Exhibit 99(b)
===============================================================================
LEASE AGREEMENT
[NW ____ _]
Dated as of
[_________________]
Between
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
Not in its Individual Capacity, except as expressly
provided herein, but solely as Owner Trustee,
Lessor
AND
NORTHWEST AIRLINES, INC.,
Lessee
One [Airbus A330-323] [Boeing 757-351] Aircraft
===============================================================================
As set forth in Section 20 hereof, Lessor has assigned to the Indenture
Trustee (as defined herein) certain of its right, title and interest in and to
this Lease. To the extent, if any, that this Lease constitutes chattel paper
(as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
thereof.
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions.......................................................1
SECTION 2. Acceptance and Lease.............................................17
SECTION 3. Term and Rent....................................................17
(a) Basic Term.............................................17
(b) [Intentionally Omitted]................................17
(c) Basic Rent.............................................17
(d) Adjustments to Basic Rent..............................17
(e) Supplemental Rent......................................19
(f) Payments in General....................................19
SECTION 4. Lessor's Representations and Warranties..........................20
SECTION 5. Return of the Aircraft...........................................21
(a) Condition Upon Return..................................21
(b) Return of the Engines..................................22
(c) Fuel; Manuals..........................................22
(d) Storage Upon Return....................................22
SECTION 6. Liens............................................................23
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.........................................23
(a) Registration and Maintenance...........................23
(b) Possession and Subleases...............................24
(c) Insignia...............................................28
SECTION 8. Replacement and Pooling of Parts; Alterations, Modifications
and Additions...............................................29
(a) Replacement of Parts...................................29
(b) Pooling of Parts.......................................29
(c) Alterations, Modifications and Additions...............30
SECTION 9. Voluntary Termination............................................31
(a) Termination Event......................................31
(b) [Intentionally Omitted]................................31
(c) Optional Sale of the Aircraft..........................31
(d) Termination as to Engines..............................33
SECTION 10. Loss, Destruction, Requisition, etc.............................33
(a) Event of Loss with Respect to the Aircraft.............33
(b) Event of Loss with Respect to an Engine................35
-i-
Page
----
(c) Application of Payments from Governmental
Authorities for Requisition of Title, etc.........36
(d) Requisition for Use of the Aircraft by the United
States Government or the Government of Registry
of the Aircraft...................................36
(e) Requisition for Use of an Engine by the United
States Government or the Government of Registry of
the Aircraft......................................37
(f) Application of Payments During Existence of Event
of Default........................................37
SECTION 11. Insurance.......................................................38
(a) Public Liability and Property Damage Insurance.........38
(b) Insurance Against Loss or Damage to the Aircraft.......39
(c) Reports, etc...........................................42
(d) Self-Insurance.........................................42
(e) Additional Insurance by Lessor and Lessee..............43
(f) Indemnification by Government in Lieu of
Insurance.........................................43
(g) Application of Payments During Existence of an
Event of Default..................................43
SECTION 12. Inspection......................................................43
SECTION 13. Assignment......................................................44
SECTION 14. Events of Default...............................................44
SECTION 15. Remedies........................................................46
SECTION 16. Lessee's Cooperation Concerning Certain Matters.................49
SECTION 17. Notices.........................................................50
SECTION 18. No Set-Off, Counterclaim, etc...................................51
SECTION 19. Renewal Options; Purchase Options; Valuation....................51
(a) Renewal Options.....................................51
(b) Purchase Options....................................52
(c) Valuation...........................................53
(d) Special Purchase Option.............................54
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates...............................................54
SECTION 21. Lessor's Right to Perform for Lessee............................55
SECTION 22. Investment of Security Funds; Liability of Lessor Limited.......55
(a) Investment of Security Funds........................55
(b) Liability of Lessor Limited.........................56
-ii-
Page
----
SECTION 23. Service of Process..............................................56
SECTION 24. Miscellaneous...................................................56
SECTION 25. Successor Trustee...............................................57
SECTION 26. Covenant of Quiet Enjoyment.....................................57
-iii-
EXHIBITS
EXHIBIT A - Form of Lease Supplement
EXHIBIT B-1 - Basic Rent Payment, Lessor's Cost and Special
Purchase Price Schedule
EXHIBIT B-2 - Basic Rent Allocation Schedule
EXHIBIT C - Stipulated Loss Value Schedule
EXHIBIT D - Termination Value Schedule
EXHIBIT E - Rent Recalculation Verification
EXHIBIT F - Schedule of Domiciles of Permitted Sublessees
EXHIBIT G - Return Conditions
-iv-
LEASE AGREEMENT
[NW ____ _]
This LEASE AGREEMENT [NW ____ _], dated as of [___________], between
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 defined in Section 1 hereof) (in such capacity,
"Lessor"), and NORTHWEST AIRLINES, INC., a corporation organized and existing
pursuant to the laws of the State of Minnesota ("Lessee");
W I T N E S S E T H:
SECTION 1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this
Lease Agreement [NW ____ _] and shall be equally applicable to both the
singular and the plural forms of the terms herein defined:
"Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common
control with such person. For the purposes of this definition,
"control" (including "controlled by" and "under common control
with") shall mean the power, directly or indirectly, to direct or
cause the direction of the management and policies of such person
whether through the ownership of voting securities or by contract or
otherwise.
"Aircraft" means the Airframe to be delivered and leased
hereunder (or any airframe from time to time substituted for such
Airframe pursuant to Section 10(a) hereof) together with the [two]
[four] Engines initially leased hereunder (or any engine substituted
for either of such Engines pursuant to the terms hereof), whether or
not any of such initial or substituted Engines may from time to time
be installed on such initial or substituted Airframe or may be
installed on any other airframe or on any other aircraft.
"Airframe" means: (i) the [Airbus A330-323] [Boeing 757-351]
aircraft (except Engines or engines from time to time installed
thereon) specified in the initial Lease Supplement, which aircraft
shall be leased by Lessor to Lessee hereunder and under such Lease
Supplement, and any aircraft (except Engines or engines from time to
time installed thereon) which may from time to time be substituted
for such aircraft (except Engines or engines from time to time
installed thereon) pursuant to clause (ii) of the first paragraph of
Section 10(a); and (ii) any and all Parts (A) so long as the same
shall be incorporated or installed in or attached to such aircraft
(except Engines or engines from time to time installed thereon), or
(B) so long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from such
aircraft (except Engines or engines from time to time installed
thereon); provided, however, that at such time as an aircraft
(except Engines or engines from time to time installed
thereon) shall be deemed part of the property leased hereunder in
substitution for the Airframe pursuant to the applicable provisions
hereof, the replaced Airframe shall cease to be an Airframe
hereunder.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.
"Base Rate" means the rate of interest announced publicly by
Citibank, N.A. in New York, New York from time to time as its base
rate.
"Basic Rent" means, for the Basic Term, the rent payable for
the Aircraft pursuant to Section 3(c) as adjusted as provided in
Section 3(d) but subject always to the provisions of Section 3(d)(v)
hereof and, for any Renewal Term, Basic Rent determined pursuant to
Section 19.
"Basic Term" means the term for which the Aircraft is leased
hereunder pursuant to Section 3(a) hereof commencing on the Delivery
Date and ending on [______________________], or such earlier date as
this Lease may be terminated in accordance with the provisions
hereof.
"Beneficial Interest" means the interest of the Owner
Participant under the Trust Agreement.
"Xxxx of Sale" means a full warranty xxxx of sale covering the
Aircraft, executed by Lessee in favor of the Owner Trustee, dated
the Delivery Date, specifically referring to the Airframe and each
Engine, which Xxxx of Sale shall contain, among other things, a
statement that such Xxxx of Sale thereby conveys to the Owner
Trustee good title to the Airframe and each Engine described in such
Xxxx of Sale, free and clear of all liens, encumbrances and rights
of others except Liens permitted by clause (v) of Section 6 of the
Lease.
"Business Day" means any day other than a Saturday or Sunday or
a day on which commercial banks are required or authorized to close
in the City of New York, New York; Boston, Massachusetts; or
Minneapolis, Minnesota.
"Certificate Holder" means Certificate Holder as defined in the
Trust Indenture.
"Certificated Air Carrier" means a Citizen of the United States
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States
Code, for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo or that otherwise is certified or
registered to the extent required to fall within the purview of 11
U.S.C. Section 1110 or any analogous successor provision of the
Bankruptcy Code.
2
"Citizen of the United States" has the meaning specified in
Section 40102(a)(15) of Title 49 of the United States Code or any
similar legislation of the United States of America enacted in
substitution or replacement therefor.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air
Fleet Program currently administered by the United States Air Force
Air Mobility Command pursuant to Executive Order No. 11490, as
amended, or any substantially similar program.
"Class C-2 Pass Through Trust" means the Northwest Airlines
Pass Through Trust 2002-1C-2 created pursuant to the Pass Through
Trust Agreement, dated as of June 3, 1999, among Northwest Airlines
Corporation, Northwest Airlines, Inc., and State Street Bank and
Trust Company of Connecticut, National Association, as supplemented
by Trust Supplement No. 2002-1C-2, dated as of the Issuance Date
among Northwest Airlines, Inc., Northwest Airlines Corporation and
State Street Bank and Trust Company of Connecticut, National
Association.
"Class C-2 Trustee" means the Pass Through Trustee for the
Class C-2 Pass Through Trust.
"Class G-2 Pass Through Trust" means the Pass Through Trust
Agreement, dated as of June 3, 1999, among Northwest Airlines
Corporation, Northwest Airlines, Inc., and State Street Bank and
Trust Company of Connecticut, National Association, as supplemented
by Trust Supplement No. 2002-1G-2, dated as of the Issuance Date
among Northwest Airlines, Inc., Northwest Airlines Corporation and
State Street Bank and Trust Company of Connecticut, National
Association.
"Class G-2 Trustee" means the Pass Through Trustee for the
Class G-2 Pass Through Trust.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means the amount of a Pass Through Trustee's or
the Owner Participant's, as the case may be, participation in
Lessor's Cost for the Aircraft required to be made available or paid
as provided in Section 1 of the Participation Agreement.
"Consent and Agreement" means[, collectively, the Manufacturer
Consent and Agreement to Assignment of Warranties and the Supplier
Consent and Agreement to Assignment of Warranties. -- A330] [that
certain Consent and Agreement [NW ____ _], dated as of the date
hereof, executed by the Manufacturer, as the same may be amended,
modified or supplemented from time to time in accordance with the
applicable provisions thereof. -- 757]
"Default" means any event which with the giving of notice or
the lapse of time or both would become an Event of Default.
3
"Delivery Date" means the date of the initial Lease Supplement
for the Aircraft, which date shall be the date the Aircraft is
leased by Lessor to Lessee and accepted by Lessee hereunder.
"Depreciation Period" means the period commencing on the
Delivery Date and ending on [________________], or such earlier date
as this Lease may be terminated in accordance with the provisions
hereof.
"Dollars" and "$" means the lawful currency of the United
States of America.
"EBO Date" means [____________] (or, if [____________] is not a
Business Day, the Business Day immediately succeeding
[____________]).
"Engine" means (i) each of the two [Xxxxx & Whitney Model
PW4168A] [Xxxxx & Xxxxxxx Model PW2040] engines listed by
manufacturer's serial number in the initial Lease Supplement,
whether or not from time to time thereafter installed on the
Airframe or installed on any other airframe or on any other
aircraft; and (ii) any engine which may from time to time be
substituted, pursuant to the terms hereof, for any of such two
engines, together in each case with any and all Parts incorporated
or installed in or attached thereto or any and all Parts removed
therefrom so long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from such
Engine; provided, however, that at such time as an engine shall be
deemed part of the property leased hereunder in substitution for an
Engine pursuant to the applicable provisions hereof, the replaced
Engine shall cease to be an Engine hereunder. The term "Engines"
means, as of any date of determination, all Engines then leased
hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder. Section references to ERISA are to
ERISA, as in effect at the date of the Participation Agreement and
any subsequent provisions of ERISA, amendatory thereof, supplemental
thereto or substituted therefor.
"Event of Default" has the meaning specified in Section 14
hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such
property: (i) the loss of such property or of the use thereof due to
the destruction of or damage to such property which renders repair
uneconomic or which renders such property permanently unfit for
normal use by Lessee (or any Sublessee) for any reason whatsoever;
(ii) any damage to such property which results in an insurance
settlement with respect to such property on the basis of a total
loss, or a constructive or compromised total loss; (iii) the theft
or disappearance of such property, or the confiscation,
condemnation, or seizure of, or requisition of title to, or use of,
such property (other than a requisition for use by the United States
4
Government or any other government of registry of the Aircraft, or
any agency or instrumentality of any thereof) which in the case of
any event referred to in this clause (iii) (other than a requisition
of title) shall have resulted in the loss of possession of such
property by Lessee (or any Sublessee) for a period in excess of 180
consecutive days or, if earlier, until the end of the Term or, in
the case of a requisition of title, the requisition of title shall
not have been reversed within 90 days from the date of such
requisition of title or, if earlier, at the end of the Term; (iv) as
a result of any law, rule, regulation, order or other action by the
Federal Aviation Administration or other governmental body of the
government of registry of the Aircraft having jurisdiction, the use
of such property in the normal course of the business of air
transportation shall have been prohibited for a period of 180
consecutive days, unless Lessee (or any Sublessee), prior to the
expiration of such 180 day period, shall have undertaken and shall
be diligently carrying forward all steps which are necessary or
desirable to permit the normal use of such property by Lessee (or
such Sublessee), but in any event if such use shall have been
prohibited for a period of two consecutive years, provided that no
Event of Loss shall be deemed to have occurred if such prohibition
has been applicable to the entire U.S. registered fleet of [Airbus
Model A330-300] [Boeing Model 757-300] aircraft of Lessee (or any
Sublessee) and Lessee (or a Sublessee), prior to the expiration of
such two-year period, shall have conformed at least one such
aircraft in its fleet to the requirements of any such law, rule,
regulation, order or other action and commenced regular commercial
use of the same in such jurisdiction and shall be diligently
carrying forward, in a manner which does not discriminate against
the Aircraft in so conforming the Aircraft, all steps which are
necessary or desirable to permit the normal use of the Aircraft by
Lessee (or such Sublessee), provided, further that, notwithstanding
any of the foregoing, such prohibition shall constitute an Event of
Loss if such use shall have been prohibited for a period of three
consecutive years or such use shall be prohibited at the expiration
of the Term; (v) the requisition for use by the United States
Government or any other government of registry of the Aircraft or
any instrumentality or agency of any thereof, which shall have
occurred during the Basic Term (or any Renewal Term) and shall have
continued for thirty (30) days beyond the Term, provided, however,
that no Event of Loss pursuant to this clause (v) shall exist if
Lessor shall have furnished to Lessee the written notice specified
in Section 10(d) hereof; and (vi) any divestiture of title to or
interest in an Engine treated as an Event of Loss pursuant to
Section 7(b) hereof. An Event of Loss with respect to the Aircraft
shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe.
"Expenses" has the meaning specified in Section 7(c) of the
Participation Agreement.
"FAA Xxxx of Sale" means a xxxx of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the Federal
Aviation Administration on the Delivery Date for the Aircraft,
executed by Lessee in favor of the Owner Trustee and dated the
Delivery Date.
5
"Federal Aviation Act" means that portion of the United States
Code comprising those provisions formerly referred to as the Federal
Aviation Act of 1958, as amended, or any subsequent legislation that
amends, supplements or supersedes such provisions.
"Federal Aviation Administration" and "FAA" mean the United
States Federal Aviation Administration and any agency or
instrumentality of the United States government succeeding to their
functions.
"Foreign Air Carrier" means any air carrier which is not a U.S.
Air Carrier and which performs maintenance, preventative maintenance
and inspections for the Aircraft, Airframe and/or any Engine or
engine to standards which are approved by, or which are
substantially equivalent to those required by, the Federal Aviation
Administration, the Civil Aviation Authority of the United Kingdom,
the Direction Generale de l'Aviation Civile of the French Republic,
the Luftfahrt Bundesamt of the Federal Republic of Germany, the
Nederlandse Luchtvaart Authoriteit of the Kingdom of the
Netherlands, the Ministry of Transportation of Japan or the Federal
Ministry of Transport of Canada (and any agency or instrumentality
of the applicable government succeeding to the functions of any of
the foregoing entities).
["French Pledge Agreement" means the French Pledge Agreement,
dated as of the date hereof, between the Owner Trustee and the
Indenture Trustee. -- A330]
"Guarantee" means that certain Guarantee [NW ____ _], dated as
of the date hereof, made by the Guarantor, as such Guarantee may be
amended or supplemented from time to time pursuant to the applicable
provisions thereof.
"Guarantor" means Northwest Airlines Corporation, a Delaware
corporation.
["Guaranty" means that certain Guaranty of the Manufacturer
attached to the Purchase Agreement.-- A330]
"Indemnitee" means (i) the Owner Trustee, in its individual
capacity and as trustee under the Trust Agreement, (ii) the
Indenture Trustee, (iii) the Owner Participant, (iv) the Trust
Estate, (v) the Loan Participants and each other Certificate Holder,
(vi) the Subordination Agent, (vii) the Primary Liquidity Provider
and the Policy Provider, (viii) the Pass Through Trustees, (ix) each
Affiliate of the Persons described in clauses (i) through (iv),
inclusive, (x) each Affiliate of the Persons described in clauses
(vi), (vii) and (viii) inclusive, (xi) the respective directors,
officers, employees, agents and servants of each of the Persons
described in clauses (i) through (viii), inclusive, (xii) the
successors and permitted assigns of the Persons described in clauses
(i) through (iv), inclusive, and (xiii) the successors and permitted
assigns of the Persons described in clauses (v), (vi), (vii) and
(viii) inclusive.
6
"Indenture Trustee" means the Indenture Trustee under the Trust
Indenture, and any entity which may from time to time be acting as
indenture trustee under the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement
and the Trust Indenture.
"Indenture Trustee's Liens" means any Lien which arises as a
result of (A) claims against the Indenture Trustee not related to
its interest in the Aircraft or the administration of the Trust
Estate pursuant to the Trust Indenture, (B) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to
take any action required by, the Operative Documents to the extent
such acts arise or such failure arises from or constitutes gross
negligence or willful misconduct, (C) claims against the Indenture
Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 of the Participation Agreement
pursuant to said Section 7, or (D) claims against the Indenture
Trustee arising out of the transfer by the Indenture Trustee of all
or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than a
transfer of the Aircraft pursuant to Section 9, 10 or 19 of the
Lease or Article IV or V of the Trust Indenture, or a transfer of
the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture
Trustee has received all amounts due pursuant to the Trust
Indenture.
["Initial Installment" has the meaning set forth in Section
19(d) hereof.]
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Primary Liquidity
Provider, the Policy Provider, the Subordination Agent and other
parties thereto, as such Intercreditor Agreement may be amended or
supplemented from time to time pursuant to the applicable provisions
thereof.
"Issuance Date" means August 5, 2002.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby" or other like
words mean this Lease Agreement [NW ____ _] as originally executed
or as modified, amended or supplemented pursuant to the applicable
provisions hereof and in accordance with the Trust Agreement and the
Trust Indenture, including, without limitation, supplementation
hereof by one or more Lease Supplements entered into pursuant to the
applicable provisions hereof.
"Lease Period" means each of the consecutive periods throughout
the Basic Term and any Renewal Term ending on a Lease Period Date,
the first such period commencing on and including the Delivery Date.
7
"Lease Period Date" means [_______________] and each succeeding
[February 20], [May 20], [August 20] and [November 20], to and
including the last such date in the Term.
"Lease Supplement" means a Lease Supplement, substantially in
the form of Exhibit A hereto, to be entered into between Lessor and
Lessee on the Delivery Date for the purpose of leasing the Aircraft
under and pursuant to the terms of this Lease Agreement, and any
subsequent Lease Supplement entered into in accordance with the
terms hereof.
"Lessee Documents" means the Participation Agreement, the
Lease, the Lease Supplement covering the Aircraft, the Purchase
Agreement (insofar as it relates to the Aircraft), the FAA Xxxx of
Sale, the Xxxx of Sale, the Purchase Agreement Assignment and the
Tax Indemnity Agreement.
