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EXHIBIT 10.64
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LEASE AGREEMENT
(N808MC)
Dated as of May 29, 1997
Between
ATLAS FREIGHTER LEASING, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
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One Boeing B747-200 Aircraft
U.S. Registration No. N808MC
Manufacturer's Serial No. 21048
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LESSOR HAS ASSIGNED TO THE AGENT CERTAIN OF ITS RIGHT, TITLE AND INTEREST IN AND
TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON
THE SIGNATURE PAGE HEREOF.
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TABLE OF CONTENTS
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SECTION 1. Definitions.............................................................................1
SECTION 2. Acceptance and Lease...................................................................22
SECTION 3. Term and Rent..........................................................................22
(a) Term and Basic Rent.............................................................22
(b) Adjustments to Basic Rent.......................................................22
(c) Supplemental Rent...............................................................22
(d) Payments in General.............................................................23
(e) Minimum Rent....................................................................23
(f) Prepayment of Rent Payments.....................................................24
SECTION 4. Certain Representations and Warranties.................................................24
SECTION 5. Lessee's Representations and Warranties................................................25
SECTION 6. Lessee's Affirmative Covenants.........................................................31
SECTION 7. Lessee's Negative Covenants............................................................38
SECTION 8. Return of the Aircraft.................................................................47
(a) Condition Upon Return...........................................................47
(b) Overhaul and Repair.............................................................47
(c) Repairs.........................................................................47
(d) Modifications...................................................................48
(e) Airworthiness Directives........................................................48
(f) Return of the Engines...........................................................48
(g) Deferred Maintenance............................................................48
(h) Corrosion Treatment.............................................................48
(i) Manuals.........................................................................48
(j) Storage Upon Return.............................................................49
(k) Severable Parts.................................................................49
(l) Survival........................................................................49
SECTION 9. Liens..................................................................................49
SECTION 10. Registration, Maintenance and Operation; Possession and Subleases;
Insignia...............................................................................49
(a) Maintenance and Operation.......................................................49
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(b) Possession......................................................................51
(c) Insignia........................................................................53
(d) Holding Out.....................................................................54
(e) No Pledging of Credit...........................................................54
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and
Additions..............................................................................54
SECTION 12. Indemnities............................................................................56
SECTION 13. Event of Loss..........................................................................57
SECTION 14. Insurance..............................................................................59
SECTION 15. Assignment.............................................................................62
SECTION 16. Events of Default......................................................................62
SECTION 17. Remedies...............................................................................65
SECTION 18. Lessee's Cooperation Concerning Certain Matters........................................67
SECTION 19. Notices................................................................................68
SECTION 20. Net Lease, True Lease, etc.............................................................69
SECTION 21. Purchase Option........................................................................70
(a) Purchase Option.................................................................70
(b) Notice of Purchase..............................................................70
SECTION 22. Lessor's Right to Perform for Lessee...................................................70
SECTION 23. Miscellaneous..........................................................................71
SECTION 24. Security for Lessor's Obligations......................................................72
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
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SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
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EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
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LEASE AGREEMENT
LEASE AGREEMENT dated as of May 29, 1997 between ATLAS FREIGHTER LEASING,
INC., a Delaware corporation ("Lessor"), and ATLAS AIR, INC., a Delaware
corporation ("Lessee").
W I T N E S S E T H :
WHEREAS, Lessee desires to lease from Lessor and Lessor is willing to lease
to Lessee the Aircraft upon the terms and subject to the conditions of this
Lease;
WHEREAS, Lessor and Lessee desire that this be of a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft to be leased pursuant to the terms of this Lease
and other similar aircraft to be leased pursuant to the other Leases:
WHEREAS, Lessor and Lessee desire that this Lease be, and be treated as, a
Lease for federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, Lessor and Lessee hereby agree as
follows:
SECTION 1. Definitions. All capitalized terms used herein shall have the
respective meanings set forth in this section.
"ACCEPTABLE ALTERNATE AIRFRAME" means a Boeing 747-200 which is in a cargo
configuration capable of immediate operation in the business of Lessee and has a
maximum gross takeoff weight of at least 800,000 pounds and is of the equivalent
or greater residual value, condition, utility, airworthiness, and remaining
useful life and which shall have been maintained, serviced, repaired and
overhauled in substantially the same manner as Lessee maintains, services,
repairs and overhauls similar airframes utilized by Lessee and without in any
way discriminating against such airframe.
"ACCEPTABLE ALTERNATE ENGINE" means a ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT90-7A engine for
the aircraft bearing U.S. registration number N808MC and a General Electric
CF6-50E2 engine for the aircraft bearing U.S. registration numbers N505MC,
N507MC, N508MC, N509MC and N516MC or an engine of the same or another
manufacturer of equivalent or greater residual value, condition, utility,
airworthiness, and remaining useful life and suitable for installation and use
on the Airframe; provided that such engine shall be of the same make, model and
manufacturer as the other engines installed on the Airframe,
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shall be an engine of a type then being utilized by Lessee on other Boeing
747-200 aircraft operated by Lessee, and shall have been maintained, serviced,
repaired and overhauled in substantially the same manner as Lessee maintains,
services, repairs and overhauls similar engines utilized by Lessee and without
in any way discriminating against such engine.
"ACMI CONTRACT" means (i) any contract entered into by Lessee pursuant to
which Lessee furnishes the aircraft, crew, maintenance and insurance and
customers bear all other operating expenses and (ii) any similar contract in
which the customer provides the flight crew, all substantially in accordance
with Lessee's historical practices.
"ACMI CONTRACTED AIRCRAFT" means an aircraft acquired by Lessee or its
Subsidiaries and intended to be used in connection with an ACMI Contract entered
into at the time of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft used pursuant to such prior ACMI Contract was operated under an
operating lease and returned to the lessor) which is in effect on the date of
calculation and has a remaining term of one year or more on the date such
aircraft was intended to be used in connection with such ACMI Contract (subject
to cancellation terms, which may include the right to cancel on six months
notice). When making any calculation on a Pro Forma Basis effect shall be given
to the acquisition of an ACMI Contracted Aircraft by adding to the appropriate
components of Consolidated Adjusted EBITDA (i) the net projected annualized
revenues from the operation of the ACMI Contracted Aircraft under such ACMI
Contract for that portion of the period for which Consolidated Adjusted EBITDA
is being calculated prior to the acquisition of such aircraft, assuming
operation for the minimum guaranteed number of block hours (less any block hours
subject to cancellation) at the minimum guaranteed rate under such ACMI Contract
less (ii) the projected annualized cash operating expenses from such operation
for the same period for which the related projected revenues are determined in
clause (i) above; provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
operating expenses of Lessee for the four full fiscal quarters immediately
preceding the date of calculation, and provided further, that if such aircraft
is of a model other than a Boeing 747 freighter, such projected cash operating
expenses shall include maintenance costs which shall not be less than the
average for such aircraft type disclosed on the most recently available DOT
Forms 41 with respect to such aircraft type or any summary of such data as
reported in a nationally recognized industry publication. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which Lessee
does not pay any crew costs, in which event pro forma effect shall be given as
described above but excluding from the projected annualized cash operating
expenses all crew costs. Cash operating expenses means for purposes of this
definition consolidated operating expenses, less consolidated depreciation and
amortization and Consolidated Rental Payments, to the extent included in
computing consolidated operating expenses.
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"AFFILIATE" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGENT" shall mean the Agent under the Credit Agreement.
"AIRCRAFT" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"AIRCRAFT CHATTEL MORTGAGE" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"AIRFRAME" means (i) the Boeing aircraft Model 747-200 (excluding Engines
or engines from time to time installed thereon) specified by the United States
Registration Number and manufacturer's serial number in the Lease Supplement and
(ii) any and all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in Lessor in accordance with this Lease.
"APPROVED APPRAISER" means B.K. Associates, Inc., Simat, Helliesen &
▇▇▇▇▇▇▇, Inc. or any other nationally recognized firm of aircraft appraisers
reasonably satisfactory to Agent.
"ASSET SALE" means the sale (including any sale-leaseback transaction) by
Lessee or any of its Subsidiaries to any other Person of (i) any of the stock of
any of Lessee's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of Lessee or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of Lessee or any of its
Subsidiaries outside of the ordinary course of business excluding (A) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less, (B) transactions related to aircraft engines, components, parts or spare
parts pursuant to customary pooling, exchange or similar arrangements, (C) asset
swaps involving aircraft engines, components, parts or spare parts; provided
that the assets received by the Lessee or any Subsidiary have a fair market
value at least equal to the assets transferred (provided that with respect to
any asset swap or series of related asset swaps involving assets of Lessee or
any Subsidiary with a fair market value exceeding $3,000,000, such determination
shall be made by the Board of Directors of Lessee)) and (D) asset sales
involving obsolete, worn-out, excess or redundant equipment as long as the
proceeds therefrom are used to replace or to upgrade the aircraft or the
equipment installed thereon.
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"ATLAS ONE" means Atlas One, Inc., a Delaware corporation.
"ATLAS ONE LEASES" means those leases existing prior to the Initial
Borrowing Date with Atlas One as lessor and Lessee as lessee.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASIC RENT" means, for the Term, the rent payable for the Aircraft
pursuant to Section 3(a) of this Lease adjusted as provided in Section 3(b) of
this Lease.
"BASIC RENT PAYMENT DATE" means each date set forth on Exhibit B.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of New York or Colorado or is a
day on which banking institutions located in either such state are authorized or
required by law or other governmental action to close.
"CAPITAL LEASE", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or ▇▇▇▇▇'▇; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-I from
▇▇▇▇▇'▇; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia that (a) is at least "adequately capitalized" (as defined
in the regulations of its primary Federal banking regulator) and (b) has Tier I
capital (as defined in such regulations) of not less than $100,000,000; and (v)
shares of any money market mutual fund that (a) has at least 95% of its assets
invested continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has the
highest rating obtainable from either S&P or ▇▇▇▇▇'▇.
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"CERTIFICATED AIR CARRIER" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to Lessor, Agent and Lenders by Lessee
pursuant to subsection 6(a)(4) hereunder.
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, and (vi) other non-cash
items reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all of the foregoing as determined on a consolidated
basis for Lessee and its Subsidiaries in conformity with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Lessee and its Subsidiaries) by
Lessee and its Subsidiaries during that period that, in conformity with GAAP,
are included in "additions to property, plant or equipment" or comparable items
reflected in the consolidated statement of cash flows of Lessee and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
definition, the aggregate of all expenditures by Lessee and its Subsidiaries
during that period to acquire (by purchase or otherwise) the business, property
or fixed assets of any Person, or the stock or other evidence of beneficial
ownership of any Person that, as a result of such acquisition, becomes a
Subsidiary of Lessee.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of the amounts
for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes
based on income, (iii) one third of Consolidated Rental Payments and (iv)
scheduled repayments of principal of Indebtedness, all of the foregoing as
determined on a consolidated basis for Lessee and its Subsidiaries in conformity
with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total net interest
expense (to be computed by reducing interest expense by the amount of interest
income) (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Lessee and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Lessee and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
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"CONSOLIDATED NET INCOME" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Lessee or is merged
into or consolidated with Lessee or any of its Subsidiaries or that Person's
assets are acquired by Lessee or any of its Subsidiaries, (iii) the income of
any Subsidiary of Lessee to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any pension plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the sum of
the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts).
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Lessee and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Interest Rate Agreements and Currency Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indi-
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rect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"CONTINUING DIRECTORS" shall mean the directors of a Person on the Initial
Borrowing Date and each other director, if such other director's nomination for
election to the Board of Directors of such Person is recommended by a majority
of the then Continuing Directors.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any Security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"CONTRIBUTION" means the contribution by Lessee to Lessor of the Aircraft
subject to this Lease and the other aircraft to be leased pursuant to the
Leases, subject to the Existing Indebtedness, and approximately $10,400,000 in
cash.
"CREDIT AGREEMENT" shall mean the Credit Agreement, dated as of May 29,
1997, by and among Lessor, as borrower, the Lenders listed therein from time to
time and Bankers Trust Company, as Agent as such agreement may be amended,
modified, waived, or supplemented from time to time.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect Lessee or any of its Subsidiaries
against fluctuations in currency values.
"DEFAULT" means any event which with the giving of notice or the lapse of
time or both would become a Lease Event of Default.
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"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"DESIGNATED INDEBTEDNESS" means Indebtedness incurred pursuant to the
FINOVA Agreement, the Pass Through Trust Documents, the Unsecured Revolving
Credit Facility, the Nationsbank Agreement, any Permitted Extension Indebtedness
and any Other Permitted Indebtedness.
"DETERMINATION DATE" has the meaning assigned to that term in subsection
7(a)(6).
"DIVIDEND" means the distribution by Atlas One to Lessee of the Aircraft
and the other aircraft to be leased pursuant to the Leases to Lessee subject to
the Existing Indebtedness.
"DOMESTIC AIR CARRIER" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"ELIGIBLE AIRCRAFT" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type and model, which (i) is in a cargo configuration capable of immediate
operation in the business of Lessee or is eligible for delivery under a
modification agreement with a delivery slot available within a six month period
(or is leased for a period of longer than six months until a delivery slot is
available), and (ii) has a maximum gross take-off weight ("MTOW") of at least
800,000 pounds, in the case of any 747-200, 747-300, or 747-400 aircraft and
630,000 pounds in the case of any MD-11 aircraft.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is, or was at any time, maintained or contributed to
by Lessee or any of its ERISA Affiliates.
"ENGINE" means: (i) each of the four ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT9D-2A aircraft
engines for the aircraft bearing U.S. registration number N808MC and each of the
General Electric CF6-50E2 aircraft engines for the aircraft bearing U.S.
registration numbers N505MC, N507MC, N508MC, N509MC and N516MC listed by
manufacturer's serial numbers in the initial Lease Supplement and installed on
the Airframe at the time of the delivery to Lessee of such Airframe, whether or
not from time to time thereafter installed on such Airframe or any other
airframe; (ii) any Acceptable Alternate Engine which may from time to time be
substituted for any of such four engines pursuant to the terms of the Lease; and
(iii) in any case, any and all Parts which are from time to time incorporated or
installed
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in or attached to any such engine and any and all parts removed
therefrom so long as title thereto remains vested in Lessor in accordance
herewith. the term "Engines" means, as of any date of determination, all Engines
then leased under this Lease.
"ENVIRONMENTAL CLAIM" means any investigation, notice, claim. suit or
order, by any governmental authority or any Person arising in connection with
any alleged or actual violation of Environmental Laws or with any Hazardous
Material, or any actual or alleged damage, or harm to health, safety or the
environment.
"ENVIRONMENTAL LAWS" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
governmental authorizations, or any other requirement of governmental
authorities relating to environmental matters, including, without limitation,
those relating to any Hazardous Materials Activity.
"EQUITY PROCEEDS" means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs associated therewith) from the
issuance of any equity Securities of Lessee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation
which is, or was at any time, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which that
Person is, or was at any time, a member; (ii) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is, or was at any time, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time, a member.
"EVENT OF DEFAULT" means an Event of Default under and as defined in the
Credit Agreement.
"EVENT OF LOSS" shall mean any of the following events with respect to the
Aircraft (whether the Airframe or an Engine of such Aircraft or both): (A) loss
of such Aircraft or the use thereof due to theft or disappearance of the
Aircraft which shall result in the loss of possession thereof for a period of
120 days (or for a shorter period ending on the date on which there is an
insurance settlement for a total loss on the basis of the theft or disappearance
of such Aircraft); (B) the destruction, damage beyond repair or rendition of
such Aircraft permanently unfit for normal use for any reason whatsoever; (C)
the condemnation, confiscation or seizure of, or requisition of title to, or use
or possession (other than
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use by the United States Government if Lessee obtains adequate compensation from
the United States Government) of such Aircraft; (D) as a result of any rule,
regulation, order or other action by the FAA or other governmental body having
jurisdiction, the use of such Aircraft in the normal course of interstate air
transportation of persons or cargo shall have been prohibited for a period of
more than nine consecutive months unless Lessee, prior to the expiration of such
nine month period, shall have undertaken and shall be diligently carrying
forward all steps which are necessary or desirable to permit the normal use of
such property by Lessee or, in any event, if such use shall have been prohibited
for a period of twelve consecutive months; (E) the operation or location of such
Aircraft, while under requisition for use by the United States or any
instrumentality or agency thereof, in any area excluded from coverage by any
insurance policy in effect with respect to such Aircraft, if Lessee shall be
unable to obtain indemnity or "war-risk" insurance in lieu thereof from the
United States; (F) any damage which results in an insurance settlement with
respect to such Aircraft on the basis of an actual or constructive total loss or
(G) a divestiture of such Airframe as described in Section 4(d)(iii) or Section
4(d)(vi) of any Aircraft Chattel Mortgage under the Credit Agreement. An Event
of Loss with respect to the Aircraft shall be deemed to have occurred if an
Event of Loss occurs with respect to the Airframe of the Aircraft.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"EXISTING INDEBTEDNESS" means the ING Obligations and the Lufthansa
Obligations.
"FAIR MARKET SALES VALUE" of the Airframe or any Engine shall mean the
value which would be obtained in an arm's-length transaction between an informed
and willing lessee-user or buyer-user (other than a lessee currently in
possession or a used equipment dealer) under no compulsion to lease or buy, as
the case may be, and an informed and willing lessor or seller, as the case may
be, under no compulsion to lease or sell, as the same shall be specified by
agreement between Lessor and Lessee or, if not agreed to by Lessor and Lessee
within a period of 15 days after either party requests a determination, then as
specified in an appraisal prepared and delivered in New York City by a
recognized independent aircraft appraiser, mutually agreed to by the Agent and
Lessee, or, if such appraiser cannot be agreed to within 20 days, then either
party may apply to the American Arbitration Association (or any successor
organization thereto) in New York City for the appointment of an appraiser,
whose determinations shall be final and binding upon the parties hereto. In
determining Fair Market Sales Value by appraisal or otherwise, it will be
assumed that the Aircraft, Airframe or Engine is in the condition, location and
overhaul status in which it is required to be returned to Lessor pursuant to
Section 8 of this Lease, that all modifications and improvements shall be taken
into account, that Lessee has removed all Parts which it is entitled to remove
pursuant to Section 11 of this Lease and
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that the Aircraft is not encumbered by this Lease. Except as otherwise expressly
provided in the Lease, all appraisal costs will be shared equally by Lessor and
Lessee.
"FEDERAL AVIATION ACT" means the Federal Aviation Act of 1958, as amended
and as recodified in ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any similar legislation of
the United States enacted to supersede, amend or supplement such Act and the
rules and regulations promulgated thereunder.
"FEDERAL AVIATION ADMINISTRATION" or "FAA" means the United States Federal
Aviation Administration or any successor thereto administering the functions of
the Federal Aviation Administration under the Federal Aviation Act.
"FINANCED AIRCRAFT" means all Financed Aircraft under and as defined in the
Second Amended and Restated Credit Agreement.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Agreement.
"FOREIGN AIR CARRIER" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"FUNDING AND PAYMENT OFFICE" means the office of Agent located at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇.
"GAAP" means, subject to the limitations on the application thereof set
forth in subsection 1 hereunder, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession. Financial statements and other information required
to be delivered by Lessee to Lessor, Agent and Lenders pursuant to clauses (1),
(2), (3) and (12) of subsection 6(a) hereunder shall be prepared in accordance
with GAAP as in effect as of the date of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this Lease
shall utilize accounting principles and policies in conformity GAAP as in effect
as of the date of this Lease.
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"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"HAZARDOUS MATERIALS" means any chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
law.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed, or
threatened use, storage, release, generation, treatment, remediation or
transportation of any Hazardous Material (i) from, under, in, into or on the
facilities or surrounding property; and (ii) caused by, or undertaken by or on
behalf of, Lessee.
"INDEBTEDNESS" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price is
(a) due more than six months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements constitute
Contingent Obligations and not Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning assigned to that term in
subsection 12(b) hereunder.
"INDEMNITEE" has the meaning assigned to that term in subsection 12(b)
hereunder.
"ING FINANCING AGREEMENT" means that certain Secured Loan Agreement dated
as of December 30, 1994 between Lessee, Atlas One and Internationale Nederlanden
Aviation Lease B.V., as amended by Amendment No. 1 thereto and as further
amended, restated, supplemented and otherwise modified from time to time.
"ING OBLIGATIONS" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the ING Financing Agreement and related documents.
"INITIAL BORROWING DATE" means the date on which Lessor effects its
borrowing of Loans pursuant to the Credit Agreement.
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"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Lessee or any of its Subsidiaries against
fluctuations in interest rates.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"INVESTMENT" means (i) any direct or indirect purchase or other acquisition
by Lessee or any of its Subsidiaries of, or of a beneficial interest in, any
Securities of any other Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of Lessee
from any Person other than Lessee or any of its Subsidiaries, of any equity
Securities of such Subsidiary, or (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by Lessee or any of its Subsidiaries to any other Person
(other than a wholly-owned Subsidiary of Lessee), including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"LEASES" means the Lease Agreements dated as of May 29, 1997 between the
Lessor and the Lessee, as the same may be amended, modified or supplemented from
time to time (including this Lease). The term "Lease" shall include any Lease
Supplement entered into pursuant to the respective Lease.
"LEASE EVENT OF DEFAULT" has the meaning specified in Section 16 of this
Lease.
"LEASE SUPPLEMENT" means a Lease Supplement, substantially in the form of
Exhibit A to this Lease, to be entered into between Lessor and Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
and any subsequent Lease Supplement entered into in accordance with the terms of
the Lease.
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"LENDER" or "LENDERS" means the persons identified as "Lenders" and listed
on the signature pages of the Credit Agreement, together with their successors
and permitted assigns.
"LESSEE" means Atlas Air, Inc., as lessee under the Lease, and its
permitted successors and assigns.
"LESSOR" means Atlas Freighter Leasing, Inc., as Lessor under the Lease,
and its permitted successors and assigns.
"LESSOR TAX" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or the transactions contemplated by this Lease or the
operation of the Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine or any Part in the jurisdiction
imposing the Tax, or (ii) the situs of organization, any place of
business or any activity of Lessee or any other Person having use,
possession or custody of the Aircraft, the Airframe, any Engine or any
Part in the jurisdiction imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"LOAN" or "LOANS" means the term loans made under the Credit Agreement.
"LOAN DOCUMENTS" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
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"LUFTHANSA AGREEMENT" means the two Conditional Sales Agreements and two
Sales Agreements between Lessee and Deutsche Lufthansa Aktiengesellschaft each
dated September 22, 1994.
"LUFTHANSA OBLIGATIONS" means all amounts owing by Lessee or any of its
Subsidiaries pursuant to the Lufthansa Agreement and related documents.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Lessee and its Subsidiaries on a consolidated basis.
"MATERIAL AGREEMENT" means any or all of the Second Amended and Restated
Credit Agreement, the Pass Through Trust Documents, the FINOVA Agreement, the
Nationsbank Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases and agreements in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc.
"NATIONSBANK AGREEMENT" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and Nationsbank Leasing Corporation,
as Lender, and as further amended, supplemented and modified in accordance with
this Lease and all other related documents.
"OBLIGATIONS" means all obligations of Lessor to pay all amounts due from
time to time under the Credit Agreement and the other Loan Documents to Agent,
Lenders or any of them, whether for principal, interest, fees, expenses,
indemnification or otherwise.
"OFFICERS' CERTIFICATE" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or one of its vice presidents and by its chief
financial officer or its treasurer.
"OPERATING LEASE" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"OTHER PERMITTED INDEBTEDNESS" means Indebtedness incurred for the purpose
of financing the acquisition of aircraft so long as (i) any such Indebtedness
bears inter-
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est at a rate which does not exceed 15% per annum, (ii) such Indebtedness has a
final stated maturity later than the end of the Term and (iii) the amortization
and the other terms, provisions, conditions, covenants and events of default
thereof taken as a whole shall be no more onerous or restrictive from the
perspective of Lessee and its Subsidiaries or any less favorable, from the
perspective of Lessor or Lenders, than any other Designated Indebtedness.
"PART" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines 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 title thereto shall vest in Lessor
in accordance with this Lease.
"PASS THROUGH TRUST DOCUMENTS" means that certain Pass Through Trust
Agreement dated as of November 30, 1995 between Atlas Air, Inc. and First
Fidelity Bank, National Association, as Trustee (the "Pass Through Trust
Agreement") and any trust indenture and security agreements including any
related trust indenture and security agreement supplements related to the
equipment notes to be held in trust pursuant to the Pass Through Trust Agreement
and all related agreements, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with this Lease.
"PAST DUE RATE" shall mean the default rate of interest as determined from
time to time in accordance with subsection 2.2D of the Credit Agreement.
"PERMITTED ENCUMBRANCES" means the following types of Liens (other than any
such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or claims the
payment of which is not, at the time, required by subsection 6(c)
hereunder;
(ii) statutory Liens of mechanics and materialmen imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith by appropriate proceedings that do not
involve any danger of the sale, forfeiture or loss of any assets, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
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(iv) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Lessee or any of its Subsidiaries;
(v) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.(i), (b) restriction or encumbrances that
the interest or title of such lessor or sublessor may be subject to, or
(c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of Sections 4(d) and 4(e) of the
Aircraft Chattel Mortgages;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens granted pursuant to the Transaction Documents;
(xi) Liens arising pursuant to the Second Amended and Restated Credit
Agreement; and
(xii) extensions, modifications, replacements and refinancings of any
of the foregoing.
"PERMITTED EXTENSION INDEBTEDNESS" means renewals, extensions,
substitutions, refinancings or replacements (each an "extension") by Lessee of
any Indebtedness of Lessee, including any such successive transactions by
Lessee, so long as (i) any such Indebtedness bears interest at a rate which does
not exceed 15% per annum, (ii) any such Permitted Extension Indebtedness shall
be in a principal amount that does not exceed the principal amount immediately
prior to such extension, plus the amount of any premium required to be paid in
connection with such extension pursuant to the terms of such Indebtedness, plus
the amount of expenses of Lessee incurred in connection with such extension,
(iii) in the case of any extension of subordinated Indebtedness, such Permitted
Extension Indebtedness is made subordinate to the obligations of Lessee
hereunder at least to the same extent as the Indebtedness immediately prior to
such extension, (iv) such Permitted Exten-
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sion Indebtedness has a final stated maturity later than the end of the stated
maturity of the Indebtedness being extended immediately prior to such extension
and (v) the amortization and the other terms, provisions, conditions, covenants
and events of default thereof taken as a whole shall be no more onerous or
restrictive from the perspective of Lessee and its Subsidiaries or any less
favorable, from the perspective of Lessor and Lenders than those contained in
the Indebtedness immediately prior to such extension.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, Joint Ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"PHILIPPINE LEASES" means, (i) that certain Lease Agreement dated as of
February 23, 1995 by and between First Security Bank of Utah, National
Association and Philippine Airlines, Inc. as amended by an Amendment dated March
31, 1995, as modified pursuant to an acknowledgement dated December 31, 1996 by
and between Philippine Airlines and Lessee, and as assigned to Atlas Air, Inc.
pursuant to an Assignment and Acceptance of Lease dated December 31, 1996 as the
Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement and (ii) that
certain Lease Agreement dated as of January 1, 1995 by and between Bankers Trust
Company and Philippine Airlines, Inc., as the Lease Agreement may be further
amended, restated, supplemented or otherwise modified from time to time in
accordance with this Agreement, as modified pursuant to an acknowledgement dated
May 12, 1997 by and between Philippine Airlines and Lessee, and as assigned to
Lessee pursuant to an Assignment and Acceptance of Lease dated May 12, 1997 as
the Lease Agreement may be further amended, restated, supplemented or otherwise
modified from time to time in accordance with this Agreement .
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice
or the expiration of any grace period or both, would constitute an Event of
Default under the Credit Agreement.
"PRO FORMA BASIS" means, with respect to compliance with any covenant
hereunder, compliance with such covenant after giving effect to any proposed
incurrence of Indebtedness by Lessee or any of its Subsidiaries and the
application of the proceeds thereof, the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business or any asset (including any ACMI Contracted
Aircraft) by Lessee or any of its Subsidiaries or any other related action which
requires compliance on a Pro Forma Basis. In making any determination of
compliance on a Pro Forma Basis, such determination shall be performed after
good faith consultation with Lessor and Agent using the consolidated financial
statements of Lessee and its Subsidiaries which shall be reformulated as if any
such incurrence of Indebtedness
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and the application of proceeds, acquisition, disposition or other related
action had been consummated at the beginning of the period specified in the
covenant with respect to which Pro Forma Basis compliance is required.
"PROCEEDINGS" has the meaning assigned to that term in subsection 6(a)(10).
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"RENT" means Basic Rent and Supplemental Rent, collectively.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Lessee now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Lessee now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Lessee now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to, any Designated Indebtedness.
"S&P" means Standard & Poor's Corporation.
"SECOND AMENDED AND RESTATED CREDIT AGREEMENT" means the Second Amended and
Restated Credit Agreement, dated as of February 28, 1997, among Lessee, as
Borrower, the lenders listed therein, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P., as
Syndication Agent, and Bankers Trust Company, as Agent, as amended by the First
Amendment thereto, dated as of April 25, 1997, and by the Second Amendment
thereto, dated as of May 29, 1997, but without giving effect to any further
amendments, modifications, supplements or waivers thereof.
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in
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temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SERVICES AGREEMENT" means a Services Agreement between Lessor and Lessee
dated as of May 29, 1997.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"SPECIAL PURPOSE SUBSIDIARY" means a Subsidiary of Lessee formed solely for
the purpose of refinancing Indebtedness associated with a Financed Aircraft or
acquiring or refinancing other aircraft with Permitted Extension Indebtedness or
Other Permitted Indebtedness the only assets of which are such financed
aircraft, leases of such aircraft and contracts related to the modification of
such aircraft and contributions to capital of such Subsidiary, which together
with all other contributions to capital made to other such Subsidiaries, are not
in excess of 15% of the consolidated book value of the assets of the Lessee and
its Subsidiaries, and the only liability of which is the Permitted Extension
Indebtedness or Other Permitted Indebtedness incurred to refinance such
Indebtedness; provided that Lessee beneficially owns and controls at least 95%
of the issued and outstanding capital stock of such Subsidiary.
"STIPULATED LOSS DETERMINATION DATE" shall mean each date referenced on the
schedule of Stipulated Loss Values set forth in Exhibit C to this Lease.
"STIPULATED LOSS VALUE" with respect to the Aircraft shall mean as of any
date, the amount set forth on Exhibit C opposite the Stipulated Loss
Determination Date immediately prior to such date, as such amount may be reduced
in accordance with Section 3(f) plus all accrued and unpaid interest on the
Loans relating to the Aircraft on the date of determination.
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"SUPPLEMENTAL RENT" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others under
any of the Transaction Documents, including payments of Stipulated Loss Value
and other amounts referred to in Section 3(c) of this Lease.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof. For all purposes of
this Agreement other than the financial covenants set forth in subsection 7(f)
and the definitions related thereto, Lessor shall not be considered a Subsidiary
of Lessee.
"TAX" or "TAXES" shall have the meaning assigned to the term in Section
12(a) hereunder.
"TERM" means the term for which the Aircraft is leased hereunder pursuant
to Section 3(a) of the Lease, beginning on the Initial Borrowing Date and ending
on the seventh anniversary of the Initial Borrowing Date, or such earlier date
as the Lease may be terminated in accordance with the terms thereof.
"TRANSACTION" means collectively (i) the termination by Atlas One of the
Atlas One Leases, (ii) the Dividend, (iii) the Contribution, (iv) the leasing by
Lessor to Lessee of the Aircraft and certain other aircraft pursuant to the
Leases, (v) the repayment of the Existing Indebtedness and (vi) the release and
termination of all security interests and Liens encumbering the Aircraft or any
part thereof or any other assets of Lessor.
"TRANSACTION DOCUMENTS" shall mean the Amendment to the Second Amended and
Restated Credit Agreement, any bills of sale or certificates of transfer for
each Aircraft (including bills of sale on AC Form 8050-2), the Leases, the
releases of the Atlas One Leases, all documents relating to the repayment of the
ING Obligations and the Lufthansa Obligations, the Loan Documents and all other
agreements and documentation executed and delivered in connection with the
Transaction, including, without limitation, in connection with the Dividend and
the Contribution.
"UNITED STATES CITIZEN" means a "citizen of the United States" within the
meaning of the Federal Aviation Act.
"UNSECURED REVOLVING CREDIT FACILITY" means that certain credit facility to
be entered into between Atlas Air, Inc. and Bank One, Colorado, N.A., which
provides for
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a $25,000,000 revolving working capital line of credit and a $1,000,000 term
real estate loan, as amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Lease.
SECTION 2. Acceptance and Lease. Subject to the satisfaction or waiver of
the conditions precedent contained in the Credit Agreement and the occurrence of
the Initial Borrowing Date, Lessor hereby agrees to lease to Lessee hereunder,
and Lessee hereby agrees to accept on the Initial Borrowing Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees to appoint in
writing one or more of its employees as its authorized representative to accept
delivery of the Aircraft pursuant to the terms hereof. Lessee hereby agrees that
acceptance of delivery by such employee or employees shall, without further act,
irrevocably constitute acceptance by Lessee of the Aircraft for all purposes of
this Lease Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the seventh anniversary of the Initial
Borrowing Date or such earlier date as this Lease may be terminated in
accordance with the provisions hereof. Basic Rent shall accrue during the Term
in accordance with Exhibit B hereto. Lessee shall pay to Lessor on each Basic
Rent Payment Date an amount of Basic Rent specified opposite each Basic Rent
Payment Date on Exhibit B hereto as such amounts may be adjusted pursuant to
Section 3 plus accrued interest on Basic Rent previously accrued but unpaid as
specified on Exhibit B.
(b) Adjustments to Basic Rent. The Basic Rent shall be adjusted upwards on
each Basic Rent Payment Date by an amount, determined by Agent and notified to
Lessor and Lessee prior to the Basic Rent Payment Date, which represents the
amount of interest due and payable on the Loans relating to the Aircraft on such
Basic Rent Payment Date and determined in accordance with the Credit Agreement.
(c) Supplemental Rent. Lessee shall pay (or cause to be paid) to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent
constituting Stipulated Loss Value as the same shall become due and owing and
all other amounts of Supplemental Rent within 10 days after demand, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent when
due, Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee also
will pay to Lessor, or to whomsoever shall be entitled thereto, as assignee of
Lessor, on demand, as Supplemental Rent, (i) interest at the Past Due Rate with
respect to any part of any installment of Basic Rent not paid when due for any
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period and, to the extent permitted by law, on
interest accrued on Basic Rent which itself was accrued and not paid to the
extent such accrued interest was not paid when
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27
due until the same shall be paid and on any other amounts payable hereunder
which are not paid when due and (ii) all amounts payable by Lessor pursuant to
subsections 2.6D, 2.7, 9.2 and 9.3 of the Credit Agreement; provided, however,
to the extent any Supplemental Rent required to be paid pursuant to this clause
(ii) of subsection 2(c) has been paid by Lessee pursuant to the terms of another
Lease, then Lessee's obligations hereunder shall be deemed to be satisfied by
the payments made pursuant to such other Lease.
(d) Payments in General. All payments of Rent shall be made directly by
Lessee prior to 12:00 p.m. (New York time), to Lessor at its office at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (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 so long as any Obligations
remain outstanding, all Rent shall be paid directly to the Agent at the Funding
and Payment Office; provided, further, that to the extent the amount of Rent
paid directly to the Agent is in excess of the amount of principal and interest
on the Loans relating to the Aircraft and other unpaid Obligations (other than
principal and interest on other Loans relating to other aircraft leased pursuant
to the other Leases and after taking into account all other payments of rent
pursuant to the other Leases on such date), then such excess amounts shall be
paid by the Agent to Lessor at its above-referenced office.
Notwithstanding anything to the contrary contained herein, if any date on
which a payment of Rent becomes due and payable is not a Business Day then such
payment shall be made on the next succeeding Business Day; provided, however, if
any date on which a payment of Rent becomes due is not a Business Day and is a
day of the month after which no further Business Day occurs in such month, the
payment of Rent shall be made on the next preceding Business Day. No interest
shall accrue on the amount of any payment made on the Business Day next
succeeding the regularly scheduled Basic Rent Payment Date, if such payment is
made on such next succeeding Business Day because the original date of payment
was not a Business Day (it being understood that the amount of Basic Rent
includes Rent for such day).
(e) Minimum Rent. Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such installment
has been adjusted pursuant to Section 3(b), together with all prior Basic
Rent due and payable on such date and all accrued interest thereon shall
be, under all circumstances and in any event, in an amount at least
sufficient for Lessor to pay in full principal and interest on the Loans
relating to the Aircraft required to be paid by Lessor on or within five
Business Days of the due date of such installment of Basic Rent; and
(ii) payments of Stipulated Loss Value shall be, under any
circumstances and in any event, in an amount which (when taken together
with any other Basic
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Rent due and payable in connection therewith) is at least equal to, as of
the date of payment, the sum of the aggregate unpaid principal of and
accrued interest on the Loans relating to the Aircraft and all other unpaid
Obligations of Lessor (other than principal and interest on Loans relating
to other Aircraft and after taking into account all other payments of
Stipulated Loss Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft pursuant to Section 2.4C(ii) of the Credit
Agreement, Lessor shall notify Lessee of such required prepayment and
Lessee shall immediately prepay an amount of Basic Rent equal to the amount
of such required prepayment less any required payments of the Loans
relating to the Aircraft actually made by the Lessor from Insurance
Proceeds or Condemnation Proceeds (as each such term is defined in the
Credit Agreement) received directly by the Lessor.
(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon not
less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section
3(f)(ii), the schedules of Basic Rent and Stipulated Loss Value, shall be
adjusted so as to preserve the after tax yield and after tax cash flows of
the Lessor and, to the extent consistent therewith, to minimize the net
present value of Basic Rent payments. All such computations shall be made
on the basis of the same assumptions and the method of computations
employed in the original calculations of Basic Rent and Stipulated Loss
Values (except to the extent such assumptions have been changed as a result
of such prepayment or any prior such adjustment). At the Lessee's written
request, independent public accountants mutually selected by the Lessor and
the Lessee shall confirm the required adjustments. The final determination
of any adjustment hereunder shall be set forth in amendments to this Lease,
executed and delivered by the Lessor, the Lessee and consented to by the
Agent. The reasonable fees, cost and expenses of the verifying accounting
firm shall be paid by the Lessee.
Anything contained in the foregoing to the contrary notwithstanding,
after giving effect to the foregoing such adjustments the revised Basic
Rent and Stipulated Loss Values shall permit to the Lessee to comply with
Section 3(e) hereof.
SECTION 4. Certain Representations and Warranties. LESSEE ACKNOWLEDGES
AND AGREES THAT AS BETWEEN LESSOR AND LESSEE (A) THE AIRFRAME AND EACH ENGINE
ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO
LESSEE AND LESSEE
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TAKES THE SAME "AS IS", (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH
ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR NOR THE AGENT NOR ANY
LENDER MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED
TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor covenants that
it will not, through its own actions or inactions, in such capacity, interfere
in Lessee's quiet enjoyment of the Aircraft unless this Lease shall have been
declared or deemed to have been declared in default pursuant to Section 17
hereof. None of the provisions of this Section 4 or any other provision of this
Lease shall be deemed to amend, modify or otherwise affect the representations,
warranties or other obligations (express or implied) of any manufacturer, any
affiliate thereof, any subcontractor or supplier of any manufacturer or any
affiliate thereof, with respect to the Airframe, Engines, or any Parts, or to
release the manufacturer, any affiliate thereof, or any such subcontractor or
supplier from any such representation, warranty or obligation. Unless a Default
or Lease Event of Default shall have occurred and be continuing, 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 or any affiliate thereof
or any of its subcontractors or suppliers and any other claims against the
manufacturer or any affiliate thereof, or any such subcontractor or supplier
with respect to the Aircraft, all pursuant to and in accordance with the terms
of any applicable purchase agreements or warranty agreements.
SECTION 5. Lessee's Representations and Warranties. In order to induce
Lessor to enter into this Lease and Agent and the Lenders to make the Loans
under the Credit Agreement, Lessee represents and warrants to the Lessor, Agent
and each Lender on the date of this Lease that the following statements are
true, correct and complete:
(a) ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
(i) ORGANIZATION AND POWERS. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lessee has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
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conducted, to enter into this Lease and the other Transaction Documents and to
carry out the transactions contemplated hereby and thereby.
(ii) QUALIFICATION AND GOOD STANDING. Lessee is qualified to do business
and in good standing in every jurisdiction where its assets are located and
wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had and will not have a Material Adverse Effect.
(iii) SUBSIDIARIES. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each of
its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) AUTHORIZATION OF TRANSACTION DOCUMENTS, ETC.
(i) AUTHORIZATION OF TRANSACTION DOCUMENTS. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) NO CONFLICT. The execution, delivery and performance by Lessee or
its Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any
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31
Liens created under this Lease or any of the other Transaction Documents in
favor of the Agent on behalf of the Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Lessee or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Initial Borrowing Date and
disclosed in writing to Lessor and Lenders.
(iii) GOVERNMENTAL CONSENTS. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.
(iv) BINDING OBLIGATION. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) FINANCIAL CONDITION.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at December 31,
1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at March 31, 1997 and the
related unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the three
months then ended. All such statements were prepared in conformity with GAAP and
fairly present the financial position (on a consolidated and, where applicable,
consolidating basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. Neither Lessee nor any of its Subsidiaries has (and
will not following the Initial Borrowing Date) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is mate-
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rial in relation to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Lessee or any of its Subsidiaries.
(B) Except as fully disclosed in the financial statements delivered
pursuant to Section 5(c)(A), there were as of the Initial Borrowing Date no
liabilities or obligations with respect to Lessee and its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole. As
of the Initial Borrowing Date, Lessee does not know of any basis for the
assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial statements delivered pursuant to
Section 5(c)(A) which, either individually or in the aggregate, could reasonably
be expected to be material to Lessee and its Subsidiaries taken as a whole.
(d) NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
Since March 31, 1997, no event or change has occurred that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since March 31, 1997, neither Lessee nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so, except as permitted by
subsection 7(e) hereunder.
(e) TITLE TO PROPERTIES, LIENS.
(i) Lessee and its Subsidiaries have (i) good, sufficient and legal title
to (in the case of fee interests in real property), (ii) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
or (iii) good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant to
subsection 6(a), in each case except for assets disposed of since the date of
such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) LITIGATION, ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its Subsidiaries or any
property of Lessee or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
Neither Lessee nor
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any of its Subsidiaries is (i) in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or (ii) subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(g) PAYMENT OF TAXES.
Except to the extent permitted by subsection 6(c), all tax returns and
reports of Lessee and its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon Lessee and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Lessee does not know of any proposed tax assessment
against Lessee or any of its Subsidiaries which is not being actively contested
by Lessee or such Subsidiary in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, for
liabilities for taxes as shall be required in conformity with GAAP shall have
been made or provided in the financial statements of Lessee. There are no
agreements with respect to taxes between Lessee and any tax agency or authority.
(h) PERFORMANCE OF AGREEMENTS.
Neither Lessee nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
(i) GOVERNMENTAL REGULATION.
Neither Lessee nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of its obligations
under the Transaction Documents unenforceable.
(j) EMPLOYEE BENEFIT PLANS.
Lessee maintains a qualified retirement plan under Section 401(k) of the
Internal Revenue Code and a medical benefit plan. Lessee's 401(k) Plan has no
unfunded li-
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34
abilities in excess of $10,000,000, and Lessee is in compliance with
all applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan
and has performed all its obligations under such Employee Benefit Plan in all
material respects. Lessee has no Employee Benefit Plans, other than its 401(k)
Plan and the medical benefit plan. The Lessee has no ERISA Affiliates that
sponsor, maintain, contribute to or are liable with respect to any Employee
Benefit Plans.
(k) CERTAIN FEES.
No broker's or finder's fee or commission will be payable with
respect to this Lease or other Transaction Documents or any of the transactions
contemplated hereby.
(l) ENVIRONMENTAL PROTECTION.
(i) All facilities and operations of the Lessee and its
Subsidiaries are, and have been to the best of Lessee's knowledge, in
compliance in all material respects with all applicable Environmental Laws.
(ii) There are no, and have been no, conditions, occurrences,
or Hazardous Materials Activity, (a) arising at any facilities owned or
operated by Lessee or (b) arising in connection with the operations of Lessee
or any of its Subsidiaries (including the transportation of Hazardous
Materials), which conditions, occurrences or Hazardous Materials Activity could
reasonably be expected to form the basis of an Environmental Claim against
Lessee and which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(iii) To the best of Lessee's knowledge, there are no pending or
threatened Environmental Claims against Lessee or any of its Subsidiaries, and
neither Lessee nor any of its Subsidiaries has received no written notices,
inquiries, or requests for information with respect to any Environmental
Claims.
(m) EMPLOYEE MATTERS.
There is no strike or work stoppage in existence or threatened
involving Lessee or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
(n) SOLVENCY.
Lessee and each of its Subsidiaries is and, upon the incurrence
of any obligations by Lessee under the Leases, will be, after giving effect to
the transactions contemplated hereby, Solvent.
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35
(o) DISCLOSURE.
No representation or warranty of Lessee or any of its Subsidiaries
contained in this Lease or any other Transaction Document or in any other
document, certificate or written statement furnished to Lessor, Agent or Lenders
by or on behalf of Lessee or any of its Subsidiaries for use in connection with
the transactions contemplated by this Lease and the other Transaction Documents
contains any untrue statement of a material fact or omits to state a material
fact (known to Lessee, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Lessee to be
reasonable at the time made, it being recognized by Lessor, Agent and Lenders
that such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Lessee (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lessor, Agent and Lenders for use in connection with the
transactions contemplated hereby.
SECTION 6. Lessee's Affirmative Covenants. Lessee covenants and
agrees that, so long as any amounts under this Lease remain unpaid, Lessee
shall perform, and will cause each of its Subsidiaries to perform, all
covenants in this Section 6.
(a) FINANCIAL STATEMENTS AND OTHER REPORTS.
Lessee will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Lessee will deliver to Lessor, Agent and Lenders:
(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared
by Lessee in the ordinary course of business certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries for such month, subject to
changes resulting from audit and normal year-end adjustments;
provided, however, such monthly financial statements shall only be
required to be delivered to Agent to the extent such monthly financial
statements are required to be delivered under the Second Amended and
Restated Credit Agreement as such agreement may be amended, modified,
supplemented, renewed or refinanced from time to time;
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36
(2) Quarterly Financials: as soon as available and in any
event within 45 days after the end of each fiscal quarter of each
fiscal year, (a) the consolidated and consolidating balance sheets of
Lessee and its Subsidiaries as at the end of such fiscal quarter and
the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for
such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the
current fiscal year delivered pursuant to subsection 6(a)(12)), all in
reasonable detail and certified by the chief financial officer of
Lessee that they fairly present the financial condition of Lessee and
its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (b) a
narrative report describing the operations of Lessee and its
Subsidiaries in the form prepared for presentation to senior management
for such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter; provided
that delivery of Lessee's Form 10-Q for such fiscal quarter shall be
deemed to satisfy the requirements of this subsection 6(a)(2);
(3) Year-End Financials: as soon as available and in any
event within 90 days after the end of each fiscal year, (a) the
consolidated and consolidating balance sheets of Lessee and its
Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income, stockholders'
equity and cash flows of Lessee and its Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding
figures for the previous fiscal year and the corresponding figures from
the consolidated plan and financial forecast delivered pursuant to
subsection 6(a)(12) for the fiscal year covered by such financial
statements, all in reasonable detail and certified by the chief
financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, (b) a narrative report describing the operations of Lessee
and its Subsidiaries in the form prepared for presentation to senior
management for such fiscal year, and (c) in the case of such
consolidated financial statements, a report thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP or other independent certified public accountants of recognized
national standing selected by Lessee and satisfactory to Lessor and
Agent, which report shall be unqualified, shall express no doubts about
the ability of Lessee and its Subsidiaries to continue as a going
concern, and shall state that such consolidated financial statements
fairly present the consolidated financial position of Lessee and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such
consolidated financial state-
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37
ments has been made in accordance with generally accepted auditing
standards; provided that delivery of Lessee's Form 10-K for such
fiscal year shall be deemed to satisfy the requirements of clauses (a)
and (b) of this subsection 6(a)(3);
(4) Officers' and Compliance Certificates: together with each
delivery of financial statements of Lessee and its Subsidiaries
pursuant to subdivisions (2) and (3) above after the Initial Borrowing
Date, (a) an Officers' Certificate of Lessee stating that the signers
have reviewed the terms of this Lease and have made, or caused to be
made under their supervision, a review in reasonable detail of the
transactions and condition of Lessee and its Subsidiaries during the
accounting period covered by such financial statements and that such
review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any
condition or event that constitutes a Default or Lease Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Lessee has taken, is taking and proposes to take with respect thereto;
and (b) a Compliance Certificate demonstrating in reasonable detail
compliance during and at the end of the applicable quarterly and
annual accounting periods with the restrictions contained in Section
7;
(5) Pricing Certificates: On or after the third anniversary
of the Initial Borrowing Date, a certificate setting forth the credit
rating on Lessee's obligations under the Pass Through Trust Documents,
(a) together with each delivery of financial statements of Lessee
pursuant to subdivisions (2) and (3) above, (b) within one Business
Day after any public release by S&P or ▇▇▇▇▇'▇ lowering its credit
rating on Lessee's obligations under the Pass Through Trust Documents
and (c) at such additional times as Lessee may elect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries
pursuant to subdivision (3) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit examination has included a review of the
terms of this Lease and the other Transaction Documents as they relate
to accounting matters, (b) stating whether, in connection with their
audit examination, any condition or event that constitutes a Default
or Lease Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such
Default or Lease Event of Default that would not be disclosed in the
course of their audit examination, and (c) stating that based on their
audit examination nothing has come to
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their attention that causes them to believe either or both that the
information contained in the certificates delivered therewith pursuant to
subdivision (4) above is not correct or that the matters set forth in the
Compliance Certificates delivered therewith pursuant to clause (b) of
subdivision (4) above for the applicable fiscal year are not stated in
accordance with the terms of this Lease;
(7) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Lessee by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Lessee and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(8) SEC Filings: promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Lessee to its security holders, (b) all regular
and periodic reports and all registration statements (other than on Form
S-8 or a similar form) and prospectuses, if any, filed by Lessee or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;
(9) Lease Events of Default, etc.: promptly upon any officer of Lessee
obtaining knowledge (a) of any condition or event that constitutes a
Default or Lease Event of Default, (b) that any Person has given any notice
to Lessee or any of its Subsidiaries or taken any other action with respect
to a claimed default or event or condition of the type referred to in
subsection 16(1), (c) of any condition or event that would be required to
be disclosed in a current report filed by Lessee with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect on the date hereof) if Lessee were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such
claimed Lease Event of Default, Default, default, event or condition, and
what action Lessee has taken, is taking and proposes to take with respect
thereto;
(10) Litigation or Other Proceedings: (a) promptly upon any officer of
Lessee obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Lessee or any of its Subsidiaries or any property of Lessee or
any of its Subsidiaries (collectively, "PROCEEDINGS")
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not previously disclosed in writing by Lessee to Lessor and Lenders or (Y)
any material development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the
end of each fiscal quarter of Lessee, a schedule of all Proceedings
involving an alleged liability of, or claims against or affecting,
Lessee or any of its Subsidiaries equal to or greater than $1,000,000
and promptly after request by Lessor and Agent such other information
as may be reasonably requested by Lessor and Agent to enable Agent and
their counsel to evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Employee
Benefit Plan, (b) any notices received by Lessee or any of its ERISA
Affiliates with respect to a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Lessor or Agent
shall reasonably request;
(12) Financial Plans and Projections: as soon as practicable after
preparation thereof by Lessee in the normal course of business, Lessee
shall provide copies of its financial plans and projections and at the
reasonable request of Lessor and Agent an opportunity for Lessor and
Lenders to question and discuss such materials with the Chief Financial
Officer of Lessee; provided that, at the request of Lessee, all copies of
such financial plans and projections shall be returned to Lessee after
review thereof and the completion of such discussion;
(13) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Lessee or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect; and
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(14) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) CORPORATE EXISTENCE.
Except as permitted under subsection 7(g) hereunder, Lessee will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the interests of Lessee
and its Subsidiaries and is not materially disadvantageous to Lessor or to any
assignee of the Lease. Lessee will at all times maintain its corporate
existence as a United States Citizen.
(c) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, with respect to any liability
for taxes, as shall be required in conformity with GAAP shall have been made
therefor in the financial statements of the Lessee.
(ii) Lessee will not, and will not permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than any Subsidiary of Lessor or Lessee).
(d) MAINTENANCE OF PROPERTIES; INSURANCE.
Lessee will, and will cause its Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, ordinary wear and tear
excepted, all material properties used or useful in the business of Lessee and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Lessee will maintain or
cause to be maintained, with financially sound and reputable insurers, insurance
with respect to its properties and business and the properties and businesses of
its Subsidiaries against loss or damage (including, without limitation, flood
insurance, if necessary or advisable) of the kinds customarily carried or
maintained
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under similar circumstances by corporations of established reputation engaged
in similar businesses.
(e) INSPECTION; LENDER MEETING.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine, and its and their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and accounts with its and their officers
and independent public accountants (provided that Lessee may, if it so chooses,
be present at or participate in any such discussion), all upon reasonable notice
and at such reasonable times during normal business hours and as often as may be
reasonably requested; provided that so long as no Lease Event of Default shall
have occurred and be continuing, such inspection shall not be disruptive to
Lessee's business, as reasonably determined by Lessee. Without in any way
limiting the foregoing, Lessee will, upon the request of Lessor or Agent,
participate in a meeting of Agent and Lenders once during each fiscal year to be
held at Lessee's corporate offices (or such other location as may be agreed to
by Lessee, Lessor and Agent) at such time as may be agreed to by Lessee, Lessor
and Agent.
(f) COMPLIANCE WITH LAWS, ETC.
Lessee will, and will cause its Subsidiaries to, comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including, without limitation, Environmental Laws),
noncompliance with which could reasonably be expected to cause a Material
Adverse Effect. Lessee shall not conduct, and shall not permit the conduct of,
any Hazardous Materials Activity at any facility or at any other location which
could reasonably be expected to form the basis of an Environmental Claim against
Lessee and which could reasonably be expected to have a Material Adverse Effect.
(g) LESSEE'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.
Lessee will promptly take, and will cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the event
Lessee or any of its Subsidiaries undertakes any remedial action with respect
to any Hazardous Materials on, under or about any facility, Lessee or such
Subsidiary will conduct and complete such remedial action in compliance with
all applicable Environmental Laws, and in accordance with the policies, orders
and directives of all federal, state and local governmental authorities except
when, and only to the extent that, Lessee's or such Subsidiary's liability for
such presence, storage, use, disposal, trans-
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portation or discharge of any Hazardous Materials is being contested in good
faith by Lessee or such Subsidiary. Notwithstanding anything to the contrary
contained in this Lease, Lessee and its Subsidiaries may engage in the
transportation of Hazardous Materials in the ordinary course of business so long
as such is conducted in compliance with all applicable Environmental Laws, and
all other applicable laws, policies, orders, directives and regulations.
(h) EMPLOYEE BENEFIT PLANS.
Lessee will not establish or permit to be established any Employee
Benefit Plans for Lessee or any of its employees and will not permit any ERISA
Affiliate to establish any Employee Benefit Plan which, in either case, could
reasonably be expected to result in a liability for Lessee, under Title IV of
ERISA or the minimum funding standards of Part 3 of Subtitle B of Title I of
ERISA, in excess of $20 million.
SECTION 7. Lessee's Negative Covenants. Lessee covenants and agrees
that, so long as any amounts remain owing under this Lease, Lessee shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 7.
(a) INDEBTEDNESS.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(1) Lessee may become and remain liable with respect to the
obligations under the Second Amended and Restated Credit Agreement;
(2) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7(d) and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases; provided that such
Capital Leases are permitted under the terms of subsection 7(i);
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Indebtedness described in Schedule 7(a)(4) annexed hereto;
(5) Lessee may become and remain liable with respect to Permitted
Extension Indebtedness; provided that with respect to any transaction in
which Permitted Extension Indebtedness is incurred with respect to any
Financed Aircraft, the
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cash proceeds from such Permitted Extension Indebtedness are sufficient to
repay in full the Indebtedness associated with such Financed Aircraft;
(6) so long as no Default or Lease Event of Default shall have
occurred and be continuing or would result therefrom and Lessee delivers an
Officers' Certificate to Lessor, Agent and Lenders, in form and substance
reasonably satisfactory to Lessor and Agent, confirming that, on a Pro
Forma Basis after giving effect to such incurrence of Indebtedness, (i) the
ratio of Consolidated Total Debt (less Cash and Cash Equivalents held by
Lessee in excess of $25 million) as of the last day of the most recently
ended fiscal quarter (the "Determination Date") to Consolidated Adjusted
EBITDA for the four-fiscal quarter period ending on such Determination Date
did not exceed 4.5:1.0, (ii) the ratio of Consolidated Adjusted EBITDA for
such four-fiscal quarter period to Consolidated Interest Expense for such
four-fiscal quarter period was not less than 3.0:1.0; and (iii) Lessee will
be in compliance with all covenants set forth in subsection 7(f) hereof,
Lessee and its Subsidiaries may incur Other Permitted Indebtedness; and
(7) Lessee may become and remain liable with respect to Indebtedness
under the Unsecured Revolving Credit Facility in an aggregate principal
amount not to exceed $26 million at any time outstanding; and
(8) Lessee may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed, without
duplication, when added to the maximum aggregate liability, contingent or
otherwise, of Lessee and its Subsidiaries outstanding in accordance with
Section 7(d)(5), 30 million at any time outstanding; and
(9) Lessee may become and remain liable with respect to Indebtedness
in respect of the Leases.
(b) LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. Lessee shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Lessee or any of its Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the Uniform Commercial Code of any state or under any similar recording or
notice statute, except:
(i) Permitted Encumbrances;
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(ii) Liens in respect of Permitted Extension Indebtedness and Other
Permitted Indebtedness; provided that such Liens encumber only assets
subject to purchase money Liens securing such Indebtedness and do not
encumber any assets subject to the Aircraft Chattel Mortgages; and
(iii) other Liens securing Indebtedness in an aggregate amount not to
exceed $10 million at any time outstanding which do not encumber any assets
subject to the Aircraft Chattel Mortgages.
Notwithstanding anything to the contrary contained above, in no event shall
Lessee create, incur, assume or permit to exist Liens on or with respect to any
assets subject to the Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO LESSEE OR OTHER
SUBSIDIARIES. Except (i) as provided herein, (ii) as described on Schedule
7.(b)B annexed hereto and (iii) with respect to Special Purpose Subsidiaries,
Lessee will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary's
capital stock to (i) pay dividends or make any other distributions on any of
such Subsidiary's capital stock owned by Lessee or any other Subsidiary of
Lessee, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Lessee
or any other Subsidiary of Lessee, or (iii) make loans or advances to Lessee or
any other Subsidiary of Lessee, or (iv) transfer any of its property or assets
to Lessee or any other Subsidiary of Lessee.
(c) INVESTMENTS; JOINT VENTURES.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Lessee may make and own Investments in Cash Equivalents;
(ii) Lessee and its Subsidiaries may continue to own the Investments
owned by them as of the Initial Borrowing Date in any Subsidiaries of
Lessee;
(iii) Lessee may make and own Investments in Special Purpose
Subsidiaries; provided that Lessee delivers to Lessor and Agent an
Officer's Certificate in form and substance satisfactory to Lessor and
Agent demonstrating that such Special Purpose Subsidiary meets the
requirements set forth in the definition thereof;
(iv) Lessee may make Investments in Joint Ventures in an aggregate
amount not to exceed in any fiscal year, (A) the lesser of 25% of
Consolidated Net Income for such fiscal year and $10 million less (B) the
sum of (x) the aggregate
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amount of dividends on the Common Stock of Lessee declared or paid in such
fiscal year and (y) the aggregate amount contributed to capital of Special
Purpose Subsidiaries in such fiscal year; provided that Lessee shall not
incur liabilities related to any such Joint Venture in excess of Lessee's
Investment therein;
(v) Lessee and its Subsidiaries may continue to own the Investments
owned by them and described in Schedule 7(c)(v) annexed hereto and
Investments made in compliance with subsection 7(c)(iv); and
(vi) Lessee and its Subsidiaries may make and own other Investments in
an aggregate amount not to exceed at any time 10.5 million.
(d) CONTINGENT OBLIGATIONS.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(1) any Subsidiary, may become and remain liable with respect to
Contingent Obligations arising under their guaranties of the obligations
under any Material Agreement;
(2) Lessee may become and remain liable with respect to Contingent
Obligations under Interest Rate Agreements and Currency Agreements arising
under any Material Agreement;
(3) Lessee and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of customary indemnification
and purchase price adjustment obligations incurred in connection with Asset
Sales or other sales of assets or securities;
(4) Lessee and its Subsidiaries, as applicable, may remain liable with
respect to Contingent Obligations described in Schedule 7(d)(4) annexed
hereto; and
(5) Lessee and its Subsidiaries may become and remain liable with
respect to other Contingent Obligations; provided that the maximum
aggregate liability, contingent or otherwise, of Lessee and its
Subsidiaries in respect of all such Contingent Obligations when added,
without duplication, to the aggregate principal amount of Indebtedness
outstanding in accordance with Section 7(a)(8) shall at no time exceed $30
million.
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(e) RESTRICTED JUNIOR PAYMENTS.
Lessee shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that Lessee may make scheduled payments of principal,
mandatory prepayments of principal (including through the exercise of remedies)
and payment of interest from time to time on Designated Indebtedness; and
provided further, that so long as no Default or Lease Event of Default has
occurred and is continuing, or would result therefrom:
(1) Lessee may prepay Designated Indebtedness from the proceeds of
Permitted Extension Indebtedness or Other Permitted Indebtedness;
(2) Lessee may declare and pay dividends on its Common Stock in an
amount not to exceed in any fiscal year, the lesser of 25% of Consolidated
Net Income for such fiscal year and $10 million; and
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness.
(f) FINANCIAL COVENANTS.
(i) MINIMUM INTEREST COVERAGE RATIO. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense
for any four-fiscal quarter period ending as of the last day of any fiscal
quarter of Lessee occurring during any of the periods set forth below to be
less than the correlative ratio indicated:
===================================================
MINIMUM INTEREST
PERIOD COVERAGE RATIO
fiscal year 1997 2.50:1.00
fiscal year 1998 2.75:1.00
fiscal year 1999 3.00:1.00
Thereafter 3.25:1.00
===================================================
(ii) MINIMUM FIXED CHARGE COVERAGE RATIO. Lessee shall not permit the
ratio of (i) Consolidated Adjusted EBITDA plus one-third of Consolidated Rental
Payments to (ii) Consolidated Fixed Charges (excluding any scheduled
amortization payments made in accordance with the Unsecured Revolving Credit
Facility as in effect on the date hereof) for any four-fiscal quarter period
ending as of the last day of any fiscal quarter of Lessee occurring during any
of the periods set forth below to be less than the correlative ratio indicated:
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==================================================
MINIMUM FIXED
PERIOD CHARGE COVERAGE RATIO
fiscal year 1997 1.25:1.00
Thereafter 1.10:1.00
==================================================
(iii) MAXIMUM LEVERAGE RATIO. Lessee shall not permit the ratio
of (i) Consolidated Total Debt as of each date set forth below (less Cash and
Cash Equivalents held by Lessee in excess of $25 million as of such date) to
(ii) Consolidated Adjusted EBITBA for the four-fiscal quarter period ending on
such date to exceed the correlative ratio indicated:
==============================================
MAXIMUM
PERIOD LEVERAGE RATIO
fiscal year 1997 4.50:1.00
fiscal year 1998 4.25:1.00
fiscal year 1999 4.00:1.00
Thereafter 3.75:1.00
==============================================
(iv) Minimum Consolidated Net Worth. Lessee shall not permit
Consolidated Net Worth at any time during any of the periods set forth below to
be less than the correlative amount indicated:
=======================================================
MINIMUM CONSOLIDATED
PERIOD NET WORTH
fiscal year 1997 $120 million
fiscal year 1998 $145 million
fiscal year 1999 $170 million
Thereafter $195 million
=======================================================
(g) RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS; NEW
SUBSIDIARIES.
Lessee shall not, and shall not permit any of its Subsidiaries to, enter
into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suf-
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fer any liquidation or dissolution), or convey, sell, lease, sub-lease, transfer
or otherwise dispose of, in one transaction or a series of transactions, all or
any part of its business, property or fixed assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or any portion of
the business, property or fixed assets of, or stock or other evidence of
beneficial ownership of, any Person or any division or line of business of any
Person, except:
(1) any Subsidiary of Lessee may be merged with or into Lessee or any
wholly-owned Subsidiary of Lessee, or be liquidated, wound up or dissolved,
or all or any part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction or a
series of transactions, to Lessee or any such wholly-owned Subsidiary of
Lessee; provided that, in the case of such a merger, Lessee or such
wholly-owned Subsidiary shall be the continuing or surviving corporation;
(2) Lessee and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(3) subject to subsection 7(m), Lessee and its Subsidiaries may make
Asset Sales of assets having a fair market value not in excess of $100
million in any fiscal year or $500 million in the aggregate; provided that
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received shall be at least 75% cash; and (z) the proceeds of such Asset
Sales shall be applied to repay permanently senior bank debt or prepay
Basic Rent;
(4) Lessee may lease or transfer any Financed Aircraft to the extent
expressly permitted by the mortgages encumbering such Financed Aircraft as
in effect on the date of this Lease;
(5) Lessee may make acquisitions of the capital stock of another
Person or all or substantially all of the assets of the business of another
Person provided that, (a) the acquisition primarily involves the
acquisition of assets to be used in the business of Lessee, (b) with
respect to such acquisition any newly acquired or created subsidiary of
Lessee shall be a wholly-owned subsidiary, (c) immediately before and after
giving effect thereto, no Default or Lease Event of Default shall have
occurred and be continuing, (d) immediately after giving effect to the
acquisition, Lessee shall be in compliance on a Pro Forma Basis with
financial covenants in subsection 7(f) and such compliance shall be
evidenced by an Officer's Certificate demonstrating such compliance, (e)
Lessor and Agent shall have reviewed and be reasonably satisfied with the
nature and amount of all contingent liabilities or other li-
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49
abilities not on the balance sheet of Lessee assumed in connection with
such acquisition and a business plan prepared by Lessee with respect to
such acquisition and (f) the aggregate amount of cash payments made in
connection with all such acquisitions other than with the proceeds from
sales or issuances of equity by Lessee does not exceed $100,000,000;
(6) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures in connection with the purchase of up to twelve Eligible
Aircraft during each fiscal year, such number of Eligible Aircraft
permitted during any fiscal year to be increased by any number of Eligible
Aircraft permitted to be purchased, but not purchased, during the previous
fiscal year (but in no event shall any such number of Eligible Aircraft
once carried forward to the next fiscal year be carried forward to any
fiscal year thereafter) together with Consolidated Capital Expenditures
with respect to the acquisition, in the normal course of business, of spare
parts and spare engines associated with such Eligible Aircraft;
(7) Lessee and its Subsidiaries may make Consolidated Capital
Expenditures with respect to maintenance of aircraft in the normal course
of business; and
(8) Lessee and its Subsidiaries may make other Consolidated Capital
Expenditures not in excess of $10 million during any fiscal year; provided
that any amount of such other Consolidated Capital Expenditures permitted,
but not made, in any fiscal year may be carried forward to and made during
the immediately succeeding fiscal year (but no amount once carried forward
to the next fiscal year may be carried forward to any fiscal year
thereafter).
AMENDMENTS OF MATERIAL AGREEMENTS.
(h) Lessee shall not permit (i) its certificate or articles of
incorporation or by laws to be amended or otherwise modified in any manner
which could reasonably be expected to have a Material Adverse Effect or
(ii) any Material Agreement to be amended or otherwise modified in any manner
with respect to any provision providing material representations and warranties
to Lessee, indemnification rights to Lessee, or limiting Lessee's remedies or
rights upon the other party to such agreements failing to perform.
RESTRICTION ON LEASES.
(i) Lessee shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a guarantor
or other surety, for the obligations of the lessee under any lease, whether an
Operating Lease or a Capital Lease (other than intercompany leases between Lesse
and its wholly-owned Subsidiaries, including Lessor); provided, however, that
Lessee may become so obligated to the extent that, and only to the extent that,
immediately after giving effect to the incurrence of liability with
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respect to such lease, the Consolidated Rental Payments at the time in effect
during the then current fiscal year do not exceed $60 million plus an amount not
to exceed $12 million during any fiscal year, equal to Consolidated Rental
Payments incurred in connection with sale leaseback transactions described in
subsection 7(j) plus Consolidated Rental Payments assumed pursuant to
acquisitions permitted under subsection 7(g)(5).
(j) SALES AND LEASE-BACKS.
Lessee shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, become or remain liable as lessee or as a guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any property (whether real, personal or mixed), whether now
owned or hereafter acquired, (i) which Lessee or any of its Subsidiaries has
sold or transferred or is to sell or transfer to any other Person (other than
Lessee or any of its Subsidiaries) or (ii) which Lessee or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Lessee or any of its
Subsidiaries to any Person (other than Lessee or any of its Subsidiaries) in
connection with such lease; provided that Lessee and its Subsidiaries may
become and remain liable as lessee, guarantor or other surety with respect to
any such lease if and to the extent that Lessee or any of its Subsidiaries
would be permitted to enter into, and remain liable under, such lease under
subsection 7(i).
(k) TRANSACTION WITH SHAREHOLDERS AND AFFILIATES.
Lessee shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Lessee or with any Affiliate of Lessee or of any
such holder, on terms that are less favorable to Lessee or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Lessee and its
Subsidiaries, (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Lessee or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Lessee or (iii) performance by Lessee of its obligations under and
in accordance with the Services Agreement.
(l) DISPOSAL OF SUBSIDIARY STOCK.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidi-
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aries, except to qualify directors if required by applicable law or to a
wholly-owned Subsidiary of Lessee; or
(2) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including such
Subsidiary), except to Lessee, another wholly-owned Subsidiary of Lessee,
or to qualify directors if required by applicable law.
(m) CONDUCT OF BUSINESS.
From and after the Initial Borrowing Date, Lessee shall not, and
shall not permit any of its Subsidiaries to, engage in any business other than
the businesses engaged in by Lessee and its Subsidiaries on the Initial
Borrowing Date and similar or related businesses.
SECTION 8. Return of the Aircraft. (a) Condition Upon Return. Unless
the Aircraft has been sold pursuant to Section 21, if at any time the Lessee
shall return the Aircraft to the Lessor hereunder, Lessee, at its own expense,
will return the Aircraft to Lessor at a location specified by the Lessor to the
Lessee in writing. At the time of such return, (i) Lessee will cause the
Aircraft to be in compliance with the maintenance covenants contained in this
Lease and (ii) the Airframe will be fully equipped with the Engines installed
thereon.
At the time of such return, such Airframe and Engines (A) shall have
an air worthiness certificate from the Federal Aviation Administration and
shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 121 (or successor regulation), and shall be in material
compliance with all applicable FAA noise, corrosion, environmental and aging
aircraft requirements, (B) shall be free and clear of all Liens and (C) shall
be in a full freighter configuration and in as good condition as when
originally delivered to Lessee, ordinary wear and tear excepted, and otherwise
in the condition required to be maintained under Lessee's FAA-approved
maintenance plan; and in all such cases the Aircraft shall not have been
discriminated against as compared to other aircraft owned or leased by Lessee
whether by reason of its leased status or otherwise in maintenance, use,
operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines and all Parts shall
have been, and shall be properly documented to have been, repaired or
overhauled by certified repair stations acceptable to the FAA.
(c) Repairs. Lessee shall ensure that all repairs performed since the
Initial Borrowing Date on the Aircraft are eligible to receive approval by the
FAA (or its designee), if so required. All such repairs shall be accompanied by
all data and documentation
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necessary to substantiate their certification, approval and methods of
compliance, as required.
(d) Modifications. All modifications performed since the Initial Borrowing
Date which deviate from the certified configuration and which are still in
existence on the Aircraft shall have approval or certification by the FAA (or
its designee) or certification if required. All such modifications shall be
accompanied by complete data and documentation necessary to substantiate their
certification and approval and methods of compliance.
(e) Airworthiness Directives. All FAA Airworthiness Directives and
amendments or changes to the Federal Aviation Regulations applicable to the
Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all
mandatory service bulletins applicable to any of the foregoing, shall have been
accomplished by terminating action in compliance with the issuing agency's or
the manufacturer's specific instructions, as the case may be,taking into
account, any waiver, deferral or deviation from such directives, regulations or
bulletins.
(f) Return of the Engines. In the event that an Acceptable Alternate Engine
shall be delivered with the returned Airframe, Lessee, concurrently with such
delivery, will, at no cost to Lessor, furnish, or cause to be furnished, to
Lessor a full warranty (as to title) ▇▇▇▇ of sale with respect to each such
Acceptable Alternate Engine, in form and substance reasonably satisfactory to
Lessor (together with an opinion of counsel to the effect that such full
warranty ▇▇▇▇ of sale has been duly authorized and delivered and is enforceable
in accordance with its terms and that such Acceptable Alternate Engines are free
and clear of all Liens) against receipt from Lessor of a ▇▇▇▇ of sale evidencing
the transfer, without recourse or warranty 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.
(g) Deferred Maintenance. There shall be no open, outstanding or deferred
maintenance items, scheduled or unscheduled, against the Aircraft including
those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft shall have
been maintained by cleaning and treating all mild and moderate corrosion and
correcting of all severe or exfoliate corrosion in accordance with Lessee's
approved maintenance program or manufacturer's structural repair manual.
(i) Manuals. Upon the return of the Aircraft upon any termination of this
Lease, Lessee shall deliver or cause to be delivered to Lessor all logs, manuals
and data and maintenance, inspection, modification and overhaul records and
similar records required to be maintained with respect to the Aircraft and Parts
under FAA rules, the Aircraft maintenance program. If any such logs, manuals,
records or other data are missing, in-
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complete or otherwise not in accordance with FAA standards applicable to Lessee,
Lessee shall re-accomplish the maintenance tasks necessary to produce such
records in accordance with its approved maintenance program prior to delivery of
the Aircraft or otherwise perform all necessary acts (without regard to any
applicable waivers or deferrals) to obtain such records in a manner satisfactory
to the FAA and Lessor.
(j) Storage Upon Return. If, at least 15 days prior to termination of this
Lease at the end of the Term or pursuant to Section 17, 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 Lessee's risk and at Lessee's expense for a
period not exceeding 30 days, and thereafter at Lessor's risk and at Lessor's
cost for insurance, maintenance and Lessee's out-of-pocket expenses for such
storage for a period not exceeding 90 days (provided that if such termination
occurs as a result of a Lease Event of Default hereunder, such storage shall be
at the cost of the Lessee), commencing on the date the Aircraft is returned
substantially in the condition required under this Section 8, at a location in
the continental United States selected by Lessee and used by Lessee as a
location for the long-term parking or storage of aircraft.
(k) Severable Parts. At any time that the Aircraft is to be returned to
Lessor, Lessee shall, at Lessor's request, advise Lessor of the nature and
condition of all severable nonproprietary Parts (other than Parts otherwise
required by Sections 10 or 11 to be maintained on the Aircraft) owned by Lessee
which have been used by Lessee during the prior six months and which Lessee has
or intends to remove from the Aircraft in accordance with Section 11 hereof.
Lessor may, at its option, upon 30 days notice to Lessee, purchase any or all of
such nonproprietary Parts from Lessee upon the expiration of the Term at their
fair market value.
(l) Survival. The obligations of Lessee to comply with the terms of this
Section 8 shall survive the expiration or other termination of this Lease.
SECTION 9. 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, except the lien of the Aircraft Chattel
Mortgage and Permitted Encumbrances. Lessee will promptly, at its own expense,
take such action as may be necessary to duly discharge any such Lien not
excepted above if the same shall arise at any time.
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, will
(i) be a "citizen of the United States" as defined in Section 40102(15) of Title
49 of the United States Code and will be an air carrier certificated under
Sections 401 and 609 of the Act and hold all necessary air carrier operating
certificates; (ii) will cause ownership of the Air-
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craft to be duly registered and remain duly registered in the name of Lessor in
accordance with the Act and otherwise registered under all applicable laws of
the United States so as to be eligible to operate in commercial air service
under the Act; and (iii) will service, repair, inspect, test, maintain and
overhaul the Airframe and each Engine and install replacement equipment and
parts on the Airframe and each Engine and install replacement equipment and
parts on the Airframe and each Engine (A) so as to keep the Airframe and each
Engine in such operating condition as may be required to permit the Airframe and
each Engine to be utilized in commercial operations (B) so as to enable the
airworthiness certification of the Airframe to be maintained in good standing at
all times under the Act, except when aircraft of the same type, model or series
as the Airframe (powered by engines of the same type as those with which the
Airframe shall be equipped at the time of grounding) registered in the United
States have been grounded by the FAA; provided, however, that if following its
issuance, the United States FAA airworthiness certificate of the Aircraft shall
be withdrawn, then subject to the provisions of Section 13 hereof, so long as
Lessee is diligently taking or causing to be taken all necessary action to
promptly correct the condition which caused such withdrawal, no Lease Event of
Default shall arise from such withdrawal, (C) in accordance with Lessee's
FAA-approved maintenance, inspection and maintenance control programs, and in
the same manner and with the same care used by Lessee with respect to the same
or similar aircraft and engines owned or operated by Lessee so as to keep the
same in as good operating condition as when originally leased hereunder,
ordinary wear and tear excepted, which practices shall at all times be at or
above the standard of the industry in the United States for prudent maintenance
of similar equipment, and (D) in such manner as may be necessary to maintain in
full force all warranties of the manufacturers thereof. Lessee shall maintain
all records, logs and other materials which may be required to permit the
Airframe and each Engine to be so utilized.
Lessee will comply in all material respects with all airworthiness
directives, mandatory notes or modifications or similar requirements affecting
the same (including those issued by the manufacturer or supplier) in such
condition so as to comply with this Lease and the rules and regulations of the
FAA from time to time in force and applicable to the Aircraft and Engines.
Neither the Airframe nor any Engine will be maintained, used or operated in
violation of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
the Airframe or such Engine issued by any such authority, and in the event that
such laws, rules, regulations or orders require alteration of the Airframe or
any Engine, Lessee, at its own cost and expense, will conform thereto or obtain
conformance therewith and will maintain the same in proper operating condition
under such laws, rules, regulations and orders, provided, however, that Lessee
may, in good faith (after having delivered to Lessor and Agent an Officers'
Certificate stating the facts with respect thereto), contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not, in Lessor's and Agent's
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opinion (in their sole discretion), adversely affect the interests of Lessor,
Agent or any Lender.
Lessee will not operate, use or locate the Airframe or any Engine, (I) in
any area in which any insurance required to be maintained pursuant to Section 14
shall not be at the time in full force and effect, or in any area excluded from
coverage by an insurance policy in effect with respect to the Airframe or such
Engine, except in the case of a requisition for use by the United States of
America, and then only if Lessee obtains indemnity in lieu of such insurance
from the United States of America against the risks and in the amounts required
by said Section covering such area, or (II) in any recognized or threatened area
of hostilities unless the Airframe or such Engine is operated or used under
contract with the Government of the United States of America under which
contract that Government assumes liabilities for any damages, loss, destruction
or failure to return possession of the Airframe or such Engine at the end of the
term of such contract and for injury to persons or damage to property of others.
Lessee shall not use the Aircraft nor suffer it to be used in any manner or
for any purpose excepted from any of the insurance on or in respect of the
Aircraft or for the purpose of carriage of goods of any description excepted
from such insurance nor do, or permit to be done, anything which, or omit to do
anything the omission of which, may invalidate any of such insurance.
(b) Possession. Lessee will not, without the prior written consent of Agent
and Lessor, sell, assign, lease or otherwise in any manner deliver, transfer or
relinquish possession or control of, or transfer the right, title or interest of
Lessee in, the Airframe or any Engine except that, unless a Default or Lease
Event of Default shall have occurred and be continuing, Lessee may without the
prior written consent of the Agent and Lessor, take the following actions so
long as the actions to be taken shall not deprive the Agent of the first
priority Lien under the Aircraft Chattel Mortgage in the assets subject thereto
and so long as the actions to be taken shall not deprive Lessor of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
and shall not deprive the Agent of the protections of Section 1110 of the
Bankruptcy Code with respect to the Aircraft as assignee of Lessee's rights
under this Lease pursuant to the Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine other than by
lease to the United States of America or any instrumentality thereof
pursuant to the Civil Reserve Air Fleet Program (as administered pursuant
to Executive Order 12656, or any substitute order) or any similar or
substitute programs;
(ii) transfer possession of the Airframe or any Engine to the
manufacturer thereof for testing or other similar purposes or any other
organization for service, repairs, maintenance or overhaul or, to the
extent permitted by Section 11 hereof, for alterations or modifications;
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(iii) subject any Engine to normal interchange or pooling agreements
or arrangements of the type customary in the United States airline industry
and entered into by Lessee in the ordinary course of business which do not
contemplate or require the transfer of title to, use for the remainder of
its useful life, or registration of the Airframe or title to or use for the
remainder of its useful life of such Engine; provided, however, that if
Lessee's title to or use for the remainder of its useful life, of the
Airframe or any Engines shall be divested under any such agreement or
arrangement, such divesture shall be deemed to be an Event of Loss with
respect to the Airframe or such Engine and Lessee shall comply with Section
13 in respect thereof;
(iv) install an Engine on an airframe which is owned by Lessee free
and clear of all Liens except (A) those permitted under clauses (i) or (ii)
of the definition of Permitted Encumbrances in the Credit Agreement, (B)
those that apply only to the engines (other than the Engines), appliances,
parts, instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe (but not to the
airframe as an entirety), and (C) the rights of any Domestic Air Carrier,
under normal interchange agreements which are customary in the airline
industry and do not contemplate or require the transfer of title to such
airframe or the engines installed thereon;
(v) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided:
(A) such airframe is free and clear of all Liens, except the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe and except Liens of the type permitted by clause
(iv) above; and (B) Agent and Lessor shall have received from the lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party of
such airframe a written agreement (which may be the lease, conditional sale
agreement or mortgage covering such airframe), whereby such lessor,
conditional vendor or secured party and each of the purchasers, mortgagees
and encumbrancers of such lessor, conditional vendor or secured party
expressly and effectively agrees that neither it nor its successors and
assigns will acquire or claim any right, title or interest in any Engine by
reason of such Engine being installed on such airframe at any time when
such Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine on an airframe owned by Lessee, leased by
Lessee or owned by Lessee subject to a conditional sale or other security
agreement under circumstances where neither clause (iv) nor clause (v)
above is applicable; provided that any divesture of title to such Engine
resulting from such installation shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall comply with Section 13 in
respect thereof; and
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(vii) enter into an ACMI Contract or wet lease for the Airframe and
the Engines or engines installed thereon with any third party pursuant to
which Lessee has operational control of the Airframe and any Engines
installed thereon such operation to be performed solely by individuals
under the operational control of Lessee possessing all current certificates
and licenses that would be required under the applicable laws of the United
States for the performance by such employees of similar functions within
the United States; provided that Lessee's obligations hereunder shall
continue in full force and effect notwithstanding any such ACMI Contract or
wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine permitted by the terms hereof shall be made subject
and subordinate to, and any lease permitted by this Section 10(b) shall be made
expressly subject and subordinate to, the Lease and the lien and security
interest of the Aircraft Chattel Mortgage and all of Agent's rights thereunder
and Lessee shall remain primarily liable hereunder for the performance of all
the terms of the Lease to the same extent as if such transfer had not occurred,
and any such instrument of transfer shall include appropriate provisions for the
maintenance and insurance of the Airframe or such Engine, and any such
instrument of transfer shall expressly prohibit any further transfer of the
Airframe or such Engine or any assignment of the rights thereunder; and provided
further, that no such lease, pooling arrangement or other transfer or
relinquishment of the possession of the Airframe or any Engine shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder.
(c) Insignia. Lessee shall, at its own cost and expense, cause the Airframe
and each Engine to be legibly marked (in a reasonably prominent location, which
in the case of the Airframe shall be adjacent to the airworthiness certificate)
with such a plate, disk, or other marking of customary size, and bearing the
legend "Owned by Atlas Freighter Leasing, Inc. and Mortgaged to Bankers Trust
Company, as Agent" or such other legend, as shall in the opinion of Lessor and
Agent be appropriate or desirable to evidence the fact that it is subject to the
ownership of Lessor and the lien and security interest created by the Aircraft
Chattel Mortgage. Lessee shall not remove or deface, or permit to be removed or
defaced, any such plate, disk, or other marking or the identifying
manufacturer's serial number, and, in the event of such removal or defacement,
shall promptly cause such plate, disk, or other marking or serial number to be
promptly replaced. Except as provided above, Lessee shall not allow the name of
any person, association or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a claim of ownership or of
any security interest therein, except that Lessee or any permitted lessee may
place its customary colors and insignia or the insignia of the manufacturer on
the Airframe or any Engine.
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(d) Holding Out. Lessee agrees that it will not at any time represent or
hold out the Lessor, the Agent or any Affiliate of any of them (and will use its
best efforts to ensure that none of the Lessor, the Agent, any Lender or any
Affiliate of any of them is not at any time represented or held out) as being in
any way connected or associated with any operation of the Airframe, any Engine
or any Part or any other operations or carriage undertaken by Lessee.
(e) No Pledging of Credit. Lessee is not authorized to, and agrees that it
will not purport to, pledge the credit of the Lessor, any Lender or the Agent
for any maintenance, service, repairs, or overhauls of, modifications to, or
changes or alterations in, the Airframe, any Engine, or any Part, or for any
other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
(a) Except as otherwise provided in Section 11(d), Lessee, at its own cost
and expense, will promptly replace all Parts, which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine and which
may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever. In addition, in the ordinary course of maintenance, service,
repair or testing, Lessee at its own cost and expense may remove any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use, provided that, except as
otherwise provided in Section 11(d), Lessee at its own cost and expense shall
replace such Parts as promptly as practicable. All replacement Parts shall be
owned by Lessor free and clear of all Liens (except Permitted Encumbrances and
for pooling arrangements to the extent permitted by Section 11(b)), and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such parts were in the condition and
repair required to be maintained by the terms hereof.
All Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor and shall remain subject to the lien and security
interest of the Aircraft Chattel Mortgage, no matter where located, until such
time as such Parts shall be replaced by parts which have been incorporated or
installed in or attached to the Airframe or any Engine and which meet the
requirements for replacement parts specified above. Immediately upon any
replacement Part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act, (A) title to such
replacement Part shall vest in and such replacement part shall become the
property of Lessor and shall become subject to this Lease and the lien and
security interest of the Aircraft Chattel Mortgage and shall be deemed part of
the Airframe or such Engine for all purposes hereof to the same extent as the
property originally comprising, or installed on, such Airframe or such Engine,
and (B) title to the replaced part shall no longer be the property of Lessor and
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shall thereupon become free and clear of all rights of Lessor hereunder and all
rights derivative of Lessor's and shall no longer be deemed a Part hereunder.
(b) Any Part removed from the Airframe or any Engine as provided in Section
11(a) may be subjected by Lessee to a normal pooling arrangement of the type
customary in the airline industry entered into by Lessee in the ordinary course
of its business and entered into with Domestic Air Carriers that are not the
subject of any bankruptcy, insolvency, or similar proceeding, voluntary or
involuntary, provided the Part replacing such removed Part shall be incorporated
or installed in or attached to the Airframe or such Engine in accordance with
Section 11(a) as promptly as possible after the removal of such removed part. In
addition, any replacement Part when incorporated or installed in or attached to
the Airframe or any Engine in accordance with Section 11(a) may be owned by any
third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and clear
of all Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage
relating to the Aircraft) or (B) replaces such replacement Part by incorporating
or installing in or attaching to the Airframe or such Engine a further
replacement Part owned by Lessee which shall become the property of Lessor
subject to the lien and security interest of the mortgage free and clear of all
Liens (except Permitted Encumbrances and the Aircraft Chattel Mortgage relating
to the Aircraft).
(c) Lessee, at its own cost and expense, shall make or cause to be made
such alterations and modifications in and additions to the Airframe and the
Engines as may be required from time to time to meet the standards of the FAA or
other governmental authority having jurisdiction; provided, that Lessee may, in
good faith, contest the validity or application of any such standard in any
reasonable manner that shall not adversely affect the Lessor's or Agent's
respective interests. Lessee also agrees, at its own cost and expense, to make
or cause to be made such alterations and modifications in and additions to the
Airframe and the Engines as may be required from time to time to meet the
standards or requirements of any directive issued by a manufacturer relating to
the Airframe or any Engine. In addition so long as no Default or Lease Event of
Default shall have occurred and be continuing, Lessee, at its own cost and
expense, may from time to time make such alterations and modifications in and
additions to the Airframe and any Engine as Lessee may deem desirable in the
proper conduct of its business, provided no such alteration, modification or
addition diminishes the value or utility or impairs the condition or
airworthiness of the Airframe or such Engine below the value, utility, condition
or airworthiness thereof immediately prior to such alteration, modification or
addition assuming the Airframe or such Engine were then in the condition and
airworthiness required to be maintained by the terms of this Lease.
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(d) All Parts incorporated or installed in or attached to or added to the
Airframe or any Engine as the result of such alteration, modification or
addition shall, without further act, become the property of, and title to such
parts shall vest in Lessor and shall be subject to the lien and security
interest of the Aircraft Chattel Mortgage; provided that, so long as no Default
or Lease Event of Default, shall have occurred and be continuing, Lessee may
remove and not replace any such Part if it (A) is in addition to, and not in
replacement of or in substitution for, any Part incorporated or installed in or
attached to the Airframe or such Engine on the date hereof, on the date hereof
or any Part in replacement of or substitution for any such Part, (B) is not
required to be incorporated or installed in or attached or added to the Airframe
or such Engine pursuant to the terms of Section 10(a) hereof or any other
provision of this Lease or the Aircraft Chattel Mortgage and (C) can be removed
from the Airframe or such Engine without diminishing or impairing the value,
utility or airworthiness which the Airframe or such Engine would have had at
such time had such alteration, modification or addition not occurred, assuming
the Airframe or such Engine was otherwise in the condition required by this
Lease and the Aircraft Chattel Mortgage. Upon the removal by Lessee of any such
Part, as above provided, title thereto shall, without further act, be free and
clear of the interests of Lessor and all rights derivative of Lessor's and such
Part shall no longer be deemed a Part hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever for
(i) any alteration or modification of, or addition to, the Airframe or any
Engine, (ii) any grounding of the Aircraft, (iii) suspension of certification of
the Aircraft, or (iv) loss of revenue suffered by Lessee for any reason
whatsoever.
SECTION 12. Indemnities.
(a) Lessee will pay, and hereby indemnifies, on an after-tax basis, Lessor
and its assignees, if any, from and against, any and all fees and taxes, levies,
imposts, duties, charges or withholdings, together with any penalties, fines or
interest thereon (any of the foregoing for the purposes of this Section 12 being
called a "Tax"), which may from time to time be imposed on or asserted against
Lessor and its assignees, if any, or the Airframe or any Engine or any part
thereof or interest therein by any Federal, state or local government or other
taxing authority in the United States or by any foreign government or
subdivision thereof or by any foreign taxing authority in connection with,
relating to or resulting from: (i) the Airframe or any Engine or any part
thereof of interest therein; (ii) the manufacture, purchase, ownership,
mortgaging, lease, sublease, use, storage, maintenance, sale or other
disposition of the Airframe or any Engine; (iii) any rentals or other earnings
therefor or arising therefrom or the income or other proceeds received with
respect thereto; or (iv) this Lease or the Aircraft Chattel Mortgage; provided,
however, that, there shall be excluded from any indemnification under this
Section 12(a) any Lessor Tax unless the payment of any such Tax shall be a
condition to the enforceability of the Aircraft Chattel Mortgage or the
perfection of the lien thereof or unless proceedings shall have been com-
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menced to foreclose any lien which may have attached as security for such Tax,
nothing in this Section shall require the payment of any Tax so long as and to
extent that validity thereof shall be contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and Lessee shall
have set aside on its books adequate reserves with respect thereto in accordance
with generally accepted accounting principles.
(b) Lessee agrees to defend, indemnify, pay and hold harmless Lessor, Agent
and each Lender, and the officers, directors, employees, agents and affiliates
of Lessor, Agent and each Lender, (collectively called the "Indemnitees") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Lease or the other Transaction Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans to Lessor or the use or intended use of the proceeds of any of
the Loans) (collectively called the "INDEMNIFIED LIABILITIES"); provided that
Lessee shall not have any obligation to any Indemnitee hereunder with respect to
any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Lessee shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with respect
to an Airframe or an Engine, Lessee will promptly notify Lessor and Agent
thereof in writing (in any event within five (5) days of such occurrence) and
will, not later than 180 days after the occurrence of such Event of Loss, convey
or cause to be conveyed to Lessor, free of all Liens (other than Permitted
Encumbrances) title to an Acceptable Alternate Airframe or Acceptable Alternate
Engine, as the case may be. Prior to or at the time of any such conveyance,
Lessee, at its own expense, will, as conditions to such transfer, (i) furnish
Lessor with a warranty (as to title) ▇▇▇▇ of sale, in form and substance
reasonably satisfactory to Lessor, with respect to such Acceptable Alternate
Airframe or Acceptable Alternate Engine, (ii) cause a Lease Supplement to be
filed for recording pursuant to Title ▇▇ ▇▇
-▇▇-
▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, as amended, (iii) furnish Lessor with such evidence of
Lessee's title to such Acceptable Alternate Airframe or Acceptable Alternate
Engine and of compliance with the insurance provisions of Section 14 hereof with
respect to such Acceptable Alternate Airframe or Acceptable Alternate Engine as
Lessor may reasonably request, (iv) furnish Lessor with an opinion of Lessee's
counsel to the effect that title to such Acceptable Alternate Airframe or
Acceptable Alternate Engine has been duly conveyed to Lessor free and clear of
all Liens except Permitted Encumbrances and Lessor and Agent continue to have
1110 protection with respect to such Aircraft and (v) transfer to or at the
direction of Lessee without recourse or warranty all of Lessor's right, title
and interest, if any, in and to (A) the Airframe or Engine with respect to which
such Event of Loss occurred and furnish to or at the direction of Lessee, at
Lessee's expense, a ▇▇▇▇ of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer and (B) all claims, if any, against third
parties, for damage to or loss of the Airframe or Engine subject to such Event
of Loss, and such Airframe or Engine shall thereupon cease to be an Airframe or
Engine leased hereunder. Lessee shall cooperate with Lessor and take all such
actions as shall be requested by Lessor so that Lessor complies with Section
4(f) of the Aircraft Chattel Mortgage. For all purposes hereof, each such
Acceptable Alternate Airframe or Acceptable Alternate Engine shall, after such
conveyance, be deemed part of the property leased hereunder, and shall be deemed
an "Airframe" or "Engine", as the case may be. No Event of Loss under the
circumstance contemplated by the terms of this paragraph (a) shall result in any
reduction in Basic Rent.
(b) With respect to the Airframe or any Engine, as between the
Lessor and Lessee, any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for
in Section 14 below) received from any government authority or other person
shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss to
an Airframe or Engine that has been or is being replaced by Lessee pursuant
to the terms hereof, so long as there shall exist no Default or Lease Event
of Default, such payment shall be paid over to or retained by Lessee upon
satisfaction of the conditions for replacement contained in paragraph (a)
above and until such time shall be held by Lessor as security for the
obligations of Lessee under the Lease; and
(B) if such payments are received with respect to an Event of Loss
with respect to which no replacement is being effected, so much of such
payments as shall not exceed (A) the Stipulated Loss Value as of the date
of payment plus (B) all unpaid Supplemental Rent due through the date of
payment, plus (C) all unpaid Basic Rent for the period ending on the date
of payment shall be paid by Lessee to Lessor 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;
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(c) In the event of a requisition for use by the United States Government
of the Airframe or any Engine, Lessee shall promptly notify Lessor and Agent of
such requisition and all of Lessee's obligations under the Lease shall continue
to the same extent as if such requisition had not occurred. Any payments
received by Lessor or Lessee from the United States Government for the use of
the Airframe or such Engine, to the extent allocable to the Term, shall be paid
over to, or retained by, Lessee.
(d) Any amount referred to in this Section 13 which is payable to or
retained by Lessee shall not be paid to Lessee or retained by Lessee, if at the
time of such payment or retention any Default or Lease Event of Default shall
have occurred and be continuing, but shall be held by or paid over to Lessor as
security for the obligations of Lessee under the Lease and shall be applied
against Lessee's obligations hereunder as and when due. At such time as there
shall not be continuing any such Default or Lease Event of Default, such amount
shall be paid to Lessee to the extent not previously applied in accordance with
the preceding sentence.
SECTION 14. Insurance. (a) Lessee will at all times carry and maintain on
or with respect to the Aircraft, at its own cost and expense, public liability
(including, without limitation, contractual liability, cargo liability,
passenger legal liability, bodily injury and product liability, but excluding
manufacturer's product liability) and property damage insurance with insurers of
recognized responsibility and reputation in amounts, of the type and covering
the risks customarily carried with respect to similar aircraft by corporations
engaged in the same or similar business and similarly situated with Lessee but
in no event in an amount less than $500,000,000 per occurrence (which shall
include war risk, governmental confiscation and expropriation and allied perils
coverage). During any period when the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of insurance
required by this Section, insurance otherwise conforming with the provisions of
this Section except that the amounts of coverage shall not be required to exceed
the amounts of comprehensive airline liability insurance, and the scope of risk
covered and type of insurance shall be the same, as are customarily carried with
respect to similar aircraft on the ground by corporations engaged in the same or
similar business and similarly situated with Lessee. Any policies of insurance
carried in accordance with this Section 14 and any policies taken out in
substitution or replacement of any such policies (A) shall be amended to name
Agent, Lenders and Lessor as additional named insureds, (B) shall be primary
without right of contribution from any other insurance which is carried by
Lessee, (C) shall expressly provide that all provisions thereof, except the
limits of the liability, shall operate in the same manner as if there were a
separate policy covering each insured, and (D) shall provide that the insurer
shall waive any right of subrogation against Agent, Lenders and Lessor.
(b) Lessee will at all times carry and maintain with insurers of recognized
responsibility and reputation on or with respect to the Aircraft, at its own
cost and expense,
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aircraft ground and flight all-risk hull insurance as well as fire and extended
coverage insurance on Engines and other equipment while removed from the
Airframe (which shall include war risk, governmental confiscation and
expropriation (other than by the United States Government) and allied perils
including (A) strikes, riots, civil commotions or labor disturbances, (B) any
malicious act or act of sabotage and (C) hijacking (air piracy) or any unlawful
seizure or wrongful exercise of control of the Aircraft or crew in flight
(including any attempt at such seizure or control) made by any person or persons
aboard the Aircraft acting without the consent of the insured, if and to the
extent the same shall be maintained by Lessee with respect to similar aircraft
owned or operated by Lessee on the same routes or if the Aircraft is operated on
routes where the custom is for Domestic Air Carriers similarly situated with
Lessee flying comparable routes with similar aircraft to carry such insurance,
of the type usually carried by corporations engaged in the same or similar
business and similarly situated with Lessee; provided that such insurance
(including any self-insurance to the extent permitted below) shall at all times
be for an amount not less than the greater of the Stipulated Loss Value as of
the closest Stipulated Loss Determinate Date and $50,000,000. During any period
when the Aircraft is on the ground and not in operation Lessee may carry or
cause to be carried, in lieu of the insurance required by this Section,
insurance otherwise conforming hereto except that the scope of risk covered and
type of insurance shall be the same as are from time to time customarily carried
with respect to similar aircraft by corporations engaged in the same or similar
business and similarly situated with Lessee for aircraft on the ground in an
amount at least equal to the applicable amount provided above. All such
insurance shall name Agent, Lenders and Lessor as additional insureds and loss
payees to the extent their interest may appear and shall provide that any loss
to the Airframe or an Engine in excess of $2,000,000 (and, if a Default or Lease
Event of Default has occurred and is continuing, any such loss) shall be payable
to the Lessor and to the Agent for the benefit of Lenders; and shall be primary
without right of contribution from any other insurance which is carried by
Lessor or Agent with respect to its interest therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other similar
aircraft in Lessee's fleet which are of a value comparable to the Aircraft and
as are not substantially greater than amounts self-insured by corporations
engaged in the same or similar business and similarly situated with Lessee;
provided, however, that Lessee may not self-insure in an amount in excess of
$1,000,000 without the prior written consent of Lessor and Agent.
(c) Any policies of insurance required pursuant to either paragraph (a) or
paragraph (b) above shall: (A) be amended to name Lessor, Agent and Lenders as
additional named insureds, but without Lessor, Agent or Lenders being thereby
liable for premiums (and the insurance companies waiving their right with
respect thereto); (B) provide that in respect of the interest of (x) Lessor or
(y) Agent or Lenders in such policies the in
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surance shall not be invalidated by any action or inaction of (x) Lessee or (y)
Lessee or Lessor, respectively, and shall insure the interests of Agent and
Lenders regardless of any breach or violation by Lessee, Lessor or any Person
(other than Agent) of any warranty, declaration, condition or exclusion from
coverage contained in such policies; (C) provide that if such insurance is
cancelled, or if any material change is made in the coverage which affects the
interest of Lessor, Agent or any Lender, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation, change or lapse shall not be
effective as to Lessor, Agent or any Lender for thirty (30) days (seven (7)
days, or such shorter or longer period as may from time to time be customarily
available in the industry, in the case of any war risk and allied perils
coverage) after receipt by Agent and Lessor of written notice from such insurers
of such cancellation, change or lapse; (D) be in full force and effect
throughout any geographical areas at any time traversed by the Aircraft and
shall be payable in U.S. dollars; (E) waive any right of the insurers to any
setoff or counterclaim or any other deduction, whether by attachment or
otherwise in respect of any liability of Lessor and Agent; and (F) waive all
rights of subrogation against Lessor and Agent.
(d) In the case of a lease or contract with the United States or any agency
or instrumentality thereof in respect of the Airframe or any Engine, a valid
agreement by the United States or such agency or instrumentality to indemnify
Lessee against the same risks against which Lessee is required hereunder to
insure shall be considered adequate insurance with respect to the Airframe or
such Engine to the extent of the risks and in the amounts that are the subject
of any such agreement to indemnify.
(e) On or prior to the date hereof, and annually thereafter on or prior to
January 31, Lessee will furnish to Lessor and Agent (A) a report signed by a
firm of independent aircraft insurance brokers, appointed by Lessee and not
objected to by Lessor or Agent, describing in reasonable detail acceptable to
Lessor and Agent the insurance then carried and maintained on or with respect to
the Aircraft and the Engines and stating that in the opinion of such firm such
insurance complies with the terms of this Section 14 and is adequate to protect
the interests of Lessee, Lessor and Agent, and (B) certificates of the insurer
or insurers evidencing the insurance covered by the report. Lessee will cause
such brokers to advise Agent in writing (x) promptly of any default in the
payment of any premium and of any other act or omission on the part of Lessee of
which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine
and (y) at least thirty (30) days prior to the expiration or termination date,
or date of effectiveness of any material change, of any insurance carried and
maintained on the Aircraft hereunder.
(f) All insurance payments and other payments received by Agent, Lessor or
Lessee from insurance referred to in paragraph (b) above shall be, if received
by Lessor or Lessee, immediately paid to Agent, as agent for itself and Lessor
and shall be paid to Les-
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see upon compliance by Lessee with the terms of Section 13, provided that no
Default or Lease Event of Default shall have occurred and be continuing.
(g) Nothing in this Section 14 shall prohibit Agent, or any Lender or
Lessor from obtaining insurance with respect to the Aircraft for its own
account. Lessee may, at its own expense, carry insurance with respect to its
interest in the Aircraft in amounts in excess of that required to be maintained
by this Section 14. No insurance maintained by Agent, Lessor or any Lender shall
prevent Lessee from carrying the insurance required or permitted by this
Section. Proceeds of any such insurance carried by Lessee, Agent or Lender shall
be paid as provided in the insurance policy relating thereto and no such Person
shall have any duty to obtain any such insurance.
SECTION 15. Assignment. Except as permitted in accordance with Section 10,
Lessee will not, without the prior written consent of Lessor, assign any of its
rights hereunder or in the Aircraft. Lessor agrees that it will not assign or
convey its right, title and interest in and to this Lease or the Aircraft except
in accordance with the Credit Agreement. Subject to the foregoing, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of
Lessor and Lessee and their respective successors and permitted assigns and
shall inure, to the direct benefit of, and shall also be enforceable by the
Agent and the Lenders, and their respective successors, as assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated Loss
Value or any other amounts owing pursuant to this Lease within 5 days after
the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as defined
in, any other Lease or Lessee shall fail to perform or observe any other
covenant or condition set forth in this Lease or any other Transaction
Document, which failure shall remain unremedied for a period of 10 Business
Days after written notice from Lessor or Agent, unless action has been
taken within 15 Business Days to remedy such breach and such action is
being diligently pursued; provided such breach is capable of being
remedied;
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(d) Any representation or warranty of the Lessee in any Transaction
Document or in any certificate furnished pursuant to any Transaction
Document is found to be incorrect in any material respect at the time it
was made and such breach shall remain unremedied for a period of 15
Business Days after written notice thereof;
(e) (i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Lessee or any of its Subsidiaries
in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law, or (ii) an
involuntary case shall be commenced against Lessee or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Lessee or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered;
or there shall have occurred the appointment of an interim receiver,
trustee or other custodian of Lessee or any of its Subsidiaries; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of Lessee or any of its
subsidiaries, and any such event described in this clause (ii) shall
continue for 60 days unless dismissed, bonded or discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent
to the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Lessee or any
of its Subsidiaries shall make any assignment for the benefit of creditors;
or (ii) Lessee or any of its Subsidiaries shall be unable, or shall fail
generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the Board of Directors of Lessee or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee or
any of its Subsidiaries decreeing the dissolution or split up of Lessee or
any of its Subsidiaries and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
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(h) Registration of the Aircraft is canceled and is not cured within
15 Business Days;
(i) The Aircraft is arrested or detained in exercise of any lien and
Lessee does not procure the release of such Aircraft within 15 business
days; or
(j) There shall have occurred an Event of Default or Potential Event
of Default under the Credit Agreement or under the Second Amended and
Restated Credit Agreement (whether or not such Event of Default or
Potential Event of Default is thereafter waived by the requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the meaning
of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on any
Indebtedness in an individual principal amount of $5 million or more or any
items of Indebtedness with an aggregate principal amount of $10 million or
more or (b) any Contingent Obligation in an individual principal amount of
$5 million or more or any Contingent Obligations with an aggregate
principal amount of $10 million or more, in each case beyond the end of any
grace period provided therefor; or (ii) there shall exist a breach by
Lessee or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount
of $5 million or more or any items of Indebtedness with an aggregate
principal amount of $10 million or more or any Contingent Obligation in an
individual principal amount of $5 million or more or any Contingent
Obligations with an aggregate principal amount of $10 million or more or
(b) any loan agreement, mortgage, indenture or other agreement relating to
such Indebtedness or Contingent Obligation(s), if the effect of such breach
or default is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s)
to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligations, as the case may be (upon
the giving or receiving of notice, lapse of time, both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of [$5]
million or (ii) in the aggregate at any time an amount in excess of [$10]
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage) shall
be entered or filed against Lessee or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded
or unstayed for a period of 60 days (or in any event later than five days
prior to the date of any proposed sale thereunder); or
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(n) (i)(a) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, his spouse, descendants or an entity
controlled by any of the foregoing, or a trust for the benefit of any of
the foregoing, shall cease to beneficially own and control shares of
capital stock of Lessee representing at least 40% of the combined voting
power of all Securities of Lessee entitled to vote in the election of
directors, other than Securities having such power only by reason of the
happening of a contingency, or (b) any Person or any two or more Persons
acting in concert (in any such case, excluding ▇▇. ▇▇▇▇▇▇▇) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act), directly or
indirectly, of Securities of Lessee (or other Securities convertible into
such Securities) representing 20% or more of the combined voting power of
all Securities of Lessee entitled to vote in the election of directors,
other than Securities having such power only by reason of the happening of
a contingency or (c) the Board of Directors of Lessee shall not consist of
a majority of Continuing Directors or (ii) a "Change of Control" shall
occur under the Pass Through Trust Documents or any other Material
Agreement (as in effect on the date of such occurrence).
SECTION 17. Remedies. Upon the occurrence of any Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, declare by written notice to Lessee this Lease to be
in default, except that upon the occurrence of a Lease Event of Default
referred to in clauses (e) (f) or (g) of Section 16, this Lease shall be deemed
declared in default without any further act or notice, and at any time
thereafter, Lessor may do one or more of the following with respect to all or
any part of the Aircraft, Airframe and any or all of the Engines as Lessor in
its sole discretion shall elect:
(a) upon the written demand of Lessor and at Lessee's expense,
promptly return the Aircraft, 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 8 hereof 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 Aircraft, Airframe or any Engine is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability accruing to Lessor for or by reason of such entry or
taking of possession or removal whether for the restoration of damage to
property caused by such action or otherwise, provided that if Lessee shall
for any reason fail to execute and deliver instruments deemed necessary or
advisable by the Lessor to obtain possession of the Aircraft, Airframe and
Engines, the Lessor shall be entitled, in a proceeding to which Lessee
shall be a necessary party, to a judgment for specific performance,
conferring the right to immediate possession upon the Lessor and requiring
Lessee to execute and deliver such instruments to the Lessor;
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(b) sell the Aircraft, Airframe or any Engine at public or private
sale, as Lessor may determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle the Aircraft, Airframe or any Engine 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 17; and
without any duty to account to Lessee with respect to such action or
inaction;
(c) whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above with
respect to the Aircraft, Lessor, by written notice to Lessee specifying a
payment date, may demand that Lessee pay to Lessor, and Lessee shall pay
Lessor, on the payment date so specified, any Basic Rent due on or before
the payment date so specified plus as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the installments of Basic Rent for
the Aircraft due after the date specified in such notice if any), an amount
equal to the Stipulated Loss Value for the Aircraft computed as of the
immediately preceding Stipulated Loss Determination Date, together with
interest, if any, at the Past Due Rate on the amount of such Basic Rent and
Stipulated Loss Value from the Stipulated Loss Determination Date as of
which Stipulated Loss Value is computed until the date of actual payment;
and upon such payment of liquidated damages and all Supplemental Rent then
due and payable by the Lessee hereunder, the Lessor shall transfer (without
any representation, recourse or warranty whatsoever) the Aircraft to the
Lessee and the Lessor shall execute and deliver such documents evidencing
such transfer and take such further action as the Lessee shall reasonably
request to effect such transfer;
(d) in the event 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 such Aircraft, may, if it shall so elect, demand
that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date of such
sale, any accrued rent with respect to the Aircraft due on or prior to such
date plus, as liquidated damages for loss of a bargain and not as a
penalty, the amount of any deficiency between the net proceeds of such sale
(after deduction of all reasonable costs of sale) and the Stipulated Loss
Value of such Aircraft, computed as of the date of such sale together with
interest, if any, on the amount of such deficiency, at the Past Due Rate,
from the date of such sale to the date of actual payment of such amount;
(e) Lessor may terminate or cancel this Lease or proceed by
appropriate court action to enforce the terms hereof or to recover damages
for breach hereof; and
(f) Lessor may exercise any other right or remedy which may be
available to it under applicable law.
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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 legal fees and other costs and expenses incurred
by Lessor and Agent and any Lender (including reasonable allocated time charges
of internal counsel for the Lender) in connection with the Lease Event of
Default, the exercise of remedies and the return of the Airframe or any Engine
in accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof, shall include, without limitation all logs,
manuals and data and inspection, maintenance, modification and overhaul and
similar records with respect thereto) in the condition and airworthiness
required by such Section. The Lessee hereby acknowledges that it shall be
directly liable for such costs and expenses to any Person designated by the
Lessor, the Agent or any Lender (as the case may be) to provide services in
connection with or to effect the return of the Airframe or any Engine in
accordance with the terms of Section 8 hereof or in placing such Airframe or
Engine (which for purposes hereof shall include, without limitation, such logs,
manuals and records) in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this Section
17, Lessor or Agent or any Lender 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. Except as
otherwise expressly provided above, no remedy referred to in this Section 17 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to 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 Lease Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Lease Event of Default. To the extent permitted by applicable law,
Lessee hereby waives any rights now or hereafter conferred by statute or
otherwise which may require Lessor to sell, lease, or otherwise use the
Aircraft, Airframe or any Engine or any part thereof in mitigation of Lessor's
damages as set forth in this Section 17 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 17.
Notwithstanding any of the foregoing provisions of this Section 17, so long
as any Loan relating to the Aircraft or other Obligations (other than principal
and interest on Loans relating to other aircraft) are outstanding under the
Credit Agreement, all rights of Lessor under this Section 17 shall be exercised
only by the Agent as assignee of Lessor's rights under this Lease pursuant to
the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a) Forthwith
upon the execution and delivery of each Lease Supplement from time to time
re-
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quired by the terms hereof and upon the execution and delivery of any amendment
to this Lease, Lessee (at its expense), unless such supplement or amendment
relates solely to the assignment of all or any portion of the Lessor's interest
hereunder, will cause such Lease Supplement (and, in the case of the initial
Lease Supplement, this Lease as well) or amendment to be duly filed and
recorded, and maintained of record, in accordance with the applicable laws of
the government of registry of the Aircraft. In addition, Lessee at its expense
will promptly and duly execute and deliver to Lessor and the Agent such further
documents and take such further action as Lessor and the Agent may from time to
time reasonably request in order more effectively to carry out the intent and
purpose of this Lease and the other Transaction Documents and to establish and
protect the rights and remedies created or intended to be created in favor of
Lessor and Agent hereunder and under the other Transaction Documents, including,
without limitation, if requested by Lessor and the Agent, the execution and
delivery of supplements or amendments hereto, at the expense of Lessee, each in
recordable form, and all financing statements and continuation statements, and
all similar notices required by applicable law at all times to be kept recorded
and filed in such manner and such places as Lessor and the Agent may reasonably
request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the Agent
promptly after execution and delivery of any supplement and amendment hereto, an
opinion of counsel satisfactory to Lessor and the Agent (which may include
Lessee's general counsel) stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of Lessor hereunder and the Agent under the Loan Documents.
SECTION 19. Notices. All notices required under the terms and provisions
hereof shall be in writing (including telex, facsimile or similar writing) and
shall be effective (a) if given by facsimile device, when transmitted and the
appropriate confirmation received, (b) if given by certified mail, three
Business Days after being deposited in the United States mail, with appropriate
postage prepaid, (c) if given by telex, upon receipt by the party transmitting
the telex of such party's answerback code at the end of such telex (receipt of
confirmation in writing not being necessary to the effectiveness of any telex)
and (d) if given by overnight service or other means, when received or
personally delivered, addressed:
(i) if to Lessee, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., or to such other address as Lessee shall
from time to time designate in writing to Lessor; and
(ii) if to Lessor, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or to such other address as Lessor shall
from time
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73
to time designate in writing to Lessee with a copy to the Agent at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇.
SECTION 20. Net Lease, True Lease, etc. (a) The Lessee's obligations
to pay Rent and all other amounts payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) any setoff, counterclaim, recoupment,
defense or other right which the Lessee may have against the Lessor, the Agent,
the Lenders, any manufacturer, any supplier or any other Person for any reason
whatsoever, (ii) any defect in the title, airworthiness, eligibility for
registration under Title 49 of the United States Code, as amended or other
applicable law, condition, design, compliance with specifications, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft,
or any theft, interference, interruption or cessation in or prohibition of the
use or possession thereof by the Lessee or any sublessee for any reason
whatsoever, including, without limitation, any such interference, interruption,
cessation or prohibition resulting from the act of any governmental authority,
(iii) any Liens, encumbrances or rights of any other Person with respect to the
Aircraft, (iv) the invalidity or unenforceability or lack of due authorization
or other infirmity of this Lease or any other Transaction Document or document
or instrument executed pursuant hereto or thereto, or any lack of right, power
or authority of the Lessor or the Lessee or any other party to any other
Transaction Document to enter into this Lease or any other Transaction Document
or any such document or instrument, (v) any loss of or damage to the Aircraft,
Airframe, any Engine or any Part, (vi) any insolvency, bankruptcy,
reorganization or similar proceedings by or against the Lessee or any other
Person, or (vii) any failure, breach or delay by the Lessor or any other Person
in performing or complying with any term of this Lease or any other cause
whether similar or dissimilar to the foregoing, any present or future law
notwithstanding, it being the intention of the parties that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at the times provided herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or any
reduction for any reason whatsoever, including any present or future claims of
Lessee against Lessor or any other Person under this Lease or otherwise. Lessee
hereby waives, and hereby agrees to waive at any future time at the request of
Lessor, to the full extent now or then 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. Each payment of Rent
made by Lessee to Lessor shall be final as to Lessor and Lessee. Lessee will
not seek to recover all or any part of any such payment of Rent from Lessor for
any reason whatsoever.
(b) It is the intention of the parties that the Lessor and the Agent
as assignee of the Lessor's right under this Lease pursuant to the Aircraft
Chattel Mortgage shall be entitled to the benefits of 11 U.S.C. ss. 1110 or any
analogous section of the Federal bankruptcy laws, as amended from time to time
with respect to the right to repossess the Air-
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frame, Engines and Parts as provided herein, and in any circumstances where more
than one construction of the terms and conditions of this Lease is possible, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits or would render them
doubtful. To the extent consistent with the provisions of 11 U.S.C. ss. 1110 or
any analogous section of the Federal bankruptcy laws, as amended from time to
time, it is hereby expressly agreed, that notwithstanding any other provisions
of the Federal bankruptcy law, as amended from time to time, any right of the
Lessor and the Agent, as assignee of the Lessor under the Aircraft Chattel
Mortgage, to take possession of the Aircraft in compliance with the provisions
of this Lease shall not be affected by the provisions of 11 U.S.C. ss. 362 or
363, as amended from time to time, or any analogue provisions of any superseding
statute or any power of the bankruptcy court to enjoin such taking of
possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any tax returns in a manner or take any other action or position
inconsistent with the foregoing or with the Lessor's ownership of the Aircraft.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft except as a Lessee only. The
Aircraft shall at all times during the term of this Lease be the sole and
exclusive property of the Lessor.
SECTION 21. Purchase Option.
(a) Purchase Option. So long as no Lease Event of Default has occurred and
is continuing, Lessee shall have the option to purchase the Aircraft at the end
of the Term for a purchase price equal to the higher of the Fair Market Sales
Value (assuming that the Aircraft is in the condition required by the Lease) as
of such date and Stipulated Loss Value plus all accrued Rent and all
Supplemental Rent then due. Upon the payment by Lessee of the full of such
amounts, Lessor shall convey to Lessee all right, title and interest of Lessor
in and to the Aircraft on an "as-is, where is" basis, without recourse or
warranty.
(b) Notice of Purchase. In order to exercise any purchase option under
Section 21, Lessee shall be required to give not less than 90 days (but not more
than 360 days) irrevocable prior written notice to Lessor. The Lessee will give
Lessor prior written irrevocable notice not less than 90 days (but not more than
360 days) before the expiration of the Term of its determination to return the
Aircraft and not exercise any purchase option under this Section 21. If Lessee
fails to give notice as required herein, Lessee will be deemed to have elected
to return the Aircraft to the Lessor.
SECTION 22. Lessor's Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, then Lessor may itself make
such payment
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or perform or comply with such agreement but shall not be obligated hereunder to
do so, and the amount of such payment and the amount of the reasonable expenses
of Lessor incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Past Due Rate, shall be deemed Supplemental Rent, payable by
Lessee upon demand.
SECTION 23. Miscellaneous. (a) 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 Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
except as a lessee only. Neither Lessee nor any Affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft or with the parties' agreement that this
Lease be treated as a tax lease for purposes of the Internal Revenue Code. The
section and paragraph headings in this Lease and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof and all reference herein to numbered sections,
unless otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE
AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT
IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR
AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE
OF LESSEE'S OR THE LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER
TRANSACTION DOCUMENT. This Lease may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof and thereof, except any agreements referred to herein.
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76
(c) The time stipulated in this Lease for all payments and notices by
Lessee to the Lessor and for the performance of Lessee's other obligations under
this Lease will be of the essence of this Lease.
SECTION 24. Security for Lessor's Obligations. In order to secure the
obligations, the Lessor has agreed in the Aircraft Chattel Mortgage, among other
things, to assign to the Agent this Lease and the Lease Supplements and to
mortgage in favor of the Agent the Aircraft, subject to the reservations and
conditions therein set forth. All rights of the Lessor hereunder are subject to
the Aircraft Chattel Mortgage and the Lessor and the Lessee agree that so long
as the lien of the Aircraft Chattel Mortgage has not been discharged in
accordance with its terms, (i) all payments hereunder shall be made to the Agent
for the benefit of Lenders to the extent of the Lenders' interest in such
payments; (ii) all notices from or to the Lessor shall be copied to the Agent
and (iii) the Lessee shall not take any actions that the Lessor would be
prohibited from taking under the terms of the Aircraft Chattel Mortgage. Lessee
hereby acknowledges due notice of, and consents to, such assignment and to the
creation of such mortgage and security interest. To the extent, if any, that
this Lease and any Lease Supplement constitutes chattel paper (as such term is
in effect in any applicable jurisdiction), no security interest in this Lease or
any Lease Supplement may be created through the transfer or possession of any
counterpart other than the original executed counterpart containing the receipt
therefor executed by the Agent on the signature page hereof or thereof.
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77
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed as of the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
__th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Title:
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78
EXHIBIT A
to
Lease Agreement
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN
THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE Agent ON THE SIGNATURE PAGE HEREOF.
FORM OF LEASE SUPPLEMENT
LEASE SUPPLEMENT No. _____, dated ___________, ____, between ATLAS
FREIGHTER LEASING, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of May 29, 1997, relating to one Boeing B747-200
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.
*/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.
**/The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, together with Lease Supplement No. 1 dated May 29,
1997, to the Lease Agreement, has been recorded by the Federal Aviation
Administration on __________ __, 1997, as one document and assigned Conveyance
No. _____________.
------------------
*/ This language for other Lease Supplement No. 1.
**/ This language for other Lease Supplements.
79
EXHIBIT A
Page 2
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
Boeing B747-200 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. _______; manufacturer's serial no.
______; and
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______]3/ (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower).
2. The closing date of the Aircraft is the date of this Lease Supplement
set forth in the opening paragraph hereof. Except as otherwise provided in the
Lease, the Term for the Aircraft shall commence on the closing date and end on
the seventh anniversary thereof.
3. 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 manufacturer,
any affiliate thereof, or any subcontractor or supplier of the manufacturer or
any affiliate thereof, under any purchase agreement or otherwise.
4. 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.
5. 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.
80
EXHIBIT A
Page 3
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
ATLAS FREIGHTER LEASING, INC.
Lessor
By
--------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
--------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
__th day of May, 1997.
BANKERS TRUST COMPANY,
as Agent
By
--------------------------------
Name:
Title:
81
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
82
EXHIBIT C
to
Lease Agreement
STIPULATED LOSS VALUES
[Confidential information intentionally deleted
from FAA-filed counterpart]
[Also to include method of calculating reductions to
Stipulated Loss Values in the event of prepayments]
83
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE