<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8836
HAWAIIAN AIRLINES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Hawaii 99-0042880
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3375 Koapaka Street, Suite G-350
Honolulu, Hawaii 96819
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (808) 835-3700
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) No
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. (X) Yes ( ) No
As of May 1, 1997, 39,856,364 shares of Common Stock shares were outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
Hawaiian Airlines, Inc.
Condensed Balance Sheets (in Thousands) (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................... $ 45,072 $ 37,237
Accounts receivable, net................................................ 30,076 28,022
Inventories, net........................................................ 8,336 7,050
Assets held for sale.................................................... 1,344 1,344
Prepaid expenses........................................................ 4,541 4,845
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Total current assets................................................... 89,369 78,498
---------- ---------
Property and equipment, less accumulated depreciation and
amortization of $11,816 and $10,161 in 1997 and 1996, respectively...... 53,239 45,794
Assets held for sale...................................................... 4,823 5,083
Other assets.............................................................. 5,226 4,362
Reorganization value in excess of amounts
allocable to identifiable assets, net................................... 61,668 62,552
---------- ---------
Total Assets........................................................... $ 214,325 $ 196,289
---------- ---------
---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt...................................... 2,213 2,247
Current portion of capital lease obligations........................... 3,545 2,912
Accounts payable....................................................... 28,257 26,799
Air traffic liability.................................................. 41,038 25,524
Accrued liabilties..................................................... 10,443 12,623
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Total current liabilities............................................. 85,496 70,105
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Long-Term Debt........................................................... 5,832 6,353
Capital Lease Obligations................................................ 11,328 7,387
Other Liabilities and Deferred Credits................................... 29,846 29,571
Shareholders' Equity:
Common and Special Preferred Stock..................................... 401 393
Captial in excess of par value......................................... 97,615 95,827
Warrants............................................................... 1,108 1,557
Notes receivable from Common Stock sales............................... (1,714) (1,714)
Accumulated deficit.................................................... (15,587) (13,190)
----------- ---------
Shareholders' equity.................................................. 81,823 82,873
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Total Liabilities and Shareholders' Equity............................ $ 214,325 $ 196,289
----------- ---------
---------- ---------
</TABLE>
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Hawaiian Airlines, Inc.
Condensed Statements of Operations (in thousands, except per share data)
(Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues:
Passenger........................................... $ 81,015 $ 79,811
Charter............................................. 10,737 6,971
Cargo............................................... 5,076 4,813
Other............................................... 2,938 2,467
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Total............................................ 99,766 94,062
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Operating Expenses:
Wages and benefits.................................. 29,531 29,077
Aircraft fuel, including taxes and oil.............. 21,805 17,018
Maintenance materials and repairs................... 18,607 15,479
Rentals and landing fees............................ 9,060 8,428
Sales commissions................................... 3,370 3,506
Depreciation and amortization....................... 2,602 2,026
Other............................................... 19,295 18,132
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Total............................................ 104,270 93,666
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Operating Income (Loss)................................ (4,504) 396
----------- ------------
Nonoperating Income (Expense):
Interest expense, net................................ (51) (956)
Gain on disposition of equipment..................... - 8
Other, net........................................... (239) (30)
----------- ------------
Total............................................. (290) (978)
----------- ------------
Loss Before Income Taxes............................... (4,794) (582)
Income Tax Benefit..................................... 2,398 -
----------- ------------
Net Loss............................................... $ (2,396) $ (582)
----------- ------------
----------- ------------
Net Loss Per Common Stock Share........................ $ (0.06) $ (0.03)
----------- ------------
----------- ------------
Weighted Average Number of Common Stock
Shares Outstanding................................... 39,384 21,521
----------- ------------
----------- ------------
</TABLE>
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<TABLE>
<CAPTION>
Condensed Statements of Cash Flows (in thousands) (Unaudited)
Three Months Ended
March 31,
-------------------
1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss....................................................... $ (2,396) $ (582)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization................................ 2,602 2,026
Net periodic postretirement benefit cost..................... 321 567
Stock option compensation.................................... - 964
Gain on disposition of equipment............................. - (8)
Increase in accounts receivable.............................. (2,054) (3,847)
Decrease (increase) in inventories........................... (1,286) 94
Decrease in prepaid expenses................................. 304 561
Increase (decrease) in accounts payable...................... 1,458 (1,407)
Increase (decrease) air traffic liability.................... 15,514 (1,690)
Decrease in accrued liabilities.............................. (2,180) (5,758)
Other, net................................................... (543) 1,135
-------- --------
Net cash provided by (used in) operating activities...... 11,740 (7,945)
-------- --------
Cash Flows From Investing Activities:
Purchase of property and equipment............................. (3,771) (1,680)
Net proceeds from disposition of equipment..................... 336 519
-------- --------
Net cash used in investing activities.................... (3,435) (1,161)
-------- --------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock......................... 1,348 20,000
Issuance of long-term debt..................................... 171 124
Repayment of long-term debt.................................... (726) (2,311)
Repayment of capital lease obligations......................... (1,263) (644)
--------- --------
Net cash provided by (used in) financing activities...... (470) 17,169
--------- --------
Net increase in cash and cash
equivalents............................................ 7,835 8,063
Cash and cash equivalents - Beginning of Period.................. 37,237 5,389
---------- --------
Cash and cash equivalents - End of Period........................ $ 45,072 $ 13,452
---------- --------
---------- --------
</TABLE>
4
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Hawaiian Airlines, Inc.
Statistical Data (in thousands, except as otherwise indicated) (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
---------- --------
<S> <C> <C>
SCHEDULED OPERATIONS:
Revenue passengers flown ............................... 1,226 1,269
Revenue passenger miles ("RPM") ...................... 790,956 809,797
Available seat miles ("ASM") ......................... 1,166,013 1,112,525
Passenger load factor .................................. 67.8% 72.8%
Revenue ton miles ...................................... 90,366 94,600
Revenue plane miles .................................... 4,689 4,681
Passenger revenue per passenger mile ("Yield")......... 10.2 CENTS 9.9 CENTS
OVERSEAS CHARTER OPERATIONS:
Revenue passengers flown ............................... 70 46
RPM .................................................... 188,118 125,660
ASM .................................................... 214,624 131,767
</TABLE>
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Hawaiian Airlines, Inc.
Notes to Condensed Financial Statements (Unaudited)
1. Basis of Presentation
In the opinion of management, the unaudited condensed financial statements
included in this report contain all adjustments necessary for a fair
presentation of the results of operations and statements of cash flows for the
interim periods covered and the financial condition of Hawaiian Airlines, Inc.
("Hawaiian Airlines" or the "Company") as of March 31, 1997 and December 31,
1996. The operating results for the interim period are not necessarily
indicative of the results to be expected for the full fiscal year.
The accompanying financial statements should be read in conjunction with the
financial statements and the notes thereto contained in Hawaiian Airlines'
Annual Report on Form 10-K for the year ended December 31, 1996, which are
incorporated herein by reference.
Certain reclassifications have been made to conform prior year's data to
current year's presentation.
2. Income Taxes
The Company's reorganization and the associated implementation of fresh
start reporting in September 1994 gave rise to significant items of expense for
financial reporting purposes that are not deductible for income tax purposes. In
large measure, it is these nondeductible expenses that result in an effective
tax rate (for financial reporting purposes) significantly greater than the
current United States corporate statutory rate of 35.0%. For the first quarter
1997, an estimated interperiod tax benefit of $2.4 million has been reflected in
the accompanying condensed statements of operations. As the Company presently
expects that its full year 1997 results will require a provision for income
taxes, the estimated tax benefit recorded in first quarter 1997 reflects
management's estimate of the annual effective tax rate. No benefit was recorded
for first quarter 1996 as the amount was considered to be not material.
3. New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share." SFAS No. 128 is effective for both interim and annual periods ending
after December 15, 1997. The Company will adopt SFAS No. 128 in the fourth
quarter of 1997. SFAS No. 128 requires the presentation of "Basic" earnings per
share, representing income available to common shareholders divided by the
weighted average number of Common Stock shares outstanding for the period, and
"Diluted" earnings per share, which is similar to the current presentation of
fully diluted earnings per share. SFAS No. 128 requires restatement of all prior
period earnings per share data presented. Management does not expect adoption of
SFAS No. 128 to have a material impact on the Company's reported earnings per
share, financial position or results of operations.
In February 1997, the FASB also issued SFAS No. 129, "Disclosure of
Information about Capital Structure," which lists required disclosures about
capital structure that had been included in a number of previously existing
statements and opinions. SFAS No. 129 is effective for periods ending after
December 15, 1997. The Company will adopt the provisions of SFAS No. 129 in its
financial statements for 1997 and does not expect adoption to have a material
effect on the Company's financial condition or results of operations.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements contained in this report that are not related to
historical results, including, without limitation, statements regarding the
Company's business strategy and objectives, future financial position and
estimated cost savings, are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act and
involve risks and uncertainties. Although the Company believes that the
assumptions on which any forward-looking statements are based are reasonable,
there can be no assurance that such assumptions will prove to be accurate and
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed under Part I, Item
I, Business and heretofore, as well as those discussed elsewhere in this Form
10-Q. All forward-looking statements contained in this Form 10-Q are qualified
in their entirety by this cautionary statement.
Results of Operations
During first quarter 1997, the Company incurred operating and net losses of
$4.5 million and $2.4 million, respectively. This compares to $396,000 of
operating income and $582,000 of net loss in first quarter 1996. Quarter over
quarter, the Company's operating and net results were primarily impacted by (1)
softness in travel demand and high fuel prices continuing into first quarter
1997 from fourth quarter 1996 and (2) higher maintenance operating costs.
Preliminary statistics from the Hawaii Visitor and Convention Bureau show a
decline of 4.4% in the total number of visitors to Hawaii in the first two
months of 1997, as compared to the same period in 1996. Total visitors in March
1997 increased by 4.3% when compared to March 1996, resulting in a net overall
decrease in total visitors of 1.4% quarter over quarter. Through the first two
months of first quarter 1997, the Company carried approximately 28,000 less
revenue passengers, a decrease of 3.3% period over period. Consistent with total
visitor counts to Hawaii, the trend reversed in March 1997, as the Company
carried approximately 9,000 or 2.0% more revenue passengers than it did in March
1996. Advance bookings for second quarter 1997 are currently ahead of 1996
levels. Fuel prices also appear to have stabilized and have started to decrease.
Management is unable to predict whether advance bookings will hold at their
present levels or that fuel prices will continue to stabilize and decrease, as
the cost of fuel can fluctuate significantly in response to global market
conditions.
7
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The following table compares first quarter 1997 operating passenger revenues
and statistics to those in first quarter 1996, in thousands, except as
otherwise indicated:
Three Months Ended
March 31,
------------------------- Increase
1997 1996 (Decrease) %
------------------------- ----------- ------
Interisland:
Passenger revenues....... $ 34,531 $ 34,275 $ 256 0.7
Revenue passengers flown. 951 992 (41) (4.1)
RPM...................... 126,379 130,642 (4,263) (3.3)
ASM...................... 217,258 221,453 (4,195) (1.9)
Passenger load factor.... 58.2% 59.0% (0.8) (1.4)
Yield.................... 27.3 CENTS 26.2 CENTS 1.1 CENTS 4.2
Transpacific ("Transpac"):
Passenger revenues....... $ 42,315 $ 41,413 $ 902 2.2
Revenue passengers flown. 263 264 (1) (0.4)
RPM...................... 631,723 644,896 (13,173) (2.0)
ASM...................... 887,465 824,968 62,497 7.6
Passenger load factor.... 71.2% 78.2% (7.0) (9.0)
Yield.................... 6.7 CENTS 6.4 CENTS 0.3 CENTS 4.7
SouthPacific ("Southpac"):
Passenger revenues....... $ 4,169 $ 4,123 $ 46 1.1
Revenue passengers flown. 12 13 (1) (7.7)
RPM...................... 32,854 34,259 (1,405) (4.1)
ASM...................... 61,290 66,104 (4,814) (7.3)
Passenger load factor.... 53.6% 51.8% 1.7 3.3
Yield.................... 12.7 CENTS 12.0 CENTS 0.7 CENTS 5.8
Overseas Charter:
Charter revenues......... $ 10,737 $ 6,971 $ 3,766 54.0
Revenue passengers flown. 70 46 24 52.2
RPM...................... 188,118 125,660 62,458 49.7
ASM...................... 214,624 131,767 82,857 62.9
Passenger revenues totaled $81.0 million during first quarter 1997, an
increase of $1.2 million or 1.5% over 1996 first quarter passenger revenues
of $79.8 million. The majority of the increase was associated with
Interisland and Transpac passenger revenues increasing period over period by
$256,000 and $902,000, respectively. Slight decreases in both Interisland and
Transpac revenue passengers flown and RPM were offset by incremental
increases in yield.
Overseas charter revenues totaled $10.7 million in first quarter 1997,
representing an increase of $3.8 million or 54.0% from first quarter 1996.
The increase was due to the Company operating in first quarter
8
<PAGE>
1997, eight charters per week to Las Vegas, Nevada and effective February
1997, three charters per week to Anchorage, Alaska. The Company operated six
charters per week solely to Las Vegas in first quarter 1996.
The following table compares operating expenses per ASM for first quarter
1997 with first quarter 1996 by major category:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------- Increase
1997 1996 (Decrease) %
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Wages and benefits ........................... 2.14 CENTS 2.34 CENTS (0.20) CENTS (8.5)
Aircraft fuel, including taxes and oil ....... 1.58 1.37 0.21 15.3
Maintenance materials and repairs ............ 1.35 1.24 0.11 8.9
Rentals and landing fees ..................... 0.66 0.68 (0.02) (2.9)
Sales commissions ............................ 0.24 0.28 (0.04) (14.3)
Depreceiation and amortization ............... 0.19 0.16 0.03 18.8
Other ........................................ 1.40 1.46 (0.06) (4.1)
----- ----- ------ -------
Total ............................... 7.56 CENTS 7.53 CENTS 0.03 CENTS 0.4
----- ----- ------ -------
----- ----- ------ -------
</TABLE>
Wages and benefits per ASM decreased by 0.20 CENTS or 8.5% quarter over
quarter. The decrease was due to an overall increase in ASM in first quarter
1997 versus first quarter 1996 of 11.0%, primarily from the Transpac and
Overseas Charter markets, offset by a 1.6% increase in wages and benefits.
Aircraft fuel cost, including taxes and oil, per ASM increased in first
quarter 1997 over first quarter 1996 by 0.21 CENTS or 15.3%. The average cost
of aircraft fuel per gallon, excluding taxes, increased by 12.4 CENTS or
19.5% in first quarter 1997 versus first quarter 1996. The Company also
consumed approximately 1.9 million or 8.1% more gallons of aircraft fuel due
to increased long-haul flying in first quarter 1997 as compared to first
quarter 1996.
Maintenance materials and repairs per ASM also increased by 0.11 CENTS or
8.9% as period over period the Company incurred (1) $2.0 million more in
DC-10 maintenance expense since the Company utilized ten DC-10 aircraft in
first quarter 1997 versus seven in first quarter 1996 and (2) $1.1 million
more in DC-9 engine repairs, while ASM increased 11.0%.
Depreciation and amortization per ASM increased by .03 CENTS or 18.8%. The
Company incurred approximately $507,000 more of depreciation and amortization
in first quarter 1997 compared to first quarter 1996 primarily due to
$400,000 of additional depreciation and amortization on capitalized portions
of scheduled DC-9 checks and overhauls.
All other decreases in operating expenses per ASM as compared to first
quarter 1996 were principally due to an overall increase in ASM period over
period of 11.0%.
9
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Liquidity and Capital Resources
As of March 31, 1997, the Company had working capital of $3.9 million,
representing a $4.5 million decrease from $8.4 million of working capital at
December 31, 1996. The decrease is primarily attributed to a $15.5 million
increase in air traffic liability being offset by related increases in cash and
cash equivalents and accounts receivable of $9.9 million.
Effective March 7, 1997 through September 30, 1997, a 10.0% excise tax on
each ticket sold (other than Transpac flights), a 6.25% cargo excise tax and a
$6.00 international departure tax (including Transpac and Overseas Charter
flights) were reinstated. The Company has and will adjust its fares accordingly
based upon prevailing market conditions. There can be no assurance that the
Company will be able to maintain its current fare levels or predict with any
certainty the effects on its fares should the taxes lapse and/or be reinstated.
Although not quantifiable, management believes a significant portion of the
activity in air traffic liability, cash and cash equivalents and accounts
receivable to be attributable to increased sales activity in advance of (1) the
peak summer travel period and (2) the reinstatement of the aforementioned excise
taxes.
Operating activities for first quarter 1997 provided $11.7 million in cash
and cash equivalents, primarily due to the increase in air traffic liability as
discussed above. In first quarter 1997, the Company expended $3.8 million of its
$20.1 million in planned capital expenditures for 1997. Capitalized portions of
scheduled DC-9 checks and overhauls, consolidation of the Company's overseas
passenger and baggage processing operations into the Honolulu Interisland
Terminal and the first of a series of investments in improved software, related
hardware and implementation costs represent a majority of these first quarter
1997 capital expenditures.
Effective March 1, 1997, the Company has entered into petroleum hedging
contracts to provide some short-term protection against the possible future
increase in aircraft fuel costs. The petroleum hedging contracts cover
approximately 25% of the Company's anticipated aircraft fuel needs for the next
11 months. At March 31, 1997, the Company had petroleum hedging contracts
outstanding with an aggregate notional value of $11.7 million. The Company is
exposed to credit loss in the event of nonperformance by the counterparties on
the petroleum hedging contracts; however, management does not anticipate
nonperformance by the counterparties.
The Company believes that it has various options available to meet its
capital, debt and operating commitments, including cash on hand at March 31,
1997 of $45.1 million, internally generated funds and a credit facility with
total availability of $12.3 million as of March 31, 1997 with aggregate term
loans and letters of credit outstanding in the amounts of $6.4 million and
$100,000, respectively. The Company will continue to consider various borrowing
or leasing options to supplement its cash requirements.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material developments in matters previously reported or reportable
events arising in the three months ended March 31, 1997 were noted.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 Code Share Agreement, dated January 6, 1997, between the
Company and Wings West Airlines, Inc.
Exhibit 10.2 Amendment No. 1 to Code Share Agreement, dated as of January
21, 1997, between the Company and Wings West Airlines, Inc.
Exhibit 10.3 Information Technology Services Agreement, dated as of
February 1, 1997, between the Company and Electronic Data Systems
Corporation
Exhibit 10.4 Aircraft Lease Agreement, dated as of January 3, 1997, between
the Company and American Airlines, Inc.
Exhibit 10.5 Separation Agreement and Complete Settlement and Release of
All Claims, dated as of February 1997, between the Company and
Bruce R. Nobles
Exhibit 10.6 Employment Agreement, effective as of April 14, 1997, between
the Company and Paul John Casey
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
(1) Current Report on Form 8-K dated January 7, 1997 (date
of event-December 24, 1996) reporting Item 5 "Other
Events" and Item 7 "Financial Statements, Proforma
Financial Information and Exhibits;"
(2) Current Report on Form 8-K dated March 4, 1997 (date of
event-February 27, 1997) reporting Item 5 "Other Events"
and Item 7 "Financial Statements, Pro forma Financial
Information and Exhibits."
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAWAIIAN AIRLINES, INC.
May 15, 1997 By /s/ John L. Garibaldi
-------------------------
John L. Garibaldi
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
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CODE-SHARE AGREEMENT
This AGREEMENT, dated as of this 6th day of January, 1997 and effective
as of March 15, 1997 (the "Effective Date"), is entered into by and between
Hawaiian Airlines, Inc., a corporation organized under the laws of the
Territory of Hawaii and existing under the laws of the State of Hawaii
("Hawaiian"), and Wings West Airlines, Inc., d/b/a American Eagle Airlines, a
California corporation ("Wings West").
WHEREAS Hawaiian and Wings West wish to enter into a Code-Share
Agreement whereby Wings West shall operate the scheduled services specified
as Code-Share Flights to connect with Hawaiian flights at Los Angeles
International Airport (LAX) and San Francisco International Airport (SFO).
1. AGREEMENT
In consideration of the mutual covenants and undertakings contained
herein, the parties hereto have agreed to operate Code-Share Flights on the
following terms and conditions.
2. DEFINITIONS
A Code-Share Flight is a flight operated by Wings West
which also carries the flight designator of "HA".
3. THE CODE-SHARE FLIGHTS
(a) The Code-Share Flights will be marketed and promoted by Hawaiian
under the flight designator of "HA" for the city-pair markets listed in
Annex A.
(b) Reservations of seats on the Code-Share Flights will be effected
and administered in accordance with the Code-Share Procedures, which will be
jointly-developed by the parties hereto within a reasonable time following
the execution of this Agreement.
4. GENERAL
(a) Wings West shall have the sole responsibility and control over, and
Hawaiian shall have no responsibility, control over or obligations or duties
with respect to, each and every aspect of Wings West's operations, including,
without limitation, scheduling, pricing, planning of flight itineraries and
routings, reservations control/yield management, dispatch and fueling, weight
and balance, flight release, maintenance, flight operations and compliance
with applicable rules and regulations. Flights operated by Wings West shall
be operated with its aircraft and crews.
(b) Hawaiian will ticket Code-Share passengers using available computer
reservation system ("CRS") inventory as specified in the Code-Share
Procedures.
<PAGE>
(c) Wings West and Hawaiian will utilize their collective reasonable
efforts to create appropriate signage and identification at the airports
served by the Code-Share Flights and will agree on the text and delivery of
public announcements in airports and onboard the Code-Share Flights. The
costs of such marketing will be borne by the marketing carrier, Hawaiian.
(d) Wings West is a duly certificated air carrier under 14 C.F.R. Part
121; and all services performed by Wings West pursuant to this Agreement
shall be conducted and all of its personnel shall at all times meet and be in
material compliance with any and all applicable federal, state and local
laws, orders, rules and regulations of all governmental agencies having
jurisdiction over its operations, including but not limited to the Department
of Transportation (the "DOT") and the Federal Aviation Administration (the
"FAA").
(e) In circumstances where an overbooking of a Code-Share Flight makes
it necessary to deny boarding to some passengers, Wings West will deny
boarding to such Hawaiian Code-Share passengers only after the Wings West
passenger list has been exhausted, provided, that Hawaiian Code-Share
passengers present themselves to the Wings West check-in desks no later than
thirty minutes prior to the scheduled time of departure of the relevant
Code-Share Flight and that Hawaiian is not the cause of the flight being
overbooked.
5. VALUATION OF CODE-SHARE TICKETS
Portions of this document have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange Commission. Such
portions have been provided separately to the Commission.
6. PAYMENTS
Wings West shall invoice Hawaiian through the Airlines Clearing House
for the sums due in accordance with normal interline settlement processes.
With respect to tickets issued by third parties, should Wings West not have
an interline traffic agreement with the ticketing carrier, Wings West will
bill such coupons to Hawaiian as exceptional items (i.e., via correspondence)
and not include that coupon in the normal monthly interline invoice to
Hawaiian. The value of coupons billed to Hawaiian as exceptional items under
this Section shall be equal to the value such coupons would have had if
issued by Hawaiian.
2
<PAGE>
Portions of this document have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange Commission. Such
portions have been provided separately to the Commission.
To support interline billing of Hawaiian tickets to third parties by
Wings West, Hawaiian agrees to waive endorsement requirements on all coupons
issued on its ticket stock naming Hawaiian in the "carrier" box used and
honored on Code-Share Flights. Hawaiian shall supply Wings West with written
confirmation in a form reasonably satisfactory to Wings West confirming its
blanket waiver of endorsement requirements for Code-Share passenger ticket
coupons issued for use on Code-Share Flights.
7. INVENTORY
The parties hereto will map inventory classes of the Code-Share Flights
to inventory classes of Wings West, as set forth in the Code-Share
Procedures. The parties will endeavor to map the average coupon value of
Hawaiian's inventory classes to comparable classes of Wings West to provide
nondiscriminatory access for bookings made by Hawaiian for passengers
yielding comparable revenue values, provided however that Wings West will
retain ultimate control over the management of seat inventory availability on
Code-Share Flights.
In consideration for Wings West agreeing to fare levels that are lower
than standard straight rate prorate methodology, it is understood that
Hawaiian will create a special inventory allocation just for Wings West
code-share passengers.
8. BAGGAGE/FLIGHT INTERRUPTION MANIFESTS
In respect of baggage of passengers traveling on Code-Share Flights and
in respect of involuntary rerouting and denied boarding of passengers, the
parties shall adhere to the procedures set forth in the Code-Share
Procedures. If the provisions of the Code-Share Procedures do not resolve the
issue, the handling and settlement of the claims shall be in accordance with
the Trade Practices Manual of the ATA or the IATA Resolutions and Recommended
Practices Manual, whichever applies. The use of the HA designator code for
Code-Share Flights does not extend to mail contract rates between each
carrier and the U.S. Postal Service.
9. PASSENGER FARES
Subject to the limitations of Section 12 of this Agreement, Hawaiian
will independently establish fares and rates for journeys that include the
Code-Share Flights. Hawaiian shall not establish or publish local fares
applicable to carriage on Code-Share Flights.
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10. TICKETS
All tickets, including tickets issued on Hawaiian ticket stock used and
honored on the Code-Share Flights shall be uplifted and retained by Wings
West, the Operating Carrier, which shall be responsible for normal processing
and billing of such documents. Hawaiian tickets issued for the Code-Share
Flights will be accepted by Wings West for carriage without the necessity for
endorsement.
11. FREE AND REDUCED RATE REVENUE TRANSPORTATION
All travel industry non-revenue (i.e., AD.., ID.., etc.) travel on
Code-Share Flights shall be administered by Wings West according to the terms
and conditions contained in any relevant agreements between Wings West (or
its affiliates) and other parties, including Hawaiian.
12. FREQUENT FLYERS TICKETS
The parties or their affiliates will execute a separate agreement, or an
amendment to an existing applicable agreement, to provide that American
AAdvantage-Registered Trademark- miles will be awarded for travel on
Code-Share Flights and to provide, further, that Hawaiian will pay Wings West
or one of its affiliates for miles awarded.
13. SALE OF CODE-SHARE FLIGHTS
Hawaiian will not sell carriage on the Code-Share Flights independently
of its own flights.
14. MARKETING THE CODE-SHARE FLIGHTS
The costs of signage and other marketing materials will be paid by
Hawaiian as the marketing carrier.
15. COMPUTER RESERVATIONS SYSTEM (CRS) CHARGES
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Portions of this document have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange Commission. Such
portions have been provided separately to the Commission.
16. PUBLICATION OF SCHEDULES
Hawaiian shall be responsible for advising the Code-Share Flights to ABC
World Airways Guide, Reed Travel Group (RTG) and to Computer Reservations
Systems.
17. CONDITIONS OF CARRIAGE
The Code-Share Procedures will address reconciliation of Hawaiian and
Wings West Conditions of Carriage.
18. APPLICABLE OPERATING RULES
In the event this Agreement is silent with respect to which party's
rules or operating procedures are applicable to the execution of the
Code-Share Flights and processing of passengers thereon, and absent any other
agreement, law, rule or regulation, the rules and procedures of Wings West,
as the operating airline, shall apply to the extent consistent with the terms
of this Agreement.
19. COMPLIANCE WITH REGULATIONS
Nothing in this Agreement will require either Wings West or Hawaiian to
contravene any government law, rule or regulation. Wings West and Hawaiian
hereby confirm that, in relation to this Agreement, all relevant
transportation services and advertising or other forms of solicitation will
comply in full with applicable laws, rules and regulations.
20. TRADEMARKS AND CORPORATE IDENTIFICATION
(a) It is understood and agreed that the logos, trademarks, service
marks and tradenames of Wings West shall be and remain at all times the
exclusive property of Wings West, and that the logos, trademarks, service
marks and tradenames of Hawaiian shall be and remain at all times the
exclusive property of Hawaiian. Neither party shall use the logos,
trademarks, service marks and tradenames of the other party without the other
party's prior written consent.
(b) Each party agrees that, should any right, title or interest in or
to the other party's logos, trademarks, service marks or tradenames become
vested in it (by operation of law or otherwise) by reason of this Agreement,
it shall hold the same in trust for the other party and shall, at the request
of such party, forthwith unconditionally assign any such right, title or
interest to such party.
(c) (i) From time to time each party may provide to the other certain
art work, drawings, or technical information and advice for the purpose of
assisting such other party in the advertising and promotion of the Code-Share
Flights. All such
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drawings, technical information and advice will be treated
by the receiving party as confidential and proprietary information of the
providing party and the receiving party will use it only for those purposes
specifically authorized by the providing party in advance and in writing.
(ii) Each party agrees that all advertising and promotional
materials promoting the Code-Share Flights will meet first quality standards.
(iii) Each party shall, in all cases, be the sole judge in
determining the acceptability of both the quality and presentation of
advertising and promotional materials using its tradenames or trademarks.
(iv) Each party shall be responsible for providing agreed upon
promotional material to its own authorized agents and airport locations.
21. NON-EXCLUSIVITY
This Agreement is non-exclusive and does not preclude either party from
entering into or maintaining marketing relationships, including code-sharing,
with other airlines.
22. INDEMNIFICATION
(a) Wings West, as Operating Carrier, shall indemnify, defend and hold
harmless Hawaiian and its Affiliates and their respective directors,
officers, employees and agents (individually a "Marketing Carrier Indemnified
Party") from and against any and all claims, suits, penalties, liabilities,
judgments, fines, losses and expenses of any nature or kind ("Damages")
arising out of, caused by or occurring in connection with (or alleged to
arise out of, be caused by or be occurring in connection with):
(i) The death of or injury to persons, or delay or loss of or
damage to property (including aircraft, baggage or cargo) occurring while
such persons or property are under the control or in the custody of, or being
transported by, Wings West, except to the extent caused by the willful
misconduct of Hawaiian; and
(ii) Negligent acts or omissions of Wings West that are in any way
related to services contemplated by this Agreement;
(b) Hawaiian, as Marketing Carrier, shall indemnify, defend and hold
harmless Wings West and its Affiliates and their respective directors,
officers, employees and agents (individually an "Operating Carrier
Indemnified Party") from and against any and all Damages arising out of,
caused by or occurring in connection with (or alleged to arise out of, be
caused by or be occurring in connection with):
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(i) The death of or injury to persons, or delay or loss of or
damage to property (including aircraft, baggage or cargo) occurring while
such persons or property are under the control or in the custody of, or being
transported by, Wings West, to the extent caused by the willful misconduct of
Hawaiian;
(ii) Negligent acts or omissions of Hawaiian that are in any way
related to services contemplated by this Agreement unless and to the extent
the Damages arising therefrom are of the type, and occur under the
circumstances, referred to in Section 21(a)(i) (in which event the Wings West
shall indemnify Hawaiian and other Marketing Carrier Indemnified Parties
notwithstanding such negligent (but not willful) acts or omissions of
Hawaiian); and
(iii) Passenger claims based on Hawaiian's failure to properly
issue and complete transportation documentation in accordance with the
provisions of the standard Airlines Clearing House or IATA ticketing
procedures, including the failure to put a proper notice of the limits of
liability on such documentation.
The rights and obligations of the parties under this Section 21 shall
survive the termination of this Agreement.
23. INSURANCE
Wings West, as the Operating Carrier, shall procure and maintain
aircraft hull all risks and hull war and allied perils insurances for the
aircraft provided by Wings West, and shall cause its insurers to waive rights
of subrogation against Hawaiian, its officers, directors, agents, servants
and employees, except in respect of claims caused by the gross negligence or
willful misconduct of Hawaiian, its officers, directors, agents, servants and
employees. Wings West shall also procure and maintain comprehensive airline
liability insurance including but not limited to third party, passenger,
baggage, cargo and mail legal liability insurance for a minimum combined
single limit of Five Hundred Million United States Dollars ($500,000,000 USD)
each occurrence. Such legal liability insurance shall contain the following
provisions:
(i) To include Hawaiian, its officers, agents, servants and employees
as additional insureds except in respect of claims caused by the gross
negligence or willful misconduct of its officers, agents, servants and
employees (the "additional insureds");
(ii) To provide that all provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate
policy issued to each insured;
(iii) To provide that this insurance shall be primary and without
rights of contribution from any other insurance carried by Hawaiian;
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(iv) To provide that the additional insureds shall have
no responsibility for premium;
(v) To provide that the cover afforded to each additional insured by
the policy shall not be invalidated by any act or omission (including
misrepresentation and non-disclosure) of any other person or party of the
policy provided that the additional insured so protected has not caused,
contributed to or knowingly condoned the said act or omission;
(vi) To give Hawaiian at least thirty (30) days prior written notice of
policy cancellation or material change except in the case of war and allied
perils where such period of notice shall be seven (7) days or such lessor
period as may be available in accordance with policy conditions; and
(vii) To provide that insurers accept and insure
the indemnification provision included in this Agreement.
Wings West shall provide Hawaiian with certificates of insurance
evidencing such coverage within five (5) business days of the date of this
Agreement and thereafter within five (5) days of the date of any subsequent
renewal of such coverage.
24. CLAIMS
The indemnified party shall give the indemnifying party prompt notice of
any claim made or suit instituted against the indemnified party which would
result in indemnification by the indemnifying party and the indemnifying
party shall have the right to compromise or participate in the defense of
same to the extent of its own interest.
25. JURISDICTION CLAUSE
The parties agree that this Agreement shall be governed by the laws of
the State of Texas without regard to any conflict of laws rule.
26. INDEPENDENT CONTRACTORS
The parties hereby confirm that they are independent contractors and
nothing herein is intended or shall be construed to create or establish a
partnership or joint venture.
27. FORCE MAJEURE
Neither Wings West nor Hawaiian shall be liable for any delays or
failure to operate caused by acts of God, Strikes, War, or acts of Government
or other causes beyond their control.
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28. WAIVER
Any waiver or invalidation of any part of this Agreement will not affect
the right of Wings West or Hawaiian to require strict compliance with any
other part of this Agreement.
29. TERM AND TERMINATION
This Agreement will become effective on the __ day of ______ 1997 and
will continue thereafter for twelve months providing that it may be
terminated by Wings West or Hawaiian with or without reason, upon not less
than ninety (90) days written notice to the address shown under NOTICES
below. At the expiration of the first twelve months, the Agreement shall
continue for further periods of twelve months unless earlier terminated by HA
as provided for in this Agreement.
30. TERMINATION FOR BREACH
In the event of any material breach of any of terms and conditions of
this Agreement, the non-breaching party may (at its option) serve a notice of
default on the breaching party requiring the remedy of the breach (as
specified in the notice) within thirty (30) days and in absence of such
remedy the Agreement shall be terminated immediately on the expiration
thereof.
31. OTHER TERMINATION
Either party may terminate this Agreement at any time if the other party
becomes insolvent, commits an act of bankruptcy or undergoes a major change
of ownership causing a conflict of interests.
32. POST TERMINATION RIGHTS
Termination of this Agreement by Wings West or Hawaiian will not absolve
either airline from the obligations accrued prior to that termination.
Obligations that are of a continuing nature will survive the termination of
this Agreement.
Notwithstanding the immediately preceding paragraph,
(a) In the event that this Agreement is terminated as provided herein
by Hawaiian pursuant to Section 29, or by Wings West pursuant to any other
Section, Hawaiian shall endorse all tickets to Wings West. Wings West shall
accept all confirmed reservations for passengers traveling on such tickets as
if such reservations had been booked through Wings West using ordinary
interline procedures but giving effect to the ticket pricing methodology
provided for in this Agreement; and
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(b) In the event that this Agreement is terminated as provided herein
by Wings West pursuant to Section 29, or by Hawaiian pursuant to any other
Section, Hawaiian, at its sole discretion, shall have the option to endorse
tickets to Wings West or any other carrier. Hawaiian shall also have the
option to transfer confirmed reservations for passengers traveling on such
tickets from Wings West to any other carrier.
33. NOTICES
All notices, reports, invoices and other communications required to be
given to any party hereto pursuant to this Agreement will be in writing and
either (a) delivered in person; (b) sent by an express courier delivery
service which provides signed acknowledgments of receipt; or (c) transmitted
by facsimile (upon receipt by sender thereof of evidence that a complete
transmission of such copy was made to the recipient thereof) and, if sent by
facsimile, confirmed by (i) telephone call contemporaneously made to the
individual designated as the one to receive such notice, or (ii) dispatching
a hard copy of such notice by air mail (postage prepaid) or either of the
methods set forth in (a) or (b) above. Unless otherwise expressly set forth
in this Agreement, all notices will be effective upon receipt. For the
purposes of notice, the addresses of the parties shall be as set forth below;
PROVIDED, HOWEVER, that either party will have the right to change its
address for notice to any other location by giving at least thirty (30) days
prior written notice to the other party in the manner set forth above.
If to Hawaiian: Hawaiian Airlines, Inc.
3375 Koapaka Street, Suite G-350
Honolulu, HA 96819
Attention: Peter Jenkins
Senior Vice President, Sales & Marketing
Phone: (808) 838-6767
Facsimile: (808) 838-6746
With a copy to: Hawaiian Airlines, Inc.
General Counsel
3375 Koapaka Street, Suite G-350
Honolulu, HA 96819
Phone: (808) 835-3690
Fax: (808) 835-3610
If to Wings West: Wings West Airlines, Inc.
720 Aerovista Place, Unit B
San Luis Obispo, CA 93401
Attention: Michael Rader
Phone: (805) 541-1010 x2134
Facsimile: (805) 541-2881
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34. OTHER AGREEMENTS
The Bilateral Traffic Agreement between Hawaiian and American Airlines,
Inc., is hereby incorporated by reference. In the event of any conflict
between the terms and conditions of this Agreement and those of the Bilateral
Traffic Agreement, the terms and conditions of this Code-Share Agreement will
control.
35. COUNTERPARTS
This Agreement may be executed and delivered be the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date indicated above.
HAWAIIAN AIR LINES, INC. WINGS WEST AIRLINES, INC.
By: ________________________ By: __________________________
Its: ________________________ Its: __________________________
By: ________________________
Its: ________________________
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Annex A: List of city-pair markets:
1. LAX-BFL
2. LAX-CLD
3. LAX-FAT
4. LAX-LAS
5. LAX-MRY
6. LAX-PSP
7. LAX-SAN
8. LAX-SBA
9. LAX-SBP
10. LAX-SNA
11. SFO-MRY
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Exhibit 10.2
AMENDMENT NO. 1 TO CODE-SHARE AGREEMENT
This AMENDMENT NO. 1 TO CODE-SHARE AGREEMENT (the "Amendment"), dated as of
January 21, 1997, is made by Hawaiian Airlines, Inc., a corporation organized
under the laws of the Territory of Hawaii and existing under the laws of the
State of Hawaii ("Hawaiian") and Wings West Airlines, Inc., d/b/a/ American
Eagle Airlines, a California corporation ("Wings West").
WHEREAS, Hawaiian and Wings West have heretofore entered into that certain
Code-Share Agreement, dated as of January 6, 1997 (the "Agreement") (defined
terms used herein as therein defined); and
WHEREAS, Hawaiian and Wings West have agreed to amend the Agreement to
change the Effective Date.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to the Agreement, Hawaiian and Wings West hereby
amend the Agreement as follows:
Section 1 Change of Effective Date. The Effective Date of the Agreement
is changed from March 15, 1997 to March 4, 1997.
Section 2 Miscellaneous.
(a) Except as set forth herein, all terms and provisions contained in the
Agreement shall remain in full force and effect.
(b) This Amendment may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, Hawaiian and Wings West have caused this Amendment to
be duly executed and delivered as of the date and year first above written.
WINGS WEST AIRLINES, INC.
By: _____________________________
Its: _____________________________
HAWAIIAN AIRLINES, INC.
By: ____________________________
Its: ____________________________
By: ____________________________
Its: ____________________________
<PAGE>
Exhibit 10.3
INFORMATION TECHNOLOGY
SERVICES AGREEMENT
between
HAWAIIAN AIRLINES, INC.
and
ELECTRONIC DATA SYSTEMS CORPORATION
<PAGE>
INFORMATION TECHNOLOGY SERVICES AGREEMENT
THIS INFORMATION TECHNOLOGY SERVICES AGREEMENT, dated as of February 1,
1997 is between Hawaiian Airlines, Inc. ("Hawaiian"), and Electronic Data
Systems Corporation ("EDS").
RECITALS:
WHEREAS, the parties desire to enter into an agreement whereby Hawaiian
will purchase from EDS, and EDS will provide to Hawaiian, certain hardware
and systems software, installation and support services, all as described in
this Agreement; and
NOW, THEREFORE, in consideration of the premises and the terms and
provisions set forth in this Agreement, the parties agree as follows:
Article I
Agreement, Term and Definitions
1.1 Agreement. During the term of this Agreement, EDS will provide to
Hawaiian, and Hawaiian will purchase from EDS, a client/server-based
passenger revenue accounting system consisting of licensed EDS-Developed
Software, Third Party Hardware and Third Party Software (collectively, the
"System") and related services, including the installation of the System,
development of certain interfaces and the provision of documentation,
training and maintenance for the EDS-Developed Software, all as more fully
described in this Agreement and in Schedule A (collectively, the "PRAS
Services"), and all upon and subject to the terms and conditions of this
Agreement.
1.2 Term. The term of this Agreement will commence as of the date of this
Agreement (the "Effective Date") and will continue until the earlier of (a)
May 1, 2003 or (b) the date upon which this Agreement is terminated in
accordance with Article XI.
1.3 Definitions. For purposes of this Agreement, the following terms will
have the following meanings:
(a) "Business Day" is any day other than a Saturday, Sunday,
Federal holiday or Hawaiian holiday.
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(b) "Change in Scope" is (i) the addition, deletion or
material change of (1) the PRAS Services, or (2) any
feature or functionality of the System or any Deliverable
or portion thereof, (ii) a material change in any
Milestone, (iii) a material variance from the
requirements outlined in the Specifications, or (iv) a
material departure from Hawaiian's core business
practices.
(c) "Deliverables" are any tangible and intangible products
and results identified as such in Schedule B and
specified as such in the Project Plan.
(d) "Documentation" means the documentation described in
Section 4.4.
(e) "EDS Charges" means the charges described in Article IX
and Schedule C.
(f) "EDS-Developed Software" means (i) EDS*PRAS as described
in Section 1 of the Specifications, and (ii) the
interfaces and additional functionality to EDS*PRAS
developed by EDS in accordance with Section 2 of the
Specifications.
(g) "EDS Development Tools" means any Software development
tools, know-how, methodologies, processes, technologies
or algorithms used by EDS in creating the EDS-Developed
Software that are based upon the trade secrets or
proprietary information of EDS or otherwise owned or
licensed by EDS.
(h) "EDS*PRAS" means EDS' proprietary passenger revenue
accounting system containing the functions and features
described in Section 1 of the Specifications.
(i) "Final Acceptance" has the meaning set forth in Section
2.4(c).
(j) "Hawaiian's Office" is the following Hawaiian office
location: 3375 Koapaka Street, Suite G350, Honolulu,
Hawaii 96819.
(k) "Milestones" are the dates on which each Deliverable is
scheduled to be delivered to Hawaiian for user acceptance
testing and which are identified as such in Schedule B
and/or the Project Plan.
(l) "Phases" are, collectively, the Definition and Analysis,
Business Design, Construction and Testing, and
Implementation phases, each as more fully described in
Section 3 of Schedule A.
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(m) "Software" means the expression of an organized set of
instructions in natural or coded language, contained on a
physical base of any nature, that must be used on
automatic data processing equipment devices, peripheral
instruments or equipment, based on digital technology, to
make them operate in a certain manner and for certain
purposes.
(n) "Specifications" are the specifications for the
functionality of the EDS-Developed Software as described
in the Specifications Document dated February 1, 1997,
which may be modified or amended from time to time in
accordance with Article VI of this Agreement or in
connection with Section 3 of Schedule A.
(o) "Third Party Hardware" is the hardware described in
Section 1(C) of Schedule A, as may be modified in
accordance with Section 4.1.
(p) "Third Party Software" is the Software described in
Section 1(B) of Schedule A, as may be modified in
accordance with Section 4.1.
Other capitalized terms used in this Agreement are defined in
this Agreement in the context in which they are used.
Article II
System Installation
2.1 Project Plan. As soon as feasible but no later than
ninety (90) days after the Effective Date, EDS will, with the cooperation and
assistance of Hawaiian, develop and deliver to Hawaiian a written work plan
(the "Project Plan") at a mutually agreed upon level of detail identifying
the implementation schedule, activities, Deliverables and Milestones required
to complete the System in accordance with this Agreement and the
Specifications and to provide the PRAS Services in accordance with the terms
of this Agreement. At a minimum, the Project Plan will more specifically
describe and incorporate the Milestones and Deliverables generally described
in Schedule B and will specify each party's tasks in connection with the
implementation of the System. The tasks indicated in the Project Plan will
include (a) the installation and testing of the System processing unit, disk
drives, EDS-Developed Software, Third Party Hardware and Third Party
Software, and (b) Hawaiian's provision of the local area network
infrastructure, including central printers and communications equipment. The
Project Plan may be updated from time to time as necessary to reflect and
document any changes in functionality, implementation schedule, scope and
charges mutually agreed upon by EDS and Hawaiian in accordance with Article
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VI of this Agreement. EDS and Hawaiian agree to work together to minimize
disruption to Hawaiian's work environment and to provide a smooth
implementation. EDS and Hawaiian acknowledge, however, that some disruption
may occur.
2.2 System Installation.
(a) Upon delivery of the Project Plan to Hawaiian in
accordance with Section 2.1, and Hawaiian's written
acceptance of the Project Plan, which acceptance (i)
shall be given within seven (7) calendar days after
Hawaiian's receipt of the Project Plan from EDS, unless
Hawaiian reasonably withholds acceptance and indicates
the reasons therefor, and (ii) shall not be unreasonably
withheld or delayed, each party will perform its
respective tasks outlined in the Project Plan in order
for EDS to deliver to Hawaiian the System and related
Deliverables in accordance with the Project Plan.
(b) Subject to the limitations set forth in this Section, EDS
will provide, and is committed to the delivery of, the
System in accordance with the schedule set forth in
Schedule B, which schedule may be modified from time to
time by mutual written agreement of the parties to
accommodate any Changes in Scope requested by Hawaiian
and agreed to by EDS. Hawaiian and EDS understand and
agree that EDS will not be liable (financially and
otherwise) for any delays in the schedule caused by
events and circumstances beyond the reasonable control of
EDS, including without limitation, (i) the nonperformance
of Hawaiian's obligations under this Agreement, (ii) the
nonperformance of any third party, including delays in
the delivery of the Third Party Hardware or Third Party
Software by third party vendors, (iii) those force
majeure events and circumstances described in Section
13.4, (iv) delays resulting from any Change Order, but
only to the extent set forth in such Change Order, or (v)
any changes to the System that EDS may be required to
make pursuant to airline industry or government mandates.
2.3 Reliance on Hawaiian's Information. Hawaiian understands and agrees
that EDS may rely on the accuracy and completeness of information provided by
Hawaiian to EDS relating to, among other things, (a) interface requirements,
specifications and data concerning Hawaiian's applications and systems, as
more fully described in Section 7.6, and (b) information provided by Hawaiian
for inclusion in the Project Plan and the Specifications, including without
limitation, Hawaiian's process descriptions, data stores/flows, and data
models for tables, reports and screens. During installation of the System,
EDS and Hawaiian will cooperate with each other in good faith to identify and
resolve issues that are based upon
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identification of new information that affects the obligations of the parties
under this Agreement. If the information provided by Hawaiian is not
accurate, such inaccuracy will be deemed to constitute a Change Order Request
pursuant to Article VI, and EDS will be permitted to recover any and all
costs incurred and adjust all applicable schedules set forth in this
Agreement and the Project Plan resulting from such inaccuracy.
