- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LEASE AGREEMENT (MSN1O24)
dated as of January 31, 1997
between
Investors Asset Holding Corp.
Lessor
and
G.P. Aer Lease Limited
Lessee
---------------------
Lockheed L-1O11-1
Aircraft
Manufacturers Serial No. 1024
and
Three Rolls Royce RB211-22B Engines
and Related Parts and Records
TABLE OF CONTENTS
SECTION 1. DEFINITIONS ............................................................ 1
SECTION 2. AGREEMENT TO LEASE; TERM ............................................... 7
2.1. Leasing of Aircraft ......................................................... 7
2.2. Delivery of Aircraft ........................................................ 7
2.3. Term ........................................................................ 7
2.4. Guarantys ................................................................... 7
SECTION 3. LESSEE'S REPRESENTATIONS, WARRANTIES AND
COVENANTS ......................................................................... 7
3.1. Organization; Good Standing; Certification ................................... 7
3.2. Authority; Consent ........................................................... 7
3.3. Legal, Valid and Binding ..................................................... 8
3.4. Compliance with Other Instruments ............................................ 8
3.5. Governmental Consents ........................................................ 8
3.6. No Adverse Agreements ........................................................ 8
3.7. No Defaults or Violations .................................................... 8
3.8. Litigation ................................................................... 8
3.9. Tax Returns .................................................................. 8
3.10. Filing or Recordation ....................................................... 9
3.11. Principal Place of Business ................................................. 9
3.12. Financial Statements ........................................................ 9
3.13. Financial and Other Information to be Supplied .............................. 9
3.14. Maintenance of Corporate Status; No Merger or Consolidation .................10
3.15. Notice of Default or Adverse Occurrence .....................................11
3.16. Maintenance of Consents and Approvals .......................................11
SECTION 4. LESSOR REPRESENTATIONS, WARRANTIES AND
AGREEMENTS ........................................................................11
SECTION 5. CONDITIONS PRECEDENT ...................................................11
5.1. Conditions Precedent to Obligation of Lessor to Lease Aircraft ...............11
5.2. Conditions Precedent to Obligation of Lessee to Lease the Aircraft ...........13
5.3. Acceptance for Lease .........................................................14
5.4. Non-fulfillment of Conditions Precedent under Section 5.2 ....................14
SECTION 6. PAYMENTS ...............................................................14
6.1. Basic Rent ...................................................................14
6.2. NET LEASE; NO SET-OFF OR DEDUCTIONS ..........................................14
-i-
6.3. Immediately Available Funds ..................................................15
6.4. Supplemental Rent ............................................................16
6.5. Security Deposit .............................................................16
6.6. Reserves .....................................................................17
6.7 Cost of Pre-delivery Check ....................................................18
SECTION 7. DISCLAIMER OF WARRANTIES AND MANUFACTURERS'
WARRANTIES ........................................................................18
7.1. Disclaimer ...................................................................18
7.2. Other Warranties .............................................................19
SECTION 8. USE, OPERATION AND MAINTENANCE .........................................19
8.1. General ......................................................................19
8.2. Operation and Use ............................................................20
8.3. Maintenance in General .......................................................20
8.4. Specific Items of Maintenance ................................................20
8.5. Parts ........................................................................21
8.6. Airworthiness Directives .....................................................22
8.7. Service Bulletins ............................................................23
8.8. Modification Payments by the Government ......................................23
8.9. Corrosion Control ............................................................23
8.10. Modifications ...............................................................23
8.11. Possession ..................................................................24
8.12. Reports .....................................................................25
8.13. Right to Inspect ............................................................25
8.14. Aircraft Records ............................................................26
SECTION 9. RETURN OF AIRCRAFT .....................................................26
9.1. Return Location, Notices, Costs, Taxes and Fees ..............................26
9.2. Return of Other Engines ......................................................27
9.3. Condition of Aircraft ........................................................27
9.4. Condition of Airframe ........................................................28
9.5. APU ..........................................................................29
9.6. Engine Condition .............................................................29
9.7. Borescope Inspection .........................................................29
9.8. Inspection ...................................................................29
9.9. Operational Ground Check .....................................................30
9.10. Operational Check Flight ....................................................30
9.11. Acceptance ..................................................................30
9.12. Deferred Return Condition Discrepancy Correction ............................30
9.13. Costs .......................................................................31
9.14. Manuals and Technical Records ...............................................31
-ii-
9.15. Lessee's Special Exterior Markings ..........................................31
9.16. Ownership ...................................................................31
9.17. Parking of Aircraft Upon Return .............................................31
9.18. Lease Continues .............................................................31
SECTION 10. TITLE; REGISTRATION; LIENS ............................................32
10.1. Title .......................................................................32
10.2. Registration ................................................................32
10.3. Liens .......................................................................32
10.4. Notice of Ownership .........................................................32
SECTION 11. INSURANCE .............................................................33
11.1. All-Risk Insurance ..........................................................33
11.2. War Risk Insurance ..........................................................33
11.3. Liability Insurance .........................................................33
11.4. Additional Requirements; Loss Payment .......................................34
11.5. No Set-off ..................................................................35
11.6. Notice of Material Alteration or Cancellation ...............................35
11.7. Application of Hull Insurance Proceeds ......................................35
11.8. Insurance for Own Account ...................................................35
11.9. Reports .....................................................................35
11.10. Continuing Insurance .......................................................36
SECTION 12. LOSS, DAMAGE OR REQUISITION ...........................................36
12.1. Total Loss of Airframe ......................................................36
12.2. Total Loss of Engine ........................................................36
12.3. Repairable Damage; Use of Insurance Proceeds ................................37
12.4. Payment from Governmental Authorities for Requisition of Title or Use;
Requisition .......................................................................38
12.5. Application of Payments During Existence of Event of Default ................38
12.6. Risk of Loss ................................................................38
SECTION 13. EVENT OF DEFAULT ......................................................38
13.1. Failure to Make Payments ....................................................38
13.2. Failure to Obtain or Maintain Insurance .....................................38
13.3. Failure to Perform Other Obligations ........................................39
13.4. Representations and Warranties Untrue .......................................39
13.5. Guaranty Default ............................................................39
13.6. Other Defaults ..............................................................39
13.7. Insolvency or Bankruptcy ....................................................39
13.8. Loss of License .............................................................40
-iii-
SECTION 14. REMEDIES ..............................................................40
SECTION 15. INDEMNITIES ...........................................................42
15.1. General Indemnification and Waiver of Certain Claims ........................42
15.2. Taxes and Other Charges .....................................................43
15.3. Continuing Indemnification ..................................................44
SECTION 16. TRANSFER, ASSIGNMENT AND SUBLEASE .....................................44
16.1. Assignment or Encumbrance by Lessor .........................................44
16.2. Sublease of Aircraft or Assignment by Lessee ................................45
16.3. Consolidation, Merger or Transfer by Lessee .................................45
16.4. Nonrecourse As to Trustee ...................................................45
SECTION 17. OPTION TO PURCHASE ....................................................45
SECTION 18. NOTICES ...............................................................45
SECTION 19. LESSOR'S RIGHT TO PERFORM FOR LESSEE ..................................46
SECTION 20. MISCELLANEOUS .........................................................46
20.1. Federal Bankruptcy Code .....................................................46
20.2. Waivers, Headings ...........................................................46
20.3. Counterparts ................................................................47
20.4. Agreement to Lease ..........................................................47
20.5. Governing Law ...............................................................47
20.6. Benefit and Binding Effect ..................................................47
20.7. Further Assurances ..........................................................47
20.8. Capitalized or Boldface Provisions ..........................................47
20.9 Venue ........................................................................48
20.10. Entire Agreement ...........................................................48
EXHIBIT A .........................................................................A-1
EXHIBIT B .........................................................................B-1
EXHIBIT C .........................................................................C-1
EXHIBIT D .........................................................................D-1
EXHIBIT E .........................................................................E-1
EXHIBIT F .........................................................................F-1
-iv-
EXECUTION COPY
JANUARY 31, 1997
LEASE AGREEMENT (MSN 1024)
This LEASE AGREEMENT (MSN 1024), dated as of January 31, 1997, ("Lease"),
is by and between Investors Asset Holding Corp., a Massachusetts corporation,
having its principal place of business at c/o Equis Financial Group, 98 North
Washington Street, Boston, MA 02114, solely as trustee and not in its individual
capacity ("Lessor"), and G.P. Aer Lease Limited, a corporation organized and
existing under the laws of the Republic of Cyprus, having its principal place of
business at c/o T.B.G. Airways Limited, Stansted Airport, Stansted, Essex CM24
1AF U.K. ("Lessee");
W I T N E S S E T H
WHEREAS, Lessor desires to lease the Aircraft to Lessee and Lessee desires
to lease the Aircraft from Lessor in each case pursuant to the terms and
conditions of this Lease;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
SECTION 1. DEFINITIONS.
The following terms shall have the following respective meanings for all
purposes of this Agreement:
"Acceptance Certificate (Delivery)" means a certificate in
substantially the form of Exhibit C hereto, to be signed by Lessor and Lessee on
the Delivery Date as required under Section 2.2.
"Acceptance Certificate (Return)" means a certificate in
substantially the form of Exhibit D hereto, to be signed by Lessor and Lessee
upon the return of the Aircraft to Lessor as required by Section 9.1 hereof.
"ACMI Lease" means any arrangement whereby Lessee agrees to furnish
the Aircraft to a third party pursuant to which (i) Lessee's crew at all times
shall maintain full operational control of the Aircraft, (ii) the Aircraft shall
be operated solely by regular employees of Lessee possessing all current
appropriate IAA certificates and licenses, (iii) the insurance required under
Section 11 shall remain in full force and effect, (iv) the Aircraft shall be
maintained in accordance with the Maintenance Program as required by the terms
of this Lease and (v) the term of any such ACMI Lease does not extend beyond the
Term.
"Aircraft" means (A) the Airframe identified and described in
Exhibit A hereto (including all Parts, including, without limitation, the APU,
comprising such Airframe) together with the three Engines delivered in
connection therewith as identified and described in Exhibit A hereto (or any
engine substituted
for any of said Engines pursuant to Section 9.2 or Section 12.2 of this Lease),
whether or not any of such initial Engines or substitute engines may from time
to time be installed on such Airframe or may be installed on any other airframe
or on any other aircraft; and (B) where the context permits, the Manuals and
Technical Records.
"Airframe" means the Aircraft except the Engines or engines from
time to time installed thereon and the Manuals and Technical Records.
"Airworthiness Directive(s)" has the meaning given the 8.6 hereof.
"Applicable Law" means all applicable laws and treaties of any
government and applicable, legally adopted rules, regulations, and orders of any
governmental body, instrumentality, agency or authority.
"APU" means the auxillary power unit installed on the Airframe from
time to time.
"A.T.T. Guaranty" means the Guaranty Agreement pursuant to which Aer
Turas Teoranta, an Irish corporation, is guaranteeing the obligations of Lessee
hereunder.
"Basic Rent" means the rent payable on Rent Payment Dates
throughout the Basic Term for the Aircraft pursuant to 6.1 of the Lease.
"Basic Term" means the period during which Lessee shall lease the
Aircraft in accordance with this Lease, which shall be a period commencing on
the Delivery Date and continuing for the 12 calendar months following the
Delivery Date and any extension thereof pursuant to the terms of the proviso in
clause (iv)(B) of the definition herein of Total Loss.
"Business Day(s)" means any day other than a Saturday, a Sunday or a
day on which commercial banking institutions are authorized by law to be closed
in any city where the principal business office of Lessee and Lessor are
located.
"Certificated Air Carrier" means an "air carrier" duly authorized
under the laws of the Republic of Ireland or any other jurisdiction having the
authority to regulate Lessee's operations of the Aircraft in the manner
contemplated by this Lease.
"Claims" has the meaning given in Section 15.1(a) hereof.
"Cycle" means one take-off and landing of the Aircraft.
"Day" means one calendar day when used to measure intervals in the
Maintenance Program relating to hard time calendar controlled Parts.
-2-
"Delivery Date" means the date on which Lessee signs and delivers to
Lessor an Acceptance Certificate (Delivery) for the Aircraft, in accordance with
Section 2.2 hereof.
"Direct Labor Rate" means Lessee's cost without, giving any account
for overhead charges or profit, per hour of productive labor.
"Dollars" or "$" means United States dollars.
"Engine" means any of the Rolls-Royce RB211-22B engines identified
and described in Exhibit A, whether or not from time to time installed on the
Airframe or installed on any other airframe; and any engine that may from time
to time be substituted, pursuant to Section 9.2 or Section 12.2 of this Lease,
for such Engine and constituting a Replacement Engine.
"Event of Default" has the meaning given in Section 13 hereof.
"Guarantors" means either or both of T.B.G. Airways Limited, an
English corporation and Aer Turas Teoranta, a corporation organized and existing
under the laws of the Republic of Ireland.
"Guaranty" means either or both of the A.T.T. Guaranty and T.B.G.
Guaranty.
"Hour(s)" means Aircraft flight time, expressed in hours, between
take-off and landing.
"IAA" means the Irish Civil Aviation Authority.
"Indemnified Person" has the meaning given in Section 15.1(a)
hereof.
"Lease" means this Lease Agreement as the same may be modified,
amended or supplemented from time to time pursuant to the terms hereof.
"Lease Documents" means the Lease with attachments and schedules and
those documents in the form of Exhibits A through D hereto.
"Lease Commencement Date" means the date designated for the
commencement of the Lease as set forth on the Acceptance Certificate.
"Lessee" means G.P. Aer Lease Limited, a corporation organized and
existing under the laws of the Republic of Cyprus.
"Lessor" means Investors Asset Holding Corp., a Massachusetts
corporation, not in its individual capacity but solely as trustee of the Trust,
and its successors and assigns.
"Lessor's Lien" means any Lien arising as a result of (i) claims
against Lessor not related to the transactions contemplated by this Lease, (ii)
any
-3-
act or omission of Lessor which is not related to the transactions contemplated
by this Lease or is in violation of any of the terms of this Lease, or (iii)
arising out of claims against Lessor with respect to Taxes against which Lessee
is not required to indemnify Lessor.
"Letter Agreement" means that certain letter agreement of even date
herewith between Lessor and Lessee relating to the sharing of the expenses
needed to place the Aircraft in the condition required for its acceptance for
lease hereunder, the form of which is attached hereto as Exhibit E.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease
or security interest relating to the Aircraft, the Lease or any Part, as the
context may require.
"Maintenance Program" has the meaning given in Section 8.3 hereof.
"Manuals and Technical Records" means all such manuals, technical
data, log books and other records pertaining to the Aircraft (including, without
limitation, the technical manuals and aircraft records listed in Exhibit B
hereto) to be maintained by Lessee as shall be required to comply with the
requirements of the IAA or otherwise by Applicable Law.
"Modification Payment" has the meaning given in Section 8.8 hereof.
"Officer's Certificate" means as to any company a certificate signed
by any officer duly authorized to execute such certificate.
"Operative Documents" means the Lease Documents, each document
provided by or entered into by Lessee, Lessor and Guarantor in conjunction with
this Lease.
"Optional Modifications" has the meaning given in Section 8.10(b)
hereof.
"Overdue Rate" means the rate of interest per annum, announced from
time to time by the Bank of Boston in Boston, Massachusetts as its "base" rate
of interest which serves as the basis on which effective rates of interest for
loans are calculated, plus 3.0 percentage points; each change in such base rate
shall cause an equal and corresponding change in the Overdue Rate on the day
specified is the Bank's public announcement of such change.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
Engines or engines) but including the APU, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or so
long as title thereto shall remain vested in Lessor in accordance with Section
8.5 hereof after removal therefrom.
-4-
"Permitted Liens" means (a) the respective rights of Lessor and
Lessee as provided herein, including, without limitation, any encumbrance which
Lessor has caused to be placed on the Aircraft as permitted pursuant to Section
16.1 hereof; (b) the rights of others under agreements or arrangements to the
extent expressly permitted in Section 8.1 1 hereof; (c) Liens for Taxes either
not yet due or being contested in good faith (and for the payments of which
adequate reserves have been provided by Lessee) by appropriate proceedings so
long as such proceedings do not involve any material danger of the sale,
forfeiture or loss of the Airframe or any Engine; (d) material suppliers',
mechanics', workers', repairers', employees' or other like liens arising in the
ordinary course of business and for amounts the payment of which is not yet
delinquent or is being withstood in good faith by appropriate proceedings and so
long as such proceedings do not involve a material danger of the sale,
forfeiture or loss of the Airframe or any Engine; and (e) Lessor's Liens.
"Permitted Sublease" means a sublease entered into by Lessee with
the prior written consent of Lessor with either of the Guarantors as sublessee.
"Permitted Sublessee" means any sublessee under a Permitted
Sublease.
"Person" means an individual, partnership, corporation, business
trust, joint venture, governmental authority or other entity of whatever nature.
"Pre-delivery Check" means the Segment C Check to be performed on
the Aircraft in or about February, 1997 and prior to the acceptance of the
Aircraft for lease hereunder which, in this instance, constitutes a full C
Check.
"Rent" means Basic Rent and Supplemental Rent.
"Rent Payment Date" has the meaning given in Section 6.1 hereof.
"Rent Period" means the period of time between any Rent Payment Date
and the next succeeding Rent Payment Date, or between the last Rent Payment Date
and the expiration of the Term.
"Replacement Engine" means an engine of the same or an improved
model as an Engine being replaced pursuant to Sections 9.2 or 12.2 hereof, which
is suitable for installation and use on the Airframe without impairing the value
or utility of the Aircraft and having a time status, modification status, value,
manufacturer's warranty status, condition and utility at least equal to the
Engine it is replacing (assuming such Engine was in the modification status,
condition, and repair required by the terms hereof immediately prior to being
replaced). Any such Replacement Engine shall be an Engine hereunder.
"Required Modifications" has the meaning given in Section 8.10(a)
hereof.
"Reserve Tasks" has the meaning given to such term in Section 6.6
hereof.
-5-
"Reserves" has the meaning given to such term in Section 6.6 hereof.
"Return Location" has the meaning given in Section 9.1(a) hereof.
"Segment C Check" means the inspection, overhaul, repair,
preservation and replacement of Parts of the Aircraft, including preventive
maintenance, identified as a Segment C Check under the Airframe manufacturer's
maintenance manuals and planning documents. Such Segment C Check shall include
all structural inspections, corrosion control and other work normally completed
in conjunction with each Segment C Check.
"Security Deposit" has the meaning given in Section 6.5 hereof.
"Service Bulletin" has the meaning given in Section 8.7 hereof.
"Stipulated Loss Value" for the Aircraft means $2,800,000.
"Supplemental Rent" means all monetary amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes or agrees to pay under
any Lease Document to Lessor including, without limitation, Stipulated Loss
Value and the purchase option price in the event of the exercise of Lessee's
option to purchase set forth in Section 17 hereof.
"T.B.G. Guaranty" means the Guaranty Agreement pursuant to which
T.B.G. Airways Limited, an English corporation, is guaranteeing the obligations
of Lessee hereunder.
"Tax" means all license and registration fees and all taxes, levies,
imposts, duties, charges, assessments or withholdings of any nature whatsoever
together with any penalties, additions to tax, fines or interest thereon.
"Term" means the Basic Term pursuant to Section 2.3 and any
extension thereof pursuant to the terms hereof or otherwise as Lessor and Lessee
may hereinafter agree.
