AIRCRAFT LEASE AGREEMENT

 

 

CONTACTS - LESSOR

 

Primary Business Contact:

 

Kathleen Park, Vice President

C.I.T. Leasing Corporation

300 South Grand Avenue

10 th  Floor

Los Angeles, CA 90071, U.S.A.

Tel:  (213) 613-2532

Fax:  (213) 613-2566

e-mail:  kathleen.park@cit.com

 

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

CONTACTS - LESSEE

 

Primary Business Contact

 

Russell Ryan, Senior Director — Fleet Planning and Financial Products

Hawaiian Airlines, Inc.

3375 Koapaka Street, Suite G-350

Honolulu, Hawaii 96819

Tel:  +808-835-3022

Fax:  +808-835-3699

e-mail:  russell.ryan@hawaiianair.com

 

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

CONTENTS

 

Article			Page
1.	DEFINITIONS AND INTERPRETATION		1
2.	LEASE TERM; NATURE OF LEASE		2
	2.1.	Lease Term	2
	2.2.	Nature of Lease	2
3.	RENT		3
	3.1.	Agreement to Pay Rent	3
	3.2.	Basic Rent at Delivery	3
	3.3.	Supplemental Rent	3
	3.4.	Obligation to Perform Unconditional	3
4.	SECURITY DEPOSIT		4
	4.1.	Security Deposit Amount	4
	4.2.	Nature of Security Deposit	4
	4.3.	Application of Security Deposit	4
	4.4.	[Reserved]	4
	4.5.	Repayment of Security Deposit	4
5.	PAYMENTS		5
	5.1.	Lessor’s Account	5
	5.2.	Payments on Non-Business Days	5
	5.3.	Timing of Payments	5
	5.4.	Late Payment	5
	5.5.	Calculation of Interest and Prorating of other Payments	5
	5.6.	Payments in United States Dollars	5
	5.7.	Retention of Certain Payments	5
	5.8.	Application of Payments	6
6.	AIRCRAFT SPECIFICATION; LESSEE INVOLVEMENT WITH SELLER		7
	6.1.	Aircraft Specification	7
	6.2.	Lessee Involvement with Seller	7
7.	CONDITIONS PRECEDENT TO DELIVERY		9
	7.1.	Conditions Precedent to Lessor’s Performance	9
	7.2.	Conditions Precedent to Lessee’s Performance	9
8.	DELIVERY; TERMINATION FOR DELAY; EVENT OF LOSS PRIOR TO DELIVERY; RISK OF LOSS		11
FOLLOWING DELIVERY
	8.1.	Delivery Location and Timing	11
	8.2.	Delivery Subject to Seller Delivery	11
	8.3.	Termination for Delay	11
	8.4.	Seller’s Right to Terminate	12
	8.5.	Event of Loss to Aircraft Prior to Delivery	12
	8.6.	Lessee Acceptance of Aircraft	12
	8.7.	Risk of Loss to Aircraft following Delivery	12
	8.8.	Waiver of Remedies for Delay in Delivery	12
	8.9.	Seller Compensation for Delay	12
9.	LESSEE’S REPRESENTATIONS, WARRANTIES AND COVENANTS		13
	9.1.	Lessee’s Representations and Warranties	13
	9.2.	Application of Representations and Warranties; Survival	14
	9.3.	Lessee’s General Covenants	14
10.	LESSOR’S REPRESENTATIONS, WARRANTIES AND COVENANTS; DISCLAIMERS		16
	10.1.	General Representations and Warranties of Lessor	16
	10.2.	Covenant of Quiet Enjoyment	16

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

	10.3.	Disclaimer; Waiver of Warranties; Waiver of Remedies	16
	10.4.	Disclaimer and Waiver of Incidental, Consequential, Special and Punitive Damages	18
	10.5.	No Duty of Indemnitees To Inspect, Etc.	19
11.	GENERAL OPERATION OF THE AIRCRAFT		20
	11.1.	General Operation	20
	11.2.	Insured Operations	20
	11.3.	Carriage of Goods	20
	11.4.	Operational Expenses	21
	11.5.	Compliance with Laws	21
	11.6.	[Reserved]	22
12.	MAINTENANCE, MODIFICATION AND OPERATION OF THE AIRCRAFT		23
	12.1.	General	23
	12.2.	Accomplishment of Tasks, Repairs and Related Items	23
	12.3.	Information on Maintenance	23
	12.4.	Aircraft Documents in English Language	24
	12.5.	Originals	24
	12.6.	Performance of Maintenance	24
	12.7.	Alterations, Modifications and Additions	24
	12.8.	Replacement of Parts	26
	12.9.	Title to Parts	27
	12.10.	Temporary Replacement of Parts	28
	12.11.	Exchanging Parts	28
	12.12.	Temporary Attachment and Removal of Engines	28
	12.13.	Installation of Items of Equipment on Other Aircraft	30
	12.14.	Failure to Reinstall Engines and Items of Equipment on the Aircraft	30
13.	MAINTENANCE RESERVES		31
	13.1.	Maintenance Reserves	31
	13.2.	Discrepancies	31
	13.3.	Rights in Maintenance Reserves	31
	13.4.	Claims for Reimbursement - Timing	31
14.	SELLER’S AND MANUFACTURER’S WARRANTIES AND SUPPORT		33
	14.1.	Assignable Warranties	33
	14.2.	Reassignment; Assignment of Lessee Warranties	33
	14.3.	Warranty Claims	33
	14.4.	Assignment of Training, Product Support and Technical Assistance	33
15.	SUBLEASING AND WET LEASING		34
	15.1.	Subleasing	34
	15.2.	Wet Leasing	35
	15.3.	No Independent Subleasing of Items of Equipment	36
	15.4.	Expenses	36
	15.5.	Lessee Remains Liable	36
16.	REPORTING AND INSPECTIONS		37
	16.1.	Financial Reporting	37
	16.2.	Aircraft Utilisation and Other Reporting/Information	37
	16.3.	Further Information; Inspections	38
	16.4.	Technical Report Prior to Return of Aircraft	39
17.	REGISTRATION; PERFECTION OF OWNER’S TITLE; LIENS		40
	17.1.	Registration	40
	17.2.	Identification Plates	40
	17.3.	Aviation Authority Acknowledgment	40
	17.4.	Authorisation to Make Perfection Filings	40
	17.5.	Perfection of Title	40
	17.6.	Cape Town Convention	41

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

	17.7.	Permitted Liens	43
18.	GENERAL INDEMNITY		44
	18.1.	Scope	44
	18.2.	Lessee’s Release	44
	18.3.	Repayment	45
	18.4.	Payment	45
	18.5.	Exclusion	45
	18.6.	After-Tax Nature of Indemnity	45
	18.7.	Survival	45
19.	INSURANCE		46
	19.1.	Obligation to Insure	46
	19.2.	Liability Insurance	46
	19.3.	Contractual Liability Tail Coverage for Liability Insurance	46
	19.4.	Insurance Against Loss or Damage to the Items of Equipment	46
	19.6.	Requirements for All Insurance	47
	19.7.	Reports	48
	19.8.	Assignee of Lessor’s Interests	49
	19.9.	Failure to Insure	49
	19.10.	Lessor’s Right to Insure	49
	19.11.	Changes to Insurance Practices	49
	19.12.	AVN 67B	49
20.	LOSS AND DAMAGE TO THE AIRCRAFT AND ITEMS OF EQUIPMENT		51
	20.1.	Risk of Loss and Damage	51
	20.2.	Notification of Loss and Damage	51
	20.3.	Event of Loss — Aircraft/Airframe	51
	20.4.	Event of Loss — Engine or APU	52
	20.5.	Event of Loss — Landing Gear	53
	20.6.	Repairable Damage	54
	20.7.	Documents Loss	54
	20.8.	Application of Payments from Governmental Authorities	55
	20.9.	No Lessor Liability to Repair or Replace Following Delivery	55
21.	TAXES; TAX INDEMNITY		56
	21.1.	Indemnity	56
	21.2.	Tax Filings; Information	57
	21.3.	Payment of Taxes and Indemnities	57
	21.4.	Contest	58
	21.5.	Refunds; Tax Savings	59
	21.6.	Effect of Event of Default on Indemnitee Payment Obligations	60
	21.7.	Withholding Tax Exemption Documentation	60
	21.8.	Non-Party Indemnitees	60
	21.9.	Survival	60
22.	RETURN OF AIRCRAFT		61
	22.1.	Time and Place	61
	22.2	Condition	61
	22.3	Lessee’s Continuing Obligations	61
	22.4.	Legal Status Upon Return	62
	22.5.	Airport and Navigation Charges	62
23.	EVENTS OF DEFAULT		63
24.	LESSOR’S RIGHTS AND REMEDIES FOLLOWING AN EVENT OF DEFAULT		65
	24.1.	Lessor’s Rights Following an Event of Default	65
	24.2.	De-Registration	68
	24.3.	Present Value of Payments	68
	24.4.	Damages After Re-Lease or Sale	68

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

	24.5.	Remedies Cumulative	69
	24.6.	Lessor’s Exercise of Remedies	69
	24.7.	Application of Payments Following Default or Event of Default	69
	24.8.	Use of Termination Date	69
25.	ASSIGNMENT AND TRANSFER		70
	25.1.	No Assignment by Lessee	70
	25.2.	Transfer of Lessor’s Interests	70
	25.3.	Cooperation with Transfers	70
	25.4.	Financings	70
	25.5.	Cooperation with Financings	71
26.	LAW AND JURISDICTION		72
	26.1.	Governing Law	72
	26.2.	Consent to Jurisdiction	72
	26.3.	Process Agent and Service of Process	72
	26.4.	Jurisdiction and Forum	72
	26.5.	Waiver of Jury Trial	72
	26.6.	Waiver of Immunity	73
27.	MISCELLANEOUS		74
	27.1.	Severability and Illegality	74
	27.2.	Amendments	74
	27.3.	Lessor’s Right to Perform; Lessor’s Right to Delegate and Servicer	74
	27.4.	Counterparts	74
	27.5.	Delivery of Documents by Electronic Means	74
	27.6.	Survival	74
	27.7.	Entire Lease	74
	27.8.	Successors and Assigns	75
	27.9.	Brokers	75
	27.10.	Transaction Costs	75
	27.11.	Time is of the Essence	75
	27.12.	Language	75
	27.13.	No Rights of Third Parties	75
	27.14.	Delegation	75
	27.15.	Further Assurances	76
	27.16.	Rights at Law	76
	27.17.	Confidentiality	76
	27.18.	Notices	77
	27.19.	Section 1110	77
	27.20.	No Future Documentation Fee	77
28.	CRAF PROGRAM		78
	28.1.	Commitment to CRAF	78
	28.2.	Indemnification by United States Government	78
	28.3.	No Geographical Limits	78
	28.4.	Notice of Default	78
	28.5.	Receipt of Payments	79

 

Appendices
1	Definitions
2	Commercial Terms
	A.	Lease Term
	B.	Rent, Security Deposit, Insurance and other Financial Matters
	C.	Escalation
	D.	Maintenance Reserves

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

	E.	Return Conditions
3	Acceptance Certificate
4	Lease Supplement
5	Participation Agreement
6	Conditions Precedent/Post-Delivery Items
7	Return Acceptance Certificate
8	Forms

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

 

2.                                       LEASE TERM; NATURE OF LEASE

 

2.1.                               Lease Term.

 

(a)                                   Lessor shall lease the Aircraft to Lessee for the period stated in Appendix 2A.

 

(b)                                  The Lease Term shall commence at Delivery and shall end on the Termination Date and shall include, if applicable, the Extension Term.

 

2.2.                               Nature of Lease.   At all times during the Lease Term, full legal title to the Aircraft and each Item of Equipment shall remain vested in Lessor to the exclusion of Lessee, notwithstanding the delivery of the Aircraft to, and the possession and use thereof by, Lessee.  This Lease and the Lease Supplement, together, transfer to Lessee with respect to the Aircraft a leasehold interest only and Lessor is the owner and lessor of the Aircraft, and Lessee is the lessee of the Aircraft, for all purposes, including for purposes of the application of all relevant laws, regulations, rules, administrative practices and policies, and all relevant financial accounting principles.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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3.                                       RENT

 

3.1.                               Agreement to Pay Rent.   As rental for the Aircraft, Lessee shall pay to Lessor Basic Rent, in advance, on each Rent Payment Date in respect of each Rent Period.  Basic Rent during any Extension Term shall be the Fair Market Rental Value of the Aircraft, as set forth in Appendix 2A, Section 4.

 

3.2.                               Basic Rent at Delivery.   The amount of Basic Rent due and payable by Lessee for each Rent Period, including adjustments calculated in accordance with Appendix 2B, Section 1, shall be set forth in the Acceptance Certificate.  If the Delivery Date is on or after the 15 th  day of the calendar month, Lessee’s first payment of Basic Rent due at Delivery shall include Lessee’s payment of Basic Rent due and payable for the second Rent Period of the Lease Term

 

3.3.                               Supplemental Rent.   Lessee shall pay to Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental Rent within ten (10) days after demand or such other relevant period as may be provided herein.

 

3.4.                               Obligation to Perform Unconditional.   This Lease is a net lease and Lessee’s obligation to pay Rent and to perform its other Obligations shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation:

 

(a)                                   any withholding, set-off, counterclaim, recoupment, defense or other right which Lessee may have against Lessor or any other Person for any reason whatsoever (whether in connection with the transactions contemplated hereby or any other transactions), including, without limitation, any breach by Lessor of its warranties, agreements or covenants contained herein or in any of the other Operative Documents;

 

(b)                                  any defect in the title, registration, airworthiness, condition, design, operation, or fitness for use of, or any damage to or loss or destruction of, the Aircraft, or any interruption or cessation in the use or possession thereof by Lessee or any other Person for any reason whatsoever;

 

(c)                                   any Liens with respect to the Aircraft;

 

(d)                                  an Event of Loss with respect to the Aircraft or any Item of Equipment;

 

(e)                                   the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any absence of right, power or authority of Lessor or Lessee to enter into this Lease;

 

(f)                                     any insolvency, bankruptcy, examinership, reorganization, administration, liquidation or similar proceedings affecting the enforcement of creditor’s rights generally by or against Lessor or Lessee;

 

(g)                                  any other circumstance or happening of any nature whatsoever, whether or not similar to any of the foregoing; or

 

(h)                                  any imposition of Taxes.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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4.                                       SECURITY DEPOSIT

 

4.1.                               Security Deposit Amount.   Lessee shall pay the Security Deposit in cash into Lessor’s bank account in accordance with the provisions of Appendix 2B, Section 2.

 

4.2.                               Nature of Security Deposit.   Except as otherwise expressly provided in this Lease, the Security Deposit shall be non-refundable.  The Security Deposit shall be the sole, absolute and unconditional property of Lessor, may be freely commingled by Lessor with its general funds and dealt with by Lessor in such manner as Lessor may see fit.  If and to the extent that, under applicable law in any relevant jurisdiction, the Security Deposit is considered to be the property of Lessee, the Security Deposit shall be held by Lessor as security for the full, timely and faithful performance by Lessee of the Obligations and Lessee hereby assigns and charges in favor of Lessor, and hereby grants to Lessor a first priority security interest in, the Security Deposit to secure such payment and such performance, and in such circumstances Lessee shall not create or permit to exist any Lien in or otherwise dispose of the Security Deposit.  Lessee shall, from time to time, execute and file with the appropriate Governmental Authorities any and all documents necessary or reasonably requested by Lessor to evidence and perfect such security interest in favor of Lessor with respect to the Security Deposit.

 

4.3.                               Application of Security Deposit.   If an Event of Default has occurred and is continuing hereunder, in addition to all other rights Lessor has under this Lease or applicable Law, Lessor may set-off against, use, apply or retain all or any part of the Security Deposit in full or partial payment of amounts due and payable by Lessee or any Affiliate of Lessee, as applicable, under any Operative Document and to compensate Lessor for any expense it may incur as a result of, or to compensate Lessor for any loss suffered as a consequence of, the occurrence of such Event of Default, or to apply toward losses or expenses Lessor may suffer or incur as a result of the occurrence of an Event of Default.

 

4.4.                               [Reserved.]

 

4.5.                               Repayment of Security Deposit.   Provided no Default or Event of Default has occurred and is continuing, the Security Deposit, less any reasonable costs incurred by Lessor, or costs incurred by Lessor on behalf of Lessee for which Lessee or any Affiliate of Lessee, as applicable, is responsible hereunder in connection with the termination or cancellation of this Lease or return of the Aircraft, shall be paid over to Lessee promptly after (i) the Termination Date, (ii) the date of termination of this Lease as set forth in Section 8.5, or (iii) the date of termination of this Lease as a result of Lessor’s failure or inability to tender the Aircraft for delivery due to a breach of Lessor’s obligations hereunder or due to the cancellation or termination of the Purchase Agreement, and, in each case, the satisfaction by Lessee, in full, of its Obligations (including any Obligations to pay Supplemental Rent specified in Section 22.3(c) and to correct discrepancies identified in the Return Acceptance Certificate, but excluding those other Obligations expressly provided herein to survive the Termination Date and which are not due for performance on or as of such date).

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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5.                                       PAYMENTS

 

5.1.                               Lessor’s Account.   All payments of Rent, Security Deposit and in respect of Maintenance Reserves shall be made by Lessee to Lessor’s bank account identified in Appendix 2B, Section 3 or to such other account designated in writing by Lessor.  Lessee shall, together with such payment, identify the source of such payment and refer to the make, model and Manufacturer’s serial number of the Aircraft.

 

5.2.                               Payments on Non-Business Days.   When any payment under any Operative Document would otherwise be due to Lessor on a day that is not a Business Day, the due date for payment shall be the preceding Business Day.

 

5.3.                               Timing of Payments.   Payments due under this Lease shall be made by Lessee for credit to Lessor not later than 3:00 P.M. New York, New York time on the due date.

 

5.4.                               Late Payment.   If Lessee fails to pay to Lessor any sum on its due date for payment under this Lease or any other Operative Document, including any payment of Supplemental Rent, Lessee shall pay to Lessor on demand interest on such sum from the due date up to the date of actual payment (including non-payment following the issuance of a judgment) at the Past Due Rate.

 

5.5.                               Calculation of Interest and Prorating of other Payments.

 

(a)                                   All interest payable under this Lease or any other Operative Document shall accrue from day to day and be calculated on the basis of actual days elapsed and a 360 day year.

 

(b)                                  All payments of a monthly nature under this Lease and any other Operative Document, including, but not limited to payments of Basic Rent and in respect of Maintenance Reserves, that accrue on a monthly basis and for which the payment due is for less than a complete month shall be pro rated on a daily basis based on a month consisting of thirty (30) days.

 

5.6.                               Payments in United States Dollars.   All amounts to be paid hereunder shall be paid in Dollars, in immediately available funds.  The specification of Dollars in this transaction is of the essence and Dollars shall be the currency of account in any and all events.  The obligations of Lessee hereunder shall not be discharged by an amount paid in another currency, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to Dollars and transfer to Lessor at Lessor’s account under normal banking procedures does not yield the amount of Dollars owing to Lessor.  If Lessor receives an amount in respect of Lessee’s liability under this Lease, or if such liability is converted into a claim, proof, judgment or order, in a currency other than Dollars, Lessee will indemnify Lessor (on an After-Tax Basis if such Lessee liability is payable on an After-Tax Basis) as an independent obligation against any loss arising out of or as a result of such receipt or conversion.  If the amount received by Lessor, when converted into Dollars (at the market rate at which Lessor is able on the relevant date to purchase Dollars in New York with that other currency) is less than the amount owed in Dollars Lessee will, forthwith on demand, pay to Lessor (on an After-Tax Basis if such Lessee liability is payable on an After-Tax Basis) an amount in Dollars equal to the deficit.  In addition, Lessee waives any right it may have in any jurisdiction to pay any amount due or to become due hereunder in a currency other than Dollars.

 

5.7.                               Retention of Certain Payments.   Any amount referred to in any Operative Document which is payable to or retainable by Lessee shall not be paid to or retained by Lessee at any time when a Default or Event of Default shall have occurred and be continuing, but instead such amount shall be paid to or held by Lessor as security for Lessee’s Obligations to be held and applied in

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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accordance with the provisions of this Lease.  At such time as there shall not be continuing any Default or Event of Default, such amount shall be paid to Lessee to the extent not applied in accordance with the preceding sentence.  Where Lessor would, but for this Section 5.7 or any similar provision in any Operative Document, be obliged to make any payment to Lessee pursuant to any Operative Document, Lessor may elect to make such payment but shall be entitled to deduct or withhold from such payment any amount then due and payable but unpaid by Lessee under or in respect of Lessee’s Obligations.

 

5.8.                               Application of Payments.   Following notice to Lessee of any shortfall and an opportunity to cure the same within one (1) Business, Day, Lessor may apply any payment received from Lessee under any Operative Document which is less than the full amount then due and owing to Lessor in respect of Lessee’s Obligations in such proportions, order and manner as Lessor may, in its absolute discretion, determine, notwithstanding any designation or instruction for application that may have been made by Lessee.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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6.                                       AIRCRAFT SPECIFICATION; LESSEE INVOLVEMENT WITH SELLER

 

6.1.                               Aircraft Specification.   The Aircraft shall be delivered to Lessee by Lessor on the Delivery Date in the configuration set forth in the Detail Specification.

 

(a)                                   Following execution of this Lease, Lessee may from time to time prior to Delivery request Agreed Options be incorporated into the Aircraft.  Any Agreed Options are subject to Seller’s and, if applicable, any BFE vendor’s lead-time, engineering and manufacturing requirements and shall not cause a delay to the Scheduled Delivery Date.  All BFE selected by Lessee for installation on the Aircraft shall first be approved by Lessor and must be from Seller’s approved BFE vendors unless otherwise consented to by Lessor and Seller and provided the same is in compliance with Seller’s lead-time, engineering and manufacturing requirements and shall not cause a delay to the Scheduled Delivery Date.  Lessee shall pay for the costs associated with any such Agreed Options pursuant to Article 3 and Appendix 2B, Section 1.

 

(b)                                  A summary listing of all such Agreed Options shall be attached to the Acceptance Certificate at Delivery.

 

6.2.                               Lessee Involvement with Seller.

 

(a)                                   Lessee’s Inspection of Aircraft.   During the course of manufacture and final assembly of the Aircraft and at Delivery, Lessee shall, at its own cost, risk and expense, have its own representative present to inspect the Aircraft at the Seller’s premises and to ensure its conformity with the Detail Specification and the requirements of this Lease.  Lessee shall participate in all ground inspections and demonstration/acceptance flights conducted by or on behalf of Lessor with respect to the delivery of the Aircraft to Lessor.  If Lessee’s inspections reveal that the Aircraft does not comply with the Detail Specification, Lessor will (for its own behalf and at Lessee’s request) promptly cause the Seller to correct any such defects and make the Aircraft available for re-inspection to Lessee.  Lessee acknowledges that in accepting the Aircraft it is relying on its own inspection and knowledge of the Aircraft in determining whether it conforms with the Detail Specification and meets the requirements of this Lease and specifically disclaims any reliance upon any representation or assurance by any Indemnitee or any representative or agent thereof in making such determination. Lessee further acknowledges that any assumption that Lessor will cure any nonconformity of the Aircraft, discovered, difficult to discover, or undiscovered, is not reasonable unless both (x) the nonconformity or possibility of nonconformity and (y) Lessor’s agreement to cure or cause the cure of such nonconformity are expressed in a written instrument signed by Lessor and Lessee delivered at or before the execution and delivery of the Acceptance Certificate and Lease Supplement; provided, however, Lessor shall use its best efforts to cause Seller, at the request of Lessee, to cure such nonconformity.  Except for any express commitment by Lessor to cure or cause the cure of any nonconformity evidenced by a written instrument of the type described in (y) above, no Indemnitee will be liable for any failure of the Aircraft to conform with the requirements of this Lease at the time of acceptance of the Aircraft by Lessee.

 

(b)                                  Participation Agreement.   Lessee’s rights under the preceding clause (a) shall be exercised pursuant to the terms of the Participation Agreement to be entered into as of the date of this Lease.

 

(c)                                   Compliance.   Lessee’s representative designated under this Section 6.2 shall comply with Seller’s occupational health and safety and security requirements as the same are advised by Lessor or any party acting by or through Lessor and shall not unreasonably

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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interfere with Seller’s or Lessor’s performance of their respective obligations in connection with the manufacture and delivery of the Aircraft while at Seller’s premises.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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7.                                       CONDITIONS PRECEDENT TO DELIVERY

 

7.1.                               Conditions Precedent to Lessor’s Performance.   Lessor’s obligation to deliver and lease the Aircraft to Lessee hereunder shall be subject to the following conditions precedent being complied with to Lessor’s satisfaction or being waived by Lessor in its discretion:

 

(a)                                   the Aircraft being in compliance with the Detail Specification and otherwise in the condition required for Delivery under this Lease;

 

(b)                                  no Event of Loss having occurred with respect to the Aircraft;

 

(c)                                   no Default or Event of Default having occurred and be continuing;

 

(d)                                  the receipt by Lessor of each item identified in Appendix 6 by the date required for such item appearing therein; and

 

(e)                                   Seller having tendered the Aircraft for purchase by Lessor under the Purchase Agreement in accordance with the Detail Specification and otherwise in the condition required for delivery thereunder.

 

In the event of a disagreement between Lessor and Lessee as to whether the Aircraft is in compliance with the Detail Specification and otherwise in the condition required for Delivery under this Lease solely as a result of a disagreement between Seller and Lessor as to whether the Aircraft is in compliance with the Detail Specification under the Purchase Agreement, Lessor and Lessee agree to promptly and reasonably cooperate with one another in good faith to resolve such disagreement.  Lessee acknowledges that there may be minor discrepancies from the Detail Specification and that pursuant to the Purchase Agreement, Lessor may be required to accept delivery of the Aircraft under such circumstances.  Lessee acknowledges that it will act promptly and reasonably to consider such discrepancies and to determine whether such discrepancies must be resolved prior to a Delivery or whether such discrepancies may be resolved after Delivery (at no cost or expense to Lessee).

 

7.2.                               Conditions Precedent to Lessee’s Performance Lessee’s obligation to lease the Aircraft from Lessor hereunder shall be subject to the following conditions precedent being complied with to Lessee’s satisfaction or being waived by Lessee in its discretion.

 

Subject to compliance by Lessee with the conditions precedent specified in this Section 7, Lessee shall have received the following:

 

(a)                                   executed copies of the Assignment of Warranties (Airframe), Consent to Assignment of Warranties (Airframe), Assignment of Warranties and Product Support (Engines), and the Consent to Assignment of Warranties and Product Support (Engines), each substantially in form appearing in Appendix 8 attached hereto;

 

(b)                                  a certificate from Lessor confirming that the representations and warranties contained in Article 10.1 hereof are true and accurate on and as of such date as though made on and as such date (except to the extent that such representations and warranties relate solely to an earlier date);

 

(c)                                   a copy of this Lease, the Participation Agreement and the Lease Supplement, each duly executed by Lessor;

 

(d)                                  a receipt for the Security Deposit; and

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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(e)                                   the Aircraft (i) shall be painted in Lessee’s livery, subject to (x) Lessee providing all paint specifications, schematics and/or all other items required by Seller with respect to such painting and (y) in the time period required by Seller and (ii) shall be in compliance with the Detail Specification (except as otherwise agreed to by and between the Lessor and Lessee in writing pursuant to the Exceptions Letter attached to the Acceptance Certificate) and otherwise in the condition required for Delivery under this Lease.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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Lessee will provide written notice within fifteen (15) Business Days of Lessor’s notice as to whether it desires to lease the Aircraft; provided that any such lease of the Aircraft would be in accordance with terms and conditions to be mutually agreed to by and between Lessor and Lessee.

 

8.4.                               Seller’s Right to Terminate.  Lessee’s rights under Section 8.3 are subject and subordinate to any rights that Seller may have under the Purchase Agreement with Lessor in connection with a delay in delivery of the Aircraft to Lessor that occurs or is anticipated to occur after the Outside Delivery Date.  If Seller exercises any right it may have to terminate Lessor’s right to purchase the Aircraft on account of any such delay, Lessor shall promptly advise Lessee of such termination (and in any event within two (2) Business Days of such termination) and this Lease shall automatically terminate and Lessor will return to Lessee the Security Deposit in accordance with Section 4.5 (without deduction of any costs or expenses).

 

8.5.                               Event of Loss to Aircraft Prior to Delivery.   If an Event of Loss with respect to the Aircraft occurs prior to Delivery, Lessor will notify Lessee promptly following receipt of notice from the Seller and this Lease shall automatically terminate whereupon neither party will have any further liability to the other except that Lessor will return to Lessee the Security Deposit in accordance with Section 4.5 (without deduction of any costs or expenses).

 

8.6.                               Lessee Acceptance of Aircraft.   If Lessee fails to (x) comply with the conditions contained in this Lease so as to allow Delivery to take place immediately following delivery of the Aircraft by Seller to Lessor or (y) take delivery of the Aircraft when properly tendered for delivery by Lessor in the condition required under this Lease, Lessee will be liable for and shall indemnify Lessor for all reasonable costs and expenses incurred by Lessor as a result thereof including (but without limitation) any payments (other than the purchase price) which Lessor becomes obligated to make to Seller.  For the avoidance of doubt, Lessor shall use commercially reasonable efforts to mitigate such costs and expenses.

 

8.7.                               Risk of Loss to Aircraft following Delivery.   Upon Delivery, risk of loss or damage to the Aircraft shall pass to Lessee for the Lease Term.

 

8.8.                               Waiver of Remedies for Delay in Delivery.   Lessor shall not be liable to Lessee for any delay or failure in Delivery to Lessee which is an Excusable Delay.  Pursuant to Section 10.3, Lessee’s only rights or remedies for a delay in delivery, or anticipated delay in delivery, of the Aircraft not caused or occasioned by an act or failure to act by Lessor as provided for in Section 8.2 (i), (ii) or (iii) above, are those rights and remedies provided for in this Article 8 and Section 10.3.

 

8.9.                               Seller Compensation for Delay.     Notwithstanding the foregoing Section 8.8, if Lessor receives compensation from the Seller in respect of a delay in delivery of the Aircraft under the Purchase Agreement with the Seller, Lessor will pay over to Lessee in cash at Delivery (or, at Lessor’s option, as a credit against Lessee’s first payment of Basic Rent due at Delivery) or on the Outside Delivery Date, if this Lease is terminated, twenty-five percent (25%) of any cash compensation actually received by Lessor or the value of any monetary credits actually received by Lessor from the Seller, if any, in respect of such delay (the “ Airbus Damages ”).  The foregoing agreement by Lessor is not nor shall it be deemed to be the assumption by Lessor of any direct obligation to Lessee to pay any compensation to Lessee on account of any such delay, but merely an agreement by Lessor to pay over to (or credit, as applicable) Lessee (or to cause the same to be paid or credited) any monies (or the value in cash of any monetary credits) actually received by Lessor, if any are received, from the Seller with respect to any such delay.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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9.                                       LESSEE’S REPRESENTATIONS, WARRANTIES AND COVENANTS

 

9.1.                               Lessee’s Representations and Warranties.   Lessee represents and warrants to Lessor that:

 

(a)                                   Lessee is a company duly organized and validly existing under the laws of its State of Organization and has the corporate power and authority to carry on its business as it is being conducted.

 

(b)                                  Lessee has the corporate power to enter into and perform, and has taken all necessary corporate action to authorize the entry into, performance and delivery of each Operative Document and upon execution by the other parties thereto the Operative Documents will constitute the valid and legally binding obligations of Lessee, enforceable against Lessee in accordance with their respective terms, except where the enforceability thereof may be limited by applicable bankruptcy, insolvency or other laws affecting creditors’ rights generally.

 

(c)                                   The execution and delivery of, the performance of its Obligations under, and compliance by Lessee with the provisions of, the Operative Documents will not (i) contravene any existing applicable law of its State of Organization or the State of Registration (or federal and other divisional governmental laws applicable therein), (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which Lessee is a party or is subject or by which it or any of its property is bound, (iii) contravene or conflict with any provision of its constitutional and/or organizational documents or (iv) result in the creation or imposition of, or oblige it to create, any Lien over its undertaking or any of its assets, rights or revenues.

 

(d)                                  Lessee is not in payment default or other material breach of any material agreement to which it is a party or by which it may be bound and no litigation, arbitration or administrative proceeding is taking place or, to the best of its knowledge, pending or threatened against Lessee which could have a material adverse effect on its ability to perform its Obligations.

 

(e)                                   The audited financial statements of Holdings for each financial year are certified by independent auditors and as delivered to Lessor have been prepared in accordance with GAAP which have been consistently applied and fairly present the financial position of Holdings and its consolidated subsidiaries (including Lessee) as at such date and the results of the operations of Lessee for the financial year ended on such date and, as at such date, Holdings did not have any significant liabilities (contingent or otherwise) or any unrealized or anticipated losses which are not disclosed by, or reserved against in, such financial statements and there has been no material adverse change in the business or financial condition of Holdings or Lessee since publication of such financial statements.

 

(f)                                     Other than making a filing in respect of this Lease in the State of Registration with the Aeronautics Authority and with the IR, it is not necessary, in order to ensure the legality, validity, enforceability or admissibility in evidence of any Operative Document, that such Operative Document or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere or that any stamp, registration or similar tax or charge be paid in relation to any of the Operative Documents.

 

(g)                                  Lessee has received and complied with or will, prior to the Delivery Date, receive and comply with, each authorization required for the valid authorization, execution, delivery and performance of this Lease and each other Operative Document, the validity and

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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enforceability hereof and thereof and the compliance, satisfaction or performance by Lessee with or of all monetary and other Obligations hereunder and thereunder and all such authorizations are, or prior to the Delivery Date will be, valid and in full force and effect.

 

(h)                                  The choice by Lessee of New York law to govern the Operative Documents and the submission by Lessee to the jurisdiction of the New York courts is valid and binding on Lessee.

 

(i)                                      In any proceedings taken in any jurisdiction in relation to any of the Operative Documents, Lessee will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process.

 

(j)                                      Lessee has paid or caused to be paid all fees or charges assessed and due against it (or against any aircraft owned by or leased to or operated by it) by any airport or air navigation authority assessing landing or navigation fees or charges in respect of the Aircraft or any other aircraft owned by or leased to or operated by it.

 

(k)                                   Holdings’ Annual Report on Form 10-K for 2007 filed with the SEC and each of Holdings’ Quarterly Reports on Form 10-Q and Current Reports on Form 8-K subsequently filed by Holdings with the SEC, as of the date it was filed with the SEC (or, if such report has been amended, in each case as amended through the Delivery Date), did not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(l)                                      No Default or Event of Default has occurred and is continuing.

 

(m)                                Lessee is solvent and able to pay its debts as the same fall due and the transactions contemplated by the Operative Documents are of commercial benefit to it and in its commercial interests.

 

(n)                                  Lessee has duly filed all material Tax returns that it is required by applicable Laws to file, has duly paid all material Taxes stated to be due and payable in such Tax returns and has duly paid all Taxes stated to be due in any communication issued by any taxing authority other than Taxes (i) which are being contested in good faith by appropriate proceedings in accordance with applicable Law, (ii) for which adequate reserves are maintained in accordance with GAAP, and (iii) the contest of which does not involve any risk of criminal penalty or any reasonable possibility of any sale, forfeiture, confiscation, seizure or loss of, or the imposition of a Lien on, any Item of Equipment or any interest therein.

 

9.2.                               Application of Representations and Warranties; Survival.   Each representation and warranty set out in Section 9.1 shall be deemed to be repeated on the Delivery Date by reference to the facts and circumstances existing on such date and shall survive the execution hereof and the delivery of the Aircraft.

 

9.3.                               Lessee’s General Covenants.   Lessee covenants to Lessor that it will:

 

(a)                                   preserve and maintain (i) its corporate existence and (ii) all of its rights, privileges and franchises in every jurisdiction in which the character of the property owned or the nature of the business transacted by it makes licensing or qualification necessary;

 

(b)                                  pay or cause to be paid (i) all Taxes required by applicable Laws to be paid by it (whether such Taxes are imposed upon it or upon its income and profits or upon any property belonging to it or otherwise) prior to the date on which any penalty accrues, except

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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Taxes which it is contesting in good faith by appropriate proceedings provided that such contest does not involve any risk of criminal penalty or any reasonable possibility of sale, forfeiture, confiscation, seizure or loss of, or the imposition of any Lien on, any Item of Equipment or any interest therein, and (ii) all other lawful claims which, if not paid, are reasonably likely to result in the imposition of a Lien upon the Aircraft or any part thereof;

 

(c)                                   remain duly qualified to operate the Aircraft under applicable Law;

 

(d)                                  maintain in full force and effect all governmental consents, licenses, authorizations, approvals, declarations, filings and registrations obtained or effected in connection with this Lease and every document or instrument contemplated hereby and to take all such additional action as may be necessary in connection herewith or therewith.  Lessee further undertakes to timely obtain or effect any new or additional governmental consents, licenses, authorizations, approvals, declarations, filings or registrations as may become necessary for Lessee’s performance of its Obligations;

 

(e)                                   not merge or consolidate with or into or be acquired by any Person or sell, lease or otherwise dispose of all or substantially all of its properties, without the prior written consent of Lessor, which consent will not be unreasonably withheld;

 

(f)                                     notify Lessor of any change to Lessee’s registered office for service of process or any change in Lessee’s jurisdiction of incorporation not more than thirty (30) days following such change;

 

(g)                                  not (i) except as otherwise permitted in this Lease, voluntarily suspend its certificated operation of the Aircraft or its fleet of Airbus A330’s or (ii) permit to be revoked, canceled or otherwise terminated, whether by act or omission, 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;

 

(h)                                  pay promptly when due all navigation and en-route charges and all other charges payable by Lessee for the use of or services provided at any airport, whether in respect of the Aircraft or any other aircraft in Lessee’s fleet;

 

(i)                                      not represent or hold out Lessor, any Financing Party or any Affiliate of the foregoing as carrying goods or passengers on the Aircraft or being in any way connected to operation of the Aircraft; and

 

(j)                                      If any items delivered to Lessor by Lessee in connection with this Lease are required by this Lease to have a validity and effectiveness for the Lease Term, but have or are of a duration or effectiveness that is for less than the Lease Term when originally delivered, cause replacements, extensions or supplements thereof to be timely delivered to Lessor during the Lease Term to ensure that Lessor maintains at all times during the Lease Term the benefits initially afforded by such items and the continued effectiveness and validity of the same for the Lease Term.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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10.                                LESSOR’S REPRESENTATIONS, WARRANTIES AND COVENANTS; DISCLAIMERS

 

10.1.                         General Representations and Warranties of Lessor.   Lessor represents and warrants to Lessee that:

 

(a)                                   Lessor is a company duly organized and validly existing under the laws of its State of Organization and has the corporate power and authority to carry on its business as it is being conducted;

 

(b)                                  Lessor has the corporate power to enter into and perform, and has taken all necessary corporate action to authorize the entry into, performance and delivery of each Operative Document to which it is a party and upon execution by the other parties thereto the Operative Documents to which it is a party will constitute its valid and legally binding and enforceable obligations;

 

(c)                                   the execution and delivery of, the performance of its obligations under, and compliance by Lessor with the provisions of, the Operative Documents to which it is a party will not (i) contravene any existing applicable law of its State of Organization (or federal and other divisional governmental laws applicable therein), (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which Lessor is a party or is subject or by which it or any of its property is bound, or (iii) contravene or conflict with any provision of its constitutional and/or organizational documents;

 

(d)                                  Lessor has received and complied with or will, prior to the Delivery Date, receive and comply with, each authorization required for the valid authorization, execution, delivery and performance of this Lease and each other Operative Document, the validity and enforceability hereof and thereof and the compliance, satisfaction or performance by Lessor with or of all monetary and other Obligations hereunder and thereunder and all such authorizations are, or prior to the Delivery Date will be, valid and in full force and effect;

 

(e)                                   on and as of Delivery, Lessor shall have the right to lease the Aircraft to Lessee; and

 

(f)                                     Lessor is a Citizen of the United States.

 

10.2.                         Covenant of Quiet Enjoyment.

 

(a)                                   Lessor covenants that so long as an Event of Default shall not have occurred and be continuing, Lessee shall quietly enjoy the Aircraft without interference by Lessor, any Financing Party or by any Person lawfully claiming by or through Lessor.  The exercise by Lessor of its rights under any Operative Document shall not constitute a breach of this Section 10.2.

 

(b)                                  Lessor shall procure that any Financing Party granted a Lien on the Aircraft shall give an undertaking to Lessee on terms substantially in the form set out in Appendix 8.

 

10.3.                         Disclaimer; Waiver of Warranties; Waiver of Remedies.

 

(a)                                   LESSEE AGREES THAT IT ACCEPTS DELIVERY OF THE AIRCRAFT AND EACH ITEM OF EQUIPMENT “AS-IS, WHERE-IS”.  LESSEE ACKNOWLEDGES AND AGREES THAT NO INDEMNITEE HAS, OR SHALL BE DEEMED TO HAVE

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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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, FOR ITSELF AND FOR EACH INDEMNITEE, HEREBY SPECIFICALLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT AS HEREIN BELOW PROVIDED), AIRWORTHINESS, CONDITION, DESIGN, OPERATION, MERCHANTABILITY, FREEDOM FROM CLAIMS OF 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 CAPABLE OF DISCOVERY, 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, RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES.  NO INDEMNITEE SHALL 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 ITEM OF EQUIPMENT 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) THE DELIVERY OR DELAY IN DELIVERY (WHERE ANY SUCH DELAY IS NOT DUE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR) OR EXCUSABLE DELAY, OR (iv) OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT OR ANY ITEM OF EQUIPMENT.  THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 10.3 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AND NO INDEMNITEE SHALL BE DEEMED TO HAVE MADE ANY OTHER WARRANTIES.

 

(b)                                  LESSEE ACKNOWLEDGES THAT THE DESCRIPTION OF THE AIRCRAFT SET FORTH IN THIS LEASE AND ANY OPERATIVE DOCUMENTS IS BASED UPON INFORMATION SUPPLIED BY THE SELLER AND, AS APPLICABLE, EACH MANUFACTURER.  LESSEE REPRESENTS TO LESSOR THAT LESSEE HAS USED ITS OWN JUDGMENT IN SELECTING THE AIRCRAFT AND HAS DONE SO BASED ON ITS SIZE, DESIGN AND TYPE.  LESSEE ACKNOWLEDGES THAT THE RENT AND OTHER AMOUNTS HAVE BEEN CALCULATED HAVING DUE REGARD FOR THE PROVISIONS OF THIS SECTION 10.3.

 

(c)                                   IN CONSIDERATION OF (i)  LESSEE’S RIGHTS HEREUNDER TO INSPECT THE AIRCRAFT AND (ii) LESSOR’S ASSIGNMENT TO LESSEE OF ANY EXISTING AND ASSIGNABLE WARRANTIES OF SELLER AND ANY MANUFACTURER, LESSEE HEREBY AGREES THAT ITS ACCEPTANCE OF THE AIRCRAFT AT DELIVERY AND ITS EXECUTION AND DELIVERY OF THE ACCEPTANCE CERTIFICATE CONSTITUTE LESSEE’S WAIVER OF THE WARRANTY OF DESCRIPTION, ANY CLAIMS LESSEE MAY HAVE AGAINST LESSOR BASED UPON THE FAILURE OF THE AIRCRAFT TO CONFORM WITH SUCH DESCRIPTION AND ANY AND ALL RIGHTS IT MAY HAVE UNDER

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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APPLICABLE LAW.  EVEN IF AT ANY TIME THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION SUBSTANTIALLY IMPAIRS THE VALUE AND UTILITY OF THE AIRCRAFT AND EITHER (1) LESSEE ACCEPTED THE AIRCRAFT BASED ON A REASONABLE ASSUMPTION THAT THE NONCONFORMITY WOULD BE CURED AND IT WAS NOT CURED WITHIN THE TIME PROVIDED OR, IF NOT PROVIDED, WITHIN A REASONABLE PERIOD OF TIME OR (2) LESSEE ACCEPTED THE AIRCRAFT WITHOUT DISCOVERING THE NONCONFORMITY BUT LESSEE’S ACCEPTANCE OF THE AIRCRAFT WAS REASONABLY INDUCED EITHER BY AN INDEMNITEE’S ASSURANCES OR BY THE DIFFICULTY OF DISCOVERING ANY DEFECT PRIOR TO ACCEPTANCE, LESSEE AGREES NOT TO LOOK TO ANY INDEMNITEE FOR DAMAGES OR RELIEF ARISING OUT OF THE FAILURE OF THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION.

 

(d)                                  DELIVERY BY LESSEE TO LESSOR OF THE ACCEPTANCE CERTIFICATE WILL BE CONCLUSIVE PROOF AS BETWEEN LESSOR AND LESSEE THAT LESSEE HAS EXAMINED AND INVESTIGATED THE AIRCRAFT, INCLUDING THE ENGINES AND THE AIRCRAFT DOCUMENTS AND THAT EACH IS IN THE CONDITION REQUIRED HEREUNDER AND WITHOUT DEFECT, EXCEPT AS SPECIFICALLY SET FORTH IN SUCH CERTIFICATE, (WHETHER OR NOT DISCOVERABLE OR DIFFICULT OF DISCOVERY AT DELIVERY) AND OTHERWISE IN EVERY WAY SATISFACTORY TO LESSEE.

 

(e)                                   LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME HEREAFTER MAY BE CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO SUSPEND ITS PERFORMANCE HEREUNDER OR TO TERMINATE, CANCEL, QUIT OR SURRENDER THIS LEASE, INCLUDING, WITHOUT LIMITATION, (X) ON ACCOUNT OF ANY GROUNDS OF INSECURITY WITH RESPECT TO LESSOR’S PERFORMANCE OF ITS OBLIGATIONS UNDER THIS LEASE AND (Y) ON ACCOUNT OF ANY REPUDIATION BY LESSOR OF ANY OF ITS OBLIGATIONS UNDER THIS LEASE, EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS HEREOF.  EACH PAYMENT OF RENT MADE BY LESSEE TO LESSOR SHALL BE FINAL AND LESSEE WILL NOT SEEK TO RECOVER ANY PART OF SUCH PAYMENT FROM LESSOR FOR ANY REASON WHATSOEVER, EXCEPT FOR NEGLIGENCE OR MANIFEST ERROR IN THE CALCULATION OF THE AMOUNT OR REMITTANCE OF SUCH PAYMENT.  LESSEE’S COVENANTS AND PROMISES IN THIS LEASE ARE IRREVOCABLE AND INDEPENDENT UPON DELIVERY HEREUNDER, AND NONE OF SUCH COVENANTS OR PROMISES IS SUBJECT TO CANCELLATION, TERMINATION, MODIFICATION, REPUDIATION, EXCUSE, OR SUBSTITUTION WITHOUT LESSOR’S CONSENT OR THE CONSENT OF SUCH OTHER PERSON TO WHOM THE COVENANT OR PROMISE RUNS.  LESSEE AGREES THAT ITS ONLY RIGHT WITH RESPECT TO A DEFAULT BY LESSOR UNDER THIS LEASE IS, AFTER COMPLYING WITH ITS OBLIGATIONS UNDER THIS LEASE, TO MAKE A CLAIM AGAINST LESSOR FOR ACTUAL DAMAGES RESULTING DIRECTLY FROM SUCH DEFAULT OR EXCEPT AS EXPRESSLY PERMITTED UNDER ARTICLE 8 OF THIS LEASE.

 

10.4.                         DISCLAIMER AND WAIVER OF INCIDENTAL, CONSEQUENTIAL, SPECIAL AND PUNITIVE DAMAGES.   LESSEE AGREES THAT IT SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES ANY RIGHT THAT IT MAY OTHERWISE HAVE TO RECOVER, (i) INCIDENTAL, CONSEQUENTIAL, SPECIAL AND PUNITIVE DAMAGES, AND/OR (ii) DAMAGES IN CONNECTION WITH ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS AS A

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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RESULT OF ANY BREACH OR ALLEGED BREACH BY LESSOR OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF LESSOR CONTAINED IN THIS LEASE OR ANY OPERATIVE DOCUMENTS, IN EACH CASE OTHER THAN THE RETURN OF THE SECURITY DEPOSIT PAID BY THE LESSEE AND PAYMENT OF AIRBUS DAMAGES PAYABLE PURSUANT TO SECTION 8.9.

 

10.5.                         NO DUTY OF INDEMNITEES TO INSPECT, ETC.   NO INDEMNITEE SHALL HAVE ANY DUTY OR OBLIGATION TO DETERMINE WHETHER ANY ITEM OF EQUIPMENT IS REQUIRED TO BE OVERHAULED OR MAINTAINED, OR TO OBSERVE OR INSPECT THE OVERHAUL OR MAINTENANCE OF ANY ITEM OF EQUIPMENT OR TO CONFIRM OR VERIFY THE FITNESS OR QUALIFICATION OF LESSEE OR ANY APPROVED MAINTENANCE ORGANIZATION TO PERFORM ANY MAINTENANCE TO ANY ITEM OF EQUIPMENT AND NO INDEMNITEE SHALL INCUR ANY LIABILITY OR OBLIGATION IN CONNECTION WITH THE FOREGOING OR BY REASON OF THE FAILURE OF ANY ITEM TO BE PROPERLY MAINTAINED OR BY REASON OF ANY INDEMNITEE’S ELECTION TO OBSERVE OR INSPECT OR NOT TO OBSERVE OR INSPECT ANY MAINTENANCE CHECK OR OTHER MAINTENANCE OF ANY ITEM OF EQUIPMENT PERFORMED DURING THE LEASE TERM.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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11.                                GENERAL OPERATION OF THE AIRCRAFT

 

11.1.                         General Operation.  Lessee will:

 

(a)                                   comply with the Law in any country or jurisdiction which may from time to time be applicable to the Aircraft and its use, maintenance and operation, including but not limited to the holding of all certificates, licenses, permits, authorizations and regulations, and take all commercially reasonable steps to ensure that the Aircraft is not used for any illegal purpose;

 

(b)                                  not use any Item of Equipment in any manner contrary to:

 

(i)                                      any Manufacturer’s operating manuals or instructions, or in violation of any airworthiness certificate or registration relating thereto; or

 

(ii)                                   any recommendation of the Manufacturer of such Item of Equipment, or regulation of the Aeronautics Authority or for any purpose for which the Aircraft is not designed or reasonably suitable;

 

(c)                                   ensure that all personnel directly or indirectly employed by it in connection with the operation and maintenance of the Aircraft have the qualifications and hold the licenses required by the Aeronautics Authority and applicable Law;

 

(d)                                  use the Aircraft solely in commercial passenger and cargo (provided such cargo is carried exclusively in the cargo compartments of the Aircraft) operations for which Lessee is duly authorized by the Aeronautics Authority and under applicable Law and from a base located within the State of Registration or Lessee’s State of Organization;

 

(e)                                   not utilize the Aircraft for purposes of training, qualifying or re-confirming the status of cockpit personnel except for the benefit of Lessee’s cockpit personnel, and then only if the use of the Aircraft for such purpose is not disproportionate to the use for such purpose of other similar model aircraft within Lessee’s fleet of aircraft; and

 

(f)                                     obtain and maintain in full force and effect all certificates, licenses, permits and authorizations required for the making of payments required by, and the compliance by Lessee with its other Obligations under, this Lease.

 

11.2.                         Insured Operations.  Lessee will not use or locate or permit the Aircraft or any Item of Equipment to be used or located in any manner, for any purpose or at any location which is not covered by the insurance policies and the scope of coverage Lessee is required to carry and maintain as set forth in this Lease.  Lessee will not carry any goods of any description excepted or exempted from such policies or do any other act or permit to be done anything which could reasonably be expected to invalidate or limit any such insurance policy or coverage provided thereunder.

 

11.3.                         Carriage of Goods.  Lessee shall not knowingly, exercising due diligence, use the Aircraft for the carriage of:

 

(a)                                   whole animals living or dead except in compliance with I.A.T.A. regulations, except domestic pet animals carried in a suitable container to prevent the escape of any liquid and to ensure the welfare of the animal;

 

(b)                                  cargo to the extent forbidden pursuant to Section 2 (Limitations) of the I.A.T.A. Dangerous Goods Regulations, as revised, from time to time;

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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(v)                                  who is the subject of a United Nations sanction or whose assets have been frozen by enabling legislation of the same in the State of Registration or Lessee’s State of Organization; or

 

(vi)                               who is the subject of or which use is contrary to any Laws similar to or consistent with the foregoing clauses (i) through (v) as the same are enacted in the Lessee’s State of Organization or the State of Registration;

 

as any or all of the same are amended or supplemented from time to time, and including any successor Laws as the same are enacted from time to time.

 

11.6.                         [Reserved.]

 

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12.                                MAINTENANCE, MODIFICATION AND OPERATION OF THE AIRCRAFT

 

12.1.                         General.   Lessee, at its own expense, shall cause the Aircraft and each Item of Equipment to be serviced, repaired, overhauled, tested and maintained:

 

(a)                                   in accordance with the Maintenance Program and the applicable Manufacturer’s Repair Manuals including, without limitation, the Manufacturer’s recommended corrosion prevention and control program for the Aircraft;

 

(b)                                  so as to keep each such Item in as good operating condition and appearance as when delivered to Lessee hereunder, ordinary and reasonable wear and tear excepted;

 

(c)                                   in compliance with all Manufacturers’ service bulletins designated by such Manufacturer as either (x) an alert service bulletin or (y) a mandatory service bulletin, either of which by their terms (i) is applicable to the respective Item of Equipment and (ii) specify compliance during the Lease Term;

 

(d)                                  in compliance with all other Manufacturer’s service bulletins which require compliance in order to maintain the validity of warranties; and

 

(e)                                   in compliance with all Airworthiness Directives which by the terms of each such AD require compliance during the Lease Term and which shall be accomplished in accordance with such AD and without application or utilization of any alternate method of compliance, provided, however, solely to the extent compliance with any AD issued by the Certificating Authority (an “ EASA AD ”) will cause Lesee to be in violation of FAA Requirements, Lessee shall not be required to comply with such EASA AD.

 

12.2.                         Accomplishment of Tasks, Repairs and Related Items.   Lessee shall cause, at its expense, all Tasks to be accomplished on the Aircraft as they become due, with no discrimination toward the Aircraft with respect to any maintenance accomplished on similar model aircraft within Lessee’s fleet of aircraft.  To the extent that the Maintenance Program permits certain Tasks to be accomplished on a sampling basis, Lessee nevertheless shall accomplish on the Aircraft all such Tasks that, by the terms of such Tasks, are applicable to the Aircraft. Any damage, defects or corrosion discovered during the Lease Term shall be repaired in accordance with the applicable Manufacturer’s Repair Manual approved procedures at the sole expense of Lessee (except to the extent any such expense is otherwise covered by a Manufacturer warranty, and in such an event Lessee shall be solely responsible for any expense not covered by any such warranty), and Lessee shall obtain Required Approval with respect to (i) any repairs, and (ii) modifications to the Airframe structure, electrical system, Engines, APU or Landing Gear, accomplished during the Lease Term which have not been approved by the Manufacturer and the Certificating Authority in addition to any approval received by Lessee from the Aeronautics Authority with respect to any such repairs or modifications, provided, in the event Lessee does not obtain Required Approval at the time any such repair or modification is accomplished, Lessee shall nevertheless obtain such Required Approval upon the earlier to occur of (x) an Event of Default having occurred, provided, that if Lessee cures such Event of Default, then after obtaining each Required Approval that was previously deferred, Lessee may resume such deferrals in the future, provided further that, upon any subsequent Event of Default, Lessee shall be required to obtain all other such Required Approvals that were deferred and will not be entitled to any further such deferrals, or (y) the Termination Date.

 

12.3.                         Information on Maintenance.   Lessee, at its cost and expense, shall furnish Lessor, at such times during the Lease Term as Lessor shall reasonably request, copies of records maintained relating to the Aircraft, with a certificate signed by an officer of Lessee affirming that all the maintenance work represented by such records was accomplished by an Approved Maintenance

 

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Organization and that the maintenance work represented by such records was performed in compliance with the terms of this Lease.

 

12.4.                         Aircraft Documents in English Language.   Lessee, at its cost and expense, shall maintain all Aircraft Documents in the English language, including Aircraft Documents required by the applicable Aeronautics Authority to be maintained in respect of each Item of Equipment, and promptly furnish to Lessor upon Lessor’s request such information as may be required to enable Lessor to file any reports required to be filed with any Governmental Authority because of Lessor’s ownership of the Aircraft.

 

12.5.                         Originals.   All Aircraft Documents, including records and documentation of maintenance accomplished on the Aircraft and any Item of Equipment shall be retained by Lessee until the Termination Date, at which time all records and Aircraft Documents shall be returned to Lessor in original (not duplicate) form, except to the extent maintained electronically.  Any such Aircraft Documents and/or other records and documentation maintained electronically must be maintained in accordance with an FAA approved electronic record keeping system and upon redelivery of the Aircraft to Lessor, Lessee shall, at Lessee’s expense, provide Lessor with (i) a copy of such FAA approval, (ii) digital (scanned) copies of the original records and (iii) any software necessary to read and print such electronic documentation.

 

12.6.                         Performance of Maintenance.   All Maintenance Checks shall be accomplished only at Approved Maintenance Organizations which shall be approved by Lessor in writing prior to the commencement of such Maintenance Check, such approval not to be unreasonably withheld.  All other maintenance on the Aircraft will be performed by Lessee using personnel that are approved and appropriately certified by the Aeronautics Authority to perform such maintenance.

 

12.7.                         Alterations, Modifications and Additions.

 

(a)                                   Required Alterations, Modifications and Additions.   Lessee, at its own cost and expense, shall make such alterations, modifications and additions to the Aircraft and any Items of Equipment as may be required from time to time to comply with:

 

(i)                                      all Manufacturers’ service bulletins designated by such Manufacturer as either (x) an alert service bulletin or (y) a mandatory service bulletin, either of which by their terms (1) is applicable to the respective Item of Equipment and (2) specify compliance during the Lease Term;

 

(ii)                                   Airworthiness Directives which by the terms of each such AD require compliance during the Lease Term and which shall be performed in accordance with such AD and without application or utilization of any alternate method of compliance; provided, however, that (i) Lessee shall not be required to comply with any EASA AD until the earlier to occur of (x) an Event of Default having occurred, provided, that if Lessee cures such Event of Default, then after obtaining each Required Approval that was previously deferred, Lessee may resume such deferrals in the future, provided further that, upon any subsequent Event of Default, Lessee shall be required to obtain all other such Required Approvals that were deferred and will not be entitled to any such further deferrals, or (y) the Termination Date, and (ii) solely to the extent compliance with any EASA AD will cause Lessee to be in violation of FAA Requirements, Lessee shall not be required to comply with such EASA AD; and

 

(iii)                                all Laws and regulations of the Aeronautics Authority which require compliance during the Lease Term.

 

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(b)                                  Discretionary Alterations, Modifications and Additions.

 

(i)                                      Except as set forth in the preceding clause (a) or the following clause (ii), Lessee shall not make any alteration, modification or addition to (A) the Airframe or any galleys, lavatories, avionics, APU or Engines without the prior written consent of Lessor or (B) any other Item of Equipment unless in accordance with the requirements of the Maintenance Program and the regulations of the Certificating Authorities.

 

(ii)                                   Notwithstanding the provisions of the preceding clause (i), Lessor’s consent shall not be required for any discretionary alteration, modification or addition that Lessee wishes to perform to the Aircraft or any Item of Equipment provided that any such alteration, modification or addition does not require or result in a modification to the Aircraft structure or electrical wiring system, and is:

 

(A)                               for the installation of additional or enhanced Items of Equipment (and not in substitution for the same); or

 

(B)                                 is cosmetic (and non-structural) in nature in order for Lessee to display its name, logo or other identification or advertising; or

 

(C)                                 to the Aircraft interior configuration that (1) utilizes the existing seat track system (without modification), (2) does not require the addition to, removal of or modification of any Aircraft structure, (3) does not impair the value or utility of the Aircraft or any Item of Equipment or adversely affect compliance with the type certificate data sheet of the Aircraft, and (4) does not cause any change in the category or status of the Aircraft as defined by the Manufacturer.  Notwithstanding anything to the contrary herein, Lessee may request Lessor’s written consent to return the Aircraft in such modified configuration at the time of the request of such modification or subsequent to that and prior to the Termination Date, and such written consent shall be at Lessor’s sole discretion, and shall be nonrevocable by Lessor.

 

(c)                                   Removed Items — Title and Risk of Loss.   Except with respect to any Part that has been replaced in accordance with the terms of this Article 12, and where title to such replacement part has transferred to Lessor, title to any and all Items of Equipment removed from the Aircraft in accordance with this Section 12.7 shall remain with Lessor and risk of loss or damage to the same shall remain with Lessee during the Lease Term and Lessee shall keep, store and maintain the same in accordance with Manufacturer’s Repair Manual requirements and standard industry practice for return to Lessor on the Termination Date if Lessor elects to have the Aircraft de-modified in accordance with the following clause (d), and title to any such Part that has been replaced in accordance with the terms of this Article 12 shall without further act, vest in Lessee, whereupon such Part shall no longer be deemed a Part hereunder.  Any Part not replaced by Lessee in accordance with the above shall remain the property of Lessor.

 

(d)                                  De-Modification of Aircraft.   At Lessor’s option Lessee shall, in connection with Return, de-modify and restore the Aircraft to the condition and configuration it was in prior to the accomplishment of any alterations, modifications or additions performed in accordance with this Section 12.7, assuming such condition was in compliance with the terms of this Lease, notwithstanding the provision of Lessor’s consent under Section 12.7(b)(i), if

 

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the same is provided, or otherwise.  Notwithstanding anything to the contrary herein, Lessee may request Lessor’s written consent to return the Aircraft in such modified configuration at the time of the request of such modification or subsequent to that and prior to the Termination Date.  Any such written consent shall be at Lessor’s sole discretion, and shall be nonrevocable by Lessor.

 

12.8.                         Replacement of Parts.   Lessee, at its own cost and expense, shall promptly replace all Parts which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever.  In addition, in the ordinary course of maintenance, service, repair, overhaul or testing, Lessee may remove any Part, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use; provided that Lessee shall as promptly as practicable either reinstall such Part or replace such Part pursuant to the terms of this Article 12.  Each replacement part prior to installation in the Aircraft or any Item of Equipment:

 

(a)                                   shall be free and clear of all Liens;

 

(b)                                  shall be in as good operating condition and shall have a value, utility, maintenance, modification and repair status at least equal to the Part replaced, assuming such replaced Part was in the condition and repair required to be maintained by the terms hereof;

 

(c)                                   shall have documentation certifying compliance with all applicable Certificating Authority or Aeronautics Authority requirements, including, without limitation, if applicable:

 

(i)                                      a Certificating Authority Form and, if not indicated on such form, a teardown report indicating time since Overhaul and a description of work accomplished with respect to such part by an Approved Maintenance Organization;

 

(ii)                                   Overhaul records;

 

(iii)                                documentation of modification status and compliance with Airworthiness Directives; and

 

(iv)                               any other appropriate documentation applicable to the maintenance and repair status of such part; and

 

(d)                                  shall:

 

(i)                                      have the same part number (except to the extent the Manufacturer has superseded the part number of such Part, and in such an event the superseding part number shall be an acceptable alternate pursuant to the Manufacturer’s Repair Manual or a Required Approval) and be of the same Manufacturer as the replaced Part, provided, however, such replacement part may be of a different Manufacturer solely to the extent that such replacement part:

 

(A)                               is an expendable or consumable part or is a part that has a line item price of less than One Thousand Five Hundred Dollars ($1,500) in Base Year Dollars; provided that this Section 12.8(d)(i)(A) shall not apply to rotable parts; and

 

(B)                                 such part is installed on the Airframe, and not on or in any Engine, Landing Gear, or the APU.

 

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(ii)                                   with respect to Time Controlled Parts, have not accumulated more time since new (and time since Overhaul if such replaced Part has previously been Overhauled) than that of the replaced Part.

 

12.9.                         Title to Parts.

 

(a)                                   Parts Replacement in Connection with Maintenance.   Any Part removed from the Airframe or any Item of Equipment shall remain the property of Lessor and subject to this Lease, no matter where located, until such time as such Part shall be replaced by a part which has been incorporated or installed in or attached to the Aircraft or an Item of Equipment pursuant to the requirements for replacement parts specified in Section 12.8 and title to such replacement part has been vested in Lessor.  Except as set forth in Section 12.10, immediately upon any replacement part becoming incorporated, installed or attached to the Aircraft or an Item of Equipment as provided above, such part shall become the property of Lessor, title to such replacement part shall immediately vest in Lessor and such replacement part shall become subject to this Lease and be deemed a Part for all purposes hereof to the same extent as the Part which it has replaced.  Once the replacement part has become subject to this Lease, title to the Part so replaced shall immediately vest in Lessee, free and clear of all rights of Lessor and any Financing Party.

 

(b)                                  Parts Replacement in Connection with Discretionary Alterations, etc.   So long as no Default or Event of Default shall have occurred and be continuing, at any time during the Lease Term, Lessee may remove any Part from an Item of Equipment that was installed pursuant to Lessee’s accomplishment of an alteration, modification or addition pursuant to Section 12.7(b), provided that:

 

(i)                                      such Part is in addition to and not in replacement of or in substitution for, any Part originally incorporated or installed in or attached to such Item at the time of delivery thereof hereunder or any Part in replacement of, or substitution for, any such original Part;

 

(ii)                                   such Part is not required to be incorporated or installed in or attached or added to such Item pursuant to the terms hereof;

 

(iii)                                such Part can be removed from such Item without diminishing or impairing the value, utility or airworthiness which such Item would have had at such time had such alteration, modification or addition not occurred; and

 

(iv)                               such Part is not required to be installed on or attached to such Item of Equipment by the Aeronautics Authority in order to maintain the airworthiness certification of the Aircraft for passenger operation.

 

Upon removal of any such Parts, Lessee shall restore the area where such Part was removed so that it is in the condition it would have been had such Part not been installed, assuming such condition was in compliance with the terms of this Lease, and so that such removal is undetectable.  Title to any Part removed by Lessee in accordance with the provisions of this Section 12.9(b) shall, without further act, vest in Lessee whereupon such Part shall no longer be deemed a Part hereunder.  Any Part not removed by Lessee in accordance with the above shall remain the property of Lessor.

 

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12.10.                   Temporary Replacement of Parts.   Provided no Event of Default has occurred and is continuing, at any time during the Lease Term, any Part incorporated or installed in or attached or added to any Item of Equipment may be replaced temporarily with a part which does not satisfy the requirements of Section 12.8; provided that

 

(a)                                   there shall not have been available to Lessee at the time and in the place that such substitute or replacement part was required to be installed on the Airframe or Engine a replacement part complying with the requirements of Section 12.8;

 

(b)                                  it would have resulted in an unreasonable disruption of the operation of the Aircraft and/or the business of Lessee as an airline to have grounded the Aircraft until such time as a replacement part complying with the requirements of Section 12.8 became available for installation on the Aircraft;

 

(c)                                   Lessee shall have notified Lessor as soon as practicable after the making of such substitution or replacement;

 

(d)                                  as soon as practicable after installation of the same on the Airframe or Engine (and in any event no later than the earliest to occur of (i) thirty (30) days following such installation, (ii) the Scheduled Termination Date or (iii) the Termination Date) Lessee shall remove any such part not complying with the requirements of Section 12.8 and replace the same with a part complying with such requirements.

 

Upon the replacement by Lessee of any such non-conforming part pursuant to the foregoing clause (d), title to such replacement part shall, without further act, vest in Lessor and such part shall be deemed a Part hereunder.

 

12.11.                   Exchanging Parts.   Any Part removed from the Aircraft or any Item of Equipment in the course of performance of maintenance on the same may be subjected by Lessee to normal exchanges customary in the airline industry in the ordinary course of Lessee’s business provided that (x) the parts replacing such removed Parts are incorporated, installed in or attached to the Aircraft or such Item of Equipment promptly following the removal of such Parts, and (y) all applicable requirements of the Aeronautics Authority or the Certificating Authority shall be adhered to with respect to all such Parts being incorporated, installed, or attached, whether or not such Part was originally removed from the Aircraft or any Item of Equipment or is a replacement for any such removed Part.  Lessee shall, whether or not such exchanged part is owned by Lessee at the time such exchange is completed, comply or ensure the continued compliance with the requirements of Sections 12.8, 12.9 and 12.10 as applicable prior to installation of the same into the Aircraft or any Item of Equipment.

 

12.12.                   Temporary Attachment and Removal of Engines.

 

(a)                                   Installation of Other Engines.

 

(i)                                      In the regular course of performance of Lessee’s Obligations under this Lease, Lessee may temporarily remove an Engine from the Airframe and install an engine on the Airframe that is owned by Lessee or which is subject to a lease, conditional sale agreement, trust indenture or other security agreement, provided that such other engine is (x) free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such engine and as the same are otherwise permitted to exist pursuant to Section 17.7, and (y) Lessee, or if Lessee is not the owner of the engine, the lessor, conditional seller, indenture trustee or secured party of any such engine agrees in writing in a form satisfactory to

 

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Lessor that it will not acquire or claim, as against Lessor, any right, title or interest in or any adverse right, title or interest to the Airframe or any Item of Equipment as the result of any such engine being installed on the Airframe.  If any of the respective interests of Lessor or any relevant Financing Party in any Item of Equipment is impaired or otherwise adversely affected by virtue of installation of such engine on the Airframe, Lessee shall promptly remove such engine from the Airframe, and if such removal is not completed within five (5) days from the date on which Lessee obtains actual knowledge of such impairment or adverse effect, such event will be deemed an Event of Default pursuant to Section 23(k).

 

(ii)                                   Lessee shall comply with the requirements of Section 19.4(c) for as long as such engine is installed on the Airframe and the engine shall be removed from the Airframe and the removed Engine reinstalled on the Airframe upon the occurrence and continuation of a Default or Event of Default, but in any event, not later than the Termination Date.

 

(iii)                                Lessor hereby agrees for the benefit of any lessor of any engine leased to Lessee or any secured party or mortgagee of an engine owned by Lessee subject to a security interest or mortgage granted by Lessee or any conditional seller of an engine purchased by Lessee subject to a conditional sale agreement that neither Lessor nor its successors or assignees will acquire or claim, as against such lessor, secured party, mortgagee or conditional vendor, or its assignee, any right, title or interest in any engine owned by such lessor under such lease or subject to a security interest, mortgage or conditional sale interest in favor of such secured party, mortgagee or conditional seller under such security agreement, mortgage or conditional sale agreement as the result of such engine being installed on the Airframe at any time while such engine is subject to such lease, security interest, mortgage or conditional sale agreement.

 

(b)                                  Installation of Engines on other Airframes.   Provided no Default or Event of Default has occurred and is continuing, Lessee may install an Engine removed from the Airframe on any other airframe of the same type operated by and in Lessee’s fleet of aircraft, but only if:

 

(i)                                      Lessee has title to such other airframe and such airframe is free and clear of all Liens (except as the same are permitted to exist pursuant to Section 17.7); or

 

(ii)                                   such other airframe is leased to Lessee or owned by Lessee subject to a conditional sale or other security agreement, provided that such airframe is free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and as the same are otherwise permitted to exist pursuant to Section 17.7, and (B) prior to such installation on an airframe that is leased to Lessee or owned by Lessee subject to a conditional sale or other security agreement, Lessor shall have received from the lessor, conditional seller or secured party of such airframe a written agreement (which may be the lease, security agreement or conditional sale agreement covering such airframe), in form and substance reasonably satisfactory to Lessor, whereby such lessor, secured party or conditional seller expressly agrees that neither it/they nor its/their successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time while such Engine is subject to this Lease or is owned by Lessor.  If any of the respective interests of Lessor or any relevant Financing Party in an Engine is impaired or otherwise adversely affected by

 

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virtue of installation on any such other airframe, Lessee shall promptly reinstall such Engine on the Airframe, failing which such impairment or adverse effect will be deemed an Engine Loss;

 

and in either case, Lessee shall comply with the requirements of Section 19.4 for as long as such Engine is installed on such other airframe and the Engine shall be removed from such other airframe for reinstallation on the Airframe upon the occurrence and continuation of a Default or Event of Default, but in any event, not less than sixty (60) days prior to the Scheduled Termination Date.

 

12.13.                   Installation of Items of Equipment on Other Aircraft.   Subject to the preceding provisions of this Article 12, Lessee may permit any Item (excluding Landing Gear) to be installed on another aircraft solely to the extent such aircraft is within Lessee’s fleet of aircraft owned or leased by Lessee; provided, however, upon the occurrence and continuation of a Default or Event of Default following the removal of any such Item from the Aircraft, Lessee shall promptly, but in no event later than ten (10) days following such Default or Event of Default:

 

(a)                                   reinstall on the Aircraft each such Item not then currently installed thereon, assuming such Item is in airworthy condition, or

 

(b)                                  in the event such Item is not in an airworthy condition, such Item shall be restored promptly to an airworthy condition and reinstalled on the Aircraft or, in the case of a Part, such Part may be exchanged in accordance with Section 12.11.

 

12.14.                   Failure to Reinstall Engines and Items of Equipment on the Aircraft.   If Lessee fails to comply with the requirements set forth in Sections 12.12 and 12.13 hereof, the provisions of Section 8 of Appendix 2B, under the heading of “Maintenance, Modification and Operation of the Aircraft” shall be applicable.

 

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which such claim is being made and (y) the Termination Date, provided, however, in the event Lessee does not have sufficient information necessary to submit such claim to Lessor by the time of the Termination Date, Lessee shall nevertheless notify Lessor of such pending claim on or prior to the Termination Date and such claim for reimbursement may then be made by Lessee following the Termination Date, but in no event later than the date that occurs one hundred eighty (180) days following the completion of the Maintenance Check for which such claim is being made.  Should Lessee fail to make such claim within such time period (or agree with Lessor in writing concerning an alternate disposition for such claim), Lessee shall thereafter be forever barred and estopped from making a claim in respect of such maintenance.

 

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14.                                SELLER’S AND MANUFACTURER’S WARRANTIES AND SUPPORT

 

14.1.                         Assignable Warranties .  At Delivery Lessor will assign or make available to Lessee for the duration of the Lease Term the benefit of all warranties given to Lessor by the Seller and the Engine Manufacturer pursuant to the airframe and engine warranty assignment agreements substantially in the forms appearing in Appendix 8. Lessor further agrees to assign or otherwise make available to Lessee such rights as Lessor may have under any warranty, service policy or product support plan of any manufacturer, vendor, subcontractor or supplier with respect to the Aircraft, any Engine or any Part, to the extent the same may legally be assigned or otherwise made available to Lessee.  Lessor agrees that it will not amend the Purchase Agreement if the amendment would have a materially adverse effect on the Aircraft or alter the Detail Specification or if it would affect the Scheduled Delivery Date of the Aircraft, unless Lessee otherwise consents, which consent will not be unreasonably withheld.

 

14.2.                         Reassignment; Assignment of Lessee Warranties .  On the Termination Date:

 

(a)                                   the benefit of any warranty and other rights assigned or made available by Lessor to Lessee pursuant to this Lease will be reassigned automatically and without further act or writing to Lessor or its designee; provided that upon the occurrence and continuation of an Event of Default, Lessor may instruct any Manufacturer of any Item of Equipment, by a reservation of rights, to make any payments of monies under any warranty claims made by Lessee directly to Lessor for further credit to Lessee upon and subject to Lessee’s cure of such Event of Default; and

 

(b)                                  Lessee shall assign and shall be deemed to have assigned to Lessor on and as of the Termination Date, at no charge to Lessor, any and all warranties Lessee has obtained in connection with any maintenance or services performed on the Aircraft or any Item of Equipment during the Lease Term.

 

14.3.                         Warranty Claims .  Lessee will diligently and promptly pursue any valid claims it may have under the warranties assigned to it hereunder with respect to the Aircraft and other Items of Equipment.  At the request of Lessor, Lessee shall provide an itemized list to Lessor not later than the earlier of (x) fourteen (14) days prior to the Scheduled Termination Date and (y) the Termination Date of all such warranty claims made by Lessee during the Lease Term to the extent historical records of the same are maintained by Lessee.

 

14.4.                         Assignment of Training, Product Support and Technical Assistance .  Contemporaneously with execution of the Participation Agreement, Lessor shall assign or cause to be assigned to Lessee certain rights to Seller and Engine Manufacturer training, product support and on-site technical assistance.  If Lessee fails to take Delivery of the Aircraft when tendered in accordance with this Lease (except as a result of a delay described in Section 8.3), Lessee will immediately pay to Lessor an amount equal to the Dollar value of such training (x) consumed by Lessee or (y) forfeited by Lessor, based on what the training and on-site technical assistance would have cost Lessee had Lessee purchased such training directly from Airframe Manufacturer and Engine Manufacturer. For the avoidance of doubt, this will include (i) an Airbus technical representative at Lessee’s premises for six (6) months after the Delivery Date, (ii) flight transition courses for eight (8) flight crews, consisting of one (1) captain and one (1) first officer per crew, to include ETOPS training, (iii) one hundred (100) days of maintenance training and (iv) one (1) cabin attendant course for up to three (3) cabin attendant instructors.

 

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15.                                SUBLEASING AND WET LEASING

 

15.1.                         Subleasing.   Provided no Default or Event of Default has occurred and is continuing, Lessee may, subject to the restrictions contained in Section 11.6, enter into Permitted Subleases for the Aircraft with Permitted Sublessees provided that:

 

(a)                                   The term of such Permitted Sublease is not for a period exceeding the Lease Term and shall expressly prohibit sub-subleasing of the Aircraft and any Item of Equipment independent of the Airframe;

 

(b)                                  the rights of the Permitted Sublessee under such Permitted Sublease are at all times expressly subject and subordinate to the rights of Lessor hereunder and to the interests of any Financing Parties and shall contain a provision substantially to the effect of:

 

“Anything in this sublease to the contrary notwithstanding, the sublessee’s rights hereunder to the possession, use and enjoyment of the Airframe, and if attached to the Airframe at the commencement of the sublease or if subsequently delivered to sublessee during the term of the sublease, the Engines in accordance with the terms hereof shall be subject to the Aircraft Lease Agreement dated October 31, 2008, (the ‘ Primary Lease ’) between C.I.T. Leasing Corporation, as lessor (the ‘ Primary Lessor ’), and the sublessor hereunder, in respect of the Aircraft, Airframe and Engines, and the sublessee confirms and agrees that this sublease is in all respects subject and subordinate to the Primary Lease.  Upon notice to the sublessee hereunder by the Primary Lessor that an Event of Default (as defined in the Primary Lease) has occurred and is continuing, and that the Primary Lease shall have been cancelled or terminated pursuant to the terms thereof, the Primary Lessor may, at its option, by written notice to the sublessee after the date of such cancellation or termination:

 

(i)                                      require the sublessee to enter into an agreement in form and substance satisfactory to the Primary Lessor, attorning to and recognizing the Primary Lessor, as the sublessor hereunder and reconfirming all of the obligations of the sublessee hereunder, or

 

(ii)                                   terminate this sublease and require prompt delivery by the sublessee of the Aircraft to the Primary Lessor, in accordance with the return provisions of this sublease.

 

Unless the sublessee shall have received any such written notice from the Primary Lessor requiring attornment or terminating this sublease, the sublessee shall be and remain fully obligated hereunder notwithstanding the continuance of any Event of Default under the Primary Lease or the termination or cancellation thereof pursuant to the terms thereof.”;

 

(c)                                   If the Permitted Sublessee is not a U.S. Air Carrier, Lessee shall cause it to deliver to and for the benefit of Lessor at or prior to the delivery of the Aircraft under the Permitted Sublease a supplemental power of attorney for deregistration of the Aircraft;

 

(d)                                  Lessee and such Permitted Sublessee shall not enter into any amendments, modifications, waivers or the like of any provision of the Permitted Sublease without Lessor’s prior written consent and should such consent be granted, Lessee shall deliver to Lessor a copy of any such duly executed agreements between Lessee and such Permitted Sublessee in connection with the same;

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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(e)                                   if necessary, Lessee and Permitted Sublessee shall authorize the filing of and deliver documents appropriate for perfection filings in State of Registration and such other jurisdictions as Lessor, in good faith, deems reasonable and appropriate, in form and substance satisfactory to Lessor, covering the interests of Lessee and such Permitted Sublessee under such Permitted Sublease, together with any other documents requested by Lessor to protect or perfect the interest of Lessor and any Financing Parties in the Permitted Sublease in the State of Registration and/or such other jurisdictions;

 

(f)                                     Lessee shall assign each Permitted Sublease and all rights and security deposits and maintenance and other reserves received thereunder to Lessor pursuant to a security assignment of the Permitted Sublease together with a consent and agreement of the Permitted Sublessee, each in form and substance satisfactory to Lessor and, if applicable, each Financing Party, as security for Lessee’s Obligations, and Lessor shall receive an opinion of Lessee’s counsel regarding the enforceability and perfection of the Permitted Sublease and such assignments for security and the consent and agreement or other assurances reasonably satisfactory to Lessor;

 

(g)                                  the provisions of each Permitted Sublease shall provide for benefits and protections to Lessee, as sublessor, which are (in respect of material terms and in the aggregate) not less advantageous to Lessee, as sublessor, than the benefits and protections provided to Lessor by the provisions of this Lease; and

 

(h)                                  Lessee shall (x) notify Lessor of the terms of each Permitted Sublease (and provide copies of the final drafts thereof) not less than ten (10) Business Days prior to the execution of such Permitted Sublease, and (y) furnish the “original” copy of such Permitted Sublease to Lessor as soon as possible after the execution thereof, but in any event prior to the delivery of the Aircraft to such Permitted Sublessee.

 

15.2.                         Wet Leasing.   Provided no Event of Default has occurred and is continuing, Lessee may, subject to the restrictions contained in Section 11.6, enter into Wet Leases for the Aircraft to any Person provided that:

 

(a)                                   the Wet Lease shall provide for the chartering of the Aircraft thereunder to cease if the leasing of the Aircraft under this Lease terminates for any reason;

 

(b)                                  the rights of the lessee under the Wet Lease are at all times expressly subject to and subordinate to, and do not conflict in any respect with (or give such wet lessee any rights greater than the rights of Lessee under), the terms of this Lease and the rights of Lessor hereunder and the interests of any Financing Party;

 

(c)                                   Lessee provides Lessor with (x) a certified copy of the applicable provisions from the Wet Lease or an officer’s certificate indicating whether Lessee or the wet lessee under the Wet Lease will be responsible for maintaining the primary passenger, baggage and cargo liability insurance relating to operation under the Wet Lease, and (y) a certified copy or original of an insurance certificate and broker’s letter of undertaking confirming the maintenance of insurance coverage required by this Lease; and

 

(d)                                  in any event, unless otherwise agreed by Lessor in writing, the term of such Wet Lease ends on a day not later than thirty (30) days prior to the Scheduled Termination Date.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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15.3.                         No Independent Subleasing of Items of Equipment.   No Item of Equipment may be subleased independently from the Aircraft.

 

15.4.                         Expenses.   Lessee shall pay or reimburse Lessor and any Financing Party on demand for their reasonable respective out of pocket costs and expenses incurred in connection with the review, negotiation and consummation of the transactions contemplated by any Permitted Sublease or Wet Lease and such parties may condition their consent and approval of the same on receipt of such payment or reimbursement.

 

15.5.                         Lessee Remains Liable.   Lessee shall remain primarily and fully responsible and liable for the performance of its Obligations under and the observance of the terms of this Lease and the Operative Documents, notwithstanding any Permitted Sublease or any Wet Lease, as if such Permitted Sublease or Wet Lease had not occurred.

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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16.                                REPORTING AND INSPECTIONS

 

16.1.                         Financial Reporting.   Lessee agrees to furnish to Lessor the following (unless available to Lessor via publicly available websites and Lessee has so advised Lessor), which shall be deemed Information:

 

(a)                                   Quarterly Statements.   As soon as practicable after the end of the first, second and third quarterly fiscal periods in each fiscal year of Holdings, and in any event within sixty (60) days thereafter (or, if Lessee has obtained an extension from the SEC to file its Form 10-Q, within ninety (90) days), a copy of the Form 10-Q (excluding exhibits) filed by Holdings with the SEC for such quarterly period; or if no such Form 10-Q was so filed, its consolidated balance sheet and related statements of operations and cash flows as of the end of and for such fiscal quarter (in the case of the statement of operations) and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, prepared in accordance with GAAP, subject to normal year-end audit adjustments;

 

(b)                                  Annual Statements.   As soon as practicable after the end of each fiscal year, and in any event within one hundred twenty (120) days thereafter, a copy of the Form 10-K (excluding exhibits) filed by Holdings with the SEC for such fiscal year, or, if no such Form 10-K was so filed, its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Holdings’ independent public accountants of recognized national standing to the effect that such consolidated financial statements present fairly in all material respects the consolidated financial condition and results of operations of Holdings and its Subsidiaries (including the Lessee) on a consolidated basis in accordance with GAAP;

 

(c)                                   [Reserved] .

 

(d)                                  Notice of Proceedings.   Prompt notice of any litigation or arbitral proceedings not covered by insurance (except for deductibles standard in the airline industry) and of all proceedings by or before any Governmental Authority (i) which might adversely affect Lessor’s ownership or other interests in the Aircraft, or (ii) which relate to the Aircraft and where the amount involved not covered by insurance is in excess of Two Hundred Fifty Thousand Dollars ($250,000); and

 

(e)                                   Additional Information.   Lessee will furnish to Lessor (i) all other information reasonably requested by Lessor with respect to the financial condition, operations, business and property of Lessee, (ii) promptly after the same has been made public, a copy of any announcement released by Lessee to any stock exchange on which Lessee is publicly traded by shares (if applicable), and (iii) a copy of any other information concerning Lessee’s business which Lessee releases or otherwise makes available to its other lessors, stockholders and/or creditors generally, provided, that Lessee shall not be required to send copies of the items described in clauses (ii) and (iii) above if such items are available to Lessor via the publicly available websites and Lessee has so advised Lessor.

 

16.2.                         Aircraft Utilization and Other Reporting/Information.   During the Lease Term, Lessee agrees to furnish to Lessor the following information in connection with Lessee’s utilization of the Aircraft:

 

*** Material has been omitted pursuant to a request for confidential treatment and filed separately with the SEC

 

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(a)                                   within (i) ten (10) days following the second Rent Payment Date and each remaining Rent Payment Date during the Lease Term, and (ii) on the Termination Date, a utilization report in the form appearing in Appendix 8 reporting the utilization of the Items of Equipment set forth therein for the immediately preceding calendar month or part thereof;

 

(b)