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EXHIBIT 10.77
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LEASE AGREEMENT
(N523MC)
DATED AS OF SEPTEMBER 5, 1997
BETWEEN
ATLAS FREIGHTER LEASING II, INC.,
Lessor
and
ATLAS AIR, INC.,
Lessee
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One Boeing B747-2D7B Aircraft
U.S. Registration No. N523MC
Manufacturer's Serial No. 21782
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Two Spare Engines
Manufacturer's Serial Nos. 530168 and 517530
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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
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SECTION 1. Definitions................................................... 1
SECTION 2. Acceptance and Lease.......................................... 24
SECTION 3. Term and Rent................................................. 24
(a) Term and Basic Rent......................................... 24
(b) Adjustments to Basic Rent................................... 25
(c) Supplemental Rent........................................... 25
(d) Payments in General......................................... 25
(e) Minimum Rent................................................ 26
(f) Prepayment of Rent Payments................................. 26
SECTION 4. Certain Representations and Warranties........................ 27
SECTION 5. Lessee's Representations and Warranties....................... 28
SECTION 6. Lessee's Affirmative Covenants................................ 34
SECTION 7. Lessee's Negative Covenants................................... 42
SECTION 8. Return of the Aircraft and Spare Engines...................... 54
(a) Condition Upon Return....................................... 54
(b) Overhaul and Repair......................................... 54
(c) Repairs..................................................... 55
(d) Modifications............................................... 55
(e) Airworthiness Directives.................................... 55
(f) Return of the Engines....................................... 55
(g) Deferred Maintenance........................................ 55
(h) Corrosion Treatment......................................... 55
(i) Manuals..................................................... 56
(j) Storage Upon Return......................................... 56
(k) Severable Parts............................................. 56
(l) Survival.................................................... 56
SECTION 9. Liens......................................................... 57
SECTION 10. Registration, Maintenance and Operation; Possession
and Subleases; Insignia.............................................. 57
(2)
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(a) Maintenance and Operation................................... 57
(b) Possession.................................................. 59
(c) Insignia.................................................... 61
(d) Holding Out................................................. 61
(e) No Pledging of Credit....................................... 62
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.................................................... 62
SECTION 12. Indemnities.................................................. 64
SECTION 13. Event of Loss................................................ 66
SECTION 14. Insurance.................................................... 68
SECTION 15. Assignment................................................... 71
SECTION 16. Events of Default............................................ 71
SECTION 17. Remedies..................................................... 74
SECTION 18. Lessee's Cooperation Concerning Certain Matters.............. 77
SECTION 19. Notices...................................................... 78
SECTION 20. Net Lease, True Lease, etc................................... 78
SECTION 21. Purchase Option.............................................. 80
(a) Purchase Option............................................. 80
(b) Notice of Purchase.......................................... 80
SECTION 22. Lessor's Right to Perform for Lessee......................... 81
SECTION 23. Miscellaneous................................................ 81
SECTION 24. Security for Lessor's Obligations............................ 82
SCHEDULE 5(a)(iii) Subsidiaries
SCHEDULE 7(a)(4) Indebtedness
SCHEDULE 7(b) Existing Liens
SCHEDULE 7(c)(v) Investments
(3)
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SCHEDULE 7(d)(4) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Compliance Certificate
(4)
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LEASE AGREEMENT
LEASE AGREEMENT dated as of September 5, 1997 between ATLAS FREIGHTER
LEASING II, 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 a net lease;
WHEREAS, Lessor has incurred certain Loans under the Credit Agreement in
connection with the Aircraft and the Spare Engines to be leased pursuant to the
terms of this Lease and other similar aircraft and spare engines to be leased
pursuant to the other Leases:
WHEREAS, 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
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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 General Electric CF6-50E2 engine for
the aircraft bearing U.S. registration number N523MC, N524MC, N526MC, N527MC or
an engine of the same or another manufacturer of equivalent or greater residual
value, condition, utility, airworthiness, and remaining useful life and
suitable for installation and use on the Airframe; provided that such engine
shall be of the same make, model and manufacturer as the other engines
installed on the Airframe, shall be an engine of a type then being utilized by
Lessee on other Boeing 747-200 aircraft operated by Lessee, and shall have been
maintained, serviced, repaired and overhauled in substantially the same manner
as 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 immedi-
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ately 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 possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities
or by contract or otherwise.
"AFL I" means Atlas Freighter Leasing, Inc., a Delaware corporation.
"AFL I Aircraft" means (i) one Boeing 747-200 Aircraft, serial number
21048, with four ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT9D-7J engines attached and (ii) five Boeing
747-200 Aircraft, serial numbers 21221, 21251, 21380, 21644, and 22507, each
with four General Electric CF6-50E2 engines attached.
"AFL I Credit Agreement" means that certain Credit Agreement dated as of
May 29, 1997 by and among AFL I, the lenders party thereto and Bankers Trust
Company, as Agent, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms hereof.
"AFL I Leases" means the Leases as such term is defined in the AFL I
Credit Agreement.
"AFL I Restructuring" means the following transactions which occurred
concurrently on May 29, 1997: (i) the termination of the leases relating to the
AFL I Aircraft in existence prior to May 29, 1997, (ii) the transfer, as a
dividend, of the AFL I Aircraft to Lessee and the simultaneous contribution of
the AFL I Aircraft to AFL I as a capital contribution, together with
approximately $10.4 million, (iii) the incurrence
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of indebtedness pursuant to the AFL I Credit Agreement and the simultaneous
repayment of the indebtedness previously secured by the AFL I Aircraft and (iv)
the entering into of the AFL I Leases.
"Agent" shall mean the Administrative Agent under the Credit Agreement.
"Aircraft" means the Airframe together with the four Engines, whether or
not such Engines are installed on the Airframe or any other airframe.
"Aircraft Chattel Mortgage" means each Aircraft Chattel Mortgage entered
into in connection with the Credit Agreement.
"Aircraft Obligations" means all amounts owing by the Lessee or any of its
Subsidiaries pursuant to the Amended Aircraft Credit Facility immediately prior
to giving effect to the third amendment and restatement thereof on the date
hereof and relating to the Aircraft and Spare Engines being contributed to the
Lessor pursuant to the Transaction.
"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.
"Amended Aircraft Credit Facility" means the Third Amended and Restated
Credit Agreement dated as of September 5, 1997, among Lessee, as Borrower, the
lenders listed therein, ▇▇▇▇▇▇▇ Sachs Credit Partners L.P., as Syndication
Agent, and Bankers Trust Company, as Administrative Agent, without giving
effect to any amendments, modifications, supplements or waivers thereof.
"Approved Appraiser" means B.K. Associates, Inc., Simat, Helliesen &
▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇ Beyer, Agnew, 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
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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.
"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 and
the Spare Engines 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
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paper maturing no more than one year from the date of creation thereof and
having, at the time of the acquisition thereof, a rating of at least A-1 from
S&P or at least P-1 from ▇▇▇▇▇'▇; (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.
"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, (I) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income less (II) all cash expenditures reducing reserves
appearing on the June 30, 1997 balance sheet of Atlas, 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.
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"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 and Currency
Agreements, but excluding, however, any amounts referred to in subsection 2.3
of the Amended Aircraft Credit Facility on or before the Third Amended and
Restated Closing Date (as such term is defined in the Amended Aircraft Credit
Facility).
"Consolidated Net Income" means, for any period, the net income (or loss)
of Lessee and its Subsidiaries on a consolidated basis for such period taken as
a single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Lessee) in which any other Person (other than Lessee or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Lessee or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Lessee or is
merged into or consolidated with Lessee or any of its Subsidiaries or that
Person's assets are acquired by Lessee or any of its Subsidiaries, (iii) the
income of any Subsidiary of Lessee to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any pension plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the sum
of the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficits) of Lessee and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the aggregate amount
of all rents paid or payable by Lessee and its Subsidiaries on a consolidated
basis (excluding rent paid pursuant to the Leases) during that period under all
Capital Leases and Operating Leases to which Lessee or any of its Subsidiaries
is a party as lessee (net of sublease income other than income from ACMI
Contracts). For the avoidance of
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doubt, all rental payments to AFL I and Lessor shall not be included in
Consolidated Rental Payments.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of 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 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
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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
and Spare Engines subject to this Lease and the other aircraft and spare
engines to be leased pursuant to the Leases, subject to the Aircraft
Obligations.
