LEASE AGREEMENT [TN] Dated as of [DD] Between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
CONFIDENTIAL:
Annexes B, C and D and Schedules 1, 2, 3 and 4 of this Lease
Agreement are subject to Restrictions on Dissemination Set Forth
in
Section 8 of the Participation Agreement (as defined
herein)
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_____________________________________________________________
LEASE
AGREEMENT [TN]
Dated
as
of [DD]
Between
XXXXX
FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
Not
in
its Individual Capacity,
except
as
expressly provided herein,
but
solely as Owner Trustee,
Lessor
and
CONTINENTAL
AIRLINES, INC.,
Lessee
_______________________________________________________
One
Embraer Model EMB-145 XR Aircraft
Bearing
United States Registration No. N[REG] and
Bearing
Manufacturer’s Serial No. [MSN] with two
Xxxxxxx
AE3007A1E Engines
Bearing
Engine Manufacturer’s Serial Nos. CAE[E1] and CAE[E2]
_____________________________________________________________
The
right, title and interest of Lessor in and to, among other things, this Lease
Agreement has been assigned to and is subject to a security interest in favor
of
Wilmington Trust Company, a Delaware banking corporation, as Mortgagee, under
the Trust Indenture and Mortgage [TN], dated as of [DD], for the benefit of
the
holders of the Equipment Notes referred to in such Trust Indenture, all to
the
extent provided in such Trust Indenture. This Lease Agreement has been executed
in multiple counterparts; to the extent, if any, that this Lease Agreement
constitutes chattel paper (as defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no security interest in Lessor’s right,
title and interest in and to this Lease Agreement may be perfected through
the
delivery or possession of any counterpart of this Lease Agreement other than
the
counterpart of this Lease Agreement that contains the original receipt executed
by Wilmington Trust Company, as Mortgagee.
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PAGE
ii
ANNEXES, EXHIBITS AND SCHEDULES
PAGE
iii
LEASE
AGREEMENT [TN]
LEASE
AGREEMENT [TN], dated as of [DD] (this “Agreement” or “Lease”), between (a)
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee (this and all other capitalized terms used
but not defined herein shall have the respective meanings ascribed thereto
in
Section 1 below) (“Lessor” or “Owner Trustee”), and (b) CONTINENTAL
AIRLINES, INC., a Delaware corporation (“Lessee”).
A. Lessor
and Lessee are parties to the Participation Agreement, pursuant to which, among
other things, Lessor and Lessee have agreed to enter into this
Agreement.
B. Pursuant
to the Trust Agreement, Owner Participant has authorized Lessor to enter into
this Agreement.
SECTION
1. DEFINITIONS
AND
CONSTRUCTION
Capitalized
terms used but not defined herein shall have the respective meanings set forth
or incorporated by reference, and shall be construed and interpreted in the
manner described, in Annex A.
Lessor
hereby agrees (subject to the satisfaction or waiver of the conditions set
forth
in Section 5 of the Participation Agreement) to lease to Lessee for the
Term and Lessee hereby agrees (subject to the satisfaction or waiver of the
conditions set forth in Section 5 of the Participation Agreement) to lease
from Lessor for the Term, the Aircraft, commencing immediately upon acquisition
of the Aircraft by Lessor pursuant to the Participation Agreement.
By
executing and delivering Lease Supplement No. 1, Lessee confirms to Lessor
that Lessee has duly and irrevocably accepted delivery of the Aircraft for
all purposes of this Agreement.
The
Aircraft shall be leased hereunder for the Term, unless this Agreement or the
leasing of the Aircraft is earlier terminated in accordance with any provision
of this Agreement. Lessee shall have the option to renew the leasing of the
Aircraft hereunder pursuant to, and subject to the terms and conditions of,
Section 17, for the Renewal Lease Term.
3.2.1 Basic
Rent
(a) During
the Base Lease Term, Lessee shall pay to Lessor, on each Payment Date, in the
manner and in the funds of the type specified in Section 3.3, Basic Rent in
the
amount specified in the column with the heading “Total Basic Rent” in
Schedule 2 for such Payment Date, which shall be rent paid in advance for
the Payment Period ending on the next Payment Date (except that the first
payment shall include rent in arrears since the Closing Date).
(b) Notwithstanding
anything to the contrary in any Operative Agreement, the amount of the payment
of Basic Rent due and payable on each Payment Date shall be at least sufficient
to pay in full, as of such Payment Date (assuming timely payment of the
Equipment Notes prior to such Date), the aggregate principal amount of scheduled
installments due on the Equipment Notes outstanding on such Payment Date,
together with the accrued and unpaid interest thereon, due on such Payment
Date
in respect of the Equipment Notes; provided, however, that no installment of
Basic Rent shall be increased to the extent such increase would be based upon
(i) any attachment or diversion of Basic Rent on account of Lessor Liens
attributable to Lessor or Owner Participant, (ii) any modification of the
payment terms of the Equipment Notes, or (iii) the acceleration of any
Equipment Note or Equipment Notes due solely to the occurrence of an Indenture
Event of Default that does not constitute a Lease Event of Default.
3.2.2 Supplemental
Rent
Lessee
shall pay to Lessor, or to whomever shall be entitled thereto, any and all
Supplemental Rent when and as the same shall become due and owing. Lessee will
also pay to Lessor, or to whomever shall be entitled thereto as Supplemental
Rent, to the extent permitted by applicable Law, interest at the Payment Due
Rate on any part of any amount of Rent (including, without limitation,
Supplemental Rent) not paid by 12:30 p.m., New York time, on the date when
due (so long as, in the case of any Person not a party to the Participation
Agreement, Lessee had received timely notice of the account to which such
payment was required to be made), for the period from and including the date
on
which the same was due to, but excluding, the date of payment in full.
(a) In
the
event that Lessee is required to indemnify the Owner Participant under the
Tax
Indemnity Agreement, the Stipulated Loss Value percentages set forth in
Schedule 3 and the Termination Value percentages set forth in
Schedule 4 shall be recalculated (upwards or downwards) by Owner
Participant, using the same methods and assumptions (except to the extent such
assumptions shall be varied to take into account the Loss or Foreign Tax Credit
Loss (as each such term is defined in the Tax Indemnity Agreement) that is
the
subject of such indemnification and any prior or contemporaneous Loss or Foreign
Tax Credit Loss) used to calculate the Stipulated Loss Value percentages and
the
Termination Value percentages on the Closing Date, in order to maintain the
Owner Participant’s Net Economic Return.
(b) All
adjustments pursuant to Section 3.2.3(a) shall be made as promptly as
practicable after either Owner Participant or Lessee gives notice to the other
that an event has occurred that requires an adjustment. Owner Participant and
Lessee shall give prompt notice to the other of any event requiring an
adjustment. Any recalculation of the percentages of Stipulated Loss Value and
Termination Value shall be prepared by Owner Participant, subject to
verification at the request of Lessee in accordance with Section 3.2.3(c),
on
the basis of the same methodology and assumptions used by Owner Participant
in
determining the percentages of Stipulated Loss Value and Termination Value
as of
the Closing Date, except as such assumptions have been modified to reflect
the
events giving rise to adjustments hereunder. Promptly after an adjustment is
made hereunder, Owner Participant shall deliver to Lessee a description of
such
adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments required pursuant to Section 3.2.3(a) shall be set forth in a Lease
Supplement or in an amendment to this Lease, and, promptly after execution
thereof by Lessor and Lessee, Lessee shall give a copy thereof to
Mortgagee.
(c) If
Lessee
believes that any calculations by Owner Participant pursuant to
Section 3.2.3(b) are in error, and if, after consultation, Lessee and Owner
Participant are unable to agree on an adjustment, then a nationally recognized
firm of accountants selected by Lessee and reasonably satisfactory to Owner
Participant shall verify such calculations. Owner Participant will make
available to such firm, but not, in any circumstances, to Lessee or any
representative of Lessee, the methodology and assumptions referred to in
Section 3.2.3(b) and any modifications thereto made to reflect the events
giving rise to adjustments hereunder (subject to the execution by such firm
of a
confidentiality agreement, reasonably acceptable to Owner Participant,
prohibiting disclosure of such methodology and assumptions to any third party).
The determination by such firm of accountants shall be final absent manifest
error. Lessee will pay the reasonable costs and expenses of such further
verification by such accountants, provided that if it results in a decrease
in
the present value (discounted at the Debt Rate) of any Stipulated Loss Value
or
Termination Value by ten or more basis points from such Stipulated Loss Value
or
Termination Value as recalculated by the Owner Participant, then the Owner
Participant will pay such costs and expenses.
(a) Payments
of Rent by Lessee shall be paid by wire transfer of immediately available
Dollars, not later than 12:30 p.m., New York time, on the date when due, to
the account of Lessor specified in Schedule 1 to the Participation Agreement
or
to such other account in the United States as directed by Lessor to Lessee
in
writing at least 10 Business Days prior to the date such payment of Rent is
due
or, in the case of any payment of Supplemental Rent expressly payable to a
person other than Lessor, to the person that shall be entitled thereto to such
account in the United States as such person may specify from time to time to
Lessee at least 10 Business Days prior to the date such payment of Rent is
due.
(b) Except
as
otherwise expressly provided herein, whenever any payment of Rent shall be
due
on a day that is not a Business Day, such payment shall be made on the next
day
that is a Business Day, and, if such payment is made on such next Business
Day,
no interest shall accrue on the amount of such payment during such
extension.
(c) So
long
as Lessee has not received written notice from the Mortgagee that the Trust
Indenture has been discharged, and notwithstanding Section 3.3(a), Lessor
hereby irrevocably directs, and Lessee agrees, that all payments of Rent and
all
other amounts payable by Lessee hereunder, other than Excluded Payments, shall
be paid directly to Mortgagee on behalf of Lessor by wire transfer of
immediately available Dollars to the account of Mortgagee specified in Schedule
1 to the Participation Agreement, or to such other account in the United States
as Mortgagee may specify by written notice to Lessor and Lessee at least 10
Business Days prior to the date such payment of Rent is due.
(d) Excluded
Payments shall be paid by wire transfer of immediately available Dollars to
the
account of the person specified in the Participation Agreement or, if not so
specified, to such account in the United States as may be specified by such
person by written notice to Lessor and Lessee from time to time at least 10
Business Days prior to the date such payment is required to be
made.
(e) All
computations of interest under this Agreement shall be made on the basis of
a
year of 360 days comprised of twelve 30-day months.
LESSOR
LEASES AND LESSEE TAKES THE AIRCRAFT “AS-IS, WHERE-IS.” LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR, MORTGAGEE AND ANY PARTICIPANT
(i) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF AND
(ii) NONE OF LESSOR, MORTGAGEE AND ANY PARTICIPANT MAKES, HAS MADE OR SHALL
BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:
(v)
|
THE
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE
OF
THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF;
|
(w)
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THE
QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE AIRFRAME,
ANY
ENGINE OR ANY PART THEREOF;
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(x)
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THE
ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY ENGINE
OR ANY
PART THEREOF, WHETHER OR NOT
DISCOVERABLE;
|
(y)
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THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT
OR THE
LIKE; OR
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(z)
|
THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY
OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT
TO
THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF.
|
Unless
a
Lease Event of Default shall have occurred and be continuing, Lessor agrees
to
make available to Lessee such rights as Lessor may have under any warranty
with
respect to the Aircraft made, or made available, by Airframe Manufacturer or
any
of its subcontractors or suppliers, as the case may be, pursuant to and in
accordance with the terms of the Purchase Agreement Assignment.
So
long
as no Lease Event of Default shall have occurred and be continuing, Lessor
shall
not interfere with Lessee’s rights hereunder to continued possession, use and
operation of, and quiet enjoyment of, the Aircraft during the Term. The
foregoing, however, shall not be construed or deemed to modify or condition
in
any respect the obligations of the Lessee pursuant to Section 16, which
obligations are absolute and unconditional.
4.4.1 Investment
Any
moneys required to be paid to or retained by Lessor that are required to be
paid
to Lessee or applied as provided herein shall, until paid to Lessee as provided
herein or applied as provided herein, be invested by Lessor from time to time
as
directed in writing by Lessee (or, if Lessee fails to so direct, by or as
directed by Lessor in its sole discretion) and at the expense and risk of Lessee
in Cash Equivalents so long as such Cash Equivalents specified by Lessee or
Lessor, as the case may be, can be acquired by Lessor using its best efforts;
provided, that so long as the Lien of the Trust Indenture shall not have been
discharged, such moneys shall be invested and held by Mortgagee, as assignee
of
Lessor, in accordance with this Lease and
upon
discharge of such Lien, Mortgagee shall pay any such money held by it to Lessor
to be held and invested in accordance with this Section.
4.4.2 Payment
of Gain or Loss
Any
net
gain (including interest received) realized as the result of investments
pursuant to Section 4.4.1 (net of any fees, commissions and other reasonable
expenses, if any, incurred in connection with such investment) shall be held
and
applied in the same manner as the principal amount is to be held and applied
hereunder. Lessee will promptly pay to Lessor, on demand, the amount of any
loss
realized as the result of any such investment (together with any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment), such amount so paid to be held and applied by Lessor as
contemplated in Section 4.4.1 above.
