*
Aircraft N171UA
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FIRST AMENDED AND RESTATED LEASE AGREEMENT
(1989 I)
Dated as of
July 20, 2000
between
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, except as expressly provided herein,
but solely as Owner Trustee,
Lessor
AND
UNITED AIR LINES, INC.,
Lessee
One Boeing 747-422 Aircraft
N171UA
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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
First Amended and Restated Lease Agreement. To the extent, if any, that this
First Amended and Restated Lease Agreement 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 First Amended and Restated Lease
Agreement 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.
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TABLE OF CONTENTS
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Page
SECTION 1. Definitions...................................................................... 1
SECTION 2. Acceptance and Lease............................................................. 18
SECTION 3. Term and Rent.................................................................... 18
(a) Interim Term and Basic Term...................................................... 18
(b) Basic Rent....................................................................... 18
(c) Adjustments to Basic Rent, Excess Amount, Stipulated Loss
Values and Termination Values.................................................... 19
(d) Supplemental Rent................................................................ 20
(e) Payments in General.............................................................. 21
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............................................................ 25
(c) Fuel; Manuals.................................................................... 25
(d) Storage Upon Return.............................................................. 25
SECTION 6. Liens............................................................................ 25
SECTION 7. Registration, Maintenance and Operation; Possession
and Sublease; Insignia........................................................... 26
(a) Registration, Maintenance and Operation.......................................... 26
(1) Registration and Maintenance............................................ 26
(2) Operation............................................................... 27
(3) Reregistration.......................................................... 28
(b) Possession and Subleases......................................................... 28
(c) Insignia......................................................................... 32
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions...................................................... 33
(a) Replacement of Parts............................................................. 33
(b) Pooling of Parts................................................................. 33
(c) Alterations, Modifications and Additions......................................... 34
SECTION 9. Voluntary Termination............................................................ 35
(a) Termination Event................................................................ 35
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Page
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(b) Option to Purchase................................................................ 36
(c) Optional Sale of the Aircraft..................................................... 36
(d) Termination as to Engines......................................................... 38
SECTION 10. Loss, Destruction, Requisition, etc............................................... 38
(a) Event of Loss with Respect to the Aircraft........................................ 38
(b) Event of Loss with Respect to an Engine........................................... 41
(c) Application of Payments from Governmental Authorities
for Requisition of Title, etc..................................................... 42
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft.............................. 43
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft.......................... 44
(f) Application of Payments During Existence of Events of Default..................... 44
SECTION 11. Insurance......................................................................... 45
(a) Public Liability and Property Damage Insurance.................................... 45
(b) Insurance Against Loss or Damage to the Aircraft.................................. 45
(c) Reports, etc...................................................................... 47
(d) Self-Insurance.................................................................... 48
(e) Additional Insurance by Lessor and Lessee......................................... 48
(f) Indemnification by Government in Lieu of Insurance................................ 48
(g) Application of Payments During Existence of an Event of Default................... 49
(h) Terms of Insurance Policies....................................................... 49
SECTION 12. Inspection........................................................................ 50
SECTION 13. Assignment........................................................................ 51
SECTION 14. Events of Default................................................................. 51
SECTION 15. Remedies.......................................................................... 53
SECTION 16. Lessee's Cooperation Concerning Certain Matters................................... 56
SECTION 17. Notices........................................................................... 57
SECTION 18. No Set-Off, Counterclaim, Etc..................................................... 58
SECTION 19. Renewal Options; Purchase Options; Valuation...................................... 58
(a) Renewal Options................................................................... 58
(1) Fixed Renewal Term....................................................... 59
(2) Fair Market Renewal Term................................................. 59
(3) Waiver................................................................... 59
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(4) Conditions Precedent; Payment of Basic Rent.............................. 59
(b) Purchase Options.................................................................. 60
(c) Valuation......................................................................... 60
SECTION 20. Security for Lessor's Obligation to Holders of Certificates....................... 61
SECTION 21. Lessor's Right to Perform for Lessee.............................................. 62
SECTION 22. Investment of Security Funds; Liability of Lessor Limited......................... 63
(a) Investment of Security Funds...................................................... 63
(b) Liability of Lessor Limited....................................................... 63
SECTION 23. Miscellaneous..................................................................... 63
SECTION 24. Certain Rights with Respect to the Japanese Lease................................. 64
SECTION 25. Certain Rights with Respect to the Relevant Documents............................. 64
SECTION 26. Bankruptcy........................................................................ 64
SECTION 27. Effectiveness..................................................................... 65
EXHIBITS
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EXHIBIT A - Form of Amended and Restated Lease Supplement
EXHIBIT B - Basic Rent and Excess Amount Schedule
EXHIBIT B-1 - Rent Allocation Schedule
EXHIBIT C - Stipulated Loss Value Schedule
EXHIBIT D - Termination Value Schedule
EXHIBIT E - Rent Recalculation and Indemnification Verification
EXHIBIT F - Schedule of Permitted Sublessees
EXHIBIT G - Schedule of Registration Countries
EXHIBIT H - Schedule of Fixed Renewal Rent and Fair Market
Renewal Rent
iii
FIRST AMENDED AND RESTATED LEASE AGREEMENT
(1989 I)
This FIRST AMENDED AND RESTATED LEASE AGREEMENT (1989 I), dated as of
July 20, 2000, between STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, 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 UNITED AIR LINES, INC., a
corporation organized and existing pursuant to the laws of the State of Delaware
("Lessee") amends and restates in its entirety that certain Lease Agreement
(1989 I) dated as of August 1, 1989 (the "Initial Lease") between BANCBOSTON
UNITED LEASING LLC, a Delaware limited liability company (the "Original
Lessor"), and Lessee, as supplemented by that certain Lease Supplement (1989 I)
No. 1 dated as of August 16, 1989 (the "Original Lease Supplement") between
Original Lessor and Lessee, and as amended by that certain First Amendment to
Lease Agreement (1989 I) dated as of February 1, 1990 (the "First Amendment")
between Original Lessor and Lessee (the Initial Lease, as supplemented by the
Original Lease Supplement and as amended by the First Amendment, shall
hereinafter be collectively referred to as the "Original Lease");
WITNESSETH:
WHEREAS, pursuant to the Original Lease, Lessee has leased from Lessor the
Aircraft, being one (1) Boeing 747-422 aircraft which consists of the following
components: (i) Airframe: U.S. Registration No. N171UA, manufacturer's serial
no. 24322 and (ii) Engines: four (4) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ model PW4056 aircraft
engines bearing, respectively, manufacturer's serial numbers P717550, P717551,
P717552 and P717573;
WHEREAS, a counterpart of the Initial Lease, to which was attached and made
a part thereof a counterpart of the Original Lease Supplement, was recorded by
the Federal Aviation Administration on August 17, 1989 and assigned Conveyance
No. Q40444;
WHEREAS, a counterpart of the First Amendment was recorded by the Federal
Aviation Administration on February 16, 1990 and assigned Conveyance No. M22314;
WHEREAS, Lessor and Lessee desire to amend and restate the Original Lease
in its entirety and Lessor, Owner Participant and Lessee desire and intend that
the terms, provisions and agreements herein set forth shall be in force and
effect from and after the Effective Date, and the provisions of the Original
Lease shall govern the transactions from and after the Delivery Date through the
date immediately preceding the Effective Date.
SECTION 1. Definitions. Unless the context otherwise requires, the
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following terms shall have the following meanings for all purposes of this Lease
Agreement and shall be equally applicable to both the singular and the plural
forms of the terms herein defined:
[First Amended and Restated Lease Agreement (1989 I)]
"Additional Insured" means Lessor, in its individual capacity and as owner
of the Aircraft, the Indenture Trustee, the Owner Participant, Lessee in its
capacity as sublessor under any Sublease, the Liquidity Provider (on and after
the Refinancing Date only), the Subordination Agent (on and after the
Refinancing Date only) (so long as it is the registered holder of any
Certificate on behalf of the Pass Through Trustees), and, on and after the
Refinancing Date only, so long as the Pass Through Trustees are Certificate
Holders, each Pass Through Trustee, and each of their respective Affiliates,
successors and permitted assigns, and the respective directors, officers and
employees of each of the foregoing.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Aircraft" means the Airframe together with the four Engines whether or not
such Engines are installed on the Airframe or any other airframe.
"Airframe" means: (i) The Boeing Company Model 747-422 aircraft (except
Engines or engines from time to time installed thereon) bearing United States
Registration Number N171UA and Manufacturer's serial number 24322; (ii) any and
all Parts which are from time to time incorporated or installed in or attached
to such airframe (except Engines or engines from time to time installed thereon)
or which have been removed therefrom (except Engines or engines from time to
time installed thereon), but where legal title to which remains vested in Lessor
(or, so long as the Japanese Lease is in effect, where legal title remains in
the Primary Lessor, subject to the rights of Lessee under the Japanese Lease and
Lessor under the Japanese Lease Assignment) in accordance herewith (or with the
Japanese Lease, so long as the Japanese Lease is in effect); and (iii) any
replacement airframe which may from time to time be substituted pursuant to
Section 10(a)(ii) hereof.
"Applicable Rate" means blended debt rate of the Pass Through Equipment
Notes, upon the issuance thereof in accordance with the Note Purchase Agreement.
"Assignment and Assumption Agreement" means that certain Assignment and
Assumption Agreement (1989 I) dated as of December 6, 1999 between BankBoston,
N.A., as assignor, and BancBoston United Leasing LLC, as assignee, recorded by
the FAA on December 8, 1999 as Conveyance No. P21816.
"Bank" means Algemene Bank Nederland N.V., a banking corporation organized
under the laws of the Netherlands and acting through its main office in
Amsterdam, the Netherlands.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C. (S)101
et seq, as amended from time to time.
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2
[First Amended and Restated Lease Agreement (1989 I)]
"Base Rate" means the rate of interest announced from time to time by The
First National Bank of Boston at its principal office in Boston, Massachusetts
as its "Base Rate" (or its equivalent successor rate if the Base Rate is no
longer used).
"Basic Rent" means, for the Basic Term, the rent payable for the Aircraft
pursuant to Section 3(b), adjusted as provided in Section 3(c) and, for a
Renewal Term, Basic Rent determined pursuant to Section 19.
"Basic Term" means the term for which the Aircraft is leased hereunder
pursuant to Section 2 hereof beginning on the Commencement Date and ending on
February 15, 2015, or such earlier date as this Lease may be terminated in
accordance with the provisions hereof.
"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
Chicago, Illinois; New York City, New York; Boston, Massachusetts, Tokyo, Japan;
or, so long as any Certificate is outstanding, the city and state in which the
principal place of business of the Indenture Trustee is located.
"Certificate" means each "Equipment Note" issued under, and as defined in,
the Trust Indenture.
"Certificate Holder" means any holder from time to time of one or more
Certificates, as registered on the Registrar's books as of any date of
determination.
"Citizen of the United States" has the meaning given such term in Section
40102(a)(15) of Title 49 of the United States Code.
"Civil Reserve Air Fleet Program" shall mean the Civil Reserve Air Fleet
Program administered by the United States Government pursuant to Executive Order
No. 11490, as amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended through the
Delivery Date.
"Commencement Date" means February 15, 1990.
"Commitment" means the commitment of the Original Lessor to finance the
Original Lessor's payment of Lessor's Cost for the Aircraft.
"Default" means any event which with the giving of notice or the lapse of
time or both would become an Event of Default pursuant to Section 14(a), (b),
(c), (d) or (e).
3
[First Amended and Restated Lease Agreement (1989 I)]
"Delivery Date" means August 16, 1989.
"Dollars" and "$" mean the lawful currency of the United States of America.
"Effective Date" means July 20, 2000.
"Engine" means (i) each of the United Technologies Corporation, ▇▇▇▇▇ &
Whitney Group, Model PW4056 engines bearing manufacturer's serial numbers
P717550, P717551, P717552 and P717573 and installed on the Airframe on the
Delivery Date, whether or not from time to time thereafter installed on such
Airframe or any other airframe; (ii) any replacement engine which may from time
to time be substituted for any of such four engines pursuant to the terms
hereof; and (iii) with respect to any such engine, any and all Parts which are
from time to time incorporated or installed in or attached to any such engine
and any and all parts removed therefrom so long as legal title thereto remains
vested in Lessor (or, so long as the Japanese Lease is in effect, where legal
title remains in the Primary Lessor, subject to the rights of Lessee under the
Japanese Lease and Lessor under the Japanese Lease Assignment) in accordance
herewith (or with the Japanese Lease, so long as the Japanese Lease is in
effect). 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.
"Event of Default" has the meaning specified in Section 14 hereof.
"Event of Loss" with respect to the Aircraft, the 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 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 by any governmental or purported governmental authority (other
than a requisition of 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) shall
have resulted in the loss of possession of such property by Lessee for a period
in excess of 180 consecutive days or, if earlier, the end of the Term; (iv) as a
result of any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft having
jurisdiction, 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, prior to the expiration of such 180 day period, shall have
undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such property by Lessee, 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
4
[First Amended and Restated Lease Agreement (1989 I)]
to have occurred pursuant to this clause (iv) if such prohibition has been
applicable to Lessee's entire U.S. registered fleet of Boeing Model 747-400
aircraft and Lessee, 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; (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 the Interim Term or any Renewal Term) and shall have
continued for 30 days beyond the Term, unless Lessor shall have furnished the
written notice specified in Section 10(d) hereof; and (vi) with respect to any
Engine, any divestiture of title to such 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 the Commencement Date means an amount determined by
multiplying Lessor's Cost by the percentage specified in Exhibit B hereto
opposite the Commencement Date (as such Exhibit B may be adjusted from time to
time as provided in Section 3(c) hereof).
"Excluded Payments" has the meaning set forth in Section 1.01 of the
Indenture.
"Expenses" means any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, out-of-pocket costs, expenses and
disbursements (including, without limitation, reasonable legal fees and expenses
and Transaction Expenses to the extent not required to be paid by Lessor
pursuant to Section 16 of the Original Participation Agreement and all costs and
expenses relating to amendments, supplements, waivers and consents to and under
the Operative Documents, but excluding internal costs and expenses such as
salaries and overhead) of whatsoever kind and nature.
"Fair Market Rental Value" means the fair market rental value determined as
provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value determined as
provided in Sections 19(a) and 19(c) hereof.
"Federal Aviation Act" means the provisions of Title 49 of the U.S. Code,
formerly known as the Federal Aviation Act of 1958, as amended.
"Federal Aviation Administration" and "FAA" mean the United States Federal
Aviation Administration and any successor agency or agencies thereto.
5
[First Amended and Restated Lease Agreement (1989 I)]
"Indemnitees" means the Owner Participant, the Owner Participant Guarantor,
the Owner Trustee, in its individual capacity and as trustee under the Trust
Agreement, the Trust Estate, the Indenture Estate, the Indenture Trustee, in its
individual capacity and as trustee under the Trust Indenture, the Subordination
Agent (on or after the Refinancing Date only) (so long as it is the registered
holder of any Certificate on behalf of the Pass Through Trustees, each Pass
Through Trustee (on and after the Refinancing Date only) (so long as the Pass
Through Trustees are Certificate Holders), the Liquidity Provider (on and after
the Refinancing Date only), and each of their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents.
"Indenture Estate" has the meaning set forth in the Trust Indenture.
"Indenture Trustee" means the Indenture Trustee under the Trust Indenture,
and any entity which may from time to time be acting as trustee under the Trust
Indenture.
"Indenture Trustee Documents" means the Participation Agreement and the
Trust Indenture.
"Initial Lease" shall have the meaning set forth in the preamble hereof.
"Intercreditor Agreement" has the meaning ascribed to it in the Trust
Indenture.
"Interim Rent" means the amount determined by multiplying Lessor's Cost by
the percentage specified in Exhibit B hereto opposite the Commencement Date
under the heading "Interim Rent" (as such Exhibit B may be adjusted from time to
time as provided in Section 3(c) hereof).
"Interim Term" means the period commencing on the Delivery Date and ending
on and including the day immediately preceding the Commencement Date unless
earlier terminated in accordance with the provisions hereof.
"Japanese Assumption Agreement" means the Assumption Agreement dated as of
July 28, 1989, between Lessee and Bank.
"Japanese Confirmation" means the Confirmation and Agreement, dated July
28, 1989, executed by Primary Lessor and Bank.
"Japanese Delivery Date" means July 28, 1989.
"Japanese FAA ▇▇▇▇ of Sale" means that certain ▇▇▇▇ of sale for the
Aircraft on AC Form 8050-2 or such other form as may be approved by the FAA on
the Japanese Delivery Date, executed by Lessee in favor of Primary Lessor.
6
[First Amended and Restated Lease Agreement (1989 I)]
"Japanese Lease" means that certain Lease Agreement dated as of July 28,
1989, as supplemented by the Japanese Lease Supplement dated as of July 28,
1989, between Primary Lessor and Lessee, as such Japanese Lease may be amended
or further supplemented from time to time pursuant to the provisions thereof.
"Japanese Lease Assignment" means the Assignment of Japanese Lease
Agreement dated as of August 1, 1989, as supplemented by the Japanese Lease
Assignment Supplement dated the Delivery Date, between Lessee and Lessor.
"Japanese Lease Assignment Supplement" means the Japanese Lease Assignment
Supplement entered into between Lessee and Lessor on the Delivery Date pursuant
to the terms of the Japanese Lease Assignment, and any subsequent Japanese Lease
Assignment Supplement entered into in accordance with the Japanese Lease
Assignment.
"Japanese Lease Event of Default" means an Event of Default as defined in
the Japanese Lease.
"Japanese Lease Supplement" means a Lease Supplement entered into between
Primary Lessor and Lessee on the Delivery Date pursuant to the terms of the
Japanese Lease, and any subsequent Japanese Lease Supplement entered into in
accordance with the terms of the Japanese Lease.
"Japanese Warranty ▇▇▇▇ of Sale" means that certain ▇▇▇▇ of sale for the
Aircraft, dated the Japanese Delivery Date, executed by Lessee in favor of
Primary Lessor.
"Lease Agreement", "this Lease Agreement", "this Lease", "this Agreement",
"herein", "hereof", "hereunder", "hereby", or other like words mean this Amended
and Restated Lease Agreement (1989 I) as originally executed or as modified,
amended or supplemented pursuant to the applicable provisions hereof, including,
without limitation, supplementation hereof by any Lease Supplement entered into
pursuant to the applicable provisions hereof.
"Lease Period" means each of the consecutive semi-annual periods throughout
the Basic Term and any Renewal Term ending on a Lease Period Date, the first
such period commencing on and including the Effective Date.
"Lease Period Date" means each Lease Period Date which occurred under the
Original Lease through the Effective Date, January 1, 2001 and each succeeding
January 1 and July 1, to and including the last such date in the Term.
"Lease Supplement" means the Original Lease Supplement and any subsequent
Lease Supplement (1989 I) entered into in accordance with the terms hereof
substantially in the form of Exhibit A hereto.
7
[First Amended and Restated Lease Agreement (1989 I)]
"Lessee Documents" means the Purchase Agreement, the Omnibus Agreement, the
Japanese Warranty ▇▇▇▇ of Sale, the Japanese FAA ▇▇▇▇ of Sale, the Japanese
Lease, any Japanese Lease Supplement, the Japanese Assumption Agreement, the
Original Participation Agreement, the Participation Agreement, the Lessor's
Purchase Agreement, the Japanese Lease Assignment, any Japanese Lease Assignment
Supplement, the Trust Indenture, any Trust Supplement, the Original Lease, this
Lease, any Lease Supplement, the Tax Indemnity Agreement, an acceptance
certificate covering the Aircraft in the form agreed to by Primary Lessor and
Lessee, an acceptance certificate covering the Aircraft in the form agreed to by
Lessee and Lessor, each Pass Through Trust Agreement (on and after the
Refinancing Date only), each Pass Through Trust Agreement Supplement (on and
after the Refinancing Date only), and any other document executed by Lessee in
connection with the transactions contemplated by the Operative Documents.
"Lessor" means State Street Bank and Trust Company, a Massachusetts trust
company, not in its individual capacity except as expressly set forth herein,
but solely as Owner Trustee under the Trust Agreement.
"Lessor Aircraft Assets" means all estate, right, title and interest of
Lessor in and to the Aircraft, the Lease, any Lease Supplement, the Purchase
Agreement, the Japanese Lease, any Japanese Lease Supplement, the Primary Lessor
Mortgage, Sections 11 and 23(b) of the Omnibus Agreement, the Primary Lessor
Comfort Letter, the Japanese Lease Assignment, the Japanese Lease Assignment
Supplement and the Lessor's Purchase Agreement, including, without limitation,
all amounts of Basic Rent and Supplemental Rent including without limitation
insurance proceeds (other than insurance proceeds payable to or for the benefit
of Lessor or the Indenture Trustee) and requisition, indemnity or other payments
of any kind for or with respect to the Aircraft (except amounts owing to Lessor,
to the Indenture Trustee or to any Certificate Holder, or to any of their
respective directors, officers, employees, servants and agents, pursuant to
Section 7 of the Participation Agreement). Notwithstanding the foregoing,
"Lessor Aircraft Assets" shall not include any Excluded Payment.
"Lessor Documents" means the Original Participation Agreement, the
Participation Agreement, the Lessor's Purchase Agreement, the Japanese Lease
Assignment, the Japanese Lease Assignment Supplement, the Original Trust
Indenture, the Trust Indenture, any Trust Supplement, the Original Lease, this
Lease Agreement, any Lease Supplement, the Tax Indemnity Agreement, an
acceptance certificate covering the Aircraft in the form agreed to by Lessor and
Lessee and the Certificates.
"Lessor Liens" means any Lien on, or disposition of title to, the Aircraft
or the Trust Estate arising as a result of (i) claims against Lessor, 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 State Street Bank and Trust Company, in its individual
capacity, which is not related to the transactions contemplated by the Operative
8
[First Amended and Restated Lease Agreement (1989 I)]
Documents or is in violation of any of the terms of the Operative Documents,
(iii) claims against the Owner Participant, Lessor or State Street Bank and
Trust Company, in its individual capacity, with respect to Taxes or Expenses
against which Lessee is not required to indemnify the Owner Participant, Lessor
or State Street Bank and Trust Company, in its individual capacity or (iv)
claims against Lessor or Owner Participant arising out of any transfer by Lessor
of all or any portion of the interest of Lessor or Owner Participant in 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 a transfer
of possession of the Aircraft by Lessor pursuant to this Agreement, a transfer
pursuant to the Trust Indenture or a transfer pursuant to Section 8, 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 State
Street Bank and Trust Company, in its individual capacity, 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 Airframe or any
Engine or any interest therein, (2) the existence of such Lien does not
interfere in any way with the use or operation 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)
State Street Bank and Trust Company, in its individual capacity, or the Owner
Participant (as the case may be) is diligently contesting such Lien by
appropriate proceeding and (5) the existence of such Lien does not result in
actual interruption in the payment of Rent assigned to the Indenture Trustee for
the benefit of the Certificate Holders.
"Lessor's Consent and Agreement" means the Lessor's Consent and Agreement
(1989 I) dated as of the Delivery Date, executed by the Manufacturer, as the
same may be amended, modified or supplemented from time to time in accordance
with the applicable provisions thereof.
"Lessor's Cost" for the Aircraft means an amount of cash equal to
$125,000,000.
"Lessor's Purchase Agreement" means the Lessor's Purchase Agreement and
Assignment (1989 I), dated the Delivery Date, between Lessee and Lessor, as the
same may be amended, modified or supplemented from time to time in accordance
with the applicable provisions thereof.
"Lien" means any mortgage, pledge, lien, charge, claim, encumbrance, lease
or security interest.
"Make-Whole Amount" has the meaning ascribed to it in the Trust Indenture.
"Manufacturer" means The Boeing Company, a Delaware corporation.
9
[First Amended and Restated Lease Agreement (1989 I)]
"Manufacturer Documents" means the Purchase Agreement, the Lessor's Consent
and Agreement, the Manufacturer's Warranty ▇▇▇▇ of Sale and the Manufacturer's
FAA ▇▇▇▇ of Sale.
"Manufacturer's FAA ▇▇▇▇ of Sale " means that certain ▇▇▇▇ of sale for the
Aircraft on AC Form 8050-2 or such other form as may be approved by the FAA on
the Japanese Delivery Date, executed by the Manufacturer in favor of Lessee.
"Manufacturer's Warranty ▇▇▇▇ of Sale" means that certain ▇▇▇▇ of sale for
the Aircraft, dated the Japanese Delivery Date, executed by the Manufacturer in
favor of Lessee.
"Multiemployer Plan" has the meaning ascribed to it in ERISA.
"Net Economic Return" means the Owner Participant's weighted average after-
tax annual return on assets (after giving effect to its expected investment
period and after-tax interest income and expense on positive and negative cash
balances), computed on the basis of the same methodology and assumptions as were
utilized by Lessor in determining Basic Rent, Excess Amount, and Stipulated Loss
Value and Termination Value percentages as of the Delivery Date, as such
assumptions may be adjusted from time to time to take into account the impact of
any change of the type specified in Section 3(c) hereof.
"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 a rate
per Lease Period equal to (a) the Applicable Rate divided by (b) the number of
Lease Periods per year.
"Note Purchase Agreement" means that certain 747 Leased Equipment Note
Purchase Agreement to be entered into on or before the Refinancing Date, among
State Street Bank and Trust Company, as Owner Trustee, BancBoston United Leasing
LLC, as Owner Participant, United Air Lines, Inc., as Lessee, and State Street
Bank and Trust Company of Connecticut, National Association, as Pass Through
Trustee under each Pass Through Trust Agreement, Subordination Agent and
Indenture Trustee.
"Obsolete Parts" shall have the meaning set forth in Section 8(c) hereof.
"Omnibus Agreement" means that certain Omnibus Agreement dated July 28,
1989, between Primary Lessor, Lessee and Primary Lender.
"Operative Documents" means the Purchase Agreement, the Manufacturer's
Warranty ▇▇▇▇ of Sale, the Manufacturer's FAA ▇▇▇▇ of Sale, the Omnibus
Agreement, the Japanese Warranty ▇▇▇▇ of Sale, the Japanese FAA ▇▇▇▇ of Sale,
the Primary Loan Agreement, the Japanese Lease (including any Japanese Lease
Supplement), the Primary Lessor Mortgage, the Japanese Assumption Agreement, the
Japanese Confirmation, the Primary Lessor Comfort Letter, the Parent Letter, the
Participation Agreement, the Lessor's Purchase Agreement, the Lessor's
10
[First Amended and Restated Lease Agreement (1989 I)]
Consent and Agreement, the Japanese Lease Assignment (including the Japanese
Lease Assignment Supplement), the Trust Indenture (including any Trust
Supplement), the Lease (including any Lease Supplement), the Certificates, the
Tax Indemnity Agreement, the Note Purchase Agreement (upon the execution
thereof), the Original Lease, the Original Participation Agreement, the Original
Trust Indenture, the Owner Participant Guaranty Agreement, the Trust Agreement,
the Assignment and Assumption Agreement, an acceptance certificate covering the
Aircraft in the form agreed to by Primary Lessor and Lessee, and an acceptance
certificate covering the Aircraft in the form agreed to by Lessor and Lessee.
"Original Amount" means, with respect to a Certificate, the stated original
principal amount of such Certificate, and with respect to all the Certificates
means the aggregate stated original principal amounts of such Certificates, as
the case may be.
"Original Lease" shall have the meaning set forth in the Preamble hereof.
"Original Lease Supplement" shall have the meaning specified in the
preamble hereto.
"Original Lessor" shall have the meaning set forth in the Preamble hereof.
"Original Participation Agreement" shall mean that certain Participation
Agreement (1989 I) dated as of August 1, 1989, as amended by that certain First
Amendment to Participation Agreement (1989 I) dated as of February 1, 1990, in
each case among United Air Lines, Inc., as lessee, BancBoston United Leasing
LLC, as lessor, and State Street Bank and Trust Company of Connecticut, National
Association, as successor to the Connecticut Bank and Trust Company, National
Association, in its individual capacity and as Indenture Trustee.
"Original Trust Indenture" shall mean that certain Trust Indenture and
Security Agreement (1989 I) dated as of August 1, 1989 among BancBoston United
Leasing LLC, as lessor, State Street Bank and Trust Company of Connecticut,
National Association, as successor to The Connecticut Bank and Trust Company,
National Association, as Indenture Trustee, and Lessee, as supplemented by that
certain Trust Indenture and Security Agreement Supplement No. 1 dated as of
August 16, 1989, and as amended by that certain First Amendment to Trust
Indenture and Security Agreement (1989 I) dated as of February 1, 1990.
"Owner Participant" means the Person executing the Participation Agreement
as the Owner Participant and any Person to which such Person 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 thereby.
"Owner Participant Documents" means the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement, the Assignment and Assumption Agreement
and any
11
[First Amended and Restated Lease Agreement (1989 I)]
other documents executed by the Owner Participant in connection with the
transactions contemplated by the Participation Agreement and the other Operative
Documents.
"Owner Participant Guarantor" means Fleet National Bank.
"Owner Participant Guaranty Agreement" means that certain Amended and
Restated Guaranty, dated as of the date hereof, made by Owner Participant
Guarantor in favor of Lessee and the Indenture Trustee, as such agreement may be
amended or supplemented from time to time pursuant to the applicable provisions
thereof and the terms of the Trust Indenture.
"Owner Trustee" means the Person executing the Participation Agreement as
Owner Trustee and any Person appointed as successor Owner Trustee in each case
not in its individual capacity but solely as Owner Trustee under the Trust
Agreement, except as otherwise expressly stated.
"Owner Trustee Documents" means the Participation Agreement, the Trust
Agreement, the Assignment and Assumption Agreement, this Lease, any Lease
Supplement, the Trust Indenture, any Trust Supplement and the Certificates and
any other document executed by the Owner Trustee in connection with the
transactions contemplated by the Participation Agreement and the other Operative
Documents.
"Participants" means and includes the Owner Participant and the Pass
Through Trustees.
"Participation Agreement" means the Amended and Restated Participation
Agreement (1989 I), dated as of the date hereof, among Lessee, Lessor, Owner
Participant and the Indenture Trustee, as such Participation Agreement may be
amended or supplemented from time to time pursuant to the applicable provisions
thereof.
"Parent Letter" means that certain letter dated July 28, 1989 from The
Sanwa Bank Limited to Lessee.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to the Airframe or any Engine and all such items which
are subsequently removed therefrom so long as legal title thereto shall vest in
the Lessor (or, so long as the Japanese Lease is in effect, where legal title
remains in the Primary Lessor, subject to the rights of Lessee under the
Japanese Lease and Lessor under the Japanese Lease Assignment) in accordance
with Section 8(a) hereof (or in accordance with the Japanese Lease, if in
effect).
"Pass Through Certificates" means any of the credit enhanced pass through
certificates issued pursuant to any of the Pass Through Trust Agreements.
12
[First Amended and Restated Lease Agreement (1989 I)]
"Pass Through Documents" means the Pass Through Trust Agreements, the
Intercreditor Agreement, the Note Purchase Agreement and the Liquidity
Facilities.
"Pass Through Trust" means each of the Class ▇-▇, ▇-▇, B and C-2 pass
through trusts created pursuant to the related Pass Through Trust Agreement.
"Pass Through Trust Agreements" means each of the ▇-▇, ▇-▇, B and C-2 Pass
Through Trust Supplements, together in each case with the Basic Pass Through
Trust Agreement, each to be entered into on the Refinancing Date by and between
the Lessee and a Pass Through Trustee as contemplated by the Note Purchase
Agreement.
"Pass Through Trust Supplement" shall have the meaning specified for the
term "Trust Supplement" in any of the Pass Through Trust Agreements.
"Pass Through Trustee" means State Street Bank and Trust Company of
Connecticut, National Association, in its capacity as trustee under each Pass
Through Trust Agreement, and such 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 any Certificate Holder, 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 (vii) of
Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled and principally
located in a country listed in Exhibit F hereto as in effect from time to time,
and with which country the United States maintains diplomatic relations at the
time of such sublease (no action need be taken by Lessee if such diplomatic
relations are severed subsequent to such sublease).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan within the meaning of Section 3(3) of
ERISA.
"Primary Lender" means Algemene Bank Nederland N.V., acting through its
Tokyo branch.
13
[First Amended and Restated Lease Agreement (1989 I)]
"Primary Lessor" means SBF West Air Co., Ltd., a corporation organized
under the laws of Japan.
"Primary Lessor Comfort Letter" means that certain letter dated July 28,
1989 from Sanwa Business Finance Co., Ltd., the parent of Primary Lessor, to
Lessee.
"Primary Lessor Mortgage" means that certain Aircraft Mortgage and Security
Agreement dated as of July 28, 1989, executed by Primary Lessor in favor of
Lessee.
"Primary Loan Agreement" means the Loan Agreement, dated as of July 28,
1989, between Primary Lessor and Primary Lender.
"Purchase Agreement" means the agreement between Lessee and the
Manufacturer relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.
"Refinancing Date" means the date on which the Pass Through Trustee issues
the Pass Through Certificates under the Pass Through Trust Agreements as
contemplated by the Note Purchase Agreement.
"Registrar" has the meaning set forth in Section 1.01(b) of the Trust
Indenture.
"Reimbursement Amount" has the meaning set forth in Section 3(f) hereof.
"Relevant Documents" means the Omnibus Agreement, the Japanese Warranty
▇▇▇▇ of Sale, the Japanese FAA ▇▇▇▇ of Sale, the Primary Loan Agreement, the
Japanese Lease (including any Japanese Lease Supplement), the Primary Lessor
Mortgage, the Japanese Assumption Agreement, the Japanese Confirmation, the
Primary Lessor Comfort Letter, the Parent Letter, and an acceptance certificate
covering the Aircraft in the form agreed to by Primary Lessor and Lessee.
"Renewal Term" means the Fixed Renewal Term or any Fair Market Renewal Term
as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Restricted Period" shall mean the period from the Delivery Date until
December 31, 1996.
"Stipulated Loss Value" with respect to the Aircraft as of any date through
and including the last day of the Basic Term, means the amount determined by
multiplying Lessor's Cost for
14
[First Amended and Restated Lease Agreement (1989 I)]
the Aircraft by the percentage specified in Exhibit C hereto opposite the
Stipulated Loss Value Date with respect to which the amount of Stipulated Loss
Value is determined (as such Exhibit C may be adjusted from time to time as
provided in Section 3(c) hereof and in Section 8 of the Tax Indemnity
Agreement). "Stipulated Loss Value" with respect to the Aircraft, as of any date
during any Renewal Term, shall be the amount determined as provided in Section
19 hereof, as such amount may be adjusted from time to time. The Stipulated Loss
Values as determined pursuant to this Lease or the Tax Indemnity Agreement shall
be at all times sufficient to repay the aggregate unpaid principal amount of the
outstanding Certificates, together with all unpaid interest accrued thereon. It
is understood and agreed that the percentages specified in Exhibit C take fully
into account the amount and application of each installment of Basic Rent, so
that no additional accrual or credit of Basic Rent is to be made in respect
thereof, except as otherwise expressly provided herein. To the extent that an
event giving rise to an obligation to pay any Stipulated Loss Value occurs, and
the actual date on which the loss of tax benefits resulting from such event
occurs shall be earlier or later than the date assumed in calculating the
Federal income tax consequences reflected in the applicable Stipulated Loss
Value, such Stipulated Loss Value shall be appropriately adjusted to reflect the
actual date of such event, but shall be otherwise based on the original
assumptions used in determining such Stipulated Loss Value.
"Stipulated Loss Value Date" means the 15th calendar day of each calendar
month during the Interim Term, the Basic Term and any Renewal Term.
"Sublease" means any sublease permitted by the terms of Section 7(b)(viii)
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)(viii) hereof.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Interim Rent and Basic Rent) which Lessee assumes or agrees to pay to
Lessor or others hereunder or under any of the other Operative Documents
(excluding, however, any amounts, liabilities or obligations referenced in the
Relevant Documents), including, without limitation, any amount payable by the
Owner Trustee under Section 2.01 of the Indenture, payments of Stipulated Loss
Value and Termination Value and amounts calculated by reference thereto, premium
on the Certificates and indemnity payments. The parties acknowledge that
Supplemental Rent is a general category and, accordingly, agree that any
provision of any Operative Document which calls for the payment of Supplemental
Rent and also calls for the payment of specific items which are includable in
Supplemental Rent is not to be interpreted as requiring any double payment.
"Tax Indemnity Agreement" means that certain Amended and Restated Tax
Indemnity Agreement (1989 I), dated as of the date hereof, between Owner
Participant and Lessee, as
15
[First Amended and Restated Lease Agreement (1989 I)]
originally executed or as modified, amended or supplemented pursuant to the
applicable provisions thereof.
"Tax Indemnitee" means the Owner Participant, the Owner Participant
Guarantor, the Owner Trustee, in its individual capacity and as trustee under
the Trust Agreement, the Trust Estate, the Indenture Estate, the Indenture
Trustee, in its individual capacity and as trustee under the Trust Indenture,
each Pass Through Trustee (so long as the Pass Through Trustees are Certificate
Holders) solely in its capacity as Pass Through Trustee but not as a Certificate
Holder, and each of their respective Affiliates, successors, permitted assigns,
directors, officers, employees, servants and agents.
"Taxes" means any and all fees (including, without limitation, license,
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), licenses levies, imposts,
duties, recording charges or fees, charges, assessments, or withholdings of any
nature whatsoever, together with any assessments, penalties, fines, additions to
tax and interest thereon.
"Taxing Authority" means any federal, state or local government or other
taxing authority in the United States or any foreign government or any political
subdivision or taxing authority thereof or any territory or possession of the
United States or any international authority with the power to imposes Taxes of
any kind.
"Term" means the Interim Term, the Basic Term and, if actually entered
into, any Renewal Term.
"Termination Date" has the meaning set forth in Section 9(a)(3) hereof.
"Termination Value" with respect to the Aircraft as of any date through and
including the last day of the Basic Term means 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
of Termination Value is determined (as such Exhibit D may be adjusted from time
to time as provided in Section 3(c) hereof and in Section 8 of the Tax Indemnity
Agreement). The Termination Values as determined pursuant to this Lease or the
Tax Indemnity Agreement shall be at all times sufficient to repay the aggregate
unpaid principal amount of the outstanding Certificates, together with all
unpaid interest accrued thereon. To the extent that an event giving rise to an
obligation to pay any Termination Value occurs, and the actual date on which the
loss of tax benefits resulting from such event occurs shall be earlier or later
than the date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value shall be
appropriately adjusted to reflect the actual date of such event, but shall be
otherwise based on the original assumptions used in determining such Termination
Value.
16
[First Amended and Restated Lease Agreement (1989 I)]
"Transaction Expenses" means (i) the reasonable and actual fees, expenses
and disbursements of (1) Day, ▇▇▇▇▇ & ▇▇▇▇▇▇, special counsel for the Indenture
Trustee, (2) ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special counsel in Oklahoma City, Oklahoma,
(3) ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇, special counsel for Lessee (but only to the extent
the same relate to documenting and negotiating the transaction and specifically
excluding the same to the extent the same relates to advising Lessee), (4)
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special counsel for Lessor, (5) Shearman & Sterling,
special counsel to the original Certificate Holder, (6) White & Case, special
counsel to the Holders of the Series A Certificates, and (7) Yuasa and Hara,
special Japanese counsel for Lessor and the Indenture Trustee, (ii) all fees,
taxes and other charges payable in connection with the recording or filing of
instruments and financing statements in connection with the transactions
contemplated hereby, (iii) the initial fee and reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (iv) the fee
of AVMARK, Inc. with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) (xviii) of the Participation
Agreement, (v) the private placement fees payable pursuant to Section 20(i) of
the Participation Agreement, (vi) printing and distribution costs relating to
the transactions contemplated by the Operative Documents, (vii) all airline
ticket fares, to the extent travel is effected on United Air Lines, Inc.,
incurred by the Certificate Holders in connection with the transactions
contemplated by the Operative Documents, (viii) all reasonable expenses and out-
of-pocket costs of Lessor, not to exceed an aggregate of $10,000, plus all
airline ticket fares, to the extent travel is effected on United Air Lines,
Inc., incurred in connection with the transactions contemplated by the Operative
Documents, (ix) all reasonable expenses and out-of-pocket costs of Lessor or
Owner Participant incurred in connection with the transactions contemplated by
Section 20 of the Original Participation Agreement and (x) the closing fee of
the original Certificate Holder.
"Trust Agreement" means that certain Trust Agreement (1989 I) dated as of
the date hereof between the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, as originally executed or as modified,
amended or supplemented in accordance with the applicable provisions thereof and
the terms of the Trust Indenture, including, without limitation, any Trust
Supplement entered into pursuant to the applicable provisions thereof.
"Trust Estate" has the meaning set forth in the Trust Agreement, but in any
event includes all Lessor Aircraft Assets.
"Trust Indenture" means that certain Amended and Restated Trust Indenture
and Mortgage (1989 I), 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 the term "Indenture
Estate" in the Trust Indenture.
17
[First Amended and Restated Lease Agreement (1989 I)]
"Trust Office" has the meaning set forth in the Trust Indenture.
"Trust Supplement" means a Supplement to the Amended and Restated Trust
Indenture, substantially in the form of Exhibit A to the Trust Indenture.
"U.S." means the United States of America.
"U.S. Air Carrier" means a Citizen of the United States holding an air
carrier operating certificate issued by the Secretary of Transportation pursuant
to Chapter 447 of Title 49 of the 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 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.
"U.S. Ownership Interest" means all right, title and interest in and to the
Aircraft conveyed to the Original Lessor pursuant to the Japanese Lease
Assignment and Lessor's Purchase Agreement, which interest the Lessee, Lessor
and Owner Participant agree constitutes ownership of the Aircraft for United
States tax purposes.
"Wet Lease" means any arrangement whereby the Lessee 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 possessing all current certificates and licenses
that would be required under the Federal Aviation Act for the performance by
such employees of similar functions within the United States of America (it is
understood that cabin attendants need not be employees of Lessee) and (ii) shall
be maintained by Lessee in accordance with its normal maintenance practices.
SECTION 2. Acceptance and Lease. It is hereby acknowledged that Original
--------------------
Lessor acquired the U.S. Ownership Interest from Lessee pursuant to the Japanese
Lease Assignment and simultaneously leased the Aircraft to Lessee under the
Original Lease, and Lessee leased from Lessor under the Original Lease, the
Aircraft as evidenced by the execution by Lessor and Lessee of a Lease
Supplement leasing the Aircraft. Lessor authorized one or more employees of
Lessee, designated by Lessee in writing, as the authorized representative or
representatives of Lessor to accept delivery of the Aircraft. Such
representatives accepted delivery of the Aircraft for all purposes of the
Original Lease and this Lease. Lessor hereby agrees to lease the Aircraft to
Lessee and Lessee hereby agrees to lease the Aircraft from Lessor, on the terms
and subject to the conditions set forth in this Lease.
SECTION 3. Term and Rent.
-------------
(a) Interim Term and Basic Term. The Interim Term commenced on
---------------------------
the Delivery Date and ended on and included the day immediately preceding the
Commencement
18
[First Amended and Restated Lease Agreement (1989 I)]
Date. The Basic Term commenced on the Commencement Date and shall end on and
include February 15, 2015, or such earlier date as this Lease may be terminated
in accordance with the provisions hereof.
(b) Basic Rent.
----------
During the Term, from and including the Delivery Date up to and
including the Effective Date, Lessee paid Basic Rent in accordance with Section
3(b)(i) of the Original Lease. From the Effective Date, Lessee shall pay Basic
Rent for the Aircraft on each Lease Period Date occurring after the Effective
Date during the remaining Term in immediately available dollars, in the amounts
and on the dates set forth in Exhibit B hereto. Each such payment of Basic Rent
shall be allocated in accordance with Exhibit B-1 hereto, and the Lessee and the
Lessor agree that such allocation is intended to constitute an allocation of
fixed rent to the periods indicated on such Exhibit B-1 hereto within the
meaning of Treasury Regulation ss.1.467-1(c)(2)(ii)(A). Basic Rent shall be
payable in advance on certain Lease Period Dates and in arrears on certain Lease
Period Dates, as specified in Exhibit B hereto.
(c) Adjustments to Basic Rent, Excess Amount, Stipulated Loss Values
----------------------------------------------------------------
and Termination Values.
----------------------
(i) In the event that there shall be an optional redemption or
refinancing of the Certificates in accordance with Section 17 of the
Participation Agreement, then the Basic Rent and Excess Amount set forth in
Exhibit B, the Stipulated Loss Value percentages set forth in Exhibit C and
the Termination Value percentages set forth in Exhibit D shall be adjusted
(upwards or downwards as the case may be) using the same methods and
assumptions used to calculate Basic Rent and Excess Amount and Stipulated
Loss Value and Termination Value percentages as set forth in Exhibits B, C
and D, respectively, in each case in compliance with clauses (iv) and (v)
of this paragraph (c) and in order to: (1) maintain Net Economic Return and
(2) minimize the Net Present Value of Rents to Lessee to the extent
possible consistent with clause (1) hereof. Prior to the Refinancing Date
only, in the event a new Funding Period is selected for the Certificates in
accordance with Section 7.04 of the Trust Indenture, then in each case the
Basic Rent and Excess Amount (if such event occurs prior to the Refinancing
Date) set forth in Exhibit B, the Stipulated Loss Value percentages set
forth in Exhibit C and the Termination Value percentages set forth in
Exhibit D shall be adjusted (upwards or downwards as the case may be) using
the same methods and assumptions (as modified on account of the prior
occurrence of any of the events referred to above) used to calculate Basic
Rent and Excess Amount and Stipulated Loss Value and Termination Value
percentages as set forth in Exhibits B, C and D, respectively, in each case
in compliance with clauses (iv) and (v) of this paragraph (c) and in order
to: (1) maintain Net Economic Return and
19
[First Amended and Restated Lease Agreement (1989 I)]
(2) minimize the Net Present Value of Rents to Lessee to the extent
possible consistent with clause (1) hereof.
(ii) On the Refinancing Date, Lessee and Lessor shall revise
Exhibits B, B-1, C and D hereto in accordance with the terms of the Note
Purchase Agreement and shall amend this Lease accordingly.
(iii) Any recalculation of Basic Rent and Excess Amount and Stipulated
Loss Value and Termination Value percentages pursuant to this Section 3(c)
shall be determined by Owner Participant on behalf of Lessor and shall be
subject to the verification procedures set forth in Exhibit E hereto. Such
recalculated Basic Rent and Excess Amount and Stipulated Loss Value and
Termination Value percentages shall be set forth in an amendment or
supplement hereto; provided, however, that any such recalculation shall be
effective upon such determination or verification, as the case may be,
notwithstanding that any such amendment or supplement shall not yet have
been executed and delivered.
(iv) 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(c),
shall, together with the amount of the Excess Amount payable on the
Commencement Date, and each payment of Termination Value and Stipulated
Loss Value, whether or not adjusted in accordance with this Section 3(c) or
Section 8 of the Tax Indemnity Agreement, and all other amounts payable
simultaneously by Lessee pursuant to this Lease, excluding however,
Excluded Payments, in each case be in an amount at least sufficient to pay
in full, on the date on which such payment is due, any payments then
required to be made on account of the principal amount (and premium, if
any) of and interest on the Certificates then outstanding. It is agreed
that no installment of Basic Rent or payment of Excess Amount, Termination
Value or Stipulated Loss Value shall be increased or adjusted by reason of
(A) any attachment or diversion of Rent on account of (x) Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens) or (y) any other Lien on or
against the Lessor Aircraft Assets, any part thereof or the Operative
Documents arising as a result of claims against the Indenture Trustee or
any Certificate Holder not related to the transactions contemplated by the
Operative Documents, (B) any modification of the payment terms of the
Certificates made without the prior written consent of Lessee (other than
such as may be permitted without Lessee's consent pursuant to the express
terms of any Operative Document and so long as any such modification does
not increase any amount payable by Lessee hereunder) or (C) the
acceleration of any Certificate due to the occurrence of an "Event of
Default" (as such term is defined in the Trust Indenture) which does not
constitute an Event of Default hereunder.
20
[First Amended and Restated Lease Agreement (1989 I)]
(v) All adjustments to Basic Rent under this Section 3(c) shall be
consistent with the requirements of: (A) Rev. Proc. 75-21 and Rev. Proc.
75-28, as modified and in effect on the Delivery Date to the same extent
and in the same manner that such requirements were satisfied in calculating
Basic Rent as originally set forth in Exhibit B, and (B) Section 467 of the
Code, or any successor provision thereof, as in effect on the date of such
adjustment.
(d) 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 Business 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 when due any amount of premium
payable under the Trust Indenture and all amounts payable by Owner Trustee
pursuant to Section 2.01 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 with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent payable to Lessor shall
-------------------
be made directly by Lessee by wire transfer of immediately available funds prior
to 11:00 a.m., New York time, on the date of payment in Dollars, to Lessor at
its office at ▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Corporate
Trust Department (or such other office of Lessor in the continental United
States or such other account 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 until Lessee shall have received notice from the Indenture Trustee to the
contrary, Lessor hereby directs and Lessee agrees, that all Basic Rent shall be
paid directly to the Indenture Trustee at the times and in funds specified in
this Section 3(e) at the offices of the Indenture Trustee at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ Square, Hartford, CT 06103, Attention: Corporate Trust Department (or
such other office of Indenture Trustee in the continental United States or such
other account as Indenture Trustee shall direct in a notice to Lessee at least
10 Business Days prior to the date such payment of Basic Rent is due).
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
21
[First Amended and Restated Lease Agreement (1989 I)]
such next succeeding Business Day) no interest shall accrue on the amount of
such payment, from and after such scheduled date.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES AND
---------------------------------------
LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES AND AGREES THAT
AS BETWEEN LESSOR, STATE STREET BANK AND TRUST COMPANY, IN ITS INDIVIDUAL
CAPACITY, ANY PARTICIPANT, THE INDENTURE TRUSTEE, AND LESSEE (A) THE AIRFRAME
AND EACH ENGINE IS OF SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND
ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE
IS SUITABLE FOR ITS PURPOSES, (C) NEITHER LESSOR NOR OWNER PARTICIPANT IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR, THE
INDENTURE TRUSTEE NOR THE OWNER PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED
TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
CONDITION, DESIGN, OPERATION, VALUE, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK 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 as set forth in Sections 8(f)(vi) and 8(p)(ii) of the
Participation Agreement as to title and except that State Street Bank and Trust
Company, in its individual capacity, (i) represents and warrants that on the
Effective Date, Lessor shall have received whatever title to the Aircraft was
conveyed to it by Owner Participant, (ii) represents and warrants that on the
Effective Date the Aircraft shall be free of Lessor Liens (including for this
purpose Liens that would be Lessor Liens but for the proviso to the definition
of Lessor Liens) attributable to it in its individual capacity, (iii) covenants
that it will not, through its own actions or inactions, in such capacity,
interfere in Lessee's quiet enjoyment, use operation or possession of the
Aircraft unless this Lease shall have been declared in default pursuant to
Section 15 hereof, (iv) agrees that it will not directly or indirectly create,
incur, assume or suffer to exist any Lessor Lien attributable to it in its
individual capacity 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 and agrees that if at any time it shall cease to be a
Citizen of the United States, 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 adverse effect on the Owner Participant,
the Certificate Holders or Lessee), effective upon the appointment of a
successor Owner Trustee in accordance with the provisions of the Trust
Agreement. None of the provisions of this Section 4 or any other provision of
this Agreement shall be deemed to amend, modify or otherwise affect the
representations, warranties
22
[First Amended and Restated Lease Agreement (1989 I)]
or other obligations (express or implied) of the Manufacturer, any affiliate
thereof, any subcontractor or supplier of the Manufacturer, or any affiliate
thereof, with respect to the Airframe, the Engines, or any Parts, or to release
the Manufacturer, any affiliate thereof, or any such subcontractor or supplier
from any such representation, warranty or obligation. Unless a Default or an
Event of Default shall have occurred and be continuing, Lessor agrees to make
available to Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made by the Manufacturer, any affiliate thereof, or any
of their respective subcontractors or suppliers and any other claims against the
Manufacturer, any affiliate thereof, or any such subcontractor or supplier with
respect to the Aircraft.
SECTION 5. Return of the Aircraft.
----------------------
(a) Condition Upon Return. Unless purchased by Lessee pursuant to
---------------------
Section 9(b) or 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 Section 15
hereof, Lessee, at its own expense, will return the Airframe to Lessor at a
major airport on Lessee's route system in one of the forty-eight contiguous
states of the United States chosen by Lessee, and Lessee will give Lessor ten
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 Aircraft to Lessor at the site of the storage
(in which event Lessor shall reimburse Lessee for Lessee's out-of-pocket
expenses in ferrying the Aircraft from the place it is located on the last day
of the Term (provided, however, that if the Aircraft is located outside of the
forty-eight contiguous states of the United States on the last day of the Term,
then such expenses shall be calculated as if the Aircraft was located in San
Francisco, California on the last day of the Term) to such storage site). At the
time of such return, (A) Lessee will, unless otherwise requested by Lessor to
retain the existing registration of the Aircraft, at least 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 FAA in the name of the
Lessor or its designee, provided that Lessee shall be relieved of its
obligations under this sentence if 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, and (B) the
Airframe will be fully equipped with the Engines (or other United Technologies
Corporation, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Group, Model PW4056 engines or four engines of the
same or another manufacturer of equivalent value and utility and suitable for
installation and use on the Airframe; provided that all four engines shall be of
the same make, model and manufacturer) 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 by reason of the proviso to
clause (A) in the preceding sentence or because Lessor has not so requested the
registration of the Aircraft, 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 that would be Lessor Liens but for the proviso to the definition of Lessor
Liens)) and rights of third parties under pooling, interchange, overhaul, repair
or other similar agreements or arrangements, (iii) shall be in a regular
passenger configuration used by
23
[First Amended and Restated Lease Agreement (1989 I)]
Lessee, in as good operating condition as when delivered by the Manufacturer to
Lessee, ordinary wear and tear excepted, and otherwise in the condition required
to be maintained under and subject to Lessee's FAA-approved maintenance plan,
irrespective of whether such Airframe or Engines have been under Sublease during
the Term, (iv) in the event that Lessee shall not be using a continuous
maintenance program with respect to the Airframe immediately prior to such
return but instead shall be using a block overhaul program with respect to the
Airframe, then (A) such block overhaul program 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, (v) in the event that Lessee 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 heavy maintenance shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine heavy maintenance allowed under
the maintenance program then in use with respect to such Engines or engines,
(vi) shall have all Lessee's and any Sublessee's exterior markings removed or
painted over with the areas thereof refinished to match adjacent areas, and
(vii) shall be in a state of cleanliness suitable under Lessee's normal service
standards for operation in Lessee's revenue passenger service, and in all such
cases the Aircraft shall not have been discriminated against whether by reason
of its leased status or otherwise in maintenance, use, operation or in any other
manner whatsoever.
In the event that upon a return of the Aircraft pursuant to this
Section 5, Lessee and Lessor cannot agree as to whether Lessee, during the
period of operation of the Aircraft immediately prior to such return, shall have
been using a continuous maintenance program or a block overhaul program with
respect to the Airframe, then Lessee and Lessor shall mutually appoint an
independent third party, satisfactory to both Lessee and Lessor, who shall make
such a determination, which determination shall be conclusive and final. Lessee
will provide, on a confidential basis, such independent third party with the
maintenance program and records applicable to the Aircraft necessary to make
such determination. The fee of such third party shall be paid equally by Lessor
and Lessee.
If clause (iv) of the first paragraph of this Section 5(a) shall be
applicable but the Airframe does not meet the conditions specified in said
clause (iv), Lessee shall pay or cause to be paid to Lessor a Dollar amount
computed by multiplying (i) 120% of the direct cost to Lessee (based upon the
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 (iv) 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
24
[First Amended and Restated Lease Agreement (1989 I)]
number of hours of operation allowable between such block overhauls in
accordance with such block overhaul program.
If clause (v) of the first paragraph of this Section 5(a) shall be
applicable but the Engines or engines do not meet the conditions specified in
said clause (v), Lessee shall pay or cause to be paid to Lessor a Dollar amount,
in regard to each Engine or engine, as the case may be, computed by multiplying
(i) 120% of the direct cost to Lessee (based upon the 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
heavy maintenance under the maintenance program then used by Lessee for engines
of the same model as the Engines, by (ii) a fraction of which (x) the numerator
shall be the excess of 25% of the hours or cycles of operation of one Engine
(whichever is applicable) between engine heavy maintenance allowable 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 all four Engines or
engines remaining until the next such scheduled engine heavy maintenance and (y)
the denominator shall be the number of hours or cycles allowable between such
scheduled engine heavy maintenance.
During the last six 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, at Lessor's sole cost, in all reasonable respects
with the efforts of Lessor to sell or lease the Aircraft, including, without
limitation, permitting prospective purchasers or lessees to inspect the Aircraft
and any records then required to be maintained by the FAA or by the applicable
government agency of the country in which the Aircraft is registered, all in
accordance with Section 12 hereof, provided that any such cooperation shall not
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee or any Sublessee.
(b) Return of the Engines. In the event that any engine not owned by
---------------------
Lessor (or so long as the Japanese Lease is in effect, in which legal title is
not held by Primary 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 (or so long as the Japanese Lease is in effect, to Primary 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 (which may be Lessee's General 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 all
Liens other than Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor 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 that would be Lessor Liens but for the proviso to 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 not installed on the Airframe at the
time of the return of the Airframe.
25
[First Amended and Restated Lease Agreement (1989 I)]
(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 as
calculated by reference to the then-current market price of 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 to the Airframe, the Engines or any Part
under applicable rules and regulations of each country under the laws of which
the Aircraft has been registered during the period of operation thereof.
(d) Storage Upon Return. If, at least 30 days prior to termination of
-------------------
this Lease at the end of the Basic Term or any Renewal Term, or pursuant to
Section 9(c) or Section 15, 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 storage facilities for the Aircraft (at
Lessor's risk and at Lessor's cost for insurance, maintenance, and Lessee's out-
of-pocket expenses other than storage fees) for a period not exceeding forty-
five days, commencing on the date of such termination, at a location in the
forty eight contiguous United States selected by Lessee and reasonably
acceptable to Lessor and used as a location for the storage of aircraft.
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 and Lessee as herein provided (including the rights of any
Sublease permitted pursuant to Section 7(b) and the rights permitted by Section
8(b)), the Lien of the Japanese Lease, the Primary Lessor Mortgage and the Trust
Indenture, and any other rights existing pursuant to the Operative Documents,
(ii) Lessor Liens (including for this purpose Liens that would be Lessor Liens
but for the proviso to the definition of Lessor Liens), (iii) Liens for Taxes of
Lessee (or any Sublessee) either not yet due or being contested in good faith by
appropriate proceeding so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Airframe or any Engine or any
interest therein, (iv) materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of Lessee's or any
Sublessee's business securing obligations that are not overdue for a period of
more than 60 days or are being contested in good faith by appropriate
proceedings so long as such proceedings do not involve any material risk of the
sale, forfeiture or loss of the Airframe or any Engine or any interest therein,
(v) Liens arising out of any judgment or award against Lessee (or any
Sublessee), so long as there does not exist a material risk of the sale,
forfeiture or loss of the Airframe or any Engine or any interest therein as a
result of such judgment or award, or unless the judgment secured shall not,
within 45 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 45 days after the expiration of such stay, (vi) any
other Lien with respect to which Lessee (or any Sublessee) shall have provided a
bond or other security in an amount and under terms reasonably satisfactory to
Lessor, and (vii)
26
[First Amended and Restated Lease Agreement (1989 I)]
any Permitted Lien as the same is defined in the Japanese Lease. 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
-------------------------------------------------------
Sublease; Insignia.
------------------
(a) Registration, Maintenance and Operation.
---------------------------------------
(1) Registration and Maintenance. Lessee, at its own cost and
----------------------------
expense, shall (or shall cause any Sublessee to): (i) on the Effective
Date, cause the Aircraft to be duly registered in the name of Lessor, and,
subject to subparagraph (3) of this Section 7(a), to remain duly registered
in the name of Lessor under the Federal Aviation Act (except as otherwise
required by applicable law or to the extent that such registration cannot
be effected because of Lessor's or Owner Participant's failure to comply
with the citizenship or other eligibility requirements for registration of
aircraft under such Act), provided that Lessor and Owner Participant 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 Lessee shall cause the Primary Lessor Mortgage and the
Trust Indenture to be duly recorded and maintained of record as a mortgage
on the Aircraft in all jurisdictions reasonably requested by the Indenture
Trustee; (ii) maintain, service, repair, test and overhaul (or cause to be
maintained, serviced, repaired, tested and overhauled) the Aircraft (and
any engine which is not an Engine but which is installed on the Aircraft);
(x) so as to keep the Aircraft in as good operating condition as on the
Delivery Date, ordinary wear and tear excepted, and in such condition as
may be necessary to enable the 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) under (I) the
Federal Aviation Act, except when all Boeing Model 747-422 aircraft
(powered by engines of the same type as those with which the Airframe shall
be equipped at the time of such grounding) registered in the United States
have been grounded by the FAA, or (II) the applicable laws of any other
jurisdiction in which the Aircraft may then be registered from time to
time, except when all Boeing Model 747-422 aircraft (powered by engines of
the same type as those with which the Aircraft shall be equipped at the
time of such grounding) registered in such jurisdiction have been grounded
by the aeronautical authorities of such jurisdiction; and (y) in the same
manner as Lessee (or, if under Sublease, Sublessee) maintains, services,
repairs, tests or overhauls similar aircraft operated by Lessee (or, if
under Sublease, Sublessee) in similar circumstances and without in any way
discriminating against the Aircraft (including, without limitation, in
regard to terminating any airworthiness directive issued by the FAA in
regard to the Aircraft), whether by reason of its leased status or
otherwise, or such other manner as shall have been approved by
27
[First Amended and Restated Lease Agreement (1989 I)]
Lessor; (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 and the applicable regulatory agency or body of any other jurisdiction
in which the Aircraft may then be registered (which records, logs and other
materials shall, as between Lessor and Lessee and all parties claiming
through Lessee, be the property of Lessor but shall be maintained by Lessee
during the Term of this Lease and shall become the property of Lessee upon
Lessee's purchase of the Lessor's interest in the Aircraft pursuant to the
terms of this Lease or upon the occurrence of an Event of Loss and Lessee's
compliance with Section 10(a)(i)); and (iv) promptly furnish or cause to be
furnished to Lessor or Owner Participant such information as may be
required to enable Lessor to file any reports required to be filed by
Lessor or Owner Participant with any governmental authority because of
Lessor's or Owner Participant's interest in the Aircraft.
(2) Operation. Lessee will not (and will not permit any Sublessee
---------
to) maintain, use, service, repair, overhaul, test 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
that, after providing Lessor with written notice stating all relevant facts
with respect thereto, Lessee or any Sublessee may contest in good faith the
validity or application of any such law, rule, regulation, order,
certificate, license, registration or violation in any reasonable manner
which does not materially adversely affect the Lessor, Owner Participant,
any Certificate Holder (on or prior to the Refinancing Date only), or any
of their respective legal and economic interests in or to the Aircraft or
any Operative Documents, but only so long as such contest does not involve
any risk of criminal liability or any material risk of civil liability to
Lessor or Owner Participant for which Lessor or Owner Participant is not
indemnified. If the indemnities or insurance from the United States
Government specified in Section 11(f), or some combination thereof in
amounts equal to amounts required by Section 11(f) hereof, have not been
obtained, Lessee will not operate the Aircraft, or suffer or permit any
Sublessee or any other Person to operate the Aircraft in or to any area
excluded from coverage by any insurance required to be maintained by the
terms of Section 11 or in any war zone or recognized or, in the reasonable
judgment of Lessee, threatened, area of hostilities, unless covered by
appropriate war risk insurance; 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 (i)
causes beyond the reasonable control of Lessee or any Sublessee and (ii)
extraordinary circumstances involving an isolated occurrence or series of
events not in the ordinary course of the regular operations of Lessee or
any Sublessee.
(3) Reregistration. So long as no Default or Event of Default shall
--------------
have occurred and be continuing, at any time after the Restricted Period
and upon 30 days' prior written notice, Lessor shall, at the request and
sole expense of Lessee,
28
[First Amended and Restated Lease Agreement (1989 I)]
cooperate with Lessee and take all actions requested by Lessee to change
the country of registration of the Aircraft (i) upon compliance with
Section 8(e) of the Participation Agreement, to any country listed in
Exhibit G hereto, as in effect from time to time, and with which country
the United States maintains diplomatic relations at the time of such
registration (no action need be taken by Lessee if such diplomatic
relations are severed subsequent to such registration) or (ii) upon
compliance with all of the terms of Section 8(e) of the Participation
Agreement, to any other country with which the United States maintains
diplomatic relations at the time of such registration (no action need be
taken by Lessee if such diplomatic relations are severed subsequent to such
registration).
(4) Operating Certificates. So long as no Event of Default has
----------------------
occurred and is continuing, Lessor hereby authorizes Lessee to act as its
agent for the purpose of obtaining any required replacement operating
certificates from the FAA. This authority includes, but is not limited to,
obtaining Registration Certificates, Airworthiness Certificates,
Certificates of Sanitary Construction, Ferry Permits and Experimental
Operating Permits. In particular, this authority includes the ability to
make use of Exemption No. 5318 issued by the FAA. This authority will allow
duly authorized personnel of Lessee to sign any application forms required
in the process of obtaining such operating certificates, and this authority
will also allow such personnel, where necessary and appropriate, to sign
certificates as the attorney-in-fact for Lessor. Lessee hereby agrees that
it will notify Lessor of any action that it has taken in accordance with
this Section 7(a)(4) as agent for the Lessor.
(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; provided that,
so long as no Default or Event of Default shall have occurred and be continuing
at the time of such sublease, delivery, transfer or relinquishment of possession
or installation, Lessee 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 any Sublessee) in the ordinary course of its
business and, in the case of the Airframe, with a U.S. Air Carrier or a
Permitted Sublessee or any other air carrier reasonably approved by Lessor;
provided, that (A) no such agreement or arrangement contemplates or
requires the transfer of title to the Airframe or any Engine, and (B) if,
in spite of Lessee's reasonable efforts to prevent the same, Lessor's
interest in 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;
29
[First Amended and Restated Lease Agreement (1989 I)]
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof or to any other Person 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
Sections 7(a) and 8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee (or any
Sublessee) which airframe is 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 interest in such Engine shall not be
divested as a result thereof and (C) mortgage Liens or other security
interests, provided that (as regards this clause (C)), such mortgage Liens
or other security interests effectively provide that such Engine shall not
become subject to the lien of such mortgage or security interest,
notwithstanding the installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such lease,
conditional sale or other security agreement effectively provides that such
Engine shall not become subject to the lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof on
such airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by Lessee (or
any Sublessee) subject to a conditional sale or other security agreement
under circumstances where neither subparagraph (iii) nor subparagraph (iv)
of this paragraph (b) is applicable, provided that such installation shall
be deemed an Event of Loss with respect to such Engine and Lessee shall (or
shall cause any Sublessee to) comply with Section 10(b) hereof in respect
thereof, Lessor not intending hereby to waive any right or interest it may
have to or in such Engine under applicable law until compliance by Lessee
with such Section 10(b);
(vi) 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 for a period, including all permissible renewal periods (so long as
such renewal options have been irrevocably exercised by Lessee), that does
not extend beyond the end of the Term so long as Lessee (or any
30
[First Amended and Restated Lease Agreement (1989 I)]
Sublessee) shall promptly notify Lessor (x) upon transferring possession of
the Airframe or any Engine to the United States of America or any agency or
instrumentality thereof pursuant to the Civil Reserve Air Fleet Program and
(y) of the name and address of the Contracting Office Representative for
the Military Airlift Command of the United States Air Force to whom notice
must be given pursuant to Section 15 hereof;
(vii) 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 provided that the
term of such contract, including all permissible renewal periods (so long
as such renewal options have been irrevocably exercised by Lessee), shall
not continue beyond the end of the Term; or
(viii) so long as the Sublessee is not subject to a proceeding or
final order under applicable bankruptcy, insolvency or reorganization laws
on the date the sublease is entered into, Lessee may, at any time (subject
to the notice requirements specified in the second to last paragraph of
this Section 7(b)), in its sole discretion, enter into a sublease with (1)
a U.S. Air Carrier, (2) after the Restricted Period, any Permitted
Sublessee, (3) after the Restricted Period, any other Person approved in
writing by the Owner Participant, which approval shall not be unreasonably
withheld if prior to Lessee's entering into such sublease, Lessor, Owner
Participant and the Indenture Trustee receive an opinion of counsel
reasonably acceptable to Lessor and Owner Participant that the terms of the
sublease and other Operative Documents will be valid in the country where
the Permitted Sublessee is domiciled; that no Participant is required to
register to do business in the Sublessee's country of domicile; that there
is no tort liability for owners not in possession that is more extensive
than under United States law or any state law; that fair compensation in a
currency freely convertible into United States dollars is mandated if there
is requisition of use or title of the Aircraft by the country in which the
Sublessee is domiciled (it being understood that if such opinion cannot be
given in a form satisfactory to the Owner Participant) such opinion will be
waived if insurance reasonably satisfactory to the Owner Participant is
provided at Lessee's expense to cover such risk); that there exist no
possessory rights in favor of the Sublessee which upon Lessee's bankruptcy
or other Default hereunder (assuming the Sublessee is not bankrupt) would
prevent the return of the Aircraft in accordance with the terms hereof or
inhibit the Lessor's rights therein; or (4) any other Person approved in
writing by the Owner Participant, which approval shall not be unreasonably
withheld if conditions similar to those set forth in clause (viii)(3) above
have been satisfied; provided, however, that no sublease, including all
permissible renewal periods, entered into pursuant to this clause (viii)
shall extend beyond the Basic Term or any Renewal Term then in effect,
unless Lessee shall have irrevocably committed to purchase the Aircraft or
renew this Lease in accordance with the terms hereof at the end of the
Basic Term or Renewal Term, as the case may be, to a date beyond the latest
permissible expiration date of such sublease.
31
[First Amended and Restated Lease Agreement (1989 I)]
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 subject and subordinate to,
and the terms of any Sublease permitted by this Section 7(b) shall be subject
and subordinate to, all the terms of this Lease, including, without limitation,
the covenants contained in Section 7(a) hereof and Lessor's (and, so long as the
Trust Indenture is in effect, the Indenture Trustee's (as Lessor's assignee))
rights to repossession pursuant to Section 15 hereof and to void 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 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 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. 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
neither Lessor nor 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. Lessee shall give the Lessor and the Indenture
Trustee written notice (which notice, to the extent feasible, shall be given
prior to entering into such Sublease) of any Sublease entered into pursuant to
the terms hereof which has a term of more than three months. Lessee shall, upon
request, provide Lessor with a copy of any Sublease hereunder which has a term
of more than three months.
Lessor acknowledges that any Wet Lease or similar arrangement under which
Lessee maintains operational control of the Aircraft shall not constitute a
delivery, transfer or relinquishment of possession for purposes of this Section
7(b). Lessor acknowledges that any consolidation or merger of Lessee or
conveyance, transfer or lease of all or substantially all of Lessee's assets
permitted by the Operative Documents shall not be prohibited by this Section
7(b).
No sublease permitted pursuant to this Section 7(b) shall permit any
further sub-subleasing of the Aircraft.
(c) Insignia. On or prior to the Effective Date, or as soon
--------
thereafter as practicable, Lessee agrees to affix and maintain (or cause to be
affixed and maintained) in the cockpit of the Airframe adjacent to the
registration certificate therein and on each Engine a nameplate bearing the
inscription:
32
[First Amended and Restated Lease Agreement (1989 I)]
Leased From
State Street Bank and Trust Company, not in its individual capacity
but solely as Owner Trustee, as 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 of Connecticut,
National Association, 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).
In addition, Lessee agrees that the nameplate required to be affixed
to the Aircraft pursuant to Section 7(d) of the Japanese Lease will include the
inscription "A security interest in SBF West Air Co., Ltd.'s title has been
granted and assigned to United Air Lines, Inc. pursuant to the Aircraft Mortgage
and Security Agreement dated as of July 28, 1989, and such security interest has
further been assigned to BancBoston United Leasing LLC, pursuant to the
Assignment of Japanese Lease Agreement dated as of August 1, 1989 and the
Supplement to Assignment of Japanese Lease Agreement dated August 16, 1989
between United Air Lines, Inc. and BancBoston United Leasing LLC, which security
interest has further been assigned to State Street Bank and Trust Company of
Connecticut, National Association, pursuant to the First Amended and Restated
Trust Indenture and Security Agreement dated as of July 20, 2000, and all such
instruments have been recorded with the Federal Aviation Administration in
Oklahoma City, Oklahoma, U.S.A."
Except as above provided and as provided in the Japanese Lease, Lessee
will not allow the name of any person, association or corporation to be placed
on the Airframe or on any Engine as a designation that might be interpreted as a
claim of ownership; provided, that nothing herein contained shall prohibit
Lessee (or any Sublessee) from placing its customary colors and insignia on the
Airframe or any Engine. Lessee shall maintain the airworthiness certificate on
the Aircraft. Upon termination of the Japanese Lease, Lessee agrees to promptly
remove any nameplate affixed to the Airframe or any Engine which refers to the
Primary Lessor.
33
[First Amended and Restated Lease Agreement (1989 I)]
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
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 Section 8(c). All replacement Parts shall be free and
clear of all Liens (except Permitted Liens, pooling arrangements permitted by
Section 8(b) hereof and replacement Parts temporarily installed on an emergency
basis) and shall be in as good an 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.
All Parts (other than Obsolete Parts) at any time removed from the Airframe or
any Engine shall remain the property of Lessor (provided, that so long as the
Japanese Lease is in effect, legal title to such Parts shall remain with the
Primary Lessor, subject to the rights of Lessee under the Japanese Lease and
Lessor under the Japanese Lease Assignment), no matter where located, until such
time as such Parts shall be replaced by Parts 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,
without further act (subject only to Permitted Liens and any pooling arrangement
permitted by Section 8(b) hereof and except replacement Parts temporarily
installed on an emergency basis), (i) title shall vest in and such replacement
Part shall become the property of Lessor (or, so long as the Japanese Lease is
in effect, legal title shall vest in the Primary Lessor, subject to the rights
of Lessee under the Japanese Lease and Lessor under the Japanese Lease
Assignment) and shall become subject to this Lease and be deemed a Part 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 (ii) the replaced
Part shall no longer be the property of Lessor (and the Primary Lessor shall
cease to hold legal title thereto) and shall no longer be deemed a Part
hereunder.
(b) Pooling of Parts. Any Part may be subjected by Lessee (or any
----------------
Sublessee) to a pooling arrangement of the type which is permitted by Section
7(b)(i) hereof; provided, that the Part replacing such removed Part shall be
incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 8(a) as promptly as practicable after the removal of
such removed Part. In addition, any replacement Part may be owned by any third
party subject to such a pooling arrangement, provided, that Lessee (or any
Sublessee), at its expense, as promptly thereafter as practicable, either (i)
causes such replacement Part to become the property of Lessor (or, so long as
the Japanese Lease is in effect, causes the Primary Lessor to hold legal title
thereto, subject to the rights of Lessee under the Japanese Lease and Lessor
under the Japanese Lease Assignment) free and clear of all Liens other than
Permitted Liens or (ii) replaces such replacement Part with a further
replacement Part owned by Lessee (or any Sublessee) which shall become the
property of Lessor (or, so long as the Japanese Lease is in effect, legal title
shall
34
[First Amended and Restated Lease Agreement (1989 I)]
vest in Primary Lessor, subject to the rights of Lessee under the Japanese Lease
and Lessor under the Japanese Lease Assignment), free and clear of all Liens
other than Permitted Liens.
(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;
provided, however, that, after providing Lessor with written notice stating all
relevant facts with respect thereto, Lessee or 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 affect any of the Lessor, any
Certificate Holder (on or prior to the Refinancing Date only) or Owner
Participant or any of their respective legal and economic interests in or to
such Airframe or Engines or any Operative Document but only so long as any such
contest does not involve any risk of criminal liability or any material risk of
civil liability to Lessor or Owner Participant for which Lessor or Owner
Participant is not indemnified. In addition, Lessee (or any Sublessee), at its
own expense, may from time to time 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 removal of Parts
which Lessee (or any Sublessee) deems 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, removal or addition
impairs the condition or airworthiness of the Airframe or such Engine, or
diminishes the value or utility of the Airframe or such Engine below the value
or utility thereof immediately prior to such alteration, modification, removal
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) 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 $600,000. 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 (except those parts which Lessee has leased from others and which may
be removed by Lessee pursuant to the next sentence) (the "Additional Parts")
shall, without further act, become the property of, and title to such parts
shall vest in, Lessor (or, so long as the Japanese Lease is in effect, legal
title shall vest in Primary Lessor, subject to the rights of Lessee under the
Japanese Lease and Lessor under the Japanese Lease Assignment). Notwithstanding
the foregoing sentence, Lessee (or any Sublessee) may, at any time during the
Term, so long as no Default or Event of Default shall have occurred and be
continuing, 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 such 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
causing material damage thereto (unless such damage is repaired) and without
impairing
35
[First Amended and Restated Lease Agreement (1989 I)]
airworthiness or diminishing the value or utility of the Airframe or such Engine
which the Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred. Upon the removal thereof as
provided above, such Additional Part shall no longer be deemed the property of
Lessor (and, so long as the Japanese Lease is in effect, the Primary Lessor
shall cease to hold legal title thereto) or part of the Airframe or Engine from
which it was removed. Any Additional Part not removed as above provided prior to
the return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor (and, so long as the Japanese Lease is in effect, the Primary
Lessor shall hold legal title thereto).
SECTION 9. Voluntary Termination.
---------------------
(a) Termination Event.
-----------------
(1) So long as no Default or Event of Default shall have
occurred and be continuing, Lessee shall have the right at its option to
elect to terminate this Lease on the 8th, 12th, 16th and 20th anniversaries
of the Delivery Date.
(2) So long as no Default or Event of Default shall have
occurred and be continuing, Lessee shall have the right to terminate this
Lease on any Lease Period Date occurring on or after the seventh
anniversary of the end of the calendar year in which occurs the Delivery
Date if Lessee shall have made a good faith determination, which shall be
evidenced by a certificate of any financial officer of Lessee, who is a
Vice President or more senior officer, that the Aircraft is surplus to
Lessee's requirements or economically obsolete to Lessee. Lessee shall
exercise this option by selling the Aircraft pursuant to Section 9(c),
unless Lessor has elected to retain title to the Aircraft as provided
therein.
(3) Lessee shall give to Lessor and the Indenture Trustee 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 the Lease Period Date on which Lessee
intends to terminate this Lease in accordance with this Section 9 (such
specified date, a "Termination Date"). The Termination Notice shall be
irrevocable thirty days prior to the Termination Date. In addition, if
Section 9(a)(1) is applicable, Lessee agrees that it shall deliver to the
Indenture Trustee and Lessor at least thirty days irrevocable notice of its
election to purchase the Aircraft pursuant to Section 9(b) or to sell the
Aircraft pursuant to Section 9(c).
(b) Option to Purchase. If Lessee exercises its right to terminate
------------------
this Lease under Section 9(a)(1) and gives its irrevocable notice pursuant to
Section 9(a)(3) to purchase the Aircraft pursuant to this Section 9(b), then on
the Termination Date specified pursuant to Section 9(a)(3), Lessee may purchase
the Aircraft at the greater of (i) the Termination Value on the Termination
Date, or (ii) its Fair Market Sales Value on the Termination Date. In such
event,
36
[First Amended and Restated Lease Agreement (1989 I)]
Lessor shall, without recourse or warranty (except as to the absence of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)), sell the Aircraft to Lessee in
exchange for, at Lessee's option, either (1) the payment in immediately
available funds of an amount equal to the sum of (A) all unpaid Basic Rent with
respect to the Aircraft due on or prior to such Termination Date (other than
Basic Rent payable in advance, if any) and all unpaid Supplemental Rent with
respect to the Aircraft due on or prior to such Termination Date plus (B) all
reasonable expense incurred by Lessor in connection with such sale plus (C) the
greater of (x) the Termination Value for the Aircraft, computed as of the
Termination Date or (y) the Fair Market Sales Value of the Aircraft on the
Termination Date, plus (D) the premium, if any, due on the Certificates; or (2)
(A) the assumption by Lessee, pursuant to Section 7.03 of the Trust Indenture,
of all of the obligations of Lessor under the Trust Indenture and the
Certificates and (B) the payment in immediately available funds in an amount
equal to the sum of (x) all unpaid Basic Rent with respect to the Aircraft due
on or prior to such Termination Date (other than Basic Rent payable in advance)
and all unpaid Supplemental Rent with respect to the Aircraft due on or prior to
such Termination Date plus (y) all reasonable expenses incurred by Lessor in
connection with such sale plus (z) the excess of the greater of (I) the
Termination Value for the Aircraft, computed as of the Termination Date and (II)
the Fair Market Sales Value of the Aircraft on the Termination Date, over the
unpaid Original Amount of the Certificates outstanding as of such date. Upon
payment in full of the amounts required to be paid and the performance of all
acts required to be performed by Lessee pursuant to the preceding sentence, (i)
the obligation of Lessee to pay Basic Rent hereunder with respect to the
Aircraft for any period commencing on or after the Termination Date shall
terminate with respect to the Aircraft, (ii) this Lease shall terminate on the
Termination Date and (iii) Lessor shall assign all of its rights and obligations
under the Japanese Lease and with respect to the Aircraft to Lessee.
(c) Optional Sale of the Aircraft. In the event that Lessee shall
-----------------------------
have terminated this Lease under Section 9(a)(1) but shall not have elected to
purchase the Aircraft pursuant to Section 9(b), or Lessee shall have terminated
this Lease under Section 9(a)(2), then during the period commencing with the
date of the Termination Notice until the proposed Termination Date, Lessee, as
agent for Lessor and at no expense to Lessor, shall use its reasonable best
efforts to obtain bids in Dollars 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 Owner Participant) submitting such bid. After Lessee shall
have certified to Lessor all bids received, Owner Participant, any Affiliate
thereof or any Person contacted by Owner Participant may submit a further bid or
bids to Lessee not later than two 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
37
[First Amended and Restated Lease Agreement (1989 I)]
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 Lessor or,
at Lessor's direction, to the bidder(s), if any, which shall have submitted the
highest bid (evaluated on a net cash basis) therefor, 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 engine installed on the Airframe and not owned
by Lessor, all in accordance with the terms of Section 5, (2) Lessor shall
acquire legal title to the Aircraft pursuant to the terms of the Japanese Lease
(if the Japanese Lease is then in effect), (3) 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 that would be
Lessor Liens but for the proviso to the definition of Lessor Liens)), subject to
prior or concurrent payment by Lessee of all amounts due under clause (4) of
this sentence, sell the Aircraft for cash in Dollars to such bidder(s), the
total selling price realized at such sale to be retained by Lessor, and (4)
Lessee shall simultaneously pay or cause to be paid to Lessor in the manner
provided in Section 3(e), (A) if the proceeds of the sale of the Aircraft so
sold, net of reasonable costs and expenses incurred by Lessor and the Owner
Participant in connection therewith, are less than the Termination Value for the
Aircraft computed as of the Termination Date, the difference between such
Termination Value and such net proceeds, in Dollars; (B) all unpaid Basic Rent
due on or prior to the Termination Date (other than Basic Rent payable in
advance on such Termination Date, if any) with respect to the Aircraft and all
unpaid Supplemental Rent with respect to the Aircraft due on or prior to such
Termination Date, and (C) the premium, if any, due on the Loan 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 that would be Lessor Liens but for the proviso to 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 in accordance with Section 9(a)(3) hereof, elect
to retain title to the Aircraft. If Lessor so elects, Lessor shall give to
Lessee written notice of such election at least five Business Days prior to the
Termination Date accompanied by an irrevocable undertaking by the Owner
Participant to make available to Lessor for payment to the Indenture Trustee on
the Termination Date the amount required to pay in full the unpaid Original
Amount of the Certificates outstanding on the Termination Date plus interest
accrued thereon through the Termination Date together with all other amounts due
thereunder as a result of the payment thereof, other than premium, if any, due
on the Certificates, which shall remain the responsibility of Lessee. Upon
receipt of notice of such an election by Lessor and the accompanying undertaking
by 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 (i) acquire legal title to the Aircraft pursuant
to the terms of the Japanese Lease (if the Japanese Lease is then in effect) and
(ii) pay in full the unpaid Original Amount of the Certificates outstanding on
the Termination Date plus interest accrued thereon through the Termination Date
together with all other amounts due thereunder as a result of the payment
thereof, including, to the extent funds have been provided by Lessee for
38
[First Amended and Restated Lease Agreement (1989 I)]
such purpose premium, if any, due on the Certificates and, provided that the
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 on or prior to the Termination Date (other than Basic Rent
payable in advance on such Termination Date, if any,) and all unpaid
Supplemental Rent due on or prior to such Termination Date. If no sale shall
have occurred on the Termination Date or Lessor has not, after making its
election referred to above, made the aggregate payment contemplated by the
preceding sentence and thereby caused this Lease to terminate, this Lease shall
continue in full force and effect as to the Aircraft, Lessee shall pay the
reasonable costs and expenses incurred by Indenture Trustee, 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 aggregate payment referred to in the immediately preceding
sentence), if any, in connection with preparation for such sale and Lessee may
give one or more additional Termination Notices, provided that no more than four
such notices may be given during the Term (not counting, in either case, any
Termination Notice for a Termination Date on which this Lease does not terminate
as 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). 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 (consistent 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.
(d) Termination as to Engines. So long as no Default or 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 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, (i) 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, (ii) Lessor shall, at
Lessee's sole expense, take all actions required to terminate the Japanese Lease
with respect to such Engine and to replace such Engine pursuant to the terms of
the Japanese Lease, and (iii) Lessor shall transfer title to the replaced Engine
as provided in Section 5(b).
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 (1) forthwith (and in any
event, within fifteen days after such occurrence) give Lessor written notice of
such Event of Loss and (2) within 45 days after such occurrence, give Lessor
written notice of its election to perform one of the following options (it
39
[First Amended and Restated Lease Agreement (1989 I)]
being understood that the failure to give such notice shall be deemed to be an
election of the option set forth in subsection (i) below). Not later than the
earlier to occur of (x) the Business Day next succeeding the 120th day following
the occurrence of such Event of Loss and (y) the third Business Day after
receipt of insurance proceeds, Lessee shall:
(i) pay or cause to be paid to Lessor as specified in Section
3(e) hereof, (A) the Stipulated Loss Value of the Aircraft computed as
of the Stipulated Loss Value Date occurring on or immediately
following the date of such Event of Loss, plus (B) interest on such
Stipulated Loss Value at the Applicable Rate from and including such
Stipulated Loss Value Date to, but not including, the date of any
advance payment in respect of Stipulated Loss Value as provided below,
and thereafter on the unpaid balance of such Stipulated Loss Value
from the date of such advance payment to, but excluding, the date such
Stipulated Loss Value is paid in full, plus (C) the premium, if any,
due on the Certificates; provided, however, that if the Commencement
Date or a Lease Period Date shall occur after the Stipulated Loss
Value Date with respect to which Stipulated Loss Value is determined
but prior to the date of such payment of the sum of the amounts
specified in clauses (A), (B) and (C) above, Lessee shall pay on the
Commencement Date or such Lease Period Date an amount equal to the
Basic Rent that would have been due on the Commencement Date or such
Lease Period Date if such Event of Loss had not occurred, which amount
shall be credited as an advance against the amounts payable pursuant
to clauses (A), (B) and (c) above, or
(ii) provided that no Default or Event of Default shall have
occurred and be continuing, substitute an aircraft or an airframe or
an airframe and one or more engines, as the case may be, in accordance
with the terms of this Section 10 and of the Trust Indenture, provided
that if Lessee shall have elected to make a substitution under this
clause (ii) and shall fail for any reason to make such substitution in
accordance with the terms hereof and of the Trust Indenture, Lessee
shall make the payments required by clause (i) above as and when due
thereunder.
At such time as Lessor shall have received the sum of the
amounts specified in clauses (A), (B) and (C) of subparagraph (i) above,
together with all other amounts that then may be due hereunder (including,
without limitation, all Supplemental Rent due on or before the date of such
payment), under the Participation Agreement and under the Tax Indemnity
Agreement, (1) the obligation of Lessee to pay the installments of Basic Rent,
Supplemental Rent (other than such Supplemental Rent that becomes due after the
date of such payment but which is attributable to an act or omission occurring
prior to such date), 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 that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)), all Lessor's right, title and
interest in and to the Japanese Lease, and the Airframe and any
40
[First Amended and Restated Lease Agreement (1989 I)]
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 (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at its own cost
and expense in accordance with Section 11(e) hereof), for damage to or loss of
the Airframe and any Engines which were subject to such Event of Loss.
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, 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 (or so long as the Japanese Lease is in effect, to Primary 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 at least the value and utility and being in as good an operating
condition as, 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 make and 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 (or so long as the Japanese Lease is in effect,
Primary Lessor) with a full warranty ▇▇▇▇ of sale and a FAA ▇▇▇▇ of sale, in
form and substance reasonably satisfactory to Owner Participant (or so long as
the Japanese Lease is in effect, to Primary 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, (3) furnish Owner Participant with such
evidence of compliance with the insurance provisions of Section 11 with respect
to such substituted property as Owner Participant may reasonably request, (4)
provide to Owner Participant an opinion of tax counsel, who shall be
satisfactory to Owner Participant, as to the tax consequences (without any
requirement as to the nature of such tax consequences) to the Lessor and Owner
Participant of such substitution and Lessor shall acquire legal title to the
Aircraft pursuant to the terms of the Japanese Lease (if the Japanese Lease is
then in effect) and Lessor simultaneously will comply with the terms of the
Trust Indenture and transfer to or at the direction of Lessee, without recourse
or warranty (except as to the absence of Lessor Liens (including for this
purpose Liens that would be Lessor Liens but for the proviso to the definition
of Lessor Liens)), all of Lessor's right, title and interest 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, evidencing such transfer, (5) provide an opinion of counsel, which
counsel and opinion shall be reasonably acceptable to the Owner Participant, to
the effect that Lessor, the Owner Participant and the Indenture Trustee shall be
entitled to the benefits and protections of Section 1110 of the Bankruptcy Code
with respect to
41
[First Amended and Restated Lease Agreement (1989 I)]
the aircraft substituted hereunder, (6) provide an opinion of counsel, which
counsel shall be reasonably acceptable to the Owner Participant, to the effect
that title to such replacement aircraft has been duly conveyed to the Lessor (or
so long as the Japanese Lease is in effect, to the Primary Lessor, subject
to the Japanese Lease) free and clear of all Liens except Permitted Liens, that
such replacement aircraft is duly subjected to the Lien of the Trust Indenture,
and as to such other matters as may be reasonably requested by the Owner
Participant, (7) so long as the Japanese Lease is in effect, provide an opinion
of Japanese counsel, which counsel shall be reasonably acceptable to the Owner
Participant, to the effect that the terms and conditions of the Japanese Lease
apply to the substituted property to the same extent and with the same force and
effect as to the Airframe or any Engine subject to such loss and as to any other
such matters as may be reasonably requested by the Owner Participant, (8) Lessee
will be subrogated to all claims of Lessor and Owner Participant, if any,
against third parties for damage to or loss of the Airframe and any Engine which
were subject to such Event of Loss (other than Lessor's or Owner Participant's
insurers under policies independently maintained at their own cost and expense
in accordance with Section 11(e) hereof), (9) the substituted Airframe or Engine
shall be of the same or an improved make and model as the Airframe or Engine
replaced, and the substituted Airframe and Engines, if any, have a value and
utility (with respect to Engines, without regard to hours or cycles) at least
equal to, and be in as good operating condition and repair as, the Airframe and
any Engines replaced (assuming that such Airframe and Engines were in the
condition required by the terms hereby) as evidenced by a certificate of an
aircraft engineer (who may be an employee of the Lessee) or an appraisal from an
independent aircraft appraiser and (10) provide a certificate of an officer of
the Lessee to the effect that each of the foregoing conditions has been
satisfied. 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 forty-five days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor (or,
so long as the Japanese Lease is in effect, cause legal title to be conveyed to
the Primary Lessor, subject to the rights of Lessee under the Japanese Lease and
Lessor under the Japanese Lease Assignment), as replacement for the Engine with
respect to which such Event of Loss occurred, title to another United
Technologies Corporation, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Group, Model PW4056 engine (or engine
of the same or another manufacturer of the same, an equivalent or an improved
model and suitable for installation and use without any retrofitting on the
Airframe) free and clear of all Liens (other than Permitted Liens, which engine
may upon its transfer to Lessor (or, so long as the Japanese Lease is in effect,
the transfer of legal title to the Primary Lessor, subject
42
[First Amended and Restated Lease Agreement (1989 I)]
to the rights of Lessee under the Japanese Lease and Lessor under the Japanese
Lease Assignment) become subject to any and all Permitted Liens) and having a
value and utility at least equal to, and being in as good an operating condition
as and having been maintained in the same manner as, the Engine subject to such
Event of Loss (assuming that such Engine had been maintained in accordance with
this Lease). Lessor shall, at Lessee's sole expense, take all actions required
to terminate the Japanese Lease with respect to such Engine and to replace such
Engine pursuant to the terms of the Japanese Lease. Prior to or at the time of
any such conveyance, Lessee, at its own expense, will (i) furnish Lessor (with a
copy to the Indenture Trustee) with a warranty (as to title) ▇▇▇▇ of sale, in
form and substance reasonably satisfactory to Owner Participant (or so long as
the Japanese Lease is in effect, to Primary 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, (iii) furnish Owner
Participant (with a copy to the Indenture Trustee) with such evidence of
compliance with the insurance provisions of Section 11 hereof with respect to
such replacement engine as Owner Participant may reasonably request, (iv)
provide the Lessor, the Owner Participant and the Indenture Trustee with an
opinion of Lessee's counsel to the effect that title to such replacement engine
has been duly conveyed to the Lessor (or, so long as the Japanese Lease is in
effect, to the Primary Lessor, subject to the Japanese Lease) free and clear of
all Liens except Permitted Liens, that such replacement engine is duly subject
to the Lien of the Trust Indenture and as to such other matters as may be
reasonably requested by Owner Participant, and (v) provide to the Owner
Participant the documentation required to be provided by Lessor pursuant to
Section 5.01 of the Trust Indenture satisfactory in form and substance to Owner
Participant, 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 that would be
Lessor Liens but for the proviso to the definition of Lessor Liens)) all of
Lessor's right, title and interest, if any, in and to (A) the Engine with
respect to which such Event of Loss occurred and furnish to or at the direction
of Lessee a ▇▇▇▇ of sale in form and substance reasonably satisfactory to
Lessee, evidencing such transfer and (B) all claims, if any, against third
parties (other than Lessor's or the Owner Participant's insurers under policies
independently maintained at its own expense in accordance with Section 11(e)
hereof), for damage to or loss of the Engine subject to such Event of Loss, and
such Engine shall thereupon cease to be an 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 resulting from the theft, disappearance,
43
condemnation, confiscation or seizure of, or requisition of title to or use of,
the Airframe or any Engine, other than a requisition for use by the United
States Government or other government of registry of the Aircraft or any
instrumentality or agency of any thereof not constituting 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) after
reimbursement of Lessor (as provided in Section 7.1 of the Trust Agreement)
and the Owner Participant 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 to Lessor 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
shall be distributed between Lessee and Lessor as their respective
interests may appear; 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 in Section
7.1 of the Trust Agreement) and the Owner Participant for reasonable costs
and expenses shall be paid over to, or retained by, Lessee, provided that
Lessee shall have fully performed, or concurrently therewith will perform,
the terms of Section 10(b) with respect to the Event of Loss for which such
payments are made.
(d) Requisition for Use of the Aircraft by the United States
--------------------------------------------------------
Government or 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 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 Lessee shall make the payments required by Section
10(a)(i), provided, however, that Lessor may notify Lessee in writing on or
44
[First Amended and Restated Lease Agreement (1989 I)]
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 (but not under any other Section), and (i) Lessee shall
pay to Lessor the daily equivalent of the Basic Rent paid during the last Lease
Period of the Term for such 30 day period and (ii) 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 Owner Participant (together with an opinion of
counsel (which may be Lessee's General 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 that would be Lessor
Liens but for the proviso to the definition of Lessor 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 that would be Lessor Liens but for the proviso to 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, or there is a deemed Event of Loss hereunder, or
Lessee shall have paid the daily equivalent of Basic Rent for such period as
provided above, in which case such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States Government
----------------------------------------------------------------
or the Government of Registry of the Aircraft. In the event of the requisition
---------------------------------------------
for use of an Engine by the United States Government or any other government of
registry of the Aircraft or any agency or instrumentality of any thereof (other
than in the circumstances contemplated by subsection (d)), Lessee shall replace
such Engine hereunder by complying (or causing any Sublessee to comply) with the
terms of Section 10(b) to the same extent as if an Event of Loss had occurred
with respect to such Engine, 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 Events 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 any
Sublessee) if at the time of such payment or retention a Default or 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 (and such
45
[First Amended and Restated Lease Agreement (1989 I)]
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 Default or
Event of Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding sentence.
SECTION 11. Insurance.
---------
(a) Public Liability and Property Damage Insurance.
----------------------------------------------
(1) Except as provided in clause (2) of this Section
11(a), and subject to the self-insurance to the extent permitted by
Section 11(d), Lessee will carry or cause to be carried at its or any
Sublessee's expense (i) comprehensive airline liability (including,
without limitation, passenger, contractual, bodily injury and property
damage legal liability) insurance and property damage insurance
(exclusive of manufacturer's product liability insurance) and (ii)
cargo liability insurance with respect to the Aircraft, (A) in an
amount not less than the greater of (x) the amounts of public
liability and property damage insurance from time to time applicable
to aircraft owned by Lessee of the same type as the Aircraft which
comprise Lessee's fleet and (y) $400,000,000 per occurrence (or such
other amount per occurrence as the parties hereto may from time to
time agree in writing), (B) of the type and covering the same risks as
from time to time applicable to aircraft owned by Lessee of the same
type as the Aircraft and which comprise Lessee's fleet and (C) which
is maintained in effect with insurers of recognized responsibility;
provided, however, that Lessee need not maintain cargo liability
insurance, or may maintain such insurance in an amount less than
$400,000,000 per occurrence, as long as the amount of cargo liability
insurance, if any, maintained with respect to the Aircraft is the same
as the cargo liability insurance, if any, maintained for other Boeing
Model 747-422 aircraft operated by Lessee.
(2) 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 (1) above, and subject to the
self-insurance to the extent permitted by Section 11(d), insurance
otherwise conforming with the provisions of said clause (1) except
that (A) the amounts of coverage shall not be required to exceed the
amounts of comprehensive aircraft public liability and property damage
insurance from time to time applicable to aircraft owned by Lessee of
the same type as the Aircraft which comprise Lessee's fleet and 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 by Lessee of the same type
which comprise Lessee's fleet and which are on the ground and not in
operation.
(b) Insurance Against Loss or Damage to the Aircraft.
------------------------------------------------
46
[First Amended and Restated Lease Agreement (1989 I)]
(1) Except as provided in clause (2) of this Section
11(b), and subject to the provisions of Section 11(d) permitting self-
insurance, Lessee shall maintain or cause to be maintained in effect,
at its or any Sublessee's expense, with insurers of recognized
responsibility, all-risk aircraft hull and fire and extended coverage
insurance covering the Aircraft and all-risk property damage insurance
covering 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, (i) if the Aircraft is operated under a sublease by a
Permitted Sublessee or (ii) if and to the extent such insurance is
maintained by Lessee with respect to other aircraft owned or operated
by Lessee on the same or similar geographic routes; provided, that
such insurance shall at all times while the Aircraft is subject to
this Lease be for an amount (taking into account self-insurance to the
extent permitted by Section 11(d)) not less than the Stipulated Loss
Value for the Aircraft. 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.
Except during a period when a Default or an Event of
Default has occurred and is continuing, all losses will be adjusted by
Lessee with the insurers. 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 and Owner Participant for reasonable costs and expenses, as
shall not exceed the Stipulated Loss Value plus such other amounts
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 plus such amounts, 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 plus such amounts, 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 and Owner
Participant for reasonable costs and
47
[First Amended and Restated Lease Agreement (1989 I)]
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 shall be paid to Lessee (or any
Sublessee if directed by Lessee).
(2) 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 (1) above, and subject to the self-
insurance to the extent permitted by Section 11(d), insurance otherwise
conforming with the provisions of said clause (1) 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 by Lessee of the same type as the
Aircraft and which comprise Lessee's fleet similarly on the ground and
not in operation, provided that, subject to the self-insurance to the
extent permitted by Section 11(d), Lessee shall maintain insurance
against risk of loss or damage to the Aircraft in an amount at least
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, the Owner Participant and, on and after the
Refinancing Date only, so long as the Pass Through Trustees are Certificate
Holders, the Pass Through Trustees, on or before the Effective Date and April 1
in each year during the Term, a report, signed by Aon Risk Services, Inc. of
Illinois or any other independent firm of insurance brokers reasonably
acceptable to Lessor and Owner Participant which brokers may be in the regular
employ of Lessee (the "Insurance Brokers"), describing in reasonable detail the
hull and liability insurance (and property insurance for detached engines and
parts) then carried and maintained with respect to the Aircraft and stating the
opinion of such firm that such insurance complies with the terms hereof;
provided, that all information contained in the foregoing report shall not be
made available by Lessor, the Indenture Trustee, the Pass Through Trustees (on
and after the Refinancing Date only), or the Owner Participant to anyone except
(A) to prospective and permitted transferees of Lessor's, the Indenture
Trustee's, the Pass Through Trustees' (on and after the Refinancing Date only),
or the Owner Participant's interest, who agree to hold such information
confidential, (B) to Lessor's, the Indenture Trustee's, the Pass Through
Trustees' (on and after the Refinancing Date only), or the Owner Participant's
counsel or independent certified public accountants, independent insurance
advisors or other agents 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 Owner Participant, the Indenture Trustee and, on and
after the Refinancing Date only, so long as the Pass Through Trustees are
Certificate Holders, the Pass Through
48
[First Amended and Restated Lease Agreement (1989 I)]
Trustees 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 or cause such insurance to lapse and to advise such persons in
writing at least 30 days (7 days in the case of war risk and allied perils
coverage) prior to the cancellation, lapse (to the extent such advice is
reasonably available) or material change of any insurance maintained pursuant to
this Section 11, provided that if the notice period specified above is not
reasonably obtainable, the Insurance Brokers shall provide for as long a period
of prior notice as shall then be reasonably obtainable. In addition, Lessee will
also cause such Insurance Brokers to deliver to Lessor, the Owner Participant,
Pass Through Trustees (on and after the Refinancing Date only), so long as the
Pass Through Trustees are Certificate Holders, and the Indenture Trustee, 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
Effective Date. In the event that Lessee or any Sublessee shall fail to maintain
or cause to be maintained insurance as herein provided, Lessor, the Pass Through
Trustees (on and after the Refinancing Date only), so long as the Pass Through
Trustees are Certificate Holders, or the Indenture Trustee may at its sole
option provide such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, the Pass Through Trustees (on and after the Refinancing Date
only), so long as the Pass Through Trustees are Certificate Holders, or the
Indenture Trustee, as Supplemental Rent, for the cost thereof to Lessor, the
Indenture Trustee or, on and after the Refinancing Date only, such Pass Through
Trustee, as the case may be, together with interest on such cost at the Past Due
Rate from the date of payment by Lessor to the date of reimbursement without
waiver of any other rights Lessor may have.
(d) Self-Insurance. Lessee may self-insure, by way of deductible,
--------------
premium adjustment provisions in insurance policies, or otherwise, 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 self-
insurance in regard to Sections 11(a) or 11(b) with respect to all of the
aircraft in Lessee's fleet (including, without limitation, the Aircraft) exceed
for any calendar year 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 (for the preceding calendar year) of all aircraft (including,
without limitation, the Aircraft) on which Lessee carries insurance. In addition
to the foregoing right to self-insure, Lessee shall have the right to 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 insurer.
(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; Lessor or the Owner Participant 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 by this Section 11 or adversely affect such
insurance or the cost thereof.
49
[First Amended and Restated Lease Agreement (1989 I)]
(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 the obligations of which are
supported by the full faith and credit of the United States Government, against
such risk in an amount which, when added to the amount of insurance against such
risk maintained by Lessee (or any Sublessee) shall be at least equal to the
amount of insurance against such risk otherwise required by this Section 11
(taking into account self-insurance permitted by Section 11(d)).
(g) Application of Payments During Existence of an Event of Default.
---------------------------------------------------------------
Any amount referred to in 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 a Default or 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 under this Lease and, if a
Default or an Event of Default shall have occurred and be continuing, applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such Default or such Event of Default, such amount
shall be paid to Lessee to the extent not previously applied in accordance with
the preceding sentence.
(h) Terms of Insurance Policies. Any policies carried in accordance
---------------------------
with Sections 11(a) and 11(b) covering the Aircraft, and any policies taken out
in substitution or replacement for any such policies, (A) shall name the
Additional Insureds as additional insureds, or, if appropriate, loss payees, as
their respective interests may appear (but without imposing on any such party
liability to pay premiums with respect to such insurance), (B) may provide for
self-insurance to the extent permitted in Section 11(d), (C) shall provide that
if the insurers cancel such insurance for any reason whatever, or if any
material change is made in the insurance which adversely affects the interest of
any Additional Insured, such cancellation or change shall not be effective as to
any Additional Insured for thirty days (seven days in the case of war risk and
allied perils coverage) after receipt by such Additional Insured of written
notice by such insurers of such cancellation 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, (D) shall provide that in respect of the respective interests of
each Additional Insured in such policies the insurance shall not be invalidated
by any action or inaction of Lessee (or any Sublessee) and shall insure the
respective interests of the Additional Insureds, as they appear, regardless of
any breach or violation of any warranty, declaration or condition contained in
such policies by Lessee (or any Sublessee), (E) shall be primary without any
right of contribution from any other insurance which is carried by any
Additional Insured, (F) 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 any Additional Insured and shall waive insurers'
subrogation rights, and (G) shall provide that (i) in the event of a loss
occurring during the continuance of a Default or Event of Default or a loss
involving proceeds in excess of
50
[First Amended and Restated Lease Agreement (1989 I)]
$5,000,000 (or, if the Aircraft is then under a Sublease, in excess of
$2,500,000), the proceeds in respect of such loss up to the amount of Stipulated
Loss Value shall be payable to Lessor (or, so long as the Trust Indenture shall
not have been discharged, the Indenture Trustee, as Lessor's assignee) (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 the event of a loss involving proceeds in
excess of such amounts) in respect of such loss to be held by Lessor (or, unless
notified to the contrary by the Indenture Trustee, 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 reasonably 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, and any interest or income earned thereon in accordance
with Section 22 hereof, to Lessee or its order, and (ii) the entire amount of
any loss involving proceeds of $5,000,000 (or, if the Aircraft is then under a
Sublease, of $2,500,000) or less or the amount of any proceeds of any loss in
excess of Stipulated Loss Value for the Aircraft shall be paid to Lessee or its
order unless a Default or an Event of Default shall have occurred and be
continuing and the insurers have been notified thereof by Lessor or the
Indenture Trustee; provided that any such amount shall be applied by Lessee
towards the repair of the damage caused by such loss to the extent the same is
required to repair such damage.
SECTION 12. Inspection. The Owner Participant or the Indenture Trustee or
----------
their respective authorized representatives may annually (except during the
continuance of an Event of Default when such inspection right shall not be so
limited) inspect the Aircraft and annually (except during the continuance of an
Event of Default when such inspection right shall not be so limited) inspect and
make copies of the books and records of Lessee and any Sublessee required to be
maintained by the FAA and any other applicable jurisdiction relating to the
maintenance of the Aircraft (at the Owner Participant's or the Indenture
Trustee's expense, as the case may be) and shall keep any information or copies
obtained thereby confidential and shall not disclose the same to any Person,
except (A) to the Pass Through Trustees (on and after the Refinancing Date only)
and to prospective and permitted transferees of Lessor's, the Owner
Participant's, the Pass Through Trustees' or the Indenture Trustee's interest
who agree to hold such information confidential, (B) to Lessor's, the Owner
Participant's, the Pass Through Trustees' (on and after the Refinancing Date
only) or the Indenture Trustee's counsel, independent insurance advisors or
other agents 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. Any such inspection (which may include an on-board
inspection) of the Aircraft shall be a visual, walk-around inspection and shall
not include opening any panels, bays or the like without the express consent of
Lessee, which consent Lessee may in its sole discretion withhold; provided that
no exercise of such inspection right shall interfere with the normal 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 stating that the Owner Participant desires to have its
51
[First Amended and Restated Lease Agreement (1989 I)]
authorized representative observe the last scheduled heavy maintenance visit to
be performed on the Aircraft during the Term (or substantially equivalent
maintenance work), Lessee shall cooperate with the Owner Participant to enable
the Owner Participant's representative to observe such heavy maintenance visit,
provided that the Owner Participant's authorized representative shall merely
observe such heavy maintenance visit, shall not interfere with or extend in any
manner the normal conduct or duration of the heavy maintenance visit and shall
not be entitled to direct any of the work performed in connection with such
heavy maintenance visit. Neither the Owner Participant nor 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 any such inspection.
SECTION 13. Assignment. Except as otherwise provided in the Operative
----------
Documents, Lessee will not, without the prior written consent of Lessor, assign
any of its rights 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 in the Operative Documents. 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, unless Lessor shall have commenced the exercise of remedies prior
thereto and the cure by Lessor of such Event of Default subsequent to such
commencement would prejudice Lessor:
(a) Lessee shall not have made a payment of Basic Rent or a payment
of Supplemental Rent which constitutes premium on the Certificates within 10
Business Days after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than a payment of Supplemental Rent which constitutes premium on the
Certificates) after the same shall have become due and such failure shall
continue for 15 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 shall not
constitute an Event of Default unless notice is given by Lessor or 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 or observed) any other covenant or agreement to be performed or
observed by it under any Operative Document (other than the Relevant Documents),
and such failure shall continue unremedied for a period of thirty days after
written notice thereof by Lessor or the Indenture
52
[First Amended and Restated Lease Agreement (1989 I)]
Trustee; provided, however, that if Lessee shall have within such thirty-day
period undertaken to cure any such failure which arises under clause (ii) of
Section 7(a)(1), or under the first sentence of Section 7(a)(2) as it relates to
maintenance, service, repair or overhaul or under Section 8 (and shall have
provided the Lessor and the Indenture Trustee with an Officer's Certificate
setting forth the nature of such failure and the steps being taken to cure such
failure) and, notwithstanding the reasonable 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 shall be cured within a reasonable period of time
not to exceed 365 days; or
(d) any material 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 the Relevant Documents and those
set forth in Section 4 of the Tax Indemnity Agreement and such documents or
certificates as are furnished to Lessor solely in connection with matters dealt
with in the Tax Indemnity Agreement and for no other purpose) shall prove to
have been incorrect in any material respect at the time made; provided, however,
such incorrectness shall constitute a default hereunder only if such
incorrectness shall continue uncured for a period of thirty days after the
receipt by Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(e) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law in the United States or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Lessee or for all or substantially all of
its property, or seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding undismissed or unstayed for a
period of 60 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 for all or
substantially all of its property, or sequestering of all or substantially all
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 60 consecutive days after the date of entry
thereof; or
(f) the commencement by Lessee of a voluntary case or other
proceeding 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
53
[First Amended and Restated Lease Agreement (1989 I)]
its property, or the making by Lessee of any assignment for the benefit of
creditors or Lessee shall take any corporate action to authorize any of the
foregoing; or
(g) Lessee shall fail to carry and maintain on or with respect to the
Aircraft (or cause to be carried and maintained) insurance required to be
maintained in accordance with the provisions of Section 11 hereof;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of any 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 Event 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 the possession of the United States Government or an
instrumentality or agency thereof, 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 60
days' (or such lesser period as may then be applicable under the Military
Airlift 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 Military Airlift 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, at Lessor's
option, store the same at Lessee's premises until disposal thereof by Lessor),
all without liability accruing to Lessor (other than that caused by Lessor's
willful misconduct or gross negligence) for or by reason of such
54
[First Amended and Restated Lease Agreement (1989 I)]
entry or taking of possession or removing whether for the restoration of damage
to property caused by such action or otherwise;
(b) sell the Aircraft 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 Aircraft, 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 the 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
Commencement Date or the Lease Period Date specified as the payment date in such
notice), any unpaid Basic Rent due on Lease Period Dates on or prior to the
payment date so specified 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
the 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 Applicable
Rate; or (ii) 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 fair market sales value of the 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 Aircraft, Lessor, in lieu of exercising its rights under paragraph (c)
above with respect to the 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, any unpaid Basic
Rent with respect to the Aircraft due on or prior to such date 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 the 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
55
[First Amended and Restated Lease Agreement (1989 I)]
(e) Lessor may rescind or terminate 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, 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 promptly 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 to 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 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 Business 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
Business Day period, such two appraisers fail to appoint a third appraiser, then
either Lessor or Lessee, on behalf of both, may apply to the American
Arbitration Association (or any successor organization thereto) in Chicago,
Illinois, 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
56
[First Amended and Restated Lease Agreement (1989 I)]
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 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 and actual legal fees and other costs and
expenses incurred by Lessor, Owner Participant, and the Indenture Trustee 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, the Indenture Trustee or the Owner Participant may bid for
and purchase such property. Lessor agrees to give Lessee at least 10 days'
written notice of the date fixed for any public sale of any Airframe or Engine
or of the date on or after which will occur the execution of any contract
providing for any private sale 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 Default or Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Default or 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 or the terms of the Trust Indenture
and upon the execution and delivery of any amendment to this Lease or to the
Trust Agreement or Trust Indenture, Lessee, at its expense, will cause such
Lease Supplement, Trust Supplement 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, at its expense,
will promptly and duly execute and deliver to Lessor or Owner Participant such
further documents and take such further action as Lessor 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, Owner Participant and the Indenture
Trustee hereunder, including, without limitation, if requested by Lessor or
Owner Participant , at the expense of Lessee, the execution and delivery of
supplements or amendments hereto, 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 may from time to time deem advisable. Lessee will promptly provide
Lessor, the Owner Participant, the Pass Through Trustees (on and after the
Refinancing Date only) (so long as the Pass Through
57
[First Amended and Restated Lease Agreement (1989 I)]
Trustees hold any Certificates) and the Indenture Trustee such financial and
other information concerning Lessee or its parent corporation as is provided
from time to time to shareholders of Lessee's parent corporation or filed by
such corporation with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934. Within 60 days after the end of each of the
first three quarterly periods of Lessee, Lessee will provide Lessor, the Owner
Participant, the Pass Through Trustees (on and after the Refinancing Date only)
(so long as the Pass Through Trustees hold any Certificates) and the Indenture
Trustee with a consolidated balance sheet of Lessee prepared by it as of the end
of such period, together with the related consolidated statements of income and
changes in cash flow for such period. Within 120 days after the end of each
fiscal year, Lessee will provide Lessor, the Owner Participant, the Pass Through
Trustees (on and after the Refinancing Date only) (so long as the Pass Through
Trustees hold any Certificates) and the Indenture Trustee with a consolidated
balance sheet of Lessee as of the end of such year, together with the related
consolidated statements of income and changes in cash flow for such year, as
certified by independent public accountants of recognized national standing.
Commencing in 2001, on or before April 30 of each year during the Term, Lessee
will deliver to Lessor, the Owner Participant, the Pass Through Trustees (on and
after the Refinancing Date only) (so long as the Pass Through Trustees hold any
Certificates) and the Indenture Trustee a certificate of Lessee, signed by the
President, a Vice President, the Chief Financial Officer or the principal
accounting 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
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 an officer of Lessee has knowledge of the existence of a Default or an Event
of Default, Lessee shall promptly give to Lessor, the Owner Participant, the
Pass Through Trustees (on and after the Refinancing Date only) (so long as the
Pass Through Trustees hold any Certificates) and the Indenture Trustee notice
thereof and such other information relating thereto as Lessor, the Owner
Participant, the Pass Through Trustees (on and after the Refinancing Date only)
(so long as the Pass Through Trustees hold any Certificates) or the Indenture
Trustee shall reasonably request.
SECTION 17. Notices. All notices required under the terms and provisions
-------
hereof shall be in writing (including telex, telecopier or similar writing) and
shall be effective (a) if given by telecopier when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the mails, (c) if given by telex, upon
receipt by the party transmitting the telex of such party's callback code at the
end of such telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by other means, when received or
personally delivered, addressed:
(i) if to Lessee, at ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (or,
if given by overnight delivery service, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, 60007) Attention: Assistant Treasurer, telecopier
number (▇▇▇) ▇▇▇-▇▇▇▇, or to such other address or telex or telecopier
number as Lessee shall from time to time designate in writing to Lessor,
58
[First Amended and Restated Lease Agreement (1989 I)]
(ii) if to Lessor, at ▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Corporate Trust Department, telecopier number (▇▇▇) ▇▇▇-▇▇▇▇,
confirmation number (▇▇▇) ▇▇▇-▇▇▇▇, or to such other address or telex or
telecopier number as Lessor shall from time to time designate in writing to
Lessee, with a copy to Owner Participant at the address set forth in clause
(iv) below,
(iii) if to the Indenture Trustee, the Owner Participant or, on and
after the Refinancing Date only, the Pass Through Trustees, addressed to
such party at such address or telex or telecopier number as such party
shall have furnished by notice to Lessor and to Lessee, and, until an
address is so furnished, addressed to such party at its address or
telecopier number set forth in Schedule I to the Participation Agreement,
and
(iv) if to Owner Participant, c/o Fleet Capital Leasing, ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇,
telecopier number (▇▇▇) ▇▇▇-▇▇▇▇.
A notice given by telecopier or telex shall be confirmed by sending a copy of
such notice by courier delivery, certified mail or personal service; a notice
shall be given by mail only if overnight courier delivery services are not
readily available.
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(e). 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), the Indenture Trustee
(in its individual capacity or as Indenture Trustee), the Certificate Holders,
the Primary Lessor, the Owner Participant, the Pass Through Trustees (on and
after the Refinancing Date only) 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, Owner
Participant or the Primary Lessor 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, (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 foreseen 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 right of Lessee to setoff under Sections 3(b) and 3(f)
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
59
[First Amended and Restated Lease Agreement (1989 I)]
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. The
Lessee covenants that it will remain obligated under this Lease in accordance
with its terms and will take no action to terminate, rescind or avoid this
lease, notwithstanding the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding-up or other proceeding affecting
the Lessor or the Owner Participant or any assignee of the Lessor or the Owner
Participant or any other action with respect to this Lease which may be taken in
any such proceeding by any trustee or receiver of the Lessor or the Owner
Participant or of any assignee of the Lessor or the Owner Participant or by any
court or any of the foregoing actions which may be taken by or against any of
the Lessor's predecessors in interest in the Airframe or any Engine.
SECTION 19. Renewal Options; Purchase Options; Valuation.
--------------------------------------------
(a) Renewal Options.
---------------
(1) Fixed Renewal Term. Not less than 120 days before the end
------------------
of the Basic Term and provided no Default or Event of Default shall be
continuing, Lessee may deliver to Lessor a written notice irrevocably
electing to renew this Lease (any such renewal term, the "Fixed Renewal
Term") for a term having a duration as determined as follows. At least 270
days before the end of the Basic Term, Lessee shall, as a condition to its
exercise of this option, notify Lessor of its demand for an appraisal
pursuant to the appraisal procedures (which shall be performed at Lessee's
expense) of Section 19(c). The appraiser(s) so appointed shall determine
the total useful life, the remaining useful life and the future residual
value of the Aircraft on the expiration date for the Fixed Renewal Term as
may be set in accordance with the constraints set forth in the following
sentence. The duration of the Fixed Renewal Term shall be a period
specified by Lessee before the end of the Basic Term which is (a) not less
than one year and (b) not more than the shorter of (i) two years or (ii)
the longest period of time (x) which would cause the Term, after giving
effect to the Fixed Renewal Term, to be equal to 80% of the total useful
life of the Aircraft (from and after the Delivery Date) as determined by
the appraiser(s) and (y) at the expiration of which the residual value of
the Aircraft, as estimated by the appraiser(s), would be at least equal to
20% of Lessor's Cost (without taking into account inflation or deflation
subsequent to the Delivery Date).
(2) Fair Market Renewal Term. Provided that no Default or
------------------------
Event of Default shall be continuing, Lessee shall have the right to renew
this Lease for two additional periods of one year each commencing at the
end of the Basic Term or the Fixed Renewal Term for a Basic Rent equal to
the Fair Market Rental Value of the Aircraft for such period (any such
renewal term, a "Fair Market Renewal Term"). Each such option
60
[First Amended and Restated Lease Agreement (1989 I)]
to renew shall be exercised by irrevocable notice from Lessee to Lessor
delivered at least 120 days prior to the commencement of such Fair Market
Renewal Term.
(3) Waiver. 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) Conditions Precedent; Payment of Basic Rent. 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 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 provided in
Exhibit H, 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 in the case of the
Fixed Renewal Term to the amount determined for each period during the
Fixed Renewal Term as the "Fixed Renewal Rent" as set forth in Schedule H
hereto and equal in the case of a Fair Market Renewal Term to the amount
determined for each period during the Fair Market Renewal Term as the "Fair
Market Rental Value" as set forth in Schedule H hereto, which Basic Rent
shall be payable in semiannual installments in arrears (unless, in the case
of the Fixed Renewal Term, any portion of Basic Rent during the last Lease
Period during the Basic Term is payable in advance, in which case the same
proportion of Basic Rent during the 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 Value Schedule applicable during the
Renewal Term shall be determined in accordance with the following
provisions.
The amounts which are payable during any Renewal Term in respect of
Stipulated Loss Value with respect to the Aircraft shall be determined on the
basis of the Fair Market Sales Value of the Aircraft as of the commencement of
such Renewal Term, amortized on a straight-line basis over such Renewal Term to
the Fair Market Sales Value of the Aircraft as of the expiration of such Renewal
Term, as such Fair Market Sales Value in each case is determined prior to the
commencement of such Renewal Term.
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 Fixed Renewal Term available or in force.
(b) Purchase Options. Lessee shall have the option, upon at least
----------------
120 days' prior irrevocable written notice to Lessor, to purchase the Aircraft:
61
[First Amended and Restated Lease Agreement (1989 I)]
(1) on the last Business Day of the Basic Term for a purchase
price equal to, at Lessee's option, either the Fair Market Sales Value of
the Aircraft on such date or 48.65% of Lessor's Cost; and
(2) on the last Business Day of any Renewal Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date.
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,
without limitation, all Rent and all reasonable costs or expenses of Lessor 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 that would be Lessor Liens but for the proviso to 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 365 days prior to the
---------
date on which Lessee may purchase the Aircraft pursuant to Section 9(b) or
Section 19(b) hereof or renew this Lease pursuant to Section 19(a)(1) or
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 in the United States and as if
it had been maintained at all times as required in accordance with Section
7(a)(1) and Section 8, (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, taking into account 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. 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 240 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 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
62
[First Amended and Restated Lease Agreement (1989 I)]
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 apply to
the American Arbitration Association (or any successor organization thereto) in
Chicago, Illinois 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 shall bear all expenses relating to such appraisal
procedure.
SECTION 20. Security for Lessor's Obligation to Holders of Certificates.
-----------------------------------------------------------
In order to secure the indebtedness evidenced by the Certificates, Lessor has
agreed in the Trust Indenture, among other things, to assign to the Indenture
Trustee this Lease, and to mortgage its interest in the Aircraft in favor of the
Indenture Trustee, subject to the reservations and conditions therein set forth.
To the extent, if any, that this Lease 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 counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by the Indenture Trustee as trustee under the Trust Indenture 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. 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 (it being
acknowledged by Lessee that all Excluded Payments have been excluded from such
assignment 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. In
the event the Indenture Trustee shall foreclose on the Lien of the Trust
Indenture and dispossess the Lessor of its right, title and interest in and to
this Lease, all references herein to the "Owner Participant" shall be deemed to
refer to the Indenture Trustee. 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. Lessee further acknowledges
that the Trust Indenture provides that so long as the Certificates are
outstanding the Lessor may not consent to any amendment, modification or waiver
to this Lease or any of the Operative Documents without the prior consent of the
Indenture Trustee (except as provided in Section 11.06 of the Trust Indenture
and except that such consent shall not be required if, prior to Lessor's consent
to such change, Lessor and
63
[First Amended and Restated Lease Agreement (1989 I)]
the Indenture Trustee receive a statement in writing of Standard & Poor's
Corporation and ▇▇▇▇▇'▇ Investors Service to the effect that, after giving
effect to the change consented to by Lessor, the Pass Through Certificates will
be rated not less than the rating thereof immediately prior to such change), and
Lessee agrees to provide to the Indenture Trustee a copy of all notices,
consents, certificates or other information provided hereunder to Lessor.
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 other 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 five Business Days
after written notice has been given by Lessor to Lessee, as to 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 to Lessor upon
demand. No such payment, performance or compliance shall be deemed to cure any
Event of Default or otherwise relieve Lessee of its obligations with respect
thereto unless, but without limiting the applicability of the preceding
sentence, the nature of such cure makes it impossible for Lessee to render
performance.
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 shall, until paid to Lessee, be invested by Lessor
or, if the Trust Indenture shall not have been discharged, by the Indenture
Trustee as assignee of Lessor, 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) obligations of, or
guaranteed by, the United States Government or agencies thereof, (ii) open
market commercial paper of any corporation incorporated under the laws of the
United States of America or any State thereof rated at least P-2 or its
equivalent by ▇▇▇▇▇'▇ Investors Service, Inc. or at least A-2 or its equivalent
by Standard & Poor's Corporation, (iii) certificates of deposit issued by
commercial banks organized under the laws of the United States or of any
political subdivision thereof having a combined capital and surplus in excess of
$750,000,000 which banks or their holding companies have a rating of A or its
equivalent by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Corporation;
provided, however, that the aggregate amount at any one time so invested in
certificates of deposit issued by any one bank shall not exceed 5% of such
bank's capital and surplus, (iv) U.S. dollar denominated offshore certificates
of deposit issued by, or offshore time deposits with, any commercial bank
described in clause (iii) above or any subsidiary thereof and (v) repurchase
agreements with any financial institution having combined capital and surplus of
at least $750,000,000 with any of the obligations described in clause (i)
through (iv) above as collateral. Such investments shall mature no later than
one year from the date on which they were made. There shall be promptly remitted
to Lessee or its order (but no more frequently than
64
[First Amended and Restated Lease Agreement (1989 I)]
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 a Default or an Event of Default shall
have occurred and be continuing. If a Default or an Event of Default shall have
occurred and be continuing, Lessor or, if the Trust Indenture shall not have
been discharged, the Indenture Trustee as assignee of Lessor, shall hold any
such gain as security for the obligations of Lessee under this Lease and apply
it against such obligations as and when due. 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) therefore on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
---------------------------
understood that, except as expressly set forth herein and in the other Operative
Documents, all representations, warranties and undertakings of Lessor hereunder
shall be binding upon Lessor only in its capacity as Owner 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. 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. Lessee agrees that Lessor is
the owner of the Aircraft for United States income tax purposes, and neither
Lessee nor any Affiliate of Lessee will file any tax returns in a manner
inconsistent with the foregoing (including Lessor's ownership interest in 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 ILLINOIS AND SHALL IN ALL RESPECTS
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
This Lease may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 24. Certain Rights with Respect to the Japanese Lease. Lessor as
-------------------------------------------------
assignee, pursuant to the Japanese Lease Assignment, of all of Lessee's right,
title and interest in the
65
[First Amended and Restated Lease Agreement (1989 I)]
Japanese Lease, the Primary Lessor Mortgage, the Primary Lessor Comfort Letter
and Sections 11 and 23(b) of the Omnibus Agreement, hereby covenants with Lessee
as follows: (i) Lessor shall, without any request or demand from Lessee,
exercise, in accordance with its terms, the end of term purchase option,
contained in Section 19 of the Japanese Lease, (ii) Lessor shall, upon the
written request of Lessee, exercise, in accordance with their respective terms,
any early termination purchase option contained in the Japanese Lease, (iii)
Lessor shall, upon the written request of Lessee, enforce against the Japanese
Lessor or Sanwa Business Finance Co., Ltd., as the case may be, any covenant
made by such entity in the aforesaid documents and (iv) unless an Event of
Default has occurred and is continuing, Lessor shall not exercise, except upon
the written request of Lessee as aforesaid, any early termination option
contained in the Japanese Lease.
SECTION 25. Certain Rights with Respect to the Relevant Documents. Neither
-----------------------------------------------------
Lessor nor Lessee shall amend any Relevant Document without the prior written
consent of the other party hereto.
SECTION 26. Bankruptcy. Lessee hereby acknowledges that Lessor, the Owner
----------
Participant and the Indenture Trustee are entitled to the benefits of Section
1110 of the Bankruptcy Code with respect to the Aircraft and that this Lease is
a "lease" within the meaning of said Section 1110. Lessee agrees not to take any
position in connection with any bankruptcy proceedings involving it that is
inconsistent with a lessor's rights under Section 1110 of the Bankruptcy Code or
any comparable or successor provision affording protection to lessors of
aircraft.
SECTION 27. Effectiveness. As of the Effective Date, this Agreement shall
-------------
amend and restate the Original Lease in its entirety, and the Original Lease,
except as expressly provided herein, shall be superseded in its entirety by this
Agreement.
* * *
66
[First Amended and Restated Lease Agreement (1989 I)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Amended and
Restated Lease to be duly executed as of the day and year first above written.
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity except as
expressly stated herein, but solely as Owner
Trustee, Lessor
By:____________________________________
Name:__________________________________
Title:_________________________________
UNITED AIR LINES, INC.,
Lessee
By:____________________________________
Name:__________________________________
Title:_________________________________
67
[First Amended and Restated Lease Agreement (1989 I)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Amended and
Restated Lease to be duly executed as of the day and year first above written.
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity except as
expressly stated herein, but solely as Owner
Trustee, Lessor
By:______________________________
Name:____________________________
Title:___________________________
UNITED AIR LINES, INC.,
Lessee
By:______________________________
Name:____________________________
Title:___________________________
/1/ Receipt of this original counterpart of the foregoing Amended and
Restated Lease Agreement is hereby acknowledged on this day __ of _____________,
2000.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION
Indenture Trustee
By:_____________________________
Vice President
_________________
/1/ This language contained in the original counterpart only.
68
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT A
to
Lease Agreement
LEASE SUPPLEMENT (1989 I) NO. ________
LEASE SUPPLEMENT (1989 I) NO. _______ , dated _____________ between STATE
STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement (1989 I) dated as of July 20, 2000
between Owner Trustee and the Owner Participant referred to therein (such Owner
Trustee, in its capacity as such Owner Trustee being herein called "Lessor"), as
Lessor, and UNITED AIR LINES, INC., as lessee ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease Agreement
(1989 I) dated as of August 1, 1989 (the "Initial Lease"), as supplemented by
that certain Lease Supplement (1989 I) No. 1 dated as of August 16, 1989, as
amended by that certain First Amendment to Lease Agreement (1989 I) dated as of
February 1, 1990, all as amended and restated by that certain Amended and
Restated Lease Agreement (1989 I), dated as of July 20, 2000, relating to one
Boeing 747-422 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 relates to the Airframe and Engines described below, and a
counterpart of the Lease has been recorded by the Federal Aviation
Administration on ___________, 2000, 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. Original Lessor hereby confirms that it has delivered and leased to
Lessee under the Lease on August 16, 1989, as evidenced by the Original Lease
Supplement, and Lessee
________________
/1/ This language for Lease Supplement No. 1.
/2/ This language for other Lease Supplements.
[First Amended and Restated Lease Agreement (1989 I)]
hereby confirms that it has accepted and leased from Lessor under the Lease on
August 16, 1989, as evidenced by the Original Lease Supplement, and Lessor
hereby leases to Lessee under the Lease as of the Effective Date and Lessee
hereby leases from Lessor under the Lease as of the Effective Date the following
described Boeing 747-422 aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
(i) Airframe: FAA Registration No. N171UA; manufacturer's
serial no. 24322; and
(ii) Engines: four (4) United Technologies Corporation,
▇▇▇▇▇ & ▇▇▇▇▇▇▇ Group, Model PW4056 engines bearing, respectively,
manufacturer's serial nos. P717550, P717551, P717552 and P717573 (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 August 16, 1989. The
Effective Date of the Lease is July 20, 2000. Except as otherwise provided in
the Lease, the Term for the Aircraft shall commence on the Delivery Date and end
on February 15, 2015.
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 The
Boeing Company, any affiliate thereof, or any subcontractor or supplier of The
Boeing Company, or any affiliate thereof, 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.
* * *
A-2
[First Amended and Restated Lease Agreement (1989 I)]
IN WITNESS WHEREOF, Original Lessor, Lessor and Lessee have caused
this Lease Supplement to be duly executed on the day and year first above
written.
BANCBOSTON UNITED LEASING LLC,
Original Lessor
By:___________________________
Name:_________________________
Title:________________________
STATE STREET BANK AND TRUST
COMPANY, not in its
individual capacity, but
solely as Owner Trustee,
Lessor
By:___________________________
Name:_________________________
Title:________________________
UNITED AIR LINES, INC.,
Lessee
By:___________________________
Name:_________________________
Title:________________________
A-3
[First Amended and Restated Lease Agreement (1989 I)]
/3/ Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this _______ day of _______________.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
Indenture Trustee
By______________________________
Name:___________________________
Title:__________________________
_____________________
/3/ This language contained in the original counterpart only.
A-4
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT B
to
Amended and Restated Lease Agreement
BASIC RENT, INTERIM RENT AND EXCESS AMOUNT SCHEDULE
---------------------------------------------------
EXHIBIT B TO THE FIRST AMENDED AND RESTATED LEASE AGREEMENT (1989 I)
HAS BEEN INTENTIONALLY OMITTED FROM THE FIRST AMENDED
AND RESTATED LEASE AGREEMENT (1989 I) ON FILE WITH THE FAA
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT B-1
to
Amended and Restated Lease Agreement
RENT ALLOCATION SCHEDULE
------------------------
EXHIBIT B-1 TO THE FIRST AMENDED AND RESTATED LEASE AGREEMENT (1989 I)
HAS BEEN INTENTIONALLY OMITTED FROM THE FIRST AMENDED
AND RESTATED LEASE AGREEMENT (1989 I) ON FILE WITH THE FAA
B-2
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT C
to
Amended and Restated Lease Agreement
STIPULATED LOSS VALUE SCHEDULE
------------------------------
EXHIBIT C TO THE FIRST AMENDED AND RESTATED LEASE AGREEMENT (1989 I)
HAS BEEN INTENTIONALLY OMITTED FROM THE FIRST AMENDED
AND RESTATED LEASE AGREEMENT (1989 I) ON FILE WITH THE FAA
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT D
to
Amended and Restated Lease Agreement
TERMINATION VALUE SCHEDULE
--------------------------
EXHIBIT D TO THE FIRST AMENDED AND RESTATED LEASE AGREEMENT (1989 I)
HAS BEEN INTENTIONALLY OMITTED FROM THE FIRST AMENDED
AND RESTATED LEASE AGREEMENT (1989 I) ON FILE WITH THE FAA
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT E
to
Amended and Restated Lease Agreement
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
----------------------------
Any recalculation of Basic Rent, Excess Amount, Stipulated Loss
Value percentages and Termination Value percentages pursuant to the Lease and
any calculation of any payment to Owner Participant or Lessee under the Tax
Indemnity Agreement or Section 7(b) of the Participation Agreement shall be
determined by Owner Participant so as to maintain Net Economic Return, computed
on the basis of the same methodology and assumptions used by Original Lessor in
determining the Basic Rent, Excess Amount, Stipulated Loss Value percentages,
and Termination Value percentages as of the Delivery Date except as such
assumptions have been modified pursuant to Section 3 of the Lease; provided,
however, Lessee may request any financial advisor to Lessee to verify such
calculations but without any requirement that Owner Participant disclose to such
advisor such methodology and assumptions and (B) if Lessee believes that such
calculations by Owner Participant are in error then a nationally recognized firm
of accountants selected by Owner Participant and reasonably acceptable to Lessee
(which may be Owner Participant's independent public accountants) shall be
permitted to verify such calculations and Owner Participant will make available
to such firm (subject to the execution by such firm of a confidentiality
agreement reasonably acceptable to Owner Participant) such methodology and
assumptions and any changes made therein pursuant to Section 3 of the Lease and
any other information reasonably necessary for such verification requested by
such firm. In the event of a verification under clause (B) of this Exhibit E 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 this
Exhibit E; provided, however, 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 10 or more basis points or there is a material error in the
computation of the indemnity payment in Lessor's original statement in Owner
Participant's favor, Owner Participant shall pay the reasonable costs and
expenses of such verification process. Such recalculated Basic Rent, Excess
Amount, Stipulated Loss Value percentages, and Termination Value percentages
shall be set forth in an amendment to the Lease.
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT F
to
Amended and Restated Lease Agreement
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
Australia Japan
Austria Luxembourg
Bahamas Malaysia
Belgium Malta
Brazil Mexico
Canada Netherlands
Denmark New Zealand
Germany Norway
Finland Peoples Republic of
China
Greece
Philippines
Grenada
Portugal
Iceland
Republic of China (Taiwan)
India
Singapore
Indonesia
South Korea
Ireland
Spain
Italy
Sweden
Jamaica
Switzerland
[First Amended and Restated Lease Agreement (1989 I)]
Thailand
Trinidad and Tobago
Turkey
United Kingdom
Venezuela
F-2
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT G
to
Amended and Restated Lease Agreement
SCHEDULE OF COUNTRIES AUTHORIZED
FOR AIRCRAFT REGISTRATION
-------------------------
Australia Japan
Austria Luxembourg
Bahamas Malaysia
Belgium Malta
Brazil Mexico
Canada Netherlands
Denmark New Zealand
Germany Norway
Finland Peoples Republic of
China
France
Philippines
Greece
Portugal
Grenada
Republic of China (Taiwan)
Iceland
Singapore
India
South Korea
Indonesia
Spain
Ireland
Sweden
Italy
Switzerland
[First Amended and Restated Lease Agreement (1989 I)]
Thailand
Trinidad and Tobago
Turkey
United Kingdom
G-2
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT H
to
Amended and Restated Lease Agreement
EXHIBIT H TO THE FIRST AMENDED AND RESTATED LEASE AGREEMENT (1989 I)
HAS BEEN INTENTIONALLY OMITTED FROM THE FIRST AMENDED
AND RESTATED LEASE AGREEMENT (1989 I) ON FILE WITH THE FAA
[First Amended and Restated Lease Agreement (1989 I)]
EXHIBIT H
to
Amended and Restated Lease Agreement
SCHEDULE OF FIXED RENEWAL RENT
AND FAIR MARKET RENTAL VALUE
----------------------------
The "Fixed Renewal Rent" shall be (i) for the first year of any such
Fixed Renewal Term, an amount equal to $xxx,xxx.00, and (ii) for any subsequent
period under any Fixed Renewal Term an amount equal to $xxx,xxx.00, payable (in
each case) semiannually in arrears provided, however, if prior to the
-------- -------
commencement of the first Fixed Rate Renewal Term, Lessee and Owner Participant
shall have received an opinion of ▇▇▇▇▇▇, ▇▇▇▇ & Priest LLP, or of other
independent counsel of national recognition selected by the Owner Participant
and reasonably acceptable to the Lessee (which the Owner Participant agrees to
seek at the request and expense of the Lessee) to the effect that the
elimination of such premium in clause (i) over clause (ii) will not result in
such renewal term being includable in the "lease term", as defined in Treasury
Regulation ss.1.467-1(h)(6), or any successor thereto, in a manner that
adversely affects the Net Economic Return, then the "Fixed Renewal Rent" for any
Fixed Renewal Term shall be the amount set forth in clause (ii) of this
paragraph.
The "Fair Market Rental Value" during the Fair Market Renewal Term
shall be determined in accordance with Section 19(c), provided, however, that
(i) unless such Fair Market Renewal Term follows a Fixed Renewal Term, for the
first year of any such Fair Market Renewal Term, such rental amount shall equal
an amount equal to 105% of the Fair Market Rental Value as determined in
accordance with Section 19(c), and (ii) for any other Fair Market Renewal Term
such rental amount shall be an amount equal to the Fair Market Rental Value
determined in accordance with Section 19(c), payable (in each case) semiannually
in arrears provided, however, if prior to the commencement of the such Fair
-------- -------
Market Renewal Term, Lessee and Owner Participant shall have received an opinion
of ▇▇▇▇▇▇, ▇▇▇▇ & Priest LLP, or of other independent counsel of national
recognition selected by the Owner Participant and reasonably acceptable to the
Lessee (which the Owner Participant agrees to seek at the request and expense of
the Lessee) to the effect that the elimination of such premium will not result
in such renewal term being includable in the "lease term", as defined in
Treasury Regulation ss.1.467-1(h)(6), or any successor thereto, in a manner that
adversely affects the Net Economic Return, such 5% premium above Fair Market
Rental Value shall not be included in the first Fair Market Renewal Term
hereunder.
H-1