamination, blemishes or
crazing that exceed the prescribed parameters under the
Manufacturer's maintenance manual and will be properly sealed.
(c) The doors will be free moving, correctly rigged and fitted with
serviceable seals.
5. Wings and Empennage
-------------------
(a) The leading edges will not contain any damage that exceeds the
prescribed parameters under the SRM.
(b) All unpainted cowlings and fairings will be polished.
(c) All wings will be free of fuel leaks.
6. Interior
--------
(a) The interior will be fully serviceable and in the configuration
as at the Delivery Date.
(b) All emergency equipment having a calendar life will have a
minimum of one year or 100% of its total approved life remaining,
whichever is less.
(c) All curtains, carpets, seat covers and seat cushions will be
clean and free from stains and worn out (threadbare) areas and
will conform to FAR fire resistance regulations as applicable to
an FAR Part 121 operator.
7. Cockpit
-------
(a) All fairing panels shall be free of stains and cracks, clean,
secure and repainted as necessary.
(b) The windshields will not contain any delamination, blemishes or
crazing that exceed the prescribed parameters under the
Manufacturer's maintenance manual and will be properly sealed.
(c) All floor coverings will be clean and effectively sealed.
(d) All seat covers will be in good condition, clean and free of
stains and will conform to FAR fire resistance regulations as
applicable to an FAR Part 121 operator.
(e) All seats will be serviceable, in good condition and repainted as
necessary.
8. Cargo Compartments
------------------
(a) All panels will be in good condition and effectively sealed.
(b) All nets will be in good condition.
(c) The cargo compartments will comply with FAR fire resistance and
containment regulations as applicable to an FAR Part 121
operator.
9. Landing Gear
------------
(a) The installed main and nose landing gear components and their
associated actuators and parts will be in serviceable condition
with no less than 3,000 Cycles or 12 months (whichever is the
most limiting factor) remaining until the next scheduled overhaul
or shop visit under the Approved Maintenance Program.
(b) The tires and brakes will have 50% of the wear, as specified by the
manufacturer as serviceable limits, remaining until next removal.
(c) The landing gear and wheel wells will be clean, free of leaks and
repaired as necessary.
10. APU
---
(a) The APU shall be serviceable in accordance with the Approved
Maintenance Program parameters.
(b) The APU shall have not more than 1,500 Flight Hours of operation since
its last hot section inspection.
11. Corrosion
---------
(a) The Aircraft will be in compliance with the CPCP and will have been
inspected and treated with respect to corrosion as required by the
CPCP; and
(b) Fuel tanks will be free from contamination and corrosion and the fuel
tank treatment program that is part of the Approved Maintenance
Program will be current.
Schedule 4 -- Insurance Requirements
1. The Insurances required to be maintained are as follows:
(a) HULL "ALL RISKS" of loss or damage while flying and on the ground
with respect to the Aircraft for the Agreed Value and with a
deductible not exceeding the Hull Insurance Deductible.
(b) HULL WAR AND ALLIED PERILS, covering those war risks excluded from
the Hull "All Risks" Policy to the extent such coverage is
available from the leading international insurance markets,
including confiscation and requisition by the State of
Registration, for the Agreed Value;
(c) "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK
except when on the ground or in transit other than by air or sea)
on all Engines and Parts when not installed on the Aircraft (to
the extent not covered under the Aircraft hull insurances
described in paragraphs (a) and (b) above), including Engine test
and running risks, in an amount equal to replacement value in the
case of the Engines;
(d) AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER,
BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING
PRODUCTS) LEGAL LIABILITY for a combined single limit (Bodily
Injury/Property Damage) of an amount not less than the Minimum
Liability Coverage for the time being in respect of any one
occurrence (but, in respect of products liability, this limit may
be an aggregate limit for any and all losses occurring during the
currency of the policy, and in respect of liability arising out of
certain offences, the limit (within the said combined single
limit) may be $25,000,000 in respect of any one offence and in the
aggregate, and cargo and mail legal liability may be subject to a
limit of $1,000,000 any one occurrence); War and Allied Risks are
also to be covered under the Policy to the extent available in the
leading international insurance markets. The Minimum Liability
Coverage may be adjusted upwards from time to time to such an
amount as Lessor may be advised by its insurance brokers
constitutes the standard Minimum Liability Coverage applicable to
aircraft of the make, model and series as the Aircraft
operating internationally by an airline similarly situated as
Lessee. If Lessee disputes any such adjustment, the matter shall
be referred to a reputable independent insurance broker appointed
by Lessor, whose decision, acting as expert, shall be conclusive
and binding on Lessee.
