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LEASE AGREEMENT
DATED AS OF APRIL 25, 2000
BETWEEN
ATLAS FREIGHTER LEASING III, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
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Three General Electric CF6-80C2 Engines
Manufacturer's Serial Nos. 704699, 704860, 704918
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THE LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN
AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
TABLE OF CONTENTS
Page
SECTION 1. Definitions.......................................................1
SECTION 2. Acceptance and Lease.............................................22
SECTION 3. Term and Rent....................................................23
(a) Term and Basic Rent.......................................23
(b) Adjustments to Basic Rent.................................23
(c) Supplemental Rent.........................................23
(d) Payments in General.......................................24
(e) Minimum Rent..............................................24
(f) Prepayment of Rent Payments...............................25
SECTION 4. Certain Representations and Warranties...........................25
SECTION 5. Lessee's Representations and Warranties..........................26
(a) Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries...............................26
(b) Authorization of Transaction Documents, etc...............27
(c) Financial Condition.......................................28
(d) No Material Adverse Change; No Restricted
Junior Payments.........................................29
(e) Title to Properties, Liens................................29
(f) Litigation, Adverse Facts.................................30
(g) Payment of Taxes..........................................30
(h) Performance of Agreements.................................30
(i) Governmental Regulation...................................31
(j) Employee Benefit Plans....................................31
(k) Certain Fees..............................................31
(l) Environmental Protection..................................31
(m) Employee Matters..........................................32
(n) Solvency..................................................32
(o) Disclosure................................................32
(p) Registration and Filing; Chief Executive Office...........33
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Page
SECTION 6. Lessee's Affirmative Covenants...................................33
(a) Financial Statements and Other Reports....................33
(b) Corporate Existence.......................................39
(c) Payment of Taxes and Claims; Tax Consolidation............39
(d) Maintenance of Properties; Insurance......................39
(e) Inspection; Lender Meeting................................40
(f) Compliance with Laws, etc.................................40
(g) Lessee's Remedial Action Regarding Hazardous Materials....41
(h) Employee Benefit Plans....................................41
(i) Corporate Separateness....................................41
SECTION 7. Lessee's Negative Covenants......................................42
(a) Indebtedness..............................................42
(b) Liens and Related Matters.................................43
(c) Investments; Joint Ventures...............................44
(d) Contingent Obligations....................................45
(e) Restricted Junior Payments................................46
(f) Financial Covenants.......................................47
(g) Restriction on Fundamental Changes; Asset Sales
and Acquisitions; New Subsidiaries .....................52
(h) Amendments of Material Agreements.........................54
(i) Restriction on Leases.....................................55
(j) Sales and Lease-Backs.....................................55
(k) Transactions with Shareholders and Affiliates.............56
(l) Disposal of Subsidiary Stock..............................56
(m) Conduct of Business.......................................56
(n) Change of Chief Executive Office..........................57
SECTION 8. Return of the Engines............................................57
(a) Condition Upon Return.....................................57
(b) Overhaul and Repair.......................................57
(c) Repairs...................................................57
(d) Modifications.............................................57
(e) Airworthiness Directives..................................58
(f) Return of the Engines.....................................58
(g) Deferred Maintenance......................................58
(h) Corrosion Treatment.......................................58
(i) Manuals...................................................58
(j) Storage Upon Return.......................................58
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Page
(k) Severable Parts...........................................59
(l) Survival..................................................59
(m) Deregistration and Export.................................59
SECTION 9. Liens............................................................60
SECTION 10. Registration, Maintenance and Operation; Possession
and Subleases; Insignia........................................60
(a) Maintenance and Operation.................................60
(b) Possession................................................62
(c) Insignia..................................................64
(d) Holding Out...............................................64
(e) No Pledging of Credit.....................................64
(f) Title.....................................................64
(g) Information and Records...................................65
SECTION 11. Replacement and Pooling of Parts; Alterations,
Modifications and Additions....................................66
SECTION 12. Indemnities......................................................68
SECTION 13. Event of Loss....................................................69
SECTION 14. Insurance........................................................71
SECTION 15. Assignment.......................................................74
SECTION 16. Events of Default................................................75
SECTION 17. Remedies.........................................................79
SECTION 18. Lessee's Cooperation Concerning Certain Matters..................82
SECTION 19. Notices..........................................................82
SECTION 20. Net Lease, True Lease, etc.......................................83
SECTION 21. Purchase Option..................................................84
(a) Purchase Option...........................................84
(b) Notice of Purchase........................................85
SECTION 22. Lessor's Right to Perform for Lessee.............................85
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Page
SECTION 23. Miscellaneous....................................................85
SECTION 24. Security for Lessor's Obligations................................86
SCHEDULES
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
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LEASE AGREEMENT
LEASE AGREEMENT dated as of April 25, 2000, between ATLAS FREIGHTER LEASING
III, INC., a Delaware corporation (the "Lessor"), and ATLAS AIR, INC., a
Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessee desires to lease from the Lessor and the Lessor is
willing to lease to the Lessee the Engines upon the terms and subject to the
conditions of this Lease;
WHEREAS, the Lessor and the Lessee desire that this be a net lease;
WHEREAS, the Lessor has incurred certain Loans under the Credit Agreement
in connection with the Engines to be leased pursuant to the terms of this Lease
and other aircraft and spare engines to be leased pursuant to the other Leases:
WHEREAS, the Lessor and the Lessee desire that this Lease be, and be
treated as, a Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the Lessor and the Lessee hereby
agree as follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"Acceptable Alternate Engine" means a General Electric CF6-80C2 engine or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and suitable
for installation and use on one or more of the Boeing 747-400 aircraft used by
the Lessee in its business; provided, that such engine shall be an engine of a
type then being utilized by the Lessee on other Boeing 747-400 aircraft operated
by the Lessee, and shall have been maintained, serviced, repaired and overhauled
in substantially the same manner as required under this Lease without in any way
discriminating against such engine.
"ACMI Contract" means (i) any contract entered into by the Lessee pursuant
to which the Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with the Lessee's historical practices.
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"ACMI Contracted Aircraft" means an aircraft acquired by the Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis, effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided, that such projected cash operating expenses shall
not be less on a per block hour basis than the average historical per block hour
operating expenses of the Lessee for the four full fiscal quarters immediately
preceding the date of calculation; and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which the Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
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"Aircraft" means each of the "Aircraft" as defined in the Credit Agreement.
"Aircraft Chattel Mortgage" means each Security Agreement and Aircraft
Chattel Mortgage entered into in connection with the Credit Agreement.
"Airframe" means each "Airframe" as defined in the Credit Agreement.
"Amended Aircraft Credit Facility" means the Fourth Amended and Restated
Credit Agreement dated as of April 25, 2000, among the Lessee, as borrower, the
lenders listed therein, and Bankers Trust Company, as administrative agent,
without giving effect to any amendments, modifications, supplements or waivers
thereof.
"Approved Appraiser" means any of AvSolutions, Inc., BK Associates, Inc.,
Simat, Helliesen & ▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, Inc., AVITAS, Inc.,
Airclaims, Ltd., Aircraft Information Services, Inc., or any other nationally
recognized firm of aircraft appraisers reasonably satisfactory to the Agent.
"Asset Sale" means the sale (including any sale-leaseback transaction other
than sale-leaseback transactions permitted by subsections 7(i) and 7(j) of this
Lease) by the Lessee or any of its Subsidiaries to any other Person of (i) any
of the stock of any of the Lessee's Subsidiaries, (ii) substantially all of the
assets of any division or line of business of the Lessee or any of its
Subsidiaries, or (iii) any other assets (whether tangible or intangible) of the
Lessee or any of its Subsidiaries outside of the ordinary course of business,
excluding (A) any such other assets to the extent that the aggregate value of
such assets sold in any single transaction or related series of transactions is
equal to $5,000,000 or less, (B) transactions related to aircraft engines,
components, parts or spare parts pursuant to customary pooling, exchange or
similar arrangements, (C) asset swaps involving aircraft engines, components,
parts or spare parts, provided that the assets received by the Lessee or any
Subsidiary have a fair market value at least equal to the assets transferred
(provided that with respect to any asset swap or series of related asset swaps
involving assets of the Lessee or any Subsidiary with a fair market value
exceeding $10,000,000, such determination shall be made by the Board of
Directors of the Lessee), (D) asset sales involving obsolete, worn-out, excess
or redundant equipment as long as the proceeds therefrom are used to replace or
to upgrade the aircraft or the equipment installed thereon, (E) transactions
permitted by Section 9.21 of the Credit Agreement and (F) the sale by the Lessor
of a single aircraft pursuant to Section 6.6 (ii) of the Credit Agreement.
"Bankruptcy Code" means Title 11 of the United States Code, entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
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"Basic Rent" means, for the Term, the rent payable for the Engines pursuant
to Section 3(a) of this Lease adjusted as provided in Section 3(b) of this
Lease.
"Basic Rent Payment Date" means each date set forth on Exhibit B.
"Business Day" means any day excluding Saturday, Sunday and any day that is
a legal holiday under the laws of the States of New York or Colorado or is a day
on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"Capital Lease," as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or ▇▇▇▇▇'▇; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
▇▇▇▇▇'▇; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or ▇▇▇▇▇'▇.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
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"Compliance Certificate" means a certificate, substantially in the form of
Exhibit D annexed hereto, delivered to the Lessor, the Agent and the Lenders by
the Lessee pursuant to subsection 6(a)(3) hereunder.
"Consolidated Adjusted EBITDA" means, for any period, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the December 31, 1999, balance sheet of Atlas, all of the foregoing
as determined on a consolidated basis for the Lessee and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of the Lessee and its
Subsidiaries) by the Lessee and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of the Lessee and its Subsidiaries plus (ii) to the extent not covered by
clause (i) of this definition, the aggregate of all expenditures by the Lessee
and its Subsidiaries during that period to acquire (by purchase or otherwise)
the business, property or fixed assets of any Person, or the stock or other
evidence of beneficial ownership of any Person that, as a result of such
acquisition, becomes a Subsidiary of the Lessee.
"Consolidated Interest Expense" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of the Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of the Lessee
and its Subsidiaries, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3 of
the Amended Aircraft Credit Facility on or before the Fourth Restatement Date
(as such term is defined in the Amended Aircraft Credit Facility).
"Consolidated Leverage Ratio" means, as of the last day of any fiscal
quarter of the Lessee, the ratio of (i) Consolidated Total Debt as of such date
(less Cash and Cash Equivalents held by the Lessee in excess of $25 million as
of such date) plus seven times Consolidated Rental Payments (for the four fiscal
quarter period ending as of such date) to (ii) Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending as of
such date.
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"Consolidated Net Income" means, for any period, the net income (or loss)
of the Lessee and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP; provided, that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of the Lessee) in which any other Person (other than the Lessee or
any of its Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Lessee or any of
its Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of the Lessee or is
merged into or consolidated with the Lessee or any of its Subsidiaries or that
Person's assets are acquired by the Lessee or any of its Subsidiaries, (iii) the
income of any Subsidiary of the Lessee to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any pension plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of the Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by the Lessee and its Subsidiaries on a
consolidated basis (excluding rent paid pursuant to the Leases) during that
period under all Capital Leases and Operating Leases to which the Lessee or any
of its Subsidiaries is a party as lessee (net of sublease income other than
income from ACMI Contracts). For the avoidance of doubt, all rental payments to
the Lessor shall not be included in Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of the Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for
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reimbursement of drawings, or (iii) under Interest Rate Agreements and Currency
Agreements. Contingent Obligations shall include, without limitation, (a) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.
"Continuing Directors" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"Contractual Obligation," as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, deed to secure debt, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
"Contribution" means the "Atlas Contribution" as defined in the Credit
Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated as of April 25,
2000, by and among the Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect the Lessee or any of its
Subsidiaries against fluctuations in currency values.
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"Default" means any event that, with the giving of notice or the lapse of
time or both, would become a Lease Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Designated Indebtedness" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the NationsBanc/Banc of
America Agreement, the Senior Note Documents, any Permitted Extension
Indebtedness and any Other Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsection
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier," as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, that (i) is in a cargo configuration capable of immediate
operation in the business of the Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"Employee Benefit Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA that is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"Engine" means: (i) each of the General Electric CF6-80C2 aircraft engines
listed in the initial Lease Supplement, whether or not from time to time
installed on any Airframe or any other airframe; (ii) any Acceptable Alternate
Engine that may from time to time be substituted for any of such engine pursuant
to the terms of this Lease; and (iii) in any case, any and all Parts that are
from time to time incorporated or installed in or attached to any such engine
and any and all parts removed therefrom so long as title thereto remains vested
in the Lessor in accordance herewith. The term "Engines" means, as of any date
of determination, all Engines then leased under this Lease.
-9-
"Environmental Claim" means any investigation, notice, claim, suit or
order, by any governmental authority or any Person, arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage or harm to health, safety or the
environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"Equipment Obligations" means the "Equipment Obligations" as defined in the
Credit Agreement.
"Equity Proceeds" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of the Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation that
is, or was at any time, a member of a controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code of which that Person
is, or was at any time, a member; (ii) any trade or business (whether or not
incorporated) that is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"Event of Default" means an Event of Default under and as defined in the
Credit Agreement.
"Event of Loss" means any of the following events with respect to any
Engine: (A) loss of such Engine or the use thereof due to theft or disappearance
of the Engine that results in the loss of possession thereof for a period of 120
days (or for a shorter period ending on the date on which there is an insurance
settlement for a total loss on the basis of the theft or disappearance of such
Engine, (B) the destruction, damage beyond repair or rendition of such Engine
permanently unfit for normal use for any reason whatsoever, (C) the
condemnation, confiscation or seizure of, or requisition of title to, or adverse
use or possession (other than
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use by the United States Government if the Lessee obtains adequate compensation
from the United States Government) of such Engine, (D) as a result of any rule,
regulation, order or any other action by the FAA or any other governmental body
having jurisdiction, the use of such Engine in the normal course of interstate
air transportation of persons or cargo shall have been prohibited for a period
of more than nine consecutive months unless the Lessee, prior to the expiration
of such nine month period, shall have undertaken and shall be diligently
carrying forward all steps that are necessary or desirable to permit the normal
use of such property by the Lessee or, in any event, if such use shall have been
prohibited for a period of twelve consecutive months, (E) the operation or
location of such Engine, while under requisition for use by the United States or
any instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Engine, if the Lessee shall be
unable to obtain indemnity or "war-risk" insurance in lieu thereof from the
United States, (F) any damage that results in an insurance settlement with
respect to such Engine on the basis of an actual or constructive total loss or
(G) a divestiture of such Engine as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage under the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of any Engine shall mean the value that would be
obtained in an arm's-length transaction between an informed and willing
lessee-user or buyer-user (other than a lessee currently in possession or a used
equipment dealer) under no compulsion to lease or buy, as the case may be, and
an informed and willing lessor or seller, as the case may be, under no
compulsion to lease or sell, as the same shall be specified by agreement between
the Lessor and the Lessee or, if not agreed to by the Lessor and the Lessee
within a period of 15 days after either party requests a determination, then as
specified in an appraisal prepared and delivered in New York City by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
the Lessee, or, if such appraiser cannot be agreed to within 20 days, then
either party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining Fair Market Sales Value by appraisal or otherwise, it will be
assumed that the Engine is in the condition, location and overhaul status in
which it is required to be returned to the Lessor pursuant to Section 8 of this
Lease, that all modifications and improvements shall be taken into account, that
the Lessee has removed all Parts that it is entitled to remove pursuant to
Section 11 of this Lease and that the Engine is not encumbered by this Lease.
Except as otherwise expressly provided in the Lease, all appraisal costs will be
shared equally by the Lessor and the Lessee.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended
and as recodified in ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any similar legislation of
the United
-11-
States enacted to supersede, amend or supplement such Act and the rules and
regulations promulgated thereunder.
"Federal Aviation Administration" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"Final Maturity Date" means April 25, 2006.
"Financed Aircraft" means all "Financed Aircraft" as defined in the Amended
Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996, between FINOVA and the Lessee, as amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of the Agent located at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by the Lessee to the Lessor, the Agent and the Lenders pursuant
to clauses (1), (2), (3) and (12) of subsection 6(a) hereunder shall be prepared
in accordance with GAAP as in effect as of the date of such preparation.
Calculations in connection with the definitions, covenants and other provisions
of this Lease shall utilize accounting principles and policies in conformity
GAAP as in effect as of the date of this Lease.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
-12-
"Hazardous Materials" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"Hazardous Materials Activity" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, the Lessee.
"Holding Company" has the meaning assigned to that term in the definition
of "Holding Company Reorganization."
"Holding Company Reorganization" means the acquisition, in one transaction
or a series of related transactions, of all of the outstanding Securities of the
Lessee that are entitled to vote in the election of directors, other than
Securities having such power only by reason of the happening of a contingency,
(and all other Securities convertible into such Securities) by another
corporation (the "Holding Company"); provided, that the Holding Company
Reorganization may involve more than one holding company of the Lessee, so long
as the ultimate Holding Company directly or indirectly owns 100% of the Lessee;
and provided further, that in connection with the Holding Company Reorganization
the Lessee and its Subsidiaries shall not incur any material obligations or
liabilities of any type other than those permitted to be paid without causing a
Lease Event of Default under Section 16(v).
"Holding Company Subsidiary" means any Subsidiary of a Holding Company
other than the Lessee and its Subsidiaries.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
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"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"Initial Borrowing Date" means the date on which the Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect the Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or other acquisition
by the Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of the
Lessee from any Person other than the Lessee or any of its Subsidiaries, of any
equity Securities of such Subsidiary, or (iii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by the Lessee or any of its Subsidiaries to
any other Person (other than a wholly-owned Subsidiary of the Lessee), including
all indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"Lease Event of Default" has the meaning specified in Section 16 of this
Lease.
"Lease Supplement" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between the Lessor and the Lessee
for the purpose of leasing the Engines under and pursuant to the terms of the
Lease, and any subsequent Lease Supplement entered into in accordance with the
terms of the Lease.
-14-
"Leases" means the Lease Agreements, dated as of April 25, 2000, between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"Lender" or "Lenders" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"Lessee" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"Lessor" means Atlas Freighter Leasing III, Inc., as Lessor under the
Lease, and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of the Lessor in the
jurisdiction imposing the Tax that is unrelated to the Lessor's dealings
with the Lessee or the transactions contemplated by this Lease or the
operation of any Engine by the Lessee; or
(b) imposed on the net income, profits or gains of the Lessor by the
United States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority of any
jurisdiction if and to the extent that such Tax results from (i) the use,
operation, presence or registration of any Engine or any Part in the
jurisdiction imposing the Tax, or (ii) the situs of organization, any place
of business or any activity of the Lessee or any other Person having use,
possession or custody of any Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to the
Lessor's dealings with the Lessee or to the transactions contemplated by
this Lease.
"Lessor's Lien" means any Lien over any of the Engines (i) arising as a
result of any act or omission of the Lessor that constitutes a breach of any of
the terms of this Lease, (ii) arising as a result of any indebtedness, liability
or other obligation arising by through or under the Lessor, including, without
limitation, any Tax, that is not indemnified against by the Lessee or (iii)
resulting from the Credit Agreement or any other Lien from time to time created
by or through the Lessor in connection with the financing of the Engines.
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"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Lessee and its Subsidiaries on a consolidated basis.
"Material Agreement" means any or all of the Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc/Banc of America Agreement, the Senior Note Documents and agreements
in respect of Permitted Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"NationsBanc/Banc of America Agreement" means the Loan Agreement, dated as
of March 28, 1997, between Atlas Air, Inc., as borrower, and NationsBanc Leasing
Corporation/Banc of America Leasing & Capital LLC, as lender, and as further
amended, supplemented and modified in accordance with this Lease and all other
related documents.
"Obligations" means all obligations of the Lessor to pay all amounts due
from time to time under the Credit Agreement and the other Loan Documents to the
Agent, the Lenders or any of them, whether for principal, interest, fees,
expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property
-16-
(whether real, personal or mixed) that is not a Capital Lease other than any
such lease under which that Person is the lessor.
"Other Permitted Indebtedness" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears interest at a rate that does not exceed 15% per annum, (ii) such
Indebtedness has a final stated maturity later than the end of the Term and
(iii) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of the Lessee and its Subsidiaries or any less
favorable, from the perspective of the Lessor or the Lenders, than any other
Designated Indebtedness.
"Part" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
Airframes, airframes, or complete Engines, Spare Engines or engines, that are
from time to time incorporated or installed in or attached to any Engine, and
all such items that are subsequently removed therefrom so long as title thereto
shall vest in the Lessor in accordance with this Lease.
"Pass Through Trust Documents" means, collectively, (i) those six certain
Pass Through Trust Agreements, dated as of February 9, 1998, between Atlas Air,
Inc., and Wilmington Trust Company, as trustee (the "1998 Pass Through Trust
Agreements") and any related agreements, notes, guaranties, indentures, security
documents or other documents, including, without limitation, documents relating
to the equipment notes to be held in trust pursuant to the 1998 Pass Through
Trust Agreements and all related documents, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Lease, (ii) that certain Pass Through Trust Agreement, dated as of
April 1, 1999, between Atlas Air, Inc., and Wilmington Trust Company, as trustee
(the "1999 Pass Through Trust Agreement") and any related agreements, trust
supplements, notes, guaranties, indentures, security documents or other
documents, including, without limitation, documents relating to the equipment
notes to be held in trust pursuant to the 1999 Pass Through Trust Agreement and
all related documents, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease and (iii)
that certain Pass Through Trust Agreement dated as of January 28, 2000, between
Atlas Air, Inc., and Wilmington Trust Company, as trustee (the "2000 Pass
Through Trust Agreement") and any related agreements, trust supplements, notes,
guaranties, indentures, security documents or other documents, including,
without limitation, documents relating to the equipment notes to be held in
trust pursuant to the 2000 Pass Through Trust Agreement and all related
documents, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with this Lease.
"Past Due Rate" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
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"Permitted Encumbrances" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any lease
permitted by subsection 7.(i), (b) restriction or encumbrances that the
interest or title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under such lease
to any restriction or encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages and (II) Sections 4(d) and 4(e) of the
aircraft chattel mortgages entered into in connection with the Amended
Aircraft Credit Facility;
-18-
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xi) Liens granted pursuant to the Transaction Documents;
(xii) Liens arising pursuant to the Amended Aircraft Credit Facility;
and
(xiii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"Permitted Extension Indebtedness" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by the Lessee
of any Indebtedness of the Lessee, including any such successive transactions by
the Lessee, so long as (i) any such Indebtedness bears interest at a rate that
does not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness
shall be in a principal amount that does not exceed the principal amount
immediately prior to such extension, plus the amount of any premium required to
be paid in connection with such extension pursuant to the terms of such
Indebtedness, plus the amount of expenses of the Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of the Lessee hereunder at least to the same
extent as the Indebtedness immediately prior to such extension, (iv) such
Permitted Extension Indebtedness has a final stated maturity later than the end
of the stated maturity of the Indebtedness being extended immediately prior to
such extension and (v) the amortization and the other terms, provisions,
conditions, covenants and events of default thereof taken as a whole shall be no
more onerous or restrictive from the perspective of the Lessee and its
Subsidiaries or any less favorable, from the perspective of the Lessor and the
Lenders than those contained in the Indebtedness immediately prior to such
extension.
"Permitted Holders" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, his spouse, his descendant(s)
or any entity controlled by any of the foregoing, or any trust solely for the
benefit of any of the foregoing.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability partnerships, limited
liability companies, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
-19-
"Potential Event of Default" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"Pricing Certificate" shall have the meaning assigned to that term in
Section 6(a)(13).
"Pro Forma Basis" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by the Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by the Lessee or any of its Subsidiaries or any other related action
that requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with the Lessor and the Agent using the consolidated
financial statements of the Lessee and its Subsidiaries, which shall be
reformulated as if any such incurrence of Indebtedness and the application of
proceeds, acquisition, disposition or other related action had been consummated
at the beginning of the period specified in the covenant with respect to which
Pro Forma Basis compliance is required. "Proceedings" has the meaning assigned
to that term in subsection 6(a)(10).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of the Lessee
now or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of the Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of the Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-
-20-
substance or legal defeasance), sinking fund or similar payment with respect to,
any Designated Indebtedness.
"S&P" means Standard & Poor's Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Senior Note Documents" means (i) the Indenture, dated as of August 13,
1997, between Atlas Air, Inc., and State Street Bank and Trust Company, relating
to the 10 3/4% $150 million Senior Notes due 2005 of the Lessee (the "10 3/4%
Senior Notes"), and any and all related agreements, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with this Lease, (ii) the Indenture, dated as of April 9, 1998, between Atlas
Air, Inc., and State Street Bank and Trust Company, relating to the 9 1/4% $175
million Senior Notes due 2008 of the Lessee (the "9 1/4% Senior Notes"), and any
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease and (iii)
the Indenture, dated as of November 18, 1998, between Atlas Air, Inc., and State
Street Bank and Trust Company, relating to the 9 3/8% $150 million Senior Notes
due 2006 of the Lessee (the "9 3/8% Senior Notes," and together with the 10 3/4%
Senior Notes and the 9 1/4% Senior Notes, the "Senior Notes"), and any and all
related agreements, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Services Agreement" means a Services Agreement between the Lessor and the
Lessee dated as of April 25, 2000.
"Solvent" means, with respect to any Person, that, as of the date of
determination, both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person, (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction, and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due, and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws re-
-21-
lating to fraudulent transfers and conveyances. For purposes of this definition,
the amount of any contingent liability at any time shall be computed as the
amount that, in light of all of the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.
"Spare Engines" means each "Spare Engine" as defined in the Credit
Agreement.
"Special Purpose Subsidiary" means a Subsidiary of the Lessee formed solely
for the purpose of refinancing Indebtedness associated with a Financed Aircraft
or acquiring or refinancing other aircraft with Permitted Extension Indebtedness
or Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided, that the Lessee beneficially owns and controls at least
95% of the issued and outstanding capital stock of such Subsidiary.
"Stipulated Loss Determination Date" means each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"Stipulated Loss Value" with respect to the Engines shall mean, as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f), plus all accrued and unpaid interest on the
Loans relating to the Engines on the date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Lease other than the financial covenants set forth in subsection 7(f) and
the definitions related thereto, the Lessor shall not be considered a Subsidiary
of the Lessee.
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"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) that the Lessee assumes or agrees to pay to the Lessor or
others under any of the Transaction Documents, including payments of Stipulated
Loss Value and other amounts referred to in Section 3(c) of this Lease.
"Tax" or "Taxes" shall have the meaning assigned to that term in Section
12(a) hereunder.
"Technical Records" shall have the meaning assigned to that term in Section
8(i).
"Term" means the term for which the Engines are leased hereunder pursuant
to Section 3(a) of this Lease, beginning on the Initial Borrowing Date and
ending on the Final Maturity Date, or such earlier date as this Lease may be
terminated in accordance with the terms hereof.
"Transaction" means, collectively, (i) the Contribution, (ii) the
Transfers, (iii) the leasing by the Lessor to the Lessee of the Spare Engines
and the Aircraft pursuant to the Leases, (iv) the repayment of the Equipment
Obligations and (v) the release and termination of all security interests and
Liens encumbering the Spare Engines and any part thereof and any other assets of
the Lessor.
"Transaction Documents" means the Amended Aircraft Credit Facility, any
bills of sale or certificates of transfer for each Aircraft and each Spare
Engine leased pursuant to the Leases (including bills of sale on AC Form 8050-2)
delivered in connection with the Transaction, the Leases, all documents relating
to the repayment of the Equipment Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Atlas
Contribution and the Transfers.
"Transfers" mean the "Transfers" as defined in the Credit Agreement.
"United States Citizen" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, the Lessor hereby agrees to lease to the Lessee
hereunder, and the Lessee hereby agrees to accept on the Initial Borrowing Date
from the Lessor hereunder, each of the Engines as evidenced by the execution by
the Lessor and the Lessee of a Lease Supplement leasing the Engines hereunder.
The Lessee agrees to appoint in writing one or more of its
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employees as its authorized representative to accept delivery of the Engines
pursuant to the terms hereof. The Lessee hereby agrees that acceptance of
delivery by such employee or employees shall, without further act, irrevocably
constitute acceptance by the Lessee of the Engines for all purposes of this
Lease Agreement.
SECTION 3. Term and Rent.
(a) Term and Basic Rent. The Term shall commence on the Initial Borrowing
Date and end on the Final Maturity Date or such earlier date as this Lease may
be terminated in accordance with the provisions hereof. Basic Rent shall accrue
during the Term in accordance with Exhibit B hereto. The Lessee shall pay to the
Lessor on each Basic Rent Payment Date an amount of Basic Rent specified
opposite each Basic Rent Payment Date on Exhibit B hereto as such amounts may be
adjusted pursuant to Section 3 plus accrued interest on Basic Rent previously
accrued but unpaid as specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by the Agent and notified
to the Lessor and the Lessee prior to the Basic Rent Payment Date, that
represents the amount of interest due and payable on the Loans relating to the
Engines on such Basic Rent Payment Date and determined in accordance with the
Credit Agreement.
(c) Supplemental Rent. The Lessee shall pay (or cause to be paid) to the
Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent constituting Stipulated Loss Value as the same shall become due and owing
and all other amounts of Supplemental Rent within 10 days after demand, and in
the event of any failure on the part of the Lessee to pay any Supplemental Rent
when due, the Lessor shall have all rights, powers and remedies provided for
herein or by law or equity or otherwise in the case of nonpayment of Basic Rent.
The Lessee also will pay to the Lessor, or to whomsoever shall be entitled
thereto, as assignee of the Lessor, on demand, as Supplemental Rent, (i) all
amounts of interest payable by the Lessor pursuant to subsection 2.2(C) of the
Credit Agreement that (I) are payable on the Loans relating to the Engines and
(II) fall due on any day that is not a Basic Rent Payment Date, (ii) interest at
the Past Due Rate with respect to any part of any installment of Basic Rent not
paid when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid when due for the period and, to the extent
permitted by law, on interest accrued on Basic Rent which itself was accrued and
not paid to the extent that such accrued interest was not paid when due until
the same shall be paid and on any other amounts payable hereunder that are not
paid when due and (iii) all amounts payable by the Lessor pursuant to
subsections 2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however,
that, to the extent that any Supplemental Rent required to be paid pursuant to
clause (iii) of this subsection 2(c) has been paid by the Lessee pursuant to the
terms of another
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Lease, then the Lessee's obligations hereunder shall be deemed to be satisfied
by the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by the
Lessee prior to 12:00 p.m. (New York time), to the Lessor at its office at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (or such other
office of the Lessor in the continental United States or such other account as
the Lessor shall direct in a notice to the Lessee at least 10 Business Days
prior to the date when such payment of Rent is due); provided, that, so long as
any Obligations remain outstanding, all Rent shall be paid directly to the Agent
at the Funding and Payment Office; and provided further, that to the extent the
amount of Rent paid directly to the Agent is in excess of the amount of
principal and interest on the Loans relating to the Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to
aircraft or other spare engines leased pursuant to the other Leases and after
taking into account all other payments of rent pursuant to the other Leases on
such date), then such excess amounts shall be paid by the Agent to the Lessor at
its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day, then such
payment shall be made on the next succeeding Business Day; provided, however,
that if any date on which a payment of Rent becomes due is not a Business Day
and is a day of the month after which no further Business Day occurs in such
month, then the payment of Rent shall be made on the next preceding Business
Day. No interest shall accrue on the amount of any payment made on the Business
Day next succeeding the regularly scheduled Basic Rent Payment Date, if such
payment is made on such next succeeding Business Day because the original date
of payment was not a Business Day (it being understood that the amount of Basic
Rent includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for the Lessor to pay in full principal and interest on the
Loans relating to the Engines required to be paid by the Lessor on or
within five Business Days of the due date of such installment of Basic
Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount that (when taken together with
any other Basic Rent due and payable in connection therewith) is at least
equal to, as of the date of payment, the sum of the aggregate unpaid
principal of and accrued interest on the Loans relating to the Engines and
all other unpaid Obligations of the Lessor (other than principal and
interest on Loans relating
-25-
to aircraft or other spare engines and after taking into account all other
payments of Stipulated Loss Value pursuant to the other Leases on such
date).
(f) Prepayment of Rent Payments:
(i) In the event that the Lessor is at any time required to repay
Loans relating to the Engines pursuant to Section 2.4C(ii) of the Credit
Agreement, the Lessor shall notify the Lessee of such required prepayment
and the Lessee shall immediately prepay an amount of Basic Rent equal to
the amount of such required prepayment less any required payments of the
Loans relating to the Engines actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to prepay Basic Rent
voluntarily at any time and from time to time, without premium or penalty,
upon not less than three Business Days' prior written or telephonic notice
to the Lessor and the Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f),
the schedules of Basic Rent and Stipulated Loss Value shall be adjusted so
as to preserve the after tax yield and after tax cash flows of the Lessor
and, to the extent consistent therewith, to minimize the net present value
of Basic Rent payments. All such computations shall be made on the basis of
the same assumptions and the method of computations employed in the
original calculations of Basic Rent and Stipulated Loss Values (except to
the extent that such assumptions have been changed as a result of such
prepayment or any prior such adjustment). At the Lessee's written request,
independent public accountants mutually selected by the Lessor and the
Lessee shall confirm the required adjustments. The final determination of
any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, costs and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding, after
giving effect to the foregoing adjustments, the revised Basic Rent and
Stipulated Loss Values shall permit the Lessee to comply with Section 3(e)
hereof.
SECTION 4. Certain Representations and Warranties. THE LESSEE ACKNOWLEDGES
AND AGREES THAT, AS BETWEEN THE LESSOR AND THE LESSEE (A) EACH ENGINE IS OF A
SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO THE LESSEE
AND THE LESSEE TAKES THE
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SAME "AS IS," (B) THE LESSEE IS SATISFIED THAT EACH ENGINE IS SUITABLE FOR ITS
PURPOSES, (C) THE LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND, AND (D) NEITHER THE LESSOR NOR THE AGENT NOR ANY LENDER 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 THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF ANY ENGINE OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER
PROPRIETARY RIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY ENGINE OR ANY PART THEREOF, except that the Lessor covenants
that it will not, through its own actions or inactions, in such capacity,
interfere in the Lessee's quiet enjoyment of the Engines unless this Lease shall
have been declared or deemed to have been declared in default pursuant to
Section 17 hereof. None of the provisions of this Section 4 or any other
provision of this Lease shall be deemed to amend, modify or otherwise affect the
representations, warranties or other obligations (express or implied) of any
manufacturer, any affiliate thereof, any subcontractor or supplier of any
manufacturer or any affiliate thereof, with respect to any Engine or any Parts,
or to release the manufacturer, any affiliate thereof, or any such subcontractor
or supplier from any such representation, warranty or obligation. Unless a
Default or Lease Event of Default shall have occurred and be continuing, the
Lessor agrees to make available to the Lessee such rights as the Lessor may have
under any warranty with respect to any Engine made by the manufacturer or any
affiliate thereof or any of its subcontractors or suppliers and any other claims
against the manufacturer or any affiliate thereof, or any such subcontractor or
supplier with respect to any Engine, all pursuant to and in accordance with the
terms of any applicable purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce the
Lessor to enter into this Lease and the Agent and the Lenders to make the Loans
under the Credit Agreement, the Lessee represents and warrants to the Lessor,
the Agent and each Lender on the date of this Lease that the following
statements are true, correct and complete:
(a) Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
(i) Organization and Powers. The Lessee is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Lessee has all requisite corporate power and
authority to own and operate its proper-
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ties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Lease and the other Transaction Documents and
to carry out the transactions contemplated hereby and thereby.
(ii) Qualification and Good Standing. The Lessee is qualified to do
business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations,
except in jurisdictions where the failure to be so qualified or in good
standing has not had and will not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of the Lessee as of the
Initial Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto.
The capital stock of each of the Subsidiaries of the Lessee identified in
Schedule 5(a)(iii) annexed hereto (as so supplemented) is duly authorized,
validly issued, fully paid and nonassessable and none of such capital stock
constitutes Margin Stock. Each of the Subsidiaries of the Lessee identified
in Schedule 5(a)(iii) annexed hereto is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be conducted, and
is qualified to do business and in good standing in every jurisdiction
where its assets are located and wherever necessary to carry out its
business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and
authority has not had and will not have a Material Adverse Effect. Schedule
5(a)(iii) annexed hereto correctly sets forth the ownership interest of the
Lessee and each of its Subsidiaries in each of the Subsidiaries of the
Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery
and performance of this Lease and the other Transaction Documents have been
duly authorized by all necessary corporate action on the part of the Lessee
or its Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by the
Lessee or its Subsidiaries, as the case may be, of this Lease and the other
Transaction Documents and the consummation of the transactions contemplated
by the Transaction Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to the Lessee
or any of its Subsidiaries, the certificate or articles of incorporation or
bylaws of the Lessee or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on
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the Lessee or any of its Subsidiaries, (ii) conflict with in any material
respect, result in a material breach of or constitute (with due notice or
lapse of time or both) a material default under any material Contractual
Obligation of the Lessee or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties
or assets of the Lessee or any of its Subsidiaries (other than any Liens
created under this Lease or any of the other Transaction Documents in favor
of the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of the Lessee or any of its Subsidiaries, except for such
approvals or consents as will be obtained on or before the Initial
Borrowing Date and disclosed in writing to the Lessor and the Lenders.
(iii) Governmental Consents. The execution, delivery and performance
by the Lessee and its Subsidiaries, as the case may be, of this Lease and
the other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and
will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body that has not been obtained or
made on or prior to the date required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by the Lessee and its
Subsidiaries, as the case may be, to the extent that it is a party thereto,
and is the legally valid and binding obligation of each such Person,
enforceable against each such Person in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
(c) Financial Condition.
(A) The Lessee has heretofore delivered to the Lessor, the Agent and
the Lenders, the following financial statements and information: the
audited consolidated and consolidating balance sheets of the Lessee and its
Subsidiaries as at December 31, 1999, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows of
the Lessee and its Subsidiaries for the fiscal year then ended. All such
statements were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated and, where applicable, consolidating
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case
of any such unaudited financial statements, to changes resulting from audit
and normal year-end adjustments. Neither the Lessee nor any of
-29-
its Subsidiaries has (and will not, following the Initial Borrowing Date,
have) any Contingent Obligation, contingent liability or liability for
taxes, long-term lease or unusual forward or long-term commitment that is
not reflected in the foregoing financial statements or the notes thereto
and which in any such case is material in relation to the business,
operations, properties, assets, condition (financial or otherwise) or
prospects of the Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to the Lessee and its Subsidiaries
of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in
aggregate, could reasonably be expected to be material to the Lessee and
its Subsidiaries taken as a whole. As of the Initial Borrowing Date, the
Lessee does not know of any basis for the assertion against it of any
liability or obligation of any nature whatsoever that is not fully
disclosed in the financial statements delivered pursuant to Section 5(c)(A)
which, either individually or in the aggregate, could reasonably be
expected to be material to the Lessee and its Subsidiaries taken as a
whole.
(d) No Material Adverse Change; No Restricted Junior Payments.
Since December 31, 1999, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect. Since December 31, 1999, neither the Lessee nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made, or
set apart any sum or property for, any Restricted Junior Payment or agreed
to do so, except as permitted by subsection 7(e) hereunder.
(e) Title to Properties, Liens.
The Lessee and its Subsidiaries have (i) good, sufficient and legal
title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or
personal property), or (iii) good title to (in the case of all other
personal property), all of the properties and assets reflected in the
financial statements referred to in subsection 5(c) or in the most recent
financial statements delivered pursuant to subsection 6(a), in each case
except for assets disposed of since the date of such financial statements
in the ordinary course of business or as otherwise permitted under
subsection 7(g). Except as permitted by this Lease, all such properties and
assets are free and clear of Liens.
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(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of the Lessee or any
of its Subsidiaries) at law or in equity or in admiralty or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee
or any of its Subsidiaries or any property of the Lessee or any of its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither the Lessee nor any
of its Subsidiaries is (i) in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to result in
a Material Adverse Effect or (ii) subject to or in default with respect to
any final judgments, writs, injunctions, decrees, rules or regulations of
any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(g) Payment of Taxes.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of the Lessee and its Subsidiaries required to be filed by any of
them have been timely filed, and all taxes, assessments, fees and other
governmental charges upon the Lessee and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises that are
due and payable have been paid when due and payable. The Lessee does not
know of any proposed tax assessment against the Lessee or any of its
Subsidiaries that is not being actively contested by the Lessee or such
Subsidiary in good faith and by appropriate proceedings; provided, that
such reserves or other appropriate provisions, if any, for liabilities for
taxes as shall be required in conformity with GAAP shall have been made or
provided in the financial statements of the Lessee. There are no agreements
with respect to taxes between the Lessee and any tax agency or authority.
(h) Performance of Agreements.
Neither the Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no
condition exists that, with the giving of notice or the lapse of time or
both, would constitute such a default, except where the consequences,
direct or indirect, of such default or defaults, if any, would not have a
Material Adverse Effect.
-31-
(i) Governmental Regulation.
Neither the Lessee nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act or the Investment Company
Act of 1940 or under any other federal or state statute or regulation that
may limit its ability to incur Indebtedness or that may otherwise render
all or any portion of its obligations under the Transaction Documents
unenforceable.
(j) Employee Benefit Plans.
The Lessee maintains a qualified retirement plan under Section 401(k)
of the Internal Revenue Code and a medical benefit plan. The Lessee's
401(k) Plan has no unfunded liabilities in excess of $10,000,000, and the
Lessee is in compliance with all applicable provisions and requirements of
ERISA and the regulations and published interpretations thereunder with
respect to each Employee Benefit Plan and has performed all of its
obligations under such Employee Benefit Plan in all material respects. The
Lessee has no Employee Benefit Plans, other than its 401(k) Plan and the
medical benefit plan. The Lessee has no ERISA Affiliates that sponsor,
maintain, contribute to or are liable with respect to any Employee Benefit
Plans.
(k) Certain Fees.
No broker's or finder's fee or commission will be payable with respect
to this Lease or any other Transaction Documents or any of the transactions
contemplated hereby.
(l) Environmental Protection.
(i) All facilities and operations of the Lessee and its Subsidiaries
are, and have been to the best of the Lessee's knowledge, in compliance in
all material respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences, or
Hazardous Materials Activity, (a) arising at any facilities owned or
operated by the Lessee or (b) arising in connection with the operations of
the Lessee or any of its Subsidiaries (including the transportation of
Hazardous Materials), which conditions, occurrences or Hazardous Materials
Activity could reasonably be expected to form the basis of an Environmental
Claim against the Lessee and which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
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(iii) To the best of the Lessee's knowledge, there are no pending or
threatened Environmental Claims against the Lessee or any of its
Subsidiaries, and neither the Lessee nor any of its Subsidiaries has
received any written notices, inquiries, or requests for information with
respect to any Environmental Claims.
(m) Employee Matters.
There is no strike or work stoppage in existence or threatened
involving the Lessee or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect.
(n) Solvency.
The Lessee and each of its Subsidiaries is and, upon the incurrence of
any obligations by the Lessee under the Leases, will be, after giving
effect to the transactions contemplated hereby, Solvent.
(o) Disclosure.
No representation or warranty of the Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to the Lessor, the
Agent or the Lenders by or on behalf of the Lessee or any of its
Subsidiaries for use in connection with the transactions contemplated by
this Lease and the other Transaction Documents contains any untrue
statement of a material fact or omits to state a material fact (known to
the Lessee, in the case of any document not furnished by it) necessary in
order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. Any projections and
pro forma financial information contained in such materials are based upon
good faith estimates and assumptions believed by the Lessee to be
reasonable at the time made, it being recognized by the Lessor, the Agent
and the Lenders that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.
There are no facts known (or which should upon the reasonable exercise of
diligence be known) to the Lessee (other than matters of a general economic
nature) that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect and that have not been
disclosed herein or in such other documents, certificates and statements
furnished to the Lessor, the Agent and the Lenders for use in connection
with the transactions contemplated hereby.
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(p) Registration and Filing; Chief Executive Office.
(1) Except for the registration of this Lease and the Lease Supplement
with the FAA and the filing of a financing statement under the Uniform
Commercial Code in Colorado, it is not necessary or advisable under
Colorado law or the law of the State of New York in order to ensure the
validity, effectiveness or enforceability of this Lease or to protect the
rights of the Lessor in any of the Engines or any part thereof that any
other instrument be filed, registered or recorded or that any action be
taken, and, under Colorado law or the law of the State of New York, the
rights of the Lessor in each of the Engines will have priority in all
respects over the claims of all creditors of the Lessee other than certain
claims by landlords of hangars, materialmen, mechanics and warehousemen in
respect of the Engines that have priority under Colorado law.
(2) The Lessee's chief executive office (as that term is defined in
Article 9 of the Uniform Commercial Code as in effect in Colorado) is
located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the records of
the Lessee concerning the Aircraft are maintained at such chief executive
office or at the operations center at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, where the Lessee normally maintains aircraft
records.
SECTION 6. Lessee's Affirmative Covenants. The Lessee covenants and agrees
that, so long as any amounts under this Lease remain unpaid, the Lessee shall
perform, and will cause each of its Subsidiaries to perform, all covenants in
this Section 6.
(a) Financial Statements and Other Reports.
The Lessee will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements
in conformity with GAAP. The Lessee will deliver to the Lessor, the Agent
and the Lenders:
(1) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each fiscal quarter of each fiscal
year, (a) the consolidated and consolidating balance sheets of the
Lessee and its Subsidiaries as at the end of such fiscal quarter and
the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Lessee and its Subsidiaries
for such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding periods of the previous fiscal year, all in
reasonable detail and certi-
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fied by the chief financial officer of the Lessee that they fairly
present the financial condition of the Lessee and its Subsidiaries as
at the dates indicated and the results of their operations and their
cash flows for the periods indicated, subject to changes resulting
from audit and normal year-end adjustments, and (b) a narrative report
describing the operations of the Lessee and its Subsidiaries in the
form prepared for presentation to senior management for such fiscal
quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter; provided, that delivery
of the Lessee's Form 10-Q for such fiscal quarter shall be deemed to
satisfy the requirements of this subsection 6(a)(1);
(2) Year-End Financials: as soon as available and in any event
within 90 days after the end of each fiscal year, (a) the consolidated
and consolidating balance sheets of the Lessee and its Subsidiaries as
at the end of such fiscal year and the related consolidated and
consolidating statements of income, stockholders' equity and cash
flows of the Lessee and its Subsidiaries for such fiscal year, setting
forth in each case in comparative form the corresponding figures for
the previous fiscal year, all in reasonable detail and certified by
the chief financial officer of the Lessee that they fairly present the
financial condition of the Lessee and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for
the periods indicated, (b) a narrative report describing the
operations of the Lessee and its Subsidiaries in the form prepared for
presentation to senior management for such fiscal year, and (c) in the
case of such consolidated financial statements, a report thereon of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other independent certified public accountants
of recognized national standing selected by the Lessee and
satisfactory to the Lessor and the Agent, which report shall be
unqualified, shall express no doubts about the ability of the Lessee
and its Subsidiaries to continue as a going concern, and shall state
that such consolidated financial statements fairly present the
consolidated financial position of the Lessee and its Subsidiaries as
at the dates indicated and the results of their operations and their
cash flows for the periods indicated in conformity with GAAP applied
on a basis consistent with prior years (except as otherwise disclosed
in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing
standards; provided, that delivery of the Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a)
and (b) of this subsection 6(a)(2);
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(3) Officers' and Compliance Certificates: together with each
delivery of financial statements of the Lessee and its Subsidiaries
pursuant to subdivisions (1) and (2) above after the Initial Borrowing
Date, (a) an Officers' Certificate of the Lessee stating that the
signers have reviewed the terms of this Lease and have made, or caused
to be made under their supervision, a review in reasonable detail of
the transactions and condition of the Lessee and its Subsidiaries
during the accounting period covered by such financial statements and
that such review has not disclosed the existence during or at the end
of such accounting period, and that the signers do not have knowledge
of the existence as at the date of such Officers' Certificate, of any
condition or event that constitutes a Default or Lease Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
the Lessee has taken, is taking and proposes to take with respect
thereto; and (b) a Compliance Certificate demonstrating in reasonable
detail compliance during and at the end of the applicable quarterly
and annual accounting periods with the restrictions contained in
Section 7;
(4) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation
of the audited financial statements referred to in subsection 5(c),
the consolidated financial statements of the Lessee and its
Subsidiaries delivered pursuant to subdivision (1) or (2) of this
subsection 6(a) will differ in any material respect from the
consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (1) or (2) of
this subsection 6(a) following such change, consolidated financial
statements of the Lessee and its Subsidiaries for (y) the current
fiscal year to the effective date of such change and (z) the two full
fiscal years immediately preceding the fiscal year in which such
change is made, in each case prepared on a pro forma basis as if such
change had been in effect during such periods, and (b) together with
each delivery of financial statements pursuant to subdivision (1) or
(2) of this subsection 6(a) following such change, a written statement
of the chief accounting officer or chief financial officer of the
Lessee setting forth the differences that would have resulted if such
financial statements had been prepared without giving effect to such
change;
(5) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of the Lessee or any of its
Subsidiaries or by independ-
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ent consultants, with respect to significant environmental matters at
any facility or that relate to an Environmental Claim that could
result in a Material Adverse Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of the Lessee and its Subsidiaries
pursuant to subdivision (2) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the
terms of this Lease and the other Transaction Documents as they relate
to accounting matters, (b) stating whether, in connection with their
audit examination, any condition or event that constitutes a Default
or Lease Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided, that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such
Default or Lease Event of Default that would not be disclosed in the
course of their audit examination, and (c) stating that based on their
audit examination nothing has come to their attention that causes them
to believe either or both that the information contained in the
certificates delivered therewith pursuant to subdivision (3) above is
not correct or that the matters set forth in the Compliance
Certificates delivered therewith pursuant to clause (b) of subdivision
(3) above for the applicable fiscal year are not stated in accordance
with the terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all
reports submitted to the Lessee by independent certified public
accountants in connection with each annual, interim or special audit
of the financial statements of the Lessee and its Subsidiaries made by
such accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(8) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices
and proxy statements sent or made available generally by the Lessee to
its security holders, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by the Lessee or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority, and
(c) all press releases and other statements made available generally
by the Lessee or any of its Subsidiaries to the public concerning
material developments in the business of the Lessee or any of its
Subsidiaries;
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(9) Lease Events of Default, etc.: promptly upon any officer of
the Lessee obtaining knowledge (a) of any condition or event that
constitutes a Default or Lease Event of Default, (b) that any Person
has given any notice to the Lessee or any of its Subsidiaries or taken
any other action with respect to a claimed default or event or
condition of the type referred to in subsection 16(1), (c) of any
condition or event that would be required to be disclosed in a current
report filed by the Lessee with the Securities and Exchange Commission
on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the
date hereof) if the Lessee were required to file such reports under
the Exchange Act, or (d) of the occurrence of any event or change that
has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the
nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Lease Event of Default, Default, default, event
or condition, and what action the Lessee has taken, is taking and
proposes to take with respect thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any
officer of the Lessee obtaining knowledge of (X) the institution of,
or non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting the Lessee or any of its Subsidiaries
or any property of the Lessee or any of its Subsidiaries
(collectively, "Proceedings") not previously disclosed in writing by
the Lessee to the Lessor and the Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of,
the transactions contemplated hereby and under the other
Transaction Documents;
written notice thereof together with such other information as may be
reasonably available to the Lessee to enable the Lessor and the
Lenders and their counsel to evaluate such matters; and (b) within
twenty days after the end of each fiscal quarter of the Lessee, a
schedule of all Proceedings involving an alleged liability of, or
claims against or affecting, the Lessee or any of its Subsidiaries
equal to or greater than $1,000,000 and promptly after request by the
Lessor and the Agent such other information as may be reasonably
requested
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by the Lessor and the Agent to enable the Agent and its counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a)
each annual report (Form 5500 Series) filed by the Lessee or any of
its ERISA Affiliates with the Internal Revenue Service with respect to
each Employee Benefit Plan, (b) any notices received by the Lessee or
any of its ERISA Affiliates with respect to a "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA, (c) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as the Lessor or the Agent shall reasonably request and
(d) promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any material and adverse event with respect to any of
the Lessee's Employee Benefit Plans, a written notice specifying the
nature thereof, what action the Lessee has taken, is taking or
proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the Pension Benefit Guaranty Corporation;
(12) Insurance: as soon as practicable and in any event by the
last day of each fiscal year, a report in form and substance
satisfactory to the Lessor and the Agent outlining all material
insurance coverage maintained as of the date of such report by the
Lessee and its Subsidiaries and all material insurance coverage
planned to be maintained by the Lessee and its Subsidiaries in the
immediately succeeding fiscal year;
(13) Pricing Certificates: (a) together with each delivery of
financial statements of the Lessee and its Subsidiaries pursuant to
subdivisions (1) and (2) above, (b) within one Business Day after any
public release by S&P or ▇▇▇▇▇'▇ lowering the Lessee's "Senior Secured
Debt Rating" or "Senior Secured Rating," as applicable, and (c) at
such additional times as the Lessee may elect, a certificate setting
forth its "Senior Secured Debt Rating" and "Senior Secured Rating," as
assigned by S&P or ▇▇▇▇▇'▇, as applicable (each, a "Pricing
Certificate");
(14) Holding Company: at least 5 Business Days prior to the
consummation thereof, the terms of the Holding Company Reorganization,
and, on and after the consummation of the Holding Company
Reorganization, in addition to the information requirements in this
Section 6(a) with respect to the Lessee, the same information shall be
delivered (and at the same times) with respect to the Holding Company
and its Subsidiaries; and
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(15) Other Information: with reasonable promptness, such other
information and data with respect to the Lessee or any of its
Subsidiaries as from time to time may be reasonably requested by the
Lessor or the Agent or any Lender.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, the Lessee will,
and will cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its corporate existence and all rights and
franchises material to its business; provided, however, that the corporate
existence of any such Subsidiary may be terminated if such termination is
in the interests of the Lessee and its Subsidiaries and is not materially
disadvantageous to the Lessor or to any assignee of the Lease. The Lessee
will at all times maintain its corporate existence as a United States
Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) The Lessee will, and will cause its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of
its properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all
claims (including, without limitation, claims for labor, services,
materials and supplies) for sums that have become due and payable and that
by law have or may become a Lien upon any of its properties or assets,
prior to the time when any penalty fine or interest shall be incurred with
respect thereto; provided, that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such reserve or other
appropriate provision, if any, with respect to any liability for taxes, as
shall be required in conformity with GAAP shall have been made therefor in
the financial statements of the Lessee.
