Form Lease
N____U_
EXHIBIT 4.11
[LEASE FORM - BASIC]
LEASE AGREEMENT
(US Airways, Inc. Trust No. N___U_)
Dated as of
[-]
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its individual capacity except as expressly
provided herein, but solely as Owner Trustee,
Lessor
and
US AIRWAYS, INC.,
Lessee
One Airbus Model A[321][330] Aircraft
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As set forth in Section 21 hereof, Lessor has assigned to the Indenture
Trustee (as defined herein) certain of its right, title and interest in and
to this Lease. To the extent, if any, that this Lease constitutes chattel
paper (as such term is defined in the Uniform Commercial Code as in effect
in any applicable jurisdiction) no security interest in this Lease may be
created through the transfer or possession of any counterpart other than
the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by the Indenture
Trustee on the signature page thereof.
TABLE OF CONTENTS TO LEASE AGREEMENT
SECTION 1. DEFINITIONS.............................................1
SECTION 2. ACCEPTANCE AND LEASE....................................1
SECTION 3. TERM AND RENT...........................................1
(a) Basic Term........................................1
(b) Basic Rent........................................1
(c) Adjustments to Basic Rent.........................2
(d) Supplemental Rent.................................4
(e) Payments in General...............................4
(f) Business Day Convention...........................5
(g) Verification......................................5
[(h)Certain Advances, Deductions of Advances...........6]
SECTION 4. DISCLAIMER; LESSOR'S REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.........................................7
(a) Disclaimer........................................7
(b) Representations, Warranties and Covenants of
First Security Bank..........................8
(c) Lessor's Covenants................................8
(d) Manufacturer's Warranties.........................8
SECTION 5. RETURN OF THE AIRCRAFT..................................9
(a) Condition Upon Return.............................9
(b) Parking and Related Matters.......................9
(c) Return of Other Engines...........................9
(d) Obligations Continue Until Return................10
SECTION 6. LIENS..................................................10
SECTION 7. REGISTRATION, MAINTENANCE, OPERATION AND REGISTRATION;
POSSESSION AND SUBLEASES; INSIGNIA................11
(a) Registration, Maintenance,
Operation and Registration11
(1) Registration and Maintenance................11
(2) Operation...................................12
(3) Reregistration..............................13
(b) Possession and Subleases.........................13
(c) Insignia.........................................18
SECTION 8. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS.......................19
(a) Replacement of Parts.............................19
(b) Pooling of Parts.................................20
(c) Alterations, Modifications and Additions.........20
(d) Certain Matters Regarding Passenger Convenience
Equipment...................................22
SECTION 9. VOLUNTARY TERMINATION..................................22
(a) Termination Event................................22
(b) Optional Sale of the Aircraft....................23
(c) Termination as to Engines........................25
(d) Special Purchase Options.........................25
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC....................26
(a) Event of Loss with Respect to the Aircraft.......26
(b) Event of Loss with Respect to an Engine..........29
(c) Application of Payments from Governmental
Authorities for Requisition of Title, etc...29
(d) Requisition for Use of the Aircraft by the United States
Government or the Government of Registry of the
Aircraft....................................30
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the
Aircraft....................................32
(f) Application of Payments During Existence of Event
of Default..................................32
SECTION 11. INSURANCE..............................................32
(a) Public Liability and Property Damage Insurance...32
(b) Insurance Against Loss or Damage to the Aircraft.33
(c) Reports, etc.....................................35
(d) Self-Insurance...................................37
(e) Terms of Policies................................37
(f) Additional Insurance by Lessor and Lessee........38
(g) Indemnification by Government
in Lieu of Insurance.............................39
(h) Application of Payments During Existence of an
Event of Default............................39
SECTION 12. INSPECTION.............................................39
SECTION 13. ASSIGNMENT.............................................41
SECTION 14. EVENTS OF DEFAULT......................................41
SECTION 15. REMEDIES...............................................43
SECTION 16. LESSEE'S COOPERATION CONCERNING CERTAIN MATTERS;
DELIVERY OF FINANCIAL STATEMENTS..................47
SECTION 17. NOTICES................................................48
SECTION 18. NO SET-OFF, COUNTERCLAIM, ETC..........................49
SECTION 19. RENEWAL OPTIONS; PURCHASE OPTIONS; VALUATION...........50
(a) Renewal Options..................................50
(1) Fixed Renewal Term..........................50
(2) Fair Market Renewal Term....................50
(3) Waiver......................................51
(4) Conditions Precedent, Payment of Basic Rent.51
(5) Termination Value...........................51
(b) Purchase Options.................................51
(c) Valuation........................................53
SECTION 20. BURDENSOME PURCHASE OPTION.............................54
SECTION 21. SECURITY FOR LESSOR'S OBLIGATION TO HOLDERS OF EQUIPMENT
NOTES.............................................55
SECTION 22. LESSOR'S RIGHT TO PERFORM FOR LESSEE...................55
SECTION 23. INVESTMENT OF SECURITY FUNDS;
LIABILITY OF LESSOR LIMITED............................56
(a) Investment of Security Funds.....................56
(b) Liability of Lessor Limited......................56
SECTION 24. JURISDICTION...........................................56
SECTION 25. MISCELLANEOUS..........................................57
SECTION 26. SUCCESSOR TRUSTEE......................................57
SECTION 27. LEASE FOR U.S. FEDERAL INCOME TAX LAW PURPOSES;
SECTION 1110 OF BANKRUPTCY CODE...................58
(a) Lease for Federal Income Tax Law Purposes........58
(b) Section 1110 of Bankruptcy Code..................58
EXHIBITS
EXHIBIT A - FORM OF LEASE SUPPLEMENT
EXHIBIT B - RETURN CONDITIONS
EXHIBIT B - 1 BASIC RENT PAYMENTS
EXHIBIT B - 2 BASIC RENT ALLOCATIONS
EXHIBIT B - 3 LESSOR'S COST
EXHIBIT C - TERMINATION VALUE SCHEDULE
EXHIBIT D - EBO AMOUNT
LEASE AGREEMENT
(US Airways, Inc. Trust No. N___U_)
This LEASE AGREEMENT (US Airways, Inc. Trust No. N___U_), dated
as of [-], between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity, except as expressly provided herein, but solely as
Owner Trustee under the Trust Agreement (as defined in Annex A hereto) (in
such capacity, "Lessor"), and US AIRWAYS, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware ("Lessee");
W I T N E S S E T H:
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SECTION 1. DEFINITIONS. 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. ACCEPTANCE AND LEASE. Lessor hereby agrees (subject
to satisfaction of the conditions set forth in Section 4(a) of the
Participation Agreement) to accept the transfer of title from and
simultaneously to lease to Lessee hereunder, and Lessee hereby agrees
(subject to satisfaction of the conditions set forth in Section 4(b) of the
Participation Agreement) to lease from Lessor hereunder, the Aircraft as
evidenced by the execution by Lessor and Lessee of a Lease Supplement
leasing the Aircraft hereunder. Lessee hereby agrees that such acceptance
of the Aircraft by Lessor shall, without further act, irrevocably
constitute acceptance by Lessee of such Aircraft for all purposes of this
Lease.
SECTION 3. TERM AND RENT.
(a) Basic Term. The Basic Term shall commence on the Delivery
Date and end on the Basic Term Expiration Date.
(b) Basic Rent. On each Rent Payment Date, Basic Rent shall be
due and payable and Lessee shall pay Basic Rent in Dollars in an amount
equal to Lessor's Cost multiplied by the percentage for such Rent Payment
Date specified on Exhibit B-1; provided, that if at any time, and from time
to time, during any six-month period between any Rent Payment Dates,
interest payable on the Series C Equipment Notes has been increased in
accordance with the terms of the Trust Indenture due to a Registration
Default, then, on each Rent Payment Date or such other date, Lessee shall
pay an amount equal to the Incremental Amount then due as an additional
payment of Basic Rent. Each payment of Basic Rent shall be final and,
absent manifest error, Lessee shall not seek, or claim any right, to
recover all or any part of such payment from Lessor or any other Person for
any reason whatsoever. Basic Rent shall be allocated to each Lease Period
in the amounts set forth for such Lease Period on Exhibit B-2 under the
caption "Basic Rent Allocation." [Each installment of Basic Rent shall be
allocated to the Lease Period(s) specified under the caption "Timing of
Payments of Allocated Rent" on Exhibit B-2.]
(c) Adjustments to Basic Rent.
(i) In the event of a refinancing as contemplated by
Section 16 of the Participation Agreement, then the Basic Rent
percentages set forth in Exhibit B-1, the Termination Value
percentages set forth in Exhibit C and the EBO Amount set forth on
Exhibit D shall be recalculated (upwards or downwards) by the Owner
Participant as contemplated by such Section to (1) maintain the Owner
Participant's Net Economic Return and (2) to the extent possible
consistent with clause (1) hereof, minimize the Net Present Value of
Rents to Lessee;
(ii) In the event that Lessee elects to satisfy any
indemnity obligation under the Tax Indemnity Agreement, then the
Basic Rent percentages set forth in Exhibit B, the Termination Value
percentages set forth in Exhibit C and the EBO Amount set forth on
Exhibit D shall be recalculated (upwards or downwards) by the Owner
Participant, using the same methods and assumptions (except to the
extent such assumptions shall be varied to take into account the Loss
(as defined in the Tax Indemnity Agreement) that is the subject of
such indemnification and any prior or contemporaneous Loss) used to
calculate the Basic Rent percentages, the Termination Value
percentages and the EBO Amount on the Delivery Date, in order to (1)
maintain the Owner Participant's Net Economic Return and (2) to the
extent possible consistent with clause (1) hereof, minimize the Net
Present Value of Rents to Lessee.
(iii)Whenever Basic Rent is recalculated pursuant to this
Section 3(c), the Owner Participant shall redetermine the Termination
Value percentages set forth in Exhibit C and the EBO Amount set forth
in Exhibit D in a manner consistent with such recalculation.
(iv) Any recalculation of Basic Rent and Termination
Value percentages pursuant to this Section 3(c) shall be determined
by the Owner Participant and shall be subject to the verification
procedures set forth in Section 3(g) hereto. Such recalculated Basic
Rent and Termination Value percentages shall be set forth in a Lease
Supplement or an amendment to this Lease.
(v) Anything contained in the Participation Agreement or
this Lease to the contrary notwithstanding, (I) each installment of
Basic Rent payable, whether or not adjusted in accordance with this
Section 3(c), together with any Advance or payment made by Lessee
pursuant to Section 3(h) and payment of Deferred Equity Amount made
by the Owner Participant under Section 7(cc) of the Participation
Agreement(1) shall be, under any circumstances and in any event, in an
amount at least sufficient for Lessor to pay in full, on the date on
which such installment of Basic Rent[, Advance or Deferred Equity
Amount](2) is due, any payments then scheduled to be made on account of
the principal of, if any, and interest on the Equipment Notes and
(II) the amount of Termination Value payable on any Termination Date,
Loss Payment Date or, in the case of payments under Sections 15 and
20, Rent Payment Date, whether or not adjusted in accordance with
this Section 3(c), together with all other amounts payable hereunder
by Lessee on such date and the amount of the premium, if any, payable
by Lessor on the Equipment Notes, shall be, under any circumstances
and in any event, in an amount at least sufficient for Lessor to pay
in full, on such Termination Date, Loss Payment Date or Rent Payment
Date, the outstanding principal of, premium, if any, and interest on
the Equipment Notes. It is agreed that no installment of Basic Rent,
payment of Termination Value or EBO Amount shall be increased or
adjusted by reason of (i) any attachment or diversion of Rent on
account of (A) Lessor Liens or (B) any Loan Participant Lien or other
Lien on or against the Trust Estate, any part thereof or the
Operative Documents arising as a result of claims against the
Indenture Trustee not related to the transactions contemplated by the
Operative Documents, (ii) any modification of the payment terms of
the Equipment Notes made without the prior written consent of Lessee
or (iii) the acceleration of any Equipment Note or Equipment Notes
due to the occurrence of an Indenture Event of Default which does not
constitute a Lease Event of Default.
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1 For deferred equity transactions only.
2 For deferred equity transactions only.
(vi) All adjustments to Basic Rent under this Section
3(c) shall be subject to verification pursuant to Section 3(g).
(d) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Termination Value and Make-Whole Amount as
the same shall become due and owing and all other amounts of Supplemental
Rent within five Business Days (5) days after demand or within such other
relevant period as may be provided in any Operative Document, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent
when due, Lessor shall have all rights, powers and remedies provided for
herein or in any other Operative Document or by law or equity or otherwise
in the case of nonpayment of Basic Rent. Lessee shall pay as Supplemental
Rent the Make-Whole Amount, if any, due pursuant to Section 2.10(b) or
Section 2.11 of the Trust Indenture in connection with a prepayment of the
Equipment Notes upon redemption of such Equipment Notes in accordance with
Section 2.10(b) or Section 2.11 of the Trust Indenture. Lessee also will
pay to Lessor, or to whosoever shall be entitled thereto, on demand, as
Supplemental Rent, to the extent permitted by applicable law, interest at
the Past Due Rate on any part of any installment of Basic Rent not paid
when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid when due for the period until the
same shall be paid.
(e) Payments in General. All payments of Rent shall be made
directly by Lessee (whether or not any Sublease shall be in effect) by wire
transfer of immediately available funds prior to 11:00 a.m., New York time,
on the date of payment, to Lessor at its account at First Security Bank,
National Association, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ABA No. ▇▇▇-▇▇▇▇-▇▇, Account No. [-], Attention: Corporate Trust
Department, Credit US Airways/US Airways, Inc. Trust No. N___U_ (or such
other account of Lessor in the continental United States as Lessor shall
direct in a notice to Lessee at least ten (10) Business Days prior to the
date such payment of Rent is due); provided that so long as the Trust
Indenture shall not have -------- been fully discharged, Lessor hereby
irrevocably directs and Lessee agrees, that, unless the Indenture Trustee
shall otherwise direct, all Rent payable to Lessor and assigned to the
Indenture Trustee pursuant to the Trust Indenture shall be paid prior to
11:00 a.m., New York time on the due date thereof in funds of the type
specified in this Section 3(e) ------------ directly to the Indenture
Trustee at its account at State Street Bank and Trust Company of
Connecticut, National Association, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ABA No. [-], Account No. [-], Reference: US Airways, Inc. ▇▇▇▇-▇
▇▇▇▇/▇▇ ▇▇▇▇▇▇▇, Inc. Trust No. N___U_ (or such other account of the
Indenture Trustee in the continental United States as the Indenture Trustee
shall direct in a notice to Lessee at least ten (10) Business Days prior to
the date such payment of Rent is due). Lessor hereby directs and Lessee
agrees that all payments of Supplemental Rent owing to the Indenture
Trustee or to a Loan Participant or any other Person (other than the
Excluded Payments payable to the Owner Participant) pursuant to the
Participation Agreement shall be made in Dollars in immediately available
funds prior to 11:00 a.m., New York time, on the due date thereof at the
office of the Indenture Trustee or at such other office of such other
financial institution located in the continental United States as the party
entitled thereto may so direct at least ten (10) Business Days prior to the
due date thereof. All payments of Supplemental Rent payable to the Owner
Participant, to the extent that such amounts constitute Excluded Payments,
shall be made in Dollars in immediately available funds prior to 11:00
a.m., New York time, on the due date thereof, to the account of the Owner
Participant specified in Schedule I to the Participation Agreement (or to
such other account as may be specified in writing by the Owner Participant
from time to time).
(f) Business Day Convention. Notwithstanding anything to the
contrary contained herein, if any date on which a payment of Rent becomes
due and payable is not a Business Day, then such payment shall not be made
on such scheduled date but shall be made on the next succeeding Business
Day with the same force and effect as if made on such scheduled date and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
(g) Verification. Any recalculation of Basic Rent, Termination
Value percentages and EBO Amount pursuant to the Lease shall be determined
by the Owner Participant, and shall maintain the Owner Participant's Net
Economic Return except as assumptions have been modified pursuant to
Section 3 of the Lease or pursuant to the Tax Indemnity Agreement or the
Participation Agreement, as the case may be; provided, however, that Lessee
may request (A) Lessee's independent public accountants to verify such
calculations but without any requirement that the Owner Participant
disclose to such Persons the methodology and assumptions and (B) if Lessee
believes that such calculations by the Owner Participant are in error then
a nationally recognized firm of accountants selected by the Owner
Participant and reasonably acceptable to Lessee shall be permitted to
verify such calculations and the Owner Participant will make available to
such firm (subject to the execution by such firm of a confidentiality
agreement reasonably acceptable to the Owner Participant) the methodology
and assumptions and any changes made therein pursuant to Section 3 of the
Lease. In the event of a verification under clause (B) of the first
sentence of this paragraph the determination by such firm of accountants
shall be final. Lessee will pay the reasonable costs and expenses of the
verification under clause (B) of the first sentence of this paragraph
unless an error adverse to Lessee is established by such firm, and if as a
result of such verification process the Basic Rent is adjusted and such
adjustment causes the Net Present Value of Rents to decline by 10 (ten) or
more basis points or causes a material reduction in Termination Value, EBO
Amount or any indemnity payment (in which event the Owner Participant shall
pay the reasonable costs and expenses of such verification process). Such
recalculated Basic Rent, Termination Value percentages and EBO Amounts
shall be set forth in a Lease Supplement or an amendment to the Lease.
(h) [Certain Advances, Deductions of Advances. On the Initial
Rent Payment Date, prior to noon New York time, Lessee shall advance to the
Indenture Trustee on behalf of the Owner Trustee an amount that, together
with the Basic Rent otherwise due on such date, will be equal to the
scheduled payments of principal and interest then due on the Equipment
Notes (the amount of such advance to be made by Lessee shall herein be
called the "Advance"); provided that, Lessee shall be relieved of such
obligation if, on the Initial Rent Payment Date, the Indenture Trustee
shall have received the amount payable by the Owner Participant pursuant to
Section 7(cc) of the Participation Agreement. In the event Lessee makes an
Advance pursuant to this Section 3(h) and is not reimbursed therefor by the
Owner Participant as provided in Section 7(cc) of the Participation
Agreement, subject to the limitation of Section 3(c)(v), Lessee shall be
entitled to offset and deduct (without duplication) against each succeeding
payment (other than as limited by the proviso to this sentence) due from
Lessee to Persons other than any Note Holder, the Indenture Trustee and
Lessor in its individual capacity (including, without limitation, Basic
Rent, payments due under Sections 5, 9, 10, 15, 19 and 20 hereof, payments
due (only to the extent due to the Owner Participant) under the Tax
Indemnity Agreement and payments due (only to the extent due to the Owner
Participant and its Related Indemnitee Group and the Owner Trustee, but
with respect to the Owner Trustee only to the extent such payments are not
attributable to the principal or interest on the Equipment Notes) under
Section 6 of the Participation Agreement) the amounts (including interest
on such amounts at the Base Rate plus 2% per annum) due and owing by the
Owner Participant to Lessee from time to time under Section 7(cc) of the
Participation Agreement until Lessee has been fully reimbursed for such
amounts (including interest on such amounts at the Base Rate plus 2%);
provided that, in the case of any payment due from Lessee which is
distributable under the terms of the Trust Indenture, Lessee's right of
offset and deduction shall be limited to the amounts distributable to
Lessor thereunder (and shall not include any amounts distributable to the
Indenture Trustee in its individual capacity or to any Note Holder), as
acknowledged by the Indenture Trustee upon 10 days' prior written notice
from Lessee to the Indenture Trustee, accompanied by a certificate of a
responsible officer of Lessee certifying that the conditions precedent to
Lessee's right to effect such an offset have been met. No such offset or
aggregate combined effect of separate offsets shall reduce the amount of
any installment of Basic Rent to an amount that is insufficient to pay in
full the payments then required to be made on account of the principal or
interest on the Equipment Notes. Lessee also will pay to the Indenture
Trustee on demand, to the extent permitted by applicable law, interest at
the Past Due Rate on any part of any Advance required to be made by Lessee
pursuant to this Section 3(h) which is not paid when required to be made
for any period for which the same shall be overdue.](3)
SECTION 4. DISCLAIMER; LESSOR'S REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
(a) Disclaimer. LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT AND
EACH PART THEREOF "AS-IS," "WHERE-IS." EXCEPT AS EXPRESSLY PROVIDED HEREIN,
NEITHER LESSOR, THE INDENTURE TRUSTEE NOR ANY PARTICIPANT MAKES, HAS MADE
OR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS AND
WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE
OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE
OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE AIRCRAFT OR ANY PART THEREOF.
(b) Representations, Warranties and Covenants of First Security
Bank. First Security Bank, National Association, in its individual
capacity, (i) represents and warrants that on the Delivery Date, Lessor
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3 For deferred equity deals only.
shall have received whatever title to the Aircraft was conveyed to it by
Lessee, (ii) represents and warrants that on the Delivery Date the Aircraft
shall be free of Lessor Liens attributable to it, (iii) covenants that
neither it nor any Person claiming by, through or under it will, through
its own actions or inactions, interfere in Lessee's or any Sublessee's
continued possession, use, operation and quiet enjoyment of the Aircraft
during the Term unless an Event of Default has occurred and is continuing
and this Lease has been duly declared in default, and this Lease shall not
be terminated except as expressly provided herein, (iv) covenants that it
will not directly or indirectly create, incur, assume or suffer to exist
any Lessor Lien attributable to it on or with respect to the Airframe or
any Engine or any portion of the Trust Estate and (v) represents and
warrants that it is a Citizen of the United States without making use of a
voting trust, voting powers agreement or similar arrangement, and agrees
that if at any time it shall cease to be a Citizen of the United States
without making use of a voting trust, voting powers agreement or similar
arrangement it will promptly resign as Owner Trustee (if and so long as
such citizenship is necessary under the Transportation Code as in effect at
such time or, if it is not necessary, if and so long as the Owner Trustee's
citizenship would have any material adverse effect on the Loan
Participants, the Owner Participant or Lessee), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of
the Trust Agreement.
(c) Lessor's Covenants. Lessor (i) covenants that neither it
nor any Person claiming by, through or under it will, through its own
actions or inactions, interfere in Lessee's or any Sublessee's continued
possession, use, operation and quiet enjoyment of the Aircraft during the
Term unless an Event of Default has occurred and is continuing and this
Lease has been duly declared in default, and this Lease shall not be
terminated except as expressly provided herein and (ii) covenants that it
will not directly or indirectly create, incur, assume or suffer to exist
any Lessor Lien attributable to it on or with respect to the Airframe or
any Engine.
(d) Manufacturer's Warranties. None of the provisions of this
Lease shall be deemed to amend, modify or otherwise affect the
representations, warranties or other obligations (express or implied) of
the Seller, the Manufacturer, any subcontractor or supplier of the
Manufacturer with respect to the Airframe, the Engines or any Parts, or to
release the Seller, the Manufacturer, or any such subcontractor or
supplier, from any such representation, warranty or obligation. Unless an
Event of Default shall have occurred and be continuing under Section 14 and
this Lease shall have been declared in default, Lessor agrees to make
available to Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made by the Seller, the Manufacturer or any
affiliate thereof or any of its subcontractors or suppliers and any other
claims against the Seller, the Manufacturer or any affiliate thereof, or
any such subcontractor or supplier with respect to the Aircraft, all
pursuant to and in accordance with the terms of the Purchase Agreement
Assignment.
SECTION 5. RETURN OF THE AIRCRAFT.
(a) Condition Upon Return. Lessee shall comply with each of the
provisions of Exhibit B, which provisions are hereby incorporated by this
reference as if set forth in full herein.
(b) Parking and Related Matters. Unless Lessee has elected to
purchase the Aircraft in accordance with the terms hereof, if Lessor gives
written notice to Lessee not less than sixty (60) days nor more than one
hundred eighty (180) days prior to the end of the Term requesting storage
of the Aircraft upon its return hereunder, Lessee will provide Lessor, or
cause Lessor to be provided, with outdoor parking facilities for the
Aircraft for a period up to thirty (30) days, commencing on the date of
such return, at such storage facility in the forty eight (48) contiguous
states of the United States as Lessee may select; provided that such
location shall be a location generally used for the parking of commercial
aircraft by aircraft owners or operators. Notwithstanding subsection (a) of
Exhibit B, such location shall be deemed to be the return location of the
Aircraft for purposes of such Exhibit B. Such parking shall be at Lessor's
risk and expense and Lessor shall pay all applicable storage, maintenance
and insurance fees and expenses. Lessee's obligation to arrange parking
shall be subject to Lessee and Lessor entering into an agreement prior to
the commencement of the storage period with the storage facility providing,
among other things, that Lessor shall bear all maintenance charges and
other costs incurred relating to such storage.
(c) 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
an Acceptable Alternate Engine meeting the requirements of, and in
accordance with, Section 10 and Exhibit 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.
(d) Obligations Continue Until Return. If Lessee shall, for any
reason, fail to return the Aircraft at the time specified herein, all
obligations of Lessee under this Lease shall continue in effect with
respect to the Aircraft until the Aircraft is returned to Lessor and Lessee
shall pay to Lessor an amount equal to the average daily Basic Rent payable
by Lessee during the Term for each day after the end of the Term to but
excluding the day of such return; provided, however, that Lessee shall not
be responsible for Lessor's failure to accept return of the Aircraft in
accordance with this Section 5 in a timely manner or for any Rent with
respect to periods after Lessee has tendered the Aircraft for return in
accordance with this Lease. Any Rent owed to Lessor pursuant to this
Section 5(d) shall be payable upon acceptance of the Aircraft by Lessor or
on the last day of each calendar month following the last day of the Term
if the Aircraft has not been accepted earlier.
SECTION 6. LIENS. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, title thereto or any interest therein or in this Lease, except
(i) the respective rights of Lessor as owner of the Aircraft and Lessee as
herein provided, the Lien of the Trust Indenture, the rights of any
Sublessee under a sublease permitted hereunder and any other rights of any
Person existing pursuant to the Operative Documents, (ii) the rights of
others under agreements or arrangements to the extent permitted by the
terms of Sections 7(b) and 8(b) hereof, (iii) Lessor Liens, Loan
Participant Liens and Indenture Trustee's Liens, (iv) Liens for Taxes of
Lessee (or any Sublessee) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
any material danger of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (v) materialmen's, mechanics', workmen's,
repairmen's, employees' or other like Liens arising in the ordinary course
of Lessee's (or, if a Sublease is then in effect, Sublessee's) business
(including those arising under maintenance agreements entered into in the
ordinary course of business) securing obligations that are not overdue for
a period of more than sixty (60) days or are being contested in good faith
by appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (vi) Liens arising out of any judgment or
award against Lessee (or any Sublessee), unless the judgment secured shall
not, within sixty (60) days after the entry thereof, have been discharged,
vacated, reversed or execution thereof stayed pending appeal or shall not
have been discharged, vacated or reversed within sixty (60) days after the
expiration of such stay, (vii) any other Lien with respect to which Lessee
(or any Sublessee) shall have provided a bond, cash collateral or other
security adequate in the reasonable opinion of Lessor and (viii) Liens
approved in writing by Lessor. Lessee will promptly, at its own expense,
take (or cause to be taken) such actions as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any
time.
SECTION 7. REGISTRATION, MAINTENANCE, OPERATION AND REGISTRATION;
POSSESSION AND SUBLEASES; INSIGNIA.
(a) Registration, Maintenance, Operation and Registration.
(1) Registration and Maintenance. Lessee, at its own cost
and expense, shall (or shall cause any Sublessee to): (A) forthwith
upon the delivery thereof hereunder, cause the Aircraft to be duly
registered in the name of Lessor, and, subject to clause 3 of this
Section 7(a) and Section 7(d) of the Participation Agreement, to
remain duly registered in the name of Lessor under the Transportation
Code, provided that Lessor shall execute and deliver all such
documents as Lessee (or any Sublessee) may reasonably request for the
purpose of effecting and continuing such registration, and shall not
register the Aircraft or permit the Aircraft to be registered under
any laws other than the Transportation Code at any time except as
provided in Section 7(d) of the Participation Agreement and, unless
the Lien of the Trust Indenture shall have been discharged, shall
cause the Trust Indenture to be duly recorded and maintained of
record as a first mortgage on the Aircraft; (B) maintain, service,
repair and/or overhaul (or cause to be maintained, serviced, repaired
and/or overhauled) the Aircraft so as to keep the Aircraft in as good
an operating condition as when delivered by the Seller to Lessee,
ordinary wear and tear excepted, and as may be necessary to enable
the applicable airworthiness certification for the Aircraft to be
maintained in good standing at all times (other than during temporary
periods of storage or during maintenance or modification permitted
hereunder) under the Transportation Code, except when all of Lessee's
Airbus Model A[321][330] aircraft powered by engines of the same type
as those with which the Airframe shall be equipped at the time of
such grounding and registered in the United States have been grounded
by the FAA (although such certification need actually be maintained
only during such periods as the Aircraft is registered in the United
States), or the applicable laws of any other jurisdiction in which
the Aircraft may then be registered from time to time in accordance
with Section 7(d) of the Participation Agreement, utilizing, except
during any period that a Sublease is in effect, the same manner and
standard of maintenance, service, repair or overhaul used by Lessee
with respect to similar aircraft operated by Lessee in similar
circumstances and utilizing, during any period that a Sublease is in
effect, the same manner and standard of maintenance, service, repair
or overhaul used by the Sublessee with respect to similar aircraft
operated by the Sublessee in similar circumstances; (C) maintain or
cause to be maintained in English all records, logs and other
materials required to be maintained in respect of the Aircraft by the
FAA or the applicable regulatory agency or body of any other
jurisdiction in which the Aircraft may then be registered; and (D)
promptly furnish or cause to be furnished to Lessor and the Owner
Participant such information as may be required to enable Lessor to
file any reports required to be filed by Lessor or the Owner
Participant with any governmental authority because of Lessor's
ownership of the Aircraft.
(2) Operation. Lessee will not maintain, use, service,
repair, overhaul or operate the Aircraft (or permit any Sublessee to
maintain, use, service, repair, overhaul or operate the Aircraft) in
violation of any law or any rule, regulation, order or certificate of
any government or governmental authority (domestic or foreign) having
jurisdiction over the Aircraft, or in violation of any airworthiness
certificate, license or registration relating to the Aircraft issued
by any such authority, except to the extent Lessee (or, if a Sublease
is then in effect, any Sublessee) is contesting in good faith the
validity or application of any such law, rule, regulation or order in
any reasonable manner which does not involve any material risk of
sale, forfeiture or loss of the Aircraft. Lessee will not operate the
Aircraft, or permit any Sublessee to operate the Aircraft, in any
area excluded from coverage by any insurance required by the terms of
Section 11; provided, however, that the failure of Lessee to comply
with the provisions of this sentence shall not give rise to an Event
of Default hereunder if indemnification complying with Section 11(c)
has been provided or where such failure is attributable to
extraordinary circumstances involving an isolated occurrence or
series of incidents not in the ordinary course of the regular
operations of Lessee (or any Sublessee) such as a hijacking, medical
emergency, equipment malfunction, weather condition, navigational
error or other causes beyond the reasonable control of Lessee (or any
Sublessee).
(3) Reregistration. At any time after the Depreciation
Period, Lessor, upon Lessee's compliance with all of the terms of
Section 7(d) of the Participation Agreement, shall, at the request
and sole expense of Lessee, cooperate with Lessee to take all actions
required to change the registration of the Aircraft to another
country.
(b) Possession and Subleases. Lessee will not, without the
prior written consent of Lessor, sublease or otherwise in any manner
deliver, transfer or relinquish possession of the Airframe or any Engine or
install or permit any Engine to be installed on any airframe other than the
Airframe or enter into any Wet Lease, and so long as Lessee (or any
Sublessee) shall comply with the provisions of Section 7(a) and Section 11
hereof, Lessee may (or may permit any Sublessee to), without the prior
written consent of Lessor:
(i) subject the Airframe and the Engines or engines
then installed thereon to interchange agreements or any Engine to
pooling or similar arrangements, in each case customary in the
airline industry and entered into by Lessee (or, if a Sublease is
then in effect, by Sublessee) in the ordinary course of its business;
provided that (A) no such agreement or arrangement contemplates or
requires the transfer of title to the Airframe, (B) if Lessor's title
to any Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall (or shall cause
Sublessee to) comply with Section 10(b) hereof in respect thereof and
(C) any interchange agreement to which the Airframe may be subject
shall be with a U.S. Air Carrier or a Foreign Air Carrier.
(ii) deliver possession of the Airframe or any Engine
to the manufacturer thereof (or for delivery thereto) or to any
organization (or for delivery thereto) for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any part of
any thereof or for alterations or modifications in or additions to
such Airframe or Engine to the extent required or permitted by the
terms of Section 8(c) hereof;
(iii) install an Engine on an airframe owned by
Lessee (or any Sublessee) free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of
third parties under interchange agreements or pooling or similar
arrangements which would be permitted under clause (i) above,
provided that Lessor's title to such Engine and, if any Equipment
Notes shall be outstanding, the first priority Lien of the Trust
Indenture shall not be divested or impaired as a result thereof and
(C) mortgage liens or other security interests, provided that (as
regards this clause (C)) the documents creating such mortgage liens
or other security interests (or, if applicable, another written
agreement governing such mortgage liens or other security interests)
effectively provide that such Engine shall not become subject to the
lien of such mortgage or security interest, notwithstanding the
installation thereof on such airframe;
(iv) install an Engine on an airframe leased to
Lessee (or any Sublessee) or purchased by Lessee (or any Sublessee)
subject to a conditional sale or other security agreement, provided
that (x) such airframe is free and clear of all Liens, except: (A)
the rights of the parties to the lease or conditional sale or other
security agreement covering such airframe, or their assignees and (B)
Liens of the type permitted by clause (iii) of this paragraph (b) and
(y) such lease, conditional sale or other security agreement
effectively provides that such Engine shall not become subject to the
lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe;
(v) install an Engine on an airframe owned by Lessee
(or any Sublessee), leased to Lessee (or any Sublessee) or purchased
by Lessee (or any Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither clause (iii) nor
clause (iv) of this paragraph (b) is applicable, provided that such
installation shall be deemed an Event of Loss with respect to such
Engine and Lessee shall (or shall cause any Sublessee to) comply with
Section 10(b) hereof in respect thereof, Lessor not intending hereby
to waive any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 10(b);
(vi) to the extent permitted by Section 8(b) hereof,
subject any appliances, Parts or other equipment owned by Lessor and
removed from the Airframe or any Engine to any pooling arrangement
referred to in Section 8(b) hereof;
(vii) subject (or permit any Sublessee to subject) the
Airframe or any Engine to the Civil Reserve Air Fleet Program and
transfer (or permit any Sublessee to transfer) possession of the
Airframe or any Engine to the United States Government or any
instrumentality or agency thereof pursuant to the Civil Reserve Air
Fleet Program, so long as Lessee (or any Sublessee) shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to
the Civil Reserve Air Fleet Program in any contract year and provide
Lessor with the name and address of the Contracting Office
Representative for the Air Mobility Command of the United States Air
Force to whom notice must be given pursuant to Section 15 hereof and
(B) promptly notify Lessor upon transferring possession of the
Airframe or any Engine to the United States of America or any agency
or instrumentality thereof pursuant to such program;
(viii) for a period not to extend beyond the end of the
Term, enter into a Wet Lease for the Airframe and Engines or engines
then installed thereon with any third party; provided that if Lessee
(or any Sublessee) shall enter into any Wet Lease for a period of
more than one year (including renewal options) Lessee shall provide
Lessor written notice of such Wet Lease (such notice to be given
prior to entering into such Wet Lease, if practicable, but in any
event promptly after entering into such Wet Lease);
(ix) for a period not to extend beyond the end of the
Term, transfer possession of the Airframe or any Engine to the United
States Government or any instrumentality or agency thereof pursuant
to a contract, a copy of which shall be provided to Lessor; or
(x) Lessee may, at any time in its sole discretion,
enter into any sublease with (A) any Person domiciled in the United
States, (B) after the Depreciation Period, any Permitted Sublessee or
(C) after the Depreciation Period, any other Person approved in
writing by Lessor, which approval shall not be unreasonably withheld;
provided, however, that no sublease entered into pursuant to this
clause (x) shall extend beyond the expiration of the Basic Term or
any Renewal Term then in effect unless Lessee shall have irrevocably
committed to purchase the Aircraft or renew the Lease in accordance
with the terms hereof at the end of the Basic Term or Renewal Term,
as the case may be, to a date beyond the latest permissible
expiration date of such sublease; provided, further, with respect to
a sublease under subclauses (B) or (C) of this clause (x), Lessee
shall deliver to Lessor an opinion of counsel to the effect that (I)
the obligations of Lessee and the rights and remedies of the Lessor
under the Lease remain valid, binding and (subject to customary
bankruptcy and equitable remedies exceptions and to other exceptions
customary in such Opinions) enforceable; (II) the terms of the
sublease constitute valid and binding obligations of the Sublessee
and (subject to customary bankruptcy and equitable remedies
exceptions and to other exceptions customary in such Opinions)
enforceable against Sublessee (it being understood that such opinion
may be an opinion as to the form of the Sublease only and may assume
due authorization, execution, delivery, requisite approvals and
absence of conflicts with laws, contracts or organizational
documents) under the laws of the jurisdiction governing the sublease,
(III) that there is no tort liability of the owner of an aircraft not
in possession thereof under the laws of the jurisdiction of the
proposed sublessee other than tort liability which might have been
imposed on such owner under the laws of the United States or any
state thereof (it being understood that in the event such opinion
cannot be given such opinion requirement shall be waived if insurance
reasonably satisfactory to Lessor, in its individual capacity, is
provided at Lessee's expense) and (IV) unless Lessee shall have
agreed to provide insurance covering the risk of requisition of use
of the Aircraft by the government of the jurisdiction of the proposed
sublessee reasonably satisfactory to the Owner Participant, that the
laws of such jurisdiction require fair compensation by the government
of such jurisdiction payable in currency freely convertible into
Dollars for the loss of use of the Aircraft in the event of the
requisition by such government of such use; and provided finally
that, with respect to any sublease to any Affiliate of Lessee, (I)
such sublessee shall be a Certificated Air Carrier and (II) Lessee
shall deliver to Lessor an opinion of counsel to the effect that
Lessee would be entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft if such Affiliate were
to be a debtor in a case under Chapter 11 of the Bankruptcy Code,
such opinion to be subject to customary assumptions and
qualifications. Lessee shall provide Lessor with a copy of any
sublease which has a term of more than one (1) year.
The rights of any Sublessee or other transferee who receives
possession by reason of a transfer permitted by this paragraph (b) (other
than the transfer of an Engine which is deemed an Event of Loss) shall be
subject and subordinate to, and any Sublease permitted by this paragraph
(b) shall be expressly subject and subordinate to, all the terms of this
Lease and Lessor's (and so long as the Trust Indenture is in effect, the
Indenture Trustee's (as Lessor's assignee)) rights to repossess and to void
such Sublease upon such repossession, and Lessee shall remain primarily
liable hereunder for the performance of all of the terms of this Lease, and
the terms of any such Sublease shall not permit any Sublessee to take any
action not permitted to be taken by Lessee in this Lease with respect to
the Aircraft. No pooling agreement, sublease or other relinquishment of
possession of the Airframe or any Engine or Wet Lease shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights or remedies hereunder. Lessor
agrees, for the benefit of Lessee (and any Sublessee) and for the benefit
of any mortgagee or other holder of a security interest in any engine
(other than an Engine) owned by Lessee (or any Sublessee), any lessor of
any engine (other than an Engine) leased to Lessee (or any Sublessee) and
any conditional vendor of any engine (other than an Engine) purchased by
Lessee (or any Sublessee) subject to a conditional sale agreement or any
other security agreement, that no interest shall be created hereunder in
any engine so owned, leased or purchased and that none of Lessor, its
successors or assigns will acquire or claim, as against Lessee (or any
Sublessee) or any such mortgagee, lessor or conditional vendor or other
holder of a security interest or any successor or assignee of any thereof,
any right, title or interest in such engine as the result of such engine
being installed on the Airframe.
Any Wet Lease or similar arrangement under which Lessee
maintains operational control of the Aircraft shall not constitute a
delivery, transfer or relinquishment of possession of the Aircraft for
purposes of this section. Lessor acknowledges that any consolidation or
merger of Lessee or conveyance, transfer or lease of all or substantially
all of Lessee's assets otherwise permitted by the Operative Documents shall
not be prohibited by this Section.
(c) Insignia. On or prior to the Delivery Date, or as soon as
practicable thereafter, Lessee agrees to affix and maintain (or cause to be
affixed and maintained), at its expense, in the cockpit of the Airframe
adjacent to the airworthiness certificate therein and on each Engine a
nameplate bearing the inscription:
Leased From
First Security Bank, National Association, as Owner Trustee, Lessor
and, for so long as the Airframe and each Engine shall be subject to the
Lien of the Trust Indenture, bearing the following additional inscription:
Mortgaged To
State Street Bank and Trust Company of Connecticut, National Association,
as Indenture Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting
the name of any successor Lessor or successor Indenture Trustee, in each
case as permitted under the Operative Documents). Except as above provided,
Lessee will not allow the name of any Person to be placed on the Airframe
or on any Engine as a designation that might be interpreted as a claim of
ownership; provided that nothing herein contained shall prohibit Lessee (or
any Sublessee) from placing its customary colors and insignia on the
Airframe or any Engine.
SECTION 8. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS.
(a) Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace or cause to be replaced all Parts which may from time
to time be incorporated or installed in or attached to the Airframe or any
Engine and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever, except as otherwise
provided in paragraph (c) of this Section 8 or if the Airframe or an Engine
to which a Part relates has suffered an Event of Loss. In addition, Lessee
(or any Sublessee) may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing, any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided that
Lessee (or any Sublessee), except as otherwise provided in paragraph (c) of
this Section 8, will, at its own cost and expense, replace such Parts as
promptly as practicable. All replacement Parts shall be free and clear of
all Liens (except for Permitted Liens and pooling arrangements to the
extent permitted by paragraph (b) of this Section 8 and except in the case
of replacement property temporarily installed on an emergency basis) and
shall be in as good operating condition as, and shall have a value and
utility at least equal to, the Parts replaced assuming such replaced Parts
were in the condition and repair required to be maintained by the terms
hereof. Except as otherwise provided in paragraph (c) of this Section 8,
all Parts at any time removed from the Airframe or any Engine shall remain
the property of Lessor, no matter where located, until such time as such
Parts shall be replaced by Parts which have been incorporated or installed
in or attached to the Airframe or such Engine and which meet the
requirements for replacement Parts specified above. Immediately upon any
replacement part becoming incorporated or installed in or attached to the
Airframe or any Engine as above provided, without further act (subject only
to Permitted Liens and any pooling arrangement to the extent permitted by
paragraph (b) of this Section 8 and except in the case of replacement
property temporarily installed on an emergency basis), (i) title to such
replacement Part shall thereupon vest in Lessor, (ii) such replacement Part
shall become subject to this Lease and be deemed part of the Airframe or
such Engine for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to the Airframe or such
Engine and (iii) title to the replaced Part shall thereupon vest in Lessee
(or, if a Sublease is then in effect, any Sublessee), free and clear of all
rights of Lessor, and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
Engine as provided in paragraph (a) of this Section 8 may be subjected by
Lessee (or any Sublessee) to a normal pooling arrangement customary in the
airline industry of which Lessee (or, if a Sublease is then in effect, any
Sublessee) is a party entered into in the ordinary course of Lessee's (or
any Sublessee's) business; provided that the Part replacing such removed
Part shall be incorporated or installed in or attached to such Airframe or
Engine in accordance with such paragraph (a) as promptly as practicable
after the removal of such removed Part. In addition, any replacement Part
when incorporated or installed in or attached to the Airframe or any Engine
in accordance with such paragraph (a) may be owned by any third party
subject to such a normal pooling arrangement, provided that Lessee (or any
Sublessee), at its expense, as promptly thereafter as practicable, either
(i) causes title to such replacement Part to vest in Lessor in accordance
with such paragraph (a) by Lessee (or any Sublessee) acquiring title
thereto for the benefit of, and transferring such title to, Lessor free and
clear of all Liens except Permitted Liens (other than pooling arrangements)
or (ii) replaces such replacement Part by incorporating or installing in or
attaching to the Airframe or Engine a further replacement Part owned by
Lessee (or any Sublessee) free and clear of all Liens except Permitted
Liens (other than pooling arrangements) and by causing title to such
further replacement Part to vest in Lessor in accordance with such
paragraph (a).
(c) Alterations, Modifications and Additions. Lessee, at its
own expense, will make (or cause to be made) such alterations and
modifications in and additions to the Airframe and Engines as may be
required from time to time to meet the applicable standards of the FAA or
any applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered as permitted by Section 7(d) of the
Participation Agreement; provided, however, that Lessee (or, if a Sublease
is then in effect, any Sublessee) may, in good faith, contest the validity
or application of any such law, rule, regulation or order in any reasonable
manner which does not adversely affect Lessor or, so long as any Equipment
Notes are outstanding, the Indenture Trustee. In addition, Lessee (or any
Sublessee), at its own expense, may from time to time add further parts or
accessories and make such alterations and modifications in and additions to
the Airframe or any Engine as Lessee (or any Sublessee) may deem desirable
in the proper conduct of its business, including, without limitation,
removal of Parts which Lessee (or any Sublessee) has determined in its
reasonable judgment to be obsolete or no longer suitable or appropriate for
use on the Airframe or such Engine (such parts, "Obsolete Parts"); provided
that no such alteration, modification or addition shall materially diminish
the value, utility or remaining useful life of the Airframe or such Engine
below the value, utility or remaining useful life thereof immediately prior
to such alteration, modification or addition, assuming the Airframe or such
Engine was then in the condition required to be maintained by the terms of
this Lease, except that the value (but not the utility or remaining useful
life) of the Airframe or any Engine may be reduced by the value of Obsolete
Parts which shall have been removed so long as the aggregate value of all
Obsolete Parts which shall have been removed and not replaced shall not
exceed [$350,000](4) [$750,000](5) in aggregate value at the time of removal.
Title to all Parts incorporated or installed in or attached or added to the
Airframe or an Engine as the result of such alteration, modification or
addition (except those parts which (x) Lessee has leased from others and
(y) may be removed by Lessee pursuant to the next sentence (the "Additional
Parts")) shall, without further act, vest in Lessor.
--------
4 For A321 aircraft.
5 For A330 aircraft.
Notwithstanding the foregoing sentence, Lessee (or any Sublessee) may
remove or suffer to be removed any Additional Part, provided that such
Additional Part (i) is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or
attached to the Airframe or any Engine at the time of delivery thereof
hereunder or any Part in replacement of, or substitution for, any such
Part, (ii) is not required to be incorporated or installed in or attached
or added to the Airframe or any Engine pursuant to the terms of Section 7
hereof or the first sentence of this paragraph (c) and (iii) can be removed
from the Airframe or such Engine without diminishing or impairing the
value, utility or remaining useful life which the Airframe or such Engine
would have had at the time of removal had such alteration, modification or
addition not occurred. Upon the removal by Lessee (or Sublessee) of any
Part as provided above, title thereto shall, without further act, vest in
Lessee (or any Sublessee, as the case may be) and such Part shall no longer
be deemed part of the Airframe or Engine from which it was removed. Any
Part not removed by Lessee (or any Sublessee) as above provided prior to
the return of the Airframe or Engine to Lessor hereunder shall remain the
property of Lessor.
(d) Certain Matters Regarding Passenger Convenience Equipment.
Lessee may install on the Airframe, subject to the requirements of Section
8(c) above, Passenger Convenience Equipment that is (i) owned by another
Person and leased to Lessee, (ii) sold to Lessee by another Person subject
to a conditional sale contract or other retained security interest, (iii)
leased to Lessee pursuant to a lease which is subject to a security
interest in favor of another Person or (iv) installed on the Aircraft
subject to a license granted to Lessee by another Person, and in any such
case the Lessor and the Indenture Trustee will not acquire or claim, as
against any such other Person, any right, title or interest in any such
Passenger Convenience Equipment solely as a result of its installation on
the Airframe. Lessee agrees that if any such Person repossesses such
Passenger Convenience Equipment, Lessee will (or will cause such Person to)
restore the Aircraft to the condition it would have been in had the
installation of such Passenger Convenience Equipment not occurred.
SECTION 9. VOLUNTARY TERMINATION.
(a) Termination Event.
(i) Lessee shall have the right to elect to terminate this
Lease (x) on any Rent Payment Date occurring on or after the close of
the calendar year in which the seventh (7th) anniversary of the
Delivery Date occurs if Lessee shall have made the good faith
determination, which shall be evidenced by a certificate of a
responsible officer of Lessee, that the Aircraft is obsolete or
surplus to its needs or (y) on the tenth, thirteenth and sixteenth
anniversaries of the Delivery Date.
(ii) Lessee shall give to Lessor at least one hundred twenty
(120) days revocable advance written notice of Lessee's intention to
so terminate this Lease (any such notice, a "Termination Notice")
specifying (A) the Rent Payment Date on which Lessee intends to
terminate this Lease in accordance with this Section 9 (such
specified date, a "Termination Date"), (B) either (I) that Lessee has
determined that the Aircraft is obsolete or surplus to its needs or
(II) that it is exercising its termination option pursuant to Section
9(a)(i)(y) and (C) in the case of a Termination under Section
9(a)(i)(y) whether Lessee elects to purchase the Aircraft pursuant to
Section 9(d). Any Termination Notice shall become irrevocable fifteen
(15) days prior to the Termination Date.
(b) Optional Sale of the Aircraft; Lessor Retention Option;
Revocation of Termination Notice. In the event that Lessee shall have
exercised its right to terminate this Lease under Section 9(a)(i)(y) but
shall not have elected to purchase the Aircraft pursuant to Section 9(d),
or Lessee shall have elected to terminate this Lease pursuant to Section
9(a)(i)(x), then during the period from the giving of the Termination
Notice until the proposed Termination Date (unless Lessee shall have
revoked the Termination Notice specifying such proposed Termination Date or
Lessor shall have irrevocably elected to retain the Aircraft pursuant to
this Section 9(b)), Lessee, as agent for Lessor and at no expense to
Lessor, shall use commercially reasonable efforts to obtain bids for the
purchase of the Aircraft and, in the event it receives any bid, Lessee
shall, within five (5) Business Days after receipt thereof and at least ten
(10) Business Days prior to the proposed Termination Date, certify to
Lessor in writing the amount and terms of such bid, and the name and
address of the party or parties (who shall not be Lessee or any Affiliate
of Lessee or any Person with whom Lessee or any such Affiliate has an
arrangement or understanding regarding the future use of the Aircraft by
Lessee or any such Affiliate but who may be the Owner Participant, any
Affiliate thereof or any Person contacted by the Owner Participant)
submitting such bid. Subject to the next succeeding sentence, on or before
the Termination Date, subject to the release of all mortgage and security
interests with respect to the Aircraft under the Trust Indenture: (1)
Lessee shall deliver the Aircraft, or cause the Aircraft to be delivered,
to the bidder(s), if any, which shall have submitted the highest bid
therefor at least ten (10) Business Days prior to such Termination Date, in
the same manner and in the same condition and otherwise in accordance with
all the terms of this Lease as if delivery were made to Lessor pursuant to
Section 5, and shall duly transfer to Lessor title to any engines not owned
by Lessor all in accordance with the terms of Section 5, (2) Lessor shall
comply with the terms of the Trust Indenture and shall, without recourse or
warranty (except as to the absence of Lessor Liens), subject to prior or
concurrent payment by Lessee of all amounts due under clause (3) of this
sentence, sell all of Lessor's right, title and interest in and to the
Aircraft for cash in Dollars to such bidder(s), the total sales price
realized at such sale to be retained by Lessor and (3) Lessee shall
simultaneously pay or cause to be paid to Lessor in funds of the type
specified in Section 3(e) hereof, an amount equal to the sum of (A) the
excess, if any, of (i) the Termination Value for the Aircraft, computed as
of the Termination Date, over (ii) the sales price of the Aircraft sold by
Lessor after deducting the reasonable expenses incurred by Lessor in
connection with such sale, (B) all unpaid Basic Rent with respect to the
Aircraft due prior to (but not on) such Termination Date and all
Supplemental Rent due by Lessee under this Lease (including, without
limitation, Supplemental Rent in respect of the Make-Whole Amount, if any,
payable in connection with a prepayment of the Equipment Notes, and upon
such payment Lessor simultaneously will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens), all of
Lessor's right, title and interest in and to any Engines constituting part
of the Aircraft which were not sold with the Aircraft. Notwithstanding the
preceding sentence, Lessor may, if Lessee has not revoked the Termination
Notice, elect to retain title to the Aircraft. If Lessor so elects, Lessor
shall give to Lessee irrevocable written notice of such election within
thirty (30) days of its receipt of a Termination Notice accompanied by an
irrevocable undertaking by the Owner Participant to make available to the
Lessor for payment to the Indenture Trustee on the Termination Date the
amount required to pay in full the unpaid principal amount of the Equipment
Notes outstanding on the Termination Date plus interest accrued thereon
through the Termination Date together with the Make-Whole Amount, if any,
due on the Equipment Notes, if the same is not otherwise paid. Upon receipt
of notice of such an election by Lessor and the accompanying undertaking by
the Owner Participant, Lessee shall cease its efforts to obtain bids as
provided above and shall reject all bids theretofore or thereafter
received. On the Termination Date, Lessor shall (subject to the payment by
Lessee of all Rent due on or prior to such date, other than any Basic Rent
due on such date) pay in full the unpaid principal amount of the Equipment
Notes outstanding on the Termination Date plus interest accrued thereon
through the Termination Date together with all Make- Whole Amount, if any,
due on the Equipment Notes and, so long as the Equipment Notes are paid as
aforesaid, Lessee shall deliver the Airframe and Engines or engines to
Lessor in accordance with Section 5 and shall pay all Basic Rent due prior
to the Termination Date and all Supplemental Rent (other than Make-Whole
Amount or Termination Value) due on or prior to the Termination Date. If no
sale shall have occurred on the Termination Date and Lessor has not made
the payment contemplated by the preceding sentence and thereby caused this
Lease to terminate, or if Lessee revokes its Termination Notice, this Lease
shall continue in full force and effect as to the Aircraft, Lessee shall
pay the reasonable costs and expenses incurred by the Owner Participant and
Lessor (unless such failure to terminate the Lease is a consequence of the
failure of Lessor or the Owner Participant without due cause to make, or
cause to be made, the payment referred to in the immediately preceding
sentence, in which case Lessor and the Owner Participant shall be
responsible for damages), if any, in connection with preparation for such
sale and Lessee may give one or more additional Termination Notices in
accordance with Section 9(a), subject to the last sentence of this Section
9(b). In the event of any such sale or such retention of the Aircraft by
Lessor and upon compliance by Lessee with the provisions of this paragraph,
the obligation of Lessee to pay Basic Rent or any other amounts hereunder
shall cease to accrue and this Lease shall terminate. Lessor may, but shall
be under no duty to, solicit bids, inquire into the efforts of Lessee to
obtain bids or otherwise take any action in connection with any such sale
other than to transfer (in accordance with the foregoing provisions) to the
purchaser named in the highest bid certified by Lessee to Lessor all of
Lessor's right, title and interest in the Aircraft, against receipt of the
payments provided herein. Lessee may revoke a Termination Notice given
pursuant to Section 9(a) no more than two (2) times during the Term.
(c) Termination as to Engines; Replacement. Lessee shall have
the right at its option at any time during the Term, on at least thirty
(30) days prior written notice, to terminate this Lease with respect to any
Engine. In such event, and prior to the date of such termination, Lessee
shall replace such Engine hereunder by complying with the terms of Section
10(b) to the same extent as if an Event of Loss had occurred with respect
to such Engine, and Lessor shall transfer such right, title and interest as
it may have to the replaced Engine as provided in Section 5(c). No
termination of this Lease with respect to any Engine as contemplated by
this Section 9(c) shall result in any reduction of Basic Rent.
(d) Special Purchase Options. If Lessee exercises its right to
terminate this Lease under Section 9(a)(i)(y), gives its notice pursuant to
Section 9(a)(ii) to purchase the Aircraft pursuant to this Section 9(d) and
such notice becomes irrevocable, then on the Termination Date specified in
Section 9(a), Lessee shall purchase the Aircraft at the greater of (i) the
Termination Value on the Termination Date, or (ii) its fair market sales
value on the Termination Date (determined in accordance with Section 19(c)
hereof), provided that Lessee shall have also paid the amounts specified in
(A) and (B) of the following sentence. In such event, Lessor shall, without
recourse or warranty (except as to the absence of Lessor Liens), sell the
Aircraft to Lessee in exchange for the payment in immediately available
funds in an amount equal to the greater of (x) the Termination Value for
the Aircraft, computed as of the Termination Value Date, or (y) the fair
market sales value of the Aircraft on the Termination Date, provided that
on such date the Lessee shall have also paid to the Lessor the sum of (A)
all unpaid Basic Rent with respect to the Aircraft due prior to (but not
on) such Termination Date and all unpaid Supplemental Rent with respect to
the Aircraft due on or prior to such Termination Date plus (B) all
reasonable expenses incurred by Lessor and the Owner Participant in
connection with such sale. Upon payment in full of the amounts required to
be paid and the performance of all acts required to be performed by Lessee
pursuant to the preceding sentence, (i) the obligation of Lessee to pay
Basic Rent hereunder with respect to the Aircraft due on or after the
Termination Date shall terminate with respect to the Aircraft, (ii) this
Lease shall terminate on the Termination Date, (iii) Lessor will transfer
to or at the direction of Lessee, without recourse or warranty (except as
to the absence of Lessor Liens), all of Lessor's right, title and interest
in the Airframe and Engines and furnish to or at the direction of the
Lessee a ▇▇▇▇ of sales in form and substance reasonably satisfactory to
Lessee, evidencing such transfer. Notwithstanding the foregoing, Lessee
may, in accordance with Section 7(u) of the Participation Agreement, assume
the principal amount of the Equipment Notes then outstanding on any
Termination Date specified in Section 9(a), in which event the Lessee will
receive a credit against the purchase price otherwise payable pursuant to
this Section 9(d) in an amount equal to the principal amount of Equipment
Notes so assumed.
SECTION 10.LOSS, DESTRUCTION, REQUISITION, ETC.
(a) Event of Loss with Respect to the Aircraft. Upon the
occurrence of an Event of Loss with respect to the Airframe or the Airframe
and the Engines and/or engines then installed thereon, Lessee shall
forthwith (and in any event, within fifteen (15) days after such
occurrence) give Lessor written notice of such Event of Loss, and, within
sixty (60) days after such Event of Loss, Lessee shall give Lessor written
notice of its election to perform one of the following options (it being
agreed that if Lessee shall not have given such notice of election within
such period, Lessee shall be deemed to have elected the option set forth in
clause (i) below). Lessee may elect either to:
(i) make the payments specified in this clause (i),
in which event not later than the earlier of (x) the Business Day
next succeeding the 120th day following the occurrence of such Event
of Loss or (y) an earlier Business Day irrevocably specified fifteen
(15) days in advance by notice from Lessee to Lessor and the
Indenture Trustee (the "Loss Payment Date"), Lessee shall pay or
cause to be paid to Lessor in funds of the type specified in Section
3(e) hereof, an amount equal to the Termination Value of the Aircraft
corresponding to the Termination Value Date occurring on or
immediately following the Loss Payment Date (the "Determination
Date"); provided that in any instance in which the applicable Loss
Payment Date shall occur after the final day of the Term, the
Determination Date shall be the last Termination Value Date in the
Term, and the Termination Value shall be reduced by any amount of
Basic Rent due on the Determination Date that has actually been paid;
(ii) substitute an aircraft or an airframe or an
airframe and one or more engines, as the case may be; provided that,
if Lessee does not perform its obligation to effect such substitution
in accordance with this Section 10(a), during the period of time
provided herein, then Lessee shall pay or cause to be paid to Lessor
on the Business Day next succeeding the 120th day following the
occurrence of such Event of Loss the amount specified in clause (i)
above.
At such time as Lessor shall have received the amounts
specified in clause (i) above, together with all other amounts that then
may be due hereunder (excluding Basic Rent due on the Determination Date
but including, without limitation, all Basic Rent due before the date of
such payment and all Supplemental Rent), under the Participation Agreement
and under the Tax Indemnity Agreement, (1) the obligation of Lessee to pay
the installments of Basic Rent shall cease to accrue, (2) this Lease shall
terminate, (3) Lessor will comply with the terms of the Trust Indenture and
transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens), all of Lessor's right, title
and interest in and to the Airframe and any Engines subject to such Event
of Loss, as well as any Engines not subject to such Event of Loss, and
furnish to or at the direction of Lessee a ▇▇▇▇ of sale in form and
substance reasonably satisfactory to Lessee (or any Sublessee), evidencing
such transfer and (4) Lessee will be subrogated to all claims of Lessor, if
any, against third parties, for damage to or loss of the Airframe and any
Engines which were subject to such Event of Loss to the extent of the then
insured value of the Aircraft.
In the event Lessee shall elect to substitute an aircraft (or
an airframe or an airframe and one or more engines, as the case may be)
Lessee shall, at its sole expense, not later than the Business Day next
succeeding the 120th day following the occurrence of such Event of Loss,
(A) convey or cause to be conveyed to Lessor and to be leased by Lessee
hereunder, an aircraft (or an airframe or an airframe and one or more
engines which, together with the Engines constituting a part of the
Aircraft but not installed thereon at the time of such Event of Loss
constitute the Aircraft) free and clear of all Liens (other than Permitted
Liens) and having a value, utility and remaining useful life at least equal
to the Aircraft subject to such Event of Loss assuming that the Aircraft
had been maintained in accordance with this Lease and (B) prior to or at
the time of any such substitution, Lessee (or any Sublessee), at its own
expense, will (1) furnish Lessor with a full warranty ▇▇▇▇ of sale and a
Federal Aviation Administration ▇▇▇▇ of sale, in form and substance
reasonably satisfactory to Lessor, evidencing such transfer of title, (2)
cause a Lease Supplement and a Trust Supplement to be duly executed by
Lessee and filed for recording pursuant to the Transportation Code, or the
applicable laws, rules and regulations of any other jurisdiction in which
the Airframe may then be registered as permitted by Section 7(d) of the
Participation Agreement, (3) cause a financing statement or statements with
respect to such substituted property to be filed in such place or places as
are deemed necessary or desirable by Lessor to perfect its and the
Indenture Trustee's interest therein and herein, (4) furnish Lessor with
such evidence of compliance with the insurance provisions of Section 11
with respect to such substituted property as Lessor may reasonably request,
(5) furnish Lessor with copies of the documentation required to be provided
by Lessee pursuant to Section 5.06 of the Trust Indenture, and Lessor
simultaneously will comply with the terms of the Trust Indenture and
transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens), all of Lessor's right, title
and interest, if any, in and to the Aircraft or the Airframe and one or
more Engines, as the case may be, with respect to which such Event of Loss
occurred and furnish to or at the direction of Lessee a ▇▇▇▇ of sale in
form and substance reasonably satisfactory to Lessee (or any Sublessee),
evidencing such transfer, (6) furnish Lessor with an opinion of counsel
(which shall be Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP or Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois) and, if not, other counsel chosen by
Lessee and reasonably acceptable to Lessor) reasonably satisfactory to
Lessor to the effect that Lessor and the Indenture Trustee will be entitled
to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to
the substitute aircraft, provided that such opinion need not be delivered
to the extent that immediately prior to such substitution the benefits of
Section 1110 of the U.S. Bankruptcy Code were not, solely by reason of a
change in law or governmental interpretation thereof after the date hereof,
available to Lessor and, so long as any Equipment Notes are outstanding,
the Indenture Trustee (it being agreed that such opinion may contain
customary qualifications and assumptions) and (7) Lessee will be subrogated
to all claims of Lessor, if any, against third parties for damage to or
loss of the Airframe and any Engine which were subject to such Event of
Loss to the extent of the then insured value of the Aircraft. For all
purposes hereof, the property so substituted shall after such transfer be
deemed part of the property leased hereunder and shall be deemed an
"Aircraft", "Airframe" and "Engine", as the case may be, as defined herein.
No Event of Loss with respect to the Airframe or the Airframe and the
Engines or engines then installed thereon for which substitution has been
elected pursuant to Section 10(a)(ii) hereof shall result in any reduction
in Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the
occurrence of an Event of Loss with respect to an Engine under
circumstances in which there has not occurred an Event of Loss with respect
to the Airframe, Lessee shall forthwith (and in any event, within fifteen
days after such occurrence) give Lessor written notice thereof and shall,
within one hundred twenty (120) days after the occurrence of such Event of
Loss, convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to an
Acceptable Alternate Engine. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will (i) furnish Lessor with a
warranty (as to title) ▇▇▇▇ of sale, in form and substance reasonably
satisfactory to Lessor, with respect to such Acceptable Alternate Engine,
(ii) cause a Lease Supplement and Trust Supplement to be duly executed by
Lessee and to be filed for recording pursuant to the Transportation Code,
or the applicable laws, rules and regulations of any other jurisdiction in
which the Airframe may then be registered as permitted by Section 7(d) of
the Participation Agreement, (iii) furnish Lessor with such evidence of
compliance with the insurance provisions of Section 11 hereof with respect
to such replacement engine as Lessor may reasonably request and furnish
Lessor with copies of the documentation required to be provided by Lessee
pursuant to Section 5.06 of the Trust Indenture, and Lessor will comply
with the terms of the Trust Indenture and transfer to or at the direction
of Lessee without recourse or warranty (except as to absence of Lessor
Liens) all of Lessor's right, title and interest, if any, in and to (A) the
Engine with respect to which such Event of Loss occurred and furnish to or
at the direction of Lessee a ▇▇▇▇ of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer and (B) all claims, if
any, against third parties, for damage to or loss of the Engine subject to
such Event of Loss, and such Engine shall thereupon cease to be the Engine
leased hereunder. For all purposes hereof, each such replacement engine
shall, after such conveyance, be deemed part of the property leased
hereunder, and shall be deemed an "Engine". No Event of Loss with
respect to an Engine under the circumstances contemplated by the terms of
this paragraph (b) shall result in any reduction in Basic Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with
respect to an Event of Loss will be applied as follows:
(i) if payments are received with respect to the
Airframe (or the Airframe and any Engine or engines then installed
thereon), (A) unless the same are replaced pursuant to the last
paragraph of Section 10(a), after reimbursement of Lessor (as
provided in Section 7.01 of the Trust Agreement) for reasonable costs
and expenses, so much of such payments remaining as shall not exceed
the Termination Value required to be paid by Lessee pursuant to
Section 10(a), shall be applied in reduction of Lessee's obligation
to pay Termination Value, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of Termination Value, and following the foregoing
application, the balance, if any, of such payments will be paid over
to, or retained by Lessee, provided that Lessor shall be entitled to
so much of the excess, if any, of such payment over the greater of
(x) the Termination Value and (y) the fair market value of the
Aircraft as Lessor shall demonstrate to Lessee's reasonable
satisfaction is attributable to compensation for loss of Lessor's
interest in the Aircraft as distinguished from the loss of use of the
Aircraft; or (B) if such property is replaced pursuant to the last
paragraph of Section 10(a), such payments shall be paid over to, or
retained by, Lessee; and
(ii) if such payments are received with respect to an
Engine under circumstances contemplated by Section 10(b) hereof, so
much of such payments remaining after reimbursement of Lessor (as
provided for in Section 7.01 of the Trust Agreement) for reasonable
costs and expenses shall be paid over to, or retained by, Lessee.
(d) Requisition for Use of the Aircraft by the United States
Government or the Government of Registry of the Aircraft. In the event of
the requisition for use of the Airframe and the Engines or engines
installed on the Airframe during the Term by the United States Government
or any other government of registry of the Aircraft or any instrumentality
or agency of any thereof, Lessee shall promptly notify Lessor of such
requisition, and all of Lessee's obligations under this Lease with respect
to the Aircraft shall continue to the same extent as if such requisition
had not occurred (except to the extent that any failure or delay in
repairing or maintaining the Aircraft shall have been caused by such
requisition), provided that if such Airframe and Engines or engines
installed thereon are not returned by such government prior to the end of
the Term, Lessee shall be obligated to return the Airframe and such Engines
or engines to Lessor pursuant to, and in all other respects in compliance
with the provisions of, Section 5 promptly on the date of such return by
such government. If, in the event of any such requisition, Lessee shall
fail to return the Aircraft on or before the thirtieth (30th) day beyond
the end of the Term, such failure shall constitute an Event of Loss which
shall be deemed to have occurred on the last day of the Term and in such
event Lessee shall make the payment contemplated by Section 10(a)(i) in
respect of such Event of Loss; provided, however, that Lessor may notify
Lessee in writing on or before the twentieth (20th) day prior to the last
day of the Term that, in the event Lessee shall fail by reason of such
requisition to return the Airframe and such Engines or engines on or before
the thirtieth day beyond the end of the Term, such failure shall not be
deemed an Event of Loss. Upon the giving of such notice and such failure to
return by the thirtieth (30th) day beyond the end of the Term, Lessee shall
be relieved of all of its obligations pursuant to the provisions of Section
5 (but not under any other Section), except that if any engine not owned by
Lessor shall then be installed on the Airframe, Lessee will, at no cost to
Lessor, furnish, or cause to be furnished, to Lessor a full warranty (as to
title) ▇▇▇▇ of sale with respect to each such engine, in form and substance
reasonably satisfactory to Lessor (together with an opinion of counsel
(which may be Lessee's General Counsel, Deputy General Counsel, Associate
General Counsel or Assistant General Counsel) to the effect that such full
warranty ▇▇▇▇ of sale has been duly authorized and delivered and is
enforceable in accordance with its terms and that such engines are free and
clear of Liens other than Lessor Liens, Loan Participant Liens and
Indenture Trustee Liens), against receipt from Lessor of a ▇▇▇▇ of sale
evidencing the transfer, without recourse or warranty (except as to the
absence of Lessor Liens), by Lessor to Lessee or its designee of all of
Lessor's right, title and interest in and to any Engine constituting part
of the Aircraft but not then installed on the Airframe. All payments
received by Lessor or Lessee from such government for the use of such
Airframe and Engines or engines during the Term shall be paid over to, or
retained by, Lessee (or, if directed by Lessee, any Sublessee); and all
payments received by Lessor or Lessee from such government for the use of
such Airframe and Engines or engines after the end of the Term shall be
paid over to, or retained by, Lessor unless Lessee shall have exercised its
purchase option hereunder, in which case such payments shall be made to
Lessee.
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the Aircraft. In the event of
the requisition for use of an Engine by the United States Government or any
other government of registry of the Aircraft or any agency or
instrumentality of any thereof (other than in the circumstances
contemplated by paragraph (d)), Lessee shall replace such Engine hereunder
by complying (or causing any Sublessee to comply) with the terms of Section
10(b) to the same extent as if an Event of Loss had occurred with respect
thereto, and, upon compliance with Section 10(b) hereof, any payments
received by Lessor or Lessee from such government with respect to such
requisition shall be paid over to, or retained by, Lessee.
(f) Application of Payments During Existence of Event of
Default. Any amount referred to in this Section 10 which is payable to or
retainable by Lessee (or any Sublessee) shall not be paid to or retained by
Lessee (or such Sublessee) if at the time of such payment or retention an
Event of Default has occurred and is continuing, but shall be held by or
paid over to Lessor as security for the obligations of Lessee (or such
Sublessee) under this Lease and, if an Event of Default has occurred and is
continuing hereunder, applied against Lessee's obligations hereunder as and
when due. At such time as there shall not be continuing any such Event of
Default, such amount shall be paid to Lessee (or such Sublessee) to the
extent not previously applied in accordance with the preceding sentence.
SECTION ▇▇.▇▇▇▇▇▇▇▇▇.
(a) Public Liability and Property Damage Insurance. (1) Except
as provided in clause (2) of this subsection (a), and subject to
self-insurance to the extent permitted by Section 11(d), Lessee will carry
or cause to be carried with respect to the Aircraft at its or any
Sublessee's expense (i) comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury and property damage
liability) insurance (exclusive of manufacturer's product liability
insurance) and (ii) cargo liability insurance, (A) in an amount not less
than the greater of (x) the amounts of comprehensive airline liability
insurance from time to time applicable to aircraft owned or leased, and
operated by Lessee (or, if a Sublease is then in effect, by Sublessee) of
the same type as the Aircraft and (y) $300 million per occurrence, (B) of
the type and covering the same risks as from time to time applicable to
aircraft owned or leased and operated by Lessee of the same type as the
Aircraft, and (C) which is maintained in effect with insurers of nationally
or internationally recognized reputation and responsibility; provided,
however, that Lessee need not maintain such cargo liability insurance, or
may maintain such cargo liability insurance in an amount less than $300
million per occurrence, so long as the amount of cargo liability insurance,
if any, maintained with respect to the Aircraft is not less than the cargo
liability insurance, if any, maintained for other Airbus Model A[321][330]
aircraft owned or leased and operated by Lessee.
(2) During any period that the Airframe or an Engine, as the
case may be, is on the ground and not in operation, Lessee may carry or
cause to be carried as to such non-operating property, in lieu of the
insurance required by clause (1) above, and subject to the self-insurance
to the extent permitted by subsection (d) hereof, insurance by insurers of
nationally or internationally recognized reputation and responsibility
otherwise conforming with the provisions of said clause (1) except that (A)
the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable to
property owned or leased by Lessee of the same type as such non-operating
property and which is on the ground and not in operation; and (B) the scope
of the risks covered and the type of insurance shall be the same as from
time to time shall be applicable to aircraft owned or leased by Lessee of
the same type as such non-operating property and which is on the ground and
not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1)
Except as provided in clause (2) of this subsection (b), and subject to the
provisions of Section 11(d) permitting the self-insurance, Lessee shall
maintain or cause to be maintained in effect, at its or any Sublessee's
expense, with insurers of nationally or internationally recognized
responsibility, all-risk aircraft hull insurance covering the Aircraft and
fire and extended coverage and all-risk aircraft hull insurance covering
Engines and Parts while temporarily removed from the Aircraft and not
replaced by similar components; provided that such insurance shall at all
times while the Aircraft is subject to this Lease be for an amount (taking
into account the self-insurance to the extent permitted by Section 11(d))
not less than the Termination Value for the Aircraft; provided further,
that, subject to compliance with Section 11(d), such all-risk property
damage insurance covering Engines and Parts temporarily removed from an
Airframe or an airframe or (in the case of Parts) an Engine need be
obtained only to the extent available at reasonable cost (as reasonably
determined by Lessee). In the case of a Loss with respect to an engine
(other than an Engine) installed on the airframe in circumstances which do
not constitute an Event of Loss with respect to the Airframe, Lessor shall
promptly remit any payment made to it of any insurance proceeds in respect
of such Loss to Lessee or any other third party that is entitled to receive
such proceeds.
Unless an Event of Default has occurred and is continuing, all
losses will be adjusted by Lessee with the insurers. As between Lessor and
Lessee, it is agreed that all insurance payments received as the result of
the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the
Airframe (or the Airframe and the Engines installed thereon),
(i) unless such property is replaced pursuant to the last
paragraph of Section 10(a), so much of such payments remaining,
after reimbursement of Lessor (as provided in Section 7.01 of
the Trust Agreement) and the Owner Participant for reasonable
costs and expenses, as shall not exceed the Termination Value
and the other amounts payable pursuant to Section 10(a) hereof
shall be applied in reduction of Lessee's obligation to pay
such Termination Value and other amounts payable pursuant to
Section 10(a) hereof, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee
for its payment of such Termination Value and such other
amounts payable, and the balance, if any, of such payments
remaining thereafter will be paid over to, or retained by,
Lessee (or if directed by Lessee, any Sublessee); or (ii) if
such property is replaced pursuant to the last paragraph of
Section 10(a), such payments shall be paid over to, or retained
by, Lessee (or if directed by Lessee, any Sublessee), provided
that Lessee shall have fully performed or, concurrently
therewith, will fully perform the terms of the last paragraph
of Section 10(a) with respect to the Event of Loss for which
such payments are made; and
(y) if such payments are received with respect to an
Engine under the circumstances contemplated by Section 10(b)
hereof, so much of such payments remaining after reimbursement
of Lessor (as provided in Section 7.01 of the Trust Agreement)
and the Owner Participant for reasonable costs and expenses,
shall be paid over to, or retained by, Lessee (or if directed
by Lessee, any Sublessee), provided that Lessee shall have
fully performed or concurrently therewith will fully perform
the terms of Section 10(b) with respect to the Event of Loss
for which such payments are made.
As between Lessor and Lessee, the insurance payments for any
property damage loss to the Airframe or any engine not constituting an
Event of Loss with respect thereto will be applied in payment for repairs
or for replacement property in accordance with the terms of Sections 7 and
8, if not already paid for by Lessee (or any Sublessee), and any balance
(or if already paid for by Lessee (or any Sublessee), all such insurance
proceeds) remaining after compliance with such Sections with respect to
such loss shall be paid to Lessee (or any Sublessee if directed by Lessee).
(2) During any period that the Aircraft is on the ground and
not in operation, Lessee may carry or cause to be carried, in lieu of the
insurance required by clause (1) above, and subject to self-insurance to
the extent permitted by Section 11(d), insurance otherwise conforming with
the provisions of said clause (1) except that the scope of the risks and
the type of insurance shall be the same as from time to time applicable to
aircraft owned or leased by Lessee (or, if a Sublease is then in effect, by
Sublessee) of the same type as the Aircraft similarly on the ground and not
in operation, provided that, subject to self-insurance to the extent
permitted by Section 11(d), Lessee shall maintain insurance against risk of
loss or damage to the Aircraft in an amount at least equal to the
Termination Value of the Aircraft during such period that the Aircraft is
on the ground and not in operation.
(3) If Lessee (or any Sublessee) shall at any time operate or
propose to operate the Aircraft, Airframe or any Engine (i) in any area of
recognized hostilities or (ii) on international routes, and war-risk,
hijacking or allied perils insurance is maintained by Lessee (or any
Sublessee) with respect to other aircraft owned and operated by Lessee (or
any Sublessee) on such routes or in such areas, Lessee shall maintain or
cause to be maintained war-risk, hijacking and related perils insurance of
substantially the same type carried by major United States commercial air
carriers operating the same or comparable models of aircraft on similar
routes or in such areas and in no event in an amount less than the
Termination Value.
(c) Reports, etc. Lessee will furnish, or cause to be
furnished, to Lessor, the Indenture Trustee, the Owner Participant and the
Pass Through Trustee, on or before the Delivery Date and on each annual
anniversary date of Lessee's applicable insurance, a report, signed by
Lessee's regular insurance broker or any other independent firm of
insurance brokers reasonably acceptable to Lessor which brokers may be in
the regular employ of Lessee (the "Insurance Brokers"), describing in
reasonable detail the hull and liability insurance (and property insurance
for detached engines and parts) then carried and maintained with respect to
the Aircraft and stating the opinion of such firm that the insurance
complies with the terms hereof; provided, that all information contained in
the foregoing report shall not be made available by Lessor, the Indenture
Trustee or the Owner Participant or the Pass Through Trustee to anyone
except (i) to prospective and permitted transferees of Lessor's, the Owner
Participant's, the Indenture Trustee's or the Pass Through Trustee's
interest or their respective counsel, independent certified public
accountants and independent insurance brokers or other agents, who agree to
hold such information confidential, (ii) to Lessor's, the Owner
Participant's, the Indenture Trustee's or a Pass Through Trustee's counsel
or independent certified public accountants, independent insurance brokers
or agents who agree to hold such information confidential or (iii) as may
be required by any statute, court or administrative order or decree or
governmental ruling or regulation; provided, however that any disclosure
permitted by clause (iii) above shall be made only to the extent necessary
to meet the specific requirements or needs of the Persons to whom such
disclosures are hereby permitted. Lessee will cause such Insurance Broker
to agree to advise Lessor, the Indenture Trustee, the Owner Participant and
the Pass Through Trustee in writing of any act or omission on the part of
Lessee of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft and to
advise in writing at least thirty (30) days (ten (10) days in the case of
war risk and allied perils coverage and ten (10) days notice with respect
to the Electronic Date Recognition Exclusion Limited Coverage Endorsement),
prior to the cancellation or material adverse change of any insurance
maintained pursuant to Section 11, provided that if the notice period
specified above is not reasonably obtainable, the Insurance Broker shall
provide for as long a period of prior notice as shall then be reasonably
obtainable. In addition, Lessee will also cause such Insurance Brokers to
deliver to Lessor, the Indenture Trustee, the Owner Participant and the
Pass Through Trustee, on or prior to the date of expiration of any
insurance policy referenced in a previously delivered certificate of
insurance, a new certificate of insurance, substantially in the same form
as delivered by Lessee to such parties on the Delivery Date except for such
changes in the report or the coverage consistent with the terms hereof. In
the event that Lessee or any Sublessee shall fail to maintain or cause to
be maintained insurance as herein provided, Lessor or the Indenture Trustee
may at its sole option, but shall be under no duty to, provide such
insurance and, in such event, Lessee shall, upon demand, reimburse Lessor
or the Indenture Trustee, as Supplemental Rent, for the cost thereof to
Lessor or the Indenture Trustee, as the case may be; provided, however,
that no exercise by Lessor or the Indenture Trustee, as the case may be, of
said option shall affect the provisions of this Lease, including the
provisions of Section 14(g).
(d) Self-Insurance. Lessee may self-insure by way of
deductible, premium adjustment or franchise provisions or otherwise
(including, with respect to insurance maintained pursuant to Section 11(b),
insuring for an amount that is less than the Termination Value of the
Aircraft) the risks required to be insured against pursuant to Section 11
under a program applicable to all aircraft (whether owned or leased) in
Lessee's fleet, but in no case shall the aggregate amount of self-insurance
in regard to Section 11(a) and Section 11(b) exceed for any policy year,
with respect to all of the aircraft (whether owned or leased) in Lessee's
fleet (including, without limitation, the Aircraft), the lesser of (i) 50%
of the highest replacement value of any single aircraft in Lessee's fleet
or (ii) 1-1/2% of the average aggregate insurable value (during the
preceding policy year) of all aircraft (including, without limitation, the
Aircraft) on which Lessee carries insurance, unless an insurance broker of
national standing shall certify that the standard among all other major
United States airlines is a higher level of self-insurance, in which case
Lessee may insure the Aircraft to such higher level. In addition to the
foregoing right to self-insure, Lessee (and any Sublessee) may self-insure
to the extent of any applicable mandatory minimum per aircraft (or, if
applicable, per annum or other period) hull or liability insurance
deductible customary in the airline industry imposed by the aircraft hull
or liability insurer.
(e) Terms of Policies. Any policies of insurance carried in
accordance with Section 11(a) or Section 11(b) and any policies taken out
in substitution or replacement for any of such policies (A) shall be
amended to name the Additional Insureds as their respective interests may
appear, (B) may provide for the self-insurance to the extent permitted in
Section 11(d), (C) shall provide that if the insurers cancel such insurance
for any reason whatever or if any material change is made in such insurance
which adversely affects the interest of the Additional Insureds, or such
insurance shall lapse for non-payment of premium, such cancellation, lapse
or change shall not be effective as to the Additional Insureds for thirty
(30) days (ten (10) days in the case of war risk and allied perils coverage
and ten (10) days in the case of the Electronic Date Recognition Limited
Coverage Endorsement) after issuance to the Additional Insureds,
respectively, of written notice by such insurers of such cancellation,
lapse or change; provided, however, that if any notice period specified
above is not reasonably obtainable, such policies shall provide for as long
a period of prior notice as shall then be reasonably obtainable, (D) shall
provide that in respect of the respective interests of the Additional
Insureds in such policies the insurance shall not be invalidated by any
action or inaction of Lessee (or, if any Sublease is then in effect, any
Sublessee) or any other Person and shall insure the Additional Insureds
regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by Lessee (or, if any Sublease is then
in effect, any Sublessee), (E) shall be primary without right of
contribution from any other insurance which is carried by any Additional
Insured, (F) shall expressly provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured, (G) shall waive any
right of the insurers to any set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability
of any Additional Insured to the extent of any moneys due to any Additional
Insured, and (H) shall provide that (i) in the event of a loss involving
proceeds in excess of $5,000,000, the proceeds in respect of such loss up
to an amount equal to the Termination Value for the Aircraft shall be
payable to Lessor (or, so long as the Trust Indenture shall not have been
discharged, the Indenture Trustee) (except in the case of a loss with
respect to an Engine installed on an airframe other than the Airframe, in
which case Lessee (or any Sublessee) shall arrange for any payment of
insurance proceeds in respect of such loss to be held for the account of
Lessor (or, so long as the Trust Indenture shall not have been discharged,
the Indenture Trustee) whether such payment is made to Lessee (or any
Sublessee) or any third party), it being understood and agreed that in the
case of any payment to Lessor (or the Indenture Trustee) otherwise than in
respect of an Event of Loss, Lessor (or the Indenture Trustee) shall, upon
receipt of evidence satisfactory to it that the damage giving rise to such
payment shall have been repaired or that such payment shall then be
required to pay for repairs then being made, pay the amount of such payment
(and all earnings thereon) to Lessee or its order and (ii) the entire
amount of any loss involving proceeds of $5,000,000 or less or the amount
of any proceeds of any loss in excess of the Termination Value for the
Aircraft shall be paid to Lessee or its order unless an Event of Default
shall have occurred and be continuing and the insurers have been notified
thereof by Lessor or the Indenture Trustee.
(f) Additional Insurance by Lessor and Lessee. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its
interest in the Aircraft in amounts in excess of that required to be
maintained by this Section 11; the Owner Participant may carry for its own
account at its sole cost and expense insurance with respect to its interest
in the Aircraft, provided that such insurance does not prevent Lessee (or
any Sublessee) from carrying the insurance required or permitted by this
Section 11 or adversely affect such insurance or the cost thereof.
(g) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 11 requiring insurance,
Lessor agrees to accept, in lieu of insurance against any risk with respect
to the Aircraft, indemnification from, or insurance provided by, the United
States Government or any agency or instrumentality thereof, or, upon the
written consent of Lessor, other government of registry of the Aircraft or
agency or instrumentality thereof, against such risk in an amount which,
when added to the amount of insurance against such risk maintained by
Lessee (or any Sublessee) shall be at least equal to the amount of
insurance against such risk otherwise required by this Section 11 (taking
into account self-insurance permitted by this Section 11).
(h) Application of Payments During Existence of an Event of
Default. Any amount referred to in Section 11(b) hereto which is payable to
or retainable by Lessee (or any Sublessee) shall not be paid to or retained
by Lessee (or any Sublessee) if at the time of such payment or retention an
Event of Default has occurred and is continuing, but shall be held by or
paid over to Lessor as security for the obligations of Lessee under this
Lease and, if Lessor declares this Lease to be in default pursuant to
Section 15 hereof, applied against Lessee's obligations hereunder as and
when due. At such time as there shall not be continuing any such Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 12.INSPECTION. At all reasonable times and upon at
least 15 days prior written notice to Lessee, the Owner Participant or the
Indenture Trustee, or their respective authorized representatives, may
inspect the Aircraft and inspect and make copies of the books and records
of Lessee and any Sublessee required to be maintained by the Federal
Aviation Administration or the regulatory agency or body of another
jurisdiction in which the Aircraft is then registered relating to the
maintenance of the Aircraft (at Lessor's, the Owner Participant's or the
Indenture Trustee's risk and expense, as the case may be) and shall keep
any information or copies obtained thereby confidential and shall not
disclose the same to any Person, except (A) to the Policy Provider, Lessor,
the Note Holders and to prospective and permitted transferees of the Policy
Provider's, Lessor's, the Owner Participant's, the Note Holders' or the
Indenture Trustee's interest (and such prospective and permitted
transferee's counsel, independent insurance advisors or other agents) who
agree to hold such information confidential, (B) to the Policy Provider's,
Lessor's, the Owner Participant's, the Note Holders' or the Indenture
Trustee's counsel, independent insurance advisors or other agents who agree
to hold such information confidential, or (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, provided, however, that any and all disclosures permitted by
clause (C) above shall be made only to the extent necessary to meet the
specific requirements or needs of the Persons for whom such disclosures are
hereby permitted. Any such inspection of the Aircraft shall be subject to
Lessee's safety and security rules applicable to the location of the
Aircraft, shall be a visual, walk-around inspection of the interior and
exterior of the Aircraft and shall not include opening any panels, bays or
the like without the express consent of Lessee (except in connection with a
heavy maintenance visit when a panel, bay or the like is scheduled or
required to be opened), which consent Lessee may in its sole discretion
withhold; provided that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or
the business of, Lessee (or any Sublessee). Upon receipt by Lessee of a
written request from the Owner Participant specifying that the Owner
Participant desires to have an authorized representative observe the next
scheduled heavy maintenance visit to be performed on the Aircraft during
the Term, Lessee shall cooperate with the Owner Participant to enable the
Owner Participant's representative to observe such scheduled maintenance to
be performed on the Aircraft during the Term; provided that the Owner
Participant's authorized representative shall merely observe such scheduled
heavy maintenance visit, shall not interfere with or extend in any manner
the normal conduct or duration of the scheduled heavy maintenance visit,
and shall not be entitled to direct any of the work performed in connection
with such scheduled heavy maintenance visit. Neither the Owner Participant
nor the Indenture Trustee shall have any duty to make any such inspection
nor shall either of them incur any liability or obligation by reason of not
making such inspection. Except during the final six (6) months of the Term
or during the continuance of an Event of Default, all inspections by the
Owner Participant and its authorized representatives or the Indenture
Trustee and its authorized representatives provided for under this Section
12 shall, in regard to each of the Owner Participant and the Indenture
Trustee, be limited to one (1) inspection of any kind contemplated by this
Section 12 during any calendar year. During the last three months of the
Term (unless Lessee shall have elected to purchase the Aircraft or renew
this Lease in accordance with the terms of this Lease), with reasonable
notice, Lessee will cooperate and cause any Sublessee to cooperate, at
Lessor's sole cost, in all reasonable respects with the efforts of Lessor
to sell or lease the Aircraft, including, without limitation, permitting
prospective purchasers or lessees to inspect the Aircraft, any maintenance
records relating to the Aircraft then required to be retained by the FAA or
by the comparable government of registry of the Aircraft, all in accordance
with the provisions set forth above; provided that any such cooperation
shall not interfere with the normal operation or maintenance of the
Aircraft by, or the business of, Lessee or any Sublessee.
SECTION 13.ASSIGNMENT. Except as otherwise provided herein,
Lessee will not, without prior written consent of Lessor, assign in whole
or in part any of its rights or obligations hereunder. Lessor agrees that
it will not assign or convey its right, title and interest in and to this
Lease or the Aircraft except as provided herein, in the Trust Indenture,
the Trust Agreement, in the Participation Agreement or in any other
Operative Document. Subject to the foregoing, the terms and provisions of
this Lease shall be binding upon and inure to the benefit of Lessor and
Lessee and their respective successors and permitted assigns.
SECTION ▇▇.▇▇▇▇▇▇ OF DEFAULT. Each of the following events
shall constitute an Event of Default (whether any such event shall be
voluntary or involuntary or come about or be effected by operation of law
or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
governmental body) and each such Event of Default shall continue so long
as, but only as long as, it shall not have been remedied:
(a) Lessee shall not have made (i) a payment of Basic Rent
within five (5) Business Days after the same shall have become due, (ii) a
payment of Termination Value within ten (10) Business Days after receipt by
Lessee of written notice that the same is past due or (iii) an Advance when
required to be made pursuant to Section 3(h) within five (5) Business Days
after the same shall have been required to have been made; or
(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Termination Value) after the same shall have become due
and such failure shall continue for thirty (30) days after Lessee's receipt
of written demand therefor by the party entitled thereto (provided that any
failure to pay any amount owed by Lessee under the Tax Indemnity Agreement
or any failure of Lessee to pay to Lessor or the Owner Participant when due
any Excluded Payments shall not constitute an Event of Default unless
notice is given by the Owner Participant to Lessee and the Indenture
Trustee that such failure shall constitute an Event of Default); or
(c) Lessee shall have failed to perform or observe (or caused
to be performed and observed) in any material respect any covenant or
agreement (except the covenants set forth in the Tax Indemnity Agreement)
to be performed or observed by it under any Operative Document, and such
failure shall continue unremedied for a period of thirty (30) days after
receipt by Lessee of written notice thereof from Lessor or the Indenture
Trustee; provided, however, that if Lessee shall have undertaken to cure
any such failure and, notwithstanding the diligence of Lessee in attempting
to cure such failure, such failure is not cured within said thirty (30) day
period but is curable with future due diligence, there shall exist no Event
of Default under this Section 14 so long as Lessee is proceeding with due
diligence to cure such failure and such failure is remedied not later than
three hundred sixty (360) days after receipt by Lessee of such written
notice; or
(d) any representation or warranty made by Lessee herein or in
the Participation Agreement or any document or certificate furnished by
Lessee in connection herewith or therewith or pursuant hereto or thereto
(except the representations and warranties set forth in the Tax Indemnity
Agreement and such documents or certificates as are furnished to the Owner
Participant solely in connection with matters dealt with in the Tax
Indemnity Agreement and for no other purpose and except for representations
or warranties contained in the Pass Through Trust Agreement, the
Underwriting Agreement or any document or instrument furnished pursuant to
either thereof) shall prove to have been incorrect in any material respect
at the time made, and such incorrectness shall not have been cured within
thirty (30) days after the receipt by Lessee of a written notice from
Lessor or the Indenture Trustee advising Lessee of the existence of such
incorrectness; or
(e) the commencement of an involuntary case or other proceeding
in respect of Lessee in an involuntary case under the federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law in the United States or
seeking the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Lessee or for all or
substantially all of its property, or seeking the winding-up or liquidation
of its affairs and the continuation of any such case or other proceeding
undismissed and unstayed for a period of ninety (90) consecutive days or an
order, judgment or decree shall be entered in any proceeding by any court
of competent jurisdiction appointing, without the consent of Lessee, a
receiver, trustee or liquidator of Lessee, or of any substantial part of
its property, or sequestering any substantial part of the property of
Lessee and any such order, judgment or decree or appointment or
sequestration shall be final or shall remain in force undismissed, unstayed
or unvacated for a period of ninety (90) days after the date of entry
thereof; or
(f) the commencement by Lessee of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in
the United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Lessee or for all or
substantially all of its property, or the making by Lessee of any
assignment for the benefit of creditors, or Lessee shall take any corporate
action to authorize any of the foregoing; or
(g) Lessee shall fail to carry and maintain on or with respect
to the Aircraft (or cause to be carried and maintained) insurance required
to be maintained in accordance with the provisions of Section 11 hereof;
provided, however, that, notwithstanding anything to the contrary contained
in Section 14(c) or (d) hereof, any failure of Lessee to perform or observe
any covenant, condition, agreement or any error in a representation or
warranty shall not constitute an Event of Default if such failure or error
is caused solely by reason of an event that constitutes an Event of Loss so
long as Lessee is continuing to comply with all of the terms of Section 10
hereof.
SECTION 15.REMEDIES. Upon the occurrence of any Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, declare by written notice to Lessee this Lease
to be in default (provided that upon the occurrence of an Event of Default
under Section 14(e) or (f) of this Lease, this Lease automatically shall be
in default without the necessity of a declaration); and at any time
thereafter, so long as any such outstanding Events of Default shall not
have been remedied, Lessor may do one or more of the following with respect
to all or any part of the Airframe and any or all of the Engines as Lessor
in its sole discretion shall elect, to the extent permitted by, and subject
to compliance with any mandatory requirements of, applicable law then in
effect; provided, however, that during any period the Aircraft is subject
to the Civil Reserve Air Fleet Program in accordance with the provisions of
Section 7(b) hereof and in possession of the United States government or an
agency or instrumentality of the United States, Lessor shall not, on
account of any Event of Default, be entitled to do any of the following in
such manner as to limit Lessee's control under this Lease (or any
Sublessee's control under any Sublease) of any Airframe or any Engines
installed thereon, unless at least sixty (60) days (or such lesser period
as may then be applicable under the Air Mobility Command program of the
United States Government) written notice of default hereunder shall have
been given by Lessor by registered or certified mail to Lessee (and any
Sublessee) with a copy addressed to the Contracting Office Representative
for the Air Mobility Command of the United States Air Force under any
contract with Lessee (or any Sublessee) relating to the Aircraft:
(a) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe or any Engine as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with all
the provisions of, Section 5 as if such Airframe or Engine were being
returned at the end of the Term, or Lessor, at its option, may enter upon
the premises where all or any part of the Airframe or any Engine is located
and take immediate possession of and remove the same by summary proceedings
or otherwise (and/or, at Lessor's option, store the same at Lessee's
premises until disposal thereof by Lessor), all without liability accruing
to Lessor for or by reason of such entry or taking of possession or
removing whether for the restoration of damage to property caused by such
action or otherwise;
(b) sell the Airframe and/or any Engine at public or private
sale, as Lessor may determine, or otherwise dispose of, hold, use, operate,
lease to others or keep idle the Aircraft as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee,
except as hereinafter set forth in this Section 15;
(c) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) or
paragraph (b) above with respect to the Airframe and/or any Engine, Lessor,
by written notice to Lessee specifying a payment date which shall be the
Rent Payment Date not earlier than ten (10) days from the date of such
notice, may demand that Lessee pay to Lessor, and Lessee shall pay Lessor,
on the payment date so specified, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the installments of Basic Rent for
the Aircraft due on Rent Payment Dates occurring on or after the Rent
Payment Date specified as the payment date in such notice), any unpaid
Basic Rent due on Rent Payment Dates prior to (but not on) the payment date
so specified (including, without limitation, any adjustments to Basic Rent
payable pursuant to Section 3(c)) plus whichever of the following amounts
Lessor, in its sole discretion, shall specify in such notice (together with
interest, if any, on such amount at the Past Due Rate from such specified
payment date until the date of actual payment of such amount): (i) an
amount equal to the excess, if any, of the Termination Value for the
Aircraft, computed as of the Rent Payment Date specified as the payment
date in such notice, over the aggregate fair market rental value (computed
as hereafter in this Section 15 provided) of such Aircraft for the
remainder of the Term, after discounting such aggregate fair market rental
value to present value as of the Rent Payment Date specified as the payment
date in such notice at an annual rate equal to the Past Due Rate; or (ii)
an amount equal to the excess, if any, of the Termination Value for such
Aircraft, computed as of the Rent Payment Date specified as the payment
date in such notice over the fair market sales value of such Aircraft
(computed as hereafter in this Section provided) as of the Rent Payment
Date specified as the payment date in such notice;
(d) in the event Lessor, pursuant to paragraph (b) above, shall
have sold the Airframe and/or any Engine, Lessor, in lieu of exercising its
rights under paragraph (c) above with respect to such Aircraft, may, if it
shall so elect, demand that Lessee pay Lessor, and Lessee shall pay to
Lessor, on the date of such sale, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the installments of Basic Rent for
the Aircraft due on or after such date), any unpaid Basic Rent with respect
to the Aircraft due prior to (but not on) such date (including, without
limitation, any adjustments to Basic Rent payable pursuant to Section 3(c))
plus the amount of any deficiency between the net proceeds of such sale
(after deduction of all reasonable costs of sale) and the Termination Value
of such Aircraft, computed as of the Termination Value Date (as set forth
on Exhibit C) on or immediately following the date of such sale together
with interest, if any, on the amount of such deficiency, at the Past Due
Rate, from the date of such sale to the date of actual payment of such
amount; and/or
(e) Lessor may rescind this Lease as to the Aircraft, and/or
may exercise any other right or remedy which may be available to it under
applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for breach hereof.
For the purposes of paragraph (c) above, the "fair market
rental value" or the "fair market sales value" of the Aircraft shall be the
rental value or sales value, as the case may be, which would be obtained in
an arm's-length transaction between an informed and willing lessee or
purchaser, as the case may be, under no compulsion to lease or purchase, as
the case may be, and an informed and willing lessor or seller in possession
under no compulsion to lease, sell, as the case may be, in each case based
upon the actual condition and location of the Aircraft, which value shall
be determined by mutual agreement or, in the absence of mutual written
agreement, pursuant to an appraisal prepared and delivered by a nationally
recognized firm of independent aircraft appraisers nominated by Lessor, and
Lessor shall immediately notify Lessee of such nomination. Unless Lessee
shall have objected in writing within ten (10) Business Days after its
receipt of Lessor's notice, Lessor's nomination shall be conclusive and
binding. If Lessee shall object, however, Lessor and Lessee shall endeavor,
within ten (10) Business Days after such objection is made, to select a
mutually acceptable appraiser; provided that, if Lessee shall not so
endeavor to make such selection, Lessor's nomination referred to in the
preceding sentence hereof shall be conclusive and binding. If Lessor and
Lessee fail to reach agreement (except for the reason referred to in the
proviso in the preceding sentence), or if any appraiser selected fails to
act for any reason, then the question shall be determined by an appraisal
(applying the definitions of "fair market rental value" and "fair market
sales value" as set forth above based upon the actual condition of the
Aircraft) mutually agreed to by two (2) recognized independent aircraft
appraisers, one of which appraisers shall be chosen by Lessor and one by
Lessee within five (5) Business Days after Lessor or Lessee shall have
received written notice from the other party of a demand that such an
appraisal be made, which notice shall specify the appraiser chosen by the
party giving the notice or, if such appraisers cannot agree on the amount
of such appraisal within twenty (20) Business Days after the end of such
five (5) Business Day period, each shall render its own appraisal and shall
by mutual consent choose another appraiser within five (5) Business Days
after the end of such twenty (20) day period. If, within such five (5) day
period, such two appraisers fail to appoint a third appraiser, then either
Lessor or Lessee, on behalf of both, may request such appointment by the
then President of the Association of the Bar of the City of New York (or
any successor organization thereto) or, in his absence, failure, refusal or
inability to act, then either Lessor or Lessee may apply to the American
Arbitration Association (or any successor organization thereto) in New
York, New York for the appointment of such third appraiser. The decision of
the third appraiser so appointed shall be given within twenty (20) Business
Days after the appointment of such third appraiser. As soon as the third
appraiser has delivered his appraisal, that appraisal shall be compared
with the appraisals given by the other two (2) appraisers. If the
determination of one appraiser is more disparate from the average of all
three determinations than each of the other two determinations, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be final and
binding upon the parties hereto. If no determination is more disparate from
the average of all three determinations than each of the other
determinations, then such average shall be final and binding upon the
parties thereto. The cost of such appraisal or appointment shall be borne
by Lessee.
In addition, Lessee shall be liable, except as otherwise
provided above and without duplication of amounts payable hereunder, for
any and all unpaid Rent due hereunder before, after or during the exercise
of any of the foregoing remedies (other than Basic Rent due on or after the
payment referenced in paragraph (d) or paragraph (c) above) and for all
reasonable legal fees and other costs and expenses (including fees of the
appraisers hereinabove referred to) incurred by Lessor, the Indenture
Trustee, the Loan Participants and the Owner Participant in connection with
the return of the Airframe or any Engine in accordance with the terms of
Section 5 or in placing such Airframe or Engine in the condition and
airworthiness required by such Section.
At any sale of the Aircraft or any part thereof pursuant to
this Section 15, Lessor (or the Indenture Trustee, any Loan Participant or
the Owner Participant) or Lessee may bid for and purchase such property.
Lessor agrees to give Lessee at least fifteen (15) days prior written
notice of the date fixed for any public sale of the Airframe or any Engine
or of the date on or after which will occur the execution of any contract
providing for any private sale and any such public sale shall be conducted
in general so as to afford Lessee (and any Sublessee) a reasonable
opportunity to bid. Except as otherwise expressly provided above, no remedy
referred to in this Section 15 is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity; and the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies. No waiver by Lessor of any Event of Default shall in
any way be, or be construed to be, a waiver of any future or subsequent
Event of Default.
SECTION 16.LESSEE'S COOPERATION CONCERNING CERTAIN MATTERS;
DELIVERY OF FINANCIAL STATEMENTS. Forthwith upon the execution and delivery
of each Lease Supplement and Trust Supplement from time to time required by
the terms hereof and upon the execution and delivery of any amendment to
this Lease, to the Trust Indenture or to the Trust Agreement, Lessee will
cause such Lease Supplement, Trust Supplement (and, in the case of the
initial Lease Supplement and Trust Supplement, this Lease, the Trust
Agreement and the Trust Indenture as well) or amendment to be duly filed
and recorded, and maintained of record, in accordance with the applicable
laws of the government of registry of the Aircraft. In addition, Lessee
will promptly and duly execute and deliver to Lessor such further documents
and take such further action as Lessor or the Indenture Trustee may from
time to time reasonably request in order more effectively to carry out the
intent and purpose of this Lease and to establish and protect the rights
and remedies created or intended to be created in favor of Lessor and the
Indenture Trustee hereunder, including, without limitation, if requested by
Lessor or the Indenture Trustee, at the expense of Lessee, the execution
and delivery of supplements or amendments hereto or to the Trust Indenture,
each in recordable form, subjecting to this Lease and the Trust Indenture,
any airframe or engine substituted for the Airframe or any Engine pursuant
to the terms thereof and the recording or filing of counterparts thereof,
in accordance with the laws of such jurisdictions as Lessor or the
Indenture Trustee may from time to time deem advisable. Lessee agrees to
furnish to Lessor and the Indenture Trustee promptly after execution and
delivery of any supplement and amendment hereto and promptly after the
execution and delivery of any supplement and amendment to the Trust
Indenture (except for any such supplement or amendment which does not
require or receive the approval of Lessee pursuant to the Operative
Documents and is not required pursuant to the terms of the Operative
Documents), an opinion of counsel (which may be Lessee's General Counsel,
Deputy General Counsel, Associate General Counsel or Assistant General
Counsel) reasonably satisfactory to Lessor and the Indenture Trustee as to
the due recording or filing of such supplement or amendment. Lessee will
deliver to Lessor, the Owner Participant and the Indenture Trustee (a)
within sixty (60) days after the end of each of the first three quarterly
periods of each fiscal year of Lessee, the publicly filed Form 10-Q report
of Lessee; and (b) within one hundred twenty (120) days after the close of
such fiscal year, the publicly filed annual report and Form 10-K report of
Lessee.
SECTION 17.NOTICES. All notices required under the terms and
provisions hereof shall be by telecopier or other telecommunication means
(with such telecopy or other telecommunication means to be confirmed in
writing), or if such notice is impracticable, by registered, first-class
airmail, with postage prepaid, or by personal delivery of written notice
and any such notice shall become effective when received, addressed:
(a) if to Lessee, for U.S. mail at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and for overnight courier at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Treasurer (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), or to
such other address or telecopy number as Lessee shall from time to time
designate in writing to Lessor,
(b) if to Lessor, at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department (Telecopy No. (801)
246-5053), or to such other address or telecopy number as Lessor shall from
time to time designate in writing to Lessee, and
(c) if to a Loan Participant, the Indenture Trustee or the
Owner Participant, addressed to such Loan Participant, the Indenture
Trustee or the Owner Participant at such address or telecopy number as such
Loan Participant, the Indenture Trustee or the Owner Participant shall have
furnished by notice to Lessor and to Lessee, and, until an address is so
furnished, addressed to such Loan Participant, the Indenture Trustee or the
Owner Participant at its address or telecopy number set forth in Schedule I
to the Participation Agreement.
SECTION ▇▇.▇▇ SET-OFF, COUNTERCLAIM, ETC. All Rent shall be
paid by Lessee to Lessor in funds of the type specified in Section 3(e).
Except as expressly provided herein, Lessee's obligation to pay all Rent
payable hereunder shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any
set-off, counterclaim, recoupment, defense or other right which Lessee may
have against Lessor, in its individual capacity or as Owner Trustee under
the Trust Agreement, the Indenture Trustee (in its individual capacity or
as Indenture Trustee), any Loan Participant, the Owner Participant, or
anyone else for any reason whatsoever (whether in connection with the
transactions contemplated hereby or any other transactions), including,
without limitation, any breach by Lessor or the Owner Participant of their
respective warranties, agreements or covenants contained in any of the
Operative Documents, (ii) any defect in the title, registration,
airworthiness, condition, design, operation, or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any interruption or
cessation in or prohibition of the use or possession thereof by Lessee (or
any Sublessee) for any reason whatsoever, including, without limitation,
any such interruption, cessation or prohibition resulting from the act of
any government authority, (iii) any insolvency, bankruptcy, reorganization
or similar case or proceedings by or against Lessee (or any Sublessee) or
any other Person, or (iv) any other circumstance, happening, or event
whatsoever, whether or not unforeseen or similar to any of the foregoing;
provided, however, that notwithstanding the foregoing, Lessee shall be
entitled to offset from any payment due to the Owner Participant the cost
incurred by Lessee to discharge Lessor Liens relating to the Owner
Participant. If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees without limitation of the other
rights or remedies of Lessor hereunder to pay to Lessor an amount equal to
each Rent payment at the time such payment would have become due and
payable in accordance with the terms hereof had this Lease not been
terminated in whole or in part. Lessee hereby waives, to the extent
permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender this Lease except in
accordance with the express terms hereof.
SECTION 19.RENEWAL OPTIONS; PURCHASE OPTIONS; VALUATION.
(a) Renewal Options.
(1) Fixed Renewal Term. Not more than 365 days and not
less than one hundred twenty (120) days, before the end of the Basic
Term or any Fixed Renewal Term (as hereinafter defined), Lessee may
deliver to Lessor a written notice irrevocably electing to renew this
Lease for a term having a duration and at a Basic Rent as determined
below (any such renewal term, a "Fixed Renewal Term"). The duration
of any Fixed Renewal Term shall be a period specified by Lessee
before the end of the Basic Term which is (i) not less than one year
(provided any such period shall be in six (6) month increments), (ii)
not more than the longest period of time which would cause the Term,
after giving effect to such Fixed Renewal Term, to be equal to 75% of
the total useful life of the aircraft as determined by the Delivery
Date appraisal. Each semi-annual installment of Basic Rent during the
Fixed Renewal Term shall be equal to the lesser of (A) the fair
market rental value of the Aircraft or (B) (I) one-half of the
average annual Basic Rent during the Basic Term divided by (II) two
(2).
(2) Fair Market Renewal Term. Lessee shall have the right
to renew this Lease for additional periods of one (1) year or more
(provided any such period shall be on six (6) month increments)
commencing at the end of the Basic Term or the Fixed Renewal Term for
a Basic Rent equal to the fair market rental value of the Aircraft
for such period (any such renewal term, a "Fair Market Renewal
Term"). Each such option to renew shall be exercised by Lessee
providing irrevocable notice at least one hundred twenty (120) days
prior to the commencement of such Fair Market Renewal Term.
(3) Waiver. If no written notice is delivered by Lessee
to Lessor pursuant to Section 19(a)(1) or (a)(2) on or before the day
specified therefor, Lessee shall be deemed to have waived any right
to renew this Lease.
(4) Conditions Precedent, Payment of Basic Rent. At the
end of the Basic Term or any Renewal Term, if Lessee has elected to
renew this Lease as aforesaid, (i) this Lease shall continue in full
force and effect during the Renewal Term and (ii) Basic Rent for such
Renewal Term shall be payable in semi-annual installments in arrears,
each such installment being due and payable on each Rent Payment Date
occurring during the Renewal Term, commencing with the Rent Payment
Date immediately following the commencement of the Renewal Term,
provided that Basic Rent for such Renewal Term shall be payable at
such other frequency of payment consistent with the length of the
Renewal Term as Lessor may reasonably designate in the event that
such period is not divisible into whole semi-annual periods.
(5) Termination Value. The amounts which are payable
during any Renewal Term in respect of Termination Value with respect
to the Aircraft shall be determined on the basis of the fair market
sales value of the Aircraft as of the commencement of such Renewal
Term, amortized on a straight-line basis over such Renewal Term to
the projected fair market sales value of the Aircraft as of the
expiration of such Renewal Term, as such fair market sales value in
each case is determined prior to the commencement of such Renewal
Term. In determining fair market sales value for purposes of
calculating Termination Value for any Renewal Term effect shall be
given to the encumbrance on the Aircraft of any Fixed Renewal Term
available or in force.
(b) Purchase Options. Lessee shall have the option, (i) upon at
least thirty (30) days irrevocable prior written notice to Lessor prior to
the EBO Date with respect to the purchase option set forth in clause (1)
and (ii) upon at least one hundred twenty (120) days irrevocable prior
written notice to Lessor prior to the relevant purchase date (each a
"Purchase Option Date") with respect to the purchase options set forth in
clauses (2) and (3), to terminate this Lease and to purchase the Aircraft:
(1) on the EBO Date, for a purchase price equal to the
EBO Amount set forth on Exhibit D, it being understood that if such
amount is to be paid in installments, Lessee will, upon payment of
the first installment of the EBO Amount, on the EBO date, receive
title to the Aircraft free and clear of all liens (other than the
Lien of the Indenture if Lessee has elected to assume the Equipment
Notes in accordance with Section 7(u) of the Participation
Agreement);
(2) on the last Business Day of the Basic Term for a
purchase price equal to the fair market sales value of the Aircraft
on such date, provided, however, that in no event shall such purchase
price exceed 50% of Lessor's Cost;
(3) on the last Business Day of any Renewal Term for a
purchase price equal to the fair market sales value of the Aircraft
on such date.
Notwithstanding the foregoing but subject to the last sentence
of this paragraph, the purchase price on any Purchase Option Date shall be
sufficient, together with all other amounts payable simultaneously by
Lessee, to pay in full the payments then required to be made on account of
the principal amount of and accrued and unpaid interest on the Equipment
Notes then outstanding. Upon payment to Lessor in immediately available
funds in Dollars of the full amount of the purchase price and payment of
any other amounts then due hereunder (including all Rent and all reasonable
costs or expenses of the Owner Participant in connection with such
purchase), Lessor will transfer to Lessee, without recourse or warranty
(except as to the absences of Lessor Liens), all of Lessor's right, title
and interest in and to the Aircraft. Notwithstanding the foregoing, Lessee
may, in accordance with Section 7(u) of the Participation Agreement, assume
the principal amount of the Equipment Notes then outstanding on any
applicable Purchase Option Date in which event Lessee shall receive a
credit against the purchase price otherwise payable pursuant to the
preceding two sentences in an amount equal to the principal amount so
assumed.
(c) Valuation. At any time not earlier than three hundred
sixty-five (365) days prior to the date on which Lessee may purchase the
Aircraft pursuant to Section 19(b)(2) or (b)(3) hereof or renew this Lease
pursuant to Section 19(a)(1) or (a)(2) hereof, Lessee may deliver to Lessor
a revocable notice of its intent to exercise its renewal option or purchase
option. For all purposes of this Section 19 and Section 20, including the
appraisal referred to in this Section 19(c), in determining "fair market
rental value" or "fair market sales value", the Aircraft shall be valued
(i) as if in the condition and otherwise in compliance with the terms of
Section 5 upon a return of the Aircraft to Lessor and as if it had been
maintained at all times as required in accordance with Section 7(a)(i)
during periods when no Sublease was in effect, (ii) on the basis of the
value which would obtain in an arm's-length transaction between an informed
and willing buyer-user or lessee (other than a lessee or an Affiliate of a
lessee currently in possession or a used equipment scrap dealer) under no
compulsion to buy or lease and an informed and willing seller or lessor
unaffiliated with such buyer-user or lessee and under no compulsion to sell
or lease and disregarding the purchase and renewal options of the lessee
provided in this Lease and (iii) in the case of such valuation for
determining "fair market rental value", assuming such lessee would have
substantially the same obligations during the Fair Market Renewal Term as
provided hereunder including without limitation the obligations of Lessee
to carry and maintain the insurance required by Section 11 hereof and to
make certain payments with reference to Termination Value during the
applicable Fair Market Renewal Term. Upon receipt of such notice Lessor and
Lessee shall confer in good faith with a view to reaching agreement on the
"fair market rental value" or "fair market sales value" of the Aircraft. If
the parties have not so agreed within two hundred seventy (270) days prior
to the end of the Basic Term or the Renewal Term in question, then the
question shall be determined by an appraisal mutually agreed to by two
recognized independent aircraft appraisers, one of which appraisers shall
be chosen by Lessor and one by Lessee within five (5) Business Days after
Lessor or Lessee shall have received written notice from the other party of
a demand that such an appraisal be made, which notice shall specify the
appraiser chosen by the party giving the notice or, if such appraisers
cannot agree on the amount of such appraisal within twenty (20) Business
Days after the end of such five (5) Business Day period, each shall render
its own appraisal and shall by mutual consent choose another appraiser
within five (5) Business Days after the end of such twenty (20) Business
Day period. If, within such five (5) Business Day period, such two
appraisers fail to appoint a third appraiser, then either Lessor or Lessee,
on behalf of both, may request such appointment by the then President of
the Association of the Bar of the City of New York (or any successor
organization thereto) or, in his absence, failure, refusal or inability to
act, then either Lessor or Lessee may apply to the American Arbitration
Association (or any successor organization thereto) in New York, New York
for the appointment of such third appraiser. The decision of the third
appraiser so appointed shall be given within ten (10) Business Days after
the appointment of such third appraiser. As soon as the third appraiser has
delivered his appraisal, that appraisal shall be compared with the
appraisals given by the other two appraisers. If the determination of one
appraiser is more disparate from the average of all three determinations
than each of the other two determinations, then the determination of such
appraiser shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and binding upon the parties
hereto. If no determination is more disparate from the average of all three
determinations than each of the other determinations, then such average
shall be final and binding upon the parties thereto. Lessee and Lessor
shall share equally all expenses relating to such appraisal procedure
provided if Lessee elects not to renew this Lease or purchase the Aircraft
following such appraisal, Lessee shall pay all expenses of such appraisal.
SECTION 20.BURDENSOME PURCHASE OPTION. If a Burdensome
Termination Event shall have occurred, then on any Rent Payment Date
occurring after the expiration of the Depreciation Period, Lessee shall
have the option, upon at least one hundred twenty (120) days revocable
prior notice to Lessor and, if any Equipment Notes are then outstanding,
the Indenture Trustee, to purchase the Aircraft on such date for a purchase
price equal to the higher of the Termination Value as of such date or the
fair market sales value of the aircraft (determined as set forth in Section
19(c) and excluding the value of any Significant Expenditure) (such price,
the "Burdensome Buyout Price"). In addition, if on such date there shall be
any Equipment Notes outstanding, Lessee shall have the option to assume,
pursuant to Section 7(u) of the Participation Agreement and Section 2.13 of
the Trust Indenture, all of the obligations of Lessor under the Trust
Indenture. If such assumption is made, Lessee shall pay Lessor a purchase
price equal to (I) the Burdensome Buyout Price minus (II) an amount equal
to principal of, and accrued but unpaid interest on, any Equipment Notes
that are outstanding on such date. Upon such payment in full and payment of
any other amounts then due hereunder (excluding any Basic Rent due on such
date but including costs or expenses of the Owner Participant in connection
with such purchase, any installments of Basic Rent due prior to such date
and all unpaid Supplemental Rent due on or prior to such date), Lessor will
transfer to Lessee, without recourse or warranty (except as to the absence
of Lessor Liens), all of Lessor's right, title and interest in and to the
Aircraft and under the Trust Indenture and, unless there shall be any
Equipment Notes outstanding after such payment, exercise such rights as it
has to cause the Aircraft to be released from the Lien of the Trust
Indenture.
SECTION ▇▇.▇▇▇▇▇▇▇▇ FOR LESSOR'S OBLIGATION TO HOLDERS OF
EQUIPMENT NOTES. In order to secure the indebtedness evidenced by the
Equipment Notes, Lessor has agreed in the Trust Indenture, among other
things, to assign to the Indenture Trustee this Lease, the Lease
Supplements and any amendments to this Lease and to mortgage its interest
in the Aircraft in favor of the Indenture Trustee, subject to the
reservations and conditions therein set forth. To the extent, if any, that
this Lease, the Lease Supplements and any amendments to this Lease
constitute 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, the Lease Supplements and any amendments to this Lease may be
created through the transfer or possession of any counterpart other than
the original counterpart, which shall be identified as the counterpart
containing the receipt therefor executed by the Indenture Trustee on the
signature page thereof. Lessee hereby accepts and consents to the
assignment of all Lessor's right, title and interest in and to this Lease
pursuant to the terms of the Trust Indenture. Subject to Section 3(e)
hereof, Lessee agrees to pay directly to the Indenture Trustee (or, after
receipt by Lessee of notice from the Indenture Trustee of the discharge of
the Trust Indenture, to Lessor), all amounts of Rent due or to become due
hereunder and assigned to the Indenture Trustee and Lessee agrees that the
Indenture Trustee's right to such payments hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, the circumstances set forth in clauses (i) through (iv)
of Section 18 hereof. Notwithstanding the foregoing assignment of this
Lease, the obligations of Lessor to Lessee to perform the terms and
conditions of this Lease shall remain in full force and effect.
SECTION 22.LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee
fails to make any payment of Rent required to be made by it hereunder or
fails to perform or comply with any of its agreements contained herein,
then (but in each case, except in the case of failure to pay Rent or in the
case of failure to maintain insurance as required hereunder, no earlier
than the fifteenth day after the occurrence of such failure, whether or not
it shall yet constitute an Event of Default hereunder) Lessor may itself
make such payment or perform or comply with such agreement but shall not be
obligated hereunder to do so, and the amount of such payment and the amount
of the reasonable expenses of Lessor incurred in connection with such
payment or the performance of or compliance with such agreement, as the
case may be, together with interest thereon at the Past Due Rate, shall be
deemed Supplemental Rent, payable by Lessee upon demand.
SECTION 23.INVESTMENT OF SECURITY FUNDS; LIABILITY OF LESSOR
LIMITED.
(a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee at a time when there is
not continuing an Event of Default shall, until paid to Lessee, be invested
by Lessor or, if the Trust Indenture shall not have been discharged, by the
Indenture Trustee, as the case may be, as Lessee may from time to time
direct in writing (and in absence of a written direction by Lessee, there
shall be no obligation to invest such moneys) in Cash Equivalents. There
shall be promptly remitted to Lessee or its order (but no more frequently
than monthly) any gain (including interest received) realized as a result
of any such investment (net of any fees, commissions and other expenses, if
any, incurred in connection with such investment) unless an Event of
Default shall have occurred and be continuing. Lessee shall be responsible
for any net loss realized as a result of any such investment and shall
reimburse Lessor (or the Indenture Trustee, as the case may be) therefor on
demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee
under the Trust Agreement, and the institution acting as Lessor shall not
be liable in its individual capacity for any breach thereof except for its
gross negligence or willful misconduct or for breach of its covenants,
representations and warranties contained herein, to the extent covenanted
or made in its individual capacity.
SECTION 24.JURISDICTION. Lessor and Lessee each hereby
irrevocably submits itself to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York and to the
non-exclusive jurisdiction of the Supreme Court of the State of New York,
New York County, for the purposes of any suit, action or other proceeding
arising out of this Lease, the subject matter hereof or any of the
transactions contemplated hereby brought by Lessor, Lessee, the Indenture
Trustee, the Loan Participants or the Owner Participant or their successors
or assigns.
SECTION 25.MISCELLANEOUS. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. No term or provision of this Lease may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by Lessor, Lessee and any assignee of Lessor's rights hereunder.
This Lease shall constitute an agreement of lease, and nothing contained
herein shall be construed as conveying to Lessee any right, title or
interest in the Aircraft except as a lessee only. Neither Lessee nor any
affiliate of Lessee will file any tax returns in a manner inconsistent with
the foregoing fact or with Lessor's ownership of the Aircraft. The section
and paragraph headings in this Lease and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit
any of the terms or provisions hereof and all references herein to numbered
sections, unless otherwise indicated, are to sections of this Lease. THIS
LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
This Lease may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all
such counterparts shall together constitute but one and the same
instrument.
SECTION 26.SUCCESSOR TRUSTEE. Lessee agrees that in the case of
the appointment of any successor Owner Trustee pursuant to the terms of the
Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee, succeed to all the rights, powers and title
of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (subject to Section 9 of the Participation Agreement)
and without in any way altering the terms of this Lease or Lessee's
obligations hereunder. One such appointment and designation of a successor
Owner Trustee shall not exhaust the right to appoint and designate further
successor Owner Trustees pursuant to the Trust Agreement, but such right
may be exercised repeatedly as long as this Lease shall be in effect.
SECTION ▇▇.▇▇▇▇▇ FOR U.S. FEDERAL INCOME TAX LAW PURPOSES;
SECTION 1110 OF BANKRUPTCY CODE.
(a) Lease for Federal Income Tax Law Purposes. It is the
intent of the parties to this Agreement that this Lease is a true lease for
U.S. Federal income tax purposes.
(b) Section 1110 of Bankruptcy Code. It is the intention of
each of Lessee and Lessor that Lessor (and the Indenture Trustee as secured
party and as assignee of Lessor under the Trust Indenture) shall be
entitled to the benefits of Section 1110 of the Bankruptcy Code with
respect to the right to take possession of the Aircraft, Airframe, Engines
and Parts, and to enforce any other of its rights and remedies as provided
in this Lease.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity except as
expressly provided herein, but solely as
Owner Trustee, Lessor
By:
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Title:
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US AIRWAYS, INC.,
Lessee
By:
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Title:
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Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on the ___ day of _________, ____.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, Indenture Trustee
By:
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Title:
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