2.4 User Acceptance Testing. Hawaiian will have the opportunity to review
each Deliverable in Phases in accordance with the time periods and procedures
described in this Section 2.4.
(a) The review period for the Definition and Analysis Phase
(as described in Section 3 of Schedule A) will be seven
(7) calendar days; however, Hawaiian will use reasonable
efforts to complete its review in less than seven (7)
calendar days. Unless, during such review period (and
any subsequent review period as described in this
subsection), Hawaiian identifies to EDS in writing a
failure of the Definition and Analysis documentation to
substantially conform to the provisions set forth in
Section 2 of the Specifications, the Definitions and
Analysis Phase will be deemed automatically accepted by
Hawaiian. If Hawaiian provides EDS with written notice
of a valid nonconformance in accordance with this
Section 2.4(a), a new review period of no more than
seven (7) calendar days will commence after EDS has
corrected and redelivered the Phase to Hawaiian.
(b) The review period for the Business Design Phase (as
described in Section 3 of Schedule A) will be seven (7)
calendar days; however, Hawaiian will use reasonable
efforts to complete its review in less than seven (7)
calendar days. Unless, during such review period (and
any subsequent review period as described in this
subsection), Hawaiian identifies to EDS in writing a
failure of the Business Design to substantially conform
to the Definitions and Analysis documentation, the
Business Design Phase will be deemed automatically
accepted by Hawaiian. If Hawaiian provides EDS with
written notice of a valid nonconformance in accordance
with this Section 2.4(b), a new review period of no more
than seven (7) calendar days will commence after EDS has
corrected and redelivered the Phase to Hawaiian.
(c) The review period for the Construction and Testing Phase
(as described in Section 3 of Schedule A) will be
fourteen (14) calendar days; however, Hawaiian will use
reasonable efforts to complete its review in less than
fourteen (14) calendar days. Unless, during such review
period (and any subsequent review period as described in
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this subsection), Hawaiian identifies to EDS in writing
a failure of the EDS-Developed Software to substantially
conform to the Business Design, the Construction and
Testing Phase will be deemed automatically accepted by
Hawaiian. If Hawaiian provides EDS with written notice
of a valid nonconformance in accordance with this
Section 2.4(c), a new review period of no more than
fourteen (14) calendar days will commence after EDS has
corrected and redelivered the Phase to Hawaiian. The
review period(s) for the Construction and Testing Phase
will constitute formal user acceptance testing.
Hawaiian's actual acceptance of the Implementation Phase
of the Phase 2 Implementation Deliverable shall
constitute "Final Acceptance" of the System.
(d) If the Hawaiian Project Manager and the EDS Project
Manager disagree in good faith with respect to whether a
Deliverable substantially conforms in all material
respects to the applicable documentation, the dispute
will be resolved in accordance with Article X of this
Agreement.
(e) Corrections to a Deliverable that are related to an EDS
error or omission shall be made at EDS' cost.
Corrections to a Deliverable that are related to a
Hawaiian error or omission shall be made at Hawaiian's
cost and costs incurred by EDS as a result of delays
caused by Hawaiian shall be borne by Hawaiian.
Article III
Warranty and Maintenance Support
3.1 Correction of Nonconformance to Specifications During
Implementation. For the period commencing with the first day
after the first Deliverable begins operation in Hawaiian's
production environment until the day the last Deliverable
begins operation in Hawaiian's production environment (the
"Warranty Period"), EDS warrants that each Deliverable will
operate in all material respects in accordance with the
Specifications for that Deliverable. The parties expressly
acknowledge and agree that Hawaiian's sole and exclusive
remedy for any breach of this warranty is as set forth in
this Section 3.1.
(a) Remedy. As soon as practicable after discovery of a
failure of a Deliverable to conform to the
Specifications during the Warranty Period, Hawaiian
shall deliver to EDS a written, detailed description of
the alleged nonconformance. EDS shall have the right to
use reasonable efforts in good faith to identify the
cause of the alleged nonconformance and to deliver to
Hawaiian, without additional charge to Hawaiian, the
necessary correction, if any. Upon offer by EDS, and
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written acceptance by Hawaiian exercisable in Hawaiian's
reasonable discretion, EDS may refund the portion of the
EDS Charges paid by Hawaiian to EDS for the portion of
the Deliverable related to the nonconformance. The
amount of any such refund will be mutually determined by
the parties. If Hawaiian elects not to accept such
refund, EDS will remain obligated to deliver a
conforming Deliverable in accordance with this
Agreement. The methods and techniques for correcting
nonconformances and implementing corrections will be at
EDS' sole reasonable discretion.
(b) Hawaiian-Caused Nonconformances. To the extent any
alleged nonconformance is caused by (i) any maintenance,
modifications, enhancements, updates or improvements to
any Deliverable made by Hawaiian, or a third party acting
on behalf of Hawaiian, (ii) improper or unauthorized use
of the EDS-Developed Software, (iii) any hardware or
Software changes not provided or approved by EDS (iv)
hardware or Software that, although approved by EDS, is
defective or malfunctioning, (v) improper or defective
installation or implementation of EDS-approved hardware
or Software changes performed by a party other than EDS,
(vi) the use of any Deliverable in combination or
connection with hardware or Software not listed in
Sections 1(B) or 1(C) of Schedule A or approved by EDS,
or (vii) changes to data/file layouts received from
Hawaiian or external sources, then Hawaiian shall pay
EDS, at [Confidential Treatment Requested] for
identifying and correcting the alleged nonconformance
during the Warranty Period.
(c) Exceptions. Except as stated in the Specifications, EDS
does not warrant that the functions of the System will
meet Hawaiian's business requirements. The parties
acknowledge that operation of the System will not be
uninterrupted or error-free. Subject to Section 8.6,
EDS will have no responsibility with respect to
Hawaiian's data or data files.
3.2 On-going Product Maintenance and Support. During the period
commencing with the day after the last Deliverable begins
operation in Hawaiian's production environment until
termination of this Agreement for any reason (the
"Maintenance Period"), EDS will provide the following product
maintenance and support services (the "Maintenance Support
Services"):
(a) Standard Support Services. EDS will provide Hawaiian
with user support accessible via pager 24-hours a day,
seven (7) days a week. EDS will use reasonable efforts
to return each such page for services within two (2) hours
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after EDS actually receives such page from
Hawaiian, subject to those events and circumstances
described in Section 13.4 and EDS personnel having
immediate access to telecommunication services. In
addition, Hawaiian will be provided with a back-up
telephone number for use in case Hawaiian is unable to
reach EDS personnel via the standard support pager
number. The standard support services will be provided
either by telephone or in written format and will
consist of providing consultation and advice on problem
diagnosis, troubleshooting and identification of Bugs
(as defined in Section 3.2(c)(i)) in the EDS-Developed
Software. The parties agree to classify and prioritize
requests for this standard support service, as follows:
(i) "Critical" means a situation where a major problem
impacts the functionality of the EDS-Developed
Software and is significant in terms of the
operation of the EDS-Developed Software, such as the
inability to audit sales or calculate revenue. EDS
will commence efforts to correct Critical problems
within one (1) Business Day after receipt of a
request for support from Hawaiian, and will
diligently pursue a remedy to the problem.
(ii) "Non-urgent" means a situation where a minor problem
causes a minor inconvenience to Hawaiian, including
without limitation, improper printout or display,
misspelled error messages and documentation errors.
EDS will commence efforts to correct Non-urgent items
within a reasonable period of time after any Critical
problem is corrected. After all Critical problems
are corrected, EDS will then diligently pursue a
remedy to Non-urgent problems. EDS will notify
Hawaiian of the status of any Non-urgent problem
within three (3) Business Days after receipt of a
request for support from Hawaiian.
(b) Bug Fixes and Problem Coordination. Hawaiian shall
notify EDS of any Bugs in the EDS-Developed Software and
specify in writing the reason the EDS-Developed Software
does not perform in conformance with the then-current
Documentation. EDS' sole responsibility relating to any
Bugs will be to use reasonable efforts to correct the Bug
and promptly initiate work toward developing a Bug Fix
(as defined in Section 3.2(c)(ii)) consistent with the
classification and prioritization schedule set forth in
Section 3.2(a). After EDS develops the Bug Fix, EDS will
provide the Bug Fix to Hawaiian by transmitting or
shipping sufficient programming and operating
instructions to remedy the Bug. EDS will include a
correction to the Bug in subsequent releases of the
EDS-Developed Software.
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(c) Definitions. For purposes of this Section 3.2, the
following terms will have the following meanings:
(i) "Bug" means a failure of the EDS-Developed Software
to conform in all material respects with the
then-current Documentation. Any nonconformity
resulting from (1) any maintenance, modifications,
enhancements, updates or improvements to the
EDS-Developed Software made by Hawaiian, or a third
party acting on behalf of Hawaiian, (2) improper or
unauthorized use of the EDS-Developed Software, (3)
any hardware or Software changes not provided or
approved by EDS, (4) hardware or Software that,
although approved by EDS, is defective or
malfunctioning, (5) the improper or defective
installation or implementation of EDS-approved
hardware or Software changes performed by a party
other than EDS, (6) the use of the EDS-Developed
Software in combination or connection with hardware
or Software not listed in Sections 1(B) or 1(C) of
Schedule A or approved by EDS, or (7) changes to
data/file layouts received from Hawaiian or external
sources, shall not be considered a Bug.
(ii) "Bug Fix" means either a Software modification or
addition that, when made or added to the
EDS-Developed Software, establishes material
conformity of the EDS-Developed Software to the
then-current Documentation.
(d) Releases. From time to time, EDS may, at its option,
issue, at no additional charge to its then-current
EDS*PRAS maintenance customers, industry standard changes
or general releases designed to enhance the operating
performance of EDS*PRAS without changing the functions of
EDS*PRAS, as described in Section 1 of the Specifications
(a "New Version"). Each New Version will fully support
and be operable with all functions and features set forth
in the Specifications. In such event, during the
Maintenance Period, EDS will provide to Hawaiian one (1)
copy of any New Version, at no additional charge,
together with a copy of any related Documentation
(including installation instructions). If Hawaiian
desires EDS' assistance in the installation and
integration of such New Version into Hawaiian's
then-existing System, EDS will do so at [Confidential
Treatment Requested] for such services and as an
additional service subject to the provisions of Section
4.8. For purposes of this Agreement, the term "New
Version" shall not include (i) improvements,
modifications or enhancements to EDS*PRAS that provide
new or expanded functionality or performance features, or
(ii) new or enhanced functionality or performance
features to EDS*PRAS that EDS develops for another
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customer. If EDS develops new or enhanced functionality
or performance features to EDS*PRAS for another customer
and such functions and features are not confidential or
subject to other contractual restrictions, EDS will (i)
permit Hawaiian to review such functionality or features,
and (ii) make such functions and features available to
Hawaiian as an additional service subject to the
provisions of Section 4.8.
(e) Hawaiian Misuse or Error. EDS reserves the right to
charge Hawaiian at [Confidential Treatment Requested]
for any requested services related to investigation
and/or correction of problems or malfunctions relating
to the EDS-Developed Software that were caused by or
contributed to by (i) any maintenance, modifications,
enhancements, updates or improvements to any Deliverable
made by Hawaiian, or a third party acting on behalf of
Hawaiian, (ii) improper or unauthorized use of the
EDS-Developed Software, (iii) any hardware or Software
changes not provided or approved by EDS, (iv) hardware
or Software that, although approved by EDS, is defective
or malfunctioning (v) the improper or defective
installation or implementation of EDS-approved hardware
or Software changes performed by a party other than EDS,
(vi) the use of the EDS-Developed Software in
combination or connection with hardware or Software not
listed in Sections 1(B) or 1(C) of Schedule A or
approved by EDS, or (vii) any changes to data/file
layouts received from Hawaiian or external sources.
(f) Remedy. EDS will use reasonable efforts in good faith
to repair or replace the EDS-Developed Software or any
New Version it distributes to the extent that they do
not conform in all material respects with the
then-current Documentation. The methods and techniques
for correcting nonconformances and implementing
corrections will be at EDS' sole reasonable discretion.
Hawaiian's sole and exclusive remedy for any damage or
loss relating to the Maintenance Support Services or the
EDS-Developed Software shall be either (1) replacement
of the affected portion of the EDS-Developed Software,
or (2) successful re-performance of the Maintenance
Support Services, and, if neither option is reasonably
available, EDS shall refund to Hawaiian that portion of
any EDS Charges paid by Hawaiian to EDS relating to the
applicable Maintenance Support Services, which refund
will be determined by mutual agreement of the parties.
EDS does not warrant that the Maintenance Support
Services will render operation of the EDS-Developed
Software uninterrupted or error free.
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3.3 Proration Software Maintenance. For purposes of this Agreement, the
term "Proration Software" will mean the Software that will (a) utilize
industry information and user data to identify the proration method to be
applied to the itinerary and (b) apply the identified method to determine the
appropriate coupon values. The Proration Software is a sub-contracted
portion of the System. During the term of this Agreement, EDS will obtain
from the Proration Software vendor, and provide to Hawaiian at no additional
charge, maintenance support for the Proration Software. Hawaiian will be
responsible for the maintenance of all data as it pertains to negotiated
agreements with other airlines.
3.4 Third Party Hardware and Third Party Software.
(a) With respect to the Third Party Hardware and Third Party
Software components of the System, EDS will assign to
Hawaiian, where permitted, or enforce for Hawaiian's
benefit (without resort to litigation or other dispute
resolution process) any warranties or indemnities extended
to EDS by the applicable vendors.
(b) EDS represents and warrants that (i) the Third Party
Hardware will not be used or refurbished hardware, and
(ii) on the date title is transferred to Hawaiian,
Hawaiian will receive good and marketable title to the
Third Party Hardware, free and clear of any lien or
encumbrance by or through EDS.
(c) EDS represents and warrants that EDS has the right to
grant Hawaiian the license to the EDS-Developed Software,
as described in Article VIII, without, to EDS' actual
knowledge, infringement on intellectual property rights of
third parties.
(d) EDS will acquire first year maintenance support for the
Third Party Software and the Third Party Hardware
(excluding the User Equipment described in Schedule A)
from the applicable third party vendor. EDS will
administer such first year maintenance services in a
manner consistent with the terms and conditions of the
applicable vendor agreement. Resolution of any
maintenance issues will be handled in accordance with the
applicable vendor agreement, and any remedies relating to
any service problems will be the remedies set forth in the
applicable vendor agreement. Although EDS will make
recommendations to Hawaiian as to future levels of
maintenance services, Hawaiian will be responsible
(financially and otherwise) for ongoing maintenance and
support of the Third Party Software and Third Party
Hardware after expiration of the first year maintenance
support described in this Section.
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3.5 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR
IN THE SPECIFICATIONS, EDS MAKES NO OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING
THE MERCHANTABILITY, SUITABILITY, ORIGINALITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE OF THE EDS DEVELOPED SOFTWARE, THE SYSTEM OR THE SERVICES
PROVIDED BY EDS UNDER THIS AGREEMENT.
Article IV
Other PRAS Services
4.1 Hardware and Software Procurement.
(a) EDS will procure and deliver, or cause to be delivered, to
Hawaiian's Office the Third Party Hardware and Third Party
Software, in consideration of the EDS Charges set forth on
Schedule C. Prior to purchasing any such hardware and
Software, EDS will review with Hawaiian the detailed
descriptions of the actual Third Party Software and Third
Party Hardware to be procured by EDS. If Hawaiian desires
that EDS purchase additional hardware or Software (in terms
of quantity, upgrades, functions, features or capacity),
then EDS will do so subject to the parties reaching a
mutual agreement in accordance with the provisions of
Article VI.
(b) The Third Party Software includes a database management
system by the vendor "Sybase". If product support for the
Sybase SQL Server is actually discontinued (as opposed to
an announcement of such discontinuation) during the term of
this Agreement, then EDS will develop and issue a new
release of the EDS-Developed Software that will utilize
another industry standard database management system. EDS
will provide such new release to Hawaiian prior to the
actual discontinuation of product support for the Sybase
SQL Server. EDS will consult with Hawaiian regarding the
selection of the new database management system; however,
EDS will have the right to decide which new database
management system will be utilized. If Hawaiian has not
made significant modifications or enhancements to the
System (other than those described in the Specifications or
effected through the provisions of Article VI), EDS will
pay for all costs associated with the development and
shipment of such new release to Hawaiian. If Hawaiian has
made significant modifications or enhancements to the
System (other than those described in the Specifications or
effected through the provisions of Article VI), EDS will
(i) perform the development services necessary to convert
the EDS-Developed Software so that it may utilize an
alternative database management system as an additional
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service to Hawaiian subject to the provisions of Section
4.8, and (ii) charge for such services only the
incremental, additional development and conversion costs
attributable to such modifications or enhancements at
[Confidential Treatment Requested] for such services.
(c) If, during the term of this Agreement, support for the
version of a particular Third Party Software product is
discontinued by the applicable vendor, then, prior to
discontinuation of such support, EDS will develop and issue
a new release of the EDS-Developed Software to Hawaiian
that will utilize the new version of the applicable Third
Party Software, and EDS will pay for the costs associated
with the development of such new release. If Hawaiian has
made significant modifications or enhancements to the
System (other than those described in the Specifications or
effected through the provisions of Article VI), EDS will
(i) perform the development services necessary to convert
the EDS-Developed Software so that it may utilize the new
version of the applicable Third Party Software as an
additional service to Hawaiian subject to the provisions of
Section 4.8, and (ii) charge for such services only the
incremental, additional development and conversion costs
attributable to such modifications or enhancements at
[Confidential Treatment Requested] for such services.
4.2 Conversion Specifications. EDS will provide to Hawaiian the file layout
information required for preparing conversion files and converting Hawaiian's
existing data into the System. Hawaiian is responsible for completing the
physical data file conversions and providing EDS with the conversion files
pursuant to Section 7.12.
4.3 Training. In accordance with a mutually agreed upon schedule, EDS will
provide a "train the trainer" session per Deliverable for up to twenty (20)
Hawaiian employees (the "Hawaiian Trainees"). Such "train the trainer"
sessions will not exceed two (2) Business Days per Deliverable. During user
acceptance testing, EDS will provide further informal training support to the
Hawaiian Trainees, on an as-needed basis. The Hawaiian Trainees shall
possess experience and training in PCs and Windows Software, and shall
possess a basic background and knowledge of passenger revenue accounting
processes or systems. Although EDS will demonstrate for members of
Hawaiian's MIS department how to operate EDS*PRAS, Hawaiian shall be
responsible for obtaining adequate training with respect to the Third Party
Hardware and Third Party Software. The "train the trainer" training sessions
will be held on Hawaiian's premises and Hawaiian will provide adequate
facilities for such training at no cost to EDS. Hawaiian will be responsible
for any travel-related expenses incurred by Hawaiian in connection with its
employee's attending such training sessions.
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4.4 Documentation. The Documentation will consist of a User Guide and a
Technical Guide for the EDS-Developed Software. The Documentation will be
available in hard copy and in electronic format. EDS will provide updates to
the Documentation for, and concurrently with, any subsequent modifications
and/or enhancements made available to Hawaiian. At Final Acceptance, all
Documentation will conform to the Specifications. EDS will deliver to
Hawaiian documentation relating to the Third Party Hardware and Third Party
Software as received from the applicable third party vendors.
4.5 Consulting Services. If requested by Hawaiian, EDS will provide
consulting services related to any process reengineering efforts or other
initiatives of Hawaiian in connection with the implementation of the System.
Any such consulting services will be provided as an additional service at
rates to be mutually agreed upon by the parties and subject to the provisions
of Section 4.8.
4.6 Airline Tariff Publishing Company (ATPCO) Data. During the term of this
Agreement, EDS will obtain and provide to Hawaiian the ATPCO data required
for operation of the System. EDS will obtain and provide such ATPCO data
only with respect to (a) domestic flights originating and ending within the
United States and Canada, and (b) international flights originating or ending
in North America. Such ATPCO data will consist of (a) domestic local fares,
(b) domestic joint fares, (c) domestic full map routings, (d) domestic market
routings, (e) domestic automated rules/footnotes for North American fares,
(f) domestic footnotes for North American fares, (g) international fares
to/from North America--published and constructed (unpublished) fares, (h)
international automated rules/footnotes for fares to/from North America (i)
international arbitraries to/from North America, and (j) international full
map routings for fares to/from North America. EDS will transmit such data to
Hawaiian over such telecommunication lines deemed appropriate by EDS. The
parties acknowledge and agree that EDS shall not be responsible for the
content of the ATPCO data. The EDS Charges for the provision of such data
are described on Schedule C.
4.7 Year 2000 Issues. The EDS-Developed Software will be written to address
year 2000 issues. EDS' services as described in this Agreement do not
include any changes, modifications, updates or enhancements to any existing
Hawaiian Software or to the Third Party Software that may be necessary to
cause such Software to (a) operate and produce data on and after January 1,
2000 accurately and without delay, interruption or error relating to the fact
that such Software is operating on or after 12:00 a.m. on January 1, 2000, or
(b) accept, calculate, process, maintain, store and output accurately and
without delay, interruption or error, all times and/or dates, whether before,
on or after 12:00 a.m. January 1, 2000, and any time periods determined on
the basis of any such times and/or dates.
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4.8 Additional Services. In addition to the services EDS is
otherwise obligated to provide under this Agreement, EDS will
provide such additional services or resources as Hawaiian may
reasonably request from time to time, on such terms and
conditions, including price and scope, as the parties may mutually
agree upon in writing. The charge for performing enhancements to
the System as an additional service is set forth on Schedule C.
Article V
Project Management
5.1 Project Personnel and Project Management. EDS will lead the
installation of the System, working in conjunction with the designated
representatives or personnel of Hawaiian. Hawaiian and EDS will each provide
appropriate personnel resources with the specific knowledge required to
complete the System and the PRAS Services. EDS will have a core project team
assigned to the project, with other EDS personnel who will supplement the
core project team from time to time as their particular skills are needed,
including System consultants, systems engineers and database engineers. EDS
will track the progress of the System installation and the PRAS Services
against the Project Plan, Milestones, Change Orders and other issues. EDS
will have oversight and management responsibility for any third party vendors
required by EDS to perform its obligations under this Agreement or the
Project Plan. Hawaiian will be responsible for the performance of any
services provided by Hawaiian's third party vendors to EDS in connection with
the System or the PRAS Services. If any third party vendors provided by
Hawaiian do not perform in accordance with the reasonable standards of EDS,
and after any such vendor has been given a reasonable opportunity to cure
such nonperformance, EDS shall be relieved of any obligations under this
Agreement to the extent such third party vendor's failure to so perform
adversely affects EDS' ability to properly perform those obligations.
Upon Hawaiian's reasonable request, EDS will furnish Hawaiian with certain
information resulting from security checks performed by EDS, including drug
tests, relating to all EDS personnel and contractors that EDS assigns to this
project and who will be physically onsite at Hawaiian's Office (the "Onsite
EDS Personnel"). Hawaiian reserves the right, exercisable in its reasonable
discretion, to reject any Onsite EDS Personnel that Hawaiian deems an
unacceptable risk based on the security-related information provided by EDS
to Hawaiian.
5.2 EDS Project Manager. EDS will designate and maintain a representative
of EDS (the "EDS Project Manager") who will be an employee of EDS and who
will (a) serve as the primary point of contact for Hawaiian in addressing
issues relating to the performance of EDS' obligations under this Agreement
and the Project Plan, (b) be authorized to act generally
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as the primary point of contact for Hawaiian in dealing with EDS and to
coordinate EDS' provision of the PRAS Services pursuant to this Agreement and
(c) have the necessary authority to act on behalf of EDS with respect to any
matters arising under this Agreement or under the Project Plan. Hawaiian may
reasonably rely on the decisions, actions, instructions and/or information
provided by the EDS Project Manager.
5.3 Hawaiian Project Manager. Hawaiian will designate and maintain a
representative of Hawaiian (the "Hawaiian Project Manager") who will be an
employee of Hawaiian and who will (a) have oversight responsibility for
directing Hawaiian's resources in support of this Agreement, (b) serve as the
primary point of contact for EDS in addressing issues relating to the
performance of Hawaiian's obligations under this Agreement and the Project
Plan, and (c) have the necessary authority to act on behalf of Hawaiian with
respect to any matters arising under this Agreement or under the Project
Plan. EDS may reasonably rely on the decisions, actions, instructions and/or
information provided by the Hawaiian Project Manager.
5.4 Project Status Reporting. Until Final Acceptance, EDS will provide
project status reports, upon a mutually agreed schedule and level of detail,
to the Hawaiian Project Manager.
Article VI
Change Control
6.1 Change Request Procedure. Unless EDS and Hawaiian otherwise
agree, each Deliverable will be completed in accordance with the
Project Plan. If, prior to the day the last Deliverable begins
operation in Hawaiian's production environment, Hawaiian should
desire a Change in Scope, the following procedures will apply:
(a) The Hawaiian Project Manager will deliver a written
notice (a "Change Order Request") to the EDS Project
Manager specifying the proposed Change in Scope and the
purpose or objective sought with the proposed Change in
Scope. Within a reasonable period of time, but no later
than fifteen (15) Business Days after EDS' receipt of
the Change Order Request, EDS will deliver to the
Hawaiian Project Manager a written response to the
Change Order Request (such response, a "Change Order
Response") specifying whether the proposed Change in
Scope is feasible.
(b) If the proposed Change in Scope is feasible, the Change
Order Response will specify (i) the statement of work of
the requested Change in Scope, (ii) any necessary
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revisions to the Project Plan or the Milestones, and
(iii) the additional charges payable to EDS for the
performance of the Change in Scope.
(c) If the Change Order Response provides for an additional
charge to Hawaiian with respect to the implementation of
the proposed Change in Scope, such additional charge
will be reflected in the Change Order Response on a time
and materials basis, based on an hourly rate of
$[Confidential Treatment Requested], plus out-of-pocket
expenses, for enhancements (including custom
modifications, updates, and improvements) to the System.
Hawaiian and EDS will work together in good faith to
limit the aggregate Changes in Scope and the charges
therefor to $[Confidential Treatment Requested] or less.
(d) Within fifteen (15) Business Days after receipt of a
Change Order Response, the Hawaiian Project Manager and
the EDS Project Manager will meet to determine whether
the parties mutually desire to proceed with the Change in
Scope.
(e) If the Change Order Response indicates that the Change
in Scope will not affect the Project Plan or result in
an additional charge to Hawaiian, EDS will implement the
Change in Scope in accordance with the Change Order
Request. If, however, the Change Order Response
indicates that the Change in Scope will affect the
Project Plan or EDS' charges for completion of the
Project Plan, then the EDS Project Manager and the
Hawaiian Project Manager must each provide written
approval (a "Change Order") to the Change Order Response
to authorize the implementation of the Change in Scope.
(f) Upon execution by the Hawaiian Project Manager and the
EDS Project Manager, Change Orders will be deemed to be
part of this Agreement, and the parties will immediately
modify, as applicable, the Project Plan, the
Specifications, the Deliverables, the Milestones and the
EDS Charges.
(g) If any Change Order provides for an increase in the EDS
Charges, Hawaiian will pay EDS such charges in accordance
with a mutually agreed upon schedule. In the absence of
such schedule, Hawaiian will pay EDS such charges in
accordance with the provisions of Article IX of this
Agreement upon the approval of the applicable Change
Order.
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Article VII
Hawaiian Responsibilities
During the term of this Agreement, to enable EDS to perform the PRAS
Services, Hawaiian will, on a timely basis and at no charge to EDS, perform
its obligations described in the Project Plan, this Section and elsewhere in
this Agreement.
7.1 Support of EDS Methodology. Hawaiian will support and participate in
the use of EDS' systems and methodologies for the project management, design,
development, implementation, operation and maintenance of the System,
provided that EDS has previously identified and reviewed these systems and
methodologies with Hawaiian.
7.2 General Cooperation. Hawaiian will make available, as reasonably
requested by the EDS Project Manager, key decision makers, personnel (whether
management, technical or user), information, approvals and acceptances as
necessary for EDS to perform its obligations under this Agreement and the
Project Plan on a timely basis. At a minimum, Hawaiian will make available
to EDS the Hawaiian Project Manager and one additional resource that has this
project as its primary responsibility and that possesses sufficient knowledge
of Hawaiian's passenger revenue accounting policies, procedures and
operations.
7.3 Hawaiian Facilities. Commencing on the Effective Date, Hawaiian will
provide to EDS such space, office furnishings, janitorial service, telephone
service (including equipment and voice mail), utilities (including air
conditioning) and office-related equipment, supplies and duplicating services
at Hawaiian's Office as EDS may reasonably require to provide the services
described in this Agreement (collectively, the "Hawaiian Facilities"). EDS
will have access to the Hawaiian Facilities twenty-four (24) hours a day,
seven (7) days a week and will comply with Hawaiian's reasonable security
procedures while on the premises of the Hawaiian Facilities. Such Hawaiian
Facilities will be equivalent to the space provided to similar Hawaiian
employees. At a minimum, Hawaiian will provide the work space necessary for
the EDS project team to effectively perform the PRAS Services, an
office/conference room for the EDS Project Manager and project team and a
reasonable amount of space to accommodate the installation efforts, including
testing and training. With respect to the telephone services, Hawaiian will
only be responsible for long distance charges made by EDS or its
subcontractors that originate from Hawaiian's Facilities.
7.4 Site Preparation. EDS will advise Hawaiian as to the requisite
environment for the System. In accordance with the schedule set forth in the
Project Plan, Hawaiian, with the
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advice of EDS, will (a) prepare and maintain the space at Hawaiian's Office
in accordance with vendor specifications and all applicable codes, statutes,
regulations and standards, and (b) provide all necessary power, power
stabilization measures, air conditioning, physical security measures and
environmental modifications required for the installation or utilization of
the System.
7.5 Access and Use Rights. Hawaiian will provide EDS with the right to
legally and physically access, use and operate any Hawaiian-owned or licensed
Software, data (such as tariff information from the Airline Tariff Publishing
Company and sales information from the Airline Reporting Corporation),
hardware or equipment in connection with the System and any services to be
provided to Hawaiian by EDS under this Agreement. Prior to the Effective
Date, Hawaiian will take, at Hawaiian's expense, all necessary actions to
obtain from third parties any consents, approvals or authorizations necessary
for EDS to legally and physically access, use and operate any Software
licensed by Hawaiian, data, hardware or equipment used in connection with the
System and the services to be provided to Hawaiian by EDS under this
Agreement. Hawaiian shall acquire, at its expense, and provide to EDS any
third party data and information required for operation of the System, such
as PNRs (passenger name records), Weekly OAG Flight Schedule data, data and
sales information from the Airline Reporting Corporation, the Bank Settlement
Plans identified in the Specifications and the following International Air
Transport Association (IATA) data, in electronic format, (a) Quarterly
Prorate Factors, (b) Daily Bankers Buying Rate, (c) Monthly 5-DAY Rates, (d)
Annual Maximum Permitted Mileage (MPM)/Ticketed Point Mileage (TPM), and (e)
Semi-annual Agency Master.
7.6 Software Interfaces. Hawaiian shall provide the information necessary
for EDS to identify interface requirements and define interface
specifications to the Hawaiian-operated and third party-operated applications
and systems identified in Section 2 of the Specifications. Hawaiian shall
provide the test data necessary to ensure that such interfaces meet the
provisions of Section 2 of the Specifications. Hawaiian shall develop and
implement all changes to the Hawaiian-operated and third party-operated
applications and systems required to interface with the System, other than
those changes and interfaces related to the Third Party Software, those
described in the Specifications and those effected through the provisions of
Article VI.
7.7 Network; Telecommunication Equipment and Services. Hawaiian will
provide and maintain on an ongoing basis the local area network, network
operating environment, telecommunication equipment, facilities and services
required for the System, including without limitation, the current NOVELL or
Windows NT local area network environment, print facilities and services, and
any other necessary infrastructure/network components.
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7.8 Supplies. Hawaiian will provide all tapes and electronic, optical and
paper media required for operation of the System.
7.9 Flight and Hospitality Privileges. Hawaiian will provide EDS personnel
who are traveling in connection with EDS' responsibilities related to the
installation of the System or the PRAS Services with round-trip, positive
space passes for Hawaiian flights. EDS agrees that the EDS personnel and
subcontractors will not displace any revenue passengers on any Hawaiian
flight. If EDS personnel are required to travel in order to perform the PRAS
Services, and cannot obtain a seat on a Hawaiian flight on a timely basis,
then Hawaiian shall reimburse EDS for all reasonable airfare incurred by EDS
under such circumstances, provided that EDS has used reasonable efforts to
notify Hawaiian. In addition, Hawaiian will use its reasonable efforts to
make available to EDS personnel who travel in connection with the PRAS
Services any hotel and/or corporate apartment discounts available to Hawaiian.
7.10 Application Systems Maintenance Support. At least three (3) months
prior to delivery of the first Deliverable, Hawaiian will assign personnel to
(a) assist EDS in user acceptance testing, including the development of user
test cases and scripts and (b) begin training in maintenance procedures for
the System. Commencing with the day the first Deliverable begins operation in
Hawaiian's production environment, Hawaiian will provide application systems
maintenance and all operations support for the System, which will include
executing and monitoring production job cycles.
7.11 Training. EDS will make available to Hawaiian the training materials
used by EDS to train Hawaiian's trainers. Following the training sessions
described in Section 4.3, Hawaiian will be responsible for training Hawaiian
users and other Hawaiian personnel to properly use the System and for
providing training materials to its personnel. EDS will assist Hawaiian in
the original preparation and development of such training materials.
7.12 Conversion Files. Hawaiian will provide EDS with the necessary
conversion files, based upon EDS' specifications, to be used during
installation of the System, as more fully described in the Project Plan.
7.13 Business Recovery. Hawaiian understands and agrees that EDS has not
undertaken by this Agreement to perform business recovery services or
functions (such as disaster recovery services) with respect to the System or
with respect to Hawaiian's data used in connection with the System. Prior to
implementation of the System, EDS will make general business recovery
recommendations to Hawaiian. If requested by Hawaiian, EDS will assist
Hawaiian in developing, testing and implementing a business recovery plan and
capabilities at
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[Confidential Treatment Requested] for such services and as an additional
service subject to the provisions of Section 4.8.
Article VIII
License, Proprietary Rights, Data Confidentiality
8.1 License of EDS-Developed Software. Subject to the provisions of this
Article VIII and provided that this Agreement is not terminated in accordance
with Article XI, EDS grants to Hawaiian, and Hawaiian accepts from EDS, a
world-wide, nontransferable and nonassignable (except as otherwise provided
herein), nonexclusive and perpetual license to operate, in object code form
only, the EDS-Developed Software and any New Versions accepted by Hawaiian.
For purposes of this Section, the term EDS-Developed Software includes the
related Documentation.
(a) Hawaiian will use the EDS-Developed Software only in
connection with its own internal accounting operations
(including code-share partnering arrangements with other
airlines, but only to the extent such arrangements are
part of Hawaiian's internal accounting operations) and
not to process the data of any other person or entity.
In addition, Hawaiian and each Participating Approved
Affiliate (as defined below) may use the EDS-Developed
Software to process the internal accounting operations
of a Participating Approved Affiliate (including
code-share partnering arrangements with other airlines,
but only to the extent such arrangements are part of
Hawaiian's or the Participating Approved Affiliate's
internal accounting operations), but not to process the
data of any other person or entity; provided, however,
that, if the aggregate annual gross passenger revenue of
all Participating Approved Affiliates (measured as
provided below) exceeds $[Confidential Treatment
Requested] EDS shall receive an incremental license fee
from Hawaiian for the increased use of the EDS-Developed
Software. The amount of such incremental license fee
will be (i) $[Confidential Treatment Requested] in the
event the aggregate annual gross passenger revenue of
all Participating Approved Affiliates (in each case
measured by the twelve-month period immediately
preceding the date such entity first became a
Participating Approved Affiliate (the "Measurement
Criteria")) is $[Confidential Treatment Requested] or
greater but less than $[Confidential Treatment
Requested], or (ii) $[Confidential Treatment Requested]
in the event the aggregate annual gross passenger
revenue of all Participating Approved Affiliates (in
each case measured pursuant to the Measurement Criteria)
is $[Confidential Treatment Requested] or greater. Any
$[Confidential Treatment Requested] license fee made by
Hawaiian to EDS pursuant to clause (i) of this Section
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shall not be credited against any subsequent obligation
of Hawaiian to make a payment under clause (ii) of this
Section. Under no circumstances, whether as a result of
multiple transactions or otherwise, will Hawaiian be
obligated to pay EDS an incremental license fee of (1)
more than $[Confidential Treatment Requested] in the
event the aggregate gross passenger revenue from all
Participating Approved Affiliates does not exceed
$[Confidential Treatment Requested], or (2) more than
$[Confidential Treatment Requested].
(b) Except as otherwise provided in this Section, Hawaiian
may not install or permit any use of the EDS-Developed
Software on any equipment that is not operated for the
sole benefit of, or owned or leased by, Hawaiian.
Hawaiian may provide third party contractors with access
to the EDS-Developed Software and/or permit the use of
the EDS-Developed Software on equipment that is owned or
leased by a third party contractor so long as:
(i) Neither the third party contractor nor any of its
affiliates directly competes with EDS in the
development, integration, implementation or
maintenance of passenger revenue accounting systems
for airlines, and such contractor is not an entity
for which EDS can demonstrate a reasonable concern
over its financial condition or business practices.
(ii) The third party contractor is an entity located within
the United States.
(iii) The third party contractor uses the EDS-Developed
Software solely for the benefit of Hawaiian and/or
one or more Participating Approved Affiliates and
will not sell, license, allow access to or otherwise
disclose the EDS-Developed Software to any other
party.
(iv) The third party contractor executes a reasonable
confidentiality agreement with EDS containing use
(including, if applicable, intellectual property
infringement indemnities) and confidentiality
provisions consistent with the use, confidentiality
and, if applicable, intellectual property
infringement indemnity provisions of this Agreement,
including the provisions of this Section 8.1. The
execution of such an agreement with the third party
contractor will not relieve Hawaiian of its
obligations with respect to the EDS-Developed
Software.
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(c) Hawaiian may make and operate unlimited copies of the
EDS-Developed Software in object code form (or as to
Documentation, in hard copy form), provided that each of
the copies is operated only at Hawaiian's then-principal
United States office, the principal office of each
Participating Approved Affiliate, or at such other
Hawaiian location as EDS consents to in writing in
advance, except as contemplated by the provisions of
Section 8.1(b).
(d) Neither Hawaiian nor any Participating Approved Affiliate
will remove from the object code of the EDS-Developed
Software, or use a copy or reproduction technique that
has the effect of removing, any EDS copyright or
proprietary notices or any other designations as EDS may
reasonably require to indicate that the EDS-Developed
Software is proprietary to and the trade secret of EDS.
(e) Hawaiian will not, and will not permit its or its
Participating Approved Affiliates' employees, agents or
representatives to, sell, assign, lease, license,
sublicense, transfer or disclose to any third party
(except as required to be disclosed pursuant to a
requirement of any governmental authority or any
statute, rule or regulation, provided that Hawaiian
gives EDS notice of such requirement prior to any such
disclosure) the EDS-Developed Software, or copy or
reproduce the EDS-Developed Software, except as provided
in this Section. Hawaiian will not allow any third
party to access the EDS-Developed Software without the
prior written consent of EDS, except as provided in this
Section. If Hawaiian or a Participating Approved
Affiliate merges with or into another entity, or if
Hawaiian decides to sell all or substantially all of its
assets, then the surviving entity of such merger or the
assignee of such asset sale will be entitled to assume
this license, provided that:
(i) EDS is given prior written notice of such merger or
asset sale, and such notice states whether (1) the
entity merging with or into Hawaiian or any of its
Participating Approved Affiliates, or (2) the
assignee and any of its respective affiliates (as
approved in accordance with this Section) will use
the EDS-Developed Software. Hawaiian (or the
surviving entity (if not Hawaiian) or assignee, as
applicable) shall permit EDS, or its designated
representative, to perform periodic audits of
Hawaiian's (or the surviving entity's or assignee's
or their respective affiliates') records to the
extent necessary to verify whether (1) the entity
that merged with or into Hawaiian or any of its
Participating Approved Affiliates, or (2) the
assignee and any of its respective affiliates (as
approved in accordance with this Section) is using
the EDS-Developed Software.
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(ii) Neither the entity that Hawaiian is assigning the
license to or merging with or into, nor any of such
entity's affiliates, directly competes with EDS in
the development, integration, implementation or
maintenance of passenger revenue accounting systems
for airlines, unless EDS consents in writing in
advance to such merger or asset sale, which consent
will not be unreasonably withheld or delayed.
(iii) EDS can not demonstrate a reasonable concern over
such entity's financial condition or business
practices.
(iv) EDS is entitled to charge, and the surviving entity
or assignee will pay EDS, an incremental license fee
(in the amount set forth below) for the EDS-Developed
Software, if (1) the surviving entity or assignee
and/or any of their respective affiliates (which meet
the criteria set forth in Section 8.1(i) below as it
relates to the surviving entity or assignee), other
than Hawaiian or a Participating Approved Affiliate,
begin to use the EDS-Developed Software after such
merger or sale for its or their own internal
accounting operations and do not have a separate
license agreement with EDS (collectively, the
"Acquirer and the Acquirer's Participating Approved
Affiliates"), and (2) the aggregate annual gross
passenger revenue of the Acquirer and the Acquirer's
Participating Approved Affiliates (as measured by the
Measurement Criteria applicable to the Acquirer and
the Acquirer's Participating Approved Affiliates),
plus, the aggregate annual gross passenger revenue of
the Participating Approved Affiliates (as measured by
the Measurement Criteria) [Confidential Treatment
Requested]. In the case of a merger in which
Hawaiian or a Participating Approved Affiliate is the
surviving entity, the annual gross passenger revenue
of the non-surviving entity and/or the non-surviving
entity's affiliates (which meet the criteria set
forth in Section 8.1(i) below as it relates to the
non-surviving entity and which begin to use the
EDS-Developed Software after such merger for
its/their own internal accounting operations and do
not have a separate license agreement with EDS) (such
non-surviving entity and its approved affiliates are
collectively referred to herein as the "Merged Entity
and the Merged Entity's Participating Approved
Affiliates") shall be added to the sum specified in
subsection (2) of this Section 8.1(e)(iv) for
purposes of this Section.
The amount of such incremental license fee will be (A)
$[Confidential Treatment Requested] in the event the
aggregate annual gross passenger revenue of (I) either
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the Acquirer and the Acquirer's Participating Approved
Affiliates or the Merged Entity and the Merged Entity's
Participating Approved Affiliates, as applicable, and
(II) all Participating Approved Affiliates (in each
case measured by the Measurement Criteria) is
$[Confidential Treatment Requested] or greater but less
than $[Confidential Treatment Requested], or (B)
$[Confidential Treatment Requested] in the event the
aggregate annual gross passenger revenue of (I) either
the Acquirer and the Acquirer's Participating Approved
Affiliates or the Merged Entity or Merged Entity's
Participating Approved Affiliates, as applicable, and
(II) all Participating Approved Affiliates (in each
case measured by the Measurement Criteria) is
$[Confidential Treatment Requested] or greater. Any
$[Confidential Treatment Requested] license fee made by
the surviving entity or the assignee pursuant to clause
(A) of this Section shall not be credited against any
subsequent obligation of the surviving entity or
assignee to pay under clause (B) of this Section. Any
payment made by Hawaiian pursuant to clause (i) of
Section 8.1(a) above shall be fully credited against
any subsequent obligation of the surviving entity or
assignee to pay under clause (A) of this Section, and
any payment made by Hawaiian pursuant to clause (ii) of
Section 8.1(a) above shall be fully credited against
any subsequent obligation of the surviving entity or
assignee to pay under clause (B) of this Section.
Under no circumstances, whether as a result of multiple
transactions or otherwise, will the surviving entity or
assignee be obligated to pay EDS an incremental license
fee of (1) more than $[Confidential Treatment
Requested] in the event the aggregate gross passenger
revenue from (I) either the Acquirer and the Acquirer's
Participating Approved Affiliates or the Merged Entity
and the Merged Entity's Participating Approved
Affiliates, as applicable, and (II) all Participating
Approved Affiliates does not exceed $[Confidential
Treatment Requested], or (2) more than $[Confidential
Treatment Requested].
(v) The assignee in an asset sale agrees in writing to be
bound by all the terms and conditions of this
Agreement to the same extent as Hawaiian.
(f) Hawaiian will not, and will not permit its or its
Participating Approved Affiliates' employees, agents or
representatives to reverse engineer, reverse compile,
decompile or otherwise recreate the EDS-Developed
Software.
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(g) If any portion of the EDS-Developed Software should come
into the possession of an unauthorized third party for
which Hawaiian is responsible, Hawaiian will, at its
expense, use reasonable efforts to retrieve such material
and, if unsuccessful in such efforts, will reimburse EDS
for all reasonable expenses incurred by EDS in attempting
to retrieve the materials.
(h) Hawaiian acknowledges that EDS has informed it that the
EDS-Developed Software is the valuable property and trade
secret of EDS, that any violation by Hawaiian of the
provisions of this Section would cause EDS irreparable
injury for which EDS would have no adequate remedy at
law, and that, in addition to any other remedies which
EDS may have, EDS will be entitled to preliminary and
other injunctive relief against any such violation.
(i) For purposes of this Section, the term
"Participating Approved Affiliate" shall mean:
(i) At any time during the term of this license, (1) an
entity that owns directly or indirectly 51% or more
of the issued and outstanding voting equity of
Hawaiian ("Hawaiian's Parent"), (2) an entity that
Hawaiian's Parent directly or indirectly owns 51% or
more of the issued and outstanding voting equity,
and (3) an entity that Hawaiian owns directly or
indirectly 51% or more of the issued and outstanding
voting equity; and
(ii) An entity that uses the EDS-Developed Software for
its own internal accounting operations and, together
with its affiliates, does not directly compete with
EDS in the development, integration, implementation
or maintenance of passenger revenue accounting
systems for airlines; and
(iii) An entity that has executed a ratification
agreement agreeing to be bound by the terms and
conditions of this Agreement.
8.2 Software Ownership. EDS and Hawaiian acknowledge and agree that EDS
retains all right, title and interest (including without limitation
copyrights and patent rights, if any) in the System, the EDS-Developed
Software and any New Version, except for those rights specifically granted to
Hawaiian in Section 8.1 hereof. The license of the EDS-Developed Software
granted to Hawaiian excludes any and all EDS Development Tools used by EDS in
creating the EDS-Developed Software, unless the EDS Development Tool is
embedded in the EDS-Developed Software. EDS retains all right, title and
interest in and to any EDS Development Tools, and all output generated
therefrom, and Hawaiian will have no interest or claim therein.
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8.3 Risk of Loss and Assignment of Hardware and Third Party Software. Risk
of loss with respect to the Third Party Hardware and the Third Party Software
described in Schedule A will pass to Hawaiian upon delivery to Hawaiian. The
title or license, as applicable, for each item of Third Party Hardware and
Third Party Software will pass to, or be assigned to, Hawaiian upon full
payment of such items to EDS. With respect to the Third Party Software, EDS
will, in a timely manner, either arrange for a direct license between
Hawaiian and the applicable vendor, or a sublicense with EDS, to use such
Software. Hawaiian agrees to execute any such license or sublicense required
by the applicable vendor.
