You are on page 1of 49

WARNING! THIS DOCUMENT HAS BEEN PROVIDED FOR TRAINING PURPOSES ONLY.

IT IS INCOMPLETE, CONTAINS DELIBERATE ERRORS AND MUST NOT BE USED AS A PRECEDENT.

Dated

2012

FANTASTIC LEASING LIMITED and RUFLY AIRWAYS LIMITED

(1)

(2)

AIRCRAFT OPERATING LEASE AGREEMENT For one TopNotch Aircraft Manufacturers Serial Number [001] Proposed [] Registration Mark [RU-AAA]

Contents
Clause Page

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Definitions.......................................................................................................................................1 Representations and Warranties....................................................................................................7 Term of lease ...............................................................................................................................10 Conditions ....................................................................................................................................10 Delivery and Acceptance .............................................................................................................11 Lessor's Warranties......................................................................................................................11 Rent ..............................................................................................................................................12 Payments, Interest and Calculations............................................................................................13 Costs and Indemnities..................................................................................................................14 Taxation........................................................................................................................................15 General Undertakings ..................................................................................................................15 Sub-leasing ..................................................................................................................................18 Operations and Maintenance .......................................................................................................19 Manuals and Technical Records..................................................................................................21 Title and Registration ...................................................................................................................21 Insurance......................................................................................................................................21 Loss and Damage ........................................................................................................................23 Requisition....................................................................................................................................25 Redelivery ....................................................................................................................................25 Termination Events ......................................................................................................................26 Lessor's rights following a Termination Event..............................................................................29 Notices .........................................................................................................................................30 Assignment...................................................................................................................................30 Miscellaneous...............................................................................................................................31 Governing law ..............................................................................................................................31 Enforcement .................................................................................................................................31

Aircraft Lease Agreement (2).DOC

Schedule 1 The Aircraft ..........................................................................................................................32 Schedule 2 List of Documents and Evidence.........................................................................................33 Schedule 3 Acceptance Certificate ........................................................................................................35 Schedule 4 Rent Instalments .................................................................................................................36 Schedule 5 Agreed Value.......................................................................................................................37 Schedule 6 Insurance Requirements .....................................................................................................38 Schedule 7 Form of Brokers' Letter of Undertaking ...............................................................................39 Schedule 8 Technical Acceptance Procedures and Delivery Condition ................................................40 Schedule 9 Redelivery Procedures and Return Conditions ...................................................................41 Schedule 10 Maintenance Reserves......................................................................................................42 Schedule 11 List of Permitted Air Carriers .............................................................................................43 Schedule 12 Form of Status Report .......................................................................................................44 Schedule 13 Deregistration Power of Attorney ......................................................................................45

Aircraft Lease Agreement (2).DOC

A LEASE AGREEMENT dated [ ] and made BETWEEN: 1 FANTASTIC LEASING LIMITED, a company incorporated under the laws of Cobraland (the Lessor); and 2 RUFLY AIRWAYS LIMITED, a company incorporated under the laws of Ruritania (the Lessee).

BY WHICH IT IS AGREED as follows:

1
1.1

Definitions
In this Agreement: Acceptance Certificate means a certificate in the form set out in Schedule 3 to be signed by the Lessee as required under clause 3; Agreed Value means the amount determined in accordance with Schedule 5 or such larger amount as the Lessor may notify the Lessee is required by the Finance Parties to be the Agreed Value pursuant to the Finance Documents; Aircraft means the Airframe together with the Engines (whether or not any of the Engines are installed on the Airframe at any relevant time) and, where the context permits, references to the Aircraft shall (a) include the Manuals and Technical Records, and (b) mean the Aircraft in its entirety and any part of it; Airframe means the TopNotch aircraft with manufacturer's serial number 001 as more particularly described in Schedule 1 (excluding the Engines or engines from time to time installed thereon), and all Parts installed on the Airframe at Delivery or installed on the Airframe during the Lease Period, or any other Parts which are required by the terms of this Agreement to remain the property of the Lessor; Airworthiness Directive means any airworthiness directive issued by the State of Registration or the EASA; Applicable Law means, in relation to any jurisdiction, any law, regulation, treaty, directive, decision, rule, regulatory requirement, judgment, order, ordinance, request, guideline or direction or any other act of any Government Entity of such jurisdiction whether or not having the force of law and with which any Transaction Party is required to comply, or with which it would, in the normal course of its business, comply; Approved Maintenance Performer means any independent maintenance performer previously approved in writing by the Lessor to perform all major maintenance work on the Aircraft;

Aircraft Lease Agreement (2).DOC

Approved Maintenance Programme means the Aviation Authority approved maintenance programme for aircraft of the same make and model as the Aircraft approved by the Lessor; Assignment of Insurances means the assignment to be granted by the Lessee in favour of the Lessor in respect of certain of its rights under the Insurances, in form and substance reasonably satisfactory to the Lessor; Authorisation means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration; Aviation Authority means each person which is from time to time vested with the control and supervision of, or has jurisdiction over, the registration, airworthiness and operation of aircraft or other matters relating to civil aviation in the State of Registration; Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London; Certificate of Airworthiness means an unrestricted certificate of airworthiness with respect to the Aircraft in the public transport category (passenger) issued by the Aviation Authority together with, if required by Applicable Law, a current Airworthiness Renewal Certificate issued by the Aviation Authority or any maintenance organisation approved by the Aviation Authority; Compulsory Acquisition means requisition of title or other compulsory acquisition, requisition, appropriation, expropriation, deprivation or confiscation for any reason of the Aircraft by any Government Entity or other competent authority, whether de jure or de facto, but shall exclude requisition for use or hire not involving requisition of title; Delivery means the time at which the Aircraft is delivered to and accepted by the Lessee under clause 5; Delivery Condition has the meaning given to it in Schedule 8; Delivery Date means the date on which Delivery shall occur; Delivery Location means [ ], or any other location as agreed by the Lessor and the Lessee; Dollars and $ mean the lawful currency of the United States of America and, in respect of all payments to be made under this Agreement in Dollars, mean funds which are for same day settlement in the New York Clearing House Interbank Payments System (or such other U.S. dollar funds as may at the relevant time be customary for the settlement of international banking transactions denominated in United States dollars);

Aircraft Lease Agreement (2).DOC

EASA means the European Aviation Safety Agency or any other organisation or authority that, under the laws of the European Union, shall from time to time have jurisdiction over, amongst other things, aircraft airworthiness and safety standards for the European Union; Engine means either of the engines specified in Schedule 1 as an Engine; Equipment means any of the Aircraft, the Airframe, the Engines or Parts; Expected Delivery Date means [ ] or such later date as the Lessor shall advise the Lessee or as may be substituted in accordance with the Technical Acceptance Procedures; Expiry Date means the twelfth anniversary of the Delivery Date; Finance Agreement means any agreement between the Lessor and the Finance Parties in which the Finance Parties agree to make finance available to the Lessor to finance its purchase of the Aircraft; Finance Documents means the Finance Agreement and the Security Documents referred to in the Finance Agreement; Finance Parties means any person who, from time to time, the Lessor shall have notified the Lessee as having an interest in the Aircraft as owner or financier or intervening lessor, and the expression Finance Party means any of them individually; Government Entity means and includes (whether having a distinct legal personality or not) (i) any national government, political sub-divisions thereof, or local jurisdiction therein; (ii) any board, commission, department, division, organ, instrumentality, court, regulatory or selfregulatory authority or agency of any entity referred to in (i) above, however constituted; and (iii) any association, organisation or institution (international or otherwise) of which any entity mentioned in (i) or (ii) above is a member or to whose jurisdiction any thereof is subject or in whose activities any thereof is a participant; Group means the Lessees group of companies; Habitual Base means Zenda Airport, Ruritania or, during the period of any sub-lease permitted under clause 12, such other place as the Lessee may notify the Lessor in writing; Indemnified Parties means the Lessor, the Finance Parties and their respective shareholders, affiliates, directors, officers, servants, agents and employees; Initial State of Registration means Ruritania; Insurances means any and all contracts or policies of insurance and reinsurance required to be effected and maintained under this Agreement;

