EXHIBIT 99(b)
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LEASE AGREEMENT
[NW ____ _]
DATED AS OF
[-----------------]
BETWEEN
XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY, EXCEPT AS EXPRESSLY
PROVIDED HEREIN, BUT SOLELY AS OWNER TRUSTEE,
LESSOR
AND
NORTHWEST AIRLINES, INC.,
LESSEE
ONE [AIRBUS A319-113/114] [BOEING 757-351] [BOEING 747-451] AIRCRAFT
================================================================================
As set forth in Section 20 hereof, Lessor has assigned to the Indenture Trustee
(as defined herein) certain of its right, title and interest in and to this
Lease. To the extent, if any, that this Lease constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in this Lease may be created through the
transfer or possession of any counterpart other than the original executed
counterpart, which shall be identified as the counterpart containing the receipt
therefor executed by the Indenture Trustee on the signature page thereof.
TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions................................................................................ 1
SECTION 2. Acceptance and Lease....................................................................... 16
SECTION 3. Term and Rent.............................................................................. 16
(a) Basic Term.......................................................................... 16
(b) [Intentionally Omitted]............................................................. 16
(c) Basic Rent.......................................................................... 16
(d) Adjustments to Basic Rent........................................................... 17
(e) Supplemental Rent................................................................... 18
(f) Payments in General................................................................. 19
SECTION 4. Lessor's Representations and Warranties.................................................... 20
SECTION 5. Return of the Aircraft..................................................................... 20
(a) Condition Upon Return............................................................... 20
(b) Return of the Engines............................................................... 21
(c) Fuel; Manuals....................................................................... 22
(d) Storage Upon Return................................................................. 22
SECTION 6. Liens...................................................................................... 22
SECTION 7. Registration, Maintenance and Operation; Possession and Subleases; Insignia................ 23
(a) Registration and Maintenance........................................................ 23
(b) Possession and Subleases............................................................ 24
(c) Insignia............................................................................ 28
SECTION 8. Replacement and Pooling of Parts; Alterations, Modifications and Additions................. 28
(a) Replacement of Parts................................................................ 28
(b) Pooling of Parts.................................................................... 29
(c) Alterations, Modifications and Additions............................................ 29
SECTION 9. Voluntary Termination...................................................................... 30
(a) Termination Event................................................................... 30
(b) [Intentionally Omitted]............................................................. 30
(c) Optional Sale of the Aircraft....................................................... 30
(d) Termination as to Engines........................................................... 32
SECTION 10. Loss, Destruction, Requisition, etc........................................................ 32
(a) Event of Loss with Respect to the Aircraft.......................................... 32
(b) Event of Loss with Respect to an Engine............................................. 34
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PAGE
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(c) Application of Payments from Governmental Authorities for Requisition of
Title, etc....................................................................... 35
(d) Requisition for Use of the Aircraft by the United States Government or the
Government of Registry of the Aircraft........................................... 36
(e) Requisition for Use of an Engine by the United States Government or the
Government of Registry of the Aircraft........................................... 37
(f) Application of Payments During Existence of Event of Default........................ 37
SECTION 11. Insurance.................................................................................. 37
(a) Public Liability and Property Damage Insurance...................................... 37
(b) Insurance Against Loss or Damage to the Aircraft.................................... 39
(c) Reports, etc........................................................................ 41
(d) Self-Insurance...................................................................... 42
(e) Additional Insurance by Lessor and Lessee........................................... 42
(f) Indemnification by Government in Lieu of Insurance.................................. 42
(g) Application of Payments During Existence of an Event of Default..................... 43
SECTION 12. Inspection................................................................................. 43
SECTION 13. Assignment................................................................................. 43
SECTION 14. Events of Default.......................................................................... 44
SECTION 15. Remedies................................................................................... 45
SECTION 16. Lessee's Cooperation Concerning Certain Matters............................................ 49
SECTION 17. Notices.................................................................................... 49
SECTION 18. No Set-Off, Counterclaim, etc.............................................................. 50
SECTION 19. Renewal Options; Purchase Options; Valuation............................................... 51
(a) Renewal Options..................................................................... 51
(b) Purchase Options.................................................................... 52
(c) Valuation........................................................................... 52
(d) Special Purchase Option............................................................. 53
SECTION 20. Security for Lessor's Obligation to Holders of Secured Certificates........................ 54
SECTION 21. Lessor's Right to Perform for Lessee....................................................... 54
SECTION 22. Investment of Security Funds; Liability of Lessor Limited.................................. 55
(a) Investment of Security Funds........................................................ 55
(b) Liability of Lessor Limited......................................................... 55
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PAGE
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SECTION 23. Service of Process......................................................................... 55
SECTION 24. Miscellaneous.............................................................................. 55
SECTION 25. Successor Trustee.......................................................................... 56
SECTION 26. Covenant of Quiet Enjoyment................................................................ 56
-iii-
EXHIBITS
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Basic Rent, Lessor's Cost and Special Purchase Price Schedule
EXHIBIT C - Stipulated Loss Value Schedule
EXHIBIT D - Termination Value Schedule
EXHIBIT E - Rent Recalculation Verification
EXHIBIT F - Schedule of Domiciles of Permitted Sublessees
EXHIBIT G - Return Conditions
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LEASE AGREEMENT
[NW ____ _]
This
LEASE AGREEMENT [NW ____ _], dated as of [___________],
between XXXXX FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not in its individual
capacity, except as expressly provided herein, but solely as Owner Trustee under
the Trust Agreement (as defined in Section 1 hereof) (in such capacity,
"LESSOR"), and NORTHWEST AIRLINES, INC., a corporation organized and existing
pursuant to the laws of the State of Minnesota ("LESSEE");
W I T N E S S E T H:
SECTION 1. DEFINITIONS. Unless the context otherwise
requires, the following terms shall have the following meanings for all purposes
of this
Lease Agreement [NW ____ _] and shall be equally applicable to both the
singular and the plural forms of the terms herein defined:
"AFFILIATE" means, with respect to any person, any
other person directly or indirectly controlling, controlled by
or under common control with such person. For the purposes of
this definition, "CONTROL" (including "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") shall mean the power, directly or
indirectly, to direct or cause the direction of the management
and policies of such person whether through the ownership of
voting securities or by contract or otherwise.
"AIRCRAFT" means the Airframe to be delivered and
leased hereunder (or any airframe from time to time
substituted for such Airframe pursuant to Section 10(a)
hereof) together with the [two] [four] Engines initially
leased hereunder (or any engine substituted for either of such
Engines pursuant to the terms hereof), whether or not any of
such initial or substituted Engines may from time to time be
installed on such initial or substituted Airframe or may be
installed on any other airframe or on any other aircraft.
"AIRFRAME" means: (i) the [Airbus A319-113/114]
[Boeing 757-351] [Boeing 747-451] aircraft (except Engines or
engines from time to time installed thereon) specified in the
initial Lease Supplement, which aircraft shall be leased by
Lessor to Lessee hereunder and under such Lease Supplement,
and any aircraft (except Engines or engines from time to time
installed thereon) which may from time to time be substituted
for such aircraft (except Engines or engines from time to time
installed thereon) pursuant to clause (ii) of the first
paragraph of Section 10(a); and (ii) any and all Parts (A) so
long as the same shall be incorporated or installed in or
attached to such aircraft (except Engines or engines from time
to time installed thereon), or (B) so long as title thereto
shall remain vested in Lessor in accordance with the terms of
Section 8 after removal from such aircraft (except Engines or
engines from time to time installed thereon); PROVIDED,
HOWEVER, that at such time as an aircraft (except Engines or
engines from time to time installed
thereon) shall be deemed part of the property leased hereunder
in substitution for the Airframe pursuant to the applicable
provisions hereof, the replaced Airframe shall cease to be an
Airframe hereunder.
"APPLICABLE RATE" means as of any date the weighted
average of the interest rates borne by the Secured
Certificates then outstanding and, if no Secured Certificates
shall be outstanding, the Base Rate.
"BANKRUPTCY CODE" means the Bankruptcy Reform Act of
1978, as amended, or any subsequent legislation that amends,
supplements or supersedes such provisions.
"BASE RATE" means the rate of interest announced
publicly by Citibank, N.A. in
New York,
New York from time to
time as its base rate.
"BASIC RENT" means, for the Basic Term, the rent
payable for the Aircraft pursuant to Section 3(c) as adjusted
as provided in Section 3(d) but subject always to the
provisions of Section 3(d)(v) hereof and, for any Renewal
Term, Basic Rent determined pursuant to Section 19.
"BASIC TERM" means the term for which the Aircraft is
leased hereunder pursuant to Section 3(a) hereof commencing on
the Delivery Date and ending on [______________________], or
such earlier date as this Lease may be terminated in
accordance with the provisions hereof.
"BENEFICIAL INTEREST" means the interest of the Owner
Participant under the Trust Agreement.
"XXXX OF SALE" means a full warranty xxxx of sale
covering the Aircraft, executed by Lessee in favor of the
Owner Trustee, dated the Delivery Date, specifically referring
to the Airframe and each Engine, which Xxxx of Sale shall
contain, among other things, a statement that such Xxxx of
Sale thereby conveys to the Owner Trustee good title to the
Airframe and each Engine described in such Xxxx of Sale, free
and clear of all liens, encumbrances and rights of others
except Liens permitted by clause (v) of Section 6 of the
Lease.
"BUSINESS DAY" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of
New York,
New York; Boston,
Massachusetts; or Minneapolis, Minnesota.
"CERTIFICATE HOLDER" means Certificate Holder as
defined in the Trust Indenture.
"CERTIFICATED AIR CARRIER" means a Citizen of the
United States holding a carrier operating certificate issued
by the Secretary of Transportation pursuant to Chapter 447 of
Title 49, United States Code, for aircraft capable of carrying
ten or more individuals or 6,000 pounds or more of cargo or
that otherwise is certified or
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registered to the extent required to fall within the purview
of 11 U.S.C. Section 1110 or any analogous successor provision
of the Bankruptcy Code.
"CITIZEN OF THE UNITED STATES" has the meaning
specified in Section 40102(a)(15) of Title 49 of the United
States Code or any similar legislation of the United States of
America enacted in substitution or replacement therefor.
"CIVIL RESERVE AIR FLEET PROGRAM" means the Civil
Reserve Air Fleet Program currently administered by the United
States Air Force Air Mobility Command pursuant to Executive
Order No. 11490, as amended, or any substantially similar
program.
["CLASS D PASS THROUGH TRUST" means the Pass Through
Trust Agreement, dated as of June 3, 1999, among
Northwest
Airlines Corporation, Northwest Airlines, Inc., and State
Street Bank and Trust Company of Connecticut, National
Association, as supplemented by Trust Supplement No. 2001-1D,
dated as of [__________, ____] among Northwest Airlines, Inc.,
Northwest Airlines Corporation and State Street Bank and Trust
Company of Connecticut, National Association. -- option
for A319's and 757's]
["CLASS D TRUSTEE" means the Pass Through Trustee
under the Pass Through Trust Agreement, dated as of June 3,
1999, among
Northwest Airlines Corporation, Northwest
Airlines, Inc., and State Street Bank and Trust Company of
Connecticut, National Association, as supplemented by Trust
Supplement No. 2001-1D, dated as of [__________, ____] among
Northwest Airlines, Inc.,
Northwest Airlines Corporation and
State Street Bank and Trust Company of Connecticut, National
Association.-- option for A319's and 757's]
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMITMENT" means the amount of a Pass Through
Trustee's or the Owner Participant's, as the case may be,
participation in Lessor's Cost for the Aircraft required to be
made available or paid as provided in Section 1 of the
Participation Agreement.
"CONSENT AND AGREEMENT" means[, collectively, the
Manufacturer Consent and Agreement to Assignment of Warranties
and the Supplier Consent and Agreement to Assignment of
Warranties. -- A319'S] [that certain Consent and Agreement [NW
____ _], dated as of the date hereof, executed by the
Manufacturer, as the same may be amended, modified or
supplemented from time to time in accordance with the
applicable provisions thereof. -- 757'S AND 747'S]
"DEFAULT" means any event which with the giving of
notice or the lapse of time or both would become an Event of
Default.
"DELIVERY DATE" means the date of the initial Lease
Supplement for the Aircraft, which date shall be the date the
Aircraft is leased by Lessor to Lessee and accepted by Lessee
hereunder.
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"DEPRECIATION PERIOD" means the period commencing on
the Delivery Date and ending on [________________], or such
earlier date as this Lease may be terminated in accordance
with the provisions hereof.
"DOLLARS" and "$" means the lawful currency of the
United States of America.
"EBO DATE" means [____________] (or, if
[____________] is not a Business Day, the Business Day
immediately succeeding [____________]).
"ENGINE" means (i) each of the [two] [four] [CFM
International, Inc. Model CFM56-5A4/5A5] [Xxxxx & Whitney
Model PW2040] [Xxxxx & Xxxxxxx Model PW4056] engines listed by
manufacturer's serial number in the initial Lease Supplement,
whether or not from time to time thereafter installed on the
Airframe or installed on any other airframe or on any other
aircraft; and (ii) any engine which may from time to time be
substituted, pursuant to the terms hereof, for any of such
[two] [four] engines, together in each case with any and all
Parts incorporated or installed in or attached thereto or any
and all Parts removed therefrom so long as title thereto shall
remain vested in Lessor in accordance with the terms of
Section 8 after removal from such Engine; PROVIDED, HOWEVER,
that at such time as an engine shall be deemed part of the
property leased hereunder in substitution for an Engine
pursuant to the applicable provisions hereof, the replaced
Engine shall cease to be an Engine hereunder. The term
"ENGINES" means, as of any date of determination, all Engines
then leased hereunder.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder. Section references
to ERISA are to ERISA, as in effect at the date of the
Participation Agreement and any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted
therefor.
"EVENT OF DEFAULT" has the meaning specified in
Section 14 hereof.
"EVENT OF LOSS" with respect to the Aircraft,
Airframe or any Engine means any of the following events with
respect to such property: (i) the loss of such property or of
the use thereof due to the destruction of or damage to such
property which renders repair uneconomic or which renders such
property permanently unfit for normal use by Lessee (or any
Sublessee) for any reason whatsoever; (ii) any damage to such
property which results in an insurance settlement with respect
to such property on the basis of a total loss, or a
constructive or compromised total loss; (iii) the theft or
disappearance of such property, or the confiscation,
condemnation, or seizure of, or requisition of title to, or
use of, such property (other than a requisition for use by the
United States Government or any other government of registry
of the Aircraft, or any agency or instrumentality of any
thereof) which in the case of any event referred to in this
clause (iii) (other than a requisition of title) shall have
resulted in the loss of possession of such property by Lessee
(or any Sublessee) for a period in excess of
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180 consecutive days or, if earlier, until the end of the Term
or, in the case of a requisition of title, the requisition of
title shall not have been reversed within 90 days from the
date of such requisition of title or, if earlier, at the end
of the Term; (iv) as a result of any law, rule, regulation,
order or other action by the Federal Aviation Administration
or other governmental body of the government of registry of
the Aircraft having jurisdiction, the use of such property in
the normal course of the business of air transportation shall
have been prohibited for a period of 180 consecutive days,
unless Lessee (or any Sublessee), prior to the expiration of
such 180 day period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or
desirable to permit the normal use of such property by Lessee
(or such Sublessee), but in any event if such use shall have
been prohibited for a period of two consecutive years,
PROVIDED that no Event of Loss shall be deemed to have
occurred if such prohibition has been applicable to the entire
U.S. registered fleet of [Airbus Model A319-100] [Boeing Model
757-300] [Boeing Model 747-400] aircraft of Lessee (or any
Sublessee) and Lessee (or a Sublessee), prior to the
expiration of such two-year period, shall have conformed at
least one such aircraft in its fleet to the requirements of
any such law, rule, regulation, order or other action and
commenced regular commercial use of the same in such
jurisdiction and shall be diligently carrying forward, in a
manner which does not discriminate against the Aircraft in so
conforming the Aircraft, all steps which are necessary or
desirable to permit the normal use of the Aircraft by Lessee
(or such Sublessee), PROVIDED, FURTHER that, notwithstanding
any of the foregoing, such prohibition shall constitute an
Event of Loss if such use shall have been prohibited for a
period of three consecutive years or such use shall be
prohibited at the expiration of the Term; (v) the requisition
for use by the United States Government or any other
government of registry of the Aircraft or any instrumentality
or agency of any thereof, which shall have occurred during the
Basic Term (or any Renewal Term) and shall have continued for
thirty (30) days beyond the Term, PROVIDED, HOWEVER, that no
Event of Loss pursuant to this clause (v) shall exist if
Lessor shall have furnished to Lessee the written notice
specified in Section 10(d) hereof; and (vi) any divestiture of
title to or interest in an Engine treated as an Event of Loss
pursuant to Section 7(b) hereof. An Event of Loss with respect
to the Aircraft shall be deemed to have occurred if an Event
of Loss occurs with respect to the Airframe.
"EXPENSES" has the meaning specified in Section 7(c)
of the Participation Agreement.
"FAA XXXX OF SALE" means a xxxx of sale for the
Aircraft on AC Form 8050-2 or such other form as may be
approved by the Federal Aviation Administration on the
Delivery Date for the Aircraft, executed by Lessee in favor of
the Owner Trustee and dated the Delivery Date.
"FEDERAL AVIATION ACT" means that portion of the
United States Code comprising those provisions formerly
referred to as the Federal Aviation Act of 1958, as amended,
or any subsequent legislation that amends, supplements or
supersedes such provisions.
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"FEDERAL AVIATION ADMINISTRATION" and "FAA" mean the
United States Federal Aviation Administration and any agency
or instrumentality of the United States government succeeding
to their functions.
"FOREIGN AIR CARRIER" means any air carrier which is
not a U.S. Air Carrier and which performs maintenance,
preventative maintenance and inspections for the Aircraft,
Airframe and/or any Engine or engine to standards which are
approved by, or which are substantially equivalent to those
required by, the Federal Aviation Administration, the Civil
Aviation Authority of the United Kingdom, the Direction
Generale de l'Aviation Civile of the French Republic, the
Luftfahrt Bundesamt of the Federal Republic of Germany, the
Nederlandse Luchtvaart Authoriteit of the Kingdom of the
Netherlands, the Ministry of Transportation of Japan or the
Federal Ministry of Transport of Canada (and any agency or
instrumentality of the applicable government succeeding to the
functions of any of the foregoing entities).
["FRENCH PLEDGE AGREEMENT" means the French Pledge
Agreement, dated as of the date hereof, between the Owner
Trustee and the Indenture Trustee. -- A319'S ONLY]
"GUARANTEE" means that certain Guarantee [NW ____ _],
dated as of the date hereof, made by the Guarantor, as such
Guarantee may be amended or supplemented from time to time
pursuant to the applicable provisions thereof.
"GUARANTOR" means
Northwest Airlines Corporation, a
Delaware corporation.
["GUARANTY" means that certain Guaranty of the
Manufacturer attached to the Purchase Agreement.-- A319'S
ONLY]
"INDEMNITEE" means (i) the Owner Trustee, in its
individual capacity and as trustee under the Trust Agreement,
(ii) the Indenture Trustee, (iii) the Owner Participant, (iv)
the Trust Estate, (v) the Loan Participants and each other
Certificate Holder, (vi) the Subordination Agent, (vii) the
Liquidity Provider, (viii) the Pass Through Trustees, (ix)
each Affiliate of the Persons described in clauses (i) through
(iv), inclusive, (x) each Affiliate of the Persons described
in clauses (vi), (vii) and (viii) inclusive, (xi) the
respective directors, officers, employees, agents and servants
of each of the Persons described in clauses (i) through
(viii), inclusive, (xii) the successors and permitted assigns
of the Persons described in clauses (i) through (iv),
inclusive, and (xiii) the successors and permitted assigns of
the Persons described in clauses (v), (vi), (vii) and (viii)
inclusive.
"INDENTURE TRUSTEE" means the Indenture Trustee under
the Trust Indenture, and any entity which may from time to
time be acting as indenture trustee under the Trust Indenture.
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"INDENTURE TRUSTEE DOCUMENTS" means the Participation
Agreement and the Trust Indenture.
"INDENTURE TRUSTEE'S LIENS" means any Lien which
arises as a result of (A) claims against the Indenture Trustee
not related to its interest in the Aircraft or the
administration of the Trust Estate pursuant to the Trust
Indenture, (B) acts of the Indenture Trustee not permitted by,
or failure of the Indenture Trustee to take any action
required by, the Operative Documents to the extent such acts
arise or such failure arises from or constitutes gross
negligence or willful misconduct, (C) claims against the
Indenture Trustee relating to Taxes or Expenses which are
excluded from the indemnification provided by Section 7 of the
Participation Agreement pursuant to said Section 7, or (D)
claims against the Indenture Trustee arising out of the
transfer by the Indenture Trustee of all or any portion of its
interest in the Aircraft, the Trust Estate, the Trust
Indenture Estate or the Operative Documents other than a
transfer of the Aircraft pursuant to Section 9, 10 or 19 of
the Lease or Article IV or V of the Trust Indenture, or a
transfer of the Aircraft pursuant to Section 15 of the Lease
while an Event of Default is continuing and prior to the time
that the Indenture Trustee has received all amounts due
pursuant to the Trust Indenture.
["INITIAL INSTALLMENT" has the meaning set forth in
Section 19(d) hereof.]
"INTERCREDITOR AGREEMENT" means that certain
Intercreditor Agreement among the Pass Through Trustees
[(originally executed without the Pass Through Trustee for the
Class D Pass Through Trust) -- option for A319's and 757's],
the Liquidity Provider and the Subordination Agent, as such
Intercreditor Agreement may be amended or supplemented from
time to time pursuant to the applicable provisions thereof.
"ISSUANCE DATE" means June 1, 2001.
"
LEASE AGREEMENT", "THIS
LEASE AGREEMENT", "THIS
LEASE", "THIS AGREEMENT", "HEREIN", "HEREOF", "HEREUNDER",
"HEREBY" or other like words mean this
Lease Agreement [NW
____ _] as originally executed or as modified, amended or
supplemented pursuant to the applicable provisions hereof and
in accordance with the Trust Agreement and the Trust
Indenture, including, without limitation, supplementation
hereof by one or more Lease Supplements entered into pursuant
to the applicable provisions hereof.
"LEASE PERIOD" means each of the consecutive periods
throughout the Basic Term and any Renewal Term ending on a
Lease Period Date, the first such period commencing on and
including the Delivery Date.
"LEASE PERIOD DATE" means [_______________] and each
succeeding [April 1] and [October 1], to and including the
last such date in the Term.
"LEASE SUPPLEMENT" means a Lease Supplement,
substantially in the form of EXHIBIT A hereto, to be entered
into between Lessor and Lessee on the Delivery
-7-
Date for the purpose of leasing the Aircraft under and
pursuant to the terms of this
Lease Agreement, and any
subsequent Lease Supplement entered into in accordance with
the terms hereof.
"LESSEE DOCUMENTS" means the Participation Agreement,
the Lease, the Lease Supplement covering the Aircraft, the
Purchase Agreement (insofar as it relates to the Aircraft),
the FAA Xxxx of Sale, the Xxxx of Sale, the Purchase Agreement
Assignment and the Tax Indemnity Agreement.
"LESSOR LIENS" means any Lien or disposition of title
or interest arising as a result of (i) claims against Lessor,
Xxxxx Fargo Bank Northwest, National Association, in its
individual capacity, or the Owner Participant not related to
the transactions contemplated by the Operative Documents, (ii)
any act or omission of the Owner Participant, Lessor, or Xxxxx
Fargo Bank Northwest, National Association, in its individual
capacity, which is not related to the transactions
contemplated by the Operative Documents or is in violation of
any of the terms of the Operative Documents, (iii) claims
against the Owner Participant, Lessor, or Xxxxx Fargo Bank
Northwest, National Association, in its individual capacity,
with respect to Taxes or Expenses against which Lessee is not
required to indemnify the Owner Participant, Lessor or Xxxxx
Fargo Bank Northwest, National Association, in its individual
capacity, pursuant to Section 7 of the Participation Agreement
or (iv) claims against Lessor or the Owner Participant arising
out of any transfer by Lessor or the Owner Participant of all
or any portion of the respective interests of Lessor or the
Owner Participant in the Aircraft, the Trust Estate or the
Operative Documents other than the transfer of possession of
the Aircraft by Lessor pursuant to this Agreement, the
transfer pursuant to the Trust Indenture or a transfer of the
Aircraft pursuant to Section 9, 10 or 19 hereof or pursuant to
the exercise of the remedies set forth in Section 15 hereof,
PROVIDED, HOWEVER, that any Lien which is attributable solely
to Xxxxx Fargo Bank Northwest, National Association or the
Owner Participant and would otherwise constitute a Lessor Lien
hereunder shall not constitute a Lessor Lien hereunder so long
as (1) the existence of such Lien poses no material risk of
the sale, forfeiture or loss of the Aircraft, (2) the
existence of such Lien does not interfere in any way with the
use, possession, operation, or quiet enjoyment of the Aircraft
by Lessee (or any Sublessee), (3) the existence of such Lien
does not affect the priority or perfection of, or otherwise
jeopardize, the Lien of the Trust Indenture, (4) Xxxxx Fargo
Bank Northwest, National Association or the Owner Participant,
as appropriate, is diligently contesting such Lien and (5) the
existence of such Lien does not pose a material threat of
interference with the payment of Rent (other than Excluded
Payments in favor of Xxxxx Fargo Bank Northwest, National
Association or the Owner Participant, as appropriate).
"LESSOR'S COST" for the Aircraft means the amount
denominated as such in EXHIBIT B to the Lease.
"LIEN" means any mortgage, pledge, lien, charge,
claim, encumbrance, lease, sublease, sub-sublease or security
interest.
-8-
"LIQUIDITY FACILITIES" means the four Revolving
Credit Agreements between the Subordination Agent, as
borrower, and the Liquidity Provider, including the related
Liquidity Fee Letter referred to therein, and any replacement
thereof, in each case as the same may be amended, modified or
supplemented.
"LIQUIDITY PROVIDER" means Landesbank
Hessen-Thuringen Girozentrale, as Class A-1 Liquidity
Provider, Class A-2 Liquidity Provider, Class B Liquidity
Provider and Class C Liquidity Provider under the Liquidity
Facilities, or any successor thereto.
"LOAN PARTICIPANT" means each Purchaser and its
respective successors and registered assigns, including any
Certificate Holder.
"LOAN PARTICIPANT LIENS" means any Lien which arises
from acts or claims against any Loan Participant not related
to the transactions contemplated by the Operative Documents.
"LOSS PAYMENT DATE" has the meaning specified in
Section 10(a) hereof.
"MAJORITY IN INTEREST OF CERTIFICATE HOLDERS" has the
meaning set forth in the Trust Indenture.
"MAKE-WHOLE AMOUNT" has the meaning assigned to that
term in the Trust Indenture.
"MANUFACTURER" means [Airbus Industrie, G.I.E.; a
Groupement d'Interet Economique established under Ordonnance
67-821, dated September 23, 1967, of the Republic of France]
[The Boeing Company, a Delaware corporation].
["MANUFACTURER CONSENT AND AGREEMENT TO ASSIGNMENT OF
WARRANTIES" means the Manufacturer Consent and Agreement to
Assignment of Warranties [NW ____ __], dated as of the date
hereof, executed by the Manufacturer, as the same may be
amended, modified or supplemented from time to time in
accordance with the applicable terms thereof. -- A319'S ONLY]
"MANUFACTURER DOCUMENTS" means [the Manufacturer
Consent and Agreement to Assignment of Warranties and the
Guaranty. -- A319'S] [the Purchase Agreement and the Consent
and Agreement.-- 757'S AND 747'S]
["MORTGAGE" means that certain Mortgage and Security
Agreement, dated as of [_______________] between Lessee and
[________________].]
"NET ECONOMIC RETURN" shall have the meaning ascribed
to such term in paragraph 2 of EXHIBIT E to the Lease.
"NET PRESENT VALUE OF RENTS" means the net present
value, as of the Delivery Date, of Basic Rent set forth in
EXHIBIT B hereto, discounted at an annual interest rate of
[___] percent on a semi-annual basis.
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"NOTE PURCHASE AGREEMENT" means that certain Note
Purchase Agreement, dated as of the Issuance Date, among
Northwest Airlines, Inc., the Subordination Agent, Xxxxx Fargo
Bank Northwest, National Association, as Escrow Agent, State
Street Bank and Trust Company, as Paying Agent and State
Street Bank and Trust Company of Connecticut, National
Association, as the Pass Through Trustee under each Pass
Through Trust Agreement [other than the Class D Pass Through
Trust -- option for A319's and 757's] providing for, among
other things, the issuance and sale of certain secured
certificates.
"OPERATIVE DOCUMENTS" and "OPERATIVE DOCUMENT" means
each of the Participation Agreement, the Lease, the Trust
Indenture, the Trust Agreement, an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee, the Tax Indemnity Agreement, the
Lease Supplement covering the Aircraft, the Trust Supplement
covering the Aircraft, the Secured Certificates, the Xxxx of
Sale, the FAA Xxxx of Sale, the Purchase Agreement (insofar as
it relates to the Aircraft), the Purchase Agreement
Assignment, the Consent and Agreement and the Guarantee.
"OVERALL TRANSACTION" means all the transactions
contemplated by the Operative Documents.
"OWNER PARTICIPANT" means the corporation executing
the Participation Agreement as the Owner Participant, and
thereafter any Person to which such corporation transfers all
of its right, title and interest in and to the Trust
Agreement, the Trust Estate and the Participation Agreement,
to the extent permitted by Section 8.01 of the Trust Agreement
and Section 8 of the Participation Agreement.
"OWNER PARTICIPANT DOCUMENTS" means the Participation
Agreement, the Trust Agreement and the Tax Indemnity
Agreement.
"OWNER TRUSTEE" means the entity executing the
Participation Agreement as Owner Trustee and any entity
appointed as successor Owner Trustee pursuant to Section 9.01
of the Trust Agreement, and references to a predecessor Owner
Trustee in its individual capacity by name in the Operative
Documents shall include such successor Owner Trustee in its
individual capacity from and after such succession.
"OWNER TRUSTEE DOCUMENTS" means the Participation
Agreement, the Trust Agreement, the Trust Supplement covering
the Aircraft, the Lease, the Lease Supplement covering the
Aircraft, the Purchase Agreement Assignment, the Trust
Indenture and the Secured Certificates.
"PARTICIPANTS" means and includes the Loan
Participants and the Owner Participant.
"PARTICIPATION AGREEMENT" means that certain
Participation Agreement [NW ____ _], dated as of the date
hereof, among Lessee, the Guarantor, the
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Purchasers, the Indenture Trustee, the Subordination Agent,
the Owner Participant and Owner Trustee, as such Participation
Agreement may be amended or supplemented from time to time
pursuant to the applicable provisions thereof.
"PARTIES" means the Owner Trustee, the Indenture
Trustee and the Participants.
"PARTS" means all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature (other than (a) complete Engines or engines,
(b) any items leased by Lessee from a third party (other than
Lessor) and (c) cargo containers) which may from time to time
be incorporated or installed in or attached to the Airframe or
any Engine or so long as title thereto shall remain vested in
Lessor in accordance with Section 8 after removal therefrom.
"PASS THROUGH CERTIFICATES" means the pass through
certificates to be issued by the Pass Through Trustee in
connection with the Overall Transaction.
"PASS THROUGH TRUST" means each of the [four] [five
-- option for A319's and 757's] separate pass through trusts
created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means the pass through
trust agreement and each of the [four] [five -- option for
A319's and 757's] separate pass through trust supplements
referred to on Schedule III to the Participation Agreement.
"PASS THROUGH TRUSTEE" means State Street Bank and
Trust Company of Connecticut, National Association, a national
banking association, in its capacity as trustee under each
Pass Through Trust Agreement, and each other person that may
from time to time be acting as successor trustee under any
such Pass Through Trust Agreement.
"PAST DUE RATE" means (i) with respect to the portion
of any payment of Rent that may be required by the Trust
Indenture to be paid by the Indenture Trustee to the Loan
Participants, or the holders of any outstanding Secured
Certificates, the "Past Due Rate" as defined in the Trust
Indenture and (ii) with respect to the remaining portion of
any payment of Rent (and the entire amount of any payment of
Rent after the satisfaction and discharge of the Trust
Indenture), a rate per annum equal to [_]% over the Base Rate.
"PERMITTED LIEN" means any Lien referred to in
clauses (i) through (viii) of Section 6 hereof.
"PERMITTED SUBLESSEE" means any entity domiciled in a
country listed in EXHIBIT F hereto.
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"PERSON" means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization or government or any agency or political
subdivision thereof.
"PURCHASE AGREEMENT" means that certain [Airbus A319
Purchase Agreement, dated as of September 19, 1997] [Purchase
Agreement No. 2159, dated January 16, 2001] [Purchase
Agreement No. 1630, dated December 1, 1989], between the
[Supplier] [Manufacturer] and Lessee relating to the purchase
by Lessee of the Aircraft, as originally executed or as
modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the
Aircraft.
"PURCHASE AGREEMENT ASSIGNMENT" means that certain
Purchase Agreement Assignment [NW ____ _], dated as of the
date hereof, between Lessee and Lessor, as the same may be
amended, supplemented or modified from time to time, with the
form[s] of Consent and Agreement to be executed by the
Manufacturer [and the Supplier -- A319'S ONLY] attached
thereto.
"PURCHASERS" means the Pass Through Trustees under
each Pass Through Trust Agreement.
"RELATED INDEMNITEE GROUP" means, with respect to any
Indemnitee, any officer, director, servant, employee, agent or
Affiliate thereof.
["REMAINING INSTALLMENTS" has the meaning set forth
in Section 19(d) hereof.]
"RENEWAL TERM" means any Fixed Renewal Term or Fair
Market Renewal Term as those terms are defined in Section 19
hereof.
"RENT" means Basic Rent and Supplemental Rent,
collectively.
"SECURED CERTIFICATES" has the meaning assigned to
that term in the Trust Indenture.
"SPECIAL PURCHASE PRICE" means the amount denominated
as such in EXHIBIT B to the Lease.
"STIPULATED LOSS VALUE" with respect to the Aircraft
as of any date through and including [_________________],
means, but subject always to the provisions of Section 3(d)(v)
hereof, the amount determined by multiplying Lessor's Cost for
the Aircraft by the percentage specified in EXHIBIT C hereto
opposite the Stipulated Loss Value Date with respect to which
the amount is determined (as such EXHIBIT C may be adjusted
from time to time as provided in Section 3(d) hereof and in
Section 7 of the Tax Indemnity Agreement). "STIPULATED LOSS
VALUE" as of any date after [_____________] shall be the
amount determined as provided in Section 19(a) hereof.
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"STIPULATED LOSS VALUE DATE" means the [___] calendar
day of each calendar month during the Basic Term and any
Renewal Term.
"SUBLEASE" means any sublease permitted by the terms
of Section 7(b)(x) hereof.
"SUBLESSEE" means any Person for so long, but only so
long, as such Person is in possession of the Airframe and/or
any Engine pursuant to the terms of a Sublease which is then
in effect pursuant to Section 7(b)(x) hereof.
"SUBORDINATION AGENT" means State Street Bank and
Trust Company, a Massachusetts trust company, as subordination
agent under the Intercreditor Agreement, or any successor
thereto.
"SUPPLEMENTAL RENT" means, without duplication, (a)
all amounts, liabilities, indemnities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay under
any Lessee Document to or on behalf of Lessor or any other
Person, (b) amounts payable by Lessor pursuant to clause (b)
of the third paragraph of Section 2.02 of the Trust Indenture,
(c) Lessor's pro rata share of all compensation and
reimbursement of expenses, disbursements and advances payable
by Lessee under the Pass Through Trust Agreements, and (d)
Lessor's pro rata share of all compensation and reimbursement
of expenses and disbursements payable to the Subordination
Agent under the Intercreditor Agreement except with respect to
any income or franchise taxes incurred by the Subordination
Agent in connection with the transactions contemplated by the
Intercreditor Agreement. As used herein, "LESSOR'S PRO RATA
SHARE" means as of any time a fraction, the numerator of which
is the principal balance then outstanding of Secured
Certificates and the denominator of which is the aggregate
principal balance then outstanding of all "Equipment Notes"
(as such term is defined in the Intercreditor Agreement).
["SUPPLIER" means AVSA, S.A.R.L., a French societe a
responsabilite limitee, organized and existing under the laws
of the French Republic, and its successors.-- A319'S ONLY]
["SUPPLIER CONSENT AND AGREEMENT TO ASSIGNMENT OF
WARRANTIES" means the Supplier Consent and Agreement to
Assignment of Warranties [NW ____ _], dated as of the date
hereof, executed by the Supplier, as the same may be amended,
modified or supplemented from time to time in accordance with
the applicable terms thereof. -- A319'S ONLY]
["SUPPLIER DOCUMENTS" means the Purchase Agreement
and the Supplier Consent and Agreement to Assignment of
Warranties.-- A319'S ONLY]
"TAX INDEMNITEE" means (i) the Owner Participant, the
Owner Trustee, in its individual capacity and as trustee under
the Trust Agreement, the Trust Estate, the Indenture Trustee,
each Pass Through Trustee as, but only so long as such Pass
Through Trustee is, the owner of any Secured Certificate, the
Subordination
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Agent as, but only so long as it is, the registered holder of
any Secured Certificate, (ii) the respective Affiliates,
successors and permitted assigns of each of the entities
described in the preceding clause (i), and (iii) the Trust
Indenture Estate, but the term "Tax Indemnitee" shall not
include any holder of a Pass Through Certificate.
"TAX INDEMNITY AGREEMENT" means that certain Tax
Indemnity Agreement [NW ____ _], dated as of the date hereof,
between the Owner Participant and Lessee, as originally
executed or as modified, amended or supplemented pursuant to
the applicable provisions thereof.
"TAXES" means any and all fees (including, without
limitation, license, recording, documentation and registration
fees), taxes (including, without limitation, income, gross
receipts, sales, rental, use, turnover, value added, property
(tangible and intangible), excise and stamp taxes), license,
levies, imposts, duties, charges, assessments or withholdings
of any nature whatsoever, together with any and all penalties,
fines, additions to tax and interest thereon (each,
individually a "TAX").
"TERM" means the Basic Term and, if actually entered
into, any Renewal Term.
"TERMINATION DATE" has the meaning set forth in
Section 9(a) hereof.
"TERMINATION VALUE" with respect to the Aircraft as
of any date through and including [_______________], means,
but subject always to the provisions of Section 3(d)(v)
hereof, the amount determined by multiplying Lessor's Cost for
the Aircraft by the percentage specified in EXHIBIT D hereto
opposite the Termination Date with respect to which the amount
is determined (as such EXHIBIT D may be adjusted from time to
time as provided in Section 3(d) hereof and in Section 7 of
the Tax Indemnity Agreement).
"TRANSACTION EXPENSES" means: all of the reasonable
out-of-pocket costs, fees and expenses incurred by the Owner
Trustee, the Owner Participant, the Pass Through Trustee, the
Subordination Agent and the Indenture Trustee in connection
with the transactions contemplated by the Participation
Agreement, the other Operative Documents, the Pass Through
Trust Agreements, the Intercreditor Agreement, the Liquidity
Facilities and the Underwriting Agreement (except, in each
case, as otherwise provided therein) including, without
limitation:
(1) the reasonable and actual fees, expenses
and disbursements of (A) Xxxxxxx Xxxx LLP, special
counsel for the Pass Through Trustee and the
Indenture Trustee, (B) Ray, Xxxxxxx & Xxxxxxx,
special counsel for the Owner Trustee, (C) Shearman &
Sterling, special counsel for the Underwriters, (D)
Xxxxx & Xxxxxxx, P.C., special counsel in Oklahoma
City, Oklahoma, (E) Xxxxxxxx, Xxxxxx & Finger, P.A.,
special counsel in
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Delaware, and (F) [[______________________],
counsel for the Supplier f and the Manufacturer; --
A319'S ONLY]
(2) the initial fees and reasonable and
actual disbursements of the Owner Trustee under the
Trust Agreement;
(3) the initial fee and reasonable and
actual disbursements of the Indenture Trustee under
the Trust Indenture;
(4) the initial fees and expenses of the
Liquidity Provider, the Pass Through Trustee and the
Subordination Agent;
(5) underwriting fees and commissions;
(6) the fees and expenses with respect to
the appraisals of the Aircraft;
(7) the reasonable fees, expenses and
disbursements of [___________________________],
special counsel to the Owner Participant, such fees
not to exceed the amount previously agreed to by the
Owner Participant and Lessee;
(8) the reasonable fees, expenses and
disbursements of Xxxxxxx Xxxxxxx & Xxxxxxxx and
Cadwalader, Xxxxxxxxxx & Xxxx, special counsel for
Lessee;
(9) the costs of filing and recording
documents with the FAA and filing Uniform Commercial
Code statements in the United States;
(10) the reasonable fees, expenses and
disbursements of Shearman & Sterling, special counsel
to the Liquidity Provider; and
(11) the equity placement fee and reasonable
disbursements of Xxxxxxx and Xxxxx Financial
Corporation.
"TRUST AGREEMENT" means that certain Trust Agreement
[NW ____ _], dated as of the date hereof, between the Owner
Participant and Xxxxx Fargo Bank Northwest, National
Association, in its individual capacity, as originally
executed or as modified, amended or supplemented pursuant to
the applicable provisions thereof, including, without
limitation, supplementation thereof by one or more Trust
Supplements entered into pursuant to the applicable provisions
thereof.
"TRUST AGREEMENT AND INDENTURE SUPPLEMENT" OR "TRUST
SUPPLEMENT" means a supplement to the Trust Agreement and the
Trust Indenture, substantially in the form of EXHIBIT A to the
Trust Indenture.
"TRUST ESTATE" means the Trust Estate as that term is
defined in the Trust Agreement.
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"TRUST INDENTURE" means that certain Trust Indenture
and Security Agreement [NW ____ __], dated as of the date
hereof, between Lessor and the Indenture Trustee, as
originally executed or as modified, amended or supplemented in
accordance with the provisions thereof.
"TRUST INDENTURE ESTATE" has the meaning assigned to
that term in the Trust Indenture.
"UNDERWRITING AGREEMENT" means that certain
Underwriting Agreement, dated as of May 22, 2001, among
Lessee, the Guarantor, and the underwriters named therein.
"U.S. AIR CARRIER" means any Certificated Air Carrier
as to which there is in force an air carrier operating
certificate issued pursuant to Part 121 of the regulations
under the Federal Aviation Act, or which may operate as an air
carrier by certification or otherwise under any successor or
substitute provisions therefor or in the absence thereof.
"WET LEASE" means any arrangement whereby the Lessee
(or any Sublessee) agrees to furnish the Airframe and Engines
or engines installed thereon to a third party pursuant to
which such Airframe and Engines or engines (i) shall be
operated solely by regular employees of Lessee (or any
Sublessee) possessing all current certificates and licenses
that would be required under the Federal Aviation Act or, if
the Aircraft is not registered in the United States, all
certificates and licenses required by the laws of the
jurisdiction of registry, for the performance by such
employees of similar functions within the United States of
America or such other jurisdiction of registry (it is
understood that cabin attendants need not be regular employees
of Lessee (or any Sublessee)) and (ii) shall be maintained by
Lessee (or any Sublessee) in accordance with its normal
maintenance practices.
SECTION 2. ACCEPTANCE AND LEASE. Lessor
hereby agrees (subject to satisfaction of the conditions set
forth in Section 4(a) of the Participation Agreement) to
accept the transfer of title from and simultaneously to lease
to Lessee hereunder, and Lessee hereby agrees (subject to
satisfaction of the conditions set forth in Section 4(b) of
the Participation Agreement) to lease from Lessor hereunder,
the Aircraft as evidenced by the execution by Lessor and
Lessee of a Lease Supplement leasing the Aircraft hereunder.
Lessee hereby agrees that such acceptance of the Aircraft by
Lessor shall, without further act, irrevocably constitute
acceptance by Lessee of such Aircraft for all purposes of this
Lease.
SECTION 3. TERM AND RENT. (a) BASIC TERM. The Basic Term shall
commence on the Delivery Date and end on [__________________], or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
(b) [Intentionally Omitted].
(c) BASIC RENT. Lessee shall pay Basic Rent with respect to
each Lease Period during the Basic Term on each Lease Period Date during the
Basic Term, in consecutive
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installments in the amounts as provided in the next sentence, each such
installment to cover the Lease Period specified in EXHIBIT B. Each such
installment of Basic Rent shall be equal to Lessor's Cost multiplied by the
percentage for the applicable Lease Period Date specified in EXHIBIT B hereto.
Lessor and Lessee agree that each installment of Basic Rent that is indicated to
be payable in advance shall be allocated over the six-month period beginning on
the Lease Period Date on which such advance payment is scheduled to be made, and
each installment of Basic Rent that is indicated to be payable in arrears shall
be allocated over the six-month period ending on the Lease Period Date on which
such arrears payment is scheduled to be made.
(d) ADJUSTMENTS TO BASIC RENT.
(i) In the event that (A) the Delivery Date occurs
other than on [____________________], (B) Transaction Expenses
paid by Lessor pursuant to Section 16(a) of the Participation
Agreement are determined to be other than [_____]% of Lessor's
Cost, or (C) there is a change in tax law (including the
issuance of proposed regulations) after [________________]and
on or prior to the Delivery Date, then in each case the Basic
Rent percentages set forth in EXHIBIT B, the Stipulated Loss
Value percentages set forth in EXHIBIT C, the Termination
Value percentages set forth in EXHIBIT D [, the Initial
Installments, the Remaining Installments] and the Special
Purchase Price shall be recalculated by the Owner Participant,
on or prior to [__________________], using the same methods
and assumptions used to calculate original Basic Rent,
Stipulated Loss Value and Termination Value percentages [, the
Initial Installments, the Remaining Installments] and the
Special Purchase Price in order to: (1) maintain the Owner
Participant's Net Economic Return and (2) minimize the Net
Present Value of Rents to Lessee to the extent possible
consistent with clause (1) hereof. In such recalculation there
will be no change in the amortization of the Secured
Certificates.
(ii) (A) In the event of a refinancing as
contemplated by Section 17 of the Participation Agreement,
then the Basic Rent percentages set forth in EXHIBIT B, the
Stipulated Loss Value percentages set forth in EXHIBIT C, the
Termination Value percentages set forth in EXHIBIT D [, the
Initial Installments, the Remaining Installments] and the
Special Purchase Price shall be recalculated (upwards or
downwards) by the Owner Participant as contemplated by such
Section to (1) maintain the Owner Participant's Net Economic
Return and (2) to the extent possible consistent with clause
(1) hereof, minimize the Net Present Value of Rents to Lessee
and (B) in the event that Lessee elects to satisfy any
indemnity obligation under the Tax Indemnity Agreement
pursuant to Section 4(d)(ii) of the Tax Indemnity Agreement,
then the Basic Rent percentages set forth in EXHIBIT B, the
Stipulated Loss Value percentages set forth in EXHIBIT C, the
Termination Value percentages set forth in EXHIBIT D [, the
Initial Installments, the Remaining Installments] and the
Special Purchase Price shall be recalculated (upwards or
downwards) by the Owner Participant, using the same methods
and assumptions (except to the extent such assumptions shall
be varied to take into account the Loss (as defined in the Tax
Indemnity Agreement) that is the subject of such
indemnification and any prior or contemporaneous Loss) used to
calculate the
-17-
Basic Rent percentages, the Stipulated Loss Value percentages,
the Termination Value percentages [, the Initial Installments,
the Remaining Installments] and the Special Purchase Price on
the Delivery Date, in order to (1) maintain the Owner
Participant's Net Economic Return and (2) to the extent
possible consistent with clause (1) hereof, minimize the Net
Present Value of Rents to Lessee.
(iii) [Intentionally Omitted].
(iv) Any recalculation of Basic Rent, Stipulated Loss
Value and Termination Value percentages[, the Initial
Installments, the Remaining Installments] and the Special
Purchase Price pursuant to this Section 3(d) shall be
determined by the Owner Participant and shall be subject to
the verification procedures set forth in EXHIBIT E hereto.
Such recalculated Basic Rent, Stipulated Loss Value and
Termination Value percentages and Special Purchase Price shall
be set forth in a Lease Supplement or an amendment to this
Lease.
(v) Anything contained in the Participation Agreement
or this Lease to the contrary notwithstanding, each
installment of Basic Rent payable hereunder, whether or not
adjusted in accordance with this Section 3(d), shall, and each
payment of Termination Value and Stipulated Loss Value,
whether or not adjusted in accordance with this Section 3(d),
shall, together with all other amounts (including an amount
equal to the Make-Whole Amount, if any, payable by Lessor on
the Secured Certificates) payable simultaneously by Lessee
pursuant to this Lease, in each case be, under any
circumstances and in any event, in an amount at least
sufficient to pay in full, on the date on which such amount of
Rent is due, any payments then required to be made on account
of the principal of, Make-Whole Amount, if any, and interest
on the Secured Certificates. It is agreed that no installment
of Basic Rent or payment of Termination Value or Stipulated
Loss Value shall be increased or adjusted by reason of (i) any
attachment or diversion of Rent on account of (A) Lessor Liens
or (B) any Loan Participant Lien on or against the Trust
Estate, any part thereof or the Operative Documents arising as
a result of claims against the Indenture Trustee not related
to the transactions contemplated by the Operative Documents,
(ii) any modification of the payment terms of the Secured
Certificates made without the prior written consent of Lessee
or (iii) the acceleration of any Secured Certificate or
Secured Certificates due to the occurrence of an "Event of
Default" (as defined in the Trust Indenture) which does not
constitute an Event of Default hereunder.
(vi) All adjustments to Basic Rent under this Section
3(d) shall be (A) in compliance with the tests of xx.xx.
4.02(5) and 4.07 of Rev. Proc. 75-28 and will not cause this
Lease to constitute a "disqualified leaseback or long-term
agreement" within the meaning of Section 467 of the Internal
Revenue Code of 1986, as amended, as each is then in effect
and (B) subject to verification pursuant to EXHIBIT E.
(e) SUPPLEMENTAL RENT. Lessee shall pay (or cause to be
paid) promptly to Lessor, or to whomsoever shall be entitled thereto, any and
all Supplemental Rent constituting
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Stipulated Loss Value or Termination Value as the same shall become due and
owing and all other amounts of Supplemental Rent within five days after demand
or within such other relevant period as may be provided in any Operative
Document, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent when due, Lessor shall have all rights, powers and remedies
provided for herein or in any other Operative Document or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall pay as
Supplemental Rent the Make-Whole Amount, if any, due pursuant to Section 2.10(b)
or Section 2.11 of the Trust Indenture in connection with a prepayment of the
Secured Certificates upon redemption of such Secured Certificates in accordance
with Section 2.10(b) or Section 2.11 of the Trust Indenture. Lessee also will
pay to Lessor, or to whomsoever shall be entitled thereto, on demand, as
Supplemental Rent, to the extent permitted by applicable law, interest at the
Past Due Rate on any part of any installment of Basic Rent not paid when due for
any period for which the same shall be overdue and on any payment of
Supplemental Rent not paid when due for the period until the same shall be paid.
(f) PAYMENTS IN GENERAL. All payments of Rent shall be made
directly by Lessee (whether or not any Sublease shall be in effect) by wire
transfer of immediately available funds prior to 10:30 A.M.,
New York time, on
the date of payment, to Lessor at its account at Xxxxx Fargo Bank Northwest,
National Association, MAC: U1254-031, 00 Xxxxx Xxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx
00000, ABA No. 000-0000-00, Account No. 051-0000000, Attention: Corporate Trust
Department, Credit Northwest/NW [____ __] (or such other account of Lessor in
the continental United States as Lessor shall direct in a notice to Lessee at
least 10 Business Days prior to the date such payment of Rent is due); PROVIDED
that so long as the Trust Indenture shall not have been fully discharged, Lessor
hereby irrevocably directs and Lessee agrees, that, unless the Indenture Trustee
shall otherwise direct, all Rent payable to Lessor and assigned to the Indenture
Trustee pursuant to the Trust Indenture shall be paid prior to 10:30 A.M.,
New
York time on the due date thereof in funds of the type specified in this Section
3(f) directly to the Indenture Trustee at its account at State Street Bank and
Trust Company, 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, ABA No.
000-000-000, Account No. 0000-000-0, Attention: Corporate Trust Department,
Reference: Northwest/NW [____ __] (or such other account of the Indenture
Trustee in the continental United States as the Indenture Trustee shall direct
in a notice to Lessee at least 10 Business Days prior to the date such payment
of Rent is due). Lessor hereby directs and Lessee agrees that all payments of
Supplemental Rent owing to the Indenture Trustee or to a Loan Participant or any
other Certificate Holder pursuant to the Participation Agreement shall be made
in Dollars in immediately available funds prior to 10:30 A.M.,
New York time, on
the due date thereof at the office of the Indenture Trustee or at such other
office of such other financial institution located in the continental United
States as the party entitled thereto may so direct at least 10 Business Days
prior to the due date thereof. All payments of Supplemental Rent payable to the
Owner Participant, to the extent that such amounts constitute Excluded Payments
(as defined in the Trust Indenture), shall be made in Dollars in immediately
available funds prior to 10:30 A.M.,
New York time, on the due date thereof, to
the account of the Owner Participant specified in Schedule I to the
Participation Agreement (or to such other account as may be specified in writing
by the Owner Participant from time to time).
Notwithstanding anything to the contrary contained herein, if
any date on which a payment of Rent becomes due and payable is not a Business
Day, then such payment shall not be made on such scheduled date but shall be
made on the next succeeding Business Day with the
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same force and effect as if made on such scheduled date and (PROVIDED such
payment is made on such next succeeding Business Day) no interest shall accrue
on the amount of such payment from and after such scheduled date.
SECTION 4. LESSOR'S REPRESENTATIONS AND WARRANTIES. LESSOR
LEASES AND LESSEE TAKES THE AIRCRAFT AND EACH PART THEREOF "AS-IS," "WHERE-IS."
NEITHER LESSOR, THE INDENTURE TRUSTEE NOR ANY PARTICIPANT MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS AND WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Xxxxx
Fargo Bank Northwest, National Association, in its individual capacity, (i)
represents and warrants that on the Delivery Date, Lessor shall have received
whatever title to the Aircraft was conveyed to it by Lessee, (ii) represents and
warrants that on the Delivery Date the Aircraft shall be free of Lessor Liens
(including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens) attributable to it, (iii) covenants
that it will not, through its own actions or inactions, interfere in Lessee's
quiet enjoyment of the Aircraft during the Term, (iv) agrees that it will not
directly or indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it on or with respect to the Airframe or any Engine or any
portion of the Trust Estate and (v) represents and warrants that it is a Citizen
of the United States without making use of a voting trust, voting powers
agreement or similar arrangement, and agrees that if at any time it shall cease
to be a Citizen of the United States without making use of a voting trust,
voting powers agreement or similar arrangement it will promptly resign as Owner
Trustee (if and so long as such citizenship is necessary under the Federal
Aviation Act as in effect at such time or, if it is not necessary, if and so
long as the Owner Trustee's citizenship would have any material adverse effect
on the Loan Participants, the Owner Participant or Lessee), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement. None of the provisions of this Lease shall be deemed to amend,
modify or otherwise affect the representations, warranties or other obligations
(express or implied) of the Manufacturer, any subcontractor or supplier of the
Manufacturer with respect to the Airframe, the Engines or any Parts, or to
release the Manufacturer, or any such subcontractor or supplier, from any such
representation, warranty or obligation. Lessor agrees that it will not directly
or indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it on or with respect to the Airframe or any Engine.
SECTION 5. RETURN OF THE AIRCRAFT. (a) CONDITION UPON RETURN.
Unless purchased by Lessee pursuant to Section 19 hereof, upon the termination
of this Lease at the end of the Basic Term or any Renewal Term or pursuant to
Section 9(c) or 15, Lessee, at its own expense, will return the Airframe to
Lessor at a major airport in one of the forty-eight contiguous states of the
United States chosen by Lessee, and Lessee will give Lessor at least ten (10)
days'
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prior written notice of the place of such return; PROVIDED, HOWEVER, that if
Lessor shall have made the request for storage pursuant to Section 5(d) hereof,
Lessee shall return the Airframe to Lessor at the site of the storage at the end
of the storage period. At the time of such return, Lessee will, unless otherwise
requested by Lessor at least ninety (90) days prior to the return hereunder,
cause the Aircraft, if it is not then so registered, to be registered under the
laws of the United States with the Federal Aviation Administration in the name
of the Lessor or its designee, PROVIDED that Lessee shall be relieved of its
obligations under this sentence if (i) such registration is prohibited by reason
of the failure of Lessor or its designee to be eligible on such date to own an
aircraft registered with the Federal Aviation Administration or (ii) such
registration is otherwise prohibited by applicable law; the Airframe will be
fully equipped with the Engines (or other [CFM International, Inc. Model
CFM56-5A4/5A5] [Xxxxx & Xxxxxxx Model PW2040] [Xxxxx & Whitney Model PW4056]
engines or [two] [four] engines of the same or another manufacturer of not less
than equivalent utility, value and remaining useful life, and suitable for
installation and use on the Airframe without impairing the value, utility or
remaining useful life of the Aircraft; PROVIDED that [both] [all] engines shall
be of the same make and model) duly installed thereon. Also, at the time of such
return, such Airframe and Engines or engines (i) shall be certified (or, if not
then registered under the Federal Aviation Act, shall be eligible for
certification) as an airworthy aircraft by the Federal Aviation Administration,
(ii) shall be free and clear of all Liens (other than Lessor Liens (including
for this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), Indenture Trustee's Liens and Loan Participant
Liens) and rights of third parties under pooling, interchange, overhaul, repair
or other similar agreements or arrangements, (iii) shall be in as good an
operating condition as when delivered to Lessee hereunder, ordinary wear and
tear excepted, or, in the case of any such engines owned by Lessee, shall have a
value, utility and remaining useful life at least equal to, and shall be in as
good an operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then installed on the
Airframe, and (iv) shall be in compliance with the return conditions, if any,
set forth in EXHIBIT G.
During the last six (6) months of the Term (unless Lessee
shall have elected to purchase the Aircraft or renew this Lease in accordance
with the terms of this Lease), with reasonable notice, Lessee will cooperate,
and cause any Sublessee to cooperate, in all reasonable respects with the
efforts of Lessor to sell or lease the Aircraft, including, without limitation,
permitting prospective purchasers or lessees to inspect fully the Aircraft and
the records relating thereto, PROVIDED that such cooperation shall not interfere
with the operation or maintenance of the Aircraft by Lessee or any Sublessee.
(b) RETURN OF THE ENGINES. In the event that any engine not
owned by Lessor shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery, will,
at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) xxxx of sale with respect to each such engine, in form
and substance satisfactory to Lessor (together with an opinion of counsel to the
effect that such full warranty xxxx of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that such engines
are free and clear of Liens other than Lessor Liens (including for this purpose
Liens which would be Lessor Liens but for the proviso in the definition of
Lessor Liens), Indenture Trustee's Liens and Loan Participant Liens), against
receipt from Lessor of a xxxx of sale or other instrument evidencing the
transfer, without recourse or warranty (except as to the absence of Lessor
Liens, including for this purpose Liens which
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would be Lessor Liens but for the proviso in the definition of Lessor Liens), by
Lessor to Lessee or its designee of all of Lessor's right, title and interest in
and to any Engine constituting part of the Aircraft but not installed on the
Airframe at the time of the return of the Airframe.
(c) FUEL; MANUALS. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessor shall pay Lessee, as compensation for any fuel or oil contained in
the fuel or oil tanks of such Airframe, the value of such fuel or oil at the
price paid by Lessee for such fuel or oil, as the case may be, and (ii) Lessee
shall deliver or cause to be delivered to Lessor all logs, manuals and data and
inspection, maintenance, modification and overhaul records required to be
maintained with respect thereto under applicable rules and regulations of each
country under the laws of which the Aircraft has been registered during the
period of operation thereof, which logs, manuals, data and records, if not
maintained in English, shall be translated into English at Lessee's expense.
(d) STORAGE UPON RETURN. If, at least sixty (60) days prior to
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(c), Lessee receives from Lessor a written request for
storage of the Aircraft upon its return hereunder, Lessee will provide Lessor,
or cause Lessor to be provided, with free parking facilities for the Aircraft
(maintenance costs and other out-of-pocket costs other than parking fees to be
for the account of Lessor) for a period not exceeding thirty (30) days
commencing on the date of such termination at a location in the continental
United States selected by Lessee and used as a location for the parking or
storage of aircraft; PROVIDED that Lessee shall have no obligation to move the
Aircraft from such location during or after the storage period. Lessee, unless
instructed by Lessor to the contrary, will maintain insurance for the Aircraft
during such period not exceeding thirty (30) days and be reimbursed by Lessor
for the premiums thereon.
SECTION 6. LIENS. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided, the Lien of the Trust Indenture, and any other rights existing
pursuant to the Operative Documents, (ii) the rights of others under agreements
or arrangements to the extent permitted by the terms of Sections 7(b) and 8(b)
hereof, (iii) Lessor Liens (including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens), Loan
Participant Liens, and Indenture Trustee's Liens, (iv) Liens for taxes of Lessee
(or any Sublessee) either not yet due or being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Airframe or any Engine or any
interest therein, or, so long as any Secured Certificates shall be outstanding,
adversely affect the Lien of the Trust Indenture, (v) materialmen's, mechanics',
workmen's, repairmen's, employees' or other like Liens arising in the ordinary
course of Lessee's (or, if a Sublease is then in effect, Sublessee's) business
(including those arising under maintenance agreements entered into in the
ordinary course of business) securing obligations that are not overdue for a
period of more than sixty (60) days or are being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture or loss of the Airframe or any Engine or any
interest therein or, so long as any Secured Certificates shall be outstanding,
adversely affect the Lien of the Trust Indenture, (vi) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless the judgment secured
shall not, within sixty (60) days after the entry thereof, have been discharged,
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vacated, reversed or execution thereof stayed pending appeal or shall not have
been discharged, vacated or reversed within sixty (60) days after the expiration
of such stay, (vii) any other Lien with respect to which Lessee (or any
Sublessee) shall have provided a bond, cash collateral or other security
adequate in the reasonable opinion of Lessor, and (viii) Liens approved in
writing by Lessor. Lessee will promptly, at its own expense, take (or cause to
be taken) such actions as may be necessary duly to discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 7. REGISTRATION, MAINTENANCE AND OPERATION;
POSSESSION AND SUBLEASES; INSIGNIA. (a)(I) REGISTRATION AND MAINTENANCE.
Lessee, at its own cost and expense, shall (or shall cause any Sublessee to):
(i) forthwith upon the delivery thereof hereunder, cause the Aircraft to be
duly registered in the name of Lessor, and, subject to the second paragraph
of this Section 7(a) and Section 8(f) of the Participation Agreement, to
remain duly registered in the name of Lessor under the Federal Aviation Act,
PROVIDED that Lessor shall execute and deliver all such documents as Lessee
(or any Sublessee) may reasonably request for the purpose of effecting and
continuing such registration, and shall not register the Aircraft or permit
the Aircraft to be registered under any laws other than the Federal Aviation
Act at any time except as provided in Section 8(f) of the Participation
Agreement and shall cause the Trust Indenture to be duly recorded and
maintained of record as a first mortgage on the Aircraft; (ii) maintain,
service, repair and overhaul (or cause to be maintained, serviced, repaired
and overhauled) the Aircraft so as to keep the Aircraft in as good an
operating condition as when delivered to Lessee hereunder, ordinary wear and
tear excepted, and as may be necessary to enable the applicable airworthiness
certification for the Aircraft to be maintained in good standing at all times
(other than during temporary periods of storage in accordance with applicable
regulations or during maintenance or modification permitted hereunder) under
the Federal Aviation Act, except when all [Airbus Model A319-100]
[Boeing Model 757-300] [Boeing Model 747-400] aircraft powered by engines of
the same type as those with which the Airframe shall be equipped at the time
of such grounding and registered in the United States have been grounded by
the FAA (although such certification need actually be maintained only during
such periods as the Aircraft is registered in the United States), or the
applicable laws of any other jurisdiction in which the Aircraft may then be
registered from time to time in accordance with Section 8(f) of the
Participation Agreement, and utilizing, except during any period that a
Sublease is in effect, the same manner and standard of maintenance, service,
repair or overhaul used by Lessee with respect to similar aircraft operated
by Lessee in similar circumstances and utilizing, during any period that a
Sublease is in effect, the same manner and standard of maintenance, service,
repair or overhaul used by the Sublessee with respect to similar aircraft
operated by the Sublessee in similar circumstances; PROVIDED, HOWEVER, that
in all circumstances the Aircraft shall be maintained by Lessee (or any
Sublessee) in accordance with maintenance standards required by, or
substantially equivalent to those required by, the FAA or the central civil
aviation authority of Canada, France, Germany, Japan, the Netherlands or the
United Kingdom; (iii) maintain or cause to be maintained all records, logs
and other materials required to be maintained in respect of the Aircraft by
the FAA or the applicable regulatory agency or body of any other jurisdiction
in which the Aircraft may then be registered; and (iv) promptly furnish or
cause to be furnished to Lessor and the Owner Participant such information as
may be required to enable Lessor to file any reports required to be filed by
Lessor or the Owner Participant with any governmental authority because of
Lessor's ownership of the Aircraft. (II) OPERATION. Lessee will not maintain,
use, service, repair, overhaul or operate the Aircraft (or permit any
Sublessee to maintain, use, service, repair,
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overhaul or operate the Aircraft) in violation of any law or any rule,
regulation, order or certificate of any government or governmental authority
(domestic or foreign) having jurisdiction, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued by any such
authority, except to the extent Lessee (or, if a Sublease is then in effect, any
Sublessee) is contesting in good faith the validity or application of any such
law, rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor or, so long as any Secured Certificates shall
be outstanding, the first priority Lien of the Trust Indenture and does not
involve any material risk of sale, forfeiture or loss of the Aircraft. Lessee
will not operate the Aircraft, or permit any Sublessee to operate the Aircraft,
in any area excluded from coverage by any insurance required by the terms of
Section 11; PROVIDED, HOWEVER, that the failure of Lessee to comply with the
provisions of this sentence shall not give rise to an Event of Default hereunder
where such failure is attributable to causes beyond the reasonable control of
Lessee (or any Sublessee) or to extraordinary circumstances involving an
isolated occurrence or series of incidents not in the ordinary course of the
regular operations of Lessee (or any Sublessee) and in each such case Lessee (or
such Sublessee, as the case may be) is taking all reasonable steps to remedy
such failure as soon as is reasonably practicable.
At any time after the Depreciation Period, Lessor, upon
compliance with all of the terms of Section 8(f) of the Participation Agreement,
shall, at the request and sole expense of Lessee, cooperate with Lessee to take
all actions required to change the registration of the Aircraft to another
country.
(b) POSSESSION AND SUBLEASES. Lessee will not, without the
prior written consent of Lessor, sublease or otherwise in any manner deliver,
transfer or relinquish possession of the Airframe or any Engine or install or
permit any Engine to be installed on any airframe other than the Airframe or
enter into any Wet Lease; PROVIDED that, so long as no Default of the type
referred to in Section 14(a), 14(b) or 14(e) or Event of Default shall have
occurred and be continuing at the time of such sublease, delivery, transfer or
relinquishment of possession or installation or such Wet Lease, and so long as
the action to be taken shall not deprive the Indenture Trustee of the perfected
first priority Lien of the Trust Indenture on the Airframe or (subject to the
further proviso (B) to clause (i) of this Section 7(b)) any Engine, and so long
as Lessee (or any Sublessee) shall comply with the provisions of Sections 7(a)
and 11 hereof, Lessee (or, except with respect to clause (x) below, any
Sublessee) may, without the prior written consent of Lessor:
(i) subject the Airframe and the Engines or engines
then installed thereon to normal interchange agreements or any
Engine to normal pooling or similar arrangements, in each case
customary in the airline industry and entered into by Lessee
(or, if a Sublease is then in effect, by Sublessee) in the
ordinary course of its business; PROVIDED that (A) no such
agreement or arrangement contemplates or requires the transfer
of title to the Airframe, (B) if Lessor's title to any Engine
shall be divested under any such agreement or arrangement,
such divestiture shall be deemed to be an Event of Loss with
respect to such Engine and Lessee shall (or shall cause
Sublessee to) comply with Section 10(b) hereof in respect
thereof, and (C) any interchange agreement to which the
Airframe may be subject shall be with a U.S. Air Carrier or a
Foreign Air Carrier;
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(ii) deliver possession of the Airframe or any Engine
to the manufacturer thereof (or for delivery thereto) or to
any organization (or for delivery thereto) for testing,
service, repair, maintenance or overhaul work on the Airframe
or Engine or any part of any thereof or for alterations or
modifications in or additions to such Airframe or Engine to
the extent required or permitted by the terms of Section 8(c)
hereof;
(iii) install an Engine on an airframe which is owned
by Lessee (or any Sublessee) free and clear of all Liens,
except: (A) Permitted Liens and those which apply only to the
engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment
(other than Parts) installed on such airframe (but not to the
airframe as an entirety), (B) the rights of third parties
under interchange agreements which would be permitted under
clause (i) above, PROVIDED that Lessor's title to such Engine
and, if any Secured Certificates shall be outstanding, the
first priority Lien of the Trust Indenture shall not be
divested or impaired as a result thereof and (C) mortgage
liens or other security interests, PROVIDED that (as regards
this clause (C)) such mortgage liens or other security
interests effectively provide that such Engine shall not
become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such
airframe;
(iv) install an Engine on an airframe leased to
Lessee (or any Sublessee) or purchased by Lessee (or any
Sublessee) subject to a conditional sale or other security
agreement, PROVIDED that (x) such airframe is free and clear
of all Liens, except: (A) the rights of the parties to the
lease or conditional sale or other security agreement covering
such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y)
such lease, conditional sale or other security agreement
effectively provides that such Engine shall not become subject
to the lien of such lease, conditional sale or other security
agreement, notwithstanding the installation thereof on such
airframe;
(v) install an Engine on an airframe owned by Lessee
(or any Sublessee), leased to Lessee (or any Sublessee) or
purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement under
circumstances where neither subparagraph (iii) nor
subparagraph (iv) of this paragraph (b) is applicable,
PROVIDED that such installation shall be deemed an Event of
Loss with respect to such Engine and Lessee shall (or shall
cause any Sublessee to) comply with Section 10(b) hereof in
respect thereof, Lessor not intending hereby to waive any
right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section
10(b);
(vi) to the extent permitted by Section 8(b) hereof,
subject any appliances, Parts or other equipment owned by
Lessor and removed from the Airframe or any Engine to any
pooling arrangement referred to in Section 8(b) hereof;
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(vii) subject (or permit any Sublessee to subject)
the Airframe or any Engine to the Civil Reserve Air Fleet
Program and transfer (or permit any Sublessee to transfer)
possession of the Airframe or any Engine to the United States
of America or any instrumentality or agency thereof pursuant
to the Civil Reserve Air Fleet Program, so long as Lessee (or
any Sublessee) shall (A) promptly notify Lessor upon
subjecting the Airframe or any Engine to the Civil Reserve Air
Fleet Program in any contract year and provide Lessor with the
name and address of the Contracting Office Representative for
the Air Mobility Command of the United States Air Force to
whom notice must be given pursuant to Section 15 hereof, and
(B) promptly notify Lessor upon transferring possession of the
Airframe or any Engine to the United States of America or any
agency or instrumentality thereof pursuant to such program;
(viii) for a period not to extend beyond the end of
the Term, enter into a Wet Lease for the Airframe and Engines
or engines then installed thereon with any third party;
PROVIDED that if Lessee (or any Sublessee) shall enter into
any Wet Lease for a period of more than one year (including
renewal options) Lessee shall provide Lessor written notice of
such Wet Lease (such notice to be given prior to entering into
such Wet Lease, if practicable, but in any event promptly
after entering into such Wet Lease);
(ix) for a period not to extend beyond the end of the
Term, transfer possession of the Airframe or any Engine to the
United States of America or any instrumentality or agency
thereof pursuant to a contract, a copy of which shall be
provided to Lessor; or
(x) Lessee may, at any time, enter into any sublease
with (1) a U.S. Air Carrier, (2) any Person approved in
writing by Lessor, which approval shall not be unreasonably
withheld or (3) after the Depreciation Period, any Permitted
Sublessee if (A) in any such case, the Sublessee under such
sublease is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on
the date such sublease is entered into, (B) in the event that
the Sublessee under such sublease is a foreign air carrier
(other than a foreign air carrier principally based in
Taiwan), the United States maintains diplomatic relations with
the country in which such proposed Sublessee is principally
based at the time such sublease is entered into (or, in the
case of a sublease to a proposed Sublessee principally based
in Taiwan, maintains diplomatic relations at least as good as
those in effect on the Delivery Date) and (C) in the event
that the Sublessee under such sublease is a foreign air
carrier, Lessor and the Indenture Trustee shall have received
an opinion of counsel to Lessee to the effect that (I) the
terms of the proposed sublease will be legal, valid, binding
and (subject to customary exceptions in foreign opinions
generally) enforceable against the proposed Sublessee in the
country in which the proposed Sublessee is principally based,
(II) there exist no possessory rights in favor of the
Sublessee under such Sublease under the laws of such
Sublessee's country of domicile that would, upon bankruptcy or
insolvency of or other default by Lessee and assuming at such
time such Sublessee is not insolvent or bankrupt, prevent the
return or repossession of
-26-
the Aircraft in accordance with the terms of this Lease, (III)
the laws of such Sublessee's country of domicile require fair
compensation by the government of such jurisdiction payable in
currency freely convertible into Dollars for the loss of use
of the Aircraft in the event of the requisition by such
government of such use, and (IV) the laws of such Sublessee's
country of domicile would give recognition to Lessor's title
to the Aircraft, to the registry of the Aircraft in the name
of the Lessor (or Lessee, as "lessee", or the proposed
Sublessee, as "sublessee", as appropriate) and to the Lien of
the Trust Indenture, PROVIDED, HOWEVER, that no sublease
entered into pursuant to this clause (x) shall extend beyond
the expiration of the Basic Term or any Renewal Term then in
effect unless Lessee shall have irrevocably committed to
purchase the Aircraft.
The rights of any Sublessee or other transferee who receives
possession by reason of a transfer permitted by this paragraph (b) (other than
the transfer of an Engine which is deemed an Event of Loss) shall be effectively
subject and subordinate to, and any Sublease permitted by this paragraph (b)
shall be expressly subject and subordinate to, all the terms of this Lease and
to the Lien of the Trust Indenture, including, without limitation, the covenants
contained in Section 7(a) hereof and Lessor's rights to repossession pursuant to
Section 15 hereof and to avoid such Sublease upon such repossession, and Lessee
shall remain primarily liable hereunder for the performance of all of the terms
of this Lease to the same extent as if such Sublease or transfer had not
occurred, and, except as otherwise provided herein, the terms of any such
Sublease shall not permit any Sublessee to take any action not permitted to be
taken by Lessee in this Lease with respect to the Aircraft. No pooling
agreement, sublease or other relinquishment of possession of the Airframe or any
Engine or Wet Lease shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or constitute a waiver of Lessor's rights or
remedies hereunder. Any sublease permitted under this Section 7(b) shall
expressly prohibit any further sub-sublease by the Sublessee. Lessor agrees, for
the benefit of Lessee (and any Sublessee) and for the benefit of any mortgagee
or other holder of a security interest in any engine (other than an Engine)
owned by Lessee (or any Sublessee), any lessor of any engine (other than an
Engine) leased to Lessee (or any Sublessee) and any conditional vendor of any
engine (other than an Engine) purchased by Lessee (or any Sublessee) subject to
a conditional sale agreement or any other security agreement, that no interest
shall be created hereunder in any engine so owned, leased or purchased and that
none of Lessor, its successors or assigns will acquire or claim, as against
Lessee (or any Sublessee) or any such mortgagee, lessor or conditional vendor or
other holder of a security interest or any successor or assignee of any thereof,
any right, title or interest in such engine as the result of such engine being
installed on the Airframe; PROVIDED, HOWEVER, that such agreement of Lessor
shall not be for the benefit of any lessor or secured party of any airframe
(other than the Airframe) leased to Lessee (or any Sublessee) or purchased by
Lessee (or any Sublessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by Lessee (or any Sublessee), unless such
lessor, conditional vendor, other secured party or mortgagee has expressly
agreed (which agreement may be contained in such lease, conditional sale or
other security agreement or mortgage) that neither it nor its successors or
assigns will acquire, as against Lessor, any right, title or interest in an
Engine as a result of such Engine being installed on such airframe. Lessee shall
provide to the Owner Participant and the Indenture Trustee (i) written notice of
any Sublease hereunder (such notice to be given not later than five days prior
to entering into such Sublease, if practicable, but
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in any event promptly after entering into any such Sublease) and (ii) a copy of
each Sublease which has a term of more than three months.
(c) INSIGNIA. On or prior to the Delivery Date, or as soon as
practicable thereafter, Lessee agrees to affix and maintain (or cause to be
affixed and maintained), at its expense, in the cockpit of the Airframe adjacent
to the airworthiness certificate therein and on each Engine a nameplate bearing
the inscription:
Leased From
Xxxxx Fargo Bank Northwest, National Association, AS OWNER TRUSTEE,
LESSOR
and, for so long as the Airframe and each Engine shall be subject to the Lien of
the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company,
AS INDENTURE TRUSTEE
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents). Except as above provided, Lessee will
not allow the name of any Person to be placed on the Airframe or on any Engine
as a designation that might be interpreted as a claim of ownership; PROVIDED
that nothing herein contained shall prohibit Lessee (or any Sublessee) from
placing its customary colors and insignia on the Airframe or any Engine.
SECTION 8. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS. (a) REPLACEMENT OF PARTS. Lessee, at its own cost
and expense, will promptly replace or cause to be replaced all Parts which may
from time to time be incorporated or installed in or attached to the Airframe or
any Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever, except as otherwise provided in
paragraph (c) of this Section 8 or if the Airframe or an Engine to which a Part
relates has suffered an Event of Loss. In addition, Lessee (or any Sublessee)
may, at its own cost and expense, remove in the ordinary course of maintenance,
service, repair, overhaul or testing, any Parts, whether or not worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use, PROVIDED that Lessee (or any Sublessee), except as
otherwise provided in paragraph (c) of this Section 8, will, at its own cost and
expense, replace such Parts as promptly as practicable. All replacement Parts
shall be free and clear of all Liens (except for Permitted Liens and pooling
arrangements to the extent permitted by paragraph (b) of this Section 8 and
except in the case of replacement property temporarily installed on an emergency
basis) and shall be in as good operating condition as, and shall have a value
and utility at least equal to, the Parts replaced assuming such replaced Parts
were in the condition and repair required to be maintained by the terms hereof.
Except as otherwise provided in paragraph (c) of this Section 8, all Parts at
any time removed from the Airframe or any Engine shall remain the property of
Lessor, no matter
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where located, until such time as such Parts shall be replaced by Parts which
have been incorporated or installed in or attached to the Airframe or such
Engine and which meet the requirements for replacement Parts specified above.
Immediately upon any replacement part becoming incorporated or installed in or
attached to the Airframe or any Engine as above provided, without further act
(subject only to Permitted Liens and any pooling arrangement to the extent
permitted by paragraph (b) of this Section 8 and except in the case of
replacement property temporarily installed on an emergency basis), (i) title to
such replacement Part shall thereupon vest in Lessor, (ii) such replacement Part
shall become subject to this Lease and be deemed part of the Airframe or such
Engine for all purposes hereof to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine, and
(iii) title to the replaced Part shall thereupon vest in Lessee (or, if a
Sublease is then in effect, any Sublessee), free and clear of all rights of
Lessor, and shall no longer be deemed a Part hereunder.
(b) POOLING OF PARTS. Any Part removed from the Airframe or
any Engine as provided in paragraph (a) of this Section 8 may be subjected by
Lessee (or any Sublessee) to a normal pooling arrangement customary in the
airline industry of which Lessee (or, if a Sublease is then in effect, any
Sublessee) is a party entered into in the ordinary course of Lessee's (or any
Sublessee's) business; PROVIDED that the Part replacing such removed Part shall
be incorporated or installed in or attached to such Airframe or Engine in
accordance with such paragraph (a) as promptly as practicable after the removal
of such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Airframe or any Engine in accordance with such
paragraph (a) may be owned by any third party subject to such a normal pooling
arrangement, PROVIDED that Lessee (or any Sublessee), at its expense, as
promptly thereafter as practicable, either (i) causes title to such replacement
Part to vest in Lessor in accordance with such paragraph (a) by Lessee (or any
Sublessee) acquiring title thereto for the benefit of, and transferring such
title to, Lessor free and clear of all Liens except Permitted Liens (other than
pooling arrangements) or (ii) replaces such replacement Part by incorporating or
installing in or attaching to the Airframe or Engine a further replacement Part
owned by Lessee (or any Sublessee) free and clear of all Liens except Permitted
Liens (other than pooling arrangements) and by causing title to such further
replacement Part to vest in Lessor in accordance with such paragraph (a).
(c) ALTERATIONS, MODIFICATIONS AND ADDITIONS. Lessee, at its
own expense, will make (or cause to be made) such alterations and modifications
in and additions to the Airframe and Engines as may be required from time to
time to meet the applicable standards of the FAA or any other governmental
authority having jurisdiction; PROVIDED, HOWEVER, that Lessee (or, if a Sublease
is then in effect, any Sublessee) may, in good faith, contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not adversely affect Lessor or, so long as any Secured Certificates
are outstanding, the Indenture Trustee. In addition, Lessee (or any Sublessee),
at its own expense, may from time to time add further parts or accessories and
make such alterations and modifications in and additions to the Airframe or any
Engine as Lessee (or any Sublessee) may deem desirable in the proper conduct of
its business, including, without limitation, removal of Parts which Lessee (or
any Sublessee) has determined in its reasonable judgment to be obsolete or no
longer suitable or appropriate for use on the Airframe or such Engine (such
parts, "OBSOLETE PARTS"); PROVIDED that no such alteration, modification or
addition shall materially diminish the value, utility or remaining useful life
of the Airframe or such Engine below the value, utility or remaining useful life
thereof immediately
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prior to such alteration, modification or addition, assuming the Airframe or
such Engine was then in the condition required to be maintained by the terms of
this Lease, except that the value (but not the utility or remaining useful life)
of the Airframe or any Engine may be reduced by the value of Obsolete Parts
which shall have been removed so long as the aggregate value of all Obsolete
Parts which shall have been removed and not replaced shall not exceed [$400,000
for A319's] [$500,000 for 757's] [$800,000 for 747's]. Title to all Parts
incorporated or installed in or attached or added to the Airframe or an Engine
as the result of such alteration, modification or addition (the "ADDITIONAL
PARTS") shall, without further act, vest in Lessor. Notwithstanding the
foregoing sentence, Lessee (or any Sublessee) may remove or suffer to be removed
any Additional Part, PROVIDED that such Additional Part (i) is in addition to,
and not in replacement of or substitution for, any Part originally incorporated
or installed in or attached to the Airframe or any Engine at the time of
delivery thereof hereunder or any Part in replacement of, or substitution for,
any such Part, (ii) is not required to be incorporated or installed in or
attached or added to the Airframe or any Engine pursuant to the terms of Section
7 hereof or the first sentence of this paragraph (c) and (iii) can be removed
from the Airframe or such Engine without diminishing or impairing the value,
utility or remaining useful life which the Airframe or such Engine would have
had at the time of removal had such alteration, modification or addition not
occurred, assuming that such Airframe or Engine was in the condition and repair
required to be maintained by the terms hereof. Upon the removal by Lessee (or
Sublessee) of any Part as provided above, title thereto shall, without further
act, vest in Lessee (or any Sublessee, as the case may be) and such Part shall
no longer be deemed part of the Airframe or Engine from which it was removed.
Any Part not removed by Lessee (or any Sublessee) as above provided prior to the
return of the Airframe or Engine to Lessor hereunder shall remain the property
of Lessor.
SECTION 9. VOLUNTARY TERMINATION. (a) TERMINATION EVENT. (1)
[Intentionally Omitted].
(2) Lessee shall have the right to elect to terminate this
Lease on any Lease Period Date occurring on or after the fifth anniversary of
the Delivery Date if Lessee shall have made the good faith determination, which
shall be evidenced by a resolution duly adopted by its Board of Directors (or
the Executive Committee thereof), that the Aircraft is obsolete or surplus to
its needs.
(3) Lessee shall give to Lessor at least ninety (90) days'
revocable advance written notice of Lessee's intention to so terminate this
Lease (any such notice, a "TERMINATION NOTICE") specifying (i) the Lease Period
Date on which Lessee intends to terminate this Lease in accordance with this
Section 9 (such specified date, a "TERMINATION DATE") and (ii) that Lessee has
determined that the Aircraft is obsolete or surplus to its needs. Any
Termination Notice shall become irrevocable fifteen (15) days prior to the
Termination Date.
(b) [Intentionally Omitted].
(c) OPTIONAL SALE OF THE AIRCRAFT. In the event that Lessee
shall have exercised its right to terminate this Lease under Section 9(a)(2),
then during the period from the giving of the notice referred to in Section
9(a)(3) until the proposed Termination Date (unless Lessee shall have revoked
the Termination Notice specifying such proposed Termination Date), Lessee, as
agent for Lessor and at no expense to Lessor, shall use commercially reasonable
efforts to obtain
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all-cash bids in the worldwide market for the purchase of the Aircraft and, in
the event it receives any bid, Lessee shall, within five Business Days after
receipt thereof and at least ten Business Days prior to the proposed Termination
Date, certify to Lessor in writing the amount and terms of such bid, and the
name and address of the party or parties (who shall not be Lessee or any
Affiliate of Lessee or any Person with whom Lessee or any such Affiliate has an
arrangement or understanding regarding the future use of the Aircraft by Lessee
or any such Affiliate but who may be the Owner Participant, any Affiliate
thereof or any Person contacted by the Owner Participant) submitting such bid.
After Lessee shall have certified to Lessor all bids received, the Owner
Participant, any Affiliate thereof or any Person contacted by the Owner
Participant may submit a further bid or bids to Lessee not later than five
Business Days prior to the Termination Date proposed by Lessee (unless Lessee
shall have revoked the Termination Notice specifying such proposed Termination
Date). Subject to the next succeeding sentence, on or before the Termination
Date, subject to the release of all mortgage and security interests with respect
to the Aircraft under the Trust Indenture: (1) Lessee shall deliver the
Aircraft, or cause the Aircraft to be delivered, to the bidder(s), if any, which
shall have submitted the highest all-cash bid therefor at least ten (or, in the
case of the Owner Participant, any Affiliate thereof, or Person contacted by the
Owner Participant, five) Business Days prior to such Termination Date, in the
same manner and in the same condition and otherwise in accordance with all the
terms of this Lease as if delivery were made to Lessor pursuant to Section 5,
and shall duly transfer to Lessor title to any engines not owned by Lessor all
in accordance with the terms of Section 5, (2) Lessor shall comply with the
terms of the Trust Indenture and shall, without recourse or warranty (except as
to the absence of Lessor Liens, including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens), subject to
prior or concurrent payment by Lessee of all amounts due under clause (3) of
this sentence, sell all of Lessor's right, title and interest in and to the
Aircraft for cash in Dollars to such bidder(s), the total sales price realized
at such sale to be retained by Lessor, and (3) Lessee shall simultaneously pay
or cause to be paid to Lessor in funds of the type specified in Section 3(f)
hereof, an amount equal to the sum of (A) the excess, if any, of (i) the
Termination Value for the Aircraft, computed as of the Termination Date, over
(ii) the net cash proceeds from the sale of the Aircraft after deducting the
reasonable expenses incurred by Lessor in connection with such sale, (B) all
unpaid Basic Rent with respect to the Aircraft due prior to such Termination
Date and, if such Basic Rent is payable in arrears on such Termination Date as
indicated on EXHIBIT B, on such Termination Date, and all unpaid Supplemental
Rent due on or prior to the Termination Date with respect to the Aircraft, and
(C) the Make-Whole Amount, if any, due on the Secured Certificates, and upon
such payment Lessor simultaneously will transfer to Lessee, without recourse or
warranty (except as to the absence of Lessor Liens, including for this purpose
Liens which would be Lessor Liens but for the proviso in the definition of
Lessor Liens), all of Lessor's right, title and interest in and to any Engines
constituting part of the Aircraft which were not sold with the Aircraft.
Notwithstanding the preceding sentence, Lessor may, if Lessee has not revoked
the Termination Notice, elect to retain title to the Aircraft. If Lessor so
elects, Lessor shall give to Lessee written notice of such election at least
five Business Days prior to the Termination Date accompanied by an irrevocable
undertaking by the Owner Participant to make available to Lessor for payment to
the Indenture Trustee on the Termination Date the amount required to pay in full
the unpaid principal amount of the Secured Certificates outstanding on the
Termination Date plus interest accrued thereon through the Termination Date,
together with the Make-Whole Amount, if any, due on the Secured Certificates.
Upon receipt of notice of such an election by Lessor and the accompanying
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undertaking by the Owner Participant, Lessee shall cease its efforts to obtain
bids as provided above and shall reject all bids theretofore or thereafter
received. On the Termination Date, Lessor shall (subject to the payment by
Lessee of all Rent due on or prior to such date as set forth below) pay in full
the unpaid principal amount of the Secured Certificates outstanding on the
Termination Date plus interest accrued thereon through the Termination Date
together with all Make-Whole Amount, if any, due on the Secured Certificates
and, so long as the Secured Certificates are paid as aforesaid, Lessee shall
deliver the Airframe and Engines or engines to Lessor in accordance with Section
5 and shall pay all Basic Rent due prior to the Termination Date and, if such
Basic Rent is payable in arrears on such Termination Date as indicated on
EXHIBIT B, on such Termination Date, and all Supplemental Rent (other than
Make-Whole Amount or Termination Value) due on or prior to the Termination Date.
If no sale shall have occurred on the Termination Date and Lessor has not made
the payment contemplated by the preceding sentence and thereby caused this Lease
to terminate, or if Lessee revokes its Termination Notice, this Lease shall
continue in full force and effect as to the Aircraft, Lessee shall pay the
reasonable costs and expenses incurred by the Owner Participant and Lessor
(unless such failure to terminate the Lease is a consequence of the failure of
Lessor or the Owner Participant without due cause to make, or cause to be made,
the payment referred to in the immediately preceding sentence), if any, in
connection with preparation for such sale and Lessee may give one or more
additional Termination Notices in accordance with Sections 9(a)(2) and 9(a)(3),
subject to the last sentence of this Section 9(c). In the event of any such sale
or such retention of the Aircraft by Lessor and upon compliance by Lessee with
the provisions of this paragraph, the obligation of Lessee to pay Basic Rent or
any other amounts hereunder shall cease to accrue and this Lease shall
terminate. Lessor may, but shall be under no duty to, solicit bids, inquire into
the efforts of Lessee to obtain bids or otherwise take any action in connection
with any such sale other than to transfer (in accordance with the foregoing
provisions) to the purchaser named in the highest bid certified by Lessee to
Lessor all of Lessor's right, title and interest in the Aircraft, against
receipt of the payments provided herein. Lessee may revoke a Termination Notice
given pursuant to Section 9(a)(3) no more than two times during the Term.
(d) TERMINATION AS TO ENGINES. So long as no Event of Default
shall have occurred and be continuing, Lessee shall have the right at its option
at any time during the Term, on at least thirty (30) days' prior written notice,
to terminate this Lease with respect to any Engine. In such event, and prior to
the date of such termination, Lessee shall replace such Engine hereunder by
complying with the terms of Section 10(b) to the same extent as if an Event of
Loss had occurred with respect to such Engine, and Lessor shall transfer such
right, title and interest as it may have to the replaced Engine as provided in
Section 5(b). No termination of this Lease with respect to any Engine as
contemplated by this Section 9(d) shall result in any reduction of Basic Rent.
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC. (a) EVENT OF
LOSS WITH RESPECT TO THE AIRCRAFT. Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and the Engines and/or engines then
installed thereon, Lessee shall forthwith (and in any event, within fifteen (15)
days after such occurrence) give Lessor written notice of such Event of Loss,
and within forty-five (45) days after such Event of Loss Lessee shall give
Lessor written notice of its election to perform one of the following options
(it being agreed that if Lessee shall not have given such notice of election
within such period, Lessee shall be deemed to have elected the option set forth
in clause (i) below). Lessee may elect either to:
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(i) make the payments specified in this clause (i),
in which event not later than the earlier of (x) the Business
Day next succeeding the 120th day following the occurrence of
such Event of Loss or (y) an earlier Business Day irrevocably
specified fifteen (15) days in advance by notice from Lessee
to Lessor and the Indenture Trustee (the "LOSS PAYMENT DATE"),
Lessee shall pay or cause to be paid to Lessor in funds of the
type specified in Section 3(f) hereof, an amount equal to the
Stipulated Loss Value of the Aircraft corresponding to the
Stipulated Loss Value Date occurring on or immediately
following the Loss Payment Date; PROVIDED, HOWEVER, that if a
Lease Period Date shall occur on or prior to the Loss Payment
Date with respect to which Stipulated Loss Value is
determined, Lessee shall pay on such Lease Period Date (A) if
the Lease Period Date occurs on the Loss Payment Date with
respect to which Stipulated Loss Value is determined, an
amount equal to the Basic Rent that would have been due on
such Lease Period Date (but only to the extent payable in
arrears as indicated on EXHIBIT B) if such Event of Loss had
not occurred and (B) if the Lease Period Date occurs prior to
the Loss Payment Date with respect to which Stipulated Loss
Value is determined, an amount equal to the Basic Rent that
would have been due on such Lease Period Date if such Event of
Loss had not occurred, or
(ii) substitute an aircraft or an airframe or an
airframe and one or more engines, as the case may be;
PROVIDED that, if Lessee does not perform its obligation to effect such
substitution in accordance with this Section 10(a) during the period of time
provided herein, then Lessee shall pay or cause to be paid to Lessor on the
Business Day next succeeding the 120th day following the occurrence of such
Event of Loss the amount specified in clause (i) above.
At such time as Lessor shall have received the amounts
specified in subparagraph (i) above, together with all other amounts that then
may be due hereunder (including, without limitation, all Basic Rent due before
the date of such payment and all Supplemental Rent), under the Participation
Agreement and under the Tax Indemnity Agreement, (1) the obligation of Lessee to
pay the installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue, (2) this Lease
shall terminate, (3) Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and any
Engines subject to such Event of Loss, as well as any Engines not subject to
such Event of Loss, and furnish to or at the direction of Lessee a xxxx of sale
in form and substance reasonably satisfactory to Lessee (or any Sublessee),
evidencing such transfer, and (4) Lessee will be subrogated to all claims of
Lessor, if any, against third parties, for damage to or loss of the Airframe and
any Engines which were subject to such Event of Loss to the extent of the then
insured value of the Aircraft.
In the event Lessee shall elect to substitute an aircraft (or
an airframe or an airframe and one or more engines, as the case may be) Lessee
shall, at its sole expense, not later than the Business Day next succeeding the
120th day following the occurrence of such Event of Loss, (A) convey or cause to
be conveyed to Lessor and to be leased by Lessee hereunder, an
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aircraft (or an airframe or an airframe and one or more engines which, together
with the Engines constituting a part of the Aircraft but not installed thereon
at the time of such Event of Loss constitute the Aircraft) free and clear of all
Liens (other than Permitted Liens) and having a value, utility and remaining
useful life (without regard to hours or cycles) at least equal to the Aircraft
subject to such Event of Loss assuming no Event of Loss had occurred and that
the Aircraft had been maintained in accordance with this Lease; PROVIDED that
any aircraft, airframe or engine so substituted hereunder shall be of the same
or improved model as those initially leased hereunder and (B) prior to or at the
time of any such substitution, Lessee (or any Sublessee), at its own expense,
will (1) furnish Lessor with a full warranty xxxx of sale and a Federal Aviation
Administration xxxx of sale, in form and substance reasonably satisfactory to
Lessor, evidencing such transfer of title, (2) cause a Lease Supplement and a
Trust Supplement to be duly executed by Lessee and filed for recording pursuant
to the Federal Aviation Act, or the applicable laws, rules and regulations of
any other jurisdiction in which the Airframe may then be registered as permitted
by Section 8(f) of the Participation Agreement, (3) cause a financing statement
or statements with respect to such substituted property to be filed in such
place or places as are deemed necessary or desirable by Lessor to perfect its
and the Indenture Trustee's interest therein and herein, (4) furnish Lessor with
such evidence of compliance with the insurance provisions of Section 11 with
respect to such substituted property as Lessor may reasonably request, (5)
furnish Lessor with copies of the documentation required to be provided by
Lessee pursuant to Section 5.06 of the Trust Indenture (whether or not the Trust
Indenture is then in effect), and Lessor simultaneously will comply with the
terms of the Trust Indenture and transfer to or at the direction of Lessee,
without recourse or warranty (except as to the absence of Lessor Liens,
including for this purpose Liens which would be Lessor Liens but for the proviso
in the definition of Lessor Liens), all of Lessor's right, title and interest,
if any, in and to the Aircraft or the Airframe and one or more Engines, as the
case may be, with respect to which such Event of Loss occurred and furnish to or
at the direction of Lessee a xxxx of sale in form and substance reasonably
satisfactory to Lessee (or any Sublessee), evidencing such transfer, (6) furnish
Lessor with an opinion of counsel (which shall be Cadwalader, Xxxxxxxxxx & Xxxx
and, if not, other counsel chosen by Lessee and reasonably acceptable to Lessor)
reasonably satisfactory to Lessor to the effect that Lessor and the Indenture
Trustee as assignee of Lessor will be entitled to the benefits of Section 1110
of the U.S. Bankruptcy Code with respect to the substitute aircraft, PROVIDED
that such opinion need not be delivered to the extent that immediately prior to
such substitution the benefits of Section 1110 of the U.S. Bankruptcy Code were
not, solely by reason of a change in law or governmental interpretation thereof,
available to Lessor and, so long as any Secured Certificates are outstanding,
the Indenture Trustee as assignee of Lessor's rights under the Lease with
respect to the Aircraft, and (7) Lessee will be subrogated to all claims of
Lessor, if any, against third parties for damage to or loss of the Airframe and
any Engine which were subject to such Event of Loss to the extent of the then
insured value of the Aircraft. For all purposes hereof, the property so
substituted shall after such transfer be deemed part of the property leased
hereunder and shall be deemed an "Aircraft", "Airframe" and "Engine", as the
case may be, as defined herein. No Event of Loss with respect to the Airframe or
the Airframe and the Engines or engines then installed thereon for which
substitution has been elected pursuant to Section 10(a)(ii) hereof shall result
in any reduction in Basic Rent.
(b) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon the
occurrence of an Event of Loss with respect to an Engine under circumstances in
which there has not occurred an
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Event of Loss with respect to the Airframe, Lessee shall forthwith (and in any
event, within fifteen days after such occurrence) give Lessor written notice
thereof and shall, within sixty (60) days after the occurrence of such Event of
Loss, convey or cause to be conveyed to Lessor, as replacement for the Engine
with respect to which such Event of Loss occurred, title to another [CFM
International, Inc. Model CFM56-5A4/5A5] [Xxxxx & Whitney Model PW2040] [Xxxxx &
Xxxxxxx Model PW4056] engine (or engine of the same or another manufacturer of
the same, an equivalent or an improved model and suitable for installation and
use on the Airframe without impairing the value, utility or remaining useful
life of the Aircraft; PROVIDED that [both] [all] Engines shall be of the same
make and model) free and clear of all Liens (other than Permitted Liens, which
engine may upon its transfer to Lessor become subject to any and all Permitted
Liens) and having a value, utility and remaining useful life (without regard to
hours or cycles) at least equal to the Engine subject to such Event of Loss
assuming no Event of Loss had occurred and that such Engine had been maintained
in accordance with this Lease. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will (i) furnish Lessor with a warranty (as to
title) xxxx of sale, in form and substance reasonably satisfactory to Lessor,
with respect to such replacement engine, (ii) cause a Lease Supplement and Trust
Supplement to be duly executed by Lessee and to be filed for recording pursuant
to the Federal Aviation Act, or the applicable laws, rules and regulations of
any other jurisdiction in which the Airframe may then be registered as permitted
by Section 8(f) of the Participation Agreement, (iii) furnish Lessor with such
evidence of compliance with the insurance provisions of Section 11 hereof with
respect to such replacement engine as Lessor may reasonably request and furnish
Lessor with copies of the documentation required to be provided by Lessee
pursuant to Section 5.06 of the Trust Indenture (whether or not the Trust
Indenture is then in effect), and Lessor will comply with the terms of the Trust
Indenture and transfer to or at the direction of Lessee without recourse or
warranty (except as to absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens) all of Lessor's right, title and interest, if any, in and to (A) the
Engine with respect to which such Event of Loss occurred and furnish to or at
the direction of Lessee a xxxx of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if any,
against third parties, for damage to or loss of the Engine subject to such Event
of Loss, and such Engine shall thereupon cease to be the Engine leased
hereunder. For all purposes hereof, each such replacement engine shall, after
such conveyance, be deemed part of the property leased hereunder, and shall be
deemed an "ENGINE". No Event of Loss with respect to an Engine under the
circumstances contemplated by the terms of this paragraph (b) shall result in
any reduction in Basic Rent.
(c) APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR
REQUISITION OF TITLE, ETC. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with respect
to an Event of Loss will be applied as follows:
(i) if payments are received with respect to the
Airframe (or the Airframe and any Engine or engines then
installed thereon), (A) unless the same are replaced pursuant
to the last paragraph of Section 10(a), after reimbursement of
Lessor (as provided in Section 7.01 of the Trust Agreement)
for reasonable costs and expenses, so much of such payments
remaining as shall not exceed the Stipulated Loss Value
required to be paid by Lessee pursuant to Section 10(a), shall
be applied in reduction of Lessee's obligation to pay
Stipulated Loss Value,
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if not already paid by Lessee, or, if already paid by Lessee,
shall be applied to reimburse Lessee for its payment of
Stipulated Loss Value, and following the foregoing
application, the balance, if any, of such payments will be
paid over to, or retained by Lessee, PROVIDED that Lessor
shall be entitled to so much of the excess, if any, of such
payment over the greater of (x) the Stipulated Loss Value and
(y) the fair market value of the Aircraft as Lessor shall
demonstrate to Lessee's reasonable satisfaction is
attributable to compensation for loss of Lessor's interest in
the Aircraft as distinguished from the loss of use of the
Aircraft; or (B) if such property is replaced pursuant to the
last paragraph of Section 10(a), such payments shall be paid
over to, or retained by, Lessee; PROVIDED that Lessee shall
have fully performed or, concurrently therewith, will fully
perform the terms of the last paragraph of Section 10(a) with
respect to the Event of Loss for which such payments are made;
and
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 10(b)
hereof, so much of such payments remaining after reimbursement
of Lessor (as provided for in Section 7.01 of the Trust
Agreement) for reasonable costs and expenses shall be paid
over to, or retained by, Lessee, PROVIDED that Lessee shall
have fully performed, or concurrently therewith will perform,
the terms of Section 10(b) with respect to the Event of Loss
for which such payments are made.
(d) REQUISITION FOR USE OF THE AIRCRAFT BY THE UNITED STATES
GOVERNMENT OR THE GOVERNMENT OF REGISTRY OF THE AIRCRAFT. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other government
of registry of the Aircraft or any instrumentality or agency of any thereof,
Lessee shall promptly notify Lessor of such requisition, and all of Lessee's
obligations under this
Lease Agreement with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred, PROVIDED
that if such Airframe and Engines or engines installed thereon are not returned
by such government (or instrumentality or agency) prior to the end of the Term,
Lessee shall be obligated to return the Airframe and such Engines or engines to
Lessor pursuant to, and in all other respects in compliance with the provisions
of, Section 5 promptly on the date of such return by such government (or
instrumentality or agency). If, in the event of any such requisition, Lessee
shall fail to return the Aircraft on or before the thirtieth day beyond the end
of the Term, such failure shall constitute an Event of Loss which shall be
deemed to have occurred on the last day of the Term and in such event Lessee
shall make the payment contemplated by Section 10(a)(i) in respect of such Event
of Loss; PROVIDED, HOWEVER, that Lessor may notify Lessee in writing on or
before the twentieth day prior to the last day of the Term that, in the event
Lessee shall fail by reason of such requisition to return the Airframe and such
Engines or engines on or before the thirtieth day beyond the end of the Term,
such failure shall not be deemed an Event of Loss. Upon the giving of such
notice and such failure to return by the thirtieth day beyond the end of the
Term, Lessee shall be relieved of all of its obligations pursuant to the
provisions of Section 5 (including EXHIBIT G) but not under any other Section,
except that if any engine not owned by Lessor shall then be installed on the
Airframe, Lessee will, at no cost to Lessor, furnish, or cause to be furnished,
to Lessor a full warranty (as to title) xxxx of sale with respect to each such
engine, in form and substance reasonably satisfactory to Lessor (together with
an opinion of counsel to the effect that such full
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warranty xxxx of sale has been duly authorized and delivered and is enforceable
in accordance with its terms and that such engines are free and clear of Liens
other than Lessor Liens (including for this purpose Liens which would be Lessor
Liens but for the proviso in the definition of Lessor Liens), Loan Participant
Liens and Indenture Trustee's Liens), against receipt from Lessor of a xxxx of
sale evidencing the transfer, without recourse or warranty (except as to the
absence of Lessor Liens, including for this purpose Liens which would be Lessor
Liens but for the proviso in the definition of Lessor Liens), by Lessor to
Lessee or its designee of all of Lessor's right, title and interest in and to
any Engine constituting part of the Aircraft but not then installed on the
Airframe. All payments received by Lessor or Lessee from such government (or
instrumentality or agency) for the use of such Airframe and Engines or engines
during the Term shall be paid over to, or retained by, Lessee (or, if directed
by Lessee, any Sublessee); and all payments received by Lessor or Lessee from
such government (or instrumentality or agency) for the use of such Airframe and
Engines or engines after the end of the Term shall be paid over to, or retained
by, Lessor unless Lessee shall have exercised its purchase option hereunder, in
which case such payments shall be made to Lessee.
(e) REQUISITION FOR USE OF AN ENGINE BY THE UNITED STATES
GOVERNMENT OR THE GOVERNMENT OF REGISTRY OF THE AIRCRAFT. In the event of the
requisition for use of an Engine by the United States Government or any other
government of registry of the Aircraft or any agency or instrumentality of any
thereof (other than in the circumstances contemplated by subsection (d)), Lessee
shall replace such Engine hereunder by complying (or causing any Sublessee to
comply) with the terms of Section 10(b) to the same extent as if an Event of
Loss had occurred with respect thereto, and, upon compliance with Section 10(b)
hereof, any payments received by Lessor or Lessee from such government (or
instrumentality or agency) with respect to such requisition shall be paid over
to, or retained by, Lessee.
(f) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF
DEFAULT. Any amount referred to in this Section 10 which is payable to or
retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or such Sublessee) if at the time of such payment or retention an Event
of Default shall have occurred and be continuing, but shall be held by or paid
over to Lessor as security for the obligations of Lessee (or such Sublessee)
under this Lease and, if Lessor declares this Lease to be in default pursuant to
Section 15 hereof, applied against Lessee's obligations hereunder as and when
due. At such time as there shall not be continuing any such Event of Default,
such amount shall be paid to Lessee (or such Sublessee) to the extent not
previously applied in accordance with the preceding sentence.
SECTION 11. INSURANCE. (a) PUBLIC LIABILITY AND PROPERTY
DAMAGE INSURANCE. (I) Except as provided in clause (II) of this Section 11(a),
Lessee will carry or cause to be carried at its or any Sublessee's expense (i)
aircraft public liability (including, without limitation, passenger legal
liability) (and including aircraft war risk and hijacking insurance, if and to
the extent the same is maintained by Lessee (or, if a Sublease is then in
effect, if and to the extent maintained by Sublessee) with respect to other
aircraft owned or leased, and operated by Lessee (or such Sublessee) on the same
routes) insurance and property damage insurance (exclusive of manufacturer's
product liability insurance) with respect to the Aircraft, in an amount not less
than the greater of (x) the amount of public liability and property damage
insurance from time to time applicable to aircraft owned or operated by Lessee
(or, if a Sublease is then in effect, by Sublessee) of the same type as the
Aircraft and (y) such amount per
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occurrence as may have been agreed to on the Delivery Date by the Owner
Participant [amount shall be at least $250,000,000 for A319's, at least
$300,000,000 for 757's and at least $400,000 for 747's] and (ii) cargo liability
insurance, in the case of both clause (i) and clause (ii), (A) of the type and
covering the same risks as from time to time applicable to aircraft operated by
Lessee (or, if a Sublease is then in effect, by Sublessee) of the same type as
the Aircraft and (B) which is maintained in effect with insurers of recognized
responsibility. Any policies of insurance carried in accordance with this
paragraph (a) and any policies taken out in substitution or replacement for any
of such policies (A) shall be amended to name Lessor, in its individual capacity
and as owner trustee, the Indenture Trustee and the Owner Participant (but
without imposing on any such parties liability to pay the premiums for such
insurance) (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) as additional insureds as their respective
interests may appear, (B) shall provide that in respect of the respective
interests of Lessor, the Indenture Trustee and the Owner Participant (and, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) in such policies the insurance shall not be invalidated by any action
or inaction of Lessee (or, if any Sublease is then in effect, any Sublessee) or
any other Person and shall insure Lessor, the Indenture Trustee and the Owner
Participant (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Lessee (or, if
any Sublease is then in effect, any Sublessee), (C) may provide for
self-insurance to the extent permitted by Section 11(d) and (D) shall provide
that if the insurers cancel such insurance for any reason whatever or if any
material change is made in such insurance which adversely affects the interest
of Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), or
such insurance shall lapse for non-payment of premium, such cancellation, lapse
or change shall not be effective as to Lessor, the Indenture Trustee or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease) for thirty (30) days (seven (7) days
in the case of war risk and allied perils coverage) after issuance to Lessor,
the Indenture Trustee or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), respectively,
of written notice by such insurers of such cancellation, lapse or change;
PROVIDED, HOWEVER, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice as
shall then be reasonably obtainable. Each liability policy (1) shall be primary
without right of contribution from any other insurance which is carried by
Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), (2)
shall expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured, and (3) shall waive any right of the insurers to any
set-off or counterclaim or any other deduction, whether by attachment or
otherwise, in respect of any liability of Lessor or the Indenture Trustee or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease) to the extent of any moneys due to
Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease).
(II) During any period that the Aircraft is on the ground
and not in operation, Lessee may carry or cause to be carried, in lieu of the
insurance required by clause (I) above, insurance otherwise conforming with the
provisions of said clause (I) except that (A) the amounts of coverage shall not
be required to exceed the amounts of public liability and property
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damage insurance from time to time applicable to aircraft owned or operated by
Lessee (or, if a Sublease is then in effect, by Sublessee) of the same type as
the Aircraft which are on the ground and not in operation; and (B) the scope of
the risks covered and the type of insurance shall be the same as from time to
time shall be applicable to aircraft owned or operated by Lessee (or, if a
Sublease is then in effect, by Sublessee) of the same type which are on the
ground and not in operation.
(b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT. (I)
Except as provided in clause (II) of this Section 11(b), Lessee shall maintain
or cause to be maintained in effect, at its or any Sublessee's expense, with
insurers of recognized responsibility, all-risk ground and flight aircraft hull
insurance covering the Aircraft and all-risk ground and flight coverage of
Engines and Parts while temporarily removed from the Aircraft and not replaced
by similar components (including, without limitation, war risk and governmental
confiscation and expropriation (other than by the government of registry of the
Aircraft) and hijacking insurance, if and to the extent the same is maintained
by Lessee (or, if a Sublease is then in effect, by Sublessee) with respect to
other aircraft owned or operated by Lessee (or such Sublessee) on the same
routes, except that Lessee (or such Sublessee) shall maintain war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance if the Aircraft is operated on
routes where the custom is for major international air carriers flying
comparable routes to carry such insurance) which is of the type as from time to
time applicable to aircraft owned or operated by Lessee (or, if a Sublease is
then in effect, by Sublessee) of the same type as the Aircraft; PROVIDED that
such insurance shall at all times while the Aircraft is subject to this Lease be
for an amount (subject to self-insurance to the extent permitted by Section
11(d)) not less than the Stipulated Loss Value for the Aircraft. Any policies
carried in accordance with this paragraph (b) covering the Aircraft and any
policies taken out in substitution or replacement for any such policies (i)
shall name Lessor, as owner trustee, the Indenture Trustee and the Owner
Participant (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) as additional insureds, as their respective
interests may appear (but without imposing on any such party liability to pay
premiums with respect to such insurance), (ii) may provide for self-insurance to
the extent permitted in Section 11(d), (iii) shall provide that (A) in the event
of a loss involving proceeds in excess of [$5,000,000 for A319's and 757's]
[$7,000,000 for 747's] (or, if the Aircraft is then under a Sublease, in excess
of [$3,000,000 for A319's and 757's] [$4,000,000 for 747's]), the proceeds in
respect of such loss up to an amount equal to the Stipulated Loss Value for the
Aircraft shall be payable to Lessor (or, so long as the Trust Indenture shall
not have been discharged, the Indenture Trustee) (except in the case of a loss
with respect to an Engine installed on an airframe other than the Airframe, in
which case Lessee (or any Sublessee) shall arrange for any payment of insurance
proceeds in respect of such loss to be held for the account of Lessor (or, so
long as the Trust Indenture shall not have been discharged, the Indenture
Trustee) whether such payment is made to Lessee (or any Sublessee) or any third
party), it being understood and agreed that in the case of any payment to Lessor
(or the Indenture Trustee) otherwise than in respect of an Event of Loss, Lessor
(or the Indenture Trustee) shall, upon receipt of evidence satisfactory to it
that the damage giving rise to such payment shall have been repaired or that
such payment shall then be required to pay for repairs then being made, pay the
amount of such payment to Lessee or its order, and (B) the entire amount of any
loss involving proceeds of [$5,000,000 for A319's and 757's] [$7,000,000 for
747's] (or, if the Aircraft is then under a Sublease, of [$3,000,000 for A319's
and 757's] [$4,000,000 for 747's]) or less or the amount of any proceeds of any
loss in
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excess of the Stipulated Loss Value for the Aircraft shall be paid to Lessee or
its order unless an Event of Default shall have occurred and be continuing and
the insurers have been notified thereof by Lessor or the Indenture Trustee, (iv)
shall provide that if the insurers cancel such insurance for any reason
whatever, or such insurance lapses for non-payment of premium or if any material
change is made in the insurance which adversely affects the interest of Lessor,
the Indenture Trustee or the Owner Participant, such cancellation, lapse or
change shall not be effective as to Lessor, the Indenture Trustee or the Owner
Participant (or, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) for thirty (30) days (seven (7) days in the case
of hull war risk and allied perils coverage) after issuance to Lessor, the
Indenture Trustee or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), respectively,
of written notice by such insurers of such cancellation, lapse or change,
PROVIDED, HOWEVER, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice as
shall then be reasonably obtainable, (v) shall provide that in respect of the
respective interests of Lessor, the Indenture Trustee and the Owner Participant
(and, if any Sublease shall be in effect, Lessee in its capacity as sublessor
under the Sublease) in such policies the insurance shall not be invalidated by
any action or inaction of Lessee (or, if a Sublease is then in effect, any
Sublessee) or any other Person and shall insure the respective interests of
Lessor, the Indenture Trustee and the Owner Participant (and, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), as
they appear, regardless of any breach or violation of any warranty, declaration
or condition contained in such policies by Lessee (or, if a Sublease is then in
effect, any Sublessee), (vi) shall be primary without any right of contribution
from any other insurance which is carried by Lessor, the Owner Participant or
the Indenture Trustee (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease), (vii) shall waive any right of
subrogation of the insurers against Lessor, the Owner Participant and the
Indenture Trustee (and, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease), and (viii) shall waive any right of
the insurers to set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of Lessor, the Indenture
Trustee, the Owner Participant or Lessee (or any Sublessee) to the extent of any
moneys due to Lessor, the Indenture Trustee or the Owner Participant. In the
case of a loss with respect to an engine (other than an Engine) installed on the
Airframe, Lessor shall hold any payment to it of any insurance proceeds in
respect of such loss for the account of Lessee or any other third party that is
entitled to receive such proceeds.
As between Lessor and Lessee, it is agreed that all insurance
payments received as the result of the occurrence of an Event of Loss will be
applied as follows:
(x) if such payments are received with respect to the
Airframe (or the Airframe and the Engines installed thereon),
(i) unless such property is replaced pursuant to the last
paragraph of Section 10(a), so much of such payments
remaining, after reimbursement of Lessor (as provided in
Section 7.01 of the Trust Agreement) for reasonable costs and
expenses, as shall not exceed the Stipulated Loss Value
required to be paid by Lessee pursuant to Section 10(a) hereof
shall be applied in reduction of Lessee's obligation to pay
such Stipulated Loss Value, if not already paid by Lessee, or,
if already paid by Lessee, shall be applied to reimburse
Lessee for its payment of such Stipulated Loss Value, and the
balance, if any, of such payments remaining thereafter will be
paid over to, or
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retained by, Lessee (or if directed by Lessee, any Sublessee);
or (ii) if such property is replaced pursuant to the last
paragraph of Section 10(a), such payments shall be paid over
to, or retained by, Lessee (or if directed by Lessee, any
Sublessee), PROVIDED that Lessee shall have fully performed,
or concurrently therewith will fully perform, the terms of the
last paragraph of Section 10(a) with respect to the Event of
Loss for which such payments are made; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 10(b)
hereof, so much of such payments remaining, after
reimbursement of Lessor (as provided in Section 7.01 of the
Trust Agreement) for reasonable costs and expenses, shall be
paid over to, or retained by, Lessee (or if directed by
Lessee, any Sublessee), PROVIDED that Lessee shall have fully
performed, or concurrently therewith will fully perform, the
terms of Section 10(b) with respect to the Event of Loss for
which such payments are made.
As between Lessor and Lessee, the insurance payments for any
property damage loss to the Airframe or any Engine not constituting an Event of
Loss with respect thereto will be applied in payment for repairs or for
replacement property in accordance with the terms of Sections 7 and 8, if not
already paid for by Lessee (or any Sublessee), and any balance (or if already
paid for by Lessee (or any Sublessee), all such insurance proceeds) remaining
after compliance with such Sections with respect to such loss shall be paid to
Lessee (or any Sublessee if directed by Lessee).
(II) During any period that the Aircraft is on the ground and
not in operation, Lessee may carry or cause to be carried, in lieu of the
insurance required by clause (I) above, insurance otherwise conforming with the
provisions of said clause (I) except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft owned or
operated by Lessee (or, if a Sublease is then in effect, by Sublessee) of the
same type similarly on the ground and not in operation, PROVIDED that Lessee
shall maintain insurance against risk of loss or damage to the Aircraft in an
amount equal to the Stipulated Loss Value of the Aircraft during such period
that the Aircraft is on the ground and not in operation.
(c) REPORTS, ETC. Lessee will furnish, or cause to be
furnished, to Lessor, the Indenture Trustee and the Owner Participant, on or
before the Delivery Date and on or before July 1 in each year thereafter during
the Term commencing July, _____, a report, signed by Aon Risk Services, Inc.,
Aon Risk Services of Minnesota, Inc. or any other independent firm of insurance
brokers reasonably acceptable to Lessor (the "INSURANCE BROKERS"), describing in
reasonable detail the insurance and reinsurance then carried and maintained with
respect to the Aircraft and stating the opinion of such firm that the insurance
then carried and maintained with respect to the Aircraft complies with the terms
hereof; PROVIDED, HOWEVER, that all information contained in the foregoing
report shall not be made available by Lessor, the Indenture Trustee, the Loan
Participants or the Owner Participant to anyone except (A) to permitted
transferees of Lessor's, the Loan Participants', the Owner Participant's or the
Indenture Trustee's interest who agree to hold such information confidential,
(B) to Lessor's, the Loan Participants', the Owner Participant's or the
Indenture Trustee's counsel or independent certified public accountants or
independent insurance advisors who agree to hold such information confidential
or (C) as may be
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required by any statute, court or administrative order or decree or governmental
ruling or regulation. Lessee will cause such Insurance Brokers to agree to
advise Lessor, the Indenture Trustee and the Owner Participant in writing of any
default in the payment of any premium and of any other act or omission on the
part of Lessee of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft. To the extent
such agreement is reasonably obtainable, Lessee will also cause such Insurance
Brokers to agree to advise Lessor, the Indenture Trustee and the Owner
Participant in writing at least thirty (30) days (seven (7) days in the case of
war risk and allied perils coverage), prior to the expiration or termination
date of any insurance carried and maintained on the Aircraft pursuant to this
Section 11. In addition, Lessee will also cause such Insurance Brokers to
deliver to Lessor, the Indenture Trustee and the Owner Participant, on or prior
to the date of expiration of any insurance policy referenced in a previously
delivered certificate of insurance, a new certificate of insurance,
substantially in the same form as delivered by Lessee to such parties on the
Delivery Date. In the event that Lessee or any Sublessee shall fail to maintain
or cause to be maintained insurance as herein provided, Lessor or the Indenture
Trustee may at its sole option provide such insurance and, in such event, Lessee
shall, upon demand, reimburse Lessor or the Indenture Trustee, as Supplemental
Rent, for the cost thereof to Lessor or the Indenture Trustee, as the case may
be, without waiver of any other rights Lessor or the Indenture Trustee may have;
PROVIDED, HOWEVER, that no exercise by Lessor or the Indenture Trustee, as the
case may be, of said option shall affect the provisions of this Lease, including
the provisions of Section 14(g) hereof.
(d) SELF-INSURANCE. Lessee may self-insure by way of
deductible, premium adjustment or franchise provisions or otherwise (including,
with respect to insurance maintained pursuant to Section 11(b), insuring for a
maximum amount which is less than the Stipulated Loss Value of the Aircraft) in
the insurance covering the risks required to be insured against pursuant to this
Section 11 under a program applicable to all aircraft in Lessee's fleet, but in
no case shall the aggregate amount of self-insurance in regard to Section 11(a)
and Section 11(b) exceed during any policy year, with respect to all of the
aircraft in Lessee's fleet (including, without limitation, the Aircraft), the
lesser of (a) 50% of the largest replacement value of any single aircraft in
Lessee's fleet or (b) 1-1/2% of the average aggregate insurable value (during
the preceding policy year) of all aircraft (including, without limitation, the
Aircraft) on which Lessee carries insurance. In addition, Lessee (and any
Sublessee) may self-insure to the extent of any applicable mandatory minimum per
aircraft (or, if applicable, per annum or other period) hull or liability
insurance deductible imposed by the aircraft hull or liability insurers.
(e) ADDITIONAL INSURANCE BY LESSOR AND LESSEE. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its interest
in the Aircraft in amounts in excess of that required to be maintained by this
Section 11; the Owner Participant either directly or through Lessor may carry
for its own account at its sole cost and expense insurance with respect to its
interest in the Aircraft, PROVIDED that such insurance does not prevent Lessee
(or any Sublessee) from carrying the insurance required or permitted by this
Section 11 or adversely affect such insurance or the cost thereof.
(f) INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE.
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance
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provided by, the United States Government or any agency or instrumentality
thereof or, upon the written consent of Lessor, other government of registry of
the Aircraft or any agency or instrumentality thereof, against such risk in an
amount which, when added to the amount of insurance against such risk maintained
by Lessee (or any Sublessee) with respect to the Aircraft (including permitted
self-insurance) shall be at least equal to the amount of insurance against such
risk otherwise required by this Section 11.
(g) APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF
DEFAULT. Any amount referred to in paragraph (b) of this Section 11 which is
payable to or retainable by Lessee (or any Sublessee) shall not be paid to or
retained by Lessee (or any Sublessee) if at the time of such payment or
retention an Event of Default shall have occurred and be continuing, but shall
be held by or paid over to Lessor as security for the obligations of Lessee (or
any Sublessee) under this Lease and, if Lessor declares this Lease to be in
default pursuant to Section 15 hereof, applied against Lessee's obligations
hereunder as and when due. At such time as there shall not be continuing any
such Event of Default, such amount shall be paid to Lessee (or such Sublessee)
to the extent not previously applied in accordance with the preceding sentence.
SECTION 12. INSPECTION. At all reasonable times and upon at
least 15 days' prior written notice to Lessee, Lessor, the Owner Participant
or the Indenture Trustee or their respective authorized representatives may
(not more than once every calendar year (unless an Event of Default has
occurred and is continuing when such inspection right shall not be so
limited)) inspect the Aircraft and inspect and make copies (at Lessor's, the
Owner Participant's or the Indenture Trustee's expense, as the case may be)
of the books and records of Lessee relating to the maintenance of the
Aircraft; any such inspection of the Aircraft shall be limited to a visual,
walk-around inspection and shall not include opening any panels, bays or the
like without the express consent of Lessee; PROVIDED that no exercise of such
inspection right shall interfere with the operation or maintenance of the
Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt by
Lessee of a written request from the Owner Participant specifying that the
Owner Participant desires to have an authorized representative observe the
next scheduled major overhaul to be performed on the Aircraft, Lessee shall
cooperate with the Owner Participant to enable the Owner Participant's
authorized representative to observe the next scheduled major overhaul to be
performed on the Aircraft; PROVIDED that Lessee shall be required to so
cooperate only to the extent necessary to enable the Owner Participant's
authorized representative to observe (i) one scheduled major overhaul during
each three year period of the Term and (ii) (notwithstanding the foregoing
clause (i) but only if a major overhaul is scheduled during the last year of
the Term) one scheduled major overhaul during the last year of the Term;
PROVIDED, FURTHER that the Owner Participant's authorized representative
shall merely observe such major overhaul, shall not interfere with or extend
in any manner the conduct or duration of the major overhaul and shall not be
entitled to direct any of the work performed in connection with such
overhaul. None of Lessor, the Owner Participant or the Indenture Trustee
shall have any duty to make any such inspection nor shall any of them incur
any liability or obligation by reason of not making such inspection.
SECTION 13. ASSIGNMENT. Except as otherwise provided herein,
Lessee will not, without prior written consent of Lessor, assign in whole or in
part any of its rights or obligations hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided herein, in the Trust Agreement or in the
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Participation Agreement. Subject to the foregoing, the terms and provisions of
this Lease shall be binding upon and inure to the benefit of Lessor and Lessee
and their respective successors and permitted assigns.
SECTION 14. EVENTS OF DEFAULT. Each of the following events
shall constitute an Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Event of Default shall continue so long as, but only as long as, it shall not
have been remedied:
(a) Lessee shall not have made a payment of Basic Rent or
Stipulated Loss Value within ten (10) Business Days after the same
shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value) after the same shall have
become due and such failure shall continue for ten (10) Business Days
after Lessee's receipt of written demand therefor by the party entitled
thereto (PROVIDED that any failure to pay any amount owed by Lessee
under the Tax Indemnity Agreement or any failure of Lessee to pay to
Lessor or the Owner Participant when due any Excluded Payments (as
defined in the Trust Indenture) shall not constitute an Event of
Default unless notice is given by the Owner Participant to Lessee and
the Indenture Trustee that such failure shall constitute an Event of
Default); or
(c) Lessee shall have failed to perform or observe (or caused
to be performed and observed), in any material respect, any covenant or
agreement (except the covenants set forth in the Tax Indemnity
Agreement and in clauses (i)(B) and (ii) of the first sentence of
second paragraph of EXHIBIT G) to be performed or observed by it under
any Operative Document, and such failure shall continue unremedied for
a period of thirty (30) days after receipt by Lessee of written notice
thereof from Lessor or the Indenture Trustee; PROVIDED, HOWEVER, that
if Lessee shall have undertaken to cure any such failure which arises
under clause (ii) or clause (iii) of the first sentence of Section
7(a), or under the second sentence of Section 7(a) as it relates to
maintenance, service, repair or overhaul or under Section 8 and,
notwithstanding the diligence of Lessee in attempting to cure such
failure, such failure is not cured within said thirty day period but is
curable with future due diligence, there shall exist no Event of
Default under this Section 14 so long as Lessee is proceeding with due
diligence to cure such failure and such failure is remedied not later
than three hundred sixty-five (365) days after receipt by Lessee of
such written notice; or
(d) any representation or warranty made by Lessee herein or in
the Participation Agreement or any document or certificate furnished by
Lessee in connection herewith or therewith or pursuant hereto or
thereto (except the representations and warranties set forth in Section
3 of the Tax Indemnity Agreement and such documents or certificates as
are furnished to the Owner Participant solely in connection with
matters dealt with in the Tax Indemnity Agreement and for no other
purpose and except for representations or warranties contained in the
Pass Through Trust Agreement, the Underwriting Agreement or the Note
Purchase Agreement or any document or
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instrument furnished pursuant to any thereof) shall prove to have been
incorrect in any material respect at the time made and such
incorrectness shall not have been cured (to the extent of the adverse
impact of such incorrectness on the interests of the Owner Participant,
Lessor or the Certificate Holders) within thirty (30) days after the
receipt by Lessee of a written notice from Lessor or the Indenture
Trustee advising Lessee of the existence of such incorrectness; or
(e) the commencement of an involuntary case or other
proceeding in respect of Lessee in an involuntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law
in the United States or seeking the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of Lessee or for all or substantially all of its property, or
seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding undismissed and
unstayed for a period of ninety (90) consecutive days or an order,
judgment or decree shall be entered in any proceeding by any court of
competent jurisdiction appointing, without the consent of Lessee, a
receiver, trustee or liquidator of Lessee, or of any substantial part
of its property, or sequestering any substantial part of the property
of Lessee and any such order, judgment or decree or appointment or
sequestration shall be final or shall remain in force undismissed,
unstayed or unvacated for a period of ninety (90) days after the date
of entry thereof; or
(f) the commencement by Lessee of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency or other
similar law in the United States, or the consent by Lessee to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of Lessee or for all or substantially all of its property, or the
making by Lessee of any assignment for the benefit of creditors, or
Lessee shall take any corporate action to authorize any of the
foregoing; or
(g) Lessee shall fail to carry and maintain on or with respect
to the Aircraft (or cause to be carried and maintained) insurance
required to be maintained in accordance with the provisions of Section
11 hereof;
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of an event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. REMEDIES. Upon the occurrence of any Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, declare by written notice to Lessee this
Lease
Agreement to be in default, provided, that, if an Event of Default referred to
in Section 14(e) or 14(f) shall have occurred, this Lease Agreement shall be
deemed to be declared in default without further act; and at any time
thereafter, so long as any such outstanding Events of Default shall not have
been remedied, Lessor may do one or more of
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the following with respect to all or any part of the Airframe and any or all of
the Engines as Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory requirements of,
applicable law then in effect; PROVIDED, HOWEVER, that during any period the
Aircraft is subject to the Civil Reserve Air Fleet Program in accordance with
the provisions of Section 7(b) hereof and in possession of the United States
government or an agency or instrumentality of the United States, Lessor shall
not, on account of any Event of Default, be entitled to do any of the following
in such manner as to limit Lessee's control under this Lease (or any Sublessee's
control under any Sublease) of any Airframe or any Engines installed thereon,
unless at least sixty (60) days' (or such lesser period as may then be
applicable under the Air Mobility Command program of the United States
Government) written notice of default hereunder shall have been given by Lessor
by registered or certified mail to Lessee (and any Sublessee) with a copy
addressed to the Contracting Office Representative for the Air Mobility Command
of the United States Air Force under any contract with Lessee (or any Sublessee)
relating to the Aircraft:
(a) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe or any Engine as Lessor may so demand to Lessor or its order
in the manner and condition required by, and otherwise in accordance
with all the provisions of, Section 5 as if such Airframe or Engine
were being returned at the end of the Term, or Lessor, at its option,
may enter upon the premises where all or any part of the Airframe or
any Engine is located and take immediate possession of and remove the
same by summary proceedings or otherwise (and/or, at Lessor's option,
store the same at Lessee's premises until disposal thereof by Lessor),
all without liability accruing to Lessor for or by reason of such entry
or taking of possession or removing whether for the restoration of
damage to property caused by such action or otherwise;
(b) sell the Airframe and/or any Engine at public or private
sale, as Lessor may determine, or otherwise dispose of, hold, use,
operate, lease to others or keep idle the Aircraft as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee, except as hereinafter set forth in this Section 15;
(c) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a)
or paragraph (b) above with respect to the Airframe and/or any Engine,
Lessor, by written notice to Lessee specifying a payment date which
shall be the Lease Period Date not earlier than ten days from the date
of such notice, may demand that Lessee pay to Lessor, and Lessee shall
pay Lessor, on the payment date so specified, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the installments of
Basic Rent for the Aircraft due for Lease Periods commencing on or
after the Delivery Date or the Lease Period Date specified as the
payment date in such notice), any unpaid Basic Rent due on Lease Period
Dates prior to the payment date so specified and, if any Basic Rent is
payable in arrears on such payment date as indicated on EXHIBIT B, any
Basic Rent payable on such payment date (including, in each case,
without limitation, any adjustments to Basic Rent payable pursuant to
Section 3(d)) PLUS whichever of the following amounts Lessor, in its
sole discretion, shall specify in such notice (together with interest,
if any, on such amount at the Past Due Rate from such specified payment
date until the date of actual payment of
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such amount): (i) an amount equal to the excess, if any, of the
Stipulated Loss Value for the Aircraft, computed as of the Lease Period
Date specified as the payment date in such notice, over the aggregate
fair market rental value (computed as hereafter in this Section 15
provided) of such Aircraft for the remainder of the Term, after
discounting such aggregate fair market rental value to present value as
of the Lease Period Date specified as the payment date in such notice
at an annual rate equal to the Base Rate plus 1%; or (ii) an amount
equal to the excess, if any, of the Stipulated Loss Value for such
Aircraft, computed as of the Lease Period Date specified as the payment
date in such notice over the fair market sales value of such Aircraft
(computed as hereafter in this Section provided) as of the Lease Period
Date specified as the payment date in such notice;
(d) in the event Lessor, pursuant to paragraph (b) above,
shall have sold the Airframe and/or any Engine, Lessor, in lieu of
exercising its rights under paragraph (c) above with respect to such
Aircraft, may, if it shall so elect, demand that Lessee pay Lessor, and
Lessee shall pay to Lessor, on the date of such sale, as liquidated
damages for loss of a bargain and not as a penalty (in lieu of the
installments of Basic Rent for the Aircraft due on or after such date),
any unpaid Basic Rent with respect to the Aircraft due prior to such
date (including, in each case, without limitation, any adjustments to
Basic Rent payable pursuant to Section 3(d)) PLUS the amount of any
deficiency between the net proceeds of such sale (after deduction of
all reasonable costs of sale) and the Stipulated Loss Value of such
Aircraft, computed as of the Stipulated Loss Value Date on or
immediately preceding the date of such sale together with interest, if
any, on the amount of such deficiency, at the Past Due Rate, from the
date of such sale to the date of actual payment of such amount; and/or
(e) Lessor may rescind, terminate or cancel this Lease
Agreement as to the Aircraft, and/or may exercise any other right or
remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover
damages for breach hereof.
For the purposes of paragraph (c) above, the "FAIR MARKET
RENTAL VALUE" or the "FAIR MARKET SALES VALUE" of the Aircraft shall be the
rental value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser, as
the case may be, under no compulsion to lease or purchase, as the case may be,
and an informed and willing lessor or seller in possession under no compulsion
to sell, as the case may be, in each case based upon the actual condition and
location of the Aircraft, which value shall be determined by mutual agreement
or, in the absence of mutual written agreement, pursuant to an appraisal
prepared and delivered by a nationally recognized firm of independent aircraft
appraisers nominated by Lessor, and Lessor shall immediately notify Lessee of
such nomination. Unless Lessee shall have objected in writing within ten days
after its receipt of Lessor's notice, Lessor's nomination shall be conclusive
and binding. If Lessee shall object, however, Lessor and Lessee shall endeavor,
within ten days after such objection is made, to select a mutually acceptable
appraiser; PROVIDED that, if Lessee shall not so endeavor to make such
selection, Lessor's nomination referred to in the preceding sentence hereof
shall be conclusive and binding. If Lessor and Lessee fail to reach agreement
(except for the reason referred to in the proviso in the preceding sentence), or
if any appraiser selected fails to act for any reason, then the question shall
be determined by an appraisal (applying the definitions of
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"fair market rental value" and "fair market sales value" as set forth above
based upon the actual condition of the Aircraft) mutually agreed to by two
recognized independent aircraft appraisers, one of which appraisers shall be
chosen by Lessor and one by Lessee within five Business Days after Lessor or
Lessee shall have received written notice from the other party of a demand that
such an appraisal be made, which notice shall specify the appraiser chosen by
the party giving the notice or, if such appraisers cannot agree on the amount of
such appraisal within twenty Business Days after the end of such five-day
period, each shall render its own appraisal and shall by mutual consent choose
another appraiser within five Business Days after the end of such twenty-day
period. If, within such five-day period, such two appraisers fail to appoint a
third appraiser, then either Lessor or Lessee, on behalf of both, may request
such appointment by the then President of the Association of the Bar of the City
of
New York (or any successor organization thereto) or, in his absence, failure,
refusal or inability to act, then either Lessor or Lessee may apply to the
American Arbitration Association (or any successor organization thereto) in
New
York, New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the appraisals
given by the other two appraisers. If the determination of one appraiser is more
disparate from the average of all three determinations than each of the other
two determinations, then the determination of such appraiser shall be excluded,
the remaining two determinations shall be averaged and such average shall be
final and binding upon the parties hereto. If no determination is more disparate
from the average of all three determinations than each of the other
determinations, then such average shall be final and binding upon the parties
thereto. The cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise
provided above and without duplication of amounts payable hereunder, for any and
all unpaid Rent due hereunder before, after or during the exercise of any of the
foregoing remedies and for all reasonable legal fees and other costs and
expenses (including fees of the appraisers hereinabove referred to) incurred by
Lessor, the Indenture Trustee, the Loan Participants and the Owner Participant
in connection with the return of the Airframe or any Engine in accordance with
the terms of Section 5 or in placing such Airframe or Engine in the condition
and airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to
this Section 15, Lessor (or the Indenture Trustee, any Loan Participant or the
Owner Participant) or Lessee may bid for and purchase such property. Lessor
agrees to give Lessee at least fifteen (15) days' prior written notice of the
date fixed for any public sale of the Airframe or any Engine or of the date on
or after which will occur the execution of any contract providing for any
private sale and any such public sale shall be conducted in general so as to
afford Lessee (and any Sublessee) a reasonable opportunity to bid. Except as
otherwise expressly provided above, no remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by Lessor
of any or all of such other remedies. No waiver by Lessor of any Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default.
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SECTION 16. LESSEE'S COOPERATION CONCERNING CERTAIN MATTERS.
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the execution
and delivery of any amendment to this Lease, to the Trust Indenture or to the
Trust Agreement, Lessee will cause such Lease Supplement, Trust Supplement (and,
in the case of the initial Lease Supplement and Trust Supplement, this Lease,
the Trust Agreement and the Trust Indenture as well) or amendment to be duly
filed and recorded, and maintained of record, in accordance with the applicable
laws of the government of registry of the Aircraft. In addition, Lessee will
promptly and duly execute and deliver to Lessor such further documents and take
such further action as Lessor or the Indenture Trustee may from time to time
reasonably request in order more effectively to carry out the intent and purpose
of this Lease and to establish and protect the rights and remedies created or
intended to be created in favor of Lessor and the Indenture Trustee hereunder,
including, without limitation, if requested by Lessor or the Indenture Trustee,
at the expense of Lessee, the execution and delivery of supplements or
amendments hereto or to the Trust Indenture, each in recordable form, subjecting
to this Lease and the Trust Indenture, any airframe or engine substituted for
the Airframe or any Engine pursuant to the terms thereof and the recording or
filing of counterparts thereof, in accordance with the laws of such
jurisdictions as Lessor or the Indenture Trustee may from time to time deem
advisable. Lessee agrees to furnish to Lessor and the Indenture Trustee promptly
after execution and delivery of any supplement and amendment hereto and promptly
after the execution and delivery of any supplement and amendment to the Trust
Indenture (except for any such supplement or amendment which does not require or
receive the approval of Lessee pursuant to the Operative Documents and is not
required pursuant to the terms of the Operative Documents), an opinion of
counsel reasonably satisfactory to Lessor and the Indenture Trustee as to the
due recording or filing of such supplement or amendment. Commencing in ____, on
or before April 30 of each year during the Term, Lessee will deliver to Lessor
and the Indenture Trustee a certificate of Lessee, signed by the President, a
Vice President, the Treasurer or the Chief Financial Officer of Lessee to the
effect that the signer is familiar with or has reviewed the relevant terms of
this Lease and the signer does not have actual knowledge of the existence, as of
the date of such certificate, of any condition or event which constitutes a
Default or an Event of Default. Lessee agrees that if the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, Treasurer or an
Assistant Treasurer of Lessee has actual knowledge of the existence of a
Default, then Lessee shall promptly give to Lessor, the Owner Participant and
the Indenture Trustee notice thereof and such other information relating thereto
as Lessor, the Owner Participant or the Indenture Trustee may reasonably
request. Lessee agrees that if an officer of Lessee has knowledge of the
existence of an Event of Default, Lessee shall promptly give to Lessor and the
Indenture Trustee notice thereof and such other information relating thereto as
Lessor or the Indenture Trustee may reasonably request. Lessee will deliver to
Lessor, the Owner Participant and the Indenture Trustee (i) within sixty (60)
days after the end of each of the first three quarterly periods of each fiscal
year of the Guarantor, the publicly filed Form 10Q report of the Guarantor; and
(ii) within one hundred twenty (120) days after the close of such fiscal year,
the publicly filed annual report and Form 10K report of the Guarantor.
SECTION 17. NOTICES. All notices required under the terms and
provisions hereof shall be by telecopier or other telecommunication means (with
such telecopy or other telecommunication means to be confirmed in writing), or
if such notice is impracticable, by
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registered, first-class airmail, with postage prepaid, or by personal delivery
of written notice and any such notice shall become effective when received,
addressed:
(i) if to Lessee, for U.S. MAIL at 0000 Xxxxxxxxx
Xxxxx (X0000), Xx. Xxxx, Xxxxxxxxx 00000-0000, and for
OVERNIGHT COURIER at 0000 Xxxx Xxx Xxxxxxx (X0000), Xxxxx,
Xxxxxxxxx 00000, Attention: Treasurer (Telecopy No. (612)
726-0665), or to such other address or telecopy number as
Lessee shall from time to time designate in writing to Lessor,
(ii) if to Lessor, at MAC: U1254-031, 00 Xxxxx Xxxx
Xxxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, Attention: Corporate Trust
Department (Telecopy No. (000) 000-0000), or to such other
address or telecopy number as Lessor shall from time to time
designate in writing to Lessee, and
(iii) if to a Loan Participant, the Indenture Trustee
or the Owner Participant, addressed to such Loan Participant,
the Indenture Trustee or the Owner Participant at such address
or telecopy number as such Loan Participant, the Indenture
Trustee or the Owner Participant shall have furnished by
notice to Lessor and to Lessee, and, until an address is so
furnished, addressed to such Loan Participant, the Indenture
Trustee or the Owner Participant at its address or telecopy
number set forth in Schedule I to the Participation Agreement.
SECTION 18. NO SET-OFF, COUNTERCLAIM, ETC. All Rent shall be
paid by Lessee to Lessor in funds of the type specified in Section 3(f).
Lessee's obligation to pay all Rent payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which Lessee may have against Lessor, in its individual capacity or as Owner
Trustee under the Trust Agreement, the Indenture Trustee (in its individual
capacity or as Indenture Trustee), any Loan Participant, the Owner Participant,
or anyone else for any reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions), including, without
limitation, any breach by Lessor or the Owner Participant of their respective
warranties, agreements or covenants contained in any of the Operative Documents,
(ii) any defect in the title, registration, airworthiness, condition, design,
operation, or fitness for use of, or any damage to or loss or destruction of,
the Aircraft, or any interruption or cessation in or prohibition of the use or
possession thereof by Lessee (or any Sublessee) for any reason whatsoever,
including, without limitation, any such interruption, cessation or prohibition
resulting from the act of any government authority, (iii) any insolvency,
bankruptcy, reorganization or similar case or proceedings by or against Lessee
(or any Sublessee) or any other person, or (iv) any other circumstance,
happening, or event whatsoever, whether or not unforeseen or similar to any of
the foregoing. If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees without limitation of the other
rights or remedies of Lessor hereunder to pay to Lessor an amount equal to each
Rent payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. Lessee hereby waives, to the extent permitted by applicable law, any
and all rights which it may now have or which at any time hereafter may be
conferred upon
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it, by statute or otherwise, to terminate, cancel, quit or surrender this Lease
except in accordance with the express terms hereof.
SECTION 19. RENEWAL OPTIONS; PURCHASE OPTIONS; VALUATION. (a)
RENEWAL OPTIONS. (1) FIXED RENEWAL TERM. Lessee shall have the right to renew
this Lease for a one year renewal term which shall commence only upon the
expiration of the Basic Term (the "FIRST FIXED RENEWAL TERM"), a one year
renewal term which shall commence only upon the expiration of the first Fixed
Renewal Term (the "SECOND FIXED RENEWAL TERM"), and a one year renewal term
which shall commence only upon the expiration of the second Fixed Renewal Term
(the "THIRD FIXED RENEWAL TERM") (the first Fixed Renewal Term, the second Fixed
Renewal Term and the third Fixed Renewal Term, each a "FIXED RENEWAL TERM") by
delivery to Lessor at least ninety (90) days before the end of the Basic Term,
the first Fixed Renewal Term or the second Fixed Renewal Term, as the case may
be, of a written notice irrevocably electing to renew this Lease for a Fixed
Renewal Term. Basic Rent during any Fixed Renewal Term shall be payable in an
amount and at the times specified in Section 19(a)(4).
(2) FAIR MARKET RENEWAL TERM. At the expiration of the third
Fixed Renewal Term or any Fair Market Renewal Term, Lessee shall have the right
to renew this Lease by delivery to Lessor of a written notice irrevocably
electing to renew this Lease for a renewal term of not less than one year and
not more than three years for a Basic Rent equal to the "fair market rental
value" of the Aircraft for such period (any such renewal term, a "FAIR MARKET
RENEWAL TERM"). Each such right to renew may be exercised by Lessee delivering
to Lessor, at least ninety (90) days prior to the commencement of such Fair
Market Renewal Term, a written notice irrevocably electing to renew this Lease
for a Fair Market Renewal Term (which notice shall also specify the length of
the Fair Market Renewal Term).
(3) If no written notice is delivered by Lessee to Lessor
pursuant to Section 19(a)(1) or 19(a)(2) on or before the day specified
therefor, Lessee shall be deemed to have waived any right to renew this Lease.
(4) At the end of the Basic Term or any Renewal Term, if
Lessee has elected to renew this Lease as aforesaid, and provided that there
shall not then have occurred and be continuing a Default of the type referred to
in Section 14(a), 14(b) or 14(e) or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above provided
and a Lease Supplement evidencing such renewal has been executed and filed for
recordation with the Federal Aviation Administration, this Lease shall continue
in full force and effect during the Renewal Term, except that (x) Lessee shall
pay Lessor Basic Rent for the Aircraft during the Renewal Term in an amount
equal to the "fair market rental value" thereof determined in accordance with
Section 19(c), each semi-annual installment of Basic Rent not to exceed in the
case of a Fixed Renewal Term 50% of the average Basic Rent during the Basic Term
(such average being determined as the total of all payments of Basic Rent during
the Basic Term added together and divided by the number of payments of Basic
Rent during the Basic Term), which Basic Rent shall be payable in semi-annual
installments in arrears, each such installment being due and payable on each
Lease Period Date occurring during the Renewal Term, commencing with the Lease
Period Date immediately following the commencement of the Renewal Term, and (y)
the Stipulated Loss Values applicable during the Renewal Term shall be
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determined separately for each Renewal Term by the Owner Participant in good
faith to reflect Stipulated Loss Values determined in accordance with the
following sentence. Stipulated Loss Values during a Renewal Term shall on the
date on which such Renewal Term begins be equal to the fair market sales value
of the Aircraft as of such date, determined in accordance with the provisions of
this Section 19(a)(4) and Section 19(c) hereof, and shall decline ratably on a
monthly basis to the fair market sales value of the Aircraft as of the last day
of such Renewal Term, determined in accordance with the provisions of this
Section 19(a)(4) and Section 19(c) hereof.
In determining fair market sales value for purposes of
calculating Stipulated Loss Value for any Renewal Term effect shall be given to
the encumbrance on the Aircraft of any Renewal Term available or in force under
this Section 19.
(b) PURCHASE OPTIONS. Lessee shall have the option, upon at
least ninety (90) days' irrevocable prior written notice to Lessor, to purchase
the Aircraft on the last Business Day of the Basic Term or any Renewal Term for
a purchase price equal to the lesser of (x) the fair market sales value of the
Aircraft or (y) 50% of Lessor's Cost. Upon payment to Lessor in immediately
available funds of the full amount of the purchase price and payment of any
other amounts then due hereunder (including all Rent and all costs or expenses
of the Owner Participant in connection with such purchase), Lessor will transfer
to Lessee, without recourse or warranty (except as to the absence of Lessor
Liens, including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens), all of Lessor's right, title and
interest in and to the Aircraft.
(c) VALUATION. At any time not earlier than three hundred
sixty-five (365) days prior to the date on which Lessee may purchase the
Aircraft pursuant to Section 19(b) hereof or renew this Lease pursuant to
Section 19(a)(1) or Section 19(a)(2) hereof, Lessee may deliver to Lessor a
revocable notice of its intent to exercise its renewal option or purchase
option. For all purposes of this Section 19, including the appraisal referred to
in this Section 19(c), in determining "fair market rental value" or "fair market
sales value", the Aircraft shall be valued (i) as if in the condition and
otherwise in compliance with the terms of Section 5 upon a return of the
Aircraft to the United States and as if it had been maintained at all times as
required in accordance with Section 7(a)(I) during periods when no Sublease was
in effect, (ii) on the basis of the value which would obtain in an arm's-length
transaction between an informed and willing buyer-user or lessee (other than a
lessee or an Affiliate of a lessee currently in possession or a used equipment
scrap dealer) under no compulsion to buy or lease and an informed and willing
seller or lessor unaffiliated with such buyer-user or lessee and under no
compulsion to sell or lease and disregarding the purchase and renewal options of
the lessee provided in this Lease, and (iii) in the case of such valuation for
determining "fair market rental value", assuming such lessee would have
substantially the same obligations during the Renewal Term as provided hereunder
including without limitation the obligations of Lessee to carry and maintain the
insurance required by Section 11 hereof and to make certain payments with
reference to Stipulated Loss Value during the applicable Renewal Term. Upon
receipt of such notice Lessor and Lessee shall confer in good faith with a view
to reaching agreement on the "fair market rental value" or "fair market sales
value" of the Aircraft. If the parties have not so agreed by two hundred seventy
(270) days prior to the end of the Basic Term or the Renewal Term in question,
then the question shall be determined by an appraisal mutually agreed to by two
recognized
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independent aircraft appraisers, one of which appraisers shall be chosen by
Lessor and one by Lessee within five Business Days after Lessor or Lessee shall
have received written notice from the other party of a demand that such an
appraisal be made, which notice shall specify the appraiser chosen by the party
giving the notice or, if such appraisers cannot agree on the amount of such
appraisal within twenty Business Days after the end of such five-day period,
each shall render its own appraisal and shall by mutual consent choose another
appraiser within five Business Days after the end of such twenty-day period. If,
within such five-day period, such two appraisers fail to appoint a third
appraiser, then either Lessor or Lessee, on behalf of both, may request such
appointment by the then President of the Association of the Bar of the City of
New York (or any successor organization thereto) or, in his absence, failure,
refusal or inability to act, then either Lessor or Lessee may apply to the
American Arbitration Association (or any successor organization thereto) in New
York, New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the appraisals
given by the other two appraisers. If the determination of one appraiser is more
disparate from the average of all three determinations than each of the other
two determinations, then the determination of such appraiser shall be excluded,
the remaining two determinations shall be averaged and such average shall be
final and binding upon the parties hereto. If no determination is more disparate
from the average of all three determinations than each of the other
determinations, then such average shall be final and binding upon the parties
thereto. Lessee and Lessor shall share equally all expenses relating to such
appraisal procedure provided if Lessee elects not to renew this Lease or
purchase the Aircraft following such appraisal, Lessee shall pay all expenses of
such appraisal.
(d) SPECIAL PURCHASE OPTION. On the EBO Date, Lessee shall
have the option, upon at least ninety (90) days' irrevocable prior notice to
Lessor and, if any Secured Certificates are then outstanding, the Indenture
Trustee, to purchase the Aircraft on such date for a purchase price equal to [,
at Lessee's option, either (a)] the Special Purchase Price [, or (b) the amount
set forth under the heading "Initial Installment" on EXHIBIT B (the "INITIAL
INSTALLMENT") (payable on the EBO Date) plus the Remaining Installments]. In
addition, if on such date there shall be any Secured Certificates outstanding,
Lessee shall have the option to assume, pursuant to Section 8(x) of the
Participation Agreement and Section 2.13 of the Trust Indenture, all of the
obligations of Lessor under the Trust Indenture. If such assumption is made, in
lieu of paying the Special Purchase Price on the EBO Date Lessee shall pay
Lessor a purchase price equal to (I) [(x) in the event Lessee has elected to pay
the Special Purchase Price,] the Special Purchase Price [or (y) in the event
Lessee has elected to pay the Initial Installment and the Remaining
Installments, the Initial Installment] minus [in either event] (II) an amount
equal to principal of, and accrued but unpaid interest on, any Secured
Certificates that are outstanding on such date. Upon such payment in full and
payment of any other amounts then due hereunder (including costs or expenses of
the Owner Participant in connection with such purchase, any installments of
Basic Rent due prior to such date and, if Basic Rent is payable in arrears on
such date as indicated on EXHIBIT B, on such date (but not any installment of
Basic Rent due on such date if Basic Rent is payable in advance on such date),
and all unpaid Supplemental Rent due on or prior to such date), [and, in the
event that Lessee has elected to pay the Initial Installment and the Remaining
Installments, after Lessee shall have provided Lessor with its undertaking to
pay the amounts due on the dates set forth under the heading "Remaining
Installments" on EXHIBIT B (the "REMAINING
-53-
INSTALLMENTS"),] Lessor will transfer to Lessee, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), all of Lessor's right, title and interest in and to the Aircraft and
under the Trust Indenture and, unless there shall be any Secured Certificates
outstanding after such payment, exercise such rights as it has to cause the
Aircraft to be released from the Lien of the Trust Indenture [; provided,
however, that in the event that Lessee has elected to pay the Initial
Installment and the Remaining Installments, Lessor shall retain a Lien on the
Aircraft until the Remaining Installments, together with interest thereon at the
Past Due Rate for any period from the date due to the date paid, are paid in
full, which Lien shall be evidenced by this Lease, which after the date Lessor
shall have transferred title to the Aircraft to Lessee shall be deemed
terminated as a true lease and shall continue as a lease intended for security,
MUTATIS MUTANDIS, to secure the payment when due of the Remaining Installments
-- provision may be utilized only if EBO Date occurs on or after maturity of
Secured Certificates].
SECTION 20. SECURITY FOR LESSOR'S OBLIGATION TO HOLDERS OF
SECURED CERTIFICATES. In order to secure the indebtedness evidenced by the
Secured Certificates, Lessor has agreed in the Trust Indenture, among other
things, to assign to the Indenture Trustee this Lease, the Lease Supplements and
any amendments to this Lease and to mortgage its interest in the Aircraft in
favor of the Indenture Trustee, subject to the reservations and conditions
therein set forth. To the extent, if any, that this Lease, the Lease Supplements
and any amendments to this Lease constitute chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease, the Lease Supplements and any
amendments to this Lease may be created through the transfer or possession of
any counterpart other than the original counterpart, which shall be identified
as the counterpart containing the receipt therefor executed by the Indenture
Trustee on the signature page thereof. Lessee hereby accepts and consents to the
assignment of all Lessor's right, title and interest in and to this Lease
pursuant to the terms of the Trust Indenture. Subject to Section 3(f) hereof,
Lessee agrees to pay directly to the Indenture Trustee (or, after receipt by
Lessee of notice from the Indenture Trustee of the discharge of the Trust
Indenture, to Lessor), all amounts of Rent due or to become due hereunder and
assigned to the Indenture Trustee and Lessee agrees that the Indenture Trustee's
right to such payments hereunder shall be absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, the
circumstances set forth in clauses (i) through (iv) of Section 18 hereof.
Notwithstanding the foregoing assignment of this Lease, the obligations of
Lessor to Lessee to perform the terms and conditions of this Lease shall remain
in full force and effect.
SECTION 21. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee
fails to make any payment of Rent required to be made by it hereunder or fails
to perform or comply with any of its agreements contained herein, then (but in
each case, except in the case of failure to pay Rent or in the case of failure
to maintain insurance as required hereunder, no earlier than the fifteenth day
after the occurrence of such failure, whether or not it shall yet constitute an
Event of Default hereunder) Lessor may itself make such payment or perform or
comply with such agreement but shall not be obligated hereunder to do so, and
the amount of such payment and the amount of the reasonable expenses of Lessor
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
Past Due Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand.
-54-
SECTION 22. INVESTMENT OF SECURITY FUNDS; LIABILITY OF LESSOR
LIMITED. (a) INVESTMENT OF SECURITY FUNDS. Any moneys held by Lessor as security
hereunder for future payments to Lessee at a time when there is not continuing
an Event of Default shall, until paid to Lessee, be invested by Lessor or, if
the Trust Indenture shall not have been discharged, by the Indenture Trustee, as
the case may be, as Lessee may from time to time direct in writing (and in
absence of a written direction by Lessee, there shall be no obligation to invest
such moneys) in (i) direct obligations of the United States of America and
agencies guaranteed by the United States government having a final maturity of
ninety (90) days or less from date of purchase thereof; (ii) certificates of
deposit issued by, bankers' acceptances of, or time deposits with, any bank,
trust company or national banking association incorporated under the laws of the
United States of America or one of the states thereof having combined capital
and surplus and retained earnings as of its last report of condition of at least
$500,000,000 and having a rating of Aa or better by Xxxxx'x Investors Service,
Inc. ("MOODY'S") or AA or better by Standard & Poor's Ratings Services, a
division of XxXxxx-Xxxx Companies, Inc. ("S&P") and having a final maturity of
ninety (90) days or less from date of purchase thereof; and (iii) commercial
paper of any holding company of a bank, trust company or national banking
association described in (ii) and commercial paper of any corporation or finance
company incorporated or doing business under the laws of the United States of
America or any state thereof having a rating assigned to such commercial paper
of A1 by S&P or P1 by Moody's and having a final maturity of ninety (90) days or
less from the date of purchase thereof; PROVIDED, HOWEVER, that the aggregate
amount at any one time so invested in certificates of deposit issued by any one
bank shall not be in excess of 5% of such bank's capital and surplus. Any of the
investments permitted hereunder may be made through or with, as applicable, the
entity acting as Indenture Trustee or its Affiliates. There shall be promptly
remitted to Lessee or its order (but no more frequently than monthly) any gain
(including interest received) realized as a result of any such investment (net
of any fees, commissions and other expenses, if any, incurred in connection with
such investment) unless an Event of Default shall have occurred and be
continuing. Lessee shall be responsible for any net loss realized as a result of
any such investment and shall reimburse Lessor (or the Indenture Trustee, as the
case may be) therefor on demand.
(b) LIABILITY OF LESSOR LIMITED. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under the
Trust Agreement, and the institution acting as Lessor shall not be liable in its
individual capacity for any breach thereof except for its gross negligence or
willful misconduct or for breach of its covenants, representations and
warranties contained herein, to the extent covenanted or made in its individual
capacity.
SECTION 23. SERVICE OF PROCESS. Lessor and Lessee each hereby
irrevocably submits itself to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York and to the
non-exclusive jurisdiction of the Supreme Court of the State of New York, New
York County, for the purposes of any suit, action or other proceeding arising
out of this Lease, the subject matter hereof or any of the transactions
contemplated hereby brought by Lessor, Lessee, the Indenture Trustee, the Loan
Participants or the Owner Participant or their successors or assigns.
SECTION 24. MISCELLANEOUS. Any provision of this Lease which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of
-55-
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. No term or provision of this Lease may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
Lessor, Lessee and any assignee of Lessor's rights hereunder. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as a lessee only. Neither Lessee nor any affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft. The section and paragraph headings in this
Lease and the table of contents are for convenience of reference only and shall
not modify, define, expand or limit any of the terms or provisions hereof and
all references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 25. SUCCESSOR TRUSTEE. Lessee agrees that in the case
of the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all
purposes hereof without the necessity of any consent or approval by Lessee
(subject to Section 10 of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor Owner Trustees pursuant to the
Trust Agreement, but such right may be exercised repeatedly as long as this
Lease shall be in effect.
SECTION 26. COVENANT OF QUIET ENJOYMENT. So long as no Event
of Default shall have occurred and be continuing and notwithstanding any default
by Lessor, the Owner Participant or the Indenture Trustee under the
Participation Agreement, the Trust Agreement or the Trust Indenture, Lessor
shall not interfere with Lessee's (or any Sublessee's) continued possession, use
and operation of, and quiet enjoyment of, the Aircraft or Lessee's rights,
benefits and obligations pursuant to the Overall Transaction during the Term of
this Lease, and this Lease shall not be terminated except as expressly provided
herein.
-56-
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease to be duly executed as of the day and year first above written.
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, not
in its individual capacity,
except as expressly
provided herein, but solely
as Owner Trustee,
Lessor
By:
----------------------------------------
Name:
Title:
NORTHWEST AIRLINES, INC.,
LESSEE
By:
----------------------------------------
Name:
Title:
Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on the _____ day of [____________]
STATE STREET BANK AND
TRUST COMPANY,
INDENTURE TRUSTEE
By:
----------------------------------------
Name:
Title:
-SIGNATURE PAGE-
EXHIBIT A
TO
LEASE AGREEMENT
[NW ____ _]
LEASE SUPPLEMENT NO.
[NW ____ _]
LEASE SUPPLEMENT NO. __, dated [_________] between XXXXX FARGO
BANK NORTHWEST, NATIONAL ASSOCIATION, not in its individual capacity, but solely
as Owner Trustee under the Trust Agreement [NW ____ _], dated as of
[_____________] between _____________________, as Owner Participant, and such
Owner Trustee (such Owner Trustee, in its capacity as such Owner Trustee, being
herein called "LESSOR"), and NORTHWEST AIRLINES, INC. ("LESSEE").
Lessor and Lessee have heretofore entered into that certain
Lease Agreement [NW ____ _], dated as of [___________], relating to one [Airbus
A319-113/114] [Boeing 757-351] [Boeing 747-451] aircraft (herein called the
"LEASE," and the defined terms therein being hereinafter used with the same
meanings). The Lease provides for the execution and delivery from time to time
of Lease Supplements for the purpose of leasing the Airframe and Engines under
the Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof.
(1)The Lease relates to the Airframe and Engines described
below, and a counterpart of the Lease is attached hereto, and made a part
hereof, and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the Federal Aviation Administration as
one document.
(2)The Lease Agreement relates to the Airframe and Engines
described below, and a counterpart of the Lease Agreement, attached and made a
part of Lease Supplement No. 1 dated [______________] to the Lease Agreement,
has been recorded by the Federal Aviation Administration on [_____________], as
one document and assigned Conveyance No. __.
NOW, THEREFORE, in consideration of the premises and other
good and sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the following
described [Airbus A319-113/114] [Boeing 757-351] [Boeing 747-451] aircraft (the
"AIRCRAFT"), which Aircraft as of the date hereof consists of the following
components:
(i) Airframe: FAA Registration No. ______;
manufacturer's serial no. _____; and
-----------------
(1) This language for Lease Supplement No. 1.
(2) This language for other Lease Supplements.
EXHIBIT A - PAGE 1
(ii) Engines: [two (2)] [four (4)] [CFM
International, Inc. Model CFM56-5A4/5A5] [Xxxxx & Xxxxxxx
Model PW2040] [Xxxxx & Whitney Model PW4056] engines bearing,
respectively, manufacturer's serial nos. ______ and ______
(each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft shall commence on the Delivery
Date and end on [_______________].
3. Lessee hereby confirms its agreement to pay Lessor Basic
Rent for the Aircraft throughout the Term therefor in accordance with Section 3
of the Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted
the Aircraft for all purposes hereof and of the Lease as being airworthy, in
good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; PROVIDED, HOWEVER, that nothing
contained herein or in the Lease shall in any way diminish or otherwise affect
any right Lessee or Lessor may have with respect to the Aircraft against [AVSA,
S.A.R.L.] [The Boeing Company], or any subcontractor or supplier of [AVSA,
S.A.R.L.] [The Boeing Company], under the Purchase Agreement or otherwise.
5. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
6. This Lease Supplement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any jurisdiction), no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
original counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
hereof.
EXHIBIT A - PAGE 2
In Witness Whereof, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
XXXXX FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY,
BUT SOLELY AS OWNER TRUSTEE,
LESSOR
By:
----------------------------------------
Name:
Title:
NORTHWEST AIRLINES, INC.,
LESSEE
By:
----------------------------------------
Name:
Title:
(3)Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ____ day of [______________]
STATE STREET BANK AND
TRUST COMPANY,
INDENTURE TRUSTEE
By:
-----------------------------------------
Name:
Title:
-----------------
(3) This language contained in the original counterpart only.
EXHIBIT A - PAGE 3
EXHIBIT B
TO
LEASE AGREEMENT
[NW ____ _]
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent:
Basic Rent Payable in Basic Rent Payable in Total Basic Rent
Lease Period Advance (Percentage of Arrears (Percentage of (Percentage of
Date Lessor's Cost) Lessor's Cost) Lessor's Cost)
------------------ ------------------------- ------------------------- ------------------
EXHIBIT B - PAGE 1
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
-----------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent Payable in Basic Rent Payable in Total Basic Rent
Lease Period Advance (Percentage of Arrears (Percentage of (Percentage of
Date Lessor's Cost) Lessor's Cost) Lessor's Cost)
------------------ ------------------------- ------------------------- ------------------
EXHIBIT B - PAGE 2
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
Lessor's Cost for the Aircraft: $[___________]
Special Purchase Price: [_____________]% of Lessor's Cost on [______________].
[Initial Installment: [__]% of Lessor's Cost on [ ].
Remaining Installments: DATE AMOUNT
---- ------
April 15, [ ] [__]% of Lessor's Cost
June 15, [ ] [__]% of Lessor's Cost
September 15, [ ] [__]% of Lessor's Cost
December 15, [ ] [__]% of Lessor's Cost]
EXHIBIT B - PAGE 3
EXHIBIT C
TO
LEASE AGREEMENT
[NW ____ _]
STIPULATED LOSS VALUE SCHEDULE
------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 1
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 2
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 3
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 4
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 5
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 6
STIPULATED LOSS VALUE SCHEDULE
------------------------------
Stipulated Stipulated Loss
Loss Value Date Value Percentage
-------------------- --------------------
EXHIBIT C - PAGE 7
EXHIBIT D
TO
LEASE AGREEMENT
[NW ____ _]
TERMINATION VALUE SCHEDULE
--------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Termination
Termination Date Value Percentage
-------------------- --------------------
EXHIBIT D - PAGE 1
EXHIBIT E
TO
LEASE AGREEMENT
[NW ____ _]
RENT RECALCULATION VERIFICATION
-------------------------------
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
1. Any recalculation of Basic Rent, Stipulated Loss Value
percentages, Termination Value percentages, [the Initial Installment, the
Remaining Installments] and the Special Purchase Price pursuant to the Lease
shall be determined by the Owner Participant, and shall maintain the Owner
Participant's Net Economic Return except as assumptions have been modified
pursuant to Section 3 of the Lease or pursuant to the Tax Indemnity Agreement or
the Participation Agreement, as the case may be; PROVIDED, HOWEVER, that Lessee
may request (A) Lessee's independent public accountants to verify such
calculations but without any requirement that the Owner Participant disclose to
such persons the methodology and assumptions and (B) if Lessee believes that
such calculations by the Owner Participant are in error then a nationally
recognized firm of accountants selected by Lessee and reasonably acceptable to
the Owner Participant shall be permitted to verify such calculations and the
Owner Participant will make available to such firm (subject to the execution by
such firm of a confidentiality agreement reasonably acceptable to the Owner
Participant) the methodology and assumptions and any changes made therein
pursuant to Section 3 of the Lease. In the event of a verification under clause
(B) of the first sentence of this paragraph 1 the determination by such firm of
accountants shall be final. Lessee will pay the reasonable costs and expenses of
the verification under clause (B) of the first sentence of this paragraph 1
unless an error adverse to Lessee is established by such firm, and if as a
result of such verification process the Basic Rent is adjusted and such
adjustment causes the Net Present Value of Rents to decline by [_] or more basis
points (in which event the Owner Participant shall pay the reasonable costs and
expenses of such verification process). Such recalculated Basic Rent, Stipulated
Loss Value percentages, Termination Value percentages [, Initial Installment,
Remaining Installments] and Special Purchase Price shall be set forth in a Lease
Supplement or an amendment to the Lease.
2. "NET ECONOMIC RETURN" means the Owner Participant's net
after-tax yield and aggregate after-tax cash flow, in each case computed from
the Delivery Date through the EBO Date and through [___________________],
utilizing the multiple investment sinking fund method of analysis, computed on
the basis of the same methodology and assumptions as were utilized by the Owner
Participant in determining Basic Rent, the Special Purchase Price, [the Initial
Installment, the Remaining Installments,] Stipulated Loss Value and Termination
Value percentages as of the Delivery Date.
EXHIBIT E - PAGE 1
EXHIBIT F
TO
LEASE AGREEMENT
[NW ____ _]
SCHEDULE OF DOMICILES OF PERMITTED SUBLESSEES
---------------------------------------------
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Egypt Portugal
Finland Republic of China (Taiwan)*
France Singapore
Germany South Africa
Greece South Korea
Hungary Spain
Iceland Sweden
India Switzerland
Indonesia Thailand
Ireland Trinidad and Tobago
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
----------------------
* So long as on the date of entering into the proposed sublease such country and
the United States have diplomatic relations at least as good as those in effect
on the Delivery Date.
EXHIBIT F - PAGE 1
EXHIBIT G
TO
LEASE AGREEMENT
[NW ____ _]
RETURN CONDITIONS
-----------------
The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto deem
it to contain confidential information.
Unless purchased by Lessee pursuant to Section 19 of the
Lease, at the time of return of the Airframe upon the expiration of the Lease at
the end of the Basic Term or any Renewal Term or upon the termination of the
Lease pursuant to Section 9(c) or 15 of the Lease: (i) in the event that Lessee
(or any Sublessee then in possession of the Aircraft) shall not then be using a
continuous maintenance program with respect to the Airframe, Lessee agrees that
during the period of operation of the Aircraft immediately prior to such return
(A) Lessee or such Sublessee, as the case may be, shall have been using a block
overhaul program with respect to the Airframe which shall have been approved by
all necessary governmental approvals of the country under the laws of which the
Aircraft shall then have been registered and (B) the Airframe shall have
remaining until the next scheduled block overhaul at least 25% of the allowable
hours between block overhauls permitted under the block overhaul program then
used by Lessee or such Sublessee, (ii) in the event that Lessee (or any
Sublessee then in possession of the Aircraft) during the period of operation of
the Aircraft immediately prior to such return shall not have been using an
on-condition maintenance program with respect to the Engines or engines, Lessee
agrees that the average number of hours or cycles of operation (whichever shall
be applicable under the maintenance program then in use with respect to such
Engines or engines) on such Engines or engines remaining until the next
scheduled engine refurbishment shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine refurbishment allowed under the
maintenance program then in use with respect to such Engines or engines which
shall have been approved by all necessary governmental approvals of the country
under the laws of which the Aircraft shall have then been registered, (iii) the
Aircraft shall have all Lessee's and any Sublessee's exterior markings removed
or painted over and the areas where such markings were removed or painted over
refurbished as necessary to blend with adjacent areas, (iv) the Aircraft shall
have no outstanding airworthiness directives issued by the FAA requiring
terminating action by the date of return, and (v) the Aircraft shall be in
Lessee's or such Sublessee's passenger configuration and the interior of the
Airframe shall be clean in accordance with Lessee's customary standards for a
"between flights" cleaning. In the event the FAA shall issue any directive which
would require improvements to the Aircraft in order for the airworthiness
certificate of the Aircraft to be maintained in good standing, Lessee shall not
apply for an extension of the date of compliance with the directive as to the
Aircraft to a date after the date of return of the Aircraft pursuant to Section
5 of the Lease, unless it shall previously or concurrently have applied for such
an extension with respect to all [Airbus A319-100] [Boeing 757-300] [Boeing
747-400] aircraft in its fleet affected by such directive.
If clause (i)(B) of the first sentence of the preceding
paragraph shall be applicable but the Airframe does not meet the conditions
specified in said clause (i)(B), Lessee shall pay or
EXHIBIT G - PAGE 1
cause to be paid to Lessor a Dollar amount computed by multiplying (I) 120% of
the average direct cost to Lessee (based upon the actual direct cost to Lessee
for similar aircraft in the fleet of Lessee) during the preceding 12 months of
performing an airframe block overhaul of the type referred to in such clause (i)
by (II) a fraction of which (x) the numerator shall be the excess of 25% of
hours of operation allowable between such block overhauls over the actual number
of hours of operation remaining on the Airframe to the next such block overhaul
and (y) the denominator shall be the number of hours of operation allowable
between such block overhauls in accordance with such block overhaul program.
If clause (ii) of the first sentence of the second preceding
paragraph shall be applicable but the Engines or engines do not meet the
conditions specified in said clause (ii), Lessee shall pay or cause to be paid
to Lessor a Dollar amount computed by multiplying (aa) [two] [four] by (bb) 120%
of the average direct cost to Lessee (based upon the actual direct cost to
Lessee for similar aircraft in the fleet of Lessee) during the preceding 12
months of performing for an engine of the same model as the Engines the
scheduled engine refurbishment under the maintenance program then used by Lessee
or any Sublessee for engines of the same model as the Engines by (cc) a fraction
of which (x) the numerator shall be the excess of 25% of the hours or cycles of
operation (whichever is applicable) between engine refurbishment allowable for
an engine under the maintenance program then in use with respect to such Engines
or engines over the actual average number of hours or cycles of operation on
such Engines or engines remaining until the next such scheduled engine
refurbishment and (y) the denominator shall be the number of hours or cycles
allowable between such scheduled engine refurbishment.
EXHIBIT G - PAGE 2
