Exhibit 10.45(a)
FIRST AMENDMENT
TO FUNDING AGREEMENT
FIRST AMENDMENT, dated as of June 11, 2002 (this "AMENDMENT"), to the
Funding Agreement, dated as of December 27, 2001 (the "FUNDING AGREEMENT"),
between CHAUTAUQUA AIRLINES, INC., a New York corporation ("CHAUTAUQUA"), and
AGENCIA ESPECIAL DE FINANCIAMENTO INDUSTRIAL, a Brazilian Federal public company
with its main offices in the City of Rio de Janeiro, at Xxxxxxx Xxxxxxxxx xx
Xxxxx, Xx. 000, registered in the General Register of Taxpayers under the number
33.660.564/0001-00 (the "LENDER" or "FINAME"), a wholly owned subsidiary of
Banco Nacional de Desenvolvimento Economico e Social, a Brazilian Federal public
company with its principal place of business in Brasilia, Distrito Federal,
Federative Republic of Brazil, and main offices in the City of Rio de Janeiro,
at Xxxxxxx Xxxxxxxxx xx Xxxxx, Xx. 000, registered in the General Register of
Taxpayers under the number 33.657.248/0001-89 ("BNDES").
W I T N E S S E T H:
WHEREAS, Chautauqua and FINAME are parties to the Funding Agreement and
desire to make certain amendments thereto; and
WHEREAS, Chautauqua and FINAME have agreed to amend the Funding
Agreement subject to the terms and conditions contained in this Amendment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. Unless otherwise defined herein, terms which are used
herein shall have the meanings assigned thereto in the Funding Agreement.
2. AMENDMENTS TO THE WHEREAS CLAUSES. (a) The first WHEREAS clause of
the Funding Agreement is hereby amended by (i) inserting after "AE3007A1P
engines" the following: "and of EMB-145 model EMB-135 KL jet aircraft, each
equipped with two Rolls Xxxxx Xxxxxxx AE3007A1/3 engines" and (ii) deleting the
words "including the 4 aircraft listed in Schedule II hereto" and substituting
in lieu thereof the words "including the 15 aircraft listed in Schedule II
hereto, 4 of which were financed with Direct Loans on January 17, 2002 and 7 of
which are being financed on June 11, 2002."
(b) The fourth WHEREAS clause of the Funding Agreement is hereby
amended to delete "Aircraft" and substitute in lieu thereof the following:
"first eleven Aircraft listed on Schedule II hereto".
(c) The fifth WHEREAS clause of the Funding Agreement is hereby amended
by deleting the words "export of the four (4) Aircraft" and substituting in lieu
thereof the words "export of the fifteen (15) Aircraft".
3. AMENDMENTS TO THE DEFINITIONS. (a) The definition of "Bridge
Aircraft" is hereby amended to read as follows: "the 11 Aircraft first listed on
Schedule II."
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Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. The omitted
materials have been filed separately with the Securities and Exchange
Commission.
(b) The definition of "Brazilian Lender" is hereby amended by deleting
the words "under 10.1.3" and substituting in lieu thereof the words "under
Section 10.1.3(b)(1)", and by deleting the words "and Section 9.5(b)" and
substituting in lieu thereof the words "and Section 9.5(b)(1)".
(c) The definition of the "Relevant Interest Rate" is hereby amended to
read as follows: "for the 11 Aircraft delivered on or before June 11, 2002, the
"Debt Rate" as set forth in the Relevant Loan Agreements, and for the 4 other
Aircraft "Relevant CIRR" for the date of the relevant closing."
(d) The definition of the term "Relevant CIRR" is hereby added to
Section 1.1 of the Funding Agreement, in alphabetical order, to read as follows:
[*]
(e) The definition of "Relevant Payment Date" is hereby amended to
insert after [*] the following: [*]
(f) The definition of "Termination Date" is hereby amended to read as
follows:
""TERMINATION DATE": the earlier of (i) December 31, 2002 and (ii) six
months following the Scheduled Delivery Date as of the date of this
Agreement of the last Aircraft which Chautauqua has the right to
purchase pursuant to the Purchase Agreement and to finance hereunder;
PROVIDED that the Termination Date may be extended, at the option of
Chautauqua, for up to the number of days during which a strike was in
effect at the Manufacturer resulting in a delay of delivery of Aircraft
to Chautauqua, at the written request of Chautauqua to the Lender."
4. AMENDMENT TO SECTION 2.2. Section 2.2(a) of the Funding Agreement is
hereby amended (i) by inserting at the end of the first sentence thereof the
following: "after [*], which fee shall begin to accrue on [*], (ii) by changing
the date "[*]" to read "[*]" and (iii) by changing the date "[*]" in the second
sentence thereof to read "[*]" Section 2.2(b) of the Funding Agreement is hereby
amended to add the phrase "not delivered on or before [*] following the words
"4 (or fewer) Aircraft" in clause (i) of Section 2.2(b).
5. CONCERNING SECTION 2.3(D). No Planning Notice shall be required for
any Bridge Aircraft or Aircraft N379SK if financed prior to June 30, 2002.
6. CONCERNING SECTION 2.4(B). The second sentence of Section 2.4(b) is
not applicable to a Relevant Interest Rate based upon Relevant CIRR.
7. AMENDMENT TO SECTION 2.4(E). The first sentence of Section 2.4(e) is
hereby amended by adding the following thereto: ", PROVIDED that with respect to
the last 4 Aircraft listed on Schedule II, the Lender agrees to cooperate in
good faith with a Borrower request to utilize a Leveraged Lease Loan structure
on the applicable closing date (in which no affiliate of Chautauqua is the Owner
Participant (as defined in the Relevant Participation Agreement) thereunder)
pursuant to a restructuring of the documentation in the same manner as is
contemplated in Section 8.18 for a restructuring after the applicable closing
date."
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8. AMENDMENT TO SECTION 2.6. Section 2.6 is hereby amended to delete
"on the date indicated in Schedule II" and by replacing the words "subject to"
with the words "in accordance with".
[*]
10. AMENDMENT TO SECTION 5.3. Section 5.3 is hereby amended by adding
the following sentence at the end of this Section: "Lender shall not be
obligated to make a Direct Loan to finance any Aircraft after June 11, 2002 if
it shall have given written notice to Chautauqua before June 19, 2002 that the
Delta Connection Agreement, dated and effective the 7th day of June, 2002,
between Delta Air Lines, Inc., is not satisfactory to Lender."
11. Amendment to Section 6. Section 6 is hereby amended by adding a new
paragraph 6(d) which reads as follows:
"(d) Confirmatory Filings. Chautauqua agrees to execute and deliver
such further documents of termination or release including any
confirmatory filings of such terminations or releases with respect to
any Bridge Loans as may reasonably be requested by FINAME."
12. AMENDMENT TO SECTION 8.7(C). Section 8.7(c) of the Funding
Agreement is hereby amended by deleting the words "and the Additional Commitment
Period" in the first sentence of Section 8.7(c).
13. AMENDMENT TO SCHEDULE II. Schedule II to the Funding Agreement is
hereby deleted and replaced in its entirety with Schedule II to the Funding
Agreement attached hereto as Exhibit 1.
14. AMENDMENT TO SECTION 8.15. Section 8.15 is hereby amended by
deleting the words "(x) to the Manufacturer" and substituting in lieu thereof
the words "(x) to the Manufacturer or, in the case of any Loan Documents or
closing documents delivered thereunder relating to the last eleven Aircraft
listed on Schedule II, to [*] and its affiliates, exclusive of Code-Share
Agreements with unaffiliated parties."
15. AMENDMENT TO SECTION 8.18. Section 8.18 is hereby amended by
deleting the words "and D-1" and substituting in lieu thereof the words "D-1,
and N."
16. AMENDMENTS TO EXHIBITS. Exhibits X, X-0, X-0, X-0 and N to the
Funding Agreement are hereby deleted in their entirety and replaced by the
exhibits attached hereto as Exhibits 2, 3, 4, 5 and 6 respectively.
17. EFFECTIVENESS. This Amendment shall become effective on the date
hereof.
18. NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Funding Agreement are
and shall remain in full force and effect.
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19. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
20. INCORPORATION. This Amendment shall be construed as supplemental to
the Funding Agreement and shall form a part of it, and the Funding Agreement is
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
21. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
CHAUTAUQUA AIRLINES, INC.
By:___________________________
Name:
Title:
AGENCIA ESPECIAL DE FINANCIAMENTO
INDUSTRIAL - FINAME
By:___________________________
Name:
Title:
WITNESSES:
____________________
____________________
5
Exhibit 1
SCHEDULE II
TO FUNDING AGREEMENT
DELIVERY DATES OF AIRCRAFT
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
FAA
AIRCRAFT REG.
TYPE XXXX MSN ENGINE 1 ENGINE 2 BORROWING DATE
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145LR N282SK 145409 311737 311740 1/17/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145LR N283SK 145424 311771 311761 1/17/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145LR N284SK 145427 311772 311768 1/17/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145LR N285SK 145435 311787 311782 1/17/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N372SK 145538 312019 312020 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N373SK 145543 312026 312021 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N374SK 145544 312032 312031 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N375SK 145569 312062 312065 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N376SK 145578 312079 312090 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N377SK 145579 312091 312100 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N378SK 145593 312048 312049 6/11/02
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N379SK 145606 312151* 312152* N/A
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N380SK 145613 ** ** N/A
---------------------------------------------------------------------------------------------------------------
* Expected ** To be assigned
EMB-145 model EMB-135 KL N381SK 145619 ** ** N/A
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
EMB-145 model EMB-135 KL N382SK 145624 ** ** N/A
----------------------------- ----------------- ---------------- --------------- -------------- ---------------
* Expected ** To be assigned
EXHIBIT 3
CONFIDENTIAL TREATMENT REQUESTED
PURSUANT TO RULE 406
EXHIBIT B-1
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TO FUNDING AGREEMENT
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[FORM OF] RELEVANT LOAN AGREEMENT
(LEVERAGED LEASING LOANS)
(CH-_____)
Dated as of ______, 2001
between
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not
individually except as stated herein and
otherwise solely as Owner Trustee under the
Trust Agreement referred to herein,
as Borrower
and
AGENCIA ESPECIAL DE FINANCIAMENTO INDUSTRIAL - FINAME,
as Lender
* * * * * * * *
One Embraer [EMB-145 model EMB-135 KL] [EMB-145 LR] Aircraft
United States Registration Number [N___]
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933. THE OMITTED
MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Table of Contents
Section 1. Definitions....................................................... 1
Section 2. The Loan. ..................................................... 1
Section 3. Voluntary Termination............................................ 6
Section 4. Events of Default................................................ 6
Section 5. Miscellaneous.................................................... 7
SCHEDULE I -- Debt Rate; Original Principal Amount; Maturity Dates
SCHEDULE II -- Loan Payment Dates and Amounts
EXHIBIT A -- Form of Note
ANNEX A -- Definitions
LOAN AGREEMENT
(CH-_____)
THIS LOAN AGREEMENT (CH-_____) dated as of _____, 2001 (this
"AGREEMENT" or this "LOAN AGREEMENT"), is between XXXXX FARGO BANK NORTHWEST
N.A., a national banking association, not individually ("BANK") except as stated
herein but otherwise solely as Owner Trustee under the Trust Agreement referred
to herein ("BORROWER"), having an office at [_______________ _________], and
AGENCIA ESPECIAL DE FINANCIAMENTO INDUSTRIAL - FINAME, a Brazilian federal
public company registered in the General Register of Taxpayers under the number
33.660.564/0001.00 ("LENDER"), having an office at Xxxxxxx Xxxxxxxxx xx Xxxxx
Xx. 000, 00xx floor, Xxx xx Xxxxxxx, xxxxx xx Xxx xx Xxxxxxx, Xxxxxx.
R E C I T A L S
---------------
WHEREAS, pursuant to that certain Participation Agreement (CH___)
dated as of even date herewith among Borrower, the Owner Participant identified
therein, Chautauqua Airlines, Inc., as Lessee, XX Xxxxxx Chase Bank, as Security
Trustee and Lender, Borrower will purchase one Xxxxxxx [XXX-000 XX][XXX-000
xxxxx XXX-000 KL] aircraft, equipped with two [Rolls Royce] Xxxxxxx [AE3007A1/3]
[AE3007A1P]-series engines (the "AIRCRAFT"); and
WHEREAS, Lender has agreed, on the terms and conditions set forth
herein, to lend Borrower the funds necessary to purchase the Aircraft and
Borrower has agreed to issue the Note to Lender in exchange therefor; and
WHEREAS, simultaneously with the purchase of the Aircraft, Borrower
will lease the Aircraft to Lessee pursuant to a Lease Agreement dated as of even
date herewith; and
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Unless otherwise specified herein or therein, all
capitalized terms used in this Agreement, the Note or any certificate or
other document made or delivered pursuant hereto shall have the meanings set
forth in Annex A hereto.
Section 2. THE LOAN.
2.01 PROCEDURE FOR BORROWING. (a) On the Closing Date, the Lender
shall make the Loan to the Borrower in Dollars in the amount of $[_______]. The
Closing of the Loan shall take place no later than 12:30 P.M., Rio de Janeiro
time, on the Closing Date at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx,
New
York,
New York, or at such other time and place as the parties to the
Participation Agreement shall have agreed in writing.
(b) The Lender shall advance the Loan to the Borrower by
transferring the amount thereof in the Brazilian Currency Equivalent of the Loan
in immediately available funds to the Aircraft Manufacturer at the time and date
aforesaid. Such advance may be made during banking hours in Rio de Janeiro on
the Closing Date; provided that the Lender irrevocably agrees to make such
advance on the Closing Date.
1
2.02 NOTE EVIDENCING THE LOAN.
(a) The Loan shall be evidenced by a Note, substantially in
the form of EXHIBIT A, payable to Lender.
The Note shall have a maturity date equal to the Maturity Date,
shall be delivered in
New York,
New York, and shall provide for the payment of
the principal amounts of the Loan in accordance with the provisions of SECTIONS
2.04, 2.05 and 2.06.
Borrower agrees to record separately the name and address and any
other necessary identifying information of Lender in a register maintained as
part of a book-entry system. Borrower and Lender shall treat the party whose
name is recorded in such register as Lender with all entitlements under this
Loan Agreement.
Notwithstanding anything to the contrary set forth in this Loan
Agreement or the other Operative Agreements, no assignment by Lender of any
rights or obligations under or in respect of the Loan or the Note shall be
effective unless and until Lender shall have complied with the provisions of
Section 5.07(c) of this Agreement.
(b) Subject to the applicable provisions of Sections 9 and 10
of the Participation Agreement, Lender, at its cost and expense (including all
Taxes, if any), may transfer the Note to a new payee or exchange the Note for a
new Note of a different denomination in a principal amount of at least $[*]
(except as may be necessary to evidence the entire outstanding principal amount
of such Note), by surrendering the Note to Borrower upon receipt of a new Note
at the principal office of Borrower, together with a written request from Lender
for the issuance of a new Note specifying the denomination or denominations of
the same, and, in the event of a surrender for registration of transfer, the
name and address of the transferee or transferees.
2.03 REPLACEMENT NOTES
(a) If the Note shall become mutilated, destroyed, lost or
stolen, Borrower shall, upon the written request of the registered holder
thereof, issue, and deliver in replacement thereof, a new Note, payable to such
registered holder in the same principal amount, with the same final maturity
date, bearing the same interest rate and dated the same date as the Note so
mutilated, destroyed, lost or stolen. If the Note being replaced has become
mutilated, such Note shall be surrendered to Borrower. If the Note being
replaced has become destroyed, lost or stolen, Lender shall furnish to Borrower
such indemnity as may be reasonably required by Borrower to save Borrower
harmless from any cost, expense, damage, loss and liability resulting therefrom,
and an affidavit as to the destruction, loss or theft of such Note and of the
ownership thereof.
(b) Subject to Sections 9 and 10 of the Participation
Agreement, upon the issuance of a new Note or new Notes pursuant to this Section
2.03, Borrower may require from the party requesting such new Note or new Notes
payment of a sum sufficient to reimburse Borrower for, or to provide funds for,
the payment of any Tax or other governmental charge in
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connection therewith or any charges and expenses connected with such Tax or
other governmental charge paid or payable by Borrower.
2.04 PRINCIPAL AND INTEREST. The Borrower hereby unconditionally
promises to pay Lender the principal amount of and interest on the Loan as
follows:
(a) Borrower shall make payments of the principal of and
interest on the Loan to the registered holder(s) of the Note in accordance with
the provisions of the Note and Section 2.05 and as set forth in SCHEDULE II. The
Lender is hereby authorized to record on the schedule annexed to and
constituting part of the Note indebtedness of the Borrower resulting from the
Loan from time to time, including the amounts of principal and interest payable
and paid from time to time under this Agreement.
(b) Borrower shall make payments to the registered holder(s)
of the Note of interest on the unpaid principal amounts of the Loan for the
period commencing on the Closing Date through but excluding the date the Loan
shall be paid in full, at the following rates (the "INTEREST RATE") per annum
(computed using a computation base of a 360-day year comprised of twelve 30-day
months):
(1) from and after the Closing Date at the Debt Rate
for the Loan; and
(2) if all or any portion of the principal of or
interest on the Loan or any other amount due from
Borrower to Lender hereunder with respect to the
Loan under the Note or the Security Agreement or
any other Operative Agreement relating to the Loan
shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), to the
extent permitted by applicable law, the amount of
such overdue principal, interest or other amount
shall bear interest at a rate per annum which is
equal to the Default Rate, in each case from the
date of such non-payment until such overdue
principal, interest or other amount is paid in
full (as well after as before judgment). Interest
accruing pursuant to the preceding sentence of
this Section 2.04(b)(2) shall be payable from time
to time on demand.
(c) On the Loan Termination Date, Borrower shall pay the
aggregate amount of principal of the Loan outstanding, all accrued interest
thereon, and all other Liabilities with respect to the Loan then due and
payable, such payments to be applied in the order specified in Section 2.04(d).
(d) Each payment of amounts due on the Note shall be applied
first to the payment of any amount (other than principal and interest) due from
the Borrower to Lender hereunder and to Lender and Security Trustee under the
other Operative Agreements, including [*], in respect of the Note; second to the
payment of accrued and unpaid interest due on the Note;
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and third to the payment of the remaining outstanding principal amount of the
Note then due and payable.
2.05 PREPAYMENT; ACCELERATION.
(a) Except as expressly provided in this SECTION 2.05,
Borrower may not prepay the Note.
(b) On any Loss Payment Date on which the Lessee is required
pursuant to Section 10.1 of the Lease to make payment of Stipulated Loss Value
with respect of the Aircraft, Borrower shall prepay the principal of the Loan
then outstanding together with all accrued and unpaid interest on the Loan and
all other Liabilities with respect to the Loan [*] then due. Any sums payable to
Borrower by the Lessee, any insurer or any other Person with respect to an Event
of Loss (other than Excluded Payments) shall, if received by the Borrower, be
paid over to Security Trustee for application as provided in Section 3 of the
Security Agreement.
(c) If Lessee elects to purchase the Aircraft prior to the end
of the Term pursuant to Section 17 of the Lease, Borrower shall on the date
Lessee so purchases the Aircraft prepay in full the principal of the Loan
outstanding, together with all accrued and unpaid interest on the Loan and all
other Liabilities with respect to the Loan [*] due on such date. Borrower shall
give Lender and Security Trustee a copy of Lessee's notice of Lessee's intent to
terminate the Lease under Section 17 thereof promptly upon receipt thereof from
Lessee (if not provided by Lessee to Lender).
(d) If Lessee determines to terminate the Lease pursuant to
Section 9 of the Lease, Borrower shall, on the date of termination of the Lease
pursuant to such Section 9, prepay in full the principal of the Loan then
outstanding, together with all accrued and unpaid interest on the Loan and all
other Liabilities [*] with respect to the Loan due on such date. Borrower shall
give Lender and Security Trustee a copy of Lessee's notice of Lessee's election
to terminate the Lease under such Section 9 promptly upon receipt thereof from
Lessee (if not provided by Lessee to Lender).
(e) Borrower shall have the right, upon 30 days' revocable
prior notice to Lender and Security Trustee), to prepay the Loan in full at any
time; PROVIDED, that such prepayment with respect to the Loan is of all
principal outstanding on the Loan, and all other Liabilities [*] of, Borrower
with respect to the Loan due on such date.
(f) The Notes and the Loan (i) may be accelerated following
any Loan Event of Default specified in Section 4.01(a) through (f) and (ii) will
automatically accelerate following any Loan Event of Default specified in
Section 4.01(g), as provided in Section 5 of the Security Agreement and, upon
any such acceleration, all principal outstanding on the Loan, all accrued
interest thereon, [*] and all other Liabilities of Borrower under the Operative
Agreements then due, shall become due and payable in full. At any time (1)
following the occurrence and during the continuance of a Loan Event of Default
and (2) prior to the Security Trustee's exercise of its rights under clause (6)
of Section 5.1(c) of the Security Agreement, Borrower shall have the right (x)
to prepay in full, [*] the principal amount then outstanding of
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the Loan, together with all accrued and unpaid interest thereon and all other
Liabilities with respect to the Loan then due or (y) to purchase the Note, for a
purchase price equal to the principal amount then outstanding of the Loan,
together with all accrued and unpaid interest on the Loan and all other
Liabilities with respect to the Loan due on the date of purchase [*]. Upon
receipt of such purchase price, Lender shall sell, assign and transfer to
Borrower (or Owner Participant if so requested by Borrower) all of Lender's
right, title and interest in and to this the Loan Agreement, the Note, the Loan,
the Collateral and the Participation Agreement (except with respect to the
period prior to such purchase), without recourse or warranty except for Lender's
own acts.
(g) [Intentionally omitted].
(h) If Lessee elects to refinance the Loan pursuant to Section
11 of the Participation Agreement, Borrower shall on the Refunding Date prepay
in full the entire principal amount of the Loan then outstanding, together with
all accrued and unpaid interest on the Loan and all other Liabilities [*] with
respect to the Loan outstanding and unpaid on such date.
(i) Notwithstanding any provision hereof or of any other
Operative Agreement to the contrary, Borrower agrees that if on or after the
date of a Securitization (x) it prepays or purchases the Loan pursuant to
Section 2.05(c) or (d) or (h), it shall make an additional payment of make-whole
premium in an amount equal to the deficiency amount paid by the Lessee in
connection with such prepayment contemplated by Section 10.1.3(b)(2), clause
(ii) of the Participation Agreement, and (y) it prepays the Loan pursuant to
Section 2.05(e) or the second sentence of Section 2.05(f) prior to the earlier
of (x) acceleration of the Note or (y) 180 days after one or more Lease Events
of Defaults have occurred, it shall make an additional payment of make-whole
premium in an amount equal to the deficiency amount contemplated by Section
10.1.3(b)(2), clause (ii) of the Participation Agreement (calculated in the same
manner as if the Lessee had initiated such prepayment). Any agreement between
the Lessee and the Lender as to the calculation or determination of the
deficiency amount contemplated by Section 10.1.3(b)(2), clause (ii) of the
Participation Agreement shall be binding on the Borrower for purposes of
Sections 2.05(c), (d) and (h) hereof provided a copy of such agreement is
furnished to the Borrower and to the Owner Participant.
2.06 PAYMENTS. (a) All payments and prepayments by Borrower of
principal and interest on the Loan, and all fees, expenses and other amounts
under this Loan Agreement or the other Operative Agreements payable to Lender
shall be made in immediately available funds in Dollars not later than 12:30
p.m.
New York City time on the dates called for under this Loan Agreement, by
wire transfer to Lender at the account of Lender set forth in Schedule 1 to the
Participation Agreement or as otherwise instructed in writing by Lender.
Notwithstanding any other provision of the Operative Agreements, unless and
until otherwise instructed in writing by Lender, all payments referred to in the
preceding sentence (or elsewhere in this Agreement as being payable to Lender)
shall be paid to the Security Trustee at the account specified in the
Participation Agreement in immediately available funds in Dollars not later than
12:30 p.m.
New York City time on the respective due dates and, if any amount is
so paid to the Security Trustee, such payment shall constitute payment to the
Lender. If any payment of principal of or interest on the Loan, or any fee or
other amounts payable hereunder or under any Operative Agreement
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becomes due and payable on a day which is not a Business Day, such payment shall
be made on the immediately following Business Day without additional interest.
(b) All payments to be made by Borrower under this Agreement
or the Note shall be made only from the income and the proceeds from the Trust
Estate to the extent included in the Collateral and only to the extent that
Borrower shall have sufficient income or proceeds from the Trust Estate to the
extent included in the Collateral to enable Borrower to make payments in
accordance with the terms hereof and thereof. Lender agrees that it will look
solely to the income and proceeds from the Collateral to the extent available
for distribution to it as provided in the Security Agreement and that none of,
Bank, Owner Participant or Security Trustee is personally liable to Lender for
any amounts payable or for any liability under this Agreement or the Note,
except as expressly provided herein or in the Participation Agreement; PROVIDED,
HOWEVER, that this Section 2.06(b) shall not be construed to prohibit any action
or proceeding against Owner Trustee for its own willful misconduct or grossly
negligent conduct or its simple negligence in the handling of remitting of
funds; and PROVIDED, FURTHER, that nothing contained in this Section 2.06(b)
shall be construed to limit the exercise and enforcement in accordance with the
terms of this Agreement or any other Operative Agreements of rights and remedies
against the Owner Trustee. The foregoing provisions of this Section 2.06(b)
shall survive the termination of this Agreement and the other Operative
Agreements.
Section 3. VOLUNTARY TERMINATION
3.01 If Lessor exercises its option to take possession of the
Aircraft as provided in Section 9 of the Lease, Lessor shall provide to Lender a
written undertaking by the Owner Participant to the effect that if the Lessee
shall have, on the Termination Date, made all payments required to be made by
Lessee under the Lease and the other Operative Agreements on or before the
Termination Date, and otherwise complied with its obligations under Section 9 of
the Lease, the Owner Participant will provide funds to the Owner Trustee, on the
Termination Date, in an amount equal to the principal amount of the Loan
outstanding on the Termination Date (but not any other amounts).
Section 4. EVENTS OF DEFAULT.
4.01 The occurrence of any one or more of the following events shall
constitute a "LOAN EVENT OF DEFAULT":
(a) any Lease Event of Default (provided that any such Lease
Event of Default caused solely by a failure of Lessee to pay to the Borrower or
the Owner Participant when due any amount that is included in the definition of
Excluded Payments shall not constitute a Loan Event of Default unless notice is
given by the Borrower to the Security Trustee that such failure shall constitute
a Loan Event of Default); or
(b) the failure of the Borrower to pay when due any payment of
principal of, interest on or other amount due and payable under the Note or
hereunder (other than as a result of a Lease Event of Default or a Lease
Default) and such failure shall have continued unremedied for five Business Days
in the case of any payment of principal or interest, if any,
6
thereon and, in the case of any other amount, for ten Business Days after the
Borrower or the Owner Participant receives written demand from the Security
Trustee or Lender; or
(c) any Lien required to be discharged by the Borrower (in its
individual or trust capacity, or by the Owner Participant under the Operative
Agreements shall remain undischarged for a period of thirty (30) days after the
Borrower or the Owner Participant, as the case may be, shall have received
written notice from the Security Trustee or the Lender of such Lien; or
(d) any representation or warranty made by the Owner
Participant or the Borrower in the Participation Agreement, the Security
Agreement or this Loan Agreement or in any certificate furnished by the Owner
Participant or the Owner Trustee to the Security Trustee or Lender in connection
with the transactions contemplated by the Operative Agreements shall prove to
have been false or incorrect when made in any material respect, and, such
misrepresentation shall not have been remedied within thirty (30) days after the
Security Trustee or the Lender shall have given Borrower or Owner Participant,
as the case may be, notice thereof; or
(e) other than as provided in (c) above or (f) below, any
failure by the Borrower or Owner Participant to observe or perform any other
covenant or obligation of the Borrower or Owner Participant, as the case may be,
for the benefit of the Security Trustee or the Lender contained in any Operative
Agreement for the benefit of the Security Trustee or Lender and required to be
complied with by Borrower or Owner Participant and such failure to comply shall
not have been remedied within a period of thirty (30) days after the Security
Trustee or the Lender shall have given Borrower or Owner Participant, as the
case may be, notice of the occurrence thereof; or
(f) if at any time when the Aircraft is registered under the
Laws of the United States, the Owner Participant shall not be a "citizen of the
United States" within the meaning of Section 40102(a)(15) of Part A of Subtitle
VII of Xxxxx 00, Xxxxxx Xxxxxx Code, and as a result thereof the registration of
the Aircraft under the Federal Aviation Act, and regulations then applicable
thereunder, shall cease to be effective; PROVIDED that no Event of Default shall
be deemed to have occurred under this paragraph (f) unless such circumstances
continue unremedied for more than thirty (30) days after Owner Participant has
Actual Knowledge of the state of facts that resulted in such ineffectiveness and
of such loss of citizenship; or
(g) a Bankruptcy Event shall have occurred and be continuing
with respect to the Owner Participant, Borrower or the Trust Estate.
Section 5. MISCELLANEOUS.
5.01 NOTICES. Any notice or other communication of any kind pursuant
hereto or in respect hereof shall be made in the manner specified in Section
16.7 of the Participation Agreement and shall be effective as provided therein.
5.02 TERM OF AGREEMENT.
7
This Loan Agreement and all covenants, agreements, representations
and warranties made herein shall survive the making by Lender of the Loan and
the execution and delivery to Lender of the Note and shall continue in full
force and effect until the payment in full of all of Borrower's obligations
hereunder and under the other Operative Agreements.
5.03 GOVERNING LAW; JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK, UNITED STATES OF AMERICA.
(b) Each of Borrower and Lender hereby irrevocably and
unconditionally:
(1) submits for itself and its property in any legal
action or proceeding relating to this Agreement
and the other Operative Agreements to which it is
a party to the jurisdiction of the Courts of the
State of
New York sitting in the City of New York,
the courts of the United States of America for the
Southern District of New York, and appellate
courts from any thereof;
(2) agrees that any suit, action or proceeding with
respect to this Agreement or the transactions
contemplated hereby may be brought only in such
courts and waives any objection that it may now or
hereafter have to the jurisdiction or venue of any
such action or proceeding in any such court or
that such action or proceeding was brought in an
inconvenient court and agrees not to plead or
claim the same by way of motion as a defense or
otherwise;
(3) agrees that nothing herein shall affect the right
to effect service of process in any manner
permitted by law in addition to Section
5.03(b)(6);
(4) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in
any legal action or proceeding with respect to
this Agreement or the transactions contemplated
hereby any special, exemplary, punitive or
consequential damages;
(5) agrees that, to the fullest extent permitted by
applicable law, a final judgment in any such
action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law;
and
8
(6) agrees that service of process upon it in any such
action or proceeding may be effected by mailing a
copy thereof by registered or certified mail (or
any substantially similar form of mail), postage
prepaid, to it at its address set forth in
Schedule 1 to the Participation Agreement or at
such other address of which the other party hereto
shall have been notified pursuant to Section 16.7
thereof.
5.04 MODIFICATIONS. Notwithstanding any provision to the contrary
herein, no term of this Loan Agreement may be amended or modified without the
prior written consent of both parties hereto.
5.05 WAIVER. Neither any failure nor any delay on the part of Lender
in exercising any right, power or privilege under any of the Operative
Agreements shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of any
other right, power or privilege. The remedies provided in the Operative
Agreements are cumulative and not exclusive of any remedies provided by law. No
notice to or demand on Borrower or Owner Participant in any case shall entitle
Borrower or Owner Participant to any other or further notice or demand in the
same, similar or other circumstances.
5.06 WAIVER OF JURY TRIAL. EACH OF BORROWER AND LENDER HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING BROUGHT BY EITHER OF SUCH PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO OR CONNECTED WITH THE OPERATIVE AGREEMENTS.
5.07 BINDING EFFECT; ASSIGNMENT; REGISTRY. (a) This Loan Agreement
shall be binding upon and inure to the benefit of Borrower, Lender and their
respective successors and permitted assigns.
(b) Except as otherwise expressly permitted or required by the
provisions of the Operative Agreements, neither Borrower nor Lender may assign
any of its rights or obligations hereunder or under any Operative Agreement
without the prior written consent of the other party, provided that Lender may
at any time, sell, assign, transfer, grant a participation in or otherwise
dispose of all or any portion of the Loan, the Note or of any of Lender's right,
title and interest therein or related thereto pursuant to Section 10.1.3 of the
Participation Agreement.
(c) The Borrower or its agent shall maintain a register (the
"REGISTER") for the recordation of the names and addresses of the owners of the
Loan and the related Notes and the principal amounts owing to such owners.
Pursuant to the Security Agreement the Security Trustee agrees to maintain the
Register as agent for and on behalf of the Borrower. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, its
agent and the Lender may treat any person whose name is recorded in the Register
as the owner of any interest in the Loan and the related Note recorded therein
for all purposes of this Agreement and the Operative Agreements. Upon the
receipt of notice from any owner of any interest in the Loan and the related
Note of any transfer of any such interest in the Loan and the
9
related Note in compliance with the provisions of Section 10.1.3 of the
Participation Agreement, the Borrower or its agent shall record such transfer in
the Register and give notice of such recordation to the owner and transferee of
any such interest in the Loan and the related Note.
Notwithstanding the foregoing, the Security Trustee shall not be
required to register the transfer of the Loan and the Note unless it shall have
received a certificate from the Borrower or the Lender to the effect that all
conditions to such transfer set forth in Section 10.1 of the Participation
Agreement have been complied with.
(d) Transfer of the right to principal of, and interest on,
the Loan will be effective only upon (i) notice to the Borrower or its agent of
such transfer and (ii) recordation of such transfer in the Register.
5.08 WITHHOLDING.
(a) All amounts payable by the Borrower under this Agreement
or the Note shall be paid free and clear of, and without withholding or
deduction for, any Taxes, now or hereafter imposed by any Government Entity or
taxing authority, respectively, unless otherwise required by Law.
(b) If any amount payable by Borrower under this Agreement or
the Note becomes subject to Taxes imposed by withholding or any other deduction,
then pursuant to Section 3.8 of the Security Agreement the Security Trustee,
after consultation with Borrower shall (1) withhold such amount and remit it to
the appropriate taxing authority (within the period for payment permitted by
Law), (2) pay such additional amounts out of funds therefor received from Lessee
so that the net amount actually received by Lender, after reduction for any
withholding or deduction, including any reduction for withholding applicable to
additional sums payable under Section 3.8 of the Security Agreement, shall be
equal to the full amount otherwise then due and payable, PROVIDED, HOWEVER, that
the Security Trustee shall only be required to pay such additional amounts to
the extent Lessee is required to indemnify Lender for such amount under Sections
9.3 and 9.4 of the Participation Agreement and shall have paid such additional
amounts to Security Trustee for distribution to Lender and (3) provide to Lender
(or cause to be provided to Lender) reasonably satisfactory evidence available
to Borrower of such payment to the relevant tax authority.
5.09 CONTRACTUAL CURRENCY.
(a) This is an international transaction in which the
specification of the currency of payments is of the essence. Except as otherwise
provided herein, each payment under this Agreement will be made in Dollars (the
"CONTRACTUAL CURRENCY"). Any obligation to make payments under this Agreement or
any other Operative Agreement in the Contractual Currency will not be, to the
extent permitted by applicable Law, discharged or satisfied by any tender in any
currency other than the Contractual Currency (unless otherwise specified herein
or therein).
(b) To the extent permitted by applicable Law, rule or
regulation, if any judgment or order expressed in a currency other than the
Contractual Currency is rendered
10
for the payment of any amount owing in respect of this Agreement or any other
Operative Agreement or in respect of a judgment or order of another court for
the payment of any amount owing in respect of this Agreement or any other
Operative Agreement, the party to which such payment is owed, after recovery in
full of the aggregate amount to which such party is entitled pursuant to the
judgment or order, will be entitled to receive immediately from the other party
the amount of any shortfall of the Contractual Currency received by such party
as a consequence of sums paid in such other currency (and will refund promptly
to the other party any excess of the Contractual Currency received by such
party) if such shortfall (or such excess) arises or results from any variation
between (i) the rate of exchange at which the currency of the judgment or order
is converted into the Contractual Currency on the date of entry of such judgment
or order and (ii) the rate of exchange at which such party is able to purchase
the Contractual Currency with the amount of the currency of the judgment or
order actually received by such party. The term "rate of exchange" includes any
premiums and costs of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.
5.10 PERFORMANCE BY LENDER. If Borrower or Owner Participant fails
to perform or comply with any of its obligations under the Operative Agreements,
Lender shall have the right, but shall not be obligated, to effect such
performance, after notice to Borrower and a reasonable opportunity to cure not
to exceed 30 days or such shorter period during which such failure shall give
rise to a Loan Event of Default, and the amount of any out-of-pocket expenses
and other reasonable expenses of Lender incurred in connection with such
performance, together with interest thereon from the date such expenses shall
have been incurred until such expenses shall have been paid in full at a rate
equal to the Default Rate, shall be payable by Borrower upon demand. Borrower
hereby irrevocably appoints Lender as Borrower's attorney-in-fact (which power
shall be deemed coupled with an interest) following the occurrence of a Loan
Event of Default to take any action Lender is allowed to take under this SECTION
5.10.
5.11 CAPTIONS. The captions or headings in this Loan Agreement are
for convenience only and in no way define, limit or describe the scope or intent
of any provision of this Loan Agreement.
5.12 COUNTERPARTS. This Loan Agreement may be signed in any number
of counterparts with the same effect as if the signatures thereto were upon the
same instrument; PROVIDED, that, without limiting the effectiveness of any
counterpart provided for above, the parties agree that one non-counterpart
original shall be fully executed and delivered to Lender.
5.13 SEVERABILITY. Any provision of this Loan Agreement which is
prohibited or unenforceable shall be, to the extent permitted by applicable Law,
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
5.14 MAXIMUM INTEREST RATE. Notwithstanding anything that may be to
the contrary in any of the Operative Agreements, no amount of interest due under
any of the Operative Agreements shall in any event exceed the maximum rate
permitted by law.
5.15 INTENT. The parties agree and intend that for U.S. federal
income tax purposes, the Loan is considered to be indebtedness of the Borrower
as of the Closing Date.
11
5.16 NOTICES, INSTRUCTIONS, CONSENTS, EXECUTION AND WAIVER. Whenever
the provisions of this Agreement or any Operative Agreements require or permit
notice from or to, instructions from, consent of, execution of any amendment,
supplement, modification, instrument, certificate or other document by, or a
waiver by, the Lender, the notice from or to, instruction from, consent of,
execution by or waiver by, the holders on the date of such notice, instruction,
consent, execution or waiver of more than 50% in interest of the principal
amount of the Loan then outstanding shall be considered notice from or to,
instruction from, consent of, execution by or waiver by, the Lender and shall be
binding upon any present or subsequent Lender; PROVIDED, HOWEVER, that without
the consent of each holder at the time thereof affected thereby, no amendment,
supplement, consent or waiver shall:
(a) change the final maturity of the Note, or change the dates
or amounts of payment of any installment of the principal of or interest on the
Note, or reduce the principal of or interest on the Note, or change to a
location outside the United States of America the place of payment where, or the
coin or currency in which, the principal amount of the Note is payable; or
(b) create any Lien with respect to the Collateral except such
as are permitted by the Security Agreement, or deprive any such holder of the
benefit of the Lien on the Collateral created by the Security Agreement; or
(c) modify the provisions of this Section 5.16; or
(d) adversely affect any indemnities in favor of such holder.
[REMAINDER OF PAGE INTENTIONALLY BLANK -- SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be executed as of the date first above written.
XXXXX FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
except as stated herein and otherwise solely
as trustee under the Trust Agreement
By: __________________________
Name:
Title:
AGENCIA ESPECIAL DE FINANCIAMENTO INDUSTRIAL -
FINAME, as Lender
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
13
SCHEDULE I
TO
LOAN AGREEMENT (N[___])
DEBT RATE
The Debt Rate is [_____]% per annum.
ORIGINAL PRINCIPAL AMOUNT
Note Original Principal Amount
Note $[________]
MATURITY DATES
The Loan Maturity Date is: [___________]
SCHEDULE II - Note
TO
LOAN AGREEMENT
Aircraft (______)
LOAN PAYMENT DATES AND AMOUNTS
Loan Payment Installment
Date Principal Interest Amount
---- --------- -------- ------
EXHIBIT A
TO
LOAN AGREEMENT (______)
Form of Note
------------
[ATTACHED]
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY,
THIS PROMISSORY NOTE MAY NOT BE SOLD, UNLESS EITHER REGISTERED UNDER SUCH ACT
AND SUCH APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
[FORM OF] PROMISSORY NOTE
NOTE
Relating to One (1) Embraer EMB-145 Aircraft
U.S. Registration No. [_____]
Manufacturer's Serial Number [______]
$[----------] ------ -, ----
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as Owner Trustee (in such
capacity, the "BORROWER") pursuant to that Trust Agreement (CH______) between
Borrower and the Owner Participant identified therein, for value received,
hereby promises to pay to Agencia Especial de Financiamento Industrial - FINAME,
or its registered assigns ("LENDER"), at x/x Xxxxxxxxx XXXXX-XXXX0, Xx.
Xxxxxxxxx do Chile, Xx. 000, XXX 00000-000 Xxx xx Xxxxxxx - XX, Xxxxxx
00-000-000, Attn: Diretor de Operacoes - DIREX1 (or at such other location as
Lender may from time to time designate), the principal sum of [__________]
Dollars ($[_________]) (the "LOAN ") or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loan made by Lender to Borrower under
that certain Loan Agreement (CH______) dated as of _____, 2001 (as at any time
hereafter amended, the "LOAN AGREEMENT"), by and between Borrower and Lender, in
lawful money of the United States of America and immediately available funds on
the Maturity Date (the period from the Closing Date to the Maturity Date, or
such lesser period if the Loan is accelerated or prepaid pursuant to the terms
of the Loan Agreement being the "LOAN TERM") and to pay interest on the unpaid
principal amount of the Loan on such dates as are provided in the Loan Agreement
and the repayment schedule attached hereto as Annex A-1 (each such day a
"PAYMENT DATE") and on the date the Loan is due (at maturity, by acceleration or
otherwise) and thereafter on demand. During the Loan Term, on each Payment Date
Borrower shall pay Lender principal and interest in accordance with Annex A-1
and as provided in the Loan Agreement.
All payments of principal, interest and other amounts to be made by
Borrower to Lender shall be made to the account specified and in the manner
provided in the Loan Agreement. Except as otherwise provided in Section 3 of the
Security Agreement, Lender shall apply each payment of amounts due on this Note
as follows: FIRST to the payment of any [*] or other amount (other than
principal and interest) due from the Borrower to Lender under the Operative
Agreements with respect to the Loan; SECOND to the payment of accrued and unpaid
interest due on this Note; and THIRD to the payment of principal under this Note
then due and payable.
Interest shall accrue on the unpaid principal amount of the Loan
from and including the Closing Date to but not including the date the principal
amount of the Loan shall be due (at maturity, by acceleration or otherwise) at
the rate per annum provided in Section 2.04 of
--------
* Confidential
the Loan Agreement (the "INTEREST RATE") and thereafter until paid in full at a
rate per annum equal to the Default Rate. Any payment of interest, principal or
any other payment not paid to the Lender when due and payable hereunder shall,
from the date when due and payable until the date when fully paid, bear interest
at the Default Rate.
This Note is a Note referred to in the Loan Agreement and is
entitled to the security and benefits provided in the Security Agreement.
Borrower may prepay or be obligated to prepay this Note, in whole or
in part, all as specified in the Loan Agreement and subject to the requirements
thereof.
All payments to be made by Borrower under the Loan Agreement or this
Note shall be made only from the income and the proceeds from the Trust Estate
to the extent included in the Collateral and only to the extent that Borrower
shall have sufficient income or proceeds from the Trust Estate to the extent
included in the Collateral to enable Borrower to make payments in accordance
with the terms thereof or hereof. Each holder of this Note, by its acceptance
hereof, agrees that it will look solely to the income and proceeds from the
Collateral to the extent available for distribution to it as provided in the
Security Agreement and that none of Bank, Owner Participant or Security Trustee
Bank is personally liable to the holder hereof for any amounts payable or
liability under the Loan Agreement or any Note, except, in the case of Borrower
or Bank, as expressly provided herein or in the Participation Agreement;
PROVIDED, HOWEVER, that this paragraph shall not be construed to prohibit any
action or proceeding against Bank or Security Trustee Bank for its own willful
misconduct or grossly negligent conduct or for its own negligence in handling or
remitting funds; and PROVIDED, FURTHER, that nothing contained in this paragraph
shall be construed to limit the exercise and enforcement in accordance with the
terms of the Loan Agreement or any other Operative Agreement of rights and
remedies against the Trust Estate. The foregoing provisions of this paragraph
shall survive the termination of the Loan Agreement and the other Operative
Agreements.
Upon the occurrence of a Loan Event of Default and for so long as
such Loan Event of Default shall continue, the principal hereof and accrued
interest hereon may be declared to be or may automatically become forthwith due
and payable, all as provided in the Loan Agreement and the Security Agreement.
Capitalized terms used herein that are not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
Borrower waives diligence, demand, presentment, notice of nonpayment
and protest, all in the sole discretion of Lender and without notice and without
affecting in any manner the liability of Borrower.
THIS NOTE A SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
[REMAINDER OF PAGE INTENTIONALLY BLANK -- SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by
one of its authorized officers as of the date hereof.
XXXXX FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity
except as stated herein and otherwise solely
as trustee under the Trust Agreement
By:__________________________
Name:
Title:
Annex A-1
to
the Note
Payment Dates and Amounts
-------------------------
[TO BE ATTACHED]
EXHIBIT 2
CONFIDENTIAL TREATMENT REQUESTED
PURSUANT TO RULE 406
EXHIBIT A
TO FUNDING AGREEMENT
--------------------
CONFIDENTIAL: SUBJECT TO RESTRICTIONS ON DISSEMINATION
SET FORTH IN SECTION 8 OF THIS AGREEMENT
================================================================================
FORM OF PARTICIPATION AGREEMENT (CH _______ )
Dated as of [_______], 2001
Among
CHAUTAUQUA AIRLINES, INC.,
Lessee,
[-------],
Owner Participant,
AGENCIA ESPECIAL DE FINANCIAMENTO
INDUSTRIAL-FINAME,
Lender
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
Not in its individual capacity
except as expressly provided herein,
but solely as Owner Trustee,
Owner Trustee,
and
JPMORGAN CHASE BANK,
Not in its individual capacity
except as expressly provided herein,
but solely as Security Trustee
under the Security Agreement,
----------------------------
One Embraer [EMB-145 model EMB-135 KL] [model EMB-145LR] Aircraft
Bearing Manufacturer's Serial No. [ ]
and U.S. Registration No. N[ ]
with Two [Rolls Royce] Xxxxxxx Model [AE3007A1/3] [AE3007A1P] Engines
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933. THE OMITTED
MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Table of Contents
Page
SECTION 1. DEFINITIONS AND CONSTRUCTION................................... 2
SECTION 2. PARTICIPATION IN LESSOR'S COST................................. 2
2.1 Participation in Lessor's Cost................................. 2
2.2 Nature of Obligations of Participants.......................... 2
SECTION 3. TERMINATION OF OBLIGATION TO PARTICIPATE....................... 2
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF
LESSOR'S COST; POSTPONEMENT OF SCHEDULED CLOSING DATE.......... 3
4.1 Notices of Scheduled Closing Date.............................. 3
4.2 Payment of Lessor's Cost....................................... 3
4.3 Postponement of Scheduled Closing Date......................... 4
4.4 Closing........................................................ 4
SECTION 5. CONDITIONS PRECEDENT........................................... 4
5.1 Conditions Precedent to Obligations of Participants............ 4
5.2 Conditions Precedent to Obligations of Owner Trustee...........13
5.3 Conditions Precedent to Obligations of Security Trustee........13
5.4 Conditions Precedent to Obligations of Lessee..................14
5.5 Post-Registration Opinion......................................14
SECTION 6. REPRESENTATIONS AND WARRANTIES.................................14
6.1 Lessee's Representations and Warranties........................14
6.2 Owner Participant's Representations and Warranties.............18
6.3 Bank Representations and Warranties............................20
6.4 Security Trustee Representations and Warranties................22
6.5 Representations and Warranties of the Lender...................25
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS.........................26
7.1 Covenants of Lessee............................................26
7.2 Covenants of Owner Participant.................................28
7.3 Covenants of Bank and Owner Trustee............................31
7.4 Covenants of Security Trustee Bank.............................33
7.5 Covenants of Lender............................................34
7.6 Agreements.....................................................34
SECTION 8. CONFIDENTIALITY................................................41
SECTION 9. INDEMNIFICATION AND EXPENSES...................................41
9.1 General Indemnity..............................................41
9.2 Expenses.......................................................47
9.3 General Tax Indemnity..........................................47
i
9.4 Withholding Taxes..............................................57
9.5 Increased Costs................................................58
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS............................59
10.1 Owner Participant, Owner Trustee; Lender and Lessee............59
10.2 Effect of Transfer.............................................66
SECTION 11. REFUNDING AND CERTAIN OTHER MATTERS............................66
11.1 Refunding Generally............................................66
11.2 Limitations to Obligation to Refund............................67
11.3 Execution of Certain Documents.................................68
11.4 ERISA..........................................................68
11.5 Consent to Optional Redemptions................................68
SECTION 12. SECTION 1110...................................................68
SECTION 13. CHANGE OF CITIZENSHIP..........................................69
13.1 Generally......................................................69
13.2 Owner Participant..............................................69
13.3 Owner Trustee..................................................69
13.4 Security Trustee...............................................70
SECTION 14. CONCERNING OWNER TRUSTEE.......................................70
SECTION 15. SPECIAL LENDER PROVISIONS......................................70
15.1 Prepayment.....................................................70
15.2 Configuration of Aircraft......................................70
15.3 Re-Registration................................................70
15.4 Subleasing.....................................................71
15.5 Quiet Enjoyment................................................71
15.6 Insurance......................................................72
SECTION 16. MISCELLANEOUS..................................................72
16.1 Amendments.....................................................72
16.2 Severability...................................................73
16.3 Survival.......................................................73
16.4 Reproduction of Documents......................................73
16.5 Counterparts...................................................73
16.6 No Waiver......................................................73
16.7 Notices........................................................74
16.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE...............74
16.9 Contractual Currency...........................................76
16.10 Third-Party Beneficiary........................................76
16.11 Entire Agreement...............................................77
16.12 Further Assurances.............................................77
16.13 Notices, Instructions, Consents, Execution and Waiver..........77
ii
ANNEX, SCHEDULES AND EXHIBITS
ANNEX A Definitions
SCHEDULE 1 Accounts; Addresses
SCHEDULE 2 Commitments
SCHEDULE 3 Certain Terms
SCHEDULE 4 Permitted Countries
SCHEDULE 5 Special Equity Amounts
iii
PARTICIPATION AGREEMENT [ ]
PARTICIPATION AGREEMENT [CH ], dated as of [__________], 2001 (this
"AGREEMENT"), among (a) CHAUTAUQUA AIRLINES, INC., a New York corporation
("LESSEE"), (b) [ ], a [____________] corporation ("OWNER PARTICIPANT"), (c)
AGENCIA ESPECIAL DE FINANCIAMENTO INDUSTRIAL , a Brazilian Federal public
company, ("LENDER"), (d) XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity, except as
expressly provided herein, but solely as Owner Trustee (this and all other
capitalized terms used but not defined herein shall have the respective meanings
ascribed thereto in Section 1) (in its capacity as Owner Trustee, "OWNER
TRUSTEE" or "LESSOR," and in its individual capacity, "BANK"), (e) JPMORGAN
CHASE BANK, not in its individual capacity, except as expressly provided herein,
but solely as Security Trustee (in its capacity as Security Trustee, "SECURITY
TRUSTEE" and in its individual capacity, "SECURITY TRUSTEE BANK").
RECITALS
WHEREAS, Solitair Corp., an affiliate of the Lessee ("SOLITAIR"), and
the Airframe Manufacturer have entered into the Purchase Agreement pursuant to
which the Airframe Manufacturer has agreed to manufacture and sell to Solitair,
and Solitair has agreed to purchase and take delivery of, among other things, an
[EMB-145 model EMB-135 KL] [EMB-145LR model] aircraft, bearing U.S. registration
no. N[ ] and equipped with two [Rolls Royce] Xxxxxxx A-series engines, Solitair
has assigned its right to purchase aircraft to the Lessee and the Lessee
acquired such aircraft and borrowed a Direct Loan for such aircraft;
WHEREAS, Lessor and the Lessee have entered into the Purchase Agreement
Assignment pursuant to which, among other things, Lessee assigned to the Lessor
certain rights with respect to the Aircraft;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Owner Participant and Owner Trustee are entering into that certain
Trust Agreement pursuant to which the Owner Trustee agrees, among other things,
to hold the Trust Estate for the use and benefit of the Owner Participant;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Owner Trustee and Lender are entering into a Loan Agreement dated the
date hereof pursuant to which Lender agrees, subject to certain conditions in
this Agreement and the Loan Agreement, to lend to Owner Trustee an amount equal
to Lessor's Cost and the Owner Trustee agrees to issue the Note in evidence of
Owner Trustee's indebtedness to Lender;
WHEREAS, concurrently with the execution and delivery of this
Agreement, in consideration for the loan made by the Lender, Owner Trustee and
the Security Trustee are entering into a Security Agreement dated the date
hereof pursuant to which the Owner Trustee will grant a security interest in the
Collateral to Security Trustee;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Owner Participant will transfer, as its equity investment in the
beneficial interest in the Trust Estate, an amount equal to Owner Participant's
Percentage of Lessor's Cost to Owner Trustee;
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WHEREAS, concurrently with the execution and delivery of this
Agreement, Owner Trustee and Lessee are entering into that certain Lease dated
as of the date hereof whereby, subject to the terms and conditions set forth
therein, Owner Trustee agrees to lease to Lessee, and Lessee agrees to lease
from Owner Trustee, the Aircraft on the Closing Date;
WHEREAS, reference is hereby made to the recitals of the Funding
Agreement for the purposes of this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the respective
meanings set forth or incorporated by reference, and shall be construed and
interpreted in the manner described, in Annex A.
SECTION 2. PARTICIPATION IN LESSOR'S COST
2.1 PARTICIPATION IN LESSOR'S COST
Subject to the terms and conditions of this Agreement, on the Closing
Date, Owner Participant and Lender shall participate in the payment of Lessor's
Cost as follows:
(a) Owner Participant shall make an equity investment in the
beneficial ownership of the Aircraft in the amount in Dollars equal to Owner
Participant's Percentage multiplied by Lessor's Cost; and
(b) Lender shall make two non-recourse secured loans to Owner
Trustee to finance the Owner Trustee's payment of Lessor's Cost in the amount in
Dollars equal to Lessor's Cost, such loans to be evidenced by the Note, dated
the Closing Date, issued to the Lender in an aggregate principal amount equal to
such amount.
2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS
The obligations hereunder of each Participant are several, and not
joint, and a Participant shall have no obligation to make available to Owner
Trustee any portion of any amount not paid hereunder by any other Participant.
The failure by any Participant to perform its obligations hereunder shall not
affect the obligations of Lessee toward the other Participant, except to the
extent provided in Section 5.4.
SECTION 3. TERMINATION OF OBLIGATION TO PARTICIPATE
Notwithstanding any other provision of this Agreement, if the Closing
does not occur on or before the Commitment Termination Date, the Commitment of
each Participant and its obligation to participate in the payment of Lessor's
Cost shall expire and be of no further force
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and effect; PROVIDED that the liability of any Participant that has defaulted in
the payment of its Commitment shall not be released.
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT
OF SCHEDULED CLOSING DATE
4.1 NOTICES OF SCHEDULED CLOSING DATE
Lessee agrees to give Participants, Owner Trustee, and Security Trustee
at least five Business Days' written notice of the Scheduled Closing Date and,
in addition, Lessee shall comply with the notice requirements of the Funding
Agreement with respect to the Lender. Each Participant agrees that making
available its respective Commitment shall constitute a waiver of such notice.
Owner Trustee and Security Trustee shall be deemed to have waived such notice if
Security Trustee or the Airframe Manufacturer, as the case may be, shall have
received from each Participant funds in the full amount of its respective
Commitment.
4.2 PAYMENT OF LESSOR'S COST
(a) Owner Participant agrees, subject to the terms and
conditions of this Agreement, to make the Dollar amount of its Commitment
available, by wire transfer of immediately available funds to the JPMorgan Chase
Bank ABA No. 000000000, Registered Bond Wire Account No. [*] or to such other
account as is specified by the Security Trustee at or before 9:30 A.M., New York
City time, on the Scheduled Closing Date.
(b) Lender agrees, subject to the terms and conditions of this
Agreement and of the Funding Agreement, to make the amount of its Commitment
available by transferring the amount thereof in the Brazilian Currency
Equivalent (as hereinafter defined) of the Loan in immediately available funds
to the Airframe Manufacturer on or prior to the time and date aforesaid. Such
advance may be made during banking hours in Rio de Janeiro on the Closing Date.
The "BRAZILIAN CURRENCY EQUIVALENT" of the amount of a borrowing denominated in
Dollars means an amount in the legal currency of Brazil computed by multiplying
such Dollar amount by the buying rate of exchange of Dollars into the legal
currency of Brazil made public by the Central Bank of Brazil for commercial
transactions under the Code PTAX 800 of SISBACEN for the Business Day
immediately prior to the Closing Date.
(c) Subject to the satisfaction or waiver by the applicable
party of the conditions precedent set forth in Section 5, and simultaneously
with the receipt by the parties hereto of all amounts to be paid to them on the
Closing Date pursuant to this Section 4.2, Owner Trustee shall:
(i) purchase, take title to, and unconditionally and
irrevocably accept delivery of the Aircraft, and in connection
therewith execute the Delivery Receipt in the form of Exhibit J hereto;
(ii) execute and deliver the Loan Agreement, the
Security Agreement, the Purchase Agreement Assignment, the Lease, Lease
Supplement No. 1, and the Loan Agreement;
--------
* Confidential
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(iii) borrow from Lender the amount of Lender's
Commitment to finance Lessor's Cost, and to issue and deliver to Lender
the Note in an aggregate principal amount equal to the amount of
Lender's Commitment pursuant hereto and pursuant to the Loan Agreement;
(iv) [intentionally omitted];
(v) in consideration of the transfer of title to the
Aircraft to Owner Trustee, direct the Lender to pay Lessor's Cost, as
set forth in the Manufacturer's Invoice to Airframe Manufacturer by
wire transfer of immediately available funds in Brazilian currency to
its account set forth in Schedule 1 or as otherwise directed by
Airframe Manufacturer.
(vi) execute an application for registration of the
Aircraft with the FAA and Lease Supplement No. 1, in each case with
respect to the Aircraft;
(vii) lease the Aircraft to Lessee pursuant to the
Lease; and
(viii) take such other action as may be required to be
taken by the Owner Trustee on the Closing Date by the terms of any
Operative Agreement.
4.3 POSTPONEMENT OF SCHEDULED CLOSING DATE
4.3.1 POSTPONEMENT AS TO OWNER PARTICIPANT
If for any reason whatsoever the Closing is not consummated on the
Scheduled Closing Date, Lessee may by telephonic notice, given by 5:00 p.m., New
York City time (such telephonic notice to be promptly confirmed in writing by
personal delivery or facsimile), on the Scheduled Closing Date to Owner
Participant, Owner Trustee and the Security Trustee, designate a Delayed Closing
Date.
4.3.2 POSTPONEMENT AS TO LENDER
The Closing may be postponed with respect to the Lender and its
Commitment as provided in the Funding Agreement.
4.4 CLOSING
The Closing shall occur at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place as the
parties shall agree, before 12:30 p.m. Rio de Janeiro time.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTICIPANTS
The obligation of each Participant to make the Dollar amount of its
respective Commitment available for payment as directed by the Owner Trustee on
the Closing Date is
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subject to satisfaction or waiver by each such Participant, at or prior to the
Closing, of the conditions precedent set forth below in this Section 5.1;
PROVIDED that it shall not be a condition precedent to the obligation of any
Participant that any document be produced or action taken that is to be produced
or taken by such Participant or by a Person within such Participant's control;
PROVIDED, FURTHER, that Sections 5.1.2(iii) and (xv) shall not be conditions
precedent to the obligation of Lender, and Section 5.1.5 shall not be a
condition precedent to the obligation of Owner Participant.
5.1.1 NOTICE
Such Participant shall have received the notice described in Section
4.1, when and as required thereby, or shall have waived such notice.
5.1.2 DELIVERY OF DOCUMENTS
Such Participant shall, except as noted below, have received executed
counterparts of the following agreements, instruments, certificates or
documents, and each of such counterparts (a) shall have been duly authorized,
executed and delivered by the respective party or parties thereto, (b) shall be
in the form indicated below and otherwise satisfactory in form and substance to
such Participant and (c) shall be in full force and effect:
(i) the Lease, in the form of Exhibit D to the Funding
Agreement; PROVIDED that only Security Trustee shall receive
the sole executed chattel paper original thereof;
(ii) Lease Supplement No. 1; PROVIDED that only Security
Trustee shall receive the sole executed chattel paper original
thereof;
(iii) the Tax Indemnity Agreement; PROVIDED that only
Owner Participant and Lessee shall receive copies of the Tax
Indemnity Agreement;
(iv) the Trust Agreement;
(v) the Loan Agreement, in the form of Exhibit B-1 to
the Funding Agreement;
(vi) the Security Agreement, in the form of Exhibit C-1
to the Funding Agreement;
(vii) [intentionally omitted];
(viii) the Purchase Agreement Assignment;
(ix) the Engine Warranty Agreement, in the form of
Exhibit L to the Funding Agreement;
(x) the Aircraft Warranty Agreement, in the form of
Exhibit M to the Funding Agreement;
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(xi) the Note dated the Closing Date; PROVIDED that only
the Lender shall receive the original Note;
(xii) (A) in the case of each Participant an excerpted
copy of the Purchase Agreement to the extent relating to
Airframe Manufacturer's warranties or related obligations or
any right in the Purchase Agreement assigned to Owner Trustee
pursuant to the Purchase Agreement Assignment; PROVIDED that
only the Owner Trustee and Security Trustee shall receive
copies of such agreements (copies of which may be inspected by
Participants and their respective special counsel on the
Closing Date, but after the Closing Date such copies shall be
retained by Owner Trustee and Security Trustee and may be
inspected and reviewed by Owner Participant or its respective
counsel if and only if there shall have occurred and be
continuing a Lease Default or Lease Event of Default), and (B)
in the case of the Lender, a copy of such portion of the
Purchase Agreement as is required to be delivered to it under
the Funding Agreement;
(xiii) the Bills of Sale and the Bills of Sale (as
defined in the Direct Loan documentation);
(xiv) the broker's report and insurance certificates
required by Section 11 of the Lease;
(xv) if requested by the Owner Participant, an appraisal
or appraisals from an Appraiser, which appraisal or appraisals
shall be reasonably satisfactory in form and substance to
Owner Participant; PROVIDED that only Owner Participant shall
receive a copy of its appraisal (the "APPRAISAL");
(xvi) in the case of Lender, a certificate of the
Secretary or an Assistant Secretary of the Lessee, dated as of
the Closing Date that certifies to the following: (A)(i) that
attached to the certificate are accurate and true copies of
each Code-Share Agreement and amendment to a Code-Share
Agreement entered into by the Lessee since the most recent
advance of a Leveraged Leasing Loan or a Direct Loan under the
Funding Agreement or, if no Leveraged Leasing Loan or Direct
Loan has been advanced under the Funding Agreement, since the
Financial Closing Date (as defined in the Funding Agreement),
or (ii) that Borrower has not entered into any Code-Share
Agreement or amendment to a Code-Share Agreement since the
most recent advance of a Leveraged Leasing Loan or Direct Loan
under the Funding Agreement or, if no Leveraged Leasing Loan
or Direct Loan has been advanced under the Funding Agreement,
since the Financial Closing Date, and (B) listing all
Code-Share Agreements which are in effect and further
indicating any Code-Share Agreement which is in effect but not
listed in Schedule III to the Funding Agreement as well as any
Code-Share Agreement which is listed in Schedule III to the
Funding Agreement but has terminated;
(xvii) (A) a copy of the Certificate of Incorporation
and By-Laws of Lessee and resolutions of the board of
directors of Lessee, in each case certified as of the Closing
Date, by the Secretary or an Assistant Secretary of
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Lessee, duly authorizing the execution, delivery and
performance by Lessee of the Lessee Operative Agreements
required to be executed and delivered by Lessee on or prior to
the Closing Date in accordance with the provisions hereof and
thereof; (B) an incumbency certificate of Lessee, Owner
Participant, Bank, Lender and Security Trustee as to the
person or persons authorized to execute and deliver the
relevant Operative Agreements on behalf of such party; (C) a
copy of the long-form good standing certificate (certified as
of a recent date by the Secretary of State of Lessee's
jurisdiction of incorporation) certified as a true and
complete copy thereof by the Secretary or an Assistant
Secretary of Lessee, and (D) a copy of the Certificate of
Incorporation or Articles of Incorporation and By-Laws and
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of Owner Participant, Bank, Lender and Security
Trustee, certified as of the Closing Date by the Secretary or
an Assistant or Attesting Secretary or other authorized
officer of Owner Participant, Bank, Lender and Security
Trustee, respectively, which authorize the execution, delivery
and performance by Owner Participant, Bank, Lender and
Security Trustee, respectively, of each of the Operative
Agreements to which it is a party, together with such other
documents and evidence with respect to it as Lessee or any
Participant may reasonably request in order to establish the
consummation of the transactions contemplated by this
Agreement and the taking of all corporate proceedings in
connection therewith;
(xviii) an Officer's Certificate of Lessee, dated as of
the Closing Date, stating that its (A) representations and
warranties set forth in this Agreement are true and correct as
of the Closing Date (or, to the extent that any such
representation and warranty expressly relates to an earlier
date, true and correct as of such earlier date), (B) all
covenants and conditions required to be performed or fulfilled
by it prior to or on the Closing Date have been performed or
fulfilled; (C) as of the Closing Date, both before and after
giving effect to the transactions contemplated by this
Agreement, no Lease Default or Lease Event of Default shall
have occurred and be continuing; (D) absent a Change in U.S.
Tax Law, or being requested to do so by any appropriate
governmental authority and subject to the receipt of a W8-EXP,
the Lessee has no present intention to withhold taxes on
payments of interest on the Note;
(xix) Officer's Certificate of Lender, dated as of the
Closing Date, stating that its (A) representations and
warranties set forth in this Agreement are true and current as
of the Closing Date, and (B) all covenants and conditions
required to be performed or fulfilled by it prior to or on the
Closing Date have been performed or fulfilled.
(xx) an Officer's Certificate of the Airframe
Manufacturer, representing and warranting to and for the
benefit of the parties to this Agreement that title to the
Aircraft, free and clear of all Liens arising from, through or
under the Airframe Manufacturer, has been conveyed to the
Owner Trustee pursuant to the Warranty Xxxx of Sale, and
agreeing to defend such title forever against the claims and
demands of all Persons.
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(xxi) an Officer's Certificate of Bank, dated as of the
Closing Date, stating that its representations and warranties,
in its individual capacity and as Owner Trustee, set forth in
this Agreement are true and correct as of the Closing Date
(or, to the extent that any such representation and warranty
expressly relates to an earlier date, true and correct as of
such earlier date);
(xxii) an Officer's Certificate of Owner Participant,
dated as of the Closing Date, stating that its representations
and warranties set forth in this Agreement are true and
correct as of the Closing Date (or, to the extent that any
such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xxiii) an Officer's Certificate of Security Trustee,
dated as of the Closing Date, stating that its representations
and warranties in its individual capacity or as Security
Trustee, as the case may be, set forth in this Agreement are
true and correct as of the Closing Date (or, to the extent
that any such representation and warranty expressly relates to
an earlier date, true and correct as of such earlier date);
(xxiv) an application for registration of the Aircraft
with the FAA under the Act on AC Form 8050-1 (or such other
form as may be approved by the FAA in the name of Owner
Trustee; PROVIDED that only special FAA counsel in Oklahoma
City, Oklahoma shall receive the sole executed copy thereof
for filing with the FAA;
(xxv) the Manufacturer's Invoice;
(xxvi) the Financing Statements;
(xxvii) the following opinions of counsel, in each case
dated the Closing Date:
(A) an opinion of Xxxxxx Xxxxxxx & Xxxx LLP, special
counsel to Lessee, in form and substance satisfactory to
each Participant;
(B) an opinion of Lessee's general counsel, in form and
substance satisfactory to each Participant;
(C) an opinion of counsel to Airframe Manufacturer, in
form and substance satisfactory to each Participant;
(D) an opinion of [ ], special counsel to Owner Trustee,
in form and substance satisfactory to each Participant;
(E) an opinion of [ ], special counsel to Security
Trustee, in form and substance satisfactory to each
Participant;
(F) an opinion of Special Counsel to Owner Participant
and
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an opinion of internal counsel to Owner Participant
(each as defined in Schedule 3 to this Agreement), in form
and substance satisfactory to each Participant;
(G) if requested by the Owner Participant, an opinion of
Special Tax Counsel to Owner Participant (as defined in
Schedule 3 to this Agreement), with respect to certain tax
consequences of the transactions contemplated hereby;
PROVIDED that only Owner Participant shall receive such
opinion;
(H) an opinion of Daugherty, Fowler, Peregrin & Xxxxxx,
P.C., special FAA counsel, in form and substance
satisfactory to each Participant; and
(I) in the case of the Lender, an opinion of Xxxxxxx
Xxxxxxx & Xxxxxxxx, special New York counsel, and of
Xxxxxxxx Neto-Advogados, Brazilian counsel, in a form
satisfactory to the Lender;
(xxviii) evidence that the Aircraft has been certified
as to type by the FAA;
(xxix) the Lender shall have received the certificate of
Lessee referred to in Section 5.3 of the Funding Agreement;
and
(xxx) the Participants and their respective counsel
shall have received copies of such documents and papers as
such Participants may reasonably request (including with
respect to the conversion of the Direct Loan into the
Leveraged Lease Loan), other than in the case of parties other
than Owner Participant and its special counsel, the Tax
Indemnity Agreement.
5.1.3 OTHER COMMITMENTS
The Lender shall have made available the Dollar amount of its
Commitment in accordance with Section 4.
5.1.4 VIOLATION OF LAW
No change shall have occurred after the date of this Agreement in any
applicable Law that makes it a violation of Law for (a) Lessee, any Participant,
Owner Trustee or Security Trustee to execute, deliver and perform the Operative
Agreements to which any of them is a party or (b) any Participant to make the
Dollar amount of its Commitment available or, in the case of the Lender, to
acquire the Note or to realize the benefits of the security afforded by the
Security Agreement.
5.1.5 PERFECTED SECURITY INTEREST
On the Closing Date, after giving effect to the filing of the FAA Filed
Documents and the Financing Statements, Security Trustee shall have received a
duly perfected first priority security
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interest in all of Owner Trustee's right, title and interest in the Aircraft and
the Lease, subject only to Permitted Liens.
5.1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of each other party to this
Agreement made, in each case, in this Agreement and in any other Operative
Agreement to which it is a party, shall be true and accurate in all material
respects as of the Closing Date (unless any such representation and warranty
shall have been made with reference to a specified date, in which case such
representation and warranty shall be true and accurate as of such specified
date) and each other party to this Agreement shall have performed and observed,
in all material respects, all of its covenants, obligations and agreements in
this Agreement and in any other Operative Agreement to which it is a party to be
observed or performed by it as of the Closing Date.
5.1.7 NO EVENT OF DEFAULT
(a) On the Closing Date, no event shall have occurred
and be continuing, or would result from the sale, mortgage or lease of the
Aircraft, which constitutes a Lease Default or Lease Event of Default, Loan
Default or Loan Event of Default.
(b) The Lessee shall not be in payment default or
other material default under any lease secured by a Leveraged Leasing Loan (as
defined in the Funding Agreement) made under the Funding Agreement or under any
Direct Loan (as defined in the Funding Agreement) made under the Funding
Agreement or under any other agreement with the Lender or BNDES.
5.1.8 NO EVENT OF LOSS
On the Closing Date, no Event of Loss with respect to the Airframe or
any Engine shall have occurred and no circumstance, condition, act or event
that, with the giving of notice or lapse of time or both, would give rise to or
constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.
5.1.9 TITLE
Owner Trustee shall have good title (subject to filing and recordation
of the FAA Xxxx of Sale with the FAA) to the Aircraft, free and clear of Liens,
except (a) the rights of Lessee under the Lease, (b) the Lien created by the
Security Agreement and (c) other Permitted Liens.
5.1.10 CERTIFICATION
(i) Lessee shall have received an FAA
certificate of airworthiness for any EMB jet aircraft
delivered to it 30 days or more prior to the Closing Date
pursuant to the Purchase Agreement and financed by the Lender,
by the later of (i) the Closing Date and (ii) 30 days after
the import of such aircraft into the United States.
(ii) The Aircraft shall have been certified
as to type by the FAA.
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(iii) The Aircraft shall have been duly
certified as to airworthiness by the Brazilian aviation
authority.
5.1.11 SECTION 1110
Owner Trustee, as lessor under the Lease (and Security Trustee, as
assignee of Owner Trustee under the Security Agreement), are entitled to the
benefits of Section 1110 (as currently in effect) including the right to take
possession of the Airframe and Engines as provided in the Lease in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
5.1.12 FILING
On the Closing Date (a) the FAA Filed Documents shall have been duly
filed for recordation (or shall be in the process of being so duly filed for
recordation) with the FAA in accordance with the Act and (b) each Financing
Statement shall have been duly filed (or shall be in the process of being so
duly filed) in the appropriate jurisdiction.
5.1.13 NO PROCEEDINGS
No action or proceeding shall have been instituted, nor shall any
action be threatened in writing, before any Government Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Government Entity, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or any other Operative Agreement or the
transactions contemplated hereby or thereby.
5.1.14 GOVERNMENTAL AUTHORITY
All appropriate action required to have been taken prior to the Closing
Date by the FAA, or any governmental or political agency, subdivision or
instrumentality of the United States or Brazil, in connection with the
transactions contemplated by this Agreement shall have been taken, and all
orders, permits, waivers, authorizations, exemptions and approvals of such
entities required to be in effect on the Closing Date in connection with the
transactions contemplated by this Agreement shall have been issued.
5.1.15 SECURITY TRUSTEE CERTIFICATE
The Lender shall have received a certificate from the Security Trustee
dated the Closing Date signed by an authorized officer of the Security Trustee
certifying that no Liens exist of the type that the Security Trustee has agreed
to remove pursuant to Section 6.7 of the Security Agreement.
5.1.16 [OMITTED]
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5.1.17 NO SALES TAX
Each Participant shall be satisfied that no sales, use, value added or
like Tax, and no stamp duty, is payable with respect to the purchase and leasing
of the Aircraft on the Closing Date.
5.1.18 NO TERMINATION OF COMMITMENTS
No Commitment Termination Event (as defined in the Funding Agreement)
shall have occurred and be continuing.
5.1.19 AMENDMENT OF PURCHASE AGREEMENT
On the Closing Date, the Lender shall (a) have received any amendments
to the Purchase Agreement since the date of the Funding Agreement that have not
been previously delivered to it, except any amendments which are not requested
by it after being informed of their substance and (b) be satisfied that none of
such amendments could reasonably be expected to result in any material increase
in the Lender's obligations or material diminution in the Lender's rights
hereunder or under any other Operative Agreements and that the Purchase
Agreement remains in full force and effect.
5.1.20 ACCEPTANCE OF AIRCRAFT
(i) The Airframe Manufacturer shall have
delivered the Aircraft under the Purchase Agreement, the
Aircraft shall have been unconditionally and irrevocably
accepted by or on behalf of the purchaser or its assignee
under the Purchase Agreement in Fly-Away-Factory Condition,
and copies of the acceptance certificate shall have been
furnished to each Participant.
(ii) The Lender shall have received by 7:00
p.m. Rio de Janeiro time on the first day prior to the Closing
Date a copy of the printout on the screen of the Register of
Credit Operation-RC, and of the Register of Export-RE, both
obtained through the SISCOMEX (Bureau of Foreign Trade)
System, evidencing the authorization for export of the
Aircraft, indicating the Lender as lender/creditor under this
Agreement and indicating the Lessor's Cost.
5.1.21 ORIGINATION FEE
The Lessee shall have paid to the Lender (directly and not through the
Security Trustee) the Origination Fee (as defined in the Funding Agreement).
5.1.22 AIRCRAFT PRICE; MANUFACTURER INVOICE
(i) The principal amount of the Loan shall
not exceed the amount permitted by Section 2.1 of the Funding
Agreement.
(ii) The Lender shall have received a copy
of the Manufacturer Invoice for the Aircraft.
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5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER TRUSTEE
The obligation of Owner Trustee to take the actions required by this
Agreement to be taken by it on the Closing Date is subject to satisfaction or
waiver by Owner Trustee, at or prior to the Closing, of the conditions precedent
set forth below in this Section 5.2.
5.2.1 NOTICE
Owner Trustee shall have received the notice described in Section 4.1
or, in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
5.2.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Owner Trustee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Owner Trustee.
5.2.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and
5.1.11 shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Owner Trustee.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF SECURITY TRUSTEE
The obligation of Security Trustee to take the actions required by this
Agreement to be taken by it on the Closing Date is subject to the satisfaction
or waiver by Security Trustee, at or prior to the Closing, of the conditions
precedent set forth below in this Section 5.3.
5.3.1 NOTICE
Security Trustee shall have received the notice described in Section
4.1 or, in the case of a Delayed Closing Date, 4.3, when and as required
thereby, or shall have waived such notice.
5.3.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Security
Trustee, except as specifically provided therein, unless the failure to receive
any such agreement, instrument, certificate or document is the result of any
action or inaction by Security Trustee.
5.3.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and
5.1.11 shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Security Trustee.
14
5.4 CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE
The obligation of Lessee to lease the Aircraft on the Closing Date and
to take the other actions required by this Agreement to be taken by it at the
Closing is subject to the satisfaction or waiver by Lessee, at or prior to the
Closing, of the conditions precedent set forth below in this Section 5.4.
5.4.1 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Lessee, except
as specifically provided therein, and shall be satisfactory to Lessee, unless
the failure to receive any such agreement, instrument, certificate or document
is the result of any action or inaction by Lessee.
5.4.2 SALES TAX
Lessee shall be satisfied that no sales, use, value added, goods and
services or like Tax, and no stamp tax duty, is payable with respect to the
delivery of the Aircraft on the Closing Date to the extent that Lessee has
liability therefor under Section 9.3.
5.4.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.3 (as to all
Participants), 5.1.4, 5.1.6, 5.1.7 (as to Loan Defaults or Loan Events of
Default not constituting Lease Defaults or Lease Events of Default,
respectively), 5.1.8, 5.1.9, 5.1.10, 5.1.11, 5.1.12, 5.1.13, 5.1.14 and 5.1.20
shall have been satisfied or waived by Lessee, unless the failure of any such
condition to be satisfied is the result of any action or inaction by Lessee.
5.5 POST-REGISTRATION OPINION
Promptly upon the registration of the Aircraft and the recordation of
the FAA Filed Documents pursuant to the Act, Lessee will cause Daugherty,
Fowler, Peregrin & Xxxxxx, P.C., special FAA counsel in Oklahoma City, Oklahoma,
to deliver to Lessee, each Participant, Owner Trustee and Security Trustee a
favorable opinion or opinions addressed to each of them with respect to such
registration and recordation.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee represents and warrants to each Participant, Owner Trustee and
Security Trustee that:
6.1.1 ORGANIZATION; QUALIFICATION
Lessee is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of New York and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to
15
enter into and perform its obligations under the Lessee Operative Agreements
which are executed and delivered by it at the Closing (the "CLOSING LESSEE
OPERATIVE AGREEMENTS"). Lessee is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the nature and extent
of the business conducted by it, or the ownership of its properties, requires
such qualification, except where the failure to be so qualified would not give
rise to a Material Change as to it.
6.1.2 CORPORATE AUTHORIZATION
Lessee has taken, or caused to be taken, all necessary corporate action
to authorize the execution and delivery of each of the Closing Lessee Operative
Agreements, and the performance of its obligations thereunder.
6.1.3 NO VIOLATION
The execution and delivery by Lessee of the Closing Lessee Operative
Agreements, the performance by Lessee of its obligations thereunder and the
consummation by Lessee on the Closing Date of the transactions contemplated
thereby, do not and will not (a) violate any provision of its Certificate of
Incorporation or By-Laws, (b) violate any Law applicable to or binding on it or
(c) violate or constitute any default under (other than any violation or default
that would not result in a Material Change as to Lessee), or result in the
creation of any Lien (other than a Permitted Lien) upon the Aircraft under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other material agreement, instrument or document to
which Lessee is a party or by which Lessee or any of its properties is bound.
6.1.4 APPROVALS
The execution and delivery by Lessee of the Closing Lessee Operative
Agreements, the performance by Lessee of its obligations thereunder and the
consummation by Lessee on the Closing Date of the transactions contemplated
thereby do not and will not require the consent or approval of, or the giving of
notice to, or the registration with, or the recording or filing of any documents
with, or the taking of any other action in respect of, (a) any trustee or other
holder of any Debt of Lessee and (b) any Government Entity, other than the
filing of (x) the FAA Filed Documents and the Financing Statements (and UCC
continuation statements periodically) and (y) filings, recordings, notices or
other ministerial actions pursuant to any routine recording, contractual or
regulatory requirements applicable to it.
6.1.5 VALID AND BINDING AGREEMENTS
The Closing Lessee Operative Agreements to have been duly authorized,
executed and delivered by Lessee and, assuming the due authorization, execution
and delivery thereof by the other party or parties thereto, constitute the
legal, valid and binding obligations of Lessee and are enforceable against
Lessee in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
16
6.1.6 LITIGATION
Except as disclosed in the financial statements referred to in Section
6.1.7, no action, claim or proceeding is now pending or, to the Actual Knowledge
of Lessee, threatened, against Lessee, before any court, governmental body,
arbitration board, tribunal or administrative agency, which is reasonably likely
to be determined adversely to Lessee and if determined adversely to Lessee would
result in a Material Change as to Lessee.
6.1.7 FINANCIAL CONDITION
The audited balance sheet of Lessee as of December 31, 2000, and the
related statements of operations and cash flows for the period then ended have
been prepared in accordance with GAAP and fairly present in all material
respects the financial condition of Lessee as of such date and the results of
its operations and cash flows for such period, and since the date of such
balance sheet, there has been no Material Change to Lessee.
6.1.8 REGISTRATION AND RECORDATION
Except for (a) the registration of the Aircraft with the FAA pursuant
to the Act in the name of Owner Trustee, (b) the filing for recordation (and
recordation) of the FAA Filed Documents pursuant to the Act, (c) the filing of
the Financing Statements (and continuation statements relating thereto at
periodic intervals), (d) the taking of possession and retention by Security
Trustee of the original counterparts of the Lease and Lease Supplement No. 1,
(e) the affixation of the nameplates referred to in Section 7.1.3 of the Lease,
no further action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the UCC) is
necessary in order to establish and perfect the right, title or interest of
Owner Trustee, and the Security Trustee's security interest created under the
Security Agreement in the Aircraft and the Lease, as against the Lessee and any
other Person, in each case in any applicable jurisdiction in the United States.
6.1.9 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of the
UCC) of Lessee is located at 0000 X. Xxxx Xxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxx.
6.1.10 NO DEFAULT
No event which, if the Aircraft were subject to the Lease constitutes a
Lease Event of Default has occurred and is continuing.
6.1.11 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any
Engine, and, to the Actual Knowledge of Lessee, no circumstance, condition, act
or event has occurred that, with the giving of notice or lapse of time or both
gives rise to or constitutes an Event of Loss with respect to the Airframe or
any Engine.
17
6.1.12 COMPLIANCE WITH LAWS
(a) Lessee is a Citizen of the United States, a U.S.
Air Carrier and a Section 1110 Air Carrier.
(b) Lessee holds all licenses, permits and franchises
from the appropriate Government Entities necessary to authorize it to lawfully
engage in air transportation and to carry on scheduled commercial passenger
service as currently conducted, except where the failure to so hold any such
license, permit or franchise would not give rise to a Material Change to Lessee.
(c) Lessee is not an "investment company" or a
company controlled by an "investment company" required to be registered under
the Investment Company Act of 1940, as amended.
6.1.13 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or the Lease or any interest in the Trust Estate
and Trust Agreement, or of the Note or any other interest in or Security under
the Security Agreement, for sale to, or solicited any offer to acquire any such
interest or Security from, or has sold any such interest or Security to, any
person in violation of the Securities Act.
6.1.14 BROKER'S FEES
No Person acting on behalf of Lessee is or will be entitled to any
broker's fee, commission or finder's fee in connection with the Transactions
(other than The Seabury Group LLC).
6.1.15 SECTION 1110
Security Trustee, as secured party under the Security Agreement, is
entitled to the benefits of Section 1110 (as currently in effect) including the
right to take possession of the Airframe and Engines as provided in the Lease in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a
debtor.
6.1.16 [*] WITHHOLDING
[*]
6.1.17 ERISA
(a) No condition exists with respect to any Plan maintained, sponsored
or contributed (or required to be contributed) to by Lessee or any Commonly
Controlled Entity which could result in a Material Change to Lessee.
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* Confidential
18
(b) No part of the funds to be used by the Lessee in connection with
the payment of Rent directly or indirectly constitutes assets of a Plan.
6.1.18
[intentionally omitted].
6.2 OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES
Owner Participant represents and warrants to Lessee, Lender, Owner
Trustee and Security Trustee that:
6.2.1 ORGANIZATION, PERMITTED INSTITUTION, ETC.
Owner Participant is a corporation duly incorporated, validly existing
and in good standing under the Laws of the OP Jurisdiction, has the corporate
power and authority to conduct the business in which it is currently engaged and
to own or hold under lease its properties and to enter into, and perform its
obligations under the Owner Participant Agreements. Owner Participant is a
Permitted Institution.
6.2.2 CORPORATE AUTHORIZATION
Owner Participant has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its Certificate of Incorporation or
By-Laws) to authorize the execution and delivery of each of the Owner
Participant Agreements, and the performance of its obligations thereunder.
6.2.3 NO VIOLATION
The execution and delivery by Owner Participant of the Owner
Participant Agreements, the performance by Owner Participant of its obligations
thereunder and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the Certificate of Incorporation or By-Laws of Owner Participant, (b) violate
any Law applicable to or binding on Owner Participant or (c) violate or
constitute any default under (other than any violation or default that would not
result in a Material Change to Owner Participant), or result in the creation of
any Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Owner Participant is a party
or by which Owner Participant or any of its properties is bound.
6.2.4 APPROVALS
The execution and delivery by Owner Participant of the Owner
Participant Agreements, the performance by Owner Participant of its obligations
thereunder and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any
19
trustee or other holder of any Debt of Owner Participant and (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements (and UCC continuation statements periodically).
6.2.5 VALID AND BINDING AGREEMENTS
The Owner Participant Agreements have been duly authorized, executed
and delivered by Owner Participant and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Owner Participant and are enforceable
against Owner Participant in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.2.6 CITIZENSHIP
On the Closing Date, Owner Participant is a Citizen of the United
States and holds an interest in the Trust Estate such that the Aircraft can be
registered in the United States (without giving consideration to Section 47.9 of
the FAA Regulations or any other provision that could restrict Lessee's use or
operation of the Aircraft).
6.2.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to Owner
Participant in respect of all or any part of the Trust Estate.
6.2.8 INVESTMENT BY OWNER PARTICIPANT
Owner Participant's beneficial interest in the Trust Estate is being
acquired by it for its own account, for investment and not with a view to any
resale or distribution thereof, except that, subject to the restrictions on
transfer set forth in Section 10, the disposition by Owner Participant of its
beneficial interest in the Trust Estate shall at all times be within its
control.
6.2.9 ERISA
No part of the funds to be used by Owner Participant to acquire or hold
its interests in the Trust Estate to be acquired by it under this Agreement
directly or indirectly constitutes assets of a Plan.
6.2.10 LITIGATION
There are no pending or, to the Actual Knowledge of Owner Participant,
threatened actions or proceedings against Owner Participant before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Owner Participant, would materially adversely affect
the ability of Owner Participant to perform its obligations under, or affect the
validity or enforceability of, the Owner Participant Agreements.
20
6.2.11 SECURITIES LAWS
Neither Owner Participant nor any person Owner Participant has
authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or the Note or any other interest in or
Security under the Security Agreement for sale to, or solicited any offer to
acquire any of the same from, any Person in violation of the registration
provisions of the Securities Act or applicable state securities Laws.
6.2.12 BROKER'S FEES
No Person acting on behalf of Owner Participant is or will be entitled
to any broker's fee, commission or finder's fee in connection with the
Transactions.
6.2.13 [*]WITHHOLDING
[*]
6.3 BANK REPRESENTATIONS AND WARRANTIES
Bank (or, with respect to 6.3.13, Owner Trustee) represents and
warrants to Lessee, Owner Participant, Lender, and Security Trustee that:
6.3.1 ORGANIZATION, ETC.
Bank is a national banking association duly organized, validly existing
and in good standing under the Laws of the United States, holding a valid
certificate to do business as a national banking association with banking
authority to execute and deliver, and perform its obligations under, the Owner
Trustee Agreements.
6.3.2 CORPORATE AUTHORIZATION
Bank has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by Law or by its Articles of Association or By-Laws) to
authorize the execution and delivery by Bank, in its individual capacity and as
Owner Trustee, of each of the Owner Trustee Agreements, and the performance of
its obligations thereunder.
6.3.3 NO VIOLATION
The execution and delivery by Bank, in its individual capacity and as
Owner Trustee of the Owner Trustee Agreements, the performance by Bank, in its
individual capacity and as Owner Trustee, of its obligations thereunder and the
consummation by Bank in its individual capacity and as Owner Trustee on the
Closing Date of the transactions contemplated thereby, do not and will not (a)
violate any provision of the Articles of Association or By-Laws of Bank, (b)
violate any Law of the State of Utah or federal banking Law applicable to or
binding on Owner Trustee or Bank or (c) violate or constitute any default
under(other than any violation or default that would not result in a Material
Change as to Bank, in its individual capacity or as
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* Confidential
21
Owner Trustee), or result in the creation of any Lien (other than the lien of
the Security Agreement) upon any property of Bank, in its individual capacity
and as Owner Trustee, or any of its Subsidiaries under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, lease, loan or
other material agreement, instrument or document to which Bank, in its
individual capacity and as Owner Trustee, is a party or by which Bank, in its
individual capacity and as Owner Trustee, or any of its properties is or may be
bound or affected.
6.3.4 APPROVALS
The execution and delivery by Bank, in its individual capacity and as
Owner Trustee, of the Owner Trustee Agreements, the performance by Bank, in its
individual capacity and as Owner Trustee, of its obligations thereunder and the
consummation by Bank, in its individual capacity and as Owner Trustee, on the
Closing Date of the transactions contemplated thereby do not and will not
require the consent, approval or authorization of, or the giving of notice to,
or the registration with, or the recording or filing of any documents with, or
the taking of any other action in respect of, (a) any trustee or other holder of
any Debt of First Security Bank or (b) any Government Entity governing banking
and trust powers, other than the filing of the FAA Filed Documents and the
Financing Statements (and UCC continuation statements periodically).
6.3.5 VALID AND BINDING AGREEMENTS
The Owner Trustee Agreements have been duly authorized, executed and
delivered by Bank, in its individual capacity or as Owner Trustee, as the case
may be, and constitute the legal, valid and binding obligations of Bank, in its
individual capacity and as Owner Trustee, and, assuming the due authorization,
execution and delivery thereof by the other party or parties thereto, are
enforceable against Bank, in its individual capacity and as Owner Trustee, in
accordance with the respective terms thereof, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
and other similar Laws affecting the rights of creditors generally and general
principles of equity, whether considered in a proceeding at law or in equity.
6.3.6 CITIZENSHIP
On the Closing Date, Bank is a Citizen of the United States.
6.3.7 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of the
UCC) of Owner Trustee is located at 00 Xxxxx Xxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx
00000.
6.3.8 TITLE
On the Closing Date, Owner Trustee shall have received whatever title
to the Aircraft as was conveyed to it under the Bills of Sale.
22
6.3.9 NO LIENS; FINANCING STATEMENTS
On the Closing Date, there are no Lessor Liens attributable to Bank or
Owner Trustee in respect of all or any part of the Aircraft or the Trust Estate.
Except for the Financing Statements, it has not, either in its individual
capacity or as Owner Trustee, executed any UCC financing statements relating to
the Aircraft or the Lease.
6.3.10 LITIGATION
There are no pending or, to the Actual Knowledge of Bank, threatened
actions or proceedings against Bank or Owner Trustee before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Bank, would materially adversely affect the ability
of Bank or Owner Trustee to perform its obligations under, or affect the
validity or enforceability of, the Owner Trustee Agreements.
6.3.11 SECURITIES LAWS
Neither Bank, nor any person authorized to act on its behalf, has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Estate or the Note or
any other interest in or Security under the Loan Agreement or Security Agreement
for sale to, or solicited any offer to acquire any such interest or Security
from, or has sold any such interest or Security to, any person other than the
Participants.
6.3.12 EXPENSES AND TAXES
There are no Expenses or Taxes that may be imposed on or asserted
against the Trust, the Trust Estate or any part thereof or any interest therein,
Lessee, Owner Participant, Owner Trustee or Security Trustee (except as to Owner
Trustee, Taxes imposed on the fees payable to Owner Trustee) under the laws of
Utah in connection with the execution, delivery or performance of any Operative
Agreement by Owner Trustee or in connection with the issuance of the Note, which
Expenses or Taxes would not have been imposed if Owner Trustee had not (x) had
its principal place of business in, (y) performed (in its individual capacity or
as Owner Trustee) any or all of its duties under the Operative Agreements in or
(z) engaged in any activities unrelated to the transactions contemplated by the
Operative Agreements in, the State of Utah.
6.3.13 [*] WITHHOLDING
[*]
6.4 SECURITY TRUSTEE REPRESENTATIONS AND WARRANTIES
Security Trustee represents and warrants to Lessee, Owner Participant,
Lender and Owner Trustee that:
6.4.1 ORGANIZATION, ETC.
Security Trustee is a New York banking corporation duly organized,
validly existing and in good standing under the Laws of the State of New York,
holding a valid certificate to do
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* Confidential
23
business as a New York banking corporation with banking authority to execute and
deliver, and perform its obligations under the Security Trustee Agreements.
6.4.2 CORPORATE AUTHORIZATION
Security Trustee has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by Law or by its Certificate of Incorporation
or By-Laws) to authorize the execution and delivery by Security Trustee Bank, as
Security Trustee, as the case may be, of the Security Trustee Agreements to and
the performance of its obligations thereunder.
6.4.3 NO VIOLATION
The execution and delivery by Security Trustee Bank, in its individual
capacity as Security Trustee of the Security Trustee Agreements, the performance
by the Security Trustee of its obligations thereunder and the consummation on
the Closing Date of the transactions contemplated thereby, do not and will not
(a) violate any provision of the Certificate of Incorporation or By-Laws of
Security Trustee Bank, (b) violate any New York or federal Law governing the
trust or banking powers of Security Trustee Bank applicable to or binding on
Security Trustee Bank, in its individual capacity or (except in the case of any
Law relating to any Plan) as Security Trustee, or (c) to the Actual Knowledge of
Security Trustee Bank, violate or constitute any default under (other than any
violation or default that would not result in a Material Change to Security
Trustee Bank), or result in the creation of any Lien (other than the lien of the
Security Agreement) upon any property of Security Trustee Bank under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other agreement, instrument or document to which
Security Trustee Bank, is a party or by which Security Trustee Bank, in its
individual capacity or as Security Trustee, or any of their respective
properties is bound.
6.4.4 APPROVALS
The execution and delivery by Security Trustee Bank, in its individual
capacity as Security Trustee of the Security Trustee Agreements, the performance
by Security Trustee Bank, in its individual capacity as Security Trustee of its
obligations thereunder and the consummation on the Closing Date by Security
Trustee Bank, in its individual capacity as Security Trustee of the transactions
contemplated thereby do not and will not require the consent, approval or
authorization of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) to the Actual Knowledge of Security Trustee Bank, any trustee or
other holder of any Debt of Security Trustee Bank or (b) any [New York] or
federal Government Entity having jurisdiction over the trust or banking powers
of Security Trustee Bank, other than the filing of the FAA Filed Documents and
the Financing Statements (and UCC continuation statements periodically).
6.4.5 VALID AND BINDING AGREEMENTS
The Security Trustee Agreements have been duly authorized, executed and
delivered by Security Trustee Bank and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Security Trustee
24
Bank, in its individual capacity or as Security Trustee, as the case may be, and
are enforceable against Security Trustee Bank, in its individual capacity or as
Security Trustee, as the case may be, in accordance with the respective terms
thereof, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.4.6 CITIZENSHIP
Security Trustee Bank is a Citizen of the United States.
6.4.7 NO LESSOR LIENS
On the Closing Date, there are no Lessor Liens attributable to Security
Trustee Bank in respect of all or any part of the Trust Estate.
6.4.8 LITIGATION
To the Actual Knowledge of Security Trustee Bank, there are no pending
or threatened actions or proceedings against Security Trustee Bank, in its
individual capacity as Security Trustee, before any court, administrative agency
or tribunal which, if determined adversely to Security Trustee Bank would
materially adversely affect the ability of Security Trustee Bank, in its
individual capacity as Security Trustee to perform its obligations under, or
affect the validity or enforceability of, any of the Security Trustee
Agreements.
6.4.9 SECURITIES LAWS
Neither Security Trustee Bank nor any person authorized to act on its
behalf has directly or indirectly offered any beneficial interest or Security
relating to the ownership of the Aircraft or any interest in the Trust Estate or
the Note or any other interest in or Security for sale to, or solicited any
offer to acquire any such interest or Security from, or has sold any such
interest or Security to, any Person other than the Participants.
6.4.10
Security Trustee Bank is not an Affiliate of the Owner Participant or
the Owner Trustee.
6.4.11 BROKER'S FEES
No Person acting on behalf of Security Trustee Bank, in its individual
capacity or as Security Trustee, is or will be entitled to any broker's fee,
commission or finder's fee in connection with the Transactions.
6.4.12 [*] WITHHOLDING
[*]
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* Confidential
25
6.5 REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender hereby represents and warrants to the Lessee, Owner
Participant, Security Trustee and Owner Trustee that:
6.5.1 EXISTENCE; COMPLIANCE WITH LAW
The Lender (a) is duly organized, validly existing and in good standing
under the laws of Brazil and (b) has the power and authority, and the legal
right, to conduct the business in which it is currently engaged.
6.5.2 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS
The Lender has the power and authority, and the legal right, to make,
deliver and perform this Agreement and the other Operative Agreements to which
it is a party and to make the Loan hereunder and has taken all necessary action
to authorize the Loan on the terms and conditions of this Agreement and the
other Operative Agreements to which it is a party and to authorize the
execution, delivery and performance of the Operative Agreements to which it is a
party. No consent or authorization of, filing with, notice to or other act
(including any approval) by or in respect of, any Government Entity or any other
Person which has not been obtained and continues in full force and effect is
required on the part of the Lender in order for it to validly execute, deliver
and perform this Agreement and the Operative Agreements to which it is a party,
except as expressly provided in any such Operative Agreements. Each of this
Agreement and the other Operative Agreements to which the Lender is a party has
been duly executed and delivered on behalf of the Lender. Each of this Agreement
and the other Operative Agreements to which the Lender is a party are in proper
legal form under the laws of Brazil for enforcement thereof in Brazil against
the Lender (except, however, that a sworn translation into Portuguese and
registration of such document with the recorder of deeds will be necessary for
purposes of enforcement). Each of this Agreement and the other Operative
Agreements to which the Lender is a party constitutes a legal, valid and binding
obligation of the Lender enforceable against the Lender in accordance with its
terms, subject to the effects of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and to general equitable principles (whether considered in a
proceeding in equity or at law).
6.5.3 NO LEGAL BAR
The execution, delivery and performance by the Lender of the Operative
Agreements to which the Lender is a party and the making of the Loan hereunder
will not result in a violation by the Lender of any material Requirement of Law
or material Contractual Obligation of the Lender that may impair the ability of
the Lender to comply with its obligations hereunder.
6.5.4 NO IMMUNITIES
Under Brazilian law and, after giving effect to the provisions of
Section 16.8(e) hereof, under United States law, the Lender is subject to civil
and commercial law with respect to its obligations under this Agreement and the
other Operative Agreements to which it is a party. Neither the Lender nor any of
its property, whether or not held for its own account, have any
26
immunity (sovereign or otherwise) from any suit or proceeding, from jurisdiction
of any court or from set-off or any legal process (whether service or notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise) under the laws of any Government Entity of
Brazil or (after giving effect to the provisions of Section 16.8(e) hereof)
under the laws of any Government Entity of the United States or the State of New
York in respect of its obligations under this Agreement or any other Operative
Agreements.
6.5.5 ERISA
No part of the funds used by Lender to make or hold Loans under the
Operative Agreements constitutes, or may be deemed under the Code or ERISA or
any regulations or rules thereunder to constitute, assets of a Plan subject to
Title I of ERISA or Section 4975 of the Code.
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS
7.1 COVENANTS OF LESSEE
Lessee covenants and agrees with Owner Participant, Lender, Owner
Trustee and Security Trustee as follows:
7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Lessee shall at all times maintain its corporate existence, except as
permitted by Section 13.2 of the Lease, and shall at all times remain a Citizen
of the United States, a U.S. Air Carrier and a Section 1110 Air Carrier.
7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Lessee will give Owner Participant, Owner Trustee and Security Trustee
timely written notice (but in any event within 30 days prior to the expiration
of the period of time specified under applicable Law to prevent lapse of
perfection) of any relocation of its chief executive office (as such term is
defined in Article 9 of the UCC) from its then present location or of any change
in its corporate name, or of any change in its jurisdiction of incorporation
(and will provide in such notice, if applicable, the identification number
assigned to it by the new jurisdiction), and will promptly take any action
required by Section 7.1.3(c) as a result of such relocation or change of name or
change in jurisdiction.
7.1.3 CERTAIN ASSURANCES
(a) Lessee shall duly execute, acknowledge and deliver, or
shall cause to be executed, acknowledged and delivered, all such further
agreements, instruments, certificates or documents, and shall do and cause to be
done such further acts and things, in any case, as Owner Participant, Owner
Trustee or Security Trustee shall reasonably request for accomplishing the
purposes of this Agreement and the other Operative Agreements, PROVIDED that any
instrument or other document so executed by Lessee will not expand any
obligations or limit any rights of Lessee in respect of the transactions
contemplated by any Operative Agreement.
(b) Lessee shall promptly take such action with respect to the
recording,
27
filing, re-recording and re-filing of the Lease, the Trust Agreement and the
Security Agreement and the respective supplements thereto, including, without
limitation, Lease Supplement No. 1, as shall be necessary to establish, perfect
and protect the interests and rights of Owner Trustee in and to the Aircraft and
under the Lease and the perfection and priority of the Lien created by the
Security Agreement, and Lessee shall pay all out-of-pocket costs and expenses
thereof to the extent not paid by another party as Transaction Expenses. Lessee
shall furnish to Owner Participant or Owner Trustee such information (other than
with respect to the citizenship of Owner Participant and Owner Trustee) in
Lessee's possession or otherwise reasonably available to Lessee as may be
required to enable Owner Participant or Owner Trustee to make application for
registration of the Aircraft under the Act (subject to Lessee's rights under
Section 7.1.2 of the Lease).
(c) Lessee will cause the FAA Filed Documents, the Financing
Statements and all continuation statements (and any amendments necessitated by
any combination, consolidation or merger pursuant to Section 13.2 of the Lease,
any relocation of its chief executive office, or any change in its jurisdiction
of incorporation, or any change in its corporate name) in respect of the
Financing Statements to be prepared and, subject only to the execution and
delivery thereof by Owner Trustee and Security Trustee, as applicable, duly and
timely filed and recorded, or filed for recordation, to the extent permitted
under the Act (with respect to the FAA Filed Documents) or the UCC or similar
law of any other applicable jurisdiction (with respect to such other documents).
(d) Pursuant to any applicable Law, Lessee authorizes the
Lessor or Security Trustee as assignee of Lessor to file or record financing
statements and other filing or recording documents or instruments with respect
to the Lease, as a precautionary matter, without the signature of Lessee in such
form and in such offices as the Lessor determines appropriate to recognize
Lessor's interest in the property subject to the Lease and the other Operative
Agreements.
7.1.4 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf will
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement or of the Note or any other interest in or Security under the
Security Agreement, for sale to, or solicit any offer to acquire any such
interest or Security from, or sell any such interest or Security to, any person
in violation of the Securities Act or applicable state or foreign securities
Laws.
7.1.5 FINANCIAL STATEMENTS
Furnish to Owner Trustee, Owner Participant, Lender and the Security
Trustee:
(a) within 120 days after the end of each fiscal year
of the Lessee, a copy of its audited balance sheet (consolidated, if applicable)
and related statements of operations, stockholders' equity and cash flows as of
the end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by the Lessee's
independent public accountants of recognized national standing to the effect
that such financial
28
statements present fairly in all material respects the financial condition and
results of operations of the Lessee (on a consolidated basis, if applicable) in
accordance with GAAP; and
(b) within 90 days after the end of each of the first
three fiscal quarters of each fiscal year of the Lessee, its balance sheet
(consolidated, if applicable) and related statements of operations and cash
flows as of the end of and for such fiscal quarter (in the case of the statement
of operations) and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as the end of) the previous
fiscal year, prepared in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes.
7.1.6 CERTIFICATES; OTHER INFORMATION
Furnish to Lender and Security Trustee:
(a) concurrently with any delivery of financial
statements under 7.1.5(a) above, a certificate of an officer of the Lessee
certifying (i) that he is familiar with or has reviewed the relevant terms of
the Lease and has made, or caused to be made under his supervision, a review of
the transactions and conditions of the Lessee during the preceding year and (ii)
as to whether the Lessee has Actual Knowledge that a Lease Event of Default has
occurred and is continuing and, if so, specifying the details thereof and any
action taken or proposed to be taken with respect thereto;
(b) promptly following any request therefor, such
other nonconfidential information regarding the Aircraft, the operations,
business affairs and financial condition of the Lessee or any Subsidiary, or
compliance with the terms of the Operative Agreements, as Lender or Security
Trustee from time to time reasonably request; and
(c) unless the Lessee is subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, or is exempt from
reporting pursuant to Rule 12g3-2(b) under that Act, if requested by Lender in
connection with a Securitization, such other additional information with respect
to the Lessee that would be within the scope of Rule 144A(d)(4) under the
Securities Act of 1933 assuming for this purpose only that the securities issued
in the Securitization were deemed to be issued by the Lessee.
7.1.7 MAINTENANCE OF PROCESS AGENT
Lessee shall maintain in New York City a Person acting as agent to
receive on its behalf service of process.
7.2 COVENANTS OF OWNER PARTICIPANT
Owner Participant covenants and agrees with Lessee, and except with
respect to Section 7.2.4, Lender, Owner Trustee and Security Trustee as follows:
29
7.2.1 LIENS
Owner Participant (a) will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Lien attributable to it on or with respect
to all or any part of the Trust Estate or the Aircraft, (b) will, at its own
cost and expense, take such action as may be necessary to discharge any Lessor
Lien attributable to Owner Participant on all or any part of the Trust Estate,
or the Aircraft, PROVIDED that Owner Participant shall not be in breach of its
obligations under this sentence so long as (i) Owner Participant shall, at its
own cost and expense, be diligently contesting such Lessor Lien in good faith by
appropriate proceedings and (ii) such Lessor Lien and such proceedings do not
involve (x) any material danger of the sale, forfeiture, or loss of the
Aircraft, the Airframe, any Engine or any Part thereof or (y) any restriction on
the use or operation of the Aircraft or title thereto. Owner Participant will
hold harmless and indemnify Lessee, Owner Trustee, Lender, Security Trustee,
each of their respective Affiliates, successors and permitted assigns and the
Trust Estate from and against (i) any and all Expenses, (ii) any reduction in
the amount payable out of the Trust Estate and (iii) any interference with the
possession, operation or other use of all or any part of the Aircraft, in each
case imposed on, incurred by or asserted against any of the foregoing as a
consequence of any such Lessor Lien.
7.2.2 REVOCATION OF TRUST AGREEMENT
(a) Owner Participant will comply with the provisions
of the Trust Agreement applicable to it, and will not terminate or revoke the
Trust Agreement or the trusts created thereunder without the prior written
consent of Lessee and Security Trustee and will not amend, modify or supplement
the Trust Agreement, or waive any of the provisions thereof, if such amendment,
modification, supplement or waiver would have a material adverse effect on
Lessee, without the consent of Lessee, or on Security Trustee or the Lender,
without the consent of Security Trustee.
(b) Notwithstanding Section 7.2.2(a), with the
consent of the Lender the Owner Participant may at any time remove Owner Trustee
pursuant to Section 9.01 of the Trust Agreement or terminate the Trust Agreement
pursuant to Section 11.01 of the Trust Agreement; PROVIDED that so long as no
Lease Event of Default shall have occurred and be continuing, no such removal
without cause shall be made without the approval of Lessee.
7.2.3 CHANGE OF SITUS OF OWNER TRUST
If, at any time, any Indemnitee or the Trust Estate becomes subject to
any Taxes for which it is indemnified pursuant to Section 9.3 of this Agreement
and if, as a consequence thereof, Lessee should request that the situs of the
Trust be moved to another state in the United States from the state in which it
is then located, the situs of the Trust may be moved with the written consent of
Owner Participant (which consent shall not be unreasonably withheld) and Owner
Participant will take whatever action may be reasonably necessary to accomplish
such removal; PROVIDED that, in any event, (a) Lessee shall provide such
additional tax indemnification as Owner Participant and the Lender or the
Security Trustee may reasonably request to cover any additional unindemnified
Taxes or loss of Tax benefits described in the assumptions in the Tax Indemnity
Agreement resulting from such change in the situs of the Trust (it being agreed
that if a Lease Event of Default shall have occurred and is then continuing, it
shall not be unreasonable
30
for Owner Participant to withhold its consent to moving the situs of the Trust,
notwithstanding the provision by Lessee of such additional tax indemnification,
unless a Section 1110 Event shall have occurred and is then continuing), (b) the
rights and obligations under the Operative Agreements of Owner Participant, the
Lender and Security Trustee shall not be adversely affected as a result of the
taking of such action, and the ability of the Lender to effect a Securitization
shall not be adversely affected as a result of taking of such action, (c) the
Lien of the Security Agreement shall not be adversely affected by such action,
and Lessee and Owner Trustee shall execute and deliver such documents as may be
necessary or as may reasonably be requested by Security Trustee to protect and
maintain the perfection and priority of such Lien, (d) Owner Participant, Lender
and Security Trustee shall have received an opinion or opinions of counsel
(which counsel is reasonably satisfactory to Owner Participant, Lender and
Security Trustee) in scope, form and substance reasonably satisfactory to Owner
Participant, Lender and Security Trustee to the effect that (i) the Trust, as
thus removed, shall remain a validly established trust, (ii) any amendments to
the Trust Agreement necessitated by such removal shall have been duly
authorized, executed and delivered by the parties thereto and shall constitute
the valid and binding obligations of such parties, enforceable in accordance
with their terms, (iii) covering such other matters as Owner Participant, Lender
or Security Trustee may reasonably request, (e) if such removal involves the
replacement of Owner Trustee, then Owner Participant, Lender and Security
Trustee shall have received an opinion of counsel to such successor Owner
Trustee in form and substance reasonably satisfactory to Owner Participant,
Lender and Security Trustee covering the matters described in the opinion
delivered pursuant to Section 5.1.2(xxvii)(D) and (f) Lessee shall indemnify and
hold harmless Owner Participant, Lender and Bank, in its individual capacity and
as Owner Trustee, on a net after-tax basis against any and all reasonable
out-of-pocket costs and expenses including attorneys' fees and disbursements,
fees and expenses of any new owner trustee, registration, recording or filing
fees and taxes incurred by Owner Participant, Lender or Owner Trustee in
connection with such change of situs. Owner Participant agrees with Lessee that
it will not consent to or direct a change in the situs of the Trust Estate
without the prior written consent of Lessee and of the Security Trustee, except
that such consent shall not be required if a Lease Event of Default shall have
occurred and is then continuing, PROVIDED that such consent of the Lessee shall
be required during a Section 1110 Period.
7.2.4 COMPLIANCE WITH LEASE PROVISIONS
Owner Participant will, solely for the benefit of Lessee, comply with
the express provisions applicable to it contained in the Lease.
7.2.5 SECURITIES ACT
Owner Participant will not directly or indirectly offer any beneficial
interest or Security relating to the ownership of the Aircraft or any interest
in the Trust Estate or the Note or any other interest in or Security under the
Security Agreement for sale to, or solicit any offer to acquire any such
interest or Security from, or sell any such interest or Security to, any Person
in violation of the registration provisions of the Securities Act or applicable
state or foreign Securities Laws, PROVIDED that the foregoing shall not be
deemed to impose on Owner Participant any responsibility with respect to any
such offer, sale or solicitation by any other party hereto.
31
7.2.6 REGARDING THE OWNER TRUSTEE
Owner Participant will instruct Owner Trustee to perform its
obligations under each Owner Trustee Agreement.
7.2.7 CERTAIN PAYMENTS
Owner Participant agrees with the Lessee that, in the event the Owner
Trustee shall become liable in connection with the termination of the Lease to
make payment to the Lessee in accordance with the provisions of Section 9.2.2(c)
(iii), Section 9.3(b) (iii), the last sentence of Section 15.1.3 or the last
sentence of Section 15.1.4 of the Lease, Owner Participant will provide Owner
Trustee on the date such payment becomes due an amount equal to the payment
required to be made by Owner Trustee to Lessee pursuant to such provisions.
7.3 COVENANTS OF BANK AND OWNER TRUSTEE
Bank, in its individual capacity and/or as Owner Trustee, as provided
below, covenants and agrees with Lessee, Owner Participant, the Lender and
Security Trustee as follows:
7.3.1 LIENS
Bank (a) will not directly or indirectly create, incur, assume or
suffer to exist any Lessor Lien attributable to it or Owner Trustee with respect
to all or any part of the Trust Estate or the Aircraft, (b) will, at its own
cost and expense, take such action as may be necessary to discharge any Lessor
Lien attributable to Bank or Owner Trustee on all or any part of the Trust
Estate or the Aircraft, PROVIDED that Bank shall not be in breach of its
obligations under this sentence so long as (i) Bank shall, at its own cost and
expense, be diligently contesting such Lessor Lien in good faith by appropriate
proceedings and (ii) such Lessor Lien and such proceedings do not involve (x)
any material danger of the sale, forfeiture, or loss of the Aircraft, the
Airframe, any Engine or any Part thereof or (y) any restriction on the use or
operation of the Aircraft or title thereto. Bank will in its individual capacity
hold harmless and indemnify Lessee, Owner Participant, the Lender, Security
Trustee, each of their respective Affiliates, successors and permitted assigns,
the Trust Estate from and against (i) any and all Expenses, (ii) any reduction
in the amount payable out of the Trust Estate and (iii) any interference with
the possession, operation or other use of all or any part of the Aircraft, in
each case imposed on, incurred by or asserted against any of the foregoing as a
consequence of any such Lessor Lien.
7.3.2 OTHER BUSINESS
Owner Trustee will not enter into any business or other activity except
as contemplated by the Operative Agreements.
7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Bank, in its individual capacity and as Owner Trustee, will give
Lessee, each Participant and Security Trustee written notice (but in any event
within 30 days prior to the expiration of the period of time specified under
applicable Law to prevent lapse of perfection) of any change in its name or of
any relocation of its chief executive office (as such term is defined in Article
9 of the
32
UCC) from its then present location or of any change in its jurisdiction of
incorporation (and will provide in such notice, if applicable, the
identification number assigned to it by the new jurisdiction) and will promptly
take any action required by Section 7.3.8 as a result of such relocation, change
of name or change of jurisdiction.
7.3.4 SECURITIES ACT
Bank, in its individual capacity and as Owner Trustee, will not
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Trust Estate or the Note or any
other interest in or Security under the Security Agreement for sale to, or
solicit any offer to acquire any such interest or Security from, or sell any
such interest or Security to, any Person in violation of the registration
provisions of the Securities Act or applicable state or foreign securities Laws,
PROVIDED that the foregoing shall not be deemed to impose on Bank in its
individual capacity or as Owner Trustee, any responsibility with respect to any
such offer, sale or solicitation by any other party hereto.
7.3.5 PERFORMANCE OF AGREEMENTS
Owner Trustee shall perform its obligations under the Owner Trustee
Agreements in accordance with the terms thereof.
7.3.6 RELEASE OF LIEN OF SECURITY AGREEMENT
Owner Trustee, in each instance referred to in the Lease in which a
transfer of any property is required to be made by Owner Trustee to Lessee or
any other Person (other than Security Trustee or Owner Participant), shall, at
Lessee's request and expense, use its reasonable efforts to procure from
Security Trustee the prompt release of the Lien of the Security Agreement with
respect to such property.
7.3.7 NOTICES; DOCUMENTS
In the event any claim with respect to any liabilities is filed against
the Owner Trustee in its capacity as such and Owner Trustee shall have Actual
Knowledge thereof, the Owner Trustee shall promptly notify Lessee and Security
Trustee in writing thereof. Owner Trustee further agrees to provide to Lessee
promptly any documents (including the certificate of aircraft registration) that
it receives from the FAA with respect to the Aircraft.
7.3.8 FILINGS
After the Closing Date, Owner Trustee shall duly execute and deliver to
Lessee all filings and recordings (including, without limitation, all filings
and UCC financing statements under the Act and the UCC and any amendments to UCC
financing statements necessitated by any relocation of its chief executive
office, change in its name or change in jurisdiction of formation), prepared and
delivered to it by Lessee required to perfect Owner Trustee's title to the
Aircraft and the liens of and security interests granted by the Security
Agreement (or to maintain such perfection) and to make such title, liens and
security interests valid and enforceable. Pursuant to any applicable Law, Owner
Trustee authorizes the Security Trustee to file or record financing statements
and other filing or recording documents or instruments with respect to the
33
Collateral without the signature of Owner Trustee in such form and in such
offices as the Security Trustee and the Lender determine appropriate to perfect
the security interests of the Security Trustee under this Agreement and the
other Operative Agreements.
7.3.9 TRUST AGREEMENT
Each of Bank and Owner Trustee hereby agrees with Lessee, the Lender
and Security Trustee not to revoke the trust created by the Trust Agreement so
long as the Lien of the Security Agreement remains undischarged or if such
revocation would have an adverse effect on the Lessee. Nothing contained in this
Agreement shall impair any right under the Trust Agreement of Bank to resign as
Owner Trustee in accordance with the provisions of the Trust Agreement.
7.4 COVENANTS OF SECURITY TRUSTEE BANK
Security Trustee Bank in its individual capacity as Security Trustee,
as the case may be, covenants and agrees with Lessee, Owner Participant and
Owner Trustee as follows:
7.4.1 LIENS
Security Trustee Bank (a) will not directly or indirectly create,
incur, assume or suffer to exist any Lessor Lien attributable to it on or with
respect to all or any part of the Trust Estate, or the Aircraft, (b) will, at
its own cost and expense, promptly take such action as may be necessary to
discharge any Lessor Lien attributable to Security Trustee Bank or the Security
Trustee on all or any part of the Trust Estate or the Aircraft and (c) will in
its individual capacity hold harmless and indemnify Lessee, Owner Participant,
the Lender, Owner Trustee, each of their respective Affiliates, successors and
permitted assigns and the Trust Estate from and against (i) any and all
Expenses, (ii) any reduction in the amount payable out of the Trust Estate and
(iii) any interference with the possession, operation or other use of all or any
part of the Aircraft, in each case imposed on, incurred by or asserted against
any of the foregoing as a consequence of any such Lessor Lien.
7.4.2 SECURITIES ACT
Security Trustee Bank in its individual capacity as Security Trustee,
will not offer any beneficial interest or Security relating to the ownership of
the Aircraft or any interest in the Trust Estate, or the Note or any other
interest in or Security under the Security Agreement for sale to, or solicit any
offer to acquire any such interest or Security from, or sell any such interest
or Security to, any Person in violation of the Securities Act or applicable
state or foreign securities Laws, PROVIDED that the foregoing shall not be
deemed to impose on Security Trustee Bank any responsibility with respect to any
such offer, sale or solicitation by any other party hereto.
7.4.3 PERFORMANCE OF AGREEMENTS
Security Trustee Bank, in its individual capacity as Security Trustee,
shall perform its obligations under the Security Trustee Agreements in
accordance with the terms thereof.
34
7.5 COVENANTS OF LENDER
Lender covenants and agrees with Lessee, Owner Participant, Owner
Trustee and Security Trustee as follows:
7.5.1 TRANSFER; COMPLIANCE
Lender will not transfer the Note or interest therein other than in
compliance with Section 10.1.3.
7.5.2 BREAKAGE COST
If the Lender becomes entitled to any Breakage Costs, it shall promptly
notify the Owner Trustee and Lessee and provide the Owner Trustee and Lessee a
certificate as to any amounts of Breakage Costs payable to it.
7.6 AGREEMENTS
7.6.1 OWNER TRUSTEE IS OWNER FOR ALL PURPOSES
Lessee, the Owner Participant, Lender and Owner Trustee agree that for
all purposes, after the Closing, Owner Trustee will be the owner of the Aircraft
(except that Owner Participant will be the owner for income tax purposes) and
Lessee will be the lessee thereof. No transfer, by operation of Law or
otherwise, of the beneficial interest of Owner Participant in and to the Trust
Estate shall operate to transfer legal title to any part of the Trust Estate to
any transferee thereof.
7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS
Lessee, each Participant, Bank, Owner Trustee and Security Trustee
agree for the benefit of each of the others that it will not commence or join in
any proceeding under the Bankruptcy Code to commence a case under Section 303 of
the Bankruptcy Code against the Trust Estate. Nothing contained herein shall be
deemed to preclude any Participant, Bank, Owner Trustee, or Security Trustee
from filing any claim against the Trust Estate in any case commenced against the
Trust Estate or preclude the exercise of remedies pursuant to, or limit the
rights of Security Trustee under, the Security Agreement in such case.
7.6.3 CERTAIN BANKRUPTCY MATTERS
If (a) all or any part of the Trust Estate becomes the property of, or
Owner Trustee or Owner Participant becomes, a debtor subject to the
reorganization provisions of the Bankruptcy Code, (b) pursuant to such
reorganization provisions, including Section 1111(b) of the Bankruptcy Code,
Bank or Owner Participant is required, by reason of Bank or Owner Participant
being held to have recourse liability to Lender or Security Trustee directly or
indirectly (other than the recourse liability of Bank or Owner Participant under
this Agreement, the Security Agreement or by separate agreement), to make
payment on account of any amount payable as principal, Breakage Cost, if any,
interest or other amounts on the Note, and (c) Lender or Security Trustee
actually receives any Excess Amount, as defined below, which reflects any
payment by Bank or Owner Participant on account of (b) above, then Lender or
Security Trustee,
35
as the case may be, shall promptly refund, to the extent permitted by applicable
Law, to Bank or Owner Participant (whichever shall have made such payment) such
Excess Amount.
For purposes of this Section 7.6.3, "EXCESS AMOUNT" means the amount by
which such payment exceeds the amount that would have been received by Lender or
Security Trustee if Bank or Owner Participant had not become subject to the
recourse liability referred to in clause (b) above, and Lender or Security
Trustee receives written notice that such amount is an Excess Amount prior to
its distribution thereof. Nothing contained in this Section 7.6.3 shall prevent
Lender or Security Trustee from enforcing any personal recourse obligation (and
retaining the proceeds thereof) of Bank or Owner Participant under this
Agreement (other than as referred to in clause (b) above) or the Security
Agreement (and any exhibits or annexes thereto) or under any other Operative
Agreement or the Funding Agreement or from retaining any amount paid by Owner
Participant under Section 3 of the Security Agreement.
7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING
(a) Owner Participant, Lender, Owner Trustee and
Security Trustee agrees as to itself with Lessee that, so long as no Lease Event
of Default shall have occurred and be continuing, such Person shall not (and
shall not permit any Affiliate or other Person claiming by, through or under it
to) interfere with Lessee's rights in accordance with the Lease to the quiet
enjoyment, possession and use of the Aircraft during the Term.
(b) Any assignment, sale, transfer or other
conveyance of the Aircraft by Owner Trustee made pursuant to the terms of this
Agreement or the Lease shall bind Owner Participant and shall be effective to
transfer or convey all right, title and interest of Owner Trustee and Owner
Participant in and to the Aircraft. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency or regularity
of such assignment, sale, transfer or conveyance, or as to the application of
any sale or other proceeds with respect thereto by Owner Trustee, as regards
Owner Participant.
7.6.5 RELEASE OF LIEN OF SECURITY AGREEMENT
Each of Lessee, Lessor and Security Trustee agrees that in each
instance referred to in the Lease in which a transfer of any property is
required to be made by Lessor to Lessee or any other Person (other than Security
Trustee), Security Trustee shall, upon request of Lessor and compliance with the
applicable provisions of the Lease and Security Agreement, promptly execute (at
Lessee's cost and expense) such instruments as Lessor or Lessee may reasonably
request to evidence the release of the Lien of the Security Agreement with
respect to such property.
7.6.6 NON-RECOURSE
Lender and Security Trustee agree that (a) obligations of Owner Trustee
under the Security Agreement or any other Operative Agreement and with respect
to the Note shall be non-recourse to Owner Participant and to Bank and (b) they
will look solely to the income and proceeds from the Trust Estate to the extent
available for distribution to Lender or Security Trustee as provided in the
Security Agreement and that neither Owner Participant nor Bank will be
personally liable to Lender or Security Trustee for any amounts payable by Owner
Trustee
36
under the Security Agreement or any other Operative Agreement; PROVIDED,
HOWEVER, that the foregoing is not intended nor shall it be construed to limit
any recourse liability of Owner Participant or Bank to the extent that such
liability is expressly set forth in this Agreement or in any of the Operative
Agreements or arises by reason of the breach of any representation or warranty
or covenant of such Person.
7.6.7 OTHER DOCUMENTS; AMENDMENT
(a) Each of the Owner Participant and the Owner
Trustee hereby agrees with Lessee, Lender and the Security Trustee not to amend,
supplement or otherwise modify any provision of the Trust Agreement in a manner
that could materially adversely affect such party without the prior written
consent of such party. Notwithstanding the foregoing, so long as the Lease has
not been terminated or expired, each Participant, the Security Trustee and the
Owner Trustee hereby agree for the benefit of Lessee that without the consent of
Lessee they will not amend, supplement or otherwise modify (i) Section 3,
Section 9 or Section 11.17 of the Security Agreement, (ii) any provision of any
Operative Agreement that will affect the stated principal amount of or premium
or interest on the Note or (iii) any other provision of the Security Agreement
or Note in a manner that could materially adversely affect Lessee. Security
Trustee and Owner Trustee agree promptly to furnish to Lessee copies of any
supplement, amendment, waiver or modification of any of the Operative Agreements
to which Lessee is not a party. Lender agrees that it will not take any action
in respect of the Trust Estate or Collateral except through the Security Trustee
pursuant to the Security Agreement or as otherwise permitted by the Security
Agreement.
(b) Owner Trustee agrees to join with Lessee to the
extent that action on its part is necessary or appropriate (i) to cause the
following to be duly accomplished in accordance with applicable United States
federal Law by the time the Aircraft is delivered under this Agreement and the
Lease: (A) the application for registration of the Aircraft in the name of Owner
Trustee and (B) all related action necessary in order for Lessee to have
temporary or permanent authority to operate the Aircraft as contemplated by the
Lease and (ii) forthwith upon delivery of the Aircraft under this Agreement and
the Lease, to cause all necessary documents to be duly filed for recording in
accordance with applicable United States federal Law.
7.6.8 CONSENTS
Owner Participant and Owner Trustee each covenants and agrees, for the
benefit of Lessee, that it shall not unreasonably withhold its consent or
approval with respect to any consent or approval requested of it or in the case
of the Owner Participant, which is requested of the Owner Trustee, under the
terms of any of the Operative Agreements, to the extent that under such terms
such consent or approval is not to be unreasonably withheld by such Person.
7.6.9 INSURANCE
Each of Owner Participant and the Owner Trustee agrees not to obtain or
maintain insurance for its own account as permitted by Section 11.2 of the Lease
if such insurance would limit or otherwise materially adversely affect the
coverage of any insurance required to be obtained or maintained by Lessee
pursuant to Section 11 and Annex D of the Lease.
37
7.6.10 EXTENT OF INTEREST OF LENDER
Lender shall not, as such, have any further interest in, or other right
with respect to, the Trust Estate or Collateral when and if the principal and
Breakage Cost, if any, of and interest on the Note, and all other sums, then due
and payable to Lender hereunder and under any other Operative Agreement, shall
have been paid in full.
7.6.11 FOREIGN REGISTRATION
Each Participant, Owner Trustee and Security Trustee hereby agree, for
the benefit of Lessee but subject to the provisions of Section 7.1.2 of the
Lease and to the provisions of Section 15.3 hereof:
(a) that Lessee shall be entitled to register the
Aircraft or cause the Aircraft to be registered in a country other than the
United States subject to compliance with the following:
(i) each of the following requirements is
satisfied:
(A) no Lease Event of Default or Bankruptcy
Default shall have occurred and be continuing at the
time of such registration;
(B) such proposed change of registration is
made in connection with a Permitted Sublease to a
Permitted Air Carrier; and
(C) such country is a Permitted Country with
which the United States then maintains normal
diplomatic relations.
(ii) the Owner Trustee, Lender, Owner
Participant and Security Trustee shall have received an
opinion (subject to customary exceptions), in form and
substance reasonably satisfactory to the Owner Participant and
Lender, of counsel reasonably satisfactory to the Owner
Participant, Security Trustee and Lender addressed to each
such party to the effect that:
(A) such country would recognize the Owner
Trustee's title to, ownership interest in and right
to possession of, the Aircraft;
(B) the obligations of Lessee, and the rights
and remedies of Owner Trustee, under the Lease are
valid, binding and enforceable under the laws of such
country (or the laws of the country to which the laws
of such country would refer as the applicable
governing law);
(C) after giving effect to such change in
registration, the Lien of the Security Agreement on
the Owner Trustee's right, title and interest in and
to the Aircraft and the Lease and, to the extent
assigned pursuant to a Sublease Assignment, any
Permitted Sublease, shall continue as a valid and
duly perfected first priority security interest and
all filing, recording or other action necessary to
protect the same shall have been accomplished
38
(or, if such opinion cannot be given at the time of
such proposed change in registration because such
change in registration is not yet effective, (1) the
opinion shall detail what filing, recording or other
action is necessary and (2) Owner Trustee and the
Security Trustee shall have received a certificate
from Lessee that all possible preparations to
accomplish such filing, recording and other action
shall have been done, and such filing, recording and
other action shall be accomplished and a supplemental
opinion to that effect shall be delivered to Owner
Trustee and the Security Trustee on or prior to the
effective date of such change in registration);
(D) it is not necessary, solely as a
consequence of such change in registration and
without giving effect to any other activity of Owner
Trustee, the Owner Participant or the Security
Trustee (or any Affiliate thereof), as the case may
be, for Owner Trustee, the Owner Participant or the
Security Trustee to qualify to do business in such
country as a result of such reregistration;
(E) there is no tort liability of the owner or
lessor or mortgagee of an aircraft not in possession
thereof under the laws of such country (it being
agreed that, in the event such latter opinion cannot
be given in a form satisfactory to the Owner
Participant and Security Trustee, such opinion shall
be waived if insurance reasonably satisfactory to the
Owner Participant and Security Trustee is provided to
cover such risk); and
(F) unless Lessee shall have agreed to provide
insurance reasonably satisfactory to Owner
Participant and Security Trustee covering the risk of
requisition of use of the Aircraft by the government
of such country (so long as the Aircraft is
registered under the laws of such country), the laws
of such country require fair compensation by the
government of such country payable in currency freely
convertible into Dollars and freely removable from
such country (without license or permit, unless
Lessee prior to such proposed reregistration has
obtained such license or permit) for the taking or
requisition by such government of such use.
(b) In addition, as a condition precedent to any
change in registration Lessee shall have given to Lessor and Security Trustee
assurances reasonably satisfactory to each of them:
(i) to the effect that the provisions of
Section 11 of the Lease have been complied with after giving
effect to such change of registration;
(ii) the country of such re-registration
imposes aircraft maintenance standards approved by, or at
least as stringent as those approved by, the FAA or the
central civil aviation authority of the United Kingdom,
France, Germany, Japan, the Netherlands or Canada;
39
(iii) no Liens (except Permitted Liens) shall
arise by reason of such re-registration;
(iv) any export licenses and certificate of
deregistration required in connection with any repossession or
return of the Aircraft will be readily obtainable in the
normal course without material delay or material burden on the
Owner Trustee, it being agreed that the Lessee shall be
responsible for the cost thereof;
(v) the courts of such proposed country of
registry will give effect to the choice of New York law to
govern the Lease; and
(vi) of the payment by Lessee of all reasonable
out-of-pocket expenses at no after-tax cost to Owner
Participant, Lender, Lessor, or Security Trustee in connection
with such change of registry, including, without limitation
(1) the reasonable fees and disbursements of counsel to
Lender, Lessor and Security Trustee, (2) any filing or
recording fees, Taxes or similar payments incurred in
connection with the change of registration of the Aircraft and
the creation and perfection of the security interest therein
in favor of Security Trustee for the benefit of Lender, (3)
all costs and expenses incurred in connection with any filings
necessary to continue in the United States the perfection of
the security interest in the Aircraft and the Lease in favor
of Security Trustee for the benefit of Lender and (4) costs in
connection with the calculation of the lump sum payment
described in clause (i)(A) of this Section 7.6.11.
7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED
Notwithstanding anything to the contrary set forth in any Operative
Agreement:
(a) Except as set forth in the Purchase Agreement
Assignment, nothing contained in the Operative Agreements shall constitute or be
deemed to be a waiver by Lessee of any rights, remedies or claims it may have
against Airframe Manufacturer or Engine Manufacturer or any subcontractor or
supplier of either; and the Operative Agreements do not and shall not be
construed or deemed to create any rights, waivers, immunities or indemnities in
favor of Airframe Manufacturer, Engine Manufacturer or any subcontractor or
supplier of either with respect to any such rights, remedies or claims of
Lessee; and
(b) The Airframe Manufacturer, by its execution and
delivery of the Consent and Agreement, shall not be deemed to have waived any
rights, remedies or claims which Airframe Manufacturer (or any subcontractor or
supplier of Airframe Manufacturer) may have against Lessee; and the Operative
Agreements do not and shall not be construed or deemed to create any rights,
waivers, immunities or indemnities in favor of Lessee with respect to any such
rights, remedies or claims of Airframe Manufacturer (or any subcontractor or
supplier of Airframe Manufacturer).
40
7.6.13 INTEREST IN CERTAIN ENGINES
Each Participant, Owner Trustee, and Security Trustee agree, for the
benefit of each of the lessor, conditional seller, mortgagee or secured party of
any airframe or engine leased to, or purchased by, Lessee or any Permitted
Sublessee subject to a lease, conditional sale, trust indenture or other
security agreement that it will not acquire or claim, as against such lessor,
conditional seller, mortgagee or secured party, any right, title or interest in
any engine as the result of such engine being installed on the Airframe at any
time while such engine is subject to such lease, conditional sale, trust
indenture or other security agreement and owned by such lessor or conditional
seller or subject to a trust indenture or security interest in favor of such
mortgagee or secured party.
7.6.14 RESTRUCTURING
In the event that withholding Taxes are imposed by a Government Entity
of or within the United States (or the IRS asserts that the Lender [*] is
subject to withholding Taxes on interest payments) with respect to any Loan
pursuant to the Funding Agreement or any similar transaction at any time during
the term of this Agreement and the other Operative Agreements, the Lessee and
the Lender shall, each acting reasonably and in good faith, endeavor to
restructure the transaction in such a manner as to reduce or eliminate the
withholding Tax, which restructuring may involve a defeasance or transfer of the
debt to an institution in the U.S. or otherwise, PROVIDED that such
restructuring shall not put the party that would not be responsible for such
withholding tax in a worse economic position than it would have been in if no
withholding Tax had been imposed and no restructuring had been undertaken. The
cost of any such restructuring shall be borne by the party that would be
responsible for such withholding Tax.
If following the imposition of withholding Taxes by a Government Entity
of or within the United States or an IRS assertion that the Lender is subject to
withholding Taxes by a Government Entity of or within the United States with
respect to any Loan pursuant to the Funding Agreement or any similar
transaction, notwithstanding the good faith efforts of the parties to
restructure, the parties are unable to agree upon a satisfactory restructuring
which would eliminate such withholding Taxes within 60 days of learning of the
possible imposition of withholding Taxes, then (A) if the Lessee shall be
responsible for such withholding Taxes, the Lessee shall, at its election either
(i) be responsible for such withholding Taxes in accordance with Section 9.4
hereof or (ii) pay an amount of Supplemental Rent, or arrange a refunding
pursuant to Section 11 hereof, sufficient for the Owner Trustee to prepay the
entire Loan in full, together with accrued interest thereon, or (B) if the
Lender would be responsible for such withholding Taxes in accordance with
Section 9.4 hereof, the Lender shall continue to be responsible for such
withholding Taxes. The Owner Participant agrees to cooperate with any
restructuring under this Section 7.6.14.
7.6.15 [INTENTIONALLY OMITTED].
7.6.16 CERTAIN TAX RELATED AGREEMENTS
[*]
--------
* Confidential
41
SECTION 8. CONFIDENTIALITY
Lessee, Owner Participant, Lender, Owner Trustee and Security Trustee
shall keep Annexes B, C and D and Schedules 1, 2, 3 and 4 to the Lease, the
Purchase Agreement Assignment, the Tax Indemnity Agreement and all other
non-public information provided to it pursuant to or in connection with this
Agreement, the other Operative Agreements and the transactions contemplated
hereby or thereby confidential and shall not disclose, or cause to be disclosed,
the same to any other Person, except (A) to prospective and permitted
transferees of Lessee's, Owner Participant's, Owner Trustee's or Security
Trustee's interest or their respective counsel or special counsel, independent
insurance brokers, auditors, or other agents who agree to hold such information
confidential and, in the case of the Lender, as permitted in Section 10.1.3 in
connection with an Assignment or a Securitization, (B) to Lessee's, Owner
Participant's, Lender's, Owner Trustee's or Security Trustee's counsel or
special counsel, independent insurance brokers, auditors, or other agents,
Affiliates or investors who agree to hold such information confidential, (C) as
may be required by any statute, court or administrative order or decree, legal
process or governmental ruling or regulation, including those of any applicable
insurance regulatory bodies (including, without limitation, the National
Association of Insurance Commissioners), federal or state banking examiners,
Internal Revenue Service and state and local income tax auditors or any stock
exchange, (D) with respect to Lessee and Owner Participant, by mutual agreement
of such parties, (E) with respect to Lender or Security Trustee, to a nationally
recognized rating agency for the purpose of obtaining a rating on the Note or to
support an NAIC rating for the Note, (F) such other Persons as are reasonably
deemed necessary by the disclosing party in order to protect the interests of
such party or for the purposes of enforcing such documents by such party, (G) as
permitted in the Funding Agreement or the other Operative Agreements, (H) if
required by the terms of the other Operative Agreements or (I) if the other
relevant party gives its prior written consent; PROVIDED that any and all
disclosures permitted by clauses (C), (D), (E), (F), (G) or(H) above shall be
made only to the extent necessary to meet the specific requirements or needs of
the Persons making such disclosures.
SECTION 9. INDEMNIFICATION AND EXPENSES
9.1 GENERAL INDEMNITY
9.1.1 INDEMNITY
If the Closing occurs, Lessee shall indemnify, protect, defend and hold
harmless each Indemnitee from, against and in respect of, and shall pay on a
After-tax Basis, any and all Expenses of any kind or nature whatsoever that may
be imposed on, incurred by or asserted against any Indemnitee, relating to,
resulting from, or arising out of or in connection with, any one or more of the
following:
(a) The Operative Agreements, the transactions
contemplated thereby, and the enforcement of any of the terms thereof;
(b) The Aircraft, the Airframe, any Engine or any
Part, including, without limitation, with respect thereto, (i) the manufacture,
design, purchase, acceptance, nonacceptance or rejection, ownership,
registration, reregistration, deregistration, delivery, nondelivery, lease,
42
sublease, assignment, possession, use or non-use, operation, maintenance,
testing, repair, overhaul, condition, alteration, modification, addition,
improvement, storage, airworthiness, replacement, repair, sale, substitution,
return, abandonment, redelivery or other disposition of the Aircraft, any Engine
or any Part, (ii) any claim or penalty arising out of violations of applicable
Laws by Lessee (or any Permitted Sublessee), (iii) tort liability, whether or
not arising out of the negligence of any Indemnitee (whether active, passive or
imputed), (iv) death or property damage of passengers, shippers or others, (v)
environmental control, noise or pollution and (vi) any Liens in respect of the
Aircraft, any Engine or any Part;
(c) Any breach of or failure to perform or observe,
or any other noncompliance with, any covenant or agreement or other obligation
to be performed by Lessee under any Lessee Operative Agreement or the falsity of
any representation or warranty of Lessee in any Lessee Operative Agreement other
than in the Tax Indemnity Agreement.
9.1.2 EXCEPTIONS
Notwithstanding anything contained in Section 9.1.1, Lessee shall not
be required to indemnify, protect, defend and hold harmless any Indemnitee
pursuant to Section 9.1.1 in respect of any Expense of such Indemnitee:
(a) For any Taxes or a loss of Tax benefit, whether
or not Lessee is required to indemnify therefor pursuant to the Tax Indemnity
Agreement provided, however, this Section 9.1.1(a) shall not apply to any Taxes
taken into account in making any payment on an After-tax Basis;
(b) Except to the extent attributable to acts or
events occurring prior thereto, acts or events (other than acts or events
related to the performance or failure to perform by Lessee of its obligations
pursuant to the terms of the Lessee Operative Agreements) that occur after the
earlier of: (i) with respect to the Airframe, any Engine or any Part, the return
of possession (it being understood that the date of the placement of the
Aircraft in storage as provided in Section 5 of the Lease constitutes the date
of return of the Aircraft under the Lease) of such Airframe, Engine or Part
pursuant to the terms of and in compliance with the Lease (other than pursuant
to Section 15 thereof, in which case Lessee's liability under this Section 9.1
shall survive for so long as Lessor or Security Trustee shall be entitled to
exercise remedies under such Section 15) or (ii) the termination of the Term in
accordance with the Lease in circumstances where the Aircraft is not required to
be returned to Lessor;
(c) To the extent attributable to any Transfer
(voluntary or involuntary) of the Note or interest therein, except (i) for
out-of-pocket costs and expenses incurred as a result of any such Transfer
pursuant to the exercise of remedies under any Operative Agreement resulting
from a Lease Event of Default and (ii) as otherwise required by the terms of the
Security Agreement or Section 11 hereof;
(d) To the extent attributable to any Transfer
(voluntary or involuntary) by or on behalf of the Owner Participant of any
interest in the Aircraft, or the Trust Estate except for costs and expenses
incurred as a result of such Transfer, if such Transfer arises directly from a
Lease Event of Default that shall have occurred and be continuing;
43
(e) To the extent attributable to the gross
negligence or willful misconduct of such Indemnitee or any related Indemnitee
(as defined below) (other than gross negligence or willful misconduct imputed to
such person by reason of its interest in the Aircraft or any Operative
Agreement);
(f) In the case of Bank, to the extent attributable
to matters enumerated in the proviso to Section 14;
(g) To the extent attributable to the incorrectness
or breach of any representation or warranty of such Indemnitee or any related
Indemnitee contained in or made pursuant to any Operative Agreement;
(h) To the extent attributable to the failure by such
Indemnitee or any related Indemnitee to perform or observe any agreement,
covenant or condition on its part to be performed or observed in any Operative
Agreement;
(i) To the extent attributable to the offer or sale
by such Indemnitee or any related Indemnitee of any interest in the Aircraft,
the Note the Trust Estate or the Trust Agreement or any similar interest, in
violation of the Securities Act or other applicable federal, state or foreign
securities Laws (other than any offer or sale thereof caused by the acts or
omissions of Lessee);
(j) (i) With respect to any Indemnitee (other than
Security Trustee), to the extent attributable to the failure of the Security
Trustee to distribute funds received and distributable by it in accordance with
the Security Agreement, (ii) with respect to any Indemnitee (other than the
Owner Trustee), to the extent attributable to the failure of the Owner Trustee
to distribute funds received and distributable by it in accordance with the
Trust Agreement, (iii) with respect to Security Trustee, to the extent
attributable to the negligence or willful misconduct of Security Trustee in the
distribution of funds received and distributable by it in accordance with the
Security Agreement and (iv) with respect to Owner Trustee, to the extent
attributable to the negligence or willful misconduct of Owner Trustee in the
distribution of funds received and distributable by it in accordance with the
Trust Agreement.
(k) Other than during the continuation of a Lease
Event of Default, to the extent attributable to the authorization or giving or
withholding of any future amendments, supplements, waivers or consents with
respect to any Operative Agreement other than such as have been requested by
Lessee or as are required by or made pursuant to the terms of the Operative
Agreements (unless such requirement results from the actions of an Indemnitee
not required by or made pursuant to the Operative Agreements);
(l) To the extent attributable to any amount which
any Indemnitee expressly agrees to pay or such Indemnitee expressly agrees shall
not be paid by or be reimbursed by Lessee;
(m) To the extent that it is an ordinary and usual
operating or overhead expense;
44
(n) With respect to the Owner Participant or the
Owner Trustee, or any related Indemnitee, to the extent attributable to the
deregistration of the Aircraft under the Act as a result of Owner Participant's
or Owner Trustee's (or any related Indemnitee of either) not being a Citizen of
the United States as a result of any act (other than reregistration of the
Aircraft pursuant to Section 7.1.2 of the Lease) of Owner Participant or Owner
Trustee, or any related Indemnitee of either of the foregoing (not taken at the
request of the Lessee);
(o) For any Lessor Lien attributable to such
Indemnitee or any related Indemnitee;
(p) If another provision of an Operative Agreement
specifies the extent of Lessee's responsibility or obligation with respect to
such Expense, to the extent arising from other than failure of Lessee to comply
with such specified responsibility or obligation;
(q) To the extent it is a Transaction Expense;
(r) To the extent constituting principal, Breakage
Cost or interest on the Note attributable solely to a Loan Event of Default not
constituting a Lease Event of Default; or
(s) [*]
For purposes of this Section 9.1, a Person shall be considered a
"related" Indemnitee with respect to an Indemnitee if such Person is an
Affiliate or employer of such Indemnitee, a director, officer, employee, agent,
or servant of such Indemnitee or any such Affiliate or a successor or permitted
assignee of any of the foregoing.
9.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
9.1.4 NOTICE
If a claim for any Expense that an Indemnitee shall be indemnified
against under this Section 9.1 is made, such Indemnitee shall give prompt
written notice thereof to Lessee. Notwithstanding the foregoing, the failure of
any Indemnitee to notify Lessee as provided in this Section 9.1.4, or in Section
9.1.5, shall not release Lessee from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to Lessee (in which event Lessee shall not be responsible for
such additional Expense) or materially impairs Lessee's ability to contest such
claim.
9.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS
(a) In case any action, suit or proceeding shall be
brought against any Indemnitee for which Lessee is responsible under this
Section 9.1, such Indemnitee shall notify Lessee of the commencement thereof and
Lessee may, at its expense, participate in and to the extent that it shall wish
(subject to the provisions of the following paragraph), assume and control the
defense thereof and, subject to Section 9.1.5(c), settle or compromise the same.
--------
* Confidential
45
(b) Lessee or its insurer(s) shall have the right, at
its or their expense, to investigate or, if Lessee or its insurer(s) shall agree
in writing not to dispute liability to the Indemnitee giving notice of such
action, suit or proceeding under this Section 9.1.5 for indemnification
hereunder or under any insurance policies pursuant to which coverage is sought,
control the defense of, any action, suit or proceeding, relating to any Expense
for which indemnification is sought pursuant to this Section 9.1, and each
Indemnitee shall cooperate with Lessee or its insurer(s) with respect thereto;
PROVIDED that Lessee shall not be entitled to control the defense of any such
action, suit, proceeding or compromise any such Expense (i) during the
continuance of any Lease Event of Default (except during the Section 1110
Period), (ii) if such proceedings would entail a material risk of the sale,
forfeiture or loss of the Aircraft, (iii) if such proceedings would entail a
risk of criminal liability or greater than de minimis risk of material civil
penalties being imposed on such Indemnitee or (iv) if an actual or potential
material conflict of interest exists making it advisable in the good faith
opinion of such Indemnitee (on the basis of prevailing standards of professional
responsibility) for such Indemnitee to be represented by separate counsel. In
connection with any such action, suit or proceeding being controlled by Lessee,
such Indemnitee shall have the right to participate therein, at its sole cost
and expense, with counsel reasonably satisfactory to Lessee; PROVIDED that such
Indemnitee's participation does not, in the reasonable opinion of the
independent counsel appointed by the Lessee or its insurers to conduct such
proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a
settlement or other compromise with respect to any Expense without the prior
written consent of Lessee, which consent shall not be unreasonably withheld or
delayed, unless such Indemnitee waives its right to be indemnified with respect
to such Expense under this Section 9.1.
(d) In the case of any Expense indemnified by the
Lessee hereunder which is covered by a policy of insurance maintained by Lessee
pursuant to Section 11 of the Lease, at Lessee's expense, each Indemnitee agrees
to cooperate with the insurers in the exercise of their rights to investigate,
defend or compromise such Expense as may be required to retain the benefits of
such insurance with respect to such Expense.
(e) If an Indemnitee is not a party to this
Agreement, Lessee may require such Indemnitee to agree in writing to the terms
of this Section 9 and Section 16.8 prior to making any payment to such
Indemnitee under this Section 9.
(f) Nothing herein shall be deemed to be an
assumption by Lessee of obligations of Owner Trustee with respect to, or a
guarantee by Lessee of, any amounts payable by Owner Trustee upon the Note or a
guarantee of any residual value of the Aircraft.
(g) Nothing contained in this Section 9.1.5 shall be
deemed to require an Indemnitee to contest any Expense or to assume
responsibility for or control of any judicial proceeding with respect thereto.
9.1.6 INFORMATION
Lessee will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in Lessee's control or is
reasonably available to Lessee, which such
46
Indemnitee may reasonably request and will otherwise cooperate with such
Indemnitee so as to enable such Indemnitee to fulfill its obligations under
Section 9.1.5. The Indemnitee shall supply Lessee with such information not
within the control of Lessee, as is in such Indemnitee's control or is
reasonably available to such Indemnitee, which Lessee may reasonably request to
control or participate in any proceeding to the extent permitted by Section
9.1.5.
9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER
ASSURANCES
Upon the payment in full by Lessee of any indemnity provided for under
this Agreement, Lessee, without any further action and to the full extent
permitted by Law, will be subrogated to all rights and remedies of the person
indemnified (other than with respect to any of such Indemnitee's insurance
policies or in connection with any indemnity claim such Indemnitee may have
under Section 6.3 of the Security Agreement or Section 5.03 or 7.01 of the Trust
Agreement) in respect of the matter as to which such indemnity was paid. Each
Indemnitee will give such further assurances or agreements and cooperate with
Lessee to permit Lessee to pursue such claims, if any, to the extent reasonably
requested by Lessee and at Lessee's expense.
9.1.8 PRIMARY OBLIGOR
The Lessee's obligations under this Section 9 shall be those of a
primary obligor whether or not the Person indemnified shall also be indemnified
with respect to the same matter under the terms of this Agreement, or any other
document or instrument, and the Person seeking indemnification from the Lessee
pursuant to any provision of this Agreement may proceed directly against the
Lessee without first seeking to enforce any other right of indemnification.
9.1.9 WAIVER OF CERTAIN CLAIMS
The Lessee hereby waives and releases any Expense now or hereafter
existing against any Indemnitee arising out of death or personal injury to
personnel of the Lessee, loss or damage to property of the Lessee, or the loss
of use of any property of the Lessee, which results from or arises out of the
condition, use or operation of the Aircraft during the Term, including, without
limitation, any latent or patent defect whether or not discoverable.
9.1.10 REFUNDS
If an Indemnitee receives any refund, in whole or in part, with respect
to any Expense paid by Lessee hereunder, such Indemnitee will (in the case of a
Brazilian Lender, to the extent permitted by applicable Law (and such Lender
agrees to use reasonable efforts to obtain any required approval of the Central
Bank of Brazil)) promptly pay the amount refunded (but not an amount in excess
of the amount Lessee or any of its insurers has paid in respect of such Expense)
over to Lessee unless a Lease Event of Default, Payment Default, or, except
during the Section 1110 Period, Bankruptcy Default shall have occurred and be
continuing, in which case such amounts shall be paid over to Owner Trustee (or,
so long as the Lien of the Security Agreement shall not have been discharged, to
Security Trustee) to hold as security for Lessee's obligations under the Lessee
Operative Agreements or, if requested by Lessee, applied to satisfy such
obligations.
47
9.2 EXPENSES
9.2.1 TRANSACTION EXPENSES
Owner Participant shall pay all Transaction Expenses (including the
fees and expenses of the financial advisor to Owner Participant but excluding
the ongoing fees, disbursements and expenses of Security Trustee and the Owner
Trustee). All Transaction Expenses which are not, for any reason, paid by the
Owner Participant shall be paid by the Lessee as Supplemental Rent. Any such
payment by Lessee shall not affect Owner Participant's obligations or Lessee's
rights against Owner Participant for its failure to make any such payment.
Notwithstanding the definition of Transaction Expenses, Lessee shall pay the
ongoing fees, disbursements and expenses (including, without limitation, the
reasonable fees and expenses of counsel) of Owner Trustee and Security Trustee.
9.2.2 PAYMENT OF OTHER EXPENSES
Lessee will be responsible for the fees and charges of its counsel
incurred in connection with the preparation, execution and delivery of the
Operative Agreements. All out-of-pocket costs and expenses of Lessee (including,
without limitation, reasonable attorney's fees and charges) incurred in
performance of Sections 7.1.3(a), (b) and (c) (other than with respect to the
first parenthetical of Section 7.1.3(c)) to the extent constituting Transaction
Expenses, shall be paid pursuant to Section 9.2.1.
9.3 GENERAL TAX INDEMNITY
9.3.1 INDEMNITY
Except as otherwise expressly provided herein, Lessee shall pay, and on
written demand shall indemnify and hold harmless on an After-tax Basis each
Indemnitee (as defined in Section 9.3.7) from and against, any and all Taxes
imposed against any Indemnitee, Lessee or any Affiliate of Lessee, the Aircraft
or any Equipment, or any sublessee or user thereof, by the United States or any
state or local government or other taxing authority thereof, or by any foreign
government or any international taxing authority or any political subdivision or
taxing authority of any of the foregoing upon or with respect to the Aircraft,
any Equipment or any interest therein; the acquisition, manufacture, purchase,
mortgaging, financing, refinancing, ownership, delivery, nondelivery,
redelivery, transport, location, lease, sublease, hire, assignment, alteration,
improvement, possession, registration, de-registration, transfer of
registration, presence, use, replacement, substitution, pooling, operation,
insurance, installation, modification, rebuilding, overhaul, condition, storage,
maintenance, repair, sale, return, abandonment, preparation, transfer of title,
conditional sale, acceptance, importation, exportation, rejection or other
disposition of the Aircraft, any Equipment or any interest in any of the
foregoing; the rentals, receipts, income or earnings arising from the purchase,
financing, ownership, delivery, redelivery, leasing, subleasing, possession,
use, operation, return, storage, transfer of title, sale or other disposition of
the Aircraft, any Equipment or any interest in any of the foregoing; the Note,
the Operative Agreements, the issuance, acquisition, transfer thereof or
assumption thereof by Lessee or refinancing thereof (such refinancing being by
or at the request of the Lessee), or the payment of any amounts thereon; the
execution, delivery or performance of
48
any of the Operative Agreements or any future amendment, supplement, waiver or
consent thereto, or any of the transactions contemplated thereby, any proceeds
or payments or amounts payable under any thereof, or the issuance, acquisition
or subsequent transfer thereof; the property or the income or other proceeds
with respect to any of the Trust Estate; the payment of the Lessor's Cost
pursuant to this Participation Agreement, the Lease, the Purchase Agreement and
the Purchase Agreement Assignment; or otherwise with respect to or in connection
with the transactions contemplated by the Operative Agreements.
9.3.2 EXCLUSIONS FROM GENERAL TAX INDEMNITY
The provisions of Section 9.3.1 shall not apply to, and Lessee shall
have no obligation to pay, or to indemnify or hold harmless any Person with
respect to the following:
(a) With respect to any Indemnitee other than Lender,
Taxes imposed on, based on, or measured by the income (including gross income),
receipts, capital, franchises, excess profits or conduct of business of the
Indemnitee (other than sales, use, ad valorem, rental, property, or license
Taxes imposed by any U.S. federal, state or local authority (or foreign
government)), provided that this paragraph (a) shall not exclude from the
indemnity described in Section 9.3.1 above any such Taxes imposed by any foreign
government to the extent such Taxes are imposed by any jurisdiction in which
such Indemnitee would not be subject to Taxes of such type but for (i) the
operation, presence, or registration of the Aircraft or any Equipment in such
jurisdiction, or (ii) the presence of Lessee or any sublessee, or Lessee or any
sublessee making payments from or performing any other actions permitted or
required under the Operative Agreements in such jurisdiction);
(b) Taxes attributable to any period following the
earlier of (i) the expiration or early termination of the Lease and, unless the
Lessee has exercised its option to purchase the Aircraft pursuant to the Lease,
return of the Aircraft pursuant to Section 15 of the Lease and (ii) the
discharge in full of Lessee's obligations to pay the Stipulated Loss Value, and
all other amounts then payable under the Lease and the other Operative
Agreements; provided, however, that the exclusions set forth in this paragraph
(b) shall not apply to Taxes incurred in connection with the exercise of
remedies pursuant to Section 15 of the Lease Agreement or Section 5 of the
Security Agreement following the occurrence and during the continuation of a
Lease Event of Default thereunder or to Taxes relating to payments made by
Lessee to or for the benefit of any Indemnitee under the Operative Agreements
following such events;
(c) Taxes imposed on an Indemnitee in excess of Taxes
that would have been imposed if such Indemnitee had not engaged in any business
in or had any presence or contact in the jurisdiction imposing such Taxes other
than any business, presence or contact as a result of the operation, presence,
registration or location of the Aircraft in such jurisdiction or as a result of
the transactions contemplated by the Operative Agreements;
(d) Taxes imposed on an Indemnitee which arise out of
or are caused by the gross negligence or willful misconduct of such Indemnitee
(unless such gross negligence or willful misconduct is imputed to such
Indemnitee by reason of the acts or omissions of Lessee);
49
(e) [*] Taxes (other than amounts necessary to make
payments on an After-tax Basis) imposed on an Indemnitee which become payable as
a result of a transfer by such Indemnitee of all or a portion of its interest in
the Aircraft, the Trust Estate, the Lease, the Note, the Loan Documents or any
of the other Operative Agreements (or, where the Indemnitee is a transferee, the
transfer to such Indemnitee) other than in connection with (i) the exercise of
remedies pursuant to a Lease Event of Default in accordance with the terms of
the Operative Agreements, (ii) the early termination of the Lease by Lessee
pursuant to Section 9 of the Lease, (iii) an Event of Loss, (iv) the exercise of
Lessee's option to purchase the Aircraft pursuant to Section 17 of the Lease, or
(v) a change in the situs of the Trust Estate pursuant to a request therefor by
Lessee under Section 7.2.3;
(f) Taxes imposed on Owner Trustee or the Bank with
respect to any fees received by it for services rendered in its capacity as
Owner Trustee under the Trust Agreement or Taxes imposed on the Security Trustee
or the Security Trustee Bank with respect to any fees received by it for
services rendered in its capacity as Security Trustee under the Security
Agreement;
(g) With respect to any Indemnitee other than Lender,
Taxes which have been included in the Lessor's Cost and Taxes which have been
capitalized as Transaction Expenses and which are paid to the appropriate taxing
authority;
(h) With respect to Owner Participant, Taxes subject
to indemnification by Lessee under the Tax Indemnity Agreement;
(i) U.S. Withholding Taxes on payments made to such
Indemnitee (except, in the case of Lender, as otherwise provided in Section
9.4);
(j) Intangible (or similar) Taxes imposed upon Owner
Participant with respect to its interest in the Trust Estate other than such
Taxes imposed solely as a result of (i) the operation, presence or registration
of the Aircraft or any Equipment in the jurisdiction imposing such Taxes, or
(ii) the presence of Lessee, or any sublessee in, or Lessee or any sublessee
making payments from or performing any other actions permitted or required under
the Operative Agreements in the jurisdiction imposing such Taxes;
(k) With respect to any Indemnitee other than Lender,
Taxes imposed on such Indemnitee resulting from or which would not have occurred
but for a Lessor Lien attributable to such Indemnitee or a related Indemnitee;
(l) With respect to any Indemnitee other than Lender,
any Taxes that would not have been imposed but for the existence or status of
the trust created by the Trust Agreement or resulting from the treatment of the
trust created by the Trust Agreement as other than a grantor trust;
(m) Taxes that would not have been imposed but for
any failure of an Indemnitee to (i) file proper and timely reports or returns or
to pay any Taxes when due (except to the extent caused by a breach by Lessee of
its obligations pursuant to this Section 9.3) or (ii) comply with any
certification, information, documentation, reporting or other similar
requirements, concerning the nationality, residence, identity or connection with
jurisdiction
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imposing such Taxes, if such compliance is required to obtain or establish
relief or exemption from or reduction in such Taxes and such Indemnitee was
eligible to comply with such requirement (but only if and to the extent that
such Indemnitee is entitled under applicable Law to furnish such forms and is
eligible to claim such reduction or exemption and only to the extent that such
forms may be filed by such Indemnitee without adverse consequences to the
Indemnitee or any of its Affiliates, or risk thereof, as reasonably determined
by such Indemnitee in good faith);
(n) With respect to an Indemnitee other than a
Lender, Taxes on items of tax preference or any minimum tax or alternative
minimum tax;
(o) To the extent incurred by or asserted against an
Indemnitee as a result of any "prohibited transaction", within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code resulting from a breach
of the representation of such Indemnitee or any related Indemnitee set forth in
Section 6.2.9 or 6.5.5, as applicable;
(p) With respect to an Indemnitee other than a
Lender, Taxes in excess of those that would have been imposed and subject to
indemnification had there not been a transfer by or to such Indemnitee (or any
predecessor in interest of such Indemnitee) described in paragraph (e) above; or
(q) [*] Taxes imposed by any Government Entity in a
jurisdiction within which such Lender is incorporated or has its principal place
of business (but excluding any such Taxes resulting from the presence,
activities or conduct of the Owner Participant or the Lessee (or any Affiliate
of either) in such jurisdiction).
9.3.3 CALCULATION OF GENERAL TAX INDEMNITY PAYMENTS
(a) Any payment which Lessee shall be required to
make to or for the account of any Indemnitee with respect to any Tax which is
subject to indemnification under this Section 9.3 shall be made on an After-tax
Basis (without regard to the exclusions therein).
(b) [*] if by reason of any payment with respect to
Taxes made by or on behalf of Lessee to or for the account of such Indemnitee
pursuant to this Section 9.3 or Section 9.4, such Indemnitee subsequently
realizes Tax savings not previously taken into account in computing such
payment, such Indemnitee shall promptly pay to Lessee an amount equal to the sum
of the actual net reduction in Taxes, if any, realized by such Indemnitee which
is attributable to such Tax savings and the actual reduction in any Taxes
realized by such Indemnitee as the result of any payment made by such Indemnitee
pursuant to this sentence, provided that such Indemnitee shall not be obligated
to pay any such amount if a Lease Event of Default shall have occurred and be
continuing or to the extent that such amount would exceed (x) the aggregate
amount of all prior payments by Lessee to such Indemnitee under this Section 9.3
and Section 9.4 (including the payment of any amount necessary for such payments
to be on an After-tax Basis) less (y) the aggregate amount of all prior payments
by such Indemnitee to Lessee pursuant to this Section 9.3, and provided,
further, that, subject to Section 9.3.3 hereof, that any amount not paid to
Lessee pursuant to the foregoing limitation
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shall be carried forward to reduce pro tanto any future payments that Lessee may
be required to make to such Indemnitee pursuant to this Section 9.3.
(c) Any Taxes that are imposed on an Indemnitee as a
result of the disallowance or reduction of any Tax savings paid to Lessee
pursuant to this Section 9.3.3 shall be treated as a Tax for which Lessee is
obligated to indemnify such Indemnitee subject to the provisions of Section
9.3.2 (other than paragraph (a) thereof), provided that such Indemnitee shall
use reasonable good faith efforts to reclaim and retain the allowance of such
Tax savings.
(d) With respect to any Indemnitee [*], in
determining the order in which such Indemnitee utilizes any foreign Taxes as a
credit against such Indemnitee's home country Income Taxes, such Indemnitee
shall be deemed to utilize (i) first, all foreign Taxes other than those
described in clause (ii) below; (ii) then, all foreign Taxes with respect to
which such Indemnitee is entitled to obtain indemnification pursuant to an
indemnification provision contained in any lease, loan agreement, financing
document, participation agreement, or indemnification agreement (including this
Agreement).
9.3.4 CONTESTS
(a) Except as provided in Section 9.4, if a written
claim shall be made against and received by any Indemnitee for any Tax for which
Lessee is obligated to indemnify pursuant to this Section 9.3, such Indemnitee
shall notify Lessee in writing of such claim within 30 days after its receipt,
and shall provide Lessee such information regarding such claim as Lessee may
reasonably request; provided, however, that the failure to provide such notice
within such 30 days shall not release Lessee from any of its obligations to
indemnify under Section 9 unless, and only to the extent that, such failure has
a material adverse effect on the conduct of such contest. To the extent
permitted under applicable Law, such Indemnitee will not make any payments with
respect to such claim for at least 30 days after giving notice of such claim to
Lessee.
(b) If requested by Lessee in writing within 30 days
after its receipt of such notice, such Indemnitee shall, at the expense of
Lessee and subject to subsection (c) below, contest the validity, applicability
or amount of such Taxes by, in the case of an "Indemnitee-Controlled Contest"
(which shall mean any contest other than a Lessee-Controlled Contest (as defined
below)), in such Indemnitee's sole discretion or, in the case of a
"Lessee-Controlled Contest" (which shall mean any contest which such Indemnitee
agrees in its sole discretion to allow Lessee to control or involving only Taxes
with respect to which participation by neither the Indemnitee nor any Affiliate
of the Indemnitee is required (it being understood that any contest involving
Taxes in the nature of Income Taxes or any contest conducted in the name of such
Indemnitee is a contest requiring the participation of such Indemnitee) and no
tax return of the Indemnitee or any of its Affiliates is held open with respect
to which any Indemnitee may reasonably be viewed as having an actual or
potential material liability for Taxes not indemnified against by Lessee), in
Lessee's sole discretion, resisting payment thereof if practicable, not paying
such Tax except under protest, if protest is necessary and proper, if payment of
such Tax is made, using reasonable efforts to obtain a refund thereof, in
appropriate administrative and judicial proceedings, and in the case of an
Indemnitee-Controlled Contest, considering in good faith any other reasonable
action as Lessee and Lessee's counsel may reasonably request. Each
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Indemnitee shall consult in good faith with Lessee and Lessee's counsel
concerning the forum in which the contest is most likely to be favorably
resolved and whether such contest shall be by (x) resisting payment of such Tax,
(y) paying such Tax under protest or (z) paying such Tax and seeking a refund or
other repayment thereof. In the case of an Indemnitee-Controlled Contest, such
Indemnitee shall (i) keep Lessee reasonably informed regarding the progress of
such contest, and (ii) consult with Lessee in good faith regarding the manner of
contesting such claim, provided, however, that the Indemnitee shall have
ultimate control over such contest and its decisions with respect to such
contest shall be conclusive and binding. If requested to do so by Lessee, the
Indemnitee shall appeal any adverse administrative or judicial decision, [*]
(c) In no event shall an Indemnitee be required, or
Lessee be permitted, to contest the imposition of any Tax for which Lessee is
obligated pursuant to this Section 9.3 or Section 9.4 hereof unless (i) Lessee
shall have agreed to pay and shall promptly on request pay on an After-tax Basis
all reasonable out of pocket costs and expenses that such Indemnitee incurs in
contesting such claim or arising out of or relating to such contest and which
are reasonably allocable to such claim (including legal fees and disbursements,
including those on appeal, if any); (ii) (unless Lessee has provided to the
relevant Indemnitee a bond or other security in form and substance acceptable to
such Indemnitee in its sole discretion) such contest is not reasonably likely to
result in a material danger of the sale, seizure, forfeiture or loss of the
Aircraft, or the creation of any Lien thereon other than Liens for Taxes either
not yet due or being contested in good faith by appropriate proceedings and for
which such reserves, if any, as are required to be provided under GAAP have been
provided by Lessee; (iii) if such contest shall be conducted in a manner
requiring the payment of the claim, Lessee shall have advanced sufficient funds,
on an interest-free basis, to make the payment required, and shall have agreed
to indemnify the Indemnitee against any additional net after-Tax cost to such
Indemnitee of such advance; (iv) if requested by the Indemnitee in writing, such
Indemnitee shall have received an opinion of independent Tax counsel selected by
Lessee and reasonably acceptable to such Indemnitee and furnished at Lessee's
sole expense to the effect that a "Realistic Possibility of Success" (which
shall mean the standard upon which an attorney may properly advise the taking of
a position on a tax return as set forth in ABA Formal Opinion 85-352) exists for
contesting such claim (or, in the case of an appeal of an adverse judicial
determination, a written opinion from such independent Tax counsel to the effect
there is a Realistic Possibility of Success such adverse judicial determination
will be reversed or substantially modified); (v) Lessee shall have delivered to
such Indemnitee a written acknowledgment of Lessee's obligation to indemnify
such Indemnitee to the extent that the contest is not successful, provided,
however, that Lessee will not be bound by its acknowledgment of liability if the
contest is resolved on a clear and unambiguous basis showing no such liability
under this Section 9.3 or Section 9.4 hereof with respect to such Tax; (vi) if a
Lease Event of Default shall have occurred and be continuing, Lessee shall have
provided security for its obligation hereunder satisfactory to the Indemnitee by
placing in escrow sufficient funds to cover any such contested Tax and the
reasonably expected expenses of such contest on an After-tax Basis, or otherwise
providing satisfactory (as determined in such Indemnitee's sole discretion)
provisions for payment of such amounts; (vii) the aggregate amount of all
indemnity payments that Lessee may be required to make to such Indemnitee with
respect to such claim (or similar or related claims) is at least $10,000 [*] and
(viii) the claim is not for a Tax the imposition of which has been previously
contested by Lessee hereunder, and such previous contest (including all
allowable appeals) was decided adversely to Lessee, unless Lessee has delivered
an opinion of independent Tax counsel selected by Lessee and reasonably
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acceptable to the Indemnitee to the effect that, on the basis of (x) a change in
applicable Law, or (y) a difference in the underlying facts, there is currently
a Realistic Possibility of Success for contesting such claim.
(d) With respect to any Indemnitee [*], if such
Indemnitee shall obtain a refund of all or any part of any Tax paid, advanced or
indemnified by Lessee (or of an amount which otherwise would have been a refund
was used to offset another liability of such Indemnitee not indemnified by
Lessee hereunder (an "Applied Amount")), such Indemnitee shall pay Lessee, but
not before Lessee shall have made all payments theretofore due to such
Indemnitee pursuant to this Section 9.3 and any other payments theretofore due
to such Indemnitee under any of the Operative Agreements, an amount equal to the
amount of such refund (or such Applied Amount), including interest received or
credited and attributable thereto plus, if Lessee has paid an amount pursuant to
the first sentence of Section 9.3.3(a), any net Tax benefit (or minus any net
Tax detriment) realized by such Indemnitee as a result of any refund (or Applied
Amount) received, and payment made, by such Indemnitee pursuant to this
sentence, provided that the Indemnitee shall not be obligated to pay any amount
under the preceding sentence to the extent that such amount (other than that
portion attributable to interest) would exceed the amount of Taxes paid,
reimbursed or advanced by Lessee to such Indemnitee plus any other payment in
respect of such Taxes paid, reimbursed or advanced, provided, further, that any
amount not paid to Lessee pursuant to the foregoing limitation shall be carried
forward to reduce pro tanto any future payments that Lessee may be required to
make to such Indemnitee pursuant to this Section 9.3. If any Indemnitee shall
have paid Lessee any refund (or Applied Amount) of all or part of any Tax paid
by Lessee and it is subsequently determined pursuant to a contest conducted in
accordance with Section 9.3.4 that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for which
Lessee is obligated to indemnify such Indemnitee pursuant to the provisions of
this Section 9.3 subject to the exclusions set forth in Section 9.3.2. With
respect to an Indemnitee [*], if an Indemnitee receives an award of attorneys
fees in a contest for which the Lessee has paid an allocable portion of the
contest expenses, such Indemnitee shall pay to the Lessee the same proportion of
the amount of such award as the amount of such Indemnitee's attorneys fees paid
or reimbursed by the Lessee bears to the total amount of attorneys fees actually
incurred by such Indemnitee in conducting such contest, up to the amount of
attorneys fees paid or borne by the Lessee in connection with such contest. With
respect to an Indemnitee [*], an Indemnitee shall have the right to settle or
compromise a contest that it is otherwise required to pursue pursuant to this
Section 9.3.4 if the applicable Indemnitee has provided Lessee a reasonable
opportunity to review a copy of that portion of the settlement or compromise
proposal which relates to the Tax for which the applicable Indemnitee is seeking
indemnification hereunder; provided that, if (i) the applicable Indemnitee fails
to provide the Lessee such a reasonable opportunity to review such portion of
such proposal or (ii) after such reasonable opportunity to review such proposal
the Lessee in writing reasonably withholds its consent to all or part of such
settlement or compromise proposal, the Lessee shall not be obligated to
indemnify such Indemnitee hereunder to the extent of the amount attributable to
the Tax to which such settlement or compromise relates as to which the Lessee
has reasonably withheld its consent and with respect to any other Tax for which
a successful contest is foreclosed because of such settlement or compromise as
to which the Lessee has withheld its consent. If the applicable Indemnitee
effects a settlement or compromise of such contest, notwithstanding that the
Lessee has reasonably withheld its consent thereto, such Indemnitee shall repay
to the Lessee such amounts theretofore advanced by the
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Lessee pursuant to this Section 9.3.4 and the amount of any Tax subject to such
contest paid or reimbursed by Lessee, to the extent the Lessee has reasonably
withheld its consent to the settlement or compromise thereof (together with
interest at the rate applicable to refunds of such Tax on any such amount paid
by the Lessee from the date paid by the Lessee to the date repaid by such
Indemnitee).
(e) [*] if [*] Lender shall obtain a refund of all or
any part of any Tax paid, advanced or indemnified by Lessee (or if an amount
which otherwise would have been a refund was used to offset another liability of
the Lender not indemnified by Lessee hereunder (an "Applied Amount")), such
Lender shall pay Lessee, but not before Lessee shall have made all payments
theretofore due to the Lender pursuant to this Section 9.3 and any other
payments theretofore due the Lender under any of the Operative Agreements, an
amount equal to the amount of such refund (or such Applied Amount), including
interest received or credited and attributable thereto plus, if Lessee has paid
an amount pursuant to the first sentence of Section 9.3.3(a), any net Tax
benefit (or minus any net Tax detriment) realized by such Lender as a result of
any refund (or Applied Amount) received, and payment made, by such Lender
pursuant to this sentence, provided that such Lender shall not be obligated to
pay any amount under the preceding sentence [*] and (ii) to the extent that such
amount (other than that portion attributable to interest) would exceed the
amount of Taxes paid, reimbursed or advanced by Lessee to such Lender plus any
other payment in respect of such Taxes paid, reimbursed or advanced. If such
Lender shall have paid Lessee any refund (or Applied Amount) of all or part of
any Tax paid by Lessee and it is subsequently determined pursuant to a contest
conducted in accordance with Section 9.3.4 that the Lender was not entitled to
the refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify the Lender pursuant to the provisions of
this Section 9.3. If such Lender receives an award of attorneys fees in a
contest for which the Lessee has paid an allocable portion of the contest
expenses, the Lender shall pay [*] to the Lessee the same proportion of the
amount of such award as the amount of the Lender's attorneys fees paid or
reimbursed by the Lessee bears to the total amount of attorneys fees actually
incurred by the Lender in conducting such contest, up to the amount of attorneys
fees paid or borne by the Lessee in connection with such contest.
(f) Nothing contained in this Section 9.3.4 shall
require any Indemnitee to contest, or permit Lessee to contest in the name of
such Indemnitee, a claim which such Indemnitee would otherwise be required to
contest pursuant to this Section 9.3.4 if such Indemnitee shall waive payment by
Lessee of any amount that might otherwise be payable by Lessee under this
Section 9.3 in connection with such claim (and any other claim for which a
successful contest would be foreclosed because of the absence of, or the failure
to pursue, such contest) and promptly [*] pay Lessee an amount equal to all
funds advanced with respect to such contest by Lessee.
9.3.5 REPORTS
Lessee will provide such information reasonably within its possession
or control as may reasonably be requested by an Indemnitee to enable an
Indemnitee to fulfill its Tax filing or other information reporting requirements
with respect to the transactions contemplated by the Operative Agreements. If
any report, return or statement is required to be filed with respect to any Tax
which is subject to indemnification under this Section 9.3, to the extent
legally
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permitted to do so Lessee shall timely file the same (except for any such
report, return or statement which the Indemnitee has notified Lessee that the
Indemnitee intends to file, or for Income Tax returns or any other return,
report or statement which the Indemnitee is required by law to file in its own
name); provided that Lessee shall have no obligation under the preceding
sentence if such Indemnitee, after receipt of Lessee's written request, shall
have failed to furnish Lessee with such information as is within such
Indemnitee's control and is necessary to file such returns. Lessee shall either
file such report, return or statement required to be filed by it pursuant to the
second preceding sentence and send a copy of such report, return or statement to
the Indemnitee, or, where Lessee is not so permitted to file such report, return
or statement, it shall notify the Indemnitee of such requirement and prepare and
deliver, subject to the immediately preceding sentence, such report, return or
statement to the Indemnitee in a manner reasonably satisfactory to such
Indemnitee within a reasonable time prior to the time such report, return or
statement is to be filed.
9.3.6 PAYMENT
Except as provided in Section 9.3.4 regarding Lessee's right to contest
certain claims for Taxes, Lessee shall pay any Tax for which it is liable
pursuant to this Section 9.3 directly to the appropriate taxing authority or,
upon demand of an Indemnitee, to such Indemnitee within 20 Business Days of such
demand, but in no event more than three Business Days prior to the date such Tax
is due, in Immediately Available Funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail the amount of the payment and the
facts upon which the right to payment is based (all in accordance with Section
9.3) and shall be verified in accordance with the procedures set forth in clause
9.3.11 below. Each Indemnitee shall promptly forward to Lessee any notice, xxxx
or advice in the nature of a notice or xxxx received by it concerning any Tax
subject to indemnification hereunder. As soon as practicable after each payment
by Lessee of any Tax, Lessee shall furnish the appropriate Indemnitee the
original or a certified copy of a receipt for Lessee's payment of such Tax (if
Lessee receives such a receipt) or such other evidence of payment of such Tax as
is reasonably acceptable to such Indemnitee.
9.3.7 DEFINITION OF INDEMNITEE
For purposes of this Participation Agreement, the term "Indemnitee"
means each of Owner Participant, Owner Trustee (in its individual capacity and
as trustee), the Trust Estate, Lender, and Security Trustee (in its individual
capacity and as such under the Security Agreement) and each of their respective
affiliates, successors, permitted assigns, directors, officers, employees,
servants and agents. For purposes of this Section 9.3 and Section 9.1, the term
"Indemnitee" shall also include any consolidated or combined group of which such
Indemnitee is a member if such group is treated as a single taxpayer for
purposes of any Tax.
9.3.8 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF
DEFAULT
Any amount payable to Lessee pursuant to the terms of this Section 9.3
shall not be paid to Lessee if at the time such payment is to be made a Lease
Event of Default shall have occurred and be continuing. At such time as there
shall not be continuing any such Lease Event of Default, Payment Default or
Bankruptcy Default, such amount shall be paid to Lessee (without
56
interest) to the extent not applied against Lessee's obligations then due and
owing hereunder or under any of the other Operative Agreements.
9.3.9 FORMS
(a) With respect to an Indemnitee [*], each such
Indemnitee agrees to furnish from time to time to Lessee, or to such other
person as Lessee may designate, at Lessee's written request or pursuant to the
terms of the Operative Agreements, such duly executed and properly completed
forms as may be necessary or appropriate in order to claim any reduction of, or
exemption from, any Tax which Lessee may be required to indemnify against
hereunder, unless such Indemnitee determines, pursuant to an opinion of counsel
selected by such Indemnitee and reasonably satisfactory to Lessee, which opinion
is to be provided at Lessee's sole cost and expense, that it is not entitled to
claim such reduction or exemption; provided that Lessee has provided such
Indemnitee timely notice of such requirement, such Indemnitee has in good faith
determined it would suffer no adverse consequences as the result of providing
such forms and Lessee agrees to pay the costs and expenses of providing such
forms on an after-tax basis.
(b) [*]
9.3.10 REIMBURSEMENTS BY INDEMNITEES GENERALLY
If, for any reason, Lessee makes any payment which Lessee is required
by applicable Law or by the Operative Agreements to make for or with respect to
any Taxes imposed on any Indemnitee in respect of the transactions contemplated
by the Operative Agreements or on the Aircraft or any Equipment, and such Taxes
are not the responsibility of Lessee pursuant to Section 9.3.2, then such
Indemnitee shall pay to Lessee within 20 Business Days of Lessee's written
demand therefor an amount which equals the amount paid by Lessee with respect to
such Taxes (minus any withholding taxes imposed thereon).
9.3.11 VERIFICATION
At Lessee's request, the amount of any indemnity payment by Lessee
pursuant to this Section 9.3, or any payment by an Indemnitee to Lessee pursuant
to this Section 9.3, shall be verified by an accounting firm to be jointly
selected by Lessee and the Indemnitee (which may not be the accounting firm that
regularly prepares the Indemnitee's or Lessee's certified financial statements).
Each Indemnitee and Lessee hereby agrees to provide such accounting firm with
all information and materials as shall be reasonably necessary or desirable in
connection herewith. Such accounting firm shall be requested to make its
determination within 30 Days. In the event such accounting firm shall determine
that such computations are incorrect, then such firm shall determine what it
believes to be the correct computations. The computations of the accounting firm
shall be final, binding and conclusive upon Lessee and Indemnitee. All fees and
expenses payable pursuant to this Section shall be borne by Lessee unless the
verification results in a reduction of the amount payable by Lessee (or an
increase in the amount payable by the Indemnitee to Lessee) of more than five
percent (5%), in which case such expense shall be borne by the Indemnitee.
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9.4 WITHHOLDING TAXES
9.4.1 WITHHOLDING TAXES ON LOAN PAYMENTS
Without regard to the exclusions set forth in Section 9.3.2 and except
as otherwise provided below, all payments to Lender under the Operative
Agreements shall be made without deduction or withholding for or on account of
any present or future Taxes whether or not collected by way of withholding or
deduction from any payment thereunder, except as required by applicable Law. If
any amount payable to Lender under any of the Operative Agreements (including
the Loan Documents) becomes subject to any Tax imposed by way of withholding or
deduction, [*] other than (i) any Taxes imposed by a Government Entity within
the jurisdiction of which such Lender is incorporated or maintains its principal
place of business (but excluding any such Taxes resulting from the presence,
activities or conduct of the Owner Participant or the Lessee or any Affiliate of
either in such jurisdiction), and (ii) any Taxes in excess of Taxes that would
have been imposed if such Lender had not engaged in any business in or had any
presence or contact in the jurisdiction imposing such Taxes other than any
business, presence or contact as a result of the operation, presence,
registration or location of the Aircraft in such jurisdiction or as a result of
the transactions contemplated by the Operative Agreements), Lessee [*] shall
indemnify and hold harmless Lender without regard to the exclusions set forth in
Section 9.3.2 (provided that the Lender has complied with the obligations set
forth in Section 9.3.9), against such Taxes and shall pay an additional amount
for distribution to Lender so that the net amount actually received by Lender,
after reduction by any such withholding tax including any reduction for
withholding applicable to additional sums payable under this Section 9.4, shall
be equal to the full amount that Lender would have otherwise received under the
Operative Agreements [*] whenever any withholding taxes are paid by Lessee,
Lessee shall promptly forward to Lender an official receipt (or certified copy
thereof) or other documentation reasonably acceptable to Lender evidencing
such payment to the relevant tax authority.
9.4.2 LENDER RESPONSIBILITY [*]
[*] Such Lender will make any indemnity under this Section [*] promptly
[*].
9.4.3 LESSEE INDEMNITY [*]
Notwithstanding anything in the Operative Agreements to the contrary
and without regard to the exclusions in Section [*] (but subject to Section [*]
and Lender's compliance with its obligations under Section [*].
9.4.4 CONTESTS
Notwithstanding anything to the contrary herein, in the event a U.S.
Withholding Tax is imposed or required to be withheld from any payment to Lender
under the Operative Agreements, the provisions of Section 9.3.4 regarding
contests shall govern [*], (i) Lender, Lessor or Lessee, as the case may be,
promptly and in writing shall notify each other, Owner Participant and Owner
Trustee immediately upon being informed of such imposition or requirement
(unless such party is so informed by the other), (ii) [*] (iii) any contest
concerning the imposition of a U.S. Withholding Tax shall in all events
constitute an Indemnitee-Controlled Contest (within the meaning of Section
9.3.4(b)) in which Lender shall control, [*].
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9.4.5 ADDITIONAL INDEMNIFICATION OF CERTAIN PAYORS
Lessee hereby agrees to indemnify and hold harmless Security Trustee,
the Owner Trustee, and the Owner Participant, to the extent otherwise provided
in Section 9.3 or this Section 9.4 from and against all liability imposed
against such party as a result of its compliance with any of Section 5.8 of the
Loan Agreement, or Section 3.8 of the Security Agreement.
9.4.6 FOREIGN TAX ON LOAN PAYMENTS
If an Owner Participant is incorporated or organized in, or maintains a
place of business or conducts activities in, a country other than the United
States or in a territory, possession or commonwealth of the United States
(within the meaning of the tax law of that foreign jurisdiction) and if as a
result thereof any foreign Taxes (including withholding Taxes) are imposed on
the Lender, then Owner Participant shall reimburse Lessee for any payments
Lessee is required to make to or on behalf of Lender under Section 9.3 or this
Section 9.4 as a result of the imposition of such Taxes. The amount payable by
Owner Participant to Lessee shall be an amount which, after taking into account
any such Taxes, any Tax imposed upon the receipt or accrual by Lessee of such
payment by Owner Participant and any tax benefits or tax savings realized by
Lessee with respect to the payment of such withholding Tax or the payment
hereunder, shall equal the amount of Lessee's payment to or on behalf of Lender.
9.5 INCREASED COSTS.
If (1) the adoption, after the date hereof, of any applicable Law, rule
or regulation regarding capital adequacy, (2) any change, after the date hereof,
in the interpretation or administration of any such law, rule or regulation by
any central bank or other Government Entity charged with the interpretation or
administration thereof or (3) compliance by a Lender or any corporation or bank
controlling a Lender with any applicable guidelines or requests of general
applicability, issued after the date hereof, by any central bank or other
Government Entity (whether or not having the force of law) that constitutes a
change of the nature described in clause (2), has the effect of (x) requiring an
increase in the amount of capital required to be maintained by a Lender or any
corporation or bank controlling a Lender or (y) reducing the rate of return on
assets or capital of such Lender (or such corporation or bank) and such
adoption, change or compliance, as the case may be, relates to a category of
claims or assets that includes such Lender's Loans, the Lessee shall pay to such
Lender from time to time such additional amount or amounts as are necessary to
compensate such Lender for such portion of such increase or reduction as shall
be reasonably allocable to such Lender's Loans or obligations to the Lessee
hereunder; PROVIDED that no such amounts shall be payable by the Lessee to any
Lender pursuant to this Section unless such Lender certifies to the Lessee that,
such Lender is assessing to its other Lessees (of loans similar to the Loans)
comparable allocable costs, PROVIDED, FURTHER, that the Lessee shall have no
obligations under this Section after consummation of any Assignment of the
Loans, in whole or in part, except with respect to any part retained by the
Lender.
Each Lender will notify the Lessee of any event occurring after the
date of this Agreement that will entitle such Lender to compensation pursuant to
this Section as promptly as practicable but in any event within 90 days, after
such Lender obtains Actual Knowledge thereof; PROVIDED, HOWEVER, that if any
Lender fails to give such notice within 90 days after it obtains
59
Actual Knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section in respect of any costs resulting
from such event, be entitled to payment under this Section only for costs
incurred from and after the date 90 days prior to the date that such Lender does
give such notice. Such notice shall describe in reasonable detail the
calculation of the amounts owed under this Section. Determinations by a Lender
for purposes of this Section of the effect of any increase in the amount of
capital required to be maintained by the bank and of the amount allocable to
such Lender's obligations to the Lessee hereunder shall be PRIMA FACIE evidence
of the amounts owed under this Section.
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS
10.1 OWNER PARTICIPANT, OWNER TRUSTEE; LENDER AND LESSEE
10.1.1 OWNER PARTICIPANT
(a) Owner Participant shall not Transfer any or all
of its right, title or interest in the Trust Estate or the Trust Agreement and
to this Agreement unless:
(i) The Transferee shall have full power,
authority and legal right to execute and deliver and to
perform the obligations of Owner Participant under this
Agreement and the other Owner Participant Agreements and shall
provide reasonably satisfactory evidence of such power and
authority to Lessee, Lender, Owner Trustee and Security
Trustee;
(ii) The Transferee shall enter into one or
more legal, valid, binding and enforceable agreements
effective to confirm that such Transferee agrees to be bound
by all the terms of, and to undertake all of the obligations
arising after such transfer of, the transferring Owner
Participant contained in the Owner Participant Agreements and
in which it makes representations and warranties substantially
the same as those contained in Section 6.2 of this
Participation Agreement;
(iii) Lessee shall not be obligated to pay
any greater amount or incur any greater obligation than that
which it would have been obliged to pay or incur under the
Lease or other Lessee Operative Agreement if no transfer or
assignment had taken place, and the terms and conditions of
the Lease and the other Lessee Operative Agreements insofar as
they relate to the rights and obligations of Lessee or the
Lender shall not be altered;
(iv) Owner Participant shall deliver to
Lessee, Owner Trustee, Lender and Security Trustee an opinion
of counsel reasonably satisfactory to each of them (which, if
the Transferee is an Affiliate of the Owner Participant, may
be in-house counsel to such Owner Participant) to the effect
that such agreement or agreements referred to in Section
10.1.1(a)(ii) and, if applicable, 10.1.1(a)(vi) are legal,
binding and enforceable in accordance with its or their terms
and that such transfer will not violate applicable securities
laws, the Act or any other applicable Law and is in accordance
with this Section 10.1.1;
60
(v) The Transferee is a Citizen of the
United States (it being understood that the existence of any
such requirement is to be determined without giving
consideration to Section 47.9 of the FAA Regulations or any
other provision that would restrict Lessee's use or operation
of the Aircraft), or shall use a voting powers trust or
similar arrangement in order to hold an interest in the Trust
Estate such that the Aircraft can be registered in the United
States (without giving consideration to Section 47.9 of the
FAA Regulations or any other provision that would restrict
Lessee's use or operation of the Aircraft);
(vi) The Transferee shall be one person and
shall be either (A) a Permitted Institution or (B) any other
person (other than, without Lessee's consent, a commercial air
carrier, a commercial aircraft operator, a freight forwarder
or an Affiliate of any of the foregoing) the obligations of
which under the Owner Participant Agreements are guaranteed by
a Permitted Institution in any case, pursuant to a written
guaranty, in form and substance reasonably satisfactory to
Lessee, Lender, Owner Trustee and Security Trustee; and
(vii) The Transferee shall be a "U.S.
Person" as defined in Section 7701(a)(30) of the Code (or
any successor provision thereto).
(b) Owner Participant shall give written notice to
Lessee, Security Trustee, Lender and Owner Trustee at least ten days prior to
any such Transfer, specifying the name and address of the proposed Transferee,
and providing financial statements of the proposed Transferee evidencing
satisfaction of the requirements described in Section 10.1.1(a)(vi)(A) or (B)
above.
(c) Any fees, charges and expenses, including the
reasonable legal fees, charges and expenses incurred by Lessee, Owner
Participant, Security Trustee, Lender or Owner Trustee in connection with any
Transfer by Owner Participant permitted by this Section 10.1.1, or by the
Transferee in any such case, will be paid for by Owner Participant.
10.1.2 OWNER TRUSTEE
Owner Trustee may transfer its interests in the Trust Agreement
pursuant to Section 9 thereof.
10.1.3 LENDER
(a) Lender shall not assign or transfer its rights or
obligations under this Agreement or the Note, including any participation in the
Note involving the transfer by the Lender of voting rights to, or the creation
of contractual privity between the Borrower and any such participant in the
Note.
(b) (1)Notwithstanding paragraph (a) of this Section
10.1.3, the Lender may assign or transfer (as aforesaid) all (but not less than
all) of its rights and obligations under this Agreement and the other Operative
Agreements if all of the following conditions are met: (i) [*] (ii) the Lender
concurrently assigns to the assignee of this Agreement all of its rights and
obligations under the other Operative Agreements to which it is a party, (iii)
neither Lessee,
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Owner Trustee or Owner Participant will be obligated to pay any amount under any
Operative Agreement in excess of the amount that would have been payable to the
Lender had such assignment not occurred, (iv) the assignee enters into an
assumption agreement or agreements, whereby the assignee confirms that it shall
be deemed a party to such Operative Agreements and agrees to be bound by all of
the terms of, and to undertake all of the obligations of, the Lender contained
in the Operative Agreements, and in which the assignee makes representations and
warranties as to immunities substantially equivalent to those of the Lender
contained herein, (v) unless a Lease Event of Default has occurred and is
continuing, each of the Lessee and the Owner Participant is given 30 days'
written notice in advance of such assignment or transfer (or such lesser period
of notice as is reasonably practicable under the circumstances), (vi) the Lender
delivers to Lessee and the Owner Participant on or prior to the date of such
assignment the certificate of a duly authorized Director or the President of the
Lender to the effect that each of the conditions set forth in clauses (i), (ii),
(iii), (iv) and (v) of this paragraph (b) has been complied with as of the date
of such assignment, (vii) the Lender delivers to Lessee and the Owner
Participant an opinion or opinions of counsel reasonably acceptable to Lessee to
the effect that the assumption agreement referred to in clause (iv) has been
duly authorized, executed and delivered by the assignee and is enforceable
against the assignee in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally or by general principles of equity and (viii)
unless a Lease Event of Default has occurred and is continuing, in the case of
the Lessee, or a Loan Event of Default not constituting a Lease Event of Default
has occurred and is continuing, in the case of the Owner Participant, the Lender
agrees to reimburse Lessee and Owner Participant for all reasonable and
documented out-of-pocket costs and expenses incurred by it in connection with
such assignment or transfer by the Lender.
(2) Notwithstanding paragraph (a) of this Section
10.1.3 and subject to Section 10.1.3(d)(iv), the Lender may
assign or transfer (as aforesaid) in whole or in part its
rights and obligations under this Agreement and the other
Operative Agreements (any such transaction, an "ASSIGNMENT");
PROVIDED that all the conditions under this clause (2) are
met. Any such Assignment may be made by the [*] Lender to an
assignee as part of a securitization transaction involving the
Loan in whole or in part (a "SECURITIZATION"). With respect to
any Assignment:
(i) each party hereto agrees that, with
respect to a Securitization, a special purpose entity
(an "SPV") organized in a manner acceptable to the
placement agents, rating agencies and other
participants in the transaction shall be an
acceptable successor Lender under the Operative
Agreements (it being understood that such SPV may
only have nominal capitalization) with the result
that neither Lender nor BNDES will be responsible for
the performance of the obligations of the Lender
under the Operative Agreements with respect to the
period after the date of assignment to the extent the
SPV assumes such obligations;
(ii) Lessee agrees that, with respect to a
Securitization, solely involving loans made under the
Funding Agreement, in connection with an optional
prepayment of the Loan by the Lessee after the date
of such Securitization the Lessee will agree to pay
as Supplemental Rent, to the
62
extent that the principal amount of the Loan is
insufficient to repay the principal amount of the
SPV's securities corresponding to such principal
amount of the Loan plus a market-based make-whole
premium (calculated with a discount rate not less
than the prevailing yield on U.S. Treasury securities
having approximately the same average life as the
average life of the SPV's securities without any
margin) on such principal amount of the SPV's
securities, an amount equal to such deficiency;
(iii) each party hereto agrees that the
Operative Agreements, closing documents and legal
opinions may be disclosed to the rating agencies,
underwriters, investors, agents and trustees and
other parties in the Assignment, and their respective
counsel, insurance brokers, auditors, agents and
advisors who agree to hold such information
confidential;
(iv) each party hereto agrees that the
transaction may be structured in a manner determined
by the Lender and its advisors within the parameters
of this clause (b)(2) to include the possibility in a
Securitization of a pre-funded structure in which the
Lender continues to initially finance the debt
portion of Lessor's Cost;
(v) each party hereto agrees that the SPV
may create a perfected lien on the Loan Agreement and
related Operative Agreements to secure the
indebtedness of the SPV to its lenders; and
(vi) Lessee agrees to name the SPV (or other
successor Lender) an additional insured on liability
insurance and as an indemnitee with respect to
indemnifications contained in the Operative
Agreements, and to continue to name the Security
Trustee as loss payee on hull insurance.
(3) At the request of the Lender, Owner Participant
agrees to cooperate reasonably with any Assignment that is
structured and proposed to be documented reasonably in light
of market standards and as a result of which Owner
Participant's obligations under the Operative Agreements are
not increased, PROVIDED that the Lender shall pay all of the
reasonable out of pocket costs and expenses of Owner
Participant (including reasonable fees and disbursements of
outside counsel to Owner Participant, subject to such counsel
providing estimates, periodic reports and documented
invoices).
(4) At the request of Lender, Lessee agrees to
cooperate reasonably with any Assignment that is structured
and proposed to be documented reasonably in light of market
standards, PROVIDED that (i) Lessee's obligations under the
Operative Agreements shall not be increased as a result of any
such transaction (except to the extent provided in paragraph
d(iv) below), (ii) the Lender pays all reasonable
out-of-pocket costs and expenses of Lessee (including
reasonable fees and disbursements of outside counsel to
Lessee, subject to such counsel providing estimate and
periodic reports and invoices) in connection with an
Assignment, and (iii) in a Securitization, the [*] Lender
agrees to indemnify Lessee for any
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liabilities, obligations, losses or damages incurred by Lessee
as a result of such Assignment (except to the extent provided
in paragraph d(iv) below), subject to normal exceptions,
provided that such indemnity shall not include Taxes which are
the subject matter of the Tax Indemnity Agreement or
liabilities thereunder. Lessee's agreement to cooperate
reasonably with Assignments that are structured and proposed
to be documented reasonably in light of market standards shall
include the following, in each case with respect to not more
than one Assignment per calendar year:
(A) to make available to the
underwriters (or investors, as
applicable) a reasonable
opportunity to conduct
customary due diligence with
respect to Lessee and its
Subsidiaries;
(B) if requested by the Lender, to
provide customary legal
opinions and accountants'
comfort letters and to
consider in good faith such
amendments to the Operative
Agreements as may be
reasonably requested by the
Lender in order to close the
Assignment in the then current
market conditions, such
possible amendments to include
adjustments of payment dates
to facilitate the Assignment
(subject to the consent of
Owner Participant, not to be
unreasonably withheld); and
(C) to make good faith efforts to
accommodate the timing of such
Assignment proposed by the
Lender, PROVIDED that Lessee
shall not be obligated to
cooperate in any such
Assignment if Lender's
proposed timing would
interfere with another similar
financing transaction proposed
by Lessee, PROVIDED, FURTHER,
that Lessee shall be available
to cooperate in at least one
such Assignment per calendar
year on a timing basis
reasonable for such an
Assignment.
(c) With respect to the non-economic covenants of
Lessee in the Operative Agreements, it is agreed by all parties hereto that such
provisions shall be amended, at the request of the Lender, prior to any
Assignment involving an assignment or transfer of the Loan in its entirety, in
order to reflect either the agreement of the parties with respect to such
provision after an Assignment as set forth in the Operative Agreements, or if no
such agreement is set forth in the Operative Agreements, the then current market
standard for transactions similar to the proposed Assignment which have been
closed by Lessee within twelve (12) months prior to the proposed Assignment,
PROVIDED that Owner Participant shall not be obligated to agree to any amendment
that, in its reasonable judgment, would have a material adverse affect on Owner
Participant under any of the Operative Agreements.
64
(d) (i) The Lender may, in the ordinary course of its
business and in accordance with applicable Law, at any time sell to one or more
banks or other entities ("LOAN PARTICIPANTS") participating interests in either
of the Note issued to Lender, and the Lender's related rights and/or obligations
under the other the Operative Agreements. In the event of any such sale by a
Lender of a participating interest to a Loan Participant, such Lender's
obligations under the other Operative Agreements to the other parties thereto
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of the Note for all
purposes under the Operative Agreements, and Lessee and the Security Trustee
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under the Operative Agreements.
(ii) The Lender further agrees that any
Assignment will be subject to the provisions of clauses (iv)
(with respect to the Loan or the portion thereof transferred,
as the case may be), (v), (vi) (as to clauses (iv) and (v))
and (viii) of Subsection 10.1.3(b)(1); PROVIDED, HOWEVER, that
no transferee (in an Assignment or Securitization) will be
obligated to assume the liabilities of the transferring Lender
with respect to its indemnities, misrepresentations or failure
to perform covenants hereunder or under the other Operative
Agreements . Notwithstanding the preceding proviso, each
transferring Lender [*] will retain and will not be relieved
of any of its liabilities referred to in the preceding
proviso.
(iii) The Lender further agrees that it will
not transfer any Loan or the Note or interest therein in
violation of the U. S. federal or applicable state or foreign
securities Law. The Lender agrees that it will not sell,
assign, convey, exchange or otherwise transfer any Loan or
Note or any interest in, or represented by, any Loan or Note
unless (it being understood that if the transferee is the SPV,
this provision shall not apply to the transfer to the SPV, but
rather to the acquiror of securities issued by the SPV) (the
"SPV SECURITIES"):
(A) the proposed transferee either
(w) provides a written
representation to the Lessee,
or (x) is deemed to represent
by acquisition of the SPV
Securities or the Loan or Note
or interest therein that
either (a) no portion of the
funds it uses to purchase,
acquire and hold the Loan or
Note or interest therein or
SPV Securities (as applicable)
constitutes, or may be deemed
under the Code or ERISA or any
regulations or rules
thereunder to constitute, the
assets of any Plan subject to
Title I of ERISA or Section
4975 of the Code, or (b) the
transfer and subsequent
holding of the Loan, Note or
interest therein or SPV
Securities (as applicable)
shall not involve and/or give
rise to a transaction that
constitutes a prohibited
transaction within the meaning
of Section 406 of ERISA or
Section 4975(c)(1) of the Code
involving Lessee
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(other than a transaction that
is exempted from the
prohibitions of such sections
by applicable provisions of
ERISA or the Code or
administrative exemptions or
regulations issued
thereunder); and
(B) each subsequent transferee is
obligated to also make the
representation or deemed
representations described in
clause (A) above.
Notwithstanding the foregoing, a proposed transferee shall only be
permitted to make the "deemed" representation described above, rather than the
"written" representation described above, if the proposed transferee is
acquiring the SPV Securities or the Loan or Note or interest therein (as
applicable) (y) in connection with a registered public offering or an offering
pursuant to Securities Act of 1933 Rule 144A (or any successor rules) (a "BROAD
BASED OFFERING") (as distinguished from a privately negotiated private
placement) or (z) in connection with a subsequent transfer of such SPV
Securities, Loan or Note or interest therein (as applicable) following a
previous Broad Based Offering.
If the proposed transferee is the SPV, the SPV shall provide the
Lessee, with a written representation to the effect that, based upon, and
subject to the accuracy of the representations made by the acquirors of the SPV
Securities described above, either (a) no portion of the funds it uses to
purchase, acquire and hold the Loan, Note or interest therein constitutes, or
may be deemed under the Code or ERISA or any regulations or rules thereunder to
constitute, the assets of any Plan subject to Title I of ERISA or Section
4975(c)(1) of the Code or (b) the transfer and subsequent holding of the Loan,
Note or interest therein shall not involve or give rise to a transaction that
constitutes a prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975(c)(1) of the Code involving Lessee (other than a transaction
that is exempted from the prohibitions of such sections by applicable provisions
of ERISA or the Code or administrative exemptions or regulations issued
thereunder).
(iv) In the event that the Loan or any
interest therein is transferred in whole or in part by the
Lender to a transferee that is not a [*], such transferee
shall not be entitled to any greater payments with respect to
withholding Tax than the Lender would have been entitled to
absent the transfer, PROVIDED, HOWEVER, that in the case of a
Lender organized in a Tax Treaty Country, the transferee shall
be entitled to indemnification for withholding Taxes that
would be subject to indemnification absent this Section
10.1.3(d)(iv) [*], PROVIDED that (A) such Lender delivers
(upon written request of the Lessee) a properly completed IRS
Form W-8BEN or W-8ECI (or successor forms) evidencing an
exemption from U.S. Withholding Tax unless such Lender is not
entitled to deliver such form due to a change in law after the
date of the transfer, and (B) a change in the income tax
treaty between the United States and such country which had
been proposed prior to the transfer date or a change in the
nature of an anti-treaty shopping or limitation on benefits
provision, shall not constitute a change in law and PROVIDED,
FURTHER, that, [*] to the extent such transferee would be
subject to U.S. Withholding Taxes on the date of the transfer,
the Lessee shall not be liable for such U.S. Withholding
Taxes.
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10.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with Section 10.1.1, 10.1.2 or 10.1.3
(other than any Transfer by Lender, to the extent it only grants participations
in the Note or in its beneficial interest therein), Transferee shall be deemed
an "Owner Participant," "Owner Trustee," or a "Lender," respectively, for all
purposes of this Agreement and the other Operative Agreements and, in the case
of a Transferee of Owner Participant or Lender, shall be deemed to have paid its
ratable portion of Lessor's Cost previously made by Owner Participant or Lender,
respectively, making such conveyance and represented by the interest being
conveyed, and each reference herein to Owner Participant, Owner Trustee or
Lender, respectively, shall thereafter be deemed a reference to such Transferee
for all purposes, and the transferring Owner Participant, Owner Trustee, or
Lender shall be released (except, in the case of Owner Participant, to the
extent of any guaranty provided by it under Section 10.1.1(a)(vi)) from all of
its liabilities and obligations under this Agreement and any other Operative
Agreements to the extent such liabilities and obligations arise after such
Transfer and, in each case, to the extent such liabilities and obligations are
assumed by the Transferee; PROVIDED that such transferring Owner Participant,
Owner Trustee, or Lender (and its respective Affiliates, successors, assigns,
agents, servants, representatives, directors and officers) will continue to have
the benefit of any rights or indemnities under any Operative Agreement vested or
relating to circumstances, conditions, acts or events prior to such Transfer.
SECTION 11. REFUNDING AND CERTAIN OTHER MATTERS
11.1 REFUNDING GENERALLY
Subject to Sections 11.2 and 11.4, in the event that at any time Lessee
shall have given written notice to Owner Participant, Owner Trustee, and
Security Trustee that Lessee is requesting a voluntary redemption of all, but
not less than all, of the outstanding Note (in compliance with the provisions of
Section 2.05(e) of the Loan Agreement) by Owner Trustee as part of a refunding
transaction, Owner Participant agrees to negotiate in good faith and promptly
conclude an agreement with Lessee as to the terms of such refunding transaction
(including the terms of any debt to be issued in connection with such refunding
transaction and the documentation to be executed in connection therewith), and
after Lessee and Owner Participant shall have concluded such an agreement:
11.1.1 REFUNDING CERTIFICATE
Within ten Business Days after reaching such agreement, Owner
Participant will deliver to Lessee a Refunding Certificate. Within ten Business
Days of its receipt of the Refunding Certificate, Lessee may demand a
verification pursuant to Section 3.2.3(c) of the Lease of the information set
forth in the Refunding Certificate. Upon the acceptance by Lessee of the
accuracy of the information set forth in the Refunding Certificate or the
determination pursuant to such verification procedures of the Refunding
Information, the appropriate parties will take the actions specified in Sections
11.1.2 through 11.1.6 below.
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11.1.2 FINANCING AGREEMENTS
The appropriate parties will enter into appropriate documentation
(which may include an underwriting agreement or similar private placement
agreement) with the institution or institutions to be named therein providing
for (a) the issuance and sale by Owner Trustee to such institution or
institutions on the Refunding Date of the New Debt and (b) the application of
the proceeds of the sale of the New Debt to the redemption of the Note on the
Refunding Date. Lessee, acting on behalf of Owner Trustee, shall give Security
Trustee at least 30 days' revocable prior written notice of the proposed date of
the optional redemption.
11.1.3 LEASE AMENDMENTS
As a condition to the closing of the refunding transaction, Lessee and
Owner Trustee will amend the Lease, as contemplated by Section 3.2.3(d) of the
Lease, to provide that (a) payments and allocations of Basic Rent in respect of
the period from and after the Refunding Date shall be as provided in the
Refunding Information and (b) amounts payable in respect of Stipulated Loss
Value and Termination Value, from and after the Refunding Date shall be as
provided in the Refunding Information.
11.1.4 SECURITY AGREEMENTS
Owner Trustee will enter into an agreement to provide for the securing
thereunder of the New Debt in like manner as the Note and will enter into such
amendments and supplements to the Security Agreement (or such new security
agreement) and the other Operative Agreements as may be necessary to effect such
refunding.
11.1.5 EXPENSES
Whether or not such refunding transaction is consummated, Lessee shall
pay or reimburse all of the reasonable out-of-pocket expenses of all parties to
such refunding transaction, including, without limitation, any underwriting or
placement fees and the reasonable fees and expenses of such parties' counsel and
any related loan or commitment fees.
11.1.6 RETURN OF NOTE
Subject to compliance by Owner Trustee and Lessee with all applicable
terms and conditions for voluntary prepayment under the Loan Agreement and this
Agreement, Lender will transfer to Owner Trustee the Note held by it for
cancellation (and Owner Trustee shall cancel the same), against receipt by
Lender of the then-outstanding principal amount of the Note, accrued and unpaid
interest thereon, together with payment in full of all other amounts then
payable to Lender and Security Trustee hereunder or under the Loan Agreement.
11.2 LIMITATIONS TO OBLIGATION TO REFUND
Notwithstanding the foregoing, Owner Participant shall have no
obligation to proceed with any refunding transaction as contemplated by this
Section 11:
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(a) If such transaction would have, or creates a
material risk of, an adverse tax consequence to Owner Participant unless Lessee
agrees to indemnify Owner Participant against such adverse tax consequence;
(b) Unless Lessee indemnifies Owner Participant for
any liability, obligation (other than the obligation to pay principal and
interest and related payments in respect of the New Debt), cost or expense
(including, without limitation, reasonable attorneys' fees) related to or
arising out of any such refunding transaction;
(c) If a Lease Event of Default shall have occurred
and be continuing; or
(d) If there shall have previously been consummated
three refunding transactions at Lessee's request pursuant to this Section 11.
11.3 EXECUTION OF CERTAIN DOCUMENTS
Lessee, Owner Participant, Owner Trustee, Lender and Security Trustee
each agree to execute any document necessary or advisable to implement this
Section 11 (including, without limitation, the execution, delivery and/or
provision of any appropriate additional or modified amendment, representation,
warranty, certificate, opinion or other document that may reasonably be
requested by Lessee or any other person).
11.4 ERISA
Owner Participant shall not be obligated to conclude the proposed
refunding transaction unless the agreements utilized to effect such refunding
contain an agreement by the initial holders of the New Debt substantially the
same as Section 10.1.3(d)(iii) of this Agreement, except in the case of any
refunding transaction where the New Debt is sold in a public offering under the
Securities Act or a private placement intended for resale pursuant to Rule 144A
under the Securities Act, in which case the holders of the New Debt shall be
subject to the restrictions relating to ERISA substantially the same as those
applicable in comparable transactions effected by Lessee.
11.5 CONSENT TO OPTIONAL REDEMPTIONS
Each of Owner Participant and Owner Trustee agrees with Lessee not to
cause an optional prepayment or redemption of the Note without Lessee's consent
except as set forth in Section 2.05 of the Loan Agreement.
SECTION 12. SECTION 1110
It is the intention of each of Lessee, Owner Participant, Lender, Owner
Trustee and Security Trustee that Owner Trustee, as lessor under the Lease (and
Security Trustee as assignee of Owner Trustee under the Security Agreement),
shall be entitled to the benefits of Section 1110 in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor. Lessee shall at
all times be certificated and registered to the extent necessary to entitle
Owner Trustee to the rights afforded to lessors of aircraft equipment under
Section 1110 of the Bankruptcy Code.
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SECTION 13. CHANGE OF CITIZENSHIP
13.1 GENERALLY
Without prejudice to the representations, warranties or covenants
regarding the status of any party hereto as a Citizen of the United States:
(a) Each of Lessee, Bank and Security Trustee agrees
that it will, immediately upon obtaining knowledge of any facts that would cast
doubt upon its continuing status as a Citizen of the United States and promptly
upon public disclosure of negotiations in respect of any transaction which would
or might adversely affect such status, notify in writing all parties hereto of
all relevant matters in connection therewith; and
(b) Owner Participant agrees that, in the event its
status is to change or has changed as a Citizen of the United States, or it
makes public disclosure of circumstances as a result of which it believes that
such status is likely to change, it will notify all the other parties to this
Participation Agreement of (i) such change in status promptly after obtaining
Actual Knowledge thereof or (ii) such belief as soon as practicable after such
public disclosure but in any event within ten Business Days after such public
disclosure.
13.2 OWNER PARTICIPANT
Owner Participant agrees, solely for the benefit of Lessee and the
Lender that if, during such time as the Aircraft is registered in the United
States, (a) it shall not be a Citizen of the United States and (b) the Aircraft
shall be, or would therefore become, ineligible for registration in the name of
Owner Trustee under the Act and regulations then applicable thereunder (without
giving consideration to Section 47.9 of the FAA Regulations or any other
provision that may restrict Lessee's use or operation of the Aircraft), then
Owner Participant shall as soon as is reasonably practicable, but in any event
within 30 days after obtaining Actual Knowledge of such ineligibility and of
such loss of citizenship, (y) effect voting trust or other similar arrangements
(in which case any provisions contained in the Operative Agreements restricting
Owner Participant's or Owner Trustee's ability to amend the Trust Agreement
shall not apply to the extent necessary to permit the use of such a voting trust
or other similar arrangement) or take any other action as may be necessary to
prevent any deregistration or maintain the United States registration of the
Aircraft or (z) transfer in accordance with the terms of this Agreement all its
right, title and interest in and to this Agreement, the Trust Estate and the
Trust Agreement in accordance with Section 10.1.
13.3 OWNER TRUSTEE
Upon Bank giving any notice in accordance with Section 13.1(a), Owner
Trustee shall, subject to Section 9.01 of the Trust Agreement, resign as Owner
Trustee. Upon its receipt of such notice, Owner Participant shall as promptly as
practicable appoint a Citizen of the United States as successor Owner Trustee
pursuant to Section 9.01 of the Trust Agreement.
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13.4 SECURITY TRUSTEE
Upon Security Trustee giving any notice in accordance with Section
13.1(a), Security Trustee shall (if and so long as such citizenship is necessary
under the Act as in effect at such time or, if it is not necessary, if and so
long as Security Trustee's citizenship could have any adverse effect on Lessee,
any Participant or the Lender), subject to Section 8 of the Security Agreement,
resign as Security Trustee promptly upon its ceasing to be such a citizen.
SECTION 14. CONCERNING OWNER TRUSTEE
It is understood and agreed that, except as otherwise expressly
provided herein or in the Trust Agreement or the Security Agreement, Owner
Trustee is entering into this Agreement solely in its capacity as trustee as
provided in the Trust Agreement and not in its individual capacity and in no
case whatsoever will it be liable or accountable in its individual capacity for
any of the statements, representations, warranties, agreements or obligations of
Owner Trustee hereunder, or for any loss in respect thereof, as to all of which
the parties agree to look solely to the Trust Estate; PROVIDED that nothing in
this Section 14 shall be deemed to limit in scope or substance the personal
liability of Bank (a) to Owner Participant as expressly set forth in the Trust
Agreement, (b) in respect of the representations, warranties and agreements of
Bank expressly made as such herein or in any other Operative Agreement to which
it is a party, and (c) for the consequences of its own gross negligence, willful
misconduct, and, in receiving, handling or remitting of funds only, its willful
misconduct or simple negligence as a trustee.
SECTION 15. SPECIAL LENDER PROVISIONS
Notwithstanding any contrary provision contained in this or any other
Operative Agreement, the following provisions shall apply but only for as long
as a Brazilian Lender has not assigned or transferred the Loan in whole or
Substantial Part to a Lender that is not a Brazilian Lender pursuant to an
Assignment and only so long as such Loan has not been paid in full, and upon
such assignment or transfer of the Loan (in whole or Substantial Part) or
payment in full, the following provisions shall no longer be effective:
15.1 PREPAYMENT
[*]
15.2 CONFIGURATION OF AIRCRAFT
Lessee shall not change or cause the configuration of any Aircraft to
be changed from a commercial passenger jet.
15.3 RE-REGISTRATION
Notwithstanding the provisions of Section 7.1.2 of the Lease Agreement,
the Aircraft shall not be re-registered outside the United States without the
prior written consent of Lender.
--------
* Confidential
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15.4 SUBLEASING
(a) With respect to Section 7.2.7 of the Lease
Agreement and notwithstanding the provisions thereof:
(i) No Permitted Sublessee shall be in
material financial or non-financial default under any loan,
note or other agreement with the Lender or BNDES at the time a
Permitted Sublease is entered into;
(ii) The Aircraft may not be subleased to a
Permitted Foreign Air Carrier without the written consent of
Lender (such consent to be given or withheld by the Lender
acting in good faith);
(iii) Lessee shall provide written notice to
Lessor of Lessee's intent to enter into a Permitted Sublease,
such notice to be accompanied by the proposed documentation,
as early as practicable but in no event less than ten days
before entering into such lease;
(iv) Any Permitted Sublease under the Lease
shall be assigned as collateral security for Lease pursuant to
a Sublease Assignment, substantially in the form of Exhibit B
to the Lease;
(v) The Lease and any sublease (unless to a
Permitted Foreign Air Carrier) entered into pursuant to
Section 7.2 thereof shall be entitled to the protections of
Section 1110 (assuming no change in U.S. Law which would make
such benefits unavailable to mortgaged or leased aircraft (as
the case may be) generally under U.S. Law) and the Security
Trustee and the Lender shall have received a legal opinion of
outside counsel to Lessee to such effect (said opinion and
such counsel to be reasonably satisfactory to Lender);
(vi) Lessee shall not sublease prior to the
first anniversary of the Closing Date;
(vii) No Permitted Sublease may have a term
(including renewals) which extends beyond the Maturity Date;
and
(viii) any Officer's Certificate delivered
pursuant to Section 7.2.7(i) of the Lease shall also confirm
that all conditions precedent set forth in this Section 15.4
to any lease or sublease which is the subject of such
Officer's Certificate have been complied with.
15.5 QUIET ENJOYMENT
Notwithstanding the provisions of Section 7.6.4 of this Participation
Agreement, in the case of a Brazilian Lender, Lender's responsibilities
thereunder shall be limited to actions taken only by itself, FINAME, BNDES or
any Affiliate of such Lender controlled by such Lender.
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15.6 INSURANCE
Notwithstanding the provisions of Section G of Annex D to the Lease,
the self insurance referred to in the first sentence of such Section shall not
exceed, on a per occurrence or on a fleet-wide basis during any policy year, an
amount equal to 1% of the Lessee's tangible net worth, calculated as at the end
of the Lessee's immediately preceding fiscal year (but in no event to exceed
$[*]); PROVIDED that the Lessee has a tangible net worth of not less than $[*].
Notwithstanding the provisions of Schedule I to the Lease, the Threshold Amount
shall be $[*].
15.7 MAINTENANCE
Notwithstanding the provisions of Section D of Annex C to the Lease,
the amount specified for removal of parts specified in the second sentence shall
not exceed $[*].
15.8 ANNUAL REPORTS
So long as there has not been a Change of Control with respect to
Chautauqua, Chautauqua shall deliver or cause to be delivered to Lender, a copy
of the annual report to shareholders (if any) with respect to the Wexford
Private Equity Fund(s) (or any successor fund or funds) through which Wexford
Capital LLC has a beneficial ownership interest in Chautauqua). Such annual
reports shall be delivered to Lender at the same time and on the same basis as
such annual reports are provided to the aforesaid shareholders.
15.9 AIRFRAME INTERCHANGE
Notwithstanding the definition of "Airframe Interchange Agreement" in
Annex A of any Relevant Security Agreement, Chautauqua or a Permitted Sublessee
may enter into an Airframe Interchange Agreement ONLY with another air carrier
that qualifies as a Permitted Sublessee.
SECTION 16. MISCELLANEOUS
16.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by the party against which the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral
communication, course of dealing or performance or other manner not set forth in
an agreement, document or instrument in writing and signed by the party against
which enforcement of the same is sought.
--------
* Confidential
73
16.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or unenforceable
in any respect in any jurisdiction, then, to the extent permitted by Law, (a)
all other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. If, however, any Law pursuant to which such provisions are held
invalid, illegal or unenforceable may be waived, such Law is hereby waived by
the parties hereto to the full extent permitted, to the end that this Agreement
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
16.3 SURVIVAL
The indemnities set forth herein shall survive the delivery or return
of the Aircraft, the Transfer of any interest of Owner Participant in this
Agreement, the Trust Estate and the Trust Agreement, the Transfer of any
interest by Lender of its Note and the expiration or other termination of this
Agreement or any other Operative Agreement.
16.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction likewise is
admissible in evidence.
16.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument; PROVIDED that, without
limiting the effectiveness of any counterpart provided for above, the parties
agree that one non-counterpart original shall be fully executed and delivered to
the Lender.
16.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay by
any party hereto in exercising, any of its respective rights, powers, remedies
or privileges under this Agreement or provided at Law, in equity or otherwise
shall impair, prejudice or constitute a waiver of any such right,
74
power, remedy or privilege or be construed as a waiver of any breach hereof or
default hereunder or as an acquiescence therein nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof by it or the exercise of any other right, power, remedy
or privilege by it. No notice to or demand on any party hereto in any case
shall, unless otherwise required under this Agreement, entitle such party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any party hereto to any other or further
action in any circumstances without notice or demand.
16.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement or other applicable Operative Agreement, and shall be personally
delivered, sent by facsimile or telecommunication transmission (which in either
case provides written confirmation to the sender of its delivery), sent by
registered mail or certified mail, return receipt requested, postage prepaid, or
sent by overnight courier service, in each case to the respective address, or
facsimile number set forth for such party in Schedule 1, or to such other
address, facsimile or other number as each party hereto may hereafter specify by
notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by facsimile
or telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
16.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK.
(b) Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in
any legal action or proceeding relating to this Agreement and
the other Operative Agreements to which it is a party to the
jurisdiction of the Courts of the State of New York sitting in
the City of New York, the courts of the United States of
America for the Southern District of New York, and appellate
courts from any thereof;
(ii) agrees that any suit, action or
proceeding with respect to this Agreement or the transactions
contemplated hereby may be brought only in such courts and
waives any objection that it may now or hereafter have to the
jurisdiction or venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same
by way of motion as a defense or otherwise;
(iii) agrees that nothing herein shall
affect the right to effect
75
service of process in any manner permitted by law in addition
to the provisions of Section 16.8(c);
(iv) waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover
in any legal action or proceeding with respect to this
Agreement or the transactions contemplated hereby any special,
exemplary, punitive or consequential damages; and
(v) agrees that, to the fullest extent
permitted by applicable Law, a final judgment in any such
action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(c) The Lender hereby irrevocably and unconditionally
appoints, at the Lessee's expense, National Registered Agents, Inc. (the "LENDER
PROCESS AGENT"), located at 000 0xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its
agent to receive on behalf of the Lender and its property service of copies of
the summons and complaint and any other process which may be served in any
action or proceeding in any court of the State of New York sitting in the City
of New York or court of the United States of America for the Southern District
of New York with respect to the Operative Agreements and, if for any reason such
Lender Process Agent (or any successor Lender Process Agent) is unable to act as
such, will promptly notify the Lessee and will within 30 days appoint a
successor Lender Process Agent in the City of New York (which successor Lender
Process Agent shall accept such appointment in a writing reasonably satisfactory
to the Lessee prior to the termination for any reason of the appointment of the
predecessor Lender Process Agent). In any action or proceeding in any court of
the State of New York sitting in the City of New York or court of the United
States of America for the Southern District of New York, such service may be
made on the Lender by delivering a copy of such process to the Lender in care of
the appropriate Lender Process Agent at such Lender Process Agent's address. The
Lender hereby also irrevocably and unconditionally authorizes and directs such
Lender Process Agent to accept such service on its behalf.
(d) Each of the parties hereto (other than the
Lender) hereby irrevocably and unconditionally agrees that service of process
upon it in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to it at its address set forth in Schedule 1 or at such
other address of which each other party hereto shall have been notified pursuant
to Section 16.7.
(e) The Lender agrees that, to the extent that the
Lender or any of its property is or becomes entitled at any time to any immunity
on the grounds of sovereignty or otherwise from (a) any legal action, suit,
arbitration proceeding or other proceeding, (b) set-off or counterclaim, (c) the
jurisdiction of any court of competent jurisdiction, (d) service of process, (e)
relief by way of injunction, order for specific performance or for recovery of
property, (f) attachment of its assets prior to judgment or after judgment, (g)
attachment in aid of execution or levy, (h) execution or enforcement of any
decree or judgment, (i) judgment or jurisdiction or from any other legal process
in any jurisdiction, the Lender, for itself and its property, does, to the full
extent permitted by applicable Law, rule or regulation, hereby irrevocably and
unconditionally waive all rights to, and agrees not to plead or claim, any such
immunity with
76
respect to its obligations, liabilities or any other matter under or arising out
of or in connection with this Agreement or the other Operative Agreements, or
the subject matter hereof or thereof. Such agreement shall be irrevocable and
not subject to withdrawal in any and all jurisdictions or under any statute,
including the Foreign Sovereign Immunities Act of 1976 of the United States of
America. The foregoing waiver shall constitute a present waiver of immunity at
any time any action is initiated against the Lender with respect to this
Agreement.
(f) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
16.9 CONTRACTUAL CURRENCY.
(a) This is an international transaction in which the
specification of the currency of payments is of the essence. Except as otherwise
provided herein, each payment under this Agreement will be made in Dollars (the
"CONTRACTUAL Currency"). Any obligation to make payments under this Agreement or
any other Operative Agreements in the Contractual Currency will not be, to the
extent permitted by applicable Law, discharged or satisfied by any tender in any
currency other than the Contractual Currency (unless otherwise specified herein
or therein).
(b) To the extent permitted by applicable Law, rule
or regulation, if any judgment or order expressed in a currency other than the
Contractual Currency is rendered for the payment of any amount owing in respect
of this Agreement or any other Operative Agreement or in respect of a judgment
or order of another court for the payment of any amount owing in respect of this
Agreement or any other Operative Agreement, the party to which such payment is
owed, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency (and will refund promptly to the other party any excess of the
Contractual Currency received by such party) if such shortfall (or such excess)
arises or results from any variation between (i) the rate of exchange at which
the currency of the judgment or order is converted into the Contractual Currency
on the date of entry of such judgment or order and (ii) the rate of exchange at
which such party is able to purchase the Contractual Currency with the amount of
the currency of the judgment or order actually received by such party. The term
"rate of exchange" includes any premiums and costs of exchange payable in
connection with the purchase of or conversion into the Contractual Currency.
16.10 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than each Indemnitee, which is an intended third party
beneficiary with respect to the provisions of Section 9.1 as provided in Section
9.1.3, the
77
other persons referred to in Section 7.6.13, who are intended third party
beneficiaries of such Section) with any rights of any nature whatsoever against
any of the parties hereto and no person not a party hereto (other than each
Indemnitee, with respect to the provisions of Section 9.1 as provided in Section
9.1.3, the other persons referred to in Section 7.6.13, with respect to such
Section) shall have any right, power or privilege in respect of any party
hereto, or have any benefit or interest, arising out of this Agreement.
16.11 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements and, in
the case of the Lessee and the Lender, the Funding Agreement, on and as of the
date hereof, constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, among any of the parties hereto with
respect to such subject matter are hereby superseded in their entireties .
16.12 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge and deliver or shall cause
to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further acts and things, in any case, as any other party hereto shall reasonably
request in connection with the administration of, or to carry out more
effectively the purposes of, or to better assure and confirm into such other
party the rights and benefits to be provided under this Agreement and the other
Operative Agreements.
16.13 NOTICES, INSTRUCTIONS, CONSENTS, EXECUTION AND WAIVER
Whenever the provisions of this Agreement or any Operative Agreement
require or permit notice from or to, instructions from, consent of, execution of
any amendment, supplement, modification, instrument, certificate or other
document by, or a waiver by, the Lender, the notice from or to, instruction
from, consent of, execution by or waiver by, the holders on the date of such
notice, instruction, consent, execution or waiver of more than 50% in interest
of the principal amount of the Loan then outstanding shall be considered notice
from or to, instruction from, consent of, execution by or waiver by, the Lender
and shall be binding upon any present or subsequent Lender; PROVIDED, HOWEVER,
that without the consent of each holder at the time thereof affected thereby, no
amendment, supplement, consent or waiver shall:
(a) change the final maturity of the Note, or change
the dates or amounts of payment of any installment of the principal of or
interest on the Note, or reduce the principal of or interest on the Note, or
change to a location outside the United States of America the place of payment
where, or the coin or currency in which, the principal amount of the Note is
payable; or
(b) create any Lien with respect to the Collateral
except such as are permitted by the Security Agreement, or deprive any such
holder of the benefit of the Lien on the Collateral created by the Security
Agreement; or
(c) modify the provisions of this Section 16.13, or
(d) adversely affect any indemnities in favor of such
holder.
IN WITNESS WHEREOF, each of the parties has caused this Participation
Agreement to be duly executed and delivered as of the day and year first above
written.
CHAUTAUQUA AIRLINES, INC.,
Lessee
By
------------------------------------------
Name:
Title:
[ ]
Owner Participant
By
------------------------------------------
Name:
Title:
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, not in its
individual capacity, except as expressly
provided herein, but solely as Owner
Trustee
By
------------------------------------------
Name:
Title:
JPMORGAN CHASE BANK,
not in its individual capacity, except as
expressly provided herein, but solely as
Security Trustee
By
------------------------------------------
Name:
Title:
AGENCIA ESPECIAL DE FINANCIAMENTO
INDUSTRIAL-FINAME,
Lender
By
------------------------------------------
Name:
Title:
SCHEDULE 1
TO PARTICIPATION AGREEMENT
ACCOUNTS; ADDRESSES
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
CHAUTAUQUA AIRLINES, INC. [__________________] Chautauqua Airlines, Inc.
Account No.: [__________] 2500 S. High School Road
ABA#: [__________] Suite 160
Attention: [__________] Xxxxxxxxxxxx, XX 00000-0000
Voice: [__________] Attention:
Facsimile: [__________] Tel: (000) 000-0000
Reference: Lease [ ] Fax: (000) 000-0000
With a copy to:
Wexford Capital LLC
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
OWNER PARTICIPANT [_______________] [_______________]
OWNER TRUSTEE [*] Xxxxx Fargo Bank Northwest, National Association
00 Xxxxx Xxxx Xxxxxx
XXX: X0000-000
Xxxx Xxxx Xxxx, XX 00000
Attn: Corporate Trust Services
Tel: 000-000-0000
Fax: 000-000-0000
SECURITY TRUSTEE JPMorgan Chase Bank JPMorgan Chase Bank
ABA #000000000 Institutional Trust Services
Institutional Trust Services 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Account #: Xxx Xxxx, XX 00000
FAO: Chautauqua Airlines, Inc. Attention: Xxxxxxx Xxxxxxxxx
FFC: Aircraft [ ] Tel: 000-000-0000
Fax: 000-000-0000/8159/8160
LENDER [*] Agencia Especial de Financiamento Industrial-FINAME
x/x Xxxx xx Xxxxxxxxxx
Xx. Xxxxxxxxx do Xxxxx, 000 - 00.(0)xxxxx
Xxx xx Xxxxxxx - XX
CEP 20.139-900 Brasil
Attn.: Xxxxxxx Xxxxx Xxxxx
--------
* Confidential
SCHEDULE 1
TO PARTICIPATION AGREEMENT
Gerente Executivo de Exportacoes
Beneficiary: Agencia Especial de Tel: (000) 00 00 0000-0000
Financiamento Industrial - FINAME Fax: (000) 00 00 0000-0000/2262-1470
SCHEDULE 2
TO PARTICIPATION AGREEMENT
COMMITMENTS
PARTICIPANT PERCENTAGE OF LESSOR'S COST DOLLAR AMOUNT
----------- --------------------------- -------------
OWNER PARTICIPANT OWNER PARTICIPANT'S
PERCENTAGE
[__%]
LENDER LENDER'S
PERCENTAGE
[SAME AS FOR THE RELATED DIRECT LOAN]
SCHEDULE 3
TO PARTICIPATION AGREEMENT
CERTAIN TERMS
DEFINED TERM DEFINITION
Equity Commitment Termination Date [_______________]
Equity Advisor [_______________]
Lessor's Cost [_______________]
Special Counsel to the Owner Participant [_______________]
OP Jurisdiction [_______________]
Special Tax Counsel to the Owner Participant [_______________]
SCHEDULE 4
TO PARTICIPATION AGREEMENT
PERMITTED COUNTRIES
[*]
--------
* Confidential
SCHEDULE 5
TO PARTICIPATION AGREEMENT
SPECIAL EQUITY AMOUNTS
See "Equity Portion" of the attached Schedule 3 to the Lease Agreement.
EXHIBIT 4
CONFIDENTIAL TREATMENT REQUESTED
PURSUANT TO RULE 406
EXHIBIT C-1
TO FUNDING AGREEMENT
--------------------------------------------------------------------------------
[FORM OF] AIRCRAFT SECURITY AGREEMENT (LEVERAGED LEASING LOANS)
(CH-___)
Dated as of
_______, 2001
between
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
not individually except as stated herein
but solely as Owner Trustee under the
Trust Agreement referred to herein,
as Debtor
and
JPMORGAN CHASE BANK
as Security Trustee
relating to
One Embraer [EMB-145 model EMB-135 KL] [EMB-145LR]
United States Registration Number [______]
Manufacturer's Serial No. [_______]
--------------------------------------------------------------------------------
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933. THE OMITTED
MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
TABLE OF CONTENTS
PAGE
Section 1. Definitions.....................................................................................1
Section 2. Security Interest...............................................................................1
Section 3. Distribution of Proceeds........................................................................4
3.1 Distribution....................................................................................4
3.2 Distribution upon Event of Loss.................................................................4
3.3 Payments After Loan Event of Default............................................................5
3.4 Application Upon Prepayment.....................................................................7
3.5 Excluded Payments...............................................................................7
3.6 Certain Payments................................................................................7
3.7 Payment Instructions............................................................................7
3.8 Withholding of Tax..............................................................................8
Section 4. Representations, Warranties and Agreements......................................................8
4.1 Authority of Debtor.............................................................................8
4.2 Agreements Constituting or Evidencing Collateral................................................8
4.3 Performance of Lease; Payments under Lease......................................................8
4.4 Attorney-in-Fact................................................................................8
4.5 No Assumption by the Security Trustee...........................................................8
4.6 Dealings with Lessee............................................................................9
4.7 Disposition of Collateral.......................................................................9
4.8 Maintenance of Security Interest...............................................................10
4.9 Delivery of Collateral.........................................................................10
4.10 Payment of Charges, etc........................................................................10
4.11 Limitation of Liability........................................................................10
-i-
4.12 Replacement Airframes and Replacement Engines..................................................10
4.13 Security Agreement Supplements for Replacements................................................11
4.14 Effect of Replacement..........................................................................11
Section 5. Events of Default; Remedies and Waivers........................................................11
5.1 Remedies.......................................................................................11
5.2 Waiver of Appraisement, etc....................................................................15
Section 6. Duties of The Security Trustee.................................................................16
6.1 Notice of Loan Event of Default; Action Upon Loan Event of Default.............................16
6.2 Action Upon Instructions; Certain Rights and Limitations.......................................16
6.3 Indemnification................................................................................18
6.4 No Duties Except as Specified in Security Agreement or Instructions............................19
6.5 No Action Except Under Security Agreement or Instructions......................................19
6.6 Reports, Notices, Etc..........................................................................19
6.7 Removal of Certain Liens.......................................................................19
6.8 No Charges.....................................................................................20
Section 7. The Security Trustee...........................................................................20
7.1 Acceptance of Trusts and Duties................................................................20
7.2 Absence of Duties..............................................................................20
7.3 Reliance; Security Trustees; Advice of Counsel.................................................20
7.4 Capacity in Which Acting.......................................................................21
Section 8. Successor Trustee..............................................................................21
8.1 Resignation of Security Trustee; Appointment of Successor......................................21
Section 9. Supplements and Amendments to this Security Agreement and Other Documents......................22
9.1 Supplemental Security Agreements...............................................................22
9.2 Security Trustee Protected.....................................................................23
-ii-
9.3 Documents Mailed to Lender.....................................................................23
Section 10. Investment of Security Funds...................................................................23
10.1 Investment of Security Funds...................................................................23
10.2 Liability for Losses...........................................................................24
Section 11. Miscellaneous..................................................................................24
11.1 Notices........................................................................................24
11.2 Benefit of Agreement...........................................................................24
11.3 Binding Effect; Assignment.....................................................................24
11.4 Remedies.......................................................................................24
11.5 Termination of Security Agreement..............................................................24
11.6 No Legal Title to Collateral in Note Holders...................................................25
11.7 Survival of Representations, Warranties and Covenants..........................................25
11.8 Form of Reports, Schedules and Assignments.....................................................25
11.9 Governing Law and Construction.................................................................25
11.10 Headings.......................................................................................25
11.11 Counterparts...................................................................................25
11.12 Waiver of Trial by Jury........................................................................26
11.13 Quiet Enjoyment................................................................................26
11.14 No Representations or Warranties as to Aircraft or Documents...................................26
11.15 No Segregation of Moneys; No Interest..........................................................26
11.16 Severability...................................................................................26
11.17 Notices, Instructions, Consents, Execution and Waiver..........................................27
11.18 Register.......................................................................................27
ANNEX A -- Definitions
-iii-
AIRCRAFT SECURITY AGREEMENT
(CH-____)
THIS AIRCRAFT SECURITY AGREEMENT (CH-___), dated as of ______,
2001 (this "SECURITY AGREEMENT"), is among XXXXX FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, a national banking association, having an office at
____________________________________, not in its individual capacity except as
stated herein, but solely as Owner Trustee under the Trust Agreement referred to
hereinafter ("DEBTOR"), and JPMorgan Chase Bank, as Security Trustee (the
"SECURITY TRUSTEE").
WHEREAS, pursuant to that certain Loan Agreement (CH ______),
dated as of even date herewith (the "LOAN AGREEMENT"), between Debtor, as
borrower, and AGENCIA ESPECIAL DE FINANCIAMENTO INDUSTRIAL - FINAME, a Brazilian
federal public company registered in the General Register of Taxpayers under the
number 33.660.564/0001.00, having an office at Xxxxxxx Xxxxxxxxx xx Xxxxx Xx.
00000, Xxx xx Janeiro, state of Rio de Janeiro, Brazil (together with its
successors and permitted assigns, "LENDER"), Lender has made the Loan, including
Loan A, to Debtor; and
WHEREAS, it is a condition precedent to Lender's acceptance of
Debtor as Borrower under the Loan Agreement that Debtor execute and deliver this
Security Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Unless otherwise specified herein or therein,
all capitalized terms used in this Agreement, the Note or any certificate or
other document made or delivered pursuant hereto shall have the meanings set
forth in Annex A hereto.
Section 2. SECURITY INTEREST. As security for the payment and
performance of all Loan Secured Obligations (whether as scheduled, upon
acceleration or otherwise) and of all costs of collection and enforcement of
such Loan Secured Obligations (but not any other Secured Obligations), Debtor
hereby conveys, mortgages, pledges and assigns to the Security Trustee, and
hereby creates in and grants to the Security Trustee, a continuing first
priority security interest in, but none of its obligations or liabilities
respecting, all of Debtor's right, title and interest in and to the following
described property, rights and privileges, whether now owned or hereafter
acquired (other than Excluded Payments) (which property, rights and privileges,
excluding Excluded Payments, but including all property hereafter specifically
subject to the Lien of this Agreement by the terms hereof or any supplement
hereto constitute the "COLLATERAL"):
(1) The Airframe which is one EMBRAER [EMB-145 model EMB-135
KL] [EMB-145LR] aircraft with the FAA Registration number of [_____] and the
manufacturer's serial number of [______] and the Engines with the manufacturer's
serial numbers of [______] and [______], each of which is a[n] [Rolls Royce]
Xxxxxxx model [AE3007A1/3] [AE3007A1P] engine and is of 750 or more rated
takeoff horsepower or the equivalent of such horsepower as the same is now and
will hereafter be constituted, whether now owned by the Debtor or hereafter
acquired, leased or intended to be leased under the Lease, and in the case of
such Engines, whether or not any such Engine shall be installed in or attached
to the Airframe or any other airframe, together with (a) all Parts of whatever
nature, which are from time to time included
within the definitions of "Airframe" or "Engines", whether now owned or
hereafter acquired, including all substitutions, renewals and replacements of
and additions, improvements, accessions and accumulations to the Airframe and
Engines (other than additions, improvements, accessions and accumulations which
constitute appliances, parts, instruments, appurtenances, accessories,
furnishings or other equipment excluded from the definition of Parts) and (b)
all Aircraft Documents;
(2) All right, title, interest, claims and demands of the
Debtor, as Lessor, in, to and under the Lease, together with all rights, powers,
privileges, options and other benefits of the Debtor as lessor under the Lease,
including the immediate and continuing right to receive and collect all Rent,
income, revenues, issues, profits, insurance proceeds, condemnation awards and
other payments, tenders and security now or hereafter payable to or receivable
by the Lessor under the Lease pursuant thereto, and, subject to Section 6.2(b)
hereof, the right to make all waivers and agreements, to give and receive copies
of all notices and other instruments or communications, to accept surrender or
redelivery of the Aircraft or any part thereof, as well as all the rights,
powers and remedies on the part of the Debtor, as Lessor under the Lease, to
take such action upon the occurrence and during the continuance of a Lease Event
of Default thereunder, including the commencement, conduct and consummation of
legal, administrative or other proceedings, as shall be permitted by the Lease
or by Law, and to do any and all other things whatsoever which the Debtor or any
lessor is or may be entitled to do under or in respect of the Lease and any
right to restitution from the Lessee or any other Person in respect of any
determination of invalidity of the Lease;
(3) All right, title, interest, claims and demands of the
Debtor in, to and under:
(a) the Purchase Agreement;
(b) the Purchase Agreement Assignment and the
Engine Warranty Agreement;
(c) the Bills of Sale; and
(d) any and all other contracts, agreements and
instruments relating to the Airframe and Engines or any rights or interests
therein to which the Debtor is now or may hereafter be a party;
together with all rights, powers, privileges, licenses, easements, options and
other benefits of the Debtor under each contract, agreement and instrument
referred to in this clause (3), including the right to receive and collect all
payments to the Debtor thereunder now or hereafter payable to or receivable by
the Debtor pursuant thereto and, subject to Section 5.1(f) hereof, the right to
make all waivers and agreements, to give and receive notices and other
instruments or communications, or to take any other action under or in respect
of any thereof or to take such action upon the occurrence of a default
thereunder, including the commencement, conduct and consummation of legal,
administrative or other proceedings, as shall be permitted thereby or by Law,
and to do any and all other things which the Debtor is or may be entitled to do
thereunder and any right to restitution from the Lessee, the Owner Participant
or any other Person in respect of any determination of invalidity of any
thereof;
2
(4) All rents, issues, profits, revenues and other income of
the property subjected or required to be subjected to the Lien of this Security
Agreement, including all payments or proceeds payable to the Debtor after
termination of the Lease with respect to the Aircraft as the result of the sale,
lease or other disposition thereof, and all estate, right, title and interest of
every nature whatsoever of the Debtor in and to the same;
(5) Without limiting the generality of the foregoing, all
insurance and requisition proceeds with respect to the Aircraft or any part
thereof, including the insurance required under Section 11 of the Lease;
(6) Without limiting the generality of the foregoing, all
rights of the Debtor to amounts paid or payable by Lessee to the Debtor under
the Participation Agreement and all rights of the Debtor to enforce payments of
any such amounts thereunder;
(7) Without limiting the generality of the foregoing, all
monies and securities from time to time deposited or required to be deposited
with the Security Trustee pursuant to any terms of this Security Agreement or
the Lease or required hereby or by the Lease to be held by the Security Trustee
hereunder as security for the obligations of the Lessee under the Lease or of
the Debtor hereunder; and
(8) All Proceeds of the foregoing;
excluding, however, in all events from each of foregoing clauses (1) through (8)
inclusive all Excluded Payments and the right to specifically enforce the same
or to xxx for damages for the breach thereof as provided in Section 6.2(b)
hereof.
Concurrently with the delivery hereof, Debtor is delivering to
the Security Trustee the executed "chattel paper" originals of the Lease and
Lease Supplement No. 1.
TO HAVE AND TO HOLD all and singular of the aforesaid property
unto the Security Trustee and its successors and assigns in trust for the
benefit and security of the Lender and for the uses and purposes and subject to
the terms and provisions set forth in this Security Agreement.
It is hereby further agreed that any and all property
described or referred to in the granting clauses hereof which is hereafter
acquired by Debtor shall IPSO FACTO, and without any further conveyance,
assignment or act on the part of Debtor or the Security Trustee, become and be
subject to the Lien and security interest herein granted as fully and completely
as though specifically described herein, but nothing contained in this paragraph
shall be deemed to modify or change the obligations of Debtor contained in the
foregoing paragraphs.
Debtor does hereby ratify and confirm the Lease and does
hereby agree that it will not violate any covenant or agreement made by it
therein, herein or in any other Collateral Document and will not take any action
not permitted by this Security Agreement, or omit to take any action required by
this Security Agreement, the taking or omission of which would reasonably be
expected to result in an alteration or impairment of any Collateral Document or
any of the rights created by any such document or the assignment hereunder.
3
Debtor agrees that at any time and from time to time, upon the
written request of the Security Trustee, Debtor will promptly and duly execute
and deliver or cause to be duly executed and delivered any and all such further
instruments and documents as the Security Trustee may reasonably request which
are necessary to perfect, preserve or protect the mortgage, security interests
and assignments created or intended to be created hereby or to obtain for the
Security Trustee the full benefits of the assignment hereunder and of the rights
and powers herein granted.
Nothing contained in this SECTION 2 shall grant the Security
Trustee a security interest in any Excluded Payment.
Section 3. DISTRIBUTION OF PROCEEDS.
3.1 DISTRIBUTION. Subject to the provisions of SECTIONS 3.2
through 3.5, any amounts received by the Security Trustee as Collateral shall be
promptly distributed by the Security Trustee in the following order of priority:
FIRST so much of such amounts as shall be required to pay in full the aggregate
amount of principal and interest (as well as any interest on overdue principal
and, to the extent permitted by law, on any overdue interest) and other amounts
then due and payable by the Borrower in respect of the Note, as certified by
Lender, shall be distributed to Lender; and SECOND the balance, if any, of such
amounts remaining thereafter shall be distributed to Debtor or as otherwise
directed by Debtor for distribution pursuant to the Trust Agreement; PROVIDED,
HOWEVER, that if a Loan Event of Default shall have occurred and be continuing,
then such balance shall not be distributed as provided in this clause SECOND but
shall be held by the Security Trustee as security for the Loan Secured
Obligations (the period that such amounts are held being the "HOLDBACK PERIOD")
until the following shall first occur: (i) Section 3.3 shall then be applicable
to the distribution of such amounts, in which event such amounts shall be
distributed in accordance with the provisions of SECTION 3.3; or (ii) the
Holdback Period with respect to such Loan Event of Default shall have continued
for a period of 120 days and no other Loan Event of Default shall have occurred
and be continuing, in which event such amounts shall be distributed as provided
in this clause SECOND as if no Loan Event of Default had occurred; or (iii) such
Loan Event of Default shall have been cured and no other Loan Event of Default
shall have occurred and be continuing, in which event such balance shall be
distributed as provided in this clause SECOND as if no Loan Event of Default had
occurred.
3.2 DISTRIBUTION UPON EVENT OF LOSS. Except as otherwise
provided in SECTION 3.3 (and except for Excluded Payments), any amounts received
or realized by the Security Trustee with respect to an Event of Loss of the
Aircraft, including, without limitation, any insurance proceeds and the
Stipulated Loss Value, shall be distributed promptly by the Security Trustee by
applying such amounts as follows:
(i) if such payments are received with respect to the
Airframe or the Airframe and the Engines or
engines installed on the Airframe that has been or
is being replaced by the Lessee pursuant to
Section 10 of the Lease, such payments shall be
paid over to, or retained by, the Security Trustee
and upon completion of such replacement (or if
such payments are to be used by Lessee
4
to acquire the Replacement Aircraft and/or
Replacement Engines, simultaneously with the
satisfaction of the requirements set forth in the
Lease with respect to such Replacement Airframe
and/or Replacement Engine) shall be paid over to,
or retained by, Lessee;
(ii) if such payments are received with respect to the
Airframe or the Airframe and the Engines or
engines installed on the Airframe that has not and
will not be replaced pursuant to Section 10 of the
Lease, first, so much of such amounts as shall be
required to pay or reimburse the Security Trustee
for any amounts then due to it under the Operative
Agreements shall be applied by the Security
Trustee to payment or reimbursement of such
amounts, and second so much of such amounts as
shall be required to reimburse Lender pursuant to
the Operative Agreements for any Tax, Expenses
(including reasonable attorneys' fees and expenses
and court costs) or any expenditures incurred or
advances made by Lender in the protection,
exercise or enforcement of any right, power or
remedy of Lender with respect to Loan A to the
date of distribution in connection with such Event
of Loss shall be applied by the Security Trustee
towards the reimbursement of such Tax, Expenses,
expenditures and any other expenses for which
Lender is entitled to reimbursement under any
Operative Agreement with respect to Loan A and has
not been previously reimbursed in full, all as
certified to Security Trustee by the Lender;
(iii) next, so much of such amounts remaining as shall
be required to pay in full the aggregate unpaid
principal amount of the Note and all accrued but
unpaid interest thereon, and all other Loan
Secured Obligations then due and payable to Lender
to the date of distribution shall be distributed
to Lender, all as certified to the Security
Trustee by the Lender; and
(iv) the balance, if any, of such amounts remaining
shall be distributed to Debtor.
3.3 PAYMENTS AFTER LOAN EVENT OF DEFAULT. Except for Excluded
Payments and subject to SECTION 3.1, all payments received and amounts realized
by the Security Trustee, after any time when both (i) a Loan Event of Default
shall have occurred and be continuing and (ii) Loan A shall have been
accelerated or deemed to have been accelerated (including, without limitation,
any amounts realized by the Security Trustee from the exercise of any remedies
pursuant to the terms of the Lease or any Operative Agreement with respect to
Loan A as well as the payments or amounts then held by Security Trustee as
security) shall be distributed promptly by the Security Trustee in the following
order of priority:
FIRST so much of such payments or amounts as shall be
required to pay the Security Trustee any
compensation and fees then due to it under the
Operative Agreements shall be applied by the
Security Trustee to the
5
payment thereof and thereafter so much of such
payments or amounts as shall be required to
reimburse, FIRST, the Security Trustee and,
SECOND, the Lender pursuant to the Operative
Agreements with respect to Loan A for any Tax,
Expenses (including reasonable attorneys' fees and
expenses and court costs) or any expenditures
incurred or advances made by Security Trustee or
Lender in the protection, exercise or enforcement
of any right, power or remedy of Security Trustee
or Lender, or of costs or expenses of Security
Trustee or Lender related to the recovery,
collection or obtaining of such amounts to the
date of distribution in connection with such Loan
Event of Default, shall be applied by Security
Trustee and Lender towards the reimbursement
therefor and Security Trustee and Lender shall be
reimbursed for any other Expenses for which they
are entitled to reimbursement under any Operative
Agreement with respect to Loan A and for which
they have not been previously reimbursed in full;
SECOND so much of such payments or amounts remaining as
shall be required to pay in full the aggregate
unpaid principal amount of the Note and all
accrued but unpaid interest thereon and all other
Loan Secured Obligations then due and payable to
Lender (other than the Breakage Cost) to the date
of distribution shall be distributed to Lender to
be applied by Lender to any of such Loan Secured
Obligations in such manner as Lender elects in its
discretion;
THIRD so much of such payments or amounts remaining as
shall be required to pay to Lender any Breakage
Cost then due and payable to Lender in an amount
not to exceed five percent (5%) of the then
outstanding principal amount of the Note shall be
distributed to Lender to be applied to such
Breakage Cost;
FOURTH from the remainder of such payments or amounts
there shall be distributed to Debtor, for
distribution to Owner Participant, the Special
Equity Amount determined as of the date of
distribution pursuant to this clause FOURTH;
FIFTH so much of such payments or amounts remaining as
shall be required to pay to Lender any Breakage
Cost then due and payable to Lender and not
theretofore paid pursuant to clause THIRD of this
Section 3.3 shall be distributed to Lender to be
applied to such Breakage Cost; and
SIXTH the remaining funds, if any, shall be distributed
to Debtor for payment to Owner Participant.
The Security Trustee shall receive, at its request, as a
condition to any payment under this Section to the Lender or the Owner
Participant, a certification of the Lender or the Owner Participant, as the case
may be, as to the amounts due to it under this Section.
6
3.4 APPLICATION UPON PREPAYMENT. Upon a prepayment by Debtor
of the Loan pursuant to Section 2.05 of the Loan Agreement, the proceeds thereof
shall be distributed in the following order of priority:
FIRST to pay or to reimburse the Security Trustee and
Lender in the manner provided in clause FIRST of
Section 3.3 hereof;
SECOND to pay the amounts specified in clause SECOND of
Section 3.3 hereof; and
THIRD the balance of such proceeds shall be distributed
in the manner set forth in clause SIXTH of Section
3.3 hereof.
3.5 EXCLUDED PAYMENTS. Notwithstanding anything contained
herein to the contrary, if the Security Trustee shall receive any Excluded
Payments, the Security Trustee shall immediately distribute Excluded Payments to
the party entitled to the payment of such Excluded Payment, subject to receipt
by the Security Trustee of certification from such party of the amount of such
Excluded Payments then due to it after such party's receipt of notice from the
Security Trustee that it has received an Excluded Payment.
3.6 CERTAIN PAYMENTS.
(a) Any payments received by the Security
Trustee for which no provision as to the application thereof is made in this
Security Agreement and for which such provision is made in the Lease or the
Participation Agreement shall be applied forthwith to the purpose for which such
payment was made in accordance with the terms of the Lease or the Participation
Agreement, as the case may be.
(b) Notwithstanding any provision of this
Security Agreement to the contrary, any amounts held by Security Trustee as
collateral pursuant to the terms of the Lease shall be held by the Security
Trustee as security for the obligations of Lessee under the Lessee Operative
Agreements and, if and when required by the Lease, paid and/or applied in
accordance with the applicable provisions of the Lease.
3.7 PAYMENT INSTRUCTIONS. All amounts to be distributed
hereunder shall be paid by wire transfer in immediately available funds to the
respective accounts of Debtor or the Security Trustee, as trustee for Lender,
set forth in Schedule 1 to the Participation Agreement or to such other account
specified by Lender or Debtor, as the case may be, in writing. The Debtor hereby
notifies the Security Trustee that unless and until the Security Trustee
receives notice to the contrary from the Debtor, all amounts to be distributed
to the Debtor pursuant to this Section 3 shall be distributed by wire transfer
of immediately available funds to the account of the Owner Participant specified
in Schedule 1 to the Participation Agreement or to such other account as the
Owner Participant may specify from time to time by notice to the Security
Trustee.
3.8 WITHHOLDING OF TAX
[*]
--------
* Confidential
7
Section 4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor
represents and warrants to and agrees with the Security Trustee as follows:
4.1 AUTHORITY OF DEBTOR. Debtor has full power and authority
to execute this Security Agreement, to perform Debtor's obligations hereunder
and to subject the Collateral to the security interest created hereby.
4.2 AGREEMENTS CONSTITUTING OR EVIDENCING COLLATERAL. Subject
to the provisions of Section 6.2(b), Debtor will not agree to any material
modification, amendment or cancellation of any Collateral Document or provide
any consent, waiver, notice, acceptance or approval thereunder or with respect
thereto without the Security Trustee's prior written consent, and will not
waive, compromise, settle or subordinate any right to payment of Debtor
thereunder to claims of other creditors of such obligor.
4.3 PERFORMANCE OF LEASE; PAYMENTS UNDER LEASE. Debtor will
perform and comply with each and every obligation of Lessor under the Lease and
the other Collateral Documents to be performed or complied with by Debtor.
Debtor agrees that should it receive any such payments so directed to the
Security Trustee or any proceeds for or with respect to the Collateral or as the
result of the sale or other disposition thereof, it will hold such payments as
agent for the Security Trustee and promptly forward such payments to the
Security Trustee. Subject to the provisions of Section 3 hereof, the Security
Trustee agrees to apply such payments from time to time received by it (from
Lessee, Debtor or otherwise) with respect to the Lease or the Aircraft in the
manner provided in Section 2.04 of the Loan Agreement. Notwithstanding anything
which may be to the contrary contained in this Section 4.3 or elsewhere in this
Security Agreement, it is understood and agreed that the Security Trustee shall
not be obligated to make any application of payments until the funds therefor
have been received by the Security Trustee in cash or other immediately
available funds.
4.4 ATTORNEY-IN-FACT. Debtor hereby irrevocably appoints,
exercisable upon the occurrence of a Loan Event of Default, the Security Trustee
its true and lawful attorney, coupled with an interest, with full power (in the
name of Debtor or otherwise) for the purpose of enforcing Debtor's rights under
any Collateral Document to endorse any checks or other instruments or orders in
connection therewith and to file claims and to make any conveyances of the
Aircraft or any part thereof or of the Lease or any other portion of the
Collateral and of effectuating any sale, assignment, transfer or delivery for
the enforcement of this Security Agreement, whether pursuant to foreclosure or
power of sale or otherwise, and to execute and deliver all bills of sale,
assignments and other instruments as the Security Trustee may consider necessary
or appropriate, with full power of substitution. If so requested by the Security
Trustee or any permitted purchaser of all or any part of the Collateral, Debtor
shall ratify and confirm any such sale, assignment, transfer or delivery by
executing and delivering to the Security Trustee or such purchaser all bills of
sale, assignments, releases and other proper instruments to effect such
ratification and confirmation as may be designated in any such request.
4.5 NO ASSUMPTION BY THE SECURITY TRUSTEE. Anything contained
herein or in any other Operative Agreement to the contrary notwithstanding: (a)
Debtor shall at all times remain primarily liable to Lessee under the Lease, and
to any other obligee under any other Collateral Document, to perform all its
duties and obligations thereunder to the same extent as if this
8
Security Agreement had not been executed; (b) the exercise by the Security
Trustee of any of the rights assigned to it hereunder shall not release Debtor
from any of its duties or obligations under the Lease or any other Collateral
Document; and (c) neither Lender nor the Security Trustee shall be obligated to
make any payment (other than an Excluded Payment) or to make any inquiry as to
the sufficiency of any payment received by it or to present or file any claim or
to take any other action to collect or enforce any claim for any payment
assigned hereunder, or to pay or to see to the payment of or to make any filings
in respect of any Taxes levied on or with respect to the Lease or any other
Collateral Document, the payments thereunder or the Aircraft and neither this
Security Agreement nor any of the other Operative Agreements, nor the exercise
of any rights or remedies hereunder, shall constitute an assumption of any such
obligations or duties of Debtor.
4.6 DEALINGS WITH LESSEE. Subject to the provisions of Section
6.2(b) and to the next succeeding sentence, unless the prior written consent of
the Security Trustee is obtained, Debtor shall not waive, amend, modify, or in
any way alter any of the terms of the Lease in any case releasing Lessee from
its obligations in respect of the payment of Basic Rent or Stipulated Loss Value
for the Aircraft or canceling or terminating the Lease or any other Collateral
Document or consenting to or accepting any cancellation, termination or
surrender thereof, or waiving any Lease Default or other material default under
or material breach of the Lease or any other Collateral Document, or consenting
to or accepting any prepayment of any amount under the Lease or any other
Collateral Document or agreeing to any discount, reduction or postponement of
any amount thereunder, or giving any other consent, acceptance, waiver, approval
or notice under or with respect to the Lease or any other Collateral Document
(other than notices which are not reasonably expected to materially affect the
Security Trustee's rights under or with respect to the Lease or any other
Collateral Document) or otherwise make any agreement with Lessee or with any
other Person under or with respect to the Lease or any other Collateral Document
(which would reasonably be expected materially to affect adversely the rights of
Lender or the Security Trustee). Without the prior written consent of Lender,
Debtor will not waive, amend, modify, or in any way alter any of the terms of
Section 3.2.1(b) of the Lease. Debtor will promptly deliver to Lender and the
Security Trustee copies of any notice or other communication received by it from
Lessee or Owner Participant in connection with the Lease.
4.7 DISPOSITION OF COLLATERAL. Debtor will not sell, transfer,
convey, lease or otherwise dispose of all or part of the Collateral (either in
one or a series of transactions), except the sale, transfer, conveyance, lease
or other disposition of all or part of the Collateral pursuant to the Lease or
as permitted in Section 13 thereof in the case of a successor Owner Trustee. The
Security Trustee shall from time to time release from the lien of this Security
Agreement any part of the Collateral so sold, transferred, conveyed or otherwise
disposed of pursuant to the Lease other than the lease of the Aircraft
thereunder.
9
4.8 MAINTENANCE OF SECURITY INTEREST. Debtor will at any time
or times hereafter execute and file or record such financing statements and
other documents and instruments and perform such acts as may be required under
the UCC or as Lender or the Security Trustee may from time to time reasonably
request in writing which are necessary to establish, perfect, maintain and
continue the perfection and priority of a valid first priority security interest
in the Collateral in favor of the Security Trustee.
4.9 DELIVERY OF COLLATERAL. Upon Debtor's receipt thereof,
Debtor will promptly deliver to the Security Trustee one original of each of the
Collateral Documents that are in Debtor's possession and, in the case of the
Lease or any Permitted Sublease included in the Collateral, the "chattel paper"
original thereof.
4.10 PAYMENT OF CHARGES, ETC. At any time after a Lease Event
of Default shall have occurred and be continuing, Lender or Security Trustee may
(without any obligation to do so) at any time, in accordance with the terms of
the Lease, effect insurance coverage and necessary repairs to the Collateral and
pay the premiums therefor and the costs thereof, pay and discharge any fees,
assessments, charges, Taxes and Liens on the Collateral and, upon the occurrence
of a Lease Event of Default, perform any of Debtor's or Lessee's obligations, or
exercise any of Debtor's rights, under the Lease or any other Collateral
Document, in each case as reasonably necessary to protect the Collateral. All
sums so advanced or paid by Lender or Security Trustee shall be payable by
Debtor to the Security Trustee on demand with interest at the Default Rate, and
any amounts remaining unpaid, together with such interest thereon, shall be a
part of the Secured Obligations.
4.11 LIMITATION OF LIABILITY. All payments to be made by
Debtor under this Security Agreement, the Loan Agreement or the Note shall be
made only from the income and the proceeds from the Trust Estate to the extent
included in the Collateral and only to the extent that Debtor shall have
sufficient income or proceeds from the Trust Estate to the extent included in
the Collateral to enable Debtor to make payments in accordance with the terms
hereof and thereof. Security Trustee agrees that it will look solely to the
income and proceeds from the Collateral to the extent available for distribution
to it as provided in this Security Agreement and that none of Debtor (in its
individual capacity), Bank or Owner Participant is personally liable to Security
Trustee for any amounts payable under this Security Agreement, the Loan
Agreement or the Note, except, in the case of Debtor or Bank or Owner
Participant, as expressly provided herein or in the Participation Agreement;
PROVIDED, HOWEVER, that nothing contained in this Section 4.11 shall be
construed to limit the exercise and enforcement in accordance with the terms of
this Security Agreement or any other Operative Agreement of rights and remedies
against the Trust Estate. In addition, nothing in this Section 4.11 shall (a)
release Bank from personal liability, or constitute a covenant not to xxx Bank
in its individual capacity, for any breach of any representations, warranties or
covenants of Bank, contained in the Operative Agreements or (b) release Debtor
for any breach of any representation, warranty or covenant of Debtor contained
in the Operative Agreements.
4.12 REPLACEMENT AIRFRAMES AND REPLACEMENT ENGINES. At any
time an Airframe or Engine is to be replaced under or pursuant to Section 10 of
the Lease by a Replacement Airframe or Replacement Engine, if no Lease Event of
Default is continuing, the Debtor shall direct the Security Trustee to execute
and deliver to the Debtor an appropriate
10
instrument releasing such Airframe and/or Engine as appropriate from the Lien of
this Security Agreement and the Security Trustee shall execute and deliver such
instrument as aforesaid, but only upon compliance by Lessee with the applicable
provisions of Section 10 of the Lease.
4.13 SECURITY AGREEMENT SUPPLEMENTS FOR REPLACEMENTS. If a
Replacement Airframe or Replacement Engine is being substituted as contemplated
by Section 10 of the Lease, the Debtor and the Security Trustee agree for the
benefit of the Lender and Lessee, subject to fulfillment of the conditions
precedent and compliance by Lessee with its obligations set forth in Section 10
of the Lease and the requirements of Section 4.12 hereof with respect to such
Replacement Airframe or Replacement Engine, to execute and deliver a Lease
Supplement and a Security Agreement Supplement, as applicable, as contemplated
by Section 10 of the Lease.
4.14 EFFECT OF REPLACEMENT. In the event of the substitution
of a Replacement Airframe or of a Replacement Engine pursuant to Section 10 of
the Lease, all provisions of this Security Agreement relating to the Airframe or
Engine or Engines being replaced shall be applicable to such Replacement
Airframe or Replacement Engine or Engines with the same force and effect as if
such Replacement Airframe or Replacement Engine or Engines were the same
airframe or engine or engines, as the case may be, as the Airframe or Engine or
Engines being replaced but for the Event of Loss with respect to the Airframe or
Engine or Engines being replaced.
Section 5. EVENTS OF DEFAULT; REMEDIES AND WAIVERS.
5.1 REMEDIES. Subject to the provisions of SECTION 5.1(F):
(a) if any Loan Event of Default described in
Section 4.01(g) of the Loan Agreement shall occur, or if a Loan Event of Default
occurs under Section 4.01(a) of the Loan Agreement as a result of a Lease Event
of Default arising under Section 14.5 of the Lease, then the outstanding
principal of the Note, the accrued interest thereon, the Breakage Cost and all
other Secured Obligations shall automatically be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, anything in this Security Agreement or in the Note
or the Loan Agreement to the contrary notwithstanding;
(b) if any other Loan Event of Default shall
occur and be continuing, then, Lender may, in addition to exercising any and all
other remedies it may have: declare the outstanding principal of the Note, the
accrued interest thereon, the Breakage Cost and all other Secured Obligations
due and payable, whereupon the Note, all accrued interest thereon and all other
Secured Obligations shall immediately become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything in this Security Agreement or in the Note or
the Loan Agreement to the contrary notwithstanding;
(c) if a Loan Event of Default shall have
occurred and be continuing, the Security Trustee may, without notice or demand
of any kind except as expressly provided herein or mandatorily by applicable
Law, exercise all rights and remedies of a secured party
11
under the Uniform Commercial Code or any other applicable Law. Without limiting
the foregoing, if a Loan Event of Default shall have occurred and be continuing,
the Security Trustee shall, have the authority, but shall not be obligated, to:
(1) notify Lessee or any or all obligors on agreements or instruments
constituting Collateral of the existence of the Security Trustee's security
interest and to require Lessee and any or all such obligors to pay or remit all
sums due or to become due directly to the Security Trustee or its nominee; (2)
in the name of Debtor, or otherwise, demand, collect, receive and receipt for,
compound, compromise, settle and give acquittance for, and prosecute and
discontinue any suits or proceedings in respect of any or all of the Collateral;
(3) take any action which the Security Trustee may deem necessary or desirable
in order to realize on the Collateral, including, without limitation, performing
any contract or endorsing in the name of Debtor any checks, drafts, notes or
other instruments or documents received in payment of or on account of the
Collateral; (4) make any claim for, negotiate settlement of claims for, receive
payment for and execute and endorse any documents, checks or other instruments
in payment for loss, theft or damage under any insurance policy covering all or
part of the Collateral; (5) enter upon any premises where any of the Collateral
may be located and take possession of and remove such Collateral (so long as
such actions are taken in a lawful and commercially reasonable manner); and (6)
upon 10 Business Days' prior written notice to Debtor, convey, transfer, sell,
lease or otherwise dispose of any or all of the Collateral, free of all rights
and claims therein and thereto of Debtor, at any public or private sale (at
which sale Lender or Owner Participant may bid for and purchase any or all of
the Collateral and Lender may credit Secured Obligations owed to Lender against
the purchase price therefor). The Security Trustee agrees that it will not
convey, transfer, sell, lease or otherwise dispose of any of the Collateral
unless it has provided 10 Business Days' prior notice to Debtor and Owner
Participant. Such notice is agreed to be commercially reasonable as among
Lender, the Security Trustee, Owner Participant and Debtor. Upon any such sale
of the Collateral or any part or interest, the receipt of the officer making the
sale under judicial proceedings or of the Security Trustee shall be sufficient
discharge to the purchaser for the purchase money, and the purchaser shall not
be obliged to see to the application thereof.
(d) Disposition and Care of Collateral; Waivers.
(1) Upon a Loan Event of Default, Debtor
shall make the Collateral available, or cause the Collateral to be made
available, to the Security Trustee at a place (or places) designated by
the Security Trustee, and shall pay all costs of the Security Trustee,
including reasonable attorneys' fees, in the collection of any of the
Loan Secured Obligations.
(2) If any notification of intended
disposition of any of the Collateral is required by applicable Law or
by terms of this Security Agreement, such notification shall be deemed
reasonable and properly given if given at least 10 Business Days'
before such disposition (unless a different period is otherwise
expressly provided for by applicable Law or this Security Agreement).
The Security Trustee may employ or use any agent or broker selected by
it in connection with the sale or other disposition of the Collateral
and any reasonable fees or expenses of such agent or broker shall be at
the sole cost of Debtor, such fees or costs to constitute Loan Secured
Obligations.
12
(3) The Security Trustee's duty of care
(as imposed by law) with respect to Collateral in its possession shall
be deemed fulfilled if Security Trustee exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in
the custody or possession of a bailee or other third Person, exercises
reasonable care in the selection of the bailee or other third Person,
and the Security Trustee need not otherwise preserve, protect, insure
or care for any Collateral. The Security Trustee shall not be obligated
to preserve any rights Debtor may have against other parties or to
realize on the Collateral at all or in any particular manner or order
except to the extent specific rights have been granted to Debtor under
the Loan Agreement.
(4) As between Debtor and the Security
Trustee, no delay or failure by the Security Trustee in the exercise of
any right, remedy, power or privilege shall constitute a waiver
thereof, and no single or partial exercise by the Security Trustee of
any right, remedy, power or privilege shall preclude other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege, and no waiver shall be valid unless in writing and signed by
the Security Trustee, and then only to the extent specifically set
forth in such writing.
(e) APPLICATION OF PROCEEDS OF SALE. The
proceeds of the sale or other disposition of any of the Collateral
shall be applied by the Security Trustee as provided in Section 3.3
hereof.
(f) CERTAIN CURE RIGHTS AND LIMITATIONS ON
EXERCISE OF REMEDIES.
(1) The Security Trustee shall give the
Lender, the Debtor and the Owner Participant prompt written notice of
any Loan Event of Default arising out of a Lease Event of Default of
which the Security Trustee has Actual Knowledge and shall give the
Lender, the Debtor and the Owner Participant not less than ten Business
Days' prior written notice of the date (the "ENFORCEMENT DATE") on or
after which the Security Trustee may, subject to the limitation set
forth in Section 5.1(f)(2), commence and consummate the exercise of any
remedy or remedies described in Section 5.1. Notice of the Enforcement
Date may also be given by the Lender. Without limiting the generality
of the foregoing, the Security Trustee or the Lender shall give the
Debtor and the Owner Participant at least ten Business Days' prior
written notice (which may be given concurrently with notice of the
Enforcement Date) of any termination of the Lease or of the exercise of
any remedy or remedies pursuant to Section 15 of the Lease. If a Loan
Event of Default arising out of a Lease Event of Default shall have
occurred and be continuing, the Debtor shall have the rights set forth
below, any of which may be exercised directly by the Owner Participant.
If as a result of the occurrence of a Loan Default in respect
of the nonpayment by Lessee of Basic Rent due under the Lease, the
Security Trustee shall have insufficient funds to make any payment of
principal of or interest on the Note on the day it becomes due and
payable, the Debtor may, but shall not be obligated, to pay the
Security Trustee prior to the earlier of the Enforcement Date or 5
Business Days after such Loan Default becomes a Loan Event of Default,
in the manner provided in Section 3.7, for application
13
in accordance with Section 3.1 hereof, an amount equal to the portion
of the principal and interest (including interest, if any, on any
overdue payments) then due and payable on the Note, and, unless the
Debtor has cured Loan Events of Default in respect of payments of Basic
Rent on each of the three immediately preceding Basic Rent Payment
Dates, or the Debtor has cured six previous Loan Events of Default in
respect of payments of Basic Rent, such payment by the Debtor shall,
solely for purposes of this Security Agreement be deemed to cure any
Loan Event of Default which would otherwise have arisen on account of
the nonpayment by Lessee of such installment of Basic Rent (but not any
other Default or Loan Event of Loan Default which shall have occurred
and be continuing).
If any Loan Event of Default (other than in respect of the
nonpayment of Basic Rent by the Lessee) which can be cured by the
payment of money has occurred, the Debtor may (unless the total amount
of cure payments under this paragraph exceeds [*]), but shall not be
obligated to, cure such Loan Event of Default by making such payment
prior to the earlier of the Enforcement Date or 5 Business Days after
such Loan Default becomes a Loan Event of Default, as is necessary to
accomplish the observance or performance of the defaulted covenant,
condition or agreement to the party entitled to the same.
Except as hereinafter in this Section 5.1(f)(1) provided, the
Debtor shall not, as a result of exercising the right to cure any such
Loan Event of Default, obtain any Lien on or rights with respect to any
of the Collateral or any Rent payable under the Lease for or on account
of costs or expenses incurred in connection with the exercise of such
right, nor shall any claim of the Debtor against Lessee or any other
party for the repayment of such costs or expenses impair the prior
right and security interest of the Security Trustee in and to the
Collateral. Upon any payment by the Debtor pursuant to the first or
second preceding paragraphs of this Section 5.1(f)(1), the Debtor shall
be subrogated to the rights of the Security Trustee and the Lender in
respect of the Basic Rent which was overdue at the time of such payment
and interest payable by the Lessee on account of its being overdue and
any Supplemental Rent in respect of the reimbursement of amounts paid
by Debtor pursuant to the immediately preceding paragraph (but in
either case shall have no rights as a secured party hereunder), and
thereafter, the Debtor shall be entitled (so long as the application
thereof shall not give rise to a Loan Event of Default hereunder) to
receive such overdue Basic Rent or Supplemental Rent, as the case may
be, and interest thereon upon receipt thereof by the Security Trustee;
PROVIDED, HOWEVER, that (i) if the principal amount and interest on the
Note shall have become due and payable pursuant to Section 5.1(a) or
5.1(b) hereof, such subrogation shall, until the Secured Obligations
shall have been paid in full, be subordinate to the rights of the
Security Trustee and the Lender in respect of such payment of overdue
Basic Rent, Supplemental Rent and such interest and (ii) the Debtor
shall not otherwise attempt to recover any such amount paid by it on
behalf of the Lessee pursuant to this Section 5.1(f) except by
demanding of the Lessee payment of such amount, or by commencing an
action at law against the Lessee and obtaining and enforcing a judgment
against the Lessee for the payment of such amount or taking appropriate
action in a pending action at law against the Lessee (PROVIDED,
HOWEVER, that at no time while an Loan Event of Default shall have
occurred and be continuing shall any such demand be made or shall any
such action be
--------
* Confidential
14
commenced (or continued) and any amounts nevertheless received by the
Debtor in respect thereof shall be held in trust for the benefit of,
and promptly paid to, the Security Trustee for distribution as provided
in Section 3.3 hereof).
Neither the Debtor nor the Owner Participant shall have the
right to cure any Lease Event of Default or Lease Default except as
specified in this Section 5.1(f)
(2) Anything in this Security Agreement
to the contrary notwithstanding, the Security Trustee shall not be
entitled to foreclose the Lien of this Security Agreement as a result
of a Loan Event of Default which arises solely by reason of one or more
events or circumstances which constitute a Lease Event of Default
unless the Security Trustee as security assignee of the Debtor shall
have exercised or concurrently be exercising one or more of the
dispossessory remedies provided for in Section 15 of the Lease with
respect to the Aircraft (a "Lease Dispossessory Remedy"); PROVIDED,
HOWEVER, that the Security Trustee need not exercise a Lease
Dispossessory Remedy in circumstances where the Security Trustee is,
and has been, for a continuous period in excess of 60 days or such
other period as may be specified in Section 1110(a)(2)(A) of the
Bankruptcy Code (such 60-day or other period being the "SECTION
1110(A)(2)(A) PERIOD"), involuntarily stayed or prohibited by
applicable law or court order from exercising any Lease Dispossessory
Remedy (a "CONTINUOUS STAY PERIOD"); PROVIDED, FURTHER that if the
Lessee, during the Section 1110(a)(2)(A) Period, assumes or agrees to
perform the Lease with the approval of the court acting pursuant to
Section 365 or Section 1110(a)(2) of the Bankruptcy Code, for so long
as Lessee performs its obligations and cures its defaults thereunder
(except as not required by the Bankruptcy Code for defaults of the type
referred to in Section 365(b)(2)) the preceding proviso shall have no
application.
It is expressly understood and agreed that, subject only to
the two preceding paragraphs, the inability, described in such paragraphs, of
the Security Trustee to exercise any right or remedy under the Lease shall in no
event and under no circumstances prevent the Security Trustee from exercising
any or all of its rights, powers and remedies under this Security Agreement,
including, without limitation, this Section 5.
5.2 WAIVER OF APPRAISEMENT, ETC. Debtor agrees, to the full
extent that it may lawfully so agree, that neither it nor anyone claiming
through or under it will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption law now or hereafter in
force in any locality where any property subject to the Lien hereof may be
situated, in order to prevent, hinder or delay the enforcement or foreclosure of
this Agreement, or the absolute sale of the Collateral or any part thereof, or
the final and absolute putting into possession thereof, immediately after such
sale, of the purchasers thereof; and Debtor, for itself and all who may at any
time claim through or under it, hereby waives, to the full extent that it may be
lawful so to do, the benefit of all such laws, and any and all right to have any
of the properties or assets comprising the Collateral marshalled upon any such
sale; PROVIDED, HOWEVER, nothing contained herein or in any other Operative
Agreement shall prohibit Debtor or Owner Participant from obtaining an appraisal
of the Collateral in any event or circumstance, at the sole cost and expense of
such party.
15
Section 6. DUTIES OF THE SECURITY TRUSTEE
6.1 NOTICE OF LOAN EVENT OF DEFAULT; ACTION UPON LOAN EVENT OF
DEFAULT. If any payments of the principal of, and interest on, the Loan Secured
Obligations when due and payable (whether as scheduled, upon acceleration or
otherwise), shall not have been paid in full, the Security Trustee shall give
telephonic notice within one Business Day (followed by prompt written notice) to
the Debtor and the Lender specifying the amount and nature of such deficiency in
payment; PROVIDED that any failure to give such notice shall not relieve the
Debtor of its obligation to make such payment. If the Security Trustee has
knowledge of a Loan Event of Default, the Security Trustee shall promptly give
notice of such Loan Event of Default to the Lender and to the Debtor by
telegram, telecopy, telex, or telephone (to be promptly confirmed in writing).
For all purposes of this Security Agreement, in the absence of Actual Knowledge,
the Security Trustee shall not be deemed to have knowledge of a Loan Event of
Default, a Loan Default, a Payment Default, a Bankruptcy Default, a Bankruptcy
Event, a Lease Event of Default, an acceleration or deemed acceleration of the
Loan Secured Obligations, or any cure or rescission of any of the foregoing, or
an Event of Loss unless notified in writing by the Debtor or the Lender;
PROVIDED, HOWEVER, the Security Trustee shall be deemed to have Actual Knowledge
of the failure of the Debtor to maintain insurance as required under Section 11
of the Lease if an officer in the Corporate Trust Department of the Security
Trustee shall receive written notice thereof from an insurer or insurance
broker.
6.2 ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND LIMITATIONS.
(a) Subject to the other terms of this Security Agreement, upon the written
instructions at any time of the Lender, the Security Trustee shall promptly (i)
give such notice, direction, consent, waiver or approval, or exercise such
right, remedy or power hereunder in respect of all or any part of the
Collateral, or (ii) take such other action in accordance with the terms hereof
as shall be specified in such instruction. The Security Trustee will execute
such continuation statements with respect to Uniform Commercial Code financing
statements relating to the security interest created hereunder in the Collateral
as may be specified from time to time in written instructions of the Lender,
which instructions shall be accompanied by the form of continuation statement to
be executed by the Security Trustee, such continuation statement to be filed by
the Debtor. The Security Trustee shall not be liable to the Debtor with respect
to any action taken or omitted to be taken by it in accordance with the requests
or instructions of the Lender, which requests or instructions are in accordance
with the terms hereof, except for any actions or omissions constituting the
gross negligence or willful misconduct of the Security Trustee.
(b) Subject to the terms of
Sections 5.1(a) , 5.1(f), 6.3 and this Section 6.2, upon the written
instructions at any time and from time to time of Lender, the Security Trustee
shall take such of the following actions as may be specified in such
instructions: (i) give such notice or direction or exercise such right, remedy
or power hereunder as shall be specified in such instructions; (ii) give such
notice or direction or exercise such right, remedy or power under the Lease, the
Participation Agreement or any other Collateral Document as shall be specified
in such instructions; and (iii) approve as satisfactory to the Security Trustee
all matters required by the terms of the Lease to be satisfactory to the Debtor,
it being understood that without the written instructions of Lender, the
Security Trustee shall not approve any such matter as satisfactory to the
Trustee; PROVIDED, HOWEVER, that anything contained in this Security
16
Agreement, the Lease or the other Operative Agreements to the contrary
notwithstanding, but subject to the next paragraph hereof:
(1) the Debtor or the Owner Participant,
may, without the consent of the Security Trustee, demand, collect, xxx
for or otherwise obtain all amounts included in Excluded Payments from
Lessee and seek legal or equitable remedies to require Lessee to
maintain the insurance coverage referred to in Section 11 of the Lease;
PROVIDED, HOWEVER, that the rights referred to in this clause (1) shall
not be deemed to include the exercise of any remedies provided for in
Section 15 of the Lease other than the right to proceed by appropriate
court action, either at Law or in equity, to enforce payment by Lessee
of such amounts included in Excluded Payments or performance by Lessee
of such insurance covenant or to recover damages for the breach thereof
or for specific performance of any other term of the Lease;
(2) so long as the Security Trustee has
not foreclosed the Lien of this Agreement, the Security Trustee shall
not, without the consent of the Debtor, which consent shall not be
withheld if no right or interest of the Debtor or the Owner Participant
shall be diminished or impaired thereby, (i) enter into, execute or
deliver waivers, amendments or consents in respect of any of the
provisions of the Lease, or (ii) approve any accountants, engineers,
appraisers or counsel as satisfactory to render services for or issue
opinions to the Debtor pursuant to the Operative Agreements;
(3) whether or not a Loan Default or
Loan Event of Default has occurred and is continuing, the Debtor and
the Owner Participant shall have the right, together with the Security
Trustee, (i) to receive from Lessee certificates and other documents
and information which Lessee is required to give or furnish to the
Debtor or the Lessor pursuant to any Operative Agreement and (ii) to
inspect in accordance with the Lease the Airframe and Engines and all
Aircraft Documents and any other part of the Collateral;
(4) whether or not a Loan Default or
Loan Event of Default has occurred and is continuing, the Debtor may,
without the consent of the Security Trustee, (i) solicit and make bids
with respect to the Aircraft under Section 9 of the Lease in respect of
a termination of the Lease by Lessee pursuant to Section 9 thereof,
(ii) determine Fair Market Sales Value and Fair Market Rental Value
under Section 17 of the Lease for all purposes except following a Lease
Event of Default, (iii) make an election pursuant to and in accordance
with the provisions of Sections 9.1(b), 9.2 and 9.3 of the Lease, and
(iv) obtain insurance for its own account in accordance with Section
11.2 of the Lease; and
(5) so long as no Loan Event of Default
shall have occurred and be continuing, all other rights of the "Lessor"
under the Lease shall be exercised by the Debtor jointly with the
Security Trustee including, without limitation, the right to (i)
exercise all rights with respect to Lessee's use and operation,
modification or maintenance of the Aircraft and any Engine which the
Lease specifically confers on the Lessor, and (ii) consent to and
approve any assignment pursuant to Section 13 of the Lease; PROVIDED,
HOWEVER, that the foregoing shall not (x) limit (A) any rights
separately
17
granted to the Security Trustee under the Operative Agreements or (B)
the right of the Security Trustee to receive any funds to be delivered
to the "Lessor" under the Lease (except with respect to Excluded
Payments) and under the Purchase Agreement or (y) confer upon the
Debtor the right to adversely affect the validity or enforceability of
the lien of this Agreement.
However, the Debtor does hereby agree that it will not without the written
consent of the Security Trustee either:
(a) receive or collect or agree to the receipt
or collection of any payment (other than Excluded Payments) of Rent, including
Basic Rent, Stipulated Loss Value, Termination Value or any other payment to be
made pursuant to Section 9 or 10 of the Lease prior to the date for the payment
thereof provided for by the Lease or assign, transfer or hypothecate (other than
to the Security Trustee hereunder) any payment of Rent, including Basic Rent,
Stipulated Loss Value, Termination Value or any other payment to be made
pursuant to Section 9 or 10 of the Lease, then due or to accrue in the future
under the Lease in respect of the Airframe and Engines; or
(b) except as contemplated by the Trust
Agreement in connection with the appointment of a successor owner trustee, sell,
mortgage, transfer, assign or hypothecate (other than to the Security Trustee
hereunder) its interest in the Airframe and Engines or any part thereof or in
any amount to be received by it from the use or disposition of the Airframe and
Engines, other than amounts distributed to it pursuant to Article III hereof.
Notwithstanding anything to the contrary contained herein
(including this Section 6.2), the Security Trustee shall have the right, to the
exclusion of the Debtor and the Owner Participant, to (A) declare the Lease to
be in default under Section 15 thereof and (B) subject only to the provisions of
Section 5.1(f) hereof, exercise the remedies set forth in such Section 15 (other
than in connection with Excluded Payments) at any time that a Lease Event of
Default shall have occurred and be continuing. Further and for the avoidance of
doubt, and anything to the contrary contained herein (including this Section
6.2) notwithstanding, in no event may the Debtor amend or otherwise modify the
final sentence of the definition of Stipulated Loss Value or Termination Value,
in any such case, without the prior written consent of the Security Trustee.
(c) If any Lease Event of Default shall have
occurred and be continuing and the Debtor shall not have cured fully such Lease
Event of Default under and in accordance with Section 5.1(f) hereof, on request
of the Lender, the Security Trustee shall declare the Lease to be in default
pursuant to Section 15 thereof and exercise those remedies specified by the
Lender. The Security Trustee agrees to provide to Lender, the Debtor and the
Owner Participant concurrently with such declaration by the Security Trustee,
notice of such declaration by the Security Trustee.
6.3 INDEMNIFICATION. The Security Trustee shall not be
required to take any action or refrain from taking any action under Section 6.1
(other than the first two sentences thereof), Section 6.2 or Article V or to
take any action or refrain from taking any action at the direction or
instructions of the Lender under any other Section hereof or under any other
Operative
18
Agreement unless it shall have received indemnification against any risks or
costs incurred in connection therewith in form and substance reasonably
satisfactory to it, including, without limitation, adequate advances against
costs which may be incurred by it in connection therewith. The Security Trustee
shall not be required to take any action under Section 6.1 (other than the first
two sentences thereof), Section 6.2 or Article V, nor shall any other provision
of this Security Agreement or any other Operative Agreement be deemed to impose
a duty on the Security Trustee to take any action, if the Security Trustee shall
have been advised in writing by outside counsel that such action is contrary to
the terms hereof or is otherwise contrary to law or would involve the Security
Trustee in personal liability against which the indemnification provided by this
Section would not be satisfactory.
6.4 NO DUTIES EXCEPT AS SPECIFIED IN SECURITY AGREEMENT OR
INSTRUCTIONS. The Security Trustee shall not have any duty or obligation to
manage, control, lease, use, sell, operate, store, dispose of or otherwise deal
with the Aircraft or any other part of the Collateral, or to otherwise take or
refrain from taking any action under, or in connection with, this Security
Agreement, except as expressly provided by the terms of this Security Agreement
or as expressly provided in written instructions received pursuant to the terms
of Section 6.1 or 6.2; and no implied duties or obligations shall be read into
this Security Agreement against the Security Trustee.
6.5 NO ACTION EXCEPT UNDER SECURITY AGREEMENT OR INSTRUCTIONS.
The Security Trustee agrees that it will not manage, control, use, sell, lease,
operate, store, dispose of or otherwise deal with the Aircraft or other property
constituting part of the Collateral except in accordance with the powers granted
to, or the authority conferred upon, the Security Trustee pursuant to this
Security Agreement and in accordance with the express terms hereof.
6.6 REPORTS, NOTICES, ETC. The Security Trustee will furnish
to the Lender, promptly upon receipt thereof, duplicates or copies of all
reports, opinions, notices, requests, demands, certificates, financial
statements and other instruments furnished to the Security Trustee, to the
extent that the same shall not have been otherwise furnished to the Lender
pursuant to this Security Agreement or any other Operative Agreement or to the
extent the Security Trustee does not reasonably believe that the same shall have
been furnished by the Debtor directly to the Lender; PROVIDED, the failure of
the Security Trustee to furnish the Lender with such duplicates or copies shall
not impair or affect the validity of any such report, opinion, notice, request,
demand, certificate, financial statement or other instrument. The Security
Trustee's sole responsibility with respect to such reports, opinions, notices,
requests, demands, certificates, financial statements and other instruments
shall be to furnish them to the Lender to the extent provided in this Section 6.
6.7 REMOVAL OF CERTAIN LIENS. The Security Trustee will not
directly or indirectly cause, incur, assume or suffer to exist any Lien
attributable to the Security Trustee on any part of the Collateral (other than
the Liens contemplated by the Operative Agreements), and it agrees that it will,
at its own cost and expense, promptly take such action as may be necessary to
discharge and satisfy any such Lien attributable to the Security Trustee and it
shall indemnify, protect, defend and hold harmless the Debtor against any claims
in any way resulting from or arising out of a breach by it of its obligations
under this Section 6.7; provided that such Liens shall not include Liens arising
out of Taxes required to be indemnified by the Lessee under the
19
Operative Agreements or transfers permitted by the terms of the Operative
Agreements or pursuant to the exercise of remedies set forth in Section 5 of
this Security Agreement and provided, further that such indemnity, to the extent
that it relates to Liens arising out of acts of the Security Trustee not
permitted by, or the failure of the Security Trustee to take any action required
by the Operative Agreements, shall only relate to those Liens as shall have
arisen as a result of the gross negligence or willful misconduct of the Security
Trustee.
6.8 NO CHARGES. The Security Trustee agrees that it will not
impose any listing charge, cable charge, remittance charge or any other charge
or fee on any transfer by the Debtor of funds to, through or by the Security
Trustee pursuant to any Operative Agreement, except as may be otherwise agreed
in writing by the Debtor.
Section 7. THE SECURITY TRUSTEE
7.1 ACCEPTANCE OF TRUSTS AND DUTIES. The Security Trustee
accepts the trusts and duties hereby created and applicable to it and agrees to
perform such duties but only upon the terms of this Security Agreement and
agrees to receive and disburse all moneys received by it as Security Trustee
constituting part of the Collateral in accordance with the terms hereof. The
Security Trustee shall have no liability hereunder or under any other Operative
Agreement, except (a) for its own willful misconduct or gross negligence (or
ordinary negligence in the receipt or disbursement of money) or breach of any of
its representations or warranties or covenants made herein or in any other
Operative Agreement to which it is a party, or (b) as otherwise expressly
provided in this Security Agreement or the other Operative Agreements.
7.2 ABSENCE OF DUTIES. Except in accordance with written
instructions, requests or consents furnished pursuant to Sections 6.1, 6.2 or
9.1 and except as provided in, and without limiting the generality of, Section
6.4, the Security Trustee shall have no duty (a) to see to any registration of
the Aircraft or any recording or filing of this Security Agreement or any other
document, or to see to the maintenance of any such registration, recording or
filing, (b) to see to any insurance on the Aircraft or to effect or maintain any
such insurance, whether or not the Debtor shall be in default with respect
thereto, (c) to confirm, verify or inquire into the failure to receive any
financial statements of the Debtor, (d) to inspect the Aircraft at any time or
ascertain or inquire as to the performance or observance of any of the Debtor's
covenants under this Security Agreement with respect to the Aircraft or (e) to
give any consent, make any election or determination or exercise any discretion,
it being understood that, except as otherwise expressly provided herein, the
duties of the Security Trustee hereunder and under any other Operative Agreement
shall be wholly ministerial in nature.
7.3 RELIANCE; SECURITY TRUSTEES; ADVICE OF COUNSEL. The
Security Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by the
Security Trustee to be genuine and reasonably believed by it to be signed by the
proper party or parties. The Security Trustee may accept a copy of a resolution
of the Board of Directors of the Debtor or the Lender certified by the Secretary
or an Assistant Secretary of such party or in the case of the Lender, by any
authorized officer as duly adopted and in full force and effect, as conclusive
evidence that such resolution has been duly adopted and that the same is in full
force and effect. As to any fact or matter the manner of ascertainment of which
is not specifically
20
described herein, the Security Trustee may for all purposes hereof rely on a
certificate, signed by a Responsible Officer of the Debtor, as to such fact or
matter, and such certificate shall constitute full protection to the Security
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon. The Security Trustee shall furnish to the Debtor upon request
such information and copies of such documents as the Security Trustee may have
and as are necessary for the Debtor to perform its duties under SECTION 2;
PROVIDED that the failure of the Security Trustee to furnish such information or
documents shall not affect the Borrower's obligations hereunder or under the
Loan Secured Obligations. The Security Trustee shall assume, and shall be fully
protected in assuming, that the Debtor is authorized to enter into this Security
Agreement and to take all actions permitted to be taken by it pursuant to the
provisions hereof, and shall not inquire into the authorization of the Debtor
with respect thereto. In the administration of the trusts hereunder, the
Security Trustee may execute any trust or power hereof and perform its powers
and duties hereunder directly or through agents or attorneys and the Security
Trustee shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder and may consult
with independent counsel, accountants and other skilled persons to be selected
and employed by it, and the Security Trustee shall not be liable for anything
done, suffered, or omitted in good faith by it in accordance with the written
advice or opinion of any such independent counsel, accountants or other skilled
persons acting within such persons' area of competence (so long as the Security
Trustee shall have exercised reasonable care in selecting such persons).
7.4 CAPACITY IN WHICH ACTING. The Security Trustee has entered
into this Security Agreement in its individual capacity
Section 8. SUCCESSOR TRUSTEE
8.1 RESIGNATION OF SECURITY TRUSTEE; APPOINTMENT OF SUCCESSOR.
Security Trustee may at any time resign by giving notice to the Debtor and the
Lender, such resignation to be effective upon the appointment of a successor
Security Trustee as hereinafter provided.
Lender may remove Security Trustee at any time by giving
notice to the Debtor and, unless a Lease Event of Default has occurred and is
continuing, with the approval of the Lessee. Debtor may remove Security Trustee
at any time with the approval of Lender and, unless a Lease Event of Default has
occurred and is continuing, with the approval of Lessee by giving written notice
to Security Trustee (countersigned by Lender). Each such removal shall be
effective only upon the appointment of a successor Security Trustee as
hereinafter provided and upon payment of the existing Security Trustee's unpaid
fees and expenses (including reasonable legal fees and disbursements).
In the event of any resignation or removal of Security
Trustee, a successor Security Trustee shall be appointed by Lender, subject to
the approval of the Lessee (except such approval shall not be required if a
Lease Event of Default has occurred and is continuing). Such successor Security
Trustee shall be (i) a bank or trust company organized under the laws of the
United States of America (the "UNITED STATES") or of a State of the United
States, having a corporate trust office in a State of the United States, and
having a capital and surplus of not less than $500,000,000, or (ii) a foreign
bank having a United States branch office in New York City, and having a capital
and surplus of not less than $1,000,000,000. If a successor Security Trustee
21
shall not have been appointed and shall not have accepted its appointment as
Security Trustee hereunder within 45 days after such notice of resignation of
Security Trustee or such notice of removal of Security Trustee, Security Trustee
or Lender may apply to any court of competent jurisdiction to appoint a
successor Security Trustee to act until such time, if any, as a successor
Security Trustee shall have accepted its appointment as above provided. Any
successor Security Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Security Trustee appointed by
Lender. Any such successor Security Trustee shall deliver to each party to this
Agreement a written instrument accepting such appointment hereunder and
thereupon such successor Security Trustee shall succeed to all the rights and
duties of Security Trustee hereunder and shall be entitled to receive all cash
and investments held on behalf of the Lender from the predecessor Security
Trustee.
Any corporation into which the Security Trustee may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Security Trustee shall
be a party, or any corporation to which substantially all the corporate trust
business of the Security Trustee may be transferred, shall, subject to the
compliance with the terms of the second sentence of the next preceding paragraph
of this Section 8.1, be a successor Security Trustee and the Security Trustee
under this Agreement without further act.
Section 9. SUPPLEMENTS AND AMENDMENTS TO THIS SECURITY AGREEMENT AND
OTHER DOCUMENTS
9.1 SUPPLEMENTAL SECURITY AGREEMENTS.
(a) With the written consent of the Lender, the
Debtor may, and the Security Trustee, subject to Section 9.2, shall, at any time
and from time to time, enter into an amendment or amendments hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Security Agreement or of modifying in any manner the
rights and obligations of the Lender and of the Debtor under this Security
Agreement, subject to Section 7.6.7 of the Participation Agreement.
(b) Notwithstanding the provisions of
Section 9.1(a), at any time after the date hereof, the Debtor and the Security
Trustee may enter into one or more agreements supplemental hereto without the
consent of the Lender for any of the following purposes: (i) (a) to cure any
defect or inconsistency herein, or to make any change not inconsistent with the
provisions hereof (PROVIDED that such cure or change does not adversely affect
the interests of the Lender in its capacity solely as Lender) or (b) to cure any
ambiguity or correct any mistake (ii) to evidence the succession of another
party as the Debtor in accordance with the terms of the Trust Agreement or to
evidence the succession of a new trustee hereunder pursuant hereto, the removal
of the trustee hereunder or the appointment of any co-trustee or co-trustees or
any separate or additional trustee or trustees; (iii) to convey, transfer,
assign, mortgage or pledge any property to or with the Security Trustee or to
make any other provisions with respect to matters or questions arising hereunder
so long as such action shall not adversely affect the interests of the Lender in
its capacity solely as Lender; (iv) to correct or amplify the description of any
property at any time subject to the Lien of this Security Agreement or better to
assure, convey and confirm unto the Security Trustee any property subject or
required to be subject to the Lien of this Agreement,
22
the Airframe or Engines or any Replacement Airframe or Replacement Engine; (v)
to add to the covenants of the Debtor for the benefit of the Lender, or to
surrender any rights or power herein conferred upon the Debtor, the Owner
Participant or the Lessee; (vi) to add to the rights of the Lender, or (vii) to
amend or supplement the Lease pursuant to Section 3.2.3(b) or 3.2.4(a) of the
Lease. Prior to entering into any agreement supplemental hereto pursuant to this
Section, the Security Trustee shall be entitled to receive and shall be fully
protected in relying upon, an opinion of counsel stating that such agreement
supplemental hereto is authorized or permitted by this Security Agreement.
9.2 SECURITY TRUSTEE PROTECTED. If in the opinion of the
Security Trustee any document required to be executed pursuant to the terms of
Section 9.l adversely affects any right, duty, immunity or indemnity in favor of
the Security Trustee under this Security Agreement or the other Operative
Agreements, the Security Trustee may in its discretion decline to execute such
document.
9.3 DOCUMENTS MAILED TO LENDER. Promptly after the execution
by the Security Trustee of any document entered into pursuant to this Section 9,
the Security Trustee shall mail, by first-class mail (air mail in the case of
international), postage prepaid, a conformed copy thereof to the Lender at the
address provided for the Lender in the Participation Agreement or at such other
address as may be specified by the Lender pursuant to the Participation
Agreement, but the failure of the Security Trustee to mail such conformed copies
shall not impair or affect the validity of such document.
Section 10. INVESTMENT OF SECURITY FUNDS
10.1 INVESTMENT OF SECURITY FUNDS. Any amounts held by the
Security Trustee as assignee of the Debtor's rights to hold monies for security
pursuant to Section 4.4 of the Lease shall be held in accordance with the terms
of such Section and the Security Trustee agrees, for the benefit of Lessee, to
perform the duties of the Debtor under such Section. Any moneys paid to or
retained by the Security Trustee that are required to be paid to the Debtor or
applied for the benefit or at the direction of the Debtor (including, without
limitation, amounts payable to the Debtor under Sections 3.2 and 3.3), but which
the Security Trustee is entitled to hold under the terms hereof pending the
occurrence of some event or the performance of some act (including, without
limitation, the remedying of a Loan Event of Default), shall, until paid to the
Debtor or applied as provided herein, be invested by the Security Trustee at the
written authorization and direction of the Debtor in Permitted Investments,
which investments shall be, as between the Debtor and the Security Trustee, at
the sole expense and risk of the Debtor. Such authorization and direction of the
Debtor shall specify the particular investment to be made and shall certify that
such investment constitutes a Permitted Investment. There shall be promptly
remitted to the Debtor any income or gain (including interest received) realized
as the result of any such investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such investment) unless a Loan
Event of Default shall have occurred and be continuing. If a Loan Event of
Default shall have occurred and be continuing, the Security Trustee shall hold
any such income or gain as security for the obligations of the Debtor hereunder
and apply it against such obligations as and when due, and at such time as there
shall not be continuing any such Loan Event of Default, such amount, to the
extent not previously so applied against the Debtor's obligations, shall be paid
to the Debtor; PROVIDED that if any such amount has been so held as
23
security for more than 120 days, during which period (i) the Security Trustee
shall not have been limited by operation of law or otherwise from exercising
remedies and (ii) the Security Trustee shall not have exercised any remedy
available to it under Section 5.1, then such amount, to the extent not
previously so applied against such obligations of the Debtor, shall be paid to
the Debtor.
LIABILITY FOR LOSSES. The Security Trustee in its individual
capacity shall not be liable for any loss relating to an investment made in
accordance with this Section 10. The Debtor will promptly pay to the Security
Trustee, on demand, the amount of any loss for which the Security Trustee is not
liable realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment).
Section 11. MISCELLANEOUS.
11.1 NOTICES. Any notice or other communication pursuant
hereto shall be in writing, and shall be effective on the day on which delivered
manually or by facsimile (with written confirmation delivered by overnight
delivery service) to any party hereto at the address and in the manner specified
in Section 16.7 of the Participation Agreement.
11.2 BENEFIT OF AGREEMENT. This Security Agreement shall be
binding upon and inure to the benefit of Debtor and the Security Trustee and
their respective successors and permitted assigns.
11.3 BINDING EFFECT; ASSIGNMENT. Subject to the terms and
provisions hereof and of the other Operative Agreements, neither this Security
Agreement nor any of the other Operative Agreements may be assigned by Debtor,
in whole or in part, without the prior written consent of Lender.
11.4 REMEDIES. All remedies, rights, powers and privileges,
either under this Security Agreement or by law or otherwise afforded the
Security Trustee, shall be cumulative and not be exclusive of any remedies,
rights, powers and privileges provided by law and shall be available until the
Secured Obligations have been paid in full in lawful money of the United States
of America. All of such remedies may be exercised in any order of priority.
11.5 TERMINATION OF SECURITY AGREEMENT. Upon (or at any time
after) payment in full of the principal amount of, and interest on and all other
amounts due under the Note and provided that there shall then be no other
Secured Obligations due to the Lender and the Security Trustee hereunder or
under the Participation Agreement or other Operative Agreement, the Debtor shall
direct the Security Trustee to execute and deliver to or as directed in writing
by the Debtor an appropriate instrument releasing, without recourse or warranty,
the Aircraft and the Engines from the Lien of this Security Agreement and
releasing, without recourse or warranty, the Lease, the Purchase Agreement, the
Purchase Agreement Assignment and other Collateral from the assignment and
pledge thereof hereunder and the Security Trustee shall execute and deliver such
instrument as aforesaid and give written notice thereof to Lessee and, in such
event, this Security Agreement and the trusts created hereby shall terminate and
this Security Agreement shall be of no further force or effect; PROVIDED,
HOWEVER, that this Security Agreement and the trusts created hereby shall
earlier terminate and this Security Agreement shall be of no
24
further force or effect upon any sale or other final disposition by the Security
Trustee of all property constituting part of the Collateral and the final
distribution by the Security Trustee of all monies or other property or proceeds
constituting part of the Collateral in accordance with the terms hereof. Except
as aforesaid otherwise provided, this Security Agreement and the trusts created
hereby shall continue in full force and effect in accordance with the terms
hereof. The Security Trustee may rely on a certificate of the Lender that all
amounts required by this Section to be paid to the Lender as a condition to the
termination hereof have in fact been paid.
11.6 NO LEGAL TITLE TO COLLATERAL IN NOTE HOLDERS. No holder
of the Note shall have legal title to any part of the Collateral. No transfer,
by operation of law or otherwise, of the Note or other right, title and interest
of any Lender in and to the Collateral or hereunder shall operate to terminate
this Security Agreement or entitle such Lender or any successor or transferee of
such Lender to an accounting or to the transfer to it of any legal title to any
part of the Collateral.
11.7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants (including without limitation
those set forth in Section 4 hereof) made by Debtor to the Security Trustee in
connection with this Security Agreement shall survive the execution and delivery
of this Security Agreement. All statements contained in any certificate or other
instrument signed by an officer of Debtor and delivered to the Security Trustee
pursuant to this Security Agreement shall be deemed representations, warranties
and covenants hereunder of Debtor.
11.8 FORM OF REPORTS, SCHEDULES AND ASSIGNMENTS. All reports,
schedules, assignments, certificates and other items delivered to the Security
Trustee or Lender pursuant to this Security Agreement or any other statement,
instrument or transaction contemplated thereby or relating thereto and all
endorsements in connection therewith, shall be executed by an authorized
representative of Debtor and shall be in form reasonably satisfactory to the
Security Trustee.
11.9 GOVERNING LAW AND CONSTRUCTION. THIS SECURITY AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. In the event of any conflict within, between or among the provisions
of this Security Agreement or any other statement, instrument or transaction
contemplated thereby or relating thereto, those provisions giving the Security
Trustee the greater right shall govern. All obligations of Debtor and the rights
of the Security Trustee under this Security Agreement shall be in addition to,
and not in limitation of, those provided by applicable Law.
11.10 HEADINGS. Section headings in this Security Agreement
are for convenience in reference only and shall not govern the interpretation of
any of the provisions of this Security Agreement.
11.11 COUNTERPARTS. This Security Agreement may be signed in
any number of counterparts with the same effect as if the signatures thereto
were upon the same instrument; PROVIDED, that, without limiting the
effectiveness of any counterpart provided for above, the
25
parties agree that one non-counterpart original shall be fully executed and
delivered to the Security Trustee.
11.12 WAIVER OF TRIAL BY JURY. EACH OF DEBTOR AND THE SECURITY
TRUSTEE HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THE OPERATIVE AGREEMENTS.
11.13 QUIET ENJOYMENT. Notwithstanding any of the provisions
of this Agreement, so long as no Lease Event of Default shall be continuing,
neither the Security Trustee nor any Person claiming by, through or under the
Security Trustee will interfere with the peaceful and quiet possession, use and
enjoyment of the Aircraft by Lessee in accordance with the Lease.
11.14 NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT OR
DOCUMENTS. DEBTOR MAKES NO, NOR SHALL DEBTOR BE DEEMED TO HAVE MADE ANY,
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, WORKMANSHIP, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY,
DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR
PURPOSE OF THE AIRCRAFT OR ANY ENGINE 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 WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE OR ANY PART THEREOF
WHATSOEVER, AND DEBTOR HEREBY EXPRESSLY DISCLAIMS ANY SUCH REPRESENTATION OR
WARRANTY, except that Debtor warrants that on the Closing Date, (i) Debtor shall
have received whatever right, title and interest in the Aircraft was conveyed to
it on such Closing Date subject to the rights of the parties to the Operative
Agreements and (ii) the Aircraft shall be free and clear of Lessor Liens
attributable to Debtor in its individual capacity.
11.15 NO SEGREGATION OF MONEYS; NO INTEREST. Any moneys paid
to or retained by the Security Trustee pursuant to any provision hereof and not
then required to be distributed to Lessee or Debtor as provided in SECTION 3
hereof need not be segregated in any manner except as required by law, and may,
except as aforesaid, be deposited under such general conditions as may be
prescribed by law, and the Security Trustee shall not be liable for any interest
thereon unless Lessee or Debtor requests that the Security Trustee put such
moneys into an interest-bearing account, at which time such account shall bear
interest at the then-existing rate for customers similar to Lessee or Debtor, as
applicable; PROVIDED that any payment received or applied hereunder by the
Security Trustee shall be accounted for by the Security Trustee so that any
portion thereof paid or applied pursuant hereto shall be identifiable as to the
source thereof.
11.16 SEVERABILITY. Any provision of this Security Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
26
11.17 NOTICES, INSTRUCTIONS, CONSENTS, EXECUTION AND WAIVER.
Whenever the provisions of this Agreement or any Operative Agreement require or
permit notice from or to, instructions from, consent of, execution of any
amendment, supplement, modification, instrument, certificate or other document
by, or a waiver by, the Lender, the notice from or to, instruction from, consent
of, execution by or waiver by, the holders on the date of such notice,
instruction, consent, execution or waiver of more than 50% in interest of the
principal amount of Loan A then outstanding shall be considered notice from or
to, instruction from, consent of, execution by or waiver by, the Lender and
shall be binding upon any present or subsequent Lender; PROVIDED, HOWEVER, that
without the consent of each holder at the time thereof affected thereby, no
amendment, supplement, consent or waiver shall:
(a) change the final maturity of the Note, or
change the dates or amounts of payment of any installment of the principal of or
interest on the Note, or reduce the principal of or interest on the Note, or
change to a location outside the United States of America the place of payment
where, or the coin or currency in which, the principal amount of the Note is
payable; or
(b) create any Lien with respect to the
Collateral except such as are permitted by the Security Agreement, or deprive
any such holder of the benefit of the Lien on the Collateral created by the
Security Agreement; or
(c) modify the provisions of this Section 11.17;
or
(d) adversely affect any indemnities in favor of
such holder.
11.18 REGISTER. The Security Trustee hereby agrees to maintain
the Register pursuant to Section 5.07(c) of the Loan Agreement as agent for and
on behalf of the Debtor.
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IN WITNESS WHEREOF, the parties have caused this Aircraft Security
Agreement to be executed by their duly authorized officers as of the day first
above written.
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, not
in its individual capacity
except as stated herein and
otherwise solely as Owner
Trustee, as Debtor
By: ________________________________
Name:
Title:
JPMORGAN CHASE BANK
as Security Trustee
By: _______________________________
Name:
Title:
ANNEX A
DEFINITIONS
[see attached]
ANNEX A
LEVERAGED LEASE DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly
provided, a reference to:
(i) Each of "Lender," "Lessee," "Lessor," "Owner Trustee,"
"Owner Participant," "Security Trustee," or any other person
includes, without prejudice to the provisions of any Operative
Agreement, any successor in interest to it and any permitted
transferee, permitted purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and
words importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex,
schedule or exhibit thereto, or any other part thereof, includes,
without prejudice to the provisions of any Operative Agreement,
that agreement, instrument or document, or annex, schedule or
exhibit, or part, respectively, as amended, modified or
supplemented from time to time in accordance with its terms and in
accordance with the Operative Agreements, and any agreement,
instrument or document entered into in substitution or replacement
therefor;
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or
reenacted prior to the Closing Date, and thereafter from time to
time;
(v) the words "Agreement," "this Agreement," "hereby,"
"herein," "hereto," "hereof" and "hereunder" and words of similar
import when used in any Operative Agreement refer to such
Operative Agreement as a whole and not to any particular provision
of such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar
import when used in any Operative Agreement, with respect to any
matter or thing, mean including, without limitation, such matter
or thing; and
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in
any Operative Agreement, or in any annex thereto, is a reference
to a section of, or an exhibit, an annex or a schedule to, such
Operative Agreement or such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative
Agreement is incorporated in, and shall be deemed to be a part of, such
Operative Agreement.
(c) Unless otherwise defined or specified in any Operative
Agreement, all accounting terms therein shall be construed and all accounting
determinations thereunder shall be
made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for
convenience only and shall not in any way affect the construction of, or be
taken into consideration in interpreting, such Operative Agreement.
DEFINED TERMS
"ACT" or "FEDERAL AVIATION CODE" means part A of subtitle VII of title
49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or Security
Trustee, as the case may be, actual knowledge of a responsible officer in the
Corporate Trust Department or the Corporate Trust Office, respectively, and (b)
as it applies to any other party, actual knowledge of a President, Director,
Vice President or more senior officer thereof having responsibility for the
transactions contemplated by the Operative Agreements; provided that a party
shall be deemed to have "Actual Knowledge" of any matter as to which it has
received notice pursuant to the applicable notice provision of any Operative
Agreement.
"ADDITIONAL COMMITMENT PERIOD" means the period in which FINAME has a
commitment to provide financing to Lessee with respect to any aircraft (other
than the 4 aircraft covered by the Funding Agreement) to be delivered under the
Purchase Agreement.
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person. For purposes of this definition, "CONTROL" means 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 and "CONTROLLING," "CONTROLLED BY" and "under common
control with" have correlative meanings.
"AFTER-TAX BASIS" with respect to any payment to be received or accrued
by any Person, the amount of such payment adjusted, if necessary, so that such
payment, after taking into account all Taxes payable to any taxing authority as
a result of the receipt or accrual of such payments and any savings in Taxes
with respect to the indemnified Taxes or other liability in respect of which
such payment is due, shall be equal to the payment to be received or accrued.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT XXXX OF SALE" means the full warranty xxxx of sale covering
the Aircraft delivered by the Lessee to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log books,
and all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time
made, or required to be made, by the FAA (or other Aviation Authority)
regulations, and in each case in whatever form and by whatever means or medium
(including, without limitation, microfiche, microfilm, paper or computer disk)
such materials may be maintained or retained by or on behalf of Lessee
(PROVIDED, that all such materials shall be maintained in the English language).
"AIRCRAFT WARRANTY AGREEMENT": means the Aircraft Warranty Agreement,
dated as of _______, 2001, between the [Airframe Manufacturer and Security
Trustee.]
"AIRFRAME" means (a) the Embraer [EMB-145LR] [EMB-145 model EMB-135 KL]
aircraft (excluding Engines or engines from time to time installed thereon)
manufactured by Airframe Manufacturer and identified by Airframe Manufacturer's
model number, United States registration number and Airframe Manufacturer's
serial number set forth in Lease Supplement No. 1 and any Replacement Airframe
and (b) any and all Parts incorporated or installed in or attached or
appurtenant to such airframe, and any and all Parts removed from such airframe,
unless title to such Parts shall not be vested in Lessor in accordance with
Section 8.1 and Annex C of the Lease. Upon substitution of a Replacement
Airframe under and in accordance with the Lease, such Replacement Airframe shall
become subject to the Lease and shall be the "Airframe" for all purposes of the
Lease and the other Operative Agreements and thereupon the Airframe for which
the substitution is made shall no longer be subject to the Lease, and such
replaced Airframe shall cease to be the "Airframe."
"AIRFRAME INTERCHANGE AGREEMENT" means an agreement between the Lessee
(or a Permitted Sublessee) and another air carrier which qualifies as a
Permitted Air Carrier pursuant to which they agree to provide passenger service
to multiple destinations under circumstances where the Airframe may be operated
by and in the possession of such other air carrier for a period not to exceed
seven consecutive days subject to extension in the event of unforeseen
circumstances.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de Aeronautica
S.A., a Brazilian corporation.
"APPRAISAL" is defined in Section 5.1.2(xvi) of the Participation
Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"ASSIGNMENT" has the meaning specified in Section 10.1.3(b)(2) of the
Participation Agreement.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted to
be, and is, registered with any other Government Entity under and in accordance
with Section 7.6.11 of the Participation Agreement, such other Government
Entity.
"BANK" means Xxxxx Fargo Bank Northwest, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 X.X.X.xx.
101 ET SEQ.
"BANKRUPTCY DEFAULT" means a Lease Default under Section 14.5 of the
Lease.
"BANKRUPTCY EVENT" means with respect to any Person, any of the
following events:
(a) such Person shall consent to the appointment of or the taking of
possession by the receiver, trustee or liquidator of itself or of substantially
all of its property, or such Person shall admit in writing its inability to pay
its debts generally as they come due, or does not pay its debts generally as
they become due or shall make a general assignment for the benefit of creditors;
or
(b) such Person shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization, liquidation or other
relief in a proceeding under the Bankruptcy Code (as in effect at such time) or
such Person shall seek relief by voluntary petition, answer, or consent under
the provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time) or such
Person's board of directors shall adopt a resolution authorizing any of the
foregoing; or
(c) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of such Person, a
receiver, trustee or liquidator of such Person or of substantially all of its
property, or sequestering substantially all of the property of such Person, and
any such order, judgment or decree of appointment or sequestration shall remain
in force undismissed, unstayed or unvacated for a period of 60 days after the
date of entry thereof; or
(d) a petition against such Person in a proceeding under the Bankruptcy
Code (as in effect at such time) or any other bankruptcy laws or other
insolvency laws, shall be filed and shall not be withdrawn or dismissed within
60 days thereafter, or, under the provisions of any Law providing for
reorganization or winding-up of corporations which may apply to such Person, any
court of competent jurisdiction shall assume jurisdiction, custody or control of
such Person or of substantially all of its property and such jurisdiction,
custody or control shall remain in force unrelinquished, unstayed or
unterminated for a period of 60 days.
"BASE LEASE TERM" means the period beginning on and including the
Closing Date and ending on the Scheduled Expiration Date, or such earlier date
on which the Term terminates in accordance with the provisions of the Lease.
"BASIC RENT" means the rent payable for the Aircraft pursuant to
Section 3.2.1 of the Lease.
"BILLS OF SALE" means the FAA Xxxx of Sale and the Aircraft Xxxx of
Sale.
"BFE": means all buyer furnished equipment, if any, installed on the
Aircraft on the Date of Actual Delivery or to be installed thereafter, and
listed in an attachment to the BFE Xxxx of Sale.
"BFE XXXX OF SALE": means a Xxxx of Sale, if there is any BFE, dated
the Closing Date executed by the Lessee in favor of the Airframe Manufacturer
(and covering the BFE for the Aircraft).
"BNDES" means Banco Nacional de Desenvolvimento Economico e Social, a
Brazilian Federal public company with its principal place of business in
Brasilia, Distrito Federal, Federative Republic of Brazil, and main offices in
the City of Rio de Janeiro, at Avenida Republica do Chile, Xx. 000 XXX 00000-000
- Xxx xx Xxxxxxx - XX, Xxxxxx 00-000-000 registered in the General Register of
Taxpayers under the number 33.657.248/0001-89.
"BRAZIL": means the Federative Republic of Brazil.
"BRAZILIAN CURRENCY EQUIVALENT" has the meaning set forth in Section
4.2(b) of the Participation Agreement.
[*]
[*]
"BREAKAGE COST" means the amount of the difference (if positive)
between (i) the benefit actually received by the Lender or BNDES, as the case
may be, pursuant to any export benefit program of the Brazilian government (the
"Export Benefit"), adjusted pursuant to applicable regulations, minus (ii) the
Export Benefit that the Lender or BNDES, as the case may be, would have received
had the maturity of the Loan at the time the Loan was advanced been the date to
which such maturity is accelerated; provided, however , that the Breakage Cost
shall be adjusted to reflect any charges imposed upon the Lender or BNDES
pursuant to applicable regulations in Brazil by reason of any late payment made
under the Loan including any penalty and fines that may be charged by the
Brazilian Central Bank; provided, further, however, that if the whole amount of
the outstanding Loan is assigned pursuant to an Assignment, other than to a
Brazilian Lender, no Breakage Cost regarding the Export Benefit shall thereafter
apply to such Loan; otherwise, if a partial Assignment of the Loan is made,
other than to a Brazilian Lender, the Breakage Cost applies only to the
non-transferred portion of the Loan held by a Brazilian Lender.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required by law to close in New
York, New York, Indianapolis, Indiana, Rio De Janeiro, Brazil or the city and
the state in which the Corporate Trust Department is located.
"CASH AND INVESTMENTS": means cash, cash equivalents, instruments,
investments and securities, including Permitted Investments.
"CHANGE IN CONTROL": as defined in Section 13 of the Lease.
[*]
"CHAUTAUQUA" means Chautauqua Airlines, Inc., a New York corporation.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of
the Act and in the FAA Regulations.
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"CLOSING" means the occurrence of the following concurrent events: (i)
sale of the Aircraft to the Owner Trustee and the filing of the FAA Xxxx of Sale
with the FAA in connection therewith; (ii) lease of the Aircraft by Owner
Trustee to Lessee pursuant to the Lease; and (iii) completion of the other
events contemplated by the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement No.
1 as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"CODE-SHARE AGREEMENT" means an agreement of the Lessee pursuant to
which it is entitled to fly under another carrier's Designator Code.
"COLLATERAL" has the meaning specified in Section 2 of the Security
Agreement.
"COLLATERAL DOCUMENTS" shall mean the Lease, each Lease Supplement, the
Purchase Agreement (to the extent assigned pursuant to the Purchase Agreement
Assignment), each Permitted Sublease (to the extent assigned under a Sublease
Assignment), each Sublease Assignment, and the Bills of Sale.
"COMMITMENT" means, for any Participant, the amount of its
participation in the payment of Lessor's Cost as set forth in Schedule 2 to the
Participation Agreement, subject, in the case of the Lender, to the additional
provisions of the Funding Agreement.
"COMMITMENT PERIOD" means the period in which the Comitment of a
Participant is in effect.
"COMMITMENT TERMINATION DATE" means, for the Owner Participant, the
date specified in Schedule 3 to the Participation Agreement.
"COMMONLY CONTROLLED ENTITY": means an entity, whether or not
incorporated, that is under common control with the Lessee within the meaning of
Section 4001 of ERISA or is part of a group that includes the Lessee and that is
treated as a single employer under Section 414 of the Code.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement
(CH_____) dated as of even date with the Participation Agreement, of Airframe
Manufacturer relating to the Aircraft.
"CORPORATE TRUST OFFICE" or "Trust Department" means the principal corporate
trust office of Owner Trustee located from time to time at Owner Trustee's
address for notices under the Participation Agreement or such other office at
which Owner Trustee's corporate trust business shall be principally administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Security Trustee and Lender.
"CRAF" means the Civil Reserve Air Fleet Program established pursuant
to 10 U.S.C. ss. 9511-13 or any similar substitute program.
"DEBT" means any liability for borrowed money, or any liability for the
payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means the interest rate per annum for the Loan set forth in
Schedule I to the Loan Agreement.
"DEBTOR" means Owner Trustee.
[*]
"DELAYED CLOSING DATE" means a delayed Closing Date notified to each
Participant, Owner Trustee and Security Trustee by Lessee pursuant to Section
4.3 of the Participation Agreement, which delayed Closing Date shall be a
Business Day not later than the Commitment Termination Date and, in the case of
the Lender, a date on which the Loan may be borrowed under the terms and
conditions of the Funding Agreement.
"DELIVERY DATE" or "DATE OF ACTUAL DELIVERY" means that date on which
the Aircraft is or was delivered by the Airframe Manufacturer to the Lessee.
"DESIGNATOR CODE" means the airline designations originally allotted
and administered pursuant to Agreements CAB 24606 and 26056.
"DIRECT LOANS": as defined in the Funding Agreement.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency of
the United States.
"DOT" means the Department of Transportation of the United States or
any Government Entity succeeding to the functions of such Department of
Transportation.
"ENGINE" means (a) each of the two [Rolls Royce] Xxxxxxx [AE3007A1/3]
[AE3007A1/P]-series engines manufactured by Engine Manufacturer and identified
by Engine Manufacturer's model number and Engine Manufacturer's serial number
set forth in Lease Supplement No. 1, and any Replacement Engine, in any case
whether or not from time to time installed on such Airframe or installed on any
other airframe or aircraft, and (b) any and all Parts incorporated or installed
in or attached or appurtenant to such engine, and any and all Parts removed from
such engine, unless title to such Parts shall not be vested in Lessor in
accordance with Annex C of the Lease. Upon substitution of a Replacement Engine
under and in accordance with the Lease, such Replacement Engine shall become
subject to the Lease and shall be an "Engine" for all purposes of the Lease and
the other Operative Agreements and thereupon the Engine for which the
substitution is made shall no longer be subject to the Lease, and such replaced
Engine shall cease to be an "Engine."
"ENGINE MANUFACTURER": means Rolls-Royce Company, formerly known as
Xxxxxxx Engine Company, Inc., a Delaware corporation.
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* Confidential
"ENGINE WARRANTY AGREEMENT": means the Engine Warranty Assignment
Agreement and Consent, dated as of______, 2001, among [the Lessee, the Engine
Manufacturer, the Owner Trustee and the Security Trustee.]
"EQUIPMENT" means the Aircraft, the Airframe, any Engine and/or any
Part.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property
beyond economic repair or rendition of such property permanently unfit for
normal use by Lessee;
(b) the actual or constructive total loss of such property or
any damage to such property, or requisition of title or use of such property,
which results in an insurance settlement with respect to such property on the
basis of a total loss or constructive or compromised total loss;
(c) any theft, hijacking or disappearance of such property for
a period of 90 consecutive days or more or, if earlier, the end of the Term;
(d) any seizure, condemnation, confiscation, taking or
requisition (including loss of title) of such property by any Government Entity
or purported Government Entity (other than a requisition of use by the U.S.
Government) for a period exceeding 90 consecutive days or, if earlier, at the
end of the Term;
(e) any seizure, condemnation, confiscation, taking or
requisition of use of such property by the U.S. Government that continues until
the last day of the Term, provided that no such Event of Loss shall exist if
Lessor shall have elected not to treat such event as an Event of Loss pursuant
to Section 10.6 of the Lease; and
(f) as a result of any law, rule, regulation, order or other
action by the Aviation Authority or by any Government Entity of the government
of registry of the Aircraft or by any Government Entity otherwise having
jurisdiction over the operation or use of the Aircraft, the use of such property
in the normal course of Lessee's business of passenger air transportation is
prohibited for a period of 90 consecutive days, unless Lessee, prior to the
expiration of such 90 day period, shall have undertaken and shall be diligently
carrying forward such steps as may be necessary or desirable to permit the
normal use of such property by Lessee, but in any event if such use shall have
been prohibited for a period of 365 days, provided that no Event of Loss shall
be deemed to have occurred if such prohibition has been applicable to Lessee's
(or a Permitted Sublessee's) entire U.S. fleet of such property and Lessee (or a
Permitted Sublessee), prior to the expiration of such 365-day period, shall have
conformed at least one unit of such property 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
such property in so conforming such property, steps which are necessary or
desirable to permit the normal use of such property by Lessee, but in any event
if such use shall have been prohibited for a period of three years or such use
shall be prohibited at the expiration of the Term.
[*]
"EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration of the United States or
any Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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 FAA) delivered to Owner
Trustee on the Closing Date by the Lessee.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the
Security Agreement, the Trust Agreement, the FAA Xxxx of Sale and an application
for registration of the Aircraft with the FAA under the Act on AC Form 8050-1(or
such other form as may be approved by the FAA) in the name of Owner Trustee.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
"FAIR MARKET SALES VALUE" means the fair market sales value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing buyer under no compulsion to buy, and an informed and
willing seller under no compulsion to sell, the Aircraft, in a transaction that
would close on or about the relevant time of determination, assuming (except as
otherwise provided in Section 15.4 of the Lease) that (a) the Aircraft has been
maintained in accordance with, and is in the condition required by, the Lease
and (b) the Aircraft would be delivered to such informed and willing buyer in
the return condition required by the Lease.
"FINAME" as defined in the recitals to the Participation Agreement.
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* Confidential
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
(i) covering the Collateral containing the required information for Owner
Trustee, as debtor, showing Security Trustee as secured party, for filing in
Utah and each other jurisdiction that is necessary or, in the opinion of
Security Trustee, is reasonably desirable to, perfect its Lien of the Security
Agreement and (ii) covering the Lease and the Aircraft, as a precautionary
matter, by Lessee, as debtor/lessee, showing Owner Trustee as secured
party/lessor and Security Trustee as assignee of Owner Trustee, for filing in
New York and each other jurisdiction that is necessary or, in the opinion of
Owner Trustee and Security Trustee, is reasonably desirable to perfect the
Security Trustee's Lien under the Security Agreement.
"FLY-AWAY-FACTORY CONDITION" with respect to any Aircraft, that such
Aircraft is or was accepted by Lessee from the Airframe Manufacturer on the
Delivery Date as new and in compliance with the Purchase Agreement, subject to
unsatisfied delivery discrepancies that the Airframe Manufacturer agrees or
agreed to remedy.
"FUNDING AGREEMENT": means the Funding Agreement, dated as of December
27, 2001, between Lender and the Lessee.
"GAAP" means generally accepted accounting principles as set forth in
the statements of financial accounting standards issued by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, as such principles may at any time or from time to time be varied
by any applicable financial accounting rules or regulations issued by the SEC
and, with respect to any person, shall mean such principles applied on a basis
consistent with prior periods except as may be disclosed in such person's
financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"HOLDBACK PERIOD" has the meaning given to such term in Section 3.1 of
the Security Agreement.
"HOLIDAY DATE" has the meaning given to such term in Schedule 1 to the
Lease.
"HOLIDAY TERM" has the meaning given to such term in Schedule 1 to the
Lease.
"INDEMNITEE" means (i) Bank and Owner Trustee, (ii) Security Trustee
Bank, and Security Trustee, (iii) each separate or additional trustee appointed
pursuant to the Trust Agreement or the Security Agreement, (iv) each
Participant, (v) the Trust Estate, (vi) each Affiliate of the persons described
in clauses (i) through (iv), inclusive, (vii) the respective directors,
officers, employees, agents and servants of each of the persons described in
clauses (i) through (iv) inclusive and in clause (vi) and (viii), the successors
and permitted assigns of the persons described in clauses (i) through (iv),
inclusive, and in clauses (vi) and (vii). If any Indemnitee is Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of
either thereof, such Person shall be an Indemnitee only in its capacity as Owner
Participant or Lender.
"INTEREST RATE" has the meaning given to such term in SECTION 2.04(b)
of the Loan Agreement.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"LAW" means (a) any constitution, treaty, statute, law, decree,
regulation, order, rule or directive of any Government Entity, and (b) any
judicial or administrative interpretation or application of, or decision under,
any of the foregoing.
"LEASE" OR "LEASE AGREEMENT" means the Lease Agreement (CH____) dated
as of even date with the Participation Agreement, between Owner Trustee and
Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute a Lease
Event of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of
Exhibit A-1 to the Lease.
"LENDER" means the Person executing the Participation Agreement as
"Lender" and each other transferee deemed a "Lender" under Section 10.2 of the
Participation Agreement.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated the
Closing Date.
"LESSEE" means Chautauqua Airlines, Inc., a New York corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the
Lease, Lease Supplement No. 1, any Permitted Lease, any Sublease Assignment, and
the Tax Indemnity Agreement.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or
other user or person in possession of the Aircraft, Airframe or an Engine during
the Term with or without color of right, or any Affiliate of any of the
foregoing (excluding any Tax Indemnitee or any related Tax Indemnitee with
respect thereto, or any person using or claiming any rights with respect to the
Aircraft, Airframe or an Engine directly by or through any of the persons in
this parenthetical, but not excluding any Person claiming directly or indirectly
through or under the Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Collateral, the
Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any payments, any
Lien on such property or payments which
(a) arises from claims against such person (if such person is a trustee, whether
in its individual capacity or in its capacity as a trustee) not related to any
of the transactions contemplated by the Operative Agreements, (b) results from
acts or omissions of such person (if such person is a trustee, whether in its
individual capacity or in its capacity as a trustee) in violation of such
person's obligations under any of the terms of the Operative Agreements, or not
related to the transactions contemplated by the Operative Agreements, (c) is
imposed as a result of Taxes against such person (if such person is a trustee,
whether in its individual capacity or in its capacity as a trustee) or any of
its Affiliates not required to be indemnified by Lessee under the Participation
Agreement, or (d) claims against such person arising out of any transfer by such
person of its interest in the Aircraft, the Trust Estate or the Operative
Agreements, other than a Transfer permitted by the terms of the Operative
Agreements or pursuant to the exercise of remedies set forth in Section 15 of
the Lease.
"LESSOR'S COST" means the amount indicated in the Manufacturer's
Invoice to be paid by Owner Trustee to Airframe Manufacturer to purchase the
Aircraft pursuant to the Participation Agreement, and is designated by Dollar
amount in Schedule 3 to the Participation Agreement.
"LEVERAGED LEASING LOAN": as defined in the Funding Agreement.
"LIABILITIES" means the obligation of Owner Trustee to pay principal
and interest on the Loan, any Breakage Cost and all other obligations and
indemnities of Owner Trustee to Lender arising under the Operative Agreements,
whether now or hereafter existing.
[*]
"LIEN": means any mortgage, pledge, lien, charge, claim, encumbrance,
lease or security interest affecting title to or any interest in property.
"LOAN" means the Loan evidenced by the Note.
"LOAN AGREEMENT" means the Loan Agreement (CH_____), dated as of the
date of the Participation Agreement, between Owner Trustee and the Lender.
"LOAN MATURITY DATE" means the date specified as such in Schedule I to
the Loan Agreement.
"LOAN SECURED OBLIGATIONS" shall mean the Secured Obligations.
"LOAN DEFAULT" means any event or condition that with the giving of
notice or the lapse of time or both would become a Loan Event of Default.
"LOAN DOCUMENTS" has the meaning given such term in the Funding
Agreement.
"LOAN EVENT OF DEFAULT" has the meaning given to such term in SECTION
4.01 of the Loan Agreement.
"LOAN PARTICIPANTS": as defined in Section 10.1.3 of the Participation
Agreement.
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* Confidential
"LOAN PAYMENT DATE" means (1) each Payment Date during the Loan Term
and (2) the Loan Termination Date.
"LOAN TERM" means the period commencing on the Closing Date and ending
on the Loan Termination Date.
"LOAN TERMINATION DATE" means the earlier of (1) the Maturity Date or
(2) the date upon which all amounts due to Lender under the Note and all
Liabilities shall be payable in full in accordance with the terms of the Loan
Agreement and of the Note and the other Operative Agreements.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant to
Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM is defined in Annex C to the Lease.
"MANDATORY MODIFICATION" has the meaning set forth in Annex C of the
Lease Agreement.
"MANUFACTURER'S INVOICE" means the invoice of the Manufacturer setting
forth the purchase price of the Aircraft (which shall be the Net Aircraft Cost).
[*]
"MATERIAL CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under, or affect the
validity or enforceability of the Operative Agreements.
"MATURITY DATE" means the date specified as the "Loan Maturity Date" in
Schedule I to the Loan Agreement.
"MINIMUM LIABILITY AMOUNT" is defined in Schedule 1 to the Lease.
"NET AIRCRAFT COST" means, for the Aircraft, the Relevant Net Aircraft
Cost (as defined in the Funding Agreement) for the Aircraft.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax yield
utilizing the multiple investment sinking fund method of analysis and aggregate
net after-tax cash flow, computed on the basis of the same methodology and
assumptions as were utilized by the initial Owner Participant in determining
Basic Rent, Stipulated Loss Value percentages and Termination Value percentages,
as of the Closing Date.
"NET PRESENT VALUE OF RENTS" means the present value, as of the date of
determination, discounted at [*] per annum, compounded semiannually to the date
of determination, of all unpaid Basic Rent payments during the then-remaining
portion of the Base Lease Term, expressed as a percentage of Lessor's Cost.
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* Confidential
"NET WORTH" means, for any person, the excess of its total assets over
its total liabilities in accordance with GAAP.
"NEW DEBT" means debt securities in an aggregate principal amount
specified in the Refunding Information.
"NON-U.S. PERSON" means any Person other than a United States person,
as defined in Section 7701(a)(30) of the Code.
"NOTE" means the promissory note of Owner Trustee to be issued to
Lender pursuant to SECTION 2.02(a) of the Loan Agreement and any subsequent
promissory note or notes issued in substitution or replacement thereof pursuant
to SECTION 2.03(a) of the Loan Agreement.
"OBSOLETE PARTS" is defined in Section D of Annex C to the Lease.
"OFFICER'S CERTIFICATE" means, in respect of any party to the
Participation Agreement, a certificate signed by the Chairman, the President,
any Vice President (including those with varying ranks such as Executive,
Senior, Assistant or Staff Vice President), any Director, the Treasurer or the
Secretary of such party.
"OPTIONAL MODIFICATION" has the meaning set forth in Annex C of the
Lease Agreement.
"OPERATIVE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Agreement, the Purchase Agreement Assignment, the Engine
Warranty Agreement, the Aircraft Warranty Agreement, the Lease, Lease Supplement
No. 1, each Permitted Sublease, each Sublease Assignment, the Security
Agreement, the Bills of Sale, the Tax Indemnity Agreement, the Loan Agreement
and the Note.
"OP JURISDICTION" is defined in Schedule 3 to the Participation
Agreement.
"ORIGINATION FEE" has the meaning set forth in Section 2.1 of the Loan
Agreement.
"OWNER PARTICIPANT" means the person executing the Participation
Agreement as "Owner Participant" or any transferee deemed an "Owner Participant"
under Section 10.2 of the Participation Agreement.
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's Cost
allocated to the Owner Participant in Schedule 2 to the Participation Agreement.
"OWNER TRUSTEE" means Xxxxx Fargo Bank Northwest, National Association,
a national banking association, not in its individual capacity, except as
expressly provided in any Operative Agreement, but solely as Owner Trustee under
the Trust Agreement.
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, any Sublease
Assignment, the Security Agreement, the Loan Agreement, the Note and the
Purchase Agreement Assignment.
"PARTICIPANTS" means, collectively, Owner Participant and the Lender
and "Participant" means Owner Participant or Lender, individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement (CH____)
dated as of _____, 2001 among Lessee, Lender, Owner Participant, Owner Trustee
and Security Trustee.
"PARTS" means all appliances, parts, components, avionics, landing
gear, instruments, appurtenances, accessories, furnishings, seats and other
equipment of whatever nature (other than (a) Engines or engines, and (b) any
Removable Parts leased by Lessee from a third party other than Lessor or subject
to a security interest granted to a third party), that may from time to time be
installed or incorporated in or attached or appurtenant to the Airframe or any
Engine.
"PAYMENT DATE" means each [__________] and [__________] during the
Term, commencing with the first such date to occur after the Closing Date and
the Maturity Date.
"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of
Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" means the Default Rate.
"PAYMENT PERIOD" means each of the consecutive periods during the Term
ending on a Payment Date, the first such period commencing on and including the
Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier,
(ii) any other Person approved in writing by Lessor, or (iii) any U.S. Air
Carrier.
"PERMITTED COUNTRY" means a country listed on Schedule 5 to the Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means the U.S. Government.
"PERMITTED INSTITUTION" means any Person (other than, without Lessee's
consent, a commercial air carrier, a commercial aircraft operator, a freight
forwarder or Affiliate of any of the foregoing), in each case (a) with a
tangible net worth of at least $25,000,000 (or $50,000,000 if such Permitted
Institution is an "Owner Participant" under Related Operative Agreements
covering five (5) or more aircraft) and (b) which is not an Affiliate of Lessee.
"PERMITTED INVESTMENTS" means the following securities (which shall
mature within 90 days of the date of purchase thereof): (a) direct obligations
of the U.S. Government; (b) obligations fully guaranteed by the U.S. Government;
(c) certificates of deposit issued by, or
bankers' acceptances of, or time deposits or a deposit account with, Owner
Trustee, Security Trustee or any bank, trust company or national banking
association incorporated or doing business under the laws of the United States
or any state thereof having a combined capital and surplus and retained earnings
of at least $500,000,000 and having a rate of "C" or better from the Thomson
BankWatch Service; (d) commercial paper of any issuer doing business under the
Laws of the United States or one of the states thereof and in each case having a
rating assigned to such commercial paper by Standard & Poor's Rating Services or
Xxxxx'x Investors Service, Inc. equal to A1 or higher; or (e) shares in money
market mutual or similar funds which invest substantially in assets satisfying
the requirements of clauses (a) through (d) of this definition.
"PERMITTED LIEN" means any Lien described in clauses (a) through (g),
inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease or sub-sublease permitted under
Section 7.2.7 of the Lease.
"PERMITTED SUBLESSEE" means the sublessee or sub-sublessee under a
Permitted Sublease.
"PERSONS" OR "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section
3(3) of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PROCEEDS" shall have the meaning given in Section 9-306 of the Uniform
Commercial Code (or successor provision) as in effect from time to time in the
State of New York.
"PURCHASE AGREEMENT" the EMB-145 Purchase Agreement Number GCT-025/98
dated as of November 12, 1998 between the Airframe Manufacturer and Solitair
Corp., to the extent assigned pursuant to the Purchase Agreement Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement Assignment
(_____), dated as of even date with the Participation Agreement, between Lessee
and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or
any Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"PURCHASE PRICE CAP" means the amount specified as such in Schedule 1
to the Lease.
"REFUNDING CERTIFICATE" means a certificate of an authorized
representative of Owner Participant delivered pursuant to Section 11.1.1 of the
Participation Agreement, setting forth (a) the Refunding Date and (b) the
following information, subject to the limitations set forth in
Section 11 of the Participation Agreement: (i) the principal amount of debt to
be issued by Owner Trustee on the Refunding Date, (ii) the proposed adjusted
debt/equity ratio and (iii) the proposed revised schedules of Basic Rent,
Stipulated Loss Value percentages and Termination Value percentages, and the
proposed amortization schedule of the new debt, calculated in accordance with
Section 3.2.3 of the Lease.
"REFUNDING DATE" means the proposed date on which the outstanding Note
will be redeemed and refinanced pursuant to Section 11 of the Participation
Agreement.
"REFUNDING INFORMATION" means the information set forth in the
Refunding Certificate (other than the Refunding Date) as such information may
have been revised by any verification procedures demanded by Lessee pursuant to
Section 3.2.3(c) of the Lease.
"REGISTER" has the meaning specified in Section 5.07(c) of the Loan
Agreement.
"RELATED LEASES" shall mean the aircraft leases included in Related
Operative Agreements.
"RELATED OPERATIVE AGREEMENTS": shall mean the "Operative Agreements"
as defined in any leveraged lease transaction entered into pursuant to the
Funding Agreement in which the Owner Participant or an Affiliate of the Owner
Participant is the "Owner Participant" thereunder.
"RELATED NOTES" means notes issued under the Related Operative
Agreements.
"RELEVANT LOAN AGREEMENT" has the meaning specified in the Funding
Agreement.
"REMOVABLE PART": has the meaning set forth in Section D of Annex C of
the Lease.
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
"RENEWAL RENT" for the Aircraft means the rent payable therefor in
respect of a Renewal Lease Term determined pursuant to Section 17.2.2 of the
Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental
Rent.
"REPLACEMENT AIRCRAFT" means Aircraft of which a Replacement Airframe
is part.
"REPLACEMENT AIRFRAME" means any airframe substituted for the Airframe
pursuant to Section 10 of the Lease.
"REPLACEMENT ENGINE" means an engine substituted for an Engine pursuant
to Section 10 of the Lease.
"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any Law, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement,
dated as of the date the Aircraft is returned to Lessor pursuant to Section 5 of
the Lease, by Lessor and Lessee substantially in the form of Exhibit A-2 to the
Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, each Participant, Owner Trustee and Security Trustee by Lessee pursuant
to Section 4.1 of the Participation Agreement, which expected Closing Date shall
be a Business Day not later than the Commitment Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the
first Renewal Lease Term, the second anniversary of the Scheduled Expiration
Date, and in the case of the second Renewal Lease Term, the fourth anniversary
of the Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United
States, or any Government Entity succeeding to the functions of such Securities
and Exchange Commission.
"SECTION 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor section of the federal bankruptcy Law in effect from time to time.
"SECTION 1110 AGREEMENT" means a written agreement of the debtor to
perform referred to in Section 1110(a)(2)(A) of the Bankruptcy Code that,
without further review or modification, qualifies under Section 1110 to keep the
automatic stay provided by Section 362 of the Bankruptcy Code in effect with
respect to the Aircraft.
"SECTION 1110 AIR CARRIER" a Person holding an air carrier operating
certificate issued pursuant to chapter 447 of Title 49 of the United States Code
for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more
of cargo; and
"SECTION 1110 EVENT" means the institution of reorganization
proceedings with respect to Lessee under Chapter 11 of the Bankruptcy Code and
thereafter so long as the Section 1110 Period continues.
"SECTION 1110 PERIOD": means the continuous period of (i) 60 days
specified in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer
period, if any, agreed to under Section 1110(b) of the Bankruptcy Code), plus
(ii) an additional period, if any, commencing with the trustee or
debtor-in-possession in such proceeding entering into with court approval a
Section 1110 Agreement within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Owner Trustee is prohibited from repossessing the Aircraft under the
Lease comes to an end; PROVIDED that, at all times on and after such 60 day
period, all cures specified in Section 1110(a)(2)(B) of the Bankruptcy Code have
been timely and fully made and performed.
"SECURED OBLIGATIONS" shall mean, collectively, unpaid principal of and
interest on the Loan and the Note and all other obligations and liabilities of
(x) Owner Trustee (including interest accruing at the then applicable rate
provided in the Loan Agreement after the maturity of the Loan and interest
accruing at the then applicable rate provided in the Loan Agreement after the
filing of any petition in bankruptcy or the commencement of any insolvency,
reorganization or like proceeding relating to Owner Trustee, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to Lender or Security Trustee, or any Security Agreement Indemnitee and (y)
Lessee to Lender, Security Trustee or any Security Agreement Indemnitee, under
the Operative Agreements, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under or out of the Loan Agreement, the Security Agreement or the other
Operative Agreements, in each case whether on account of principal, interest,
Breakage Cost, fees, indemnities, costs, expenses or otherwise (including all
fees and disbursements of counsel to Lender that are required to be paid by
Owner Trustee pursuant to the terms of any of the foregoing agreements).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIZATION" has the meaning specified in Section 10.1.3(b)(2) of
the Participation Agreement.
"SECURITIZATION RATE" means the weighted average coupon rate of the
debt issued in the Securitization transaction, which the Lender shall certify to
the Security Trustee and to the Lessee at the request of either of them.
"SECURITY" means a "security" as defined in Section 2(1) of the
Securities Act.
"SECURITY AGREEMENT" means the Aircraft Security Agreement (_____),
dated as of the date of the Participation Agreement between Owner Trustee and
the Security Trustee.
"SECURITY AGREEMENT INDEMNITEE" means each Indemnitee other than (i)
Bank and Owner Trustee, (ii) any separate or additional trustee under the Trust
Agreement, (iii) the Owner Participant, and (iv) Indemnitees in respect of the
foregoing Persons named in clauses (vi), (vii) and (viii) of the definition of
the term "Indemnitees".
"SECURITY AGREEMENT SUPPLEMENT" means any supplement to the Security
Agreement from time to time executed and delivered in accordance with the
Security Agreement.
"SECURITY TRUSTEE" means JPMorgan Chase Bank, a New York banking
corporation, as security trustee under the Security Agreement.
"SECURITY TRUSTEE AGREEMENTS" means the Participation Agreement, the
Engine Warranty Agreement, the Security Agreement, and the Sublease Assignment
(if any) dated the date of the Participation Agreement.
"SECURITY TRUSTEE BANK" means JPMorgan Chase Bank in its individual
capacity, as Security Trustee.
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"SOLITAIR": has the meaning given in the Recitals to the Participation
Agreement.
[*]
"SPECIAL PURCHASE DATE" and "SPECIAL PURCHASE PRICE" are defined in
Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a) during
the Base Lease Term, the amount determined by multiplying (i) the percentage set
forth in Schedule 3 to the Lease (as adjusted from time to time in accordance
with Section 3.2.3 of the Lease) opposite the Stipulated Loss Value Date by (ii)
Lessor's Cost, (b) during any Renewal Lease Term, the amount determined pursuant
to Section 17.2.3 of the Lease and (c) during any extension of the Term pursuant
to the proviso to the definition of "Term", the Stipulated Loss Value
immediately prior to the commencement of such extension. Notwithstanding
anything to the contrary in any Operative Agreement, Stipulated Loss Value shall
always be sufficient to pay in full, as of the date of payment thereof (assuming
timely payment of the Note prior to such date), the aggregate unpaid principal
amount of the Loan outstanding as of such date, together with accrued and unpaid
interest on the Loan as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such
month indicated in Schedule 3 to the Lease.
"SUBLEASE ASSIGNMENT" means a Sublease Assignment, substantially in the
form of Exhibit B to the Lease covering the assignment of a Permitted Sublease.
"SUBSIDIARY" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"SUBSTANTIAL PART" means, with respect to a Loan at any time, 90% or
more of the then remaining cash flow scheduled to be paid with respect to such
Loan.
"SUPPLEMENTAL RENT" means, without duplication all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Breakage Cost, if any) that Lessee assumes or becomes obligated to
or agrees to pay under any Lessee Operative Agreement to or on behalf of Lessor
or any other person, including, without limitation, payments of Stipulated Loss
Value, Termination Value and payments of indemnities, fees and costs under
Section 9 of the Participation Agreement.
"TAX" and "TAXES" means all governmental or quasi-governmental fees
(including, without limitation, license, filing and registration fees) and all
taxes (including, without limitation, franchise, excise, stamp, value added,
income, gross receipts, sales, use, property, personal and real, tangible and
intangible taxes and mandatory contributions), withholdings,
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* Confidential
assessments, levies, imposts, duties or charges, of any nature whatsoever,
together with any penalties, fines, additions to tax or interest thereon or
other additions thereto imposed, withheld, levied or assessed by any country,
taxing authority or governmental subdivision thereof or therein or by any
international authority, including any taxes imposed on any Person as a result
of such Person being required to collect and pay over withholding taxes.
"TAX ATTRIBUTE PERIOD" is defined in Section 1(f) of the Tax Indemnity
Agreement.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement (CH_____),
dated as of even date with the Participation Agreement, between Lessee and Owner
Participant.
"Tax Treaty Countries" means [*]
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; provided that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
"TERMINATION DATE" means any Payment Date occurring on or after the
[_____] on which the Lease shall terminate in accordance with Section 9 of the
Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Note prior to such date), the aggregate
unpaid principal amount of the Loan outstanding as of such date, together with
accrued and unpaid interest on the Loan as of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the Participation
Agreement and the other Operative Agreements to occur on the Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Lender, Owner Participant, Owner Trustee, and Security Trustee in connection
with the preparation, execution and delivery of the Operative Agreements
(including, without limitation, the reasonable fees and expenses of counsel for
such parties), (b) all costs and expenses for the recording or filing of any
documents, certificates or instruments in accordance with any Operative
Agreement, including, without limitation, the FAA Filed Documents and the
Financing Statements, (c) the equity placement fee and expenses of Equity
Advisor attributable to the Aircraft, (d) the reasonable fees and disbursements
of special FAA counsel in Oklahoma City, Oklahoma, in connection with the
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Closing, (f) all initial and ongoing fees, disbursements and expenses of Owner
Trustee, and Security Trustee, (g) the fees and expenses of counsel to the
Lessee in connection with the preparation, execution and delivery of the
Operative Agreements, and (h) the fees and expenses of the Appraiser
contemplated by Section 5.1.2(xvi) of the Participation Agreement.
"TRANSFER" means the transfer, sale, assignment or other conveyance of
all or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner
Trustee or Lender purports or intends to Transfer any or all of its right, title
or interest in the Trust Estate or the Note, respectively, as described in
Section 10 (but excluding participants in any participation referred to in
Section 10.1.3), respectively, of the Participation Agreement.
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement (______) dated as of even
date with the Participation Agreement, between Owner Participant and Owner
Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement and the other
Operative Agreements, and the other Collateral, including, without limitation,
all amounts of Basic Rent and Supplemental Rent including, without limitation,
insurance proceeds (other than insurance proceeds payable to or for the benefit
of Owner Participant, Lender or Security Trustee) and requisition, indemnity or
other payments of any kind for or with respect to the Aircraft (except amounts
owing to Owner Participant, Lender, or Security Trustee or to any of their
respective directors, officers, employees, servants and agents, pursuant to
Section 9 of the Participation Agreement). Notwithstanding the foregoing, "Trust
Estate" shall not include any Excluded Payment.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNITED STATES" OR "U.S." means the United States of America; provided,
that for geographic purposes, "United States" means, in aggregate, the 50 states
and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a
Citizen of the United States holding an air carrier operating certificate issued
pursuant to chapter 447 of title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6000 pounds or more of cargo, and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"U.S. GOVERNMENT" means the federal government of the United States, or
any instrumentality or agency thereof the obligations of which are guaranteed by
the full faith and credit of the federal government of the United States.
[*]
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* Confidential
"U.S. WITHHOLDING TAX" any Tax imposed by way of deduction or
withholding by the United States federal government, including the federal
income tax imposed under Sections 881(a) and 1442 of the Code, on payments to a
person who is not a U.S. Person within the meaning of Section 7701(a)(30) of the
Code.
"WET LEASE" means any arrangement whereby Lessee or a Permitted
Sublessee agrees to furnish the Aircraft, Airframe or any Engine to a third
party pursuant to which the Aircraft, Airframe or Engine shall at all times be
in the operational control of Lessee or a Permitted Sublessee, provided that
Lessee's obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
EXHIBIT N
TO THE FUNDING AGREEMENT
--------------------------------------------------------------------------------
[FORM OF] TRUST AGREEMENT
(CH___)
Dated as of December ___, 2001
between
[_____]
as Owner Participant,
and
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
individually and as Owner Trustee
One Embraer [EMB-145LR] [EMB-145 model EMB-135 KL] Aircraft
U.S. Registration No. [_____]
Serial No.: [____]
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TABLE OF CONTENTS
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ARTICLE I Definitions.............................................................................................1
1.01 Certain Definitions.............................................................................1
ARTICLE II AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS; DECLARATION OF TRUST................................2
2.01 Authority to Execute Agreements.................................................................2
2.02 Declaration of Trust............................................................................2
ARTICLE III PURCHASE OF AIRCRAFT..................................................................................2
3.01 Purchase of Aircraft............................................................................2
3.02 Conditions Precedent............................................................................3
ARTICLE IV RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE..................................3
4.01 Distribution of Payments........................................................................3
ARTICLE V DUTIES OF OWNER TRUSTEE.................................................................................5
5.01 Notice of Default or Event of Default...........................................................5
5.02 Action Upon Instructions........................................................................5
5.03 Indemnification of Owner Trustee................................................................5
5.04 No Duties Except as Specified in Trust Agreement or Instructions................................6
5.05 No Action Except Under Specified Agreements or Instruction......................................6
5.06 Fixed Investment Trust..........................................................................6
ARTICLE VI OWNER TRUSTEE..........................................................................................7
6.01 Acceptance of Trusts and Duties.................................................................7
6.02 Absence of Certain Duties.......................................................................7
6.03 Title, Lessor Liens and Representations and Warranties..........................................7
6.04 No Segregation of Monies Required; No Interest..................................................8
6.05 Reliance Upon Certificates, Counsel and Agents..................................................8
6.06 Not Acting in Individual Capacity...............................................................9
6.07 Fees; Compensation..............................................................................9
6.08 Tax Returns.....................................................................................9
ARTICLE VII INDEMNIFICATION OF BANK BY OWNER PARTICIPANT..........................................................9
7.01 Owner Participant to Indemnify Bank.............................................................9
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ARTICLE VIII TRANSFER OF OWNER PARTICIPANT'S INTEREST............................................................11
8.01 Transfer of Interests..........................................................................11
ARTICLE IX SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES.................................................................11
9.01 Resignation of Owner Trustee; Appointment of Successor.........................................11
9.02 Co-Trustees and Separate Trustees..............................................................12
ARTICLE X SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT AND OTHER DOCUMENTS......................................13
10.01 Supplements and Amendments and Delivery Thereof................................................13
10.02 Discretion as to Execution of Documents........................................................13
10.03 Absence of Requirements as to Form.............................................................14
10.04 Distribution of Documents......................................................................14
10.05 No Request Needed as to Lease Supplement.......................................................14
ARTICLE XI MISCELLANEOUS.........................................................................................14
11.01 Termination of Trust Agreement.................................................................14
11.02 Owner Participant Has No Legal Title in Trust Estate...........................................15
11.03 Assignment or Sale of Aircraft.................................................................15
11.04 Trust Agreement for Benefit of Certain Parties Only............................................15
11.05 Citizenship of Owner Participant; Multiple Owner Participants..................................16
11.06 Notices........................................................................................16
11.07 Severability...................................................................................16
11.08 Waivers, etc...................................................................................16
11.09 Counterparts...................................................................................16
11.10 Binding Effect, etc............................................................................16
11.11 Construction...................................................................................17
11.12 Governing Law..................................................................................17
ARTICLE XII CERTAIN LIMITATIONS..................................................................................17
12.01 Limitations on Control.........................................................................17
12.02 Discretion and Action of Owner Trustee.........................................................17
12.03 General........................................................................................18
12.04 Payments.......................................................................................18
12.05 Owner Trustee Acts as Trustee..................................................................18
12.06 Waiver of Claim Against Owner Trustee..........................................................18
12.07 Amendments.....................................................................................19
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TRUST AGREEMENT (CH___)
THIS TRUST AGREEMENT (CH___) (this "AGREEMENT") is dated as of December
___, 2001 between [_____], a [Delaware] corporation ("OWNER PARTICIPANT"), and
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION a national banking association,
in its individual capacity ("BANK"), and otherwise not in its individual
capacity but solely as trustee hereunder (together with its permitted successors
and assigns, "OWNER TRUSTEE").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Participation Agreement (CH___) dated as of
even date herewith (the "PARTICIPATION AGREEMENT"), among Owner Trustee, Owner
Participant, Chautauqua Airlines, Inc. ("LESSEE"), JPMorgan Chase Bank, as
Security Trustee, and Agencia Especial de Financiamento Industrial - FINAME, a
Brazilian federal public company registered in the General Register of Taxpayers
under the number 33.660.564/0001.00 ("LENDER"), Owner Trustee will purchase one
Embraer [EMB-145LR] [EMB-145 model EMB-135 KL] aircraft with U.S. registration
number [_______] and manufacturer's serial number [_____] (as further described
and defined in the Participation Agreement, the "AIRCRAFT") on the Delivery
Date; and
WHEREAS, simultaneously with Owner Trustee's purchase of the Aircraft,
Lessee desires to lease from Owner Trustee and operate the Aircraft, such lease
to be evidenced by the execution and delivery of an Aircraft Lease Agreement and
a Lease Supplement No. 1 dated as of even date herewith and covering the
Aircraft (collectively, the "LEASE"); and
WHEREAS, Owner Participant desires to create a trust for the purposes
of financing the acquisition of the Aircraft by Owner Trustee and leasing it to
Lessee in accordance with the Participation Agreement; and
WHEREAS, Owner Trustee is willing to accept the duties and obligations
imposed hereby on the terms and conditions hereinafter set forth; and
NOW, THEREFORE, in consideration for the representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
Definitions
1.01 CERTAIN DEFINITIONS. Unless the context shall otherwise
require (or unless otherwise defined herein), the capitalized terms used herein
shall have the respective meanings assigned thereto in the Lease for all
purposes hereof.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE
AGREEMENTS; DECLARATION OF TRUST
2.01 AUTHORITY TO EXECUTE AGREEMENTS. Owner Participant hereby
authorizes and directs Owner Trustee to execute and deliver the Operative
Agreements and any other agreements, instruments or documents to which Owner
Trustee is required to be a party in connection with the Operative Agreements in
the respective forms thereof in which delivered from time to time by Owner
Participant to Owner Trustee for execution and delivery and, subject to the
terms hereof, to exercise its rights and perform its duties under the Operative
Agreements and such other agreements, instruments and documents as shall be
required in connection with the same to effectuate the intent thereof and to
perfect the interests of Security Trustee under the Security Agreement and
thereafter, subject to the terms hereof, to exercise its rights and perform its
duties thereunder in accordance with the terms thereof.
2.02 DECLARATION OF TRUST. Owner Trustee hereby declares and agrees
that it will hold the Aircraft and the Lease and the rights and interests
incidental thereto (including rights and interests in and to all papers,
documents and agreements relative to the same), but excluding Excluded Payments
upon the trusts hereinafter set forth (collectively, as more fully described in
the definition of the term, the "TRUST ESTATE") for the use and benefit of Owner
Participant (the "OWNERSHIP INTEREST"), subject, however, to the Lien of the
Security Agreement, and the provisions of the Operative Agreements.
ARTICLE III
PURCHASE OF AIRCRAFT
3.01 PURCHASE OF AIRCRAFT. Owner Participant hereby authorizes and
directs Owner Trustee to, and Owner Trustee agrees for the benefit of Owner
Participant, that it will, on the Closing Date, subject to due compliance with
the terms of SECTION 3.02:
(a) execute and deliver the Purchase Agreement Assignment;
(b) purchase the Aircraft pursuant to the Participation Agreement;
(c) authorize one or more representatives of Owner Trustee (who are
employees of Lessee) to accept delivery of the Aircraft pursuant to the
Participation Agreement and the Lease;
(d) accept the delivery of the Aircraft Xxxx of Sale and the FAA Xxxx
of Sale;
(e) execute and deliver Lease Supplement No. 1 covering the Aircraft;
(f) execute and deliver the Lease to Lessee and cause the Lease and
Lease Supplement No. 1 to be filed for recordation with the FAA;
(g) execute and deliver the Loan Agreement, the Security Agreement,
and such other documents as may be required or contemplated thereby;
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(h) execute, issue and deliver to Lender the Note in the amount and
otherwise as provided in the Loan Agreement;
(i) execute and deliver the financing statements referred to in
Section 5 of the Participation Agreement, together with all other
agreements, documents and instruments referred to in such Section 5 to
which Owner Trustee is to be a party;
(j) execute and deliver all agreements, documents and instruments
referred to in the Lease to which Owner Trustee is a party;
(k) pay (or cause to be paid) an amount equal to the Lessor's Cost to
the Airframe Manufacturer in consideration of the sale of the Aircraft to
Owner Trustee;
(l) [Intentionally omitted];
(m) effect the registration of the Aircraft in the name of Owner
Trustee by filing or causing to be filed with the FAA: (i) the FAA Xxxx of
Sale; (ii) an application for registration of the Aircraft with the FAA
under the Act on AC Form 8050-1 in the name of Owner Trustee (including,
without limitation, an affidavit from Owner Trustee stating that it is a
Citizen of the United States; (iii) this Trust Agreement; (iv) the Lease;
and (v) Lease Supplement No. 1;
(n) cause to be filed with the FAA the Security Agreement, the Lease,
and Lease Supplement No. 1; and
(o) execute and deliver all such other instruments, documents or
certificates and take all such other actions in accordance with the
directions of Owner Participant in connection with the transactions
contemplated hereby.
3.02 CONDITIONS PRECEDENT. The right and obligation of Owner
Trustee to take the action required by SECTION 3.01 with respect to the Aircraft
shall be subject to the following conditions precedent: (a) Owner Participant
shall have made the full amount of its Commitment available in accordance with
the Participation Agreement; (b) the terms and conditions of Section 5 of the
Participation Agreement shall have been either fulfilled to the satisfaction of
or waived by Owner Trustee and (c) this Trust Agreement shall be and remain in
full force and effect. Owner Participant shall, by transferring the amount of
its Commitment as provided in the Participation Agreement, be deemed to have
found satisfactory to it, or waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
4.01 DISTRIBUTION OF PAYMENTS.
(a) PAYMENTS TO SECURITY TRUSTEE. Until the Security Agreement
shall have been discharged pursuant to Section 11.5 thereof, all Basic
Rent, Supplemental Rent,
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insurance proceeds and requisition or other payments of any kind
included in the Trust Estate (other than Excluded Payments) payable to
Owner Trustee (other than payments received from the Security Trustee
or the Lender) shall be payable to the Security Trustee as provided in
the Security Agreement (and, if any of the same are received by Owner
Trustee, shall upon receipt be paid over to the Security Trustee as
provided in the Security Agreement) without deduction, set-off or
adjustment of any kind for distribution by the Security Trustee in
accordance with the provisions of Section 3 of the Security Agreement;
PROVIDED, HOWEVER, that any such payments received by Owner Trustee
from (i) Owner Participant with respect to Owner Trustee's fees and
disbursements, or (ii) Owner Participant pursuant to ARTICLE VII shall
not be paid over to the Security Trustee but shall be retained by
Owner Trustee and applied toward the purpose for which such payments
were made.
(b) PAYMENTS TO OWNER TRUSTEE, OTHER PARTIES. After the
Security Agreement shall have been discharged pursuant to Section 11.5
thereof, any payment of the type referred to in SECTION 4.01(a) (other
than Excluded Payments) received by Owner Trustee, any payments
received from Lender or Security Trustee other than as specified in
SECTION 4.01(d) and any other amount received as part of the Trust
Estate and for the application or distribution of which no provision is
made herein, shall be distributed forthwith upon receipt by Owner
Trustee in the following order of priority: FIRST, so much of such
payment as shall be required to reimburse Owner Trustee for any
expenses not otherwise reimbursed as to which Owner Trustee is entitled
to be so reimbursed pursuant to the provisions hereof shall be retained
by Owner Trustee; SECOND, so much of the remainder for which provision
as to the application thereof is contained in the Lease or any of the
other Operative Agreements shall be applied and distributed in
accordance with the terms of the Lease or such other Operative
Agreement, to the extent such remainder was not previously paid
pursuant to the terms of such other Operative Agreements; and THIRD,
the balance, if any, shall be paid to Owner Participant.
(c) CERTAIN DISTRIBUTIONS TO OWNER PARTICIPANT. All amounts
from time to time distributable by Lender or Security Trustee to Owner
Participant pursuant to the Security Agreement or the Loan Agreement
shall, if paid to Owner Trustee, be distributed by Owner Trustee to
Owner Participant.
(d) EXCLUDED PAYMENTS. Any Excluded Payment received by Owner
Trustee shall be paid by Owner Trustee to the Person to whom such
Excluded Payment is payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
(e) METHOD OF PAYMENTS. Owner Trustee shall make any
distributions or cause any distributions to be made to Owner
Participant pursuant to this ARTICLE IV by transferring by wire
transfer, in immediately available funds, on the date received (or on
the next succeeding Business Day if the funds to be so distributed
shall not have been received by Owner Trustee by 2:00 p.m. New York
time) the amount to be distributed as provided in Schedule I to the
Participation Agreement or to such account or accounts of Owner
Participant as Owner Participant may designate from time to time in
writing to Owner Trustee; PROVIDED, HOWEVER, that Owner Trustee shall
use reasonable efforts to
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invest overnight, in Permitted Investments, all funds received by it
at or later than 2:00 p.m. New York time.
ARTICLE V
DUTIES OF OWNER TRUSTEE
5.01 NOTICE OF DEFAULT OR EVENT OF DEFAULT. If Owner Trustee shall
have knowledge of a Lease Default, a Lease Event of Default or a Loan Event of
Default, Owner Trustee shall give to Owner Participant, Lender, Security Trustee
and Lessee prompt telephonic or facsimile notice thereof followed by prompt
confirmation thereof by certified mail, postage prepaid. Subject to the terms of
SECTION 5.03, Owner Trustee shall take such action or shall refrain from taking
such action, not inconsistent with the provisions of the Security Agreement,
with respect to such Lease Default, Lease Event of Default or Loan Event of
Default as Owner Trustee shall be directed in writing by Owner Participant. For
all purposes of this Trust Agreement, the Lease and the other Operative
Agreements, in the absence of Actual Knowledge by a responsible officer of the
Corporate Trust Department of Owner Trustee in his or her capacity as such,
Owner Trustee shall not be deemed to have knowledge of a Lease Default, a Lease
Event of Default or a Loan Event of Default referred to in this SECTION 5.01
unless so notified in writing by Owner Participant, Security Trustee, Lender or
Lessee.
5.02 ACTION UPON INSTRUCTIONS. Subject to the terms of SECTIONS
5.01 and 5.03, upon the written instructions at any time and from time to time
of Owner Participant, Owner Trustee will take such of the following actions, not
inconsistent with the provisions of the Lease, the Security Agreement and the
Participation Agreement, as may be specified in such instructions: (a) give such
notice or direction or exercise such right, remedy or power hereunder or under
any of the Operative Agreements to which Owner Trustee is a party or in respect
of all or any part of the Trust Estate, or take such other action, as shall be
specified in such instructions; (b) take such action to preserve or protect the
Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (c) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to Owner
Trustee, it being understood that without written instructions of Owner
Participant, Owner Trustee shall not approve any such matter as satisfactory to
it; and (d) after the expiration or earlier termination of the Lease, convey all
of Owner Trustee's right, title and interest in and to the Aircraft for such
amount, on such terms and to such purchaser or purchasers as shall be designated
in such instructions, or retain, lease or otherwise dispose of, or from time to
time take such other action with respect to, the Aircraft on such terms as shall
be designated in such instructions.
5.03 INDEMNIFICATION OF OWNER TRUSTEE. Owner Trustee shall not be
required to take any action under SECTION 5.01 (other than the giving of the
notices referred to therein) or 5.02 if Owner Trustee shall reasonably believe
that it is not adequately indemnified by Lessee under the Participation
Agreement or by Owner Participant under this Trust Agreement, unless Owner
Trustee shall have been indemnified by Lessee or Owner Participant, in both
manner and form satisfactory to Owner Trustee, against any loss, damage,
liability, claims, demands, disbursements and expenses, including Taxes (but
excluding any Taxes payable by Owner Trustee on or measured by any compensation
received by it for its services hereunder) and reasonable counsel fees and
disbursements, which may be incurred in connection therewith; PROVIDED, HOWEVER,
that Owner Participant shall not be required to make any such payments in
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respect of any such loss, damage, liability, claims, demands, disbursements and
expenses, including Taxes and counsel fees, arising from or as a result of (a)
Owner Trustee's willful misconduct or gross negligence, (b) Bank's failure to
perform the terms of the last sentence of SECTION 5.04, (c) Bank's failure to
use ordinary care in the receiving, handling and disbursement of funds
hereunder, or (d) the inaccuracy of any representation or warranty of Bank (or
the failure of Bank to perform any covenant) in SECTION 6.03 or elsewhere in the
Operative Agreements, including in Sections 6 and 7 of the Participation
Agreement. Owner Trustee shall not be required to take any action under SECTION
5.01 (other than the giving of the notices referred to therein) or 5.02 if Owner
Trustee shall reasonably determine, or shall have been advised by counsel, that
such action is contrary to the terms of any of the Operative Agreements to which
Owner Trustee is a party, or is otherwise contrary to law.
5.04 NO DUTIES EXCEPT AS SPECIFIED IN TRUST AGREEMENT OR
INSTRUCTIONS. Owner Trustee shall not have any duty or obligation to manage,
control, use, sell, dispose of or otherwise deal with the Aircraft or any other
part of the Trust Estate, or to otherwise take or refrain from taking any action
under, or in connection with, any of the Operative Agreements to which Owner
Trustee is a party, except as expressly required by the terms of any of the
Operative Agreements to which Owner Trustee is a party, or as expressly provided
by the terms hereof or in a written instruction from Owner Participant received
pursuant to the terms of SECTION 5.01 or 5.02, and no implied duties or
obligations shall be read into this Trust Agreement against Owner Trustee. Bank
agrees that it will, in its individual capacity and at its own cost or expense
(but without any right of indemnity in respect of any such cost or expense under
SECTION 7.01), promptly take such action as may be necessary to duly discharge
and satisfy in full all Lessor Liens attributable to it in its individual
capacity that it is required to discharge pursuant to Section 7.3 of the
Participation Agreement and otherwise comply with the terms of said Section
binding upon it. Bank agrees to indemnify, protect, save and keep harmless Owner
Participant from and against any loss, cost or expense (including reasonable
attorneys fees and disbursements) incurred by Owner Participant as a result of
the imposition or enforcements of any such Lessor Lien against the Aircraft, any
interest herein or on any part of the Trust Estate resulting from any Lessor
Lien attributable to the Bank.
5.05 NO ACTION EXCEPT UNDER SPECIFIED AGREEMENTS OR INSTRUCTION.
Owner Trustee shall have no power or authority to, and Owner Trustee agrees that
it will not, manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate except (a) as expressly required
by the terms of any of the Operative Agreements to which Owner Trustee is a
party, (b) as expressly provided by the terms hereof, (c) as required or
contemplated by the Loan Agreement and the Security Agreement or (d) as
expressly provided in written instructions from Owner Participant pursuant to
SECTION 5.01 or 5.02 hereof, but subject always to the provisions of the Loan
Agreement and the Security Agreement.
5.06 FIXED INVESTMENT TRUST. Notwithstanding anything in this Trust
Agreement to the contrary, the Owner Trustee shall not be authorized and shall
have no power to "vary the investment" of the Owner Participant within the
meaning of Treasury Regulation Section 301.7701-4(c)(1).
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ARTICLE VI
OWNER TRUSTEE
6.01 ACCEPTANCE OF TRUSTS AND DUTIES. Bank accepts the trusts
hereby created and agrees to perform the same but only upon the terms hereof
applicable to it. Owner Trustee also agrees to receive and disburse all monies
received by it constituting part of the Trust Estate upon the terms hereof. Bank
shall not be answerable or accountable under any circumstances, except (a) for
its own willful misconduct or gross negligence, (b) for performance of the terms
of the last sentence of SECTION 5.04, (c) for its or Owner Trustee's failure to
use ordinary care in the handling or disbursement of funds, (d) for liabilities
that may result from the inaccuracy of any representation or warranty of it (or
from the failure by it to perform any covenant) in SECTION 6.03 or in any other
Operative Agreement, including those set forth in Sections 6 and 7 of the
Participation Agreement, and (e) Taxes, fees or other charges on, based on or
measured by any fees, commissions or other compensation received by Owner
Trustee as compensation for its services rendered as Owner Trustee.
6.02 ABSENCE OF CERTAIN DUTIES. Except in accordance with written
instructions furnished pursuant to SECTION 5.02 and except as provided in, and
without limiting the generality of, SECTIONS 3.01 and 5.04 and the last sentence
of SECTION 9.01(b), neither Owner Trustee nor Bank shall have any duty (a) to
bear independent and primary responsibility for any recording or filing of any
Operative Agreement or of any supplement thereto or to see to the maintenance of
any such recording or filing or any other filing of reports with the FAA or any
other Government Entity, except that Bank in its individual capacity agrees to
comply with the FAA reporting requirements set forth in 14 CFR 47.45 and 14 CFR
47.51, and Owner Trustee shall, to the extent that information for that purpose
is timely supplied by Lessee pursuant to any of the Operative Agreements,
complete and timely submit (and furnish Owner Participant with a copy of) any
and all reports relating to the Aircraft that may from time to time be required
by the FAA or any other Government Entity having jurisdiction, (b) to bear
independent and primary responsibility for any insurance on the Aircraft or to
effect or maintain any such insurance, whether or not Lessee shall be in default
with respect thereto, other than to forward to Owner Participant copies of all
reports and other written information that Owner Trustee receives from Lessee
pursuant to Section 11 of the Lease, (c) to bear independent and primary
responsibility for the payment or discharge of any Tax, assessment or other
governmental charge or any Lien owing with respect to, assessed or levied
against any part of the Trust Estate, except as provided in the last two
sentences of SECTION 5.04 hereof or in Section 7.3 of the Participation
Agreement, or (d) to inspect Lessee's books and records with respect to the
Aircraft at any time permitted pursuant to the Lease. Notwithstanding the
foregoing, Owner Trustee will furnish to Owner Participant, promptly upon
receipt thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments furnished to
Owner Trustee under the Lease or any other Operative Agreement which a
responsible officer of Owner Trustee reasonably believes have not also been
delivered to Owner Participant.
6.03 TITLE, LESSOR LIENS AND REPRESENTATIONS AND WARRANTIES.
NEITHER OWNER TRUSTEE NOR BANK MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT
OR ANY PART THEREOF, OR ANY OTHER
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REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT WHATSOEVER, except that
Bank in its individual capacity represents and warrants that on the Closing Date
Owner Trustee shall have received whatever title was conveyed to it under the
Xxxx of Sale and that the Aircraft shall during the Term be free of Lessor Liens
attributable to Bank in its individual capacity, and (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any Operative Agreement to which Owner Trustee is a party, or any other
document or instrument, or as to the correctness of any statement contained in
any thereof, except to the extent that any such statement is expressly made
herein or therein by Bank as a representation by Bank in its individual capacity
or by Owner Trustee for itself, as the case may be. Additionally, Bank, in its
individual capacity, hereby represents and warrants that this Trust Agreement
has been, and (assuming due authorization, execution and delivery by Owner
Participant of this Trust Agreement) the Operative Agreements to which it or
Owner Trustee is a party have been (or at the time of execution and delivery of
any such instrument by it or Owner Trustee hereunder or pursuant to the terms of
the Participation Agreement, that such instruments will be) duly executed and
delivered by one of its officers who is or will be, as the case may be, duly
authorized to execute and deliver such instruments on behalf of itself or Owner
Trustee, as the case may be.
6.04 NO SEGREGATION OF MONIES REQUIRED; NO INTEREST. Except as
otherwise provided in written instructions from Owner Participant to Owner
Trustee, monies received by Owner Trustee hereunder need not be segregated in
any manner except to the extent required by law, and may be deposited under such
general conditions as may be prescribed by law.
6.05 RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS. Owner Trustee
shall incur no liability to anyone in acting in reliance upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper reasonably believed by it to be genuine
and reasonably believed by it to be signed by the proper party or parties.
Unless other evidence in respect thereof is specifically prescribed herein, any
request, direction, order or demand of Owner Participant or Lessee mentioned
herein or in any of the Operative Agreements to which Owner Trustee is a party
shall be sufficiently evidenced by written instruments signed by a person
purporting to be the Chairman of the Board, the President, any Vice President or
any other officer and in the name of Owner Participant or Lessee, as the case
may be. Owner Trustee may accept a copy of a resolution of the Board of
Directors or Executive Committee of Lessee, certified by the Secretary or an
Assistant Secretary of Lessee as duly adopted and in full force and effect, as
conclusive evidence that such resolution has been duly adopted by said Board or
Committee and that the same is in full force and effect. As to any fact or
matter the manner of ascertainment of which is not specifically described
herein, Owner Trustee may for all purposes hereof conclusively rely on a
certificate signed by a person purporting to be the Chairman of the Board, the
President, any Vice President or any other officer of Lessee or of Owner
Participant, as the case may be, as to such fact or matter, and such certificate
shall constitute full protection to Owner Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon. In the
administration of trusts hereunder, Owner Trustee may execute any of the trusts
or powers hereof and perform its powers and duties hereunder directly or through
agents or attorneys and may consult with counsel, accountants and other skilled
persons to be selected and employed by it. Owner Trustee shall not be liable
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for anything done, suffered or omitted in good faith by it in accordance with,
the advice or opinion of any such counsel, accountants or other skilled persons
and Owner Trustee shall not be liable for the negligence of any such counsel,
accountant or other skilled person appointed by it with due care hereunder.
6.06 NOT ACTING IN INDIVIDUAL CAPACITY. In acting hereunder, Owner
Trustee acts solely as trustee and not in its individual capacity except as
otherwise expressly provided herein; and, except as may be otherwise expressly
provided in this Trust Agreement, the Loan Agreement, the Security Agreement,
the Participation Agreement and the Lease, all Persons having any claim against
Owner Trustee by reason of the transactions contemplated hereby and thereby
shall look only to the Trust Estate for payment or satisfaction thereof.
6.07 FEES; COMPENSATION. Except as provided in SECTION 4.01(b) and
except with respect to Transaction Expenses, Owner Trustee agrees that it shall
have no right to receive compensation from the Trust Estate or Owner Participant
for any fee as compensation for its services hereunder and under any other
Operative Agreement; PROVIDED, HOWEVER, Owner Trustee shall have a Lien on the
Trust Estate for any such fee not paid by Owner Participant and such Lien shall
entitle Owner Trustee to priority as to payment thereof over payment to any
other Person under this Trust Agreement; provided, that such Lien shall be
subject and subordinate in all events to the Liens of the Security Agreement;
and provided, further, that Owner Trustee shall have no right to exercise, and
shall not exercise, any rights or remedies Owner Trustee may have with respect
to such Lien unless and until the Secured Obligations have been paid and
performed in full.
6.08 TAX RETURNS. Owner Trustee shall be responsible for the
keeping of all appropriate books and records relating to the receipt and
disbursement of all monies under this Trust Agreement or any agreement
contemplated hereby. Owner Participant shall be responsible for causing to be
prepared and filed all income tax returns required to be filed by Owner
Participant. Owner Trustee shall be responsible for causing to be prepared, at
the request and expense of Owner Participant, all income tax returns required to
be filed with respect to the trusts created hereby and shall execute and file
such returns. Each party hereto, upon request, will furnish the other party with
all such information as may be reasonably required from any such other party in
connection with the preparation of such income tax returns. Owner Trustee agrees
to forward to Owner Participant in accordance with SECTION 11.06 any
communications with respect to Taxes pertaining to the Trust Estate which are
received by the Owner Trustee.
ARTICLE VII
INDEMNIFICATION OF BANK
BY OWNER PARTICIPANT
7.01 OWNER PARTICIPANT TO INDEMNIFY BANK. Owner Participant hereby
agrees, whether or not any of the transactions contemplated hereby shall be
consummated, to assume liability for, and to indemnify, protect, save and keep
harmless Bank in its individual capacity and its successors, assigns, legal
representatives, agents and servants, from and against any and all liabilities,
obligations, losses, damages, penalties, Taxes (excluding any Taxes payable by
Bank in its individual capacity on or measured by any fees or compensation
received by Owner Trustee and Bank in its individual capacity for its services
hereunder), claims, actions, suits, costs, expenses or disbursements (including,
without limitation, reasonable legal fees and expenses, and including, without
limitation, any liability of an owner, any strict liability and any
9
liability without fault) of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against Bank in its individual capacity in any way
relating to or arising out of this Trust Agreement or any of the Operative
Agreements as and to the extent they relate to the Aircraft or the enforcement
of any of the terms of any thereof as and to the extent they relate to the
Aircraft, or in any way relating to or arising out of the manufacture, purchase,
acceptance, nonacceptance, rejection, ownership, delivery, lease, mortgage,
financing, refinancing, possession, use, operation, condition, sale, return or
other disposition of the Aircraft (including, without limitation, latent and
other defects, whether or not discoverable, and any claim for patent, trademark
or copyright infringement), or in any way relating to or arising out of the
administration of the Trust Estate or the action or inaction of Owner Trustee or
Bank in its individual capacity hereunder, PROVIDED that such indemnification
shall not extend to (a) any of the foregoing resulting from willful misconduct
or gross negligence (including for purposes hereof any breach of Section 4.3 of
the Lease) on the part of Owner Trustee or Bank in its individual capacity or
any agents thereof in the performance or nonperformance of its duties hereunder,
or (b) any of the foregoing resulting from the inaccuracy of any representation
or warranty of Bank in its individual capacity (or from the failure of Bank in
its individual capacity to perform any of its covenants) in SECTION 6.03 or
elsewhere in the Operative Agreements, including in Sections 6 and 7 of the
Participation Agreement, or (c) any of the foregoing resulting from a breach by
Bank in its individual capacity of its covenant in the last two sentences of
SECTION 5.04 or (d) notwithstanding clause (a) above, any of the foregoing
resulting from the failure to use ordinary care on the part of Owner Trustee or
Bank in its individual capacity in the handling or disbursement of funds or any
act of the Bank described in the last sentence of SECTION 6.01; provided,
further, that Owner Participant shall be liable under this Section 7.01 only to
the extent that Owner Trustee is indemnified by Lessee pursuant to Section 9 of
the Participation Agreement (with the exception of limitations to Lessee's
indemnification obligations set forth in Sections 9.1.2(b), 9.1.2(c), 9.3.2(b)
and 9.3.2(e) therein to the extent relating to a transfer by Owner Participant
excluded from the indemnity obligations of Lessee under Section 9.1.2(d) or any
such Transfer by Owner Trustee at the direction of Owner Participant); provided,
further, that before asserting its right to indemnification pursuant to this
SECTION 7.01, Owner Trustee shall first demand its corresponding right to
indemnification, if any, pursuant to the Participation Agreement (but need not
exhaust any or all remedies available thereunder) and Owner Participant shall
have the right to pursue any such remedies against Lessee which are not pursued
by Owner Trustee. The indemnities contained in this SECTION 7.01 extend to Bank
only in its individual capacity and shall not be construed as indemnities of the
Trust Estate (except to the extent, if any, that Bank in its individual capacity
has been reimbursed by the Trust Estate for amounts covered by the indemnities
contained in this SECTION 7.01). The indemnities contained in this SECTION 7.01
shall survive the termination of this Trust Agreement. In addition, if
necessary, the Bank shall be entitled to indemnification from the Trust Estate,
subject to the Liens of the Security Agreement, for any liability, obligation,
loss, damage, penalty, tax, claim, action, suit, cost, expense or disbursement
indemnified against pursuant to this Section 7 to the extent not reimbursed by
Lessee, Owner Participant or others, but without releasing any of them from
their respective agreements of reimbursement; and, to secure the same Bank shall
have a Lien on the Trust Estate, subject to the Liens of the Security Agreement
and subject further to the provisions of Section 6.07, which shall be prior to
any interest therein of Owner Participant. The payor of any
10
indemnity under this ARTICLE VII shall be subrogated to any right of the Person
indemnified in respect of the matter as to which such indemnity was paid.
ARTICLE VIII
TRANSFER OF OWNER PARTICIPANT'S INTEREST
8.01 TRANSFER OF INTERESTS. All provisions of Section 10.1.1 (and
10.2 to the extent relating thereto) of the Participation Agreement shall (with
the same force and effect as if set forth in full in this Section 8.01) be
applicable to any assignment, conveyance or other transfer by Owner Participant
of any of its right, title or interest in and to this Trust Agreement, any other
Operative Agreement to which it is a party, the Trust Estate or any proceeds
thereof.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
9.01 RESIGNATION OF OWNER TRUSTEE; APPOINTMENT OF SUCCESSOR.
(a) RESIGNATION OR REMOVAL. Owner Trustee or any successor
Owner Trustee (i) shall resign if required to do so pursuant to Section
13.3 of the Participation Agreement and (ii) may resign at any time
without cause by giving at least 60 days' prior written notice to Owner
Participant, Lender, Security Trustee and Lessee, such resignation to
be effective upon the acceptance of appointment by the successor Owner
Trustee under SECTION 9.01(b). In addition, Owner Participant may at
any time remove Owner Trustee with cause by a notice in writing
delivered to Owner Trustee, Lender, Security Trustee and Lessee, such
removal to be effective upon the acceptance of appointment by the
successor Owner Trustee under SECTION 9.01(b). In the case of the
resignation or removal of Owner Trustee, Owner Participant may appoint
a successor Owner Trustee by an instrument signed by Owner Participant.
If a successor Owner Trustee shall not have been appointed within 30
days after such notice of resignation or removal, Owner Trustee, Owner
Participant or Lessee may apply to any court of competent jurisdiction
to appoint a successor Owner Trustee to act until such time, if any, as
a successor shall have been appointed as above provided. Any successor
Owner Trustee so appointed by such court shall immediately and without
further act be superseded by any successor Owner Trustee appointed by
Owner Participant as above provided. Any entity becoming a successor
Owner Trustee hereunder shall be deemed the "Owner Trustee" for all
purposes hereof, and each reference herein to Owner Trustee shall
thereafter be deemed a reference to such entity.
(b) EXECUTION AND DELIVERY OF DOCUMENTS. Any successor Owner
Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall
become vested with all the estates, properties, rights, powers, duties
and trusts of the predecessor Owner Trustee in the trusts hereunder
with like effect as if originally named Owner Trustee herein; but
nevertheless, upon the written request of such successor Owner Trustee,
such predecessor Owner Trustee shall execute and deliver an instrument
transferring to such successor Owner Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers and trusts of
such predecessor Owner
11
Trustee, and such predecessor Owner Trustee shall duly assign,
transfer, deliver and pay over to such successor Owner Trustee all
monies or other property then held by such predecessor Owner Trustee
upon the trusts herein expressed. Upon the appointment of any
successor Owner Trustee hereunder, the predecessor Owner Trustee will
execute such documents as are provided to it by such successor Owner
Trustee and will take such further actions as are requested of it by
such successor Owner Trustee as are reasonably required to cause
registration of the Aircraft included in the Trust Estate to be
transferred upon the records of the FAA, or any other Government
Entity having jurisdiction, into the name of the successor Owner
Trustee.
(c) QUALIFICATIONS. Any successor Owner Trustee, however
appointed, shall, if required by the Federal Aviation Code, be a
Citizen of the United States and shall also be a bank or trust company
organized under the laws of the United States or any state thereof
having a combined capital and surplus of at least $250,000,000, if
there be such an institution willing, able and legally qualified to
perform the duties of Owner Trustee hereunder upon reasonable or
customary terms. No such successor trustee shall charge fees for its
services as an Owner Trustee in excess of the then prevailing market
rates for such services.
(d) MERGER OR CONSOLIDATION. Any corporation into which Owner
Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion
or consolidation to which Owner Trustee shall be a party, or any
corporation to which substantially all corporate trust business of
Owner Trustee may be transferred, shall, subject to the terms of
SECTION 9.01(c), be deemed the "Owner Trustee" hereunder without
further act.
9.02 CO-TRUSTEES AND SEPARATE TRUSTEES. If (a) at any time it shall
be necessary or prudent in order to conform to any law of any jurisdiction in
which all or any part of the Trust Estate is located, or (b) Owner Trustee being
advised by counsel shall determine that it is so necessary or prudent in the
interest of Owner Participant or Owner Trustee, or (c) Owner Trustee shall have
been directed in writing to do so by Owner Participant, then Owner Trustee and
Owner Participant shall execute and deliver an agreement supplemental hereto and
all other instruments and agreements necessary or proper to constitute another
bank or trust company or one or more persons (any and all of which shall, if
required by the Federal Aviation Code, be a Citizen of the United States,
approved by Owner Trustee and Owner Participant) either to act as co-trustee,
jointly with Owner Trustee, or to act as separate trustee hereunder (any such
co-trustee or separate trustee being herein sometimes referred to as an
"ADDITIONAL TRUSTEE"). If Owner Participant shall not have joined in the
execution of such agreements supplemental hereto within 15 days after the
receipt of a written request from Owner Trustee so to do, or in case an Event of
Default shall occur and be continuing, Owner Trustee may act under the foregoing
provisions of this Section 9.02 without the concurrence of Owner Participant;
and Owner Participant hereby appoints Owner Trustee its agent and
attorney-in-fact to act for it under the foregoing provisions of this Section
9.02 in either of such contingencies.
Every additional trustee hereunder shall, to the extent permitted by
law, be appointed and act, and Owner Trustee and its successors shall act,
subject to the following provisions and conditions:
12
(A) All powers, duties, obligations and rights
conferred upon Owner Trustee in respect of the custody,
control and management of monies, the Aircraft or documents
authorized to be delivered hereunder or under the
Participation Agreement shall be exercised solely by Owner
Trustee;
(B) all other rights, powers, duties and obligations
conferred or imposed upon Owner Trustee shall be conferred or
imposed upon and exercised or performed by Owner Trustee and
such additional trustee jointly, except to the extent that
under any law of any jurisdiction in which any particular act
or acts are to be performed (including the holding of title to
the Trust Estate or the Aircraft) Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations shall
be exercised and performed by such additional trustee;
(C) no power given or provided hereby to any such
additional trustee may be exercised by such additional
trustee, except jointly with, or with the consent in writing
of, Owner Trustee;
(D) no trustee hereunder shall be personally liable
by reason of any action or omission of any other trustee
hereunder;
(E)Owner Participant, at any time, by an instrument
in writing, may remove any such additional trustee; and
(F) no appointment of, or action by, any additional
trustee will relieve Owner Trustee of any of its obligations
under, or otherwise adversely affect any of the terms of, the
Security Agreement or adversely affect the security interest
of Security Trustee in the Trust Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
10.01 SUPPLEMENTS AND AMENDMENTS AND DELIVERY THEREOF. Subject to
Section 10.05 of this Agreement and Section 7.6.7 of the Participation
Agreement, this Trust Agreement may not be amended, supplemented or otherwise
modified except by an instrument in writing signed by Owner Trustee and Owner
Participant. Subject to Section 10.02 of this Agreement and Section 7.6.7 of the
Participation Agreement, Owner Trustee will execute any amendment, supplement or
other modification of this Trust Agreement or of any other Operative Agreement
to which Owner Trustee is a party which it is requested in writing to execute by
Owner Participant, except that Owner Trustee shall not execute any such
amendment, supplement or other modification unless both (i) the prior written
consent of the Owner Participant shall have been obtained and (ii) the prior
written consent of any other party which the express provisions of any of the
above documents require shall have been obtained.
10.02 DISCRETION AS TO EXECUTION OF DOCUMENTS. Prior to executing
any document required to be executed by it pursuant to the terms of Section
10.01, Owner Trustee shall be entitled to receive an opinion of its counsel to
the effect that the execution of such document is
13
authorized hereunder. If in the reasonable opinion of Owner Trustee any such
document materially adversely affects any right, duty, immunity or indemnity in
favor of Owner Trustee hereunder or under any other Operative Agreement to which
Owner Trustee is a party, Owner Trustee may in its discretion decline to execute
such document and shall incur no liability to anyone as a result thereof.
10.03 ABSENCE OF REQUIREMENTS AS TO FORM. It shall not be necessary
for any written request furnished pursuant to Section 10.01 to specify the
particular form of the proposed documents to be executed pursuant to such
Section, but it shall be sufficient if such request shall indicate the substance
thereof.
10.04 DISTRIBUTION OF DOCUMENTS. Promptly after the execution by
Owner Trustee of any document entered into pursuant to Section 10.01, Owner
Trustee shall mail, by certified mail, postage prepaid, a conformed copy thereof
to Owner Participant (and, so long as the Security Agreement is in effect, to
Lender), but the failure of Owner Trustee to mail such conformed copies shall
not impair or affect the validity of such document.
10.05 NO REQUEST NEEDED AS TO LEASE SUPPLEMENT. No written request
pursuant to Section 10.01 shall be required to enable Owner Trustee to enter
into Lease Supplement No. 1 dated as of even date herewith with Lessee covering
the Aircraft pursuant to the terms of the Lease and Section 3.01 of this
Agreement.
ARTICLE XI
MISCELLANEOUS
11.01 TERMINATION OF TRUST AGREEMENT.
(a) This Trust Agreement and the trusts created hereby shall
be of no further force or effect upon the earlier of (1) the sale,
transfer or other final disposition by Owner Trustee of all property
constituting part of the Trust Estate and the final distribution by
Owner Trustee of all monies or other property or proceeds constituting
part of the Trust Estate in accordance with ARTICLE IV, PROVIDED that
at such time Lessee shall have fully complied with all of the terms of
the Lease and the Participation Agreement, and the Lien of the Security
Agreement shall have been discharged with respect to the Trust Estate,
(2) revocation by Owner Participant upon notice to Owner Trustee as
described below in SUBSECTION (b) or (3) 21 years less one day after
the death of the last survivor of all of the descendants of the
grandparents of Xxxxx X. Xxxxxxxxxxx living on the date of the earliest
execution of this Trust Agreement by any party hereto, but if this
Trust Agreement and the trusts created hereby shall be or become
authorized under applicable Law to be valid for a period commencing on
the 21st anniversary of the death of such last survivor (or, without
limiting the generality of the foregoing, if legislation shall become
effective providing for the validity of this Trust Agreement and the
trusts created hereby for a period in gross exceeding the period for
which this Trust Agreement and the trusts created hereby are
hereinabove stated to extend and be valid), then this Trust Agreement
and the trusts created hereby shall not terminate under this clause (3)
but shall extend to and continue in effect, but only if such
nontermination and extension shall then be valid under applicable Law,
until the day preceding such date as the same shall, under
14
applicable Law, cease to be valid; otherwise this Trust Agreement and
the trusts created hereby shall continue in full force and effect in
accordance with the terms hereof.
(b) Irrespective of any other provisions of this Trust
Agreement, Owner Participant, at its sole option, may, at any time
after the Lien of the Security Agreement shall have been satisfied in
full, or at any other time with the written consent of Lender, revoke
this trust and vest in itself title to the Aircraft, moneys or other
property, proceeds and rights comprising the Trust Estate upon delivery
of written instructions to such effect to Owner Trustee. Upon receipt
of such instructions and the satisfaction of all liabilities of Owner
Participant to Owner Trustee hereunder, Owner Trustee shall transfer to
Owner Participant the Aircraft, moneys or other property, proceeds and
rights comprising the Trust Estate and the trusts created hereby shall
thereupon terminate. In the event of the transfer of the Aircraft,
moneys and other property, proceeds and rights comprising the Trust
Estate to Owner Participant, Owner Participant will, to the extent of
the Trust Estate and to no greater extent, discharge the obligations of
Owner Trustee hereunder and under any related documents (as such
obligations are limited in said documents). In the event of such
transfer, pursuant to this SECTION 11.01(b), Owner Participant will
execute a written instrument or instruments in form and substance
satisfactory to the other parties thereto and their counsel, evidencing
Owner Participant's full assumption of the aforementioned obligations
of Owner Trustee. Nothing contained in this SECTION 11.01(b) shall be
deemed to impose on Owner Participant any liability or obligation if
the trusts created hereby are terminated (whether by operation of law
or otherwise) other than expressly in accordance with the terms of this
SECTION 11.01(b).
11.02 OWNER PARTICIPANT HAS NO LEGAL TITLE IN TRUST ESTATE. Owner
Participant shall not have legal title to any part of the Trust Estate. No
transfer, by operation of law or otherwise, of any right, title and interest of
Owner Participant in and to the Trust Estate hereunder shall operate to
terminate this Trust Agreement or the trusts hereunder or entitle any successors
or transferees of Owner Participant to an accounting or to the transfer of legal
title to any part of the Trust Estate.
11.03 ASSIGNMENT OR SALE OF AIRCRAFT. Any assignment, sale, transfer
or other conveyance of the Aircraft by Owner Trustee made pursuant to the terms
hereof or of the Lease or the Participation Agreement shall bind Owner
Participant and shall be effective to transfer or convey all right, title and
interest of Owner Trustee and Owner Participant in and to the Aircraft. No
purchaser or other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such assignment, sale, transfer or
conveyance or as to the application of any sale or other proceeds with respect
thereto by Owner Trustee.
11.04 TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY. Except
for the terms of Section 10 of the Participation Agreement incorporated in
Article VIII and except as otherwise provided in Article IX and Section 10.01,
nothing herein, whether expressed or implied, shall be construed to give any
person other than Owner Trustee and Owner Participant any legal or equitable
right, remedy or claim under or in respect of this Trust Agreement; but this
Trust Agreement shall be held to be for the sole and exclusive benefit of Owner
Trustee and Owner Participant.
15
11.05 CITIZENSHIP OF OWNER PARTICIPANT; MULTIPLE OWNER PARTICIPANTS.
If at any time there shall be more than one Owner Participant, and if the right
to exercise voting or similar rights hereunder by an Owner Participant to
direct, influence or limit the exercise of, or to prevent the direction or
influence of, or place any limitation on the exercise of, Owner Trustee's
authority or to remove Owner Trustee would adversely affect the United States
registration of the Aircraft, any such Owner Participant shall have no such
right. Subject to the foregoing, if at any time prior to the termination of this
Trust Agreement there is more than one Owner Participant, then during such time,
whenever any direction, authorization, approval, consent, instruction or other
action is permitted to be given or taken by the Owner Participant, it shall be
given or taken only upon unanimous agreement of all Owner Participants, provided
that the termination of this Trust Agreement in accordance with Section 11.01(b)
may be effected upon the election of any Owner Participant.
11.06 NOTICES. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by facsimile device, or by
prepaid courier service, and shall be deemed to be given for purposes of this
Trust Agreement on the day that such writing is delivered or, if sent by
registered or certified mail, on the day received. Unless otherwise specified in
a notice sent or delivered in accordance with the foregoing provisions of this
Section 11.06, notices, demands, instructions and other communications in
writing shall be given to or made upon the respective parties hereto at their
respective addresses (or to their respective telecopier numbers) as follows: (a)
if to Lessee, Owner Trustee, Lender or Owner Participant, to the respective
addresses set forth on Schedule I to the Participation Agreement, or (b) if to a
subsequent or successor Owner Participant, Owner Trustee or Lender, addressed to
such subsequent or successor Owner Participant, Owner Trustee or Lender,
respectively, at such address as such subsequent or successor Owner Participant,
Owner Trustee or Lender shall have furnished by notice to the other Parties.
11.07 SEVERABILITY. Any provision hereof 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.
11.08 WAIVERS, ETC. No term or provision hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
entered into in compliance with the terms of Article X, and any waiver of the
terms hereof shall be effective only in the specific instance and for the
specific purpose given.
11.09 COUNTERPARTS. This Trust Agreement 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.
11.10 BINDING EFFECT, ETC. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, Owner Trustee and its
successors and assigns, and Owner Participant, its successors and, to the extent
permitted by Article VIII, its assigns. Any request, notice, direction, consent,
waiver or other instrument or action of or by Owner
16
Participant shall bind its successors and assigns. Any Owner Participant which
shall cease to have any Ownership Interest shall thereupon cease to be a party
hereto or an Owner Participant for any reason and shall have no further
obligations hereunder.
11.11 CONSTRUCTION. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof. References in this Trust Agreement
to Articles and Sections, without further attribution, are intended to refer to
Articles and Sections of this Trust Agreement.
11.12 GOVERNING LAW. THIS TRUST AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAWS OF THE STATE OF UTAH, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.
ARTICLE XII
CERTAIN LIMITATIONS
12.01 LIMITATIONS ON CONTROLNotwithstanding any other provision of
this Agreement, but subject to the other provisions of this Article 12,
from and after the Closing Date and until termination of this Agreement
and the Trust, (i) Owner Participant shall not have any voting rights
or other rights to direct Owner Trustee hereunder (collectively
"CONTROL RIGHTS") and (ii) Owner Trustee shall have absolute and
complete discretion in all matters as to which Owner Participant
otherwise would have had any Control Rights, but for the provision of
this Article. Such discretion (a) is in addition to the discretion
given to Owner Trustee under the other Articles of this Agreement and
be held or exercisable by Owner Participant, and (b) does not extend to
any other rights, powers or privileges in respect of the beneficial
interest of the Owner Participant in the Trust Estate.
12.02 DISCRETION AND ACTION OF OWNER TRUSTEE.
(a) In exercising its discretion under this Article 12, Owner
Trustee shall exercise its best judgment and shall not be liable for
any action taken or omitted hereunder, except for its gross negligence
or willful misconduct, and shall exercise the Control Rights in
connection with all matters involving the ownership and operation of
the Aircraft by Owner Trustee. Owner Trustee shall not be required, and
shall have no duty or obligation, to exercise Control Rights in respect
of any other matters.
(b) In the exercise or administration of the power or duties
created under this Article 12, Owner Trustee may act directly or
through any agents or attorneys and may, at the cost and expense of the
Trust Estate, consult with counsel, accountants and other skilled
Persons to be selected and retained by it, and Owner Trustee, in its
individual capacity, shall not be liable for anything done, suffered or
omitted in good faith in accordance with the advice or opinion of any
such counsel, accountants or other skilled Persons and Owner Trustee,
in its individual capacity, shall not be liable for the negligence of
any such counsel, accountants or other skilled Persons.
(c) Notwithstanding any other provision hereof, in exercising
any Control Rights pursuant to this Article 12 in connection with all
matters involving the ownership
17
or operation of the Aircraft by Owner Trustee, Owner Trustee shall be
free of any kind of control by Owner Participant and shall exercise
the Control Rights as it, in its discretion, shall deem necessary to
protect the interests of the United States, notwithstanding any
countervailing interests of any foreign power which, or whose citizens
may, have a direct or indirect interest in Owner Participant and any
such action by Owner Trustee shall not be considered malfeasance or in
breach of any obligation which Owner Trustee might otherwise have to
Owner Participant. In exercising any Control Rights pursuant to this
Article 12 in connection with any other matters which may arise not
relating to the ownership and operation of the Aircraft, Owner Trustee
shall be permitted, but shall be under no duty, to seek the advice of
Owner Participant before exercising any Control Rights. Owner Trustee,
promptly after each exercise of any Control Rights hereunder, shall
notify Owner Participant of the exercise thereof.
(d) Notwithstanding any other provision hereof, without the
prior written consent of Owner Participant, Owner Trustee agrees that
it shall not (i) in its individual capacity, dissolve or amend the
Trust Agreement, (ii) sell, mortgage, pledge or otherwise dispose of
all or a part of the Trust Estate, including the Aircraft and the
Lease, (iii) transfer any portion of Owner Participant's beneficial
interest in the Trust Estate to any other person or (iv) amend the
Lease or any other Operative Agreement.
12.03 GENERAL. Notwithstanding anything to the contrary in this
Agreement, the Owner Trustee and the Owner Participant hereby agrees as
follows:
If Persons who are not "Citizens of the United States" as defined in
Section 40102(a)(15) of the Federal Aviation Code or resident aliens
have the power to direct or remove the Owner Trustee, either directly
or indirectly through the control of another Person, those Persons
together may not have more than 25 percent of the aggregate power to
direct or remove the Owner Trustee. Nothing in this paragraph prevents
those Persons from having more than 25 percent of the beneficial
interest in the Trust Estate.
12.04 PAYMENTS. Notwithstanding any other provision of this Article
12, Owner Participant and not Owner Trustee shall be entitled to receive from
Owner Trustee, or otherwise, all rent, payment or insurance proceeds, and other
payments of whatsoever kind and nature payable to Owner Participant pursuant to
this Agreement or any other Operative Agreement in the same manner as if the
Control Rights had not been transferred to Owner Trustee and held in trust
hereunder.
12.05 OWNER TRUSTEE ACTS AS TRUSTEE. Notwithstanding any other
provision of this Agreement, in exercising any Control Rights pursuant to this
Article 12, Owner Trustee acts solely as trustee and not in its individual
capacity, and except as may be otherwise expressly provided in Section 12.02
hereof, all Persons having any claim against Owner Trustee in either its
individual or trust capacity by reason of the transactions contemplated by this
Article 12 shall not have any recourse to Owner Trustee in its individual
capacity. Nothing in this Section 12.05 shall be deemed to limit the liability
of the Bank and the Owner Trustee pursuant to Section 6.01.
12.06 WAIVER OF CLAIM AGAINST OWNER TRUSTEE. To the extent permitted
by law, Owner Participant agrees to waive and does waive any and all claims of
every kind and nature which
18
hereafter Owner Participant may have against Bank in its individual capacity,
its successors and permitted assigns, from any liability whatsoever arising out
of or in connection with the exercise of its powers or the performance of its
duties under this Article 12 except liability for the gross negligence or
willful misconduct of Owner Trustee. Nothing in this Section 12.06 shall be
deemed to limit the liability of the Bank and the Owner Trustee pursuant to
Section 6.01.
12.07 AMENDMENTS. Notwithstanding Section 10.01 hereof, so long as
the Aircraft shall be registered under the laws of the United States and until
termination of this Agreement and the Trust, this Article 12 shall not be
amended, supplemented or modified unless either (i) Owner Participant shall have
become a Citizen of the United States or (ii) the FAA shall have concluded that
such amendment, supplement or modification would not cause the Aircraft to be
ineligible for registration in the United States.
[Remainder of Page Intentionally Blank -- Signature Page Follows]
19
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
[___________]
as Owner Participant
By:
----------------------------------
Name:
Title:
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, individually and as
Owner Trustee
By:
----------------------------------
Name:
Title:
EXHIBIT 5
EXHIBIT D-1
TO THE FUNDING AGREEMENT
CONFIDENTIAL: ANNEXES B, C AND D AND SCHEDULES 1, 2, 3 AND 4 OF THIS LEASE
AGREEMENT ARE SUBJECT TO RESTRICTIONS ON DISSEMINATION SET FORTH IN SECTION 8 OF
THE PARTICIPATION AGREEMENT (AS DEFINED HEREIN)
================================================================================
[FORM OF] LEASE AGREEMENT (CH_)
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
CHAUTAUQUA AIRLINES, INC.,
LESSEE
------------------------------------------------------
ONE EMBRAER [EMB-145LR] [EMB-145 MODEL EMB-135 KL] AIRCRAFT
BEARING UNITED STATES REGISTRATION NO. [___] AND
BEARING MANUFACTURER'S SERIAL NO. [____] WITH TWO
[ROLLS ROYCE] XXXXXXX [AE3007A1/3] [AE3007A1P] ENGINES
BEARING ENGINE MANUFACTURER'S SERIAL NOS. [____] AND [____]
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The right, title and interest of Lessor in and to, among other things, this
Lease Agreement has been assigned to and is subject to a security interest in
favor of JPMorgan Chase Bank, as Security Trustee, under the Aircraft Security
Agreement (______), dated as of[_________], for the benefit of the holders of
the Note referred to in such Aircraft Security Agreement, all to the extent
provided in such Aircraft Security Agreement. This Lease Agreement has been
executed in multiple counterparts; to the extent, if any, that this Lease
Agreement constitutes chattel paper (as defined in the Uniform Commercial Code
as in effect in any applicable jurisdiction), no security interest in Lessor's
right, title and interest in and to this Lease Agreement may be perfected
through the delivery or possession of any counterpart of this Lease Agreement
other than the counterpart of this Lease Agreement that contains the original
receipt executed by JPMorgan Chase Bank, as Security Trustee.
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND CONSTRUCTION 1
SECTION 2. DELIVERY AND ACCEPTANCE 1
2.1 Delivery and Lease of Aircraft 1
2.2 Acceptance by Lessee 1
SECTION 3. TERM AND RENT 2
3.1 Term 2
3.2 Rent 2
3.3 Payments 4
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS 5
4.1 Disclaimer 5
4.2 Certain Agreements of Lessor 6
4.3 Quiet Enjoyment 6
4.4 Investment of Funds Held as Security 6
4.5 Title Transfers by Lessor 7
4.6 Lessor's Interest in Certain Engines 7
4.7 Section 1110 of Bankruptcy Code 8
SECTION 5. RETURN OF AIRCRAFT 8
5.1 Obligation to Return 8
5.2 Compliance with Annex B 8
5.3 Storage and Related Matters 8
5.4 Return of Other Engines 9
SECTION 6. LIENS 9
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS 10
7.1 Registration and Operation 10
7.2 Possession 11
7.3 Certain Limitations on Subleasing or Other Relinquishment of Possession 15
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS; OTHER LESSEE COVENANTS 16
8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
Modifications and Additions 16
8.2 Information for Filings 16
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SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE 16
9.1 Right of Termination 16
9.2 Election by Lessor to Sell 17
9.3 Retention of Aircraft by Lessor 19
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC. 21
10.1 Event of Loss With Respect to Aircraft 21
10.2 Event of Loss With Respect to an Engine 23
10.3 Conditions to any Replacement 23
10.4 Conveyance to Lessee 25
10.5 Application of Payments 25
10.6 Requisition of Aircraft for Use 26
10.7 Requisition of an Engine for Use 27
10.8 Application of Payments 27
10.9 Application of Payments During Existence of Certain Defaults 27
SECTION 11. INSURANCE 27
11.1 Lessee's Obligation to Insure 27
11.2 Insurance for Own Account 28
11.3 Indemnification by Government in Lieu of Insurance 28
11.4 Application of Insurance Proceeds 28
11.5 Application of Payments During Existence of Default 28
SECTION 12. INSPECTION 29
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE 30
13.1 Successors and Assigns 30
13.2 Mergers of Lessee 30
13.3 Assignment Security for Lessor's Obligations 33
13.4 Successor Owner Trustee 33
SECTION 14. LEASE EVENTS OF DEFAULT 33
14.1 Payments 34
14.2 Insurance 34
14.3 Other Covenants 34
14.4 Representations and Warranties 34
14.5 Bankruptcy and Insolvency 34
14.6 Related Leases 35
SECTION 15. REMEDIES AND WAIVERS 35
15.1 Remedies 35
15.2 Limitations Under CRAF 38
15.3 Right to Perform for Lessee 39
15.4 Determination of Fair Market Sales Value 39
15.5 Remedies Cumulative 39
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SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC. 40
SECTION 17. RENEWAL AND PURCHASE OPTIONS 40
17.1 Notices Generally 40
17.2 Renewal Options 41
17.3 Purchase Option 42
17.4 Appraisals 43
17.5 Special Purchase Option 44
SECTION 18. MISCELLANEOUS 44
18.1 Amendments 44
18.2 Severability 44
18.3 Third-Party Beneficiary 45
18.4 Reproduction of Documents 45
18.5 Counterparts 45
18.6 Notices 45
18.7 GOVERNING LAW; Submission to Jurisdiction; Venue 46
18.8 No Waiver 47
18.9 Entire Agreement 47
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ANNEXES, EXHIBITS AND SCHEDULES
EXHIBIT A-1 Form of Lease Supplement
EXHIBIT A-2 Form of Return Acceptance Supplement
EXHIBIT B Form of Sublease Assignment
SCHEDULE 1 Certain Terms
SCHEDULE 2 Basic Rent
SCHEDULE 2A Basic Rent Allocation
SCHEDULE 3 Stipulated Loss Value
SCHEDULE 4 Termination Value
SCHEDULE 5 Permitted Countries
SCHEDULE 6 Placards
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
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LEASE AGREEMENT (CH_)
LEASE AGREEMENT (CH_) dated as of [______________] (this
"AGREEMENT" or "LEASE"), between (a) XXXXX FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
except as expressly provided herein, but solely as Owner Trustee (this and all
other capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in Section 1 below) ("LESSOR" or "OWNER TRUSTEE"), and
(b) CHAUTAUQUA AIRLINES, INC., a New York corporation ("LESSEE").
RECITALS
A. Lessor and Lessee are parties to the Participation
Agreement, pursuant to which, among other things, Lessor and Lessee have agreed
to enter into this Agreement.
B. Pursuant to the Trust Agreement, Owner Participant
has authorized Lessor to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements contained herein and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 DELIVERY AND LEASE OF AIRCRAFT
Lessor hereby agrees (subject to the satisfaction or waiver of
the conditions set forth in Section 5 of the Participation Agreement) to lease
to Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commencing immediately upon
acquisition of the Aircraft by Lessor pursuant to the Participation Agreement.
2.2 ACCEPTANCE BY LESSEE
(a) By executing and delivering Lease Supplement No. 1,
Lessee confirms to Lessor that Lessee has duly and irrevocably accepted delivery
of the Aircraft for all purposes of this Agreement.
(b) Lessor has authorized one or more employees of
Lessee, designated by Lessee in writing, as the authorized representative or
representatives of Lessor to accept delivery of the Aircraft on behalf of Lessor
pursuant to the Purchase Agreement Assignment and the
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Participation Agreement. Lessee hereby agrees that if delivery of the Aircraft
shall be accepted by an employee or employees of Lessee pursuant to such
authorization by Lessor, such acceptance of delivery by such employee or
employees on behalf of Lessor shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Agreement.
SECTION 3. TERM AND RENT
3.1 TERM
The Aircraft shall be leased hereunder for the Term, unless
this Agreement or the leasing of the Aircraft is earlier terminated in
accordance with any provision of this Agreement. Lessee shall have the option to
renew the leasing of the Aircraft hereunder pursuant to, and subject to the
terms and conditions of, Section 17, for the Renewal Lease Term.
3.2 RENT
3.2.1 BASIC RENT
(a) No Basic Rent shall be paid during or
allocated to the Holiday Term (as defined in Schedule 1 to this Lease). During
the Base Lease Term, Lessee shall pay to Lessor, on each Payment Date, in the
manner and in the funds of the type specified in Section 3.3, Basic Rent in the
amount specified in the column with the heading "Total Basic Rent" in Schedule 2
for such Payment Date. The parties hereto agree that, irrespective of Lessee's
payment obligations as shown on Schedule 2 hereto, Lessee's liability on account
of the use of the Aircraft for any particular allocation period listed in
Schedule 2A hereto shall be the amount specified beside such period in the
column with the heading "Basic Rent Allocation Amount" on Schedule 2A hereto.
(b) Notwithstanding anything to the contrary in
any Operative Agreement (including without limitation, Section 3.2.1(a)), the
amount of the payment of Basic Rent due and payable on each Payment Date shall
be at least sufficient to pay in full, as of such Payment Date (assuming timely
payment of the Note prior to such date), the aggregate principal amount of
scheduled installments due on the Note outstanding on such Payment Date,
together with the accrued and unpaid interest thereon, due on such Payment Date
in respect of the Note; provided, however, that no installment of Basic Rent
shall be increased to the extent such increase would be based upon (i) any
attachment or diversion of Basic Rent on account of Lessor Liens attributable to
Lessor or Owner Participant, (ii) any modification of the payment terms of the
Note, or (iii) the acceleration of the Note due solely to the occurrence of a
Loan Event of Default that does not constitute a Lease Event of Default.
3.2.2 SUPPLEMENTAL RENT
Lessee shall pay to Lessor, or to whomever shall be entitled
thereto under the Operative Agreements, any and all Supplemental Rent when and
as the same shall become due and owing. Lessee will also pay to Lessor, or to
whomever shall be entitled thereto under the Operative Agreements as
Supplemental Rent, to the extent permitted by applicable Law, interest
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at the Payment Due Rate on any part of any amount of Rent (including, without
limitation, Supplemental Rent) not paid by 12:30 p.m., New York time, on the
date when due (so long as, in the case of any Person not a party to the
Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to, but excluding, the date of payment in
full. Lessee agrees to pay to Lessor an amount equal to Breakage Cost when due
under the Loan Agreement.
3.2.3 ADJUSTMENTS TO BASIC RENT, STIPULATED
LOSS VALUES AND TERMINATION VALUES
(a) In the event that Lessee is required to
indemnify the Owner Participant under the Tax Indemnity Agreement, the
Stipulated Loss Value percentages set forth in Schedule 3 and the Termination
Value percentages set forth in Schedule 4 shall be recalculated (upwards or
downwards) by Owner Participant, using the same methods and assumptions (except
to the extent such assumptions shall be varied to take into account the Loss or
Foreign Tax Credit Loss (as each such term is defined in the Tax Indemnity
Agreement) that is the subject of such indemnification and any prior or
contemporaneous Loss or Foreign Tax Credit Loss) used to calculate the
Stipulated Loss Value percentages and the Termination Value percentages on the
Closing Date, in order to maintain the Owner Participant's Net Economic Return.
(b) All adjustments pursuant to Section 3.2.3(a)
or (d) shall be made as promptly as practicable after either Owner Participant
or Lessee gives notice to the other that an event has occurred that requires an
adjustment. Owner Participant and Lessee shall give prompt notice to the other
of any event requiring an adjustment. Any recalculation of the percentages of
Stipulated Loss Value and Termination Value, and the Basic Rent payments and
allocations set forth in ScheduleS 2 and 2A shall be prepared by Owner
Participant, subject to verification at the request of Lessee in accordance with
Section 3.2.3(c), on the basis of the same methodology and assumptions used by
Owner Participant in determining the percentages of Stipulated Loss Value and
Termination Value and the Basic Rent payments and allocations set forth in
ScheduleS 2 and 2A as of the Closing Date, except as such assumptions have been
modified to reflect the events giving rise to adjustments hereunder. Promptly
after an adjustment is made hereunder, Owner Participant shall deliver to Lessee
and to Security Trustee a description of such adjustment, setting forth in
reasonable detail the calculation thereof. All adjustments required pursuant to
Section 3.2.3(a) shall be set forth in a Lease Supplement or in an amendment to
this Lease, and, promptly after execution thereof by Lessor and Lessee, Lessee
shall give a copy thereof to the Security Trustee.
(c) If Lessee believes that any calculations by
Owner Participant pursuant to Section 3.2.3(b) are in error, and if, after
consultation, Lessee and Owner Participant are unable to agree on an adjustment,
then a nationally recognized firm of accountants selected by Lessee and
reasonably satisfactory to Owner Participant shall verify such calculations.
Owner Participant will make available to such firm, but not, in any
circumstances, to Lessee or any representative of Lessee, the methodology and
assumptions referred to in Section 3.2.3(b) and any modifications thereto made
to reflect the events giving rise to adjustments hereunder (subject to the
execution by such firm of a confidentiality agreement, reasonably acceptable to
Owner
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Participant, prohibiting disclosure of such methodology and assumptions to any
third party). The determination by such firm of accountants shall be final
absent manifest error. Lessee will pay the reasonable costs and expenses of such
further verification by such accountants, provided that if it results in a
decrease in the present value (discounted at the Debt Rate) of any Basic Rent
payment, Stipulated Loss Value or Termination Value by ten or more basis points
from such Basic Rent payment, Stipulated Loss Value or Termination Value as
recalculated by the Owner Participant, then the Owner Participant will pay such
costs and expenses.
(d) In the event of a refinancing as
contemplated by Section 11 of the Participation Agreement, then the Basic Rent
payments set forth in Schedule 2, the Basic Rent allocations set forth in
Schedule 2A, Stipulated Loss Value percentages set forth in Schedule 3 and the
Termination Value percentages set forth in Schedule 4 shall be recalculated
(upwards and downwards) by the Owner Participant as contemplated by such Section
11 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.
3.2.4 OTHER ADJUSTMENTS
(a) Lessee and Lessor may, without the prior
written consent of the Lender but with at least 10 Business Days prior written
notice to Security Trustee of the proposed changes, adjust the Basic Rent,
Stipulated Loss Values and Termination Values consistent with the limitations of
Section 3.2.1(b) and the last sentence of the definitions of the terms
"Stipulated Loss Value" and "Termination Value". All adjustments required
pursuant to this Section shall be set forth in a Lease Supplement or in an
amendment to this Lease, and, promptly after execution thereof by Lessor and
Lessee, Lessee shall give a copy thereof to the Security Trustee.
(b) Supplemental Rent shall include any
Transaction Expenses which are paid by the Lessee.
(c) All adjustments to Basic Rent, Stipulated
Loss Values and Termination Values under Sections 3.2.3 and 3.2.4 shall include
corresponding adjustments to the equity portion and debt portion thereof.
3.3 PAYMENTS
(a) Payments of Rent by Lessee shall be paid by
wire transfer of immediately available Dollars, not later than 12:30 p.m., New
York time, on the date when due, to the account of Lessor specified in Schedule
1 to the Participation Agreement or to such other account in the United States
as directed by Lessor to Lessee in writing at least 10 Business Days prior to
the date such payment of Rent is due or, in the case of any payment of
Supplemental Rent expressly payable to a person other than Lessor, to the person
that shall be entitled thereto to such account in the United States as such
person may specify from time to time to Lessee at least 10 Business Days prior
to the date such payment of Rent is due.
(b) Except as otherwise expressly provided
herein, whenever any payment of Rent shall be due on a day that is not a
Business Day, such payment shall be made on
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the next day that is a Business Day, and, if such payment is made on such next
Business Day, no interest shall accrue on the amount of such payment during such
extension.
(c) So long as Lessee has not received written
notice from the Security Trustee that the Lien of the Security Agreement has
been discharged, and notwithstanding Section 3.3(a), Lessor hereby irrevocably
directs, and Lessee agrees, that all payments of Rent and all other amounts
payable by Lessee hereunder, other than Excluded Payments, shall be paid
directly to the Security Trustee on behalf of Lessor by wire transfer of
immediately available Dollars to the account of the Security Trustee specified
in Schedule 1 to the Participation Agreement, or to such other account in the
United States as the Security Trustee may specify by written notice to Lessor
and Lessee at least 10 Business Days prior to the date such payment of Rent is
due.
(d) Excluded Payments shall be paid by wire
transfer of immediately available Dollars to the account of the person specified
in the Participation Agreement or, if not so specified, to such account in the
United States as may be specified by such person by written notice to Lessor and
Lessee from time to time at least 10 Business Days prior to the date such
payment is required to be made.
(e) All computations of interest under this
Agreement shall be made on the basis of a year of 360 days comprised of twelve
30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR;
SECTION 1110 MATTERS
4.1 DISCLAIMER
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS."
LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR,
SECURITY TRUSTEE AND ANY PARTICIPANT (i) LESSEE HAS SELECTED THE AIRCRAFT AND
MANUFACTURER THEREOF AND (ii) NONE OF LESSOR, SECURITY TRUSTEE AND ANY
PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR
ANY PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY
ENGINE OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
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(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF.
4.2 CERTAIN AGREEMENTS OF LESSOR
Unless a Lease Event of Default shall have occurred and be
continuing, Lessor agrees to make available to Lessee such rights as Lessor may
have under any warranty with respect to the Aircraft made, or made available, by
Airframe Manufacturer or Engine Manufacturer, or any of their respective
subcontractors or suppliers, as the case may be, pursuant to and in accordance
with the terms of the Purchase Agreement Assignment.
4.3 QUIET ENJOYMENT
So long as no Lease Event of Default shall have occurred and
be continuing, Lessor shall not interfere with Lessee's rights hereunder to
continued possession, use and operation of, and quiet enjoyment of, the Aircraft
during the Term. The foregoing, however, shall not be construed or deemed to
modify or condition in any respect the obligations of the Lessee pursuant to
Section 16, which obligations are absolute and unconditional.
4.4 INVESTMENT OF FUNDS HELD AS SECURITY
4.4.1 INVESTMENT
Any moneys required to be paid to or retained by Lessor that
are required to be paid to Lessee or applied as provided herein shall, until
paid to Lessee as provided herein or applied as provided herein, be invested by
Lessor from time to time as directed in writing by Lessee, which direction shall
specify the particular investment to be made and shall certify that such
investment constitutes a Permitted Investment (or, if Lessee fails to so direct,
by or as directed by Lessor in its sole discretion) and at the expense and risk
of Lessee in Permitted Investments so long as such Permitted Investments
specified by Lessee or Lessor, as the case may be, can be acquired by Lessor
using its best efforts; provided, that so long as the Lien of the Security
Agreement shall not have been discharged, such moneys shall be invested and held
by the Security Trustee, as assignee of Lessor, in accordance with this Lease
and upon discharge of such Lien, the Security Trustee shall pay any such money
held by it to Lessor to be held and invested in accordance with this Section.
4.4.2 PAYMENT OF GAIN OR LOSS
Any net gain (including interest received) realized as the
result of investments pursuant to Section 4.4.1 (net of any fees, commissions
and other reasonable expenses, if any, incurred in connection with such
investment) shall be held and applied in the same manner as the principal amount
is to be held and applied hereunder. Lessee will promptly pay to Lessor, on
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demand, the amount of any loss realized as the result of any such investment
(together with any fees, commissions and other reasonable expenses, if any,
incurred in connection with such investment), such amount so paid to be held and
applied by Lessor as contemplated in Section 4.4.1 above.
4.4.3 LIMITATION OF LIABILITY
All investments under this Section 4.4 shall be at the expense
and risk of Lessee, and Lessor and the Security Trustee shall not be liable for
any loss resulting from any investment made under this Section 4.4 other than by
reason of its willful misconduct or gross negligence. Any such investment may be
sold (without regard to its maturity) by Lessor without instructions whenever
such sale is necessary to make a distribution required by this Lease.
4.5 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall at Lessee's expense (1) transfer to Lessee or such other
person, as the case may be, all of Lessor's right, title and interest in and to
the Aircraft, Airframe or such Engine, as the case may be, free and clear of all
Lessor Liens attributable to Lessor, Bank or Owner Participant, but otherwise on
an "as-is", "where is" basis, (2) so long as the Lien of the Security Agreement
has not been discharged, comply with the Security Agreement relating to the
release of the Aircraft, Airframe or such Engine, (3) assign to Lessee or such
other person, as the case may be, if and to the extent permitted under the
Purchase Agreement, all warranties of Airframe Manufacturer and Engine
Manufacturer with respect to the Aircraft, Airframe or such Engine, and (4)
assign to Lessee or such other person, as the case may be, if and to the extent
permitted, all claims, if any, for damage to the Aircraft, Airframe or such
Engine, in each case free of Lessor Liens attributable to Lessor, Bank or Owner
Participant, and without recourse or warranty of any kind whatsoever (except as
to the transfer described in clause (1) above and as to the absence of such
Lessor Liens, as aforesaid), and (b) Lessor shall at Lessee's expense promptly
deliver to Lessee or such other person, as the case may be, a xxxx of sale and
agreements of assignment, evidencing such transfer and assignment, and such
other instruments of transfer, all in form and substance reasonably satisfactory
to Lessee (or such other person, as the case may be), as Lessee (or such other
person, as the case may be) may reasonably request.
4.6 LESSOR'S INTEREST IN CERTAIN ENGINES
Lessor hereby agrees for the benefit of each lessor,
conditional seller, indenture trustee or secured party of any engine leased to,
or purchased by, Lessee or any Permitted Sublessee subject to a lease,
conditional sale, trust indenture or other security agreement that Lessor, its
successors and assigns will not acquire or claim, as against such lessor,
conditional seller, indenture trustee or secured party, any right, title or
interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in favor
of such indenture trustee or secured party.
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4.7 SECTION 1110 OF BANKRUPTCY CODE
It is the intention of each of Lessee and Lessor that Lessor
(and the Security Trustee as assignee of Lessor under the Security Agreement)
shall be entitled to all of the benefits of Section 1110 including, without
limitation, the right to take possession of the Aircraft, Airframe, Engines and
Parts as provided in this Lease.
SECTION 5. RETURN OF AIRCRAFT
5.1 OBLIGATION TO RETURN
Upon the termination of this Lease at the expiration of the
Term or upon the earlier termination of this Lease pursuant to the terms hereof,
unless the Lessee shall purchase the Aircraft or there shall have been an Event
of Loss with respect to the Aircraft, the Lessee, at its own expense, shall,
except as otherwise expressly provided herein, return the Airframe by delivering
the same to the Lessor in the continental United States of America at a location
on the Lessee's jet route system chosen by the Lessor, and otherwise in
compliance with conditions required by the provisions of this Section 5, fully
equipped with two Engines or engines meeting the requirements of Replacement
Engines duly installed thereon. In addition, at such time as Lessee shall be
obligated to return the Aircraft it shall deliver or cause to be delivered to
Lessor the Aircraft Documents. The Aircraft when returned to Lessor shall be in
the operating condition required by Annex B and in compliance with all other
provisions of Annex B. At the time of return of the Aircraft to Lessor, Lessor
and Lessee shall execute a Return Acceptance Supplement.
5.2 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B
hereto, which provisions are hereby incorporated by this reference as if set
forth in full herein.
5.3 STORAGE AND RELATED MATTERS
If Lessor gives written notice to Lessee not less than 60 days
nor more than 120 days prior to the end of the Term requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with outdoor parking facilities for the Aircraft for a period up
to 30 days, commencing on the date of such return at Lessor's expense; provided,
that if such termination occurs as a result of a Lease Event of Default, such
storage shall be at the Lessee's expense. Lessee shall maintain in effect during
such storage period insurance covering the Aircraft to the extent such insurance
is available at reasonable commercial rates, and in such amounts and against
such risks as would be customarily carried in similar circumstances by a
reasonably prudent lessor, with such insurance being paid for by the Lessor;
provided, that if such termination occurs as a result of a Lease Event of
Default, the Lessee will cooperate with the Lessor in obtaining such insurance
at the Lessee's expense.
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5.4 RETURN OF OTHER ENGINES
In the event that any Engine owned by Lessor shall not be
installed on the Airframe at the time of return hereunder, Lessee shall be
required to return the Airframe hereunder with a Replacement Engine meeting the
requirements of, and in accordance with, Section 10 hereof and Annex B hereto.
Thereupon, Lessor will transfer to Lessee the Engine constituting part of such
Aircraft but not installed on such Airframe at the time of the return of the
Airframe.
SECTION 6. LIENS
The Lessee shall not during the Term directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, Airframe, any Engine or any Part or title thereto or any interest
therein of Lessee or in this Lease except (a) the respective rights of the
Lessor and the Lessee as provided herein and the rights of the parties to the
other Operative Agreements or of any Permitted Sublessee under any Permitted
Sublease; (b) the rights of others under agreements or arrangements to the
extent expressly permitted in Sections 7.2 or Annex C; (c) Liens for Taxes
either not yet due or 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 Aircraft, Airframe or an Engine or the interest of
Owner Participant or Security Trustee therein or any risk of criminal liability
or any material risk of material civil penalty against Lessor or Security
Trustee or any Participant; (d) Liens of suppliers, mechanics, workers,
repairers, employees, airport operators, air traffic control authorities or
other like Liens arising in the ordinary course of business and for amounts the
payment of which is either not yet delinquent for more than 30 days or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings, so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Airframe or
an Engine or the interest of Owner Participant or Security Trustee therein or
any risk of criminal liability or any material risk of material civil penalty
against Lessor or Security Trustee or any Participant; (e) Liens arising out of
judgments or awards against the Lessee (or any Permitted Sublessee) so long as
within 30 days after entry thereof there shall be in effect with respect to
which a stay of execution or such judgments or awards have been discharged or
vacated; (f) Lessor Liens attributable to Lessor, Lender, Owner Participant or
Security Trustee; (g) salvage and similar rights of insurers under policies of
insurance maintained with respect to the Aircraft; and (h) Liens with respect to
which the Lessee (or any Permitted Sublessee) has provided a bond or other
security adequate in the good faith opinion of the Lessor and the Owner
Participant. Lessee shall promptly (and in any case, by the end of the Term), at
its own expense, take (or cause to be taken) such action as may be necessary to
duly discharge (by bonding or otherwise) any Lien not excepted above if the same
shall at any time arise in respect of the Aircraft, the Airframe, any Engine or
any Part during the Term.
10
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND
RECORDS
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Subject to the compliance by Lessor and Owner Participant with
their respective obligations under Section 13 of the Participation Agreement,
Lessee shall cause the Aircraft to be, and at all times during the Term to
remain, duly registered with the FAA under the Act or with such other country of
registry and in such name as shall be permitted under Section 7.1.2 below
(except to the extent that such registration under the Act cannot be effected
with the FAA because of Lessor's or Owner Participant's failure to comply with
the citizenship requirements for registration of the Aircraft under the Act).
Lessor shall execute any and all such documents as Lessee (or any Permitted
Sublessee) may reasonably request for the purpose of effecting and continuing
such registration. Unless the Security Trustee has given Lessee notice that the
Lien of the Security Agreement has been discharged, Lessee shall also cause the
Security Agreement to be duly recorded and at all times maintained of record as
a first-priority perfected mortgage (subject to Permitted Liens) on the
Aircraft, the Airframe and each of the Engines (except to the extent that such
perfection or priority cannot be maintained as a result of the failure by Lessor
or the Security Trustee to execute and deliver any necessary documents).
7.1.2 REREGISTRATION
So long as no Lease Event of Default, Payment Default or
Bankruptcy Default shall have occurred and be continuing, Lessee may, by 20
days' written notice to Lessor, request to change the country of registration of
the Aircraft. Any such change in registration shall be effected only in
compliance with, and subject to all of the conditions set forth in, Section
7.6.11 of the Participation Agreement.
7.1.3 MARKINGS
If permitted by applicable Law, on or reasonably promptly
after the Closing, Lessee will cause to be affixed to, and maintained in, the
cockpit of the Airframe and on each Engine, in each case, in a clearly visible
location (it being understood that the location of such placards, as identified
to the Owner Participant prior to the Closing, shall be deemed to be in
compliance with this requirement), a placard of a reasonable size and shape
bearing the legend, in English, set forth in Schedule 6. Such placards may be
removed temporarily, if necessary, in the course of maintenance of the Airframe
or Engines. If any such placard is damaged or becomes illegible, Lessee shall
promptly replace it with a placard complying with the requirements of this
Section 7.1.3.
7.1.4 COMPLIANCE WITH LAWS
The Lessee shall not permit the Airframe or any Engine to be
used, operated, maintained, serviced, repaired or overhauled during the Term in
violation of any Law binding on or applicable to the Aircraft, the Airframe or
any Engine, or in violation of any airworthiness
11
certificate, license or registration of any Government Entity relating to Lessee
or the Aircraft, the Airframe or any Engine, except for immaterial or
non-recurring violations with respect to which corrective measures are taken
promptly by Lessee or Permitted Sublessee, as the case may be, upon discovery,
unless (i) the validity thereof is being contested in good faith and by
appropriate proceedings which do not involve a material danger of the sale,
forfeiture or loss of the Airframe or such Engine or the interest of Security
Trustee or Owner Participant therein, any risk of criminal liability or any
material risk of material civil liability against Lessor, Security Trustee or
any Participant, or (ii) it is not possible for the Lessee (or a Permitted
Sublessee) to comply with the laws of a jurisdiction other than the United
States (or other than any jurisdiction in which the Aircraft is then registered)
because of a conflict with the applicable laws of the United States (or such
jurisdiction in which the Aircraft is then registered).
7.1.5 OPERATION
Lessee agrees not to operate, use or locate the Aircraft, the
Airframe or any Engine, or allow the Aircraft, the Airframe or any Engine to be
operated, used or located (a) in any area excluded from coverage by any
insurance required by the terms of Section 11, except in the case of a
requisition by the U.S. Government where Lessee obtains (and provides evidence
of) an indemnity in lieu of such insurance from the U.S. Government, or
insurance from the U.S. Government, covering such area, in accordance with
Section 11.3 or (b) in any recognized area of hostilities unless fully covered
in accordance with Annex D by war-risk insurance as required by the terms of
Section 11 (including, without limitation, Section 11.3), unless in any case
referred to in this Section 7.1.5 the Aircraft is only temporarily operated,
used or located in such area as a result of an emergency, equipment malfunction,
navigational error, hijacking, weather condition or other similar unforeseen
circumstances, so long as Lessee diligently and in good faith proceeds to remove
the Aircraft from such area.
7.2 POSSESSION
The Lessee will not, without the prior written consent of
Lessor and Owner Participant (which consent shall not be unreasonably withheld),
sublease or otherwise in any manner deliver, transfer or relinquish possession
of the Aircraft, the Airframe or any Engine or install any Engine, or permit any
Engine to be installed, on any airframe other than the Airframe; PROVIDED,
HOWEVER, subject to the provisions of Section 7.3, that Lessee may, so long as
no Lease Event of Default has occurred and is continuing (except during the
Section 1110 Period), without such prior written consent:
7.2.1 INTERCHANGE AND POOLING
Subject or permit any Permitted Sublessee to subject (x) the
Airframe to an Airframe Interchange Agreement or (y) any Engine to normal
interchange agreements or pooling agreements or arrangements, in each case
customary in the commercial airline industry and entered into by Lessee or such
Permitted Sublessee, as the case may be, in the ordinary course of business with
an air carrier; PROVIDED, HOWEVER, that (A) (i) no such Agreement, agreement or
arrangement shall under any circumstances result in, contemplate or require the
transfer of title to the Aircraft, Airframe or any Engine and (ii) if the
Lessor's title to any Engine shall nevertheless
12
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 the Lessee shall
be required to replace such Engine with a Replacement Engine meeting the
requirements of, and in accordance with, Section 10; and (B) the party to such
Airframe Interchange Agreement or interchange agreement is not then subject to a
proceeding under applicable bankruptcy, insolvency or reorganization laws on the
date such interchange agreement is entered into.
7.2.2 TESTING AND SERVICE
Deliver or permit any Permitted Sublessee to deliver
possession of the Aircraft, Airframe, any Engine or any Part (i) to the
manufacturer thereof or to any third-party maintenance provider, for testing,
service, repair, maintenance or overhaul work on the Aircraft, Airframe, any
Engine or any Part, or, to the extent required or permitted by the terms of
Annex C, for alterations or modifications in or additions to the Aircraft,
Airframe or any Engine or (ii) to any Person for the purpose of transport to a
Person referred to in the preceding clause (i).
7.2.3 TRANSFER TO U.S. GOVERNMENT
Transfer or permit any Permitted Sublessee to transfer
possession of the Aircraft, Airframe or any Engine to the U.S. Government, in
which event Lessee shall promptly notify Lessor and Security Trustee in writing
of any such transfer of possession and, in the case of any transfer pursuant to
CRAF, in such notification shall identify by name, address and telephone numbers
the Contracting Office Representative or Representatives for the Military
Airlift Command of the United States Air Force to whom notices must be given and
to whom requests or claims must be made to the extent applicable under CRAF.
7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine
on an airframe owned by Lessee or such Permitted Sublessee, as the case may be,
free and clear of all Liens, except (a) Permitted Liens and those that do not
apply to the Engines and (b) the rights of third parties under normal
interchange or pooling agreements and arrangements of the type that would be
permitted under Section 7.2.1.
7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
Install or permit any Permitted Sublessee to install an Engine
on an airframe leased to Lessee or such Permitted Sublessee, or purchased by
Lessee or such Permitted Sublessee subject to a mortgage, security agreement,
conditional sale or other secured financing arrangement, but only if (a) such
airframe is free and clear of all Liens, except (i) the rights of the parties to
such lease, or any such secured financing arrangement, covering such airframe
and (ii) Liens of the type permitted by clauses (a) and (b) of Section 7.2.4 and
(b) Lessee or Permitted Sublessee, as the case may be, shall have received from
the lessor, mortgagee, secured party or conditional seller, in respect of such
airframe, a written agreement (which may be a copy of the lease, mortgage,
security agreement, conditional sale or other agreement covering such airframe),
13
whereby such Person agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being installed on
such airframe at any time while such Engine is subject to this Lease or is owned
by Lessor.
7.2.6 INSTALLATIONS OF ENGINES ON FINANCED
AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine
on an airframe owned by Lessee or such Permitted Sublessee, leased to Lessee or
such Permitted Sublessee, or purchased by Lessee or such Permitted Sublessee
subject to a conditional sale or other security agreement under circumstances
where neither Section 7.2.4 or 7.2.5 is applicable; PROVIDED, HOWEVER, that any
such installation shall be deemed an Event of Loss with respect to such Engine,
and Lessee shall comply with Section 10.2 hereof in respect thereof.
7.2.7 SUBLEASING
With respect to the Aircraft, Airframe or any Engine, so long
as no Payment Default, Bankruptcy Default or Lease Event of Default has occurred
and is continuing, enter into a sublease with any Permitted Air Carrier, but
only if:
(a) Lessee shall provide written notice to
Lessor of Lessee's intent to enter into a Permitted Sublease 10 days in advance
of entering into such sublease, such notice to be accompanied by the proposed
sublease documents;
(b) At the time that Lessee enters into such
Permitted Sublease, such Permitted Sublessee shall not be subject to any
bankruptcy, insolvency, liquidation, reorganization, dissolution or similar
proceeding, shall not be seeking any reorganization or any readjustment of its
debts and shall not be, or shall not have substantially all of its property, in
the possession of any liquidator, trustee, receiver or similar person and, if
such Permitted Sublessee is a Permitted Foreign Air Carrier, the United States
then maintains normal diplomatic relations with the country in which such
Permitted Sublessee has its principal executive offices (or in the case of
Taiwan, diplomatic relations at least as good as those in effect on the
Borrowing Date);
(c) Any such Permitted Sublease: (i) shall
include provisions for the maintenance, operation, possession, inspection and
insurance of, and removal of Liens on, the Aircraft that are the same in all
material respects as the applicable provisions of this Lease, (ii) shall provide
that such Permitted Sublessee may not further sublease or transfer its interests
(except transfers of the type permitted in Sections 7.2.1 through 7.2.6,
inclusive in the Aircraft, Airframe or Engines, (iii) shall not extend beyond
the end of the Term and (iv) shall be expressly subject and subordinate to all
the terms of this Agreement and to the rights, powers and remedies of Lessor
hereunder;
(d) In connection with a sublease to a Permitted
Foreign Air Carrier, Lessee shall have furnished Lessor and Security Trustee an
opinion (reasonably satisfactory to Lessor) of counsel (reasonably satisfactory
to Lessor and Security Trustee), in the country of domicile of such Permitted
Foreign Air Carrier, that (i) the terms of such sublease are the legal, valid
and binding obligations of the parties thereto enforceable under the Laws of
such
14
jurisdiction, (ii) it is not necessary for any Participant, Lessor or Security
Trustee to register or qualify to do business in such jurisdiction, if not
already so registered or qualified, as a result, in whole or in part, of the
proposed sublease, (iii) the Laws of such jurisdiction of domicile require fair
compensation by the government of such jurisdiction, payable in a currency
freely convertible into Dollars, for the loss of title to the Aircraft, Airframe
or Engines in the event of the requisition by such government of such title
(unless Lessee shall provide insurance in the amounts required with respect to
hull insurance under Section 11 covering the requisition of title to the
Aircraft, Airframe or Engines by the government of such jurisdiction so long as
the Aircraft, Airframe or Engines are subject to such sublease), (iv) the laws
of such sublessee's country of domicile would give recognition to Lessor's title
to, and Security Trustee's Lien in respect of, such Engine or the Airframe and
to the registry of such Engine or the Airframe in the name of Lessor (or Lessee,
as "lessee", or the proposed sublessee, as appropriate), (v) the agreement of
such Permitted Foreign Air Carrier that its rights under the sublease are
subject and subordinate to all the terms of this Lease is enforceable against
such Permitted Foreign Air Carrier under applicable Law, (vi) there is no tort
liability of the owner or Lessor of an aircraft not in possession thereof under
the Laws of such country (it being agreed that, in the event such latter opinion
cannot be given in a form satisfactory to the Owner Participant and the Security
Trustee, such opinion shall be waived if insurance reasonably satisfactory to
the Owner Participant and the Security Trustee is provided to cover such risk),
and (vii) there exist no possessory rights in favor of the Permitted Foreign Air
Carrier under such sublease under the laws of such Permitted Foreign Air
Carrier's country of domicile that would, upon bankruptcy or insolvency of or
other default by the Lessee and assuming that at such time such Permitted
Foreign Air Carrier is not insolvent or bankrupt, prevent the return or
repossession of the Aircraft in accordance with and when permitted by the terms
of Section 15 upon the exercise by Lessor of its remedies under Section 15;
(e) [intentionally omitted];
(f) Lessee shall furnish to Lessor and the
Security Trustee a certificate of its regularly retained independent insurance
broker to the effect that the insurance required by Section 11 remains in effect
at the time such sublease is entered into;
(g) All necessary documents shall have been duly
filed, registered or recorded in such public offices in the United States and in
such country as may be required fully to preserve the title of Lessor, and the
first priority perfected security interest (subject to Permitted Liens) of
Security Trustee, in the Aircraft, Airframe and Engines;
(h) Lessee shall reimburse Lessor and Security
Trustee for all of its reasonable out-of-pocket fees and expenses, including,
without limitation, reasonable fees and disbursements of counsel, incurred by
Lessor and Security Trustee in connection with any such sublease; and
(i) Lessee shall have furnished to Lessor and
Security Trustee an Officer's Certificate to the effect that all conditions
precedent provided for herein relating to entry into such sublease have been
complied with.
15
7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER
RELINQUISHMENT OF POSSESSION
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives
possession of the Aircraft in accordance with Section 7.2 shall be subject and
subordinate to all the terms of this Lease, and to Lessor's rights, powers and
remedies hereunder, including, without limitation (i) Lessor's right to
repossess the Aircraft pursuant to Section 15, (ii) Lessor's right to terminate
and avoid such sublease, delivery, transfer or relinquishment of possession upon
the occurrence of a Lease Event of Default and (iii) the right to require Lessee
or such other Person to forthwith deliver the Aircraft, the Airframe and Engines
subject to such transfer upon the occurrence of a Lease Event of Default;
(b) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease to the same extent
as if such transfer had not occurred, and no transfer of possession of the
Aircraft, the Airframe, any Engine or any Part or any failure of performance
under or with respect to any such transfer shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or under any Operative
Agreement;
(c) Lessee shall ensure that no sublease,
delivery, transfer or relinquishment permitted under Section 7.2 shall affect
the United States registration of the Aircraft, unless also made in accordance
with the provisions of Section 7.1.2;
(d) Any event that constitutes or would, with
the passage of time, constitute an Event of Loss under paragraph (c), (d), or
(e) of the definition of such term (as set forth in Annex A) shall not be deemed
to violate the provisions of Section 7.2; and
(e) Any Wet Lease shall not constitute a
delivery, transfer or relinquishment of possession for purposes of Section 7.2
and shall not be prohibited by the terms hereof.
16
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS; OTHER
LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
At all times during the Term, Lessee shall comply with, or
cause to be complied with, each of the provisions of Annex C, which provisions
are hereby incorporated by this reference as if set forth in full herein.
8.2 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Owner Participant, Security
Trustee or Lessor such information (other than with respect to the citizenship
of Owner Participant and Lessor) within Lessee's or any Permitted Sublessee's
possession, or reasonably available to or obtainable by Lessee or such Permitted
Sublessee, as may be required to enable Lessor timely to file any reports
required to be filed by it as lessor under the Lease, to enable the Security
Trustee timely to file any reports required to be filed by it as the Security
Trustee under the Security Agreement or to enable Owner Participant to timely
file any reports required to be filed by it, as the beneficiary of the Trust
Estate, in any such case, with any Government Entity because of, or in
connection with, the interest of Owner Participant, Security Trustee or Lessor
in the Aircraft, Airframe or Engines, this Lease or any other part of the Trust
Estate; provided, however, that with respect to any such information which
Lessee reasonably deems commercially sensitive or confidential, Owner
Participant, the Security Trustee or Lessor, as the case may be, shall afford
Lessee a reasonable opportunity to seek from any such Government Entity a waiver
of the obligation of Owner Participant, the Security Trustee or Lessor to file
any such information, or shall consent to the filing of such information
directly by Lessee in lieu of filing by Owner Participant, the Security Trustee
or Lessor, and if any such waiver or consent is evidenced to the reasonable
satisfaction of Owner Participant, the Security Trustee or Lessor, as the case
may be, then Lessee shall not be required to furnish such information to Owner
Participant, the Security Trustee or Lessor.
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 RIGHT OF TERMINATION
(a) Unless a Payment Default, Bankruptcy Default
or Lease Event of Default shall have occurred and be continuing, Lessee shall
have the right at its option to terminate this Lease during the Base Lease Term,
effective only on a Termination Date occurring after the end of the Tax
Attribute Period, if:
(i) Lessee makes a good faith determination that the
Aircraft either has become economically obsolete or is surplus
to Lessee's requirements and the Chief Financial Officer of
Lessee so certifies in writing to Lessor; and
17
(ii) written notice of Lessee's exercise of its
option to terminate this Agreement shall be given to Lessor
not less than 90 days prior to the proposed Termination Date
specified in such notice.
(b) Lessor shall notify Lessee and Security
Trustee of Lessor's intention to sell or retain the Aircraft, as provided in
this Section 9, no later than 45 days after Lessee gives Lessor written notice
pursuant to Section 9.1(a)(ii). Any failure by Lessor to give such notice of its
election shall be deemed to be an election to sell the Aircraft, as provided in
this Section 9.
(c) Any termination pursuant to this Section 9
shall become effective on the date of the sale, if any, pursuant to Section 9.2
or upon the date of termination and payment by Lessee and Lessor in accordance
with Section 9.3 if Lessor elects to retain the Aircraft.
9.2 ELECTION BY LESSOR TO SELL
9.2.1 BIDS; CLOSING OF SALE
Unless Lessor has given Lessee notice of Lessor's election to
retain the Aircraft, Lessee, as agent for Lessor, shall, until the date ten
Business Days prior to the proposed Termination Date, use commercially
reasonable efforts to obtain bids for a cash purchase of the Aircraft and Lessor
may, if it desires to do so, also seek to obtain such bids. In the event Lessee
receives any bid, Lessee shall promptly, and in any event at least ten Business
Days prior to the proposed date of sale, certify to Lessor in writing the amount
and terms of such bid, the proposed date of such sale and the name and address
of the person (who shall not be Lessee or any Affiliate of Lessee or any person
with whom Lessee or any such Affiliate has an arrangement for the future use of
the Aircraft by Lessee or any such Affiliate) submitting such bid. In the event
Lessor receives any bid on or prior to the date ten Business Days prior to the
proposed date of sale, certify to Lessee in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the person
submitting such bid.
9.2.2 CLOSING OF SALE
(a) On the proposed Termination Date (i) Lessee
shall deliver the Airframe and Engines or engines constituting part of the
Aircraft to the bidder, if any, which shall have submitted the highest cash bid
(net of applicable brokerage commissions) on or before the date ten Business
Days prior to such Termination Date, in the same manner as if delivery were made
to Lessor pursuant to Section 5 and Annex B and in full compliance with the
terms thereof, and shall duly transfer to Lessor title to any such engines not
owned by Lessor, all in accordance with the terms of Section 5 and Annex B, and
(ii) Lessor shall simultaneously therewith transfer the Airframe and Engines or
engines to such bidder, in the manner described in Section 4.5, against cash
paid to Lessor in the amount of such highest bid (net of applicable brokerage
commissions and all reasonable out-of-pocket fees and expenses incurred by
Lessor, Security Trustee and Owner Participant in connection with such sale and
the related termination
18
of this Lease (collectively, the "EXPENSES OF SALE")) and in the manner and in
funds of the type specified in Section 3.3.
(b) All proceeds of any sale described in
Section 9.2.2(a), net of Expenses of Sale, shall be paid to and retained by
Lessor and, on such Termination Date, and as a condition precedent to such sale
and the delivery of the Aircraft and Engines or engines to such bidder, Lessee
shall pay to Lessor, in the manner and in funds of the type specified in Section
3.3:
(i) all unpaid Basic Rent due at any time prior to
such Termination Date, but excluding Basic Rent due on such
Termination Date; plus
(ii) an amount equal to the excess, if any, of the
Termination Value for the Aircraft, computed as of such
Termination Date, over the proceeds of such sale, net of
Expenses of Sale; plus
(iii) as provided in Section 3.2.2, interest on the
amounts specified in the foregoing clause (i) at the Payment
Due Rate from and including the date on which any such amount
was due to the date of payment of such amount in full; plus
(iv) an amount equal to the excess, if any, of (A)
the amount, if any, set forth opposite such Termination Date
in Schedule 4 hereto in the column with the heading "Deferred
Basic Rent", over (B) the amount, if any, set forth opposite
such Termination Date in Schedule 4 hereto in the column with
the heading "Prepaid Basic Rent".
As a further condition precedent to such sale and delivery,
Lessee shall pay all Supplemental Rent due by Lessee to Lessor, Security
Trustee, or the Participants under this Lease (including, without limitation,
all interest charges provided for hereunder or under any other Lessee Operative
Agreement with respect to the late payment of any amounts so payable, and the
Expenses of Sale).
(c) Upon and subject to any such sale and
receipt of proceeds by Lessor, and full and final payment of all amounts
described in Section 9.2.2(b), and compliance by Lessee with all the other
provisions of this Section 9.2,
(i) Lessor will transfer to Lessee, in accordance
with Section 4.5, any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and
sold therewith; and
(ii) the obligation of Lessee to pay Basic Rent, on
or after the Payment Date with reference to which Termination
Value is computed, shall cease, and the Term for the Aircraft
shall end effective as of the date of such sale; and
(iii) if and to the extent that the amount specified
in clause (iv)(B) of the first sentence of Section 9.2.2(b)
exceeds the aggregate amount specified in
19
clause (iv)(A) of the first sentence of Section 9.2.2(b),
subject to receipt by Lessor of all amounts owing to it under
Section 9.2.2(b) and payment by Lessee of all other amounts
payable by Lessee under Section 9.2.2(b), Lessor shall pay to
Lessee an amount equal to such excess out of funds received by
the Lessor from the Security Trustee or provided for that
purpose by the Owner Participant.
(d) A sale of the Aircraft pursuant to this
Section 9.2.2 shall take place only on a Termination Date. Subject to Section
9.3, if no sale shall have occurred on or as of the proposed Termination Date,
this Agreement shall continue in full force and effect, and all of Lessee's
obligations shall continue, including, without limitation, its obligation to pay
Rent, in each case, as if the notice under Section 9.1 shall not have been given
and, subject to Section 9.2.3, Lessee may give another notice pursuant to
Section 9.1.
9.2.3 WITHDRAWAL OF NOTICE OF TERMINATION
(a) Lessee may withdraw any notice given
pursuant to Section 9.1 at any time on or before the date 20 days prior to the
proposed Termination Date, whereupon this Agreement shall continue in full force
and effect and all of Lessee's obligations shall continue, including, without
limitation, its obligation to pay Rent, in each case, as if the notice under
Section 9.1 shall not have been given and Lessee may give another notice
pursuant to Section 9.1; PROVIDED that Lessee shall not be entitled to give more
than three notices pursuant to Section 9.1.
(b) Lessee shall pay all reasonable
out-of-pocket fees and expenses of Lessor, Security Trustee and Owner
Participant in connection with any notice of termination withdrawn by Lessee or
in connection with any notice of termination pursuant to which a sale of the
Aircraft fails to occur.
9.3 RETENTION OF AIRCRAFT BY LESSOR
(a) If Lessor shall elect to retain the Aircraft
in accordance with Section 9.1, on the proposed Termination Date:
(i) Lessor shall pay, or cause to be paid, in the
manner and in funds of the type specified in Section 3.3, to
the Security Trustee an amount sufficient to prepay the Note
pursuant to the Loan Agreement, together with accrued interest
thereon;
(ii) subject to receipt by Security Trustee of the
funds described in paragraph (i) above, Lessee shall deliver
the Airframe and Engines or engines constituting part of the
Aircraft to Lessor pursuant to Section 5 and Annex B and in
full compliance with the terms thereof, and shall duly
transfer to Lessor title to any such engines not owned by
Lessor, all in accordance with the terms of Section 5 and
Annex B;
(iii) Lessee shall pay to Lessor, in the manner
and in funds of the type specified in Section 3.3:
20
(1) all unpaid Basic Rent due at any
time prior to such Termination Date
but excluding Basic Rent due on such
Termination Date; plus
(2) as provided in Section 3.2.2,
interest on the amounts specified in
the foregoing clause (1) at the
Payment Due Rate from and including
the date on which any such amount
was due to the date of payment of
such amount in full; plus
(3) an amount equal to the excess of (A)
the amount, if any, set forth
opposite such Termination Date in
Schedule 4 hereto in the column with
the heading "Deferred Basic Rent",
over (B) the amount, if any, set
forth opposite such Termination Date
in Schedule 4 hereto in the column
with the heading "Prepaid Basic
Rent"; and
(iv) Lessee shall also pay all Supplemental Rent due
and payable by Lessee to Lessor, Security Trustee, or the
Participants under this Lease (including without limitation
all interest charges provided for hereunder or under any other
Lessee Operative Agreement with respect to the late payment of
any amounts so payable, and the reasonable out-of-pocket fees
and expenses incurred by Lessor and Owner Participant in
connection with such termination and sale).
(b) Upon full and final payment to Lessor,
Security Trustee, and the Participants of the amounts described in Section
9.3(a), and compliance by Lessee with all the other applicable provisions of
this Section 9.3,
(i) Lessor will transfer to Lessee, in accordance
with Section 4.5, any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and
returned therewith; and
(ii) The obligation of Lessee to pay Basic Rent
otherwise due on or after the Termination Date shall cease,
and the Term for the Aircraft shall end effective as of such
Termination Date; and
(iii) if and to the extent that the amount specified
in clause (iii)(3)(B) of Section 9.3(a) exceeds the aggregate
amount specified in clause (iii)(3)(A) of Section 9.3(a),
subject to receipt by Lessor of all amounts owing to it under
Section 9.3(a) and payment by Lessee of all other amounts
payable by Lessee under Section 9.3(a), Lessor shall pay to
Lessee an amount equal to such excess out of funds received by
the Lessor from the Security Trustee or provided for that
purpose by the Owner Participant.
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SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS WITH RESPECT TO AIRCRAFT
10.1.1 NOTICE AND ELECTION
(a) Upon the occurrence of an Event of Loss with
respect to the Airframe, and any Engine or Engines installed thereon at the time
of such Event of Loss, Lessee shall promptly (and in any event within 10
Business Days after such occurrence) give Lessor and Security Trustee written
notice of such Event of Loss. Within 45 days after such occurrence, Lessee shall
give Lessor and Security Trustee written notice of Lessee's election to make
payment in respect of such Event of Loss, as provided in Section 10.1.2, or to
replace the Airframe, and any such Engines, as provided in Section 10.1.3.
(b) Any failure by Lessee to give such notice of
its election shall be deemed to be an election of the option set forth in
Section 10.1.2. In addition, Lessee shall not be entitled to elect the option
set forth in Section 10.1.3 if, at the time Lessor receives such notice from
Lessee, there shall have occurred and be continuing a Payment Default, a
Bankruptcy Default or a Lease Event of Default.
(c) For purposes of Section 10.1.2, an Event of
Loss with respect to the Airframe shall be deemed to constitute an Event of Loss
with respect to the Aircraft. For purposes of Section 10.1.3, any Engine not
actually suffering an Event of Loss shall not be required to be replaced.
10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) If Lessee elects, in accordance with
Section 10.1.1, to make payment in respect of any such Event of Loss, then
Lessee shall pay, in the manner and in funds of the type specified in Section
3.3, the following amounts:
(i) on the Stipulated Loss Value Date next following
the earlier of (x) the 120th day following the date of the
occurrence of such Event of Loss, and (y) the third day
following the receipt of insurance proceeds with respect to
such occurrence (but in any event not earlier than the date of
Lessee's election under Section 10.1.1 to make payment under
this Section 10.1.2), Lessee shall pay to Lessor:
(1) all unpaid Basic Rent or Renewal
Rent, as the case may be, due at any
time prior to such Stipulated Loss
Value Date; plus
(2) an amount equal to the excess of (A)
the sum of (I) the Stipulated Loss
Value of the Aircraft computed as of
such Stipulated Loss Value Date plus
(II) the amount, if any, set forth
opposite such Stipulated Loss Value
Date in Schedule 3 hereto in the
column with the heading "Deferred
Basic
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Rent", over (B) the amount, if
any, set forth opposite such
Stipulated Loss Value Date in
Schedule 3 hereto in the column with
the heading "Prepaid Basic Rent";
plus
(3) as provided in Section 3.2.2,
interest on the amount specified in
the foregoing clause (1) at the
Payment Due Rate from and including
the date on which any such amount
was due to the date of payment of
such amount in full;
PROVIDED, that if such Stipulated Loss Value Date is a Payment Date, Lessee
shall not be obligated to pay the Basic Rent or Renewal Rent otherwise required
to be paid on such date.
(ii) on or before the date required for payment of
the amounts specified in paragraph (i) above, Lessee shall
also pay to Lessor, Security Trustee, and the Participants all
other amounts due and payable by Lessee to Lessor, Security
Trustee and the Participants under this Lease, the
Participation Agreement or any other Lessee Operative
Agreement.
(b) Upon payment in full of all amounts
described in the foregoing paragraph (a),(i) the obligation of Lessee to pay
Basic Rent or Renewal Rent hereunder with respect to the Aircraft shall
terminate, (ii) the Term for the Aircraft shall end and (iii) Lessor will at
Lessee's expense transfer the Aircraft to Lessee, as-is and where-is, and
subject to any insurer's salvage rights, but otherwise in the manner described
in Section 4.5.
10.1.3 REPLACEMENT OF AIRFRAME AND ENGINES
(a) If Lessee elects, in accordance with
Section 10.1.1, to replace the Airframe, and any Engine actually suffering the
Event of Loss, then Lessee shall, as promptly as possible and in any event
within 120 days after the occurrence of such Event of Loss, convey or cause to
be conveyed to Lessor, in compliance with Section 10.3 and as replacement for
the Airframe, and any such Engine, title to a Replacement Airframe (which shall
comply with paragraph (b) below), and for each such Engine a Replacement Engine,
in each case free and clear of all Liens other than Permitted Liens. If Lessee
makes such election, but for any reason fails or is unable to effect such
replacement within such time period and in compliance with the requirements set
forth in Section 10.3, then Lessee shall be deemed to have initially made the
election set forth in Section 10.1.2 with the effect that Lessee shall
immediately pay, in the manner and in funds of the type specified in Section
3.3, the amounts required under, and in accordance with, Section 10.1.2.
(b) Any such Replacement Airframe shall be an
airframe that is the same model as the Airframe to be replaced thereby, or an
improved model, and that has a value, utility and remaining useful life, at
least equal to the Airframe to be replaced thereby (assuming that such Airframe
had been maintained in accordance with the Lease). Any such Replacement Engine
shall meet the requirements of, and be conveyed by Lessee to Lessor in
accordance with, Section 10.2 (other than the notice requirement set forth in
Section 10.2.1).
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10.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE
10.2.1 NOTICE
Upon the occurrence of an Event of Loss with respect to an
Engine under circumstances in which an Event of Loss with respect to the
Airframe has not occurred, Lessee shall promptly (and in any event within 10
Business Days after such occurrence) give Lessor and Security Trustee written
notice of such Event of Loss.
10.2.2 REPLACEMENT OF ENGINE
Lessee shall, promptly and in any event within 90 days after
the occurrence of such Event of Loss, convey or cause to be conveyed to Lessor,
in compliance with Section 10.3 and as replacement for the Engine with respect
to which any Event of Loss occurred, title to a Replacement Engine free and
clear of all Liens other than Permitted Liens. Such Replacement Engine shall be
an engine manufactured by Engine Manufacturer that is the same model as the
Engine to be replaced thereby, or an improved model, and that is suitable for
installation and use on the Airframe, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).
10.2.3 ENGINE EXCHANGE
Unless a Payment Default, Bankruptcy Default or Lease Event of
Default shall have occurred and be continuing, upon not less than 30 days' prior
written notice to Lessor and Security Trustee, Lessee may replace any Engine
leased hereunder with another engine (the "EXCHANGED ENGINE") meeting the
requirements of Section 10.2.2. Such Exchanged Engine shall be deemed to be a
"Replacement Engine" and Lessor and Lessee shall comply with the provisions of
Section 10.3 with regard to the Exchanged Engine and the Engine so replaced.
10.3 CONDITIONS TO ANY REPLACEMENT
10.3.1 DOCUMENTS
Prior to or at the time of conveyance of title to any
Replacement Airframe or Replacement Engine to Lessor, Lessee shall take each of
the following actions:
(a) furnish Lessor with a full warranty xxxx of
sale duly conveying to Lessor such Replacement Airframe or Replacement Engine,
in form and substance reasonably satisfactory to Lessor and cause such
Replacement Airframe to be duly registered in the name of Lessor pursuant to the
Act;
(b) cause (i) a Lease Supplement subjecting such
Replacement Airframe or Replacement Engine to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution and, upon such execution, to be
filed for recordation with the FAA pursuant to the Act, (ii) a Security
Agreement Supplement, subjecting such Replacement Airframe or Replacement Engine
to the Security Agreement, to be delivered to Lessor for execution and,
24
upon execution, to be filed for recordation with the FAA pursuant to the Act and
(iii) such Financing Statements and other filings, as Lessor or Security Trustee
may reasonably request, or as may be required by applicable Law to perfect the
Security Trustee's security interest in such Replacement Airframe or Replacement
Engine duly executed by Lessee and, to the extent applicable, Lessor and
Security Trustee (and Lessor and Security Trustee shall execute and deliver the
same), to be filed in such locations as any such party may reasonably request or
as may be required by applicable Law to perfect the Security Trustee's security
interest in such Replacement Airframe or Replacement Engine;
(c) furnish a certificate of its regularly
retained independent insurance broker to the effect that the insurance
provisions of Section 11 with respect to such Replacement Airframe or
Replacement Engine have been complied with;
(d) furnish an opinion or opinions of Lessee's
counsel (which may be Lessee's General Counsel) reasonably satisfactory to
Lessor and Security Trustee and addressed to Lessor and Security Trustee to the
effect that (i) such full warranty xxxx of sale referred to in Section 10.3.1(a)
constitutes an effective instrument for the conveyance of title to the
Replacement Airframe or Replacement Engine and (ii) in the case of a Replacement
Airframe, Lessor and Security Trustee, as assignee of Lessor, will be entitled
to the benefits of Section 1110 with respect to the Replacement Airframe,
provided that such opinion referred to in this clause (ii) need not be delivered
to the extent that immediately prior to such replacement the benefits of Section
1110 were not, solely by reason of a change in law or court interpretation
thereof, available to Lessor or Security Trustee, as assignee of Lessor;
(e) furnish an opinion of Lessee's counsel
reasonably satisfactory to Lessor and Security Trustee and addressed to Lessor
and Security Trustee as to the due registration of any such Replacement
Airframe, the ownership of title to such Replacement Airframe by Owner Trustee
and the absence of Liens of record with respect to such Replacement Airframe
(other than Permitted Liens) and the due filing for recordation of each Lease
Supplement and Security Agreement Supplement with respect to such Replacement
Airframe or Replacement Engine under the Act;
(f) with respect to the replacement of the
Airframe, and any Engine installed thereon at the time of the subject Event of
Loss, if requested by Lessor and at Lessee's expense, furnish a certified report
of a qualified independent aircraft appraiser, reasonably satisfactory to
Lessor, certifying that such Replacement Airframe and any such Replacement
Engine complies with the value, utility and remaining useful life requirements
set forth in Section 10.1.3(b);
(g) furnish a certificate of a qualified
aircraft engineer (who may be an employee of Lessee) certifying that such
Replacement Engine complies with the value, utility and remaining useful life
requirements set forth in Section 10.2.2; and
(h) furnish an Officer's Certificate of the
Lessee stating that all conditions precedent provided for herein to the
replacement of the Airframe and/or Engine have been complied with.
25
Lessor and Lessee understand and agree that if at the time of
any replacement of the Airframe or any Engine, as contemplated in this Section
10, the Airframe was registered in a jurisdiction other than the United States,
then the requirements set forth above in this Section 10.3.1 relating to
compliance with the requirements of the Act or the FAA, shall be deemed to refer
to the comparable applicable Law of, and the Aviation Authority of, such other
jurisdiction.
10.3.2 OTHER OBLIGATIONS
(a) Lessor and Lessee agree that, upon any
Replacement Airframe becoming the Airframe hereunder, and upon any Replacement
Engine becoming an Engine hereunder, this Lease shall continue to be, and shall
be treated as, a lease for U.S. federal income tax purposes of, among other
things, such Replacement Airframe and such Replacement Engine. Without limiting
the foregoing, Lessee and Lessor intend that Lessor shall, in all events, be
entitled to the benefits of Section 1110 with respect to any Replacement
Airframe or Replacement Engine and Lessee and Lessor shall cooperate and take
such action as the other may reasonably request so as to ensure that Lessor
shall be entitled to such benefits.
(b) No Event of Loss with respect to an Engine,
or with respect to an Airframe, shall result in, or otherwise allow or permit
(other than as provided in Section 10.1.2(b)), any reduction, deferral,
discharge or other change in the timing or amount of any Rent payable by Lessee
hereunder, and (subject to such Section 10.1.2(b)) Lessee shall pay all such
Rent and other amounts as though such Event of Loss had not occurred.
(c) Lessee shall reimburse Lessor for all
reasonable out-of-pocket costs (including reasonable attorney's fees) incurred
by it in connection with any Replacement Airframe becoming the Airframe
hereunder and any Replacement Engine becoming an Engine hereunder.
10.4 CONVEYANCE TO LESSEE
Upon compliance by Lessee with the applicable terms of
Sections 10.1.3, 10.2 and 10.3.1, Lessor will transfer to Lessee the Airframe or
Engine, as the case may be, with respect to which such Event of Loss occurred,
in accordance with Section 4.5.
10.5 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of
damage or loss not constituting an Event of Loss (the application of which is
provided for in Section 11), received at any time by Lessor, Lessee or any
Permitted Sublessee from any Government Entity or any other Person in respect of
any Event of Loss will be applied as follows:
26
10.5.1 REPLACEMENT OF AIRFRAME AND ENGINES
If such amounts are received with respect to the Airframe, and
any Engine installed thereon at the time of such Event of Loss, upon compliance
by Lessee with the applicable terms of Section 10.1.3 with respect to the Event
of Loss for which such amounts are received, such amounts shall be paid over to,
or retained by, Lessee.
10.5.2 LOSS OF ENGINE
If such amounts are received with respect to an Engine (other
than an Engine installed on the Airframe at the time such Airframe suffers an
Event of Loss), upon compliance by Lessee with the applicable terms of Section
10.2.2 with respect to the Event of Loss for which such amounts are received,
such amounts shall be paid over to, or retained by, Lessee.
10.5.3 PAYMENT OF LOSS
If such amounts are received, in whole or in part, with
respect to the Airframe, and Lessee makes, has made or is deemed to have made
the election set forth in Section 10.1.2, such amounts shall be applied as
follows:
(a) FIRST, if the sum described in
Section 10.1.2 has not then been paid in full by Lessee, such amounts shall be
paid to Lessor (or to Security Trustee so long as Security Trustee has not given
notice to Lessee that the Lien of the Security Agreement has been duly
discharged, except with respect to Excluded Payments) to the extent necessary to
pay in full such sum;
(b) SECOND, the remainder, if any, shall be
applied to reimburse Lessor and Security Trustee for its reasonable costs
(including attorney's fees), if any, of procuring such payments; and
(c) THIRD, the remainder, if any, shall be paid
to Lessee.
10.6 REQUISITION OF AIRCRAFT FOR USE
If any Government Entity shall requisition for use the
Airframe and the Engines or engines installed thereon, and if the same does not
constitute an Event of Loss, Lessee shall promptly notify Lessor and Security
Trustee of such requisition and all of Lessee's obligations under this Agreement
shall continue to the same extent as if such requisition had not occurred;
PROVIDED, HOWEVER, that if the Airframe and Engines or engines installed thereon
are not returned to Lessor by Lessee at the end of the Term, unless Lessor shall
have elected, upon notice given not less than 30 days nor more than 120 days
before the end of the Term, not to treat such event as constituting an Event of
Loss with respect to the Aircraft, Lessee shall be obligated to pay the
Stipulated Loss Value and all other amounts payable pursuant to Section 10.1.2
with respect to the Aircraft. If Lessor shall have elected not to treat such
event as an Event of Loss, Lessee shall be obligated to return the Airframe and
Engines or engines to Lessor pursuant to, and in all other respects to comply
with the provisions of, Section 5 promptly upon their return by such Government
Entity, and Lessee shall pay to Lessor upon such return an amount equal to the
27
average daily Basic Rent payable by Lessee during the Term for each day after
the end of the Term to but excluding the day of such return, up to a maximum of
30 days.
10.7 REQUISITION OF AN ENGINE FOR USE
If any Government Entity shall requisition for use any Engine
but not the Airframe, Lessee will replace such Engine by complying with the
applicable terms of Sections 10.2 and 10.3 to the same extent as if an Event of
Loss had occurred with respect to such Engine, and any payments received by
Lessor or Lessee from such Government Entity with respect to such requisition
shall be paid or retained in accordance with Section 10.5.2.
10.8 APPLICATION OF PAYMENTS
All payments received by Lessor or Lessee, or any Permitted
Sublessee, from any Government Entity for the use of the Airframe and Engines or
engines installed thereon during the Term shall be paid over to, or retained by,
Lessee and all payments received by Lessor or Lessee from any Government Entity
for the use of the Airframe and Engines or engines installed thereon after the
Term shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, then all such payments shall be paid
over to Lessor (or to Security Trustee so long as Security Trustee has not given
notice to Lessee that the Lien of the Security Agreement has been duly
discharged), and held as provided in Section 10.5.3.
10.9 APPLICATION OF PAYMENTS DURING EXISTENCE OF CERTAIN
DEFAULTS
Any amount described in this Section 10 that is payable or
creditable to, or retainable by, Lessee shall not be paid or credited to, or
retained by, Lessee if at the time such payment, credit or retention would
otherwise occur a Lease Event of Default, Payment Default or Bankruptcy Default
shall have occurred and be continuing, but shall instead be held by or paid over
to Lessor (or to Security Trustee so long as Security Trustee has not given
notice to Lessee that the Lien of the Security Agreement has been duly
discharged) as security for the obligations of Lessee under this Lease and the
other Lessee Operative Agreements and shall be invested pursuant to Section 4.4
hereof unless and until Lessor shall have demanded liquidated damages pursuant
to Section 15.1.3 or 15.1.4 or 15.1.5 and such amount is applied, at the option
of Lessor, or upon the written request of Lessee to Lessor, from time to time
during the continuance of a Lease Event of Default, to Lessee's obligations
under this Lease as and when due, it being understood that any such application
shall be made to such obligations of Lessee as Lessor may determine in its sole
discretion. At such time as there shall not be continuing any Lease Event of
Default, Payment Default or Bankruptcy Default, such amount shall be paid to
Lessee to the extent not previously applied in accordance with this Section
10.9.
SECTION 11. INSURANCE
11.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each
of the provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
28
11.2 INSURANCE FOR OWN ACCOUNT
Nothing in Section 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurance required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Security Trustee or Owner
Participant from obtaining insurance for its own account (and any proceeds
payable under such separate insurance shall be payable as provided in the policy
relating thereto); PROVIDED, HOWEVER, that no insurance may be obtained or
maintained that would limit or otherwise adversely affect the coverage of any
insurance required to be obtained or maintained by Lessee pursuant to this
Section 11 and Annex D it being understood that all salvage rights to the
Airframe or the Engine shall remain with the Lessee's insurers at all times.
11.3 INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE
Lessor agrees to accept, in lieu of insurance against any risk
with respect to the Aircraft described in Annex D, indemnification from, or
insurance provided by, the U.S. Government, or upon the written consent of
Lessor and Security Trustee, other Government Entity, against such risk in an
amount that, when added to the amount of insurance (including permitted
self-insurance), if any, against such risk that Lessee (or any Permitted
Sublessee) may continue to maintain, in accordance with this Section 11, during
the period of such requisition or transfer, shall be at least equal to the
amount of insurance against such risk otherwise required by this Section 11.
11.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds received
as a result of the occurrence of an Event of Loss with respect to the Aircraft
or any Engine under policies required to be maintained by Lessee pursuant to
this Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect to the Aircraft, Airframe or any Engine will be
applied in payment (or to reimburse Lessee) for repairs or for replacement
property, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Lessee.
11.5 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT
Any amount described in this Section 11 that is payable or
creditable to, or retainable by, Lessee shall not be paid or credited to, or
retained by, Lessee if at the time such payment, credit or retention would
otherwise occur a Payment Default, a Bankruptcy Default or any Lease Event of
Default shall have occurred and be continuing, but shall instead be held by or
paid over to Lessor (or to Security Trustee so long as Security Trustee has not
given notice to Lessee that the Lien of the Security Agreement has been duly
discharged) as security for the obligations of Lessee under this Lease and shall
be invested pursuant to Section 4.4 hereof unless and until Lessor shall have
demanded liquidated damages pursuant to Section 15.1.3 or 15.1.4 or 15.1.5 and
such amount is applied, at the option of Lessor, or upon the written request of
Lessee to Lessor, from time to time, to Lessee's obligations under this Lease
and the other Lessee
29
Operative Agreements as and when due, it being understood that any such
application shall be made to such obligations of Lessee as Lessor may determine
in its sole discretion. At such time as there shall not be continuing any
Payment Default, Bankruptcy Default or Lease Event of Default, such amount shall
be paid to Lessee to the extent not previously applied in accordance with this
Section 11.5.
SECTION 12. INSPECTION
(a) At all reasonable times during the Term,
Lessor, Security Trustee or their respective authorized representatives, which
may be the Lender, (the "INSPECTING PARTIES") may upon reasonable notice to
Lessee (which shall be 1 Business Day if a Lease Event of Default has occurred
and is continuing) inspect the Aircraft, Airframe and Engines (including,
without limitation, the Aircraft Documents) and Lessee shall cooperate, and
shall cause any Permitted Sublessee to cooperate, with the Inspecting Parties in
connection with any such inspection (including, without limitation, permitting
any such Inspecting Party to make copies of such Aircraft Documents).
(b) Except during the continuance of any Lease
Event of Default while the Section 1110 Period shall not be in effect, any
inspection of the Aircraft hereunder shall be limited to a visual, walk-around
inspection and shall not include the opening of any panels, bays or other
components of the Aircraft, Airframe or Engines. In addition, (a) the Inspecting
Parties shall be fully covered by their own insurance with respect to any risks
incurred in connection with any such inspection, (b) any such inspection shall
be subject to the safety, security and workplace rules applicable at the
location where such inspection is conducted and any applicable governmental
rules or regulations, (c) in the case of an inspection during a maintenance
visit, such inspection shall not interfere with the normal conduct of such
maintenance visit or extend the time required for such maintenance visit or, in
any event, at any time interfere with the use or operation of the Airframe or
any Engine or with the normal conduct of the Lessee's or a Permitted Sublessee's
business, and (d) the Lessee shall not be required to undertake or incur any
additional liabilities in connection with any such inspection. All information
obtained in connection with any such inspection shall be held confidential by
the Inspecting Parties and shall not be furnished or disclosed by them to anyone
other than each other, their bank examiners, auditors, accountants, agents and
legal counsel and any Person with whom the Owner Participant is in good faith
conducting negotiations relating to the possible transfer and sale of the Owner
Participant's interest in the Trust Estate or the Aircraft, if such Person shall
have entered into an agreement similar to that contained in this Section 12
whereby such Person agrees to hold such information confidential, and except as
may be required by an order of any court or administrative agency or by any
statute, rule, regulation or order of any governmental authority or as may be
necessary to enforce the terms of this Lease, PROVIDED, HOWEVER, that the Lessor
or the Owner Participant may during any time it is offering the Aircraft for
sale make customary disclosures to prospective purchasers of the Aircraft as to
the then current flight and maintenance status of the Aircraft.
(c) With respect to such rights of inspection,
neither Lessor nor Security Trustee shall have any duty or liability to make, or
any duty or liability by reason of not making, any such visit, inspection or
survey.
30
(d) Each Inspecting Party, subject in the case
of the Security Trustee to Section 6.3 of the Security Agreement or Section
9.2.1 of the Participation Agreement, shall bear its own expenses in connection
with any such inspection (including the cost of any copies made in accordance
with Section 12(a)); provided, that if a Lease Event of Default shall have
occurred and be continuing, Lessee shall bear all such reasonable expenses,
except, in the case of a Chapter 11 reorganization, during the Section 1110
Period.
(e) If requested by Lessor or Security Trustee,
Lessee shall promptly advise, or shall cause any Permitted Sublessee to advise,
Lessor of the date upon which the Aircraft, Airframe or any Engine undergoes its
next scheduled maintenance visit or next "c" check or other major check, and
with respect to any Engine, the next off-the-wing maintenance, and shall advise
Lessor of the name and location of the relevant maintenance performer. An
Inspecting Party shall have the opportunity to attend such scheduled maintenance
visit or "c" check or other major check, subject to the other provisions of this
Section 12.
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 SUCCESSORS AND ASSIGNS
13.1.1 This Lease and the other Lessee Operative
Agreements shall be binding upon and inure to the benefit of Lessor and Lessee
and their respective successors and permitted assigns. Except as otherwise
expressly permitted by the terms of the Lease or any other Lessee Operative
Agreement, Lessee will not, without the prior written consent of Lessor and
Security Trustee, assign any of its rights under this Lease. Except as otherwise
provided herein (including, without limitation, under the provisions of Section
15 hereof) or in the Security Agreement, Lessor and Security Trustee may not
assign or convey any of its right, title and interest in and to this Lease or
the Aircraft without the prior written consent of Lessee, such consent not to be
unreasonably withheld.
Notwithstanding the foregoing, Lessee may assign or transfer
(as aforesaid) all (but not less than all) of its rights and obligations under
this Agreement in connection with a transaction of merger, consolidation or
transfer of all or substantially all its assets made in compliance with all of
the conditions set forth in this Section.
13.2 MERGERS OF LESSEE
(a) Lessee agrees that it will not consolidate
or merge with or into any other Person or sell, convey, transfer, lease or
otherwise dispose of substantially all of its assets in one or a series of
transactions to any Person (a "Lessee Merger Transaction"), except as follows:
(i) After giving effect to any such Lessee Merger
Transaction Lessee (or its successor or assignee or transferee
(the "Lessee Successor", if any) (1) is a Citizen of the
United States, (2) is a U.S. Certificated Air Carrier and a
Section 1110 Air Carrier, (3) is not the subject of a
Bankruptcy Event or of bankruptcy or
31
insolvency proceedings in any jurisdiction, and (4) is not an
airframe manufacturer or an affiliate thereof;
(ii) Lessor, as lessor under the Lease, and Security
Trustee, as assignee of Owner Trustee under the Security
Agreement, shall be entitled to the benefits of Section 1110
with respect to the Aircraft to the same extent that the
benefits of Section 1110 were available immediately preceding
such Lessee Merger Transaction;
(iii) The Lessee Successor, if any, shall execute and
deliver to Lessor, Owner Participant and Security Trustee a
duly authorized, valid, binding and enforceable agreement in
form and substance reasonably satisfactory to Lessor, Owner
Participant and Security Trustee containing an assumption by
such Person of the Lease and the other Operative Agreements to
which Lessee is a party;
(iv) Immediately after giving effect to such Lessee
Merger Transaction, the tangible net worth of Lessee (or
Lessee Successor, if any) shall be equal to or greater than
100% of the tangible net worth of Lessee immediately prior to
the Lessee Merger Transaction;
(v) Immediately after giving effect to such Lessee
Merger Transaction no Payment Default, Bankruptcy Default or
Lease Event of Default shall have occurred and be continuing
and no material adverse change in the financial condition of
Lessee (or Lessee Successor, if any) shall occur as a result
of such Lessee Merger Transaction;
(vi) If such Lessee Merger Transaction is closed
before the earlier of (a) the expiration of the Commitment
Period and the Additional Commitment Period and (b) the
transfer, by means of an Assignment or Securitization, of all
or Substantial Part of the Loan by Lender, other than to a
Brazilian Lender, then (A) the Lessee (or Lessee Successor, if
any) shall have a tangible net worth of not less than
$50,000,000 (on a pro forma basis) or shall be a Group III air
carrier under 14CFR241 (or if such determination has not been
made has annual operating revenues of at least $1 billion in
its most recently completed fiscal year on a pro forma basis),
and (B) the Lessee (or Lessee Successor) shall not be in
payment or other material default under any lease, loan or
other transaction with Lender, and (C) no lending limit
binding upon Lender under applicable law shall be exceeded as
a result of such transaction nor shall Lender then be subject
to any mandatory prohibition under applicable law preventing
it from engaging in the transactions contemplated by the Lease
Agreement with the Lessee Successor (if any); PROVIDED,
HOWEVER, in the event that the aforesaid legal lending limit
or mandatory prohibition under applicable law would be
violated by reason of any Lessee Merger Transaction, Lender
agrees to endeavor in good faith to restructure Lender's
participation in the overall leasing transaction on a basis
reasonably acceptable to Lender and the other parties; and
32
(vii) Lessee shall (1) at least 30 days prior to such
Lessee Merger Transaction have given written notice of such
Lessee Merger Transaction to Owner Trustee, Owner Participant,
Security Trustee and Lender and (2) have delivered to Owner
Trustee, Owner Participant, Security Trustee and Lender (A) a
certificate signed by the President or any Vice President of
Lessee stating that such Lessee Merger Transaction and the
assumption agreement mentioned in CLAUSE (iii) above (if any)
comply with this Section and that all conditions precedent
herein provided for relating to such transaction have been
complied with and (B) an opinion of counsel (which shall be
reasonably satisfactory to Owner Trustee, Owner Participant
and Security Trustee) to the effect that the assumption
agreement mentioned in CLAUSE (iii) above is, subject to
normal assumptions, qualifications and exceptions, the duly
authorized, valid and binding agreement of the Lessee
Successor.
(b) Upon closing of Lessee Merger Transaction
made in accordance with this Section 13, the Lessee Successor (if any) shall
succeed to, and be substituted for, and may exercise every right and power of,
Lessee under the Lease and the other Operative Agreements to which Lessee is a
party with the same effect as if such Lessee Successor had been named as Lessee
originally. No Lessee Merger Transaction shall have the effect of releasing
Lessee or any Lessee Successor from liability in respect of the Lease or any
other Operative Agreement to which it is a party.
(c) Lessee agrees that no Change in Control
shall occur before the earlier of (i) the expiration of the Commitment Period
and the Additional Commitment Period, and (ii) the transfer, by means of an
Assignment or Securitization, of all or a Substantial Part of the Loan, unless:
(i) the conditions specified in clauses (i),
(ii) and (v) of Section 13.2(a) are satisfied; and
(ii) either (x) Lender consents thereto, or (y) the
acquiring or controlling Person meets the requirements of
sub-clause (A) and (B) of clause (vi) of Section 13.2(a).
Lessee shall provide written notice of a Change in Control
transaction to Lessor and Lender at least thirty (30) days prior to the closing
of such transaction, such notice to be accompanied by a certificate signed by
the President or any Vice President of Lessee to the effect that such
transaction will comply with this Section and that all conditions precedent
provided for herein relating to such transaction will be complied with.
As used in this Section 13.2(c): "CHANGE IN CONTROL" means (a)
the acquisition of ownership, directly or indirectly, beneficially or of record,
by any Person or group (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof), of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Lessee; (b) occupation after the date hereof of a majority
of the seats (other than vacant seats)
33
on the board of directors of the Lessee by Persons who were neither (i)
nominated by the board of directors of the Lessee as of the date hereof nor (ii)
nominated by directors so nominated; or (c) Wexford Capital LLC ceases to be in
Control of Lessee. "CONTROL" means the possession, direct or indirect, of the
power to direct or to cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.
13.3 ASSIGNMENT SECURITY FOR LESSOR'S OBLIGATIONS
In order to secure the indebtedness evidenced by the Note,
Lessor has agreed in the Security Agreement, among other things, to assign to
Security Trustee this Lease and to mortgage the Aircraft, Airframe and Engines
in favor of Security Trustee, subject to the reservations and conditions therein
set forth. Lessee hereby accepts and consents to the assignment of all Lessor's
right, title and interest in and to this Lease pursuant to the terms of the
Security Agreement. In accordance with, and subject to, Section 3.3(c), Lessee
agrees to pay directly to Security Trustee (or, after receipt by Lessee of
notice from Security Trustee of the discharge of the Lien of the Security
Agreement, to Lessor), all amounts of Rent (other than Excluded Payments) due or
to become due hereunder and assigned to Security Trustee and Lessee agrees that
Security 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 Section 16 hereof. Notwithstanding
the foregoing assignment of this Lease, the obligations of Lessee to Lessor to
perform the terms and conditions of this Lease shall remain in full force and
effect.
13.4 SUCCESSOR OWNER TRUSTEE
Lessee agrees that in the case of the appointment of any
successor Owner Trustee pursuant to the terms of the Participation Agreement and
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft and the other assets of the Trust Estate for all purposes hereof
without the necessity of any consent or approval by Lessee and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. An
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Participation Agreement and the Trust Agreement, and such right
may be exercised repeatedly as long as this Lease shall be in effect.
13.5 [omitted]
SECTION 14. LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following
circumstances, conditions, acts or events, for any reason whatsoever and whether
any such circumstance, condition, act or event shall be voluntary or involuntary
or come about or be effected by operation of Law or pursuant to or in compliance
with any judgment, decree, order, rule or regulation of any Government Entity,
shall constitute a Lease Event of Default so long as it shall not have been
remedied:
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14.1 PAYMENTS
Lessee shall fail to pay any amount of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value within five (5) Business Days
after the same shall have become due; or Lessee shall fail to pay any
Supplemental Rent (other than Stipulated Loss Value or Termination Value) when
due and such failure shall continue for a period in excess of ten (10) Business
Days from and after the date of any written notice to Lessee from Lessor,
Security Trustee or Owner Participant of the failure to make such payment when
due; provided that any such failure to pay any Excluded Payment shall not
constitute a Lease Event of Default until written notice is given by the Owner
Participant to Lessee and Security Trustee that such failure constitutes a Lease
Event of Default and such failure shall have continued for a period in excess of
ten (10) Business Days after such notice.
14.2 INSURANCE
Lessee shall fail to carry and maintain, or cause to be
carried and maintained, insurance on and in respect of the Aircraft, Airframe
and Engines in accordance with the provisions of Section 11.
14.3 OTHER COVENANTS
Lessee shall fail to observe or perform (or caused to be
observed and performed) in any material respect any other covenant, agreement or
obligation set forth herein or in any other Lessee Operative Agreement (other
than the covenants, agreements and obligations set forth in the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
from and after the date of written notice thereof to Lessee from Lessor, Owner
Participant or Security Trustee, unless such failure is capable of being
corrected and Lessee shall be diligently proceeding to correct such failure, in
which case there shall be no Lease Event of Default unless and until such
failure shall continue unremedied for a period of 120 days after receipt of such
notice.
14.4 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee herein, in the
Participation Agreement or in any other Lessee Operative Agreement (other than
the representations and warranties of Lessee in the Tax Indemnity Agreement) (a)
shall prove to have been untrue or inaccurate in any material respect as of the
date made, (b) such untrue or inaccurate representation or warranty is material
at the time in question, (c) and the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor, Owner Participant or Security Trustee to Lessee.
14.5 BANKRUPTCY AND INSOLVENCY
(a) Lessee shall consent to the appointment of
or the taking of possession by a receiver, trustee or liquidator of itself or of
substantially all of its property, or Lessee shall admit in writing its
inability to pay its debts generally as they come due, or does not
35
pay its debts generally as they become due or shall make a general assignment
for the benefit of creditors, or Lessee shall file a voluntary petition in
bankruptcy or a voluntary petition or an answer seeking reorganization,
liquidation or other relief in a case under the U.S. Bankruptcy Code (as in
effect at such time) or other bankruptcy or insolvency Laws (as in effect at
such time), or Lessee shall seek relief by voluntary petition, answer or
consent, under the provisions of any other bankruptcy or other similar Law
providing for the reorganization or winding-up of corporations (as in effect at
such time) or Lessee's board of directors shall adopt a resolution authorizing
any of the foregoing; or
(b) an order, judgment or decree shall be
entered by any court of competent jurisdiction appointing, without the consent
of Lessee, a receiver, trustee or liquidator of Lessee or of substantially all
of its property, or substantially all of the property of Lessee shall be
sequestered, and any such order, judgment or decree of appointment or
sequestration shall remain in force undismissed, unstayed and unvacated for a
period of 60 days after the date of entry thereof; or
(c) a petition against Lessee in a case under
the U.S. Bankruptcy Code (as in effect at such time) or other bankruptcy or
insolvency Laws (as in effect at such time), is filed and not withdrawn or
dismissed within 90 days thereafter, or if, under the provisions of any Law
providing for reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction, custody or
control of Lessee or of substantially all of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed and unterminated
for a period of 60 days.
14.6 RELATED LEASES
[*]
SECTION 15. REMEDIES AND WAIVERS
15.1 REMEDIES
If any Lease Event of Default shall occur and be continuing,
Lessor may, at its option and at any time and from time to time, exercise any
one or more of the following remedies as Lessor in its sole discretion shall
elect:
15.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to Lessee,
to return promptly, and Lessee shall return promptly, the Airframe and Engines
as Lessor may so demand, to Lessor or its designee in the manner and condition
required by, and otherwise in accordance with, all the provisions of Section 5
as if the Airframe or Engine were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are located and
take immediate possession of and remove the same by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the
--------
* Confidential
36
restoration of damage to property caused by such taking or otherwise, and Lessee
expressly waives any right it may have to a hearing prior to repossession of the
Aircraft.
15.1.2 SALE AND USE
Lessor may sell the Airframe and/or any Engine at public or
private sale, at such times and places, and to such Persons (including Lessor,
Security Trustee or any Participant), as Lessor may determine; or Lessor may
otherwise dispose of, hold, use, operate, lease to others or keep idle the
Airframe and/or any Engine, as Lessor, in its sole discretion, may determine,
all free and clear of any rights of Lessee and without any duty to account to
Lessee with respect to such action or inaction or for any proceeds with respect
thereto, except as hereinafter set forth in this Section 15, and except to the
extent that such proceeds would constitute, under applicable Law, a mitigation
of Lessor's damages suffered or incurred as a result of the subject Lease Event
of Default. Lessor shall give Lessee at least 15 days prior written notice of
the date fixed for any public sale of the Airframe and/or any Engine or of the
date on or after which will occur the execution of any contract providing for
any private sale.
15.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Section 15.1.1 or
15.1.2 with respect to the Airframe and/or any Engine, or any Part thereof,
Lessor, by written notice to Lessee specifying a payment date (which shall be
the Stipulated Loss Value Date next occurring not less than 10 days after the
date of such notice), may demand Lessee to pay to Lessor, and Lessee shall pay
to Lessor, on the payment date so specified and in the manner and in funds of
the type specified in Section 3.3, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may
be, for the Aircraft in respect of all periods commencing on or after the date
specified for payment in such notice), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as
the case may be, due at any time prior to the Stipulated Loss Value Date
specified in such notice, but excluding Basic Rent or Renewal Rent due on such
Stipulated Loss Value Date; plus
(b) an amount equal to the excess, if any, of
the Stipulated Loss Value for the Aircraft, computed as of the Stipulated Loss
Value Date specified in such notice, over the Fair Market Sales Value of the
Aircraft, as of the Stipulated Loss Value Date specified in such notice; plus
(c) interest on the amounts specified in the
foregoing clause (a) at the Payment Due Rate from and including the date on
which any such amount was due to the date of payment of such amount; plus
(d) an amount equal to the excess, if any, of
(i) the amount, if any, set forth in Schedule 3 hereto in the column with the
heading "Deferred Basic Rent" opposite the Stipulated Loss Value Date specified
in such notice, over (ii) the amount, if any, set forth in
37
Schedule 3 hereto in the column with the heading "Prepaid Basic Rent" opposite
the Stipulated Loss Value Date specified in such notice;
(e) interest on the amount specified in the
foregoing clauses (b) and (d) at the Payment Due Rate from and including the
Stipulated Loss Value Date specified in such notice to the date of payment of
such amount.
If Lessor by written notice specifies a payment date under
this Section 15.1.3 with respect to the Aircraft, then upon payment by Lessee on
such payment date of all amounts described in this Section 15.1.3 and all other
Supplemental Rent due and payable, if and to the extent the amount specified in
the foregoing clause (d)(ii) of this Section 15.1.3 exceeds the aggregate amount
specified in the foregoing clause (d)(i) of this Section 15.1.3, Lessor shall
pay to Lessee an amount equal to such excess but only out of funds provided to
it for such purpose by the Owner Participant or distributed to it by the
Security Trustee.
15.1.4 LIQUIDATED DAMAGES UPON SALE
If Lessor, pursuant to Section 15.1.2 or applicable Law, shall
have sold the Aircraft, Lessor, in lieu of exercising its rights under Section
15.1.3 with respect to the Aircraft, may, if Lessor shall so elect, upon giving
written notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to
Lessor, on the date of such sale and in the manner and in funds of the type
specified in Section 3.3, as liquidated damages for loss of a bargain and not as
a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, for
the Aircraft in respect of all periods commencing on or after the date of such
sale), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as
the case may be, due at any time prior to the Stipulated Loss Value Date on or
immediately preceding the date of such sale, but excluding Basic Rent or Renewal
Rent due on such Stipulated Value Date; plus
(b) an amount equal to the excess, if any, of
(i) the Stipulated Loss Value of the Aircraft, computed as of the Stipulated
Loss Value Date used in the foregoing clause (a) for the computation of unpaid
Rent, over (ii) the proceeds of such sale, minus all reasonable costs of Lessor
in connection with the sale; plus
(c) if the date of such sale is not a Stipulated
Loss Value Date, an amount equal to interest on the outstanding principal amount
of the Note at the rate per annum borne thereby from and including the
Stipulated Loss Value Date used in the foregoing clause (a) for the computation
of unpaid Rent to the date of such sale; plus
(d) interest on the amounts specified in the
foregoing clause (a) at the Payment Due Rate from and including the date on
which any such amount was due to the date of payment of such amount; plus
(e) an amount equal to the excess, if any, of
(i) the amount, if any, set forth in Schedule 3 hereto in the column with the
heading "Deferred Basic Rent" opposite the Stipulated Loss Value Date used in
the foregoing clause (a) for the computation of unpaid Rent, over (ii) the
amount, if any, set forth in Schedule 3 hereto in the column with the heading
38
"Prepaid Basic Rent" opposite the Stipulated Loss Value Date used in the
foregoing clause (a) for the computation of unpaid Rent; plus
(f) interest on the sum of the amounts specified
in the foregoing clause (b) and clause (e) at the Payment Due Rate from and
including the date of such sale to the date of payment of such amounts.
If Lessor by written notice exercises its rights under this
Section 15.1.4, then upon payment by Lessee of all amounts described in this
Section 15.1.4 and all other Supplemental Rent due and payable, if and to the
extent the amount specified in the foregoing clause (e)(ii) of this Section
15.1.4 exceeds the amount specified in the foregoing clause (e)(i) of this
Section 15.1.4, Lessor shall pay to Lessee an amount equal to such excess but
only out of funds provided to it for such purpose by the Owner Participant or
distributed to it by the Security Trustee.
15.1.5 RESCISSION
Lessor may (i) at its option, rescind or terminate this Lease
as to the Aircraft, Airframe or any Engine, or any Part thereof, or (ii)
exercise any other right or remedy that may be available to it under applicable
Law or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof, including without limitation Lessee's
agreement to lease the Aircraft for the Term and to pay Rent.
15.1.6 OTHER REMEDIES
In addition to the foregoing remedies (but without duplication
of amounts otherwise paid under this Section 15), Lessee shall be liable for any
and all unpaid Rent due hereunder before, during or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor, including,
without limitation, interest on overdue Rent at the rate as herein provided,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all reasonable
costs and expenses of Lessor incurred in connection with the return of the
Airframe or any Engine, in accordance with the terms of Section 5 or in placing
the Airframe or any Engine, in the condition and airworthiness required by
Section 5.
15.2 LIMITATIONS UNDER CRAF
Notwithstanding the provisions of Section 15.1, during any
period that the Aircraft, Airframe or any Engine is subject to CRAF in
accordance with the provisions of Section 7.2.3 and in the possession of the
U.S. Government, Lessor shall not, as a result of any Lease Event of Default,
exercise its remedies hereunder in such manner as to limit Lessee's control
under this Lease (or any Permitted Sublessee's control under any Permitted
Sublease, as the case may be) of the Aircraft, Airframe or such Engine, unless
at least 30 days' (or such other period as may then be applicable under CRAF)
written notice of default hereunder shall have been given by Lessor or Security
Trustee by registered or certified mail to Lessee (and any Permitted Sublessee)
with a copy to the Contracting Officer Representative or Representatives for the
Military Airlift Command of the United States Air Force to whom notices must be
given
39
under the contract governing Lessee's (or any Permitted Sublessee's)
participation in CRAF with respect to the Aircraft, Airframe or any Engine.
15.3 RIGHT TO PERFORM FOR LESSEE
If Lessee (i) fails to make any payment of Rent required to be
made by it hereunder or (ii) fails to perform or comply with any of its
agreements contained herein and such failure continues for a period of thirty
days after written notice thereof is given by Lessor, Security Trustee or Owner
Participant to Lessee, Lessor may (but shall not be obligated to) make such
payment or perform or comply with such agreement, and the amount of such payment
and the amount of the expenses of Lessor or Security Trustee incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Payment Due
Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand by Lessor
or Security Trustee, whichever is entitled thereto. No such payment, performance
or compliance shall be deemed to cure any Lease Default or Lease Event of
Default or otherwise relieve Lessee of its obligations with respect thereto.
15.4 DETERMINATION OF FAIR MARKET SALES VALUE
For the purpose of this Section 15, the "FAIR MARKET SALES
VALUE" of the Aircraft shall be determined on an "as is, where is" basis and
shall take into account customary brokerage and other out-of-pocket fees and
expenses which typically would be incurred in connection with a sale of the
Aircraft. Any such determination shall be made by an Appraiser selected by
Lessor and the costs and expenses associated therewith shall be borne by Lessee,
unless Lessor does not obtain possession of the Aircraft, Airframe and Engines
pursuant to this Section 15, in which case an Appraiser shall not be appointed
and Fair Market Sales Value for purposes of this Section 15 shall be zero.
15.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit in
any way any right, power, remedy or privilege of Lessor hereunder or under any
other Operative Agreement or now or hereafter existing at law or in equity. Each
and every right, power, remedy and privilege hereby given to, or retained by,
Lessor in this Lease shall be in addition to and not in limitation of every
other right, power, remedy and privilege given under the Operative Agreements or
now or hereafter existing at law or in equity. Each and every right, power,
remedy and privilege of Lessor under this Lease and any other Operative
Agreement may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by Lessor. All such rights, powers,
remedies and privileges shall be cumulative and not mutually exclusive, and the
exercise of one shall not be deemed a waiver of the right to exercise any other.
Lessee hereby waives to the extent permitted by applicable Law any right which
it may have to require Lessor to choose or elect remedies.
40
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent hereunder
shall be absolute and unconditional, and shall not be affected by any event or
circumstance, including, without limitation: (i) any setoff, counterclaim,
recoupment, defense or other right that Lessee may have against Lessor, Security
Trustee, any Participant, BNDES or any other Person for any reason whatsoever;
(ii) any defect in the title, airworthiness, condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft,
Airframe or any Engine, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever; (iii) any insolvency,
bankruptcy, reorganization or similar proceedings by or against Lessee or any
other Person; or (iv) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(b) If for any reason whatsoever this Lease
shall be terminated in whole or in part by operation of Law or otherwise except
as specifically provided herein, Lessee nonetheless agrees to pay an amount
equal to each Rent payment at the time such payment would have become due and
payable in accordance with the terms hereof had this Agreement not been
terminated in whole or in part. Lessee hereby waives, to the extent permitted by
applicable Law, any and all rights that it may now have or that at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Agreement, except in accordance with the express
terms hereof.
(c) Nothing set forth in this Section 16 shall
be construed to prohibit Lessee from separately pursuing any claim that it may
have from time to time against Lessor or any other Person with respect to any
matter (other than the absolute and unconditional nature of Lessee's obligations
hereunder to pay Rent, and other than the matters specified in paragraphs (a)
and (b) above). Without limiting the foregoing, nothing in this Section 16 shall
be construed as a waiver by Lessee, or otherwise limit Lessee in pursuing any
claim by Lessee, of any breach by Lessor, Owner Participant or any other Person
of any covenant or obligation contained in any Operative Agreement.
SECTION 17. RENEWAL AND PURCHASE OPTIONS
17.1 NOTICES GENERALLY
(a) At least 225 days but not more than 375 days
prior to the Scheduled Expiration Date or, if a Renewal Lease Term is then in
effect, prior to the Scheduled Renewal Term Expiration Date of such Renewal
Lease Term, Lessee may provide notice to Lessor that Lessee may exercise either
the option to extend the leasing of the Aircraft for a Renewal Lease Term
pursuant to Section 17.2 or the option to purchase the Aircraft on the Scheduled
Expiration Date or on the Scheduled Renewal Term Expiration Date of such Renewal
Lease Term, as the case may be, pursuant to Section 17.3 (a "PRELIMINARY
NOTICE").
(b) If any such Preliminary Notice is given by
Lessee, then Lessee may provide a further notice specifying which option it
intends to elect, with respect to the relevant period, pursuant to Section
17.2.1 or 17.3.1, as the case may be.
41
17.2 RENEWAL OPTIONS
17.2.1 RENEWAL NOTICE
(a) If Lessee has given a Preliminary Notice, as
specified in Section 17.1, and subject to the terms and conditions of this
Section 17.2, Lessee may exercise its option to extend the leasing of the
Aircraft hereunder on two occasions, in each case until the next Scheduled
Renewal Term Expiration Date, on the same terms, provisions and conditions
(except as contemplated by this Section 17) set forth herein and in the other
Lessee Operative Agreements with respect to the Base Lease Term, by delivery of
a notice (a "RENEWAL NOTICE") to Lessor not less than 180 days but not more than
375 days prior to (i) if the Base Lease Term is then in effect, the Scheduled
Expiration Date, or (ii) if a Renewal Lease Term is then in effect, the
Scheduled Renewal Term Expiration Date for such Renewal Lease Term.
(b) Notwithstanding anything to the contrary in
this Agreement or any other Operative Agreement:
(i) No Preliminary Notice or Renewal Notice shall be
binding on Lessor or oblige Lessor to extend the leasing of
the Aircraft hereunder for a Renewal Lease Term if any Payment
Default, Bankruptcy Default or Lease Event of Default shall
have occurred and be continuing on and as of the date that
such Renewal Lease Term would otherwise commence.
(ii) Any Renewal Notice shall be revocable by Lessee
until 10 Business Days after the Renewal Rent is determined in
accordance with Sections 17.2.2 and unless revoked by written
notice by Lessee to Lessor shall thereafter become irrevocable
and shall constitute an unconditional obligation of Lessee to
extend the leasing of the Aircraft hereunder for the Renewal
Lease Term to which such Renewal Notice relates.
(iii) Lessee shall not be entitled to give any
Renewal Notice if it has (x) not delivered a Preliminary
Notice or (y) delivered a Purchase Notice to Lessor.
17.2.2 RENEWAL RENT
(a) During the Renewal Lease Term, Lessee shall pay
to Lessor on each Payment Date, in the manner and in the funds of the type
specified in Section 3.3, Renewal Rent in advance.
(b) The Renewal Rent payable by Lessee on each
Payment Date during the first Renewal Lease Term shall be the Renewal Rent
Amount (as defined in Schedule 1 hereto) and during the second Renewal Lease
Term shall be the Fair Market Rental Value of the Aircraft for such Renewal
Lease Term. Any such Fair Market Rental Value shall be determined not more than
10 Business Days after Lessee gives a Preliminary Notice by mutual agreement of
Lessor and Lessee or, if they shall be unable to agree, by an appraisal in
accordance with Section 17.4.
42
17.2.3 STIPULATED LOSS AND TERMINATION VALUES
(a) With respect to any Renewal Lease Term,
Stipulated Loss Value Dates and Termination Value dates shall be extended
throughout such Renewal Lease Term on the same days and for the same months as
during the Base Lease Term.
(b) Stipulated Loss Value and Termination Value
amounts that are payable during any such Renewal Lease Term shall be determined
at the same time that the Renewal Rent for such Renewal Lease Term is determined
under Section 17.2.2. Stipulated Loss Values and Termination Values for any such
Renewal Lease Term shall, commencing on the first day of such Renewal Lease
Term, be equal to the Fair Market Sales Value of the Aircraft, computed as of
the first day of such Renewal Lease Term, and shall decline ratably on a monthly
basis to the Fair Market Sales Value of the Aircraft as of the last day of such
Renewal Lease Term.
(c) Any Fair Market Sales Value of the Aircraft,
for purposes of calculating Stipulated Loss Value and Termination Value amounts
applicable during any such Renewal Lease Term, shall be determined by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
17.3 PURCHASE OPTION
17.3.1 PURCHASE NOTICE
(a) Subject to Section 17.1 and the terms and
conditions of this Section 17.3, Lessee may elect to purchase the Aircraft, on
any Purchase Date, at a purchase price equal to the Fair Market Sales Value of
the Aircraft computed as of the Purchase Date.
(b) Lessee may exercise such option to purchase
the Aircraft, by delivery of a notice (a "PURCHASE NOTICE") to Lessor not less
than 180 and not more than 375 days prior to the Purchase Date specified in such
Purchase Notice.
(c) Notwithstanding anything to the contrary in
this Agreement or any other Operative Agreement:
(i) Any Purchase Notice (whether delivered or deemed
to have been delivered) shall be revocable until 10 Business
Days after the determination of the Fair Market Sales Value in
accordance with Section 17.3.2 and unless revoked by written
notice by Lessee to Lessor shall thereafter become irrevocable
and shall constitute an unconditional obligation of Lessee to
purchase the Aircraft under this Section 17.3.
(ii) No Preliminary Notice or Purchase Notice shall
be binding on Lessor or oblige Lessor to sell the Aircraft
hereunder if any Payment Default, Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing and
Lessee shall not be entitled to give any Purchase Notice in
respect of any Purchase Date if it has (x) not delivered a
Preliminary Notice or
43
(y) delivered a Renewal Notice for a Renewal Lease Term that
would commence immediately following such Purchase Date.
17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE
The Fair Market Sales Value of the Aircraft shall be
determined not more than 10 Business Days after Lessee gives a Preliminary
Notice by mutual agreement of Lessor and Lessee or, if they shall be unable to
agree, by an appraisal in accordance with Section 17.4.
17.3.3 TITLE
Upon full and final payment by Lessee of (a) the applicable
purchase price of the Aircraft, (b) all unpaid Rent due and payable through and
including the Purchase Date and (c) all other amounts due and payable by Lessee
under this Agreement, Lessor will transfer to Lessee title to the Aircraft in
accordance with Section 4.5.
17.4 APPRAISALS
Whenever Fair Market Rental Value or Fair Market Sales Value
of the Aircraft is required to be determined by an appraisal under this Section
17, Lessee and Lessor shall appoint a mutually satisfactory Appraiser to conduct
such appraisal. If Lessee and Lessor fail to agree upon a satisfactory Appraiser
then each shall promptly appoint a separate Appraiser and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor fails to so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within 7 days after the appointment of the
latter of such two Appraisers, they cannot agree upon such amount, such two
Appraisers shall, within 8 days after such latter appointment, appoint a third
Appraiser and such amount shall be determined by such three Appraisers, who
shall make their separate appraisals within 7 days following the appointment of
the third Appraiser, and any determination so made shall be conclusive and
binding upon Lessor and Lessee. If no such third Appraiser is appointed within
such 8-day period, either Lessor or Lessee may apply to the American Arbitration
Association to make such appointment, and both parties shall be bound by such
appointment. The foregoing appraisal procedure shall in any event be completed
no less than 190 days before the end of the Base Lease Term or the current
Renewal Lease Term, as the case may be. If three Appraisers are appointed and
the difference between the determination which is farther from the middle
determination and the middle determination is more than 125% of the difference
between the middle determination and the third determination, then such farther
determination shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and binding upon Lessor and Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon Lessor and Lessee. The fees and expenses of all such Appraisers and such
appraisal procedure shall be borne equally by Lessee and Lessor, provided that
if Lessee elects not to renew this Lease or purchase the Aircraft following the
conclusion of such appraisal, Lessee shall pay all expenses of such appraisal.
44
17.5 SPECIAL PURCHASE OPTION
17.5.1 PURCHASE NOTICE
Lessee may elect to purchase the Aircraft on the Special
Purchase Date at the Special Purchase Price. Lessee may exercise such option to
purchase the Aircraft by delivery of an irrevocable notice to Lessor and the
Security Trustee not less than 90 days prior to the Special Purchase Date (the
"SPECIAL PURCHASE NOTICE"). Promptly after receipt of the Special Purchase
Notice Lessor shall give notice to the Security Trustee that the Note will be
redeemed on the Special Purchase Date.
17.5.2 TITLE
Upon payment by Lessee on the Special Purchase Date of (a) an
amount equal to the excess of (I) the sum of (A) the Special Purchase Price plus
(B) the amount, if any, specified in Schedule 1 hereto as the "Deferred Basic
Rent Amount as of Special Purchase Date" over (II) the amount, if any, specified
in Schedule 1 hereto as the "Prepaid Basic Rent Amount" as of Special Purchase
Date", (b) the Basic Rent due on the Special Purchase Date, (c) all unpaid Rent
due and payable through and including the Special Purchase Date and (d) all
other amounts due and payable by Lessee to Lessor under this Lease, (i) the
obligation of Lessee to pay Basic Rent hereunder shall terminate, (ii) the Term
for the Aircraft shall end and the Lease shall be terminated and (iii) Lessor
will transfer to Lessee title to the Aircraft in accordance with Section 4.5
SECTION 18. MISCELLANEOUS
18.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented,
waived, modified, discharged, terminated or otherwise varied orally, but only by
an instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by Lessor and Lessee with the written
consent of the Security Trustee if required by the Security Agreement. Each such
amendment, supplement, waiver, modification, discharge, termination or variance
shall be effective only in the specific instance and for the specific purpose
for which it is given. No provision of this Agreement shall be varied or
contradicted by oral communication, course of dealing or performance or other
manner not set forth in an agreement, document or instrument in writing and
signed by Lessor and Lessee.
18.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the
45
full extent permitted, to the end that this Agreement shall be deemed to be a
valid and binding agreement in all respects, enforceable in accordance with its
terms.
18.3 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any
person not a party hereto (other than Security Trustee, the Participants and the
Persons referred to in Section 4.6, with respect to matters expressly for their
benefit in this Lease) with any rights of any nature whatsoever against either
of the parties hereto, and no person not a party hereto (other than Security
Trustee, the Participants and the Persons referred to in Section 4.6, with
respect to matters expressly for their benefit in this Lease) shall have any
right, power or privilege in respect of, or have any benefit or interest arising
out of, this Agreement.
18.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and
all agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by such party in the regular course of business) and any enlargement, facsimile
or further reproduction of such reproduction likewise is admissible in evidence.
18.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts (or upon
separate signature pages bound together into one or more counterparts), each of
which when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument.
18.6 NOTICES
Unless otherwise expressly permitted by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers and
other communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile or
telecommunication transmission (which in either case provides written
confirmation to the sender of its delivery), sent by registered mail or
certified mail, return receipt requested, postage prepaid, or sent by overnight
courier service, in each case to the respective address or facsimile number set
forth for such party in Schedule 1 to the Participation Agreement, or to such
other address or number as either party hereto may
46
hereafter specify by notice to the other party hereto. Each such notice,
request, demand, authorization, direction, consent, waiver or other
communication shall be effective when received or, if made, given, furnished or
filed (a) by facsimile or telecommunication transmission, when confirmed, or (b)
by registered or certified mail, three Business Days after being deposited,
properly addressed, with the U.S. Postal Service.
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(a) THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
(b) Each of the parties hereto hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the other
Operative Agreements to which it is a party to the
jurisdiction of the Courts of the State of New York sitting in
the City of New York, the courts of the United States of
America for the Southern District of New York, and appellate
courts from any thereof;
(ii) agrees that any suit, action or proceeding with
respect to this Agreement or the transactions contemplated
hereby may be brought only in such courts and waives any
objection that it may now or hereafter have to the
jurisdiction or venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same
by way of motion as a defense or otherwise;
(iii) agrees that nothing herein shall affect the
right to effect service of process in any manner permitted by
law in addition to the provisions of Section 18.7(c);
(iv) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding with respect to this Agreement or the
transactions contemplated hereby any special, exemplary,
punitive or consequential damages; and
(v) agrees that, to the fullest extent permitted by
applicable law, a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law.
(c) Each of the parties hereto hereby
irrevocably and unconditionally agrees that service of process upon it in any
such action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to its address as provided in Section 18.6.
47
(d) EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENTS AND FOR
ANY COUNTERCLAIM THEREIN.
18.8 NO WAIVER
No failure on the part of Lessor to exercise, and no delay by
Lessor in exercising, any of its rights, powers, remedies or privileges under
this Agreement or provided at Law, in equity or otherwise shall impair,
prejudice or constitute a waiver of any such right, power, remedy or privilege
or be construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
Lessor to any other further action in any circumstances without notice or
demand.
18.9 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements
and the Funding Agreement, on and as of the date hereof constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof, and
all prior or contemporaneous understandings or agreements, whether written or
oral, between the parties hereto with respect to such subject matter are hereby
superseded in their entireties.
48
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Agreement to be duly executed as of the day and year first above written.
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION,
not in its individual
capacity, except as
expressly provided
herein, but solely as
Owner Trustee under the
Trust Agreement, as
Lessor
By
------------------------------------------
Name:
Title:
CHAUTAUQUA AIRLINES, INC.,
as Lessee
By
------------------------------------------
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this ____ day of _________, _______.
JPMorgan Chase Bank,
as Security Trustee
By
------------------------------------------
Name:
Title:
Exhibit A-1
TO THE LEASE AGREEMENT
[FORM OF] LEASE SUPPLEMENT NO.__
LEASE SUPPLEMENT (CH_____) No. __, dated ________, 200_,
between XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, but solely as Owner Trustee under
the Trust Agreement (______), dated as of [_____], with the Owner Participant
named therein (such Owner Trustee, in its capacity as such Owner Trustee being
herein called "LESSOR") and CHAUTAUQUA AIRLINES, INC., a New York corporation,
as Lessee ("LESSEE").
Lessor and Lessee have heretofore entered into that certain
Lease Agreement (CH___), dated as of[__________], relating to one Embraer
[EMB-145LR] [EMB-145 model EMB-135 KL] aircraft (herein called the "LEASE" and
the defined terms therein being hereinafter used with the same meanings). The
Lease provides for the execution and delivery of this Lease Supplement for the
purpose of leasing the Airframe and Engines under the Lease as and when
delivered by Lessor to Lessee in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease to which this Lease Supplement is attached and of
which this Lease Supplement is a part, is being filed for recordation on the
date hereof with the Federal Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee has been duly authorized by Lessor to accept, and
does hereby irrevocably accept on behalf of Lessor delivery of the
Aircraft under, and for all purposes of, the Aircraft Xxxx of Sale, the
Participation Agreement and Purchase Agreement Assignment.
2. Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the
following described Embraer [EMB-145LR] [EMB-145 model EMB-135 KL]
aircraft (the "AIRCRAFT"), which Aircraft as of the date hereof
consists of the following components
(i) Airframe: U.S. Registration No.[____]; manufacturer's
serial no.[____]; and
(ii) Engines: two (2) [Rolls Royce] Xxxxxxx [AE3007A1/3]
[AE3007A1P] engines bearing, respectively, manufacturer's serial nos.
[_____] and [______] (each of which engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower).
3. The Closing Date for the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
4. Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of
the Lease and of the other Lessee Operative Agreements.
5. All of the terms and provisions of this Lease Supplement
are hereby incorporated by reference in the Lease to the same extent as
if fully set forth therein.
6. This Lease Supplement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
7. To the extent, if any, that this Lease Supplement
constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Lease Supplement may be created through the
transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by the Security Trustee on the
signature page thereof.
[This space intentionally left blank.]
2
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Supplement 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 under the
Trust Agreement, as Lessor
By
------------------------------------------
Name:
Title:
CHAUTAUQUA AIRLINES, INC.,
as Lessee
By
------------------------------------------
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ____ day of _________, __________.
JPMORGAN CHASE BANK,
as Security Trustee
By
------------------------------------------
Name:
Title:
Exhibit A-2
TO THE LEASE
[FORM OF] RETURN ACCEPTANCE SUPPLEMENT
RETURN ACCEPTANCE SUPPLEMENT dated ________, between XXXXX
FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, not
in its individual capacity, but solely as Owner Trustee under the Trust
Agreement, dated as of [______], with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"LESSOR") and CHAUTAUQUA AIRLINES, INC., a New York corporation, as Lessee
("LESSEE").
Lessor and Lessee have heretofore entered into that certain
Lease Agreement (CH___), dated as of [____________], relating to one Embraer
[EMB-145LR] [EMB-145 model EMB-135 KL] aircraft (herein called the "LEASE" and
the defined terms therein being hereinafter used with the same meanings). The
Lease relates to the Airframe and Engines described below.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. This Return Acceptance Supplement is executed by Lessor and
Lessee to confirm that on the date hereof the following described
Airframe and Engines were returned by Lessee to Lessor:
(i) Airframe: U.S. Registration No. [_____];
manufacturer's serial no. [_____]; and
(ii) Engines: two (2) [Rolls Royce] Xxxxxxx
[AE3007A1/3] [AE3007A1P] engines bearing, respectively, manufacturer's
serial nos. [_____] and [_____].
2. This Return Acceptance Supplement is intended to be
delivered in _____________________.
3. Lessor and Lessee agree that the return of the Aircraft is
in compliance with Section 5 and Annex B of the Lease, except as set
forth below:
4. Lessor and Lessee agree that the Lease is terminated,
except for the provisions thereof that expressly survive termination.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Return Acceptance Supplement to be duly executed as of the day and year first
above written.
WELLSFARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual
capacity, except as expressly provided
herein, but solely as Owner Trustee
under the Trust Agreement, as Lessor
By
------------------------------------------
Name:
Title:
CHAUTAUQUA AIRLINES, INC.,
as Lessee
By
------------------------------------------
Name:
Title:
3
Exhibit B
TO THE LEASE AGREEMENT
================================================================================
[FORM OF] SUBLEASE ASSIGNMENT
DATED AS OF [_______ __, _____]
BY AND AMONG
CHAUTAUQUA AIRLINES, INC.,
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS OWNER TRUSTEE,
AND
JPMORGAN CHASE BANK,
AS SECURITY TRUSTEE
AIRCRAFT SUBLEASE AGREEMENT, DATED AS OF [__________],
AMONG CHAUTAUQUA AIRLINES, INC., AS SUBLESSOR,
and
[-----------]
AS SUBLESSEE,
RELATING TO
ONE EMBRAER [EMB-145LR] [EMB-145 MODEL EMB-135 KL]
AIRCRAFT BEARING MANUFACTURER'S SERIAL NUMBER [____]
AND U.S. REGISTRATION [_____]
================================================================================
SUBLEASE ASSIGNMENT, dated as of [_______ __, ____] (the
"ASSIGNMENT") by and among Chautauqua Airlines, Inc. ("CHAUTAUQUA"),
[___________________], not in its individual capacity but solely as Owner
Trustee ("OWNER TRUSTEE") and JPMorgan Chase Bank, as Security Trustee (the
"SECURITY TRUSTEE").
WHEREAS, pursuant to that certain Lease Agreement (_____)
dated [_____] (as amended or modified, the "LEASE"), between Owner Trustee and
Chautauqua, Owner Trustee leased to Chautauqua one Embraer [EMB-145LR] [EMB-145
model EMB-135 KL] aircraft bearing manufacturer's serial number [_____] and U.S.
Registration No. [______] and the aircraft engines described therein (the
"Aircraft") upon the terms and conditions set forth therein;
WHEREAS, pursuant to that certain Aircraft Sublease Agreement,
dated as of [_______ __, ____] (as amended or modified, the "SUBLEASE") between
Chautauqua, as sublessor, and [______], as sublessee (the "SUBLESSEE"),
Chautauqua subleased the Aircraft to Sublessee;
WHEREAS, pursuant to that certain Security Agreement (_____)
dated as of [_____ ___, _____] (as amended or modified, the "SECURITY
AGREEMENT"), between Owner Trustee and the Security Trustee, Owner Trustee
assigned as collateral to the Security Trustee all of its right, title and
interest in, to and under the Lease as security for certain obligations of Owner
Trustee to the Security Trustee;
WHEREAS, the Lease requires that Chautauqua collaterally
assign all of its rights, title and interest in, to and under the Sublease to
Owner Trustee and that Owner Trustee further collaterally assign all such right,
title and interest to the Security Trustee; and
WHEREAS, capitalized terms used in this Assignment shall,
unless otherwise defined herein, have the meanings ascribed them in Annex A to
that certain Participation Agreement (______), dated as of [_____, ___, _____],
as amended or modified, ("ANNEX A") among Chautauqua, as Lessee, Owner Trustee,
as Owner Trustee, the Owner Participant named therein, the Lender named therein
and the Security Trustee.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. SUBLEASE ASSIGNMENT.
1.1.1 For value received and to secure the due and
punctual payment and performance of all Chautauqua's obligations under the
Lease, Chautauqua hereby collaterally assigns, transfers and conveys to Owner
Trustee, its successors and assigns, all its right, title and interest in, to
and under the Sublease, including but not limited to:
(a) all of Chautauqua's rights and interests as
sublessor of the Aircraft and any part thereof at any time subject to the
Sublease;
(b) any and all rents, insurance and
condemnation proceeds, and all other payments and other moneys due or to become
due, and any and all claims, rights, powers, remedies, title and interest of
Chautauqua in and to or under or arising out of the Sublease
(including without limitation all claims for damages or other sums arising upon
sale or other disposition of or loss of use of or requisition of title to or use
of the Aircraft and any part thereof at any time subject to the Sublease or upon
any event of default specified therein (hereinafter referred to as an "SUBLEASE
EVENT OF DEFAULT"));
(c) all rights, powers, privileges, remedies and
other benefits of Chautauqua under the Sublease and all rights to make
determinations, exercise options or elections, give or withhold consents,
waivers and approvals, give notices and exercise remedies (including the right
to declare or exercise remedies with respect to Sublease Event of Default and to
repossess any property), to appoint any appraiser or to take any other action
under or in respect of the Sublease or accept any surrender or redelivery of the
Aircraft and any part thereof, as well as all the rights, powers and remedies on
the part of Chautauqua, whether arising under the Sublease or by statute or at
law or in equity or otherwise, as a result of any Sublease Event of Default or
event that, with the giving of notice or the lapse of time, or both, would
become a Sublease Event of Default (hereinafter referred to as a "SUBLEASE
DEFAULT"); and
(d) all proceeds of the foregoing.
((a), (b),(c) and (d) above, collectively, the "ASSIGNED
RIGHTS")
1.1.2 This Assignment is a present assignment and
shall be effective, and the security interest created hereby shall attach,
immediately upon execution of this Assignment; PROVIDED, HOWEVER, that the Owner
Trustee and Security Trustee shall not be entitled to exercise, and Chautauqua
alone shall remain entitled to exercise, any of the rights, powers, privileges,
remedies and other benefits of Chautauqua described above, unless and until a
Lease Event of Default shall have occurred and be continuing.
1.1.3 Owner Trustee, with the irrevocable and
unconditional consent of Chautauqua, as evidenced by Chautauqua's execution of
this Assignment, has further assigned all of the Assigned Rights to the Security
Trustee as and to the extent provided in the Security Agreement; PROVIDED,
HOWEVER, that the Security Trustee shall not be entitled to exercise, and
Chautauqua or Owner Trustee alone shall remain entitled to exercise, any of the
rights, powers, privileges, remedies and other benefits of Chautauqua described
above, unless and until a Lease Event of Default that constitutes a Loan Event
of Default shall have occurred and be continuing.
SECTION 2. PERFORMANCE OF CHAUTAUQUA'S OBLIGATIONS.
It is expressly agreed that notwithstanding anything herein
contained to the contrary, (i) Chautauqua shall remain liable under the Sublease
to perform all of its obligations thereunder to the same extent as if this
Assignment had not been executed, and (ii) neither Owner Trustee nor the
Security Trustee shall have any obligation or liability under the Sublease
solely by reason of or arising out of the Assignment, nor shall Owner Trustee or
the Security Trustee or any other party be required or obligated in any manner
to perform or fulfill any obligation of Chautauqua under or pursuant to the
Sublease, or to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or to
2
take any other action to collect or enforce the payment of any amounts to which
it or they may be entitled hereunder at any time or times.
SECTION 3. EVENT OF DEFAULT.
Upon the occurrence of a Lease Event of Default the Owner
Trustee may (or if a Lease Event of Default that is also a Loan Event of Default
shall occur, the Security Trustee may), at any time thereafter so long as the
same shall be continuing, at its option, exercise one or more of the remedies
set forth below and/or available to it under the Sublease or which may be
available to it under the New York Uniform Commercial Code whether or not
applicable in the relevant jurisdiction, as Owner Trustee or Security Trustee,
as the case may be, may, in its sole discretion determine, which remedies are
cumulative and in addition to every other right or remedy provided by law.
3.1 COLLECTION OF SUBLEASE PAYMENTS. Owner Trustee or
Security Trustee, as the case may be, may collect and retain all rents,
proceeds, payments and other moneys due or to become due under the Sublease or
any other property assigned hereunder and apply such amount to payments due
under the Lease (in the case of Owner Trustee) or under the Loan Agreement (in
the case of the Security Trustee), as the Owner Trustee or Security Trustee, as
the case may be, in its discretion, shall determine;
3.2 MAINTENANCE OF SUBLEASE. Owner Trustee or Security
Trustee, as the case may be, may assume all or any part of Chautauqua's right,
title and interest in the Sublease and/or any other property assigned thereunder
and maintain the Sublease and such other property assigned hereunder in full
force and effect, with Owner Trustee or Security Trustee, as the case may be,
substituted for Chautauqua thereunder, and in any such event all the right,
title and interest of Chautauqua therein shall be extinguished and the Owner
Trustee or Security Trustee, as the case may be, shall be entitled to collect
and retain all rents and payments thereunder; and/or
3.3 SALE. Owner Trustee or Security Trustee, as the case
may be, may sell at public or private sale, without appraisal, for such price as
it may deem fair, the Sublease and all Chautauqua's right, title and interest
therein, in which case the Owner Trustee or Security Trustee, as the case may
be, shall give Owner Trustee (in the case of the Security Trustee) and
Chautauqua at least 15 days' notice of the date fixed for any public sale or of
the date on or after which will occur the execution of any contract providing
for any private sale thereof, and each purchaser at any such sale shall hold
such property absolutely free from any claim or right on the part of Chautauqua,
Chautauqua hereby waiving and releasing (to the extent permitted by law) all
rights of redemption, stay, appraisal, reclamation and turnover that Chautauqua
now has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
SECTION 4. WAIVER, INVALIDITY OF REMEDIES.
Each of Chautauqua and Owner Trustee waives any right to
require the Security Trustee to pursue any other remedy it may have against
Chautauqua or Owner Trustee. The
3
invalidity or unenforceability of any remedy in any jurisdiction shall not
invalidate such remedy or render it unenforceable in any other jurisdiction. The
invalidity or unenforceability of any of the remedies provided herein in any
jurisdiction shall not in any way affect the right to enforcement in such
jurisdiction or elsewhere of any of the other remedies provided herein.
SECTION 5. POWER OF ATTORNEY.
Chautauqua and Owner Trustee do hereby constitute the Security
Trustee and its successors and assigns, its respective true and lawful
attorney-in-fact, with full power (in the name of Chautauqua or Owner Trustee or
otherwise) and at the expense of Chautauqua but for the use and benefit of the
Security Trustee, at any time after a Loan Event of Default, that is also a
Lease Event of Default, has occurred and for so long as it is continuing, to
enforce each and every term and provision of the Sublease and any other property
assigned hereunder, to ask, require, demand, receive, collect, compound and give
acquittance and discharge for any and all moneys and claims for moneys due and
to become due under or arising out of the Sublease or any other property
assigned hereunder, to endorse any checks or other instruments or orders in
connection therewith, to settle, compromise, compound or adjust any such claims,
to exercise and enforce any and all claims, rights, powers or remedies of every
kind and description of Chautauqua and/or Owner Trustee under or arising out of
the Sublease or any other property assigned hereunder, to file, commence,
prosecute, compromise and settle in the name of Chautauqua, Owner Trustee or the
Security Trustee, or otherwise any suits, actions or proceedings at law or in
equity in any court, to collect any such moneys or to enforce any rights in
respect thereto on all other claims, rights, powers and remedies of every kind
and description of Chautauqua and/or Owner Trustee under or arising out of the
Sublease or any other property assigned hereunder and generally to sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with any
of such claims, rights, powers and remedies as fully and completely as though
the Security Trustee were the absolute owner thereof for all purposes, and at
such times and in such manner as the Security Trustee may deem to be necessary
or advisable or convenient or proper in its absolute discretion.
SECTION 6. EXECUTION OF DOCUMENTS.
Each of Chautauqua and Owner Trustee agrees that at any time
or from time to time, upon the written request of the Security Trustee,
Chautauqua and Owner Trustee shall promptly and duly execute and deliver any and
all such further instruments, documents and financing statements and do such
other acts and things as the Security Trustee may reasonably request in order to
obtain the full benefit of this Assignment and the rights and powers granted
herein. Chautauqua and Owner Trustee agree to give a notice of assignment in the
form of Exhibit A hereto to the Sublessee and to obtain from the Sublessee a
consent to assignment in the form of Exhibit B hereto concurrently with their
execution of this Agreement.
SECTION 7. ASSIGNMENT; PAYMENTS.
Security Trustee may at any time sell, assign, transfer or
otherwise dispose of its interest in the Sublease, this Assignment, and in the
property and security created thereby and
4
hereby, but only in accordance with the express provisions of the Security
Agreement other Operative Agreements. Neither Chautauqua nor Owner Trustee shall
assign, delegate, pledge or otherwise encumber any of its rights or obligations
hereunder except as provided herein.
SECTION 8. CHAUTAUQUA'S REPRESENTATIONS AND WARRANTIES.
Chautauqua represents and warrants that it has not assigned,
transferred or pledged, and hereby covenants that it will not assign, transfer
or pledge, the whole or any part of the rents, moneys, claims, rights, powers,
remedies, titles or interests hereby assigned except as provided herein.
SECTION 9. GOVERNING LAW.
This Assignment is being delivered in the State of New York,
United States of America. This Assignment, including all matters of
construction, validity and performance, shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts made in such State by residents thereof and to be performed
entirely within such State.
SECTION 10. COUNTERPARTS.
This Assignment may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall constitute
one and the same instrument.
SECTION 11. MISCELLANEOUS.
This assignment may not be amended, supplemented, modified or
waived without the prior written consent of the Security Trustee, Owner Trustee
and Chautauqua. This Assignment shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and permitted assigns.
Except as otherwise provided in this Assignment, all notices hereunder shall be
in writing and shall be given in the manner and at the addresses provided for
notices under the Lease and the Sublease.
[CONTINUED ON THE FOLLOWING PAGE]
5
IN WITNESS WHEREOF, each of these parties hereto have duly executed
this Assignment as of the date first set forth above.
CHAUTAUQUA AIRLINES, INC.
By:
Name:
Title:
XXXXX FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee
By:
-----------------------------------------
Name:
Title:
JPMORGAN CHASE BANK, as Security Trustee
By:
-----------------------------------------
Name:
Title:
EXHIBIT A
TO THE SUBLEASE ASSIGNMENT
NOTICE OF ASSIGNMENT
[------- --, ----]
[Insert Name and address of Permitted Sublessee]
Ladies and Gentlemen:
We hereby give you notice that by that certain Sublease
Assignment dated as of [_______ __, ____] and made among Chautauqua Airlines,
Inc. ("CHAUTAUQUA"), First Security Bank, National Association, not in its
individual capacity, but solely as Owner Trustee, and JPMorgan Chase Bank, as
Security Trustee (the "SECURITY TRUSTEE"), Chautauqua has collaterally assigned
to Owner Trustee, and that Owner Trustee has further collaterally assigned to
the Security Trustee all right, title and interest in, to and under that certain
Aircraft Sublease Agreement dated as of [_______ __, ____] (the "SUBLEASE")
among Chautauqua and you relating to one Embraer [EMB-145LR] [EMB-145 model
EMB-135 KL] aircraft bearing manufacturer's serial number [_____].
Henceforth, upon receipt of written notice from Security
Trustee that a Lease Event of Default that constitutes a Loan Event of Default
has occurred and is continuing (a) all moneys that may be payable by you under
said Sublease shall be paid to the Security Trustee and (b) all notices,
documents and materials required to be delivered by you to Chautauqua under the
Sublease shall be delivered to the Security Trustee, and not to Chautauqua, at:
[________, ______________________] Attention: [______________].
This notice and the instructions herein contained are
irrevocable. Please acknowledge receipt of this notice to the Security Trustee
on the enclosed consent to assignment.
CHAUTAUQUA AIRLINES, INC.
By:
-----------------------------------------
Name:
Title:
XXXXX FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee
By:
-----------------------------------------
Name:
Title:
EXHIBIT B
TO THE SUBLEASE ASSIGNMENT
CONSENT TO ASSIGNMENT
[Insert Name and Address of Permitted Sublessee]
[------- --, ----]
To: Those parties listed on Schedule A attached hereto
Ladies and Gentlemen:
We acknowledge receipt of a copy of (i) a Notice of Assignment
dated as of [_______ __, ____] and (ii) a Sublease Assignment dated as of
[_______ __, ____] (the "ASSIGNMENT") by and among Chautauqua Airlines, Inc.,
Xxxxx Fargo Bank Northwest, National Association, not in its individual capacity
but solely as Owner Trustee (the "OWNER TRUSTEE") and JPMorgan Chase Bank, as
Security Trustee, as adequate notice of such Assignment.
For good and valuable consideration, the receipt of which we
hereby acknowledge, we hereby agree that upon receipt of written notice from the
Security Trustee that a Lease Event of Default that constitutes a Loan Event of
Default has occurred and is continuing and thereafter, until otherwise notified
in writing by Security Trustee, (i) all moneys that may be payable by us
pursuant to the Sublease shall be paid to the Security Trustee's account at:
_______________________________, and (ii) that all notices, documents and
materials required to be delivered to Chautauqua under the Sublease shall be
delivered to the Security Trustee at such address as listed on the attached
Schedule A.
This consent shall be governed by and construed in accordance
with the internal laws of the State of New York without reference to principles
of conflicts of laws.
[PERMITTED SUBLESSEE]
By:
-----------------------------------------
Name:
Title:
1
SCHEDULE A TO CONSENT TO ASSIGNMENT
Chautauqua Airlines, Inc.
0000 X. Xxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000-0000
JPMORGAN CHASE BANK,
AS SECURITY TRUSTEE
Institutional Trust Services
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
00 Xxxxx Xxxx Xxxxxx
XXX: X0000-000
Xxxx Xxxx Xxxx, XX 00000
Attn: Corporate Trust Services
Tel: 000-000-0000
Fax: 000-000-0000
Schedule 1
TO LEASE AGREEMENT
CERTAIN TERMS
DEFINED TERM DEFINITION
------------ ----------
Holiday Date [_______]
Holiday Term The period commencing on and
including the Closing Date and ending
on and including the day immediately
preceding the Holiday Date.
Minimum Liability Amount [*]
Renewal Rent Amount [_____]
Scheduled Expiration Date [____], or if such date is not a
Business Day, then the Business Day
next preceding such date
Similar Aircraft Embraer [EMB-145LR] [EMB-145 model
EMB-135 KL] aircraft (other than the
Aircraft)
SLV Rate [*]
Special Purchase Date [_____] (or, if not a Business Day,
the next Business Day)
Special Purchase Price [_____], plus all amounts required to
be paid pursuant to the Loan
Agreement for the prepayment of
Loan A
Threshold Amount [*]
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* Confidential
Schedule 2
TO LEASE AGREEMENT
BASIC RENT
PAYMENT DATE BASIC RENT BASIC RENT
------------------------------------------
EQUITY PORTION DEBT PORTION
-------------------- ------------------
[intentionally omitted]
Schedule 2A
TO LEASE AGREEMENT
BASIC RENT ALLOCATION
Allocation Period Basic Rent
starts from and to Allocation
and including but excluding Amount
------------- ------------- ------
Schedule 3
TO LEASE AGREEMENT
STIPULATED LOSS VALUE
DATE PERCENTAGE OF LESSOR'S COST PERCENTAGE OF LESSOR'S COST
-------------- -------------------------------- --------------------------------------------------
EQUITY PORTION DEBT PORTION
-------------------- --------------------
[intentionally omitted]
Schedule 4
TO LEASE AGREEMENT
TERMINATION VALUE
DATE PERCENTAGE OF LESSOR'S COST PERCENTAGE OF LESSOR'S COST
-------------- -------------------------------- --------------------------------------------------
EQUITY PORTION DEBT PORTION
-------------------- --------------------
[intentionally omitted]
Schedule 5
TO LEASE AGREEMENT
PERMITTED COUNTRIES
[*]
--------
* Confidential
Schedule 6
TO LEASE AGREEMENT
PLACARDS
Leased from
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Owner Trustee, Owner and Lessor
and
Mortgaged to
JPMORGAN CHASE BANK,
not in its individual capacity but solely as Security Trustee
Annex B
TO LEASE AGREEMENT
ANNEX B
RETURN CONDITIONS
A. GENERAL CONDITION.
At the time of return of the Aircraft to Lessor, (i) the
Aircraft shall be registered with the FAA (except for a failure caused by the
Lessor being ineligible to be the registered owner of an aircraft registered
with the FAA), (ii) the Aircraft shall have and be in compliance with a
currently valid standard certificate of airworthiness issued by the FAA, (iii)
the Aircraft shall be free and clear of all Liens (other than Lessor Liens) and
rights of persons not party to any Operative Agreement under pooling,
interchange, overhaul, repair or similar agreements or arrangements, (iv) the
Aircraft shall be in as good operating condition as when originally delivered to
Lessee, ordinary wear and tear excepted, and be fully equipped with two Engines
or other engines meeting the requirements of Replacement Engines, (v) the
Aircraft shall have Lessee's logo removed or painted over in a workmanlike
manner and shall be clean by United States commercial airline operating
standards, (vi) there shall be no open or outstanding maintenance items against
the Aircraft appearing in the log books applicable to the Aircraft, (vii) the
Aircraft shall be returned in a passenger configuration, (viii) the Aircraft
shall be in compliance with the corrosion control program in accordance with the
Maintenance Program, (ix) the Aircraft shall comply with all outstanding
Airworthiness Directives issued by the FAA and other requirements mandatory
under U.S. law applicable to the Aircraft that by their terms require compliance
at or before the time of return of the Aircraft, (x) Lessee shall deliver or
cause to be delivered to Lessor the Aircraft Documents.
B. CONDITION.
1. "C" Check Inspection - The Airframe shall have completed,
within [*] flight hours of return, the next sequential "C" check or any multiple
thereof. If the Aircraft has logged more than [*] flight hours since the last
"C" check or any multiple thereof, then Lessee shall perform the next scheduled
"C" check or any multiple thereof, as applicable. All defects observed during
such "C" check shall be rectified at Lessee's expense, in accordance with the
Maintenance Program.
2. Structural Inspections - The Airframe shall have at least
[*] months, or [*] flight hours or cycles, whichever is applicable, remaining
before any scheduled structural inspection under the Maintenance Program which
is not included in 1. above. In the event that a structural inspection interval
is required at less than the above, Lessee shall, at its expense, perform all
such structural inspections immediately prior to return of the Aircraft.
3. Engines - The hours of operation remaining on both the
Engines shall not average less than 50% of the total flight hours between
scheduled engine removals under the Maintenance Program, with no life limited
part or cycle controlled part installed in the Engines having less than 12
months or equivalent hours or cycles remaining under the Maintenance Program.
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* Confidential
4. APU - The installed APU shall have remaining at least [*]
of the expected mean time before removal under the Maintenance Program.
D. PROVISION FOR "POWER BY THE HOUR AGREEMENTS".
If the Engines, APU, or any other hour or cycle controlled
components on the day of return are maintained under valid Power-By-The Hour
Agreements (the "PBH AGREEMENTS") (and either have been maintained throughout
the Term under PBH Agreements, or Lessee has made payments to the maintenance
provider to cover the period in which such components were not under such PBH
Agreements), under which the Lessee is current on all payments and otherwise in
good standing, then, in lieu of the relevant requirements in Sections B.3 or
B.4, hereof, the Lessee shall return each such component in such condition as
shall make it eligible for continued maintenance under PBH Agreements, without
additional costs, start-up charges, or overhaul requirements. For the purposes
hereof, a PBH Agreement shall mean a maintenance program, provided by the
Engine, APU or component manufacturer or its successor or designee, providing
full maintenance (other than routine day-to-day maintenance; provided, that
foreign object damage and abuse and life limited parts may be excluded or
separately charged) for such components at no cost other than standard per-cycle
rates (i.e., excluding charges based on the current maintenance status of such
component), all benefits of which program, including but not limited to the
payments made by Lessee under such PBH Agreements while operating the Aircraft,
shall be assignable or otherwise transferable to any other carrier without
restrictions of any kind.
E. RETURN CONDITION ADJUSTMENT.
If upon return the Airframe, any Engine (including any
Replacement Engine) or the APU (each, an "ITEM OF EQUIPMENT") is below the
minimum standard applicable thereto specified in Section C (the "MINIMUM"),
Lessor shall accept return of the Aircraft provided that the other return
conditions set forth in this Annex B have been satisfied or waived by Lessor
upon payment to Lessor of the excess, if any, of (i) the sum of the Deficiency
Amounts (as such term is defined below) for all such Items of Equipment over
(ii) the sum of the Credit Amounts (as defined below) for all such Items of
Equipment; provided that if there is no such excess, Lessor shall accept return
of the Aircraft without any payment by Lessee. For purposes of this Section E,
"PERFORMANCE COSTS," with respect to any Item of Equipment, shall mean the cost
of performing the applicable overhaul or refurbishment on which the Minimum for
such Item of Equipment is based at the rate then charged by qualified third
party maintenance providers capable of performing such work nearest to the
return location; "DEFICIENCY AMOUNT," with respect to any Item of Equipment,
shall mean the Performance Cost for such Item of Equipment multiplied by a
fraction, the numerator of which shall be the number of months, hours or cycles,
whichever is applicable, below the Minimum applicable to such Item of Equipment
at the time of return and the denominator of which shall be the total months,
hours or cycles, whichever is applicable, between such check, inspection,
overhaul or replacement under the Maintenance Program; "CREDIT AMOUNT," with
respect to any Item of Equipment, shall mean the Performance Cost for such Item
of Equipment multiplied by a fraction, the numerator of which shall be the
number of months, hours or cycles, whichever is applicable, above the Minimum
applicable to such Item of Equipment at the time of return and the denominator
of which shall be the total
--------
* Confidential
2
months, hours or cycles, whichever is applicable, between such check,
inspection, overhaul or replacement under the Maintenance Program.
F. INSPECTION UPON RETURN.
1. Ground Inspection - The Aircraft including the Aircraft
Documents shall be made available to Lessor for ground inspection by Lessor or
its designee at Lessee's facilities. Such inspection shall commence no later
than five (5) Business Days prior to the date of return of the Aircraft. Lessee
shall remove the Aircraft from scheduled service and open the areas of the
Aircraft as required to perform the necessary checks as specified in Section 2
hereof.
2. Operational Ground Check - Lessee shall conduct an
operations ground check on the Aircraft in accordance with the Maintenance
Program manual criteria for the purpose of demonstrating to Lessor the
satisfactory operation of the systems, including a full fuel tank leak check,
pilot and static systems check and hydraulic system internal leak check.
3. Operational Test Flight - The Aircraft shall be test flown
by Lessee, using qualified flight test personnel, for up to two (2) hours to
satisfactorily demonstrate the airworthiness of the Aircraft. During such test
flight command, care, custody and control of the Aircraft shall remain at all
times with Lessee. Up to five (5) of Lessor's designated representatives (or
more if mutually agreed) may participate in such flight as observers. Upon
completion of such operational flight-testing, the representatives of Lessee and
Lessor participating in such testing shall agree in writing upon any
discrepancies required to be corrected by Lessee in order to comply with the
conditions required hereunder.
3
Annex C
To Lease Agreement
ANNEX C
MAINTENANCE
Capitalized terms used but not defined term shall have the
respective meanings set forth in Annex A to the Lease.
A. MAINTENANCE.
Lessee shall maintain and operate the Aircraft, the Airframe
and each Engine, or cause the Aircraft, the Airframe and each Engine to be
maintained and operated in accordance with (1) Lessee's or a Permitted
Sublessee's maintenance program for the Aircraft, Airframe and Engines approved
by the FAA under FAA Regulations Part 121 (or, if subleased to a Permitted
Foreign Air Carrier, in accordance with a maintenance program approved by or
substantially equivalent to maintenance standards required by the Aviation
Authority of the United States, Netherlands, France, Germany, Japan, Canada or
the United Kingdom (the "MAINTENANCE PROGRAM"), so as to (i) keep the Aircraft,
the Airframe and each Engine in as good operating condition as originally
delivered hereunder, ordinary wear and tear excepted, (ii) keep the Aircraft in
such operating condition as may be necessary to enable the airworthiness
certificate of the Aircraft to be maintained under FAA Regulations parts 21 and
121 or other Aviation Authority then having jurisdiction over the operation of
the Aircraft under regulations which are, on the whole, qualitatively equivalent
to FAA Regulations parts 21 and 121, except to the extent the FAA or other such
Aviation Authority has revoked or suspended the airworthiness certificates for
all aircraft of the same type and (iii) comply with all service, inspection,
maintenance, modification, repair and overhaul regulations, directives and
instructions which are mandatory by the FAA (or, if the Aircraft is registered
in another country, the regulations of such country) upon the operator of the
Aircraft and Engines; (2) the requirements of the Purchase Agreement so as to
preserve the availability of any product warranties thereunder; and (3) except
during periods when a Permitted Sublease is in effect, the same standards as
Lessee uses with respect to aircraft of similar size in its fleet (including
other regional aircraft of comparable size) and, during a period when a
Permitted Sublease is in effect, the same standards used by the Permitted
Sublessee thereunder with respect to similar aircraft of similar size in its
fleet and operated by such Permitted Sublessee in similar circumstances. Lessee
will not discriminate against the Aircraft (as compared to other aircraft of
similar size, including other regional aircraft, in Lessee's fleet), in respect
of maintenance other than withdrawal of the Aircraft from use and operation as
is necessary to prepare the Aircraft for return to Lessor upon expiration or
termination of the Lease; PROVIDED that the foregoing non-discrimination
provision shall not apply to any Optional Modifications or Mandatory
Modifications (as such terms are defined below) not required to be complied with
prior to the end of the Term. Lessee further agrees that the Aircraft, Airframe
and Engines will be maintained, used, serviced, repaired, overhauled and
inspected in compliance with applicable Laws with respect to the maintenance of
the Aircraft and in compliance with each applicable airworthiness certificate,
license and registration relating to the Aircraft, Airframe or any Engine issued
by the Aviation Authority, other than minor or non-recurring violations with
respect to which corrective measures are taken promptly upon discovery thereof
and except to the extent Lessee or Permitted Sublessee is contesting in good
faith the validity or application of any such Law or requirement relating to any
such certificate, license or registration in any reasonable manner which does
not involve any risk of criminal liability or
greater than non-material risk of material civil penalty against Lessor,
Security Trustee or any Participant, or any material danger of the sale,
forfeiture or loss of the Aircraft, the Airframe, or any Engine, PROVIDED,
HOWEVER, that no such contest shall affect Lessee's obligations to comply with
the return conditions described in Annex B. Lessee shall maintain the Aircraft
Documents in English. Lessee or a Permitted Sublessee may have the Aircraft, the
Airframe, the Engines and any Parts installed on the Aircraft thereof maintained
by a third party under a maintenance agreement, provided that such third party
shall be duly certified by the FAA as a repair station. Any such maintenance
agreement shall require maintenance in a manner consistent with the requirements
of the Lease.
B. REPLACEMENT OF PARTS.
Except as otherwise provided herein, Lessee, at its own cost
and expense, will, or will cause a Permitted Sublessee to, at its own cost and
expense, promptly replace (or cause to be replaced) all Parts which may from
time to time be incorporated or installed in or attached to the Aircraft,
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. In addition, Lessee may, at
its own cost and expense, or may permit a Permitted Sublessee at its own cost
and expense to, remove (or cause to be removed) in the ordinary course of
maintenance, service, repair, overhaul or testing any Parts, whether or not worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use; PROVIDED, HOWEVER, that Lessee, except as
otherwise provided herein, at its own cost and expense, will, or will cause a
Permitted Sublessee at its own cost and expense to, 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 Section C below (and except in the case of replacement property
temporarily installed on an emergency basis) and shall be in good operating
condition and have a value and utility not less than the value and utility of
the Parts replaced (assuming such replaced Parts were in the condition required
under this Lease). Except as otherwise provided herein, all Parts at any time
removed from the Aircraft, 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
Aircraft, 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 Aircraft, Airframe or
such Engine as above provided, without further act, (i) title to the replaced
Part shall thereupon vest in Lessee (or if a Permitted Sublease is then in
effect, in the Permitted Sublessee, as the case may be) free and clear of all
Lessor Liens and all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement Part shall thereupon
vest in Lessor and subject only to Permitted Liens and pooling arrangements to
the extent permitted by Section C below and except in the case of replacement
property temporarily installed on an emergency basis, and (iii) such replacement
Part shall become subject to this Lease and the Security Agreement and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof and
thereof to the same extent as the Parts originally incorporated or installed in
or attached to such Aircraft, Airframe or Engine.
2
C. POOLING OF PARTS.
Any Part removed from the Aircraft, Airframe or any Engine may
be subjected by Lessee or a Permitted Sublessee to a normal pooling arrangement
customary in the airline industry and entered into in the ordinary course of
business of Lessee or such Permitted Sublessee, so long as a Part replacing such
removed Part shall be incorporated or installed in or attached to the Aircraft,
Airframe or such Engine in accordance with paragraph B of this Annex C 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 Aircraft,
Airframe or any Engine may be owned by any third party subject to such a normal
pooling arrangement, so long as Lessee, Permitted Sublessee, at its own cost and
expense, as promptly thereafter as reasonably possible either (i) causes title
to such replacement part to vest in Lessor in accordance with paragraph B of
this Annex C, free and clear of all Liens (except Permitted Liens), or (ii)
replaces (or causes to be replaced) such replacement Part by incorporating or
installing in or attaching to the Aircraft, Airframe or such Engine a further
replacement Part owned by Lessee or a Permitted Sublessee free and clear of all
Liens (except Permitted Liens) and by causing title to such further replacement
Part to vest in Lessor in accordance with Section B of this Annex C.
D. ALTERATIONS, MODIFICATIONS AND ADDITIONS.
Lessee shall, or shall cause a Permitted Sublessee to, make
(or cause to be made) such alterations and modifications in and additions to the
Aircraft, Airframe and each Engine as may be required from time to time by
applicable Law, to the extent made mandatory in respect of the Aircraft (a
"MANDATORY MODIFICATION"); PROVIDED, HOWEVER, that Lessee or any Permitted
Sublessee may, in good faith and by appropriate procedure, contest the validity
or application of any law, rule, regulation or order in any reasonable manner
which does not involve any risk of criminal liability or material risk of
material civil liability against Lessor, Security Trustee or any Participant,
and does not involve a material risk of sale, forfeiture or loss of the
Aircraft, it being understood that no such contest shall affect Lessee's
obligations to comply with the return conditions described in Annex B. In
addition, so long as no Payment Default or Lease Event of Default shall have
occurred and be continuing, Lessee, at its own cost and expense, may, or may
permit a Permitted Sublessee at its own cost and expense to, from time to time
make such alterations and modifications in and additions to the Aircraft,
Airframe or any Engine (each an "OPTIONAL MODIFICATION") as Lessee or such
Permitted Sublessee may deem desirable in the proper conduct of its business,
including, without limitation, removal of Parts which Lessee or such Permitted
Sublessee deems are obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine ("OBSOLETE PARTS"); PROVIDED, HOWEVER, that
(A) the aggregate value of such removed parts (based on their value on the
Delivery Date) shall not exceed [*] and (B) no such Optional Modification shall
(i) diminish the fair market value, utility, condition or useful life of the
Aircraft or any Engine below its fair market value, utility, condition or useful
life immediately prior to such Optional Modification (assuming the Aircraft or
such Engine was in the condition required by the Lease immediately prior to such
Optional Modification), or (ii) cause the Aircraft to cease to have a standard
certificate of airworthiness issued under FAA Regulations Parts 21 and 121 and
cease to be eligible for operation under FAA Regulations Part 121. Except as
otherwise provided herein, title to all Parts (other than Removable Parts (as
defined below)) incorporated in the Aircraft, Airframe or such Engine as the
result of such
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* Confidential
3
Optional Modification shall, without further act, vest in Lessor and become
subject to this Lease and the Security Agreement. Notwithstanding anything to
the contrary in this Section D, Lessee or a Permitted Sublessee may, at any time
during the Term, remove any Part (such Part being referred to herein as a
"REMOVABLE PART") if (i) such Part is in addition to, and not in replacement of
or substitution for, any Part originally incorporated in the Aircraft, Airframe
or such Engine at the time of delivery thereof hereunder, (ii) such Part is not
required to be incorporated in the Aircraft, Airframe or such Engine pursuant to
the terms of paragraph A of Annex B to the Lease, and (iii) such Part can be
removed from the Aircraft, Airframe or such Engine without causing damage to the
Aircraft or any Engine that is not repaired by Lessee. Lessee shall be
responsible for the cost of any such removal and repair of any such damage.
Removable Parts may be leased from or financed by third parties other than
Lessor. Notwithstanding anything to the contrary contained herein, title to any
Removable Part so leased from or financed by a third party other than Lessor
shall remain vested in such third-party lessor, financing party or Lessee. Upon
the removal by Lessee or such Permitted Sublessee of any Removable Part or
Obsolete Part as above provided, title thereto shall, without further act, vest
in Lessee or such Permitted Sublessee and such Part shall no longer be deemed
part of the Aircraft, Airframe or such Engine from which it was removed. Any
Part not removed as above provided prior to the return of the Aircraft, Airframe
or such Engine to Lessor hereunder shall remain the property of Lessor.
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Annex D
TO THE LEASE AGREEMENT
ANNEX D
INSURANCE
A. LIABILITY INSURANCE
1. Subject to the rights of the Lessee under Section G and
except as provided in Section A.2 below, the Lessee shall, without expense to
the Lessor, Owner Participant or Security Trustee maintain or cause to be
maintained in effect at all times during the Term with insurers of nationally or
internationally recognized responsibility public liability insurance (including,
without limitation, aircraft third party, passenger legal liability, property
damage, general third party legal liability and product liability coverage but
excluding manufacturer's product liability coverage) with respect to the
Aircraft in an amount not less than the greater of (i) the amount which Lessee
may carry from time to time on other similar aircraft in its fleet (whether
owned or leased) and (ii) the Minimum Liability Amount. Such insurance shall be
of the type usually carried by the Lessee with respect to similar aircraft and
engines, and covering risks of the kind customarily insured against by the
Lessee.
2. During any period that the Aircraft is grounded and not in
operation, the Lessee may modify the insurance required by Section A.1 above, to
modify the amounts of public liability and property damage insurance, the scope
of the risks covered and the type of insurance, in all circumstances to conform
to such insurance customary in the United States airlines industry for regional
air carriers similarly situated with the Lessee in respect of similar aircraft
which are grounded, not in operation, and stored or hangared, except that in all
instances, the amounts of coverage and scope of risk covered and the type of
insurance shall be at a minimum no less favorable than the insurance as from
time to time applicable to aircraft owned or leased by Lessee on the ground, not
in operation, and stored or hangared.
X. XXXX INSURANCE
Subject to the rights of the Lessee under Section G, the
Lessee shall, without expense to the Lessor, Owner Participant or Security
Trustee, maintain or cause to be maintained in effect at all times during the
Term with insurers of nationally or internationally recognized responsibility
(i) all risk, ground and flight hull insurance, which may, except as provided
below, exclude war risks and allied perils, covering the Aircraft for an amount
at all times (even when the Aircraft is grounded or in storage) not less than
the greater of (x) Stipulated Loss Value of the Aircraft and (y) 110% of the
outstanding principal amount of Loan A at the time; PROVIDED THAT, neither the
Lessee nor any Permitted Sublessee shall be required to maintain all-risk flight
aircraft hull insurance with respect to any period in which the Aircraft is
grounded and properly stored or hangared. Such insurance shall not provide
insurers with a right to replace the Airframe or any Engine with another
airframe or engine. Such hull insurance or other insurance of the Lessee (or a
Permitted Sublessee) shall cover Engines and Parts temporarily removed from the
Airframe, pending replacement by installation of the same or similar Engines or
Parts on the Airframe. Such insurance shall be of the type usually carried by
the Lessee with respect to similar aircraft and engines, and covering risks of
the kind customarily insured against by the Lessee.
Any policies of insurance carried in accordance with this
Section B covering the Aircraft and any policies taken out in substitution or
replacement for any such policies (i) shall name Lessor, or so long as the Lien
of the Security Agreement shall not have been discharged, Security Trustee as
exclusive loss payee for any proceeds to be paid under such policies up to an
amount equal to the Stipulated Loss Value and (ii) shall provide that (A) in the
event of a loss involving proceeds in excess of the Threshold Amount, 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 Lien of
the Security Agreement shall not have been discharged, the Security 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 Permitted Sublessee) shall
endeavor to 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 Lien of the
Security shall not have been discharged, the Security Trustee) whether such
payment is made to Lessee (or any Permitted Sublessee) or any third party, it
being understood and agreed that in the case of any payment to Lessor (or the
Security Trustee) otherwise than in respect of an Event of Loss Lessor (or the
Security Trustee) shall, upon receipt of a certificate of a qualified engineer
(who may be an employee of Lessee) certifying 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 designee, and (B) the entire amount of any loss involving proceeds
of the Threshold Amount 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 designee, PROVIDED that if a Payment Default, Bankruptcy Default or any
Lease Event of Default shall have occurred and be continuing and the insurers
have been notified thereof by Lessor or the Security Trustee, such payment
referred to in clause (B) shall be made as provided in clause (i) above. 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.
C. WAR-RISK, HIJACKING AND ALLIED PERILS INSURANCE
If and to the extent that the Lessee or a Permitted Sublessee
operates the Aircraft (A) on routes where it maintains war risk, hijacking or
allied perils insurance in effect with respect to other similar owned or leased
aircraft in its fleet, (B) on routes (other than routes within the United
States, Canada, Mexico, Bermuda and islands other than Cuba in the Caribbean
Basin) where the custom in the industry is to carry war risk insurance or (C) in
any area of recognized hostilities, the Lessee or such Permitted Sublessee shall
maintain or cause to be maintained such insurance in effect with respect to the
Aircraft in an amount not less than the greater of (x) Stipulated Loss Value of
the Aircraft and (y) 110% of the outstanding amount of Loan A at the time.
D. GENERAL PROVISIONS
The Lessee shall cause all policies of insurance carried in
accordance with Section A, B, and C, to name the Security Trustee, Lender and
the Lessor as additional insureds (collectively, the "ADDITIONAL INSUREDS"), as
their respective interests may appear. Such polices shall provide with respect
to such Additional Insureds that (i) none of their respective interest in
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such policies shall be invalidated by any act or omission or breach of warranty
or condition contained in such policies by the Lessee or, in the case of any
particular Additional Insured, any other Additional Insured; (ii) no
cancellation or lapse of coverage for nonpayment of premium or otherwise, and no
substantial change of coverage which adversely affects the interests of any such
Additional Insured, shall be effective as to such Additional Insured until 30
days (or such lesser period as may be applicable in the case of any war risk,
hijacking and allied perils insurance coverage) after receipt by such Additional
Insured of written notice from the insurers of such cancellation, lapse or
change; (iii) they shall have no liability for premiums, commissions, calls,
assessments or advances with respect to such policies; (iv) such policies will
be primary without any right of contribution from any other insurance carried by
such Additional Insureds; (v) the insurers waive any rights of set-off,
counterclaim, deduction or subrogation against such Additional Insureds; (vi)
shall apply worldwide and have no territorial restrictions or limitations
(except in the case of war risk, hijacking or related perils insurance, which
shall apply to the fullest extent available in the international insurance
market); and (vii) shall contain a 50/50% Clause per Lloyd's Aviation
Underwriter's Association Standard Policy Form AVS 103. Each liability policy
shall provide that all 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 provide that the exercise by the insurer of rights of
subrogation derived from rights retained by the Lessee will not delay payment of
any claim that would otherwise be payable but for such rights of subrogation.
E. REPORTS AND CERTIFICATES; OTHER INFORMATION
Lessee will furnish to the Lessor, the Owner Participant and
Security Trustee (A) on or prior to the Delivery Date, insurance certificates
describing in reasonable detail the insurance maintained by Lessee as required
pursuant to this Annex D, (B) prior to the cancellation, lapse or expiration of
the insurance policies required pursuant to this Annex D, evidence of renewal of
such insurance policies, and (C) on or prior to the Delivery Date and on or
before the renewal dates of the insurance policies carried by the Lessee
pursuant to this Annex D, a report signed by a firm of aircraft insurance
brokers, not affiliated with the Lessee, regularly retained by the Lessee,
stating the opinion of such firm that all premiums in connection with the
insurance then due have been paid and the insurance then carried and maintained
on the Aircraft complies with the terms hereof and, in the case of renewal
insurance, that such renewal insurance will on and after the effective date
thereof so comply with the terms hereof, PROVIDED that all information contained
in such report shall be held confidential by the Lessor, the Owner Participant
and Security Trustee and their respective agents (PROVIDED that they shall agree
for the benefit of the Lessee to hold all such information similarly
confidential) or as may be required by Applicable Law. The Lessee will instruct
such firm to give prompt written advice to the Lessor, Owner Participant and
Security Trustee of any default in the payment of any premium and of any other
act or omission on the part of the Lessee of which it has knowledge and which
would in such firm's opinion invalidate or render unenforceable, in whole or in
any material part, any insurance on the Aircraft. The Lessee will also instruct
such firm to advise the Lessor, the Owner Participant and Security Trustee in
writing at least 30 days prior to the termination or cancellation of, or
material adverse change in, such insurance carried and maintained on the
Aircraft pursuant to this Annex D (or such lesser period as may be applicable in
the case of war risk, hijacking and allied perils coverage).
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F. RIGHT TO PAY PREMIUMS
The Additional Insureds shall have the rights but not the
obligations of an additional named insured. None of Lessor, Owner Participant
and Security Trustee and the other Additional Insureds shall have any obligation
to pay any premium, commission, assessment or call due on any such insurance
(including reinsurance). Notwithstanding the foregoing, in the event of
cancellation of any insurance due to the nonpayment of premiums, each of Lessor,
Owner Participant and Security Trustee shall have the option, in its sole
discretion, to pay any cash premium in respect of the Aircraft that is due in
respect of the coverage pursuant to this Lease and to maintain such coverage, as
Lessor, Owner Participant or Security Trustee may require, until the scheduled
expiry date of such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, Owner Participant and Security Trustee for amounts so paid by
them.
G. DEDUCTIBLES; SELF-INSURANCE
The Lessee may self-insure, by way of deductible or premium
adjustment provisions in insurance policies or otherwise, the risks required to
be insured against pursuant to Section 11 and this Annex D in such amounts as
are then self-insured with respect to similar owned or leased aircraft in the
Lessee's fleet but in no case shall such self-insurance in the aggregate exceed,
on a per occurrence or on a fleetwide basis during any policy year, an amount
equal to 5% of the Lessee's tangible net worth, calculated as at the end of the
Lessee's immediately preceding fiscal year (but in no event to exceed [*]). A
deductible per occurrence that is not in excess of the prevailing standard
market deductible for similar aircraft shall be permitted, for each aircraft in
the Lessee's fleet, in addition to such self-insurance.
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* Confidential
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