8.4 Other Customers, Residual Knowledge and Independent Development. EDS
will have the sole right to market and license to third parties the System,
the EDS-Developed Software (including any New Version) or any system similar
in scope and function to the System, and nothing in this Agreement will limit
or restrict EDS from doing so. Subject to EDS' obligations under Section 8.6
(which Section does not in any way limit EDS' ability to market the features
and functions described in the Specifications), EDS will be free to use the
ideas, concepts or know-how developed during the course of the development of
the System and the performance of the PRAS Services that are in non-tangible
form and may be retained by EDS employees.
8.5 Hawaiian Data. Hawaiian data shall remain Hawaiian's property.
Hawaiian hereby authorizes EDS to have access to and to make use of
Hawaiian's data as is appropriate solely for the performance by EDS of its
obligations under this Agreement.
8.6 Confidentiality. Except as otherwise provided in this Agreement, each
of the parties agrees that all confidential documents, the EDS-Developed
Software, the Specifications, the Documentation and any information
(including all computer code and related materials) received or otherwise
obtained from the other party pursuant to this Agreement, whether before or
after the Effective Date, shall be, and shall be deemed to have been,
received in strict confidence and shall be used only for the purposes of
carrying out the obligations of, or as otherwise contemplated by, this
Agreement. Without obtaining the prior written consent of the other party,
neither party shall disclose any such information to any third party, and
each party will disclose such information only to such of its officers,
employees and agents that have a need to know such information for the
purposes contemplated by this Agreement; provided, however, that this Section
shall not prevent a party from disclosing any such information that (a) is or
becomes generally available to the public other than as a result,
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directly or indirectly, of a disclosure by such party or by other persons to
whom such party disclosed such information, (b) is already in the possession
of such party without being subject to another confidentiality agreement, (c)
is or becomes available to such party on a non-confidential basis from a
source other than the other party or its representatives, provided that such
source is not bound by a confidentiality agreement with the other party, (d)
is independently developed by such party without the use of the other party's
confidential information, or (e) is required to be disclosed pursuant to a
requirement of any governmental authority or any statute, rule or regulation,
provided that such party gives the other party notice of such requirement
prior to any such disclosure.
The parties acknowledge that Hawaiian may determine to file this Agreement
with the Securities and Exchange Commission (the "SEC") and relevant stock
exchanges (the "Exchanges") pursuant to the regulations and rules of the SEC
and the Exchanges. In connection with any such filing, Hawaiian will seek
confidential treatment of certain portions of this Agreement (which
confidential treatment cannot be assured). EDS will assist Hawaiian in the
preparation of the request and will reimburse Hawaiian for all reasonable
fees, costs and expenses (excluding attorney's fees), up to $1,000, related
to the electronic filing of such request via EDGAR (as such term is defined
by the SEC). The parties agree to work together in good faith to minimize
the fees, costs and expenses related to such filing.
8.7 Source Code Escrow. Hawaiian may, at any time after Final Acceptance
and at its option, require the establishment of a source code escrow with an
independent third party experienced in these transactions (such as Data
Securities International, Inc.). All costs associated with the creation and
administration of the source code escrow that are charged by the escrow agent
shall be borne by Hawaiian. Upon receipt of Hawaiian's written notification
of its election to establish a source code escrow, EDS shall, at Hawaiian's
expense in accordance with the terms of Article VI, promptly cooperate in all
reasonable respects, including without limitation, (a) executing escrow
documentation with reasonable and customary terms and conditions, (b)
delivering full and accurate source code for the then-current version of the
EDS-Developed Software, and (c) delivering source code to the escrow agent
for each subsequent New Version of the EDS-Developed Software concurrent with
its issuance and release. The escrow instructions will include a provision
instructing the escrow agent to deliver the source code to Hawaiian in the
event of EDS' bankruptcy, cessation of business or EDS' discontinuation of
maintenance and support for EDS*PRAS. The parties agree that, if such source
code is delivered to Hawaiian, it will be subject to the same licensing terms
set forth in Section 8.1 of this Agreement. Hawaiian further agrees to use
the source code for the sole purpose of maintaining and supporting the
EDS-Developed Software for the benefit of Hawaiian and/or any Participating
Approved Affiliates.
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Article IX
EDS Charges
9.1 Compensation to EDS. In consideration for the System and the PRAS
Services, Hawaiian shall pay to EDS the charges set forth on Schedule C (the
"EDS Charges"). The EDS Charges shall be subject to adjustment (a) in the
event of a Change Order, as provided in Article VI and (b) for cost of living
increases, as provided in Section 9.5. Charges for any partial month will be
prorated on a per diem basis.
9.2 Travel/Out-of-Pocket Expenses. Except as provided in Section 7.9, EDS
will be responsible for the EDS travel-related expenses incurred in
performing the PRAS Services. However, Hawaiian will pay, or reimburse EDS
for, the reasonable out-of-pocket expenses, incurred by EDS in connection
with a request by Hawaiian that EDS travel in connection with any additional
services or with the prior approval of Hawaiian. EDS will furnish to
Hawaiian receipts related to travel or out-of-pocket expenses over $75.00.
9.3 Time and Methodology of Payment. Hawaiian will pay EDS all amounts due
under this Agreement by wire transfer to a bank account designated by EDS.
Any amount due EDS pursuant to this Agreement will be due and payable 15
(fifteen) calendar days after Hawaiian's receipt of an invoice from EDS. Any
amount due EDS pursuant to this Agreement that is not paid when due and
payable shall thereafter bear interest until paid at a rate of interest equal
to the lesser of (a) 2% per annum more than the prime or base rate
established from time to time by Citibank, N.A. in New York, New York, or (b)
the maximum rate of interest allowed by applicable law.
If Hawaiian disputes in good faith whether an invoice is accurate or proper,
then Hawaiian will pay EDS the charges described in Sections 1, 2 and 5 of
Schedule C, and pay any other charges listed on such invoice that Hawaiian
disputes in good faith into an interest bearing escrow account (the "Escrow
Account") established as follows:
(a) The Escrow Account will be opened by the parties in the
name of the parties at a major national bank selected by
the parties.
(b) The Escrow Account will be established pursuant to an
escrow agreement that provides that the funds therein,
including accrued interest, will be disbursed to EDS
and/or Hawaiian, as applicable, in accordance with the
mutual agreement of EDS and Hawaiian or an arbitration or
judicial decision binding on EDS and Hawaiian.
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(c) After resolution of any dispute with respect to which
funds were placed in the Escrow Account, and after
payment from the Escrow Account of all amounts, if any,
due to EDS with respect to that dispute, any remaining
portion of the funds which were placed in the Escrow
Account with respect to that dispute, including
undisbursed accrued interest thereon, will be promptly
paid to Hawaiian.
(d) Subject to Section 9.3(c) above, to the extent funds
which were placed in the Escrow Account with respect to
any dispute are not sufficient to satisfy any award or
mutually agreed amount due to EDS with respect to that
dispute, Hawaiian will promptly pay to EDS the balance
due, including any interest computed in accordance with
this Section.
(e) The prevailing party shall be entitled to reimbursement
from the non-prevailing party for fees and costs
incurred by the prevailing party in connection with the
Escrow Account.
9.4 Taxes. There will be added to any amounts due under this Agreement, and
Hawaiian shall pay to EDS at the times Hawaiian pays such amounts due under
this Agreement, amounts equal to any taxes, however designated or levied,
based upon such amounts due, or upon this Agreement or the System or other
services and items provided by EDS pursuant to this Agreement, or their use,
including state and local privilege or excise taxes based on gross revenue,
sales and use taxes and any taxes or amounts in lieu thereof paid or payable
by EDS in respect of the foregoing, exclusive, however, of EDS' franchise
taxes and taxes based on net worth or net income of EDS.
9.5 Cost of Living Adjustments. The portion of the EDS Charges relating to
the Maintenance Support Services shall be indexed to the Consumer Price Index
for All Urban Consumers, U.S. City Average, for All Items (1982-84 = 100), as
published by the Bureau of Labor Statistics of the U.S. Department of Labor
(the "CPI"). If, on each anniversary of the first day of month sixteen of
this Agreement (measuring from the Effective Date), the CPI for the calendar
month immediately preceding such day (the "Dollars Current Index") is higher
or lower than the CPI twelve months prior thereto (the "Dollars Base Index"),
then, effective as of such anniversary, the EDS Charges (excluding the
value-based payments described on Schedule C) shall be increased or decreased
by the percentage that the Dollars Current Index increased or decreased from
the Dollars Base Index subject to a maximum increase or decrease in any one
year of [Confidential Treatment Requested]%. If the CPI is no longer
published or is substantially changed, then Hawaiian and EDS will substitute
another similar mutually agreeable measure for the CPI.
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9.6 Bonus Payments. If EDS delivers either the Phase I Implementation
Deliverable or the Phase II Implementation Deliverable to Hawaiian more than
thirty (30) calendar days prior to the date of the applicable Milestone (as
identified in Schedule B and as may be adjusted in accordance with the terms
of this Agreement), EDS will be entitled to a bonus (per Deliverable) from
Hawaiian, payable as provided below, in an amount equal to the product of (a)
the number of full months between the date of the applicable Milestone (as
adjusted, if applicable) and the date the applicable Deliverable was first
delivered by EDS to Hawaiian for user acceptance testing (the "Bonus Delivery
Date"), as may be adjusted in accordance with the following sentence, and (b)
$[Confidential Treatment Requested] per Deliverable. For purposes of this
bonus calculation only, if during user acceptance testing, Hawaiian delivers
to EDS written notice of a valid nonconformance (as determined in accordance
with Section 2.4), then EDS will have fourteen (14) calendar days from the
date the parties mutually determine that such nonconformance was valid to
correct and redeliver the Phase to Hawaiian. Hawaiian and EDS shall each act
in good faith to determine as promptly as practicable whether a reported
nonconformance is valid. If EDS corrects (as mutually determined by the
parties in accordance with Section 2.4) and redelivers the Phase within such
time period, then such fourteen day period will not be added to the Bonus
Delivery Date for purposes of the bonus calculation above, and accordingly,
the original Bonus Delivery Date will remain in effect. If EDS does not
correct and redeliver within such time period, then the period of time
(measured from the determination date of a valid nonconformance) it takes EDS
to actually correct and redeliver the Phase (in accordance with Section 2.4)
will be added to the Bonus Delivery Date for purposes of the bonus
calculation above. Hawaiian agrees to pay EDS any such bonus immediately
after Hawaiian's actual or deemed acceptance of the Construction and Testing
Phase of the Deliverable to which the bonus relates.
Article X
Dispute Resolution
10.1 Dispute Resolution. The parties agree to resolve any dispute
relating to this Agreement as set forth below:
(a) Negotiation. If any dispute between the parties of any
kind or nature occurs, then, upon the written request of
either party, each party will appoint a senior
representative whose task will be to meet to resolve
such dispute. Such representatives will discuss the
dispute or controversy and negotiate in good faith
towards resolution of the dispute or renegotiate the
applicable section or provision of this Agreement
without the necessity of formal proceedings.
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(b) Arbitration. If the designated representatives conclude
in good faith that amicable resolution through such
continued negotiation of the matter is not likely to
occur, then, upon the request of either party, the
dispute will be settled by final and binding arbitration
conducted by one or more arbitrators in accordance with
the Commercial Arbitration Rules of the American
Arbitration Association then in effect (the "Rules").
Unless otherwise mutually agreed upon by the parties, the
arbitration hearings shall be held in the City of Los
Angeles, California. The arbitrators shall allow such
discovery as is appropriate, consistent with the purposes
of arbitration in accomplishing fair, speedy and cost
effective resolution of disputes. The arbitrators shall
reference the rules of evidence of the Federal Rules of
Civil Procedure then in effect in setting the scope of
discovery. Judgment upon the award rendered in any such
arbitration may be entered in any court having
jurisdiction thereof, or application may be made to such
court for a judicial acceptance of the award and an
enforcement, as the law of such jurisdiction may require
or allow; provided however, any such award rendered by
the arbitrators shall be strictly in conformance to, and
in accordance with, the terms and conditions of this
Agreement.
10.2 Exclusive Remedy. Other than any action necessary to enforce the award
of the arbitrators, the parties agree that the provisions of this Article X
are a complete defense to any suit, action or other proceeding instituted in
any court or before any administrative tribunal with respect to any dispute,
controversy or claim arising under or in connection with this Agreement.
Nothing in this Article X prevents the parties from exercising their rights
to terminate this Agreement in accordance with this Agreement.
10.3 Continued Performance. If the parties are in arbitration for any reason
(except if the Agreement has been terminated), EDS will continue to perform
its obligations under this Agreement during the arbitration proceedings, but
only to the extent that Hawaiian continues to pay EDS in accordance with this
Agreement during the arbitration proceedings.
Article XI
Termination
11.1 Termination for Cause.
(a) The parties acknowledge and agree that delivery of each
Deliverable in accordance with the Milestone dates set
forth in Schedule B is important to both parties. In that
regard, EDS agrees to use reasonable efforts to keep
appropriate resources on this project, unless this
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Agreement is terminated for any reason. If, and to the
extent caused solely by EDS, either the Phase I
Implementation Deliverable or the Phase II Implementation
Deliverable is (1) actually delayed by more than
[Confidential Treatment Requested] after the date of the
applicable Milestone (as identified on Schedule B and as
may be adjusted in accordance with the terms of this
Agreement) (an "Actual [Confidential Treatment Requested]
Delay"), or (2) first delivered to Hawaiian prior to an
Actual [Confidential Treatment Requested] Delay (the
"Original Delivery Date") and, after adding all
Adjustments (as defined in the following paragraph), such
adjusted delivery date results in a delay of more than
[Confidential Treatment Requested] after the date of the
applicable Milestone (as identified on Schedule B and as
may be adjusted in accordance with the terms of this
Agreement) (a "Deemed [Confidential Treatment Requested]
Delay), then, Hawaiian may elect to terminate this
Agreement by giving EDS written notice of such
termination, provided that Hawaiian makes such election
within thirty (30) calendar days after the Actual
[Confidential Treatment Requested] Delay or the Deemed
[Confidential Treatment Requested] Delay, as applicable,
unless the parties otherwise mutually agree.
For purposes of this termination provision only, if EDS
delivers a Deliverable to Hawaiian prior to an Actual
[Confidential Treatment Requested] Delay, and if during user
acceptance testing, Hawaiian delivers to EDS written notice
of a valid nonconformance (as determined in accordance with
Section 2.4), then EDS will have twenty-eight (28) calendar
days from the date the parties mutually determine that such
nonconformance was valid to correct and redeliver the Phase
to Hawaiian. Hawaiian and EDS shall each act in good faith
to determine as promptly as practicable whether a reported
nonconformance is valid. If EDS corrects (as mutually
determined by the parties in accordance with Section 2.4) and
redelivers the Phase within such time period, then the
Original Delivery Date will remain in effect. If EDS does
not correct and redeliver within such time period, then the
period of time (measured from the determination date of a
valid nonconformance) it takes EDS to actually correct and
redeliver the Phase (in accordance with Section 2.4) will be
added to the Original Delivery Date (an "Adjustment") for
purposes of determining a Deemed [Confidential Treatment
Requested] Delay.
(i) Remedy Due to Lateness of Phase I Implementation
Deliverable. If Hawaiian terminates this Agreement in
accordance with Section 11.1(a) due to the lateness of
the Phase I Implementation Deliverable, then EDS shall
promptly [Confidential Treatment Requested].
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(ii) Remedy Due to Lateness of Phase II Implementation
Deliverable. If Hawaiian terminates this Agreement in
accordance with Section 11.1(a) due to the lateness of
the Phase II Implementation Deliverable, then (1) EDS
shall [Confidential Treatment Requested].
(iii) Sole and Exclusive Remedy. Hawaiian and EDS expressly
acknowledge that the remedies and damages set forth in
this Section 11.1(a) represent the parties' negotiated
agreement as to any losses or damages to Hawaiian
resulting from EDS' late delivery of either
Deliverable as described in Section 11.1(a).
Accordingly, Hawaiian agrees that the remedies and
damages described in this Section 11.1(a) constitute
Hawaiian's sole and exclusive remedies and damages
relating to late delivery of a Deliverable and
Hawaiian will not seek any other remedies or damages,
in contract or otherwise, related to such late
delivery.
(b) If, during the Maintenance Period, the EDS-Developed
Software fails to conform in all material respects to the
then-current Documentation, and EDS can not substantially
cure such failure within a reasonable period of time
after being given written notice specifying the default,
then Hawaiian, by giving written notice to EDS, may
terminate this Agreement as of a date specified in the
notice of termination.
(c) If either party materially defaults in the performance
of any of its duties or obligations under this Agreement
(except for a default in payments to EDS and the default
specified in Section 11.1(a) or (b)), and does not
substantially cure such default within sixty (60)
calendar days after being given written notice
specifying the default, or, with respect to any default
which cannot reasonably be cured within sixty (60)
calendar days, if the defaulting party fails to proceed
within sixty (60) calendar days after being given such
notice to commence curing said default and thereafter to
proceed with all due diligence to substantially cure
such default, then the party not in default, by giving
written notice to the defaulting party, may terminate
this Agreement as of a date specified in the notice of
termination.
11.2 Termination for Nonpayment. If Hawaiian defaults in the payment when
due of any amount due to EDS pursuant to this Agreement and does not cure
such default within ten (10) calendar days after being given written notice
of such default, then EDS, by giving written notice of such default to
Hawaiian, may terminate this Agreement as of a date specified in the notice
of termination.
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11.3 Termination for Insolvency. If either party to this Agreement becomes
or is declared insolvent, is the subject of any proceedings relating to
suspension of payments or its liquidation, insolvency or for the appointment
of a receiver or similar officer for it, makes an assignment for the benefit
of all or substantially all of its creditors, or enters into an agreement for
the composition, extension, or readjustment of all or substantially all of
its obligations, then the other party hereto, by giving written notice
thereof to such party, may terminate this Agreement as of a date specified in
the notice of termination.
11.4 Rights Upon Termination. If Hawaiian terminates this Agreement (a) in
accordance with Section 11.1(c) for breach of the warranty provision set
forth in Section 3.1, or (b) in accordance with Section 12.1(a)(ii) for
intellectual property infringement, then, in accordance with such Sections,
Hawaiian will return the EDS-Developed Software to EDS and EDS will refund to
Hawaiian the portion of the EDS Charges paid by Hawaiian to EDS for the
EDS-Developed Software. Upon termination of this Agreement for any reason
(except as described in Section 11.1(a)), then, in addition to any other
rights that either party may have, (a) Hawaiian shall promptly (i) return to
EDS all copies of the Deliverables and the EDS-Developed Software for which
Hawaiian has not fully paid (full payment shall include payment of the
value-based payments described on Schedule C), and (ii) return to EDS all
Third Party Hardware and Third Party Software for which Hawaiian has not
fully paid, and (b) EDS will promptly return to Hawaiian all copies of
Hawaiian's confidential information and any Hawaiian data. Further, EDS will
be under no further obligation to provide the System or the EDS-Developed
Software.
Article XII
Indemnities and Liability
12.1 Intellectual Property Indemnity.
(a) EDS Developed Software.
(i) EDS will defend any action brought against Hawaiian
and/or any Participating Approved Affiliate to the
extent that such action is based on a claim by a
third party that the EDS-Developed Software (which,
for purposes of this indemnity, includes any third
party Software code embedded within the
EDS-Developed Software), or any part thereof, (1)
infringes a copyright perfected under a United
States statute, (2) infringes a patent granted under
United States law, or (3) constitutes an unlawful
disclosure, use or misappropriation of another
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party's trade secret or other intellectual property
rights. EDS will bear the expense of such defense
and pay any and all costs, expenses, losses,
judgments, fines, damages and attorneys' fees that
are finally awarded by a court of competent
jurisdiction and attributable to such claim or
result from a settlement thereof, provided that
Hawaiian and any Participating Approved Affiliates
notify EDS promptly in writing of the claim and that
Hawaiian and any Participating Approved Affiliate
allow EDS to fully direct the defense or settlement
of such claim. Failure to provide such notice shall
only relieve EDS of its obligations under this
Section if and to the extent that EDS is prejudiced
thereby. EDS shall not be responsible for any
settlement or compromise made without its consent.
(ii) Should the EDS-Developed Software, or any part
thereof, become, or in EDS' opinion be likely to
become, the subject of a claim by a third party of
infringement of a copyright or patent or other
intellectual property right, EDS will use reasonable
efforts to procure for Hawaiian and any Participating
Approved Affiliates the right to continue using the
EDS-Developed Software, or replace or modify the
EDS-Developed Software to make its use under this
Agreement non-infringing. If neither option is
reasonably available in EDS' judgment, (1) Hawaiian
and any Participating Approved Affiliates shall
return the EDS-Developed Software to EDS, (2) EDS
shall reimburse Hawaiian for all amounts paid to EDS
for the EDS-Developed Software, and (3) the rights
granted under this Agreement shall terminate, subject
to Section 13.13.
(iii) EDS shall have no liability to Hawaiian and/or any
Participating Approved Affiliates under this
Agreement (1) to the extent that any claim of
infringement is based upon the use of the
EDS-Developed Software in connection or in
combination with hardware, equipment, devices or
Software not listed in Sections 1(A) or 1(B) of
Schedule A or approved by EDS or used in a manner
for which the EDS-Developed Software was not
designed, and (2) for maintenance, modifications,
updates, enhancements and improvements to the
EDS-Developed Software made by any party other than
EDS. This Section states EDS' entire obligation to
Hawaiian and/or any Participating Approved
Affiliates regarding infringement.
(iv) Hawaiian will indemnify EDS in like manner, and to
the same extent and subject to the same exceptions as
above, for claims against EDS that arise from
modifications, updates, enhancements and improvements
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to the EDS-Developed Software made by Hawaiian or
third parties acting on behalf of Hawaiian.
(b) Software Provided By Hawaiian. Hawaiian agrees to defend
EDS against any action to the extent that such action is
based on a claim that Software, or any part thereof,
provided and owned by Hawaiian, (i) infringes a copyright
perfected under a United States statute, (ii) infringes a
patent granted under United States law or (iii)
constitutes an unlawful disclosure, use or
misappropriation of another party's trade secret or other
intellectual property right. Hawaiian will bear the
expense of such defense and pay any and all costs,
expenses, losses, judgments, fines, damages and
attorneys' fees that are attributable to such claim and
finally awarded by a court of competent jurisdiction.
With respect to any third party licensed Software
provided by Hawaiian, Hawaiian will assign to EDS, where
permitted, or enforce for EDS' benefit (without resort to
litigation or other dispute resolution process) any
warranties or indemnities extended to Hawaiian by the
applicable vendors.
12.2 Cross Indemnities.
(a) Hawaiian and EDS each will be responsible for damages to
their respective tangible personal and real property
(whether owned or leased), and each party agrees to look
to their own insuring arrangements with respect to such
damages. Hawaiian and EDS each waive all rights to
recover against each other for any loss or damage to
their respective tangible personal property (whether
owned or leased) from any cause covered by insurance
maintained by each of them, including their respective
deductibles or self-insured retentions. Hawaiian and
EDS will each cause their respective insurers to issue
appropriate waivers of subrogation rights endorsements to
all property insurance policies maintained by each party.
Each party will give the other party written notice if a
waiver of subrogation is unobtainable, or obtainable only
at additional expense. If the party receiving such notice
agrees to reimburse the other party for such additional
expense, the other party shall obtain such waiver of
subrogation. If a waiver is unobtainable or if a party
elects not to pay the additional expense of a waiver, then
neither party shall waive their insurers subrogation
rights.
(b) Hawaiian and EDS each will be responsible for claims for
the death of or personal injury to any person (including
any employee of either party), and claims for damages to
any third party's tangible personal or real property
(whether owned or leased), in accordance with the common
law of the jurisdiction in which such claim is alleged to
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have occurred. Each party will indemnify, defend and
hold harmless the other party from any and all claims,
actions, damages, liabilities, costs and expenses,
including without limitation, reasonable attorneys' fees
and expenses, arising out of claims for which the
indemnitor is responsible under the preceding sentence.
12.3 Indemnity Procedures. Notwithstanding anything herein to the contrary,
no indemnity obligation set forth in this Article XII shall apply unless the
party claiming indemnification notifies the other promptly of any matters in
respect of which the indemnity may apply and of which the notifying party has
knowledge and gives the other party full opportunity to control the response
thereto and the defense thereof, including, without limitation, any agreement
relating to the settlement thereof. Failure to so provide such notice shall
only relieve the indemnitor of its indemnity obligations if and to the extent
that the indemnitor is prejudiced thereby.
12.4 Limitation of Liability.
(a) If EDS shall be liable to Hawaiian for any matter
relating to or arising in connection with this
Agreement, whether based on an action or claim in
contract, equity, negligence, intended conduct, tort or
otherwise, the amount of damages recoverable against EDS
for all events, acts or omissions shall not exceed in
the aggregate $[Confidential Treatment Requested]. Such
dollar limitation of liability, however, shall not apply
to [Confidential Treatment Requested]. In those
instances only, the dollar limitation of liability shall
be the amount of the refund. In no event will the
measure of damages include, nor will EDS be liable for,
any amounts for loss of income, profit or savings or
indirect, incidental, consequential, or punitive damages
of any party, including third parties.
(b) The limitations set forth in Section 12.4(a) shall not
apply to claims covered by the indemnification obligation
set forth in Section 12.1(a)(i).
(c) The provisions of this Section shall survive termination
of this Agreement for any reason.
12.5 Contractual Limitation Period. No claim or cause of action
that accrued more than two years prior to the filing of a suit or
claim in arbitration may be asserted against EDS.
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12.6 Acknowledgment. Hawaiian and EDS expressly acknowledge that the
limitations contained in Section 12.4 represent the parties' agreement with
respect to the allocation of risks between the parties, including the level
of risk to be associated with the provision of EDS' services pursuant to
this Agreement as related to the payments to be made to EDS for such
services, and each party fully understands and accepts such limitations.
Article XIII
Miscellaneous
13.1 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action by either party is required by any provision of
this Agreement, such action shall not be unreasonably delayed or withheld.
13.2 Relationship of Parties. EDS, in furnishing the services described in
this Agreement to Hawaiian, is acting only as an independent contractor. EDS
does not undertake by this Agreement or otherwise to perform any obligation
of Hawaiian, whether regulatory or contractual, or to assume any
responsibility for Hawaiian's business or operations. EDS shall not be
considered or be deemed to be an agent, employee, joint venturer or partner
of Hawaiian, and no other relationship is intended or created by and between
EDS and Hawaiian.
13.3 Restriction on Hiring. Each party agrees that, during the term of this
Agreement and for a period of two years thereafter, it will not, except with
the other party's prior written consent, solicit for its employment, employ,
engage as an independent contractor, or otherwise obtain the services of any
person employed then or within the preceding twelve months by the other party
if that person was involved in the performance of this Agreement.
13.4 Force Majeure. Each party shall be excused from its nonmonetary
performance obligations under this Agreement for any period, and the time of
any performance shall be extended as reasonably necessary under the
circumstances, to the extent that such party is prevented from performing, in
whole or in part, its obligations under this Agreement, as a result of acts
or omissions by the other party or an act of God, natural disaster,
hurricane, governmental authority, war, civil disturbance, court order, labor
dispute, third party nonperformance or any other cause beyond its reasonable
control, including without limitation failures or fluctuations in electrical
power, heat, light, air conditioning or telecommunications equipment or lines
or other equipment. Such nonperformance shall not be a default under this
Agreement or a ground for termination of this Agreement.
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13.5 Compliance with Laws. In performing its obligations under this
Agreement, neither party shall be required to undertake any activity that
would conflict with the requirements of any applicable statute, rule,
regulation, interpretation, judgment, order or injunction of any governmental
authority.
13.6 Attorneys' Fees. If any legal action or other proceeding is brought for
the enforcement of this Agreement or any arbitration award, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Agreement, the prevailing party will be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
13.7 Media Releases. Each party will coordinate with the other party
regarding any media release, public announcement or similar disclosure
relating to this Agreement or its subject matter and will give the other
party a reasonable opportunity to review and comment on the content of such
release, announcement or disclosure prior to its release. EDS may reference
Hawaiian as a customer, however, EDS will not otherwise use this Agreement as
an advertising tool without the prior consent of Hawaiian, which consent will
not be unreasonably withheld or delayed. This Section does not alter the
restrictions on the disclosure of confidential information set out in Section
8.6 of this Agreement and will not be construed so as to delay or restrict
either party from disclosing any information required to be disclosed in
order to comply with any applicable law, rule or regulation.
13.8 Notices. Wherever under this Agreement one party is required or
permitted to give written notice to the other, such notice, (a) if delivered
personally, shall be deemed given when delivered in hand to an appropriate
representative of the other party, (b) if delivered by mail, shall be deemed
given three (3) days after being mailed by United States mail, registered or
certified mail, return receipt requested, postage prepaid, and addressed as
described below, or (c) if delivered by telecopy, shall be deemed given when
sent to the fax number set forth below and confirmed (with the notice
concurrently mailed as provided above):
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In the case of EDS:
Electronic Data Systems Corporation
5400 Legacy Drive
Mail Stop H3-6C-46
Plano, Texas 75024
Fax Number: 972-605-5270
Phone Number: 972-605-5252
Attention: President, Air Transport Services SBU
With a copy to:
Electronic Data Systems Corporation
5400 Legacy Drive
Mail Stop H3 3A-05
Plano, Texas 75024
Fax Number: 972-605-5610
Phone Number: 972-605-5500
Attention: General Counsel
In the case of Hawaiian:
Hawaiian Airlines, Inc.
3375 Koapaka Street
Suite G350
Fax Number: 808-835-3015
Phone Number: 808-835-3700
Attention: Executive Vice President/CFO
With a copy to:
Hawaiian Airlines, Inc.
3375 Koapaka Street
Suite G350
Fax Number: 808-835-3015
Phone Number: 808-835-3610
Attention: General Counsel and Corporate Secretary
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Either party may from time to time change its address, fax or phone number
for notification purposes by giving the other party prior written notice of
the new address and the date upon which it will become effective.
13.9 Severability. If any provision of this Agreement is held illegal,
unenforceable or void, then both parties will be relieved of all obligations
arising under that provision, but only to the extent the provision is
illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement will be deemed amended by modifying such
provision to the extent necessary to make it valid and enforceable while
preserving its intent or, if that is not possible, by substituting therefor
another provision which is valid and enforceable and achieves the same
objectives.
13.10 Amendment. This Agreement may not be modified, changed or amended
except by a written instrument executed by each of the parties to this
Agreement.
13.11 Waivers. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if it is in writing and signed by the party against
which such waiver is to be asserted. Unless otherwise expressly provided in
this Agreement, no delay or omission on the part of any party in exercising
any right or privilege under this Agreement shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right or
privilege under this Agreement operate as a waiver of any other right or
privilege under this Agreement nor shall any single or partial exercise of
any right or privilege preclude any other or further exercise thereof or the
exercise of any other right or privilege under this Agreement.
13.12 Entire Agreement. All Schedules attached to this Agreement, the Change
Orders and the Project Plan are incorporated into, and expressly made a part
of, this Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter of this Agreement and
supersedes all prior and contemporaneous agreements and understandings,
whether written or oral, between the parties with respect to the subject
matter of this Agreement, and there are no representations, understandings or
agreements relating to this Agreement that are not fully expressed in this
Agreement.
13.13 Survival. Each party's obligations under Sections 8.1, 8.6, 12.1 and
13.3 and any other provisions of this Agreement that should survive in order
to effectuate the intent of the parties will survive and continue after
termination of this Agreement.
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13.14 Export Compliance. The System and the PRAS Services are subject to any
United States laws, rules, regulations, orders, treaties and other
restrictions that may be imposed from time to time on the exportation or
re-exportation of technical data, or of information about technical data.
Hawaiian will not export or permit the re-export of the System or the PRAS
Services (a) in violation of any such restriction; and (b) without obtaining
the appropriate export license from the Government of the United States. EDS
may restrict Hawaiian's export or re-export of the System or the PRAS
Services if Hawaiian will not agree to additional license provisions
necessary in the sole discretion of EDS to adequately protect EDS'
intellectual property rights; if the destination country does not adequately
protect intellectual property rights; or if Hawaiian will not agree to fully
comply with the applicable laws of the destination country.
13.15 Binding Nature and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Neither party may assign this Agreement
without obtaining the prior written consent of the other party, which consent
will not be unreasonably withheld or delayed.
13.16 Third Party Beneficiaries. Except as otherwise provided herein, this
Agreement is for the benefit of the parties hereto and is not intended to
confer any rights or benefits on any third party, including any employee,
creditor or affiliate of either party.
13.17 Governing Law. This Agreement shall be construed in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
Hawaii without regard to the principles of conflicts of laws.
13.18 Certain Construction Rules. The Article and Section headings and the
table of contents used in this Agreement are for reference only and in no way
define, limit, extend or describe the scope or intent of any provisions of
this Agreement. In addition, as used in this Agreement any reference to a
"Section," "Article," or "Schedule" is a reference to a Section or Article of
this Agreement or a Schedule attached to this Agreement.
13.19 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which taken together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the date first set forth above.
HAWAIIAN AIRLINES, INC. ELECTRONIC DATA SYSTEMS
CORPORATION
By:__________________________ By:___________________________
Name:________________________ Name:_________________________
Title:_______________________ Title:_________________________
By:__________________________
Name:________________________
Title:_________________________
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SCHEDULE A
SCOPE OF SERVICES
EDS will provide the following System and PRAS Services:
1. The System. EDS will provide the System as described in this
Agreement in accordance with its System Life Cycle Phases, as described in
Section 3 to this Schedule A.
A. EDS-Developed Software. The Software developed by EDS to meet
the Specifications, as such may be modified in accordance with Article VI
of this Agreement or in connection with Section 3 of this Schedule.
B. Third Party Software.
1 Sybase SQL Server (with user license for up to 60 users)
1 Sybase SQL Manager
1 Sybase SQL Monitor
1 Oracle database management system license for 10
concurrent users, if necessary for the Proration Software
1 Maestro for UNIX (job scheduler)
C. Third Party Hardware.
Server
1 9000/800 HP UNIX K class Server with uninterrupted power supply
and CD ROM
User Equipment
60 Pentium PCs, with 16MB of RAM and 100 Mhz or faster processors,
Windows 95 operating environment, and 15" color monitors
60 Network Cards
D. Interfaces. EDS will develop the required automated interfaces
between the EDS-Developed Software and the Software applications identified
in Section 2 of the Specifications.
The parties acknowledge and agree that EDS may substitute any item of
Third Party Software or Third Party Hardware for a similar or better
product after consultation with Hawaiian.
A-1
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EDS and Hawaiian will diligently work together in good faith to select and
implement appropriate Third Party Software and Third Party Hardware that will
enable an average on-line response time of [Confidential Treatment Requested]
for the System utilizing the PCs (as described in Section 1(C) of Schedule A,
or as modified by mutual agreement of the parties in accordance with Section
4.1) connected directly to the server (as described in Section 1(C) of
Schedule A, or as modified by mutual agreement of the parties in accordance
with Section 4.1) bypassing Hawaiian's local area network/wide area network
capabilities. The average response time calculation will (a) include all
responses executed at the PC workstation and those that require the System to
communicate with the server described above, (b) exclude reports and large
database queries, and (c) exclude delays caused by (i) scheduled downtime,
(ii) circumstances that constitute a force majeure event under Section 13.4,
and (iii) a Hawaiian act, omission or failure to perform under this
Agreement. Hawaiian will be responsible for the local area network
requirements and activities related to the System and for the overall
operation and performance of the System after final implementation.
2. PRAS Services. The PRAS Services are the services described in
Article IV and Section 3.2.
3. Description of System Life Cycle Phases.
A. Definition and Analysis Phase
EDS will analyze Hawaiian's current environment in order to determine the
requirements for implementing the System for Hawaiian. This Phase will
include further defining the functionality described in the Specifications,
and reaffirming or modifying, as necessary, the Project Plan.
B. Business Design Phase
During the Business Design Phase, EDS will address those functions of the
System that will be newly developed or customized for Hawaiian. EDS will
develop detailed business requirements for new functions to be developed for
Hawaiian (the "Business Design").
C. Construction and Testing Phase
During this Phase, EDS will translate the designs and specifications of the
newly developed functions of the EDS-Developed Software, as described in
Section 2 of the Specifications, into the System. EDS will develop and then
unit and system test such Software; develop technical operation/installation
documentation; develop user guides for operations; and develop training
materials. Hawaiian will conduct user acceptance testing of the System with
assistance from EDS in accordance with mutually agreed upon test scripts and
the provisions of Section 2.4 of this Agreement.
A-2
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D. Implementation Phase.
This Phase, which will begin after Hawaiian has approved user acceptance
testing, includes the installation of the Deliverable into the production
environment, moving programs and conducting any agreed upon conversions.
A-3
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SCHEDULE B
MILESTONES AND DELIVERABLES
As of the Effective Date, and unless otherwise mutually agreed to by
Hawaiian and EDS, the Project Plan will include the following
Milestones and Deliverables:
Deliverable Milestone
Phase 1 Implementation [Confidential Treatment
Requested]
Phase 1 Implementation is the sales audit function of the System
completed and available for Hawaiian's user acceptance testing by the
Milestone date. The sales audit function includes the following:
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
Deliverable Milestone
Phase 2 Implementation [Confidential Treatment
Requested]
Phase 2 Implementation is the full System completed and available for
Hawaiian's user acceptance testing by the Milestone date. The
remaining functions include the following:
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
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<PAGE>
SCHEDULE C
EDS CHARGES
1. Monthly Charges. During the term of this Agreement, EDS will
charge, and Hawaiian will pay EDS, the following monthly charges
in accordance with Article IX:
Calendar Month of the Agreement Monthly Charge
February 1997 $[Confidential Treatment Requested]
March 1997 through January 1998 $[Confidential Treatment Requested]
February 1998 through April 1998 $[Confidential Treatment Requested]
May 1998 through May 2003 $[Confidential Treatment Requested]
Each monthly charge will be invoiced on the first day of the
month.
2. Third Party Hardware and Third Party Software Charge. EDS will
charge, and Hawaiian will pay EDS, a charge of $[Confidential
Treatment Requested] for the Third Party Hardware, Third Party
Software, and maintenance support as described in Section 3.4(d),
which charge will be invoiced to Hawaiian at the time the order
for such hardware and Software is placed.
3. Value-based Payments.
(a) EDS will charge, and Hawaiian will pay EDS, the value-based
payments described below, which payments reflect the value that
the System brings to Hawaiian. The value-based payments will be
calculated as follows:
The System will track the total monetary amount of all Exceptions
(as defined below) identified by the System during each month.
From February 1998 through April 1998, Hawaiian will pay EDS a
monthly value-based payment equal to [Confidential Treatment
Requested] during the prior month.
From May 1998 until expiration of this Agreement by its terms,
Hawaiian will pay EDS a monthly value-based payment equal to
[Confidential Treatment Requested] during the prior month.
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<PAGE>
The value-based payments will be capped at an aggregate amount of
$[Confidential Treatment Requested] paid to EDS and, after such
aggregate amount of value-based payments has been paid to EDS,
Hawaiian will have no further obligation to make value-based
payments to EDS.
(b) For purposes of this Section, the term "Exceptions" shall
mean any apparent deviation from, or failure to conform to,
Hawaiian's rules, procedures, policies and tariffs for selling
and/or issuing Hawaiian airline tickets, which deviations or
nonconformances were identified by the System and made by a travel
agent, wholesaler or such other non-Hawaiian person or entity
selling and/or issuing airline tickets on behalf of Hawaiian.
Such Exceptions shall include without limitation the following
activities:
A reported ticket sale for less than the applicable fare
A reported commission greater than the applicable commission
A reported fare class that is different from the booked fare class
An invalid form of payment was used
Where a fare basis requires the ticket to be issued within a given
time period from when the reservation is made and such ticket is
not issued within that time period
A reported ticket exchange or ticket refund was greater than the
corresponding ticket sale amount
A ticket refund has been improperly issued
A ticket sale has not been reported
Receipt of a flight coupon that had been previously used
The appropriate penalty amount was not collected
(c) In order to facilitate the computation of these value-based
payments, Hawaiian shall provide EDS, on an ongoing basis and in a
manner reasonably acceptable to EDS, (i) the monthly Sales Audit
Results report generated by the System, which report summarizes
the total Exceptions and the total monetary amount of such
Exceptions identified for that particular month, and (ii) access
to and use of the System. Hawaiian shall permit EDS, or its
designated representative, to perform periodic audits of
Hawaiian's records to the extent necessary to verify the results
and/or processes of the System.
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<PAGE>
4. Change Orders. Immediately after execution of a Change Order,
EDS will invoice Hawaiian for the services and/or products that
are the subject of that particular Change Order, and Hawaiian will
pay EDS the amounts stated in such invoice in accordance with the
provisions of Section 9.3.
5. Airline Tariff Publishing Company (ATPCO) Charges. During the
term of this Agreement commencing with the seventh month after the
Effective Date, EDS will charge, and Hawaiian will pay EDS,
$[Confidential Treatment Requested] per month for the provision of
the ATPCO data and information to Hawaiian, as described in
Section 4.6 of the Agreement.
C-3
<PAGE>
AIRCRAFT LEASE
AGREEMENT
Dated as of January 3, 1997
Between
AMERICAN AIRLINES, INC., as
Lessor
and
HAWAIIAN AIRLINES, INC., as
Lessee
One (1) DC10-10 Aircraft
Registration No. N160AA
Serial Number 46710
with Three GE CF6-6K Engines
This Lease Agreement has been executed in several counterparts. To the
extent, if any, that this Lease Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the
original. The counterpart to be deemed the original shall be the counterpart
that is designated on the signature pages thereof as the original counterpart
and no security interest in this Lease Agreement may be created through the
transfer of any counterpart other than such original counterpart. This is
not the original counterpart.
<PAGE>
TABLE OF CONTENTS
Page No.
Section 1. Definitions...............................................1
Section 2. Delivery and Acceptance..................................14
(a) Time and Place...........................................14
(b) Delivery Date............................................14
Section 3. Term and Rent............................................15
(a) Term.....................................................15
(b) Basic Rent...............................................15
(c) Supplemental Rent........................................15
(d) Prohibition Against Setoff,Etc...........................15
(e) Payment to Lessor........................................16
Section 4. Disclaimer; Warranties Relating to the Aircraft;
Certain Agreements of Lessee, Representations of
Lessee...................................................16
(a) Disclaimer...............................................16
(b) Quiet Enjoyment..........................................17
(c) Waiver of Warranties.....................................17
(d) Lessee's Representations and Warranties..................18
(e) Lessor's Representations and Warranties..................20
Section 5. Return of Airframe and Engines...........................21
(a) Return of Airframe and Serviced Engines..................21
(b) Return of Other Engines..................................22
Section 6. Liens....................................................22
Section 7. Registration, Maintenance and Operation;
Possession; Insignia.....................................23
(a) Registration, Maintenance and Operation..................23
(b) Additional Maintenance Provisions........................24
(c) Territorial Restrictions on Use of Aircraft..............24
(d) Obligations Absolute.....................................24
(e) Possession...............................................25
(f) Registration and Insignia................................25
(g) Replacement of Parts.....................................25
(h) Alterations, Modifications and Additions.................26
(i) Manuals and Technical Records............................27
(j) Maintenance and Usage....................................27
Section 8. Loss, Destruction, Requisition,Etc.......................27
(a) Event of Loss to the Aircraft............................27
(b) Event of Loss to a Serviced Engine.......................28
(c) Application of Payments for Requisition of Title.........31
(d) Requisition of Use of the Airframe.......................31
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<PAGE>
(e) Investment of Proceeds Pending Replacement...............32
(f) Application of Payments During Default...................32
Section 9. Insurance................................................32
(a) Liability Insurance......................................32
(b) All Risk Hull Insurance..................................33
(c) War-Risk Insurance.......................................35
(d) Application of Proceeds..................................35
(e) Reports, Etc.............................................35
(f) Additional Insurance.....................................36
(g) Notice from Lessee; No Modification......................36
(h) Reinsurance..............................................36
(i) Insurance of Lessor......................................36
(j) Insurance Relating to Allocated Parts....................37
Section 10. Inspection; Financial Information........................37
(a) Inspection...............................................38
(b) Financial Information....................................39
Section 11. Lessee's Covenants.......................................39
(a) Merger...................................................39
(b) Certificated Air Carrier.................................39
Section 12. FAA Recordation and Further Assurances...................39
(a) FAA Recordation..........................................40
(b) Further Assurances.......................................40
Section 13A. Lessee Events of Default.................................40
Section 13B. Lessor Events of Default.................................42
Section 14A. Lessor Remedies..........................................43
Section 14B. Lessee Remedies..........................................45
(a) Remedies................................................45
(b) Limitation on Damages...................................45
(c) No Implied Waiver.......................................46
Section 15. Indemnification.........................................46
(a) General.................................................46
(b) Indemnification for Negligent Acts......................48
(c) Defense of Claims; Settlement...........................48
(d) Indemnification by Lessor...............................49
(e) Survival................................................49
Section 16. General Tax Indemnity...................................49
(a) Tax Indemnity...........................................49
(b) Exclusions from General Tax Indemnity...................50
(c) Calculation of General Tax Indemnity Payments...........52
(d) Payment of General Tax Indemnity........................53
(e) Verification of Calculations............................53
(f) Reports.................................................54
(g) General Tax Indemnity Contest Provisions................54
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<PAGE>
(h) Compromise or Settlement................................56
(i) Refunds.................................................56
(j) Failure to Contest......................................57
(k) Interest................................................57
(l) Effect of Other Indemnities.............................57
Section 17. Miscellaneous...........................................57
(a) Construction; Governing Law.............................57
(b) Notices.................................................58
(c) Lessor's Right to Perform...............................60
(d) Confidentiality.........................................60
(e) Counterparts............................................62
(f) Grant of Security Interest by Lessor....................62
(g) Survival................................................62
(h) Assignment..............................................62
(i) Transaction Expenses....................................63
(j) Entirety................................................63
(k) Force Majeure...........................................63
(l) Independent Contractor; No Agency.......................64
(m) Certain Consents and Waivers of Lessee..................64
(n) Offset..................................................66
Section 18. True Lease..............................................66
(a) Intent of the Parties...................................66
Section 19. Enforceability in Jurisdictions........................66
Section 20. No Third-Party Beneficiaries...........................67
Section 21. Maintenance Obligations................................67
Section 22. Amendment of Long-Term Lease Agreement.................67
iii
<PAGE>
Exhibits
Exhibit A Lease Supplement No. 1
Exhibit B Stipulated Loss Value Schedule
Exhibit C Conditions Precedent to Delivery
Exhibit D Delivery and Return Conditions
Exhibit E Supplemental Rent for Maintenance
Schedules
Schedule I Basic Rent
Schedule 4(d)(i)
Schedule 4(d)(iv)
Schedule 4(d)(v)
Schedule 4(d)(vi)
Schedule 4(d)(vii)
iv
<PAGE>
AIRCRAFT LEASE AGREEMENT
This AIRCRAFT LEASE AGREEMENT, dated as of January 3,
1997, between AMERICAN AIRLINES, INC., a Delaware
corporation, with its principal place of business at
Dallas/Fort Worth International Airport, Texas 75261-9616,
and its successors and assigns ("Lessor"), and HAWAIIAN
AIRLINES, INC., a Hawaii corporation with its principal
place of business at 3375 Koapaka Street, Suite G350,
Honolulu, Hawaii 96819 ("Lessee").
