Air Canada 2010 Annual Report Download - page 139

Consolidated Financial Statements and Notes
139
Indemnification Agreements
In the ordinary course of the Corporation’s business, the Corporation enters into a variety of agreements, some of which
may provide for indemnifications to counterparties that may require the Corporation to pay for costs and/or losses incurred
by such counterparties. The Corporation cannot reasonably estimate the potential amount, if any, it could be required to
pay under such indemnifications. Such amount would also depend on the outcome of future events and conditions, which
cannot be predicted. While certain agreements specify a maximum potential exposure, certain others do not specify a
maximum amount or a limited period. Historically, the Corporation has not made any significant payments under these
indemnifications.
The Corporation enters into real estate leases or operating agreements, which grant a license to the Corporation to use
certain premises, in substantially all cities that it serves. It is common in such commercial lease transactions for the
Corporation, as the lessee, to agree to indemnify the lessor and other related third parties for tort liabilities that arise out
of or relate to the Corporation’s use or occupancy of the leased or licensed premises. Exceptionally, this indemnity extends
to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused
by their gross negligence or willful misconduct. Additionally, the Corporation typically indemnifies such parties for any
environmental liability that arises out of or relates to its use or occupancy of the leased or licensed premises.
In aircraft financing or leasing agreements, the Corporation typically indemnifies the financing parties, trustees acting on
their behalf and other related parties and/or lessors against liabilities that arise from the manufacture, design, ownership,
financing, use, operation and maintenance of the aircraft and for tort liability, whether or not these liabilities arise out of
or relate to the negligence of these indemnified parties, except for their gross negligence or willful misconduct. In addition,
in aircraft financing or leasing transactions, including those structured as leveraged leases, the Corporation typically
provides indemnities in respect of various tax consequences including in relation to the leased or financed aircraft, the
use, possession, operation maintenance, leasing, subleasing, repair, insurance, delivery, import, export of such aircraft,
the lease or finance arrangements entered in connection therewith, changes of law and certain income, commodity and
withholding tax consequences.
When the Corporation, as a customer, enters into technical service agreements with service providers, primarily service
providers who operate an airline as their main business, the Corporation has from time to time agreed to indemnify the
service provider against certain liabilities that arise from third party claims, which may relate to services performed by
the service provider.
Under its general by-laws and pursuant to contractual agreements between the Corporation and each of its officers and
directors, the Corporation has indemnification obligations to its directors and officers. Pursuant to such obligations, the
Corporation indemnifies these individuals, to the extent permitted by law, against any and all claims or losses (including
amounts paid in settlement of claims) incurred as a result of their service to the Corporation.
The maximum amount payable under the foregoing indemnities cannot be reasonably estimated. The Corporation expects
that it would be covered by insurance for most tort liabilities and certain related contractual indemnities described above.