Aircraft Lease Agreement (2).DOC

Lessor Transfer means any assignment or transfer by the Lessor of any of its rights or obligations under the Lessee Documents or any of its right, title or interest in and to the Aircraft; Losses means any costs, expenses, payments, charges, losses, demands, liabilities, claims, actions, proceedings, penalties, fines, damages, judgments, orders or other sanctions; Manufacturer's MPD means the latest version from time to time of the recommended maintenance programme for the Aircraft issued by the Manufacturer; Mortgage means the first priority mortgage of the Aircraft granted or to be granted by the Lessor in favour of its lenders; Original Financial Statements means the audited consolidated financial statements of the Group for the financial year ended [ ]; Part means all appliances, parts, accessories, instruments, navigational and communications equipment, furnishings, modules, components and other items of equipment (other than complete Engines or engines); Party means a party to this Agreement; Payment Date means, subject to clause 8.2, each of the dates set out in column (1) of Schedule 4; Permitted Air Carrier means any carrier, duly authorised by the appropriate regulatory authorities to operate aircraft of the same make and model as the Aircraft for the public carriage of passengers and cargo for hire or reward, which the Lessor may from time to time approve in writing (such approval not to be unreasonably withheld); Permitted Lien means: (a) any Security for Taxes not assessed or, if assessed, not yet due and payable, or being contested in good faith by appropriate proceedings; (b) any Security of an airport or air navigation authority or of a repairer, mechanic, carrier, hangarkeeper or other similar Security arising in the ordinary course of business by operation of law in respect of obligations which are not overdue or are being contested in good faith by appropriate proceedings; (c) (d) any Lessor's Security; any Security expressly permitted by the terms of this Agreement or the other Lessee Documents; and

Aircraft Lease Agreement (2).DOC

(e)

the proprietary interests in the Aircraft, the Insurances and any Requisition Compensation created by any of the Lessee Documents;

but only if (in the case of both (a) and (b)) (i) adequate resources have been provided by the Lessee for the payment of such Taxes or obligations; and (ii) such proceedings, or the continued existence of the Security, do not give rise to any material likelihood of the sale, forfeiture or other loss of the Aircraft or any interest in it or of criminal liability on the Lessor or any Finance Party; Permitted Sub-Lessee means, at any time, any Permitted Air Carrier to whom the Aircraft may be leased or chartered at such time by the Lessee in accordance with the provisions of clause 12; Redelivery Location means [ ]; Relevant Documents means the Lessee Documents and the Finance Documents and all other documents which the Lessor and the Lessee agree at any time should be Relevant Documents; Relevant Event means any Termination Event or any event which with the giving of notice and/or lapse of time would constitute a Termination Event; Relevant Parties means the Lessor and the Finance Parties and the expression Relevant Party means any of them individually; Relevant Rate of Interest means the rate of interest determined by the Lessor to be five per cent per annum above the cost (expressed as a percentage rate per annum) to the Lessor of obtaining funds for such period as the Lessor may determine in the currency and in amounts comparable with the sum in respect of which the Relevant Rate of Interest falls to be determined; Removed Engine means, at any time, an Engine which is not installed on the Airframe at such time; Rent means the instalments of rent payable by the Lessee pursuant to clause 7.1; Requisition Compensation means all moneys or other compensation payable at any relevant time in respect of the Compulsory Acquisition of the Aircraft; Return Condition has the meaning given to it in Schedule 9; Security means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind or other agreement or arrangement having the effect of conferring security (including title transfer and/or retention arrangements having a similar effect);

Aircraft Lease Agreement (2).DOC

State of Registration means, at any relevant time, the Initial State of Registration or, in the event that the Aircraft has then been sub-leased to a Permitted Sub-Lessee in accordance with clause 12, such other state on whose national aircraft register the Aircraft may be registered at such time; Taxes includes all present and future taxes, levies, imposts, duties, fees or charges of whatever nature and howsoever described, including any value added or similar tax, imposed, levied, collected or assessed by any Government Entity or taxing authority anywhere in the world together with interest payable in respect of any of the same and penalties imposed or levied in respect of any of the same and Tax and Taxation shall be construed accordingly; Technical Acceptance Procedures means the procedures related to pre-delivery inspection and technical acceptance of the Aircraft by the Lessee as set out in Schedule 8; Termination Event means any of the events or circumstances described in clause 20; Total Loss means with respect to any item of Equipment, the occurrence of any of the following events: (a) the actual or constructive total loss of that item of Equipment (including any damage to it which results in an insurance settlement on the basis of a total loss, or its requisition for use or hire which results in an insurance settlement on the basis of a total loss); (b) that item of Equipment being destroyed, damaged beyond repair, or otherwise ceasing to be usable by an airline in the normal course of its business for a period exceeding sixty (60) days; (c) (d) the Compulsory Acquisition of that item of Equipment; or the hijacking, theft, confiscation, capture, detention, seizure or requisition for use or hire of that item of Equipment, other than where the same amounts to its Compulsory Acquisition, which deprives the operator of its use for more than thirty (30) days, excluding requisition for use or hire by any Government Entity of the State of Registration; Total Loss Payment Date means the earlier to occur of (i) the date falling thirty (30) days after the date on which a Total Loss of the Aircraft is deemed to have occurred under clause 17.3.2 and (ii) the date on which payment is made under the Insurance in respect of such Total Loss; and Transaction Parties means the Lessee and the Relevant Parties and the expression Transaction Party means any of them individually.

Aircraft Lease Agreement (2).DOC

2
2.1

Representations and Warranties


Lessees Representations and Warranties The Lessee makes the representations and warranties set out in this clause 2.1 to the Lessor.

2.1.1

Status (a) It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation. (b) It has the power to own its assets and carry on its business as it is being conducted.

2.1.2

Binding obligations The obligations expressed to be assumed by it in this Agreement are, subject to any general principles of law limiting its obligations which are specifically referred to in any legal opinion delivered pursuant to clause 4 legal, valid, binding and enforceable obligations.

2.1.3

Non-conflict with other obligations The entry into and performance by it of, and the transactions contemplated by, this Agreement do not and will not conflict with: (a) any Applicable Law applicable to it; (b) its constitutional documents; or (c) any agreement or instrument binding upon it or any of its assets.

2.1.4

Power and authority It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Lessee Documents to which it is a party and the transactions contemplated by the Lessee Documents.

2.1.5

Validity and admissibility in evidence Other than all Authorisations required or desirable: (a) to enable the Lessee lawfully to enter into, exercise its rights and comply with its obligations in the Lessee Documents; and (b) to make the Relevant Documents admissible in evidence in the State of Registration and, if different, the Lessee's jurisdiction of incorporation,

Aircraft Lease Agreement (2).DOC

have been obtained or effected and are in full force and effect. 2.1.6 Governing law and enforcement (a) The choice of English law as the governing law of this Agreement and such of the Relevant Documents as are expressed to be governed by English law will be recognised and enforced in the State of Registration and (if different at the relevant time) in the Lessee's jurisdiction of incorporation. (b) Any judgment obtained in England in relation to a Relevant Document will be recognised and enforced in the State of Registration and (if different at the relevant time) in the Lessee's jurisdiction of incorporation. 2.1.7 No filing or stamp taxes Under the Applicable Law of the State of Registration and (if different at the relevant time) of the Lessee's jurisdiction of incorporation it is not necessary that the Lessee Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Relevant Documents or the transactions contemplated by the Relevant Documents. 2.1.8 No default (a) No Termination Event is continuing or might reasonably be expected to result as a consequence of delivery of the Aircraft to the Lessee hereunder. (b) No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any member of the Group or to which its (or any member of the Group's) assets are subject which might have a material adverse effect on its business, assets or financial condition. 2.1.9 Pari passu ranking Its payment obligations under this Agreement rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally. 2.1.10 Financial Statements (a) Its Original Financial Statements were prepared in accordance with GAAP consistently applied unless expressly disclosed to the Lessor in writing to the contrary before the date of this Agreement.

Aircraft Lease Agreement (2).DOC

(b) Its Original Financial Statements fairly represent its financial condition and operations (consolidated in the case of the Group) during the relevant financial year unless expressly disclosed to the Lessor in writing to the contrary before the date of this Agreement. 2.1.11 Immunity The Lessee is subject to civil and commercial law with respect to its obligations under the Lessee Documents and the transactions contemplated thereby constitute private and commercial acts done for private and commercial purposes and neither the Lessee nor any of its assets is entitled to any immunity on the grounds of sovereignty or otherwise from any legal action or proceedings (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement). 2.1.12 No Material Adverse Change There has been no material adverse change in the business or financial position of the Lessee or the consolidated financial position of the Group from that set forth in the Original Financial Statements referred to in clause 2.1.10. 2.1.13 Financial Information The financial and other information furnished by the Lessee in connection with the matters contemplated by the Lessee Documents does not contain any untrue statement nor omit to state material facts, the omission of which makes the statements therein, in the light of the circumstances under which they were made, materially misleading, nor omit to disclose any material matter to the Lessor and all forecasts and opinions containing such information were honestly made on reasonable grounds after due and careful inquiry by the Lessee. 2.1.14 No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, might reasonably be expected to have a material adverse effect on its business, assets or financial condition have (to the best of its knowledge and belief) been started or threatened against it or any member of the Group. 2.1.15 Tax The Lessee is not required under any Applicable Law to make any deduction or withholding for or on account of any Tax from any payment it may make and the execution or delivery or performance by the Lessee or the Lessor of the Lessee Documents will not result in the Lessor: (a) having any liability in respect of Taxes in Ruritania;

Aircraft Lease Agreement (2).DOC

(b) having or being deemed to have a place of business in Ruritania; 2.1.16 Insurances Neither the Insurances nor any part thereof will be, on the Delivery Date, subject to any Security save for any Permitted Lien. 2.2 Survival and Repetition The representations and warranties in clause 2.1 will survive the execution of this Agreement and Delivery. The representations and warranties in clause 2.1 will be deemed to be repeated by the Lessee on the Delivery Date and on each Payment Date with reference to the facts and circumstances then existing (and, in the case of the representation and warranty in each of clauses 2.1.10 and 2.1.12, by reference to the latest audited financial statements delivered by the Lessee to the Lessor).

3
3.1

Term of lease
Term of Lease The Lessor shall lease and the Lessee shall take on lease the Aircraft, subject to the terms and conditions of this Agreement, for the Lease Term.

4
4.1

Conditions
The obligation of the Lessor to lease the Aircraft to the Lessee under this Agreement is subject to the condition that, not later than the relevant date specified in relation to such document or evidence in the first paragraph of part 1 of Schedule 2, the Lessor shall have received the documents and evidence specified in part 1 of Schedule 2 in form and substance satisfactory to the Lessor. The obligation of the Lessor to lease the Aircraft to the Lessee under this Agreement is subject to the further conditions that:

4.1.1

the representations and warranties set out in clause 2.1 are true and correct as if each were made with respect to the facts and circumstances existing immediately prior to the time when Delivery is to take place;

4.1.2

no Relevant Event shall have occurred and be continuing or would arise by reason of the Aircraft being delivered to the Lessee under this Agreement;

4.1.3 4.1.4

no Total Loss shall have occurred on or prior to Delivery; the conditions precedent specified in clause [ ] of the Finance Agreement shall have been fulfilled or waived to the satisfaction of the Lender; and

Aircraft Lease Agreement (2).DOC

10

4.1.5

There shall have been no material adverse change in either (a) the business or financial condition of the Group or (b) the global debt and/or equity markets.

4.2

The conditions specified in clause 4.1 are inserted for the sole benefit of the Lessor and may be waived in whole or in part and with or without conditions by the Lessor.

5
5.1

Delivery and Acceptance


The Lessee shall accept the Aircraft "as is, where is" and, subject to clause 4, the Aircraft shall be delivered to and accepted by the Lessee at the Delivery Location on the Expected Delivery Date and shall become subject to and governed by this Agreement, the Lease Period shall commence and the Lessee shall sign and deliver to the Lessor the Acceptance Certificate.

5.2 5.2.1

If: the Lessee does not accept delivery of the Aircraft in accordance with this clause 5 on the Expected Delivery Date in circumstances where the Lessee is obliged pursuant to the terms of this Agreement to accept delivery of the Aircraft; and/or

5.2.2

the Aircraft is not delivered to the Lessee on the Expected Delivery Date by reason of the Lessees failure to fulfil any of the conditions set out in clause 4, (a) the Lessor shall be entitled to treat such failure as a Termination Event; and (b) the Lessees obligation to pay Rent hereunder shall commence on the Expected Delivery Date and after such date Rent shall be payable by the Lessee to the Lessor on each Payment Date in accordance with the terms of this Agreement. Notwithstanding the foregoing the Lessor shall be under no obligation to deliver the Aircraft to the Lessee otherwise than in accordance with clauses 4 and 5.

6
6.1

Lessor's Warranties
The Lessor warrants and agrees that, provided that no Termination Event has occurred and is continuing, the Lessor shall not, through its own acts, interfere during the Lease Period with the use, possession and quiet enjoyment of the Aircraft by the Lessee.

6.2

The Lessee expressly agrees and acknowledges that, save only as expressly provided in clause 6.1, no condition, warranty or representation of any kind is or has been given by or on behalf of the Lessor in respect of the Aircraft or any part thereof, and accordingly the Lessee confirms that it has not, in entering into this Agreement, relied on any condition, warranty or representation by the Lessor or any person on the Lessor's behalf, express or implied, whether arising by law or otherwise in relation to the Aircraft or any part thereof, including warranties or representations as to the description, airworthiness, suitability, quality, merchantability, fitness

Aircraft Lease Agreement (2).DOC

11

for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Aircraft or any part thereof, and the benefit of any such condition, warranty or representation by the Lessor is hereby irrevocably and unconditionally waived by the Lessee. To the extent permissible under Applicable Law, the Lessee hereby also waives any rights which it may have in tort in respect of any of the matters referred to above and irrevocably agrees that the Lessor shall have no greater liability in tort in respect of any such matter than it would have in contract after taking account of all of the foregoing exclusions. No third party making any representation or warranty relating to the Aircraft or any part of the Aircraft is the agent of the Lessor, nor has any such third party authority to bind the Lessor. Nothing contained in this clause 6.2 is intended to prejudice any rights of warranty or other claims which the Lessee or the Lessor may have against the manufacturer or supplier of the Aircraft or any third party.

7
7.1

Rent
During the Lease Period the Lessee shall pay to the Lessor on the Payment Dates specified in Schedule 4 monthly instalments of Rent for the Aircraft in advance, each such instalment being of the amount of $100,000 one such instalment being payable on each Payment Date.

7.2

The Lessee's obligation to pay Rent and make other payments in accordance with this Agreement shall, subject to clause 17.4, be absolute and unconditional irrespective of any contingency whatsoever including, but not limited to: (a) any right of set-off, counterclaim, recoupment, defence or other right which either Party may have against the other; (b) any unavailability of the Aircraft for any reason, including any lack or invalidity of title or any other defect in the title, airworthiness, merchantability, fitness for any purpose, condition, design, or operation of any kind or nature of the Aircraft, or the ineligibility of the Aircraft for any particular use or trade, or for registration or documentation under the laws of any relevant jurisdiction, or the Total Loss of, or any damage to, the Aircraft; (c) any failure or delay on the part of either Party, whether with or without fault on its part, in performing or complying with any of the terms or conditions of this Agreement; (d) any insolvency, bankruptcy, administration, reorganisation, arrangement, readjustment of debt, dissolution, liquidation or similar proceedings by or against the Lessor or the Lessee; or (e) any lack of due authorisation of, or other defect in, this Agreement;

Aircraft Lease Agreement (2).DOC

12

8
8.1

Payments, Interest and Calculations


Payments All payments to be made by the Lessee to the Lessor under any Lessee Document shall be made without (unless specifically otherwise provided in such Lessee Document) prior demand and in full, without any set-off or counterclaim whatsoever, and, subject as provided in clause 10, free and clear of any deductions or withholdings in Dollars for value on the day on which payment is due to the account of the Lessor at such bank in such place as the Lessor may have notified to the Lessee.

8.2

Business Day Convention When any payment under any Lessee Document would otherwise be due to the Lessor on a day which is not a Business Day, the due date for payment shall be extended to the next following Business Day.

8.3

Late Payment If the Lessee fails to pay to the Lessor any sum (including without limitation, any sum payable pursuant to this clause 8.3) on its due date for payment under any Lessee Document or, in the case of a sum payable on demand, on the date of demand the Lessee shall pay to the Lessor on demand interest on such sum from the due date or, as the case may be, date of demand up to the date of actual payment, both before and after judgment, at the Relevant Rate of Interest.

8.4 8.4.1

Deposit The Lessee shall on or prior to Delivery pay to the Lessor, as security for the obligations of the Lessee under the Lessee Documents, the sum of $1,000,000.

8.4.2

The Deposit shall be held without any obligation for the payment of interest thereon to the Lessee, and may be commingled by the Lessor with its own general or other funds, during the Lease Period as security for the full and punctual performance of all of the Lessee's obligations to the Lessor under the Lessee Documents.

8.4.3

The Lessor may, but shall not be obliged to, apply the Deposit in whole or in part for the payment of any amounts owing from time to time by the Lessee under any Lessee Document, or may utilise the Deposit in whole or in part to perform any of the Lessee's obligations under any Lessee Document or otherwise remedy any Relevant Event (including in respect of the redelivery condition of the Aircraft), without prejudice to any other remedy of the Lessor.

8.4.4

If the Lessor shall so apply or utilise the Deposit or any part of it, the Lessee shall, forthwith on demand, restore the Deposit to the full amount provided for herein by payment to the Lessor of an amount in cash equal to the amount applied or utilised.

Aircraft Lease Agreement (2).DOC

13

9
9.1

Costs and Indemnities


Whether or not the Aircraft is delivered to the Lessee pursuant to this Agreement, the Lessee shall pay to the Lessor on demand:

9.1.1

all expenses (including legal, printing and out-of-pocket expenses) incurred by the Lessor and/or the Finance Parties in connection with the negotiation, preparation, execution and, where relevant, registration of the Relevant Documents, and of any amendment or extension of, or the granting of any waiver or consent under, any of the Relevant Documents; and

9.1.2

all expenses (including legal, survey and other costs) incurred by the Lessor in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under, any of the Relevant Documents, or otherwise in respect of moneys owing under any of the Relevant Documents, or in respect of breach of any representation, warranty, covenant, agreement, condition or stipulation contained in any of the Relevant Documents, together with interest at the Relevant Rate of Interest from the date on which such expenses were incurred to the date of payment (both before and after judgment).

9.2

The Lessee agrees at all times, whether during or after the Lease Period, to pay promptly all costs and expenses of or arising from the matters referred to in clause 9.2.1 below and indemnify and hold harmless each Indemnified Party from and against all Losses:

9.2.1

relating to, or arising directly or indirectly in any manner or for any cause or reason whatsoever out of, the design, manufacture, testing, delivery, import, export, registration, ownership, possession, control, use, operation, leasing pursuant to this Agreement, sub-leasing by the Lessee, insurance, maintenance, repair, refurbishment, condition, service, overhaul,

modification, change, alteration, loss, damage, removal, storage or re-delivery of, in or to the Aircraft, or otherwise in connection with the Aircraft, or relating to loss or destruction of or damage to any property, or death or injury of, or other loss of whatsoever nature suffered by, any person caused by, relating to, or arising from or out of (in each case whether directly or indirectly) any of the above matters; 9.2.2 which may at any time be made or brought on the ground that any design, article or material in the Aircraft or the operation or use thereof constitutes an infringement of any patent, design, or other intellectual property right; 9.2.3 which may at any time be incurred by such Indemnified Party in preventing or attempting to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Aircraft, or in securing the release of the Aircraft from any such occurrence. 9.3 The Lessee hereby agrees to indemnify the Lessor on demand against any amount (other than scheduled principal and interest) which may from time to time be expressed to have become payable pursuant to the Finance Agreement.
Aircraft Lease Agreement (2).DOC 14

10
10.1

Taxation
General Indemnity The Lessee shall indemnify the Lessor on demand against all Taxes levied or assessed (whether on Lessor or Lessee) on or in respect of the Aircraft, any payments made under any of the Lessee Documents or any of the transactions contemplated by any of the Lessee Documents. REMAINDER OF TAX CLAUSE DELIBERATLEY OMITTED

11
11.1

General Undertakings
General Undertakings The undertakings in this clause 11.1 remain in force from the date of this Agreement.

11.1.1

Financial Statements The Lessee shall supply to the Lessor in sufficient copies for all the Relevant Parties: (a) as soon as the same become available, but in any event within 60 days after the end of each of its financial years: (i) (ii) its audited consolidated financial statements for that financial year; and the audited consolidated financial statements of the Group for that financial year; and (b) as soon as the same become available, but in any event within 60 days after the end of each half of each of its financial years: (i) (ii) its financial statements for that financial half year; and the consolidated financial statements of the Group for that financial half year.

11.1.2

Requirements as to financial statements (a) Each set of financial statements delivered by the Lessee pursuant to clause 11.1.1 (Financial statements) shall be certified by a director of the Lessee as fairly representing its financial condition as at the date as at which those financial statements were drawn up. (b) The Lessee shall procure that each set of financial statements delivered pursuant to clause 11.1 (Financial statements) is prepared using GAAP.

Aircraft Lease Agreement (2).DOC

15

11.1.3

Information: miscellaneous The Lessee shall supply to the Lessor (in sufficient copies for all the Relevant Parties, if the Lessor so requests): (a) all documents dispatched by the Lessee to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched; (b) promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group; and (c) promptly, such further information regarding the financial condition, business and operations of the Lessee as any Relevant Party (through the Lessor) may request.

11.1.4

Notification of default (a) The Lessee shall notify the Lessor of any Relevant Event (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence. (b) Promptly upon a request by the Lessor, the Lessee shall supply to the Lessor a certificate signed by two of its directors or senior officers on its behalf certifying that no Relevant Event is continuing (or if a Relevant Event is continuing, specifying the Relevant Event and the steps, if any, being taken to remedy it).

11.1.5

Authorisations The Lessee shall promptly: (a) obtain, comply with and do all that is necessary to maintain in full force and effect; and (b) supply certified copies to the Lessor of, any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Lessee Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Relevant Document.

11.1.6

Compliance with Applicable Laws The Lessee shall comply in all respects with all Applicable Laws to which it may be subject, if failure so to comply either: (a) would materially impair its ability to perform its obligations under the Lessee Documents; or

Aircraft Lease Agreement (2).DOC

16

(b) might result in a Security arising over the Aircraft. 11.1.7 Merger The Lessee shall not (and the Lessee shall ensure that no other member of the Group will) enter into any amalgamation, demerger, merger or corporate reconstruction. 11.1.8 Change of business The Lessee shall procure that no substantial change is made to the general nature of the business of the Lessee or the Group from that carried on at the date of this Agreement. 11.1.9 Disposal The Lessee shall not dispose of any or of any substantial part of its assets without the consent of the Lessor. 11.2 11.2.1 The Lessee further undertakes with the Lessor that it will: Status Report provide the Lessor on each Payment Date during the Lease Period, and whenever reasonably requested by the Lessor, with a status report on the Aircraft and the Engines in the form of Schedule 12. 11.2.2 Information concerning the Aircraft promptly provide the Lessor (a) upon reasonable request of the Lessor with details of any Indebtedness in respect of which an Security (other than a Lessor's Security) may arise over the Aircraft and (b) with such other information regarding the location, operation, use, insurance, maintenance and condition of the Aircraft as the Lessor may from time to time reasonably require; 11.2.3 Inspection and Valuation throughout the Lease Period permit, and procure that any Permitted Sub-Lessee shall permit, the Lessor and/or its agents or representatives to inspect or survey the Aircraft at any reasonable time (including while undergoing scheduled maintenance) upon giving the Lessee reasonable notice and so that any such inspection shall be carried out so as not to disrupt unreasonably the operation or maintenance of the Aircraft and is carried out in compliance with all applicable security procedures and safety rules. The cost of such inspections and surveys shall be paid by the Lessee. The Lessor shall have no duty to make any such inspection or survey and shall not incur any liability or obligation by reason of not making any such inspection.

Aircraft Lease Agreement (2).DOC

17

11.2.4

No operational interest procure that neither the Lessor nor any Finance Party is at any time represented as carrying goods or passengers on the Aircraft, or as being in any way connected or associated with any operation of carriage which may be undertaken by the Lessee or any other operator of the Aircraft, or as having any operational interest in, or responsibility for, the Aircraft;

11.2.5

Compliance with Insurances comply, and procure compliance by any other operator of the Aircraft, with the terms and conditions of the Insurances, and not do, consent to, or permit any act or omission which might invalidate or render unenforceable the whole or any part of the Insurances;

11.2.6

Permitted Liens discharge any Permitted Lien of the type referred to in (a), (b) or (c) of the definition of Permitted Lien which may arise over the Aircraft forthwith upon the obligations in respect of which such Permitted Lien arises becoming due, unless such obligations consist of Indebtedness which is being contested in good faith by the Lessee by appropriate proceedings;

11.2.7

Air Traffic Control Information procure that the Aviation Authority, Eurocontrol and any other relevant air traffic control authority or airport shall furnish to the Lessor, upon the Lessor's request from time to time, statements of account of all sums due by the Lessee to such authorities or airports in respect of all aircraft (including the Aircraft) operated by the Lessee and the Lessee shall provide as a condition precedent to Delivery to the Lessor a letter in form and substance satisfactory to the Lessor.

12
12.1

Sub-leasing
The Lessee will not at any time, without the prior written consent of the Lessor, sub-lease, charter, hire or otherwise part with the possession or operational control of the Aircraft; provided however that this clause shall not prevent the Lessee from:

12.1.1

putting the Aircraft in the possession of any qualified person for the purpose of maintenance, service, repair or overhaul work or any modifications, changes or alterations permitted under this Agreement being carried out thereon;

12.1.2

entering into and carrying out any charter or other agreement with respect to the Aircraft on terms whereby the Aircraft will at all times be operated by air crew employed by and subject to the operational control of the Lessee and provided further that: (a) no Relevant Event has occurred and is continuing;

Aircraft Lease Agreement (2).DOC

18

(b) any such charter or other agreement: (i) (ii) shall be subordinate in all respects to this Agreement, shall have a maximum term of one month and will not in any event be capable of extending beyond the end of the Lease Period, and (iii) shall not result in any change in the State of Registration.

13
13.1

Operations and Maintenance


The Lessee further undertakes with the Lessor that throughout the Lease Period it will or any Permitted Sub-Lessee will (at its own cost and expense):

13.1.1

Certificates and Licences obtain and maintain in full force and effect all necessary certificates and approvals required for the use and operation of the Aircraft including, without limitation, an air operators certificate, an unrestricted Certificate of Airworthiness with respect to the Aircraft and such airworthiness review certificates and certificates of maintenance, review and release to service as are required for the Aircraft to be used for the public transport of passengers;

13.1.2

Operation and Use procure that the Aircraft is used, operated and controlled (a) in accordance with all Applicable Laws (including I.A.T.A. regulations) affecting the Aircraft in any jurisdiction and (b) in accordance with the Manuals and Technical Records and all certificates and approvals relating to the Aircraft regardless of upon whom any of the same are by their terms imposed, (c) so as not to invalidate any manufacturer's warranties and (d) not for any purpose for which it is not designed (including by the carriage of cargo which could reasonably be expected to damage the Aircraft) or reasonably suited, nor outside the tolerances and limitations for which the Aircraft was designed nor, save for the benefit of the Lessee's cockpit personnel (and then only if the use of the Aircraft for such purpose is not disproportionate to the use for such purpose of other aircraft of the same type operated by the Lessee (if any)), for the purposes of training, qualifying or re-confirming the status of cockpit personnel nor for any purpose or in any manner not fully covered by the Insurances, or outside any geographical limit imposed by the Insurances;

13.1.3

Base of Operations ensure that the Aircraft shall be based in and operated from Zenda and the Lessee will advise the Lessor if it is intended that the Aircraft should be located outside the Habitual Base for a period of more than five consecutive days;

Aircraft Lease Agreement (2).DOC

19

13.1.4

Maintenance by using the Approved Maintenance Performer, maintain, service, repair and overhaul the Aircraft in accordance with the Approved Maintenance Programme with properly qualified personnel acceptable to the Aviation Authority so as to: (a) keep the Aircraft in good repair, condition and appearance and airworthy in all respects, clean by airline standards, and to at least the same standard as other aircraft which it owns or operates and in as good operating condition as at Delivery, fair wear and tear excepted; (b) comply with the applicable manufacturer's maintenance, component maintenance or structural repair manuals and corrosion prevention programmes and all mandatory modifications, Airworthiness Directives, service bulletins and similar requirements applicable to the Aircraft; (c) comply with all Applicable Laws affecting the Aircraft in any jurisdiction regardless of upon whom such Applicable Laws are by their terms imposed; (d) to keep the Aircraft at all times in the condition appropriate to a first class airline; and (e) enable the Lessee to redeliver the Aircraft to the Lessor in the condition required pursuant to clause 19;

13.1.5

Nameplates ensure that, at all times during the Lease Period, subject to any regulations of the Aviation Authority concerning the size and siting of the same, there are fixed and kept (a) a fireproof nameplate of not less than 10cm x 7cm in a reasonably prominent position on the flightdeck or cockpit of the Aircraft stating that the Aircraft is owned by the Lessor and is mortgaged to the Lender, and (b) a fireproof nameplate of not less than 10cm x 7cm in a reasonably prominent position on each Engine stating that the relevant Engine is owned by the Lessor and is mortgaged to the Lender, and that such nameplates are not covered or painted over;

13.1.6

Alterations procure that no modification to or change or alteration in the Aircraft is made which will have the effect of reducing the value or airworthiness of the Aircraft except as is: (a) necessary for compliance with the provisions of this Agreement; or (b) required by the manufacturer of the Aircraft; or (c) required by the Aviation Authority.

Aircraft Lease Agreement (2).DOC

20

13.2

Dealing with Engines and Parts DELIBERATLEY OMITTED

13.3

Maintenance Accruals The Lessee shall during the Lease Period pay maintenance accruals in respect of the cost of scheduled maintenance on the Airframe, the Engines and certain Parts in accordance with the provisions of Schedule 10. The Lessor shall pay contributions towards the cost of such scheduled maintenance and Airworthiness Directives and shall release sums from maintenance reserves in accordance with the provisions of Schedule 10.

14

Manuals and Technical Records


DELIBERATELY OMITTED

15

Title and Registration


DELIBERATELY OMITTED

16
16.1

Insurance
Duty to maintain insurances On or before Delivery and throughout the Lease Period and thereafter until the Aircraft is redelivered to the Lessor the Lessee shall or shall procure that the Permitted Sub-Lessee shall obtain, maintain and keep in full force and effect physical loss and damage insurance with respect to the Aircraft and liability insurance with respect to the Aircraft satisfactory to the Lessor. Such insurances shall as a minimum comply with the provisions of this clause 16 and Schedule 6, and shall be carried with such insurers and reinsurers and, where appropriate, through such brokers and subject to such exclusions and deductibles in each case as the Lessor may approve (such approval not to be unreasonably withheld).

16.2

Certificates of Insurance On or before Delivery, the Lessee shall provide the Lessor with evidence satisfactory to the Lessor (including a certificate or certificates of insurance with respect to the Insurances and a letter of undertaking addressed by the Lessee's insurance brokers to the Lessor either in the form set out in Schedule 7 or otherwise in form and substance satisfactory to the Lessor) that the Insurances are and will continue in full force after Delivery for the balance of the policy year (subject in the case of War Risks policies to usual termination or cancellation rights). Not later than 2 Business Days prior to the renewal date the renewal certificates and letters of undertaking with respect to the Insurances shall be furnished to the Lessor.

Aircraft Lease Agreement (2).DOC

21

16.3

Failure to insure If the Insurances are not kept in full force and effect, the Lessor, without prejudice to any other rights it may have on the occurrence of a Termination Event, shall be entitled (but not bound):

16.3.1

at any time while such failure is continuing to require the Aircraft to remain at an airport or (after taking out new insurances pursuant to clause 16.3.2 below) to proceed to and remain at an airport designated by the Lessor until, in either case, the Insurances are in full force and effect; and/or

16.3.2

to pay the premiums due or to take out and maintain new insurances complying with the requirements of this clause 16, including an owner's interest policy in such form as the Lessor may reasonably require, and any sums so expended by the Lessor shall become immediately due and payable to the Lessor by the Lessee together with interest thereon at the Relevant Rate of Interest from the date of expenditure by the Lessor until the date of reimbursement by the Lessee (both before and after any relevant judgment).

16.4

Change in circumstances If at any time the Lessor or the Lessor's insurance advisers consider that either

16.4.1

the Insurances effected or procured by the Lessee under this Agreement do not adequately protect the interests of the Indemnified Parties; or

16.4.2

there has otherwise been any change in circumstances (including, without limitation, any change in the terms and conditions available for insurances of the type of any of the Insurances in relevant markets or in generally accepted market practice); the Lessor shall be entitled (without prejudice to any of its other rights); (a) to require the Lessee to procure that the terms and conditions of the Insurances be changed forthwith in such a way as the Lessor may reasonably require; and/or (b) to take out and maintain, for so long as the Insurances are considered to be inadequate, at the cost of the Lessee, a policy in respect of its and/or the other Relevant Parties interests and in favour of itself and the other Indemnified Parties with such insurers and in such form as the Lessor reasonably considers appropriate, and/or (c) require the Aircraft to remain at, or to proceed to and remain at, any airport designated by the Lessor until the Lessee shall have implemented, at the Lessee's expense, any amendments to the terms of the Insurances and any operational changes which the Lessor reasonably considers are required to ensure that the interests of the Indemnified Parties are adequately protected.

Aircraft Lease Agreement (2).DOC

22

17
17.1

Loss and Damage


Risk Without prejudice to clause 6.1, throughout the Lease Period, the Lessee shall bear the full risk of any loss, destruction, hi-jacking, theft, condemnation, confiscation, seizure or requisition of or damage to the Aircraft and of any other occurrence of whatever kind which shall deprive the Lessee, or the operator of the Aircraft for the time being, of the use, possession or enjoyment thereof.

17.2 17.2.1

Partial Loss The Lessee shall give the Lessor immediate notice in writing of any loss or damage to the Aircraft (other than repairable damage the likely cost of rectification of which will not exceed $250,000) or any other occurrence of whatever kind which shall deprive the Lessee or the operator of the Aircraft for the time being of the use, possession or enjoyment thereof.

17.2.2

The Lessee and the Lessor shall cooperate with each other (at the Lessee's expense), including by the provision of all necessary information and documentation, in connection with making any claim under the Insurances.

17.3 17.3.1

Total Loss If a Total Loss of the Aircraft shall occur during the Lease Period, the Lessee shall pay, or procure that the insurers or reinsurers pay, to the Lessor on the Total Loss Payment Date, the Agreed Value as at the Total Loss Payment Date together with all amounts of Rent and any other amounts then due and payable under the Lessee Documents.

17.3.2

For the purposes of this Agreement a Total Loss of the Aircraft shall be deemed to have occurred: (a) in the case of an actual total loss, at noon (London time) on the actual date the Aircraft was lost or, if such date is not known, noon (London time) on the day on which the Aircraft was last heard of; (b) in the case of any of the events described in sub-paragraph (a) of the definition of Total Loss (other than an actual total loss), upon the date that notice claiming the loss of the Aircraft is given to the relevant insurers, unless the insurers do not forthwith admit such claim, when such Total Loss shall be deemed to have occurred at the date and time at which either a total loss is subsequently admitted by the insurers or a competent court or arbitration tribunal issues a judgment or award to the effect that a total loss has occurred;

Aircraft Lease Agreement (2).DOC

23

(c) in the case of any of the events described in sub-paragraph (b) of the definition of Total Loss, upon the date of occurrence of such destruction, damage or cessation; (d) in the case of Compulsory Acquisition, upon the date upon which the relevant requisition of title or other compulsory acquisition, requisition, appropriation, expropriation, deprivation or confiscation occurs; and (e) in the case of any of the events described in sub-paragraph (d) of the definition of Total Loss, upon the expiry of the period of 30 days referred to in such sub-paragraph (d) after the date upon which the relevant hijacking, theft, condemnation, confiscation, capture, detention, seizure or requisition for use or hire occurred. The Lessor or, with the prior written consent of the Lessor (such consent not to be unreasonably withheld), the Lessee or any Permitted Sub-Lessee for the time being shall be entitled to give notice claiming a constructive Total Loss but prior to the giving of such notice by the Lessor or the Lessee or such Permitted Sub-Lessee (if any) there shall be consultation by the Lessee or such Permitted Sub-Lessee with the Lessor. In every such case the party proposing to give the notice shall be entitled to such relevant information as it may request but only to the extent that the party from whom such information is requested is permitted by law to provide such information. 17.4 Payment of Rent The Lessee shall continue to pay Rent on the days and in the amounts required under this Agreement notwithstanding any Total Loss up to and including the Total Loss Payment Date, on which date the Lease Period shall terminate. 17.5 Application of Moneys All moneys (including any Requisition Compensation) received by the Lessor from insurers or others in respect of a Total Loss shall be applied by the recipient as follows: 17.5.1 First, in or towards settlement of any amounts owing by the Lessee to the Lessor under the Lessee Documents (including any interest due in respect thereof); 17.5.2 Secondly, if the Lessee shall on or before the date of application of such moneys have paid the Agreed Value, or a part thereof, in accordance with clause 17.3.1, in or towards refunding, by way of rebate of rent, to the Lessee the amount of the Agreed Value or part of it so paid by the Lessee; and 17.5.3 Thirdly to the Lessee.

Aircraft Lease Agreement (2).DOC

24

17.6

Repairable Damage DELIBERATELY OMITTED

18

Requisition
DELIBERATELY OMITTED

19
19.1

Redelivery
At the end of the Lease Period (other than following a Total Loss) the Lessee, at its own expense, shall redeliver the Aircraft to the Lessor at the Redelivery Location and the Lessee shall provide such assistance as the Lessor may require in connection with the de-registration and export of the Aircraft from the State of Registration.

19.2

On redelivery the condition of the Aircraft shall be such as to demonstrate that the Lessee has in all respects complied with the obligations on its part contained in this Agreement and shall otherwise be in a condition complying with the requirements of Schedule 9.

19.3

The procedures for inspection, testing and checking condition of the Aircraft (including Manuals and Technical Records) so as to verify compliance with Return Condition and for acceptance of redelivery of the Aircraft and for the making (where permitted) of adjusting payments to reflect actual condition of the Aircraft as against Return Condition are all set out in Schedule 9.

19.4

If on redelivery the Aircraft (including the Manuals and Technical Records) shall not be in the condition required by clause 19.2, the Lessor shall be entitled to require the Lessee at the Lessee's expense to rectify any defects or deficiencies in the Aircraft when it is redelivered, and the Lessee shall promptly comply with any such requirement. To the extent that such rectification extends beyond the Lease Term, the Lessor may, at its discretion: (a) remedy such defects and deficiencies and recover on demand from the Lessee the costs so incurred, together with interest thereon at the Relevant Rate of Interest from the date of expenditure by the Lessor of the relevant cost until the date of recovery thereof from the Lessee (both before and after any relevant judgment); or (b) continue the Lease Period on a day-to-day basis until such non-compliance is rectified by the Lessee with Rent being payable by the Lessee on demand by the Lessor at the rate which the Lessor certifies to the Lessee is three times the Rent payable by the Lessee immediately prior to the Expiry Date; or (c) treat such event as a Termination Event and exercise any or all of its remedies under clause 21 (including without limitation clause 21.3).

Aircraft Lease Agreement (2).DOC

25

19.5

The Lessee shall indemnify the Lessor for any Losses it may incur by reason of any fluctuation in the fair market value of the Aircraft, or in the fair market rental obtainable for it, between the Expiry Date and the date on which the Lessee complies with its obligations under this clause 19.

20

Termination Events
The Lessor and the Lessee agree that it is a fundamental term and condition of this Agreement that none of the following events or circumstances occurs during the Lease Period and that the occurrence of any of the following events and/or circumstances constitutes a repudiatory breach by the Lessee of this Agreement and a Termination Event.

20.1

Non-Payment The Lessee fails to pay any sum due from it under a Relevant Document in the currency and in the manner stipulated on the due date.

20.2

Insurances The Insurances are not obtained and maintained in full force and effect in accordance with the provisions of clause 16 and Schedule 6.

20.3 20.3.1

Other obligations The Lessee does not comply with any provision of the Lessee (other than those referred to in clause 20.3.1 (Non-payment) and clause 20.3.2 (Insurances)).

20.3.2

No Termination Event under clause 20.3.1 above will occur if the failure to comply is capable of remedy and is remedied within 10 days of the Lessor giving notice to the Lessee or the Lessee becoming aware of the failure to comply.

20.4

Misrepresentation Any representation or statement made or deemed to be made by the Lessee in the Lessee Documents or any other document delivered by or on behalf of the Lessee under or in connection with any Lessee Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.

20.5 20.5.1

Cross default Any Indebtedness of the Lessee or any member of the Group is not paid when due nor within any originally applicable grace period.

20.5.2

Any lease of an aircraft to the Lessee is terminated prior to its specified maturity as a result of an event of default (however described).

Aircraft Lease Agreement (2).DOC

26

20.6 20.6.1

Insolvency The Lessee or any member of the Group is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its Indebtedness.

20.6.2

The value of the assets of any member of the Group is less than its liabilities (taking into account contingent and prospective liabilities).

20.6.3

A moratorium is declared in respect of any Indebtedness of the Lessee or any member of the Group.

20.7

Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken in relation to:

20.7.1

the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Lessee or any member of the Group other than a solvent liquidation or reorganisation of any member of the Group other than the Lessee;

20.7.2

a composition, compromise, assignment or arrangement with any creditor of the Lessee or any member of the Group;

20.7.3

the appointment of a liquidator (other than in respect of a solvent liquidation of a member of the Group other than the Lessee), receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of the Lessee or any of its assets; or

20.7.4

enforcement of any security over any assets of the Lessee any member of the Group, or any analogous procedure or step is taken in any jurisdiction.

20.8

Creditors' process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Lessee or any member of the Group having an aggregate value of $10,000.

20.9

Repudiation The Lessee repudiates, or evidences an intention to repudiate, any Lessee Document.

Aircraft Lease Agreement (2).DOC

27

20.10

Unlawfulness It is or becomes unlawful for the Lessee to perform any of its obligations under the Lessee Documents.

20.11

Litigation Any litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely detemined, might reasonably be expected to have a material adverse effect on the business, assets or financial condition of any member of the Group, are started or threatened against the Lessee or any member of the Group.

20.12

Cessation of Business The Lessee or any member of the Group suspends or ceases or threatens to suspend or cease to carry on its business.

20.13

Material Adverse Change There occurs, in the opinion of the Lessor, a material adverse change in the financial condition of the Lessee or the Group by reference to the financial statements referred to in clause 2.1.10.

20.14

Ownership of Lessee There is a change in the legal or beneficial ownership of the Lessee.

20.15

Arrest of Aircraft The Aircraft is arrested, confiscated, seized, taken in execution, impounded, forfeited, detained in exercise or purported exercise of any possessory lien or other claim, or otherwise taken from the possession of the Lessee or any operator thereof and the Lessee shall fail to procure the release of the Aircraft within a period of five days.

20.16

Registration of Aircraft The registration of the Aircraft is cancelled and the Aircraft is not immediately reregistered in accordance with Applicable Law in the State of Registration.

20.17

Licences The Lessee shall lose any licence or permit and as a result is not permitted it to use or operate the Aircraft for the carriage, for hire or reward, of passengers.

20.18

Other Events

Aircraft Lease Agreement (2).DOC

28

Any other event occurs (other than a Total Loss) or circumstance arises which, in the opinion of the Lessor, has or may be expected to have a prejudicial effect on the Lessor's or any Finance Party's rights, title and interest to the Aircraft or its rights under any Relevant Document or a material adverse effect on the ability of the Lessee (or any other party to any of the Relevant Documents to perform all or any of their respective obligations under, or otherwise to comply with the terms of, any of the Relevant Documents or on the business prospects of the Lessee.

21
21.1

Lessor's rights following a Termination Event


At any time after the occurrence of any Termination Event (and provided that the same is continuing) the Lessor may:

21.1.1

by notice to the Lessee, terminate the Lease Period (and, at the time specified in such notice, as the Lessee hereby agrees and acknowledges, the Lessee's right, title and interest in and to the Aircraft, and to possess and operate the Aircraft, shall terminate and the Lessee shall redeliver the Aircraft to the Lessor in accordance with clause 19) and/or;

21.1.2

retake possession of the Aircraft, and the Lessee agrees that the Lessor may for this purpose enter upon any premises of the Lessee where the Aircraft or any part thereof may be located.

21.1.3

require that the Lessee redeliver the Aircraft to the Lessor either immediately or, at the Lessor's absolute discretion, on such other date as the Lessor shall specify in such notice;

21.2

The Lessee shall pay to the Lessor forthwith upon demand upon such termination such sum as shall equal the aggregate of:

21.2.1 21.2.2

all amounts due under the Lessee Documents as shall be payable and remain outstanding; all Losses incurred by the Lessor in connection with such termination including all costs and expenses incurred in recovering possession of the Aircraft and/or in carrying out any works or modifications required to bring the Aircraft up to the condition specified in clause 19 and Schedule 9;

21.2.3

any Loss suffered by the Lessor because of the Lessor's inability to place the Aircraft on lease with another lessee on terms as favourable to the Lessor as this Agreement or because whatever use, if any, to which the Lessor is able to put the Aircraft upon its return to the Lessor, or the funds arising upon a sale or other disposal, of the Aircraft, does not yield to the Lessor revenue or income equivalent to the sums which would otherwise have been recoverable by it under or pursuant to this Agreement had the Lease Period not been terminated; and

21.2.4

any Losses which may be incurred in unwinding any interest swap, forward interest rate agreement or other hedge agreement entered into by the Lessor or any other Finance Party in connection with the funding of the leasing of the Aircraft under this Agreement; and

Aircraft Lease Agreement (2).DOC

29

21.2.5

all Losses incurred by the Lessor under any of the Finance Documents as a consequence of any part of the finance provided under the Finance Documents to the Lessor becoming repayable in connection with, or as a consequence of, such termination.

21.3

The Lessee shall further pay to the Lessor by way of liquidated damages (and not as a penalty) the amount equal to the Agreed Value as at the date of termination.

21.4

If the Lessee fails to comply with any of its obligations under this Agreement or any other Lessee Document the Lessor may, without being in any way obliged or responsible for so doing and without prejudice to the ability of the Lessor to treat that non-compliance as a Termination Event, effect compliance on the Lessee's behalf, and if the Lessor incurs any expenditure in effecting such compliance the Lessor shall be entitled (without prejudice to clause 21.1) to recover such expenditure from the Lessee together with interest thereon at the Relevant Rate of Interest from the date on which such expenditure is incurred by the Lessor until the date of reimbursement thereof by the Lessee (both before and after any relevant judgment).

21.5

The rights and remedies of the Lessor provided in this Agreement are cumulative and are not exclusive of any rights and remedies provided by law.

22

Notices
DELIBERATELY OMITTED

23
23.1

Assignment
Benefit of Agreement The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assignees and permitted transferees.

23.2

Assignment by Lessee The Lessee shall not, without the prior written consent of Lessor, assign any of its rights or obligations hereunder. Without prejudice to the foregoing, any sub-leasing permitted by clause 12 shall not constitute an assignment or transfer by the Lessee for the purposes of this clause 23.2.

23.3 23.3.1

Assignment by Lessor The Lessor may enter into a Lessor Transfer without the consent of the Lessee. The Lessor will promptly notify the Lessee of any proposed Lessor Transfer and the Lessee agrees, promptly to execute and deliver in connection with any proposed Lessor Transfer such documents and assurances (including a consent to the proposed Lessor Transfer) and to take such further action as the Lessor may reasonably request to establish or protect the rights and remedies

Aircraft Lease Agreement (2).DOC

30

created or intended to be created in favour of the transferees in connection with any proposed Lessor Transfer.

24

Miscellaneous
DELIBERATELY OMITTED

25

Governing law
This Agreement and any non-contractual obligations connected with it are governed by English law.

26
26.1 26.1.1

Enforcement
Jurisdiction The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement and the other Lessee Documents or any non-contractual obligations connected with this Agreement or the other Lessee Documents (including a dispute regarding the existence, validity or termination of this Agreement or any other Lessee Document) (a Dispute).

26.1.2

The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly neither party will argue to the contrary.

26.1.3

Clauses 26.1.1 and 26.1.2 are for the benefit of the Lessor only. As a result, the Lessor shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lessor may take concurrent proceedings in any number of jurisdictions.

26.1.4

Notwithstanding the provisions of this clause 26.1, the Lessee may take proceedings in relation to a Dispute before the courts of the jurisdiction of incorporation of the Lessor.

IN WITNESS whereof the Parties have caused this Agreement to be duly executed the day and year first above written.

Aircraft Lease Agreement (2).DOC

31

Schedule 1 The Aircraft


[FILL IN SPECIFICATION]

Aircraft Lease Agreement (2).DOC

32

Schedule 2 List of Documents and Evidence


Part 1 (clause 4.1) The following conditions precedent shall, in the case of items 1 to 4 be delivered not later than 10 Business Days prior to the scheduled Delivery Date and, in the case of all other items, shall be delivered prior to Delivery. 1 A copy certified by a Director or the Secretary of the Lessee to be a true, complete and up-todate copy, of the Memorandum and Articles of Association of the Lessee. 2 A copy, certified by a Director or the Secretary of the Lessee to be a true copy, and as being in full force and effect and not amended or rescinded, of resolutions of the board of directors of the Lessee: (a) (b) approving the transactions contemplated by the Lessee Documents; and authorising a person or persons to sign and deliver on behalf of the Lessee of the Lessee Documents and any notices or other documents to be given pursuant thereto. 3 Specimen signatures, authenticated by a Director or the Secretary of the Lessee of each of the authorised signatories referred to in sub-clause 2(b) of this Schedule 2. 4 Evidence that all Authorisations necessary for any matter or thing contemplated by the Lessee Documents and for the legality, validity, enforceability, admissibility in evidence and effectiveness thereof (including, but without prejudice to the generality of the foregoing, any necessary export and/or import licences in respect of the Aircraft) have been obtained or effected on an unconditional basis and remain in full force and effect (or, in the case of the effecting of any registrations and filings, that arrangements satisfactory to the Lessor have been made for the effecting of the same within any applicable time limit). 5 (a) Originals or certified copies of certificates evidencing the insurance and reinsurance required to be maintained pursuant to clause 16 and Schedule 6 in form and substance satisfactory to the Lessor. (b) A letter of undertaking addressed by the Lessee's insurance brokers to the Lessor and the Lender in the form set out in Schedule 7 or such other form as the Lessor and the Lender may approve.

Aircraft Lease Agreement (2).DOC

33

(c)

A letter addressed to, and be obtained by, the Lessor by a recognised firm of aviation insurance brokers confirming that the insurance required to be maintained pursuant to clause 16 and Schedule 6 adequately protects the interests of the Lessor.

A certified copy of each of: (a) an Export Certificate of Airworthiness in the public transport (passenger) category issued by the Aviation Authority with respect to the Aircraft issued by EASA; (b) the Certificate of Airworthiness with respect to the Aircraft together with such airworthiness review certificates as are required for the Aircraft to be used for the public transport of passengers; (c) the current Air Operator's Certificate issued by the Aviation Authority to the Lessee with respect to aircraft of the type of the Aircraft; (d) the application made by the Lessee for registration of the Aircraft with the Aviation Authority; (e) the certificate of registration of the Mortgage issued by the Aviation Authority.

7 8

Original copies of each of the Relevant Documents executed by each of the parties thereto. Legal opinions from Norton Rose LLP and Wise Old Owl as to the laws of England and Ruritania.

A deregistration power of attorney executed by the Lessee in favour of the Lessor in the form of Schedule 13 together with a notarised copy translated into Ruritanian.

10

Evidence that the whole of the Deposit has been received by the Lessor's designated bank.

Aircraft Lease Agreement (2).DOC

34

Schedule 3 Acceptance Certificate


TO BE COMPLETED

Aircraft Lease Agreement (2).DOC

35

Schedule 4 Rent Instalments


(1) Payment Date (2) Rent

Aircraft Lease Agreement (2).DOC

36

Schedule 5 Agreed Value


Agreed Value means $[ ];

Aircraft Lease Agreement (2).DOC

37

Schedule 6 Insurance Requirements


TO BE COMPLETED

Aircraft Lease Agreement (2).DOC

38

Schedule 7 Form of Brokers' Letter of Undertaking


TO BE COMPLETED

Aircraft Lease Agreement (2).DOC

39

Schedule 8 Technical Acceptance Procedures and Delivery Condition


TO BE COMPLETED

Aircraft Lease Agreement (2).DOC

40

Schedule 9 Redelivery Procedures and Return Conditions


TO BE COMPLETED

Aircraft Lease Agreement (2).DOC

41

Schedule 10 Maintenance Reserves 1


1.1

Amount
In reflection of the fact that certain maintenance costs in relation to the operation of the Aircraft by the Lessee will be payable (both before the end of the Lease Period and thereafter), the Lessee shall pay the following Maintenance Reserves to the Lessor (or to its order) by reference to each calendar month or part thereof following the Delivery Date during the Lease Period on the [tenth] day following the end of that calendar month: (a) in respect of the Airframe: (i) [ ] Dollars ($[ ]) (for each Flight Hour operated by the Airframe during that calendar month) as a provision towards the next 5 year check and 4C/5 year check tasks; and (ii) [ ] Dollars ($[ ]) (for each Flight Hour operated by the Airframe during that calendar month) as a provision towards the next 10 year check and 8C/10 year check tasks; (together, the Airframe Maintenance Reserves); (b) in respect of each Engine, [ ] Dollars ($[ ]) for each Running Hour operated by that Engine during that calendar month (Engine Maintenance Reserves); (c) in respect of the Engine LLPs, [ ] Dollars ($[ ]) for each Cycle accomplished by each Engine during that calendar month (Engine LLP Maintenance Reserves); (d) in respect of the APU, [ ] Dollars ($[ ]) for each Running Hour operated by the Aircraft during that calendar month (APU Maintenance Reserves); and (e) in respect of the Landing Gear, [ ] Dollars ($[ ]) for each Cycle accomplished by the Landing Gear during that calendar month (Landing Gear Maintenance Reserves). TO BE COMPLETED

Aircraft Lease Agreement (2).DOC

42

Schedule 11 List of Permitted Air Carriers

Aircraft Lease Agreement (2).DOC

43

Schedule 12 Form of Status Report

Aircraft Lease Agreement (2).DOC

44

Schedule 13 Deregistration Power of Attorney

Aircraft Lease Agreement (2).DOC

45

SIGNED by for and on behalf of RUFLY AIRWAYS LIMITED

) ) )

SIGNED by for and on behalf of

) ) )

FANTASTIC LEASING LIMITED

Aircraft Lease Agreement (2).DOC

46