"Total Loss" with respect to the Aircraft, Airframe, any Engine or
Part means any of the following events with respect to such property; (i) loss
of such property or the use thereof due to theft or disappearance for more than
45 consecutive days; (ii) loss of such property or the use thereof due to
destruction, damage beyond economic repair or rendition of such property
permanently unfit for normal use; (iii) any event which should or does result in
the receipt of insurance proceeds with respect to such property on the basis of
a total loss, arranged total loss, constructive or agreed total loss; (iv) (A)
the confiscation or seizure of title to the Aircraft or Airframe (B) the
condemnation, taking, confiscation or seizure of the use of the Aircraft or
Airframe for a period equal to the shorter of 90 consecutive days or the date
the Aircraft is required to be returned to Lessor pursuant to Section 9 hereof
by any government or agency or instrumentality thereof; (v) with respect to any
Engine, the taking of title or requisition for use by any government
-6-
and any divestiture of title deemed a Total Loss pursuant to Section 12.2 of
this Lease; or (vi) as a result of any rule, regulation, order or other action
(generally applicable to aircraft of the same type as the Aircraft) by the IAA
or other governmental body (including any court) having jurisdiction, the use of
the Aircraft for the commercial transportation of persons is prohibited for a
period of 180 consecutive days. A Total Loss with respect to the Aircraft shall
be deemed to occur if a Total Loss occurs with respect to the Airframe.
"Trust" has the meaning given in Section 16.4 hereof.
SECTION 2. AGREEMENT TO LEASE; TERM
2.1. LEASING OF AIRCRAFT. Subject to the terms and conditions of the Lease
Documents, and in reliance upon the agreements, representations and warranties
therein contained and made pursuant hereto, Lessor agrees to lease the Aircraft
to Lessee hereunder on the Delivery Date, such leasing to be evidenced by Lessor
executing and delivering the Acceptance Certificate hereunder.
2.2. DELIVERY OF AIRCRAFT. The Aircraft shall be delivered to Lessee by
Lessor for purposes of this Lease at facilities of Marshall of Cambridge
Aerospace Limited, The Airport, Cambridge CB5 8RX England.
2.3. TERM. Except as otherwise provided herein, the Aircraft shall be
leased for the Term which shall comprises the Basic Term and any extension
thereof pursuant to the terms hereof except that the Term shall end upon any
earlier termination of this Lease in accordance with its terms.
2.4. GUARANTYS. Simultaneously with the execution and delivery of the
Acceptance Certificate by Lessee and Lessor hereunder, Guarantors shall execute
and deliver the Guarantys in favor of Lessor.
SECTION 3. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee
represents, warrants and agrees as follows:
3.1. ORGANIZATION; GOOD STANDING; CERTIFICATION. Lessee and each Guarantor
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the corporate power and
authority to own or hold under lease its properties and to enter into and
perform its obligations hereunder. Lessee and each Guarantor is duly qualified
and authorized to do business wherever the nature of its activities or
properties requires such authorization. Aer Turas Teoranta is as of the date
hereof and at all times during the Term shall remain a Certificated Air Carrier.
3.2. AUTHORITY; CONSENT. Lessee and each Guarantor has the full power,
authority and legal right to execute, deliver and perform the terms of each of
the Lease Documents to which it is a party. The execution, delivery and
performance of each of the Lease Documents to which it is a party have been duly
authorized by all necessary corporate action of Lessee and each Guarantor and do
not require any stockholder approval or approval or consent of, or notice to,
any trustee or holders of any indebtedness or obligations of Lessee.
-7-
3.3. LEGAL, VALID AND BINDING. Each of the Operative Documents to which
Lessee and each Guarantor is a party has been duly executed and delivered by
Lessee and constitutes a legal, valid and binding obligation of Lessee,
enforceable in accordance with its terms.
3.4. COMPLIANCE WITH OTHER INSTRUMENTS. Neither the execution, delivery or
performance by Lessee or each Guarantor of the Operative Documents to which it
is a party nor the consummation or performance by Lessee of the transactions
contemplated therein will conflict with or result in any violation of, or
constitute a default under, the certificate of incorporation or by-laws of
Lessee or each Guarantor or any agreement, mortgage, indenture, lease or other
instrument or any Applicable Law by which Lessee or each Guarantor or their
properties or assets are bound.
3.5. GOVERNMENTAL CONSENTS. Neither the execution and delivery of any of
the Lease Documents nor the performance of any of the transactions contemplated
thereby by Lessee or each Guarantor requires the consent or approval of, the
giving of notice to, the registration with, or the taking of any other action in
respect to the IAA, any other Irish or foreign governmental authority or agency,
including any judicial body.
3.6. NO ADVERSE AGREEMENTS. Neither Lessee nor each Guarantor is a party
to any agreement or instrument or subject to any charter or any corporate
restriction, which if performed in accordance with its terms, would materially
and adversely affect Lessee's or each Guarantor's financial condition, business
or operations or the ability of Lessee or each Guarantors to perform its
obligations under any of the Operative Documents to which it is a party.
3.7. NO DEFAULTS OR VIOLATIONS. Lessee and each Guarantor are not now, and
during the Term will not, be in default under any mortgage, deed of trust,
indenture or other instrument or agreement to which Lessee or each Guarantor is
a party or by which it or any of its properties or assets may be bound, or be in
violation of any Applicable Law, which default or violation would have a
material adverse effect on the financial condition, business or operations of
Lessee or its ability to perform any of their obligations under any of the Lease
Documents to which it is a party.
3.8. LITIGATION. There are no pending or, to the best of Lessee's
knowledge after due inquiry, threatened actions or proceedings by or before any
court, administrative agency, regulatory authority or arbitrator that would if
decided against Lessee either individually or in the aggregate materially and
adversely affect the financial condition, business or operations of Lessee or
the ability of Lessee to perform its obligations under any of the Lease
Documents to which it is a party.
3.9. TAX RETURNS. Lessee and each Guarantor have filed or caused to be
filed all tax returns which are required to be filed by it, and has paid or
caused to be paid all taxes shown to be due or payable on said returns or on any
assessment received by Lessee or each Guarantor, except as may be contested in
-8-
good faith by appropriate proceedings. There are no currently pending audits for
any federal or state income taxes or any other taxes for any period.
3.10. FILING OR RECORDATION. Except for the filing made with the Irish
Civil Aircraft register, no other filing or recording of this Lease with the
IAA, no further filing or recording of this Lease or of any other document and
no further action, are necessary or desirable in order to (A) fully protect and
establish Lessor's title to, and interest in, and property rights with respect
to the Aircraft as against Lessee or any third party claiming through Lessee and
to ensure that the property rights of Lessor therein will have priority in all
respects over the claims of all creditors of Lessee, or (B) ensure the validity,
effectiveness and enforceability of this Lease and the other Operative
Documents.
3.11. PRINCIPAL PLACE OF BUSINESS. Unless Lessee gives the notice provided
in this Section 3.11, Lessee shall maintain its principal place of business and
chief executive office and the office where it keeps its business and financial
records and files concerning the Lease Documents at the location specified in
Section 18 hereof. Lessee shall hold and preserve such records and files
concerning the Lease Documents as are required hereunder and shall permit
representatives of Lessor at any time during normal business hours upon
reasonable notice to inspect and make abstracts from such records and files.
Lessee shall give Lessor at least 30 days' prior written notice of any change in
Lessee's principal place of business and chief executive office, and shall
cooperate with Lessor in executing and delivering all such documents as Lessor
may reasonably request which are required or desirable as a result of such
change of principal place of business of Lessee. Notwithstanding any of the
foregoing provisions of this Section 3.11 to the contrary, Lessee shall not
maintain its principal place of business in any location which would cause
Lessee not to be a Certificated Air Carrier.
3.12. FINANCIAL STATEMENTS. The audited consolidated balance sheet of
Lessee and each Guarantor and their subsidiaries, as of the end of each of its
last three fiscal years (up to December 31, 1995) and the related audited
consolidated statements of income and changes in financial position for the
years then ended and the unaudited consolidated balance sheet of Lessee and each
Guarantor and their subsidiaries as of September, 1996 and the related
statements of income and changes in financial position for the three months then
ended (copies of each of which will be furnished to Lessor), each prepared in
accordance with generally accepted accounting principles and practices, fairly
and accurately present the financial position of Lessee and each Guarantor, as
of the dates thereof and for the periods covered thereby. Since September, 1996,
there has been no material adverse change in the financial condition, business,
operations or prospects of Lessee and each Guarantor.
3.13. FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED. Lessee agrees to
furnish to Lessor during the Term:
(a) As soon as possible and in any event within 5 days after the
occurrence of an Event of Default which is continuing, an Officer's Certificate
setting forth in detail the nature of such Event of Default and the action which
Lessee proposes to take with respect thereto;
-9-
(b) as soon as available, and in any event within 30 days after the
end of each calendar month falling during the Term, consolidated balance sheets
of Lessee and Aer Turas Teoranta as of the end of such month and related
statements of income, shareholders' equity and changes in financial condition of
Lessee for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period in such other
preceding fiscal year, all in reasonable detail and duly certified (subject to
year-end audit adjustments) by a financial officer of Lessee and each Guarantor
as having been prepared in accordance with generally accepted accounting
principles and practices, consistently applied; notwithstanding the foregoing,
provided no Event of Default has occurred and is then continuing, absent a
request by Lessor, Lessee need not provide the reports required by this Section
3.13(b) after the report due on or about August 31, 1997.
(c) as soon as available, and in any event within 90 days after the
end of each of Lessee's and each Guarantor's fiscal years falling during the
Term, a copy of the annual report for such year for Lessee and its subsidiaries
on a consolidated basis, including therein consolidated balance sheets of Lessee
and each Guarantor as of the end of such fiscal year and related statements of
income, shareholders' equity and changes in financial condition of Lessee for
such fiscal year, in comparative form with the preceding fiscal year, in each
case certified by independent certified public accountants of national standing
as having been prepared in accordance with generally accepted accounting
principles and practices consistently applied.
(d) promptly upon the sending or filing thereof, copies of all such
proxy statements, financial statements and reports which Lessee or the
affiliated group of which Lessee is a member sends to its stockholders
generally, and copies of all regular periodic and special reports and all
registration statements under the Securities Act of 1933, as amended, which
Lessee files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or with any national securities
exchange;
(e) from time to time, such other information relating to its
financial, operational or business affairs or conditions as Lessor may
reasonably request.
3.14. MAINTENANCE OF CORPORATE STATUS; NO MERGER OR CONSOLIDATION. Lessee
and each Guarantor will preserve and maintain its corporate existence and such
of its rights, privileges, licenses and franchises in any jurisdiction where
failure to obtain such licensing or qualification would have a material adverse
effect upon Lessee and each Guarantor. The Lessee and each Guarantor shall not
consolidate or merge with or into any other corporation or sell, convey,
transfer, lease or otherwise dispose of, whether in one transaction or a series
of related transactions, any of its assets if the aggregate value thereof
represents all or substantially all of its assets unless the surviving entity
has the same or greater net worth as that of Lessee or each Guarantor (as the
case may be) immediately prior to
-10-
any such consolidation or merger and such surviving entity agrees in writing to
assume all of the obligations of Lessee under this Lease or Guarantor under the
related Guaranty, as the case may be. Lessee and each Guarantor shall not
voluntarily permit to be revoked, canceled or otherwise terminated all or
substantially all of the franchises, concessions, permits, rights or privileges
required for the conduct of business and operations of Lessee or the free and
continued use and exercise thereof
3.15. NOTICE OF DEFAULT OR ADVERSE OCCURRENCE. The Lessee shall
promptly inform the Lessor of any occurrence of which it becomes aware which
might adversely affect its ability to perform any of its obligations under this
Lease and the other Operative Documents to which the Lessee is a party or the
ability of each Guarantor to perform its obligations under its respective
Guaranty.
3.16. MAINTENANCE OF CONSENTS AND APPROVALS. Lessee shall obtain or
cause to be obtained, maintain in full force and effect and comply in all
material respects with the conditions and restrictions (if any) imposed on, or
in connection with, every consent, license, authorization, approval, filing and
registration obtained or effected in connection with this Lease, including
without limitation foreign exchange and transfer permits regarding Dollar
amounts due hereunder, or which may from time to time be necessary under
Applicable Law for the continued due performance of all obligations of the
Lessee under this Lease, including without limitation qualifications to operate
the Aircraft in accordance with Applicable Laws. Where it is required under
Applicable Law with respect to this Lease, consent, approval, sanction, to
stamp, file, register or attend to any act, matter or thing, Lessee will do so
promptly and within any applicable prescribed time period in respect thereof.
SECTION 4. LESSOR REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Subject to certain disclaimers set forth in Section 7 hereof, Lessor
represents, warrants and agrees as follows:
4.1. Lessor covenants and agrees that provided no Event of Default
has occurred and remains unremedied, neither it nor anyone claiming exclusively
by, through or under Lessor will interfere with Lessee's quiet use and enjoyment
of the Aircraft during the Term.
4.2 Lessor is the legal owner of the Aircraft and that the Aircraft
is not subject to any Lien and Lessor hereby covenants and agrees to discharge
any Lien arising from facts or circumstances existing prior to the commencement
of the Pre-delivery Check.
SECTION 5. CONDITIONS PRECEDENT.
5.1. CONDITIONS PRECEDENT TO OBLIGATION OF LESSOR TO LEASE AIRCRAFT.
The obligation of Lessor to lease the Aircraft to Lessee under this Lease is
subject to the fulfillment to the satisfaction of Lessor, on or before the
Delivery Date or
-11-
concurrently with Lessor's leasing of the Aircraft hereunder (unless waived in
writing by Lessor), of the following conditions precedent:
(a) Each of the Operative Documents and such other documents deemed
necessary or reasonably desirable by Lessor, shall have been duly authorized,
executed and delivered by the respective party or parties thereto and shall be
satisfactory in form and substance to Lessor, and an executed original or
conformed copy, as appropriate, of the Lease Documents and such other documents
deemed necessary or desirable by Lessor shall have been delivered to Lessor.
(b) On the Delivery Date, the following statements shall be true and
Lessor shall have received evidence in form and substance reasonably
satisfactory to it that:
(i) The Aircraft is duly registered with and certificated by the
IAA as to type and airworthiness in accordance with the terms
of this Lease;
(ii) The Lease and Acceptance Certificate shall be in due form for
recording and shall be duly filed pursuant to Applicable Law;
(c) On the Delivery Date for the Aircraft (i) the representations
and warranties of Lessee contained in the Lease Documents shall be true and
accurate; (ii) nothing shall have occurred which materially and adversely has
affected or will affect the ability of Lessee to carry on its business and to
perform its obligations under the Lease Documents; and (iii) no event shall have
occurred and be continuing, or would result from the lease of the Aircraft,
which constitutes an Event of Default.
(d) Lessee shall have delivered an Officer's Certificate to Lessor
certifying as to the matters set forth with respect to Lessee in Section 5.1(c)
hereof.
(e) No change shall have occurred after the date of this Agreement
in Applicable Law that in the opinion of Lessor would make it illegal for Lessor
to maintain its interest in the Aircraft.
(f) in furtherance of and not in limitation of its rights set forth
in Section 5.1(a), Lessor shall have received the following, in each case in
form and substance satisfactory to it:
(i) incumbency certificates of Lessee and Guarantors regarding the
officers of Lessee and Guarantors authorized to execute and
deliver the Lease Documents to which each is a party,
respectively, and other documents and agreements delivered in
connection therewith;
(ii) an insurance broker's letter of undertaking in substantially
the form of Exhibit F hereto;
-12-
(iii) certified copies of all documents evidencing the corporate
actions of Lessee and Guarantors and the Board of Directors of
Lessee and Guarantor, duly authorizing the lease by Lessee of
the Aircraft hereunder and the execution, delivery and
performance by Lessee of each of the Lease Documents to which
it is a party and the Guaranty by Guarantor, of Lessee's
obligations under the Lease Documents;
(iv) such other documents and evidence with respect to Lessee as
Lessor may reasonably request in order to consummate the
transactions contemplated by the Lease Documents, the taking
of all corporate actions in connection therewith and
compliance with the conditions herein set forth.
(g) Lessor shall have received the Security Deposit, in cash, from
Lessee.
(h) a favorable opinion from Gore & Grimes, counsel to Aer Turas
Teoranta, covering such matters incident to the transactions contemplated hereby
as it may reasonably request.
5.2. CONDITIONS PRECEDENT TO OBLIGATION OF LESSEE TO LEASE THE AIRCRAFT.
The obligation of Lessee to lease the Aircraft from Lessor under this Lease is
subject to the fulfillment to the satisfaction of Lessee, on or before the
Delivery Date of the following conditions precedent. With respect to subsections
(c), (d) and (f) below, the standards of the Aircraft's former Cathay Pacific
Airways maintenance program shall be applicable:
(a) Lessor shall have delivered proof reasonably satisfactory to
Lessee that the Aircraft has completed the Pre-delivery Check which may be
satisfied by having a representative of Lessee present at a check flight of the
Aircraft of at least two hours duration flown following the completion of the
Predelivery Check so that Lessee may be reasonably satisfied that the
Pre-delivery Check has been satisfactorily completed and that the Aircraft is
otherwise in the condition required by this Section 5.2. In the event the person
performing the Predelivery Check would not ordinarily perform such a check
flight, Lessor shall perform a check flight reasonably acceptable to Lessee at
Lessor's expense upon Lessee's request, which check flight shall not exceed two
hours duration without Lessor's consent.
(b) The Aircraft has been fitted with at least 299 passenger seats.
(c) Each Engine shall have not less than 3,000 Hours and 1,500
Cycles remaining until such Engine's next limiter or next scheduled shop visit.
-13-
(d) Each landing gear shall have at least 3,000 Hours remaining
until its next schedule shop overhaul.
(e) The APU shall be serviceable.
(f) The Aircraft shall have received a certificate of airworthiness
from the IAA.
(g) the time controlled components of the Aircraft shall have at
least twelve calendar months or 3,000 Hours of life remaining to their next
scheduled overhaul or replacement.
5.3. ACCEPTANCE FOR LEASE. Upon the execution of the Acceptance
Certificate, it shall be conclusively presumed that the conditions set forth in
Sections 5.1 and Section 5.2 have been met in full (or that any discrepancies
have been irrevocably waived by Lessee), and that the Aircraft shall, by the
execution of the Acceptance Certificate, be accepted for lease by Lessee for all
purposes hereunder.
5.4. NON-FULFILLMENT OF CONDITIONS PRECEDENT UNDER SECTION 5.2. In the
event that Lessor has failed to fulfill any or all of the conditions set our in
Section 5.2. hereof and Lessee has not waived such non-fulfillment, Lessee shall
be under no obligation to take the Aircraft on Lease and the parties hereto
shall be released from all obligations to each other hereunder save that Lessor
shall forthwith return to Lessee any installments of the Security Deposit paid
to it by Lessee.
SECTION 6. PAYMENTS.
6.1. BASIC RENT. During the Basic Term Lessee shall pay Lessor, in
accordance with the provisions of Section 6.3 hereof Basic Rent each in the
amount of One Hundred Thousand Dollars $100,000 on each Rent Payment Date as
hereinafter defined. Basic Rent in the foregoing amount is due and payable on
the Lease Commencement Date and such Basic Rent shall be due and payable
thereafter on the same day of each month during the Basic Term as the day of the
month the Lease Commencement Day fell (each such day a "Rent Payment Date").
