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LEASE AGREEMENT
(N527MC)
DATED AS OF APRIL 25, 2000
BETWEEN
ATLAS FREIGHTER LEASING III, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
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One Boeing B747-2D7B Aircraft
U.S. Registration No. N527MC
Manufacturer's Serial No. 22471
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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
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SECTION 1. Definitions..............................................................................1
SECTION 2. Acceptance and Lease....................................................................21
SECTION 3. Term and Rent...........................................................................22
(a) Term and Basic Rent............................................................22
(b) Adjustments to Basic Rent......................................................22
(c) Supplemental Rent..............................................................22
(d) Payments in General............................................................23
(e) Minimum Rent...................................................................23
(f) Prepayment of Rent Payments....................................................24
SECTION 4. Certain Representations and Warranties..................................................24
SECTION 5. Lessee's Representations and Warranties.................................................25
SECTION 6. Lessee's Affirmative Covenants..........................................................31
SECTION 7. Lessee's Negative Covenants.............................................................38
SECTION 8. Return of the Aircraft..................................................................50
(a) Condition Upon Return..........................................................50
(b) Overhaul and Repair............................................................51
(c) Repairs........................................................................51
(d) Modifications..................................................................51
(e) Airworthiness Directives.......................................................51
(f) Return of the Engines..........................................................51
(g) Deferred Maintenance...........................................................52
(h) Corrosion Treatment............................................................52
(i) Manuals........................................................................52
(j) Storage Upon Return............................................................52
(k) Severable Parts................................................................52
(l) Survival.......................................................................53
(m) Deregistration and Export......................................................53
SECTION 9. Liens...................................................................................53
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Page
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SECTION 10. Registration, Maintenance and Operation; Possession and Subleases; Insignia.............54
(a) Maintenance and Operation......................................................54
(b) Possession.....................................................................55
(c) Insignia.......................................................................58
(d) Holding Out....................................................................58
(e) No Pledging of Credit..........................................................58
(f) Title..........................................................................58
(g) Information and Records........................................................59
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and Additions..............60
SECTION 12. Indemnities.............................................................................62
SECTION 13. Event of Loss...........................................................................63
SECTION 14. Insurance...............................................................................65
SECTION 15. Assignment..............................................................................68
SECTION 16. Events of Default.......................................................................68
SECTION 17. Remedies................................................................................72
SECTION 18. Lessee's Cooperation Concerning Certain Matters.........................................75
SECTION 19. Notices.................................................................................76
SECTION 20. Net Lease, True Lease, etc..............................................................76
SECTION 21. Purchase Option.........................................................................77
(a) Purchase Option................................................................77
(b) Notice of Purchase.............................................................78
SECTION 22. Lessor's Right to Perform for Lessee....................................................78
SECTION 23. Miscellaneous...........................................................................78
SECTION 24. Security for Lessor's Obligations.......................................................79
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SCHEDULES
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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
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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 Aircraft 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 Aircraft to be leased pursuant to the terms of
this Lease and other similar 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. All capitalized terms used herein shall have the respective
meanings set forth in this section.
"ACCEPTABLE ALTERNATE AIRFRAME" means a Boeing 747-200 that is in a
cargo configuration capable of immediate operation in the business of the Lessee
and has a maximum gross takeoff weight of at least 800,000 pounds and is of the
equivalent or greater residual value, condition, utility, airworthiness, and
remaining useful life and that 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 airframe.
"ACCEPTABLE ALTERNATE ENGINE" means a General Electric CF6-50E2 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 the Airframe; provided, that such engine
shall be of the same make, model and manufacturer as the other engines installed
on the Airframe, shall be an engine of a type then being utilized by Lessee on
other Boeing 747-200 aircraft operated by 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.
"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
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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.
"AIRCRAFT" means the Airframe together with the four Engines, whether
or not such Engines are installed on the Airframe or any other airframe.
"AIRCRAFT CHATTEL MORTGAGE" means each Security Agreement and Aircraft
Chattel Mortgage entered into in connection with the Credit Agreement.