4.4.3 Limitation
of Liability
All
investments under this Section 4.4 shall be at the expense and risk of Lessee,
and Lessor and Mortgagee shall not be liable for any loss resulting from any
investment made under this Section 4.4 other than by reason of its willful
misconduct or gross negligence. Any such investment may be sold (without regard
to its maturity) by Lessor without instructions whenever such sale is necessary
to make a distribution required by this Lease.
If
Lessor
shall be required to transfer title to the Aircraft, Airframe or any Engine
to
Lessee or any other person pursuant to this Lease, then (a) Lessor shall
(1) transfer to Lessee or such other person, as the case may be, all of
Lessor’s right, title and interest in and to the Aircraft, Airframe or such
Engine, as the case may be, free and clear of all Lessor Liens but otherwise
on
an “as-is”, “where is” basis, (2) so long as the Lien of the Trust
Indenture has not been discharged, comply with the Trust Indenture relating
to
the release of the Aircraft, Airframe or such Engine, (3) assign to Lessee
or such other person, as the case may be, if and to the extent permitted under
the Purchase Agreement, all warranties of Airframe Manufacturer with respect
to
the Aircraft, Airframe or such Engine, and (4) assign to Lessee or such
other person, as the case may be, if and to the extent permitted, all claims,
if
any, for damage to the Aircraft, Airframe or such Engine, in each case free
of
Lessor Liens, and without recourse or warranty of any kind whatsoever (except
as
to the transfer described in clause (1) above and as to the absence of such
Lessor Liens, as aforesaid), and (b) Lessor shall promptly deliver to
Lessee or such other person, as the case may be, a xxxx of sale and agreements
of assignment, evidencing such transfer and assignment, and such other
instruments of transfer, all in form and substance reasonably satisfactory
to
Lessee (or such other person, as the case may be), as Lessee (or such other
person, as the case may be) may reasonably request.
Lessor
hereby agrees for the benefit of each lessor, conditional seller, indenture
trustee or secured party of any engine leased to, or purchased by, Lessee
or any
Permitted Sublessee subject to a lease, conditional sale, trust indenture
or
other security agreement that Lessor, its successors and assigns will not
acquire or claim, as against such lessor, conditional
seller,
indenture trustee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or
other
security agreement and owned by such lessor or conditional seller or subject
to
a trust indenture or security interest in favor of such indenture trustee or
secured party.
(a) Lessee
and Lessor agree that this Lease is, and shall be treated as, a lease for U.S.
federal income tax purposes of the Aircraft, Airframe, Engines and
Parts.
(b) It
is the
intention of each of Lessee and Lessor that Lessor (and Mortgagee as assignee
of
Lessor under the Trust Indenture) shall be entitled to the benefits of Section
1110 with respect to the right to take possession of the Aircraft, Airframe,
Engines and Parts and to enforce any of its other rights or remedies as provided
in this Lease.
Lessee
shall comply with each of the provisions of Annex B hereto, which provisions
are
hereby incorporated by this reference as if set forth in full herein.
If
Lessor
gives written notice to Lessee not less than 60 days nor more than 120 days
prior to the end of the Term requesting storage of the Aircraft upon its return
hereunder, Lessee will provide Lessor, or cause Lessor to be provided, with
outdoor parking facilities for the Aircraft for a period up to 30 days,
commencing on the date of such return, and upon request of Lessor to Lessee
made
at least 10 days prior to the end of such initial 30 day period, for an
additional 120 day period commencing upon expiration of such initial period,
at
such storage facility in the 48 contiguous states of the United States on
Lessee’s route system for Similar Aircraft as Lessor may select as the site for
such return of the Aircraft. Such storage shall be at Lessor’s risk, and Lessor
shall pay all applicable storage fees, except that Lessee shall pay the parking
fees for the initial 30 day storage period; provided
that
Lessee’s obligation to provide parking shall be subject to Lessor entering into
an agreement prior to the commencement of the storage period with the storage
facility providing, among other things, that Lessor shall bear all maintenance
charges and other costs (other than parking fees for the initial 30 day period)
incurred.
In
the
event that any Engine owned by Lessor shall not be installed on the Airframe
at
the time of return hereunder, Lessee shall be required to return the Airframe
hereunder with a Replacement Engine meeting the requirements of, and in
accordance with, Section 10 hereof and Annex B hereto. Thereupon,
Lessor will transfer to Lessee the Engine
constituting
part of such Aircraft but not installed on such Airframe at the time of the
return of the Airframe.
Lessee
shall not, directly or indirectly, create, incur, assume or suffer to exist
any
Lien on or with respect to the Aircraft, the Airframe, any Engine or any Part,
title to any of the foregoing or any interest of Lessee therein, or the Lessee’s
rights in and to this Lease or any Permitted Sublease, except (a) the respective
rights of Lessor, Mortgagee, the Participants or Lessee under the Operative
Agreements, or of any Permitted Sublessee under any Permitted Sublease; (b)
Lessor Liens with respect to any Participant, Lessor or Mortgagee; (c) the
rights of others under agreements or arrangements to the extent permitted by
the
terms of Sections 7.2 and 7.3 or Annex C; (d) Liens for Taxes of Lessee
(and its U.S. federal tax law consolidated group), or Liens for Taxes of any
Tax
Indemnitee (and its U.S. federal tax law consolidated group) for which Lessee
is
obligated to indemnify such Tax Indemnitee under any of the Lessee Operative
Agreements, in any such case either not yet due or being contested in good
faith
by appropriate proceedings so long as such Liens and such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft,
the
Airframe, any Engine or any Part thereof; (e) materialmen’s, mechanics’,
workers’, repairers’, employees’ or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 35 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Aircraft, the Airframe,
any Engine or any Part thereof; and (f) Liens arising out of any judgment or
award against Lessee (or against any Permitted Sublessee), so long as such
judgment shall, within 30 days after the entry thereof, have been discharged
or
vacated, or execution thereof stayed pending appeal or shall have been
discharged, vacated or reversed within 30 days after the expiration of such
stay, and so long as during any such 30-day period there is not, or any such
judgment or award does not involve, any material risk of the sale, forfeiture
or
loss of the Aircraft, the Airframe or any Engine. Lessee shall promptly (and
in
any case, by the end of the Term), at its own expense, take (or cause to be
taken) such action as may be necessary to duly discharge (by bonding or
otherwise) any Lien not excepted above if the same shall at any time arise
in
respect of the Aircraft, the Airframe, any Engine or any Part during the
Term.
7.1.1 Registration
and Recordation
Subject
to the compliance by Lessor and Owner Participant with their respective
obligations under Section 13 of the Participation Agreement, Lessee shall
cause
the Aircraft to be, and at all times during the Term to remain, duly registered
with the FAA under the Act or with such other country of registry as shall
be
permitted under Section 7.1.2 below, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Act cannot
be
effected with the FAA because of Lessor’s or Owner Participant’s failure to
comply with the
citizenship
requirements for registration of the Aircraft under the Act). Lessor shall
execute any and all such documents as Lessee (or any Permitted Sublessee) may
reasonably request for the purpose of effecting and continuing such
registration. Unless Mortgagee has given Lessee notice that the Trust Indenture
has been discharged, Lessee shall also cause the Trust Indenture to be duly
recorded and at all times maintained of record as a first-priority perfected
mortgage (subject to Permitted Liens) on the Aircraft, the Airframe and each
of
the Engines (except to the extent that such perfection or priority cannot be
maintained as a result of the failure by Lessor or Mortgagee to execute and
deliver any necessary documents).
7.1.2 Reregistration
So
long
as no Lease Event of Default shall have occurred and be continuing, Lessee
may,
by written notice to Lessor, request to change the country of registration
of
the Aircraft. Any such change in registration shall be effected only in
compliance with, and subject to all of the conditions set forth in,
Section 7.6.11 of the Participation Agreement.
7.1.3 Markings
If
permitted by applicable Law, on or reasonably promptly after the Closing, Lessee
will cause to be affixed to, and maintained in, the cockpit of the Airframe
and
on each Engine, in each case, in a clearly visible location (it being understood
that the location of such placards, as identified to the Owner Participant
prior
to the Closing, shall be deemed to be in compliance with this requirement),
a
placard of a reasonable size and shape bearing the legend, in English, set
forth
in Schedule 6. Such placards may be removed temporarily, if necessary, in
the course of maintenance of the Airframe or Engines. If any such placard is
damaged or becomes illegible, Lessee shall promptly replace it with a placard
complying with the requirements of this Section 7.1.3.
7.1.4 Compliance
With Laws
Lessee
shall not, and shall not allow any other person to, operate, use, maintain,
service, repair or overhaul the Aircraft (a) in violation of any Law binding
on
or applicable to the Aircraft,
the Airframe or any Engine, or (b) in violation of any airworthiness
certificate, license or registration of any Government Entity relating to Lessee
or the Aircraft, the Airframe or any Engine, except (1) immaterial or
non-recurring violations with respect to which corrective measures are taken
promptly by Lessee or a Permitted Sublessee, as the case may be, upon discovery
thereof, and (2) to the extent Lessee or any Permitted Sublessee is
contesting the validity or application of any such Law or requirement relating
to any such certificate, license or registration in good faith in any reasonable
manner that does not involve a material danger of the sale, forfeiture or loss
of the Aircraft, the Airframe, or any Engine, any risk of criminal liability
or
a greater than de minimis risk of material civil penalties being imposed against
Lessor, Mortgagee or any Participant or impair the Lien of the Trust
Indenture.
7.1.5 Operation
Lessee
agrees not to operate, use or locate the Aircraft, the Airframe or any Engine,
or allow the Aircraft, the Airframe or any Engine to be operated, used or
located (a) in any area excluded from coverage by any insurance required by
the terms of Section 11, except in
the
case
of a requisition by the U.S. Government where Lessee obtains an indemnity in
lieu of such insurance from the U.S. Government, or insurance from the U.S.
Government, covering such area, in accordance with Section 11.3 or (b) in
any recognized area of hostilities unless fully covered in accordance with
Annex D by war-risk insurance as required by the terms of Section 11
(including, without limitation, Section 11.3), unless in any case referred
to in this Section 7.1.5 the Aircraft is only temporarily operated, used or
located in such area as a result of an emergency, equipment malfunction,
navigational error, hijacking, weather condition or other similar unforeseen
circumstances, so long as Lessee diligently and in good faith proceeds to remove
the Aircraft from such area.
Lessee
will not, without the prior written consent of Lessor and Owner Participant
(which consent shall not be unreasonably withheld), sublease or otherwise in
any
manner deliver, transfer or relinquish possession of the Aircraft, the Airframe
or any Engine or install any Engine, or permit any Engine to be installed,
on
any airframe other than the Airframe; provided,
however,
subject
to the provisions of Section 7.3, Lessee may, without such prior written
consent:
7.2.1 Interchange
and Pooling
Subject
or permit any Permitted Sublessee to subject any Engine to normal interchange
agreements or pooling agreements or arrangements, in each case customary in
the
commercial airline industry and entered into by Lessee or such Permitted
Sublessee, as the case may be, in the ordinary course of business; provided,
however,
that if
Lessor’s title to any such Engine is divested under any such agreement or
arrangement, then such Engine shall be deemed to have suffered an Event of
Loss
as of the date of such divestiture, with the effect that Lessee shall be
required to replace such Engine with a Replacement Engine meeting the
requirements of, and in accordance with, Section 10.
7.2.2 Testing
and Service
Deliver
or permit any Permitted Sublessee to deliver possession of the Aircraft,
Airframe, any Engine or any Part (i) to the manufacturer thereof or to any
third-party maintenance provider, for testing, service, repair, maintenance
or
overhaul work on the Aircraft, Airframe, any Engine or any Part, or, to the
extent required or permitted by the terms of Annex C, for alterations or
modifications in or additions to the Aircraft, Airframe or any Engine or
(ii) to any Person for the purpose of transport to a Person referred to in
the preceding clause (i).
7.2.3 Transfer
to U.S. Government
Transfer
or permit any Permitted Sublessee to transfer possession of the Aircraft,
Airframe or any Engine to the U.S. Government, in which event Lessee shall
promptly notify Lessor and Mortgagee in writing of any such transfer of
possession and, in the case of any transfer pursuant to CRAF, in such
notification shall identify by name, address and telephone numbers the
Contracting Office Representative or Representatives for the Military Airlift
Command
of the United States Air Force to whom notices must be given and to whom
requests or claims must be made to the extent applicable under
CRAF.
7.2.4 Installation
of Engines on Owned Aircraft
Install
or permit any Permitted Sublessee to install an Engine on an airframe owned
by
Lessee or such Permitted Sublessee, as the case may be, free and clear of all
Liens, except (a) Permitted Liens and those that do not apply to the
Engines and (b) the rights of third parties under normal interchange or
pooling agreements and arrangements of the type that would be permitted under
Section 7.2.1.
7.2.5 Installation
of Engines on Other Airframes
Install
or permit any Permitted Sublessee to install an Engine on an airframe leased
to
Lessee or such Permitted Sublessee, or purchased by Lessee or such Permitted
Sublessee subject to a mortgage, security agreement, conditional sale or other
secured financing arrangement, but only if (a) such airframe is free and
clear of all Liens, except (i) the rights of the parties to such lease, or
any such secured financing arrangement, covering such airframe and
(ii) Liens of the type permitted by clauses (a) and (b) of Section 7.2.4
and (b) Lessee or Permitted Sublessee, as the case may be, shall have
received from the lessor, mortgagee, secured party or conditional seller, in
respect of such airframe, a written agreement (which may be a copy of the lease,
mortgage, security agreement, conditional sale or other agreement covering
such
airframe), whereby such Person agrees that it will not acquire or claim any
right, title or interest in, or Lien on, such Engine by reason of such Engine
being installed on such airframe at any time while such Engine is subject to
this Lease or is owned by Lessor.
