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EXHIIBIT 10.65
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LEASE AGREEMENT
(N505MC)
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. N505MC
Manufacturer's Serial No. 21251
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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
Page
SECTION 1. Definitions.............................................................................1
SECTION 2. Acceptance and Lease...................................................................21
SECTION 3. Term and Rent..........................................................................21
(a) Term and Basic Rent.............................................................21
(b) Adjustments to Basic Rent.......................................................21
(c) Supplemental Rent...............................................................22
(d) Payments in General.............................................................22
(e) Minimum Rent....................................................................23
(f) Pepayment of Rent Payments......................................................23
SECTION 4. Certain Representations and Warranties.................................................24
SECTION 5. Lessee's Representations and Warranties................................................25
SECTION 6. Lessee's Affirmative Covenants.........................................................30
SECTION 7. Lessee's Negative Covenants............................................................37
SECTION 8. Return of the Aircraft.................................................................45
(a) Condition Upon Return...........................................................45
(b) Overhaul and Repair.............................................................46
(c) Repairs.........................................................................46
(d) Modifications...................................................................46
(e) Airworthiness Directives........................................................46
(f) Return of the Engines...........................................................46
(g) Deferred Maintenance............................................................47
(h) Corrosion Treatment.............................................................47
(i) Manuals.........................................................................47
(j) Storage Upon Return.............................................................47
(k) Severable Parts.................................................................47
(l) Survival........................................................................48
SECTION 9. Liens..................................................................................48
SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia....................................................................48
(a) Maintenance and Operation.......................................................48
(b) Possession......................................................................50
(c) Insignia........................................................................52
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(d) Holding Out.....................................................................52
(e) No Pledging of Credit...........................................................52
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications and
Additions..............................................................................52
SECTION 12. Indemnities............................................................................55
SECTION 13. Event of Loss..........................................................................56
SECTION 14. Insurance..............................................................................57
SECTION 15. Assignment.............................................................................60
SECTION 16. Events of Default......................................................................60
SECTION 17. Remedies...............................................................................63
SECTION 18. Lessee's Cooperation Concerning Certain Matters........................................66
SECTION 19. Notices................................................................................66
SECTION 20. Net Lease, True Lease, etc.............................................................67
SECTION 21. Purchase Option........................................................................68
(a) Purchase Option.................................................................68
(b) Notice of Purchase..............................................................68
SECTION 22. Lessor's Right to Perform for Lessee...................................................69
SECTION 23. Miscellaneous..........................................................................69
SECTION 24. Security for Lessor's Obligations......................................................70
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
SCHEDULE 7(d)(4) Contingent Obligations
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EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
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LEASE AGREEMENT
LEASE AGREEMENT dated as of 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, shall be an engine
of a type then being utilized by Lessee on other Boeing 747-200 aircraft
operated by Lessee, and shall have
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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.
"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 pos-
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session, 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.
"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.
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"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
▇▇▇▇▇'▇.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Federal Aviation Act, operating pursuant to a certificate issued
under Section 401 of such Act, or a carrier of comparable status under any
successor law or provision.
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"Compliance Certificate" means a certificate substantially in the form of
Exhibit D annexed hereto delivered to 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.
"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 be-
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comes 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 indirect
guaranty, endorsement (otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by
any other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement (contingent or
otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the case of
any
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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.
"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.
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"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 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.
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"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 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.
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"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 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
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15
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.
"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.
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"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.
"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
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(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.
"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:
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 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 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.
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"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"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 interest at a rate
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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 Extension Indebtedness
has a final stated maturity later than the end of the stated maturity of the
Indebtedness being extended immediately prior to such extension and (v) the
amortization and the other terms, provisions, conditions, covenants and events
of default thereof taken as a whole shall be no more onerous
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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 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).
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"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 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
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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.
"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
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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 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.
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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 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
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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 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) Pepayment 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.
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(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 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 repre-
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sentation, 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
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.
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(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of 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 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
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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 material 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
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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 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.
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(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 liabilities 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.
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(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.
(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 ordi-
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nary 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;
(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 go
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ing concern, and shall state that suchconsolidated financial statements
fairly present the consolidated financial position of Lessee and its
Subsidiaries as at the dates indicated and the results of their operations
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the examination
by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards; provided that delivery of 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
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would not be disclosed in the course of their audit examination, and (c)
stating that based on their audit examination nothing has come to their
attention that causes them to believe either or both that the information
contained in the certificates delivered therewith pursuant to subdivision
(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") not previ-
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ously 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
(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.
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(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 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
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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, transportation 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.
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(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 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 re-
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cently 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;
(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
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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 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.
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(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.
(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.
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(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:
Minimum Fixed
Charge Coverage
Period 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
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(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 suffer any liquidation or dissolution), or convey, sell,
lease, sub-lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or any portion of the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person or any division
or line of business of any Person, except:
(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;
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(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 liabilities 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).
(h) Amendments of Material Agreements.
Lessee shall not permit (i) its certificate or articles of incorporation
or bylaws to be amended or otherwise modified in any manner which could
reasonably be expected to have a
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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.
(i) Restriction on Leases.
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 Lessee 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 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 Subsi-
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diaries, (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 Subsidiaries, 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.
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(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 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
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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, incomplete 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
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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 Aircraft 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 opinion (in their sole discretion),
adversely affect the interests of Lessor, Agent or any Lender.
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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;
(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 Air
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frame 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
(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
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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.
(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.
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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 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
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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.
(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.
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(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 commenced
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
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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 49 of the United States
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
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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;
(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
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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, 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.
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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 insurance 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
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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 Lessee 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;
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(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;
(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
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(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
(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 Subsidiar-
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ies 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
(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.
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
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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. Forthwith
upon the execution and delivery of each Lease Supplement from time to time
required by the terms hereof and upon the execution and delivery of any
amendment to this Lease, 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
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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.
(a) 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 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
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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 Airframe, Engines and Parts as
provided herein, and in any circumstances where more than one construction of
the terms and conditions of this Lease is possible, a construction 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.
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(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 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
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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.
(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 Sup-
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plement 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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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
------------------------------
Name:
Title:
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74
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 Lease Supplement No. 1.
**/ This language for other Lease Supplements.
75
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.
76
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 Supplement is hereby
acknowledged on May __, 1997.
BANKERS TRUST COMPANY, as
Agent
By
------------------------------
Name:
Title:
77
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
78
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]
79
EXHIBIT D
to
Lease Agreement
COMPLIANCE CERTIFICATE