"Credit Agreement" shall mean the Credit Agreement, dated as of September
5, 1997, by and among Lessor, as borrower, the Lenders listed therein from time
to time and Bankers Trust Company, as Administrative Agent for the Lenders, and
▇▇▇▇▇▇▇ Sachs Credit Partners L.P., as Syndication Agent for the Lenders, as
such agreement may be amended, modified, waived, or supplemented from time to
time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement designed to protect 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 NationsBanc Agreement, the AFL I Credit Agreement, the
Senior Note Documents, any Permitted Extension Indebtedness and any Other
Permitted Indebtedness.
"Determination Date" has the meaning assigned to that term in subsec- tion
7(a)(6).
"Domestic Air Carrier" means any United States "domestic air carrier", as
defined in Part 121 of the Federal Aviation Regulations, that is operating in
accordance with the operating certificate and appropriate operations
specifications issued under Part 121 or any successor regulation.
"Eligible Aircraft" means a Boeing 747-200, 747-300 or 747-400 or MD-11
aircraft, including any engines installed thereon and any spare engines of the
same type
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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 General Electric CF6-50E2 aircraft engines
for the aircraft bearing U.S. registration numbers N523MC, N524MC, N526MC and
N527MC 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
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"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 Spare Engine or
both): (A) loss of such Aircraft or Spare Engine or the use thereof due to
theft or disappearance of the Aircraft or Spare Engine 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 or Spare
Engine); (B) the destruction, damage beyond repair or rendition of such
Aircraft or Spare Engine 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 or Spare Engine; (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 or Spare Engine 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 or Spare Engine, 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 or Spare Engine, 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 or Spare
Engine on the basis of an actual or constructive total loss or (G) a
divestiture of such Airframe or Spare Engine as described in Section 4(d)(iii)
or Section 4(d)(vi) of any Aircraft Chattel Mortgage under
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the Credit Agreement. An Event of Loss with respect to the Aircraft shall
be deemed to have occurred if an Event of Loss occurs with respect to the
Airframe of the Aircraft.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Sales Value" of the Airframe or any Engine or Spare Engine
shall mean the value 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, Engine or Spare 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, or Spare Engine, as the case may be, 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.
"Final Maturity Date" means May 29, 2004.
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"Financed Aircraft" means all Financed Aircraft under and as defined in
the Amended Aircraft Credit Facility.
"FINOVA Agreement" means that certain Secured Loan Agreement dated as of
April 11, 1996 between FINOVA and Lessee, as amended, restated, supplemented or
otherwise modified from time to time in accordance with this Lease.
"Foreign Air Carrier" means any "foreign air carrier" as defined in the
Act, as to which there is in force a permit issued pursuant to Section 402 of
said Act or operators of aircraft operating under or governed by the provisions
of Parts 121, 123 or 129 of the Federal Aviation Regulations, in each case that
are certificated in a country that is a signatory to the Convention on
International Civil Aviation and are operating in conformity with the Annexes
thereunder and that fly routes into the United States on a regularly scheduled
basis.
"Funding and Payment Office" means the office of 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
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of any Hazardous Material (i) from, under, in, into or on the facilities
or surrounding property; and (ii) caused by, or undertaken by or on behalf of,
Lessee.
"Indebtedness" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity
with GAAP, (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (iv) any
obligation owed for all or any part of the deferred purchase price of property
or services (excluding any such obligations incurred under ERISA), which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument, and (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnified Liabilities" has the meaning assigned to that term in
subsection 12(b) hereunder.
"Indemnitee" has the meaning assigned to that term in subsection 12(b)
hereunder.
"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
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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.
"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 and Spare Engines under and pursuant to the
terms of the Lease, and any subsequent Lease Supplement entered into in
accordance with the terms of the Lease.
"Leases" means the Lease Agreements dated as of September 5, 1997 between
the Lessor and the Lessee, as the same may be amended, modified or supplemented
from time to time (including this Lease). The term "Lease" shall include any
Lease Supplement entered into pursuant to the respective Lease.
"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 II, Inc., as Lessor under the
Lease, and its permitted successors and assigns.
"Lessor Tax" means (where the Lessor is the indemnitee) any Tax that is:
(a) imposed solely as the result of activities of Lessor in the
jurisdiction imposing the Tax that is unrelated to Lessor's dealings
with Lessee or
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the transactions contemplated by this Lease or the operation of the
Aircraft by Lessee; or
(b) imposed on the net income, profits or gains of Lessor by the United
States of America or the state or political subdivision thereof, but
excluding any Tax imposed by any such government or taxing authority
of any jurisdiction if and to the extent that such Tax results from
(i) the use (or to and/or from) operation, presence or registration of
the Aircraft, the Airframe, any Engine, any Spare 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, any Spare Engine or any Part in the jurisdiction
imposing the Tax; or
(c) imposed solely as the result of an event that occurs after the
expiration or other termination of this Lease and that is unrelated to
Lessor's dealings with Lessee or to the transactions contemplated by
this Lease.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, hypothecation, preference, priority, privilege, lease or encumbrance of
any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof, and any agreement to give any security
interest) and any option, trust or other preferential arrangement having the
practical effect of any of the foregoing.
"Loan" or "Loans" means the term loans made under the Credit Agreement.
"Loan Documents" means the Credit Agreement, the promissory notes
thereunder, the Leases, the Aircraft Chattel Mortgages and any other security
agreement entered into in connection with the Credit Agreement.
"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 Amended Aircraft Credit
Facility, the Pass Through Trust Documents, the FINOVA Agreement, the
NationsBanc Agreement, the Unsecured Revolving Credit Facility, the Philippine
Leases, the AFL I
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Leases, the Senior Note Documents and agreements in respect of Permitted
Extension Indebtedness and Other Permitted Indebtedness.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"NationsBanc Agreement" means the Loan Agreement, dated as of March 28,
1997, between Atlas Air, Inc., as Borrower, and NationsBanc 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 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, Spare Engines or engines, which are from time to time
incorporated or installed in or attached to the Airframe or any Engine, or
Spare Engine and all such items which are subsequently removed therefrom so
long as title thereto shall vest in Lessor in accordance with this Lease.
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"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);
(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
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interest of the lessee or sublessee under such lease to any restriction or
encumbrance referred to in the preceding clause (b);
(vi) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(vii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(viii) the rights of others under agreements or arrangements to the
extent expressly permitted by the terms of: (I) Sections 4(d) and 4(e) of
the Aircraft Chattel Mortgages, (II) Sections 4(d) and 4(e) of the
aircraft chattel mortgages entered into in connection with the AFL I
Credit Agreement and (III) Sections 4(d) and 4(e) of the aircraft chattel
mortgages entered into in connection with the Amended Aircraft Credit
Facility;
(ix) Liens described in Schedule 7(b) annexed hereto;
(x) Liens arising pursuant to the AFL I Credit Agreement; provided
that such Liens do not encumber any assets other than the AFL I Aircraft
and other assets of AFL I;
(xi) Liens securing Indebtedness incurred in accordance with Section
7(a)(11);
(xii) Liens granted pursuant to the Transaction Documents;
(xiii) Liens arising pursuant to the Amended Aircraft Credit
Facility; and
(xiv) 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
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such Indebtedness, plus the amount of expenses of Lessee reasonably incurred in
connection with such extension, (iii) in the case of any extension of
subordinated Indebtedness, such Permitted Extension Indebtedness is made
subordinate to the obligations of Lessee hereunder at least to the same extent
as the Indebtedness immediately prior to such extension, (iv) such Permitted
Extension Indebtedness has a final stated maturity later than the end of the
stated maturity of the Indebtedness being extended immediately prior to such
extension and (v) the amortization and the other terms, provisions, conditions,
covenants and events of default thereof taken as a whole shall be no more
onerous or restrictive from the perspective of 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, limited liability companies, joint stock
companies, Joint Ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"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 Lease.