6.2. NET LEASE; NO SET-OFF OR DEDUCTIONS. THIS LEASE IS A NET LEASE.
LESSEE ACKNOWLEDGES AND AGREES THAT ITS OBLIGATIONS TO PAY ALL RENT DUE AND
OWING UNDER THE TERMS HEREOF SHALL BE ABSOLUTE AND UNCONDITIONAL AND SHALL NOT
BE AFFECTED BY ANY CIRCUMSTANCE WHATSOEVER, INCLUDING, WITHOUT LIMITATION (A)
ANY SET-OFF, COUNTERCLAIM, RECOUPMENT, DEFENSE OR OTHER RIGHT WHICH LESSEE MAY
HAVE AGAINST LESSOR OR ANYONE ELSE FOR ANY REASON WHATSOEVER, (B) ANY DEFECT IN
THE TITLE, AIRWORTHINESS, ELIGIBILITY FOR REGISTRATION UNDER
-14-
THE IAA, OR ANY DAMAGE TO OR LOSS OR DESTRUCTION OF, THE AIRCRAFT, OR ANY
INTERFERENCE, INTERRUPTION OR CESSATION IN OR PROHIBITION OF THE USE OR
POSSESSION THEREOF BY LESSEE FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, ANY SUCH INTERFERENCE, INTERRUPTION, CESSATION OR PROHIBITION
RESULTING FROM THE ACT OF ANY GOVERNMENTAL AUTHORITY (C) ANY LIENS, ENCUMBRANCES
OR RIGHTS OF OTHERS WITH RESPECT TO THE AIRCRAFT, (D) THE INVALIDITY OR
UNENFORCEABILITY OR LACK OF DUE AUTHORIZATION OR OTHER INFIRMITY OF THIS LEASE
OR ANY LACK OF RIGHT, POWER OR AUTHORITY OF LESSOR OR LESSEE TO ENTER INTO THIS
LEASE, (E) ANY INSOLVENCY, BANKRUPTCY REORGANIZATION OR SIMILAR PROCEEDINGS BY
OR AGAINST LESSEE, LESSOR, OR ANY OTHER PERSON, OR (F) ANY OTHER CAUSE WHETHER
SIMILAR OR DISSIMILAR TO THE FOREGOING, ANY PRESENT OR FUTURE LAW
NOTWITHSTANDING, IT BEING THE INTENTION OF THE PARTIES HERETO THAT ALL RENT
PAYABLE BY LESSEE HEREUNDER SHALL CONTINUE TO BE PAYABLE IN ALL EVENTS IN THE
MANNER AND AT THE TIMES PROVIDED HEREIN. SUCH RENT SHALL NOT BE SUBJECT TO ANY
ABATEMENT AND THE PAYMENTS HEREOF SHALL NOT BE SUBJECT TO ANY SET-OFF OR
REDUCTION FOR ANY REASON WHATSOEVER, INCLUDING ANY PRESENT OR FUTURE CLAIMS OF
LESSEE AGAINST LESSOR UNDER THIS LEASE OR OTHERWISE. EACH RENT PAYMENT MADE
PURSUANT TO THIS LEASE BY LESSEE SHALL BE FINAL AND LESSEE WILL NOT SEEK TO
RECOVER ALL OR ANY PART OF SUCH PAYMENT FROM LESSOR OR FOR ANY REASON
WHATSOEVER. IF FOR ANY REASON WHATSOEVER THIS LEASE SHALL BE TERMINATED IN WHOLE
OR IN PART BY OPERATION OF LAW OR OTHERWISE, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN OR AS OTHERWISE AGREED, LESSEE NONETHELESS AGREES TO PAY TO LESSOR AN
AMOUNT EQUAL TO EACH PAYMENT OF BASIC RENT AND SUPPLEMENTAL RENT DUE HEREUNDER
AT THE TIME SUCH PAYMENT WOULD HAVE BECOME DUE AND PAYABLE IN ACCORDANCE WITH
THE TERMS HEREOF HAD THIS LEASE NOT BEEN TERMINATED IN WHOLE OR IN PART. THE
OBLIGATION OF LESSEE IN THIS SECTION 6.2 SHALL SURVIVE THE EXPIRATION OR THE
TERMINATION OF THIS LEASE OTHER THAN IN ACCORDANCE WITH ITS TERMS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY RIGHTS WHICH IT MAY NOW
HAVE OR WHICH MAY BE CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE,
CANCEL, QUIT OR SURRENDER THIS LEASE EXCEPT IN ACCORDANCE WITH THE TERMS HEREOF.
6.3. IMMEDIATELY AVAILABLE FUNDS. All Rent shall be paid in United
States Dollars by wire transfer in immediately available funds by 12:00 noon EST
or EDT, as the case may be, on the day it is due and payable hereunder to Lessor
at Fleet Bank, N.A., 80 Pine Street, New York, NY, ABA No. 021200339, Account
No. 2181-01-7572, Re: AFG Rent Escrow, with sufficient information to identify
the source and application of such funds. If any Rent is due on a day which is
not a Business Day, it shall be due on the immediately preceding Business Day.
-15-
6.4. SUPPLEMENTAL RENT. Lessee also agrees to pay to Lessor, in
accordance with the provisions of Section 6.3 hereof, any and all Supplemental
Rent when the same shall become due and owing, and in the event of any failure
on the part of Lessee to pay any Supplemental Rent, Lessor shall have all
rights, powers and remedies provided for herein or by law or equity in the case
of nonpayment of Basic Rent. Lessee will also pay, on demand, as Supplemental
Rent, interest at the Overdue Rate on any part of any installment of Basic Rent
not paid when due for any period for which the same shall be overdue and, to the
extent permitted by Applicable Law, on any payment of Supplemental Rent not paid
when due for the period until the same shall be paid.
6.5. SECURITY DEPOSIT. On or before the acceptance of the Aircraft
for lease hereunder, Lessee shall deposit with Lessor in an amount in cash equal
to three hundred thousand Dollars ($300,000) to serve as security for Lessee's
full and faithful performance of all of its obligations under this Lease (the
"Security Deposit").
6.5.1. Lessor hereby acknowledges receipt of $50,000 as the
initial installment of the Security Deposit. The balance of the
Security Deposit shall be payable by Lessee to Lessor as follows:
$50,000 upon the earlier to occur of the execution of this Lease or
fourteen days prior to the Delivery Date and the balance of $200,000
shall be due and payable on the Delivery Date. In the event Lessor
has satisfied the conditions precedent set forth in Section 5.2
hereof and Lessee fails to accept the Aircraft for lease hereunder,
Lessor may retain the Security Deposit in its possession as
liquidated damages for loss of bargain and not as a penalty.
6.5.2 If Lessee fails to pay Rent or any other sums due or
fails to perform any of the other terms or provisions of this Lease
or is otherwise in default hereunder, in addition to all other
rights Lessor shall have, Lessor may use, apply or retain all or any
portion of the Security Deposit in partial payment for any sums it
may in its discretion advance as a result of a default by the Lessee
or to apply toward losses or expenses Lessor may suffer of incur as
a result of such Default. If Lessor uses or applies all or any
portion of the Security Deposit, such application shall not be
deemed a cure of any default, and Lessee shall immediately upon
receipt of written demand from Lessor pay an amount necessary to
restore the Security Deposit to its required amount, and the failure
to do so shall be an Event of Default without further notice. In the
event that the Lessee does not make timely payments of Basic Rent in
any two consecutive months during the Term, the Lessor, without
limitation to any other rights and remedies hereunder, may on each
such occasion require the Lessee to increase the Security Deposit by
an amount equal to one payment of Basic Rent. The Security Deposit
shall remain in effect until after the Aircraft is returned in the
condition required by this Lease. Lessee shall not be entitled to
off-set any Rent against the Security Deposit. After the return of
the Aircraft in the condition required by this Lease, Lessor shall
return the Security Deposit, without
-16-
interest, provided that Lessee has otherwise fulfilled all its
obligations hereunder.
6.5.3. Provided Lessee has duly exercised its option to
purchase under Section 17 hereof, Lessor shall retain the entire
Security Deposit as part of the purchase price of the Aircraft. In
the event Lessee has not exercised its option to purchase under
Section 17 and the Aircraft has been returned to Lessor in
accordance with the provisions of Section 9 hereof, the Security
Deposit shall be refunded to Lessee without interest within 30 days
following the expiration of the Basic Term.
6.6. RESERVES. Segment C Checks, Engine heavy maintenance requiring
shop repair, landing gear overhauls, and auxiliary power unit overhauls are
collectively and individually referred to as "Reserve Tasks." In addition to
monthly installments of Basic Rent, Lessee shall pay to Lessor an Hourly payment
to be reserved for Reserve Tasks as follows:
6.6.1. The Lessee shall, on or before the 10th day following
the second and each subsequent Rent Payment Date and the 10th day
following the expiration of the Basic Term if Lessee has not
exercised its option under Section 17, submit to Lessor a true
summary of the Aircraft usage for the preceding Rent Period,
specifying the number of Hours the Aircraft shall have flown in such
Rent Period. Such usage shall be determined by Lessee by reference
to the Aircraft operating logs, subject to audit and verification by
Lessor. On or before the 15th day following the second and
subsequent Rent Payment Dates and the 15th day following the
expiration of the Basic Term if Lessee has not exercised its option
under Section 17, Lessee shall pay to Lessor for each Hour the
Aircraft was operated during the Rent Period with respect to which
such usage data applies the following amounts applicable to the
specified Reserve Tasks: for Segment C Checks, $200; for Engine
heavy maintenance (including overhaul, hot section inspection,
replacement of internal Life Limited Components that have reached
their applicable hour or cycle limits, disassembly, assembly and
testing required thereof) requiring shop repair $175 per Engine; for
complete landing gear overhaul, $15, combined for all landing gear;
and for complete auxiliary power unit overhaul, $10. The foregoing
amounts shall be collectively or individually referred to as
"Reserves."
6.6.2. Lessee shall obtain Lessor's prior written approval of
Reserve Tasks and the cost thereof, such consent not to be
unreasonably withheld. Upon submission by Lessee to Lessor of
invoices or receipts evidencing the performance of a Reserve Task in
accordance with the provisions hereof, Lessor shall, provided than
an Event of Default shall not have occurred and be continuing,
reimburse Lessee from Reserves corresponding to the Reserve Task,
but not in an amount to exceed the actual invoice or receipts, and
not in excess of Reserves actually received for the corresponding
Reserve Task. Under no circumstance shall Reserves be used to
reimburse Lessee for the cost of repairs arising as a result of
foreign object damage, an insured occurrence, or operational
-17-
mishandling. If, on any occasion, Reserves actually received are
insufficient to pay for the corresponding Reserve Task, the
shortfall shall be for the account of the Lessee and may not be
carried forward or made the subject of any further claim for
payment.
6.6.3. Reserves shall be and remain the property of the Lessor
until disbursed. Except as otherwise set forth in Section 12.1(a)
hereof, all undisbursed Reserves, upon the expiration or earlier
termination of this Lease, shall be retained by Lessor as additional
Rent for the Aircraft unless Lessee has exercised its option to
purchase under Section 17 hereof in which case the amount of any
then remaining Reserves shall be paid to Lessee at the time title to
the Aircraft is transferred to Lessee pursuant to Section 17. Lessor
shall be under no obligation to segregate Reserves, and may mingle
Reserves with other funds.
6.7 COST OF PRE-DELIVERY CHECK. The cost of the Pre-delivery Check
shall be allocated as follows: The first $500,000 of the Pre-delivery Check
shall be for the account of Lessor. Lessor and Lessee shall each share equally
the cost, if any, above $500,000 to a maximum of $750,000 with all remaining
expenses of the Pre-delivery Check, if any, for the account of Lessee. Under no
circumstances shall Lessor be obligated to pay more than $625,000 for the
Pre-delivery Check and except as specifically set forth in the Letter Agreement,
under no circumstance will Lessor be obligated to pay more than $625,000 to
place the Aircraft in the condition required for its acceptance for lease
hereunder by Lessee. Lessor and Lessee agree to promptly pay when due the
respective amounts owed by them to the party performing the Pre-delivery Check.
SECTION 7. DISCLAIMER OF WARRANTIES AND MANUFACTURERS' WARRANTIES.
7.1. DISCLAIMER. UPON THE ACCEPTANCE OF THE AIRCRAFT FOR LEASE
HEREUNDER IT SHALL BE DEEMED TO BE LEASED HEREUNDER "AS IS" AND "WHERE IS."
LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE (WHETHER BY VIRTUE OF HAVING
LEASED THE AIRCRAFT UNDER THIS LEASE OR HAVING ACQUIRED THE AIRCRAFT, OR HAVING
DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS
UNDER OR IN RELATION TO THIS LEASE OR OTHERWISE), AND LESSOR HEREBY SPECIFICALLY
DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY, FREEDOM FROM CLAIMS OF
INTERFERENCE OR INFRINGEMENT OR THE LIKE, OR FITNESS FOR USE FOR A PARTICULAR
PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF
THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE
OR DEALING OR USAGE OF TRADE), WITH RESPECT TO THE AIRCRAFT; AND LESSEE HEREBY
WAIVES,
-18-
RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH
WARRANTY OR WARRANTIES. LESSOR SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY TO
LESSEE OR ANY OTHER PERSON, WHETHER ARISING IN CONTRACT OR TORT OUT OF ANY
NEGLIGENCE OR STRICT LIABILITY OF LESSOR OR OTHERWISE, FOR (I) ANY LIABILITY,
LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE
AIRCRAFT OR ANY ENGINE OR BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT
THEREIN OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION THEREWITH, (II) THE USE,
OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS RELATING THERETO, (III)
ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR
CONSEQUENTIAL DAMAGES OR (IV) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE,
REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES AND
REPRESENTATIONS SET FORTH IN THIS SECTION 7.1 ARE EXCLUSIVE AND IN LIEU OF ALL
OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AND LESSOR
SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER WARRANTIES, EXCEPT AND ONLY TO THE
EXTENT OF THOSE WARRANTIES SET FORTH IN SECTION 4 OF THIS LEASE.
7.2. OTHER WARRANTIES. So long as no Event of Default shall have
occurred, Lessor agrees that if there are any outstanding warranties of
manufacturers and suppliers relating to the Aircraft or any of the Engines which
would otherwise inure to the benefit of or be enforceable by Lessor during the
Term, they shall, notwithstanding title to the Airframe and Engines being vested
in Lessor, inure to the benefit of Lessee throughout the Term and Lessor agrees
to authorize Lessee to exercise for the account of Lessor such rights as Lessor
may have under such warranties.
SECTION 8. USE, OPERATION AND MAINTENANCE
8.1. GENERAL. Lessee, at its own cost and expense, shall during the
Term service, repair, maintain and overhaul or cause the same to be done to the
Airframe and each Engine under the Maintenance Program for so long as the
Aircraft is in the possession of Lessee or subject to this Lease with the same
or better care as used by Lessee at a minimum, give the Aircraft the same level
of attention and maintenance as the Lessee or either Guarantor affords to the
other aircraft in its fleet, including Airworthiness Directive compliance and
level of incorporation, improvements, repairs, cleanliness, and correction of
items of a cosmetic nature (such as hail damage), and the "build standard"
applicable to all Engine shop visits with regard to both exhaust gas temperature
and life limited components, except where the terms of this Lease dictate higher
standards; and maintain the Aircraft in compliance with the requirements of the
Airframe manufacturer's aging aircraft and corrosion control program document
and supplemental inspection document as periodically revised. By way of
expansion and not in limitation of the foregoing, Lessee agrees to (i) keep the
Airframe and each Engine in as good operating condition as when delivered to
Lessee hereunder, ordinary wear and tear excepted, (ii) keep the Aircraft in
such condition as is necessary to enable the airworthiness certification of the
Aircraft to be maintained
-19-
in good standing at all times under Applicable Law, (iii) maintain the Manuals
and Technical Records in the English language in accordance with such
Maintenance Program and in a manner acceptable to the IAA and (iv) cause the
Aircraft to be maintained in a manner which will not discriminate against the
Aircraft compared with other similar aircraft owned or leased by Lessee.
8.2. OPERATION AND USE.
(a) Lessee agrees not to operate or locate the Airframe or any
Engine, or suffer the Airframe or any Engine to be operated or located, in any
area (i) excluded from coverage by any insurance policy required to be
maintained hereunder or (ii) in any recognized or, in Lessor's reasonable
judgment, threatened area of hostilities unless fully covered by war risk
insurance meeting the terms of Section 11 hereof, except in the case of a
requisition by the United States government, where Lessee obtains indemnity from
the United States government against the risks and in the amounts required by
Section 11 hereof covering such area. Lessee agrees not to operate the Aircraft,
or suffer the Aircraft to be operated during the Term (1) unless the Aircraft is
covered by insurance as required by the provisions of Section 11 hereof or (2)
contrary to the terms of such insurance as required by the provisions of Section
11 hereof.
(b) Lessee agrees not to (i) operate the Airframe or any Engine or
permit the Airframe or any Engine to be operated during the Term except in a
passenger configuration, in commercial or other operations for which Lessee is
duly authorized by the IAA or otherwise in accordance with Applicable Law; or
(ii) use or permit the Aircraft to be used for a purpose for which the Aircraft
is not designed or reasonably suitable. Lessee will not permit the Airframe or
any Engine to be maintained, used or operated during the Term in violation of
any Applicable Law, or contrary to any manufacturer's operating manuals or
instructions.
8.3. MAINTENANCE IN GENERAL. Lessee agrees it solely has the
obligation to maintain and repair the Airframe and Engines in accordance with a
maintenance program which meets the IAA requirements for commercial airline
operations under the relevant laws and regulations of the Republic of Ireland,
and to the extent such requirements are more stringent, meets the requirements
of the manufacturers with respect to its recommended standards of maintenance
and repair of Lockheed L-1O11-1 aircraft and Rolls-Royce RB211-22B engines, and
meets the non-discrimination requirements set forth in Sections 8.1 and 8.7
hereof (the "Maintenance Program"), so as to keep it in at least as good a
condition during the Term as on the Delivery Date and until the Aircraft is
redelivered to Lessor pursuant to Section 9 hereof, ordinary wear and tear
excepted. Included within the obligation of maintenance and repair under the
Maintenance Program is the obligation and affirmative undertaking by Lessee to
replace from time to time all worn or defective Parts, to the extent required to
cause the Aircraft to be in an airworthy condition in all respects and to be
covered by an effective Certificate of Airworthiness at all times.
8.4. SPECIFIC ITEMS OF MAINTENANCE. Lessee agrees that maintenance
and repairs shall include, but shall not be limited to, the following specific
items:
-20-
(a) to perform or have performed in accordance with Section 8.3 all
routine maintenance work, including on-line maintenance on the Aircraft, and to
ensure that all such maintenance shall be in accordance with the regulations and
directives of the IAA or other applicable government authority. Lessee shall
have all maintenance and repairs performed at repair facilities approved by the
IAA;
(b) to correct promptly and diligently any deficiencies revealed at
any time by any inspection of Lessor which under the Maintenance Program require
proper repair, replacement, overhaul and adjustment;
(c) to maintain all Aircraft documentation, including, without
limitation, the Manuals and Technical Records, in compliance with IAA
regulations and in up-to-date status, (if necessary, through manufacturers'
revision service) and to make these available for review and copying by Lessor
on reasonable notice at Lessee's principal maintenance base;
(d) to incorporate into the Aircraft all those Airframe, Engine, and
Parts manufacturer and other vendor service bulletins which Lessee plans to
adopt during the Term for the Term for the rest of its Lockheed L-1011 aircraft
fleet. The Aircraft, with respect to the rest of Lessee's fleet, shall not be
discriminated against in service bulletin compliance or other maintenance
matters.