WHEREAS, Lessee desires to lease from Lessor, and
Lessor is willing to lease to Lessee, the Aircraft (as
defined below) upon the terms and conditions set forth
herein; and
WHEREAS, Lessor is certificated under FAA Regulations
Part 121 to inspect, maintain, repair and overhaul the
Aircraft with GE CF6-6K Engines; and
WHEREAS, Lessee has requested that Lessor perform
certain repair, maintenance and overhaul services with
respect to the Aircraft, other than the Lessee Assumed
Services (as defined below), at a fixed cost per flight
hour; and
WHEREAS, Lessee has further requested that Lessor
perform certain additional repair, modification, maintenance
and overhaul services on a time-and-materials basis; and
WHEREAS, Lessor desires to perform such maintenance
services for Lessee;
NOW, THEREFORE, in consideration of the mutual
covenants herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, Lessor and Lessee hereby agree as
follows:
Section 1. Definitions. Unless the context
otherwise requires, the following terms shall have the
following meanings for all purposes of this Lease Agreement
and shall be equally applicable to both the singular and the
plural forms of the terms herein defined:
"AAdvantage Agreement" means the AAdvantage-Registered
Trademark- Participating Agreement, dated as of September
12, 1994 between Lessee and Lessor, and all other
agreements, instruments, certificates and documents related
thereto or executed or delivered in connection therewith,
all as from time to time amended, supplemented or modified.
"AA Station" means HNL, LAS, LAX, SEA, SFO or TUL.
"ACARS" means the Aircraft Communications and Reporting
System currently installed on the Aircraft.
"ADs" means Airworthiness Directives issued by the FAA.
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<PAGE>
"AD Effective Date" shall have the meaning assigned to
such term in Section 4(s) of Exhibit E.
"Additional Insured" shall have the meaning specified
in Section 9 hereof.
"Additional Services" means the engineering,
inspection, maintenance, repair and overhaul services that
are necessary or appropriate (i) to correct damage
(including replacement at Lessee's expense if Lessor
reasonably determines that the damage (other than ordinary
wear and tear) is beyond economic repair) to the Serviced
Aircraft, any Serviced Engines and/or any Rotable Parts
(including Serviced Parts removed during the delivery of
Maintenance Services other than Additional Services) that
resulted from (a) improper use, improper repairs by Persons
other than Lessor or its subcontractors, neglect (other than
by Lessor or its subcontractors), or any cause other than
ordinary wear and tear or (b) Foreign Object Damage, (ii) to
complete modifications to the Serviced Aircraft and any
Serviced Engines requested by Lessee to customize the
Serviced Aircraft in any manner that deviates from Lessor's
standard configuration (subject to the provisions of Section
4(q) of Exhibit E which require Lessee to procure and
provide certain Serviced Parts prior to their installation
on the Serviced Aircraft), (iii) to complete modifications
(including those modifications mandated by the FAA) to the
Serviced Aircraft the costs of which exceed $1,000 per
Serviced Aircraft, or (iv) to complete any inspections
mandated by the FAA that are not included in Lessor's
existing maintenance program and are not related to aging
aircraft and corrosion prevention issues, but excluding
Field Trip Maintenance Services, and On-Call Maintenance
Services.
"Affiliate" of any Person means any other Person
directly or indirectly controlling, controlled by or under
common control with such Person. For purposes of this
definition, "control" when used with respect to any
specified Person means the power to direct or cause the
direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
"Aircraft" means the Airframe delivered and leased
hereunder, together with the three Engines initially leased
hereunder with the Airframe (or any Engine substituted for
any such Engine hereunder), whether or not any of such
initial or substituted Engines may from time to time be
installed on the Airframe or may be installed on any other
airframe or on any other aircraft.
"Airframe" means (i) the McDonnell Douglas DC10-10
aircraft (except engines or Serviced Engines from time to
time installed thereon) bearing the U.S. Registration Number
N160AA and Manufacturer's Serial Number 46710 and (ii) any
and all Parts so long as the same shall be incorporated or
installed in or attached to the Airframe or so long as title
thereto shall remain vested in Lessor.
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<PAGE>
"Allocated Parts" shall have the meaning assigned to
such term in the Long-Term Lease Agreement.
"Allocated Spare Engine" shall have the meaning
assigned to such term in Section 4(n) of Exhibit F of the
Long-Term Lease Agreement.
"American Agreements" mean the Lease Agreement, the
Long Term Agreements, the Ancillary Agreements, 151 Lease,
161 Lease, 162 Lease and the 171 Lease.
"AMRCG" means AMR Training & Consulting Group, Inc., a
Delaware corporation, and its successors and assigns.
"AMR Leasing" means AMR Aircraft Sales & Leasing
Company, a Delaware corporation, and its successors and
assigns.
"Ancillary Agreements" means that certain Manuals
Supplement, Amended and Restated Training Document and FOS
Implementation Document, each dated as of March 31, 1994,
and entered into by and between Lessor and Lessee.
"A.O.G." means aircraft on the ground.
"Applicable Law" means all applicable laws of any
Governmental Authority, including securities laws, tax laws,
tariff and trade laws, ordinances, judgments, decrees,
injunctions, writs and orders or like actions of any court,
arbitrator, judicial or quasi-judicial tribunal,
governmental agency or authority in any country and rules,
regulations, orders, interpretations, licenses and permits
of any federal, state, county, municipal, regional or other
United States or foreign governmental body, instrumentality,
agency or authority.
"APU" means auxiliary power unit.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. Section 101 et seq.), as amended from time
to time and any successor statute.
"Base Maintenance Services" means the inspection,
engineering, maintenance, repair and overhaul services of
the Serviced Aircraft, any Serviced Engines and any Serviced
Parts that are ordinarily performed at a Maintenance Base as
part of the scheduled maintenance of the Serviced Aircraft,
any Serviced Engines or any Serviced Parts to repair
ordinary wear and tear including, without limitation, all
aircraft heavy maintenance checks and phase checks, but
excluding (i) the inspection, maintenance, repair and
overhaul of Parts described in Section 4(q) of Exhibit E and
(ii) Additional Services, Field Trip Maintenance Services,
Line Maintenance Services and On-Call Maintenance Services.
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<PAGE>
"Basic Rent" means the rent payable for the Aircraft
pursuant to Section 3(b), as the same may be adjusted
pursuant to Section 16.
"Basic Rent Payment Date" means the dates for payment
of Basic Rent described in Schedule I attached hereto.
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banking institutions
in New York City, New York, Fort Worth, Texas or Honolulu,
Hawaii are authorized or required by law, regulation or
executive order to be closed.
"Change in Control" means the acquisition by any Person
or 13D Group (other than Airline Investors Partnership, L.P.
or its Affiliates) of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of Voting
Securities after which such Person or Group owns Voting
Securities representing 30% or more of the outstanding
Voting Securities.
"Claims" means actual or threatened claims, demands and
suits.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and analogous provisions of any
successor statute.
"Confidential Information" shall have the meaning
assigned to such term in Section 17(d).
"Confidentiality Agreement" means that certain
Confidentiality Agreement dated November 8, 1993, between
AMRCG and Lessee.
"Cycle" means, with respect to the Serviced Aircraft,
one takeoff of such Serviced Aircraft and the next
subsequent landing of such Serviced Aircraft.
"Default" means any event which with the passage of
time or the giving of notice or both would become a Lessee
Event of Default.
"Defect" shall have the meaning assigned to such term
in Section 5(a) of Exhibit E.
"Deferred Purchase Certificate" has the meaning set
forth in the Indenture.
"Delivery Date" means the date on which the Aircraft is
delivered by Lessor to, and accepted by, Lessee.
"Discount Rate" means the Prime Rate.
"DOT" means the United States Department of
Transportation, or any Person, governmental department,
bureau, commission, or agency succeeding to the functions of
such department.
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<PAGE>
"Engine" means (i) each of the three General Electric
Model CF6-6K engines listed by manufacturer's serial numbers
in Lease Supplement No. 1, whether or not from time to time
installed on the Airframe or installed on any other airframe
or on any other aircraft and (ii) any Replacement Engine
which may from time to time be substituted pursuant to
Section 8 for an Engine leased hereunder; together in each
case with any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so
long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from
such Engine. Except as otherwise set forth herein, at such
time as a Replacement Engine shall be so substituted, such
replaced Engine shall cease to be an Engine hereunder. The
term "Engines" means, as of any date of determination, all
Engines then leased hereunder.
"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 theft, disappearance, destruction, damage
beyond repair or rendition of such Item of Equipment
permanently unfit for normal use for any reason whatsoever;
(ii) any damage to such Item of Equipment which results in
an insurance settlement with respect to such Item of
Equipment on the basis of a total loss whether actual,
constructive or arranged; (iii) the condemnation,
confiscation or seizure of, or requisition of title to such
Item of Equipment; (iv) the requisition of use of such Item
of Equipment (other than requisition for use by the
Government); (v) the requisition of use of such Item of
Equipment by the Government for any period ending after the
expiration of the Term unless Lessor elects, upon 30 days'
prior notice, not to treat such requisition as an Event of
Loss at the end of the Term; (vi) as a result of any rule,
regulation, order or other action by the FAA, DOT or other
governmental body of the United States 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, unless Lessee, prior to
the expiration of such six-month period, shall have
undertaken and shall be diligently carrying forward all
steps which are necessary or desirable to permit the normal
use of such property by Lessee or, in any event, if such use
shall have been prohibited for a period of twelve
consecutive months or if such use is prohibited at the end
of the Term, unless at the end of the Term such use has then
been prohibited for less than six consecutive months, then
an Event of Loss shall not be deemed to have occurred
hereunder until the expiration of six consecutive months
during which the use of the Item of Equipment has been so
prohibited, but only so long as Lessee continues to pay
Basic Rent to the Lessor on the first day of each month, at
the rate set forth in Schedule I attached hereto and
Supplemental Rent pursuant to Exhibit E hereto, and agrees
to and does comply with all other provisions hereof; or
(vii) the operation or location of the Item of Equipment,
while under requisition for use by the Government, in any
area excluded from coverage by any insurance policy in
effect with respect to the Item of Equipment required by the
terms of Section 9, if Lessee shall not have obtained
indemnity in lieu thereof from the Government, acceptable to
Lessor; provided that if such property shall be returned to
Lessee in such a condition that Lessee can within 30 days
following the return thereof cause the Item of Equipment to
comply with the maintenance conditions set forth in Section
7 hereof, then such event shall, at the option of Lessee,
not constitute an Event of Loss. An Event of Loss with
respect to the Aircraft shall be deemed to have occurred if an
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<PAGE>
Event of Loss occurs with respect to the Airframe. In
the case of clauses (i), (ii), (iii) and (iv), the date of
an Event of Loss shall be the date of destruction, damage,
requisition, loss, etc. to any Item of Equipment. In the
cases of clauses (v), (vi) and (vii), the date of an Event
of Loss shall be respectively (A) such 180th day or last day
of the applicable Term as the case may be, and (B) the last
day of such six month period or twelve month period, as the
case may be and (C) the first day of such operation or
location.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Expendable Parts" means (i) Serviced Parts used in the
repair and overhaul of the Serviced Airframe, any Serviced
Engines and other Rotable Parts that are assumed to have no
potential for reuse and miscellaneous materials and supplies
consumed during the repair and overhaul process, and (ii)
Serviced Parts that have some potential for repair but that
are customarily assumed to be expended.
"Expenses" means liabilities, obligations, losses,
damages, penalties, claims (including claims involving
liability in tort, strict liability or otherwise), actions,
suits, judgments, costs, expenses and disbursements
(including legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any
limitation as to amount, together with interest thereon at
the Stipulated Interest Rate from the date incurred until
reimbursed hereunder.
"FAA" means the United States Federal Aviation
Administration, or any person, governmental department,
bureau, commission or agency succeeding to the functions of
such Administration.
"Federal Aviation Act" or "Act" means the Federal
Aviation Act of 1958, as amended.
"Field Trip Maintenance Services" means, with respect
to the Serviced Aircraft, any Serviced Engine or any
Serviced Part that experiences a mechanical malfunction, the
inspection, maintenance and repair of such malfunction at
any location where Lessor does not have on-site the
necessary number of mechanics trained to work on the
particular malfunction experienced by the Serviced Aircraft,
any Serviced Engine or any Serviced Part.
"Flight Hour" means the amount of time (expressed in
hours and rounded upward to the nearest one-tenth (1/10th)
of an hour) during the flight of a Serviced Aircraft between
"wheels off" on takeoff and "wheels on" on landing.
"Foreign Object Damage" means damage to a Serviced
Engine or any component thereof caused by any object or
material ingested into the Serviced Engine that results in
the breakage or destruction of a Serviced Engine component
or a notch, non-stress related crack, cut, indentation or
other depression to the surface of a Serviced Engine
component in each case beyond specification limits of the
Lessor's maintenance program, but excluding the gradual
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<PAGE>
erosion or smoothing of any Serviced Engine component caused
by numerous Flight Hours of operation.
"Government" means the government of the United States
of America, and any instrumentality or agency thereof.
"Governmental Authority" means any governmental
department, court, bureau, commission, agency or any other
entity, whether of the United States (including any state or
subdivision thereof) or any other country (including any
political subdivision thereof), having jurisdiction over
this Lease, the transactions contemplated hereby, or any
document related hereto or thereto or delivered in
connection herewith or therewith, the Serviced Aircraft or
the parties hereto.
"HNL" means Honolulu International Airport in Honolulu,
Hawaii.
"IATA" means International Air Transport Association.
"Indemnified Party" shall have the meaning assigned to
such term in Section 15.
"Interim Aircraft Lease Agreements" means the Interim
Aircraft Lease Agreements each dated as of December 30,
1993, May 20, 1994, August 10, 1994 or August 31, 1994
between AMR Leasing and Lessee, as the same may be amended,
modified or supplemented from time to time.
"Interim Aircraft Maintenance Agreement" means the
Interim Aircraft Maintenance Agreement dated as of December
30, 1993 between Lessor and Lessee, as the same may be
amended, modified or supplemented from time to time.
"Interim Definitive Agreements" means the Interim
Aircraft Lease Agreements, the Interim AAdvantage
Participating Carrier Agreement dated as of December 30,
1993 between Lessee and Lessor, the Interim Aircraft
Maintenance Agreement, the Interim Multihost Agreement dated
as of December 30, 1993 between Lessee and SABRE, the
Interim Flight Operating System Agreement dated as of
December 30, 1993 between Lessee and SABRE, the Interim
Equipment Master Equipment Lease Agreement dated as of
December 30, 1993 between Lessee and SABRE, the Guaranty
Agreement dated as of December 10, 1993 executed by HAL,
Inc. and West Maui Airport, Inc. in favor of Lessor, AMRCG,
AMR Leasing and SABRE and the Security Agreement dated as
of December 10, 1993 between Lessee, HAL, Inc. and West Maui
Airport, Inc. as debtors and Lessor, AMRCG, AMR Leasing and
SABRE as secured parties, and all other agreements,
instruments, certificates or documents related thereto or
executed or delivered in connection therewith, as amended or
modified from time to time.
"In-Use Aircraft" means the Airframe delivered and
leased hereunder, together with the three Serviced Engines
or engines installed from time to time thereon.
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<PAGE>
"Issuer Insolvency" shall have the meaning assigned
thereto in Section 13A hereof.
"Item of Equipment" or "Item" means the Airframe or
each of the Serviced Engines, and for purposes of the
definition of "Event of Loss" as used in Section 8(b)(3)
hereof, shall mean each Engine.
"LAS" means McCarren International Airport in Las
Vegas, Nevada.
"LAX" means Los Angeles International Airport in Los
Angeles, California.
"Lease Agreement", "this Lease Agreement", "this
Lease", "this Agreement", "herein", "hereunder", "hereby" or
other like words mean this Lease Agreement as originally
executed or as modified, amended or supplemented pursuant to
the applicable provisions hereof, including, without
limitation, supplementation hereof by one or more Lease
Supplements entered into pursuant to the applicable
provisions hereof.
"Lease Supplement" means Lease Supplement No. 1,
substantially in the form of Exhibit A hereto to be entered
into between Lessor and Lessee for the purpose of leasing
the Aircraft under and pursuant to the terms of this Lease,
or any amendment hereto or to any other Lease Supplement
entered into subsequent to the Delivery Date.
"Lease Term" means the period from the Delivery Date of
the Aircraft until September 11, 2001, unless earlier
terminated in accordance with the provisions of this Lease.
"Lessee Assumed Services" means those maintenance
services set forth on Attachment C to Exhibit E to be
performed by Lessee at HNL during the Lease Term and any
other maintenance services that the parties mutually agree
pursuant to Section 1 of Exhibit E that Lessee will assume
and perform.
"Lessee Event of Default" shall have the meaning
specified in Section 13A hereof.
"Lessor Event of Default" shall have the meaning
specified in Section 13B hereof.
"Lessor Warranty" shall have the meaning assigned to
such term in Section 5(a) of Exhibit E.
"Lessor's Liens" means any Lien arising as a result of
(i) Claims against or affecting Lessor, not related to the
transactions contemplated by this Lease; (ii) acts or
omissions of Lessor, not related to the transactions
contemplated by this Lease, or not permitted under this
Lease; (iii) Taxes or Claims imposed against Lessor which
are not indemnified against by Lessee pursuant hereto; or
(iv) Claims against Lessor arising out of the voluntary or
involuntary transfer by Lessor (without the consent of
Lessee) of any of its interests in the Airframe, any Serviced
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Engine or any Engine, including, without
limitation, by means of granting a security interest
therein, other than a transfer of the Aircraft pursuant to
Section 8 or 14A hereof.
"Liabilities" means Claims, liabilities, losses,
judgments, damages, fines, penalties and costs, fees and
expenses of any nature incident thereto (including, without
limitation, reasonable attorneys' fees and expenses and
costs of investigation and litigation), whether arising in
tort, contract or otherwise.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or
Claim.
"Line Maintenance Services" means all customary line
maintenance services to the Serviced Aircraft, any Serviced
Engine or any Serviced Part, including scheduled inspections
and servicing of the Serviced Aircraft and related repairs,
but excluding (i) Additional Services, Base Maintenance
Services, Field Trip Maintenance Services and On-Call
Maintenance Services and (ii) Lessee Assumed Services.
"Long-Term Agreements" means the Long-Term Lease
Agreement, the 151 Lease Agreement, the 161Lease Agreement,
the 162 Lease Agreement, the 171Lease Agreement, the
AAdvantage Participating Carrier Agreement dated as of
September 12, 1994 between Lessee and Lessor, the Multihost
Agreement dated as of September 12, 1994 between Lessee and
SABRE, the Flight Operating System Agreement dated as of
September 12, 1994 between Lessee and SABRE, the Equipment
Master Lease Agreement dated as of September 12, 1994
between Lessee and SABRE, and all other agreements,
instruments, certificates and documents related thereto or
executed or delivered in connection therewith, all as
amended or modified from time to time.
"Long-Term Lease Agreement" means the Aircraft Lease
Agreement dated as of September 12, 1994 between Lessor and
Lessee, as amended, supplemented, modified and renewed from
time to time.
"Loss Payment Date" shall have the meaning set forth in
Section 8(a) hereof.
"MAGSA Rates" means the hourly rates applicable to
participants in the Mutual Assistance Ground Service
Agreement among Lessor and other participating IATA carriers
as amended from time to time, or any comparable replacement
agreement.
"Maintenance Base" shall have the meaning assigned to
such term in Section 2(a)(i) of Exhibit E.
"Maintenance Services" means Additional Services, Base
Maintenance Services, Field Trip Maintenance Services, Line
Maintenance Services and On-Call Maintenance Services but
excluding Lessee Assumed Services.
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"Maintenance Services Termination Date" shall have the
meaning set forth in Section 1 to Exhibit E hereto.
"Manual" means the Standard Practice Manual mutually
prepared by Lessor and Lessee for administration of this
Agreement, a true and correct copy of which has been
provided to Lessor and Lessee, together with any amendments
made thereto from time to time by a party hereto with the
consent of the other party hereto (which consent shall not
be unreasonably withheld).
"Manufacturer" means, collectively, the respective
manufacturers of the Airframe, each Engine and each Serviced
Engine.
"Monthly Minimum Maintenance Amount" shall have the
meaning set forth in Section 3(f)(i) of Exhibit E hereto.
"NTF" means, with respect to the Serviced Aircraft, any
Serviced Engine or any Serviced Part upon which an
inspection has been performed to determine the existence of
a suspected malfunction, that the results of such inspection
indicated there was "no trouble found."
"On-Call Field Stations" means (i) LAS, LAX, SEA and
SFO and any other station requested by Lessee and agreed to
in writing by Lessor, and in each case, at which, pursuant
to Section 1 of Exhibit E, Lessee has elected to perform,
and is performing, Line Maintenance Services at such
location and (ii) HNL.
"On-Call Maintenance Services" means, with respect to
the Serviced Aircraft, any Serviced Engine or any Serviced
Part that experiences a mechanical malfunction, the
inspection, maintenance and repair of such malfunction at
the request of Lessee at any of the On-Call Field Stations
but excluding Field Trip Maintenance Services.
"151 Lease" or "151 Lease Agreement" means the Aircraft
Lease Agreement, dated as of December 15, 1995 between
Lessee and Lessor, and all other agreements, instruments,
certificates and documents related thereto or executed or
delivered in connection therewith, all as from time to time
amended, supplemented or modified.
"161 Lease" or "161 Lease Agreement" means the Aircraft
Lease Agreement, dated as of December 30, 1995 between
Lessee and Lessor, and all other agreements, instruments,
certificates and documents related thereto or executed or
delivered in connection therewith, all as from time to time
amended, supplemented or modified.
"162 Lease" or "162 Lease Agreement" means the Aircraft
Lease Agreement, dated as of November 6, 1996 between Lessee
and Lessor, and all other agreements, instruments,
certificates and documents related thereto or executed or
delivered in connection therewith, all as from time to time
amended, supplemented or modified.
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"171 Lease" or "171 Lease Agreement" means the Aircraft
Lease Agreement, dated as of May 15, 1996 between Lessee and
Lessor, and all other agreements, instruments, certificates
and documents related thereto or executed or delivered in
connection therewith, all as from time to time amended,
supplemented or modified.
"Outside Services" shall have the meaning assigned to
such term in Section 4(f) of Exhibit E.
"Parts" means (i) any and all appliances, parts,
instruments, appurtenances, accessories, furnishings, seats
and other equipment of whatever nature (other than complete
engines or Serviced Engines), which may from time to time be
incorporated or installed in or attached to the Airframe or
any Serviced Engine, or having been so installed in or
attached, are later removed therefrom, so long as title
thereto remains vested in Lessor, and (ii) all Allocated
Parts (other than the Allocated Spare Engine).
"Permitted Liens" means Liens referred to in clauses
(i) through (vii) of Section 6.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or other form of
entity or any government or any agency or political
subdivision thereof.
"Phased-Out Parts" means Serviced Parts of a type
formerly utilized during the Lease Term by Lessor but
discontinued with respect to Lessor's fleet of DC10-10
Aircraft that Lessee has properly elected without
contravening Section 4 of Exhibit E to continue to utilize
on the Serviced Aircraft.
"Pooling Agreement" means the Pooling Agreement dated
the date hereof between Lessor and Lessee, as amended,
supplemented and modified from time to time.
"Prime Rate" means the per annum rate announced by The
Chase Manhattan Bank, N.A. from time to time as its prime
rate in New York, New York.
"Rent" means Basic Rent and Supplemental Rent,
collectively.
"Replacement Engine" means a GE CF6-6K engine (or an
engine of the same or another manufacturer of a comparable
or an improved model and suitable for installation and use
on the Airframe) which shall have been leased hereunder
pursuant to Section 8, together with all Parts relating to
such engine.
"Return Aircraft" means upon the return of the Aircraft
to Lessor hereunder pursuant to Section 5, 8, or 14A hereof,
the Airframe constituting part of the Aircraft and the
engines or Serviced Engines attached thereto.
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"Rotable Parts" means Serviced Parts that customarily
have a potential for reuse through inspection, repair,
overhaul or calibration.
"SABRE" means SABRE Decision Technologies, a division
of The SABRE Group, Inc. (formerly known as AMR Information
Services, Inc.).
"SEA" means the Seattle/Tacoma International Airport in
Seattle, Washington.
"Serviced Aircraft" means the Aircraft.
"Serviced Airframe" means (i) the Serviced Aircraft
(except Serviced Engines) and (ii) any and all Serviced
Parts (except Serviced Parts that comprise a Serviced
Engine) so long as the same shall be incorporated or
installed in, or attached to, such Serviced Aircraft.
"Serviced Engines" means (i) each Engine, so long as
Lessee has not delivered possession of any such Engine to
Lessor pursuant to the Pooling Agreement; (ii) each of the
GE CF6-6K engines delivered to Lessee by Lessor pursuant to
the Pooling Agreement so long as such engines have not been
redelivered by Lessee to Lessor under the Pooling Agreement,
provided that, for the purposes of Exhibit E attached
hereto, an engine delivered by Lessee to Lessor thereunder
shall remain a Serviced Engine until all Maintenance
Services have been completed thereon; and (iii) the
Allocated Spare Engine; and (iv) for purposes of Exhibit E
only, GE CF6-6K engines in transit between Lessor and Lessee
pursuant to Sections 3(d), 3(i) and 4(d)(iii) of Exhibit E.
"Serviced Part" means any Serviced Aircraft component,
including any APU, landing gear, part, equipment, accessory,
instrument, avionics or system and miscellaneous materials
and supplies consumed during operation or inspection,
maintenance, repair and overhaul services.
"SFO" means the San Francisco International Airport in
San Francisco, California.
"Stipulated Interest Rate" means the rate of ten
percent (10%) per annum.
"Stipulated Loss Value" payable with respect to an
Event of Loss for the Airframe and its Serviced Engines
shall mean, as of any date of determination, the amounts set
forth in Exhibit B hereto.
"Supplemental Rent" means all amounts, liabilities and
obligations (other than Basic Rent) which Lessee assumes or
agrees to pay hereunder to Lessor or others, including,
without limitation, all Monthly Supplemental Rent Payments
and all other amounts, liabilities and obligations of Lessee
to Lessor set forth in Exhibit E attached hereto.
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"Taxes" means any and all fees (including license,
documentation and registration fees), taxes (including
income, gross receipts, preferences, sales, use, turnover,
value added, property (tangible and intangible), excise and
stamp taxes), licenses, levies, imposts, duties, charges,
surcharges, assessments or withholdings of any nature
whatsoever, together with any and all penalties, fines,
additions to tax and interest thereon in each case imposed
by a Taxing Authority.
"Taxing Authority" means any Federal, state or local
government or other taxing authority in the United States or
any political subdivision or territory or possession
thereof, any international authority and any taxing
authority of any other government or political subdivision
or territory or possession thereof.
"Term" means the period for which the Aircraft is
leased pursuant to Section 3(a) hereof and Section 3 of the
Lease Supplement.
"13D Group" means any partnership, limited partnership,
syndicate or other "group" (as such term is used in
Section 13(d)(3) of the Exchange Act).
"TUL" means Tulsa International Airport in Tulsa,
Oklahoma.
"Turn Time" means, with respect to any particular
Maintenance Services, the period of time ordinarily required
by Lessor, exerting its reasonable efforts, to complete such
Maintenance Services in accordance with its customary
practices and procedures or such specified period of time
agreed to in writing by Lessor and Lessee for the
performance of any particular Maintenance Services.
"Voting Securities" means any securities of Lessee
entitled to vote generally in the election of directors, or
securities convertible into or exercisable or exchangeable
for such securities.
"Warranty Claim" means a written notice delivered to
Lessor by Lessee of a Defect in Maintenance Services
performed by Lessor, which Defect is claimed to be within
the scope of the warranty provided by Lessor in Section 5(a)
of Exhibit E, such notice specifying in detail the nature of
the Defect.
"Warranty Period" means, with respect to the Serviced
Aircraft, any Serviced Engine or any Serviced Part upon
which Maintenance Services were performed, that period of
time commencing upon redelivery to Lessee of such Serviced
Aircraft, Serviced Engine or Serviced Part after performance
of Maintenance Services thereon and expiring on the first to
occur of the following: (i) the expiration of one hundred
twenty (120) days after redelivery of such Serviced
Aircraft, Serviced Engine or Serviced Part to Lessee, or
(ii) the completion of four hundred (400) Flight Hours of
operation of such Serviced Aircraft, Serviced Engine or
Serviced Part after redelivery to Lessee.
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"Weekly Supplemental Rent Payment" shall have the
meaning assigned to such term in Section 3(f) of Exhibit E.
"Weekly Supplemental Rent Payment Date" shall have the
meaning assigned to such term in Section 3(f) of Exhibit E.
Rules of Interpretation. The following rules of
interpretation apply to this Lease Agreement:
(1) "or" is not exclusive and "include" and "including"
are not limiting; (2) "hereby", "herein", "hereof",
"hereunder", "this Lease", "this Agreement", "Lease
Agreement", or other like words refer to this Aircraft Lease
Agreement; (3) a reference to any agreement or other
contract includes permitted supplements and amendments; (4)
a reference to a law includes any amendment or modification
to such law and any rules or regulations issued thereunder
or any law enacted in substitution or replacement therefore;
(5) a reference to a Person includes its permitted
successors and assigns; (6) a reference herein to an
Article, Section, Exhibit or Schedule is to the relevant
Article, Section, Exhibit or Schedule of this Lease
Agreement; (7) any right may be exercised at any time and
from time to time; (8) all obligations are continuing
obligations; (9) time shall be of the essence in the
performance of all payment obligations; (10) the heading of
the Articles, Sections, Exhibits, Schedules and subsections
are for the convenience of reference only and shall not
affect the meaning of this Lease Agreement; and (11) no term
or provision herein may be changed, waived, discharged or
terminated orally, but only by written instrument signed by
the party against which the enforcement of the change,
waiver, discharge or termination is sought.
Section 2. Delivery and Acceptance.
(a) Time and Place. Lessor hereby agrees (subject to
satisfaction of the conditions set forth in Exhibit C
attached hereto) to lease to Lessee hereunder and Lessee
hereby agrees to lease from Lessor hereunder, on the
Delivery Date, the Aircraft, as evidenced by the execution
by Lessor and Lessee of Lease Supplement No. 1 hereunder.
Delivery of the Aircraft by Lessor and acceptance thereof by
Lessee shall occur at LAX, or such other location agreed on
by Lessor and Lessee.
(b) Delivery Date. The Delivery Date for the Aircraft
shall occur on or about January 3, 1997.
Lessor shall deliver the In-Use Aircraft in the
condition set forth in Exhibit D attached hereto, provided
that such delivery and fulfillment of delivery conditions
shall, subject to the execution and delivery of Lease
Supplement No. 1 (and satisfaction of the conditions set
forth in Exhibit C attached hereto), be deemed to have been
met. Lessor shall use its reasonable efforts to deliver the
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In-Use Aircraft on the Delivery Date, but if Lessor is
unable to deliver the In-Use Aircraft on the Delivery Date,
it shall deliver the In-Use Aircraft to Lessee as soon
thereafter as possible without any penalty, charge or
damages for late delivery.
Section 3. Term and Rent.
(a) Term. Except as otherwise provided herein
(including, without limitation, pursuant to the definition
of Event of Loss), the Term for the Aircraft shall commence
on the Delivery Date and end on September 11, 2001.
Notwithstanding the foregoing, Lessor shall have the right
to terminate this Lease by written notice to Lessee upon the
occurrence of a Change in Control and the relevant Term for
each Aircraft shall end on the date specified in such notice
.
(b) Basic Rent. Lessee hereby agrees to pay Lessor
Basic Rent for the Aircraft throughout the Term, in advance
in the amounts set forth in Schedule I, on each Basic Rent
Payment Date, commencing on the Delivery Date.
(c) Supplemental Rent. Lessee also agrees to pay to
Lessor, or to whosoever shall be entitled thereto, any and
all Supplemental Rent promptly as the same shall become due
and owing, including on each Monthly Supplemental Rent
Payment Date (as defined in Exhibit E attached hereto) (or
on demand if no due date is specified), and in the event of
any failure on the part of Lessee to pay any Supplemental
Rent, Lessor shall have all rights, powers and remedies
provided for herein or by law or in equity or otherwise in
the case of nonpayment of Basic Rent. In addition, Lessee
shall pay, on demand, as Supplemental Rent, to the extent
permitted by applicable law, an amount equal to interest at
the Stipulated Interest Rate on any part of any installment
of Basic Rent not paid when due for any period for which the
same shall be overdue and on any payment of Supplemental
Rent not paid when due or demanded, as the case may be, for
the period until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of
Lessee with respect to Supplemental Rent. All Supplemental
Rent to be paid pursuant to this Section 3(c) shall be
payable in the type of funds and in the manner set forth in
Section 3(e).
(d) Prohibition Against Setoff, Etc. Except as set
forth in Section 4(c)(i)(D) of Exhibit E attached hereto,
this Lease is a net lease and Lessee's obligation to pay
Rent hereunder shall be absolute and unconditional and shall
not be affected by any circumstance including (i) any claim
which Lessee may have against Lessor or anyone else for any
reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions),
including any breach by Lessor or any of its Affiliates, of
any of its warranties, agreements or covenants contained
herein or in any of the Long-Term Agreements or any of the
documents related hereto or thereto or performance, or
nonperformance by Lessor of any of its duties or obligations
to Lessee set forth in Exhibit E attached hereto, (ii) any
defect in the title, registration, airworthiness, condition,
design, operation, or fitness for use of, or any damage to
or loss or destruction of, the Airframe, any Serviced Engine
or any Engine, or any interruption or cessation in or
including any such interruption, cessation or prohibition of the use or
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possession thereof by Lessee for any reason
whatsoever, resulting from the act of any Governmental
Authority; and (iii) any other circumstance, happening or
event whatsoever, whether or not foreseen or similar to the
foregoing; provided that Lessee's obligations to pay Basic
Rent and Supplemental Rent shall cease with respect to the
Aircraft, except with respect to Rent accrued at such time
upon (i) redelivery of the Aircraft by Lessee to Lessor in
accordance with the provisions of Sections 5 hereof; and/or
(ii) repossession of the Aircraft by Lessor pursuant to
Section 14A hereof, but subject to Lessee's payments of sums
specified under said Section 14A; and/or (iii) with respect
to any Item of Equipment, payment by or on behalf of Lessee
to Lessor in full of the Stipulated Loss Value and other
sums specified in Section 8 hereof to be paid by Lessee
pursuant to an Event of Loss with respect to such Item of
Equipment. Lessee hereby waives, and hereby agrees to waive
at any future time at the request of Lessor, to the extent
now or then permitted by Applicable Law, any and all rights
which it may now have or which at any time hereafter may be
conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance
with the express terms hereof. Each payment of Rent made by
Lessee to Lessor shall be final as to Lessor and Lessee.
Lessee shall not seek to recover all or any part of any such
payment of Rent from Lessor for any reason whatsoever except
manifest error. The parties agree that nothing contained in
this Section 3(d) shall affect or limit any right of Lessee
to collect damages for the breach of any covenant or
representation by Lessor hereunder, including Section 4
hereto or Exhibit E hereto or by any Affiliate of Lessor
under any Long-Term Agreement. Lessee shall pay all costs
and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary or structural or nonstructural, in
connection with the delivery, use, operation, maintenance,
return, and repair and reconstruction of the Airframe and
each Serviced Engine by Lessee, including the costs and
expenses particularly set forth in this Lease, except as may
be otherwise expressly set forth in the other documents
related hereto.
(e) Payment to Lessor. All Rent shall be paid by
Lessee to Lessor by wire transfer of immediately available
funds in U. S. Dollars, to such account as Lessor shall
designate to Lessee in writing. Such funds shall be
available to Lessor not later than 3:00 p.m., New York City
time on the date of payment. Whenever any payment of Rent
is due on a day other than a Business Day, such payment
shall be made on the next preceding Business Day. All Rent
to be paid by Lessee hereunder shall be paid in full without
any deduction or withholding with respect to Taxes of any
nature imposed by any Taxing Authority unless Lessee is
prohibited by Applicable Law from doing so, in which event
Lessee shall comply with Section 16 below.
Section 4. Disclaimer; Warranties Relating to the
Aircraft; Certain Agreements of Lessee,
Representations of Lessee.
(a) Disclaimer. LESSOR LEASES AND LESSEE TAKES THE
AIRCRAFT "AS-IS, WHERE-IS", AND LESSOR DOES NOT MAKE NOR
SHALL BE DEEMED TO HAVE MADE, AND EXPRESSLY DISCLAIMS, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
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PARTICULAR PURPOSE OF ANY ITEM OF EQUIPMENT OR ENGINE OR AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS
BASED ON STRICT LIABILITY IN TORT, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP IN ANY ITEM OF EQUIPMENT OR
ENGINE OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR
WARRANTY WHATSOEVER WITH RESPECT THERETO, except for the
representations of Lessor set forth in Section 4(e) below,
and that Lessor represents that (i) it has good title to the
Aircraft free of Lessor's Liens and the lawful right to
lease the Aircraft to Lessee in accordance with the terms
hereof, (ii) Lessor has the lawful right to lease the
Airframe to Lessee in accordance with the terms hereof, and
(iii) that Lessor is a citizen of the United States of
America as defined in Section 40102(a)(15) (former 101(16))
of the Act. LESSOR SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY TO LESSEE OR ANY OTHER PERSON WITH RESPECT TO (I)
ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY OR INDIRECTLY BY ANY ITEM OF EQUIPMENT OR ENGINE OR
BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR
BY ANY OTHER CIRCUMSTANCES IN CONNECTION THEREWITH; (II) THE
USE, OPERATION OR PERFORMANCE OF ANY ITEM OF EQUIPMENT OR
ENGINE OR ANY RISKS RELATING THERETO; (III) ANY INTERRUPTION
OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES; OR (IV) THE
DELIVERY HEREUNDER, OPERATION, SERVICING, MAINTENANCE,
REPAIR OR IMPROVEMENT OF ANY ITEM OF EQUIPMENT EXCEPT AS
EXPRESSLY PROVIDED IN THE PROVISIONS OF EXHIBIT E HERETO
RELATING TO THE SERVICING, MAINTENANCE, REPAIR OR
IMPROVEMENT OF ANY SERVICED ENGINE OR SERVICED AIRCRAFT;
PROVIDED THAT NOTHING CONTAINED IN THIS SECTION 4(a) SHALL
IN ANY WAY LIMIT THE RIGHTS OF LESSEE AGAINST ANY AFFILIATE
OF LESSOR UNDER ANY LONG-TERM AGREEMENT.
(b) Quiet Enjoyment. Notwithstanding any other term
or provision of this Agreement, Lessor covenants that, so
long as no Lessee Event of Default shall have occurred and
be continuing, it shall not take any action contrary to
Lessee's rights under this Lease, or otherwise through its
own actions or inactions in any way interfere with the quiet
enjoyment of the use and possession of the Aircraft, the
Airframe or any Serviced Engines by Lessee; provided that no
performance or failure by Lessor to perform its obligations
under Exhibit E hereto shall be deemed a breach of this
Section 4(b).
(c) Waiver of Warranties. LESSEE HEREBY WAIVES,
RELEASES AND RENOUNCES THE BENEFIT OF ANY AND ALL
CONDITIONS, WARRANTIES OR REPRESENTATIONS ON THE PART OF
LESSOR WHICH ARE EXPRESSED OR WOULD OR MIGHT BE IMPLIED IN
THIS AGREEMENT WHETHER BY LAW OR OTHERWISE AND RELATING IN
ANY WAY TO THE STATE, CONDITION OR AIRWORTHINESS OF AN ITEM
OF EQUIPMENT OR ENGINE. LESSEE ACKNOWLEDGES THAT THE
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PROVISIONS OF SECTIONS 4(a) AND 4(b) HAVE BEEN THE SUBJECT
OF FULL DISCUSSION AND NEGOTIATION BETWEEN LESSEE AND LESSOR
AND THAT THE BASIC RENT AND ALL OTHER AGREEMENTS OF LESSEE
AND LESSOR CONTAINED IN THIS AGREEMENT WERE ARRIVED AT IN
CONSIDERATION OF THE PROVISIONS OF SECTIONS 4(a) AND 4(b)
SPECIFICALLY INCLUDING THE DISCLAIMER BY LESSOR SET FORTH IN
SECTION 4(a) AND THE WAIVER, RELEASE AND RENUNCIATION BY
LESSEE SET FORTH IN THIS SECTION 4(c).
(d) Lessee's Representations and Warranties. To
induce Lessor to enter into this Lease Agreement, and any
documents contemplated hereby, Lessee makes the following
representations and warranties, each of which shall survive
the execution and delivery of this Lease Agreement and the
Delivery Date:
(i) Lessee is a corporation duly incorporated under
the laws of the Territory of Hawaii and is validly existing
in good standing under the laws of the State of Hawaii and
has its chief executive office in Honolulu, Hawaii. Except
as set forth on Schedule 4(d)(i) hereto Lessee has all
requisite corporate power and authority to carry on its
business as now conducted, and to execute, deliver and
perform its obligations under this Lease and each Lease
Supplement. Lessee is a duly certificated "air carrier"
under Section 41102 (former Section 401) and Section 44705
(former Section 604) of the Federal Aviation Act and
possesses all necessary licenses or permits required by any
Governmental Authority having jurisdiction over Lessee or
the Aircraft to permit Lessee to engage in air
transportation and to perform and comply with its
obligations under this Lease, and is duly qualified to do
business as a foreign corporation, and is in good standing,
in each jurisdiction in which its failure to so qualify
would adversely and materially affect it or its ability to
carry out its obligations under this Lease;
(ii) this Lease has been duly authorized by all
necessary corporate action on the part of Lessee, does not
require any approval of stockholders of Lessee (or if such
approval is required, such approval has been obtained), and
the execution and delivery hereof, and/or the consummation
of the transactions contemplated hereby, and/or compliance
by Lessee with any of the terms and provisions hereof, do
not contravene any provisions of the Articles of
Incorporation or By-laws of Lessee, or result in any breach
of, or constitute any default under, or result in the
creation of any Lien upon any assets or property of Lessee
under, any (A) indenture, mortgage, lease, chattel mortgage,
deed of trust, conditional sales contract, bank loan, credit
agreement or other material agreement or instrument to which
Lessee is a party or by which Lessee or its properties may
be bound or affected other than the Lien under this Lease
and Permitted Liens, or (B) Applicable Law;
(iii) the execution and delivery by Lessee of this
Lease, and the performance by Lessee of any of the
transactions contemplated hereby do not require the consent
or approval of, or registration with, or the giving or prior
notice to any Person, including any federal, state or
foreign governmental authority or entity having appropriate
jurisdiction, except (A) any such consent, approval, notice
registration, notice or action that has been obtained or as would not
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affect the validity, enforceability or binding
nature of this Lease, and (B) routine reporting requirements
of the Securities and Exchange Commission, the FAA, the DOT
or other Governmental Authorities after the Delivery Date;
(iv) this Lease has been duly executed and delivered by
Lessee, and this Lease, together with Lease Supplement No. 1
when executed and delivered by Lessee, will constitute
legal, valid and binding obligations of Lessee, fully
enforceable, except as set forth on Schedule 4(d)(iv), in
accordance with their respective terms;
(v) except as set forth on Schedule 4(d)(v), there are
no pending or, to the knowledge of Lessee, threatened
investigations, suits or proceedings against it or affecting
it or its properties or operations, that, if determined
adversely, would materially adversely affect it, the
consummation of the transactions described in, or the
performance of its obligations under, this Lease Agreement
or affect the right, title or interest of Lessor in the
Aircraft;
(vi) except as set forth on Schedule 4(d)(vi), Lessee
is not in violation of, or in default under, any law,
ordinance, order, regulation or authorization of any
Governmental Authority or any permit or certificate issued
or granted by any Governmental Authority, that could have a
material adverse effect on the business or condition
(financial or otherwise) of Lessee;
(vii) except as set forth in Schedule 4(d)(vii),
Lessee is not in default, and no condition exists that with
notice or lapse of time or both would constitute a default,
under any mortgage, deed of trust, indenture, or other
instrument or agreement to which it is a party, or by which
it or any of its properties or assets may be bound, that
would have a material adverse effect on any of the actions
described in, or on its ability to perform its obligations
under, this Lease, and it is not in breach of any Applicable
Law that would have a material adverse effect on it, or any
of the actions described in, or on its ability to perform
its obligations under, this Lease;
(viii) except for the filing for recordation of this
Lease, and Lease Supplement No. 1, and the placing on the
Aircraft and on each Engine of the plates containing the
legends referred to in Section 7(f) hereof, no further
filing or recording of this Lease or of any other document
(including any financing statement under Article 9 of the
Uniform Commercial Code) and no further action is necessary
or advisable, under the laws of the United States of America
or the State of Hawaii, in order to fully protect and
establish Lessor's title to, and interest in, the Aircraft
and the Engines as against Lessee or any third parties;
(ix) the financial and written information furnished by
Lessee in connection with this Agreement, and the
transactions contemplated hereby does not contain any untrue
statement of a material fact or omit to state a material
fact;
(x) No Default or Lessee Event of Default has occurred
and is continuing hereunder;
(xi) Lessee has assets in excess of $5,000,000.00
according to its most recent financial statement prepared in
accordance with generally accepted accounting principles and
is not a
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"consumer" as that term is defined in Section 17.45
of the Texas Deceptive Trade Practices-Consumer Protection
Act;
(xii) Lessee is not a consumer as defined by Hawaii
Revised Statutes Section 480-1 (1992 Supp.), and therefore
has no right to bring an action or pursue damages based upon
unfair or deceptive acts or practices under that Section;
(xiii) Lessee is an air carrier under 14 C.F.R. Part
121; and
(xiv) Lessor shall be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to its
rights of repossession of the Aircraft, any Engines, any
appliances or spare parts, each as defined in such Section
1110 of the Bankruptcy Code, pursuant to Section 14A hereof.
(e) Lessor's Representations and Warranties. To
induce Lessee to enter into this Lease Agreement, Lessor
makes the following representations and warranties each of
which shall survive the execution and delivery of this Lease
Agreement and the Delivery Date:
(i) the execution and delivery by Lessor of this
Agreement have been duly authorized by all necessary
corporate action on the part of Lessor, do not require any
approval of stockholders of Lessor (or if such approval is
required, such approval has been obtained), and the
execution and delivery hereof, and/or the consummation by
Lessor of the transactions contemplated hereby, and/or
compliance by Lessor with any of the terms and provisions
hereof, do not contravene any provisions of the Certificate
of Incorporation or By-laws of Lessor, or result in any
breach of, or constitute any default under, or result in the
creation of any Lien upon any assets or property of Lessor
under, any (A) indenture, mortgage, lease, chattel mortgage,
deed of trust, conditional sales contract, bank loan, credit
agreement or other material agreement or instrument to which
Lessor is a party or by which Lessor or its properties may
be bound or materially affected, which breach or default
would have a material adverse effect on its ability to
perform the transactions contemplated by this Agreement, or
(B) any Applicable Law binding on Lessor, which breach or
default would have a material adverse effect on its ability
to perform the transactions contemplated by this Agreement;
(ii) the execution and delivery by Lessor of this
Agreement and the performance by Lessor of its obligations
under this Agreement do not require the consent or approval
of, or registration with, or the giving of prior notice to,
any Person including any federal, state or foreign
Governmental Authority or entity having appropriate
jurisdiction, except (A) any such consent, approval, notice
registration, notice or action that has been obtained or as
would not affect the validity, enforceability or binding
nature of this Agreement, and (B) routine reporting
requirements of the Securities and Exchange Commission, the
FAA, the DOT or other Governmental Authorities after the
Effective Date;
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(iii) this Agreement has been duly executed and
delivered by Lessor and, assuming due authorization,
execution and delivery by Lessee, constitutes the legal,
valid and binding obligation of Lessor, fully enforceable
against Lessor in accordance with its terms;
(iv) Lessor is not in default, and no condition exists
that with notice or lapse of time or both would constitute a
default, under any material mortgage, deed of trust,
indenture, or other instrument or agreement to which it is a
party, or by which it or any of its properties or assets may
be bound, that would have a material adverse effect on its
ability to perform its obligations under this Agreement;
(v) there are no pending or, to the knowledge of
Lessor, threatened investigations, suits or proceedings
against it or affecting it or its properties or operations,
that, if determined adversely, would materially adversely
affect the consummation by Lessor of the transactions
described in, or the performance of its obligations under,
this Agreement;
(vi) Lessor is not in violation of, or in default
under, any Applicable Law, of any Governmental Authority or
any permit or certificate issued or granted by any
Governmental Authority, that would have a material adverse
effect on its ability to perform its obligations under this
Agreement;
(vii) Lessor is certificated under 14 C.F.R.