"AIRFRAME" means (i) the Boeing aircraft Model 747-200 (excluding
Engines or engines from time to time installed thereon) specified by the United
States Registration Number and manufacturer's serial number in the Lease
Supplement and (ii) any and all Parts that are from time to time incorporated or
installed in or attached thereto or that have been removed therefrom, but where
title to which remains vested in the Lessor in accordance with this Lease.
"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 & Xxxxxxx, Inc., Xxxxxx Xxxxx & Xxxxx, 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
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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.
"BASIC RENT" means, for the Term, the rent payable for the Aircraft
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 Xxxxx'x; (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
Xxxxx'x; (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 Xxxxx'x.
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"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.
"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
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(ii) Consolidated Adjusted EBITDA plus Consolidated Rental Payments for the four
fiscal quarter period ending as of such date.
"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
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of credit issued for the account of that Person or as to which that Person is
otherwise liable for 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.
"DEFAULT" means any event that, with the giving of notice or the lapse
of time or both, would become a Lease Event of Default.
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"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 four General Electric CF6-50E2 aircraft
engines listed in the initial Lease Supplement, whether or not from time to time
installed on the Airframe or any other airframe; (ii) any Acceptable Alternate
Engine that may from time to time be substituted for any of such four engines
pursuant to the terms of the 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.
"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.
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"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 the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft 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
Aircraft, (B) the destruction, damage beyond repair or rendition of such
Aircraft 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 use by the United States Government if the Lessee
obtains adequate compensation from the United States Government) of such
Aircraft, (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
Aircraft 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
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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 Aircraft, 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 Aircraft, 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 Aircraft on the
basis of an actual or constructive total loss or (G) a divestiture of such
Airframe as described in Section 4(d)(iii) or Section 4(d)(vi) of any Aircraft
Chattel Mortgage under the Credit Agreement. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe of the Aircraft.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"FAIR MARKET SALES VALUE" of the Airframe or any Engine or Spare 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 Aircraft, Airframe or 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
Aircraft 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 Xxxxx 00, Xxxxxx Xxxxxx Code, or any similar
legislation of the United 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.
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"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
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxxxx Xxxxxx.
"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.
"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.
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"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.
"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.
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"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 Aircraft under and pursuant to the terms of the
Lease, and any subsequent Lease Supplement entered into in accordance with the
terms of the Lease.
"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.
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"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 the
Aircraft 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 the Aircraft, the
Airframe, 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 the
Aircraft, the Airframe, 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 the Aircraft (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 Aircraft.
"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.
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"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 Xxxxx'x 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 (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
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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
complete Engines, Spare Engines or engines, that are from time to time
incorporated or installed in or attached to the Airframe or 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.
"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
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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;
(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.
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"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 Xxxxxxx X. Xxxxxxx, 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.
"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
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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-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 oth
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erwise 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 relating 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.
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"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 Aircraft 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 Aircraft 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.
"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 Aircraft is 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 Aircraft and
certain other aircraft and spare engines 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 Aircraft and any part thereof
and any other assets of the Lessor.
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"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, the Aircraft as evidenced by the execution by the
Lessor and the Lessee of a Lease Supplement leasing the Aircraft hereunder. The
Lessee agrees to appoint in writing one or more of its employees as its
authorized representative to accept delivery of the Aircraft 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 Aircraft 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
Aircraft 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 Sup-
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plemental 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 Aircraft and (II) fall due on any day which
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
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
000 Xxxxxxx Xxxxx, Xxxxxx, XX 00000, Attention: Xxxxxxx X. Xxxxxxx (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 Aircraft and
other unpaid Obligations (other than principal and interest on other Loans
relating to other aircraft or 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
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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 Aircraft 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 Aircraft and
all other unpaid Obligations of the Lessor (other than principal and
interest on Loans relating to other aircraft or 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 Aircraft 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 Aircraft 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,
independ-
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ent 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) THE
AIRFRAME AND EACH ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO THE LESSEE AND THE LESSEE TAKES THE SAME "AS IS,"
(B) THE LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE ARE 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 THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, 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 THE AIRCRAFT 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 Aircraft 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 the Airframe, Engines 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 the Aircraft 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
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any such subcontractor or supplier with respect to the Aircraft, 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 properties, 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.
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(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 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.
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(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 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
state-
-28-
ments 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.
(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.
(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 Indebted-
-29-
ness 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.
(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.
-30-
(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.
(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 the Aircraft 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 the Aircraft 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 Aircraft 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 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000, and the records of
the Lessee concerning the Aircraft are maintained at such chief executive
office or at the operations center at XXX Xxxxxxxxxxxxx Xxxxxxx, Xxxxxxxx
000, Xxxxxxx, Xxx Xxxx 00000, where the Lessee normally maintains aircraft
records.
SECTION 6. Lessee's Affrimative 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.
-31-
(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 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, 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 Xxxxxx Xxxxxxxx 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
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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);
(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;
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(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 independent 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;
(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
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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 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
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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 Xxxxx'x 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 Xxxxx'x, 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
(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.
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(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, 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 the Aircraft or any part
thereof and any Engine, 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
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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 Airframe
maintenance visit, APU shop visit, landing gear shop visit or 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 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
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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
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
transaction in which Permitted Extension Indebtedness is incurred with
respect to any Financed Aircraft, the
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cash proceeds from such Permitted Extension Indebtedness are sufficient
to repay in full the Indebtedness associated with such Financed
Aircraft;
(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 Lien on or with respect to any property or asset of any
kind (including any document or instrument in
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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:
(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;
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(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;
(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;
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(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;
(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
-43-
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
----------------------------- ---------------------------
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
----------------------------- ---------------------------
December 31, 2003 2.75:1.00
----------------------------- ---------------------------
March 31, 2004 2.75:1.00
----------------------------- ---------------------------
June 30, 2004 2.75:1.00
----------------------------- ---------------------------
-44-
=========================================================
FISCAL QUARTER MINIMUM INTEREST
ENDING COVERAGE RATIO
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
----------------------------- ---------------------------
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
------------------------------ ---------------------------
-45-
==========================================================
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
============================== ===========================
(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
------------------------------- --------------------------------
-46-
=============================== ================================
MINIMUM CONSOLIDATED
PERIOD NET WORTH
=============================== ================================
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
------------------------------- --------------------------------
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
=============================== ================================
-47-
(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 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
acquisi-
-48-
tion 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 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.
-49-
(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
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).
(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
-50-
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.
(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 Aircraft.
(a) Condition Upon Return. Unless the Aircraft has been sold
pursuant to Section 21, if at any time the Lessee shall return the Aircraft to
the Lessor hereunder, the Lessee, at its own expense, will return the Aircraft
to the Lessor at a location specified by the
-51-
Lessor to the Lessee in writing. At the time of such return, (i) the Lessee will
cause the Aircraft to be in compliance with the maintenance covenants contained
in this Lease and (ii) the Airframe will be fully equipped with the Engines
installed thereon.
At the time of such return, such Airframe and Engines (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) in the
case of the Aircraft, shall be in a full freighter configuration and 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 Aircraft shall
not have been discriminated against as compared to other aircraft 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 Airframe, 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 Aircraft 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 Aircraft 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.
(e) Airworthiness Directives. All FAA Airworthiness Directives
and amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, 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 with the returned Airframe, 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) xxxx of sale
with respect to each such Acceptable Alternate Engine, in form
-52-
and substance reasonably satisfactory to the Lessor (together with an opinion of
counsel to the effect that such full warranty xxxx of sale has been duly
authorized and delivered and is enforceable in accordance with its terms and
that such Acceptable Alternate Engines are free and clear of all Liens) against
receipt from the Lessor of a xxxx 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 not installed on the
Airframe at the time of the return of the Airframe.
(g) Deferred Maintenance. There shall be no open, outstanding
or deferred maintenance items, scheduled or unscheduled, against the Aircraft
including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft
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 Aircraft 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 Aircraft and Parts under FAA rules and the Aircraft 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 Aircraft 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 the Aircraft
upon its return hereunder, the Lessee will provide the Lessor, or cause the
Lessor to be provided, with storage facilities for the Aircraft 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 the Aircraft 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 parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be
returned to the Lessor, the Lessee shall, at the Lessor's request, advise the
Lessor of the nature and condition
-53-
of all severable nonproprietary Parts (other than Parts otherwise required by
Sections 10 or 11 to be maintained on the Aircraft) owned by the Lessee have
been used by the Lessee during the prior six months and that the Lessee has or
intends to remove from the Aircraft 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 the Aircraft 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 the Aircraft (subject to the Lessor giving, or
procuring that any mortgagee of the Aircraft 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 Aircraft
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
the Aircraft from the state of registration or such other country in
which the Aircraft 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 the Airframe, Engines or any Part; and
(iii) provide to the Lessor such assistance with respect to
information and documentation as the Lessor may reasonably require so
as to enable the Aircraft 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 the
Aircraft, 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.
-54-
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 Aircraft 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 the Airframe and each Engine,
install replacement equipment and parts on the Airframe and each Engine and
maintain the Technical Records (A) so as to keep the Airframe and each Engine in
such operating condition as may be required to permit the Airframe and each
Engine to be utilized in commercial operations in the United States, (B) so as
to enable the airworthiness certification of the Airframe to be maintained in
good standing at all times under the Federal Aviation Act, except when aircraft
of the same type, model or series as the Airframe (powered by engines of the
same type as those with which the Airframe shall be equipped at the time of
grounding) registered in the United States have been grounded by the FAA;
provided, however, that if, following its issuance, the United States FAA
airworthiness certificate of the Aircraft shall be withdrawn, then, subject to
the provisions of Section 13 hereof, so long as the Lessee is diligently taking
or causing to be taken all necessary action promptly to correct the condition
that caused such withdrawal, no Lease Event of Default shall arise from such
withdrawal, (C) 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 aircraft and
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, (D)
in such manner as may be necessary to maintain in full force all warranties of
the manufacturers thereof, and (E) to enable the Lessee to deliver the Aircraft
to the Lessor in accordance with Section 8. The Lessee shall maintain all
records, logs and other materials that may be required to permit the Airframe
and 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 Lease and the rules and
regulations of the FAA from time to time in force and applicable to the Aircraft
and Engines. Neither the Airframe nor any 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 airworthi-
-55-
ness certificate, license or registration relating to the Airframe or such
Engine issued by any such authority, and in the event that such laws, rules,
regulations or orders require alteration of the Airframe or 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 Aircraft
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
similarly situated to the Lessor.
The Lessee will not operate, use or locate the Airframe or 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
the Airframe or 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 the Airframe or 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 the Airframe or 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 the Aircraft 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 Aircraft or for the purpose of carriage of goods of any
description excepted from such insurance nor do, or permit 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
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relinquish possession or control of, or transfer the right, title or interest of
the Lessee in, the Airframe or 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
Aircraft and shall not deprive the Agent of the protections of Section 1110 of
the Bankruptcy Code with respect to the Aircraft as assignee of the Lessee's
rights under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or 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 the Airframe or 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, use for the remainder of its useful life, or registration of the
Airframe or 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 the Airframe or 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 the
Airframe or such Engine and the Lessee shall comply with Section 13 in
respect thereof;
(iv) install an 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 not contemplate or require the transfer of title to such airframe or
the engines installed thereon;
(v) install an 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
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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 an 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 the Airframe
and the Engines or engines installed thereon with any third party
pursuant to which the Lessee has operational control of the Airframe
and any Engines installed thereon, 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) sell the Aircraft in accordance with Section 6.6(ii) of
the Credit Agreement or replace the Airframe or 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 the Airframe or 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
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 the Airframe or such Engine, and
any such instrument of transfer shall expressly prohibit any further transfer of
the Airframe or such Engine or any assignment of the rights thereunder;
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and provided further, that no such lease, pooling arrangement or other transfer
or relinquishment of the possession of the Airframe or 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 the Airframe and each Engine to be legibly marked (in a reasonably
prominent location, which in the case of the Airframe shall be adjacent to the
airworthiness certificate) 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 the Airframe or 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 the
Airframe or 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 the Airframe, 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, the Airframe, any Engine or any
Part, or for any other purpose whatsoever.
(f) Title. Title to the Aircraft 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,
the Aircraft and shall cause to be taken all actions necessary or reasonably
requested by the Lessor to prevent the rights of the Lessor and the Lenders in
the Aircraft from being jeopardized. The Lessee shall not hold itself out to any
third party as the owner of the Aircraft or any part of it, and when any third
party inquires as to ownership of the Aircraft or 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 the Aircraft is mortgaged to the Lenders. Without
limiting the
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foregoing, if at any time subsequent to the initial registration of the
Aircraft, 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 the Aircraft 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
Aircraft under Section 8 or any sublease of the Aircraft, (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 the Aircraft,
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 flights made by the Aircraft, of all Flight Hours and
Cycles of the Airframe, each Engine, the APU, the landing gear and the
Parts, and of all maintenance and repairs carried out on the Aircraft
and 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 not installed on the Aircraft,
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 the Aircraft, 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 the
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Aircraft or any Engine, (II) any loss, theft, damage or destruction to
the Aircraft or any Engine or any part thereof if the potential cost of
repairs or replacement may exceed $5,000,000, (III) any loss, arrest,
hijacking, confiscation, seizure, requisitioning, impounding, taking in
execution, detention or forfeiture of the Aircraft or any part thereof
and (IV) any event in respect of the Aircraft 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 the
Airframe or any Engine and which may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. 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 the Airframe or 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 the Airframe or 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 the
Airframe or 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
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such 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 the Airframe or 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,
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insolvency, or similar proceeding, voluntary or involuntary; provided, that the
Part replacing such removed Part shall be incorporated or installed in or
attached to the Airframe or 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 the Airframe
or 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 Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or 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 Aircraft).
(c) The Lessee, at its own cost and expense, shall make or
cause to be made such alterations and modifications in and additions to the
Airframe and 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 Airframe and 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 the Airframe or 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 the Airframe
and 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 the Airframe
or such Engine below the value, utility, condition or airworthiness thereof
immediately prior to such alteration, modification or addition, assuming that
the Airframe or such Engine were then in the condition and airworthiness
required to be maintained by the terms of this Lease.
(d) All Parts incorporated or installed in or attached to or
added to the Airframe or 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 the Airframe or such Engine on the date hereof, or
any Part in replacement of or substitution for any such
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Part, (B) is not required to be incorporated or installed in or attached or
added to the Airframe or 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 the Airframe or such Engine without diminishing or
impairing the value, utility or airworthiness that the Airframe or such Engine
would have had at such time had such alteration, modification or addition not
occurred, assuming that the Airframe or 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, the
Airframe or any Engine, (ii) any grounding of the Aircraft, (iii) suspension of
certification of the Aircraft, 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 the Airframe 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)
the Airframe or 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 the Airframe or 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, 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, penal-
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ties, 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 an Airframe or an 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 Airframe or
Acceptable Alternate Engine, as the case may be. 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) xxxx of sale,
from a person and in form and substance reasonably satisfactory to the Lessor,
with respect to such Acceptable Alternate Airframe or Acceptable Alternate
Engine, (ii) cause a Lease Supplement to be filed for recording pursuant 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 Airframe or
Acceptable Alternate Engine and of compliance with the insurance provisions of
Section 14 hereof with respect to such Acceptable Alternate Airframe or
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 Airframe or 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 Aircraft. 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
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(A) the Airframe or 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 xxxx 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
Airframe or Engine subject to such Event of Loss, and such Airframe or Engine
shall thereupon cease to be an Airframe or 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
Airframe or Acceptable Alternate Engine shall, after such conveyance, be deemed
part of the property leased hereunder, and shall be deemed an "Airframe" or
"Engine," as the case may be. 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 the Airframe or 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 an Airframe or 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;
(c) In the event of a requisition for use by the United States
Government of the Airframe or 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 the Airframe or 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
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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 the Aircraft, 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 aircraft 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 the Aircraft is on the ground
and not in operation, the Lessee may 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 aircraft 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.
(b) The Lessee will at all times carry and maintain with
insurers of recognized responsibility and reputation on or with respect to the
Aircraft, 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 the 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 aircraft owned or operated by
the Lessee on the same routes or if the Aircraft or another aircraft is operated
on routes where the custom is for Domestic Air Carriers similarly situated with
the Lessee flying comparable routes with similar aircraft to carry such
insurance, of the type usually carried by corporations engaged in the same or
simi-
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lar 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 Aircraft or crew in flight (including any attempt at
such seizure or control) made by any person or persons aboard the 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 the Aircraft is on the ground and not in operation, the
Lessee may 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 aircraft by corporations engaged in
the same or similar business and similarly situated with the Lessee for aircraft
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 the Airframe or an 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 aircraft or spare engines in the Lessee's fleet that are of a
value comparable to the Aircraft, and as are not substantially greater than
amounts self-insured by corporations engaged in the same or similar business and
similarly 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
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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 the Aircraft 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 Aircraft, (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 the Airframe or 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 the Airframe or 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 Aircraft and 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 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 the Aircraft or 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 Aircraft
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.
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(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 the Aircraft 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 the Aircraft
for its own account. The Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft in amounts in excess of that required to
be maintained by this Section 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 the Aircraft. The Lessor agrees
that it will not assign or convey its right, title or interest in or to this
Lease or the Aircraft except in accordance with the Credit Agreement. Subject to
the foregoing, the terms and provisions of this Lease shall be 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;
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(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 the Aircraft or 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
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
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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 the Aircraft is canceled and is not cured
within 15 Business Days;
(i) the Aircraft is arrested or detained in exercise of any
lien and the Lessee does not procure the release of the Aircraft 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;
(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);
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(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 (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 re-
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quired 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 unaccept-
able 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 the Aircraft or may give rise
to criminaliability 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;
(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 the Aircraft hereunder, or the
rights of any Lender, as mortgagee, of the Aircraft 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 xxxx of sale affecting
the Aircraft 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 the Aircraft;
(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)
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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 the Aircraft, Airframe and 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 the Aircraft, Airframe or 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 Airframe or 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 the Aircraft,
Airframe or any Engine is located and take immediate possession of and
remove the same by 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 the
Aircraft, Airframe and 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 Aircraft 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 the Aircraft, Airframe or 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 the Aircraft, Airframe
or 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 Aircraft, 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 speci-
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fied plus, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the installments of Basic Rent for the Aircraft due
after the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft 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 Aircraft 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 the Aircraft, the Lessor, in lieu of exercising
its rights under paragraph (c) above with respect to such Aircraft,
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 Aircraft due on or prior to such date
plus, as liquidated 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 Aircraft, 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 the Airframe or any Engine in accordance with the terms of Section 8
hereof or in placing such Airframe or 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 the Airframe or
any Engine in accordance with the terms
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of Section 8 hereof or in placing such Airframe or 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 the Aircraft 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 Airframe or 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 the Aircraft, Airframe or
any 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 the Aircraft or other Obligations
(other than principal and interest on Loans relating to other aircraft or 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 Aircraft. 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
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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, (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 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx
00000, 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 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx
00000, Attention: Xx. Xxxxxxx X. Xxxxxxx, 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 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxxxxxx Xxxxxx.
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 Aircraft, 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, en-
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cumbrances or rights of any other Person with respect to the Aircraft, (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 the Aircraft, Airframe, 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 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.
Section 1110 or any analogous section of the Federal bankruptcy laws, as amended
from time to time with respect to the right to repossess the Airframe, 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. Section 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 Aircraft in compliance with the provisions
of this Lease shall not be affected by the provisions of 11 U.S.C. Section 362
or Section 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
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returns in a manner or take any other action or position inconsistent with the
foregoing or with the Lessor's ownership of the Aircraft. Nothing contained in
this Lease shall be construed as conveying to the Lessee any right, title or
interest in the Aircraft except as a Lessee only. The Aircraft 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
Aircraft at the end of the Term for a purchase price equal to the higher of the
Fair Market Sales Value (assuming that the Aircraft 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 interest of the Lessor in and to the Aircraft 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 Aircraft 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 Aircraft 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 Aircraft except as a lessee only. Neither the Lessee nor any
Affili-
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ate of the Lessee will file any tax returns in a manner inconsistent with the
foregoing fact or with the Lessor's ownership of the Aircraft 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 INDIRECTLY, 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 the Aircraft, 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
Les-
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see 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:
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