8.5. PARTS
(a) Unless the Airframe or an Engine has suffered a Total Loss,
Lessee, at its own cost and expense, will during the Term promptly replace all
Parts that may from time to time become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for use
for any reason whatsoever and shall replace such Parts as promptly as
practicable with replacement Parts. All replacement Parts shall be made by the
same manufacturer and of the same model number and modification status, or be
IAA-approved substitutes normally used by Lessee, shall be free and clear of all
Liens except Permitted Liens and shall be in at least as good operating
condition as, and shall have a value, utility, and useful life at least equal
to, the Parts replaced assuming such replaced Parts were in the condition and
repair required to be maintained by the terms hereof.
(b) All Parts at any time removed from the Airframe or any Engine
shall remain the property of Lessor and subject to this Lease, no matter where
located, until such time as such Parts shall be replaced by Parts that have been
incorporated or installed in or attached to such Airframe or Engine and that
meet the requirements for replacement Parts specified in clause (a) of this
Section 8.5. Immediately upon any replacement Part becoming incorporated or
installed in or attached to such Airframe or Engine as provided in clause (a)
hereof, without further act, (i) title to such replacement Part shall thereupon
vest in Lessor; (ii) such replacement Part shall become subject to this Lease
and be deemed part of such Airframe or Engine, as the case may be, for all
purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to such Airframe or Engine; and (iii) title to the
replaced Part shall thereupon vest in
-21-
Lessee, free and clear of all rights of Lessor and shall no longer be deemed a
Part hereunder.
(c) Title to all Parts incorporated or installed in or attached or
added to the Airframe or any Engine as the result of any alteration,
modification or addition effected by Lessee shall, without further act vest in
Lessor and become subject to this Lease.
8.6. AIRWORTHINESS DIRECTIVES.
(a) During the Term hereof Lessee agrees at its sole cost and
expense (except as otherwise stated) to comply with any IAA airworthiness
directive, manufacturers' mandatory service bulletin or any other mandatory
regulation, directive or instruction ("Airworthiness Directive") which the IAA
or other competent regulatory authority may from time to time issue (whether
prior to or subsequent to the commencement of the Term) and with respect to
which compliance is required during the Term in order to meet the requirements
of Applicable Law for the public transport of passengers and/or cargo. All
Airworthiness Directives shall be accomplished in accordance with all applicable
bulletins and manuals published by the manufacturer of the Airframe or Engines
or Parts.
(b) Lessor shall hold title to any Parts included in a new system
installed on the Aircraft pursuant to an Airworthiness Directive which is
required by such Airworthiness Directive to be installed during the Term.
(c) If Lessee would normally perform the terminating action
specified by an Airworthiness Directive, the terms of which permit performance
after the end of the Term, prior to the end of the Term on its entire fleet of
Lockheed L- 1011 aircraft pursuant to its schedule for performing such
Airworthiness Directive applicable to its fleet of such aircraft, Lessee shall
perform such Airworthiness Directive in accordance with Section 8.6(a), above.
(d) If Lessee would not normally perform the terminating action
specified by an Airworthiness Directive, the terms of which permit performance
after the end of the Term, pursuant to its schedule for performing such
Airworthiness Directive applicable to its fleet of Lockheed L-1011 aircraft and
Lessor requests Lessee, in writing, to perform such Airworthiness Directive,
Lessee shall perform such Airworthiness Directive, PROVIDED, HOWEVER, that
Lessee's obligations to perform such Airworthiness Directive pursuant to this
Section 8.6(d) shall be subject to availability of the necessary material, labor
and facilities to perform such Airworthiness Directive. The costs of such
performance shall be borne solely by Lessor and shall be equal to the sum of
material costs and the associated Direct Labor Rate cost of performing such
Airworthiness Directive.
(e) In the event an Airworthiness Directive can be complied with by
both more frequent inspection of such Part or the Aircraft than had theretofore
been the case or by repair or replacement of the relevant Part and if, in
accordance with the Maintenance Program, Lessee has elected to comply by more
frequent inspections, Lessee shall no later than the Segment C check referred to
in
-22-
Section 9.4(a) hereof perform the repair or replacement needed to obviate the
more frequent inspections of the Aircraft arising out of such Airworthiness
Directive.
(f) Lessee shall be solely responsible for the expense of complying
with each particular Airworthiness Directive; in the event the cost of
compliance exceeds $25,000, Lessee may be reimbursed up to the contents of the
Reserve account relating to the Part or a portion of the Airframe or Engine
subject to the Airworthiness Directive in question with the balance of the
compliance costs, if any, for the account of Lessee.
8.7. SERVICE BULLETINS. Lessee agrees, at its sole cost and expense,
to incorporate into the Aircraft, all Lockheed, Rolls-Royce and other vendor
service bulletins ("Service Bulletins") which Lessee adopts and incorporates
during the Term into its Lockheed L-1011 aircraft fleet.
8.8. MODIFICATION PAYMENTS BY THE GOVERNMENT. In the event that,
during the Term, Applicable Law shall provide for the payment to Lessee from a
governmental entity (a "Modification Payment") with respect to a modification of
the Aircraft, including without limitation, in whole or in part with respect to
the retrofitting or replacement of Engines installed on any Lockheed L-1011
aircraft operated by Lessee in order for Lessee to comply with any laws or
regulations relating to emissions, noise, or other pollution, environmental or
fuel economy standards and requirements, Lessee shall comply with such law or
regulation by performing upon the Aircraft such modifications as are required
thereby, and only under such circumstances may Lessee retain such Modification
Payment. In the event that Lessee is not required by such law or by this
Agreement to perform any such modification upon the Aircraft and Lessee has not
theretofore given to Lessor its irrevocable written commitment to perform such
modification, Lessee shall pay Lessor, within 30 days of Lessee's receipt
thereof the Modification Payment.
8.9. CORROSION CONTROL. Lessee shall carry out such work as may be
required for the control or corrosion, including, without limitation, periodic
inspections for penetration of fuel tanks, periodic inspections and clean-up
under galleys, forward and aft cargo pit areas and lavatories, periodic
treatment of all mild and moderate corrosion and correcting of all severe or
exfoliated corrosion, in accordance with the Maintenance Program.
8.10. MODIFICATIONS.
(a) Lessee, at its own expense, shall make such alterations and
modifications in and additions to the Airframe or any Engine pursuant to Section
8.6 hereof as may be required to be made from time to time by Applicable Law
during the Term regardless upon whom such requirements are, by their terms,
nominally imposed, as required by Section 8.6 hereof ("Required Modifications").
(b) Lessee, at its own expense, may from time to time make such
alterations and modifications in and additions to the Airframe or any Engine as
Lessee may deem desirable in the proper conduct of its business provided that no
such alteration, modification or addition shall diminish the value or utility of
the Aircraft, or impair the condition or airworthiness thereof, below the value,
utility,
-23-
condition and airworthiness thereof prior to such alteration, modification or
addition assuming the Aircraft met the requirements of this Lease prior to such
alteration, modification or addition. In addition, Lessee may, at any time
during the Term remove any Part pursuant to this paragraph, provided that (1)
such Part is in addition to, and not in replacement of or substitution for, any
part originally incorporated or installed in or attached to the Aircraft at the
time of delivery thereof hereunder or any Part in replacement of, or
substitution for any such Part, and (2) such Part can be removed from the
Aircraft without diminishing or impairing the value, utility, condition or
airworthiness required to be maintained by the terms of this Lease which the
Aircraft would have had at such time had such alteration, modification or
addition not occurred. Notwithstanding the foregoing, Lessee shall not, without
Lessor's prior written consent, make any major modifications, alterations or
additions, (collectively, "Optional Modifications") to the Aircraft. For the
purposes of this section Optional Modifications shall exclude the Required
Modifications and modifications or required by the terms of this Lease, but
shall include all modifications to the Aircraft with a cost of $100,000. Ail
Optional Modifications shall be accomplished by Lessee at its own expense.
(c) NOTWITHSTANDING ANY OTHER PROVISION OF THIS LEASE, NO OPTIONAL
MODIFICATION SHALL BE MADE WITHOUT LESSOR'S PRIOR WRITTEN CONSENT (WHICH CONSENT
MAY BE WITHHELD FOR ANY REASON WHATSOEVER) IF ANY OPTIONAL MODIFICATION HAS THE
EFFECT OF DECREASING THE UTILITY OR VALUE OF THE AIRCRAFT OR ADVERSELY AFFECTS
ITS AIRWORTHINESS OR USE FOR TRANSPORTING PASSENGERS IN COMMERCIAL SERVICE.
8.11. POSSESSION. Lessee shall not sublease the Aircraft or otherwise in
any manner deliver, relinquish or transfer possession of the Airframe or any
Engine to any Person or install any Engine, or permit any Engine to be
installed, on any airframe other than the Airframe, during the Term, without the
prior written consent of Lessor, provided, however, that so long as Lessee shall
comply with the provisions of Section 11 hereof Lessee may, without the prior
written consent of Lessor:
(a) enter into an ACMI Lease in the ordinary course of Lessee's
business;
(b) deliver possession of the Airframe or an Engine to the
manufacturer thereof for testing or other similar purposes or to any
organization for service, repair, maintenance or overhaul work on the Airframe
or Engines or for alterations or modifications in or additions to the Airframe
or Engines, provided such organization is qualified and duly licensed to perform
such work and otherwise to the extent required or permitted by the terms of this
Lease;
(c) subject any Engine to normal interchange or pooling agreements
or arrangements, in each case customary in the European airline industry
applicable to other similar aircraft and engines operated by Lessee, if any, and
entered into by Lessee in the ordinary course of its business with any
Certificated Air Carrier, provided that (i) no such agreement or arrangement
contemplates or requires the transfer of title to any Engine, and (ii) if
Lessor's title
-24-
to any Engine shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be a Total Loss with respect to such Engine and
Lessee shall comply with Section 12.2 hereof in respect of such Engine;
(d) install an Engine on an airframe owned by Lessee provided that
following such installation such Engine shall be free and clear of all liens,
except (i) Permitted Liens, and (ii) those which apply only to the engines
(other than Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts) installed on
such airframe (but not to the airframe as an entirety), and (C) those created by
the rights of other Certificated Air Carriers under normal interchange or
pooling agreements or arrangements customary in the airline industry which do
not contemplate, permit or require the transfer of title to such airframe or
engines installed thereon;
(e) install an Engine on an airframe leased to Lessee or purchased
by Lessee subject to a conditional sale or other security agreement, provided
that (i) such airframe is free and clear of all liens except (A) the rights of
the parties to the lease, conditional sale or other security agreement and (B)
Liens of the type permitted by clause (d) above, and (ii) such lease,
conditional sale or other security agreement effectively provides that such
Engine shall not become subject to the Lien of such lease, conditional sale or
other security agreement, notwithstanding the installation thereof on such
airframe;
(f) Notwithstanding any transfers of possession of the Airframe or
any Engine permitted pursuant to this Section 8.11, Lessee shall at all times
during the Term of this Lease remain fully liable and obligated to perform all
of the terms of this Lease to the same extent as if such transfer had not
occurred.
8.12. REPORTS. Lessee shall furnish to Lessor the following reports on a
monthly basis: (i) the Hours and Cycles operated by the Airframe as required
pursuant to Section 6.6 hereof; (ii) the Hours and Cycles operated by each of
the Engines (noting their location) as required pursuant to Section 6.6 hereof;
(iii) scheduled and unscheduled Engine and Parts changes; (iv) monthly aircraft
maintenance planning sheet; (v) monthly deferred items carried forward; (vi)
damage reports; (vii) a list of those service bulletins, Airworthiness
Directives and engineering modifications issued during such month and applicable
to the Aircraft, whether or not incorporated on the Aircraft; (viii) copies of
any written communications with the manufacturers with respect to defects or
malfunctions of the Aircraft or such other matters; and (ix) Segment C Check and
Engine shop visit scheduled dates. In addition, Lessee shall notify Lessor of
all accidents, cases of significant theft or vandalism, extended periods of
Aircraft grounding for cause, and insured occurrences as practicable.
8.13. RIGHT TO INSPECT.
(a) Lessor and its agents shall have the right to inspect the
Aircraft at any reasonable time without interrupting Lessee's commercial
operation of the Aircraft, upon giving Lessee reasonable notice, to ascertain
the condition of the Aircraft and to satisfy Lessor that the Aircraft is being
repaired and maintained in accordance with the requirements of this Lease.
Lessee shall, at the request of
-25-
Lessor, provide Lessor with such information concerning the location of the
Aircraft as may be necessary to facilitate such inspection and shall permit any
duly authorized representative of Lessor to be present during any overhaul or
the performance of any major scheduled maintenance check of the Aircraft. The
cost of the inspection or survey shall be paid by Lessee if the Aircraft, or any
part thereof, is not in the condition required by this Lease but shall otherwise
be for the account of Lessor. All repairs which shall be shown by the inspection
or survey to be required shall be made at Lessee's expense in accordance with
the Maintenance Program. All required repairs shall be performed as soon as
practicable thereafter. In the event of a dispute between Lessor and Lessee as
to the proper performance by Lessee of the repairs required hereunder, the
decision of a publicly-recognized aircraft appraiser selected by Lessor and
reasonably acceptable to Lessee of the Airframe, Engine or Part, as the case may
be, shall control. The non-prevailing party shall be responsible for payment of
all expenses of such appraiser incurred in connection with the rendering of its
decision. Lessor shall have no duty to make any such inspection and shall not
incur any liability or obligation by reason of not making such inspection.
(b) Lessee shall make available to Lessor for its review (i) such
records as it may have in its possession which Lessor may request in the course
of an inspection by Lessor as contemplated by subsection (a), above; (ii) such
other written communications with the IAA or other regulatory authority or any
manufacturer as it may have in its possession relating to defects or
malfunctions of the Aircraft or Parts or any other matters relating to the
Aircraft; and (iii) Lessee's most recent IAA-approved operations specifications,
including any amendments or additions made thereto.
8.14. AIRCRAFT RECORDS. Lessee shall maintain all Manuals and Technical
Records during the term of this Lease relating to the service, inspection,
maintenance, modification, repair and overhaul of the Airframe, Engines and
Parts installed therein as required by the IAA and the Maintenance Program which
records will at all times be "back to birth" and be kept current and up-to-date.
Aircraft records for life limited Parts shall establish total service, origin
and authenticity back to the original manufacturer thereof and shall establish
strict compliance with the IAA type data sheet and with the Maintenance Program.
SECTION 9. RETURN OF AIRCRAFT
9.1. RETURN LOCATION, NOTICES, COSTS, TAXES AND FEES. The return of the
Aircraft at the expiration or earlier termination of this Lease shall be subject
to the following provisions:
(a) At the end of the Term or upon the earlier termination of this
Lease pursuant to Section 14 hereof, Lessee shall return the Airframe and
Engines to Lessor in Marana, Arizona, U.S.A. as Lessor in its sole discretion
shall determine (the "Return Location"). The Aircraft at the time of its return
shall be free and clear of all Liens other than Lessor's Liens. At the time of
return of the Aircraft to Lessor, and provided Lessee is in compliance with the
terms of this Lease, Lessor and Lessee shall execute an Acceptance Certificate
(Return) at the Return Location.
-26-
(b) Lessee and Lessor agree that Lessee shall pay all costs of
returning the Aircraft to Lessor including, but not limited to, fuel, oil, crew,
inspections, insurance, maintenance, repairs, service and other costs of the
Aircraft to the Return Location.
(c) TAXES AND FEES. Lessee shall pay all Taxes and fees arising out
of the return of the Aircraft at the Return Location.
9.2. RETURN OF OTHER ENGINES. In the event at the time the Aircraft is
returned to Lessor pursuant to the terms of this Section 9 and an Engine fails
to meet the return conditions for such Engine as set forth herein, Lessee may
return installed on the Airframe a Rolls-Royce RB211-22B engine not owned by
Lessor but meeting all of the standards set forth in this Section 9; any such
engine shall be a Replacement Engine, and Lessee shall, at its own expense and
concurrently with such return, furnish Lessor with a full warranty bill of sale,
in form and substance satisfactory to Lessor, with respect to each such
Replacement Engine and shall take such other actions conveying title to the
Replacement Engine to Lessor free and clear of all liens other than Lessor's
Liens and such additional documents, including an opinion of counsel acceptable
to Lessor, as Lessor may request in order that title to such Replacement Engine
shall be duly and properly vested in Lessor. Any Replacement Engine shall, at
the time it replaces an Engine, have a fair market value at least as great as
the Engine it replaces and no such Replacement Engine shall, prior to its
installation on the Airframe and the. return of the Aircraft to Lessor, have had
any disk, module or other Part removed and replaced with a disk, module or other
part of lesser value than that it replaced. Upon passage of title to Lessor such
Replacement Engine shall be deemed to be an Engine for all purposes hereunder
and thereupon Lessor shall transfer to Lessee, without recourse or warranty
except a warranty of title excluding Lessor's Liens, all of Lessor's right,
title and interest in and to any Engine not installed on the Airframe at the
time of the return thereof to Lessor.
9.3. CONDITION OF AIRCRAFT. The Aircraft at the time of the return to
Lessor shall have been maintained and repaired in accordance with the
Maintenance Program and this Lease, and shall meet the following requirements:
(a) OPERATING CONDITION. The Aircraft shall be in at least as good
operating condition as on the Delivery Date, ordinary wear and tear from normal
airline passenger operations excepted.
(b) CLEANLINESS STANDARDS. The Aircraft shall be clean by European
commercial airline standards and shall have received an exterior wash and an
interior deep cleaning since its last commercial flight.
(c) CERTIFICATE OF AIRWORTHINESS. The Aircraft shall have, and be in
compliance with a current valid Standard Certificate of Airworthiness issued by
the IAA without any corrections, repairs, modifications, alterations or
overhauls having to be performed by Lessor to meet such standards and rules, and
shall comply with the then current provisions of the applicable IAA rules and
regulations. If required by Lessor, Lessee shall at Lessee's expense request in
the name of Lessor a Certificate of Airworthiness for Export so as to allow
Lessor to place the
-27-
Aircraft on a registry other than that of the Republic of Ireland. If any fees
to a manufacturer or the IAA, or any work, including engineering, is required on
the Aircraft to obtain such Certificate of Airworthiness for Export, Lessee
shall perform such work at its expense.
(d) COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Aircraft shall be
in compliance with all Airworthiness Directives affecting the Aircraft and
requiring performance during the Term, or as otherwise required under this
Lease. In the event Lessee has obtained a waiver or deviation from the IAA from
having to comply with any such Airworthiness Directives, Lessee shall,
irrespective of such waiver or deviation, fully comply with all such
Airworthiness Directives covered by such waiver or deviation prior to the return
of the Aircraft to Lessor as if such waiver or deviation did not exist.
(e) DEFERRED MAINTENANCE. The Aircraft shall have had accomplished
thereon all outstanding deferred maintenance items. Items deferred because of
maintenance concessions (i.e., an exemption to operate beyond the normal limits
by monitoring) shall be brought up-to-date as if such maintenance concessions or
exemptions did not exist. Parts whose time status exceeds the conditions or
requirements imposed by this Lease shall be brought into compliance with such
conditions or requirements.
(f) CORROSION TREATMENT. The Aircraft shall have been maintained by
cleaning and treating of all mild corrosion and correcting of all moderate and
severe or exfoliated corrosion in accordance with the recommendations of the
manufacturer of the Airframe. All fuel tanks shall be free of leaks.
(g) CONFIGURATION AND CONDITION. The Aircraft shall be returned
having the same configuration and in the same or better condition with all Parts
installed therein as on the Delivery Date, excepting only Modifications,
additions, replacements and substitution of Parts as may have been properly made
by Lessee pursuant to Section 8 and as specifically otherwise set forth in this
Section 9.
9.4. CONDITION OF AIRFRAME. The Airframe at the time of its return to
Lessor shall meet the requirements set forth below, all at Lessee's expense,
except as otherwise provided herein:
(a) At the end of the Term, Lessee shall have performed immediately
prior to redelivery to Lessor a Segment C Check, including all phases and
multiples in accordance with the Maintenance Program, a corrosion inspection and
clean-up under galleys, forward and aft cargo pit areas and lavatories. Items
deferred because of maintenance concessions (i.e., an exemption to operate
beyond the normal limits by monitoring) shall be brought up-to-date as if such
maintenance concessions or exemptions did not exist. Components whose time
status exceeds the conditions or requirements imposed by this Lease shall be
brought into compliance with such conditions or requirements.;
(b) The cockpit shall be clean by normal airline standards and paint
shall not be cracked or peeled. Lessee shall insure that any items which are
-28-
found to be defective in the Aircraft's interior will be replaced or
repaired in accordance with the Maintenance Program;
(c) Lessee shall permanently repair the fuselage. including but not
limited to (i) dents, abrasions, and scab patches; and (ii) loose or pulled
rivets, impact damage to the Aircraft caused by ground handling equipment or
impact damage caused by foreign objects. The exterior of the Airframe shall be
clear of all names, logos and other special markings, which markings the Lessee
shall remove.
(d) All life limited time controlled Airframe Parts (except for the
landing gear and APU) shall be serviceable in accordance with IAA standards and
have a value, modification status and time since overhaul or replacement
equivalent to the Parts installed in the Aircraft when accepted by Lessee for
lease hereunder, reasonable wear and tear excepted.
9.5. APU. Lessee will return the Aircraft's installed APU in good and
efficient operating condition in accordance with the manufacturer's
specifications and those of the Maintenance Program, ordinary wear and tear
alone excepted. Immediately prior to the return of the Aircraft the APU shall be
inspected and all items requiring repair or replacement shall be repaired or
replaced at Lessee's expense. Any operational discrepancies of the APU shall be
corrected in accordance with the Maintenance Program at Lessee's expense prior
to the return of the Aircraft to Lessor.
9.6. ENGINE CONDITION. Upon return of the Aircraft there shall be
installed on the Aircraft three Rolls Royce RB211-22B Engines. Each Engine shall
meet both the Engine manufacturer specifications and the Maintenance Program
parameters for acceptable exhaust gas temperature margin, engine pressure ratio
maximum rated thrust and fuel flow at maximum certificated rated thrust.
9.7. BORESCOPE INSPECTION. A full videotaped borescope inspection on all
Engine and APU sections in accordance with manufacturer's specification shall be
performed in the presence of a representative of Lessor at Lessee's expense at
the time of the Aircraft's return, but prior to any parking pursuant to Section
9.17, and Lessee shall provide evidence satisfactory to Lessor that no
discrepancies exist beyond the applicable shop repair limits of the manufacturer
of the Engines including no abnormal repetitive inspection limits.
9.8. INSPECTION.
(a) Lessor may, from time to time, wish to make the Aircraft
available for inspection to Persons evaluating the Aircraft for use after the
Term provided always that such inspection does not interfere with Lessee's
commercial operation of the Aircraft. Lessor agrees to give Lessee not less than
3 Business Days' advance notice of any such inspection and Lessee agrees to
cooperate with Lessor's requests in making the Aircraft and the Manuals and
Technical Records available to such Persons.
(b) The Aircraft (including the Manuals and Technical Records to be
returned therewith as set forth in this Section 9) shall be made available to
-29-
Lessor for ground inspection by Lessor at Lessee's facilities where the Segment
C check required by Section 9.4(a) is being performed, while such Segment C
check is being performed. During the Segment C check required by Section 9.4(a),
while Lessee has removed the Aircraft from service and opened the areas of the
Aircraft needed to perform such C check, Lessee shall allow Lessor to accomplish
its inspection in order to determine that the Aircraft (including the Manuals
and Technical Records) is in the condition required by the provisions of this
Section 9. Lessee at its sole cost and expense shall promptly correct any
discrepancies from the condition required by the provisions of this Section 9.
9.9. OPERATIONAL GROUND CHECK. Promptly after completion of any
corrections required under Section 9.8, Lessee shall conduct an operational
ground check in accordance with the requirements of the Maintenance Program and
shall correct any discrepancies disclosed by such check.
9.10.OPERATIONAL CHECK FLIGHT. Promptly after completion of all
corrections required under Sections 9.8 and 9.9 above, the Aircraft shall be
check flown by Lessee at its expense, using qualified flight personnel
demonstrating to Lessor the satisfactory operation of the Aircraft and its
equipment and systems. Lessor's employees or representatives may participate in
such flight as observers. Such flight shall be flown using standard air carrier
operational check flight procedures requested by Lessor's representative and be
sufficient to demonstrate the proper operation of all systems for normal
passenger use. Upon completion of such operational check flight, the
representatives of Lessee and Lessor participating in such flight shall agree in
writing upon any discrepancies in such Aircraft required to be corrected by
Lessee in order to comply with provisions of this Section 9 and Lessee shall
promptly correct or cause to be corrected at Lessee's expense any such
discrepancies. If any of the discrepancies referred to in Sections 9.8 and 9.9
or 9.10 continue to persist, Lessor may (but shall not be obligated to) accept
delivery of the Aircraft and apply the procedure set forth in Section 9.12 for
such discrepancies.
9.11. ACCEPTANCE. Upon completion of the operational check flight
specified in Section 9.10, after Lessee has corrected the discrepancies as
specified therein and after Lessee has delivered the Aircraft to the Return
Location and the Aircraft is in the condition required by this Section 9, the
Aircraft shall be technically accepted by Lessor's representatives at the Return
Location and Lessor's representative shall thereupon execute the Acceptance
Certificate (Return).
9.12. DEFERRED RETURN CONDITION DISCREPANCY CORRECTION. If,
notwithstanding Lessee's best efforts to fully comply with the provisions of
Section 9 hereof, any return condition discrepancies are found during the ground
inspection, operational ground check and operational check flight set forth in
Sections 9.8, 9.9 and 9.10 above, which were not corrected by Lessee prior to
return of the Aircraft to Lessor, at the election of Lessor such discrepancies
may be corrected by Lessor or its designee after return of the Aircraft and
Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor or
its designee for accomplishing such discrepancy corrections or, in the
alternative, Lessor may reasonably determine the cost of performing such
maintenance and repairs and in either event Lessee shall, upon receipt of
Lessor's invoice, pay Lessor for all such costs and expenses. Any late payments
shall be subject to interest at the Overdue Rate.
-30-
9.13. COSTS. All flights pursuant to Sections 9.10 shall be made at
Lessee's expense and Lessee shall pay for any and all costs associated with such
flights including, but not limited to, costs for crew, fuel, oil, airport fees,
insurance, takeoff/landing fees, airway communication fees, and ground handling
fees. At the option of Lessor, Lessee's obligations under this Lease, including
but not limited to Lessees obligations under Sections 11 and 15 hereof and its
obligation to pay Basic Rent shall remain in effect until the execution of the
Acceptance Certificate (Return).
9.14. MANUALS AND TECHNICAL RECORDS. Lessee at its sole cost and expense
shall return to Lessor, at the time the Aircraft is returned to Lessor, all of
the Manuals and Technical Records and other data described in Exhibit B hereto,
originally received from Lessor, and subject to IAA retention time limits,
updated and maintained by Lessee through the date of return of the Aircraft. In
addition. Lessee shall also provide Lessor, at the time the Aircraft is returned
to Lessor, all records, documents, manuals, authorizations, drawings and data in
English (or with English translations thereof) which were developed or caused to
be developed by Lessee and required by the IAA or any other regulatory entity
having authority over the Aircraft, updated and maintained by Lessee for the
Aircraft and through the date of return of the Aircraft in an accurate and
correct condition. At the time of return of the Manuals and Technical Records
for the Aircraft and the other documents required to be delivered by Lessee
pursuant to this Section 9.14 to Lessor and provided such documents are in the
condition they are required to be in hereunder, Lessee and Lessor shall execute
the Acceptance Certificate (Return).
9.15. LESSEE'S SPECIAL EXTERIOR MARKINGS. At the time of the return of the
Aircraft, Lessee shall, at Lessor's election, remove and paint over all of
Lessee's logos and other exterior markings painted on the Aircraft by Lessee. In
the event that, notwithstanding Lessee's obligation to do so, Lessee does not
remove such markings, Lessor shall have no obligation to remove such markings
prior to the sale, lease, or other disposition of the Aircraft by Lessor after
its return.
9.16. OWNERSHIP. Any documents, equipment and any other property returned
to Lessor pursuant to this Section 9 which are not already owned by Lessor shall
thereupon and without further act become the property of Lessor.
9.17. PARKING OF AIRCRAFT UPON RETURN. Upon the written request of Lessor
given at least 15 Business Days prior to the end of the Term, Lessee, at
Lessee's expense shall provide parking facilities for the Aircraft at the Return
Location or at such other location as Lessor shall designate, for a period not
to exceed 30 days. During the period referred to in the preceding sentence,
Lessee shall continue to bear the risk of loss of the Aircraft and shall pay all
maintenance costs, ground insurance costs, and other costs with respect to the
Aircraft.
9.18. LEASE CONTINUES. In the event, for any cause, Lessee does not return
the Aircraft to Lessor on the last Business Day of the Term or earlier
termination of the Lease in the condition required hereunder, then all of the
obligations of Lessee under this Lease shall continue and such continued use
shall not be considered a renewal of the Term of this Lease or a waiver of any
right of
-31-
Lessor hereunder. During such continued use, Rent shall continue to be paid by
Lessee to Lessor and the other performance and obligations of Lessee to Lessor
shall continue hereunder and the same shall be prorated at the rate of one
thirtieth (1/30) of 125% of the monthly installment of Basic Rent for each day
until the Aircraft is actually delivered to Lessor, and all other terms and
conditions of this Lease shall remain in full force and effect. Payment shall be
made upon presentation of Lessor's invoice and any failure to pay shall
constitute an Event of Default of Lessee.
SECTION 10. TITLE: REGISTRATION; LIENS.
10.1. TITLE. Lessee acknowledges that legal title to the Aircraft shall
remain vested in Lessor, notwithstanding the possession and use thereof by
Lessee, and Lessee shall do all acts and things Lessor may reasonably require to
evidence the interest of Lessor in the Aircraft or to protect such interest
against the claims of any other person. Lessee shall not attempt to hold itself
out as having any power to sell or dispose of the Aircraft or any Engine.
10.2. REGISTRATION. Lessee acknowledges that, throughout the Term, the
Aircraft shall be registered on the Irish Civil Aircraft Register and Lessor
shall be stated on such Register to be lessor and Lessee shall not do, and shall
further use its best endeavors to ensure that no third party does, any act or
things which might prejudice or cancel such registration.
10.3. LIENS. Lessee shall not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to the Airframe or any Engine
other than Permitted Liens. Lessee shall promptly, at its own expense, take such
action as may be necessary to duly discharge any Lien other than a Permitted
Lien if the same shall arise at any time, which obligations of the Lessee shall
survive the termination of this Lease.
10.4. NOTICE OF OWNERSHIP. Within 10 Business Days after the Delivery
Date, Lessee shall (i) remove from the Aircraft all notices of the ownership
interest of any prior owner or mortgagee of the Aircraft and (ii) affix in a
reasonably prominent position on the flight deck or cockpit, and on each of the
Engines, a legible notice supplied by Lessor reading as follows:
"Investors Asset Holding Corp., as Trustee,
Owner and Lessor
Leased to G.P. Aer Lease Limited
Lessee"
Once affixed as aforesaid, such notice shall not be defaced, covered or
removed during the Term, unless Lessor instructs Lessee to change such notice.
Lessee shall not allow the name of any person other than Lessor or any assignee
of Lessor's interest hereunder to be placed on the Airframe or any Engine as a
designation that might be interpreted as a claim of ownership or any interest
therein, provided,
-32-
however, that Lessee may operate the Aircraft in its livery, including its name
and logo.
SECTION 11. INSURANCE.
On or before the Delivery Date and throughout the Term, Lessee shall
without cost or expense to Lessor obtain, maintain and keep in full force and
effect the following insurance with respect to the Aircraft, carried with
responsible insurers acceptable to Lessor of recognized and good reputation in
the aviation industry.
11.1. ALL-RISK INSURANCE. "All-risk" hull, ground and flight insurance on
the Aircraft (with flight, taxiing and ingestion coverage) in an amount not less
than the Stipulated Loss Value with a deductible amount not exceeding
$1,000,000. In addition, Lessor may request such greater amounts of coverage as
Lessor may determine necessary or desirable from time to time (and for which
Lessor shall reimburse Lessee for its cost of increased premium, if any, for
such greater amounts of insurance). Such hull insurance shall cover Engines or
engines and Parts temporarily removed from the Airframe pending installation of
the same or similar Engines, engines or Parts on the Airframe in an aggregate
amount not less than their replacement cost.
11.2. WAR RISK INSURANCE. War risk and allied perils insurance on the
Aircraft in an amount not less than the Stipulated Loss Value covering the
perils of:
(a) war, invasion, acts of foreign enemies, hostilities (whether war
be declared or not), civil war, rebellion, revolution, insurrection, martial
law, military or usurped power, or attempts at usurpation of power;
(b) strikes, riots, civil commotions or labor disturbances;
(c) any act of one or more persons, whether or not agents of a
sovereign power, for political or terrorist purposes and whether the loss or
damage therefrom is accidental or intentional;
(d) any malicious act or act of sabotage;
(e) confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition of title or use by or under the order of any
government (whether civil, military or de facto) or public or local authority
other than the government or any public or local authority of the country of
registration; and
(f) hijacking or any unlawful seizure or wrongful seizure or
wrongful exercise of control of the Aircraft or crew in flight (including any
attempt at such seizure or control) made by any person or persons on board the
Aircraft acting without the consent of Lessee.
11.3. LIABILITY INSURANCE. Public liability insurance for a combined
single limit of not less than $500,000,000 per occurrence or such greater
amounts as
-33-
Lessee may carry from time to time on other aircraft in its fleet similar to the
Aircraft, which shall:
(a) include public liability insurance, passenger liability
insurance and property damage liability insurance; and
(b) provide that all the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each such insured.
In the event that Lessee increases its public liability insurance
coverage, it shall do so with respect to the Aircraft contemporaneously with
increasing its insurance coverage on other aircraft similar to the Aircraft
which it owns or operates.
11.4. ADDITIONAL REQUIREMENTS; LOSS PAYMENT. The insurance required under
this Section 11 shall be provided on an agreed value basis, and the policies
shall:
(a) name Lessor, and any assignee of its interests hereunder as
additional insured and (with respect to Lessor) as sole loss payee for up to the
Stipulated Loss Value for total loss of the Aircraft;
(b) provide that the insurance shall not be invalidated by any
action or inaction by Lessee and insure the interest of Lessor regardless of any
breach or violation by Lessee or any other named insured of any warranty,
declaration or condition contained in such policies;
(c) provide that in the event of separate insurance being arranged
to cover the all-risk hull insurance and the war risk and allied perils
insurance, the underwriters subscribing to such insurance agree to a 50/50 claim
funding arrangement in the event of any dispute as to which insurance is
applicable;
(d) with respect to the liability coverage required hereunder, be
primary and without right of contribution from other insurance which may be
available to Lessor;
(e) extend to, and the underwriters thereof have agreed to insure,
the indemnification provided in Section 15.1 hereof to the extent of the
insurance;
(f) be of the type usually carried by corporations engaged in the
same or a similar business, similarly situated with Lessee and owning and
operating similar aircraft and engines, and covering risks of the kind
customarily insured against by such corporations;
(g) provide that Lessor shall have no liability for premiums,
commissions, calls or assessments with respect to such policies; and
-34-
(h) provide in the case of the insurance required by Sections 11.1
and 11.2 hereof that, so long as the insurers shall not have received written
notice that an Event of Default has occurred and is continuing, any proceeds of
less than $50,000 shall be payable to Lessee: and any proceeds in excess of
$50,000, and any and all proceeds in respect of a Total Loss, or if the insurers
shall have received written notice that an Event of Default has occurred and is
continuing, any single loss regardless of the amount, shall be payable to
Lessor.
11.5. NO SET-OFF. Each insurance policy to be maintained under this
Section 11 shall contain a waiver of any right of the insurers to any set-off or
counterclaim or any other deduction against Lessee or Lessor.
11.6. NOTICE OF MATERIAL ALTERATION OR CANCELLATION. No cancellation or
lapse of coverage for nonpayment of premium or otherwise, and no substantial
change of coverage which adversely affects Lessor shall be effective as to
Lessor until not less than 30 days (7 days in the case of war risk policies,
subject to exceptions uniformly applied in war risk policies then available
commercially) after sending written notice to Lessor from the insurers (or
Lessee's insurance broker) of such cancellation, lapse or change.
11.7. APPLICATION OF HULL INSURANCE PROCEEDS. As between Lessor and
Lessee, any payments received under policies of insurance required to be
maintained by Lessee pursuant to Sections 11.1 or 11.2, shall be applied as
follows:
(a) if such payments are received by Lessor with respect to loss or
damage (including a Total Loss with respect to an Engine) not constituting a
Total Loss with respect to the Airframe such payments shall be paid over to
Lessee upon Lessee's performance of its repair or replacement obligations under
this Lease pursuant to Section 12.3 hereof and
(b) if such payments are received with respect to a Total Loss with
respect to the Airframe, so much of such payments as shall not exceed the amount
required to be paid by Lessee pursuant to Section 12.1 hereof shall be applied
in reduction of Lessee's obligation to pay such amount if not already paid by
Lessee, and to reimburse Lessee if it shall have paid all or part of such
amount, and the balance, if any, of such payments shall be paid over to or
retained by Lessor.
11.8. INSURANCE FOR OWN ACCOUNT. Nothing in this Section 11 shall prohibit
Lessor or Lessee from obtaining insurance for its own account and any proceeds
payable thereunder shall be payable as provided in the insurance policy relating
thereto, provided that no such insurance may be obtained which would limit or
otherwise adversely affect the coverage or payment of any insurance required to
be obtained or maintained pursuant to this Section 11.
11.9. REPORTS. Lessee shall furnish to Lessor not later than the Delivery
Date a report signed by a firm of aircraft insurance brokers reasonably
satisfactory to Lessor an undertaking of such firm in substantially the form of
Exhibit F hereto. Lessee shall during the Term furnish to Lessor evidence of
renewal of the insurance policies required pursuant to this Section 11 prior to
the cancellation, lapse or expiration of such insurance policies and, on the
renewal dates of the insurance
-35-
policies carried by Lessee pursuant to this Section 11, a report similar to that
required by the preceding sentence.
11.10. CONTINUING INSURANCE. Lessee's insurance coverage shall cover all
liabilities from an occurrence which arises during the Term, regardless of the
date on which any claim is made with respect to such occurrence and Lessee at
Lessor's request shall provide evidence of the existence of such insurance
following the expiration or earlier termination of this Lease. Lessee shall in
any event be responsible for any and all liabilities to which Lessor may be
exposed as a result of Lessee's lease, use, possession, or operation of the
Aircraft.
SECTION 12. LOSS, DAMAGE OR REQUISITION.
12.1. TOTAL LOSS OF AIRFRAME.
(a) Upon the occurrence of a Total Loss with respect to the Airframe
during the Term, Lessee shall give Lessor immediate written notice of such Total
Loss. Lessee shall pay or cause to be paid to Lessor in immediately available
funds on the earlier of 60 days following the Total Loss or the date hull
insurance proceeds are received with respect to such Total Loss, an amount equal
to (i) the Basic Rent, if any, due and payable on or before such payment date,
plus (ii) all unpaid Supplemental Rent due on or before such payment date,
(including the Stipulated Loss Value for the Aircraft) plus (iii) an amount
equal to the daily equivalent of Basic Rent for each day during the period
commencing the day after the last Rent Payment Date up to and including such
payment date. Upon its receipt of the foregoing amounts, Lessor shall promptly
remit to Lessee all Reserves then held by it.
(b) In the event of a payment in full of the Stipulated Loss Value
for the Aircraft and other Rent payable as provided above, (i) this Lease and
the obligations of Lessee to pay Basic Rent and Supplemental Rent (except for
Supplemental Rent obligations surviving pursuant to Section 15 hereof or which
have otherwise accrued but not been paid as of the date of such payment and the
insurance to be provided pursuant to Section 11.10) shall terminate; and (ii)
Lessor shall convey to Lessee all of Lessor's right, title and interest, as-is,
where-is without recourse or warranty, express or implied, except to warrant
that it is free and clear of liens placed thereon by Lessor, in and to the
Airframe and Engines.
(c) In the event Lessee has itself paid the amounts specified in
Section 12.1(a)(i), (ii) and (iii) above and Lessor thereafter receives the hull
insurance policy proceeds with respect to the Total Loss in question, Lessor
shall promptly remit such proceeds to Lessee.
12.2. TOTAL LOSS OF ENGINE.
(a) Upon the occurrence during the Term of a Total Loss with respect
to an Engine whether or not installed on the Airframe and not involving a Total
Loss with respect to the Airframe, Lessee shall give Lessor written notice
thereof within 10 Business Days of such loss and shall within 60 days of the
-36-
occurrences of such Total Loss and on at least 5 days' prior written notice to
Lessor substitute a Replacement Engine for such Engine, provided, however, under
all circumstances a Replacement Engine shall be substituted on or before the
expiration of the Term. In such event, immediately upon the effectiveness of
such substitution on the date set forth in such notice and without further act,
(i) title to the Replacement Engine shall thereupon vest in Lessor
(subject only to Permitted Liens),
(ii) title to the replaced engine shall thereupon vest in Lessee, in
as-is, where-is condition, free and clear of all rights of Lessor and shall no
longer be deemed an Engine hereunder, and
(iii) such Replacement Engine shall become subject to this Lease and
be deemed part of the Aircraft for all purposes hereof to the same extent as the
Engine originally installed on or attached to the Airframe.
(b) Upon such substitution, Lessee shall execute and deliver to
Lessor such bills of sale, opinions of counsel and other documents and
instruments as Lessor shall reasonably request, in form and substance acceptable
to Lessor, to evidence the interest of Lessor and conveyance to Lessor of good
and marketable title to such Replacement Engine. Upon such substitution, (i)
Lessor shall execute and deliver to Lessee such bills of sale and other
documents and instruments, prepared at Lessee's expense, as Lessee shall
reasonably request to evidence such transfer and vesting of title in and to the
replaced Engine in Lessee, free and clear of all rights of Lessor and (ii)
Lessee shall receive all insurance proceeds and proceeds in respect of any Total
Loss causing such replacement to the extent not previously applied to the
purchase price of the Replacement Engine as provided in Section 12.3 hereof. No
Total Loss with respect to an Engine under the circumstances contemplated by
this Section 12.2 shall result in any reduction of Lessee's obligations to pay
Rent hereunder.
12.3. REPAIRABLE DAMAGE; USE OF INSURANCE PROCEEDS. In the event of
repairable damage to the Aircraft or any of the Engines, or any Engine loss
(when no Total Loss of the Aircraft has occurred), Lessor shall forthwith either
pay any insurance proceeds received by it to Lessee upon Lessee's furnishing
evidence to Lessor that such damage has been made good or repaired such that the
condition of the Aircraft shall be at least equivalent to its condition,
assuming compliance with the provisions of this Lease, immediately prior to the
event of damage or, in the case of an Engine loss, evidence that Lessee has
purchased or otherwise acquired and installed a Replacement Engine. All damage
to the Aircraft shall be documented and any repair to the Aircraft shall be
documented and accomplished pursuant to the applicable manufacturer's structural
repair manual instructions and (where applicable) the Maintenance Program. Such
repairs shall be permanent. Repairs to the skin of the Aircraft shall be flush
and not merely patched, unless otherwise specified in the Airframe manufacturer
structural repair manual. Lessee shall notify Lessor of any repair to the
structure or skin of the Aircraft or any other repair costing in excess of One
Hundred Thousand Dollars ($100,000) promptly after its being made (but in any
event no later than fifteen (15) calendar days thereafter); provided, however,
that Lessor shall have no liability to
-37-
Lessee or third parties with regard to such repair or the quality thereof and
Lessee shall indemnify and hold Lessor harmless with regard thereto. All
technical and engineering data, calculations, drawings, and documentation
covering major repairs shall become a permanent part of the Aircraft documents.
12.4. PAYMENT FROM GOVERNMENTAL AUTHORITIES FOR REQUISITION OF TITLE OR
USE; REQUISITION. In the event of a requisition for use by any government, so
long as it does not constitute a Total Loss of the Airframe, Lessee shall
promptly notify Lessor of such requisition and all Lessee's obligations under
this Lease shall continue to the same extent as if such requisition had not
occurred; including, without limitation, that Lessee's obligations for the
payment of Rent and its obligations under Section 11 hereof shall in no way be
affected, reduced or delayed by such requisition. In the circumstances described
in the preceding sentence, any payments received by Lessor or Lessee from such
government with respect to such requisition shall be paid over to or retained
by, Lessee. In the event of the requisition for use by a government of any
Engine (but not the Airframe), Lessee shall replace such Engine hereunder by
complying with the terms of Section 12.2 hereof to the same extent as if a Total
Loss had occurred with respect to such Engine. Any payments received by Lessor
or Lessee from such government with respect to such requisition shall be paid
over to, or retained by, Lessor until Lessee's replacement of such Engine
pursuant to Section 12.2 hereof, at which point it shall be paid over to Lessee.
12.5. APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT. Any
amount referred to in Sections 11 or 12 hereof which is payable to Lessee shall
not be paid to Lessee, or, if it has been previously paid directly to Lessee,
shall not be retained by Lessee, if at the time of such payment an Event of
Default shall have occurred and be continuing, but shall be paid to and held by
Lessor as security for the obligations of Lessee under this Lease.
12.6. RISK OF LOSS. The Lessee will bear the entire risk of destruction,
loss, theft, requisition of title, or use, confiscation, taking or damage of or
to the Aircraft from any cause during he period commencing when the Acceptance
Certificate (Delivery) is executed and delivered by Lessee and ending when the
Acceptance Certificate (Return) is executed and delivered by Lessor.
SECTION 13. EVENT OF DEFAULT.
Each of the following events shall be an Event of Default:
13.1. FAILURE TO MAKE PAYMENTS. If Lessee shall fail to make any payment
of Rent when due within three Business Days following written notice from Lessor
of its failure to pay such Rent;
13.2. FAILURE TO OBTAIN OR MAINTAIN INSURANCE. If Lessee fails to obtain
or maintain any insurance required by Section 11 of this Lease or operates or
locates or permits operation or location of the Airframe in violation of Section
8.2(a) hereof;
-38-
13.3. FAILURE TO PERFORM OTHER OBLIGATIONS. If Lessee fails to duly
observe or perform any of its other obligations or agreements under any Lease
Document to which Lessee is a party and such failure shall not have been
remedied within a period of 20 days (5 days with respect to Lessee's agreement
in Section 10.3 of this Lease) after written notice specifying the same from
Lessor:
13.4. REPRESENTATIONS AND WARRANTIES UNTRUE. If any representation or
warranty made by Lessee in any Lease Document or in any document or certificate
furnished to Lessor in connection therewith shall prove to be untrue in any
material respect when made;
13.5. GUARANTY DEFAULT. If either Guarantor is in default of its
obligations under its respective Guaranty, PROVIDED. HOWEVER, in the case of a
default under the A.T.T. Guaranty occurring on or before July 31, 1997, it shall
be deemed cured if within 5 Business Days of Lessee's discovery of such default
it pays to Lessor an additional $200,000 in cash as an addition to the Security
Deposit PROVIDED FURTHER that a default under the A.T.T. Guaranty shall not
constitute a default hereunder if such default under the A.T.T. Guaranty occurs
on or after August 1, 1997 and T.B.G. Airways Limited is not in default of its
obligations under the T.B.G. Guaranty.
13.6. OTHER DEFAULTS. If Lessee or either Guarantor shall fail to make any
payment in excess of $250,000 of indebtedness (other than Rent payable
hereunder) for money borrowed or indebtedness under any capitalized lease or
other purchase money obligation or shall fail to perform the terms of any
agreement relating to such indebtedness and such default shall continue, without
having been duly cured, waived or consented to, beyond the period of grace, if
any, therein specified, or any such indebtedness shall be accelerated or
declared due and payable prior to the stated maturity thereof.
13.7. INSOLVENCY OR BANKRUPTCY
(a) If any action is taken by any person to appoint, an
administrator, administrative receiver, assignee, custodian, sequestrator,
trustee or liquidator (or other similar official) of Lessee or either Guarantor
or the taking possession by any such person of a substantial part of the
property of any of them, or Lessee or either Guarantor shall fail to pay its
debts generally as they come due, or shall admit in writing its inability to pay
its debts as they become due, or shall make a general assignment for the benefit
of its creditors, or Lessee or either Guarantor shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under the bankruptcy laws of Cyprus, the Republic
of Ireland, as now or hereafter constituted or any other applicable bankruptcy,
insolvency or other similar laws or shall consent to the entry of an order for
relief in an involuntary case under any such law or Lessee shall file an answer
admitting the material allegations of a petition filed against Lessee in any
such proceedings or otherwise seek relief under the provisions of any now
existing or future bankruptcy, insolvency or other similar laws providing for
the reorganization or winding-up of corporations, or providing for an agreement,
composition, extension or adjustment with its creditors.
-39-
(b) If an order, judgment or decree shall be entered in any
proceedings by any court of competent jurisdiction appointing, without the
consent of Lessee, a receiver, trustee or liquidator of Lessee or either
Guarantor, or of any substantial part of its property, or any substantial part
of the property of Lessee or either Guarantor shall be sequestered, and any such
order, judgment or decree or appointment or sequestration shall remain in force
undismissed, unstayed or unvacated for a period of 60 days after the date of
entry thereof;
(c) If a petition against Lessee or either Guarantor in a proceeding
or case under the bankruptcy laws or other insolvency laws shall be filed and
shall not be withdrawn or dismissed within 60 days thereafter, or, in case the
approval of such petition by a court of competent jurisdiction is required, the
petition as filed or amended shall be approved by such a court as properly filed
and such approval shall not be withdrawn or the proceeding dismissed within 60
days thereafter, or a decree or order fir relief in respect of Lessee or either
Guarantor shall be entered by a court of competent jurisdiction in an
involuntary case under the bankruptcy laws of the Republic of Ireland, as now or
hereafter constituted, or any other applicable bankruptcy, insolvency or other
similar laws, as now or hereafter constituted and such decree or order shall
remain unstayed in effect for a period of 60 days, or if, under the provisions
of any law providing for reorganization or winding-up of corporations which may
apply to Lessee or either Guarantor any court of competent jurisdiction shall
assume jurisdiction, custody or control of Lessee or either Guarantor or of any
substantial part of their property and such jurisdiction, custody or control
shall remain in force unrelinquished, unstayed or underminated for a period of
60 days.
13.8. LOSS OF LICENSE. Aer Turas Teoranta or a Permitted Sublessee shall
cease to be a Certificated Air Carrier.
SECTION 14. REMEDIES.
Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, Lessor may, at its option, declare this
Lease to be in default; and at any time thereafter, Lessor may do, and Lessee
shall comply with, any one or more of the following with respect to all or any
part of the Aircraft, as Lessor in its sole discretion shall elect:
(a) Cause Lessee, upon the written demand of Lessor and at Lessee's
expense, to, and Lessee shall, promptly return the Aircraft to Lessor at such
location in the continental United States of America selected by Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Section 9 hereof as if such Airframe or such Engines were being
returned at the end of the Term; or Lessor, at its option, may enter upon the
premises where the Airframe or any or all Engines are located or believed to be
located and take immediate possession of and remove such Airframe or Engines
without the necessity for first instituting proceedings, or by summary
proceedings or otherwise, and Lessee shall comply therewith, all without
liability to Lessor for or by reason of such entry or taking possession, whether
for the restoration of damage to property caused by such taking or otherwise;
-40-
(b) Sell or otherwise dispose of the Aircraft at a commercially
reasonable market price, at public or private sale and with or without notice to
Lessee or advertisement, as Lessor may determine or hold, use, operate, lease to
others or keep idle all or any part of the Airframe or any Engine as Lessor, in
its sole discretion, may determine, in any such case free and clear of any
rights of Lessee and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with respect thereto except to the extent
required by paragraph (d) below in the event Lessor elects to exercise its
rights under said paragraph in lieu of its rights under paragraph (c) below;
(c) Whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a) or paragraph (b)
above with respect to the Aircraft, Lessor, by written notice to Lessee
specifying a payment date may cause Lessee to pay to Lessor, and Lessee shall
pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty, any installment of Basic
Rent with respect to the Aircraft due on or before such payment date plus an
amount equal to all amounts of Basic Rent to be paid during the balance of the
Term, together with interest at the Overdue Rate on such amount from such
payment date specified pursuant to this paragraph (c) to the date such amount is
actually received by Lessor in cash;
(d) In the event Lessor, pursuant to paragraph (b) above, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under paragraph (c)
above with respect to the Aircraft, may, if it shall so elect, cause Lessee to
pay Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent for the Aircraft due after the date on which such sale occurs but in
addition to any installment of Basic Rent for this Aircraft due on or up to the
date on which such sale occurs), the amount of any deficiency of the net
proceeds of such sale below the Stipulated Loss Value of the Aircraft,
determined as of the date of such sale, together with interest at the Overdue
Rate on the amount of such deficiency from the date as of which such Stipulated
Loss Value is determined to the date such amount is actually received by Lessor
in cash; or
(e) Rescind this Lease as to the Aircraft or exercise any other
right or remedy which may be available under Applicable Law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
the breach hereof. In addition, Lessee shall be liable for any and all
Supplemental Rent due hereunder before or after any termination hereof,
including all costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by reason of the occurrence of any Event of Default or
the exercise of Lessor's remedies with respect thereto including all costs and
expenses incurred in connection with the return of the Airframe or any Engine in
accordance with the terms of Section 9 hereof or any appraisal of the Aircraft.
No remedy referred to in this Section 14 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity, including, without
limitation, those remedies set forth in Article 2A-523(1) of the Uniform
Commercial Code; and the exercise or beginning of exercise by Lessor of any one
or more of such remedies shall not preclude the simultaneous or later
-41-
exercise by Lessor of any or all such other remedies. No express or implied
waiver by Lessor of any Event of Default hereunder shall in any way be, or be
construed to be, a waiver of any future or subsequent Event of Default.
SECTION 15. INDEMNITIES.
15.1. GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.
(a) For the purposes of this Lease, "Claims" shall mean any and all
liabilities (including strict or absolute liability and costs, actions or suits
and all legal proceedings whether civil or criminal, fines and other sanctions,
which may be imposed on, incurred by, suffered by, or asserted against Lessor
its successors and assigns and the officers, directors, agents, partners and
employees of Lessor, its successors and assigns, and in addition if Lessor is a
trustee under any trust, the beneficiaries of any such trust and its or their
officers, directors, agents, partners and employees, their successors and
assigns (individually, an "Indemnified Person" for purposes of this Section
15.1) and, except as otherwise expressly provided in this Section 15.1, shall
include all reasonable costs, disbursements and expenses (including attorneys'
fees and expenses) of an Indemnified Person in connection therewith or related
thereto.
(b) Lessee agrees to indemnify, defend and hold harmless each
Indemnified Person against Claims resulting from, arising out of, or related to:
(i) the operation, possession, use, non-use, maintenance, storage,
overhaul, testing or disposition of the Aircraft, Airframe or
any Engine, or any engine used in connection with the
Airframe, or any Part or part thereof by Lessee or any other
Person whatsoever, whether or not such operation, possession,
use, non-use, maintenance, storage, overhaul or testing is in
compliance with the terms of the Lease including, without
limitation, Claims for death, personal injury or property
damage or other loss or harm to any Person whatsoever,
including, without limitation, any passengers, shippers or
other persons wherever located, and Claims relating to any
laws, rules or regulations, including, without limitation,
environmental control, noise and pollution laws, rules or
regulations;
(ii) the sale, purchase, acceptance, rejection, delivery,
condition, repair, modification, servicing, rebuilding,
airworthiness, performance, nondelivery, sublease,
merchantability, fitness for use, substitution or replacement
of the Airframe, an Engine or part under the Lease, or other
transfer of use or possession of the Aircraft, Airframe,
Engine or Part, and registration of the Aircraft, Airframe or
any Engine, including, without limitation, latent and other
defects, whether or not discoverable; and
-42-
(iii) any breach of or failure to perform or observe, or any other
non-compliance with, any covenant or agreement to be
performed, or other obligation of Lessee under any Lease
Document.
(c) An Indemnified Person shall notify Lessee of any Claim as to
which indemnification is sought. Lessee shall have the right to investigate and
the right to defend, and with the prior written consent of such Indemnified
Party, such consent not to be unreasonably withheld, compromise any Claim for
which indemnification is sought under this Section 15.1, and the Indemnified
Person shall cooperate with all reasonable requests of Lessee in connection
therewith: provided that at such time no Event of Default shall have occurred
and be continuing. In discharging its obligations, under this Section 15.1
Lessee agrees to utilize counsel reasonably acceptable to such Indemnified
Person. An Indemnified Person may participate at its own expense in any judicial
proceeding controlled by Lessee pursuant to the preceding provisions, and such
participation shall not constitute a waiver of the indemnification provided in
this Section 15.1. Nothing contained in this Section 15.1(c) shall be deemed to
require an Indemnified Person to contest any Claim or to assume responsibility
for or control of any judicial proceeding with respect thereto.
(d) In the event Lessee is required to indemnify any Indemnified
Person under this Section 15.1, Lessee shall pay to such Indemnified Person an
amount which, after deduction of all taxes actually required to be paid by such
Indemnified Person in respect of the receipt of such amount under the Applicable
Laws of any government or taxing jurisdiction, shall be equal to the amount of
the indemnification required.
(e) Lessee hereby waives and releases any Claim now or hereafter
existing against any Indemnified Person arising out of death or personal injury
to personnel of the Lessee, loss or damage to property of Lessee, or the loss of
use of any property of Lessee, which may result from or arise out of the
condition, use or operation of the Aircraft during the Term, including without
limitation any latent or patent defect whether or not discoverable unless caused
by the negligence or willful misconduct of Lessor, its employees or agents or on
the part of any Indemnified Person.
(f) The general indemnification provisions of this Section 15.1 are
not intended to waive or supersede any specific provisions of this Lease to the
extent such provisions apply to any Claim.
15.2. TAXES AND OTHER CHARGES.
(a) Lessee shall pay, indemnify and hold Lessor harmless from all
Taxes which relate to the leasing of the Aircraft pursuant hereto which may be
levied or assessed against, or imposed on Lessor, the Aircraft or any Part or
part thereof upon or with respect to or as a result of (i) the interest of
Lessee or Lessor in the Aircraft, (ii) any Rent, (iii) this Lease or the
interest of Lessee or Lessor hereunder, (iv) the manufacture, purchase,
delivery, leasing, operation, return, possession, use, occupancy, installation,
construction, maintenance, repair, renewal
-43-
or modification of the Aircraft, the Airframe, the Engines, the Parts or any
part of any of the foregoing, (v) receipts from the Aircraft, or (vi) the
earnings arising from the possession, use or occupancy thereof. Without
limitation of the foregoing, Lessee shall also pay and discharge, as and when
due and payable without penalty, all Taxes which may be levied or assessed
against or payable by Lessee or Lessor on account of the ownership, leasing, or
use of the Aircraft. Notwithstanding the foregoing provisions of this Section
15.2(a), Lessee shall not be required to pay any Tax levied or based on Lessor's
net income, profits or gains and imposed on Lessor by any taxing jurisdiction in
which Lessor is subject to such tax solely by reason of activities unrelated to
the acquisition, ownership, financing, installation. construction, leasing or
use of the Aircraft unless any such Tax or a portion thereof is imposed or
levied upon or assessed against Lessor in substitution for or in place of any
other Tax required to be paid by Lessee pursuant to this Section 15.2.
(b) Lessee shall furnish to Lessor, upon Lessor's written request,
proof of the payment of any such Tax which is payable by Lessee pursuant to
Section l5.2(a).
(c) Whenever the term "Lessor" is used in this Section 15.2, such
term shall include every Indemnified Person, Lessor, its successors,
transferees, assigns and partners, and if any Lessor is a trust, the beneficiary
and the owner of such trust and the partners of each such beneficiary and owner.
In addition, the indemnities in this Section 15.2 shall apply to any Taxes which
at any time prior to or during the Term may be levied or assessed against, or
imposed on, Lessor, Lessee, the Aircraft or any part thereof upon or with
respect to or as a result of any of the items described in the clauses (i)
through (vi) of the first sentence of Section 15.2(a) and the second sentence of
Section 15.2(a).
15.3. CONTINUING INDEMNIFICATION. The agreements and indemnities contained
in this Section 15 shall survive the end of the Term.
SECTION 16. TRANSFER, ASSIGNMENT AND SUBLEASE.
16.1. ASSIGNMENT OR ENCUMBRANCE BY LESSOR. Lessor may, without notice to
or the consent of Lessee, at its expense sell the Aircraft or assign any of its
rights hereunder whether as collateral security or otherwise, subject only to
the condition that any such assignment or security interest be expressly made
subject to Lessee's rights under Section 4 hereof and provided that such
assignment shall not materially increase the aggregate financial exposure of
Lessee under this Lease. In connection with any such assignment, Lessee further
agrees to take all actions as may be reasonably requested by Lessor to secure
such assignee's interest, including without limitation: (i) indemnifying any
assignee to the same extent as Lessor under Section 15 hereof; (ii) adding any
assignee as additional insureds and loss payees to all insurance policies so
naming the Lessor in accordance with Section 11 hereof; (iii) executing,
recording and filing all consents, agreements, certificates, financing
statements, opinions and other documents or instruments as may be reasonably
necessary or desirable to recognize, evidence, secure or perfect any assignees
ownership or security interest in the Aircraft and this Lease; (iv) permit
-44-
the Liens created by security interests granted pursuant hereto: and (v) to
recognize all rights of such any assignee to exercise any and all rights of
Lessor hereunder.
16.2. SUBLEASE OF AIRCRAFT OR ASSIGNMENT BY LESSEE. Without the prior
written consent of Lessor, such consent not to be unreasonably withheld, Lessee
may not sublease of the Aircraft, including the Airframe or any of the Engines
to any person other than a Guarantor. LESSEE MAY NOT WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR ASSIGN TO ANY OTHER PERSON THE AIRCRAFT OR ANY OF LESSEE'S
RIGHTS OR OBLIGATIONS HEREUNDER.
16.3. CONSOLIDATION, MERGER OR TRANSFER BY LESSEE. Lessee shall not,
without the prior written consent of Lessor, consolidate with or merge into any
other corporation or convey, transfer or lease all or substantially all of its
assets as an entity to any Person.
16.4. NONRECOURSE AS TO TRUSTEE. Neither the Lessor nor any entity acting
as successor trustee shall be personally liable for, or for any loss in respect
of, any of the statements, representations, warranties, agreements, actions,
failures to act or obligations of Lessor hereunder; Lessee hereby agrees to look
solely to the trust estate of the owner trust created by the trust agreement
pursuant to which the Aircraft and this Lease are held by Lessor ("Trust") in
the event of any default by Lessor of its obligations hereunder or otherwise.
SECTION 17. OPTION TO PURCHASE
Provided no Event of Default has occurred and is continuing, Lessee upon
not less than 90 days prior written notice to Lessor may purchase the Aircraft
effective as of the last day of the Basic Term for a purchase price equal to
$1,400,000. All Taxes, levied or assessed on the transfer of title pursuant to
Lessee's exercise of its option to purchase shall be for the account of Lessee.
Lessor shall retain the Security Deposit and on the last day of the Basic Term
Lessor shall transfer title to the Aircraft and the Reserves then held by Lessor
to Lessee or its designee against Lessor's receipt in good funds of $1,400,000
less the Security Deposit then held by Lessor. Upon the transfer of title to the
Aircraft, Lessor shall warrant to Lessee that it holds good and marketable title
to the Aircraft, free and clear of all liens and encumbrances placed thereon by
Lessor but otherwise that title is transferred "AS IS" and "WHERE IS" without
additional warranty of any kind. Lessee agrees to provide the insurance
specified in Section 11.3 for period of two years following the transfer of
title to the Aircraft.
SECTION 18. NOTICES.
Unless otherwise specifically provided herein, all notices required or
permitted by the terms hereof shall be in writing. Any written notice shall
become effective the earlier of when received or five days after the deposit of
such notice by first class airmail (or its equivalent in the United Kingdom).
Any written notice shall be sent by mail (as specified in the preceding
sentence) or sent in the form of a facsimile
-45-
message, or by overnight delivery service or delivered by hand. Any written
notice shall be addressed as follows:
If to Lessor:
c/o Equis Financial Group Limited Partnership
98 North Washington Street
Boston, MA 02114, U.S.A.
Attn: Vice President Aircraft Management
Fax:(617) 523-1410
If to Lessee:
c/o T.B.G. Airways Limited Stansted Airport
Stansted, Essex CM24 lAF, U.K.
Attention: G. Thornton
Fax:44-1279-681482
Such persons and addresses may be changed, from time to time, by means of a
notice given in the manner provided in this Section 18.
SECTION 19. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make
any payment of Rent required to be made by it hereunder, or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment or perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement (including reasonable attorneys' fees), as the case may be, together
with interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 20. MISCELLANEOUS.
20.1. FEDERAL BANKRUPTCY CODE. To the extent provided thereby (or to the
fullest extent it may lawfully so agree, whether or not provided thereby) Lessee
hereby agrees in accordance with 11 U.S.C. Section 1110, or any superseding
statute, as amended from time to time, that the title of Lessor to the Aircraft
and any right of Lessor to take possession of such Aircraft in compliance with
the provisions of this Agreement shall not be affected by the provisions of 11
U.S.C. Sections 362 or 363, or other analogous part of any superseding statute,
as amended from time to time.
20.2. WAIVERS, HEADINGS. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
-46-
writing signed by Lessor and Lessee or their respective successors and permitted
assigns. The headings contained herein are for convenience and reference only
and are not intended to define or limit the scope of any provisions of this
Lease.
20.3. COUNTERPARTS. This Lease may be signed in one or more counterparts
with the same effect as if the signatures to each counterpart were upon a single
instrument.
20.4. AGREEMENT TO LEASE. This Lease shall constitute an agreement to
lease, and nothing contained herein shall be construed as conveying to Lessee
any right, title or interest in any Aircraft except as a lessee only. In
recognition of the fact that a court of competent jurisdiction could determine
that this Lease constitutes a "lease intended as security" under applicable law
(including under Section 1-201(37) of the Uniform Commercial Code) Lessee hereby
grants to Lessor to secure Lessee's performance of its obligations under this
Lease a first priority security interest in the Aircraft and all replacements,
substitutions accessions thereto and proceeds (cash and non-cash) thereof,
including the proceeds of all insurance policies on the Aircraft. Lessee agrees
that, with respect to the Aircraft, Lessor shall have all the rights and
remedies of a first priority secured party under the UCC.
20.5. GOVERNING LAW. This Lease has been delivered in the Commonwealth of
Massachusetts and shall in all respects be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, including all
matters of construction, validity and performance but without giving effect to
its choice of law provisions and including Article 2A of the Uniform Commercial
Code in effect in the Commonwealth of Massachusetts, Lessor and Lessee intend
that this Lease be characterized as a "finance lease" within the meaning of
Article 2A-103(1)(g), whether or not each requirement of the definition thereof
has been technically or strictly met, and this Lease is to be so construed if
permitted by law.
20.6. BENEFIT AND BINDING EFFECT. The terms and provisions of this Lease
shall inure to the benefit of and be binding on Lessor its successors and
assigns and Lessee and its successors and permitted assigns.
20.7. FURTHER ASSURANCES. Lessor and Lessee shall, from time to time, do
and perform such other and further acts and execute and deliver any and all such
other and further instruments as may be required by law or reasonably requested
by the other party to establish, maintain and protect the respective rights and
remedies of the other party and to carry out the intent and purpose of this
Lease. In furtherance of and not in limitation of the foregoing and
notwithstanding any breach or alleged breach by Lessor of its obligations
hereunder, Lessee agrees that unless Lessee has exercised its rights under
Section 17 hereof upon the expiration or earlier termination of this Lease to
promptly execute upon Lessor s request a lease termination certificate or
similar instrument in a form suitable for recordation with the IAA.
20.8. CAPITALIZED OR BOLDFACE PROVISIONS. Capitalized or boldfaced items
in this Agreement are conspicuous, in writing and specific. Lessee understands
all
-47-
such items and has read, understood and concurred in all Sections of this
Agreement.
20.9. VENUE. Lessor and Lessee hereby agree that any legal action or
proceeding with respect to this Lease, or to enforce any judgment obtained
against the Lessee, may be brought in the courts of the Commonwealth of
Massachusetts, in the United Stated federal courts in the Commonwealth of
Massachusetts or in the courts of any other appropriate jurisdiction as Lessor
may elect, and Lessee hereby irrevocably submits to such jurisdiction. In
addition, with respect to any action or proceeding within the jurisdictions of
the courts of the Commonwealth of Massachusetts and of the United States federal
courts in the Commonwealth of Massachusetts, the Lessee hereby irrevocably
consents to the service of process out of said Massachusetts or United States
courts in any such action or proceeding by the mailing thereof by United States
registered mail to it at its address set forth in Section 18 hereof.
20.10. ENTIRE AGREEMENT. This Agreement (together with all schedules and
attachments hereto) constitutes the entire agreement between Lessor and Lessee.
[The remainder of this page left intentionally blank.]
-48-
Lease Agreement (MSN1024) dated
as of January 31, 1997
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement as
of the date first set forth above.
LESSOR:
By: James F. Livesey
-----------------------------
Title: VICE PRESIDENT
-----------------------------
LESSEE:
By:
-----------------------------
Title: Managing Director
-----------------------------
THIS LEASE IS COUNTERPART NO. 1 OF THREE SERIALLY NUMBERED ORIGINAL
EXECUTED COUNTERPART COPIES OF THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS
LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART MARKED COUNTERPART NO.
1.
-49-
EXHIBIT A
DESCRIPTION OF AIRCRAFT
Model Serial
Manufacturer Configuration Number
- ------------ ------------- ------
Lockheed L-1011-1 1024
Martin
Corporation
Number and Type Serial
of Engines Number
- ---------- ------
3 Rolls Royce 10524
RB211-22B 10209
10154
A-1
EXHIBIT B
to
Lease Agreement (MSN1024)
AIRCRAFT DOCUMENTS
A. CERTIFICATES
1. IAA Certificate of Airworthiness (on board aircraft), or returned to the
Lessor if Aircraft is delivered to another country.
2. Current Certificate of Registration (on board aircraft), or proof of
deregistration of the Aircraft to be submitted to the authorities in
subsequent country of registration.
3. Noise Certificate affirming that the aircraft meet Chapter III noise
standards.
4. Radio Certificate affirming the current approved radio equipment is
installed.
B. AIRCRAFT STATUS SUMMARIES
1. Signed statement giving total hours flown, total landings, and the time
and landings since the last major check, average utilization stated as
average Hours per month and average Cycles per month.
2. IAA Regulation Compliance Summary.
3. Record for the most recent 90 days of operation showing Hours and
Cycles.
4. Summary of Airworthiness Directives accomplished on the aircraft,
engines and appliances including the date, time and/or cycles and the
method of accomplishment.
5. Summary of all Service Bulletins accomplished to aircraft, engines and
appliances including the date, time and/or cycles and the method of
accomplishment.
6. A record of the Supplemental Structural Inspections (SSID) accomplished,
including a copy of the approved document that authorizes the SSID
program.
7. A record of the Corrosion Prevention Control Program (CPCP)
accomplished, including a copy of the approved document that authorizes
the CPCP program.
B-1
8. A record of Lessee modifications, with reference documents issued by the
Lessee that authorize the modifications.
9. A record of all alterations and repairs made beyond the Structural
Repair Manual including the date, Hours and/or Cycles when the repair
was done, and reference to the document used to accomplish the repair
including Designated Engineering Representative Approval or equivalent.
10. Signed Statement with Respect to Accident/Incident/Major Damage to
Aircraft
11. List of Repetitive Inspections Resulting from Existing Known Aircraft
Defects (including inspection manhour requirement and interval)
12. List and Status of Life Limited Components
13. Check/Inspection Status
14. A current summary and status of all time/cycles controlled components,
showing time and type of maintenance - "Hard Time", "On-Condition" or
"Condition Monitored" and the time and/or cycles since the last overhaul
or major shop visit.
15. Serialized On-Condition/Condition Monitored Components Inventory of
Installed Units, if available.
C. AIRCRAFT MAINTENANCE RECORDS
Airframe inspection, maintenance, modification, and repair documents with
maintenance and/or inspection signatures (as required) and description of
work done.
1. Last "A", "B", and "Segment C" Checks (or equivalents). (In the event
that a check is performed in phases, all phases necessary to constitute
a complete block check are required. In the event that check content
varies by multiples of the check, all multiples necessary to constitute
a complete cycle are required.)
2. Airworthiness Directive, Service Bulletin and Modification compliance
documents including engineering orders, drawings, shop cards, etc., as
necessary to establish method of compliance, and approval authority.
3. Documentation of Major Repairs and Alterations including engineering
orders, drawings, Supplemental Type Certificates, Master Change Notice,
etc., as necessary to define work done, certification basis, and
approval authority.
B-2
4. Aircraft weigh records, including cabin layout and equipment list.
D. ENGINE RECORDS (for each engine)
1. Signed Statement giving Engine Total Hours and Cycles and Time Since
Last Shop Visit as of Time of Delivery
2. Engine Airworthiness Directive Applicability and Compliance Report
(giving date, time, method of compliance and status)
3. Service Bulletin Compliance Report
4. List of Operator Modifications Incorporated, if any, with Accomplishment
Instructions
5. List of Repetitive Inspections Resulting from Existing Known Engine
Defects (including inspection manhour requirement and interval)
6. List and Current Status of Life Limited Components
7. Check/Inspection Status
8. List and Status of Time Controlled Components and Record of Last
Overhaul
9. Serialized On-Condition/Condition Monitored Components List of Installed
Units, if available
10. Engine Build Specifications
11. Repair, overhaul and inspection documents
12. Documents necessary to establish current total time in service on all
life-limited parts.
13. Test Cell Records for last test
E. APU RECORDS
1. APU Log Book (or equivalent documentation)
2. Airworthiness Directive Applicability and Compliance Report
3. Manufacturer Service Bulletin Compliance Report
4. List and Current Status of Life Limited Components
B-3
5. List and Status of Time Controlled Components
6. Serialized On-Condition/Condition Monitored Components Inventory of
Installed Units, if available
7. Repair, overhaul and inspection documents including FAA Forms 337
F. COMPONENT RECORDS
1. Time Controlled Component Historical Records
2. Installation records and serviceable tags for Serialized
On-Condition/Condition Monitored Components, if available
G. MANUALS
1. IAA Approved Airplane Flight Manual (paper copy)
2. Weight and Balance Manual Chapter 1 (paper copy)
3. Weight and Balance Report Chapter 2 (paper copy)
4. Weight and Balance Manual (paper copy)
5. Maintenance Manual (microfilm)
6. Wiring Diagram Manual (microfilm)
7. Wire Lists and Hookup Charts (microfilm)
8. Power Plant Buildup Manual (paper copy)
9. Illustrated Parts Catalog (microfilm)
10. Structural Repair Manual (microfilm)
11. Flight Crew Operating Manual (paper copy)
12. Any supplements to the manual set forth in items 1 and 3 through 10
above, if available
13. Copy of Aircraft operations specs for bridging the Maintenance Program
to the next Lessee.
14. Fueling Manual.
B-4
H. MISCELLANEOUS TECHNICAL DOCUMENTS
1. Interior Configuration Layout Drawing
2. Aircraft Readiness Log (manufacturer delivery document), if available.
3. Master reference copies of Aircraft operators Engineering Orders and
repairs applicable to the Aircraft, airframe, engines and appliances, to
include drawings, data packages, and approval authority
4. Master reference copies of Operator Unique Component Maintenance Manuals
which have been altered by the operator as allowed under the authority
granted to operators with a continuous airworthiness maintenance and
inspection program, if available.
5. Master reference copies of any operator obtained master change Service
Bulletins for the Aircraft, airframe, engine and appliances, if
available.
B-5
EXHIBIT C
to
Lease Agreement (MSN1024)
ACCEPTANCE CERTIFICATE
(DELIVERY)
G.P. Aer Lease Limited ("Lessee") hereby acknowledges that on the __ day
of 1997, Investors Asset Holding Corp., not in its individual capacity but
solely as trustee of the AFG/Cathay Pacific 1989-1 Trust ("Lessor") delivered
for inspection to Lessee one (1) Lockheed L-1011-1 Airframe, bearing
Manufacturer's Serial Number 1024, together with three (3) Rolls Royce RB211-22B
Engines, bearing manufacturer's serial numbers 10524, 10209 and 10154, together
with all instruments, parts, and other equipment attached hereto or installed
therein ("Parts"), in accordance with the Lease Agreement between Lessor and
Lessee, dated as of ______________ 1997 (the "Lease").
Lessee hereby further acknowledges that: (i) it did conduct an inspection
of the aforementioned Airframe, Engines, and Parts; (ii) the same are acceptable
to it and that the conditions for delivery and acceptance as required under the
Lease as set forth on Schedule 1 hereto have been met or waived; and (iii) the
execution and delivery of this Acceptance Certificate hereby constitutes
irrevocable acceptance of the Aircraft for lease under the Lease.
Notwithstanding the foregoing, but not in derogation of the unconditional
acceptance of the Aircraft for lease as set forth above, the items listed on
Schedule 2 to this Acceptance Certificate (Delivery) are not in the condition
required by the Lease and Lessor hereby agrees that the expense of correcting
such items shall be for the account of Lessor.
IN WITNESS WHEREOF, this Acceptance Certificate has been executed and
delivered at Marshall of Cambridge Aerospace Limited, The Airport, Cambridge,
England, this __ day of _________, 1997.
INVESTORS ASSETS HOLDING G.P. AER LEASE LIMITED (Lessee)
CORP., as trustee (Lessor)
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
C-1
SCHEDULE 1
TO
ACCEPTANCE CERTIFICATE
(DELIVERY)
Aircraft Status
Just Prior to Delivery Date
1. AIRFRAME SEGMENT "C" CHECK:
Interval:
Time Remaining:
2. LANDING GEAR OVERHAUL:
Interval:
Time Remaining:
Hrs. Left Gear
Hrs. Right Gear
Hrs. Nose Gear
3. ENGINES:
Interval: On Condition
Hot Section Inspection ("HSI"):
S/N Time Since HSI* Cycles Since HSI*
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
* Times and cycles since Acceptance Borescope
Interval: On Condition
Cold Section Inspection ("CSI"):
C-2
S/N Time Since CSI* Cycles Since CSI*
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
* Times and cycles since Acceptance Borescope
4. Engines Time Remaining to First Restriction:
Engine S/N: ___ Limiter:
Hours: ___ ___
Cycles: ___ ___
Engine S/N: ___ Limiter:
Hours: ___ ___
Cycles: ___ ___
Engine S/N: ___ Limiter:
Hours: ___ ___
Cycles: ___ ___
5. Auxiliary Power Unit:
On Condition
Time Since Last APU _____
Heavy Shop Visit:
Date of Last APU ______
Heavy Shop Visit:
C-3
SCHEDULE 2
TO
ACCEPTANCE CERTIFICATE
(DELIVERY)
DISCREPANCIES (Append additional pages as required and initial each such page):
FOR: INVESTORS ASSET HOLDING FOR: G.P. AER LEASE LIMITED
CORP., as trustee of the AFG/
Cathay Pacific 1989-1 Trust
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
------------------------------ ------------------------------
C-4
EXHIBIT D
to
LEASE AGREEMENT (MSN1024)
ACCEPTANCE CERTIFICATE
(RETURN)
Investors Asset Holding Corp., not in its individual capacity but solely
as trustee of the AFG/Cathay Pacific 1989-1 Trust ("Lessor") hereby acknowledges
that on this _____ day of ____________, 1998 G.P. Aer Lease Limited ("Lessee")
delivered for inspection to Lessor one (1) Lockheed L-1011-1 Airframe, bearing
Manufacturer's Serial Number 1024, together with three (3) Rolls Royce RB211-22B
Engines, bearing manufacturer's serial numbers 10524, 10209 and 10154, together
with all instruments, parts, and other equipment attached hereto or installed
therein ("Parts"), in accordance with the Lease Agreement between Lessor and
Lessee, dated as of ______________ __, 1997 (the "Lease").
Lessor hereby further acknowledges that: (i) it did conduct an inspection
of the aforementioned Airframe, Engines, and Parts; and (ii) the same are
acceptable to it and that the conditions for redelivery and acceptance as
required under the Lease as set forth on Schedule 1 hereto have been met or
waived. Notwithstanding the foregoing, the items listed on Schedule 2 to this
Acceptance Certificate (Return) are not in the condition required by the Lease
and Lessor hereby agrees that the expense of correcting such items shall be for
the account of Lessor.
IN WITNESS WHEREOF, this Acceptance Certificate has been executed and
delivered at ___________________________________ this __ day of
_________________ 1998.
INVESTORS ASSETS HOLDING G.P. AER LEASE LIMITED (Lessee)
CORP., as trustee (Lessor)
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
D-1
SCHEDULE 1
TO
ACCEPTANCE CERTIFICATE
(RETURN)
Aircraft Status
Just Prior to Return
1. AIRFRAME SEGMENT "C" CHECK:
Interval:
Time Remaining:
2. LANDING GEAR OVERHAUL:
Interval:
Time Remaining:
Hrs. Left Gear
Hrs. Right Gear
Hrs. Nose Gear
3. ENGINES:
Interval: On Condition
Hot Section Inspection ("HSI"):
S/N Time Since HSI* Cycles Since HSI*
- -------------------------------------
- -------------------------------------
- -------------------------------------
*Times and cycles since Acceptance Borescope
Interval: On Condition
D-2
Cold Section Inspection ("CSI"):
S/N Time Since CSI* Cycles Since CSI*
- -------------------------------------
- -------------------------------------
- -------------------------------------
* Times and cycles since Acceptance Borescope
4. Engines Time Remaining to First Restriction:
Engine S/N: ___ Limiter:
Hours: ___ ___
Cycles: ___ ___
Engine S/N: ___ Limiter:
Hours: ___ ___
Cycles: ___ ___
Engine S/N: ___ Limiter:
Hours: ___ ___
Cycles: ___ ___
5. Auxiliary Power Unit:
On Condition
Time Since Last APU _____
Heavy Shop Visit:
Date of Last APU ______
Heavy Shop Visit:
D-3
SCHEDULE 2
TO
ACCEPTANCE CERTIFICATE
(RETURN)
Discrepancies (Append additional pages as required and initial each such page):
FOR: INVESTORS ASSET HOLDING FOR: G.P. AER LEASE LIMITED
not in its individual capacity
but solely as trustee of the AFG/
Cathay Pacific 1989-1 Trust
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
------------------------------ ------------------------------
D-4
EXHIBIT E
to
Lease Agreement (MSN1024)
POSSIBLE CATHAY ITEMS
1. APU Air Inlet Act s/n 750207 TBO
2. APU Pressure Switch CX2808
3. APU Fuel Pump - PE 1224
4. APU FCU A15089
5. APU Inlet Guide- EB61176
6. APU Surge Valve - HM62658
7. APU Surge Controller - DK40984
8. APU Shock Switch - CG60206
9. APU Load Compress Controller
10. No. 2 Engine Fuel Pump
11. No. 1 Eng Misc Actuator - 1093
12. No. 3 Eng Misc Actuator - 1116
13. No. 1 P4/PF Press Ratio Switch
14. No. 2
15. No. 1 Eng Press Reg/SO Valve
16. No. 2 Eng Press Reg/SO Valve
17. No. 3 Eng Press Reg/SO Valve
18. No. 3 Eng Air Starter
OTHER ITEMS
1. Device Emergency Descent #2
p\n 379103-15
2. " "#3
3. " "#4
4. " "#5
5. Assy Slideraft Hose L1
6. " "R1
7. " "R2
8. " "L3
9. " "L2
E-1
10. Desalter Slideraft R1
p\n MILD5531E
11. Kit Slideraft First Aid R2
p\n 56-01-0014
12. Unit Power Slideraft R2
p\n p4-01-0014-110
13. Assy Slideraft Hose L4
p\n D17469-507
14. Cylinder Slideraft Air R4
p\n D17468-523
15. Pack survival o/head R4
p\n L25-6007
16. " " R3
17. Extinguisher #2\apu
p\n 895752-01
18. Tape DFDR readout
p\n MS313101
19. MLG CYL Ring Grove Insp L\H&R\H
20. H20 ster & purif Pot Sys
(Expect filter need changing)
Filter p\n AD9410F17 or 1-3811-3-0028
21. Disk Rotor LP Comp #1
p\n UL19630
22. Pump Fuel Eng #2
p\n PAC1O1MK8
23. Aux Battery Cap Test
24. No. RH Door Electrical
25. ARU Starts when mixture Power Switches on
26. UFG Smoke detector Test inop
27. No. 4 RH Cabin Crew Emergency Torch Missing
28. CVR ULB Battery Cap Test
29. FDR ULB Battery Cap test due
30. Avionic Air Fwd Fan not running
31. Capts RDDMI LH Selector (VOR/ADF) button defective
32. Row 54 Seat K-Seat Back Pocket Bungee u\s
33. Seat 56G Recline u\s
34. Seat 55G Life vest expries
35. Seat 55E Life Vest expries
36. Seat 55A Seat Cover heavily stained
37. Seat 54B Recline fails to retract
38. Seat 53A - seat cover stained
39. Seat 53B Life vest expires
E-2
40. Seat 51B Life Vest expires
41. No. 2 RH MED safety strap broken
42. NLG retract Jack Waring please investigate
43. C3 FRT Door will not close electrically
44. External water service point drain valve leaking
45. Crack in HSC canted
bulkhead BS1212(RH)
46. Seat rows 38 thru 42 (centre) removed for access for repair in item 63
(HGI63)
47. 2 off centre RH Floor Boards removed for access for repair in item 63 (Row
38-42)
48. Reconnect all Electronic Sort units and check function multiplex System
49. FAK at MED No. 1 LH expires
50. FAK at MED No. 2 LH Expires
51. FAK at MED No. 4 LH expire
52. FAK at MED No. 5 LH exprie
53. MESC external access door craked at bottom edge (1 1/2" long)
54. APU Aft isolation valve slow to close
55. RH hand lift lower RH well section of material adrift causing lift to
deflect at down position
56. Seat 45C life Vest expire
57. " 40A
58. " 40B
59. " 38C
60. " 37C
61. " 36B
62. " 50G
63. " 47G
64. " 46E
65. " 46F
66. " 39D
67. " 39F
68. " 38E
69. " 37D
70. " 35D
71. " 35K
72. " 44J
73. " 32G
74. " 30A
75. " 11F
76. Seat 11C recline u\s
77. No. 1 RH MED - operation intermittent
78. No. 2 RH MED - operation intermittent
79. No. 5 MED - attendants life vest exprie
E-3
80. No. 4 MED LH - Firec weight check
81. Ref card no. 6200-03044 cnk operation of basin heater when motor system
serviced check for leaks
82. Ref card no. 62-00-0250 a chk
83. RH ATT fuselage Panel to RH stabservd Mesh cracked (Panel 317CB)
84. LH Nose wheel tyre tread damaged - o\b side (1 50" missing)
85. "C" system reservoir well not hold pressure (after pumps turned off)
86. "C" system reservoir has drip\leak for Air Bleed with pressure on
87. 3 Eng exhause cone cracked (6") above previous repair
88. Light fuselage lower skin corrosion at FS850 area
89. Signs of HYD LEAK from lower rudder area
90. Seat 14A - Dado panel lens cracked
91. RHS Fwd w\robe Firex
92. No. 2 Engine Thrust Reversor Locked Out
93. Intermittant fault in Auto Pilot\drgs off
94. Rader is spokes on 1 & 2 needs check
95. Main RHS\LVS 1, 3 & 5 Brake units out of limits
E-4
EXHIBIT F
TO
LEASE AGREEMENT (MSN1024)
FORM OF BROKERS' LETTER OF UNDERTAKING
To: Investors Asset Holding Corp., as trustee
of the AFG/Cathay Pacific 1989-1 Trust
and
The persons named as additional insureds
in the Schedule hereto
Dear Sirs,
We confirm that insurances are in effect on and in respect of the Lockheed
L-1011-1 aircraft whose manufacturer's serial number is 1024 and whose
registration mark is [ ] (the "Aircraft") for the risks set out in the attached
Certificate of Insurance and that all premiums due at the date hereof in respect
of such insurance have been paid in full. We also confirm that those named in
the Schedule to this letter are named as additional or joint insured(s), as the
case may be, on the insurance policies evidenced in the attached Certificate of
Insurance for the period stipulated therein.
We further undertake:
1. to advise you in writing immediately of any material changes notified to
us which are proposed to be made in the terms of the insurance which
might adversely affect your interests or are inconsistent with the terms
of Section 11 of a Lease Agreement (MSN1024) dated January 31, 1997 made
between Investors Asset Holding Corp., as trustee, and G.P. Aer Lease
Limited (the "Lessee") (and not to effect any such changes without
giving you at least thirty (30) days prior written notice) and to notify
you subject to Automatic Termination Clause and the Amendment of Terms
Clause at least thirty (30) days prior to the expiry of these insurances
if we have not received renewal instructions from the Lessee and in the
event of our receiving
F-1
instructions to renew to advise you promptly of the details thereof:
2. to pay to IAHC without any set-off or deduction of any kind for any
reason, any and all proceeds from the physical damage insurances
collected from underwriters except as might be otherwise permitted in
the relevant Loss Payable Clause;
3. to advise you promptly in writing:
(a) if any underwriter or insurer cancels or gives notice of
cancellation of this insurance, or in the case of any non-renewal.
termination or other cancellation, at least thirty (30) days (except
that in respect of War and Allied Risks policies not less than seven
(7) days' prior written notice shall be given (subject to exceptions
uniformly provided in War and Allied Risk policies then available on
commercial reasonable terms)) before such cancellation is to take
effect as to any named insured;
(b) of any act of omission or of any event of which we have any
knowledge and which might invalidate or render unenforceable in
whole or in part this insurance.
The above undertakings are given:
(1) subject to our lien, if any, on the policies referred to above for
premiums due under such Policies in respect of the Aircraft (but no other
aircraft) and subject to underwriters' right of cancellation on default in
payment of such premiums, but we undertake to advise you immediately if
such premiums are not paid to us by the due date and to give you a
reasonably opportunity of paying such amounts of such premiums outstanding
before notification of non-payment of premiums to underwriters or
notification of cancellation on behalf of underwriters;
(2) subject to our continuing appointment for the time being as insurance
brokers to the Lessee and through whom any claim or claims shall be
collected from underwriters;
(3) in consideration of your approving us as brokers for the insurance on the
above Aircraft.
We also undertake for the consideration aforesaid to advise you immediately if
we cease to be insurance brokers to the Lessee.
F-2
This letter shall be governed and construed in all respects in accordance with [
] law.
Yours faithfully,
--------------------------------
Director
F-3
LEASE AGREEMENT (MSN1024)
ACCEPTANCE CERTIFICATE
(DELIVERY)
G.P. Aer Lease Limited ("Lessee") hereby acknowledges that on the 28th day
of April, 1997, Investors Asset Holding Corp., not in its individual capacity
but solely as trustee of the AFG/Cathay Pacific 1989-1 Trust ("Lessor")
delivered for inspection to Lessee one (1) Lockheed L-1011-1 Airframe, bearing
Manufacturer's Serial Number 1024, together with three (3) Rolls Royce RB211-22B
Engines, bearing manufacturer's serial numbers 10524, 10209 and 10154, together
with all instruments, parts, and other equipment attached hereto or installed
therein ("Parts"), in accordance with the Lease Agreement between Lessor and
Lessee, dated as of JANUARY 31, 1997 (the "Lease").
Lessee hereby further acknowledges that: (i) it did conduct an inspection
of the aforementioned Airframe, Engines, and Parts; (ii) the same are acceptable
to it and that the conditions for delivery and acceptance as required under the
Lease as set forth on Schedule 1 hereto have been met or waived; and (iii) the
execution and delivery of this Acceptance Certificate hereby constitutes
irrevocable acceptance of the Aircraft for lease under the Lease.
Notwithstanding the foregoing, but not in derogation of the unconditional
acceptance of the Aircraft for lease as set forth above, the items listed on
Schedule 2 to this Acceptance Certificate (Delivery) are not in the condition
required by the Lease and Lessor hereby agrees that the expense of correcting
such items shall be for the account of Lessor.
IN WITNESS WHEREOF, this Acceptance Certificate has been executed and
delivered at Marshall of Cambridge Aerospace Limited, The Airport, Cambridge,
England, this 28th day of April, 1997.
INVESTORS ASSETS HOLDING G.P. AER LEASE LIMITED (Lessee)
CORP., as trustee (Lessor)
By: James F. Livesey By:
-------------------------------- -----------------------------
Title: Vice President Title: Director
-------------------------------- -----------------------------
SCHEDULE 1
TO
ACCEPTANCE CERTIFICATE
(DELIVERY)
Aircraft Status
Just Prior to Delivery Date
1. AIRFRAME SEGMENT "C" CHECK:
Interval: 2 years
Time Remaining: 2 years
2. LANDING GEAR OVERHAUL:
Interval: 120 months
Time Remaining:
Hrs. Left Gear- Due date July 17, 2003
Hrs. Right Gear- Due date July 17, 2003
Hrs. Nose Gear - Due date July 17, 2003
3. ENGINES:
Interval: On Condition
Hot Section Inspection ("HSI):
S/N Time Since HSI* Cycles Since HSI*
10524 17 hours 5 cycles
10209 17 hours 5 cycles
10154 17 hours 5 cycles
* Times and cycles since Acceptance Borescope
Interval: On Condition
2
4. ENGINES TIME REMAINING TO FIRST RESTRICTION:
Engine S/N 10524 Limiter:
Hours: ___ ___
Cycles: 1520.8 L.P. Comp. Rotor Disk
Engine S/N 10209 Limiter:
Hours: ___ ___
Cycles: 1572 L.P. Comp. Stage 1.5
Engine S/N 10154 Limiter:
Hours: ___ ___
Cycles: 1567 L.P. Comp. Fan Blade
5. AUXILIARV POWER UNIT:
On Condition
Time Since Last APU 622 hours
Heavy Shop Visit:
Date of Last APU
Heavy Shop Visit: NK (Not known)
6. OTHER:
Aircraft TSN (Time Since New): 46,494.05 hours
CSN (Cycles Since New): 23,810
"Parts" on board specifically include (without limitation) complete sets
of galley equipment, life vests and life rafts.
3
SCHEDULE 2
TO
ACCEPTANCE CERTIFICATE
(DELIVERY)
DISCREPANCIES (Append additional pages as required and initial each such page):
The following items are to be actioned at the next suitable input.
WQCNA 008244 RH Wing Lwr Surface Inspection
008246 Vertical Stab Rear Spar Inspection
10825 Rudder Act. Attach Assy Terminating Action
10872 Wing Centre Sections Inspection
10885 RH ECS Bay Sidewall Terminating Action
FOR: INVESTORS ASSETS HOLDING FOR: G.P. AER LEASE LIMITED
CORP., as trustee of the AFG/
Cathay Pacific 1989-1 Trust
By: James F. Livesey By:
-------------------------------- -----------------------------
Title: Vice President Title: Director
-------------------------------- -----------------------------
As of April 28, 1997
4