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LEASE AGREEMENT
[NW 1999 _]
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
NORTHWEST AIRLINES, INC.,
Lessee
One Boeing 747-451 Aircraft
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As set forth in Section 20 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
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SECTION 1. Definitions......................................................1
SECTION 2. Acceptance and Lease............................................16
SECTION 3. Term and Rent...................................................16
(a) Basic Term...............................................16
(b) [Intentionally Omitted]..................................16
(c) Basic Rent...............................................16
(d) Adjustments to Basic Rent................................16
(e) Supplemental Rent........................................18
(f) Payments in General......................................19
SECTION 4. Lessor's Representations and Warranties.........................19
SECTION 5. Return of the Aircraft..........................................20
(a) Condition Upon Return....................................20
(b) Return of the Engines....................................21
(c) Fuel; Manuals............................................22
(d) Storage Upon Return......................................22
SECTION 6. Liens...........................................................22
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia...........................................23
(a) Registration and Maintenance.............................23
(b) Possession and Subleases.................................24
(c) Insignia.................................................28
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions...................................29
(a) Replacement of Parts.....................................29
(b) Pooling of Parts.........................................29
(c) Alterations, Modifications and Additions.................30
SECTION 9. Voluntary Termination...........................................31
(a) Termination Event........................................31
(b) [Intentionally Omitted]..................................31
(c) Optional Sale of the Aircraft............................31
(d) Termination as to Engines................................33
(i)
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SECTION 10. Loss, Destruction, Requisition, etc............................33
(a) Event of Loss with Respect to the Aircraft...............33
(b) Event of Loss with Respect to an Engine..................36
(c) Application of Payments from Governmental
Authorities for Requisition of Title, etc................36
(d) Requisition for Use of the Aircraft by the United
States Government or the Government of Registry of
the Aircraft.............................................37
(e) Requisition for Use of an Engine by the United
States Government or the Government of Registry of
the Aircraft.............................................38
(f) Application of Payments During Existence of Event of
Default..................................................38
SECTION 11. Insurance......................................................39
(a) Public Liability and Property Damage Insurance...........39
(b) Insurance Against Loss or Damage to the Aircraft.........40
(c) Reports, etc.............................................43
(d) Self-Insurance...........................................44
(e) Additional Insurance by Lessor and Lessee................44
(f) Indemnification by Government in Lieu of Insurance.......44
(g) Application of Payments During Existence of an Event
of Default................................................44
SECTION 12. Inspection.....................................................45
SECTION 13. Assignment.....................................................45
SECTION 14. Events of Default..............................................46
SECTION 15. Remedies.......................................................48
SECTION 16. Lessee's Cooperation Concerning Certain Matters................51
SECTION 17. Notices........................................................52
SECTION 18. No Set-Off, Counterclaim, etc..................................53
SECTION 19. Renewal Options; Purchase Options; Valuation...................53
(a) Renewal Options..........................................53
(b) Purchase Options.........................................54
(c) Valuation................................................55
(d) Special Purchase Option..................................56
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates..................................................57
SECTION 21. Lessor's Right to Perform for Lessee...........................57
SECTION 22. Investment of Security Funds; Liability of Lessor Limited......57
(a) Investment of Security Funds.............................57
(b) Liability of Lessor Limited..............................58
(ii)
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SECTION 23. Service of Process.............................................58
SECTION 24. Miscellaneous..................................................59
SECTION 25. Successor Trustee..............................................59
SECTION 26. Covenant of Quiet Enjoyment....................................59
(iii)
EXHIBITS
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Basic Rent, Lessor's Cost and Special Purchase Price Schedule
EXHIBIT C - Stipulated Loss Value Schedule
EXHIBIT D - Termination Value Schedule
EXHIBIT E - Rent Recalculation Verification
EXHIBIT F - Schedule of Domiciles of Permitted Sublessees
EXHIBIT G - Return Conditions
(iv)
LEASE AGREEMENT
[NW 1999 _]
This LEASE AGREEMENT [NW 1999 _], 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 Section 1 hereof) (in such capacity, "Lessor"), and
NORTHWEST AIRLINES, INC., a corporation organized and existing pursuant to the
laws of the State of Minnesota ("Lessee");
W I T N E S S E T H:
SECTION 1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this Lease
Agreement [NW 1999 _] and shall be equally applicable to both the singular and
the plural forms of the terms herein defined:
"Affiliate" means, with respect to any person, any other
person directly or indirectly controlling, controlled by or under
common control with such person. For the purposes of this
definition, "control" (including "controlled by" and "under common
control with") shall mean the power, directly or indirectly, to
direct or cause the direction of the management and policies of such
person whether through the ownership of voting securities or by
contract or otherwise.
"Aircraft" means the Airframe to be delivered and leased
hereunder (or any airframe from time to time substituted for such
Airframe pursuant to Section 10(a) hereof) together with the four
Engines initially leased hereunder (or any engine substituted for
either of such Engines pursuant to the terms hereof), whether or not
any of such initial or substituted Engines may from time to time be
installed on such initial or substituted Airframe or may be
installed on any other airframe or on any other aircraft.
"Airframe" means: (i) the Boeing 747-451 aircraft (except
Engines or engines from time to time installed thereon) specified in
the initial Lease Supplement, which aircraft shall be leased by
Lessor to Lessee hereunder and under such Lease Supplement, and any
aircraft (except Engines or engines from time to time installed
thereon) which may from time to time be substituted for such
aircraft (except Engines or engines from time to time installed
thereon) pursuant to clause (ii) of the first paragraph of Section
10(a); and (ii) any and all Parts (A) so long as the same shall be
incorporated or installed in or attached to such aircraft (except
Engines or engines from time to time installed thereon), or (B) so
long as title thereto shall remain vested in Lessor in accordance
with the
terms of Section 8 after removal from such aircraft (except Engines
or engines from time to time installed thereon); provided, however,
that at such time as an aircraft (except Engines or engines from
time to time installed thereon) shall be deemed part of the property
leased hereunder in substitution for the Airframe pursuant to the
applicable provisions hereof, the replaced Airframe shall cease to
be an Airframe hereunder.
"Applicable Rate" means as of any date the weighted average of
the interest rates borne by the Secured Certificates then
outstanding and, if no Secured Certificates shall be outstanding,
the Base Rate.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.
"Base Rate" means the rate of interest announced publicly
by Citibank, N.A. in New York, New York from time to time as its
base rate.
"Basic Rent" means, for the Basic Term, the rent payable for
the Aircraft pursuant to Section 3(c) as adjusted as provided in
Section 3(d) but subject always to the provisions of Section 3(d)(v)
hereof and, for any Renewal Term, Basic Rent determined pursuant to
Section 19.
"Basic Term" means the term for which the Aircraft is leased
hereunder pursuant to Section 3(a) hereof commencing on the Delivery
Date and ending on [______________________], or such earlier date as
this Lease may be terminated in accordance with the provisions
hereof.
"Beneficial Interest" means the interest of the Owner
Participant under the Trust Agreement.
"▇▇▇▇ of Sale" means a full warranty ▇▇▇▇ of sale covering the
Aircraft, executed by Lessee in favor of the Owner Trustee, dated
the Delivery Date, specifically referring to the Airframe and each
Engine, which ▇▇▇▇ of Sale shall contain, among other things, a
statement that such ▇▇▇▇ of Sale thereby conveys to the Owner
Trustee good title to the Airframe and each Engine described in such
▇▇▇▇ of Sale, free and clear of all liens, encumbrances and rights
of others except Liens permitted by clause (v) of Section 6 of the
Lease.
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to
close in the City of New York, New York; Boston, Massachusetts; or
Minneapolis, Minnesota.
"Certificate Holder" means Certificate Holder as defined in
the Trust Indenture.
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"Certificated Air Carrier" means a Citizen of the United
States holding a carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49,
United States Code, for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo or that otherwise is
certified or registered to the extent required to fall within the
purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the Bankruptcy Code.
"Citizen of the United States" has the meaning specified in
Section 40102(a)(15) of Title 49 of the United States Code or any
similar legislation of the United States of America enacted in
substitution or replacement therefor.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air
Fleet Program currently administered by the United States Air Force
Air Mobility Command pursuant to Executive Order No. 11490, as
amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means the amount of a Pass Through Trustee's or
the Owner Participant's, as the case may be, participation in
Lessor's Cost for the Aircraft required to be made available or paid
as provided in Section 1 of the Participation Agreement.
"Consent and Agreement" means that certain Consent and
Agreement [NW 1999 _], dated as of the date hereof, executed by the
Manufacturer, as the same may be amended, modified or supplemented
from time to time in accordance with the applicable provisions
thereof.
"Default" means any event which with the giving of notice or
the lapse of time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement
for the Aircraft, which date shall be the date the Aircraft is
leased by Lessor to Lessee and accepted by Lessee hereunder.
"Depreciation Period" means the period commencing on the
Delivery Date and ending on [________________], or such earlier date
as this Lease may be terminated in accordance with the provisions
hereof.
"Dollars" and "$" means the lawful currency of the United
States of America.
"EBO Date" means [____________] (or, if [____________] is
not a Business Day, the Business Day immediately succeeding
[_________].
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"Engine" means (i) each of the four ▇▇▇▇▇ & Whitney Model
PW4056 engines listed by manufacturer's serial number in the initial
Lease Supplement, whether or not from time to time thereafter
installed on the Airframe or installed on any other airframe or on
any other aircraft; and (ii) any engine which may from time to time
be substituted, pursuant to the terms hereof, for any of such four
engines, together in each case with any and all Parts incorporated
or installed in or attached thereto or any and all Parts removed
therefrom so long as title thereto shall remain vested in Lessor in
accordance with the terms of Section 8 after removal from such
Engine; provided, however, that at such time as an engine shall be
deemed part of the property leased hereunder in substitution for an
Engine pursuant to the applicable provisions hereof, the replaced
Engine shall cease to be an Engine hereunder. The term "Engines"
means, as of any date of determination, all Engines then leased
hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder. Section references to ERISA are to
ERISA, as in effect at the date of the Participation Agreement and
any subsequent provisions of ERISA, amendatory thereof, supplemental
thereto or substituted therefor.
"Event of Default" has the meaning specified in Section 14
hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any
Engine means any of the following events with respect to such
property: (i) the loss of such property or of the use thereof due to
the destruction of or damage to such property which renders repair
uneconomic or which renders such property permanently unfit for
normal use by Lessee (or any Sublessee) for any reason whatsoever;
(ii) any damage to such property which results in an insurance
settlement with respect to such property on the basis of a total
loss, or a constructive or compromised total loss; (iii) the theft
or disappearance of such property, or the confiscation,
condemnation, or seizure of, or requisition of title to, or use of,
such property (other than a requisition for use by the United States
Government or any other government of registry of the Aircraft, or
any agency or instrumentality of any thereof) which in the case of
any event referred to in this clause (iii) (other than a requisition
of title) shall have resulted in the loss of possession of such
property by Lessee (or any Sublessee) for a period in excess of 180
consecutive days or, if earlier, until the end of the Term or, in
the case of a requisition of title, the requisition of title shall
not have been reversed within 90 days from the date of such
requisition of title or, if earlier, at the end of the Term; (iv) as
a result of any law, rule, regulation, order or other action by the
Federal Aviation Administration or other governmental body of the
government of registry of the Aircraft having jurisdiction, the use
of such property in the normal course of the business of air
transportation shall have been prohibited for a period of 180
consecutive days, unless Lessee (or any
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Sublessee), prior to the expiration of such 180 day period, shall
have undertaken and shall be diligently carrying forward all steps
which are necessary or desirable to permit the normal use of such
property by Lessee (or such Sublessee), but in any event if such use
shall have been prohibited for a period of two consecutive years,
provided that no Event of Loss shall be deemed to have occurred if
such prohibition has been applicable to the entire U.S. registered
fleet of Boeing Model 747-400 aircraft of Lessee (or any Sublessee)
and Lessee (or a Sublessee), prior to the expiration of such
two-year period, shall have conformed at least one such aircraft in
its fleet to the requirements of any such law, rule, regulation,
order or other action and commenced regular commercial use of the
same in such jurisdiction and shall be diligently carrying forward,
in a manner which does not discriminate against the Aircraft in so
conforming the Aircraft, all steps which are necessary or desirable
to permit the normal use of the Aircraft by Lessee (or such
Sublessee), provided, further that, notwithstanding any of the
foregoing, such prohibition shall constitute an Event of Loss if
such use shall have been prohibited for a period of three
consecutive years or such use shall be prohibited at the expiration
of the Term; (v) the requisition for use by the United States
Government or any other government of registry of the Aircraft or
any instrumentality or agency of any thereof, which shall have
occurred during the Basic Term (or any Renewal Term) and shall have
continued for thirty (30) days beyond the Term, provided, however,
that no Event of Loss pursuant to this clause (v) shall exist if
Lessor shall have furnished to Lessee the written notice specified
in Section 10(d) hereof; and (vi) any divestiture of title to or
interest in an Engine treated as an Event of Loss pursuant to
Section 7(b) hereof. An Event of Loss with respect to the Aircraft
shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe.
"Expenses" has the meaning specified in Section 7(c) of the
Participation Agreement.
"FAA ▇▇▇▇ of Sale" means a ▇▇▇▇ of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the Federal
Aviation Administration on the Delivery Date for the Aircraft,
executed by Lessee in favor of the Owner Trustee and dated the
Delivery Date.
"Federal Aviation Act" means that portion of the United States
Code comprising those provisions formerly referred to as the Federal
Aviation Act of 1958, as amended, or any subsequent legislation that
amends, supplements or supersedes such provisions.
"Federal Aviation Administration" and "FAA" mean the United
States Federal Aviation Administration and any agency or
instrumentality of the United States government succeeding to their
functions.
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"Foreign Air Carrier" means any air carrier which is not a
U.S. Air Carrier and which performs maintenance, preventative
maintenance and inspections for the Aircraft, Airframe and/or any
Engine or engine to standards which are approved by, or which are
substantially equivalent to those required by, the Federal Aviation
Administration, the Civil Aviation Authority of the United Kingdom,
the Direction Generale de l'Aviation Civile of the French Republic,
the Luftfahrt Bundesamt of the Federal Republic of Germany, the
Rijksluchtvaartdienst of the Kingdom of the Netherlands, the
Ministry of Transportation of Japan or the Federal Ministry of
Transport of Canada (and any agency or instrumentality of the
applicable government succeeding to the functions of any of the
foregoing entities).
"Guarantee" means that certain Guarantee [NW 1999 _], dated as
of the date hereof, made by the Guarantor, as such Guarantee may be
amended or supplemented from time to time pursuant to the applicable
provisions thereof.
"Guarantor" means Northwest Airlines Corporation, a Delaware
corporation.
"Indemnitee" means (i) the Owner Trustee, in its individual
capacity and as trustee under the Trust Agreement, (ii) the
Indenture Trustee, (iii) the Owner Participant, (iv) the Trust
Estate, (v) the Loan Participants and each other Certificate Holder,
(vi) the Subordination Agent, (vii) the Liquidity Provider, (viii)
the Pass Through Trustees, (ix) each Affiliate of the Persons
described in clauses (i) through (iv), inclusive, (x) each Affiliate
of the Persons described in clauses (vi), (vii) and (viii)
inclusive, (xi) the respective directors, officers, employees,
agents and servants of each of the Persons described in clauses (i)
through (viii), inclusive, (xii) the successors and permitted
assigns of the Persons described in clauses (i) through (iv),
inclusive, and (xiii) the successors and permitted assigns of the
Persons described in clauses (v), (vi), (vii) and (viii) inclusive.
"Indenture Trustee" means the Indenture Trustee under the
Trust Indenture, and any entity which may from time to time be
acting as indenture trustee under the Trust Indenture.
"Indenture Trustee Documents" means the Participation
Agreement and the Trust Indenture.
"Indenture Trustee's Liens" means any Lien which arises as a
result of (A) claims against the Indenture Trustee not related to
its interest in the Aircraft or the administration of the Trust
Estate pursuant to the Trust Indenture, (B) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to
take any action required by, the Operative Documents to the extent
such acts arise or such failure arises from or constitutes gross
negligence or
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willful misconduct, (C) claims against the Indenture Trustee
relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 of the Participation Agreement
pursuant to said Section 7, or (D) claims against the Indenture
Trustee arising out of the transfer by the Indenture Trustee of all
or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than a
transfer of the Aircraft pursuant to Section 9, 10 or 19 of the
Lease or Article IV or V of the Trust Indenture, or a transfer of
the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture
Trustee has received all amounts due pursuant to the Trust
Indenture.
["Initial Installment" has the meaning set forth in Section
19(d) hereof.]
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Pass Through Trustees, the Liquidity Provider
and the Subordination Agent, as such Intercreditor Agreement may be
amended or supplemented from time to time pursuant to the applicable
provisions thereof.
"Issuance Date" means February 16, 1999.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby" or other like
words mean this Lease Agreement [NW 1999 _] as originally executed
or as modified, amended or supplemented pursuant to the applicable
provisions hereof and in accordance with the Trust Agreement and the
Trust Indenture, including, without limitation, supplementation
hereof by one or more Lease Supplements entered into pursuant to the
applicable provisions hereof.
"Lease Period" means each of the consecutive periods
throughout the Basic Term and any Renewal Term ending on a Lease
Period Date, the first such period commencing on and including the
Delivery Date.
"Lease Period Date" means [_______________] and each
succeeding [_________________] and [____________], to and including
the last such date in the Term.
"Lease Supplement" means a Lease Supplement, substantially in
the form of Exhibit A hereto, to be entered into between Lessor and
Lessee on the Delivery Date for the purpose of leasing the Aircraft
under and pursuant to the terms of this Lease Agreement, and any
subsequent Lease Supplement entered into in accordance with the
terms hereof.
"Lessee Documents" means the Participation Agreement, the
Lease, the Lease Supplement covering the Aircraft, the Purchase
Agreement (insofar as it relates to the Aircraft), the FAA ▇▇▇▇ of
Sale, the ▇▇▇▇ of Sale, the Purchase Agreement Assignment and the
Tax Indemnity Agreement.
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"Lessor Liens" means any Lien or disposition of title or
interest arising as a result of (i) claims against Lessor, First
Security Bank, National Association, in its individual capacity, or
the Owner Participant not related to the transactions contemplated
by the Operative Documents, (ii) any act or omission of the Owner
Participant, Lessor, or First Security Bank, National Association,
in its individual capacity, which is not related to the transactions
contemplated by the Operative Documents or is in violation of any of
the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or First Security Bank, National Association,
in its individual capacity, with respect to Taxes or Expenses
against which Lessee is not required to indemnify the Owner
Participant, Lessor or First Security Bank, National Association, in
its individual capacity, pursuant to Section 7 of the Participation
Agreement or (iv) claims against Lessor or the Owner Participant
arising out of any transfer by Lessor or the Owner Participant of
all or any portion of the respective interests of Lessor or the
Owner Participant in the Aircraft, the Trust Estate or the Operative
Documents other than the transfer of possession of the Aircraft by
Lessor pursuant to this Agreement, the transfer pursuant to the
Trust Indenture or a transfer of the Aircraft pursuant to Section 9,
10 or 19 hereof or pursuant to the exercise of the remedies set
forth in Section 15 hereof, provided, however, that any Lien which
is attributable solely to First Security Bank, National Association
or the Owner Participant and would otherwise constitute a Lessor
Lien hereunder shall not constitute a Lessor Lien hereunder so long
as (1) the existence of such Lien poses no material risk of the
sale, forfeiture or loss of the Aircraft, (2) the existence of such
Lien does not interfere in any way with the use, possession,
operation, or quiet enjoyment of the Aircraft by Lessee (or any
Sublessee), (3) the existence of such Lien does not affect the
priority or perfection of, or otherwise jeopardize, the Lien of the
Trust Indenture, (4) First Security Bank, National Association or
the Owner Participant, as appropriate, is diligently contesting such
Lien and (5) the existence of such Lien does not pose a material
threat of interference with the payment of Rent (other than Excluded
Payments in favor of First Security Bank, National Association or
the Owner Participant, as appropriate).
"Lessor's Cost" for the Aircraft means the amount denominated
as such in Exhibit B to the Lease.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease, sublease, sub-sublease or security interest.
"Liquidity Facilities" means the [three] Revolving Credit
Agreements between the Subordination Agent, as borrower, and the
Liquidity Provider, and any replacement thereof, in each case as the
same may be amended, modified or supplemented.
-8-
"Liquidity Provider" means Citibank, N.A., as Class A
Liquidity Provider, Class B Liquidity Provider and Class C Liquidity
Provider under the Liquidity Facilities, or any successor thereto.
"Loan Participant" means each Purchaser and its respective
successors and registered assigns, including any Certificate Holder.
"Loan Participant Liens" means any Lien which arises from acts
or claims against any Loan Participant not related to the
transactions contemplated by the Operative Documents.
"Loss Payment Date" has the meaning specified in Section 10(a)
hereof.
"Majority in Interest of Certificate Holders" has the meaning
set forth in the Trust Indenture.
"Make-Whole Amount" has the meaning assigned to that term in
the Trust Indenture.
"Manufacturer" means The Boeing Company, a Delaware
corporation.
"Manufacturer Documents" means the Purchase Agreement and the
Consent and Agreement.
"Net Economic Return" shall have the meaning ascribed to such
term in paragraph 2 of Exhibit E to the Lease.
"Net Present Value of Rents" means the net present value, as
of the Delivery Date, of Basic Rent set forth in Exhibit B hereto,
discounted at an annual interest rate of [___] percent on a
semi-annual basis.
"Note Purchase Agreement" shall mean the Note Purchase
Agreement, dated as of the Issuance Date, among Northwest Airlines,
Inc., the Subordination Agent, First Security Bank, National
Association, as Escrow Agent, State Street Bank and Trust Company,
as Paying Agent and the Pass Through Trustee under each Pass Through
Trust Agreement providing for, among other things, the issuance and
sale of certain secured certificates.
"Operative Documents" and "Operative Document" means each of
the Participation Agreement, the Lease, the Trust Indenture, the
Trust Agreement, an acceptance certificate covering the Aircraft in
the form agreed to by the Participants and Lessee, the Tax Indemnity
Agreement, the Lease Supplement covering the Aircraft, the Trust
Supplement covering the Aircraft, the Secured Certificates, the ▇▇▇▇
of Sale, the FAA ▇▇▇▇ of Sale, the Purchase Agreement (insofar as it
relates to the Aircraft), the Guarantee, the Purchase Agreement
Assignment and the Consent and Agreement.
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"Overall Transaction" means all the transactions contemplated
by the Operative Documents.
"Owner Participant" means the corporation executing the
Participation Agreement as the Owner Participant, and thereafter any
Person to which such corporation transfers all of its right, title
and interest in and to the Trust Agreement, the Trust Estate and the
Participation Agreement, to the extent permitted by Section 8.01 of
the Trust Agreement and Section 8 of the Participation Agreement.
"Owner Participant Documents" means the Participation
Agreement, the Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means the entity executing the Participation
Agreement as Owner Trustee and any entity appointed as successor
Owner Trustee pursuant to Section 9.01 of the Trust Agreement, and
references to a predecessor Owner Trustee in its individual capacity
by name in the Operative Documents shall include such successor
Owner Trustee in its individual capacity from and after such
succession.
"Owner Trustee Documents" means the Participation Agreement,
the Trust Agreement, the Trust Supplement covering the Aircraft, the
Lease, the Lease Supplement covering the Aircraft, the Purchase
Agreement Assignment, the Trust Indenture and the Secured
Certificates.
"Participants" means and includes the Loan Participants and
the Owner Participant.
"Participation Agreement" means that certain Participation
Agreement [NW 1999 _], dated as of the date hereof, among Lessee,
the Guarantor, the Purchasers, the Indenture Trustee, the
Subordination Agent, the Owner Participant and Owner Trustee, as
such Participation Agreement may be amended or supplemented from
time to time pursuant to the applicable provisions thereof.
"Parties" means the Owner Trustee, the Indenture Trustee and
the Participants.
"Parts" means all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature (other than (a) complete Engines or engines, (b) any
items leased by Lessee from a third party (other than Lessor) and
(c) cargo containers) which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine or so long as
title thereto shall remain vested in Lessor in accordance with
Section 8 after removal therefrom.
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"Pass Through Certificates" means the pass through
certificates to be issued by the Pass Through Trustee in connection
with the Overall Transaction.
"Pass Through Trust Agreement" means the pass through trust
agreement and each of the [three] separate pass through trust
supplements referred to on Schedule III to the Participation
Agreement.
"Pass Through Trust" means each of the [three] separate pass
through trusts created under the Pass Through Trust Agreements.
"Pass Through Trustee" means State Street Bank and Trust
Company, a Massachusetts trust company, in its capacity as trustee
under each Pass Through Trust Agreement, and each other person that
may from time to time be acting as successor trustee under any such
Pass Through Trust Agreement.
"Past Due Rate" means (i) with respect to the portion of any
payment of Rent that may be required by the Trust Indenture to be
paid by the Indenture Trustee to the Loan Participants, or the
holders of any outstanding Secured Certificates, the "Past Due Rate"
as defined in the Trust Indenture and (ii) with respect to the
remaining portion of any payment of Rent (and the entire amount of
any payment of Rent after the satisfaction and discharge of the
Trust Indenture), a rate per annum equal to [_]% over the Base Rate.
"Permitted Lien" means any Lien referred to in clauses (i)
through (viii) of Section 6 hereof.
"Permitted Sublessee" means any entity domiciled in a country
listed in Exhibit F hereto.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Purchase Agreement" means that certain Purchase Agreement No.
1630, dated December 1, 1989, between the Manufacturer and Lessee
relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with
the terms thereof, but only insofar as the foregoing relates to the
Aircraft.
"Purchase Agreement Assignment" means that certain Purchase
Agreement Assignment [NW 1999 _], dated as of the date hereof,
between Lessee and Lessor, as the same may be amended, supplemented
or modified from time to time, with a form of Consent and Agreement
to be executed by the Manufacturer attached thereto.
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"Purchasers" means the Pass Through Trustees under each Pass
Through Trust Agreement.
"Related Indemnitee Group" means, with respect to any
Indemnitee, any officer, director, servant, employee, agent or
Affiliate thereof.
["Remaining Installments" has the meaning set forth in Section
19(d) hereof.]
"Renewal Term" means any Fixed Renewal Term or Fair Market
Renewal Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Secured Certificates" has the meaning assigned to that term
in the Trust Indenture.
"Special Purchase Price" means the amount denominated as such
in Exhibit B to the Lease.
"Stipulated Loss Value" with respect to the Aircraft as of any
date through and including [_________________], means, but subject
always to the provisions of Section 3(d)(v) hereof, the amount
determined by multiplying Lessor's Cost for the Aircraft by the
percentage specified in Exhibit C hereto opposite the Stipulated
Loss Value Date with respect to which the amount is determined (as
such Exhibit C may be adjusted from time to time as provided in
Section 3(d) hereof and in Section 7 of the Tax Indemnity
Agreement). "Stipulated Loss Value" as of any date after
[_____________] shall be the amount determined as provided in
Section 19(a) hereof.
"Stipulated Loss Value Date" means the [___] calendar day of
each calendar month during the Basic Term and any Renewal Term.
"Sublease" means any sublease permitted by the terms of
Section 7(b)(x) hereof.
"Sublessee" means any Person for so long, but only so long, as
such Person is in possession of the Airframe and/or any Engine
pursuant to the terms of a Sublease which is then in effect pursuant
to Section 7(b)(x) hereof.
"Subordination Agent" means State Street Bank and Trust
Company, a Massachusetts trust company, as subordination agent under
the Intercreditor Agreement, or any successor thereto.
"Supplemental Rent" means, without duplication, (a) all
amounts, liabilities, indemnities and obligations (other than Basic
Rent) which Lessee
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assumes or agrees to pay under any Lessee Document to or on behalf
of Lessor or any other Person, (b) amounts payable by Lessor
pursuant to clause (b) of the third paragraph of Section 2.02 of the
Trust Indenture, (c) Lessor's pro rata share of all compensation and
reimbursement of expenses, disbursements and advances payable by
Lessee under the Pass Through Trust Agreements, and (d) Lessor's pro
rata share of all compensation and reimbursement of expenses and
disbursements payable to the Subordination Agent under the
Intercreditor Agreement except with respect to any income or
franchise taxes incurred by the Subordination Agent in connection
with the transactions contemplated by the Intercreditor Agreement.
As used herein, "Lessor's pro rata share" means as of any time a
fraction, the numerator of which is the principal balance then
outstanding of Secured Certificates and the denominator of which is
the aggregate principal balance then outstanding of all "Equipment
Notes" (as such term is defined in the Intercreditor Agreement).
"Tax Indemnitee" means (i) the Owner Participant, the Owner
Trustee, in its individual capacity and as trustee under the Trust
Agreement, the Trust Estate, the Indenture Trustee, (ii) the
respective Affiliates, successors and permitted assigns of each of
the entities described in the preceding clause (i), and (iii) the
Trust Indenture Estate.
"Tax Indemnity Agreement" means that certain Tax Indemnity
Agreement [NW 1999 _], dated as of the date hereof, between the
Owner Participant and Lessee, as originally executed or as modified,
amended or supplemented pursuant to the applicable provisions
thereof.
"Taxes" means any and all fees (including, without limitation,
license, recording, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales,
rental, use, turnover, value added, property (tangible and
intangible), excise and stamp taxes), license, levies, imposts,
duties, charges, assessments or withholdings of any nature
whatsoever, together with any and all penalties, fines, additions to
tax and interest thereon (each, individually a "Tax").
"Term" means the Basic Term and, if actually entered into, any
Renewal Term.
"Termination Date" has the meaning set forth in Section 9(a)
hereof.
"Termination Value" with respect to the Aircraft as of any
date through and including [_______________], means, but subject
always to the provisions of Section 3(d)(v) hereof, the amount
determined by multiplying Lessor's Cost for the Aircraft by the
percentage specified in Exhibit D hereto opposite the Termination
Date with respect to which the amount is determined (as such
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Exhibit D may be adjusted from time to time as provided in Section
3(d) hereof and in Section 7 of the Tax Indemnity Agreement).
"Transaction Expenses" means: all of the reasonable
out-of-pocket costs, fees and expenses incurred by the Owner
Trustee, the Owner Participant, the Pass Through Trustee, the
Subordination Agent and the Indenture Trustee in connection with the
transactions contemplated by the Participation Agreement, the other
Operative Documents, the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the
Underwriting Agreement (except, in each case, as otherwise provided
therein) including, without limitation:
(1) the reasonable and actual fees, expenses and
disbursements of (A) ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, special counsel for the
Pass Through Trustee and the Indenture Trustee, (B) Ray,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel for the Owner Trustee, (C)
Shearman & Sterling, special counsel for the Underwriters, and
(D) ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., special counsel in Oklahoma City,
Oklahoma;
(2) the initial fees and reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement;
(3) the initial fee and reasonable and actual
disbursements of the Indenture Trustee under the Trust
Indenture;
(4) the initial fees and expenses of the Liquidity
Provider, the Pass Through Trustee and the Subordination
Agent;
(5) underwriting fees and commissions;
(6) the fees and expenses with respect to the appraisals
of the Aircraft;
(7) the reasonable fees, expenses and disbursements of
[___________________________], special counsel to the Owner
Participant, such fees not to exceed the amount previously
agreed to by the Owner Participant and Lessee;
(8) the reasonable fees, expenses and disbursements of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇,
special counsel for Lessee;
(9) the costs of filing and recording documents with the
FAA and filing Uniform Commercial Code statements in the
United States;
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(10) the reasonable fees, expenses and disbursements of
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special counsel to the
Liquidity Provider; and
(11) the equity placement fee and reasonable
disbursements of ▇▇▇▇▇▇▇ and ▇▇▇▇▇ Financial Corporation.
"Trust Agreement" means that certain Trust Agreement [NW 1999
_], dated as of the date hereof, between the Owner Participant and
First Security Bank, National Association, in its individual
capacity, as originally executed or as modified, amended or
supplemented pursuant to the applicable provisions thereof,
including, without limitation, supplementation thereof by one or
more Trust Supplements entered into pursuant to the applicable
provisions thereof.
"Trust Agreement and Indenture Supplement" or "Trust
Supplement" means a supplement to the Trust Agreement and the Trust
Indenture, substantially in the form of Exhibit A to the Trust
Indenture.
"Trust Estate" means the Trust Estate as that term is defined
in the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and
Security Agreement [NW 1999__], dated as of the date hereof, between
Lessor and the Indenture Trustee, as originally executed or as
modified, amended or supplemented in accordance with the provisions
thereof.
"Trust Indenture Estate" has the meaning assigned to that term
in the Trust Indenture.
"Underwriting Agreement" means that certain Underwriting
Agreement, dated as of February 4, 1999, among Lessee, the
Guarantor, and the underwriters named therein.
"U.S. Air Carrier" means any Certificated Air Carrier as to
which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the regulations under the Federal Aviation
Act, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provisions therefor or
in the absence thereof.
"Wet Lease" means any arrangement whereby the Lessee (or any
Sublessee) agrees to furnish the Airframe and Engines or engines
installed thereon to a third party pursuant to which such Airframe
and Engines or engines (i) shall be operated solely by regular
employees of Lessee (or any Sublessee) possessing all current
certificates and licenses that would be required under the Federal
Aviation Act or, if the Aircraft is not registered in the United
States, all certificates and licenses required by the laws of the
jurisdiction of
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registry, for the performance by such employees of similar functions
within the United States of America or such other jurisdiction of
registry (it is understood that cabin attendants need not be regular
employees of Lessee (or any Sublessee)) and (ii) shall be maintained
by Lessee (or any Sublessee) in accordance with its normal
maintenance practices.
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 [__________________], or such earlier
date as this Lease may be terminated in accordance with the provisions hereof.
(b) [Intentionally Omitted].
(c) Basic Rent. Lessee shall pay Basic Rent with respect to each
Lease Period during the Basic Term on each Lease Period Date during the Basic
Term, in consecutive installments in the amounts as provided in the next
sentence, each such installment to cover the Lease Period specified in Exhibit
B. Each such installment of Basic Rent shall be equal to Lessor's Cost
multiplied by the percentage for the applicable Lease Period Date specified in
Exhibit B hereto. Lessor and Lessee agree that each installment of Basic Rent
that is indicated to be payable in advance shall be allocated over the six-month
period beginning on the Lease Period Date on which such advance payment is
scheduled to be made, and each installment of Basic Rent that is indicated to be
payable in arrears shall be allocated over the six-month period ending on the
Lease Period Date on which such arrears payment is scheduled to be made.
(d) Adjustments to Basic Rent.
(i) In the event that (A) the Delivery Date occurs other than
on [____________________], (B) Transaction Expenses paid by Lessor
pursuant to Section 16(a) of the Participation Agreement are
determined to be other than [_____]% of Lessor's Cost, or (C) there
is a change in tax law (including the issuance of proposed
regulations) after [________________] and on or prior to the
Delivery Date, then in each case the Basic Rent percentages set
forth in Exhibit B, the Stipulated Loss Value percentages set forth
in Exhibit C, the Termination Value percentages set forth in Exhibit
D [, the Initial Installments, the Remaining Installments] and the
Special Purchase Price shall be recalculated by the Owner
Participant, on or prior to [__________________], using the
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same methods and assumptions used to calculate original Basic Rent,
Stipulated Loss Value and Termination Value percentages [, the
Initial Installments, the Remaining Installments] and the Special
Purchase Price in order to: (1) maintain the Owner Participant's Net
Economic Return and (2) minimize the Net Present Value of Rents to
Lessee to the extent possible consistent with clause (1) hereof. In
such recalculation there will be no change in the amortization of
the Secured Certificates.
(ii) (A) In the event of a refinancing as contemplated by
Section 17 of the Participation Agreement, then the Basic Rent
percentages set forth in Exhibit B, the Stipulated Loss Value
percentages set forth in Exhibit C, the Termination Value
percentages set forth in Exhibit D [, the Initial Installments, the
Remaining Installments] and the Special Purchase Price 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
and (B) in the event that Lessee elects to satisfy any indemnity
obligation under the Tax Indemnity Agreement pursuant to Section
4(d)(ii) of the Tax Indemnity Agreement, then the Basic Rent
percentages set forth in Exhibit B, the Stipulated Loss Value
percentages set forth in Exhibit C, the Termination Value
percentages set forth in Exhibit D [, the Initial Installments, the
Remaining Installments] and the Special Purchase Price 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 Stipulated Loss Value
percentages, the Termination Value percentages [, the Initial
Installments, the Remaining Installments] and the Special Purchase
Price 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) [Intentionally Omitted].
(iv) Any recalculation of Basic Rent, Stipulated Loss Value
and Termination Value percentages [, the Initial Installments, the
Remaining Installments] and the Special Purchase Price pursuant to
this Section 3(d) shall be determined by the Owner Participant and
shall be subject to the verification procedures set forth in Exhibit
E hereto. Such recalculated Basic Rent, Stipulated Loss Value and
Termination Value percentages and Special Purchase Price 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, each installment of Basic
Rent payable
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hereunder, whether or not adjusted in accordance with this Section
3(d), shall, and each payment of Termination Value and Stipulated
Loss Value, whether or not adjusted in accordance with this Section
3(d), shall, together with all other amounts (including an amount
equal to the premium, if any, payable by Lessor on the Secured
Certificates) payable simultaneously by Lessee pursuant to this
Lease, in each case be, under any circumstances and in any event, in
an amount at least sufficient to pay in full, on the date on which
such amount of Rent is due, any payments then required to be made on
account of the principal of, premium, if any, and interest on the
Secured Certificates. It is agreed that no installment of Basic Rent
or payment of Termination Value or Stipulated Loss Value 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 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 Secured Certificates made without the prior written consent
of Lessee or (iii) the acceleration of any Secured Certificate or
Secured Certificates due to the occurrence of an "Event of Default"
(as defined in the Trust Indenture) which does not constitute an
Event of Default hereunder.
(vi) All adjustments to Basic Rent under this Section 3(d)
shall be (A) in compliance with the tests of ▇▇.▇▇. 4.02(5) and 4.07
of Rev. Proc. 75-28 and will not cause this Lease to constitute a
"disqualified leaseback or long-term agreement" within the meaning
of Section 467 of the Internal Revenue Code of 1986, as amended, as
each is then in effect and (B) subject to verification pursuant to
Exhibit E.
(e) 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 Stipulated Loss Value or Termination Value as the
same shall become due and owing and all other amounts of Supplemental Rent
within five 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 Secured Certificates upon redemption of such Secured Certificates in
accordance with Section 2.10(b) or Section 2.11 of the Trust Indenture. Lessee
also will pay to Lessor, or to whomsoever 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.
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(f) 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 10:30 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. 051-▇▇▇▇▇▇▇, Attention: Corporate Trust Department,
Credit Northwest/NW 1999 _ (or such other account of Lessor in the continental
United States as Lessor shall direct in a notice to Lessee at least 10 Business
Days prior to the date such payment of Rent is due); provided that so long as
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 10:30 A.M., New
York time on the due date thereof in funds of the type specified in this Section
3(f) directly to the Indenture Trustee at its account at State Street Bank and
Trust Company, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ABA No.
▇▇▇-▇▇▇-▇▇▇, Account No. ▇▇▇▇-▇▇▇-▇, Attention: Corporate Trust Department,
Reference: Northwest/NW 1999 _ (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 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 Certificate Holder pursuant to the Participation Agreement shall be made
in Dollars in immediately available funds prior to 10:30 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 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
(as defined in the Trust Indenture), shall be made in Dollars in immediately
available funds prior to 10:30 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).
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.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES
AND LESSEE TAKES THE AIRCRAFT AND EACH PART THEREOF "AS-IS," "WHERE-IS." 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
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PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except that First Security Bank, National Association, in its
individual capacity, (i) represents and warrants that on the Delivery Date,
Lessor 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 (including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of Lessor Liens) attributable
to it, (iii) covenants that it will not, through its own actions or inactions,
interfere in Lessee's quiet enjoyment of the Aircraft during the Term, (iv)
agrees 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 Federal Aviation Act 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. 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 Manufacturer, any subcontractor
or supplier of the Manufacturer with respect to the Airframe, the Engines or any
Parts, or to release the Manufacturer, or any such subcontractor or supplier,
from any such representation, warranty or obligation. Lessor covenants that
during the Term (so long as this Lease shall not have been declared or deemed to
have been declared in default pursuant to Section 15 hereof) it will not,
through its own actions or inactions interfere in the quiet enjoyment of the
Aircraft by Lessee or any Sublessee and agrees 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.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return. Unless
purchased by Lessee pursuant to Section 19 hereof, upon the termination of this
Lease at the end of the Basic Term or any Renewal Term or pursuant to Section
9(c) or 15, Lessee, at its own expense, will return the Airframe to Lessor at a
major airport in one of the forty-eight contiguous states of the United States
chosen by Lessee, and Lessee will give Lessor at least ten (10) days' prior
written notice of the place of such return; provided, however, that if Lessor
shall have made the request for storage pursuant to Section 5(d) hereof, Lessee
shall return the Airframe to Lessor at the site of the storage at the end of the
storage period. At the time of such return, Lessee will, unless otherwise
requested by Lessor at least ninety (90) days prior to the return hereunder,
cause the Aircraft, if it is not then so registered, to be registered under the
laws of the United States with the Federal Aviation Administration in the name
of
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the Lessor or its designee, provided that Lessee shall be relieved of its
obligations under this sentence if (i) such registration is prohibited by reason
of the failure of Lessor or its designee to be eligible on such date to own an
aircraft registered with the Federal Aviation Administration or (ii) such
registration is otherwise prohibited by applicable law; the Airframe will be
fully equipped with the Engines (or other ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model PW4056 engines
or four engines of the same or another manufacturer of not less than equivalent
utility, value and remaining useful life, and suitable for installation and use
on the Airframe without impairing the value, utility or remaining useful life of
the Aircraft; provided that all engines shall be of the same make and model)
duly installed thereon. Also, at the time of such return, such Airframe and
Engines or engines (i) shall be certified (or, if not then registered under the
Federal Aviation Act, shall be eligible for certification) as an airworthy
aircraft by the Federal Aviation Administration, (ii) shall be free and clear of
all Liens (other than Lessor Liens (including for this purpose Liens which would
be Lessor Liens but for the proviso in the definition of Lessor Liens),
Indenture Trustee's Liens and Loan Participant Liens) and rights of third
parties under pooling, interchange, overhaul, repair or other similar agreements
or arrangements, (iii) shall be in as good an operating condition as when
delivered to Lessee hereunder, ordinary wear and tear excepted, or, in the case
of any such engines owned by Lessee, shall have a value, utility and remaining
useful life at least equal to, and shall be in as good an operating condition as
required by the terms hereof with respect to, Engines constituting part of the
Aircraft but not then installed on the Airframe, and (iv) shall be in compliance
with the return conditions, if any, set forth in Exhibit G.
During the last six (6) 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, 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 fully the Aircraft and the records
relating thereto, provided that such cooperation shall not interfere with the
operation or maintenance of the Aircraft by Lessee or any Sublessee.
(b) Return of the Engines. In the event that any engine not owned
by Lessor shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery, will,
at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) ▇▇▇▇ of sale with respect to each such engine, in form
and substance satisfactory to Lessor (together with an opinion of counsel to the
effect that such full warranty ▇▇▇▇ of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that such engines
are free and clear of Liens other than Lessor Liens (including for this purpose
Liens which would be Lessor Liens but for the proviso in the definition of
Lessor Liens), Indenture Trustee's Liens and Loan Participant Liens), against
receipt from Lessor of a ▇▇▇▇ of sale or other instrument evidencing the
transfer, without recourse or warranty (except as to the absence of Lessor
Liens, including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition 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 installed on the Airframe at the time of the return
of the Airframe.
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(c) Fuel; Manuals. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessor shall pay Lessee, as compensation for any fuel or oil contained in
the fuel or oil tanks of such Airframe, the value of such fuel or oil at the
price paid by Lessee for such fuel or oil, as the case may be, and (ii) Lessee
shall deliver or cause to be delivered to Lessor all logs, manuals and data and
inspection, maintenance, modification and overhaul records required to be
maintained with respect thereto under applicable rules and regulations of each
country under the laws of which the Aircraft has been registered during the
period of operation thereof, which logs, manuals, data and records, if not
maintained in English, shall be translated into English at Lessee's expense.
(d) Storage Upon Return. If, at least sixty (60) days prior to
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(c), Lessee receives from Lessor a written request for
storage of the Aircraft upon its return hereunder, Lessee will provide Lessor,
or cause Lessor to be provided, with free parking facilities for the Aircraft
(maintenance costs and other out-of-pocket costs other than parking fees to be
for the account of Lessor) for a period not exceeding thirty (30) days
commencing on the date of such termination at a location in the continental
United States selected by Lessee and used as a location for the parking or
storage of aircraft; provided that Lessee shall have no obligation to move the
Aircraft from such location during or after the storage period. Lessee, unless
instructed by Lessor to the contrary, will maintain insurance for the Aircraft
during such period not exceeding thirty (30) days and be reimbursed by Lessor
for the premiums thereon.
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, and any other rights 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 (including for this purpose Liens which would be
Lessor Liens but for the proviso in the definition of 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
risk of the sale, forfeiture or loss of the Airframe or any Engine or any
interest therein, or, so long as any Secured Certificates shall be outstanding,
adversely affect the Lien of the Trust Indenture, (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 or, so long as any Secured Certificates shall be outstanding,
adversely affect the Lien of the Trust Indenture, (vi) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless the judgment secured
shall not,
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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 and Operation; Possession and
Subleases; Insignia. (a)(I) Registration and Maintenance. Lessee, at its own
cost and expense, shall (or shall cause any Sublessee to): (i) forthwith upon
the delivery thereof hereunder, cause the Aircraft to be duly registered in the
name of Lessor, and, subject to the second paragraph of this Section 7(a) and
Section 8(f) of the Participation Agreement, to remain duly registered in the
name of Lessor under the Federal Aviation Act, 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 Federal Aviation Act at any time except
as provided in Section 8(f) of the Participation Agreement and shall cause the
Trust Indenture to be duly recorded and maintained of record as a first mortgage
on the Aircraft; (ii) maintain, service, repair and overhaul (or cause to be
maintained, serviced, repaired and overhauled) the Aircraft so as to keep the
Aircraft in as good an operating condition as when delivered to Lessee
hereunder, 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 in
accordance with applicable regulations or during maintenance or modification
permitted hereunder) under the Federal Aviation Act, except when all Boeing
Model 747-400 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 8(f) of the Participation Agreement, and 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; provided,
however, that in all circumstances the Aircraft shall be maintained by Lessee
(or any Sublessee) in accordance with maintenance standards required by, or
substantially equivalent to those required by, the FAA or the central civil
aviation authority of Canada, France, Germany, Japan, the Netherlands or the
United Kingdom; (iii) maintain or cause to be maintained 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 (iv) promptly furnish or cause to be
furnished to Lessor and the Owner
-23-
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. (II)
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, 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
materially adversely affect Lessor or, so long as any Secured Certificates shall
be outstanding, the first priority Lien of the Trust Indenture and 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
where such failure is attributable to causes beyond the reasonable control of
Lessee (or any Sublessee) or 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) and in each such case Lessee (or
such Sublessee, as the case may be) is taking all reasonable steps to remedy
such failure as soon as is reasonably practicable.
At any time after the Depreciation Period, Lessor, upon compliance
with all of the terms of Section 8(f) 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; provided that, so long as no Default of the type referred to in
Section 14(a), 14(b) or 14(e) or Event of Default shall have occurred and be
continuing at the time of such sublease, delivery, transfer or relinquishment of
possession or installation or such Wet Lease, and so long as the action to be
taken shall not deprive the Indenture Trustee of the perfected first priority
Lien of the Trust Indenture on the Airframe or (subject to the further proviso
(B) to clause (i) of this Section 7(b)) any Engine, and so long as Lessee (or
any Sublessee) shall comply with the provisions of Sections 7(a) and 11 hereof,
Lessee (or, except with respect to clause (x) below, any Sublessee) may, without
the prior written consent of Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to
normal 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
-24-
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 which is 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 which
would be permitted under clause (i) above, provided that Lessor's
title to such Engine and, if any Secured Certificates 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)) 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 subparagraph (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 subparagraph
(iii) nor subparagraph (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
-25-
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 of America 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 of America 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, enter into any sublease with (1)
a U.S. Air Carrier, (2) any Person approved in writing by Lessor,
which approval shall not be unreasonably withheld or (3) after the
Depreciation Period, any Permitted Sublessee if (A) in any such
case, the Sublessee under such sublease is not subject to a
proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date such sublease is entered into, (B)
in the event that the Sublessee under such sublease is a foreign air
carrier (other than a foreign air carrier principally based in
Taiwan), the United States maintains diplomatic relations with the
country in which such proposed Sublessee is principally based at the
time such sublease is entered into (or, in
-26-
the case of a sublease to a proposed Sublessee principally based in
Taiwan, maintains diplomatic relations at least as good as those in
effect on the Delivery Date) and (C) in the event that the Sublessee
under such sublease is a foreign air carrier, Lessor and the
Indenture Trustee shall have received an opinion of counsel to
Lessee to the effect that (I) the terms of the proposed sublease
will be legal, valid, binding and (subject to customary exceptions
in foreign opinions generally) enforceable against the proposed
Sublessee in the country in which the proposed Sublessee is
principally based, (II) there exist no possessory rights in favor of
the Sublessee under such Sublease under the laws of such Sublessee's
country of domicile that would, upon bankruptcy or insolvency of or
other default by Lessee and assuming at such time such Sublessee is
not insolvent or bankrupt, prevent the return or repossession of the
Aircraft in accordance with the terms of this Lease, (III) the laws
of such Sublessee's country of domicile 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 (IV)
the laws of such Sublessee's country of domicile would give
recognition to Lessor's title to the Aircraft, to the registry of
the Aircraft in the name of the Lessor (or Lessee, as "lessee", or
the proposed Sublessee, as "sublessee", as appropriate) and to the
Lien of the Trust Indenture, 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.
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 effectively
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
to the Lien of the Trust Indenture, including, without limitation, the covenants
contained in Section 7(a) hereof and Lessor's rights to repossession pursuant to
Section 15 hereof and to avoid such Sublease upon such repossession, and Lessee
shall remain primarily liable hereunder for the performance of all of the terms
of this Lease to the same extent as if such Sublease or transfer had not
occurred, and, except as otherwise provided herein, 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. Any sublease permitted under this Section 7(b) shall
expressly prohibit any further sub-sublease by the Sublessee. 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
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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; provided, however, that such agreement of Lessor
shall not be for the benefit of any lessor or secured party of any airframe
(other than the Airframe) leased to Lessee (or any Sublessee) or purchased by
Lessee (or any Sublessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by Lessee (or any Sublessee), unless such
lessor, conditional vendor, other secured party or mortgagee has expressly
agreed (which agreement may be contained in such lease, conditional sale or
other security agreement or mortgage) that neither it nor its successors or
assigns will acquire, as against Lessor, any right, title or interest in an
Engine as a result of such Engine being installed on such airframe. Lessee shall
provide to the Owner Participant and the Indenture Trustee (i) written notice of
any Sublease hereunder (such notice to be given not later than five days prior
to entering into such Sublease, if practicable, but in any event promptly after
entering into any such Sublease) and (ii) a copy of each Sublease which has a
term of more than three months.
(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,
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
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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
-29-
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 other governmental authority
having jurisdiction; 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 Secured Certificates
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 $800,000. 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 (the "Additional Parts") shall, without further act,
vest in Lessor. 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, assuming that such Airframe
or Engine was in the condition and repair required to be maintained by the terms
hereof. 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.
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SECTION 9. Voluntary Termination. (a) Termination Event. (1)
[Intentionally Omitted].
(2) Lessee shall have the right to elect to terminate this Lease on
any Lease Period Date occurring on or after the fifth anniversary of the
Delivery Date if Lessee shall have made the good faith determination, which
shall be evidenced by a resolution duly adopted by its Board of Directors (or
the Executive Committee thereof), that the Aircraft is obsolete or surplus to
its needs.
(3) Lessee shall give to Lessor at least ninety (90) days' revocable
advance written notice of Lessee's intention to so terminate this Lease (any
such notice, a "Termination Notice") specifying (i) the Lease Period Date on
which Lessee intends to terminate this Lease in accordance with this Section 9
(such specified date, a "Termination Date") and (ii) in the case of a
termination pursuant to Section 9(a)(2), that Lessee has determined that the
Aircraft is obsolete or surplus to its needs. Any Termination Notice shall
become irrevocable fifteen (15) days prior to the Termination Date.
(b) [Intentionally Omitted].
(c) Optional Sale of the Aircraft. In the event that Lessee shall
have exercised its right to terminate this Lease under Section 9(a)(2), then
during the period from the giving of the notice referred to in Section 9(a)(3)
until the proposed Termination Date (unless Lessee shall have revoked the
Termination Notice specifying such proposed Termination Date), Lessee, as agent
for Lessor and at no expense to Lessor, shall use commercially reasonable
efforts to obtain all-cash bids in the worldwide market for the purchase of the
Aircraft and, in the event it receives any bid, Lessee shall, within five
Business Days after receipt thereof and at least ten 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. After Lessee shall have certified to Lessor all bids
received, the Owner Participant, any Affiliate thereof or any Person contacted
by the Owner Participant may submit a further bid or bids to Lessee not later
than five Business Days prior to the Termination Date proposed by Lessee (unless
Lessee shall have revoked the Termination Notice specifying such proposed
Termination Date). 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 all-cash bid therefor at least ten (or,
in the case of the Owner Participant, any Affiliate thereof, or Person contacted
by the Owner Participant, five) 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
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shall comply with the terms of the Trust Indenture and shall, without recourse
or warranty (except as to the absence of Lessor Liens, including for this
purpose Liens which would be Lessor Liens but for the proviso in the definition
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(f) 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 net cash proceeds from the sale of the Aircraft
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
such Termination Date and, if such Basic Rent is payable in arrears on such
Termination Date as indicated on Exhibit B, on such Termination Date, and all
unpaid Supplemental Rent due on or prior to the Termination Date with respect to
the Aircraft, and (C) the Make-Whole Amount, if any, due on the Secured
Certificates, and upon such payment Lessor simultaneously will transfer to
Lessee, without recourse or warranty (except as to the absence of Lessor Liens,
including for this purpose Liens which would be Lessor Liens but for the proviso
in the definition 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 written notice of such election at
least five Business Days prior to the Termination Date accompanied by an
irrevocable undertaking by the Owner Participant to make available to Lessor for
payment to the Indenture Trustee on the Termination Date the amount required to
pay in full the unpaid principal amount of the Secured Certificates outstanding
on the Termination Date plus interest accrued thereon through the Termination
Date, together with the Make-Whole Amount, if any, due on the Secured
Certificates. 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 as set forth below)
pay in full the unpaid principal amount of the Secured Certificates outstanding
on the Termination Date plus interest accrued thereon through the Termination
Date together with all Make-Whole Amount, if any, due on the Secured
Certificates and, so long as the Secured Certificates 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, if such Basic Rent is payable in arrears on such Termination Date as
indicated on Exhibit B, on such 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), if any, in
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connection with preparation for such sale and Lessee may give one or more
additional Termination Notices in connection with Section 9(a)(2), subject to
the last sentence of this Section 9(c). 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 in connection with Section 9(a)(2) no more than two times during the Term.
(d) Termination as to Engines. So long as no Event of Default
shall have occurred and be continuing, 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(b). No termination of this Lease with respect to any Engine as
contemplated by this Section 9(d) shall result in any reduction of Basic Rent.
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 forty-five (45) 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(f) hereof, an amount equal to the Stipulated Loss Value of the
Aircraft corresponding to the Stipulated Loss Value Date occurring
on or immediately following the Loss Payment Date; provided,
however, that if a Lease Period Date shall occur on or prior to the
Loss Payment Date with respect to which Stipulated Loss Value is
determined, Lessee shall pay on such Lease Period Date (A) if the
Lease Period Date occurs on the Loss Payment Date with respect to
which Stipulated Loss Value is determined, an amount equal to the
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Basic Rent that would have been due on such Lease Period Date (but
only to the extent payable in arrears as indicated on Exhibit B) if
such Event of Loss had not occurred and (B) if the Lease Period Date
occurs prior to the Loss Payment Date with respect to which
Stipulated Loss Value is determined, an amount equal to the Basic
Rent that would have been due on such Lease Period Date if such
Event of Loss had not occurred, or
(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
subparagraph (i) above, together with all other amounts that then may be due
hereunder (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, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount 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, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition 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
(without regard to hours or cycles) at least equal to the Aircraft subject to
such Event of Loss assuming that the Aircraft had been maintained in accordance
with this Lease; provided that any aircraft, airframe or engine so substituted
hereunder shall be of the same or improved model as those initially leased
hereunder 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
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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 Federal Aviation Act, or the applicable laws, rules
and regulations of any other jurisdiction in which the Airframe may then be
registered as permitted by Section 8(f) 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, including for this
purpose Liens which would be Lessor Liens but for the proviso in the definition
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 Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ 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 as
assignee of Lessor 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,
available to Lessor and, so long as any Secured Certificates are outstanding,
the Indenture Trustee as assignee of Lessor's rights under the Lease with
respect to the Aircraft, 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 sixty (60) 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 another ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model PW4056 engine (or engine of the same or
another manufacturer of the same, an equivalent or an improved model and
suitable for installation and use on the Airframe without impairing the value,
utility or remaining useful life of the
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Aircraft; provided that all Engines shall be of the same make and model) free
and clear of all Liens (other than Permitted Liens, which engine may upon its
transfer to Lessor become subject to any and all Permitted Liens) and having a
value, utility and remaining useful life (without regard to hours or cycles) at
least equal to the Engine subject to such Event of Loss assuming that such
Engine had been maintained in accordance with this Lease. 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 replacement engine, (ii) cause a
Lease Supplement and Trust Supplement to be duly executed by Lessee and to be
filed for recording pursuant to the Federal Aviation Act, or the applicable
laws, rules and regulations of any other jurisdiction in which the Airframe may
then be registered as permitted by Section 8(f) 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, including for this purpose Liens which
would be Lessor Liens but for the proviso in the definition 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 Stipulated
Loss Value required to be paid by Lessee pursuant to Section 10(a),
shall be applied in reduction of Lessee's obligation to pay
Stipulated Loss Value, if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its payment
of Stipulated Loss 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
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(x) the Stipulated Loss 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; 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
(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, provided
that Lessee shall have fully performed, or concurrently therewith
will perform, the terms of Section 10(b) with respect to the Event
of Loss for which such payments are made.
(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 Agreement with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred, 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
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 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 day beyond the
end of the Term, Lessee shall be relieved of all of its obligations pursuant to
the provisions of Section 5 (including Exhibit G) 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 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 (including for this purpose Liens which would be Lessor Liens but
for the proviso in the
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definition of Lessor Liens), Loan Participant Liens and Indenture Trustee's
Liens), against receipt from Lessor of a ▇▇▇▇ of sale evidencing the transfer,
without recourse or warranty (except as to the absence of Lessor Liens,
including for this purpose Liens which would be Lessor Liens but for the proviso
in the definition 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 subsection (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 shall
have occurred and be 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 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 (or such Sublessee) to the extent not previously applied in
accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
Insurance. (I) Except as provided in clause (II) of this Section 11(a), Lessee
will carry or cause to be carried at its or any Sublessee's expense (i) aircraft
public liability (including, without limitation, passenger legal liability) (and
including aircraft war risk and hijacking insurance, if and to the extent the
same is maintained by Lessee (or, if a Sublease is then in effect, if and to the
extent maintained by Sublessee) with respect to other aircraft owned or leased,
and operated by Lessee (or such Sublessee) on the same routes) insurance and
property damage insurance (exclusive of manufacturer's product liability
insurance) with respect to the Aircraft, in an amount not less than the greater
of (x) the amount of public liability and property damage insurance from time to
time applicable to aircraft owned or operated by Lessee (or, if a Sublease is
then in effect, by Sublessee) of the same type as the Aircraft and (y) such
amount per occurrence as may have been agreed to on the Delivery Date by the
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Owner Participant [amount shall be at least $400,000,000] and (ii) cargo
liability insurance, in the case of both clause (i) and clause (ii), (A) of the
type and covering the same risks as from time to time applicable to aircraft
operated by Lessee (or, if a Sublease is then in effect, by Sublessee) of the
same type as the Aircraft and (B) which is maintained in effect with insurers of
recognized responsibility. Any policies of insurance carried in accordance with
this paragraph (a) and any policies taken out in substitution or replacement for
any of such policies (A) shall be amended to name Lessor, in its individual
capacity and as owner trustee, the Indenture Trustee and the Owner Participant
(but without imposing on any such parties liability to pay the premiums for such
insurance) (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) as additional insureds as their respective
interests may appear, (B) shall provide that in respect of the respective
interests of Lessor, the Indenture Trustee and the Owner Participant (and, if
any Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease) 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 Lessor, the Indenture Trustee and the Owner
Participant (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) 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), (C) may provide for
self-insurance to the extent permitted by Section 11(d) and (D) 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 Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), or
such insurance shall lapse for non-payment of premium, such cancellation, lapse
or change shall not be effective as to Lessor, the Indenture Trustee or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease) for thirty (30) days (seven (7) days
in the case of war risk and allied perils coverage) after issuance to Lessor,
the Indenture Trustee or the Owner Participant (or, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease), 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. Each liability policy (1) shall be primary
without right of contribution from any other insurance which is carried by
Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), (2)
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, and (3) 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 Lessor or the Indenture Trustee or the
Owner Participant (or, if any Sublease shall be in effect, Lessee in its
capacity as sublessor under the Sublease) to the extent of any moneys due to
Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease).
(II) 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
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(I) above, insurance otherwise conforming with the provisions of said clause (I)
except that (A) the amounts of coverage shall not be required to exceed the
amounts of public liability and property damage insurance from time to time
applicable to aircraft owned or operated by Lessee (or, if a Sublease is then in
effect, by Sublessee) of the same type as the Aircraft which are 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 operated by Lessee (or, if a Sublease is then in effect, by Sublessee)
of the same type which are on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (I) Except
as provided in clause (II) of this Section 11(b), Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense, with insurers of
recognized responsibility, all-risk ground and flight aircraft hull insurance
covering the Aircraft and all-risk ground and flight coverage of Engines and
Parts while temporarily removed from the Aircraft and not replaced by similar
components (including, without limitation, war risk and governmental
confiscation and expropriation (other than by the government of registry of the
Aircraft) and hijacking insurance, if and to the extent the same is maintained
by Lessee (or, if a Sublease is then in effect, by Sublessee) with respect to
other aircraft owned or operated by Lessee (or such Sublessee) on the same
routes, except that Lessee (or such Sublessee) shall maintain war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance if the Aircraft is operated on
routes where the custom is for major international air carriers flying
comparable routes to carry such insurance) which is of the type as from time to
time applicable to aircraft owned or operated by Lessee (or, if a Sublease is
then in effect, by Sublessee) of the same type as the Aircraft; provided that
such insurance shall at all times while the Aircraft is subject to this Lease be
for an amount (subject to self-insurance to the extent permitted by Section
11(d)) not less than the Stipulated Loss Value for the Aircraft. Any policies
carried in accordance with this paragraph (b) covering the Aircraft and any
policies taken out in substitution or replacement for any such policies (i)
shall name Lessor, as owner trustee, the Indenture Trustee and the Owner
Participant (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease) as additional insureds, as their respective
interests may appear (but without imposing on any such party liability to pay
premiums with respect to such insurance), (ii) may provide for self-insurance to
the extent permitted in Section 11(d), (iii) shall provide that (A) in the event
of a loss involving proceeds in excess of $7,000,000 (or, if the Aircraft is
then under a Sublease, in excess of $4,000,000), the proceeds in respect of such
loss up to an amount equal to the Stipulated Loss 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
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pay for repairs then being made, pay the amount of such payment to Lessee or its
order, and (B) the entire amount of any loss involving proceeds of $7,000,000
(or, if the Aircraft is then under a Sublease, of $4,000,000) or less or the
amount of any proceeds of any loss in excess of the Stipulated Loss 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, (iv) shall provide that if the
insurers cancel such insurance for any reason whatever, or such insurance lapses
for non-payment of premium or if any material change is made in the insurance
which adversely affects the interest of Lessor, the Indenture Trustee or the
Owner Participant, such cancellation, lapse or change shall not be effective as
to Lessor, the Indenture Trustee or the Owner Participant (or, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease) for
thirty (30) days (seven (7) days in the case of hull war risk and allied perils
coverage) after issuance to Lessor, the Indenture Trustee or the Owner
Participant (or, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease), 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, (v)
shall provide that in respect of the respective interests of Lessor, the
Indenture Trustee and the Owner Participant (and, if any Sublease shall be in
effect, Lessee in its capacity as sublessor under the Sublease) in such policies
the insurance shall not be invalidated by any action or inaction of Lessee (or,
if a Sublease is then in effect, any Sublessee) or any other Person and shall
insure the respective interests of Lessor, the Indenture Trustee and the Owner
Participant (and, if any Sublease shall be in effect, Lessee in its capacity as
sublessor under the Sublease), as they appear, regardless of any breach or
violation of any warranty, declaration or condition contained in such policies
by Lessee (or, if a Sublease is then in effect, any Sublessee), (vi) shall be
primary without any right of contribution from any other insurance which is
carried by Lessor, the Owner Participant or the Indenture Trustee (or, if any
Sublease shall be in effect, Lessee in its capacity as sublessor under the
Sublease), (vii) shall waive any right of subrogation of the insurers against
Lessor, the Owner Participant and the Indenture Trustee (and, if any Sublease
shall be in effect, Lessee in its capacity as sublessor under the Sublease), and
(viii) shall waive any right of the insurers to set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in respect of any liability
of Lessor, the Indenture Trustee, the Owner Participant or Lessee (or any
Sublessee) to the extent of any moneys due to Lessor, the Indenture Trustee or
the Owner Participant. In the case of a loss with respect to an engine (other
than an Engine) installed on the Airframe, Lessor shall hold any payment to it
of any insurance proceeds in respect of such loss for the account of Lessee or
any other third party that is entitled to receive such proceeds.
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
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Trust Agreement) for reasonable costs and expenses, as shall not
exceed the Stipulated Loss Value required to be paid by Lessee
pursuant to Section 10(a) hereof shall be applied in reduction of
Lessee's obligation to pay such Stipulated Loss Value, if not
already paid by Lessee, or, if already paid by Lessee, shall be
applied to reimburse Lessee for its payment of such Stipulated Loss
Value, 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) 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).
(II) 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 (I) above, insurance otherwise conforming with the provisions
of said clause (I) 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 operated
by Lessee (or, if a Sublease is then in effect, by Sublessee) of the same type
similarly on the ground and not in operation, provided that Lessee shall
maintain insurance against risk of loss or damage to the Aircraft in an amount
equal to the Stipulated Loss Value of the Aircraft during such period that the
Aircraft is on the ground and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished,
to Lessor, the Indenture Trustee and the Owner Participant, on or before the
Delivery Date and on or before July 1 in each year thereafter during the Term
commencing July, _____, a report, signed by Aon Risk Services, Inc., Aon Risk
Services of Minnesota, Inc. or any other independent firm of insurance brokers
reasonably acceptable to Lessor (the "Insurance
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Brokers"), describing in reasonable detail the insurance and reinsurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained with respect to the
Aircraft complies with the terms hereof; provided, however, that all information
contained in the foregoing report shall not be made available by Lessor, the
Indenture Trustee, the Loan Participants or the Owner Participant to anyone
except (A) to permitted transferees of Lessor's, the Loan Participants', the
Owner Participant's or the Indenture Trustee's interest who agree to hold such
information confidential, (B) to Lessor's, the Loan Participants', the Owner
Participant's or the Indenture Trustee's counsel or independent certified public
accountants or independent insurance advisors 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. Lessee will cause such
Insurance Brokers to agree to advise Lessor, the Indenture Trustee and the Owner
Participant in writing of any default in the payment of any premium and of any
other 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. To the extent such agreement is reasonably obtainable, Lessee will
also cause such Insurance Brokers to agree to advise Lessor, the Indenture
Trustee and the Owner Participant in writing at least thirty (30) days (seven
(7) days in the case of war risk and allied perils coverage), prior to the
expiration or termination date of any insurance carried and maintained on the
Aircraft pursuant to this Section 11. In addition, Lessee will also cause such
Insurance Brokers to deliver to Lessor, the Indenture Trustee and the Owner
Participant, 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. 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 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, without waiver of any other rights Lessor or the
Indenture Trustee may have; 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) hereof.
(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 a maximum amount
which is less than the Stipulated Loss Value of the Aircraft) in the insurance
covering the risks required to be insured against pursuant to this Section 11
under a program applicable to all aircraft 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 during any policy year, with respect to all of the aircraft
in Lessee's fleet (including, without limitation, the Aircraft), the lesser of
(a) 50% of the largest replacement value of any single aircraft in Lessee's
fleet or (b) 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. In addition, Lessee (and any
Sublessee) may self-insure to the extent of any applicable mandatory minimum per
aircraft (or,
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if applicable, per annum or other period) hull or liability insurance deductible
imposed by the aircraft hull or liability insurers.
(e) 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 either directly or through Lessor 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.
(f) 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 any 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)
with respect to the Aircraft (including permitted self-insurance) shall be at
least equal to the amount of insurance against such risk otherwise required by
this Section 11.
(g) Application of Payments During Existence of an Event of Default.
Any amount referred to in paragraph (b) of this Section 11 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 shall have occurred and be continuing, but shall be held by or paid
over to Lessor as security for the obligations of Lessee (or any Sublessee)
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 (or such Sublessee) 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, Lessor, the Owner Participant or the
Indenture Trustee or their respective authorized representatives may (not more
than once every calendar year (unless an Event of Default has occurred and is
continuing when such inspection right shall not be so limited)) inspect the
Aircraft and inspect and make copies (at Lessor's, the Owner Participant's or
the Indenture Trustee's expense, as the case may be) of the books and records of
Lessee relating to the maintenance of the Aircraft; any such inspection of the
Aircraft shall be limited to a visual, walk-around inspection and shall not
include opening any panels, bays or the like without the express consent of
Lessee; provided that no exercise of such inspection right shall interfere with
the 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 major overhaul to be performed on the
Aircraft, Lessee shall
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cooperate with the Owner Participant to enable the Owner Participant's
authorized representative to observe the next scheduled major overhaul to be
performed on the Aircraft; provided that Lessee shall be required to so
cooperate only to the extent necessary to enable the Owner Participant's
authorized representative to observe (i) one scheduled major overhaul during
each three year period of the Term and (ii) (notwithstanding the foregoing
clause (i) but only if a major overhaul is scheduled during the last year of the
Term) one scheduled major overhaul during the last year of the Term; provided,
further that the Owner Participant's authorized representative shall merely
observe such major overhaul, shall not interfere with or extend in any manner
the conduct or duration of the major overhaul and shall not be entitled to
direct any of the work performed in connection with such overhaul. None of
Lessor, the Owner Participant or the Indenture Trustee shall have any duty to
make any such inspection nor shall any of them incur any liability or obligation
by reason of not making such inspection.
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 Agreement or in the
Participation Agreement. Subject to the foregoing, the terms and provisions of
this Lease shall be binding upon and inure to the benefit of Lessor and Lessee
and their respective successors and permitted assigns.
SECTION 14. Events 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 a payment of Basic Rent or
Stipulated Loss Value within ten (10) Business Days after the same
shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value) after the same shall have
become due and such failure shall continue for ten (10) Business
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 (as defined in the Trust Indenture) 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 and in clauses
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(i)(B) and (ii) of the first sentence of second paragraph of Exhibit
G) 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 which arises under
clause (ii) or clause (iii) of the first sentence of Section 7(a),
or under the second sentence of Section 7(a) as it relates to
maintenance, service, repair or overhaul or under Section 8 and,
notwithstanding the diligence of Lessee in attempting to cure such
failure, such failure is not cured within said thirty 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-five (365) 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
Section 3 of 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 the Note Purchase Agreement or any
document or instrument furnished pursuant to any thereof) shall
prove to have been incorrect in any material respect at the time
made and such incorrectness shall not have been cured (to the extent
of the adverse impact of such incorrectness on the interests of the
Owner Participant, Lessor or the Certificate Holders) 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
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(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
this Section 14, 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 Agreement to be in
default, provided, that, if an Event of Default referred to in Section 14(e) or
14(f) shall have occurred, this Lease Agreement shall be deemed to be declared
in default without further act; 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
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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 Lease Period Date not earlier than ten 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 for
Lease Periods commencing on or after the Delivery Date or the Lease
Period Date specified as the payment date in such notice), any
unpaid Basic Rent due on Lease Period Dates prior to the payment
date so specified and, if any Basic Rent is payable in arrears on
such payment date as indicated on Exhibit B, any Basic Rent payable
on such payment date (including, in each case, without limitation,
any adjustments to Basic Rent payable pursuant to Section 3(d)) 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 Stipulated Loss Value for the
Aircraft, computed as of the Lease Period 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 Lease
Period Date specified as the payment date in such notice at an
annual rate equal to the Base Rate plus 1%; or (ii) an amount equal
to the excess, if any, of the Stipulated Loss Value for such
Aircraft, computed as of the Lease Period 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
Lease Period 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
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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 such date
(including, in each case, without limitation, any adjustments to
Basic Rent payable pursuant to Section 3(d)) plus the amount of any
deficiency between the net proceeds of such sale (after deduction of
all reasonable costs of sale) and the Stipulated Loss Value of such
Aircraft, computed as of the Stipulated Loss Value Date on or
immediately preceding 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, terminate or cancel this Lease
Agreement 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 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 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 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 recognized independent
aircraft appraisers, one of which appraisers shall be chosen by Lessor and one
by Lessee within five 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 Business Days after the end of such five-day period, each shall render
its own appraisal and shall by mutual consent choose another appraiser within
five Business Days after the end of such twenty-day period. If, within such
five-day period, such two appraisers fail to appoint a third appraiser, then
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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 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. 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 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.
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
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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 reasonably satisfactory to Lessor and the
Indenture Trustee as to the due recording or filing of such supplement or
amendment. Commencing in ____, on or before April 30 of each year during the
Term, Lessee will deliver to Lessor and the Indenture Trustee a certificate of
Lessee, signed by the President, a Vice President or the Chief Financial Officer
of Lessee to the effect that the signer is familiar with or has reviewed the
relevant terms of this Lease and the signer does not have actual knowledge of
the existence, as of the date of such certificate, of any condition or event
which constitutes a Default or an Event of Default. Lessee agrees that if the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
Treasurer or an Assistant Treasurer of Lessee has actual knowledge of the
existence of a Default, then Lessee shall promptly give to Lessor, the Owner
Participant and the Indenture Trustee notice thereof and such other information
relating thereto as Lessor, the Owner Participant or the Indenture Trustee may
reasonably request. Lessee agrees that if an officer of Lessee has knowledge of
the existence of an Event of Default, Lessee shall promptly give to Lessor and
the Indenture Trustee notice thereof and such other information relating thereto
as Lessor or the Indenture Trustee may reasonably request. Lessee will deliver
to Lessor, the Owner Participant and the Indenture Trustee (i) within sixty (60)
days after the end of each of the first three quarterly periods of each fiscal
year of the Guarantor, the publicly filed Form 10Q report of the Guarantor; and
(ii) within one hundred twenty (120) days after the close of such fiscal year,
the publicly filed annual report and Form 10K report of the Guarantor.
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:
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(i) 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,
(ii) if to Lessor, at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Department (Telecopy No.
(▇▇▇) ▇▇▇-▇▇▇▇), or to such other address or telecopy number as
Lessor shall from time to time designate in writing to Lessee, and
(iii) 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 18. No Set-Off, Counterclaim, etc. All Rent shall be paid by
Lessee to Lessor in funds of the type specified in Section 3(f). 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.
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.
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SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
Renewal Options. (1) Fixed Renewal Term. Lessee shall have the option to renew
this Lease for a one year renewal term which shall commence only upon the
expiration of the Basic Term (the "first Fixed Renewal Term"), a one year
renewal term which shall commence only upon the expiration of the first Fixed
Renewal Term (the "second Fixed Renewal Term"), and a one year renewal term
which shall commence only upon the expiration of the second Fixed Renewal Term
(the "third Fixed Renewal Term") (the first Fixed Renewal Term, the second Fixed
Renewal Term and the third Fixed Renewal Term, each a "Fixed Renewal Term") by
delivery to Lessor at least ninety (90) days before the end of the Basic Term,
the first Fixed Renewal Term or the second Fixed Renewal Term, as the case may
be, a written notice irrevocably electing to renew this Lease for a Fixed
Renewal Term. Basic Rent during any Fixed Renewal Term shall be payable in an
amount and at the times specified in Section 19(a)(4).
(2) Fair Market Renewal Term. At the expiration of the third Fixed
Renewal Term or any Fair Market Renewal Term, Lessee shall have the right to
renew this Lease by delivery to Lessor of a written notice irrevocably electing
to renew this Lease for a renewal term of not less than one year and not more
than three years 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 right to renew may be exercised by Lessee delivering to Lessor, at
least ninety (90) days prior to the commencement of such Fair Market Renewal
Term, a written notice irrevocably electing to renew this Lease for a Fair
Market Renewal Term (which notice shall also specify the length of the Fair
Market Renewal Term).
(3) If no written notice is delivered by Lessee to Lessor pursuant
to Section 19(a)(1) or 19(a)(2) on or before the day specified therefor, Lessee
shall be deemed to have waived any right to renew this Lease.
(4) At the end of the Basic Term or any Renewal Term, if Lessee
has elected to renew this Lease as aforesaid, and provided that there shall not
then have occurred and be continuing a Default of the type referred to in
Section 14(a), 14(b) or 14(e) or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above provided
and a Lease Supplement evidencing such renewal has been executed and filed for
recordation with the Federal Aviation Administration, this Lease shall continue
in full force and effect during the Renewal Term, except that (x) Lessee shall
pay Lessor Basic Rent for the Aircraft during the Renewal Term in an amount
equal to the "fair market rental value" thereof determined in accordance with
Section 19(c), each semi-annual installment of Basic Rent not to exceed in the
case of a Fixed Renewal Term 50% of the average Basic Rent during the Basic Term
(such average being determined as the total of all payments of Basic Rent during
the Basic Term added together and divided by the number of payments of Basic
Rent during the Basic Term), which Basic Rent shall be payable in semi-annual
installments in arrears, each such installment being due and payable on each
Lease Period Date occurring during the Renewal Term, commencing with the Lease
Period Date immediately following the commencement of the Renewal Term, and (y)
the Stipulated Loss Values applicable during the
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Renewal Term shall be determined separately for each Renewal Term by the Owner
Participant in good faith to reflect Stipulated Loss Values determined in
accordance with the following sentence. Stipulated Loss Values during a Renewal
Term shall on the date on which such Renewal Term begins be equal to the fair
market sales value of the Aircraft as of such date, determined in accordance
with the provisions of this Section 19(a)(4) and Section 19(c) hereof, and shall
decline ratably on a monthly basis to the fair market sales value of the
Aircraft as of the last day of such Renewal Term, determined in accordance with
the provisions of this Section 19(a)(4) and Section 19(c) hereof.
In determining fair market sales value for purposes of calculating
Stipulated Loss Value for any Renewal Term effect shall be given to the
encumbrance on the Aircraft of any Renewal Term available or in force under this
Section 19.
(b) Purchase Options. Lessee shall have the option, upon at least
ninety (90) days' irrevocable prior written notice to Lessor, to purchase the
Aircraft on the last Business Day of the Basic Term or any Renewal Term for a
purchase price equal to the lesser of (x) the fair market sales value of the
Aircraft or (y) 50% of Lessor's Cost. Upon payment to Lessor in immediately
available funds of the full amount of the purchase price and payment of any
other amounts then due hereunder (including all Rent and all 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 absence of Lessor
Liens, including for this purpose Liens which would be Lessor Liens but for the
proviso in the definition of Lessor Liens), all of Lessor's right, title and
interest in and to the Aircraft.
(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) hereof or renew this Lease pursuant to
Section 19(a)(1) or Section 19(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, 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 the United States 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 Stipulated Loss 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
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not so agreed by 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 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
Business Days after the end of such five-day period, each shall render its own
appraisal and shall by mutual consent choose another appraiser within five
Business Days after the end of such twenty-day period. If, within such five-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 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.
(d) Special Purchase Option. On the EBO Date, Lessee shall have
the option, upon at least ninety (90) days' irrevocable prior notice to Lessor
and, if any Secured Certificates are then outstanding, the Indenture Trustee, to
purchase the Aircraft on such date for a purchase price equal to [, at Lessee's
option, either (a)] the Special Purchase Price [, or (b) the amount set forth
under the heading "Initial Installment" on Exhibit B (the "Initial Installment")
(payable on the EBO Date) plus the Remaining Installments]. In addition, if on
such date there shall be any Secured Certificates outstanding, Lessee shall have
the option to assume, pursuant to Section 8(x) 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, in lieu of paying the Special
Purchase Price on the EBO Date Lessee shall pay Lessor a purchase price equal to
(I) [(x) in the event Lessee has elected to pay the Special Purchase Price,] the
Special Purchase Price [or (y) in the event Lessee has elected to pay the
Initial Installment and the Remaining Installments, the Initial Installment]
minus [in either event] (II) an amount equal to principal of, and accrued but
unpaid interest on, any Secured Certificates that are outstanding on such date.
Upon such payment in full and payment of any other amounts then due hereunder
(including costs or expenses of the Owner Participant in connection with such
purchase, any installments of Basic Rent due prior to such date and, if
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Basic Rent is payable in arrears on such date as indicated on Exhibit B, on such
date (but not any installment of Basic Rent due on such date if Basic Rent is
payable in advance on such date), and all unpaid Supplemental Rent due on or
prior to such date), [and, in the event that Lessee has elected to pay the
Initial Installment and the Remaining Installments, after Lessee shall have
provided Lessor with its undertaking to pay the amounts due on the dates set
forth under the heading "Remaining Installments" on Exhibit B (the "Remaining
Installments"),] Lessor will transfer to Lessee, without recourse or warranty
(except as to the absence of Lessor Liens, including for this purpose Liens
which would be Lessor Liens but for the proviso in the definition 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 Secured Certificates
outstanding after such payment, exercise such rights as it has to cause the
Aircraft to be released from the Lien of the Trust Indenture [; provided,
however, that in the event that Lessee has elected to pay the Initial
Installment and the Remaining Installments, Lessor shall retain a Lien on the
Aircraft until the Remaining Installments, together with interest thereon at the
Past Due Rate for any period from the date due to the date paid, are paid in
full, which Lien shall be evidenced by this Lease, which after the date Lessor
shall have transferred title to the Aircraft to Lessee shall be deemed
terminated as a true lease and shall continue as a lease intended for security,
mutatis mutandis, to secure the payment when due of the Remaining Installments
-- provision may be utilized only if EBO Date occurs on or after maturity of
Secured Certificates].
SECTION 20. Security for Lessor's Obligation to Holders of Secured
Certificates. In order to secure the indebtedness evidenced by the Secured
Certificates, 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(f) 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 21. 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
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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 22. 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 (i) direct obligations of the United States of America and
agencies guaranteed by the United States government having a final maturity of
ninety (90) days or less from date of purchase thereof; (ii) certificates of
deposit issued by, bankers' acceptances of, or time deposits with, any bank,
trust company or national banking association incorporated under the laws of the
United States of America or one of the states thereof having combined capital
and surplus and retained earnings as of its last report of condition of at least
$500,000,000 and having a rating of Aa or better by ▇▇▇▇▇'▇ Investors Service,
Inc. ("Moody's") or AA or better by Standard & Poor's Ratings Services, a
division of ▇▇▇▇▇▇-▇▇▇▇, Inc. ("S&P") and having a final maturity of ninety (90)
days or less from date of purchase thereof; and (iii) commercial paper of any
holding company of a bank, trust company or national banking association
described in (ii) and commercial paper of any corporation or finance company
incorporated or doing business under the laws of the United States of America or
any state thereof having a rating assigned to such commercial paper of A1 by S&P
or P1 by Moody's and having a final maturity of ninety (90) days or less from
the date of purchase thereof; provided, however, that the aggregate amount at
any one time so invested in certificates of deposit issued by any one bank shall
not be in excess of 5% of such bank's capital and surplus. 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.
-57-
SECTION 23. Service of Process. 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 24. 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 25. 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 10 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 26. Covenant of Quiet Enjoyment. So long as no Event of
Default shall have occurred and be continuing and notwithstanding any default by
Lessor, the Owner Participant or the Indenture Trustee under the Participation
Agreement, the Trust Agreement or the Trust Indenture, Lessor shall not
interfere with Lessee's (or any Sublessee's)
-58-
continued possession, use and operation of, and quiet enjoyment of, the Aircraft
or Lessee's rights, benefits and obligations pursuant to the Overall Transaction
during the Term of this Lease, and this Lease shall not be terminated except as
expressly provided herein.
-59-
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:
-----------------------------------------
Name:
Title:
NORTHWEST AIRLINES, INC.,
Lessee
By:
-----------------------------------------
Name:
Title:
Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on the _____ day of [____________]
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
By:
-----------------------------------------
Name:
Title:
- Signature Page -
EXHIBIT A
to
Lease Agreement
[NW 1999 _]
LEASE SUPPLEMENT ▇▇.
[▇▇ ▇▇▇▇ _]
LEASE SUPPLEMENT NO. __, dated [_________] between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement [NW 1999 _], dated as of
[_____________] between _____________________, as Owner Participant, and such
Owner Trustee (such Owner Trustee, in its capacity as such Owner Trustee,
being herein called "Lessor"), and NORTHWEST AIRLINES, INC. ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement [NW 1999 _], dated as of [___________], relating to one Boeing 747-451
aircraft (herein called the "Lease," and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
(1)The Lease relates to the Airframe and Engines described below,
and a counterpart of the Lease is attached hereto, and made a part hereof, and
this Lease Supplement, together with such attachment, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document.
(2)The Lease Agreement relates to the Airframe and Engines described
below, and a counterpart of the Lease Agreement, attached and made a part of
Lease Supplement No. 1 dated [______________] to the Lease Agreement, has been
recorded by the Federal Aviation Administration on [_____________], as one
document and assigned Conveyance No. __.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the following
described Boeing 747-451 aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
(i) Airframe: FAA Registration No. ______; manufacturer's
serial no. _____; and
----------
(1) This language for Lease Supplement No. 1.
(2) This language for other Lease Supplements.
(ii) Engines: four (4) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ Model PW4056 engines
bearing, respectively, manufacturer's serial nos. ______, ______,
______ and ______ (each of which engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft shall commence on the Delivery
Date and end on [_______________].
3. Lessee hereby confirms its agreement to pay Lessor Basic Rent for
the Aircraft throughout the Term therefor in accordance with Section 3 of the
Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease as being airworthy, in good
working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that nothing
contained herein or in the Lease shall in any way diminish or otherwise affect
any right Lessee or Lessor may have with respect to the Aircraft against The
Boeing Company, or any subcontractor or supplier of The Boeing Company, under
the Purchase Agreement or otherwise.
5. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
6. This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any jurisdiction), no security interest in this Lease Supplement 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
hereof.
EXHIBIT A - PAGE 2
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not in its Individual Capacity,
but solely as Owner Trustee,
Lessor
By:
-----------------------------------------
Name:
Title:
NORTHWEST AIRLINES, INC.,
Lessee
By:
-----------------------------------------
Name:
Title:
Receipt of this original counterpart of the foregoing Lease is
hereby acknowledged on the _____ day of [____________]
STATE STREET BANK AND
TRUST COMPANY,
Indenture Trustee
By:
-----------------------------------------
Name:
Title:
EXHIBIT B
to
Lease Agreement
[NW 1999 _]
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information. Basic Rent:
Basic Rent Payable Basic Rent Payable Total Basic
in Advance in Arrears Rent
Lease Period (Percentage of (Percentage of (Percentage of
Date Lessor's Cost) Lessor's Cost) Lessor's Cost)
------------ ------------------ ------------------ --------------
EXHIBIT B - PAGE 2
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Basic Rent Payable Basic Rent Payable Total Basic
in Advance in Arrears Rent
Lease Period (Percentage of (Percentage of (Percentage of
Date Lessor's Cost) Lessor's Cost) Lessor's Cost)
------------------------------------------------------------------------------
BASIC RENT, LESSOR'S COST
AND SPECIAL PURCHASE PRICE SCHEDULE
Lessor's Cost for the Aircraft: $[___________]
Special Purchase Price: [_____________]% of Lessor's Cost on [______________].
[Initial Installment: [__]% of Lessor's Cost on [ ].
Remaining Installments: Date Amount
April 15, [ ] [__]% of Lessor's Cost June 15, [ ] [__]%
of Lessor's Cost September 15, [ ] [__]% of Lessor's Cost
December 15, [ ][__]% of Lessor's Cost]
EXHIBIT C
to
Lease Agreement
[NW 1999 _]
STIPULATED LOSS VALUE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 2
STIPULATED LOSS VALUE SCHEDULE
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 3
STIPULATED LOSS VALUE SCHEDULE
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 4
STIPULATED LOSS VALUE SCHEDULE
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 5
STIPULATED LOSS VALUE SCHEDULE
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 6
STIPULATED LOSS VALUE SCHEDULE
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 7
STIPULATED LOSS VALUE SCHEDULE
Stipulated Stipulated Loss
Loss Value Date Value Percentage
--------------- ----------------
EXHIBIT C - PAGE 8
EXHIBIT D
to
Lease Agreement
[NW 1999 _]
TERMINATION VALUE SCHEDULE
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Termination
Termination Value
Date Percentage
---------- -----------
EXHIBIT E - PAGE
EXHIBIT E
to
Lease Agreement
[NW 1999 _]
RENT RECALCULATION VERIFICATION
The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
1. Any recalculation of Basic Rent, Stipulated Loss Value
percentages, Termination Value percentages, [the Initial Installment, the
Remaining Installments] and the Special Purchase Price 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 Lessee and reasonably acceptable to
the Owner Participant 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 1 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 1
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 [_] or more basis
points (in which event the Owner Participant shall pay the reasonable costs and
expenses of such verification process). Such recalculated Basic Rent, Stipulated
Loss Value percentages, Termination Value percentages [, Initial Installment,
Remaining Installments] and Special Purchase Price shall be set forth in a Lease
Supplement or an amendment to the Lease.
2. "Net Economic Return" means the Owner Participant's net after-tax
yield and aggregate after-tax cash flow, in each case computed from the Delivery
Date through the EBO Date and through [___________________], utilizing the
multiple investment sinking fund method of analysis, computed on the basis of
the same methodology and assumptions as were utilized by the Owner Participant
in determining Basic Rent, the Special Purchase Price, [the Initial Installment,
the Remaining Installments,] Stipulated Loss Value and Termination Value
percentages as of the Delivery Date.
EXHIBIT F
to
Lease Agreement
[NW 1999 _]
SCHEDULE OF DOMICILES OF PERMITTED SUBLESSEES
Argentina Malaysia
Australia Malta
Austria Mexico
Bahamas Morocco
Belgium Netherlands
Brazil New Zealand
Canada Norway
Chile Paraguay
Denmark People's Republic of China
Egypt Philippines
Finland Portugal
France Republic of China (Taiwan)*
Germany Singapore
Greece South Africa
Hungary South Korea
Iceland Spain
India Sweden
Indonesia Switzerland
Ireland Thailand
Italy Trinidad and Tobago
Japan United Kingdom
Luxembourg Uruguay
Venezuela
--------------------
* So long as on the date of entering into the proposed sublease such country
and the United States have diplomatic relations at least as good as those in
effect on the Delivery Date.
EXHIBIT G
to
Lease Agreement
[NW 1999 _]
RETURN CONDITIONS
The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto deem
it to contain confidential information.
Unless purchased by Lessee pursuant to Section 19 of the Lease, at
the time of return of the Airframe upon the expiration of the Lease at the end
of the Basic Term or any Renewal Term or upon the termination of the Lease
pursuant to Section 9(c) or 15 of the Lease: (i) in the event that Lessee (or
any Sublessee then in possession of the Aircraft) shall not then be using a
continuous maintenance program with respect to the Airframe, Lessee agrees that
during the period of operation of the Aircraft immediately prior to such return
(A) Lessee or such Sublessee, as the case may be, shall have been using a block
overhaul program with respect to the Airframe which shall have been approved by
all necessary governmental approvals of the country under the laws of which the
Aircraft shall then have been registered and (B) the Airframe shall have
remaining until the next scheduled block overhaul at least 25% of the allowable
hours between block overhauls permitted under the block overhaul program then
used by Lessee or such Sublessee, (ii) in the event that Lessee (or any
Sublessee then in possession of the Aircraft) during the period of operation of
the Aircraft immediately prior to such return shall not have been using an
on-condition maintenance program with respect to the Engines or engines, Lessee
agrees that the average number of hours or cycles of operation (whichever shall
be applicable under the maintenance program then in use with respect to such
Engines or engines) on such Engines or engines remaining until the next
scheduled engine refurbishment shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine refurbishment allowed under the
maintenance program then in use with respect to such Engines or engines which
shall have been approved by all necessary governmental approvals of the country
under the laws of which the Aircraft shall have then been registered, (iii) the
Aircraft shall have all Lessee's and any Sublessee's exterior markings removed
or painted over and the areas where such markings were removed or painted over
refurbished as necessary to blend with adjacent areas, (iv) the Aircraft shall
have no outstanding airworthiness directives issued by the FAA requiring
terminating action by the date of return, and (v) the Aircraft shall be in
Lessee's or such Sublessee's passenger configuration and the interior of the
Airframe shall be clean in accordance with Lessee's customary standards for a
"between flights" cleaning. In the event the FAA shall issue any directive which
would require improvements to the Aircraft in order for the airworthiness
certificate of the Aircraft to be maintained in good standing, Lessee shall not
apply for an extension of the date of compliance with the directive as to the
Aircraft to a date after the date of return of the Aircraft pursuant to Section
5 of the Lease, unless it shall previously or concurrently have applied for such
an extension with respect to all Boeing 747-400 aircraft in its fleet affected
by such directive.
If clause (i)(B) of the first sentence of the preceding paragraph
shall be applicable but the Airframe does not meet the conditions specified in
said clause (i)(B), Lessee shall pay or cause to be paid to Lessor a Dollar
amount computed by multiplying (I) 120% of the average direct cost to Lessee
(based upon the actual direct cost to Lessee for similar aircraft in the fleet
of Lessee) during the preceding 12 months of performing an airframe block
overhaul of the type referred to in such clause (i) by (II) a fraction of which
(x) the numerator shall be the excess of 25% of hours of operation allowable
between such block overhauls over the actual number of hours of operation
remaining on the Airframe to the next such block overhaul and (y) the
denominator shall be the number of hours of operation allowable between such
block overhauls in accordance with such block overhaul program.
If clause (ii) of the first sentence of the second preceding
paragraph shall be applicable but the Engines or engines do not meet the
conditions specified in said clause (ii), Lessee shall pay or cause to be paid
to Lessor a Dollar amount computed by multiplying (aa) four by (bb) 120% of the
average direct cost to Lessee (based upon the actual direct cost to Lessee for
similar aircraft in the fleet of Lessee) during the preceding 12 months of
performing for an engine of the same model as the Engines the scheduled engine
refurbishment under the maintenance program then used by Lessee or any Sublessee
for engines of the same model as the Engines by (cc) a fraction of which (x) the
numerator shall be the excess of 25% of the hours or cycles of operation
(whichever is applicable) between engine refurbishment allowable for an engine
under the maintenance program then in use with respect to such Engines or
engines over the actual average number of hours or cycles of operation on such
Engines or engines remaining until the next such scheduled engine refurbishment
and (y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishment.
EXHIBIT G - PAGE 2