"Lessor Liens" means any Lien or disposition of title or
interest arising as a result of (i) claims against Lessor, Xxxxx
Fargo Bank Northwest, National Association, in its individual
capacity, or the Owner Participant not related to the transactions
contemplated by the Operative Documents, (ii) any act or omission of
the Owner Participant, Lessor, or Xxxxx Fargo Bank Northwest,
National Association, in its individual capacity, which is not
related to the transactions contemplated by the Operative Documents
or is in violation of any of the terms of the Operative Documents,
(iii) claims against the Owner Participant, Lessor, or Xxxxx Fargo
Bank Northwest, National Association, in its individual capacity,
with respect to Taxes or Expenses against which Lessee is not
required to indemnify the Owner Participant, Lessor or Xxxxx Fargo
Bank Northwest, National Association, in its individual capacity,
pursuant to Section 7 of the Participation Agreement or (iv) claims
against Lessor or the Owner Participant arising out of any transfer
by Lessor or the Owner Participant of all or any portion of the
respective interests of Lessor or the Owner Participant in the
Aircraft, the Trust Estate or the Operative Documents other than the
transfer of possession of the Aircraft by Lessor pursuant to this
Agreement, the transfer pursuant to the Trust Indenture or a
transfer of the Aircraft pursuant to Section 9, 10 or 19 hereof or
pursuant to the exercise of the remedies set forth in Section 15
hereof, provided, however, that any Lien which is attributable
solely to Xxxxx Fargo Bank Northwest, National Association or the
Owner Participant and would otherwise constitute a Lessor Lien
hereunder shall not constitute a Lessor Lien hereunder so long as
(1) the existence of such Lien poses no material risk of the sale,
forfeiture or loss of the Aircraft, (2) the existence of such Lien
does not interfere in any way with the use, possession, operation,
or quiet enjoyment of the Aircraft by Lessee (or any Sublessee), (3)
the existence of such Lien does not affect the priority or
perfection of, or otherwise jeopardize, the Lien of the Trust
Indenture, (4) Xxxxx Fargo Bank Northwest, National Association or
the Owner Participant, as appropriate, is diligently contesting such
Lien and (5) the existence of such Lien does not pose a material
threat of interference with the payment of Rent (other than Excluded
Payments in favor of Xxxxx Fargo Bank Northwest, National
Association or the Owner Participant, as appropriate).
8
"Lessor's Cost" for the Aircraft means the amount denominated
as such in Exhibit B-1 to the Lease.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease, sublease, sub-sublease or security interest.
"Loan Participant" means each Purchaser and its respective
successors and registered assigns, including any Certificate Holder.
"Loan Participant Liens" means any Lien which arises from acts
or claims against any Loan Participant not related to the
transactions contemplated by the Operative Documents.
"Loss Payment Date" has the meaning specified in Section 10(a)
hereof.
"Majority in Interest of Certificate Holders" has the meaning
set forth in the Trust Indenture.
"Make-Whole Amount" has the meaning assigned to that term in
the Trust Indenture.
"Manufacturer" means [Airbus G.I.E., f/k/a Airbus Industrie,
G.I.E., a Groupement d'Interet Economique established under
Ordonnance 67-821, dated September 23, 1967, of the Republic of
France] [The Boeing Company, a Delaware corporation].
["Manufacturer Consent and Agreement to Assignment of
Warranties" means the Manufacturer Consent and Agreement to
Assignment of Warranties [NW ____ __], dated as of the date hereof,
executed by the Manufacturer, as the same may be amended, modified
or supplemented from time to time in accordance with the applicable
terms thereof. -- A330]
"Manufacturer Documents" means [the Manufacturer Consent and
Agreement to Assignment of Warranties and the Guaranty.-- A330] [the
Purchase Agreement and the Consent and Agreement.-- 757]
["Mortgage" means that certain Mortgage and Security Agreement,
dated as of [_______________] between Lessee and
[________________].]
"Net Economic Return" shall have the meaning ascribed to such
term in paragraph 2 of Exhibit E to the Lease.
"Net Present Value of Rents" means the net present value, as of
the Delivery Date, of Basic Rent set forth in Exhibit B-1 hereto,
discounted at an annual interest rate of [___] percent on a
semi-annual basis.
"Note Purchase Agreement" means that certain Note Purchase
Agreement, dated as of the Issuance Date, among Northwest Airlines,
Inc., the
9
Subordination Agent, Xxxxx Fargo Bank Northwest, National
Association, as Escrow Agent, State Street Bank and Trust Company,
as Paying Agent, State Street Bank and Trust Company of Connecticut,
National Association, as the Pass Through Trustee under each Pass
Through Trust Agreement and other parties thereto, providing for,
among other things, the issuance and sale of certain secured
certificates.
"Operative Documents" and "Operative Document" means each of
the Participation Agreement, the Lease, the Trust Indenture, the
Trust Agreement, an acceptance certificate covering the Aircraft in
the form agreed to by the Participants and Lessee, the Tax Indemnity
Agreement, the Lease Supplement covering the Aircraft, the Trust
Supplement covering the Aircraft, the Secured Certificates, the Xxxx
of Sale, the FAA Xxxx of Sale, the Purchase Agreement (insofar as it
relates to the Aircraft), the Purchase Agreement Assignment, the
Consent and Agreement and the Guarantee.
"Overall Transaction" means all the transactions contemplated
by the Operative Documents.
"Owner Participant" means the corporation executing the
Participation Agreement as the Owner Participant, and thereafter any
Person to which such corporation transfers all of its right, title
and interest in and to the Trust Agreement, the Trust Estate and the
Participation Agreement, to the extent permitted by Section 8.01 of
the Trust Agreement and Section 8 of the Participation Agreement.
"Owner Participant Documents" means the Participation
Agreement, the Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means the entity executing the Participation
Agreement as Owner Trustee and any entity appointed as successor
Owner Trustee pursuant to Section 9.01 of the Trust Agreement, and
references to a predecessor Owner Trustee in its individual capacity
by name in the Operative Documents shall include such successor
Owner Trustee in its individual capacity from and after such
succession.
"Owner Trustee Documents" means the Participation Agreement,
the Trust Agreement, the Trust Supplement covering the Aircraft, the
Lease, the Lease Supplement covering the Aircraft, the Purchase
Agreement Assignment, the Trust Indenture and the Secured
Certificates.
"Participants" means and includes the Loan Participants and the
Owner Participant.
"Participation Agreement" means that certain Participation
Agreement [NW ____ _], dated as of the date hereof, among Lessee,
the Guarantor, the Purchasers, the Indenture Trustee, the
Subordination Agent, the Owner Participant
10
and Owner Trustee, as such Participation Agreement may be amended or
supplemented from time to time pursuant to the applicable provisions
thereof.
"Parties" means the Owner Trustee, the Indenture Trustee and
the Participants.
"Parts" means all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature (other than (a) complete Engines or engines, (b) any
items leased by Lessee from a third party (other than Lessor) and
(c) cargo containers) which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine or so long as
title thereto shall remain vested in Lessor in accordance with
Section 8 after removal therefrom.
"Pass Through Certificates" means the pass through certificates
to be issued by the Pass Through Trustee in connection with the
Overall Transaction.
"Pass Through Trust" means each of the two separate pass
through trusts created under the Pass Through Trust Agreements.
"Pass Through Trust Agreement" means the pass through trust
agreement and each of the two separate pass through trust
supplements referred to on Schedule III to the Participation
Agreement.
"Pass Through Trustee" means State Street Bank and Trust
Company of Connecticut, National Association, a national banking
association, in its capacity as trustee under each Pass Through
Trust Agreement, and each other person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
"Past Due Rate" means (i) with respect to the portion of any
payment of Rent that may be required by the Trust Indenture to be
paid by the Indenture Trustee to the Loan Participants, or the
holders of any outstanding Secured Certificates, the "Past Due Rate"
as defined in the Trust Indenture and (ii) with respect to the
remaining portion of any payment of Rent (and the entire amount of
any payment of Rent after the satisfaction and discharge of the
Trust Indenture), a rate per annum equal to [_]% over the Base Rate.
"Permitted Lien" means any Lien referred to in clauses (i)
through (viii) of Section 6 hereof.
"Permitted Sublessee" means any entity domiciled in a country
listed in Exhibit F hereto.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
11
"Policy Provider" means MBIA Insurance Corporation, a New
York-domiciled stock insurance company.
"Policy Provider Agreement" means the Insurance and Indemnity
Agreement dated as of the Issuance Date among the Subordination
Agent, the Class G-2 Trustee, the Policy Provider and the other
party thereto, including the related Policy Provider Fee Letter
referred to therein, as amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"Primary Liquidity Facilities" means the two Revolving Credit
Agreements (consisting of a separate Revolving Credit Agreement with
the Primary Liquidity Provider with respect to each Pass Through
Trust) between the Subordination Agent, as borrower, and the Primary
Liquidity Provider, each dated as of the Issuance Date including, in
each case, the related Liquidity Fee Letter referred to therein, and
any replacement thereof, in each case as the same may be amended,
modified or supplemented.
"Primary Liquidity Provider" means Westdeutsche Landesbank
Girozentrale, a German banking institution organized under the laws
of the State of North Rhine-Westphalia, acting through its New York
branch, or any successor thereto, as "Class G-2 Primary Liquidity
Provider" and "Class C-2 Primary Liquidity Provider" (as such terms
are defined in the Intercreditor Agreement).
"Purchase Agreement" means that certain [Airbus A330 Purchase
Agreement, dated as of December 21, 2000] [Purchase Agreement No.
2159, dated January 16, 2001], between the [Supplier] [Manufacturer]
and Lessee relating to the purchase by Lessee of the Aircraft, as
originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the foregoing
relates to the Aircraft.
"Purchase Agreement Assignment" means that certain Purchase
Agreement Assignment [NW ____ _], dated as of the date hereof,
between Lessee and Lessor, as the same may be amended, supplemented
or modified from time to time, with the form[s] of Consent and
Agreement to be executed by the Manufacturer [and the Supplier --
A330] attached thereto.
"Purchasers" means the Pass Through Trustees under each Pass
Through Trust Agreement.
"Related Indemnitee Group" means, with respect to any
Indemnitee, any officer, director, servant, employee, agent or
Affiliate thereof.
["Remaining Installments" has the meaning set forth in Section
19(d) hereof.]
"Renewal Term" means any Fixed Renewal Term or Fair Market
Renewal Term as those terms are defined in Section 19 hereof.
12
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Secured Certificates" has the meaning assigned to that term in
the Trust Indenture.
"Special Purchase Price" means the amount denominated as such
in Exhibit B-1 to the Lease, which shall be in an amount at least
sufficient to pay in full the outstanding Principal Amount of, and
accrued but unpaid interest on, the Secured Certificates.
"Stipulated Loss Value" with respect to the Aircraft as of any
date through and including [_________________], means, but subject
always to the provisions of Section 3(d)(v) hereof, the amount
determined by multiplying Lessor's Cost for the Aircraft by the
percentage specified in the last column of Exhibit C hereto opposite
the Stipulated Loss Value Date with respect to which the amount is
determined (as such Exhibit C may be adjusted from time to time as
provided in Section 3(d) hereof and in Section 7 of the Tax
Indemnity Agreement). "Stipulated Loss Value" as of any date after
[_____________] shall be the amount determined as provided in
Section 19(a) hereof.
"Stipulated Loss Value Date" means the [___] calendar day of
each calendar month during the Basic Term and any Renewal Term.
"Sublease" means any sublease permitted by the terms of Section
7(b)(x) hereof.
"Sublessee" means any Person for so long, but only so long, as
such Person is in possession of the Airframe and/or any Engine
pursuant to the terms of a Sublease which is then in effect pursuant
to Section 7(b)(x) hereof.
"Subordination Agent" means State Street Bank and Trust
Company, a Massachusetts trust company, as subordination agent under
the Intercreditor Agreement, or any successor thereto.
"Supplemental Rent" means, without duplication, (a) all
amounts, liabilities, indemnities and obligations (other than Basic
Rent) which Lessee assumes or agrees to pay under any Lessee
Document to or on behalf of Lessor or any other Person, (b) amounts
payable by Lessor pursuant to clauses (b) and (c) of the third
paragraph of Section 2.02 of the Trust Indenture, (c) Lessor's pro
rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through
Trust Agreements, and (d) Lessor's pro rata share of all
compensation and reimbursement of expenses and disbursements payable
to the Subordination Agent under the Intercreditor Agreement except
with respect to any income or franchise taxes incurred by the
Subordination Agent in connection with the transactions contemplated
by the Intercreditor Agreement. As used herein, "Lessor's pro rata
share" means as of any time a fraction, the numerator of which is
the principal balance then outstanding of Secured Certificates and
the denominator of which is the aggregate
13
principal balance then outstanding of all "Series G-2 Equipment
Notes" and "Series C-2 Equipment Notes" (as such terms are defined
in the Intercreditor Agreement).
["Supplier" means AVSA, S.A.R.L., a French societe a
responsabilite limitee, organized and existing under the laws of the
French Republic, and its successors.-- A330]
["Supplier Consent and Agreement to Assignment of Warranties"
means the Supplier Consent and Agreement to Assignment of Warranties
[NW ____ _], dated as of the date hereof, executed by the Supplier,
as the same may be amended, modified or supplemented from time to
time in accordance with the applicable terms thereof. -- A330]
["Supplier Documents" means the Purchase Agreement and the
Supplier Consent and Agreement to Assignment of Warranties.-- A330]
"Tax Indemnitee" means (i) the Owner Participant, the Owner
Trustee, in its individual capacity and as trustee under the Trust
Agreement, the Policy Provider, the Trust Estate, the Indenture
Trustee, each Pass Through Trustee as, but only so long as such Pass
Through Trustee is, the owner of any Secured Certificate, the
Subordination Agent as, but only so long as it is, the registered
holder of any Secured Certificate, (ii) the respective Affiliates,
successors and permitted assigns of each of the entities described
in the preceding clause (i), and (iii) the Trust Indenture Estate,
but the term "Tax Indemnitee" shall not include any holder of a Pass
Through Certificate.
"Tax Indemnity Agreement" means that certain Tax Indemnity
Agreement [NW ____ _], dated as of the date hereof, between the
Owner Participant and Lessee, as originally executed or as modified,
amended or supplemented pursuant to the applicable provisions
thereof.
"Taxes" means any and all fees (including, without limitation,
license, recording, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales,
rental, use, turnover, value added, property (tangible and
intangible), excise and stamp taxes), license, levies, imposts,
duties, charges, assessments or withholdings of any nature
whatsoever, together with any and all penalties, fines, additions to
tax and interest thereon (each, individually a "Tax").
"Term" means the Basic Term and, if actually entered into, any
Renewal Term.
"Termination Date" has the meaning set forth in Section 9(a)
hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including [_______________], means, but subject always
to the provisions of Section 3(d)(v) hereof, the amount determined
by multiplying Lessor's Cost for
14
the Aircraft by the percentage specified in the last column of
Exhibit D hereto opposite the Termination Date with respect to which
the amount is determined (as such Exhibit D may be adjusted from
time to time as provided in Section 3(d) hereof and in Section 7 of
the Tax Indemnity Agreement).
"Transaction Expenses" means: all of the reasonable
out-of-pocket costs, fees and expenses incurred by the Owner
Trustee, the Owner Participant, the Pass Through Trustee, the
Subordination Agent and the Indenture Trustee in connection with the
transactions contemplated by the Participation Agreement, the other
Operative Documents, the Pass Through Trust Agreements, the
Intercreditor Agreement, the Primary Liquidity Facilities, the
Policy Provider Agreement and the Underwriting Agreement (except, in
each case, as otherwise provided therein) including, without
limitation:
(1) the reasonable and actual fees, expenses and
disbursements of (A) Xxxxxxx Xxxx LLP, special counsel for the
Pass Through Trustee and the Indenture Trustee, (B) Ray,
Xxxxxxx & Xxxxxxx, special counsel for the Owner Trustee, (C)
Shearman & Sterling, special counsel for the Underwriters, (D)
Xxxxx & Xxxxxxx, P.C., special counsel in Oklahoma City,
Oklahoma, (E) Xxxxxxxx, Xxxxxx & Finger, P.A., special counsel
in Delaware, and (F) [[____________________________], counsel
for the Supplier and the Manufacturer; -- A330]
(2) the initial fees and reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement;
(3) the initial fee and reasonable and actual
disbursements of the Indenture Trustee under the Trust
Indenture;
(4) the initial fees and expenses of the Primary Liquidity
Provider, the Pass Through Trustee and the Subordination Agent;
(5) underwriting fees and commissions;
(6) the fees and expenses with respect to the appraisals
of the Aircraft;
(7) the reasonable fees, expenses and disbursements of
[___________________________], special counsel to the Owner
Participant, such fees not to exceed the amount previously
agreed to by the Owner Participant and Lessee;
(8) the reasonable fees, expenses and disbursements of
Xxxxxxx Xxxxxxx & Xxxxxxxx and Xxxxxxxxxx, Xxxxxxxxxx & Xxxx,
special counsel for Lessee;
(9) the costs of filing and recording documents with the
FAA and filing Uniform Commercial Code statements in the United
States;
15
(10) the reasonable fees, expenses and disbursements of
Pillsbury Winthrop LLC, special counsel to the Primary
Liquidity Provider;
(11) the reasonable fees, expenses and disbursements of
Xxxxxx & Xxxxxxx, special counsel to the Policy Provider; and
(12) the equity placement fee and reasonable disbursements
of Xxxxxxx and Xxxxx Financial Corporation.
"Trust Agreement" means that certain Trust Agreement [NW ____ _],
dated as of the date hereof, between the Owner Participant and Xxxxx
Fargo Bank Northwest, National Association, in its individual capacity,
as originally executed or as modified, amended or supplemented pursuant
to the applicable provisions thereof, including, without limitation,
supplementation thereof by one or more Trust Supplements entered into
pursuant to the applicable provisions thereof.
"Trust Agreement and Indenture Supplement" or "Trust Supplement"
means a supplement to the Trust Agreement and the Trust Indenture,
substantially in the form of Exhibit A to the Trust Indenture.
"Trust Estate" means the Trust Estate as that term is defined in the
Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Security
Agreement [NW ____ __], dated as of the date hereof, between Lessor and
the Indenture Trustee, as originally executed or as modified, amended or
supplemented in accordance with the provisions thereof.
"Trust Indenture Estate" has the meaning assigned to that term in
the Trust Indenture.
"Underwriting Agreement" means that certain Underwriting Agreement,
dated as of July 29, 2002, among Lessee, the Guarantor, and the
underwriters named therein.
"U.S. Air Carrier" means any Certificated Air Carrier as to which
there is in force an air carrier operating certificate issued pursuant to
Part 121 of the regulations under the Federal Aviation Act, or which may
operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"Wet Lease" means any arrangement whereby the Lessee (or any
Sublessee) agrees to furnish the Airframe and Engines or engines
installed thereon to a third party pursuant to which such Airframe and
Engines or engines (i) shall be operated solely by regular employees of
Lessee (or any Sublessee) possessing all current certificates and
licenses that would be required under the Federal Aviation Act or, if the
Aircraft is not registered in the United States, all
16
certificates and licenses required by the laws of the jurisdiction of
registry, for the performance by such employees of similar functions
within the United States of America or such other jurisdiction of
registry (it is understood that cabin attendants need not be regular
employees of Lessee (or any Sublessee)) and (ii) shall be maintained by
Lessee (or any Sublessee) in accordance with its normal maintenance
practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees (subject to
satisfaction of the conditions set forth in Section 4(a) of the Participation
Agreement) to accept the transfer of title from and simultaneously to lease to
Lessee hereunder, and Lessee hereby agrees (subject to satisfaction of the
conditions set forth in Section 4(b) of the Participation Agreement) to lease
from Lessor hereunder, the Aircraft as evidenced by the execution by Lessor
and Lessee of a Lease Supplement leasing the Aircraft hereunder. Lessee hereby
agrees that such acceptance of the Aircraft by Lessor shall, without further
act, irrevocably constitute acceptance by Lessee of such Aircraft for all
purposes of this Lease.
SECTION 3. Term and Rent. (a) Basic Term. The Basic Term shall
commence on the Delivery Date and end on [__________________], or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
(b) [Intentionally Omitted].
(c) Basic Rent. Lessee shall pay Basic Rent on each Lease
Period Date during the Basic Term, in installments in the amounts specified in
Exhibit B-1. Each such installment of Basic Rent shall be equal to Lessor's
Cost multiplied by the percentage for the applicable Lease Period Date
specified in Exhibit B-1 hereto. Lessor and Lessee agree that Basic Rent shall
be allocated as specified in Exhibit B-2.
(d) Adjustments to Basic Rent.
(i) In the event that (A) the Delivery Date occurs other than
on [____________________], or (B) Transaction Expenses paid by
Lessor pursuant to Section 16(a) of the Participation Agreement are
determined to be other than [_____]% of Lessor's Cost, then in each
case the Basic Rent percentages set forth in Exhibit B-1, the
allocation of Basic Rent set forth in Exhibit B-2, the Stipulated
Loss Value percentages set forth in Exhibit C, the Termination Value
percentages set forth in Exhibit D [, the Initial Installments, the
Remaining Installments] and the Special Purchase Price shall be
recalculated by the Owner Participant, on or prior to
[__________________], using the same methods and assumptions used to
calculate original Basic Rent percentages and allocations,
Stipulated Loss Value and Termination Value percentages [, the
Initial Installments, the Remaining Installments] and the Special
Purchase Price in order to: (1) maintain the Owner Participant's Net
Economic Return and (2) minimize the Net Present Value of Rents to
Lessee to the extent possible consistent with clause (1) hereof. In
such recalculation there will be no change in the amortization of
the Secured Certificates.