Part 121 to perform Maintenance Services; and(viii)Lessor
has the right to transfer possession and use of the Serviced
Engines to Lessee.
Section 5. Return of Airframe and Engines.
(a) Return of Airframe and Serviced Engines. Upon the
termination of this Lease at the end of the Term or pursuant
to Sections 8 or 14A hereof, Lessee shall return the Return
Aircraft by delivering the same, at its own expense, to
Tulsa, Oklahoma (TUL), Marana, Arizona (MZJ), Amarillo,
Texas (AMA), Dallas/Fort Worth International Airport (DFW),
or Los Angeles International Airport (LAX) at Lessor's sole
option. Upon the expiration of the Term or pursuant to
Sections 8 or 14A, as the case may be, Lessee shall make the
redelivered Return Aircraft available for inspection by
Lessor and its representatives and designees. At the time
of the return of the Return Aircraft:
(i) the Return Aircraft shall be in compliance with
the Return Conditions as set forth in Exhibit D;
(ii) the Return Aircraft shall be in compliance with
Lessee's FAA-approved maintenance program;
(iii) each Item of Equipment and Engine shall be
free and clear of all Liens (except Lessor's Liens);
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<PAGE>
(iv) the Return Aircraft shall be in the same passenger
configuration as when delivered to Lessee, and each Item of
Equipment shall be in as good an operating condition as when
delivered to the Lessee on the Delivery Date, ordinary wear
and tear excepted;
(v) Upon the return of the Airframe, either at the end
of the Term, pursuant to Section 8 hereof or pursuant to
Section 14A, (i) Lessee shall have no obligation with
respect to the amount of fuel or oil contained in the
Airframe and all fuel or oil remaining on board the Airframe
shall be the property of Lessor without charge and (ii)
Lessee shall deliver or cause to be delivered to Lessor all
logs, manuals and data, and inspection, modification and
overhaul records required to be maintained with respect
thereto under applicable rules and regulations of the FAA;
(vi)Subject to the availability of storage space, upon the
termination of the Lease as to the Aircraft, upon request of
Lessor, Lessee shall provide Lessor with storage facilities
for such Return Aircraft for a period not exceeding ninety
(90) days in accordance with the applicable manufacturer's
recommendations for storage and FAA regulations and shall
arrange for insurance and maintenance (performance of such
maintenance subject to the availability of Lessee's
employees) for such Return Aircraft during such storage
period. The Lessor shall pay Lessee's direct costs for such
storage, maintenance and insurance without mark-up;
and(vii)Any Serviced Engines returned by Lessee on any
Return Aircraft are deemed to be Engines for the purpose of
compliance with Return Conditions.
So long as Lessor is maintaining the Aircraft pursuant
to Exhibit E attached hereto, the Return Conditions set
forth in Exhibit D (other than Sections 2F(a) and (b), 2k,
2M(2), (4) and (5) and 2P thereof and the obligation to
return all documents required for return set forth in
Exhibit D and the obligation to return the Aircraft clean)
shall be deemed to be satisfied with respect to the
Aircraft.
(b) Return of Other Engines. In the event that any
engine that is not a Serviced Engine shall be installed on
the Airframe returned, such engine shall be an engine
suitable to be a Replacement Engine hereunder. Upon return
of the Aircraft, Lessee shall duly convey to Lessor good
title to any such engine, free and clear of all Liens and,
upon such conveyance, Lessee will furnish Lessor with a full
warranty bill of sale, in form and substance reasonably
satisfactory to it, with respect to such engine and take
such other action as may be reasonably requested in order
that title to such engine may be duly and properly vested in
Lessor to the same extent as the Engine replaced thereby.
Upon conveyance of good title to such engine to Lessor, and
upon full compliance by Lessee with its obligations
hereunder, at Lessee's expenses, Lessor will transfer to
Lessee all rights, title and interest originally conveyed to
Lessor in an Engine constituting part of the Aircraft but
not installed on the Airframe at the time of the return of
the Airframe "as-is, where-is", free and clear of any
Lessor's Liens but otherwise without recourse or warranty,
express or implied to Lessee.
Section 6. Liens. Lessee shall not directly or
indirectly create, incur, assume or suffer to exist any Lien
on or with respect to the Airframe or any Engine or any
Serviced Engine or any Parts, title thereto or any interest
therein or in this Lease except (i) the respective rights of
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Lessor and Lessee as herein provided, (ii) the rights of
others under agreements or arrangements to the extent
expressly permitted by the terms of Sections 7(e) and 7(h),
(iii) Lessor's Liens, (iv) Liens for Taxes either not yet
due or being contested in good faith (and the payment of
which has been bonded to the satisfaction of Lessor) by
appropriate proceedings so long as such proceedings do not
involve any danger of the sale, forfeiture or loss of the
Airframe or any Engine or any Serviced Engine or interest
therein, (v) materialmen's, mechanics', workmen's,
repairmen's, employees' or other like liens arising in the
ordinary course of business for amounts the payment of which
is either not yet delinquent or is being contested in good
faith (and the payment of which has been bonded to the
satisfaction of Lessor) by appropriate proceedings so long
as such proceedings do not involve any danger of the sale,
forfeiture or loss of the Airframe or any Engine or any
Serviced Engine or interest therein, (vi) liens arising out
of judgments or awards against Lessee with respect to which
at the time an appeal or proceeding for review is being
prosecuted in good faith and with respect to which there
shall have been secured a stay of execution pending such
appeal or proceeding for review, and (vii) the Pooling
Agreement. Lessee shall promptly, at its own expense, take
such action as may be necessary duly to discharge (by
bonding or otherwise) any such Lien not excepted above if
the same shall arise at any time.
Section 7. Registration, Maintenance and Operation;
Possession; Insignia.
(a) Registration, Maintenance and Operation. Lessee,
at its own cost and expense, shall:
(i) maintain, service, repair, overhaul and test or
cause to be maintained, serviced, repaired, overhauled and
tested each Item of Equipment in accordance with Lessee's
FAA approved maintenance program, so as to keep each Item of
Equipment (A) in at least as good an operating condition as
when delivered, ordinary wear and tear excepted, and within
the acceptable limits of performance provided in the
Manufacturer's manuals, (B) in conformity with any
Manufacturer's operating manual, instructions and service
bulletins and all mandatory service bulletins and such other
non-mandatory Manufacturer's service bulletins reasonably
requested by Lessor and by the Manufacturer, (C) in
conformity with all AD's that are required to be performed
with respect to any Item of Equipment during the Lease Term,
(D) in conformity with the requirements of any other
Governmental Authority having jurisdiction over the Item of
Equipment, (E) in such condition that the Airframe and each
Serviced Engine will comply with the FAA type certificate
(as in effect from time to time) issued to the Manufacturer
of the Airframe or such Serviced Engine and in compliance
with a maintenance program approved by the FAA so long as
such maintenance program conforms to the maintenance program
(as in effect from time to time) established by the
applicable FAA-approved maintenance review board report for
airframes and engines of the same type, and (F) in such
condition as may be necessary to enable the airworthiness
certification of the In-Use Aircraft to be maintained in
good standing at all times (and, in the case of any Engine
when it is not installed on the Airframe, so as to keep such
Engine serviceable at all times except when such Engine is
awaiting overhaul, maintenance, repair, inspection or
servicing in the normal course
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<PAGE>
of Lessee's FAA-approved or
compatible maintenance program) under the rules and
regulations of the FAA. All maintenance on the Airframe and
Serviced Engines shall be performed by Lessee in accordance
with the standards set forth above. Lessee shall promptly
notify Lessor of any material change in the maintenance
program in respect of the In-Use Aircraft from that in
effect on the Delivery Date;
(ii) not permit the Airframe, any Serviced Engine, or
any Part to be maintained, serviced, repaired, overhauled,
tested, used or operated in violation of any Applicable Law
of any Governmental Authority having jurisdiction or in
violation of any airworthiness certificate, license or
registration relating to the Airframe, any Serviced Engine
or any Part issued by any such Governmental Authority. In
the event that any such Applicable Law requires alteration
of the Airframe, any Serviced Engine, or any Part, Lessee
will conform thereto or obtain conformance therewith at no
expense to Lessor and will maintain the Airframe, such
Serviced Engine or such Part in proper operating condition
under such Applicable Laws;
(iii) maintain or cause to be maintained all
records, logs and other materials required by the FAA or
other applicable Governmental Authority to be maintained in
respect of the In-Use Aircraft; and(iv)promptly furnish to
Lessor such information as may be required to enable Lessor
to file any reports required to be filed by Lessor with any
Governmental Authority because of Lessor's ownership of the
Aircraft.
(b) Additional Maintenance Provisions. Lessee
covenants and agrees that it shall use, operate, maintain,
service, repair, overhaul and test or cause to be used,
operated, maintained, serviced, repaired, overhauled and
tested, the Airframe, each Serviced Engine and any Part in
at least as good manner and with at least as much care as
used by Lessee with respect to other airframes, engines and
parts of the same type or utility owned, leased or operated
by Lessee and that it will not discriminate against the
Airframe, any Serviced Engine or any Part (as compared to
other airframes, engines or parts of the same type or
utility owned, leased or operated by Lessee) in the use,
operation, maintenance, service, repair, overhaul or testing
of the Airframe, each Serviced Engine or any Part.
(c) Territorial Restrictions on Use of Aircraft.
Lessee agrees not to operate or locate any Item of
Equipment, or suffer such Item to be operated, (A) unless
such Item is covered by insurance as required by the
provisions of Section 9, (B) contrary to the terms of the
insurance required by the provisions of Section 9 of this
Lease, (C) in any war zone or recognized or threatened area
of hostilities unless covered to Lessor's satisfaction by
war risk insurance, (D) to or from any airport which is at
such time the subject of a prohibition order of any
Governmental Authority of the United States or of any
international authority or treaty organization of which the
United States is a member, or (E) to or from any airport
that the aircraft leased by Lessee from Lessor pursuant to
the Long-Term Lease are not operated to or from.
(d) Obligations Absolute. Nothing herein, including
Exhibit E hereto, shall be deemed to affect Lessee's
obligations pursuant to this Section 7 or to impose on
Lessor the
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obligation to pay for or be responsible for the
payment of any maintenance, repair or overhaul. It is
understood and agreed that Lessee shall be responsible for
all of its obligations under this Section 7 hereof,
regardless of the performance or non-performance by Lessor
of its obligations described in Exhibit E hereto; provided
that nothing contained in this Lease shall prohibit Lessee
from maintaining a separate action against Lessor for any
default by Lessor of its obligations described on Exhibit E
attached hereto. So long as Lessor is required to maintain
the Aircraft pursuant to Exhibit E hereto, the maintenance
requirements of this Section 7 shall be deemed to have been
satisfied to the extent such maintenance has been provided
by Lessor pursuant to Exhibit E hereto.
(e) Possession. Except for the delivery of the
Airframe or any Serviced Engine to Lessor pursuant to
Exhibit E hereto or delivery of any Serviced Engines
pursuant to the Pooling Agreement, Lessee shall not sublease
or otherwise in any manner deliver, transfer or relinquish
possession of the Airframe, and shall not, without the prior
written consent of Lessor, sublease or otherwise in any
manner deliver, transfer or relinquish possession of any
Serviced Engine or install any Serviced Engine, or permit
any Serviced Engine to be installed, on any airframe other
than the Airframe.
(f) Registration and Insignia. Lessee shall maintain
in the cockpit of the Airframe adjacent to the airworthiness
certificate therein the metal nameplate bearing the Lessor's
name, as owner and lessor. Lessee shall affix as promptly
as practicable after the Delivery Date and thereafter to
maintain on each Engine a metal nameplate bearing the
inscription "AMERICAN AIRLINES, INC., OWNER AND LESSOR".
Lessee may place its customary colors and insignia on the
Airframe or Engines so long as no polished portion of the
In-Use Aircraft is painted. The placement of and colors or
insignia on the In-Use Aircraft shall be performed by
Lessor. Provided that Lessor shall (i) remain a citizen of
the United States of America as defined in Section
40102(a)(15) (former 101(16)) of the Act and (ii) cooperate
with the Lessee, Lessee shall maintain continued
registration of the Airframe in Lessor's name under the Act.
Except as set forth in Section 7(h) below, no additional
modifications may be made to the Aircraft or any Serviced
Engines without the prior written consent of Lessor.
(g) Replacement of Parts. Subject to the provisions
of Exhibit E hereof, Lessee at its own cost and expense,
shall promptly replace (or cause to be replaced) all Parts
which may from time to time be incorporated or installed in
or attached to the Airframe or any Serviced Engine and which
may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason
whatsoever, except as otherwise provided in Section 8. In
addition, Lessee may, at its own cost and expense, remove or
cause to be removed in the ordinary course of maintenance,
service, repair, overhaul or testing, any Parts, whether or
not worn out, lost, stolen, destroyed, seized, confiscated,
damages beyond repair or permanently rendered unfit for use;
provided that Lessee, except as otherwise provided in
Section 8, will, at its own cost and expense, replace such
Parts as promptly as possible. All replacement Parts shall
be free and clear of all Liens (except for Permitted Liens),
and shall be in as good operating condition as, and shall
have a value and
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<PAGE>
utility at least equal to, the Parts
replaced, assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any
Serviced Engine shall remain the property of Lessor, no
matter where located. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the
Airframe or any Serviced Engine as above provided, without
further act, (i) title to the replacement Part shall
thereupon vest in Lessor free and clear of all Liens
(except for Permitted Liens); and (iii) such replacement
Part shall become subject to this Lease and be deemed part
of the Airframe or such Serviced Engine for all purposes to
the same extent as the Parts originally incorporated or
installed in or attached to the Airframe or such Serviced
Engine. Any Parts replaced or supplied by Lessor pursuant
to Exhibit E attached hereto shall be deemed to satisfy the
conditions of this Section.
(h) Alterations, Modifications and Additions. Subject
to the provisions of Section 7(a) hereof, and, in addition,
so long as Lessor is maintaining the Aircraft pursuant to
Exhibit E attached hereto, in compliance with Exhibit E
attached hereto, Lessee, at its own expense, will make (or
cause to be made) such alterations and modifications in and
additions to the Airframe and the Serviced Engines as may be
required from time to time to meet the standards of the FAA
or other Governmental Authority having jurisdiction. In
addition and subject to the terms of Exhibit E hereto,
Lessee, at its own expense, may from time to time make (or
cause to be made) such alterations and modifications in and
additions to the Airframe or any Serviced Engine as Lessee
may deem desirable in the proper conduct of its business,
including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use
in the Airframe or any Serviced Engine, provided that (i) no
such alteration, modification, addition or removal shall
diminish the fair market value, utility or remaining useful
life of the Airframe or such Serviced Engine, or impair the
condition or airworthiness thereof below the value, utility,
condition and airworthiness thereof immediately prior to
such alteration, modification, addition or removal assuming
the Airframe or such Serviced Engine was then of the value
and utility and in the condition and airworthiness required
to be maintained by the terms of this Lease; and (ii) no
structural modification shall be made without the prior
written consent of Lessor. Title to all Parts incorporated
or installed in or attached or added to the Airframe or any
Serviced Engine as the result of such alteration,
modification or addition shall, without further act, vest in
Lessor. Notwithstanding the foregoing sentence of this
Section 7(h), so long as no Default or Lessee Event of
Default shall have occurred and be continuing, Lessee may,
at any time during the Term, remove any Part, provided that
(i) such Part is in addition to, and not in replacement of
or substitution for, (x) any Part originally incorporated or
installed in or attached to the Airframe or any Serviced
Engine at the time of delivery thereof hereunder, or (y) any
Part in replacement of or substitution for any such Part,
(ii) such Part is not required to be incorporated or
installed in or attached or added to the Airframe or any
Serviced Engine pursuant to the terms of this Section 7(h),
and (iii) such Part can be removed from the Airframe or such
Serviced Engine without causing material damage to the
Airframe or such Serviced Engine and without diminishing or
impairing the value, utility, condition or airworthiness
required to be maintained by the terms of this Lease which
the Airframe or such Serviced Engine would have had at such
time had such alteration, modification or addition not
occurred.
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<PAGE>
Upon the removal by Lessee of any Part as
provided in the immediately preceding sentence, title
thereto shall, without further act, vest in Lessee and such
Part shall no longer be deemed part of the Airframe or such
Serviced Engine from which it was removed. Any Part not
removed by Lessee as provided in such sentence prior to the
return of the Airframe or such Serviced Engine to Lessor
hereunder shall remain the property of Lessor.
(i) Manuals and Technical Records.
Lessee undertakes that:
(1) Throughout the Lease Term, Lessee shall keep, or
cause to be kept, accurate, complete and current records of
all flights made by the Aircraft and each Serviced Engine
and of all maintenance and repairs carried out to the
Airframe and each Serviced Engine and shall allow the Lessor
or its agents to examine and make reasonable copies of the
records at any reasonable time upon giving reasonable notice
to Lessee.
(2) The records so kept shall conform with Lessee's
approved maintenance program.
(3) The records so kept shall be part of the manuals
and technical records and shall be the property of Lessor
and that at the end of the relevant Lease Term or upon the
repossession or redelivery of the Aircraft, Lessee shall
deliver the relevant records to the Lessor, provided that
Lessee shall be entitled to take and retain copies thereof.
(4) The Lessee shall provide to the Lessor or its
authorized representative each month a status report
containing engine and airframe utilization in hours and
cycles, and other information which Lessor may reasonably
request.
(5) All original records shall be maintained in their
original paper form and shall be the property of the Lessor
upon lease termination.
(j) Maintenance and Usage. Except as otherwise
expressly provided herein, throughout the Lease Term, Lessor
and Lessee each agrees to perform its obligations, duties
and liabilities set forth in Exhibit E attached hereto.
Section 8. Loss, Destruction, Requisition, Etc.
(a) Event of Loss to the Aircraft. Upon the
occurrence of an Event of Loss with respect to the In-Use
Aircraft Lessee shall (i) forthwith (and in any event within
five days after such occurrence) give to Lessor written
notice of such Event of Loss and (ii) comply with Section
8(a)(1):
(1) Payment of Stipulated Loss Value and Rent. On or
before the Business Day before the earlier of (i) the 60th
day following the date of the occurrence of such Event of Loss
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with respect to the In-Use Aircraft; or (ii) five days
following the receipt of insurance proceeds with respect to
such occurrence (the "Loss Payment Date"), Lessee shall pay
to Lessor, in the manner and in funds of the type specified
in Section 3(e), an amount equal to the sum of (i) the
Stipulated Loss Value for the In-Use Aircraft calculated as
of the Basic Rent Payment Date next following the Event of
Loss (or if the date of such Event of Loss is a Basic Rent
Payment Date, as of such Basic Rent Payment Date (the "Loss
Computation Date")) less any payment of Basic Rent paid by
Lessee after the date of such Event of Loss and on or prior
to the Loss Payment Date, (ii) any installment of Basic Rent
due and owing prior to the Loss Payment Date, (iii) all
Supplemental Rent then due and owing for the Aircraft on the
Loss Payment Date, and (iv) interest on the amounts
described in clause (i) and (ii) hereof from the Loss
Computation Date to the Loss Payment Date at the Prime Rate.
(2) Termination Upon Payment of Stipulated Loss Value.
Upon payment in full of the amounts required pursuant to
Section 8(a)(1), (i) Lessee's obligation to pay Basic Rent
hereunder with respect to the Aircraft for any period
commencing after the Loss Payment Date shall terminate (but
Lessee shall remain liable for all payments of Rent,
including Basic Rent and Supplemental Rent, including,
without limitation, the Supplemental Rent pursuant to
Exhibit E hereto, for the Aircraft, due through and
including the date of such payment), (ii) the Term for the
Aircraft shall end, and (iii) Lessor shall (subject to the
rights of any insurer) transfer to Lessee all of Lessor's
right, title and interest in the Airframe and the Serviced
Engines, if any, which were subject to the Event of Loss
"as-is, where-as", free and clear of Lessor's Liens, but
otherwise without recourse or warranty, express or implied.
(b) Event of Loss to a Serviced Engine.
(1) Event of Loss. Upon the occurrence of an Event of
Loss with respect to a Serviced Engine not then installed on
the Airframe, or upon the occurrence of an Event of Loss
with respect to a Serviced Engine installed on the Airframe
but not involving an Event of Loss with respect to the
Airframe, Lessee shall give Lessor prompt written notice
thereof and shall: (i) within sixty (60) days after the
occurrence of such Event of Loss, convey or cause to be
conveyed to Lessor, as replacement for the Serviced Engine
with respect to which such Event of Loss occurred, title to
a replacement Serviced Engine free and clear of Liens (other
than Permitted Liens) or (ii) if mutually agreed between
Lessor and Lessee, Lessee shall in lieu of replacing such
Serviced Engine pursuant to this Section 8(b)(1), pay or
cause to be paid to Lessor hereunder, within ten (10) days
after such agreement, the Stipulated Loss Value for such
Serviced Engine, computed as of the Basic Rent Payment Date
next following the date of such Event of Loss.
(2) Conditions, Lessee's Obligations. Lessee's right
to replace contemplated by Section 8(b)(1) shall be subject
to the fulfillment, in addition to the requirements
contained in Section 9(b), of the conditions precedent set
forth below:
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(i) No Default or Lessee Event of Default shall be
continuing on the replacement date;
(ii) Lessee will promptly (all writings referred to
below to be reasonably satisfactory in form and substance to
Lessor):
(a) furnish Lessor a bill of sale duly conveying to
Lessor such replacement Serviced Engine, together with such
evidence of title as Lessor may reasonably request;
(b) if the replaced Serviced Engine is an Engine
hereunder, cause a Lease Supplement, subjecting such
Replacement Engine to this Lease, duly executed by Lessee,
to be delivered to Lessor for execution and, upon such
execution, to be duly filed for recordation with the FAA;
(c) furnish Lessor with such evidence of compliance
with the insurance provisions of Section 9 with respect to
such replacement Serviced Engine as Lessor may reasonably
request;
(d) furnish Lessor with a certificate or certification
of a qualified aircraft engineer reasonably satisfactory to
Lessor certifying that such replacement Serviced Engine has
a value, utility and remaining useful life at least equal to
the Serviced Engine so replaced (assuming such Serviced
Engine was in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Event of
Loss), provided that in addition to such certificate or
certification, Lessor shall have the right to inspect such
replacement Serviced Engine and shall be reasonably
satisfied that it has a value, utility and remaining useful
life at least equal to the Serviced Engine so replaced
(assuming such Serviced Engine was in the condition and
repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss); and
(e) On or before such replacement date, Lessee shall
(i) furnish Lessor with an opinion of independent counsel
reasonably satisfactory to Lessor, that Lessor will suffer
no adverse tax consequences as a result of such replacement
or (ii) have agreed to pay to Lessor as an indemnity such
amount or amounts as may be necessary to hold harmless, on
an after-tax basis, Lessor against any and all adverse tax
consequences as may result from such replacement and shall
have provided to Lessor satisfactory assurances regarding
Lessee's ability to pay such indemnity; and(f)take such
other actions and furnish such other certificates and
documents as Lessor may reasonably request in order that
such replacement Serviced Engine be duly and properly titled
in Lessor and leased hereunder to the same extent as the
Serviced Engine replaced thereby.
(3) Event of Loss to an Engine, Not a Serviced Engine.
Upon the occurrence of an Event of Loss to an Engine which
is not a Serviced Engine, Lessor shall give Lessee prompt
written notice thereof and shall within sixty (60) days
after the occurrence of such Event of Loss, lease hereunder
to Lessee a Replacement Engine with respect to such Engine
to which such Event of Loss occurred, free and clear of
Liens (other than Permitted Liens). Lessor shall
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furnish Lessee with a certificate or certification of a qualified
aircraft engineer reasonably satisfactory to Lessee
certifying that such Replacement Engine has a value, utility
and remaining useful life at least equal to the Engine so
replaced, provided that in addition to such certificate or
certification, Lessee shall have the right to inspect such
Replacement Engine and shall be reasonably satisfied that it
has a value, utility and remaining useful life at least
equal to the Engine so replaced (assuming such Engine was in
the condition and repair required by the terms hereof
immediately prior to the occurrence of such Event of Loss).
(4) Conditions, Lessor's Obligations. Lessor's
obligation to replace contemplated by Section 8(b)(3) shall
be subject to the fulfillment of the conditions precedent
that Lessee and Lessor will promptly:
(i) cause a Lease Supplement, subjecting such
Replacement Engine to this Lease, duly executed by Lessee
and Lessor, to be delivered to Lessor for execution and,
upon such execution, to be duly filed for recordation with
the FAA; and
(ii) take such other actions and furnish such other
certificates and documents as Lessor may reasonably request
in order that such Replacement Engine be duly and properly
titled in Lessor and leased hereunder to the same extent as
the Engine replaced thereby;
provided that Lessor shall have no obligation to deliver
possession of a Replacement Engine to Lessee so long as a
Default or Lessee Event of Default has occurred and is
continuing hereunder.
(5) Recordation and Opinions. Promptly after the
recordation of the Lease Supplement covering any such
Replacement Engine pursuant to the Federal Aviation Act (or
in case the Aircraft was at the time of the Event of Loss
subject to registration under the laws of a country other
than the United States, pursuant to the laws of such
country), Lessee shall cause to be delivered to Lessor an
opinion of counsel reasonably satisfactory to Lessor as to
the due recordation of such Lease Supplement pursuant to the
Act (or such other laws).
(6) Conveyance; Replacement Engine. Upon compliance
by Lessee with the terms of this Section 8(b), Lessor will
(subject to the rights of any insurer) transfer (other than
in the case of the replacement of an Engine which was not
upon the occurrence of the Event of Loss, a Serviced Engine)
to Lessee all of Lessor's right, title and interest as of
the delivery date of such replacement Serviced Engine in the
replaced Serviced Engine, "as-is, where-is", free and clear
of Lessor's Liens but otherwise without recourse or
warranty, express, implied or otherwise.
(7) No Reduction of Basic Rent. No Event of Loss with
respect to a Serviced Engine or an Engine under the
circumstance contemplated by this Section 8(b) shall result
in any reduction of Basic Rent. Upon the payment by Lessee
to Lessor of the Stipulated Loss Value of any Serviced
Engine, Lessor, shall provide Lessee with a replacement
Serviced Engine.(8)If
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Lessor furnishes the replacement
Serviced Engine, then the conditions set forth in Sections
8(b)(2)(ii)(a) and (d) shall be deemed to be fulfilled.
(c) Application of Payments for Requisition of Title.
Any payments (other than insurance proceeds the application
of which is provided for in Section 9) received at any time
by Lessor, Lessee or from any Governmental Authority or
other Person with respect to any Event of Loss, other than
a requisition for use by the Government not constituting an
Event of Loss, will be applied as follows:
(1) Replacement of Serviced Engine. If such payments
are received as a result of an Event of Loss to a Serviced
Engine under circumstances contemplated by Section 8(b), and
the Serviced Engine is replaced, so much of such payments
remaining after reimbursement of Lessor for reasonable costs
and expenses, if any, theretofore incurred by Lessor related
to such replacement shall be paid over to, or retained by,
Lessee, provided that Lessee shall have fully performed, or
concurrently therewith will perform, the terms of Section
8(b) with respect to the Event of Loss for which such
payments are made.
(2) Loss of Airframe. If such payments are received
as a result of an Event of Loss to the Airframe or the
Airframe or Serviced Engines then installed thereon, so much
of such payments as shall not exceed the amounts payable
pursuant to 8(a)(1) shall be applied to pay such amounts (or
reimburse Lessee for its payment of such amounts), and the
balance, if any, of such payment remaining thereafter shall,
first, to the extent of the value of Lessee's interest in
such payment, be paid over to Lessee, and, second, the
remainder, if any, shall be retained by Lessor. For
purposes of this clause (2), the value of Lessee's interest
in a payment shall be the amount of the Basic Rent due in
regard to the leasing of the Aircraft for the remainder of
the applicable Term.
(d) Requisition of Use of the Airframe. In the event
of the requisition for use of the Airframe or any Serviced
Engines installed on the Airframe during the Term not
constituting an Event of Loss including without limitation,
pursuant to CRAF, Lessee shall promptly notify Lessor of
such requisition and all of Lessee's obligations under this
Lease shall continue to the same extent as if such
requisition had not occurred, except to the extent that any
failure or delay in Lessee's performance or observance of
such obligations (other than obligations for the payment of
Rent) is caused by such requisition. Unless Lessor elects
to treat such requisition as an Event of Loss, Lessee shall
be obligated to return the Airframe and such Serviced
Engines to Lessor pursuant to, and in all other respects in
compliance with the provisions of, Section 5 promptly at the
later of the end of the Term or, if Lessor consents, the
date of such return by any such Governmental Authority. All
payments received by Lessor or Lessee from any Governmental
Authority for the use of the Airframe and Serviced Engines
during the Term (so long as no Lessee Event of Default shall
have occurred and be continuing) shall be paid over to, or
retained by, Lessee; and all payments received by Lessor or
Lessee from the Government for the use of the Airframe and
such Serviced Engines after the Term (or so long as a
default or a Lessee Event of Default shall have occurred and
be continuing) shall be paid over to, or
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retained by, Lessor, unless such requisition for use by any Governmental
Authority is treated as an Event of Loss in which case all such payments
shall be applied in accordance with Section 8(c)(2).
(e) Investment of Proceeds Pending Replacement. If an
Event of Loss shall occur with respect to a Serviced Engine
and the provisions of Section 8(b) apply, or Lessor
receives any insurance proceeds pending completion of
repairs by Lessee to the Airframe or a Serviced Engine,
Lessor shall, if requested by Lessee and if no Lessee Event
of Default shall have occurred and be continuing, use its
reasonable efforts to invest, at the request, direction and
risk of Lessee, any payments received theretofore or
thereafter with respect to the Airframe or such Serviced
Engine from any insurer under insurance required to be
maintained hereunder or from Lessee or from any Governmental
Authority or other person with respect to the applicable
Event of Loss or otherwise. Any such investments shall be in
obligations of the United States or obligations guaranteed
as to principal and interest by the Government or
certificates of deposit issued in the United States by a
commercial bank or banks each having a combined capital,
surplus, and undivided profits of at least $250,000,000, in
each case having a stated maturity not later than one year
from the date of the acquisition thereof by Lessor. Lessee
will pay to Lessor on demand the amount of any loss incurred
in connection with any such investment. All profits and
losses on such investments and any taxes in respect thereof
shall be for the account of Lessee. In order to make the
payments to Lessee provided for in Section 8 or 9 hereof,
Lessor is authorized to sell any obligations purchased as
aforesaid; and Lessor shall not be required to make such
payments to Lessee until Lessor shall have had a reasonable
time to sell such obligations and to obtain the sale
proceeds therefrom.
(f) Application of Payments During Default. Any
amount for requisition of title or requisition of use of any
Item of Equipment referred to in this Section 8 which is
payable to or retainable by Lessee shall not be paid to or
retained by Lessee if at the time of such payment or
retention a Default or a Lessee Event of Default shall have
occurred and be continuing, but shall be held by or paid to
Lessor and applied against the obligations of Lessee under
this Lease, and at such time as there shall not be
continuing any such Default or Lessee Event of Default, such
amount shall be paid to Lessee to the extent not previously
applied in accordance with this sentence.
Section 9. Insurance.
(a) Liability Insurance. During the Lease Term and
during the next three years thereafter, Lessee shall
maintain (or cause to be maintained) at no expense to Lessor
the following insurance, on a worldwide basis with no
territorial restrictions, except as may be specifically
consented to from time to time by Lessor, such consent not
to be unreasonably withheld, with insurers of recognized
responsibility approved by Lessor through nationally
recognized aviation insurance brokers: comprehensive
aviation liability insurance (including third party legal
liability, public liability, passenger legal liability,
personal injury liability, passenger's baggage and personal
effects (checked and unchecked) liability, cargo legal
liability,
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mail legal liability, premises liability,
products/completed operations, hangarkeepers (ground and
in-flight) liability and war risks liability (Lloyd's of
London Clause AV.52 or its equivalent), insurance of the
indemnification obligations set forth in Section 15 hereof,
and property damage liability insurance with respect to the
In-Use Aircraft in an amount not less than that carried by
Lessee on similar equipment owned or leased by Lessee,
provided that such liability insurance shall in no event be
less than $500,000,000 for any one accident, or series of
accidents arising out of any one event. Lessee shall not
self-insure with respect to any public liability coverage
with the exception of baggage, cargo and mail liabilities.
Any policies of insurance carried in accordance with this
Section 9(a) and any policies taken out in substitution or
replacement for any of such policies shall: (1) name Lessor
and its Affiliates and directors, officers, employees,
servants and agents as an additional insured (each such
Person an "Additional Insured"), as their respective
interests may appear; (2) provide that in respect of the
interest of each Additional Insured in such policies, the
insurance shall not be invalidated by any action or inaction
of Lessee or any other insured, and shall insure each
Additional Insured regardless of any breach or violation of
any warranty, declaration or condition contained in such
policies by Lessee; (3) provide that if the insurers cancel
such insurance for any reason whatever, or if there is any
substantial change in policy terms and conditions or
coverage, such cancellation, lapse or change shall not be
effective as to any Additional Insured until thirty days
(seven days, or such other period as may from time to time
be customarily obtainable in the industry, in the case of
war risk and allied perils coverage) after receipt by such
Additional Insured of written notice from such insurers of
such cancellation, lapse or change; and (4) provide that no
Additional Insured shall have any obligation or liability
for premiums, commissions, assessments or calls in
connection with such insurance. Each liability policy shall
(i) be primary without right of contribution from any other
insurance which is carried by any Additional Insured, (ii)
expressly provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as
if there were a separate policy covering any Additional
Insured, and (iii) waive any right of the insurers to any
subrogation, set-off or counterclaim or any other deduction,
whether by attachment or otherwise, in respect of any
liability of any Additional Insured or Lessee to the extent
of any moneys due to such Additional Insureds. In the case
of the requisition for use of the In-Use Aircraft or any
Serviced Engine by the Government, a valid agreement by the
Government to indemnify Lessee in a manner satisfactory to
Lessor against any of the risks which Lessee is required
hereunder to insure against in an amount at least equal to
the amount of insurance required to be maintained for the
Aircraft under this Section 9 from time to time shall, to
the extent such indemnity from the Government complies with
the requirements set forth in Section 7(g) hereof, be
considered adequate insurance to the extent of the risks and
in the amounts that are the subject of any such agreement to
indemnify.
(b) All Risk Hull Insurance. During the relevant
Term, Lessee shall maintain (or cause to be maintained) at
no expense to Lessor the following insurance, on a worldwide
basis with no territorial restrictions with insurers of
recognized responsibility (A) all-risks (ground, taxing,
flight and ingestion) hull insurance covering the In-Use
Aircraft; and (B) all risks (including transit) Aviation
Spare Parts (including Engine and Equipment) Insurance and
(C) at all times that any In-Use Aircraft or any Serviced
Engine is not covered by the insurance
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described in Section
9(c), coverage against the perils of (i) strikes, riots,
civil commotions or labor disturbances, (ii) any vandalism,
malicious act or act of sabotage, and (iii) hijacking, or
any unlawful seizure or wrongful exercise of control of the
In-Use Aircraft or crew in flight made by any person or
persons on board the In-Use Aircraft without the consent of
the insured other than hijacking committed by persons
engaged in a program of irregular warfare for terrorist
purposes, in each case to the extent insured by the standard
"buy-back" provisions to the Airline War Exclusion Clause
(AV48B) or its equivalent. Such insurance shall be for an
Agreed Value basis which shall be in an amount not less than
the Stipulated Loss Value. With the consent of Lessor,
which will not be unreasonably withheld, Lessee may
self-insure only by way of standard market deductibles, the
risks required to be insured against pursuant to the
preceding two sentences in such amounts as are acceptable to
Lessor in its sole discretion. Any policies carried in
accordance with this Section 9(b) covering the In-Use
Aircraft and any policies taken out in substitution or
replacement for any such policies shall (1) name Lessor as
loss payee as its interests may appear; (2) provide that the
entire amount of any loss shall be paid to Lessor or its
order; (3) provide that if such insurance is canceled for
any reason whatsoever, or any substantial change is made in
policy terms, conditions or coverage, or the same is allowed
to lapse for non-payment of premium, such cancellation,
change or lapse shall not be effective as to Lessor until
thirty days (seven days or such other period as may from
time to time be customarily obtainable in the industry, in
the case of war risk and allied perils coverage), after
receipt by Lessor of written notice from such insurers of
such cancellation or lapse or change in policy terms,
conditions or coverage; (4) provide that losses shall be
adjusted with Lessor; (5) provide that in respect of Lessor,
such insurance shall not be invalidated by any action or
inaction of Lessee or any other insured and shall insure
such parties regardless of any breach contained in such
policies by Lessee or any other insured; (6) be primary
without right of contribution from any other insurance which
is carried by Lessor with respect to its interest in the
In-Use Aircraft; (7) waive any right of subrogation of the
insurers against Lessor; (8) waive any right of the insurers
to set-off or counterclaim or any other deduction, whether
by attachment or otherwise, in respect of any liability of
Lessor or Lessee to the extent of any moneys due to Lessor;
and (9) provide that Lessor shall have no obligation or
liability for premiums, commissions, assessments or calls in
connection with such insurance. If the insurance required
to be carried pursuant to Sections 9(b) and 9(c) is effected
under separate policies, the insurers shall agree that if a
disagreement arises as to whether a claim is covered by the
all-risk insurance or the war-risk insurance, the insurers
will settle such claims on the basis of a 50-50 claim
funding arrangement. In the case of the requisition for use
of the In-Use Aircraft or any Serviced Engine by the
Government, a valid agreement by the Government,
satisfactory to Lessor, to indemnify Lessee against any of
the risks which Lessee is required hereunder to insure
against in an amount at least equal to the amount of
insurance required to be maintained for the In-Use Aircraft
under this Section 9 from time to time shall, to the extent
such indemnity from the Government complies with the
requirements set forth in Section 7(g) hereof, be considered
adequate insurance to the extent of the risks and in the
amounts that are the subject of any such agreement to
indemnify.
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<PAGE>
(c) War-Risk Insurance. During the Lease Term, Lessee
shall maintain (or cause to be maintained), at no expense to
Lessor War-Risk and Allied Perils Aviation Hull (including
Spare Parts, Engines and Equipment) Insurance on an Agreed
Value basis, which shall be not less than the Stipulated
Loss Value. Such policy shall (i) insure against those
perils excluded under Lessee's All Risks Hull and Spares
policy(ies) by virtue of Lloyd's of London Exclusion Clause
AVN.48B ("War, Hijacking and Other Perils Exclusion Clause")
or its equivalent (other than paragraph (b) thereof relating
to nuclear perils), (ii) provide for payment in U.S.
Dollars, (iii) contain a 50/50 clause in accordance with
Lloyd's of London Aviation Clause AVS.103 or its equivalent,
(iv) be endorsed to include coverage for confiscation,
requisition, nationalization, seizure, restraint, detention,
appropriation, requisition of title or for use by any
Governmental Authority (except for the government of
registry) of the In-Use Aircraft, (v) provide coverage on a
worldwide basis (subject only to such geographical limits as
may be imposed by the hull, war and allied perils insurance)
and (vi) be endorsed to include provisions identical to
those contained in clauses (1), (2), (3), (4), (5), (6),
(7), (8), and (9) of Section 9(b).
(d) Application of Proceeds. Provided no Lessee Event
of Default shall have occurred and be continuing, all
insurance payments received under policies required to be
maintained by Lessee pursuant to Section 9 as the result of
the occurrence of an Event of Loss shall be applied in
accordance with Section 8(c)(1) or Section 8(c)(2).
Insurance payments relating to any property damage or loss
to the In-Use Aircraft or any Serviced Engine not
constituting an Event of Loss with respect thereto will be
applied in payment for repairs or for replacement property
in accordance with the terms of Section 8(c) hereof, if not
already paid for by Lessee, and any balance remaining after
compliance with such Sections with respect to such loss
shall be paid to Lessee. Any amount representing proceeds
of insurance required to be maintained by Lessee hereunder
which is payable to or retainable by Lessee shall not be
paid to or retained by Lessee if at the time of such payment
a Default or a Lessee Event of Default shall have occurred
and be continuing, but shall be held by or paid to Lessor as
security for the obligations of Lessee under this Lease and
such amount (to the extent not previously applied against
such obligations) shall be paid to Lessee at such time as
there no longer exists any Default or Lessee Event of
Default.
(e) Reports, Etc. On or before the Delivery Date
(except, with respect to the insurance required by Section
9(j), prior to the date hereof), and no less than five (5)
Business Days prior to the expiration of any insurance
required pursuant to this Section 9, Lessee shall furnish to
Lessor (i) appropriate certification by each insurer or its
authorized signatories and (ii) a report signed by a firm of
independent insurance brokers, then retained by Lessee,
attaching certificates evidencing the insurance and
reinsurance then carried and maintained with respect to the
In-Use Aircraft and Allocated Parts and stating that in the
opinion of such firm the insurance then carried and
maintained with respect to the In-Use Aircraft and Serviced
Engines or Parts complies with the terms hereof. Lessee
will cause such firm to advise Lessor in writing promptly of
any material default in the payment of any premium and of
any other act or omission on the part of Lessee of which
they have knowledge which might invalidate or render
unenforceable, in whole or in part, any insurance on the
In-Use Aircraft or any Serviced
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Engine or Parts. Lessee
also shall cause such firm to advise Lessor in writing at
least thirty (30) days (seven (7) days, or such other period
as may from time to time be customarily obtainable in the
industry, in the case of war risk and allied perils
coverage), prior to the expiration or termination of any
insurance policy carried or maintained with respect to the
In-Use Aircraft or any Serviced Engine any Parts pursuant to
this Section 9.
(f) Additional Insurance. Lessee at its option and at
its sole cost and expense may obtain insurance with respect
to its interest in the In-Use Aircraft, provided that such
insurance does not prevent Lessee from obtaining the
insurance required by this Section 9; and provided further,
that such additional insurance does not prevent Lessor from
obtaining insurance for its own account with respect to the
In-Use Aircraft in excess of Stipulated Loss Value. No such
insurance shall be subject to this Section 9. Lessor may
carry for its own account at its sole cost and expense
insurance with respect to its interest in the In-Use
Aircraft but in no event shall such insurance prevent Lessee
from carrying insurance required by this Section 9 or
adversely affect the cost thereof.
(g) Notice from Lessee; No Modification. Lessee shall
forthwith notify Lessor of any event which may give rise to
a claim under the insurance required pursuant to this
Section 9.
(h) Reinsurance. In the event of any reinsurance of
the risks set forth in Section 9(b) the following clause
shall be incorporated into such reinsurance policies:
"Reinsurers hereby agree that notwithstanding the
insolvency, liquidation, bankruptcy, dissolution of or
similar proceedings affecting Insurers in respect of a total
loss or other claim whereas provided by the Lease such claim
will be paid to the person or persons named as loss payee
under the primary insurance and that Reinsurers shall in
lieu of payment to the Insured, its successors in interest
and assigns, pay to the person named as loss payee under the
primary insurance that portion of any loss due for which
the reinsurers would otherwise be liable to pay the Insurers
(subject to proof of loss), it being understood and agreed
that any such payment by the Reinsurers shall (to the extent
of such payment) fully discharge and release the Reinsurers
from any and all further liability in connection therewith,
subject to such clause not contravening any law of the
government of registration."
(i) Insurance of Lessor. Lessor agrees to maintain
throughout the Lease Term Hangarkeeper's Legal Liability
Insurance that, in accordance with the terms and conditions
of the policy, covers the Serviced Aircraft during periods
in which the Serviced Aircraft is within custody and control
of Lessor for an amount not less than the Stipulated Loss
Value.
(j) Insurance Relating to Allocated Parts. During the
Term, Lessee shall maintain (or cause to be maintained) at
no expense to Lessor the following insurance with respect to
the Allocated Parts with insurers of recognized
responsibility satisfactory to Lessor: (A) All Risks
Property Insurance and (B) coverage against the perils of
(i) strikes, riots, civil commotions or labor disturbances
or (ii) vandalism, malicious acts or acts of sabotage. Such
insurance shall
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be for an aggregate amount of no less than
$1,600,000. With the written consent of Lessor, Lessee may
self-insure, only by way of deductibles, the risks required
to be insured against pursuant to the preceding two
sentences in such amounts as are acceptable to Lessor in its
sole discretion. Any policies carried in accordance with
this Section 9(j) covering the Allocated Parts and any
policies taken out in substitution or replacement for any
such policies shall (1) name Lessor as sole loss payee;
(2) provide that the entire amount of any loss shall be paid
to Lessor or its order; (3) provide that if such insurance
is canceled for any reason whatsoever, or any substantial
adverse change is made in policy terms, conditions or
coverage, or the same is allowed to lapse for non-payment of
premium, such cancellation, change or lapse shall not be
effective as to Lessor until thirty (30) days after receipt
by Lessor of written notice from such insurers of such
cancellation or lapse or change in policy terms, conditions
or coverage; (4) provide that losses shall be adjusted with
Lessor; (5) provide that in respect of Lessor, such
insurance shall not be invalidated by any action or inaction
of Lessee or any other insured and shall insure such parties
regardless of any breach contained in such policies by
Lessee or any other insured; (6) waive any right of
subrogation of the insurers against Lessor; (7) waive any
right of the insurers to set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in
respect of any liability of Lessor or Lessee to the extent
of any moneys due to Lessor; and (8) provide that Lessor
shall not have any obligation or liability for premiums,
commissions, assessments or calls in connection with such
insurance. Lessee shall bear the risk of loss to the extent
of any deficiency in any effective insurance coverage with
respect to loss or damage to all or any portion of the
Allocated Parts.
Section 10. Inspection; Financial Information.
(a) Inspection. During the Lease Term, Lessee shall
furnish to Lessor such information concerning the location,
condition, use and operation of the In-Use Aircraft as such
party may reasonably request. Lessee shall permit any
person designated in writing by Lessor, at such Lessor's
expense, to visit and inspect (at any reasonable time,
provided that such inspection shall not unreasonably
interfere in any material respect with Lessee's business
operations or operation or maintenance of the In-Use
Aircraft) the In-Use Aircraft and the records maintained in
connection therewith and, at such designating party's
expense, to make copies of such records as such party may
reasonably designate. Lessor shall not have any duty to
make any such inspection and shall not incur any liability
or obligation by reason of making or not making any such
inspection. Any such inspection of the In-Use Aircraft
shall be a visual, walk-around inspection which may include
going on board the In-Use Aircraft and shall not include
opening any panels, bays, or the like, provided that any
such designee of Lessor shall be entitled to be present
during any maintenance check of the In-Use Aircraft at which
any panels, bays or the like may be opened and shall have
the right to inspect such items during such maintenance
check. Upon written request from Lessor, Lessee shall
provide such requesting party with the anticipated dates of
any scheduled major maintenance checks (including any "C",
heavy "C" or "D" check) occurring within the six-month
period following such request.
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(b) Financial Information. Lessee also agrees to
furnish to Lessor during the Lease Term:
(1) as soon as possible and in any event within ten
(10) days after the occurrence of a Default or Lessee Event
of Default, a certificate of Lessee, signed by a vice
president of Lessee, setting forth in detail the nature of
such Default or Lessee Event of Default and the action which
the Lessee proposes to take with respect thereto;
(2) from time to time, such information as Lessor may
reasonably request with respect to the operations of Lessee
in order to determine whether the covenants, terms and
provisions of this Lease have been complied with by Lessee;
(3) such information as may be required to enable
Lessor to file any reports required to be filed with any
Governmental Authority because of Lessor's ownership of the
Items of Equipment;
(4) as soon as available, quarterly and year-end
unaudited Reports of Financial and Operating Statistics for
Large Certified Air Carriers (U.S. Department of
Transportation Form 41 Schedule A);
(5) as soon as available, and in any event within
sixty (60) days after the end of each of the first three
fiscal quarters, an unaudited balance sheet of the Lessee
and its consolidated subsidiaries, as of the end of such
quarter and related unaudited statements of income and
retained earnings of the Lessee and its consolidated
subsidiaries, setting forth in each case in comparative form
the corresponding figures for the corresponding period of
the preceding fiscal year;
(6) as soon as available, and in any event within
120 days after the end of each fiscal year of Lessee, a
financial report for the Lessee for such year, including
therein a balance sheet of Lessee as of the end of such
fiscal year and related statements of income and retained
earnings and changes in financial position of the Lessee for
such fiscal year, setting forth in each case in comparative
form corresponding figures for the preceding fiscal year,
all in reasonable detail and as certified by the Lessee's
public accountants, including their certificate and
accompanying comments;
(7) promptly upon their becoming available, one copy
of each financial statement, report, notice or proxy
statement sent by Lessee to stockholders generally and of
each regular or periodic report, registration statement or
prospectus filed by Lessee with any securities exchange or
the Securities and Exchange Commission or any successor
agency, and of any order issued by any Governmental
Authority in any proceeding in which Lessee is a party;
and(8)from time to time, such statistical information
concerning the In-Use Aircraft as Lessor may reasonably
request to enable Lessor to evaluate, calculate and/or
report any Taxes.
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Section 11. Lessee's Covenants.
(a) Merger. Lessee shall not consolidate with or
merge into any other corporation, or convey, transfer or
lease all or substantially all of its assets to any Person,
unless (i) the corporation formed by such consolidation or
into which Lessee is merged or the Person who acquires by
conveyance, transfer or lease all or substantially all of
the assets of Lessee (the "Successor"): (A) remains entitled
to the benefits of Section 1110 of the Bankruptcy Code with
respect to this Lease; and (B) shall execute and deliver to
Lessor an agreement containing an assumption by such
Successor of the due and punctual performance and observance
of each covenant and condition of this Lease Agreement to be
performed or observed by Lessee; (ii) immediately after
giving effect to such transaction, no Default or Lessee
Event of Default shall have occurred and be continuing
hereunder; (iii) Lessee shall have delivered to Lessor, an
officer's certificate and an opinion of independent counsel,
each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement described in
clause (i) above comply with this Section 11(a) and that all
conditions precedent herein provided for relating to such
transaction have been complied with (except that such
opinion need not cover the matters referred to in clause
(ii) above and may rely, as to factual matters, on an
officer's certificate of Lessee) and, in the case of such
opinion, that such assumption agreement has been duly
authorized, executed and delivered by the Successor,
constitutes its legal, valid and binding obligation and is
enforceable against such Successor in accordance with its
terms, that Lessor shall continue to be entitled to the
benefits and protections set forth in Section 1110 of the
Bankruptcy Code; and (iv) Lessor shall not suffer any
adverse tax consequences as a result of such consolidation,
merger or transfer which is not indemnified by Lessee in
accordance with the terms hereof or against which Lessor is
otherwise indemnified in form and substance reasonably
satisfactory to Lessor.
Upon any consolidation or merger, or any conveyance,
transfer or lease of all or substantially all of the assets
of Lessee as an entirety in accordance with this Section
11(a), the Successor shall succeed to, be substituted for,
and may exercise every right and power of, and shall assume
every obligation and liability of, Lessee under this Lease
Agreement with the same effect as if the Successor had been
named as Lessee herein and therein. No such consolidation
or merger or conveyance, transfer or lease of all or
substantially all of the assets of Lessee shall have the
effect of releasing Lessee or any Successor which shall
theretofore have become such in the manner prescribed in
this Section 11(a) from its liability hereunder. Nothing
contained herein shall permit any lease, sublease or other
arrangement for the use, operation or possession of the
In-Use Aircraft or Engines except in compliance with the
applicable provisions of this Lease.
(b) Certificated Air Carrier. Lessee will continue to
be a certificated air carrier authorized to engage in
scheduled air transportation under the Federal Aviation Act.
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Section 12. FAA Recordation and Further Assurances.
(a) FAA Recordation. Lessee shall cause this Lease,
all Lease Supplements and any and all additional instruments
which shall be executed pursuant to the terms hereof so far
as permitted by Applicable Laws or regulations, to be duly
kept, filed and recorded, and maintained of record, in
accordance with the applicable law of the government of
registry of the Aircraft, which shall be in the office of
the FAA. The cost of all such action shall be borne by
Lessor.
(b) Further Assurances. Each party hereto shall, at
its expense, promptly and duly execute and deliver to the
other party such further documents and promptly take such
further action not inconsistent with the terms hereof as the
other party may from time to time reasonably request in
order more effectively to carry out the intent and purpose
of this Lease or to perfect and protect the rights and, with
respect to Lessor, remedies created or intended to be
created hereunder.
Section 13A. Lessee Events of Default. The following
events shall constitute Lessee Events of Default (each a
"Lessee Event of Default") (whether any such event shall be
voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority) and each such
Lessee Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have
been remedied or waived by Lessor in writing:
(a) Lessee shall fail to make any payment of Basic
Rent or Supplemental Rent due pursuant to Exhibit E hereto,
as and when due or shall fail to make any other payment of
Supplemental Rent within five (5) Business Days after
delivery to Lessee of notice from Lessor that the amount
shall have become due hereunder; or
(b) Lessee shall fail to procure, carry and maintain
any insurance required by Section 9 hereof; provided that in
the case of insurance with respect to which cancellation,
change or lapse for nonpayment of premium shall not be
effective as to Lessor for 30 days (five days in the case of
any war risk and allied perils coverage, or if shorter, such
other period as may be customary in the industry for such
notice of cancellation) after receipt of notice by Lessor of
such cancellation, change or lapse, no such failure to carry
and maintain insurance shall constitute a Lessee Event of
Default hereunder until the earlier of (i) the date such
insurance is no longer in effect as to Lessor, or (ii) the
date such failure shall have continued unremedied for a
period of 20 days (five days in the case of any war risk and
allied perils coverage, or if shorter, such other period as
may be customary in the industry for such notice of
cancellation) after receipt by Lessor of the notice of
cancellation, change or lapse; or
(c) Lessee shall fail to perform or observe, breach or
be in default under Sections 5, 7(c), 10(c), or 11 hereof;
or
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(d) Lessee shall fail to perform or observe, breach or
be in default under any other covenant, condition or
agreement to be performed or observed by it hereunder and
such failure shall continue unremedied for a period of
thirty (30) Business Days after written notice thereof by
Lessor; or
(e) any material representation or warranty made by
Lessee herein or in any document or certificate furnished by
Lessee in connection herewith or pursuant hereto shall prove
to have been incorrect in any material respect when made; or
(f) Lessee shall fail to pay any sums which are or
become due and owing under any Interim Aircraft Lease
Agreement, the Interim Aircraft Maintenance Agreement, the
Long-Term Lease Agreement, the July Lease Agreement or the
November Lease Agreement or shall fail to perform under any
indemnification obligations contained in any Interim
Aircraft Lease Agreement, the Long-Term Lease Agreement, the
151 Lease Agreement, the 161 Lease Agreement, the 162 Lease
Agreement, the 171 Lease Agreement or the Interim Aircraft
Maintenance Agreement; or
(g) Reserved; or
(h) all or substantially all of Lessee's airline
operations are suspended for more than two days; or
(i) Lessee shall consent to the appointment of a
custodian, receiver, trustee or liquidator (or other similar
official) of itself or of a substantial part of its
property, or Lessee shall be unable to pay its debts
generally as they become due, or shall make a general
assignment for the benefit of creditors, or Lessee shall
file a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding
under any bankruptcy law (as now or hereafter in effect) or
an answer admitting the material allegations of a petition
filed against Lessee in any such proceeding, or Lessee by
voluntary petition, answer or consent shall seek relief as
debtor under the provisions of any other present or future
bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or providing
for an agreement, composition, extension or adjustment with
its creditors or Lessee shall take any corporate action to
authorize any of the foregoing; or
(j) a petition against Lessee in a proceeding under
any bankruptcy or other insolvency law (as now or hereafter
in effect) shall be filed, and any decree or order adjudging
Lessee a bankrupt or insolvent in such proceeding shall
remain in force undismissed and unstayed for a period of
sixty (60) days after such adjudication or, in case the
approval of such petition by a court of competent
jurisdiction is required, the petition as filed or amended
shall be approved by such a court as properly filed and such
approval shall not be withdrawn and the proceeding shall not
be dismissed within sixty (60) days thereafter, or if, under
the provisions of any law providing for reorganization or
winding-up of corporations which may apply to Lessee, any
court of competent jurisdiction shall enter an order or
decree assuming custody or control of
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Lessee or of any substantial part of its property and such custody or control
remains in force unrelinquished, unstayed and unterminated
for a period of thirty (30) days; or
(k) obligations of Lessee for the payment of borrowed
money shall not be paid when the same become due after the
expiration of any applicable grace period, if the effect of
such default is to cause obligations in excess of
$20,000,000 to be accelerated or otherwise declared to be
due and unpaid prior to their stated maturity.
Section 13B. Lessor Events of Default. The following
events shall constitute Lessor Events of Default (each a
"Lessor Event of Default") (whether any such event shall be
voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority) and each such
Lessor Event of Default shall be deemed to exist and
continue so long as, but only as long as, it shall not have
been remedied, or waived by Lessee in writing:
(a) Lessor shall fail to procure, carry and maintain
any insurance required by Section 9(i) to be carried and
maintained by Lessor;
(b) Lessor shall fail to perform or observe, breach or
be in default under any other covenant, condition or
agreement to be performed or observed by Lessor hereunder
and such failure shall continue unremedied for a period of
thirty (30) Business Days after written notice thereof by
the Lessee; provided the existence of any Defect shall not
constitute a Lessor Event of Default so long as Lessor
promptly commences and diligently complies with its warranty
obligations under Section 5 of Exhibit E;
(c) Any material representation or warranty made by
Lessor herein or in any document or certificate furnished by
Lessor in connection herewith or pursuant hereto shall prove
to have been incorrect in any material respect when made;
(d) Lessor shall consent to the appointment of a
custodian, receiver, trustee or liquidator (or other similar
official) of itself or of a substantial part of its
property, or Lessor shall be unable to pay its debts
generally as they become due, or shall make a general
assignment for the benefit of creditors, or Lessor shall
file a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding
under any bankruptcy law (as now or hereafter in effect) or
an answer admitting the material allegations of a petition
filed against Lessor in any such proceeding, or such party
by voluntary petition, answer or consent shall seek relief
as debtor under the provisions of any other present or
future bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or providing
for an agreement, composition, extension or adjustment with
its creditors or Lessor shall take any corporate action to
authorize any of the foregoing; or
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(e) A petition against Lessor in a proceeding under
any bankruptcy or other insolvency law (as now or hereafter
in effect) shall be filed, and any decree or order adjudging
Lessor a bankrupt or insolvent in such proceeding shall
remain in force undismissed and unstayed for a period of
sixty (60) days after such adjudication or, in case the
approval of such petition by a court of competent
jurisdiction is required, the petition as filed or amended
shall be approved by such a court as properly filed and such
approval shall not be withdrawn and the proceeding shall not
be dismissed within sixty (60) days thereafter, or if, under
the provisions of any law providing for reorganization or
winding-up of corporations which may apply to Lessor, any
court of competent jurisdiction shall enter an order or
decree assuming custody or control of such party or of any
substantial part of its property and such custody or control
remains in full force unrelinquished, unstayed and
unterminated for a period of thirty (30) days.
Section 14A. Lessor Remedies. Upon the occurrence of
any Lessee Event of Default and at any time thereafter so
long as the same shall be continuing, Lessor may, at its
option, declare this Lease to be in default by a written
notice to Lessee and Lessor may concurrently therewith or at
any time thereafter, as part of the same or a separate
written notice, declare this Lease to be terminated, and
immediately proceed to do any one or more of the following
as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory
requirements of, applicable law then in effect; provided
that upon the occurrence of any Lessee Event of Default
described in Section 13A(i) or (j) above, this Lease
Agreement shall automatically be in default, and Lessor may
elect to do any of the following, without prior notice to
Lessee:
(a) Lessor may terminate this Lease;
(b) Lessor may cause Lessee, upon the written demand
of Lessor and at Lessee's expense, to return promptly, and
Lessee shall return promptly the In-Use Aircraft and any
Serviced Engines, as Lessor may so demand to Lessor or its
order in the manner and condition required by, and otherwise
in accordance with all the provisions of, Section 5, as if
the Airframe and Engines were being returned at the end of
the Term, or Lessor, at its option, may enter upon the
premises where the Airframe or Engine is located and take
immediate possession of and remove the same (together with
any engine or any part which is not an Engine but which is
installed on an Airframe, subject to all of the rights of
any owner, lessor, lienor or secured party of such engine or
the Airframe; it being agreed that such engine or airframe,
as the case may be, shall be held for the account of any
such owner, lessor, lienor or secured party, or, if such
engine is owned by Lessee, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the
provisions of Section 8(b)) without the necessity for first
instituting proceedings, or by summary proceedings or
otherwise, all without liability accruing to Lessor for or
by reason of such entry or taking of possession, whether for
the restoration of damage to property caused by such taking
or otherwise;
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(c) Lessor may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance
by Lessee of the applicable covenants of this Lease and to
recover damages for the breach thereof;
(d) Lessor, to the extent permitted by applicable law,
may with or without taking possession thereof, sell any
Airframe or Engine at public or private sale, as Lessor may
determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle all or the Airframe or Engine
as Lessor, in its sole discretion, may determine, all free
and clear of any rights of Lessee except as hereinafter set
forth in this Section 14A and without any duty to account to
Lessee with respect to such action or inaction or for any
proceeds with respect thereto;
(e) whether or not Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights
specified above with respect to all or the Airframe or
Engine, Lessor, by written notice to Lessee specifying a
payment ten (10) days from such written notice, may demand
that the Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Rent for the Aircraft due for
periods commencing on or after the date specified for
payment in such notice), any unpaid Basic Rent for the
Aircraft due for periods prior to the payment date specified
in such notice plus an amount equal to the excess, if any,
of the present worth of the aggregate unpaid Basic Rent due
under this Lease for the Airframe or Engine, discounted
quarterly at the Discount Rate, over the fair market rental
value therefore, discounted in like manner;
(f) in the event Lessor, pursuant to paragraph (d)
above, shall have sold all or any Airframe or Engine,
Lessor, in lieu of exercising its rights under paragraph
(e) above with respect to the Airframe or such Engine or
part thereof, may, if it shall so elect, demand that Lessee
pay to Lessor, and Lessee shall pay to Lessor, on the date
of such sale as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the installments of Basic Rent
for the Aircraft due after the Basic Rent Payment Date
preceding such date of sale) any unpaid Basic Rent with
respect to the Aircraft due prior to such date plus the
amount of any deficiency between the net proceeds of such
sale (after deduction of all reasonable costs of sale) and
the Stipulated Loss Value of the Aircraft, computed as of
the Basic Rent Payment Date on or immediately succeeding the
date of such sale together with interest, if any, on the
amount of such deficiency, at the Stipulated Interest Rate,
from the date of such sale to the date of actual payment of
such amount;
(g) [Intentionally Left Blank]
(h) Lessor may rescind this Lease as to any or all
Airframe and any or all Engines, or may exercise any other
right or remedy which may be available to it under
applicable law;
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(i) Lessee shall be liable for any and all unpaid Rent
and for all legal fees and other costs and expenses incurred
by reason of the occurrence of any Lessee Event of Default
or the exercise of Lessor's remedies with respect thereto,
including all costs or expenses incurred in connection with
the return of any Item of Equipment in accordance with the
terms of Section 5 hereof or in placing such Item of
Equipment in the condition and with airworthiness
certificates as required by Section 5; and
(j) No remedy referred to in this Section 14A is
intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or
otherwise available to Lessor or its Affiliates at law or in
equity, and the exercise by Lessor of any one or more of
such remedies shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies
under either this Lease or any other agreement between
Lessor or its Affiliates and Lessee. No express or implied
waiver by Lessor of any Lessee Event of Default shall in any
way be, or be construed to be a waiver of any future or
further Lessee Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any and all rights to
notice and to a judicial hearing with respect to the
repossession of any Item of Equipment by Lessor upon the
occurrence of a Lessee Event of Default.
Section 14B. Lessee Remedies.
(a) Remedies. Upon the occurrence of a Lessor Event
of Default and at any time thereafter so long as the same
shall be continuing, Lessee may, at its option, declare a
default by a written notice to Lessor; provided that
Lessee's remedies shall in all respects be limited as set
forth in Section 5(b) and 5(g) of Exhibit E and this Section
14B. At any time after delivery of such written notice to
Lessor, so long as Lessor shall not have remedied all
outstanding Lessor Events of Default Lessee may proceed
pursuant to Section 6 of Exhibit E to enforce performance by
Lessor of its covenants and obligations under Exhibit E to
this Agreement and to recover damages for the breach
thereof, but only to the extent permitted under Section
14B(b) and Section 5(b) and 5(g) of Exhibit E. Subject to
Section 5(b) and 5(g) of Exhibit E and Section 14B(b),
Lessor shall be liable for any and all unpaid amounts due
from it hereunder and for all legal fees and other costs and
expenses incurred by reason of the occurrence of any Lessor
Event of Default or the exercise of Lessee's remedies with
respect thereto.
(b) Limitation on Damages. WITHOUT LIMITING THE
PROVISIONS OF SECTION 4 OF THIS AGREEMENT AND
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY,
LESSOR SHALL HAVE NO OBLIGATION OR LIABILITY WHETHER ARISING
IN CONTRACT (INCLUDING WARRANTY), TORT (INCLUDING ACTIVE,
PASSIVE OR IMPUTED NEGLIGENCE OR GROSS NEGLIGENCE) OR STRICT
LIABILITY OR OTHERWISE FOR LOSS OF USE, REVENUE OR PROFIT OR
FOR ANY OTHER SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES WITH RESPECT TO ANY BREACH OF THIS AGREEMENT OR THE
PROCEDURES SET FORTH IN THE MANUAL (OR ANY MANUAL REFERENCED
THEREIN) OR ANY NONCONFORMANCE OR DEFECT IN
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ANY SERVICE OR WORKMANSHIP OR ANY SERVICED PART OR OTHER MATERIAL,
COMPONENT, ACCESSORY, EQUIPMENT OR PRODUCT PROVIDED OR
DELIVERED PURSUANT TO THIS AGREEMENT. FURTHERMORE, LESSOR'S
LIABILITY FOR DAMAGES, IF ANY, ARISING AS A RESULT OF ANY
BREACH OF, OR DEFAULT BY LESSOR UNDER, THIS AGREEMENT
(INCLUDING ANY BREACH OF WARRANTY) SHALL IN NO EVENT EXCEED
LESSEE'S DIRECT, ACTUAL AND REASONABLE DAMAGES (AFTER TAKING
INTO ACCOUNT AMOUNTS THAT WOULD HAVE BEEN PAID TO LESSOR AS
SUPPLEMENTAL RENT BUT FOR SUCH BREACH OR DEFAULT) SUFFERED
BY LESSEE TO OBTAIN SUBSTITUTE COMPARABLE MAINTENANCE
SERVICES FOR THE AIRCRAFT FOR THE REMAINDER OF THE LEASE
TERM AFTER THE DATE OF SUCH BREACH OR DEFAULT.
(c) No Implied Waiver. No express or implied waiver
by Lessee of any Lessor Event of Default shall in any way
be, or be construed to be a waiver of any future or further
Lessor Event of Default.
Section 15. INDEMNIFICATION.
(a) General. LESSEE DOES HEREBY ASSUME LIABILITY FOR,
AND DOES HEREBY INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS
LESSOR AND ANY AFFILIATE OF LESSOR AND THEIR RESPECTIVE
SUCCESSORS, PERMITTED ASSIGNS, SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS AND SERVANTS (EACH THEREOF, WITH
ITS RESPECTIVE AFFILIATES, SUCCESSORS, PERMITTED ASSIGNS,
AGENTS AND SERVANTS REFERRED TO HEREIN AS AN "INDEMNIFIED
PARTY") FROM AND AGAINST, AND ON WRITTEN DEMAND TO PAY, OR
TO REIMBURSE EACH INDEMNIFIED PARTY FOR THE PAYMENT OF, AS
THE CASE MAY BE, ANY AND ALL EXPENSES OR LIABILITIES IMPOSED
ON, CHARGED TO, RECOVERED FROM, INCURRED BY OR ASSERTED
AGAINST ANY INDEMNIFIED PARTY AS A RESULT OF ANY CLAIM BY A
PERSON (OTHER THAN LESSEE UNDER SECTION 5(a) OF EXHIBIT E
AND 14B HEREOF) RELATING TO OR ARISING OUT OF, OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE INTERIM AIRCRAFT LEASE
AGREEMENTS, THE INTERIM AIRCRAFT MAINTENANCE AGREEMENT, THE
POOLING AGREEMENT, THE MANUAL (OR ANY OTHER LESSOR MANUAL
REFERENCED THEREIN) OR ANY MAINTENANCE SERVICES, OUTSIDE
SERVICES, SERVICED ENGINES OR SERVICED PARTS PROVIDED
HEREUNDER, OR ANY FAILURE BY LESSEE OR LESSOR TO PERFORM
HEREUNDER, INCLUDING CLAIMS FOR INJURY TO OR DEATH OF
PERSONS (INCLUDING ANY EMPLOYEES OR AGENTS OF LESSEE WHO
ENTER LESSOR'S PREMISES PURSUANT TO SECTION 4(g) OF
EXHIBIT E AND ALL INVITEES, GUESTS, PASSENGERS, SHIPPERS,
EMPLOYEES AND AGENTS OF LESSEE), AND DAMAGE TO OR
DESTRUCTION OF PROPERTY (INCLUDING PROPERTY OF LESSEE AND OF
ITS INVITEES, GUESTS, PASSENGERS, EMPLOYEES AND AGENTS AND
PROPERTY OF EACH INDEMNIFIED PARTY). THE FOREGOING INDEMNITY
OBLIGATIONS SHALL
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INCLUDE THE OBLIGATION OF LESSEE TO
INDEMNIFY EACH INDEMNIFIED PARTY FROM AND AGAINST, AND ON
WRITTEN DEMAND TO PAY, OR TO REIMBURSE EACH INDEMNIFIED
PARTY FOR THE PAYMENT OF, AS THE CASE MAY BE, ANY AND ALL
EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY
INDEMNIFIED PARTY RELATING TO OR ARISING OUT OF (i) ANY
ACTION OR INACTION OF LESSEE; (ii) THE MANUFACTURE OF THE
AIRFRAME AND SERVICED ENGINES (INCLUDING LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE, AND PATENT, TRADEMARK
OR COPYRIGHT INFRINGEMENT); (iii) THE OWNERSHIP OF THE
AIRCRAFT AND, EXCEPT AS PROVIDED IN SECTION 15(d) BELOW,
SERVICED ENGINES, DURING THE TERM OF THIS LEASE; (iv) THE
DELIVERY, NONDELIVERY, REDELIVERY, LEASE, REGISTRATION,
ASSIGNMENT, TRANSFER, POSSESSION, USE, OPERATION, CONDITION,
SALE OR RETURN OR OTHER DISPOSITION OF THE AIRFRAME AND
SERVICED ENGINES AND PARTS BY LESSEE (INCLUDING INJURY,
DEATH OR PROPERTY DAMAGE SUFFERED BY PASSENGERS, SHIPPERS OR
OTHERS), AND ENVIRONMENTAL CONTROL, NOISE AND POLLUTION
REGULATIONS; (v) THE CONDITION UPON RETURN OF THE AIRFRAME
AND SERVICED ENGINES AND PARTS, TO THE EXTENT SUCH CONDITION
DOES NOT COMPLY WITH SECTION 5 HEREOF OR (vi) (WITHOUT
LIMITING ANY OF THE FOREGOING) ANY BREACH BY LESSEE OF,
NONCOMPLIANCE BY LESSEE WITH, OR MISREPRESENTATION BY LESSEE
MADE OR DEEMED MADE IN, UNDER OR IN CONNECTION WITH, THIS
LEASE OR ANY OTHER DOCUMENT REQUIRED TO BE DELIVERED
PURSUANT HERETO, OR ANY WARRANTY, CERTIFICATE OR AGREEMENT
MADE OR DELIVERED IN, UNDER OR IN CONNECTION HEREWITH OR
THEREWITH. THE FOREGOING INDEMNITY OBLIGATIONS OF LESSEE
SHALL NOT INCLUDE THE OBLIGATION TO INDEMNIFY (i) EMPLOYEES
OF LESSOR AND ITS AFFILIATES WHO SUFFER A CLAIM RESULTING
FROM THE ACTS (INCLUDING FAILURE TO ACT) OF AN EMPLOYEE OF
LESSOR AND ITS AFFILIATES OR OF ANY SUBCONTRACTOR TO LESSOR
AND ITS AFFILIATES OR (ii) SUBCONTRACTORS TO LESSOR AND ITS
AFFILIATES WHO SUFFER A CLAIM RESULTING FROM THE ACTS
(INCLUDING FAILURE TO ACT) OF AN EMPLOYEE OF LESSOR AND ITS
AFFILIATES OR OF ANY SUBCONTRACTOR TO LESSOR AND ITS
AFFILIATES. LESSEE ALSO SHALL NOT BE REQUIRED TO INDEMNIFY
ANY INDEMNIFIED PARTY FOR (i) LIABILITIES RESULTING FROM
ACTS (INCLUDING FAILURE TO ACT) OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY, (ii) DAMAGE TO
OR DESTRUCTION OF PROPERTY OF AN INDEMNIFIED PARTY, WHILE
WITHIN SUCH INDEMNIFIED PARTY'S SOLE CARE, CUSTODY AND
CONTROL, TO THE EXTENT RESULTING FROM THE ACTS (INCLUDING
FAILURE TO ACT) OF AN EMPLOYEE OF LESSOR AND ITS AFFILIATES
OR OF ANY SUBCONTRACTOR TO LESSOR AND ITS AFFILIATES, (iii)
ACTS, OMISSIONS OR EVENTS THAT OCCUR AFTER FULL AND FINAL
COMPLIANCE BY LESSEE WITH THE TERMS OF THIS LEASE OR AFTER
AN AIRCRAFT, ANY SERVICED ENGINE OR AN ENGINE WHICH IS NOT A
SERVICED ENGINE OR PART HAS BEEN RETURNED TO LESSOR PURSUANT
TO THE TERMS
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HEREOF, OR THE POOLING AGREEMENT AS SUCH ACTS,
OMISSIONS OR EVENTS RELATE TO SUCH RETURNED AIRCRAFT, ANY
SERVICED ENGINE, OR AN ENGINE WHICH IS NOT A SERVICED ENGINE
OR PART AFTER ITS RETURN; OR (iv) ANY TAX EXCEPT TO THE
EXTENT AND AS SET FORTH IN SECTION 16 HEREOF AND SECTION
3(h) OF EXHIBIT E.
(b) Indemnification for Negligent Acts. WITHOUT
LIMITING SECTION 15(a), LESSOR AND LESSEE EXPRESSLY INTEND
THAT LESSEE SHALL HOLD HARMLESS, DEFEND AND INDEMNIFY EACH
INDEMNIFIED PARTY AGAINST CLAIMS (OTHER THAN CLAIMS THAT ARE
EXPRESSLY EXCEPTED IN SECTION 15(a)) THAT ARISE AS A RESULT
OF THE NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED) OF
LESSOR OR ANY OTHER INDEMNIFIED PARTY AND AS A RESULT OF THE
JOINT OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
IMPUTED) OF LESSOR, ANY OTHER INDEMNIFIED PARTY AND LESSEE.
(c) Defense of Claims; Settlement. IF ANY INDEMNIFIED
PARTY SHALL HAVE KNOWLEDGE OF ANY CLAIM OR LIABILITY
REQUIRED TO BE INDEMNIFIED AGAINST UNDER THIS SECTION 15,
SUCH INDEMNIFIED PARTY SHALL GIVE REASONABLY PROMPT WRITTEN
NOTICE THEREOF TO LESSEE AFTER BECOMING AWARE OF SUCH CLAIM,
BUT THE FAILURE OF SUCH INDEMNIFIED PARTY SO TO NOTIFY
LESSEE SHALL NOT RELIEVE LESSEE FROM ANY LIABILITY THAT IT
WOULD OTHERWISE HAVE TO SUCH INDEMNIFIED PARTY HEREUNDER
EXCEPT TO THE EXTENT, AND ONLY TO THE EXTENT, THAT LESSEE
DEMONSTRATES THAT THE DEFENSE OF SUCH CLAIM OR LIABILITY IS
PREJUDICED THEREBY. LESSEE AND LESSEE'S INSURERS SHALL HAVE
THE RIGHT, AT THEIR SOLE COST AND EXPENSE, TO INVESTIGATE,
DEFEND OR, EXCEPT AS LIMITED HEREINAFTER, COMPROMISE ANY
CLAIM FOR WHICH INDEMNIFICATION IS SOUGHT UNDER THIS SECTION
15 UPON ACKNOWLEDGMENT BY LESSEE OR SUCH INSURER OF ITS
LIABILITIES TO EACH INDEMNIFIED PARTY IN RESPECT THEREOF.
LESSEE SHALL ASSUME ALL RESPONSIBILITY FOR ANY CLAIM COVERED
BY THE FOREGOING INDEMNITY, AND THE INDEMNIFIED PARTY SHALL
PROVIDE REASONABLE ASSISTANCE AND COOPERATION DURING THE
DEFENSE OR SETTLEMENT OF THE CLAIM. EXCEPT AS LIMITED
HEREAFTER, LESSEE SHALL HAVE COMPLETE CONTROL OF THE DEFENSE
OR SETTLEMENT OF SUCH CLAIM OR COMPROMISE THEREOF; PROVIDED
THAT COUNSEL SELECTED BY LESSEE SHALL BE REASONABLY
ACCEPTABLE TO THE INDEMNIFIED PARTY. NO COMPROMISE OR
SETTLEMENT OF ANY CLAIM MAY BE EFFECTED BY LESSEE WITHOUT
THE INDEMNIFIED PARTY'S CONSENT, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD; PROVIDED, NO CONSENT SHALL BE
REQUIRED IF (i) THERE IS NO FINDING OR ADMISSION OF ANY
VIOLATION OF ANY LAW BY THE INDEMNIFIED PARTY OR ANY
VIOLATION OF THE RIGHTS OF ANY PERSON BY THE INDEMNIFIED
PARTY, (ii) THERE IS NO EFFECT ON ANY CLAIM THAT MAY BE MADE
BY THE INDEMNIFIED PARTY, AND (iii) THE RELIEF
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PROVIDED IS THE SOLE RESPONSIBILITY OF LESSEE. EACH INDEMNIFIED PARTY
SHALL HAVE THE RIGHT, BUT NOT THE DUTY, AT ITS OWN EXPENSE,
TO PARTICIPATE IN THE DEFENSE AND/OR SETTLEMENT OF ANY CLAIM
WITH COUNSEL OF ITS OWN CHOOSING WITHOUT RELIEVING LESSEE OF
ANY OBLIGATIONS HEREUNDER. LESSEE AND ITS COUNSEL SHALL
COOPERATE WITH THE INDEMNIFIED PARTY'S COUNSEL AND SHALL
SUPPLY THE INDEMNIFIED PARTY WITH SUCH INFORMATION
REASONABLY REQUESTED BY THE INDEMNIFIED PARTY AS IS
NECESSARY OR ADVISABLE FOR THE INDEMNIFIED PARTY TO
PARTICIPATE IN ANY PROCEEDING TO THE EXTENT PERMITTED BY
THIS SECTION 15, BUT CONTROL OF THE MATTER SHALL REMAIN WITH
LESSEE.
ANY PAYMENT OR INDEMNITY PURSUANT TO THIS SECTION 15
SHALL INCLUDE THE AMOUNT, IF ANY, NECESSARY TO HOLD THE
INDEMNIFIED PARTY HARMLESS ON AN AFTER-TAX BASIS (TAKING
INTO ACCOUNT ANY CURRENT TAX BENEFITS TO WHICH ANY SUCH
INDEMNIFIED PARTY IS ENTITLED) AS A RESULT OF THE MATTER
INDEMNIFIED AGAINST UNDER THIS SECTION 15 FROM ALL TAXES
REQUIRED TO BE WITHHELD BY LESSEE OR PAID BY SUCH
INDEMNIFIED PARTY AS A RESULT OF SUCH PAYMENT OR INDEMNITY
UNDER THE LAWS OF ANY FEDERAL, STATE OR LOCAL GOVERNMENT OR
TAXING AUTHORITY IN THE UNITED STATES OR ANY TERRITORY,
COMMONWEALTH OR POSSESSION OF THE UNITED STATES OR BY ANY
FOREIGN GOVERNMENT OR ANY POLITICAL SUBDIVISION OR TAXING
AUTHORITY THEREOF.
(d) Indemnification by Lessor. IF A PERSON WHICH HAS
A LIEN ON ANY SERVICED ENGINE TAKES POSSESSION OF OR
INTERFERES WITH LESSEE'S QUIET ENJOYMENT OR USE OF A
SERVICED ENGINE, LESSOR SHALL INDEMNIFY AND HOLD HARMLESS
LESSEE FROM ANY AND ALL COSTS, LIABILITIES AND DAMAGES
INCURRED BY LESSEE RELATING TO OR ARISING THEREFROM.
(e) Survival. THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS SECTION 15 SHALL SURVIVE ANY TRANSFER OF
TITLE OR POSSESSION OF THE SERVICED AIRCRAFT, ANY SERVICED
ENGINE OR ANY SERVICED PART, ANY TERMINATION OR EXPIRATION
OF THIS AGREEMENT OR ANY IMPOSSIBILITY OF PERFORMANCE OF
THIS AGREEMENT OR FRUSTRATION OF PURPOSE OF THIS AGREEMENT.
Section 16. General Tax Indemnity.
(a) Tax Indemnity.
(i) Except as provided in Section 16(b), Lessee agrees
that each payment of Rent and any other amounts payable to
Lessor (with any affiliate of Lessor and their respective
successors, permitted assigns, shareholders, directors,
officers, employees, agents and servants referred to
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herein as a "Tax Indemnified Party") by Lessee under this Lease
shall be paid in full without any deduction or withholding
with respect to Taxes of any nature whatsoever imposed by
the United States or any other Taxing Authority unless
Lessee is prohibited by Applicable Law from doing so, in
which event Lessee shall (a) ensure that the deduction or
withholding does not exceed the minimum amount legally
required; (b) immediately pay to Lessor or any other Person
entitled to receive such payment an additional amount (as
Supplemental Rent) in such amount, net of any Taxes
thereon, and at such time as shall result in the net amount
actually received by Lessor or such other Person being,
after all deductions or withholdings, equal to the full
amount which would have been received by Lessor or such
other Person had such deduction or withholding not been made
and shall be free of expense to the Lessor or such other
Person for collection or other charges; (c) pay to the
relevant Taxing Authority within the period for payment
permitted by Applicable Law the full amount of all
deductions or withholdings; and (d) upon the request of
Lessor or such other Person furnish to Lessor or such other
Person, as the case may be, within the period for payment
permitted by Applicable Law, an official receipt of the
relevant Taxing Authority for all amounts deducted or
withheld as aforesaid; and
(ii) Except as provided in Section 16(b) hereof, Lessee
shall pay, protect, save, and on written demand shall
indemnify and hold harmless on an after-tax basis each Tax
Indemnified Party from and against any and all Taxes imposed
against any Tax Indemnified Party, Lessee or the Serviced
Aircraft by any Taxing Authority in connection with or
relating to (A) the construction, financing, refinancing,
purchase, acquisition, acceptance, rejection, delivery,
nondelivery, transport, ownership, registration,
reregistration, assembly, possession, repossession,
operation, location, use, condition, maintenance, repair,
sale, return, abandonment, preparation, installation,
storage, redelivery, manufacture, leasing, subleasing,
modification, rebuilding, importation, reimportation,
transfer of title, transfer of registration, exportation,
reexportation or other application or disposition of, or the
imposition of any Lien (or the incurrence of any liability
to refund or pay over any amount as the result of any Lien)
on, the Serviced Aircraft, the Serviced Airframe, and any
Serviced Engine or any Serviced Part or interest therein,
(B) payments of Basic Rent or Supplemental Rent or the
receipts or earnings arising therefrom or received with
respect to the Serviced Aircraft, the Serviced Airframe, any
Serviced Engine or any Serviced Part or interest therein,
(C) the Serviced Aircraft, any Serviced Airframe, any
Serviced Engine or any Serviced Part or interest therein,
(D) otherwise with respect to or in connection with the
transactions contemplated by this Lease, and (E) any
out-of-pocket penalties, late payment fees, interest, costs
and expenses fairly attributed to any of the foregoing
incurred by any Tax Indemnified Party.
(b) Exclusions from General Tax Indemnity. The
provisions of subsection 16(a) shall not apply to a Tax
Indemnified Party in the case of:
(i) Taxes that are imposed on or measured by the net
income, excess profits, receipts (other than any excise or
gross receipts tax imposed by the State of Hawaii),
franchises, capital or conduct of business of such Tax
Indemnified Party, other than any such taxes which are
imposed in lieu of any sales, use or value added taxes;
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(ii) any other Taxes based on, or measured by, the net income of such
Tax Indemnified Party (other than (x) Taxes which are, or are in the nature
of, sales, use or rental taxes or (y) Taxes imposed by any Taxing Authority
(other than a taxing authority for the jurisdiction in which such Tax
Indemnified Party is doing business) as a result of a nexus between the
jurisdiction of the Taxing Authority and any Item of Equipment or any Part or
any part or the activities in the jurisdiction of the Taxing Authority of
Lessee, any sublessee or any other user of the Aircraft (other than such Tax
Indemnified Party or any Affiliate thereof) or any Affiliate of any of the
foregoing);
(iii) Taxes that are imposed as a result of (y) any voluntary sale,
assignment, transfer or other disposition by such Tax Indemnified Party of
any interest of such Tax Indemnified Party in the Aircraft, the Airframe, any
Serviced Engine, any Part, or any interest therein, unless such sale,
assignment, transfer or disposition results from (1) action taken by or on
behalf of such Tax Indemnified Party as provided in or permitted by this
Lease in connection with or by reason of any Lessee Event of Default that has
occurred and is continuing or any exercise by the Lessor of any of its
remedies in connection with any such Lessee Event of Default as provided in
or permitted by the Lease, or (2) any replacement or substitution by the
Lessee of any Engine or any Part; or (z) any involuntary transfer of any of
the foregoing interests in connection with any bankruptcy or other proceeding
for the relief of debtors in which such Tax Indemnified Party is the debtor
or any foreclosure by a creditor of such Tax Indemnified Party;
(iv) Taxes in the nature of penalties, additions to tax, interest or
fines resulting directly from the negligence of the Tax Indemnified Party in
connection with the preparation or filing of any tax return unless such Tax
Indemnified Party files any tax return in a manner requested by Lessee,
required to be filed by such Tax Indemnified Party without regard to the
transactions contemplated by this Lease, the payment of any taxes shown
thereon or the conduct of any proceeding in respect thereof, except to the
extent attributable to the failure of Lessee to perform its obligations or to
otherwise perform its duties and responsibilities pursuant to this Lease,
including, without limitation, the obligation to make payments hereunder;
(v) so long as no Lessee Default or Event of Default shall be
continuing, Taxes imposed with respect to any period after (i) the expiration
of the Term and the return of the Aircraft to the Lessor in accordance with
Section 5 of this Lease or (ii) the earlier discharge in full of Lessee's
obligation to pay the Stipulated Loss Value and all other amounts due under
this Lease; provided, however, that this exception shall not apply to Taxes
(x) relating to events occurring or matters arising upon or prior to such
expiration and return or discharge, or (y) imposed on or with respect to any
payments due after such expiration and return or discharge until after such
payments have been made;
(vi) Taxes to the extent of the excess of such Taxes over the amount of
such Taxes which would have been imposed and indemnified against had there
not been a sale, assignment, transfer or other disposition (whether voluntary
or, if resulting from bankruptcy, foreclosure (other than foreclosure
resulting from a Lessee Event of Default) or similar proceedings in which
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such Tax Indemnified Party is the debtor, involuntary) by a Tax Indemnified
Party of any interest of such Tax Indemnified Party in the Aircraft, the
Airframe, any Serviced Engine, or any Part, unless such transfer results from
action taken by or on behalf of such Tax Indemnified Party after a Lessee
Event of Default has occurred and while it is continuing or any exercise by
the Lessor of any of its remedies in connection with any such Lessee Event of
Default;
(vii) Taxes arising out of or caused by any willful misconduct or gross
negligence of such Tax Indemnified Party;
(viii) with respect to any Tax Indemnified Party, any Tax that results
solely from such Tax Indemnified Party or a related Tax Indemnified Party
engaging in transactions other than those contemplated by this Lease or any
Long-Term Agreement, or those in which such Tax Indemnified Party is
currently engaged;
(ix) sales tax incurred by Lessor in connection with the maintenance of
the Serviced Aircraft pursuant to Attachment A to Exhibit E hereto, other
than any such tax, whether in the form of a sales tax, gross receipts tax or
other functional equivalent of a sales tax imposed by the State of Hawaii;
(x) any Tax to the extent such Tax would not have been imposed if a Tax
Indemnified Party or a related Tax Indemnified Party had not engaged in
activities in the jurisdiction imposing such Tax which activities are
unrelated to the transactions contemplated by the this Lease or the other
Long Term Agreements, but only to the extent such Tax would not have been
payable in the absence of such unrelated activities; or
(xi) any failure of a Tax Indemnified Party to comply with (I)
certification, information, documentation, reporting or other similar
requirements concerning the nationality, residence, identity or connection
with the jurisdiction imposing such Tax, if such compliance is required by
statute or by regulation of the jurisdiction imposing such Tax as a
precondition to relief or exemption from such Tax; or (II) any other
certification, information, documentation, reporting or other similar
requirements under the Tax laws or regulations of the jurisdiction imposing
such Tax that would establish entitlement to otherwise applicable relief or
exemption from such Tax; provided, however, that the exclusion set forth in
this subsection 16(a)(x) shall not apply if (v) such failure to comply was
due to a failure of the Lessee to provide such Tax Indemnified Party with the
information required to be supplied by the Lessee in order for such Tax
Indemnified Party to comply with such requirement or due to a failure of the
Lessee to notify such Tax Indemnified Party of such requirement and such Tax
Indemnified Party was not otherwise aware of such requirement; or (w) such
failure to comply was done upon the advice, concurrence and/or direction or
with the knowledge of the Lessee.
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(c) Calculation of General Tax Indemnity Payments.
(i) Lessee agrees that, with respect to any payment or indemnity to a
Tax Indemnified Party under Section 16 hereof, the Lessee's indemnity
obligations shall include the payment of an amount necessary to hold such Tax
Indemnified Party harmless on an after-tax basis from all Taxes required to
be paid by such Tax Indemnified Party with respect to such payment or
indemnity (including any payments made pursuant to this subsection 16(c)
under the laws of any Taxing Authority.
(ii) If any Tax Indemnified Party shall realize a current tax benefit as
a result of any Taxes paid or indemnified against by the Lessee under this
Section 16 (except to the extent previously taken into account in computing
the indemnity paid with respect to such Taxes), such Tax Indemnified Party
shall, so long as no Lessee Event of Default shall have occurred and be
continuing and no payment is due and owing by Lessee under this Lease or any
Long-Term Agreement, pay to the Lessee an amount which, after subtraction of
any further tax savings such Tax Indemnified Party realizes as a result of
the payment thereof, is equal to the amount of such current tax benefit, but
only after the Lessee shall have made all payments then due and owing to such
Tax Indemnified Party pursuant to this Lease and the Long-Term Agreements;
provided that any subsequent loss of any tax benefit paid to the Lessee
hereunder shall be treated as a Tax subject to indemnification in accordance
with subsection 16(a) (without regard to any exclusions set forth in
subsection 16(b) or the provisions of subsection 16(g); and provided further,
that such Tax Indemnified Party shall not be obligated to make any payment
pursuant to this subsection 16(c) to the extent that the amount of such
payment would exceed (x) the amount of all prior payments by Lessee to such
Tax Indemnified Party pursuant to this subsection 16(c), less (y) the amount
of all prior payments by such Tax Indemnified Party to Lessee hereunder.
Each such Tax Indemnified Party shall in good faith use reasonable efforts in
filing its tax returns and in dealing with taxing authorities to seek and
claim any such tax benefit.
(d) Payment of General Tax Indemnity. Unless otherwise requested by a
Tax Indemnified Party, or unless the Tax is being contested in accordance
with the provisions of subsections 16(g) hereof, the Lessee shall pay when
due any Tax for which it is liable pursuant to this Section 16 directly to
the appropriate Taxing Authority, or, upon written demand, shall reimburse a
Tax Indemnified Party for the payment of any such Tax made by such Tax
Indemnified Party. Within thirty (30) days after the date of each payment by
the Lessee of any Tax referred to in the preceding sentence, the Lessee shall
upon request furnish such Tax Indemnified Party the original or a copy of the
receipt for the Lessee's payment of such Tax or such other evidence of
payment of such Tax as is reasonably acceptable to such Tax Indemnified
Party. The Lessee shall also cause to be furnished, promptly upon request,
such data as such Tax Indemnified Party reasonably may require that are
within the reasonable control or possession of Lessee and are not otherwise
reasonably obtainable by such Tax Indemnified Party to enable such Tax
Indemnified Party to comply with the requirements of any Taxing Authority in
respect of any Tax referred to in subsection 16(a) hereof.
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(e) Verification of Calculations. At the request of Lessee, the
accuracy of any calculation of the amount or amounts payable to a Taxing
Authority or a Tax Indemnified Party pursuant to this Section 16 shall be
verified by independent public accountants selected by such Tax Indemnified
Party and reasonably satisfactory to Lessee, and such verification shall be
binding on both the Tax Indemnified Party and Lessee. In order, and to the
extent necessary, to enable such independent accountants to verify such
amounts, such Tax Indemnified Party shall provide to such independent
accountants (for their confidential use and not to be disclosed to Lessee or
any other person) all information reasonably necessary for such verification.
Such verification shall be at the expense of Lessee.
(f) Reports. If any report, return or statement is required to be
filed with respect to any Tax which is subject to indemnification under this
Section 16, the Lessee shall timely file the same, except for any such
report, return or statement which a Tax Indemnified Party has notified the
Lessee that it intends to file. The Lessee shall either file such report,
return or statement so as to show the ownership of the Aircraft in the Lessor
and send a copy of such report, return or statement to such Tax Indemnified
Party or, where the Lessee is not so permitted to file in the name of such
Tax Indemnified Party, shall notify such Tax Indemnified Party of such
requirements and cooperate reasonably with such Tax Indemnified Party with
respect thereto.
(g) General Tax Indemnity Contest Provisions.
(i) Notice. If a Tax Indemnified Party receives a written notice
regarding the imposition of a Tax, or if at the conclusion of any audit by
any Taxing Authority there is a proposed adjustment regarding any Tax which
if agreed to by such Tax Indemnified Party would result in the imposition of
a Tax for which such Tax Indemnified Party would seek indemnification from
the Lessee in an amount equal to or in excess of $25,000 pursuant to this
Section 16, such Tax Indemnified Party shall within the lesser of: (A)
thirty (30) days after receipt of such written notice by a responsible
officer of such Tax Indemnified Party or promptly after the conclusion of
such audit; or (B) not less than ten (10) days prior to the expiration of the
statutory period to respond, so notify the Lessee in writing; provided,
however, that the failure so to notify the Lessee shall not diminish the
Lessee's obligations hereunder, except in the event that Lessee's rights to
contest such tax shall have been precluded by such failure, and after such
contest, Lessor would not have been liable for such taxes and except for any
interest or penalties related to any late or missed payment dates.
(ii) Contest Provisions. If requested by the Lessee in writing, a Tax
Indemnified Party shall in good faith contest in the name of such Tax
Indemnified Party or, if requested by the Lessee and if such contest does not
in such Tax Indemnified Party's reasonable discretion involve or potentially
involve taxes imposed on such Tax Indemnified Party that are not indemnified
against hereunder, to contest in the name of the Lessee (or permit the
Lessee, if requested by the Lessee, to contest in the name of the Lessee or
the Tax Indemnified Party) the validity, applicability and amount of the
imposition of any Tax or any proposed adjustment that
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would give rise to the proposed imposition of any Tax by (a) resisting
payment thereof, if such Tax Indemnified Party in its sole and reasonable
discretion shall determine such course of action to be appropriate, (b) not
paying the same except under protest, if protest is necessary and proper, or
(c) if payment shall be made, using reasonable efforts to obtain a refund
thereof in appropriate administrative and judicial proceedings; provided,
however, that (u) such Tax Indemnified Party shall not be required to contest
such imposition or proposed adjustment if the aggregate amount of an
indemnity on an after-tax basis, would be less than $25,000, (v) no Lessee
Event of Default has occurred and is continuing, (w) such Tax Indemnified
Party has been provided with an opinion of independent tax counsel selected
by such Tax Indemnified Party and reasonably acceptable to the Lessee (the
cost of which shall be borne by the Lessee) to the effect that a reasonable
basis in law or in fact exists that such Tax Indemnified Party will prevail
in such contest, (x) such Tax Indemnified Party, at its sole option, may at
any time forego any and all administrative appeals, proceedings, hearings and
conferences with any Taxing Authority and, in lieu thereof, continue to
contest the claim in any permissible judicial forum selected by such Tax
Indemnified Party, (y) Lessee shall have agreed to pay such Tax Indemnified
Party (or, in the case of item (iii) below, lend to such Tax Indemnified
Party on an interest-free basis (and in such case pay any additional amount
as shall be required to hold such Tax Indemnified Party harmless on a net
after-tax basis from any adverse tax consequences attributable to the loan),
on demand, all reasonable out-of-pocket costs and expenses which such Tax
Indemnified Party incurs in connection with and reasonably allocable to
contesting such imposition or adjustment, including, without limitation, (i)
all legal, accountants' and investigatory fees and disbursements, (ii) the
amount of any interest, penalties or additions to tax (to the date such
payment is made) payable as a result of contesting such adjustment, and (iii)
if such contest is to be initiated by the payment of, and the claiming of a
refund for, the amount of such imposition or adjustment, funds sufficient to
make such payment of, and the claiming of a refund for, the amount of such
imposition or adjustment, funds sufficient to make such payment (and in the
event such contest is finally determined adversely, the amount of such loan
shall be applied against the Lessee's obligation to indemnify such Tax
Indemnified Party for the Tax which was the subject of such contest), and (z)
such proceedings do not involve any risk (other than a remote risk) of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Serviced Engine
or any Part or interest therein or, if there is such a risk, Lessee has
provided to such Tax Indemnified Party a bond in form and substance
reasonably satisfactory to such Tax Indemnified Party in an amount sufficient
to protect such Tax Indemnified Party from any detriment that would be
suffered by the Lessor as a result of such sale, forfeiture, or loss or has
otherwise protected such Tax Indemnified Party in a manner acceptable to such
Tax Indemnified Party and there is no risk or the imposition of criminal
penalties. Such Tax Indemnified Party will consult with Lessee regarding any
contest and will consider in good faith any suggestions made by Lessee with
respect to the most favorable forum for, and the conduct of, such contest;
provided, however, that, unless such Tax Indemnified Party elects to permit
Lessee to conduct such contest, such contest shall be controlled by such Tax
Indemnified Party and conducted by independent counsel selected by such Tax
Indemnified Party or by "in-house" counsel of such Tax Indemnified Party and
reasonably acceptable to Lessee. In the event that such Tax Indemnified
Party elects to permit the Lessee to conduct such contest, the independent
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counsel selected by the Lessee to conduct such contest shall be reasonably
satisfactory to such Tax Indemnified Party. If requested by the Lessee in
writing, such Tax Indemnified Party will appeal (or, if desired by such Tax
Indemnified Party, permit the Lessee to appeal) any adverse judicial
determination, provided that, as a condition to the commencement of the
appeal of such adverse judicial determination, (a) such Tax Indemnified Party
shall receive, at the Lessee's expense, an opinion of independent counsel,
selected by such Tax Indemnified Party and reasonably satisfactory to Lessee,
to the effect that a more likely than not probability of success exists for
such appeal and (b) Lessee shall have acknowledged its liability to such
Indemnified Party for an indemnity payment as a result of such tax claim if
such Tax Indemnified Party shall not prevail in the contest; provided,
however, that such Tax Indemnified Party shall not be required to appeal any
adverse judicial determination to the United States Supreme Court.
Notwithstanding anything contained in this subsection 16(g) to the
contrary, no Tax Indemnified Party shall be required to contest any claim if
the subject matter thereof shall be of a continuing nature and shall have
previously been decided pursuant to the contest provisions of this subsection
16(g) (including a contest pursuant to the contest provisions hereof in which
the Tax Indemnified Party may be required to contest such a claim if there
shall have been a change in the law (including, without limitation,
amendments to statutes or regulations, administrative ruling and court
decisions)) or Lessee shall have provided new facts after such claim shall
have been so previously decided, and such Tax Indemnified Party shall have
received an opinion of independent tax counsel selected by such Tax
Indemnified Party and approved by the Lessee (the cost of which shall be
borne by the Lessee) to the effect that, as a result of such change or new
facts, it is more likely than not that the position which such Tax
Indemnified Party or the Lessee, as the case may be, had asserted in such
previous contest, would prevail; provided that the provisions of this
paragraph shall not require an Tax Indemnified Party to file an amended tax
return or refund claim for any prior taxable period.
(h) Compromise or Settlement. A Tax Indemnified Party shall have the
right to settle or compromise a contest if such Tax Indemnified Party has
provided Lessee a reasonable opportunity to review a copy of that portion of
the settlement or compromise proposal which relates to the Tax for which such
Tax Indemnified Party is seeking indemnification hereunder, provided that, if
(i) such Tax Indemnified Party fails to provide the Lessee such a reasonable
opportunity to review such portion of such proposal or (ii) after such
reasonable opportunity to review such proposal the Lessee in writing
reasonably withholds its consent to all or part of such settlement or
compromise proposal, the Lessee shall not be obligated to indemnify such Tax
Indemnified Party hereunder to the extent of the amount attributable to the
Tax to which such settlement or compromise relates as to which the Lessee has
reasonably withheld its consent. If such Tax Indemnified Party effects a
settlement or compromise of such contest without giving notice to the Lessee
or, notwithstanding that the Lessee has reasonably withheld its consent
thereto, such Tax Indemnified Party shall repay to the Lessee such amounts
theretofore advanced by the Lessee pursuant to clause (y)(iii) of subsection
16(g)(i) hereof as relate to such claim, to the extent the Lessee has
reasonably withheld its consent to the settlement or compromise thereof.
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(i) Refunds. If any Tax Indemnified Party shall obtain a refund of all
or any part of any Taxes that the Lessee shall have paid for such Tax
Indemnified Party or for which the Lessee shall have reimbursed such Tax
Indemnified Party, such Tax Indemnified Party shall, so long as no Default or
Lessee Event of Default shall have occurred and be continuing and no payment
is due and owing by the Lessee under this Agreement or any Long-Term
Agreement, pay to the Lessee an amount which is equal to the sum of the
amount of such refund, plus any interest received attributable thereto net of
any net taxes payable by such Tax Indemnified Party with respect to the
receipt or accrual of such interest and the payment thereof to the Lessee,
but only after the Lessee shall have made all payments then due and owing to
such Tax Indemnified Party pursuant to this Section 16; provided, however,
that any subsequent loss of any refund paid to the Lessee hereunder shall be
treated as a Tax subject to indemnification in accordance with this Section
16 (without regard to any exclusions set forth in subsection 16(b) or the
provisions of subsection 16(g)).
(j) Failure to Contest. Notwithstanding anything to the contrary
contained in this subsection 16(g), a Tax Indemnified Party may at any time
decline to take any further action with respect to a proposed adjustment or
the imposition of a Tax; provided that if the Lessee has properly requested
such action pursuant to, and is otherwise entitled to require any action to
be taken by a Tax Indemnified Party pursuant to the provisions of subsection
16(g), and such Tax Indemnified Party has failed to contest, or permit the
Lessee to contest, such proposed adjustment or the imposition of such Tax,
such Tax Indemnified Party shall be deemed to have waived its right to any
Indemnity payment that would otherwise be payable by the Lessee pursuant to
this Section 16 in respect of such adjustment or the imposition of such Tax.
In such event, such Tax Indemnified Party shall reimburse the Lessee for all
amounts previously advanced by the Lessee to such Tax Indemnified Party with
respect to such proposed adjustment pursuant to clause (y)(iii) of subsection
16(g) hereof. If a Tax Indemnified Party fails to contest or to permit a
contest hereunder, such Tax Indemnified Party will not be required to pay
over the Lessee any amount representing tax benefits described in subsection
16(c)(B) hereof which result from the payment of Taxes as to which such Tax
Indemnified Party has been deemed to have waived its right to any indemnity
payment hereunder.
(k) Interest. To the extent permitted by applicable law, interest at
the Stipulated Interest Rate shall be paid, on demand, on any amount not paid
when due, pursuant to Section 16 until the same shall be paid. Such interest
shall be paid in the same manner as the unpaid amount in respect of which
such interest is due.
(l) Effect of Other Indemnities. The Lessee's obligations under the
indemnities provided for in this Agreement and the Long-Term Agreements shall
be those of a primary obligor whether or not the Person indemnified shall
also be indemnified with respect to the same matter under the terms of this
Agreement, any Lease or any Long-Term Agreement or any other document or
instrument, and the Person seeking indemnification from the Lessee pursuant
to any provisions of this Agreement may proceed directly against the Lessee
without first seeking to enforce any other right of indemnification.
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Section 17. Miscellaneous
(a) Construction; Governing Law. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by Applicable Law, the parties hereby waive any
provision of law which renders any provisions hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by written
instrument signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought; and, in compliance with Section
2A-208(b) of the Texas Business and Commerce Code requiring a separate
signature of this provision, Lessee has signed in the space provided below.
Any consent or approval specified herein of a party hereto may be withheld
entirely in such party's discretion unless it is herein expressly provided
that such consent may not be unreasonably withheld.
No waiver of a breach of any provision of this Lease Agreement by either
party shall constitute a waiver of any subsequent breach of the same or any
other provision hereof, and no waiver shall be effective unless in writing.
HAWAIIAN AIRLINES, INC.
By:
-------------------------------------
Clarence K. Lyman,
Vice President-Finance, Treasurer
and Assistant Corporate Secretary
By:
---------------------------------------
Rae A. Capps,
Vice President, General Counsel
and Corporate Secretary
The captions in this Lease are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof. THIS LEASE SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS (EXCLUDING THE CONFLICT OF LAW PROVISIONS THERETO),
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
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(b) Notices. All notices, offers, acceptances, approvals, waivers,
requests, demands and other communications hereunder or under any instrument,
certificate or other instrument delivered in connection with the transactions
described herein shall be in writing, shall be addressed as provided below
and shall be considered as properly given (a) if delivered in person, (b) if
sent by overnight delivery service (including, without limitation, Federal
Express, UPS, Emery, Purolator, DHL, Air Borne, and other similar overnight
delivery services), (c) if sent by telecopier (upon receipt by the sender
thereof of evidence that a clean transmission of such telecopy was made to
the recipient thereof) and, in such case, dispatching a copy of such notice
by the methods described in clause (a) or (b) above. All notices shall be
effective upon delivery; provided that if any notice is tendered to an
addressee, such notice shall be effective upon tender. For the purposes of
notice the addresses of the parties shall be as set forth below; provided
that any party shall have the right to change its address for notice
hereunder to any other location by giving thirty (30) days' notice to the
other parties in the manner set forth hereinabove. The initial addresses of
the parties hereto are as follows:
If to Lessor: American Airlines, Inc.
4333 Amon Carter Boulevard
MD 5566
Fort Worth, Texas 76155
Attention: Vice President Corporate
Development and Treasurer
Telecopier: (817) 967-2199
Telephone: (817) 967-1227; and
American Airlines, Inc. Maintenance & Engineering Center
3900 N. Mingo Road
Tulsa, Oklahoma 74115
Attention: Senior Vice President,
Maintenance and Engineering
Telecopier: (918) 292-2203
Telephone: (918) 292-2612
With copies to: American Airlines, Inc.
4333 Amon Carter Boulevard
MD 5675
Ft. Worth, Texas 76155
Attention: Corporate Secretary
Telecopier: (817) 967-4313
Telephone: (817) 967-1254; and
Haynes and Boone, L.L.P.
901 Main Street
3100 NationsBank Plaza
Dallas, Texas 75202-3789
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Attention: Janice V. Sharry
Telecopier: (214 651-5940
Telephone: (214) 651-5000
If to Lessee: Hawaiian Airlines, Inc.
3375 Koapaka Street
Suite G350
Honolulu, Hawaii 96819
Attention: Vice President-Finance
Telecopier: (808) 836-4795
Telephone: (808) 835-3075
With copies to: Hawaiian Airlines, Inc.
3375 Koapaka Street
Suite G350
Honolulu, Hawaii 96819
Attention: Vice President-General Counsel
Telecopier: (808) 835-3690
Telephone: (808) 835-3610
(c) Lessor's Right to Perform. If Lessee fails to perform any of its
obligations hereunder, Lessor may (but shall not be obligated to) discharge
such obligation, and the amount of the expenses of Lessor incurred in
connection with such discharge shall be deemed Supplemental Rent, payable by
Lessee upon demand together with interest thereon at the Stipulated Interest
Rate to but excluding the date of payment. Lessor shall use its best efforts
to give Lessee prior notice of Lessor's intention to discharge any such
obligation.
(d) Confidentiality.
(i) Confidential Information. For purposes of this Agreement,
confidential information shall mean any and all (i) trade secrets, (ii)
confidential or other proprietary information of a party or its Affiliates
concerning past, present or future research, development, business activities
or affairs, finances, properties, methods of operation, processes and
systems, (iii) customer lists, and (iv) other customer information, whether
oral, written or contained in any magnetic, electronic or other media;
provided that in order for a party's information to be considered
confidential hereunder such information, if non-oral, must be marked by such
party as confidential; and provided further that oral information must be
specified as confidential at the time of disclosure (collectively,
"Confidential Information"). Notwithstanding the foregoing, the parties
expressly acknowledge and agree that the terms and conditions of this
Agreement set forth in Exhibit E of this Agreement constitute Confidential
Information. The party which receives Confidential Information from the
other party agrees to maintain such information in secrecy at all times,
using the same degree of care with respect to such Confidential Information
as it uses in protecting its own proprietary information, trade secrets and
similar items; provided
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that Confidential Information may be used in an action by one party to this
Agreement against the other if subject to the conditions set forth in (ii)
below. Information of either party which would otherwise be considered
Confidential Information shall not be considered Confidential Information if
such information is in the public domain, or is placed in the public domain
through no violation of this Agreement, or is lawfully obtained from another
source free of restriction.
(ii) Use of Confidential Information. Except to the extent expressly
permitted in Section 4(l) of Exhibit E, neither party shall sell, transfer,
publish, disclose, display or otherwise make available the Confidential
Information of the other party to any third party (and third parties shall be
deemed also to include Affiliates of the party so restricted which are not
parents or subsidiaries), except as may be required by Applicable Law in
which case the party from whom disclosure is sought shall promptly notify the
other party. To the extent that the other party objects to disclosure of
such Confidential Information, the party from which disclosure is sought
shall (i) use reasonable and lawful efforts to resist making any disclosure
of such Confidential Information, (ii) use reasonable and lawful efforts to
limit the amount of such Confidential Information to be disclosed, and
(iii) use all reasonable efforts to obtain a protective order or other
appropriate relief to minimize the further dissemination of any Confidential
Information to be disclosed. In addition, neither party shall disclose the
Confidential Information of the other party to any employee or agent except
on a need-to-know basis. Each party shall use reasonable efforts to inform
all such employees and agents that the Confidential Information of the other
party is subject to this non-disclosure obligation. Furthermore, neither
party shall use the Confidential Information of the other party for any
purpose other than as expressly provided in this Agreement.
(iii) Termination. Upon termination of this Agreement for any cause or
reason, each party shall, within ninety (90) days of such termination, either
deliver to the other party or destroy all of such other party's Confidential
Information (including all copies thereof, other than copies of this
Agreement) at the option of the other party then in its possession and shall
purge any copies thereof encoded or stored on magnetic or other electronic
media or processors; provided that neither Lessee nor Lessor shall be
required to purge or destroy any Confidential Information that is reasonably
necessary in connection with the resolution of any disputes which may have
arisen pursuant to the terms of this Agreement.
(iv) No Adequate Remedy. Each party acknowledges and agrees that the
other party will have no adequate remedy at law if there is a breach or
threatened breach of this Section 17(d) and, accordingly, that the other
party shall be entitled to an injunction against such breach. Nothing herein
shall be construed as a waiver of any other legal or equitable remedies that
may be available to either party if the other party breaches this Section
17(d).
(v) Survival. The restrictions of this Section 17(d) shall survive for
a period of eight (8) years after the termination or expiration of this
Agreement.
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(vi) Affiliates. The Affiliates of Lessor and Lessee shall comply in
all respects with the restrictions of this Section 17(d) and Lessor and
Lessee, respectively, shall in all respects be responsible for their
compliance.
(vii) Other Confidentiality Agreements. The provisions of this
Section 17(d) are in addition to, and shall not be deemed to affect the terms
and provisions of, the Confidentiality Agreement. To the extent the terms
hereof may be deemed to be inconsistent with the terms of the Confidentiality
Agreement or such Confidentiality Agreement shall be silent, this Agreement
shall control with respect to this Agreement and any Confidential Information
relating hereto. Upon the written consent of Lessor, which consent shall not
be unreasonably withheld, Lessee may provide this Agreement to third party
lenders or investors of Lessee; provided that the party receiving this
Agreement shall, prior to obtaining it, enter into a confidentiality
agreement with Lessee for the benefit of Lessor in substantially the form of
this Section 17(d).
(e) Counterparts. This Lease and the Lease Supplement No. 1 may be
executed in several counterparts, each of which shall be deemed an original,
and all such counterparts shall constitute one and the same instrument. To
the extent that this Lease constitutes chattel paper, as such term is defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction,
no security interest in this Lease may be created through the transfer or
possession of any counterpart other than the counterpart marked as the
"Original" and containing the receipt therefore executed by the applicable
secured party on the signature page thereof.
(f) Grant of Security Interest by Lessor. In compliance with the terms
of this Section, Lessor may grant a security interest in this Lease as
collateral for a loan provided Lessor notifies Lessee at least ten (10)
Business Days before granting such security interest. The rights of Lessee
under this Lease shall be superior in all respects to the rights of any such
lender and Lessor shall require any such lender to agree in writing in form
and substance reasonably satisfactory to Lessee that such lender's rights in
and to the Aircraft and under the Lease shall be subject and subordinate to
the terms of this Lease to receive all such performance from Lessor as may
from time to time be required by the terms hereof. Lessee agrees to
reasonably cooperate with Lessor in connection with Lessor's efforts to grant
such security interest and to provide, at Lessor's cost and expense, such
documents and certificates in connection therewith as Lessor may reasonably
request, provided, that anything in this Section 17(f) to the contrary
notwithstanding, the consummation of any such loan shall not increase the
actual or potential responsibilities or liabilities of the Lessee or deprive
Lessee of any of its rights or privileges under the Long-Term Agreements.
(g) Survival. Except as otherwise expressly set forth herein or in the
Long-Term Agreements, the representations, warranties and covenants set forth
in this Agreement, and the obligations hereunder, shall survive any transfer
of title or possession of the Serviced Aircraft, any Serviced Engines or any
Serviced Part, any termination or expiration of this Agreement or any
impossibility of performance of this Agreement or frustration of purpose of
this Agreement.
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(h) Assignment. SUBJECT TO THE TERMS HEREOF, THIS AGREEMENT SHALL BIND
AND BENEFIT LESSOR, LESSEE, AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED
ASSIGNS. LESSOR MAY ASSIGN ANY OR ALL OF ITS RIGHTS AND/OR DELEGATE ANY OR
ALL OF ITS OBLIGATIONS HEREUNDER TO ANY AFFILIATE OF LESSOR; PROVIDED THAT
LESSOR SHALL NOT ASSIGN ANY OR ALL OF ITS RIGHTS AND/OR DELEGATE ANY OR ALL
OF ITS OBLIGATIONS UNDER EXHIBIT E OR ANY RELATED PROVISIONS OF THIS
AGREEMENT TO ANY AFFILIATE THAT IS NOT CERTIFICATED BY THE FAA TO PERFORM
MAINTENANCE SERVICES. SUBJECT TO THE PROVISIONS OF SECTION 4(f) OF EXHIBIT
E, LESSOR MAY SUBCONTRACT CERTAIN SPECIFIC TYPES OF MAINTENANCE SERVICES
CONSTITUTING LESS THAN ALL OR SUBSTANTIALLY ALL OF THE MAINTENANCE SERVICES
TO BE PERFORMED HEREUNDER, AND, IN CONNECTION THEREWITH, ASSIGN CERTAIN OF
ITS RIGHTS AND DELEGATE CERTAIN OF ITS OBLIGATIONS UNDER EXHIBIT E AND ANY
RELATED PROVISIONS OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, LESSOR MAY ASSIGN ALL OR SUBSTANTIALLY ALL OF ITS
RIGHTS AND/OR DELEGATE ALL OR SUBSTANTIALLY ALL OF ITS OBLIGATIONS UNDER
EXHIBIT E AND ANY RELATED PROVISIONS OF THIS AGREEMENT TO ANY PERSON
CERTIFICATED BY THE FAA TO PERFORM MAINTENANCE SERVICES SUBJECT ONLY TO
SECTION 3(f)(ii)(C) OF EXHIBIT E. LESSEE MAY NOT (EITHER VOLUNTARILY OR
INVOLUNTARILY) ASSIGN ANY OF ITS RIGHTS OR DELEGATE ANY OF ITS OBLIGATIONS
HEREUNDER.
(i) Transaction Expenses. Lessee agrees to pay the reasonable
out-of-pocket costs and expenses incurred by Lessor in connection with the
preparation, execution and delivery of any amendments, modifications or
waivers requested by Lessee or resulting from any requests of Lessee under
this Agreement. Except as specifically set forth herein, each of Lessor and
Lessee shall be responsible for their own legal and out-of-pocket expenses
arising from the transactions contemplated herein.
(j) Entirety. This Lease Agreement, the Lease Supplements, the
Confidentiality Agreement and the Letter of Credit embody the entire
agreement between the parties hereto and thereto concerning the subject
hereof and thereof and such agreements terminate and supersede all prior or
contemporaneous agreements, discussions, undertakings, and understandings,
whether written or oral, express or implied, between the parties hereto and
thereto concerning the subject hereof and thereof.
(k) Force Majeure. Lessor shall not be liable to Lessee for a failure
or delay in the performance of any obligation or agreement contained herein,
if such failure or delay arises from any cause beyond Lessor's reasonable
control, including any act, omission, or breach of this Lease Agreement by
Lessee, acts of God, action or regulation of any Governmental Authority,
fire, the elements, flood, earthquakes, explosions, accidents, mechanical or
electrical failures, acts of the public enemy, war, civil disturbance,
rebellion, insurrection, work stoppage, strikes
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<PAGE>
(including any mechanic, flight attendant or pilot strike), labor dispute or
difference with workers, regardless of whether or not Lessor (or its
Affiliate) is capable of settling such labor problem, or any other cause,
whether similar or dissimilar, beyond Lessor's reasonable control; provided,
however, that, notwithstanding the foregoing, with respect to Maintenance
Services and related obligations as provided in Exhibit E hereto, the
provisions of Section 4(c)(i) of Exhibit E shall apply.
(l) Independent Contractor; No Agency.
Nothing in this Agreement is intended or shall be construed to create or
establish any agency, partnership, or joint venture or fiduciary relationship
between the parties and neither Lessee nor any of its Affiliates has any
authority to act for or to incur any obligations on behalf of or in the name
of Lessor or any of its Affiliates and neither Lessor nor any of its
Affiliates has any authority to act for or to incur any obligations on behalf
of or in the name of Lessee or any of its Affiliates by virtue of this
Agreement. The parties hereto acknowledge and agree that nothing contained
herein creates any fiduciary duties between the parties or their respective
Affiliates.
(m) Certain Consents and Waivers of Lessee.
(i) Jurisdiction. Except as set forth in Section 6 of Exhibit E hereto,
(a) Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of: (i) the United States District Court for the Northern
District of Texas, and of the courts of the State of Texas in Tarrant County,
and (ii) to the United States District Court for the District of Hawaii
(other than the Court), and of the courts of the State of Hawaii in Honolulu
County, for the purposes of any suit, action or other proceeding arising out
of this Lease Agreement or the subject matter hereof brought by any other
party, and (iii) any federal, state or foreign court of competent
jurisdiction where the In-Use Aircraft may be located from time to time for
the purpose of Lessor exercising any rights and remedies under this Lease
Agreement, including, without limitation, repossession of the In-Use
Aircraft. Lessor and Lessee each agrees that neither of them will bring any
suit, action or other proceeding arising out of this Lease Agreement, the
subject matter herein, or any of the transactions described herein, in any
jurisdiction other than the jurisdictions described above.
(b) To the extent permitted by applicable law, each party hereby waives
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such suit, action or proceeding, any claim (i) that it is not personally
subject to the jurisdiction of the above-named courts, (ii) that the suit,
action or proceeding is brought in an inconvenient forum, (iii) that it is
immune from any legal process with respect to itself or its property, (iv)
that the venue of the suit, action or proceeding is improper, or (v) that
this Lease Agreement or the subject matter hereof may not be enforced in or
by such courts;
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(c) Lessee agrees to designate CT Corporation in Texas as its agent for
service of process in Texas, and Lessor agrees to designate CT Corporation in
Hawaii as its agent for service of process in Hawaii. Lessor and Lessee each
agrees that submission to jurisdiction and designation of an agent for
service of process set forth above is made solely for the express benefit of
the other party and is effective solely for purposes of this Lease Agreement;
(d) Final judgment against a party in any suit in any court of
competent jurisdiction shall be conclusive, and may be enforced in other
jurisdictions, to the extent permitted by Applicable Law, by suit on the
judgment, a certified and true copy of which, to the extent permitted by
Applicable Law, shall be conclusive evidence of the fact and the amount of
any indebtedness or liability of the party therein described; and
(e) To the extent that any party or any of its property is or becomes
entitled at any time to any immunity on the grounds of sovereignty or
otherwise, from any legal action, suit or proceeding, from setoff or
counterclaim, from the jurisdiction of any competent court, from service of
process, from attachment prior to judgment, from attachment in aid of
execution, or from jurisdiction, that party for itself and its property does
hereby irrevocably and unconditionally waive, and agrees not to plead or
claim any such immunity with respect to its obligations, liabilities or any
other matter arising hereof. Such agreement shall be irrevocable and not
subject to withdrawal in any and all jurisdictions including under the
Foreign Sovereign Immunities Act of 1976 of the United States of America.
(ii) WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS LEASE AGREEMENT OR ANY
MATTER RELATED HERETO.
(iii) OTHER WAIVERS. LESSEE AGREES AND ACKNOWLEDGES THAT UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT UNDER THIS LEASE AGREEMENT, LESSOR SHALL
SUFFER IRREPARABLE HARM FOR WHICH MONEY DAMAGES WILL NOT BE ADEQUATE OR
CANNOT BE READILY ASCERTAINED. IN FURTHERANCE THEREOF, LESSEE AGREES THAT IT
WILL TAKE NO ACTION TO HINDER, DELAY OR INTERFERE WITH ANY ACTIONS TAKEN BY
LESSOR IN CONNECTION WITH THE REPOSSESSION OF THE IN-USE AIRCRAFT.
SPECIFICALLY, LESSEE WILL NOT TAKE ANY ACTION WHICH WOULD REQUIRE THE LESSOR
TO BREACH THE PEACE IN CONNECTION WITH REPOSSESSION OF THE IN-USE AIRCRAFT.
LESSEE CONSENTS TO THE ISSUANCE OF ANY ORDER OF ANY COURT OF COMPETENT
JURISDICTION ENABLING LESSOR TO REPOSSESS THE IN-USE AIRCRAFT, FOLLOWING THE
OCCURRENCE OF ANY EVENT OF DEFAULT, WITHOUT THE NECESSITY OF LESSOR POSTING
OR ISSUING ANY BOND. IN ADDITION, LESSEE AGREES THAT UPON THE OCCURRENCE OF
ANY EVENT OF DEFAULT DESCRIBED IN SECTIONS 13A(I) OR (J) OF THE LEASE
AGREEMENT, LESSEE SHALL NOT TAKE ADVANTAGE OF ANY PERIODS SPECIFIED IN
SECTIONS 365 OR 1110 OF THE
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BANKRUPTCY CODE DURING WHICH IT MIGHT RETAIN POSSESSION OF THE IN-USE
AIRCRAFT OR THE PROVISIONS OF THE AUTOMATIC STAY SET FORTH IN SECTION 362 OF
THE BANKRUPTCY CODE, AND, WITHOUT LIMITING OTHER REMEDIES AVAILABLE TO
LESSOR, SHALL EITHER IMMEDIATELY UPON THE FILING OF ANY BANKRUPTCY PETITION
TURN OVER THE IN-SERVICE AIRCRAFT TO LESSOR OR PAY ALL AMOUNTS THEN DUE AND
OWING HEREUNDER AND THEREAFTER ACCRUING UNDER THIS LEASE AGREEMENT. IN THE
EVENT THAT AN ORDER IS ISSUED GIVING LESSOR POSSESSION OF ANY IN-USE
AIRCRAFT, LESSEE HEREBY WAIVES ANY RIGHT IT MAY HAVE TO RETURN OF POSSESSION
OF SUCH AIRCRAFT, AND COVENANTS THAT IT WILL NOT SEEK ANY ORDER PERMITTING IT
TO RETAIN OR REPOSSESS SUCH AIRCRAFT, BY POSTING A BOND OR OTHERWISE. IN THE
EVENT THAT ANY COURT DECLINES TO ISSUE AN ORDER PERMITTING LESSOR TO
REPOSSESS ANY IN-USE AIRCRAFT UNLESS LESSOR POSTS OR ISSUES A BOND, OR LESSOR
ELECTS NOT TO REQUEST THAT THE REQUIREMENT FOR SUCH A BOND BE WAIVED, LESSEE
HEREBY AGREES THAT (IF LESSOR SO ELECTS) THE AMOUNT OF SUCH BOND SHALL NOT BE
REQUIRED TO EXCEED ONE YEAR'S BASIC RENT FOR SUCH AIRCRAFT.
(n) Offset. Until all Deferred Basic Rent is paid under the Long-Term
Lease Agreement (provided that on the date all Deferred Basic Rent is paid
thereunder, all other Rent then due and payable thereunder and hereunder has
also been paid; such date being the "Setoff Release Date") Lessor, AMRCG,
SABRE and AMS shall each have the right to setoff and recoup any sums payable
to Lessee against any sums payable by Lessee to Lessor, AMRCG, SABRE or AMS
pursuant to this Lease Agreement, the other Long-Term Agreements or
otherwise. Until the Setoff Release Date Lessor shall also have the right to
setoff and recoup any amounts payable by Lessee to Lessor, AMRCG, SABRE or
AMS pursuant to this Lease Agreement, or the other Long-Term Agreements by
drawing upon any letter of credit or withdrawing any portion or all of the
Deposit (which may constitute all or a portion of the Letter of Credit).
Nothing set forth in this Subsection 17(n) or Subsection 17(n) of the
Long-Term Lease Agreement, the July Lease Agreement or the November Lease
Agreement shall otherwise limit Lessor's right to draw upon or withdraw from
the Letter of Credit to the extent otherwise set forth herein or in any
Long-Term Agreement.
Section 18. True Lease
(a) Intent of the Parties. It is the intent of the parties to this
lease that it will be a true lease and not a "finance lease" as defined in
Section 168(f) of the Internal Revenue Code of 1954, as amended and in effect
prior to the Tax Reform Act of 1986 (P.L. 99-154) or a "conditional sale" as
defined in 49 U.S.C. Section 40102(a)(18) (former 1301) and that the Lessor
shall at all times be considered to be the owner of the Aircraft which is the
subject of this Lease for the purposes of 49 U.S.C. Section 44103 (former
1401) and for all Federal, state,
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city and local income taxes or for franchise taxes measured by net income and
that this Lease conveys to the Lessee no right, title or interest in the
Aircraft except as a lessee.
Section 19. Enforceability in Jurisdictions. Any provision of this
Lease which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Section 20. No Third-Party Beneficiaries. Except for rights and
benefits conferred on certain of Lessor's Affiliates as set forth in this
Lease Agreement, all rights, remedies, and obligations of the parties
hereunder shall accrue or apply solely to the parties hereto or their
permitted successors or assigns and there is no intent to benefit any third
parties.
Section 21. Maintenance Obligations. Lessee and Lessor agree that
notwithstanding the provisions of the Long-Term Lease Agreement, including
Exhibit F thereto, which by its terms relates to the provision of maintenance
services by Lessor of all DC10-10 aircraft leased by Lessor to Lessee, that
the terms of this Lease Agreement shall govern the maintenance of the
Aircraft. The Long-Term Lease Agreement, including Exhibit F thereto shall
continue in full force and effect as to all other Serviced Aircraft (as
defined in the Long-Term Lease Agreement) other than the aircraft which is
subject to the November Lease Agreement, which shall remain subject to the
maintenance provisions set forth in Exhibit E to the November Lease
Agreement, the aircraft which is subject to the July Lease Agreement, which
shall remain subject to the maintenance provisions set forth in Exhibit E to
the July Lease Agreement and the aircraft which is subject to the December
Lease Agreement, which shall remain subject to the maintenance provisions set
forth in Exhibit E of the December Lease Agreement.
Section 22. Amendment of Long-Term Lease Agreement. Lessor and Lessee
agree that the occurrence of any Lessee Event of Default hereunder shall
constitute a "Lessee Event of Default" under the Long-Term Lease Agreement,
the 151 Lease Agreement, the 161 Lease Agreement, the 162 Amendment and the
171 Lease Agreement.
[Next following page is the signature page.]
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IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
Lessor:
AMERICAN AIRLINES, INC.
By:
___________________________________
Jeffery M. Jackson
Vice President - Corporate
Development and Treasurer
Lessee:
HAWAIIAN AIRLINES, INC.
By:
___________________________________
Clarence K. Lyman,
Vice President-Finance, Treasurer
and Assistant Corporate Secretary
By:
___________________________________
Rae A. Capps,
Vice President, General Counsel
and Corporate Secretary
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EXHIBIT A TO LEASE AGREEMENT
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated , 1997, between AMERICAN
AIRLINES, INC., a Delaware corporation ("Lessor"), and HAWAIIAN AIRLINES,
INC., a Hawaii corporation ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have heretofore entered into the Aircraft
Lease Agreement dated as of January, 3, 1997 (the "Lease Agreement", defined
terms used herein are as therein defined), which provides in Section 2 for
the execution of a Lease Supplement substantially in the form hereof for the
purpose of leasing the Aircraft under the Lease Agreement on its Delivery
Date in accordance with the terms hereof; and
WHEREAS, the Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached to and
made a part of this Lease Supplement, and this Lease Supplement, together
with such attachment, is being filed for recordation on the date hereof with
the FAA as one document;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to Section 2 of the Lease Agreement, the Lessor
and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby
accepts and leases from Lessor, under the Lease Agreement as hereby
supplemented, the McDonnell Douglas DC10-10 aircraft (the "Aircraft") which
consists of the following components (which may or may not be attached to
each other at the moment of acceptance hereunder):
(i) airframe: U.S. registration number N160AA; manufacturer's serial
no. 46710; and
(ii) three General Electric CF6-6K engines bearing manufacturer's
serial nos. 451210, 451392and 451262 (each of which engines has 750 or
more rated takeoff horsepower or the equivalent of such horsepower).
2. The Term for the Aircraft commences on the date of this Lease
Supplement.
3. The Term shall commence on the date hereof and shall end on
September 11, 2001, unless earlier terminated in accordance with the
provisions of the Lease Agreement.
4. Lessee hereby confirms its agreement to pay to Lessor Basic Rent
for the Aircraft throughout the Term in accordance with Section 3 of the
Lease Agreement and to pay Supplemental Rent pursuant to Exhibit E attached
to the Lease.
<PAGE>
5. All of the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement on and as of the date of
this Lease Supplement to the same extent as if fully set forth herein.
6. 6.This Lease Supplement is being delivered in the State of Texas
and shall in all respects be governed by, and construed in accordance with,
the laws of the State of Texas, including all matters of construction,
validity and performance.
7. This Lease Supplement may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument. To the
extent that this Lease Supplement constitutes chattel paper, as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest in this Lease Supplement may be created
through the transfer or possession of any counterpart other than the
counterpart marked as the "Original".
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
to be duly executed and delivered as of the date and year first above written.
AMERICAN AIRLINES, INC.
By: ___________________________________
Jeffery M. Jackson
Vice President --Corporate
Development and Treasurer
HAWAIIAN AIRLINES, INC.
By: ___________________________________
Clarence K. Lyman,
Vice President-Finance, Treasurer
and Assistant Corporate Secretary
By: ___________________________________
Rae A. Capps,
Vice President, General Counsel
and Corporate Secretary
-2-
<PAGE>
EXHIBIT B
This Exhibit B has been intentionally omitted for recording purposes, as
the parties deem the information contained therein to be confidential
financial information.
<PAGE>
EXHIBIT C
CONDITIONS PRECEDENT TO DELIVERY
1. The Aircraft shall have been tendered for delivery to Lessee in the
condition required by the Lease at LAX or such other location as Lessor and
Lessee may have agreed to in writing.
2. On the Delivery Date, the representations and warranties of Lessor
set forth in the Lease Agreement shall be true and accurate as if made on
such date.
3. This Lease and Lease Supplement No. 1 shall have been executed and
delivered to Lessor for filing for information with the FAA in Oklahoma City,
Oklahoma.
4. The receipt by Lessor from Lessee not later than two (2) days prior
to the Delivery Date of the following, dated as of such Delivery Date, all of
which shall be satisfactory in form and substance to Lessor:
(a) copies of the articles of incorporation and
by-laws of Lessee, certified to be true and up to
date copies by a duly authorized officer thereof;
(b) copies of resolutions of the board of directors of
Lessee authorizing Lessee to enter into and
perform the Lease Agreement and the transactions
contemplated hereby, certified to be true and up
to date copies by a duly authorized officer of
Lessee;
(c) a closing certificate and an incumbency
certificate of a duly authorized officers of
Lessee setting out the names and signatures of the
person or persons authorized to sign the Lease
Agreement;
(d) Opinion of in-house counsel to Lessee in form and
substance reasonably satisfactory to Lessor, and
the opinion of independent counsel confirming the
applicability of the protections of Section 1110
of the Bankruptcy Code to the Lease Agreement;
(e) certificate acceptable in form and substance to
Lessor evidencing the insurance required by
Section 9 of the Lease Agreement;
(f) receipt by Lessor of the first installment of
Basic Rent pursuant to Section 3 of the Lease
Agreement and Supplemental Rent pursuant to
Exhibit E to the Lease Agreement and payment of
all amounts then due under any Long-Term
Agreement; and
(g) Execution and delivery by Lessee of any financing
statements required by Lessor.
<PAGE>
5. Execution by Lessee of the Lease Termination relating to this Lease
Agreement.
6. The Final Order (as defined in the Long-Term Lease Agreement)
confirming the Plan shall be and remain in full force and effect.
7. The Long-Term Agreements are in full force and effect.
8. No Default or Lessee Event of Default shall have occurred and be
continuing and no "Event of Default" or "Termination Event" shall have
occurred and be continuing under the Interim Definitive Agreements or
Long-Term Agreements; provided however, that the effectiveness of this Lease
Agreement shall not be deemed to be a waiver by either party to this Lease
Agreement or any of the Interim Definitive Agreements of any claims (whether
or not disclosed) such party may have against the other party under the
Interim Definitive Agreements or the Long Term Agreements.
-2-
<PAGE>
EXHIBIT D
TO LEASE AGREEMENT
DELIVERY AND RETURN CONDITIONS
The following conditions shall apply to the In-Use Aircraft upon
delivery of the In-Use Aircraft by Lessor to Lessee and upon return of each
Return Aircraft to the Lessor by the Lessee pursuant to this Agreement.
CONDITION OF IN-USE AIRCRAFT UPON DELIVERY AND
RETURN AIRCRAFT UPON RETURN
Lessor and Lessee agree that Lessor shall deliver the In-Use Aircraft
and Lessee shall return the Return Aircraft to the Lessor in compliance with
all of the following provisions:
1. Inspection of "on-condition" and "condition monitored" components
will have been accomplished when due and all such items shall be serviceable.
2. It is the intent of the parties that the Return Aircraft at the
termination of the Lease shall be to conform to that of the standards of
international air transportation, with the interior and exterior in good
repair and appearance, without significant corrosion, or structural
maintenance work deferred, and with all Airworthiness Directives in full
compliance. It is further the intent of the Lease that the Return Aircraft
and its Serviced Engines will be readily transferable to the registration of
another carrier without having to undergo significant repairs, refurbishment
or modification being required on the Return Aircraft. At the time of such
return, the Return Aircraft shall comply with the following conditions:
A. Upon delivery to Lessee, the In-Use Aircraft shall
comply with Lessor's FAA-approved maintenance program.
Upon return to Lessor, the Return Aircraft shall comply
with Lessee's FAA-approved maintenance program.
B. All deferred maintenance items and all
deficiencies or discrepancies which by their nature are
outside Lessor's (upon delivery) and Lessee's (upon
return) maintenance manual limits for unrestricted
operation found prior to or during the predelivery or
return inspection or final inspection or demonstration
delivery flight(s) shall be corrected by repair in
accordance with the approved Lessor's (upon delivery)
and Lessee's (upon return) maintenance manual. Except
upon the delivery of the In-Use Aircraft, any
maintenance items, deficiencies or discrepancies which
are approved for Lessor's (upon delivery) and Lessee's
(upon return) maintenance manual limits for
unrestricted operation which may be deferred, may at
the discretion of Lessor (upon delivery) and Lessee
(upon return) be deferred until the next C check.
C. In addition, the fuel, hydraulic, pneumatic, water
and waste systems leaks on the In-Use Aircraft shall be
within the limits allowable pursuant to Lessor's (upon
<PAGE>
delivery) maintenance manual. The fuel, hydraulic,
pneumatic, water and waste system leaks on the Return
Aircraft shall be within the limits allowable pursuant
to Lessee's (upon return) maintenance manual. This is
to be demonstrated by filling all tanks and reservoirs
to capacity for performance of a functional and leak
check of all related systems. The cost of such checks
shall be borne by Lessor (upon delivery) and the Lessee
(upon return).
D. The Aircraft on delivery by Lessor and Return by
Lessee and all parts installed shall have all necessary
FAA-approved service tags or equivalent Lessor (upon
delivery) and Lessee (upon return) documents approved
by the Lessor's (upon delivery) and Lessee's (upon
return) maintenance program.
E. In the event Lessor is no longer maintaining the
Aircraft, upon return, Lessee shall provide the life
history of all life limited parts, as well as airframe
and engine records, carried forward from the life
histories thereof furnished to Lessee by Lessor.
F. Engines
a. Engine borescope inspections of compressor, burner
and turbine sections of each installed engine shall be
conducted in accordance with Lessor's engine borescope
inspection cards #4930-1, 4930-2 and 4930-3 (or any
such replacement card therefor). Each card shall have
attached thereto findings and comments along with
visual records (photographic or video data). Inspected
engines shall meet the requirements of Lessor's
maintenance manual (upon delivery) and Lessee's
maintenance manual (upon return). Borescope inspection
findings that result in inspection intervals being
reduced to less than 400 hours will be corrected by
engine replacement and/or repair prior to delivery of
the In-Use Aircraft by Lessor and the return of the
Return Aircraft by Lessee.
Borescope inspections shall have been completed by
Lessor/Lessee or its authorized representative, at
Lessee's expense prior to re-delivery. In the event
the APU fails to meet the pneumatic or electrical load
requirements, the APU shall be changed.
b. Each installed engine will be subject to
completion of a power assurance run and review of
engine trend analysis with all engine parameters being
within limits in accordance with the appropriate
manufacturer's engine manual. Engine ground runs for
the Aircraft prior to re-delivery shall be conducted in
accordance with Lessor's engine ground run-up card
number DR71-95-18 (or any such replacement card
therefor). Engine Exhaust Gas Temperature ("EGT")
shall not exceed a maximum of 925 DEG C during ground runs
to max power. In the event EGT exceeds 925 DEG C and
adjustments cannot be accomplished with the engine
installed within eight working hours to reduce EGT
below 925 DEG C at max power, the engine installed shall be
rejected and a Replacement Engine installed.
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<PAGE>
c. No re-delivered aircraft shall have an installed
engine which shall be on "watch" and each such engine
shall comply with the operations specification of
Lessee without waiver or exceptions.
In the event Lessor is no longer maintaining the In-Use
Aircraft, the expense of complying with this paragraph
F shall be at Lessee's sole expense. In the event
Lessor is maintaining the In-Use Aircraft pursuant to
Exhibit F hereto, the cost of any repairs or
replacements required by this paragraph F shall be
borne by the parties in accordance with the other terms
of Exhibit F as if such repairs and replacements were
made in the normal course of the term of the Lease
Agreement, except to the extent specifically set forth
in this Exhibit D.
G. Lessor shall (upon delivery) and Lessee shall
(upon return) provide the then current weight and
balance report in the delivery configuration as
required by the FARs provided to Lessor and/or Lessee.
H. All required placards per Lessor's/Lessee's
maintenance and operations specifications must be
current, in place and in English and legible.
I. Fuselage:
(1) Dents, corrosion and abrasions, or any loose,
pulled or missing rivets shall be within the limits of
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual. External patches shall be of a
type consistent with industry standards and approved by
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual. Each repair shall have proper
documentation of structural repair manual reference
and/or engineering repair drawings or documentation as
applicable.
(2) Windows shall be serviceable in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual. Visibility through windows will
comply with industry standards.
(3) Doors shall be free moving, correctly rigged and
be fitted with serviceable seals, in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual limits.
(4) Exterior logos will be removed pursuant to Exhibit
F hereto, by stripping the present logo, and repainting
to blend with existing exterior paint in accordance
with Lessor's (upon delivery) and Lessee's (upon
return) standard maintenance manual practices.
(5) Unpainted metal surfaces shall be clean and
buffed.
-3-
<PAGE>
J. Wings and Empennage
(1) All leading edges shall be serviceable in
accordance with Lessor's (upon delivery) and Lessee's
(upon return) maintenance manual limits. Any repairs
to leading edges shall be in accordance with Lessor's
(upon delivery) and Lessee's (upon return) maintenance
manuals.
(2) All control surfaces shall be clean by airline
standards and free of delamination in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manual.
(3) Unpainted cowlings and fairings shall be buffed
and clean by airline standards and tightly fitted in
accordance with Lessor's (upon delivery) and Lessee's
(upon return) maintenance manual limits.
(4) Fuel leaks in the wings shall be within the limits
allowed by Lessor's (upon delivery) and Lessee's (upon
return) FAA-approved maintenance program. Except upon
the delivery of any In-Use Aircraft, temporary fuel
leak repairs will be within the limits allowed, by
Lessor's (upon delivery) and Lessee's (upon return)
FAA-approved maintenance program. Permanent repairs
may be deferred until the next C check.
(5) Fuel tanks shall be free from contaminates, as
evidenced by sumping the tanks externally.
K. Interior
(1) The In-Use Aircraft shall be delivered in the
standard Lessee's interior configuration, including,
but not limited to seats, seat covers and belts. Upon
return, the Return Aircraft shall be delivered with
Lessee's carpet, flooring, drapes, tapestries and hard
decor as last operated in revenue service by Lessee,
all of which items shall become the property of Lessor
and may be subsequently used by Lessor in its sole
discretion. Upon return, all logos and markings of
Lessee shall be carefully and tastefully removed.
Except as otherwise provided herein, Lessor may retain
other severable items that do not add to the value of
the Return Aircraft and that are not required to be
installed in the Aircraft by the FAA. Unless otherwise
agreed in writing, Lessee shall deliver the Return
Aircraft with Lessor's seat covers installed in the
In-Use Aircraft.
(2) Ceilings, sidewalls and bulkhead panels shall be
clean and free of major cracks and stains by normal
airline standards.
-4-
<PAGE>
(3) All carpets and seat covers shall be in good
condition, normal wear and tear excepted, clean and
stain-free by normal standards and shall meet current
FAA fire retardant regulations.
(4) All seats shall be serviceable in accordance with
maintenance manual limits in good condition, normal
wear and tear excepted and repainted as reasonably
required.
(5) All signs and decals shall be in English, clean
and properly fitted to the seat by normal industry
standards.
(6) All emergency equipment which is limited by
calendar life shall have a minimum of one year's useful
life remaining.
(7) Aircraft galleys delivered in the In-Use Aircraft
hereunder and the Return Aircraft shall include all
necessary inserts, ovens, coffee makers and trash
containers as required for normal passenger revenue
flights.
(8) Floor panels shall be in good condition free of
soft spots and delamination. If field repairs are
installed, permanent repairs may be deferred to the
next C check.
(9) The aircraft interior shall be thoroughly cleaned
to the standards acceptable for passenger revenue
flights.
L. Cockpit
(1) All placard and decals shall be in English, clean,
secure and legible.
(2) All fairing panels shall be free of major stains
and major cracks and shall be clean.
(3) Floor coverings shall be clean and effectively
sealed as required by Lessor's (upon delivery) and
Lessee's (upon return) maintenance program.
(4) Seat covers shall be in good condition, free of
major tears and major stains, normal wear and tear
excepted, and shall conform to existing fire-blocking
regulations.
(5) Seats shall be fully serviceable, in good
condition, normal wear and tear excepted, and repainted
as reasonably required.
-5-
<PAGE>
M. Cargo Compartments
(1) All panels shall be in serviceable condition,
normal wear and tear excepted. All repairs to floor,
ceilings or side walls shall be in accordance with
Lessor's (upon delivery) and Lessee's (upon return)
maintenance manuals. Except, if approved field repairs
are installed, permanent repairs may be deferred to the
next C Check.
(2) Upon return of the Return Aircraft, one ship set
of serviceable cargo containers shall be included.*
(3) All cargo loading functions shall be tested under
load conditions by utilizing one fully loaded cargo
container.
(4) Upon the return of the Return Aircraft, one ship
set of catering modules shall be included.*
(5) One ship set of onboard ovens/coffee makers shall
be included.*
N. Landing Gear and Wheel Wells
(1) Shall be clean, free from leaks and in good
repair, normal wear and tear excepted.
(2) All decals shall be in English, clean, secure and
legible.
(3) Upon return of the Return Aircraft brakes will be
in good condition. No brake will have less than one
half (1.950) inch of wear remaining on wear indicator
with the brake hydraulic system fully pressurized.
O. No structural repairs including corrosion, skin
replacement, crack propagation or SSI programs shall be
overdue on the Return Aircraft at time of redelivery, or be
in a deferred status.
P.
(1) reserved
(2) Lessee shall make the In-Use Aircraft available to
Lessor on or before the anticipated Delivery Date for
an operational test flight. Up to five persons
designated by Lessor may participate in such flight as
observers. Such test flight shall be conducted at
Lessee's expense and, unless mutually agreed by Lessee
and Lessor, shall not exceed two hours. The test
flight shall be conducted by Lessee using Lessee's
standard flight test procedures. Lessee shall
demonstrate such additional
-6-
<PAGE>
aircraft functions as may reasonably requested by Lessor's
observers. Lessor shall identify to the Lessee in writing any
claim of any discrepancy between the required condition of the
Return Aircraft and the Return Aircraft's actual condition.
In the event Lessor is no longer maintaining the
Aircraft, the expense of correcting any discrepancy
shall be at Lessee's sole expense. In the event Lessor
is maintaining the Aircraft pursuant to Exhibit F
hereto, the cost of correcting any discrepancy required
by this paragraph P(2) shall be borne by the parties in
accordance with the other terms of Exhibit F as if such
actions were taken in the normal course of the Term.
Q. Upon return to Lessor the In-Use Aircraft shall be in compliance
with Stage III Noise Regulations.
R. Any FAA-mandated corrosion control program will be current as
specified by the manufacturer's corrosion control document or approved
Lessee's corrosion control program.
S. The Return Aircraft shall be in compliance with all mandatory
environmental, noise, air pollution and other standards prescribed by the
respective regulatory authorities.
* Lessee shall be responsible for removing such Items of Equipment for the
In-Use Aircraft returned to Lessor.
Pre-Delivery and Return Inspection and Acceptance Flight Ground Inspection
- --------------------------------------------------------------------------
The In-Use Aircraft shall be made available to Lessee on or before
delivery and the Return Aircraft shall be made available to Lessor on or
before return of the Return Aircraft, for ground inspection(s) at either
Tulsa, Oklahoma Airport or another Airport satisfactory to Lessor on or
before the due date for delivery or return, as the case may be, in order that
Lessee or Lessor, as the case may be, may reasonably satisfy itself that the
Aircraft is in the condition required under this Agreement. The manuals and
technical records shall be made available to Lessee or Lessor, as the case
may be, for inspection during such period prior to delivery thereof as Lessee
reasonably requires or during such period prior to return thereof as Lessor
reasonably requires. Such inspections shall be conducted in coordination
with Lessee's and Lessor's respective personnel and Lessee or Lessor, as the
case may be, shall be allowed reasonable access to the Aircraft, as the case
may be, to verify compliance with the conditions set forth in this Agreement.
Lessee or Lessor, as the case may be, shall immediately state orally and
confirm in writing within one (1) business day of the relevant inspection to
Lessee or Lessor, as the case may be, each claim of discrepancy. To
facilitate such inspection Lessor or Lessee, as the case may be, will provide
reasonable office
-7-
<PAGE>
accommodation at or near the inspection site (equipped with a telephone and
having access to a photocopier, telecopier and word processing facilities)
provided, however, that Lessee or Lessor, as the case may be, shall indemnify
Lessor or Lessee, as the case may be, for all out-of-pocket costs so incurred
by Lessee or Lessor.
Documents Required for Return
- -----------------------------
Listed below are the Lessor's documents or Lessee's equivalent documents
that will be required upon delivery of the In-Use Aircraft by Lessor and the
return of the Return Aircraft by Lessee. All documents shall be valid at
time of return and shall incorporate the most recent revisions issued by the
document's controlling regulatory agency:
1. Standard Airworthiness Certificate
2. Certificate of Sanitary Construction
3. A copy of Maintenance Check Manual
4. Airworthiness Directive Compliance Status including Repetitive and
Method of Compliance
5. Status of Time Controlled and Life Limited Parts; Status of
Airframe, Engines, Auxiliary Power Unit and Land Gear
6. Report covering any Minor Accidents or Repairs on the Aircraft with
Supporting Documentation
7. A review of the Aircraft Log Books
8. FAR Compliance Status including Method of Compliance
9. Alteration/Repair/Modification Records
10. Service Bulletin Status List
11. AOL/Service Letter Status List
12. Supplemental type Certificates issued for Aircraft and Equipment as
held by operator
13. List of Open Items
14. Weight and Balance Records
-8-
<PAGE>
The following Lessor's manuals or Lessee's equivalent manuals shall be
furnished in hard copy or reproducible film or in the then current form in
which it is used by Lessor (upon delivery) and Lessee (upon return). Unless
otherwise indicated, one copy of each of the following manuals or equivalents
will be provided to Lessee or Lessor, as the case may be. Additional copies
will be or have been provided pursuant to that certain Manuals Supplement
between Lessor and Lessee, the Interim Aircraft Lease Agreements, the Interim
Aircraft Maintenance Agreement or pursuant to the provisions hereof and all
copies of each of the following shall be returned. All manuals will be valid
at time of return and shall include the most recent revisions issued by the
documents controlling regulatory agency.
1. FAA Approved Flight Manual
2. Flight Crew Operational Manual
3. Performance Manual
4. Airframe Maintenance Manual
5. Airframe Illustrated Parts Catalog
6. Airframe Structures Repair Manual
7. Wiring Diagram Manual
8. Engine Maintenance Manual
9. Engine Illustrated Parts Manual
10. Weight and Balance Records
11. Minimum Equipment List
12. Part Number Conversation List - Operator to Manufacturer P/N
13. Red Book for each microfilm library
NOTE: All documents and manuals must be in English.
Return of Other Engines. In the event that any engine not owned or leased by
Lessor shall be installed on an Airframe (upon return), such engine shall be
an engine suitable to be a Replacement Engine hereunder. Upon return of the
Return Aircraft, Lessee shall duly convey to Lessor good title to any such
engine, free and clear of all Liens and, upon such conveyance, Lessee will
furnish Lessor with a full warranty bill of sale, in form and
-9-
<PAGE>
substance reasonably satisfactory to Lessor, with respect to such engine and
take such other action as may be reasonably requested in order that title to
such engine may be duly and properly vested in Lessor to the same extent as
the Engine replaced thereby. Upon conveyance by Lessee of good title to such
engine to Lessor, and upon full compliance by Lessee with its obligations
hereunder, at Lessee's expense, Lessor will transfer to Lessee all rights,
title and interest originally conveyed to Lessor in an Engine constituting
part of any Aircraft but not installed on the Airframe at the time of the
return of the Airframe "as-is, where-is", free and clear of Lessor's Liens
but otherwise without recourse or warranty, express or implied to Lessee.
-10-
<PAGE>
EXHIBIT D-1
ADDITIONAL RETURN CONDITIONS
At the time of return, the Return Aircraft shall be returned to Lessor
as follows:
(i) All time controlled and life limited components of the
Serviced Engines shall have at least the same number of hours and
cycles (as appropriate) remaining until the applicable limit of
hours and cycles as set forth in Lessee's or manufacturer's
Maintenance Manual as existed at the Delivery Date.
(ii) All time controlled and life-limited components, the
landing gear, and other Items of Equipment shall have at least the
same number of hours, cycles or days (as appropriate) remaining
until the applicable limit of hours, cycles and days as set forth
in Lessee's or manufacturer's Maintenance Manual as existed at the
Delivery Date.
(iii) The Airframe shall have at least the same number of flight hours
remaining to the next "C-check" (based on a 7200 hours "C-check"
interval) as existed at the Delivery Date.
(iv) Immediately prior to return of the Return Aircraft to Lessor, the
Aircraft shall have received a "B-check" and shall have fewer than
four (4) flights and ten (10) flight hours since such "B-check"
(based on a 400 hour "B-check" interval) as existed at the Delivery
Date.
<PAGE>
EXHIBIT E
This Exhibit E has been intentionally omitted for recording purposes, as
the parties deem the information contained therein to be confidential
financial information.
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<PAGE>
SCHEDULE I
This Schedule I has been intentionally omitted for recording purposes,
as the parties deem the information contained therein to be confidential
financial information.
<PAGE>
SCHEDULE 4(d)(i)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
<PAGE>
SCHEDULE 4(d)(iv)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
<PAGE>
SCHEDULE 4(d)(v)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
<PAGE>
SCHEDULE 4(d)(vi)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
<PAGE>
SCHEDULE 4(d)(vii)
Refer to letter dated December 15, 1995 from Lessee to Lessor.
<PAGE>
Exhibit 10.5
SEPARATION AGREEMENT
AND COMPLETE SETTLEMENT AND RELEASE OF ALL CLAIMS
I.
PARTIES TO THE AGREEMENT
This Separation Agreement and Complete Settlement and Release of All
Claims ("Agreement") is made between BRUCE R. NOBLES ("Executive") and
HAWAIIAN AIRLINES, INC. ("Hawaiian"). Executive and Hawaiian are
collectively referred to as the "Parties."
II.
BACKGROUND AND RECITAL
A. By mutual agreement, Executive's active employment with Hawaiian
will end as of the close of business on March 31, 1997.
B. The Parties wish to resolve all potential claims Executive may have
arising out of or related to Executive's employment by Hawaiian.
III.
CLAIMS
For the purpose of this Agreement, the term "Claims" shall be defined as
any and all claims, counterclaims, cross-claims, third-party complaints,
demands, causes of action, obligations, controversies, liabilities and
damages of any kind, name, nature or description, whether based on contract,
tort, fraud, misrepresentation, statute or any other theory which the Parties
had, have or may have against each other and/or related persons and/or past
and present officers and directors and/or entities either at law, or in
equity, whether now known, or unknown, and whether suspected or unsuspected,
and which have been, or could have been, alleged by the Parties in a lawsuit
or administrative or other legal proceeding or forum of any nature or which
are based upon, arose from, related to, or are connected in any way
whatsoever with: (i) the hiring, employment, or cessation of employment of
Executive; or (ii) any and all claims arising from any alleged violations by
Hawaiian and/or past or present officers and directors and/or related persons
and/or entities of any federal, state or local statutes, ordinances or common
laws, including, but not limited to, Title VII of the Civil Rights Act of
1964, the Employee Retirement Income Security Act, and all federal and state
laws and regulations regarding employment matters.
As used in this Agreement the term "Claims" expressly does not include
any of the obligations under this Agreement. The duties, covenants and
warranties of the Parties under this Agreement shall expressly survive the
execution of this Agreement.
<PAGE>
IV.
CONSIDERATION
In consideration of the mutual covenants contained in this Agreement,
the Parties hereby agree as follows:
A. SETTLEMENT SUM. If and only if Executive does not breach any term
or condition in this Agreement, Hawaiian shall provide Executive with the
following:
1. Pay Executive the sum of Three Hundred Thirty-One Thousand
Dollars ($331,000.00) in equal semi-monthly payments beginning on April 1,
1997 and continuing through March 31, 1998.
2. Provide Executive with full medical, dental and insurance
benefits as provided to senior executives of Hawaiian through March 31, 1998.
3. a. Extend the last exercise date of Executive's existing
stock options granted under Hawaiian's 1994 Stock Option Plan (including
those transferred to Executive's former wife pursuant to their Property
Settlement Agreement) until June 30, 1999.
b. During the term of Executive's options, extend to
Executive and his former spouse the benefits of any amendments, other than
maturity changes, awarded to the other option holders.
4. Provide Executive travel benefits on Hawaiian as a senior
executive through March 31, 1999.
5. Provide Executive with travel benefits on other airlines as a
continuing employee of Hawaiian through the expiration dates of the current
year's pass cards, with the exception of American Airlines. The intention is
that Executive shall be entitled to Executive's current boarding priority
category.
6. Provide free shipment of Executive's personal effects from
Hawaii to Dallas, Texas, including pick up and delivery.
7. Provide Executive with COMAT cargo benefits on Hawaiian as if
he were employed by Hawaiian through March 31, 1998.
8. Provide Executive with a container freight employee discount
between Hawaii and the U.S. mainland as if he were employed by Hawaiian
through March 31, 1998.
9. Provide Executive with the use of his leased vehicle through
March 31, 1997.
2
<PAGE>
10. For the nine-month period from April 1, 1997, it will be
assumed that employee status for income tax on personal travel will apply.
After that, taxable travel will be valued at no higher than FTP rates unless
changes in federal tax law, regulations or practice dictate otherwise.
11. Hawaiian will continue to assist Executive in making required
personal SEC filings relating to Hawaiian securities.
The consideration stated in this paragraph IV.A. in its entirety is
hereinafter referred to as the "Settlement Sum." If Executive breaches in a
material way any term of this Agreement, he shall immediately forfeit all
rights under this Agreement to any portion of the Settlement Sum that remains
to be paid or provided as of the date of the breach. In the event of such
breach, the Executive's duties under this Agreement will remain, and
Executive acknowledges that his receipt of any portion of the Settlement Sum
shall be good and adequate consideration for all of the duties he has
undertaken in this Agreement.
Prior to the time that Executive's medical and dental benefits cease or
are terminated, Hawaiian shall provide Executive with information regarding
his right to receive COBRA benefits.
B. ACCRUAL OF BENEFITS. Executive agrees and understands that his
active employment with Hawaiian will cease as of March 31, 1997 and that
final separation from Hawaiian's payroll will occur on March 31, 1998. Both
Parties agree that the Settlement Sum provided by paragraph IV.A. is
consideration for this Agreement and is not a wage or employment benefit.
C. COMPANY PROPERTY. Executive shall immediately return to Hawaiian
all company issued items, including but not limited to office keys, computer
equipment, disks and/or electronic data. Immediately after Hawaiian's
payment obligations pursuant to paragraph IV.A. above cease or are
terminated, Executive shall immediately return to Hawaiian his A.O.A. badge
and Friendship Program vouchers. On or before March 31, 1998, Executive
shall return to Hawaiian his employee identification badge and annual pass
card.
D. MUTUAL RELEASE. The Parties, and their respective and related
entities, for themselves and each of their heirs, and their executors,
administrators, or personal representatives, hereby fully and finally waive,
release and discharge each other and their respective and related entities,
and their stockholders, partners, related partnerships and partners,
subsidiaries, parent corporations, affiliate corporations, corporations under
common control, past and present employees, past and present officers, past
and present directors, agents, representatives, brokers, attorneys, insurers,
excess insurers, reinsurers, indemnitors, subcontractors, consultants,
suppliers, and successors and/or assigns from any and all Claims.
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E. ABSOLUTE BAR. This Agreement is an absolute bar to all Claims
released hereunder. The Parties agree that they will not at any time file
any suit or make any claim or demand against each other or related persons or
entities concerning the Claims released hereunder. The Parties also
specifically warrant that they have no other claims and will bring no other
claim against each other and/or related persons and/or entities.
F. NO PENDING CHARGES OR COMPLAINTS. The Parties warrant that neither
they nor any other person or entity have filed or reported any complaint,
charge, or claim of any nature with any court, agency, or other governmental
office or entity against each other regarding the Claims. The Parties agree
that they will not file or report or permit the filing or reporting of any
complaint, charge, or claim of any nature with any court, agency, or other
governmental office or entity regarding the Claims.
V.
FURTHER AGREEMENTS, COVENANTS AND REPRESENTATIONS
A. CONSULTING. Hawaiian may at its initiative call upon Executive for
services during the nine month period from April 1, 1997 at per diem rates to
be agreed plus expenses for car and lodging, separate from the Settlement
Sum. Executive shall be issued an IRS Form 1099 at year-end for all such
income derived as a result of these services.
B. RIGHT OF REVOCATION. Executive has a period of seven (7) full days
following the execution of this Agreement by all Parties hereto to revoke
this Agreement by providing written notice of such revocation to Hawaiian.
This Agreement shall not become effective or enforceable until this seven (7)
day revocation period has expired without Executive having exercised his
right of revocation.
C. FURTHER ACKNOWLEDGMENTS. Executive fully understands, acknowledges
and agrees that among the various rights and claims he is waiving, releasing
and forever discharging by the execution of this Agreement are all rights and
claims arising under the Federal Age Discrimination in Employment Act of
1967, 29 U.S.C. section 621 et seq. Executive further understands,
acknowledges and agrees that he:
1. Has been given at least twenty-one (21) full days within which
to consider this Agreement before executing it;
2. Has carefully read and fully understands all of the provisions
of this Agreement;
3. Is, by the execution of this Agreement, waiving, releasing and
forever discharging Hawaiian from all claims for relief, causes of action and
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liabilities of any nature whatsoever, known or unknown, that he has or may
have against Hawaiian, individually and/or collectively, including but not
limited to claims of age discrimination;
4. Knowingly and voluntarily agrees to all of the terms of this
Agreement;
5. Knowingly and voluntarily intends to be legally bound by all
of the terms of this Agreement;
6. Was previously advised, and is hereby further advised, in
writing to consult with an attorney of his choice before executing this
Agreement;
7. Has a period of seven (7) full days following the execution of
this Agreement by all Parties hereto to revoke this Agreement by providing
written notice of such revocation to Hawaiian and was previously advised, and
is hereby further advised, in writing that this Agreement shall not become
effective or enforceable until this seven (7) day revocation period has
expired without Executive having exercised his right of revocation; and
8. Understands that rights or claims under the Federal Age
Discrimination in Employment Act of 1967, 29 U.S.C. section 621 et seq., that
may arise after the date when this Agreement is executed by all Parties
hereto are not waived.
D. ACCEPTANCE OF AGREEMENT. If Executive does not revoke this
Agreement within the seven (7) day revocation period described in paragraph
IV.B. above, Executive agrees to mail or hand deliver to Rae A. Capps the
original of a letter he has executed, in the form attached hereto as Exhibit
"A," confirming Executive has not exercised his right to revoke. Within
seven (7) days after Hawaiian receives the original of said letter as
executed by Executive, Hawaiian agrees to commence the settlement
consideration described in paragraph IV.A. above.
E. INDEMNITY AND ENFORCEMENT OF THIS AGREEMENT. Each Party agrees that
if he or it shall breach this Agreement, said Party shall fully indemnify and
hold harmless the other Party from the consequences of such breach. The
liability of any Party in any action or other proceeding for breach of this
Agreement shall include not only the monetary amount of any judgment which
may be awarded but also all of the damages, costs and reasonable attorneys'
fees and costs incurred by the non-breaching party.
F. ALL CLAIMS. As a further inducement for this Agreement, the Parties
expressly waive the provisions of any and all ordinances, statutes, and
common law principles and doctrines providing that a general release may not
extend to claims which they did not know or suspect to exist in their favor
at the time of executing
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the release, which if known by them might have materially affected their
settlement with each other and/or related persons and/or entities.
The Parties acknowledge that they understand that this Agreement shall
extend and apply to all unknown, unsuspected and unanticipated Claims, and/or
losses, and/or damages, which are related to the Claims, as well as those
which are specifically referred to herein, and the Parties hereby affirm that
they have affixed their signatures hereto voluntarily and of their own free
will and accord.
G. FACTS. The Parties understand and expressly accept and assume the
risk that the facts with respect to which this Agreement is executed may be
found hereafter to be other than or different from the facts now believed by
them to be true, and agree that this Agreement shall remain effective
notwithstanding any such differences in fact.
H. SERIOUSNESS OF CLAIMS. The Parties further understand that there
is a risk that their damages or Claims may be or may become more serious than
they now expect or anticipate. The Parties expressly accept and assume this
risk, and agree that this Agreement shall be and remain effective
notwithstanding any such misunderstanding as to the seriousness of their
damages or Claims.
I. OWNERSHIP OF CLAIMS. The Parties represent and warrant to each
other that no person other than themselves had, or has, an interest in the
Claims and that they have not sold, assigned, transferred, conveyed or
otherwise disposed of any of the Claims.
J. HEADINGS. The headings included in this Agreement are for
convenience only and do not in any way limit, alter or affect the matters
contained in this Agreement or the paragraphs that they encaption.
K. ALTERATION OF THIS AGREEMENT. This Agreement shall not be altered,
amended, modified or otherwise changed in any respect or particular
whatsoever, except in writing duly executed by all the Parties. Each Party
acknowledges and agrees that he or it will make no claim, at any time or
place, that this Agreement has been verbally altered or modified in any
respect whatsoever.
L. ATTORNEYS' FEES. The Parties will each bear their own attorneys'
fees and costs to date relative to this Agreement, [except that Hawaiian shall
pay for Executive's attorneys' fees relating to the review and execution of this
Agreement].
M. AUTHORITY. The Parties warrant to each other that each of them has
full power, authority and capacity to execute this Agreement. Executive
acknowledges that he has been informed of his right to consult with an
attorney prior to entering into this Agreement.
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N. CONFIDENTIALITY. As a condition of this Agreement, Executive
agrees not to reveal any information concerning the Claims, the terms and
conditions of this Agreement, or the negotiations leading to this Agreement
or the amount or range of amount of the Settlement Sum and/or any other
aspect of settlement made by or on behalf of the Parties to any third person,
except his immediate family members, his attorney (if any), as necessary for
tax purposes, or as otherwise required by law. Anyone to whom the terms are
disclosed as allowed by this Agreement shall be advised of this
confidentiality requirement.
As a further condition of this Agreement, Executive warrants that
he has not disclosed the amount of the Settlement Sum, except as permitted
above, and that he will not and has not, in any manner, publicized the
existence of the Settlement Sum. Executive further warrants that he has not
and will not disclose any confidential or proprietary information of Hawaiian
which he obtained during his employment with Hawaiian except as permitted in
writing signed by an authorized representative of Hawaiian.
O. SUPPORT OF THE COMPANY. Executive acknowledges and understands
that the Settlement Sum pursuant to this Agreement is contingent upon his
support of Hawaiian both in the public domain and within the Company.
Executive agrees that in the aforementioned twelve (12) month period, he will
recommend and promote Hawaiian and not disparage it or its past or present
directors, officers, employees or agents in any way or manner.
P. DISPUTES. Any dispute which arises under this Agreement shall be
resolved solely by binding arbitration under the rules of the American
Arbitration Association with arbitration to take place in Honolulu, Hawaii.
Q. COMPLETE AGREEMENT. This Agreement contains the entire agreement
between the Parties with respect to the subject matter hereof.
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DATED: Honolulu, Hawaii. February __ 1997.
HAWAIIAN AIRLINES, INC.
By _______________________________
John W. Adams
Chairman
By _______________________________
Rae A. Capps
Vice President, General
Counsel and Corporate Secretary
"HAWAIIAN"
_______________________________
BRUCE R. NOBLES
"EXECUTIVE"
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Exhibit 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), effective as of April 14, 1997
("Effective Date") is entered by and between Paul John Casey ("Employee") and
Hawaiian Airlines, Inc. ("Company").
The Company desires to establish its right to the continued services of
the Employee, in the capacity described below, on the terms and conditions
and subject to the rights of termination hereinafter set forth, and the
Employee is willing to accept such employment on such terms and conditions,
In consideration of the mutual agreements hereinafter set forth, the
Employee and the Company have agreed and do hereby agree as follows:
1. EMPLOYMENT AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY.
The Company does hereby employ, engage, and hire the Employee as President
and Chief Executive Officer of the Company and the Employee does hereby
accept and agree to such hiring, engagement, and employment. The Employee's
duties during the Employment Period (defined below) shall be such executive,
managerial and reporting duties as are appropriate for a President/CEO and
such other duties as the Board of Directors of the Company shall from time to
time prescribe and as provided in the Bylaws of the Company. The Employee
shall devote his full time, energy, and skill to the performance of his
duties for the Company and for the benefit of the Company, reasonable
vacations authorized by the Company's Board of Directors and reasonable
absences because of illness excepted. Furthermore, the Employee shall
exercise due diligence and care in the performance of his duties to the
Company under this Agreement.
2. TERM OF AGREEMENT. This Agreement ("Term") shall commence on the
Effective Date and shall continue for a period of eighteen (18) months;
provided; however, that on the first day of each calendar month commencing
one month following the Effective Date, the Term shall be extended one
additional month unless either party shall have given written notice to the
other that it does not wish to extend the Term. The period of time
commencing on the Effective Date and ending on the expiration date of the
Term, or, if earlier, the date of termination of the Employee's employment
("Termination Date") under this or any successor agreement shall be referred
to as the "Employment Period." If (a) Employee is still employed with the
Company on April 14, 1999 or (b) the Company is involved in a merger or other
change in control as provided in PARA 9, and neither party has prior to that
date given notice that it does not wish to extend the term of this Agreement,
the term hereof will, on April 14, 1999 or the effective date of the merger
or change of control, be extended from 18 (eighteen) months to 24
(twenty-four) months and thereafter it will be extended month-by-month, as
provided above.
<PAGE>
3. COMPENSATION
(a) BASE SALARY. The Company shall pay the Employee, and the
Employee agrees to accept from the Company in full payment for his services
to the Company, a base salary at the rate of Three Hundred Thousand U.S.
Dollars ($300,000) per year ("Base Salary"), payable in equal semi-monthly
installments or at such other time or times or times as the Employee and the
Company shall agree. Employee's Base Salary shall be reviewed on a calendar
year basis, at least annually by the Company and may be increased as
determined by the Company's Board of Directors in its sole and absolute
discretion. In addition to the foregoing and in consideration of Employee
entering into this Agreement, Employee shall receive an initial bonus of
Seventy Thousand U.S. Dollars ($70,000.00), payable on April 14, 1997.
Provided, however that if Employee is hereafter able to obtain any bonus from
his present employer; the bonus to be paid by the Company will be reduced by
an amount equal to fifty percent (50%) of the amount of such bonus, up to a
maximum reduction of Twenty Thousand U.S. Dollars ($20,000.00). Thus, in no
circumstances will Company's obligation be less than Fifty Thousand U.S.
Dollars ($50,000.00). Company understands that it is unlikely that
Employee's current employer will pay him any bonus.
(b) PERFORMANCE BONUS-BOARD OF DIRECTORS' DISCRETION. Employee
shall be eligible to receive an annual performance bonus based upon the
Company's actual performance compared to the Company's business plan(s).
Promptly after the execution of this Agreement Employee and a representative
of Company shall develop a new package of financial incentives for Employee
and Company's other senior management. This package shall include, but not be
limited to stock incentives and cash performance bonuses.
4. FRINGE BENEFITS. Employee shall be entitled to participate in any
benefit programs adopted from time to time by the Company for the benefit of
its executive employees, and Employee shall be entitled to receive such other
fringe benefits as may be granted to him from time to time by the Company's
Board of Directors.
(a) BENEFIT PLANS. Employee shall be entitled to participate in
any benefit plans relating to stock options, stock purchases, pension,
thrift, profit sharing, life and disability insurance, medical coverage,
executive medical coverage, education, or other retirement or employee
benefits available to other executive employees of the Company, subject to
any restrictions (including waiting periods) specified in such plans.
(b) AUTOMOBILE. The Company shall provide Employee with an
automobile allowance of $800.00 per month.
(c) CLUB DUES. The Company shall pay all dues and similar charges
(other than initiation fees) for one combination social and golf club, one
business meal club and one health or fitness club.
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(d) TRAVEL BENEFITS. Employee and his spouse shall be entitled to
travel benefits on Company flights (but not charter flights) at the PS2F/PS2Y
category. Employee's dependents shall be entitled to travel benefits on
Company flights (but not charter flights) at the SA2F/SA1Y category.
Employee and his dependents shall be entitled to travel benefits on other
airlines at the sole discretion of such airlines, at a comparable level to
that provided to other Company executive officers.
(e) 1996 INCENTIVE STOCK PLAN. On February 28, 1996, Employee
shall be granted 150,000 options under the Company's 1996 Incentive Stock
Plan, contingent upon this Agreement becoming effective on April 14, 1997.
The exercise price will be equal to the closing price of the Company's stock
on February 28, 1997. The vesting period and other terms will be determined
by the Compensation Committee.
(f) EXECUTIVE LONG-TERM DISABILITY INSURANCE PLAN. Subject to the
applicable waiting periods, Employee will be included in the Company's
Executive Long-Term Disability Insurance Plan, as it may be modified from
time to time, at the Company's expenses.
(g) BUSINESS EXPENSES. The Company shall reimburse the Employee
for any and all necessary, customary, and usual expenses, properly received
in accordance with Company policies, incurred by Employee on behalf of the
Company.
5. CONFIDENTIAL INFORMATION. Employee recognizes that by reason of his
employment by and service to the Company he will occupy a position of trust
with respect to business and technical information of a secret or
confidential nature which is the property of the Company which will be
imparted to him from time to time in the course of the performance of his
duties hereunder. Employee acknowledges that such information is a valuable
and unique asset of the Company and agrees that he shall not during or after
the Term of this Agreement, use or disclose directly or indirectly any
confidential information of the Company to any person, except that Employee
may use and disclose to authorized personnel of the company such confidential
information as is reasonably appropriate in the course of the performance of
his duties hereunder. Confidential information of the Company shall include
all information and knowledge of any nature and in any form relating to the
Company including but not limited to, business plans; development projects;
computer software and related documentation and materials; designs,
practices, processes, methods, know-how and other facts relating to the
business of the Company; advertising, promotions, financial matters, sales
and profits figures, customers or customer lists. Confidential information
shall not include any information that is or shall become publicly known
through no fault of the Employee and any information received in good faith
from a third party who has the right to disclose such information and who has
not received such information, either directly or indirectly, from the
Company.
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6. TERMINATION OF EMPLOYEE'S EMPLOYMENT.
(a) DEATH. If the Employee dies while employed by the Company, his
employment shall immediately terminate. The Company's obligation to pay the
Employee's Base Salary shall cease as of the date of Employee's death.
Thereafter, Employee's beneficiaries or his estate shall receive benefits in
accordance with the Company's retirement, insurance and other applicable
programs and plans then in effect.
(b) DISABILITY. If, as a result of Employee's mental or physical
incapacity, Employee shall be unable to perform the services for the Company
contemplated by this Agreement in the manner in which he previously performed
them during an aggregate of one hundred twenty (120) business days in any
consecutive seven (7) month period ("Disability"). Employee's employment may
be terminated by the Company for Disability. During any period prior to such
termination during which Employee is absent from the full-time performance of
his duties with the Company due to Disability, the Company shall continue to
pay Employee his Base Salary at the rate in effect at the commencement of
such period of Disability. Any such payments made to the Employee shall be
reduced by amounts received from disability insurance obtained or provided by
the Company, and by the amounts of any benefits payable to Employee, with
respect to such period, under the Company's Executive Long-Term Disability
Plan. Subsequent to the termination provided for in this Section 6(b),
Employee's benefits shall be determined under the Company's retirement,
insurance, and other compensation programs then in effect in accordance with
the terms of such programs.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate Employee's employment under this Agreement for "Cause" at any time
prior to expiration of the Term, only upon the occurrence of any one or more
of the following events:
(i) The material breach of this Agreement by Employee,
including without limitation, repeated willful neglect of Employee's duties,
Employee's material lack of diligence and attention in performing services as
provided in this Agreement, or Employee's repeated willful failure (other
than any such failure resulting from the termination of the Employee's
employment for death, disability, retirement or good reason, as provided
elsewhere in this Agreement) to implement or adhere to policies established
by, or directives of, the Company's Board of Directors.
(ii) Conduct of a criminal nature that may have an adverse
impact on the Company's reputation and standing in the community; or
(iii) Fraudulent conduct in connection with the business
affairs of the Company, regardless of whether said conduct is designed to
defraud the Company or others.
In the event of termination for cause or resignation by the Employee
without good reason, the Company's obligation to pay Employee's Base Salary
for any periods after the Termination Date shall cease as the Termination
Date. If Employee's employment is terminated
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for cause, Employee's employment may be terminated immediately without any
advance written notice.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company shall
have the right to terminate this Agreement prior to the expiration of Term,
at any time, without cause. In the event the Company shall so elect to
terminate this Agreement, the Employee shall receive compensation pursuant to
the provisions of Section 7 hereof.
(e) TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The Employee
shall have the right to terminate this Agreement for good reason. For
purposes of this Agreement, "good reason" shall mean the occurrence, without
the Employee's prior written consent, of any one or more of the following
events:
(i) The assignment to the Employee of any duties that are
materially inconsistent with, or reflect a material continuing reduction of
the powers and responsibilities, or a change of the Employee's reporting
responsibilities, or a material improper intervention by the Company's Board
of Directors in the Employee's ability to materially perform the duties and
responsibilities.
(ii) The Company's material breach of any of the provisions of
this Agreement, or a material change in the conditions of Employee's
employment (e.g. including, without limitation, a failure by the Company to
provide the Employee with incentive compensation and benefit plans that
provide comparable benefits and amounts as such type programs in effect as of
the Effective Date or as provided to other Company executive officers, etc.);
and
(iii) The relocation of the Company's principal executive
officers to a location outside of the Honolulu areas or the Company's
requiring the Employee to be based anywhere other than the Company's
principal executive offices, except for travel on Company business to an
extent substantially consistent with the Employee's position and
responsibilities.
The Employee agrees to provide the Company thirty (30) days' prior
written notice of any termination for good reason, during which 30-day period
the Company shall have the right to cure the circumstances giving rise to the
good reason stated in such notice. In the event of termination for good
reason, the Employee shall receive compensation pursuant to the provision of
Section 7 hereof.
(f) RETIREMENT. The Employee may terminate this Agreement on
account of retirement. For purposes of this Agreement, retirement shall have
the same meaning as provided for in the Company's defined benefit plan
covering Employee. Employee shall provide six (6) months notice to the
Company of Employee's intent to terminate this Agreement on account of
retirement. The Employee shall not be entitled to any further payments of
compensation or other benefits provided under Section 3 of this Agreement
after the Termination
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Date, except for any amounts earned and any accrued but unpaid retirement
benefit payment due the Employee from any Company sponsored plan.
7. COMPENSATION UPON TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR
BY THE EMPLOYEE FOR GOOD REASON. If the Employee's employment shall be
terminated (i) by act of the Company other than for cause, or (ii) by the
Employee for good reason, the Employee shall be entitled to the following
benefits:
(a) PAYMENT OF UNPAID BASE SALARY. The Company shall immediately
pay the Employee any portion of the Employee's Base salary accrued, but not
paid, prior to the Termination Date.
(b) CONTINUED PAYMENT OF BASE SALARY. The Employee shall receive,
on a monthly basis, the Base Salary that would have been paid to the Employee
pursuant to this Agreement had the Employee continued to be employed for the
remaining term of this Agreement (i.e., eighteen (18) months or twenty-four
(24) months, depending upon the Termination Date)(such Base Salary for such
period being equal to the Employee's Base Salary in effect as of the
Termination Date); plus (ii) an amount equal to the bonus payments that would
have been payable to the Employee pursuant to this Agreement. These
post-termination bonus payments will be equal to the greater of (A) the total
of any performance bonus or bonuses paid to the Employee pursuant to Section
3(b) in the fiscal year of the Company which ended immediately prior to the
fiscal year in which the Termination Date occurs, and (B) the average of the
annual performance bonuses (excluding the signing bonus and any special bonus
not based on performance) paid to Employee by the Company during the three
prior fiscal years or, if the Employee has been employed with the Company
less than three fiscal years, during the term of Employee's tenure with the
Company.
(c) CONTINUATION OF FRINGE BENEFITS. The Company shall continue to
provide the Employee with all Fringe Benefits set forth in Section 4
throughout the remaining term of this Agreement (i.e., eighteen (18) months
or twenty-four (24) months, depending upon the Termination Date), as if the
Employee's employment under the Agreement had not been terminated. If, as
the result of terminating of Employee's employment, Employee and/or his
otherwise eligible dependents or beneficiaries shall become ineligible for
benefits under any one or more of the Company's benefit plans, the Company
shall continue to provide the Employee and his eligible dependents or
beneficiaries with benefits at a level at least equivalent to the level of
benefits for which the Employee and his dependents and beneficiaries were
eligible under such plans immediately prior to the Termination Date.
(d) STOCK OPTIONS. Notwithstanding any provision in any applicable
Company benefit plans or agreements (including, but not limited to, those
relating to stock options, stock appreciation rights, restricted stock
awards, stock purchases, pensions, thrift, profit sharing, or other
retirement or employee benefits) to the contrary, all rights to such benefits
previously granted to Employee shall become immediately fully vested and
exercisable as of the Termination Date and shall remain exercisable for a
period thereafter of one (1) year.
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The provision of this Section 7(d) shall supersede, insofar as concerns
Employee, any such plans or agreements of the Company referred to above as of
the Effective Date.
(e) NO MITIGATION REQUIRED; NO OTHER ENTITLEMENT TO BENEFITS UNDER
AGREEMENT. The Employee shall not be required in any way to mitigate the
amount of any payment provided for in this Section 7, including, but not
limited to, by seeking other employment, nor shall the amount of any payment
provided for in this Section 7 be reduced by any compensation earned by the
Employee as the result of employment with another employer after the
Termination Date, or otherwise. Following a termination governed by this
Section 7, the Employee shall not be entitled to any compensation or benefits
beyond those set forth in this Agreement, except as may be separately
negotiated by the parties and approved by the Board of Directors of the
Company in writing in conjunction with the termination of Employee's
employment under this Section 7.
8. NONCOMPETITION PROVISIONS.
(a) RIGHT TO COMPANY MATERIALS. Employee agrees that all styles,
designs, lists, materials, books, files, reports, correspondence, records,
and other documents ("Company Materials") used, prepared, or made available
to Employee, shall be and shall remain the property of the Company. Upon the
termination of employment or the expiration of this Agreement, all Company
Materials shall be returned immediately to the Company, and Employee shall
not make or retain any copies thereof.
(b) ANTISOLICITATION. Employee promises and agrees that during the
term of this Agreement he will not influence or attempt to influence
customers or suppliers of the Company or any of its present or future
subsidiaries or affiliates, either directly or indirectly, to divert their
business to any individual, partnership, firm, corporation or other entity
then in competition with the business of the Company, or any subsidiary or
affiliate of the Company.
(c) SOLICITING EMPLOYEES. During the term of this Agreement and
for the eighteen (18) month period commencing on the termination Date,
Employee promises and agrees that he will not directly or indirectly solicit
any of the Company's employees to work for any business, individual,
partnership, firm, corporation, or other entity then in competition in Hawaii
with the business of the Company or any subsidiary or affiliate of the
Company.
9. MERGER OR OTHER CHANGE IN CONTROL. Employee shall have the right to
terminate this Agreement for good reason if at any time within ninety (90)
days after completion of (i) a merger of the Company with any other
corporation as a result of which the shareholders of the Company immediately
prior to such merger fail to hold at least a majority of the voting
securities of the surviving corporation in such merger immediately after the
merger, and members of the pre-merger Board of Directors of the Company,
elected by the pre-merger shareholders of the Company or by a majority of the
directors of the Company who were elected by the pre-merger stockholders of
the Company, fail to constitute a majority of the Board of Directors of the
surviving corporation following completion of the merger, or (ii) a sale of
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all or substantially all of the assets of the Company to another corporation
if (x) a majority of the directors of the ultimate parent of the purchaser
immediately following the purchase and sale were not members of the Board of
Directors of the Company immediately prior to such sale and y) shareholders
of the Company immediately prior to such sale do not hold a majority of the
voting securities of the ultimate parent of the purchasing corporation
following completion of such sale; or (iii) a purchase by another person,
firm, or corporation of a majority of the voting securities of the Company,
and following completion of such sale, members of the Board of Directors of
the Company elected by shareholders of the Company (other than such
purchaser) fail to constitute a majority of the Board of Directors of the
Company.
10. NOTICES. All notices and other communications under the Agreement
shall be in writing and shall be given by facsimile, first class mail,
certified or registered with return receipt requested, or express mail and
shall be deemed to have been duly given three (3) days after mailing or
twenty-four (24) hours after transmission of a facsimile to the respective
persons named below:
If to the Company: Hawaiian Airlines, Inc.
Attn: Chairman
3375 Koapaka Street, Suite G-350
Honolulu, Hawaii 96819
with a copy to the General Counsel
If to Employee: Paul John Casey
1221 Victoria Street, #2805
Honolulu, Hawaii 96814
Fax (808) 523-1289
Either party may change such party's address for notices by notice duly
given pursuant hereto.
11. ATTORNEY'S FEES. In the event judicial or quasi-judicial
determination is necessary of any dispute arising as to the parties' rights
and obligations hereunder, the Company and the Employee shall each bear their
own respective attorneys' fees and costs associated with such dispute.
12. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
supersedes any and all prior agreements and understandings between the
parties with respect to employment or with respect to the compensation of the
Employee by the Company from and after the Effective Date.
13. ASSIGNMENT: SUCCESSORS. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided that, in the event of the merger,
8
<PAGE>
consolidation, transfer or sale of all or substantially all of the assets of
the Company with or to any other individual or entity, this Agreement shall,
subject to the express provisions hereof, be binding upon and inure to the
benefit of such successor and such successor shall discharge and perform all
the promises, covenants, duties, and obligations of the Company hereunder.
14. GOVERNING LAW. This Agreement and the legal relations thus created
between the parties hereto shall be governed by and construed under and in
accordance with the laws of the State of Hawaii.
15. ARBITRATION. Any dispute regarding the interpretation or
performance of this Agreement which cannot be resolved by the parties shall
be resolved through arbitration under the Commercial Arbitration Rules of the
American Arbitration Association in Honolulu, Hawaii. The arbitrators will
allocate costs of arbitration as they deem just.
16. ENTIRE AGREEMENT: HEADINGS. This Agreement embodies the entire
Agreement of the parties respecting the matters within its scope and may be
modified only in writing. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purposes.
17. WAIVER: MODIFICATION. Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times. This
Agreement shall not be modified in any respect except by a writing executed
by each party hereto.
18. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute
or public policy, only the portions of this Agreement that violate such
statute or public policy shall be stricken. All portions of this Agreement
that do not violate any statute or public policy shall continue in full force
and effect. Further, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much
effect as possible to the intentions of the parties under this Agreement.
19. INDEMNIFICATION. The Company shall indemnify and hold Employee
harmless to the maximum extent permitted by Section 415-5 of the Hawaii
Business Corporation Act and the Restated Articles of Incorporation of the
Company, as amended.
20. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Employee has hereunto signed this
Agreement, as of the date first above written.
By:______________________________________
John Adams
Chairman
By:______________________________________
Rae A. Capps
Its Vice President, General
Counsel and Corporate Secretary
"Company"
By:______________________________________
Paul J. Casey
"Employee"
10
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 45,072
<SECURITIES> 0
<RECEIVABLES> 30,576
<ALLOWANCES> 500
<INVENTORY> 8,336
<CURRENT-ASSETS> 89,369
<PP&E> 65,055
<DEPRECIATION> 11,816
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<CURRENT-LIABILITIES> 85,496
<BONDS> 17,160
0
0
<COMMON> 401
<OTHER-SE> 81,422
<TOTAL-LIABILITY-AND-EQUITY> 214,325
<SALES> 99,766
<TOTAL-REVENUES> 99,766
<CGS> 104,270
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<OTHER-EXPENSES> 239
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<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 4,794
<INCOME-TAX> 2,398
<INCOME-CONTINUING> 2,396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,396
<EPS-PRIMARY> 0.06
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