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EXHIBIT 4.21
EXHIBIT A-2 to
Note Purchase Agreement
FORM OF LEASE
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CONFIDENTIAL: Annexes B, C and D and Schedules 1, 2A, 2B, 3 and 4 of
this Lease Agreement are subject to Restrictions on Dissemination Set
Forth in Section 8 of the Participation Agreement (as defined herein)
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LEASE AGREEMENT
Dated as of _______________
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
ATLAS AIR, INC.,
Lessee
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One Boeing Model 747-47UF Aircraft Bearing
United States Registration No. N______
and Bearing Manufacturer's Serial No. ______
with four GE Model __ Engines
Bearing Engine Manufacturer's Serial
Nos. ______, ______, ______ and ______
================================================================================
The right, title and interest of Lessor in and to, among other things,
this Lease Agreement has been assigned to and is subject to a security interest
in favor of Wilmington Trust Company, a Delaware banking corporation, as
Mortgagee, under the Trust Indenture and Mortgage, dated as of ,
, for the benefit of the holders of the Equipment Notes referred to
in such Trust Indenture, all to the extent provided in such Trust Indenture.
This Lease Agreement has been executed in multiple counterparts; to the extent,
if any, that this Lease Agreement constitutes chattel paper (as defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in Lessor's right, title and interest in and to this Lease
Agreement may be perfected through the delivery or possession of any counterpart
of this Lease Agreement other than the counterpart of this Lease Agreement that
contains the original receipt executed by Wilmington Trust Company, as
Mortgagee.
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND CONSTRUCTION......................................................................1
SECTION 2. DELIVERY AND ACCEPTANCE...........................................................................2
2.1 Delivery and Lease of Aircraft........................................................................2
2.2 Acceptance by Lessee..................................................................................2
SECTION 3. TERM AND RENT.....................................................................................3
3.1 Term .................................................................................................3
3.2 Rent .................................................................................................3
3.3 Payments..............................................................................................7
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS....................................8
4.1 Disclaimer............................................................................................8
4.2 Certain Agreements of Lessor..........................................................................9
4.3 Quiet Enjoyment.......................................................................................9
4.4 Investment of Funds Held as Security.................................................................10
4.5 Title Transfers by Lessor............................................................................11
4.6 Lessor's Interest in Certain Engines.................................................................12
4.7 Lease for U.S. Federal Income Tax Law Purposes; Section 1110 of Bankruptcy Code......................12
SECTION 5. RETURN OF AIRCRAFT...............................................................................13
5.1 Compliance with Annex B..............................................................................13
5.2 Storage and Related Matters..........................................................................13
5.3 Return of Other Engines..............................................................................14
5.4 Fuel ................................................................................................14
SECTION 6. LIENS ...........................................................................................14
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS......................................16
7.1 Registration and Operation...........................................................................16
7.2 Possession...........................................................................................18
7.3 Certain Limitations on Subleasing or Other Relinquishment of Possession..............................23
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS
AND ADDITIONS; OTHER LESSEE COVENANTS...............................................25
8.1 Maintenance; Replacement and Pooling of Parts; Alterations, Modifications and
Additions....................................................................................25
8.2 Information, Certificates, Notices and Reports.......................................................25
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SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE..........................................................27
9.1 Right of Termination.................................................................................27
9.2 Election by Lessor to Sell...........................................................................29
9.3 Retention of Aircraft by Lessor......................................................................32
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.............................................................34
10.1 Event of Loss With Respect to Aircraft..............................................................34
10.2 Event of Loss With Respect to an Engine.............................................................37
10.3 Conditions to any Replacement.......................................................................38
10.4 Conveyance to Lessee................................................................................41
10.5 Application of Payments.............................................................................41
10.6 Requisition of Aircraft for Use.....................................................................42
10.7 Requisition of an Engine for Use....................................................................43
10.8 Application of Payments.............................................................................43
10.9 Application of Payments During Existence of a Special Default.......................................44
SECTION 11. INSURANCE ......................................................................................44
11.1 Lessee's Obligation to Insure.......................................................................44
11.2 Insurance for Own Account...........................................................................45
11.3 Indemnification by Government in Lieu of Insurance..................................................45
11.4 Application of Insurance Proceeds...................................................................45
11.5 Application of Payments During Existence of a Special Default.......................................46
SECTION 12. INSPECTION .....................................................................................46
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE.....................................................47
13.1 In General..........................................................................................47
13.2 Merger of Lessee....................................................................................48
13.3 Assignment Security for Lessor's Obligations........................................................49
13.4 Successor Owner Trustee.............................................................................50
SECTION 14. LEASE EVENTS OF DEFAULT.........................................................................50
14.1 Payments............................................................................................50
14.2 Insurance...........................................................................................51
14.3 Other Covenants.....................................................................................51
14.4 Representations and Warranties......................................................................51
14.5 Bankruptcy and Insolvency...........................................................................52
SECTION 15. REMEDIES AND WAIVERS............................................................................53
15.1 Remedies............................................................................................53
15.2 Limitations Under CRAF..............................................................................57
15.3 Right to Perform for Lessee.........................................................................58
15.4 Determination of Fair Market Rental Value and Fair Market Sales Value...............................58
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15.5 Remedies Cumulative.................................................................................59
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC..............................................59
SECTION 17. RENEWAL AND PURCHASE OPTIONS....................................................................60
17.1 Preliminary Notices.................................................................................60
17.2 Renewal Options.....................................................................................61
17.3 Purchase Option.....................................................................................63
17.4 Appraisals..........................................................................................65
SECTION 18. MISCELLANEOUS...................................................................................66
18.1 Amendments..........................................................................................66
18.2 Severability........................................................................................67
18.3 Third-Party Beneficiary.............................................................................67
18.4 Reproduction of Documents...........................................................................67
18.5 Counterparts........................................................................................68
18.6 Notices.............................................................................................68
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE....................................................69
18.8 Survival............................................................................................70
18.9 No Waiver...........................................................................................70
18.10 Entire Agreement....................................................................................71
EXHIBITS, SCHEDULES AND ANNEXES
EXHIBIT A Form of Lease Supplement
EXHIBIT B Form of Return Acceptance Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2A Basic Rent
SCHEDULE 2B Basic Rent Allocation
SCHEDULE 3 Stipulated Loss Value Schedule
SCHEDULE 4 Termination Value Schedule
SCHEDULE 5 Permitted Countries
SCHEDULE 6 Placards
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
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LEASE AGREEMENT
LEASE AGREEMENT dated as of _______________ (this "Agreement"
or "Lease"), between (a) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) ATLAS AIR,
INC., a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee are parties to the Participation
Agreement, pursuant to which, among other things, Lessor and Lessee have agreed
to enter into this Agreement.
B. Pursuant to the Trust Agreement, Owner Participant has
authorized Lessor to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements contained herein and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 Delivery and Lease of Aircraft
Lessor hereby agrees (subject to the satisfaction or waiver of
the conditions set forth in Section 5 of the Participation Agreement) to lease
to Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commencing
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immediately upon acquisition of the Aircraft by Lessor pursuant to the Purchase
Agreement Assignment.
2.2 Acceptance by Lessee
(a) By executing and delivering Lease Supplement No. 1, Lessee
confirms to Lessor that Lessee has duly and irrevocably accepted delivery of the
Aircraft for all purposes of this Agreement.
(b) Lessor has authorized one or more employees of Lessee,
designated by Lessee in writing, as the authorized representative or
representatives of Lessor to accept delivery of the Aircraft on behalf of Lessor
pursuant to the Purchase Agreement Assignment and the Participation Agreement.
Lessee hereby agrees that if delivery of the Aircraft shall be accepted by an
employee or employees of Lessee pursuant to such authorization by Lessor, such
acceptance of delivery by such employee or employees on behalf of Lessor shall,
without further act, irrevocably constitute acceptance by Lessee of the Aircraft
for all purposes of this Agreement.
SECTION 3. TERM AND RENT
3.1 Term
The Aircraft shall be leased hereunder for the Term, unless
this Agreement or the leasing of the Aircraft is earlier terminated in
accordance with any provision of this Agreement. Lessee shall have the option to
renew the leasing of the Aircraft hereunder pursuant to, and subject to the
terms and conditions of, Section 17.
3.2 Rent
3.2.1 Basic Rent; Adjustments to Basic Rent and Certain Other
Amounts
(a) During the Base Lease Term, Lessee shall pay to Lessor, on
each Payment Date, Basic Rent in the amount equal to the percentage of Lessor's
Cost specified in Schedule 2 for such Payment Date, which shall be allocated to
the Payment Period ending on such Payment Date, if designated as a payment in
arrears, or allocated to the Payment Period commencing on such Payment Date, if
designated as a payment in advance, in each case as specified in Schedule 2, as
such amount may be adjusted pursuant to Section 3.2.1(b).
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(b) Basic Rent, Stipulated Loss Values and Termination Values,
the EBO Price and the EBO Date shall be subject to adjustment as follows:
(i) In the event that Transaction Expenses paid by Lessor
pursuant to Section 9.2 of the Participation Agreement are determined
to be other than [ ]% of Lessor's Cost, then in each case the Basic
Rent percentages set forth in Schedule 2, the Stipulated Loss Value
percentages set forth in Schedule 3, the Termination Value percentages
set forth in Schedule 4 and the EBO Price and the EBO Date set forth in
Schedule 1 shall be recalculated (upwards or downwards) by the Owner
Participant, on or prior to the 120th day after the Delivery Date using
the same methods and assumptions used to calculate the original Basic
Rent, Stipulated Loss Value and Termination Value percentages and the
EBO Price and the EBO Date in order to (1) maintain the Owner
Participant's Net Economic Return and (2) minimize the Net Present
Value of Rents and the EBO Price to Lessee to the extent possible
consistent with clause (1) hereof.
(ii) In the event of a refinancing as contemplated by Section
11 of the Participation Agreement, then the Basic Rent percentages set
forth in Schedule 2, the Stipulated Loss Value percentages set forth in
Schedule 3, the Termination Value percentages set forth in Schedule 4
and the EBO Price and the EBO Date set forth in Schedule 1 shall be
recalculated (upwards or downwards) by the Owner Participant using the
same methods and assumptions used to calculate the original Basic Rent,
Stipulated Loss Value and Termination Value percentages and the EBO
Price and the EBO Date 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 and the EBO Price
to Lessee.
(iii) In the event that Lessee is required to indemnify the
Owner Participant under the Tax Indemnity Agreement, then (A) in the
event that Lessee agrees to satisfy such indemnity obligation pursuant
to Section __ of the Tax Indemnity Agreement, the Basic Rent
percentages set forth in Schedule 2, and (B) in any case, the
Stipulated Loss Value percentages set forth in Schedule 3 and the
Termination Value percentages set forth in Schedule 4 shall be
recalculated (upwards or downwards) by Owner Participant, using the
same methods and assumptions (except to the extent such assumptions
shall be varied to take
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into account the Tax Loss [or Foreign Tax Credit Loss] (as each such
term is defined in the Tax Indemnity Agreement) that is the subject of
such indemnification and any prior or contemporaneous Tax Loss [or
Foreign Tax Credit Loss]) used to calculate the Basic Rent percentages,
the Stipulated Loss Value percentages and the Termination Value
percentages 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 and the EBO Price
to Lessee.
(c) All adjustments pursuant to Section 3.2.1(b) shall be made
as promptly as practicable after either Owner Participant or Lessee gives notice
to the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Basic Rent, the
EBO Price and the EBO Date (which may change only at the election of Lessee),
Stipulated Loss Value and Termination Value shall be prepared by Owner
Participant, subject to verification by Lessee in accordance with Section
3.2.1(d), using the same methodology and assumptions used by Owner Participant
in determining the percentages of Basic Rent, Stipulated Loss Value and
Termination Value and the EBO Price and the EBO Date as of the Delivery Date,
except as such methodologies and assumptions have been modified to reflect the
events giving rise to adjustments hereunder. Promptly after an adjustment is
made hereunder, Owner Participant shall deliver to Lessee a description of such
adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments shall (i) be made so as to avoid characterization of the Lease as a
"disqualified leaseback or long-term agreement" within the meaning of Section
467 of the Code and/or regulations thereunder (or any successor or relevant code
provision or regulations) and (ii) be in compliance with the requirements of
Sections 4.02(5), 4.07(l) and, on a prospective basis, 4.08(1) of Revenue
Procedure 75-28 (or any successor or relevant procedure), except to the extent
that on the Delivery Date the Lease constituted a "disqualified leaseback or
long-term agreement" or was not in compliance with the revenue procedure
referred to in clause (ii). All adjustments required pursuant to Section
3.2.1(b) shall be set forth in a Lease Supplement or in an amendment to this
Lease, and , promptly after execution thereof by Lessor and Lessee, Lessee shall
give a copy thereof to Mortgagee.
(d) If Lessee believes that any calculations by Owner
Participant pursuant to Section 3.2.1(c) are in error,
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and if, after consultation, Lessee and Owner Participant are unable to agree on
an adjustment, then Xxxxxxx & Xxxxx Inc. or any other nationally recognized
certified public accounting or lease advisory firm selected by Lessee and
reasonably satisfactory to Owner Participant shall verify such calculations.
Owner Participant will make available to such firm, but not, in any
circumstances, to Lessee or any representative of Lessee, the methodology and
assumptions referred to in Section 3.2.1(b) and any modifications thereto made
to reflect the events giving rise to adjustments hereunder (subject to the
execution by such firm of a confidentiality agreement, reasonably acceptable to
Owner Participant, prohibiting disclosure of such methodology and assumptions to
any third party). The determination by such firm shall be final. Lessee will pay
the reasonable costs and expenses of such further verification by such firm,
provided that if such verification results in a decrease in Basic Rent which
decreases the remaining Net Present Value of Rents and/or the EBO Price by
$10,000 or more from the remaining Net Present Value of Rents and/or the EBO
Price as recalculated by the Owner Participant, then the Owner Participant will
pay such costs and expenses.
(e) Notwithstanding anything to the contrary in any Operative
Agreement, the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes prior to such Payment
Date), the aggregate principal amount of scheduled installments due on the
Equipment Notes outstanding on such Payment Date, together with the accrued and
unpaid interest thereon, due on such Payment Date in respect of the Equipment
Notes; provided, however, that no installment of Basic Rent shall be increased
to the extent such increase would be based upon (i) any attachment or diversion
of Basic Rent on account of Lessor Liens attributable to Lessor or Owner
Participant, (ii) any modification of the payment terms of the Equipment Notes,
other than as required or permitted by any Operative Agreement (including,
without limitation, as permitted upon the occurrence of a Lease Event of
Default) or (iii) the acceleration of any Equipment Note or Equipment Notes due
solely to the occurrence of an Event of Default that does not constitute a Lease
Event of Default.
3.2.2 Supplemental Rent
Lessee shall pay to Lessor, or to whosoever shall be entitled
thereto, any and all Supplemental Rent when and as the same shall become due and
owing. Lessee will also pay to Lessor, or to whosoever shall be entitled thereto
as Supplemental
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Rent, to the extent permitted by applicable Law, interest at the Payment Due
Rate on any part of any amount of Rent (including, without limitation,
Supplemental Rent) not paid by 12:30 p.m., New York time, on the date when due
(so long as, in the case of any person not a party to the Participation
Agreement, Lessee had received timely notice of the account to which such
payment was required to be made), for the period from and including the date on
which the same was due to, but excluding, the date of payment in full.
3.3 Payments
(a) Payments of Rent by Lessee shall be paid by wire transfer
of immediately available Dollars, not later than 12 noon, New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior to the
date such payment of Rent is due or, in the case of any payment of Supplemental
Rent expressly payable to a person other than Lessor, to the person that shall
be entitled thereto to such account in the United States as such person may
specify from time to time to Lessee at least 10 Business Days prior to the date
such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever
any payment of Rent shall be due on a day that is not a Business Day, such
payment shall be made on the next day that is a Business Day, and, if such
payment is made on such next Business Day, no interest shall accrue on the
amount of such payment during such extension.
(c) So long as Lessee has not received written notice from the
Mortgagee that the Lien of the Trust Indenture has been discharged, and
notwithstanding Section 3.3(a), Lessor hereby directs, and Lessee agrees, that
all payments of Rent and all other amounts payable by Lessee hereunder, other
than Excluded Payments, shall be paid directly to Mortgagee on behalf of Lessor
by wire transfer of immediately available Dollars to the account of Mortgagee
specified in Schedule 1 to the Participation Agreement, or to such other account
in the United States as Mortgagee may specify by written notice to Lessor and
Lessee at least 10 Business Days prior to the date such payment of Rent is due.
(d) Excluded Payments shall be paid by wire transfer to the
person entitled thereto pursuant to the Operative Agreements of immediately
available Dollars to the account of such
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person specified in the Participation Agreement or, if not so specified, to such
account in the United States as may be specified by such person by written
notice to Lessor and Lessee from time to time at least 10 Business Days prior to
the date such payment is required to be made.
(e) All computations of interest under this Agreement shall be
made on the basis of a year of 360 days comprised of twelve 30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS
4.1 Disclaimer
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS."
LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR,
MORTGAGEE AND ANY PARTICIPANT (i) LESSEE HAS SELECTED THE AIRCRAFT AND THE
MANUFACTURER THEREOF AND (ii) NONE OF LESSOR, MORTGAGEE AND ANY PARTICIPANT
MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE
EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO
THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME,
ANY ENGINE OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK
OR COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER (OTHER THAN
REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND ANY OWNER
PARTICIPANT WITH RESPECT TO LESSOR LIENS IN EXISTENCE ON THE DELIVERY
DATE), EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR
ANY PART THEREOF.
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4.2 Certain Agreements of Lessor
Unless a Lease Event of Default shall have occurred and be
continuing, Lessor agrees to make available to Lessee such rights as Lessor may
have under any warranty with respect to the Aircraft made, or made available, by
Airframe Manufacturer or Engine Manufacturer or any of their respective
subcontractors or suppliers, as the case may be, pursuant to and in accordance
with the terms of the Purchase Agreement Assignment.
4.3 Quiet Enjoyment
So long as no Lease Event of Default shall have occurred and
be continuing, Lessor shall not take or cause to be taken or permit any Person
lawfully claiming by or through it to take any action to interfere with Lessee's
(or any Permitted Sublessee's) rights hereunder to continued possession, use and
operation of, and quiet enjoyment of the Aircraft, the Airframe, any Engine or
any Part and other rights with respect to the Aircraft hereunder during the
Term.
4.4 Investment of Funds Held as Security
4.4.1 Investment
Any moneys held by Lessor as security for Lessee's obligations
under the Operative Agreements, shall, until paid to Lessee as provided herein
or applied as provided herein, be invested by Lessor from time to time as
directed in writing by Lessee (or, if Lessee fails to so direct, as directed by
Lessor in its sole discretion) and at the expense and risk of Lessee in Cash
Equivalents so long as such Cash Equivalents specified by Lessee or Lessor, as
the case may be, can be acquired by Lessor using its best efforts; provided,
that so long as the Lien of the Trust Indenture shall not have been discharged,
such moneys shall be invested and held by Mortgagee, as assignee of Lessor, in
accordance with this Lease and upon discharge of such Lien, Mortgagee shall pay
any such money held by it to Lessor to be held and invested in accordance with
this Section.
4.4.2 Payment of Gain or Loss
Any net gain (including interest received) realized as the
result of investments pursuant to Section 4.4.1 (net of any fees, commissions
and other reasonable expenses, if any, incurred in connection with such
investment) shall be held and applied in the same manner as the principal amount
is to be
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held and applied hereunder. Lessee will promptly pay to Lessor, on
demand, the amount of any loss realized as the result of any such investment
(together with any fees, commissions and other reasonable expenses, if any,
incurred in connection with such investment), such amount so paid to be
held and applied by Lessor as contemplated in Section 4.4.1 above.
4.4.3 Limitation of Liability
All investments under this Section 4.4 shall be at the expense
and risk of Lessee, and Lessor and Mortgagee shall not be liable for any loss
resulting from any investment made under this Section 4.4 other than by reason
of its willful misconduct or gross negligence. Any such investment may be sold
(without regard to its maturity) by Lessor, or by Mortgagee as assignee of
Lessor, without instructions whenever such sale is necessary to make a
distribution required by this Lease.
4.5 Title Transfers by Lessor
If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other person, as the case
may be, all of Lessor's right, title and interest in and to the Aircraft,
Airframe or such Engine, as the case may be, free and clear of all Lessor Liens
attributable to Lessor or Owner Participant, (2) so long as the Lien of the
Trust Indenture has not been discharged, comply with the terms of the Trust
Indenture relating to the release of the Aircraft, Airframe or such Engine, (3)
assign to Lessee or such other person, as the case may be, if and to the extent
permitted under the Purchase Agreement, all warranties of Airframe Manufacturer
and Engine Manufacturer with respect to the Aircraft, Airframe or such Engine,
and (4) assign to Lessee or such other person, as the case may be, if and to the
extent permitted, all claims, if any, for damage to the Aircraft, Airframe or
such Engine, in each case free of Lessor Liens attributable to Lessor or Owner
Participant, and without recourse or warranty of any kind whatsoever (except as
to the transfer described in clause (1) above and as to the absence of such
Lessor Liens, as aforesaid), and (b) Lessor shall promptly deliver to Lessee or
such other person, as the case may be, a xxxx of sale and agreements of
assignment, evidencing such transfer and assignment, and such other instruments
of transfer, all in form and substance reasonably satisfactory to Lessee (or
such other person, as the case may be), as Lessee (or such other person, as the
case may be) may reasonably request.
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4.6 Lessor's Interest in Certain Engines
Lessor hereby agrees for the benefit of each lessor,
conditional seller, indenture trustee or secured party of any engine leased to,
or purchased by, Lessee or any Permitted Sublessee subject to a lease,
conditional sale, trust indenture or other security agreement that Lessor, its
successors and assigns will not acquire or claim, as against such lessor,
conditional seller, indenture trustee or secured party, any right, title or
interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in favor
of such indenture trustee or secured party.
4.7 Lease for U.S. Federal Income Tax Law Purposes; Section 1110 of
Bankruptcy Code
(a) Lessee and Lessor agree that this Lease is, and shall be
treated as, a lease for U.S. federal income tax purposes of the Aircraft,
Airframe, Engines and Parts.
(b) It is the intention of each of Lessee and Lessor that
Lessor (and Mortgagee as assignee of Lessor under the Trust Indenture) shall be
entitled to the benefits of Section 1110 with respect to the right to take
possession of the Aircraft, Airframe, Engines and Parts as provided in this
Lease.
SECTION 5. RETURN OF AIRCRAFT
5.1 Compliance with Annex B
Lessee shall comply with each of the provisions of Annex B
hereto, which provisions are hereby incorporated by this reference as if set
forth in full herein.
5.2 Storage and Related Matters
If Lessor gives written notice to Lessee not less than 60 days
nor more than 120 days prior to the end of the Term requesting outdoor parking
of the Aircraft upon its return hereunder, Lessee will assist Lessor in
arranging outdoor parking facilities for the Aircraft for a period up to 30
days, commencing on the date of such return, and upon request of Lessor to
Lessee made at least 10 days prior to the end of such initial 30 day period, for
an additional 30 day period commencing
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upon expiration of such initial period, at such outdoor parking facility in the
48 contiguous states of the United States as Lessee may select. Lessee shall, at
Lessor's written request, maintain insurance (if available) for the Aircraft
during such outdoor parking period, provided that Lessor shall reimburse Lessee
for Lessee's out-of-pocket cost of providing such insurance. Such outdoor
parking shall be at Lessor's risk, and Lessor shall pay all applicable outdoor
parking fees; provided that Lessee's obligation to assist Lessor in arranging
parking shall be subject to Lessor entering into an agreement prior to the
commencement of the outdoor parking period with the outdoor parking facility
providing, among other things, that Lessor shall bear all maintenance charges
(other than maintenance required as a direct result of Lessee's failure to
comply with the provisions of Annex B) and other costs incurred.
5.3 Return of Other Engines
In the event that any Engine owned by Lessor shall not be
installed on the Airframe at the time of return hereunder, Lessee shall be
required to return the Airframe hereunder with a Replacement Engine meeting the
requirements of, and in accordance with, Section 10 hereof and Annex B hereto.
Thereupon, Lessor will transfer to Lessee the Engine constituting part of such
Aircraft but not installed on such Airframe at the time of the return of the
Airframe.
5.4 Fuel
Upon the return of the Airframe upon any termination of this
Lease, 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, provided that if the Aircraft is
being returned in connection with the exercise of remedies pursuant to Section
15, Lessor shall have no obligation to make such payment to Lessee until Lessor
shall have been paid all amounts due to it pursuant to Section 15.
SECTION 6. LIENS
Lessee shall not, directly or indirectly, create, incur,
assume or suffer to exist any Lien on or with respect to the Aircraft, the
Airframe, any Engine or any Part, title to any of the foregoing or any interest
of Lessee therein, or the Lessee's rights in and to this Lease or any Permitted
Sublease,
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except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens; (c) the rights of others under agreements
or arrangements to the extent permitted by the terms of Sections 7.2 and 7.3;
(d) Liens for Taxes of Lessee or any Permitted Sublessee (and their respective
U.S. federal tax law consolidated groups), or Liens for Taxes of any Tax
Indemnitee (and its U.S. federal tax law consolidated group) for which Lessee is
obligated to indemnify such Tax Indemnitee under any of the Lessee Operative
Agreements, in any such case either not yet due or being contested in good faith
by appropriate proceedings so long as such Liens and such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or the interest of any Participant therein or impair the
lien of the Trust Indenture; (e) materialmen's, mechanics', workers',
repairers', employees' or other like Liens arising in the ordinary course of
business for amounts the payment of which is either not yet delinquent for more
than 60 days or is being contested in good faith by appropriate proceedings, so
long as such Liens and such proceedings do not involve any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein or impair the lien of the Trust Indenture;
(f) Liens arising out of any judgment or award against Lessee (or against any
Permitted Sublessee), so long as such judgment shall, within 60 days after the
entry thereof, have been discharged or vacated, or execution thereof stayed
pending appeal or shall have been discharged, vacated or reversed within 60 days
after the expiration of such stay, and so long as during any such 60-day period
there is not, or any such judgment or award does not involve, any material risk
of the sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein or impair the lien of the Trust Indenture,
and (g) any other Lien with respect to which Lessee (or any Permitted Sublessee)
shall have provided a bond, cash collateral or other security adequate in the
reasonable opinion of Lessor. Lessee shall promptly take (or cause to be taken)
such action as may be necessary duly to discharge (by bonding or otherwise) any
Lien not excepted above if the same shall at any time arise in respect of the
Aircraft, the Airframe, any Engine or any Part during the Term.
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SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS
7.1 Registration and Operation
7.1.1 Registration and Recordation
Subject to the compliance by Lessor and Owner Participant with
their respective obligations under Section 13 of the Participation Agreement,
Lessee shall cause the Aircraft to be, and at all times during the Term to
remain, duly registered with the FAA under the Act or with such other country of
registry as shall be permitted under Section 7.1.2 below, in the name of Lessor
as owner and lessor (except to the extent that such registration under the Act
cannot be effected with the FAA because of Lessor's or Owner Participant's
failure to comply with the citizenship requirements for registration of the
Aircraft under the Act). Lessor shall execute and deliver all such documents as
Lessee (or any Permitted Sublessee) may reasonably request for the purpose of
effecting and continuing such registration. Unless Mortgagee has given Lessee
notice that the Trust Indenture has been discharged, Lessee shall also cause the
Trust Indenture to be duly recorded and at all times maintained of record as a
first-priority perfected mortgage (subject to Permitted Liens) on the Aircraft,
the Airframe and each of the Engines (except to the extent such perfection or
priority cannot be maintained solely as a result of the failure by Lessor or
Mortgagee to execute and deliver any necessary documents).
7.1.2 Reregistration
So long as no Lease Event of Default shall have occurred and
be continuing, Lessee may, by written notice to Lessor, request to change the
country of registration of the Aircraft. Any such change in registration shall
be effected only in compliance with, and subject to all of the conditions set
forth in, Section 7.6.11 of the Participation Agreement.
7.1.3 Markings
If permitted by applicable Law, on or reasonably promptly
after the Delivery Date, Lessee will cause to be affixed to, and maintained in,
the cockpit of the Airframe and on each Engine, in each case, in a clearly
visible location (it being understood that the location of such placards, as
identified to the Owner Participant prior to the Delivery Date, shall be deemed
to be in compliance with this requirement), a placard
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of a reasonable size and shape bearing the legend, in English, set forth in
Schedule 6. Such placards may be removed temporarily, if necessary, in the
course of maintenance of the Airframe or Engines. If any such placard is
destroyed or becomes illegible, Lessee shall promptly replace it with a placard
complying with the requirements of this Section 7.1.3.
7.1.4 Compliance With Laws
Lessee shall not, and shall not allow any other person to,
operate, use, maintain, service, repair or overhaul the Aircraft (a) in
violation of any Law binding on or applicable to the Aircraft, the Airframe or
any Engine, or (b) in violation of any airworthiness certificate, license or
registration of any Government Entity relating to the Aircraft, the Airframe or
any Engine, except (1) immaterial or non-recurring violations with respect to
which corrective measures are taken promptly by Lessee or a Permitted Sublessee,
as the case may be, upon discovery thereof, and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement relating to any such certificate, license or registration in good
faith in any reasonable manner which does not involve any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein, any material risk of criminal liability or
of material risk of civil penalty against Lessor, Mortgagee or any Participant
or impair the lien of the Trust Indenture.
7.1.5 Operation
Lessee agrees not to operate, use or locate the Aircraft, the
Airframe or any Engine, or allow the Aircraft, the Airframe or any Engine to be
operated, used or located (a) in any area excluded from coverage by any
insurance required by the terms of Section 11, except in the case of a
requisition by or transfer to the U.S. Government where Lessee obtains an
indemnity in lieu of such insurance from the U.S. Government, or insurance from
the U.S. Government, covering such area, in accordance with Section 11.3 or (b)
in any recognized area of hostilities unless fully covered in accordance with
Annex D by war-risk insurance as required by the terms of Section 11 (including,
without limitation, Section 11.3), unless in any case referred to in this
Section 7.1.5 the Aircraft is only temporarily operated, used or located in such
area as a result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition or other similar unforeseen circumstances,
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so long as Lessee diligently and in good faith proceeds to remove the Aircraft
from such area.
7.2 Possession
Lessee will not, without the prior written consent of Lessor,
sublease or otherwise in any manner deliver, transfer or relinquish possession
of the Aircraft, the Airframe or any Engine or install any Engine, or permit any
Engine to be installed, on any airframe other than the Airframe; provided,
however, subject to the provisions of Section 7.3, Lessee may, without such
prior written consent:
7.2.1 Interchange and Pooling
Subject or permit any Permitted Sublessee to subject any
Engine to normal interchange agreements or pooling agreements or arrangements,
in each case customary in the commercial air cargo industry and entered into by
Lessee or such Permitted Sublessee, as the case may be, in the ordinary course
of business; provided, however, that if Lessor's title to any such Engine is
divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with,
Section 10.
7.2.2 Testing and Service
Deliver or permit any Permitted Sublessee to deliver
possession of the Aircraft, Airframe, any Engine or any Part (i) to the
manufacturer thereof or to any third-party maintenance provider, for testing,
service, repair, maintenance or overhaul work on the Aircraft, Airframe, any
Engine or any Part, or, to the extent required or permitted by the terms of
Annex C, for alterations or modifications in or additions to the Aircraft,
Airframe or any Engine or (ii) to any Person for the purpose of transport to a
Person referred to in the preceding clause (i).
7.2.3 Transfer to U.S. Government
Transfer or permit any Permitted Sublessee to transfer
possession of the Aircraft, Airframe or any Engine to the U.S. Government, in
which event Lessee shall promptly notify Lessor and Mortgagee in writing of any
such transfer of possession and, in the case of any transfer pursuant to CRAF,
in such
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notification shall identify by name, address and telephone numbers the
Contracting Office Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given and to whom
requests or claims must be made to the extent applicable under CRAF.
7.2.4 Installation of Engines on Owned Aircraft
Install or permit any Permitted Sublessee to install an Engine
on an airframe owned by Lessee or such Permitted Sublessee, as the case may be,
free and clear of all Liens, except (a) Permitted Liens and those that do not
apply to the Engines and (b) the rights of third parties under normal
interchange or pooling agreements and arrangements of the type that would be
permitted under Section 7.2.1.
7.2.5 Installation of Engines on Other Airframes
Install or permit any Permitted Sublessee to install an Engine
on an airframe leased to Lessee or such Permitted Sublessee, or purchased by
Lessee or such Permitted Sublessee subject to a mortgage, security agreement,
conditional sale or other secured financing arrangement, but only if (a) such
airframe is free and clear of all Liens, except (i) the rights of the parties to
such lease, or any such secured financing arrangement, covering such airframe
and (ii) Liens of the type permitted by clauses (a) and (b) of Section 7.2.4 and
(b) Lessee or Permitted Sublessee, as the case may be, shall have received from
the lessor, mortgagee, secured party or conditional seller, in respect of such
airframe, a written agreement (which may be a copy of the lease, mortgage,
security agreement, conditional sale or other agreement covering such airframe),
whereby such Person agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being installed on
such airframe at any time while such Engine is subject to this Lease or is owned
by Lessor.
7.2.6 Installations of Engines on Financed Aircraft
Install or permit any Permitted Sublessee to install an Engine
on an airframe owned by Lessee or such Permitted Sublessee, leased to Lessee or
such Permitted Sublessee, or purchased by Lessee or such Permitted Sublessee
subject to a conditional sale or other security agreement under circumstances
where neither Section 7.2.4 or 7.2.5 is applicable; provided, however, that any
such installation shall be deemed an Event of Loss with respect to such Engine,
and Lessee shall comply with
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Section 10.2 hereof in respect thereof. Until Section 10.2 has been fully
complied with, Lessor's interest in any such Engine shall continue in full force
and effect.
7.2.7 Subleasing
With respect to the Aircraft, Airframe or any Engine, so long
as no Lease Event of Default shall have occurred and is continuing, enter into a
sublease with any Permitted Air Carrier, but only if:
(a) Lessee shall provide written notice to Lessor and
Mortgagee (such notice in the event of a sublease to a U.S. Air Carrier
to be given promptly after entering into any such sublease or, in the
case of a sublease to any other Permitted Air Carrier, 10 days in
advance of entering into such sublease);
(b) At the time that Lessee enters into such sublease, such
Permitted Air Carrier shall not be subject to any bankruptcy,
insolvency, liquidation, reorganization, dissolution or similar
proceeding, and shall not have substantially all of its property in the
possession of any liquidator, trustee, receiver or similar person;
(c) Any such sublease (i) shall not extend beyond the
expiration of the Base Lease Term or any Renewal Lease Term then in
effect unless Lessee shall have irrevocably committed to purchase the
Aircraft, (ii) shall include provisions for the maintenance, operation,
possession, inspection and insurance of the Aircraft that are the same
in all material respects as the applicable provisions of this Lease and
(iii) shall be expressly subject and subordinate to all the terms of
this Agreement and to the rights, powers and remedies of Lessor
hereunder, including, without limitation, Lessor's rights under Section
15 to repossess the Aircraft, Airframe and Engines and to terminate
such sublease upon the occurrence of a Lease Event of Default;
(d) In connection with a sublease to a Permitted Foreign Air
Carrier or a Permitted Foreign Manufacturer, (1) the United States
maintains diplomatic relations with the country of domicile of such
Permitted Foreign Air Carrier or Permitted Foreign Manufacturer (or, in
the case of Taiwan, diplomatic relations at least as good as those in
effect on the Delivery Date) and (2) Lessee shall have furnished
Lessor, Owner Participant and Mortgagee a favorable
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opinion of counsel, reasonably satisfactory to Lessor and Owner
Participant, in the country of domicile of such Permitted Foreign Air
Carrier or Permitted Foreign Manufacturer, that (i) the terms of such
sublease are the legal, valid and binding obligations of the parties
thereto enforceable under the laws of such jurisdiction, (ii) it is not
necessary for Owner Participant, Lessor or Mortgagee to register or
qualify to do business in such jurisdiction, if not already so
registered or qualified, as a result, in whole or in part, of the
proposed sublease, (iii) Lessor's title to, and Mortgagee's Lien in
respect of, the Aircraft, Airframe and Engines will be recognized in
such jurisdiction, (iv) the Laws of such jurisdiction of domicile
require fair compensation by the government of such jurisdiction,
payable in a currency freely convertible into Dollars, for the loss of
title to the Aircraft, Airframe or Engines in the event of the
requisition by such government of such title (unless Lessee shall
provide insurance in the amounts required with respect to hull
insurance under Section 11 covering the requisition of title to the
Aircraft, Airframe or Engines by the government of such jurisdiction so
long as the Aircraft, Airframe or Engines are subject to such sublease)
and (v) the agreement of such Permitted Foreign Air Carrier or
Permitted Foreign Manufacturer that its rights under the sublease are
subject and subordinate to all the terms of this Lease is enforceable
against such Permitted Foreign Air Carrier or Permitted Foreign
Manufacturer under applicable law;
(e) Lessee shall furnish to Lessor, Mortgagee and Owner
Participant evidence reasonably satisfactory to Lessor that the
insurance required by Section 11 remains in effect;
(f) All necessary documents shall have been duly filed,
registered or recorded in such public offices as may be required fully
to preserve the title of Lessor, and the first priority security
interest (subject to Permitted Liens) of Mortgagee, in the Aircraft,
Airframe and Engines;
(g) Lessee shall reimburse Lessor, Mortgagee and Owner
Participant for all of their reasonable out-of-pocket fees and
expenses, including, without limitation, reasonable fees and
disbursements of counsel, incurred by Lessor, Mortgagee and Owner
Participant in connection with any such sublease;
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(h) For all purposes of this Section 7.2.7, the term
"sublease" shall be deemed to include interchange agreements with
respect to the Aircraft or Airframe; and
(i) No such sublease shall be made to a Permitted Foreign Air
Carrier or a Permitted Foreign Manufacturer prior to the close of the
Tax Attribute Period, unless Lessee prepays on a lump-sum basis any
liability due under the Tax Indemnity Agreement as a result of such
sublease based upon the assumption that such sublease were to continue
for the remainder of the term of such sublease; provided, however, that
such sublease shall not be restricted under this paragraph (i) if it
would not have the effect of lengthening the "recovery period" (as
defined in Section 168 of the Code) then applicable to the Aircraft.
7.3 Certain Limitations on Subleasing or Other Relinquishment of
Possession
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives possession of the
Aircraft in accordance with Section 7.2 shall be subject and
subordinate to all the terms of this Lease, and to Lessor's rights,
powers and remedies hereunder, including, without limitation (i)
Lessor's right to repossess the Aircraft pursuant to Section 15, (ii)
Lessor's right to terminate and avoid such sublease, delivery, transfer
or relinquishment of possession upon the occurrence of a Lease Event of
Default and (iii) the right to require such person to forthwith deliver
the Aircraft, the Airframe and Engines subject to such transfer upon
the occurrence of a Lease Event of Default;
(b) Lessee shall remain primarily liable hereunder for the
performance of all the terms of this Lease to the same extent as if
such transfer had not occurred, and no transfer of possession of the
Aircraft, the Airframe, any Engine or any Part shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder
or under any Operative Agreement;
(c) Lessee shall ensure that no sublease, delivery, transfer
or relinquishment permitted under Section 7.2 shall affect the United
States registration of the Aircraft, unless also made in accordance
with the provisions of Section 7.1.2;
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(d) Any event that constitutes or would, with the passage of
time, constitute an Event of Loss under paragraph (c), (d), or (e) of
the definition of such term (as set forth in Annex A) shall not be
deemed to violate the provisions of Section 7.2; and
(e) Any Wet Lease or ACMI Contract shall not constitute a
delivery, transfer or relinquishment of possession for purposes of
Section 7.2 and shall not be prohibited by the terms hereof, but shall
be subject and subordinate to the terms of this Lease. Neither a Wet
Lease nor an ACMI contract shall be deemed to be a "sublease", and the
counterparty of a Wet Lease or an ACMI Contract shall not be deemed to
be a sublessee for any purposes under this Lease. Any contract that is
part of the United States Civil Reserve Air Fleet Program shall not be
deemed to be a sublease for any purposes under this Lease.
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS; OTHER LESSEE COVENANTS
8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
Modifications and Additions
At all times during the Term, Lessee shall comply with, or
cause to be complied with, each of the provisions of Annex C, which provisions
are hereby incorporated by this reference as if set forth in full herein.
8.2 Information, Certificates, Notices and Reports
8.2.1 Financial Information
Lessee will furnish to Lessor:
(a) Within 90 days after the end of each of the first three
fiscal quarters in each fiscal year of Lessee, a consolidated balance
sheet of Lessee as of the end of such quarter and related statements of
income and cash flows for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding period in the preceding fiscal year, prepared in
accordance with GAAP; provided that so long as Lessee is subject to the
reporting requirements of the Securities Exchange Act of 1934, a
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copy of Lessee's report on Form 10-Q for such fiscal quarter (excluding
exhibits) will satisfy this paragraph (a).
(b) Within 120 days after the end of each fiscal year of
Lessee, a consolidated balance sheet of Lessee as of the end of such
fiscal year and related statements of income and cash flows of Lessee
for such fiscal year, in comparative form with the preceding fiscal
year, prepared in accordance with GAAP, together with a report of
Lessee's independent certified public accountants with respect to their
audit of such financial statements; provided that so long as Lessee is
subject to the reporting requirements of the Securities Exchange Act of
1934, a copy of Lessee's report on Form 10-K for such fiscal year
(excluding exhibits) will satisfy this paragraph (b).
8.2.2 Annual Certificate
Within 120 days after the close of each fiscal year of Lessee,
Lessee shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee
to the effect that such officer is familiar with or has reviewed or caused to be
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements and that such officer does not have knowledge of the existence as of
the date of such certificate of any Lease Event of Default.
8.2.3 Information for Filings
Lessee shall promptly furnish to Owner Participant or Lessor
such information (other than with respect to the citizenship of Owner
Participant and Lessor) within Lessee's or any Permitted Sublessee's possession,
or reasonably available to or obtainable by Lessee or such Permitted Sublessee,
as may be required to enable Lessor timely to file any reports required to be
filed by it as lessor under the Lease or to enable Owner Participant to timely
file any reports required to be filed by it, as the beneficiary of the Trust
Estate, in either case, with any Government Entity because of, or in connection
with, the interest of Owner Participant or Lessor in the Aircraft, Airframe or
Engines, this Lease or any other part of the Trust Estate; provided, however,
that with respect to any such information which Lessee or such Permitted
Sublessee reasonably deems commercially sensitive or confidential, Owner
Participant or Lessor, as the case may be, shall afford Lessee or such Permitted
Sublessee a reasonable opportunity to seek from any such Government Entity a
waiver of the obligation of Owner Participant or Lessor to file any such
information, or shall consent
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to the filing of such information directly by Lessee or such Permitted Sublessee
in lieu of filing by Owner Participant or Lessor, and if any such waiver or
consent is evidenced to the reasonable satisfaction of Owner Participant or
Lessor, as the case may be, then Lessee shall not be required to furnish such
information to Owner Participant or Lessor.
8.2.4 Other
Lessee shall furnish annually any such opinions as may be
required pursuant to Section 7.1.3(d) of the Participation Agreement.
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 Right of Termination
(a) Lessee shall have the right at its option to terminate
this Lease during the Base Lease Term, effective only on a Termination Date
occurring on or after the fifth anniversary of the Delivery Date, if:
(i) Lessee makes a good faith determination that the Aircraft
either has become economically obsolete or is surplus to Lessee's
requirements and the Chief Financial Officer or Treasurer of Lessee so
certifies in writing to Lessor; or
(ii) the Aircraft is to be disposed of pursuant to a program
of fleet renewal.
Lessee shall give to Lessor written notice of Lessee's
exercise of its option to terminate this Agreement not less than 90 days prior
to the proposed Termination Date specified in such notice.
(b) Lessor shall notify Lessee and Mortgagee of Lessor's
intention to sell or retain the Aircraft, as provided in this Section 9, within
30 days of receipt by Lessor of the written notice from Lessee given pursuant to
Section 9.1(a). Any failure by Lessor to give such notice of its election shall
be deemed to be an election to sell the Aircraft, as provided in this Section 9.
(c) Any termination pursuant to this Section 9 shall become
effective on the date of the sale, if any, pursuant to Section 9.2 or upon the
date of termination and payment by Lessee
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and Lessor in accordance with Section 9.3 if Lessor elects to retain the
Aircraft.
9.2 Election by Lessor to Sell
9.2.1 Bids; Closing of Sale
Unless Lessor has given Lessee notice of Lessor's election to
retain the Aircraft, Lessee (or a person authorized by the Lessee, acting as
agent for the Lessor, for a commercially reasonable commission) shall, until the
date 10 Business Days prior to the proposed Termination Date, use commercially
reasonable efforts to obtain bids for a cash purchase of the Aircraft and Lessor
may, if it desires to do so, also seek to obtain such bids. In the event Lessee
receives any bid, Lessee shall promptly, and in any event at least 10 Business
Days prior to the proposed date of sale, certify to Lessor in writing the amount
and terms of such bid, the proposed date of such sale and the name and address
of the person (who shall not be Lessee or any Affiliate of Lessee or any person
with whom Lessee or any such Affiliate has an arrangement for the future use of
the Aircraft by Lessee or any such Affiliate) submitting such bid. In the event
Lessor receives any bid on or prior to the date 10 Business Days prior to the
proposed Termination Date, Lessor shall, at least 10 Business Days prior to the
proposed date of sale, certify to Lessee in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the person
submitting such bid. Notwithstanding anything in this Section 9.2 to the
contrary, Lessee shall have no liability to Lessor or any other party for
failure to obtain a higher price for the Aircraft than the price actually
obtained, if any, or for the manner in which Lessee solicited bids for the
Aircraft, such manner of soliciting bids to be in the sole discretion of Lessee,
including, without limitation, the decision whether or not to solicit bids
publicly or in any particular market or venue. In addition, Lessee shall have no
obligation to Lessor or any other party to accept any bid solicited pursuant to
this Section 9.2.1 that Lessee, in good faith, believes is unlikely to result in
the consummation of the sale of the Aircraft in accordance with the terms
hereof.
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9.2.2 Closing of Sale
(a) On the proposed Termination Date (i) Lessee shall deliver
the Airframe and Engines or engines constituting part of the Aircraft to the
bidder, if any, which shall have submitted the highest cash bid (net of any
fees, commissions or expenses of any broker retained by the Lessee) on or before
the date 10 Business Days prior to such Termination Date, in the same manner as
if delivery were made to Lessor pursuant to Section 5 and Annex B and in full
compliance with the terms thereof, and shall duly transfer to Lessor title to
any such engines not owned by Lessor, all in accordance with the terms of
Section 5 and Annex B, and (ii) Lessor shall simultaneously therewith transfer
the Airframe and Engines or engines to such bidder, in the manner described in
Section 4.5, against cash paid by such bidder to Lessor in the amount of such
highest bid (net of any fees, commissions or expenses of any broker retained by
the Lessee) and in the manner and in funds of the type specified in Section 3.3.
(b) The net proceeds of any sale described in Section 9.2.2(a)
shall be paid to and retained by Lessor and, on such Termination Date, and as a
condition precedent to such sale and the delivery of the Aircraft and Engines or
engines to such bidder, Lessee shall pay to Lessor, in the manner and in funds
of the type specified in Section 3.3:
(i) all unpaid Basic Rent due at any time prior to such
Termination Date and all Basic Rent due on such Termination Date to the
extent payable in arrears with respect to the Payment Period then
ended; plus
(ii) an amount equal to the excess, if any, of the Termination
Value for the Aircraft, computed as of such Termination Date, over the
net proceeds of any sale described in Section 9.2.2(a); plus
(iii) as provided in Section 3.2.2, interest on the amounts
specified in the foregoing clause (i) at the Payment Due Rate from and
including the date on which any such amount was due to the date of
payment of such amount in full.
As a further condition precedent to such sale and delivery,
Lessee shall pay all Supplemental Rent (other than Termination Value) due by
Lessee to Lessor, Mortgagee or the Participants under this Lease, including,
without limitation, (A) Supplemental Rent in respect of Make-Whole Amount, if
any, payable
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pursuant to Section 2.10(b) of the Trust Indenture in connection with a
prepayment of the Equipment Notes upon such sale, (B) all interest charges
provided for hereunder or under any other Lessee Operative Agreement with
respect to the late payment of any amounts so payable and (C) the reasonable
out-of-pocket fees and expenses (including any sales, transfer or similar taxes)
incurred by Lessor, Mortgagee and Owner Participant in connection with such
termination and sale, other than any fees, commissions or expenses payable to
any broker retained by the Lessor.
(c) Upon and subject to any such sale and receipt of proceeds
by Lessor, and full and final payment of all amounts described in Section
9.2.2(b), and compliance by Lessee with all the other provisions of this Section
9.2,
(i) Lessor will transfer to Lessee, in accordance with Section
4.5, any Engines constituting part of the Aircraft but which were not
then installed on the Airframe and sold therewith; and
(ii) the obligation of Lessee to pay Basic Rent, on or after
the Payment Date with reference to which Termination Value is computed,
shall cease, and the Term for the Aircraft shall end effective as of
the date of such sale.
(d) A sale of the Aircraft pursuant to this Section 9.2.2
shall take place only on a Termination Date or any other date within 10 Business
Days after a Termination Date as Lessor may consent to, which consent shall not
be withheld unreasonably; provided that interest shall accrue on each such day
of the aforementioned 10-day extension at the Debt Rate. Subject to Section 9.3,
if no sale shall have occurred on or as of the proposed Termination Date (or
such later date pursuant to the immediately preceding sentence), this Agreement
shall continue in full force and effect, and all of Lessee's obligations shall
continue, including, without limitation, its obligation to pay Rent, in each
case, as if the notice under Section 9.1 shall not have been given and, subject
to Section 9.2.3(b), Lessee may give another notice pursuant to Section 9.1.
9.2.3 Withdrawal of Notice of Termination
(a) Lessee may withdraw any notice given pursuant to Section
9.1 at any time on or before the date 10 Business Days prior to the proposed
Termination Date, whereupon this Agreement shall continue in full force and
effect and all of Lessee's
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obligations shall continue, including, without limitation, its obligation to pay
Rent, in each case, as if the notice under Section 9.1 shall not have been given
and Lessee may give another notice pursuant to Section 9.1; provided that Lessee
shall not be entitled to give more than five notices pursuant to Section 9.1.
(b) Lessee shall pay all reasonable out-of-pocket fees and
expenses of Lessor, Mortgagee and Owner Participant in connection with any
notice of termination withdrawn by Lessee or in connection with any notice of
termination pursuant to which a sale of the Aircraft fails to occur.
9.3 Retention of Aircraft by Lessor
(a) If Lessor shall elect to retain the Aircraft in accordance
with Section 9.1, on the proposed Termination Date:
(i) Lessor shall pay, or cause to be paid, in the manner and
in funds of the type specified in Section 3.3, to the Mortgagee an
amount sufficient to prepay all outstanding Equipment Notes pursuant to
Section 2.10(b) of the Trust Indenture plus the Make-Whole Amount, if
any;
(ii) subject to receipt by Mortgagee of the funds described in
paragraph (i) above, Lessee shall deliver the Airframe and Engines or
engines constituting part of the Aircraft to Lessor pursuant to Section
5 and Annex B and in full compliance with the terms thereof, and shall
duly transfer to Lessor title to any such engines not owned by Lessor,
all in accordance with the terms of Section 5 and Annex B;
(iii) Lessee shall pay to Lessor, in the manner and in funds
of the type specified in Section 3.3:
(1) all unpaid Basic Rent due at any time prior to
such Termination Date (or any later date agreed by the parties
pursuant to Section 9.2.2(d)) and all Basic Rent due on such
Termination Date (or any later date agreed by the parties
pursuant to Section 9.2.2(d)) to the extent payable in arrears
with respect to the Payment Period then ended; plus
(2) as provided in Section 3.2.2, interest on the
amounts specified in the foregoing clause (1) at the Payment
Due Rate from and including the date on
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which any such amount was due to the date of payment of such
amount in full; and
(iv) Lessee shall also pay all Supplemental Rent due and
payable by Lessee to Lessor, Mortgagee or the other Participants under
this Lease (other than any Supplemental Rent in respect of Make-Whole
Amount, if any, payable pursuant to Section 2.10(b) of the Trust
Indenture in connection with a prepayment of the Equipment Notes upon
such sale), including without limitation all interest charges provided
for hereunder or under any other Lessee Operative Agreement with
respect to the late payment of any amounts, so payable, and the
reasonable out-of-pocket fees and expenses incurred by Lessor,
Mortgagee and Owner Participant in connection with such termination and
sale.
(b) Upon full and final payment to Lessor, Mortgagee and the
Participants of the amounts described in Section 9.3(a), and compliance by
Lessee with all the other applicable provisions of this Section 9.3,
(i) Lessor will transfer to Lessee, in accordance with Section
4.5, any Engines constituting part of the Aircraft but which were not
then installed on the Airframe and sold therewith; and
(ii) The obligation of Lessee to pay Basic Rent otherwise due
on or after the Termination Date shall cease, and the Term for the
Aircraft shall end effective as of such Termination Date.
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 Event of Loss With Respect to Aircraft
10.1.1 Notice and Election
(a) Upon the occurrence of an Event of Loss with respect to
the Airframe, and any Engine or Engines installed thereon at the time of such
Event of Loss, Lessee shall promptly (and in any event within 15 days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss.
Within 60 days after such occurrence, Lessee shall give Lessor and Mortgagee
written notice of Lessee's election to make payment in respect of such Event of
Loss, as provided in Section 10.1.2, or to replace the Airframe, and any such
Engines, as provided in Section 10.1.3.
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(b) Any failure by Lessee to give such notice of its election
shall be deemed to be an election of the option set forth in Section 10.1.2.
(c) For purposes of Section 10.1.2, an Event of Loss with
respect to the Airframe shall be deemed to constitute an Event of Loss with
respect to the Aircraft. For purposes of Section 10.1.3, any Engine not actually
suffering an Event of Loss shall not be required to be replaced.
(d) Notwithstanding the foregoing, if (i) an Event of Default
has occurred and is continuing or (ii) if a Lease Event of Default under Section
14.5 has occurred and is continuing, Lessee shall be required to make payment in
respect of such Event of Loss pursuant to Section 10.1.2.
10.1.2 Payment of Loss and Termination of Lease
(a) If Lessee elects, in accordance with Section 10.1.1, to
make payment in respect of any such Event of Loss, then Lessee shall pay, in the
manner and in funds of the type specified in Section 3.3, the following amounts:
(i) on the earlier of (x) the first Business Day following
the 180th day after the date of the occurrence of such Event of Loss,
and (y) the Business Day specified by Lessee as the payment date in an
irrevocable notice delivered by Lessee to the applicable Lessor and
Mortgagee not less than 20 days prior to such payment date, Lessee
shall pay to Lessor an amount equal to the Stipulated Loss Value of the
Aircraft as of the Loss Payment Date plus:
(1) any unpaid Basic Rent or Renewal Rent, as the
case may be, payable in advance and due prior to the Loss
Payment Date; plus
(2) any unpaid Basic Rent or Renewal Rent, as the
case may be, payable in arrears and due on or before such Loss
Payment Date; plus
(3) all other amounts of Supplemental Rent due on or
before the Loss Payment Date (but excluding any Make-Whole
Amount) and any reasonable out-of-pocket fees and expenses
incurred in connection with such Event of Loss by Lessor,
Owner Participant or Mortgagee; plus
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(ii) on or before the Loss Payment Date, Lessee shall also pay
to Lessor, Mortgagee and each Participant all other amounts due and
payable by Lessee to Lessor, Mortgagee and such Participant under this
Lease, the Participation Agreement or any other Lessee Operative
Agreement.
(b) Upon payment in full of all amounts described in the
foregoing paragraph (a),(i) the obligation of Lessee to pay Basic Rent or
Renewal Rent hereunder with respect to the Aircraft shall terminate, (ii) the
Term for the Aircraft shall end and (iii) Lessor will transfer the Aircraft to
Lessee, as-is and where-is, and subject to any insurer's salvage rights, but
otherwise in the manner described in Section 4.5.
10.1.3 Replacement of Airframe and Engines
(a) If Lessee elects, in accordance with Section 10.1.1, to
replace the Airframe, and any Engines actually suffering the Event of Loss, then
Lessee shall, as promptly as possible and in any event within 180 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3 and as replacement for the Airframe, title to a
Replacement Airframe (which shall comply with paragraph (b) below), and for each
such Engine, title to a Replacement Engine, in each case free and clear of all
Liens other than Permitted Liens. If Lessee makes such election, but for any
reason fails or is unable to effect such replacement within such time period and
in compliance with the requirements set forth in Section 10.3, then Lessee shall
be deemed to have initially made the election set forth in Section 10.1.2 with
the effect that Lessee shall immediately pay, in the manner and in funds of the
type specified in Section 3.3, the amounts required under, and in accordance
with, Section 10.1.2.
(b) Any replacement airframe shall be an airframe that is the
same model as the Airframe to be replaced thereby, or an improved model, and
that has a value, utility and remaining useful life (without regard to hours or
cycles remaining until the next regular maintenance check), at least equal to
the Airframe to be replaced thereby (assuming that such Airframe had been
maintained in accordance with this Lease) (a "Replacement Airframe"). Any such
Replacement Engine shall meet the requirements of, and be conveyed by Lessee to
Lessor in accordance with, Section 10.2 (other than the notice requirement set
forth in Section 10.2.1).
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10.2 Event of Loss With Respect to an Engine
10.2.1 Notice
Upon the occurrence of an Event of Loss with respect to an
Engine under circumstances in which an Event of Loss with respect to the
Airframe has not occurred, Lessee shall promptly (and in any event within 15
days after such occurrence) give Lessor written notice of such Event of Loss.
10.2.2 Replacement of Engine
Lessee shall, promptly and in any event within 90 days after
the occurrence of such Event of Loss, convey or cause to be conveyed to Lessor,
in compliance with Section 10.3 and as replacement for the Engine with respect
to which any Event of Loss occurred, title to a Replacement Engine free and
clear of all Liens other than Permitted Liens. Any replacement engine shall be
an engine that is the same or improved make and model as the Engine to be
replaced, and that is suitable for installation and use on the Airframe, and
that has a value, utility and remaining useful life (without regard to hours and
cycles remaining until overhaul) at least equal to the Engine to be replaced
thereby (assuming that such Engine had been maintained in accordance with this
Lease) (a "Replacement Engine").
10.2.3 Engine Exchange
Upon not less than five Business Days' prior written notice to
Lessor, Lessee may replace any Engine leased hereunder with another engine (the
"Exchanged Engine") meeting the requirements of Section 10.2.2. Such Exchanged
Engine shall be deemed to be a "Replacement Engine" and Lessor and Lessee shall
comply with the provisions of Section 10.3 with regard to the Exchanged Engine
and the Engine so replaced.
10.3 Conditions to any Replacement
10.3.1 Documents
Prior to or at the time of conveyance of title to any
Replacement Airframe or Replacement Engine to Lessor, Lessee shall take each of
the following actions:
(a) furnish Lessor with a full warranty xxxx of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in
form and substance reasonably satisfactory
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to Lessor and cause such Replacement Airframe to be duly registered in
the name of Lessor pursuant to the Act;
(b) cause (i) a Lease Supplement subjecting such Replacement
Airframe or Replacement Engine to this Lease, duly executed by Lessee,
to be delivered to Lessor for execution and, upon such execution, to be
filed for recordation with the FAA pursuant to the Act, (ii) a Trust
Indenture Supplement, subjecting such Replacement Airframe or
Replacement Engine to the Trust Indenture, to be delivered to Lessor
for execution and, upon execution, to be filed for recordation with the
FAA pursuant to the Act and (iii) such Financing Statements and other
filings, as Lessor or Mortgagee may reasonably request, duly executed
by Lessee and, to the extent applicable, Lessor and Mortgagee (and
Lessor and Mortgagee shall execute and deliver the same), to be filed
in such locations as any such party may reasonably request;
(c) furnish such evidence of compliance with the insurance
provisions of Section 11 with respect to such Replacement Airframe or
Replacement Engine as Lessor may reasonably request;
(d) furnish an opinion or opinions of Lessee's counsel (which
may be Lessee's legal department) reasonably satisfactory to Lessor and
addressed to Lessor and Mortgagee to the effect that (i) such full
warranty xxxx of sale referred to in Section 10.3.1(a) constitutes an
effective instrument for the conveyance of title to the Replacement
Airframe or Replacement Engine and (ii) in the case of a Replacement
Airframe, Lessor and Mortgagee, as assignee of Lessor, will be entitled
to the benefits of Section 1110 with respect to the Replacement
Airframe, provided that such opinion referred to in this clause (ii)
need not be delivered to the extent that immediately prior to such
replacement the benefits of Section 1110 were not, solely by reason of
a change in law or court interpretation thereof, available to Lessor or
Mortgagee, as assignee of Lessor;
(e) furnish an opinion of Lessee's aviation law counsel
reasonably satisfactory to Lessor and addressed to Lessor and Mortgagee
as to the due registration of any such Replacement Airframe and the due
filing for recordation of each Lease Supplement and Trust Indenture
Supplement with respect to such Replacement Airframe or Replacement
Engine under the Act;
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(f) with respect to any Replacement Airframe, furnish an
opinion of tax counsel, selected by Owner Participant and reasonably
satisfactory to Lessee, as to the federal income tax consequences
(without any requirement as to the nature of such Federal income tax
consequences) to Lessor and Owner Participant of any such replacement;
(g) with respect to the replacement of the Airframe, and any
Engine installed thereon at the time of the subject Event of Loss, if
requested by Lessor and at Lessor's expense, furnish a certified report
of a qualified independent aircraft appraiser, reasonably satisfactory
to Lessor, certifying that such Replacement Airframe and any such
Replacement Engine complies with the value, utility and remaining
useful life requirements set forth in Section 10.1.3(b).
Lessor and Lessee understand and agree that if at the time of
any replacement of the Airframe or any Engine, as contemplated in this Section
10, the Airframe was registered in a jurisdiction other than the United States,
then the requirements set forth above in this Section 10.3.1 relating to
compliance with the requirements of the Act or the FAA, shall be deemed to refer
to the comparable applicable Law of, and the Aviation Authority of, such other
jurisdiction.
10.3.2 Other Obligations
(a) Lessor and Lessee agree that, upon any Replacement
Airframe becoming the Airframe hereunder, and upon any Replacement Engine
becoming an Engine hereunder, this Lease shall continue to be, and shall be
treated as, a lease for U.S. federal income tax purposes of, among other things,
such Replacement Airframe and such Replacement Engine. Without limiting the
foregoing, Lessee and Lessor intend that Lessor shall, in all events, be
entitled to the benefits of Section 1110 with respect to any Replacement
Airframe or Replacement Engine and Lessee and Lessor shall cooperate and take
such action as the other may reasonably request so as to ensure that Lessor
shall be entitled to such benefits; provided that Lessor shall not be entitled
to such benefits to the extent that immediately prior to any Replacement Engine
becoming an Engine hereunder, the benefits of Section 1110 were not, solely by
reason of a change in law or court interpretation thereof, available to Lessor
or Mortgagee, as assignee of Lessor.
(b) No Event of Loss with respect to an Engine, or with
respect to an Airframe, shall result in, or otherwise allow
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or permit (other than as provided in Section 10.1.2(b)), any reduction,
deferral, discharge or other change in the timing or amount of any Rent payable
by Lessee hereunder, and (subject to such Section 10.1.2(b)) Lessee shall pay
all such Rent and other amounts as though such Event of Loss had not occurred.
10.4 Conveyance to Lessee
Upon compliance by Lessee with the applicable terms of
Sections 10.1.3, 10.2 and 10.3.1, Lessor will transfer to Lessee the Airframe or
Engine, as the case may be, with respect to which such Event of Loss occurred,
in accordance with Section 4.5.
10.5 Application of Payments
Any amounts, other than insurance proceeds in respect of
damage or loss not constituting an Event of Loss (the application of which is
provided for in Section 11), received at any time by Lessor, Lessee or any
Permitted Sublessee from any Government Entity or any other Person in respect of
any Event of Loss will be applied as follows:
10.5.1 Replacement of Airframe and Engines
If such amounts are received with respect to the Airframe, and
any Engine installed thereon at the time of such Event of Loss, upon compliance
by Lessee with the applicable terms of Section 10.1.3 with respect to the Event
of Loss for which such amounts are received, such amounts shall be paid over to,
or retained by, Lessee.
10.5.2 Loss of Engine
If such amounts are received with respect to an Engine (other
than an Engine installed on the Airframe at the time such Airframe suffers an
Event of Loss), upon compliance by Lessee with the applicable terms of Section
10.2.2 with respect to the Event of Loss for which such amounts are received,
such amounts shall be paid over to, or retained by, Lessee.
10.5.3 Payment of Loss
If such amounts are received, in whole or in part, with
respect to the Airframe, and Lessee makes, has made or is deemed to have made
the election set forth in Section 10.1.2, such amounts shall be applied as
follows:
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(a) first, if the sum described in Section 10.1.2 has not then
been paid in full by Lessee, such amounts shall be paid to Lessor (or
to Mortgagee so long as Mortgagee has not given notice to Lessee that
the Lien of the Trust Indenture has been duly discharged, except with
respect to Excluded Payments) to the extent necessary to pay in full
such sum;
(b) second, the remainder, if any, shall be paid to Lessee.
10.6 Requisition of Aircraft for Use
If any Government Entity shall requisition for use the
Airframe and the Engines or engines installed thereon, and if the same does not
constitute an Event of Loss, Lessee shall promptly notify Lessor and Mortgagee
of such requisition and all of Lessee's obligations under this Agreement shall
continue to the same extent as if such requisition had not occurred; provided,
however, that if the Airframe and Engines or engines installed thereon are not
returned to Lessor by Lessee at the end of the Term or within 180 days
thereafter, and Lessor, upon notice given not less than 30 days nor more than
120 days before the end of the Term, shall have elected to treat such event as
constituting an Event of Loss with respect to the Aircraft, Lessee shall then be
deemed to have made the election set forth in Section 10.1.2 with the effect
that Lessee shall be obligated to pay the Stipulated Loss Value and all other
amounts payable pursuant to Section 10.1.2 with respect to the Aircraft as if an
Event of Loss had occurred as of the end of the Term. If Lessor shall not have
elected to treat such event as an Event of Loss, Lessee shall be obligated to
return the Airframe and Engines or engines to Lessor pursuant to, and in all
other respects to comply with the provisions of, Section 5 promptly upon their
return by such Government Entity, and Lessee shall pay to Lessor upon such
return an amount equal to the average daily Basic Rent or Renewal Rent, as the
case may be, payable by Lessee during the Term for each day after the end of the
Term to but excluding the day of such return, up to a maximum of 30 days.
10.7 Requisition of an Engine for Use
If any Government Entity shall requisition for use any Engine
but not the Airframe, Lessee will, if such requisition continues to the end of
the Term, replace such Engine by complying with the applicable terms of Sections
10.2 and 10.3 to the same extent as if an Event of Loss had occurred with
respect
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to such Engine, and any payments received by Lessor or Lessee from such
Government Entity with respect to such requisition shall be paid or retained in
accordance with Section 10.5.2.
10.8 Application of Payments
All payments received by Lessor or Lessee, or any Permitted
Sublessee, from any Government Entity for the use of the Airframe and Engines or
engines installed thereon during the Term shall be paid over to, or retained by,
Lessee and all payments received by Lessor or Lessee from any Government Entity
for the use of the Airframe and Engines or engines installed thereon after the
Term shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, or Lessor has elected under Section
10.6 to treat such requisition as an Event of Loss, then all such payments shall
be paid over to Lessor (or to Mortgagee so long as Mortgagee has not given
notice to Lessee that the Lien of the Trust Indenture has been duly discharged),
and held as provided in Section 10.5.
10.9 Application of Payments During Existence of a Special Default
Any amount described in this Section 10 that is payable or
creditable to, or retainable by, Lessee shall not be paid or credited to, or
retained by, Lessee if at the time such payment, credit or retention would
otherwise occur a Special Default shall have occurred and be continuing, but
shall instead be held by or paid over to Lessor (or to Mortgagee so long as
Mortgagee has not given notice to Lessee that the Trust Indenture has been duly
discharged) as security for the obligations of Lessee under this Lease and the
other Lessee Operative Agreements and shall be invested pursuant to Section 4.4
hereof unless and until such amount is applied, at the option of Lessor, or upon
the written request of Lessee to Lessor, from time to time during the
continuance of a Special Default, to Lessee's obligations under this Lease as
and when due, it being understood that any such application shall be made to
such obligations of Lessee as Lessor may determine in its sole discretion. At
such time as there shall not be continuing any Special Default, such amount
shall be paid to Lessee to the extent not previously applied in accordance with
this Section 10.9.
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SECTION 11. INSURANCE
11.1 Lessee's Obligation to Insure
Lessee shall comply with, or cause to be complied with, each
of the provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
11.2 Insurance for Own Account
Nothing in Section 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurance required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Mortgagee or Owner Participant
from obtaining insurance for its own account (and any proceeds payable under
such separate insurance shall be payable as provided in the policy relating
thereto); provided, however, that no insurance may be obtained or maintained
that would limit or otherwise adversely affect the coverage of any insurance
required to be obtained or maintained by Lessee pursuant to this Section 11 and
Annex D.
11.3 Indemnification by Government in Lieu of Insurance
Lessor agrees to accept, in lieu of insurance against any risk
with respect to the Aircraft described in Annex D, indemnification from, or
insurance provided by, the U.S. Government, or upon the written consent of
Lessor, other Government Entity, against such risk in an amount that, when added
to the amount of insurance (including permitted self-insurance), if any, against
such risk that Lessee (or any Permitted Sublessee) may continue to maintain, in
accordance with this Section 11, during the period of such requisition or
transfer, shall be at least equal to the amount of insurance against such risk
otherwise required by this Section 11.
11.4 Application of Insurance Proceeds
As between Lessor and Lessee, all insurance proceeds received
as a result of the occurrence of an Event of Loss with respect to the Aircraft
or any Engine under policies required to be maintained by Lessee pursuant to
this Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect
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to the Aircraft, Airframe or any Engine will be applied in payment (or to
reimburse Lessee) for repairs or for replacement property, and any balance
remaining after such repairs or replacement with respect to such damage or loss
shall be paid over to, or retained by, Lessee.
11.5 Application of Payments During Existence of a Special Default
If a Special Default shall have occurred and be continuing at
any time that an amount described in this Section 11 is payable or creditable
to, or retainable by, Lessee, Lessee shall cause such amount to be paid over to
Lessor (or to Mortgagee so long as Mortgagee has not given notice to Lessee that
the Lien of the Trust Indenture has been duly discharged) as security for the
obligations of Lessee under this Lease and shall be invested pursuant to Section
4.4 hereof unless and until such amount is applied, at the option of Lessor, or
upon the written request of Lessee to Lessor, from time to time during the
continuance of a Special Default, to Lessee's obligations under this Lease and
the other Lessee Operative Agreements as and when due, it being understood that
any such application shall be made to such obligations of Lessee as Lessor may
determine in its sole discretion. At such time as there shall not be continuing
any Special Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 11.5.
SECTION 12. INSPECTION
(a) At all reasonable times Lessor, Mortgagee or the Owner
Participant, and their respective authorized representatives (the "Inspecting
Parties") may (not more than once every 12 months unless a Lease Event of
Default has occurred and is continuing in which case such inspection right shall
not be so limited) inspect the Aircraft, the Airframe and the Engines
(including, without limitation, the Aircraft Documents) and any such Inspecting
Party may make copies of such Aircraft Documents not reasonably deemed
confidential by Lessee or such Permitted Sublessee.
(b) Any inspection of the Aircraft hereunder shall be limited
to a visual, walk-around inspection and shall not include the opening of any
panels, bays or other components of the Aircraft (although those otherwise open
may be inspected), and no such inspection shall interfere with Lessee's or any
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Permitted Sublessee's maintenance and operation of the Aircraft, the Airframe
and the Engines.
(c) With respect to such rights of inspection, Lessor, Owner
Participant and Mortgagee shall not have any duty or liability to make, or any
duty or liability by reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in
connection with any such inspection (including the cost of any copies made in
accordance with Section 12(a)).
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 In General
This Lease and the other Lessee Operative Agreements shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns. Except as otherwise expressly permitted by the
terms of the Lease or any other Lessee Operative Agreement, Lessee will not,
without the prior written consent of Lessor and Mortgagee, assign any of its
rights under this Lease, such consent not to be unreasonably withheld. Except as
otherwise provided herein (including, without limitation, under the provisions
of Section 15 hereof), Lessor and Mortgagee may not assign or convey any of
their right, title and interest in and to this Lease or the Aircraft without the
prior written consent of Lessee, such consent not to be unreasonably withheld.
13.2 Merger of Lessee
13.2.1 In General
Lessee shall not consolidate with or merge into any other
Person under circumstances in which Lessee is not the surviving corporation, or
convey, transfer or lease in one or more transactions all or substantially all
of its assets to any other Person, unless:
(a) such Person is organized, existing and in good standing
under the Laws of the United States, any State of the United States or the
District Columbia and, upon consummation of such transaction, such Person will
be a U.S. Air Carrier;
(b) such Person executes and delivers to Lessor and Mortgagee
a duly authorized, legal, valid, binding and enforceable
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agreement, reasonably satisfactory in form and substance to Lessor, containing
an effective assumption by such Person of the due and punctual performance and
observance of each covenant, agreement and condition in the Lessee Operative
Agreements to be performed or observed by Lessee;
(c) such Person makes such filings and recordings with the FAA
pursuant to the Act as shall be necessary to evidence such consolidation or
merger; and
(d) immediately after giving effect to such consolidation or
merger no Lease Event of Default shall have occurred and be continuing.
13.2.2 Effect of Merger
Upon any such consolidation or merger of Lessee with or into,
or the conveyance, transfer or lease by Lessee of all or substantially all of
its assets to, any Person in accordance with this Section 13.2, such Person will
succeed to, and be substituted for, and may exercise every right and power of,
Lessee under the Lessee Operative Agreements with the same effect as if such
person had been named as "Lessee" therein. No such consolidation or merger, or
conveyance, transfer or lease, shall have the effect of releasing Lessee or such
Person from any of the obligations, liabilities, covenants or undertakings of
Lessee under the Lease.
13.3 Assignment Security for Lessor's Obligations
In order to secure the indebtedness evidenced by the Equipment
Notes, Lessor has agreed in the Trust Indenture, among other things, to assign
to Mortgagee this Lease and to mortgage the Aircraft, the Airframe and the
Engines in favor of Mortgagee, subject to the reservations and conditions
therein set forth. Lessee hereby accepts and consents to the assignment of all
Lessor's right, title and interest in and to this Lease pursuant to the terms of
the Trust Indenture. In accordance with Section 3.3(c), Lessee agrees to pay
directly to Mortgagee (or, after receipt by Lessee of notice from Mortgagee of
the discharge of the Lien of the Trust Indenture, to Lessor), all amounts of
Rent (other than Excluded Payments) due or to become due hereunder and assigned
to Mortgagee and Lessee agrees that Mortgagee's right to such payments hereunder
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, the circumstances set forth in
Section 16 hereof. Notwithstanding the foregoing assignment of this Lease, the
obligations of Lessee to Lessor
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to perform the terms and conditions of this Lease shall remain in full force and
effect.
13.4 Successor Owner Trustee
Lessee agrees that in the case of the appointment of any
successor Owner Trustee pursuant to the terms of the Participation Agreement and
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft and the other assets of the Trust Estate for all purposes hereof
without the necessity of any consent or approval by Lessee and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. An
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Participation Agreement and the Trust Agreement, and such right
may be exercised repeatedly as long as this Lease shall be in effect.
SECTION 14. LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following
circumstances, conditions, acts or events, for any reason whatsoever and whether
any such circumstance, condition, act or event shall be voluntary or involuntary
or come about or be effected by operation of Law or pursuant to or in compliance
with any judgment, decree, order, rule or regulation of any Government Entity,
shall constitute a Lease Event of Default so long as it shall not have been
remedied:
14.1 Payments
Lessee shall fail to pay any amount of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value when due and such failure shall
continue for a period in excess of 10 Business Days after the same shall have
become due; Lessee shall fail to pay any Supplemental Rent (other than
Stipulated Loss Value or Termination Value or Excluded Payments) when due and
such failure shall continue for a period in excess of 10 Business Days from and
after the date of any written notice to Lessee from Lessor or the Mortgagee of
the failure to make such payment when due; or Lessee shall fail to pay any
Excluded Payment when due and such failure shall continue for a period in excess
of 10 Business Days from and after the date of any written
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notice to Lessee and Mortgagee from the Owner Paticipant that such failure
constitutes a Lease Event of Default.
14.2 Insurance
Lessee shall fail to carry and maintain, or cause to be
carried and maintained, insurance on and in respect of the Aircraft, Airframe
and Engines in accordance with the provisions of Section 11.
14.3 Other Covenants
Lessee shall fail to observe or perform (or caused to be
observed and performed) in any material respect any other covenant, agreement or
obligation set forth herein or in any other Lessee Operative Agreement (other
than the covenants, agreements and obligations set forth in the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
from and after the date of written notice thereof to Lessee from Lessor or
Mortgagee, unless such failure is capable of being corrected and Lessee shall be
diligently proceeding to correct such failure, in which case there shall be no
Lease Event of Default unless and until such failure shall continue unremedied
for a period of 180 days after receipt of such notice.
14.4 Representations and Warranties
Any representation or warranty made by Lessee herein, in the
Participation Agreement or in any other Lessee Operative Agreement (other than
the representations and warranties of Lessee in the Tax Indemnity Agreement) (a)
shall prove to have been untrue or inaccurate in any material respect as of the
date made, (b) such untrue or inaccurate representation or warranty is material
at the time in question, and (c) the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor or Mortgagee to Lessee.
14.5 Bankruptcy and Insolvency
(a) Lessee shall consent to the appointment of or the taking
of possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit
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of creditors, or Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization, liquidation or other
relief in a case under any bankruptcy Laws or other insolvency Laws (as in
effect at such time), or Lessee shall seek relief by voluntary petition, answer
or consent, under the provisions of any other bankruptcy or other similar Law
providing for the reorganization or winding-up of corporations (as in effect at
such time) or Lessee's board of directors shall adopt a resolution authorizing
any of the foregoing; or
(b) an order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the consent of Lessee, a receiver,
trustee or liquidator of Lessee or of substantially all of its property, or
substantially all of the property of Lessee shall be sequestered, and any such
order, judgment or decree of appointment or sequestration shall remain in force
undismissed, unstayed and unvacated for a period of 90 days after the date of
entry thereof; or
(c) a petition against Lessee in a case under any bankruptcy
Laws or other insolvency Laws (as in effect at such time) is filed and not
withdrawn or dismissed within 90 days thereafter, or if, under the provisions of
any Law providing for reorganization or winding-up of corporations which may
apply to Lessee, any court of competent jurisdiction assumes jurisdiction,
custody or control of Lessee or of substantially all of its property and such
jurisdiction, custody or control remains in force unrelinquished, unstayed and
unterminated for a period of 90 days.
SECTION 15. REMEDIES AND WAIVERS
15.1 Remedies
If any Lease Event of Default shall occur and be continuing,
Lessor may, at its option and at any time and from time to time, exercise any
one or more of the following remedies as Lessor in its sole discretion shall
elect:
15.1.1 Return and Repossession
Lessor may cause Lessee, upon giving written notice to Lessee,
to return promptly, and Lessee shall return promptly, the Airframe and Engines
as Lessor may so demand, to Lessor or its order in the manner and condition
required by, and otherwise in accordance with, all the provisions of Section 5
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as if the Airframe or Engines were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are located and
take immediate possession of and remove the same by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise.
15.1.2 Sale and Use
Lessor may sell the Airframe and/or any Engine at public or
private sale, at such times and places, and to such Persons (including Lessor,
Mortgagee or any Participant), as Lessor may determine; or Lessor may otherwise
dispose of, hold, use, operate, lease to others or keep idle the Airframe and/or
any Engine, as Lessor, in its sole discretion, may determine, all free and clear
of any rights of Lessee and without any duty to account to Lessee with respect
to such action or inaction or for any proceeds with respect thereto, except as
hereinafter set forth in this Section 15, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor's
damages suffered or incurred as a result of the subject Lease Event of Default.
Lessor shall give Lessee at least 15 days prior written notice of the date fixed
for any public sale of the Airframe and/or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.
15.1.3 Certain Liquidated Damages
Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Section 15.1.1 or
15.1.2 with respect to the Airframe and/or any Engine, or any Part thereof,
Lessor, by written notice to Lessee specifying a payment date (which shall be
the Stipulated Loss Value Date next occurring not less than 10 days after the
date of such notice), may demand Lessee to pay to Lessor, and Lessee shall pay
to Lessor, on the payment date so specified and in the manner and in funds of
the type specified in Section 3.3, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may
be, for the Aircraft in respect of all periods commencing on or after the date
specified for payment in such notice), the following amounts:
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(a) all unpaid Basic Rent or Renewal Rent, as the case may be,
due at any time prior to the Stipulated Loss Value Date specified in
such notice; plus
(b) whichever of the following amounts Lessor, in its sole
discretion shall specify in such notice:
(i) an amount equal to the excess, if any, of the present
value, computed as of the Stipulated Loss Value Date specified in such
notice, discounted to such date at a rate per annum equal to the Debt
Rate, compounded semiannually, of all unpaid Basic Rent during the then
remaining portion of the Base Lease Term or, if a Renewal Lease Term
has commenced, of all unpaid Renewal Rent during the remaining portion
of such Renewal Lease Term, over the Fair Market Rental Value of the
Aircraft for the remainder of the Term, after discounting such Fair
Market Rental Value to its then present value (at a rate per annum
equal to the Debt Rate, compounded semiannually) as of the Stipulated
Loss Value Date specified in such notice, or
(ii) an amount equal to the excess, if any, of the Stipulated
Loss Value for the Aircraft, computed as of the Stipulated Loss Value
Date specified in such notice, over the Fair Market Sales Value of the
Aircraft, as of the Stipulated Loss Value Date specified in such
notice; plus
(c) interest on the amounts specified in the foregoing clause
(a) at the Payment Due Rate from and including the date on which any
such amount was due to the date of payment of such amount; plus
(d) interest on the amount specified in the foregoing clause
(b)(i) or (b)(ii), according to Lessor's election, at the Payment Due
Rate from and including the Stipulated Loss Value Date specified in
such notice to the date of payment of such amount.
15.1.4 Liquidated Damages Upon Sale
If Lessor, pursuant to Section 15.1.2 or applicable Law, shall
have sold the Airframe and/or any Engine, Lessor, in lieu of exercising its
rights under Section 15.1.3 with respect to the Aircraft, Airframe or any
Engine, as the case may be, may, if Lessor shall so elect, upon giving written
notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor,
on the date of such sale and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for
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loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal
Rent, as the case may be, for the Aircraft in respect of all periods commencing
on or after the date of such sale), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be,
due at any time prior to the Stipulated Loss Value Date on or
immediately preceding the date of such sale; plus
(b) an amount equal to the excess, if any, of (i) the
Stipulated Loss Value of the Aircraft, computed as of the Stipulated
Loss Value Date used in the foregoing clause (a) for the computation of
unpaid Rent, over (ii) the proceeds of such sale; plus
(c) all reasonable brokerage and other out-of-pocket fees and
expenses incurred by Lessor and, Mortgagee in connection with such
sale; plus
(d) if the date of such sale is not a Stipulated Loss Value
Date, an amount equal to interest on the outstanding principal amount
of the Equipment Notes at the rate per annum borne thereby from and
including the Stipulated Loss Value Date used in the foregoing clause
(a) for the computation of unpaid Rent to the date of such sale; plus
(e) interest on the amounts specified in the foregoing clause
(a) at the Payment Due Rate from and including the date on which any
such amount was due to the date of payment of such amount; plus
(f) interest on the sum of the amounts specified in the
foregoing clause (b) at the Payment Due Rate from and including the
date of such sale to the date of payment of such amounts.
15.1.5 Rescission
Lessor may (i) at its option, rescind or terminate this Lease
as to the Aircraft, Airframe or any Engine, or any Part thereof, or (ii)
exercise any other right or remedy that may be available to it under applicable
Law or proceed by appropriate court action to enforce the terms hereof.
15.1.6 Other Remedies
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(a) In addition to the foregoing remedies (but without
duplication of amounts otherwise paid under this Section 15), Lessee shall be
liable for any and all unpaid Rent due hereunder before, during or after (except
as otherwise provided herein) the exercise of any of the foregoing remedies and
for all reasonable attorneys' fees and other costs and expenses of Lessor,
Mortgagee the Owner Participant and the Note Holders, including, without
limitation, interest on overdue Rent at the rate as herein provided, incurred by
reason of the occurrence of any Lease Event of Default or the exercise of
Lessor's remedies with respect thereto, including all reasonable costs and
expenses incurred in connection with the return of the Airframe or any Engine,
in accordance with the terms of Section 5 or in placing the Airframe or any
Engine, in the condition and airworthiness required by Section 5.
(b) The prevailing party in any dispute between Lessee and
Lessor under this Lease shall be entitled to reimbursement from the other party
for all reasonable attorneys' fees and other costs and expenses of such
prevailing party, incurred by reason of such dispute.
15.2 Limitations Under CRAF
Notwithstanding the provisions of Section 15.1, during any
period that the Aircraft, Airframe or any Engine is subject to CRAF in
accordance with the provisions of Section 7.2.3 and in the possession of the
U.S. Government, Lessor shall not, as a result of any Lease Event of Default,
exercise its remedies hereunder in such manner as to limit Lessee's control
under this Lease (or any Permitted Sublessee's control under any Permitted
Sublease) of the Aircraft, Airframe or such Engine, unless at least 30 days' (or
such other period as may then be applicable under CRAF) written notice of
default hereunder shall have been given by Lessor or Mortgagee by registered or
certified mail to Lessee (and any Permitted Sublessee) with a copy to the
Contracting Officer Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given under the
contract governing Lessee's (or any Permitted Sublessee's) participation in CRAF
with respect to the Aircraft, Airframe or any Engine.
15.3 Right to Perform for Lessee
If Lessee (i) fails to make any payment of Rent required to be
made by it hereunder or (ii) fails to perform or comply with any of its
agreements contained herein and such
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failure continues for a period of 30 days after written notice thereof is given
by Lessor or Mortgagee to Lessee, Lessor or Mortgagee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or Mortgagee
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
Payment Due Rate, shall be deemed Supplemental Rent, payable by Lessee upon
demand by Lessor or Mortgagee, whichever is entitled thereto. No such payment,
performance or compliance shall be deemed to cure any Lease Default or Lease
Event of Default or otherwise relieve Lessee of its obligations with respect
thereto.
15.4 Determination of Fair Market Rental Value and Fair Market Sales
Value
For the purpose of this Section 15 only, the "Fair Market
Rental Value" or the "Fair Market Sales Value" of the Aircraft, the Airframe or
any Engine, shall be determined on an "as is, where is" basis and shall take
into account customary brokerage and other out-of-pocket fees and expenses which
typically would be incurred in connection with a re-lease or sale of the
Aircraft, the Airframe or any Engine. Any such determination shall be made by an
Appraiser selected by Lessor and the costs and expenses associated therewith
shall be borne by Lessee, unless Lessor does not obtain possession of the
Aircraft, the Airframe and the Engines pursuant to this Section 15, in which
case an Appraiser shall not be appointed and Fair Market Rental Value and Fair
Market Sales Value for purposes of this Section 15 shall be zero.
15.5 Remedies Cumulative
Nothing contained in this Lease shall be construed to limit in
any way any right, power, remedy or privilege of Lessor hereunder or under any
other Operative Agreement or now or hereafter existing at law or in equity. Each
and every right, power, remedy and privilege hereby given to, or retained by,
Lessor in this Lease shall be in addition to and not in limitation of every
other right, power, remedy and privilege given under the Operative Agreements or
now or hereafter existing at law or in equity. Each and every right, power,
remedy and privilege of Lessor under this Lease and any other Operative
Agreement may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by Lessor. All such rights, powers,
remedies and privileges shall be cumulative and not mutually exclusive, and the
exercise of
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one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent hereunder shall be
absolute and unconditional, and shall not be affected by any event or
circumstance, including, without limitation: (i) any setoff, counterclaim,
recoupment, defense or other right that Lessee may have against Lessor,
Mortgagee, any Participant, any Note Holder, or any other Person for any reason
whatsoever; (ii) any defect in the title, airworthiness, condition, design,
operation or fitness for use of, or any damage to or loss or destruction of, the
Aircraft, Airframe or any Engine, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever; (iii) any insolvency,
bankruptcy, reorganization or similar proceedings by or against Lessee or any
other Person; or (iv) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(b) If for any reason whatsoever this Lease shall be
terminated in whole or in part by operation of law or otherwise except as
specifically provided herein, Lessee nonetheless agrees to pay an amount equal
to each Rent payment at the time such payment would have become due and payable
in accordance with the terms hereof had this Agreement not been terminated in
whole or in part. Lessee hereby waives, to the extent permitted by applicable
law, any and all rights that it may now have or that at any time hereafter may
be conferred upon it, by statute or otherwise, to terminate, cancel, quit or
surrender this Agreement, except in accordance with the express terms hereof.
(c) Nothing set forth in this Section 16 shall be construed to
prohibit Lessee from separately pursuing any claim that it may have from time to
time against Lessor or any other Person with respect to any matter (other than
the absolute and unconditional nature of Lessee's obligations hereunder to pay
Basic Rent, Renewal Rent, the Stipulated Loss Value with respect to any
Aircraft, and the Termination Value with respect to any Aircraft and other than
the matters specified in paragraphs (a) and (b) above).
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SECTION 17. RENEWAL AND PURCHASE OPTIONS
17.1 Preliminary Notices
(a) At least (i) 120 days prior to the Scheduled Expiration
Date or a Renewal Term Expiration Date, as applicable, or (ii) if a Renewal
Lease Term of six months or less is then in effect, 60 days prior to the Renewal
Term Expiration Date, Lessee may provide notice to Lessor that Lessee may
exercise the option to extend the leasing of the Aircraft for a Renewal Lease
Term pursuant to Section 17.2 or the option to purchase the Aircraft on the
Scheduled Expiration Date or Renewal Term Expiration Date of such Renewal Lease
Term, as the case may be, pursuant to Section 17.3 (a "Preliminary Notice").
(b) If any such Preliminary Notice is given by Lessee, then
Lessee may provide a further notice specifying which option it intends to elect,
with respect to the relevant period, pursuant to Section 17.2.1 or 17.3.1, as
the case may be. If Lesser fails to provide such further notice, such
Preliminary Notice shall be deemed revoked.
17.2 Renewal Options
17.2.1 Renewal Notice
(a) If Lessee has given a Preliminary Notice, as specified in
Section 17.1, and subject to the terms and conditions of this Section 17.2,
Lessee may exercise its option to extend the leasing of the Aircraft hereunder
until the applicable Renewal Term Expiration Date, on the same terms, provisions
and conditions (except as contemplated by this Section 17) set forth herein and
in the other Lessee Operative Agreements with respect to the Base Lease Term, by
delivery of a notice (a "Renewal Notice") to Lessor not less than (i) 75 days
prior to the Scheduled Expiration Date or a Renewal Term Expiration Date, as
applicable, or (ii) if a Renewal Lease Term of six months or less is then in
effect, 20 days prior to the Renewal Term Expiration Date.
(b) Notwithstanding anything to the contrary in this Agreement
or any other Operative Agreement:
(i) No Renewal Notice shall be binding on Lessor or oblige
Lessor to extend the leasing of the Aircraft hereunder for a Renewal
Lease Term if any Lease Event of Default shall have occurred and be
continuing on and as of
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the date that such Renewal Lease Term would otherwise commence.
(ii) Any Renewal Notice shall be revocable by Lessee until 10
Business Days after the Renewal Rent is determined in accordance with
Section 17.2.2 and unless revoked by written notice by Lessee to Lessor
shall thereafter become irrevocable and shall constitute an
unconditional obligation of Lessee to extend the leasing of the
Aircraft hereunder for the Renewal Lease Term to which such Renewal
Notice relates.
(iii) Lessee shall not be entitled to give any Renewal Notice
if it has (x) not delivered a Preliminary Notice or (y) delivered a
Purchase Notice to Lessor.
17.2.2 Renewal Rent
(a) During the Renewal Lease Term, Lessee shall pay to Lessor
on each Payment Date, in the manner and in the funds of the type specified in
Section 3.3, Renewal Rent in arrears.
(b) The Renewal Rent payable by Lessee on each Payment Date
during the First Renewal Lease Term shall be the lower of (i) an amount equal to
one-half of the average of the semiannual Basic Rent amounts payable during the
Base Lease Term and (ii) the Fair Market Rental Value of the Aircraft for such
Renewal Lease Term. The Renewal Rent payable by Lessee on each Payment Date
during any Subsequent Renewal Lease Term shall be the Fair Market Rental Value
of the Aircraft for such Subsequent Renewal Lease Term. Any such Fair Market
Rental Value shall be determined not more than 35 days after delivery of a
Preliminary Notice by mutual agreement of Lessor and Lessee or, if they shall be
unable to agree, by an appraisal in accordance with Section 17.4.
17.2.3 Stipulated Loss and Termination Values
(a) For any Renewal Lease Term, Stipulated Loss Value Dates
and Termination Value Dates shall be extended throughout such Renewal Lease Term
on the same day of each month as during the Base Lease Term, and a new EBO Date
shall be established.
(b) Stipulated Loss Value and Termination Value amounts and
the EBO Price that are payable during any Renewal Lease Term shall be determined
at the same time that the Renewal Rent for such Renewal Lease Term is determined
under Section 17.2.2.
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Stipulated Loss Values and Termination Values for any such Renewal Lease Term
shall, commencing on the first day of such Renewal Lease Term, be equal to the
Fair Market Sales Value of the Aircraft, computed as of the first day of such
Renewal Lease Term, and shall decline ratably on a monthly basis to the Fair
Market Sales Value of the Aircraft as of the last day of such Renewal Lease
Term.
(c) Any Fair Market Sales Value of the Aircraft, for purposes
of calculating Stipulated Loss Value and Termination Value amounts applicable
during any such Renewal Lease Term, shall be determined 35 days after delivery
of a Preliminary Notice by mutual agreement of Lessor and Lessee or, if they
shall be unable to agree, by an appraisal in accordance with Section 17.4.
17.3 Purchase Option
17.3.1 Purchase Notice
(a) Subject to the terms and conditions of this Section 17.3,
Lessee or its designee may elect to purchase the Aircraft, (A) on any Purchase
Date, at a purchase price equal to the Fair Market Sales Value of the Aircraft,
(B) on the EBO Date at a purchase price equal to the EBO Price or (C) at any
time following the occurrence of a Materially Adverse Tax Event at a purchase
price equal to the Fair Market Sales Value of the Aircraft (or, if greater, the
Termination Value) determined as of the date of purchase.
(b) Lessee may exercise its option to purchase the Aircraft
pursuant to clause (A), clause (B) or clause (C) of Section 17.3.1(a), by
delivery of a notice (a "Purchase Notice") to Lessor not less than (i) in the
case of clause (A), 75 days prior to the Purchase Date specified in such
Purchase Notice, or (ii) in the case of Clause (A) if a Renewal Lease Term of
six months or less is then in effect, 20 days prior to the Purchase Date
specified in such Purchase Notice, or (iii) in the case of clause (B), not less
than 30 days prior to the EBO Date, or (iv) in the case of clause (C) at any
time following a Materially Adverse Tax Event.
(c) Notwithstanding anything to the contrary in this Agreement
or any other Operative Agreement:
(i) Any Purchase Notice (whether delivered or deemed to have
been delivered) shall be revocable until 10 Business Days after the
determination of the Fair Market Sales
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Value in accordance with Section 17.3.2 or until 16 days prior to the
EBO Date, and unless revoked by written notice by Lessee to Lessor
shall thereafter become irrevocable and shall constitute an
unconditional obligation of Lessee to purchase the Aircraft under this
Section 17.3.
(ii) Lessee shall not be entitled to give any Purchase Notice
in respect of any Purchase Date if it has delivered a Renewal Notice
for a Renewal Lease Term that would commence immediately following such
Purchase Date.
(d) If any purchase option is exercised, upon payment of the
applicable purchase price any Rent otherwise due and payable on the date of
purchase or thereafter with respect to such Aircraft shall not be due and
payable.
(e) At the election of the Lessee, any purchase option
described in this Section 17.3 may be exercised by a designee of the Lessee.
17.3.2 Determination of Fair Market Sales Value
The Fair Market Sales Value of the Aircraft shall be
determined not more than 35 days after delivery of a Preliminary Notice by
mutual agreement of Lessor and Lessee or, if they shall be unable to agree, by
an appraisal in accordance with Section 17.4.
17.3.3 Title
Upon full and final payment by Lessee of (a) the applicable
purchase price of the Aircraft, (b) all unpaid Rent due and payable through and
including the Purchase Date, EBO Date or the date of Purchase under clause (C)
of Section 17.3.1(a), as the case may be, and (c) all other amounts due and
payable by Lessee under this Agreement, Lessor will transfer to Lessee title to
the Aircraft in accordance with Section 4.5.
17.4 Appraisals
Whenever Fair Market Rental Value or Fair Market Sales Value
of the Aircraft is required to be determined by an appraisal under the foregoing
provisions of this Section 17, Lessee and Lessor shall, within seven days after
the expiration of the 35-day period referred to in Sections 17.2.2(b), 17.2.3(c)
and 17.3.2, appoint a mutually satisfactory Appraiser to complete such appraisal
within seven days of the appointment
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and the determination of such Appraiser shall be final and binding on Lessor and
Lessee. If Lessee and Lessor fail to agree within such 7-day period upon a
satisfactory Appraiser then each shall within one day thereafter appoint a
separate Appraiser and such Appraisers shall within seven days of such
appointment jointly determine such amount and such jointly determined amount
shall be final and binding on Lessor and Lessee. If either Lessee or Lessor
fails to so appoint an Appraiser, the determination of the single Appraiser
appointed shall be final and binding on Lessor and Lessee. If two Appraisers are
appointed and within seven days after the appointment of the latter of such two
Appraisers, they cannot agree upon such amount, such two Appraisers shall,
within two days after such seventh day, appoint a third Appraiser and such
amount shall be determined by such three Appraisers, who shall make their
separate appraisals within seven days following the appointment of the third
Appraiser, and any determination so made shall be conclusive and binding upon
Lessor and Lessee in accordance with the following provisions of this Section
17. If three Appraisers are appointed and the difference between the
determination which is farther from the middle determination and the middle
determination is more than 125% of the difference between the middle
determination and the third determination, then such farther determination shall
be excluded, the remaining two determinations shall be averaged and such average
shall be final and binding upon Lessor and Lessee. Otherwise, the average of all
three determinations shall be final and binding upon Lessor and Lessee. If no
such third Appraiser is appointed within such 2-day period, either Lessor or
Lessee may apply to the American Arbitration Association to make such
appointment, and both parties shall cooperate in making, and be bound by, such
appointment. The fees and expenses of all such Appraisers and such appraisal
procedure shall be borne equally by Lessee and Lessor; provided, that if Lessee
elects not to renew this Lease or purchase the Aircraft following the conclusion
of such appraisal, Lessee shall pay all such fees and expenses of such
appraisal.
SECTION 18. MISCELLANEOUS
18.1 Amendments
No provision of this Agreement may be amended, supplemented,
waived, modified, discharged, terminated or otherwise varied orally, but only by
an instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate
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or otherwise vary and is signed by Lessor and Lessee. Each such amendment,
supplement, waiver, modification, discharge, termination or variance shall be
effective only in the specific instance and for the specific purpose for which
it is given. No provision of this Agreement shall be varied or contradicted by
oral communication, course of dealing or performance or other manner not set
forth in an agreement, document or instrument in writing and signed by Lessor
and Lessee.
18.2 Severability
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the full extent permitted, to the end that this
Agreement shall be deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
18.3 Third-Party Beneficiary
This Agreement is not intended to, and shall not, provide any
person not a party hereto (other than Mortgagee, the Participants, the Indenture
Indemnitees and the Persons referred to in Section 4.6) with any rights of any
nature whatsoever against either of the parties hereto, and no person not a
party hereto (other than Mortgagee, the Participants, the Indenture Indemnitees
and the Persons referred to in Section 4.6) shall have any right, power or
privilege in respect of, or have any benefit or interest arising out of, this
Agreement.
18.4 Reproduction of Documents
This Agreement, all annexes, schedules and exhibits hereto and
all agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original
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itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by such party in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction likewise is admissible in evidence.
18.5 Counterparts
This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts (or upon
separate signature pages bound together into one or more counterparts), each of
which when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument.
18.6 Notices
Unless otherwise expressly permitted by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers and
other communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile (followed by
overnight courier service for next Business Day receipt) or telecommunication
transmission (which in either case provides written confirmation to the sender
of its delivery), sent by registered mail or certified mail, return receipt
requested, postage prepaid, or sent by overnight courier service, in each case
to the respective address or facsimile number set forth for such party in
Schedule 1 to the Participation Agreement, or to such other address or number as
either party hereto may hereafter specify by notice to the other party hereto.
Each such notice, request, demand, authorization, direction, consent, waiver or
other communication shall be effective when received or, if made, given,
furnished or filed (a) by facsimile or telecommunication transmission, when
confirmed; provided there is receipt of such notice the next Business Day from
overnight courier service or (b) by registered or certified mail, three Business
Days after being deposited, properly addressed, with the U.S. Postal Service.
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18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND
SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR
PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES
TO THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE
MADE BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
AT THE ADDRESS SET FORTH PURSUANT TO SECTION 18.6. EACH PARTY HERETO HEREBY
AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE
WITH THIS SECTION 18.7(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE
UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF
ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR
OR AFFECT IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT
RENDERED IN ANY ACTION OR PROCEEDING BASED THEREON.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
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(e) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION
BASED UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
18.8 Survival
The representations, warranties, indemnities and covenants set
forth herein shall survive the delivery of the Aircraft, the Transfer of any
interest of Owner Participant in this Agreement, the other Operative Agreements,
the Trust Estate and the Trust Agreement, the Transfer or any interest by any
Note Holder of its Equipment Notes, but no such provision other than such
indemnities shall survive the expiration or other termination of this Lease in
accordance with its terms; it being expressly understood and agreed that the
foregoing shall not be construed so as to release Lessee from any obligation
theretofore accrued, including the payment of any Rent then due and payable,
provided that the foregoing shall not be construed to change any provision in
the Operative Agreements in which any such representation, warranty, indemnity
or covenant expires by its terms.
18.9 No Waiver
No failure on the part of Lessor to exercise, and no delay by
Lessor in exercising, any of its rights, powers, remedies or privileges under
this Agreement or provided at Law, in equity or otherwise shall impair,
prejudice or constitute a waiver of any such right, power, remedy or privilege
or be construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
Lessor to any other or further action in any circumstances without notice or
demand.
18.10 Entire Agreement
This Agreement, together with the other Operative Agreements,
on and as of the date hereof constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, and all prior or
contemporaneous understandings or agreements, whether written or oral, between
the parties
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hereto with respect to such subject matter are hereby superseded in their
entireties.
[This space intentionally left blank.]
64
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual capacity,
except as expressly provided herein, but
solely as Owner Trustee under the Trust
Agreement
By:
-----------------------------------------
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By:
-----------------------------------------
Name:
Title:
65
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual capacity,
except as expressly provided herein, but
solely as Owner Trustee under the Trust
Agreement
By:
-----------------------------------------
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By:
-----------------------------------------
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this ____ day of _________, ____.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but
solely as Mortgagee
By:
-----------------------------------------
Name:
Title:
