Exhibit 4(a)(3)
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LEASE AGREEMENT
[NW 1997 A]
Dated as of
September 25, 1997
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity, except as expressly
provided herein, but solely as Owner Trustee,
Lessor
AND
NORTHWEST AIRLINES, INC.,
Lessee
One British Aerospace Avro 146-RJ85A Aircraft
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As set forth in Section 20 hereof, Lessor has assigned to the Indenture
Trustee (as defined herein) certain of its right, title and interest in and to
this Lease. To the extent, if any, that this Lease constitutes chattel paper
(as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
thereof.
TABLE OF CONTENTS TO LEASE AGREEMENT
Page
SECTION 1. Definitions.....................................................1
SECTION 2. Acceptance and Lease...........................................16
SECTION 3. Term and Rent..................................................16
(a) Basic Term................................................16
(b) [Intentionally Omitted]...................................16
(c) Basic Rent................................................16
(d) Adjustments to Basic Rent.................................17
(e) Supplemental Rent.........................................18
(f) Payments in General.......................................19
(g) Prepayment of Certain Rent Payments.......................20
SECTION 4. Lessor's Representations and Warranties........................21
SECTION 5. Return of the Aircraft.........................................22
(a) Condition Upon Return.....................................22
(b) Return of the Engines.....................................23
(c) Fuel; Manuals.............................................23
(d) Storage Upon Return.......................................23
SECTION 6. Liens..........................................................24
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia............................................24
(a) Registration and Maintenance..............................24
(b) Possession and Subleases..................................26
(c) Insignia..................................................30
SECTION 8. Replacement and Pooling of Parts; Alterations, Modifications
and Additions..................................................30
(a) Replacement of Parts......................................30
(b) Pooling of Parts..........................................31
(c) Alterations, Modifications and Additions..................31
SECTION 9. Voluntary Termination..........................................32
(a) Termination Event.........................................32
(b) [Intentionally Omitted]...................................33
(c) Optional Sale of the Aircraft.............................33
(i)
(d) Termination as to Engines.................................35
SECTION 10. Loss, Destruction, Requisition, etc............................35
(a) Event of Loss with Respect to the Aircraft................35
(b) Event of Loss with Respect to an Engine...................37
(c) Application of Payments from Governmental Authorities
for Requisition of Title, etc.............................38
(d) Requisition for Use of the Aircraft by the United
States Government or the Government of Registry of the
Aircraft..................................................39
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the
Aircraft..................................................40
(f) Application of Payments During Existence of Event of
Default...................................................40
SECTION 11. Insurance......................................................40
(a) Public Liability and Property Damage Insurance............40
(b) Insurance Against Loss or Damage to the Aircraft..........42
(c) Reports, etc..............................................44
(d) Self-Insurance............................................45
(e) Additional Insurance by Lessor and Lessee.................45
(f) Indemnification by Government in Lieu of Insurance........46
(g) Application of Payments During Existence of an Event of
Default...................................................46
SECTION 12. Inspection.....................................................46
SECTION 13. Assignment.....................................................47
SECTION 14. Events of Default..............................................47
SECTION 15. Remedies.......................................................49
SECTION 16. Lessee's Cooperation Concerning Certain Matters................52
SECTION 17. Notices........................................................53
SECTION 18. No Set-Off, Counterclaim, etc..................................54
SECTION 19. Renewal Options; Purchase Options; Valuation...................55
(a) Renewal Options...........................................55
(b) Purchase Options..........................................56
(c) Valuation.................................................56
(d) Special Purchase Option...................................57
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates...................................................58
SECTION 21. Lessor's Right to Perform for Lessee...........................58
(ii)
SECTION 22. Investment of Security Funds; Liability of Lessor Limited......59
(a) Investment of Security Funds..............................59
(b) Liability of Lessor Limited...............................59
SECTION 23. Service of Process.............................................59
SECTION 24. Miscellaneous..................................................60
SECTION 25. Successor Trustee..............................................60
SECTION 26. Covenant of Quiet Enjoyment....................................60
(iii)
EXHIBITS
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Basic Rent, Excess Amount, Lessor's Cost
and Special Purchase Price Schedule
EXHIBIT C - Stipulated Loss Value Schedule
EXHIBIT D - Termination Value Schedule
EXHIBIT E - Rent Recalculation and Indemnification Verification
EXHIBIT F - Schedule of Domiciles of Permitted Sublessees
EXHIBIT G - Return Conditions
EXHIBIT H - Return Conditions (EBT)
(iv)
LEASE AGREEMENT
[NW 1997 A]
This LEASE AGREEMENT [NW 1997 A], dated as of September 25, 1997,
between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity, except as expressly provided herein, but solely as Owner Trustee under
the Trust Agreement (as defined in Section 1 hereof) (in such capacity,
"Lessor"), and NORTHWEST AIRLINES, INC., a corporation organized and existing
pursuant to the laws of the State of Minnesota ("Lessee");
W I T N E S S E T H:
SECTION 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease Agreement [NW 1997 A] and shall be equally applicable to both the singular
and the plural forms of the terms herein defined:
"Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common
control with such person. For the purposes of this definition,
"control" (including "controlled by" and "under common control with")
shall mean the power, directly or indirectly, to direct or cause the
direction of the management and policies of such person whether
through the ownership of voting securities or by contract or
otherwise.
"Aircraft" means the Airframe to be delivered and leased
hereunder (or any airframe from time to time substituted for such
Airframe pursuant to Section 10(a) hereof) together with the four
Engines initially leased hereunder (or any engine substituted for
either of such Engines pursuant to the terms hereof), whether or not
any of such initial or substituted Engines may from time to time be
installed on such initial or substituted Airframe or may be installed
on any other airframe or on any other aircraft.
"Airframe" means: (i) the British Aerospace Avro 146-RJ85A
aircraft (except Engines or engines from time to time installed
thereon) specified in the initial Lease Supplement, which aircraft
shall be leased by Lessor to Lessee hereunder and under such Lease
Supplement, and any aircraft (except Engines or engines from time to
time installed thereon) which may from time to time be substituted for
such aircraft (except Engines or engines from time to time installed
thereon) pursuant to clause (ii) of the first paragraph of Section
10(a); and (ii) any and all Parts (A) so long as the same shall be
incorporated or installed in or attached to such aircraft (except
Engines or engines from time to time installed thereon), or (B) so
long as title thereto shall remain vested in Lessor in accordance with
the terms of Section 8 after removal from such aircraft (except
Engines or
engines from time to time installed thereon); provided, however, that
at such time as an aircraft (except Engines or engines from time to
time installed thereon) shall be deemed part of the property leased
hereunder in substitution for the Airframe pursuant to the applicable
provisions hereof, the replaced Airframe shall cease to be an Airframe
hereunder.
"Applicable Rate" means as of any date the weighted average of
the interest rates borne by the Secured Certificates then outstanding
and, if no Secured Certificates shall be outstanding, the Base Rate.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.
"Base Rate" means the rate of interest announced publicly by
Citibank, N.A. in New York, New York from time to time as its base
rate.
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(c) as adjusted as provided in Section
3(d) but subject always to the provisions of Section 3(d)(v) hereof
and, for any Renewal Term, Basic Rent determined pursuant to Section
19.
"Basic Term" means the term for which the Aircraft is leased
hereunder pursuant to Section 3(a) hereof commencing on the Delivery
Date and ending on July 2, 2017, or such earlier date as this Lease
may be terminated in accordance with the provisions hereof.
"▇▇▇▇ of Sale" means a full warranty ▇▇▇▇ of sale covering the
Aircraft, executed by Lessee in favor of the Owner Trustee, dated the
Delivery Date, specifically referring to the Airframe and each Engine,
which ▇▇▇▇ of Sale shall contain, among other things, a statement that
such ▇▇▇▇ of Sale thereby conveys to the Owner Trustee good title to
the Airframe and each Engine described in such ▇▇▇▇ of Sale, free and
clear of all liens, encumbrances and rights of others except Liens
permitted by clause (v) of Section 6 of the Lease.
"Business Day" means any day other than a Saturday or Sunday or a
day on which commercial banks are required or authorized to close in
the City of New York, New York; Boston, Massachusetts; or Minneapolis,
Minnesota.
"Certificate Holder" means Certificate Holder as defined in the
Trust Indenture.
"Certificated Air Carrier" means a Citizen of the United States
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States
Code, for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo or that otherwise is certified or
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registered to the extent required to fall within the purview of 11
U.S.C. Section 1110 or any analogous successor provision of the
Bankruptcy Code.
"Citizen of the United States" has the meaning specified in
Section 40102(a)(15) of Title 49 of the United States Code or any
similar legislation of the United States of America enacted in
substitution or replacement therefor.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air
Fleet Program currently administered by the United States Air Force
Air Mobility Command pursuant to Executive Order No. 11490, as
amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means the commitment of a Pass Through Trustee or of
the Owner Participant, as the case may be, to finance the Owner
Trustee's payment of Lessor's Cost for the Aircraft.
"Consent and Agreement" means the Consent and Agreement [NW 1997
A], dated as of the date hereof, executed by the Manufacturer, as the
same may be amended, modified or supplemented from time to time in
accordance with the applicable provisions thereof.
"Contract Rights" means all of Lessee's right, title and interest
in and to Part H and Part J of the Manufacturer Support Agreement, as
and to the extent that the same relate to the warranties with respect
to the Aircraft, including, without limitation, (a) all claims for
damages in respect of the Aircraft arising as a result of any default
by the Manufacturer under Part H or Part J of the Manufacturer Support
Agreement, including, without limitation, all warranty, service life
policy and indemnity provisions in Part H and Part J of the
Manufacturer Support Agreement in respect of the Aircraft and all
claims thereunder and (b) any and all rights of Lessee to compel
performance of the terms of Part H and Part J of the Manufacturer
Support Agreement in support thereof.
"Default" means any event which with the giving of notice or the
lapse of time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement
for the Aircraft, which date shall be the date the Aircraft is leased
by Lessor to Lessee and accepted by Lessee hereunder.
"Depreciation Period" means the period commencing on the Delivery
Date and ending on December 31, 2004, or such earlier date as this
Lease may be terminated in accordance with the provisions hereof.
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"Dollars" and "$" means the lawful currency of the United States
of America.
"Engine" means (i) each of the four AlliedSignal LF507 type
engines listed by manufacturer's serial number in the initial Lease
Supplement, whether or not from time to time thereafter installed on
the Airframe or installed on any other airframe or on any other
aircraft; and (ii) any engine which may from time to time be
substituted, pursuant to the terms hereof, for either of such four
engines, together in each case with any and all Parts incorporated or
installed in or attached thereto or any and all Parts removed
therefrom so long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from such Engine;
provided, however, that at such time as an engine shall be deemed part
of the property leased hereunder in substitution for an Engine
pursuant to the applicable provisions hereof, the replaced Engine
shall cease to be an Engine hereunder. The term "Engines" means, as
of any date of determination, all Engines then leased hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder. Section references to ERISA are to
ERISA, as in effect at the date of the Participation Agreement and any
subsequent provisions of ERISA, amendatory thereof, supplemental
thereto or substituted therefor.
"Event of Default" has the meaning specified in Section 14
hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such
property: (i) the loss of such property or of the use thereof due to
the destruction of or damage to such property which renders repair
uneconomic or which renders such property permanently unfit for normal
use by Lessee (or any Sublessee) for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with
respect to such property on the basis of a total loss, or a
constructive or compromised total loss; (iii) the theft or
disappearance of such property, or the confiscation, condemnation, or
seizure of, or requisition of title to, or use of, such property
(other than a requisition for use by the United States Government or
any other government of registry of the Aircraft, or any agency or
instrumentality of any thereof) which in the case of any event
referred to in this clause (iii) (other than a requisition of title)
shall have resulted in the loss of possession of such property by
Lessee (or any Sublessee) for a period in excess of 180 consecutive
days or, in the case of a requisition of title, the requisition of
title shall not have been reversed within 90 days from the date of
such requisition of title; (iv) as a result of any law, rule,
regulation, order or other action by the Federal Aviation
Administration or other governmental body of the government of
registry of the Aircraft having jurisdiction, the use of such property
in the normal course of the business of air transportation shall have
been prohibited for a period of 180 consecutive days, unless Lessee
(or any Sublessee), prior to the
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expiration of such 180 day period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable
to permit the normal use of such property by Lessee (or such
Sublessee), but in any event if such use shall have been prohibited
for a period of two consecutive years, provided that no Event of Loss
shall be deemed to have occurred if such prohibition has been
applicable to the entire U.S. registered fleet of British Aerospace
Avro 146-RJ85A aircraft of Lessee (or any Sublessee) and Lessee (or a
Sublessee), prior to the expiration of such two-year period, shall
have conformed at least one such aircraft in its fleet to the
requirements of any such law, rule, regulation, order or other action
and commenced regular commercial use of the same in such jurisdiction
and shall be diligently carrying forward, in a manner which does not
discriminate against the Aircraft in so conforming the Aircraft, all
steps which are necessary or desirable to permit the normal use of the
Aircraft by Lessee (or such Sublessee), but in any event if such use
shall have been prohibited for a period of three years or such use
shall be prohibited at the expiration of the Term; (v) the requisition
for use by the United States Government or any other government of
registry of the Aircraft or any instrumentality or agency of any
thereof, which shall have occurred during the Basic Term (or any
Renewal Term) and shall have continued for thirty (30) days beyond the
Term, provided, however, that no Event of Loss pursuant to this clause
(v) shall exist if Lessor shall have furnished to Lessee the written
notice specified in Section 10(d) hereof; and (vi) any divestiture of
title to or interest in an Engine treated as an Event of Loss pursuant
to Section 7(b) hereof. An Event of Loss with respect to the Aircraft
shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe.
"Excess Amount" for a Lease Period Date means an amount equal to
the amount determined by multiplying Lessor's Cost by the percentage
set forth in Exhibit B hereto under the heading "Excess Amount"
opposite such Lease Period Date.
"Expenses" has the meaning specified in Section 7(c) of the
Participation Agreement.
"FAA ▇▇▇▇ of Sale" means a ▇▇▇▇ of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the Federal
Aviation Administration on the Delivery Date for the Aircraft,
executed by Lessee in favor of the Owner Trustee and dated the
Delivery Date.
"Federal Aviation Act" means that portion of the United States
Code comprising those provisions formerly referred to as the Federal
Aviation Act of 1958, as amended, or any subsequent legislation that
amends, supplements or supersedes such provisions.
"Federal Aviation Administration" and "FAA" mean the United
States Federal Aviation Administration and any agency or
instrumentality of the United States government succeeding to their
functions.
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"Foreign Air Carrier" means any air carrier which is not a U.S.
Air Carrier and which performs maintenance, preventative maintenance
and inspections for the Aircraft, Airframe and/or any Engine or engine
to standards which are approved by, or which are substantially
equivalent to those required by, the Federal Aviation Administration,
the Civil Aviation Authority of the United Kingdom, the Direction
Generale de l'Aviation Civile of the French Republic, the Luftfahrt
Bundesamt of the Federal Republic of Germany, the Rijflauchtraatdienst
of the Kingdom of the Netherlands, the Ministry of Transportation of
Japan or the Federal Ministry of Transport of Canada (and any agency
or instrumentality of the applicable government succeeding to the
functions of any of the foregoing entities).
"Guarantee" means the ▇▇▇▇▇▇▇▇▇ [▇▇ ▇▇▇▇ A], dated as of the date
hereof, made by the Guarantor, as such Guarantee may be amended or
supplemented from time to time pursuant to the applicable provisions
thereof.
"Guarantor" means Northwest Airlines Corporation, a Delaware
corporation.
"Half-Life Adjustment" has the meaning specified in Exhibit H
hereto.
"Indemnitee" means (i) the Owner Trustee, in its individual
capacity and as trustee under the Trust Agreement, (ii) the Indenture
Trustee, (iii) the Owner Participant, (iv) the Trust Estate, (v) the
Loan Participants and each other Certificate Holder, (vi) the
Subordination Agent, (vii) the Liquidity Provider, (viii) the Pass
Through Trustees, (ix) each Affiliate of the Persons described in
clauses (i) through (iv), inclusive, (x) each Affiliate of the Persons
described in clauses (vi), (vii) and (viii), (xi) the respective
directors, officers, employees, agents and servants of each of the
Persons described in clauses (i) through (viii), inclusive, (xii) the
successors and permitted assigns of the Persons described in clauses
(i) through (iv), inclusive, and (xiii) the successors and permitted
assigns of the Persons described in clauses (v), (vi), (vii) and
(viii).
"Indenture Trustee" means the Indenture Trustee under the Trust
Indenture, and any entity which may from time to time be acting as
indenture trustee under the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement
and the Trust Indenture.
"Indenture Trustee's Liens" means any Lien which arises as a
result of (A) claims against the Indenture Trustee not related to its
interest in the Aircraft or the administration of the Trust Estate
pursuant to the Trust Indenture, (B) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action
required by, the Operative Documents to the extent such acts arise or
such failure arises from or constitutes gross negligence or willful
misconduct, (C)
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claims against the Indenture Trustee relating to Taxes or Expenses
which are excluded from the indemnification provided by Section 7 of
the Participation Agreement pursuant to said Section 7, or (D) claims
against the Indenture Trustee arising out of the transfer by the
Indenture Trustee of all or any portion of its interest in the
Aircraft, the Trust Estate, the Trust Indenture Estate or the
Operative Documents other than a transfer of the Aircraft pursuant to
Section 9, 10 or 19 of the Lease or Article IV or V of the Trust
Indenture, or a transfer of the Aircraft pursuant to Section 15 of the
Lease while an Event of Default is continuing and prior to the time
that the Indenture Trustee has received all amounts due pursuant to
the Trust Indenture.
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Liquidity Provider and
the Subordination Agent.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby" or other like
words mean this Lease Agreement [NW 1997 A] as originally executed or
as modified, amended or supplemented pursuant to the applicable
provisions hereof and in accordance with the Trust Agreement and the
Trust Indenture, including, without limitation, supplementation hereof
by one or more Lease Supplements entered into pursuant to the
applicable provisions hereof.
"Lease Period" means each of the consecutive periods throughout
the Basic Term and any Renewal Term ending on a Lease Period Date, the
first such period commencing on and including the Delivery Date.
"Lease Period Date" means January 2, 1998 and each succeeding
January 2 and July 2, to and including the last such date in the Term.
"Lease Supplement" means a Lease Supplement, substantially in the
form of Exhibit A hereto, to be entered into between Lessor and Lessee
on the Delivery Date for the purpose of leasing the Aircraft under and
pursuant to the terms of this Lease Agreement, and any subsequent
Lease Supplement entered into in accordance with the terms hereof.
"Lessee Documents" means the Participation Agreement, the Lease,
the Lease Supplement covering the Aircraft, the Purchase Agreement
(insofar as it relates to the Aircraft), the FAA ▇▇▇▇ of Sale, the
▇▇▇▇ of Sale, the Purchase Agreement Assignment and the Tax Indemnity
Agreement.
"Lessor Liens" means any Lien or disposition of title or interest
arising as a result of (i) claims against Lessor, First Security Bank,
National Association, in its individual capacity, or the Owner
Participant not related to the transactions contemplated by the
Operative Documents, (ii) any act or omission of the Owner
Participant, Lessor, or First Security Bank, National Association, in
its individual
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capacity, which is not related to the transactions
contemplated by the Operative Documents or is in violation of any of
the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or First Security Bank, National Association, in
its individual capacity, with respect to Taxes or Expenses against
which Lessee is not required to indemnify the Owner Participant,
Lessor or First Security Bank, National Association, in its individual
capacity, pursuant to Section 7 of the Participation Agreement or (iv)
claims against Lessor or the Owner Participant arising out of any
transfer by Lessor or the Owner Participant of all or any portion of
the respective interests of Lessor or the Owner Participant in the
Aircraft, the Trust Estate or the Operative Documents other than the
transfer of possession of the Aircraft by Lessor pursuant to this
Agreement, the transfer pursuant to the Trust Indenture or a transfer
of the Aircraft pursuant to Section 9, 10 or 19 hereof or pursuant to
the exercise of the remedies set forth in Section 15 hereof, provided,
however, that any Lien which is attributable solely to First Security
Bank, National Association or the Owner Participant and would
otherwise constitute a Lessor Lien hereunder shall not constitute a
Lessor Lien hereunder so long as (1) the existence of such Lien poses
no material risk of the sale, forfeiture or loss of the Aircraft, (2)
the existence of such Lien does not interfere in any way with the use,
possession, operation, or quiet enjoyment of the Aircraft by Lessee
(or any Sublessee), (3) the existence of such Lien does not affect the
priority or perfection of, or otherwise jeopardize, the Lien of the
Trust Indenture, (4) First Security Bank, National Association or the
Owner Participant, as appropriate, is diligently contesting such Lien
and (5) the existence of such Lien does not pose a material threat of
interference with the payment of Rent (other than Excluded Payments in
favor of First Security Bank, National Association or the Owner
Participant, as appropriate).
"Lessor's Cost" for the Aircraft means the amount denominated as
such in Exhibit B to the Lease.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease, sublease, sub-sublease or security interest.
"Liquidity Facilities" means the three Revolving Credit
Agreements between the Subordination Agent, as borrower, and the
Liquidity Provider, and any replacement thereof, in each case as the
same may be amended, modified or supplemented.
"Liquidity Provider" means Royal Bank of Canada, as Class A
Liquidity Provider, Class B Liquidity Provider and Class C Liquidity
Provider under the Liquidity Facilities, or any successor thereto.
"Loan Participant" means each Purchaser and its respective
successors and registered assigns, including any Certificate Holder.
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"Loan Participant Liens" means any Lien which arises from acts or
claims against any Loan Participant not related to the transactions
contemplated by the Operative Documents.
"Loss Payment Date" has the meaning specified in Section 10(a)
hereof.
"Majority in Interest of Certificate Holders" has the meaning set
forth in the Trust Indenture.
"Make-Whole Amount" has the meaning assigned to that term in the
Trust Indenture.
"Manufacturer" means British Aerospace (Operations) Limited, a
limited company incorporated under the laws of England and Wales, and
its successors and assigns.
"Manufacturer Documents" means the Purchase Agreement, the
Residual Agreement and the Consent and Agreement.
"Manufacturer Support Agreement" means the Manufacturer Support
Agreement, dated February 5, 1997, between the Manufacturer and
Lessee.
"Mortgage" means the Mortgage and Security Agreement (N501XJ),
dated as of April 25, 1997, between Lessee and First Union National
Bank (f/k/a First Union National Bank of North Carolina).
"Net Economic Return" shall have the meaning ascribed to such
term in paragraph 2 of Exhibit E to the Lease.
"Net Present Value of Rents" means the net present value, as of
the Delivery Date, of Basic Rent set forth in Exhibit B hereto,
discounted at an annual interest rate of 7.25 percent on a semi-annual
basis.
"Operative Documents" and "Operative Document" means each of the
Participation Agreement, the Lease, the Trust Indenture, the Trust
Agreement, an acceptance certificate covering the Aircraft in the form
agreed to by the Participants and Lessee, the Tax Indemnity Agreement,
the Lease Supplement covering the Aircraft, the Trust Supplement
covering the Aircraft, the Secured Certificates, the ▇▇▇▇ of Sale, the
FAA ▇▇▇▇ of Sale, the Purchase Agreement (insofar as it relates to the
Aircraft), the Guarantee, the Residual Agreement, the Purchase
Agreement Assignment and the Consent and Agreement.
"Overall Transaction" means all the transactions contemplated by
the Operative Documents.
"Owner Participant" means the corporation executing the
Participation Agreement as the Owner Participant and any person to
which such corporation
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transfers all or any portion of its right, title and interest in and
to the Trust Agreement, the Trust Estate and the Participation
Agreement, to the extent permitted by Section 8.01 of the Trust
Agreement and Section 8 of the Participation Agreement.
"Owner Participant Documents" means the Participation Agreement,
the Trust Agreement, and the Tax Indemnity Agreement.
"Owner Trustee" means the entity executing the Participation
Agreement as Owner Trustee and any entity appointed as successor Owner
Trustee pursuant to Section 9.01 of the Trust Agreement, and
references to a predecessor Owner Trustee in its individual capacity
by name in the Operative Documents shall include such successor Owner
Trustee in its individual capacity from and after such succession.
"Owner Trustee Documents" means the Participation Agreement, the
Trust Agreement, the Trust Supplement covering the Aircraft, the
Lease, the Lease Supplement covering the Aircraft, the Purchase
Agreement Assignment, the Residual Agreement, the Trust Indenture and
the Secured Certificates.
"Participants" means and includes the Loan Participants and the
Owner Participant.
"Participation Agreement" means that certain Participation
Agreement [NW 1997 A], dated as of the date hereof, among Lessee, the
Guarantor, the Purchasers, the Indenture Trustee, the Subordination
Agent, the Owner Participant and Owner Trustee, as such Participation
Agreement may be amended or supplemented from time to time pursuant to
the applicable provisions thereof.
"Parties" means the Owner Trustee, the Indenture Trustee and the
Participants.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other
than (a) complete Engines or engines, (b) any items leased by Lessee
from a third party (other than Lessor) and (c) cargo containers) which
may from time to time be incorporated or installed in or attached to
the Airframe or any Engine or so long as title thereto shall remain
vested in Lessor in accordance with Section 8 after removal therefrom.
"Pass Through Certificates" means the pass through certificates
to be issued by the Pass Through Trustee in connection with the
Overall Transaction.
"Pass Through Trust Agreement" means the pass through trust
agreement and each of the three separate pass through trust
supplements referred to on Schedule I to the Participation Agreement.
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"Pass Through Trustee" means State Street Bank and Trust Company,
a Massachusetts trust company, in its capacity as trustee under each
Pass Through Trust Agreement, and each other person that may from time
to time be acting as successor trustee under any such Pass Through
Trust Agreement.
"Past Due Rate" means (i) with respect to the portion of any
payment of Rent that may be required by the Trust Indenture to be paid
by the Indenture Trustee to the Loan Participants, or the holders of
any outstanding Secured Certificates, the "Past Due Rate" as defined
in the Trust Indenture and (ii) with respect to the remaining portion
of any payment of Rent (and the entire amount of any payment of Rent
after the satisfaction and discharge of the Trust Indenture), a rate
per annum equal to 1% over the Base Rate.
"Permitted Lien" means any Lien referred to in clauses (i)
through (viii) of Section 6 hereof.
"Permitted Sublessee" means any entity domiciled in a country
listed in Exhibit F hereto.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Predecessor Lease" means the Lease Agreement (N501XJ), dated as
of April 25, 1997, between Lessee and Mesaba Aviation Inc.
"Prepaid Rent" has the meaning assigned in Section 3(g) hereof.
"Purchase Agreement" means the Sale and Purchase Agreement, dated
as of February 5, 1997, between the Manufacturer and Lessee relating
to the purchase by Lessee of the Aircraft (including the Manufacturer
Support Agreement), as originally executed or as modified, amended or
supplemented in accordance with the terms thereof, but only insofar as
the foregoing relates to the Aircraft.
"Purchase Agreement Assignment" means the Purchase Agreement
Assignment [NW 1997 A], dated as of the date hereof, between Lessee
and Lessor, as the same may be amended, supplemented or modified from
time to time, with a form of Consent and Agreement to be executed by
the Manufacturer attached thereto.
"Purchasers" means the Pass Through Trustees under each Pass
Through Trust Agreement.
"Reimbursement Amount" has the meaning set forth in Section 3(g)
hereof.
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"Related Indemnitee Group" means, with respect to any Indemnitee,
any officer, director, servant, employee, agent or Affiliate thereof.
"Renewal Term" means any Fixed Renewal Term or Fair Market
Renewal Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Residual Agreement" means the Residual Value Agreement (N501XJ),
dated as of September 25, 1997, among the Manufacturer, the Owner
Participant and the Owner Trustee.
"Secured Certificates" has the meaning assigned to that term in
the Trust Indenture.
"Special Purchase Price" shall mean the amount denominated as
such in Exhibit B to the Lease.
"Stipulated Loss Value" with respect to the Aircraft as of any
date through and including July 2, 2017, means, but subject always to
the provisions of Section 3(d)(v) hereof, the amount determined by
multiplying Lessor's Cost for the Aircraft by the percentage specified
in Exhibit C hereto opposite the Stipulated Loss Value Date with
respect to which the amount is determined (as such Exhibit C may be
adjusted from time to time as provided in Section 3(d) hereof and in
Section 7 of the Tax Indemnity Agreement). "Stipulated Loss Value" as
of any date after July 2, 2017 shall be the amount determined as
provided in Section 19(a) hereof.
"Stipulated Loss Value Date" means the 2nd calendar day of each
calendar month during the Basic Term and any Renewal Term.
"Sublease" means any sublease permitted by the terms of Section
7(b)(x) hereof.
"Sublessee" means any Person for so long, but only so long, as
such Person is in possession of the Airframe and/or any Engine
pursuant to the terms of a Sublease which is then in effect pursuant
to Section 7(b)(x) hereof.
"Subordination Agent" means State Street Bank and Trust Company
of Connecticut, National Association, a national banking association,
as subordination agent under the Intercreditor Agreement, or any
successor thereto.
"Supplemental Rent" means, without duplication, (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent) which
Lessee assumes or agrees to pay under any Lessee Document to or on
behalf of Lessor or any other Person, (b) amounts payable by Lessor
pursuant to clause (b) of the third paragraph of Section 2.02 of the
Trust Indenture, (c) Lessor's pro rata share of all
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compensation and reimbursement of expenses, disbursements and advances
payable by Lessee under the Pass Through Trust Agreements, and (d)
Lessor's pro rata share of all compensation and reimbursement of
expenses and disbursements payable to the Subordination Agent under
the Intercreditor Agreement except with respect to any income or
franchise taxes incurred by the Subordination Agent in connection with
the transactions contemplated by the Intercreditor Agreement. As used
herein, "Lessor's pro rata share" means as of any time a fraction, the
numerator of which is the principal balance then outstanding of
Secured Certificates and the denominator of which is the aggregate
principal balance then outstanding of all "Equipment Notes" (as such
term is defined in the Intercreditor Agreement).
"Tax Indemnitee" means (i) the Owner Participant, the Owner
Trustee, in its individual capacity and as trustee under the Trust
Agreement, the Trust Estate, the Indenture Trustee, (ii) the
respective Affiliates, successors and permitted assigns of each of the
entities described in the preceding clause (i), and (iii) the Trust
Indenture Estate.
"Tax Indemnity Agreement" means that certain Tax Indemnity
Agreement [NW 1997 A], dated as of the date hereof, between the Owner
Participant and Lessee, as originally executed or as modified, amended
or supplemented pursuant to the applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation,
license, recording, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales, rental,
use, turnover, value added, property (tangible and intangible), excise
and stamp taxes), license, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever, together with
any and all penalties, fines, additions to tax and interest thereon
(each, individually a "Tax").
"Term" means the Basic Term and, if actually entered into, any
Renewal Term.
"Termination Date" has the meaning set forth in Section 9(a)
hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including July 2, 2017, means, but subject always to the
provisions of Section 3(d)(v) hereof, the amount determined by
multiplying Lessor's Cost for the Aircraft by the percentage specified
in Exhibit D hereto opposite the Termination Date with respect to
which the amount is determined (as such Exhibit D may be adjusted from
time to time as provided in Section 3(d) hereof and in Section 7 of
the Tax Indemnity Agreement).
"Transaction Expenses" means: all of the reasonable
out-of-pocket costs, fees and expenses incurred by the Owner Trustee,
the Pass Through Trustee, the
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Subordination Agent and the Indenture Trustee in connection with the
transactions contemplated by the Participation Agreement, the other
Operative Documents, the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Underwriting
Agreement (except, in each case, as otherwise provided therein)
including, without limitation:
(1) the reasonable and actual fees, expenses and
disbursements of (A) ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, special counsel
for the Pass Through Trustee and the Indenture Trustee, (B) Ray,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel for the Owner Trustee, (C)
Shearman & Sterling, special counsel for the Underwriters, and
(D) ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special counsel in Oklahoma City,
Oklahoma;
(2) the initial fees and reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement;
(3) the initial fee and reasonable and actual disbursements
of the Indenture Trustee under the Trust Indenture;
(4) the initial fees and expenses of the Liquidity
Provider, the Pass Through Trustee and the Subordination Agent;
(5) underwriting fees and commissions;
(6) the fees and expenses with respect to the appraisal of
the Aircraft;
(7) the reasonable fees, expenses and disbursements of ▇▇▇▇
& Levi LLP, special counsel to the Owner Participant, such fees
not to exceed the amount previously agreed to by the Owner
Participant and Lessee, and the reasonable fees, expenses and
disbursements of David, Hagner, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special
tax counsel to the Owner Participant, such fees not to exceed the
amount previously agreed to by the Owner Participant and Lessee;
(8) the fees, expenses and disbursements of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, special counsel for
Lessee;
(9) the costs of filing and recording documents with the
FAA and filing Uniform Commercial Code statements in the United
States;
(10) the reasonable fees, expenses and disbursements of
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special counsel to the
Liquidity Provider; and
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(11) the reasonable fees, expenses and disbursements of
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, special counsel to the
Manufacturer.
"Trust Agreement" means that certain Trust Agreement [NW 1997 A],
dated as of the date hereof, between the Owner Participant and First
Security Bank, National Association, in its individual capacity, as
originally executed or as modified, amended or supplemented pursuant
to the applicable provisions thereof, including, without limitation,
supplementation thereof by one or more Trust Supplements entered into
pursuant to the applicable provisions thereof.
"Trust Agreement and Indenture Supplement" or "Trust Supplement"
means a supplement to the Trust Agreement and the Trust Indenture,
substantially in the form of Exhibit A to the Trust Indenture.
"Trust Estate" means the Trust Estate as that term is defined in
the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Security
Agreement [NW 1997 A], dated as of the date hereof, between Lessor and
the Indenture Trustee, as originally executed or as modified, amended
or supplemented in accordance with the provisions thereof.
"Trust Indenture Estate" has the meaning assigned to that term in
the Trust Indenture.
"Underwriting Agreement" means that certain Underwriting
Agreement, dated as of September 16, 1997, among Lessee, the Guarantor
and the several underwriters named therein.
"U.S. Air Carrier" means any Certificated Air Carrier as to which
there is in force an air carrier operating certificate issued pursuant
to Part 121 of the regulations under the Federal Aviation Act, or
which may operate as an air carrier by certification or otherwise
under any successor or substitute provisions therefor or in the
absence thereof.
"Wet Lease" means any arrangement whereby the Lessee (or any
Sublessee) agrees to furnish the Airframe and Engines or engines
installed thereon to a third party pursuant to which such Airframe and
Engines or engines (i) shall be operated solely by regular employees
of Lessee (or any Sublessee) possessing all current certificates and
licenses that would be required under the Federal Aviation Act or, if
the Aircraft is not registered in the United States, all certificates
and licenses required by the laws of the jurisdiction of registry, for
the performance by such employees of similar functions within the
United States of America or such other jurisdiction of registry (it is
understood that cabin attendants need not be regular employees of
Lessee (or any Sublessee)) and (ii)
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shall be maintained by Lessee (or any Sublessee) in accordance with
its normal maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees (subject to
satisfaction of the conditions set forth in Section 4(a) of the Participation
Agreement) to accept the transfer of title from and simultaneously to lease to
Lessee hereunder, and Lessee hereby agrees (subject to satisfaction of the
conditions set forth in Section 4(b) of the Participation Agreement) to lease
from Lessor hereunder, the Aircraft as evidenced by the execution by Lessor and
Lessee of a Lease Supplement leasing the Aircraft hereunder. Lessee hereby
agrees that such acceptance of the Aircraft by Lessor shall, without further
act, irrevocably constitute acceptance by Lessee of such Aircraft for all
purposes of this Lease.
SECTION 3. Term and Rent. (a) Basic Term. The Basic Term shall
commence on the Delivery Date and end on July 2, 2017, or such earlier date as
this Lease may be terminated in accordance with the provisions hereof.
(b) [Intentionally Omitted].
(c) Basic Rent. Lessee shall pay Basic Rent with respect to each
Lease Period during the Basic Term on each Lease Period Date during the Basic
Term, in consecutive installments in the amounts as provided in the next
sentence, each such installment to cover the Lease Period specified in Exhibit
B. Each such installment of Basic Rent shall be equal to Lessor's Cost
multiplied by the percentage for the Delivery Date or applicable Lease Period
Date, as the case may be, specified in Exhibit B hereto.
(d) Adjustments to Basic Rent.
(i) In the event that (A) the Delivery Date occurs other than
on September 25, 1997, or (B) Transaction Expenses paid by Lessor
pursuant to Section 16(a) of the Participation Agreement are
determined to be other than 1.37% of Lessor's Cost, then in each
case the Basic Rent percentages set forth in Exhibit B and
Stipulated Loss Value percentages set forth in Exhibit C and the
Termination Value percentages set forth in Exhibit D shall be
recalculated by the Owner Participant, on or prior to December 30,
1997, using the same methods and assumptions used to calculate
original Basic Rent, Stipulated Loss Value and Termination Value
percentages, in order to: (1) maintain the Owner Participant's Net
Economic Return and (2) minimize the Net Present Value of Rents to
Lessee to the extent possible consistent with clause (1) hereof.
In such recalculation there will be no change in the amortization
of the Secured Certificates.
(ii) (A) In the event of a refinancing as contemplated by
Section 17 of the Participation Agreement, then the Basic Rent
percentages set forth in Exhibit B and Stipulated Loss Value
percentages set forth in Exhibit C and the Termination Value
percentages set forth in Exhibit D shall be recalculated (upwards
or downwards) by the Owner Participant as contemplated by such
Section to (1) maintain the Owner Participant's Net Economic Return
and (2) to
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the extent possible consistent with clause (1) hereof, minimize the
Net Present Value of Rents to Lessee and (B) in the event that
Lessee elects to satisfy any indemnity obligation under the Tax
Indemnity Agreement pursuant to Section 4(d)(ii) of the Tax
Indemnity Agreement, then the Basic Rent percentages set forth in
Exhibit B and the Stipulated Loss Value percentages set forth in
Exhibit C and the Termination Value percentages set forth in
Exhibit D shall be recalculated (upwards or downwards) by Owner
Participant, using the same methods and assumptions (except to the
extent such assumptions shall be varied to take into account the
Loss (as defined in the Tax Indemnity Agreement) that is the
subject of such indemnification and any prior or contemporaneous
Loss) used to calculate the Basic Rent percentages, the Stipulated
Loss Value percentages and the Termination Value percentages on the
Delivery Date, in order to (1) maintain the Owner Participant's Net
Economic Return and (2) to the extent possible consistent with
clause (1) hereof, minimize the Net Present Value of Rents to
Lessee.
(iii) Whenever Basic Rent is recalculated pursuant to this
Section 3(d), the Owner Participant shall redetermine the Excess
Amounts set forth in Exhibit B in a manner consistent with such
recalculation.
(iv) Any recalculation of Basic Rent, Excess Amounts and
Stipulated Loss Value and Termination Value percentages pursuant to
this Section 3(d) shall be determined by the Owner Participant and
shall be subject to the verification procedures set forth in
Exhibit E hereto. Such recalculated Basic Rent, Excess Amounts and
Stipulated Loss Value and Termination Value percentages shall be
set forth in a Lease Supplement or an amendment to this Lease.
(v) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Basic
Rent payable hereunder, whether or not adjusted in accordance with
this Section 3(d), shall, together with the amount of the Excess
Amount in respect of the date on which such installment is payable,
and each payment of Termination Value and Stipulated Loss Value,
whether or not adjusted in accordance with this Section 3(d),
shall, together with all other amounts (including an amount equal
to the premium, if any, payable by Lessor on the Secured
Certificates) payable simultaneously by Lessee pursuant to this
Lease, in each case be, under any circumstances and in any event,
in an amount at least sufficient to pay in full, on the date on
which such amount of Rent is due, any payments then required to be
made on account of the principal of, premium, if any, and interest
on the Secured Certificates. It is agreed that no installment of
Basic Rent or payment of Termination Value or Stipulated Loss Value
shall be increased or adjusted by reason of (i) any attachment or
diversion of Rent on account of (A) Lessor Liens or (B) any Loan
Participant Lien or other Lien on or against the Trust Estate, any
part thereof or the Operative Documents arising as a result of
claims against the Indenture Trustee not related to the
transactions contemplated by the Operative Documents, (ii) any
modification of the payment terms of the Secured Certificates made
without the prior written consent of Lessee or (iii) the
acceleration of any Secured Certificate or Secured
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Certificates due to the occurrence of an "Event of Default" (as
defined in the Trust Indenture) which does not constitute an Event
of Default hereunder.
(vi) All adjustments to Basic Rent under this Section 3(d) shall
be (A) in compliance with the tests of Sections 4.02(5) and 4.07 of
Rev. Proc. 75-28 and with one or more of any "safe harbors" from
characterization of this Lease as a "disqualified leaseback or
long-term agreement" set forth in Section 467 of the Code (or any
proposed, temporary or final regulations thereunder applicable to
this Lease) or, if no "safe harbor" exists, made in a manner to
avoid characterization of this Lease as a "disqualified leaseback
or long-term agreement" within the meaning of Section 467 of the
Code and (B) subject to verification pursuant to Exhibit E.
(e) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value or Termination Value as the
same shall become due and owing and all other amounts of Supplemental Rent
within five days after demand or within such other relevant period as may be
provided in any Operative Document, and in the event of any failure on the part
of Lessee to pay any Supplemental Rent when due, Lessor shall have all rights,
powers and remedies provided for herein or in any other Operative Document or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee
shall pay as Supplemental Rent the Make-Whole Amount, if any, due pursuant to
Section 2.10(b) or Section 2.11 of the Trust Indenture in connection with a
prepayment of the Secured Certificates upon redemption of such Secured
Certificates in accordance with Section 2.10(b) or Section 2.11 of the Trust
Indenture. Lessee also will pay to Lessor, or to whomsoever shall be entitled
thereto, on demand, as Supplemental Rent, to the extent permitted by applicable
law, interest at the Past Due Rate on any part of any installment of Basic Rent
not paid when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid when due for the period until the same
shall be paid.
(f) Payments in General. All payments of Rent shall be made directly
by Lessee (whether or not any Sublease shall be in effect) by wire transfer of
immediately available funds prior to 10:30 A.M., New York time, on the date of
payment, to Lessor at its account at First Security Bank, National Association,
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ABA No. ▇▇▇-▇▇▇▇-▇▇, Account
No. 051-▇▇▇▇▇▇▇, Attention: Corporate Trust Department, Credit Northwest/NW
1997 A (or such other account of Lessor in the continental United States as
Lessor shall direct in a notice to Lessee at least 10 Business Days prior to the
date such payment of Rent is due); provided that so long as the Trust Indenture
shall not have been fully discharged, Lessor hereby irrevocably directs and
Lessee agrees, that, unless the Indenture Trustee shall otherwise direct, all
Rent payable to Lessor and assigned to the Indenture Trustee pursuant to the
Trust Indenture shall be paid prior to 10:30 A.M., New York time on the due date
thereof in funds of the type specified in this Section 3(f) directly to the
Indenture Trustee at its account at State Street Bank and Trust Company, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ABA No. 011-00-0028, Account No.
▇▇▇▇-▇▇▇-▇, Attention: Corporate Trust Department, Reference: Northwest/NW
1997 A (or such other account of the Indenture Trustee in the continental United
States as the Indenture Trustee shall direct in a notice to Lessee at least 10
Business Days prior to the date such payment of Rent is due). Lessor hereby
directs and Lessee agrees that all payments of Supplemental Rent owing to the
Indenture Trustee or to a Loan Participant or any other Certificate Holder
pursuant to the Participation Agreement shall be made in Dollars in immediately
available funds prior to 10:30 A.M., New York time, on the due date thereof at
the office of the Indenture Trustee or at such other office of such other
financial institution located in the continental United States as the party
entitled thereto may so direct at least
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10 Business Days prior to the due date thereof. All payments of Supplemental
Rent payable to the Owner Participant, to the extent that such amounts
constitute Excluded Payments (as defined in the Trust Indenture), shall be made
in Dollars in immediately available funds prior to 10:30 A.M., New York time, on
the due date thereof, to the account of the Owner Participant specified in
Schedule I to the Participation Agreement (or to such other account as may be
specified in writing by the Owner Participant from time to time).
Notwithstanding anything to the contrary contained herein, if any date
on which a payment of Rent becomes due and payable is not a Business Day, then
such payment shall not be made on such scheduled date but shall be made on the
next succeeding Business Day with the same force and effect as if made on such
scheduled date and (provided such payment is made on such next succeeding
Business Day) no interest shall accrue on the amount of such payment from and
after such scheduled date.
(g) Prepayment of Certain Rent Payments. To the extent, if any, that
there shall not have been received by the Indenture Trustee to its account and
in funds of the type specified in Section 3(f) hereof by 10:30 A.M., New York
time, on any Lease Period Date from Lessor an amount equal to the Excess Amount
for such date, Lessee shall on the Delivery Date, prepay on such Lease Period
Date a portion of Basic Rent equal to the Excess Amount not so paid (the amount
of such Basic Rent to be prepaid by Lessee being herein called "Prepaid Rent");
provided that Lessee will also pay to the Indenture Trustee, on demand, as
Supplemental Rent, to the extent permitted by applicable law, interest at the
Past Due Rate in effect from time to time on any part of any Prepaid Rent and on
the amount, if any, payable pursuant to the immediately preceding proviso not
paid when due for any period for which the same shall be overdue. Lessor agrees
to reimburse Lessee in the manner provided in the following sentence for (x) the
Prepaid Rent so paid by Lessee, plus (y) any Supplemental Rent paid with respect
to Prepaid Rent by Lessee pursuant to this Section 3(g), plus (z) accrued
interest on the unreimbursed portion thereof at a rate per annum equal to 5%
over the Base Rate from the date such amount is paid by Lessee to but not
including the date of each such reimbursement (such amounts to be reimbursed
being herein called the "Reimbursement Amount"). Lessor shall pay to Lessee, in
funds of the type specified in Section 3(f) hereof, within five days after
Lessor, the Owner Participant and the Indenture Trustee shall have received
written notice from Lessee demanding payment, the Reimbursement Amount. In
addition, if, for any reason, Lessor shall fail to pay to Lessee the
Reimbursement Amount as above provided, Lessee shall be entitled to offsets
(without duplication) against each succeeding payment (other than as limited by
the proviso to this sentence) due from Lessee to Persons other than the Loan
Participants, the Indenture Trustee and the Owner Trustee in its individual
capacity (including, without limitation, Basic Rent, payments due under Section
9, 10, 15 and 19 hereof, payments due under the Tax Indemnity Agreement and
payments due to Persons other than the Loan Participants, the Indenture Trustee
and Lessor in its individual capacity under Section 7 of the Participation
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Agreement), until Lessee has been fully reimbursed for the Reimbursement Amount;
provided, however, that in the case of any payment due from Lessee which is
distributable under the terms of the Trust Indenture, Lessee's right of offset
shall be limited to amounts distributable to Lessor thereunder. No such offset
or aggregate combined effect of separate offsets shall reduce the amount of any
installment of Basic Rent to an amount insufficient, together with the Excess
Amount and all other amounts payable simultaneously by Lessee, to pay in full
the payments then required to be made on account of the principal of and
interest on (and premium, if any, due with respect to) the Secured Certificates
then outstanding.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES
AND LESSEE TAKES THE AIRCRAFT AND EACH PART THEREOF "AS-IS," "WHERE-IS."
NEITHER LESSOR, THE INDENTURE TRUSTEE NOR ANY PARTICIPANT MAKES, HAS MADE OR
SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS AND WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that First
Security Bank, National Association, in its individual capacity, (i) represents
and warrants that on the Delivery Date, Lessor shall have received whatever
title to the Aircraft was conveyed to it by Lessee, (ii) represents and warrants
that on the Delivery Date the Aircraft shall be free of Lessor Liens (including
for this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens) attributable to it, (iii) covenants that it will
not, through its own actions or inactions, interfere in Lessee's quiet enjoyment
of the Aircraft during the Term, (iv) agrees that it will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien attributable
to it on or with respect to the Airframe or any Engine or any portion of the
Trust Estate and (v) represents and warrants that it is a Citizen of the United
States without making use of a voting trust, voting powers agreement or similar
arrangement, and agrees that if at any time it shall cease to be a Citizen of
the United States without making use of a voting trust, voting powers agreement
or similar arrangement it will promptly resign as Owner Trustee (if and so long
as such citizenship is necessary under the Federal Aviation Act as in effect at
such time or, if it is not necessary, if and so long as the Owner Trustee's
citizenship would have any material adverse effect on the Loan Participants, the
Owner Participant or Lessee), effective upon the appointment of a successor
Owner Trustee in accordance with Section 9.01 of the Trust Agreement. None of
the provisions of this Lease shall be deemed to amend, modify or otherwise
affect the representations, warranties or other obligations (express or implied)
of the Manufacturer, any subcontractor or supplier of the Manufacturer with
respect to the Airframe, the Engines or any Parts, or to release the
Manufacturer, or any such subcontractor or supplier, from any such
representation, warranty or obligation. Lessor covenants that during the Term
(so long as this Lease shall not have been declared in default pursuant to
Section 15 hereof) it will not,
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through its own actions or inactions interfere in the quiet enjoyment of the
Aircraft by Lessee or any Sublessee and agrees that it will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien attributable
to it on or with respect to the Airframe or any Engine.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return.
Unless purchased by Lessee pursuant to Section 19 hereof, upon the termination
of this Lease at the end of the Basic Term or any Renewal Term or pursuant to
Section 9(c) or 15, Lessee, at its own expense, will return the Airframe to
Lessor at a major airport in one of the forty-eight contiguous states of the
United States chosen by Lessee, and Lessee will give Lessor at least ten (10)
days' prior written notice of the place of such return; provided, however, that
if Lessor shall have made the request for storage pursuant to Section 5(d)
hereof, Lessee shall return the Airframe to Lessor at the site of the storage at
the end of the storage period. At the time of such return, Lessee will, unless
otherwise requested by Lessor at least ninety (90) days prior to the return
hereunder, cause the Aircraft, if it is not then so registered, to be registered
under the laws of the United States with the Federal Aviation Administration in
the name of the Lessor or its designee, provided that Lessee shall be relieved
of its obligations under this sentence if (i) such registration is prohibited by
reason of the failure of Lessor or its designee to be eligible on such date to
own an aircraft registered with the Federal Aviation Administration or (ii) such
registration is otherwise prohibited by applicable law; the Airframe will be
fully equipped with the Engines (or other AlliedSignal LF507 type engines or
four engines of the same or another manufacturer of not less than equivalent
utility, value and remaining useful life, and suitable for installation and use
on the Airframe without impairing the value, utility or remaining useful life of
the Aircraft; provided that all engines shall be of the same make and model)
duly installed thereon. Also, at the time of such return, such Airframe and
Engines or engines (i) shall be certified (or, if not then registered under the
Federal Aviation Act, shall be eligible for certification) as an airworthy
aircraft by the Federal Aviation Administration, (ii) shall be free and clear of
all Liens (other than Lessor Liens (including for this purpose Liens which would
be Lessor Liens but for the proviso in the definition of Lessor Liens),
Indenture Trustee's Liens and Loan Participant Liens) and rights of third
parties under pooling, interchange, overhaul, repair or other similar agreements
or arrangements, (iii) shall be in as good an operating condition as when
delivered to Lessee hereunder, ordinary wear and tear excepted, or, in the case
of any such engines owned by Lessee, shall have a value, utility and remaining
useful life at least equal to, and shall be in as good an operating condition as
required by the terms hereof with respect to, Engines constituting part of the
Aircraft but not then installed on the Airframe, and (iv) shall be in compliance
with the return conditions, if any, set forth in (a) Exhibit G, in the event
such return occurs other than at the termination of this Lease on July 2, 2017,
or (b) Exhibit H, in the event such return occurs at the termination of this
Lease on July 2, 2017; provided that if a Half-Life Adjustment is required to be
calculated pursuant to the terms of Exhibit H, if the Half-Life Adjustment is a
positive number Lessee shall pay Lessor the Half-Life Adjustment and if the
Half-Life Adjustment is a negative number Lessor shall pay Lessee the Half-Life
Adjustment; provided, further, that Lessor shall only be required to make such
payment if the Owner Participant shall have irrevocably exercised its option
pursuant to Section 2 of the Residual Agreement.
During the last six (6) months of the Term (unless Lessee shall have
elected to purchase the Aircraft or renew this Lease in accordance with the
terms of this Lease), with reasonable notice, Lessee will cooperate, and cause
any Sublessee to cooperate, in all reasonable
-21-
respects with the efforts of Lessor to sell or lease the Aircraft, including,
without limitation, permitting prospective purchasers or lessees to inspect
fully the Aircraft and the records relating thereto, provided that such
cooperation shall not interfere with the operation or maintenance of the
Aircraft by Lessee or any Sublessee.
(b) Return of the Engines. In the event that any engine not owned by
Lessor shall be delivered with the returned Airframe as set forth in paragraph
(a) of this Section 5, Lessee, concurrently with such delivery, will, at no cost
to Lessor, furnish, or cause to be furnished, to Lessor a full warranty (as to
title) ▇▇▇▇ of sale with respect to each such engine, in form and substance
satisfactory to Lessor (together with an opinion of counsel to the effect that
such full warranty ▇▇▇▇ of sale has been duly authorized and delivered and is
enforceable in accordance with its terms and that such engines are free and
clear of Liens other than Lessor Liens (including for this purpose Liens which
would be Lessor Liens but for the proviso in the definition of Lessor Liens),
Loan Participant Liens and Indenture Trustee Liens), against receipt from Lessor
of a ▇▇▇▇ of sale or other instrument evidencing the transfer, without recourse
or warranty (except as to the absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the definition
of Lessor Liens), by Lessor to Lessee or its designee of all of Lessor's right,
title and interest in and to any Engine constituting part of the Aircraft but
not installed on the Airframe at the time of the return of the Airframe.
(c) Fuel; Manuals. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessor shall pay Lessee, as compensation for any fuel or oil contained in
the fuel or oil tanks of such Airframe, the value of such fuel or oil at the
price paid by Lessee for such fuel or oil, as the case may be, and (ii) Lessee
shall deliver or cause to be delivered to Lessor all logs, manuals and data and
inspection, modification and overhaul records required to be maintained with
respect thereto under applicable rules and regulations of each country under the
laws of which the Aircraft has been registered during the period of operation
thereof, which logs, manuals, data and records, if not maintained in English,
shall be translated into English at Lessee's expense.
(d) Storage Upon Return. If, at least sixty (60) days prior to
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(c), Lessee receives from Lessor a written request for
storage of the Aircraft upon its return hereunder, Lessee will provide Lessor,
or cause Lessor to be provided, with free parking facilities for the Aircraft
(maintenance costs and other out-of-pocket costs other than parking fees to be
for the account of Lessor) for a period not exceeding thirty (30) days
commencing on the date of such termination, at a location in the continental
United States selected by Lessee used as a location for the parking or storage
of aircraft. Lessee will maintain insurance for the Aircraft during such period
not exceeding thirty (30) days and be reimbursed by Lessor for the premiums
thereon.
SECTION 6. Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided, the Lien of the Trust Indenture, and any other rights existing
pursuant to the Operative Documents, (ii) the rights of others under agreements
or arrangements to the extent permitted by the terms of Sections 7(b) and 8(b)
hereof, (iii) Lessor Liens (including for this
-22-
purpose Liens which would be Lessor Liens but for the proviso in the definition
of Lessor Liens), Loan Participant Liens, and Indenture Trustee's Liens,
(iv) Liens for taxes of Lessee (or any Sublessee) either not yet due or being
contested in good faith by appropriate proceedings so long as such proceedings
do not involve any material danger of the sale, forfeiture or loss of the
Airframe or any Engine or any interest therein, or, so long as any Secured
Certificates shall be outstanding, adversely affect the Lien of the Trust
Indenture, (v) materialmen's, mechanics', workmen's, repairmen's, employees' or
other like Liens arising in the ordinary course of Lessee's (or, if a Sublease
is then in effect, Sublessee's) business (including those arising under
maintenance agreements entered into in the ordinary course of business) securing
obligations that are not overdue for a period of more than sixty (60) days or
are being contested in good faith by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture or loss
of the Airframe or any Engine or any interest therein or, so long as any Secured
Certificates shall be outstanding, adversely affect the Lien of the Trust
Indenture, (vi) Liens arising out of any judgment or award against Lessee (or
any Sublessee), unless the judgment secured shall not, within sixty (60) days
after the entry thereof, have been discharged, vacated, reversed or execution
thereof stayed pending appeal or shall not have been discharged, vacated or
reversed within sixty (60) days after the expiration of such stay, (vii) any
other Lien with respect to which Lessee (or any Sublessee) shall have provided a
bond, cash collateral or other security adequate in the reasonable opinion of
Lessor, and (viii) Liens approved in writing by Lessor. Lessee will promptly,
at its own expense, take (or cause to be taken) such actions as may be necessary
duly to discharge any such Lien not excepted above if the same shall arise at
any time.
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia. (a)(I) Registration and Maintenance. Lessee, at its own
cost and expense, shall (or shall cause any Sublessee to): (i) forthwith upon
the delivery thereof hereunder, cause the Aircraft to be duly registered in the
name of Lessor, and, subject to the second paragraph of this Section 7(a) and
Section 8(f) of the Participation Agreement, to remain duly registered in the
name of Lessor under the Federal Aviation Act, provided that Lessor shall
execute and deliver all such documents as Lessee (or any Sublessee) may
reasonably request for the purpose of effecting and continuing such
registration, and shall not register the Aircraft or permit the Aircraft to be
registered under any laws other than the Federal Aviation Act at any time except
as provided in Section 8(f) of the Participation Agreement and shall cause the
Trust Indenture to be duly recorded and maintained of record as a first mortgage
on the Aircraft; (ii) maintain, service, repair and overhaul (or cause to be
maintained, serviced, repaired and overhauled) the Aircraft so as to keep the
Aircraft in as good an operating condition as delivered to Lessee hereunder,
ordinary wear and tear excepted, and as may be necessary to enable the
applicable airworthiness certification for the Aircraft to be maintained in good
standing at all times (other than during temporary periods of storage in
accordance with applicable regulations or during maintenance or modification
permitted hereunder) under the Federal Aviation Act, except when all British
Aerospace Avro 146-RJ85A aircraft powered by engines of the same type as those
with which the Airframe shall be equipped at the time of such grounding and
registered in the United States have been grounded by the FAA (although such
certification need actually be maintained only during such periods as the
Aircraft is registered in the United States), or the applicable laws of any
other jurisdiction in which the Aircraft may then be registered from time to
time in
-23-
accordance with Section 8(f) of the Participation Agreement, utilizing, except
during any period that a Sublease is in effect, the same manner and standard of
maintenance, service, repair or overhaul used by Lessee with respect to similar
aircraft operated by Lessee in similar circumstances and utilizing, during any
period that a Sublease is in effect, the same manner and standard of
maintenance, service, repair or overhaul used by the Sublessee with respect to
similar aircraft operated by the Sublessee in similar circumstances; provided,
however, that in all circumstances the Aircraft shall be maintained by Lessee
(or any Sublessee) in accordance with maintenance standards required by, or
substantially equivalent to those required by, the FAA or the central civil
aviation authority of Canada, France, Germany, Japan, the Netherlands or the
United Kingdom; (iii) maintain or cause to be maintained all records, logs and
other materials required to be maintained in respect of the Aircraft by the FAA
or the applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered; and (iv) promptly furnish or cause to be
furnished to Lessor and the Owner Participant such information as may be
required to enable Lessor to file any reports required to be filed by Lessor or
the Owner Participant with any governmental authority because of Lessor's
ownership of the Aircraft. (II) Operation. Lessee will not maintain, use,
service, repair, overhaul or operate the Aircraft (or permit any Sublessee to
maintain, use, service, repair, overhaul or operate the Aircraft) in violation
of any law or any rule, regulation, order or certificate of any government or
governmental authority (domestic or foreign) having jurisdiction, or in
violation of any airworthiness certificate, license or registration relating to
the Aircraft issued by any such authority, except to the extent Lessee (or, if a
Sublease is then in effect, any Sublessee) is contesting in good faith the
validity or application of any such law, rule, regulation or order in any
reasonable manner which does not materially adversely affect Lessor or, so long
as any Secured Certificates shall be outstanding, the first priority Lien of the
Trust Indenture and does not involve any material risk of sale, forfeiture or
loss of the Aircraft. Lessee will not operate the Aircraft, or permit any
Sublessee to operate the Aircraft, in any area excluded from coverage by any
insurance required by the terms of Section 11; provided, however, that the
failure of Lessee to comply with the provisions of this sentence shall not give
rise to an Event of Default hereunder where such failure is attributable to
causes beyond the reasonable control of Lessee (or any Sublessee) or to
extraordinary circumstances involving an isolated occurrence or series of
incidents not in the ordinary course of the regular operations of Lessee (or any
Sublessee) and in each such case Lessee (or such Sublessee, as the case may be)
is taking all reasonable steps to remedy such failure as soon as is reasonably
practicable.
At any time after the Depreciation Period, Lessor, upon compliance
with all of the terms of Section 8(f) of the Participation Agreement, shall, at
the request and sole expense of Lessee, cooperate with Lessee to take all
actions required to change the registration of the Aircraft to another country.
(b) Possession and Subleases. Lessee will not, without the prior
written consent of Lessor, sublease or otherwise in any manner deliver, transfer
or relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the Airframe or enter into any
Wet Lease; provided that, so long as no Default of the type referred to in
Section 14(a) or 14(e) or Event of Default shall have occurred and be continuing
at the time of such sublease, delivery, transfer or relinquishment of possession
or installation or such Wet Lease, and so long as the action to be taken shall
not deprive the
-24-
Indenture Trustee of the perfected first priority Lien of the Trust Indenture on
the Airframe or (subject to the further proviso (B) to clause (i) of this
Section 7(b)) any Engine, and so long as Lessee (or any Sublessee) shall comply
with the provisions of Sections 7(a) and 11 hereof, Lessee (or, except with
respect to clause (x) below, any Sublessee) may, without the prior written
consent of Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to
normal pooling or similar arrangements, in each case customary in the
airline industry and entered into by Lessee (or, if a Sublease is then
in effect, by Sublessee) in the ordinary course of its business;
provided that (A) no such agreement or arrangement contemplates or
requires the transfer of title to the Airframe, (B) if Lessor's title
to any Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall (or shall cause Sublessee
to) comply with Section 10(b) hereof in respect thereof, and (C) any
interchange agreement to which the Airframe may be subject shall be
with a U.S. Air Carrier or a Foreign Air Carrier;
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof (or for delivery thereto) or to any organization
(or for delivery thereto) for testing, service, repair, maintenance or
overhaul work on the Airframe or Engine or any part of any thereof or
for alterations or modifications in or additions to such Airframe or
Engine to the extent required or permitted by the terms of Section
8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee (or
any Sublessee) free and clear of all Liens, except: (A) Permitted
Liens and those which apply only to the engines (other than Engines),
appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of
third parties under interchange agreements which would be permitted
under clause (i) above, provided that Lessor's title to such Engine
and, if any Secured Certificates shall be outstanding, the first
priority Lien of the Trust Indenture shall not be divested or impaired
as a result thereof and (C) mortgage liens or other security
interests, provided that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide that such Engine
shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such
lease, conditional sale or other security agreement effectively
provides that such Engine
-25-
shall not become subject to the lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof
on such airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by Lessee
(or any Sublessee) subject to a conditional sale or other security
agreement under circumstances where neither subparagraph (iii) nor
subparagraph (iv) of this paragraph (b) is applicable, provided that
such installation shall be deemed an Event of Loss with respect to
such Engine and Lessee shall (or shall cause any Sublessee to) comply
with Section 10(b) hereof in respect thereof, Lessor not intending
hereby to waive any right or interest it may have to or in such Engine
under applicable law until compliance by Lessee with such Section
10(b);
(vi) to the extent permitted by Section 8(b) hereof, subject any
appliances, Parts or other equipment owned by Lessor and removed from
the Airframe or any Engine to any pooling arrangement referred to in
Section 8(b) hereof;
(vii) subject (or permit any Sublessee to subject) the
Airframe or any Engine to the Civil Reserve Air Fleet Program and
transfer (or permit any Sublessee to transfer) possession of the
Airframe or any Engine to the United States of America or any
instrumentality or agency thereof pursuant to the Civil Reserve Air
Fleet Program, so long as Lessee (or any Sublessee) shall (A) promptly
notify Lessor upon subjecting the Airframe or any Engine to the Civil
Reserve Air Fleet Program in any contract year and provide Lessor with
the name and address of the Contracting Office Representative for the
Air Mobility Command of the United States Air Force to whom notice
must be given pursuant to Section 15 hereof, and (B) promptly notify
Lessor upon transferring possession of the Airframe or any Engine to
the United States of America or any agency or instrumentality thereof
pursuant to such program;
(viii) for a period not to extend beyond the end of the Term,
enter into a Wet Lease for the Airframe and Engines or engines then
installed thereon with any third party; provided that if Lessee (or
any Sublessee) shall enter into any Wet Lease for a period of more
than one year (including renewal options) Lessee shall provide Lessor
written notice of such Wet Lease (such notice to be given prior to
entering into such Wet Lease, if practicable, but in any event
promptly after entering into such Wet Lease);
(ix) for a period not to extend beyond the end of the Term,
transfer possession of the Airframe or any Engine to the United States
of America or any instrumentality or agency thereof pursuant to a
contract, a copy of which shall be provided to Lessor; or
(x) Lessee may, at any time, enter into any sublease with (1) a
U.S. Air Carrier, (2) any Person approved in writing by Lessor, which
approval shall not be
-26-
unreasonably withheld or (3) after the Depreciation Period, any
Permitted Sublessee if (A) in any such case, the Sublessee under such
sublease is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
such sublease is entered into, (B) in the event that the Sublessee
under such sublease is a foreign air carrier (other than a foreign air
carrier principally based in Taiwan), the United States maintains
diplomatic relations with the country in which such proposed Sublessee
is principally based at the time such sublease is entered into (or, in
the case of a sublease to a proposed Sublessee principally based in
Taiwan, maintains diplomatic relations at least as good as those in
effect on the Delivery Date) and (C) in the event that the Sublessee
under such sublease is a foreign air carrier, Lessor and the Indenture
Trustee shall have received an opinion of counsel to Lessee to the
effect that (I) the terms of the proposed sublease will be legal,
valid, binding and (subject to customary exceptions in foreign
opinions generally) enforceable against the proposed Sublessee in the
country in which the proposed Sublessee is principally based, (II)
there exist no possessory rights in favor of the Sublessee under such
Sublease under the laws of such Sublessee's country of domicile that
would, upon bankruptcy or insolvency of or other default by Lessee and
assuming at such time such Sublessee is not insolvent or bankrupt,
prevent the return or repossession of the Aircraft in accordance with
the terms of this Lease, (III) the laws of such Sublessee's country of
domicile require fair compensation by the government of such
jurisdiction payable in currency freely convertible into Dollars for
the loss of use of the Aircraft in the event of the requisition by
such government of such use, and (IV) the laws of such Sublessee's
country of domicile would give recognition to Lessor's title to the
Aircraft, to the registry of the Aircraft in the name of the Lessor
(or Lessee, as "lessee", or the proposed Sublessee, as "sublessee", as
appropriate) and to the Lien of the Trustee Indenture, provided,
however, that no sublease entered into pursuant to this clause (x)
shall extend beyond the expiration of the Basic Term or any Renewal
Term then in effect unless Lessee shall have irrevocably committed to
purchase the Aircraft.
The rights of any Sublessee or other transferee who receives
possession by reason of a transfer permitted by this paragraph (b) (other than
the transfer of an Engine which is deemed an Event of Loss) shall be effectively
subject and subordinate to, and any Sublease permitted by this paragraph (b)
shall be expressly subject and subordinate to, all the terms of this Lease and
to the Lien of the Trust Indenture, including, without limitation, the covenants
contained in Section 7(a) hereof and Lessor's rights to repossession pursuant to
Section 15 hereof and to avoid such Sublease upon such repossession, and Lessee
shall remain primarily liable hereunder for the performance of all of the terms
of this Lease to the same extent as if such Sublease or transfer had not
occurred, and, except as otherwise provided herein, the terms of any such
Sublease shall not permit any Sublessee to take any action not permitted to be
taken by Lessee in this Lease with respect to the Aircraft. No pooling
agreement, sublease or other relinquishment of possession of the Airframe or any
Engine or Wet Lease shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or constitute a waiver of Lessor's rights or
remedies hereunder. Any sublease permitted under this Section 7(b) shall
-27-
expressly prohibit any further sub-sublease by the Sublessee. Lessor agrees,
for the benefit of Lessee (and any Sublessee) and for the benefit of any
mortgagee or other holder of a security interest in any engine (other than an
Engine) owned by Lessee (or any Sublessee), any lessor of any engine (other than
an Engine) leased to Lessee (or any Sublessee) and any conditional vendor of any
engine (other than an Engine) purchased by Lessee (or any Sublessee) subject to
a conditional sale agreement or any other security agreement, that no interest
shall be created hereunder in any engine so owned, leased or purchased and that
none of Lessor, its successors or assigns will acquire or claim, as against
Lessee (or any Sublessee) or any such mortgagee, lessor or conditional vendor or
other holder of a security interest or any successor or assignee of any thereof,
any right, title or interest in such engine as the result of such engine being
installed on the Airframe; provided, however, that such agreement of Lessor
shall not be for the benefit of any lessor or secured party of any airframe
(other than the Airframe) leased to Lessee (or any Sublessee) or purchased by
Lessee (or any Sublessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by Lessee (or any Sublessee), unless such
lessor, conditional vendor, other secured party or mortgagee has expressly
agreed (which agreement may be contained in such lease, conditional sale or
other security agreement or mortgage) that neither it nor its successors or
assigns will acquire, as against Lessor, any right, title or interest in an
Engine as a result of such Engine being installed on such airframe. Lessee
shall provide to the Owner Participant and the Indenture Trustee (i) written
notice of any Sublease hereunder (such notice to be given not later than five
days prior to entering into such Sublease, if practicable, but in any event
promptly after entering into any such Sublease) and (ii) a copy of each Sublease
which has a term of more than three months.
(c) Insignia. On or prior to the Delivery Date, or as soon as
practicable thereafter, Lessee agrees to affix and maintain (or cause to be
affixed and maintained), at its expense, in the cockpit of the Airframe adjacent
to the airworthiness certificate therein and on each Engine a nameplate bearing
the inscription:
Leased From
First Security Bank, National Association, as Owner Trustee,
Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien
of the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company,
as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents). Except as above provided, Lessee will
not allow the name of any Person to be placed on the Airframe or on any Engine
as a designation that might be interpreted as a claim of
-28-
ownership; provided that nothing herein contained shall prohibit Lessee (or any
Sublessee) from placing its customary colors and insignia on the Airframe or any
Engine.
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions. (a) Replacement of Parts. Lessee, at its own
cost and expense, will promptly replace or cause to be replaced all Parts which
may from time to time be incorporated or installed in or attached to the
Airframe or any Engine and which may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever, except as otherwise provided
in paragraph (c) of this Section 8 or if the Airframe or an Engine to which a
Part relates has suffered an Event of Loss. In addition, Lessee (or any
Sublessee) may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, provided that Lessee (or any Sublessee),
except as otherwise provided in paragraph (c) of this Section 8, will, at its
own cost and expense, replace such Parts as promptly as practicable. All
replacement Parts shall be free and clear of all Liens (except for Permitted
Liens and pooling arrangements to the extent permitted by paragraph (b) of this
Section 8 and except in the case of replacement property temporarily installed
on an emergency basis) and shall be in as good operating condition as, and shall
have a value and utility at least equal to, the Parts replaced assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof. Except as otherwise provided in paragraph (c) of this Section 8,
all Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts shall
be replaced by Parts which have been incorporated or installed in or attached to
the Airframe or such Engine and which meet the requirements for replacement
Parts specified above. Immediately upon any replacement part becoming
incorporated or installed in or attached to the Airframe or any Engine as above
provided, without further act (subject only to Permitted Liens and any pooling
arrangement to the extent permitted by paragraph (b) of this Section 8 and
except in the case of replacement property temporarily installed on an emergency
basis), (i) title to such replacement Part shall thereupon vest in Lessor, (ii)
such replacement Part shall become subject to this Lease and be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
Parts originally incorporated or installed in or attached to the Airframe or
such Engine, and (iii) title to the replaced Part shall thereupon vest in Lessee
(or, if a Sublease is then in effect, any Sublessee), free and clear of all
rights of Lessor, and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
Engine as provided in paragraph (a) of this Section 8 may be subjected by Lessee
(or any Sublessee) to a normal pooling arrangement customary in the airline
industry of which Lessee (or, if a Sublease is then in effect, any Sublessee) is
a party entered into in the ordinary course of Lessee's (or any Sublessee's)
business; provided that the Part replacing such removed Part shall be
incorporated or installed in or attached to such Airframe or Engine in
accordance with such paragraph (a) as promptly as practicable after the removal
of such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Airframe or any Engine in accordance with such
paragraph (a) may be owned by any third party subject to such a normal pooling
arrangement, provided that Lessee (or any Sublessee), at its expense, as
promptly thereafter as practicable, either (i) causes title to such replacement
Part to vest in Lessor in accordance with
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such paragraph (a) by Lessee (or any Sublessee) acquiring title thereto for the
benefit of, and transferring such title to, Lessor free and clear of all Liens
except Permitted Liens (other than pooling arrangements) or (ii) replaces such
replacement Part by incorporating or installing in or attaching to the Airframe
or Engine a further replacement Part owned by Lessee (or any Sublessee) free and
clear of all Liens except Permitted Liens (other than pooling arrangements) and
by causing title to such further replacement Part to vest in Lessor in
accordance with such paragraph (a).
(c) Alterations, Modifications and Additions. Lessee, at its own
expense, will make (or cause to be made) such alterations and modifications in
and additions to the Airframe and Engines as may be required from time to time
to meet the applicable standards of the FAA or any applicable regulatory agency
or body of any other jurisdiction in which the Aircraft may then be registered
as permitted by Section 8(f) of the Participation Agreement; provided, however,
that Lessee (or, if a Sublease is then in effect, any Sublessee) may, in good
faith, contest the validity or application of any such law, rule, regulation or
order in any reasonable manner which does not adversely affect Lessor or, so
long as any Secured Certificates are outstanding, the Indenture Trustee. In
addition, Lessee (or any Sublessee), at its own expense, may from time to time
add further parts or accessories and make such alterations and modifications in
and additions to the Airframe or any Engine as Lessee (or any Sublessee) may
deem desirable in the proper conduct of its business, including, without
limitation, removal of Parts which Lessee (or any Sublessee) has determined in
its reasonable judgment to be obsolete or no longer suitable or appropriate for
use on the Airframe or such Engine (such parts, "Obsolete Parts"); provided that
no such alteration, modification or addition shall materially diminish the
value, utility or remaining useful life of the Airframe or such Engine below
the value, utility or remaining useful life thereof immediately prior to such
alteration, modification or addition, assuming the Airframe or such Engine was
then in the condition required to be maintained by the terms of this Lease,
except that the value (but not the utility or remaining useful life) of the
Airframe or any Engine may be reduced by the value of Obsolete Parts which shall
have been removed so long as the aggregate value of all Obsolete Parts which
shall have been removed and not replaced shall not exceed $200,000. Title to
all Parts incorporated or installed in or attached or added to the Airframe or
an Engine as the result of such alteration, modification or addition (the
"Additional Parts") shall, without further act, vest in Lessor. Notwithstanding
the foregoing sentence, Lessee (or any Sublessee) may remove or suffer to be
removed any Additional Part, provided that such Additional Part (i) is in
addition to, and not in replacement of or substitution for, any Part originally
incorporated or installed in or attached to the Airframe or any Engine at the
time of delivery thereof hereunder or any Part in replacement of, or
substitution for, any such Part, (ii) is not required to be incorporated or
installed in or attached or added to the Airframe or any Engine pursuant to the
terms of Section 7 hereof or the first sentence of this paragraph (c) and (iii)
can be removed from the Airframe or such Engine without diminishing or impairing
the value, utility or remaining useful life which the Airframe or such Engine
would have had at the time of removal had such alteration, modification or
addition not occurred, assuming that such Airframe or Engine was in the
condition and repair required to be maintained by the terms hereof. Upon the
removal by Lessee (or Sublessee) of any Part as provided above, title thereto
shall, without further act, vest in Lessee (or any Sublessee, as the case may
be) and such Part shall no longer be deemed part of the Airframe or Engine from
which it was removed. Any Part not removed by
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Lessee (or any Sublessee) as above provided prior to the return of the Airframe
or Engine to Lessor hereunder shall remain the property of Lessor.
SECTION 9. Voluntary Termination. (a) Termination Event. (1)
[Intentionally Omitted].
(2) Lessee shall have the right to elect to terminate this Lease on
any Lease Period Date occurring on or after the fifth anniversary of the
Delivery Date if Lessee shall have made the good faith determination, which
shall be evidenced by a resolution duly adopted by its Board of Directors (or
the Executive Committee thereof), that the Aircraft is obsolete or surplus to
its needs.
(3) Lessee shall give to Lessor at least one hundred twenty (120)
days' revocable advance written notice of Lessee's intention to so terminate
this Lease (any such notice, a "Termination Notice") specifying (i) the Lease
Period Date on which Lessee intends to terminate this Lease in accordance with
this Section 9 (such specified date, a "Termination Date") and (ii) that Lessee
has determined that the Aircraft is obsolete or surplus to its needs. Any
Termination Notice shall become irrevocable fifteen (15) days prior to the
Termination Date.
(b) [Intentionally Omitted].
(c) Optional Sale of the Aircraft. In the event that Lessee shall
have exercised its right to terminate this Lease under Section 9(a)(2), then
during the period from the giving of the notice referred to in Section 9(a)(3)
until the proposed Termination Date (unless Lessee shall have revoked the
Termination Notice specifying such proposed Termination Date), Lessee, as agent
for Lessor and at no expense to Lessor, shall use commercially reasonable
efforts to obtain bids in the worldwide market for the purchase of the Aircraft
and, in the event it receives any bid, Lessee shall, within five Business Days
after receipt thereof and at least ten Business Days prior to the proposed
Termination Date, certify to Lessor in writing the amount and terms of such bid,
and the name and address of the party or parties (who shall not be Lessee or any
Affiliate of Lessee or any Person with whom Lessee or any such Affiliate has an
arrangement or understanding regarding the future use of the Aircraft by Lessee
or any such Affiliate but who may be the Owner Participant, any Affiliate
thereof or any Person contacted by the Owner Participant) submitting such bid.
After Lessee shall have certified to Lessor all bids received, the Owner
Participant, any Affiliate thereof or any Person contacted by the Owner
Participant may submit a further bid or bids to Lessee not later than five
Business Days prior to the Termination Date proposed by Lessee (unless Lessee
shall have revoked the Termination Notice specifying such proposed Termination
Date). Subject to the next succeeding sentence, on or before the Termination
Date, subject to the release of all mortgage and security interests with respect
to the Aircraft under the Trust Indenture: (1) Lessee shall deliver the
Aircraft, or cause the Aircraft to be delivered, to the bidder(s), if any, which
shall have submitted the highest bid therefor at least ten (or, in the case of
the Owner Participant, any Affiliate thereof, or Person contacted by the Owner
Participant, five) Business Days prior to such Termination Date, in the same
manner and in the same condition and otherwise in accordance with all the terms
of this Lease as if delivery were made to Lessor pursuant to Section 5, and
shall duly transfer to Lessor title to any engines
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not owned by Lessor all in accordance with the terms of Section 5, (2) Lessor
shall comply with the terms of the Trust Indenture and shall, without recourse
or warranty (except as to the absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the definition
of Lessor Liens), subject to prior or concurrent payment by Lessee of all
amounts due under clause (3) of this sentence, sell all of Lessor's right, title
and interest in and to the Aircraft for cash in Dollars to such bidder(s), the
total sales price realized at such sale to be retained by Lessor, and (3) Lessee
shall simultaneously pay or cause to be paid to Lessor in funds of the type
specified in Section 3(f) hereof, an amount equal to the sum of (A) the excess,
if any, of (i) the Termination Value for the Aircraft, computed as of the
Termination Date, over (ii) the sales price of the Aircraft sold by Lessor after
deducting the reasonable expenses incurred by Lessor in connection with such
sale, (B) all unpaid Basic Rent with respect to the Aircraft due prior to such
Termination Date and, if such Basic Rent is payable in arrears on such
Termination Date as indicated on Exhibit B, on such Termination Date, and all
unpaid Supplemental Rent due on or prior to the Termination Date with respect to
the Aircraft, and (C) the Make-Whole Amount, if any, due on the Secured
Certificates, and upon such payment Lessor simultaneously will transfer to
Lessee, without recourse or warranty (except as to the absence of Lessor Liens,
including for this purpose Liens which would be Lessor Liens but for the proviso
in the definition of Lessor Liens), all of Lessor's right, title and interest in
and to any Engines constituting part of the Aircraft which were not sold with
the Aircraft. Notwithstanding the preceding sentence, Lessor may, if Lessee has
not revoked the Termination Notice, elect to retain title to the Aircraft. If
Lessor so elects, Lessor shall give to Lessee written notice of such election at
least five Business Days prior to the Termination Date accompanied by an
irrevocable undertaking by the Owner Participant to make available to the Lessor
for payment to the Indenture Trustee on the Termination Date the amount required
to pay in full the unpaid principal amount of the Secured Certificates
outstanding on the Termination Date plus interest accrued thereon through the
Termination Date together with the Make-Whole Amount, if any, due on the Secured
Certificates, if the same is not otherwise paid. Upon receipt of notice of such
an election by Lessor and the accompanying undertaking by the Owner Participant,
Lessee shall cease its efforts to obtain bids as provided above and shall reject
all bids theretofore or thereafter received. On the Termination Date, Lessor
shall (subject to the payment by Lessee of all Rent due on or prior to such date
as set forth below) pay in full the unpaid principal amount of the Secured
Certificates outstanding on the Termination Date plus interest accrued thereon
through the Termination Date together with all Make-Whole Amount, if any, due on
the Secured Certificates and, so long as the Secured Certificates are paid as
aforesaid, Lessee shall deliver the Airframe and Engines or engines to Lessor in
accordance with Section 5 and shall pay all Basic Rent due prior to the
Termination Date and, if such Basic Rent is payable in arrears on such
Termination Date as indicated on Exhibit B, on such Termination Date, and all
Supplemental Rent (other than Make-Whole Amount or Termination Value) due on or
prior to the Termination Date. If no sale shall have occurred on the
Termination Date and Lessor has not made the payment contemplated by the
preceding sentence and thereby caused this Lease to terminate, or if Lessee
revokes its Termination Notice, this Lease shall continue in full force and
effect as to the Aircraft, Lessee shall pay the reasonable costs and expenses
incurred by the Owner Participant and Lessor (unless such failure to terminate
the Lease is a consequence of the failure of Lessor or the Owner Participant
without due cause to make, or cause to be made, the payment referred to in the
immediately preceding sentence), if any, in connection with preparation for such
sale and Lessee
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may give one or more additional Termination Notices in accordance with Section
9(a)(2), subject to the last sentence of this Section 9(c). In the event of any
such sale or such retention of the Aircraft by Lessor and upon compliance by
Lessee with the provisions of this paragraph, the obligation of Lessee to pay
Basic Rent or any other amounts hereunder shall cease to accrue and this Lease
shall terminate. Lessor may, but shall be under no duty to, solicit bids,
inquire into the efforts of Lessee to obtain bids or otherwise take any action
in connection with any such sale other than to transfer (in accordance with the
foregoing provisions) to the purchaser named in the highest bid certified by
Lessee to Lessor all of Lessor's right, title and interest in the Aircraft,
against receipt of the payments provided herein. Lessee may revoke a
Termination Notice given pursuant to Section 9(a)(2) no more than two times
during the Term.
(d) Termination as to Engines. So long as no Event of Default shall
have occurred and be continuing, Lessee shall have the right at its option at
any time during the Term, on at least thirty (30) days' prior written notice, to
terminate this Lease with respect to any Engine. In such event, and prior to
the date of such termination, Lessee shall replace such Engine hereunder by
complying with the terms of Section 10(b) to the same extent as if an Event of
Loss had occurred with respect to such Engine, and Lessor shall transfer such
right, title and interest as it may have to the replaced Engine as provided in
Section 5(b). No termination of this Lease with respect to any Engine as
contemplated by this Section 9(d) shall result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of
Loss with Respect to the Aircraft. Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and the Engines and/or engines then
installed thereon, Lessee shall forthwith (and in any event, within fifteen (15)
days after such occurrence) give Lessor written notice of such Event of Loss,
and within forty-five (45) days after such Event of Loss Lessee shall give
Lessor written notice of its election to perform one of the following options
(it being agreed that if Lessee shall not have given such notice of election
within such period, Lessee shall be deemed to have elected the option set forth
in clause (i) below). Lessee may elect either to:
(i) make the payments specified in this clause (i), in which
event not later than the earlier of (x) the Business Day next
succeeding the 120th day following the occurrence of such Event of
Loss or (y) an earlier Business Day irrevocably specified fifteen (15)
days in advance by notice from Lessee to Lessor and the Indenture
Trustee (the "Loss Payment Date"), Lessee shall pay or cause to be
paid to Lessor in funds of the type specified in Section 3(f) hereof,
an amount equal to the Stipulated Loss Value of the Aircraft
corresponding to the Stipulated Loss Value Date occurring on or
immediately following the Loss Payment Date; provided, however, that
if a Lease Period Date shall occur prior to the Loss Payment Date with
respect to which Stipulated Loss Value is determined, Lessee shall pay
on such Lease Period Date an amount equal to the Basic Rent that would
have been due on such Lease Period Date if such Event of Loss had not
occurred, or
(ii)substitute an aircraft or an airframe or an airframe and one
or more engines, as the case may be;
-33-
provided that, if Lessee does not perform its obligation to effect such
substitution in accordance with this Section 10(a), during the period of time
provided herein, then Lessee shall pay or cause to be paid to Lessor on the
Business Day next succeeding the 120th day following the occurrence of such
Event of Loss the amount specified in clause (i) above.
At such time as Lessor shall have received the amounts specified in
subparagraph (i) above, together with all other amounts that then may be due
hereunder (including, without limitation, all Basic Rent due before the date of
such payment and all Supplemental Rent), under the Participation Agreement and
under the Tax Indemnity Agreement, (1) the obligation of Lessee to pay the
installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue, (2) this Lease
shall terminate, (3) Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), all of Lessor's right, title and interest in and to the Airframe and any
Engines subject to such Event of Loss, as well as any Engines not subject to
such Event of Loss, and furnish to or at the direction of Lessee a ▇▇▇▇ of sale
in form and substance reasonably satisfactory to Lessee (or any Sublessee),
evidencing such transfer, and (4) Lessee will be subrogated to all claims of
Lessor, if any, against third parties, for damage to or loss of the Airframe and
any Engines which were subject to such Event of Loss to the extent of the then
insured value of the Aircraft.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall, at its sole expense, not later than the Business Day next succeeding the
120th day following the occurrence of such Event of Loss, (A) convey or cause to
be conveyed to Lessor and to be leased by Lessee hereunder, an aircraft (or an
airframe or an airframe and one or more engines which, together with the Engines
constituting a part of the Aircraft but not installed thereon at the time of
such Event of Loss constitute the Aircraft) free and clear of all Liens (other
than Permitted Liens) and having a value, utility and remaining useful life at
least equal to the Aircraft subject to such Event of Loss assuming that the
Aircraft had been maintained in accordance with this Lease; provided that any
aircraft, airframe or engine so substituted hereunder shall be of the same or
improved model as those initially leased hereunder and (B) prior to or at the
time of any such substitution, Lessee (or any Sublessee), at its own expense,
will (1) furnish Lessor with a full warranty ▇▇▇▇ of sale and a Federal Aviation
Administration ▇▇▇▇ of sale, in form and substance reasonably satisfactory to
Lessor, evidencing such transfer of title, (2) cause a Lease Supplement and a
Trust Supplement to be duly executed by Lessee and filed for recording pursuant
to the Federal Aviation Act, or the applicable laws, rules and regulations of
any other jurisdiction in which the Airframe may then be registered as permitted
by Section 8(f) of the Participation Agreement, (3) cause a financing statement
or statements with respect to such substituted property to be filed in such
place or places as are deemed necessary or desirable by Lessor to perfect its
and the Indenture Trustee's interest therein and herein, (4) furnish Lessor with
such evidence of compliance with the insurance provisions of Section 11 with
respect to such substituted property as Lessor may reasonably request, (5)
furnish Lessor with copies of the documentation required to be provided by
Lessee pursuant to Section 5.06 of the Trust Indenture, and Lessor
simultaneously will comply with the terms of the Trust Indenture and transfer to
or at the direction of Lessee, without recourse or warranty (except as to the
absence of Lessor Liens, including for this purpose Liens
-34-
which would be Lessor Liens but for the proviso in the definition of Lessor
Liens), all of Lessor's right, title and interest, if any, in and to the
Aircraft or the Airframe and one or more Engines, as the case may be, with
respect to which such Event of Loss occurred and furnish to or at the direction
of Lessee a ▇▇▇▇ of sale in form and substance reasonably satisfactory to Lessee
(or any Sublessee), evidencing such transfer, (6) furnish Lessor with an opinion
of counsel (which shall be Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ and, if not, other
counsel chosen by Lessee and reasonably acceptable to Lessor) reasonably
satisfactory to Lessor to the effect that Lessor and the Indenture Trustee as
assignee of Lessor will be entitled to the benefits of Section 1110 of the U.S.
Bankruptcy Code with respect to the substitute aircraft, provided that such
opinion need not be delivered to the extent that immediately prior to such
substitution the benefits of Section 1110 of the U.S. Bankruptcy Code were not,
solely by reason of a change in law or governmental interpretation thereof,
available to Lessor and, so long as any Secured Certificates are outstanding,
the Indenture Trustee as assignee of Lessor's rights under the Lease with
respect to the Aircraft, and (7) Lessee will be subrogated to all claims of
Lessor, if any, against third parties for damage to or loss of the Airframe and
any Engine which were subject to such Event of Loss to the extent of the then
insured value of the Aircraft. For all purposes hereof, the property so
substituted shall after such transfer be deemed part of the property leased
hereunder and shall be deemed an "Aircraft", "Airframe" and "Engine", as the
case may be, as defined herein. No Event of Loss with respect to the Airframe
or the Airframe and the Engines or engines then installed thereon for which
substitution has been elected pursuant to Section 10(a)(ii) hereof shall result
in any reduction in Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the occurrence of
an Event of Loss with respect to an Engine under circumstances in which there
has not occurred an Event of Loss with respect to the Airframe, Lessee shall
forthwith (and in any event, within fifteen days after such occurrence) give
Lessor written notice thereof and shall, within sixty (60) days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, as
replacement for the Engine with respect to which such Event of Loss occurred,
title to another AlliedSignal LF507 type engine (or engine of the same or
another manufacturer of the same, an equivalent or an improved model and
suitable for installation and use on the Airframe without impairing the value,
utility or remaining useful life of the Aircraft; provided that all Engines
shall be of the same make and model) free and clear of all Liens (other than
Permitted Liens, which engine may upon its transfer to Lessor become subject to
any and all Permitted Liens) and having a value, utility and remaining useful
life at least equal to the Engine subject to such Event of Loss assuming that
such Engine had been maintained in accordance with this Lease. Prior to or at
the time of any such conveyance, Lessee, at its own expense, will (i) furnish
Lessor with a warranty (as to title) ▇▇▇▇ of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such replacement engine, (ii)
cause a Lease Supplement and Trust Supplement to be duly executed by Lessee and
to be filed for recording pursuant to the Federal Aviation Act, or the
applicable laws, rules and regulations of any other jurisdiction in which the
Airframe may then be registered as permitted by Section 8(f) of the
Participation Agreement, (iii) furnish Lessor with such evidence of compliance
with the insurance provisions of Section 11 hereof with respect to such
replacement engine as Lessor may reasonably request and furnish Lessor with
copies of the documentation required to be provided by Lessee pursuant to
Section 5.06 of the Trust Indenture, and Lessor will comply with the terms of
the Trust Indenture and transfer to or at the direction of Lessee without
recourse or warranty (except as to absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the definition
of Lessor Liens) all of Lessor's right, title and interest, if any, in and to
(A) the Engine with respect to which such Event of Loss occurred and furnish to
or
-35-
at the direction of Lessee a ▇▇▇▇ of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if any,
against third parties, for damage to or loss of the Engine subject to such Event
of Loss, and such Engine shall thereupon cease to be the Engine leased
hereunder. For all purposes hereof, each such replacement engine shall, after
such conveyance, be deemed part of the property leased hereunder, and shall be
deemed an "Engine". No Event of Loss with respect to an Engine under the
circumstances contemplated by the terms of this paragraph (b) shall result in
any reduction in Basic Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with respect
to an Event of Loss will be applied as follows:
(i) if payments are received with respect to the Airframe (or
the Airframe and any Engine or engines then installed thereon), (A)
unless the same are replaced pursuant to the last paragraph of Section
10(a), after reimbursement of Lessor (as provided in Section 7.01 of
the Trust Agreement) for reasonable costs and expenses, so much of
such payments remaining as shall not exceed the Stipulated Loss Value
required to be paid by Lessee pursuant to Section 10(a), shall be
applied in reduction of Lessee's obligation to pay Stipulated Loss
Value, if not already paid by Lessee, or, if already paid by Lessee,
shall be applied to reimburse Lessee for its payment of Stipulated
Loss Value, and following the foregoing application, the balance, if
any, of such payments will be paid over to, or retained by Lessee,
provided that Lessor shall be entitled to so much of the excess, if
any, of such payment over the greater of (x) the Stipulated Loss Value
and (y) the fair market value of the Aircraft as Lessor shall
demonstrate to Lessee's reasonable satisfaction is attributable to
compensation for loss of Lessor's interest in the Aircraft as
distinguished from the loss of use of the Aircraft; or (B) if such
property is replaced pursuant to the last paragraph of Section 10(a),
such payments shall be paid over to, or retained by, Lessee; provided
that Lessee shall have fully performed or, concurrently therewith,
will fully perform the terms of the last paragraph of Section 10(a)
with respect to the Event of Loss for which such payments are made;
and
(ii) if such payments are received with respect to an Engine
under circumstances contemplated by Section 10(b) hereof, so much of
such payments remaining after reimbursement of Lessor (as provided for
in Section 7.01 of the Trust Agreement) for reasonable costs and
expenses shall be paid over to, or retained by, Lessee, provided that
Lessee shall have fully performed, or concurrently therewith will
perform, the terms of Section 10(b) with respect to the Event of Loss
for which such payments are made.
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(d) Requisition for Use of the Aircraft by the United States
Government or the Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other government
of registry of the Aircraft or any instrumentality or agency of any thereof,
Lessee shall promptly notify Lessor of such requisition, and all of Lessee's
obligations under this Lease Agreement with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred, provided
that if such Airframe and Engines or engines installed thereon are not returned
by such government prior to the end of the Term, Lessee shall be obligated to
return the Airframe and such Engines or engines to Lessor pursuant to, and in
all other respects in compliance with the provisions of, Section 5 promptly on
the date of such return by such government. If, in the event of any such
requisition, Lessee shall fail to return the Aircraft on or before the thirtieth
day beyond the end of the Term, such failure shall constitute an Event of Loss
which shall be deemed to have occurred on the last day of the Term and in such
event Lessee shall make the payment contemplated by Section 10(a)(i) in respect
of such Event of Loss; provided, however, that Lessor may notify Lessee in
writing on or before the twentieth day prior to the last day of the Term that,
in the event Lessee shall fail by reason of such requisition to return the
Airframe and such Engines or engines on or before the thirtieth day beyond the
end of the Term, such failure shall not be deemed an Event of Loss. Upon the
giving of such notice and such failure to return by the thirtieth day beyond the
end of the Term, Lessee shall be relieved of all of its obligations pursuant to
the provisions of Section 5 (including Exhibits G and H) but not under any other
Section, except that if any engine not owned by Lessor shall then be installed
on the Airframe, Lessee will, at no cost to Lessor, furnish, or cause to be
furnished, to Lessor a full warranty (as to title) ▇▇▇▇ of sale with respect to
each such engine, in form and substance reasonably satisfactory to Lessor
(together with an opinion of counsel to the effect that such full warranty ▇▇▇▇
of sale has been duly authorized and delivered and is enforceable in accordance
with its terms and that such engines are free and clear of Liens other than
Lessor Liens (including for this purpose Liens which would be Lessor Liens but
for the proviso in the definition of Lessor Liens), Loan Participant Liens and
Indenture Trustee Liens), against receipt from Lessor of a ▇▇▇▇ of sale
evidencing the transfer, without recourse or warranty (except as to the absence
of Lessor Liens, including for this purpose Liens which would be Lessor Liens
but for the proviso in the definition of Lessor Liens), by Lessor to Lessee or
its designee of all of Lessor's right, title and interest in and to any Engine
constituting part of the Aircraft but not then installed on the Airframe. All
payments received by Lessor or Lessee from such government for the use of such
Airframe and Engines or engines during the Term shall be paid over to, or
retained by, Lessee (or, if directed by Lessee, any Sublessee); and all payments
received by Lessor or Lessee from such government for the use of such Airframe
and Engines or engines after the end of the Term shall be paid over to, or
retained by, Lessor unless Lessee shall have exercised its purchase option
hereunder, in which case such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States Government
or the Government of Registry of the Aircraft. In the event of the requisition
for use of an Engine by the United States Government or any other government of
registry of the Aircraft or any agency or instrumentality of any thereof (other
than in the circumstances contemplated by subsection (d)), Lessee shall replace
such Engine hereunder by complying (or causing any Sublessee to comply)
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with the terms of Section 10(b) to the same extent as if an Event of Loss had
occurred with respect thereto, and, upon compliance with Section 10(b) hereof,
any payments received by Lessor or Lessee from such government with respect to
such requisition shall be paid over to, or retained by, Lessee.
(f) Application of Payments During Existence of Event of Default.
Any amount referred to in this Section 10 which is payable to or retainable by
Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or such
Sublessee) if at the time of such payment or retention an Event of Default shall
have occurred and be continuing, but shall be held by or paid over to Lessor as
security for the obligations of Lessee (or such Sublessee) under this Lease and,
if Lessor declares this Lease to be in default pursuant to Section 15 hereof,
applied against Lessee's obligations hereunder as and when due. At such time as
there shall not be continuing any such Event of Default, such amount shall be
paid to Lessee (or such Sublessee) to the extent not previously applied in
accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
Insurance. (I) Except as provided in clause (II) of this Section 11(a), Lessee
will carry or cause to be carried at its or any Sublessee's expense (i)
aircraft public liability (including, without limitation, passenger legal
liability) (and including aircraft war risk and hijacking insurance, if and to
the extent the same is maintained by Lessee (or, if a Sublease is then in
effect, if and to the extent maintained by Sublessee) with respect to other
aircraft owned or leased, and operated by Lessee (or such Sublessee) on the same
routes) insurance and property damage insurance (exclusive of manufacturer's
product liability insurance) with respect to the Aircraft, in an amount not less
than the greater of (x) the amount of public liability and property damage
insurance from time to time applicable to aircraft owned or operated by Lessee
(or, if a Sublease is then in effect, by Sublessee) of the same type as the
Aircraft and (y) such amount per occurrence as may have been agreed to on the
Delivery Date by the Owner Participant and (ii) cargo liability insurance, in
the case of both clause (i) and clause (ii), (A) of the type and covering the
same risks as from time to time applicable to aircraft operated by Lessee (or,
if a Sublease is then in effect, by Sublessee) of the same type as the Aircraft
and (B) which is maintained in effect with insurers of recognized
responsibility. Any policies of insurance carried in accordance with this
paragraph (a) and any policies taken out in substitution or replacement for any
of such policies (A) shall be amended to name Lessor, in its individual capacity
and as owner trustee, the Indenture Trustee and the Owner Participant (but
without imposing on any such parties liability to pay the premiums for such
insurance) (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) as additional insureds as their respective
interests may appear, (B) shall provide that in respect of the respective
interests of Lessor, the Indenture Trustee and the Owner Participant (and, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) in such policies the insurance shall not be invalidated by any action
or inaction of Lessee (or, if any Sublease is then in effect, any Sublessee) or
any other Person and shall insure Lessor, the Indenture Trustee and the Owner
Participant (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Lessee (or, if
any Sublease is then in effect, any Sublessee), (C) may provide for
self-insurance to the extent permitted by Section 11(d) and (D) shall provide
that if the insurers cancel such insurance for any reason whatever or if any
material change is made in
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such insurance which adversely affects the interest of Lessor, the Indenture
Trustee or the Owner Participant (or, if any Sublease shall be in effect, Lessee
in its capacity as sublessor under the Sublease), or such insurance shall lapse
for non-payment of premium, such cancellation, lapse or change shall not be
effective as to Lessor, the Indenture Trustee or the Owner Participant (or, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) for thirty (30) days (seven (7) days in the case of war risk and
allied perils coverage) after issuance to Lessor, the Indenture Trustee or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease), respectively, of written notice by
such insurers of such cancellation, lapse or change; provided, however, that if
any notice period specified above is not reasonably obtainable, such policies
shall provide for as long a period of prior notice as shall then be reasonably
obtainable. Each liability policy (1) shall be primary without right of
contribution from any other insurance which is carried by Lessor, the Indenture
Trustee or the Owner Participant (or, if any Sublease shall be in effect, Lessee
in its capacity as sublessor under the Sublease), (2) shall expressly provide
that all of the provisions thereof, except the limits of liability, shall
operate in the same manner as if there were a separate policy covering each
insured, and (3) shall waive any right of the insurers to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of Lessor or the Indenture Trustee or the Owner
Participant (or, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) to the extent of any moneys due to Lessor, the
Indenture Trustee or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease).
(II) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (I) above, insurance otherwise conforming with the provisions
of said clause (I) except that (A) the amounts of coverage shall not be required
to exceed the amounts of public liability and property damage insurance from
time to time applicable to aircraft owned or operated by Lessee (or, if a
Sublease is then in effect, by Sublessee) of the same type as the Aircraft which
are on the ground and not in operation; and (B) the scope of the risks covered
and the type of insurance shall be the same as from time to time shall be
applicable to aircraft owned or operated by Lessee (or, if a Sublease is then in
effect, by Sublessee) of the same type which are on the ground and not in
operation.
(b) Insurance Against Loss or Damage to the Aircraft. (I) Except as
provided in clause (II) of this Section 11(b), Lessee shall maintain or cause to
be maintained in effect, at its or any Sublessee's expense, with insurers of
recognized responsibility, all-risk ground and flight aircraft hull insurance
covering the Aircraft and all-risk ground and flight coverage of Engines and
Parts while temporarily removed from the Aircraft and not replaced by similar
components (including, without limitation, war risk and governmental
confiscation and expropriation (other than by the government of registry of the
Aircraft) and hijacking insurance, if and to the extent the same is maintained
by Lessee (or, if a Sublease is then in effect, by Sublessee) with respect to
other aircraft owned or operated by Lessee (or such Sublessee) on the same
routes, except that Lessee (or such Sublessee) shall maintain war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance if the Aircraft is operated on
routes where the custom is for major international air carriers flying
comparable routes to carry such insurance) which is of the type as from time to
time applicable to
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aircraft owned or operated by Lessee (or, if a Sublease is then in effect, by
Sublessee) of the same type as the Aircraft; provided that such insurance shall
at all times while the Aircraft is subject to this Lease be for an amount
(subject to self-insurance to the extent permitted by Section 11(d)) not less
than the Stipulated Loss Value for the Aircraft. Any policies carried in
accordance with this paragraph (b) covering the Aircraft and any policies taken
out in substitution or replacement for any such policies (i) shall name Lessor,
as owner trustee, the Indenture Trustee and the Owner Participant (and, if any
Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) as additional insureds, as their respective interests may appear (but
without imposing on any such party liability to pay premiums with respect to
such insurance), (ii) may provide for self-insurance to the extent permitted in
Section 11(d), (iii) shall provide that (A) in the event of a loss involving
proceeds in excess of $3,500,000 (or, if the Aircraft is then under a Sublease,
in excess of $2,000,000), the proceeds in respect of such loss up to an amount
equal to the Stipulated Loss Value for the Aircraft shall be payable to Lessor
(or, so long as the Trust Indenture shall not have been discharged, the
Indenture Trustee) (except in the case of a loss with respect to an Engine
installed on an airframe other than the Airframe, in which case Lessee (or any
Sublessee) shall arrange for any payment of insurance proceeds in respect of
such loss to be held for the account of Lessor (or, so long as the Trust
Indenture shall not have been discharged, the Indenture Trustee) whether such
payment is made to Lessee (or any Sublessee) or any third party), it being
understood and agreed that in the case of any payment to Lessor (or the
Indenture Trustee) otherwise than in respect of an Event of Loss, Lessor (or the
Indenture Trustee) shall, upon receipt of evidence satisfactory to it that the
damage giving rise to such payment shall have been repaired or that such payment
shall then be required to pay for repairs then being made, pay the amount of
such payment to Lessee or its order, and (B) the entire amount of any loss
involving proceeds of $3,500,000 (or, if the Aircraft is then under a Sublease,
of $2,000,000) or less or the amount of any proceeds of any loss in excess of
the Stipulated Loss Value for the Aircraft shall be paid to Lessee or its order
unless an Event of Default shall have occurred and be continuing and the
insurers have been notified thereof by Lessor or the Indenture Trustee, (iv)
shall provide that if the insurers cancel such insurance for any reason
whatever, or such insurance lapses for non-payment of premium or if any material
change is made in the insurance which adversely affects the interest of Lessor,
the Indenture Trustee or the Owner Participant, such cancellation, lapse or
change shall not be effective as to Lessor, the Indenture Trustee or the Owner
Participant (or, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) for thirty (30) days (seven (7) days in the case
of hull war risk and allied perils coverage) after issuance to Lessor, the
Indenture Trustee or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), respectively,
of written notice by such insurers of such cancellation, lapse or change,
provided, however, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior notice as
shall then be reasonably obtainable, (v) shall provide that in respect of the
respective interests of Lessor, the Indenture Trustee and the Owner Participant
(and, if any Sublease shall be in effect, Lessee in its capacity as sublessor
under the Sublease) in such policies the insurance shall not be invalidated by
any action or inaction of Lessee (or, if a Sublease is then in effect, any
Sublessee) or any other Person and shall insure the respective interests of
Lessor, the Indenture Trustee and the Owner Participant (and, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), as
they appear, regardless of any breach or violation of any warranty, declaration
or condition contained in such policies by Lessee
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(or, if a Sublease is then in effect, any Sublessee), (vi) shall be primary
without any right of contribution from any other insurance which is carried by
Lessor, the Owner Participant or the Indenture Trustee (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease),
(vii) shall waive any right of subrogation of the insurers against Lessor, the
Owner Participant and the Indenture Trustee (and, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), and (viii)
shall waive any right of the insurers to set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
Lessor, the Indenture Trustee, the Owner Participant or Lessee (or any
Sublessee) to the extent of any moneys due to Lessor, the Indenture Trustee or
the Owner Participant. In the case of a loss with respect to an engine (other
than an Engine) installed on the Airframe, Lessor shall hold any payment to it
of any insurance proceeds in respect of such loss for the account of Lessee or
any other third party that is entitled to receive such proceeds.
As between Lessor and Lessee, it is agreed that all insurance payments
received as the result of the occurrence of an Event of Loss will be applied as
follows:
(x) if such payments are received with respect to the Airframe
(or the Airframe and the Engines installed thereon), (i) unless such
property is replaced pursuant to the last paragraph of Section 10(a),
so much of such payments remaining, after reimbursement of Lessor (as
provided in Section 7.01 of the Trust Agreement) for reasonable costs
and expenses, as shall not exceed the Stipulated Loss Value required
to be paid by Lessee pursuant to Section 10(a) hereof shall be applied
in reduction of Lessee's obligation to pay such Stipulated Loss Value,
if not already paid by Lessee, or, if already paid by Lessee, shall be
applied to reimburse Lessee for its payment of such Stipulated Loss
Value, and the balance, if any, of such payments remaining thereafter
will be paid over to, or retained by, Lessee (or if directed by
Lessee, any Sublessee); or (ii) if such property is replaced pursuant
to the last paragraph of Section 10(a), such payments shall be paid
over to, or retained by, Lessee (or if directed by Lessee, any
Sublessee), provided that Lessee shall have fully performed, or
concurrently therewith will fully perform, the terms of the last
paragraph of Section 10(a) with respect to the Event of Loss for which
such payments are made; and
(y) if such payments are received with respect to an Engine
under the circumstances contemplated by Section 10(b) hereof, so much
of such payments remaining, after reimbursement of Lessor (as provided
in Section 7.01 of the Trust Agreement) for reasonable costs and
expenses, shall be paid over to, or retained by, Lessee (or if
directed by Lessee, any Sublessee), provided that Lessee shall have
fully performed, or concurrently therewith will fully perform, the
terms of Section 10(b) with respect to the Event of Loss for which
such payments are made.
As between Lessor and Lessee, the insurance payments for any property
damage loss to the Airframe or any engine not constituting an Event of Loss with
respect thereto will be applied in payment for repairs or for replacement
property in accordance with the terms of Sections 7 and 8, if not already paid
for by Lessee (or any Sublessee), and any balance (or if
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already paid for by Lessee (or any Sublessee), all such insurance proceeds)
remaining after compliance with such Sections with respect to such loss shall be
paid to Lessee (or any Sublessee if directed by Lessee).
(II) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (I) above, insurance otherwise conforming with the provisions
of said clause (I) except that the scope of the risks and the type of insurance
shall be the same as from time to time applicable to aircraft owned or operated
by Lessee (or, if a Sublease is then in effect, by Sublessee) of the same type
similarly on the ground and not in operation, provided that Lessee shall
maintain insurance against risk of loss or damage to the Aircraft in an amount
equal to the Stipulated Loss Value of the Aircraft during such period that the
Aircraft is on the ground and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished, to
Lessor, the Indenture Trustee and the Owner Participant, on or before the
Delivery Date and on or before July 1 in each year thereafter during the Term
commencing July, 1998, a report, signed by Aon Risk Services, Inc., Aon Risk
Services of Minnesota, Inc. or any other independent firm of insurance brokers
reasonably acceptable to Lessor (the "Insurance Brokers"), describing in
reasonable detail the insurance and reinsurance then carried and maintained with
respect to the Aircraft and stating the opinion of such firm that the insurance
then carried and maintained with respect to the Aircraft complies with the terms
hereof; provided, however, that all information contained in the foregoing
report shall not be made available by Lessor, the Indenture Trustee, the Loan
Participants or the Owner Participant to anyone except (A) to permitted
transferees of Lessor's, the Loan Participants', the Owner Participant's or the
Indenture Trustee's interest who agree to hold such information confidential,
(B) to Lessor's, the Loan Participants', the Owner Participant's or the
Indenture Trustee's counsel or independent certified public accountants or
independent insurance advisors who agree to hold such information confidential
or (C) as may be required by any statute, court or administrative order or
decree or governmental ruling or regulation. Lessee will cause such Insurance
Brokers to agree to advise Lessor, the Indenture Trustee and the Owner
Participant in writing of any default in the payment of any premium and of any
other act or omission on the part of Lessee of which it has knowledge and which
might invalidate or render unenforceable, in whole or in part, any insurance on
the Aircraft. To the extent such agreement is reasonably obtainable, Lessee
will also cause such Insurance Brokers to agree to advise Lessor, the Indenture
Trustee and the Owner Participant in writing at least thirty (30) days (seven
(7) days in the case of war risk and allied perils coverage), prior to the
expiration or termination date of any insurance carried and maintained on the
Aircraft pursuant to this Section 11. In addition, Lessee will also cause such
Insurance Brokers to deliver to Lessor, the Indenture Trustee and the Owner
Participant, on or prior to the date of expiration of any insurance policy
referenced in a previously delivered certificate of insurance, a new certificate
of insurance, substantially in the same form as delivered by Lessee to such
parties on the Delivery Date. In the event that Lessee or any Sublessee shall
fail to maintain or cause to be maintained insurance as herein provided, Lessor
or the Indenture Trustee may at its sole option provide such insurance and, in
such event, Lessee shall, upon demand, reimburse Lessor or the Indenture
Trustee, as Supplemental Rent, for the cost thereof to Lessor or the Indenture
Trustee, as the case may be, without waiver of any other rights Lessor or the
Indenture Trustee may have; provided, however, that no exercise by Lessor or the
Indenture Trustee, as the case may be, of
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said option shall affect the provisions of this Lease, including the provisions
of Section 14(g) hereof.
(d) Self-Insurance. Lessee may self-insure by way of deductible,
premium adjustment or franchise provisions or otherwise (including, with respect
to insurance maintained pursuant to Section 11(b), insuring for a maximum amount
which is less than the Stipulated Loss Value of the Aircraft) in the insurance
covering the risks required to be insured against pursuant to this Section 11
under a program applicable to all aircraft in Lessee's fleet, but in no case
shall the aggregate amount of self-insurance in regard to Section 11(a) and
Section 11(b) exceed during any policy year, with respect to all of the aircraft
in Lessee's fleet (including, without limitation, the Aircraft), the lesser of
(a) 50% of the largest replacement value of any single aircraft in Lessee's
fleet or (b) 1-1/2% of the average aggregate insurable value (during the
preceding policy year) of all aircraft (including, without limitation, the
Aircraft) on which Lessee carries insurance. In addition, Lessee (and any
Sublessee) may self-insure to the extent of any applicable mandatory minimum per
aircraft (or, if applicable, per annum or other period) hull or liability
insurance deductible imposed by the aircraft hull or liability insurers.
(e) Additional Insurance by Lessor and Lessee. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its interest
in the Aircraft in amounts in excess of that required to be maintained by this
Section 11; the Owner Participant either directly or through Lessor may carry
for its own account at its sole cost and expense insurance with respect to its
interest in the Aircraft, provided that such insurance does not prevent Lessee
(or any Sublessee) from carrying the insurance required or permitted by this
Section 11 or adversely affect such insurance or the cost thereof.
Notwithstanding any other provision of this Lease, all proceeds of insurance
carried by Lessor shall be paid to Lessor.
(f) Indemnification by Government in Lieu of
Insurance. Notwithstanding any provisions of this Section 11 requiring
insurance, Lessor agrees to accept, in lieu of insurance against any risk with
respect to the Aircraft, indemnification from, or insurance provided by, the
United States Government or any agency or instrumentality thereof or, upon the
written consent of Lessor, other government of registry of the Aircraft or any
agency or instrumentality thereof, against such risk in an amount which, when
added to the amount of insurance against such risk maintained by Lessee (or any
Sublessee) with respect to the Aircraft (including permitted self-insurance)
shall be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
(g) Application of Payments During Existence of an Event of Default.
Any amount referred to in paragraph (b) of this Section 11 which is payable to
or retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or any Sublessee) if at the time of such payment or retention an Event
of Default shall have occurred and be continuing, but shall be held by or paid
over to Lessor as security for the obligations of Lessee (or any Sublessee)
under this Lease and, if Lessor declares this Lease to be in default pursuant to
Section 15 hereof, applied against Lessee's obligations hereunder as and when
due. At such time as there shall not be continuing any such Event of Default,
such amount shall be paid to Lessee (or such Sublessee) to the extent not
previously applied in accordance with the preceding sentence.
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SECTION 12. Inspection. At all reasonable times and upon at least
15 days' prior written notice to Lessee, Lessor, the Owner Participant or the
Indenture Trustee or their respective authorized representatives may (not more
than once every calendar year (unless an Event of Default has occurred and is
continuing when such inspection right shall not be so limited)) inspect the
Aircraft and inspect and make copies (at Lessor's, the Owner Participant's or
the Indenture Trustee's expense, as the case may be) of the books and records of
Lessee relating to the maintenance of the Aircraft; any such inspection of the
Aircraft shall be limited to a visual, walk-around inspection and shall not
include opening any panels, bays or the like without the express consent of
Lessee; provided that no exercise of such inspection right shall interfere with
the operation or maintenance of the Aircraft by, or the business of, Lessee (or
any Sublessee). Upon receipt by Lessee of a written request from the Owner
Participant specifying that the Owner Participant desires to have an authorized
representative observe the next scheduled major overhaul to be performed on the
Aircraft, Lessee shall cooperate with the Owner Participant to enable the Owner
Participant's authorized representative to observe the next scheduled major
overhaul to be performed on the Aircraft; provided that Lessee shall be required
to so cooperate only to the extent necessary to enable the Owner Participant's
authorized representative to observe one scheduled major overhaul during each
three year period of the Term and (notwithstanding the foregoing but only if a
major overhaul is scheduled during the last year of the Term) one scheduled
major overhaul during the last year of the Term; provided that the Owner
Participant's authorized representative shall merely observe such major
overhaul, shall not interfere with or extend in any manner the conduct or
duration of the major overhaul and shall not be entitled to direct any of the
work performed in connection with such overhaul. None of Lessor, the Owner
Participant or the Indenture Trustee shall have any duty to make any such
inspection nor shall any of them incur any liability or obligation by reason of
not making such inspection.
SECTION 13. Assignment. Except as otherwise provided herein,
Lessee will not, without prior written consent of Lessor, assign in whole or in
part any of its rights or obligations hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided herein, in the Trust Agreement or in the
Participation Agreement. Subject to the foregoing, the terms and provisions of
this Lease shall be binding upon and inure to the benefit of Lessor and Lessee
and their respective successors and permitted assigns.
SECTION 14. Events of Default. Each of the following events shall
constitute an Event of Default (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body) and each such Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(a) Lessee shall not have made a payment of Basic Rent or
Stipulated Loss Value within ten (10) Business Days after the same
shall have become due; or
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(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value) after the same shall have
become due and such failure shall continue for ten (10) Business Days
after Lessee's receipt of written demand therefor by the party
entitled thereto (provided that any failure to pay any amount owed by
Lessee under the Tax Indemnity Agreement or any failure of Lessee to
pay to Lessor or the Owner Participant when due any Excluded Payments
(as defined in the Trust Indenture) shall not constitute an Event of
Default unless notice is given by the Owner Participant to Lessee and
the Indenture Trustee that such failure shall constitute an Event of
Default); or
(c) Lessee shall have failed to perform or observe (or caused to
be performed and observed) in any material respect any covenant or
agreement (except the covenants set forth in the Tax Indemnity
Agreement, in clauses (i)(B) and (ii) of the first sentence of second
paragraph of Exhibit G and in the proviso contained in the last
sentence of the first paragraph of Section 5(a)) to be performed or
observed by it under any Operative Document, and such failure shall
continue unremedied for a period of thirty (30) days after receipt by
Lessee of written notice thereof from Lessor or the Indenture Trustee;
provided, however, that if Lessee shall have undertaken to cure any
such failure which arises under clause (ii) or clause (iii) of the
first sentence of Section 7(a), or under the second sentence of
Section 7(a) as it relates to maintenance, service, repair or overhaul
or under Section 8 and, notwithstanding the diligence of Lessee in
attempting to cure such failure, such failure is not cured within said
thirty day period but is curable with future due diligence, there
shall exist no Event of Default under this Section 14 so long as
Lessee is proceeding with due diligence to cure such failure and such
failure is remedied not later than two hundred seventy (270) days
after receipt by Lessee of such written notice; or
(d) any representation or warranty made by Lessee herein or in
the Participation Agreement or any document or certificate furnished
by Lessee in connection herewith or therewith or pursuant hereto or
thereto (except the representations and warranties set forth in
Section 3 of the Tax Indemnity Agreement and such documents or
certificates as are furnished to the Owner Participant solely in
connection with matters dealt with in the Tax Indemnity Agreement and
for no other purpose and except for representations or warranties
contained in the Pass Through Trust Agreement or the Underwriting
Agreement (as defined in the Participation Agreement) or any document
or instrument furnished pursuant to either thereof) shall prove to
have been incorrect in any material respect at the time made and such
incorrectness shall not have been cured (to the extent of the adverse
impact of such incorrectness on the interests of the Owner
Participant, Lessor or the Certificate Holders) within thirty (30)
days after the receipt by Lessee of a written notice from Lessor or
the Indenture Trustee advising Lessee of the existence of such
incorrectness; or
(e) the commencement of an involuntary case or other proceeding
in respect of Lessee in an involuntary case under the federal
bankruptcy laws, as now
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or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law in the United States or
seeking the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Lessee or
for all or substantially all of its property, or seeking the
winding-up or liquidation of its affairs and the continuation of any
such case or other proceeding undismissed and unstayed for a period of
ninety (90) consecutive days or an order, judgment or decree shall be
entered in any proceeding by any court of competent jurisdiction
appointing, without the consent of Lessee, a receiver, trustee or
liquidator of Lessee, or of any substantial part of its property, or
sequestering any substantial part of the property of Lessee and any
such order, judgment or decree or appointment or sequestration shall
be final or shall remain in force undismissed, unstayed or unvacated
for a period of ninety (90) days after the date of entry thereof; or
(f) the commencement by Lessee of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy, insolvency or other
similar law in the United States, or the consent by Lessee to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official)
of Lessee or for all or substantially all of its property, or the
making by Lessee of any assignment for the benefit of creditors, or
Lessee shall take any corporate action to authorize any of the
foregoing; or
(g) Lessee shall fail to carry and maintain on or with respect
to the Aircraft (or cause to be carried and maintained) insurance
required to be maintained in accordance with the provisions of Section
11 hereof;
provided, however, that, notwithstanding anything to the contrary contained in
Section 14(c) or (d) hereof, any failure of Lessee to perform or observe any
covenant, condition, agreement or any error in a representation or warranty
shall not constitute an Event of Default if such failure or error is caused
solely by reason of an event that constitutes an Event of Loss so long as Lessee
is continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing, Lessor may,
at its option, declare by written notice to Lessee this Lease Agreement to be in
default; and at any time thereafter, so long as any such outstanding Events of
Default shall not have been remedied, Lessor may do one or more of the following
with respect to all or any part of the Airframe and any or all of the Engines as
Lessor in its sole discretion shall elect, to the extent permitted by, and
subject to compliance with any mandatory requirements of, applicable law then in
effect; provided, however, that during any period the Aircraft is subject to the
Civil Reserve Air Fleet Program in accordance with the provisions of Section
7(b) hereof and in possession of the United States government or an agency or
instrumentality of the United States, Lessor shall not, on account of any Event
of Default, be entitled to do any of the following in such manner as to limit
Lessee's control under this Lease (or any Sublessee's control under any
Sublease) of any Airframe or any Engines installed thereon, unless at least
sixty (60) days' (or such lesser period as may then be applicable
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under the Air Mobility Command program of the United States Government) written
notice of default hereunder shall have been given by Lessor by registered or
certified mail to Lessee (and any Sublessee) with a copy addressed to the
Contracting Office Representative for the Air Mobility Command of the United
States Air Force under any contract with Lessee (or any Sublessee) relating to
the Aircraft:
(a) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe or any Engine as Lessor may so demand to Lessor or its order
in the manner and condition required by, and otherwise in accordance
with all the provisions of, Section 5 as if such Airframe or Engine
were being returned at the end of the Term, or Lessor, at its option,
may enter upon the premises where all or any part of the Airframe or
any Engine is located and take immediate possession of and remove the
same by summary proceedings or otherwise (and/or, at Lessor's option,
store the same at Lessee's premises until disposal thereof by Lessor),
all without liability accruing to Lessor for or by reason of such
entry or taking of possession or removing whether for the restoration
of damage to property caused by such action or otherwise;
(b) sell the Airframe and/or any Engine at public or private
sale, as Lessor may determine, or otherwise dispose of, hold, use,
operate, lease to others or keep idle the Aircraft as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee, except as hereinafter set forth in this Section 15;
(c) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a)
or paragraph (b) above with respect to the Airframe and/or any Engine,
Lessor, by written notice to Lessee specifying a payment date which
shall be the Lease Period Date not earlier than ten days from the date
of such notice, may demand that Lessee pay to Lessor, and Lessee shall
pay Lessor, on the payment date so specified, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the
installments of Basic Rent for the Aircraft due for Lease Periods
commencing on or after the Delivery Date or the Lease Period Date
specified as the payment date in such notice), any unpaid Basic Rent
due on Lease Period Dates prior to the payment date so specified
(including, without limitation, any adjustments to Basic Rent payable
pursuant to Section 3(d)) plus whichever of the following amounts
Lessor, in its sole discretion, shall specify in such notice (together
with interest, if any, on such amount at the Past Due Rate from such
specified payment date until the date of actual payment of such
amount): (i) an amount equal to the excess, if any, of the
Stipulated Loss Value for the Aircraft, computed as of the Lease
Period Date specified as the payment date in such notice, over the
aggregate fair market rental value (computed as hereafter in this
Section 15 provided) of such Aircraft for the remainder of the Term,
after discounting such aggregate fair market rental value to present
value as of the Lease Period Date specified as the payment date in
such notice at an annual rate equal to the Base Rate plus 1%; or
(ii) an amount equal to the excess, if any, of the Stipulated Loss
Value for such
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Aircraft, computed as of the Lease Period Date specified as the
payment date in such notice over the fair market sales value of such
Aircraft (computed as hereafter in this Section provided) as of the
Lease Period Date specified as the payment date in such notice;
(d) in the event Lessor, pursuant to paragraph (b) above, shall
have sold the Airframe and/or any Engine, Lessor, in lieu of
exercising its rights under paragraph (c) above with respect to such
Aircraft, may, if it shall so elect, demand that Lessee pay Lessor,
and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (in lieu
of the installments of Basic Rent for the Aircraft due on or after
such date), any unpaid Basic Rent with respect to the Aircraft due
prior to such date (including, without limitation, any adjustments to
Basic Rent payable pursuant to Section 3(d)) plus the amount of any
deficiency between the net proceeds of such sale (after deduction of
all reasonable costs of sale) and the Stipulated Loss Value of such
Aircraft, computed as of the Stipulated Loss Value Date on or
immediately following the date of such sale together with interest, if
any, on the amount of such deficiency, at the Past Due Rate, from the
date of such sale to the date of actual payment of such amount; and/or
(e) Lessor may rescind this Lease Agreement as to the Aircraft,
and/or may exercise any other right or remedy which may be available
to it under applicable law or proceed by appropriate court action to
enforce the terms hereof or to recover damages for breach hereof.
For the purposes of paragraph (c) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser, as
the case may be, under no compulsion to lease or purchase, as the case may be,
and an informed and willing lessor or seller in possession under no compulsion
to sell, as the case may be, in each case based upon the actual condition and
location of the Aircraft, which value shall be determined by mutual agreement
or, in the absence of mutual written agreement, pursuant to an appraisal
prepared and delivered by a nationally recognized firm of independent aircraft
appraisers nominated by Lessor, and Lessor shall immediately notify Lessee of
such nomination. Unless Lessee shall have objected in writing within ten days
after its receipt of Lessor's notice, Lessor's nomination shall be conclusive
and binding. If Lessee shall object, however, Lessor and Lessee shall endeavor,
within ten days after such objection is made, to select a mutually acceptable
appraiser; provided that, if Lessee shall not so endeavor to make such
selection, Lessor's nomination referred to in the preceding sentence hereof
shall be conclusive and binding. If Lessor and Lessee fail to reach agreement
(except for the reason referred to in the proviso in the preceding sentence), or
if any appraiser selected fails to act for any reason, then the question shall
be determined by an appraisal (applying the definitions of "fair market rental
value" and "fair market sales value" as set forth above based upon the actual
condition of the Aircraft) mutually agreed to by two recognized independent
aircraft appraisers, one of which appraisers shall be chosen by Lessor and one
by Lessee within five Business Days after Lessor or Lessee shall have received
written notice from the other party of a demand that
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such an appraisal be made, which notice shall specify the appraiser chosen by
the party giving the notice or, if such appraisers cannot agree on the amount of
such appraisal within twenty Business Days after the end of such five-day
period, each shall render its own appraisal and shall by mutual consent choose
another appraiser within five Business Days after the end of such twenty-day
period. If, within such five-day period, such two appraisers fail to appoint a
third appraiser, then either Lessor or Lessee, on behalf of both, may request
such appointment by the then President of the Association of the Bar of the City
of New York (or any successor organization thereto) or, in his absence, failure,
refusal or inability to act, then either Lessor or Lessee may apply to the
American Arbitration Association (or any successor organization thereto) in New
York, New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the appraisals
given by the other two appraisers. If the determination of one appraiser is
more disparate from the average of all three determinations than each of the
other two determinations, then the determination of such appraiser shall be
excluded, the remaining two determinations shall be averaged and such average
shall be final and binding upon the parties hereto. If no determination is more
disparate from the average of all three determinations than each of the other
determinations, then such average shall be final and binding upon the parties
thereto. The cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above and without duplication of amounts payable hereunder, for any and all
unpaid Rent due hereunder before, after or during the exercise of any of the
foregoing remedies and for all reasonable legal fees and other costs and
expenses (including fees of the appraisers hereinabove referred to) incurred by
Lessor, the Indenture Trustee, the Loan Participants and the Owner Participant
in connection with the return of the Airframe or any Engine in accordance with
the terms of Section 5 or in placing such Airframe or Engine in the condition
and airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor (or the Indenture Trustee, any Loan Participant or the Owner
Participant) or Lessee may bid for and purchase such property. Lessor agrees to
give Lessee at least fifteen (15) days' prior written notice of the date fixed
for any public sale of the Airframe or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale
and any such public sale shall be conducted in general so as to afford Lessee
(and any Sublessee) a reasonable opportunity to bid. Except as otherwise
expressly provided above, no remedy referred to in this Section 15 is intended
to be exclusive, but each shall be cumulative and in addition to any other
remedy referred to above or otherwise available to Lessor at law or in equity;
and the exercise or beginning of exercise by Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by Lessor of any
or all of such other remedies. No waiver by Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default.
SECTION 16. Lessee's Cooperation Concerning Certain Matters.
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the execution
and delivery of any amendment to this
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Lease, to the Trust Indenture or to the Trust Agreement, Lessee will cause such
Lease Supplement, Trust Supplement (and, in the case of the initial Lease
Supplement and Trust Supplement, this Lease, the Trust Agreement and the Trust
Indenture as well) or amendment to be duly filed and recorded, and maintained of
record, in accordance with the applicable laws of the government of registry of
the Aircraft. In addition, Lessee will promptly and duly execute and deliver to
Lessor such further documents and take such further action as Lessor or the
Indenture Trustee may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and to establish
and protect the rights and remedies created or intended to be created in favor
of Lessor and the Indenture Trustee hereunder, including, without limitation, if
requested by Lessor or the Indenture Trustee, at the expense of Lessee, the
execution and delivery of supplements or amendments hereto or to the Trust
Indenture, each in recordable form, subjecting to this Lease and the Trust
Indenture, any airframe or engine substituted for the Airframe or any Engine
pursuant to the terms thereof and the recording or filing of counterparts
thereof, in accordance with the laws of such jurisdictions as Lessor or the
Indenture Trustee may from time to time deem advisable. Lessee agrees to
furnish to Lessor and the Indenture Trustee promptly after execution and
delivery of any supplement and amendment hereto and promptly after the execution
and delivery of any supplement and amendment to the Trust Indenture (except for
any such supplement or amendment which does not require or receive the approval
of Lessee pursuant to the Operative Documents and is not required pursuant to
the terms of the Operative Documents), an opinion of counsel reasonably
satisfactory to Lessor and the Indenture Trustee as to the due recording or
filing of such supplement or amendment. Commencing in 1998, on or before April
30 of each year during the Term, Lessee will deliver to Lessor and the Indenture
Trustee a certificate of Lessee, signed by the President, a Vice President or
the Chief Financial Officer of Lessee to the effect that the signer is familiar
with or has reviewed the relevant terms of this Lease and the signer does not
have actual knowledge of the existence, as of the date of such certificate, of
any condition or event which constitutes a Default or an Event of Default.
Lessee agrees that if the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, Treasurer or an Assistant Treasurer of Lessee has
actual knowledge of the existence of a Default, then Lessee shall promptly give
to Lessor, the Owner Participant and the Indenture Trustee notice thereof and
such other information relating thereto as Lessor, the Owner Participant or the
Indenture Trustee may reasonably request. Lessee agrees that if an officer of
Lessee has knowledge of the existence of an Event of Default, Lessee shall
promptly give to Lessor and the Indenture Trustee notice thereof and such other
information relating thereto as Lessor or the Indenture Trustee may reasonably
request. Lessee will deliver to Lessor, the Owner Participant and the Indenture
Trustee (i) within sixty (60) days after the end of each of the first three
quarterly periods of each fiscal year of the Guarantor, the publicly filed Form
10-Q report of the Guarantor; and (ii) within one hundred twenty (120) days
after the close of such fiscal year, the publicly filed annual report and Form
10-K report of the Guarantor.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be by telecopier or other telecommunication means (with
such telecopy or other telecommunication means to be confirmed in writing), or
if such notice is impracticable, by registered, first-class airmail, with
postage prepaid, or by personal delivery of written notice and any such notice
shall become effective when received, addressed:
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(i) if to Lessee, for U.S. mail at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇▇),
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and for overnight courier at ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇), ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Senior Vice
President-Finance and Treasurer (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), or to
such other address or telecopy number as Lessee shall from time to
time designate in writing to Lessor,
(ii) if to Lessor, at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, Attention: Corporate Trust Department (Telecopy No.
(▇▇▇) ▇▇▇-▇▇▇▇), or to such other address or telecopy number as Lessor
shall from time to time designate in writing to Lessee, and
(iii) if to a Loan Participant, the Indenture Trustee or the Owner
Participant, addressed to such Loan Participant, the Indenture Trustee
or the Owner Participant at such address or telecopy number as such
Loan Participant, the Indenture Trustee or the Owner Participant shall
have furnished by notice to Lessor and to Lessee, and, until an
address is so furnished, addressed to such Loan Participant, the
Indenture Trustee or the Owner Participant at its address or telecopy
number set forth in Schedule I to the Participation Agreement.
SECTION 18. No Set-Off, Counterclaim, etc. All Rent shall be paid
by Lessee to Lessor in funds of the type specified in Section 3(f). Except as
provided in Section 3(g) hereof, Lessee's obligation to pay all Rent payable
hereunder shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which Lessee may have against Lessor, in its
individual capacity or as Owner Trustee under the Trust Agreement, the Indenture
Trustee (in its individual capacity or as Indenture Trustee), any Loan
Participant, the Owner Participant, or anyone else for any reason whatsoever
(whether in connection with the transactions contemplated hereby or any other
transactions), including, without limitation, any breach by Lessor or the Owner
Participant of their respective warranties, agreements or covenants contained in
any of the Operative Documents, (ii) any defect in the title, registration,
airworthiness, condition, design, operation, or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any interruption or
cessation in or prohibition of the use or possession thereof by Lessee (or any
Sublessee) for any reason whatsoever, including, without limitation, any such
interruption, cessation or prohibition resulting from the act of any government
authority, (iii) any insolvency, bankruptcy, reorganization or similar case or
proceedings by or against Lessee (or any Sublessee) or any other person, or (iv)
any other circumstance, happening, or event whatsoever, whether or not
unforeseen or similar to any of the foregoing. If for any reason whatsoever
this Lease shall be terminated in whole or in part by operation of law or
otherwise except as specifically provided herein, Lessee nonetheless agrees
without limitation of the other rights or remedies of Lessor hereunder, subject
to the rights of Lessee to setoff under Section 3(g) hereof, to pay to Lessor an
amount equal to each Rent payment at the time such payment would have become due
and payable in accordance with the terms hereof had this Lease not been
terminated in whole or in part. Lessee hereby waives, to the extent permitted
by applicable law, any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the express terms
hereof.
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SECTION 19. Renewal Options; Purchase Options; Valuation.
(a) Renewal Options. (1) Fixed Renewal Term. Lessee shall have the right to
renew this Lease for up to three consecutive one year renewal terms the first of
which shall commence only upon the expiration of the Basic Term (any such
renewal term, a "Fixed Renewal Term") by delivery to Lessor at least ninety (90)
days before the end of the Basic Term, the first Fixed Renewal Term or the
second Fixed Renewal Term, as the case may be, a written notice irrevocably
electing to renew this Lease for a Fixed Renewal Term. Basic Rent during any
Fixed Renewal Term shall be payable in an amount and at the times specified in
Section 19(a)(4).
(2) Fair Market Renewal Term. Not less than ninety (90)
days before the end of the third Fixed Renewal Term, the first Fair Market
Renewal Term or the second Fair Market Renewal Term for the Aircraft, Lessee
shall have the right to renew this Lease by delivery to Lessor of a written
notice irrevocably electing to renew this Lease for a renewal term of not
less than one year and not more than two years for a Basic Rent equal to the
"fair market rental value" of the Aircraft for such period (any such renewal
term, a "Fair Market Renewal Term"); provided that Lessee shall not be
entitled to renew this Lease pursuant to this Section 19(a)(2) more than
three times.
(3) If no written notice is delivered by Lessee to Lessor pursuant
to Section 19(a)(1) or 19(a)(2) on or before the day specified therefor,
Lessee shall be deemed to have waived any right to renew this Lease.
(4) At the end of the Basic Term or any Renewal Term, if Lessee
has elected to renew this Lease as aforesaid, and provided that there shall
not then have occurred and be continuing a Default of the type referred to in
Section 14(a), 14(b) or 14(e) or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above provided
and a Lease Supplement evidencing such renewal has been executed and filed
for recordation with the Federal Aviation Administration, this Lease shall
continue in full force and effect during the Renewal Term, except that (x)
Lessee shall pay Lessor Basic Rent for the Aircraft during the Renewal Term
in an amount equal to the "fair market rental value" thereof determined in
accordance with Section 19(c), but not to exceed in the case of a Fixed
Renewal Term one-half of the average Basic Rent during the Basic Term (such
average being determined as the total of all payments of Basic Rent during
the Basic Term added together and divided by the number of payments of Basic
Rent during the Basic Term), which Basic Rent shall be payable in semi-annual
installments in arrears unless in the case of a Fixed Renewal Term, any
portion of Basic Rent during the Basic Term is payable in advance, in which
case the same proportion of Basic Rent during such Fixed Renewal Term shall
also be payable in advance, each such installment being due and payable on
each Lease Period Date occurring during the Renewal Term, commencing with the
Lease Period Date immediately following the commencement of the Renewal Term,
and (y) the Stipulated Loss Values applicable during the Renewal Term shall
be determined separately for each Renewal Term by the Owner Participant in
good faith to reflect Stipulated Loss Values determined in accordance with
the following sentence. Stipulated Loss Values during a Renewal Term shall
on the date on which such Renewal Term begins be equal to the fair market
sales value of the Aircraft as of such date, determined in accordance with
the provisions of this Section 19(a)(4) and Section 19(c) hereof, and shall
decline ratably on a
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monthly basis to the fair market sales value of the Aircraft as of the last day
of such Renewal Term, determined in accordance with the provisions of this
Section 19(a)(4) and Section 19(c) hereof.
In determining fair market sales value for purposes of calculating
Stipulated Loss Value for any Renewal Term effect shall be given to the
encumbrance on the Aircraft of any Renewal Term available or in force under
this Section 19.
(b) Purchase Options. Lessee shall have the option, upon at least
ninety (90) days' irrevocable prior written notice to Lessor, to purchase the
Aircraft on the last Business Day of the Basic Term or any Renewal Term for a
purchase price equal to the lesser of the fair market sales value of the
Aircraft and 50% of Lessor's Cost. Upon payment to Lessor in immediately
available funds of the full amount of the purchase price and payment of any
other amounts then due hereunder (including all Rent and all costs or expenses
of the Owner Participant in connection with such purchase), Lessor will transfer
to Lessee, without recourse or warranty (except as to the absence of Lessor
Liens, including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens), all of Lessor's right, title and
interest in and to the Aircraft.
(c) Valuation. At any time not earlier than three hundred sixty-five
(365) days prior to the date on which Lessee may purchase the Aircraft pursuant
to Section 19(b) hereof or renew this Lease pursuant to Section 19(a)(1) or
Section 19(a)(2) hereof, Lessee may deliver to Lessor a revocable notice of its
intent to exercise its renewal option or purchase option. For all purposes of
this Section 19, including the appraisal referred to in this Section 19(c), in
determining "fair market rental value" or "fair market sales value", the
Aircraft shall be valued (i) as if in the condition and otherwise in compliance
with the terms of Section 5 upon a return of the Aircraft to the United States
and as if it had been maintained at all times as required in accordance with
Section 7(a)(I) during periods when no Sublease was in effect, (ii) on the basis
of the value which would obtain in an arm's-length transaction between an
informed and willing buyer-user or lessee (other than a lessee or an Affiliate
of a lessee currently in possession or a used equipment scrap dealer) under no
compulsion to buy or lease and an informed and willing seller or lessor
unaffiliated with such buyer-user or lessee and under no compulsion to sell or
lease and disregarding the purchase and renewal options of the lessee provided
in this Lease, and (iii) in the case of such valuation for determining "fair
market rental value", assuming such lessee would have substantially the same
obligations during the Fair Market Renewal Term as provided hereunder including
without limitation the obligations of Lessee to carry and maintain the insurance
required by Section 11 hereof and to make certain payments with reference to
Stipulated Loss Value during the applicable Fair Market Renewal Term. Upon
receipt of such notice Lessor and Lessee shall confer in good faith with a view
to reaching agreement on the "fair market rental value" or "fair market sales
value" of the Aircraft. If the parties have not so agreed by two hundred
seventy (270) days prior to the end of the Basic Term or the Renewal Term in
question, then the question shall be determined by an appraisal mutually agreed
to by two recognized independent aircraft appraisers, one of which appraisers
shall be chosen by Lessor and one by Lessee within five Business Days after
Lessor or Lessee shall have received written notice from the other party of a
demand that such an appraisal be made, which notice shall specify the appraiser
chosen by the party giving the notice or, if such appraisers cannot agree on
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the amount of such appraisal within twenty Business Days after the end of such
five-day period, each shall render its own appraisal and shall by mutual consent
choose another appraiser within five Business Days after the end of such
twenty-day period. If, within such five-day period, such two appraisers fail to
appoint a third appraiser, then either Lessor or Lessee, on behalf of both, may
request such appointment by the then President of the Association of the Bar of
the City of New York (or any successor organization thereto) or, in his absence,
failure, refusal or inability to act, then either Lessor or Lessee may apply to
the American Arbitration Association (or any successor organization thereto) in
New York, New York for the appointment of such third appraiser. The decision of
the third appraiser so appointed shall be given within twenty Business Days
after the appointment of such third appraiser. As soon as the third appraiser
has delivered his appraisal, that appraisal shall be compared with the
appraisals given by the other two appraisers. If the determination of one
appraiser is more disparate from the average of all three determinations than
each of the other two determinations, then the determination of such appraiser
shall be excluded, the remaining two determinations shall be averaged and such
average shall be final and binding upon the parties hereto. If no determination
is more disparate from the average of all three determinations than each of the
other determinations, then such average shall be final and binding upon the
parties thereto. Lessee and Lessor shall share equally all expenses relating to
such appraisal procedure provided if Lessee elects not to renew this Lease or
purchase the Aircraft following such appraisal, Lessee shall pay all expenses of
such appraisal.
(d) Special Purchase Option. On January 2, 2014 (or, if January 2,
2014 is not a Business Day, the Business Day immediately succeeding January 2,
2014), Lessee shall have the option, upon at least ninety (90) days' irrevocable
prior notice to Lessor and, if any Secured Certificates are then outstanding,
the Indenture Trustee, to purchase the Aircraft on such date for a purchase
price equal to the Special Purchase Price. In addition, if on such date there
shall be any Secured Certificates outstanding, Lessee shall have the option to
assume, pursuant to Section 8(x) of the Participation Agreement and Section 2.13
of the Trust Indenture, all of the obligations of Lessor under the Trust
Indenture. If such assumption is made, Lessee shall pay Lessor a purchase price
equal to (I) the Special Purchase Price minus (II) an amount equal to principal
of, and accrued but unpaid interest on, any Secured Certificates that are
outstanding on such date. Upon such payment in full and payment of any other
amounts then due hereunder (including costs or expenses of the Owner Participant
in connection with such purchase, any installments of Basic Rent due prior to
such date and, if Basic Rent is payable in arrears on such date as indicated on
Exhibit B, on such date (but not any installment of Basic Rent due on such date
if Basic Rent is payable in advance on such date), and all unpaid Supplemental
Rent due on or prior to such date), Lessor will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens, including for
this purpose Liens which would be Lessor Liens but for the proviso in the
definition of Lessor Liens), all of Lessor's right, title and interest in and to
the Aircraft and under the Trust Indenture and, unless there shall be any
Secured Certificates outstanding after such payment, exercise such rights as it
has to cause the Aircraft to be released from the Lien of the Trust Indenture.
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates. In order to secure the indebtedness evidenced by the Secured
Certificates, Lessor has agreed in the Trust Indenture, among other things, to
assign to the Indenture Trustee this Lease, the Lease Supplements and any
amendments to this Lease and to mortgage its interest in
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the Aircraft in favor of the Indenture Trustee, subject to the reservations and
conditions therein set forth. To the extent, if any, that this Lease, the Lease
Supplements and any amendments to this Lease constitute chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease, the Lease Supplements and any
amendments to this Lease may be created through the transfer or possession of
any counterpart other than the original counterpart, which shall be identified
as the counterpart containing the receipt therefor executed by the Indenture
Trustee on the signature page thereof. Lessee hereby accepts and consents to
the assignment of all Lessor's right, title and interest in and to this Lease
pursuant to the terms of the Trust Indenture. Subject to Section 3(f) hereof,
Lessee agrees to pay directly to the Indenture Trustee (or, after receipt by
Lessee of notice from the Indenture Trustee of the discharge of the Trust
Indenture, to Lessor), all amounts of Rent due or to become due hereunder and
assigned to the Indenture Trustee and Lessee agrees that the Indenture Trustee's
right to such payments hereunder shall be absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, the
circumstances set forth in clauses (i) through (iv) of Section 18 hereof.
Notwithstanding the foregoing assignment of this Lease, the obligations of
Lessor to Lessee to perform the terms and conditions of this Lease shall remain
in full force and effect.
SECTION 21. Lessor's Right to Perform for Lessee. If Lessee fails
to make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, then (but in each
case, except in the case of failure to pay Rent or in the case of failure to
maintain insurance as required hereunder, no earlier than the fifteenth day
after the occurrence of such failure, whether or not it shall yet constitute an
Event of Default hereunder) Lessor may itself make such payment or perform or
comply with such agreement but shall not be obligated hereunder to do so, and
the amount of such payment and the amount of the reasonable expenses of Lessor
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
Past Due Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
Limited. (a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee at a time when there is not
continuing an Event of Default shall, until paid to Lessee, be invested by
Lessor or, if the Trust Indenture shall not have been discharged, by the
Indenture Trustee, as the case may be, as Lessee may from time to time direct in
writing (and in absence of a written direction by Lessee, there shall be no
obligation to invest such moneys) in (i) direct obligations of the United States
of America and agencies guaranteed by the United States government having a
final maturity of ninety (90) days or less from date of purchase thereof; (ii)
certificates of deposit issued by, bankers' acceptances of, or time deposits
with, any bank, trust company or national banking association incorporated under
the laws of the United States of America or one of the states thereof having
combined capital and surplus and retained earnings as of its last report of
condition of at least $500,000,000 and having a rating of Aa or better by
▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's") or AA or better by Standard & Poor's
Corporation ("S&P") and having a final maturity of ninety (90) days or less from
date of purchase thereof; and (iii) commercial paper of any holding company of a
bank, trust company or national banking association described in (ii) and
commercial paper of any corporation or finance company
-55-
incorporated or doing business under the laws of the United States of America or
any state thereof having a rating assigned to such commercial paper of A1 by S&P
or P1 by Moody's and having a final maturity of ninety (90) days or less from
the date of purchase thereof; provided, however, that the aggregate amount at
any one time so invested in certificates of deposit issued by any one bank shall
not be in excess of 5% of such bank's capital and surplus. There shall be
promptly remitted to Lessee or its order (but no more frequently than monthly)
any gain (including interest received) realized as a result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless an Event of Default shall have occurred
and be continuing. Lessee shall be responsible for any net loss realized as a
result of any such investment and shall reimburse Lessor (or the Indenture
Trustee, as the case may be) therefor on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under the
Trust Agreement, and the institution acting as Lessor shall not be liable in its
individual capacity for any breach thereof except for its gross negligence or
willful misconduct or for breach of its covenants, representations and
warranties contained herein, to the extent covenanted or made in its individual
capacity.
SECTION 23. Service of Process. Lessor and Lessee each hereby
irrevocably submits itself to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York and to the
non-exclusive jurisdiction of the Supreme Court of the State of New York, New
York County, for the purposes of any suit, action or other proceeding arising
out of this Lease, the subject matter hereof or any of the transactions
contemplated hereby brought by Lessor, Lessee, the Indenture Trustee, the Loan
Participants or the Owner Participant or their successors or assigns.
SECTION 24. Miscellaneous. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and any assignee of Lessor's
rights hereunder. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. Neither Lessee nor
any affiliate of Lessee will file any tax returns in a manner inconsistent with
the foregoing fact or with Lessor's ownership of the Aircraft. The section and
paragraph headings in this Lease and the table of contents are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof and all references herein to numbered sections, unless
otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease may be executed
by the parties hereto in separate counterparts,
-56-
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 25. Successor Trustee. Lessee agrees that in the case of
the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all
purposes hereof without the necessity of any consent or approval by Lessee
(subject to Section 10 of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor Owner Trustees pursuant to the
Trust Agreement, but such right may be exercised repeatedly as long as this
Lease shall be in effect.
SECTION 26. Covenant of Quiet Enjoyment. So long as no Event of
Default shall have occurred and be continuing and notwithstanding any default by
Lessor, the Owner Participant or the Indenture Trustee under the Participation
Agreement, the Trust Agreement or the Trust Indenture, Lessor shall not
interfere with Lessee's (or any Sublessee's) continued possession, use and
operation of, and quiet enjoyment of, the Aircraft or Lessee's rights, benefits
and obligations pursuant to the Overall Transaction during the Term of this
Lease, and this Lease shall not be terminated except as expressly provided
herein.
-57-
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its individual capacity,
except as expressly provided
herein, but solely as Owner
Trustee,
Lessor
BY: s/▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Title: Vice President
NORTHWEST AIRLINES, INC.,
Lessee
BY: s/▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Title: Vice President-Finance
and Assistant Treasurer
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged on the 25 day of September, 1997.
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
BY: s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Title: Vice President
-Signature Page-
EXHIBIT A
to
Lease Agreement
[NW 1997 A]
LEASE SUPPLEMENT No.
[NW 1997 A]
LEASE SUPPLEMENT NO. __, dated _________, 19___, between FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely
as Owner Trustee under the Trust Agreement [NW 1997 A], dated as of September
25, 1997, between _______________________, as Owner Participant, and such Owner
Trustee (such Owner Trustee, in its capacity as such Owner Trustee, being herein
called "Lessor"), and NORTHWEST AIRLINES, INC. ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement [NW 1997 A], dated as of September 25, 1997, relating to one British
Aerospace Avro 146-RJ85A aircraft (herein called the "Lease," and the defined
terms therein being hereinafter used with the same meanings). The Lease
provides for the execution and delivery from time to time of Lease Supplements
for the purpose of leasing the Airframe and Engines under the Lease as and when
delivered by Lessor to Lessee in accordance with the terms thereof.
(1)The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease is attached hereto, and made a part hereof,
and this Lease Supplement, together with such attachment, is being filed for
recordation on the date hereof with the Federal Aviation Administration as
one document.
(2)The Lease Agreement relates to the Airframe and Engines described
below, and a counterpart of the Lease Agreement, attached and made a part of
Lease Supplement No. 1 dated _______________, 19__ to the Lease Agreement, has
been recorded by the Federal Aviation Administration on ________________, 19__,
as one document and assigned Conveyance No. __.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease the following
described British Aerospace Avro 146-RJ85A aircraft (the "Aircraft"), which
Aircraft as of the date hereof consists of the following components:
___________________________________________
(1)This language for Lease Supplement No. 1.
(2)This language for other Lease Supplements.
(i) Airframe: FAA Registration No. ______; manufacturer's serial no.
_____; and
(ii) Engines: four (4) AlliedSignal LF507 type engines bearing,
respectively, manufacturer's serial nos. LFO______, LFO______,
LFO______ and LFO______ (each of which engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft shall commence on the Delivery
Date and end on ____________, 201_.
3. Lessee hereby confirms its agreement to pay Lessor Basic Rent for
the Aircraft throughout the Term therefor in accordance with Section 3 of the
Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease as being airworthy, in good
working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that nothing
contained herein or in the Lease shall in any way diminish or otherwise affect
any right Lessee or Lessor may have with respect to the Aircraft against British
Aerospace (Operations) Limited, or any subcontractor or supplier of British
Aerospace (Operations) Limited, under the Purchase Agreement or otherwise.
5. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
6. This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any jurisdiction), no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
original counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
hereof.
EXHIBIT A-PAGE 2
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee,
Lessor
By
______________________
Title: Vice President
NORTHWEST AIRLINES, INC.,
Lessee
By
______________________________
Title: Vice President-Finance
and Assistant Treasurer
(3)Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ____ day of _______________, 19__.
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
By
______________________
Title: Vice President
_______________________________________________________________
(1) This language contained in the original counterpart only.
EXHIBIT A-PAGE 3
EXHIBIT B
to
Lease Agreement
[NW 1997 A]
BASIC RENT, EXCESS AMOUNT,
LESSOR'S COST AND SPECIAL PURCHASE PRICE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent and Excess Amount:
Excess Amount Basic Rent
Lease Period (Percentage of (Percentage of
Date Lessor's Cost) Lessor's Cost)
____________ _______________ _______________
* Denotes payment in arrears from preceding Lease Period Date (or Delivery
Date in the case of the first Lease Period) to specified Lease Period Date.
** Denotes payment in advance from specified Lease Period Date to succeeding
Lease Period Date.
BASIC RENT, EXCESS AMOUNT,
LESSOR'S COST AND SPECIAL PURCHASE PRICE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Excess Amount Basic Rent
Lease Period (Percentage of (Percentage of
Date Lessor's Cost) Lessor's Cost)
____________ _______________ ______________
* Denotes payment in arrears from preceding Lease Period Date (or
Delivery Date in the case of the first Lease Period) to specified Lease Period
Date.
** Denotes payment in advance from specified Lease Period Date to succeeding
Lease Period Date.
EXHIBIT B-PAGE 2
BASIC RENT, EXCESS AMOUNT,
LESSOR'S COST AND SPECIAL PURCHASE PRICE SCHEDULE
Lessor's Cost for the Aircraft: $21,000,000
Special Purchase Price: 50.96059% of Lessor's Cost.
EXHIBIT B-PAGE 3
EXHIBIT C
to
Lease Agreement
[NW 1997 A]
STIPULATED LOSS VALUE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Stipulated Stipulated Loss
Loss Value Date Value Percentage
_______________ ________________
EXHIBIT D
to
Lease Agreement
[NW 1997 A]
TERMINATION VALUE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Termination
Termination Value
Date Percentage
___________ ___________
EXHIBIT E
to
Lease Agreement
[NW 1997 A]
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
1. Any recalculation of Basic Rent, Excess Amounts, Stipulated Loss
Value percentages and Termination Value percentages pursuant to the Lease shall
be determined by the Owner Participant, and shall maintain the Owner
Participant's Net Economic Return except as assumptions have been modified
pursuant to Section 3 of the Lease or pursuant to the Tax Indemnity Agreement or
the Participation Agreement, as the case may be; provided, however, that Lessee
may request (A) Lessee's independent public accountants to verify such
calculations but without any requirement that the Owner Participant disclose to
such persons the methodology and assumptions and (B) if Lessee believes that
such calculations by the Owner Participant are in error then a nationally
recognized firm of accountants selected by Lessee and reasonably acceptable to
the Owner Participant shall be permitted to verify such calculations and the
Owner Participant will make available to such firm (subject to the execution by
such firm of a confidentiality agreement reasonably acceptable to the Owner
Participant) the methodology and assumptions and any changes made therein
pursuant to Section 3 of the Lease. In the event of a verification under clause
(B) of the first sentence of this paragraph 1 the determination by such firm of
accountants shall be final. Lessee will pay the reasonable costs and expenses
of the verification under clause (B) of the first sentence of this paragraph 1
unless an error adverse to Lessee is established by such firm, and if as a
result of such verification process the Basic Rent is adjusted and such
adjustment causes the Net Present Value of Rents to decline by 15 or more basis
points (in which event the Owner Participant shall pay the reasonable costs and
expenses of such verification process). Such recalculated Basic Rent, Excess
Amounts, Stipulated Loss Value percentages and Termination Value percentages
shall be set forth in a Lease Supplement or an amendment to the Lease.
2. "Net Economic Return" means the Owner Participant's net after-tax
yield and aggregate after-tax cash flow utilizing the multiple investment
sinking fund method of analysis, computed on the basis of the same methodology
and assumptions as were utilized by the Owner Participant in determining Basic
Rent, Special Purchase Price, Stipulated Loss Value and Termination Value
percentages as of the Delivery Date.
EXHIBIT F
to
Lease Agreement
[NW 1997 A]
SCHEDULE OF DOMICILES OF PERMITTED SUBLESSEES
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Egypt Portugal
Finland Republic of China (Taiwan)*
France Singapore
Germany South Africa
Greece South Korea
Hungary Spain
Iceland Sweden
India Switzerland
Indonesia Thailand
Ireland Tobago
Italy Trinidad
Japan United Kingdom
Luxembourg Uruguay
Malaysia Venezuela
________________________________________________
* So long as on the date of entering into the proposed sublease such
country and the United States have diplomatic relations at least as good as
those in effect on the Delivery Date.
EXHIBIT G
to
Lease Agreement
[NW 1997 A]
RETURN CONDITIONS
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Unless purchased by Lessee pursuant to Section 19 of the Lease, at the
time of return of the Airframe upon the termination of the Lease at the end of
any Renewal Term or pursuant to Section 9(c) or 15 of the Lease: (i) in the
event that Lessee (or any Sublessee then in possession of the Aircraft) shall
not then be using a continuous maintenance program with respect to the Airframe,
Lessee agrees that during the period of operation of the Aircraft immediately
prior to such return (A) Lessee or such Sublessee, as the case may be, shall
have been using a block overhaul program with respect to the Airframe which
shall have been approved by all necessary governmental approvals of the country
under the laws of which the Aircraft shall then have been registered and (B) the
Airframe shall have remaining until the next scheduled block overhaul at least
25% of the allowable hours between block overhauls permitted under the block
overhaul program then used by Lessee or such Sublessee, (ii) in the event that
Lessee (or any Sublessee then in possession of the Aircraft) during the period
of operation of the Aircraft immediately prior to such return shall not have
been using an on-condition maintenance program with respect to the Engines or
engines, Lessee agrees that the average number of hours or cycles of operation
(whichever shall be applicable under the maintenance program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 25% of the hours or
cycles (whichever shall be applicable) between engine refurbishment allowed
under the maintenance program then in use with respect to such Engines or
engines which shall have been approved by all necessary governmental approvals
of the country under the laws of which the Aircraft shall have then been
registered, (iii) shall have all Lessee's and any Sublessee's exterior markings
removed or painted over and the areas where such markings were removed or
painted over refurbished as necessary to blend with adjacent areas, (iv) shall
have no outstanding airworthiness directives issued by the FAA requiring
terminating action by the date of return, and (v) shall be in Lessee's or such
Sublessee's passenger configuration and the interior of the Airframe shall be
clean in accordance with Lessee's customary standards for a "between flights"
cleaning. In the event the FAA shall issue any directive which would require
improvements to the Aircraft in order for the airworthiness certificate of the
Aircraft to be maintained in good standing, Lessee shall not apply for an
extension of the date of compliance with the directive as to the Aircraft to a
date after the date of return of the Aircraft pursuant to Section 5 of the
Lease, unless it shall previously or concurrently have applied for such an
extension with respect to all British Aerospace Avro 146-RJ85A aircraft in its
fleet affected by such directive. In addition, if at the time of return the
Aircraft is not being maintained on a continuous maintenance program, the
landing gear, APU
and hard time component on the Airframe will have at least 25% life remaining
to the next scheduled maintenance visit.
If clause (i)(B) of the first sentence of the preceding paragraph
shall be applicable but the Airframe does not meet the conditions specified in
said clause (i)(B), Lessee shall pay or cause to be paid to Lessor a Dollar
amount computed by multiplying (I) 120% of the average direct cost to Lessee
(based upon the actual direct cost to Lessee for similar aircraft in the fleet
of Lessee) during the preceding 12 months of performing an airframe block
overhaul of the type referred to in such clause (i) by (II) a fraction of which
(x) the numerator shall be the excess of 25% of hours of operation allowable
between such block overhauls over the actual number of hours of operation
remaining on the Airframe to the next such block overhaul and (y) the
denominator shall be the number of hours of operation allowable between such
block overhauls in accordance with such block overhaul program.
If clause (ii) of the first sentence of the second preceding paragraph
shall be applicable but the Engines or engines do not meet the conditions
specified in said clause (ii), Lessee shall pay or cause to be paid to Lessor a
Dollar amount computed by multiplying (aa) four by (bb) 120% of the average
direct cost to Lessee (based upon the actual direct cost to Lessee for similar
aircraft in the fleet of Lessee) during the preceding 12 months of performing
for an engine of the same model as the Engines the scheduled engine
refurbishment under the maintenance program then used by Lessee or any Sublessee
for engines of the same model as the Engines by (cc) a fraction of which (x) the
numerator shall be the excess of 25% of the hours or cycles of operation
(whichever is applicable) between engine refurbishment allowable for an engine
under the maintenance program then in use with respect to such Engines or
engines over the actual average number of hours or cycles of operation on such
Engines or engines remaining until the next such scheduled engine refurbishment
and (y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishment.
EXHIBIT G-PAGE 2
EXHIBIT H
to
Lease Agreement
[NW 1997 A]
RETURN CONDITIONS (EBT)
The portion of this Exhibit appearing below this text is intentionally
deleted from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Unless purchased by Lessee pursuant to Section 19 of the Lease, the
following return conditions apply to a return of the Airframe upon the
termination of the Lease on July 2, 2017:
1. Definitions. Capitalized terms used in this Exhibit H without
other definition have the respective meanings ascribed thereto in the Lease
Agreement [NW 1997 A], dated as of September 25, 1997, as amended from time to
time (the "Lease"), between First Security Bank, National Association, not in
its individual capacity but solely as Owner Trustee, and Northwest Airlines,
Inc. In addition, the following capitalized terms shall have the respective
meanings set forth below:
"Aircraft Documentation" means all logs, manuals, certificates, data
and inspection, modification, repair, and overhaul records which are required to
be maintained with respect to the Aircraft under the Maintenance Program or by
the Relevant Aviation Authority.
"APU" means the Sundstrand Model APIC 10000 auxiliary power unit
originally installed on the Aircraft on the Delivery Date or any auxiliary power
unit of a comparable or improved model substituted for such originally installed
auxiliary power unit.
"BFE" means the equipment described in Annex II to the Residual
Agreement, or any equivalent replacement equipment that may from time to time be
substituted for any such BFE.
"Country of Registration" means the country in which the Aircraft is
registered on the date the Aircraft is returned under the Lease at the end of
the Basic Term, which shall be one of the United States, the United Kingdom,
Japan, Canada or the Netherlands.
"HSI" means with respect to an Engine or the APU a hot section
inspection of such Engine or APU in accordance with the Maintenance Program.
"Maintenance Planning Document" means the Manufacturer's maintenance
planning document for Avro 146-RJ85 aircraft as in effect on the date the
Aircraft is returned under the Lease.
"Maintenance Program" means the maintenance program for the Aircraft
required to be maintained pursuant to Section 7(a)(I) of the Lease, as in effect
on the date the Aircraft is returned under the Lease at the end of the Basic
Term.
"Manufacturer" means, with respect to the Airframe, British Aerospace
(Operations) Limited, and its successors and assigns, and, with respect to the
Engines, AlliedSignal Engines, a division of AlliedSignal.
"MRB" means the Maintenance Review Board for British Aerospace Avro
146-RJ85 aircraft.
"Operator" means the operator of the Aircraft immediately prior to the
date the Aircraft is returned under the Lease.
"Relevant Aviation Authority" means the civil aviation authority of
the Country of Registration.
"Structural Repair Manual" means the Manufacturer's structural repair
manual for Avro 146-RJ85 aircraft as in effect on the date the Aircraft is
returned under the Lease.
2. Aircraft Return Conditions on July 2, 2017.
(a) General Conditions. On the date the Aircraft is returned under
the Lease, the Aircraft shall be in compliance with the conditions set forth
below, ordinary wear and tear excepted:
(i) The Aircraft shall be registered in a Country of
Registration.
(ii) The Aircraft shall be airworthy, possess a currently valid
standard certificate of airworthiness, transport category, issued by the
Relevant Aviation Authority and be eligible for commercial passenger
transportation in the Country of Registration.
(iii) The Aircraft shall be fully equipped with four Engines
and the APU.
(iv) All maintenance required by the Maintenance Program to have
been performed on or prior to the date the Aircraft is returned under the
Lease shall have been accomplished. The Airframe, each Engine, the APU and
the landing gear shall be serviceable and free from all known defects and
discrepancies outside the limits of the Maintenance Program other than fair
wear and tear not affecting airworthiness. All major dents and abrasions,
scab patches and loose or pulled rivets shall be within the prescribed
limits referred to in the Structural Repair Manual or the Maintenance
Program.
(v) All mandatory modifications to the Aircraft required to be
made on or prior to the date the Aircraft is returned under the Lease by
the Relevant Aviation
EXHIBIT H-PAGE 2
Authority shall have been made, provided that if an inspection program is
permitted as an alternative to a mandatory modification and the Aircraft is
in compliance with such inspection program, then such mandatory
modification shall not be required. All Manufacturer's Mandatory Service
Bulletins and Airworthiness Directives issued by the Relevant Aviation
Authority and, in either case, applicable to the Aircraft, which are in
force on the date the Aircraft is returned under the Lease and which
require termination within six months of the date the Aircraft is returned
under the Lease shall have been accomplished on the Aircraft.
(vi) Brakes and tires shall be serviceable and in good
condition. The landing gear and wheel ▇▇▇▇▇ shall be clean, free of
leaks and in good repair as required to be serviceable in accordance
with the Maintenance Program. The fuel system shall be in compliance
with the Maintenance Program. Except for BFE, the cockpit, all calendar
lifed emergency equipment, toilets and galley areas and the interior
shall be in serviceable condition and shall meet applicable fire
resistance regulations issued by the Relevant Aviation Authority in
effect on the date the Aircraft is returned under the Lease.
(vii) The Aircraft shall be clean by the Operator's normal
operating conditions. The Aircraft shall have all of the Operator's
exterior logos removed.
(b) Life Remaining. On the date the Aircraft is returned under the
Lease at the end of the Basic Term, the Aircraft shall comply with the following
additional requirements:
(i) The Engines shall have on average a minimum of one-half HSI
period remaining in accordance with MRB limits current on the date the
Aircraft is returned under the Lease, provided that in the event the
Engines do not have an average of at least one-half HSI period remaining in
accordance with such MRB limits, an Engine HSI Half-Life Adjustment under
clause (c)(i) shall be made in lieu of meeting such condition, provided,
however, that in no event shall any Engine have less than one-quarter HSI
period remaining in accordance with such MRB limits or have any defects or
discrepancies outside of the limits set forth in the Maintenance Planning
Document.
(ii) Engine life limited parts shall have on average at least
half-life remaining to their respective scheduled replacement in accordance
with the Engine Manufacturer's published life limited part replacement
schedule current on the date the Aircraft is returned under the Lease,
provided that in the event the Engine life limited parts do not have an
average of at least half-life remaining to their respective scheduled
replacement, an Engine life limited part Half-Life Adjustment under clause
(c)(ii) shall be made in lieu of meeting such condition, provided, however,
that in no event shall any Engine life limited part have less than
one-quarter life remaining to its scheduled replacement in accordance with
the Engine Manufacturer's published life limited part replacement schedule
current on the date the Aircraft is returned under the Lease.
EXHIBIT H-PAGE 3
(iii) The APU shall have remaining at least half of any
applicable HSI period remaining on the date the Aircraft is returned under
the Lease in accordance with the then current MRB standards, provided that
in the event the APU does not have at least half of any applicable HSI
period remaining, an APU Half-Life Adjustment under clause (c)(iii) shall
be made in lieu of meeting such condition.
(iv) The landing gear shall have at least half-life remaining to
the next landing gear overhaul according to MRB requirements current on the
date the Aircraft is returned under the Lease, provided that in the event
the landing gear does not have at least half-life remaining to such next
landing gear overhaul, a landing gear Half-Life Adjustment under clause
(c)(iv) shall be made in lieu of meeting such condition.
(v) The Aircraft's next sequential block C check (which C check
shall include full fault rectification) shall have been completed
immediately prior to the date the Aircraft is returned under the Lease,
provided that in the event the Aircraft has at least 25% of the time
remaining until its next scheduled sequential block C check, a C check
Half-Life Adjustment under clause (c)(v) shall be made in lieu of such
block C check. If the Maintenance Program permits a block C check to be
performed in phases, all phases of such block C check shall have been
performed in order to align such block C check with the BAe/Avro "block
type" Maintenance Planning Document schedule.
(vi) The Airframe shall have a minimum of half-time remaining
until its next scheduled major structural inspections, provided that in the
event the Aircraft has at least 25% of the time remaining until its next
scheduled major structural inspection, but less than half-time, a
structural inspection Half-Life Adjustment under the first sentence of
clause (c)(vi) shall be made in lieu of meeting such condition and in the
event the Aircraft has more than 75% of the time remaining until its next
scheduled major structural inspection, a structural inspection Half-Life
Adjustment under the second sentence of clause (c)(vi) shall be made.
For purposes of determining whether the foregoing requirements have been
satisfied:
(x) to the extent the Maintenance Program provides that a part
or component (for purposes of this clause (x) and clause (y) below, the
term "part or component" may include the entire Airframe, an entire Engine,
the APU or the landing gear) is maintained on a continuous or on condition
maintenance program with no fixed overhaul or major repair required in
accordance with the Manufacturer's requirements, such part or component
shall be deemed to have half-life or half-time (as the case may be)
remaining; and
(y) in the event that a part or component is subject to a power
by the hour program, or the equivalent, on terms and conditions acceptable
to Lessor, and provided that such program is fully assignable with no
material buy-in fees and for a sufficient term remaining to provide the
equivalent of half-life remaining on the affected part or component, such
part or component shall be deemed to have half-life remaining.
EXHIBIT H-PAGE 4
(c) Half-Life Adjustment. The Half-Life Adjustment shall equal the
sum of the Engine HSI Half-Life Adjustment, the Engine life limited parts
Half-Life Adjustment, the APU Half-Life Adjustment, the landing gear Half-Life
Adjustment, the C check Half-Life Adjustment and the structural inspection
Half-Life Adjustment (which shall be added if calculated pursuant to the first
sentence of clause (vi) below and subtracted if calculated pursuant to the
second sentence of clause (vi) below), each as calculated as set forth below:
(i) In the event that the Engines do not have an average of at
least a half HSI period remaining in accordance with MRB limits current on
the date the Aircraft is returned under the Lease, the Engine HSI Half-Life
Adjustment shall be an amount computed by multiplying (A) four by (B) the
cost (as evidenced by industry norms) of performing an HSI for engines of
the same type as the Engines by (C) a fraction, of which (x) the numerator
shall be the excess of 50% of the HSI period in accordance with such MRB
limits over the actual average amount of the HSI period remaining and (y)
the denominator shall be the HSI period.
(ii) In the event the Engine life limited parts do not have an
average of at least half-life remaining to their respective scheduled
replacement, the Engine life limited parts Half-Life Adjustment shall be an
amount computed by multiplying (A) four by (B) the average cost (as
evidenced by industry norms) of scheduled replacements of life limited
parts for engines of the same type as the Engines by (C) a fraction, of
which (x) the numerator shall be the excess of 50% of the life remaining to
scheduled replacement over the actual average remaining life to scheduled
replacement and (y) the denominator shall be the life between scheduled
replacements of Engine life limited parts.
(iii) In the event the APU does not have at least half of any
applicable HSI period remaining, the APU Half-Life Adjustment shall be an
amount computed by multiplying (A) the average cost (as evidenced by
industry norms) of an HSI for auxiliary power units of the same type as the
APU by (B) a fraction, of which (x) the numerator shall be the excess of
50% of the HSI period over the actual amount of the HSI period remaining
and (y) the denominator shall be the entire HSI period.
(iv) In the event the landing gear does not have at least
half-life remaining to such next scheduled landing gear overhaul, the
landing gear Half-Life Adjustment shall be an amount computed by
multiplying (A) the average cost (as evidenced by industry norms) of a
landing gear overhaul for landing gear of the same type as the landing gear
installed on the Aircraft by (B) a fraction, of which (x) the numerator
shall be the excess of 50% of the period between landing gear overhauls
over the actual period remaining to the next scheduled landing gear
overhaul and (y) the denominator shall be the period between scheduled
landing gear overhauls.
(v) In the event the Aircraft's next sequential block C check
(which C check shall include the full fault rectification) shall not have
been completed immediately prior to the date the Aircraft is returned under
the Lease, the C check Half-Life Adjustment shall be an amount computed by
multiplying (A) the average cost (as
EXHIBIT H-PAGE 5
evidenced by industry norms) of a block C check (including full fault
rectification) for aircraft of the same type as the Aircraft by (B) a
fraction, of which (x) the numerator shall be the excess of period between
sequential block C checks over the actual period remaining to the
sequential block C check and (y) the denominator shall be the period
between sequential block C checks.
(vi) In the event the Aircraft has less than half-time remaining
until its next scheduled major structural inspection, the structural
inspection Half-Life Adjustment shall be an amount computed by multiplying
(A) the average cost (as evidenced by industry norms) of a scheduled major
structural inspection for aircraft of the same type as the Aircraft by (B)
a fraction, of which (x) the numerator shall be the excess of 50% of the
period between scheduled major structural inspections over the actual
period remaining to the next scheduled major structural inspection and (y)
the denominator shall be the period between scheduled major structural
inspections. In the event the Aircraft has more than 75% of the time
remaining until its next scheduled major structural inspection, the
structural inspection Half-Life Adjustment shall be an amount computed by
multiplying (A) the average cost (as evidenced by industry norms) of a
scheduled major structural inspection for aircraft of the same type as the
Aircraft by (B) a fraction, of which (x) the numerator shall be the excess
of the actual period remaining to the next scheduled structural inspection
over 75% of the period between scheduled major structural inspection and
(y) the denominator shall be the period between scheduled major structural
inspections.
(d) Aircraft Documentation. On July 2, 2017, the Aircraft shall be
returned with all Aircraft Documentation. The Aircraft Documentation shall be
current as of the date the Aircraft is returned under the Lease and in full
compliance with the requirements of the Relevant Aviation Authority. In the
event that the Maintenance Program deviates from the Maintenance Planning
Document, the Aircraft Documentation shall include a document which shall
cross-reference all deviations. The Aircraft Documentation shall document all
repairs to the Aircraft with appropriate references to the Structural Repair
Manual and a repair scheme approved by the Manufacturer or the Relevant Aviation
Authority.
EXHIBIT H-PAGE 6