"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
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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).
"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 Ratings Services.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general
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any instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Senior Notes Documents" means the Indenture, dated as of August 13, 1997
between Atlas Air, Inc. and State Street Bank and Trust Company relating to the
10 3/4% $150 million Senior Notes due 2005 of Lessee (the "Senior Notes") and
any and all related agreements, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with this
Lease.
"Services Agreement" means a Services Agreement between Lessor and Lessee
dated as of September 5, 1997.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Spare Engines" shall mean each General Electric CF6-50E2 aircraft engine
bearing manufacturer's serial numbers listed in the initial Lease Supplement.
"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
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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 and Spare Engines
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 and Spare Engines on the
date of determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof. For all
purposes of this Agreement other than the financial covenants set forth in
subsection 7(f) and the definitions related thereto, Lessor shall not be
considered a Subsidiary of Lessee.
"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.
"Tax" or "Taxes" shall have the meaning assigned to the term in Section
12(a) hereunder.
"Term" means the term for which the Aircraft and Spare Engines is leased
hereunder pursuant to Section 3(a) of the Lease, beginning on the Initial
Borrowing Date and ending on the Final Maturity Date, or such earlier date as
the Lease may be terminated in accordance with the terms thereof.
"Transaction" means collectively (i) the Contribution, (ii) the leasing by
Lessor to Lessee of the Aircraft, Spare Engines and certain other aircraft and
other spare engines pursuant to the Leases, (iii) the repayment of the Aircraft
Obligations and (iv) the release and termination of all security interests and
Liens encumbering the Aircraft, Spare Engines and any part thereof and any
other assets of Lessor.
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"Transaction Documents" shall mean the Amended Aircraft Credit Facility,
any bills of sale or certificates of transfer for each Aircraft and the Spare
Engines (including bills of sale on AC Form 8050-2), the Leases, all documents
relating to the repayment of the Aircraft 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
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 and the Spare Engines as evidenced by the
execution by Lessor and Lessee of a Lease Supplement leasing the Aircraft and
the Spare Engines hereunder. Lessee agrees to appoint in writing one or more of
its employees as its authorized representative to accept delivery of the
Aircraft pursuant to the terms hereof. Lessee hereby agrees that acceptance of
delivery by such employee or employees shall, without further act, irrevocably
constitute acceptance by Lessee of the Aircraft for all purposes of this Lease
Agreement.
SECTION 3. Term and Rent. (a) Term and Basic Rent. The Term shall commence
on the Initial Borrowing Date and end on the Final Maturity Date or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
Basic Rent shall accrue during the Term in accordance with Exhibit B hereto.
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
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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 and the Spare Engines 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 the Spare Engines and other unpaid
Obligations (other than principal and interest on other Loans relating to
other aircraft and other spare engines leased pursuant to the other Leases
and after taking into account all other payments of rent pursuant to the other
Leases on such date), then such excess amounts shall be paid by the Agent to
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
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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 and the Spare Engines 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 the Spare Engines and all other unpaid Obligations of Lessor (other
than principal and interest on Loans relating to other aircraft and other
spare engines and after taking into account all other payments of
Stipulated Loss Value pursuant to the other Leases on such date).
(f) Prepayment of Rent Payments:
(i) In the event that Lessor is at any time required to repay Loans
relating to the Aircraft and the Spare Engines 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 and the Spare Engines
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.
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(ii) The Lessee shall also be permitted to voluntarily prepay Basic
Rent at any time and from time to time, without premium or penalty upon
not less than three Business Days prior to written or telephonic notice to
Lessor and Agent.
(iii) In the event of any prepayment pursuant to this Section 3(f),
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 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 AND
SPARE 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 AND SPARE 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, SPARE ENGINE 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
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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 AND SPARE ENGINES 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 or Spare Engines 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, Spare Engines or any Parts, or
to release the manufacturer, any affiliate thereof, or any such subcontractor
or supplier from any such representation, warranty or obligation. Unless a
Default or Lease Event of Default shall have occurred and be continuing, Lessor
agrees to make available to Lessee such rights as Lessor may have under any
warranty with respect to the Aircraft or Spare Engines 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 or Spare Engines, 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
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necessary to carry out its business and operations, except in jurisdictions
where the failure to be so qualified or in good standing has not had and will
not have a Material Adverse Effect.
(iii) Subsidiaries. All of the Subsidiaries of Lessee as of the Initial
Borrowing Date are identified on Schedule 5(a)(iii) annexed hereto. The capital
stock of each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii)
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such capital stock constitutes Margin Stock.
Each of the Subsidiaries of Lessee identified in Schedule 5(a)(iii) annexed
hereto is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5(a)(iii)
annexed hereto correctly sets forth the ownership interest of Lessee and each
of its Subsidiaries in each of the Subsidiaries of Lessee identified therein.
(b) Authorization of Transaction Documents, etc.
(i) Authorization of Transaction Documents. The execution, delivery and
performance of this Lease and the other Transaction Documents have been duly
authorized by all necessary corporate action on the part of Lessee or its
Subsidiaries, as the case may be.
(ii) No Conflict. The execution, delivery and performance by Lessee or its
Subsidiaries, as the case may be, of this Lease and the other Transaction
Documents and the consummation of the transactions contemplated by the
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to Lessee or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Lessee
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Lessee or any of its Subsidiaries, (ii)
conflict with in any material respect, result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any material Contractual Obligation of Lessee or any of its Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon any of the
properties or assets of Lessee or any of its Subsidiaries (other than any 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
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any Contractual Obligation of Lessee or any of its Subsidiaries, except for
such approvals or consents which will be obtained on or before the Initial
Borrowing Date and disclosed in writing to Lessor and Lenders.
(iii) Governmental Consents. The execution, delivery and performance by
the Lessee and its Subsidiaries, as the case may be, of this Lease and the
other Transaction Documents and the consummation of the transactions
contemplated by this Lease and the other Transaction Documents do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body which has not been obtained or made on or prior to the date
required to be obtained or made.
(iv) Binding Obligation. This Lease and each of the other Transaction
Documents has been duly executed and delivered by Lessee and its Subsidiaries,
as the case may be, to the extent it is a party thereto, and is the legally
valid and binding obligation of each such Person, enforceable against each such
Person in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
(c) Financial Condition.
(A) Lessee has heretofore delivered to Lessor, Agent and Lenders, the
following financial statements and information: (i) the audited consolidated
and consolidating balance sheets of Lessee and its Subsidiaries as at December
31, 1996, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows of Lessee and its Subsidiaries for the
fiscal year then ended, (ii) the unaudited consolidated and consolidating
balance sheets of Lessee and its Subsidiaries as at June 30, 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
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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 June 30, 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 June 30, 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.
Lessee and its Subsidiaries have (i) good, sufficient and legal title to
(in the case of fee interests in real property), (ii) valid leasehold interests
in (in the case of leasehold interests in real or personal property), or (iii)
good title to (in the case of all other personal property), all of the
properties and assets reflected in the financial statements referred to in
subsection 5(c) or in the most recent financial statements delivered pursuant
to subsection 6(a), in each case except for assets disposed of since the date
of such financial statements in the ordinary course of business or as otherwise
permitted under subsection 7(g). Except as permitted by this Lease, all such
properties and assets are free and clear of Liens.
(f) Litigation, Adverse Facts.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Lessee or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Lessee,
threatened against or affecting Lessee or any of its
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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.
(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.
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(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.
(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.
