EXHIBIT 10.4.1
================================================================================
LEASE AGREEMENT
Dated as of July 29, 1998
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
ATLAS AIR, INC.,
Lessee
--------------------------------------------------------------------------------
One Boeing Model 747-47UF Aircraft Bearing
United States Registration No. N491MC
and Bearing Manufacturer's Serial No. 29252
with four GE Model CF6-80C2B1F Engines
Bearing Engine Manufacturer's Serial
Nos. 704-692, 704-693, 704-694 and 704-695
================================================================================
The right, title and interest of Lessor in and to, among other things,
this Lease Agreement has been assigned to and is subject to a security interest
in favor of Wilmington Trust Company, a Delaware banking corporation, as
Mortgagee, under the Trust Indenture and Mortgage, dated as of July 29, 1998,
for the benefit of the holders of the Equipment Notes referred to in such Trust
Indenture, all to the extent provided in such Trust Indenture. This Lease
Agreement has been executed in multiple counterparts; to the extent, if any,
that this Lease Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in Lessor's right, title and interest in and to this Lease Agreement
may be perfected through the delivery or possession of any counterpart of this
Lease Agreement other than the counterpart of this Lease Agreement that contains
the original receipt executed by Wilmington Trust Company, as Mortgagee.
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND CONSTRUCTION ............................... 1
SECTION 2. DELIVERY AND ACCEPTANCE .................................... 1
2.1 Delivery and Lease of Aircraft ................................ 1
2.2 Acceptance by Lessee .......................................... 2
SECTION 3. TERM AND RENT .............................................. 2
3.1 Term .......................................................... 2
3.2 Rent .......................................................... 2
3.3 Payments ...................................................... 6
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF
LESSOR; SECTION 1110 MATTERS ............................ 7
4.1 Disclaimer .................................................... 7
4.2 Certain Agreements of Lessor .................................. 8
4.3 Quiet Enjoyment ............................................... 8
4.4 Investment of Funds Held as Security .......................... 9
4.5 Title Transfers by Lessor ..................................... 10
4.6 Lessor's Interest in Certain Engines .......................... 10
4.7 Lease for U.S. Federal Income Tax Law
Purposes; Section 1110 of Bankruptcy Code .................. 11
SECTION 5. RETURN OF AIRCRAFT ......................................... 11
5.1 Compliance with Annex B ....................................... 11
5.2 Storage and Related Matters ................................... 11
5.3 Return of Other Engines ....................................... 12
5.4 Fuel .......................................................... 12
SECTION 6. LIENS ...................................................... 12
SECTION 7. REGISTRATION, OPERATION, POSSESSION,
SUBLEASING AND RECORDS .................................. 13
7.1 Registration and Operation .................................... 13
7.2 Possession .................................................... 15
7.3 Certain Limitations on Subleasing or
Other Relinquishment of Possession ......................... 20
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING
OF PARTS; ALTERATIONS, MODIFICATIONS
AND ADDITIONS; OTHER LESSEE COVENANTS ................... 21
8.1 Maintenance; Replacement and Pooling of
Parts; Alterations, Modifications and Additions ............ 21
-i-
15.1 Remedies ...................................................... 44
15.2 Limitations Under CRAF ........................................ 48
15.3 Right to Perform for Lessee ................................... 48
15.4 Determination of Fair Market Rental Value
and Fair Market Sales Value ................................ 48
15.5 Remedies Cumulative ........................................... 49
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF,
COUNTERCLAIM, ETC. ...................................... 49
SECTION 17. RENEWAL AND PURCHASE OPTIONS ............................... 50
17.1 Preliminary Notices ........................................... 50
17.2 Renewal Options ............................................... 51
17.3 Purchase Option ............................................... 53
17.4 Appraisals .................................................... 54
SECTION 18. MISCELLANEOUS .............................................. 55
18.1 Amendments .................................................... 55
18.2 Severability .................................................. 56
18.3 Third-Party Beneficiary ....................................... 56
18.4 Reproduction of Documents ..................................... 56
18.5 Counterparts .................................................. 57
18.6 Notices ....................................................... 57
18.7 Governing Law; Submission To
Jurisdiction; Venue ........................................ 57
18.8 No Waiver ..................................................... 58
18.9 Entire Agreement .............................................. 59
-iii-
LEASE AGREEMENT
LEASE AGREEMENT dated as of July 29, 1998 (this "Agreement" or
"Lease"), between (a) First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) ATLAS AIR,
INC., a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee are parties to the Participation Agreement,
pursuant to which, among other things, Lessor and Lessee have agreed to enter
into this Agreement.
B. Pursuant to the Trust Agreement, Owner Participant has
authorized Lessor to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements contained herein and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 Delivery and Lease of Aircraft
Lessor hereby agrees (subject to the satisfaction or waiver of the
conditions set forth in Section 5 of the Participation Agreement) to lease to
Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commenc-
-2-
ing immediately upon acquisition of the Aircraft by Lessor pursuant to the
Purchase Agreement Assignment.
2.2 Acceptance by Lessee
(a) By executing and delivering Lease Supplement No. 1, Lessee
confirms to Lessor that Lessee has duly and irrevocably accepted delivery of the
Aircraft for all purposes of this Agreement.
(b) Lessor has authorized one or more employees of Lessee,
designated by Lessee in writing, as the authorized representative or
representatives of Lessor to accept delivery of the Aircraft on behalf of Lessor
pursuant to the Purchase Agreement Assignment and the Participation Agreement.
Lessee hereby agrees that if delivery of the Aircraft shall be accepted by an
employee or employees of Lessee pursuant to such authorization by Lessor, such
acceptance of delivery by such employee or employees on behalf of Lessor shall,
without further act, irrevocably constitute acceptance by Lessee of the Aircraft
for all purposes of this Agreement.
SECTION 3. TERM AND RENT
3.1 Term
The Aircraft shall be leased hereunder for the Term, unless this
Agreement or the leasing of the Aircraft is earlier terminated in accordance
with any provision of this Agreement. Lessee shall have the option to renew the
leasing of the Aircraft hereunder pursuant to, and subject to the terms and
conditions of, Section 17, for the Renewal Lease Term.
3.2 Rent
3.2.1 Basic Rent; Adjustments to Basic Rent and Certain Other
Amounts
(a) During the Base Lease Term, Lessee shall pay to Lessor, on
each Payment Date, Basic Rent in the amount equal to the percentage of Lessor's
Cost specified in Schedule 2 for such Payment Date, which shall be allocated to
the Payment Period ending on such Payment Date, if designated as a payment in
arrears, or allocated to the Payment Period commencing on such Payment Date, if
designated as a payment in advance, in each case as specified in Schedule 2, as
such amount may be adjusted pursuant to Section 3.2.1(b).
-3-
(b) Basic Rent, Stipulated Loss Values, EBO Price, the EBO Date,
and Termination Values shall be subject to adjustment as follows:
(i) In the event that Transaction Expenses paid by Lessor pursuant
to Section 9.2 of the Participation Agreement are determined to be other
than 2.086% of Lessor's Cost, then in each case the Basic Rent percentages
set forth in Schedule 2, Stipulated Loss Value percentages set forth in
Schedule 3, the Termination Value percentages set forth in Schedule 4, and
the EBO Price and the EBO Date shall be recalculated (upwards or
downwards) by the Owner Participant, on or prior to the 120th day after
the Delivery Date using the same methods and assumptions used to calculate
original Basic Rent, Stipulated Loss Value and Termination Value
percentages and the EBO Price and the EBO Date, in order to (1) maintain
the Owner Participant's Net Economic Return and (2) to the extent possible
consistent with clause (1) hereof, maintain a targeted monthly Rent and
then minimize the Net Present Value of Rents and EBO Price to Lessee.
(ii) In the event of a refinancing as contemplated by Section 11 of
the Participation Agreement, then the Basic Rent percentages set forth in
Schedule 2, Stipulated Loss Value percentages set forth in Schedule 3, the
Termination Value percentages set forth in Schedule 4, and the EBO Price
and the EBO Date shall be recalculated (upwards or downwards) by the Owner
Participant, using the same methods and assumptions used to calculate
original Basic Rent, Stipulated Loss Value and Termination Value
Percentages, and the EBO Price and the EBO Date, in order to (1) maintain
the Owner Participant's Net Economic Return, and (2) to the extent
possible consistent with clause (1) hereof, maintain a targeted monthly
Rent and then minimize the Net Present Value of Rents and EBO Price to
Lessee.
(iii) In the event that Lessee is required to indemnify the Owner
Participant under the Tax Indemnity Agreement, then (A) in the event that
Lessee agrees to satisfy such indemnity obligation through an adjustment
to Basic Rent pursuant to Section 2.1(a) of the Tax Indemnity Agreement,
the Basic Rent percentages set forth in Schedule 2 and (B) in any event,
the Stipulated Loss Value percentages set forth in Schedule 3 and the
Termination Value percentages set forth in Schedule 4 shall be
recalculated (upwards or downwards) by Owner Participant, using the same
methods and assumptions (except to the extent such
-4-
assumptions shall be varied to take into account the Tax Loss (as such
term is defined in the Tax Indemnity Agreement) that is the subject of
such indemnification and any prior or contemporaneous Tax Loss) used to
calculate the Basic Rent percentages, the Stipulated Loss Value
percentages and the Termination Value percentages on the Delivery Date, in
order to (1) maintain Owner Participant's Net Economic Return and (2) to
the extent possible consistent with clause (1) hereof, maintain, a
targeted monthly Rent and then minimize the Net Present Value of Rents and
EBO Price to Lessee.
(iv) Notwithstanding anything to the contrary in this paragraph
(b), all adjustments, upwards or downwards, to Basic Rent shall be made in
a manner that causes the Lease to comply with Sections 4.02(5) and 4.07 of
Revenue Procedure 75-28 (or any applicable successor thereto) and Proposed
Treasury Regulation Section 1.467-3(c)(2)(i) (or any applicable successor
thereto), provided, however, that if no such Proposed Treasury Regulation
(or corresponding final Treasury Regulation) is in effect providing an
applicable "safe harbor" from characterization of the Lease as a
"disqualified leaseback or long-term agreement" within the meaning of
Section 467(b)(4) of the Code, taking into account the adjusted Basic Rent
structure and the event or events giving rise to the adjustment to Basic
Rent, then the adjustments, upwards or downwards, to Basic Rent shall be
made in a manner such that independent tax counsel, selected by Owner
Participant and reasonably acceptable to and compensated by Lessee, is
able to opine and does opine that there is no non-de minimis increased
risk that the Lease will be characterized as a "disqualified leaseback or
long-term agreement" within the meaning of Section 467(b)(4) of the Code
or will be subject to "constant rental accrual" under Section 467(b)(2) of
the Code.
(c) All adjustments pursuant to Section 3.2.1(b) shall be made as
promptly as practicable after either Owner Participant or Lessee gives notice to
the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Basic Rent, the
EBO Price, the EBO Date (which may change only at the election of Lessee),
Stipulated Loss Value and Termination Value shall be prepared by Owner
Participant, subject to verification by Lessee in accordance with Section
3.2.1(d). Promptly after an adjustment is made hereunder, Owner Participant
shall deliver to Lessee a description of such adjustment,
-5-
setting forth in reasonable detail the calculation thereof. All adjustments
required pursuant to Section 3.2.1(b) shall be set forth in a Lease Supplement
or in an amendment to this Lease, and, promptly after execution thereof by
Lessor and Lessee, Lessee shall give a copy thereof to Mortgagee. Furthermore,
notwithstanding anything contained in these subparagraphs (b) and (c) to the
contrary, the EBO Price shall not under any circumstances be adjusted to an
amount that is less than the anticipated fair market value of the Aircraft on
the EBO Date (as determined by GRA Aviation Specialists, Inc. on the Closing
Date as set forth in the appraisal required as a closing condition in Section
5.1.2(xv) of the Participation Agreement) nor to an amount that is less than the
amount required to preserve Owner Participant's Net Economic Return. Any such
post-Closing adjustment to the EBO Date shall be conditioned on the Owner
Participant receiving an appraisal (at Lessee's expense) from GRA Aviation
Specialists, Inc. (or such other appraisor selected by the Owner Participant and
reasonably acceptable to the Lessee) at such time to the effect that (A) the EBO
Price on such adjusted EBO Date is not below the greater of (i) the estimated
Fair Market Sales Value on such adjusted EBO Date and (ii) the amount required
to preserve Owner Participant's Net Economic Return, and (B) based on the
remaining scheduled Basic Rent payments and Lessee's fair market value purchase
option at the end of the originally scheduled Base Lease Term, Lessee will not
be economically compelled to exercise its option to purchase the Aircraft at the
EBO Price on such adjusted EBO Date.
(d) If Lessee believes that any calculations by Owner Participant
pursuant to Section 3.2.1(c) are in error, and if, after consultation, Lessee
and Owner Participant are unable to agree on an adjustment, then a nationally
recognized independent certified public accounting firm selected by Lessee and
reasonably satisfactory to Owner Participant shall verify such calculations.
Owner Participant will make available to such firm, but not, in any
circumstances, to Lessee or any representative of Lessee, the methodology and
assumptions referred to in Section 3.2.1(b) and any modifications thereto made
to reflect the events giving rise to adjustments hereunder (subject to the
execution by such firm of a confidentiality agreement, reasonably acceptable to
Owner Participant, prohibiting disclosure of such methodology and assumptions to
Lessee or any third party). The determination by such firm of accountants shall
be final. Lessee shall pay all costs and expenses of such verification by such
accountants, provided that if it results in a decrease in Basic Rent which
decreases the remaining Net Present Value of Rents by $10,000 from the re-
-6-
maining Net Present Value of Rents as recalculated by the Owner Participant,
then the Owner Participant will pay such costs and expenses.
(e) Notwithstanding anything to the contrary in any Operative
Agreement, the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes prior to such Date), the
aggregate principal amount of scheduled installments due on the Equipment Notes
outstanding on such Payment Date, together with the accrued and unpaid interest
thereon, due on such Payment Date in respect of the Equipment Notes; provided,
however, that no installment of Basic Rent shall be increased to the extent such
increase would be based upon (i) any attachment or diversion of Basic Rent on
account of Lessor Liens, (ii) any modification of the payment terms of the
Equipment Notes, other than as required or permitted by any Operative Agreement
(including, without limitation, as permitted upon the occurrence of a Lease
Event of Default) or (iii) the acceleration of any Equipment Note or Equipment
Notes due solely to the occurrence of an Indenture Event of Default that does
not constitute a Lease Event of Default.
3.2.2 Supplemental Rent
Lessee shall pay to Lessor, or to whosoever shall be entitled
thereto, any and all Supplemental Rent when and as the same shall become due and
owing. Lessee will also pay to Lessor, or to whosoever shall be entitled thereto
as Supplemental Rent, to the extent permitted by applicable Law, interest at the
Payment Due Rate on any part of any amount of Rent (including, without
limitation, Supplemental Rent) not paid by 12:30 p.m., New York time, on the
date when due (so long as, in the case of any person not a party to the
Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to, but excluding, the date of payment in
full.
3.3 Payments
(a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 12:30 p.m., New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior
-7-
to the date such payment of Rent is due or, in the case of any payment of
Supplemental Rent expressly payable to a person other than Lessor, to the person
that shall be entitled thereto to such account in the United States as such
person may specify from time to time to Lessee at least 10 Business Days prior
to the date such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever any
payment of Rent shall be due on a day that is not a Business Day, such payment
shall be made on the next day that is a Business Day, and, if such payment is
made on such next Business Day, no interest shall accrue on the amount of such
payment during such extension.
(c) So long as Lessee has not received written notice from the
Mortgagee that the Lien of the Trust Indenture has been discharged, and
notwithstanding Section 3.3(a), Lessor hereby directs, and Lessee agrees, that
all payments of Rent and all other amounts payable by Lessee hereunder, other
than Excluded Payments, shall be paid directly to Mortgagee on behalf of Lessor
by wire transfer of immediately available Dollars to the account of Mortgagee
specified in Schedule 1 to the Participation Agreement, or to such other account
in the United States as Mortgagee may specify by written notice to Lessor and
Lessee at least 10 Business Days prior to the date such payment of Rent is due.
(d) Excluded Payments shall be paid by wire transfer of immediately
available Dollars to the account of the person specified in the Participation
Agreement or, if not so specified, to such account in the United States as may
be specified by such person by written notice to Lessor and Lessee from time to
time at least 10 Business Days prior to the date such payment is required to be
made.
(e) All computations of interest under this Agreement shall be made
on the basis of a year of 360 days comprised of twelve 30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS
4.1 Disclaimer
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS."
LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR,
MORTGAGEE AND ANY PARTICIPANT
-8-
(i) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF AND (ii) NONE OF
LESSOR, MORTGAGEE AND ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE
MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY
ENGINE OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR
ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER (OTHER THAN
REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND ANY OWNER
PARTICIPANT WITH RESPECT TO LESSOR LIENS IN EXISTENCE ON THE DELIVERY
DATE), EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY
PART THEREOF.
4.2 Certain Agreements of Lessor
Unless a Lease Event of Default shall have occurred and be
continuing, Lessor agrees to make available to Lessee such rights as Lessor may
have under any warranty with respect to the Aircraft made, or made available, by
Airframe Manufacturer or Engine Manufacturer or any of their respective
subcontractors or suppliers, as the case may be, pursuant to and in accordance
with the terms of the Purchase Agreement Assignment.
4.3 Quiet Enjoyment
So long as no Lease Event of Default shall have occurred and be
continuing, Lessor shall not take or cause to be taken or permit any Person
lawfully claiming by or through it to take any action to interfere with Lessee's
(or Permitted Sublessee's) rights hereunder to continued possession, use and
operation of, and quiet enjoyment of the Aircraft, and other rights with respect
to the Aircraft hereunder during the Term.
-9-
4.4 Investment of Funds Held as Security
4.4.1 Investment
Any moneys required to be paid to or retained by Lessor that are
required to be paid to Lessee or applied as provided herein shall, until paid to
Lessee as provided herein or applied as provided herein, be invested by Lessor
from time to time as directed in writing by Lessee (or, if Lessee fails to so
direct, as directed by Lessor in its sole discretion) and at the expense and
risk of Lessee in Cash Equivalents so long as such Cash Equivalents specified by
Lessee or Lessor, as the case may be, can be acquired by Lessor using its best
efforts; provided, that so long as the Lien of the Trust Indenture shall not
have been discharged, such moneys shall be invested and held by Mortgagee, as
assignee of Lessor, in accordance with this Lease and upon discharge of such
Lien, Mortgagee shall pay any such money held by it to Lessor to be held and
invested in accordance with this Section.
4.4.2 Payment of Gain or Loss
Any net gain (including interest received) realized as the result of
investments pursuant to Section 4.4.1 (net of any fees, commissions and other
reasonable expenses, if any, incurred in connection with such investment) shall
be held and applied in the same manner as the principal amount is to be held and
applied hereunder. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment), such amount so paid to be held and applied by Lessor as
contemplated in Section 4.4.1 above.
4.4.3 Limitation of Liability
All investments under this Section 4.4 shall be at the expense and
risk of Lessee, and Lessor and Mortgagee shall not be liable for any loss
resulting from any investment made under this Section 4.4 other than by reason
of its willful misconduct or gross negligence. Any such investment may be sold
(without regard to its maturity) by Lessor, or by Mortgagee as assignee of
Lessor, without instructions whenever such sale is necessary to make a
distribution required by this Lease.
-10-
4.5 Title Transfers by Lessor
If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other person, as the case
may be, all of Lessor's right, title and interest in and to the Aircraft,
Airframe or such Engine, as the case may be, free and clear of all Lessor Liens,
(2) so long as the Lien of the Trust Indenture has not been discharged, comply
with the Trust Indenture relating to the release of the Aircraft, Airframe or
such Engine, (3) assign to Lessee or such other person, as the case may be, if
and to the extent permitted under the Purchase Agreement, all warranties of
Airframe Manufacturer and Engine Manufacturer with respect to the Aircraft,
Airframe or such Engine, and (4) assign to Lessee or such other person, as the
case may be, if and to the extent permitted, all claims, if any, for damage to
the Aircraft, Airframe or such Engine, in each case free of Lessor Liens, and
without recourse or warranty of any kind whatsoever (except as to the transfer
described in clause (1) above and as to the absence of such Lessor Liens, as
aforesaid), and (b) Lessor shall promptly deliver to Lessee or such other
person, as the case may be, a ▇▇▇▇ of sale and agreements of assignment,
evidencing such transfer and assignment, and such other instruments of transfer,
all in form and substance reasonably satisfactory to Lessee (or such other
person, as the case may be), as Lessee (or such other person, as the case may
be) may reasonably request.
4.6 Lessor's Interest in Certain Engines
Lessor hereby agrees for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any engine leased to, or purchased
by, Lessee or any Permitted Sublessee subject to a lease, conditional sale,
trust indenture or other security agreement that Lessor, its successors and
assigns will not acquire or claim, as against such lessor, conditional seller,
indenture trustee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such indenture trustee or
secured party.
-11-
4.7 Lease for U.S. Federal Income Tax Law Purposes; Section 1110 of
Bankruptcy Code
(a) Lessee and Lessor agree that this Lease is, and shall be treated
as, a lease for U.S. federal income tax purposes of the Aircraft, Airframe,
Engines and Parts.
(b) It is the intention of each of Lessee and Lessor that Lessor
(and Mortgagee as assignee of Lessor under the Trust Indenture) shall be
entitled to the benefits of Section 1110 with respect to the right to take
possession of the Aircraft, Airframe, Engines and Parts as provided in this
Lease.
SECTION 5. RETURN OF AIRCRAFT
5.1 Compliance with Annex B
Lessee shall comply with each of the provisions of Annex B hereto,
which provisions are hereby incorporated by this reference as if set forth in
full herein.
5.2 Storage and Related Matters
If Lessor gives written notice to Lessee not less than 60 days nor
more than 120 days prior to the end of the Term requesting outdoor parking of
the Aircraft upon its return hereunder, Lessee will assist Lessor in arranging
outdoor parking facilities for the Aircraft for a period up to 30 days,
commencing on the date of such return, and upon request of Lessor to Lessee made
at least 10 days prior to the end of such initial 30 day period, for an
additional 30 day period commencing upon expiration of such initial period, at
such outdoor parking facility in the 48 contiguous states of the United States
as Lessee may select. Lessee shall, at Lessor's written request, maintain
insurance (if available) for the Aircraft during such outdoor parking period,
provided that Lessor shall reimburse Lessee for Lessee's out-of-pocket cost of
providing such insurance. Such outdoor parking shall be at Lessor's risk, and
Lessor shall pay all applicable outdoor parking fees; PROVIDED that Lessee's
obligation to assist Lessor in arranging parking shall be subject to Lessor
entering into an agreement prior to the commencement of the outdoor parking
period with the outdoor parking facility providing, among other things, that
Lessor shall bear all maintenance charges (other than maintenance required as a
direct result of Lessee's failure to comply with the provisions of Annex B) and
other costs incurred.
-12-
5.3 Return of Other Engines
In the event that any Engine owned by Lessor shall not be installed
on the Airframe at the time of return hereunder, Lessee shall be required to
return the Airframe hereunder with a Replacement Engine meeting the requirements
of, and in accordance with, Section 10 hereof and Annex B hereto. Thereupon,
Lessor will transfer to Lessee the Engine constituting part of such Aircraft but
not installed on such Airframe at the time of the return of the Airframe.
5.4 Fuel
Upon the return of the Airframe upon any termination of this Lease,
Lessor shall pay Lessee, as compensation for any fuel or oil contained in the
fuel or oil tanks of such Airframe, the value of such fuel or oil at the price
paid by Lessee for such fuel or oil, provided that if the Aircraft is being
returned in connection with the exercise of remedies pursuant to Section 15,
Lessor shall have no obligation to make such payment to Lessee until Lessor
shall have been paid all amounts due to it pursuant to Section 15.
SECTION 6. LIENS
Lessee shall not, directly or indirectly, create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine or any Part, title to any of the foregoing or any interest of Lessee
therein, or the Lessee's rights in and to this Lease or any Permitted Sublease,
except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens; (c) the rights of others under agreements
or arrangements to the extent permitted by the terms of Sections 7.2 and 7.3;
(d) Liens for Taxes of Lessee or any Permitted Sublessee (and their respective
U.S. federal tax law consolidated groups), or Liens for Taxes of any Tax
Indemnitee (and its U.S. federal tax law consolidated group) for which Lessee is
obligated to indemnify such Tax Indemnitee under any of the Lessee Operative
Agreements, in any such case either not yet due or being contested in good faith
by appropriate proceedings so long as such Liens and such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or the interest of any Participant therein or impair the
lien of the Trust Indenture; (e) materialmen's, mechanics', workers',
repairers', employees'
-13-
or other like Liens arising in the ordinary course of business for amounts the
payment of which is either not yet delinquent for more than 60 days or is being
contested in good faith by appropriate proceedings, so long as such Liens and
such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Aircraft, the Airframe, any Engine or the interest of any
Participant therein or impair the lien of the Trust Indenture; (f) Liens arising
out of any judgment or award against Lessee (or against any Permitted
Sublessee), so long as such judgment shall, within 60 days after the entry
thereof, have been discharged or vacated, or execution thereof stayed pending
appeal or shall have been discharged, vacated or reversed within 60 days after
the expiration of such stay, and so long as during any such 60-day period there
is not, or any such judgment or award does not involve, any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein or impair the lien of the Trust Indenture,
and (g) any other Lien with respect to which Lessee (or any Permitted Sublessee)
shall have provided a bond, cash collateral or other security adequate in the
reasonable opinion of Lessor. Lessee shall promptly take (or cause to be taken)
such action as may be necessary duly to discharge (by bonding or otherwise) any
Lien not excepted above if the same shall at any time arise in respect of the
Aircraft, the Airframe, any Engine or any Part during the Term.
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS
7.1 Registration and Operation
7.1.1 Registration and Recordation
Subject to the compliance by Lessor and Owner Participant with their
respective obligations under Section 13 of the Participation Agreement, Lessee
shall cause the Aircraft to be, and at all times during the Term to remain, duly
registered with the FAA under the Act or with such other country of registry as
shall be permitted under Section 7.1.2 below, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Act cannot be
effected with the FAA because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Act). Lessor shall execute and deliver all such documents as Lessee (or any
Permitted Sublessee) may reasonably request for the purpose of effecting and
continuing such registration. Unless Mortgagee has given Lessee notice
-14-
that the Trust Indenture has been discharged, Lessee shall also cause the Trust
Indenture to be duly recorded and at all times maintained of record as a
first-priority perfected mortgage (subject to Permitted Liens) on the Aircraft,
the Airframe and each of the Engines (except to the extent such perfection or
priority cannot be maintained solely as a result of the failure by Lessor or
Mortgagee to execute and deliver any necessary documents).
7.1.2 Reregistration
So long as no Specified Default or Lease Event of Default shall have
occurred and be continuing, Lessee may, by written notice to Lessor, request to
change the country of registration of the Aircraft. Any such change in
registration shall be effected only in compliance with, and subject to all of
the conditions set forth in, Section 7.6.11 of the Participation Agreement;
PROVIDED, HOWEVER, that any such reregistration to a Permitted Foreign Air
Carrier shall not be permitted to occur prior to the end of the Tax Attribute
Period unless Lessee prepays to the Owner Participant on a lump-sum basis any
indemnity required under the Tax Indemnity Agreement as a result of such
reregistration.
7.1.3 Markings
If permitted by applicable Law, on or reasonably promptly after the
Delivery Date, Lessee will cause to be affixed to, and maintained in, the
cockpit of the Airframe and on each Engine, in each case, in a clearly visible
location (it being understood that the location of such placards, as identified
to the Owner Participant prior to the Delivery Date, shall be deemed to be in
compliance with this requirement), a placard of a reasonable size and shape
bearing the legend, in English, set forth in Schedule 6. Such placards may be
removed temporarily, if. necessary, in the course of maintenance of the Airframe
or Engines. If any such placard is destroyed or becomes illegible, Lessee shall
promptly replace it with a placard complying with the requirements of this
Section 7.1.3. Except as provided above, Lessee will not allow the name of any
Person to be placed on the Airframe or on an Engine as an explicit designation
of ownership.
7.1.4 Compliance With Laws
Lessee shall not, and shall not allow any other person to, operate,
use, maintain, service, repair or overhaul the Aircraft (a) in violation of any
Law binding on or applicable
-15-
to the Aircraft, the Airframe or any Engine, or (b) in violation of any
airworthiness certificate, license or registration of any Government Entity
relating to the Aircraft, the Airframe or any Engine, except (1) immaterial or
non-recurring violations with respect to which corrective measures are taken
promptly by Lessee or a Permitted Sublessee, as the case may be, upon discovery
thereof, and (2) to the extent Lessee or any Permitted Sublessee is contesting
the validity or application of any such Law or requirement relating to any such
certificate, license or registration in good faith in any reasonable manner
which does not involve any material risk of the sale, forfeiture or loss of the
Aircraft, the Airframe, any Engine or the interest of any Participant therein,
any material risk of criminal liability or of material civil penalty against
Lessor, Mortgagee or any Participant or impair the lien of the Trust Indentures.
7.1.5 Operation
Lessee agrees not to operate, use or locate the Aircraft, the
Airframe or any Engine, or allow the Aircraft, the Airframe or any Engine to be
operated, used or located (a) in any area excluded from coverage by any
insurance required by the terms of Section 11, except in the case of a
requisition by or transfer to the U.S. Government where Lessee obtains an
indemnity in lieu of such insurance from the U.S. Government, or insurance from
the U.S. Government, covering such area, in accordance with Section 11.3 or (b)
in any recognized area of hostilities unless fully covered in accordance with
Annex D by war-risk insurance as required by the terms of Section 11 (including,
without limitation, Section 11.3), unless in any. case referred to in this
Section 7.1.5 the Aircraft is only temporarily operated, used or located in such
area as a result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition or other similar unforeseen circumstances, so long
as Lessee diligently and in good faith proceeds to remove the Aircraft from such
area.
7.2 Possession
Lessee will not, without the prior written consent of Lessor,
sublease or otherwise in any manner deliver, transfer or relinquish possession
of the Aircraft, the Airframe or any Engine or install any Engine, or permit any
Engine to be installed, on any airframe other than the Airframe; provided,
however, subject to the provisions of Section 7.3, Lessee may, without such
prior written consent:
-16-
7.2.1 Interchange and Pooling
Subject or permit any Permitted Sublessee to subject any Engine to
normal interchange agreements or pooling agreements or arrangements, in each
case customary in the commercial air cargo industry and entered into by Lessee
or such Permitted Sublessee, as the case may be, in the ordinary course of
business; provided, however, that if Lessor's title to any such Engine is
divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with, Section
10.
7.2.2 Testing and Service
Deliver or permit any Permitted Sublessee to deliver possession of
the Aircraft, Airframe, any Engine or any Part (i) to the manufacturer thereof
or to any third-party maintenance provider, for testing, service, repair,
maintenance or overhaul work on the Aircraft, Airframe, any Engine or any Part,
or, to the extent required or permitted by the terms of Annex C, for alterations
or modifications in or additions to the Aircraft, Airframe or any Engine or (ii)
to any Person for the purpose of transport to a Person referred to in the
preceding clause (i).
7.2.3 Transfer to U.S. Government
Transfer or permit any Permitted Sublessee to transfer possession of
the Aircraft, Airframe or any Engine to the U.S. Government, in which event
Lessee shall promptly notify Lessor and Mortgagee in writing of any such
transfer of possession and, in the case of any such transfer pursuant to a
written contract, will provide to the extent available and practicable a copy of
such written contract to Lessor, and, in the case of any transfer pursuant to
CRAF, in such notification shall identify by name, address and telephone numbers
the Contracting Office Representative or Representatives for the Military
Airlift Command of the United States Air Force to whom notices must be given and
to whom requests or claims must be made to the extent applicable under CRAF.
7.2.4 Installation of Engines on Owned Aircraft
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sub-
-17-
lessee, as the case may be, free and clear of all Liens, except (a) Permitted
Liens and those that do not apply to the Engines and (b) the rights of third
parties under normal interchange or pooling agreements and arrangements of the
type that would be permitted under Section 7.2.1.
7.2.5 Installation of Engines on Other Airframes
Install or permit any Permitted Sublessee to install an Engine on an
airframe leased to Lessee or such Permitted Sublessee, or purchased by Lessee or
such Permitted Sublessee subject to a mortgage, security agreement, conditional
sale or other secured financing arrangement, but only if (a) such airframe is
free and clear of all Liens, except (i) the rights of the parties to such lease,
or any such secured financing arrangement, covering such airframe and (ii) Liens
of the type permitted by clauses (a) and (b) of Section 7.2.4 and (b) Lessee or
Permitted Sublessee, as the case may be, shall have received from the lessor,
mortgagee, secured party or conditional seller, in respect of such airframe, a
written agreement (which may be a copy of the lease, mortgage, security
agreement, conditional sale or other agreement covering such airframe), whereby
such Person agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being installed
on such airframe at any time while such Engine is subject to this Lease or is
owned by Lessor.
7.2.6 Installations of Engines on Financed Aircraft
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, leased to Lessee or such
Permitted Sublessee, or purchased by Lessee or such Permitted Sublessee subject
to a conditional sale or other security agreement under circumstances where
neither Section 7.2.4 or 7.2.5 is applicable; provided, however, that any such
installation shall be deemed an Event of Loss with respect to such Engine, and
Lessee shall comply with Section 10.2 hereof in respect thereof. Until Section
10.2 shall have been complied with, Lessor's interest in such Engine shall
remain in full force and effect.
7.2.7 Subleasing
With respect to the Aircraft, Airframe or any Engine, so long as no
Specified Default or Lease Event of Default shall have occurred and is
continuing, enter into a sublease with any Permitted Air Carrier, but only if:
-18-
(a) Lessee shall provide written notice to Lessor and Mortgagee
(such notice in the event of a sublease to a U.S. Air Carrier to be given
promptly after entering into any such sublease or, in the case of a
sublease to any other Permitted Air Carrier, 30 days in advance of
entering into such sublease if during the Tax Attribute Period, otherwise
10 days in advance of entering into such sub lease);
(b) At the time that Lessee enters into such sublease, such
Permitted Air Carrier shall not be subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding, and shall
not have substantially all of its property in the possession of any
liquidator, trustee, receiver or similar person;
(c) Any such sublease (i) shall not extend beyond the expiration
of the Base Lease Term or any Renewal Lease Term then in effect unless
Lessee shall have irrevocably committed to purchase the Aircraft, (ii)
shall include provisions for the maintenance, operation, possession,
inspection and insurance of the Aircraft that are the same in all material
respects as the applicable provisions of this Lease and (iii) shall be
expressly subject and subordinate to all the terms of this Agreement and
to the rights, powers and remedies of Lessor hereunder, including, without
limitation, Lessor's rights under Section 15 to repossess the Aircraft,
Airframe and Engines and to terminate such sublease upon the occurrence of
a Lease Event of Default;
(d) In connection with a sublease to a Permitted Foreign Air
Carrier, (1) the United States maintains diplomatic relations with the
country of domicile of such Permitted Foreign Air Carrier (or, in the case
of Taiwan, diplomatic relations at least as good as those in effect on the
Delivery Date) and (2) Lessee shall have furnished Lessor and Mortgagee a
favorable opinion of counsel, reasonably satisfactory to Lessor, in the
country of domicile of such Permitted Foreign Air Carrier, that (i) the
terms of such sublease are the legal, valid and binding obligations of the
parties thereto enforceable under the laws of such jurisdiction, (ii) it
is not necessary for Owner Participant, Lessor or Mortgagee to register or
qualify to do business in such jurisdiction, if not already so registered
or qualified, as a result, in whole or in part, of the proposed sublease,
(iii) Lessor's title to, and Mortgagee's Lien in respect of, the Aircraft,
Airframe and En-
-19-
▇▇▇▇▇ will be recognized in such jurisdiction, (iv) the Laws of such
jurisdiction of domicile require fair compensation by the government of
such jurisdiction, payable in a currency freely convertible into Dollars,
for the loss of title to the Aircraft, Airframe or Engines in the event of
the requisition by such government of such title (unless Lessee shall
provide insurance in the amounts required with respect to hull insurance
under Section 11 covering the requisition of title to the Aircraft,
Airframe or Engines by the government of such jurisdiction so long as the
Aircraft, Airframe or Engines are subject to such sublease) and (v) the
agreement of such Permitted Foreign Air Carrier that its rights under the
sublease are subject and subordinate to all the terms of this Lease is
enforceable against such Permitted Foreign Air Carrier under applicable
law;
(e) Lessee shall furnish to Lessor, Mortgagee and Owner
Participant evidence reasonably satisfactory to Lessor that the insurance
required by Section 11 remains in effect;
(f) All necessary documents shall have been duly filed, registered
or recorded in such public offices as may be required fully to preserve
the title of Lessor, and the first priority security interest (subject to
Permitted Liens) of Mortgagee, in the Aircraft, Airframe and Engines;
(g) Lessee shall reimburse Lessor, Mortgagee and Owner Participant
for all of their reasonable out-of-pocket fees and expenses, including,
without limitation, reasonable fees and disbursements of counsel, incurred
by Lessor, Mortgagee and Owner Participant in connection with any such
sublease;
(h) For all purposes of this Section 7.2.7, the term "sublease"
shall be deemed to include interchange agreements with respect to the
Aircraft or Airframe; and
(i) Notwithstanding anything to the contrary in this Section 7.2,
no such sublease shall be made to a Permitted Foreign Air Carrier prior to
the close of the Tax Attribute Period, unless Lessee prepays to Owner
Participant on a lump-sum basis any indemnity required under the Tax
Indemnity Agreement as a result of such sublease based upon the assumption
that such sublease were to continue for the remainder of the term of the
Lease.
-20-
7.3 Certain Limitations on Subleasing or Other Relinquishment of
Possession
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives possession of the
Aircraft in accordance with Section 7.2 shall be subject and subordinate
to all the terms of this Lease, and to Lessor's rights, powers and
remedies hereunder, including, without limitation (i) Lessor's right to
repossess the Aircraft pursuant to Section 15, (ii) Lessor's right to
terminate and avoid such sublease, delivery, transfer or relinquishment of
possession upon the occurrence of a Lease Event of Default and (iii) the
right to require such person to forthwith deliver the Aircraft, the
Airframe and Engines subject to such transfer upon the occurrence of a
Lease Event of Default;
(b) Lessee shall remain primarily liable hereunder for the
performance of all the terms of this Lease to the same extent as if such
transfer had not occurred, and no transfer of possession of the Aircraft,
the Airframe, any Engine or any Part shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or under any
Operative Agreement;
(c) Lessee shall ensure that no sublease, delivery, transfer or
relinquishment permitted under Section 7.2 shall affect the United States
registration of the Aircraft, unless also made in accordance with the
provisions of Section 7.1.2;
(d) Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under paragraph (c), (d), or (e) of the
definition of such term (as set forth in Annex A) shall not be deemed to
violate the provisions of Section 7.2;
(e) Any Wet Lease or ACMI Contract shall not constitute a
delivery, transfer or relinquishment of possession for purposes of Section
7.2 and shall not be prohibited by the terms hereof nor shall a Wet Lease
or ACMI Contract be deemed to be a "sublease," nor shall the lessee of a
Wet Lease or ACMI Contract be deemed to be a "sublessee" under the Lease;
and
-21-
(f) Any sublease with a term of two years or longer shall be
assigned to or for benefit of Lessor and/or Mortgagee, PROVIDED that it is
understood that such sublease be for security purposes only and the rents
under such sublease shall not be so assigned and shall be payable directly
to Lessee.
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS; OTHER LESSEE COVENANTS
8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
Modifications and Additions
At all times during the Term, Lessee shall comply with, or cause to
be complied with, each of the provisions of Annex C, which provisions are hereby
incorporated by this reference as if set forth in full herein.
8.2 Information, Certificates, Notices and Reports
8.2.1 Financial Information
Lessee will furnish to Lessor:
(a) Within 90 days after the end of each of the first three fiscal
quarters in each fiscal year of Lessee, a consolidated balance sheet of
Lessee as of the end of such quarter and related statements of income and
cash flows for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, setting forth in each case
in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year, prepared in accordance with GAAP; provided
that so long as Lessee is subject to the reporting requirements of the
Securities Exchange Act of 1934, a copy of Lessee's report on Form 10-Q
for such fiscal quarter (excluding exhibits) will satisfy this paragraph
(a).
(b) Within 120 days after the end of each fiscal year of Lessee, a
consolidated balance sheet of Lessee as of the end of such fiscal year and
related statements of income and cash flows of Lessee for such fiscal
year, in comparative form with the preceding fiscal year, prepared in
accordance with GAAP, together with a report of Lessee's independent
certified public accountants with respect to their audit of such financial
statements; pro-
-22-
vided that so long as Lessee is subject to the reporting requirements of
the Securities Exchange Act of 1934, a copy of Lessee's report on Form
10-K for such fiscal year (excluding exhibits) will satisfy this paragraph
(b).
8.2.2 Annual Certificate
Within 120 days after the close of each fiscal year of Lessee,
Lessee shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee
to the effect that such officer is familiar with or has reviewed or caused to be
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements and that such officer does not have knowledge of the existence as at
the date of such certificate of any Lease Event of Default.
8.2.3 Information for Filings
Lessee shall promptly furnish to Owner Participant or Lessor such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor timely to file any reports required to be filed by it
as lessor under the Lease or to enable Owner Participant to timely file any
reports required to be filed by it, as the beneficiary of the Trust Estate, in
either case, with any Government Entity because of, or in connection with, the
interest of Owner Participant or Lessor in the Aircraft, Airframe or Engines,
this Lease or any other part of the Trust Estate; provided, however, that with
respect to any such information which Lessee or such Permitted Sublessee
reasonably deems commercially sensitive or confidential, Owner Participant or
Lessor, as the case may be, shall afford Lessee or such Permitted Sublessee a
reasonable opportunity to seek from any such Government Entity a waiver of the
obligation of Owner Participant or Lessor to file any such information, or shall
consent to the filing of such information directly by Lessee or such Permitted
Sublessee in lieu of filing by Owner Participant or Lessor, and if any such
waiver or consent is evidenced to the reasonable satisfaction of Owner
Participant or Lessor, as the case may be, then Lessee shall not be required to
furnish such information to Owner Participant or Lessor.
-23-
8.2.4 Other
Lessee shall furnish annually any such opinions as may be required
pursuant to Section 7.1.3(d) of the Participation Agreement.
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 Right of Termination
(a) So long as no Specified Default or Lease Event Default set
forth in Section 14.1 or 14.5 below, shall have occurred and be continuing,
Lessee shall have the right upon not less than 90 days' prior written notice at
its option to terminate this Lease during the Base Lease Term, effective only on
a Termination Date occurring after the seventh anniversary of the close of the
calendar year in which occurs the applicable Closing Date, if:
(i) Lessee makes a good faith determination that the Aircraft
either has become economically obsolete or is surplus to Lessee's
requirements and the Chief Financial Officer or Treasurer of Lessee so
certifies in writing to Lessor; or
(ii) the Aircraft is to be disposed of pursuant to a program of
fleet renewal.
(b) Lessor shall notify Lessee and Mortgagee of Lessor's intention
to sell or retain the Aircraft, as provided in this Section 9, no less than 30
days after Lessee gives Lessor written notice pursuant to Section 9.1(a). Any
failure by Lessor to give such notice of its election shall be deemed to be an
election to sell the Aircraft, as provided in this Section 9.
(c) Any termination pursuant to this Section 9 shall become
effective on the date of the sale, if any, pursuant to Section 9.2 or upon the
date of termination and payment by Lessee and Lessor in accordance with Section
9.3 if Lessor elects to retain the Aircraft.
-24-
9.2 Election by Lessor to Sell
9.2.1 Bids; Closing of Sale
Unless Lessor has given Lessee notice of Lessor's election to retain
the Aircraft, Lessee (or a person authorized by the Lessee, acting as agent for
the Lessor, for a commercially reasonable commission payable by Lessee) as agent
for Lessor at no expense to Lessor shall, until the date ten Business Days prior
to the proposed Termination Date, use commercially reasonable efforts to obtain
third-party bids for a cash purchase of the Aircraft and Lessor may, if it
desires to do so, also seek to obtain such third-party bids at its own expense.
In the event Lessee receives any bid, or more than one bid, Lessee shall
promptly, and in any event at least ten Business Days prior to the proposed date
of sale, certify to Lessor in writing the amount and terms of such bid or, in
the event that there shall be more than one bid, the terms of the highest BONA
FIDE all cash bid, the proposed date of such sale and the name and address of
the person (who shall not be Lessee or any Affiliate of Lessee or any person
with whom Lessee or any such Affiliate has an arrangement for the future use of
the Aircraft by Lessee or any such Affiliate) submitting such bid.
Notwithstanding anything in this Section 9.2 to the contrary, Lessee shall have
no liability to the Lessor or any other party for failure to obtain a higher
price for the Aircraft than the price actually obtained, if any, or for the
manner in which Lessee solicited bids for the Aircraft, such manner of
soliciting bids to be in the sole discretion of Lessee, including, without
limitation, the decision whether or not to solicit bids publicly or in any
particular market or venue. In addition. Lessee shall have no obligation to
Lessor or any other party to accept any bid solicited pursuant to this Section
9.2.1 that Lessee, in good faith, believes is unlikely to result in the
consummation of the sale of the Aircraft in accordance with the terms hereof.
9.2.2 Closing of Sale
(a) On the proposed Termination Date (i) Lessee shall deliver the
Airframe and Engines or engines constituting part of the Aircraft to the bidder,
if any, which shall have submitted the highest cash bid on or before the date
ten Business Days prior to such Termination Date, in the same manner as if
delivery were made to Lessor pursuant to Section 5 and Annex B and in full
compliance with the terms thereof, and shall duly transfer to Lessor title to
any such engines not owned by Lessor, all in accordance with the terms of
Section 5 and An-
-25-
nex B, and (ii) Lessor shall simultaneously therewith transfer the Airframe and
Engines or engines to such bidder, in the manner described in Section 4.5,
against cash paid by such bidder to Lessor in the amount of such highest bid and
in the manner and in funds of the type specified in Section 3.3.
(b) The proceeds of any sale described in Section 9.2.2(a) shall
be paid to and retained by Lessor and, on such Termination Date, and as a
condition precedent to such sale and the delivery of the Aircraft and Engines or
engines to such bidder, Lessee shall pay to Lessor, in the manner and in funds
of the type specified in Section 3.3:
(i) all unpaid Basic Rent due at any time prior to such
Termination Date and all Basic Rent due on such Termination Date to the
extent payable in arrears with respect to the Payment Period then ended;
plus
(ii) an amount equal to the excess, if any, of the Termination
Value for the Aircraft, computed as of such Termination Date, over the
sales price of the Aircraft less any sales commissions or marketing
expenses for brokers and agents engaged by Lessee or Permitted Sublessee;
PROVIDED that such commission and expenses shall have been deducted from
the sales proceeds of the Aircraft; plus
(iii) as provided in Section 3.2.2, interest on the amounts
specified in the foregoing clause (i) at the Payment Due Rate from and
including the date on which any such amount was due to the date of payment
of such amount in full.
As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent (other than Termination Value) due by Lessee to
Lessor, Mortgagee or the Participants under this Lease, including, without
limitation, (A) Supplemental Rent in respect of Make-Whole Amount, if any,
payable pursuant to Section 2.10(b) of the Trust Indenture in connection with a
prepayment of the Equipment Notes upon such sale and (B) all interest charges
provided for hereunder or under any other Lessee Operative Agreement with
respect to the late payment of any amounts so payable. In addition, Lessee shall
pay all reasonable out-of-pocket fees and expenses incurred by Lessor, Mortgagee
and Owner Participant in connection with such sale and related termination of
this Lease (but excluding any sales commissions or marketing expenses for
brokers and agents engaged by Lessor or Owner Participant in connection with
such sale unless engaged by Lessee on behalf of Lessor).
-26-
(c) Upon and subject to any such sale and receipt of proceeds by
Lessor, and full and final payment of all amounts described in Section 9.2.2(b),
and compliance by Lessee with all the other provisions of this Section 9.2,
(i) Lessor will transfer to Lessee, in accordance with Section
4.5, any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) the obligation of Lessee to pay Basic Rent, on or after the
Payment Date with reference to which Termination Value is computed, shall
cease, and the Term for the Aircraft shall end effective as of the date of
such sale.
(d) A sale of the Aircraft pursuant to this Section 9.2.2 shall
take place only on a Termination Date or any such other date within 10 Business
Days after a Termination Date as Lessor may consent to, which consent shall not
be withheld unreasonably, PROVIDED, that during any such 10-day extension or any
part thereof, interest shall accrue on the amount due at a rate of interest
equal to the Debt Rate. Subject to Section 9.3, if no sale shall have occurred
on or as of the proposed Termination Date, this Agreement shall continue in full
force and effect, and all of Lessee's obligations shall continue, including,
without limitation, its obligation to pay Rent, in each case, as if the notice
under Section 9.1 shall not have been given and, subject to Section 9.2.3(b),
Lessee may give another notice pursuant to Section 9.1.
9.2.3 Withdrawal of Notice of Termination
(a) Lessee may withdraw any notice given pursuant to Section 9.1
at any time on or before the date ten Business Days prior to the proposed
Termination Date, whereupon this Agreement shall continue in full force and
effect and all of Lessee's obligations shall continue, including, without
limitation, its obligation to pay Rent, in each case, as if the notice under
Section 9.1 shall not have been given and Lessee may give another notice
pursuant to Section 9.1; provided that Lessee shall not be entitled to give more
than four notices pursuant to Section 9.1.
(b) Lessee shall pay all reasonable out-of-pocket fees and
expenses of Lessor, Mortgagee and Owner Participant in connection with any
notice of termination withdrawn by Lessee or in connection with any notice of
termination pursuant to which a sale of the Aircraft fails to occur.
-27-
9.3 Retention of Aircraft by Lessor
(a) If Lessor shall elect to retain the Aircraft in accordance
with Section 9.1, on the proposed Termination Date:
(i) Lessor shall pay, or cause to be paid, in the manner and in
funds of the type specified in Section 3.3, to the Mortgagee an amount
sufficient to prepay all outstanding Equipment Notes pursuant to Section
2.10(b) of the Trust Indenture;
(ii) subject to receipt by Mortgagee of the funds described in
paragraph (i) above, Lessee shall deliver the Airframe and Engines or
engines constituting part of the Aircraft to Lessor pursuant to Section 5
and Annex B and in full compliance with the terms thereof, and shall duly
transfer to Lessor title to any such engines not owned by Lessor, all in
accordance with the terms of Section 5 and Annex B;
(iii) Lessee shall pay to Lessor, in the manner and in funds of the
type specified in Section 3.3:
(1) all unpaid Basic Rent due at any time prior to such
Termination Date (or any later date agreed by the parties pursuant
to Section 9.2.2(d)) and all Basic Rent due on such Termination Date
(or any later date agreed by the parties pursuant to Section
9.2.2(d))to the extent payable in arrears with respect to the
Payment Period then ended; plus
(2) as provided in Section 3.2.2, interest on the amounts
specified in the foregoing clause (1) at the Payment Due Rate from
and including the date on which any such amount was due to the date
of payment of such amount in full; and
(iv) Lessee shall also pay all Supplemental Rent due and payable by
Lessee to Lessor, Mortgagee or the other Participants under this Lease
(other than any Supplemental Rent in respect of Make-Whole Amount, if any,
payable pursuant to Section 2.10(b) of the Trust Indenture in connection
with a prepayment of the Equipment Notes upon such sale), including
without limitation all interest charges provided for hereunder or under
any other Lessee Operative Agreement with respect to the late payment of
any amounts, so payable, and the reasonable out-of-pocket fees and ex-
-28-
penses incurred by Lessor, Mortgagee and Owner Participant in connection
with such termination and sale;
(b) Upon full and final payment to Lessor, Mortgagee and the
Participants of the amounts described in Section 9.3(a), and compliance by
Lessee with all the other applicable provisions of this Section 9.3,
(i) Lessor will transfer to Lessee, in accordance with Section
4.5, any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) The obligation of Lessee to pay Basic Rent otherwise due on or
after the Termination Date shall cease, and the Term for the Aircraft
shall end effective as of such Termination Date.
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 Event of Loss With Respect to Aircraft
10.1.1 Notice and Election
(a) Upon the occurrence of an Event of Loss with respect to the
Airframe, and any Engine or Engines installed thereon at the time of such Event
of Loss, Lessee shall promptly (and in any event within 15 days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss.
Within 45 days after such occurrence, Lessee shall give Lessor and Mortgagee
written notice of Lessee's election to make payment in respect of such Event of
Loss, as provided in Section 10.1.2, or to replace the Airframe, and any such
Engines, as provided in Section 10.1.3.
(b) Any failure by Lessee to give such notice of its election
shall be deemed to be an election of the option set forth in Section 10.1.2. In
addition, Lessee shall not be entitled to elect the option set forth in Section
10.1.3 if, at the time Lessor receives such notice from Lessee, there shall have
occurred and be continuing a Specified Default or Lease Event of Default.
(c) For purposes of Section 10.1.2, an Event of Loss with respect
to the Airframe shall be deemed to constitute an Event of Loss with respect to
the Aircraft. For purposes of
-29-
Section 10.1.3, any Engine not actually suffering an Event of Loss shall not be
required to be replaced.
10.1.2 Payment of Loss and Termination of Lease
(a) If Lessee elects, in accordance with Section 10.1.1, to make
payment in respect of any such Event of Loss, then Lessee shall pay, in the
manner and in funds of the type specified in Section 3.3, the following amounts:
(i) on or before the Business Day next following the earlier of
(x) the 180th day following the date of the occurrence of such Event of
Loss, and (y) no later than the third Business Day following the receipt
of all insurance proceeds with respect to such occurrence (but in any
event not earlier than the date of Lessee's election under Section 10.1.1
to make payment under this Section 10.1.2), Lessee shall pay to Lessor an
amount equal to the Stipulated Loss Value of the Aircraft as of the Loss
Payment Date plus (a) all unpaid Basic Rent or Renewal Rent, as the case
may be, payable in advance and due prior to the Loss Payment Date, plus
(b) any unpaid Basic Rent or Renewal Rent, as the case may be, payable in
arrears and due on or before such Loss Payment Date, plus (c) all other
amounts of Supplemental Rent due on or before the Loss Payment Date and
any reasonable expenses and costs incurred in connection with such Event
of Loss by Lessor, the Owner Participant or the Mortgagee (including with
respect to Make-Whole Amount, if any).
(ii) on or before the date required for payment of the amounts
specified in paragraph (i) above, Lessee shall also pay to Lessor,
Mortgagee and the other Participants all other amounts due and payable by
Lessee to Lessor, Mortgagee and the other Participants under this Lease,
the Participation Agreement or any other Lessee Operative Agreement.
(b) Upon payment in full of all amounts described in the foregoing
paragraph (a),(i) the obligation of Lessee to pay Basic Rent or Renewal Rent
hereunder with respect to the Aircraft shall terminate, (ii) the Term for the
Aircraft shall end and (iii) Lessor will transfer the Aircraft to Lessee, as-is
and where-is, and subject to any insurer's salvage rights, but otherwise in the
manner described in Section 4.5.
-30-
10.1.3 Replacement of Airframe and Engines
(a) If Lessee elects, in accordance with Section 10.1.1, to
replace the Airframe, and any Engines actually suffering the Event of Loss, then
Lessee shall, as promptly as possible and in any event within 180 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3 and as replacement for the Airframe, and any such
Engine, title to a Replacement Airframe (which shall comply with paragraph (b)
below), and for each such Engine a Replacement Engine, in each case free and
clear of all Liens other than Permitted Liens. If Lessee makes such election,
but for any reason fails or is unable to effect such replacement within such
time period and in compliance with the requirements set forth in Section 10.3,
then Lessee shall be deemed to have initially made the election set forth in
Section 10.1.2 with the effect that Lessee shall immediately pay, in the manner
and in funds of the type specified in Section 3.3, the amounts required under,
and in accordance with, Section 10.1.2.
(b) Any such Replacement Airframe shall be an airframe that is
the same model as the Airframe to be replaced thereby, or an improved model, and
that has a value, utility and remaining useful life (without regard to hours or
cycles remaining until the next regular maintenance check), at least equal to
the Airframe to be replaced thereby (assuming that such Airframe had been
maintained in accordance with the Lease). Any such Replacement Engine shall meet
the requirements of, and be conveyed by Lessee to Lessor in accordance with,
Section 10.2 (other than the notice requirement set forth in Section 10.2.1).
10.2 Event of Loss With Respect to an Engine
10.2.1 Notice
Upon the occurrence of an Event of Loss with respect to an Engine
under circumstances in which an Event of Loss with respect to the Airframe has
not occurred, Lessee shall promptly (and in any event within 15 days after such
occurrence) give Lessor written notice of such Event of Loss.
10.2.2 Replacement of Engine
Lessee shall, promptly and in any event within 90 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3
-31-
and as replacement for the Engine with respect to which any Event of Loss
occurred, title to a Replacement Engine free and clear of all Liens other than
Permitted Liens. Such Replacement Engine shall be an engine that is the same or
improved make and model as the Engine to be replaced, and that is suitable for
installation and use on the Airframe, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).
10.2.3 Engine Exchange
Upon not less than five (5) Business Days' prior written notice to
Lessor, Lessee may replace any Engine leased hereunder with another engine (the
"Exchanged Engine") meeting the requirements of Section 10.2.2. Such Exchanged
Engine shall be deemed to be a "Replacement Engine" and Lessor and Lessee shall
comply with the provisions of Section 10.3 with regard to the Exchanged Engine
and the Engine so replaced.
10.3 Conditions to Any Replacement
10.3.1 Documents
Prior to or at the time of conveyance of title to any Replacement
Airframe or Replacement Engine to Lessor, Lessee shall take each of the
following actions:
(a) furnish Lessor with a full warranty ▇▇▇▇ of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in
form and substance reasonably satisfactory to Lessor and cause such
Replacement Airframe to be duly registered in the name of Lessor pursuant
to the Act;
(b) cause (i) a Lease Supplement subjecting such Replacement
Airframe or Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution and, upon such execution, to be filed
for recordation with the FAA pursuant to the Act, (ii) a Trust Indenture
Supplement, subjecting such Replacement Airframe or Replacement Engine to
the Trust Indenture, to be delivered to Lessor for execution and, upon
execution, to be filed for recordation with the FAA pursuant to the Act
and (iii) such Financing Statements and other filings, as Lessor or
Mortgagee may reasonably request, duly executed by Lessee and, to the
extent applicable, Lessor and Mortgagee
-32-
(and Lessor and Mortgagee shall execute and deliver the same), to be filed
in such locations as any such party may reasonably request;
(c) furnish such evidence of compliance with the insurance
provisions of Section 11 with respect to such Replacement Airframe or
Replacement Engine as Lessor may reasonably request;
(d) furnish an opinion or opinions of Lessee's counsel (which may
be Lessee's legal department) reasonably satisfactory to Lessor and
addressed to Lessor and Mortgagee to the effect that (i) such full
warranty ▇▇▇▇ of sale referred to in Section 10.3.1(a) constitutes an
effective instrument for the conveyance of title to the Replacement
Airframe or Replacement Engine and (ii) in the case of a Replacement
Airframe, Lessor and Mortgagee, as assignee of Lessor, will be entitled to
the benefits of Section 1110 with respect to the Replacement Airframe,
provided that such opinion referred to in this clause (ii) need not be
delivered to the extent that immediately prior to such replacement the
benefits of Section 1110 were not, solely by reason of a change in law or
court interpretation thereof, available to Lessor or Mortgagee, as
assignee of Lessor;
(e) furnish an opinion of Lessee's aviation law counsel reasonably
satisfactory to Lessor and addressed to Lessor and Mortgagee as to the due
registration of any such Replacement Airframe and the due filing for
recordation of each Lease Supplement and Trust Indenture Supplement with
respect to such Replacement Airframe or Replacement Engine under the Act;
(f) with respect to any Replacement Airframe, furnish an opinion
of tax counsel, selected by Owner Participant and reasonably satisfactory
to Lessee, as to the federal income tax consequences (without any
requirement as to the nature of such Federal income tax consequences) to
Lessor and Owner Participant of any such replacement;
(g) with respect to the replacement of the Airframe, and any
Engine installed thereon at the time of the subject Event of Loss, if
requested by Lessor and at Lessor's expense, furnish a certified report of
a qualified independent aircraft appraiser, reasonably satisfactory to
Lessor, certifying that such Replacement Airframe and any such Replacement
Engine complies with the value, utility
-33-
and remaining useful life requirements set forth in Section 10.1.3(b).
Lessor and Lessee understand and agree that if at the time of any
replacement of the Airframe or any Engine, as contemplated in this Section 10,
the Airframe was registered in a jurisdiction other than the United States, then
the requirements set forth above in this Section 10.3.1 relating to compliance
with the requirements of the Act or the FAA, shall be deemed to refer to the
comparable applicable Law of, and the Aviation Authority of, such other
jurisdiction.
10.3.2 Other Obligations
(a) Lessor and Lessee agree that, upon any Replacement Airframe
becoming the Airframe hereunder, and upon any Replacement Engine becoming an
Engine hereunder, this Lease shall continue to be, and shall be treated as, a
lease for U.S. federal income tax purposes of, among other things, such
Replacement Airframe and such Replacement Engine. Without limiting the
foregoing, Lessee and Lessor intend that Lessor shall, in all events, be
entitled to the benefits of Section 1110 with respect to any Replacement
Airframe or Replacement Engine and Lessee and Lessor shall cooperate and take
such action as the other may reasonably request so as to ensure that Lessor
shall be entitled to such benefits; provided that Lessor shall not be entitled
to such benefits to the extent that immediately prior to any Replacement Engine
becoming an Engine hereunder, the benefits of Section 1110 were not, solely by
reason of a change in law or court interpretation thereof, available to Lessor
or Mortgagee, as assignee of Lessor.
(b) No Event of Loss with respect to an Engine, or with respect to
an Airframe, shall result in, or otherwise allow or permit (other than as
provided in Section 10.1.2(b)), any reduction, deferral, discharge or other
change in the timing or amount of any Rent payable by Lessee hereunder, and
(subject to such Section 10.1.2(b)) Lessee shall pay all such Rent and other
amounts as though such Event of Loss had not occurred.
10.4 Conveyance to Lessee
Upon compliance by Lessee with the applicable terms of Sections
10.1.3, 10.2 and 10.3.1, Lessor will transfer to Lessee the Airframe or Engine,
as the case may be, with respect to which such Event of Loss occurred, in
accordance with Section 4.5.
-34-
10.5 Application of Payments
Any amounts, other than insurance proceeds in respect of damage or
loss not constituting an Event of Loss (the application of which is provided for
in Section 11), received at any time by Lessor, Lessee or any Permitted
Sublessee from any Government Entity or any other Person in respect of any Event
of Loss will be applied as follows:
10.5.1 Replacement of Airframe and Engines
If such amounts are received with respect to the Airframe, and any
Engine installed thereon at the time of such Event of Loss, then depending upon
whether such amounts are above or below the Threshold Amount, such amounts will
be paid over to either Lessor or Lessee, as applicable, in accordance with
paragraph B.1(ii)(A) and (B) of Annex D, as applicable, and upon compliance by
Lessee with the applicable terms of Section 10.1.3 with respect to the Event of
Loss for which such amounts are received, any such amounts not previously paid
to Lessee shall be paid over to, Lessee.
10.5.2 Loss of Engine
If such amounts are received with respect to an Engine (other than
an Engine installed on the Airframe at the time such Airframe suffers an Event
of Loss), then depending upon whether such amounts are above or below the
Threshold Amount, such amounts will be paid over to either Lessor or Lessee, as
applicable, in accordance with clauses (ii)(A) and (B) of the second paragraph
of Section B.1. of Annex D, as applicable, and upon compliance by Lessee with
the applicable terms of Section 10.2.2 with respect to the Event of Loss for
which such amounts are received, any such amounts not previously paid to Lessee
shall be paid over to, Lessee.
10.5.3 Payment of Loss
If such amounts are received, in whole or in part, with respect to
the Airframe, and Lessee makes, has made or is deemed to have made the election
set forth in Section 10.1.2, such amounts shall be applied as follows:
(a) first, if the sum described in Section 10.1.2 has not then
been paid in full by Lessee, such amounts shall be paid to Lessor (or to
Mortgagee so long as Mortgagee has not given notice to Lessee that the
Lien of the Trust Indenture has been duly discharged, except with re-
-35-
spect to Excluded Payments) to the extent necessary to pay in full such
sum;
(b) second, the remainder, if any, shall be paid to Lessee.
10.6 Requisition of Aircraft for Use
If any Government Entity shall requisition for use the Airframe and
the Engines or engines installed thereon, and if the same does not constitute an
Event of Loss, Lessee shall promptly notify Lessor and Mortgagee of such
requisition and all of Lessee's obligations under this Agreement shall continue
to the same extent as if such requisition had not occurred; provided, however,
that if the Airframe and Engines or engines installed thereon are not returned
to Lessor by Lessee at the end of the Term or within 180 days thereafter, and
Lessor, upon notice given not less than 30 days nor more than 120 days before
the end of the Term, shall have elected to treat such event as constituting an
Event of Loss with respect to the Aircraft, Lessee shall then be deemed to have
made the election set forth in Section 10.1.2 with the effect that Lessee shall
be obligated to pay the Stipulated Loss Value and all other amounts payable
pursuant to Section 10.1.2 with respect to the Aircraft as if an Event of Loss
had occurred as of the end of the Term. If Lessor shall not have elected to
treat such event as an Event of Loss, Lessee shall be obligated to return the
Airframe and Engines or engines to Lessor pursuant to, and in all other respects
to comply with the provisions of, Section 5 promptly upon their return by such
Government Entity, and Lessee shall pay to Lessor upon such return an amount
equal to the average daily Basic Rent or Renewal Rent, as the case may be,
payable by Lessee during the Term for each day after the end of the Term to but
excluding the day of such return, up to a maximum of 30 days.
10.7 Requisition of an Engine for Use
If any Government Entity shall requisition for use any Engine but
not the Airframe, Lessee will, if such requisition continues to the end of the
Term, replace such Engine by complying with the applicable terms of Sections
10.2 and 10.3 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received by Lessor or Lessee from such
Government Entity with respect to such requisition shall be paid or retained in
accordance with Section 10.5.2.
-36-
10.8 Application of Payments
All payments received by Lessor or Lessee, or any Permitted
Sublessee, from any Government Entity for the use of the Airframe and Engines or
engines installed thereon during the Term shall be paid over to, or retained by,
Lessee and all payments received by Lessor or Lessee from any Government Entity
for the use of the Airframe and Engines or engines installed thereon after the
Term shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, or Lessor has elected under Section
10.6 to treat such requisition as an Event of Loss, then all such payments
shall be paid over to Lessor (or to Mortgagee so long as Mortgagee has not given
notice to Lessee that the Lien of the Trust Indenture has been duly discharged),
and held as provided in Section 10.5.
10.9 Application of Payments During Existence of a Specified Default or
Lease Event of Default
Any amount described in this Section 10 that is payable or
creditable to, or retainable by, Lessee shall not be paid or credited to, or
retained by, Lessee if at the time such payment, credit or retention would
otherwise occur a Specified Default or Lease Event of Default shall have
occurred and be continuing, but shall instead be held by or paid over to Lessor
(or to Mortgagee so long as Mortgagee has not given notice to Lessee that, the
Trust Indenture has been duly discharged) as security for the obligations of
Lessee under this Lease and the other Lessee Operative Agreements and shall be
invested pursuant to Section 4.4 hereof unless and until such amount is applied,
at the option of Lessor, or upon the written request of Lessee to Lessor, from
time to time during the continuance of a Lease Event of Default, to Lessee's
obligations under this Lease as and when due, it being understood that any such
application shall be made to such obligations of Lessee as Lessor may determine
in its sole discretion. At such time as there shall not be continuing any
Specified Default or Lease Event of Default, such amount shall be paid to Lessee
to the extent not previously applied in accordance with this Section 10.9.
SECTION 11. INSURANCE
11.1 Lessee's Obligation to Insure
Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are
-37-
hereby incorporated by this reference as if set forth in full herein.
11.2 Insurance for Own Account
Nothing in Section 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurance required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Mortgagee or Owner Participant
from obtaining insurance for its own account (and any proceeds payable under
such separate insurance shall be payable as provided in the policy relating
thereto); provided, however, that no insurance may be obtained or maintained
that would limit or otherwise adversely affect the coverage of any insurance
required to be obtained or maintained by Lessee pursuant to this Section 11 and
Annex D.
11.3 Indemnification by Government in Lieu of Insurance
Lessor agrees to accept, in lieu of insurance against any risk with
respect to the Aircraft described in Annex D, indemnification from, or insurance
provided by, the U.S. Government, or upon the written consent of Lessor, other
Government Entity, against such risk in an amount that, when added to the amount
of insurance (including permitted self-insurance), if any, against such risk
that Lessee (or any Permitted Sublessee) may continue to maintain, in accordance
with this Section 11, during the period of such requisition or transfer, shall
be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
11.4 Application of Insurance Proceeds
As between Lessor and Lessee, all insurance proceeds received as a
result of the occurrence of an Event of Loss with respect to the Aircraft or any
Engine under policies required to be maintained by Lessee pursuant to this
Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect to the Aircraft, Airframe or any Engine will be
applied in payment (or to reimburse Lessee) for repairs or for replacement
property, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Lessee.
-38-
ll.5 Application of Payments During Existence of Specified Default or
Event of Default
If a Specified Default or Event of Default shall have occurred and
be continuing at any time that an amount described in this Section 11 is payable
or creditable to, or retainable by, Lessee, Lessee shall cause such amount to be
paid over to Lessor (or to Mortgagee so long as Mortgagee has not given notice
to Lessee that the Lien of the Trust Indenture has been duly discharged) as
security for the obligations of Lessee under this Lease and shall be invested
pursuant to Section 4.4 hereof unless and until such amount is applied, at the
option of Lessor, or upon the written request of Lessee to Lessor, from time to
time during the continuance of a Specified Default or Event of Default, to
Lessee's obligations under this Lease and the other Lessee Operative Agreements
as and when due, it being understood that any such application shall be made to
such obligations of Lessee as Lessor may determine in its sole discretion. At
such time as there shall not be continuing any Specified Default or Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with this Section 11.5.
SECTION 12. INSPECTION
(a) At all reasonable times Lessor, Mortgagee or the Owner
Participant, and their respective authorized representatives (the "Inspecting
Parties") may (not more than once every 12 months unless a Lease Event of
Default has occurred and is continuing then such inspection right shall not be
so limited) inspect the Aircraft, Airframe and Engines (including, without
limitation, the Aircraft Documents) and any such Inspecting Party may make
copies of such Aircraft Documents not reasonably deemed confidential by Lessee
or such Permitted Sublessee.
(b) Any inspection of the Aircraft hereunder shall be limited to a
visual, walk-around inspection and shall not include the opening of any panels,
bays or other components of the Aircraft, PROVIDED, HOWEVER, that in the event
any such panels, bays or other components shall have already been opened and
continue to remain open at the sole discretion of Lessee or the Permitted
Sublessee, then such inspection may include such opened areas, and no such
inspection shall interfere with Lessee's or any Permitted Sublessee's
maintenance and operation of the Aircraft, Airframe and Engines.
-39-
(c) With respect to such rights of inspection, Lessor, Owner
Participant and Mortgagee shall not have any duty or liability to make, or any
duty or liability by reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in
connection with any such inspection (including the cost of any copies made in
accordance with Section 12(a)).
(e) Upon prior written request by Owner Participant, Lessee shall
disclose to Owner Participant as soon as practicable any heavy maintenance
inspection of the Aircraft scheduled to take place within the 12-month period
following such request.
(f) Upon the request of the Lessor, the Lessee shall provide to
the Lessor, not more frequently than once per calendar year, or, if an Event of
Default has occurred and is continuing, not more frequently than once per
calendar quarter, a written report with respect to the flight hours and cycles
of operation of the Airframe and each Engine during the period since the end of
the period to which the most recent such report related (or, if there has been
no such previous report, since the commencement of the Term) through the last
day of the calendar year, or quarter, as the case may be, most recently ended
prior to the date of the current report.
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 In General
This Lease and the other Lessee Operative Agreements shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns. Except as otherwise expressly permitted by the
terms of the Lease or any other Lessee Operative Agreement, Lessee will not,
without the prior written consent of Lessor and Mortgagee, assign any of its
rights under this Lease, such consent not to be unreasonably withheld. Except as
otherwise provided herein (including, without limitation, under the provisions
of Section 15 hereof), Lessor and Mortgagee may not assign or convey any of
their right, title and interest in and to this Lease or the Aircraft without the
prior written consent of Lessee, such consent not to be unreasonably withheld.
-40-
13.2 Merger of Lessee
13.2.1 In General
Lessee shall not consolidate with or merge into any other person
under circumstances in which Lessee is not the surviving corporation, or convey,
transfer or lease in one or more transactions all or substantially all of its
assets to any other person, unless:
(a) such person is organized, existing and in good standing under
the Laws of the United States, any State of the United States or the District
Columbia and, upon consummation of such transaction, such person will be a U.S.
Air Carrier;
(b) such person executes and delivers to Lessor, Owner Participant
and Mortgagee a duly authorized, legal, valid, binding and enforceable
agreement, reasonably satisfactory in form and substance to Lessor, containing
an effective assumption by such person of the due and punctual performance and
observance of each covenant, agreement and condition in the Lessee Operative
Agreements to be performed or observed by Lessee;
(c) such person makes such filings and recordings with the FAA
pursuant to the Act as shall be necessary to evidence such consolidation or
merger;
(d) immediately after giving effect to such consolidation or
merger no Lease Event of Default shall have occurred and be continuing; and
(e) Lessee shall have promptly notified Owner Participant of such
merger or consolidation and provided Owner Participant with copies of all
filings and recordings with the SEC in connection therewith.
13.2.2 Effect of Merger
Upon any such consolidation or merger of Lessee with or into, or the
conveyance, transfer or lease by Lessee of all or substantially all of its
assets to, any Person in accordance with this Section 13.2, such Person will
succeed to, and be substituted for, and may exercise every right and power of,
Lessee under the Lessee Operative Agreements with the same effect as if such
person had been named as "Lessee" therein. No such consolidation or merger, or
conveyance, transfer or lease, shall have the effect of releasing Lessee or such
Person from
-41-
any of the obligations, liabilities, covenants or undertakings of Lessee under
the Lessee Operative Agreements.
13.3 Assignment Security for Lessor's Obligations
In order to secure the indebtedness evidenced by the Equipment
Notes, Lessor has agreed in the Trust Indenture, among other things, to assign
to Mortgagee this Lease and to mortgage the Aircraft, Airframe and Engines in
favor of Mortgagee, subject to the reservations and conditions therein set
forth. Lessee hereby accepts and consents to the assignment of all Lessor's
right, title and interest in and to this Lease pursuant to the terms of the
Trust Indenture. In accordance with Section 3.3 (c), Lessee agrees to pay
directly to Mortgagee (or, after receipt by Lessee of notice from Mortgagee of
the discharge of the Lien of the Trust Indenture, to Lessor), all amounts of
Rent (other than Excluded Payments) due or to become due hereunder and assigned
to Mortgagee and Lessee agrees that Mortgagee's right to such payments hereunder
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, the circumstances set forth in
Section 16 hereof. Notwithstanding the foregoing assignment of this Lease, the
obligations of Lessee to Lessor to perform the terms and conditions of this
Lease shall remain in full force and effect.
13.4 Successor Owner Trustee
Lessee agrees that in the case of the appointment of any successor
Owner Trustee pursuant to the terms of the Participation Agreement and the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee to Lessee, succeed to all the rights, powers and title
of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft and the other assets of the Trust Estate for all purposes hereof
without the necessity of any consent or approval by Lessee and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. An
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Participation Agreement and the Trust Agreement, and such right
may be exercised repeatedly as long as this Lease shall be in effect.
-42-
SECTION 14. LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following circumstances,
conditions, acts or events, for any reason whatsoever and whether any such
circumstance, condition, act or 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, order, rule or regulation of any Government Entity, shall
constitute a Lease Event of Default so long as it shall not have been remedied:
14.1 Payments
Lessee shall fail to pay any amount of Basic Rent, Renewal Rent,
Stipulated Loss Value or Termination Value when due and such failure shall
continue for or period in excess of ten (10) Business Days after the same shall
become due; or Lessee shall fail to pay any Supplemental Rent (other than
Stipulated Loss Value or Termination Value) when due and such failure shall
continue for a period in excess of ten (10) Business Days from and after the
date of any written notice to Lessee from Lessor of the failure to make such
payment when due; provided that any such failure to pay any Excluded Payment
shall not constitute a Lease Event of Default until written notice is given by
the Owner Participant to Lessee and Mortgagee that such failure constitutes a
Lease Event of Default and such failure shall have continued for a period in
excess of ten (10) Business Days after such notice.
14.2 Insurance
Lessee shall fail to carry and maintain, or cause to be carried and
maintained, insurance on and in respect of the Aircraft, Airframe and Engines in
accordance with the provisions of Section 11.
14.3 Other Covenants
Lessee shall fail to observe or perform (or caused to be observed
and performed) in any material respect any other covenant, agreement or
obligation to be observed or performed by it as set forth herein or in any other
Lessee Operative Agreement (other than the covenants, agreements and obligations
set forth in the Tax Indemnity Agreement), and such failure shall continue
unremedied for a period of 30 days from and after the date of written notice
thereof to Lessee from Lessor or Mortgagee, unless such failure is capable of
being corrected and Lessee shall be diligently proceeding to correct such fail-
-43-
ure, in which case there shall be no Lease Event of Default unless and until
such failure shall continue unremedied for a period of 180 days after receipt of
such notice.
14.4 Representations and Warranties
Any material representation or warranty made by Lessee herein, in
the Participation Agreement or in any other Lessee Operative Agreement (other
than the representations and warranties of Lessee in the Tax Indemnity
Agreement) (a) shall prove to have been untrue or inaccurate in any material
respect as of the date made, (b) such untrue or inaccurate representation or
warranty is material at the time in question and (c) the same shall remain
uncured (to the extent of the adverse impact of such incorrectness on the
interest of the Participants or Lessor) for a period in excess of 30 days from
and after the date of written notice thereof from Lessor or Mortgagee to
Lessee.
14.5 Bankruptcy and Insolvency
(a) Lessee shall consent to the appointment of or the taking of
possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition in bankruptcy or a voluntary petition or
an answer seeking reorganization, liquidation or other relief in a case under
any bankruptcy Laws or other insolvency Laws (as in effect at such time), or
Lessee shall seek relief by voluntary petition, answer or consent, under the
provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time) or
Lessee's board of directors shall adopt a resolution authorizing any of the
foregoing; or
(b) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
trustee or liquidator of Lessee or of substantially all of its property, or
substantially all of the property of Lessee shall be sequestered, and any such
order, judgment or decree of appointment or sequestration shall remain in force
undismissed, unstayed and unvacated for a period of 90 days after the date of
entry thereof; or
-44-
(c) a petition against Lessee in a case under any bankruptcy Laws
or other insolvency Laws (as in effect at such time) is filed and not withdrawn
or dismissed within 90 days thereafter, or if, under the provisions of any Law
providing for reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction, custody or
control of Lessee or of substantially all of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed and unterminated
for a period of 90 days.
SECTION 15. REMEDIES AND WAIVERS
15.1 Remedies
If any Lease Event of Default shall occur and be continuing, Lessor
may, at its option and at any time and from time to time, exercise any one or
more of the following remedies as Lessor in its sole discretion shall elect:
15.1.1 Return and Repossession
Lessor may cause Lessee, upon giving written notice to Lessee, to
return promptly, and Lessee shall return promptly, the Airframe and Engines as
Lessor may so demand, to Lessor or its order in the manner and condition
required by, and otherwise in accordance with, all the provisions of Section 5
as if the Airframe or Engine were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are 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, whether for the restoration of damage to
property caused by such taking or otherwise.
15.1.2 Sale and Use
Lessor may sell the Airframe and/or any Engine at public or private
sale, at such times and places, and to such Persons (including Lessor, Mortgagee
or any Participant), as Lessor may determine; or Lessor may otherwise dispose
of, hold, use, operate, lease to others or keep idle the Airframe and/or any
Engine, as Lessor, in its sole discretion, may determine, all free and clear of
any rights of Lessee and without any duty to account to Lessee with respect to
such action or inaction or
-45-
for any proceeds with respect thereto, except as hereinafter set forth in this
Section 15, and except to the extent that such proceeds would constitute, under
applicable Law, a mitigation of Lessor's damages suffered or incurred as a
result of the subject Lease Event of Default. Lessor shall give Lessee at least
15 days prior written notice of the date fixed for any public sale of the
Airframe and/or any Engine or of the date on or after which will occur the
execution of any contract providing for any private sale.
15.1.3 Certain Liquidated Damages
Whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under Section 15.1.1 or 15.1.2 with respect
to the Airframe and/or any Engine, or any Part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be the Stipulated Loss
Value Date next occurring not less than 10 days after the date of such notice),
may demand Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the
payment date so specified and in the manner and in funds of the type specified
in Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date specified for payment
in such notice), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due
at any time prior to the Stipulated Loss Value Date specified in such
notice; plus
(b) whichever of the following amounts Lessor, in its sole
discretion shall specify in such notice:
(i) an amount equal to the excess, if any, of the present value,
computed as of the Stipulated Loss Value Date specified in such notice,
discounted to such date at a rate per annum equal to the Debt Rate,
compounded semi-annually, of all unpaid Basic Rent during the then
remaining portion of the Base Lease Term or, if a Renewal Lease Term has
commenced, of all unpaid Renewal Rent during the remaining portion of such
Renewal Lease Term, over the Fair Market Rental Value of the Aircraft for
the remainder of the Term, after discounting such Fair Market Rental Value
to its then present value (at a rate per annum equal to the Debt Rate,
compounded semiannually) as of the Stipulated Loss Value Date specified in
such notice, or
-46-
(ii) an amount equal to the excess, if any, of the Stipulated Loss
Value for the Aircraft, computed as of the Stipulated Loss Value Date
specified in such notice, over the Fair Market Sales Value of the
Aircraft, as of the Stipulated Loss Value Date specified in such notice;
plus
(c) interest on the amounts specified in the foregoing clause (a)
at the Payment Due Rate from and including the date on which any such
amount was due to the date of payment of such amount; plus
(d) interest on the amount specified in the foregoing clause (b)
(i) or (b) (ii), according to Lessor's election, at the Payment Due Rate
from and including the Stipulated Loss Value Date specified in such notice
to the date of payment of such amount.
15.1.4 Liquidated Damages Upon Sale
If Lessor, pursuant to Section 15.1.2 or applicable Law, shall have
sold the Airframe and/or any Engine, Lessor, in lieu of exercising its rights
under Section 15.1.3 with respect to the Aircraft, Airframe or any Engine, as
the case may be, may, if Lessor shall so elect, upon giving written notice to
Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor, on the date
of such sale and in the manner and in funds of the type specified in Section
3.3, as liquidated damages for loss of a bargain and not as a penalty (in lieu
of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft in
respect of all periods commencing on or after the date of such sale), the
following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due
at any time prior to the Stipulated Loss Value Date on or immediately
preceding the date of such sale; plus
(b) an amount equal to the excess, if any, of (i) the Stipulated
Loss Value of the Aircraft, computed as of the Stipulated Loss Value Date
used in the foregoing clause (a) for the computation of unpaid Rent, over
(ii) the proceeds of such sale, minus all reasonable costs of Lessor and
Mortgagee in connection with the sale; plus
(c) if the date of such sale is not a Stipulated Loss Value Date,
an amount equal to interest on the outstanding principal amount of the
Equipment Notes at the rate per annum borne thereby from and including the
Stipu-
-47-
lated Loss Value Date used in the foregoing clause (a) for the computation
of unpaid Rent to the date of such sale; plus
(d) interest on the amounts specified in the foregoing clause (a)
at the Payment Due Rate from and including the date on which any such
amount was due to the date of payment of such amount; plus
(e) interest on the sum of the amounts specified in the foregoing
clause (b) at the Payment Due Rate from and including the date of such
sale to the date of payment of such amounts.
15.1.5 Rescission
Lessor may (i) at its option, rescind or terminate this Lease as to
the Aircraft, Airframe or any Engine, or any Part thereof, or (ii) exercise any
other right or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof.
15.1.6 Other Remedies
(a) In addition to the foregoing remedies (but without duplication
of amounts otherwise paid under this Section 15), Lessee shall be liable for any
and all unpaid Rent due hereunder before, during or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor, Mortgagee the
Owner Participant and the Note Holders, including, without limitation, interest
on overdue Rent at the rate as herein provided, incurred by reason of the
occurrence of any Lease Event of Default or the exercise of Lessor's remedies
with respect thereto, including all reasonable costs and expenses incurred in
connection with the return of the Airframe or any Engine, in accordance with
the terms of Section 5 or in placing the Airframe or any Engine, in the
condition and airworthiness required by Section 5.
(b) The prevailing party in any dispute between Lessee and Lessor
under this Lease shall be entitled to reimbursement from the other party for all
reasonable attorneys' fees and other costs and expenses of such prevailing
party, incurred by reason of such dispute.
-48-
15.2 Limitations Under CRAF
Notwithstanding the provisions of Section 15.1, during any period
that the Aircraft, Airframe or any Engine is subject to CRAF in accordance with
the provisions of Section 7.2.3 and in the possession of the U.S. Government,
Lessor shall not, as a result of any Lease Event of Default, exercise its
remedies hereunder in such manner as to limit Lessee's control under this Lease
(or any Permitted Sublessee's control under any Permitted Sublease) of the
Aircraft, Airframe or such Engine, unless at least 30 days' (or such other
period as may then be applicable under CRAF) written notice of default hereunder
shall have been given by Lessor or Mortgagee by registered or certified mail to
Lessee (and any Permitted Sublessee) with a copy to the Contracting Officer
Representative or Representatives for the Military Airlift Command of the United
States Air Force to whom notices must be given under the contract governing
Lessee's (or any Permitted Sublessee's) participation in CRAF with respect to
the Aircraft, Airframe or any Engine.
15.3 Right to Perform for Lessee
If Lessee (i) fails to make any payment of Rent required to be made
by it hereunder or (ii) fails to perform or comply with any of its agreements
contained herein and such failure continues for a period of thirty days after
written notice thereof is given by Lessor or Mortgagee to Lessee, Lessor or
Mortgagee may (but shall not be obligated to) make such payment or perform or
comply with such agreement, and the amount of such payment and the amount of the
expenses of Lessor or Mortgagee 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 Payment Due Rate, shall be deemed Supplemental
Rent, payable by Lessee upon demand by Lessor or Mortgagee, whichever is
entitled thereto. No such payment, performance or compliance shall be deemed to
cure any Lease Default or Lease Event of Default or otherwise relieve Lessee of
its obligations with respect thereto.
15.4 Determination of Fair Market Rental Value and Fair Market Sales
Value
For the purpose of this Section 15 only, the "Fair Market Rental
Value" or the "Fair Market Sales Value" of the Aircraft, Airframe or any Engine,
shall be determined on an "as is, where is" basis and shall take into account
customary brokerage and other out-of-pocket fees and expenses which typi-
-49-
cally would be incurred in connection with a re-lease or sale of the Aircraft,
Airframe or any Engine. Any such determination shall be made by an Appraiser
selected by Lessor and the costs and expenses associated therewith shall be
borne by Lessee, unless Lessor does not obtain possession of the Aircraft,
Airframe and Engines pursuant to this Section 15, in which case an Appraiser
shall not be appointed and Fair Market Rental Value and Fair Market Sales Value
for purposes of this Section 15 shall be zero.
15.5 Remedies Cumulative
Nothing contained in this Lease shall be construed to limit in any
way any right, power, remedy or privilege of Lessor hereunder or under any other
Operative Agreement or now or hereafter existing at law or in equity. Each and
every right, power, remedy and privilege hereby given to, or retained by, Lessor
in this Lease shall be in addition to and not in limitation of every other
right, power, remedy and privilege given under the Operative Agreements or now
or hereafter existing at law or in equity. Each and every right, power, remedy
and privilege of Lessor under this Lease and any other Operative Agreement may
be exercised from time to time or simultaneously and as often and in such order
as may be deemed expedient by Lessor. All such rights, powers, remedies and
privileges shall be cumulative and not mutually exclusive, and the exercise of
one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent hereunder shall be absolute
and unconditional, and shall not be affected by any event or circumstance,
including, without limitation: (i) any setoff, counterclaim, recoupment, defense
or other right that Lessee may have against Lessor, Mortgagee, any Participant,
any Note Holder, or any other Person for any reason whatsoever; (ii) any defect
in the title, airworthiness, condition, design, operation or fitness for use of,
or any damage to or loss or destruction of, the Aircraft, Airframe or any
Engine, or any interruption or cessation in the use or possession thereof by
Lessee for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
or (iv) any other circumstance,
-50-
happening or event whatsoever, whether or not similar to any of the foregoing.
(b) If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Agreement not been terminated in whole or in
part. Lessee hereby waives, to the extent permitted by applicable law, any and
all rights that it may now have or that at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Agreement, except in accordance with the express terms hereof.
(c) Nothing set forth in this Section 16 shall be construed to
prohibit Lessee from separately pursuing any claim that it may have from time to
time against Lessor or any other Person with respect to any matter (other than
the absolute and unconditional nature of Lessee's obligations hereunder to pay
Basic Rent, Renewal Rent, the Stipulated Loss Value with respect to any
Aircraft, and the Termination Value with respect to any Aircraft and other than
the matters specified in paragraphs (a) and (b) above).
SECTION 17. RENEWAL AND PURCHASE OPTIONS
17.1 Preliminary Notices
(a) At least (i) 180 days prior to the Scheduled Expiration Date,
Lessee may provide written notice to Lessor that Lessee may exercise either the
option to extend the leasing of the Aircraft for the first Renewal Lease Term
pursuant to Section 17.2 or the option to purchase the Aircraft on the Scheduled
Expiration Date and (ii) 180 days prior to the first Renewal Term Expiration
Date, Lessee may, if it has leased the Aircraft during the first Renewal Lease
Term, provide notice to Lessor that Lessee may exercise either the option to
extend the leasing of the Aircraft for the Subsequent Renewal Lease Term
pursuant to Section 17.2, or the option to purchase the Aircraft on the first
Renewal Term Expiration Date pursuant to Section 17.3. Any such notice (a
"Preliminary Notice") shall be revocable.
(b) If any such Preliminary Notice is given by Lessee, then Lessee
may provide a further notice specifying which
-51-
option it intends to elect, with respect to the relevant period, pursuant to
Section 17.2.1 or 17.3.1, as the case may be. If Lessee fails to provide such
further notice, such Preliminary Notice shall be deemed revoked.
17.2 Renewal Options
17.2.1 Renewal Notice
(a) If Lessee has given a Preliminary Notice and has not revoked
such Preliminary Notice, as specified in Section 17.1, and subject to the terms
and conditions of this Section 17.2, Lessee may exercise its option to extend
the leasing of the Aircraft hereunder until the applicable Renewal Term
Expiration Date, on the same terms, provisions and conditions (except as
contemplated by this Section 17) set forth herein and in the other Lessee
Operative Agreements with respect to the Base Lease Term, by delivery of an
irrevocable notice (a "Renewal Notice") to Lessor not less than (i) 90 days
prior to the Scheduled Expiration Date or a Renewal Term Expiration Date, as
applicable, or (ii) if a Renewal Lease Term of six months or less is then in
effect, 20 days prior to the Renewal Term Expiration Date.
(b) Notwithstanding anything to the contrary in this Agreement or
any other Operative Agreement:
(i) No Renewal Notice shall be binding on Lessor or oblige Lessor
to extend the leasing of the Aircraft hereunder for a Renewal Lease Term
if any Lease Event of Default or Specified Default shall have occurred and
be continuing on and as of the date that such Renewal Lease Term would
otherwise commence.
(ii) Any Renewal Notice shall be irrevocable and shall constitute
an unconditional obligation of Lessee to extend the leasing of the
Aircraft hereunder for the Renewal Lease Term to which such Renewal Notice
relates.
(iii) Lessee shall not be entitled to give any Renewal Notice if it
has (x) not delivered a Preliminary Notice or (y) delivered a Purchase
Notice to Lessor.
17.2.2 Renewal Rent
(a) During the Renewal Lease Term, Lessee shall pay to Lessor on
each Payment Date, in the manner and in the funds of the type specified in
Section 3.3, Renewal Rent in arrears;
-52-
PROVIDED, however if the Renewal Lease Term does not end on a Payment Date, the
last Payment Date of such Renewal Lease Term shall include a payment of Renewal
Rent in advance for the remaining period of such Renewal Lease Term following
such Payment Date.
(b) The Renewal Rent payable by Lessee on each Payment Date during
the first Renewal Lease Term (such Term to extend for one period only of not
less than 3 months and not more than two (2) years) shall be the lower of (i) an
amount equal to the Renewal Rent Cap and (ii) the Fair Market Rental Value of
the Aircraft for such Renewal Lease Term. The Renewal Rent payable by Lessee on
each Payment Date during the Subsequent Renewal Lease Term (such Term to extend
for one period only of not less than 3 months and not more than two (2) years)
shall be the Fair Market Rental Value of the Aircraft for such Renewal Lease
Term. Any such Fair Market Rental Value shall be determined not more than 35
days after delivery of a Preliminary Notice by mutual agreement of Lessor and
Lessee or, if they shall be unable to agree, by an appraisal in accordance with
Section 17.4.
17.2.3 Stipulated Loss and Termination Values
(a) For any Renewal Lease Term, Stipulated Loss Value Dates and
Termination Value Dates shall be extended throughout such Renewal Lease Term on
the same days and for the same months as during the Base Lease Term.
(b) Stipulated Loss Value and Termination Value amounts that are
payable during any such Renewal Lease Term shall be determined at the same time
that the Renewal Rent for such Renewal Lease Term is determined under Section
17.2.2. Stipulated Loss Values and Termination Values for any such Renewal Lease
Term shall, commencing on the first day of such Renewal Lease Term, be equal to
the Fair Market Sales Value of the Aircraft, computed as of the first day of
such Renewal Lease Term, and shall decline ratably on a monthly basis to the
Fair Market Sales Value of the Aircraft as of the last day of such Renewal Lease
Term.
(c) Any Fair Market Sales Value of the Aircraft, for purposes of
calculating Stipulated Loss Value and Termination Value amounts applicable
during any such Renewal Lease Term, shall be determined 35 days after delivery
of a Preliminary Notice by mutual agreement of Lessor and Lessee or, if they
shall be unable to agree, by an appraisal in accordance with Section 17.4.
-53-
17.3 Purchase Option
17.3.1 Purchase Notice
(a) Subject to the terms and conditions of this Section 17.3,
Lessee or its designee may elect to purchase the Aircraft, (A) on any Purchase
Date, at a purchase price equal to the Fair Market Sales Value of the Aircraft,
(B) on the EBO Date at a purchase price equal to the EBO Price or (C) provided
there shall not have occurred and be continuing at the time of purchase a
Specified Default or a Lease Event of Default, at any time following the
occurrence of a Materially Adverse Tax Event at a purchase price equal to the
Fair Market Sales Value of the Aircraft (or, if greater, the Termination Value
thereof), determined as of the date of purchase.
(b) Lessee may exercise its option to purchase the Aircraft
pursuant to clause (A), clause (B) or clause (C) of Section 17.3.1(a), by
delivery of an irrevocable notice (a "Purchase Notice") to Lessor not less than
(i) in the case of Clause A, 90 days prior to the Purchase Date specified in
such Purchase Notice, or (ii) in the case of Clause A, if a Renewal Lease Term
of six months or less is then in effect, 20 days prior to the Purchase Date
specified in such Purchase Notice, or (iii) in the case of Clause (B) of
Sections 17.3.1(a) not less than 60 days prior to the EBO Date or (iv) in the
case of Clause (C) of Section 17.3.1(a) at any time following a Materially
Adverse Tax Event.
(c) Notwithstanding anything to the contrary in this Agreement or
any other Operative Agreement:
(i) Lessee shall not be entitled to give any Purchase Notice in
respect of any Purchase Date if it (x) has not delivered a Preliminary
Notice or (y) has delivered a Renewal Notice for a Renewal Lease Term that
would commence immediately following such Purchase Date.
(ii) If any purchase option is exercised, upon payment of the
applicable purchase price any Rent otherwise due and payable on the date
of purchase or thereafter with respect to such Aircraft shall not be due
and payable.
(iii) At the election of the Lessee, any purchase option described
in this Section 17.3 may be exercised by a designee of the Lessee.
-54-
(iv) The purchase option herein specified may be effected by the
acquisition by Lessee of the Owner Participant's beneficial interest in
the Aircraft.
17.3.2 Determination of Fair Market Sales Value
The Fair Market Sales Value of the Aircraft shall be determined not
more than 35 days after delivery of a Preliminary Notice by mutual agreement of
Lessor and Lessee or, if they shall be unable to agree, by an appraisal in
accordance with Section 17.4.
17.3.3 Title
Upon full and final payment by Lessee of (a) the applicable purchase
price of the Aircraft, (b) all unpaid Rent due and payable through and including
the Purchase Date, EBO Date, or the date of Purchase under Clause (C) of Section
17.3.1(a), as the case may be and (c) all other amounts due and payable by
Lessee under this Agreement, Lessor will transfer to Lessee title to the
Aircraft in accordance with Section 4.5.
17.4 Appraisals
Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this Section 17,
Lessee and Lessor shall within 7 days after the expiration of the 35-day period
referred to in Sections 17.2.2(b), 17.2.3.(c) and 17.3.2 appoint a mutually
satisfactory Appraiser to conduct such appraisal. If Lessee and Lessor fail to
agree upon a satisfactory Appraiser then each shall promptly appoint a separate
Appraiser and such Appraisers shall jointly determine such amount. If either
Lessee or Lessor fails to so appoint an Appraiser, the determination of the
single Appraiser appointed shall be final. If two Appraisers are appointed and
within 7 days after the appointment of the latter of such two Appraisers, they
cannot agree upon such amount, such two Appraisers shall, within 8 days after
such latter appointment, appoint a third Appraiser and such amount shall be
determined by such three Appraisers, who shall make their separate appraisals
within 7 days following the appointment of the third Appraiser, and any
determination so made shall be conclusive and binding upon Lessor and Lessee. If
no such third Appraiser is appointed within such 8-day period, either Lessor or
Lessee may apply to the American Arbitration Association to make such
appointment, and both parties shall be bound by such appointment. If three
Appraisers are appointed and the difference between the determination which is
farther
-55-
from the middle determination and the middle determination is more than 125% of
the difference between the middle determination and the third determination,
then such farther determination shall be excluded, the remaining two
determinations shall be averaged and such average shall be final and binding
upon Lessor and Lessee. Otherwise, the average of all three determinations shall
be final and binding upon Lessor and Lessee. The fees and expenses of all such
Appraisers and such appraisal procedure shall be borne equally by Lessee and
Lessor, provided that if Lessee elects not to renew this Lease or purchase the
Aircraft following the conclusion of such appraisal, Lessee shall pay all
expenses of such appraisal. The foregoing appraisal procedure shall in any event
be completed no less than 97 days prior to the Scheduled Expiration Date or
Renewal Term Expiration Date, or, if a Renewal Lease Term of six months or less
is then in effect, no less than 35 days before the end of such Renewal Lease
Term. It is understood that if such appraisal process shall not have been
completed by such time due to any delays or lateness caused by Lessor with
respect to the time constraints set forth in this Section 17, then the notice
requirements for the delivery by Lessee of any Renewal Notice under Section
17.2.1(a) or any Purchase Notice under Section 17.3.1(b) shall each be reduced
from their present number by the same number of days as the completion of the
appraisal procedure shall have been delayed in each case past such 97-day time
limit.
SECTION 18. MISCELLANEOUS
18.1 Amendments
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by Lessor and Lessee. Each such
amendment, supplement, waiver, modification, discharge, termination or variance
shall be effective only in the specific instance and for the specific purpose
for which it is given. No provision of this Agreement shall be varied or
contradicted by oral communication, course of dealing or perform-
-56-
ance or other manner not set forth in an agreement, document or instrument in
writing and signed by Lessor and Lessee.
18.2 Severability
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the full extent permitted, to the end that this
Agreement shall be deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
18.3 Third-Party Beneficiary
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than Mortgagee, the Participants, the Indenture
Indemnitees and the Persons referred to in Section 4.6) with any rights of any
nature whatsoever against either of the parties hereto, and no person not a
party hereto (other than Mortgagee, the Participants, the Indenture Indemnitees
and the Persons referred to in Section 4.6) shall have any right, power or
privilege in respect of, or have any benefit or interest arising out of, this
Agreement.
18.4 Reproduction of Documents
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by such party in the regular course of business) and any enlargement, facsimile
or further reproduction of such reproduction likewise is admissible in evidence.
-57-
18.5 Counterparts
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
18.6 Notices
Unless otherwise expressly permitted by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers and
other communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile or
telecommunication transmission (which in either case provides written
confirmation to the sender of its delivery), sent by registered mail or
certified mail, return receipt requested, postage prepaid, or sent by overnight
courier service, in each case to the respective address or facsimile number set
forth for such party in Schedule 1 to the Participation Agreement, or to such
other address or number as either party hereto may hereafter specify by notice
to the other party hereto. Each such notice, request, demand, authorization,
direction, consent, waiver or other communication shall be effective when
received or, if made, given, furnished or filed (a) by facsimile or
telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND
SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION,
-58-
SUIT OR PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO
THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE
BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT
THE ADDRESS SET FORTH PURSUANT TO SECTION 18.6. EACH PARTY HERETO HEREBY AGREES
THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 18.7(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(e) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION
BASED UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
18.8 No Waiver
No failure on the part of Lessor to exercise, and no delay by Lessor
in exercising, any of its rights, powers, remedies or privileges under this
Agreement or provided at Law, in equity or otherwise shall impair, prejudice or
constitute a waiver of any such right, power, remedy or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances
-59-
or constitute a waiver of the rights of Lessor to any other or further action in
any circumstances without notice or demand.
18.9 Entire Agreement
This Agreement, together with the other Operative Agreements, on and
as of the date hereof constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, between the parties
hereto with respect to such subject matter are hereby superseded in their
entireties.
[This space intentionally left blank.]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual
capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
ATLAS AIR, INC.,
as Lessee
By: _____________________________________
Name:
Title:
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual
capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By: _____________________________________
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President - Finance &
Chief Financial Officer
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual
capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
ATLAS AIR, INC.,
as Lessee
By: _____________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this 29th day of July, 1998.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Mortgagee
By: _____________________________________
Name:
Title:
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual
capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By: _____________________________________
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President - Finance &
Chief Financial Officer
Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this 29th day of July, 1998.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Mortgagee
By: _____________________________________
Name:
Title:
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its individual
capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By: _____________________________________
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By: _____________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this 29th day of July, 1998.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Mortgagee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Financial Services Officer
Exhibit A - Lease Supplement
Lease Agreement
LEASE SUPPLEMENT NO.___
LEASE SUPPLEMENT No. __, dated ________, 199_, between First
Security Bank, National Association, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement
_____, dated as of ___________, 1998, with the Owner Participant named therein
(such Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and ATLAS AIR, INC., a Delaware corporation, as Lessee ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement______, dated as of ______________, relating to one Boeing Model
__________ 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 of this Lease Supplement for the purpose of leasing the
Airframe and Engines under the Lease as and when delivered by Lessor to Lessee
in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease to which this Lease Supplement is attached and of which
this Lease Supplement is a part, is being filed for recordation on the date
hereof with the Federal Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee has been duly authorized by Lessor to accept, and does
hereby irrevocably accept on behalf of Lessor delivery of the Aircraft from
Airframe Manufacturer under, and for all purposes of, the Aircraft ▇▇▇▇ of Sale,
the Participation Agreement and the Purchase Agreement Assignment.
2. 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 747-47UF aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
(i) Airframe: U.S. Registration No. N491MC; manufacturer's serial
no. 29252; and
-2-
(ii) Engines: four (4) GE CF 6-80C2B1F engines bearing,
respectively, manufacturer's serial nos. 704-692, 704-693, 704-694 and
704-695 (each of which engines has 750 or more rated takeoff horsepower or
the equivalent of such horsepower).
3. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
4. Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Lessee Operative Agreements.
5. All of the terms and provisions of this Lease Supplement are
hereby incorporated by reference in the Lease to the same extent as if fully set
forth therein.
6. This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
7. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any 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, which shall be identified as the
counterpart containing the receipt therefor executed by the Mortgagee on the
signature page thereof.
[This space intentionally left blank.]
-3-
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its
individual capacity, except
as expressly provided herein,
but solely as Owner Trustee
under the Trust Agreement
By: ____________________________
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By: ____________________________
Name:
Title:
-4-
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Lessor, not in its
individual capacity, except
as expressly provided herein,
but solely as Owner Trustee
under the Trust Agreement
By: ____________________________
Name:
Title:
ATLAS AIR, INC.,
as Lessee
By: ____________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease
Supplement is hereby acknowledged on this ___ day of ___________, ____________.
WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Mortgagee
By: ____________________________
Name:
Title:
(FINOVA)
ANNEX A
TO LEASE FINANCING AGREEMENTS
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly
provided, a reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner
Trustee," "Owner Participant," "Mortgagee," "Note Holder" or any other
person includes, without prejudice to the provisions of any Operative
Agreement, any successor in interest to it and any permitted transferee,
permitted purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and words
importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule
or exhibit thereto, or any other part thereof, includes, without prejudice
to the provisions of any Operative Agreement, that agreement, instrument
or document, or annex, schedule or exhibit, or part, respectively, as
amended, modified or supplemented from time to time in accordance with its
terms and in accordance with the Operative Agreements, and any agreement,
instrument or document entered into in substitution or replacement
therefor (including, without limitation, in the case of each Pass Through
Trust Agreement, the "Related Pass Through Trust Agreement" as defined
therein);
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or reenacted prior
to the Delivery Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby," "herein,"
"hereto," "hereof" and "hereunder" and words of similar import when used
in any Operative Agreement refer to such Operative Agreement as a whole
and not to any particular provision of such Operative Agreement;
-2-
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar import
when used in any Operative Agreement, with respect to any matter or thing,
mean including, without limitation, such matter or thing; and
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in any
Operative Agreement, or in any annex thereto, is a reference to a section
of, or an exhibit, an annex or a schedule to, such Operative Agreement or
such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement
is incorporated in, and shall be deemed to be a part of, such Operative
Agreement.
(c) Unless otherwise defined or specified in any Operative
Agreement, all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience
only and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACMI CONTRACT" means (i) any Wet Lease entered into by Lessee
pursuant to which Lessee furnishes the aircraft, crew, maintenance and insurance
and the other party to such contract bears all other operating expenses and (ii)
any similar Wet Lease in which the other party to such contract provides the
flight crew, all substantially in accordance with Lessee's historical practices.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or
Mortgagee, as the case may be, actual knowledge of a responsible officer in the
Corporate Trust Department or the Corporate Trust Office, respectively, and (b)
as it applies to Owner Participant or Lessee, actual knowledge of a Vice
President or more senior officer of Owner Participant or Lessee, respectively,
or any other officer of Owner Participant or Lessee, respectively, having
responsibility for the transactions
-3-
contemplated by the Operative Agreements; PROVIDED that each of Lessee, Owner
Participant, Owner Trustee and Mortgagee shall be deemed to have "Actual
Knowledge" of any matter as to which it has received notice from Lessee, Owner
Participant, any Note Holder, Owner Trustee or Mortgagee, such notice having
been given pursuant to Section 15.7 of the Participation Agreement.
"ADDITIONAL INSURED" is defined in Section D of Annex D to the
Lease.
"ADVERSE CHANGE IN TAX LAW" means (a) for Lessee, a Change in Tax
Law that Lessee regards as one that could adversely affect the economic
consequences of the transactions contemplated by the Participation Agreement and
the other Operative Agreements that are anticipated by Lessee or (b) for Owner
Participant, a Change in Tax Law that, in the reasonable judgment of Owner
Participant, would adversely affect its Net Economic Return or that would
adversely affect any of the following tax assumptions:
(i) For federal income tax purposes, the Lease will be a "true"
lease for purposes of the Code and Owner Participant will be treated as
the owner of the Aircraft and Lessee will be treated as the lessee
thereof;
(ii) For federal income tax purposes, Owner Participant will be
entitled to depreciation or cost recovery deductions with respect to
Lessor' s Cost of the Aircraft including amortization of Transaction
Expenses; and
(iii) For federal income tax purposes, Owner Participant will be
entitled to deductions for interest payments on the Equipment Notes.
"AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
-4-
"AIRCRAFT ▇▇▇▇ OF SALE" means the full warranty ▇▇▇▇ of sale
covering the Aircraft delivered by Airframe Manufacturer to Owner Trustee on the
Delivery Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log
books, and all inspection, modification and overhaul records and other service,
repair, maintenance and technical records that are required by the FAA (or the
relevant Aviation Authority), to be maintained with respect to the Aircraft,
Airframe, Engines or Parts; and such term shall include all additions, renewals,
revisions and replacements of any such materials from time to time made, or
required to be made, by the FAA (or other Aviation Authority) regulations, and
in each case in whatever form and by whatever means, or medium (including,
without limitation, microfiche, microfilm, paper or computer disk) such
materials may be maintained or retained by or on behalf of Lessee (PROVIDED,
that all such materials shall be maintained in, or are contemporaneously
translated into, the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from
time to time installed thereon) manufactured by Airframe Manufacturer and
identified by Airframe Manufacturer's model number, United States registration
number and Airframe Manufacturer's serial number set forth in Lease Supplement
No. 1 and any Replacement Airframe and (b) any and all Parts incorporated or
installed in or attached or appurtenant to such airframe, and any and all Parts
removed from such airframe, unless title to such Parts shall not be vested in
Lessor in accordance with Section 8.1 and Annex C of the Lease. Upon
substitution of a Replacement Airframe under and in accordance with the Lease,
such Replacement Airframe shall become subject to the Lease and shall be the
"Airframe" for all purposes of the Lease and the other Operative Agreements and
thereupon the Airframe for which the substitution is made shall no longer be
subject to the Lease, and such replaced Airframe shall cease to be the
"Airframe."
"AIRFRAME MANUFACTURER" means The Boeing Company, a Delaware
corporation.
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as
of any Payment Date, the amount determined by multiplying the percentage set
forth opposite such Payment Date on the Amortization Schedule by the Original
Amount of such Equipment Note.
-5-
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note,
the amortization schedule for such Equipment Note delivered pursuant to Section
2.02 of the Trust Indenture.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which
follows the time of determination by a period equal to the Remaining Weighted
Average Life of such Equipment Note. "Remaining Weighted Average Life" on a
given date with respect to any Equipment Note shall be the number of days equal
to the quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining scheduled payment
of principal of such Equipment Note by (ii) the number of days from and
including such determination date to but excluding the date on which such
payment of principal is scheduled to be made, by (b) the then outstanding
principal amount of such Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted
to be, and is, registered with any other Government Entity under and in
accordance with Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BASE LEASE TERM" means the period beginning on and including the
Commencement Date and ending on the Scheduled Expiration Date, or such earlier
date on which the Term terminates in accordance with the provisions of the
Lease.
"BASIC RENT" means the rent payable for the Aircraft pursuant to
Section 3.2.1(a) of the Lease.
"BENEFICIAL OWNER" when used in relation to an Equipment Note means
a Person that, by reason of direct ownership, contract, share ownership or
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
-6-
"BILLS OF SALE" means the FAA ▇▇▇▇ of Sale and the Aircraft ▇▇▇▇ of
Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required by law to close in New
York, New York, Denver, Colorado, Salt Lake City, Utah, Wilmington, Delaware, or
Chicago, Illinois.
"CASH EQUIVALENTS" means the following securities (which shall
mature within 90 days of the date of purchase thereof): (a) direct obligations
of the U.S. Government; (b) obligations fully guaranteed by the U.S. Government;
(c) certificates of deposit issued by, or bankers' acceptances of, or time
deposits or a deposit account with, Owner Trustee, Mortgagee or any bank, trust
company or national banking association incorporated or doing business under the
laws of the United States or any state thereof having a combined capital and
surplus and retained earnings of at least $500,000,000 and having a rate of "C"
or better from the Thomson BankWatch Service; or (d) commercial paper of any
issuer doing business under the laws of the United States or one of the states
thereof and in each case having a rating assigned to such commercial paper by
Standard & Poor's or Moody's equal to Al or higher.
"CHANGE IN TAX LAW" means any amendment, modification, addition or
change in or to the provisions of the Code, any other federal tax statutes, the
Treasury Regulations promulgated thereunder, the Internal Revenue Service
Revenue Rulings, Revenue Procedures or other administrative or judicial
interpretations of the Code or the federal tax statutes that affects the tax
assumptions set forth in the Tax Indemnity Agreement or otherwise affects Owner
Participant's anticipated Net Economic Return.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of
the Act and in the FAA Regulations.
"CLASS A PASS THROUGH TRUST" means the Atlas Air Pass Through Trust
1998-1A.
"CLASS B PASS THROUGH TRUST" means the Atlas Air Pass Through Trust
1998-1B.
"CLASS C PASS THROUGH TRUST" means the Atlas Air Pass Through Trust
1998-1C.
-7-
"CLOSING" means the closing of the transactions contemplated by the
Participation Agreement on the Delivery Date.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended;
PROVIDED, that when used in relation to a Plan, "Code" shall mean the Internal
Revenue Code of 1986 and any regulations and rulings issued thereunder, all as
amended and in effect from time to time.
"COMMENCEMENT DATE" is defined in Schedule 1 to the Lease.
"COMMITMENT" means, for any Participant, the amount of its
participation in the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the
Participation Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement
dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "TRUST OFFICE" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the corporate trust administration
office of WTC located at One ▇▇▇▇▇▇ Square, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or, in the case of any replacement Mortgagee, the
principal office of Mortgagee located at Mortgagee's address for notices under
the Participation Agreement or such other office at which Mortgagee's corporate
trust business shall be administered which Mortgagee shall have specified by
notice in writing to Lessee, Owner Trustee and each Note Holder.
-8-
"CRAF" means the Civil Reserve Air Fleet Program established
pursuant to 10 U.S.C. Section 9511-13 or any similar substitute program.
"CUT-OFF DATE" is defined in Section 1.01 of the Pass Through Trust
Agreements.
"DEBT" means any liability for borrowed money, or any liability for
the payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per
annum specified for such Series under the heading "Interest Rate" in Schedule I
to the Trust Indenture and (ii) any other purpose, with respect to any period,
the weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of
notice or the lapse of time or both would become an Event of Default.
"DELAYED DELIVERY DATE" means a delayed Delivery Date notified to
each Participant, Owner Trustee and Mortgagee by Lessee pursuant to Section 4.3
of the Participation Agreement, which delayed Delivery Date shall be a Business
Day not later than the Commitment Termination Date.
"DELIVERY DATE" means the Business Day specified in Lease Supplement
No. 1 as the date on which, among other things, the Aircraft is delivered to and
accepted by Lessee under the Lease and the Closing occurs.
"DELIVERY PERIOD TERMINATION DATE" is defined in Section l(b) of the
Note Purchase Agreement.
"DEPOSIT AGREEMENT" means each of the three Deposit Agreements
between the Depositary and the Escrow Agent, dated as of the Issuance Date, each
of which relates to one of the Pass Through Trusts, PROVIDED that, for purposes
of any obligation of Lessee, no amendment, modification or supplement to, or
substitution or replacement of, any such Deposit Agreement shall be effective
unless consented to by Lessee.
-9-
"DEPOSITARY" means ABN-AMRO Bank N.V., acting through its Chicago
Branch, as Depositary under each Deposit Agreement.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency
of the United States.
"DOT" means the Department of Transportation of the United States or
any Government Entity succeeding to the functions of such Department of
Transportation.
"EBO DATE" is defined in Schedule 1 to the Lease.
"EBO PRICE" is defined in Schedule 1 to the Lease.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust
Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine
Manufacturer and identified by Engine Manufacturer's model number and Engine
Manufacturer's serial number set forth in Lease Supplement No. 1 and originally
installed on the Air-frame on delivery thereof pursuant to the Lease, and any
Replacement Engine, in any case whether or not from time to time installed on
such Airframe or installed on any other airframe or aircraft, and (b) any and
all Parts incorporated or installed in or attached or appurtenant to such
engine, and any and all Parts removed from such engine, unless title to such
Parts shall not be vested in Lessor in accordance with Section 8.1 and Annex C
of the Lease. Upon substitution of a Replacement Engine under and in accordance
with the Lease, such Replacement Engine shall become subject to the Lease and
shall be an "Engine" for all purposes of the Lease and the other Operative
Agreements and thereupon the Engine for which the substitution is made shall no
longer be subject to the Lease, and such replaced Engine shall cease to be an
"Engine."
"ENGINE CONSENT AND AGREEMENT" means the Engine Manufacturer Consent
and Agreement dated as of even date with the Participation Agreement, of Engine
Manufacturer.
"ENGINE MANUFACTURER" means General Electric Company, a New York
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
"EQUIPMENT NOTES" means and includes any equipment notes issued
under the Trust Indenture in the form specified in
-10-
Section 2.01 thereof (as such form may be varied pursuant to the terms of the
Trust Indenture) and any Equipment Note issued under the Trust Indenture in
exchange for or replacement of any Equipment Note.
"ERISA" means the Employee Retirement Income Security Act of 1974
and any regulations and rulings issued thereunder all as amended and in effect
from time to time.
"ESCROW AGENT" means First Security Bank, National Association,
as Escrow Agent under each of the Escrow Agreements.
"ESCROW AGREEMENT" means each of the three Escrow and Paying Agent
Agreements, among the Escrow Agent, the Paying Agent, certain initial purchasers
of the Pass Through Certificates named therein and one of the Pass Through
Trustees, dated as of the Issuance Date, each of which relates to one of the
Pass Through Trusts, PROVIDED that, for purposes of any obligation of Lessee, no
amendment, modification or supplement to, or substitution or replacement of, any
such Escrow Agreement shall be effective unless consented to by Lessee.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust
Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property
beyond economic repair or rendition of such property permanently unfit for
normal use by Lessee;
(b) the actual or constructive total loss of such property or any
damage to such property, or requisition of title or use of such property,
which results in an insurance settlement with respect to such property on
the basis of a total loss or constructive or compromised total loss;
(c) any theft, hijacking or disappearance of such property for a
period of 180 consecutive days or more;
(d) any seizure, condemnation, confiscation, taking or requisition
of title to or use of such property (other than a requisition of use by
the government of the United
-11-
States) for a period exceeding 180 consecutive days or, if earlier, at the
end of the Term;
(e) any seizure, condemnation, confiscation, taking or requisition
of use of such property by the government of the United States that
continues until the 30th day after the last day of the Term, PROVIDED that
no such Event of Loss shall exist if Lessor shall have elected not to
treat such event as an Event of Loss pursuant to Section 10.6 of the
Lease; and
(f) as a result of any law, rule, regulation, order or other
action by the Aviation Authority or by any Government Entity of the
government of registry of the Aircraft or by any Government Entity
otherwise having jurisdiction over the operation or use of the Aircraft,
the use of such property in the normal course of Lessee's business of
cargo air transportation is prohibited for a period of 180 consecutive
days, unless Lessee, prior to the expiration of such 180 day period, shall
have undertaken and shall be diligently carrying forward such steps as may
be necessary or desirable to permit the normal use of such property by
Lessee and such normal use shall have been resumed prior to the expiration
of a period of two consecutive years (or beyond the end of the Term),
PROVIDED that no Event of Loss shall be deemed to have occurred after the
expiration of such two-year period if (A) such prohibition has been
applicable to Lessee's entire U.S. fleet of such property and (B) prior to
the expiration of such two-year period, Lessee shall have conformed at
least one Boeing 747-47UFF aircraft (but not necessarily an Aircraft) to
the requirements of any such law, rule, regulation, order or other action
and commenced regular commercial use of the same in such jurisdiction and
(C) Lessee shall be diligently carrying forward, in a manner which does
not discriminate against such property in so conforming such property,
steps which are necessary or desirable to permit the normal use of the
Aircraft by Lessee and such normal use shall have resumed prior to the
expiration of a period of three years or such use shall be prohibited at
the expiration of the Term.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by
Lessee to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Sections 9
and 11 of the Participation Agreement or any corresponding pay-
-12-
ments under the Lease, (ii) proceeds of public liability insurance paid or
payable as a result of insurance claims made, or losses suffered, by Owner
Trustee in its individual capacity or by Owner Participant, that are payable
directly to Owner Trustee in its individual capacity, or Owner Participant,
respectively, for their own account, (iii) proceeds of insurance maintained with
respect to the Aircraft by Owner Participant or any Affiliate thereof for its or
their own account or benefit (whether directly or through Owner Trustee) and
permitted under Section 11.2 of the Lease, (iv) all payments required to be made
under the Tax Indemnity Agreement by Lessee whether or not denominated as
Supplemental Rent, (v) any Transaction Expenses paid or payable by the Lessee to
the Owner Trustee (to the extent for its sole benefit) or the Owner Participant
pursuant to the Lease or the Participation Agreement, (vi) any amount payable to
the Owner Participant by any transferee as the purchase price of the Owner
Participant's interest in the Trust Estate, (vii) any interest that pursuant to
the Operative Agreements may from time to time accrue in respect of any of the
amounts described in clauses (i) through (vi) above, (viii) any right to
enforce, against the primary obligor or any guarantor or similar party, the
payment of any amount described in clauses (i) through (vii) above (PROVIDED,
that the rights referred to in this clause (viii) shall not be deemed to include
the exercise of any remedies provided for in the Lease other than the right to
▇▇▇ for specific performance of any covenant to make such payment or to ▇▇▇ for
damages in respect of the breach of any such covenant) and (ix) any right to
exercise any election or option or make any decision or determination, or to
give or receive any notice, consent, waiver or approval, or to take any other
action in respect of, but in each case, only to the extent relating to, any
Excluded Payments.
"EXCESS AMOUNT" has the meaning specified in Section 2.03(b) of the
Indenture.
"EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration of the United States
or any Government Entity succeeding to the functions of such Federal Aviation
Administration.
-13-
"FAA ▇▇▇▇ OF SALE" means a ▇▇▇▇ of sale for the Aircraft on AC Form
8050-2 (or such other form as may be approved by the FAA) delivered to Owner
Trustee on the Delivery Date by Airframe Manufacturer.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the
Trust Indenture, the Trust Agreement, the initial Trust Indenture Supplement,
the FAA ▇▇▇▇ of Sale and an application for registration of the Aircraft with
the FAA in the name of Owner Trustee.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made semi-annually, and (c) the Aircraft would be leased during
any such Renewal Lease Term on the same terms and conditions as are set forth in
the Lease with respect to the Base Lease Term.
"FAIR MARKET SALES VALUE" means the fair market sales value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing buyer under no compulsion to buy, and an informed and
willing seller under no compulsion to sell, the Aircraft, in a transaction that
would close on or about the relevant time of determination, assuming that (a)
the Aircraft has been maintained in accordance with, and is in the condition
required by, the Lease and (b) the Aircraft would be delivered to such informed
and willing buyer in the return condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, UCC-1 (and, where
appropriate, UCC-3) financing statements (a) covering the Trust Indenture
Estate, by Owner Trustee, as debtor, showing Mortgagee as secured party, for
filing in Utah and each other jurisdiction that, in the opinion of Mortgagee,
is necessary to perfect its Lien on the Trust Indenture Estate and (b) covering
the Lease and the Aircraft, as a precautionary matter, by Lessee, as lessee,
showing Owner Trustee as lessor and Mortgagee as assignee of Owner Trustee, for
filing in Colo-
-14-
rado and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, a national banking
association, not in its capacity as Owner Trustee under the Trust Agreement, but
in its individual capacity.
"FITCH" means Fitch IBCA, Inc.
"FUNDING DATE" has the meaning specified in Section 1(b) of the Note
Purchase Agreement.
"GAAP" means generally accepted accounting principles as set forth
in the statements of financial accounting standards issued by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, as such principles may at any time or from time to time be varied
by any applicable financial accounting rules or regulations issued by the SEC
and, with respect to any person, shall mean such principles applied on a basis
consistent with prior periods except as may be disclosed in such person's
financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or
similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"GTA" means the General Terms Agreement as defined in the Purchase
Agreement Assignment.
"INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC,
Pass Through Trustee, Subordination Agent and Mortgagee, (iii) each separate or
additional trustee appointed pursuant to the Trust Agreement or the Trust
Indenture, (iv) each Participant, (v) the Trust Estate and the Trust Indenture
Estate, (vi) each Affiliate of the persons described in clauses (i) through
(iv), inclusive, (vii) the respective directors, officers, employees, agents and
servants of each of the persons described in clauses (i) through (iv) inclusive
and in clause (vi), (viii) the successors and permitted assigns of the persons
described in clauses (i) through (iv), inclusive, and in clauses (vi) and (vii)
and (ix) the Pass Through Indemnitees;
-15-
PROVIDED THAT the Pass Through Indemnitees are Indemnitees only for purposes of
Section 9.1 of the Participation Agreement. If any Indemnitee is Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of either
thereof, such Person shall be an Indemnitee only in its capacity as Owner
Participant, Loan Participant or Note Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease,
the Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Engine Consent and Agreement, the Bills of Sale, each Permitted
Sublease and any other contract, agreement or instrument from time to time
assigned or pledged under the Trust Indenture.
"INDENTURE DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the
conditions, circumstances, acts or events set forth in Section 4.02 of the
Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each
separate or additional trustee appointed pursuant to the Trust Indenture, (iii)
the Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through
Trustee, (vi) the Paying Agent, (vii) the Escrow Agent and (viii) each of the
respective directors, officers, employees, agents and servants of each of the
persons described in clauses (i) through (vii) inclusive above.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Liquidity Providers and the
Subordination Agent, dated as of the Issuance Date, PROVIDED that, for purposes
of any obligation of Lessee, no amendment, modification or supplement to, or
substitution or replacement of, such Intercreditor Agreement shall be effective
unless consented to by Lessee.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means February 9, 1998.
"LAW" means (a) any constitution, treaty, statute, law, decree,
regulation, order, rule or directive of any Gov-
-16-
ernment Entity, and (b) any judicial or administrative interpretation or
application of, or decision under, any of the foregoing.
"LEASE" or "LEASE AGREEMENT" means the Lease Agreement, dated as of
even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would constitute a
Lease Event of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of
Exhibit A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated
the Delivery Date.
"LESSEE" means Atlas Air, Inc., a Delaware corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the
Lease, Lease Supplement No. 1, the Tax Indemnity Agreement, the Purchase
Agreement Assignment and each other agreement between Lessee and any other party
to the Participation Agreement, relating to the Transactions, delivered on the
Delivery Date.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or
other user or person in possession of the Aircraft, Airframe or an Engine with
or without color of right, or any Affiliate of any of the foregoing (excluding
any Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any
person using or claiming any rights with respect to the Aircraft, Airframe or an
Engine directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSEE'S ADVISOR" is defined in Schedule 3 to the Participation
Agreement.
"LESSOR" means Owner Trustee in its capacity as lessor under the
Lease.
-17-
"LESSOR LIEN" means, with respect to any person and in respect of
any property (including, without limitation, the Trust Estate, the Trust
Indenture Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents)
or any payments, any Lien on such property or payments which (a) arises from
claims against such person (if such person is a trustee, whether in its
individual capacity or in its capacity as a trustee) not related to any of the
transactions contemplated by the Operative Agreements, (b) results from acts or
omissions of such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) in violation of such person's
obligations under any of the terms of the Operative Agreements, or not related
to the transactions contemplated by the Operative Agreements, (c) is imposed as
a result of Taxes against such person (if such person is a trustee, whether in
its individual capacity or in its capacity as a trustee) or any of its
Affiliates not required to be indemnified by Lessee under the Participation
Agreement, or (d) claims against such person arising out of any transfer by such
person of its interest in the Aircraft, the Trust Estate or the Operative
Agreements, other than a Transfer permitted by the terms of the Operative
Agreements or pursuant to the exercise of remedies set forth in Section 15 of
the Lease.
"LESSOR'S COST" means the aggregate of the amounts paid by Owner
Trustee to Airframe Manufacturer and Lessee to purchase the Aircraft pursuant to
the Purchase Agreement Assignment and the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance,
lease or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means (i) the Revolving Credit Agreement
between the Subordination Agent, as borrower, and ABN-AMRO Bank, N.V., Chicago
Branch, with respect to the Class A Pass Through Trust and (ii) the Revolving
Credit Agreement between the Subordination Agent, as borrower, and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Capital Services, Inc. with respect to the Class B Pass Through Trust
and the Class C Pass Through Trust, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means (i) ABN-AMRO Bank, N.V., Chicago Branch,
as the Class A Liquidity Provider, and
-18-
(ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services, Inc. as the Class B Liquidity Provider and
the Class C Liquidity Provider (as such terms are defined in the Intercreditor
Agreement) under the respective Liquidity Facilities, or any successor thereto.
"LOAN PARTICIPANTS" mean, until the Closing shall have been
consummated, the Pass Through Trustees, and after the Closing shall have been
consummated, each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant
to Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date
of determination, the holders of a majority in aggregate unpaid Original Amount
of all Equipment Notes outstanding as of such date (excluding any Equipment
Notes held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of
any such party or any interests of Owner Trustee or Owner Participant therein by
reason of subrogation pursuant to Section 4.03 of the Trust Indenture (unless
all Equipment Notes then outstanding shall be held by Owner Trustee, Lessee,
Owner Participant or any Affiliate of any thereof)); PROVIDED that for the
purposes of directing any action or casting any vote or giving any consent,
waiver or instruction hereunder any Note Holder of an Equipment Note or
Equipment Notes may allocate, in such Note Holder's sole discretion, any
fractional portion of the principal amount of such Equipment Note or Equipment
Notes in favor of or in opposition to any such action, vote, consent, waiver or
instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an
amount (as determined by an independent investment banker of national standing)
equal to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a semiannual basis on each Payment Date
(assuming a 360-day year of twelve 30-day months) using a discount rate equal to
the Treasury Yield over (b) the outstanding principal amount of such Equipment
Note plus accrued interest to the date of determination. For purposes of
determining the Make-Whole Amount, "Treasury Yield" means, at the date of
determination with respect to any Equipment Note, the interest rate (expressed
as a decimal and, in the case of United States Treasury bills, converted to a
bond equivalent yield) determined to be the per annum rate equal to
-19-
the semi-annual yield to maturity for United States Treasury securities maturing
on the Average Life Date of such Equipment Note and trading in the public
securities markets either as determined by interpolation between the most recent
weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
"MANUFACTURER'S PURCHASE PRICE" means the amount required to be paid
to the Airframe Manufacturer to purchase the Aircraft pursuant to the Purchase
Agreement Assignment.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any
event, condition or circumstance that materially and adversely affects such
person's business or consolidated financial condition, or its ability to observe
or perform its obligations, liabilities and agreements under the Operative
Agreements.
"MATERIALLY ADVERSE TAX EVENT" means any event (other than excessive
foreign usage of the Aircraft) that makes it more likely than not that the
Lessee will be required to indemnify any Indemnitee for Taxes under any of the
Operative Agreements or the Owner Participant or any Tax Indemnitee under the
Tax Indemnity Agreement, or both (but not for any loss of MACRS Deductions (as
defined in the Tax Indemnity Agreement) as a result of foreign use, subleasing
or reregistration of the Aircraft prior to the end of the Tax Attribute Period)
(the determination of whether such event makes the foregoing more likely than
not to be based upon a written opinion of independent tax counsel selected and
compensated by Lessee and reasonably acceptable to Owner Participant to that
effect, which opinion shall be addressed and delivered to both Lessee and Owner
Par-
-20-
ticipant), provided that (i) the estimated aggregate of such indemnity payments
(computed as a hypothetical adjustment of Basic Rent or, if applicable, Renewal
Rent) over the then-remaining Term is equal to at least 5% of Basic Rent (and,
if applicable, Renewal Rent) payable over the remaining Term, and (ii) future
payments of the Taxes giving rise to the indemnity or indemnities will not be
required if the Lessee purchases the Aircraft.
"MINIMUM LIABILITY INSURANCE AMOUNT" is defined in Schedule 1 to the
Lease.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust
Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as loan trustee under the
Trust Indenture.
"MORTGAGEE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Indenture and each other agreement between Mortgagee and
any other party to the Participation Agreement, relating to the Transactions,
delivered on the Delivery Date.
"MORTGAGEE EVENT" means (i) in the event of a reorganization
proceeding involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the
trustee in such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assuming such obligations, such trustee or the
Lessee ceasing to perform such obligations with the result that the Continuous
Stay Period comes to an end or (ii) either the Equipment Notes shall have become
due and payable pursuant to Section 4.04(b) of the Trust Indenture or Mortgagee
has taken action or notified Owner Trustee that it intends to take action to
foreclose the Lien of the Trust Indenture or otherwise commence the exercise of
any repossessory remedy in accordance with Section 4.04(a) of the Trust
Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax
yield utilizing the multiple investment sinking fund method of analysis and
aggregate net after-tax cash flow,
-21-
computed on the basis of the same methodology and assumptions as were utilized
by the initial Owner Participant in determining Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages, as of the Delivery Date, as
such assumptions may be adjusted for events that have been the basis for
adjustments to Basic Rent pursuant to Section 3.2.1(b) of the Lease or events
that have given rise to indemnity payments pursuant to the Tax Indemnity
Agreement; PROVIDED, that, if the initial Owner Participant shall have
transferred its interest, Net Economic Return shall be calculated as if the
initial Owner Participant had retained its interest; PROVIDED FURTHER, that,
notwithstanding the preceding proviso, solely for purposes of Section 11 of the
Participation Agreement and calculating any adjustments to Basic Rent,
Stipulated Loss Values and Termination Values in connection with a refunding
pursuant to such Section 11 at a time when Owner Participant is a transferee
(other than an Affiliate of the initial Owner Participant), the after-tax yield
(but not the after-tax cash flow) component of Net Economic Return shall be
calculated on the basis of the methodology and assumptions utilized by the
transferee Owner Participant as of the date on which it acquired its interest.
"NET PRESENT VALUE OF RENTS" is defined in Schedule 1 to the Lease.
"NET WORTH" means, for any person, the excess of its total assets
over its total liabilities.
"NEW DEBT" means debt securities in an aggregate principal amount
specified in the Refunding Information.
"NON-U.S. PERSON" means any Person other than a United States
person, as defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" means at any time each registered holder of one or
more Equipment Notes.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement, dated
as of the Issuance Date, among Atlas Air, Inc., the Subordination Agent, the
Escrow Agent, the Paying Agent and the Pass Through Trustee under each Pass
Through Trust Agreement providing for, among other things, the issuance and sale
of Equipment Notes.
"OFFICER'S CERTIFICATE" means, in respect of any party to the
Participation Agreement, a certificate signed by the Chairman, the President,
any Vice President (including
-22-
those with varying ranks such as Executive, Senior, Assistant or Staff Vice
President), the Treasurer or the Secretary of such party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Agreement, the Purchase Agreement Assignment, the Consent
and Agreement, the Engine Consent and Agreement, the Lease, Lease Supplement No.
1, the Trust Indenture, the initial Trust Indenture Supplement, the Bills of
Sale, the Tax Indemnity Agreement and the Equipment Notes.
"OPERATIVE INDENTURES" means each of the indentures under which
notes have been issued and purchased by the Pass Through Trustees pursuant to
the Note Purchase Agreement.
"OP JURISDICTION" is defined in Schedule 3 to the Participation
Agreement.
"ORIGINAL AMOUNT." with respect to an Equipment Note, means the
stated original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation
Agreement as "Owner Participant" or, if a second person becomes an "Owner
Participant" pursuant to Section 10.1.1 of the Participation Agreement, both of
such persons; PROVIDED that if an Owner Participant Transfers 100% of its
interest to a successor Owner Participant, such transferring Owner Participant
shall thereafter no longer be considered an "Owner Participant".
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the
Participation Agreement, the Tax Indemnity Agreement, the Trust Agreement and
each other agreement between Owner Participant and any other party to the
Participation Agreement relating to the Transactions, delivered on the Delivery
Date.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's
Cost allocated to the Owner Participant in Schedule 2 to the Participation
Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a
national banking association, not in its individual capacity, except as
expressly provided in any Operative Agreement, but solely as Owner Trustee under
the Trust Agreement.
-23-
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes, the
Purchase Agreement Assignment, and each other agreement between Owner Trustee
and any other party to the Participation Agreement, relating to the
Transactions, delivered on the Delivery Date.
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement dated as
of the July 29, 1998 among Lessee, Owner Participant, Owner Trustee, the Pass
Through Trustees, Subordination Agent and Mortgagee.
"PARTS" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings, seats and other equipment of whatever
nature (other than (a) Engines or engines, and (b) any items leased by Lessee
from a third party other than Lessor)), that may from time to time be installed
or incorporated in or attached or appurtenant to the Airframe or any Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements,
the Note Purchase Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letters referred
to in Section 2.03 of each of the Liquidity Facilities, PROVIDED, that no
amendment, modification or supplement to, or substitution or replacement of, any
such Fee Letter shall be effective for purposes of any obligation of Lessee,
unless consented to by Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates
issued by the Pass Through Trusts (and any other pass through certificates for
which such pass through certificates may be exchanged).
"PASS THROUGH INDEMNITEES" means (i) the Subordination Agent, the
Paying Agent, the Escrow Agent, the Liquidity Providers, the Depositary and the
Pass Through Trustees, (ii) each Affiliate of a person described in the
preceding clause (i), (iii) the respective directors, officers, employees,
agents and servants of each of the persons described in the preceding clauses
(i) and (ii) and (iv) the successors and per-
-24-
mitted assigns of the persons described in the preceding clauses (i), (ii) and
(iii).
"PASS THROUGH TRUST" means each of the three separate pass through
trusts created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Pass
Through Trust Agreements, each dated as of the Issuance Date, by and between the
Lessee and Pass Through Trustee.
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, in its capacity as trustee under each Pass Through Trust
Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement,
the Pass Through Trust Agreements, the Note Purchase Agreement, the Deposit
Agreements, the Escrow Agreements, and the Intercreditor Agreement.
"PAYMENT DATE" means each January 2 and July 2 during the Term,
commencing with the first such date to occur after the Commencement Date.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PAYMENT PERIOD" means each of the consecutive semiannual periods
during the Term ending on a Payment Date, the first such period commencing on
and including the Commencement Date.
"PAYING AGENT" means Wilmington Trust Company, as Paying Agent under
each of the Escrow Agreements.
"PERMITTED AIR CARRIER" means (i) any manufacturer of airframes or
aircraft engines, or any Affiliate of a manufacturer of airframes or aircraft
engines domiciled in the United States, (ii) any Permitted Foreign Air Carrier,
(iii) any person approved in writing by Lessor or (iv) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the
Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline opera-
-25-
tions and to operate jet aircraft similar to the Aircraft under the applicable
Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii)
any Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance
company, financial institution or corporation (other than, without Lessee's
consent, a commercial air carrier, a commercial aircraft operator, a freight
forwarder or Affiliate of any of the foregoing), in each case with a combined
capital and surplus or Net Worth of at least $75,000,000.
"PERMITTED LIEN" means any Lien described in clauses (a) through
(g), inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7
of the Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted
Sublease.
"PERSONS" or "PERSONS" means individuals, firms, partnerships,
joint ventures, trusts, trustees, Government Entities, organizations,
associations, corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether having
distinct legal status or not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section
3(3) of ERISA, or any plan within the meaning of Section 4975(e)(1) of the
Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee,
the percentage of Lessor's Cost allocated to such Pass Through Trustee in
Schedule 2 to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement dated as of June
6, 1997 between Airframe Manufacturer and Lessee (including all exhibits
thereto, together with all letter agreements entered into that by their terms
constitute part of
-26-
such Purchase Agreement), to the extent assigned pursuant to the Purchase
Agreement Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement and
Engine Warranties Assignment dated as of even date with the Participation
Agreement, between Lessee and Owner Trustee.
"PURCHASE DATE" means the last day, or if such day is not Business
Day, the immediately succeeding Business Day of the originally scheduled Base
Lease Term or any Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"OIB" is defined in Section 2.08 of the Trust Indenture.
"REFUNDING CERTIFICATE" means a certificate of an authorized
representative of Owner Participant delivered pursuant to Section 11.1.1 of the
Participation Agreement, setting forth (a) the Refunding Date and (b) the
following information, subject to the limitations set forth in Section 11 of the
Participation Agreement: (i) the principal amount of debt to be issued by Owner
Trustee on the Refunding Date, (ii) the proposed adjusted debt/equity ratio and
(iii) the proposed revised schedules of Basic Rent, Stipulated Loss Value
percentages, Termination Value percentages, EBO Price and EBO Date and the
proposed Amortization Schedules, calculated in accordance with Section 3.2.1 of
the Lease.
"REFUNDING DATE" means the proposed date on which the outstanding
Equipment Notes will be redeemed and refinanced pursuant to Section 11 of the
Participation Agreement.
"REFUNDING INFORMATION" means the information set forth in the
Refunding Certificate (other than the Refunding Date) as such information may
have been revised by any verification procedures demanded by Lessee pursuant to
Section 3.2.1(d) of the Lease.
"RENEWAL LEASE TERM" means either term for which the Lease is
extended by Lessee pursuant to Section 17 of the Lease, if any.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
-27-
"RENEWAL RENT" for the Aircraft means the rent payable therefor in
respect of a Renewal Lease Term determined pursuant to Section 17.2.2 of the
Lease.
"RENEWAL RENT CAP" is defined in Schedule 1 to the Lease.
"RENEWAL TERM EXPIRATION DATE" means, in the case of either Renewal
Lease Term, the date determined by Lessee, which date shall be between three
months and two years from the commencement date of each Renewal Lease Term.
"RENT" means, collectively, Basic Rent, Renewal Rent and
Supplemental Rent.
"REPLACEMENT AIRFRAME" means any airframe substituted for the
Airframe pursuant to Section 10 of the Lease.
"REPLACEMENT ENGINE" means an engine substituted for an Engine
pursuant to the Lease.
"RESTRICTED PERIOD" means the period commencing on the Delivery Date
and ending on the close of the calendar year in which occurs the seventh
anniversary of the Delivery Date.
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement,
dated as of the date the Aircraft is returned to Lessor pursuant to Section 5 of
the Lease, by Lessor and Lessee substantially in the form of Exhibit B to the
Lease.
"SCHEDULED DELIVERY DATE" means the expected Delivery Date notified
to each Participant, Owner Trustee and Mortgagee by Lessee pursuant to Section
4.1 of the Participation Agreement, which expected Delivery Date shall be a
Business Day not later than the Commitment Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SEC" means the Securities and Exchange Commission of the United
States, or any Government Entity succeeding to the functions of such Securities
and Exchange Commission.
"SECOND AIRCRAFT" means the Boeing Model 747-47UF aircraft (other
than the Aircraft) which is the subject of a participation agreement entered
into in 1998 to which FINOVA Capital Corporation is an original signatory in the
capacity of
-28-
owner participant and Atlas Air, Inc. is an original signatory in the capacity
of lessee.
"SECTION 1110" means 11 U.S.C. Section 1110 of the Bankruptcy Code
or any successor or analogous section of the federal bankruptcy Law in effect
from time to time.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the
Securities Act.
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust
Indenture.
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes
issued under the Trust Indenture and designated as "Series A" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes
issued under the Trust Indenture and designated as "Series B" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes
issued under the Trust Indenture and designated as "Series C" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SPECIFIED DEFAULT" means (i) the occurrence of any event set forth
in Section 14.1 of the Lease that with the passage of time and/or the giving of
notice would become a Lease Event of Default or (ii) the occurrence of any event
set forth in Section 14.5(a) of the Lease or any event set forth in Section
14.5(b) or (c) of the Lease which, upon the passage of the
-29-
90 day period referred to therein, would become a Lease Event of Default.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a)
during the Base Lease Term, the amount determined by multiplying (i) the
percentage set forth in Schedule 3 to the Lease (as adjusted from time to time
in accordance with Section 3.2.1 of the Lease) opposite the Stipulated Loss
Value Date by (ii) Lessor's Cost and (b) during any Renewal Lease Term, the
amount determined pursuant to Section 17.2.3 of the Lease. Notwithstanding
anything to the contrary in any Operative Agreement, Stipulated Loss Value shall
always be sufficient to pay in full, as of the date of payment thereof (assuming
timely payment of the Equipment Notes prior to such date), the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such date, together
with accrued and unpaid interest on all such Equipment Notes as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such
month specified in Schedule 3 to the Lease or, if such day is not a Business
Day, the immediately succeeding Business Day.
"SUBORDINATION AGENT" means Wilmington Trust Company, as
subordination agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement,
the Liquidity Facilities and the Intercreditor Agreement.
"SUBSEQUENT RENEWAL LEASE TERM" means the term for which the Lease
is extended by Lessee, if any, after the first Renewal Lease Term.
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other Person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, but excluding any amount as to which
Lessee is obligated to pay a pro rata share pursuant to clause (e) of this
definition, (b) (i) to the extent not payable (whether or not
-30-
in fact paid) under Section 6(a) of the Note Purchase Agreement (as originally
in effect or amended with the consent of the Owner Participant), an amount or
amounts equal to the fees paid to the relevant Liquidity Provider under Section
2.03 of each Liquidity Facility and the related Fee Letter (as defined in the
Intercreditor Agreement) multiplied by a fraction the numerator of which shall
be the then outstanding aggregate principal amount of the Series A Equipment
Notes, Series B Equipment Notes and Series C Equipment Notes and the denominator
of which shall be the then outstanding aggregate principal amount of all "Series
A Equipment Notes", "Series B Equipment Notes" and "Series C Equipment Notes"
(each as defined in the Note Purchase Agreement); (ii) (x) the amount equal to
interest on any Downgrade Advance (other than any Applied Downgrade Advance)
payable under Section 3.07(e) of each Liquidity Facility minus Investment
Earnings from such Downgrade Advance multiplied by (y) the fraction specified in
the foregoing clause (i); (iii) (x) the amount equal to interest on any
Non-Extension Advance (other than any Applied Non-Extension Advance) payable
under Section 3.07(a)(i) of each Liquidity Facility minus Investment Earnings
from such Non-Extension Advance multiplied by (y) the fraction specified in the
forgoing clause (i); (iv) if any payment default shall have occurred and be
continuing with respect to interest on any Series A Equipment Notes, Series B
Equipment Notes or Series C Equipment Notes, (x) the excess, if any, of (1) an
amount equal to interest on any Unpaid Advance, Applied Downgrade Advance or
Applied Non-Extension Advance payable under Section 3.07(a) of each Liquidity
Facility over (2) the sum of Investment Earnings from any Final Advance plus any
amount of interest at the Payment Due Rate actually payable (whether or not in
fact paid) by Lessee in respect of the overdue scheduled interest on the
Equipment Notes in respect of which such Unpaid Advance, Applied Downgrade
Advance or Applied Non-Extension Advance was made multiplied by (y) a fraction
the numerator of which shall be the then aggregate overdue amounts of interest
on the Series A Equipment Notes, Series B Equipment Notes and Series C Equipment
Notes (other than interest becoming due and payable solely as a result of
acceleration of any such Equipment Notes) and the denominator of which shall be
the then aggregate overdue amounts of interest on all "Series A Equipment
Notes", "Series B Equipment Notes" and "Series C Equipment Notes" (each as
defined in the Note Purchase Agreement) (other than interest becoming due and
payable solely as a result of acceleration of any such "Equipment Notes"); and
(v) Lessee's pro rata share of any other amounts owed to the Liquidity Providers
by the Subordination Agent as borrower under each Liquidity Facility (other than
amounts due as repayment of advances thereunder or as in-
-31-
terest on such advances), except to the extent payable pursuant to clause (ii),
(iii) or (iv) above, (c) Lessee's pro rata share of all compensation and
reimbursement of expenses, disbursements and advances payable by Lessee under
the Pass Through Trust Agreements, (d) Lessee's pro rata share of all
compensation and reimbursement of expenses and disbursements payable to the
Subordination Agent under the Intercreditor Agreement except with respect to any
income or franchise taxes incurred by the Subordination Agent in connection with
the transactions contemplated by the Intercreditor Agreement, (e) Lessee's pro
rata share of any amount payable under Section 9.1 (and, if attributable
thereto, Section 9.5) of the Participation Agreement to any Pass Through
Indemnitee to the extent such amount relates to, results from or arises out of
or in connection with (i) the Pass Through Agreements or the enforcement of any
of the terms of any of the Pass Through Agreements, (ii) the offer, sale, or
delivery or the Pass Through Certificates or any interest therein or represented
thereby or (iii) any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by Lessee under any Pass Through Agreement or the falsity of any
representation or warranty of Lessee in any Pass Through Agreement and (f) in
the event Lessee requests any amendment to any Operative Agreement or Pass
Through Agreement, Lessee's pro rata share of all reasonable fees and expenses
(including, without limitation, fees and disbursements of counsel) of the Escrow
Agents and the Paying Agents in connection therewith payable by the Pass Through
Trustees under the Escrow Agreements. As used herein, "Lessee's pro rata share"
means as of any time a fraction, the numerator of which is the principal balance
then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures). For purposes of this
definition, the terms "Applied Downgrade Advance", "Applied Non-Extension
Advance", "Cash Collateral Account", "Downgrade Advance", "Final Advance",
"Investment Earnings", "Non-Extension Advance" and "Unpaid Advance" shall have
the meanings specified in each Liquidity Facility.
"TAX ATTRIBUTE PERIOD" means the Restricted Period or, in the event
the Aircraft, the Airframe, any Engine or any Part is used "predominantly
outside the United States" (within the meaning of Section 168(g)(1)(A) of the
Code) or becomes "tax-exempt use property" (within the meaning of Section 168(h)
of the Code) (in either case to the extent resulting in a Tax Loss as defined in
the Tax Indemnity Agreement) at any time during the Restricted Period, the
period commencing on the De-
-32-
livery Date and ending on the close of the calendar year in which occurs the end
of the new "recovery period" (as determined under Section 168(g) of the Code)
resulting from such use or from such status as "tax-exempt use property";
PROVIDED, HOWEVER, upon the occurrence, in either case, of an event described in
Section 2.2(b) of the Tax Indemnity Agreement, the Tax Attribute Period shall
end on the close of the calendar year in which occurs the end of the applicable
recovery period as determined in accordance with such Section.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b)
WTC, Pass Through Trustee, Subordination Agent and Mortgagee, (c) each separate
or additional trustee appointed pursuant to the Trust Agreement or the Trust
Indenture, (d) each Participant, (e) the Trust Estate and the Trust Indenture
Estate and (f) the respective successors, assigns, agents and servants of the
foregoing. For purposes of this definition, the term "Owner Participant" shall
include any member of an affiliated group (within the meaning of Section 1504 of
the Code) of which Owner Participant is, or may become, a member if
consolidated, joint or combined returns are filed for such affiliated group for
federal, state or local income tax purposes.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated
as of even date with the Participation Agreement, between Lessee and Owner
Participant.
"TAXES" means all license, recording, documentary, registration and
other similar fees and all taxes, levies, imposts, duties, charges, assessments
or withholdings of any nature whatsoever imposed by any Taxing Authority,
together with any penalties, additions to tax, fines or interest thereon or
additions thereto.
"TAXING AUTHORITY" means any federal, state or local government or
other taxing authority in the United States, any foreign government or any
political subdivision or taxing authority thereof, any international taxing
authority or any territory or possession of the United States or any taxing
authority thereof.
"TERM" means the term, commencing on the Delivery Date, for which
the Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended
-33-
for the period necessary to accommodate usage of the Aircraft or Airframe
pursuant to CRAF plus six months thereafter, and Lessee shall be obligated to
pay Basic Rent with respect to any such period of extension at a semiannual rate
equal to the average of the Basic Rent paid during the Base Lease Term or the
applicable Renewal Lease Term, whichever shall have ended immediately prior to
such extension.
"TERMINATION DATE" means any Payment Date occurring after the
seventh anniversary of the Delivery Date on which the Lease shall terminate in
accordance with Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.1 of the
Lease) opposite the Termination Value Date by (b) Lessor's Cost. Notwithstanding
anything to the contrary in any Operative Agreement, Termination Value shall
always be sufficient to pay in full, as of the date of payment thereof (assuming
timely payment of the Equipment Notes prior to such date), the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such date, together
with accrued and unpaid interest on all such Equipment Notes as of such date.
"TERMINATION VALUE DATE" means, for any month, the day in such month
specified in Schedule 4 to the Lease or, if such day is not a Business Day, the
immediately succeeding Business Day.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the
Participation Agreement and the other Operative Agreements.
"TRANSACTION EXPENSES" means: (i) the reasonable and actual fees,
expenses and disbursements incurred in connection with the negotiation,
execution and delivery of the Operative Agreements of (1) Morris, James,
Hitchens & ▇▇▇▇▇▇▇▇, special counsel for Mortgagee and the Loan Participants,
such information to be furnished by the Subordination Agent, (2) ▇▇▇▇▇ &
▇▇▇▇▇▇▇, special counsel in Oklahoma City, Oklahoma, such information to be
furnished by Lessee, (3) ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel to Lessee,
such information to be furnished by Lessee and (4) Ray, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
special counsel to the Owner Trustee, such information to be provided by
-34-
the Owner Trustee, (ii) all fees, taxes and other charges payable in connection
with the recording or filing of instruments and financing statements, such
information to be furnished by Lessee, (iii) the initial fee and reasonable and
actual disbursements of Owner Trustee under the Trust Agreement, such
information to be furnished by the Owner Trustee, (iv) the initial fee and
reasonable and actual disbursements of Mortgagee under the Trust Indenture, such
information to be furnished by Mortgagee, (v) the fee of the Appraiser with
respect to the appraisal of the Aircraft referred to in Section 5.1.2(xv) of the
Participation Agreement, such information to be furnished by the Owner
Participant, (vi) subject to the limitations set forth in a separate agreement
between Owner Participant and Lessee, the reasonable and actual fees,
out-of-pocket expenses and disbursements of special counsel to the Owner
Participant (as defined in Schedule 3 to the Participation Agreement), such
information to be furnished by the Owner Participant, (vii) the reasonable
out-of-pocket costs, fees, expenses and disbursements incurred by Lessee in
respect of the transactions contemplated by the Pass Through Trust Agreements
and the Operative Agreements, such information to be furnished by Lessee, and
(viii) the equity placement and debt arrangement fees and reasonable
disbursements of Lessee's Advisor, such information to be furnished by Lessee.
"TRANSFER" means the transfer, sale, assignment or other conveyance
of all or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner
Trustee or any Loan Participant or Note Holder purports or intends to Transfer
any or all of its right, title or interest in the Trust Estate or in its
Equipment Note and the Trust Indenture Estate, respectively, as described in
Section 10.1.1 (a), 10.1.2 or 10.1.3 (but excluding participants in any
participation referred to in Section 10.1.3), respectively, of the Participation
Agreement.
"TRIGGERING EVENT" is defined in Section 1.1 of the Intercreditor
Agreement.
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement dated as of even date
with the Participation Agreement, between Owner Participant and Owner Trustee.
-35-
"TRUST ESTATE" means all estate, right, title and interest of Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement including, without limitation, all amounts of Basic Rent and
Supplemental Rent including, without limitation, insurance proceeds and
requisition, indemnity or other payments of any kind for of with respect to the
Aircraft. Notwithstanding the foregoing, "Trust Estate" shall not include any
Excluded Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage dated as of
even date with the Participation Agreement, between Owner Trustee and Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the
Trust Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.
"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
"UNITED STATES" or "U.S." means the United States of America;
PROVIDED, that for geographic purposes, "United States" means, in aggregate, the
50 states and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a
U.S. Person and a Citizen of the United States holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to chapter 447 of
title 49 of the United States Code for aircraft capable of carrying 10 or more
individuals or 6000 pounds or more of cargo, and as to which there is in force
an air carrier operating certificate issued pursuant to Part 121 of the FAA
Regulations, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provisions therefor or in the
absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of
the Code.
"U.S. GOVERNMENT" means the federal government of the United States,
or any instrumentality or agency thereof the obligations of which are guaranteed
by the full faith and credit of the federal government of the United States.
-36-
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any
specified Debt, at the time of the determination thereof the number of years
obtained by dividing the then Remaining Dollar-years of such Debt by the then
outstanding principal amount of such Debt. The term "Remaining Dollar-years"
shall mean the amount obtained by (1) multiplying the amount of each
then-remaining principal payment on such Debt by the number of years (calculated
at the nearest one-twelfth) that will elapse between the date of determination
of the Weighted Average Life to Maturity of such Debt and the date of that
required payment and (2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement, including, but not limited to an
ACMI Contract, whereby Lessee or a Permitted Sublessee agrees to furnish the
Aircraft, Airframe or any Engine to a third party pursuant to which the
Aircraft, Airframe or Engine shall at all times be in the operational control of
Lessee or a Permitted Sublessee, provided that Lessee's obligations under the
Lease shall continue in full force and effect notwithstanding any such
arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking
corporation, not in its capacity as Mortgagee under the Trust Indenture, but in
its individual capacity.
SCHEDULE TO EXHIBIT 10.4.2
The agreements listed below are substantially identical to this exhibit and are
not being filed separately as exhibits pursuant to instruction 2 to Regulation
S-K, Item 601.
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
PROGRAM YEAR REGISTRATION NUMBER RESTRUCTURE AGREEMENT TYPE LESSOR LESSEE
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998 N494MC Owned Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998 N408MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998 N491MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998 N492MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1998 N493MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999 N495MC Owned Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999 N496MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999 N497MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999 N498MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
1999 N499MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
2000 N409MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
2000 N412MC Leased Aircraft Restructure ▇▇▇▇▇ Fargo Bank Northwest, Atlas Air, Inc.
Agreement National Association
------------------ ----------------------- ---------------------------------- ------------------------------ -----------------------