7.2.6 Installations
of Engines on Financed Aircraft
So
long
as no Payment Default, Bankruptcy Default or Lease Event of Default shall
have
occurred and be continuing, install or permit any Permitted Sublessee to
install
an Engine on an airframe owned by Lessee or such Permitted Sublessee, leased
to
Lessee or such Permitted Sublessee, or purchased by Lessee or such Permitted
Sublessee subject to a conditional sale or other security agreement under
circumstances where neither Section 7.2.4 or 7.2.5 is applicable;
provided,
however,
that
any such installation shall be deemed an Event of Loss with respect to such
Engine, and Lessee shall comply with Section 10.2 hereof in respect
thereof.
7.2.7 Subleasing
With
respect to the Aircraft, Airframe or any Engine, so long as no Payment Default,
Bankruptcy Default or Lease Event of Default has occurred and is continuing,
enter into a sublease with any Permitted Air Carrier, but only if:
(a) Lessee
shall provide written notice to Lessor of Lessee’s intent to enter into a
Permitted Sublease (except if the Permitted Sublessee is Express) and of
any
permitted sub-sublease, such notice in the event of a sublease to a U.S.
Air
Carrier to be given promptly after entering into any such sublease or, in
the
case of a sublease to any other Permitted Air Carrier, 20 days in advance
of
entering into such sublease;
(b) At
the
time that Lessee enters into such Permitted Sublease or a sublessee enters
into
a permitted sub-sublease, such Permitted Sublessee shall not be subject to
any
bankruptcy, insolvency, liquidation, reorganization, dissolution or similar
proceeding, shall not be seeking any reorganization or any readjustment of
its
debts and shall not be, or shall not have substantially all of its property,
in
the possession of any liquidator, trustee, receiver or similar person and,
if
such Permitted Sublessee is a Permitted Foreign Air Carrier, the United States
then maintains normal diplomatic relations with the country in which such
Permitted Sublessee has its principal executive offices;
(c) Any
such
Permitted Sublease (including any permitted sub-sublease) (i) shall
include provisions for the maintenance, operation, possession, inspection and
insurance of the Aircraft that are the same in all material respects as the
applicable provisions of this Lease, (ii) shall provide that, except if Express
or any subsidiary of Lessee is the Permitted Sublessee, such Permitted Sublessee
may not further sublease or transfer its interests (except transfers of the
type
permitted in Sections 7.2.1 through 7.2.6, inclusive) in the Aircraft, Airframe
or Engines, (iii) shall not extend beyond the end of the Term and (iv) shall
be
expressly subject and subordinate to all the terms of this Agreement and to
the
rights, powers and remedies of Lessor hereunder;
(d) In
connection with a sublease (including any permitted sub-sublease) to a Permitted
Foreign Air Carrier, Lessee shall have furnished Lessor and Mortgagee an opinion
of counsel, reasonably satisfactory to Lessor and Mortgagee, in the country
of
domicile of such Permitted Foreign Air Carrier, that (i) the terms of such
sublease are the legal, valid and binding obligations
of the parties thereto enforceable under the Laws of such jurisdiction, (ii)
it
is not necessary for Owner Participant, Lessor or Mortgagee to register or
qualify to do business in such jurisdiction, if not already so registered or
qualified, as a result, in whole or in part, of the proposed sublease, (iii)
Lessor’s title to, and Mortgagee’s Lien in respect of, the Aircraft, Airframe
and Engines will be recognized in such jurisdiction, (iv) the Laws of such
jurisdiction of domicile require fair compensation by the government of such
jurisdiction, payable in a currency freely convertible into Dollars, for the
loss of title to the Aircraft, Airframe or Engines in the event of the
requisition by such government of such title (unless Lessee shall provide
insurance in the amounts required with respect to hull insurance under Section
11 covering the requisition of title to the Aircraft, Airframe or Engines by
the
government of such jurisdiction so long as the Aircraft, Airframe or Engines
are
subject to such sublease), (v) the agreement of such Permitted Foreign Air
Carrier that its rights under the sublease are subject and subordinate to all
the terms of this Lease is enforceable against such Permitted Foreign Air
Carrier under applicable Law, and (vi) there is no tort liability of the owner
or Lessor of an aircraft not in possession thereof under the Laws of such
country (it being agreed that, in the event such latter opinion cannot be given
in a form satisfactory to the Owner Participant and Mortgagee, such opinion
shall be waived if insurance reasonably satisfactory to the Owner Participant
and Mortgagee is provided to cover such risk);
(e) No
such
sublease shall be made to a “tax exempt entity” as defined in
Section 168(h)(2) of the Code (including any Permitted Foreign Air Carrier)
prior to the close of the Tax Attribute Period, unless Lessee prepays on
a
lump-sum basis any liability due under the Tax Indemnity Agreement as a result
of such sublease based upon the assumption that such sublease were to continue
for the remainder of the term of such sublease, provided,
that
notwithstanding
the foregoing, such sublease may be made without requiring such prepayment
during the taxable year in which the seventh anniversary of the Closing Date
occurs so long as the Aircraft is not “used predominantly outside the United
States” within the meaning of Section 168(g) of the Code during such taxable
year;
(f) Lessee
shall furnish to Lessor and Mortgagee evidence reasonably satisfactory to Lessor
and Mortgagee that the insurance required by Section 11 remains in effect at
the
time such sublease (including any permitted sub-sublease) is entered
into;
(g) All
necessary documents shall have been duly filed, registered or recorded in such
public offices as may be required fully to preserve the title of Lessor, and
the
first priority perfected security interest (subject to Permitted Liens) of
Mortgagee, in the Aircraft, Airframe and Engines;
(h) Except
for the initial sublease to Express, Lessee shall reimburse Lessor and Mortgagee
for all of its reasonable out-of-pocket fees and expenses, including, without
limitation, reasonable fees and disbursements of counsel, incurred by Lessor
and
Mortgagee in connection with any such sublease; and
(i) For
all
purposes of this Section 7.2.7, the term “sublease” shall be deemed to include
interchange agreements with respect to the Aircraft or Airframe.
Notwithstanding
anything to the contrary in Section 7.2:
(a) The
rights of any person that receives possession of the Aircraft in accordance
with
Section 7.2 shall be subject and subordinate to all the terms of this
Lease, and to Lessor’s rights, powers and remedies hereunder, including, without
limitation (i) Lessor’s right to repossess the Aircraft pursuant to
Section 15, (ii) Lessor’s right to terminate and avoid such sublease,
delivery, transfer or relinquishment of possession upon the occurrence of
a
Lease Event of Default and (iii) the right to require such person to
forthwith deliver the Aircraft, the Airframe and Engines subject to such
transfer upon the occurrence of a Lease Event of Default;
(b) Lessee
shall remain primarily liable hereunder for the performance of all the terms
of
this Lease to the same extent as if such transfer had not occurred, and no
transfer of possession of the Aircraft, the Airframe, any Engine or any Part
shall in any way discharge or diminish any of Lessee’s obligations to Lessor
hereunder or under any Operative Agreement;
(c) Lessee
shall ensure that no sublease, delivery, transfer or relinquishment permitted
under Section 7.2 shall affect the United States registration of the
Aircraft, unless also made in accordance with the provisions of
Section 7.1.2;
(d) Any
event
that constitutes or would, with the passage of time, constitute an Event
of Loss
under paragraph (c), (d), or (e) of the definition of such term (as set forth
in
Annex A) shall not be deemed to violate the provisions of Section 7.2;
and
(e) Any
Wet
Lease shall not constitute a delivery, transfer or relinquishment of possession
for purposes of Section 7.2 and shall not be prohibited by the terms
hereof.
SECTION
8. MAINTENANCE;
REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND ADDITIONS;
OTHER LESSEE COVENANTS
At
all
times during the Term, Lessee shall comply with, or cause to be complied with,
each of the provisions of Annex C, which provisions are hereby incorporated
by this reference as if set forth in full herein.
8.2.1 Financial
Information
Lessee
will furnish to Lessor and Mortgagee:
(a) Within
90
days after the end of each of the first three fiscal quarters in each fiscal
year of Lessee, a consolidated balance sheet of Lessee as of the end of such
quarter and related statements of income and cash flows for the period
commencing at the end of the previous fiscal year and ending with the end
of
such quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year, prepared
in
accordance with GAAP; provided that
so long
as Lessee is subject to the reporting requirements of the Securities Exchange
Act of 1934, a copy of Lessee’s report on Form 10-Q for such fiscal quarter
(excluding exhibits) or an e-mail notice that such report has been filed
with
the SEC and providing a website address at which such report may be accessed
will satisfy this paragraph (a).
(b) Within
120 days after the end of each fiscal year of Lessee, a consolidated balance
sheet of Lessee as of the end of such fiscal year and related statements
of
income and cash flows of Lessee for such fiscal year, in comparative form
with
the preceding fiscal year, prepared in accordance with GAAP, together with
a
report of Lessee’s independent certified public accountants with respect to
their audit of such financial statements; provided that
so long
as Lessee is subject to the reporting requirements of the Securities Exchange
Act of 1934, a copy of Lessee’s report on Form 10-K for such fiscal year
(excluding exhibits) or an e-mail notice that such report has been filed
with
the SEC and providing a website address at which such report may be accessed
will satisfy this paragraph (b).
8.2.2 Annual
Certificate
Within
120 days after the close of each fiscal year of Lessee, Lessee shall deliver
to
Lessor and Mortgagee an Officer’s Certificate of Lessee (which, in lieu of
delivery pursuant to Section 18.6, may be delivered by e-mail and, in such
case, need not include a manual signature of a required officer but instead
shall set forth a typed signature of such officer) to the effect that such
officer is familiar with or has reviewed or caused to be reviewed the relevant
terms of this
Lease
and
the other Lessee Operative Agreements and that such officer does not have
knowledge of the existence as at the date of such certificate of any Lease
Event
of Default or if there is knowledge of a Lease Event of Default, the steps
that
are being taken with respect thereto.
8.2.3 Information
for Filings
Lessee
shall promptly furnish to Owner Participant, Mortgagee or Lessor such
information (other than with respect to the citizenship of Owner Participant
and
Lessor) within Lessee’s or any Permitted Sublessee’s possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor timely to file any reports required to be filed by
it
as lessor under the Lease, to enable Mortgagee timely to file any reports
required to be filed by it as Mortgagee under the Trust Indenture or to enable
Owner Participant to timely file any reports required to be filed by it, as
the
beneficiary of the Trust Estate, in any such case, with any Government Entity
because of, or in connection with, the interest of Owner Participant, Mortgagee
or Lessor in the Aircraft, Airframe or Engines, this Lease or any other part
of
the Trust Estate; provided, however, that with respect to any such information
which Lessee reasonably deems commercially sensitive or confidential, Owner
Participant, Mortgagee or Lessor, as the case may be, shall afford Lessee a
reasonable opportunity to seek from any such Government Entity a waiver of
the
obligation of Owner Participant, Mortgagee or Lessor to file any such
information, or shall consent to the filing of such information directly by
Lessee in lieu of filing by Owner Participant, Mortgagee or Lessor, and if
any
such waiver or consent is evidenced to the reasonable satisfaction of Owner
Participant, Mortgagee or Lessor, as the case may be, then Lessee shall not
be
required to furnish such information to Owner Participant, Mortgagee or
Lessor.
(a) Unless
a
Lease Event of Default, Payment Default or Bankruptcy Default shall have
occurred and be continuing, Lessee shall have the right at its option to
terminate this Lease during the Base Lease Term, effective only on a Termination
Date occurring after the end of the Tax Attribute Period, if:
(i) Lessee
makes a good faith determination that the Aircraft either has become
economically obsolete or is surplus to Lessee’s requirements and the Chief
Financial Officer or Treasurer of Lessee so certifies in writing to Lessor;
and
(ii) written
notice of Lessee’s exercise of its option to terminate this Agreement shall be
given to Lessor not less than 90 days prior to the proposed Termination Date
specified in such notice.
(b) Lessor
shall notify Lessee and Mortgagee of Lessor’s intention to sell or retain the
Aircraft, as provided in this Section 9, no later than 45 days after Lessee
gives Lessor written notice pursuant to Section 9.1(a)(ii). Any failure by
Lessor to give such notice of its election shall be deemed to be an election
to
sell the Aircraft, as provided in this Section 9.
(c) Any
termination pursuant to this Section 9 shall become effective on the date
of the sale, if any, pursuant to Section 9.2 or upon the
date
of termination and payment
by Lessee and Lessor in accordance with Section 9.3 if Lessor elects to
retain the Aircraft.
9.2.1 Bids;
Closing of Sale
Unless
Lessor has given Lessee notice of Lessor’s election to retain the Aircraft,
Lessee, as agent for Lessor, shall, until the date ten Business Days prior
to
the proposed Termination Date, use commercially reasonable efforts to obtain
bids for a cash purchase of the Aircraft and Lessor may, if it desires to do
so,
also seek to obtain such bids. In the event Lessee receives any bid, Lessee
shall promptly, and in any event at least ten Business Days prior to the
proposed date of sale, certify to Lessor in writing the amount and terms of
such
bid, the proposed date of such sale and the name and address of the person
(who
shall not be Lessee or any Affiliate of Lessee or any person with whom Lessee
or
any such Affiliate has an arrangement for the
future use of the Aircraft by Lessee or any such Affiliate) submitting such
bid.
In the event Lessor receives any bid on or prior to the date ten Business Days
prior to the proposed Termination Date, Lessor shall, at least ten Business
Days
prior to the proposed date of sale, certify to Lessee in writing the amount
and
terms of such bid, the proposed date of such sale and the name and address
of
the person submitting such bid.
9.2.2 Closing
of Sale
(a) On
the
proposed Termination Date (i) Lessee shall deliver the Airframe and Engines
or engines constituting part of the Aircraft to the bidder, if any, which
shall
have submitted the highest cash bid (net of applicable brokerage commissions)
on
or before the date ten Business Days prior to such Termination Date, in the
same
manner as if delivery were made to Lessor pursuant to Section 5 and
Annex B and in full compliance with the terms thereof, and shall duly
transfer to Lessor title to any such engines not owned by Lessor, all in
accordance with the terms of Section 5 and Annex B, and
(ii) Lessor shall simultaneously therewith transfer the Airframe and
Engines or engines to such bidder, in the manner described in Section 4.5,
against cash paid to Lessor in the amount of such highest bid (net of applicable
brokerage commissions and all reasonable out-of-pocket fees and expenses
incurred by Lessor, Mortgagee and Owner Participant in connection with such
sale
and the related termination of this Lease (collectively, the “Expenses of Sale”)
and in the manner and in funds of the type specified in
Section 3.3.
(b) All
proceeds of any sale described in Section 9.2.2(a), net of Expenses of
Sale, shall be paid to and retained by Lessor and, on such Termination Date,
and
as a condition precedent to such sale and the delivery of the Aircraft and
Engines or engines to such bidder, Lessee shall pay to Lessor, in the manner
and
in funds of the type specified in Section 3.3:
(i) all
unpaid Basic Rent due at any time prior to such Termination Date, but excluding
Basic Rent due on such Termination Date; plus
(ii) an
amount
equal to the excess, if any, of the Termination Value for the Aircraft, computed
as of such Termination Date, over the proceeds of such sale, net of Expenses
of
Sale; plus
(iii) as
provided in Section 3.2.2, interest on the amounts specified in the foregoing
clause (i) at the Payment Due Rate from and including the date on which any
such
amount was due to the date of payment of such amount in full.
As
a
further condition precedent to such sale and delivery, Lessee shall pay all
Supplemental Rent due by Lessee to Lessor, Mortgagee or the Participants under
this Lease (including, without limitation, (A) Supplemental Rent in respect
of Make-Whole Amount, if any, payable pursuant to Section 2.10(b) of the Trust
Indenture in connection with a prepayment of the Equipment Notes upon such
sale,
(B) all interest charges provided for hereunder or under any other Lessee
Operative Agreement with respect to the late payment of any amounts so payable,
(C) the Expenses of Sale).
(c) Upon
and
subject to any such sale and receipt of proceeds by Lessor, and full and
final
payment of all amounts described in Section 9.2.2(b), and compliance by
Lessee with all the other provisions of this Section 9.2,
(i) Lessor
will transfer to Lessee, in accordance with Section 4.5, any Engines
constituting part of the Aircraft but which were not then installed on the
Airframe and sold therewith; and
(ii) the
obligation of Lessee to pay Basic Rent, on or after the Payment Date with
reference to which Termination Value is computed, shall cease, and the Term
for
the Aircraft shall end effective as of the date of such sale.
(d) A
sale of
the Aircraft pursuant to this Section 9.2.2 shall take place only on a
Termination Date. Subject to Section 9.3, if no sale shall have occurred
on or
as of the proposed Termination Date, this Agreement shall continue in full
force
and effect, and all of Lessee’s obligations shall continue, including, without
limitation, its obligation to pay Rent, in each case, as if the notice under
Section 9.1 shall not have been given and, subject to Section 9.2.3,
Lessee may give another notice pursuant to Section 9.1.
(a) Lessee
may withdraw any notice given pursuant to Section 9.1 at any time on or
before the date 20 days prior to the proposed Termination Date, whereupon
this
Agreement shall continue in full force and effect and all of Lessee’s
obligations shall continue, including, without limitation, its obligation
to pay
Rent, in each case, as if the notice under Section 9.1 shall not have been
given and Lessee may give another notice pursuant to Section 9.1;
provided
that
Lessee shall not be entitled to give more than three notices pursuant to
Section 9.1.
(b) Lessee
shall pay all reasonable out-of-pocket fees and expenses of Lessor, Mortgagee
and Owner Participant in connection with any notice of termination withdrawn
by
Lessee or in connection with any notice of termination pursuant to which
a sale
of the Aircraft fails to occur.
(a) If
Lessor
shall elect to retain the Aircraft in accordance with Section 9.1, on the
proposed Termination Date:
(i) Lessor
shall pay, or cause to be paid, in the manner and in funds of the type specified
in Section 3.3, to the Mortgagee an amount sufficient to prepay all
outstanding Equipment Notes pursuant to Section 2.10(b) of the Trust
Indenture;
(ii) subject
to receipt by Mortgagee of the funds described in paragraph (i) above, Lessee
shall deliver the Airframe and Engines or engines constituting part of the
Aircraft to Lessor pursuant to Section 5 and Annex B and in full compliance
with the terms
thereof, and shall duly transfer to Lessor title to any such engines not owned
by Lessor, all in accordance with the terms of Section 5 and Annex
B;
(iii) Lessee
shall pay to Lessor, in the manner and in funds of the type specified in
Section 3.3:
(1)
|
all
unpaid Basic Rent due at any time prior to such Termination
Date, but
excluding Basic Rent due on such Termination
date;
plus
|
(2)
|
as
provided in Section 3.2.2, interest on the amounts specified
in the
foregoing clause (1) at the Payment Due Rate from
and
including the date on which any such amount was due to the
date of payment
of such amount in full; and
|
(iv) Lessee
shall also pay all Supplemental Rent due and payable by Lessee to Lessor,
Mortgagee or the Participants under this Lease (including without limitation
(A) Supplemental Rent in respect of Make-Whole Amount, if any, payable
pursuant to Section 2.10(b) of the Trust Indenture in connection with
a
prepayment of the Equipment Notes, (B) all interest charges provided for
hereunder or under any other Lessee Operative Agreement with respect
to the late
payment of any amounts so payable, and (C) the reasonable out-of-pocket
fees and
expenses incurred by Lessor and Owner Participant in connection with
such
termination and sale).
(b) Upon
full
and final payment to Lessor, Mortgagee and the Participants of the amounts
described in Section 9.3(a), and ompliance by Lessee with all the other
applicable provisions of this Section 9.3,
(i) Lessor
will transfer to Lessee, in accordance with Section 4.5, any Engines
constituting part of the Aircraft but which were not then installed on the
Airframe and returned therewith; and
(ii) The
obligation of Lessee to pay Basic Rent otherwise due on or after the Termination
Date shall cease, and the Term for the Aircraft shall end effective as of
such
Termination Date.
10.1.1 Notice
and Election
(a) Upon
the
occurrence of an Event of Loss with respect to the Airframe, and any Engine
or
Engines installed thereon at the time of such Event of Loss, Lessee shall
promptly (and in any event within 10 Business Days after such occurrence) give
Lessor and Mortgagee written notice of such Event of Loss. Within 45 days after
such occurrence, Lessee shall give Lessor and Mortgagee written notice of
Lessee’s election to make payment in respect of such Event
of
Loss, as provided in Section 10.1.2, or to replace the Airframe, and any such
Engines, as provided in Section 10.1.3.
(b) Any
failure by Lessee to give such notice of its election shall be deemed to
be an
election of the option set forth in Section 10.1.2. In addition, Lessee shall
not be entitled to elect the option set forth in Section 10.1.3 if, at the
time
Lessor receives such notice from Lessee, there shall have occurred and be
continuing a Payment Default, a Bankruptcy Default or a Lease Event of
Default.
(c) For
purposes of Section 10.1.2, an Event of Loss with respect to the Airframe
shall
be deemed to constitute an Event of Loss with respect to the Aircraft. For
purposes of Section 10.1.3, any Engine not actually suffering an Event of
Loss
shall not be required to be replaced.
10.1.2 Payment
of Loss and Termination of Lease
(a) If
Lessee
elects, in accordance with Section 10.1.1, to make payment in respect of
any
such Event of Loss, then Lessee shall pay, in the manner and in funds of
the
type specified in Section 3.3, the following amounts:
(i) on
the
Stipulated Loss Value Date next following the earlier of (x) the 120th day
following the date of the occurrence of such Event of Loss, and (y) the
twentieth day following the receipt of insurance proceeds with respect to
such
occurrence (but in any event not earlier than the date of Lessee’s election
under Section 10.1.1 to make payment under this Section 10.1.2), Lessee shall
pay to Lessor:
(1)
|
all
unpaid Basic Rent or Renewal Rent, as the case may be, due at any
time
prior to such Stipulated Loss Value Date;
plus
|
(2)
|
the
Stipulated Loss Value of the Aircraft computed as of such Stipulated
Loss
Value Date; plus
|
(3)
|
as
provided in Section 3.2.2, interest on the amount specified in
the
foregoing clause (1) at the Payment Due Rate from and including
the date
on which any such amount was due to the date of payment of such
amount in
full;
|
provided,
that if
such Stipulated Loss Value Date is a Payment Date, Lessee shall not be obligated
to pay the Basic Rent or Renewal Rent otherwise required to be paid on such
date; and
(ii) on
or
before the date required for payment of the amounts specified in paragraph
(i)
above, Lessee shall also pay to Lessor, Mortgagee and the Participants all
other
amounts due and payable by Lessee to Lessor, Mortgagee and the Participants
under this Lease, the Participation Agreement or any other Lessee Operative
Agreement.
(b) Upon
payment in full of all amounts described in the foregoing paragraph
(a),(i) the obligation of Lessee to pay Basic Rent or Renewal Rent
hereunder with respect to the Aircraft shall terminate, (ii) the Term for
the Aircraft shall end and (iii) Lessor will transfer the Aircraft to
Lessee, as-is and where-is, and subject to any insurer’s salvage rights, but
otherwise in the manner described in Section 4.5.
10.1.3 Replacement
of Airframe and Engines
(a) If
Lessee
elects, in accordance with Section 10.1.1, to replace the Airframe, and any
Engine actually suffering the Event of Loss, then Lessee shall, as promptly
as
possible and in any event within 120 days after the occurrence of such Event
of
Loss, convey or cause to be conveyed to Lessor, in compliance with Section
10.3
and as replacement for the Airframe, and any such Engine, title to a Replacement
Airframe (which shall comply with paragraph (b) below), and for each such
Engine
a Replacement Engine, in each case free and clear of all Liens other than
Permitted Liens. If Lessee makes such election, but for any reason fails
or is
unable to effect such replacement within such time period and in compliance
with
the requirements set forth in Section 10.3, then Lessee shall be deemed to
have
initially made the election set forth in Section 10.1.2 with the effect that
Lessee shall immediately pay, in the manner and in funds of the type specified
in Section 3.3, the amounts required under, and in accordance with, Section
10.1.2.
(b) Any
such
Replacement Airframe shall be an airframe that is the same model as the Airframe
to be replaced thereby, or an improved model, and that has a value, utility
and
remaining useful life (without regard to hours or cycles remaining until
the
next regular maintenance check), at least equal to the Airframe to be replaced
thereby (assuming that such Airframe had been maintained in accordance with
the
Lease). Any such Replacement Engine shall meet the requirements of, and be
conveyed by Lessee to Lessor in accordance with, Section 10.2 (other than
the
notice requirement set forth in Section 10.2.1).
10.2.1 Notice
Upon
the
occurrence of an Event of Loss with respect to an Engine under circumstances
in
which an Event of Loss with respect to the Airframe has not occurred, Lessee
shall promptly (and in any event within 10 Business Days after such occurrence)
give Lessor written notice of such Event of Loss.
10.2.2 Replacement
of Engine
Lessee
shall, promptly and in any event within 90 days after the occurrence of such
Event of Loss, convey or cause to be conveyed to Lessor, in compliance with
Section 10.3 and as replacement for the Engine with respect to which any Event
of Loss occurred, title to a Replacement Engine free and clear of all Liens
other than Permitted Liens. Such Replacement Engine shall be an engine
manufactured by Engine Manufacturer that is the same model as the Engine
to
be replaced thereby, or an improved model, and that is suitable for installation
and use on the Airframe, and that has a value, utility and remaining useful
life
(without regard to hours and cycles remaining until overhaul) at least equal
to
the Engine to be replaced thereby (assuming that such Engine had been maintained
in accordance with the Lease).
10.2.3 Engine
Exchange
Unless
a
Payment Default, Bankruptcy Default or Lease Event of Default shall have
occurred and be continuing, upon not less than five (5) Business Days’ prior
written notice to Lessor, Lessee may replace any Engine leased hereunder
with
another engine (the “Exchanged Engine”) meeting the requirements of Section
10.2.2. Such Exchanged Engine shall be deemed to be a “Replacement Engine” and
Lessor and Lessee shall comply with the provisions of Section 10.3 with regard
to the Exchanged Engine and the Engine so replaced.
10.3.1 Documents
Prior
to
or at the time of conveyance of title to any Replacement Airframe or Replacement
Engine to Lessor, Lessee shall take each of the following actions:
(a) furnish
Lessor with a full warranty xxxx of sale duly conveying to Lessor such
Replacement Airframe or Replacement Engine, in form and substance reasonably
satisfactory to Lessor and cause such Replacement Airframe to be duly registered
in the name of Lessor pursuant to the Act;
(b) cause
(i)
a Lease Supplement subjecting such Replacement Airframe or Replacement Engine
to
this Lease, duly executed by Lessee, to be delivered to Lessor for execution
and, upon such execution, to be filed for recordation with the FAA pursuant
to
the Act, (ii) a Trust Indenture Supplement, subjecting such Replacement
Airframe or Replacement Engine to the Trust Indenture, to be delivered to
Lessor
for execution and, upon execution, to be filed for recordation with the FAA
pursuant to the Act and (iii) such Financing Statements and other filings,
as Lessor or Mortgagee may reasonably request, duly executed by Lessee and,
to
the extent applicable, Lessor and Mortgagee (and Lessor and Mortgagee shall
execute and deliver the same), to be filed in such locations as any such
party
may reasonably request;
(c) furnish
such evidence of compliance with the insurance provisions of Section 11 with
respect to such Replacement Airframe or Replacement Engine as Lessor may
reasonably request;
(d) furnish
an opinion or opinions of Lessee’s counsel (which may be Lessee’s legal
department) reasonably satisfactory to Lessor and Mortgagee and addressed to
Lessor and Mortgagee to the effect that (i) such full warranty xxxx of sale
referred to in Section 10.3.1(a) constitutes an effective instrument for the
conveyance of title to the Replacement Airframe or Replacement Engine and (ii)
in the case of a Replacement Airframe, Lessor and Mortgagee, as assignee of
Lessor, will be entitled to the benefits of Section 1110 with respect to the
Replacement Airframe, provided that such opinion referred to in this clause
(ii)
need not be delivered
to the extent that immediately prior to such replacement the benefits of Section
1110 were not, solely by reason of a change in law or court interpretation
thereof, available to Lessor or Mortgagee, as assignee of Lessor;
(e) furnish
an opinion of Lessee’s aviation law counsel reasonably satisfactory to Lessor
and Mortgagee and addressed to Lessor and Mortgagee as to the due registration
of any such Replacement Airframe, the ownership of title to such Replacement
Airframe by Owner Trustee and the absence of Liens of record with respect
to
such Replacement Airframe (other than Permitted Liens) and the due filing
for
recordation of each Lease Supplement and Trust Indenture Supplement with
respect
to such Replacement Airframe or Replacement Engine under the Act;
(f) with
respect to the replacement of the Airframe, and any Engine installed thereon
at
the time of the subject Event of Loss, if requested by Lessor and at Lessee’s
expense, furnish a certified report of a qualified independent aircraft
appraiser, reasonably satisfactory to Lessor, certifying that such Replacement
Airframe and any such Replacement Engine complies with the value, utility
and
remaining useful life requirements set forth in Section 10.1.3(b);
and
(g) furnish
a
certificate of a qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine complies with the value, utility
and
remaining useful life requirements set forth in Section 10.2.2.
Lessor
and Lessee understand and agree that if at the time of any replacement of
the
Airframe or any Engine, as contemplated in this Section 10, the Airframe
was
registered in a jurisdiction other than the United States, then the requirements
set forth above in this Section 10.3.1 relating to compliance with the
requirements of the Act or the FAA, shall be deemed to refer to the comparable
applicable Law of, and the Aviation Authority of, such other
jurisdiction.
10.3.2 Other
Obligations
(a) Lessor
and Lessee agree that, upon any Replacement Airframe becoming the Airframe
hereunder, and upon any Replacement Engine becoming an Engine hereunder,
this
Lease shall continue to be, and shall be treated as, a lease for U.S. federal
income tax purposes of, among other things, such Replacement Airframe and
such
Replacement Engine. Without limiting the foregoing, Lessee and Lessor intend
that Lessor shall, in all events, be entitled to the benefits of
Section 1110 with respect to any Replacement Airframe or Replacement Engine
and Lessee and Lessor shall cooperate and take such action as the other may
reasonably request so as to ensure that Lessor shall be entitled to such
benefits.
(b) No
Event
of Loss with respect to an Engine, or with respect to an Airframe, shall
result
in, or otherwise allow or permit (other than as provided in Section 10.1.2(b)),
any reduction, deferral, discharge or other change in the timing or amount
of
any Rent payable by Lessee hereunder, and (subject to such Section 10.1.2(b))
Lessee shall pay all such Rent and other amounts as though such Event of
Loss
had not occurred.
Upon
compliance by Lessee with the applicable terms of Sections 10.1.3, 10.2 and
10.3.1, Lessor will transfer to Lessee the Airframe or Engine, as the case
may
be, with respect to which such Event of Loss occurred, in accordance with
Section 4.5.
Any
amounts, other than insurance proceeds in respect of damage or loss not
constituting an Event of Loss (the application of which is provided for in
Section 11), received at any time by Lessor, Lessee or any Permitted
Sublessee from any Government Entity or any other Person in respect of any
Event
of Loss will be applied as follows:
10.5.1 Replacement
of Airframe and Engines
If
such
amounts are received with respect to the Airframe, and any Engine installed
thereon at the time of such Event of Loss, upon compliance by Lessee with
the
applicable terms of Section 10.1.3 with respect to the Event of Loss for
which
such amounts are received, such amounts shall be paid over to, or retained
by,
Lessee.
10.5.2 Loss
of Engine
If
such
amounts are received with respect to an Engine (other than an Engine installed
on the Airframe at the time such Airframe suffers an Event of Loss), upon
compliance by Lessee with the applicable terms of Section 10.2.2 with respect
to
the Event of Loss for which such amounts are received, such amounts shall
be
paid over to, or retained by, Lessee.
10.5.3 Payment
of Loss
If
such
amounts are received, in whole or in part, with respect to the Airframe,
and
Lessee makes, has made or is deemed to have made the election set forth in
Section 10.1.2, such amounts shall be applied as follows:
(a) first,
if the
sum described in Section 10.1.2 has not then been paid in full by Lessee,
such amounts shall be paid to Lessor (or to Mortgagee so long as Mortgagee
has
not given notice to Lessee that the Lien of the Trust Indenture has been
duly
discharged, except with respect to Excluded Payments) to the extent necessary
to
pay in full such sum;
(b) second,
the
remainder, if any, shall be paid to Lessee.
If
any
Government Entity shall requisition for use the Airframe and the Engines or
engines installed thereon, and if the same does not constitute an Event of
Loss,
Lessee shall promptly notify Lessor and Mortgagee of such requisition and all
of
Lessee’s obligations under this
Agreement shall continue to the same extent as if such requisition had not
occurred; provided,
however,
that if
the Airframe and Engines or engines installed thereon are not returned to Lessor
by Lessee at the end of the Term, unless Lessor shall have elected, upon notice
given not less than 30 days nor more than 120 days before the end of the Term,
not to treat such event as constituting an Event of Loss with respect to the
Aircraft, Lessee shall be obligated to pay the Stipulated Loss Value and all
other amounts payable pursuant to Section 10.1.2 with respect to the
Aircraft. If Lessor shall have elected not to treat such event as an Event
of
Loss, Lessee shall be obligated to return the Airframe and Engines or engines
to
Lessor pursuant to, and in all other respects to comply with the provisions
of,
Section 5 promptly upon their return by such Government Entity, and Lessee
shall pay to Lessor upon such return an amount equal to the average daily Basic
Rent payable by Lessee during the Term for each day after the end of the Term
to
but excluding the day of such return, up to a maximum of 30 days.
If
any
Government Entity shall requisition for use any Engine but not the Airframe,
Lessee will replace such Engine by complying with the applicable terms of
Sections 10.2 and 10.3 to the same extent as if an Event of Loss had
occurred with respect to such Engine, and any payments received by Lessor
or
Lessee from such Government Entity with respect to such requisition shall
be
paid or retained in accordance with Section 10.5.2.
All
payments received by Lessor or Lessee, or any Permitted Sublessee, from any
Government Entity for the use of the Airframe and Engines or engines installed
thereon during the Term shall be paid over to, or retained by, Lessee and
all
payments received by Lessor or Lessee from any Government Entity for the
use of
the Airframe and Engines or engines installed thereon after the Term shall
be
paid over to, or retained by, Lessor; provided that, if such requisition
constitutes an Event of Loss, then all such payments shall be paid over to
Lessor (or to Mortgagee so long as Mortgagee has not given notice to Lessee
that
the Trust Indenture has been duly discharged), and held as provided in Section
10.5.
Any
amount described in this Section 10 that is payable or creditable to, or
retainable by, Lessee shall not be paid or credited to, or retained by, Lessee
if at the time such payment, credit or retention would otherwise occur a
Lease
Event of Default, Payment Default or Bankruptcy Default shall have occurred
and
be continuing, but shall instead be held by or paid over to Lessor (or to
Mortgagee so long as Mortgagee has not given notice to Lessee that the Trust
Indenture has been duly discharged) as security for the obligations of Lessee
under this Lease and the other Lessee Operative Agreements and shall be invested
pursuant to Section 4.4 hereof unless and until Lessor shall have demanded
liquidated damages pursuant to Section
15.1.3
or
15.1.4 and such amount is applied, at the option of Lessor, or upon the written
request of Lessee to Lessor, from time to time during the continuance of a
Lease
Event of Default, to Lessee’s obligations under this Lease as and when due, it
being understood that any such application shall be made to such obligations
of
Lessee as Lessor may determine in its sole discretion.
At such time as there shall not be continuing any Lease Event of Default,
Payment Default or Bankruptcy Default, such amount shall be paid to Lessee
to
the extent not previously applied in accordance with this
Section 10.9.
Lessee
shall comply with, or cause to be complied with, each of the provisions of
Annex D, which provisions are hereby incorporated by this reference as if
set forth in full herein.
Nothing
in Section 11 shall limit or prohibit (a) Lessee from maintaining the policies
of insurance required under Annex D with higher limits than those specified
in
Annex D, or (b) Lessor, Mortgagee or Owner Participant from obtaining insurance
for its own account (and any proceeds payable under such separate insurance
shall be payable as provided in the policy relating thereto); provided,
however,
that no
insurance may be obtained or maintained that would limit or otherwise adversely
affect the coverage of any insurance required to be obtained or maintained
by
Lessee pursuant to this Section 11 and Annex D.
Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft described in Annex D, indemnification from, or insurance provided
by,
the U.S. Government, or upon the written consent of Lessor and Mortgagee,
other
Government Entity, against such risk in an amount that, when added to the
amount
of insurance (including permitted self-insurance), if any, against such risk
that Lessee (or any Permitted Sublessee) may continue to maintain, in accordance
with this Section 11, during the period of such requisition or transfer,
shall be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
As
between Lessor and Lessee, all insurance proceeds received as a result of
the
occurrence of an Event of Loss with respect to the Aircraft or any Engine
under
policies required to be maintained by Lessee pursuant to this Section 11
will be applied in accordance with Section 10.5. All proceeds of insurance
required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not
constituting an Event of Loss with respect to the Aircraft, Airframe or any
Engine will be applied in payment (or to reimburse Lessee) for repairs or
for
replacement property, and any balance remaining after such repairs or
replacement with respect to such damage or loss shall be paid over to, or
retained by, Lessee.
Any
amount described in this Section 11 that is payable or creditable to, or
retainable by, Lessee shall not be paid or credited to, or retained by, Lessee
if at the time such payment, credit or retention would otherwise occur a Lease
Event of Default shall have occurred and be continuing, but shall instead be
held by or paid over to Lessor (or to Mortgagee so long as Mortgagee has not
given notice to Lessee that the Trust Indenture has been duly discharged) as
security for the obligations of Lessee under this Lease and shall be invested
pursuant to Section 4.4 hereof unless and until Lessor shall have demanded
liquidated damages pursuant to Section 15.1.3 or 15.1.4 and such amount is
applied, at the option of Lessor, or upon the written request of Lessee to
Lessor, from time to time during the continuance of a Lease Event of Default,
to
Lessee’s obligations under this Lease and the other Lessee Operative Agreements
as and when due, it being understood that any such application shall be made
to
such obligations of Lessee as Lessor may determine in its sole discretion.
At
such time as there shall not be continuing any Lease Event of Default, such
amount shall be paid to Lessee to the extent not previously applied in
accordance with this Section 11.5.
(a) Lessor,
Mortgagee or their respective authorized representatives (the “Inspecting
Parties”) may, upon reasonable notice to Lessee, inspect the Aircraft, Airframe
and Engines (including, without limitation, the Aircraft Documents) and Lessee
shall cooperate, and shall cause any Permitted Sublessee to cooperate, with
the
Inspecting Parties in connection with any such inspection (including, without
limitation, permitting any such Inspecting Party to make copies of such Aircraft
Documents not reasonably deemed confidential by Lessee or such Permitted
Sublessee).
(b) Except
during the continuance of any Lease Event of Default while the Section 1110
Period shall not be in effect, any inspection of the Aircraft hereunder shall
be
limited to a visual, walk-around inspection and shall not include the opening
of
any panels, bays or other components of the Aircraft, Airframe or Engines.
Any
inspection permitted hereunder, including any inspection conducted during the
continuance of a Lease Event of Default, shall be conducted in a manner which
does not interfere with Lessee’s or a Permitted Sublessee’s operation, use and
maintenance of such Aircraft, which determination of interference shall be
made
by Lessee in its reasonable sole discretion.
(c) With
respect to such rights of inspection, neither Lessor nor Mortgagee shall have
any duty or liability to make, or any duty or liability by reason of not making,
any such visit, inspection or survey.
(d) Each
Inspecting Party shall bear its own expenses in connection with any such
inspection (including the cost of any copies made in accordance with Section
12(a)); provided,
that if
a Lease Event of Default shall have occurred and be continuing, Lessee shall
bear all such reasonable expenses, except, in the case of a Chapter 11
reorganization, during the Section 1110 Period.
(e) If
requested by Lessor or Mortgagee, Lessee shall promptly advise, or shall cause
any Permitted Sublessee to advise, Lessor of the date upon which the Aircraft,
Airframe or any Engine undergoes its next scheduled maintenance visit or next
major check, and with respect to any Engine, the next off-the-wing maintenance,
and shall advise Lessor of the name and location of the relevant maintenance
performer. An Inspecting Party shall have the opportunity to attend such
scheduled maintenance visit or major check, subject to the other provisions
of
this Section 12.
This
Lease and the other Lessee Operative Agreements shall be binding upon and inure
to the benefit of Lessor and Lessee and their respective successors and
permitted assigns. Except as otherwise expressly permitted by the terms of
the
Lease or any other Lessee Operative Agreement, Lessee will not, without the
prior written consent of Lessor and Mortgagee, assign any of its rights under
this Lease. Except as otherwise provided herein (including, without limitation,
under the provisions of Section 15 hereof) or in the Trust Indenture, Lessor
and
Mortgagee may not assign or convey any of its right, title and interest in
and
to this Lease or the Aircraft without the prior written consent of Lessee,
such
consent not to be unreasonably withheld.
13.2.1 In
General
Lessee
shall not consolidate with or merge into any other person under circumstances
in
which Lessee is not the surviving corporation, or convey, transfer or lease
in
one or more transactions all or substantially all of its assets to any other
person, unless:
(a) such
person is organized, existing and in good standing under the Laws of the United
States, any State of the United States or the District Columbia and, upon
consummation of such transaction, such person will be a U.S. Air
Carrier;
(b) such
person executes and delivers to Lessor and Mortgagee a duly authorized, legal,
valid, binding and enforceable agreement, reasonably satisfactory in form and
substance to Lessor and Mortgagee, containing an effective assumption by such
person of the due and punctual performance and observance of each covenant,
agreement and condition in the Lessee Operative Agreements to be performed
or
observed by Lessee;
(c) such
person makes such filings and recordings with the FAA pursuant to the Act as
shall be necessary to evidence such consolidation or merger; and
(d) immediately
after giving effect to such consolidation or merger no Lease Event of Default
shall have occurred and be continuing.
13.2.2 Effect
of Merger
Upon
any
such consolidation or merger of Lessee with or into, or the conveyance, transfer
or lease by Lessee of all or substantially all of its assets to, any Person
in
accordance with this Section 13.2, such Person will succeed to, and be
substituted for, and may exercise every right and power of, Lessee under the
Lessee Operative Agreements with the same effect as if such person had been
named as “Lessee” therein. No such consolidation or merger, or conveyance,
transfer or lease, shall have the effect of releasing Lessee or such Person
from
any of the obligations, liabilities, covenants or undertakings of Lessee under
the Lease.
In
order
to secure the indebtedness evidenced by the Equipment Notes, Lessor has agreed
in the Trust Indenture, among other things, to assign to Mortgagee this Lease
and to mortgage the Aircraft, Airframe and Engines in favor of Mortgagee,
subject to the reservations and conditions therein set forth. Lessee hereby
accepts and consents to the assignment of all Lessor’s right, title and interest
in and to this Lease pursuant to the terms of the Trust Indenture. In accordance
with Section 3.3(c), Lessee agrees to pay directly to Mortgagee (or, after
receipt by Lessee of notice from Mortgagee of the discharge of the Trust
Indenture, to Lessor), all amounts of Rent (other than Excluded Payments) due
or
to become due hereunder and assigned to Mortgagee and Lessee agrees that
Mortgagee’s right to such payments hereunder shall be absolute and unconditional
and shall not be affected by any circumstance, including, without limitation,
the circumstances set forth in Section 16 hereof. Notwithstanding the foregoing
assignment of this Lease, the obligations of Lessee to Lessor to perform the
terms and conditions of this Lease shall remain in full force and effect.
Lessee
agrees that in the case of the appointment of any successor Owner Trustee
pursuant to the terms of the Participation Agreement and the Trust Agreement,
such successor Owner Trustee shall, upon written notice by such successor Owner
Trustee to Lessee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft and
the
other assets of the Trust Estate for all purposes hereof without the necessity
of any consent or approval by Lessee and without in any way altering the terms
of this Lease or Lessee’s obligations hereunder. An appointment and designation
of a successor Owner Trustee shall not exhaust the right to appoint and
designate further successor or additional Owner Trustees pursuant to the
Participation Agreement and the Trust Agreement, and such right may be exercised
repeatedly as long as this Lease shall be in effect.
The
occurrence of any one or more of the following circumstances, conditions, acts
or events, for any reason whatsoever and whether any such circumstance,
condition, act or 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, order, rule or regulation of any Government Entity, shall constitute
a
Lease Event of Default so long as it shall not have been remedied:
Lessee
shall fail to pay any amount of Basic Rent, Renewal Rent, Stipulated Loss Value
or Termination Value within five (5) Business Days after the same shall have
become due; or Lessee shall fail to pay any Supplemental Rent (other than
Stipulated Loss Value or Termination Value) when due and such failure shall
continue for a period in excess of ten (10) Business Days from and after the
date of any written notice to Lessee from Lessor, Mortgagee or Owner Participant
of the failure to make such payment when due; provided that any such failure
to
pay any Excluded Payment shall not constitute a Lease Event of Default until
written notice is given by the Owner Participant to Lessee and Mortgagee that
such failure constitutes a Lease Event of Default and such failure shall have
continued for a period in excess of ten (10) Business Days after such
notice.
Lessee
shall fail to carry and maintain, or cause to be carried and maintained,
insurance on and in respect of the Aircraft, Airframe and Engines in accordance
with the provisions of Section 11.
Lessee
shall fail to observe or perform (or cause to be observed and performed) in
any
material respect any other covenant, agreement or obligation set forth herein
or
in any other Lessee Operative Agreement (other than the covenants, agreements
and obligations set forth in the Tax Indemnity Agreement), and such failure
shall continue unremedied for a period of 30 days from and after the date of
written notice thereof to Lessee from Lessor, Owner Participant or Mortgagee,
unless such failure is capable of being corrected and Lessee shall be diligently
proceeding to correct such failure, in which case there shall be no Lease Event
of Default unless and until such failure shall continue unremedied for a period
of 90 days after receipt of such notice.
Any
representation or warranty made by Lessee herein, in the Participation Agreement
or in any other Lessee Operative Agreement (other than the representations
and
warranties of Lessee in the Tax Indemnity Agreement) (a) shall prove to
have been untrue or inaccurate in any material respect as of the date made,
(b) such untrue or inaccurate representation or warranty is material at the
time in question, (c) and the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants
or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor, Owner Participant or Mortgagee to Lessee (except
that this clause (c) shall be inapplicable in the case of Section 6.1.7 of
the
Participation Agreement).
(a) Lessee
shall consent to the appointment of or the taking of possession by a receiver,
trustee or liquidator of itself or of substantially all of its property,
or
Lessee shall admit in writing its inability to pay its debts generally as
they
come due, or does not 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, liquidation or other
relief in a case under any bankruptcy Laws or other insolvency Laws (as in
effect at such time), or Lessee shall seek relief by voluntary petition, answer
or consent, under the provisions of any other bankruptcy or other similar Law
providing for the reorganization or winding-up of corporations (as in effect
at
such time) or Lessee’s board of directors shall adopt a resolution authorizing
any of the foregoing; or
(b) an
order,
judgment or decree shall be entered by any court of competent jurisdiction
appointing, without the consent of Lessee, a receiver, trustee or liquidator
of
Lessee or of substantially all of its property, or substantially all of the
property of Lessee shall be sequestered, and any such order, judgment or decree
of appointment or sequestration shall remain in force undismissed, unstayed
and
unvacated for a period of 90 days after the date of entry thereof;
or
(c) a
petition against Lessee in a case under any bankruptcy Laws or other insolvency
Laws (as in effect at such time) is filed and not withdrawn or dismissed within
90 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 assumes jurisdiction, custody or control of
Lessee or of substantially all of its property and such jurisdiction, custody
or
control remains in force unrelinquished, unstayed and unterminated for a period
of 90 days.
If
any
Lease Event of Default shall occur and be continuing, Lessor may, at its option
and at any time and from time to time, exercise any one or more of the following
remedies as Lessor in its sole discretion shall elect:
15.1.1 Return
and Repossession
Lessor
may cause Lessee, upon giving written notice to Lessee, to return promptly,
and
Lessee shall return promptly, the Airframe and 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 or
Engine were being returned at the end of the Base Lease Term or any Renewal
Lease Term or Lessor, at its option, may enter upon the premises where the
Airframe or any Engine, or any Part thereof, are located and take immediate
possession of and remove the same 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, and
Lessee expressly waives any right it may have to a hearing prior to repossession
of the Aircraft.
15.1.2 Sale
and Use
Lessor
may sell the Airframe and/or any Engine at public or private sale, at such
times
and places, and to such Persons (including Lessor, Mortgagee or any
Participant), as
Lessor
may determine; or Lessor may otherwise dispose of, hold, use, operate, lease
to
others or keep idle the Airframe and/or any Engine, as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee and
without any duty to account to Lessee with respect to such action or inaction
or
for any proceeds with respect thereto, except as hereinafter set forth in this
Section 15, and except to the extent that such proceeds would constitute,
under applicable Law, a mitigation of Lessor’s damages suffered or incurred as a
result of the subject Lease Event of Default. Lessor shall give Lessee at least
15 days prior written notice of the date fixed for any public sale of the
Airframe and/or any Engine or of the date on or after which will occur the
execution of any contract providing for any private sale.
15.1.3 Certain
Liquidated Damages
Whether
or not Lessor shall have exercised, or shall thereafter at any time exercise,
any of its rights under Section 15.1.1 or 15.1.2 with respect to the
Airframe and/or any Engine, or any Part thereof, Lessor, by written notice
to
Lessee specifying a payment date (which shall be the Stipulated Loss Value
Date
next occurring not less than 10 days after the date of such notice), may demand
Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the payment date
so
specified and in the manner and in funds of the type specified in Section 3.3,
as liquidated damages for loss of a bargain and not as a penalty (in lieu of
the
Basic Rent or Renewal Rent, as the case may be, for the Aircraft in respect
of
all periods commencing on or after the date specified for payment in such
notice), the following amounts:
(a) all
unpaid Basic Rent or Renewal Rent, as the case may be, due at any time prior
to
the Stipulated Loss Value Date specified in such notice, but excluding Basic
Rent or Renewal Rent due on such Stipulated Loss Value Date; plus
(b) an
amount
equal to the excess, if any, of the Stipulated Loss Value for the Aircraft,
computed as of the Stipulated Loss Value Date specified in such notice, over
the
Fair Market Sales Value of the Aircraft, as of the Stipulated Loss Value Date
specified in such notice; plus
(c) interest
on the amounts specified in the foregoing clause (a) at the Payment Due Rate
from and including the date on which any such amount was due to the date of
payment of such amount; plus
(d) interest
on the amount specified in the foregoing clause (b) at the Payment Due Rate
from
and including the Stipulated Loss Value Date specified in such notice to the
date of payment of such amount.
15.1.4 Liquidated
Damages Upon Sale
If
Lessor, pursuant to Section 15.1.2 or applicable Law, shall have sold the
Aircraft, Lessor, in lieu of exercising its rights under Section 15.1.3
with respect to the Aircraft, may, if Lessor shall so elect, upon giving
written
notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor,
on the date of such sale and in the manner and in funds of the type specified
in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date of such sale),
the
following amounts:
(a) all
unpaid Basic Rent or Renewal Rent, as the case may be, due at any time prior
to
the Stipulated Loss Value Date on or immediately preceding the date of such
sale, but excluding Basic Rent or Renewal Rent due on such Stipulated Loss
Value
Date; plus
(b) an
amount
equal to the excess, if any, of (i) the Stipulated Loss Value of the Aircraft,
computed as of the Stipulated Loss Value Date used in the foregoing clause
(a)
for the computation of unpaid Rent, over (ii) the proceeds of such sale,
minus all reasonable costs of Lessor in connection with the sale;
plus
(c) if
the
date of such sale is not a Stipulated Loss Value Date, an amount equal to
interest on the outstanding principal amount of the Equipment Notes at the
rate
per annum borne thereby from and including the Stipulated Loss Value Date used
in the foregoing clause (a) for the computation of unpaid Rent to the date
of
such sale; plus
(d) interest
on the amounts specified in the foregoing clause (a) at the Payment Due Rate
from and including the date on which any such amount was due to the date of
payment of such amount; plus
(e) interest
on the sum of the amounts specified in the foregoing clause (b) at the Payment
Due Rate from and including the date of such sale to the date of payment of
such
amounts.
15.1.5 Rescission
Lessor
may (i) at its option, rescind or terminate this Lease as to the Aircraft,
Airframe or any Engine, or any Part thereof, or (ii) exercise any other right
or
remedy that may be available to it under applicable Law or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for
the breach hereof, including without limitation Lessee’s agreement to lease the
Aircraft for the Term and to pay Rent.
15.1.6 Other
Remedies
In
addition to the foregoing remedies (but without duplication of amounts otherwise
paid under this Section 15), Lessee shall be liable for any and all unpaid
Rent due hereunder before, during or after (except as otherwise provided herein)
the exercise of any of the foregoing
remedies and for all reasonable attorneys’ fees and other costs and expenses of
Lessor, including, without limitation, interest on overdue Rent at the rate
as
herein provided, incurred by reason of the occurrence of any Lease Event of
Default or the exercise of Lessor’s remedies with respect thereto, including all
reasonable costs and expenses of Lessor incurred in connection with the return
of the Airframe or any Engine, in accordance with the terms of Section 5 or
in placing the Airframe or any Engine, in the condition and airworthiness
required by Section 5.
Notwithstanding
the provisions of Section 15.1, during any period that the Aircraft, Airframe
or
any Engine is subject to CRAF in accordance with the provisions of
Section 7.2.3 and in the possession of the U.S. Government, Lessor shall
not, as a result of any Lease Event of Default, exercise its remedies hereunder
in such manner as to limit Lessee’s
control
under this Lease (or any Permitted Sublessee’s control under any Permitted
Sublease) of the Aircraft, Airframe or such Engine, unless at least 30 days’ (or
such other period as may then be applicable under CRAF) written notice of
default hereunder shall have been given by Lessor or Mortgagee by registered
or
certified mail to Lessee (and any Permitted Sublessee) with a copy to the
Contracting Officer Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given under
the
contract governing Lessee’s (or any Permitted Sublessee’s) participation in CRAF
with respect to the Aircraft, Airframe or any Engine.
If
Lessee
(i) fails to make any payment of Rent required to be made by it hereunder or
(ii) fails to perform or comply with any of its agreements contained herein
and
such failure continues for a period of thirty days after written notice thereof
is given by Lessor, Mortgagee or Owner Participant to Lessee, Lessor may (but
shall not be obligated to) make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the expenses of
Lessor or Mortgagee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with interest
thereon at the Payment Due Rate, shall be deemed Supplemental Rent, payable
by
Lessee upon demand by Lessor or Mortgagee, whichever is entitled thereto. No
such payment, performance or compliance shall be deemed to cure any Lease
Default or Lease Event of Default or otherwise relieve Lessee of its obligations
with respect thereto.
For
the
purpose of this Section 15, the “Fair Market Sales Value” of the Aircraft
shall be determined on an “as is, where is” basis and shall take into account
customary brokerage and other out-of-pocket fees and expenses which typically
would be incurred in connection with a sale of the Aircraft. Any such
determination shall be made by an Appraiser selected by Lessor and the costs
and
expenses associated therewith shall be borne by Lessee, unless Lessor does
not
obtain possession of the Aircraft, Airframe and Engines pursuant to this
Section 15, in which case
an
Appraiser shall not be appointed and Fair Market Sales Value for purposes of
this Section 15 shall be zero.
Nothing
contained in this Lease shall be construed to limit in any way any right,
power,
remedy or privilege of Lessor hereunder or under any other Operative Agreement
or now or hereafter existing at law or in equity. Each and every right, power,
remedy and privilege hereby given to, or retained by, Lessor in this Lease
shall
be in addition to and not in limitation of every other right, power, remedy
and
privilege given under the Operative Agreements or now or hereafter existing
at
law or in equity. Each and every right, power, remedy and privilege of Lessor
under this Lease and any other Operative Agreement may be exercised from
time to
time or simultaneously and as often and in such order as may be deemed expedient
by Lessor. All such rights, powers, remedies and privileges shall be cumulative
and not mutually exclusive, and the exercise of one shall not be deemed a
waiver
of the right to exercise any other. Lessee
hereby
waives to the extent permitted by applicable Law any right which it may have
to
require Lessor to choose or elect remedies.
(a) Lessee’s
obligation to pay Rent hereunder shall be absolute and unconditional, and shall
not be affected by any event or circumstance, including, without limitation:
(i) any setoff, counterclaim, recoupment, defense or other right that
Lessee may have against Lessor, Mortgagee, any Participant, any Note Holder,
or
any other Person for any reason whatsoever; (ii) any defect in the title,
airworthiness, condition, design, operation or fitness for use of, or any damage
to or loss or destruction of, the Aircraft, Airframe or any Engine, or any
interruption or cessation in the use or possession thereof by Lessee for any
reason whatsoever; (iii) any insolvency, bankruptcy, reorganization or
similar proceedings by or against Lessee or any other Person; or (iv) any
other circumstance, happening or event whatsoever, whether or not similar to
any
of the foregoing.
(b) If
for
any reason whatsoever this Lease shall be terminated in whole or in part by
operation of Law or otherwise except as specifically provided herein, Lessee
nonetheless agrees to pay an amount equal to each Rent payment at the time
such
payment would have become due and payable in accordance with the terms hereof
had this Agreement not been terminated in whole or in part. Lessee hereby
waives, to the extent permitted by applicable Law, any and all rights that
it
may now have or that at any time hereafter may be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Agreement, except
in
accordance with the express terms hereof.
(c) Nothing
set forth in this Section 16 shall be construed to prohibit Lessee from
separately pursuing any claim that it may have from time to time against Lessor
or any other Person with respect to any matter (other than the absolute and
unconditional nature of Lessee’s obligations hereunder to pay Rent, and other
than the matters specified in paragraphs (a) and (b) above). Without limiting
the foregoing, nothing in this Section 16 shall be construed as a waiver by
Lessee, or otherwise limit Lessee in pursuing any claim by Lessee, of any breach
by
Lessor, Owner Participant or any other Person of any covenant or obligation
contained in any Operative Agreement.
(a) At
least
225 days but not more than 375 days prior to the Scheduled Expiration Date
or,
if a Renewal Lease Term is then in effect, prior to the Scheduled Renewal
Term
Expiration Date of such Renewal Lease Term, Lessee may provide notice to
Lessor
that Lessee may exercise either the option to extend the leasing of the Aircraft
for a Renewal Lease Term pursuant to Section 17.2 or the option to purchase
the Aircraft on the Scheduled Expiration Date or Scheduled Renewal Term
Expiration Date of such Renewal Lease Term, as the case may be, pursuant
to
Section 17.3 (a “Preliminary Notice”).
(b) If
any
such Preliminary Notice is given by Lessee, then Lessee may provide a further
notice specifying which option it intends to elect,
with respect to the relevant period, pursuant to Section 17.2.1 or 17.3.1,
as
the case may be.
17.2.1 Renewal
Notice
(a) If
Lessee
has given a Preliminary Notice, as specified in Section 17.1, and subject
to the terms and conditions of this Section 17.2, Lessee may exercise its
option to extend the leasing of the Aircraft hereunder on two occasions, in
each
case until the next Scheduled Renewal Term Expiration Date, on the same terms,
provisions and conditions (except as contemplated by this Section 17) set
forth herein and in the other Lessee Operative Agreements with respect to the
Base Lease Term, by delivery of a notice (a “Renewal Notice”) to Lessor not less
than 180 days but not more than 375 days prior to (i) if the Base Lease
Term is then in effect, the Scheduled Expiration Date, or (ii) if a Renewal
Lease Term is then in effect, the Scheduled Renewal Term Expiration Date for
such Renewal Lease Term.
(b) Notwithstanding
anything to the contrary in this Agreement or any other Operative
Agreement:
(i) No
Preliminary Notice or Renewal Notice shall be binding on Lessor or oblige Lessor
to extend the leasing of the Aircraft hereunder for a Renewal Lease Term if
any
Payment Default, Bankruptcy Default or Lease Event of Default shall have
occurred and be continuing on and as of the date that such Renewal Lease Term
would otherwise commence.
(ii) Any
Renewal Notice shall be revocable by Lessee until 10 Business Days after the
Renewal Rent is determined in accordance with Sections 17.2.2 and unless revoked
by written notice by Lessee to Lessor shall thereafter become irrevocable and
shall constitute an unconditional obligation of Lessee to extend the leasing
of
the Aircraft hereunder for the Renewal Lease Term to which such Renewal Notice
relates.
(iii) Lessee
shall not be entitled to give any Renewal Notice if it has (x) not
delivered a Preliminary Notice or (y) delivered a Purchase Notice to
Lessor.
17.2.2 Renewal
Rent
(a) During
the Renewal Lease Term, Lessee shall pay to Lessor on each Payment Date,
in the
manner and in the funds of the type specified in Section 3.3, Renewal Rent
in
advance.
(b) The
Renewal Rent payable by Lessee on each Payment Date during any Renewal Lease
Term shall be the Fair Market Rental Value of the Aircraft for such Renewal
Lease Term. Any such Fair Market Rental Value shall be determined not more
than
10 Business Days after Lessee gives a Preliminary Notice by mutual agreement
of
Lessor and Lessee or, if they shall be unable to agree, by an appraisal in
accordance with Section 17.4.
(a) For
any
Renewal Lease Term, Stipulated Loss Value dates and Termination Value dates
shall be extended throughout such Renewal Lease Term on the same days and for
the same months as during the Base Lease Term.
(b) Stipulated
Loss Value and Termination Value amounts that are payable during any such
Renewal Lease Term shall be determined at the same time that the Renewal Rent
for such Renewal Lease Term is determined under Section 17.2.2. Stipulated
Loss Values and Termination Values for any such Renewal Lease Term shall,
commencing on the first day of such Renewal Lease Term, be equal to the Fair
Market Sales Value of the Aircraft, computed as of the first day of such Renewal
Lease Term, and shall decline ratably on a monthly basis to the Fair Market
Sales Value of the Aircraft as of the last day of such Renewal Lease Term,
but
shall be adjusted to credit Lessee for any Renewal Rent paid in advance
attributable to any subsequent period.
(c) Any
Fair
Market Sales Value of the Aircraft, for purposes of calculating Stipulated
Loss
Value and Termination Value amounts applicable during any such Renewal Lease
Term, shall be determined by mutual agreement of Lessor and Lessee or, if they
shall be unable to agree, by an appraisal in accordance with
Section 17.4.
17.3.1 Purchase
Notice
(a) Subject
to Section 17.1 and the terms and conditions of this Section 17.3,
Lessee may elect to purchase the Aircraft, on any Purchase Date, at a purchase
price equal to the lesser of (i) the Purchase Price Cap (as defined in
Schedule 1 to the Lease) and (ii) the Fair Market Sales Value of the
Aircraft computed as of the Purchase Date.
(b) Lessee
may exercise such option to purchase the Aircraft, by delivery of a notice
(a
“Purchase Notice”) to Lessor not less than 180 and not more than 375 days prior
to the Purchase Date specified in such Purchase Notice.
(c) Notwithstanding
anything to the contrary in this Agreement or any other Operative
Agreement:
(i) Any
Purchase Notice (whether delivered or deemed to have been delivered) shall
be
revocable until 10 Business Days after the determination of the Fair Market
Sales Value in accordance with Section 17.3.2 and unless revoked by written
notice by Lessee to Lessor shall thereafter become irrevocable and shall
constitute an unconditional obligation of Lessee to purchase the Aircraft
under
this Section 17.3.
(ii) No
Preliminary Notice or Purchase Notice shall be binding on Lessor or oblige
Lessor to sell the Aircraft hereunder if any Payment Default, Bankruptcy
Default
or Lease Event of Default shall have occurred and be continuing on and as
of
such Purchase Date.
(iii) Lessee
shall not be entitled to give any Purchase Notice in respect of any Purchase
Date if it has (x) not delivered a Preliminary Notice or (y) delivered
a Renewal Notice for a Renewal Lease Term that would commence immediately
following such Purchase Date.
The
Fair
Market Sales Value of the Aircraft shall be determined not more than 10 Business
Days after Lessee gives a Preliminary Notice by mutual agreement of Lessor
and
Lessee or, if they shall be unable to agree, by an appraisal in accordance
with
Section 17.4.
17.3.3 Title
Upon
full
and final payment by Lessee of (a) the applicable purchase price of the
Aircraft, (b) all unpaid Rent due and payable through and including the
Purchase Date and (c) all other amounts due and payable by Lessee under
this Agreement, Lessor will transfer to Lessee title to the Aircraft in
accordance with Section 4.5.
Whenever
Fair Market Rental Value or Fair Market Sales Value of the Aircraft is required
to be determined by an appraisal under this Section 17, Lessee and Lessor
shall appoint a mutually satisfactory Appraiser to conduct such appraisal.
If
Lessee and Lessor fail to agree upon a satisfactory Appraiser then each shall
promptly appoint a separate Appraiser and such Appraisers shall jointly
determine such amount. If either Lessee or Lessor fails to so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within 7 days after the appointment of
the
latter of such two Appraisers, they cannot agree upon such amount, such two
Appraisers shall, within 8 days after such latter appointment, appoint a third
Appraiser and such amount shall be determined by such three Appraisers, who
shall make their separate appraisals within 7 days following the appointment
of
the third Appraiser, and any determination so made shall be conclusive and
binding upon Lessor and Lessee. If no such third Appraiser is appointed within
such 8-day period, either Lessor or Lessee may apply to the American Arbitration
Association to make such appointment, and both parties shall be bound by such
appointment. The foregoing appraisal procedure shall in any event be completed
no less than 190 days before the end of the Base Lease Term or the current
Renewal Lease Term, as the case may be. If three Appraisers are appointed and
the difference between the determination which is farther from the middle
determination and the middle determination is more than 125% of the difference
between the middle determination and the third determination, then such farther
determination shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and binding upon Lessor and Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon Lessor and Lessee. The fees and expenses of all such Appraisers and such
appraisal procedure shall be borne equally by Lessee and Lessor, provided
that if
Lessee elects not to renew this Lease or purchase the Aircraft following the
conclusion of such appraisal, Lessee shall pay all expenses of such
appraisal.
No
provision of this Agreement may be amended, supplemented, waived, modified,
discharged, terminated or otherwise varied orally, but only by an instrument
in
writing that specifically identifies the provision of this Agreement that it
purports to amend, supplement, waive, modify, discharge, terminate or otherwise
vary and is signed by Lessor and Lessee with the written consent of the
Mortgagee if required by the Trust Indenture. Each such amendment, supplement,
waiver, modification, discharge, termination or variance shall be effective
only
in the specific instance and for the specific purpose for which it is given.
No
provision of this Agreement shall be varied or contradicted by oral
communication, course of dealing or performance or other manner not set forth
in
an agreement, document or instrument in writing and signed by Lessor and
Lessee.
If
any
provision hereof shall be held invalid, illegal or unenforceable in any respect
in any jurisdiction, then, to the extent permitted by Law (a) all other
provisions hereof shall remain in full force and effect in such jurisdiction
and
(b) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction. If, however, any Law pursuant to which such provisions are held
invalid, illegal or unenforceable may be waived, such Law is hereby waived
by
the parties hereto to the full extent permitted, to the end that this Agreement
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
This
Agreement is not intended to, and shall not, provide any person not a party
hereto (other than Mortgagee, the Participants, the Indenture Indemnitees
and
the Persons referred to in Section 4.6, with respect to matters expressly
for their benefit in this Lease) with any rights of any nature whatsoever
against either of the parties hereto, and no person not a party hereto (other
than Mortgagee, the Participants, the Indenture Indemnitees and the Persons
referred to in Section 4.6, with respect to matters expressly for their
benefit in this Lease) shall have any right, power or privilege in respect
of,
or have any benefit or interest arising out of, this Agreement.
This
Agreement, all annexes, schedules and exhibits hereto and all agreements,
instruments and documents relating hereto, including, without limitation
(a) consents, waivers and modifications that may hereafter be executed and
(b) financial statements, certificates and other information previously or
hereafter furnished to any party hereto, may be reproduced by such party
by any
photographic, photostatic, microfilm, micro-card, miniature photographic
or
other similar process, and such party may destroy any original documents
so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or
not the
original is in existence and whether or not such
reproduction
was made by such party in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction likewise is admissible
in
evidence.
This
Agreement and any amendments, waivers, consents or supplements hereto may be
executed in any number of counterparts (or upon separate signature pages bound
together into one or more counterparts), each of which when so executed shall
be
deemed to be an original, and all of which counterparts, taken together, shall
constitute one and the same instrument.
Unless
otherwise expressly permitted by the terms hereof, all notices, requests,
demands, authorizations, directions, consents, waivers and other communications
required or permitted to be made, given, furnished or filed hereunder shall
be
in writing (it being understood that the specification of a writing in certain
instances and not in others does not imply an intention that a writing is not
required as to the latter), shall refer specifically to this Agreement and
shall
be personally delivered, sent by facsimile or telecommunication transmission
(which in either case provides written confirmation to the sender of its
delivery), sent by registered mail or certified mail, return receipt requested,
postage prepaid, or sent by overnight courier service, in each case to the
respective address or facsimile number set forth for such party in
Schedule 1 to the Participation Agreement, or to such other address or
number as either party hereto may hereafter specify by notice to the other
party
hereto. Each such notice, request, demand, authorization,
direction, consent, waiver or other communication shall be effective when
received or, if made, given, furnished or filed (a) by facsimile or
telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
(a) THIS
AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(b) EACH
PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE
CITY
AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
OF NEW
YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT
TO
ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
(c) EACH
PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE SERVICE OF ANY
AND
ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY MAILING
COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET
FORTH PURSUANT TO SECTION 18.6. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 18.7(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON
SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(d) EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,
IN
ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN ANY OF THE ABOVE-NAMED
COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM,
THAT
VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR ANY
OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS.
(e) EACH
PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR
CAUSE OF ACTION IN ANY COURT
IN
ANY JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
No
failure on the part of Lessor to exercise, and no delay by Lessor in exercising,
any of its rights, powers, remedies or privileges under this Agreement or
provided at Law, in equity or otherwise shall impair, prejudice or constitute
a
waiver of any such right, power, remedy or privilege or be construed as a
waiver
of any breach hereof or default hereunder or as an acquiescence therein,
nor
shall any single or partial exercise of any such right, power, remedy or
privilege preclude any other or further exercise thereof by Lessor or the
exercise of any other right, power, remedy or privilege by Lessor. No notice
to
or demand on Lessee in any case shall, unless otherwise required under this
Agreement, entitle Lessee to any other or further notice or demand in similar
or
other circumstances or constitute a waiver of the rights of Lessor to any
other
further action in any circumstances without notice or demand.
This
Agreement, together with the other Operative Agreements, on and as of the
date
hereof constitutes the entire agreement of the parties hereto with respect
to
the subject matter hereof, and all prior or contemporaneous understandings
or
agreements, whether written or oral, between the parties hereto with respect
to
such subject matter are hereby superseded in their entireties.
[This
space intentionally left blank.]
XXXXX
FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee under the
Trust Agreement, as Lessor
NATIONAL ASSOCIATION, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee under the
Trust Agreement, as Lessor
By
Name:
Title:
CONTINENTAL
AIRLINES, INC.,
as
Lessee
By
Name:
Title:
Receipt
of this original counterpart of the foregoing Lease Agreement is hereby
acknowledged on this ____ day of _________, _______.
WILMINGTON
TRUST COMPANY,
as
Mortgagee
By
Name:
Title:
XXXXX
FARGO BANK NORTHWEST,
NATIONAL
ASSOCIATION, not in its
individual
capacity, except as expressly provided
herein,
but solely as Owner Trustee under the
Trust
Agreement, as Lessor
By
Name:
Title:
CONTINENTAL
AIRLINES, INC.,
as
Lessee
By
Name:
Title:
DEFINITIONS
[SEE
PARTICIPATION AGREEMENT ANNEX A]
ANNEX
B
RETURN
CONDITIONS
[OMITTED
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
ANNEX
C
MAINTENANCE
[OMITTED
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
ANNEX
D
INSURANCE
[OMITTED
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
PAGE
1
EXHIBIT
A - LEASE SUPPLEMENT
LEASE
AGREEMENT [TN]
LEASE
SUPPLEMENT No. __, dated ________, 200_, between XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, but solely as Owner Trustee under the [Amended and
Restated]1
Trust
Agreement [TN], dated as of [DD], with the Owner Participant named therein
(such
Owner Trustee, in its capacity as such Owner Trustee being herein called
“Lessor”), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
(“Lessee”).
Lessor
and Lessee have heretofore entered into that certain Lease Agreement [TN],
dated
as of [DD], relating to one Embraer Model EMB-145 XR aircraft (herein called
the
“Lease” and the defined terms therein being hereinafter used with the same
meanings). The Lease provides for the execution and delivery of this Lease
Supplement for the purpose of leasing the Airframe and Engines under the Lease
as and when delivered by Lessor to Lessee in accordance with the terms
thereof.
The
Lease
relates to the Airframe and Engines described below, and a counterpart of the
Lease to which this Lease Supplement is attached and of which this Lease
Supplement is a part, is being filed for recordation on the date hereof with
the
Federal Aviation Administration as one document.
1. Lessee
has been duly authorized by Lessor to accept, and does hereby irrevocably accept
on behalf of Lessor delivery of the Aircraft under, and for all purposes of,
the
Aircraft Xxxx of Sale, the Participation Agreement and the Purchase Agreement
Assignment.
2. Lessor
hereby delivers and leases to Lessee under the Lease and Lessee hereby accepts
and leases from Lessor under the Lease the following described Embraer EMB-145
XR aircraft (the “Aircraft”), which Aircraft as of the date hereof consists of
the following components:
(i) Airframe:
U.S. Registration No. ___________; manufacturer’s serial no. ___________;
and
(ii) Engines:
two (2) Xxxxxxx AE3007A1E engines bearing, respectively, manufacturer’s serial
nos. ___________ and ____________(each of which engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower).
3. The
Closing Date for the Aircraft is the date of this Lease Supplement set forth
in
the opening paragraph hereof.
___________________________
1. Delete
for New Aircraft.
PAGE
1
4. Lessee
hereby confirms to Lessor that Lessee has duly and irrevocably accepted the
Aircraft under and for all purposes hereof, of the Lease and of the other Lessee
Operative Agreements.
5. All
of
the terms and provisions of this Lease Supplement are hereby incorporated by
reference in the Lease to the same extent as if fully set forth
therein.
6. This
Lease Supplement may be executed by 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 but one and the same
instrument.
7. To
the
extent, if any, 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 original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Mortgagee on the signature page
thereof.
[This
space intentionally left blank.]
PAGE
2
XXXXX
FARGO BANK NORTHWEST,
NATIONAL
ASSOCIATION, not in its
individual
capacity, except as
expressly
provided
herein, but
solely as Owner
Trustee
under
the
Trust Agreement, as
Lessor
By
Name:
Title:
CONTINENTAL
AIRLINES, INC.,
as
Lessee
By
Name:
Title:
PAGE
3
XXXXX
FARGO BANK NORTHWEST,
NATIONAL
ASSOCIATION, not in its
individual
capacity, except as expressly
provided
herein, but solely as Owner
Trustee
under
the
Trust Agreement, as
Lessor
By
Name:
Title:
CONTINENTAL
AIRLINES, INC.,
as
Lessee
By
Name:
Title:
Receipt
of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged on this ____ day of _________, __________.
WILMINGTON
TRUST COMPANY,
as
Mortgagee
By
Name:
Title:
RETURN
ACCEPTANCE SUPPLEMENT
RETURN
ACCEPTANCE SUPPLEMENT dated ________, between XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, but solely as Owner Trustee under the [Amended and
Restated]2
Trust
Agreement [TN], dated as of [DD], with the Owner Participant named therein
(such
Owner Trustee, in its capacity as such Owner Trustee being herein called
“Lessor”), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
(“Lessee”).
Lessor
and Lessee have heretofore entered into that certain Lease Agreement [TN],
dated
as of [DD], relating to one Embraer Model EMB-145 XR aircraft (herein called
the
“Lease” and the defined terms therein being hereinafter used with the same
meanings). The Lease relates to the Airframe and Engines described
below.
1. This
Return Acceptance Supplement is executed by Lessor and Lessee to confirm that
on
the date hereof the following described Airframe and Engines were returned
by
Lessee to Lessor:
(i) Airframe:
U.S. Registration No. ______________; manufacturer’s serial no.
__________________; and
(ii) Engines:
two (2) Xxxxxxx AE3007A1E engines bearing, respectively, manufacturer’s serial
nos. ____________________________ and _________________________.
2. This
Return Acceptance Supplement is intended to be delivered in
_____________________.
3. Lessor
and Lessee agree that the return of the Aircraft is in compliance with Section
5
and Annex B of the Lease, except as set forth below:
4. Lessor
and Lessee agree that the Lease is terminated, except for the provisions thereof
that expressly survive termination.
__________________________________
2 . Delete
for New Aircraft.
PAGE
1
XXXXX
FARGO BANK NORTHWEST,
NATIONAL
ASSOCIATION, not in its
individual
capacity, except as expressly
provided
herein, but solely as Owner
Trustee
under
the
Trust Agreement, as
Lessor
By
Name:
Title:
CONTINENTAL
AIRLINES, INC.,
as
Lessee
By
Name:
Title:
CERTAIN
TERMS
[OMITTED
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
BASIC
RENT
[OMITTED
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
STIPULATED
LOSS VALUE
[OMITTED
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
TERMINATION
VALUE
[OMITTED AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
PERMITTED
COUNTRIES
Argentina
Australia
Austria
Bahamas
Belgium
Brazil
Canada
Chile
Denmark
Ecuador
Egypt
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Italy
Japan
|
Luxembourg
Malaysia
Malta
Mexico
Netherlands
New
Zealand
Norway
Philippines
Portugal
Republic
of China (Taiwain)
Singapore
South
Africa
South
Korea
Spain
Sweden
Switzerland
Thailand
Tobago
Trinidad
United
Kingdom
Venezuela
|
PLACARDS
Leased
from
Xxxxx
Fargo Bank Northwest, National Association,
not
in
its individual capacity but solely as
Owner
Trustee, Owner and Lessor
and
Mortgaged
to
Wilmington
Trust Company,
not
in
its individual capacity but solely as Mortgagee