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(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:
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(1) Monthly Financials: within 30 days after the end of each month
ending after the Initial Borrowing Date, financial statements prepared by
Lessee in the ordinary course of business certified by the chief financial
officer of Lessee that they fairly present the financial condition of
Lessee and its Subsidiaries for such month, subject to changes resulting
from audit and normal year-end adjustments; provided, however, such
monthly financial statements shall only be required to be delivered to
Agent to the extent such monthly financial statements are required to be
delivered under the Amended Aircraft Credit Facility 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
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financial officer of Lessee that they fairly present the financial
condition of Lessee and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, (b) a narrative report describing the operations of Lessee and
its Subsidiaries in the form prepared for presentation to senior
management for such fiscal year, and (c) in the case of such consolidated
financial statements, a report thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other
independent certified public accountants of recognized national standing
selected by Lessee and satisfactory to Lessor and Agent, which report
shall be unqualified, shall express no doubts about the ability of Lessee
and its Subsidiaries to continue as a going concern, and shall state that
such consolidated financial statements fairly present the consolidated
financial position of Lessee and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial 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) 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
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relate to an Environmental Claim which could result in a Material Adverse
Effect;
(6) Accountants' Certification: together with each delivery of
consolidated financial statements of Lessee and its Subsidiaries pursuant
to subdivision (3) above, a written statement by the independent certified
public accountants giving the report thereon (a) stating that their audit
examination has included a review of the terms of this Lease and the other
Transaction Documents as they relate to accounting matters, (b) stating
whether, in connection with their audit examination, any condition or
event that constitutes a Default or Lease Event of Default has come to
their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such Default or Lease Event of Default that would
not be disclosed in the course of their audit examination, and (c) stating
that based on their audit examination nothing has come to 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
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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 previously
disclosed in writing by Lessee to Lessor and Lenders or (Y) any material
development in any Proceeding that, in any case:
(I) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(II) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby and under the other Transaction
Documents;
written notice thereof together with such other information as may be
reasonably available to Lessee to enable Lessor and Lenders and their
counsel to evaluate such matters; and (b) within twenty days after the end
of each fiscal quarter of Lessee, a schedule of all Proceedings involving
an alleged liability of, or claims against or affecting, Lessee or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Lessor and Agent such other information as may be reasonably
requested by Lessor and Agent to enable Agent and their counsel to
evaluate any of such Proceedings;
(11) ERISA Notices: with reasonable promptness, copies of (a) each
annual report (Form 5500 Series) filed by Lessee or any of its ERISA
Affiliates with the Internal Revenue Service with respect
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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; and
(13) Other Information: with reasonable promptness, such other
information and data with respect to Lessee or any of its Subsidiaries as
from time to time may be reasonably requested by Lessor or Agent.
(b) Corporate Existence.
Except as permitted under subsection 7(g) hereunder, Lessee will, and
will cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however, that the corporate existence of any such
Subsidiary may be terminated if such termination is in the interests of Lessee
and its Subsidiaries and is not materially disadvantageous to Lessor or to any
assignee of the Lease. Lessee will at all times maintain its corporate
existence as a United States Citizen.
(c) Payment of Taxes and Claims; Tax Consolidation.
(i) Lessee will, and will cause its Subsidiaries to, pay all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty, fine or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty fine or interest shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such reserve or other appropriate provision, if any, with respect to any
liability for taxes, as shall be required in conformity with GAAP shall have
been made therefor in the financial statements of the Lessee.
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(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 insurers of recognized responsibility and
reputation, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage
(including, without limitation, flood insurance, if necessary or advisable) of
the kinds customarily carried or maintained under similar circumstances by
corporations engaged in similar businesses.
(e) Inspection; Lender Meeting.
Lessee will, and will cause its Subsidiaries to, permit any authorized
representatives designated by Lessor, Agent or any Lender to visit and inspect
any of the properties of Lessee or any of its Subsidiaries, including the
Aircraft or any part thereof and any Engine and any Spare Engine, and its and
their financial and accounting records, and, with the permission of Lessee
which shall not be unreasonably withheld, to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that 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 reason-
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ably 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.
(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.
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(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 Amended Aircraft Credit Facility;
(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 recently ended fiscal quarter (the "Determination Date") plus
seven times Consolidated Rental Payments for the four fiscal quarter
period ending on such Determination Date to Consolidated Adjusted EBITDA
plus Consolidated Rental Payments for the four fiscal quarter period
ending on such Determination Date does not exceed the ratio set forth in
subsection 7(f)(ii) for the fiscal quarter in which such Indebtedness is
to be incurred, (ii) the ratio of Consolidated Adjusted EBITDA for such
four fiscal
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quarter period to Consolidated Interest Expense for such four fiscal
quarter period is not less than the ratio set forth in subsection 7(f)(i)
for the fiscal quarter in which such Indebtedness is to be incurred; and
(iii) Lessee will be in compliance with all covenants set forth in
subsection 7(f) hereof, Lessee and its Subsidiaries may incur Other
Permitted Indebtedness;
(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;
(8) Lessee may become and remain liable with respect to Indebtedness
under the NationsBanc Agreement;
(9) AFL I may become and remain liable with respect to all the
obligations under AFL I Credit Agreement and Lessee may become and remain
liable with respect to the AFL I Leases;
(10) Lessee may become and remain liable with respect to the Senior
Notes;
(11) Lessee and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed, without duplication, when added to the maximum aggregate
liability, contingent or otherwise, of Lessee and its Subsidiaries
outstanding in accordance with Section 7(d)(6), $30 million at any time
outstanding; and
(12) 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 there- from, 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:
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(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 Aircraft Chattel Mortgages except for Permitted
Encumbrances of the type described in clauses (i), (ii) or (viii) of the
definition thereof.
B. No Restrictions on Subsidiary Distributions to Lessee or Other
Subsidiaries. Except (i) as provided herein, (ii) as described on Schedule 7(b)
annexed hereto, (iii) with respect to Special Purpose Subsidiaries and (iv)
pursuant to the AFL I Credit Agreement, 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, (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
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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 $15 million at any time
outstanding.
(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;
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(5) Lessee and its Subsidiaries may become and remain liable
with respect to Contingent Obligations to the extent such Contingent
Obligations are permitted pursuant to subsections 7(i) and 7(j); and
(6) 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)(11) 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 make Restricted Junior Payments with respect to
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;
(3) Lessee may apply Equity Proceeds to prepay Designated
Indebtedness; and
(4) Lessee may repurchase its Common Stock in an amount not to
exceed in any fiscal year $15 million for purposes of establishing or
contributing to an employee benefit plan; provided that any such
repurchased Common Stock resold to employees of Lessee shall, to the
extent of the price paid for such Common Stock by such employee, be
excluded from the calculation of the $15 million limit set forth above.
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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 set forth below to be less than the
correlative ratio indicated:
Fiscal Quarter Minimum Interest
Ending Coverage Ratio
June 30, 1997 1.90:1.00
September 30, 1997 1.90:1.00
December 31, 1997 1.90:1.00
March 31, 1998 1.90:1.00
June 30, 1998 1.90:1.00
September 30, 1998 1.90:1.00
December 31, 1998 1.90:1.00
March 31, 1999 1.90:1.00
June 30, 1999 1.90:1.00
September 30, 1999 2.00:1.00
December 31, 1999 2.00:1.00
March 31, 2000 2.10:1.00
June 30, 2000 2.10:1.00
September 30, 2000 2.20:1.00
December 31, 2000 2.20:1.00
March 31, 2001 2.20:1.00
June 30, 2001 2.20:1.00
September 30, 2001 2.30:1.00
December 31, 2001 2.30:1.00
March 31, 2002 2.40:1.00
June 30, 2002 2.40:1.00
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September 30, 2002 2.50:1.00
December 31, 2002 2.50:1.00
March 31, 2003 2.60:1.00
Thereafter 2.70:1.00
(ii) Maximum Leverage Ratio. Lessee shall not permit the ratio of (i)
Consolidated Total Debt at the end of any four fiscal quarter period ending
during one of the periods set forth below (less Cash and Cash Equivalents held
by Lessee in excess of $25 million as of such date) plus seven times
Consolidated Rental Payments for such four fiscal quarter period to (ii)
Consolidated Adjusted EBITDA plus Consolidated Rental Payments for such four
fiscal quarter period to exceed the correlative ratio indicated below:
Fiscal Quarter Maximum
Ending Leverage Ratio
June 30, 1997 5.75:1.00
September 30, 1997 6.25:1.00
December 31, 1997 6.75:1.00
March 31, 1998 6.75:1.00
June 30, 1998 7.00:1.00
September 30, 1998 7.00:1.00
December 31, 1998 6.75:1.00
March 31, 1999 6.50:1.00
June 30, 1999 6.25:1.00
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September 30, 1999 5.75:1.00
December 31, 1999 5.75:1.00
March 31, 2000 5.75:1.00
June 30, 2000 5.50:1.00
September 30, 2000 5.50:1.00
December 31, 2000 5.25:1.00
March 31, 2001 5.25:1.00
June 30, 2001 5.25:1.00
September 30, 2001 5.00:1.00
December 31, 2001 5.00:1.00
March 31, 2002 4.75:1.00
June 30, 2002 4.75:1.00
September 30, 2002 4.50:1.00
December 31, 2002 4.50:1.00
March 31, 2003 4.50:1.00
Thereafter 4.25:1.00
(iii) 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
Period Consolidated
Net Worth
fiscal year 1997 $215 million
fiscal year 1998 $225 million
fiscal year 1999 $250 million
fiscal year 2000 $275 million
fiscal year 2001 $300 million
fiscal year 2002 $350 million
fiscal year 2003 $400 million
fiscal year 2004 $450 million
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(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;
(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 a division or line of
business of another Person provided that, (a) the acquisition primarily
involves the acquisition of assets to be used in the business of Lessee,
(b) with respect to such
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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;
(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); and
(9) Lessee shall be permitted to dispose of or acquire assets
pursuant to the consolidation and relocation of its offices and
operations to Colorado; provided that the aggregate consideration paid
with respect to the acquisition of assets shall be in an amount not to
exceed $20 million.