(ii) The Lessee will not, and will not permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return
with any Person (other than any Subsidiary of the Lessor or the Lessee and
other than the Holding Company and its Subsidiaries).
(d) Maintenance of Properties; Insurance.
The Lessee will, and will cause its Subsidiaries to, maintain or cause
to be maintained in good repair, working order and condition, ordinary wear
and tear excepted, all material properties used or useful in the business
of the Lessee and its Subsidiaries and from time to time will make or cause
to be made all appropriate repairs,
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renewals and replacements thereof. The Lessee will maintain or cause to be
maintained, with insurers of recognized responsibility and reputation,
insurance with respect to its properties and business and the properties
and businesses of its Subsidiaries against loss or damage (including,
without limitation, flood insurance, if necessary or advisable) of the
kinds customarily carried or maintained under similar circumstances by
corporations engaged in similar businesses.
(e) Inspection; Lender Meeting.
The Lessee will, and will cause its Subsidiaries to, permit any
authorized representatives designated by the Lessor, the Agent or any
Lender to visit and inspect any of the properties of the Lessee or any of
its Subsidiaries, including any Engine or any part thereof, and its and
their financial and accounting records, and, with the permission of the
Lessee, which shall not be unreasonably withheld, to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided, that the Lessee may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be
reasonably requested, provided, so long as no Lease Event of Default shall
have occurred and be continuing, that such inspection is not disruptive to
the Lessee's business, as reasonably determined by the Lessee. The cost of
any such inspection shall be borne by the Lessee if an Event of Default has
occurred and is continuing or if the Lessee is thereby shown to be in
material breach of any of its obligations hereunder, and otherwise by the
party making the inspection. Neither the Lessor, the Agent nor any Lender
shall have any obligation to make any inspection. Without limiting the
foregoing, the Lessor (or its authorized representative) may attend any
Engine shop visit. The Lessee shall provide the Lessor not less than twenty
days' prior written notice of any such scheduled visit; provided, that if a
scheduled visit is to occur less than twenty days after the scheduling
thereof, the Lessee shall provide written notice of such scheduled visit
promptly upon the scheduling thereof. Without in any way limiting the
foregoing, the Lessee will, upon the request of the Lessor or the Agent,
participate in a meeting of the Agent and the Lenders once during each
fiscal year to be held at the Lessee's corporate offices (or such other
location as may be agreed to by the Lessee, the Lessor and the Agent) at
such time as may be agreed to by the Lessee, the Lessor and the Agent.
(f) Compliance with Laws, etc.
The Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with
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which could reasonably be expected to cause a Material Adverse Effect or
prevent the Lessee from performing its obligations hereunder. The Lessee
shall not conduct, and shall not permit the conduct of, any Hazardous
Materials Activity at any facility or at any other location that could
reasonably be expected to form the basis of an Environmental Claim against
the Lessee and that could reasonably be expected to have a Material Adverse
Effect.
(g) Lessee's Remedial Action Regarding Hazardous Materials.
The Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with
the presence, storage, use, disposal, transportation or Release of any
Hazardous Materials on, under or about any facility in order to comply with
all applicable Environmental Laws and Governmental Authorizations. In the
event that the Lessee or any of its Subsidiaries undertakes any remedial
action with respect to any Hazardous Materials on, under or about any
facility, the Lessee or such Subsidiary will conduct and complete such
remedial action in compliance with all applicable Environmental Laws, and
in accordance with the policies, orders and directives of all federal,
state and local governmental authorities except when, and only to the
extent that, the Lessee's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous
Materials is being contested in good faith by the Lessee or such
Subsidiary. Notwithstanding anything to the contrary contained in this
Lease, the Lessee and its Subsidiaries may engage in the transportation of
Hazardous Materials in the ordinary course of business so long as such is
conducted in compliance with all applicable Environmental Laws, and all
other applicable laws, policies, orders, directives and regulations.
(h) Employee Benefit Plans.
The Lessee will not establish or permit to be established any Employee
Benefit Plans for the Lessee or any of its employees and will not permit
any ERISA Affiliate to establish any Employee Benefit Plan that, in either
case, could reasonably be expected to result in a liability for the Lessee,
under Title IV of ERISA or the minimum funding standards of Part 3 of
Subtitle B of Title I of ERISA, in excess of $20 million.
(i) Corporate Separateness.
The Lessee will take all such action as is necessary to keep its
operations separate and apart from those of the Holding Company or any of
its Affiliates, including, without limitation, ensuring that all customary
corporate formalities, including the maintenance of separate corporate
records and documents and holding regular meetings, are followed. Any
financial statements distributed to any creditors of the Lessee
-42-
shall clearly establish the corporate separateness of the Lessee from the
Holding Company and each of the Holding Company's other Subsidiaries. The
Lessee shall not take any action or conduct its affairs in a manner that is
likely to result in the corporate existence of the Lessee on the one hand
and of the Holding Company or any Subsidiary of the Holding Company on the
other hand being disregarded, or in the assets and liabilities of the
Holding Company or any Subsidiary of the Holding Company being
substantively consolidated with those of the Lessee in a bankruptcy,
reorganization or other insolvency proceeding.
SECTION 7. Lessee's Negative Covenants. The Lessee covenants and agrees
that, so long as any amounts remain owing under this Lease, the Lessee shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
(a) Indebtedness.
The Lessee shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to create, incur, assume or guaranty, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except that:
(1) the Lessee may become and remain liable with respect to the
obligations under the Amended Aircraft Credit Facility;
(2) the Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by subsection 7(d)
and, upon any matured obligations actually arising pursuant thereto,
the Indebtedness corresponding to the Contingent Obligations so
extinguished;
(3) the Lessee and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Capital Leases; provided,
that such Capital Leases are permitted under the terms of subsection
7(i);
(4) the Lessee and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 7(a)(4)
annexed hereto;
(5) the Lessee may become and remain liable with respect to
Permitted Extension Indebtedness, provided that, with respect to any
transaction in which Permitted Extension Indebtedness is incurred with
respect to any Financed Aircraft, the cash proceeds from such
Permitted Extension Indebtedness are sufficient to repay in full the
Indebtedness associated with such Financed Aircraft;
-43-
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and the Lessee
delivers an Officers' Certificate to the Lessor, the Agent and the
Lenders, in form and substance reasonably satisfactory to the Lessor
and the Agent, confirming that, on a Pro Forma Basis after giving
effect to such incurrence of Indebtedness, (i) the ratio of
Consolidated Total Debt (less Cash and Cash Equivalents held by the
Lessee in excess of $25 million) as of the last day of the most
recently ended fiscal quarter (the "Determination Date") plus seven
times Consolidated Rental Payments for the four fiscal quarter period
ending on such Determination Date to Consolidated Adjusted EBITDA plus
Consolidated Rental Payments for the four fiscal quarter period ending
on such Determination Date does not exceed the ratio set forth in
subsection 7(f)(ii) for the fiscal quarter in which such Indebtedness
is to be incurred, (ii) the ratio of Consolidated Adjusted EBITDA for
such four fiscal quarter period to Consolidated Interest Expense for
such four fiscal quarter period is not less than the ratio set forth
in subsection 7(f)(i) for the fiscal quarter in which such
Indebtedness is to be incurred, and (iii) the Lessee will be in
compliance with all covenants set forth in subsection 7(f) hereof, the
Lessee and its Subsidiaries may incur Other Permitted Indebtedness;
(7) the Lessee may become and remain liable with respect to
Indebtedness under the NationsBanc/Banc of America Agreement;
(8) the Lessee may become and remain liable with respect to the
Senior Notes;
(9) the Lessee and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount
not to exceed, without duplication, when added to the maximum
aggregate liability, contingent or otherwise, of the Lessee and its
Subsidiaries outstanding in accordance with Section 7(d)(6), $50
million at any time outstanding; and
(10) the Lessee may become and remain liable with respect to
Indebtedness in respect of the Leases; provided that, notwithstanding
the foregoing, the Lessee may not become or remain liable, directly or
indirectly, for any Indebtedness of any Holding Company Subsidiary.
(b) Liens and Related Matters.
A. Prohibition on Liens. The Lessee shall not, and shall not permit
any of its Subsidiaries, directly or indirectly, to create, incur, assume
or permit to exist any
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Lien on or with respect to any property or asset of any kind (including any
document or instrument in respect of goods or accounts receivable) of the
Lessee or any of its Subsidiaries, whether now owned or hereafter acquired,
or any income or profits therefrom, or file or permit the filing of, or
permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens in respect of Permitted Extension Indebtedness and
Other Permitted Indebtedness, provided that such Liens encumber only
assets subject to purchase money Liens securing such Indebtedness and
do not encumber any assets subject to the Aircraft Chattel Mortgages;
and
(iii) other Liens, securing Indebtedness in an aggregate amount
not to exceed $10 million at any time outstanding, that do not
encumber any assets subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event
shall the Lessee create, incur, assume or permit to exist Liens on or with
respect to any assets subject to the Aircraft Chattel Mortgages except for
Permitted Encumbrances of the type described in clauses (i), (ii) or (viii)
of the definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule
7(b) annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
the Lessee will not, and will not permit any of its Subsidiaries to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such
Subsidiary's capital stock (i) to pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by the Lessee
or any other Subsidiary of the Lessee, (ii) to repay or prepay any
Indebtedness owed by such Subsidiary to the Lessee or any other Subsidiary
of the Lessee, (iii) to make loans or advances to the Lessee or any other
Subsidiary of the Lessee, or (iv) to transfer any of its property or assets
to the Lessee or any other Subsidiary of the Lessee.
(c) Investments; Joint Ventures.
The Lessee shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to make or own any Investment in any Person,
including any Joint Venture, except:
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(i) the Lessee may make and own Investments in Cash Equivalents;
(ii) the Lessee and its Subsidiaries may continue to own the
Investments owned by them as of the Initial Borrowing Date in any
Subsidiaries of the Lessee;
(iii) the Lessee may make and own Investments in Special Purpose
Subsidiaries, provided that the Lessee delivers to the Lessor and the
Agent an Officer's Certificate in form and substance satisfactory to
the Lessor and the Agent demonstrating that such Special Purpose
Subsidiary meets the requirements set forth in the definition thereof;
(iv) the Lessee may make Investments in Joint Ventures in an
aggregate amount not to exceed (A) $50 million plus (B) 20% of
cumulative Consolidated Net Income for each fiscal year commencing
with fiscal year 2000 and ending before the date of determination less
(C) the sum of (x) the aggregate amount of Restricted Junior Payments
with respect to the Common Stock of the Lessee declared or paid in
each such fiscal year (excluding Restricted Junior Payments made in
accordance with Section 7(e)(4)) and (y) the aggregate amount
contributed to capital of Special Purpose Subsidiaries in each such
fiscal year; provided, that the Lessee shall not incur liabilities
related to any such Joint Venture in excess of the Lessee's Investment
therein;
(v) the Lessee and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7(c)(v) annexed
hereto and Investments made in compliance with subsection 7(c)(iv);
and
(vi) the Lessee and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed $15 million at any
time outstanding.
(d) Contingent Obligations.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to
any Contingent Obligation, except:
(1) any Subsidiary may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the
obligations under any Material Agreement;
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(2) the Lessee may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements and Currency
Agreements arising under any Material Agreement;
(3) the Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets or securities;
(4) the Lessee and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule
7(d)(4) annexed hereto;
(5) the Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations to the extent that such
Contingent Obligations are permitted pursuant to subsections 7(i) and
7(j); and
(6) the Lessee and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided, that the
maximum aggregate liability, contingent or otherwise, of the Lessee
and its Subsidiaries in respect of all such Contingent Obligations
when added, without duplication, to the aggregate principal amount of
Indebtedness outstanding in accordance with Section 7(a)(9) shall at
no time exceed $50 million.
(e) Restricted Junior Payments.
The Lessee shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to declare, order, pay, make or set apart any sum
for any Restricted Junior Payment; provided, that the Lessee may make
scheduled payments of principal, mandatory prepayments of principal
(including through the exercise of remedies) and payment of interest from
time to time on Designated Indebtedness; and provided further, that, so
long as no Default or Lease Event of Default has occurred and is
continuing, or would result therefrom:
(1) the Lessee may prepay Designated Indebtedness from the
proceeds of Permitted Extension Indebtedness or Other Permitted
Indebtedness;
(2) the Lessee may make Restricted Junior Payments with respect
to its Common Stock in an amount not to exceed, in any fiscal year,
the lesser of 20% of Consolidated Net Income for such fiscal year and
$15 million;
-47-
(3) the Lessee may apply Equity Proceeds to prepay Designated
Indebtedness;
(4) the Lessee may repurchase its Common Stock in an amount not
to exceed in any fiscal year $15 million for purposes of establishing
or contributing to an employee benefit plan; provided, that any such
repurchased Common Stock resold to employees of the Lessee shall, to
the extent of the price paid for such Common Stock by such employee,
be excluded from the calculation of the $15 million limit set forth
above;
(5) the Lessee shall be permitted to consummate the Transaction;
and
(6) the Lessee may repurchase or redeem all or any portion of the
Senior Notes for aggregate cash consideration, when aggregated with
any "change of control" put payments arising as a result of the
Holding Company Reorganization, not to exceed $75,000,000, provided
that (A) after giving effect to the proposed repurchase or redemption,
the Lessee shall have not less than $150,000,000 in Cash or Cash
Equivalents on its balance sheet and (B) its Consolidated Leverage
Ratio (calculated on a pro forma basis as if the proposed repurchase
or redemption had been consummated on the last day of the most recent
four fiscal quarter period) shall not exceed the lower of 4.25:1.00 or
the ratio required to be met in accordance with Section 7(f)(ii) for
the immediately succeeding fiscal quarter end.
(f) Financial Covenants.
(i) Minimum Interest Coverage Ratio. The Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
Expense for the four fiscal quarter period ending as of the last day of any
fiscal quarter of the Lessee set forth below to be less than the
correlative ratio indicated:
==================================== ==================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
==================================== ==================================
March 31, 2000 2.10:1.00
------------------------------------ ----------------------------------
June 30, 2000 2.10:1.00
------------------------------------ ----------------------------------
September 30, 2000 2.20:1.00
------------------------------------ ----------------------------------
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==================================== ==================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
==================================== ==================================
December 31, 2000 2.20:1.00
------------------------------------ ----------------------------------
March 31, 2001 2.40:1.00
------------------------------------ ----------------------------------
June 30, 2001 2.40:1.00
------------------------------------ ----------------------------------
September 30, 2001 2.50:1.00
------------------------------------ ----------------------------------
December 31, 2001 2.50:1.00
------------------------------------ ----------------------------------
March 31, 2002 2.50:1.00
------------------------------------ ----------------------------------
June 30, 2002 2.50:1.00
------------------------------------ ----------------------------------
September 30, 2002 2.50:1.00
------------------------------------ ----------------------------------
December 31, 2002 2.50:1.00
------------------------------------ ----------------------------------
March 31, 2003 2.50:1.00
------------------------------------ ----------------------------------
June 30, 2003 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2003 2.75:1.00
------------------------------------ ----------------------------------
December 31, 2003 2.75:1.00
------------------------------------ ----------------------------------
March 31, 2004 2.75:1.00
------------------------------------ ----------------------------------
June 30, 2004 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2004 2.75:1.00
------------------------------------ ----------------------------------
December 31, 2004 2.75:1.00
------------------------------------ ----------------------------------
March 31, 2005 2.75:1.00
------------------------------------ ----------------------------------
June 30, 2005 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2005 2.75:1.00
------------------------------------ ----------------------------------
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==================================== ==================================
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
==================================== ==================================
December 31, 2005 2.75:1.00
------------------------------------ ----------------------------------
March 31, 2006 2.75:1.00
------------------------------------ ----------------------------------
June 30, 2006 2.75:1.00
------------------------------------ ----------------------------------
September 30, 2006 2.75:1.00
------------------------------------ ----------------------------------
December 31, 2006 2.75:1.00
==================================== ==================================
(ii) Maximum Leverage Ratio. The Lessee shall not permit the ratio of
(i) Consolidated Total Debt at the end of any four fiscal quarter period
ending during one of the periods set forth below (less Cash and Cash
Equivalents held by the Lessee in excess of $25 million as of such date)
plus seven times Consolidated Rental Payments for such four fiscal quarter
period to (ii) Consolidated Adjusted EBITDA plus Consolidated Rental
Payments for such four fiscal quarter period to exceed the correlative
ratio indicated below:
==================================== ==================================
Fiscal Quarter Maximum
Ending Leverage Ratio
==================================== ==================================
March 31, 2000 4.75:1.00
------------------------------------ ----------------------------------
June 30, 2000 4.75:1.00
------------------------------------ ----------------------------------
September 30, 2000 4.75:1.00
------------------------------------ ----------------------------------
December 31, 2000 4.75:1.00
------------------------------------ ----------------------------------
March 31, 2001 4.75:1.00
------------------------------------ ----------------------------------
June 30, 2001 4.50:1.00
------------------------------------ ----------------------------------
September 30, 2001 4.50:1.00
------------------------------------ ----------------------------------
December 31, 2001 4.50:1.00
------------------------------------ ----------------------------------
March 31, 2002 4.50:1.00
------------------------------------ ----------------------------------
-50-
==================================== ==================================
Fiscal Quarter Maximum
Ending Leverage Ratio
==================================== ==================================
June 30, 2002 4.50:1.00
------------------------------------ ----------------------------------
September 30, 2002 4.50:1.00
------------------------------------ ----------------------------------
December 31, 2002 4.25:1.00
------------------------------------ ----------------------------------
March 31, 2003 4.25:1.00
------------------------------------ ----------------------------------
June 30, 2003 4.25:1.00
------------------------------------ ----------------------------------
September 30, 2003 4.25:1.00
------------------------------------ ----------------------------------
December 31, 2003 4.00:1.00
------------------------------------ ----------------------------------
March 31, 2004 4.00:1.00
------------------------------------ ----------------------------------
June 30, 2004 4.00:1.00
------------------------------------ ----------------------------------
September 30, 2004 4.00:1.00
------------------------------------ ----------------------------------
December 31, 2004 3.75:1.00
------------------------------------ ----------------------------------
March 31, 2005 3.75:1.00
------------------------------------ ----------------------------------
June 30, 2005 3.75:1.00
------------------------------------ ----------------------------------
September 30, 2005 3.75:1.00
------------------------------------ ----------------------------------
December 31, 2005 3.50:1.00
------------------------------------ ----------------------------------
March 31, 2006 3.50:1.00
------------------------------------ ----------------------------------
June 30, 2006 3.50:1.00
------------------------------------ ----------------------------------
September 30, 2006 3.50:1.00
------------------------------------ ----------------------------------
December 31, 2006 3.50:1.00
==================================== ==================================
-51-
(iii) Minimum Consolidated Net Worth. The Lessee shall not permit
Consolidated Net Worth at any time during any of the periods set forth
below to be less than the correlative amount indicated:
==================================== ==================================
Minimum Consolidated
Period Net Worth
==================================== ==================================
March 31, 2000 $300 million
------------------------------------ ----------------------------------
June 30, 2000 $300 million
------------------------------------ ----------------------------------
September 30, 2000 $325 million
------------------------------------ ----------------------------------
December 31, 2000 $325 million
------------------------------------ ----------------------------------
March 31, 2001 $350 million
------------------------------------ ----------------------------------
June 30, 2001 $350 million
------------------------------------ ----------------------------------
September 30, 2001 $350 million
------------------------------------ ----------------------------------
December 31, 2001 $350 million
------------------------------------ ----------------------------------
March 31, 2002 $400 million
------------------------------------ ----------------------------------
June 30, 2002 $400 million
------------------------------------ ----------------------------------
September 30, 2002 $400 million
------------------------------------ ----------------------------------
December 31, 2002 $400 million
------------------------------------ ----------------------------------
March 31, 2003 $450 million
------------------------------------ ----------------------------------
June 30, 2003 $450 million
------------------------------------ ----------------------------------
September 30, 2003 $450 million
------------------------------------ ----------------------------------
December 31, 2003 $450 million
------------------------------------ ----------------------------------
March 31, 2004 $450 million
------------------------------------ ----------------------------------
-52-
==================================== ==================================
Minimum Consolidated
Period Net Worth
==================================== ==================================
June 30, 2004 $450 million
------------------------------------ ----------------------------------
September 30, 2004 $450 million
------------------------------------ ----------------------------------
December 31, 2004 $450 million
------------------------------------ ----------------------------------
March 31, 2005 $450 million
------------------------------------ ----------------------------------
June 30, 2005 $450 million
------------------------------------ ----------------------------------
September 30, 2005 $450 million
------------------------------------ ----------------------------------
December 31, 2005 $450 million
------------------------------------ ----------------------------------
March 31, 2006 $450 million
------------------------------------ ----------------------------------
June 30, 2006 $450 million
------------------------------------ ----------------------------------
September 30, 2006 $450 million
------------------------------------ ----------------------------------
December 31, 2006 $450 million
==================================== ==================================
(g) Restriction on Fundamental Changes; Asset Sales and Acquisitions;
New Subsidiaries.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, sub-lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
property or fixed assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or any portion of the business,
property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person,
except that:
(1) any Subsidiary of the Lessee may be merged with or into the
Lessee or any wholly-owned Subsidiary of the Lessee, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to the
Lessee or any such wholly-owned Subsidiary
-53-
of the Lessee; provided, that, in the case of such a merger, the
Lessee or such wholly-owned Subsidiary shall be the continuing or
surviving corporation;
(2) the Lessee and its Subsidiaries may sell or otherwise dispose
of assets in transactions that do not constitute Asset Sales;
provided, that the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof;
(3) subject to subsection 7(m), the Lessee and its Subsidiaries
may make Asset Sales of assets having a fair market value not in
excess of $100 million in any fiscal year or $500 million in the
aggregate; provided, that (x) the consideration received for such
assets shall be in an amount at least equal to the fair market value
thereof, (y) the consideration received shall be at least 75% cash,
and (z) the proceeds of such Asset Sales shall be applied to repay
permanently senior bank debt or prepay Basic Rent;
(4) the Lessee may lease or transfer any Financed Aircraft to the
extent expressly permitted by the mortgages encumbering such Financed
Aircraft as in effect on the date of this Lease;
(5) the Lessee may make acquisitions of the capital stock of
another Person or all or substantially all of the assets of a division
or line of business of another Person, provided that (a) the
acquisition primarily involves the acquisition of assets to be used in
the business of the Lessee, (b) if such acquisition is structured as a
merger or a stock or other equity acquisition, then either (i) the
Person so acquired becomes a wholly-owned Subsidiary of the Lessee or
(ii) such Person is merged with and into the Lessee or a wholly-owned
Subsidiary of the Lessee (with the Lessee or such wholly-owned
Subsidiary being the surviving corporation of such merger), (c) if
such acquisition is structured as an asset acquisition, then such
assets are acquired either by the Lessee directly or by a wholly-owned
Subsidiary of the Lessee, (d) immediately before and after giving
effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (e) immediately after giving effect to the
acquisition, the Lessee shall be in compliance on a Pro Forma Basis
with the financial covenants in subsection 7(f) and such compliance
shall be evidenced by an Officer's Certificate demonstrating such
compliance, (f) the Lessor and the Agent shall have reviewed and be
reasonably satisfied with the nature and amount of all contingent
liabilities or other liabilities not on the balance sheet of the
Lessee assumed in connection with such acquisition and (g) the
aggregate amount of cash payments made in connection with all such
acquisitions other than with
-54-
the proceeds from sales or issuances of equity by the Lessee does not
exceed $100,000,000;
(6) the Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of
Eligible Aircraft permitted to be purchased, but not purchased, during
the previous fiscal year (but in no event shall any such number of
Eligible Aircraft once carried forward to the next fiscal year be
carried forward to any fiscal year thereafter) together with
Consolidated Capital Expenditures with respect to the acquisition, in
the normal course of business, of spare parts and spare engines
associated with such Eligible Aircraft;
(7) the Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal
course of business;
(8) the Lessee and its Subsidiaries may make other Consolidated
Capital Expenditures not in excess of $10 million during any fiscal
year; provided, that any amount of such other Consolidated Capital
Expenditures permitted, but not made, in any fiscal year may be
carried forward to and made during the immediately succeeding fiscal
year (but no amount once carried forward to the next fiscal year may
be carried forward to any fiscal year thereafter);
(9) the Lessee shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and
operations to Colorado; provided, that the aggregate consideration
paid with respect to the acquisition of assets shall be in an amount
not to exceed $20 million; and
(10) the Holding Company Reorganization and any transaction
effected in accordance with Subsection 10(b) of this Lease or Section
6.6 (ii) or Section 9.21 of the Credit Agreement shall be permitted..
(h) Amendments of Material Agreements.
The Lessee shall not permit (i) its certificate or articles of
incorporation or bylaws to be amended or otherwise modified in any manner
that could reasonably be expected to have a Material Adverse Effect or (ii)
any Material Agreement to be amended or otherwise modified in any manner
with respect to any provision providing
-55-
material representations and warranties to the Lessee, indemnification
rights to the Lessee, or limiting the Lessee's remedies or rights upon the
other party to such agreements failing to perform.
(i) Restriction on Leases.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any
lease, whether an Operating Lease or a Capital Lease (other than
intercompany leases between the Lessee and its wholly-owned Subsidiaries,
including the Lessor); provided, however, that the Lessee may become so
obligated to the extent that, and only to the extent that, immediately
after giving effect to the incurrence of liability with respect to such
lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year do not exceed $35 million plus the amount of
Consolidated Rental Payments made during such fiscal year in respect of up
to eight 747-400F aircraft subject to Operating Leases as of the Initial
Borrowing Date plus the amount of Consolidated Rental Payments in respect
of up to two 747-400F aircraft per year, subject to the agreement dated
June 9, 1997, between the Lessee and The Boeing Company regarding the
purchase of twelve new 747-400F aircraft, and the option to purchase eight
additional new 747-400F aircraft, plus an amount, not to exceed $15 million
during any fiscal year, equal to Consolidated Rental Payments incurred in
connection with sale and leaseback transactions described in subsection
7(j), plus Consolidated Rental Payments assumed pursuant to acquisitions
permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real, personal or mixed), whether
now owned or hereafter acquired, (i) that the Lessee or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than the Lessee or any of its Subsidiaries) or (ii) that the
Lessee or any of its Subsidiaries intends to use for substantially the same
purpose as any other property that has been or is to be sold or transferred
by the Lessee or any of its Subsidiaries to any Person (other than the
Lessee or any of its Subsidiaries) in connection with such lease; provided,
that the Lessee and its Subsidiaries may become and remain liable as
lessee, guarantor or other surety with respect to any such lease if and to
the extent that the Lessee or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease under subsection 7(i).
-56-
(k) Transactions with Shareholders and Affiliates.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with any holder of 10% or
more of any class of equity Securities of the Lessee or with any Affiliate
of the Lessee or of any such holder, on terms that are less favorable to
the Lessee or that Subsidiary, as the case may be, than those that might be
obtained at the time from Persons who are not such holders or Affiliates;
provided, that the foregoing restriction shall not apply to (i) reasonable
and customary fees paid to and indemnification of members of the Boards of
Directors of the Lessee and its Subsidiaries, (ii) reasonable and customary
salaries, bonuses and other compensation paid to and indemnification of
employees of the Lessee or any of its Subsidiaries in accordance with past
practice or approved by the compensation committee of the Lessee, (iii)
performance by the Lessee of its obligations under and in accordance with
the Services Agreement or (iv) the Holding Company Reorganization.
(l) Disposal of Subsidiary Stock.
The Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law or to a wholly-owned Subsidiary of the
Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to the Lessee, another
wholly-owned Subsidiary of the Lessee, or to qualify directors if
required by applicable law.
Notwithstanding the foregoing, the Lessor shall be permitted to
issue preferred stock in an amount not to exceed $100,000 to a third
party.
(m) Conduct of Business.
From and after the Initial Borrowing Date, the Lessee shall not, and
shall not permit any of its Subsidiaries to, engage in any business other
than the businesses engaged in by the Lessee and its Subsidiaries on the
Initial Borrowing Date and similar or related businesses.
-57-
(n) Change of Chief Executive Office.
The Lessee shall not, and shall not permit any of its Subsidiaries to,
change its chief executive office without giving 30 days' prior written
notice to the Lessor and the Agent.
SECTION 8. Return of the Engines.
(a) Condition Upon Return. Unless any Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return any Engine to the Lessor
hereunder, the Lessee, at its own expense, will return such Engine to the Lessor
at a location specified by the Lessor to the Lessee in writing. At the time of
such return, the Lessee will cause such Engine to be in compliance with the
maintenance covenants contained in this Lease.
At the time of such return, such Engine (A) shall have an airworthiness
certificate from the Federal Aviation Administration and shall be in full
compliance with the provisions of Federal Aviation Regulations, Part 121 (or
successor regulation), and shall be in material compliance with all applicable
FAA noise, corrosion, environmental and aging aircraft requirements, (B) shall
be free and clear of all Liens and (C) shall be in as good condition as when
originally delivered to the Lessee, ordinary wear and tear excepted, and
otherwise in the condition required to be maintained under the Lessee's
FAA-approved maintenance plan; and in all such cases the Engines shall not have
been discriminated against as compared to other engines owned or leased by the
Lessee whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Engines and all Parts shall have been, and
shall be properly documented to have been, repaired or overhauled by certified
repair stations acceptable to the FAA.
(c) Repairs. The Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Engines are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation necessary to substantiate their certification,
approval and methods of compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date that deviate from the certified configuration and that are still in
existence on the Engines shall have approval or certification by the FAA (or its
designee) or certification if required. All such modifications shall be
accompanied by complete data and documentation necessary to substantiate their
certification and approval and methods of compliance.
-58-
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Engines or Acceptable Alternate Engines or Parts, as well as all mandatory
service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be, taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered by the Lessee, the Lessee, concurrently with such delivery,
will, at no cost to the Lessor, furnish, or cause to be furnished, to the Lessor
a full warranty (as to title) ▇▇▇▇ of sale with respect to each such Acceptable
Alternate Engine, in form and substance reasonably satisfactory to the Lessor
(together with an opinion of counsel to the effect that such full warranty ▇▇▇▇
of sale has been duly authorized and delivered and is enforceable in accordance
with its terms and that any such Acceptable Alternate Engine is free and clear
of all Liens) against receipt from the Lessor of a ▇▇▇▇ of sale evidencing the
transfer, without recourse or warranty by the Lessor to the Lessee or its
designee of all of the Lessor's right, title and interest in and to any Engine
for which the Acceptable Alternate Engine was substituted.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against any of the Engines
including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, each of the Engines shall
have been maintained by cleaning and treating all mild and moderate corrosion
and correcting of all severe or exfoliate corrosion in accordance with the
Lessee's approved maintenance program or manufacturer's structural repair
manual.
(i) Manuals. Upon the return of the Engines upon any termination of this
Lease, the Lessee shall deliver or cause to be delivered to the Lessor all logs,
manuals and data and maintenance, inspection, modification and overhaul records
and similar records required to be maintained with respect to the Engines and
Parts under FAA rules and the Engine maintenance program (the "Technical
Records"). If any such logs, manuals, records or other data are missing,
incomplete or otherwise not in accordance with FAA standards applicable to the
Lessee, the Lessee shall re-accomplish the maintenance tasks necessary to
produce such records in accordance with its approved maintenance program prior
to delivery of the Engines or otherwise perform all necessary acts (without
regard to any applicable waivers or deferrals) to obtain such records in a
manner satisfactory to the FAA and the Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, the Lessee receives from
the Lessor a written request for storage of any Engine upon its return
hereunder, the Lessee will provide
-59-
the Lessor, or cause the Lessor to be provided, with storage facilities for such
Engine at the Lessee's risk and at the Lessee's expense for a period not
exceeding 30 days, and thereafter at the Lessor's risk and at the Lessor's cost
for insurance, maintenance and the Lessee's out-of-pocket expenses for such
storage for a period not exceeding 90 days (provided, that if such termination
occurs as a result of a Lease Event of Default hereunder, such storage shall be
at the cost of the Lessee), commencing on the date when such Engine is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by the Lessee and used by the Lessee as a
location for the long-term storage of engines.
(k) Severable Parts. At any time that any Engine is to be returned to the
Lessor, the Lessee shall, at the Lessor's request, advise the Lessor of the
nature and condition of all severable nonproprietary Parts (other than Parts
otherwise required by Sections 10 or 11 to be maintained on the Engine) owned by
the Lessee that have been used by the Lessee during the prior six months and
that the Lessee has or intends to remove from the Engine in accordance with
Section 11 hereof. The Lessor may, at its option, upon 30 days notice to the
Lessee, purchase any or all of such nonproprietary Parts from the Lessee upon
the expiration of the Term at their fair market value.
(l) Survival. The obligations of the Lessee to comply with the terms of
this Section 8 shall survive the expiration or other termination of this Lease.
(m) Deregistration and Export. At such time as the Lessee is obligated to
redeliver any Engine to the Lessor pursuant to this Lease, the Lessee shall at
its expense upon the request of the Lessor:
(i) promptly take all such steps (not including procuring the
discharge of any Lessor's Liens) as may be necessary to cancel the existing
registration of each Engine (subject to the Lessor giving, or procuring
that any mortgagee of the Engine gives, such notices and/or required
consents to the cancellation of such registration) and obtain and deliver
to the Lessor all certificates relating to the Engine required by
applicable law on any transfer of or alteration to the registration
thereof;
(ii) provide to the Lessor all assistance as the Lessor may reasonably
request so as to enable the Lessor to obtain any documents (including,
without limitation, any export certificate of airworthiness) required by
applicable law in relation to the export of such Engine from the state of
registration or such other country in which such Engine is for the time
being located and shall re-assign or otherwise confirm to the Lessor the
benefit of any indemnities or warranties available to the Lessee from the
manufacturer or any other supplier or manufacturer of such Engine or any
Part; and
-60-
(iii) provide to the Lessor such assistance with respect to
information and documentation as the Lessor may reasonably require so as to
enable such Engine to be registered and certified as to airworthiness under
any applicable laws and/or regulations of any country other than the state
of registration; provided, that the Lessor shall reimburse, the Lessee for
its reasonable out-of-pocket expenses incurred in providing such
assistance.
SECTION 9. Liens. The Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien, on or with respect to any of the Engines,
title thereto or any interest therein, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. The Lessee will promptly, at its own
expense, take such action as may be necessary to duly discharge any such Lien
not excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. The Lessee, at its own cost and expense,
until the expiration or earlier termination of this Lease, (i) will be a
"citizen of the United States" as defined in Section 40102(15) of Title 49 of
the United States Code and will be an air carrier certificated under Sections
401 and 609 of the Federal Aviation Act and hold all necessary air carrier
operating certificates; (ii) will cause ownership of the Engines to be duly
registered and remain duly registered with the FAA in the name of the Lessor in
accordance with the Federal Aviation Act and otherwise registered under all
applicable laws of the United States so as to be eligible to operate in
commercial air service under the Federal Aviation Act; and (iii) will service,
repair, inspect, test, maintain and overhaul each Engine, install replacement
equipment and parts on each Engine and maintain the Technical Records (A) so as
to keep each Engine in such operating condition as may be required to permit
each Engine to be utilized in commercial operations in the United States, (B) in
accordance with the Lessee's FAA-approved maintenance, inspection and
maintenance control programs, and in the same manner and with the same care used
by the Lessee with respect to the same or similar engines owned or operated by
the Lessee so as to keep the same in as good operating condition as when
originally leased hereunder, ordinary wear and tear excepted, which practices
shall at all times be at or above the standard of the industry in the United
States for prudent maintenance of similar equipment, (C) in such manner as may
be necessary to maintain in full force all warranties of the manufacturers
thereof, and (D) to enable the Lessee to deliver the Engines to the Lessor in
accordance with Section 8. The Lessee shall maintain all records, logs and other
materials that may be required to permit each Engine to be so utilized.
The Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this
-61-
Lease and the rules and regulations of the FAA from time to time in force and
applicable to the Engines. No Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
such Engine issued by any such authority, and in the event that such laws,
rules, regulations or orders require alteration of any Engine, the Lessee, at
its own cost and expense, will conform thereto or obtain conformance therewith
and will maintain the same in proper operating condition under such laws, rules,
regulations and orders, provided, however, that the Lessee may, in good faith
(after having delivered to the Lessor and the Agent an Officers' Certificate
stating the facts with respect thereto), contest the validity or application of
any such law, rule, regulation or order in any reasonable manner that does not,
in the Lessor's and the Agent's opinion (in their sole discretion), adversely
affect the interests of the Lessor, the Agent or any Lender.
The Lessee covenants and agrees with the Lessor that, the better to ensure
the availability of the benefits of Section 1110 of the Bankruptcy Code, the
Lessee shall not object to any motion, petition or application filed by the
Lessor with any bankruptcy court having jurisdiction over the Lessee, solely as
to the portion thereof that seeks, and to the extent that such motion, petition
or application seeks, a determination that such Section 1110 of the Bankruptcy
Code applies to the lease of the Engines hereunder. In the event that Section
1110 is amended, or if it is repealed and another statute is enacted in lieu
thereof, the Lessor and the Lessee (at the Lessee's expense) agree to amend this
Lease and take such other action not inconsistent with this Lease as the Lessor
reasonably deems necessary so as to afford to the Lessor the rights and benefits
as such amended or substituted statute confers upon owners, lessors and
conditional vendors of aircraft engines similarly situated to the Lessor.
The Lessee will not operate, use or locate any Engine, (I) in any area in
which any insurance required to be maintained pursuant to Section 14 shall not
be at the time in full force and effect, or in any area excluded from coverage
by an insurance policy in effect with respect to such Engine, except in the case
of a requisition for use by the United States of America, and then only if the
Lessee obtains indemnity in lieu of such insurance from the United States of
America against the risks and in the amounts required by said Section covering
such area, or (II) in any recognized or threatened area of hostilities unless
such Engine is operated or used under contract with the Government of the United
States of America under which contract that Government assumes liabilities for
any damages, loss, destruction or failure to return possession of such Engine at
the end of the term of such contract and for injury to persons or damage to
property of others.
The Lessee shall not use any Engine nor suffer it to be used in any manner
or for any purpose excepted from any of the insurance on or in respect of the
Engine or for the purpose of carriage of goods of any description excepted from
such insurance nor do, or per-
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mit to be done, anything which, or omit to do anything the omission of which,
may invalidate any of such insurance.
(b) Possession. The Lessee will not, without the prior written consent of
the Agent and the Lessor, sell, assign, lease or otherwise in any manner
deliver, transfer or relinquish possession or control of, or transfer the right,
title or interest of the Lessee in, any Engine except that, unless a Default or
Lease Event of Default shall have occurred and be continuing, the Lessee may,
without the prior written consent of the Agent and the Lessor, take the
following actions so long as the actions to be taken shall not deprive the Agent
of the first priority Lien under the Aircraft Chattel Mortgage in the assets
subject thereto and so long as the actions to be taken shall not deprive the
Lessor of the protections of Section 1110 of the Bankruptcy Code with respect to
the any Engine and shall not deprive the Agent of the protections of Section
1110 of the Bankruptcy Code with respect to the any Engine as assignee of the
Lessee's rights under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of any Engine other than by lease to the
United States of America or any instrumentality thereof pursuant to the
Civil Reserve Air Fleet Program (as administered pursuant to Executive
Order 12656, or any substitute order) or any similar or substitute
programs;
(ii) transfer possession of any Engine to the manufacturer thereof for
testing or other similar purposes or any other organization for service,
repairs, maintenance or overhaul or, to the extent permitted by Section 11
hereof, for alterations or modifications;
(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by the Lessee in the ordinary course of business that do
not contemplate or require the transfer of title to or use for the
remainder of its useful life of such Engine; provided, however, that if the
Lessee's title to or use for the remainder of its useful life of any Engine
shall be divested under any such agreement or arrangement, such divesture
shall be deemed to be an Event of Loss with respect to such Engine and the
Lessee shall comply with Section 13 in respect thereof;
(iv) install any Engine on an airframe that is owned by the Lessee
free and clear of all Liens except (A) those permitted under clauses (i) or
(ii) of the definition of Permitted Encumbrances in the Credit Agreement,
(B) those that apply only to the engines (other than the Engines),
appliances, parts, instruments, appurtenances, accessories, furnishings and
other equipment (other than Parts) installed on such airframe (but not to
the airframe as an entirety), and (C) the rights of any Domestic Air
Carrier, under normal interchange agreements that are customary in the
airline industry and do
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not contemplate or require the transfer of title to such airframe or the
engines installed thereon;
(v) install any Engine on an airframe leased to the Lessee or owned by
the Lessee subject to a conditional sale or other security agreement,
provided that: (A) such airframe is free and clear of all Liens, except for
the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe and except for Liens of the type
permitted by clause (iv) above; and (B) the Agent and the Lessor shall have
received from the lessor, conditional vendor or secured party and each of
the purchasers, mortgagees and encumbrancers of such lessor, conditional
vendor or secured party of such airframe a written agreement (which may be
the lease, conditional sale agreement or mortgage covering such airframe),
whereby such lessor, conditional vendor or secured party and each of the
purchasers, mortgagees and encumbrancers of such lessor, conditional vendor
or secured party expressly and effectively agrees that neither it nor its
successors and assigns will acquire or claim any right, title or interest
in any Engine by reason of such Engine being installed on such airframe at
any time when such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install any Engine on an airframe owned by the Lessee, leased by
the Lessee or owned by the Lessee subject to a conditional sale or other
security agreement under circumstances where neither clause (iv) nor clause
(v) above is applicable; provided, that any divesture of title to such
Engine resulting from such installation shall be deemed to be an Event of
Loss with respect to such Engine and the Lessee shall comply with Section
13 in respect thereof;
(vii) enter into an ACMI Contract or wet lease for any Engine with any
third party pursuant to which the Lessee has operational control of such
Engine, such operation to be performed solely by individuals under the
operational control of the Lessee possessing all current certificates and
licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided, that the Lessee's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI Contract or
wet lease; and
(viii) replace any Engine in accordance with Section 9.21 of the
Credit Agreement;
provided, however, that the rights of any transferee (other than with respect to
any transactions referred to in paragraph (viii) above) who receives possession
of any Engine permitted by the terms hereof shall be made subject and
subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and
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security interest of the Aircraft Chattel Mortgage and all of the Agent's rights
thereunder and the Lessee shall remain primarily liable hereunder for the
performance of all the terms of the Lease to the same extent as if such transfer
had not occurred, and any such instrument of transfer shall include appropriate
provisions for the maintenance and insurance of such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of such
Engine or any assignment of the rights thereunder; and provided further, that no
such lease, pooling arrangement or other transfer or relinquishment of the
possession of any Engine shall in any way discharge or diminish any of the
Lessee's obligations to the Lessor hereunder.
(c) Insignia. The Lessee shall, at its own cost and expense, cause each
Engine to be legibly marked with such a plate, disk, or other marking of
customary size, and bearing the legend "Owned by Atlas Freighter Leasing III,
Inc., and Mortgaged to Bankers Trust Company, as the Agent" or such other
legend, as shall in the opinion of the Lessor and the Agent be appropriate or
desirable to evidence the fact that it is subject to the ownership of the Lessor
and the lien and security interest created by the Aircraft Chattel Mortgage. The
Lessee shall not remove or deface, or permit to be removed or defaced, any such
plate, disk, or other marking or the identifying manufacturer's serial number,
and, in the event of such removal or defacement, shall promptly cause such
plate, disk, or other marking or serial number to be promptly replaced. Except
as provided above, the Lessee shall not allow the name of any person,
association or corporation to be placed on any Engine as a designation that
might be interpreted as a claim of ownership or of any security interest
therein, except that the Lessee or any permitted lessee may place its customary
colors and insignia or the insignia of the manufacturer on any Engine.
(d) Holding Out. The Lessee agrees that it will not at any time represent
or hold out the Lessor, the Agent, any Lender or any Affiliate of any of them
(and will use its best efforts to ensure that none of the Lessor, the Agent, any
Lender or any Affiliate of any of them is not at any time represented or held
out) as being in any way connected or associated with any operation of any
Engine or any Part or any other operations or carriage undertaken by the Lessee.
(e) No Pledging of Credit. The Lessee is not authorized to, and agrees that
it will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, any Engine or any Part, or for any other purpose
whatsoever.
(f) Title. Title to each of the Engines shall remain vested in the Lessor
subject to the Aircraft Chattel Mortgage and any assignments, charges or other
disposals that the Lessor may make in accordance with this Lease. The Lessee
shall not do or knowingly permit to be done anything that would jeopardize the
rights of the Lessor as owner of, or the rights of any Lender in, any of the
Engines and shall cause to be taken all actions necessary or
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reasonably requested by the Lessor to prevent the rights of the Lessor and the
Lenders in the Engines from being jeopardized. The Lessee shall not hold itself
out to any third party as the owner of the Engines or any part thereof, and when
any third party inquires as to ownership of any Engine or any part thereof, it
will make clear to such third party that title to the same is held by the Lessor
and that such Engine is mortgaged to the Lenders. Without limiting the
foregoing, if at any time subsequent to the initial registration of the Engines,
any filing, recording or act is necessary or reasonably requested by the Lessor
to perfect, protect and preserve the rights and interests of the Lessor in any
of the Engines and the rights and interests of any Lender under the Aircraft
Chattel Mortgage, the Lessee, at its own cost and expense, will procure that
such filings, recordings and acts are done pursuant to applicable laws. At the
reasonable request of the Lessor, the Lessee shall furnish to the Lessor an
opinion of counsel or other evidence satisfactory to the Lessor of each such
filing, recordation and act. The Lessor will reimburse the Lessee for its
reasonable out-of-pocket expenses incurred in complying with its obligations
under this Section 10(f) insofar as they relate to any Lender; provided, that,
to the extent that such expenses relate to (i) any reregistration of the Engines
under Section 8 or any sublease of the Engines, (ii) any Event of Default or
(iii) any substitution of Parts or Engines pursuant to the terms hereof, the
Lessor shall not be obligated to reimburse the Lessee for such increase in
expense.
(g) Information and Records. The Lessee shall:
(i) promptly furnish to the Lessor all such information as the Lessor
may from time to time reasonably request regarding any Engine or any part
thereof, its use, location and condition;
(ii) keep, or procure that there are kept, the Technical Records and
shall keep as part thereof accurate, complete and current records of all
Flight Hours and Cycles of each Engine and the Parts, and of all
maintenance and repairs carried out on each Engine and every Part;
(iii) procure that the Technical Records shall be kept and maintained
in English and in such manner, form and location as the FAA and any
applicable law may from time to time require and shall disclose the
location of all Engines and Parts, which Technical Records, unless
otherwise required by applicable law, shall be the property of the Lessor;
(iv) make the Technical Records available to the Lessor (or any
authorized representative of the Lessor) for examination during normal
business hours (or at such other time as the Lessee and the Lessor shall
mutually agree) upon giving reasonable written notice, provided that, so
long as no Event of Default shall have occurred and be continuing, such
examination does not impede the normal commercial operation of
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the Engines, and provided further that the cost of any such inspection
shall be borne by the Lessee if the Lessee is thereby shown to be in breach
of its material obligations hereunder, and otherwise by the party making
the inspection; and
(v) promptly on, but in no event later than three Business Days after,
becoming aware of the same, notify the Lessor of: (I) any Total Loss with
respect to any Engine, (II) any loss, theft, damage or destruction to any
Engine or any part thereof if the potential cost of repairs or replacement
may exceed $2,000,000, (III) any loss, arrest, hijacking, confiscation,
seizure, requisitioning, impounding, taking in execution, detention or
forfeiture of any Engine or any part thereof and (IV) any event in respect
of any of the Engines that might reasonably be expected to involve the
Lessor, the Lessee, the Agent or any Lender in any loss or liability.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), the Lessee, at its own
cost and expense, will promptly replace all Parts, which may from time to time
be incorporated or installed in or attached to any Engine and which may from
time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance, service, repair
or testing, the Lessee at its own cost and expense may remove any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, that, except as
otherwise provided in Section 11(d), the Lessee at its own cost and expense
shall replace such Parts as promptly as practicable. All replacement Parts shall
be owned by the Lessor free and clear of all Liens (except Permitted
Encumbrances and for pooling arrangements to the extent permitted by Section
11(b)), and shall be in as good operating condition as, and shall have a value
and utility at least equal to, the Parts replaced, assuming that such parts were
in the condition and repair required to be maintained by the terms hereof.
All Parts at any time removed from any Engine shall remain the property of
the Lessor and shall remain subject to the lien and security interest of the
Aircraft Chattel Mortgage, no matter where located, until such time as such
Parts shall be replaced by parts that have been incorporated or installed in or
attached to any Engine and that meet the requirements for replacement parts
specified above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to any Engine as above provided, without further act,
(A) title to such replacement Part shall vest in and such replacement part shall
become the property of the Lessor and shall become subject to this Lease and the
lien and security interest of the Aircraft Chattel Mortgage and shall be deemed
part of such Engine for all purposes hereof to the same extent as the property
originally comprising, or installed on, such
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Engine, and (B) title to the replaced part shall no longer be the property of
the Lessor and shall thereupon become free and clear of all rights of the Lessor
hereunder and all rights derivative of the Lessor's and shall no longer be
deemed a Part hereunder.
(b) Any Part removed from any Engine as provided in Section 11(a) may be
subjected by the Lessee to a normal pooling arrangement of the type customary in
the airline industry entered into by the Lessee in the ordinary course of its
business and entered into with Domestic Air Carriers that are not the subject of
any bankruptcy, insolvency, or similar proceeding, voluntary or involuntary;
provided, that the Part replacing such removed Part shall be incorporated or
installed in or attached to such Engine in accordance with Section 11(a) as
promptly as possible after the removal of such removed part. In addition, any
replacement Part when incorporated or installed in or attached to any Engine in
accordance with Section 11(a) may be owned by any third party subject to such a
pooling arrangement, provided that the Lessee, at its expense, as promptly
thereafter as possible, either (A) causes such replacement Part to become
property of the Lessor and subject to the lien and security interest of the
Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Engine) or (B) replaces such replacement Part by incorporating or
installing in or attaching to such Engine a further replacement Part owned by
the Lessee which shall become the property of the Lessor subject to the lien and
security interest of the mortgage free and clear of all Liens (except Permitted
Encumbrances and the Aircraft Chattel Mortgage relating to the Engine).
(c) The Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to each of the Engines as
may be required from time to time to meet the standards of the FAA or other
governmental authority having jurisdiction; provided, that the Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or the Agent's
respective interests. The Lessee also agrees, at its own cost and expense, to
make or cause to be made such alterations and modifications in and additions to
the Engines as may be required from time to time to meet the standards or
requirements of any directive issued by a manufacturer relating to any Engine.
In addition, so long as no Default or Lease Event of Default shall have occurred
and be continuing, the Lessee, at its own cost and expense, may from time to
time make such alterations and modifications in and additions to any Engine as
the Lessee may deem desirable in the proper conduct of its business, provided
that no such alteration, modification or addition diminishes the value or
utility or impairs the condition or airworthiness of such Engine below the
value, utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition, assuming that such Engine were then in the
condition and airworthiness required to be maintained by the terms of this
Lease.
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(d) All Parts incorporated or installed in or attached to or added to any
Engine as the result of such alteration, modification or addition shall, without
further act, become the property of, and title to such parts shall vest in the
Lessor and shall be subject to the lien and security interest of the Aircraft
Chattel Mortgage; provided, that, so long as no Default or Lease Event of
Default shall have occurred and be continuing, the Lessee may remove and not
replace any such Part if it (A) is in addition to, and not in replacement of or
in substitution for, any Part incorporated or installed in or attached to such
Engine on the date hereof, or any Part in replacement of or substitution for any
such Part, (B) is not required to be incorporated or installed in or attached or
added to such Engine pursuant to the terms of Section 10(a) hereof or any other
provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from such Engine without diminishing or impairing the value, utility or
airworthiness that the such Engine would have had at such time had such
alteration, modification or addition not occurred, assuming that such Engine was
otherwise in the condition required by this Lease and the Aircraft Chattel
Mortgage. Upon the removal by the Lessee of any such Part, as above provided,
title thereto shall, without further act, be free and clear of the interests of
the Lessor and all rights derivative of the Lessor's and such Part shall no
longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, any Engine, (ii) any
grounding of any Engine, (iii) suspension of certification of any Engine, or
(iv) loss of revenue suffered by the Lessee for any reason whatsoever.
SECTION 12. Indemnities.
(a) The Lessee will pay, and hereby indemnifies, on an after-tax basis, the
Lessor and its assignees, if any, from and against, any and all fees and taxes,
levies, imposts, duties, charges or withholdings, together with any penalties,
fines or interest thereon (any of the foregoing for the purposes of this Section
12 being called a "Tax"), that may from time to time be imposed on or asserted
against the Lessor and its assignees, if any, or any Engine or any part thereof
or interest therein by any federal, state or local government or other taxing
authority in the United States or by any foreign government or subdivision
thereof or by any foreign taxing authority in connection with, relating to or
resulting from: (i) any Engine or any part thereof or interest therein, (ii) the
manufacture, purchase, ownership, mortgaging, lease, sublease, use, storage,
maintenance, sale or other disposition of any Engine, (iii) any rentals or other
earnings therefor or arising therefrom or the income or other proceeds received
with respect thereto, or (iv) this Lease or the Aircraft Chattel Mortgage;
provided, however, that there shall be excluded from any indemnification under
this Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been commenced
to foreclose any lien that may have attached as security for such Tax,
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nothing in this Section shall require the payment of any Tax so long as and to
the extent that the validity thereof shall be contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
the Lessee shall have set aside on its books adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
(b) The Lessee agrees to defend, indemnify, pay and hold harmless the
Lessor, the Agent and each Lender, and the officers, directors, partners,
employees, agents and affiliates of the Lessor, the Agent and each Lender,
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, commenced or threatened by any Person, whether or not any
such Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including, without
limitation, securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable or other cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Lease or the other
Transaction Documents or the transactions contemplated hereby or thereby
(including, without limitation, the Lenders' agreement to make the Loans to the
Lessor or the use or intended use of the proceeds of any of the Loans)
(collectively called the "Indemnified Liabilities"); provided, that the Lessee
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent that such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, the Lessee shall contribute the maximum portion that
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to any Engine, the Lessee will promptly notify the Lessor and the Agent thereof
in writing (in any event within five (5) days of such occurrence) and will, not
later than 180 days after the occurrence of such Event of Loss, convey or cause
to be conveyed to the Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Engine. Prior to or at the time
of any such conveyance, the Lessee, at its own expense, will, as conditions to
such transfer, (i) furnish the Lessor with a warranty (as to title) ▇▇▇▇ of
sale, from a person and in form and substance reasonably satisfactory to the
Lessor, with respect to such Acceptable Alternate Engine, (ii) cause a Lease
Supplement to be filed for recording pursuant
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to Title 49 of the United States Code, as amended, (iii) furnish the Lessor with
such evidence of the Lessee's title to such Acceptable Alternate Engine and of
compliance with the insurance provisions of Section 14 hereof with respect to
such Acceptable Alternate Engine as the Lessor may reasonably request, (iv)
furnish the Lessor with an opinion of the Lessee's counsel to the effect that
title to such Acceptable Alternate Engine has been duly conveyed to the Lessor
free and clear of all Liens except Permitted Encumbrances and the Lessor and the
Agent continue to have 1110 protection with respect to such Engine. Upon
satisfaction of the foregoing conditions, the Lessor shall transfer to or at the
direction of the Lessee without recourse or warranty all of the Lessor's right,
title and interest, if any, in and to (A) the Engine with respect to which such
Event of Loss occurred and furnish to or at the direction of the Lessee, at the
Lessee's expense, a ▇▇▇▇ of sale without warranty other than to the absence of a
Lessor Lien in form and substance reasonably satisfactory to the Lessee,
evidencing such transfer and (B) all claims, if any, against third parties, for
damage to or loss of the Engine subject to such Event of Loss, and such Engine
shall thereupon cease to be a Engine leased hereunder. The Lessee shall
cooperate with the Lessor and take all such actions as shall be requested by the
Lessor so that the Lessor complies with Section 4(f) of the Aircraft Chattel
Mortgage. For all purposes hereof, each such Acceptable Alternate Engine shall,
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Engine." No Event of Loss under the circumstance
contemplated by the terms of this paragraph (a) shall result in any reduction in
Basic Rent or any other obligation of the Lessee hereunder.
(b) With respect to any Engine, as between the Lessor and the Lessee, any
payments on account of an Event of Loss (other than insurance proceeds or other
payments the application of which is provided for in Section 14 below) received
from any governmental authority or other person shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
any Engine that has been or is being replaced by the Lessee pursuant to the
terms hereof, so long as there shall exist no Default or Lease Event of
Default, such payment shall be paid over to or retained by the Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by the Lessor as security for the
obligations of the Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by the Lessee to the Lessor and following the
foregoing application, the balance, if any, of such payments shall be
distributed between the Lessee and the Lessor as their respective interests
may appear;
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(c) In the event of a requisition for use by the United States Government
of any Engine, the Lessee shall promptly notify the Lessor and the Agent of such
requisition and all of the Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by the Lessor or the Lessee from the United States Government for the
use of such Engine, to the extent allocable to the Term, shall be paid over to,
or retained by, the Lessee.
(d) Any amount referred to in this Section 13 that is payable to or
retained by the Lessee shall not be paid to the Lessee or retained by the
Lessee, if at the time of such payment or retention any Default or Lease Event
of Default shall have occurred and be continuing, but shall be held by or paid
over to the Lessor as security for the obligations of the Lessee under the Lease
and shall be applied against the Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Lease Event of
Default, such amount shall be paid to the Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 14. Insurance. (a) The Lessee will at all times carry and maintain
on or with respect to each of the Engines, at its own cost and expense, public
liability (including, without limitation, contractual liability, cargo
liability, passenger legal liability, bodily injury and product liability, but
excluding manufacturer's product liability) and property damage insurance with
insurers of recognized responsibility and reputation in amounts, of the type and
covering the risks customarily carried with respect to similar engines by
corporations engaged in the same or similar business and similarly situated with
the Lessee but in no event in an amount less than $500,000,000 per occurrence
(which shall include war risk, governmental confiscation and expropriation and
allied perils coverage). During any period when any of the Engines are on the
ground and not in operation, the Lessee may in respect of any such Engines carry
or cause to be carried, in lieu of insurance required by this Section, insurance
otherwise conforming with the provisions of this Section except that the amounts
of coverage shall not be required to exceed the amounts of comprehensive airline
liability insurance, and the scope of risk covered and type of insurance shall
be the same, as are customarily carried with respect to similar Engines on the
ground by corporations engaged in the same or similar business and similarly
situated with the Lessee. Any policies of insurance carried in accordance with
this Section 14 and any policies taken out in substitution or replacement of any
such policies (A) shall be amended to name the Agent, the Lenders and the Lessor
and their respective shareholders, directors, officers, members, partners,
servants, employees and agents as additional named insureds, (B) shall be
primary without right of contribution from any other insurance that is carried
by the Lessee, (C) shall expressly provide that all provisions thereof, except
the limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against the Agent, the Lenders and the
Lessor.
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(b) The Lessee will at all times carry and maintain with insurers of
recognized responsibility and reputation on or with respect to the Engines, at
its own cost and expense, aircraft ground and flight all-risk hull insurance as
well as fire and extended coverage insurance on the Engines and other equipment
while removed from any airframe, which shall include war risk, governmental
confiscation and expropriation (other than by the United States Government) and
allied perils (if and to the extent that the same shall be maintained by the
Lessee with respect to similar engines owned or operated by the Lessee on the
same routes or if the Engines or other engines are operated on routes where the
custom is for Domestic Air Carriers similarly situated with the Lessee flying
comparable routes with similar engines to carry such insurance, of the type
usually carried by corporations engaged in the same or similar business and
similarly situated with the Lessee) including (A) strikes, riots, civil
commotions or labor disturbances, (B) any malicious act or act of sabotage and
(C) hijacking (air piracy) or any unlawful seizure or wrongful exercise of
control of the Engine or crew of the aircraft in which such Engine is installed
in flight (including any attempt at such seizure or control) made by any person
or persons aboard such aircraft or another aircraft acting without the consent
of the insured; provided, that such insurance (including any self-insurance to
the extent permitted below) shall at all times be for an agreed value not less
than the greater of the Stipulated Loss Value as of the closest Stipulated Loss
Determinate Date and $50,000,000. During any period when any Engine is on the
ground and not in operation, the Lessee may in respect of any such Engines carry
or cause to be carried, in lieu of the insurance required by this Section,
insurance otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time customarily carried
with respect to similar engines by corporations engaged in the same or similar
business and similarly situated with the Lessee for engines on the ground in an
amount at least equal to the applicable amount provided above. All such
insurance shall name the Agent, the Lenders and the Lessor as additional
insureds and loss payees to the extent that their interest may appear and shall
provide that any loss to any Engine in excess of $2,000,000 (and, if a Default
or Lease Event of Default has occurred and is continuing, any such loss) shall
be payable to the Lessor and to the Agent for the benefit of the Lenders; and
shall be primary without right of contribution from any other insurance that is
carried by the Lessor or the Agent with respect to its interest therein. In the
event that the Lessee arranges separate insurances to cover the all-risk hull
insurance and the war and perils hull insurance, the Lessee shall ensure that
the insurers subscribing to such insurances shall agree to a 50/50 claims
funding arrangement in the event of any dispute as to which insurance is
applicable.
The Lessee may self-insure, by way of deductible or equivalent provisions
in insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
engines in the Lessee's fleet that are of a value comparable to the Engines, and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly
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situated with the Lessee; provided, however, that the Lessee may not self-insure
in an amount in excess of $1,000,000 without the prior written consent of the
Lessor and the Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name the Lessor, the Agent and the
Lenders as additional named insureds, but without the Lessor, the Agent or the
Lenders being thereby liable for premiums (and the insurance companies waiving
their right with respect thereto), (B) provide that in respect of the interest
of (x) the Lessor or (y) the Agent or the Lenders in such policies the insurance
shall not be invalidated by any action or inaction of (x) the Lessee or (y) the
Lessee or the Lessor, respectively, and shall insure the interests of the Agent
and the Lenders regardless of any breach or violation by the Lessee, the Lessor
or any Person (other than the Agent) of any warranty, declaration, condition or
exclusion from coverage contained in such policies, (C) provide that if such
insurance is cancelled, or if any material change is made in the coverage that
affects the interest of the Lessor, the Agent or any Lender, or if such
insurance is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to the Lessor, the Agent or any Lender
for thirty (30) days (seven (7) days, or such shorter or longer period as may
from time to time be customarily available in the industry, in the case of any
war risk and allied perils coverage) after receipt by the Agent and the Lessor
of written notice from such insurers of such cancellation, change or lapse, (D)
be in full force and effect throughout any geographical areas at any time
traversed by any Engine and shall be payable in U.S. dollars, (E) waive any
right of the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise in respect of any liability of the Lessee,
the Lessor or the Agent except in respect of outstanding premium due for the
Engines, (F) waive all rights of subrogation against the Lessor and the Agent
and (G) include a year 2000 date recognition writeback.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of any Engine, a valid agreement by the
United States or such agency or instrumentality to indemnify the Lessee against
the same risks against which the Lessee is required hereunder to insure shall be
considered adequate insurance with respect to such Engine to the extent of the
risks and in the amounts that are the subject of any such agreement to
indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, the Lessee will furnish to the Lessor and the Agent (A) a report
signed by a firm of independent aircraft insurance brokers, appointed by the
Lessee and not objected to by the Lessor or the Agent, describing in reasonable
detail acceptable to the Lessor and the Agent the insurance then carried and
maintained on or with respect to the Engines and stating that in the opinion of
such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of the Lessee, the Lessor and the Agent, and
(B) certificates of the insurer or insurers evidencing the insurance covered by
the report. The Lessee will cause
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such brokers to advise the Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of the
Lessee of which such firm has knowledge and that might invalidate or render
unenforceable, in whole or in part, any insurance on any Engine and (y) at least
thirty (30) days prior to the expiration or termination date, or date of
effectiveness of any material change, of any insurance carried and maintained on
the Engines hereunder.
(f) All insurance payments and other payments received by the Agent, the
Lessor or the Lessee from insurance referred to in paragraph (b) above shall be,
if received by the Lessor or the Lessee, immediately paid to the Agent, as agent
for itself and the Lessor and shall be paid to the Lessee upon compliance by the
Lessee with the terms of Section 13, provided that no Default or Lease Event of
Default shall have occurred and be continuing.
(g) The Lessee shall not create or permit to exist any Lien over the
insurances required by this Lease, or its interest therein, save as constituted
by this Lease and the Credit Agreement.
(h) If at any time the Lessee fails to maintain in full force and effect
insurances in compliance with any provision of this Article 14, the Lessor shall
be entitled but not bound (without prejudice to any other rights that it may
have or acquire under this Lease by reason of such failure) (i) to pay any
premiums due or to effect or maintain insurances satisfactory to the Lessor or
otherwise remedy such failure in such manner as the Lessor considers
appropriate, and the Lessee shall immediately reimburse the Lessor in full for
any amount so expended by the Lessor and/or (ii) at any time while such failure
is continuing, to require any Engine to remain at any airport, or to proceed to
and remain at any airport designated by the Lessor, the Agent or the Lenders,
until such failure is remedied.
(i) Nothing in this Section 14 shall prohibit the Agent, or any Lender or
the Lessor from obtaining insurance with respect to any Engine for its own
account. The Lessee may, at its own expense, carry insurance with respect to its
interest in any Engine in amounts in excess of that required to be maintained by
this Section 14. No insurance maintained by the Agent, the Lessor or any Lender
shall prevent the Lessee from carrying the insurance required or permitted by
this Section. Proceeds of any such insurance carried by the Lessee, the Agent or
any Lender shall be paid as provided in the insurance policy relating thereto
and no such Person shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
the Lessee will not, without the prior written consent of the Lessor, assign any
of its rights hereunder or in any of the Engines. The Lessor agrees that it will
not assign or convey its right, title or interest in or to this Lease or any of
the Engines except in accordance with the Credit Agreement. Subject to the
foregoing, the terms and provisions of this Lease shall be
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binding upon and inure to the benefit of the Lessor and the Lessee and their
respective successors and permitted assigns and shall inure to the direct
benefit of, and shall also be enforceable by, the Agent and the Lenders, and
their respective successors, as assignees of the Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) the Lessee shall fail to pay any installment of Rent, Stipulated
Loss Value or any other amounts owing pursuant to this Lease within 5 days
after the due date thereof;
(b) the Lessee shall fail (i) to comply in any material respect with
the maintenance standards or (ii) to procure insurance coverage as
prescribed herein or (iii) to operate any Engine at a time or in a place
where insurance described in Article 14 shall not be in effect;
(c) there shall exist a Lease Event of Default under, and as defined
in, any other Lease or the Lessee shall fail to perform or observe any
other covenant or condition set forth in this Lease or any other
Transaction Document, which failure shall remain unremedied for a period of
10 Business Days after written notice from the Lessor or the Agent, unless
action has been taken within 15 Business Days to remedy such breach and
such action is being diligently pursued, provided such breach is capable of
being remedied;
(d) any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Lessee or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against the Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the
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premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Lessee
or any of its Subsidiaries, or over all or a substantial part of its
property, shall have been entered; or there shall have occurred the
appointment of an interim receiver, trustee or other custodian of the
Lessee or any of its Subsidiaries; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of the Lessee or any of its subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged;
(f) (i) the Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or the Lessee or
any of its Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) the Lessee or any of its Subsidiaries shall be unable,
or shall fail generally, or shall admit in writing its inability, to pay
its debts as such debts become due; or the Board of Directors of the Lessee
or any of its Subsidiaries (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii);
(g) any order, judgment or decree shall be entered against the Lessee
or any of its Subsidiaries decreeing the dissolution or split up of the
Lessee or any of its Subsidiaries and such order shall remain undischarged
or unstayed for a period in excess of 30 days;
(h) registration of any Engine is canceled and is not cured within 15
Business Days;
(i) any Engine is arrested or detained in exercise of any lien and the
Lessee does not procure the release of such Engine within 15 business days;
(j) there shall have occurred an Event of Default or Potential Event
of Default under the Amended Aircraft Credit Facility (whether or not such
Event of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) the Lessee shall not be a Certificated Air Carrier within the
meaning of Title 49 of the United States Code, as amended;
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(l) the Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by the
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise);
(m) any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against the Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder);
(n) (i) (a) Permitted Holders shall cease to own beneficially and
control shares of capital stock of the Lessee representing at least 30% of
the combined voting power of all Securities of the Lessee entitled to vote
in the election of directors, other than Securities having such power only
by reason of the happening of a contingency, or (b) any Person or any two
or more Persons acting in concert (in any such case, excluding Permitted
Holders) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Exchange
Act), directly or indirectly, of Securities of the Lessee (or other
Securities convertible into such Securities) representing 20% or more of
the combined voting power of all Securities of the Lessee entitled to vote
in the election of directors, other than Securities having such power only
by reason of the happening of a contingency, or
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(c) the Board of Directors of the Lessee shall not consist of a majority of
Continuing Directors or (ii) a "Change of Control" shall occur under any of
the Pass Through Trust Documents, any of the Senior Note Documents or any
other Material Agreement (as in effect on the date of such occurrence);
provided, however, that, following the consummation of the Holding Company
Reorganization, references in clause (i) above to the Lessee shall be
deemed to be references to the Holding Company, and, after the consummation
of the Holding Company Reorganization, it shall also be a Lease Event of
Default if, at any time, the Holding Company ceases to own directly or
indirectly 100% of the outstanding Securities of the Lessee; provided
further, however, that a "Lease Event of Default" under clause (ii) above
arising as a result of the Holding Company Reorganization shall not
constitute a "Lease Event of Default;" provided further, however, that, in
the event that Permitted Holders cease to own 30% of the combined voting
power of all Securities of the Lessee (or the Holding Company, as the case
may be) because of the issuance of Securities of the Lessee, or the Holding
Company, as the case may be, (as opposed to the Permitted Holders selling
Securities), then the failure to maintain the 30% ownership level shall not
constitute a Lease Event of Default unless the Permitted Holders shall
cease to own shares of capital stock constituting 25% of the combined
voting power of all Securities of the Lessee (or the Holding Company, as
the case may be);
(o) if any consent, authorization, license or approval of, or
registration with or declaration to any governmental entity required by the
Lessee to authorize, or required by the Lessee in connection with, the
execution, delivery, validity, enforceability or admissibility in evidence
of this Lease or any other Transaction Document or the performance by the
Lessee of its obligations hereunder or thereunder is modified in a manner
unacceptable to the Lessor or is withheld, or is revoked, suspended,
canceled, withdrawn or terminated or expires and is not renewed, or
otherwise ceases to be in full force and effect and the Lessor reasonably
determines that such modification, withholding revocation, suspension,
cancellation, withdrawal, termination or non-renewal or cessation may
significantly prejudice its rights under or in connection with this Lease,
may have a material adverse effect on the Lessee's ability to perform its
obligations hereunder or jeopardize the respective interests of the Lessor
or any Lender in any of the Engines or may give rise to criminal liability
of or the Lessor;
(p) if any event occurs, circumstance arises or proceeding is taken
with respect to the Lessee in any jurisdiction to which the Lessee is
subject that has an effect equivalent or similar to any of the events
mentioned in Sections 16(e) or (f);
(q) if the Lessee suspends or ceases or threatens to suspend or cease
to carry on its business;
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(r) if the Lessee disposes, threatens to dispose or takes any action
to dispose of all or a material part of its assets, whether by one or a
series of transactions, related or not, and such disposal or action will
have a material adverse effect on its ability to perform its obligations
under this Lease or any other Transaction Document;
(s) if the existence, validity, enforceability or priority of the
rights of the Lessor in respect of any of the Engines hereunder, or the
rights of any Lender, as mortgagee, of any of the Engines or the Lender as
assignee of the insurances are challenged by the Lessee or any other person
claiming through the Lessee;
(t) if the Lessee sells or executes any ▇▇▇▇ of sale affecting any of
the Engines or any interest therein or agrees or purposes to do any of the
same, or contests in any legal proceedings the Lessor's ownership of any of
the Engines;
(u) if any governmental authority shall have condemned, seized or
appropriated all or substantially all of the property of the Lessee; or
(v) if the Lessee becomes obligated to make any "change of control"
put payments in connection with the Holding Company Reorganization that,
when aggregated with all payments made under Section 7(e)(6), exceed
$75,000,000 or if, after giving effect to such "change of control" put
payments, (A) the Lessee shall have less than $150,000,000 in Cash or Cash
Equivalents on its balance sheet or (B) its Consolidated Leverage Ratio
(calculated on a pro forma basis as if the proposed payment had been
consummated on the last day of the most recent four fiscal quarter period)
shall exceed the lower of 4.25:1.00 or the ratio to be met in accordance
with Section 7(f)(ii) for the immediately succeeding fiscal quarter end.
SECTION 17. Remedies. Upon the occurrence of any Lease Event of Default and
at any time thereafter so long as the same shall be continuing, the Lessor may,
at its option, declare, by written notice to the Lessee, this Lease to be in
default, except that upon the occurrence of a Lease Event of Default referred to
in clauses (e), (f) or (g) of Section 16, this Lease shall be deemed declared in
default without any further act or notice, and at any time thereafter, the
Lessor may do one or more of the following with respect to all or any part of
any or all of the Engines as the Lessor in its sole discretion shall elect:
(a) upon the written demand of the Lessor and at the Lessee's expense,
promptly return any Engine as the Lessor may so demand to the Lessor or its
order in the manner and condition required by, and otherwise in accordance
with all the provisions of, Section 8 hereof as if such Engine were being
returned at the end of the Term, or the Lessor, at its option, may enter
upon the premises where all or any part of any Engine is located and take
immediate possession of and remove the same by
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summary proceedings or otherwise, all without liability accruing to the
Lessor for or by reason of such entry or taking of possession or removal,
whether for the restoration of damage to property caused by such action or
otherwise; provided, that if the Lessee shall for any reason fail to
execute and deliver instruments deemed necessary or advisable by the Lessor
to obtain possession of any of the Engines, the Lessor shall be entitled,
in a proceeding (which proceeding may be done on an ex parte basis without
notice to the Lessee), to a preliminary injunction granting the Lessor the
right to possess the Engines without having to post a bond or provide any
other type of security and to a final judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
the Lessee to execute and deliver such instruments to the Lessor;
(b) sell any Engine at public or private sale, as the Lessor may
determine, or otherwise dispose of, hold, use, operate, lease to others or
keep idle any Engine as the Lessor, in its sole discretion, may determine,
all free and clear of any rights of the Lessee, except as hereinafter set
forth in this Section 17, and without any duty to account to the Lessee
with respect to such action or inaction;
(c) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) or
(b) above with respect to the Engine, the Lessor, by written notice to the
Lessee specifying a payment date, may demand that the Lessee pay to the
Lessor, and the Lessee shall pay the Lessor, on the payment date so
specified, any Basic Rent due on or before the payment date so specified
plus, as liquidated damages for loss of a bargain and not as a penalty (in
lieu of the installments of Basic Rent for the Engines due after the date
specified in such notice if any), an amount equal to the Stipulated Loss
Value for the Engines computed as of the immediately preceding Stipulated
Loss Determination Date, together with interest, if any, at the Past Due
Rate on the amount of such Basic Rent and Stipulated Loss Value from the
Stipulated Loss Determination Date as of which Stipulated Loss Value is
computed until the date of actual payment; and upon such payment of
liquidated damages and all Supplemental Rent then due and payable by the
Lessee hereunder, the Lessor shall transfer (without any representation,
recourse or warranty whatsoever) the Engines to the Lessee and the Lessor
shall execute and deliver such documents evidencing such transfer and take
such further action as the Lessee shall reasonably request to effect such
transfer;
(d) in the event that the Lessor, pursuant to paragraph (b) above,
shall have sold any of the Engines, the Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to the Engines, may, if it
shall so elect, demand that the Lessee pay the Lessor, and the Lessee shall
pay to the Lessor, on the date of such sale, any accrued rent with respect
to the Engines due on or prior to such date plus, as liquidated
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damages for loss of a bargain and not as a penalty, the amount of any
deficiency between the net proceeds of such sale (after deduction of all
reasonable costs of sale) and the Stipulated Loss Value of such the
Engines, computed as of the date of such sale together with interest, if
any, on the amount of such deficiency, at the Past Due Rate, from the date
of such sale to the date of actual payment of such amount;
(e) the Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) the Lessor may exercise any other right or remedy which may be
available to it under applicable law.
In addition, the Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies and for all reasonable legal fees and other costs and expenses incurred
by the Lessor and the Agent and any Lender (including reasonable allocated time
charges of internal counsel for the Lender) in connection with the Lease Event
of Default, the exercise of remedies and the return of any Engine in accordance
with the terms of Section 8 hereof or in placing such Engine (which for purposes
hereof, shall include, without limitation, all logs, manuals and data and
inspection, maintenance, modification and overhaul and similar records with
respect thereto) in the condition and airworthiness required by such Section.
The Lessee hereby acknowledges that it shall be directly liable for such costs
and expenses to any Person designated by the Lessor, the Agent or any Lender (as
the case may be) to provide services in connection with or to effect the return
of any Engine in accordance with the terms of Section 8 hereof or in placing
such Engine (which for purposes hereof shall include, without limitation, such
logs, manuals and records) in the condition and airworthiness required by such
Section.
At any sale of any Engine or any part thereof pursuant to this Section 17,
the Lessor or the Agent or any Lender may bid for and purchase such property.
The Lessor agrees to give the Lessee at least 10 days' written notice of the
date fixed for any public sale of any Engine or of the date on or after which
will occur the execution of any contract providing for any private sale. Except
as otherwise expressly provided above, no remedy referred to in this Section 17
is intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to the Lessor at law or in
equity or otherwise; and the exercise or beginning of exercise by the Lessor of
any one or more of such remedies shall not preclude the simultaneous or later
exercise by the Lessor of any or all of such other remedies. No waiver by the
Lessor of any Lease Event of Default shall in any way be, or be construed to be,
a waiver of any future or subsequent Lease Event of Default. To the extent
permitted by applicable law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise that may require the Lessor to sell,
lease, or otherwise use any
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Engine or any part thereof in mitigation of the Lessor's damages as set forth in
this Section 17 or that may otherwise limit or modify any of the Lessor's rights
and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to any Engine or other Obligations (other than principal
and interest on Loans relating to aircraft or other spare engines) are
outstanding under the Credit Agreement, all rights of the Lessor under this
Section 17 shall be exercised only by the Agent as assignee of the Lessor's
rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, the Lessee (at its expense), unless such supplement or
amendment relates solely to the assignment of all or any portion of the Lessor's
interest hereunder, will cause such Lease Supplement (and, in the case of the
initial Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Engines. In addition, the Lessee at its
expense will promptly and duly execute and deliver to the Lessor and the Agent
such further documents and take such further action as the Lessor and the Agent
may from time to time reasonably request in order more effectively to carry out
the intent and purpose of this Lease and the other Transaction Documents and to
establish and protect the rights and remedies created or intended to be created
in favor of the Lessor and the Agent hereunder and under the other Transaction
Documents, including, without limitation, if requested by the Lessor and the
Agent, the execution and delivery of supplements or amendments hereto, at the
expense of the Lessee, each in recordable form, and all financing statements and
continuation statements, and all similar notices required by applicable law at
all times to be kept recorded and filed in such manner and such places as the
Lessor and the Agent may reasonably request.
(b) The Lessee agrees at its own expense to furnish to the Lessor and the
Agent promptly after execution and delivery of any supplement and amendment
hereto, an opinion of counsel satisfactory to the Lessor and the Agent (which
may include the Lessee's general counsel) stating that, in the opinion of such
counsel, such supplement or amendment to the Lease (or a financing statement,
continuation statement or similar notice thereof if and to the extent permitted
or required by applicable law) has been properly recorded or filed for record in
all public offices in which such recording or filing is necessary to protect the
right, title and interest of the Lessor hereunder and the Agent under the Loan
Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received,
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(b) if given by certified mail, three Business Days after being deposited in the
United States mail, with appropriate postage prepaid, (c) if given by telex,
upon receipt by the party transmitting the telex of such party's answerback code
at the end of such telex (receipt of confirmation in writing not being necessary
to the effectiveness of any telex) and (d) if given by overnight service or
other means, when received or personally delivered, addressed:
(i) if to the Lessee, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Counsel, or to such other address as the Lessee shall from time
to time designate in writing to the Lessor; and
(ii) if to the Lessor, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or to such other address as the Lessor
shall from time to time designate in writing to the Lessee, with a copy to
the Agent at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations to pay
Rent and all other amounts payable hereunder shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
that the Lessee may have against the Lessor, the Agent, the Lenders, any
manufacturer, any supplier or any other Person for any reason whatsoever, (ii)
any defect in the title, airworthiness, eligibility for registration under Title
49 of the United States Code, as amended, or other applicable law, condition,
design, compliance with specifications, operation or fitness for use of, or any
damage to or loss or destruction of, the Engines, or any theft, interference,
interruption or cessation in or prohibition of the use or possession thereof by
the Lessee or any sublessee for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority or any other Person, (iii)
any Liens, encumbrances or rights of any other Person with respect to the
Engines, (iv) the invalidity or unenforceability or lack of due authorization or
other infirmity of this Lease or any other Transaction Document or document or
instrument executed pursuant hereto or thereto, or any lack of right, power or
authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to any Engine or
any Part, (vi) any insolvency, bankruptcy, reorganization or similar proceedings
by or against the Lessee or any other Person, or (vii) any failure, breach or
delay by the Lessor or any other Person in performing or complying with any term
of this Lease or any other cause whether similar or dissimilar to the foregoing,
any present or future law notwithstanding, it being the intention of the parties
that all Rent payable by the Lessee hereunder shall continue to be payable in
all events in the manner and at the times provided herein. Such Rent shall not
be subject to any abatement and the payments thereof shall not be subject to any
setoff or any reduction for any reason whatsoever, including any present or
future claims of the Lessee against the Lessor or any other
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Person under this Lease or otherwise. The Lessee hereby waives, and hereby
agrees to waive at any future time at the request of the Lessor, to the full
extent now or then 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 Lease except in
accordance with the express terms hereof. Each payment of Rent made by the
Lessee to the Lessor shall be final as to the Lessor and the Lessee. The Lessee
will not seek to recover all or any part of any such payment of Rent from the
Lessor for any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent, as
assignee of the Lessor's right under this Lease pursuant to the Aircraft Chattel
Mortgage, shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Engines and Parts as provided herein,
and in any circumstances where more than one construction of the terms and
conditions of this Lease is possible, a construction that would preserve such
benefits shall control over any construction that would not preserve such
benefits or would render them doubtful. To the extent consistent with the
provisions of 11 U.S.C. ss. 1110 or any analogous section of the federal
bankruptcy laws, as amended from time to time, it is hereby expressly agreed,
that notwithstanding any other provisions of the federal bankruptcy law, as
amended from time to time, any right of the Lessor and the Agent, as assignee of
the Lessor under the Aircraft Chattel Mortgage, to take possession of the
Engines in compliance with the provisions of this Lease shall not be affected by
the provisions of 11 U.S.C. ss. 362 or ss. 363, as amended from time to time, or
any analogous provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and the Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code, and neither the Lessor nor
the Lessee shall file any tax returns in a manner or take any other action or
position inconsistent with the foregoing or with the Lessor's ownership of the
Engines. Nothing contained in this Lease shall be construed as conveying to the
Lessee any right, title or interest in the Engines except as a Lessee only. The
Engines shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, the Lessee shall have the option to purchase the Engines at the
end of the Term for a purchase price equal to the higher of the Fair Market
Sales Value (assuming that the Engines are in the condition required by the
Lease) as of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by the Lessee of the full of such
amounts, the Lessor shall convey to the Lessee all right, title and
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interest of the Lessor in and to the Engines on an "as-is, where is" basis,
without recourse or warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, the Lessee shall be required to give not less than 90 days (but not
more than 360 days) irrevocable prior written notice to the Lessor. The Lessee
will give the Lessor prior written irrevocable notice not less than 90 days (but
not more than 360 days) before the expiration of the Term of its determination
to return the Engines and not exercise any purchase option under this Section
21. If the Lessee fails to give notice as required herein, the Lessee will be
deemed to have elected to return the Engines to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If the Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to perform
or comply with any of its agreements contained herein, then the Lessor may
itself make such payment or perform or comply with such agreement but shall not
be obligated hereunder to do so, and the amount of such payment and the amount
of the reasonable expenses of the Lessor incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, together with interest thereon at the Past Due Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand.
SECTION 23. Miscellaneous. (a) Any provision of this Lease that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the Lessor, the Lessee and the Agent. This
Lease shall constitute an agreement of lease, and nothing contained herein shall
be construed as conveying to the Lessee any right, title or interest in the
Engines except as a lessee only. Neither the Lessee nor any Affiliate of the
Lessee will file any tax returns in a manner inconsistent with the foregoing
fact or with the Lessor's ownership of the Engines or with the parties'
agreement that this Lease be treated as a tax lease for purposes of the Internal
Revenue Code. The section and paragraph headings in this Lease and the table of
contents are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof and all reference herein
to numbered sections, unless otherwise indicated, are to sections of this Lease.
THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. EACH OF THE LESSEE
AND THE LESSOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
IT IS A PARTY INVOLVING, DIRECTLY OR INDI-
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RECTLY, ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE OR ANY OTHER
TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND
WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER
THE PAYMENT, OBSERVANCE OR PERFORMANCE OF THE LESSEE'S OR THE LESSOR'S
OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This Lease may
be executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
(c) The time stipulated in this Lease for all payments and notices by the
Lessee to the Lessor and for the performance of the Lessee's other obligations
under this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent each of the Engines, subject to the reservations
and conditions therein set forth. All rights of the Lessor hereunder are subject
to the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so
long as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments, (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. The
Lessee hereby acknowledges due notice of, and consents to, such assignment and
to the creation of such mortgage and security interest. To the extent, if any,
that this Lease and any Lease Supplement constitutes chattel paper (as such term
is in effect in any applicable jurisdiction), no security interest in this Lease
or any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
(Remainder of page intentionally left blank)
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IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Lease
to be duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING III, INC.,
Lessor
By:
---------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By:
---------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of April, 2000.
BANKERS TRUST COMPANY,
as Agent
By:
---------------------------------
Name:
Title:
