LEASE AGREEMENT

 

 

TABLE OF CONTENTS

 

		Page
ARTICLE 1.	DEFINITIONS AND INTERPRETATION	1-1
1.1	Definitions	1-1
1.2	Interpretation	1-11
ARTICLE 2.	DELIVERY AND ACCEPTANCE UNDER LEASE	2-1
2.1	Agreement to Lease	2-1
2.2	Conditions Precedent	2-1
2.3	Time of Delivery	2-4
2.4	Place of Delivery	2-5
2.5	Delivery Fuel	2-5
2.6	Inspection; Demonstration Flight	2-5
2.7	Specification Change Notices	2-6
2.8	Manufacturer Specification Change Notices; Development Changes	2-6
2.9	Buyer Furnished Equipment	2-7
ARTICLE 3.	TERM AND RENT	3-1
3.1	Term	3-1
3.2	Basic Rent	3-1
3.3	Security Deposit	3-1
3.4	Supplemental Rent	3-2
3.5	Payments on Business Days	3-2
3.6	Place of Payment	3-2
3.7	Computation of Interest and Other Payments	3-3
3.8	Prohibition Against Setoff, Counterclaim, etc.	3-3
ARTICLE 4.	DISCLAIMERS; WAIVERS; REPRESENTATIONS AND WARRANTIES	4-1
4.1	Lessor Disclaimer and Exclusion of Representations and Warranties	4-1
4.2	Waiver by Lessee	4-1

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

 

i

 

4.3	Confirmation by Lessee	4-2
4.4	Assignment of Warranties	4-2
4.5	Lessee’s Representations and Warranties	4-3
4.6	Lessor’s Representations and Warranties	4-4
ARTICLE 5.	POSSESSION AND USE	5-1
5.1	Possession	5-1
5.2	Lawful Operations; Use	5-1
5.3	Maintenance	5-3
5.4	Maintenance Payments	5-6
5.5	Registration and Insignia	5-14
5.6	Transfer of Engines Within Lessee’s Fleet	5-14
ARTICLE 6.	REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND ADDITIONS	6-1
6.1	Replacement of Parts	6-1
6.2	Pooling of Parts	6-3
6.3	Alterations, Modifications and Additions	6-3
ARTICLE 7.	INSPECTION; FINANCIAL INFORMATION; RECORDS	7-1
7.1	Information and Inspection	7-1
7.2	Financial and Other Information	7-1
7.3	Reports of Aircraft Use	7-2
ARTICLE 8.	INDEMNIFICATION BY LESSEE	8-1
8.1	General Indemnity	8-1
8.2	Withholding Tax Indemnity	8-1
8.3	Value Added Taxes	8-2
8.4	General Tax Indemnity	8-2
8.5	After-Tax Nature of Indemnity	8-6
8.6	Survival of Indemnities	8-6
8.7	Tax Forms	8-6
ARTICLE 9.	DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION	9-1
9.1	Event of Loss with Respect to Aircraft	9-1
9.2	Event of Loss with Respect to an Engine	9-1

 

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

 

ii

 

9.3	Application of Payments from Governmental Entity in Respect of Event of Loss	9-5
9.4	Application of Payments During Existence of Event or Event of Default	9-5
ARTICLE 10.	INSURANCE	10-1
10.1	Liability and Property Damage Insurance	10-1
10.2	Insurance Against Loss or Damage to Aircraft	10-1
10.3	Requirements in Insurance Policies	10-2
10.4	Uninsured Operations	10-4
10.5	Application of Insurance Proceeds for Event of Loss	10-4
10.6	Application of Insurance Proceeds for Other than Event of Loss	10-5
10.7	Application in Default	10-5
10.8	Reports, Certificates, etc.	10-5
10.9	Insurance - General	10-6
10.10	Insurance of Lessee’s Interest	10-6
10.11	Insurance of Removed Engines	10-7
10.12	Assignment of Rights by Lessor	10-7
ARTICLE 11.	MORTGAGES, LIENS, ETC.	11-1
ARTICLE 12.	RECORDATION AND FURTHER ASSURANCES	12-1
12.1	Recordation	12-1
12.2	Conventions	12-1
12.3	Further Assurances	12-1
ARTICLE 13.	RETURN OF AIRCRAFT AND RECORDS	13-1
13.1	Return	13-1
13.2	Inspection; Demonstration Flight	13-1
13.3	Flight Hours/Cycles/Time Requirements	13-2
13.4	General Return Requirements	13-4
13.5	Records	13-9
13.6	Warranty Rights	13-11
13.7	Navigation Charges, Landing Fees, etc.	13-11
13.8	Technical Acceptance; Ferry Flight	13-12

 

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

 

iii

 

13.9	Delay in Return	13-12
13.10	Aid in Disposition	13-13
13.11	Storage	13-14
13.12	Discharge of International Interests	13-14
ARTICLE 14.	EVENTS OF DEFAULT	14-1
14.1	Non-Payment	14-1
14.2	Insurance	14-1
14.3	Certain Breaches-Immediate Event of Default	14-1
14.4	Other Breaches	14-1
14.5	Representations	14-1
14.6	Certain Insolvency/Bankruptcy Events	14-1
14.7	Appointment of Receiver, etc.	14-1
14.8	Involuntary Bankruptcy	14-2
14.9	Adverse Judgment	14-2
14.10	Suspension of Licenses, etc.	14-2
14.11	Companion Leases	14-2
ARTICLE 15.	REMEDIES	15-1
15.1	Remedies of Lessor	15-1
15.2	Additional Damages	15-3
15.3	Remedies Not Exclusive	15-3
15.4	Rescission of Effect of Notice of Default	15-4
ARTICLE 16.	EXCUSABLE DELAY	16-1
16.1	General	16-1
16.2	Twelve (12) Months’ Excusable Delay	16-1
16.3	Consequence of Termination	16-1
16.4	Failure to Terminate	16-1
16.5	Damage to or Destruction of Aircraft — Delivery Delay	16-1
16.6	Termination Rights Exclusive	16-2
16.7	Compensation	16-2
ARTICLE 17.	MISCELLANEOUS	17-1
17.1	Construction and Applicable Law	17-1

 

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

 

iv

 

17.2	Notices	17-1
17.3	Lessor’s Right to Perform for Lessee	17-3
17.4	Corporate Existence; Merger	17-3
17.5	Integration	17-3
17.6	Quiet Enjoyment	17-3
17.7	Assignment	17-3
17.8	Expenses	17-5
17.9	Survival	17-5
17.10	English Language	17-5
17.11	Jurisdiction; Service of Process	17-5
17.12	Lessor’s Payment Obligations	17-7
17.13	Currency	17-7
17.14	Counterparts	17-7
17.15	Execution by Facsimile	17-7
17.16	Confidentiality	17-7
17.17	Servicing Agreement	17-8
17.18	Federal Bankruptcy Code	17-9
17.19	Product Services	17-9
17.20	Additional Covenant	17-9
ARTICLE 18.	CRAF PROGRAM	18-1
18.1	Commitment to CRAF	18-1
18.2	Indemnification by United States Government	18-1
18.3	No Geographical Limit	18-1
18.4	Notice of Default	18-2
18.5	Receipt of Payments	18-2
Schedule “1”		S-1
Exhibit A LEASE SUPPLEMENT		A-1
Exhibit B TRAINING AND OTHER SUPPORT SERVICES		B-1

 

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

 

v

 

votes) of whose voting stock (or in the case of a person that is not a corporation, 10% or more of the equity or beneficial interest) is beneficially owned, controlled or held by such person or a subsidiary of such person. The term “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise. The term “ person ” means any individual, partnership, corporation, limited liability company, trust, association, business organization, joint venture, government (or department or agency thereof), or any other entity.

 

“ Airbus Aircraft Specification ” means the Airbus A330-200 Standard Specification, Reference G 000 02000, Issue 4.3, dated July 13, 2006, as modified by Manufacturer to incorporate developmental changes or by mutual written agreement of Lessor and Lessee from time to time.

 

“ Aircraft ” means the Airframe to be leased hereunder, together with each Engine initially installed on the Airframe when delivered and leased hereunder (or any engine substituted for any such Engine pursuant to the terms of this Lease), whether or not any of such initial or substituted Engines may from time to time no longer be installed on the Airframe or on any other aircraft.

 

“ Aircraft Documentation ” means the log books, manuals, technical data, and all inspection, modification, and overhaul records and other service, repair, maintenance and technical records that are required by the Aeronautics Authority, this Lease, or the Maintenance Program to be maintained with respect to the Aircraft, Airframe, Engines or any Part, or that are of a type required to be delivered by Lessee upon return of the Aircraft, Airframe, or Engines under Article 13 of this Lease; and such term shall include all additions, renewals, revisions, and replacements of any such materials from time to time made or required to be made, in accordance with this Lease, the Maintenance Program or such Aeronautics Authority regulations.

 

“ Airframe ” means:

 

(i)             the factory new Airbus Model A330-200 aircraft, excluding any Engines or other engines that may be installed on such aircraft from time to time, to be manufactured and sold by Manufacturer to Lessor pursuant to the Purchase Agreement and leased by Lessor to Lessee hereunder; and

 

(ii)            any and all Parts, so long as the same shall be incorporated in or installed on or attached to the Airframe or so long as title thereto shall remain vested in Lessor in accordance with the terms of Article 6 hereof after removal from the Airframe.

 

“ Approved Maintenance Performer ” means any maintenance performer chosen by Lessee and approved by Lessor, which approval shall not be unreasonably withheld, and holding all necessary approvals of the Aeronautics Authority (FAR145) for the performance of the maintenance tasks to be performed in respect of the Airframe, Engines and Parts, including the APU or Landing Gear.

 

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

 

1-2

 

“ APU ” means the auxiliary power unit installed in the Airframe on the Delivery Date (or such auxiliary power unit as may be substituted therefor after the Delivery Date with the prior consent of Lessor and in accordance with the requirements of this Lease).

 

“ APU Hour ” means, in respect of the APU or other auxiliary power unit, each hour or part thereof which elapses from the time the APU or such other auxiliary power unit is turned on to the time the APU or such other auxiliary power unit is turned off.

 

“ Assignment of Warranties ” means assignment of warranties agreements, in form and substance reasonably satisfactory to Lessee and Lessor, to be executed by Lessor in favor of Lessee, together with the consent thereto of the Manufacturer in respect of the Airframe warranties and the consent of the Engine manufacturer in respect of the Engines warranties, pursuant to which Lessor will assign to Lessee the right to enforce the warranties in respect of the Aircraft.

 

“ Basic Rent ” for the Aircraft means the basic rent payable for the Aircraft pursuant to Article 3.2 hereof (as supplemented by Schedule “1” hereto).

 

“ BFE ” means the items of equipment that are described in the Airbus Aircraft Standard Specification as being furnished for the Aircraft by Lessor, and such other items of equipment as Lessor and Lessee may agree to incorporate into the Aircraft pursuant to Article 2.9 hereof.

 

“ BFE Budgeted Amount ” has the meaning assigned to such term in paragraph 3 of Schedule “1” hereto.

 

“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banking institutions in the city of Honolulu, Hawaii, or New York, New York (or such other city as may be designated by Lessor from time to time pursuant to Article 3.6 hereof) are authorized by applicable Law to be closed.

 

“ Cape Town Convention ” means the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, both signed in Cape Town, South Africa, on November 16, 2001, together with any protocols, regulations, rules, orders, agreements, instruments, amendments, supplements, revisions or otherwise that have or will be subsequently made in connection with the Cape Town Convention by the “Supervisory Authority” (as defined in the Cape Town Convention), the “International Registry” or “Registrar” (as defined in the Cape Town Convention) or any other appropriate “registry authority” (as defined in the Cape Town Convention) or other international or national body or authority. For the avoidance of doubt, references to the Cape Town Convention are to be deemed references to the English language version of the Cape Town Convention.

 

“ Certificated Air Carrier ” means an air carrier holding an air carrier operating certificate issued by the United States Secretary of Transportation pursuant to chapter 447 of title 49 of the United States Code Annotated, or under similar provisions of any statute enacted in lieu thereof.

 

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

 

1-3

 

“ Citizen of the United States ” has the meaning set forth in Section 40102(a)(15)(c) of the Title 49 of the United States Code.

 

“ Companion Lease ” means:  (i) each of the four Lease Agreements dated as of September 20, 2001, between AWMS I, a Delaware statutory trust (an Affiliate of Lessor), and Lessee pursuant to each of which AWMS I has leased to Lessee one Boeing Model 767-300AER aircraft (as modified, amended or supplemented from time to time), (ii) the Lease Agreement dated the date of this Lease, between Lessor or an Affiliate of Lessor and Lessee pursuant to which Lessor or such Affiliate has agreed to lease to Lessee another Airbus Model A330-200 aircraft (as modified, amended or supplemented from time to time), and (iii) each lease agreement or sublease agreement that may hereafter be entered into between Lessee, as lessee, and Lessor or any Affiliate of Lessor, as lessor, in respect of any aircraft (as modified, amended or supplemented from time to time).

 

“ Consent to Security Assignment ” means the acknowledgement and consent to the Security Assignment to be executed by Lessee in the form provided to Lessee by Lessor and Mortgagee.

 

“ Contractual Definition Freeze Date ” means the date by which, pursuant to the Purchase Agreement, the contractual definition of the Aircraft must be finalized and all SCN’s must be executed by Lessor in conjunction with Lessee pursuant to Article 2.7 to enable Manufacturer to incorporate the SCN’s into the manufacturing of the Aircraft and to be able to deliver the Aircraft during the contracted delivery month under the Purchase Agreement.

 

“ Country of Registration ” means the United States of America.

 

“ Cycle ” means:

 

(i)             with respect to the Airframe, one take-off and landing of the Airframe,

 

(ii)            with respect to an Engine or other engine,  the operation of such Engine or other engine from the time the Airframe or other airframe on which such Engine or other engine is installed leaves the ground until it touches the ground at the end of a flight (but, an aborted take-off, an aborted landing or a touch and go landing shall also be considered as a Cycle);

 

(iii)           with respect to any Part or part, one take-off and landing of the Aircraft or other aircraft on which such Part or part is installed.

 

“ Delivery Date ” means the date of the Lease Supplement for the Aircraft, which date shall be the same date the Aircraft is delivered to, and accepted by, Lessee hereunder.

 

“ Dollars ” or “ $ ” means lawful currency of the United States of America.

 

“ EASA ” means the European Aviation Safety Agency, created pursuant to the European Union and Council Regulation No. 1592/2002 (as the same may be amended, modified, superseded or

 

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

 

1-4

 

re-enacted from time to time), or any successor thereof, and any other person or Governmental Entity succeeding to any of the functions thereof.

 

“ EMP ” or “ Engine Management Program ” means the engine management program proposed by the Engine manufacturer and agreed by Lessee (which, among other things, specifies the Engine configuration, Lessee’s specific instructions for the incorporation of airworthiness directives, alert service bulletins and other recommended service bulletins and the shop management requirements for the repair of Lessee’s engines) and included in the Maintenance Program which is approved by the Aeronautics Authority, so long as the same is reasonably acceptable to Lessor (which acceptance will not be unreasonably withheld or delayed), and as may be amended from time to time with the consent of Lessor (which consent will not be unreasonably withheld or delayed) following proposals by the Engine manufacturer and agreed and approved by Lessee and the Aeronautics Authority.

 

“ Engine ” means:

 

(i)             each of the two Rolls Royce Trent 772B engines, rated at 71,100 lbs. nominal thrust, specified by manufacturer’s serial numbers in the Lease Supplement entered into on the Delivery Date (or an engine which may from time to time be substituted for such an Engine pursuant to Article 9.2), whether or not from time to time installed on the Airframe or installed on any other aircraft, and

 

(ii)            any and all Parts, so long as the same shall be incorporated in or installed on or attached to such Engine (or engine) or so long as title thereto shall remain vested in Lessor in accordance with the terms of Article 6 hereof after removal from such Engine (or engine).

 

“ Equipment ” means, as the context may require, the Aircraft, Airframe and Engines then leased hereunder. An “ Item of Equipment ” means, as the context may require, the Aircraft, Airframe or any Engine then leased hereunder.

 

“ Eurocontrol ” means the European Organization for the Safety of Air Navigation established by the Convention related to the Co-operation for the Safety of Air Navigation (Eurocontrol) signed on 13 December 1960, as amended by the protocol thereto signed on 12 February 1981.

 

“ Event ” means an event or occurrence which, with the passing of time and/or the giving of notice, would constitute an Event of Default.

 

“ Event of Default ” means any of the events referred to in Article 14 hereof.

 

“ Event of Loss ” with respect to any Item of Equipment means any of the following events with respect to such Item of Equipment:

 

(i)             loss of such Item of Equipment or the use thereof due to hijacking, theft or disappearance for a period in excess of ninety (90) days, or destruction, damage

 

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

 

1-5

 

beyond economic repair or rendition of such Item of Equipment permanently unfit for normal use for any reason whatsoever;

 

(ii)            any loss of or damage to such Item of Equipment which results in an insurance settlement with respect thereto on the basis of a total loss, or a constructive or compromised total loss;

 

(iii)           the condemnation, confiscation, deprivation or seizure of, or requisition of title to or use of, such Item of Equipment, other than a requisition for use of such Item of Equipment by any Governmental Entity of the Country of Registration of the Aircraft for a period of less than ninety (90) days; or

 

(iv)           as a result of any rule, regulation, order, or other action by the Aeronautics Authority or other governmental body having jurisdiction, the use of such Item of Equipment in the normal course of air transportation of persons shall have been prohibited for a period of six consecutive months.

 

An Event of Loss to the Aircraft shall be deemed to have occurred if an Event of Loss occurs with respect to the Airframe of the Aircraft.

 

“ Excusable Delay ” shall have the meaning set forth in Article 16 hereof.

 

“ FAR ” means the United States Federal Aviation Regulations issued by the FAA pursuant to the Federal Aviation Act of 1994, embodied in Title 14 of the United States Code of Federal Regulations, as amended or supplemented from time to time.

 

“ Flight Hour ” means:

 

(i)             with respect to the Airframe, each hour or part thereof which elapses from the time the wheels of the Airframe leave the ground on takeoff to the time when the wheels of the Airframe touch the ground on landing; and

 

(ii)            with respect to an Engine or other engine or any Part or part, including the APU, each hour or part thereof which elapses from the time the wheels of the airframe, whether or not the Airframe leased hereunder, on which such Engine or other engine or Part or part is installed, leave the ground on takeoff to the time when the wheels of such airframe touch the ground on landing.

 

“ GAAP ” means generally accepted accounting principles in the United States of America applied on a consistent basis.

 

“ Governmental Entity ” means:

 

(i)             any national, federal, state or local government, or any board, commission, bureau, department, division, instrumentality, court, agency, regulatory authority, taxing authority or political subdivision thereof; and

 

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

 

1-6

 

(ii)            any association, organization or institution of which any entity referred to in clause (i) is a member or to whose jurisdiction any such entity is subject or in whose activities any such entity is a participant.

 

“ Holdings ” means Hawaiian Holdings, Inc., a Delaware corporation and the parent of Lessee.

 

“ Incentive Rate ” means a rate equal to two (2) percentage points above the prime or base rate of interest charged by Citibank, N.A., in New York from time to time as its prime or base commercial lending rate, but, if prohibited by applicable Law, the maximum contract rate permitted by applicable Law.

 

“ International Interest ” has the meaning assigned in the Cape Town Convention.

 

“ International Registry ” means the registration operations established pursuant to the Cape Town Convention by Aviareto in Dublin, Ireland.

 

“ Landing Gear ” means the landing gear (as per the Manufacturer’s definition, i.e. , excluding actuating mechanisms, etc.) installed on the Airframe on the Delivery Date (or such landing gear as may be substituted therefor after the Delivery Date with the prior consent of Lessor and in accordance with the requirements of this Lease).

 

“ Law ” means any:

 

(i)             statute, law, decree, constitution, regulation, rule, order or directive of any Governmental Entity;

 

(ii)            treaty, pact, compact or other agreement to which any Governmental Entity is a signatory or party; and

 

(iii)           judicial or administrative interpretation or application of any of the foregoing, as any of the foregoing may be revised, amended, substituted or re-enacted.

 

“ Lease Agreement ,” “ this Lease ,” “ this Agreement ,” “ herein ,” “ hereof ,” “ hereunder ” or other like words means this Lease Agreement as the same may hereafter from time to time be supplemented, amended, waived or modified pursuant to the applicable provisions hereof, including, without limitation, supplementation hereof by one or more Lease Supplements.

 

“ Lease Supplement ” means each Lease Supplement, substantially in the form of Exhibit ”A” hereto, to be entered into between Lessor and Lessee for the purpose of leasing an Item of Equipment under and pursuant to the terms of this Lease Agreement.

 

“ Lender ” means each bank, financial institution or other entity (including any facility agent or other agent or representative acting on behalf of such entities) that has entered into the Loan Agreement with Lessor (and any Affiliate(s) of Lessor) for the purpose of financing the acquisition of the Aircraft by Lessor, and their respective successors and assigns.

 

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

 

1-7

 

“ Lessor Lien ” means:

 

(i)             the rights of Lessor, Lender or any other person or entity having an ownership, mortgage or security interest in the Aircraft or this Lease which has been granted or conveyed by Lessor, including the interests created pursuant to the Security Documents; and

 

(ii)            Liens which result from claims against Lessor or Lender that are not to be paid or indemnified against by Lessee under this Lease.

 

“ Lien ” means any mortgage, pledge, lien, charge, encumbrance, lease, security interest, statutory detention right or claim (including any claim for nonpayment of fees or charges by Eurocontrol, any airport authority or traffic control authority or any claim for airport or landing fees or related charges).

 

“ Loan Agreement ” means the loan agreement, credit agreement or similar agreement to be entered into between each Lender, Lessor and certain other entities more particularly identified therein, pursuant to which each Lender will make a loan to Lessor to finance the purchase of the Aircraft by Lessor, as such loan agreement may be modified, amended or supplemented from time to time.

 

“ Maintenance Payments ” means the maintenance payments payable by Lessee pursuant to Article 5.4 (as supplemented by Schedule “1” hereto).

 

“ Maintenance Program ,” as of any date of determination, means Lessee’s program of overhaul and maintenance for the Equipment, approved by the Aeronautics Authority and which:

 

(i)             at all times complies in all material respects with the then latest revision of the MPD;

 

(ii)            at all times complies in all material respects with the Engine manufacturer’s then latest recommendations for on-wing maintenance of the Engines; and

 

(iii)           is reasonably satisfactory to Lessor.

 

“ Manufacturer ” means Airbus S.A.S., a societe par actions simplifiee, created and existing under French Law.

 

“ Mortgage ” means the aircraft mortgage agreement, indenture or similar agreement to be entered into between Lessor, Mortgagee and certain other entities more particularly described therein, pursuant to which Lessor will mortgage its right, title and interest in and to the Aircraft and certain other property (as more particularly described in the Mortgage) as security for, among other things, the obligations of Lessor under the Loan Agreement, as the same may be amended, modified or supplemented from time to time.

 

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

 

1-8

 

“ Mortgagee ” means the entity identified in the Lease Supplement to be entered into on the Delivery Date as the mortgagee under the Mortgage, and its successors and assigns.

 

“ MPD ” means the Manufacturer’s Maintenance Planning Document for Airbus A330 aircraft, as the same may have been revised, amended, supplemented or updated from time to time.

 

“ Participants ” means Servicer, each Sub-Servicer, AWAS Aviation Trading Limited, AWAS Aviation Capital Limited, and Mortgagee (and any other person or entity hereafter acquiring an ownership or mortgage interest in the Aircraft, whether as owner trustee, indenture trustee, mortgagee, owner participant, loan participant or otherwise).

 

“ Parts ” means all appliances, components, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature, including BFE, the APU and Landing Gear (but excluding whole Engines or engines), so long as the same shall be furnished with, incorporated in, installed on, or attached to the Aircraft, Airframe or any Engine or so long as title thereto shall remain vested in Lessor in accordance with the terms of Article 6 hereof after removal from the Aircraft, Airframe or such Engine.

 

“ Performance Restoration ” of an Engine means a shop visit for such Engine performed by an Approved Maintenance Performer that involves a full refurbishment workscope (minimum of level 3 in accordance with the EMP) in respect of Module 41 (HPC, HPT and Combustor), and Module 51 (IPT) of the Engine, to the extent required by the Rolls Royce Engine Manual and the EMP, and which results in performance restoration of such Engine and the zero-timing of  Module 41 (HPC, HPT and Combustor) and Module 51 (IPT) for soft-life purposes in accordance with the EMP.

 

“ PMA Parts ” shall mean Parts manufactured in accordance with a Parts Manufacturing Approval Supplement issued by the FAA.

 

“ Prevailing Swap Rate ,” for purposes of adjusting the Basic Rent payment amount pursuant to Article 3.2.2, means the eight (8) year Dollar swap ask rate as quoted on Reuters on the third (3 rd ) Business Day preceding the Delivery Date.

 

“ Purchase Agreement ” means the A330-200 Purchase Agreement between Manufacturer and Lessor (by assignment in respect of the Aircraft), dated as of December 21, 2006, including the Aircraft General Terms Agreement between Manufacturer and Lessor (by assignment in respect of the Aircraft), also dated as of December 21, 2006, and the Airbus Aircraft Specification, to the extent the same relates to the Aircraft, as such Purchase Agreement has heretofore been, and may hereafter from time to time be, assigned, novated, supplemented, amended, waived or modified.

 

“ Rent ” means Basic Rent and Supplemental Rent.

 

“ RFC ” shall have the meaning set forth in Article 2.7 hereof.

 

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

 

1-9

 

“ Scheduled Aircraft Delivery ” for the Aircraft means the month set forth in Article 2.3.1 in which Lessor and Lessee anticipate that the Aircraft will be ready to be delivered to Lessee in accordance with the requirements of this Lease.

 

“ SCN ” means a specification change notice, including the specification change notices incorporated in the Aircraft as contemplated by Article 2.7 and 2.8, which amend the Airbus Aircraft Specification.

 

“ Security Assignment ” means any security assignment to be entered into by Lessor in favor of Mortgagee or a Lender pursuant to which Lessor will assign its rights and interests under this Lease as collateral security for, among other things, the obligations of Lessor under the Loan Agreement.

 

“ Security Document ” means the Mortgage, the Security Assignment and any other document or agreement creating a Lien over the Aircraft or this Lease in favor of Mortgagee or any Lender identified as such from time to time by Lessor to Lessee.

 

“ Security Deposit ” means the cash security deposited with Lessor pursuant to Article 3.3 (as supplemented by Schedule “1”).

 

“ Servicer ” means AWAS (Ireland) Limited, and its successors, transferees and assigns.

 

“ Stipulated Loss Value ” for an Item of Equipment, as of any date of computation, means the applicable sum specified in paragraph 2 of Schedule “1” hereto as the Stipulated Loss Value for such Item of Equipment as of such date of computation.

 

“ Sub-Servicer ” means any of AWAS Aviation Services, Inc., a New York corporation, and AWAS (Singapore) Pte. Ltd., a Singapore company, and each of their respective successors, transferees and assigns.

 

“ Supplemental Rent ” means any and all amounts, liabilities and obligations which Lessee assumes or agrees hereunder to pay to Lessor or others, including Maintenance Payments and Stipulated Loss Value payments, but excluding Basic Rent.

 

“ Term ,” in respect of an Item of Equipment, means the lease term for which such Item of Equipment is leased hereunder pursuant to Article 3.1 hereof, including the extended Term (but only on and after the date Lessee notifies Lessor of its election to exercise such option to extend).

 

“ TotalCare Agreement ” means an agreement with respect to the Engines between Lessee and the Engine manufacturer (or a member of the Engine manufacturer’s affiliated group of companies that customarily enters into such agreements) providing, among other services, for the repair and maintenance of the Engines, including the performance of Performance Restoration shop visits for the Engines. For the avoidance of doubt, the TotalCare Agreement does not include the replacement of life-limited Parts of the Engines, in the absence of additional charges.

 

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

 

1-10

 

 

 

 

ARTICLE 2.           DELIVERY AND ACCEPTANCE UNDER LEASE .

 

2.1           Agreement to Lease . Lessor hereby agrees to lease to Lessee hereunder, and Lessee hereby agrees to lease from Lessor hereunder, the Aircraft upon delivery thereof by Manufacturer under the Purchase Agreement, as further evidenced by the execution by Lessor and Lessee of a Lease Supplement on the Delivery Date.

 

2.2           Conditions Precedent . Lessor’s obligation to 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:

 

2.2.1        Pre-Delivery . On or prior to the date specified below, Lessor shall have received:

 

(i)             within thirty (30) days following the date this Lease is signed by Lessor and Lessee, and in any event prior to the date the Aircraft is ready for delivery to Lessee hereunder, (1) a copy of the constitutional documents of Lessee, and (2) a copy of a resolution of the Board of Directors of Lessee, certified by the appropriate officer(s) of Lessee, duly authorizing or ratifying the lease of the Aircraft hereunder and the execution, delivery and performance of this Lease, the Lease Supplement and all other documents and agreements that are to be executed and delivered by Lessee pursuant hereto;

 

(ii)            on the date this Lease is signed by Lessor and Lessee, the second portion of the Security Deposit required as of such date pursuant to the first sentence of paragraph 4 of Schedule “1”; and no later than February 1, 2010 (or such later date as may be determined under the circumstances contemplated in paragraph 4 of Schedule “1”), the third portion of the Security Deposit required as of such date pursuant to the second sentence of paragraph 4 of Schedule “1”; and

 

(iii)           at least three (3) Business Days prior to the Scheduled Aircraft Delivery date, a copy of the Maintenance Program for the Aircraft approved by the Aeronautics Authority, to enable Lessor to verify to its satisfaction that the Maintenance Program fully complies with the MPD.

 

2.2.2        Delivery . The following additional conditions shall be complied with to Lessor’s satisfaction (or be waived by Lessor) at or prior to the time the Aircraft is ready for delivery from Lessor to Lessee hereunder or on such earlier date as may be applicable to such condition:

 

(i)             Lessor shall have received the following:

 

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

 

2-1

 

(A)           the Lease Supplement for the Aircraft, duly authorized and executed by Lessee and dated the Delivery Date for the Aircraft;

 

(B)            the first installment of Basic Rent for the Aircraft required under Article 3.2;

 

(C)            payment of any remaining portion of the Security Deposit required pursuant to the second paragraph of paragraph 4 of Schedule “1”;

 

(D)           at least three (3) Business Days prior to the Delivery Date, a certificate and a letter of undertaking signed by independent aircraft insurance brokers as to the due compliance with the insurance provisions of Article 10 hereof;

 

(E)            a favorable opinion of Lessee’s internal and external counsel, addressed to Lessor and Mortgagee and dated the Delivery Date for the Aircraft, concerning the matters set forth in Article 4.5.1 through 4.5.7, and as to such other matters as Lessor shall specify;

 

(F)            at Lessee’s expense, a favorable opinion of FAA counsel satisfactory to Lessor concerning the proper registration of the Aircraft with the FAA and (provided Lessor and Mortgagee have taken all action required to be taken by them in connection with the financing by Lessor of the Aircraft) the recordation of Lessor’s and Mortgagee’s interests in the Aircraft and in this Lease with the FAA and at the International Registry;

 

(G)            evidence satisfactory to Lessor that Lessee has duly obtained any required import license to import the Aircraft into the Country of Registration, and has paid all import duties, if any, resulting from the transactions contemplated by this Lease;

 

(H)           a copy of Lessee’s Air Transport License and Lessee’s Operator’s Certificate listing the Aircraft thereon, issued by the Aeronautics Authority;

 

(I)             the Consent to Security Assignment, duly executed by Lessee, acknowledging the notice of the assignment of this Lease to be provided to Lessee by Lessor and Mortgagee (which notice of assignment shall contain a covenant of quiet enjoyment from Mortgagee to the effect that if, and as long as, Lessee performs and observes each and every covenant and agreement to be performed or observed by it hereunder and no Event of Default shall have occurred and be continuing, Lessee shall quietly enjoy the Aircraft

 

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

 

2-2

 

without hindrance or interference by Mortgagee or by any other person lawfully claiming through Mortgagee); and

 

(J)             such other documents as Lessor may reasonably request.

 

(ii)            During the period commencing June 30, 2008, through the Delivery Date for the Aircraft, the following statements shall be true and Lessor shall have received a certificate, signed by a duly authorized officer of Lessee, dated the Delivery Date, stating that:

 

(A)           the representations and warranties contained in Article 4.5 hereof are true and accurate throughout such period as though made on and as of each date in such period (except to the extent that such representations and warranties relate solely to an earlier date);

 

(B)            no event has occurred and is continuing, or would result from the lease of the Aircraft, which constitutes an Event or an Event of Default; and

 

(C)            as of the Delivery Date, all necessary approvals, authorizations, consents, licenses, certificates and orders of the Aeronautics Authority and any other Governmental Entity having jurisdiction with respect to the ownership, use or operation of the Aircraft or the transactions contemplated by this Lease have been obtained, and such approvals, authorizations, consents, licenses, certificates and orders are in full force and effect and constitute sufficient authorization therefor.

 

(iii)           Lessor shall be satisfied, in Lessor’s reasonable opinion, that no material adverse change has occurred in Lessee’s financial condition or operations at any time during the period December 31, 2007, through the date the Aircraft is ready for delivery hereunder.

 

If any of the conditions contained in Article 2.2.1 or 2.2.2 have not been fulfilled, observed or complied with, other than as a result of Lessor’s failure to perform its obligations hereunder, the same shall constitute an Event of Default under this Lease.

 

2.2.3        Conditions of 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:

 

(i)             Subject to compliance by Lessee with the conditions precedent specified in this Article 2, Lessee shall have received the following:

 

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

 

2-3

 

(A)           guaranty agreement, duly executed in favor of Lessee by AWAS Aviation Trading Limited, guaranteeing performance of Lessor’s obligations hereunder;

 

(B)            executed copies of the Assignment of Warranties in respect of the Airframe and the Engines, together with the consents of the Manufacturer and the manufacturer of the Engines in respect thereof;

 

(C)            a certificate from Lessor confirming that the representations and warranties contained in Article 4.6 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);

 

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

 

(E)            a receipt for the Security Deposit; and

 

(F)            the Aircraft shall be painted in Lessee’s livery and shall be in compliance with the Airbus Aircraft Specification.

 

As promptly as possible following the Delivery Date (but in any event prior to the first payment required to be made by Lessee following the Delivery Date), Lessor shall provide (or Lessor (or Lessor’s assignees or transferees, other than an assignee for security purposes) shall ensure that any entity or person that acquires a direct or beneficial interest in this Lease by assignment, sale, novation or transfer pursuant to Article 17.7 shall provide) to Lessee a true, complete and accurate Form W-8BEN, W-8ECI, W-9, or similar form, duly executed by the person(s) treated as the recipient(s), for U.S. tax purposes, of the payments made by Lessee under this Lease.

 

2.3           Time of Delivery .

 

2.3.1        Scheduled Aircraft Delivery . Subject to the provisions of Article 16, and the satisfaction (or waiver) of the conditions set forth in Article 2 hereof, the Aircraft shall be delivered to Lessee, and Lessee shall accept delivery of the Aircraft hereunder, upon tender of delivery of the Aircraft by Manufacturer under the Purchase Agreement and conformity of the Airbus Aircraft Specification with such SCN’s as shall be agreed between Lessor and Lessee, currently scheduled to occur during the month of April, 2011. Lessor shall give Lessee at least seven (7) days’ advance notice of the date on which the Aircraft is expected to be delivered to Lessee hereunder, and shall promptly advise Lessee if such expected Delivery Date is required to be delayed (and, if a delay is required, Lessor shall advise Lessee of the revised expected Delivery Date and shall keep Lessee fully advised of any developments in respect thereof).

 

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

 

2-4

 

2.3.2        Delay or Failure in Delivery . Subject to Article 16 hereof, Lessor shall not be liable for any loss or expense, including loss of profit, or other damage suffered by Lessee based on or resulting from any delay or failure in delivery of the Aircraft to Lessee, unless such delay or failure is the direct result of the willful misconduct or gross negligence of Lessor. In no event will Lessor be liable for any delay or failure in delivery which is caused by a breach or delay on the part of the Manufacturer under the Purchase Agreement.

 

2.3.3        Lessee Failure to Perform . If the Aircraft is tendered for delivery to Lessee in compliance with the requirements of the Purchase Agreement and this Lease but delivery of the Aircraft does not occur due to Lessee’s fault or responsibility, without limiting Lessor’s rights to cancel or terminate this Lease and to recover damages as the result of Lessee’s failure to take delivery of the Aircraft, Lessee shall promptly reimburse Lessor for all reasonable costs and expenses incurred by Lessor as a result of such delay, including but not limited to reasonable amounts for transportation, storage, insurance, taxes, preservation or protection of the Aircraft, legal expenses attributable to the delay, and costs incurred by Lessor in connection with financing of the Aircraft to the extent attributable to the delay, and any interest on payments payable or that would have been payable in respect of the Aircraft to Manufacturer, and Lessee shall also be obligated to pay Lessor, on demand, an amount equal to the Basic Rent that would have been payable in respect of the Aircraft hereunder if Lessee had taken delivery of the Aircraft on such expected Delivery Date, prorated on a daily basis for each day from and including such expected Delivery Date to the earlier of the date the Aircraft is delivered to Lessee hereunder or the date this Lease is terminated or canceled by Lessor as a result of Lessee’s failure to take delivery of the Aircraft in accordance with the terms and conditions of this Lease. For the avoidance of doubt, Lessor shall use commercially reasonable efforts to mitigate such damages.

 

2.4           Place of Delivery . The Aircraft shall be delivered to Lessee hereunder at the Manufacturer’s delivery location in Toulouse, France, or, at Lessee’s expense, at such alternate site as may be mutually agreed upon in writing by Lessor and Lessee.

 

2.5           Delivery Fuel . Promptly after the Delivery Date for the Aircraft, but in no event more than thirty (30) days thereafter, Lessee shall reimburse Lessor for the cost of the fuel contained in the fuel tanks of the Aircraft on delivery.

 

2.6           Aircraft Condition at Delivery . The Aircraft shall be delivered to Lessee hereunder factory new from Manufacturer in the Airbus Aircraft Specification, and evidence thereof (or waiver thereof by Lessee) shall be conclusively demonstrated by Lessee’s execution of the Lease Supplement on the Delivery Date (subject to any minor discrepancies that Manufacturer, Lessor and Lessee agree are inconsistent with the requirements of the Purchase Agreement and this Lease and are listed by Lessor and Lessee in the schedule to the Lease Supplement for correction by Manufacturer subsequent to delivery of the Aircraft).

 

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

 

2-5

 

Lessee shall participate with Lessor in Manufacturer’s customary configuration development process for the Aircraft and shall consult with Lessor in a timely fashion to establish a mutually agreeable final specification for the Aircraft prior to the respective cut-off dates dictated by the Customization Milestones Chart to be supplied by Manufacturer to Lessor and Lessee pursuant to the Purchase Agreement. In any event, the final specification for the Aircraft shall be agreed by the Contractual Definition Freeze Date, both parties acting reasonably and in good faith.

 

Lessor shall permit (and shall cause Manufacturer to permit) Lessee to observe the Manufacturer’s technical acceptance process for the Aircraft and to attend and observe the acceptance tests of the Aircraft contemplated for the Aircraft under the Purchase Agreement. In furtherance thereof, Lessor shall enter into a Participation Agreement with Lessee, which shall be consented to by Manufacturer, providing for Lessee’s participation in such process and tests.

 

2.7  Specification Change Notices . Subject to the terms of the Purchase Agreement, the Airbus Aircraft Specification may, by mutual agreement between Lessee and Lessor, be amended from time to time, such agreement not to be unreasonably withheld. Lessor shall notify Manufacturer of each such proposed change agreed between Lessor and Lessee by way of a request for change (“RFC”) and, if accepted by Manufacturer, the proposed change referenced in the RFC will be detailed in an SCN issued by Manufacturer, which shall set forth the effect, if any, of such particular changes on the design, performance, weight, expected delivery date, BFE and price of the Aircraft. Such SCN’s and other written agreements shall be signed on behalf of Lessor by its duly authorized representative. For the avoidance of doubt, title to any Parts and any documentation relating to any SCN shall at all times be and remain the property of Lessor.

 

2.8  Manufacturer Specification Change Notices; Development Changes . The Airbus Aircraft Specification also may be revised by Manufacturer without Lessee’s consent to incorporate development changes if such changes do not adversely affect Lessor’s cost or the Scheduled Aircraft Delivery, weight, performance or interchangeability or replaceability requirements. Development changes are changes deemed necessary to correct defects, improve the Aircraft, prevent industrial delay, or ensure compliance with the Purchase Agreement.

 

In addition, in the event Manufacturer proposes a specification change to the Aircraft that is not a development change referred to in the preceding paragraph and adversely affects Lessor’s cost or the Scheduled Aircraft Delivery, weight, performance or interchangeability or replaceability requirements, Manufacturer will furnish Lessor with a notice of such a change via a Manufacturer Specification Change Notice (“MSCN”). Lessor will promptly provide Lessee with the MSCN received by Lessor from Manufacturer (if not already advised to Lessee by Manufacturer) regarding the proposed specification change. Lessor and Lessee shall mutually decide whether to accept or reject such MSCN’s. Unless Lessee notifies Lessor in writing within twenty one (21) days of receipt of the MSCN that the change specified therein is not acceptable to Lessee, the same may be accepted by Lessor and, if so accepted, the Airbus Aircraft Specification shall be changed accordingly. If no notice of rejection is received by Manufacturer rejecting an MSCN, the MSCN shall be deemed to have been accepted. For the avoidance of doubt, title to any Parts and any documentation relating to any developmental changes or

 

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

 

2-6

 

Manufacturer proposed specification changes to the Aircraft shall at all times be and remain the property of Lessor.

 

2.9  Buyer Furnished Equipment . In addition to or in lieu of the BFE contemplated for the Aircraft pursuant to the current Airbus Aircraft Specification, Lessee may request Lessor to purchase other items of equipment for installation in the Aircraft as BFE. Lessor agrees to purchase, or procure that an Affiliate of Lessor purchases, each such item of equipment, provided any such request of Lessee is reasonably acceptable to Lessor, such BFE is approved by Manufacturer, and Lessee’s request is made by such date as will allow Lessor sufficient time, exercising all reasonable diligence, to arrange for Lessor or an Affiliate of Lessor to purchase such item of equipment and have the same delivered to Manufacturer with sufficient time to permit installation in the Aircraft and delivery of the Aircraft in accordance with the relevant delivery schedule under the Purchase Agreement. Lessee shall pay to Lessor prior to the date on which Lessor, or its relevant Affiliate, is contractually required to pay to the BFE supplier any taxes, shipping, non-recurring costs or other costs (other than direct equipment cost) that may be incurred by Lessor, or its relevant Affiliate, in the acquisition or delivery of any item of BFE.

 

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

 

2-7

 

ARTICLE 3.           TERM AND RENT .

 

3.1           Term .      (i)  Initial Term . Except as otherwise provided herein, the Aircraft shall be leased to Lessee hereunder for a Term of ten (10) years, commencing on the Delivery Date for the Aircraft.

 

(ii)  Extended Term . Lessee may at its option elect to extend the initial Term for an additional two (2) years, commencing on the expiration of the initial Term. Such election to extend the initial Term must be made by written notice given by Lessee to Lessor no later than the first day of the fifteenth (15 th ) month prior to the tenth (10 th ) anniversary of the Delivery Date. Once such notice is given by Lessee, the election to extend the initial Term is irrevocable and the Term shall be extended on the same terms and conditions as are applicable during the initial Term (except for this Article 3.1(ii) and as otherwise provided in Article 3.2). Notwithstanding any of the foregoing, if an Event or Event of Default shall have occurred or be continuing at the time Lessee notifies Lessor of its election to extend the initial Term, or on the last day of the initial Term, at Lessor’s option, Lessee shall not have the option to extend the initial Term and such option or election made pursuant to such option shall lapse and be null and void.

 

3.2           Basic Rent . Lessee shall pay Lessor Basic Rent for the Aircraft in one hundred twenty (120) consecutive monthly-in-advance payments in the amount and on the dates set forth in paragraph 3 of Schedule “1” hereto. During the extended Term, if any, Lessee shall pay Lessor Basic Rent for the Aircraft in twenty-four (24) consecutive monthly-in-advance payments in the amount and on the dates set forth in paragraph 3 of Schedule “1” hereto.

 

3.3           Security Deposit .

 

3.3.1        Security Deposit . Lessee shall provide Lessor with the cash Security Deposit referred to in paragraph 4 of Schedule “1” hereto, to be held by Lessor as security for performance of all Lessee’s obligations hereunder and under the Companion Leases. Lessee agrees to maintain the Security Deposit with Lessor for the full amount required under this Article 3.3 and paragraph 4 of Schedule “1” until all Lessee’s obligations hereunder have been fully performed; and if the Security Deposit is reduced below the amount required hereby as the result of Lessor’s application thereof towards payment of any of Lessee’s unperformed obligations hereunder or under a Companion Lease, Lessee shall immediately on demand replenish the Security Deposit to the amount required hereby. Lessor may commingle the Security Deposit with its general funds, and Lessee shall not be entitled to any interest or other earnings thereon.

 

3.3.2        Application of Security Deposit . In the event Lessee fails to take delivery of the Aircraft as provided herein in breach of its obligations hereunder or if any other Event of Default occurs and shall be continuing or shall result in the termination or cancellation of this Lease, in addition to any other rights or remedies available hereunder or under a Companion Lease, Lessor shall be entitled, at its option, to apply the Security Deposit

 

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

 

3-1

 

towards any or all amounts due under this Lease or any Companion Lease, whether such amounts due constitute Basic Rent payments hereunder or thereunder, damages for breach of this Lease or such Companion Lease, or other Rent payments hereunder or thereunder, all in Lessor’s sole discretion.

 

3.3.3        Security Deposit Under Companion Lease .     The Security Deposit required hereunder is in addition to the security deposit required under each Companion Lease.

 

3.3.4        Return of Security Deposit . Upon full performance by Lessee of all its obligations hereunder, and provided no Event or Event of Default shall have occurred and be continuing, Lessor shall promptly return the Security Deposit to Lessee, without interest.

 

3.4           Supplemental Rent . Lessee also agrees to pay to Lessor, or to whomsoever Lessor shall direct, any and all Supplemental Rent promptly as the same shall become due and owing, and in the event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor shall have all the rights, powers and remedies provided for herein, by Law or otherwise, as in the case of non-payment of Basic Rent. Lessee will also pay to Lessor, as Supplemental Rent, on demand, interest at the Incentive Rate on any part of any Basic Rent not paid when due and on any payment of Supplemental Rent not paid when due or, if due on demand, when demanded by Lessor in accordance with the terms hereof for the period for which the same shall become due until the same shall be paid. Such interest will accrue on a day to day basis and be compounded monthly.

 

3.5           Payments on Business Days . If any date on which a payment of Rent becomes due and payable is not a Business Day, the Rent payment otherwise due and payable on such date shall be due and payable on the immediately preceding Business Day.

 

3.6           Place of Payment . All Rent shall be payable in Dollars, in immediately available funds, not later than 11:00 a.m. (local time in the place of payment), on the due date thereof, at the following bank and account:

 

 

 

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

 

3-2

 

 

 

 

ARTICLE 4.           DISCLAIMERS; WAIVERS; REPRESENTATIONS AND WARRANTIES .

 

4.1           Lessor Disclaimer and Exclusion of Representations and Warranties . THE AIRCRAFT IS DELIVERED TO LESSEE AND ACCEPTED BY LESSEE AND LEASED HEREUNDER “AS-IS, WHERE-IS,” WITH ALL FAULTS. LESSEE UNCONDITIONALLY ACKNOWLEDGES THAT NEITHER LESSOR NOR ANY PARTICIPANT, NOR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, AFFILIATES, AGENTS OR REPRESENTATIVES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY PROMISE, GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE DESCRIPTION, TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, AGE, OPERATION, PERFORMANCE, MERCHANTABILITY, FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE, OF ANY ITEM OF EQUIPMENT OR ANY PART THEREOF, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT OR ANY PART THEREOF OR AS TO THE CONFORMITY OF ANY ITEM OF EQUIPMENT TO THE DESCRIPTION OR CONDITIONS SET FORTH IN THIS LEASE OR THE PURCHASE AGREEMENT, OR AS TO THE ADEQUACY OF ANY DOCUMENTATION OR RECORDS PROVIDED OR TO BE PROVIDED TO LESSEE UNDER THIS LEASE OR AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE AND WHETHER KNOWN OR UNKNOWN, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT OR ANY PART THEREOF, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND EXTINGUISHED.

 

4.2           Waiver by Lessee . LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR AND THE PARTICIPANTS, AND AGREES NOT TO SEEK TO ESTABLISH OR ENFORCE ANY RIGHTS, REMEDIES OR CLAIMS (WHETHER STATUTORY OR OTHERWISE) AGAINST LESSOR OR ANY PARTICIPANT IN RESPECT OF ANY OF THE MATTERS SET FORTH IN ARTICLE 4.1. WITHOUT LIMITING THE FOREGOING, LESSEE WAIVES ANY CLAIM, LIABILITY, OR RESPONSIBILITY (WHETHER KNOWN OR UNKNOWN) THAT LESSEE OR ANY OTHER PERSON CLAIMING UNDER OR THROUGH LESSEE MAY NOW OR HEREAFTER HAVE OR CLAIM AGAINST LESSOR OR ANY PARTICIPANT WITH RESPECT TO:

 

(i)             ANY COST, LOSS OR DAMAGE (CONSEQUENTIAL OR OTHERWISE), LOSS OF PROFIT OR REVENUE, LOSS OR SUSPENSION OF CERTIFICATION OF THE AIRCRAFT, GROUNDING OF THE AIRCRAFT, OR ANY OTHER CLAIM WHATSOEVER ARISING FROM THE CONDITION OF ANY ITEM OF EQUIPMENT OR PART THEREOF, ANY MAINTENANCE, REPAIR OR REPLACEMENT OF ANY ITEM OF EQUIPMENT, ANY ALTERATION, MODIFICATION OR ADDITION TO ANY ITEM OF EQUIPMENT, OR ANY INSPECTION OF THE AIRCRAFT OR ITS RECORDS PERFORMED BY LESSOR OR

 

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

 

4-1

 

LESSEE, OR THE LACK OF SUCH INSPECTION BY LESSOR OR LESSEE; AND

 

(iii)          ANY OBLIGATION OR LIABILITY OF LESSOR OR ANY PARTICIPANT WITH RESPECT TO ANY IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, USAGE OR TRADE, ANY IMPLIED WARRANTY OF FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE, AND ANY OBLIGATION OR CLAIM FOR LOSS OF USE OF OR THE LOSS OF OR DAMAGE TO THE EQUIPMENT, OR ANY PART THEREOF, FOR ANY REASON, AND FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY AND FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE, WHETHER OR NOT ARISING FROM THE NEGLIGENCE (ACTUAL OR IMPUTED) OF LESSOR OR ANY PARTICIPANT, AND ANY RISKS WITH RESPECT THERETO ARE HEREBY ASSUMED BY LESSEE .

 

4.3           Confirmation by Lessee . Lessee confirms to Lessor that Lessee is fully aware of and understands the full meaning of the provisions of Articles 4.1 and 4.2, and acknowledges that Basic Rent and the other provisions of this Lease have been agreed in reliance on Lessee’s agreements in, and the effectiveness of, Articles 4.1 and 4.2.

 

4.4           Assignment of Warranties .

 

4.4.1        Assignment . Provided no Event or Event of Default shall have occurred and be continuing), Lessor agrees to assign or otherwise make available to Lessee, without representation, warranty or recourse of any kind, express or implied, such rights as Lessor may have with respect to the Aircraft under any warranty, service policy or product support plan of Manufacturer, the Engine manufacturer or any other 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 Airbus Aircraft Specification or if it would affect the Scheduled Aircraft Delivery of the Aircraft, unless Lessee otherwise consents, which consent will not be unreasonably withheld.

 

4.4.2        Further Action . Lessor further agrees, if requested by Lessee and at Lessee’s expense, to take such further action as Lessee may reasonably request to confirm Lessee’s authority to enforce any such rights and to assist Lessee in the enforcement thereof.

 

4.4.3        Reassignment . Upon the occurrence of an Event of Default or the cancellation or sooner termination of the Term, Lessee shall no longer be entitled to enforce or obtain the benefits of such rights and the same will immediately revert and be deemed reassigned to

 

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

 

4-2

 

Lessor, without further act, but on request by Lessor Lessee will immediately execute all documents required by Lessor to evidence and confirm such reversion and reassignment.

 

4.5  Lessee’s Representations and Warranties . Lessee represents and warrants that:

 

4.5.1        Formation . Lessee is a corporation duly organized and existing in good standing under the Laws of Delaware, has full power, authority and legal right to own its properties and to carry on its business as presently conducted and to perform its obligations under this Lease, holds all licenses, certificates and permits from each Governmental Entity necessary for the conduct of its business, and is duly qualified to do business as a corporation in good standing in each jurisdiction in which the failure to be so qualified would have a materially adverse effect on Lessee or on its ability to perform its obligations hereunder.

 

4.5.2        Authorization . This Lease has been duly authorized by all necessary action on the part of Lessee, including any required authorization of the stockholders of Lessee, and neither the execution and delivery hereof nor the consummation of the transactions contemplated hereby nor compliance by Lessee with any of the terms and provisions hereof does or will violate any provision of the articles of incorporation or by-laws of Lessee or any Law or judgment of any Governmental Entity having jurisdiction over Lessee or any of its activities or properties, or does or will result in any breach of, or constitute any default under, or result in the creation of any Lien upon any property of Lessee under, any indenture, mortgage, deed of trust, conditional sale contract, loan or credit agreement, or other agreement or instrument to which Lessee is a party or by which Lessee or its properties may be bound or affected.

 

4.5.3        Consents . Neither the execution and delivery by Lessee of this Lease nor the performance by Lessee of any of the transactions contemplated hereby require the consent, approval, order or authorization of, or registration with, or the giving of notice to, the Aeronautics Authority or any other domestic or foreign Governmental Entity, except for those that have heretofore been obtained, true and complete copies of which have been delivered to Lessor.

 

4.5.4        Due Execution . This Lease has been duly executed and delivered by Lessee and constitutes, and the Lease Supplement when executed and delivered by Lessee will constitute, legal, valid and binding obligations of Lessee, enforceable in accordance with their terms, except where the enforceability thereof may be limited by applicable bankruptcy, insolvency or other laws affecting creditors’ rights generally.

 

4.5.5        Filing of Documents, etc . Except for the registration of the Aircraft with the Aeronautics Authority in the name of Lessor as contemplated hereby and the filing for recordation of the Security Documents, this Lease and the Lease Supplement with the Aeronautics Authority and the registration of the International Interests with the International Registry in respect of the Aircraft, the Engines, the Security Documents and this Lease, no other registration and no further filing or recording of this Lease, the

 

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

 

4-3

 

Security Documents or of any other instrument or document is necessary or advisable under the Laws of the United States or any State therein to:  (1) establish the priority, legality, validity or enforceability of the obligations of Lessee under this Lease, or (2) fully protect, establish and perfect Lessor’s title to and Lessor’s and Mortgagee’s interest in the Equipment or their respective rights and interests hereunder and thereunder (including with respect to the Security Deposit) as against Lessee and any third parties in any jurisdiction.

 

4.5.6        Certificated Air Carrier . Lessee is a Certificated Air Carrier within the meaning of Section 41102 of Title 49 of the United States Code Annotated, and Lessor is entitled to the benefits and protections of Section 1110 of the Bankruptcy Code (11 U.S.C. Section 1110) in respect of the Aircraft leased to Lessee under this Lease.

 

4.5.7        Legal Proceedings . There are no suits or proceedings pending or, to the knowledge of Lessee, threatened in any Governmental Entity against or affecting Lessee which may have a materially adverse effect on the financial condition or business of Lessee except those described in writing to Lessor prior to the date hereof.

 

4.5.8        Tax Returns . Lessee has filed or caused to be filed all material tax returns which are required to be filed and:  (i) has paid or caused to be paid all taxes shown to be due or payable on said returns and on any assessment received by Lessee, to the extent that such taxes have become due and payable, or (ii) has provided adequate reserves for the payment thereof to the extent any such taxes have not become due and payable.

 

4.5.9        Balance Sheet . The balance sheet of Lessee as of December 31, 2007, and the statements of income and cash flows of Lessee for the three fiscal years then ended (copies of which have been furnished to Lessor), are complete and correct and fairly set forth Lessee’s financial condition as of such dates and the results of its operations for such periods, and since December 31, 2007, there has been no material adverse change in such condition or operations.

 

4.5.10      Prohibited Persons . Lessee is not (i) a person identified on, nor does it have any affiliation of any kind with any person identified on any “watch list” established by the United States Office of Foreign Assets Control (“OFAC”), including, without limitation, OFAC’s list of specially designated nationals and blocked persons; and (ii) resident in, nor does it have funds that are transferred from or through, nor does it have operations in, any jurisdiction identified as non-cooperative by the Financial Action Task Force of the United States or sanctioned by OFAC.

 

4.5.11      Cape Town Convention . Lessee is a “Transaction User Entity” and has appointed an “Administrator” that has authorized specific “Transaction User Entities” and/or “Professional User Entities” (as such terms are defined in the Cape Town Convention) to consent to the Cape Town Convention registrations contemplated hereby.

 

4.6  Lessor’s Representations and Warranties . Lessor represents and warrants that:

 

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

 

4-4

 

4.6.1  Formation . Lessor is a corporation duly organized and existing under the Laws of Delaware, has full power, authority and legal right to own its properties and to carry on its business as presently conducted and to perform its obligations under this Lease, holds all licenses, certificates and permits from each Governmental Entity necessary for the conduct of its business, and is duly qualified to do business as a corporation in good standing in each jurisdiction in which the failure to be so qualified would have a materially adverse effect on Lessor or on its ability to perform its obligations hereunder.

 

4.6.2  Consents . Neither the execution and delivery by Lessor of this Lease, nor the performance by it of its obligations hereunder, requires the consent or approval of, the giving of notice to, or the registration or filing with, or the taking of any other action in respect of, the Aeronautics Authority or any domestic Governmental Entity, except for those that have already been obtained.

 

4.6.3  Conflict . The execution and delivery of this Lease, the performance of Lessor’s obligations hereunder, the consummation of the transactions contemplated hereby, and compliance by Lessor with the terms and provisions hereof do not or will not violate any provision of Lessor’s constitutional documents, or any Law or judgment of any Governmental Entity applicable to it, or court having jurisdiction over it or any of its activities or properties, and do not and will not result in any breach of or constitute a default under or result in the creation of any lien upon any of Lessor’s property, under any indenture, mortgage, deed of trust, conditional sale contract or credit agreement or other instrument or agreement to which it is a party or by which it may be bound or to which any of its property or assets may be subject or affected.

 

4.6.4  Authorization . The execution, delivery and performance by Lessor of this Lease has been duly authorized by all necessary action on its part, and this Lease constitutes its valid, legal and binding obligation, enforceable against it in accordance with its terms, except where the enforceability thereof may be limited by applicable bankruptcy, insolvency or other laws affecting creditors’ rights generally.

 

THE WARRANTIES OF LESSOR SET FORTH IN THIS ARTICLE 4.6 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OF LESSOR, INCLUDING FITNESS FOR USE OR FOR A PARTICULAR PURPOSE AND MERCHANTABILITY, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED.

 

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

 

4-5

 

ARTICLE 5.           POSSESSION AND USE .

 

5.1           Possession . Subject to the right of Lessee to deliver possession of any Item of Equipment to the manufacturer thereof for testing or other similar purposes or to any organization for service, repair, maintenance or overhaul work on such Item of Equipment or any part thereof or for alterations or modifications in or additions to such Item of Equipment to the extent required or permitted by the terms of Article 6 hereof, LESSEE SHALL NOT SUBLEASE, ASSIGN OR OTHERWISE TRANSFER OR RELINQUISH POSSESSION OR CONTROL OF ANY ITEM OF EQUIPMENT, OR ANY PART THEREOF, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, which consent shall not be unreasonably withheld or delayed (provided that if Lessee seeks consent from Lessor for a proposed sublease, Lessee shall be responsible (whether or not Lessor consents to the proposed sublease) for all expenses, including reasonable attorneys’ fees, incurred by Lessor in connection with assessing or implementing the proposed sublease, and any such sublease shall be and be expressly made subject and subordinate to this Lease and all Lessor’s rights and remedies hereunder).

 

5.2           Lawful Operations; Use .

 

5.2.1        Compliance with Laws .        Lessee will not cause or permit any Item of Equipment to:

 

(i)             be maintained, used or operated in violation of any Law or airworthiness directive of any Governmental Entity having jurisdiction (domestic or foreign), or in violation of any airworthiness certificate, license or registration relating to any Item of Equipment issued by any such authority, and if any such Law, airworthiness directive, airworthiness certificate, license or registration requires addition to or modification or alteration of the Equipment, Lessee shall conform therewith at its expense and Lessee shall maintain the same in proper condition for operation under such Laws, airworthiness directives, airworthiness certificates, licenses or registrations; or

 

(ii)            enter any airspace or be flown or transported to, or to remain at, any airport or country that is prohibited under the Laws of any Governmental Entity having jurisdiction applicable to the Aircraft, Lessor or Lessee, including any country that is the subject of a prohibition order or similar order, directive or sanction of, or does not maintain normal diplomatic relations with, the Government of the United States of America or the Country of Registration or the subject of prohibition order or similar order, directive or sanction of any international authority or control or treaty organization of which the United States of America or the Country of Registration is a member.

 

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

 

5-1

 

Without limiting the foregoing, Lessee shall base the Equipment in Hawaii and shall use the Equipment solely in its commercial operations for which it is duly licensed.

 

5.2.2        Operations . Lessee shall ensure that the Aircraft is at all times operated by, and under control of, qualified and duly licensed pilots employed by Lessee, with proper ratings. Lessee agrees not to cause or permit any person under any circumstance to cause the Aircraft or any Engine to be:

 

(i)             flown or otherwise operated or used for any military purpose;

 

(ii)            operated or used for any purpose for which such Item of Equipment was not designed and reasonably suited; or

 

(iii)           operated or used at any time for any illegal purpose or in any illegal manner.

 

5.2.3        I.A.T.A. Requirements . Lessee further agrees that it will not use or permit the use of the Aircraft for the carriage of:

 

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

 

(ii)            acids, toxic chemicals, other corrosive materials, explosives, nuclear fuels, nuclear wastes, or any nuclear assemblies or components, except as permitted for cargo under the “Restriction of Goods” schedule issued by I.A.T.A. from time to time and provided that all the requirements for packaging or otherwise contained therein are fulfilled;

 

(iii)           any other goods, materials or items of cargo which could reasonably be expected to cause damage to the Aircraft and which would not be adequately covered by the insurances maintained in accordance with Article 10 hereof; or

 

(iv)           any illegal item or substance.

 

5.2.4        Eurocontrol . Lessee agrees that it will not use or permit the use of the Aircraft for in or over any airspace subject to the jurisdiction of Eurocontrol unless Lessee first provides Lessor with a letter from Lessee, in form and substance satisfactory to Lessor, addressed to Eurocontrol pursuant to which Lessee authorizes Eurocontrol to issue to Lessor, upon Lessor’s request from time to time, a statement of account of all sums due by Lessee to Eurocontrol in respect of the Aircraft (and in respect of any other aircraft for which Eurocontrol may have the right to claim against the Aircraft) as at the dates of each such request.

 

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

 

5-2

 

5.3           Maintenance .

 

5.3.1        Maintenance of Aircraft and Records . Lessee, at its own cost and expense, shall:

 

(i)             cause each Item of Equipment leased hereunder to be serviced, repaired, maintained, modified, overhauled and tested only by Approved Maintenance Performers holding all required certificates and approvals for each of the tasks performed and:

 

(A)           so as to keep such Item of Equipment in the same condition and appearance as when delivered to Lessee hereunder, reasonable wear and tear from normal flight operations excepted, and in good operating condition;

 

(B)            so as to keep the Aircraft in the condition necessary to maintain the airworthiness certificate for the Aircraft under the Federal Aviation Act of 1994, 49 United States Code Ann., title 49, section 40101, et seq., as amended, and to be operated under FAR Part 121; and

 

(C)            in strict compliance with the Maintenance Program, a true and complete copy of which has heretofore been or will promptly be delivered by Lessee to Lessor (and Lessee agrees not to modify or otherwise vary or permit the same to be done to the Maintenance Program unless required by applicable Law or unless otherwise agreed to by Lessor and the Aeronautics Authority);

 

(ii)            maintain all records, logs and other materials required by the Aeronautics Authority to be maintained with respect to such Equipment. All such records, logs, and other materials shall be maintained in the English language; and

 

(iii)           promptly furnish to Lessor such information as may be required to enable Lessor or any Participant to file any reports required to be filed by Lessor or such Participant with any Governmental Entity because of Lessor’s or such Participant’s interest in the Equipment.

 

All deficiencies revealed by any inspection of the Equipment by Lessee, Lessor or any of Lessee’s maintenance providers shall be promptly corrected by proper cleaning, sealing, repairing, replacement, overhaul, modification and adjustment.

 

5.3.2        Repairs . All repairs performed to the Aircraft during the Term shall be permanent and performed in accordance with the Manufacturer’s Structural Repair Manual and in compliance with the Manufacturer’s damage tolerance assessment process (to the highest level of compliance possible). If the Manufacturer’s Structural Repair Manual authorizes as permanent a non-flush structural patch repair or a flush-type

 

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

 

5-3

 

structural patch repair, such repair shall be a flush-type permanent repair. Any repair not covered by the Manufacturer’s Structural Repair Manual or the Engine manufacturer’s approved manual, as the case may be, shall be in accordance with FAA-approved data, and shall be approved by Manufacturer or the Engine manufacturer, as the case may be. Lessee shall maintain complete data and documentation to verify and substantiate certification and methods of compliance for all repairs performed during the Term, and Lessee shall keep and maintain a complete summary listing of all repairs performed (with dirty fingerprint accomplishment records).

 

5.3.3        Maintenance Program; Revision Services .     Lessee shall ensure that the Maintenance Program at all times complies in all material respects with the then latest revision of the MPD. Lessee shall, at its expense, obtain and maintain in effect throughout the Term appropriate revision services necessary to maintain all documentation, manuals and records required to be maintained for the Aircraft hereunder or by applicable Law in a current, up-to-date status and in accordance with the best practices of major international commercial airlines.

 

5.3.4        Documentation for Parts .   Lessee shall ensure that only EASA/FAA-approved parts and materials that have EASA Form 1 or FAA 8130-3 release notes or serviceable tags (hereafter “release tags”) are installed or used on the Aircraft during the Term. Lessee shall also ensure that:

 

(i)             all release tags for life-limited Parts installed in the Aircraft during the Term shall have the Flight Hours/Cycles since new stated thereon, as applicable;

 

(ii)            all release tags for hard time components installed in the Aircraft during the Term shall have the Flight Hours/Cycles since overhaul or since last shop visit (and, if applicable, calendar time since overhaul/last shop visit) stated thereon; and

 

(iii)           if a modification has been carried out on a hard time Part or an “on condition/condition monitored” Part during an overhaul or shop visit during the Term which has altered the part number for that component, the new part number shall be stated on the release tag for such Part.

 

Lessee shall ensure that all parts installed or used on the Aircraft during the Term shall not adversely affect any of the warranties for the Aircraft, the Airframe, any Engine or any Part, and shall not adversely affect the certification of an installation or assembly into which or in respect of which such part is installed or used.

 

For the avoidance of doubt, Lessee shall install only original equipment manufacturer (hereinafter “OEM”) parts, as fitted at delivery of the Aircraft or as subsequently modified per an approved OEM service bulletin, on the Engines, the APU, the Landing Gears and any OEM manufactured structural assemblies. In addition, Lessee agrees that it

 

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

 

5-4

 

 

maintained and stored in accordance with accepted industry and manufacturer specifications and procedures.

 

5.3.7        Notification of Loss, Damage, etc .    Lessee shall notify Lessor promptly of all details relating to any loss, damage or destruction to the Aircraft, or any part thereof, that affects the airworthiness of the Aircraft, and any loss, theft, damage or destruction to the Aircraft, or any part thereof, exceeding the sum of $300,000 (or the equivalent in any other currency).

 

5.4           Maintenance Payments .

 

5.4.1        Calculation of Amount and Payment . In addition to the Basic Rent required to be paid for the Aircraft pursuant to Article 3.2, Lessee shall pay to Lessor the 4C Airframe Payments, 8C Airframe Payments, Performance Restoration Payments, Engine Life-Limited Parts Payments, APU Payments and Landing Gear Payments (collectively, the “Maintenance Payments”) set forth in paragraph 5 of Schedule “1” hereto.

 

Maintenance Payments shall be payable within fifteen (15) days following the end of each calendar month, commencing with the month in which the Delivery Date occurs, through and including the month in which this Lease is cancelled, terminated or expires and the Equipment is returned to Lessor in accordance with the terms of this Lease, computed on the number of Flight Hours/Cycles or for the calendar month (or portion thereof), as the case may be, accumulated on the relevant Items of Equipment, APU and Landing Gear during the month immediately preceding such payment date.

 

5.4.2        Adjustment of Maintenance Payments . The Maintenance Payments amounts shall be subject to adjustment by Lessor as follows:

 

(i)             Operational Criteria . The amount of the Performance Restoration Payments is based on the assumed annual utilization of 4,000 Flight Hours and an average annual sector flight time of 6.0 hours. Lessor shall have the right to adjust the Performance Restoration Payment amounts payable hereunder in respect of the Engines as provided in paragraph 6 of Schedule “1” hereto.

 

(ii)            Performance Restoration Shop Visit . In addition to the adjustments pursuant to clause (i), above, each time an Engine undergoes Performance Restoration during the Term, Lessor shall have the right to adjust the rate for the Performance Restoration Payments thereafter payable by Lessee in respect of the Engines to ensure payment by Lessee of an hourly rate sufficient to meet the projected costs of future Performance Restoration of the Engines. The amount of such adjustment shall be determined by reference to the amount obtained by dividing:

 

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

 

5-6

 

(A) the actual total cost of the Performance Restoration shop visit performed for an Engine by

 

(B) the lesser of:

 

(1) the actual number of Flight Hours that were accumulated on such Engine from the date of the Performance Restoration shop visit immediately preceding the Performance Restoration shop visit referred to in clause (A), above, to the date of the Performance Restoration shop visit for such Engine referred to in clause (A), or

 

(2) the number of Flight Hours that constitutes the then current industry mean time between removals (excluding removals for foreign object damage or operator convenience, such as to address vibration, fan blade rework, etc.) for engines of similar type, age and characteristics as the Engines, as determined from records maintained by the Engine manufacturer on the basis of the average of the industry mean time between removals (excluding removals for foreign object damage or operator convenience, such as to address vibration, fan blade rework, etc.) over the immediately preceding twelve (12) months.

 

For example (but subject to any necessary adjustments to give effect to the other relevant circumstances), if the total cost incurred for Performance Restoration of an Engine is $5,000,000 and the number to be used as the result of the calculation described in clause (B), above, is the industry mean time between removals and such industry mean time between removals is 20,000 Flight Hours, the hourly rate that Lessee will thereafter be required to pay for Performance Restoration Payments for each Engine will be $250 per Flight Hour.

 

(iii)           Annual Review . In addition to the adjustment to the Performance Restoration Payment amounts pursuant to clauses (i) and (ii), above, the Maintenance Payment rates payable pursuant to this Article 5.4 (other than for the Engine Life-Limited Parts Payments) shall be increased by the percentage specified in the last paragraph of paragraph 5 of Schedule “1” hereto, compounded annually, as of each anniversary of the Delivery Date, and such increased rates shall be applicable to Aircraft use on and after such anniversary date until the next anniversary date throughout the Term; and, as of each anniversary of the Delivery Date, the Engine Life-Limited Parts Payments rate shall be increased (and which shall include a 5% stub life value) to reflect:  (A) the increases in the Manufacturer’s catalogue

 

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

 

5-7

 

prices that have occurred during the preceding annual period, and (B) the increase, if any, required as the result of a change in the relationship between the catalogue price of an Engine life-limited Part and the Engine manufacturer’s warranted or, in the case of a Group B Part, declared cyclic life of such Engine life-limited Part, and such increased rates in each case shall be applicable to Engine use on and after such anniversary date until the next anniversary date throughout the Term.

 

5.4.3        Payment from Maintenance Payments by Lessor . Maintenance Payments paid by Lessee to Lessor will be reimbursed to Lessee as follows:

 

(i)             Airframe-4C . If the Airframe undergoes a scheduled block “4C”/6-year check when due (including the airframe systems/zonal/structural inspections, corrosion prevention and control and aging aircraft inspections, if any, and the corresponding lower level checks (i.e., “A” checks and all lower level “C” checks), and all out-of-sequence inspections due at that time), as defined in the then latest revision of the MPD (and herein referred to as the “4C Check”), performed by an Approved Maintenance Performer reasonably acceptable to Lessor, Lessor will pay Lessee the 4C Airframe Payments referred to in paragraph 9(i) of Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the preceding sentence shall be Lessee’s sole responsibility and shall be promptly paid by Lessee. Lessee agrees to provide Lessor with a copy of the workscope for the 4C Check contemplated by this clause (i) at least 30 days prior to introduction of the Aircraft for the 4C Check, and to obtain Lessor’s prior approval of the workscope and warranties for the 4C Check (which warranties shall expressly be assignable to Lessor). Lessor agrees that it will not unreasonably withhold or delay its approval of the workscope or the warranties for the 4C Check.

 

(ii)            Airframe-8C . If the Airframe undergoes a scheduled block “8C”/10year check (or “8C”/11 or 12-year check, as the case may be) when due (including the airframe systems/zonal/structural inspections, corrosion prevention and control and aging aircraft inspections, if any, and the corresponding lower level checks (i.e., “A” checks and all lower level “C” checks), and all out-of-sequence inspections due at that time), as defined in the then latest revision of the MPD (and herein referred to as the “8C Check”), performed by an Approved Maintenance Performer reasonably acceptable to Lessor, Lessor will pay Lessee the 8C Airframe Payments referred to in paragraph 9(ii) of Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the preceding sentence shall be Lessee’s sole responsibility and shall be promptly paid by Lessee. Lessee agrees to provide Lessor with a copy of the workscope for the 8C Check contemplated by this clause (i) at least 30 days prior to introduction

 

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

 

5-8

 

of the Aircraft for the 8C Check, and to obtain Lessor’s prior approval of the workscope and warranties for the 8C Check (which warranties shall expressly be assignable to Lessor). Lessor agrees that it will not unreasonably withhold or delay its approval of the workscope or the warranties for the 8C Check.

 

(iii)           Engine Performance Restoration .    If at any time any Engine is not covered by the TotalCare Agreement, and such Engine undergoes a shop visit for Performance Restoration performed by an Approved Maintenance Performer pursuant to the Maintenance Program and the then latest revision of the Trent 700 Engine Management Programme for Airbus A330 aircraft approved by the Engine manufacturer, Lessor will pay Lessee the Performance Restoration Payments referred to in paragraph 9(iii) of Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the preceding sentence shall be Lessee’s sole responsibility and shall be promptly paid by Lessee.

 

Whether or not an Engine is covered by the TotalCare Agreement, Lessee agrees to provide Lessor with a copy of the workscope for the Performance Restoration shop visit for such Engine and to obtain Lessor’s prior approval of the workscope and warranties for the Performance Restoration shop visit for such Engine (which warranties shall expressly be assignable to Lessor). Lessor agrees that it will not unreasonably withhold or delay its approval of the workscope or warranties for the Performance Restoration shop visit for such Engine.

 

(iv)           Engine Life-limited Parts . If as required pursuant to the Engine manual published by the Engine manufacturer a life-limited Part of an Engine is required to be replaced at the time such Engine undergoes a shop visit, Lessor will pay Lessee the Engine Life-Limited Parts Payments referred to in paragraph 9(iv) of Schedule “1” hereto, less the amount of any credits, rebates, warranty benefit or remedy or other allowances for any Cycles or time remaining on the replaced life-limited Part. Any cost in excess of such amount to be paid by Lessor pursuant to the preceding sentence shall be Lessee’s sole responsibility and shall be promptly paid by Lessee.

 

(v)            APU . If the APU undergoes a heavy repair shop visit (as defined by the APU manufacturer) pursuant to the Maintenance Program, subject to the penultimate sentence of this clause (v), Lessor will pay Lessee the APU Payments referred to in paragraph 9(v) of Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the preceding sentence shall be Lessee’s sole responsibility and shall be promptly paid by Lessee. Lessor will pay the APU Payments to Lessee for the cost of the heavy repair shop visit of the removed APU: (x) when Lessee reinstalls such APU in the Airframe following such shop visit or (y) when

 

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

 

5-9

 

Lessee replaces such APU with an auxiliary power unit fresh from a heavy repair shop visit that meets all requirements of this Lease, including Article 6 hereof (determined immediately after giving effect to a heavy repair shop visit for the removed APU and on the assumption that the removed APU had been reinstalled in the Airframe). Lessee agrees to provide Lessor with a copy of the warranties for the heavy repair shop visit of the APU for approval by Lessor (which warranties shall expressly be assignable to Lessor), which approval will not be unreasonably withheld.

 

(vi)           Landing Gear . If the Landing Gear undergoes an overhaul as defined in Manufacturer’s component maintenance manual, or equivalent, which results in full refurbishment of the Landing Gear, subject to the penultimate sentence of this clause (vi), Lessor will pay Lessee the Landing Gear Payments referred to in paragraph 9(vi) of Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the preceding sentence shall be Lessee’s sole responsibility and shall be promptly paid by Lessee. Lessor will pay the Landing Gear Payments to Lessee for the cost of such overhaul of the removed Landing Gear: (x) when Lessee reinstalls such Landing Gear in the Airframe following such overhaul or (y) when Lessee replaces such Landing Gear with a freshly overhauled landing gear that meets the requirements of this Lease, including Article 6 hereof (determined immediately after giving effect to such overhaul of the removed Landing Gear and on the assumption that the removed Landing Gear had been reinstalled in the Airframe). Lessee agrees to provide Lessor with a copy of the warranties for the overhaul for approval by Lessor (which warranties shall expressly be assignable to Lessor), which approval will not be unreasonably withheld.

 

5.4.4        Foreign Object Damage to Engines . If an Engine is required to undergo a Performance Restoration shop visit following foreign object damage, Lessor shall reimburse the Performance Restoration Payments theretofore paid by Lessee in respect of such Engine to Lessee for the cost of such Performance Restoration shop visit as contemplated in Article 5.4.3(iii)(as supplemented by Schedule “1”), subject to the following conditions:

 

(i)             Lessee and the Approved Maintenance Performer confirm to Lessor that the Performance Restoration is required as the result of the foreign object damage,

 

(ii)            Lessee provides Lessor with the workscope for the Performance Restoration shop visit,

 

(iii)           the Approved Maintenance Performer confirms to Lessor that the Performance Restoration shop visit has been completed in accordance with the

 

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

 

5-10

 

Engine manufacturer’s Trent 700 Engine Management Programme for Airbus A330 aircraft,

 

(iv)           all proceeds of insurance that are payable in connection with the foreign object damage are first applied towards the cost of the Performance Restoration shop visit, and the Performance Restoration Payments to be refunded by Lessor shall only be applied to the remaining unpaid balance of the cost of the Performance Restoration shop visit, and

 

(v)            the Approved Maintenance Performer confirms to Lessor that it has been fully paid for the cost of the Performance Restoration shop visit and will not assert a Lien against the Engine or its records as a result of the shop visit.

 

When the conditions in clauses (i) through (v) have been satisfied, Lessor will pay to Lessee the Performance Restoration Payments in respect of such Engine referred to in paragraph 10 of Schedule “1” hereto.

 

5.4.5        Procedures for Reimbursement . Prior to performing any maintenance or overhaul for which Lessee will seek reimbursement under this Article 5.4, Lessee shall submit to Lessor for approval an estimate of the cost of such maintenance or overhaul to be performed by an Approved Maintenance Performer. Estimates and invoices submitted for maintenance and overhaul work to be paid for out of the applicable Maintenance Payments shall contain billing only in respect of the Airframe, the Engine(s), the APU or the Landing Gear, and shall contain or be accompanied with the following substantiating data or reasonable equivalent (to the extent such data is applicable):

 

Invoice:

 

(i)                                     work scope (routine, non-routine, hard time items, materials)

(ii)                                  vendor repair and overhaul instructions

(iii)                              engine removal message and report

(iv)                              vendor invoice and billing summary (and for Engines, broken down by major modules)

(v)                                  list of airworthiness directives and service bulletins accomplished during maintenance visit, and cost breakdown for each

(vi)                               insurance claims submitted

(vii)                           date of removal

(viii)                        reason for removal

(ix)                                Flight Hours and Cycles since last shop visit and since new

(x)                                   data supporting Lessee payment of invoices must be submitted for reimbursement

(xi)                                FAA Form 337 (or EASA equivalent)

(xii)                             FAA 8130-3 Serviceable Tag (or EASA Form 1)

(xiii)                         vendor tear down report

(xiv)                         current disk sheet for engine

(xv)                            total Flight Hours and Cycles at removal for the relevant maintenance event

 

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

 

5-11

 

(xvi)                          for Engines, work description per major module, test cell results (including EGT margin), post-test cell full gas path borescope inspection results

 

Provided no Event or Event of Default has occurred and is continuing, within fifteen (15) Business Days after receipt of the invoice for such maintenance or overhaul work for an Item of Equipment, APU, Landing Gear or for the purchase of an Engine life-limited Part, with the required accompanying data, and provided that Lessee has paid such invoice amount in full, Lessor will reimburse Lessee for such invoice amount for such Item of Equipment, APU, Landing Gear or Engine life-limited Part, out of the applicable Maintenance Payments theretofore paid to Lessor with respect to such Item of Equipment, APU, Landing Gear or Engine life-limited Part, except for any amounts which are materially inconsistent with the estimate previously approved by Lessor (and as to such amounts Lessor and Lessee agree to seek to resolve any such disputes as expeditiously as possible). Alternatively:  (i) if Lessee has paid a portion of the invoice amount and if such amount paid by Lessee, together with the amount to be paid by Lessor hereunder, will constitute full payment for such maintenance or overhaul work or (ii) whether or not Lessee has paid a portion of the invoice amount, if the amount to be paid by Lessor hereunder will constitute full payment for such maintenance or overhaul work, and (iii) in either case, provided Lessor is satisfied that the Approved Maintenance Performer will release the Aircraft free of Liens upon receipt of such payment from Lessor, Lessor will pay such amount directly to the Approved Maintenance Performer if so requested by Lessee. Lessee acknowledges and agrees that in the event the cost of such overhaul or maintenance for an Item of Equipment, APU, Landing Gear or the cost of an Engine life-limited Part exceeds the unused balance of the applicable Maintenance Payments theretofore paid to Lessor for such Item of Equipment, APU, Landing Gear or Engine life-limited Part, Lessee shall be solely responsible for and shall have paid such excess amount, without affecting any of Lessee’s other obligations hereunder or entitling Lessee to any further claim for reimbursement in respect thereof.

 

5.4.6                      Character of Maintenance Payments . Lessee acknowledges that the Maintenance Payments constitute additional Rent payable for the use of the Equipment and such Maintenance Payments shall become the unencumbered property of Lessor upon payment thereof by Lessee, except as otherwise expressly set forth herein, free of any claims or right, title or interest therein or thereto by Lessee. Lessor acknowledges, however, that to the extent of the unused balance of the applicable Maintenance Payments paid to Lessor for an Item of Equipment, APU, Landing Gear or Engine life-limited Part, as the case may be, Lessor is obligated to pay the invoices submitted to Lessor for maintenance for such Item of Equipment, APU or Landing Gear, or for the payment of such life-limited Part, as the case may be, contemplated by Article 5.4, upon and subject to the terms and conditions of Article 5.4. If Maintenance Payments are used to pay for the cost of any maintenance or life-limited Parts replacement contemplated in Article 5.4, any recoveries from Manufacturer or any subcontractor, vendor or supplier in respect thereof shall be reimbursed to Lessor.

 

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

 

5-12

 

5.4.7                      Additional Exclusions from Reimbursement . Notwithstanding anything in this Article 5.4 to the contrary, none of the Maintenance Payments will be available to pay for:  (A) any maintenance or Parts replacement required as the result of foreign object damage (except with respect to the Engines to the extent provided in Article 5.4.4), or (B) taxes or shipping and handling charges or the like incurred in connection with any of the foregoing maintenance or overhaul or purchase of life-limited Parts.

 

5.4.8                      No Inspection Obligation of Lessor . NEITHER LESSOR NOR ANY PARTICIPANT SHALL HAVE ANY DUTY TO DETERMINE WHETHER ANY ITEM OF EQUIPMENT, APU OR LANDING GEAR IS REQUIRED TO BE OVERHAULED OR MAINTAINED, OR TO OBSERVE OR INSPECT THE MAINTENANCE OF ANY ITEM OF EQUIPMENT, APU OR LANDING GEAR, AND NEITHER LESSOR NOR ANY PARTICIPANT SHALL INCUR ANY LIABILITY OR OBLIGATION BY REASON OF THE FAILURE OF ANY EQUIPMENT TO BE PROPERLY MAINTAINED OR BY REASON OF ITS ELECTION TO OBSERVE OR INSPECT OR NOT TO OBSERVE OR INSPECT ANY OVERHAUL OR MAINTENANCE OF ANY EQUIPMENT.

 

5.4.9                      Reimbursement Following Aircraft Return . Lessee shall be irrevocably barred from requesting Lessor to reimburse Lessee or pay any amounts from the Maintenance Payments following the date Lessee returns the Aircraft to Lessor at the end of the Term unless, on or prior to such date, Lessee notifies Lessor in writing that such request(s) for reimbursement are forthcoming and such notice sets forth the details of the anticipated request(s), i.e. , the relevant Item of Equipment involved, the maintenance task(s) involved, and the anticipated cost thereof (but, for the avoidance of doubt, Lessee’s request for reimbursement shall not be limited to the anticipated amount set forth in Lessee’s notice to Lessor, which is merely Lessee’s good faith estimate of the anticipated cost). So long as Lessee has provided such notice to Lessor, Lessee shall be allowed to submit invoices thereafter received for the relevant Item(s) of Equipment and maintenance tasks described in Lessee’s notice to Lessor, but only until the date that is twelve (12) months after the end of the Term. Thereafter, Lessee shall be barred from requesting any reimbursement.

 

5.4.10               Monthly Reports . Together with each monthly Maintenance Payment, Lessee shall notify Lessor of the number of Flight Hours and Cycles which have been accumulated on the Airframe, each Engine, the Landing Gear and the APU, respectively, during the preceding calendar month, and Lessee shall provide Lessor with such supporting or other information and documentation as Lessor may from time to time request.

 

5.4.11               Non-Payment in Event of Default . Any amount referred to in Article 5.4 which is payable to Lessee shall not be paid to Lessee if at the time of such payment an Event or an Event of Default shall have occurred and be continuing. In such event, all such amounts shall continue to be held by Lessor as security for the performance by Lessee of its obligations under this Lease and under any Companion Lease or, at Lessor’s option,

 

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

 

5-13

 

applied by Lessor toward payment of any of such obligations of Lessee at the time due hereunder or under the Companion Lease as Lessor may in its sole discretion elect. At such time as Lessee shall have cured all Events and Events of Default, all such amounts at the time held by Lessor which should have been distributed to Lessee, in excess of the amounts, if any, which Lessor shall have elected to apply as above provided, shall be paid to Lessee.

 

5.5  Registration and Insignia . Lessee agrees that it will, on behalf of Lessor and at Lessee’s expense, forthwith upon delivery of the Aircraft, cause the Aircraft to be duly registered, and at all times thereafter to remain duly registered, in accordance with Title 49 of the United States Code, as amended. Lessor agrees that throughout the Term, Lessor will either be and remain a Citizen of the United States or shall otherwise be qualified to register the Aircraft without restricting Lessee’s operational use of the Aircraft, so that the Lessee will be able to comply with the requirements of this Article 5.

 

Upon delivery of the Aircraft and throughout the Term, unless Lessor otherwise directs, Lessee shall cause (provided Lessor has notified Manufacturer of the appropriate details within any time period required by the Manufacturer) to be fastened and maintained in the cockpit of the Aircraft adjacent to the airworthiness certificate for the Aircraft, in a prominent location, a metal nameplate satisfactory to Lessor bearing the legend:

 

“THIS AIRCRAFT IS OWNED BY [OWNER NAME]
C/O AWAS (IRELAND) LIMITED
AND SUBJECT TO A MORTGAGE INTEREST IN
FAVOR OF [MORTGAGEE NAME]”

 

and Lessee shall also cause (provided Lessor has notified Manufacturer of the appropriate details within any time period required by the Manufacturer) to be fastened and maintained on each Engine, in a prominent location, metal nameplates satisfactory to Lessor bearing the legend:

 

“THIS ENGINE IS OWNED BY [OWNER NAME]
C/O AWAS (IRELAND) LIMITED
AND SUBJECT TO A MORTGAGE INTEREST IN
FAVOR OF [MORTGAGEE NAME]”

 

Except as above provided, Lessee will not allow the name of any person, firm or corporation to be placed on the Airframe or any Engine as a designation that might be interpreted as a Lien thereon; provided, however, Lessee may cause the Airframe or any Engine to be lettered in an appropriate manner for convenience of identification of the interest of Lessee therein.

 

5.6                                Transfer of Engines Within Lessee’s Fleet . So long as no Event or Event of Default shall have occurred and be continuing, Lessee may install an Engine on an airframe owned by Lessee free of Liens or leased to Lessee or owned by Lessee subject to a security agreement or mortgage or purchased by Lessee subject to a conditional sale agreement, provided that (i) such

 

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

 

5-14