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(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 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 the amount of
Consolidated Rental Payments made during such fiscal year in respect of up to
four 747-400F aircraft, subject to the agreement dated June 9, 1997 between
Lessee and The Boeing Company regarding the purchase of 10 new 747-400F
aircraft, leased by the Lessee within twelve months following the Initial
Borrowing Date plus an amount not to exceed $12 million during any fiscal year,
equal to Consolidated Rental Payments incurred in connection with sale and
leaseback transactions described in subsection 7(j), plus Consolidated Rental
Payments assumed pursuant to acquisitions permitted under subsection 7(g)(5).
(j) Sales and Lease-Backs.
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).
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(k) Transaction with Shareholders and Affiliates.
Lessee shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 10% or more of any
class of equity Securities of Lessee or with any Affiliate of Lessee or of any
such holder, on terms that are less favorable to Lessee or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to (i) reasonable and customary fees paid to and
indemnification of members of the Boards of Directors of Lessee and its
Subsidiaries, (ii) reasonable and customary salaries, bonuses and other
compensation paid to and indemnification of employees of Lessee or any of its
Subsidiaries in accordance with past practice or approved by the compensation
committee of Lessee or (iii) performance by Lessee of its obligations under and
in accordance with the Services Agreement.
(l) Disposal of Subsidiary Stock.
Lessee shall not:
(1) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its 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.
Notwithstanding the foregoing, each of the Lessor and AFL I shall be
permitted to issue preferred stock in an amount not to exceed $100,000 each to
a third party.
(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.
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SECTION 8. Return of the Aircraft and Spare Engines. (a) Condition Upon
Return. Unless the Aircraft or any Spare Engine has been sold pursuant to
Section 21, if at any time the Lessee shall return the Aircraft or Spare
Engines to the Lessor hereunder, Lessee, at its own expense, will return the
Aircraft or Spare Engines 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 and Spare Engines 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, Engines and Spare Engines (A)
shall have an airworthiness certificate from the Federal Aviation
Administration and shall be in full compliance with the provisions of Federal
Aviation Regulations, Part 121 (or successor regulation), and shall be in
material compliance with all applicable FAA noise, corrosion, environmental and
aging aircraft requirements, (B) shall be free and clear of all Liens and (C)
in the case of the Aircraft, shall be in a full freighter configuration and in
the case of the Aircraft and Spare Engines 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 and Spare Engines shall
not have been discriminated against as compared to other aircraft owned or
leased by Lessee whether by reason of its leased status or otherwise in
maintenance, use, operation or in any other manner whatsoever.
(b) Overhaul and Repair. The Airframe, Engines, Spare 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 and Spare Engines 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 and Spare Engines 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.
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(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), Spare Engines or
Acceptable Alternate Engine 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 or in lieu of a Spare
Engine, 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 or Spare 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 or Spare
Engines including those identified in pre-delivery inspections or test flights.
(h) Corrosion Treatment. At the time of return, the Aircraft and Spare
Engines 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 and Spare Engines upon any
termination of this Lease, Lessee shall deliver or cause to be delivered to
Lessor all logs, manuals and data and maintenance, inspection, modification and
overhaul records and similar records required to be maintained with respect to
the Aircraft and Spare Engines and Parts under FAA rules and 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.
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(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 or Spare Engines upon
its return hereunder, Lessee will provide Lessor, or cause Lessor to be
provided, with storage facilities for the Aircraft or Spare Engines 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 or Spare Engine 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 or Spare Engines are
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 or Spare Engines 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 or Spare
Engines, 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.
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SECTION 10. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.
(a) Maintenance and Operation. Lessee, at its own cost and expense, (i)
will be a "citizen of the United States" as defined in Section 40102(15) of
Title 49 of the United States Code and will be an air carrier certificated
under Sections 401 and 609 of the Act and hold all necessary air carrier
operating certificates; (ii) will cause ownership of the Aircraft and Spare
Engines 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, each Engine and each Spare Engine and install
replacement equipment and parts on the Airframe, each Engine and each Spare
Engine (A) so as to keep the Airframe, each Engine and each Spare Engine in
such operating condition as may be required to permit the Airframe, each Engine
and each Spare 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, each Engine and each Spare 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, Engines and
Spare Engines. Neither the Airframe nor any Engine nor any Spare Engine will be
maintained, used or operated in violation of any
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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 or Spare 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 or Spare 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.
Lessee will not operate, use or locate the Airframe or any Engine or
Spare 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 or Spare 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 or Spare 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 or Spare 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 or any Spare Engine 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 Spare Engine 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 or Spare 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
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deprive Lessor of the protections of Section 1110 of the Bankruptcy Code with
respect to the Aircraft or Spare Engine and shall not deprive the Agent of the
protections of Section 1110 of the Bankruptcy Code with respect to the Aircraft
or Spare Engine as assignee of Lessee's rights under this Lease pursuant to the
Aircraft Chattel Mortgage:
(i) transfer possession of the Airframe or any Engine or Spare
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 or Spare
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 or Spare Engine to normal interchange or
pooling agreements or arrangements of the type customary in the United
States airline industry and entered into by Lessee in the ordinary course
of business which do not contemplate or require the transfer of title to,
use for the remainder of its useful life, or registration of the Airframe
or title to or use for the remainder of its useful life of such Engine or
Spare Engine; provided, however, that if Lessee's title to or use for the
remainder of its useful life, of the Airframe or any Engine or Spare
Engine shall be divested under any such agreement or arrangement, such
divesture shall be deemed to be an Event of Loss with respect to the
Airframe or such Engine or Spare Engine and Lessee shall comply with
Section 13 in respect thereof;
(iv) install an Engine or Spare 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 and other than the Spare 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 or Spare Engine on an airframe leased to
Lessee or owned by Lessee subject to a conditional sale or other security
agreement,
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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 or Spare Engine by reason of such
Engine or Spare Engine being installed on such airframe at any time when
such Engine or Spare Engine is subject to the Aircraft Chattel Mortgage;
(vi) install an Engine or Spare 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 or Spare Engine resulting from such installation shall be
deemed to be an Event of Loss with respect to such Engine or Spare 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, Spare Engines or engines installed thereon with any third
party pursuant to which Lessee has operational control of the Airframe
and any Engines or Spare Engines installed thereon such operation to be
performed solely by individuals under the operational control of Lessee
possessing all current certificates and licenses that would be required
under the applicable laws of the United States for the performance by
such employees of similar functions within the United States; provided
that Lessee's obligations hereunder shall continue in full force and
effect notwithstanding any such ACMI Contract or wet lease.
provided, however, that the rights of any transferee who receives possession of
the Airframe or any Engine or Spare 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
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Engine or Spare Engine, and any such instrument of transfer shall expressly
prohibit any further transfer of the Airframe or such Engine or Spare 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 or Spare 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 and Spare 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 II,
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 or Spare 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 or Spare 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 Spare 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, any Spare Engine or any
Part, or for any other purpose whatsoever.
SECTION 11. Replacement and Pooling of Parts; Alterations, Modifications
and Additions.
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(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 or
any Spare 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 or any
Spare 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 or any Spare 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 or any
Spare 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 or Spare Engine for all purposes hereof to the same
extent as the property originally comprising, or installed on, such Airframe or
such Engine or Spare 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 or Spare 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 or Spare Engine in accordance with Section 11(a) as promptly as possible
after the removal of such removed part. In addition, any
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replacement Part when incorporated or installed in or attached to the Airframe
or any Engine or Spare Engine in accordance with Section 11(a) may be owned by
any third party subject to such a pooling arrangement, provided Lessee, at its
expense, as promptly thereafter as possible, either (A) causes such replacement
Part to become property of Lessor and subject to the lien and security interest
of the Aircraft Chattel Mortgage in accordance with Section 11(a) free and
clear of all Liens (except Permitted Encumbrances and the Aircraft Chattel
Mortgage relating to the Aircraft or Spare Engine) or (B) replaces such
replacement Part by incorporating or installing in or attaching to the Airframe
or such Engine or Spare 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 or Spare Engine).
(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, the
Engines and Spare 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, the Engines and Spare 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
or Spare 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 or Spare 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 or Spare Engine below the value,
utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition assuming the Airframe or such Engine or
Spare 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 or Spare 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)
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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 or
Spare Engine 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 or Spare 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 or Spare Engine without diminishing or impairing the value, utility or
airworthiness which the Airframe or such Engine or Spare Engine would have had
at such time had such alteration, modification or addition not occurred,
assuming the Airframe or such Engine or Spare Engine was otherwise in the
condition required by this Lease and the Aircraft Chattel Mortgage. Upon the
removal by Lessee of any such Part, as above provided, title thereto shall,
without further act, be free and clear of the interests of Lessor and all
rights derivative of Lessor's and such Part shall no longer be deemed a Part
hereunder.
(e) In no event shall the Lessor bear any liability or cost whatsoever
for (i) any alteration or modification of, or addition to, the Airframe or any
Engine or Spare 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 Spare 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 Spare 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 or Spare
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
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as security for such Tax, nothing in this Section shall require
the payment of any Tax so long as and to the extent that the validity thereof
shall be contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and 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, partners, employees, agents
and affiliates of Lessor, Agent and each Lender, (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct,
indirect or consequential and whether based on any federal, state or foreign
laws, statutes, rules or regulations (including without limitation securities
and commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of this Lease or the other Transaction Documents or
the transactions contemplated hereby or thereby (including without limitation
Lenders' agreement to make the Loans to Lessor or the use or intended use of
the proceeds of any of the Loans) (collectively called the "Indemnified
Liabilities"); provided that Lessee shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend,
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Lessee shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by the Indemnitees or any of them.
SECTION 13. Event of Loss. (a) If an Event of Loss shall occur with
respect to an Airframe or an Engine or Spare 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
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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 or Spare
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 or Spare Engine subject to such Event of Loss, and such
Airframe or Engine or Spare Engine shall thereupon cease to be an Airframe or
Engine or Spare 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" or "Spare 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 or Spare Engine, as
between the Lessor and Lessee, any payments on account of an Event of Loss
(other than insurance proceeds or other payments the application of which is
provided for in Section 14 below) received from any government authority or
other person shall be applied as follows:
(A) if such payments are received with respect to an Event of Loss
to an Airframe or Engine or Spare 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
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(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 or Spare 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 or Spare 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 and Spare Engines, 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 and Spare Engines
are on the ground and not in operation, Lessee may carry or cause to be
carried, in lieu of insurance required by this Section, insurance otherwise
conforming with the provisions of this Section except that the amounts of
coverage shall not be required to exceed the amounts of comprehensive airline
liability insurance, and the scope of risk covered and
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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 and
Spare Engines, 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
Spare Engines and other equipment while removed from the Airframe or 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 Spare Engine or crew in flight
(including any attempt at such seizure or control) made by any person or
persons aboard the Aircraft or another aircraft acting without the consent of
the insured, 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 or another 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 or Spare Engine, as the case may be, 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 and spare engines 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 or a
Spare Engine in excess of $2,000,000 (and, if a Default or Lease Event of
Default has occurred and is continuing,
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any such loss) shall be payable to the Lessor and to the Agent for the benefit
of Lenders; and shall be primary without right of contribution from any other
insurance which is carried by Lessor or Agent with respect to its interest
therein.
Lessee may self-insure, by way of deductible or equivalent provisions in
insurance policies, the risks required to be insured against pursuant to this
Section 14(b) in such reasonable amounts as are then applicable to other
similar aircraft or spare engines in Lessee's fleet which are of a value
comparable to the Aircraft or Spare Engines, as the case may be, 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 or
Spare 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
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Engine or Spare 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, the Engines and Spare Engines and stating that in the opinion
of such firm such insurance complies with the terms of this Section 14 and is
adequate to protect the interests of Lessee, Lessor and Agent, and (B)
certificates of the insurer or insurers evidencing the insurance covered by the
report. Lessee will cause such brokers to advise Agent in writing (x) promptly
of any default in the payment of any premium and of any other act or omission
on the part of Lessee of which such firm has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft or any Engine or Spare 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 or Spare
Engines 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 or Spare Engines
for its own account. Lessee may, at its own expense, carry insurance with
respect to its interest in the Aircraft or Spare Engines 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 or in the Spare Engines. Lessor agrees
that it will not assign or convey its right, title and interest in and to this
Lease or the Aircraft or Spare Engines except in accordance with the Credit
Agreement. Subject to the
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foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns and shall inure, to the direct benefit of, and shall also be
enforceable by the Agent and the Lenders, and their respective successors, as
assignees of Lessor.
SECTION 16. Events of Default. Each of the following events shall
constitute a Lease Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and each such
Lease Event of Default shall continue so long as, but only as long as, it shall
not have been remedied:
(a) Lessee shall fail to pay any installment of Rent, Stipulated
Loss Value or any other amounts owing pursuant to this Lease within 5
days after the due date thereof;
(b) Lessee shall fail to comply in any material respect with the
maintenance standards or to procure insurance coverage as prescribed
herein;
(c) There shall exist a Lease Event of Default under, and as
defined in, any other Lease or Lessee shall fail to perform or observe
any other covenant or condition set forth in this Lease or any other
Transaction Document, which failure shall remain unremedied for a period
of 10 Business Days after written notice from Lessor or Agent, unless
action has been taken within 15 Business Days to remedy such breach and
such action is being diligently pursued; provided such breach is capable
of being remedied;
(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
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bankruptcy, insolvency or similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over Lessee or any of its
Subsidiaries, or over all or a substantial part of its property, shall
have been entered; or there shall have occurred the appointment of an
interim receiver, trustee or other custodian of Lessee or any of its
Subsidiaries; or a warrant of attachment, execution or similar process
shall have been issued against any substantial part of the property of
Lessee or any of its subsidiaries, and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or
discharged;
(f) (i) Lessee or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall
consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; or
Lessee or any of its Subsidiaries shall make any assignment for the
benefit of creditors; or (ii) Lessee or any of its Subsidiaries shall be
unable, or shall fail generally, or shall admit in writing its inability,
to pay its debts as such debts become due; or the Board of Directors of
Lessee or any of its Subsidiaries (or any committee thereof) shall adopt
any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or
(g) Any order, judgment or decree shall be entered against Lessee
or any of its Subsidiaries decreeing the dissolution or split up of
Lessee or any of its Subsidiaries and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
(h) Registration of the Aircraft or Spare Engine is canceled and is
not cured within 15 Business Days;
(i) The Aircraft or Spare Engine are arrested or detained in
exercise of any lien and Lessee does not procure the release of such
Aircraft or Spare Engine within 15 business days; or
(j) There shall have occurred an Event of Default or Potential
Event of Default under the Amended Aircraft Credit Facility (whether or
not such Event
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of Default or Potential Event of Default is thereafter waived by the
requisite lenders);
(k) Lessee shall not be a Certificated Air Carrier within the
meaning of Title 49 of the United States Code, as amended;
(l) Lessee or any of its Subsidiaries shall fail to pay when due
following applicable grace periods (a) any principal of or interest on
any Indebtedness in an individual principal amount of $5 million or more
or any items of Indebtedness with an aggregate principal amount of $10
million or more or (b) any Contingent Obligation in an individual
principal amount of $5 million or more or any Contingent Obligations with
an aggregate principal amount of $10 million or more, in each case beyond
the end of any grace period provided therefor; or (ii) there shall exist
a breach by Lessee or any of its Subsidiaries with respect to any other
material term of (a) any evidence of any Indebtedness in an individual
principal amount of $5 million or more or any items of Indebtedness with
an aggregate principal amount of $10 million or more or any Contingent
Obligation in an individual principal amount of $5 million or more or any
Contingent Obligations with an aggregate principal amount of $10 million
or more or (b) any loan agreement, mortgage, indenture or other agreement
relating to such Indebtedness or Contingent Obligation(s), if the effect
of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its
stated maturity or the stated maturity of any underlying obligations, as
the case may be (upon the giving or receiving of notice, lapse of time,
both, or otherwise); or
(m) Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5
million or (ii) in the aggregate at any time an amount in excess of $10
million (in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Lessee or any of its Subsidiaries or
any of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days (or in any event later than
five days prior to the date of any proposed sale thereunder); or
(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
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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 or Spare 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 or Spare 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 or Spare 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 or Spare 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 or Spare Engine, 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 or Spare 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 or Spare 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 or Spare Engine, 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 and Spare Engines due
after the date specified in such notice if any), an amount equal to the
Stipulated Loss Value for the Aircraft and Spare Engines 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 and Spare Engines 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 and Spare Engines, Lessor, in lieu of exercising
its rights under paragraph (c) above with respect to such Aircraft and
Spare Engines, 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 and Spare Engines 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 and Spare Engines, 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;
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(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 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 or Spare Engine in accordance with the terms of Section 8 hereof or
in placing such Airframe or Engine or Spare 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 or Spare Engine in accordance with the terms of
Section 8 hereof or in placing such Airframe or Engine or Spare 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, Spare Engine 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 Spare 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
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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 Spare 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 Spare Engine or other Obligations
(other than principal and interest on Loans relating to other aircraft or other
spare engines) are outstanding under the Credit Agreement, all rights of Lessor
under this Section 17 shall be exercised only by the Agent as assignee of
Lessor's rights under this Lease pursuant to the Aircraft Chattel Mortgage.
SECTION 18. Lessee's Cooperation Concerning Certain Matters. (a)
Forthwith upon the execution and delivery of each Lease Supplement from time to
time 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 and Spare Engines. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor and the Agent such further documents and take such further action as
Lessor and the Agent may from time to time reasonably request in order more
effectively to carry out the intent and purpose of this Lease and the other
Transaction Documents and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor and Agent hereunder and
under the other Transaction Documents, including, without limitation, if
requested by Lessor and the Agent, the execution and delivery of supplements or
amendments hereto, at the expense of Lessee, each in recordable form, and all
financing statements and continuation statements, and all similar notices
required by applicable law at all times to be kept recorded and filed in such
manner and such places as Lessor and the Agent may reasonably request.
(b) Lessee agrees at its own expense to furnish to the Lessor and the
Agent promptly after execution and delivery of any supplement and amendment
hereto, an opinion of counsel satisfactory to Lessor and the Agent (which may
include Lessee's general counsel) stating that in the opinion of such counsel,
such supplement or amendment to the Lease (or a financing statement,
continuation statement or similar notice thereof if and to the extent permitted
or required by applicable law) has been properly recorded or filed for record
in all public offices in which such recording or filing is necessary to protect
the right, title and interest of Lessor hereunder and the Agent under the Loan
Documents.
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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: Counsel, 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 with specifications, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft or
Spare Engines, 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 or Spare Engines, (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
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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 Spare 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, Spare 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 or Spare Engines, as the case may
be, in compliance with the provisions of this Lease shall not be affected by
the provisions of 11 U.S.C. ss. 362 or 363, as amended from time to time, or
any analogue provisions of any superseding statute or any power of the
bankruptcy court to enjoin such taking of possession.
(c) The Lessor and Lessee hereby agree that this Lease, including any
modifications, supplements and amendments thereto, is intended to be treated as
a lease for purposes of the Internal Revenue Code and neither Lessor nor Lessee
shall file any
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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 or Spare Engines.
Nothing contained in this Lease shall be construed as conveying to the Lessee
any right, title or interest in the Aircraft or Spare Engines except as a
Lessee only. The Aircraft and Spare Engines 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 and
the Spare Engines at the end of the Term for a purchase price equal to the
higher of the Fair Market Sales Value (assuming that the Aircraft and Spare
Engines are in the condition required by the Lease) as of such date and
Stipulated Loss Value plus all accrued Rent and all Supplemental Rent then due.
Upon the payment by Lessee of the full of such amounts, Lessor shall convey to
Lessee all right, title and interest of Lessor in and to the Aircraft and Spare
Engines 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 Spare Engines 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 and Spare Engines
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.
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SECTION 23. Miscellaneous. (a) Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and Agent. This Lease shall
constitute an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title or interest in the Aircraft
or Spare Engines 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 and Spare Engines or with the
parties' agreement that this Lease be treated as a tax lease for purposes of
the Internal Revenue Code. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
reference herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK. LESSEE AND THE LESSOR HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER ARISING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE
OR ANY OTHER TRANSACTION DOCUMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR
BEFORE OR AFTER THE PAYMENT, OBSERVANCE OR PERFORMANCE OF LESSEE'S OR THE
LESSOR'S OBLIGATIONS UNDER THIS LEASE OR ANY OTHER TRANSACTION DOCUMENT. This
Lease may be executed by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
(b) This Lease, together with the agreements, instruments and other
documents required to be executed and delivered in connection herewith,
supersedes all prior agreements and understanding of the parties with respect
to the subject matter hereof and thereof, except any agreements referred to
herein.
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(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 and the Spare Engines, subject
to the reservations and conditions therein set forth. All rights of the Lessor
hereunder are subject to the Aircraft Chattel Mortgage and the Lessor and the
Lessee agree that so long as the lien of the Aircraft Chattel Mortgage has not
been discharged in accordance with its terms, (i) all payments hereunder shall
be made to the Agent for the benefit of Lenders to the extent of the Lenders'
interest in such payments; (ii) all notices from or to the Lessor shall be
copied to the Agent and (iii) the Lessee shall not take any actions that the
Lessor would be prohibited from taking under the terms of the Aircraft Chattel
Mortgage. Lessee hereby acknowledges due notice of, and consents to, such
assignment and to the creation of such mortgage and security interest. To the
extent, if any, that this Lease and any Lease Supplement constitutes chattel
paper (as such term is in effect in any applicable jurisdiction), no security
interest in this Lease or any Lease Supplement may be created through the
transfer or possession of any counterpart other than the original executed
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof or thereof.
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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 II, INC.
Lessor
By
------------------------------
Name:
Title:
ATLAS AIR, INC.,
Lessee
By
------------------------------
Name:
Title:
Receipt of this original counterpart of this Lease is hereby acknowledged this
____ day of September, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------
Name:
Title:
88
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 II, INC., ("Lessor"), and ATLAS AIR, INC. ("Lessee").
Lessor and Lessee have heretofore entered into a Lease Agreement
(___________), dated as of September 5, 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, Engines and Spare Engines under the Lease as and when delivered
by Lessor to Lessee in accordance with the terms thereof.
[(1)The Lease relates to the Airframe, Engines and Spare 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.]
--------
(1) This language for Lease Supplement No. 1.
89
EXHIBIT A
Page 2
[(2)The Lease relates to the Airframe, Engines and Spare Engines
described below, and a counterpart of the Lease, together with Lease Supplement
No. 1 dated September 5, 1997, to the Lease Agreement, has been recorded by the
Federal Aviation Administration on __________ __, 1997, as one document and
assigned Conveyance No. ____________.]
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease and Lessee
hereby accepts and leases from Lessor under the Lease the following described
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. ______;
(ii) Engines: four (4) aircraft engines bearing, respectively,
manufacturer's serial nos. [______, ______, ______ and ______] (each of
which engines has 750 or more rated takeoff horsepower or the equivalent
of such horsepower); and
(iii) Two Spare Engines: two (2) aircraft engines bearing,
respectively, manufacturer's serial nos. [__________________ and
___________] (each of which engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower).
2. The closing date of the Aircraft and Spare Engines 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 and Spare Engines shall
commence on the closing date and end on the Final Maturity Date.
3. Lessee hereby confirms to Lessor that Lessee has accepted the Aircraft
and Spare Engines for all purposes hereof and of the Lease as being airworthy,
--------
(2) This language for other Lease Supplements.
90
EXHIBIT A
Page 3
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 or
Spare Engines 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.
91
EXHIBIT A
Page 4
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 II, 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 September ___, 1997.
BANKERS TRUST COMPANY,
as Agent
By
------------------------------
Name:
Title:
92
EXHIBIT B
to
Lease Agreement
BASIC RENT
Date Principal Repayment
[Confidential information intentionally deleted
from FAA-filed counterpart]
93
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]
94
EXHIBIT D
to
Lease Agreement
[FORM OF COMPLIANCE CERTIFICATE]
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) We are the duly elected [Title] and [Title] of Atlas Air, Inc.,
a Delaware corporation ("Atlas");
(2) We have reviewed the terms of the four Lease Agreements, dated
as of September 5, 1997, between Atlas Freighter Leasing II, Inc., as
Lessor and Atlas, as Lessee (the "Leases") and the other Transaction Loan
Documents, and we have made, or have caused to be made under our
supervision, a review in reasonable detail of the transactions and the
condition of Atlas and its Subsidiaries during the accounting period
covered by the attached financial statements.*** The terms defined
therein and not otherwise defined in this Certificate (including
Attachment No. 1 annexed hereto and made a part hereof) shall be used in
this Certificate as therein defined; and
(3) The examination described in paragraph (2) above did not
disclose, and we have no knowledge of, the existence of any condition or
event which constitutes a Default or Lease Event of Default under any
Lease during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate[,
except as set forth below].
[Set forth [below] [in a separate attachment to this Certificate] are all
exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Atlas has taken, is taking, or proposes to take with respect to each such
condition or event:
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*** Compliance Certificate delivered on the date on which the Leases are
executed and delivered shall provide financials for the fourth quarter
fiscal period most recently ended.
95
EXHIBIT D
Page 2
The foregoing certifications, together with the computations set forth in
Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this _____________ day of ____________, 199__ pursuant to subsection
6(a)(4) of each Lease.
ATLAS AIR, INC.
By
------------------------------
Name:
Title:
96
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of _____________, 199__ and pertains to the period from
_____________, 199__ to _________________, 199__. Subsection references herein
relate to subsections of each Lease.
A. Indebtedness
1. Indebtedness permitted under subsection 7(a)(11): $__________
2. Aggregate liability, contingent or otherwise,
outstanding under subsection 7(d)(6): $__________
3. Maximum permitted under subsection 7(a)(11)
($30,000,000)-(A.2)): $__________
B. Liens
1. Indebtedness secured by Liens permitted under
subsection 7(b)A(iii): $__________
2. Maximum permitted under subsection 7(b)A(iii): $10,000,000
C. Investments
1. Consolidated book value of the assets of Atlas
and its Subsidiaries: $__________
2. 15% of C.1: $__________
3. Investments permitted under subsection 7(c)(iii): $__________
4. Maximum permitted under subsection 7(c)(iii)(C.2): $__________
5. Investments permitted under subsection 7(c)(vi): $__________
6. Maximum permitted under subsection 7(c)(vi): $15,000,000
97
D. Investments in Joint Ventures(1)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared or paid during fiscal year: $_________
3. Contributions to capital of Special Purpose
Subsidiaries during fiscal year: $_________
4. Investments made under subsection 7(c)(iv): $_________
5. Maximum permitted under subsection 7(c)(iv) (1-2-3): $_________
E. Contingent Obligations
1. Contingent Obligations permitted under sub-
section 7(d)(6): $_________
2. Indebtedness outstanding under subsection
section 7(a)(11): $_________
3. Maximum permitted under subsection 7(d)(6)
($30,000,000 - (E.2)): $__________
F. Restricted Junior Payments(2)
1. Lesser of 25% of Consolidated Net Income for
fiscal year and $10,000,000: $_________
2. Dividends declared and paid under sub-
section 7(e)(2): $_________
3. Maximum permitted under subsection 7(e)(2) (F.1): $_________
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(1) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of such fiscal year.
(2) To be determined with respect to Compliance Certificate delivered with
delivery of year-end financial statements pursuant to subdivision 6(a)(3)
in respect of fiscal year.
98
G. Minimum Interest Coverage Ratio (for the four-fiscal quarter
period ending ___________, 199__)
1. Consolidated Net Income: $_________
2. Consolidated Interest Expense: $_________
3. Provisions for taxes based on income: $_________
4. Total depreciation expense: $_________
5. Total amortization expense: $_________
6. Other non-cash items reducing Consolidated Net
Income: $_________
7. Other non-cash items increasing Consolidated
Net Income: $_________
8. All cash expenditures relating to reserves on
the June 30, 1997 balance sheet: $_________
9. Consolidated Adjusted EBITDA (adjusted for
periods ending prior to December 31, 1996)
(1 + 2 + 3 + 4 + 5 + 6 - 7) - 8 : $_________
10.Interest Coverage Ratio (9):(2): ____:1.00
11.Minimum ratio required under subsection 7(f)(i): ____:1.00
H. Maximum Leverage Ratio (as of _____________, 199__)
1. Consolidated Total Debt: $_________
2. Cash and Cash Equivalents in excess of
$25,000,000: $_________
3. Consolidated Rental Payments: $_________
4. Consolidated Adjusted EBITDA (G.9 above): $_________
5. Leverage Ratio (H.1 - H.2) + (7 x H.3) : (H.4 + H.3): ____:1.00
99
6. Maximum ratio permitted under subsection 7(f)(ii): ____:1.00
I. Minimum Consolidated Net Worth (as of ___________, 199__)
1. Consolidated Net Worth: $_________
2. Minimum required under subsection 7(f)(iii): $_________
J. Fundamental Changes
1. Aggregate value of assets sold in Asset Sales
during current fiscal year permitted under
subsection 7(g)(3): $_________
2. Maximum permitted under subsection 7(g)(3): $100,000,000
3. Aggregate value of assets sold in Asset Sales
after Closing Date in one or more transactions
permitted under subsection 7(g)(3): $_________
4. Maximum permitted under subsection 7(g)(3): $500,000,000
K. Consolidated Capital Expenditures
1. Consolidated Capital Expenditures for fiscal
year-to-date: $_________
2. Maximum Consolidated Capital Expenditures Amount
permitted under subsection 7(g)(8) for fiscal year: $_________
L. Leases
1. Consolidated Rental Payments incurred in connection with the
sale-leaseback transactions described in Subsection 7(j) of
the Leases in an amount not to exceed $12 million plus
Consolidated Rental Payments pursuant to acquisitions
permitted under Subsection
7(g)(5): $_________
2. Consolidated Rental Payments in effect during
current fiscal year: $_________
3. Maximum permitted under subsection 7(i) (L.1 +
$60,000,000): $_________