17
(ii) (A) In the event of a refinancing as contemplated by
Section 17 of the Participation Agreement, then the Basic Rent
percentages set forth in Exhibit B-1, the allocation of Basic Rent
set forth in Exhibit B-2, the Stipulated Loss Value percentages set
forth in Exhibit C, the Termination Value percentages set forth in
Exhibit D [, the Initial Installments, the Remaining Installments]
and the Special Purchase Price shall be recalculated (upwards or
downwards) by the Owner Participant as contemplated by such Section
to (1) maintain the Owner Participant's Net Economic Return and (2)
to the extent possible consistent with clause (1) hereof, minimize
the Net Present Value of Rents to Lessee and (B) in the event that
Lessee elects to satisfy any indemnity obligation under the Tax
Indemnity Agreement pursuant to Section 4(d)(ii) of the Tax
Indemnity Agreement, then the Basic Rent percentages set forth in
Exhibit B-1, the allocation of Basic Rent set forth in Exhibit B-2,
the Stipulated Loss Value percentages set forth in Exhibit C, the
Termination Value percentages set forth in Exhibit D [, the Initial
Installments, the Remaining Installments] and the Special Purchase
Price shall be recalculated (upwards or downwards) by the Owner
Participant, using the same methods and assumptions (except to the
extent such assumptions shall be varied to take into account the
Loss (as defined in the Tax Indemnity Agreement) that is the subject
of such indemnification and any prior or contemporaneous Loss) used
to calculate the Basic Rent percentages and allocations, the
Stipulated Loss Value percentages, the Termination Value percentages
[, the Initial Installments, the Remaining Installments] and the
Special Purchase Price on the Delivery Date, in order to (1)
maintain the Owner Participant's Net Economic Return and (2) to the
extent possible consistent with clause (1) hereof, minimize the Net
Present Value of Rents to Lessee.
(iii) [Intentionally Omitted].
(iv) Any recalculation of Basic Rent percentages and
allocations, Stipulated Loss Value and Termination Value
percentages[, the Initial Installments, the Remaining Installments]
and the Special Purchase Price pursuant to this Section 3(d) shall
be determined by the Owner Participant and shall be subject to the
verification procedures set forth in Exhibit E hereto. Such
recalculated Basic Rent percentages and allocations, Stipulated Loss
Value and Termination Value percentages and Special Purchase Price
shall be set forth in a Lease Supplement or an amendment to this
Lease.
(v) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Basic
Rent payable hereunder, whether or not adjusted in accordance with
this Section 3(d), shall, and each payment of Termination Value and
Stipulated Loss Value, whether or not adjusted in accordance with
this Section 3(d), shall, together with all other amounts (including
an amount equal to the Make-Whole Amount, if any, payable by Lessor
on the Secured Certificates) payable simultaneously by Lessee
pursuant to this Lease, in each case be, under any circumstances and
in any event, in an amount at least sufficient to pay in full, on
the date on which such amount of Rent is due, any payments then
required to be made on account of the principal of,
18
Make-Whole Amount, if any, and interest on the Secured Certificates.
It is agreed that no installment of Basic Rent or payment of
Termination Value or Stipulated Loss Value shall be increased or
adjusted by reason of (i) any attachment or diversion of Rent on
account of (A) Lessor Liens or (B) any Loan Participant Lien on or
against the Trust Estate, any part thereof or the Operative
Documents arising as a result of claims against the Indenture
Trustee not related to the transactions contemplated by the
Operative Documents, (ii) any modification of the payment terms of
the Secured Certificates made without the prior written consent of
Lessee or (iii) the acceleration of any Secured Certificate or
Secured Certificates due to the occurrence of an "Event of Default"
(as defined in the Trust Indenture) which does not constitute an
Event of Default hereunder.
(vi) All adjustments to Basic Rent percentages and allocations
under this Section 3(d) shall be (A) in compliance with the tests of
xx.xx. 4.02(5) and 4.07 of Rev. Proc. 2001-29 and will not cause
this Lease to constitute a "disqualified leaseback or long-term
agreement" within the meaning of Section 467 of the Internal Revenue
Code of 1986, as amended, as each is then in effect and (B) subject
to verification pursuant to Exhibit E.
(e) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value or Termination Value as
the same shall become due and owing and all other amounts of Supplemental Rent
within five days after demand or within such other relevant period as may be
provided in any Operative Document, and in the event of any failure on the
part of Lessee to pay any Supplemental Rent when due, Lessor shall have all
rights, powers and remedies provided for herein or in any other Operative
Document or by law or equity or otherwise in the case of nonpayment of Basic
Rent. Lessee shall pay as Supplemental Rent the Make-Whole Amount, if any, due
pursuant to Section 2.10(b) or Section 2.11 of the Trust Indenture in
connection with a prepayment of the Secured Certificates upon redemption of
such Secured Certificates in accordance with Section 2.10(b) or Section 2.11
of the Trust Indenture. Lessee also will pay to Lessor, or to whomsoever shall
be entitled thereto, on demand, as Supplemental Rent, to the extent permitted
by applicable law, interest at the Past Due Rate on any part of any
installment of Basic Rent not paid when due for any period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due for
the period until the same shall be paid.
(f) Payments in General. All payments of Rent shall be made directly
by Lessee (whether or not any Sublease shall be in effect) by wire transfer of
immediately available funds prior to 10:30 A.M., New York time, on the date of
payment, to Lessor at its account at Xxxxx Fargo Bank Northwest, National
Association, MAC: U1228-120, 000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx, Xxxx Xxxx
Xxxx, Xxxx 00000, ABA No. 000-0000-00, Account No. 051-0000000, Attention:
Corporate Trust Services, Credit Northwest/NW [____ __] (or such other account
of Lessor in the continental United States as Lessor shall direct in a notice
to Lessee at least 10 Business Days prior to the date such payment of Rent is
due); provided that so long as the Trust Indenture shall not have been fully
discharged, Lessor hereby irrevocably directs and Lessee agrees, that, unless
the Indenture Trustee shall otherwise direct, all Rent payable to Lessor and
assigned to the Indenture Trustee pursuant to the Trust Indenture shall be
paid prior to 10:30
19
A.M., New York time on the due date thereof in funds of the type specified in
this Section 3(f) directly to the Indenture Trustee at its account at State
Street Bank and Trust Company, 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, ABA No. 000-000-000, Account No. 0000-000-0, Attention: Corporate Trust
Department, Reference: Northwest/NW [____ __] (or such other account of the
Indenture Trustee in the continental United States as the Indenture Trustee
shall direct in a notice to Lessee at least 10 Business Days prior to the date
such payment of Rent is due). Lessor hereby directs and Lessee agrees that all
payments of Supplemental Rent owing to the Indenture Trustee or to a Loan
Participant or any other Certificate Holder pursuant to the Participation
Agreement shall be made in Dollars in immediately available funds prior to
10:30 A.M., New York time, on the due date thereof at the office of the
Indenture Trustee or at such other office of such other financial institution
located in the continental United States as the party entitled thereto may so
direct at least 10 Business Days prior to the due date thereof. All payments
of Supplemental Rent payable to the Owner Participant, to the extent that such
amounts constitute Excluded Payments (as defined in the Trust Indenture),
shall be made in Dollars in immediately available funds prior to 10:30 A.M.,
New York time, on the due date thereof, to the account of the Owner
Participant specified in Schedule I to the Participation Agreement (or to such
other account as may be specified in writing by the Owner Participant from
time to time).
Notwithstanding anything to the contrary contained herein, if any
date on which a payment of Rent becomes due and payable is not a Business Day,
then such payment shall not be made on such scheduled date but shall be made
on the next succeeding Business Day with the same force and effect as if made
on such scheduled date and (provided such payment is made on such next
succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES
AND LESSEE TAKES THE AIRCRAFT AND EACH PART THEREOF "AS-IS," "WHERE-IS."
NEITHER LESSOR, THE INDENTURE TRUSTEE NOR ANY PARTICIPANT MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS AND WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except
that Xxxxx Fargo Bank Northwest, National Association, in its individual
capacity, (i) represents and warrants that on the Delivery Date, Lessor shall
have received whatever title to the Aircraft was conveyed to it by Lessee,
(ii) represents and warrants that on the Delivery Date the Aircraft shall be
free of Lessor Liens (including for this purpose Liens which would be Lessor
Liens but for the proviso in the definition of Lessor Liens) attributable to
it, (iii) covenants that it will not, through its own actions or inactions,
interfere in Lessee's quiet enjoyment of the Aircraft during the Term, (iv)
agrees that it will not directly or indirectly create, incur, assume or suffer
to exist
20
any Lessor Lien attributable to it on or with respect to the Airframe
or any Engine or any portion of the Trust Estate and (v) represents and
warrants that it is a Citizen of the United States without making use of a
voting trust, voting powers agreement or similar arrangement, and agrees that
if at any time it shall cease to be a Citizen of the United States without
making use of a voting trust, voting powers agreement or similar arrangement
it will promptly resign as Owner Trustee (if and so long as such citizenship
is necessary under the Federal Aviation Act as in effect at such time or, if
it is not necessary, if and so long as the Owner Trustee's citizenship would
have any material adverse effect on the Loan Participants, the Owner
Participant or Lessee), effective upon the appointment of a successor Owner
Trustee in accordance with Section 9.01 of the Trust Agreement. None of the
provisions of this Lease shall be deemed to amend, modify or otherwise affect
the representations, warranties or other obligations (express or implied) of
the Manufacturer, any subcontractor or supplier of the Manufacturer with
respect to the Airframe, the Engines or any Parts, or to release the
Manufacturer, or any such subcontractor or supplier, from any such
representation, warranty or obligation. Lessor agrees that it will not
directly or indirectly create, incur, assume or suffer to exist any Lessor
Lien attributable to it on or with respect to the Airframe or any Engine.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return. Unless
purchased by Lessee pursuant to Section 19 hereof, upon the termination of
this Lease at the end of the Basic Term or any Renewal Term or pursuant to
Section 9(c) or 15, Lessee, at its own expense, will return the Airframe to
Lessor at a major airport in one of the forty-eight contiguous states of the
United States chosen by Lessee, and Lessee will give Lessor at least ten (10)
days' prior written notice of the place of such return; provided, however,
that if Lessor shall have made the request for storage pursuant to Section
5(d) hereof, Lessee shall return the Airframe to Lessor at the site of the
storage at the end of the storage period. At the time of such return, Lessee
will, unless otherwise requested by Lessor at least ninety (90) days prior to
the return hereunder, cause the Aircraft, if it is not then so registered, to
be registered under the laws of the United States with the Federal Aviation
Administration in the name of the Lessor or its designee, provided that Lessee
shall be relieved of its obligations under this sentence if (i) such
registration is prohibited by reason of the failure of Lessor or its designee
to be eligible on such date to own an aircraft registered with the Federal
Aviation Administration or (ii) such registration is otherwise prohibited by
applicable law; the Airframe will be fully equipped with the Engines (or other
[Xxxxx & Xxxxxxx Model PW4168A] [Xxxxx & Whitney Model PW2040] engines or two
engines of the same or another manufacturer of not less than equivalent
utility, value and remaining useful life, and suitable for installation and
use on the Airframe without impairing the value, utility or remaining useful
life of the Aircraft; provided that both engines shall be of the same make and
model) duly installed thereon. Also, at the time of such return, such Airframe
and Engines or engines (i) shall be certified (or, if not then registered
under the Federal Aviation Act, shall be eligible for certification) as an
airworthy aircraft by the Federal Aviation Administration, (ii) shall be free
and clear of all Liens (other than Lessor Liens (including for this purpose
Liens which would be Lessor Liens but for the proviso in the definition of
Lessor Liens), Indenture Trustee's Liens and Loan Participant Liens) and
rights of third parties under pooling, interchange, overhaul, repair or other
similar agreements or arrangements, (iii) shall be in as good an operating
condition as when delivered to Lessee hereunder, ordinary wear and tear
excepted, or, in the case of any such engines owned by Lessee, shall have a
value, utility and remaining useful life at least equal to, and shall be in as
good an operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then
21
installed on the Airframe, and (iv) shall be in compliance with the return
conditions, if any, set forth in Exhibit G.
During the last six (6) months of the Term (unless Lessee shall have
elected to purchase the Aircraft or renew this Lease in accordance with the
terms of this Lease), with reasonable notice, Lessee will cooperate, and cause
any Sublessee to cooperate, in all reasonable respects with the efforts of
Lessor to sell or lease the Aircraft, including, without limitation,
permitting prospective purchasers or lessees to inspect fully the Aircraft and
the records relating thereto, provided that such cooperation shall not
interfere with the operation or maintenance of the Aircraft by Lessee or any
Sublessee.
(b) Return of the Engines. In the event that any engine not owned by
Lessor shall be delivered with the returned Airframe as set forth in paragraph
(a) of this Section 5, Lessee, concurrently with such delivery, will, at no
cost to Lessor, furnish, or cause to be furnished, to Lessor a full warranty
(as to title) xxxx of sale with respect to each such engine, in form and
substance satisfactory to Lessor (together with an opinion of counsel to the
effect that such full warranty xxxx of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that such
engines are free and clear of Liens other than Lessor Liens (including for
this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), Indenture Trustee's Liens and Loan Participant
Liens), against receipt from Lessor of a xxxx of sale or other instrument
evidencing the transfer, without recourse or warranty (except as to the
absence of Lessor Liens, including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens), by Lessor
to Lessee or its designee of all of Lessor's right, title and interest in and
to any Engine constituting part of the Aircraft but not installed on the
Airframe at the time of the return of the Airframe.
(c) Fuel; Manuals. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessor shall pay Lessee, as compensation for any fuel or oil contained in
the fuel or oil tanks of such Airframe, the value of such fuel or oil at the
price paid by Lessee for such fuel or oil, as the case may be, and (ii) Lessee
shall deliver or cause to be delivered to Lessor all logs, manuals and data
and inspection, maintenance, modification and overhaul records required to be
maintained with respect thereto under applicable rules and regulations of each
country under the laws of which the Aircraft has been registered during the
period of operation thereof, which logs, manuals, data and records, if not
maintained in English, shall be translated into English at Lessee's expense.
(d) Storage Upon Return. If, at least sixty (60) days prior to
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(c), Lessee receives from Lessor a written request for
storage of the Aircraft upon its return hereunder, Lessee will provide Lessor,
or cause Lessor to be provided, with free parking facilities for the Aircraft
(maintenance costs and other out-of-pocket costs other than parking fees to be
for the account of Lessor) for a period not exceeding thirty (30) days
commencing on the date of such termination at a location in the continental
United States selected by Lessee and used as a location for the parking or
storage of aircraft; provided that Lessee shall have no obligation to move the
Aircraft from such location during or after the storage period. Lessee, unless
instructed by Lessor to the contrary, will maintain insurance for the Aircraft
during such period not exceeding thirty (30) days and be reimbursed by Lessor
for the premiums thereon.
22
SECTION 6. Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided, the Lien of the Trust Indenture, and any other rights existing
pursuant to the Operative Documents, (ii) the rights of others under
agreements or arrangements to the extent permitted by the terms of Sections
7(b) and 8(b) hereof, (iii) Lessor Liens (including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), Loan Participant Liens, and Indenture Trustee's Liens, (iv) Liens for
taxes of Lessee (or any Sublessee) either not yet due or being contested in
good faith by appropriate proceedings so long as such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Airframe or
any Engine or any interest therein, or, so long as any Secured Certificates
shall be outstanding, adversely affect the Lien of the Trust Indenture, (v)
materialmen's, mechanics', workmen's, repairmen's, employees' or other like
Liens arising in the ordinary course of Lessee's (or, if a Sublease is then in
effect, Sublessee's) business (including those arising under maintenance
agreements entered into in the ordinary course of business) securing
obligations that are not overdue for a period of more than sixty (60) days or
are being contested in good faith by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of the Airframe or any Engine or any interest therein or, so long as any
Secured Certificates shall be outstanding, adversely affect the Lien of the
Trust Indenture, (vi) Liens arising out of any judgment or award against
Lessee (or any Sublessee), unless the judgment secured shall not, within sixty
(60) days after the entry thereof, have been discharged, vacated, reversed or
execution thereof stayed pending appeal or shall not have been discharged,
vacated or reversed within sixty (60) days after the expiration of such stay,
(vii) any other Lien with respect to which Lessee (or any Sublessee) shall
have provided a bond, cash collateral or other security adequate in the
reasonable opinion of Lessor, and (viii) Liens approved in writing by Lessor.
Lessee will promptly, at its own expense, take (or cause to be taken) such
actions as may be necessary duly to discharge any such Lien not excepted above
if the same shall arise at any time.
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia. (a)(I) Registration and Maintenance. Lessee, at its own
cost and expense, shall (or shall cause any Sublessee to): (i) forthwith upon
the delivery thereof hereunder, cause the Aircraft to be duly registered in
the name of Lessor, and, subject to the second paragraph of this Section 7(a)
and Section 8(f) of the Participation Agreement, to remain duly registered in
the name of Lessor under the Federal Aviation Act, provided that Lessor shall
execute and deliver all such documents as Lessee (or any Sublessee) may
reasonably request for the purpose of effecting and continuing such
registration, and shall not register the Aircraft or permit the Aircraft to be
registered under any laws other than the Federal Aviation Act at any time
except as provided in Section 8(f) of the Participation Agreement and shall
cause the Trust Indenture to be duly recorded and maintained of record as a
first mortgage on the Aircraft; (ii) maintain, service, repair and overhaul
(or cause to be maintained, serviced, repaired and overhauled) the Aircraft so
as to keep the Aircraft in as good an operating condition as when delivered to
Lessee hereunder, ordinary wear and tear excepted, and as may be necessary to
enable the applicable airworthiness certification for the Aircraft to be
maintained in good standing at all times (other than during temporary periods
of storage in accordance with applicable regulations or during maintenance or
modification permitted hereunder) under the Federal Aviation Act, except when
all [Airbus Model A330-300] [Boeing Model 757-300] aircraft powered by engines
of the same type as
23
those with which the Airframe shall be equipped at the time of such grounding
and registered in the United States have been grounded by the FAA (although
such certification need actually be maintained only during such periods as the
Aircraft is registered in the United States), or the applicable laws of any
other jurisdiction in which the Aircraft may then be registered from time to
time in accordance with Section 8(f) of the Participation Agreement, and
utilizing, except during any period that a Sublease is in effect, the same
manner and standard of maintenance, service, repair or overhaul used by Lessee
with respect to similar aircraft operated by Lessee in similar circumstances
and utilizing, during any period that a Sublease is in effect, the same manner
and standard of maintenance, service, repair or overhaul used by the Sublessee
with respect to similar aircraft operated by the Sublessee in similar
circumstances; provided, however, that in all circumstances the Aircraft shall
be maintained by Lessee (or any Sublessee) in accordance with maintenance
standards required by, or substantially equivalent to those required by, the
FAA or the central civil aviation authority of Canada, France, Germany, Japan,
the Netherlands or the United Kingdom; (iii) maintain or cause to be
maintained all records, logs and other materials required to be maintained in
respect of the Aircraft by the FAA or the applicable regulatory agency or body
of any other jurisdiction in which the Aircraft may then be registered; and
(iv) promptly furnish or cause to be furnished to Lessor and the Owner
Participant such information as may be required to enable Lessor to file any
reports required to be filed by Lessor or the Owner Participant with any
governmental authority because of Lessor's ownership of the Aircraft. (II)
Operation. Lessee will not maintain, use, service, repair, overhaul or operate
the Aircraft (or permit any Sublessee to maintain, use, service, repair,
overhaul or operate the Aircraft) in violation of any law or any rule,
regulation, order or certificate of any government or governmental authority
(domestic or foreign) having jurisdiction, or in violation of any
airworthiness certificate, license or registration relating to the Aircraft
issued by any such authority, except to the extent Lessee (or, if a Sublease
is then in effect, any Sublessee) is contesting in good faith the validity or
application of any such law, rule, regulation or order in any reasonable
manner which does not materially adversely affect Lessor or, so long as any
Secured Certificates shall be outstanding, the first priority Lien of the
Trust Indenture and does not involve any material risk of sale, forfeiture or
loss of the Aircraft. Lessee will not operate the Aircraft, or permit any
Sublessee to operate the Aircraft, in any area excluded from coverage by any
insurance required by the terms of Section 11; provided, however, that the
failure of Lessee to comply with the provisions of this sentence shall not
give rise to an Event of Default hereunder where such failure is attributable
to causes beyond the reasonable control of Lessee (or any Sublessee) or to
extraordinary circumstances involving an isolated occurrence or series of
incidents not in the ordinary course of the regular operations of Lessee (or
any Sublessee) and in each such case Lessee (or such Sublessee, as the case
may be) is taking all reasonable steps to remedy such failure as soon as is
reasonably practicable.
At any time after the Depreciation Period, Lessor, upon compliance
with all of the terms of Section 8(f) of the Participation Agreement, shall,
at the request and sole expense of Lessee, cooperate with Lessee to take all
actions required to change the registration of the Aircraft to another
country.
(b) Possession and Subleases. Lessee will not, without the
prior written consent of Lessor, sublease or otherwise in any manner deliver,
transfer or relinquish possession of the Airframe or any Engine or install or
permit any Engine to be installed on any airframe other than the Airframe or
enter into any Wet Lease; provided that, so long as no Default of the
24
type referred to in Section 14(a), 14(b) or 14(e) or Event of Default shall
have occurred and be continuing at the time of such sublease, delivery,
transfer or relinquishment of possession or installation or such Wet Lease,
and so long as the action to be taken shall not deprive the Indenture Trustee
of the perfected first priority Lien of the Trust Indenture on the Airframe or
(subject to the further proviso (B) to clause (i) of this Section 7(b)) any
Engine, and so long as Lessee (or any Sublessee) shall comply with the
provisions of Sections 7(a) and 11 hereof, Lessee (or, except with respect to
clause (x) below, any Sublessee) may, without the prior written consent of
Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to
normal pooling or similar arrangements, in each case customary in
the airline industry and entered into by Lessee (or, if a Sublease
is then in effect, by Sublessee) in the ordinary course of its
business; provided that (A) no such agreement or arrangement
contemplates or requires the transfer of title to the Airframe, (B)
if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect to such Engine and Lessee shall (or shall
cause Sublessee to) comply with Section 10(b) hereof in respect
thereof, and (C) any interchange agreement to which the Airframe may
be subject shall be with a U.S. Air Carrier or a Foreign Air
Carrier;
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof (or for delivery thereto) or to any
organization (or for delivery thereto) for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any part
of any thereof or for alterations or modifications in or additions
to such Airframe or Engine to the extent required or permitted by
the terms of Section 8(c) hereof;
(iii) install an Engine on an airframe which is owned by Lessee
(or any Sublessee) free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other
than Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety),
(B) the rights of third parties under interchange agreements which
would be permitted under clause (i) above, provided that Lessor's
title to such Engine and, if any Secured Certificates shall be
outstanding, the first priority Lien of the Trust Indenture shall
not be divested or impaired as a result thereof and (C) mortgage
liens or other security interests, provided that (as regards this
clause (C)) such mortgage liens or other security interests
effectively provide that such Engine shall not become subject to the
lien of such mortgage or security interest, notwithstanding the
installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of
the parties to the lease or conditional sale or other security
agreement covering such airframe, or their assignees, and (B) Liens
of
25
the type permitted by subparagraph (iii) of this paragraph (b) and
(y) such lease, conditional sale or other security agreement
effectively provides that such Engine shall not become subject to
the lien of such lease, conditional sale or other security
agreement, notwithstanding the installation thereof on such
airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by
Lessee (or any Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither subparagraph
(iii) nor subparagraph (iv) of this paragraph (b) is applicable,
provided that such installation shall be deemed an Event of Loss
with respect to such Engine and Lessee shall (or shall cause any
Sublessee to) comply with Section 10(b) hereof in respect thereof,
Lessor not intending hereby to waive any right or interest it may
have to or in such Engine under applicable law until compliance by
Lessee with such Section 10(b);
(vi) to the extent permitted by Section 8(b) hereof, subject
any appliances, Parts or other equipment owned by Lessor and removed
from the Airframe or any Engine to any pooling arrangement referred
to in Section 8(b) hereof;
(vii) subject (or permit any Sublessee to subject) the Airframe
or any Engine to the Civil Reserve Air Fleet Program and transfer
(or permit any Sublessee to transfer) possession of the Airframe or
any Engine to the United States of America or any instrumentality or
agency thereof pursuant to the Civil Reserve Air Fleet Program, so
long as Lessee (or any Sublessee) shall (A) promptly notify Lessor
upon subjecting the Airframe or any Engine to the Civil Reserve Air
Fleet Program in any contract year and provide Lessor with the name
and address of the Contracting Office Representative for the Air
Mobility Command of the United States Air Force to whom notice must
be given pursuant to Section 15 hereof, and (B) promptly notify
Lessor upon transferring possession of the Airframe or any Engine to
the United States of America or any agency or instrumentality
thereof pursuant to such program;
(viii) for a period not to extend beyond the end of the Term,
enter into a Wet Lease for the Airframe and Engines or engines then
installed thereon with any third party; provided that if Lessee (or
any Sublessee) shall enter into any Wet Lease for a period of more
than one year (including renewal options) Lessee shall provide
Lessor written notice of such Wet Lease (such notice to be given
prior to entering into such Wet Lease, if practicable, but in any
event promptly after entering into such Wet Lease);
(ix) for a period not to extend beyond the end of the Term,
transfer possession of the Airframe or any Engine to the United
States of America or any instrumentality or agency thereof pursuant
to a contract, a copy of which shall be provided to Lessor; or
26
(x) Lessee may, at any time, enter into any sublease with (1) a
U.S. Air Carrier, (2) any Person approved in writing by Lessor,
which approval shall not be unreasonably withheld or (3) after the
Depreciation Period, any Permitted Sublessee if (A) in any such
case, the Sublessee under such sublease is not subject to a
proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date such sublease is entered into, (B)
in the event that the Sublessee under such sublease is a foreign air
carrier (other than a foreign air carrier principally based in
Taiwan), the United States maintains diplomatic relations with the
country in which such proposed Sublessee is principally based at the
time such sublease is entered into (or, in the case of a sublease to
a proposed Sublessee principally based in Taiwan, maintains
diplomatic relations at least as good as those in effect on the
Delivery Date) and (C) in the event that the Sublessee under such
sublease is a foreign air carrier, Lessor and the Indenture Trustee
shall have received an opinion of counsel to Lessee to the effect
that (I) the terms of the proposed sublease will be legal, valid,
binding and (subject to customary exceptions in foreign opinions
generally) enforceable against the proposed Sublessee in the country
in which the proposed Sublessee is principally based, (II) there
exist no possessory rights in favor of the Sublessee under such
Sublease under the laws of such Sublessee's country of domicile that
would, upon bankruptcy or insolvency of or other default by Lessee
and assuming at such time such Sublessee is not insolvent or
bankrupt, prevent the return or repossession of the Aircraft in
accordance with the terms of this Lease, (III) the laws of such
Sublessee's country of domicile require fair compensation by the
government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use of the Aircraft in the
event of the requisition by such government of such use, and (IV)
the laws of such Sublessee's country of domicile would give
recognition to Lessor's title to the Aircraft, to the registry of
the Aircraft in the name of the Lessor (or Lessee, as "lessee", or
the proposed Sublessee, as "sublessee", as appropriate) and to the
Lien of the Trust Indenture, provided, however, that no sublease
entered into pursuant to this clause (x) shall extend beyond the
expiration of the Basic Term or any Renewal Term then in effect
unless Lessee shall have irrevocably committed to purchase the
Aircraft.
The rights of any Sublessee or other transferee who receives
possession by reason of a transfer permitted by this paragraph (b) (other than
the transfer of an Engine which is deemed an Event of Loss) shall be
effectively subject and subordinate to, and any Sublease permitted by this
paragraph (b) shall be expressly subject and subordinate to, all the terms of
this Lease and to the Lien of the Trust Indenture, including, without
limitation, the covenants contained in Section 7(a) hereof and Lessor's rights
to repossession pursuant to Section 15 hereof and to avoid such Sublease upon
such repossession, and Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease to the same extent as if such
Sublease or transfer had not occurred, and, except as otherwise provided
herein, the terms of any such Sublease shall not permit any Sublessee to take
any action not permitted to be taken by Lessee in this Lease with respect to
the Aircraft. No pooling agreement, sublease or other relinquishment of
possession of the Airframe or any Engine or Wet Lease shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights or remedies hereunder. Any sublease
permitted under this Section 7(b) shall
27
expressly prohibit any further sub-sublease by the Sublessee. Lessor agrees,
for the benefit of Lessee (and any Sublessee) and for the benefit of any
mortgagee or other holder of a security interest in any engine (other than an
Engine) owned by Lessee (or any Sublessee), any lessor of any engine (other
than an Engine) leased to Lessee (or any Sublessee) and any conditional vendor
of any engine (other than an Engine) purchased by Lessee (or any Sublessee)
subject to a conditional sale agreement or any other security agreement, that
no interest shall be created hereunder in any engine so owned, leased or
purchased and that none of Lessor, its successors or assigns will acquire or
claim, as against Lessee (or any Sublessee) or any such mortgagee, lessor or
conditional vendor or other holder of a security interest or any successor or
assignee of any thereof, any right, title or interest in such engine as the
result of such engine being installed on the Airframe; provided, however, that
such agreement of Lessor shall not be for the benefit of any lessor or secured
party of any airframe (other than the Airframe) leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a conditional
sale or other security agreement or for the benefit of any mortgagee of or any
other holder of a security interest in an airframe owned by Lessee (or any
Sublessee), unless such lessor, conditional vendor, other secured party or
mortgagee has expressly agreed (which agreement may be contained in such
lease, conditional sale or other security agreement or mortgage) that neither
it nor its successors or assigns will acquire, as against Lessor, any right,
title or interest in an Engine as a result of such Engine being installed on
such airframe. Lessee shall provide to the Owner Participant and the Indenture
Trustee (i) written notice of any Sublease hereunder (such notice to be given
not later than five days prior to entering into such Sublease, if practicable,
but in any event promptly after entering into any such Sublease) and (ii) a
copy of each Sublease which has a term of more than three months.
(c) Insignia. On or prior to the Delivery Date, or as soon as
practicable thereafter, Lessee agrees to affix and maintain (or cause to be
affixed and maintained), at its expense, in the cockpit of the Airframe
adjacent to the airworthiness certificate therein and on each Engine a
nameplate bearing the inscription:
Leased From
Xxxxx Fargo Bank Northwest, National Association, as Owner Trustee,
Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien
of the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company,
as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents). Except as above provided, Lessee
will not allow the name of any Person to be placed on the Airframe or on any
Engine as a designation that might be interpreted as a claim of
28
ownership; provided that nothing herein contained shall prohibit Lessee (or
any Sublessee) from placing its customary colors and insignia on the Airframe
or any Engine.
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions. (a) Replacement of Parts. Lessee, at its own cost
and expense, will promptly replace or cause to be replaced all Parts which may
from time to time be incorporated or installed in or attached to the Airframe
or any Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever, except as otherwise provided in
paragraph (c) of this Section 8 or if the Airframe or an Engine to which a
Part relates has suffered an Event of Loss. In addition, Lessee (or any
Sublessee) may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use, provided that Lessee (or any
Sublessee), except as otherwise provided in paragraph (c) of this Section 8,
will, at its own cost and expense, replace such Parts as promptly as
practicable. All replacement Parts shall be free and clear of all Liens
(except for Permitted Liens and pooling arrangements to the extent permitted
by paragraph (b) of this Section 8 and except in the case of replacement
property temporarily installed on an emergency basis) and shall be in as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced assuming such replaced Parts were in the condition and
repair required to be maintained by the terms hereof. Except as otherwise
provided in paragraph (c) of this Section 8, all Parts at any time removed
from the Airframe or any Engine shall remain the property of Lessor, no matter
where located, until such time as such Parts shall be replaced by Parts which
have been incorporated or installed in or attached to the Airframe or such
Engine and which meet the requirements for replacement Parts specified above.
Immediately upon any replacement part becoming incorporated or installed in or
attached to the Airframe or any Engine as above provided, without further act
(subject only to Permitted Liens and any pooling arrangement to the extent
permitted by paragraph (b) of this Section 8 and except in the case of
replacement property temporarily installed on an emergency basis), (i) title
to such replacement Part shall thereupon vest in Lessor, (ii) such replacement
Part shall become subject to this Lease and be deemed part of the Airframe or
such Engine for all purposes hereof to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine, and
(iii) title to the replaced Part shall thereupon vest in Lessee (or, if a
Sublease is then in effect, any Sublessee), free and clear of all rights of
Lessor, and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
Engine as provided in paragraph (a) of this Section 8 may be subjected by
Lessee (or any Sublessee) to a normal pooling arrangement customary in the
airline industry of which Lessee (or, if a Sublease is then in effect, any
Sublessee) is a party entered into in the ordinary course of Lessee's (or any
Sublessee's) business; provided that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine
in accordance with such paragraph (a) as promptly as practicable after the
removal of such removed Part. In addition, any replacement Part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with such paragraph (a) may be owned by any third party subject to
such a normal pooling arrangement, provided that Lessee (or any Sublessee), at
its expense, as promptly thereafter as practicable, either (i) causes title to
such replacement Part to vest in Lessor in accordance with such paragraph (a)
by Lessee (or any Sublessee) acquiring title thereto for the benefit of, and
29
transferring such title to, Lessor free and clear of all Liens except
Permitted Liens (other than pooling arrangements) or (ii) replaces such
replacement Part by incorporating or installing in or attaching to the
Airframe or Engine a further replacement Part owned by Lessee (or any
Sublessee) free and clear of all Liens except Permitted Liens (other than
pooling arrangements) and by causing title to such further replacement Part to
vest in Lessor in accordance with such paragraph (a).
(c) Alterations, Modifications and Additions. Lessee, at its own
expense, will make (or cause to be made) such alterations and modifications in
and additions to the Airframe and Engines as may be required from time to time
to meet the applicable standards of the FAA or any other governmental
authority having jurisdiction; provided, however, that Lessee (or, if a
Sublease is then in effect, any Sublessee) may, in good faith, contest the
validity or application of any such law, rule, regulation or order in any
reasonable manner which does not adversely affect Lessor or, so long as any
Secured Certificates are outstanding, the Indenture Trustee. In addition,
Lessee (or any Sublessee), at its own expense, may from time to time add
further parts or accessories and make such alterations and modifications in
and additions to the Airframe or any Engine as Lessee (or any Sublessee) may
deem desirable in the proper conduct of its business, including, without
limitation, removal of Parts which Lessee (or any Sublessee) has determined in
its reasonable judgment to be obsolete or no longer suitable or appropriate
for use on the Airframe or such Engine (such parts, "Obsolete Parts");
provided that no such alteration, modification or addition shall materially
diminish the value, utility or remaining useful life of the Airframe or such
Engine below the value, utility or remaining useful life thereof immediately
prior to such alteration, modification or addition, assuming the Airframe or
such Engine was then in the condition required to be maintained by the terms
of this Lease, except that the value (but not the utility or remaining useful
life) of the Airframe or any Engine may be reduced by the value of Obsolete
Parts which shall have been removed so long as the aggregate value of all
Obsolete Parts which shall have been removed and not replaced shall not exceed
[$800,000 for A330] [$500,000 for 757]. Title to all Parts incorporated or
installed in or attached or added to the Airframe or an Engine as the result
of such alteration, modification or addition (the "Additional Parts") shall,
without further act, vest in Lessor. Notwithstanding the foregoing sentence,
Lessee (or any Sublessee) may remove or suffer to be removed any Additional
Part, provided that such Additional Part (i) is in addition to, and not in
replacement of or substitution for, any Part originally incorporated or
installed in or attached to the Airframe or any Engine at the time of delivery
thereof hereunder or any Part in replacement of, or substitution for, any such
Part, (ii) is not required to be incorporated or installed in or attached or
added to the Airframe or any Engine pursuant to the terms of Section 7 hereof
or the first sentence of this paragraph (c) and (iii) can be removed from the
Airframe or such Engine without diminishing or impairing the value, utility or
remaining useful life which the Airframe or such Engine would have had at the
time of removal had such alteration, modification or addition not occurred,
assuming that such Airframe or Engine was in the condition and repair required
to be maintained by the terms hereof. Upon the removal by Lessee (or
Sublessee) of any Part as provided above, title thereto shall, without further
act, vest in Lessee (or any Sublessee, as the case may be) and such Part shall
no longer be deemed part of the Airframe or Engine from which it was removed.
Any Part not removed by Lessee (or any Sublessee) as above provided prior to
the return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.
30
SECTION 9. Voluntary Termination. (a) Termination Event. (1)
[Intentionally Omitted].
(2) Lessee shall have the right to elect to terminate this Lease on
any Lease Period Date occurring on or after the fifth anniversary of the
Delivery Date if Lessee shall have made the good faith determination, which
shall be evidenced by a resolution duly adopted by its Board of Directors (or
the Executive Committee thereof), that the Aircraft is obsolete or surplus to
its needs.
(3) Lessee shall give to Lessor at least ninety (90) days' revocable
advance written notice of Lessee's intention to so terminate this Lease (any
such notice, a "Termination Notice") specifying (i) the Lease Period Date on
which Lessee intends to terminate this Lease in accordance with this Section 9
(such specified date, a "Termination Date") and (ii) that Lessee has
determined that the Aircraft is obsolete or surplus to its needs. Any
Termination Notice shall become irrevocable fifteen (15) days prior to the
Termination Date.
(b) [Intentionally Omitted].
(c) Optional Sale of the Aircraft. In the event that Lessee shall
have exercised its right to terminate this Lease under Section 9(a)(2), then
during the period from the giving of the notice referred to in Section 9(a)(3)
until the proposed Termination Date (unless Lessee shall have revoked the
Termination Notice specifying such proposed Termination Date), Lessee, as
agent for Lessor and at no expense to Lessor, shall use commercially
reasonable efforts to obtain all-cash bids in the worldwide market for the
purchase of the Aircraft and, in the event it receives any bid, Lessee shall,
within five Business Days after receipt thereof and at least ten Business Days
prior to the proposed Termination Date, certify to Lessor in writing the
amount and terms of such bid, and the name and address of the party or parties
(who shall not be Lessee or any Affiliate of Lessee or any Person with whom
Lessee or any such Affiliate has an arrangement or understanding regarding the
future use of the Aircraft by Lessee or any such Affiliate but who may be the
Owner Participant, any Affiliate thereof or any Person contacted by the Owner
Participant) submitting such bid. After Lessee shall have certified to Lessor
all bids received, the Owner Participant, any Affiliate thereof or any Person
contacted by the Owner Participant may submit a further bid or bids to Lessee
not later than five Business Days prior to the Termination Date proposed by
Lessee (unless Lessee shall have revoked the Termination Notice specifying
such proposed Termination Date). Subject to the next succeeding sentence, on
or before the Termination Date, subject to the release of all mortgage and
security interests with respect to the Aircraft under the Trust Indenture: (1)
Lessee shall deliver the Aircraft, or cause the Aircraft to be delivered, to
the bidder(s), if any, which shall have submitted the highest all-cash bid
therefor at least ten (or, in the case of the Owner Participant, any Affiliate
thereof, or Person contacted by the Owner Participant, five) Business Days
prior to such Termination Date, in the same manner and in the same condition
and otherwise in accordance with all the terms of this Lease as if delivery
were made to Lessor pursuant to Section 5, and shall duly transfer to Lessor
title to any engines not owned by Lessor all in accordance with the terms of
Section 5, (2) Lessor shall comply with the terms of the Trust Indenture and
shall, without recourse or warranty (except as to the absence of Lessor Liens,
including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens), subject to prior or concurrent
payment by Lessee of all amounts due under clause (3) of this sentence, sell
all of Lessor's right, title and
31
interest in and to the Aircraft for cash in Dollars to such bidder(s), the
total sales price realized at such sale to be retained by Lessor, and (3)
Lessee shall simultaneously pay or cause to be paid to Lessor in funds of the
type specified in Section 3(f) hereof, an amount equal to the sum of (A) the
excess, if any, of (i) the Termination Value for the Aircraft, computed as of
the Termination Date, over (ii) the net cash proceeds from the sale of the
Aircraft after deducting the reasonable expenses incurred by Lessor in
connection with such sale, (B) all unpaid Basic Rent with respect to the
Aircraft payable prior to such Termination Date and all unpaid Supplemental
Rent due on or prior to the Termination Date with respect to the Aircraft, and
(C) the Make-Whole Amount, if any, due on the Secured Certificates, and upon
such payment Lessor simultaneously will transfer to Lessee, without recourse
or warranty (except as to the absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), all of Lessor's right, title and interest in and
to any Engines constituting part of the Aircraft which were not sold with the
Aircraft. Notwithstanding the preceding sentence, Lessor may, if Lessee has
not revoked the Termination Notice, elect to retain title to the Aircraft. If
Lessor so elects, Lessor shall give to Lessee written notice of such election
at least five Business Days prior to the Termination Date accompanied by an
irrevocable undertaking by the Owner Participant to make available to Lessor
for payment to the Indenture Trustee on the Termination Date the amount
required to pay in full the unpaid principal amount of the Secured
Certificates outstanding on the Termination Date plus interest accrued thereon
through the Termination Date, together with the Make-Whole Amount, if any, due
on the Secured Certificates. Upon receipt of notice of such an election by
Lessor and the accompanying undertaking by the Owner Participant, Lessee shall
cease its efforts to obtain bids as provided above and shall reject all bids
theretofore or thereafter received. On the Termination Date, Lessor shall
(subject to the payment by Lessee of all Rent due on or prior to such date as
set forth below) pay in full the unpaid principal amount of the Secured
Certificates outstanding on the Termination Date plus interest accrued thereon
through the Termination Date together with all Make-Whole Amount, if any, due
on the Secured Certificates and, so long as the Secured Certificates are paid
as aforesaid, Lessee shall deliver the Airframe and Engines or engines to
Lessor in accordance with Section 5 and shall pay all Basic Rent payable prior
to the Termination Date and all Supplemental Rent (other than Termination
Value) due on or prior to the Termination Date. If no sale shall have occurred
on the Termination Date and Lessor has not made the payment contemplated by
the preceding sentence and thereby caused this Lease to terminate, or if
Lessee revokes its Termination Notice, this Lease shall continue in full force
and effect as to the Aircraft, Lessee shall pay the reasonable costs and
expenses incurred by the Owner Participant and Lessor (unless such failure to
terminate the Lease is a consequence of the failure of Lessor or the Owner
Participant without due cause to make, or cause to be made, the payment
referred to in the immediately preceding sentence), if any, in connection with
preparation for such sale and Lessee may give one or more additional
Termination Notices in accordance with Sections 9(a)(2) and 9(a)(3), subject
to the last sentence of this Section 9(c). In the event of any such sale or
such retention of the Aircraft by Lessor and upon compliance by Lessee with
the provisions of this paragraph, the obligation of Lessee to pay Basic Rent
or any other amounts hereunder shall cease to accrue and this Lease shall
terminate. Lessor may, but shall be under no duty to, solicit bids, inquire
into the efforts of Lessee to obtain bids or otherwise take any action in
connection with any such sale other than to transfer (in accordance with the
foregoing provisions) to the purchaser named in the highest bid certified by
Lessee to Lessor all of Lessor's right, title and interest in the Aircraft,
against receipt of the payments
32
provided herein. Lessee may revoke a Termination Notice given pursuant to
Section 9(a)(3) no more than two times during the Term.
(d) Termination as to Engines. So long as no Event of Default shall
have occurred and be continuing, Lessee shall have the right at its option at
any time during the Term, on at least thirty (30) days' prior written notice,
to terminate this Lease with respect to any Engine. In such event, and prior
to the date of such termination, Lessee shall replace such Engine hereunder by
complying with the terms of Section 10(b) to the same extent as if an Event of
Loss had occurred with respect to such Engine, and Lessor shall transfer such
right, title and interest as it may have to the replaced Engine as provided in
Section 5(b). No termination of this Lease with respect to any Engine as
contemplated by this Section 9(d) shall result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of Loss
with Respect to the Aircraft. Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and the Engines and/or engines then
installed thereon, Lessee shall forthwith (and in any event, within fifteen
(15) days after such occurrence) give Lessor written notice of such Event of
Loss, and within forty-five (45) days after such Event of Loss Lessee shall
give Lessor written notice of its election to perform one of the following
options (it being agreed that if Lessee shall not have given such notice of
election within such period, Lessee shall be deemed to have elected the option
set forth in clause (i) below). Lessee may elect either to:
(i) make the payments specified in this clause (i), in which
event not later than the earlier of (x) the Business Day next
succeeding the 120th day following the occurrence of such Event of
Loss or (y) an earlier Business Day irrevocably specified fifteen
(15) days in advance by notice from Lessee to Lessor and the
Indenture Trustee (the "Loss Payment Date"), Lessee shall pay or
cause to be paid to Lessor in funds of the type specified in Section
3(f) hereof, an amount equal to the Stipulated Loss Value of the
Aircraft corresponding to the Stipulated Loss Value Date occurring
on or immediately following the Loss Payment Date; provided,
however, that if a Lease Period Date shall occur prior to the Loss
Payment Date with respect to which Stipulated Loss Value is
determined, Lessee shall pay on such Lease Period Date an amount
equal to the Basic Rent that would have been payable on such Lease
Period Date if such Event of Loss had not occurred, or
(ii) substitute an aircraft or an airframe or an airframe and
one or more engines, as the case may be;
provided that, if Lessee does not perform its obligation to effect such
substitution in accordance with this Section 10(a) during the period of time
provided herein, then Lessee shall pay or cause to be paid to Lessor on the
Business Day next succeeding the 120th day following the occurrence of such
Event of Loss the amount specified in clause (i) above.
At such time as Lessor shall have received the amounts specified in
subparagraph (i) above, together with all other amounts that then may be due
hereunder (including, without limitation, all Basic Rent due before the date
of such payment and all Supplemental Rent), under
33
the Participation Agreement and under the Tax Indemnity Agreement, (1) the
obligation of Lessee to pay the installments of Basic Rent, Supplemental Rent,
Stipulated Loss Value, Termination Value or any other amount shall cease to
accrue, (2) this Lease shall terminate, (3) Lessor will comply with the terms
of the Trust Indenture and transfer to or at the direction of Lessee, without
recourse or warranty (except as to the absence of Lessor Liens, including for
this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), all of Lessor's right, title and interest in and
to the Airframe and any Engines subject to such Event of Loss, as well as any
Engines not subject to such Event of Loss, and furnish to or at the direction
of Lessee a xxxx of sale in form and substance reasonably satisfactory to
Lessee (or any Sublessee), evidencing such transfer, and (4) Lessee will be
subrogated to all claims of Lessor, if any, against third parties, for damage
to or loss of the Airframe and any Engines which were subject to such Event of
Loss to the extent of the then insured value of the Aircraft.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall, at its sole expense, not later than the Business Day next succeeding
the 120th day following the occurrence of such Event of Loss, (A) convey or
cause to be conveyed to Lessor and to be leased by Lessee hereunder, an
aircraft (or an airframe or an airframe and one or more engines which,
together with the Engines constituting a part of the Aircraft but not
installed thereon at the time of such Event of Loss constitute the Aircraft)
free and clear of all Liens (other than Permitted Liens) and having a value,
utility and remaining useful life (without regard to hours or cycles) at least
equal to the Aircraft subject to such Event of Loss assuming no Event of Loss
had occurred and that the Aircraft had been maintained in accordance with this
Lease; provided that any aircraft, airframe or engine so substituted hereunder
shall be of the same or improved model as those initially leased hereunder and
(B) prior to or at the time of any such substitution, Lessee (or any
Sublessee), at its own expense, will (1) furnish Lessor with a full warranty
xxxx of sale and a Federal Aviation Administration xxxx of sale, in form and
substance reasonably satisfactory to Lessor, evidencing such transfer of
title, (2) cause a Lease Supplement and a Trust Supplement to be duly executed
by Lessee and filed for recording pursuant to the Federal Aviation Act, or the
applicable laws, rules and regulations of any other jurisdiction in which the
Airframe may then be registered as permitted by Section 8(f) of the
Participation Agreement, (3) cause a financing statement or statements with
respect to such substituted property to be filed in such place or places as
are deemed necessary or desirable by Lessor to perfect its and the Indenture
Trustee's interest therein and herein, (4) furnish Lessor with such evidence
of compliance with the insurance provisions of Section 11 with respect to such
substituted property as Lessor may reasonably request, (5) furnish Lessor with
copies of the documentation required to be provided by Lessee pursuant to
Section 5.06 of the Trust Indenture (whether or not the Trust Indenture is
then in effect), and Lessor simultaneously will comply with the terms of the
Trust Indenture and transfer to or at the direction of Lessee, without
recourse or warranty (except as to the absence of Lessor Liens, including for
this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), all of Lessor's right, title and interest, if
any, in and to the Aircraft or the Airframe and one or more Engines, as the
case may be, with respect to which such Event of Loss occurred and furnish to
or at the direction of Lessee a xxxx of sale in form and substance reasonably
satisfactory to Lessee (or any Sublessee), evidencing such transfer, (6)
furnish Lessor with an opinion of counsel (which shall be Cadwalader,
Xxxxxxxxxx & Xxxx and, if not, other counsel chosen by Lessee and reasonably
acceptable to Lessor) reasonably satisfactory to Lessor to the effect that
Lessor and the Indenture Trustee as assignee of Lessor
34
will be entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code
with respect to the substitute aircraft, provided that such opinion need not
be delivered to the extent that immediately prior to such substitution the
benefits of Section 1110 of the U.S. Bankruptcy Code were not, solely by
reason of a change in law or governmental interpretation thereof, available to
Lessor and, so long as any Secured Certificates are outstanding, the Indenture
Trustee as assignee of Lessor's rights under the Lease with respect to the
Aircraft, and (7) Lessee will be subrogated to all claims of Lessor, if any,
against third parties for damage to or loss of the Airframe and any Engine
which were subject to such Event of Loss to the extent of the then insured
value of the Aircraft. For all purposes hereof, the property so substituted
shall after such transfer be deemed part of the property leased hereunder and
shall be deemed an "Aircraft", "Airframe" and "Engine", as the case may be, as
defined herein. No Event of Loss with respect to the Airframe or the Airframe
and the Engines or engines then installed thereon for which substitution has
been elected pursuant to Section 10(a)(ii) hereof shall result in any
reduction in Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the occurrence of
an Event of Loss with respect to an Engine under circumstances in which there
has not occurred an Event of Loss with respect to the Airframe, Lessee shall
forthwith (and in any event, within fifteen days after such occurrence) give
Lessor written notice thereof and shall, within sixty (60) days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, as
replacement for the Engine with respect to which such Event of Loss occurred,
title to another [Xxxxx & Whitney Model PW4168A] [Xxxxx & Xxxxxxx Model
PW2040] engine (or engine of the same or another manufacturer of the same, an
equivalent or an improved model and suitable for installation and use on the
Airframe without impairing the value, utility or remaining useful life of the
Aircraft; provided that both Engines shall be of the same make and model) free
and clear of all Liens (other than Permitted Liens, which engine may upon its
transfer to Lessor become subject to any and all Permitted Liens) and having a
value, utility and remaining useful life (without regard to hours or cycles)
at least equal to the Engine subject to such Event of Loss assuming no Event
of Loss had occurred and that such Engine had been maintained in accordance
with this Lease. Prior to or at the time of any such conveyance, Lessee, at
its own expense, will (i) furnish Lessor with a warranty (as to title) xxxx of
sale, in form and substance reasonably satisfactory to Lessor, with respect to
such replacement engine, (ii) cause a Lease Supplement and Trust Supplement to
be duly executed by Lessee and to be filed for recording pursuant to the
Federal Aviation Act, or the applicable laws, rules and regulations of any
other jurisdiction in which the Airframe may then be registered as permitted
by Section 8(f) of the Participation Agreement, (iii) furnish Lessor with such
evidence of compliance with the insurance provisions of Section 11 hereof with
respect to such replacement engine as Lessor may reasonably request and
furnish Lessor with copies of the documentation required to be provided by
Lessee pursuant to Section 5.06 of the Trust Indenture (whether or not the
Trust Indenture is then in effect), and Lessor will comply with the terms of
the Trust Indenture and transfer to or at the direction of Lessee without
recourse or warranty (except as to absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens) all of Lessor's right, title and interest, if any,
in and to (A) the Engine with respect to which such Event of Loss occurred and
furnish to or at the direction of Lessee a xxxx of sale in form and substance
reasonably satisfactory to Lessee, evidencing such transfer and (B) all
claims, if any, against third parties, for damage to or loss of the Engine
subject to such Event of Loss, and such Engine shall thereupon cease to be the
Engine leased hereunder. For all
35
purposes hereof, each such replacement engine shall, after such conveyance, be
deemed part of the property leased hereunder, and shall be deemed an "Engine".
No Event of Loss with respect to an Engine under the circumstances
contemplated by the terms of this paragraph (b) shall result in any reduction
in Basic Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with
respect to an Event of Loss will be applied as follows:
(i) if payments are received with respect to the Airframe (or
the Airframe and any Engine or engines then installed thereon), (A)
unless the same are replaced pursuant to the last paragraph of
Section 10(a), after reimbursement of Lessor (as provided in Section
7.01 of the Trust Agreement) for reasonable costs and expenses, so
much of such payments remaining as shall not exceed the Stipulated
Loss Value required to be paid by Lessee pursuant to Section 10(a),
shall be applied in reduction of Lessee's obligation to pay
Stipulated Loss Value, if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its payment
of Stipulated Loss Value, and following the foregoing application,
the balance, if any, of such payments will be paid over to, or
retained by Lessee, provided that Lessor shall be entitled to so
much of the excess, if any, of such payment over the greater of (x)
the Stipulated Loss Value and (y) the fair market value of the
Aircraft as Lessor shall demonstrate to Lessee's reasonable
satisfaction is attributable to compensation for loss of Lessor's
interest in the Aircraft as distinguished from the loss of use of
the Aircraft; or (B) if such property is replaced pursuant to the
last paragraph of Section 10(a), such payments shall be paid over
to, or retained by, Lessee; provided that Lessee shall have fully
performed or, concurrently therewith, will fully perform the terms
of the last paragraph of Section 10(a) with respect to the Event of
Loss for which such payments are made; and
(ii) if such payments are received with respect to an Engine
under circumstances contemplated by Section 10(b) hereof, so much of
such payments remaining after reimbursement of Lessor (as provided
for in Section 7.01 of the Trust Agreement) for reasonable costs and
expenses shall be paid over to, or retained by, Lessee, provided
that Lessee shall have fully performed, or concurrently therewith
will perform, the terms of Section 10(b) with respect to the Event
of Loss for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or the Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on
the Airframe during the Term by the United States Government or any other
government of registry of the Aircraft or any instrumentality or agency of any
thereof, Lessee shall promptly notify Lessor of such requisition, and all of
Lessee's obligations under this Lease Agreement with respect to the Aircraft
shall continue to the same extent as if such requisition had not occurred,
provided that if such Airframe and Engines or engines installed thereon are
not returned by such government (or instrumentality or agency)
36
prior to the end of the Term, Lessee shall be obligated to return the Airframe
and such Engines or engines to Lessor pursuant to, and in all other respects
in compliance with the provisions of, Section 5 promptly on the date of such
return by such government (or instrumentality or agency). If, in the event of
any such requisition, Lessee shall fail to return the Aircraft on or before
the thirtieth day beyond the end of the Term, such failure shall constitute an
Event of Loss which shall be deemed to have occurred on the last day of the
Term and in such event Lessee shall make the payment contemplated by Section
10(a)(i) in respect of such Event of Loss; provided, however, that Lessor may
notify Lessee in writing on or before the twentieth day prior to the last day
of the Term that, in the event Lessee shall fail by reason of such requisition
to return the Airframe and such Engines or engines on or before the thirtieth
day beyond the end of the Term, such failure shall not be deemed an Event of
Loss. Upon the giving of such notice and such failure to return by the
thirtieth day beyond the end of the Term, Lessee shall be relieved of all of
its obligations pursuant to the provisions of Section 5 (including Exhibit G)
but not under any other Section, except that if any engine not owned by Lessor
shall then be installed on the Airframe, Lessee will, at no cost to Lessor,
furnish, or cause to be furnished, to Lessor a full warranty (as to title)
xxxx of sale with respect to each such engine, in form and substance
reasonably satisfactory to Lessor (together with an opinion of counsel to the
effect that such full warranty xxxx of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that such
engines are free and clear of Liens other than Lessor Liens (including for
this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), Loan Participant Liens and Indenture Trustee's
Liens), against receipt from Lessor of a xxxx of sale evidencing the transfer,
without recourse or warranty (except as to the absence of Lessor Liens,
including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens), by Lessor to Lessee or its
designee of all of Lessor's right, title and interest in and to any Engine
constituting part of the Aircraft but not then installed on the Airframe. All
payments received by Lessor or Lessee from such government (or instrumentality
or agency) for the use of such Airframe and Engines or engines during the Term
shall be paid over to, or retained by, Lessee (or, if directed by Lessee, any
Sublessee); and all payments received by Lessor or Lessee from such government
(or instrumentality or agency) for the use of such Airframe and Engines or
engines after the end of the Term shall be paid over to, or retained by,
Lessor unless Lessee shall have exercised its purchase option hereunder, in
which case such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States Government
or the Government of Registry of the Aircraft. In the event of the requisition
for use of an Engine by the United States Government or any other government
of registry of the Aircraft or any agency or instrumentality of any thereof
(other than in the circumstances contemplated by subsection (d)), Lessee shall
replace such Engine hereunder by complying (or causing any Sublessee to
comply) with the terms of Section 10(b) to the same extent as if an Event of
Loss had occurred with respect thereto, and, upon compliance with Section
10(b) hereof, any payments received by Lessor or Lessee from such government
(or instrumentality or agency) with respect to such requisition shall be paid
over to, or retained by, Lessee.
(f) Application of Payments During Existence of Event of Default.
Any amount referred to in this Section 10 which is payable to or retainable by
Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or such
Sublessee) if at the time of such payment or retention an Event of Default
shall have occurred and be continuing, but shall be held
37
by or paid over to Lessor as security for the obligations of Lessee (or such
Sublessee) under this Lease and, if Lessor declares this Lease to be in
default pursuant to Section 15 hereof, applied against Lessee's obligations
hereunder as and when due. At such time as there shall not be continuing any
such Event of Default, such amount shall be paid to Lessee (or such Sublessee)
to the extent not previously applied in accordance with the preceding
sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
Insurance. (I) Except as provided in clause (II) of this Section 11(a), Lessee
will carry or cause to be carried at its or any Sublessee's expense (i)
aircraft public liability (including, without limitation, passenger legal
liability) (and including aircraft war risk and hijacking insurance, if and to
the extent the same is maintained by Lessee (or, if a Sublease is then in
effect, if and to the extent maintained by Sublessee) with respect to other
aircraft owned or leased, and operated by Lessee (or such Sublessee) on the
same routes) insurance and property damage insurance (exclusive of
manufacturer's product liability insurance) with respect to the Aircraft, in
an amount not less than the greater of (x) the amount of public liability and
property damage insurance from time to time applicable to aircraft owned or
operated by Lessee (or, if a Sublease is then in effect, by Sublessee) of the
same type as the Aircraft and (y) such amount per occurrence as may have been
agreed to on the Delivery Date by the Owner Participant [amount shall be at
least $300,000,000 for 757 and at least $350,000,000 for A330] and (ii) cargo
liability insurance, in the case of both clause (i) and clause (ii), (A) of
the type and covering the same risks as from time to time applicable to
aircraft operated by Lessee (or, if a Sublease is then in effect, by
Sublessee) of the same type as the Aircraft and (B) which is maintained in
effect with insurers of recognized responsibility. Any policies of insurance
carried in accordance with this paragraph (a) and any policies taken out in
substitution or replacement for any of such policies (A) shall be amended to
name Lessor, in its individual capacity and as owner trustee, the Indenture
Trustee, the Policy Provider and the Owner Participant (but without imposing
on any such parties liability to pay the premiums for such insurance) (and, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) as additional insureds as their respective interests may appear, (B)
shall provide that in respect of the respective interests of Lessor, the
Indenture Trustee, the Policy Provider and the Owner Participant (and, if any
Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) in such policies the insurance shall not be invalidated by any
action or inaction of Lessee (or, if any Sublease is then in effect, any
Sublessee) or any other Person and shall insure Lessor, the Indenture Trustee,
the Policy Provider and the Owner Participant (and, if any Sublease shall be
in effect, Lessee in its capacity as sublessor under the Sublease) regardless
of any breach or violation of any warranty, declaration or condition contained
in such policies by Lessee (or, if any Sublease is then in effect, any
Sublessee), (C) may provide for self-insurance to the extent permitted by
Section 11(d) and (D) shall provide that if the insurers cancel such insurance
for any reason whatever or if any material change is made in such insurance
which adversely affects the interest of Lessor, the Indenture Trustee, the
Policy Provider or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), or such
insurance shall lapse for non-payment of premium, such cancellation, lapse or
change shall not be effective as to Lessor, the Indenture Trustee, the Policy
Provider or the Owner Participant (or, if any Sublease shall be in effect,
Lessee in its capacity as sublessor under the Sublease) for thirty (30) days
(seven (7) days in the case of war risk and allied perils coverage) after
issuance to Lessor, the Indenture Trustee, the Policy Provider or the Owner
Participant (or, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease), respectively,
38
of written notice by such insurers of such cancellation, lapse or change;
provided, however, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice
as shall then be reasonably obtainable. Each liability policy (1) shall be
primary without right of contribution from any other insurance which is
carried by Lessor, the Indenture Trustee, the Policy Provider or the Owner
Participant (or, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease), (2) shall expressly provide that all of the
provisions thereof, except the limits of liability, shall operate in the same
manner as if there were a separate policy covering each insured, and (3) shall
waive any right of the insurers to any set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
Lessor or the Indenture Trustee, the Policy Provider or the Owner Participant
(or, if any Sublease shall be in effect, Lessee in its capacity as sublessor
under the Sublease) to the extent of any moneys due to Lessor, the Indenture
Trustee, the Policy Provider or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease).
(II) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (I) above, insurance otherwise conforming with the
provisions of said clause (I) except that (A) the amounts of coverage shall
not be required to exceed the amounts of public liability and property damage
insurance from time to time applicable to aircraft owned or operated by Lessee
(or, if a Sublease is then in effect, by Sublessee) of the same type as the
Aircraft which are on the ground and not in operation; and (B) the scope of
the risks covered and the type of insurance shall be the same as from time to
time shall be applicable to aircraft owned or operated by Lessee (or, if a
Sublease is then in effect, by Sublessee) of the same type which are on the
ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (I) Except as
provided in clause (II) of this Section 11(b), Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense, with insurers
of recognized responsibility, all-risk ground and flight aircraft hull
insurance covering the Aircraft and all-risk ground and flight coverage of
Engines and Parts while temporarily removed from the Aircraft and not replaced
by similar components (including, without limitation, war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance, if and to the extent the
same is maintained by Lessee (or, if a Sublease is then in effect, by
Sublessee) with respect to other aircraft owned or operated by Lessee (or such
Sublessee) on the same routes, except that Lessee (or such Sublessee) shall
maintain war risk and governmental confiscation and expropriation (other than
by the government of registry of the Aircraft) and hijacking insurance if the
Aircraft is operated on routes where the custom is for major international air
carriers flying comparable routes to carry such insurance) which is of the
type as from time to time applicable to aircraft owned or operated by Lessee
(or, if a Sublease is then in effect, by Sublessee) of the same type as the
Aircraft; provided that such insurance shall at all times while the Aircraft
is subject to this Lease be for an amount (subject to self-insurance to the
extent permitted by Section 11(d)) not less than the Stipulated Loss Value for
the Aircraft. Any policies carried in accordance with this paragraph (b)
covering the Aircraft and any policies taken out in substitution or
replacement for any such policies (i) shall name Lessor, as owner trustee, the
Indenture Trustee and the Owner Participant (and, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease) as additional
insureds, as their respective
39
interests may appear (but without imposing on any such party liability to pay
premiums with respect to such insurance), (ii) may provide for self-insurance
to the extent permitted in Section 11(d), (iii) shall provide that (A) in the
event of a loss involving proceeds in excess of [$5,000,000 for 757]
[$7,000,000 for A330] (or, if the Aircraft is then under a Sublease, in excess
of [$3,000,000 for 757] [$4,000,000 for A330]), the proceeds in respect of
such loss up to an amount equal to the Stipulated Loss Value for the Aircraft
shall be payable to Lessor (or, so long as the Trust Indenture shall not have
been discharged, the Indenture Trustee) (except in the case of a loss with
respect to an Engine installed on an airframe other than the Airframe, in
which case Lessee (or any Sublessee) shall arrange for any payment of
insurance proceeds in respect of such loss to be held for the account of
Lessor (or, so long as the Trust Indenture shall not have been discharged, the
Indenture Trustee) whether such payment is made to Lessee (or any Sublessee)
or any third party), it being understood and agreed that in the case of any
payment to Lessor (or the Indenture Trustee) otherwise than in respect of an
Event of Loss, Lessor (or the Indenture Trustee) shall, upon receipt of
evidence satisfactory to it that the damage giving rise to such payment shall
have been repaired or that such payment shall then be required to pay for
repairs then being made, pay the amount of such payment to Lessee or its
order, and (B) the entire amount of any loss involving proceeds of [$5,000,000
for 757] [$7,000,000 for A330] (or, if the Aircraft is then under a Sublease,
of [$3,000,000 for 757] [$4,000,000 for A330]) or less or the amount of any
proceeds of any loss in excess of the Stipulated Loss Value for the Aircraft
shall be paid to Lessee or its order unless an Event of Default shall have
occurred and be continuing and the insurers have been notified thereof by
Lessor or the Indenture Trustee, (iv) shall provide that if the insurers
cancel such insurance for any reason whatever, or such insurance lapses for
non-payment of premium or if any material change is made in the insurance
which adversely affects the interest of Lessor, the Indenture Trustee or the
Owner Participant, such cancellation, lapse or change shall not be effective
as to Lessor, the Indenture Trustee or the Owner Participant (or, if any
Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) for thirty (30) days (seven (7) days in the case of hull war risk
and allied perils coverage) after issuance to Lessor, the Indenture Trustee or
the Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease), respectively, of written notice by
such insurers of such cancellation, lapse or change, provided, however, that
if any notice period specified above is not reasonably obtainable, such
policies shall provide for as long a period of prior notice as shall then be
reasonably obtainable, (v) shall provide that in respect of the respective
interests of Lessor, the Indenture Trustee and the Owner Participant (and, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) in such policies the insurance shall not be invalidated by any
action or inaction of Lessee (or, if a Sublease is then in effect, any
Sublessee) or any other Person and shall insure the respective interests of
Lessor, the Indenture Trustee and the Owner Participant (and, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease),
as they appear, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by Lessee (or, if a
Sublease is then in effect, any Sublessee), (vi) shall be primary without any
right of contribution from any other insurance which is carried by Lessor, the
Owner Participant or the Indenture Trustee (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), (vii) shall
waive any right of subrogation of the insurers against Lessor, the Owner
Participant and the Indenture Trustee (and, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), and (viii)
shall waive any right of the insurers to set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
40
liability of Lessor, the Indenture Trustee, the Owner Participant or Lessee
(or any Sublessee) to the extent of any moneys due to Lessor, the Indenture
Trustee or the Owner Participant. In the case of a loss with respect to an
engine (other than an Engine) installed on the Airframe, Lessor shall hold any
payment to it of any insurance proceeds in respect of such loss for the
account of Lessee or any other third party that is entitled to receive such
proceeds.
As between Lessor and Lessee, it is agreed that all insurance
payments received as the result of the occurrence of an Event of Loss will be
applied as follows:
(x) if such payments are received with respect to the Airframe
(or the Airframe and the Engines installed thereon), (i) unless such
property is replaced pursuant to the last paragraph of Section
10(a), so much of such payments remaining, after reimbursement of
Lessor (as provided in Section 7.01 of the Trust Agreement) for
reasonable costs and expenses, as shall not exceed the Stipulated
Loss Value required to be paid by Lessee pursuant to Section 10(a)
hereof shall be applied in reduction of Lessee's obligation to pay
such Stipulated Loss Value, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of such Stipulated Loss Value, and the balance, if any, of
such payments remaining thereafter will be paid over to, or retained
by, Lessee (or if directed by Lessee, any Sublessee); or (ii) if
such property is replaced pursuant to the last paragraph of Section
10(a), such payments shall be paid over to, or retained by, Lessee
(or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed, or concurrently therewith will fully
perform, the terms of the last paragraph of Section 10(a) with
respect to the Event of Loss for which such payments are made; and
(y) if such payments are received with respect to an Engine
under the circumstances contemplated by Section 10(b) hereof, so
much of such payments remaining, after reimbursement of Lessor (as
provided in Section 7.01 of the Trust Agreement) for reasonable
costs and expenses, shall be paid over to, or retained by, Lessee
(or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed, or concurrently therewith will fully
perform, the terms of Section 10(b) with respect to the Event of
Loss for which such payments are made.
As between Lessor and Lessee, the insurance payments for any
property damage loss to the Airframe or any Engine not constituting an Event
of Loss with respect thereto will be applied in payment for repairs or for
replacement property in accordance with the terms of Sections 7 and 8, if not
already paid for by Lessee (or any Sublessee), and any balance (or if already
paid for by Lessee (or any Sublessee), all such insurance proceeds) remaining
after compliance with such Sections with respect to such loss shall be paid to
Lessee (or any Sublessee if directed by Lessee).
(II) During any period that the Aircraft is on the ground and
not in operation, Lessee may carry or cause to be carried, in lieu of the
insurance required by clause (I) above, insurance otherwise conforming with
the provisions of said clause (I) except that the scope of the risks and the
type of insurance shall be the same as from time to time applicable to
aircraft
41
owned or operated by Lessee (or, if a Sublease is then in effect, by
Sublessee) of the same type similarly on the ground and not in operation,
provided that Lessee shall maintain insurance against risk of loss or damage
to the Aircraft in an amount equal to the Stipulated Loss Value of the
Aircraft during such period that the Aircraft is on the ground and not in
operation.
(c) Reports, etc. Lessee will furnish, or cause to be
furnished, to Lessor, the Indenture Trustee and the Owner Participant, on or
before the Delivery Date and on or before July 1 in each year thereafter
during the Term commencing July, _____, a report, signed by Aon Risk Services,
Inc., Aon Risk Services of Minnesota, Inc. or any other independent firm of
insurance brokers reasonably acceptable to Lessor (the "Insurance Brokers"),
describing in reasonable detail the insurance and reinsurance then carried and
maintained with respect to the Aircraft and stating the opinion of such firm
that the insurance then carried and maintained with respect to the Aircraft
complies with the terms hereof; provided, however, that all information
contained in the foregoing report shall not be made available by Lessor, the
Indenture Trustee, the Loan Participants or the Owner Participant to anyone
except (A) to permitted transferees of Lessor's, the Loan Participants', the
Owner Participant's or the Indenture Trustee's interest who agree to hold such
information confidential, (B) to Lessor's, the Loan Participants', the Owner
Participant's or the Indenture Trustee's counsel or independent certified
public accountants or independent insurance advisors who agree to hold such
information confidential or (C) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation. Lessee
will cause such Insurance Brokers to agree to advise Lessor, the Indenture
Trustee and the Owner Participant in writing of any default in the payment of
any premium and of any other act or omission on the part of Lessee of which it
has knowledge and which might invalidate or render unenforceable, in whole or
in part, any insurance on the Aircraft. To the extent such agreement is
reasonably obtainable, Lessee will also cause such Insurance Brokers to agree
to advise Lessor, the Indenture Trustee and the Owner Participant in writing
at least thirty (30) days (seven (7) days in the case of war risk and allied
perils coverage), prior to the expiration or termination date of any insurance
carried and maintained on the Aircraft pursuant to this Section 11. In
addition, Lessee will also cause such Insurance Brokers to deliver to Lessor,
the Indenture Trustee and the Owner Participant, on or prior to the date of
expiration of any insurance policy referenced in a previously delivered
certificate of insurance, a new certificate of insurance, substantially in the
same form as delivered by Lessee to such parties on the Delivery Date. In the
event that Lessee or any Sublessee shall fail to maintain or cause to be
maintained insurance as herein provided, Lessor or the Indenture Trustee may
at its sole option provide such insurance and, in such event, Lessee shall,
upon demand, reimburse Lessor or the Indenture Trustee, as Supplemental Rent,
for the cost thereof to Lessor or the Indenture Trustee, as the case may be,
without waiver of any other rights Lessor or the Indenture Trustee may have;
provided, however, that no exercise by Lessor or the Indenture Trustee, as the
case may be, of said option shall affect the provisions of this Lease,
including the provisions of Section 14(g) hereof.
(d) Self-Insurance. Lessee may self-insure by way of deductible,
premium adjustment or franchise provisions or otherwise (including, with
respect to insurance maintained pursuant to Section 11(b), insuring for a
maximum amount which is less than the Stipulated Loss Value of the Aircraft)
in the insurance covering the risks required to be insured against pursuant to
this Section 11 under a program applicable to all aircraft in Lessee's fleet,
but in no case shall the aggregate amount of self-insurance in regard to
Section 11(a) and Section 11(b) exceed
42
during any policy year, with respect to all of the aircraft in Lessee's fleet
(including, without limitation, the Aircraft), the lesser of (a) 50% of the
largest replacement value of any single aircraft in Lessee's fleet or (b)
1-1/2% of the average aggregate insurable value (during the preceding policy
year) of all aircraft (including, without limitation, the Aircraft) on which
Lessee carries insurance. In addition, Lessee (and any Sublessee) may
self-insure to the extent of any applicable mandatory minimum per aircraft
(or, if applicable, per annum or other period) hull or liability insurance
deductible imposed by the aircraft hull or liability insurers.
(e) Additional Insurance by Lessor and Lessee. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its interest
in the Aircraft in amounts in excess of that required to be maintained by this
Section 11; the Owner Participant either directly or through Lessor may carry
for its own account at its sole cost and expense insurance with respect to its
interest in the Aircraft, provided that such insurance does not prevent Lessee
(or any Sublessee) from carrying the insurance required or permitted by this
Section 11 or adversely affect such insurance or the cost thereof.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance provided by, the United States
Government or any agency or instrumentality thereof or, upon the written
consent of Lessor, other government of registry of the Aircraft or any agency
or instrumentality thereof, against such risk in an amount which, when added
to the amount of insurance against such risk maintained by Lessee (or any
Sublessee) with respect to the Aircraft (including permitted self-insurance)
shall be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
(g) Application of Payments During Existence of an Event of
Default. Any amount referred to in paragraph (b) of this Section 11 which is
payable to or retainable by Lessee (or any Sublessee) shall not be paid to or
retained by Lessee (or any Sublessee) if at the time of such payment or
retention an Event of Default shall have occurred and be continuing, but shall
be held by or paid over to Lessor as security for the obligations of Lessee
(or any Sublessee) under this Lease and, if Lessor declares this Lease to be
in default pursuant to Section 15 hereof, applied against Lessee's obligations
hereunder as and when due. At such time as there shall not be continuing any
such Event of Default, such amount shall be paid to Lessee (or such Sublessee)
to the extent not previously applied in accordance with the preceding
sentence.
SECTION 12. Inspection. At all reasonable times and upon at least 15
days' prior written notice to Lessee, Lessor, the Owner Participant or the
Indenture Trustee or their respective authorized representatives may (not more
than once every calendar year (unless an Event of Default has occurred and is
continuing when such inspection right shall not be so limited)) inspect the
Aircraft and inspect and make copies (at Lessor's, the Owner Participant's or
the Indenture Trustee's expense, as the case may be) of the books and records
of Lessee relating to the maintenance of the Aircraft and upon any such
inspection by the Indenture Trustee or its authorized representatives of the
books and records of Lessee relating to the maintenance of the Aircraft, the
Policy Provider or its authorized representatives may also inspect and make
copies (at the Policy Provider's expense) of the books and records of Lessee
relating to the maintenance of the Aircraft; any such inspection of the
Aircraft shall be limited to a visual, walk-
43
around inspection and shall not include opening any panels, bays or the like
without the express consent of Lessee; provided that no exercise of such
inspection right shall interfere with the operation or maintenance of the
Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt by
Lessee of a written request from the Owner Participant specifying that the
Owner Participant desires to have an authorized representative observe the
next scheduled major overhaul to be performed on the Aircraft, Lessee shall
cooperate with the Owner Participant to enable the Owner Participant's
authorized representative to observe the next scheduled major overhaul to be
performed on the Aircraft; provided that Lessee shall be required to so
cooperate only to the extent necessary to enable the Owner Participant's
authorized representative to observe (i) one scheduled major overhaul during
each three year period of the Term and (ii) (notwithstanding the foregoing
clause (i) but only if a major overhaul is scheduled during the last year of
the Term) one scheduled major overhaul during the last year of the Term;
provided, further that the Owner Participant's authorized representative shall
merely observe such major overhaul, shall not interfere with or extend in any
manner the conduct or duration of the major overhaul and shall not be entitled
to direct any of the work performed in connection with such overhaul. None of
Lessor, the Policy Provider, the Owner Participant or the Indenture Trustee
shall have any duty to make any such inspection nor shall any of them incur
any liability or obligation by reason of not making such inspection.
SECTION 13. Assignment. Except as otherwise provided herein, Lessee
will not, without prior written consent of Lessor, assign in whole or in part
any of its rights or obligations hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided herein, in the Trust Agreement or in the
Participation Agreement. Subject to the foregoing, the terms and provisions of
this Lease shall be binding upon and inure to the benefit of Lessor and Lessee
and their respective successors and permitted assigns.
SECTION 14. Events of Default. Each of the following events shall
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Event of Default shall continue so long as, but only as long as, it shall not
have been remedied:
(a) Lessee shall not have made a payment of Basic Rent or Stipulated
Loss Value within ten (10) Business Days after the same shall have become
due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Stipulated Loss Value) after the same shall have become due
and such failure shall continue for ten (10) Business Days after Lessee's
receipt of written demand therefor by the party entitled thereto
(provided that any failure to pay any amount owed by Lessee under the Tax
Indemnity Agreement or any failure of Lessee to pay to Lessor or the
Owner Participant when due any Excluded Payments (as defined in the Trust
Indenture) shall not constitute an Event of Default unless notice is
given by the Owner Participant to Lessee and the Indenture Trustee that
such failure shall constitute an Event of Default); or
44
(c) Lessee shall have failed to perform or observe (or caused to be
performed and observed), in any material respect, any covenant or
agreement (except the covenants set forth in the Tax Indemnity Agreement
and in clauses (i)(B) and (ii) of the first sentence of the second
paragraph of Exhibit G) to be performed or observed by it under any
Operative Document, and such failure shall continue unremedied for a
period of thirty (30) days after receipt by Lessee of written notice
thereof from Lessor or the Indenture Trustee; provided, however, that if
Lessee shall have undertaken to cure any such failure which arises under
clause (ii) or clause (iii) of the first sentence of Section 7(a), or
under the second sentence of Section 7(a) as it relates to maintenance,
service, repair or overhaul or under Section 8 and, notwithstanding the
diligence of Lessee in attempting to cure such failure, such failure is
not cured within said thirty day period but is curable with future due
diligence, there shall exist no Event of Default under this Section 14 so
long as Lessee is proceeding with due diligence to cure such failure and
such failure is remedied not later than three hundred sixty-five (365)
days after receipt by Lessee of such written notice; or
(d) any representation or warranty made by Lessee herein or in the
Participation Agreement or any document or certificate furnished by
Lessee in connection herewith or therewith or pursuant hereto or thereto
(except the representations and warranties set forth in Section 3 of the
Tax Indemnity Agreement and such documents or certificates as are
furnished to the Owner Participant solely in connection with matters
dealt with in the Tax Indemnity Agreement and for no other purpose and
except for representations or warranties contained in the Pass Through
Trust Agreement, the Underwriting Agreement or the Note Purchase
Agreement or any document or instrument furnished pursuant to any
thereof) shall prove to have been incorrect in any material respect at
the time made and such incorrectness shall not have been cured (to the
extent of the adverse impact of such incorrectness on the interests of
the Owner Participant, Lessor or the Certificate Holders) within thirty
(30) days after the receipt by Lessee of a written notice from Lessor or
the Indenture Trustee advising Lessee of the existence of such
incorrectness; or
(e) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law in the United States or
seeking the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Lessee or for all or
substantially all of its property, or seeking the winding-up or
liquidation of its affairs and the continuation of any such case or other
proceeding undismissed and unstayed for a period of ninety (90)
consecutive days or an order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without the
consent of Lessee, a receiver, trustee or liquidator of Lessee, or of any
substantial part of its property, or sequestering any substantial part of
the property of Lessee and any such order, judgment or decree or
appointment or sequestration shall be final or shall remain in force
undismissed, unstayed or unvacated for a period of ninety (90) days after
the date of entry thereof; or
45
(f) the commencement by Lessee of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law
in the United States, or the consent by Lessee to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of Lessee or for all
or substantially all of its property, or the making by Lessee of any
assignment for the benefit of creditors, or Lessee shall take any
corporate action to authorize any of the foregoing; or
(g) Lessee shall fail to carry and maintain on or with respect to
the Aircraft (or cause to be carried and maintained) insurance required
to be maintained in accordance with the provisions of Section 11 hereof;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of an event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor
may, at its option, declare by written notice to Lessee this Lease Agreement
to be in default, provided, that, if an Event of Default referred to in
Section 14(e) or 14(f) shall have occurred, this Lease Agreement shall be
deemed to be declared in default without further act; and at any time
thereafter, so long as any such outstanding Events of Default shall not have
been remedied, Lessor may do one or more of the following with respect to all
or any part of the Airframe and any or all of the Engines as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect;
provided, however, that during any period the Aircraft is subject to the Civil
Reserve Air Fleet Program in accordance with the provisions of Section 7(b)
hereof and in possession of the United States government or an agency or
instrumentality of the United States, Lessor shall not, on account of any
Event of Default, be entitled to do any of the following in such manner as to
limit Lessee's control under this Lease (or any Sublessee's control under any
Sublease) of any Airframe or any Engines installed thereon, unless at least
sixty (60) days' (or such lesser period as may then be applicable under the
Air Mobility Command program of the United States Government) written notice
of default hereunder shall have been given by Lessor by registered or
certified mail to Lessee (and any Sublessee) with a copy addressed to the
Contracting Office Representative for the Air Mobility Command of the United
States Air Force under any contract with Lessee (or any Sublessee) relating to
the Aircraft:
(a) upon the written demand of Lessor and at Lessee's expense, cause
Lessee to return promptly, and Lessee shall return promptly, the Airframe
or any Engine 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 such Airframe or Engine were being
returned at the end of the Term, or Lessor, at its option, may enter upon
the premises where all or any part of the Airframe or any Engine is
located and take immediate possession of and remove the same by summary
proceedings or otherwise
46
(and/or, at Lessor's option, store the same at Lessee's premises until
disposal thereof by Lessor), all without liability accruing to Lessor for
or by reason of such entry or taking of possession or removing whether
for the restoration of damage to property caused by such action or
otherwise;
(b) sell the Airframe and/or any Engine at public or private sale,
as Lessor may determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle the Aircraft as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee,
except as hereinafter set forth in this Section 15;
(c) whether or not Lessor shall have exercised, or shall thereafter
at any time exercise, any of its rights under paragraph (a) or paragraph
(b) above with respect to the Airframe and/or any Engine, Lessor, by
written notice to Lessee specifying a payment date which shall be the
Lease Period Date not earlier than ten days from the date of such notice,
may demand that Lessee pay to Lessor, and Lessee shall pay Lessor, on the
payment date so specified, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the installments of Basic Rent for the
Aircraft due for Lease Periods commencing on or after the Delivery Date
or the Lease Period Date specified as the payment date in such notice),
any unpaid Basic Rent specified in Exhibit B-1 as payable on Lease Period
Dates prior to the payment date so specified (including, in each case,
without limitation, any adjustments to Basic Rent payable pursuant to
Section 3(d)) plus whichever of the following amounts Lessor, in its sole
discretion, shall specify in such notice (together with interest, if any,
on such amount at the Past Due Rate from such specified payment date
until the date of actual payment of such amount): (i) an amount equal to
the excess, if any, of the Stipulated Loss Value for the Aircraft,
computed as of the Lease Period Date specified as the payment date in
such notice, over the aggregate fair market rental value (computed as
hereafter in this Section 15 provided) of such Aircraft for the remainder
of the Term, after discounting such aggregate fair market rental value to
present value as of the Lease Period Date specified as the payment date
in such notice at an annual rate equal to the Base Rate plus 1%; or (ii)
an amount equal to the excess, if any, of the Stipulated Loss Value for
such Aircraft, computed as of the Lease Period Date specified as the
payment date in such notice over the fair market sales value of such
Aircraft (computed as hereafter in this Section provided) as of the Lease
Period Date specified as the payment date in such notice;
(d) in the event Lessor, pursuant to paragraph (b) above, shall have
sold the Airframe and/or any Engine, Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to such Aircraft, may, if
it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay to
Lessor, on the date of such sale, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the installments of Basic Rent
for the Aircraft due on or after such date), any unpaid Basic Rent with
respect to the Aircraft specified in Exhibit B-1 as payable prior to such
date (including, in each case, without limitation, any adjustments to
Basic Rent payable pursuant to Section 3(d)) plus the amount of any
deficiency between the net proceeds of such sale (after deduction of all
reasonable costs of sale) and the Stipulated Loss Value of such Aircraft,
computed as of the Stipulated Loss Value Date on or immediately preceding
the date of such sale
47
together with interest, if any, on the amount of such deficiency, at the
Past Due Rate, from the date of such sale to the date of actual payment
of such amount; and/or
(e) Lessor may rescind, terminate or cancel this Lease Agreement as
to the Aircraft, and/or may exercise any other right or remedy which may
be available to it under applicable law or proceed by appropriate court
action to enforce the terms hereof or to recover damages for breach
hereof.
For the purposes of paragraph (c) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession under no
compulsion to sell, as the case may be, in each case based upon the actual
condition and location of the Aircraft, which value shall be determined by
mutual agreement or, in the absence of mutual written agreement, pursuant to
an appraisal prepared and delivered by a nationally recognized firm of
independent aircraft appraisers nominated by Lessor, and Lessor shall
immediately notify Lessee of such nomination. Unless Lessee shall have
objected in writing within ten days after its receipt of Lessor's notice,
Lessor's nomination shall be conclusive and binding. If Lessee shall object,
however, Lessor and Lessee shall endeavor, within ten days after such
objection is made, to select a mutually acceptable appraiser; provided that,
if Lessee shall not so endeavor to make such selection, Lessor's nomination
referred to in the preceding sentence hereof shall be conclusive and binding.
If Lessor and Lessee fail to reach agreement (except for the reason referred
to in the proviso in the preceding sentence), or if any appraiser selected
fails to act for any reason, then the question shall be determined by an
appraisal (applying the definitions of "fair market rental value" and "fair
market sales value" as set forth above based upon the actual condition of the
Aircraft) mutually agreed to by two recognized independent aircraft
appraisers, one of which appraisers shall be chosen by Lessor and one by
Lessee within five Business Days after Lessor or Lessee shall have received
written notice from the other party of a demand that such an appraisal be
made, which notice shall specify the appraiser chosen by the party giving the
notice or, if such appraisers cannot agree on the amount of such appraisal
within twenty Business Days after the end of such five-day period, each shall
render its own appraisal and shall by mutual consent choose another appraiser
within five Business Days after the end of such twenty-day period. If, within
such five-day period, such two appraisers fail to appoint a third appraiser,
then either Lessor or Lessee, on behalf of both, may request such appointment
by the then President of the Association of the Bar of the City of New York
(or any successor organization thereto) or, in his absence, failure, refusal
or inability to act, then either Lessor or Lessee may apply to the American
Arbitration Association (or any successor organization thereto) in New York,
New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the appraisals
given by the other two appraisers. If the determination of one appraiser is
more disparate from the average of all three determinations than each of the
other two determinations, then the determination of such appraiser shall be
excluded, the remaining two determinations shall be averaged and such average
shall be final and binding upon the parties hereto. If no determination is
more disparate from the average of all three determinations than each of the
other determinations, then such average shall be final
48
and binding upon the parties thereto. The cost of such appraisal or
appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above and without duplication of amounts payable hereunder, for any and all
unpaid Rent due hereunder before, after or during the exercise of any of the
foregoing remedies and for all reasonable legal fees and other costs and
expenses (including fees of the appraisers hereinabove referred to) incurred
by Lessor, the Indenture Trustee, the Loan Participants and the Owner
Participant in connection with the return of the Airframe or any Engine in
accordance with the terms of Section 5 or in placing such Airframe or Engine
in the condition and airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor (or the Indenture Trustee, any Loan Participant or the
Owner Participant) or Lessee may bid for and purchase such property. Lessor
agrees to give Lessee at least fifteen (15) days' prior written notice of the
date fixed for any public sale of the Airframe or any Engine or of the date on
or after which will occur the execution of any contract providing for any
private sale and any such public sale shall be conducted in general so as to
afford Lessee (and any Sublessee) a reasonable opportunity to bid. Except as
otherwise expressly provided above, no remedy referred to in this Section 15
is intended to be exclusive, but each shall be cumulative and in addition to
any other remedy referred to above or otherwise available to Lessor at law or
in equity; and the exercise or beginning of exercise by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No waiver by Lessor of any Event
of Default shall in any way be, or be construed to be, a waiver of any future
or subsequent Event of Default.
SECTION 16. Lessee's Cooperation Concerning Certain Matters.
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the
execution and delivery of any amendment to this Lease, to the Trust Indenture
or to the Trust Agreement, Lessee will cause such Lease Supplement, Trust
Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well)
or amendment to be duly filed and recorded, and maintained of record, in
accordance with the applicable laws of the government of registry of the
Aircraft. In addition, Lessee will promptly and duly execute and deliver to
Lessor such further documents and take such further action as Lessor or the
Indenture Trustee may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and to establish
and protect the rights and remedies created or intended to be created in favor
of Lessor and the Indenture Trustee hereunder, including, without limitation,
if requested by Lessor or the Indenture Trustee, at the expense of Lessee, the
execution and delivery of supplements or amendments hereto or to the Trust
Indenture, each in recordable form, subjecting to this Lease and the Trust
Indenture, any airframe or engine substituted for the Airframe or any Engine
pursuant to the terms thereof and the recording or filing of counterparts
thereof, in accordance with the laws of such jurisdictions as Lessor or the
Indenture Trustee may from time to time deem advisable. Lessee agrees to
furnish to Lessor and the Indenture Trustee promptly after execution and
delivery of any supplement and amendment hereto and promptly after the
execution and delivery of any supplement and amendment to the Trust Indenture
(except for any such supplement or amendment which does
49
not require or receive the approval of Lessee pursuant to the Operative
Documents and is not required pursuant to the terms of the Operative
Documents), an opinion of counsel reasonably satisfactory to Lessor and the
Indenture Trustee as to the due recording or filing of such supplement or
amendment. Commencing in ____, on or before April 30 of each year during the
Term, Lessee will deliver to Lessor and the Indenture Trustee a certificate of
Lessee, signed by the President, a Vice President, the Treasurer or the Chief
Financial Officer of Lessee to the effect that the signer is familiar with or
has reviewed the relevant terms of this Lease and the signer does not have
actual knowledge of the existence, as of the date of such certificate, of any
condition or event which constitutes a Default or an Event of Default. Lessee
agrees that if the Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, Treasurer or an Assistant Treasurer of Lessee has actual
knowledge of the existence of a Default, then Lessee shall promptly give to
Lessor, the Owner Participant and the Indenture Trustee notice thereof and
such other information relating thereto as Lessor, the Owner Participant or
the Indenture Trustee may reasonably request. Lessee agrees that if an officer
of Lessee has knowledge of the existence of an Event of Default, Lessee shall
promptly give to Lessor and the Indenture Trustee notice thereof and such
other information relating thereto as Lessor or the Indenture Trustee may
reasonably request. Lessee will deliver to Lessor, the Owner Participant and
the Indenture Trustee (i) within sixty (60) days after the end of each of the
first three quarterly periods of each fiscal year of the Guarantor, the
publicly filed Form 10Q report of the Guarantor; and (ii) within one hundred
twenty (120) days after the close of such fiscal year, the publicly filed
annual report and Form 10K report of the Guarantor.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be by telecopier or other telecommunication means
(with such telecopy or other telecommunication means to be confirmed in
writing), or if such notice is impracticable, by registered, first-class
airmail, with postage prepaid, or by personal delivery of written notice and
any such notice shall become effective when received, addressed:
(i) if to Lessee, for U.S. mail at 0000 Xxxx Xxx Xxxxxxx (X0000),
Xxxxx, Xxxxxxxxx 00000-0000, and for overnight courier at 0000 Xxxx Xxx
Xxxxxxx (X0000), Xxxxx, Xxxxxxxxx 00000-0000, Attention: Treasurer
(Telecopy No. (000) 000-0000), or to such other address or telecopy
number as Lessee shall from time to time designate in writing to Lessor,
(ii) if to Lessor, at MAC: U1228-120, 000 Xxxxx Xxxx Xxxxxx, 00xx
Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, Attention: Corporate Trust Services
(Telecopy No. (000) 000-0000), or to such other address or telecopy
number as Lessor shall from time to time designate in writing to Lessee,
and
(iii) if to a Loan Participant, the Indenture Trustee or the Owner
Participant, addressed to such Loan Participant, the Indenture Trustee or
the Owner Participant at such address or telecopy number as such Loan
Participant, the Indenture Trustee or the Owner Participant shall have
furnished by notice to Lessor and to Lessee, and, until an address is so
furnished, addressed to such Loan Participant, the Indenture Trustee or
the Owner Participant at its address or telecopy number set forth in
Schedule I to the Participation Agreement.
50
SECTION 18. No Set-Off, Counterclaim, etc. All Rent shall be paid by
Lessee to Lessor in funds of the type specified in Section 3(f). Lessee's
obligation to pay all Rent payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense or
other right which Lessee may have against Lessor, in its individual capacity
or as Owner Trustee under the Trust Agreement, the Indenture Trustee (in its
individual capacity or as Indenture Trustee), any Loan Participant, the Owner
Participant, or anyone else for any reason whatsoever (whether in connection
with the transactions contemplated hereby or any other transactions),
including, without limitation, any breach by Lessor or the Owner Participant
of their respective warranties, agreements or covenants contained in any of
the Operative Documents, (ii) any defect in the title, registration,
airworthiness, condition, design, operation, or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any interruption or
cessation in or prohibition of the use or possession thereof by Lessee (or any
Sublessee) for any reason whatsoever, including, without limitation, any such
interruption, cessation or prohibition resulting from the act of any
government authority, (iii) any insolvency, bankruptcy, reorganization or
similar case or proceedings by or against Lessee (or any Sublessee) or any
other person, or (iv) any other circumstance, happening, or event whatsoever,
whether or not unforeseen or similar to any of the foregoing. 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 without limitation of the other rights or remedies of
Lessor hereunder to pay to Lessor 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 Lease not been terminated in whole or in part. Lessee
hereby waives, to the extent permitted by applicable law, any and all rights
which it may now have or which at any time hereafter may be conferred upon it,
by statute or otherwise, to terminate, cancel, quit or surrender this Lease
except in accordance with the express terms hereof.
SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
Renewal Options. (1) Fixed Renewal Term. Lessee shall have the right to renew
this Lease for a one year renewal term which shall commence only upon the
expiration of the Basic Term (the "first Fixed Renewal Term"), a one year
renewal term which shall commence only upon the expiration of the first Fixed
Renewal Term (the "second Fixed Renewal Term"), and a one year renewal term
which shall commence only upon the expiration of the second Fixed Renewal Term
(the "third Fixed Renewal Term") (the first Fixed Renewal Term, the second
Fixed Renewal Term and the third Fixed Renewal Term, each a "Fixed Renewal
Term") by delivery to Lessor at least ninety (90) days before the end of the
Basic Term, the first Fixed Renewal Term or the second Fixed Renewal Term, as
the case may be, of a written notice irrevocably electing to renew this Lease
for a Fixed Renewal Term. Basic Rent during any Fixed Renewal Term shall be
payable in an amount and at the times specified in Section 19(a)(4).
(2) Fair Market Renewal Term. At the expiration of the
third Fixed Renewal Term or any Fair Market Renewal Term, Lessee shall have
the right to renew this Lease by delivery to Lessor of a written notice
irrevocably electing to renew this Lease for a renewal term of not less than
one year and not more than three years for a Basic Rent equal to the "fair
market rental value" of the Aircraft for such period (any such renewal term, a
"Fair Market Renewal Term"). Each such right to renew may be exercised by
Lessee delivering to Lessor, at least ninety (90) days prior to the
commencement of such Fair Market Renewal Term, a written notice
51
irrevocably electing to renew this Lease for a Fair Market Renewal Term (which
notice shall also specify the length of the Fair Market Renewal Term).
(3) If no written notice is delivered by Lessee to Lessor pursuant
to Section 19(a)(1) or 19(a)(2) on or before the day specified therefor,
Lessee shall be deemed to have waived any right to renew this Lease.
(4) At the end of the Basic Term or any Renewal Term, if Lessee
has elected to renew this Lease as aforesaid, and provided that there shall
not then have occurred and be continuing a Default of the type referred to in
Section 14(a), 14(b) or 14(e) or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above provided
and a Lease Supplement evidencing such renewal has been executed and filed for
recordation with the Federal Aviation Administration, this Lease shall
continue in full force and effect during the Renewal Term, except that (x)
Lessee shall pay Lessor Basic Rent for the Aircraft during the Renewal Term in
an amount equal to the "fair market rental value" thereof determined in
accordance with Section 19(c), each semi-annual installment of Basic Rent not
to exceed in the case of a Fixed Renewal Term 50% of the average Basic Rent
during the Basic Term (such average being determined as the total of all
payments of Basic Rent during the Basic Term added together and divided by the
number of payments of Basic Rent during the Basic Term), which Basic Rent
shall be payable in semi-annual installments in arrears, each such installment
being due and payable on each Lease Period Date occurring during the Renewal
Term, commencing with the Lease Period Date immediately following the
commencement of the Renewal Term, and (y) the Stipulated Loss Values
applicable during the Renewal Term shall be determined separately for each
Renewal Term by the Owner Participant in good faith to reflect Stipulated Loss
Values determined in accordance with the following sentence. Stipulated Loss
Values during a Renewal Term shall on the date on which such Renewal Term
begins be equal to the fair market sales value of the Aircraft as of such
date, determined in accordance with the provisions of this Section 19(a)(4)
and Section 19(c) hereof, 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
Term, determined in accordance with the provisions of this Section 19(a)(4)
and Section 19(c) hereof.
In determining fair market sales value for purposes of calculating
Stipulated Loss Value for any Renewal Term effect shall be given to the
encumbrance on the Aircraft of any Renewal Term available or in force under
this Section 19.
(b) Purchase Options. Lessee shall have the option, upon at
least ninety (90) days' irrevocable prior written notice to Lessor, to
purchase the Aircraft on the last Business Day of the Basic Term or any
Renewal Term for a purchase price equal to the lesser of (x) the fair market
sales value of the Aircraft or (y) 50% of Lessor's Cost. Upon payment to
Lessor in immediately available funds of the full amount of the purchase price
and payment of any other amounts then due hereunder (including all Rent and
all costs or expenses of the Owner Participant in connection with such
purchase), Lessor will transfer to Lessee, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), all of Lessor's right, title and interest in and to the Aircraft.
52
(c) Valuation. At any time not earlier than three hundred sixty-five
(365) days prior to the date on which Lessee may purchase the Aircraft
pursuant to Section 19(b) hereof or renew this Lease pursuant to Section
19(a)(1) or Section 19(a)(2) hereof, Lessee may deliver to Lessor a revocable
notice of its intent to exercise its renewal option or purchase option. For
all purposes of this Section 19, including the appraisal referred to in this
Section 19(c), in determining "fair market rental value" or "fair market sales
value", the Aircraft shall be valued (i) as if in the condition and otherwise
in compliance with the terms of Section 5 upon a return of the Aircraft to the
United States and as if it had been maintained at all times as required in
accordance with Section 7(a)(I) during periods when no Sublease was in effect,
(ii) on the basis of the value which would obtain in an arm's-length
transaction between an informed and willing buyer-user or lessee (other than a
lessee or an Affiliate of a lessee currently in possession or a used equipment
scrap dealer) under no compulsion to buy or lease and an informed and willing
seller or lessor unaffiliated with such buyer-user or lessee and under no
compulsion to sell or lease and disregarding the purchase and renewal options
of the lessee provided in this Lease, and (iii) in the case of such valuation
for determining "fair market rental value", assuming such lessee would have
substantially the same obligations during the Renewal Term as provided
hereunder including without limitation the obligations of Lessee to carry and
maintain the insurance required by Section 11 hereof and to make certain
payments with reference to Stipulated Loss Value during the applicable Renewal
Term. Upon receipt of such notice Lessor and Lessee shall confer in good faith
with a view to reaching agreement on the "fair market rental value" or "fair
market sales value" of the Aircraft. If the parties have not so agreed by two
hundred seventy (270) days prior to the end of the Basic Term or the Renewal
Term in question, then the question shall be determined by an appraisal
mutually agreed to by two recognized independent aircraft appraisers, one of
which appraisers shall be chosen by Lessor and one by Lessee within five
Business Days after Lessor or Lessee shall have received written notice from
the other party of a demand that such an appraisal be made, which notice shall
specify the appraiser chosen by the party giving the notice or, if such
appraisers cannot agree on the amount of such appraisal within twenty Business
Days after the end of such five-day period, each shall render its own
appraisal and shall by mutual consent choose another appraiser within five
Business Days after the end of such twenty-day period. If, within such
five-day period, such two appraisers fail to appoint a third appraiser, then
either Lessor or Lessee, on behalf of both, may request such appointment by
the then President of the Association of the Bar of the City of New York (or
any successor organization thereto) or, in his absence, failure, refusal or
inability to act, then either Lessor or Lessee may apply to the American
Arbitration Association (or any successor organization thereto) in New York,
New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the appraisals
given by the other two appraisers. If the determination of one appraiser is
more disparate from the average of all three determinations than each of the
other two determinations, then the determination of such appraiser shall be
excluded, the remaining two determinations shall be averaged and such average
shall be final and binding upon the parties hereto. If no determination is
more disparate from the average of all three determinations than each of the
other determinations, then such average shall be final and binding upon the
parties thereto. Lessee and Lessor shall share equally all expenses relating
to such appraisal procedure provided if Lessee elects not to renew this
53
Lease or purchase the Aircraft following such appraisal, Lessee shall pay all
expenses of such appraisal.
(d) Special Purchase Option. On the EBO Date, Lessee shall have the
option, upon at least ninety (90) days' irrevocable prior notice to Lessor
and, if any Secured Certificates are then outstanding, the Indenture Trustee,
to purchase the Aircraft on such date for a purchase price equal to [, at
Lessee's option, either (a)] the Special Purchase Price [, or (b) the amount
set forth under the heading "Initial Installment" on Exhibit B-1, which shall
be in an amount at least sufficient to pay in full the outstanding Principal
Amount of, and accrued but unpaid interest on, the Secured Certificates (the
"Initial Installment") (payable on the EBO Date) plus the Remaining
Installments]. In addition, if on such date there shall be any Secured
Certificates outstanding, Lessee shall have the option to assume, pursuant to
Section 8(x) of the Participation Agreement and Section 2.13 of the Trust
Indenture, all of the obligations of Lessor under the Trust Indenture. If such
assumption is made, in lieu of paying the Special Purchase Price on the EBO
Date Lessee shall pay Lessor a purchase price equal to (I) [(x) in the event
Lessee has elected to pay the Special Purchase Price,] the Special Purchase
Price [or (y) in the event Lessee has elected to pay the Initial Installment
and the Remaining Installments, the Initial Installment] minus [in either
event] (II) an amount equal to principal of, and accrued but unpaid interest
on, any Secured Certificates that are outstanding on such date. Upon such
payment in full and payment of any other amounts then due hereunder (including
costs or expenses of the Owner Participant in connection with such purchase,
any installments of Basic Rent payable prior to such date and all unpaid
Supplemental Rent due on or prior to such date), [and, in the event that
Lessee has elected to pay the Initial Installment and the Remaining
Installments, after Lessee shall have provided Lessor with its undertaking to
pay the amounts due on the dates set forth under the heading "Remaining
Installments" on Exhibit B-1 (the "Remaining Installments"),] Lessor will
transfer to Lessee, without recourse or warranty (except as to the absence of
Lessor Liens, including for this purpose Liens which would be Lessor Liens but
for the proviso in the definition of Lessor Liens), all of Lessor's right,
title and interest in and to the Aircraft and under the Trust Indenture and,
unless there shall be any Secured Certificates outstanding after such payment,
exercise such rights as it has to cause the Aircraft to be released from the
Lien of the Trust Indenture [; provided, however, that in the event that
Lessee has elected to pay the Initial Installment and the Remaining
Installments, Lessor shall retain a Lien on the Aircraft until the Remaining
Installments, together with interest thereon at the Past Due Rate for any
period from the date due to the date paid, are paid in full, which Lien shall
be evidenced by this Lease, which after the date Lessor shall have transferred
title to the Aircraft to Lessee shall be deemed terminated as a true lease and
shall continue as a lease intended for security, mutatis mutandis, to secure
the payment when due of the Remaining Installments -- provision may be
utilized only if EBO Date occurs on or after maturity of Secured Certificates
and satisfaction and discharge of the Trust Indenture].
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates. In order to secure the indebtedness evidenced by the Secured
Certificates, Lessor has agreed in the Trust Indenture, among other things, to
assign to the Indenture Trustee this Lease, the Lease Supplements and any
amendments to this Lease and to mortgage its interest in the Aircraft in favor
of the Indenture Trustee, subject to the reservations and conditions therein
set forth. To the extent, if any, that this Lease, the Lease Supplements and
any amendments to this Lease constitute chattel paper (as such term is defined
in the Uniform Commercial Code as
54
in effect in any applicable jurisdiction), no security interest in this Lease,
the Lease Supplements and any amendments to this Lease may be created through
the transfer or possession of any counterpart other than the original
counterpart, which shall be identified as the counterpart containing the
receipt therefor executed by the Indenture Trustee on the signature page
thereof. 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. Subject to Section 3(f) hereof, Lessee agrees to pay directly
to the Indenture Trustee (or, after receipt by Lessee of notice from the
Indenture Trustee of the discharge of the Trust Indenture, to Lessor), all
amounts of Rent due or to become due hereunder and assigned to the Indenture
Trustee and Lessee agrees that the Indenture Trustee'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
clauses (i) through (iv) of Section 18 hereof. Notwithstanding the foregoing
assignment of this Lease, the obligations of Lessor to Lessee to perform the
terms and conditions of this Lease shall remain in full force and effect.
SECTION 21. Lessor's Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, then (but in
each case, except in the case of failure to pay Rent or in the case of failure
to maintain insurance as required hereunder, no earlier than the fifteenth day
after the occurrence of such failure, whether or not it shall yet constitute
an Event of Default hereunder) Lessor may itself make such payment or perform
or comply with such agreement but shall not be obligated hereunder to do so,
and the amount of such payment and the amount of the reasonable expenses of
Lessor 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 Past Due Rate, shall be deemed Supplemental Rent, payable by
Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
Limited. (a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee at a time when there is not
continuing an Event of Default shall, until paid to Lessee, be invested by
Lessor or, if the Trust Indenture shall not have been discharged, by the
Indenture Trustee, as the case may be, as Lessee may from time to time direct
in writing (and in absence of a written direction by Lessee, there shall be no
obligation to invest such moneys) in (i) direct obligations of the United
States of America and agencies guaranteed by the United States government
having a final maturity of ninety (90) days or less from date of purchase
thereof; (ii) certificates of deposit issued by, bankers' acceptances of, or
time deposits with, any bank, trust company or national banking association
incorporated under the laws of the United States of America or one of the
states thereof having combined capital and surplus and retained earnings as of
its last report of condition of at least $500,000,000 and having a rating of
Aa or better by Xxxxx'x Investors Service, Inc. ("Moody's") or AA or better by
Standard & Poor's Ratings Services, a division of XxXxxx-Xxxx Companies, Inc.
("S&P") and having a final maturity of ninety (90) days or less from date of
purchase thereof; and (iii) commercial paper of any holding company of a bank,
trust company or national banking association described in (ii) and commercial
paper of any corporation or finance company incorporated or doing business
under the laws of the United States of America or any state thereof having a
rating assigned to such commercial paper of A1 by S&P or P1 by Moody's and
having a final maturity of ninety (90) days or less from the date of purchase
thereof; provided, however, that the aggregate amount
55
at any one time so invested in certificates of deposit issued by any one bank
shall not be in excess of 5% of such bank's capital and surplus. Any of the
investments permitted hereunder may be made through or with, as applicable,
the entity acting as Indenture Trustee or its Affiliates. There shall be
promptly remitted to Lessee or its order (but no more frequently than monthly)
any gain (including interest received) realized as a result of any such
investment (net of any fees, commissions and other expenses, if any, incurred
in connection with such investment) unless an Event of Default shall have
occurred and be continuing. Lessee shall be responsible for any net loss
realized as a result of any such investment and shall reimburse Lessor (or the
Indenture Trustee, as the case may be) therefor on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under
the Trust Agreement, and the institution acting as Lessor shall not be liable
in its individual capacity for any breach thereof except for its gross
negligence or willful misconduct or for breach of its covenants,
representations and warranties contained herein, to the extent covenanted or
made in its individual capacity.
SECTION 23. Service of Process. Lessor and Lessee each hereby
irrevocably submits itself to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York and to the
non-exclusive jurisdiction of the Supreme Court of the State of New York, New
York County, for the purposes of any suit, action or other proceeding arising
out of this Lease, the subject matter hereof or any of the transactions
contemplated hereby brought by Lessor, Lessee, the Indenture Trustee, the Loan
Participants or the Owner Participant or their successors or assigns.
SECTION 24. Miscellaneous. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No term or
provision of this Lease may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Lessor, Lessee and any
assignee of Lessor's rights hereunder. This Lease shall constitute an
agreement of lease, and nothing contained herein shall be construed as
conveying to Lessee any right, title or interest in the Aircraft except as a
lessee only. Neither Lessee nor any affiliate of Lessee will file any tax
returns in a manner inconsistent with the foregoing fact or with Lessor's
ownership of the Aircraft. The section and paragraph headings in this Lease
and the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. This Lease 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.
56
SECTION 25. Successor Trustee. Lessee agrees that in the case of the
appointment of any successor Owner Trustee pursuant to the terms of the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for
all purposes hereof without the necessity of any consent or approval by Lessee
(subject to Section 10 of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor Owner Trustees pursuant to
the Trust Agreement, but such right may be exercised repeatedly as long as
this Lease shall be in effect.
SECTION 26. Covenant of Quiet Enjoyment. So long as no Event of
Default shall have occurred and be continuing and notwithstanding any default
by Lessor, the Owner Participant or the Indenture Trustee under the
Participation Agreement, the Trust Agreement or the Trust Indenture, Lessor
shall not interfere with Lessee's (or any Sublessee's) continued possession,
use and operation of, and quiet enjoyment of, the Aircraft or Lessee's rights,
benefits and obligations pursuant to the Overall Transaction during the Term
of this Lease, and this Lease shall not be terminated except as expressly
provided herein.
57
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed as of the day and year first above written.
XXXXX FARGO BANK
NORTHWEST, NATIONAL
ASSOCIATION, not in its
individual capacity,
except as expressly
provided herein, but
solely as Owner Trustee,
Lessor
By: _______________________________
Name:
Title:
NORTHWEST AIRLINES, INC.,
Lessee
By: ______________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on the _____ day of [____________]
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
By: _____________________________
Name:
Title:
Signature Page
EXHIBIT A
to
Lease Agreement
[NW ____ _]
LEASE SUPPLEMENT No.
[NW ____ _]
LEASE SUPPLEMENT No. __, dated [_________] between XXXXX FARGO BANK
NORTHWEST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement [NW ____ _], dated as of
[_____________] between _____________________, as Owner Participant, and such
Owner Trustee (such Owner Trustee, in its capacity as such Owner Trustee,
being herein called "Lessor"), and Northwest Airlines, Inc. ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement [NW ____ _], dated as of [___________], relating to one [Airbus
A330-323] [Boeing 757-351] 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 from time to time of Lease
Supplements 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.
1The Lease relates to the Airframe and Engines described below, and
a counterpart of the Lease is attached hereto, and made a part hereof, and
this Lease Supplement, together with such attachment, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document.
2The Lease Agreement relates to the Airframe and Engines described
below, and a counterpart of the Lease Agreement, attached and made a part of
Lease Supplement No. 1 dated [______________] to the Lease Agreement, has been
recorded by the Federal Aviation Administration on [_____________], as one
document and assigned Conveyance No. __.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease the following
described [Airbus A330-323] [Boeing 757-351] aircraft (the "Aircraft"), which
Aircraft as of the date hereof consists of the following components:
(i) Airframe: FAA Registration No. ______; manufacturer's serial no.
_____; and
_________________
1 This language for Lease Supplement No. 1.
2 This language for other Lease Supplements.
EXHIBIT A - PAGE 1
(ii) Engines: two (2) [Xxxxx & Xxxxxxx Model PW4168A] [Xxxxx &
Whitney Model PW2040] 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).
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft shall commence on the
Delivery Date and end on [_______________].
3. Lessee hereby confirms its agreement to pay Lessor Basic Rent for
the Aircraft throughout the Term therefor in accordance with Section 3 of the
Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease as being airworthy, in good
working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that
nothing contained herein or in the Lease shall in any way diminish or
otherwise affect any right Lessee or Lessor may have with respect to the
Aircraft against [AVSA, S.A.R.L.] [The Boeing Company], or any subcontractor
or supplier of [AVSA, S.A.R.L.] [The Boeing Company], under the Purchase
Agreement or otherwise.
5. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
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. 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 jurisdiction), no security interest in this Lease
Supplement may be created through the transfer or possession of any
counterpart other than the original counterpart, which shall be identified as
the counterpart containing the receipt therefor executed by the Indenture
Trustee on the signature page hereof.
EXHIBIT A - PAGE 2
In Witness Whereof, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION,
not in its Individual Capacity,
but solely as Owner Trustee,
Lessor
By: ____________________________
Name:
Title:
Northwest Airlines, Inc.,
Lessee
By: ____________________________
Name:
Title:
3Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ____ day of [--------------]
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
By: ___________________________
Name:
Title:
_________________
3 This language contained in the original counterpart only.
EXHIBIT A - PAGE 3
EXHIBIT B-1
to
Lease Agreement
[NW ____ _]
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent Payments:
Basic Rent Payable (Percentage of
Lease Period Date Lessor's Cost)
----------------- --------------
EXHIBIT B-1 - PAGE 1
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent Payable
Lease Period Date (Percentage of Lessor's Cost)
----------------- -----------------------------
EXHIBIT B-1 - PAGE 2
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
Lessor's Cost for the Aircraft: $[___________]
Special Purchase Price: [_____________]% of Lessor's Cost (comprised of an
early buy-out amount of [___]% of Lessor's Cost plus the Cumulative Basic Rent
Allocation of [___]% of Lessor's Cost minus Cumulative Basic Rent Payments of
[___]% of Lessor's Cost) on [______________].
[Initial Installment: [__]% of Lessor's Cost on [ ].
Remaining Installments: Date Amount
---- ------
April 15, [ ] [__]% of Lessor's Cost
June 15, [ ] [__]% of Lessor's Cost
September 15, [ ] [__]% of Lessor's Cost
December 15, [ ] [__]% of Lessor's Cost]
EXHIBIT B-1 - PAGE 3
EXHIBIT B-2
to
Lease Agreement
[NW ____ _]
BASIC RENT ALLOCATION SCHEDULE
------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent Allocated
Lease Period (Percentage of Lessor's Cost)
---------------- -----------------------------
From To
EXHIBIT B-2 - PAGE 1
EXHIBIT C
to
Lease Agreement
[NW ____ _]
STIPULATED LOSS VALUE SCHEDULE
------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ---------------- --------------- --------------- -----------------
EXHIBIT C - PAGE 1
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ------------------ --------------- --------------- -----------------
EXHIBIT C - PAGE 2
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ----------------- --------------- --------------- -----------------
EXHIBIT C - PAGE 3
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ----------------- --------------- --------------- -----------------
EXHIBIT C - PAGE 4
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ----------------- --------------- --------------- -----------------
EXHIBIT C - PAGE 5
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ----------------- --------------- --------------- -----------------
EXHIBIT C - PAGE 6
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Loss Stipulated Loss
Value Percentage Cumulative Cumulative Cash Value Percentage
Stipulated Before Basic Rent Allocated Basic Basic Rent to After Basic Rent
Loss Value Date Adjustments Rent to Date Date Adjustments
--------------- ----------------- --------------- --------------- -----------------
EXHIBIT C - PAGE 7
------------------
EXHIBIT D
to
Lease Agreement
[NW ____ _]
TERMINATION VALUE SCHEDULE
--------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Termination Value Termination
Percentage Before Cumulative Cumulative Cash Value Percentage
Basic Rent Allocated Basic Basic Rent to After Basic Rent
Termination Date Adjustments Rent to Date Date Adjustments
--------------- ----------------- --------------- --------------- -----------------
EXHIBIT D - PAGE 1
EXHIBIT E
to
Lease Agreement
[NW ____ _]
RENT RECALCULATION VERIFICATION
-------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
1. Any recalculation of Basic Rent percentages or allocations, Stipulated
Loss Value percentages, Termination Value percentages, [the Initial
Installment, the Remaining Installments] and the Special Purchase Price
pursuant to the Lease shall be determined by the Owner Participant, and shall
maintain the Owner Participant's Net Economic Return except as assumptions
have been modified pursuant to Section 3 of the Lease or pursuant to the Tax
Indemnity Agreement or the Participation Agreement, as the case may be;
provided, however, that Lessee may request (A) Lessee's independent public
accountants to verify such calculations but without any requirement that the
Owner Participant disclose to such persons the methodology and assumptions and
(B) if Lessee believes that such calculations by the Owner Participant are in
error then a nationally recognized firm of accountants selected by Lessee and
reasonably acceptable to the Owner Participant shall be permitted to verify
such calculations and the Owner Participant will make available to such firm
(subject to the execution by such firm of a confidentiality agreement
reasonably acceptable to the Owner Participant) the methodology and
assumptions and any changes made therein pursuant to Section 3 of the Lease.
In the event of a verification under clause (B) of the first sentence of this
paragraph 1 the determination by such firm of accountants shall be final.
Lessee will pay the reasonable costs and expenses of the verification under
clause (B) of the first sentence of this paragraph 1 unless an error adverse
to Lessee is established by such firm, and if as a result of such verification
process the Basic Rent is adjusted and such adjustment causes the Net Present
Value of Rents to decline by [_] or more basis points (in which event the
Owner Participant shall pay the reasonable costs and expenses of such
verification process). Such recalculated Basic Rent percentages or
allocations, Stipulated Loss Value percentages, Termination Value percentages
[, Initial Installment, Remaining Installments] and Special Purchase Price
shall be set forth in a Lease Supplement or an amendment to the Lease.
2. "Net Economic Return" means the Owner Participant's net after-tax
yield and aggregate after-tax cash flow, in each case computed from the
Delivery Date through the EBO Date and through [___________________],
utilizing the multiple investment sinking fund method of analysis, computed on
the basis of the same methodology and assumptions as were utilized by the
Owner Participant in determining Basic Rent percentages or allocations, the
Special Purchase Price, [the Initial Installment, the Remaining Installments,]
Stipulated Loss Value and Termination Value percentages as of the Delivery
Date.
EXHIBIT E - PAGE 1
EXHIBIT F
to
Lease Agreement
[NW ____ _]
SCHEDULE OF DOMICILES OF PERMITTED SUBLESSEES
---------------------------------------------
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Egypt Portugal
Finland Republic of China (Taiwan)*
France Singapore
Germany South Africa
Greece South Korea
Hungary Spain
Iceland Sweden
India Switzerland
Indonesia Thailand
Ireland Trinidad and Tobago
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
---------
* So long as on the date of entering into the proposed sublease such country
and the United States have diplomatic relations at least as good as those in
effect on the Delivery Date.
EXHIBIT F - PAGE 1
EXHIBIT G
to
Lease Agreement
[NW ____ _]
RETURN CONDITIONS
-----------------
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to
contain confidential information.
Unless purchased by Lessee pursuant to Section 19 of the Lease, at the
time of return of the Airframe upon the expiration of the Lease at the end of
the Basic Term or any Renewal Term or upon the termination of the Lease
pursuant to Section 9(c) or 15 of the Lease: (i) in the event that Lessee (or
any Sublessee then in possession of the Aircraft) shall not then be using a
continuous maintenance program with respect to the Airframe, Lessee agrees
that during the period of operation of the Aircraft immediately prior to such
return (A) Lessee or such Sublessee, as the case may be, shall have been using
a block overhaul program with respect to the Airframe which shall have been
approved by all necessary governmental approvals of the country under the laws
of which the Aircraft shall then have been registered and (B) the Airframe
shall have remaining until the next scheduled block overhaul at least 25% of
the allowable hours between block overhauls permitted under the block overhaul
program then used by Lessee or such Sublessee, (ii) in the event that Lessee
(or any Sublessee then in possession of the Aircraft) during the period of
operation of the Aircraft immediately prior to such return shall not have been
using an on-condition maintenance program with respect to the Engines or
engines, Lessee agrees that the average number of hours or cycles of operation
(whichever shall be applicable under the maintenance program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 25% of the hours or
cycles (whichever shall be applicable) between engine refurbishment allowed
under the maintenance program then in use with respect to such Engines or
engines which shall have been approved by all necessary governmental approvals
of the country under the laws of which the Aircraft shall have then been
registered, (iii) the Aircraft shall have all Lessee's and any Sublessee's
exterior markings removed or painted over and the areas where such markings
were removed or painted over refurbished as necessary to blend with adjacent
areas, (iv) the Aircraft shall have no outstanding airworthiness directives
issued by the FAA requiring terminating action by the date of return, and (v)
the Aircraft shall be in Lessee's or such Sublessee's passenger configuration
and the interior of the Airframe shall be clean in accordance with Lessee's
customary standards for a "between flights" cleaning. In the event the FAA
shall issue any directive which would require improvements to the Aircraft in
order for the airworthiness certificate of the Aircraft to be maintained in
good standing, Lessee shall not apply for an extension of the date of
compliance with the directive as to the Aircraft to a date after the date of
return of the Aircraft pursuant to Section 5 of the Lease, unless it shall
previously or concurrently have applied for such an extension with respect to
all [Airbus A330-300] [Boeing 757-300] aircraft in its fleet affected by such
directive.
If clause (i)(B) of the first sentence of the preceding paragraph shall
be applicable but the Airframe does not meet the conditions specified in said
clause (i)(B), Lessee shall pay or
EXHIBIT G - PAGE 1
cause to be paid to Lessor a Dollar amount computed by multiplying (I) 120% of
the average direct cost to Lessee (based upon the actual direct cost to Lessee
for similar aircraft in the fleet of Lessee) during the preceding 12 months of
performing an airframe block overhaul of the type referred to in such clause
(i) by (II) a fraction of which (x) the numerator shall be the excess of 25%
of hours of operation allowable between such block overhauls over the actual
number of hours of operation remaining on the Airframe to the next such block
overhaul and (y) the denominator shall be the number of hours of operation
allowable between such block overhauls in accordance with such block overhaul
program.
If clause (ii) of the first sentence of the second preceding paragraph
shall be applicable but the Engines or engines do not meet the conditions
specified in said clause (ii), Lessee shall pay or cause to be paid to Lessor
a Dollar amount computed by multiplying (aa) two by (bb) 120% of the average
direct cost to Lessee (based upon the actual direct cost to Lessee for similar
aircraft in the fleet of Lessee) during the preceding 12 months of performing
for an engine of the same model as the Engines the scheduled engine
refurbishment under the maintenance program then used by Lessee or any
Sublessee for engines of the same model as the Engines by (cc) a fraction of
which (x) the numerator shall be the excess of 25% of the hours or cycles of
operation (whichever is applicable) between engine refurbishment allowable for
an engine under the maintenance program then in use with respect to such
Engines or engines over the actual average number of hours or cycles of
operation on such Engines or engines remaining until the next such scheduled
engine refurbishment and (y) the denominator shall be the number of hours or
cycles allowable between such scheduled engine refurbishment.
EXHIBIT G - PAGE 2