2. All required hull and spares insurance specified in Sections 1(a), 1(b)
and 1(c) above, so far as it relates to the Aircraft, will:
(a) provide that any loss will be settled with Lessee (who undertakes
to consult with Lessor and any Mortgagee in regard thereto), and
any claim that becomes payable on the basis of a Total Loss shall
be paid in Dollars to Lessor (unless or until the Lessor notifies
Lessee that said payments should be made to a Mortgagee) as sole
loss payee up to the Agreed Value, and loss proceeds in excess of
the Agreed Value shall be payable to Lessee, with any other claim
being payable as may be necessary for the repair of the damage to
which it relates;
(b) if separate Hull "All Risks" and "War Risks" insurances are
arranged, include a 50/50 provision in the terms of Lloyd's
endorsement AVS103 or its equivalent;
(c) confirm that the Insurers are not entitled to replace the Aircraft
in the event of a Total Loss; and
(d) conform to AVN67B except to the extent greater protection is
afforded under any provision contained in section 9 of, or in this
Schedule 4 to, the Agreement.
3. All required liability insurances specified in Section 1(d) above will:
(a) include the Indemnitees as additional insureds for their
respective rights and interests, warranted (each as to itself
only) no operational interest; but the coverage provided will not
include claims arising out of their legal liability as
manufacturer, repairer or servicing agent of the aircraft or any
part thereof;
(b) include a severability of interest clause;
(c) contain a provision confirming that the policy is primary without
right of contribution and that the liability of the insurers will
not be affected by any other insurance of which any Indemnitee or
Lessee have the benefit; and
(d) accept and insure the indemnity provisions of this Agreement to
the extent of the risks covered by the relevant policy or
policies.
4. All Insurances specified in Sections 1(a) through (d) above will:
(a) be in accordance with normal industry practice of Persons
operating similar aircraft in similar circumstances;
(b) provide coverage on a worldwide basis subject to those territorial
exclusions which are usual and customary for carriers similarly
situated with Lessee in the case of War Risks and Allied Perils
coverage which are advised to and approved by Lessor, such
approval not to be unreasonably withheld;
(c) acknowledge that the insurers are aware that the Aircraft is owned
by Lessor and is subject to this Agreement;
(d) provide that, in relation to the interests of each of the
additional insureds, in accordance with AVN67B, the Insurances
will not be invalidated by any act or omission of the Insured
which results in a breach of any terms, conditions or warranty of
the policies;
(e) provide that the Insurers will waive any rights of recourse and/or
subrogation against each additional assured to the same extent
that Lessee has waived or has no rights of recovery against such
additional assured in the Lease;
(f) provide that the additional insureds will have no obligation or
responsibility for the payment of any premiums (but reserve the
right to pay the same should any of them elect to do so) and that
the Insurers will waive any right of offset or counterclaim
against the respective additional insureds other than for
outstanding premiums in respect of the Aircraft, any Engine or
Part;
(g) provide that, except in the case of any provision for cancellation
or automatic termination specified in the policies or endorsements
thereof, the Insurance can only be canceled or materially altered
in a manner adverse to the additional insureds by giving at least
30 days' written notice to Lessor and each Financing Party, except
in the case of war risks (or radioactive contamination), for which
seven days' written notice (or such lesser period as is or may be
customarily available in respect thereof) will be given; and
(h) include a services of suit clause.
Schedule 5 -- Post-Delivery Modifications
The Post-Delivery Modifications to be performed in accordance with Section
7.2 are as follows:
1. 2x Comm. transceiver with range 118-137 Mhz/ 8.33 Khz separation.
2. 2x FM imune NAV receiver / FM imunity upgrade.
3. B-RNAV navigation system.
4. ACAS II (TCAS II equipped with software version no. 7/TPA-81A TCAS
processor-change 7 upgrade).
5. ELT automatic-portable + 'ELT automatic-fixed 406 Mhz
6. RUSM -modification in accordance with Boeing S/B ###-##-#### and
Boeing 737 S/L -02015
Exhibit A -- Certificate of Acceptance
Certificate of Acceptance
This Certificate of Acceptance is delivered on the date set forth in
paragraph 1 below by Air Slovakia BWJ, Ltd. (the "Lessee") to First Security
Bank, National Association, not in its individual capacity but solely as owner
trustee (the "Lessor") pursuant to Lease Agreement 21722, dated August __, 2000,
between Lessor and Lessee (the "Agreement"). Capitalized terms used but not
defined in this Certificate of Acceptance shall have the meaning given to such
terms in the Agreement.
1. Details of Acceptance
---------------------
Lessee hereby confirms to Lessor that Lessee has at __:__ _.m. G.M.T. on
this _____ day of August 2000, at ____________________, Tucson, Arizona,
accepted the following, in accordance with the provisions of the Agreement.
(a) one Boeing Model 737-200A airframe, bearing manufacturer's serial
number 21722 and registration mark _____;
(b) two Pratt & Whitney Model JT8D-9A engines, bearing manufacturer's
serial numbers ________ and ________;
(c) all Parts installed on, attached to or appurtenant to the Airframe
and Engines; and
(d) the Aircraft Documents specified in Part 2 of Schedule 1 to the
Agreement.
2. Lessee's Confirmation Lessee confirms to Lessor that as at the time
---------------------
indicated above, being the time of Delivery:
(a) Lessee's representations and warranties contained in Sections 2.1
and 2.2 of the Agreement are hereby repeated;
(b) the Aircraft is insured as required by the Agreement; and
(c) Lessee confirms that there have been affixed to the Aircraft and
the Engines the fireproof notices required by the Agreement.
(d) Lessee confirms that the Leased Property has been delivered in
working order and is fit for the use specified in the Lease
Agreement.
3. Lessor's Confirmation Lessor confirms to Lessee that, as at the time
---------------------
indicated above, being the time of Delivery, Lessor's representations and
warranties contained in Section 2.4 of the Agreement are hereby repeated.
IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
- ------------------
Acceptance on the date set forth in Section 1 of this Certificate.
SIGNED on behalf of
------
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as owner trustee
By:_______________________________
Name:
Title:
SIGNED on behalf of
AIR SLOVAKIA BWJ, LTD.
By:_______________________________
Name:
Title:
Exhibit B - Certificate of Delivery Condition
Certificate of Delivery Condition
This Certificate of Delivery Condition is delivered on August __,
2000 by Air Slovakia BWJ, Ltd. (the "Lessee") to First Security Bank, National
Association, not in its individual capacity but solely as owner trustee (the
"Lessor") pursuant to Lease Agreement 21722, dated August __, 2000, between
Lessor and Lessee (the "Agreement"). Capitalized terms used but not defined in
this Certificate of Delivery Condition shall have the meaning given to such
terms in the Agreement.
1. Aircraft Acceptance: Lessee hereby confirms to Lessor that, pursuant to the
Agreement, Lessee has accepted the Boeing Model 737-200A airframe bearing
manufacturer's serial number 21722 and registration mark ______, together with
the two Pratt & Whitney Model JT8D-9A aircraft engines bearing manufacturer's
serial numbers ______ and _______, all Parts installed on, attached to or
appurtenant to the Airframe and Engines and the Aircraft Documents, and Lessor
and Lessee agree that such Airframe, Engines and Parts are in the condition set
forth on the attached Annex 1.
2. Confirmation of Delivery Condition: Lessee confirms to Lessor that at the
----------------------------------
time of acceptance of the Leased Property, the Leased Property complied in all
respects with the condition required at Delivery under Section 4.2 and Schedule
2 of the Agreement, except for the items (if any) listed on the attached Annex 2
(the "Discrepancies"). Lessor and Lessee agree that the Discrepancies (if any)
shall be corrected as set forth on the attached Annex 2.
IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Delivery Condition on the date set forth at the beginning of this Certificate.
SIGNED on behalf of SIGNED on behalf of
FIRST SECURITY BANK, NATIONAL AIR SLOVAKIA BWJ, LTD.
ASSOCIATION, not in its individual
capacity but solely as owner trustee
By:_______________________________ By:_______________________________
Name: Name:
Title: Title:
ANNEX 1
-------
MAINTENANCE STATUS AT DELIVERY
------------------------------
DATE: August __, 2000
AIRFRAME TIME:
- -------------
Total Flight Hours: [_____]
Total Cycles: [_____]
AIRFRAME LIMITS:
- ---------------
Type of Check: C Check
Check Interval: [_____]
Time Since Last Check: [_____]
ENGINE DATA:
- -----------
Position: No.1 No.2
Model: JT8D-9A JT8D-9A
Serial Numbers: [_____] [_____]
Total Flight Hours: [_____] [_____]
Total Cycles: [_____] [_____]
Flight Hours Since Last CER: [_____] [_____]
Cycles Since Last CER: [_____] [_____]
Flight Hours to Next Hard Limit: [_____] [_____]
Cycles to Next Hard Limit: [_____] [_____]
APU:
- ---
Manufacturer: [_____]
Model: [_____]
Serial Number: [_____]
Total Flight Hours: [_____]
Total Cycles: [_____]
Flight Hours Since Last CER: [_____]
Cycles Since Last CER: [_____]
Flight Hours Remaining on LLPs: [_____]
Cycles Remaining on LLPs: [_____]
LANDING GEAR LIMITS:
Position: Nose Left Right
Overhaul Interval: [_____] [_____] [_____]
Time Since Overhaul: [_____] [_____] [_____]
Time to Next Overhaul: [_____] [_____] [_____]
ANNEX 2
-------
DISCREPANCIES
-------------
Description of Discrepancy Agreed Corrective Action
-------------------------- ------------------------
Exhibit C - Form of Letter of Credit
[LETTERHEAD OF ISSUING BANK]
IRREVOCABLE LETTER OF CREDIT
----------------------------
Current Date: ___________, 20__
Irrevocable Letter of Credit No. ___________
Re: Lease Agreement 21722, dated August __, 2000
between First Security Bank, National Association,
as owner trustee, and Air Slovakia BWJ, Ltd. relating to the Boeing
Model 737-200A aircraft bearing serial no. 21722
Expiration Date: ____________, 20__
First Security Bank, National Association,
as owner trustee
79 South Main Street
Salt Lake City, Utah 84111
U.S.A.
Attention: Corporate Trust Department
Ladies and Gentlemen:
We hereby issue in your favor, at the request of and for the account of Air
Slovakia BWJ, Ltd. ("Lessee"), this Irrevocable Letter of Credit No. ______ in
the amount of ____________________________________ Dollars (US$________) (the
"Stated Amount") available upon presentation in accordance with this Letter of
Credit of (i) a Sight Draft drawn on us dated on or before the date of such
presentation and in the form attached as Annex 1 and (ii) a Drawing Certificate
dated the date of such draft in the form attached as Annex and signed by an
individual being or purporting to be your authorized representative.
Such presentation musts be made on a Banking Day to our offices at [insert
address of Issuing Bank], Facsimile Number: [_________], confirming Telephone
Number: [____________] on or before the Expiration Date set forth above or, if
such date is not a Banking Day, then on or before the following Banking Day.
"Banking Day" means a day other than a Saturday, a Sunday or a day on which
banks are required or authorized to be closed in [City/State of Issuing Bank].
Any such presentation may be made by means of electronic facsimile transmission
and we shall be entitled to rely thereon as if such draft and certificate were
presented in person, provided such draft and certificate are in conformity with
the requirements for the same as set forth herein, but for the requirement of an
original signature. In addition, any draft and certificate hereunder may be
presented by U.S. Mail, express courier (e.g., Federal Express or DHL) or in
person at the address set forth above.
A Sight Draft presented hereunder may be in an amount of up to the Stated
Amount. More than one Sight Draft may be presented hereunder, provided the
aggregate amount of such drafts shall not exceed the Stated Amount.
We hereby agree that, to the extent that within five (5) calendar days of any
drawing by you hereunder, such drawing is reimbursed in full to us by, or on
behalf of, Lessee, including any banking charges, such drawing shall not be
considered as a drawing hereunder for the purposes of, and only for such
purposes, calculating the aggregate maximum amount of all drawings made
hereunder.
We hereby agree that each draft presented hereunder in compliance with the terms
hereof will be duly honored by the amount of such draft in immediately available
funds in United States dollars to the account specified on the sight draft:
(a) not later than 3:00 p.m., [City of Issuing Bank] time, on the
day such draft is presented to us as aforesaid, if such
presentation is made to us at or before 12:00 noon, [City of
Issuing Bank] time, or
(b) not later than 3:00 p.m., [City of Issuing Bank] time, on the
Business Day following the day such draft is presented to us
as aforesaid, if such presentation is made to us after 12:00
noon, [City of Issuing Bank] time.
Upon the earlier of (a) the Expiration Date set forth above or (b) irrevocable
payment of the entire Stated Amount (in one or more drawings), this Letter of
Credit shall automatically terminate.
It is a condition of this Letter of Credit that it shall be deemed automatically
extended without amendment for a period of one year from the Expiration Date and
from each anniversary of the Expiration Date unless, 30 days prior to such date,
we shall notify you in writing that we elect not to consider this Letter of
Credit renewed for any such additional period. In the event that we notify you
that we elect not to renew this Letter of Credit, a drawing can be made by you
by presenting a sight draft and a certificate in the forms attached hereto.
Except as otherwise provided herein, this Letter of Credit shall be governed by
and construed in accordance with the Uniform Customs and Practice for
Documentary Credits (1993 Revision), ICC Publication No. 500 (the "UCP").
Notwithstanding Article 17 of the UCP, if this Letter of Credit expires during
an interruption of business as described in said Article 17, we agree to effect
payment if a drawing is made against this Letter of Credit within 30 days after
the resumption of business.
Upon request, but no more than once in any 30 day period, we will confirm to you
in writing that this Letter of Credit is in full force and effect and is
enforceable against us in accordance with its terms.
This Letter of Credit sets forth in full the terms of our undertaking and shall
not in any way be modified, amended or amplified by reference to any documents,
instruments or agreements referred to herein, or in which this Letter of Credit
is referred to or to which this Letter of Credit relates, and any such reference
shall not be deemed to incorporate herein by reference any such documents,
instruments and agreements.
This Letter of Credit may be transferred by you to any person and we will honor
a drawing hereunder by such transferee.
Communications with respect to this Letter of Credit shall be in writing,
addressed to [name of Issuing Bank] at [address of Issuing Bank]. Attention:
[___________], specifically referring to the number of this Letter of Credit,
and if directed to you, shall be addressed to you at First Security Bank,
National Association, as owner trustee, 79 South Main Street, Salt Lake City,
Utah, U.S.A., Attention: Corporate Trust Department.
All banking charges in connection with this Letter of Credit and any drawings
made hereunder shall be for the account of Lessee. All payments made to you
pursuant to this Letter of Credit shall be made free and clear of, and without
deduction for, any present or future fees, taxes,
restrictions or conditions of any nature, and without set off of counterclaim
for any reasons whatsoever.
We hereby confirm and engage with drawers, endorsers and bonafide holders of
Sight Drafts drawn and in compliance with the terms of this Letter of Credit
that the same shall be duly honored upon presentation and delivery of documents
as specified at this office, if negotiated on/or before the expiration date of
this letter of Credit.
[ISSUING BANK]
________________________________
[Name]
[Title]
Annex 1 to Irrevocable Letter of Credit No. ______
SIGHT DRAFT
Irrevocable Letter of Credit No. _______ Date of Draft: ________________
To the Order of First Security Bank, National Association, as owner trustee
Pay _______________________________________ ($_____________) US DOLLARS
At SIGHT by wire transfer of such amount to the account of First Security Bank,
National Association, as owner trustee, at:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
U.S.A.
ABA Number: 124000012
Account Number: 051-0922115 for credit to account no. _______
Reference: Air Slovakia B737 s/n 21722
DRAWN UNDER IRREVOCABLE LETTER OF CREDIT NO. _________________.
TO: [Name of Issuing Bank]
[Address of Issuing Bank]
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as owner trustee
By:_______________________________
Name:
Title:
[Endorse on back]
Annex 2 to Irrevocable Letter of Credit No. ______
DRAWING CERTIFICATE
Irrevocable Letter of Credit No. ___________
The undersigned, a duly authorized representative of First Security Bank,
National Association, as owner trustee ("Beneficiary"), hereby certifies to
[Issuing Bank](the "Bank") with reference to Irrevocable Letter of Credit No.
_________ (the "Letter of Credit"), issued by the Bank in favor of Beneficiary,
as follows:
1. Beneficiary is presenting a sight draft herewith to draw funds
under the Letter of Credit in the amount of US$[____________].
2. Demand for payment under the Letter of Credit is being made
prior to the expiration thereof.
3. Either (a) an Event of Default has occurred and is
continuing under and as defined in Lease
Agreement 21722, dated August __, 2000,
between Beneficiary and Air Slovakia BWJ, Ltd.
("Lessee"); or
(b) the Letter of Credit expires within 30 days of
the date hereof and Lessee has not as of the
date hereof provided Beneficiary with evidence
of a renewal or extension of the Letter of
Credit or with a substitute Letter of Credit,
in each case, in form and substance
satisfactory to Beneficiary.
IN WITNESS WHEREOF, Beneficiary has caused this Drawing Certificate and the
accompanying Sight Draft to be executed as of the ____ day of _________, ____.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as owner trustee
By:________________________________
Name:
Title:
Exhibit D - Form of Legal Opinion
[to be supplied]
Exhibit E - Form of Deregistration Power of Attorney
Irrevocable Power of Attorney
By this Irrevocable Power of Attorney, Air Slovakia BWJ, Ltd. a
company incorporated under the laws of Slovakia and having its registered office
at ______________________________ (together with its successors and assigns, the
"Lessee"), hereby irrevocably nominates and appoints First Security Bank,
National Association, as owner trustee, having its principal place of business
at 79 south Main Street, Salt Lake City, Utah 84111, U.S.A., acting alone and
without the authorization of any other person, to be the Lessee's true and
lawful attorney-in-fact (the "Lessor") so that the Lessor may take any of the
following actions in the name of and for Lessee with respect to the Boeing 737-
200A airframe bearing manufacturer's serial no. 21722 and Slovakian registration
mark ______, including the engines and any and all parts installed on or
appurtenant to such airframe (collectively, the "Aircraft"), leased by the
Lessor to the Lessee pursuant to Lease Agreement 21722, dated August __, 2000,
between the Lessor and the Lessee (the "Lease"):
1. In the exercise of the rights of the Lessor under the Lease
to recover the Aircraft from Lessee after termination of the Lease due to an
Event of Default under the Lease or for termination of the Lease for any other
reason, the Lessor may take all action, and may execute in the Lessee's name and
for and on behalf of the Lessee any and all documents, applications and
instruments, that may at any time be required in order to (a) cause the Aircraft
to be repossessed by the Lessor, (b) cause the Aircraft to be deregistered from
the register of aircraft maintained by the Civil Aviation Authority ("CAA"), (c)
obtain any document (whether in the nature of an export license, certificate of
airworthiness for export or otherwise) that is required for the purpose of
canceling the registration of the Aircraft with the CAA and/or securing the
export of the Aircraft from Slovakia, and (d) export the Aircraft after the
expiration of the Lease.
2. Pursuant to the Lease, Lessee is maintaining all risk hull
and war risk insurance and reinsurance covering the Aircraft, and the Lessor has
been named loss payee on such insurance and reinsurance policies in the event of
a total loss or constructive total loss of the Aircraft, in the event of damage
to the Aircraft in excess of $100,000 or in the event of damage to the Aircraft
while an "Event of Default" under the Lease has occurred and is continuing. The
Lessor may take all action, and may execute in the Lessee's name and for and on
behalf of the
Lessee any and all documents, applications and instruments, including executing
on behalf of the Lessee an appropriate form of discharge and release, that may
at any time be required in order for the Lessor to collect such insurance
proceeds or to adjust or settle any claim under such insurance policies.
3. In the exercise of the rights listed in paragraphs 1 and 2,
the Lessor may take all such other actions and sign all such other documents as
the Lessor considers necessary or appropriate in its absolute discretion. In
connection with such documents, or in connection with any registrations or
filings to which such documents are subject, the Lessor may represent the Lessee
before and submit any such document, application or instrument to any applicable
authorities, government department and agencies (including without limitation,
the CAA) of Slovakia as shall be necessary to achieve the aforementioned
purposes.
4. The Lessee hereby undertakes from time to time and at all
times to indemnify the Lessor against all costs, claims, expenses and
liabilities lawfully and reasonably incurred by such Lessor in connection with
this Irrevocable Power of Lessor and, upon request, to ratify and confirm
whatever the Lessor shall lawfully and reasonably do or cause to be done by
virtue of this Irrevocable Power of Attorney.
5. The Lessee hereby grants to the Lessor the full power and
authority to substitute and appoint in its place one or more attorney or
attorneys to exercise for it as attorney or attorneys of the Lessee any or all
the powers and authorities conferred on the Lessor by this Irrevocable Power of
Attorney, and to revoke any such appointment from time to time and to substitute
or appoint any other or others in the place of such attorney or attorneys, all
as the Lessor shall from time to time deem appropriate.
Any person, agency or company relying upon this Irrevocable Power of
Attorney need not and will not make any determination or require any court
judgment as to whether an "Event of Default" has occurred under the Lease or
whether the Lease has been terminated. Lessee hereby waives any claims against
(i) any person acting on the instructions given by Lessor or its designee
pursuant to this Irrevocable Power of Attorney and (ii) any person designated by
Lessor or an officer of Lessor to give instructions pursuant to this Irrevocable
Power of Attorney. Lessee also agrees to indemnify and hold harmless any person,
agency or company that may act in reliance upon this Irrevocable Power of
Attorney and pursuant to instructions given by Lessor or its designee.
This Power of Attorney is given as security by the Lessee for the
performance of its obligations under the Lease. This Power of Attorney is
irrevocable and coupled with an
interest. Lessee hereby represents, warrants and covenants that this Irrevocable
Power of Attorney is irrevocably granted to the Lessor, and constitutes the
legal, valid and irrevocably binding obligation of the Lessee, enforceable
against the Lessee in accordance with its terms.
This Power of Attorney shall be governed by the laws of Slovakia.
IN WITNESS WHEREOF, AIR SLOVAKIA BWJ, Ltd. has executed and delivered
this Irrevocable Power of Attorney this ____ day of August 2000.
AIR SLOVAKIA BWJ, INC.
By:________________________________
Name:
Title:
Exhibit F - Form of Monthly Status Report
Monthly Status Report
AIRCRAFT TYPE REG. MARK SERIAL NO. MONTH ENDING
--------- ---------- ------------
Boeing 737-200A 21722 ..........
1. AIRCRAFT UTILIZATION:
--------------------
(a) Airframe Total Flight Hours ...........
(b) Airframe Total Cycles ...........
(c) Airframe Flight Hours for Month ...........
(d) Airframe Cycles for Month ...........
(e) Airframe Flight Hours since Overhaul ...........
(f) Airframe Cycles since Overhaul ...........
(g) Airframe Flight Hours since C-Check ...........
(h) Airframe Cycles since C-Check ...........
2. POWERPLANT STATUS: No.1 No.2
-----------------------
(a) Serial Nos. of Delivered Engines
(b) Serial Nos. of Replacement Engines .......... ..........
(if applicable)
(c) Serial Nos. of Installed Engines .......... ..........
(if different from (a) or (b) above)
(d) Current Location of Delivered or .......... ..........
Replacement Engines (as applicable)
(if not installed on Airframe)
(e) Total Time Since New of Delivered .......... .........
or Replacement Engines (as applicable)
(f) Total Cycles Since New of Delivered .......... .........
or Replacement Engines (as applicable)
(g) Total Time Since Last Service .......... .........
(h) Total Cycles Since Last Service .......... .........
(i) Flight Hours to Limiter .......... .........
(j) Cycles to Limiter .......... .........
(k) Limiter .......... .........
(l) Total Flight Hours for the Month for .......... .........
each Delivered or Replacement Engine
(as applicable)
(m) Total Cycles for the Month for each .......... .........
Delivered or Replacement Engine
(as applicable)
(n) Serial No. of Delivered APU [________]
(o) Serial No. of Replacement APU ..........
(if applicable)
(p) Serial No. of Installed APU ..........
(if different from (a) or (b) above)
(q) Current Location of Delivered or .............
Replacement APU (as applicable)
(if not installed on Airframe)
(r) Total Time Since New of Delivered .............
or Replacement APU (as applicable)
(s) Total Cycles Since New of Delivered .............
or Replacement APU (as applicable)
(t) Total Hours for the Month for .............
Delivered or Replacement APU
(as applicable)
(u) Total Cycles for the Month for .............
Delivered or Replacement APU
(as applicable)
3. ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:
-----------------------------------------
(a) Routine Checks (A and above) performed during Month:
(b) Airworthiness Directives complied with during Month:
(c) Service Bulletins complied with during Month:
4. AIRCRAFT DAMAGE OR ENGINE CHANGES:
---------------------------------
Details of any repairs carried out to the Aircraft beyond SRM limits and
Engine changes, giving reasons for repair or change:
5. UPCOMING MAINTENANCE CHECKS
(a) Maintenance Checks (C-Check or segment and above) scheduled or
expected to be performed on the Airframe during the next 12
months:
(b) Scheduled shop visits or heavy maintenance visits scheduled or
expected to be performed on the Engines during the next 12 months:
(c) Overhauls, or replacements scheduled or expected to be performed
on the APU or Landing Gear during the next 12 months:
Date: ___________, ____ Certified for and on Behalf of
AIR SLOVAKIA BWJ, LTD.
By:_______________________________
Name:
Title: